ERIC EDWARD HOTUNG AND ANOTHER v. HO YUEN KI AND OTHERS

HCA 857/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 857 OF 2011

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D E C I S I O N

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INTRODUCTION

1.  I have before me an appeal brought by the plaintiffs against the order (“the Order”) of Master M Wong dated 5 April 2016 ordering them to pay into court the total sum of HK$12,000,000 on or before 26 April 2016 as further security for the three defendants’ respective costs (each in the sum of HK$4,000,000) up to the conclusion of the trial which has been fixed to commence on 23 May 2016 (with 17 days reserved).

2.  In view of the fact that the proceedings in the present action have been stayed pursuant to the Order pending provision of the security by the plaintiffs and the trial has been scheduled to commence in less than 4 weeks’ time from today, I have decided to give my decision with brief reasons now.

BACKGROUND

3.  This action was commenced by the plaintiffs by a writ of summons issued on 20 May 2011.  As set out in the statement of claim dated 30 June 2011, the plaintiffs allege that in around late 1961, the 1^st plaintiff provided the sum of HK$2,000,000 (“the Funds”) to the 1^st defendant for her to invest in certain gaming and related business in Macau with the intention that the 1^st defendant would hold the business interest on his behalf.  The plaintiffs further say that the investment is now represented by:-

(1)  6,251 shares of and in a company called Sociedade De Turismo E Diversoes De Macau SA (“STDM”) held in the name of the 1^st defendant; and

(2)  40,050 shares of and in another company called Shun Tak Shipping Company Limited (“STS”) held in the name of the 2^nd defendant (collectively the “Trust Property”).

4.  The plaintiffs also allege that the 3^rd defendant has, since around 2005, been assisting the 1^st defendant to manage the Trust Property and has thereby assumed the duties of a trustee.

5.  By this action, the plaintiffs seek, inter alia, an order for the transfer by the 1^st and 2^nd defendants of the Trust Property to the 2^nd plaintiff (as new trustee for the 1^st plaintiff), and an account of all income and profits derived from the Funds and/or the Trust Property.

6.  The 1^st defendant and the 2^nd and 3^rd defendants have filed their respective defences to the plaintiffs’ claim.  It is not necessary, for the present purpose, for me to set out the detail of their defences, save to mention that they deny the existence of any trust as alleged by the 1^st plaintiff. It is said by the defendants that the provision of the Funds was in the nature of a loan which has been repaid.  The defendants also rely on the defence of laches.  These are obviously matters for the trial.

7.  On 9 August 2013, the 3^rd defendant took out a summons seeking security for costs in the amount of HK$1,004,700 up to the setting down of this action for trial on the ground that the plaintiffs were ordinarily resident out of the jurisdiction.  After a contested hearing on 13 December 2013, Mr Registrar Lung ordered the plaintiffs to pay into court the sum of HK$600,000 as security for the 3^rd defendant’s costs. The Registrar held, amongst other things, that the 1^st plaintiff was not ordinarily resident in Hong Kong, and accepted the 3^rd defendant’s contention that he was ordinarily resident in Virginia, USA.

8.  Thereafter, pursuant to consent orders dated 13 February 2014 and 12 March 2014 respectively, the plaintiffs gave security for the 1^st and 2^nd defendants’ costs, in the sum of HK$600,000 each.

9.  The action then progressed in the usual way.  On 26 November 2014, the plaintiffs were granted leave to set the action down for trial.  On 22 December 2014, notice of setting down for trial was given.  On 5 February 2015, trial dates were fixed.  As earlier mentioned, the trial has been scheduled to commence on 23 May 2016, with 17 days reserved.

10.  On 16 December 2015, each of the 1^st, 2^nd and 3^rd defendants took out a summons seeking further security for costs, for the amounts of HK$10,000,000, HK$5,185,000 and HK$6,850,000 respectively, up to the conclusion of the trial.

11.  The 3 summonses came before Master M Wong on 19 February 2016, who reserved his decision at the end of the hearing.

12.  In the meantime, the pre-trial review came before this court on 4 March 2016. Directions were given for steps to be taken by the parties leading to the trial proper.

13.  On 5 April 2016, Master M Wong handed down his decision on the 3 summonses for security for costs.  In summary, the Master found (inter alia) that:-

(1)  there had not been any material change of circumstances regarding the place of ordinary residence of the 1^st plaintiff since the decision of Mr Registrar Lung given on 13 December 2013;

(2)  the amount of the taxed costs owing by the 3^rd defendant to the plaintiffs in HCMP 643/2012 and CACV 83/2013, namely, HK$1,763,223.40, was far below the amounts of the security sought by the defendants, and therefore should not have any bearing on the present applications; and

(3)  the defendants’ applications should not be dismissed by reason of their delay in making the applications, which the Master did not consider to be inordinate, inexplicable or unacceptable.

14.  As earlier mentioned, Master M Wong ordered the plaintiffs to pay into court the total sum of HK$12,000,000 on or before 26 April 2016 as further security for the three defendants’ costs, and that all further proceedings in this action were to be stayed pending payment of the security.

15.  On 8 April 2014, the plaintiffs filed the present notice of appeal against Master M Wong’s Order.

1^ST PLAINTIFF IS ORDINARILY RESIDENT IN HONG KONG

16.  The applicable principles in an application of this nature are well established. The phrase “ordinarily resident” should be construed in accordance with its natural and ordinary meaning, and that a person is ordinarily resident in a place if he habitually and normally resides lawfully in such place from choice and for a settled purpose, apart from temporary or occasional absences, even if his permanent residence or “real home” is elsewhere: see Hong Kong Civil Procedure 2016, paragraph 23/3/4.

17.  In the present case, it is not in dispute that, as a matter of fact, the 1^st plaintiff has been residing continuously in Hong Kong since no later than late 2011 apart from short occasion absences from Hong Kong, as can be seen from the statement of his travel records obtained from the Immigration Department.  In his affidavit filed on 28 January 2016, the 1^st plaintiff states that he has been permanently residing in Hong Kong and will continue to do so, with his various residential addresses in Hong Kong since 2011 given in paragraph 20 of that affidavit.  He has also explained why, at the age of 89[1], he intends to live in Hong Kong until his death (see paragraphs 20 to 28 of his said affidavit). There is also evidence to the effect that:-

(1)  his Virginia residence has been sold;

(2)  two of his sons who are currently taking care of him are living in Hong Kong; and

(3)  his wife left Virginia and came to live with the 1^st plaintiff in Hong Kong in 2012, and she moved from Hong Kong to the UK in 2014 and is currently living with their daughter there.

18.  All three defendants place heavy reliance on the decision of Mr Registrar Lung given on 13 December 2013, in particular his finding that the 1^st plaintiff was not ordinarily resident in Hong Kong at that time.

19.  Faced with this finding, the 1^st plaintiff, in his affidavit filed on 28 January 2016, states that there have been material changes of circumstances regarding his place of ordinary residence since the decision of the Registrar.  As recited in paragraph 22 of Master M Wong’s decision, the following matters are relied upon by the 1^st plaintiff:

“(a) Registrar Lung’s order was made more than 2 years ago.

(b) Dr Leung’s medical report dated 5 January 2016 and Dr Lam’s medical report dated 21 January 2016 show that the 1^st plaintiff has since Registrar Lung’s order been admitted to hospital for endoscopic, gallbladder, and laparoscopic (cholecystectomy) operations on a number of occasions, his health has substantially deteriorated since Registrar Lung’s order, and he is no longer fit to travel given his health conditions.

(c) The 1^st plaintiff has a Hong Kong ID card as stated in Dr Lam’s medical report dated 21 January 2016.

(d) Now, the 1^st plaintiff has no ability and energy to travel, and has no intention to do so either.

(e) The employment contracts in relation to domestic helpers entered into by the 1^st plaintiff as employer as approved by the Immigration Department show that the 1^st plaintiff has been residing in Hong Kong at least since 2014 (if not earlier).

(f) Consistently, the 1^st plaintiff has been active in Hong Kong socially and culturally.

(g) The 1^st plaintiff’s sons have been residents in Hong Kong and the 1^st plaintiff would like to be with his sons when in his deathbed.

(h)   Both the 1^st and 3^rd defendants owe the plaintiffs substantial costs in HCMP 643 of 2012 and CACV 83 of 2013 running up to at least $2,000,000.00.  The plaintiffs are now willing to have those outstanding costs paid into Court as security for the present proceedings or alternatively to give an undertaking not to remove those costs if paid.”

20.  It is clear that no res judicata arises from the aforesaid finding of the Registrar because (i) the question of whether a plaintiff is ordinarily resident out of the jurisdiction for the purpose of Order 23, rule 1 of the Rules of the High Court is to be determined at the time of the application, and (ii) the decision of the Registrar that the 1^st plaintiff was not ordinarily resident in Hong Kong was based on the evidence then before him.

21.  In Re Little Olympian Each Ways Ltd [1995] WLR 560, the following statement of principle was stated by Lindsay J at 563:-

“But before I return to Order 23in more detail I should mention two arguments of the defendants' which do not rely on the rule. First, it was sought to argue that, because the plaintiff had had an earlier award for security of costs made against it, an order which, if not formally a consent order, was at least unopposed, and because the plaintiff had not then taken the jurisdiction point it now takes, the plaintiff is, by way of issue estoppel, denied the ability to take the point now. In the course of arguing for issue estoppel Mr. Stubbs came up against this stumbling block: the tense used in Ord. 23, r. 1(1)(a) is the present tense — ‘the plaintiff is ordinarily resident out of the jurisdiction.’ If there were any ‘res’ which could be said to have been ‘judicata’ in respect of the earlier award for security, it was that the plaintiff was then ordinarily resident out of the jurisdiction. But whether the plaintiff was then so resident is now irrelevant; the question is now whether the plaintiff is now so resident, an issue not only not yet adjudged but which logically has no necessary relationship with the plaintiff's residence at an earlier date. Estoppel per rem judicatam cannot avail if the only ‘res’ which can be described as already ‘judicata’ is strictly irrelevant at the subsequent occasion at which the doctrine is invoked, a subsequent occasion at which not that ‘res’ but a different ‘res’ fall for decision.”

22.  In my view, I ought to determine the question of whether the 1^st plaintiff is ordinarily resident out of the jurisdiction on the totality of the admissible evidence before me.  I do not consider that it is strictly necessary for the 1^st plaintiff to establish some material changes of circumstances regarding the place of his ordinary residence since the date of the Registrar’s decision, although I shall pay proper regard to the findings and reasoning which led the Registrar to conclude that the 1^st plaintiff was not ordinarily resident in Hong Kong as at 13 December 2013.

23.  On the evidence before me, I consider that the 1^st plaintiff can properly be said to be ordinarily resident in Hong Kong at present.  Master M Wong considered, however, that the 1^st plaintiff’s residence in Hong Kong is purely the result of his health conditions and not out of his free choice, and for that reason he could not be said to be ordinarily resident in Hong Kong. The following was said at paragraphs 26 and 27 of Master M Wong’s decision:-

“26. The present evidence shows that the 1^st plaintiff’s health conditions are worse than before and he has no choice now but to stay in Hong Kong for medical treatments. It is clear to me that the 1^st plaintiff’s stay in Hong Kong is purely caused by his health conditions and not out of his free choice.

27.   As held in Xu Xiuzhi v Wong Yuk Choi & anor, HCA 1525/2012 (see also Hong Kong Civil Procedure 2016, paragraph 23/3/4 and R v Barnet LBC, ex p Shah [1983] 2 AC 309), ‘the phrase ‘ordinarily resident’ should be construed according to its ordinary and natural meaning, and that a person is ordinarily resident in a place if he habitually and normally resides lawfully in such place from choice and for a settled purpose, apart from temporary or occasional absences, even if his permanent residence or ‘real home’ is elsewhere’ (emphasis added).  I do not find that the 1^st plaintiff’s decision to stay in Hong Kong is made ‘from choice’, as he has no choice at all.”

24.  It is important to appreciate, however, that the requirement of “free choice” for the purpose of determining a person’s place of ordinary residence is linked to the concept of “voluntariness” in that person’s adoption of that place as his residence.  In R v Barnet LBC, Ex p Shah [1983] 2 AC 309 at 344, the following was said by Lord Scarman:-

“There are two, and no more than two, respects in which the mind of the ‘propositus’ is important in determining ordinary residence. The residence must be voluntarily adopted. Enforced presence by reason of kidnapping or imprisonment, or a Robinson Crusoe existence on a desert island with no opportunity of escape, may be so overwhelming a factor as to negative the will to be where one is.”

25.  As a matter of principle, it seems to me that a person who decides to reside in a place for health or medical reasons is no different from a person who decides to reside in that place for educational, family or employment reasons.  In each instance, the residence in that place is “adopted voluntarily and for settled purposes as part of the regular order of his life for the time being, whether of short or of long duration”, per Lord Scarman in Ex p Shah (at 343G-H).

26.  The decision of Master Li in Robbie Hana Tenza v Dr Vincent C Goh, HCPI 718/2011 (19 April 2013), referred to in paragraph 28 of the decision of Master M Wong, is a decision on its own facts, and cannot be treated as establishing any general proposition that a person who stays in a place other than his home country for a lengthy period of time due to his or her poor state of health must be treated as not being ordinarily resident in that place.

27.  None of the other matters referred to by Master M Wong in paragraphs 29 to 32 of his decision seems to me to be sufficient to negate the 1^st plaintiff’s residence in Hong Kong as being ordinary.

28.  In all, I am of the view that the 1^st plaintiff is ordinarily resident in Hong Kong and therefore no order for security for costs should be made against him.

29.  In so far as the 2^nd plaintiff is concerned, it is clear that the 2^nd plaintiff has been joined as a party to this action because it has been nominated by the 1^st plaintiff as the new trustee of the Trust Property.  The real parties to the present disputes are the 1^st plaintiff and the defendants.  I accept that there is no inflexible rule that the existence of a co-plaintiff within the jurisdiction means that no security could be ordered against the other, foreign, plaintiff.  However, that is at least a relevant factor, and seems to me to be a strong factor in the present case in view of the foregoing consideration.  Also, it is clear on the evidence that the 2^nd plaintiff does not carry on any business, and is the 1^st plaintiff’s nominee for the purpose of holding the Trust Property claimed in this action.  It is owned and controlled by the 1^st plaintiff. Hence, the place of ordinary residence of the 2^nd plaintiff would follow that of the 1^st plaintiff (being its central management and control), ie Hong Kong.

DISCRETION

30.  Having reached the above conclusions, it is not strictly necessary for me to consider matters relating to the exercise of discretion whether to order security for costs.  I shall, however, deal with them briefly because they have been extensively argued by counsel.

31.  I do not attach any weight on the merits of the plaintiffs’ claim because they are to be determined at the trial and the existing materials are not sufficient to enable me to form a clear view on the merits.  I also do not attach much weight on the unsatisfied taxed costs ordered to be paid by the 1^st and 3^rd defendants in other proceedings because the amounts involved (totalling a little over HK$2 million) are plainly not sufficient to satisfy the security sought and ordered by Master M Wong.

32.  I would not, however, be disposed to order the plaintiffs to provide further security because of the defendants’ delay in making the applications.  The defendants were aware that the plaintiffs were granted leave to set the action down for trial on 26 November 2014, and that trial dates were fixed on 5 February 2015.  They did not, however, make the present applications until 16 December 2015.  Delay in making an application for security for costs, particularly where there is no good explanation for the delay, is itself sufficient to deny the application: see BBMB Finance (Hong Kong) Ltd v China Underwriters Life and General Insurance Co Ltd (in liquidation) [1991] 1 HKLR 617; Tsang Yee Mui v Mak Chik Wing, HCA 2606/2006 (21 July 2008); Waddington Ltd v Chan Chun Hoo Thomas, HCA 3291/2003 (7 May 2013); Haifa International Finance Co Ltd v Concord Strategic Investments Ltd, HCA 4442/2003 (7 March 2014).

33.  In the present case, I do not consider that any good reason has been given by the defendants for their delay in making the applications in December 2015, many months after the setting down of this action for trial.  The fact that the present applications are not the first time that the defendants seek security for costs do not seem to me to provide a good reason for delaying the applications.

34.  The defendants refer to the observation of Deputy High Court Judge Muttrie in his decision in Midland Realty International Ltd v Wise Surplus Limited, HCA 3065/2001 (21 June 2005), at paragraph 19, to the effect that the decision on the timing of an application for security involves a balancing act between applying too early (because one cannot forecast accurately how long the trial will take and how much it will cost) and applying too late (because one may be said to have led the plaintiff up the garden path).  However, once leave to set an action down for trial is given, and certainly once the trial dates have been fixed, all interlocutory steps should have been completed and only the costs of the trial will be outstanding.  I am unable to see why there should be any difficulty in estimating the reasonable and probable costs of the trial at that stage.

35.  Lastly, the defendants argue that the plaintiffs have not suffered prejudice by reason of the delay.  However, as pointed out by Chu J (as she then was) in Tsang Yee Mui, at paragraph 37, if an order for security for costs is made at a late stage, in order not to abandon and waste all the work done and costs the plaintiff has incurred for the action, he or she would have little or no choice but to put up the security.  This amounts to potential injustice.  Also, as Au-Yeung J pointed out in her judgment in Haifa International Finance Co, at paragraph 16, the prejudice arising from a late application for security for costs lies in the plaintiff’s attention being diverted from preparation of a trial to answering a late application.

36.  In all, had it been necessary to do so, I would have declined, in the exercise of my discretion, to order the plaintiffs to provide any further security for costs on the ground of the defendants’ delay in making the application.

DISPOSTION

37.  For the foregoing reasons, I allow the plaintiffs’ appeal and set aside the Order.  I shall hear the parties on the question of costs.