TSANG YEE MUI v. MAK CHIK WING

HCA2606/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2606 OF 2006

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D E C I S I O N

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1. By summons filed on 4 February 2008, the defendants apply for an order that the plaintiff provides security for their costs up to and including the trial of the action.  This is a renewed application.  The previous summons filed on 2 January 2008 was dismissed for want of prosecution consequential upon the absence of the defendants’ legal representative at the hearing on 15 January 2008.

2. The action has been set down for trial to commence on 13 October 2008 with eight days reserved.

The parties

3. The plaintiff is aged 84.  Her late husband and Mak Chik Wing, deceased (“the Deceased”) were brothers.

4. The 2^nd defendant is the natural son of the Deceased.  He is also the adopted son of the plaintiff and her late husband.

The action

5. The dispute between the parties relates to a property known as No. 33 Fung Yuen Village, Tai Po, New Territories which is situate at subsection 1 of Section B of Lot No. 161 in Demarcation District No. 11 (“the Land”).

6. Briefly stated, the plaintiff’s case is that since about 11 February 1981, the Deceased held the Land on trust for her pending an application to be made by the Deceased to discharge a mortgage registered in 1939 against the Land.  The plaintiff says that the Deceased acted in fraudulent breach of the trust when he assigned, inter alia, the Land to the 2^nd defendant and his other son for $250,000 by an assignment dated 24 August 1993.  The plaintiff further says that the 2^nd defendant held the interest in the Land as a constructive trustee on the ground of knowing receipt.  It is also the plaintiff’s case that she has been in adverse possession of the Land.

7. As against the 1^st defendant, the plaintiff seeks damages for breach of trust, an order for account and declaratory relief for the setting aside of the assignment to the 2^nd defendant.  As against the 2^nd defendant, the plaintiff seeks a vesting order and declarations that he is a constructive trustee, that the assignment to him should be set aside for breach of trust and that the plaintiff’s interest should have priority and that she is in adverse possession of the Land.

8. The defendants deny that the Land is held on trust for the plaintiff and/or that she is in adverse possession of the Land.  Their case is that the plaintiff and her family members only have a bare licence from the Deceased and/or the 2^nd defendant to stay and use the house on the Land on the occasions of their return from the U.K. to Hong Kong.  The defendants say that the licence had been terminated in April 2006.  

9. The defendants further raise the defence of limitation.  As for the 2^nd defendant, he also claims to have priority over the plaintiff’s interest, if any, on the basis that he is the bona fide purchaser for value without notice.

10. Leave to set down the action for trial was initially granted on 14 November 2007.  As a result of delay on the defendants’ part to provide trial counsel’s certificate on the time estimates for the trial, the time originally granted for setting down the action for trial had lapsed.

11. After the defendants’ 1^st summons for security for costs was dismissed, the plaintiff applied by summons for leave to set down the action for trial out of time.  Leave was granted on 24 January 2008.

12. The action was eventually set down for trial on 29 January 2008.  On 4 February 2008, the defendants took out the present summons for security for costs.

The application

13. The application is made under Order 23 rule 1 of the Rules of the High Court (“RHC”) on the ground that the plaintiff is ordinarily resident outside Hong Kong.  

14. The defendants initially ask for security in the amount of $294,700 which was based on a three-day trial.  The figure has since been revised to $473,700 on account of the trial estimate being revised to eight days.  In this regard, it is to be noted that the defendants’ estimate in their checklist filed on 9 November 2007 is two days.  However, in their trial counsel’s certificate, it was estimated that the defendants’ case alone would require four to five days, a substantial part of which was allocated to cross-examinations of the plaintiff’s witnesses.

The opposition

15. The plaintiff opposes the application on several grounds.  They are :

(1)  The plaintiff has a genuine and strong prospect of success.

(2)  The plaintiff has landed properties in Hong Kong, which are available for enforcement in the event a costs order is made against her.

(3)  There has been intentional delay in taking out the application for security for costs.

(4)  The amount of security sought is excessive.

Order 23 rule 1(1)(a) RHC

16. Order 23 rule 1(1)(a) RHC provides that :

“1.—(1)    Where, on the application of a defendant to an action or other proceeding in the Court of First Instance, it appears to the Court—

(a)  that the plaintiff is ordinarily resident out of the jurisdiction, or

(b)  …

(c)  …

(d)  …

then if, having regard to all the circumstances of the case, the Court thinks it just to do so, it may order the plaintiff to give such security for the defendant’s costs of the action or other proceeding as it thinks just.”

17. The power to order security for costs is discretionary and the court should have regard to all the circumstances in the case.  Although the fact that a plaintiff is ordinarily resident outside jurisdiction is a necessary condition, there is no inflexible rule that a foreign plaintiff will be ordered to provide security for costs.  However, as a matter of discretion, it is common that the court will require a foreign plaintiff to give security for costs because it is ordinarily just to do so : Montgomery Ward & Co., Incorporated v. Evergo Trading Company Limtied & Another (unreported) CACV32/1996.

18. In considering the exercise of the discretion, the court may have regard to the likelihood of the plaintiff succeeding and also whether the plaintiff has any substantial property in the jurisdiction readily available for costs : Hong Kong Civil Procedure 2008, Vol. 1, paras. 23/3/3 to 23/3/6.

19. Mr Lam who appears for the plaintiff had made references to Article 39 of the Basic Law, Articles 1(1), 10 and 22 of Hong Kong Bill of Rights Ordinance and the English cases of Nasser v. United Bank of Kuwait [2002] 1 WLR 1868, Naghshineh & Ors v. Chaffe & Ors [2003] EWHC 2107 and Leyland Barasch & Ors, 15 February 2000, Lexis Transcript.  The crux of the submission is that it would be discriminatory and contrary to the right of access to court if security for costs is to be ordered on the mere basis that the plaintiff is ordinarily resident outside Hong Kong.  Reference was also made to H.H. Judge Lok’s decision in Izumo Mokko Co. Ltd v. T.S. Lines Ltd [2007] 2 HKLRD 363, in which the case of Nasser v. United Bank of Kuwait had been considered.  In particular, the judge observed (at p.370, para. 15) that :

“    In view of the development of the English jurisprudence on the exercise of the discretion in a manner which is compatible with the human rights legislations, the Hong Kong courts, in deciding whether to order a foreign plaintiff to provide security for costs, should now focus on the difficulties faced by the defendant in enforcing the judgment rather than on the status of a particular plaintiff.  Nasser should now reflect the modern approach, and I am prepared to accept Mr Kerry’s submission to such extent.”

20. In my view, it is not necessary to go into any detailed examination or analysis of the English authorities or the provisions in the Basic Law and the Hong Kong Bill of Rights Ordinance.

21. As noted above, it is not an inflexible rule that a foreign plaintiff will be ordered to provide security of costs.  Order 23 rule 1(1)(a) does not discriminate against plaintiffs who are ordinarily resident outside jurisdiction.  The point about the right of access to court is irrelevant because it is not the plaintiff’s case and there is no suggestion that the plaintiff is impecunious or that her claim will be stifled by an order for security : see To Kin Wah v. Tuen Mun District Officer & Others (unreported) CACV358/2004 (6 September 2005) at paras. 44-50.

The plaintiff’s residence

22. Although the plaintiff’s solicitors had in their correspondence with the defendants’ solicitors disputed that the plaintiff is ordinarily resident outside Hong Kong, this was not put forward as a ground of opposition.

23. It would in any event appear from the plaintiff’s witness statement that she has since about 1993 or 1994 moved to live in the U.K., though she also said she returned regularly to Hong Kong.

Strength of the claim

24. On an application for security of costs, it is clearly not the function of the court to make a preliminary run at deciding the ultimate success or failure of the claim : Sunchase International Group (China) Ltd v. Uincor Group of Companies (Investment) Ltd [2004] 1 HKLRD 732, 733.  It is not an occasion for a detailed examination of the merits of the case.  The parties should not attempt to go into the merits of the case unless it can be easily demonstrated one way or another that there is a high degree of probability of success or failure : Porzelack K.G. v. Porzelack (UK) Ltd [1987] 1 WLR 420, 423.

25. In the present case, the dispute involves mainly issues of facts.  Apart from the plaintiff and the 2^nd defendant, there are another six plaintiff witnesses relating to the various aspects of the factual disputes.  It is thus inappropriate to embark on an examination of the merits of the parties’ case at this interlocutory stage.

26. On the materials before the court, I will however be prepared to approach the present application on the basis that the plaintiff has a genuine and reasonably arguable claim, and that the defendants have a reasonably arguable and viable defence.

The plaintiff’s properties in the jurisdiction

27. The defendants do not dispute that the plaintiff holds four plots of properties in Tai Po, New Territories, the descriptions and details of which had been set out in the affirmation and the plaintiff’s List of Documents.  The relevant land search records do not reveal any encumbrance against the lands.

28. The defendants however say that there is no evidence or indication of their value.  It is also said that they are agricultural land that may not have any substantial value or readily available purchaser.  Their solicitors had also previously written to ask the plaintiff for the value of the lands and to extract an undertaking that she will not deal with or alleviate her interest in these properties.  This was not met with any positive reply from the plaintiff.

29. Although the properties held by the plaintiff are capable of being sold or transferred, it does not mean that they are not readily available for enforcement against the plaintiff.  It is not the defendants’ case, and there is no evidential basis to suggest, that there is any risk of the plaintiff dissipating her assets within the jurisdiction so as to defeat any order of costs that may be made against her.

30. As to the defendants’ doubt over the value of the land held by the plaintiff, it is to be noted that the costs of the defendants was estimated to be a little under $500,000.  It is not a very large amount.  It is not apparent that the four plots of land held by the plaintiff will not be sufficient to cover it.

31. Further, the fact that the plaintiff is known to have fixed assets in the jurisdiction is highly relevant.  This is because the rationale or objective underlying Order 23 rule 1(1)(a) is to alleviate the difficulty that may be faced by a successful defendant in seeking to recover costs against a foreign plaintiff.  If it is known that there are assets within the jurisdiction available for costs, then the concern that the rule sets out to address will be met.  It must not be forgotten that an order for security for costs is not to confer an advantage on a defendant in terms of enforcement.

32. However, I disagree with Mr Lam’s submission that the defendants are shifting the burden of proof when they say that the plaintiff has adduced no evidence as to the precise value of the lands she held.  To the extent that the plaintiff argues that there is no risk of the defendants not being able to recover their costs in the event the claim fails because she has fixed assets in Hong Kong, she is obliged to make good that proposition.  Normally, a foreign plaintiff who says that he has means and assets within jurisdiction available for costs should adduce supporting information to substantiate his assertion.  In this connection, the value of his assets is a relevant information.

Delay in making the application

33. There can be no dispute that the present application was made at a late stage in the proceeding.  The defendants are well aware that the plaintiff resides in the U.K.  They had alluded to this in the Defence.  The request for provision of security was however only made after leave to set down the action for trial was granted.

34. It is correct to say that an application for security may be made at any stage of the proceedings.  However, the application should be made as promptly as possible.  Delay in making the application is a factor to be taken into account and may in some cases constitute an important factor, particularly where it has or might have caused detriment to the plaintiff or hardship in the future conduct of the action.  Where the application is late, it would be incumbent upon the defendant to explain the delay : BBMB Finance (Hong Kong) Ltd v. China Underwriters Life and General Insurance Co. Ltd (In Liquidation) & Anor [1991] 1 HKLR 617, 626G-627C, 627J-628E.

35. In the present case, there is no satisfactory explanation for the delay in making the application.  The argument that it was after the service of the plaintiff’s witness statement that it was confirmed that the plaintiff is resident abroad cannot stand up to scrutiny.  First, it was pleaded in the Defence that the plaintiff resides in the U.K.  Second, even after the plaintiff’s witness statement was served, the defendants indicated in their Checklist that there would be no application for security of costs.

36. On behalf of the defendants, Miss Lau submitted that there is no prejudice to the plaintiff in that little additional costs were incurred after leave was given to set down the action for trial.

37. However, the fact that the application was made at such late stage in the proceeding and that it is now only three months away from the trial will occasion some hardship and prejudice to the plaintiff.  Effectively, she has little or no choice but to put up the security, if an order were made against her, in order not to abandon and waste all the work done and costs she had incurred for the action.  As observed by Sir John Donaldson MR (as he then was) in A Co. v. K Ltd [1987] 1 WLR 1655, 1657 and approved by our Court of Appeal in the BBMB Finance (Hong Kong) Ltd case, supra, at 628, it will amount to potential injustice.

Exercise of the discretion

38. Having regard to the above matters, I am of the view that the discretion should be exercised against ordering the plaintiff to provide security for the defendants’ costs.

Amount of security

39. That being the position, it would not be necessary to decide on whether the amount of security sought is appropriate or excessive.

40. I would only deal briefly with Mr Lam’s submission that if security were to be ordered, it should be limited to the additional costs of enforcement in the U.K.  In advancing this argument, Mr Lam derived support from the decision of Naghshineh & Ors v. Chaffe & Ors, supra.

41. For my part, I have reservation as to whether an order for limited security represents the general approach to applications under Order 23 rule 1(1)(a).

42. In any event, as acknowledged by Mr Lam, there is no evidence before the court for making a limited award.  I do not find Mr Lam’s suggestion that the court should decide on the principle and leave it to the parties to agree on the exact amount attractive or practically viable in the circumstances of this case.

Conclusion

43. The defendants’ summons is dismissed.  I make an order nisi that the defendants pay the plaintiff the costs of the application in any event, to be taxed if not agreed.