CHEN MEI HUAN v. SILVER FAITH HOLDINGS LTD AND OTHERS

HCCW 111/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS No.111 OF 2014

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D E C I S I O N

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I. INTRODUCTION

1.  On 2 May 2014, the petitioner Chen Mei Huan (“Chen”) presented a petition for the winding up of the 1^st respondent Silver Faith Holdings Limited (“Silver Faith”). On 8 May and 3 July 2014, Chen filed her 1^st and 3^rd affirmations in support of the petition.

2.  On 23 May 2014, Harris J granted a mareva injunction to restrain the 2^nd respondent Ng Man Sun (“Ng”) and 3^rd respondent Ng Wai Yee (Ng’s daughter, “Daughter”) from selling, encumbering or dealing with shareholding in Tronken Enterprises Limited (“Tronken”), Sheen River Investments Limited (“Sheen River”), and Sheen View Enterprises Limited (“Sheen View”) in the names of Ng/Daughter, or any assets held or registered in the names of Tronken, Sheen River and Sheen View until further order, but the proceeds of sale of 67 units on 3^rd floor of the Podium of Shun Tak Centre (“STC”), Nos 168-200 Connaught Road Central, Hong Kong registered in the name of Tronken and Sheen River to Garswell Limited were to be paid into an account in the name of Chen’s solicitors as stakeholders (“Injunction”).

3.  Consequently, the net proceeds of sale of the 67 STC units in the total sum of $26,910,696.57 were paid into the stakeholder account held by Chen’s solicitors.[1] On 22 September 2014, DHCJ Le Pichon ordered that the Injunction be continued until further order.[2]

4.  Chen re-filed her Amended Petition on 22 July 2014. On 25 July 2014, Chen filed her 4^th affirmation in support of the Amended Petition.

5.  On 5 January 2015, Harris J granted leave for Chen to re‑amend her Amended Petition, which shall stand as her Points of Claim. On 6 January 2015, Chen re-filed her Re-Amended Petition, which was supported by Chen’s 6^th affirmation filed on 31 December 2014.

6.  On 2 February and 14 April 2015, Ng/Daughter filed and re‑filed their Points of Defence. On 19 March 2015, Chen filed her Points of Reply. On 1 March 2016, Ng/Daughter filed their Amended Points of Defence (which merely added a statement of truth).

7.  On 10 and 14 August 2015, Ng/Daughter and Chen filed their respective List of Documents. There were various requests/ summonses for further and better particulars (“FBP”). Answers to requests for FBP were filed in late 2015. On 26 February 2016, Ng/Daughter and Chen filed their respective Supplemental List of Documents.

8.  On 26 February 2016, Ng/Daughter filed the witness statement of Ng, Cheng Tai Chee (“Cheng”) and Daughter, and Chen filed her own witness statement.

9.  At the 2^nd case management conference on 18 May 2016, Harris J granted inter alia the following orders (“Harris Order”):

“2. All further interlocutory application(s), if any, are to be taken out by the parties before 28 June 2016.

3. Leave be given to the parties to have the matter set down for trial with 6 days reserved if no further interlocutory application(s) are taken out by 28 June 2016. There be a pre-trial review (“PTR”) before the trial judge no less than 6 weeks before trial.

4. In the event that there is/are further interlocutory application(s), they are to be listed for argument at the next case management hearing to be held with 2 hours reserved.”

10.  On 31 May 2016, Ng/Daughter filed Ng’s supplemental witness statement, and Chen filed her 2^nd witness statement. On the same day, Chen filed her 2^nd Supplemental List of Documents.

11.  On 8 August 2016, Ng’s/Daughter’s solicitors Ribeiro Hui wrote to Chen’s solicitors Robertsons seeking security for costs of HK$2,521,000 for the trial and pre-trial review (“PTR”). The letter sought a response within 14 days and Chen’s proposed amount. No response was received from Chen’s solicitors.

12.  On 9 November 2016, Ng/Daughter filed a summons for Chen to provide security for their costs for PTR/trial to the satisfaction of the court by payment into court within 14 days after the date of the order to be made on the ground that Chen was ordinarily resident out of the jurisdiction with consequential directions (“Summons”).

13.  On 9 November 2016 and 3 March 2017, Ng/Daughter filed Ng’s 2^nd affirmation (“Ng 2^nd Aff”) and Ng’s 3^rd affirmation in support of the Summons. On 16 January 2017, Chen filed her 7^th affirmation in opposition.

14.  The Summons came before me for hearing on 15 September 2016 (“Hearing”). With no objection by Mr Chua SC (and Mr Tang with him), counsel for Ng/Daughter, and Mr Pao, counsel for Chen, I granted leave for Chen to file the 2^nd affidavit of her solicitor Li Chung Nam dated 8 September 2017 (“Li Aff”) and for Ng/Daughter to file the affirmation of their solicitor George Anthony Ribeiro dated 4 September 2017, and to rely on such affidavit/affirmation evidence at the Hearing.

15.  Chen had yet to apply to set down the present proceedings for trial.

II.  HCA1440/2012

16.  On 14 August 2012, Venetian Macau Limited (“VML”) sued Chen in HCA1440/2012 for substantial gambling debts. On 27 January 2014, VML entered judgment against Chen for HK$54,990,570 with interest in the sum of HK$28,168,443.04 and thereafter at judgment rate (“Macau Judgment”).[3]

III.  BVI ACTION

17.  Chen claimed that in 1996 she/Ng acquired the New Century Hotel (“Hotel”) in Macau through a British Virgin Islands (“BVI”) company called Peckson Limited (“Peckson”),[4] and Chen/Ng moved into the Hotel after its acquisition. On 4 October 2011, Ng transferred his 80% shares in Peckson (“80% Shares”) to Chen (“Peckson Transfer”). As explained below, Chen and Ng were involved in strenuous litigation in BVI with regard to the ownership of the 80% shares.

18.  In/about July 2012, Ng commenced legal proceedings in BVI (BVIHC(COM)88/2012, “BVI Action”) against Peckson for a declaration that the Peckson Transfer was invalid and that he was still the beneficial owner of the 80% Shares, and for an order to restore Peckson’s shareholding structure prior to 4 October 2011. In October 2012, Chen joined as party to the BVI Action. On 14 November 2013, Bannister J [Ag] in the High Court of Justice of the Eastern Carribbean Supreme Court (“Supreme Court”) dismissed Ng’s claim and held Chen was the legal/beneficial owner of the 80% Shares (“Bannister Judgment”).

19.  Ng appealed against the Bannister Judgment, and on 22 May 2015 the Court of Appeal of the Supreme Court (“BVICA”) allowed the appeal (“CA Judgment”). The BVICA declared that Chen held the 80% Shares on trust for Ng, and ordered inter alia that Chen should pay Ng’s costs of the appeal and below to be assessed if not agreed. Chen applied for leave to appeal to the Judicial Committee of the Privy Council (“Privy Council”).

20.  On/about 30 November 2015,[5] Ng applied for and successfully discharged an order for stay of execution of the CA Judgment. On/about 23 December 2015, Ng applied for interim payment on account of costs in the BVI Action against Chen in the sum of US$2,000,000. On 22 January 2016, BVICA inter alia granted Chen leave to appeal to the Privy Council on condition that she paid US$1,000,000 as interim payment on account of costs (“BVI Interim Payment”). Upon complying with certain conditions imposed by the Privy Council, Ng was able to and did take over the management of the Hotel in/about January 2016. On 3 March 2016, Chen paid the BVI Interim Payment into BVICA.

21.  Chen’s appeal to the Privy Council was heard on 22-23 May 2017. On 17 August 2017, the Privy Council handed down judgment (“PC Judgment”) that allowed Chen’s appeal to the extent of setting aside the CA Judgment that the 80% Shares were beneficially owned by Ng, and ordered a new trial before a different judge. Paragraph 66 of the PC Judgment urged the parties to try and agree an appropriate order to give effect to the conclusions of the Privy Council and for costs within 14 days, failing which they should make submissions in writing to the Board on those matters they could not agree within 28 days thereafter. Chen claimed the parties could not reach agreement on the terms of the order/costs, so they had to file written submissions by 28 September 2017. As at the date of the Li Aff (ie 8 September 2017), the BVI Interim Payment still remained with BVICA.

IV.  CHEN’s CLAIM

22.  Silver Faith was a Hong Kong company with an authorised share capital of HK$10,000 and an issued share capital of HK$2 with 1 share held by Ng and another share held by Chen. Ng/Chen were the only directors, and Ng was the company secretary. Silver Faith was engaged in property investment, and through its subsidiaries held various landed properties in Hong Kong. One of its subsidiaries Tronken[6] held 8 units on the ground floor and 69 units on the 3^rd floor of STC, and 66 out of such 69 units on the 3^rd floor had been sold. Silver Faith’s other subsidiaries Superfaith Corporation Limited (“Superfaith”),[7] Sheen River and Sheen View[8] respectively held 13 units in STC, 1 unit in STC and 4 properties in Nathan Road.

23.  Chen claimed she/Ng had an intimate relationship in which they reposed trust and confidence in each other, and since 1992 they were cohabitees. Their investment in Silver Faith was a consequence of their intimate relationship. Ng was responsible for business management/ operation of Silver Faith, and Ng/Chen agreed and understood they each had the right to participate in all major decisions relating to Silver Faith’s affairs. On such premise, Chen claimed Silver Faith and its subsidiaries were formed and operated on the basis of a quasi-partnership.

24.  Chen said her relationship with Ng broke down in early 2012, and they had not met and/or communicated with each other since then. Except for a short period from 16 May to mid-July 2012, Chen continued to reside at the Hotel, but Ng moved out of the Hotel in/about mid‑July 2012. Due to their separation and the BVI Action, the trust and confidence between Chen and Ng were irretrievably damaged.

25.  Chen complained that since 16 May 2012 and before the commencement of the present proceedings she had not been provided with information (eg financial information) about Silver Faith, and that without her knowledge/consent (a) on 15 February 2013 CHK Business Development Ltd (a company incorporated on 2 January 2013) replaced Ng as Silver Faith’s company secretary, (b) on 22 March 2013 9,998 Silver Faith shares were issued and allotted to Ng, (c) on 22 March 2013 the Daughter was purportedly appointed as director of Silver Faith, and (d) the aforesaid changes were reflected in Silver Faith’s 2013 annual return which did not state Chen as director of the company.

26.  Chen said she only discovered these changes in/about October 2013 when the trial in the BVI Action was about to commence as she never received[9] any notification and/or notice of meeting(s) in relation to appointment of the Daughter as director or Chen’s removal as director, so Chen did not attend any purported board and/or shareholders’ meetings for passing resolutions for the aforesaid changes. On such basis, Chen alleged Ng unilaterally and wrongfully diluted her shareholding in Silver Faith and wrongfully appointed the Daughter as director,[10] and the aforesaid changes in paragraph 25(a)-(c) above and her removal as director of Silver Faith were invalid, void and of no legal effect.

27.  Chen claimed that shortly before she presented the Petition it was reported in the media that Ng sold about 80 units in STC for about HK$230,000,000, which was confirmed by relevant provisional agreements for sale and purchase dated 10 and 30 April 2014. Such 80 STC units comprised 13 units, 66 units and 1 unit held by Superfaith, Tronken and Sheen River respectively. Chen complained such sale was surreptitiously effected without notice to her. On 23 May 2014, on Chen’s application, Harris J granted the Injunction. The sale proceeds eventually paid into the stakeholder account of Chen’s solicitors were just over HK$26,900,000. On 22 September 2014, DHCJ Le Pichon continued the Injunction.

28.  Chen claimed Tronken’s audited accounts for the years ended 31 March 2012 and 31 March 2013 revealed that director’s (ie Ng’s) loan stood at HK$383,000,000. Chen further claimed it appeared Tronken was insolvent, but the existence of such director loan was controversial.

29.  Chen claimed she was not a director of Silver Faith’s subsidiaries. She claimed the management/operation of such subsidiaries was with Ng, but the underlying assets of such subsidiaries were their joint investments. Chen claimed that Tronken’s management called for explanation by Ng since (a) rental income from its 77 STC units was suspiciously low over the years and only covered small percentage of the interest payment for the bank loan, (b) director’s loan for 1992-1994 of over HK$265,000,000 was repaid in full in 1994/1995, (c) there was no rental income from 1995 to 2000, and (d) director’s loan in 1995/1996 would have been unnecessary but for loans made to companies wholly/ substantially owned by Ng, and that there was lack of explanation for such unsecured and interest-free loans with no fixed term for repayment. Chen questioned why Tronken did not ask for repayment of such interest-free loans to itself when it was incurring heavy interest payments on loans granted to it.

30.  By reason of the above matters, Chen claimed that the affairs of Silver Faith required further investigation, that Ng was in breach of fiduciary duties to Silver Faith / Tronken, and that the improprieties in the management of Silver Faith / Tronken destroyed the mutual trust/ confidence between shareholders and directors and between Chen and Ng in quasi-partnership. Chen suggested Ng had conducted the affairs of Silver Faith in a manner that was oppressive or prejudicial to her, and it was no longer possible for her to work together with Ng in relation to the affairs of Silver Faith given the collapse in relationship and lack of trust/confidence. In view of the lack of clarity as to Silver Faith’s financial situation, Chen averred that any proposal by Ng to buy out her shareholding in Silver Faith or any court order to such effect would be inappropriate, and that in all the circumstances it was just and equitable to wind up Silver Faith, which would enable the liquidator to investigate Ng’s conduct and the above matters, and to sell its subsidiaries to the public at a favourable price or to enable Chen to acquire some such properties.

31.  Chen therefore sought declarations that (a) Chen was/is a director of Silver Faith and (b) the purported allotment of 9,998 Silver Faith shares to Ng on 22 March 2013, the purported appointment of the Daughter as director of Silver Faith on 22 March 2013 and any resolution to remove Chen as director of Silver Faith were void, invalid and of no legal effect, and she also sought an order that Silver Faith be wound up by the court.

32.  More details were set out in Chen’s Points of Reply, FBP of the Points of Reply, and Chen’s witness statements. But as Mr Chua SC and Mr Pao agreed there was no need for me to delve into the merits of Chen’s case, I do not propose to set out further details here.

V.  NG’s/DAUGHTER’s CASE

33.  Ng/Daughter denied Chen’s claims. They admitted Ng/Chen had an intimate relationship from about the end of 1996 until early 2012, but Ng/Chen maintained separate rooms at the Hotel. Silver Faith was formed by Ng as an investment holding company. Upon its incorporation on 22 July 1993, Ng/Cheng each held 1 issued share, and they were the only directors until 15 September 1996. Cheng held his 1 share as nominee on trust for Ng, and acted pursuant to Ng’s directions/wishes. On 15 September 1996, at Ng’s direction, Chen was appointed as director in place of Cheng. From then until breakdown in their relationship in/about 2012, Chen was privy to the affairs of Silver Faith and its subsidiaries. On 14 October 1997, the legal title in Cheng’s 1 share was transferred to Chen without payment of consideration. Chen held such share on trust for Ng who was solely responsible for injection of operation funds into Silver Faith and/or its subsidiaries. Hence, Ng was 100% beneficial owner of the Silver Faith shares, and Chen had no right/expectation to participate in the management/affairs of Silver Faith. Ng also denied Silver Faith and/or any of its subsidiaries were formed/operated on the basis of a quasi-partnership.

34.  Ng/Daughter admitted Peckson was a vehicle for acquisition of the Hotel, but Ng was the beneficial owner of the 80% Shares notwithstanding the Peckson Transfer. The nature/validity of the Peckson Transfer were the subject matter of the BVI Action. Ng/Daughter agreed the relationship between Ng and Chen broke down in/about 2012, they had not communicated directly with each other since then, and Ng moved out of the Hotel in/about July 2012.

35.  As regards the various changes to Silver Faith, Ng/Daughter claimed the allotment of 9,998 Silver Faith shares to Ng was made on the advice of a company secretarial consultant so that its shareholdings would more accurately reflect the parties’ financial contributions to the company, and the appointment of the Daughter as director was to facilitate the company’s operation. Ng/Daughter denied Chen was removed as director. Further or alternatively, they claimed that as Chen lived in Macau she was not entitled to receive notice of board meetings under regulation 100 of Table A in the First Schedule of the former Companies Ordinance Cap 32 as adopted by Silver Faith’s articles of association. Further or alternatively, Chen as Ng’s nominee was bound to exercise her rights as shareholder in accordance with his direction/wishes. Still further or alternatively, Ng had by letter dated 15 May 2014 openly offered to reverse the allotment of 9,998 shares in Silver Faith and the appointment of the Daughter as director.

36.  It was said Tronken was incorporated on 17 September 1992. Ng/Daughter averred that as at 10 December 1992 Chio Ho Cheong (“Chio”) and Ng were the first directors. On 12 February 1993, Chio/Ng each acquired 1 subscriber share. On the following day, further shares were allotted to Ng (2,499 shares), Chio (2,499 shares), Szeto Yuk Lin (“Szeto”) (2,500 shares) and Chen Jun Yi (“CJY”) (2,500 shares). Szeto and CJY were also appointed as directors. Ng/Daughter claimed Chio, Szeto and CJY held their shares as nominees for Ng. On 15 September 1996, they resigned as directors and Tronken appointed Silver Faith as director, so Silver Faith and Ng became the only directors. But Chio, Szeto, CJY remained as shareholders of Tronken from 13 February 1993 to 29 June 2011 when 9,999 Tronken shares were transferred to Silver Faith without payment of consideration.

37.  Ng/Daughter claimed Ng was solely responsible for the provision of funds to acquire the STC units held by Tronken, Superfaith and Sheen River (collectively, “STC Units”) by way of director’s loans to pay the purchase price or to pay bank loan interest and mortgage repayments from time to time, and Chen never contributed to the working capital of Silver Faith, Tronken and/or any other subsidiary of Silver Faith from her own funds. Tronken was not profitable from 1996 to 2012 as the majority of the STC Units were not let and were treated as trading stock. But unless and until Ng made a demand on Silver Faith for repayment of the outstanding director’s loans Silver Faith was not insolvent or unable to pay its debts when they fell due.

38.  In the meantime, Tronken was kept afloat by Ng’s director’s loan from time and time to cover shortfall in company expenditure the most significant of which were bank loan interest payments. Since 1999 the outstanding director’s loan as reflected in Tronken’s financial statements was consistently well over HK$200,000,000, and since 2006 it rose to over HK$300,000,000. As at 31 March 2013, the amount due from Tronken to Ng as outstanding director’s loan stood at HK$383,175,389.86. All along Chen had full access and knowledge of Tronken’s audited financial statements, and since 1997 through her role as director of Silver Faith (which in turn was Tronken’s corporate director) Chen was aware of and agreed to the manner in which Silver Faith and its subsidiaries were operated. Chen never raised any complaint in relation to the above matters until commencement of the present proceedings.

39.  Ng/Daughter claimed the sale of the STC Units in April 2014 was made bona fide in the best interests of Silver Faith to repay outstanding mortgage liabilities over such properties and to avoid foreclosure / other enforcement by the bank. Ng had no duty to inform Chen of the sale of properties held by Tronken by virtue of the fact Chen was absent from Hong Kong, or further or alternatively by reason that Chen as Ng’s nominee was bound to exercise her rights as shareholder in accordance with Ng’s directions/wishes.

40.  Ng/Daughter admitted Tronken’s rental income was low and amounted to HK$11,000,000 over the past 20 years. The director’s loan for 1992-1994 of over HK$265,000,000 (which Ng advanced for acquiring the STC Units for which he was entitled to repayment on demand) was repaid in full in 1994/1995 when Silver Faith had no direct or indirect interest in Tronken. It was also admitted there was no rental income from the Tronken properties for the years from 1995 to 2000. But Chen was aware and in control of the management of Tronken at all material times, and took no steps to cause more units at STC to be let to generate more rental income. Further, any transaction undertaken by Tronken in 1994/1995 recorded in the audited financial statements occurred at a time when Silver Faith had no direct or indirect interest in Tronken.

41.  In all the circumstances, Ng/Daughter denied it was just and equitable to wind up Silver Faith. Further or alternatively, it was averred Chen held her 1 share in Silver Faith as trustee for Ng, and as such she had no standing or tangible interest to seek a winding up order against Silver Faith. Ng also reserved the right to ask for rectification of Silver Faith’s register of members to reflect Ng’s 100% beneficial interest in the Silver Faith shares.

42.  More details were set out in Ng’s/Daughter’s FBP of the Points of Defence, and in the witness statements filed for Ng/Daughter. As explained above, there was no need for me to delve into the merits of Ng’s/Daughter’s case, I do not propose to set out such details here.

VI.  CHEN’s AFFIRMATION EVIDENCE

43.  Foreign plaintiff Chen accepted she was ordinarily resident in Macau, but claimed her foreign residence was not the only factor when considering whether or not she ought to be ordered to provide security for costs. Chen claimed that in all the circumstances it would be unjust to make such an order. 

44.  Time taken for seeking security The Summons was filed about 4 months after the deadline imposed in paragraph 2 of the Harris Order and more than 2½ years after the commencement of the present proceedings. It was said Ng’s/Daughter’s belated application for security for costs would inevitably lead to further delay when the present proceedings were otherwise ready for trial.

45.  Macau Judgment On 16 December 2014, VML enforced the Macau Judgment by obtaining a Charging Order Absolute against the 1 Silver Faith share registered in Chen’s name being the subject matter of the present proceedings. Chen said Ng must have been aware of such Charging Order Absolute because it was Ng’s former solicitors who served copy of such Charging Order Absolute on Chen’s solicitors.[11]

46.  Safeguarding creditor interest Chen claimed she owned 1 Silver Faith share registered in her name that represented 50% interest in Silver Faith, which together with its subsidiaries and related companies held considerable landed properties in Hong Kong. Although Chen’s such interests were the main dispute in the present proceedings, Chen said she would pursue her claim to safeguard her entitlements/interests in Silver Faith and those of her judgment creditor VML.

47.  Stifling claim Chen said even if the court in the present proceedings held she had 50% interest in Silver Faith and its subsidiaries and underlying assets, it was unlikely for her to receive any actual monetary award as the value of her interests was likely to be less than the Macau Judgment.

48.  First, if she were ordered to provide security for costs but failed to comply, her claim in the present proceedings would stand dismissed, the purported allotment of 9,998 Silver Faith shares that Ng arranged in his favour would be unopposed, and her shareholding in Silver Faith (as well as the interest of VML as chargor) would be diluted from 50% to 0.01%. Secondly, Chen claimed the Summons was an unreasonably oppressive attempt to suffocate her claim in the present proceedings by burdening her with a huge amount of security for costs before trial.

49.  Chen claimed she was in “dire financial difficulties” even though she paid the BVI Interim Payment of US$1,000,000 to BVICA for her appeal to the Privy Council. Chen noted the judgment debt in excess of HK$83,000,000 under the Macau Judgment was charged against her interest in Silver Faith, and as the Macau Judgment was a matter of public record, it would be difficult if not impossible for her to raise loan to provide security for costs when at the same time she needed funds to cover her own legal costs in Hong Kong, BVI and Macau all of which were related to Ng. Chen claimed she had no alternative available assets/funds to provide any security for costs, and any order for security for costs would worsen her financial difficulties and stifle her genuine claim in the present proceedings.

50.  Unreliability as witness Chen reminded that in the Bannister Judgment the learned judge ruled in her favour and in paragraph 33 found Ng’s explanation inherently incredible.

51.  Closing down of Hotel  Chen claimed Ng took over management/control of the Hotel in January 2016. In July 2016, the Macau Government Tourism Office (“MGTO”) closed down the Hotel (under Ng’s management) for 6 months for having committed serious administrative irregularities and having failed to carry out essential fire safety measures that posed a threat to public safety. The Hotel was required to undergo maintenance/restoration work to meet statutory requirements and fire safety standards by the end of January 2017 before MGTO would consider if it could be re-opened. If the Hotel could not meet the required standards at the expiration of such deadline, MGTO would consider closing down the Hotel permanently and revoking its hotel operating licence (“Licence”). But upon expiry of such deadline, MGTO had not received from the operator of the Hotel any application for commencement of maintenance projects.

52.  Chen sought legal advice from her Macanese lawyers on whether/how she as interested party in respect of the Hotel could prospectively apply to forestall revocation of the Licence by undertaking to arrange for requisite maintenance/restoration works to be done for the Hotel. This was something Ng as the person-in-charge of the Hotel should have done but for months had recklessly failed to do, which might cause the Hotel to be shut down permanently. Chen’s contemplated the proposed efforts probably required considerable funds, so if she were ordered to provide security for costs, she might not be able to save the Hotel from prospective forcible permanent closure. Chen suggested these matters and her prospective expenditure on the Hotel were relevant considerations in relation to the belated Summons.

53.  BVI Interim Payment  It was said the parties’ entitlement on costs in respect of the BVI Action would be determined by the Privy Council in due course. But since the Privy Council allowed the appeal, Chen claimed it was unlikely for the cost order in the CA Judgment to stand, which would have an impact on whether the BVI Interim Payment would be returned to her. Her solicitors understood her BVI solicitors would apply for return of the BVI Interim Payment currently deposited with BVICA.

54.  Summary  Chen said it would be unjust to order her to give security for costs, and the present proceedings should be dealt with expeditiously and set down for trial without any further delay.

VII.  NG’s/DAUGHTER’s AFFIRMATION EVIDENCE

55.  Chen’s assets in Hong Kong  Ng claimed it appeared Chen’s only asset within the Hong Kong jurisdiction was 1 share in Silver Faith registered in her name. But Chen averred in her Re-Amended Petition that Silver Faith’s main asset-holding subsidiary Tronken was insolvent, so on Chen’s case such Silver Faith share in Chen’s name was not good security. In any event, the beneficial ownership of such share was a hotly contested issue in the present proceedings.

56.  Macau Judgment Ng claimed Chen was deeply in debt by virtue of the Macau Judgment for HK$83,159,013 including interest. Ng was concerned he might have difficulty or risk of difficulty in enforcing any costs orders in Ng’s/Daughter’s favour.

57.  Time taken for seeking security  Ng disagreed the Summons would lead to further delay in the present proceedings. By the Harris Order, leave was granted to set the present proceedings down for trial. But since Chen neither made any application to set down the present proceedings for trial nor took any action to further prosecute these proceedings, Ng found it difficult to see how the alleged delay in issuing the Summons would prejudice Chen. Ng noted Chen had not suggested she would be prejudiced by an order for security other than her alleged inability to meet such an order. Ng explained he/Daughter did not apply for security for costs earlier as he was preoccupied with numerous applications and interlocutory applications in the present proceedings in Hong Kong, in the BVI Action and in Macau.

58.  Safeguarding creditor interest  Ng said Chen’s alleged need to safeguard the interests of VML as her judgment creditor was misconceived. VML as chargor under the Charging Order Absolute over 1 Silver Faith share registered in Chen’s name could always apply for (a) an appointment of receiver over such share and (b) sale of such share, and VML would not require Chen’s assistance to protect its own interests. But if Chen did not bring the present proceedings for her own benefit, question would arise as to whether she was a mere nominee, which would form another ground under which security ought to be granted.

59.  Stifling claim  Ng claimed that for Chen to resist provision of security on this ground it would be necessary for her to do more than simply assert she was not in a position to provide security. In particular, she would have to adduce detailed information as to her resources, and to show not only that she was unable to meet any order for security from her own resources, but also she was unable to raise the funds from other sources. But here Chen merely asserted her own impecuniosity without evidence as to her financial position, whether in the form of bank statements or other materials. Ng reminded that Chen was able to raise US$1,000,000 for the BVI Interim Payment, which suggested she was able to raise funds from other sources to meet any order for security that might be made against her in the present proceedings.

60.  Chen’s unreliability as witness Ng claimed Chen was found to be an unreliable/evasive witness in paragraphs 8 and 13 of the Bannister Judgment (see also paragraphs 22 and 24 of the Appeal Judgment). Even though the Bannister Judgment ruled in Chen’s favour, BVICA subsequently ruled in Ng’s favour, stating in paragraphs 84 and 89 of the CA Judgment that on the totality of the evidence Ng had met the degree of proof necessary for discharge of the burden of raising a resulting trust on the evidence, and Chen failed to rebut the presumption and hence Ng succeeded on his claim for return of the 80% Shares that she held for him on a resulting trust.

61.  Closing Down of Hotel  Ng claimed it was Chen’s long term mismanagement of the Hotel that led to its operational difficulties and eventual closure:

(a)   In 2013, when the Hotel was still managed by Chen, she did not renew the insurance policies required to operate the Hotel, which put the Licence at risk since valid insurance was needed for continued grant of the Licence, and also put the bank loan at risk since taking out and renewing insurance was a condition for such loan.

(b)   Since in/about 2015 Chen failed to undertake maintenance/ restoration work, including works in relation to fire safety.

(c)   Due to a series of incidents including failure to comply with government rectification notice on, say, fire safety and removal of unauthorised structures, the Hotel was forced to cease operation in July 2016.

62.  Ng claimed that after he resumed control of the Hotel he took steps to rectify the aforesaid defaults, including but not limited to (a) purchase/installation of additional fire extinguishers to comply with the fire safety regulations, and (b) application for approval of rectification works on removal of unauthorised building structures. He had dealt with the requirements in (a) above. For (b) above, the relevant authority was unable to grant approval for rectification works due to objection from Victory Success Holdings Limited claiming ownership over the Hotel. Ng did not accept such claim, which was now under investigation.

63.  Ng argued that Chen’s assertions in paragraph 52 above made little sense:

(a) Chen herself acknowledged the management of the Hotel currently vested in Ng and not her, so she had no standing to do anything on behalf of the Hotel.

(b) Ng had taken steps to rectify the defaults that led to closure of the Hotel.

(c) Chen’s claim was extremely tentative, ie she was simply seeking legal advice as to whether she “may” do something which may require an indeterminate sum of money, and which “may” affect her ability to pay security for costs.

Ng considered such information to be irrelevant to the issue of whether security for costs should be ordered.

64.  Summary By reason of the above matters and the inevitable fact that further costs would be incurred if the matter were to proceed to trial, Ng considered it would be just to order Chen to provide security for costs.

VIII.  UNDISPUTED MATTERS

65.  First, there was no dispute Chen being a foreign plaintiff was ordinarily resident in Macau outside Hong Kong. Chen had resided at the Hotel for some time. She claimed that in November 2015 when she crossed the border from Macau on her way to Taishan, Mainland China to arrange for the burial of her late mother’s remains, she was detained at immigration checkpoint at Gongbei Port, Mainland China, and that she was detained and closely monitored by the PRC Public Security Bureau.[12] Chen said that by the time she was released from detention in/about February 2016, she could no longer reside in the Hotel (see paragraph 20 above). Chen alleged Ng knew her new address was at Avenida de General Castelo Branco No 45, Floor 3, Flat C, Wan On, Macau SAR.[13]

66.  Secondly, apart from her alleged interests in 1 share in Silver Faith (which was the subject matter of the present proceedings and contested by Ng) there was no evidence that she had any substantial assets within this jurisdiction.

67.  Mr Chua SC and Mr Pao agreed there was no need to investigate or conduct mini-trial as to the merits of the parties’ respective case for the purpose of the Summons, and learned counsel were prepared to proceed on the basis that Chen/Ng had an arguable case/defence.

68.  As seen in paragraphs 50 and 60 above, the parties sought to undermine each other’s credibility by referring to observations and findings in the Bannister and CA Judgments. But given the conclusion in the PC Judgment that the BVI Action should go for retrial before a different judge, it would be inappropriate to place weight on such observations and findings. In any event, it is unnecessary to do so given counsel’s common stance in the above paragraph.

69.  Although Chen’s affirmation evidence contended that her claim in the present proceedings would be stifled if security were to be ordered (see paragraph 47 below) and Mr Pao did not expressly abandon such point at the Hearing, such argument did not feature in his written submissions, and he did not develop such argument in his oral submissions. This was a wise approach given the paucity of concrete information as to Chen’s finances and the powerful response in Ng’s affirmation evidence (see paragraph 59 below). I am not persuaded by Chen’s allegation that her claim would be stifled by an order for security for costs.

IX.  LEGAL PRINCIPLES

70.  General principles The relevant legal principles are trite. I have summarised them in paragraphs 20-25 of my decision in Chris Au v Steve Yoon Soo Kim,[14] which I shall adopt but not repeat here. However, it is perhaps useful to emphasise that the power to order security is discretionary and the court should have regard to all the circumstances of the case. It is necessary to consider what is just.

71.  Mr Chua SC sought to underline that even though there is no inflexible or rigid rule, 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. He referred to Lord Donaldson MR’s observations in The Alpha as follows:[15]

“The basic principle underlying R.S.C. O. 23 r. 1(1)(a) is that it is prima facie unjust that a foreign plaintiff, who by virtue of his foreign residence is more or less immune to the consequences of an order for costs against him, should be allowed to proceed without making funds available within the jurisdiction against which such an order can be executed.

…… it has to be remembered that the purpose of O. 23 r.1 is not to make it difficult for foreign plaintiffs to sue, but to protect defendants.”

72.  Difficulty of enforcement  Difficulty of enforcement abroad is a relevant factor for consideration. Whilst it is not conclusive and not the only factor to focus on, it is ordinarily just to order a foreign plaintiff to give security as explained by Parker LJ in Berkeley Administration Inc & ors v McClelland & ors as follows:[16]

“As to this the current law of the United Kingdom does not permit of an order for security solely by reason for residence abroad. As I have already stressed, residence abroad merely confers jurisdiction. Having acquired jurisdiction the court must then consider whether in all the circumstances it would be just to make an order. The English authorities make it plain that residence abroad is not per se a ground for making an order. As to current practice, it is, Iaccept, common for orders to be made on little if anything more than fact of residence outside the jurisdiction, but this is because it is also commonly the case that it is obvious from the pleadings that enforcement of any judgment for costs in the event of the plaintiff’s action being dismissed would be difficult and costly to enforce. The Porzelack [1987] 1 W.L.R. 420 and De Bry [1990] 1 W.L.R. 552 cases show clearly that if such a judgment would be simple to enforce, that is a powerful factor to be taken into account against the making of an order.” (my emphasis)

73.  If a foreign plaintiff had substantial property, whether real or personal, within the jurisdiction, it may ease difficulty in enforcement. But overseas assets (even if they do exist) may not be easy to enforce. Parker LJ at p 417 underlined the importance of this factor in connection with the exercise of discretion of whether or not to order security for costs: “if ……, by reason of the way in which he (a plaintiff) orders his affairs, …...an order for costs against him is likely to be unenforceable, or enforceable only by significant expenditure of time and money, the defendant should be entitled to security ……”

74.  Impecuniosity  In the exercise of discretion, the court is entitled to take the impecuniosity of the personal plaintiff into account even though such factor is not of itself enough to confer on the court jurisdiction to order security (see Thune v London Properties Ltd,[17] Lim Yi Shenn v Wong Yuen Yee & ors[18] and Chris Au at paras 25 and 95).

75.  Timing of application  An application for security can be made at any stage of the proceedings.[19]  In Croft Leisure Ltd (in liq) v Gravestock & Owen, Staughton LJ said as follows:[20]

“…… it is often a difficult decision when to make a substantive application before trial. If one makes it too early one is reproached because one cannot forecast accurately how long the trial will take or how much it will cost. If one makes it too late, one is said to have led the plaintiffs up the garden path ……”

76.  Delay per se is not a bar to an application for security for costs.[21] But delay is a relevant consideration, particularly when it causes prejudice to the plaintiff. In Keary Developments Ltd v Tarmac Construction Ltd & anor, Peter Gibson LJ said as follows:[22]

“7. The lateness of the application for security is a circumstance which can properly be taken into account …… But what weight, if any, this factor should have and in which direction it should weigh must depend upon matters such as whether blame for the lateness of the application is to be placed at the door of the defendant or at that of the plaintiff. It is proper to take into account the fact that costs have already been incurred by the plaintiff without there being an order for security. Nevertheless it is appropriate for the court to have regard to what costs may yet be incurred.”

77.  In that case, whilst it was proper to take into account the lateness of the application, it was held that in the balancing exercise the tribunal should also take note of the substantial costs that had already been incurred on both sides, and the fact that an even larger sum by way of costs was yet to be incurred.

78.  In Sunchase International Group (China) Ltd & ors v Vincor Group of Companies (Investment) Ltd & ors,[23] the plaintiffs commenced proceedings against the defendants in 1995 but was not active in pursuing their claim until 2001. In 2003, the defendants applied for security for costs against the plaintiffs. The plaintiffs complained of delay saying that had such application been made earlier and security for costs was ordered against them, “they may well, but not necessarily would, have discontinued this action”. But because the application was made at such a late stage, the plaintiffs were prejudiced because of the costs that had been incurred since 1995. Rogers VP said at p 734 as follows:

“8. …… The argument, to my mind, is entirely erroneous. To say that a plaintiff might have discontinued the action because he was being asked to put up money in respect of a claim which he was making but would have abandoned that claim when he was asked to put money where his mouth was seems to me to be entirely wrong. If the plaintiffs have a good claim, it makes no difference whether the security for costs is asked for at the beginning or later on.

9. In this case, …… because the plaintiffs were not pursuing their case, there was no apparent reason, it seems to me, why the defendants should make an application for security for costs, but now, when it is likely that substantial costs will be incurred in the run-up and over the course of the trial, it is entirely understandable that the defendants should seek security for costs. In my view, there is no ground for interfering with the Judge’s discretion in this matter.”

79.  In 1990, the plaintiff (in liquidation) in Croft Leisure Ltd (in liq) commenced action against the defendants. In 1991, a consent order was made that the plaintiff should give security for costs. In 1992, the plaintiff set down the action, and 3 months later applied for further security. It was held that although it was rather late in the circumstances to make a renewed application for security, there was little if any prejudice to the plaintiff through that, and it was wrong to attach importance to such delay.

80.  Mr Pao drew my attention to Tsang Yee Mui v Mak Chik Wing and anor[24] in which the plaintiff was 84 years old and the defendants were the estate of her deceased husband and their adopted son. The dispute concerned a property in the New Territories. The legal action commenced in 2006, and leave to set down for trial was initially granted on 14 November 2007. Due to the defendants’ delay in providing trial counsel’s certificate of time estimates for trial, such deadline for setting down the action for trial lapsed. The defendants’ summons for security for costs filed on 2 January 2008 was dismissed for want of prosecution whereupon the plaintiff applied by summons for leave to set down the action for trial out of time. Leave was granted on 24 January 2008, and the action was set down for trial on 29 January 2008. The defendants renewed application for security for costs up to and including trial by summons filed on 4 February 2008.

81.  Chu J (as she then was) held there was no satisfactory explanation for the delay as the defendants knew the plaintiff resided abroad and indicated in their checklist there would be no application for security for costs, so there was prejudice to the plaintiff when it was just 3 months away from trial and she would have no choice but to put up security if an order was made against her in order not to abandon and waste all the work done and costs incurred for the action. It was said in paragraph 34 that:

“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.”

82.  In Eric Edward Hotung & anor v Ho Yuen Ki & ors,[25] the foreign plaintiff commenced action in May 2011. In 2013, the 3^rd defendant took out a summons seeking security for costs up to setting down for trial. In December 2014, notice of setting down for trial was given. In February 2015, trial dates were fixed. The trial was scheduled to commence in May 2016 with 17 days reserved. In December 2015, the defendants applied for further security up to the conclusion of the trial. The PTR was heard on 4 March 2016.

83.  Chow J took into account the imminence of trial and the fact that the application was made after fixing of trial dates, and noted no good reason was given for the delay. Chow J said:

“32. …… 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 vChan 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).

……

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.”

84.  Time limits In Lessy SARL v Pacific Star Development Ltd & anor[26] the plaintiff was ordered to pay security for costs of its action up to the setting down for trial. When an application for setting down the action for trial came to be heard, the defendants indicated their intention to apply for further security. The judge imposed a time limit for filing application for further security, but the defendant missed the deadline. It was held that “any delay in applying for security for costs is relevant to the exercise of the court’s discretion as to whether security should be ordered. The closer to the trial that an application for security for costs is made, the less likely it is to be granted”.

85.  In the circumstances, the Court of Appeal in that case considered the application for further security made after the action was set down was a factor to be taken into account in deciding whether security should be ordered. But whilst orders of the court were to be obeyed, it was said a defendant should not normally be deprived of the opportunity to apply for security of its costs because of a failure to comply with a time limit, unless either the failure amounted to procedural abuse as opposed to procedural default, or the failure caused prejudice to the plaintiff for which the plaintiff could not otherwise be compensated. As no procedural abuse arose in that case and the plaintiff’s prejudice was to face an application for further security a few weeks closer to trial than would otherwise have been the case, the Court of Appeal allowed the appeal and extended time for the defendant’s application.

86.  In Waddington Limited v Chan Chun Hoo Thomas & ors,[27] the plaintiffs sued the defendants in 2003. The trial was fixed to be heard on 15 July 2013, and the 1^st defendant applied for security for costs shortly before the PTR in April 2013 for over HK$10,000,000. DHCJ Lok (as he then was) noted the CJR culture discouraged late applications that would disrupt the trial/milestone dates, and Practice Direction 5.2 provided that the case should be ready for trial at PTR such that late interlocutory applications at PTR may be dismissed on the basis of delay alone. In his Timetabling Questionnaire dated 28 January 2011 in the case, the 1^st defendant indicated intention to apply for security for costs within 28 days of close of pleadings and sought directions to such effect. But there was no reference to seeking security in the Listing Questionnaires on 20 September 2011 and 19 March 2012. Rather the 1^st defendant confirmed in the 2^nd Listing Questionnaire that he would not take out further interlocutory applications save those which ought to be made to the listing judge or master. In the end, there was such substantial delay that the learned judge had “reason to believe that the application is only a tactical move by the 1^st defendant to put undue pressure on the plaintiff to raise substantial fund in the limited time before the trial”, and he dismissed the application.

87.  Similar observations were seen in Jigme Tsewang Athoup also known as Jigme Rinpoche v Brightec Limited & ors,[28] and Haifa International Finance Company Limited v Concord Strategic Investments Limited.[29]

X. DISCUSSION

88.  The main focus of Chen’s resistance to the Summons was Ng’s/Daughter’s alleged undue, inordinate and prolonged delay in seeking security for costs in the absence of (according to Chen) any credible or satisfactory explanation for such delay. However, in light of the legal principles discussed above, Mr Pao accepted there was no bright line rule and the issue of delay must be fact-sensitive.

89.  Delay First, the present proceedings started in May 2014, pleadings were closed in March 2015, and witness statements were filed in February/May 2016, but the Summons was issued in November 2016. Mr Pao submitted the 2½ years’ delay (since commencement of the present proceedings) was on any view prolonged, inordinate and substantial, and even though security could be ordered at any stage of the proceedings, it did not mean security should be ordered at a late stage.  Mr Pao submitted the application for security for costs should have been taken when Chen issued the Petition because Ng/Daughter knew about Chen’s residence in Macau since the inception of the present proceedings, or at the latest when pleadings were closed by which time the disputed issues would have been elicited. Mr Pao argued there were no new circumstances justifying the lateness of the Summons.

90.  As explained in Croft Leisure Ltd (in liq), the timing of an application for security for costs is often a difficult decision. Here, the starting point is that Ng/Daughter only sought security for prospective costs being costs of PTR/trial, and not security for incurred costs. In seeking security for such costs, the realisation that Chen lived in Macau was not enough. It would have been premature for Ng/Daughter to seek security for such costs when the present proceedings were commenced or when the pleadings were closed. At that stage, Ng/Daughter would not have been able to properly forecast the scope and complexity of the evidence to be adduced at trial. A realistic time for seeking such security would be after completion of discovery and exchange of witness statements. That would be at the end of May 2016, which was in line with the Harris Order that directed all further interlocutory application(s), if any, were to be taken out by the parties before 28 June 2016.

91.  On such view, there was a delay of about 4 months in taking out the Summons. But subject to (a) the terms of the Harris Order and (b) the question of prejudice discussed below, I am unable to see how these 4 months could be described as prolonged, inordinate and substantial when these 4 months had no real impact on the progress of the present proceedings. After all, Chen herself had been dilatory in setting down the present proceedings for trial. Under the Harris Order, Chen could have set down the present proceedings any time after 28 June 2016, but she had not done so to date (ie even after Ng/Daughter issued the Summons more than 9 months ago in November 2016). Thus, insofar as the present proceedings were concerned, and whatever might have been Chen’s reasons for not progressing the present proceedings after June 2016, there was no material difference in the status/progress of the present proceedings as at November 2016 as compared with that as at June/July 2016 except that Chen (who had carriage of her claim) had let the present proceedings stagnate for a few more months.

92.  Turning to the terms of the Harris Order, Mr Pao was at pains to point out that the Summons was issued about 4 months after the deadline (ie before 28 June 2016) imposed by the Harris Order for parties to take out all interlocutory applications. Mr Pao complained that not only was the Summons out of time under the Harris Order, even the pre-application letter dated 8 August 2016 by Ng’s/Daughter’s solicitors requesting security for costs was out of time. He argued this was a strong factor against granting security for costs. It was said as Harris J had granted leave to set down the present proceedings for trial with 6 days reserved if no further interlocutory applications were taken out by 28 June 2016, any contravention of such timetable would upset efficient progress of litigation contemplated by the Harris Order. This argument might have more force if Chen had actively complied with the Harris Order to set down the present proceedings for trial in a timely fashion. The complaint that the Summons was detrimental to efficient/effective progress of Chen’s claim was necessarily less meaningful when Chen herself let sleeping dogs lie.

93.  It is true that case management orders setting time limits for procedural steps are important, especially in the post-CJR era, to facilitate effective and expeditious conduct of legal proceedings, and to encourage a cards-on-the-table approach for civil litigation. Mr Pao submitted that such case management time limits should only be adjusted if there were material changes in circumstances, but here there were no such material changes as Ng/Daughter knew all along that (a) Chen’s ordinary residence was in Macau, and (b) Chen was impecunious.[30]

94.  I note that although the Harris Order imposed a time limit for filing application for interlocutory applications, it was not an “unless” order debarring further interlocutory application after the imposed deadline.  There was no disruption of any milestone date. I accept that contravention of the time limit in the Harris Order was clearly a factor to be taken into account in deciding whether security should be ordered, but the Court of Appeal in Lessy SARL made clear that a defendant would not necessarily be deprived of the opportunity to apply for security for costs because of failure to comply with a time limit unless it was a tactical move or procedural abuse and/or unless it caused prejudice to the plaintiff. This was in line with the post-CJR consideration that the primary aim in exercising the powers of the court is to secure the just resolution of disputes in accordance with the substantive rights of the parties.[31]

95.  Mr Pao referred me to Waddington Limited, Jigme Tsewang Athoup also known as Jigme Rinpoche and Haifa International Finance Company Limited, but these cases concerned situations where the defendants had indicated intention to seek security for costs but failed to do so in a timely fashion and/or had indicated they would not seek security or make any further interlocutory applications in the relevant questionnaires, and then much later they applied for security for costs. There was no such conduct on the part of Ng/Daughter in the present proceedings. It could not be said that Ng’s/Daughter’s application for security for costs in November 2016 had the same tactical connotations as the defendants’ about face in the 3 authorities.

96.  Also, in these 3 authorities, the case had been set down for trial with trial dates fixed, and the applications for security for costs were made afterwards or even at/after PTR. This was also what happened in Eric Edward Hotung & anor and BBMB Finance (Hong Kong) Ltd v China Underwriters Life and General Insurance Co Ltd (In Liquidation) and George Tan Soon-gin & ors (third parties).[32] It was worse in Tsang Yee Mui when the 1^st application for security was dismissed for want of prosecution, and the renewed application was made after the case had been set down for trial. It was no wonder that the procrastination in those cases drew censure from the courts, but such scenarios were a far cry from the present proceedings which had not been set down for trial, so there were no trial dates as yet. The situation as at the date of the Summons was no different from the situation as at 28 June 2016 except a few more months had passed. I bear in mind that the issue of delay was fact‑sensitive, and I am unable to agree the delay in issuing the Summons here had the same sinister connotations as in the above authorities.

97.  But Mr Pao suggested I should view this differently because Ng’s/Daughter’s purported explanations for the delay were self-serving, unsatisfactory, incredible and lacking in particulars. It was said the grounds in support of the Summons, which were not complex or difficult, should have been obvious to any properly advised litigant. But I have explained why I consider that in seeking security for prospective costs of PTR/trial, it would be premature to apply too early in the litigation. After all, one never knows at an early stage whether the litigation will survive unpredictable hurdles that may stifle its maturity towards trial.

98.  Mr Pao then submitted Ng had been able to actively defend the present proceedings despite other litigation in BVI / Privy Council and in Macau, and suggested the allegation that Ng was preoccupied with numerous applications and interlocutory applications in Hong Kong, BVI and Macau (which he suggested was vague and lacking particulars) did not really explain why a simple application such as the Summons could not have been taken out at the outset. On such basis it was said the delay on the part of Ng/Daughter was inexcusable.

99.  Insofar as the present proceedings in Hong Kong were concerned, I am unable to say there was any dragging of feet by either side up to June 2016. Despite some extensions of time, the parties attended to pleadings, discovery and witness statements, and generally moved the present proceedings along. But after June 2016, neither party took active steps in the present proceedings. Both parties alluded to their involvement in the BVI Action as explanation for inaction in the present proceedings. As regards the complaint about lack of particulars, the Bannister, CA and PC Judgments themselves spoke of the scope of the BVI Action, and the need for Chen’s and Ng’s personal involvement despite legal representation. After all, they were the main protagonists and witnesses, and witness’ credibility was very much at stake. I do refer to paragraph 20 above which mentioned a flurry of applications in 2015-2016 in the BVI Action (ie after the CA Judgment and before the appeal hearing at the Privy Council).

100.  It was interesting to note that Mr Pao’s written submissions suggested Chen had not set down the present proceedings for trial because she was awaiting the PC Judgment which was recently delivered on 17 August 2017. If the matters in the BVI Action (and hence the PC Judgment) had no impact on the present proceedings, it would have been pointless to await the PC Judgment before setting down for trial. But if those matters were pertinent to the present proceedings (and Chen’s conduct in waiting for the PC Judgment seemed to suggest they were), then question immediately arose as to whether or not they would have impact on the scope and complexity of the trial in the present proceedings, and hence on the quantum of any security to be sought.

101.  Mr Chua SC submitted that Chen’s allegation of prejudice was long on assertions and short on specifics, especially when she herself had been dilatory in setting down the present proceedings for trial. But Mr Pao submitted Chen suffered prejudice by reason of the lateness in taking out the application for security because she had already incurred significant legal costs in the present proceedings. It was said that if an order for security for costs was made against her (and here Ng/Daughter were asking for substantial security of about HK$2,500,000), Chen would be put to the invidious position of being compelled to put up security in order not to abandon the proceedings and waste the significant work done and costs incurred to date.

102.  Mr Pao submitted it was a recognised form of prejudice as seen in judicial observations in BBMB Finance (Hong Kong) Ltd, Tsang Yee Mui and Eric Edward Hotung & anor. But such observations had consonance with the extreme lateness in taking out application for security for costs that was beyond setting down with trial dates fixed or with the trial itself looming on the horizon. Mr Pao relied strongly on the strictures by Sir John Donaldson MR in A Co v K Ltd[33] cited by Fuad VP in BBMB Finance (Hong Kong) Ltd at pp 627-628, but the respondent to the appeal in A Co only took out application for security for costs of the appeal at a very late stage. “…… [Within] 14 days of the hearing of the appeal, the appellant is deeply involved in preparation. He had already either paid or secured his solicitors’ costs, or at any rate his solicitors were very ill-advised if he has not been required to do so”.

103.  Here, the parties were nowhere near that late stage in legal proceedings where it was likely that parties had committed costs up to trial. The present proceedings had not been set down for trial as yet, and the costs for PTR/trial had not been committed or incurred. In the balancing exercise, it was necessary not just to look at the incurred costs but also to take note that possibly a larger sum by way of costs was yet to be incurred. After all, Ng/Daughter were not seeking protection for retrospective costs but for the substantial and intensive costs for PTR/trial. In such context, the “abandon all this or put up security for costs” prejudice had much less force.

104.  In the present context, the observations by Rogers VP in Sunchase International Group (China) Ltd & ors which dealt with the same argument raised by Chen had more pertinence and appeal (see paragraph 78 above). In that case the plaintiff allowed the case to go to sleep, and when it started to move again (with no suggestion that the case had been set down for trial and/or trial dates had been fixed), the defendants sought security for costs. I respectfully agree with the approach by Rogers VP that in assessing the timing of the application and any resulting prejudice it would be relevant to consider that (a) Chen herself had been dilatory (so that there were as yet no milestone dates or committed costs), and (b) “it is likely that substantial costs will be incurred in the run-up and over the course of the trial” that might require protection.

105.  I am unconvinced that the Summons was merely a tactical move by Ng/Daughter with a view to exert financial pressure on Chen in circumstances where she was facing financial difficulty. Apart from Chen’s bare assertions, I am not persuaded there was clear and cogent evidence that she was in “dire financial difficulties” as alleged. It was said that since Ng/Daughter were content to actively oppose the present proceedings for 2½ years with the knowledge that Chen was resident in Macau, Ng/Daughter could have issued the application for security for costs much earlier, and their failure to do so reflected there was no genuine concern regarding costs protection on their part. However, I cannot see why Ng/Daughter should be faulted for not seeking protection for pre-trial costs and for focusing their attention on security for the more substantial costs for PTR/trial in the present context (ie when the present proceedings had not been set down for trial). Taking into account all circumstances (including the factors discussed below), I am not persuaded that the delay in the present context would prevent Ng/ Daughter from having security for costs of PTR/trial. Indeed, considering the matter as a whole, it is just to order security for costs.

106.  Difficulty in enforcement Mr Pao submitted there was no evidence that Ng/Daughter would incur significant difficulty or expense in seeking to enforce a costs order in Macau against the Petitioner, particularly bearing in mind that they already have lawyers instructed in that jurisdiction. I am persuaded otherwise. Neither counsel referred me to any reciprocal enforcement of judgment arrangements with Macau. The need to engage Macanese lawyers to enforce any judgment against Chen would itself be another layer of time and costs for Ng/Daughter. As explained in paragraph 74 above, although impecuniosity is not enough to confer jurisdiction to order security against a personal plaintiff, it is a relevant consideration in the exercise of the overall discretion. There were no known properties/assets of Chen in Hong Kong or Macau. Beneficial entitlements in the 1 Silver Faith share registered in her name were the subject of hot debate in the present proceedings. Such share was also subject to the Charging Order Absolute. The ownership of the Hotel in Macau was the subject of vigorous contest in the BVI Action. Although Chen alluded to business dealings in Mainland China, there were no concrete information of properties/assets she owned in that jurisdiction. Chen’s reticence over her financial status meant this court could not conclude she would be unable to put up security if ordered (and she wisely did not pursue the argument that an order for security for costs would stifle her claim), but at the very least it demonstrated real risk of difficulty in enforcement in Macau or elsewhere even if Ng/Daughter were able to secure a Hong Kong costs order. Finally, there was the unsatisfied Macau Judgment hanging over Chen’s properties/assets which underlined risk of difficulty in enforcement. In any event, it lied ill in the mouth of Chen to suggest there was no difficulty in enforcement when she herself averted to her “dire financial difficulties” albeit without particulars.

107.  Summary  In my view, the overall circumstances discussed above suggested it would be just to order security against Chen. I have carefully considered Chen’s complaint of the lateness of the application, but such factor was not conclusive. I am also not persuaded there was any mileage in Chen’s contentions concerning safeguarding VML’s interests and closing down the Hotel (see paragraphs 46 and 51-52 above). Looking at the entirety of the situation, I am not persuaded that there was any compelling case of prejudice that would lead me to dismiss the Summons.

XI.  QUANTUM

108.  As evident from the skeleton bill of costs exhibited to the Ng 2^nd Aff (“Bill”), Ng/Daughter asked for security for costs in the sum of $2,430,700. Mr Pao submitted the quantum sought was manifestly excessive, unreasonable and exaggerated, and the Bill was largely unreliable and inaccurate.

109.  I have set out the relevant principles at paragraph 110 in Chris Au:

“110. A party was only entitled to sufficient (and not complete) security that would be just in all the circumstances, and not necessarily on full indemnity basis. What constitutes sufficient security depends on the circumstances of each case.[34] It was for the party seeking security to place materials before the court to enable the court to come to a view on the quantum to be ordered as security for costs. It has been said that if an applicant fails to provide a properly itemised bill of costs with the necessary breakdown for each item, the judge may use his own experience to decide on the amount to be ordered as security for costs.[35] But in Hero Rich International Limited v Benefun International Holdings Limited & ors[36] the court went further and held that when faced with an unhelpful (and especially overly ambitious) skeleton bill, it is entitled in an appropriate case to dismiss the application for security on this ground alone. In my view, this must be a consideration of last resort.”

110.  Mr Pao suggested the Bill appeared to be based on a full indemnity approach, but Mr Chua SC confirmed it was not. Hence, I proceed to consider the Bill on the assumption that it was prepared on party-and-party basis. The Bill was divided into A (fee-earners’ rates), B (preparation of PTR/trial bundles and correspondence with counsel/ client), C (PTR), D (brief fee), E (refreshers and correspondence with counsel/client), E (preparation of written closing submissions and correspondence with counsel/client).

111.  Mr Pao did not raise specific objection to the hourly rates in Part A, but suggested the present proceedings did not warrant instructing senior leading counsel (silk for 14 years). But the fact that pleadings were settled by a senior junior did not necessarily mean the trial would not need the forensic skill of senior counsel. Here, the underlying value of the Silver Faith share was substantial, and the disputes were significant. Much would turn on witnesses’ credibility, and the art of cross-examining would be vital, especially when developments and evidence in the BVI Action would provide fodder for cross-examining counsel. There was clearly arguable basis for retaining two-counsel for trial. But that said, I am not persuaded it would be necessary for senior counsel to attend PTR. So far there was no indication of any other outstanding matter, and the PTR would appear to be straightforward. Junior trial counsel’s attendance would suffice on party-and-party basis.

112.  I also accept it would be appropriate for Ng’s/Daughter’s solicitors to involve 2 fee-earners. But since there would be significant involvement of counsel at PTR/trial, I would expect the bulk of solicitors’ professional work to be undertaken by the junior fee-earner with the senior fee-earner taking on a supervisory role and managing client/ counsel liaison on key matters.

113.  As regards preparation of the PTR/trial bundles, I am unable to fathom why correspondence with client would be required save for a brief letter telling them the bundles had been prepared for PTR/trial. Likewise, I do not expect litigation solicitors familiar with the guidance on preparation of bundles in the Practice Directions to require any detailed input from counsel. In short, I do not expect significant client input or counsel’s advice on preparation of trial bundles. I also do not expect professional fee-earners to carry out the mechanical task of compiling the bundles themselves. Such task can be relegated to litigation clerks. However, I would allow some time for Ng’s/Daughter’s solicitors to liaise with Chen’s solicitors to agree on the indices of the PTR/trial bundle. But even then it should be a straightforward matter given the guidance in paragraphs 26 and 35 in Practice Direction 5.2 (PTR bundle) and Practice Direction 5.6 (trial bundle). I am convinced that the time estimates on party-and-party basis for preparation of PTR/trial bundles are excessive.

114.  Normally, PTR is scheduled for hearing with 30-60 minutes reserved, and I am wholly unable to see why the PTR would require the solicitor fee-earners to spend 10 hours each. On party-and-party basis, usually 1 fee-earner’s attendance is allowed for time spent at the hearing, and preparation for the PTR would be limited given such fee earner’s familiarity with the PTR bundle/issues from work on the bundle index and previous involvement in the conduct of the present proceedings. As for correspondence with client and counsel, they should be fairly limited since there did not appear to be outstanding matters.

115.  Solicitor fee-earners’ fees of 48 hours for the proposed 6-day trial would translate into 8 hours/day. There would be 5 hours of hearing time a day (and travelling time would not be allowed under taxation on party-and-party basis). Even allowing a further hour or so each day for follow up and liaison with client/counsel, I find the time estimates to be somewhat on the high side. I am also not persuaded that under party‑and‑party taxation 2 fee-earners’ costs would be allowed for the entirety of the trial.

116.  As regards correspondence with client and counsel, I do not believe there would be significant correspondence. After all, the solicitors would be seeing counsel and client face-to-face at the trial hearings. But I accept there might be some reporting of developments, discussion of strategy and last minute instructions that were not unusual at trial.  But I am unable to see how both fee earners need to be involved to the same extent.

117.  There was a separate item for written closing submissions. Mr Pao submitted this should be excluded in its entirety as closing submissions should be included in counsel’s brief. Be that as it may, since the present application was an application for security for costs and not taxation of costs, I need not decide this on principle. But if preparation of written closing submissions was to be carved out of counsel’s brief fee, then the propriety of the brief fee must be considered on such basis. However, I could not see why solicitors should be involved in the preparation of written closing submissions when counsel had carriage and conduct of the trial. It is proper for solicitor fee-earners to read the written closing submissions and offer some observations if appropriate and to report to client, but it is ultimately counsel’s handiwork. The correspondence with client and counsel should not be elaborate.

118.  But that said, there would be core items of costs because PTR/trial would be the final and intensive stage of the litigation with substantial costs to be incurred over a short period. Taking a broad-brush approach, I consider security in the sum of HK$1,600,000 for PTR/trial to be appropriate. In coming to this view, I also bear in mind the need to grant sufficient and not necessarily complete security.

XII. CONCLUSION

119.  Mr Pao submitted that as to the time for payment of the security sought, the PC Judgment allowed Chen’s appeal, but the parties were unable to agree on the terms of the order and on costs, so written submissions had to be filed by 28 September 2017, and Chen would ask for an order that the BVI Interim Payment of US$1,000,000 deposited with BVICA be returned to her. Chen claimed that since the BVI Interim Payment might be returned to Chen in the near future, the time to provide security should be fixed at 28 days after determination by the Privy Council of her application for return of the BVI Interim Payment.  It was said there was no urgency as the present proceedings had not been set down for trial, but that did not sit well with Chen’s assertion that she was ready and willing to proceed.

120.  Mr Chua SC disagreed and said this was an unreasonable and unrealistic time limit. In my view, there was quite simply no certainty whether and if so when the BVI Interim Payment would be returned to Chen. More importantly, Chen had not condescended upon the particulars in respect of her financial status apart from bare assertions of impecuniosity. The fact she was able to raise US$1,000,000 for the BVI Interim Payment spoke of her ability to put up significant funds. There was insufficient persuasive evidence before me that Chen was unable to afford the security ordered without resorting to the BVI Interim Payment. But that said, HK$1,600,000 was not a paltry sum, and the court would consider allowing reasonable time for compliance.

121.  In the circumstances, I grant an order that (a) Chen do within 35 days from the date hereof pay into court the amount of HK$1,600,000 as security for Ng’s/Daughter’s costs up to the conclusion of the present proceedings with liberty to apply, and (b) until such security is given (but subject to any order that may be made by the Companies Judge) all further proceedings against Ng/Daughter be stayed. It is important to bear in mind the present proceedings were winding up proceedings, which should not be left in indefinite abeyance since other parties (eg creditors) might be affected, hence any stay granted by this court must be subject to any order that may be made by the Companies Judge who is seized of the Petition.

122.  Ng/Daughter by the Summons also sought an order that in default of Chen providing for security as prescribed, “the Petitioner’s action against the 2^nd and 3^rd Respondents do stand dismissed without further order with costs of and occasioned by these proceedings to be paid by the Petitioner to the 2^nd and 3^rd Respondents”. Again, it must be remembered that these are winding up proceedings, and it is inappropriate for a petition to be dismissed without order of the court. Should Chen fail to pay the prescribed security within the prescribed time, it would be for Ng/Daughter to take appropriate action as they see fit in relation to the disposal of the present proceedings. But it would be inappropriate for this court to order dismissal of the present proceedings without further order.

123.  There is no reason why costs should not follow event. I therefore grant a costs order nisi that Chen shall forthwith pay Ng’s/ Daughter’s costs of and occasioned by the Summons (with all costs reserved, if any) to be summarily assessed with certificate for two counsel.

124.  I make the following directions in relation to the summary assessment of costs:

(a)  Ng/Daughter do within 14 days from the date hereof lodge and serve statement of costs of not more than 1 page pursuant to Practice Direction 14.3;

(b)  Chen do within 7 days thereafter lodge and serve succinct summary of objections of not more than 1 page in respect of Ng’s/Daughter’s statement of costs;

(c)  if no application is made to vary the costs order nisi within 14 days from the date hereof, the summary assessment of costs will be by paper disposal (unless otherwise directed);

(d)  if application is made to vary the costs order nisi within 14 days from the date hereof, the party seeking variation of the costs order nisi do within 14 days from the date hereof fix a date with the Listing Clerk for the hearing of the application for variation of the costs order nisi and summary assessment of costs before me in chambers (open to the public) on a date not before 28 days from the date hereof with half hour reserved.