LUAN GANG v. SIMPSON MARINE LTD

HCA 107/2011

[2020] HKCFI 207

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 107 OF 2011

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(By Original Action)

AND BETWEEN

AND

HCAJ 171/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ADMIRALTY ACTION NO 171 OF 2011

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R U L I N G

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1.  This is the ruling of the court. There is before this court an application by summons dated 24 April 2019 under Rules of the High Court, Order 75 rule 13 by the applicants, Mr Luan Gang and Offtech International Limited, for an order that all the money currently in court standing to the credit of the applicants in the consolidated actions of HCA 107 and HCAJ 171/2011 in the sum of HK$2,408,674.20 be released to Messrs Ho, Tse, Wai & Partners, solicitors for the applicants.

2.  The relevant historical background is that the vessel, “Maggie”, was arrested in HCAJ 171 and was subsequently sold by order of the court with the sale proceeds paid into court.  HCAJ 171 was consolidated with HCA 107 in June 2012 and the trial of the consolidated action was scheduled to commence before Deputy High Court Judge Hartmann on 3 September 2013.  That was adjourned on the first day of trial. 

3.  The trial was then resumed before this court in October 2015.  After trial, by a judgment handed down on 20 May 2016, this court granted judgment in favour of Simpson Marine Limited against Mr Luan in the sum of HK$542,089 together with interest but dismissed Simpson Marine’s counterclaim against Offtech.  The sale proceeds paid into court were subsequently used to satisfy the judgment debt and interest and paid to Simpson Marine.

4.  On 15 November 2016, this court made its first costs order, including, inter alia, that costs of the action be paid by Mr Luan and Offtech to Simpson Marine, to be taxed if not agreed.

5.  On 13 April 2017, this court made its second costs order dealing with various interlocutory costs as well as ordering (i) costs of the hearing on 3 September 2013 be paid by Simpson Marine to Mr Luan, and (ii) costs of Simpson Marine’s counterclaim be paid by Simpson Marine to Offtech, both to be taxed if not agreed.

6.  On 27 April 2018, Mr Luan’s appeal was dismissed by the Court of Appeal with costs to Simpson Marine.

7.  On 20 March 2019, Mr Luan’s application for leave to the CFA was dismissed with no order as to costs.

8.  On 24 April 2019, the applicants issued the present summons.

9.  As of today, the parties have yet to proceed to taxation of costs.  As far as Simpson Marine is concerned, it has instructed a law costs draftsman to prepare bills of costs for the costs of the action and costs of the appeal.  The draft bills show a total of around HK$2.7 million comprising HK$2.05 million for the action and HK$658,000 odd for the appeal which exceeds the HK$2.4 million now sitting in court which the applicants seek to release to them in full.  These sums do not include Simpson Marine’s costs of taxation. 

10.  Under Rules of the High Court Order 62 rule 32A, the party entitled to payment of any costs to be taxed is also entitled to costs of taxation.  So the totality of the costs claimed by Simpson Marine would be higher than HK$2.7 million.  Of course, under party-and-party taxation, the costs that Simpson Marine claims would usually be taxed down but even if they are taxed down by, say, 30 per cent, the taxed costs of the action and the appeal would still be quite substantial, to which costs of taxation would have to be added. 

11.  The draft bills have only very recently been sent to the solicitors for Mr Luan and Offtech, and Ms Yeung tells this court that they have yet the time to study them.

12.  As far as the applicants are concerned, they have not yet drawn up a draft bill of the costs which they claim from Simpson Marine, and there is simply no evidence as to what that amount might be.  On instructions, Ms Yeung tells this court the amount is around HK$400,000, but it is very difficult for this court to place any weight on that figure since it is unsupported by evidence.

13.  Mr Alder for Simpson Marine opposes the present application.  In gist, he submits that this court should not permit release of any amount now in court if there is an appreciable risk of Simpson Marine’s recoverable costs might become unsecured.  He relies on the well-established principle that an arresting party ie Simpson Marine is entitled to sufficient security to cover the amount of its claim with interest and costs on the basis of his reasonably arguable best case: The Hua Tian Long [2008] 4 HKLRD 745 at paragraph 8 and that the sale proceeds now in court represent such sufficient security.

14.  Further, he submits that even where the arresting party’s principal claim has been paid in full under protest, he is still entitled to have sufficient security for his likely costs of the action and not merely for the limited costs up to the time of payment under protest or release of the vessel: The Acrux [2004] SGHC 198 at paragraph 14, per Belinda Ang J.  Importantly, in that paragraph, the learned Singapore Admiralty Judge said, “It is for the defendant to seek a moderation of the quantum demanded.”

15.  By analogy, in the present case, it is for the applicants to persuade this court to what extent the costs now claimed by Simpson Marine in the two draft bills of costs should be moderated and work out how much of the sale proceeds in court, if any, should be paid out to them after such moderation.  This they have not done nor have they sought an adjournment to enable it to be done.  Instead, the applicants seek to have the entirety of the sale proceeds released to them.

16.  In this court’s view, the law has been neatly summarised in Meeson and Kimbell, Admiralty Jurisdiction and Practice 5th Ed at paragraph 4.78 cited by Ms Yeung:

“Property under arrest may not be released unless either the arresting party consents, which will normally only be upon terms that full security is provided for the claim, or the court orders release. Unlike arrest, the release of a ship from arrest is discretionary. However, the usual practice of the court is only to order release upon the provision of sufficient security to cover the amount of the claim, plus interest and costs, on the basis of the claimant’s best reasonably arguable case. The court may release arrested property without such security being provided, but this is only done in exceptional circumstances, and only where some satisfactory alternative to ordinary security is provided.”

citing The Vanessa Ann [1985] 1 Lloyd’s Rep 549 and North Saskatchewan Riverboat Company Limited v The Edmonton Queen (1995) LMLN 414, the same two cases cited by Ms Yeung to this court.

17.  Upon inquiry from the bench, Ms Yeung on instructions told this court her clients are not prepared to provide sufficient security or some satisfactory alternative to ordinary security.  In her skeleton submissions, Ms Yeung very properly accepts that the sale proceeds represent security for Simpson Marine’s claim.  She also accepts that the usual course of action is to allow the proceeds of sale of a vessel to serve as security to the plaintiff sufficient to cover the amount of his reasonably best arguable case in rem together with interest and costs. However, she submits that there are exceptional circumstances which warrant the making of the order for the release of the sale proceeds to the applicants now.

18.  As far as this court can see, the only circumstances relied upon is that Mr Luan has substantial assets in Hong Kong, including four properties valued at around HK$148 million. This court has also inquired with Ms Yeung earlier whether Mr Luan is willing to give an undertaking to execute a legal charge over any of the properties to secure Simpson Marine’s taxed costs.  On instructions, the answer is no.

19.  It seems to this court futile to suggest Mr Luan has a lot of valuable properties if he is free to sell them and remove the sale proceeds from Hong Kong anytime.  The end result would be as Simpson Marine fears would happen ie its recoverable costs would be unsecured.

20.  To conclude, this court agrees with Mr Alder that it is premature to release the sale proceeds in court to the applicants at this stage.  The application must be dismissed.  If and when after taxation of the parties’ costs and there is a surplus left which belongs to the applicants, then the balance should be returned to them and they can make a fresh application for that purpose unless that can be done by consent.  That is something that I have inquired with Mr Alder and he fully agrees with that course.