Arrow Ecs Norway As v. M Yang Trading Ltd and Others
Read the full judgment text of CACV 202/2018 on BabelCite. This Court of Appeal judgment was delivered on 14 February 2019 before Cheung JA, Kwan JA.
Civil procedure – security for costs – appeal – impecuniosity of appellant – email and telephone scam – unjust enrichment – change of position defence – Tinsley v Milligan – Patel v Mirza – Court of Appeal bound by its previous decision – Practice Direction 14.3 – Skeleton Bill of Costs – excessive hours – two counsel not justified – Whether security for costs should be ordered against the relevant defendants (D5, D10, D11, D13, D14 and D15) – held yes, given established impecuniosity and absence of countervailing factors – Whether the defendants' reliance on Patel v Mirza displaced the discretion – held no, the argument was at best reasonably arguable but not strong enough – Appropriate amount of security – HK$700,000 inclusive of HK$70,000 for the costs of the application – The 5th, 10th, 11th, 13th, 14th and 15th defendants ordered jointly and severally to pay HK$700,000 into Court within 21 days – appeal stayed pending payment – in default, appeal dismissed with costs to plaintiff – plaintiff to have costs of the security application.
Legal issues: Whether security for costs should be ordered against the relevant defendants · Appropriate amount of security for costs
Outcome: Application for security for costs granted; the 5th, 10th, 11th, 13th, 14th and 15th defendants are jointly and severally required to pay HK$700,000 into Court as security for costs of their appeal within 21 days.
Cited by 5 cases · Cites 2 cases
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CACV 202/2018 [2019] HKCA 176 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 202 OF 2018 (ON APPEAL FROM HCA NO. 239 OF 2016) ________________
________________ Before: Hon Cheung and Kwan JJA in Court Dates of Plaintiff’s Written Submissions: 22 November 2018 and 3 January 2019 Date of 10th, 13th and 14th Defendants’ 1st set of Written Submission: 21 December 2018 (lodged on 21 December 2018) Date of 10th, 13th and 14th Defendants’ 2nd set of Written Submission: 21 December 2018 (lodged on 24 December 2018) Date of Decision: 14 February 2019 _____________________ D E C I S I O N _____________________ Hon Cheung JA (giving the decision of the Court) : I. Application for security for costs 1.1On 7 May 2018, Chow J granted summary judgment for the plaintiff against the 5th, 10th, 11th, 13th, 14th and 15th defendants (‘D5, D10, D11, D13, D14 and D15’) (‘the relevant defendants’). 1.2The relevant defendants filed their notice of appeal appealing against the summary judgment of Chow J. 1.3The plaintiff now applies for security for costs of the appeal against them. We will deal with the application on paper. II. Factual background 2.1The plaintiff was the victim of an email and telephone scam. 2.2Between 18and 22 January 2016, the plaintiff was induced by fraudsters to transfer nine sums totalling US$23,395,000 to the 2nd defendant’s (‘D2’) account. 2.3The plaintiff was able to recall a certain part of its money from instructing its bank. A total of about US$17,423,000 was unable to be recalled. Between 20and 22 January 2016, portions of this sum of US$17,423,000 were transferred from the D2’s bank account to various bank accounts of the relevant defendants. The plaintiff claimed against them on grounds of unjust enrichment, money had and received, and/or restitution. 2.4The relevant defendants admitted the receipt of funds, but sought to defend the plaintiff’s claims on the grounds of change of position in good faith in the ordinary course of a money exchange business. The Judge rejected their defence. III. Legal principles 3.It is clear that the Court of Appeal may in special circumstances order an appellant to furnish security for costs of its appeal. An example is where the appellant is impecunious. The reason why security is to be ordered in such a situation is to ensure that the respondent to the appeal would not be unable to recover its costs despite being successful in the appeal. But even where impecuniosity is shown, the Court still has a discretion not to order security where the appellant is able to show countervailing factors such as a high prospect of success in the appeal. IV. Grounds of the application 4.1The plaintiff relied on the following evidence to support its case that the relevant defendants are impecunious : 1) According to the affirmations of assets of the relevant defendants filed previously pursuant to orders made in injunction proceedings issued by the plaintiff, their only assets in Hong Kong are bank accounts held by each of them in the Hong Kong and Shanghai Bank (‘HSBC’). The fund in these accounts is not sufficient to meet the costs of the plaintiff. The total fund is US$3,110,773.22 and the judgment against them is US$4,764,132 with a shortfall of about US$1,653,000; 2) On 21 December 2018 and on 24 December 2018 respectively, three of the relevant defendants, namely, D10, D13 and D14, lodged their 1st set of written submission and 2nd set of written submission. The 1st set of written submission is about the substantive appeal itself. The 2nd set of submission dealt with the financial situation of the relevant defendants. In it, the defendants attempted to seek leave to adduce a bank statement of D14 which purported to show that it has substantial money in a bank account and it is submitted that the plaintiff should be able to recover costs against the defendants in the event that it is successful in the appeal. 4.2On 4 January 2019, the Registrar of Civil Appeals (‘the Registrar’) ordered that only the 1st set of written submission will be considered and not the 2nd set of written submission because the 2nd set of written submission was lodged out of time in breach of an Unless Order of the Registrar dated 7 December 2018. V. Our view 5.1On the evidence the plaintiff clearly has established the impecuniosity of the relevant defendants. There is no admissible evidence concerning their current financial position other than the one adduced by the plaintiff. 5.2The 2nd set of submission is, of course, ruled inadmissible but we would like to express our disapproval of Jim & Co., Solicitors for D10, D13 and D14 who lodged the 2nd set of submission. Notwithstanding the order disallowing the 2nd set of submission, Jim & Co. still tried to adduce the so‑called new evidence through the back door by means of the 2nd set of submission without even bothering to lodge a proper application by way of summons and a supporting affidavit. This is not the proper conduct of a responsible officer of the Court. 5.3On the merits of the appeal, the defendants submitted that they have a strong ground of appeal because of the recent UK Supreme Court judgment of UK Supreme Court case of Patel v Mirza [2017] AC 467 which they claimed effectively overruled the earlier decision of Tinsley v Milligan [1994] 1 AC 340. They submitted that the Judge was wrong in holding that the defence of change of position was not available to them. Further, the Judge was wrong to hold that the relevant defendants did not produce sufficient evidence to show a causal link between the receipt and the change in position. Chow J held that although he was aware that the UK judgment may have an effect on how the Hong Kong Court of Final Appeal will later decide on issues involving illegality, he being a judge of the Court of First Instance must at this stage follow the principles of Tinsley. He held that :
5.4In our view the defendants have to show that this Court was plainly wrong in its previous decision and therefore that decision should no longer be followed before they could make any headway with the Patel argument. At best the defendants’ argument on Patel is only a reasonably arguable point for the purpose of the appeal but we are not convinced that it is such a strong point that we should exercise the discretion in favour of the defendants. Our view applies likewise to the other grounds of appeal and the proposed new grounds identified in the 1st set of submission. 5.5The defendants stated that the plaintiff is a foreign corporation and the defendants are entitled to apply for security for costs against the plaintiff. But no application was taken out by the defendants for that purpose. In the circumstances the Court will order security for costs of the appeal. 5.6The plaintiff seeks HK$1,524,000 as security. The Skeleton Bill of Costs is in breach of Practice Direction 14.3in that it does not state that the amount claimed does not exceed the plaintiff’s liability for costs to its own solicitors. We will require the plaintiff’s solicitor to submit a properly endorsed Skeleton Bill within two days. We are of the view that the amount claimed is excessive. We do not see why the preparation of the present application and the appeal should require two solicitors and a litigation clerk. A total of 39 hours of work (HK$156,200) is said to be needed for the present application which included an assumed hearing which is no longer required. 105 hours (HK$382,000) are said to be required for the preparation of the hearing. 55 hours (HK$151,000) are said to be needed for documentary preparation of the appeal. Another 48 hours (HK$190,400) are said to be needed for ‘correspondence, general care and research’. In our view the hours are excessive. Counsel fee (two counsel) for the one day hearing is said to be HK$570,000. With the argument on law, attendance by senior counsel may be arguably needed but we do not see why two counsel can be justified on a party to party taxation. We are of the view that HK$700,000 is appropriate for security which will include the costs of the present application at HK$70,000. 5.7We will make the following order : 1) The 5th, 10th, 11th, 13th, 14th and 15th defendants are jointly and severally required to pay into Court HK$700,000 as security for the costs of their appeal within 21 days from the date of this order; 2) Pending payment into Court, the appeal is stayed; 3) In default of payment, the appeal will be dismissed without further order together with the costs of the appeal to the plaintiff; and 4) The plaintiff is to have the costs of the application for security.
Mr Randall Arthur, solicitor advocate, of Kobre & Kim, for the plaintiff Jim & Co., for the 10th, 13th and 14th defendants H M Tsang & Co., for the 5th, 11th and 15th defendants | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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