Chan Wai Yee v. Kwong Wai Piu, The Administrator of the Estate of Wong Chin also known as Kwong Wong Chun (or Gine), Deceased

CACV 411/2020

[2021] HKCA 891

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 411 OF 2020

(ON APPEAL FROM HCA NO. 1206 OF 2015)

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JUDGMENT

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Hon Chu JA giving the judgment of the Court:

Introduction

1.This is the defendant’s application that the plaintiff provides security for his costs in this appeal in the sum of HK$501,200.  The plaintiff opposes the application.  Both parties have lodged written submissions.

2.Having considered the papers, we are of the view that it is appropriate to deal with the application based on the written submissions only without an oral hearing, pursuant to Order 59 rule 14A(1) of the Rules of the High Court, Cap. 4A.

HCA 1206/2015

3.In this appeal, the plaintiff seeks to appeal against the judgment of Deputy High Court Judge To (“the Judge”) made on 31 July 2020 dismissing her claim and entering judgment for the defendant on the counterclaim with cost[1].

4.The plaintiff’s claim in the action below is for adverse possession of a residential flat in a mansion in Causeway Bay (“the Property”) registered in the name of Madam Kwong Wong Chun (“the Deceased”), who passed away on 10 December 1974.  The defendant is her son and the administrator of her estate.  By way of counterclaim, the defendant claims for vacant possession of the Property and mesne profit.    

5.It is common ground that by an oral tenancy created in April 1968, the Property was leased to the plaintiff’s father by the defendant, on behalf of the Deceased, at a monthly rent of $250.  The defendant was responsible for the collection of rent and he would issue rental receipts as agent of the Deceased.  It is also not in dispute that the defendant ceased to collect rent after April 1980. 

6.The plaintiff’s case is that after 15 April 1980, for no reason the defendant stopped to come to collect rent.  Her father made various attempts to look for the defendant, including placing a notice in the newspapers on three consecutive days between 15 and 17 August 1980, but to no avail.  In 1983, her father renovated the Property and changed the locks of the main door and the gate.  Her family has since treated the Property as their own and has enjoyed uninterrupted occupation of the Property without interference from the Deceased or the defendant.  Over the years, her family has carried out further renovation, and she has paid all the utility bills and the management fees, except for the period from October 2014 to June 2016 which were paid by the defendant.  After the plaintiff’s father and mother died in 2005 and 2012 respectively, the plaintiff and her husband and daughter continued to live in the Property until about 2015 when the building became deserted after the other units were acquired by a property developer and they had concerns over security and the hygiene condition.  The plaintiff has however kept some furniture in the Property which was locked up.  Accordingly, the plaintiff claims that she has been in adverse possession of the Property for over 30 years since 1980. 

7.The defendant’s case is that after April 1980 the plaintiff’s father and his family occupied the Property as licencees until April 2010 pursuant to two oral agreements he made with the plaintiff’s father.  The first oral agreement was made in 1980 when the Property was in need of repairs.  As he did not have the money to carry out the repairs, he agreed to allow the plaintiff’s father and his family to live in the Property rent free for 15 years until April 1995 in return for the plaintiff’s father paying the costs of renovating the Property.  The second agreement was made in 1995 after the Building Authority issued a Building Order in respect of the Property.  The defendant agreed to allow the plaintiff’s father and his family to live in the Property rent free for another 15 years up to April 2010 in return for the plaintiff’s father carrying out the repairs required to comply with the Building Order.  The defendant did not contact the plaintiff’s family to negotiate the rent after the second oral agreement expired as he has since 2012 been in poor health and has since 2014 lived in an elderly home.  Throughout the years, he has been settling the rates and property tax of the Property.  In 2015, after learning of the property developer’s offer to acquire the Property, he applied for letters of administration of the deceased to enable him to sell the Property.  On the defendant’s case, time only started to run against him in April 2010 and the period of limitation has not expired by 2015 when the plaintiff commenced the action.  

8.The Judge considered that the case turned on disputes of facts.  He did not find the plaintiff a credible witness and rejected her evidence as internally inconsistent and inherently improbable.  In particular, he did not accept her evidence that her father could not have made the two oral agreements with the defendant because he had strokes in 1975, 1994 and 2000 which seriously impaired his ability to communicate as being inconsistent with her case that her father tried to locate the defendant in April 1980 by making telephone calls and placing notices in the newspaper, and also arranged renovation of the Property in 1983.  The Judge also rejected her explanation for not paying the management fees from October 2014 to June 2016. 

9.As for the defendant, he did not attend court and had not testified.  Despite no hearsay notice had been served, the Judge admitted his witness statement as evidence, taking into account the fact that the defendant was medically certified to be chairbound and suffering from slurred speech.  The Judge was satisfied that he had difficulties in speaking and was unable to attend court.  He also considered there was no surprise nor prejudice to the plaintiff as the defendant’s witness statement had already been served on her.   And while there was no opportunity to cross-examine the defendant, the veracity of his witness statement could be tested against contemporaneous documents as well as undisputed and indisputable evidence and that it was ultimately a question of weight. 

10.The Judge was of the view that the defendant’s case that he would automatically become the owner of the Property upon the Deceased’s death “begs belief”, his evidence that he did not have funds to carry out the renovation in 1980 and the building works in 1995 “hard to believe”, and that he did not consider it necessary to reduce the two oral agreements into writing as “even harder to believe”.  He, however, considered that these may, on another view, “reflect the defendant’s casual nature in dealing with his affairs and his naivety”.  He was further impressed by the fact that the defendant had been paying the rates and property tax throughout the years, which suggests he had not forgotten he was the beneficial owner. The Judge concluded that the defendant was a credible witness and his case was “less incredible than the plaintiff’s”. 

11.The Judge rejected the plaintiff’s case that the defendant had abandoned the Property since 1980.  He accepted the defendant’s case that the renovation of the Property in 1983 was made pursuant to the first oral agreement, and also his evidence about the second oral agreement.  The Judge concluded that the plaintiff’s occupation of the Property since April 1980 was with the defendant’s consent and it was only since 15 April 2010 that she has been in wrongful occupation.  The limitation period has not expired when the defendant filed the counterclaim in February 2018.  He therefore dismissed the plaintiff’s claim and entered judgment on the counterclaim.

The application for security for costs

12.On 27 August 2020, the plaintiff filed the notice of appeal to appeal the Judge’s decision.  The respondent filed a respondent’s notice seeking to affirm the Judge’s decision on additional grounds. The appeal has yet to be listed for hearing. 

13.By letter dated 8 September 2020, the defendant through his solicitors requested the plaintiff to provide security for his costs of the appeal in the sum of HK$501,200, and enclosing a draft skeleton bill of costs. 

14.Not having received a response to the request from the applicant, the respondent issued the present summons on 10 December 2020 together with a supporting affirmation made by his solicitor.  The ground on which the present application is made is that the plaintiff is impecunious and the defendant will encounter undue delay and put to undue expense to enforce a costs order against her if her appeal was unsuccessful. 

15.The defendant relies on the following matters to support his application:

(1)   Despite demands, the plaintiff has not satisfied the judgment sum ordered against her.  She has also through her solicitors requested the defendant to withhold enforcing the judgment.

(2)   The plaintiff has not disclosed her new address after she moved out of the Property.  

16.The plaintiff does not dispute that she has limited financial means.  She stated in her affirmation that there is a real risk that she will be bankrupted if her appeal is dismissed and she is ordered to pay the defendant’s costs.  The plaintiff provided her current address in her affirmation, but stressed that it is a rented accommodation and that it is merely a temporary arrangement.

17.The plaintiff primarily resists the application on the basis that there are merits in her appeal.

The applicable legal principles

18.Under Order 59 rule 10(5) of the Rules of the High Court, the Court of Appeal may, in special circumstances, order that such security shall be given for the costs of an appeal as may be just.

19.It is settled practice to require security for costs to be given by an appellant who would be unable through impecuniosity to pay the costs of the appeal, if unsuccessful.  Security for costs may also be ordered upon proof that the respondent will be likely to encounter undue delay or put to undue expense in enforcing any order for costs in the appeal. The court, however, has a discretion and is entitled to consider other relevant factors such as the strength of the appeal to determine whether or not it would be just to order that security for costs be provided.  But once a case of impecuniosity or some other factor such as difficulty or expense in enforcing a costs order is demonstrated, it is generally up to the appellant to demonstrate countervailing factors militating against an order being made: See Chung Kau v. Hong Kong Housing Authority & Others [2004] 2 HKLRD 650 and Hong Kong Civil Procedure 2021 Vol.1 paras.59/10/26 & 59/10/27.

Merits of the appeal

20.On the materials before us, we are satisfied that the defendant has made out a case for seeking security for costs from the plaintiff, given that the plaintiff is admittedly impecunious and the defendant may encounter undue delay and have to incur expenses to enforce any costs order made against her. 

21.What we have to consider is whether we should exercise our discretion against making an order for security, having regard to the merits of the plaintiff’s appeal.  In this regard, a detailed examination of the case and arguments on appeal is neither necessary nor desirable.  All that the court needs to do is to form a preliminary view: Chung Kau v. Hong Kong Housing Authority & Others, supra.

22.The plaintiff put forward four grounds of appeal in the notice of appeal.  They are (1) the Judge erred in law and fact in finding there were the two oral agreements giving rise to licences; (2) the Judge erred in disregarding facts and evidence which are pertinent to the plaintiff’s claim, and wrongly took into consideration irrelevant facts; (3) the Judge erred in making serious finding of misconduct against the plaintiff’s father, which is speculative and wholly unsupported by evidence; and (4) the Judge erred in law in ordering the plaintiff to pay costs on indemnity basis.

23.In gist, the plaintiff argued that (1) the Judge failed to consider the inherent probability of the plaintiff’s case that the defendant disappeared in April 1980, and the inherent improbability of the defendant’s case that he had made the two oral agreements with the plaintiff’s father, the result of which was 30 years of rent-free occupation for the plaintiff’s family; (2) the Judge fundamentally misconstrued the evidence, especially the significance of the advertisement put up by the plaintiff’s father in 1980; (3) the Judge erred in giving full weight to, and adopting the whole of, the defendant’s witness statement, notwithstanding no hearsay notice was served and it was only revealed at the trial that the defendant would not attend and be available for cross-examination, resulting in prejudice and unfairness to the plaintiff; and (4) the Judge’s finding that the advertisement put up by the plaintiff’s father in 1980 was “either concoctions or were made with the purpose of obtaining no result” neither accords with the defendant’s case nor the evidence in the case, and is further logically flawed.

24.It would seem that the plaintiff is essentially seeking to challenge the Judge’s assessment of the evidence and finding of primary facts and drawing of inferences.  It is trite law that the plaintiff faces a high threshold of demonstrating that the Judge was plainly or palpably wrong:   Ting Kwok Keung v Tam Dick Yuen & Ors [2002] 3 HKLRD 1, and China Gold Finance Limited v CIL Holdings Ltd, CACV 11/2015 (unreported, 27 November 2015). 

25.We accept that part of the grounds of appeal and arguments are arguable and may have merits, such as the acceptance and reliance on of the defendant’s evidence in the witness statement, and the evaluation of the evidence and the findings in relation to the 1980 advertisement and the two oral agreements.  We are, however, not persuaded that the merits of the plaintiff’s appeal are so strong as justifying exercising our discretion against ordering security for costs to be provided by the plaintiff.  It is to be noted that even if the defendant’s witness statement is excluded, the burden remains on the plaintiff to make out a case of adverse possession.           

Quantum of the security to be ordered

26.On the quantum of the security to be ordered, the skeleton bill is in the total sum of $501,200, of which $109,600 is costs of the application for security for costs (under Part B). 

27.The plaintiff objects to the quantum of the skeleton bill of costs on the basis that (1) the appeal is straightforward involving narrow and simple issues; (2) the present application for security for costs is likewise simple and straightforward involving short affirmations; and (3) the time estimated for the solicitor’s and litigation clerk’s work are excessive and the estimated length of the appeal should be three hours instead of one day.  She suggests that the security to be ordered should not exceed $120,000.

28.We agree with the plaintiff’s objections.  In respect of the security for costs application, it is a short, simple application that does not justify, on party-and-party basis, a very experienced solicitor and the litigation clerk spending 10 hours and 8 hours on it respectively as well as $50,000 of counsel fee.  We would summarily assess the costs of the security for costs application at $60,000, including $40,000 as counsel fee.   

29.As for the costs of the appeal, it does not appear to us, from reading the Judge’s Judgment and the notice of appeal and respondent’s notice, that the appeal is complex or involves difficult questions of law.  We believe the papers involved in the appeal would have all been considered in the trial below and most, if not all, the arguments in the appeal would have been canvassed at the trial.  We are of the view that, on party-and-party basis, 20 hours (6+8+6 hours) and 18 hours (2+10+6 hours) for the solicitor and the litigation clerk respectively and counsel fee of $270,000 are excessive.  Adopting a broad brush approach, we consider $120,000 is an appropriate estimate of the costs of the appeal.      

30.We would therefore order the security in the sum of $180,000.

Costs of the application for security for costs

31.Considering that the plaintiff did not respond to the defendant’s request for security for costs, which necessitated the application to court, and applying the usual rule of costs follow the event, we would order that the plaintiff pays the defendant the costs of the present application, which we have assessed at $60,000.  It will be included in the amount of the security to be provided by the plaintiff. 

Disposition

32.The orders we make are as follows:

(1)  The plaintiff shall within 30 days from the date of handing down of this judgment give security for the defendant’s costs of this appeal (inclusive of the costs of the application for security for costs) in the sum of HK$180,000, by making payment into court of the said sum;

(2)  Until the plaintiff has given the security ordered in (1) above and notice thereof is given to the solicitors for the defendant (such notice to be given on the same day as the lodgement is made), all proceedings in this appeal are to be stayed;

(3)  In default of the plaintiff giving security as ordered in (1) above, this appeal do (upon the solicitors for the defendant certifying such default to the Registrar of High Court) stand dismissed out of this court without further order; and

(4)  In the event that the appeal is dismissed in the circumstances provided for in (3) above, the plaintiff shall pay the defendant

(a)    the costs of the application for security for costs summarily assessed at HK$60,000; and

(b)    the costs of this appeal, such costs to be summarily assessed or taxed if not agreed.

Mr Sunny Chan, instructed by Eddie Lee & Company, for the plaintiff.

Mr Patrick Siu, instructed by BC Chow & Co, for the defendant.