Szeto Kwok Hung Roque v. Szeto Kwok Kwong Bernard and Others

HCMP 2596/2017

[2021] HKCFI 1765

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2596 OF 2017

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Before: Hon K Yeung J in Chambers

Date of Hearing: 15 June 2021

Date of Decision: 25 June 2021

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DECISION

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1.For reasons set out in my Decision of 18 March 2021[1] (the “Decision”), I refused Ds’ application for security for costs against P.

2.By summons of 1 April 2021, Ds seek leave to appeal against the Decision.  This is the hearing of the Summons.

3.Mr Leo Remedios together with Ms Alice Lau appeared for Ds.  P did not appear.  Mr Philip Cheng appeared for the Official Solicitor, who is neutral to the application.

The background facts

4.For background of the matter, I refer to my previous Decisions (in particular that of 18 April 2018[2]).

The proposed grounds of appeal

5.As has been summarized by Mr Remedios[3], proposed Grounds 1 to 4 all revolve around a similar theme, ie “it is wrong in law and in principle to depart from the well‑established legal principle that shares in a Hong Kong private company do not amount to substantial assets within the jurisdiction readily available for costs for the purpose of defending a security for costs application”.

6.I have considered the authorities cited to me, which include Re Charter View Developments Ltd, unrep, HCCW 45/2006, 21 December 2006 and So Yee Mui and Others v Lam Pui Chi, unrep, CACV 283/2010, 28 June 2011.

7.I am not satisfied that those grounds are reasonably arguable.

8.The important emphasis is not the nature of the P’s assets being in the form of shareholding in a private company.  The important facts relevant to this Court’s exercise of discretion are rather:

(a)  Worth Enterprises is a family company holding family assets;

(b)  As revealed in D2’s 4^th affirmation, Worth Enterprises has been holding cash and cash equivalents as the main forms of asset; 

(c)  P has interest in a share of the family assets, in the form of 12% shareholding in Worth Enterprises;

(d)  Ds are directors of Worth Enterprises[4]. P is not a director;

(e)  The family assets are not the subject matter of the disputes before this Court;

(f)  As I have pointed out in the Decision, the reality in the present case is that Ds as directors are controlling Worth Enterprises.  P has a share of family assets in Hong Kong which happens to be in the form of shareholding in that company which is (ie his share alone) according to the accounts before me worth upwards of HK$10,000,000.  Ds know their value.  Ds say they do not want to buy them even if they could upon execution.  They want an order for security now instead;

(g)  In the course of his oral submissions, Mr Remedios with reference to Ameritax Plus Ltd v Harris [2012] 5 HKLRD 757 emphasized that the process of enforcing any adverse costs order against P by seeking a charging order in respect of P’s shares in Worth Enterprises is going to be a protracted one.  I note however Worth Enterprises is an asset holding company.  It has been holding cash or cash equivalents.  The valuation of its shares should not be a difficult exercise.  The process of enforcing a judgment through a charging order on company shares is a common occurrence.  Though not obliged to, Ds can buy P’s shares.  It does not assist to over‑exaggerate the complexity of that process.  That is in any event at best a factor to be taken into account, which the Court has;

(h)  It was in the light of those facts and considerations that on balance, given P’s assets in the form of his shareholding in Worth Enterprises, and given Ds’ attitude, I formed the view that it would be too oppressive to P by requiring him to pay security.  The 12% shares in Worth Enterprises which company Ds control in my view already offers them a measure of security.

9.I refuse Ds leave to appeal on proposed Grounds 1 to 4.

10.Proposed Ground 5 complains that this Court in effect reversed the burden of proof.  I have not.  I had regard to all the circumstances of the case in deciding whether it was just in ordering P to give security for costs. I decided that it was not.

11.In all the circumstances, I refuse Ds leave to appeal.

12.As P did not appear, I make no order as to costs.

The Plaintiff, unrepresented, and did not appear

Mr Leo Remedios and Ms Alice Y C Lau, instructed by Bernard Wong & Co, for the 1^st to 3^rd Defendants

Mr Philip Cheng, of the Official Solicitor