Yip Kim Po v. Aig Insurance Hong Kong Ltd (Formerly Known As American International Underwriters Ltd)
Read the full judgment text of HCSD 1/2020 on BabelCite. This HCSD judgment was delivered on 26 October 2021.
1. This is an application by Yip Kim Po (“the applicant”) to stay a costs order made on 22 June 2021 in favour of the respondent (“the costs order”). The amount of costs payable was summarily assessed at $213,000. At the conclusion of the hearing, the stay application was refused. My reasons appear below.
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HCSD 1/2020 [2021] HKCFI 3256 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE APPLICATION TO SET ASIDE A STATUTORY DEMAND NO. 1 OF 2020 ____________________
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________________________ REASONS FOR DECISION ________________________ 1.This is an application by Yip Kim Po (“the applicant”) to stay a costs order made on 22 June 2021 in favour of the respondent (“the costs order”). The amount of costs payable was summarily assessed at $213,000. At the conclusion of the hearing, the stay application was refused. My reasons appear below. 2.The costs order arose out of the applicant’s unsuccessful application to set aside a statutory demand. The applicant has filed a notice of appeal to set aside this court’s order dismissing his application to set aside the statutory demand. Applicable legal principles 3.The applicable legal principles for a stay pending an appeal are well-established. They may be summarised as follows:
See Astro Nusantara International BV v PT Ayunda Prima Mitra (No 2) [2016] 1 HKLRD 591 at §15. 4.Mr Jonathan Lee, counsel for the applicant, submitted that (a) the applicant has strong grounds of appeal; in any event, (b) where there exists an arguable appeal, it should be stayed where the appeal would be rendered nugatory if a stay were not granted. Whether the appeal has a strong likelihood of success 5.The court was referred to the judgment of the Court of Appeal in Maeda Kensetsu Kogyo Kabushiki Kaisha also known as Maeda Corporation & Ano v Bauer Hong Kong Limited [2020] HKCA 768 at §15 where it was held that questions of contractual construction are always treated as questions of law in England and in Hong Kong. 6.Mr Lee submitted that as the appeal involves a question of law, the threshold for appellate intervention is much lower than that of an appeal against a finding of fact or exercise of discretion and that it follows that the applicant does not have to show that the decision was plainly wrong. For my part, I have difficulty in comprehending that that was the ratio of the Maeda case. 7.I accept that the appeal involves a question of construction and thus a question of law arises. That would normally mean that the appeal is at least arguable. When it was put to Mr Lee whether it was his submission that whenever an appeal involves a question of law, it would automatically fall into the “strong reason” category, he shied away from such a proposition. 8.Turning to the merits of the appeal, the gravamen of the applicant’s grounds is that the court erred in its construction of the policy in 2 respects, namely, in its construction of (a) the phrase “judgment, or other final adjudication” in clause 3 of the policy; and (b) the words “advance payments” in the 2nd sentence of clause 5.6. 9.The applicant submitted that the phrase should be read disjunctively and in support, cited The Unencumbered Assets Trust v Great American Insurance Co et al (S.D. Ohio 2011) 817 F. Supp. 2d 1014 (Ohio District Court) (“the UAT case”) where the Ohio District Court had to consider the meaning of an identical phrase in an excess directors and officers (D & O) policy. Relevantly, under Ohio choice of law rules, Ohio law governs the interpretation of the D & O policy. 10.In the UAT case, the policy contained a dishonesty exclusion for criminal conduct. §2.Q[1] of the policy provided that “[a] loss includes amounts the insured is legally obligated to pay as a result of all claims made against the insured, including defence costs incurred in defending or investigating”. 11.The judge rejected the submission that exhaustion of appellate review was required to trigger the dishonesty exclusion, holding (at 1033) that the policy requires simply “a judgment or other final adjudication adverse to such Insured” establishing deliberately fraudulent or deliberately dishonest acts, omissions or purposeful violations and remarked that “[t]he policy speaks nothing of exhaustion of appellate review”. 12.On a question of contractual interpretation, it is not evident to what extent a decision of a foreign jurisdiction involving a different policy can assist notwithstanding identical wording of the phrase in question. For example, the scope of coverage in the UAT case is unclear. §2.Q of the policy in UAT makes no mention of appeal costs when in the case under consideration by this court, the term “defense costs” is defined in clause 2.5. 13.Context is highly material and, for my part, I consider it entirely unsatisfactory to adopt an interpretation without the benefit of seeing the full terms of the policy. 14.While several cases decided in other states[2] addressing the exhaustion of appellate review and holding exclusion of coverage were cited, it is noteworthy that the judge considered it appropriate to preface the citations with the caveat “admittedly not Ohio cases”. This indicates that there could be a difference in the approach of different states to questions of this kind. When it is the law of a foreign jurisdiction altogether, the caveat applies with even greater force. 15.So far as the interpretation of the 2nd sentence in clause 5.6 is concerned, I have reviewed my reasons stated in the Decision in the light of the applicant’s submissions. I adhere to what I have stated in the Decision and remain unpersuaded that the reasoning is plainly wrong. 16.For the reasons stated, the applicant has not shown the appeal has a strong likelihood of success. He has no more than an arguable appeal. Whether the appeal would otherwise be rendered nugatory 17.The applicant submitted that the appeal would be rendered nugatory because the levying of execution of the costs order is likely to result in serious deleterious effect on him. 18.In a nutshell, the applicant relies solely on the fact that he has had to finance the defence costs and the subsequent appeals which spanned 5 years from 2009 to 2014. That, it was said, amounted to a “colossal burden” on his financial resources. 19.I have little doubt that the legal costs were considerable but there is no evidence before the court as to the applicant’s assets within and outside the jurisdiction nor of his means to raise money. 20.The applicant submitted that it has never been an absolute rule that documentary evidence showing serious financial consequences or deleterious effect is necessary, and their absence can be compensated by the cumulative effect of the other evidence. But what is set out in §18 above tells the court nothing. 21.Mr James Man, counsel for the respondent, invited the court to adopt the same rigorous approach as that required in determining whether an order of security would prevent the appellant from pursuing his appeal: Hong Kong Civil Procedure 2022 §59/10/32. There is something to be said for adopting such an approach. 22.The court is being invited to consider the cumulative impact of the litigation costs on the applicant’s financial resources in circumstances where the court has no inkling of his current financial resources nor the amount of litigation costs he has borne nor indeed his occupation since his release. The only indicium of the applicant’s likely standard of living discernible from the hearing bundles is his address stated in his affirmations which is at a luxury residential development. 23.The court cannot and should not be operating in the dark when making decisions as to whether or not the appeal would be rendered nugatory if the costs order is not stayed. 24.The applicant further submitted that the respondent would not suffer undue prejudice if a stay is granted because it is a well-reputed insurance company with an international presence and the amount involved is small. All that is beside the point. Whether the respondent would suffer prejudice is not a relevant consideration. 25.For the reasons stated above, the application for a stay was refused.
Mr Jonathan Lee instructed by Leung & Lau, Solicitors LLP for the Applicant Mr James Man instructed by Kennedys for the Respondent |
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