Dao Heng Bank Ltd v. Cheng Sau Har and Another

CACV000809/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 809 OF 2001

(ON APPEAL FROM HCMP 2205 OF 2000)

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Coram: Hon Woo JA in Chambers

Date of hearing: 6 June 2001

Date of decision: 6 June 2001

Date of reasons for decision: 7 June 2001

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REASONS FOR DECISION

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Hon Woo JA:

This is an application for security for costs of the appeal brought by the plaintiff by way of summons dated 23 May 2001. As neither of the defendants appeared by 9:55 am on 6 June 2001 while the time for hearing was fixed to commence at 9:30 am and my clerk was not able to contact them over the telephone, I granted the order in terms as set out at the end of this Reasons for Decision.

2.The application is made pursuant to Order 59 Rule 10(5) of the Rules of the High Court. In the affirmation of Chu Kuo Fai Gordon, a partner of the firm of solicitors acting for the plaintiff, two grounds for security for costs are set out, namely, the appeal is an abuse of the process of this court and the defendants are believed to be impecunious.

3.The original action, HCMP 2205/2000, is a mortgage action commenced by originating summons dated 4 May 2000 against the defendants pursuant to a mortgage made on 10 October 1995 between the 1^st defendant as mortgagor, the 2^nd defendant as borrower and the plaintiff as lender in respect of Flat 1506, Block B, Kai Tin Towers, Nos. 51-67C Kai Tin Road, Kowloon, as security for the granting of banking facilities by the plaintiff to the 2^nd defendant.

4.By Order of Master Yuen made on 30 November 2000, the Master ordered that (a) the plaintiff do recover against the 1^st and 2^nd defendants the sum of $1,262,198.56 secured by the mortgage and further interest; (b) the 1^st defendant do deliver vacant possession of the mortgaged property to the plaintiff; and (c) the defendants do pay the plaintiff costs of the proceedings on an indemnity basis. On 11 December 2000, the defendants appealed against Master Yuen's Order and the hearing of the appeal was fixed before Sakhrani J on 30 March 2001.

5.On 30 March 2001, the 1^st defendant was absent on the ground of illness and the judge adjourned the hearing of the appeal to a new date to be fixed before a bilingual judge with half a day reserved and there be an early date.

6.On 3 April 2001, the 2^nd defendant and representatives from the plaintiff's solicitors appeared before the Clerk of the Court for fixing the date. The 2^nd defendant refused to accept the date of 19 April 2001 given and insisted to have a later date. The Clerk of Court advised the 2^nd defendant to take out a summons to vary Sakhrani J's direction. The plaintiff's solicitors were informed by the Clerk of Court that should the 2^nd defendant proceed with his application and issue a summons by the 4 April 2001 to vary Sakhrani J's direction, the parties were to appear before Chung J on 6 April 2001 at 9:30 am. Despite the absence of a summons, the plaintiff's solicitors, being cautious, attended Chung J's court at 9:30 am on 6 April 2001. The 2^nd defendant was present and had with him a summons which had not been filed or served. His application to seek a later date for the hearing of the appeal was refused by Chung J and costs were awarded to the plaintiff. By a notice dated 9 April 2001, the court gave notice of the hearing of the defendants' appeal against Master Yuen's decision, which was fixed before Yeung J on 19 April 2001 at 10 am. By a letter dated 17 April 2001 addressed to Yeung J, the defendants complained about Yeung J's refusal to replace Master Yuen for hearing the originating summons. The defendants' application to remove Master Yuen as the Master hearing the originating summons originated from a letter of 17 October 2000 addressed to the Registrar, High Court in which the defendants objected to Master Yuen hearing the case on apparently two grounds, namely, (1) there was no urgency in proceeding with the case to justify borrowing the District Court premises at which Master Yuen was going to sit instead of the High Court, and (2) "a strong evidence indicating practice of cronism (sic)". That application was rejected by Yeung J. The letter of 17 April 2001 addressed to Yeung J complained that his handling of the defendants' application for replacing Master Yuen was without giving any good legal reason and explanation and had allegedly violated two legal rules, namely, (1) "you have completely destroyed our legal status and freedom of speech"; and (2) "you have legally prejudiced against yourself to hear the same case again on 19^th April 2001". While urging the judge to disqualify himself from hearing the case on 19 April 2001, the defendants said: "We are holding your responsible for all the consequences which may arise on account of your improper legal conduct of the said case on 19^th April 2001." In fact, another letter of 17 April 2001 was addressed to the Chief Judge High Court enclosing a copy of the letter to Yeung J for the CJHC's urgent action. The letter concluded: "We seriously warn that both you and Mr. Justice Yeung have to bear all the consequences for any improper legal conduct of the said case on the 19^th April 20001."

7.When the plaintiff's solicitors heard of the arrangements made for the case to be heard by Waung J instead of Yeung J, they informed the defendants accordingly. By a letter of 18 April 2001, the defendants wrote to Waung J to state that Yeung J had legally committed serious error in arranging Waung J to hear the case on 19 April on the basis that Yeung J had "prejudiced against himself in the said case, he has no authority whatsoever to suggest, make arrangement and decision." The letter concluded: "As your hearing to-morrow is in the strict sense of the word, illegal, we will not appear before you at the High Court Chambers to-morrow."

8.As Waung J's clerk was on leave that day, Waung J immediately wrote a reply to the letter from the two defendants on 18 April 2001 and faxed it to the defendants, advising the defendants that he would proceed with hearing the appeal whether they would appear or not, suggesting that they should attend court for the hearing. However, on 19 April 2001, neither defendant appeared Waung J dismissed the appeal with costs on an indemnity basis, including the costs of the hearing before Sakhrani J. On 2 May 2001, the defendants issued the Notice of Appeal against Waung J's Order made on 19 April 2001. It is in respect of this appeal that the plaintiff now seeks security for costs.

9.When the plaintiff's solicitors attempted in early May 2001 to execute the order for possession granted by Master Yuen, the defendants wrote to the Registrar, High Court on 21 May 2001 complaining about the execution. The contents were abusive and offending; for instance, part of the letter reads:

10.There is no wonder why, because of the apparent delaying tactics employed by the defendants to postpone the hearing by Master Yuen and later the hearings by Yeung J and Waung J, and by reason of the abusive, offending, frivolous, vexatious and totally unjustified remarks made in their correspondence to various judges and the Registrar of the High Court, most judges dealing with the defendants' applications awarded costs against them on an indemnity basis.

11.Now, I turn to the grounds of appeal. In the Notice of Appeal dated 2 May 2001, the defendants set out the following grounds of appeal:

12.The first three grounds are a prolongation of the allegations against the various judges in the handling of this case. As is obvious, arrangements for the hearing of cases should be decided by the court and not by the defendants. The defendants' allegations of prejudice have not been justified. The inference that can be drawn from the defendants' attitude towards the court officials is that the defendants were trying to delay the proceedings. No reasonable or sane person would make allegations of this sort, except for an ulterior motive.

13.I am not able to find any material in the papers before me that the defendants have very strong case against the plaintiff. There was nothing wrong with the mortgage by the security of which the 2^nd defendant obtained banking facilities from the plaintiff, nor do the five letters of facilities from 1995 to 2000 bear any sign of illegality. It is surprising that the last ground of appeal seem to be complaining that the plaintiff has failed to explain the contents of the five facility letters to them. The 1^st facility letter was issued and signed between the plaintiff and the 2^nd defendant on 22 September 1995, then the 2^nd facility letter on 14 November 1996, the 3^rd facility letter on 25 November 1997 and the 4^th facility letter on 7 January 1999. It is surprising that the 2^nd defendant, as the user of the banking facilities as from 1995, had not sought to understand the terms under which he obtained the facilities for several years until the plaintiff took out proceedings under the mortgage for possession of the mortgaged property and for the repayment of the amount owed. I do not see any merit in any of the grounds raised by the defendants.

14.Mr Chu has very fairly pointed out to me that the defendants might wish to raise some argument on the basis of the 5^th facility letter signed by the parties some time in late February 2000. From the transcript of the proceedings before Master Yuen, it can be seen that the only point taken by the solicitor acting for the defendants was that the signing of the 5^th facility letter dated 22 December 1999 posed as a defence not to grant judgment in favour of the plaintiff. The 5^th facility letter was in essence a restructured loan facility offered by the plaintiff to the 2^nd defendant to enable him to repay $1.2m of his total indebtedness towards the plaintiff by means of 120 instalments. There was a dispute as to whether the 5^th facility letter had come into operation. I do not think it necessary to go into that dispute. Suffice for me to say is that this facility letter provides that it is "subject to our overriding right of withdrawal and repayment on demand including the right to call for cash cover on demand for prospective and contingent liabilities." This is an expressed provision agreed to by both parties that the facilities provided by virtue of the letter could be withdrawn and the plaintiff could seek repayment on demand. The plaintiff did seek repayment on demand and upon the defendants' failure to repay, the originating summons was taken out.

15.In the result, I find that the appeal is quite hopeless. It also raises matters which are frivolous and vexatious and it amounts to an abuse of process.

16.Order 59 Rule 10(5) of the RHC provides that 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. It is well established that special circumstances under the above rule include a prima facie case of an abuse or threatened abuse of the process of the court and the appellant's impecunosity. See paras 59/10/28 and 59/10/32 of the Hong Kong Civil Procedure 2001.

17.As I have decided that the appeal has no merit and the grounds of appeal are frivolous and vexatious, amounting to an abuse of the process of this Court, I do not need to decide whether the defendants are impecunious for the purposes of ordering security for costs against them. By letter of 10 May 2000, exhibit GKFC-1, the plaintiff's solicitors had asked the defendants before they took out the summons for security for costs to provide security in the sum of $178,000 with a breakdown. I examined the breakdown of the figures. It is not clear whether they are costs on a solicitor and own client basis or costs on a party and party basis, although they are said to be an estimate of the plaintiff's costs of and occasioned by the appeal. In the circumstances, I was of the view that a sum of $120,000 should be ordered as a sum to be secured as a condition for the defendants to proceed with the appeal. I therefore made the following order on 6 June 2001:

Representation:

Mr Chu Kuo Fai Gordon, of Messrs Iu, Lai & Li, for the plaintiff.

The 1^st and 2^nd defendants (in person), absent.