The Joint and Several Trustees of the Property of So Ching Wan v. Assen Ltd and Others

CACV 144/2024

[2024] HKCA 877

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 144 OF 2024

(ON APPEAL FROM HCB NO. 4475 OF 2002)

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DECISION

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Hon Cheung JA (giving the Decision of the Court) :

1.This is the 2^nd to 4^th respondents’ application for security for costs in respect of the applicant’s appeal (‘the Appeal’) against the judgment of Deputy High Court Judge Reyes SC (‘the Judge’) dated 18 March 2024 (‘the Judgment’), dismissing the applicant’s application for review of a taxation review conducted by Master Lai who gave his Determinations on 25 August 2023 (‘the Determinations’).

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

I.  Background facts

3.For the purpose of disposing the present application, the following brief summary of the basic facts of this case, taken from the Judgment, should suffice.

4.The applicant consists of Mr Alan Tang Chung Wah (‘Tang’) and Mr Wong Kwok Man (‘Wong’), being the joint and several trustees of the property of So Ching Wan (‘the Bankrupt’).

5.The present application arose from the costs orders stemming from a judgment dated 6 June 2019 (‘2019 Costs Orders’) of Deputy High Court Judge William Wong SC ([2019] HKCFI 1491). The judgment concerned an amended summons requiring the 2^nd to 4^th respondents to answer certain questions and provide related documents. Deputy High Court Judge Wong dismissed the amended summons and ordered the applicant to pay the 2^nd to 4^th respondents’ costs on a party‑and‑party basis with certificate for two counsel.

6.Master Lai taxed the costs on 24 August 2021, 18 July 2022 and 6 December 2022. On 30 January 2023, Tang applied for a review under Order 62, rule 33 of RHC, which was dismissed by Master Lai by the Determinations. On 20 November 2023, Master Lai issued the allocatur with respect to the Costs Orders and allowed the respondents $1,495,786.97 (‘HCB Allocatur’).

7.Tang then appealed the 2019 Costs Orders to the Court of Appeal. On 29 December 2020, the appeal was dismissed as ‘totally without merits’ with costs on an indemnity basis ([2021] 3 HKC 5) (Judgment at [1]) (‘CA Costs Order’).

8.On 24 February 2022, taxation of the CA Costs Order took place. Tang also applied for an Order 62, rule 33 of RHC review (Re So Ching Wan [2023] HKCA 1314). On 15 February 2024, Master Rita So taxed the respondents’ costs at $1,361,953 (‘CACV Allocatur’), and for the costs of the Order 62, rule 33 of RHC review to be at $38,993.60 payable forthwith by Tang to the respondents. Tang has since applied for a review under Order 62, rule 35 of RHC, but no hearing date has yet been fixed.

9.On 8 January 2024, Tang, as the applicant, by way of summons, applied to the Judge for a review of the HCB Allocatur issued by Master Lai.

10.The applicant’s grounds of complaint focused on four matters (Judgment at [3]) :

1)  Three counsel, namely, Mr Anson Wong SC, Mr Alan Kwong and Ms Sakinah appeared at the hearing before Deputy High Court Judge Wong. The most junior (Ms Sakinah Sat) appeared on a complimentary basis, as evidenced by her brief which was placed before Master Lai. The applicant says that the certificate for two counsel only covered the briefs of Mr Anson Wong SC and Ms Sat. In other words, the applicant claims the benefit of the complimentary brief. But Master Lai instead allowed the briefs of Mr Anson Wong SC ($360,000) and Mr Alan Kwong ($130,000) in full (‘Complaint 1’).

2)  The applicant says that the solicitors’ hourly rates applied by Master Lai did not reflect solicitors’ hourly rates as approved by the Chief Justice from time to time (‘Complaint 2’).

3)  The 2^nd to 4^th respondents’ solicitors are said to have charged too many hours. The solicitors billed $1,731,209 in fees. Master Lai taxed the amount down by $979,906 to $751,303 (43.40%). According to the applicant, the amended summons was not complicated, even taking account that the applicant (then acting in person) addressed numerous questions to the 2^nd to 4^th respondents’ solicitors before the amended summons was heard. If one assumes an average hourly rate of $5,500 (reflecting the fact that 81.8% of the work was done by a senior solicitor), then the taxed down amount of $751,303 is equivalent to about 136 billing hours. The applicant submitted that it is excessive for a simple application of the sort (‘Complaint 3’).

4)  Regardless of the outcome of Complaint 1, the amounts charged by senior and senior junior counsel were excessive and should not have been allowed in full. At most, Master Lai should only have allowed $280,000 and $100,000 respectively for the two counsel (‘Complaint 4’).

11.By the Judgment, the Judge found in favour of the 2^nd to 4^th respondents and dismissed the Review Application :

1)  on Complaint 1, it was found that it was common practice for very junior counsel to be instructed to appear in court on a complimentary basis, but this did not mean that, if a certificate for two counsel is granted, a master should treat the certificate as covering the very junior counsel’s complimentary charge, rather than the fees of the senior junior counsel briefed (Judgment at [12]);

2)  on Complaint 2, it was found that there was no ground for interference with the Master’s decision (Judgment at [16]);

3)  on Complaint 3, while the Judge commented that he was personally somewhat surprised at the number of hours involved, Master Lai in fact taxed solicitors’ fees down by 43.4%, and absent an error in principle or law or some glaring misapprehension of the facts, he was not in a position to disturb Master Lai’s taxation (Judgment at [17]); and

4)  on Complaint 4, it was found that Master Lai was entitled to conclude as he did, given that the applicant’s allegations of fraud and the ‘convoluted’, ‘incomprehensible’, and unfocussed nature of the applicant’s submissions (Judgment at [15]).

12.By a notice of appeal dated 12 April 2024 (‘the Notice of Appeal’), the applicant now appeals the Judgment to the Court of Appeal.

II.  Security for costs of the appeal

13.On 3 May 2024, the 2^nd to 4^th respondents took out the present summons with an affirmation in support, applying for an order, inter alia, that the applicant do provide security for costs for the respondents’ costs of the Appeal in the sum of $336,850.

14.On 25 May 2024, Wong (i.e. the other trustee), not Tang, settled the HCB Allocatur (after over four years) under the compulsion of bankruptcy proceedings under HCB 1635/2024 against Wong. Wong confirmed that the proceedings against the respondents were conducted solely by Tang but there was an arrangement between them that Tang would indemnify Wong for him to remain as one of the joint trustees notwithstanding that he (i.e. Wong) would not be involved in the case.

15.The respondents contend that the following special circumstances exist in the present case which justify an order for security for their costs of the Appeal being made against the applicant :

1)  the respondent is likely to encounter difficulty, undue delay and undue expense in enforcing any order for costs in respect of the Appeal;

2)  the applicant is impecunious and his inability to pay costs of the Appeal; and

3)  the Appeal is apparently without merit.

16.In contending that the respondents will be put to undue delay or expense to enforce any order for costs in the present Appeal, the respondents rely on the following matters :

1)  the fact that Tang had been seeking to review and appeal on costs on every possible turn regardless of the underlying merits is an irresponsible litigation tactic;

2)  the payment under the HCB Allocatur was paid by Wong and not Tang; payment to the respondents was made only under the compulsion of bankruptcy proceedings; Tang is still exposed to a potential liability for the money paid by Wong under the indemnity; and Tang had already brought two failed reviews to resist payment;

3)  in a related action of HCA 996/2022, Tang, the 2^nd plaintiff, in his capacity as one of the joint and several liquidators of the 1^st plaintiff, was ordered by Master James Kwan on May 2024 to pay together with the 1^st plaintiff $585,445.90 to the 2^nd respondent forthwith. Although the costs were eventually paid, there remains $3,500 outstanding from withdrawing Tang’s review of the costs in HCA 996/2022 and Tang did not pay any interest on these costs; and

4)  the review under Order 62, rule 35 of RHC on the CACV Allocatur is not an appeal and does not operate as a stay of execution.

17.The applicant lodged a skeleton dated 18 July 2024 in opposition (‘Applicant’s Skeleton’). The applicant submitted that :

1)  there was no difficulty to enforce payment as there was a payment of $2,105,387.33, which settled the costs and interests accrued, proving that there is no impecuniosity (Applicant’s Skeleton at [6]‑[15]); and

2)  there are merits in the present appeal (Applicant’s Skeleton at [17]).

III.  Principles

18.Under Order 59, rule 10(5) of RHC, the Court of Appeal may, in special circumstances, order the appellant to provide security for the costs of the appeal. For this purpose, ‘special circumstances’ include cases of insolvency or impecuniosity, and difficulty or expense in enforcing costs order (see Hong Kong Civil Procedure 2024, Vol 1, at [59/10/26] and [59/10/27]).

19.The Court, however, retains a discretion not to order security if the appellant can demonstrate sufficient countervailing factors which would militate against such order being made (see Hong Kong Civil Procedure 2024, at [59/10/27]).

20.Whilst the burden of showing that the appellant is impecunious rests upon the defendant, Anthony To J in E‑Global Ltd v Trenda Ltd [2012] 2 HKLRD 1211 at [8] adopting the view of Quilliam J in Concorde Enterprises Ltd v Anthony Motors (Hutt) Ltd (No 2) [1977] 1 NZLR 516 observed :

‘ .... by the very nature of the application and the relationship between the parties, the defendant cannot be expected to produce conclusive evidence of the plaintiff’s lack of means. It has no access to the plaintiff’s books of account or other evidence. Nor is it desirable to mount a comprehensive discovery process for the purpose of making such an application. It is therefore sufficient for the defendant to point to the surrounding circumstances or adduce some credible evidence in support of his belief that the plaintiff will be unable to pay the defendant’s costs. It is then up to the plaintiff to adduce such evidence as he thinks fit to demonstrate his means or to contradict the defendant’s evidence. The Court shall decide whether a reasonable person with ordinary experience of daily life would consider the plaintiff unable to pay such costs. The threshold is just one of adducing credible evidence for the belief and falls short of proof of lack of means to pay.’

21.Supplementing the point made above, the Court may take into account circumstances and findings made in other related proceedings: Re Estate of Nina Kung (Security for Costs) [2023] 2 HKLRD 1221.

IV.  Our view

1)  Impecuniosity of the Applicant

22.On the materials before us, we are satisfied that the circumstances of the case, particularly those surrounding the delay in the settlement of the HCB Allocatur where payment was made not by Tang but by Wong after over four years and only due to the compulsion of bankruptcy proceedings and that costs in HCA 996/2022 are not paid in full, that the respondents have demonstrated that the applicant is impecunious, and will encounter difficulties or delay in recovering their costs of the Appeal from the applicant if the Appeal were to be dismissed.

23.In our view, we are satisfied that the respondents have made out a case of special circumstances for requiring security for costs to be provided.

2)  Merits of the Appeal

24.Although we find the applicant is impecunious, and the respondents will encounter difficulties or delay in recovering their costs of the Appeal from the applicant if the Appeal were to be dismissed, we have to now consider whether there are sufficient countervailing factors which would militate against an order for security for costs being made against the applicant.

25.It is generally up to the party resisting the application to demonstrate countervailing factors militating against an order being made (see Chung Kau v Hong Kong Housing Authority [2004] 2 HKLRD 650, at [14(2)]).

26.In the present case, the applicant submitted why an order for security should not be made in the present appeal, which can be summarised as follows :

1)  it is not just to order security; and

2)  there are merits in the present appeal.

27.Having found that the applicant is impecunious, we do not accept Mr Chu’s contention that it is not just to order security. It is also not necessary to go into the details of the contentions which have been canvassed in the Notice of Appeal in the present application. All that we need to say is that the merits of the Appeal are not such that it will cause us to exercise the discretion against the granting of security.

28.Overall, we consider that there are special circumstances which justify ordering the applicant to give security for the Respondents’ Costs of the Appeal.

3)  Quantum

29.As to the amount of security, according to the Respondents’ Skeleton Bill of Costs of the Appeal, the estimated costs (excluding the costs of the present application) are $336,850, comprising of $171,850 in solicitors’ fees and $120,000 in counsel fee and $45,000 in law costs draftsman’s fees.

30.According to the Respondents’ Statement of Costs of the 2^nd to 4^th respondents for Summary Assessment under Order 62, rule 9A of RHC dated 29 July 2024, the costs of the present application are estimated at $257,004 which includes $90,000 as counsel’s fee.

31.We consider that the appropriate amount of security of the Appeal (excluding the costs of the present application) on a party to party basis is $250,000 (which includes $120,000 for counsel fee).

V.  Conclusion

32.Accordingly, we make the following orders :

1)  The applicant is to pay into court within 21 days from the date of this order the sum of $250,000 as security for the costs of the Appeal;

2)  The Appeal is stayed until the sum is paid;

3)  In default of payment and upon the solicitors for the 2^nd to 4^th respondents certifying such default to the Registrar of Civil Appeal, the Appeal will be dismissed without further order together with costs of the appeal to the 2^nd to 4^th respondents; and

4)  the 2^nd to 4^th respondents are to have the costs of this application which are to be summarily assessed by this Court upon the applicant filing a statement of objection (limited to two pages) to the 2^nd to 4^th respondents’ Statement of Costs dated 29 July 2024 within 14 days.

Mr George Chu, instructed by KB Chau & Co, for the Applicant

Mr Vincent Lung and Ms Ivy Ho, instructed by Hom & Associates, for the 2^nd to 4^th Respondents