Regent Land Asia Ltd v. Lee Chau Hung, Eva and Others

DCCJ 4460/2007

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 4460 OF 2007

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BETWEEN

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R U L I N G

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1.This is an application by the Plaintiff for leave to appeal against my Judgment given on 12^th October 2010 when I ordered the Plaintiff to pay security for costs.

2.There is no draft Notice of Appeal or grounds of appeal attached to the summons, and I have to rely on the skeleton submissions prepared by Mr Chung to understand the ground of appeal. 

3.Before I move on to consider the grounds set out in the skeleton of Mr Chung, I should first deal with the principle upon which I should grant leave to appeal.  

4.Mr Ma has very kindly referred me to the case of SMSE v. KLCACV111/2009 and he quoted the judgment of Madam Justice Le Pichon.  In particular, Her Ladyship has referred to section 14AA(4) of the High Court Ordinance, and discussed about when leave to appeal under Order 59 rule 2B should be given. 

5.For leave to appeal in the District Court, we are basically governed by section 63 of the District Court Ordinance.  If I would just read section 63(1):

“Subject to subsection (3), an appeal can, with leave of a judge or the Court of Appeal, be made to the Court of Appeal from every judgment, order or decision of a judge in any civil cause or matter.”

6.And under section 63A(2):

“Leave to appeal shall not be granted unless the judge, the master or theCourt of Appeal hearing the application for leave is satisfied that—

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appealshould be heard.”

7.If I compare that with section 14AA(4) of the High Court Ordinance which reads:

“Leave to appeal for the purpose of subsection (1) shall not be grantedunless the court hearing the application for leave is satisfied that—

(a) the appeal has a reasonable prospect of success; or

(b) there is some other reason in the interests of justice why the appealshould be heard.”

8.Both section 14AA(4) and our section 63A(2) are in similar wordings. Accordingly, the able judgment of Madam Justice Le Pichon would be a guidance to this court as to how leave should be granted.

9.If I would read out paragraph 17 of Her Ladyship’s judgment:

“Leave to appeal under Order 59 rule 2B is not lightly granted. The relevant test appears in section 14AA(4) of the High Court Ordinance. In granting leave, the judge must have considered that the test set out in section 14AA(4) had been met. The section requires that the court be satisfied that the appeal has a reasonable prospect of success or there is some other reason in the interests of justice why the appeal should be heard before granting leave. Reasonable prospects of success involves the notion that the prospects of succeeding must be ‘reasonable’ and therefore more than ‘fanciful’, without having to be ‘probable’.”

10.So that will be the guiding principle for me to consider whether I should grant leave to the Plaintiff to appeal against my judgment.

11.As background, my judgment is an appeal against a decision of Master Mak on an application first taken out by the 1^stand 2^ndDefendants for security of costs against the Plaintiff. It is argued that the Plaintiff is a limited company, and there is credible evidence to show that the Plaintiff will not be able to pay the legal costs of the Defendants if they succeeded in their defence after trial. The application has been allowed by Master Mak and upheld by myself in my said judgment.

12.Mr Chung submitted that I have made an error in my judgment, and if I would now go directly to his skeleton.

13.He has two separate parts of his skeleton. The first one is error of facts. I only need to read out paragraph 3.4 when he said that:

“The learned trial judge in his assessment of the merits of the case erred not to consider the fact that the 1^stDefendant failed to give a Witness Statement and has been debarred to give evidence at the trial plus the fact that the 1^stand 2^ndDefendant did not give affirmation in support of the application on material issues or affirmation in opposition to the version of material events given by the Plaintiff in the 6^thaffidavit of Tang Che Shun, Michael.”

14.And 3.5 said I erred:

“ ...not to accept version of the material facts as the true version as set out in the 6^th affidavit of Tang Che Shun Michael, which is not rebutted, contradicted or denied at all by the 1^stand 2^ndDefendants, by the fact “Nonetheless” for the purpose of this security for costs application, I do not intend to deal with every allegation deposed in the 6^thaffidavit of Tang Che Shun, Michael herein, and I will leave it to my advisor to make submission all on the matter at the hearing.”

15.Mr Chung submitted that the 1^stand 2^ndDefendants did not say a word to rebut, contradict or deny the material allegations. But it isthe argument of the Defendants that in an application for security for costs, the court should not go into details of finding. I shall come back to this point shortly.

16.The second argument that runs from, I believe, paragraph 6 onward is that I have failed to take into consideration two judgments referred to me by Mr Chung being Sheraton Properties Limited v. Lau Choi Tang[HCA 6319/1986]; and the case, Richard Ellis v. Tai Sang Container Cold Storage and Wharf Limited[HCA 5445/1985].Therefore, I erred in concluding that the Plaintiff does not have a strong case in their claim against the Defendants.

17.To understand the argument, I believe I have to refer to my judgment in order to understand whether those grounds have reasonable prospect of success.

18.As I mentioned earlier on, this is an application by the Defendants for security for costs based on section 357 of the Companies Ordinance and Order 23 rule 1 of the rules of District Court.

19.In all this application, my first consideration is whether there is credible evidence to show that the Plaintiff could not pay the costs if the Defendants are successful with their defence.

20.I find in favour of the Defendants on the evidence in front of me, and there is no suggestion that I erred in that finding. Having made that finding, it does not immediately allow me to order the Plaintiff to pay security for costs as it is still a discretion for this court to decide whether I should order the Plaintiff to pay security.

21.In how to exercise that discretion, in my judgment I referred to the case Keary Developments Ltd v. Tarmac Construction Ltd[1997] 3 AER 534, and I only need to refer to a short passage in the headnote again, which reads:

“In considering all the circumstances, the court will have regard to the Plaintiff’s company’s prospects of success, but without going into the merits in detail unless it can clearly be demonstrated that there is a high degree of probability of success of failure. Account should also be taken of the conduct of litigation, including any open offer or payment in the court, ay change of stance by the parties in the lateness of the application if appropriate. The court would not refuse to order security on the ground that it will unfairly stifle a valid claim unless it is satisfied that in all the circumstances, including whether the company can fund the litigation from outside sources,it is probable that the claim will be stifled. In this regard, it is for the Plaintiff company to satisfy the court that it will be prevented by order for securities from continuing the litigation.”

22.So, clearly, from this judgment, the court is to take all the circumstances into consideration and two very often relied‑on consideration would be the Plaintiff’s prospect of success, and whether there is any evidence to show that the Plaintiff could not obtain funding from someone who is backing it, including the shareholders. So, I approach the question in line with this ruling.

23.Further on, in deciding whether the Plaintiff has a good prospect of success, I accepted the submission by Mr Ma that I should not go into details as this is not my function to resolve the contested issue: see Sunchase International Group (China) Ltd & Anor v. Vincor Group of Companies Investment Limited [2004] 1 HKLRD 731.

24.I do not repeat my analysis of the submission and evidence that was in front of me, but at paragraph 38 I do say that I agree with Mr Ma that the terms of the oral contract will depend on oral evidence.

25.I believe, everybody will remember, it is both stated in my judgment and in today’s submission that this issue turns on an oral agreement made between the 2^ndDefendant on behalf of the 1^stDefendant. The terms of the oral agreement, the interpretation and further legal argument would determine the rights of the parties.

26.It is not disputed that there is no signed agency agreement between the Plaintiff with the 1^stDefendant.

27.I have heard detailed argument between the parties, and on that I concluded that without a full hearing, I could not really conclude one way or the other. That is the reason why I mentioned at paragraph 38 that it is not possible for me to decide whether this is a case there is a good chance of success of the Plaintiff without going into details of the evidence.

28.So, if I do not go into details of the evidence, surely I should not make any finding. So, on the first issue that is raised by Mr Chung that I failed to make sufficient regard to the affirmation by the Plaintiff, in that I have made full consideration and come to my conclusion, I do not see any real prospect of success in that argument.

29.The second limb of the argument is I failed to consider two cases. I have not mentioned these two cases in my judgment, but that does not mean I have not considered these two judgments, in particular, they have been argued before me at the hearing. The only reason why I did not mention them is because they are not helpful to my judgment.

30.If I refer toRichard Ellis v. Tai Sang Container Cold Storage and Wharf Limited[HCA 5445/1985], and if I just take a look at paragraph 43 of Mr Justice Rhind’s judgment, he said this:

“The onus was on Richard Ellis to prove that it was the effective cause of the transaction, and I am satisfied that it has done that.”

31.So, clearly, it is a case that turns first on finding of facts. I am not suggesting that the analysis of law would not be helpful, but it would only be helpful to the trial judge.

32.Given that I decide that I should not go into detail, and I have no finding of facts, I need not and should not go into further analysis of the law, and leave that for the trial judge to decide in due course.

33.If I also turn to the case of Sheraton Properties Limited v. Lau Choi Tang[HCA 6319/1986] the second paragraph already mentioned this:

“This case which raises essential question of facts fall within a very small compass.”

34.So, again, this is a trial case before Mr Justice Sears and it is a case that starts off with finding of facts. Again, I have no doubt that this analysis, in due course, could be helpful to the judge, but I do not consider that they are relevant or necessary for my ruling. Accordingly, I make no mention, and I do not consider that an error that would assist the Plaintiff in any way.

35.Surely, when we are considering the reasonable prospect, what we are considering is whether there is a reasonable prospect of overturning my exercise of discretion in favour of the Defendants.

36.In this particular case, when I am exercising my discretion, I did mention two additional points in my judgment.

37.Firstly, for the 2^ndDefendant who is one of the Applicants, the only cause of action from the statement of claim is that he had conspired with the 1^stDefendant to cause damage to the Plaintiff.

38.At paragraph 39 of my judgment I mention that, the 2^ndDefendant is not a party to agency contract. The only cause of action against him is on conspiracy. It is not at all clear from the statement of claim how the Plaintiff would prove the conspiracy.

39.So, that is a situation I have difficulty to convince myself that there is any strong case against the 2^ndDefendant.

40.And last, I also mention that there was no material before me to suggest that the shareholder will not put up the funding for the security.

41.So balancing all this, I come to my conclusion that it is a just case. And today I have to rule whether the appeal has a reasonable prospect, based on the suggested grounds from the skeleton submission from Mr Chung, my answer is no. If I ask myself whether there is other reason in the interests of justice why the appeal should be heard, my answer is, again, no.

42.Coming to that, I therefore dismiss the application.

(Submissions re application for higher costs be awarded)

43.This is the second judgment I give this week touching on indemnity costs.

44.I believe the starting point I would look at is Order 62 rule 5. After the Civil Justice Reform, we have some new consideration that we could take into account when we are exercising our discretion as to costs. I only cite a few of those newly added considerations. Order 62 r. 5(1) (aa) refers to the underlying objectives in Order 1A rule 1, and (e), the conduct of all the parties,(d) any written offer which expressly to be “without prejudice save as to costs”, (f) whether a party has succeeded on part of its case even if he has not been wholly successful, and (g) any admissible offer to settle made by a party which is drawn to the court’s attention.

45.I believe the conduct of the parties is a newly added consideration on issue of costs which I consider may have the legislative intention to expand cases for indemnity costs. So, subsection (2) goes on to say the conducts indemnity is that whether it was reasonable for a party to raise, pursue or contest a particular allegation; the manner in which a party has pursued or defended his case; whether a claimant has succeeded in its claim in whole or in part, exaggerated his claim; and conduct before as well as during the proceedings.

46.I heard Mr Ma that he would not press on the application, I believe the reason is it is not clear from the evidence that this is a just case, that the conduct of the Plaintiff would warrant a higher scale be given. I do not consider it is a case where I need to allow a higher scale of costs be awarded, but I do allow the Defendants’ costs of this application.

(Discussion as to costs)

47.Costs to the 1^stand 2^ndDefendants summarily assessed at $20,000.

Mr Raymond H T Chung, of Messrs. Chung Fong & Co., for the Plaintiff

Mr Billy N P Ma, instructed by Messrs.William Sin & So, for the1^stand 2^nd Defendants

3^rd Defendant, Absent