Re Ng Fui

CACV 137/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 137 OF 2012

(ON APPEAL FROM HCB NO 6506 OF 2011)

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Before: Hon Lam JA in Chambers

Date of Hearing: 12 October 2012

Date of Judgment: 12 October 2012

Date of Reasons for Judgment: 17 October 2012

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REASONS FOR JUDGMENT

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1.By a summons of 5 September 2012, the Petitioner (who is the Respondent in the appeal) seeks security for costs against the Debtor under Order 59 rule 10. The Debtor appeals against the judgment of Barma J of 23 May 2012 adjudging the Debtor to be a bankrupt. The grounds of appeal, as set out in the Notice of Appeal of 19 June 2012 are as follows,

“1. Insofar as finding that the learned Judge had failed to take into account the following matters when making such an Order:-

(a) During my submission when I expressed that I had an ability to repay the debt, the learned Judge interrupted me many times and did not give me a chance to speak for my objection. The learned Judge said that he knew the case very well. However, when I pointed out that the 5 Defendants in HCA 739 of 2011 had deceived me in the loan made between me and the Petitioner which resulted in the Bankruptcy Petition, I observed that the learned Judge did not allow me to continue my submission and repeatedly watched the clock.

(b) The learned Judge showed his impatience and did not solve my problem seriously.

(c) The learned Judge considered me not to have an ability to repay the debt but 1 can settle the debt very soon.

(d) The learned Judge interrupted my witness to speak.

(e) Suspicious radical and religious discrimination.

(f) The non-professionalism of the court interpreter.

(g) The learned Judge consulted and agreed with the Petitioner’s solicitors to dispose the case as soon as possible and only concerned the feeling of the Solicitors for the Petitioner, but ignored my hard feeling.

2.   Had the Court taken into account the aforesaid matters, it ought to have found that the bankruptcy order should not be granted against me.”

2.As set out in the judgment of Barma J, the petition was based on the liability of the Petitioner under a personal guarantee of 8 December 2010 executed in favour of the Petitioner and a Statutory Demand of 17 March 2011.  As it is apparent from a letter dated 24 May 2011 from the then solicitors acting for the Debtor to the solicitors for the Petitioner, the Debtor was aware of the Statutory Demand in May 2011, if not before.  The Petitioner had demanded for payment since 17 March 2011.

3.The Petitioner contends that the Debtor is impecunious and asks for security in the sum of $229,000.

4.Despite my directions of 7 September 2012, the Debtor did not file any evidence in opposition to the application.

5.For present purposes, the principles governing the exercise of discretion to grant security for costs can be taken from Hong Kong Civil Procedure 2012 para 59/10/26 citing the decision of the Court of Appeal in Chung Kau v Hong Kong Housing Authority [2004] 2 HKLRD 650,

“(1) The fact that an appellant is impecunious does not lead automatically to an order that security for costs must be provided. The court is entitled to consider other relevant factors such as the strength of the appeal to determine whether or not it would be just to order that security for costs be provided.

(2) That said, as a matter of practice, once an applicant for security can demonstrate that impecuniosity (or some other factor such as difficulty or expense in enforcing a costs order) exists, while the court retains an overall discretion whether or not to make the order, it would then generally be up to the party resisting the application for security to demonstrate countervailing factors which would militate against such an order being made. A common countervailing factor to resist applications for security are the merits of an appeal.

(3) On a consideration of the merits of the appeal, while a detailed examination is not required (or desirable, even if possible on the materials before the court at this stage), the court should form some sort of preliminary, even instinctive, view. Where the merits appear to go strongly one way or the other, this may, by itself, be a decisive factor. Thus, an appeal which is very strong would often be a very good reason not to order security. The converse of course also applies. A hopeless appeal may even by itself justify an order for security. However, if the court takes the view that the appeal could really go either way, then generally it will look to the existence of any other factors to tilt the balance, in the absence of which security will be ordered. This is of course on the assumption that a factor such as impecuniosity has already been demonstrated.

(4) As I have said above, the overriding consideration for the court is to consider, as the rule requires, whether “special” (not exceptional) circumstances exist making it “just” to order security.”

6.The Debtor had failed to pay the debt since 17 March 2011.  He did not pay the same despite the Statutory Demand and the issue of the bankruptcy petition.  Though he claimed to have the ability to pay, up to now he has not put before the court any credible evidence to demonstrate that he has such means.  He has other creditors apart from the Petitioner.  The Official Receiver informed the Petitioner on 27 June 2012 that the Debtor had no noticeable asset to be realized.  Though he has advanced a claim against others in HCA 739 of 2011, he did not disclose any information regarding the progress of that action.  In any event, there is no suggestion that he has obtained judgment in that action against the defendants and substantial damages are to be recovered in the near future.  The Debtor’s claim that he might recover assets from his ex‑wife in the pending divorce suit is again not substantiated by any concrete evidence.

7.I am satisfied that the Debtor is impecunious.

8.Is there any counter-veiling factor to weigh against the grant of security for costs? Having considered the grounds set out in the Notice of Appeal and the judgment of Barma J and having heard the Debtor, I am of the view that the Debtor’s appeal does not have a realistic prospect of success. I have read the evidence of the Debtor filed in the bankruptcy proceedings.  As mentioned, the Debtor had not placed before the court any credible evidence as to his ability to repay the debt.  The other grounds relied upon by him to oppose the petition were considered by Barma J in his careful judgment.  His allegations in the Notice of Appeal against the judge are serious but, putting aside that he had not placed before this court any evidence to support such allegations, he could not pinpoint a valid ground for opposing the petition which had not been sufficiently considered by the judge in his judgment.

9.I cannot find any reason why security should not be ordered in this case.

10.As regards the amount of security, I think the figure sought by the Petitioner is on the high side.  A reduction should also be made to the sum set out in the skeleton bill as there is no need to have a call-over hearing for this application.  Looking the matter in the round, I would order security in the sum of $150,000.  As discussed at the hearing, I will give the Debtor up to 30 November 2012 to pay.

11.Subject to the revision as to the figure and deadline for payment as stated above, I make an order in terms of the summons.

Ms Eva Sit, instructed by Mayer Brown JSM, for the Respondent (Petitioner)

The Appellant (Debtor) appeared in person