Big Island Construction (HK) Ltd v. Wu Yi Development Co Ltd and Another

Read the full judgment text of CACV 189/2011 on BabelCite. This Court of Appeal judgment was delivered on 18 September 2014 before Yuen JA, Kwan JA, Chu JA.

Civil procedure – Court of Appeal – application for leave to appeal to the Court of Final Appeal – security for costs – agreed order – variation – functus officio – Hong Kong Court of Final Appeal Ordinance (Cap 484) s.22(1)(a), s.25(2), s.25(3)(b), s.25(4), s.25(5) – Hong Kong Court of Final Appeal Rules r.13 – dismissal of underlying appeals in CACV 160/2011, 189/2011, 190/2011, 191/2011 and 257/2012 on 25 April 2014 with costs to follow the event – appellant Big Island Construction (HK) Limited sought leave 'as of right' to the CFA – parties' solicitors agreed to deal with the application on paper and filed a jointly-endorsed draft order providing for security of HK$400,000 – court made order in those terms on 16 July 2014 (endorsed 7 July 2014) and the order was sealed on 18 July 2014 – appellant paid the $400,000 into court on 31 July 2014 – respondents' late 'clarification' request that the security should be $400,000 per respondent was rejected by the court – respondents issued summons on 28 July 2014 seeking to vary the order to (a) increase security to $800,000 (i.e. $400,000 per respondent) and (b) impose a further condition requiring the appellant to prove on oath capacity to pay an additional HK$3 million in costs – whether the Court of Appeal is functus officio in respect of the agreed order – held, yes: the draft order was jointly agreed and endorsed by both solicitors, was made by the court, and its paragraph 3 expressly channeled any variation application to a single Permanent Judge of the CFA – Re Wing Fai Construction Co Ltd (Security for Costs) (2008) 11 HKCFAR 657 confirms that the two respondents, although not separately represented, were not suing jointly and were prima facie entitled to separate security, but no negotiations on amount took place and the $400,000 figure was knowingly acceded to – whether security for costs in excess of $400,000 per respondent may be ordered as a condition of leave – held, no: under s.25(3)(b) HKCFAO the cap is $400,000 per respondent and only the Chief Executive in Council may amend it under s.25(5) – World Fuel Services (Singapore) Pte Ltd v Florens Container Inc (2007) 10 HKCFAR 252 – whether further 'additional conditions' under s.25(4) HKCFAO may require proof of capacity to pay costs beyond the cap – held, no: although additional conditions of a type other than those in s.25(2)(a) and (b) are permissible (Cathay Pacific Airways v Wong Sau Lai (2006) 9 HKCFAR 45), no condition can override the $400,000 cap – summons dismissed with costs order nisi that respondents pay appellant's costs of the summons.

Legal issues: Whether the Court of Appeal can vary an agreed order for security for costs to increase the amount · Whether the cap on security for costs and the ambit of additional conditions under s.25 HKCFAO permit the orders sought

Outcome: Summons dismissed. The respondents' application to vary the order dated 7 July 2014 was refused, with a costs order nisi that the respondents pay the appellant's costs of the summons.

Cited by 4 cases · Cites 3 cases

Case No.CACV 189/2011

Court

Court of Appeal

Date18 Sep 2014

JudgeYuen JA, Kwan JA, Chu JA

Case Document

100%Judiciary

CACV 189/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 189 OF 2011

( on appeal from HCA NO. 1957 of 2005)

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BETWEEN
	BIG ISLAND CONSTRUCTION (HK) LIMITED	Plaintiff/ Appellant
	and
	WU YI DEVELOPMENT COMPANY LIMITED	1st Defendant/ 1^st Respondent
	WU YI CONSTRUCTION COMPANY LIMITED	2^nd Defendant/ 2^nd Respondent

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Before: Hon Yuen, Kwan and Chu JJA

Date of written submissions: 2 September 2014

Date of Decision: 18 September 2014

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DECISION

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Hon Yuen JA (giving the judgment of the Court):

Background

1.On 25 April 2014 this court handed down judgment in CACV160/2011, CACV189/2011, CACV190/2011, CACV191/2011 and CACV257/2012. All appeals were dismissed with an order nisi that costs follow the event.

2.On 19 May 2014 Big Island (Construction) (HK) Ltd, the appellant in CACV189/2011, filed a Notice of Intended Application for leave to appeal to the Court of Final Appeal.

3.On 22 May 2014 a Notice of Motion for that purpose was filed. Leave “as of right” was sought under s. 22(1)(a) Hong Kong Court of Final Appeal Ordinance Cap. 484 (“HKCFAO”). The respondents made no submissions to the contrary.

4.On 29 May 2014 the respective solicitors of the appellant and the respondents sent a joint letter to this Court agreeing that the application for leave could be dealt with on paper.

5.On 7 July 2014 this court endorsed on the Notice of Motion: “Order in terms on usual conditions”. The parties’ solicitors were directed to attempt to agree an order for the conditions.

Agreed draft

6.After correspondence between the parties’ respective solicitors which involved revisions to a draft proposed by one party, an agreed draft signed by both sets of solicitors was sent to the court on 14 July 2014. It was made an order of the court on 16 July 2014 and sealed on 18 July 2014. It was in these terms:

“1. Leave to appeal to the Court of Final Appeal be granted to the applicant on condition that the applicant do within 28 days from the date of this Order pay into Court the sum of HK$400,000.00 (or such alternative sum or form of security provided in such manner as may be agreed by the parties within 14 days from the date of this Order in accordance with paragraph 2 of this Order) as security for the due prosecution of the appeal and payment of all such costs as may become payable to the 1^st and 2^nd respondents in the event of the appeal being dismissed for non-prosecution or of the Court ordering the applicant to pay the 1^st and 2^nd respondents’ costs of the appeal.

2. In the event of the parties reaching agreement as to an alternative sum and/or form of security as referred to in paragraph 1 of this Order, such agreement shall be recorded in a joint letter filed with the Registrar, signed by the parties’ solicitors, or by the party if unrepresented, setting out the conditions agreed and making reference to this Order by its date and FAMV number.

3. In the event that any one of the parties wishes to apply for a variation to the standard Order regarding the provision of security where no agreement is reached between the parties as to the proposed alternative, the party seeking the variation may apply by summons to a single Permanent Judge within 21 days from the date of this Order for the alternative Order sought, accompanying the summons with written submissions in support. The other party or parties shall be at liberty to file written submissions opposing such application within 7 days of service of the said summons and written submissions. Such application will be dealt with by a single Permanent Judge on the papers unless otherwise directed.

4. Upon due compliance with the condition regarding the provision of security as hereinbefore provided, the applicant should apply for final leave in accordance with Rule 13 of the Hong Kong Court of Final Appeal Rules and, upon the Registrar certifying such compliance by letter to the parties, final leave shall be deemed to be granted by the Court on the date of the said letter without further order.

5. In default of the applicant complying with the aforesaid condition as to the provision of security within 3 months from the date of this Order, leave to appeal granted in paragraph 1 above shall be rescinded and the Application for Leave to Appeal shall stand dismissed with costs to the 1^st and 2^nd respondents to be taxed if not agreed, without further order.

6. Any directions or orders arising out of this Order which the parties may wish to seek from the Court (including but not limited to any applications for payment out of the money in Court) should be sought from the Registrar who may, if he thinks it appropriate and desirable, refer the same to a single Permanent Judge.

7. Costs of this application be in the appeal.”

Subsequent developments

7.However, at 7:22 pm on 16 July 2014 (after the court had made an order in terms of the agreed draft), the respondents’ solicitors faxed a letter to the court saying that it had “come to [their] attention” that the amount of security in para. 1 of the agreed draft was $400,000 and not $400,000 for each respondent, and asking the court to “clarify” the order.

8.The following day (17 July 2014), the appellant’s solicitors wrote to the court rejecting the suggestion that there had been any mistake by reference to the correspondence that had been exchanged between the solicitors before the agreed draft was sent to the court.

9.In view of that, this court made the following direction on 17 July 2014:

“As the order was made pursuant to the draft approved by both solicitors following correspondence between them, the court does not see fit to set aside the court”.

The order was sealed on 18 July 2014.

10.On 31 July 2014 the appellant paid $400,000 into court as security for costs.

Summons for variation

11.On 28 July 2014 the respondents filed a summons applying for the following order:

“1. The security for appeal payable by the Appellant in the sum of HK$400,000.00 as provided for by the order of the Court of Appeal dated 7^th July 2014(Yuen, Kwan, Chu JJA) be increased to the amount of HK$800,000.00 (to reflect security of HK$400,000 for each Respondent), to be paid within 21 days.

2. As a further condition for leave to appeal, the Appellant shall within 21 days adduce proof on oath that it has capability of paying costs (in addition to the security sum of HK$800,000) of HK$3 million, through inter alia (i) producing audited financial statements of the Appellant for the years 2012 to 2014; (ii) producing up-to-date bank statements of the Appellant; and/or (iii) such other means that the Court considers just and appropriate.

3. In default of compliance with paragraphs 1 and 2, leave to appeal be rescinded without further order.

4. The costs of this application be in the cause of the appeal.”

12.Pursuant to directions, affirmations were duly filed. The parties have agreed that the summons can be disposed of on paper and skeleton submissions were filed on 2 September 2014.

Discussion

13.1 In an appeal to the Court of Final Appeal it is usual for security for costs to be given in respect of each respondent (see s.25(3)(b) HKCFAO).

13.2 Although not separately represented, the respondents in this appeal are not suing jointly and would prima facie be entitled to separate security (Re Wing Fai Construction Co Ltd (Security for Costs) (2008) 11 HKCFAR 657 paras. 13-14). Therefore it was surprising to see the sum of $400,000 expressed as security for both respondents, and not for each respondent, in the draft order provided to the court.

13.3 However the draft had been agreed by both solicitors after correspondence. The draft order duly endorsed by both solicitors was received by the court on 14 July 2014. Accordingly this court did not consider it appropriate to “clarify” the order or to set it aside as requested by the respondents’ solicitors in their letter which arrived after the order had already been made on 16 July 2014.

14.1 It is clear from the correspondence exhibited to the affirmations now before us that there were no negotiations regarding the amount of security.

14.2 Further the affirmation filed by Lian Mingshun for the respondents (28 July 2014) in support of the summons does not say that any mistake had been made by their legal advisers in agreeing the draft. He said instead:

“I should make clear that whilst the Wu Yi Parties acceded to the sum of HK$400,000 as security for the appeal for purposes of the sealed order, this was by no means intended to be a final and binding agreement between the parties as to the amount of security”.

He then refers to para. 3 of the draft order which has been set out in para. 6 of this Decision.

15.I am afraid I do not understand the respondents’ position. It seems to me that if they had wanted $400,000 for each respondent, they should have made it clear in the correspondence and should have explicitly set that out in the draft order. If the appellant disagreed, then that could be decided by the court.

16.As it is, the parties agreed a draft which has been made into the court’s order. And by para. 3 of the order, they have agreed that any application for “variation” should be made to a single Permanent Judge of the Court of Final Appeal. It seems to me therefore that this court is functus.

17.As for the application for a “further condition” in support of the respondents’ request for security for $3m costs, the application must also be rejected in light of what was said in World Fuel Services (Singapore) Pte Ltd v Florens Container Inc (2007) 10 HKCFAR 252, para. 5 regarding the ambit of s.25(4) HKCFAO:

“... Subsection (4) is concerned with varying conditions that have been imposed. No such variation can operate to bring about a condition that there was no jurisdiction to impose in the first place. Subsection (3)(b) caps the amount that can be ordered by way of security for costs at $400,000 per respondent. That cap can be amended. As we have seen, sub-s.(5) provides that ‘[t]he Chief Executive in Council may by order published in the Gazette amend sub-s.(3)(b) to vary the amount specified’. No such amendment to the amount specified has been made, and $400,000 therefore remains the cap. The formula in sub-s.(2) ‘Without restricting the generality of sub-s.(1)’ leaves room for what the Appeal Committee described in Cathay Pacific Airways v Wong Sau Lai (2006) 9 HKCFAR 45 as ‘additional conditions’ ie conditions other than those of the type specifically provided for in sub-s.(2)(a) and (b). But the formula cannot override the $400,000 cap. There is no jurisdiction to order security for costs in excess of $400,000 per respondent”.

Order

18.For the reasons set out above, I would dismiss the summons with a costs order nisi that the respondents are to pay the appellant’s costs of the summons.

Hon Kwan JA:

19.I agree.

Hon Chu JA:

20.I agree.