ERIC EDWARD HOTUNG AND ANOTHER v. HO YUEN KI AND OTHERS

HCA 857/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 857 OF 2011

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DECISION

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INTRODUCTION

1.  On 7 September 2016, I handed down a written judgment after a contested trial dismissing the plaintiffs’ action against the 1^st, 2^nd and 3^rd defendants. I also made (inter alia) the following orders:-

(1) the plaintiffs were to pay the 1^st defendant’s costs of the action (including the expenses incurred in relation to live note for the hearing on 26, 27, 30 and 31 May 2016), to be taxed if not agreed;

(2) on a nisi basis, there be no order as to costs as between the plaintiffs and the 2^nd and 3^rd defendants (“the Costs Order Nisi”); and

(3) there be no order as to the costs of and incidental to the three summonses taken out by the 1^st, 2^nd and 3^rd defendants all dated 24 May 2016 seeking security for costs against the plaintiffs.

2.  I have now before me the following 4 summonses:-

(1) The 3^rd defendant’s summons dated 20 September 2016 seeking a variation of the Costs Order Nisi such that the plaintiffs shall pay the 3^rd defendant’s costs of the action or a portion of such costs as the court shall see fit.

(2) The 2^nd defendant’s summons dated 21 September 2016 seeking a variation of the Costs Order Nisi such that the plaintiffs shall pay the 2^nd defendant’s costs of the action or a portion of such costs as the court shall see fit.

(3) The plaintiffs’ summons dated 21 September 2016 seeking leave to appeal against the orders made, or said to have been made, on 7 September 2016, such that –

(a) there shall be no order as to the costs of the action as between the plaintiffs on the one part and the 1^st defendant on the other part;

(b) the 1^st and 3^rd defendants do jointly and severally or otherwise pay the plaintiffs’ costs of and incidental to the two summonses dated 24 May 2016 relating to security for costs; and

(c) the 1^st and 3^rd defendants do jointly and severally or otherwise pay the plaintiffs’ costs of and incidental to the appeal brought by the plaintiffs against the order of Master M Wong dated 5 April 2016, if the same has not been dealt with.

(4) The plaintiffs’ summons dated 3 April 2017 seeking a stay of execution of the Judgment and Order dated 7 September 2016 (including any taxation proceedings) pending the final determination of the plaintiffs’ application to “vary the costs order nisi” and the plaintiffs’ appeal in CACV 198/2016.

THE 2^ND AND 3^RD DEFENDANTS’ APPLICATIONS FOR VARIATION OF THE COSTS ORDER NISI

3.  I shall first deal with the 2^nd and 3^rd defendants’ respective summonses seeking to vary the Costs Order Nisi.

4.  Both Mr Patrick Siu (for the 2^nd and 3^rd defendants) and Mr Barrie Barlow SC (for the plaintiffs) have referred me to the decision of Deputy High Court Judge Stone QC in 廈門新景地集團有限公司vEton Properties Limited and Others, HCCL 13/2011 (20 November 2012), in which the following was stated by the learned judge:-

“10 Mr Barlow suggested that the fact that the plaintiff had chosen to sue 11 related defendants did not ‘necessitate’ 4 teams of lawyers, and drew the attention of the court to the words of Lindley MR in Bagshaw v Pimm [1900] P 148 at 151 that ‘it does not at all follow that the Court would allow the costs of appearing separately, however many defendants there might be…’; whilst more recently the English Court of Appeal in SEB TryggLiv Holding Aktiebolag v Manches and others, [2005] EWCA 1237 had reaffirmed the proposition that ‘Whilst [P&J] had the right to separate representation that did not mean that, if successful, it would necessarily be entirely at [AMB’s] expense.’

23 Mr Barlow was correct in making the broad argument that the courts carefully scrutinize costs’ orders in order to ensure that apparent ‘profligacy’ of representation is not necessarily to be subvented by an unsuccessful plaintiff. Divers judicial observations readily illustrate that the courts are concerned with weighing, in the exercise of an unfettered discretion, where costs should, or should not, appropriately lie upon resolution of an action.

24 There has been debate between counsel as to the appropriate benchmark to be adopted when considering the issue of the representation of multiple defendants: is it, as Mr Barlow says, one of ‘necessity’ or, as Mr Shieh argues, a matter of ‘reasonableness’?

28 … Litigation is often opaque at the outset, in stark contrast to the position pertaining once a trial has taken place, when any conclusion as to the ‘necessity’ of particular representation has the inestimable benefit of hindsight, which always provides 20/20 vision; to take one of Mr Barlow’s examples, the fact that no cut‑throat defence actually was run in this case (which it was not) is not, I think, dispositive of the point now in issue.

29 Accordingly if, as Mr Barlow strongly pressed, ‘necessity’ indeed is the appropriate benchmark when considering the separate representation of multiple defendants, then it seems to me that this must be qualified in terms of the ‘necessity’ of such separate representation being reasonably apparent when viewed through the factual prism existing at the time of the retention of such representation, and not simply as a post‑facto conclusion based upon that which did, or did not, occur at trial.

30 In the present case therefore, at the time of retention of the representation in question – and as we know in this case eventually there were four ‘cluster’s of defendants and four legal teams – was it reasonable or unreasonable to have taken the view that separate representation was ‘necessary’ in order to guard against the possibility of conflicts of interest arising between the multiple defendants?”

5.  It would appear that the learned judge considered the applicable test to be whether it was reasonably necessary for two (or more) legal teams to be engaged for a number of defendants when viewed at the time of retention of such representation, and not as a matter of hindsight.

6.  On behalf of the 2^nd and 3^rd defendants, Mr Siu argues that:-

(1) At the time when the 2^nd and 3^rd defendants retained lawyers, it was not reasonably apparent that they should join force with the 1^st defendant and should retain only one legal team.

(2) When the 3^rd defendant first applied for security for costs against the plaintiffs on 9 August 2013, Mr Registrar Lung granted the application on 13 December 2013.  There was no argument at that time that the 3^rd defendant should not be separately represented from the 1^st and/or 2^nd defendants.

(3) The same comment applies to the plaintiffs’ subsequent consent to give security for costs of the 1^st and 2^nd defendants in February and March 2014 respectively.

(4) The 1^st, 2^nd and 3^rd defendants’ applications for further security for costs made on 16 December 2015 were granted by Master M Wong, who rejected the plaintiffs’ argument that the 2^nd and 3^rd defendants should not be separately represented.

(5) There was a divergence of interest between the 1^st and 2^nd defendants, in that the 1^st defendant’s interest was to protect her shareholding in STDM, whereas the 2^nd defendant’s interest was to protect its shareholding in STS.

(6) The 2^nd defendant is an entity completely separate from the 1^st defendant.

(7) The 1^st and 2^nd defendants did not represent the interest of the 3^rd defendant, who did not hold any of the alleged trust property in his name.

(8) The 3^rd defendant advanced a line of defence which was completely separate from that of the 1^st and 2^nd defendants, namely, that the plaintiffs could not establish a case of trusteeship de son tort against him.

7.  I do not accept Mr Siu’s principal argument that, at the time when the 2^nd and 3^rd defendants retained lawyers, it was not reasonably apparent that they should join force with the 1^st defendant and should retain only one legal team.  It is clear, from the pleadings and the course of the trial, that the principal defence run by all three defendants in this action has always been that the trust alleged by the 1^st plaintiff did not exist as a matter of fact.  This common factual defence was effectively run by Mr Edward Chan SC who, understandably, took the leading role at the trial on the side of the defendants.  Although Mr Chan ran that defence on behalf of the 1^st defendant only, his cross examination of the 1^st plaintiff was adopted by Mr Issac Chan (for the 2^nd defendant) and Mr Siu (for the 3^rd defendant).  I accept that the matter is not to be looked at with hindsight.  I consider, however, that what happened at the trial demonstrates, or throws light on, what has been the position throughout, namely, that the main or principal issue in this case is the existence of the alleged trust arrangement.

8.  I should add that I consider the assistance given by Mr Issac Chan and Mr Patrick Siu at the trial to be helpful.  I have no doubt, however, that I would have reached the same conclusion on the issue of the existence of the alleged trust with or without their participation at the trial.  I should also make it clear that this is not a matter I take into account when considering the 2^nd and 3^rd defendants’ respective applications for variation of the Costs Order Nisi because, as earlier mentioned, the matter should not be viewed with hindsight.

9.  On the other hand, the fact that the 2^nd and 3^rd defendants filed a joint defence is relevant to show, at least, that they could have been represented by one team of lawyers at the trial.

10.  Also relevant is the fact that the 2^nd defendant only filed one witness statement for the purpose of the trial, namely, that of the 1^st defendant dated 17 February 2014, who was in fact not called to give evidence due to her poor health conditions.  That statement is a short one, consisting of 3 pages with 9 paragraphs only, effectively adopting her principal witness statement also dated 16 February 2014 filed in her capacity as the 1^st defendant in this action.

11.  I do not consider the original orders for security for costs made by Mr Registrar Lung or by consent to have much significance, because it does not appear that the issue of the reasonableness of the defendants being separately represented was raised or determined.

12.  In relation to the rejection by Master M Wong of the argument that the 2^nd and 3^rd defendants should not be separately represented, I am not bound by his decision and, with respect, do not agree with it.

13.  I accept that the 2^nd defendant is an entity separate from the 1^st defendant, that the 1^st and 2^nd defendants did not represent the interest of the 3^rd defendant, and that the 3^rd defendant advanced a line of defence which was separate from that of the 1^st and 2^nd defendants.  It does not follow, however, from any or all of those facts or matters that the 1^st, 2^nd and 3^rd defendants could not, or should not, be represented by one team of lawyers in this action.

14.  Overall, I consider that there was no reasonable necessity for the 2^nd and 3^rd defendants to be separately represented.  I consider that all three defendants could reasonably have been represented by one team of lawyers in this action.

15.  It is a separate question whether some extra costs would have to be incurred on their behalf had they been represented by the 1^st defendant’s team of lawyers in this action.

16.  Had the 2^nd defendant been represented by the same team of lawyers who represented the 1^st defendant, I do not see that substantial extra costs would have been incurred on behalf of the 2^nd defendant, although I accept that some minor additional costs might have to be incurred.

17.  I accept that some more costs would have been incurred on behalf of the 3^rd defendant had he been represented by the same team of lawyers who represented the 1^st defendant, in view of the additional line of defence advanced by him relating to the issue of trusteeship de son tort.

18.  Neither the 2^nd nor 3^rd defendant has produced any figure or given any estimate of the extra costs which might have to be incurred had they been represented by the 1^st defendant’s team of lawyers.  Mr Siu submits that the court should approach the matter on a broad brush basis.  I agree that is the only practical way to proceed in the circumstances.  On a broad brush basis, I would vary the Costs Order Nisi such that the plaintiffs are to pay 10% of the 2^nd defendant’s costs, and 25% of the 3^rd defendant’s costs.

19.  In passing, I should mention that Mr Barlow argues that, in view of the 2^nd and 3^rd defendants’ application to vary the Costs Order Nisi, it would be open to the plaintiffs to apply to vary the order made in relation to the 1^st, 2^nd and 3^rd defendants’ three summonses dated 24 May 2016 seeking security for costs, namely, that there be no order as to the costs of and incidental to the three summonses.  As I see it, the order that I made in paragraph 74 of my written judgment in relation to those three summonses was an order absolute and not an order nisi.  It can only be challenged by an appeal, but not by an application to vary.

THE PLAINTIFFS’ APPLICATION SEEKING A STAY OF EXECUTION OF THE JUDGMENT AND ORDER DATED 7 SEPTEMBER 2016 (INCLUDING ANY TAXATION PROCEEDINGS)

20.  In so far as the stay of execution is sought pending “the final determination of the Plaintiffs’ application to vary the costs order nisi”, since the plaintiffs have not, as a matter of fact, made any application to vary the Costs Order Nisi, plainly no stay of execution can be granted on such basis.

21.  In so far as the stay of execution is sought pending the final determination of the plaintiffs’ appeal in CACV 198/2016, I have looked at the plaintiffs’ notice of appeal dated 5 October 2016.  I do not propose to examine the grounds of appeal in detail in this decision.  As I see it, I dismissed the plaintiffs’ action against the defendants because I did not accept the 1^st plaintiff’s evidence regarding the basis on which he paid the sum of HK$2 million to the 1^st defendant in around 1961, or the nature of the transaction between them in respect of that payment.  This is a finding of fact.  The various grounds raised by the plaintiffs in the notice of appeal seek to challenge that finding in the Court of Appeal.  The plaintiffs are of course entitled to do so.  All that I would say is that I am not satisfied that the plaintiffs’ appeal is reasonably arguable.

22.  In any event, I do not see any good reason for a stay of execution.  The only matter to be stayed would be the taxation proceedings.  The financial ability of the 1^st defendant to repay any costs which the plaintiffs may have to pay to the 1^st defendant upon taxation of her costs is not in issue.  I do not accept that without a stay, the plaintiffs’ appeal may be rendered nugatory.  The plaintiffs’ alleged poor financial position, while relevant to an application for security for costs of the appeal, cannot, in my view, justify a stay of execution.

23.  Mr Barlow also argues that, in view of the 1^st defendant’s incapacity and her consequent probable inability to give instructions to her solicitors, it must have been her son, the 3^rd defendant, who is giving instructions to the 1^st defendant’s solicitors to seek costs against the plaintiffs.  It is further said that the 1^st plaintiff is convinced that were it not for her incapacity, the 1^st defendant would have instructed her solicitors not to seek costs against him, since her entire costs have been or will be paid out of the Fund that the 1^st plaintiff originally provided.  I am not satisfied that there is sufficient evidence before me to conclude that the 1^st defendant’s current health conditions are such that she is unable to give instructions to her solicitors to pursue the taxation proceedings against the plaintiffs.  It is primarily a matter for Messrs C K Mok & Co, who are currently solicitors on the record for the 1^st defendant, to decide whether they have received proper instructions from the 1^st defendant to act in this action.  In the absence of clear evidence pointing otherwise, I do not consider that I ought to look behind the 1^st defendant’s representation.

24.  In all, I am not prepared to grant any stay of execution of the Judgment and Order pending the determination of the plaintiffs’ appeal in CACV 198/2016.

THE PLAINTIFFS’ APPLICATION SEEKING LEAVE TO APPEAL

25.  At the hearing, Mr Barlow informed the court that his clients would not pursue the summons dated 21 September 2016.

DISPOSITION

26.  In respect of the 2^nd and 3^rd defendants’ summonses dated 21 and 20 September 2016 respectively, I vary the Costs Order Nisi such that the plaintiffs shall pay 10% of the 2^nd defendant’s costs and 25% of the 3^rd defendant’s costs of the action, to be taxed if not agreed, with certificate for counsel. The plaintiffs shall also pay them their costs of those summonses, to be taxed if not agreed, with certificate for counsel.

27.  I grant leave to the plaintiffs to withdraw the summons 21 September 2016, with costs to the 1^st and 3^rd defendants, to be taxed if not agreed, with certificate for counsel.

28.  I dismiss the plaintiffs’ summons dated 3 April 2017, with costs to the 1^st defendant, to be taxed on a party and party basis if not agreed, with certificate for counsel.  Mr Yin asks for those costs to be taxed on an indemnity basis. I do not consider the circumstances to be such as would justify taxation on an indemnity basis.

HCA 857/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 857 OF 2011

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___________________

J U D G M E N T

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INTRODUCTION

1. The 1^st plaintiff (“Eric”) and the 1^st defendant (“Winnie”) were secret lovers. In 1961, Eric gave HK$2,000,000 (“the Fund”) to Winnie for the purpose of (according to Eric) investing in certain gaming and related business in Macau on his behalf.  It is Eric’s case that the investment is now represented by:-

(1)   6,251 shares of and in a company called Sociedade De Turismo E Diversoes De Macau SA (“STDM”) held in the name of the 1^st defendant; and

(2)   40,050 shares of and in another company called Shun Tak Shipping Company Limited (“STS”) held in the name of the 2^nd defendant (“MVI”) (collectively the “Trust Property”).

2. Winnie admits having received the Fund from Eric in 1961, but denies the case of trust advanced by Eric.  She previously said that the Fund was provided to her as a “loan” which had been repaid to, and/or waived by, Eric.  Her current case, as I understand it from her counsel, Mr Edward Chan SC, is that the Fund was given to her as a “gift”.

3. Eric and Winnie’s son (“Michael”) has been joined as the 3^rd defendant in this action on the ground that since around 2005, he has been assisting Winnie in managing the Trust Property and has thereby assumed the duties of a trustee.

4. By a Deed of Settlement dated 20 November 2010 (“the Deed of Settlement”) made between Eric as the “Assignor” and the 2^nd plaintiff (“Lare Sare”), then known as Assure Capital Global Limited, as the “Assignee”, Eric purportedly assigned all rights and benefits of and in relation to (inter alia) the Trust Property to Lare Sare to be held on trust in favour of the “Beneficiary”, ie Sir Robert Ho Tung Charitable Fund, a fund managed by HSBC Trustee (HK) Ltd.

5. This action was commenced by Eric and Lare Sare by way of a writ of summons on 20 May 2011.  In their Amended Statement of Claim dated 25 May 2016, they seek, inter alia, an order for the transfer by Winnie and MVI of the Trust Property to Lare Sare to be held on trust pursuant to the Deed of Settlement, and an account of all income and profits derived from the Fund and/or the Trust Property.

6. In their respective defences filed in this action, Winnie, MVI and Michael deny the existence of any trust as alleged by Eric.  They also rely on the defence of laches.

7. The primary issue which falls for determination in this action is whether the Fund was provided by Eric to Winnie upon trust for her to invest in the gaming and related business in Macau on his behalf.  There is no contemporaneous documentary evidence which directly supports or contradicts Eric’s case.  At the trial, only Eric gave evidence.  Although Winnie made a number of witness statements in this action, she did not give oral evidence at the trial because she was, apparently, too ill to do so and was confined to a hospital. Accordingly, the validity of the plaintiffs’ claim rests essentially on Eric’s oral evidence.

ERIC’S EVIDENCE

8. Eric made two witness statements dated 16 February 2014 and 17 February 2016 respectively, the contents of which he adopted as his evidence in chief.  The following narrative is taken largely from Eric’s witness statements or from the “Agreed Chronology” dated 19 May 2016, unless otherwise expressly stated.

(i)  Background

9. Eric was born in Hong Kong in 1926.  His grandfather was Sir Robert Ho Tung and his father was Edward Hotung.  Eric’s family moved to Shanghai in 1927, and returned to Hong Kong in November 1940.

10. Eric first met Winnie in Hong Kong on 2 December 1941 at Sir Robert Ho Tung and Lady Ho Tung’s diamond wedding anniversary celebration.  Winnie was there because her grandfather and Sir Robert Ho Tung were brothers.  Eric was 15½ years old at that time and Winnie was a few years older than Eric.  In the words of Eric, as soon as he met Winnie, he found her very attractive and it was “love at first sight”.  Thereafter, Eric visited Winnie at her home at Conduit Road almost every day, even after the Japanese invasion of Hong Kong on 8 December 1941, until Eric and his family left Hong Kong for Shanghai in May 1942.  Apparently, Winnie also left Hong Kong and went to Vietnam in about 1942 after Eric had left for Shanghai. They did not then keep in contact with each other.

11. In 1947, Eric moved to the United States and studied at Georgetown University. After graduation from university in around 1951, Eric started working in the United States.  He worked as a runner in the commodities trade in New York for some time and later worked for General Motors.

12. In April 1956, Sir Robert Ho Tung passed away in Hong Kong.  In July 1957, Edward Hotung also passed away.  At about that time, General Motors decided to send Eric to work in their office in Asia, which was then in Singapore.  Before he started working in Singapore, Eric took an extended leave of about 2 months so that he could return to Hong Kong to attend his father’s funeral and deal with other family matters.  It was during that period of time that he met Winnie again in Hong Kong.  By that time, Winnie had already been married to one Mr Mak, and given birth to a daughter (Anita) and a son (Winston).  According to Eric, they “nevertheless resumed [their] relationship, though secretly, some 15 years after [they] first met”.

13. Eric then went to Singapore to work for General Motors.  After a few months of being in Singapore, Winnie came to visit him and stayed with him for about 6 months. Upon Winnie’s persuasion, Eric decided to come back to Hong Kong to secure his inheritance from his grandfather’s estate and his father’s estate, which he had not yet received.  Eventually, Eric returned to Hong Kong in the late 1950s, and began investing in stocks using funds advanced to him by the trustee of Sir Robert Ho Tung’s will.  He also continued his secret “romantic” relationship with Winnie in Hong Kong.  Arising out of that relationship, Winnie gave birth to the 3^rd defendant (ie Michael) in May 1959, and a daughter (“Barbara”) in April 1960.

14. Over the years, Eric purchased a number of properties and gifted them to Winnie, including:-

(1)   a flat of about 700 square feet at 31F, Robinson Road, Hong Kong, at the price of about HK$30,000 in around 1959;

(2)   a larger flat at 30 Kennedy Road, Hong Kong, at the price of about HK$200,000 in around mid-1960s; and

(3)   265 Atherton Avenue, Atherton, California, at the price of about US$300,000 in the 1970s.

15. Eric married his wife (Patricia Anne Shea) on 17 January 1959.

16. In 1960, Eric received some shares and dividends from the estate of Sir Robert Ho Tung, and started to diversify his business interests from stock investment into property and cinema projects.  In about October 1960, Eric obtained a loan of HK$1 million from HSBC which he invested in the stock market and was able to double the money within a period of about 3 months.  At that stage, although he had not yet received his full inheritance, he had about HK$3 million worth of cash and stocks and a couple of properties held on his behalf.

(ii)  Winnie’s assistance

17. In addition to their personal relationship, Winnie also worked as Eric’s assistant in relation to his investments and business shortly after his return to Hong Kong in the late 1950s.  Winnie looked after Eric’s assets and properties, acted as his Cantonese interpreter, helped him negotiate with tenants and obtain vacant possession of properties for the purpose of redevelopment, and took care of his business interests, including property management, construction and cinema projects.  Eric said that he paid her well, as much as HK$8,000 per month at one point.

18. In view of his disputes in relation to his grandfather’s will, ongoing and potential litigations, as well as liabilities for overdraft facilities made available to him on the credit of his entitlement under his grandfather’s will, and in order to avoid adverse and unmeritorious claims against his properties, Eric held investments and properties using aliases and trusts.  In particular, he purchased a number of properties using Winnie’s name or alias, including:-

(1)   115 and 117, Tung Choi Street, purchased in the name of Winnie’s alias, “Shing Tsui”;

(2)   Flats I and J, 8^th Floor, Edward Mansion, 141 Prince Edward Road West, held in the name of “Wong Man Lay” (a name which I shall come back to later in this judgment).

19. According to Eric, these properties were not gifts to Winnie, but were managed by her on his behalf.

(iii)  Investment in the Casino Business

20. In 1961, tendering for Macau’s casino gaming licence began.  The gaming licence was eventually awarded to STDM, a Macanese company set up by, amongst others, Stanley Ho (Winnie’s elder brother), Yip Hon, Teddy Yip and Henry Fok.  The casino gaming licence brought with it other business opportunities, including hotels and sea transportation (collectively the “Casino Business”).  However, Stanley Ho did not at that time have enough capital to initiate the Casino Business and was looking for investors.

21. In around late 1961, Winnie told Eric about the licence obtained by STDM.  She said that she obtained the details of the Casino Business from her brother-in-law, Teddy Yip, and suggested to Eric to invest HK$2 million in the Casino Business which she said would be a good business opportunity. Winnie told Eric that that total capital intended to be raised was HK$10 million, and thus Eric’s proposed investment would come to about 20% to 30% of the Casino Business.  At that time, Eric only had a little over HK$3 million available to him.  Nevertheless, considering the opportunity, he agreed to invest HK$2 million in the Casino Business.

22. Eric and Winnie then agreed to find a way to front the proposed investment, for essentially three reasons:-

(1)   Stanley Ho and Eric were not on good terms at that time, and he would not accept the investment if he knew that the money originated from Eric.

(2)   Eric’s wife, being a strict Catholic, had made known to him of her strong disapproval of gambling when they got married, and thus the investment had to be concealed from her.

(3)   In Sir Robert Ho Tung’s will, it was expressly stated that he wished all his children to refrain from gambling. Since Eric still had to obtain his full inheritance under his grandfather’s will and his father’s will, and he was involved in a number of disputes in relation to his inheritance, he did not want to give the trustees of their estates any excuse or reason to withhold his inheritance.

23. Eventually, Winnie and Eric came up with the pseudonym of “黃萬里” (Wong Man Lay) to hold the investment in the Casino Business on Eric’s behalf.  The underlying reason of this pseudonym was their joke that Stanley Ho would have to walk ten thousand miles before he could discover that the money for the investment originated from Eric.  Winnie also told Eric that she would represent to Stanley Ho that Wong Man Lay was a rich tycoon in South East Asia who was willing to make the investment through her.

24. In around late 1961, Eric gave Winnie a cheque for HK$2 million (ie the Fund) for her to invest in the Casino Business on his behalf.  Soon after Eric had provided the Fund to Winnie, she told him that Wong Man Lay’s interest in the Casino Business would be represented as a joint interest with Teddy Yip and managed wholly by her.  She also told him that Teddy Yip knew that the Fund originated from him and that he would keep up the cover story of Wong Man Lay.  At around this time, Eric also learned from Winnie that Stanley Ho and other investors were not able to raise the proposed capital of HK$10 million, and Teddy Yip was able to secure for him (through Wong Man Lay) a 62% interest in the Casino Business because his investment of HK$2 million constituted the majority of the capital raised for the Casino Business.

25. Soon afterwards, Winnie brought to Eric’s office the share certificates representing his interests in the Casino Business.  They were printed in red ink on green coloured paper.  Eric told Winnie to lock up the share certificates and keep them safe.  Other than on that occasion, Eric does not recall seeing those certificates again.

26. Winnie also told Eric that the Casino Business was divided into three sections, namely, (i) STDM which operated the casino, (ii) STS which carried on sea transport and hotel business, and (iii) Wing Hing Lottery Limited (a Macanese company) which operated a lottery business under the name of “Wing Hing Lottery”.

(iv)  Dilution of Eric’s interests in the Casino Business

27. Although Stanley Ho and his fellow investors were initially unable to raise the capital of HK$10 million for the Casino Business, it appears that at a later stage the proposed capital of HK$10 million was fully paid up.  As a result, Eric’s interest in the Casino Business was reduced to about 20%.  It is not entirely clear, on Eric’s evidence, as to when it was that he was informed about the dilution of his interests in the Casino Business.

(1)   At paragraph 46 of his first statement, Eric said that during the first few years of the Casino Business, Henry Fok presented a number of bills to STDM and other companies in the Casino Business for them to pay for the construction of various infrastructures relating to the hotel and shipping business.  It was at that time that more investors joined in the Casino Business and Eric’s interests dropped from 62% to twenty odd percent.  Eric was not, however, told about this reduction until later when Stanley Ho further diluted his interests.  At paragraph 48 of his first statement, Eric said that sometime after he gave Winnie the HK$2 million (in around late 1961), Stanley Ho discovered that (part of) the funds represented by Teddy Yip and Winnie Ho came from him and forced a re-organisation of the shareholdings in the Casino Business, and Eric’s interests were eventually diluted to about 7% in STDM and 8% in STS.  From these two paragraphs, it would seem that Eric was not informed about the dilution of his interests in the Casino Business until at least a few years after the commencement of the business in 1961.

(2)   On the other hand, at paragraph 47 of his first statement, Eric said that he was informed by Winnie of the dilution of his interests about 6 to 8 months after his payment of HK$2 million. That would be in around 1962.

28. The exact date on which Eric was informed about the dilution of his interests in the Casino Business does not matter much.  Whatever the position, according to Eric, when Winnie told him about the further dilution of his interests in the Casino Business, Eric was very angry and frustrated and protested how Stanley Ho could do that.  Winnie told Eric that Stanley Ho had found out about their relationship and that Michael was their son.  She also told Eric that Stanley Ho had told her to accept the restructuring of the shareholdings in STDM and STS otherwise he would tell everyone that Michael was their illegitimate son. 

29. Eric then went to seek legal advice from a lawyer called Peter Griffiths of Wilkinson & Grist, but was told that there was nothing that he could do because the relevant corporate entities were in Macau and there was no recourse that he could seek in Hong Kong.  Further, Eric was told that even if he were to seek help from a Macanese lawyer, in view of the fact that Stanley Ho and the other founders of the Casino Business were very well connected in Macau he would not be able to do anything there either.

30. When Eric found out that his interests in Casino Business had been diluted by Stanley Ho, he also inquired with Winnie whether there was anyone who might be interested to buy his shares.  However, Winnie told him that there would not be anyone with sufficient capital to purchase his shares, and suggested that he should keep the shares because, in a matter of a few years, they were already worth many times of what he had originally paid for them, the Casino Business would continue to be lucrative, and his shares would yield very handsome dividends.  Hence, Eric decided to keep the investment in the Casino Business.

31. At this juncture, I should mention that there is in evidence before the court the following facts and matters.

32. First, on 13 August 1965, Teddy Yip commenced an action in the High Court, O J No 1875/1965 (“the 1965 Action”), against Eric as the 1^st defendant, Winnie as the 2^nd defendant and Consolidated Holdings Ltd as the 3^rd defendant. The court file in respect of that action is no longer available.  However, from the Court’s Case Book for 1965 (which is still available), it would appear that:-

(1)   Teddy Yip’s claim was for (i) an injunction to restrain the defendants from alienating any interest in (inter alia) “Sociedade”, “Shun Tak” and “Macau Lottery”, and (ii) damages;

(2)   Wilkinson & Grist appeared on the record as solicitors acting for Eric, Winnie and Consolidated Holdings Ltd; and

(3)   the action was settled on 8 October 1965.

33. Second, on 25 September 1965, Winnie and Teddy Yip entered into a Memorandum of Settlement (“the 1965 Settlement”) in settlement of the 1965 Action whereby it was agreed (inter alia) that:-

“1. HO YUEN KI alias WINNIE HO alias MAK HO YUEN KI alias WONG MAN LAY (hereinafter called ‘Winnie Ho’) hereby declares that Winnie Ho is the sole beneficial owner of SIXTY (60) per cent of the undermentioned shareholdings.

2. TEDDY YIP hereby declares that Teddy Yip is solely beneficially entitled to FORTY (40) per cent of the undermentioned shareholdings presently registered in the name of Teddy Yip, namely:-

SHUN TAK SHIPPING CO. LTD.	126,000 shares
SOCIEDADE DE TURISMO E
DI VERSOES DE MACAU, S.A.R.L.	630 shares
WING HING LOTTERY CO. LTD.	2,100 shares

5. Teddy Yip will execute transfers of portions of the sixty percent shareholdings belonging to Winnie Ho, to Yip Ho, to Stanley Ho and to Henry Fok and will transfer such number of shares in each of the above named Companies to the said parties as Winnie Ho shall direct and Teddy Yip shall have no claim to the proceeds thereof.

6. Teddy Yip will forthwith execute transfers and take all steps necessary to register the remaining portion of Winnie Ho’s sixty percent shareholdings in the said Companies into her own name.

18.  Winnie Ho guarantees that no third party has anything to do with the shareholdings referred to in this Agreement and that she has sole and complete right to deal with them and to enter into the provisions herein contained…”

34. I shall return to the 1965 Action and the 1965 Settlement when I come to assess Eric’s evidence below.

(v)  Dividends

35. Subsequently, while Winnie was still under Eric’s employ, he would from time to time ask Winnie whether or not any dividends had been paid from the Casino Business. Throughout the 1960s, Winnie’s answer to Eric’s inquiry was that the profits generated from the business were required to cover the expansion of the Casino Business and its related expenses, and thus no dividends were paid.

36. Winnie’s left Eric’s employ and migrated to California with her family in 1973. According to Eric, he purchased a property for Winnie and her family at 265 Atherton Avenue, Atherton, California, for about US$300,000 as her long service payment.  Thereafter, whenever Eric visited Winnie in the United States, which he did occasionally, he would continue to ask her about the status of the Casino Business and whether or not dividends from the business had been paid. Winnie would give him an update on how the Casino Business was doing, but she always said that no dividends had yet been paid because the profits were going back to the casino for its expansion and to defray the expenses for more infrastructural developments.

37. In around the mid-1970s, Winnie returned to Hong Kong and worked for Stanley Ho in the Casino Business in Macau.  In the mid to late 1970s, Eric heard from sources that Stanley Ho was paying dividends from the Casino Business.  On his next meeting with Winnie in his office at 10 Stanley Street, Eric asked Winnie whether Stanley Ho was paying dividends from the Casino Business. On that occasion, Winnie told Eric that Stanley Ho had started paying out dividends, and that she was helping Eric reinvest the dividends in the Casino Business.  She told Eric that she was not being paid enough by Stanley Ho to maintain her family so she was using part of the dividends for that purpose.  She asked Eric whether that was fine with him, and Eric told her that he had no problem with it.  Winnie also told Eric that if there were excess funds available, she would like to have Eric’s permission to donate some of the dividends to charities because the dividends were after all profits from the gambling business in Macau.  Again, Eric told her that it was fine with him for Winnie to donate some of the dividends to charities.

38. After this occasion, Eric had on a few more occasions asked Winnie about the dividends received from the Casino Business.  On those occasions, Winnie gave essentially the same answer to Eric, who raised no objection to Winnie’s use of the dividends as represented by her.

(vi)  Transfer or attempted transfer by Winnie of shares in STS and STDM to MVI and MVF respectively

39. In about early 1980s, at one of their meetings at Eric’s office at 10 Stanley Street, Winnie told Eric that it would be better for his interests in the Casino Business to be held by a foreign registered company so that they would not be so obvious to outsiders.  Winnie also told Eric that everyone whom she worked with in the Casino Business already knew that she was holding her shares in the Casino Business on his behalf.  At that time, Eric also did not want too many people to know that he was involved in the gambling business because he was very much involved in international politics and trade relations between China and the United States, and considered that his involvement in the Macau gambling business could have a stigma on his credibility.  He therefore told Winnie that he was fine with her suggestion of transferring his interests in the Casino Business to a foreign registered company.  He also told her to keep the relevant documentation safe.

40. Winnie later told Eric, in around early 2000s, that she was unable to transfer his interests in the Casino Business to an offshore company because her other children (Winston and Anita) has applied for an injunction from the Macau court to restrain her from so doing.  Winnie nevertheless assured Eric that his interests in the Casino Business would not be affected.

41. It is not in dispute that Winnie has transferred the STS shares that she held to MVI, a company incorporated in the Republic of Panama.  The relevant instrument or deed of transfer has not, however, been adduced as evidence at the trial. There is also no evidence on the date of the transfer, or the number of STS shares transferred to MVI.

42. On 27 June 2005, Winnie executed a deed purporting to transfer 6,000 shares in STDM by way of an absolute gift to Moon Valley Foundation Limited (“MVF”).  It is not clear whether this transfer has been effected or recognised by STDM.  In any event, according to Eric, he had no knowledge about this attempted transfer of 6,000 shares in STDM to MVF, until he learnt about this matter from his legal advisors when Michael joined him and Lare Sare as parties to the matrimonial proceedings between Michael and his ex-wife (on grounds which are not relevant for the present purpose).

(vii)  Michael’s management of Eric’s interests in the Casino Business

43. In around 2005, in a meeting at the 7^th Floor of The China Club Building, Winnie told Eric that she was tired of everything that had to do with the Casino Business and asked him whether she could let Michael take over the management of his interests in the Casino Business.  Winnie said that she would oversee what Michael did.  She also asked Eric whether she could use the dividends from the Casino Business for charitable purposes.  Eric agreed with both proposals made by Winnie.  At that time, Eric had a liking for Michael as a son, and his relationship with Michael was close.  In fact, in his will dated 4 September 2007, Eric specifically bequeathed to Michael, inter alia, all his interests in the Casino Business.

44. However, relationship between Eric and Michael turned sour towards the late 2000s, leading to (other other things) defamation proceedings commenced by Michael against Eric in the United States.  For the purpose of this judgment, it is not necessary for me to set out the details of their disputes, save to mention that Eric alleged that Michael took steps to obstruct his access to Winnie.  The last time that Eric met Winnie was in around the fourth quarter of 2009, at the Police Club in Causeway Bay.

(viii)Winnie’s denial of Eric’s interests in the Casino Business

45. In about January 2011, Eric wrote to Winnie.  In that letter, Eric stated (inter alia) the following:-

“… Things are also sad on another front. The shares which I entrusted to you for safe keeping many years ago that is the subject of transference to the company called Moon Valley. I understand at one time this was a trust fund created by Michael to various charitable acts under his care and that I am the beneficiary.

I feel that all the proceed from STDM shares of which I am the beneficiary appears to have disappeared … I didn’t want to query too much but the situation has arisen that I find all my wealth that I deposited with you appears to have been placed under Michael control without regard to my other children.

…

As you know all my children’s future was placed in your care my true intention was the STDM shares in your custody to be a gift to them. It was not my intention to have Michael’s usurp control and denying my wish. I therefore ask you to please put things right by returning my shares to a trustee company which will administer it.

I request a full accounting of the sums you have received and request a full accounting with interest.”

46. Winnie replied by letter dated 29 January 2011.  In her letter, she stated (inter alia) the following:-

“ I do not at all understand your motive in asserting a claim of beneficial interest in my STDM shares. You know very well that those shares belong to me absolutely and that they are not held in trust for you. Everybody in Hong Kong and Macau knows that I have been a shareholder of STDM in my own right for the past half a century and you have never before claimed that the shares held in my name are yours…

You know there is no truth in the allegation that I hold the STDM shares in trust for you. Although I have asked for and received 2 million dollars from you half a century ago which enabled me to make the initial investment in STDM, that was a loan which you agreed to give me because you said you loved me and because I am the mother of Michael. I have already repaid to you most of that money within a few years after the establishment of STDM when I sold some of the STDM shares allotted to me and you told me to forget about the balance. Do you not remember any of this? I have since been working hard to make my investment grow and the STDM shares now held by Moon Valley Foundation have nothing to do with you. Moon Valley Foundation was set up by me, Michael and other persons to carry out charitable work. You were never a part of it. In fact, throughout the years you have openly and proudly proclaimed yourself not to be associated with the gambling business in any way…

  Whatever may be your quarrels with Michael, there is no justification for your making a claim on my STDM shares.  You know it is dishonest and you should stop it at once.”

47. Eric wrote back to Winnie on 8 March 2011, reiterating his claim that she held the shares in the gambling business in Macau on trust for him.  The matter was not resolved.  Eventually, Eric and Lare Sare commenced the present action against Winnie, MVI and Michael on 20 May 2011.

Applicable principles for assessent of Eric’s evidence

48. The court’s approach in assessing the oral evidence of a witness is well settled. In Esquire (Electronics) Ltd v Hong Kong and Shanghai Banking Corp Ltd [2007] 3 HKLRD 439 at 481, Stock JA (as he then was) stated as follows:-

“ …… I do not say that an assessment of the character of a witness plays no part in the fact-finding process, but it is a task that may sometimes be elusive even to the best trained eye and ear, and I would venture to suggest that the truth, in so for as one is able to reach it or, as is sometimes the case, to reach a version of it that is more likely to be correct than not, can best be tested by reference to contemporaneous documentation where it exists, or to its absence where one could expect it to have been created, as well as to inherent improbabilities (though bearing in mind that there may be occasions where the truth may run against that particular grain) having regard to all the facts that are known … This is not to say that the documentation should have been treated as if it stood on its own, not to be explained, contradicted or supported by oral testimony. It is however to say that in this case the approach adopted to assessment of the facts placed far too much emphasis on character impression and too little upon what was suggested by the documentation and by the inherent improbabilities in their historical context. That documentation, as well as conflicts within the evidence, inherent probabilities, and a study of how matters were originally pleaded and asserted in witness statements – these are the factors which in a trial such as this, so long removed from the time of the events in question, were likely to be of particular use in assessing the facts …”

49. In other words, when assessing a witness’s evidence, one should pay particular attention to:-

(1)   the inherent probabilities, or improbabilities, of the events put forward by the witness;

(2)   the consistency, or inconsistency, of the witness’s evidence with undisputed background facts or documents; and

(3)   the consistency, or inconsistency, of the witness’s evidence with his/her previous statements and pleadings.

ERIC’S CASE OF TRUST IS NOT ACCEPTED

50. Eric was in the witness box, giving evidence in English, for a total of a little over 3 days. He was well educated, having graduated from a well known university in the United States.  He had been involved in different business fields in Hong Kong for many years.  I have no doubt that he was, in his prime, a shrewd, intelligent and highly successful businessman.  Nevertheless, he was about 90 years old at the time of the trial, and age had obviously caught up with him. It was clear that he was not in good health and required constant nursing care and attention.  He had difficulty hearing, and often had difficulty in expressly himself clearly.  At times, he appeared to be confused by questions put to him by counsel.  I bear all these in mind when assessing his evidence. For the reasons mentioned hereinafter, I am unable to accept his evidence that the Fund was provided by him to Winnie upon trust for her to invest in the Casino Business in Macau on his behalf.

51. First, in paragraph 1(6) of the Amended Statement of Claim, it is alleged that:-

“[Eric] and [Winnie] accordingly agreed that [Winnie] would hold and invest in the [Casino Business] the sum ofHK$2,000,000 on behalf of [Eric] and thereafter hold the interest in the [Casino Business] on his behalf”.

52. Read in the context of the five preceding sub-paragraphs of paragraph 1 of the Amended Statement of Claim, it is clear that Eric’s pleaded case is that there was an express oral agreement between him and Winnie to the effect as set out in paragraph 1(6) of the Amended Statement of Claim.  However, in his cross examination (on 25 May 2016, Day 3), Eric accepted that he never expressly said anything to Winnie when he parted with the HK$2 million back in 1960 or 1961, and that there was in fact no express oral agreement as alleged. He accepted the proposition put by to him Mr Chan that “[t]here was nothing actually said”.

53. Second, in Eric’s cross examination (on 27 May 2016, Day 5), he was asked why, when Winnie sold some shares in STDM pursuant to the 1965 Settlement leading to the dilution of his shareholding in STDM to 7%, he did not ask Winnie for the proceeds of sale.  He accepted Mr Chan’s proposition that he did not do so “because at that time [he] never dreamt that the shares were in fact [his]” and “[he] simply allowed her to have the shares”. To make sure that Eric in fact understood the questions he had been asked and the answers he had given, I specifically clarified the questions and answers with Eric.  His answers to me confirmed the above evidence.

54. Third, in his re-examination (on 30 May 2016, Day 6), Eric was again asked, this time by his counsel (Mr Alex Lok) why, when Winnie sold some of the shares in the Casino Business and pocketed the proceeds, he did not further enquire about the sale of the shares or the proceeds of sale.  He said, “I had plenty of money.  I was not short of a buck.  And I let her keep the shares and keep the money.”  A few questions and answers later, he explained that, by allowing Winnie to keep the shares, he meant “[b]y right, the shares were mine and so were the proceeds, but in my generosity, I just let her have them.  She was not that well off.”  When Mr Lok further asked him what he had in mind when Winnie sold the shares and got the proceeds, his answer was “[w]e are getting richer, that’s all.”  These answers suggest to me that Eric had decided, at some point in time, to let Winnie have the shares in the Casino Business as well as any proceeds of sale of those shares.

55. Fourth, according to Eric, he saw the share certificates in respect of the Casino Business only once, when Winnie brought them to his office soon after he had paid the HK$2 million.  Eric said that he told Winnie to lock up the share certificates and keep them safe.  While his failure to take possession of the share certificates at that time might be explicable on the basis that Winnie was then employed as his personal assistant, it seems to me to be inherently improbable that, if he truly thought that Winnie held the shares on trust for him, he did not get back the share certificates from Winnie when she and her family emigrated to the United States in 1973.

56. Fifth, Eric accepted that, over the years, he never received any dividends from the Casino Business even though he knew that dividends had in fact been declared and paid.  On his evidence, he did not, it would seem, even ask Winnie what were the amounts of the dividends, and he simply let Winnie keep and use them as she wished.  In my view, if he truly thought or believed that the dividends (and the shares) belonged to him, he would have shown a lot more interest in the dividends which plainly were substantial in amount.  His apparent disinterest in the dividends is, in my view, indicative that he did not consider that Winnie held the STDM and STS shares on trust for him.

57. Sixth, in his witness statement, Eric said that the name “黃萬里” (Wong Man Lay) used for the purpose of holding the investment in the Casino Business on his behalf was coined by him and Winnie based on their joke that Stanley Ho would have to walk ten thousand miles before he could discover that the money for the investment originated from him.  However, in his re-examination (on 30 May 2016, Day 6), he said that this name was not used until Stanley Ho “had ripped us off”, that being a reference to the dilution of his interests in the Casino Business from 62% to eventually 7% or 8% (which took place in or after 1965).

58. Seventh, in relation to the 1965 Action and 1965 Settlement, Eric says, in paragraph 98 of his first witness statement and paragraph 24 of his supplemental witness statement, that:-

(1)   he was not aware that there was any dispute between Winnie and Teddy Yip about his shares in the Casino Business;

(2)   Winnie had never informed him of any dispute that she had with Teddy Yip or the 1965 Action;

(3)   all he knew was that Teddy Yip was related to Winnie and was working with Winnie to front his interests in the Casino Business; and

(4)   he was not aware of the 1965 Settlement.

59. However, in his cross examination, Eric admitted that he was aware of 1965 Action at the time when he was sued, and that the visit he made to Wilkinson & Grist for legal advice in 1965 was in relation to the proceedings taken out by Teddy Yip (see his evidence on 26 May 2016, Day 4).  Having regard to the fact that Wilkinson & Grist appeared on the record as acting for him in that action, his original evidence that he did not know about the action would have been difficult to accept in any event.  It is, in my view, also inherently improbable that Eric had no knowledge of the 1965 Settlement.  In the ordinary course of events, it is to be expected that Wilkinson & Grist would have informed their client (Eric) about the settlement of the 1965 Action and the terms of the settlement.

60. In passing, I should mention that it is Eric’s contention that Teddy Yip must have been aware of the fact that the monies for investing in the Casino Business by Winnie came from him, in view of the fact that he was named as the 1^st defendant, and Winnie the 2^nd defendant, in the 1965 Action in which an injunction was sought by Teddy Yip to restrain the defendants from alienating any interests in (inter alia) STDM and STS.  This contention is, in my view, speculative because there could be many different reasons why Eric was sued and named as the 1^st defendant in the 1965 Action.  In this regard, it may be noted that Teddy Yip also claimed damages against the defendants in that action.  In the absence of further evidence regarding the nature and basis of Teddy Yip’s claim against Eric in the 1965 Action, I do not consider it right to draw any inference from the mere fact that Eric was named as the 1^st defendant in the 1965 Action.

61. Eighth, in around early June 2001 when he was interviewed by a reporter of a local magazine, Eric publicly denied that he had any interests in the Casino Business.  He said, in the interview, that he gave HK$2 million to Winnie when she asked him for a loan, it was none of his business as to how she used the money, and the shares (in the Casino Business) belonged to Winnie.  In his witness statement, Eric explained that he denied having any interests in the Casino Business because (i) he did not want to disappoint his wife, who had a great dislike of gambling, and (ii) he did not wish his children, with whom he was then engaged in litigation, to “bite into that part of his assets”.  I am not entirely satisfied with either explanation.  In respect of the former, there is no evidence from Eric’s wife on her knowledge of Eric’s alleged interests in the Casino Business (although it may be said that Eric would be reluctant to call his wife to give evidence in this action).  Further, it is Eric’s own evidence that he had been told by Winnie in about early 1980s that everyone whom she worked with in the Casino Business already knew that she was holding her shares in STDM/STS on his behalf.  If the fact of his interests in the Casino Business was so widely known, he could hardly have believed it to be a well kept secret (although he may argue that his wife remained ignorant of his interests in the Casino Business).  In respect of the latter, it was a simple matter for him to make either an inter vivos disposition of his interests in the Casino Business to whomsoever he wishes, or a specific legacy of those interests in his will.  In fact, in his cross examination (on 27 May 2016, Day 5), he accepted the proposition put to him by Mr Chan that the second reason was made up by him “retrospectively” as there was, at the time of the interview, simply no litigation with his children at all.  Overall, I would give weight to his public statement against interest, but not the explanations of his statement given subsequently in this litigation.

62. Ninth, in his will dated 3 October 2001, Eric made a specific legacy of US$50 million to his wife, a specific legacy of US$1 million to each of his 3 named daughters and a legacy in respect of his collection of books.  Save and except those legacies, he gave the whole of his residuary estate (after payment of his debts and testamentary expenses) to two solicitors, Mr Peter Alan Lee Vine and Mr Billy Ma Wah Yan, being the executors and trustees named in his will, jointly and absolutely.  If he believed that the shares in the Casino Business held by Winnie belonged to him beneficially, he would be making a huge gift to each of the two professional executors/trustees, which he said originally would be worth US$100 million, and later US$20 million, each.  When it was pointed out to him in cross examination that such gifts to the two gentlemen would be too generous to be true, his explanation was that they were to be rewarded for their “loyalty”.  In his words, “Their loyalty cannot be rewarded exactly in cash” (27 May 2016, Day 5).  In my view, this explanation is simply incredible.  I pause to observe that it is not his explanation that he had somehow forgotten or overlooked his interests in the Casino Business when he made his will in 2001.

63. Tenth, it is Eric’s case that he had adequately rewarded Winnie for her services by paying her a generous salary as well as making other valuable gifts to her, including the properties mentioned in paragraph 14 above, and thus there was no reason for him to make a gift of HK$2 million to her in 1961.  The various properties which Eric allegedly gifted to Winnie include:-

(1)   a flat of about 700 square feet at 31F, Robinson Road, Hong Kong, purchased at the price of about HK$30,000 in around 1959 (“Property (1)”); and

(2)   a larger flat at 30 Kennedy Road, Hong Kong, purchased at the price of about HK$200,000 in around mid-1960s (“Property (2)”).

64. The land search in respect of Property (1) shows that the relevant assignment of the property to Winnie was dated 15 May 1957.  That was before Eric and Winnie met again in Hong Kong after Eric’s father passed away in July 1957.  It seems to me to be clear that his evidence that Property (1) was a gift made by him to Winnie cannot be correct.  Indeed, in his cross examination (on 27 May 2016, Day 5), he admitted that his allegation that the money for the purchase of this property came from him was not true.  In his re-examination (on 30 May 2016, Day 6), he changed his evidence to say that he reimbursed Winnie for the purchase price of this property in 1959.  I am unable to accept this late change of evidence by Eric given in re-examination.

65. In respect of Property (2), Eric’s evidence was also inconsistent.  In paragraph 56 of his first witness statement, he said that he purchased the property for about HK$200,000 and it was a gift to Winnie to thank her for all her help in dealing with his businesses and assets.  However, in his cross examination (on 30 May 2016, Day 6), he said that it was an “investment” for him and also a gift to Winnie, and that it was “a place to meet for [them]”.  Eric also said that he did not know whether Winnie in fact paid for the property herself.

66. Although the above inconsistencies in Eric’s evidence regarding Property (1) and Property (2) do not directly go to the critical issue of whether he provided the Fund to Winnie upon trust for her to invest in the Casino Business on his behalf, they undermine his credibility generally as a witness.

67. In all, I do not accept Eric’s evidence regarding the basis on which he paid the sum of HK$2 million to Winnie in around 1961, or the nature of the transaction between them in respect of this payment.  I reject his case of express trust.  The facts and matters mentioned in paragraphs 51 to 62 above also negate or rebut the allegation of resulting trust raised in paragraph 8 of the Amended Statement of Claim.

68. On the evidence before me, I am unable to determine whether the payment of HK$2 million by Eric to Winnie in 1961 was a loan or a gift or something else.  I do not consider that I am required to make a definitive finding on the true nature of the payment when the evidence does not permit such finding to be properly made.  All that I would conclude is that I am not satisfied, on the balance of probabilities, that Winnie held the interests in the Casino Business which she acquired using the HK$2 million provided by Eric upon trust for him, whether on the basis of an express, implied or resulting trust.

69. In coming to the above conclusion, I have not lost sight of a number of matters urged upon me on behalf of Eric.  In particular:-

(1)   It is said that HK$2 million was a huge sum of money in 1961 and Eric could not possibly have made such a generous gift to Winnie, or lent such a huge amount to Winnie on an informal basis.  I readily accept that HK$2 million was a huge sum of money in 1961.  However, Eric was from a very rich family in Hong Kong.  In 1961, Eric had reasons to believe that he would eventually receive a huge inheritance from the estates of his grandfather and his father respectively.  Although he said he only had ready or liquid assets of about HK$3 million available to him at that time, on his own evidence he was able to make money easily from the stock market (he said he made a profit of about HK$1 million within a period of about 3 months using a loan of HK$1 million advanced to him by HSBC in the late 1960s).  Also, Eric and Winnie had a special, personal, relationship.  I do not consider it beyond the realm of possibility that he could lend HK$2 million to Winnie on an informal basis, or make a gift of HK$2 million to her, in 1961.

(2)   The plaintiff also relies on what is stated in the biography of Henry Fok Ying Tung published in 2005.  I do not propose to recite the relevant passages in that biography.  It is obvious that they contain many inaccuracies (eg, it was stated, mistakenly, that Sir Robert Ho Tung was the largest shareholder in the Casino Business, that he made his investment in the Casino Business through his granddaughter (Winnie), and that Winnie appeared to be Sir Robert Ho Tung’s secretary).  I am not prepared to give any weight to the contents of the biography.

70. Lastly, I should refer to Eric’s will dated 4 September 2007, in which he made a specific bequest of “all [his] beneficial interests in Macau casinos” in favour of Michael absolutely. This document may be said to provide some support for Eric’s case that he was the beneficial owner of the shares in STDM/STS held in the name of Winnie.  Mr Chan submits that there could be another explanation as to why Eric would make such a provision in his will.  That explanation is quite convoluted – it is, I understand, to be effect that Eric made such a provision in his will in order to pre-empt any (unfounded) claim which his children might, after his death, raise that Winnie held her interests in the Casino Business upon trust for him.  I do not propose to speculate on this matter.  I am not prepare to find the plaintiffs’ case of an express or resulting trust proved merely on the basis of what, on any view of the matter, is a “self serving” statement contained in a former will of Eric which has since been revoked and replaced by a further will made on 13 May 2011. I do not consider that the contents of Eric’s 2007 will are sufficient to override the matters referred to in paragraphs 51 to 66 above which lead me to reject the plaintiffs’ case of an express or resulting trust.

DISPOSTION

71. For the foregoing reasons, I dismiss the plaintiffs’ action against the defendants. I also order the plaintiffs to pay the costs of the 1^st defendant (including the expenses incurred in relation to live note for the hearing on 26, 27, 30 and 31 May 2016), to be taxed if not agreed.

72. The costs incurred in the preparation of the trial bundles are expressly excluded from the above costs order for the following reason.  A total of 18 trial bundles (including 1 bundle of pleadings, 1 bundle of witness statements, and 16 bundles of documents) were placed before the court at the trial.  In respect of the 16 bundles of documents, only a limited number of documents (of no more than 2 bundles in total) were actually used or referred to in the course of the trial. Paragraph 1 of Practice Directions 5.6 (Documents for Use at Trial) states that “[b]undles must not include documents which are unlikely to be referred to at the trial.”  At the pre-trial review on 4 March 2016, the court expressly reminded the parties to comply with Practice Directions 5.6. Regrettably, that reminder did not appear to have been taken heed of by the parties.  There was, in my view, a breach of Practice Directions 5.6 in relation to the preparation of the trial bundles.  This matter was raised by the court briefly in the course of final submissions, but the information provide by counsel was insufficient to enable the court to form a clear view on the question of responsibility for the breach of Practice Directions 5.6.  As indicated by the court at the end of the trial, the costs order to be made by the court would not include the costs of preparation of the trial bundles, but the court would give liberty to the parties to apply for those costs separately (if so advised).

73. The 2^nd and 3^rd defendants filed a joint defence but were represented by two different teams of counsel and solicitors at the trial.  While I accept that each defendant is entitled to be separately represented, it is a different matter whether the plaintiffs should be responsible for 3 sets of costs incurred by the 3 defendants when the principal grounds of defence run by the 2^nd and 3^rd defendants are the same as those run by the 1^st defendant.  The issue of whether the plaintiff should be responsible for 3 sets of costs was mentioned by Mr Barlow SC in his submissions in opposition to the defendants’ applications for security for costs (see below) and also by counsel briefly in the course of final submissions.  My provisional view is that the 2^nd and 3^rd defendants’ defence could easily have been conducted by the same team of lawyers acting for the 1^st defendant, and it is not reasonable for the plaintiffs to have to bear 3 sets of costs.  However, I have not been referred to the relevant authorities or heard full arguments on this matter.  I would therefore make an order nisi that there be no order as to costs as between the plaintiffs and the 2^nd and 3^rd defendants.

74. In respect of the three summonses taken out by the 1^st, 2^nd and 3^rd defendants all dated 24 May 2016 relating to security for costs (disposed of by my earlier decision given on 25 May 2016), the applications were prompted by the late disclosure of the Deed of Settlement by the plaintiffs on the first day of the trial (23 May 2016), but the 1^st, 2^nd and 3^rd defendants were unsuccessful in their applications.  In all the circumstances, I consider that a fair order to make would be no order as to the costs of and incidental to those summonses.

75. Lastly, it remains for me to thank counsel for the assistance that they have rendered to the court.

HCA 857/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 857 OF 2011

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__________________

D E C I S I O N

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INTRODUCTION

1.  I have before me three summonses taken out by the 1^st, 2^nd and 3^rd defendants all dated 24 May 2016 renewing their applications against the plaintiffs for security for costs up to the conclusion of the trial of this action, which commenced on 23 May 2016 and is scheduled to last for a total of 17 days up to 15 June 2016.  The amounts of the security sought are HK$10,000,000, HK$2,100,000 and HK$2,421,333 respectively.

2.  The background facts leading to my previous order dated 27 April 2016 allowing the plaintiffs’ appeal against the order of Master M Wong dated 5 April 2016 ordering the plaintiffs to give further security for the three defendants’ respective costs (each in the sum of HK$4,000,000) are set out in my written decision dated 27 April 2016 (“the Decision”), and I shall not repeat them here.

3.  In what follows, I shall adopt the expressions and abbreviations as defined in the Decision unless the context indicates otherwise.

4.  The defendants’ previous applications for security for costs were advanced on the basis that the plaintiffs were ordinarily resident out of the jurisdiction.  I concluded, on the basis of the evidence then before me, that the 1^st plaintiff was ordinarily resident in Hong Kong at the time of the hearing of the appeal and therefore no order for security for costs should be made against him. In so far as the 2^nd plaintiff was concerned, I held that it likewise should not be required to give security for costs because:-

(1)  It was made a party to this action only because it had been nominated by the 1^st plaintiff as the new trustee of the Trust Property.  The real parties to the present disputes were the 1^st plaintiff and the defendants.

(2)  Although there was no inflexible rule that the existence of a co-plaintiff within the jurisdiction meant that no security could be ordered against the other, foreign, plaintiff, that was at least a relevant factor and seemed to me to be a strong factor in the present case in view of the foregoing consideration.

(3)  The 2^nd plaintiff did not carry on any business, and was the 1^st plaintiff’s nominee for the purpose of holding the Trust Property claimed in the action. It was owned and controlled by the 1^st plaintiff.  Hence, the place of ordinary residence of the 2^nd plaintiff would follow that of the 1^st plaintiff (being its central management and control), ie Hong Kong.

5.  The above findings relating to the position of the 2^nd plaintiff was based on what was pleaded in paragraphs 10 and 11 of the statement of claim dated 30 June 2011, which was verified by the 1^st plaintiff’s statement of truth, and on the evidence before me at the hearing of the appeal.

6.  In particular, at paragraph 11 of the statement of claim, it is pleaded that:

“By a letter dated 20 January 2011, the 1^st plaintiff by his then solicitors wrote to the 1^st and 2^nd defendants requesting them to transfer the Trust Property to the 2^nd plaintiff (then named Assure Capital Global Limited) as the new trustee for the 1^st plaintiff” [emphasis added].

7.  Also, in paragraph 23 of the 1^st plaintiff’s affidavit filed on 30 September 2013, he stated that the 2^nd plaintiff was his nominee to take over as trustee and the Trust Property from the defendants, and he had included the 2^nd plaintiff in these proceedings to ensure that there would be no doubt as to who the new trustee would be and to specify that in the prayer for relief claimed in the statement of claim.  The assertion that the 2^nd plaintiff was the 1^st plaintiff’s nominee in relation to the Trust Property was repeated in paragraph 13 of the 1^st plaintiff’s 2^nd affidavit filed on 16 February 2016.

8.  However, on the first day of the trial (ie 23 May 2016), the plaintiffs’ solicitors disclosed for the first time to the defendants’ solicitors the existence of a “Deed of Settlement” dated 20 November 2010 between the 1^st plaintiff as the “Assignor” and Assure Capital Global Limited (ie the 2^nd plaintiff) as the “Assignee”, under which the 1^st plaintiff purportedly assigned all rights and benefits of and in relation to the “Funds” to the 2^nd plaintiff to be held on trust in favour of the “Beneficiary”.  I shall come back to the Settlement Deed later in this decision.

9.  The disclosure of the Settlement Deed has prompted the defendants to renew their applications for security for costs, this time on the basis that both plaintiffs are nominal parties and there is reason to believe that they will be unable to pay the costs of the defendants if ordered by the court to do so, in reliance on Order 23, rule 1(b) of the Rules of the High Court. In addition, the 1^st defendant relies on section 905 of the Companies Ordinance, Cap 622, in support of her application against the 2^nd plaintiff for security for costs.

THE DEED OF SETTLEMENT

10.  In the Deed of Settlement, which is stated to be known or referred to as the “STDM Trust” or “Assignment”:-

(1)  The “Funds” is defined, in Schedule A thereto, to mean and include the sum of HK$2,000,000 paid to the 1^st defendant in or around 1962 by the 1^st plaintiff for investment and the income and profits thereafter generated from such investment.  It is further stated that as of the date thereof, the Funds comprise:-

(a)  6,251 shares in STDM;

(b)  40,050 shares in STS; and

(c)  such other income and dividends thereof accountable by the 1^st defendant.

In other words, the “Trust Property” as defined in paragraph 7 of the statement of claim forms part of the “Funds” as defined in the Deed of Settlement.

(2)  The “Trust Fund” is defined in clause 1.3 thereof to mean, inter alia, the “Funds” (sub-paragraph (a)), and “the money, investments and property from time to time representing the above” (sub-paragraph (e)).

(3)  The “Beneficiary” is defined, in Schedule B thereto, to mean “Sir Robert Ho Tung Charitable Fund, a fund managed by HSBC Trustee (HK) Ltd.”.

11.  The following provisions in the Deed of Settlement are of note.  First, it is stated, in recital (H), that it is intended that the “Declaration of Trust” shall be irrevocable. To the same effect is clause 6.9 thereof that “[t]his STDM Trust and the rights and benefits assigned hereto are expressly excluded from the estate of the [1^st plaintiff] and cannot be revoked by any existing or subsequent will or assignment.  The [1^st plaintiff] may not assign any rights benefit or obligation under this Assignment to any third party.”

12.  Second, by clause 2, it is provided that the 2^nd plaintiff shall stand possessed of the “Trust Fund” and the income from it on such trust with and subject to such charges powers and provisions thereafter in favour of the Beneficiary.

13.  Third, by clause 3.1, the 1^st plaintiff irrevocably assigns all rights and benefits of and in relation to the Funds to the 2^nd plaintiff, and by clause 3.2, the 1^st plaintiff shall use all reasonable means to forthwith transfer, deliver, or otherwise place under the control of, the Funds to the 2^nd plaintiff.

14.  Fourth, by clause 3.3, the 1^st plaintiff undertakes to give notice of the aforesaid assignment to the 1^st defendant as soon as practicable.  Pausing here, there is no dispute that such notice was not given by the 1^st plaintiff to the 1^st defendant until 23 May 2016.

15.  Fifth, by clause 8, the “Assignment” is governed by the laws of the Hong Kong Special Administrative Region.

16.  Sixth, the Deed of Settlement is stated to have been made on 20 November 2010, ie prior to the commencement of this action on 20 May 2011.  It follows that the 1^st plaintiff was well aware, at the time of the signing of the statement of truth, that he was no longer the beneficial owner of the Funds (including the Trust Property), even on his own pleaded case.

WHETHER THE 1^ST AND 2^ND PLAINTIFFS ARE NOMINAL PLAINTIFFS?

17.  On the assumption that, prior to the execution of the Deed of Settlement, the 1^st defendant held the Trust Property on behalf, or for the benefit, of the 1^st plaintiff as alleged in the statement of claim (which is of course the central issue to be tried in this action), the assignment of the Trust Property under the Deed of Settlement could only operate as an “equitable” assignment until notice in writing of the assignment in compliance with section 9 of the Law Amendment and Reform (Consolidation) Ordinance (Cap 23) is given.  In the case of an equitable assignment of the Trust Property, both the 1^st and 2^nd plaintiffs would be proper parties to an action to recover the same from the 1^st defendant, the alleged trustee.  It is a nice question of law whether the mere handing over of a copy of the assignment to the “debtor, trustee or other person from whom the assignor would have been entitled to receive or claim such debt or chose in action” would satisfy the notice requirement under section 9.  I have been told by Mr Edward Chan SC that he and his learned junior have not been able to find any authority on this point.  It is not a point that I need to decide now, because if the handing over of the assignment could be regarded as notice in writing given in compliance with section 9, that would only have occurred on the first day of the trial.  The 1^st plaintiff would have been a proper party to the present action at the time of the issue of the writ and at all times up to at least the first day of the trial.  His presence as a party for the rest of the trial would not, as I see it, lead to any, or any significant, increase in the costs of the action.  The question of the precise order that ought to be made should the court find in favour of the plaintiffs in relation to the trust arrangement alleged in the statement of claim, including the questions of costs, can be dealt with at the end of the trial.

18.  Where a shareholder has transferred shares in a company to a purchaser but the transfer has not yet been registered, he holds the shares as trustee for the benefit of the purchaser.  He is treated, in proceedings relating to the shares, as a nominal party for the purpose of an application for security for costs: see Ng Yat Chi v Max Share Ltd [1996] 4 HKC 284, at 285I-286A per Cheung J (as he then was); and Fong Tak Shing v Greensward Company Limited and Another, HCCW 162/2004, at paragraph 15 per Kwan J (as she then was).  The same conclusion was reached in relation to a plaintiff who, at the time of starting an action, had charged the fruits of the action to another person: see Semler v Murphy [1968] 1 Ch 183 at 191C-F, 193B-D and 194D-G. It seems clear, therefore, that the 1^st plaintiff should be treated as a nominal plaintiff in the present action for the purpose of Order 23, rule 1(b) of the Rules of the High Court.

19.  On the other hand, it is by no means clear that the 2^nd plaintiff, being the trustee of the “Trust Fund” for a charitable trust, should likewise be regarded as a nominal plaintiff for the purpose of Order 23, rule 1(b). Counsel have not referred me to any authority to show that a trustee or, in an analogous situation, a personal representative, suing to recover the trust estate or the estate of a deceased person is generally to be regarded as a nominal plaintiff.  It is clear that a trustee suing for the benefit of the beneficiaries is not necessarilyto be regarded as a nominal plaintiff: see White v Butt [1909] 1 KB 50 referred to in paragraph 16 of Kwan J’s decision in Fong Tak Shing, ante.  In the shortness of time available, I have not been able to research into this matter in depth, and I do not therefore wish to express any concluded view on this matter.

THERE IS REASON TO BELIEVE THAT BOTH PLAINTIFFS WILL BE UNABLE TO PAY THE COSTS OF THE DEFENDANTS

20.  It is not necessary for me to reach a firm view on whether the 2^nd plaintiff should be regarded as a nominal plaintiff in the present case, because Mr Barrie Barlow SC (for the plaintiffs) accepts that, on the evidence before the court, there is reason to believe that both plaintiffs will be unable to pay the costs of the defendants if ordered to do so. 

21.  Accordingly, the jurisdiction of the court to make an order for security for costs is satisfied in the case of the 1^st plaintiff under Order 23, rule 1(b) of the Rules of the High Court, and in the case of the 2^nd plaintiff under section 905 of the Companies Ordinance.

DISCRETION

22.  Mr Barlow submits that the defendants’ applications should be rejected on the ground of delay, and argues that the defendants ought to have found out about the true position of the 1^st and 2^nd plaintiffs as regards their rights and interests in the Trust Property much earlier by pursuing applications for specific discovery and/or interrogatories.  In my view, this complaint cannot fairly be made because the obligation to make full discovery is on the plaintiffs and on-going.  There is, I consider, also some justification in Mr Chan’s submission that the plaintiffs have presented a false, or at least a misleading, case on the pleadings and in the 1^st plaintiff’s affidavits in this regard.

23.  Nevertheless, the jurisdiction to order security for costs is not to be exercised on a punitive basis.  I consider that the proper inquiry that I ought to undertake is to balance the injustice to the parties arising from making, or refusing to make, an order for security for costs against the plaintiffs in the present case.

24.  On the one hand, refusing the defendants’ application would mean that they may not be able to recover the costs (including costs already incurred and costs to be incurred for rest of the trial) should they succeed in this action and a costs order is eventually made by the court in their favour.  This having been said, it is clear that a good part of their costs would already have been incurred by now, including all the costs up to the commencement of the trial, as well as counsel’s brief for the trial and (at least in the case of the 1^st and 3^rd defendants) half of unused refreshers.  Even if the proceedings should now be aborted, the defendants would still face the prospect of not being able to recover the costs already incurred.  I accept, of course, that without an order for security for costs, they may suffer the further injustice of not being able to recover the costs yet to be incurred up to the conclusion of the trial.

25.  On the other hand, making an order against the plaintiffs for security for costs may well mean that their claim will not be adjudicated upon at all.  The amount at stake is, I am given to understand, very substantial.  If this is purely a claim advanced by the 1^st plaintiff for his personal interest, I would be less disinclined to make an order for security for costs against the plaintiffs even at this late stage of the proceedings.  I cannot, however, ignore the fact that the fruits of this action, if successful, would accrue to the benefit of a charitable trust.  In view of the late disclosure of the Deed of Settlement, the Secretary for Justice, as Protector of Charities, has not had the opportunity to consider whether to intervene in this action.

26.  Both Mr Chan and Mr Barlow have made submissions on the merits of the plaintiffs’ claim.  I do not consider that the apparent merits, or lack or merits, is such as should be decisive one way or another in my decision whether to make an order for security for costs.

27.  The overall interest of justice would, I believe, demand that this action, having gone so far, should proceed to its final conclusion.

DISPOSITION

28.  For the foregoing reasons, I am not minded to order the plaintiffs to provide any further security for costs.  I shall deal with the question of the costs of these applications at the end of the trial.

29.  The plaintiffs will need to amend the pleadings, including the prayer for relief, but the amendments ought to be relatively simply and should not impede the continuation of the trial.  I shall hear the plaintiffs on when the proposed amendments will be made available, and the parties on how they propose to proceed in the meantime.

HCA 857/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 857 OF 2011

____________

____________

__________________

D E C I S I O N

__________________

1.  I have before me 2 summonses, one taken out by the 1^st defendant and the other taken out by the 2^nd defendant, both on 18 May 2016 seeking leave to file and serve voluntary particulars in relation to the defence of laches. The voluntary particulars, including an additional paragraph 3 first raised this morning, which the 1^st and 2^nd defendants propose to put in are, I am told, identical.

2.  Paragraph 1 asserts that the 1^st plaintiff’s long inaction and delay in asserting his claim has resulted in the destruction or loss of evidence by which his claim might have been resisted.  This paragraph has to be read together with paragraph 2, which itemizes the evidence which it is said has been destroyed or lost.

3.  Sub-paragraphs (a) to (c) of paragraph 2 relate to (i) the date and manner of the alleged repayment of $1.6m by the 1^st defendant to the 1^st plaintiff, (ii) the banking records of that repayment, and (iii) the allegation that the 1^st plaintiff had forgiven the rest of the 1^st defendant’s indebtedness. These are not new matters on the existing pleadings and further and better particulars already served.  They are relevant to the plea of laches.  I do not see that the plaintiffs would be prejudiced by these matters now being formally set out by the 1^st and 2^nd defendants in support of the defence of laches.

4.  Sub-paragraphs (d) to (e) of paragraph 2 relate to potential witnesses (who have either passed away or can no longer be traced) and documents which it is said would support the 1^st defendant’s case and/or contradict the 1^st plaintiff’s allegations.  As I understand from counsel’s submissions, these witnesses and documents all relate to a previous litigation in 1965 brought by Mr Teddy Yip against, amongst others, the 1^st plaintiff and 1^st defendant in respect of the same subject matters of this action or matters connected therewith.  The 1^st plaintiff says that the fact that he was named as a defendant in the 1965 action is some indication that Mr Teddy Yip recognized that he had an interest in the relevant shares.

5.  Mr Chung for the plaintiffs accepts that the persons named in paragraph 2(d) have passed away between 1997 and 2006.  He has made no submission regarding the availability of the documents mentioned in paragraph 2(e), and he says that the plaintiffs have not had any opportunity to investigate the availability of the potential witnesses named in paragraph 2(f).

6.  It seems to me that the matters raised in paragraphs 2(d) to (e) are all relevant to the defence of laches.  Whether the potential witnesses or documents would actually assist the 1^st and 2^nd defendants in establishing the defence of laches is something which can be argued in due course, and obviously I would have to bear in mind the lateness of these particulars when assessing what, if any, weight ought to be given to them, particularly when the 1^st plaintiff and 1^st defendant have made witness statements and may give direct evidence at the trial on the true arrangement between them in relation to the HK$2m payment.  In fairness to the plaintiffs, I should indicate that I would permit the plaintiffs to put in further evidence regarding the availability of those persons named in paragraph 2(f) should they wish to do so.

7.  Paragraph 3 relates to the age of the 1^st defendant, which is not in dispute.  It is also said that “[s]ince the commencement of this action the health of the 1^st defendant had deteriorated especially since the last pretrial review in March 2016.  Her condition as on 23 May 2016 is such that it is very doubtful whether she would be in a condition fit to give evidence in the course of the trial.”  There is, however, no medical evidence regarding the 1^st defendant’s current health condition.  Neither is there any evidence that her health has deteriorated especially since the last pretrial review in March 2016 as alleged.  Such evidence ought to have been readily available.   I am not prepared to accept the bare statement made in paragraph 3 on those matters.

8.  In all, I would grant leave to the 1^st and 2^nd defendants to file and serve voluntary particulars in the form of the amended draft before me, save the last two sentences in paragraph 3.

9.  In passing, I should mention that although paragraph 2 of voluntary particulars is stated in the “inclusive” sense, having spelt out the evidence which it is said has been destroyed or lost in sub‑paragraphs (a) to (f), I would consider that list as being exhaustive, unless 1^st and 2^nd defendants apply to add to the list (which will have to be dealt with separately).

HCA 857/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 857 OF 2011

____________

____________

__________________

D E C I S I O N

__________________

INTRODUCTION

1.  I have before me an appeal brought by the plaintiffs against the order (“the Order”) of Master M Wong dated 5 April 2016 ordering them to pay into court the total sum of HK$12,000,000 on or before 26 April 2016 as further security for the three defendants’ respective costs (each in the sum of HK$4,000,000) up to the conclusion of the trial which has been fixed to commence on 23 May 2016 (with 17 days reserved).

2.  In view of the fact that the proceedings in the present action have been stayed pursuant to the Order pending provision of the security by the plaintiffs and the trial has been scheduled to commence in less than 4 weeks’ time from today, I have decided to give my decision with brief reasons now.

BACKGROUND

3.  This action was commenced by the plaintiffs by a writ of summons issued on 20 May 2011.  As set out in the statement of claim dated 30 June 2011, the plaintiffs allege that in around late 1961, the 1^st plaintiff provided the sum of HK$2,000,000 (“the Funds”) to the 1^st defendant for her to invest in certain gaming and related business in Macau with the intention that the 1^st defendant would hold the business interest on his behalf.  The plaintiffs further say that the investment is now represented by:-

(1)  6,251 shares of and in a company called Sociedade De Turismo E Diversoes De Macau SA (“STDM”) held in the name of the 1^st defendant; and

(2)  40,050 shares of and in another company called Shun Tak Shipping Company Limited (“STS”) held in the name of the 2^nd defendant (collectively the “Trust Property”).

4.  The plaintiffs also allege that the 3^rd defendant has, since around 2005, been assisting the 1^st defendant to manage the Trust Property and has thereby assumed the duties of a trustee.

5.  By this action, the plaintiffs seek, inter alia, an order for the transfer by the 1^st and 2^nd defendants of the Trust Property to the 2^nd plaintiff (as new trustee for the 1^st plaintiff), and an account of all income and profits derived from the Funds and/or the Trust Property.

6.  The 1^st defendant and the 2^nd and 3^rd defendants have filed their respective defences to the plaintiffs’ claim.  It is not necessary, for the present purpose, for me to set out the detail of their defences, save to mention that they deny the existence of any trust as alleged by the 1^st plaintiff. It is said by the defendants that the provision of the Funds was in the nature of a loan which has been repaid.  The defendants also rely on the defence of laches.  These are obviously matters for the trial.

7.  On 9 August 2013, the 3^rd defendant took out a summons seeking security for costs in the amount of HK$1,004,700 up to the setting down of this action for trial on the ground that the plaintiffs were ordinarily resident out of the jurisdiction.  After a contested hearing on 13 December 2013, Mr Registrar Lung ordered the plaintiffs to pay into court the sum of HK$600,000 as security for the 3^rd defendant’s costs. The Registrar held, amongst other things, that the 1^st plaintiff was not ordinarily resident in Hong Kong, and accepted the 3^rd defendant’s contention that he was ordinarily resident in Virginia, USA.

8.  Thereafter, pursuant to consent orders dated 13 February 2014 and 12 March 2014 respectively, the plaintiffs gave security for the 1^st and 2^nd defendants’ costs, in the sum of HK$600,000 each.

9.  The action then progressed in the usual way.  On 26 November 2014, the plaintiffs were granted leave to set the action down for trial.  On 22 December 2014, notice of setting down for trial was given.  On 5 February 2015, trial dates were fixed.  As earlier mentioned, the trial has been scheduled to commence on 23 May 2016, with 17 days reserved.

10.  On 16 December 2015, each of the 1^st, 2^nd and 3^rd defendants took out a summons seeking further security for costs, for the amounts of HK$10,000,000, HK$5,185,000 and HK$6,850,000 respectively, up to the conclusion of the trial.

11.  The 3 summonses came before Master M Wong on 19 February 2016, who reserved his decision at the end of the hearing.

12.  In the meantime, the pre-trial review came before this court on 4 March 2016. Directions were given for steps to be taken by the parties leading to the trial proper.

13.  On 5 April 2016, Master M Wong handed down his decision on the 3 summonses for security for costs.  In summary, the Master found (inter alia) that:-

(1)  there had not been any material change of circumstances regarding the place of ordinary residence of the 1^st plaintiff since the decision of Mr Registrar Lung given on 13 December 2013;

(2)  the amount of the taxed costs owing by the 3^rd defendant to the plaintiffs in HCMP 643/2012 and CACV 83/2013, namely, HK$1,763,223.40, was far below the amounts of the security sought by the defendants, and therefore should not have any bearing on the present applications; and

(3)  the defendants’ applications should not be dismissed by reason of their delay in making the applications, which the Master did not consider to be inordinate, inexplicable or unacceptable.

14.  As earlier mentioned, Master M Wong ordered the plaintiffs to pay into court the total sum of HK$12,000,000 on or before 26 April 2016 as further security for the three defendants’ costs, and that all further proceedings in this action were to be stayed pending payment of the security.

15.  On 8 April 2014, the plaintiffs filed the present notice of appeal against Master M Wong’s Order.

1^ST PLAINTIFF IS ORDINARILY RESIDENT IN HONG KONG

16.  The applicable principles in an application of this nature are well established. The phrase “ordinarily resident” should be construed in accordance with its natural and ordinary meaning, and that a person is ordinarily resident in a place if he habitually and normally resides lawfully in such place from choice and for a settled purpose, apart from temporary or occasional absences, even if his permanent residence or “real home” is elsewhere: see Hong Kong Civil Procedure 2016, paragraph 23/3/4.

17.  In the present case, it is not in dispute that, as a matter of fact, the 1^st plaintiff has been residing continuously in Hong Kong since no later than late 2011 apart from short occasion absences from Hong Kong, as can be seen from the statement of his travel records obtained from the Immigration Department.  In his affidavit filed on 28 January 2016, the 1^st plaintiff states that he has been permanently residing in Hong Kong and will continue to do so, with his various residential addresses in Hong Kong since 2011 given in paragraph 20 of that affidavit.  He has also explained why, at the age of 89[1], he intends to live in Hong Kong until his death (see paragraphs 20 to 28 of his said affidavit). There is also evidence to the effect that:-

(1)  his Virginia residence has been sold;

(2)  two of his sons who are currently taking care of him are living in Hong Kong; and

(3)  his wife left Virginia and came to live with the 1^st plaintiff in Hong Kong in 2012, and she moved from Hong Kong to the UK in 2014 and is currently living with their daughter there.

18.  All three defendants place heavy reliance on the decision of Mr Registrar Lung given on 13 December 2013, in particular his finding that the 1^st plaintiff was not ordinarily resident in Hong Kong at that time.

19.  Faced with this finding, the 1^st plaintiff, in his affidavit filed on 28 January 2016, states that there have been material changes of circumstances regarding his place of ordinary residence since the decision of the Registrar.  As recited in paragraph 22 of Master M Wong’s decision, the following matters are relied upon by the 1^st plaintiff:

“(a) Registrar Lung’s order was made more than 2 years ago.

(b) Dr Leung’s medical report dated 5 January 2016 and Dr Lam’s medical report dated 21 January 2016 show that the 1^st plaintiff has since Registrar Lung’s order been admitted to hospital for endoscopic, gallbladder, and laparoscopic (cholecystectomy) operations on a number of occasions, his health has substantially deteriorated since Registrar Lung’s order, and he is no longer fit to travel given his health conditions.

(c) The 1^st plaintiff has a Hong Kong ID card as stated in Dr Lam’s medical report dated 21 January 2016.

(d) Now, the 1^st plaintiff has no ability and energy to travel, and has no intention to do so either.

(e) The employment contracts in relation to domestic helpers entered into by the 1^st plaintiff as employer as approved by the Immigration Department show that the 1^st plaintiff has been residing in Hong Kong at least since 2014 (if not earlier).

(f) Consistently, the 1^st plaintiff has been active in Hong Kong socially and culturally.

(g) The 1^st plaintiff’s sons have been residents in Hong Kong and the 1^st plaintiff would like to be with his sons when in his deathbed.

(h)   Both the 1^st and 3^rd defendants owe the plaintiffs substantial costs in HCMP 643 of 2012 and CACV 83 of 2013 running up to at least $2,000,000.00.  The plaintiffs are now willing to have those outstanding costs paid into Court as security for the present proceedings or alternatively to give an undertaking not to remove those costs if paid.”

20.  It is clear that no res judicata arises from the aforesaid finding of the Registrar because (i) the question of whether a plaintiff is ordinarily resident out of the jurisdiction for the purpose of Order 23, rule 1 of the Rules of the High Court is to be determined at the time of the application, and (ii) the decision of the Registrar that the 1^st plaintiff was not ordinarily resident in Hong Kong was based on the evidence then before him.

21.  In Re Little Olympian Each Ways Ltd [1995] WLR 560, the following statement of principle was stated by Lindsay J at 563:-

“But before I return to Order 23in more detail I should mention two arguments of the defendants' which do not rely on the rule. First, it was sought to argue that, because the plaintiff had had an earlier award for security of costs made against it, an order which, if not formally a consent order, was at least unopposed, and because the plaintiff had not then taken the jurisdiction point it now takes, the plaintiff is, by way of issue estoppel, denied the ability to take the point now. In the course of arguing for issue estoppel Mr. Stubbs came up against this stumbling block: the tense used in Ord. 23, r. 1(1)(a) is the present tense — ‘the plaintiff is ordinarily resident out of the jurisdiction.’ If there were any ‘res’ which could be said to have been ‘judicata’ in respect of the earlier award for security, it was that the plaintiff was then ordinarily resident out of the jurisdiction. But whether the plaintiff was then so resident is now irrelevant; the question is now whether the plaintiff is now so resident, an issue not only not yet adjudged but which logically has no necessary relationship with the plaintiff's residence at an earlier date. Estoppel per rem judicatam cannot avail if the only ‘res’ which can be described as already ‘judicata’ is strictly irrelevant at the subsequent occasion at which the doctrine is invoked, a subsequent occasion at which not that ‘res’ but a different ‘res’ fall for decision.”

22.  In my view, I ought to determine the question of whether the 1^st plaintiff is ordinarily resident out of the jurisdiction on the totality of the admissible evidence before me.  I do not consider that it is strictly necessary for the 1^st plaintiff to establish some material changes of circumstances regarding the place of his ordinary residence since the date of the Registrar’s decision, although I shall pay proper regard to the findings and reasoning which led the Registrar to conclude that the 1^st plaintiff was not ordinarily resident in Hong Kong as at 13 December 2013.

23.  On the evidence before me, I consider that the 1^st plaintiff can properly be said to be ordinarily resident in Hong Kong at present.  Master M Wong considered, however, that the 1^st plaintiff’s residence in Hong Kong is purely the result of his health conditions and not out of his free choice, and for that reason he could not be said to be ordinarily resident in Hong Kong. The following was said at paragraphs 26 and 27 of Master M Wong’s decision:-

“26. The present evidence shows that the 1^st plaintiff’s health conditions are worse than before and he has no choice now but to stay in Hong Kong for medical treatments. It is clear to me that the 1^st plaintiff’s stay in Hong Kong is purely caused by his health conditions and not out of his free choice.

27.   As held in Xu Xiuzhi v Wong Yuk Choi & anor, HCA 1525/2012 (see also Hong Kong Civil Procedure 2016, paragraph 23/3/4 and R v Barnet LBC, ex p Shah [1983] 2 AC 309), ‘the phrase ‘ordinarily resident’ should be construed according to its ordinary and natural meaning, and that a person is ordinarily resident in a place if he habitually and normally resides lawfully in such place from choice and for a settled purpose, apart from temporary or occasional absences, even if his permanent residence or ‘real home’ is elsewhere’ (emphasis added).  I do not find that the 1^st plaintiff’s decision to stay in Hong Kong is made ‘from choice’, as he has no choice at all.”

24.  It is important to appreciate, however, that the requirement of “free choice” for the purpose of determining a person’s place of ordinary residence is linked to the concept of “voluntariness” in that person’s adoption of that place as his residence.  In R v Barnet LBC, Ex p Shah [1983] 2 AC 309 at 344, the following was said by Lord Scarman:-

“There are two, and no more than two, respects in which the mind of the ‘propositus’ is important in determining ordinary residence. The residence must be voluntarily adopted. Enforced presence by reason of kidnapping or imprisonment, or a Robinson Crusoe existence on a desert island with no opportunity of escape, may be so overwhelming a factor as to negative the will to be where one is.”

25.  As a matter of principle, it seems to me that a person who decides to reside in a place for health or medical reasons is no different from a person who decides to reside in that place for educational, family or employment reasons.  In each instance, the residence in that place is “adopted voluntarily and for settled purposes as part of the regular order of his life for the time being, whether of short or of long duration”, per Lord Scarman in Ex p Shah (at 343G-H).

26.  The decision of Master Li in Robbie Hana Tenza v Dr Vincent C Goh, HCPI 718/2011 (19 April 2013), referred to in paragraph 28 of the decision of Master M Wong, is a decision on its own facts, and cannot be treated as establishing any general proposition that a person who stays in a place other than his home country for a lengthy period of time due to his or her poor state of health must be treated as not being ordinarily resident in that place.

27.  None of the other matters referred to by Master M Wong in paragraphs 29 to 32 of his decision seems to me to be sufficient to negate the 1^st plaintiff’s residence in Hong Kong as being ordinary.

28.  In all, I am of the view that the 1^st plaintiff is ordinarily resident in Hong Kong and therefore no order for security for costs should be made against him.

29.  In so far as the 2^nd plaintiff is concerned, it is clear that the 2^nd plaintiff has been joined as a party to this action because it has been nominated by the 1^st plaintiff as the new trustee of the Trust Property.  The real parties to the present disputes are the 1^st plaintiff and the defendants.  I accept that there is no inflexible rule that the existence of a co-plaintiff within the jurisdiction means that no security could be ordered against the other, foreign, plaintiff.  However, that is at least a relevant factor, and seems to me to be a strong factor in the present case in view of the foregoing consideration.  Also, it is clear on the evidence that the 2^nd plaintiff does not carry on any business, and is the 1^st plaintiff’s nominee for the purpose of holding the Trust Property claimed in this action.  It is owned and controlled by the 1^st plaintiff. Hence, the place of ordinary residence of the 2^nd plaintiff would follow that of the 1^st plaintiff (being its central management and control), ie Hong Kong.

DISCRETION

30.  Having reached the above conclusions, it is not strictly necessary for me to consider matters relating to the exercise of discretion whether to order security for costs.  I shall, however, deal with them briefly because they have been extensively argued by counsel.

31.  I do not attach any weight on the merits of the plaintiffs’ claim because they are to be determined at the trial and the existing materials are not sufficient to enable me to form a clear view on the merits.  I also do not attach much weight on the unsatisfied taxed costs ordered to be paid by the 1^st and 3^rd defendants in other proceedings because the amounts involved (totalling a little over HK$2 million) are plainly not sufficient to satisfy the security sought and ordered by Master M Wong.

32.  I would not, however, be disposed to order the plaintiffs to provide further security because of the defendants’ delay in making the applications.  The defendants were aware that the plaintiffs were granted leave to set the action down for trial on 26 November 2014, and that trial dates were fixed on 5 February 2015.  They did not, however, make the present applications until 16 December 2015.  Delay in making an application for security for costs, particularly where there is no good explanation for the delay, is itself sufficient to deny the application: see BBMB Finance (Hong Kong) Ltd v China Underwriters Life and General Insurance Co Ltd (in liquidation) [1991] 1 HKLR 617; Tsang Yee Mui v Mak Chik Wing, HCA 2606/2006 (21 July 2008); Waddington Ltd v Chan Chun Hoo Thomas, HCA 3291/2003 (7 May 2013); Haifa International Finance Co Ltd v Concord Strategic Investments Ltd, HCA 4442/2003 (7 March 2014).

33.  In the present case, I do not consider that any good reason has been given by the defendants for their delay in making the applications in December 2015, many months after the setting down of this action for trial.  The fact that the present applications are not the first time that the defendants seek security for costs do not seem to me to provide a good reason for delaying the applications.

34.  The defendants refer to the observation of Deputy High Court Judge Muttrie in his decision in Midland Realty International Ltd v Wise Surplus Limited, HCA 3065/2001 (21 June 2005), at paragraph 19, to the effect that the decision on the timing of an application for security involves a balancing act between applying too early (because one cannot forecast accurately how long the trial will take and how much it will cost) and applying too late (because one may be said to have led the plaintiff up the garden path).  However, once leave to set an action down for trial is given, and certainly once the trial dates have been fixed, all interlocutory steps should have been completed and only the costs of the trial will be outstanding.  I am unable to see why there should be any difficulty in estimating the reasonable and probable costs of the trial at that stage.

35.  Lastly, the defendants argue that the plaintiffs have not suffered prejudice by reason of the delay.  However, as pointed out by Chu J (as she then was) in Tsang Yee Mui, at paragraph 37, if an order for security for costs is made at a late stage, in order not to abandon and waste all the work done and costs the plaintiff has incurred for the action, he or she would have little or no choice but to put up the security.  This amounts to potential injustice.  Also, as Au-Yeung J pointed out in her judgment in Haifa International Finance Co, at paragraph 16, the prejudice arising from a late application for security for costs lies in the plaintiff’s attention being diverted from preparation of a trial to answering a late application.

36.  In all, had it been necessary to do so, I would have declined, in the exercise of my discretion, to order the plaintiffs to provide any further security for costs on the ground of the defendants’ delay in making the application.

DISPOSTION

37.  For the foregoing reasons, I allow the plaintiffs’ appeal and set aside the Order.  I shall hear the parties on the question of costs.

HCA 857/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 857 OF 2011

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D E C I S I O N
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Background

1.  There are 3 separate summonses all dated 16 December 2015 heard together before me.  They are taken out by the 1^st, 2^nd and 3^rd defendants respectively to seek further security for costs against the 1^st and 2^nd plaintiffs for the trial of the action which has been fixed for 17 days commencing on 23 May 2016.

2.  All 3 defendants had previously obtained security for costs against the plaintiffs.  On 13 December 2013, after a contested hearing, Registrar Lung found that the 1^st plaintiff was ordinarily resident out of the jurisdiction, and as the 2^nd plaintiff was admittedly a foreign company, he ordered the 1^st and 2^nd plaintiffs to provide security for the 3^rd defendant’s costs in the sum of $600,000.00.  Without appealing against Registrar’s Lung’s order, the plaintiffs then agreed with the 1^st and 2^nd defendants to provide each of them the same amount of $600,000.00 as security for costs and the matters were dealt with by way of consent orders made on 13 February 2014 and 12 March 2014 respectively.

3.  The 1^st to 3^rd defendants contend that the previous securities provided by the plaintiffs are not sufficient to cover the defendants’ costs up to the trial, and hence ask for further security in the sums of $10,000,000.00, $5,185,000.00 and 6,850,000.00 respectively.

4.  The plaintiffs oppose the applications on the ground that there has been a material change of circumstances, namely the 1^st plaintiff has by the time of the defendants’ applications in December 2015 (2 years after Registrar Lung’s order) been ordinarily resident within the jurisdiction.  Thus, there is no legal basis for seeking security for costs against the 1^st plaintiff.  As to the 2^nd plaintiff, since the ordinary rule of practice is that no order for security for costs will be made if there is a co-plaintiff resident within the jurisdiction (see paragraph 23/3/5 of Hong Kong Civil Procedure 2016, Volume 1), the 2^nd plaintiff should not be ordered to provide security for costs either.

5.  The plaintiffs also contend that there has been a long delay for the defendants to make the present applications, and that the amounts of security requested by the defendants are grossly inflated and should be assessed on a party-and-party basis.  The 1^st to 3^rd defendants’ respective defences are largely the same or at least substantially overlapped, and as a matter of good case management, they should not be allowed to duplicate work unnecessarily.  The 2^nd and 3^rd defendants have filed a single Defence.  There is no good reason why they should now have separate legal representation.  The plaintiffs should not be required to bear such unnecessary consequence.  The estimated length of trial of 17 days is too generous as there are only 4 witnesses.

6.  There are two preliminary issues raised by the defendants.  The first one is in respect of the 1^st plaintiff’s affidavit.  The 3^rd defendant contends that it is defective because the jurat does not follow immediately after the end of the text on the same page but on a fresh page.

7.  The second issue arises out of the consent orders made by the plaintiffs with the 1^st and 2^nd defendants.  The 1^stand 2^nd defendant both contend that the previous consent orders contain a term that gives them liberty to seek further security for trial of this action, and hence they are not making fresh applications for security for costs under Order 23, rule 1(1) of the Rules of the High Court but applications for further security pursuant to the terms of the consent orders already made.

8.  I shall deal with these preliminary issues first.

Jurat

9.  It seems that the 3^rd defendant does not want to pursue with the issue on the jurat of the 1^st plaintiff’s affidavit in order to save time and in view of the filing of the 1^st plaintiff’s 2^nd affidavit.  However, the 3^rd defendant is adamant that the jurat is defective and the parties cannot waive such defect.  I therefore find it necessary for me to deal with this issue.

10.  Order 41 of the Rules of the High Court lays down the rules for the form of affidavit. However, there is no specific rule requiring the jurat to follow immediately after the end of the text on the same page and not to be placed on a fresh page.  Order 41, rule 1(8) only requires that “Every affidavit must be signed by the deponent and the jurat must be completed and signed by the person before whom it is sworn”.

11.  The 3^rd defendant’s contention about the jurat is based on a passage in paragraph 41/1/9 of the Hong Kong Civil Procedure 2016, where it is stated as follows:-

“Affidavit should never end on one page with the jurat following overleaf. The jurat should follow immediately after the end of the text.”

12.  In the same paragraph, it is also stated that “Irregularities in the form of the jurat cannot be waived by the parties but see r.4.”  Rule 4 of Order 41 stipulates that “An affidavit may, with the leave of the Court, be filed or used in evidence notwithstanding any irregularity in the form thereof.”  Thus, the 3^rd defendant contends that the parties cannot waive this irregularity and the 1^st plaintiff’s affidavit may only be filed or used in evidence with the leave of the Court.  However, the plaintiffs did not make any application for such leave to be given to them.  The 3^rd defendant therefore objects to the use of the 1^st plaintiff’s affidavit in these proceedings.

13.  I do not accept the 3^rd defendant’s contention in this regard.  It is clear to me that there is no such rule requiring the jurat to follow immediately after the end of the text and not to be placed on a fresh page.  The passage in paragraph 41/1/9 as cited above does not refer to any case law authority.  However, there is a reference in the judgment of Lord Justice Stocker in Rajankumar Nemchand Shah Illa Ketchi Shah v Habib Bank AG Zurich, 1988 WL 1608840 saying that jurat on a separate page is defective.  The judgment did not elaborate on why such a jurat is defective and no rule has been referred to in the judgment.  It is therefore unclear on what basis Lord Justice Stocker made that finding.  Without any specific rule requiring a jurat to be on the same page as the ending of the text, I am of the view that it will only amount to a good practice to follow that suggestion, but it will not make the jurat irregular or defective when the practice is not followed.

14.  The 3^rd defendant submits that when the jurat is not on the same page as the one where the text ends, there could be missing pages in between.  However, this cannot be the case for the 1^st plaintiff’s affidavit, which ends clearly with a conclusion, namely paragraph 40, and the text of which is “For the reasons stated above, the Defendants’ Summonses should be dismissed with costs to the Plaintiffs.”  The jurat is just on the next page after paragraph 40.  With such clear concluding words, it is highly unlikely that there could be missing pages in between.  I do not see any real concern that could be caused by the placing of the jurat on a fresh page.

15.  In the circumstances, I do not accept that the jurat is irregular or defective as submitted by the 3^rd defendant.  In fact, there is no problem with the form of the jurat at all.  It is just the location of the jurat that is in question.  Even if the jurat could be regarded as irregular or defective in form, I have the power to waive such irregularity or defect under Order 41, rule 4 of the Rules of the High Court, and I would exercise this power in respect of the 1^st plaintiff’s affidavit.  I do not think that there is any need for the plaintiffs to make formal application for such leave to be given before I can exercise such power.  I would therefore grant leave to the plaintiffs to file and use the 1^st plaintiff’s affidavit in evidence, on the assumption that such leave is required.

Consent orders

16.  The consent order dated 13 February 2014 made between the plaintiffs and the 1^st defendant contains the term that “There be liberty for the 1^st Defendant to seek further security for trial of this action”.  Likewise, the consent order dated 12 March 2014 made between the plaintiffs and the 2^nd defendant contains the term that “There be liberty for the 2^nd Defendant to seek further security for trial of this action”.

17.  Relying on these terms, the 1^st and 2^nd defendants contend that they are not making any fresh application for security for costs.  They submit that these terms are contractual in nature and the plaintiffs are contractually bound to provide further security for costs of the trial, subject only to the Court’s discretion over the amount of such security.  Thus, they argue that the plaintiffs cannot resile from the consent orders just because of some material change of circumstances, and the onus is on the plaintiffs to apply to vary or discharge the consent orders.

18.  I do not accept the 1^st and 2^nd defendants’ contention in this regard.  The words “liberty … to seek further security” in the consent orders must be given their ordinary and natural meaning, namely the 1^st and 2^nd defendants are at liberty to make applications to apply for further security.  Normally, when there is an order for “liberty to apply”, it just means that the parties are not restricted in any way to apply.  The aforesaid terms of the consent orders should be understood in the same way.  That is the 1^st and 2^nd defendants are not restricted in any way to make application for further security, but it does not mean that they do not need to apply again.  The word “seek” must refer to seeking an order from the Court.  In other words, there must be an application before the Court before the 1^st and 2^nd defendants can “seek” for an order of the Court and before the Court can grant such an order.

19.  It does not make any sense to me to say that this is not a fresh application under Order 23, rule 1(1) of the Rules of the High Court.  If it is not such an application, are the 1^st and 2^nd defendants making an enforcement application because of a breach of the consent orders?  However, I do not see any words in the consent orders that can give rise to the understanding that the plaintiffs are bound to give further security without the 1^st and 2^nd defendants making fresh applications.  I also cannot see how the Court’s discretion is restricted by the consent orders to deal with the amount of security only.  If the parties had intended that the plaintiffs must pay further security for the trial of the action and only the amount is to be determined by the Court, there should be clear wordings such as “the plaintiffs shall pay further security to the defendant for the trial of the action, the amount of which shall be determined by the Court” instead of just stating that there be liberty to seek further security for the trial.

20.  Thus, I do not find that the plaintiffs are bound by the consent orders to give further security as suggested by the 1^st and 2^nd defendants.  The 1^st and 2^nd defendants’ applications for further security will be dealt with as fresh applications and in the same way as the 3^rd defendant’s application.

Material change of circumstances

21.  The parties have no issue on the Court’s power in ordering further security under Order 23, rule 1(1) of the Rules of the High Court when the plaintiffs are ordinarily resident out of the jurisdiction.  It is also not disputed Registrar Lung made a finding on 13 December 2013 that the 1^st plaintiff was not ordinarily resident in Hong Kong.  However, the 1^st plaintiff contends that he is now ordinarily resident in Hong Kong because of material change of circumstances.

22.  The 1^st plaintiff relies on the following matters to contend that there has been a material change of circumstances: -

(a) Registrar Lung’s order was made more than 2 years ago.

(b) Dr Leung’s medical report dated 5 January 2016 and Dr Lam’s medical report dated 21 January 2016 show that the 1^st plaintiff has since Registrar Lung’s order been admitted to hospital for endoscopic, gallbladder, and laparoscopic (cholecystectomy) operations on a number of occasions, his health has substantially deteriorated since Registrar Lung’s order, and he is no longer fit to travel given his health conditions.

(c) The 1^st plaintiff has a Hong Kong ID card as stated in Dr Lam’s medical report dated 21 January 2016.

(d) Now, the 1^st plaintiff has no ability and energy to travel, and has no intention to do so either.

(e) The employment contracts in relation to domestic helpers entered into by the 1^st plaintiff as employer as approved by the Immigration Department show that the 1^st plaintiff has been residing in Hong Kong at least since 2014 (if not earlier).

(f) Consistently, the 1^st plaintiff has been active in Hong Kong socially and culturally.

(g) The 1^st plaintiff’s sons have been residents in Hong Kong and the 1^st plaintiff would like to be with his sons when in his deathbed.

(h) Both the 1^st and 3^rd defendants owe the plaintiffs substantial costs in HCMP 643 of 2012 and CACV 83 of 2013 running up to at least $2,000,000.00.  The plaintiffs are now willing to have those outstanding costs paid into Court as security for the present proceedings or alternatively to give an undertaking not to remove those costs if paid.

23.  The plaintiffs submit that the above are uncontradicted evidence of what has happened after Registrar Lung’s order, and they deal with some of the concerns of Registrar Lung as follows: -

(a) The question of the lack of evidence to show the 1^st plaintiff’s physical condition or health before Registrar Lung is now addressed by the medical evidence in relation to the 1^st plaintiff’s health conditions after Registrar Lung’s decision.

(b) The question of the lack of particulars of his close family members before Registrar Lung is now addressed by the 1^st plaintiff’s desire to stay with his sons.

(c) The 1^st plaintiff’s preference to the lifestyle in the United States and his residence in the United States are now made impossible due to his health conditions and his intention to stay in Hong Kong.

(d) The 1^st plaintiff’s occasional brief stay in Hong Kong is no longer the case, as evidenced by the 1^st plaintiff’s travel record.

(e) The 1^st plaintiff is now willing to give an undertaking as to the costs in HCMP 643 of 2012.

24.  In gist, the 1^st plaintiff is saying that the deterioration of his health conditions has led to changes of circumstances in that (1) he would like to stay with his sons so that they would be at his bedsides at the hour of his death; (2) he has no intention to go abroad; and (3) he simply cannot travel and thus stay in Hong Kong far more substantially than before.  These changes have resulted in him being ordinarily resident in Hong Kong.

25.  However, I do not accept that there is any material change of circumstances as suggested by the plaintiffs.  All these matters had in fact been argued before Registrar Lung and what the plaintiffs are doing is just to supplement some evidence that were not available before Registrar Lung.  From the notes of proceedings for the hearing before Registrar Lung, it is clear that Registrar Lung has already ruled that the 1^st plaintiff was ordinarily resident out of the jurisdiction notwithstanding his assertion that he chose Hong Kong as his place of residence because he wanted to be close to his family and his need to seek medical treatments here.  There was also production of his entry and exit records showing that he stayed in Hong Kong most of the time in 2012 and 2013. So there have been rulings on all these matters.

26.  The present evidence shows that the 1^st plaintiff’s health conditions are worse than before and he has no choice now but to stay in Hong Kong for medical treatments.  It is clear to me that the 1^st plaintiff’s stay in Hong Kong is purely caused by his health conditions and not out of his free choice.

27.  As held in Xu Xiuzhi v Wong Yuk Choi & anor, HCA 1525/2012 (see also Hong Kong Civil Procedure 2016, paragraph 23/3/4 and R v Barnet LBC, ex p Shah [1983] 2 AC 309), ‘the phrase “ordinarily resident” should be construed according to its ordinary and natural meaning, and that a person is ordinarily resident in a place if he habitually and normally resides lawfully in such place from choice and for a settled purpose, apart from temporary or occasional absences, even if his permanent residence or “real home” is elsewhere’ (emphasis added).  I do not find that the 1^st plaintiff’s decision to stay in Hong Kong is made “from choice”, as he has no choice at all.

28.  In Robbie Ilana Tenza v Dr Vincent C Goh, HCPI 718/2011, the plaintiff there was absent continuously from Hong Kong for a lengthy period of time due to her dental treatments and poor state of health rather than for work or other reasons, and the Court held that she was not “ordinarily resident” out of the jurisdiction. By the same token, the 1^st plaintiff cannot be regarded as “ordinarily resident” in Hong Kong, when his lengthy stay here was due to his medical treatments and poor health.

29.  The 1^st plaintiff’s intention to stay close with his family has already been argued before Registrar Lung.  His present intention to have his sons staying around him in his deathbed is basically the same thing.  I do not consider it as material change of circumstances.  In any event, there is no supporting evidence that his sons live in Hong Kong apart from the 1^st plaintiff’s bare allegation.  There is also no evidence that if the 1^st plaintiff moves out of Hong Kong, his 2 sons cannot be with him.  In fact, his alleged intention to be with his family members in Hong Kong is contradicted by his own case, when it was heard before Registrar Lung, that he mistrusted his family members who allegedly took away his assets.  Thus, the 1^st plaintiff’s intention to stay in Hong Kong because of his sons is just untenable.

30.  Although the 1^st plaintiff has a Hong Kong ID card, it does not automatically make him an ordinary resident in Hong Kong (see Chan Ker Chi Paul v Super Zone Investment Ltd & anor [1994] 2 HKC 679).  Indeed, from the evidence before Registrar Lung, it is clear that the 1^st Plaintiff used to live in Virginia.  There is no evidence to show that the 1^st plaintiff has “up-rooted” or “re-located” from Virginia to Hong Kong, even though he stays here for medical treatments (see Robbie Ilana Tenza v Dr Vincent C Goh, supra).  Despite being a very wealthy man, the 1^st plaintiff did not even purchase a property for his own stay in Hong Kong.  He has only rented different premises to stay in Hong Kong.  Although there is no law saying that a person must own a property in a place before he can be regarded as resident in that place, with the 1^st plaintiff’s background, this would be an indicator of whether he really has the intention to up-root or re-locate to Hong Kong.

31.  There is also no evidence that he has transferred any asset of permanent nature to Hong Kong.  Although ordinary residence within the jurisdiction and existence of assets within or without the jurisdiction are two different concepts, the existence of assets of permanent nature within the jurisdiction is again an indicator of the 1^st plaintiff’s intention to treat Hong Kong as his place of residence, and the lacking of it indicates otherwise.

32.  In fact, there is no evidence to show the 1^st plaintiff has any ties in Hong Kong.  His social and cultural activities in Hong Kong cannot be regarded as such ties in Hong Kong, as any person not residing in Hong Kong can also take part in such activities.

33.  As to the plaintiffs’ suggestion that they are now willing to have the outstanding costs in HCMP 643 of 2012 and CACV 83 of 2013 paid into Court as security or alternatively to give an undertaking not to remove those costs if paid, I do not find it as material change of circumstance, and in fact no such costs have been paid.  Moreover, the 3^rd defendant is appealing against the ruling in those proceedings including costs and the result of the appeal is still pending.  It is still not sure yet if the plaintiffs would definitely obtain such costs.  In any event, the amount of the taxed costs is just $1,763,223.40, which is far below what the defendants are seeking as further security.  I do not consider such an undertaking should have any bearing in the present applications.

34.  By reasons aforesaid, I do not find that the 1^st plaintiff has established that he is now ordinarily resident in Hong Kong or that there is any material change of circumstances.

Delay

35.  The plaintiffs submit that the 1^st and 2^nd defendants in their respective Timetabling Questionnaires confirmed that they would make an application for further security before the case is set down for trial and the 3^rd defendant in his Timetabling Questionnaire confirmed that he would take out further application for security of costs upon leave is granted to set down the case for trial.  However, without any explanation, the defendants waited until December 2015 (10 months after the notice of trial was given and 13 months after leave for setting down was granted) to send out demand for further security.

36.  The plaintiffs contend that such delay is inordinate, inexplicable and unacceptable.  The defendants’ failure to keep their confirmation to the Court in the Timetabling Questionnaires has caused the plaintiffs to incur costs for the Pre-trial Review and the preparation for the trial.  The delay is a sufficient ground for dismissing the applications, and if necessary, for a substantial discount of the further security that would be ordered, as the plaintiffs would have very little time to raise more than $20,000,000.00 (besides their own costs) for the trial (see Raj Kumar Mahajan v HCL Technologies (Hong Kong) Limited & ors, HCA 1510/2004).

37.  Although I accept that the defendants could have applied for further security at such time as indicated in their respective Timetabling Questionnaires, I do not consider the delay as one that is inordinate, inexplicable and unacceptable, or warrant dismissal of the applications.  As pointed out by Muttrie DHCJ in Midland Realty International Ltd v Wise Surplus Ltd, HCA 3065/2001, the decision on the timing of an application for security involves a balancing act between applying too early and applying too late.  It is not unreasonable for the defendants to wait a bit longer until the time when they have a clearer idea as to how much costs would be incurred after the trial dates have been fixed and agreement with counsel on their fees are made.

38.  The defendants requested for further security in November/December 2015.  There was still about half a year before the trial.  I see no reason why the plaintiffs would be prejudiced by the time frame.  There is in fact no evidence that the plaintiffs would have difficulty in giving further security whether in term of the time or the quantum, as the 1^st plaintiff is admittedly an extremely wealthy man.

39.  Thus, I do not accept that the defendants’ application for further security should be dismissed or the amount of further security should be reduced on the ground of delay.

Liability to pay further security

40.  Since the 1^st plaintiff fails in his contentions that there has been material change of circumstances and that there was inordinate, inexplicable and unacceptable delay on the part of the defendants in making the applications, the 1^st plaintiff has simply no ground to oppose the defendants’ applications for further security.  The 1^st plaintiff has been held to be ordinarily resident out of the jurisdiction and this remains the case.  The defendants are clearly entitled to make applications under Order 23, rule 1(1)(a) of the Rules of the High Court to ask for further security for costs.  The amounts ordered previously are clearly not sufficient to cover the costs of the trial.  There is no reason not to grant further security to the defendants.

41.  As to the 2^nd plaintiff, it cannot rely on the general rule that there is a co-plaintiff who is ordinarily resident in Hong Kong, as the 1^st plaintiff is not such a person.  Although the 2^nd defendant has recently been registered in Hong Kong as a non-Hong Kong company, it still does not change its identity as a foreign company.  Being a foreign company and in the absence of any special reasons, the 2^nd plaintiff is also liable to pay further security to the defendants.

Quantum

42.  As to the amount of further security, there is no dispute that I can apply a broad-brush approach.  After all, the aim is just to give security for the defendants’ costs, not to assess their actual costs that would be incurred for the trial, whether on party-and-party basis or otherwise.

43.  The plaintiffs have raised the arguments that there is substantial overlapping of work when the defendants are separately represented and that the 2^nd and 3^rd defendants should not be separately represented when they have filed a single Defence.  However, I do not think that the defendants can be deprived of their rights to have separate legal representation or that they should suffer in costs when they are separately represented.

44.  The 17 days fixed for the trial may or may not be too generous, but this is the length of trial that has been fixed and the defendants are entitled to prepare the costs estimate based on that length.  After all, counsel’s diaries would be marked for that length.

45.  Judging from the complexity of the case, the volume of documents involved, the length of the trial and the number of witnesses to be called, I estimate that it would be sufficient for each of the defendants to have $4,000,000.00 as further security for the trial.

Conclusion

46.  In the circumstances, I find that the plaintiffs should provide further security to the defendants in the sum of $4,000,000.00 each.

47.  I therefore order as follows: -

(a) The plaintiffs do on or before 26 April 2016 pay a total sum of $12,000,000.00 into Court in an interest bearing account as further security for the defendants’ costs up to the conclusion of the trial (ie $4,000,000.00 for each of the defendants);

(b) In default of payment of the said further security, the plaintiffs’ action against the defendants be dismissed;

(c) Pending payment of the said further security, all further proceedings in this action be stayed;

(d) Costs order nisi: The plaintiffs do pay the defendants costs of the 3 summonses all dated 16 December 2015 with certificate for one counsel for each of the defendants to be assessed summarily on paper;

(e) The defendants do submit and serve their respective statement of costs on or before 19 April 2016; and

(f) The plaintiffs do submit and serve their statement of objection on or before 3 May 2016.

HCA 857/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 857 OF 2011

_____________

D E C I S I O N

_____________

THE APPLICATION

1. This is D3’s application by summons dated 9^th August 2013 [1-3][1] for security for costs (“D3’s application”) against P1 and P2 (collectively “Ps”) up to the stage of setting down.  The application is opposed by Ps.

2. Mr. C Y Li, SC leading Mr. J. Ah-weng, counsel acts for D3.  Mr. R. Whitehead SC leading Mr. R. D’Souza, counsel acts for the plaintiffs.

THE FACTUAL BACKGROUND

3. The facts of this case can be briefly stated that P1 claims that back in 1961, some 52 years ago, P1 transferred $2 million to D1 for her to invest, on his behalf, in a casino business in Macau and it is alleged that a trust (said to be express or resulting trust) came to be created with P1 being the settlor and the beneficiary and D1 as trustee (“the alleged trust”). The trust property is (i) 6,251 STDM shares (ii) 40,050 STS shares (collectively “thealleged trust property”).  P1’s claim against D1, D2 and D3 (collectively “Ds”) is based on the alleged trust for which he seeks a declaration that he is the beneficial owner of the alleged trust property, return of the alleged trust property and account and inquiry.

4. D1 admits that the funds invested in the casino business originated from P1, but says that the HK$2 million was a loan from P1 to her.  She says, through the years, she has partly paid back the loan and P1 has waived the remainder.  However, she is unable to recall how and when she made the repayment. [19/§5]

5. D3 is the son of P1 and D1.[2]

D3’S GROUND IN SUPPORT

6. D3’s grounds in support of his application are:

a.  P1 is ordinary resident out of the jurisdiction;

b.  P2 is not ordinary resident within jurisdiction;

c.   P1 and P2 have not correctly stated their address in the Writ; and

d.  P2 is a nominal plaintiff;

THE LAW

Order 23 rule 1

7. The power to order security for costs is in Order 23(1) RHC:-

“1.—(1) Where, on the application of a defendant to an action or other proceeding in the Court of First Instance, it appears to the Court—

(a) that the plaintiff is ordinarily resident out of the jurisdiction, or

(b) that the plaintiff (not being a plaintiff who is suing in a representative capacity) is a nominal plaintiff who is suing for the benefit of some other person and that there is reason to believe that he will be unable to pay the costs of the defendant if ordered to do so, or

(c) subject to paragraph (2) that the plaintiff’s address is not stated in the writ or other originating process or is incorrectly stated therein, or

(d) …,

then if, having regard to all the circumstances of the case, the Court thinks it just to do so, it may order the plaintiff to give such security for the defendant’s costs of the action or other proceeding as it thinks just.

  (2)  The Court shall not require a plaintiff to give security by reasons only of paragraph (1)(c) if he satisfies the Court that the failure to state his address or the mis-statement thereof was made innocently and without intention to deceive ”

Legal principles on the meaning of ordinary resident out of the jurisdiction

8. This issue has attracted much argument.  The parties do not have much difference in the relevant legal principles as set out below:

a. “The onus is on the defendant to prove that P1 is ordinarily resident out of jurisdiction and the question is one of fact and degree not depending on the duration of the residence, but upon the way in which a man’s life is usually ordered in contrast with temporary residence [HKCP 2013, §23/3/4];”

b. “the phrase “ordinarily resident” should be construed according to its ordinary and natural meaning, and that a person is ordinarily resident in a place if he habitually and normally resides lawfully in such place from choice and for a settled purpose, apart from temporary or occasional absences, even if his permanent residence or “real home” is elsewhere” (Emphasis added): HKCP 2013, §23/3/4;

c. “When determining whether a plaintiff is “ordinarily resident” outside the jurisdiction it does not necessarily matter that the plaintiff has spent significant amounts of time abroad.  One has to consider the reasons for the absence from the jurisdiction and whether the plaintiff has “up-rooted” and relocated him or herself abroad” (Emphasis added): HKCP 2013, §23/3/4;

d. “A holder of a Hong Kong identity card is not necessarily ordinarily resident within Hong Kong.”HKCP 2013, §23/3/4

e. “There is no inflexible rule or practice that a plaintiff resident abroad will be ordered to give security for costs – the power to make such order is entirely discretionary [HKCP 2013, §23/3/4];”

f. In the recent CFA case ofVallejos Evangeline Banao, aka Vallejos Evangeline B. v Commissioner of Registration andAnother[2013] 2 HKLRD 533, the CFA ruled that the interpretation of “ordinary resident” is highly dependent on context of the statutory framework in which the phrase is found.  (per Ma CJ, at §27, §28, §30, §47-49, §79)

g. The statutory context of O.23 RHC has been so stated by CA in Hui Yin Sang & others v. Tsoi Ping Kwan &Others [2012] 2 HKLRD 1085, at §46:-

‘It is important to bear in mind, in the context of O.23, that:

“The purpose of ordering security for costs against a plaintiff ordinarily resident outside the jurisdiction is to ensure that a successful defendant will have a fund available within the jurisdiction of this court against which it can enforce the judgment for costs. It is not, in the ordinary case, in any sense designed to provide a defendant with security for costs against a plaintiff who lacks funds. The risk of defending a case brought by a penurious plaintiff is as applicable to plaintiffs coming from outside the jurisdiction as it is to plaintiffs resident within the jurisdiction.”

(Per Sir Nicholas Browne-Wilkinson VC (as he then was) in Porzelack KC v Porzelack (UK) Ltd [1987] 1 WLR 420 at p. 422H – cited in Akai Holdings Ltd v Ernst & Young (2009) 12 HKCFAR 376 at §14).’

h. “One of the main factors which the Court will take into account when exercising its discretion is the financial position of a foreign plaintiff [HKCP 2013, §23/3/4]”; and

i. “Subject to the general discretion of the Court, the ordinary rule of practice is that no order for security for costs will be made if there is a co-plaintiff resident within the jurisdiction [HKCP 2013, §23/3/4]”.

P1 IS ORDINARY RESIDENT OUT OF THE JURISDICTION

D3’evidence

9. D3 is the biological son of P1.  He is in a good position to give evidence on P1’s preference for his ordinary residence.  He gave evidence in his affidavit [81] that P1 is not ordinary resident in Hong Kong.  He said that for as long as he remembered, P1 spent most of his time away from Hong Kong, and he only visited Hong Kong from time to time.  He further said, “I remember he used to only spend at most several weeks a year in Hong Kong in the recent decades.  He had always told me that he preferred the space and lifestyle abroad.  Indeed, his residence is in Virginia USA where he used to spend most of his time.  I verily believe that he is ordinarily resident there.”

P1’s evidence

10. In response to D3’s evidence above, P1 in his affidavit [91] at §11 said, “Although, it is true that I prefer the lifestyle and space abroad as stated at paragraph 14 of D3’s affirmation, however Hong Kong is where some of my close family is, and these are the people that take care of me. The opportunity to be close to the part of my family that still cares for me greatly outweighs any preference I may have for the lifestyle and space abroad.”

11. Mr. Whitehead SC submits in paragraph 24(3) of his written submissions:

“It is evident from Eric’s (P1’s) travel records from the immigration department that he has spent most of his time in Hong Kong in 2012 and 2013 [164-165], and in particular:

(a) In 2012, Eric resided in Hong Kong for 324 days (only 41 days away from Hong Kong) [167];

(b) In 2013, from 1 January until the end of August, Eric has resided in Hong Kong for 219 days (only 22 days away from Hong Kong covering 2 trips to Macau and one trip to Shanghai) [168]; and

(c) None of Eric’s time away from Hong Kong was in the United States except in January 2012 when one of his sons passed away;”

Evidence not admissible

12. Mr. Li SC has, in his written submissions[3], referred to the legal proceedings in the US to discredit the credibility of P1. This is not permissible as held in Sun Legend Investment Ltd. v Ho Yuk Wah David and Others(2011) 14 HKCFAR 541 at §58 by Litton PJ:

57. … …A civil case is a trial of the issues as put before the court.  It is not a trial of the character of the parties.  This is a matter beyond the scope of analysis in a court of law.

58. … …Generally speaking evidence of facts and circumstances to show the disposition of a party is inadmissible: see Sankey LJ in Hobbs v. Tinling [1929] 2 KB1 at 50.  Far less is it permissible to have the labels “devious character” “coward” etc. created in unrelated proceedings attached to the parties before the court.”

I shall therefore attach no weight to those submissions.

Discussion

13. D3 has given evidence that for the recent decades, P1 was not ordinarily resident in Hong Kong and he preferred to the space and lifestyle abroad, which P1 did not dispute.  However, P1 now says for the past two years, i.e. 2012 to 2013 as demonstrated by the records of the Immigration Department, coupled with the medical references in Hong Kong, that he has determined to remain close to his family in Hong Kong.

14. D3 comments that the reason for P1 to have stayed in Hong Kong for 2012 and 2013 is on medical grounds.  He further says that there is no clear evidence on his family members and ties in Hong Kong or any evidence that his centre of activity is in Hong Kong or he has any asset of permanent nature in Hong Kong.  His claim that there are “close family members” in Hong Kong [P/§11/91]is a bare assertion with no particularity.

15. It cannot be denied that in P1’s affidavit, he did not set out the particulars of his close family members.  Although the burden is on D3 to prove that P1 is not ordinarily resident within the jurisdiction, once D3 has established a prima facie case, P1 has the opportunity of responding to D3’s evidence by giving his version of the fact, with reasonable particulars to support his version.

16. On the one hand, P1 says that he wants to stay in Hong Kong so that he may stay close to his family.  On the other hand, he says that he has to keep the whereabouts of his assets to himself because his family is trying to take his assets away and he has no choice but to keep his assets to himself.[4]  This shows that he has no trust in his family.

17. D3 goes further to say that P1 has not given his residential address in the writ of summons.  He has only given his PO box address on it.  The writ was prepared by his solicitor.  It can be seen that P1 has deliberately concealed his residential address from the court and D3.  P1 has not explained why he should give the PO box address.  D3 refers to Order 6 rule 5 RHC, which provides that P1 should provide his address, relying upon Re Like Grand Holdings Ltd HCCW 603 of 2001 at §§4, 5, 6, 7, 8 and 9, in which the learned judge held that the rationale in Order 6 rule 5 applicable to writs should apply to petitions for winding-up of companies and that the purpose of having P1’s address in the originating document is:

“9. … …to state his address as well as his solicitor’s address, which is the address for service, is to inform the other party whether the plaintiff or petitioner is ordinarily resident within or outside the jurisdiction; if it is the latter, the other party may wish to apply for security for costs. Thus, the address of the petitioner that should be stated in the petition must be his place of residence.”

18. It is correct for Mr. Whitehead SC to say that P1, who is being legally represented, does not have to put in his address of residence in the writ because he has the option of having his solicitor’s address in the writ and that even if the PO box address is not a proper address, it is not evidence that he had the intention to deceive.[5]  However, under Order 6 rule 5(1), P1 is required to indorse his writ with his address, be it residential or business address:

5. Indorsement as to solicitor and address (O. 6, r. 5) (1) Before a writ is issued it must be indorsed-

(a) where the plaintiff sues by a solicitor, with the plaintiff's address and the solicitor's name or firm and a business address of his within the jurisdiction and also (if the solicitor is the agent of another) the name or firm and business address of his principal; (emphasis added)

It may be said that the PO box address is not a proper address as construed in Re Like Grand Holdings Ltd, supra.  There is no explanation from P1 for the PO box address that he has given instead of his residential address.  However, I am not satisfied that the evidence before me is sufficient to support that Ps had the intention to deceive and that on that reason alone, the court should require them to provide security for costs.

Mr. Whitehead SC has pointed out the discrepancies in D3’s statements that he had given for his US legal proceedings and for this action here in relation to P1’s residence.  At page 182 of the bundle, D3 had said that P1 is a resident of China, the United Kingdom and the United States whereas in his affidavit on page 81 of the bundle, he said P1 is not ordinary resident in Hong Kong.  The discrepancy exists.  But I do not consider that it demonstrates that D3’s evidence is not reliable.  There is a difference between the residence of a person and his being ordinarily resident in a certain place.

19. As stated in paragraph 7a., supra, whether P1 is ordinarily resident out of the jurisdiction is one of fact and degree not depending on the duration of the residence, but upon the way in which his life is usually ordered in contrast with temporary residence. In the assessment of the evidence, the Court must weigh all the evidence and circumstances as adduced by the parties, taking into account whether there is any reasonable explanation for any doubts or incomplete picture as enunciated in the evidence.  It then comes to its own decision accordingly.

Conclusion

20. Having considered the evidence above, I come to a view that D3 has established that P1 was and is not ordinarily resident within the jurisdiction.  I have taken into account P1’s assertion that with his age of 87, he would like to be close to his family in Hong Kong and therefore he has the intention of staying in Hong Kong for the future.  However, these factors are diluted by his lack of evidence to show his physical condition or health and particulars of his close family members, coupled with his admission that he preferred the lifestyle of the US and that he had been residing in the US over the past decades, with a few occasional brief stays in Hong Kong.  His evidence that he wants to be close to his family in Hong Kong does not sit well with his distrust of his family either.  All these have caused me to conclude that he is not ordinary resident in Hong Kong. He may, if he likes, leave Hong Kong any time in future.  D3 has reached the threshold under Order 23 rule 1.

ASSETS OF FIXED AND PERMNENT NATURE

21. Mr. Li SC submits in his written submissions that if P1 is found to be not ordinarily resident within the jurisdiction, then in the exercise of this Court’s discretion, the Court may consider whether P1 has assets of fixed and permanent nature in Hong Kong.  However, there is not one iota of evidence that he has any asset of fixed and permanent nature in Hong Kong (there was only the vague assertion that he has wealth held by companies, trusts and bank accounts all over the world including Hong Kong at P1/16/93).

22. Mr. Whitehead SC refers to D3’s evidence in the legal proceedings in Virginia in the US, in which D3 said that P1’s wealth was estimated towards two billion US dollars.[6]  However, it is trite law that the evidence in another legal proceeding is not admissible in this proceeding, let alone the evidence in the legal proceedings in the foreign court.  See Sun Legend Investment Ltd.  I shall not consider such evidence here.

23. D3 has stated clearly that he deliberately keeps the whereabouts of his assets to himself.[7]  This Court is therefore unable to consider the nature of his assets in light of Mr. Li SC’s submissions.

Inconsistent decisions

24. Notwithstanding this issue is not argued here, Mr. Li SC’s proposition that the Court should consider P1’s assets of fixed and permanent nature is not entirely clear in view of the following authorities:

a. HKCP 2013 at 23/3/6 : “Security will not be required from a person …if he has substantial property, whether real or personal, within it …but semble, the property must be of fixed and permanent nature, which can certainly be available for costs (Ebrad v Gassier  (1884) 28 Ch.D. 232)”;

b. Hoogland Hendricus Antonius v Gino L Lin & Anor, HCA 657/2007 (29 May 2008): Chung J. quoted the passage above.  But in his case, there were real properties under mortgage. Nevertheless the learned Judge ordered security for costs;

c. On the basis of the above case, Anthony Neoh SC submitted to DHCJ S. Leung in his appeal in Lin Man Yuan v Kin Ming Holdings International Ltd & Others HCA216/2008 (unreported DHCJ S. Leung) 29 November 2013, that even residential property was not regarded as fixed and permanent asset sufficient to provide security, which the Deputy Judge did not agree.  See paragraph 35 of his judgment.

My views

25. The authorities above have made reference to the nature of the property being fixed and permanent in order to determine it is sufficient to provide security for the costs.  But there has not been a consistent view.  In my view, the meaning of security under Order 23 should be construed within the context of the order itself.  The Court of Appeal in Hui Yin Sang’s case has already defined its meaning as “The purpose of ordering security for costs against a plaintiff ordinarily resident outside the jurisdiction is to ensure that a successful defendant will have a fund available within the jurisdiction of this court against which it can enforce the judgment for costs.”

26. The Court of Appeal in Montgomery Ward & Co Incorporated v Evergo Trading Company Limited and Evergo Holdings Company Limited, unreported, CACV 32/1996, 31 May 1996, where Nazareth VP held (paragraph 8):

‘Given that there are no proper factors weighing in favour of the foreign plaintiff or at least either way, it seems to me that [the judge 's] discretion plainly had to be exercised in conformity with the position set out in the judgment of Lord Denning in Aeronave SPA v Westland Charters [1971] 3 All ER 531 at 533 where he said this:

"I agree with the note in the Supreme Court Practice that the rule does give a discretion to the court.  In 1984 in Crozai v Brogden Lopes J said that there was an inflexible rule that if a foreigner sued he should give security for costs.  But that is putting it too high.  It is the usual practice of the courts to make a foreign plaintiff give security for costs.  But it does so, as a matter of discretion, because it is just to do so.  After all, if the defendant succeeds and gets an order for his costs, it is not right that he should have to go to a foreign country to enforce the order."…’ (emphasis added)

27. On the basis of the above authorities, if the plaintiff is shown to be ordinary resident outside the jurisdiction, it will be for the plaintiff to show to the court why an order for security for costs should not be made.  If the plaintiff says that he has sufficient assets within the jurisdiction to satisfy the costs order in favour of the defendant, the plaintiff has to demonstrate that the assets are sufficient to meet such costs.  The emphasis should be on the security, that is to say, the plaintiff’s proof that there should be no risk of the defendant not getting its costs.  The nature of the property, whether fixed and permanent, is only one of the factors that the court should take into account to determine whether sufficient security has been provided by the plaintiff.  The nature of security can take various forms, such as cash, real property, bank guarantee or other arrangements acceptable to the court. Undertaking by the plaintiff to use the costs as ordered in another legal proceedings for the costs of the defendant such as that mentioned in Desarrollo’s case and asserted by Mr Li SC for this application is another example.  Cash has been taken as not sufficient because of its volatility.  But it can be sufficient if a party agrees to have a charge on the deposit or to give an undertaking to the court not to withdraw it without court’s leave.  Real property may not be sufficient if it is a negative equity.

P1’s and P2’s case

28. P1 has been found to be not ordinarily resident in Hong Kong and he elects not to disclose his assets in Hong Kong.  He has therefore failed to discharge his duty and should be ordered to provide security for costs unless there are other circumstances, which show that it is unnecessary for P1 to do so.

29. P2 does not dispute that it is a foreign company.  On this basis, D3 is entitled to ask for an order for security for costs against P2 under Order 23 rule 1.  P2 only argues that it is not a nominal plaintiff within the context of Order 23 rule 1(b), RHC.  Even if P2 is successful in arguing that it is not a nominal plaintiff within the context of Order 23 rule 1(b), it will still be liable to be ordered to give the security for costs under Order 23 rule 1(a).  I shall therefore refrain from discussing the meaning of nominal plaintiff within the context of Order 23 rule 1 RHC.

30. P2’s argument that it should not be ordered to give security for costs if P1 is found to be ordinary resident within the jurisdiction will not be discussed as I have already found that P1 is not ordinary resident within the jurisdiction.

THE REMAINING GROUND

HCMP 643 of 2012 order for costs

31. The only remaining ground as raised by Ps against D3’s application for security for costs is that this Court should not exercise its discretion to make the order as requested because in HCMP 643 of 2012, it has been ordered that D3 is to pay costs of P1 and P2 incurred in those proceedings on a party and party basis and the estimated amount of costs up to the end of trial is HK$2.4 million [96/§22].  D3 has not, in his reply affirmation, made any challenges to the estimated amount of costs incurred by P1 and P2 in those proceedings.  Mr. Whitehead SC also submits that in family proceedings like HCMP 643 of 2012 the Court is frequently updated with estimates of costs.[8]

32. Mr. Whitehead SC also says that even on a 50% taxation, the amount due to P1 and P2 by D3 is HK$1.2 million.  This will more than cover the costs sought by D3 in the sum of about HK$1 million odd.

33. Ps rely upon the court order above to say that the court should not make an order for security for costs because of its indebtedness to the plaintiff, which has provided sufficient security for its costs, reference made to SNE Engineering Co. Ltd. v. Chim Kee Machinery Co. Ltd(HCA 2025/2012; Unreported; Mr. Registrar K.W. Lung; 27 September 2013), §§21-22 and Desarrollo Inmobiliario Y Negocious Industriales De Alta Technologia De Hermosillo, S. A. De C.V. v. Kader Holdings Company Limited(HCCL 19/2012; Unreported; A. Chan J; 26 November 2013), §39.

34. Mr. Li SC accepts that this Court can take into consideration the above costs order against D3.  He points out that the order was under appeal and that the amount of the taxation bill is inflated and will be challenged.

Undertaking by Ps to use the costs for security in this action

35. Mr. Li SC further submits that Ps should not be specially treated as judgment creditors and that theyhave never agreed to give an undertaking that the costs as payable to them under the costs order of HCMP 643 of 2012 could be used as security for costs (see §35 of Desarrollo Inmobiliario Y Negocious Industries v Kader Holdings Co. Ltd.).  Absent such undertaking, this Court should still order security for costs.

36. Mr. Whitehead SC refers to the letter dated 30 August 2013 [211] and submits that although D3 had mentioned the costs in HCMP 643 of 2012 be held by D3 or be paid into court, it was not an offer or mechanism that the Ps should consider.  I consider that D3’s solicitor had given sufficient reason for the costs in HCMP 643 of 2012 be kept by him as security or to be paid into court.  Otherwise, D3 will be left without security despite the court now finds that according to the law, Ps should provide security.  This can be distinguished from the Decision that I made in SNE Engineering Co. Ltd as counsel acting for the defendant had not argued on this issue.

37. I shall simply make an order for security for costs in favour of D3.  As to how the parties will agree to provide the security, I shall leave it to their solicitors.

38. As to the quantum of the security for costs, I have noted the criticisms on D3’s draft bill.  I agree that it is an inflated bill, especially senior counsel’s fee.  But I do not consider that only nominal security should be ordered.

39. On a broad-brush approach, I shall make an order for the sum of $600,000, including the costs for this application.

40. On the question of costs for this application, including the costs reserved and for today, they should be awarded to D3 (with certificate for one senior counsel).  I have the schedule of costs from D3, which amounts to $414,281. I agree with Mr. Whitehead SC that the complexity of this application does not warrant senior counsel’s service.  However, since both parties are represented by senior counsel, I simply consider that it is just to allow one senior counsel.  The other comments are on the amount for counsel to charge their fees on the drafting of D3’s affidavit.  On a broad-brush approach basis, I assess the costs under Order 62 rule 9A RHC to be $150,000 to be paid by Ps to D3.

41. I shall now make an order in terms as follows:

a. The plaintiffs shall within 21 days from the date hereof provide security for costs for the sum of $600,000 to be paid into court or in other forms as agreed by the parties, failing which, the plaintiffs’ claim be dismissed;

b. Further proceedings be stayed except for the implementation of this order;

c. The costs of this application, including the costs reserved and today’s hearing assessed at $150,000 are to be paid by the plaintiffs to D3 within 14 days from the date hereof.