Case Detail

CACV 117/2014

[2019] HKCA 941

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 117 OF 2014

(ON APPEAL FROM HCA 2073 OF 2011)

________________________

BETWEEN
	GURDAS S CHOITHRAMANI	Plaintiff
	and
	THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED	Defendant

________________________

Before: Hon Poon Ag CJHC, Kwan VP and Yuen JA in Court

Dates of the Plaintiff’s Written Submissions: 1 & 22 September 2017

Date of the Defendant’s Written Submissions: 15 September 2017

Date of Judgment: 19 August 2019

________________________

JUDGMENT

________________________

Hon Poon Ag CJHC:

1. I agree with the Judgment of Hon Yuen JA.

Hon Kwan VP:

2. I agree with the Judgment of Hon Yuen JA.

Hon Yuen JA:

3. This is the plaintiff’s application by Notice of Motion for leave to appeal to the Court of Final Appeal (“CFA”) from the Judgment given by this court on 21 July 2017 (“the Judgment”).

4. The Judgment was in respect of the plaintiff’s appeal from a Ruling given on 28 April 2014 (“the Ruling”) by DHCJ Whitehead SC (“the judge”) striking out the plaintiff’s claim in HCA2073/2011 (“the 2011 Action”).

Background

5. The background to the 2011 Action and the Ruling have been summarized in our Judgment at §§2-10.

- Essentially, the plaintiff controlled a company called Esquire which was a customer of amongst others, HSBC (“the bank”). In 1994, Esquire sued the bank (“the Esquire action”). The plaintiff was not a party.
- In 2006 the Esquire action was dismissed.
- In the meantime, the plaintiff had been made bankrupt in 1996, which bankruptcy was discharged in 2003 (“the 1^st bankruptcy”). The OR was the trustee in bankruptcy.
- In the 2011 Action, the plaintiff sued HSBC.
- The 2011 Action was struck out by the judge for reasons set out in the Ruling.

6.1. The plaintiff lodged a notice of appeal from the Ruling but he was made bankrupt again on 9 March 2015 (“the 2^nd bankruptcy”). The 2^nd bankruptcy order was not stayed.

6.2. As for the hearing of the appeal from the Ruling, it was initially stayed as the OR had just been appointed trustee in the 2^nd bankruptcy.

6.3. On 23 September 2016, this court gave directions that the appeal from the Ruling be restored for hearing. The original notice of the hearing (which was fixed for 14 February 2017) indicated incorrectly that the hearing was “for directions”. This notice was corrected the day before the hearing, stating that it was the appeal itself which was restored for hearing.

7.1. In any event, even before the corrected notice of hearing was sent to the parties, counsel for the OR1 had on 10 February 2017 filed written submissions asserting that the plaintiff’s right of appeal from the Ruling had been vested in the OR and thus the plaintiff himself had no locus standi to pursue the appeal.

7.2. As for the plaintiff, his counsel2 filed written submissions on 13 and 14 February 2017 arguing that the plaintiff did have locus standi to pursue two causes of action in the claim3:

(a) wrongful procurement of the plaintiff’s 1^st bankruptcy causing him loss of business reputation, which was personal to the plaintiff and thus was not vested in the OR, reliance being placed on cases including Wilson v United Counties Bank4;
(b) wrongful procurement of the judgment5, which occurred after the date of the 1^st bankruptcy.

8.1. At the hearing on 14 February 2017, counsel for the plaintiff asked for an adjournment, relying on three grounds (§§15.1-15.2). The last of those grounds was that, despite having filed the written submissions referred to in the preceding paragraph, she had not had sufficient time to prepare as the original hearing notice was said to be for directions only.

8.2. This court reserved its decision on the application for adjournment, and directed that if the application were to be dismissed, the parties would have 7 days after our decision to provide written submissions on the issues arising on the appeal.

8.3. On 17 February 2017, we handed down our decision on the plaintiff’s application for adjournment, which was dismissed with costs.

9.1. Pursuant to the directions referred to in §8.2 above, on 23 February 2017 the OR indicated she had no further submissions to those provided on 10 February 2017. On 24 February 2017, solicitors for the bank filed written submissions. On 27 February 2017, the plaintiff filed written submissions.

9.2. Further submissions were filed by the OR on 22 May 2017 and by the plaintiff on 29 May 2017.

10. On 21 July 2017, we gave Judgment which the plaintiff seeks to appeal to the CFA by way of the Notice of Motion. Written submissions were provided (in accordance with the automatic directions in Practice Direction 2.1) which we have considered.

Question (1)

11. The plaintiff submits that, in relation to cause of action (a) above6, the 1^st question of law of great general or public importance which he wishes to submit to the CFA for decision is as follows:

“(1) whether the scope of the rule decided in Wilson v United Counties Bank Ltd [1920] AC 102 (PC)7 (that a bank’s negligence which caused a customer’s bankruptcy and thus loss of business reputation gave rise to a cause of action personal to the bankrupt which was not vested in the trustee) as applied in Hong Kong is confined to where the bank is in breach of an express agreement to maintain the customer’s personal credit and reputation, or extends to a situation where a bank in breach of contract alternatively in breach of fiduciary duty alternatively by tortious acts foreseeably caused the bankruptcy and loss of credit and business reputation of the bankrupt?”

12.1. As discussed in our Judgment (§§21.3-24), in the action instituted against the bank by Major Wilson and his trustee in bankruptcy as co-plaintiffs8, the jury found that “under the peculiar language of the agreement”9, the bank had an “express obligation”¹⁰ not only to supervise Wilson’s business while he was on military service, but also to “maintain his credit”¹¹. Thus, although arising from the same breach by the bank¹², there were “two heads of damages, 1. that relating to the business and estate; and 2. that relating to the plaintiff Wilson’s loss of credit and reputation”¹³.

12.2. Accordingly, apart from Wilson’s estate, Wilson himself had a “personal” claim, meaning “claims which relate to the bankrupt’s body, mind or character without immediate reference to his rights of property”. Thus, personal claims include claims for damages for personal injuries and defamation. The rationale here is that compensation awarded for personal injuries or defamation will represent, in monetary terms, that part of a person (for example, his limbs or the use of them) or his reputation that has been lost or harmed. These types of claim do not involve his property”¹⁴. Therefore the House of Lords upheld the award of 45,000 pounds in damages to Wilson’s estate, and the separate award of 7,500 pounds to Wilson himself as damages for loss of reputation.

12.3. Lord Birkenhead LC justified the personal award due to “the exceptional language of an exceptional contract”¹⁵. It is clear from this and other speeches in the House of Lords that Wilson’s personal claim was a “stand-alone” cause of action founded on the express contract made with him to “maintain his credit and reputation”. The award of 7,500 pounds was not a relief which was consequential to, or follow from, the bank’s breach of the agreement regarding his business.

12.4. So analysed, the plaintiff’s reliance on Wilson is misplaced. The plaintiff seeks to rely on a personal guarantee that he had signed in favour of the bank¹⁶ guaranteeing Esquire’s liabilities. But it is not alleged that this guarantee contained any obligations undertaken by the bank to maintain his personal reputation. All that the plaintiff has alleged is that the bank had acted wrongfully and dishonestly in making it impossible for Esquire to meet its obligations, which led to the plaintiff’s guarantee being called upon, resulting in the 1^st bankruptcy order¹⁷. In other words, there is no “stand-alone” cause of action based on the bank’s contractual obligation to maintain the plaintiff’s own reputation as found in Wilson, and as discussed above, a “personal” claim in the Chung Kau sense does not follow from a breach of the bank’s contractual or tortious duties under the commercial transaction.

13. As for the plaintiff’s argument that “given the [plaintiff’s] capacity as a party was stated as a personal guarantor, the obligation owed to him could not be other than ‘personal’”¹⁸, the guarantee relates to his property, not his “person” as the term is explained in Chung Kau and the cases cited therein¹⁹.

14. For the reasons set out above, we do not consider question (1) to be reasonably arguable, nor is it a question of great general or public importance.

Question (2)

15. The plaintiff submits that, in relation to cause of action (b) above²⁰, the 2^nd question of law of great general or public importance is as follows:

“(2) Does the rule against reflective loss established in Johnson v Gore Wood & Co [2002] 2 AC 1 and as stated in Landune International Ltd v Cheung Chung Leung [2006] 1 HKLRD 39 debar a shareholder from suing to recover a loss suffered by the company only where there is a risk of double recovery, or is it an absolute bar to such action by a shareholder so as to entitle the alleged wrongdoer to strike out the shareholder’s action regardless of other circumstances including the likelihood of double recovery?”

16. The plaintiff alleged that he is entitled to pursue the cause of action of “wrongful procurement of judgment”, that judgment being the dismissal of Esquire’s action against the bank in 2006. As noted earlier, the plaintiff was not a party to the Esquire action. As discussed in our Judgment (§27), even if the judgment in the Esquire action was procured wrongfully, the party to sue in respect of that wrong would be Esquire, and any loss suffered by the plaintiff would be merely reflective loss. This bar to the plaintiff’s cause of action had been raised before the judge. In this connection it is significant that there was no pleading at all in the Statement of Claim of any facts which placed the situation outside the double recovery rule.

17. It is noteworthy that the section of the Statement of Claim pleading wrongful procurement of judgment (§§179-195) was not referred to at all in the pleading of the plaintiff’s losses (§§208-216). This may be contrasted with other specific causes of action which were stated to have led to specific losses (eg the cause of action in §§136-138 allegedly led to the loss pleaded in §208, and the causes of action in §§58-129 and §§140 - 178 allegedly led to the loss pleaded in §209, etc). The plaintiff’s allegations now that Esquire has gone into liquidation and “no action had been or would be brought against HSBC”²¹ because the assignee has been dissolved²² were never pleaded.

18. For the reasons set out above, we do not consider question (2) to be reasonably arguable in this case, nor is it a question of great general or public importance.

“Or otherwise” ground

19. Finally, it is the practice of this court to leave it to the CFA to decide whether or not to give leave under the “or otherwise” ground, and we are not persuaded that any exception has been shown in §§15-20 of the plaintiff’s written submissions or §§16-18 of his submissions in reply.

Order

20. For the reasons set out above, the Notice of Motion is dismissed with costs. Upon a summary assessment of costs, the defendant’s costs of $41,125 are reasonable and the plaintiff is ordered to pay that sum. The time taken to prepare this Judgment is regretted.

(Jeremy Poon)	(Susan Kwan)	(Maria Yuen)
Acting Chief Judge	Vice President	Justice of Appeal
of the High Court

Ms Margaret Ng, instructed by Arun Nigam Associates, for the Plaintiff

Mr Nicholas David Hunsworth of Mayer Brown JSM, Solicitors for the Defendant

1 Mr Maurellet SC.

2 Ms Margaret Ng.

3 Written Submissions of the Plaintiff/Appellant, 27.2.2017, §7.

4 [1920] AC 102.

5 Against Esquire in 2006.

6 §7.2 (a) above.

7 The correct citation is HL.

8 In contradistinction to the present case, where the plaintiff did not join as a party in the Esquire action.

9 Wilson, p.111.

10 See fn. 9.

11 See fn. 9.

12Wilson, p.128.

13Wilson, p.115.

14Chung Kau v Hong Kong Housing Society & Others [2004] 2 HKLRD 650, §8.

15Wilson, p.112.

16 And other banks.

17 Written Submissions of the Plaintiff (“the Applicant”), 1.9.2017, §5.

18 See fn. 17, §9.

19 §12.2 above.

20 §7.2 (b) above.

21 Written Submissions of the Plaintiff (“the Applicant”), 1.9.2017, §14.

22 Written Submissions in Reply of the Plaintiff (“the Applicant”), 22.9.2017, §14.

CACV 117/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 117 OF 2014

(ON APPEAL FROM HCA 2073 OF 2011)

________________________

BETWEEN
	GURDAS S CHOITHRAMANI	Plaintiff
	and
	THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED	Defendant

________________________

Before: Hon Yuen, Hon Kwan and Hon Poon JJA in Court

Dates of Written Submissions of Plaintiff: 27 February, 8 May and 29 May 2017

Date of Written Submission of Defendant: 24 February 2017

Dates of Written Submissions of Official Receiver: 10 February and 22 May 2017

Date of Judgment: 21 July 2017

________________________

J U D G M E N T

________________________

Hon Yuen JA:

1. Two matters fall to be decided in this Judgment. They are set out in para. 19 below. However by reason of the rather complex history of these proceedings, it is necessary to set out a brief summary of the relevant background.

The Esquire action

2. In HCA11077/1994, a company (“Esquire”) controlled by Gurdas S Choithramani (“GSC”) commenced proceedings in the High Court (“the Esquire action”) against a bank (“HSBC”) with which it had business. GSC was not a party to the action. The final result was that the action was dismissed in 2006.

The 1996-2003 bankruptcy

3. In the meantime, in 1996 GSC was adjudicated bankrupt on a petition presented by BNP. The bankruptcy order was discharged in 2003 (“the 1996-2003 bankruptcy”).

The GSC action

4. In HCA2073/2011, GSC commenced proceedings against HSBC (“the GSC action”). The statement of claim was 54 pages long and after setting out various factual allegations, contained claims under 13 headings. Although GSC and HSBC are in disagreement as to how many causes of action are contained in it, all the wrongs alleged in the statement of claim (with one exception) occurred before the 1996-2003 bankruptcy. The exception was an allegation of “wrongful procurement of judgment” which allegedly occurred in 2006 (when the Esquire action was dismissed).

Application to strike out the GSC action

5.1. On 17 July 2012, HSBC applied by summons to strike out the statement of claim and to dismiss the GSC action on the following grounds¹:

(1) GSC had no locus standi;
(2) the proceedings were an abuse of process;
(3) all claims (save for the “wrongful procurement of judgment” claim) were time-barred;
(4) the “wrongful procurement of judgment” claim, amongst others, was in any event barred by the rule against reflective loss.

5.2. It should be noted that Section E of the Skeleton Submissions of leading counsel for HSBC made it clear that the term “locus standi” was used in 2 different respects:

(1) where the right of action was vested in Esquire alone (Section E1);
(2) where the right of action was vested in the OR by reason of the 1996-2003 bankruptcy (Section E2).

5.3. However, as will be seen below², it may be that the term was understood differently in the course of oral arguments at the hearing of the strike-out summons.

5.4. The strike-out summons was fixed to be heard before Deputy Judge Whitehead SC (“the judge”) on 28 April 2014.

GSC’s application to adjourn the strike-out summons

6.1. Two weeks before the hearing, GSC applied for an adjournment so that he could procure the Official Receiver (“OR”), the trustee in the 1996-2003 bankruptcy, to assign to him the right to commence the GSC action, or to consent to his continuation of it.

6.2. On 16 April 2014, Au-Yeung J dismissed the application.

6.3. On 28 April 2014, GSC renewed the application before the judge. It is clear from the transcript of the oral ruling that the application was again refused for unreasonable delay.

Hearing of strike-out application

7.1. The judge proceeded to hear the strike-out application. It would appear from the judge’s narration of counsel’s arguments that he regarded the “no locus standi” argument as being confined to the impact of GSC’s bankruptcy (Section E2), and not including the argument that the loss was suffered by Esquire alone (Section E1).

7.2. Thus, the judge said in the Ruling of 28 April 2014 (“the Ruling”):

“3. As to ... no locus standi, Mr Fung SC, counsel for [HSBC] asserts that as the causes of action pleaded in the Statement of Claim have accrued before or upon [GSC]’s bankruptcy, that the only party who can prosecute these proceedings in respect of the purported causes of action is the [OR].
4. Mr Reynolds, counsel on behalf of [GSC] accepts that Mr Fung’s analysis is correct. The court also accepts that this is the position, and as such the Statement of Claim is bound to be struck out on the basis that [GSC] has no locus standi”.

The Ruling

8. The judge held that:

(1) as GSC had no locus standi to commence the GSC action, the court had no jurisdiction to deal with the other issues³;
(2) even if the court did have jurisdiction to deal with the other issues, he would nevertheless decline to rule on them. The judge’s reason was that as it was unlikely that the OR would take the matter further, there would be no justification in spending further “court time adjudicating upon issues which, in the event, may never need to be decided in order to resolve this case”⁴.

9. I shall discuss these rulings later in this Judgment⁵.

The Deputy Judge’s order

10. The judge ordered:

(1) the Writ and Statement of Claim be struck out on the ground that GSC had no locus standi to pursue the claims in the action;
(2) the action be dismissed;
(3) the costs of the action, including the costs of the strike-out application, be taxed and assessed at $1,550,000 and be paid by GSC to HSBC within 28 days.

GSC’s appeal (CACV117/2014)

11.1. GSC filed a Notice of Appeal against the judge’s order on 26 May 2014 (“the appeal”). The grounds were subsequently amended⁶ and the current grounds may be summarized as follows:

(1) the judge had misunderstood the submission of counsel for HSBC as well as the concession of counsel for GSC in relation to which of the causes of action were vested in the OR at the time of the hearing (amended Ground 1);
(2) “even if it were correct that it is only the [OR] who can prosecute particular Causes of Action because they accrued before [GSC]’s bankruptcy and thus vested in the [OR], it would have been necessary for the Court to call for and hear full submissions upon and determine which Causes of Action (if any) were of that kind and which were not rather than proceeding on a prima facie basis with regard to the Statement of Claim as a whole without any specific enquiry into each individual impugned Cause of Action and thus striking out the entire Statement of Claim without any regard to its specific contents” (amended Ground 2). (Emphasis added).

11.2. In other words, the focus was not on what the judge held in respect of the causes of action that had vested in the OR, but on what the judge did not hold in respect of any causes of action that had not vested in her.

The 2015 bankruptcy

12.1. Shortly after the Notice of Appeal was filed however, HSBC served a statutory demand on GSC as he had failed to pay the costs pursuant to the judge’s order.

12.2. On 9 March 2015, a bankruptcy order was made against him. The OR was made trustee in bankruptcy. The bankruptcy is extant.

Directions pursuant to the 2015 bankruptcy

13. The hearing of the appeal was stayed as the OR had just been appointed trustee in the 2015 bankruptcy.

14.1. After lengthy but inconclusive correspondence between HSBC’s solicitors and the OR on the approach to the appeal, the court gave directions on 23 September 2016 that the appeal be restored for hearing, and that notice of hearing be given to GSC, the OR as the trustee in both the 1995-2003 bankruptcy as well as the 2015 bankruptcy, and HSBC.

14.2. The original notice of hearing indicated that the hearing was “for directions”. It was corrected before the hearing fixed for 14 February 2017 to reflect that the appeal was being restored for hearing.

Hearing on 14 February 2017 - GSC’s application for adjournment

15.1. At the hearing, Miss Margaret Ng counsel for GSC⁷, applied for an adjournment again. She submitted that the appeal should not be heard pending:

(1) GSC’s application by summons filed on 27 January 2017 to annul the 1995-2003 bankruptcy (“the annulment application”) and failing that,
(2) GSC’s proposed application in the 1995-2003 bankruptcy for a declaration that the OR has by conduct given consent to him to commence and continue the GSC action; or alternatively, for an order that the OR do assign those proceedings to him (“the proposed assignment application”).

15.2. In any event, Miss Ng submitted that she was not ready with submissions on the issues arising on the appeal as the original notice of hearing was said to be for directions, and she did not have sufficient time after the corrective notice to prepare for submissions on the issues arising on the appeal.

15.3. We reserved judgment on the application for adjournment, and indicated that if the application is dismissed, the parties would have 7 days after our judgment to provide written submissions on the issues arising on the appeal.

Decision on application for adjournment

16.1. We handed down judgment on the application for adjournment on 17 February 2017. In brief, we held that the annulment application and the proposed assignment application had come far too late. GSC had alluded to his intention to make those applications as early as April 2014, but had delayed in making any application for more than 2½ years.

16.2. Accordingly, we refused the application for adjournment and made an order nisi that GSC pay the costs of the application to the OR and HSBC.

Submissions on issues arising on the appeal

17. The OR by letter dated 23 February 2017 indicated that she had no further submissions to those provided on 10 February 2017. HSBC and GSC provided written submissions on 24 February 2017 and 27 February 2017 respectively.

Summons to vary costs order nisi

18.1. Shortly afterwards, on 2 March 2017 GSC applied to vary the costs order nisi of 17 February 2017, for an order that there be no order as to costs between him and the OR⁸. Directions were agreed for written submissions.

18.2. Written submissions were provided by GSC on 8 May, by the OR on 22 May, and in reply by GSC on 29 May 2017.

Discussion

19. This Judgment therefore deals with the following matters:

(1) issues arising on GSC’s appeal from the judge’s Ruling given on 28 April 2014; and
(2) GSC’s application to vary the costs order nisi in our Judgment of 17 February 2017.

(1) Issues arising on GSC’s appeal from the Ruling

20.1. GSC’s counsel contended that, notwithstanding the 1996-2003 bankruptcy, he had locus standi to pursue 2 causes of action against HSBC:

(a) wrongful procurement of the 1996-2003 bankruptcy, causing him loss of business reputation, which is personal to him and is not vested in the OR as the trustee in bankruptcy;
(b) wrongful procurement of the judgment against Esquire which occurred in 2006, after the date of the 1996-2003 bankruptcy.

20.2. HSBC’s solicitors submitted that, although the Ruling did not contain any discussion on these contentions, the judge must have examined the individual causes of action in the statement of claim and must have satisfied himself that each one was bad.

20.3. With respect, I do not agree that the judge had considered these arguments before making the Ruling. If that had been the judge’s approach, he would not have expressed himself in the way he did in the Ruling. In para. 3, he referred to an argument (attributed to HSBC’s leading counsel) that the OR was “the only party who can prosecute” the GSC action, and in para. 4, he explicitly accepted that position after the “concession” of lack of locus standi by GSC’s counsel. Clearly the judge understood the “concession” to have covered all the claims in thestatement of claim, for it led to his view (in para. 7) that the court had no jurisdiction to deal with the other issues. He also declined to exercise his discretion (assuming he had it) by taking into account the position of only the OR (paras. 9-12).

20.4. As for the disagreement between the parties now as to what was understood (or misunderstood) by counsel and/or the judge, in my view it is not constructive to trawl through the transcript to see whether the judge’s understanding of counsel’s concession was correct or not, because in any event concessions of law can be withdrawn⁹. Instead, it would be a more efficient use of the court’s resources for us to consider Miss Ng’s arguments substantively.

(a) “Wrongful procurement of bankruptcy, causing loss of business reputation”

21.1. In respect of (a), it is submitted on behalf of GSC that the cause of action is “wrongful procurement of bankruptcy, causing loss of business reputation”. It is submitted that this has been pleaded in paras. 209 and 211 - 214 of the statement of claim.

21.2. Para. 209 pleaded that by reason of HSBC’s wrongdoing, Esquire was unable to pay its debts and went into liquidation. Para. 211 pleaded BNP’s proceedings against GSC as guarantor of Esquire’s debts to BNP, para. 212 pleaded BNP’s petition for his bankruptcy, para. 213 pleaded the bankruptcy order and para. 214 pleaded that by reason of the bankruptcy, GSC’s business reputation was irrevocably harmed, whereby he lost the opportunity to derive any substantial income.

21.3. Reliance was placed on Wilson v United Counties Bank Ltd¹⁰. In that case, a bank had an agreement with a customer who was going abroad on military service. The agreed questions put before the jury included the following question¹¹:

Did the bank agree with the customer that
(a) the manager would generally supervise the customer’s business and see it carried on, and in particular the financial side thereof?
(b) the bank would take all reasonable steps to maintain the customer’s credit and reputation and that the customer could rely on the bank to look after his financial affairs?

21.4. The jury found that there was such an agreement and that due to the bank’s negligent management, the customer became bankrupt.

21.5. The customer and his trustee in bankruptcy sued the bank. Their causes of action were for breach of contract. The jury awarded a sum of money to the customer’s estate in bankruptcy, and a separate sum to him personally for his loss of credit and reputation.

21.6. The jury’s award was upheld by the Privy Council. Lord Birkenhead LC held that as a result of the “peculiar language of the agreement”¹², “the express obligation of the [bank] to maintain the credit of [the customer] as a trader”¹³, that the breach was actionable and the customer had a right of action separate from that of his trustee in bankruptcy.

21.7. Viscount Finlay held¹⁴:

“It is clear that the fact of bankruptcy must injure the credit of the person made bankrupt apart from damage to the estate. In an action for negligence against a solicitor leading to the bankruptcy of his client, even if owing to fortuitous circumstances, the estate had not been damaged, it seems on principle that the jury might give substantial damages for injury to the credit of the person made bankrupt. For a libel falsely imputing bankruptcy to the plaintiff, damages might be recovered in respect of injury to his credit. It is difficult to see on what principle such damages might not be given if there had been an actual bankruptcy as the result of breach of contract on the part of the defendant to take steps to prevent it. If the imputation of bankruptcy would give a right to such damages in an action for libel, why should not the fact of the bankruptcy owing to the defendants’ breach of duty confer a similar right upon the plaintiff?” (Emphasis added).

21.8. Lord Atkinson held¹⁵:

“The difficulty involved in this question arises from the fact that the same breach of contract, the neglect of the [bank] to take reasonable steps to maintain [the customer]’s credit and reputation, caused loss to his estate, and at the same time, inflicted upon him as a trader (for it was in reference to his trade and business the contract was entered into) pain and humiliation and loss of credit and repute”. (Emphasis added)

22. In my view it is clear from the judgment in Wilson that the customer’s cause of action was for breach of contract, viz. part (b) of the agreement. In making that agreement to “maintain his credit and reputation”, the bank undertook an obligation to his “person”, not his property. Because of the character of that obligation, its breach¹⁶ gave rise to a cause of action which did not vest in the trustee in bankruptcy.

23. By contrast, I cannot see any obligation to GSC’s “person” (as distinguished from any obligation to his property) which was owed to GSC by HSBC, the breach of which gave rise to a cause of action. There is no pleading of an agreement whereby HSBC undertook an obligation to “maintain credit and reputation”, of the peculiar nature found in Wilson. There is no pleading of a personal tort such as defamation. GSC has only pleaded causes of action against HSBC affecting his property, such as conversion (Headings 6 and 11), breach of implied terms of the Restructuring Agreement to which he was a party (Heading 12), and breach of fiduciary duty (Heading 13), but these are causes of action which are vested in the OR. It is insufficient simply to plead that the bankruptcy has caused the alleged loss of business reputation, for there is no pleading of any obligation owed to his “person”, the breach of which caused the bankruptcy.

24. Miss Ng submitted that “causation would be readily apparent”¹⁷, but the primary difficulty lies in the identification of an obligation which bears the character of being owed to his “person”. None has been advanced in the submissions and no draft amendments to the Statement of Claim have been proffered. Accordingly there is no ground for acceding to the request that leave be granted to amend the statement of claim to correct defects in it¹⁸.

25. Accordingly, I take the view that the judge would have struck out this cause of action had he adjudicated upon it.

(b) Wrongful procurement of judgment

26. This can be dealt with briefly, such that it is not necessary for us to even consider the question whether this is a cause of action which has now vested in the OR as trustee in the 2015 bankruptcy.

27. The judgment referred to as a cause of action against HSBC is the judgment against Esquire in the Esquire action. GSC was not a party to that action. Consequently if the judgment in that action was procured wrongfully, the party to sue in respect of that wrong would be Esquire. Any loss allegedly suffered by GSC would be merely reflective loss for which generally no action would lie. This was established in Johnson v Gore Wood & Co¹⁹, referred to in HSBC’s submissions before the judge²⁰. It has not been addressed in Miss Ng’s submissions for GSC.

28. Accordingly, I take the view that the judge would also have struck out this cause of action had he adjudicated upon it.

Order

29. I would dismiss the appeal with an order nisi that GSC should pay the costs of the appeal.

(2) GSC’s application to vary the costs order nisi of 17 February 2017

30.1. It was submitted on GSC’s behalf that he should not be liable for the OR’s costs, although he accepted he should be liable for HSBC’s costs. The reason given was that it was because the OR and HSBC were unable to agree on the approach to the appeal that it was necessary for the court to restore the hearing. In any event, it was submitted, it was not necessary for the OR to instruct senior counsel.

30.2. With respect, the time fixed for the hearing on 17 February 2017 was taken up by GSC’s late (and unsuccessful) applications to adjourn the hearing. Having said that, I agree that it was not necessary for senior counsel to be instructed and this view will no doubt be reflected in the taxation of costs, if there should be one.

31. Accordingly, I would dismiss the summons, and the costs order of 17 February 2017 is therefore absolute. As an application to vary a costs order nisi is regarded as part of the working out of the order, the costs incurred in the summons would be treated as part of the costs of 17 February 2017.

Hon Kwan JA:

32. I agree with the judgment of Hon Yuen JA.

Hon Poon JA:

33. I agree with the judgment of Hon Yuen JA.

(Maria YUEN)
Justice of Appeal

(Susan KWAN)
Justice of Appeal

(Jeremy POON)
Justice of Appeal

Ms Margaret Ng, instructed by Arun Nigam Associates, for the Plaintiff

Mr Nicholas David Hunsworth of Mayer Brown JSM, Solicitors for the Defendant

Mr Jose Maurellet SC, instructed by the Official Receiver for written submission dated 10 February 2017

Mr Alvin Sin, Acting Assistant Principal Solicitor of Official Receiver for written submission dated 22 May 2017

1 Skeleton Submissions for the defendant, 14 April 2014.

2 Para. 7.1.

3 Ruling, para. 7.

4 Ruling, para. 12.

5 Paras. 20.3 below.

6 By consent in November 2014.

7 Who did not appear below.

8 GSC did not seek to vary the costs order nisi as between himself and HSBC.

9 Subject of course to costs implications.

10 [1920] AC 102, PC.

11 At 106.

12 At 111.

13 At 111.

14 At 120.

15 At 128.

16 Similar to an injury to a bankrupt’s physical well-being, e.g. personal injuries.

17 Written Submissions of the Plaintiff/Appellant, para. 15.

18 Written Submissions of the Plaintiff/Appellant, para. 15.

19 [2002] 2 AC 1.

20 Skeleton Submissions for the Defendant, Section E1.

CACV 117/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 117 OF 2014

(ON APPEAL FROM HCA 2073 OF 2011)

________________________

BETWEEN
	GURDAS S CHOITHRAMANI	Plaintiff
	and
	THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED	Defendant

________________________

Before: Hon Yuen, Hon Kwan and Hon Poon JJA in Court

Date of Hearing: 14 February 2017

Date of Judgment: 17 February 2017

________________________

JUDGMENT

________________________

Hon Yuen JA:

1.1. 1. On 23 September 2016, the court directed that:

(1) CACV117/2014, which is Mr Gurdas S Choithramani’s appeal from DHCJ Whitehead’s Judgment given on 28 April 2014 in HCA2073/2011 (“the 2011 action”), should be restored for hearing; and
(2) notice of hearing to be given to the appellant, the Official Receiver’s Office the trustee in Mr Choithramani’s bankruptcy adjudicated in 1996 (“the 1^st Bankruptcy”) as well as his bankruptcy adjudicated in 2015 (“the 2^nd Bankruptcy”), and HSBC the respondent in the appeal.

1.2. Notice was given on 30 September 2016 to all parties of the restored hearing on 14 February 2017. The original notice indicated that the hearing was for directions. It was corrected shortly before the hearing to reflect the direction referred to in para. 1.1(1) above.

1.3. At the restored hearing, Miss Margaret Ng counsel for Mr Choithramani, applied for an adjournment pending:

(1) Mr Choithramani’s application by summons filed on 27 January 2017 under s.33 Bankruptcy Ordinance, to annul the 1^st Bankruptcy (which was presented on the petition of BNP and from which Mr Choithramani was discharged on 24 September 2003) (“the annulment application”);
(2) Mr Choithramani’s proposed application¹ in the 1^st Bankruptcy under s.83-4 Bankruptcy Ordinance for a declaration that the OR has by her conduct given consent to Mr Choithramani to take and continue proceedings (the 2011 action) against HSBC; or alternatively for an order that the OR do assign the proceedings to him (“the assignment application”).

Background

2. A brief history of the factual background has been set out in paras. 2-22 of my Judgment dated 3 December 2014 (annexed hereto) which paragraphs are incorporated as part of this Judgment. The following paragraphs are supplemental to it.

3. As noted in paras. 20-22, on 28 April 2014 DHCJ Whitehead

(a) refused Mr Choithramani’s application to adjourn the hearing of HSBC’s application to strike-out his claim in the 2011 action;
(b) proceeded to strike-out the 2011 action on the basis that Mr Choithramani had no locus standi because the causes of action had accrued before Mr Choithramani’s 1^st Bankruptcy; and
(c) ordered Mr Choithramani to pay HSBC’s costs assessed on a gross sum basis at $1.55m.

4. Mr Choithramani filed the present appeal on 26 May 2014.

5.1. On 11 July 2014 HSBC served a statutory demand on Mr Choithramani on the ground of his failure to pay the costs of $1.55m.

5.2. Mr Choithramani applied to stay DHCJ Whitehead’s order and to set aside the statutory demand. These applications were refused by DHCJ Wilson Chan (now Wilson Chan J) on 18 September 2014.

5.3. Mr Choithramani applied for leave to appeal DHCJ Chan’s order out of time. On 20 November 2014 his application was dismissed by this court.

6.1. Meanwhile HSBC had applied for security for costs of the appeal.

6.2. On 3 December 2014, I gave judgment ordering security for costs (which was subsequently paid into court).

7.1. However on 9 March 2015, the 2^nd Bankruptcy was made against Mr Choithramani pursuant to the statutory demand which remained unsatisfied.

7.2. As the OR was made trustee in bankruptcy, on 9 April 2015 the court stayed this appeal pending the OR’s decision on the progress of the appeal.

8. There then followed correspondence between the solicitors for HSBC and the OR on the status of the latter in the appeal. Eventually the court gave the direction for the restoration of the appeal referred to in para. 1.1(1) above.

Discussion

9. Miss Ng applied for an adjournment so that Mr Choithramani could pursue the annulment application, and failing that, so that he could pursue the assignment application.

10. In my view, these applications have come far too late for this court to exercise its discretion to put back the further progress of this appeal, which was filed some 32 months ago.

11.1. The bankruptcy order sought to be annulled is the 1^st Bankruptcy Order which was made in 1996 and discharged in 2003.

11.2. Mr Choithramani says in his affirmation that he became aware of the grounds on which the annulment application is made in 2006, when HSBC provided documents for the assessment of damages following his success at first instance in HCA11077/1994. That was 11 years ago.

11.3. He alleges that it was only after the first instance judgment was overturned on appeal that he carried out a detailed review. No satisfactory reason is given as to why he did not do so earlier.

11.4. He commenced proceedings against HSBC in 2011 with a 54-page statement of claim.

11.5. By April 2014 at the latest, his then solicitors (“JNK”) had written to the OR indicating that he intended to apply for annulment of the 1^st Bankruptcy. That was nearly 3 years ago.

11.6. Clearly therefore Mr Choithramani has been in possession of the materials which he says support his case for annulment for a considerably long period of time. No satisfactory reason has been given why he has waited until 27 January 2017 to make the annulment application.

11.7. It is one of underlying objectives of civil justice reform which the courts are enjoined to implement that cases should be dealt with as expeditiously as are reasonably practicable. It is the duty of all parties to implement this objective.

11.8. By reason of the above, I would dismiss the application to adjourn the appeal pending the resolution of the annulment application, which has been made very late and for which delay no satisfactory reason has been given.

12.1. In my view the same objection of unexplained delay applies to the proposed assignment application which is also intended to be made in the 1^st Bankruptcy. Even if we were to put to one side the correspondence between Mr Choithramani and the OR (some under the reference of Esquire’s winding-up) which began in 2009, the fact of the matter is that by April 2014 (if not before), he was aware of the need for the OR’s consent/assignment.

12.2. It would appear that on 22 April 2014² JNK wrote to the OR for consent/assignment.

12.3. Indeed on 28 April 2014 Mr Choithramani’s then counsel asked DHCJ Whitehead for an adjournment “on the basis that he wishes to take steps to procure the assignment to him by the Official Receiver of the various causes of action a subject of these proceedings and/or to seek to bring an action with the consent of the Official Receiver”. The judge refused to adjourn the hearing.

12.4. Two days later JNK wrote to the OR saying:

“In the circumstances, our client would be grateful if you could grant your consent urgently so that our client can appeal against the said decision”.

12.5. In response, on 16 May 2014 the OR required from JNK (a) materials to demonstrate the merits of Mr Choithramani’s claim, (b) an indemnity for costs for which the OR may be liable if the right of action is assigned to him, and (c) an estimate of costs.

12.6. In a letter dated 2 September 2014 to JNK, the OR reiterated the view that Mr Choithramani was aware of the need for consent/assignment and had never sought it previously.

12.7. Yet, notwithstanding Mr Choithramani’s awareness of this requirement for at least the past 2½ years and despite the lack of progress in the correspondence with the OR, no application was made, save a proposed, conditional application at the door of this court.

Order

13. By reason of the above, I would dismiss the application to adjourn the appeal pending the resolution of the annulment application and the proposed assignment application, with an order nisi that Mr Choithramani is to pay the costs of the application to the OR and HSBC.

14. As Miss Ng said she had inadequate time to prepare for the hearing of the appeal by reason of the matters set out in para. 1.2 above, we gave directions on 14 February 2017 that all parties have leave to file and serve further written submissions therefor (limited to 15 pages) within 7 days of the date of this Judgment. Unless further submissions are required, this court will then hand down its Judgment on the appeal.

Hon Kwan JA:

15. I agree with the judgment of Yuen JA.

Hon Poon JA:

16. I agree with the Judgment of Yuen JA.

(Maria Yuen)
Justice of Appeal

(Susan Kwan)
Justice of Appeal

(Jeremy Poon)
Justice of Appeal

Ms Margaret Ng, instructed by Arun Nigam Associates, for the Plaintiff

Mr Nicholas David Hunsworth of Mayer Brown JSM, Solicitors for the Defendant

Mr Jose Maurellet SC, instructed by the Official Receiver

1 No summons or other application was filed prior to the hearing on 14 February 2017 but an application was supplied to the court with an undertaking to file it the same day.

2 This letter was not exhibited to Mr Choithramani’s affirmations but has been referred to in later correspondence.

CACV 117/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 117 OF 2014

(ON APPEAL FROM HCA 2073 OF 2011)

________________________

BETWEEN

	GURDAS S CHOITHRAMANI	Plaintiff
	and
	THE HONGKONG AND SHANGHAI BANKING CORPORATION LIMITED	Defendant

________________________

Before: Hon Yuen JA in Chambers

Date of Hearing: 27 November 2014

Date of Judgment: 3 December 2014

________________________

JUDGMENT

________________________

Hon Yuen JA:

1. This is an application by Hongkong and Shanghai Banking Corporation Ltd (“HSBC”) the defendant in HCA2073/2011 and the respondent in the appeal therefrom (CACV117/2014) for security for costs of the appeal.

Background

2. Briefly, the background is as follows. In the 1970's and 1980's, the plaintiff Mr Gurdas S Choithramani (“Mr Choithramani”) controlled a company called Esquire (Electronics) Ltd, which was the principal company in a group of companies.

3. Esquire’s principal banker was HSBC, although it also did business with other banks. Mr Choithramani gave a personal guarantee and provided other security to HSBC to secure Esquire’s liabilities to HSBC.

4. In the early 1980's, Esquire was in financial difficulties. It has been said that its difficulties were caused (at least partly) by HSBC reneging on a proposed purchase of Li Fung House, a property owned by Esquire, in 1982. This property was later sold by Esquire in 1987, allegedly as a result of misrepresentations made by HSBC.

5. By reason of Esquire’s financial difficulties, in February 1984 it entered into a restructuring agreement with HSBC, acting on behalf of itself and as agent for other banks to which Esquire was indebted (“the 1984 RSA”). Mr Choithramani was a party to the 1984 RSA.

6. The 1984 RSA was extended from time to time. In January 1988, the parties to this agreement, save for Bank of America, entered into a further restructuring agreement (“the 1988 RSA”). Bank of America had assigned its rights to HSBC after the 1984 RSA and before the 1988 RSA.

Esquire’s action

7. In 1994, Esquire sued HSBC in HCA11077/1994 for, amongst other things, economic duress (“Esquire’s action”). As Mr Choithramani was in control of Esquire, he was well aware of the action. However he did not join the action as a party, nor did he commence separate proceedings himself.

8. However in January 1996 Esquire was wound-up.

9. Subsequently in December 1996 Mr Choithramani was adjudicated bankrupt. Accordingly any causes of action he might have thereupon became vested in his trustee in bankruptcy, the Official Receiver (“OR”).

10. In 1997, Esquire assigned its action to a company called Magic Score. Mr Choithramani, whose bankruptcy order was discharged on 24 September 2003, gave evidence for Esquire at the trial of Esquire’s action in 2004.

11. In July 2005, Waung J gave judgment in favour of Esquire.

12. HSBC appealed in CACV312/2005. In October 2006 the Court of Appeal allowed the appeal. There was apparently no further appeal to the Court of Final Appeal.

Mr Choithramani’s action

13. Five years later in December 2011, Mr Choithramani issued a writ against HSBC in HCA2073/2011 (“Mr Choithramani’s action”). The statement of claim is 54 pages long. There were the following 13 headings relating to claims:

(1) Misrepresentation of Esquire’s Property Debt
(2) Misappropriation of Esquire Monies
(3) Wrongful Assignment of Bank of America Debt
(4) Compromise of Termination Rights
(5) Invalidity and Unenforceability of Security
(6) Wrongful Sale of Gurdas Shares and Conversion of Proceeds
(7) Wrongful Sale of Esquire Shares and Conversion of Proceeds
(8) Wrongful Sale of Li Fung House
(9) Fictitious Property Loans
(10) Wrongful Procurement of Judgment (meaning the appellate judgment in the Esquire action)
(11) Wrongful Sale of Gurdas Properties
(12) Breach of Implied Terms
(13) Breach of Fiduciary Duty.

14.1. On HSBC’s side, it is said that the statement of claim contains 9 alleged wrongs (see para. 28 of the skeleton submissions dated 14 April 2014).

14.2. On Mr Choithramani’s side, it is said that the statement of claim contains 16 causes of action (see para. 4 of the skeleton submissions dated 24 April 2014).

14.3. It is not necessary at this stage to consider whether there is any real difference in these analyses and if so, which one is correct. The statement of claim is there for all to see.

15. One notable feature is that all the wrongs alleged in the statement of claim (with one exception) occurred before Esquire’s action and before Mr Choithramani’s bankruptcy order. It is well-established law that a right of action is a chose in action and therefore it is property that is vested in a bankrupt’s trustee in bankruptcy when a bankruptcy order is made. When a bankruptcy order is discharged, the bankrupt is released from his debts but that does not mean that property that has been vested in the trustee in bankruptcy reverts to him. The trustee in bankruptcy remains under a duty to administer the estate, and to realize any realizable assets for the benefit of the creditors. Of course it is open to the trustee in bankruptcy at any time to assign the chose in action to anyone, or to consent to the bankrupt prosecuting the action, so long as that is in the best interests of the estate.

16. As noted above, all the wrongs alleged in the statement of claim occurred before the bankruptcy order. The single exception is the allegation of “wrongful procurement of judgment” which allegedly occurred in 2006. I shall return to this point later in this judgment.

Application to strike out

17. In July 2012 HSBC issued a summons to strike out the statement of claim and to dismiss Mr Choithramani’s action. HSBC relied on the following grounds:

(i) Mr Choithramani has no locus standi to bring the claims;
(ii) all the claims constituted an abuse of process;
(iii) all (but one) of the claims are time-barred;
(iv) most of the claims are barred by the rule against reflective loss.

18.1. In relation to (i), HSBC’s submissions were found in Section E of its skeleton submissions dated 14 April 2014.

18.2. Section E1 (paras. 35-38) contained HSBC’s arguments that Mr Choithramani had no locus standi to pursue a claim in respect of the wrongful sale of Esquire’s shares, or a claim arising from misrepresentation leading to the sale of Li Fung House, or for “wrongful procurement of judgment” because these were wrongs allegedly done to Esquire, not Mr Choithramani.

18.3. Section E2 (paras. 39-43) contained HSBC’s arguments that the rest of the rights of action remain vested in the OR, and the OR has neither assigned them to Mr Choithramani nor consented to his bringing this action.

19. On 14 April 2014 Mr Choithramani applied to adjourn the strike-out application (listed for hearing on 28 April 2014) so that he could take steps to procure the OR’s assignment or consent. This application was dismissed by Au-Yeung J on 16 April 2014.

Deputy Judge Whitehead’s ruling on the adjournment application

20. Mr Choithramani’s renewed adjournment application was heard by Deputy Judge Whitehead on 28 April 2014, before the hearing of the strike-out application. It is clear from the transcript of the ruling that the judge refused the adjournment application on the ground of delay.

Deputy Judge Whitehead’s ruling on the strike-out application

21. The judge then proceeded to hear the strike-out application. In his written Ruling, the judge said, in summary:

- HSBC’s counsel asserted that as the causes of action pleaded in the Statement of Claim accrued before or upon Mr Choithramani’s bankruptcy, the only party who could prosecute the proceedings in respect of the purported causes of action is the OR (para. 3);
- Mr Choithramani’s counsel (not Mr Christopher Young who appeared in this security for costs application) accepted that the analysis of HSBC’s counsel was correct. The judge recorded that the court also accepted that this is the position, and as such the statement of claim is bound to be struck out on the basis that Mr Choithramani had no locus standi (para. 4);
- that being the case, Mr Choithramani’s counsel submitted that the court had no jurisdiction to determine HSBC’s other heads of complaint, the court having no jurisdiction to make further findings or orders in respect of a party who has no locus standi in the proceedings (para. 5);
- HSBC’s counsel maintained that although Mr Choithramani had no locus standi, the court could and should nevertheless hear and determine HSBC’s other complaints (para. 6);
- the judge took the view that once it was finally determined that a plaintiff had no locus standi to bring or maintain proceedings, the court had no jurisdiction to determine the arguments advanced by the defendant (para. 7);
- if the judge was wrong in that respect, and if he did have jurisdiction to deal with the matters, then as a matter of discretion he declined to do so (para. 8);
- it might be the case that the OR might assign the proceedings or consent to Mr Choithramani bringing an action (para. 9);
- if the OR did take the matter up, then HSBC could ventilate the same arguments at that later time, and hence it did not suffer any real prejudice in not having the matter disposed of now (para. 10);
- HSBC’s submission was that there was no real likelihood of an assignment or consent from the OR, and Mr Choithramani’s submission was that there was only a prospect that that might occur (para. 11);
- the judge took the view that it was “at least unlikely” that the OR would take the matter further, and it was not justified to spend more court time adjudicating on issues which might never need to be decided for the case to be resolved (para. 12);
- accordingly the judge ordered that the statement of claim be struck out on the basis that Mr Choithramani had no locus standi to pursue the action (para. 13).

22. The judge ordered the writ and the statement of claim to be struck out on the ground that Mr Choithramani had no locus standi to pursue the claims in the action, dismissed the action and ordered Mr Choithramani to pay costs assessed at $1.55m within 28 days.

Appeal

23. Mr Choithramani lodged a notice of appeal on 26 May 2014. He sought orders that

- the strike-out application be adjourned to enable Mr Choithramani to conduct negotiations with the OR for assignment or consent, and
- “further or alternatively” that the strike-out application be remitted to the Court of First Instance for the court to determine whether each cause of action required the OR’s assignment or consent in order for Mr Choithramani to have locus standi to prosecute it.

24. On 26 November 2014 (the day before the hearing of the security for costs application), Mr Choithramani filed a summons for leave to amend the grounds of appeal as per an attached draft. On 1 December 2014 HSBC indicated that it would consent to the application for amendment. Consequently this judgment has been written on the basis that the grounds of appeal are those set out in the amended notice of appeal.

Application for security for costs

25. Meanwhile, HSBC sought security for the costs of the appeal. This was done initially in correspondence. The upshot of it was that HSBC demanded $339,000, which was not challenged by Mr Choithramani, but he was prepared only to “make best efforts” to provide it 7 days before the appeal listed for hearing on 14 January 2015.

26. On 30 September 2014 HSBC issued the present summons for security for costs requesting security in the sum of $455,000.

27.1. The application was resisted by Mr Choithramani on the basis that he had “every chance of succeeding” on his appeal.

27.2. As far as his financial ability was concerned, Mr Choithramani has not paid the costs ordered by Deputy Judge Whitehead. He applied for a stay of execution but this was rejected first by Deputy Judge Wilson Chan on 18 September 2014 and then by this court (Lam VP and Yuen JA) on 20 November 2014 in HCMP2607/2014.

27.3. As for the quantum of security, Mr Young declined an invitation to challenge the items or sums charged, and indeed expressly accepted that the draft bill of costs was properly costed. However as HSBC did not instruct counsel to appear at this application, there should be a deletion of Item 12 ($60,000 counsel’s brief fee for the present application) and a reduction of related items (which I have assessed at $12,000). This results in a bill of $383,612.70.

Principles

28. Turning now to the general principles governing security for costs of an appeal, it is clear that the court has a discretion to give, and would normally give, security for costs of an appeal where an appellant is impecunious, although the court may in some circumstances decline to order security notwithstanding the appellant’s impecuniosity where, for instance, it is "satisfied that the appeal raises real and substantial issues and that the appellant bears a sufficiently good chance of success to justify exposing the respondent to the injustice of having to bear his own costs even if he successfully resists the appeal" (Chan Sai Lun Henry v Chan Wai Wah, Lily-Ann CACV 143 & 205/1998).

Discussion

29. It was necessary to set out the above matters in some detail in order to understand the arguments now advanced regarding Mr Choithramani’s chances on appeal, to which I shall now turn. Of course at this stage, the court should only form a preliminary view as a detailed examination is neither required nor desirable (Chung Kauv Hong Kong Housing Authority [2004] 2 HKLRD 650).

30. It has been suggested on Mr Choithramani’s behalf that the judge had misunderstood his counsel to have conceded that he had no locus standi in prosecuting the action as all the causes of action were vested in the OR. It was submitted that that was wrong, because at least the “wrongful procurement of judgment” occurred after the discharge of bankruptcy.

31.1. As far as HSBC’s skeleton submissions were concerned (referred to in para. 18 above) it is clear that the locus standi point had two aspects, one based on the contention that the wrongs were allegedly done to Esquire, not Mr Choithramani (Section E1, paras. 35-38) and the other, on the contention that the rest of the rights of action remain vested in the OR, and the OR has neither assigned them to Mr Choithramani nor consented to his bringing this action (Section E2, paras. 39-43). “Wrongful procurement of judgment” was placed in Section E1 and therefore had nothing to do with the OR.

31.2. As far as Mr Choithramani’s skeleton submissions were concerned, the two contentions were treated separately as well, para. 5 dealing with Section E2 and paras. 6 and 8 dealing with Section E1.

32. No transcript of counsel’s submissions before Deputy Judge Whitehead having been produced in the present application, it is not known what was said orally by counsel at the hearing. However the matters set out in para. 5 of the Ruling (see para. 21 above) appear to corroborate the judge’s view that there had been a concession by Mr Choithramani’s counsel that he had no locus standi to prosecute the action because all the causes of action were vested in the OR.

33. Be that as it may, the more important question is, irrespective of the concession, whether in law the point conceded was right.

34. As noted earlier, all the wrongs alleged in the statement of claim (bar one) had occurred before the bankruptcy order, and as such were rights of action that remain vested with the OR.

35. That leaves only “wrongful procurement of judgment” which allegedly occurred in 2006, after the bankruptcy order had been discharged. However Mr Choithramani was not a party to the Esquire action in which the judgment was procured, and the statement of claim failed to plead any connection between this alleged wrong to Esquire and any losses suffered by himself.

35.1. It is notable that in the section entitled “Losses suffered by Gurdas”, there is no reference at all to paras. 179-195, which are the parts in the statement of claim pleading the “wrongful procurement of judgment”. Thus on the face of the statement of claim itself, no right of action has been disclosed entitling Mr Choithramani to claim.

35.2. In para. 8.17 of Mr Choithramani’s skeleton submissions before the judge, it was acknowledged that there was no “direct authority” on the proposition. Nor did the rest of paras. 8.17 - 8.18 address the lacuna in the pleading.

35.3. Further, Mr Choithramani’s skeleton submissions before me also did not address the lacuna, saying only that “in passing, it is worth noting that Reflective Loss is a complicated area, with exceptions to the general rule and recent conflicting authority. There is much scope for argument”.

35.4. In other words, as the statement of claim itself failed to show a connection between Mr Choithramani and the alleged “wrongful procurement of judgment” in Esquire’s action, he had no locus standi regarding this cause of action either. Accordingly the point conceded was right (regardless of whether there had been a concession).

36. In conclusion Mr Choithramani has failed to persuade me at this stage that he has such high prospects of success on appeal from the judge’s order that I should decline to order security notwithstanding his financial difficulties. I do not consider that the appeal raises such real and substantial issues, and that he bears such a sufficiently good chance of success, to justify exposing the respondent to the injustice of having to bear its own costs if it successfully resists the appeal.

Order

37. I would give an order in terms of the summons of 30 September 2014 save that in para. 1, the plaintiff is to have 21 days from the date of this judgment (ie by 24 December 2014) to furnish security in a sum rounded down to $383,000. The costs of this application are to be paid by the plaintiff to the defendant to be taxed if not agreed.

(MARIA YUEN)
Justice of Appeal

Mr Christopher Young instructed by Jal N Karbhari & Co, Solicitors for the Plaintiff

Mr Nicholas David Hunsworth of Mayer Brown JSM, Solicitors for the Defendant

GURDAS S CHOITHRAMANI v. THE HONGKONG AND SHANGHAI BANKING CORPORATION LTD

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