Charles Allen Antony Sassi September 27 2022 Surplus security for costs of appeal not retained in court for unpaid trial costs RPC | Litigation - Hong Kong Charles Allen, Antony Sassi Litigation IntroductionBackgroundJudgmentCommentIntroduction In Tang v Law the Court of Appeal ordered that the balance of an amount of security for costs paid into court by an appellant for purposes of an appeal be returned to him rather than retained in court as security for the respondent's unpaid costs of successfully defending an earlier trial.(1) This appears to have been a novel point in Hong Kong. In so holding, the Court distinguished between security provided for the costs of an appeal and a sum of money ordered to be paid into court pursuant to the courts' general case management powers.BackgroundThe appeal arose out of a dispute between the plaintiff (the appellant) and the defendant (the respondent) over the ownership of some land in the New Territories, Hong Kong. In short, the respondent succeeded on his counterclaim and the appellant's appeal was dismissed by the Court.(2) The appellant had previously paid HK$669,835 into court as security for the costs of the appeal pursuant to a consent order – the consent order had been agreed between the two parties pursuant to the relevant provision in the court rules providing for security for costs of an appeal.(3)As a result of the dismissal of the appeal, the respondent was entitled to the costs of the appeal and the Court summarily assessed these at HK$430,000. Therefore, the balance of the security for costs paid by the appellant was approximately HK$230,000 (the balance).The appellant applied for an order that the balance be returned to him. He argued that he was entitled to the balance because the security for costs had been paid pursuant to a consent order that, in turn, had been made pursuant to the relevant appeal rules.(4)The respondent applied for the balance to be retained in court to contribute to his unpaid trial costs. He argued that he was entitled to the balance given the courts' general case management powers, in particular:Court's general powers of managementOrder 1B, rule 1 –(3) When the Court makes an order, it may — (a) make it subject to conditions, including a condition to pay a sum of money into court; and(b) specify the consequences of failure to comply with the order or a condition.(4) Where a party pays money into court following an order under paragraph (3), the money is security for any sum payable by that party to any other party in the proceedings.The issue for determination by the Court was whether Order 1B, rule 1(3) and (4) applied so that the balance should be treated as "security for any sum payable by that party to any other party in the proceedings" – in that event, the respondent argued that he would be entitled to the balance to contribute to his unpaid trial costs.JudgmentThe Court allowed the appellant's application and dismissed the respondent's application. The Court gave the following reasons.First, the appellant had agreed to pay the security "for the costs of the appeal only".(5) As such, the consent order was contractual in nature and should be given effect, save for exceptional circumstances such as fraud or economic duress.Second, Order 1B rule 1(4) only applied "[w]here a party pays money into court following an order under paragraph (3)". In contrast the appellant had paid the security for costs pursuant to a consent order and the regime for security for costs on an appeal to the Court.Third, and described as "more importantly" by the Court, the courts' general case management power to impose a condition that a party pay a sum of money into court related to the future conduct of a case(6) – it did not apply to an order for security for costs that had already been made pursuant to the power of the Court to order security for an appeal.(7) The courts' general case management powers were in addition to the power to order security for an appeal – however, these general case management powers did not replace a pre-existing order or rule.(8) As the Court noted:It cannot be "tagged on" to a pre-existing order, such as, in the present case, the Consent Order made in December 2020 for security for costs of the appeal.(9)The Court used the expression "pre-existing" no fewer than five times in its judgment to contrast the courts' general case management powers (adopted as part of the civil procedure reforms in April 2009) with previous court rules and powers that still exist.The judge giving the lead judgment of the Court concluded:For the above reasons, I consider that Order 1B rules 1(3) and (4) cannot be applied in order to change funds paid pursuant to a previous order for security for costs of an appeal into security for the costs of the trial. The respondent may have other procedural means to enforce an order for costs of the trial against the Balance, but not, in my view, under Order 1B rules 1(3) and (4).(10)CommentAs a result of its judgment, the Court ordered that the costs of the appeal (HK$430,000 plus interest) be paid to the respondent and, in the absence of any further order, that the balance be paid to the appellant upon the expiry of 14 days from the judgment. The Court's reasoning appears to apply irrespective of whether the security for costs of an appeal was ordered by a court or paid pursuant to a consent order.Although the appellant was unsuccessful at trial and on appeal, he did ultimately succeed on the arguments concerning the disposal of the balance of the security for costs. However, the reference in the Court's judgment to the respondent having the possibility of "other procedural means to enforce an order for costs of the trial against the Balance"(11) and in the Court's order to "the absence of any order to the contrary in the meantime"(12) may be a reference to the respondent's rights as a judgment creditor in respect of his unpaid trial costs – for example, it is possible to obtain a charging order over funds in court.(13)The Court's judgment is also notable for the significant reliance placed on English case law in order to distinguish between, on the one hand, the courts' general case management powers to enforce the "underlying objectives" of the court rules and, on the other, the courts' specific pre-existing rules.(14) This makes for some interesting reading and comparisons.For further information on this topic please contact Charles Allen or Antony Sassi at RPC by telephone (+852 2216 7000) or email ([email protected] or [email protected]). The RPC website can be accessed at www.rpc.co.uk.Endnotes (1)  HKCA 1002, 8 July 2022.(2)  HKCA 1856, 8 December 2021.(3) Rules of High Court, Order 59, rule 10 (5) ("General powers of the Court of Appeal").(4) Supra note 3.(5) Supra note 1, at paragraph 7.(6) Supra note 1, at paragraphs 8.2 and 9.1.(7) Supra note 1, at paragraph 9.1.(8) Supra note 1, at paragraph 9.2.(9) Supra note 1, at paragraph 12.4.(10) Supra note 1, at paragraph 18.(11) Supra note 1, at paragraph 18.(12) Supra note 1, at paragraph 19.(13) High Court Ordinance (Cap. 4), section 20A(2)(c), including funds paid into court as security for costs.(14) Supra note 1, paragraphs 10–16. In England and Wales, the Civil Procedure Rules refer to the "overriding objective".