STRONG & ASSOCIATES LTD. v. FLYWIN CO. LTD.

CACV 40/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 40 OF 2001

(ON APPEAL FROM HCA NO. 5309 OF 1998)

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J U D G M E N T

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1. On 14 December 2000, Deputy Judge Muttrie dismissed the Plaintiff's claim against the Defendant. The Plaintiff is appealing to the Court of Appeal. The appeal is due to be heard on 13 September 2001. The Defendant now applies for security for its costs of the appeal. By its summons, it seeks security in the sum of $956,590.00. It does so on the ground that the Plaintiff is impecunious. If the appeal fails and if the Plaintiff is ordered to pay the Defendant's costs of the appeal, it is said that the Plaintiff will be unable to do so.

2. Well before the trial of the action, the Defendant sought security for its costs of the action. It did so pursuant to section 357 of the Companies Ordinance (Cap. 32) on the ground that the Plaintiff would be unable to pay the Defendant's costs if the Defendant succeeded in the action. The grounds relied upon were that the Plaintiff was a shelf company which had been bought for the purpose of entering into the sale and purchase agreement to which the action related, that it had an authorised share capital of $10,000.00 with a paid-up capital of only $100.00, that its purchase of the property to which the sale and purchase agreement related was the only business which it had transacted and that it had no known assets. Those facts were not disputed, and orders for security for the Defendant's costs of the action were made by consent.

3. The same grounds are relied upon for the present application under Ord. 59 r. 10(5) of the Rules of the High Court. The evidence relied upon by the Defendant is sufficient to raise an inference of impecuniosity on the part of the Plaintiff such as to call for a response from it. No evidence has been filed by the Plaintiff in response. Accordingly, I think that this is an appropriate case for an order to be made for security of the Defendant's costs.

4. However, the skeleton bill of costs which has been exhibited, though prepared (so I am told from the Bar Table) on a party and party basis and not on a solicitor and client basis, does not take into account the effect of taxation, despite the statement in Hong Kong Civil Procedure 2001, para. 59/10/37, that the skeleton bill "should set out the costs which could reasonably be expected to be allowed on a taxation on the standard basis." In the skeleton bill, by far the largest item ($710,000.00) relates to the disbursements to counsel. I do not know what they are likely to be taxed down to, and in the absence of any material before me as to how I should assess the level of the disbursements after taxation, I have to proceed on the basis of an assessment most favourable to the Plaintiff, bearing in mind that I have been told that taxing masters assess counsel's fees by reference to the hourly rate of counsel of the appropriate seniority for the case multiplied by the number of hours spent on preparing the case and appearing in court. It may well be held on any taxation in this case that this would not have been an appropriate case for more than one counsel or even for counsel of the seniority whom the Defendant's solicitors propose to instruct. In my opinion, a more realistic figure for the Defendant's taxed costs of the appeal, taking into account the time which the Defendant's solicitors are really likely to spend on the preparation of the appeal and what the disbursements to counsel are likely to be after taxation, is $300,000.00.

5. I therefore direct that all proceedings in the appeal be stayed until the Plaintiff pays the sum of $300,000.00 into court as security for the Defendant's costs of the appeal. I further direct that if the Plaintiff fails to pay that sum into court by 4.00 p.m. on 10 July 2001, the appeal be dismissed and that the Plaintiff be ordered to pay the Defendant's costs of the appeal to be taxed if not agreed. However, I give the Plaintiff liberty to apply for an extension of time to provide the security if it finds itself in genuine difficulty in raising the $300,000.00 by 10 July.