BUILD FAME SERVICES LTD v. YAU LEE CONSTRUCTION CO LTD

HCCT 59/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 59 of 2007

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(by counterclaim)

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D E C I S I O N

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1.  In this action Build Fame sues Yau Lee for a sum in excess of $23 million being outstanding payments for work done and prolongation costs apparently incurred by Build Fame under a subcontract in the construction of Hong Kong Science Park Phase 2 Main Works.  Yau Lee has brought a counter claim for a sum in excess of $26 million for loss and damage suffered, allegedly as a direct consequence of theory as breaches of the subcontracting agreement on the part of Build Fame.  The counterclaim is against both Build Fame, and its director, Mr Wong Kin Yee.

2.  Now, Yau Lee seeks security for costs in the sum of $2,370,000 to cover solicitors fees, junior counsel and senior counsel’s fee, and experts are both as to programming and quantum.  The application is made in reliance upon s 357 Companies Ordinance, Cap 32.

3.  The solicitors for Build Fame have been given leave to withdraw.  The Master refused leave to Mr Wong to represent Build Fame in the proceedings before me, but I heard him, as not to do so would have left Build Fame unrepresented, and in any event Mr Wong was entitled to be heard on his own account.

4.  Mr Wong handed to me a petition to wind up Build Fame in respect of debts due by way of judgments obtained in the Labour Tribunal for a sum a little less than $100,000.  The petition is set down for hearing on 18 August 2010.  Mr Wong says the company has no money.  There is no dispute that there is reason to believe the company will be unable to pay the costs of Yau Lee is successful in its defence.

5.  Mr Wong said that he has no money to put into Build Fame.  The principal shareholder in Build Fame is a BVI company.  In 2005-2006 that company gave an undertaking to provide continued financial support to enable Build Fame to meet its liabilities as they fall due.  A similar undertaking was not given in 2007 accounts.

6.  There is no evidence at all from the BVI company as to its position.  In the absence of evidence I cannot say that an order for security for costs will stifle the action.  Further, as recently as 19 November 2009, by letter, Build Fame claimed its business had been improving and it had been awarded several large-scale projects.  The light of that assertion there is evidence that funds will be available to Build Fame.

7.  The only other issue is that of delay.  Until earlier this year Yau Lee had no reason to suspect that Build Fame might not be able to meet costs.  Having been assured as to the stability of the company, as I have noted above. The solicitors for Yau Lee sought evidence as to the assertion.  That was refused.

8.  This is not an application which can be seen as an application for security for costs, brought at the last minute before trial in an effort to stave off litigation to which Yau Lee has no answer.  It is a perfectly proper application in the circumstances.

9.  I have considered the schedule of provisional costs.  It has been discounted by 50% in respect of costs incurred in prosecuting Yau Lee’s counterclaim.  The claim is not one however which in my view justifies leading counsel.  It is a relatively straightforward construction case with the usual issues.

10.  Taking a broad view of the matter I fix security for costs in the sum of $1,500,000 to be paid within 28 days of the date of this order.  Failing payment the action by Build Fame will be stayed.

11.  There will be an order nisi that Build Fame must pay Yau Lee’s costs on summons the security costs, be taxed at a party and party basis.