REDOAK CAPITAL LTD v. STANDARD INDUSTRIAL INTERNATIONAL CO LTD

HCA 1625/2017

[2018] HKCFI 2835

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1625 OF 2017

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J U D G M E N T

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A. INTRODUCTION

1.  Before the court were the plaintiff’s application for the admission of further evidence and its appeal from an order for security for costs made by Master Phoebe Man on 29 March 2018.

B. APPLICATION FOR ADMISSION OF FURTHER EVIDENCE

2.  By summons dated 3 September 2018 (the “Further Evidence Summons”), the plaintiff applied for leave to adduce fresh evidence in the form of the 2^nd Affirmation of Wong Sin Fai Cynthia (“Wong”) and its exhibits for the purpose of its appeal against the decision of Master Phoebe Man made on 29 March 2018.

3.  At the hearing, the Further Evidence Summons was dismissed with costs to the defendant.  My reasons are as follows.

B1.    Relevant legal principles on admission of further evidence

4.  The plaintiff’s application is made pursuant to Order 58, rule 1(5) of the Rules of the High Court, Cap 4A.

5.  After the Civil Justice Reform, Order 58, rule 1(5) provides that:

“no further evidence (other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made) may be received on the hearing of an appeal under this rule except on special grounds.” [Emphasis supplied]

6.  As explained by DHCJ Au-Yeung (as she then was) in Bank of China (Hong Kong) Limited v Certain Aim Ltd, HCMP 1272/2007 (Decision dated 4/10/10), Order 58, rule 1(5) was introduced to “curb the undesirable practice before the Civil Justice Reform when parties sought to adduce a further round(s) of evidence on appeal after an unfavourable decision from a Master.  Rule 1(5) aims at effecting a change of culture so that parties should prepare their application properly at the earliest possible opportunity and lay all cards on the table prior to the hearing before a Master.  The spirit of this rule will be defeated if a party is allowed to revert to the pre-CJR practice…” (at paragraph 17).

7.  As such, in the post-CJR era, the approach where a party would wait for the decision of the Master, and if the decision is not in his favour, then present further evidence to the court in the appeal, is no longer considered acceptable by the court [see Gannon Vietnam Co Ltd v Robert Paul Greene, HCA 584/2012 (Decision dated 11/10/13), at paragraph 33 per DHCJ Lok (as he then was)].

8.  The phrase “special grounds” is the same expression as in Order 59, rule 10(2) of the Rules of the High Court and requires the three conditions laid down in Ladd v Marshall [1954] 1 WLR 1489 to be satisfied.  These conditions are:

(1) that the evidence could not have been obtained with reasonable diligence for use at the hearing below;

(2) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and

(3) the evidence must be such as is presumably to be believed.

[See Hong Kong Civil Procedure 2019, Vol 1, Practice Note 58/1/3]

B2.    The new evidence proposed to be adduced by the plaintiff

9.  As submitted by the defendant, the new evidence disclosed in the 2^nd Affirmation of Wong can be categorized as follows: –

(1) Category 1 – Evidence of the plaintiff’s latest bank balance.  The plaintiff sought to produce as exhibit “WSFC-4” the cash management transaction records and consolidated bank statements of the plaintiff’s account with the Bank of China (“BOC”) covering the period from April to July 2018.

(2) Category 2 – Evidence that the plaintiff has been receiving service/consultancy fees from different companies for the financial years ended 31 March 2017 and 31 March 2018.  The consolidated bank statement of the plaintiff (ie “WSFC-4”) shows that the plaintiff received a monthly sum of $61,250 from April 2018 to July 2018.

(3) Category 3 – Evidence regarding the services provided by the plaintiff to its clients after 31 March 2018 and the service fees earned or to be earned therefrom by the plaintiff.

(4) Category 4 – Evidence of the plaintiff’s net profit and net asset positions for the financial years ended 31 March 2017 and 31 March 2018.  The audited reports of the plaintiff for the financial years ended 31 March 2017 and 31 March 2018 as well as the latest Business Registration Certificate of the plaintiff were produced as exhibit “WSFC-5”.

(5) Category 5 – Evidence of the value of the plaintiff’s car parking space and private cars.

(6) Category 6 – Evidence that the plaintiff had sold one of its private cars, a Porsche Boxster, on 9 August 2018.  The relevant sale and purchase agreement and payment record are produced as exhibit “WSFC-7”.

(7) Category 7 – Evidence that the plaintiff obtained loan facilities from a money lender on 24 July 2018.

B3.    Discussion

10.  Overall, it is plain that the 2^nd Affirmation of Wong purported to put before this court more information about the plaintiff’s financial position.

11.  It is obvious that these evidence now sought to be adduced by the plaintiff are for the purpose of addressing the criticisms made by the defendant (and accepted by the Master) at the hearing below, namely that the plaintiff had failed to provide adequate disclosure of its financial position to rebut the inference that it may be unable to pay the defendant’s costs if the defendant is successful in the action.  This is not a case where the plaintiff alleges that there is a change of its financial position after the hearing on 29 March 2018 so much so that it is entitled to explain its changed position by evidence.  The position is rather that the plaintiff is making an attempt to patch up its case on its financial position based on alleged new evidence which indeed should have been available or have been adduced before the hearing on 29 March 2018.  As observed by DHCJ Lok (as he then was) in Gannon Vietnam Co Ltd v Robert Paul Greene, supra, this is “exactly the undesirable practice that r 1(5) seeks to avoid” (at paragraph 32).

B4.    Category 1

12.  The plaintiff has already produced the statement of the plaintiff’s BOC bank account as at 31 October 2017 in the 1^st Affirmation of Wong.  For reason which Wong has not explained, Wong then only produced the BOC monthly bank statement as at 31 October 2017 and asserted that it showed a credit balance of $538,536.77.  The new BOC statements and Cash Management Transaction Details, as asserted by Wong, showed a credit balance of $613,456.12.  The plaintiff has not explained how production of these updated bank statements of the plaintiff would have an important bearing on the result of the security for costs application.  The new bank documents just show a slightly larger credit balance.  After all, irrespective of the amount of credit balance, money is a liquid asset and can be disposed of or transferred away easily.  The mere suggestion that the plaintiff has cash balance cannot have an important influence on the outcome of the case.  The 2^nd Ladd v Marshall condition is therefore not satisfied in respect of this category of evidence.

B5.    Category 2

13.  There is no apparent reason given by the plaintiff as to why this category of evidence was not disclosed in the 1^st Affirmation of Wong (which was filed on 8 January 2018), when it is the plaintiff’s evidence that: –

(1) It has been receiving the monthly service fee from Talent Million Limited since as early as 2011.

(2) It had the monthly retainer fee from “another client” between 28 March 2016 and October 2017.

(3) The consultancy agreements with I-Access Group Limited, Odysseus Capital Asia Limited, and Cheng Metal Packaging Company Limited were entered into during the financial years ended 31 March 2017 and 31 March 2018.  The plaintiff did not say that any of these consultancy agreements was only made after the hearing on 29 March 2018.

14.  The 1^st Ladd v Marshall condition is thus not satisfied in respect of this category of evidence.

B6.    Category 3

15.  The alleged mandate for Quintessentially Wine APAC Limited was said to have been completed from 1 April up to 31 July 2018 by Wong.  The reasonable inference was that the alleged engagement of the plaintiff by Quintessentially Wine APAC Limited must have been made some time before 1 April 2018.  If so, why was such engagement not mentioned earlier?  The 1^st Ladd v Marshall condition is not fulfilled.

16.  As for the alleged mandate for Aevitas Limited, for reason only known to Wong, she eschewed from telling the court as to when the engagement was made and simply chose to state the target completion date for the mandate.  In view of the failure of Wong to be forthcoming, this court is entitled to come to a view that such mandate, if existed at all, was made before 29 March 2018 and if relevant it should have been mentioned by Wong in the earlier affirmation.  Again the 1^st Ladd v Marshall condition is not satisfied.

17.  Further, one also takes note that the nature of this category of evidence is in fact no different from the 2^nd category of evidence, which is to show that the plaintiff has been earning revenues from its business.  Thus viewed, this category of evidence should not be admissible, as otherwise it would be allowing the plaintiff to circumvent the restrictions imposed under Order 58, rule 1(5) by simply referring to matters which took place after date of the order, when evidence of the same nature and for the same purpose (ie the 2^nd category of evidence) could have been but was not disclosed at the hearing before the Master.  

B7.    Category 4

18.  Evidence relating to net profit and net asset position of the plaintiff for the financial years ended 31 March 2017 and 2018 were clearly in existence prior to the hearing before the Master.

19.  Wong’s purported explanation that the relevant audited reports of the plaintiff were only provided to the plaintiff on 1 August 2018 cannot exonerate the plaintiff from its failure to adduce these evidence for the hearing below: –

(1) First, Wong has failed to explain why the plaintiff could not have, with the exercise of reasonable diligence, obtained its audited report for the year ended 31 March 2017 before the hearing on 29 March 2018.

(2) Second, even if it might not be possible to adduce the plaintiff’s audited report for the year ended 31 March 2018 at the hearing below, there is no reason why the plaintiff could not have produced the audited accounts for year ended 31 March 2017, its management accounts, general ledgers and/or trial balance for the financial year as close to the time of hearing on 29 March 2018 as possible.

20.  The failure by the plaintiff to produce this category of evidence earlier is all the more inexcusable and culpable considering that the defendant’s solicitors had repeatedly requested such evidence from the plaintiff by correspondence before the defendant took out the summons for security for costs on 4 December 2017.  The defendant’s requests were, however, ignored by the plaintiff.

21.  The 1^st Ladd v Marshall condition is not satisfied with respect to the audited reports.

22.  Moreover, it cannot be seen why these audited reports have an important influence in the outcome of the security for costs application.  As can be seen from them, the plaintiff had a loss of $245,454 in 2016 and a small amount of profit of $123,679 in 2017 and $213,563 in 2018.  Its total equity is $2,476 in 2016, $126,155 in 2017 and $339,718 in 2018.  It is also apparent that the plaintiff subsisted largely based on loan from Wong, its sole director who apparently was paid substantial sum at least by way of emoluments.  In all reckoning, even with the 2017 and 2018 audited reports, one simply does not see that the plaintiff is a company earning constant profit or being a substantial company at all.  The 2^nd Ladd v Marshall condition is not fulfilled.   

23.  Finally, in this category of new evidence, there is also the plaintiff’s Business Registration (“BR”) record seemingly for the period from 6 June 2018 to 5 June 2019.  One cannot discern what is the purpose of producing the new BR record.  A previous BR certificate has already been produced.  The plaintiff has not explained at all the probative value of the latest BR certificate and how it can have an important influence on the outcome of the case.  At least, the 2^nd Ladd v Marshall condition is not fulfilled.

24.  That said, one further takes note that even in the latest BR certificate, the business of the plaintiff is still said to be “investment”, which is not the same as appeared in the Statement of Claim or as portrayed in Wong’s 2^nd Affirmation.

B8.    Category 5

25.  The plaintiff has not explained why such further evidence regarding the value of the car park space and private car owned by the plaintiff could not have been included in the 1^st affirmation of Wong where she has already alluded to them as the plaintiff’s assets.  This category of evidence fails to meet the 1^st Ladd v Marshall condition.  The plaintiff is not entitled to pluck the loophole in her evidence.

B9.    Category 6

26.  This category of evidence ought not to be admitted because: –

(1) No explanation is given in the 2^nd affirmation of Wong as to why the plaintiff came to sell its the Porsche Boxster.

(2) Further, the existence of the Porsche Boxster has been alluded to in the 1^st Affirmation of Wong.  It is not clear how the sale of the car would have an important influence on the outcome of the security for costs application as compared with the time when the car was allegedly an asset of the plaintiff.  Wong has not cared to explain.  

(3) The 2^nd Ladd v Marshall condition is not satisfied.

B10.  Category 7

27.  This category of evidence is even more mystifying.  There is not a single word of explanation as to why the 2 different loan facilities were allegedly obtained from M Success Finance Co Ltd and whether the loans have been drawn and spent and if so for what purpose.  In particular, Wong has also not told the court as to when the loan facilities were negotiated with M Success Finance Co Ltd so much so that if there had already been negotiation before 29 March 2018, why the plaintiff did not disclose it earlier?  

28.  Further, the plaintiff has not explained in the 2^nd Affirmation of Wong how this category of evidence would have influenced the result of the security for costs application.  After all, the loan facilities, if drawn down, merely creates a debt.

29.  So again the 1^st and 2^nd Ladd v Marshall conditions are not satisfied.

B11.  Lateness of the Further Evidence Summons

30.  Further, the plaintiff’s Further Evidence Summons is inordinately and inexcusably late.  The order appealed against was made on 29 March 2018 and the notice of appeal was filed on 11 April 2018.  Yet it was only on 6 August 2018, some 4 months after the notice of appeal was filed, when the plaintiff first wrote to the defendant to seek the defendant’s consent for the admission of the evidence.  The draft 2^nd Affirmation of Wong was not exactly the same as the present one.  After the defendant refused the plaintiff’s request, the plaintiff then waited for almost another month (ie until 3 September 2018) before taking out the present application.  The present application was taken out just 8 days before the appeal hearing and is fixed to be heard at the same time as the appeal hearing.  The inordinate delay in bringing the application is not explained by the plaintiff.  I agree that the lateness of the application also means that the defendant is deprived of sufficient time to consider the application.  Such delay constitutes a further ground for rejecting the application to adduce new evidence.

C. APPEAL AGAINST MASTER’S ORDER FOR SECURITY FOR COSTS

C1.    The Law

31.  It is trite that an appeal from a master to the judge in chambers is dealt with by way of an actual rehearing of the application which led to the order under appeal.  

32.  The law governing the defendant’s security for costs application is also well settled.

33.  Section 905(1) and (2) of the Companies Ordinance, Cap 622 provide as follows: –

“(1) This section applies where –

(a) a company is a plaintiff in an action or other legal proceedings; and

(b) it appears, by credible testimony, to the court having jurisdiction in the matter that there is reason to believe the company will be unable to pay the defendant’s costs if the defendant succeeds in the defence.

(2) Without limiting the powers of the court under any other Ordinance, the court may—

(a) require sufficient security to be given for those costs; and

(b)   stay all proceedings until the security is given.”

34.  The principles governing section 905 and applications for security for costs in general are discussed extensively in Hong Kong Civil Procedure 2019.  Of particular relevance to the present case are the following principles extracted from Hong Kong Civil Procedure 2019, Practice Note 23/3/14: –

(1) An applicant for security for costs has to show that the company would not be able to meet its debts when an order for costs was made against it.

(2) “Sufficient security” within section 905(2) means the probable amount of costs taking into account the chance of the case collapsing.

(3) It is not uncommon that an applicant for security for costs may not be in a position to adduce direct evidence on the financial status of a plaintiff company.  However, it suffices if a defendant is able to point to surrounding circumstances which evidence a genuine and reasonable belief of an inability to pay on the part of the plaintiff.

(4) The Court may accept that there is prima facie case that the threshold under section 905 has been met as a result of the following factors: (i) the plaintiff is a shelf company with a nominal amount of paid-up capital; (ii) the plaintiff company does not have an actual registered address (apart from the address of a secretarial company); and (iii) the plaintiff company does not ordinarily carry on business.

(5) Once the threshold of section 905 is met, the court has a discretion, just as under Order 23, rule 1 of the Rules of the High Court, whether to order security for costs having regard to all the circumstances of the cases.

35.  In deciding the question of whether there is sufficient credible testimony, Deputy High Court Judge L Chan (as he then was) held in Sprite Mass Enterprises Ltd v Loyal Profit Enterprise Ltd,HCA 1841 and 1842/2004 (Decision dated 3/05/2005) as follows: -

“8. … I also refer to the New Zealand case of Concorde Enterprises Limited v Anthony Motors (Hutt) Limited (No.2)[1977] 1 NZLR 516 at 518 line 50 where Quilliam J said:

“The wording of section 467 (similar to our section 357) requires consideration. It is to be observed that the legislature has departed from the more familiar phraseology, namely, “if it appears to the Court”, or, “if the Court is satisfied”, or the like. Indeed, the expression used is “if it appears by credible testimony that there is reason to believe”. I think this form of expression is of some significance and the reason for it is not difficult to find. There can be no doubt that the onus under the section rests upon the applicant, that is, the defendant. By the very nature of the application, however, the defendant cannot be expected to produce anything very conclusive in the way of proof. It has no access at this stage to the plaintiff’s books of account or other records, and can do no more than point to the surrounding circumstances. ... I think that what the statute contemplates is that there should be credible (that is believable) evidence of surrounding circumstances from which it may reasonably be inferred that the company will be unable to pay the costs. This does not, of course, amount to proof that the company will, in fact, be unable to pay them….”

9. I agree with the reasoning of Quilliam J and I think what the plaintiff can do is no more than referring to the surrounding circumstances in this case. …”

(Emphasis supplied)

36.  In the case of Dongguan Harris Plastic Products Co Ltd v Chan Dai Chung, HCA 289/1999 (Judgment dated 27/09/2001), the court accepted that surrounding circumstances may raise the inference that the plaintiff would be unable to pay.  It then called on the plaintiff to produce evidence to the contrary and in the absence of which an order for security might be made (paragraph 14).

37.  More recently, in Manhattan Properties Ltd v Eton Properties Agency Co Ltd, HCA 1829/2014 (Judgment dated 10/02/16), Master Leong observed (at paragraph 6) that another relevant factor for the court to consider in determining whether section 905 is engaged is “the value of the company to those owning it, so that if the litigation turns bad, whether there is reason to believe that those owning the company will simply “abandon ship” rather than funding the costs”.  He continued (at paragraph 7): -

“Obviously, the court needs to look at all the circumstances concerning the value of a company to those owning it, for example: is the company currently holding valuable assets? Is it currently running a proper and viable business? Is the company associated with any “goodwill”? Is it no more than a “shelf company” incorporated for a certain transaction or purpose, and thus can be replaced easily?”

C2.    Reasons to believe that the plaintiff will be unable to pay the defendant’s costs

38.  I accept there is credible testimony to support the case that the plaintiff will be unable to pay the defendant’s costs.  The defendant has obtained a credit report on the plaintiff dated 27 July 2017 (the “Report”) from one Alpha & Leader Risks and Assets Management Co Ltd (“A&L Co”).  The defendant has also obtained a letter dated 15 November 2017 from A&L Co for clarifying some matters stated in the Report. 

39.  As advanced in the Report, the letters from the defendant’s solicitors and the affirmations filed by the defendant in support of the defendant’s application, there is the following credible evidence regarding the surrounding circumstances from which it may reasonably be inferred that the plaintiff will be unable to pay the defendant’s costs: –

(1) Although the plaintiff was incorporated on 6 June 2006 and its business registration stated that its business is investment, there is no evidence that the plaintiff has involvement in any actual business activities especially investment activities.

(2) The plaintiff only has a paid-up capital of $10,000.

(3) Wong is the only director of the plaintiff.

(4) Wong is the majority shareholder of the plaintiff holding 99% of its shares.

(5) The name of the plaintiff or Wong was not found in any major reference books or directories including telephone listing.  It must be noted that the telephone number 25726111 is indeed the telephone number of Suncorp Securities Limited (“Suncorp”) listed in its Annual Return and not that of the plaintiff.

(6) No payment history of the plaintiff could be found.

(7) The plaintiff’s registered address is Unit 3615, 36/F, Cosco Tower, 183 Queen’s Road (the “Address”). But the Address is only a correspondence address of the plaintiff and no logo or name of the plaintiff is displayed at the Address.

(8) The plaintiff has no full-time employee working at the Address.

40.  A&L Co opined that: –

(1) the plaintiff is an investment company with no business activities or operations and only maintains the Address as a correspondence address; and

(2) the plaintiff is not an entity which is capable of meeting substantial financial obligations.

41.  In addition, on 26 October 2017, Ms Mok Yee-wa of the defendant’s solicitors personally attended the Address and discovered the following: –

(1) The nameplate of Suncorp was found affixed at the entrance of the Address, which together with an adjoining unit, was being occupied by the staff of Suncorp and not the plaintiff.

(2) On inquiry with a staff at the main lobby of Cosco Tower (ie the building where the Address is at), the staff told Ms Mok that he was unaware of the existence of the plaintiff.

42.  A subsequent company search reveals that Wong is the company secretary of Suncorp.  

43.  While all of the above matters, taken individually, may not of itself be an indication of an inability to pay, I agree that taken together, they give rise to a strong inference that the plaintiff is a shell company or corporate vehicle used by Wong for her own personal purpose.  Therefore, there is a real risk that the plaintiff will not be able to pay any costs which may be awarded against it or Wong who is in control of the plaintiff would simply allow the plaintiff to default in complying with such costs order.

C3.    The plaintiff’s purported assets

44.  Wong has in her 1^st affirmationsought to raise various matters on the plaintiff’s alleged current financial position to support her contention that the plaintiff would have sufficient means to meet an adverse costs order.

45.  In my view, the plaintiff has not adduced sufficient evidence to demonstrate its means or to contradict the defendant’s evidence: –

(1) It is undisputed by the plaintiff that it has a small paid-up capital.

(2) There is also no challenge to the suggestions that the plaintiff has no regular business office.

(3) The plaintiff’s statement that it “facilitates the provision of company secretarial services and derives its income therefrom” is extremely vague and equivocal as to what business (if any) it actually carried/carries on.  Further, it is inconsistent with the Business Registration record that the plaintiff is in the business of investment.  The assertion is a bare one unsupported by any documentary evidence especially on the alleged income of the plaintiff.

(4) As to the evidence that the plaintiff owns certain assets and has a banking account with Bank of China, it does not represent a complete picture of the plaintiff’s financial position and cannot per se go to prove the plaintiff’s ability to pay costs.

(5) Wong says that the plaintiff is the registered owner of a car park at Tseung Kwan O (the “said CP”) which was acquired on 31 May 2017.  The plaintiff has not disclosed whether the said CP was acquired in the course of the plaintiff’s business or not, and more importantly, whether the said CP was acquired with the plaintiff’s own monies and if yes how did the money come about and where it was kept.  Absent any record or evidence of the plaintiff’s business at all times, there is just no basis to say that the plaintiff had its own funds to acquire the said CP.  Although it does not appear that there is any mortgage over the said CP as gathered from the land search record, in the present circumstances, it was likely that the said CP was paid for by money coming from third party.  The most likely candidate is Wong herself who advanced the money by shareholder or director’s loan.  We have not been told anything about such loan, such as the loan amount and terms of repayment including whether the repayment is secured or not secured or payable on demand or not.  In this regard, it should be noted that the said CP is situated at the same building where Wong resides.  It is more than likely that Wong acquired the said CP for her own use using the plaintiff as the corporate vehicle.  The said CP was not purchased by the plaintiff as part of its business at all.  In short, it is the likely case that the said CP may not be available for satisfying any costs order as may be made against the plaintiff as it can be sold for paying off the loan owed by the plaintiff.  Last but not the least, it is unclear what is the net asset position of the plaintiff in general and what is the net worth of the said CP (after taking into account the loan advanced to the plaintiff for the purchase of the said CP).

(6) Wong also mentions that the plaintiff is the registered owner of a Porsche and a Tesla motor car acquired respectively in 2014 and 2017 at a total cost of about $1.4 million (the “said 2 cars”).  Again, Wong has not explained whether the said 2 cars were acquired in the course of the plaintiff’s business and if so for what sort of business.  Judging by the nature of the said 2 cars (which are both passenger cars), the objective circumstances is that Wong used the plaintiff as her corporate vehicle to acquire the said 2 cars for her own use.  Moreover, like the said CP, there is just no evidence that the plaintiff acquired the said 2 cars with its own money.  There is no evidence on the plaintiff’s liability on repayment of the loan advanced for the purchase of the said 2 cars and the net worth of it.  Further, as pointed out by the defendant, motor cars depreciate over time and one has no idea as to the current value of the said 2 cars.  It would be very easy for Wong to dispose of the said 2 cars once she apprehends that the plaintiff may be liable to pay the defendant’s costs.

(7) Wong further asserts that the total balance of the plaintiff’s bank account with Bank of China (the “said bank account”) as at 31 October 2017 was $538,536.77.  She produced a copy of the plaintiff’s consolidated statement dated 31 October 2017 (the “said statement”).  Several points can be noted: –

(a) First, the said statement produced was not up-to-date and covered only the month of October 2017 (ie more than 2 months before the affirmation was filed).

(b) Second, Wong has never explained the source of money being deposited or withdrawn from the said bank account, and she has never said that the money has anything to do with the plaintiff’s business.  In Sunny Securities Investment Ltd v Benelux Manufacturing Ltd, HCA 1801/2005 (Decision dated 26/09/13), the plaintiff, in arguing that it was not a shell company produced only a bank letter to show that it had a bank balance of $2,499,960.  Master Leong dismissed the value of that evidence (at paragraph 23), saying: –

“Indeed, as …rightly argued, there was neither a suggestion nor an indication from the plaintiff as to the source of the funds in the bank and how long it would remain there, and the funds could be withdrawn anytime. ...”

(c) Third, the bank balance figure asserted by Wong was “total relationship balance”.  Wong has not explained what the “total relationship balance” comprised of.  It is noted that in the said statement, the plaintiff only had a current deposit of $96,457.12.

(d) Fourth, money at bank is liquid asset and can be dissipated or transferred away quickly and easily.  Absent any undertaking not to deplete the money or a charge over it, the money at bank cannot be sufficient security for costs.

46.  The plaintiff has not put forward any other reason why this court should not exercise its discretion to order the plaintiff to furnish security for costs.

C4.    Conclusion

47.  For the reasons stated above, I agree that the Master was correct in ordering security for costs against the plaintiff and that the appeal should be dismissed.

48.  The parties agree that costs should follow the event.  Accordingly, I order that the costs of the appeal be paid by the plaintiff to the defendant, to be taxed if not agreed with certificate for one counsel only.