EXCELLENT RICH SERVICES LTD v. TSANG KIN ON

DCCJ 4699/2014

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4699 OF 2014

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DECISION

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1.  This is the defendant’s application under Order 23 rule 1 of the Rules of District Court (Cap 336H) and section 905 of the Companies Ordinance (Cap 622) by Summons dated 4 March 2016 for an order for security for costs against the plaintiff, which is a limited company incorporated in Hong Kong on 26 June 2014, in the sum of HK$167,100 (up to and including setting down for trial), to be paid within 28 days.  The defendant supports his application by his Affirmation filed on 4 March 2016.  The plaintiff has filed no affidavit evidence in opposition, despite an unless order made by Deputy District Judge Phoebe Man on 19 April 2016.  Thus, before me, there is no evidence in opposition to the present application.  That said, the defendant still carries the burden of satisfying me that the application should be allowed according to the relevant legal principles.

2.  The legal principles governing such an application are well-established. In determining whether it is just to order for security for costs, the court has to consider all the relevant circumstances, among which are (1) whether the plaintiff’s claim is bona fide and in relation to that what are the prospects of success of the plaintiff’s claim, if they can be demonstrated clearly one way or the other; (2) the plaintiff’s ability to pay costs; (3) whether an order for security for costs would stifle the plaintiff’s claim; and (4) delay.  (As the present proceeding has only reached the close of pleadings, there is no delay in the present application.)  Where the court is satisfied that it is just to make such an order, the court usually provides that the plaintiff’s claim should be dismissed upon failure to pay security for costs within a certain period of time.

3.  It is not disputed that on 26 September 2014, the plaintiff and the defendant entered into a written agreement dated 26 September 2014 (the “Agreement”) whereby the plaintiff, at the defendant’s requests, agreed to act as the defendant’s consultant for consultancy services in relation to a loan application for an agreed fee of HK$150,000.  It is also not disputed that the defendant has received no loan and the defendant has not paid any part of the HK$150,000.

4.  The plaintiff claims that the defendant failed to cooperate with the plaintiff in respect of the processing of the loan application and claims the payment of the HK$150,000.  The defendant’s defence is that the Agreement is unenforceable because (1) the plaintiff was in fact a moneylender but was not licensed under the Money Lenders Ordinance (Cap 163); (2) the Agreement is against public policy; and/or (3) the HK$150,000 is a penalty but not liquidated damages.

Merits of the plaintiff’s claim

5.  I do not need to go into the details of the merits.  Suffice to say, without expressing any view that may prejudice the trial judge, that I am satisfied that the plaintiff’s claim is not so strong that by the merits of the plaintiff’s claim itself, the defendant’s present application should be shut out.

Plaintiff’s ability to pay and security for costs stifling?

6.  The plaintiff was incorporated on 26 June 2014, after the new Companies Ordinance (Cap 622) came into effect, and just 3 months before the signing of the Agreement entered into on 26 September 2014.  I can infer from that the plaintiff was and still is relatively new in its business operation, and not much money has been reserved.  This must be the case particularly when I consider that it only has a capital of HK$1.00.  It must be noted that this capital is not a par value capital as in the old Companies Ordinance (Cap 32), above which the company may actually has substantial equity.  This HK$1.00 capital presumably is all the capital the company has as its initial equity.

7.  The above clearly constitutes a prima facie case the plaintiff does not have sufficient resources to pay costs.  However, the plaintiff chose not to file any evidence.  In the circumstances, I am satisfied that the plaintiff does not have the sufficient resources to pay the costs if ordered to, and as there is no evidence to suggest any stifling effect, I am also satisfied that an order for security for costs, despite the plaintiff’s lack of resources to pay up costs, would not stifle the plaintiff’s claim.

Conclusion

8.  In the circumstances, I find it just to order the plaintiff to pay security for costs.

Quantum

9.  The court adopts a broad-brush approach to quantum.  I take into account that at least at this stage, there are not many factual disputes, while the main disputes relate to the legal questions of whether or not the Agreement is enforceable by virtue of the Money Lenders Ordinance or public policy.  The defendant also confirmed to me that at this stage, it is not expected that Counsel would be engaged for the trial, and that the sum of the HK$167,100 sought by the Summons also includes the costs of Summons itself.  In the circumstances, I think HK$95,000 is appropriate at this stage.

Order

10.  Thus, I make the following order:-

(1)   Within 28 days, the plaintiff do pay into court security for the defendant’s costs up to and including setting down for trial in the sum of HK$95,000.

(2)   Pending the plaintiff’s compliance with paragraph (1) above, the action herein be stayed.

(3)   Should the plaintiff fail to comply with paragraph (1) above, the plaintiff’s claim be dismissed with costs to the defendant, to be taxed if not agreed.

(4)   The costs of the present application be to the defendant summarily assessed to be HK$21,175.