AKTIESELSKABET DANSK SKIBFINANSIERING v. WHEELOCK MARDEN & CO. LTD. AND OTHERS

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JUDGMENT

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Sir Derek Cons, V.P., delivered the judgment of the Court :

1. This is an appeal against the refusal of Jones, J. to make an order under Order 23 rule 1(1)(a) for security of costs against the Aktieselskabet Dansk Skibfinansiering, a plaintiff ordinarily resident out of the jurisdiction. He took the view that it was:

2. Mr. Thomas, who appears now for the appeallant, the first of 12 defendants to the action below, maintains two lines of attack upon the judge's decision; one is by way of principle, the other on matters of fact.

3. The basic premise of his argument on principle is neatly encapsulated in one paragraph of his skeleton argument:

To make that good he refers to the words of the Master of the Rolls in Corfu Navigation Co. and Another v. Mobil Shipping Co. Ltd. and Others Times Newspaper 28th February 1991:

4. It is suggested therefore, the plaintiff admittedly  having no assets or substance within the jurisdiction, that inevitably the judge erred in principle in declining to make the order.

5. It is to be noted that the Master of the Rolls had spoken to similar effect in De Bry v. Fitzgerald and Another [1990] 1 WLR 552 at 555:

6. Nevertheless we do not think that by these words he was intending to restrict the ambit of what in the former case he had just described as "such a wide measure of discretion", and had referred to the case of Slazengers Ltd. v. See Speed Ferries Intl. Ltd. [1988] 1 WLR 221 where, he said,

7. That observation echoes the words of the rule itself, that the court may order security:

8. It may well be that only rarely will a plaintiff having no assets within the jurisdiction be able to escape an order for security,. but we find in the words of the rule no justification to limit those occasions to the established instances of a hopeless defence or an impecunious plaintiff with a good cause of action. In our view the judge below was entitled, and was indeed so bound once the submission had been advanced, to take into account the situation of the plaintiff as he saw it. We are not persuaded that he erred in principle.

9. The factual attack on the judge's decision involves the contention that there was simply insufficient evidence on which it could properly be based. It will be useful therefore to set out the essentials of what was before the judge. We should note that a summons to adduce further evidence before this court was in the event not pursued.

10. The plaintiff is a company formed under the laws of Denmark. It has no place of business nor any asset in Hong Kong. It is the wholly owned subsidiary of another Danish corporation, the Denmarks Skibskreditfond ("DSF")

11. DSF is a statutory corporation set up to meet the financial needs of the Danish Shipbuilding industry which had proved too great for the normal banking system. It has no shareholders, but has instead guaranteed capital subscribed by the Danish Central Bank, other Danish banks, insurance companies, shipowners and Shipyards. Those in actual control are drawn principally from the three main Danish banks, with representatives from the other subscribing interests. Its reserves at the moment are in the region of HK$4.5 billion.

12. The plaintiff was set up so that English interests wishing to order ships in Denmark could take advantage of a double taxation agreement between the two countries, which could not be invoked as long as DSF remained, as it did formerly, a tax-exempt company within Denmark. The function of the plaintiff is simply that of a conduit for money passing between DSF and the shipowners. Its share capital is the equivalent of a mere HK$350,000.

13. The plaintiff's claim in the present action arises from guarantees given by Wheelock Maritime Intl. Ltd. in respect of loans made to English subsidiaries of that company for the building of two particular ships. It is alleged that at the material time Wheelock Maritime Intl. Ltd., which went into voluntary liquidation in August 1985 was, already insolvent and that the defendants, who were all directors or officers of the company, were trading fraudulently within s. 275 of the Companies Ordinance, Cap. 32.

14. It was against this background that the judge came to his conclusion that it would be "inconceivable that any order for costs would not be honoured" because, as we read his words, "the reality of the situation is that the liabilities of the plaintiff would at the end of the day be guaranteed by the Danish government".

15. Mr, Smith, who appears for the plaintiff as he did below, does not contend that the judge was using the word "guarantee" in its strict sense of making one party liable for the debts of another. Nor do we so think. We take the judge to be referring to the political pressure that the Danish government would in his view undoubtedly bring to bear, having regard to the importance of the shipbuilding industry to the economy of Denmark, upon those in control of DSF if, having brought and lost an action of this character against foreign shipping interests, they hesitated to meet an order of costs, albeit the order would necessarily be, as we are told, in a substantial amount. We cannot say that that was an unreasonable inference to draw in the circumstances. Although it may well be that other judges would not think it a consideration sufficient to displace the normal practice, the question was essentially one for his discretion and we see no justification for our interference.

16. For these reasons the appeal must be dismissed. In handing down that decision we make an order nisi that the respondent plaintiff is to have its costs.