XCHRX NAM KWONG MEDICINES & HEALTH PRODUCTS CO. LTD. v. CHINA INSURANCE CO. LTD.

HCCL27/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 27 OF 1999

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J U D G M E N T

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1. This is a security for costs application mounted by the defendant herein pursuant to its summons dated 25 January 2002.

2. This is the second such application in the head action. By a summons dated 3 February 2000 the defendant sought security for costs in the sum of HK$1,388,448.65 up to and including the exchange of witness statements, an application which was heard on 24 February 2000.

3. Whilst there appears to be no engrossed order, on that occasion this court ordered that the plaintiff "provide security for costs, up to but not including trial, in the sum of HK$700,000, such security to be provided in a manner agreed between the parties", with the costs of the application being awarded to the defendant in any event.

4. This initial application was backed by an affidavit of Mr Andrew Horton sworn on 3 February 2000, Mr Horton himself appearing on that occasion, together with Mr Potts for the defendant. Exhibited to Mr Horton's affidavit was inter partes correspondence with the defendant upon the issue of security, together with a breakdown of costs (including costs attributable to the Third Party proceedings) which took the matter up to trial.

5. As earlier noted, the amount then sought has been $1.388 million. My notes of the argument at that application, to which I have now had the opportunity to refer, indicated that Mr Potts had conceded that security for costs was payable in principle, but maintained a hard line on quantum, being prepared to concede "$750,000 up to and including trial", whilst Mr Horton, for his part, declared that he "would be happy with $800,000 today". The latter figure, of course, did not include security for the costs of the trial, and in the event the sum of $700,000 was ordered.

6. This then is the background against which this second application is mounted. Once again, the application is backed by an affidavit from Mr Horton, dated 24 January 2002. This affidavit also exhibits a costs breakdown for the entire action, that is, up to and including trial, the figure thus produced amounting to $4,126,737.65. After deduction of the sum of $700,000 already provided, the present application now seeks additional security for costs of HK$3,426,737.65.

7. The shape of the argument is broadly thus. Mr Sussex SC, who appears for the defendant on this application (and who is designated senior counsel for defendant for trial) maintains that this is a serious commercial action which, by agreement, now has been set down for 15 days for the period 7-28 May 2002. The plaintiff's claim under an all-risks policy of marine insurance issued with regard to the vessel "Pacifica" is, he said, of substance, amounting to US$2.5 million together with interest thereon from October 1998, and raises difficult questions of fact and of law. In this latter regard, Mr Sussex noted that in total eight factual witnesses would be called to testify, together with three expert witnesses, and he outlined six distinct defences his client intended to run. These were, he asserted, eminently good defences to this action, which would be strenuously resisted, albeit whilst asserting misrepresentation on the part of the plaintiff at the time of the issuance of the policy, he did not seek to implicate the plaintiff in what clearly was a serious fraud by shipowners involving in the disappearance of the "Pacifica", now regarded as a "phantom vessel", and the well-planned theft of her cargo of palm oil. In the circumstances, suggested Mr Sussex, the defendant was well able to justify the order for security now sought in the amount of $3.42 million.

8. Mr Potts did not agree. He made complaint about the late timing of this application, coming as it did but three months before trial, and suggested that this was a further attempt by the defendant to stifle the plaintiff's legitimate claim : it had, he said, received no moneys pursuant to its claim under its policy of marine insurance, and had been forced to maintain this action in order to be paid out what was legitimately due.

9. In common with the initial security for costs application, Mr Potts did not feel able to dispute primary liability to furnish security, but launched a strenuous and detailed attack upon all aspects of Mr Horton's draft bill, including in particular the time costs of the several solicitors involved for the plaintiff, and also the necessity to employ two counsel in what was, from his viewpoint, a relatively straightforward matter. On the basis of the individual revised figures produced whilst on his feet (the sum of which I have now recalculated), by the conclusion of his submission he had whittled the total amount sought from $3.42 million to approximately $1.79 million, each of these figures having been arrived at after making allowance for the original payment of $700,000.

10. It is evident from the approach now adopted that what the plaintiff was doing in proffering these new figures was twofold : first, seeking to 'top-up' the initial sum of $700,000 granted in security and second, to obtain security for the significant trial costs to come.

11. For my own part, and even assuming jurisdiction so to do, I decline now to revisit the initial security for costs figure simply on the basis that the plaintiff appears to have spent considerably more than its original estimate. This court already has made the determination of the amount of security to be furnished up to and including trial, and I do not now accede to the submission that this figure should effectively be upgraded.

12. What remains appropriate, in my view, is to consider the figures put up from now until the conclusion of the 15 day trial. In round figures these are anticipated counsels' fees and other disbursements of $1.938 million, and a further $484,000 comprising solicitors' costs, thus totalling $2.422 million.

13. A central feature in this equation is, of course, the justification or otherwise for the use by the defendant of senior and junior counsel in this case, although I am told by Mr Potts that he will be using but one counsel, albeit a junior of expertise and seniority. In this connection Mr Sussex submitted that since a certificate for two counsel was no longer required to be granted by the trial judge for trial in open court, it ought then to follow that in a security for costs context the amount of security to be furnished must reflect that fact.

14. Persuasive though this sounds at first blush, I am far from sure that that this result inexorably follows. To the contrary. In my judgment it is always open to the court to take a view about the case at the pre-trial stage, so that even though a certificate for two counsel may no longer be necessary at taxation, the ordering of security for the costs of both counsel does not, it seems to me, occur as a matter of course. All must depend on the particular circumstances, and I discern no difficulty in reviewing the case in the round in order to arrive at a view regarding the use, or otherwise, of two counsel.

15. The present case is undoubtedly a serious commercial action, with a significant sum of money at stake. I factor in, also, that there appear to be a significant number of documents (I pause to note that the number of relevant documents inevitably is far fewer than the mass of papers that is contained in large numbers of bundles), that there is a certain amount of cross-examination to be prepared, and that difficult points of law are to be argued. In my view, however, whilst eminently suitable for a counsel of Mr Sussex's standing, this case does not strike me as insuperably difficult, at least by the standards of commercial actions, so that I am unpersuaded that the defendant should be required to furnish security for the costs of junior counsel briefed to assist Mr Sussex, however desirable that may be thought to be.

16. After considering the draft bill regarding the anticipated costs to the conclusion of this trial, in the exercise of my discretion I order that the appropriate additional amount now to be furnished in security is $1.8 million, thereby producing an overall figure of $2.5 million in security for costs, which in the circumstances strikes me as about right.

17. Given the proximity of Chinese New Year, which in practical terms means the loss of an entire business week, I further order that the said sum be provided in a manner agreed between the parties, alternatively to be paid into court not later than five weeks from today's date, that is, by 4:00 p.m. on Friday, 15 March 2002. There is to be no interim stay, and indeed Mr Sussex properly did not ask for one.

18. I have reflected upon Mr Potts's assertion that this application had a 'stifling' aim. No affidavit has been filed on behalf of the plaintiff, and Mr Potts did not seek to suggest impecuniosity on behalf of his client, so that this submission is not made out. I would, however, comment that I regard it as unfortunate that this application for a significant further sum in security was not mounted with greater period of leeway prior to trial. Perhaps this was oversight and nothing more. In any event, I do not accept Mr Sussex's riposte that the application had been brought before, as he put it, the 'expiry' of the last order. That order had canvassed security for costs up to and including trial, and it cannot seriously be maintained that anticipated costs for trial would or could not earlier have been ascertained.

19. Unlike the previous instance, no pre-application correspondence has been exhibited to Mr Horton's latest affidavit upon the issue of security. Absent knowledge of any offer in this regard, I make an order nisi that the costs of this application be to the defendant in any event, to be taxed if not agreed. Whilst this court is always assisted by Mr Sussex SC, in my view this particular application was not appropriate for senior counsel, and could and should have been conducted either by Mr Horton (as on the last occasion) or by junior counsel if counsel's presence was regarded as necessary at all. In the circumstances, I see no reason why the plaintiff should bear the full brunt of the defendant's fees incurred for this application, and I further direct that the taxing master consider the defendant's bill of costs in light of these observations.