NEW HEAVEN INVESTMENTS LTD AND ANOTHER v. YU GUOLIN

HCA 115/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 115 OF 2013

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D E C I S I O N

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The Application

1.  This is an application taken out by the defendant (“D”) for further security for costs pursuant to Order 23 of the Rule of the High Court.  D asks for $1,701,311.99, which is supported by the skeleton bill of costs.  See pp. 153-159 of the bundle of documents.

2.  D applied in April 2014 for security for costs against the plaintiffs (“Ps”).  By the order of Master J. Wong dated 3 April 2014, Ps were ordered to pay $812,500 as security up to setting down. 

3.  In the supporting affirmation of D, D seeks security for costs for $1,834,158.33.  Ps had offered $300,000 for further security.[1]  Obviously, the parties were unable to come to an agreement.  Hence this application.

4.  The parties are legally represented.[2]

5.  Ps filed a reply affirmation by Mr Fung dated 12 October 2016, in which Ps admitted they are foreign plaintiffs, but assert that they have substantial assets in Hong Kong of $3M convertible notes.

6.  Ps also challenge the quantum of the security for costs.  See §§6-9 of Ps’ counsel’s written submissions.

The issues for resolution

7.  Now, Ps do not dispute the liability for security for costs, it is not necessary to set out the factual background of this matter for this hearing.

8.  The question for today’s hearing will thus be the appropriate quantum for the security for D’s costs.

Discussion

9.  D agrees that the amount of costs for this application and today’s hearing should be taken out from the skeleton bill of costs as the costs for today will be dealt with and be paid forthwith.  The net amount for the security for costs will be the amount as stated in the summons less the amount for the costs of this application.  The net figure is about $1.455 million.

10.  As to the quantum for the security for costs of this action, it is well known that the Court in assessing quantum for security for costs adopts a “broad brush” approach and should not condescend to a line by line evaluation of the skeleton bill: Daimler Chrysler Services China Ltd. v. Harbour Union Investments Ltd. and Others, (unreported, HCCL 34/2002, May 2004) at §32, adopted by Deputy High Court Judge Pow SC in Wingames Investments Limited & Others v Mascot Land Limited & Others (unreported, HCA 907/2011, 17 July 2012) at §26.

11.  Also, I bear in mind Ps’ submissions that the court should take a broad brush approach, taking into account the amount to be taxed off in taxation.  (Procon (Great Britain) Ltd v Provincial Building Co. Ltd and Another [1984] 1 W.L.R. 557).

12.  I have asked Ps to raise specific objections to the items in the skeleton bill of costs of D’s.  Ps have done so.  But they had not set out the appropriate amounts that they think fair.

13.  In the circumstances, applying a broad brush approach to the skeleton bill of costs, I consider that Ps shall provide a further security in the sum of $1 million for D’s costs from the setting down until the end of the trial, taking into account that the parties might consider seeking further mediation to resolve their dispute before trial.

14.  However, D has also asked for a top-up security before setting down for the sum of $692,163.33 already incurred, relying upon the authority of The Republic of Kazakhstan v Istil Group Inc. [2005] EWHC 2309 (Comm).  Ps have no dispute over this authority.  For these costs incurred, I order that Ps should provide $519,000 as security.

15.  The aggregate amount for the further security for costs will thus be $1 million plus the top-up security for costs in the sum of $519,000, totally $1,519,000.

16.  As to the order as proposed in D’s summons, I do not consider that an order for striking out if Ps are in breach of this Order is appropriate, taking into consideration of the following factors:

(a) Absence of any statutory provision under Order 23, rule 1 of RHC to the like effect.

(b) The factors under Order 2 of RHC.

Costs and Order

17.  As to the costs of this application, Ps concede that the costs of this application, including the costs reserved and the costs for the hearing this morning (with counsel’s certificate) be to D.  The costs are summarily assessed at $100,000, taking into account of the following factors:

(a) This is an application for further security for costs, the costs for argument on liability should have been spent in the previous hearing before Master J. Wong;

(b) The correspondence between the solicitors was not that as set out in the bill of costs;

(c) The law on the further security is not complicated at all. It is a matter of setting out the costs for the further legal proceedings after setting down; and

(d) D has included the amount of the costs for this application as if Ps would not have to pay the costs after this hearing. This has to be taken out from the skeleton bill of costs as agreed by D.

(e) This Court does not agree with D’s proposed order of striking out if Ps are in breach of this order.

18.  I shall make an order in terms as follows:

(a) Ps shall by 7 February 2017, as agreed, provide further security in the sum of $1,519,000 to D for costs up to the end of the trial;

(b) All proceedings shall be stayed, including the Case Management Conference scheduled on 5 January 2017, which should be vacated and adjourned to another date, except for the enforcement of this Order;

(c) Liberty to apply;

(d) The costs of this application be as per paragraph 17 above.