SINOEARN INTERNATIONAL LTD v. HYUNDAI CCECC JOINT VENTURE (a firm)

CACV 83/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 83 OF 2011

(ON APPEAL FROM HCA NO. 3987 OF 2003)

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BETWEEN

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J U D G M E N T

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1.  This is an application by the Respondent, Defendant in the court below, for security for its costs of the Plaintiff’s appeal.

2.  By his judgment dated 18 April 2011, Mr Justice Au dismissed the Plaintiff’s claim and gave judgment in favour of the Defendant on its counterclaim in the sum of $3,151,824 with interest and costs.  He subsequently granted a stay of execution of the judgment on condition that the Plaintiff pay $500,000 into court as security for the judgment sum, which condition has been met by the Plaintiff.

3.  Under Order 59 Rule 10(5) of the Rules of the High Court, the Court of Appeal may, in special circumstances, order that such security shall be given for the costs of an appeal as may be just.

4.  The basis of the application is that special circumstances exist in that the Plaintiff/Appellant is impecunious.  Evidence has been filed to demonstrate the Plaintiff’s impecuniosity, and this has not been challenged.

5.  The principles on which the court acts are well-established and were not in dispute. Impecuniosity does not lead automatically to an order for the provision of security for costs.  However, as a matter of practice, once impecuniosity is demonstrated, it is then generally up to the party resisting the application for security to demonstrate countervailing factors militating against such an order.

6.  The Plaintiff does not seek to argue that an order for security for costs should not be made, and I am satisfied that special circumstances exist to engage the jurisdiction to order such security. The issue that divides the parties before me today is the question of the quantum of the security for costs that should be ordered.

7.  In correspondence, the Respondent initially requested $1,263,500 by way of security, and provided the Plaintiff with a schedule of its estimated costs of the appeal, and that is the amount of security sought in the Respondent’s summons.  In his skeleton submissions, the Respondent’s counsel, Mr Martin Wong, has now indicated that the amount of security sought by the Respondent is the sum of $800,000.  As against this, Mr Adrian Lai, counsel for the Plaintiff, submits that the appropriate amount of security should be in the region of $215,000 to $235,000.

8.  So far as quantum is concerned, the normal practice of the court is to award security in an amount that will cover the Respondent’s costs of the appeal estimated as accurately as possible, applying the standard basis.  That is to say, the amount of security should be premised on the estimated costs that would be allowed on taxation on a party-and-party basis.

9.  Mr Lai submits that the amount of security sought by the Respondent is excessive in a number of respects.  He submits that the appeal is straightforward, being concerned only with the construction of two documents referred to in the judgment below as the 14/7 agreement and the 21/7 agreement.

10.  In this respect, I accept that the issues raised in the notice of appeal are of limited scope, and note that no respondent’s notice has been filed.  It is likely, in my view, that the appeal will be concluded within the one day estimated for the hearing.

11.  Mr Lai also submitted that the appeal does not merit leading counsel being instructed, and that Mr Wong, who was junior counsel at the trial, would be competent to handle the appeal.

12.  As to this, both parties were represented by leading and junior counsel at the trial, which lasted eight days, and I note that the notice of appeal has been signed by leading and junior counsel.  In addition, the Plaintiff’s director in his evidence opposing security for costs says that he would like to engage leading counsel for the appeal, but that lack of resources means he may only instruct junior counsel for the appeal.  In view of the size of the Plaintiff’s claim, which is for in excess of $108 million, I do not think it inappropriate for the Respondent to wish to be represented by leading and junior counsel on the appeal.

13.  There are, however, aspects of the Respondent’s estimate of the costs of the appeal which I think are excessive and should be discounted for the purposes of fixing an appropriate amount of security.  I do not propose to go through the estimate as if on a taxation itself.  However, in broad terms, I consider that the estimate is arguably excessive in respect of (a) the number of hours it is claimed the two partners of the Respondent’s solicitors will spend on preparation for the appeal; (b) the number of hours to be spent by counsel separate from the brief fees in advising before the appeal; (c) the amounts of counsel’s briefs themselves; and (d) the inclusion of a refresher for the appeal hearing; and there may be scope for these items to be reduced on taxation.  However, I stress that this is not to tie the hands of the taxing master if it should come to a taxation of the Respondent’s costs.

14.  Adopting a broadbrush approach, and in order to arrive at a figure for security which is realistic, being neither excessively generous to the Respondent nor unduly lenient to the Plaintiff, I fix security in the sum of $650,000.

15.  I therefore order that:

(1)  The Plaintiff is to pay into court the sum of $650,000 as security for costs of this appeal within 35 days hereof;

(2)  The appeal proceedings are to be stayed until payment by the Plaintiff of the security for costs as ordered in paragraph (1) above; and

(3)  In the event security is not provided as ordered in paragraph (1) above, this appeal do stand dismissed with costs without further order.

(Submissions on costs)

16.  As to costs, these shall be paid by the Plaintiff to the Respondent in any event.