XCHRX LEE WING KIM v. LEE TAK YEE

1998, No. A12428

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. The defendant seeks an order that the plaintiff provide security for the defendant's costs, and that the proceedings be stayed until that security is given. The defendant sought this order from the Master, but failed.

2. The basis for the application is that the plaintiff is permanently resident outside this jurisdiction. The basis for the opposition is that the plaintiff has substantial property within the jurisdiction.

3. The plaintiff has within the jurisdiction 100 shares in Prudential Enterprises Limited (PEL), a private company. The evidence is, on the basis of a valuation by the board of directors of the company, of which the defendant is the "permanent managing director" and his children and his nominee company are the other directors, that these shares are worth $3,172,100. In a document issued by the company in respect of an issue of new shares and signed by the defendant, it is said that the directors have taken "a cautious approach to the valuation exercise" but that "the value reached of HK$31,721 per new Ordinary share is fair and reasonable in all circumstances.". The defendant himself has undertaken to subscribe for the shares at this price.

4. With regard to the value of the shares, the defendant says in his affidavit that "any value attributed to the shares is effectively theoretical: in reality the shares are not readily capable of being sold. I do not therefore regard the plaintiff's 100 shares in PEL as having substantial value nor could she readily call on them to meet any order for costs against her.".

5. The point made by the defendant might well have some validity if the shares in PEL were shares in a private company to which he was a stranger. But he is not a stranger to PEL. He knows it intimately, and he knows that he has at least a substantial measure of control over the disposal of the plaintiff's shares. It is quite unrealistic for him to suggest, with one voice, that he is prepared to pay $31,721 for each share of a greater total number of issued shares and, with another, to say that the plaintiff's shares do not have any "substantial value". Looking at this matter with some common-sense, as one must, the fact of the matter is that, if the defendant succeeds in his defence and obtains a judgment for costs, he will, in reality, have at his mercy an asset of the plaintiff worth at least $3,172,100. The plaintiff cannot possibly dispose of these shares without at least the defendant knowing about any attempt to do so. Of course it is so that the shares are not readily saleable in the open market to strangers, but they are, on the evidence, certainly saleable to the defendant, his company or his children; the defendant having said unequivocally that he is prepared to subscribe for shares in the company at $31,721 each. It is also so that the defendant might be able to dictate on the limited market available a sale price of far less than their true worth, but I am sure he would not stoop to that. If the plaintiff does not pay any judgment for costs, the defendant will be able to say to the plaintiff - "I have a judgment for costs. You owe me $x. You must sell your shares in PEL to raise the money. If you do not, I will execute against them and buy them at a fair value." In my view, these shares provide the defendant with security for any award of costs in his favour as good as money paid into court, perhaps even better.

6. The plaintiff has other assets in Hong Kong, but it is not necessary to examine these. Even if I were to think that the appropriate amount of security was the full amount claimed by the defendant, which is $1,766,421, this is adequately covered by the value of the PEL shares.

7. In any event, the defendant has not demonstrated to me that, in the exercise of my discretion, that it would be just to order that the plaintiff provide security in this case.

8. Accordingly, I conclude that the defendant has not made out a case for ordering security. The application, which is in the form of an appeal from the Master's decision, is dismissed.

9. There seems no obvious reason why the plaintiff should have the costs. I make an order nisi that the defendant pay the costs of this application, here and before the Master, in any event.