AACHEN (ASIA PACIFIC) CONSULTANTS LTD v. KHOO EE LIAM

HCA4354/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4354 OF 2003

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JUDGMENT

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Introduction

1.  By its application dated 20 February 2011, the defendant — as his primary position — seeks security for his costs of the action up to the trial in the sum of $7 million (or such other sum as the court thinks fit).  As will be seen, the application is not supported by an actual skeleton bill of costs, and the $7 million figure is sought by applying a discount to an overall estimate of costs (apparently all-inclusive and prepared on a solicitor and client basis). 

2.  This is not the defendant’s first application for security for costs made in this action, and it is necessary to consider the application against the previous relevant procedural history.  Though the detail of that history can be given below, it suffices by way of introduction to state that a previous application for security was dismissed in the face of certain undertakings volunteered by the plaintiff (and subsequently replaced, with leave). 

3.  It is for that reason that the defendant’s secondary and alternative position on his application seeks a variation to the terms of the plaintiff’s undertakings as currently in place (“the Current Undertakings”). 

4.  The plaintiff’s reaction to the current application is that it should be dismissed upon the plaintiff’s proposed revised undertakings (“the Revised Undertakings”), which are offered without prejudice to the plaintiff’s position that no order for security should be made. 

Applicable Principles

5.  The application is made pursuant to section 357 of the Companies Ordinance Cap. 32, and the applicable principles are settled, well known and need not be rehearsed at length. 

6.  It falls to the applicant defendant in this case to demonstrate by credible testimony that the plaintiff will not (as opposed to may not) be able to pay the costs that might be ordered in the defendant’s favour.  The question is to be determined by reference to matters as they stand when the application is heard by the court, albeit that appropriate weight can be given to evidence about what is expected to happen in the interval before the costs order would fall to be met. 

7.  Where a previous application for security has been refused, there is no bar to a fresh application.  However, any such fresh application is likely to be entertained only if the court is satisfied that there has been a significant and relevant change of circumstances since the refusal of the previous application. 

8.  It also seems to me, lest it be suggested otherwise, that if a fresh application is entertained it will fall to be determined by reference to the same test as any other application.  In other words, that an application is a second application does not change the test to be applied on it, if it is entertained. 

9.  As regards the quantum of any security ordered, it is settled that it is not necessary to provide “complete” security; a defendant is only entitled to sufficient security for his costs.  The amount to be ordered is not reached through some form of taxation exercise.  Whilst in broad terms the amount of security which might be ordered can represent the amount of party and party costs likely to be incurred in the proceedings, discounts can be and, in the right case, should be made for the possibility of settlement or the case collapsing. 

10.  The court has to consider what is just in all the circumstances, and this is a balancing exercise.  The court should adopt a broad brush approach seeking to order security in an amount which is sufficient, but not excessive or oppressive. 

Relevant procedural history

11.  As the action number indicates, the proceedings were commenced by writ in 2003.  The writ is specifically endorsed with a statement of claim.  Following a failed application to stay these proceedings, a defence and counterclaim was filed in November 2004.  Further and better particulars of the defence and counterclaim were provided in July 2005. 

12.  In August 2008, there was filed an amended defence and counterclaim, to which the plaintiff has responded by its re-amended reply and defence to counterclaim dated November 2008. 

13.  In the meantime, in March 2007 the defendant applied for security for costs against the plaintiff on the grounds that (1) the person in control of the plaintiff was ordinarily resident out of the jurisdiction, and (2) the plaintiff was a limited company which will be unable to pay the defendant’s costs in the event of his being successful in the action.  The amount of security then being sought was approximately $8.5 million, calculated by reference to a detailed bill of costs prepared by a costs draftsman. 

14.  In June 2007, the plaintiff applied for security for costs of the defendant’s counterclaim.  The basis of that application was that the defendant was ordinarily resident out of the jurisdiction.  The application was resolved by consent by an order made by a Master in September 2007 that the defendant should provide security for costs to the plaintiff in the sum of $4.9 million by way of bank guarantee (which was provided). 

15.  The defendant’s own application for security was dismissed by the Master in September 2007, and the dismissal was appealed to a Judge in Chambers.  The appeal was heard by Deputy High Court Judge Harris SC (as he then was).  First, he held that the defendant had not demonstrated that the plaintiff was ordinarily resident outside the jurisdiction (and this is an issue which need not be revisited at all for today’s purposes).  Secondly, he held that he was not satisfied that the plaintiff will be unable to pay any costs order in the defendant’s favour in the light of certain undertakings offered by the plaintiff.  The appeal was dismissed with costs. 

16.  Those undertakings were subsequently recorded in an affirmation filed on behalf of the plaintiff by Chen Aun Li Andrew, the sole director and 98% shareholder of the plaintiff.  The undertakings related to the then only significant asset of the plaintiff, a convertible bond or its proceeds, and were :

(1)     If the sum of $4.9 million plus interest calculated at 3% per annum from the date of payment or the subscription price by the plaintiff to the issuer to 31 December 2008 has not been paid in full by 31 December 2008 the plaintiff will inform the defendant in writing by 5 p.m. on 7 January 2009. 

(2)     The plaintiff will not dispose of any payments that it receives from the issuer up to $4.9 million without the written agreement of the defendant or order of the court. 

17.  In the course of his consideration of the matters in the appeal, the deputy judge looked at the draft bill of costs.  He expressed the view that, if he had been minded to make any order for security, it would not have been in the amount on that bill and would have been no more than the sum of $4.9 million which the defendant had been ordered to pay as security to the costs of his counterclaim.  Though the deputy judge would have been prepared to use that figure of $4.9 million as a “yardstick”, he plainly did not engage in any close analysis or assessment of the bill of costs (as he did not need to). 

18.  Although not by the date originally envisaged, the plaintiff received full payment of the convertible bond interest totaling around $5.29 million in March 2009. 

19.  The plaintiff then immediately took out a summons asking (by amendment of a summons issued in January 2009) for it to be released from the previously given undertakings, the release to be upon the giving of new undertakings in lieu.  The application was opposed by the defendant and came before Poon J on 17 March 2009. 

20.  Poon J recorded that it was important that it be borne in mind at the outset that no order for security had been made against the plaintiff.  On the other hand, looking at the undertakings, he pointed out that the rationale was to make sure that the plaintiff will set aside sufficient funds from the repayment proceeds of the convertible bond and to preserve those funds in such a way that the plaintiff will be able to meet an adverse costs order made in favour of the defendant should he succeed after trial.  Thus, the undertakings are tantamount to some form of security for the defendant’s costs.  This is a point of some emphasis for the defendant on this application. 

21.  The learned judge then went on to pose and answer the two questions : first, what is the proper amount of security for the defendant’s costs; second, are the new undertakings now offered by the plaintiff sufficient bearing in mind the rationale identified? 

22.  The learned judge considered the estimated costs of some $8.5 million as “grossly excessive” because “the nature of the disputes and the issues involved certainly do not justify such exorbitant and disproportionate costs”.  (It might at this point be usefully noted that the state of the pleadings then before the learned judge is the same as now.)  By reference to the $4.9 million which the deputy judge might have been prepared to order, Poon J considered even that to be “far on the high side”. Taking the matter in the round, he considered the plaintiff’s estimate of about $3.5 million more reasonable. 

23.  It seems clear to me that in taking that estimate as reasonable, the learned judge was not performing any detailed assessment of the individual figures making up the total on the bill of costs. For example, he was not paying particular attention to the level of counsel’s fees, nor was he intending to apply any particular percentage reduction to any item or the total.  He was simply stating that a more proportionate and reasonable costs figure overall would be $3.5 million.

24.  The learned judge went on to point out that the plaintiff is entitled to deal with its money in any way as it thinks fit, so long as the undertakings are sufficient to protect the defendant’s position on costs.  He considered the undertakings offered by the plaintiff, in lieu of the undertakings from which it sought to be released, to be sufficient and so he allowed the application with costs to the plaintiff. 

25.  The undertakings offered to and accepted by Poon J are still in place (“the Current Undertakings”) and are in the following terms :

(1)     The plaintiff shall in its discretion use the Repayment Receipts and interest accrued thereon to purchase listed securities in Hong Kong and Singapore (“Investment Securities”) and/or to hold the same in banks as cash deposits.

(2)     Any net sale proceeds of the Investment Securities from time to time will be held in banks as cash deposits and/or re-invested in other Investment Securities in the plaintiff’s discretion;

(3)     If at any time the value of the Investment Securities and the cash sums held by the plaintiff (together “the Cash Equivalents”) falls below HK$3,500,000 :

(a)     the plaintiff would inform the defendant in writing within 10 days of such event;

(b)     Mr Chen Aun Li Andrew (“Mr Chen”), a director of the plaintiff, shall make additional got into the plaintiff’s bank account within 30 days or such other so that the Cash Equivalents shall exceed HK$3,500,000.

Provided always that the plaintiff may at any time repay Mr Chen any sum in excess of the Cash Equivalents.

(c)      Upon the making for the additional deposit the plaintiff shall provide the defendant with the relevant copy bank statement or records evidencing the said deposit and the balance of the Cash Equivalents.

(4)     Save as provided above, the plaintiff will not dispose of the Investment Securities and/or any said cash deposits without the written agreement of the defendant or the order of the court.

Subsequent events

26.  In an effort to perform what can fairly be described as some sort of “policing” of the Current Undertakings given by the plaintiff, the defendant made various requests for information through his solicitors.  I do not need to set out at any length the various exchanges of solicitors’ correspondence, but as part of the correspondence the defendant was given sight of the plaintiff’s audited accounts for the year ended 31 March 2010 (the 2010 Accounts”). 

27.  It is partly on the basis of concerns which are said to arise from what is revealed in those accounts that the defendant’s current application was made.  The concerns are said to amount to a change of circumstances — presumably in recognition that it is necessary to have such a change for the matter of security to be revisited. 

28.  The other aspect, and a suggested further change of circumstances, underpinning the application is that the current level of protection provided is woefully inadequate. 

29.  There is perhaps an analytical conundrum which arises.  If the defendant is to succeed on an application for security for costs he must first demonstrate by credible evidence that the plaintiff will not be able to pay his costs.  In order to make that demonstration, the defendant will have to identify what is the appropriate amount of costs which the plaintiff will not be able to pay.  So the question arises : (a) does one first identify the total sum of costs which the defendant might incur, and then look to see whether the plaintiff will be able to pay that amount, or (b) does one first identify an amount which would be sufficient security against the total amount of costs which the defendant might incur, and then look to see whether the plaintiff will be able to pay that sufficient security amount? 

30.  Ultimately, this conundrum may not matter — at least not in this case — and I propose to adopt a similar approach as has been adopted in this case previously by Deputy Judge Harris SC and Poon J. 

31.  It would, therefore, seem logical first to deal with an appropriate amount of security as might be ordered, before turning to the question of whether or not there is credible evidence that the plaintiff will not be able to pay that amount. 

Sufficient amount for security

32.  As already stated, the original bill of costs drafted in February 2007 had a total sum of about $8.5 million (of which about $3.8 million had already been incurred).  The bill was drafted by reference to a trial, then estimated on the basis of 10 days, with both leading counsel and junior counsel.  Counsel’s fees for the trial were estimated at $1.57 million. 

33.  In advance of a mediation, which I am told took place but which obviously has not resulted in any settlement of the matters in dispute in the proceedings, in August 2010 the parties exchanged statements of costs or costs budgets.  The plaintiff’s statement estimated a total of about $7.2 million, of which approximately $4.7 million had already been incurred.  The defendant’s budget plan estimated a total of about $20.7 million, of which approximately $12 million had already been incurred. 

34.  The defendant recognises that part of the costs incurred, and reflected in his estimate, must be attributed to his changing solicitors twice.  Similarly, there has been a change in team of counsel to a more senior SC and junior.  It is also pointed out that the trial is now estimated to last for 17 days.  (I understand that the trial dates had been fixed for October 2011, but those dates have been vacated.  New trial dates have been fixed for dates in April and May 2012.)  Mr Paul Lam, counsel for the plaintiff, suggests that the 17 day estimate is probably excessive, but I shall assume that the trial might well be something of that order, not least on the basis that the trial dates were fixed and have apparently been re-fixed for the period of 17 days. 

35.  Notwithstanding that the defendant’s estimate of total costs now exceeds $20 million, the application is made for security in the sum of $7 million.  This is said to take into account the changes in solicitors amongst other matters and is described as a “generous discount”.  However, it seems to me that this “discount” must at least in part be a recognition of the practical impossibility of ever persuading a court to order security in a sum even approaching $20 million for a case such as this one, and instead to pick (without any real arithmetical basis) a figure which can this be argued as being more reasonable. 

36.  Mr Edward Chan SC, leading counsel for the defendant, has submitted that in mid-2011 it is not helpful to harp back (his words) on the amount of security that previous judges might have been prepared to order in 2007, 2008 and 2009.  He points out that by July 2010 (a date, I note, just before the exchange of costs estimates) the agreed documents ran to about 600 items in 13 full lever arch files, and the agreed documents in the court bundle fill 10 files. 

37.  This is, he says, a sign of a case continuing to develop and that experience shows that the number of documents will continue to increase as the case comes closer to trial and during the trial.  Whilst I accept that in some cases the number of documents does increase as a trial approaches, and sometimes during the trial itself, experience also shows that the number of documents referred to at any trial are usually a relatively small fraction of the total number in the trial bundle. 

38.  On the other hand, I also accept that though the pleaded issues may not have changed from the time the matter was before Poon J, the factual matters under those issues may have become more complicated as the issues have been explored through discovery and the interlocutory process. 

39.  In any event, says Mr Chan SC, at this stage in the proceedings it is possible to give a much more accurate estimate of costs than it is at an earlier stage of the action.  That may well be correct, but it seems to me that my task is not simply to ask whether the defendant’s own estimate is now more accurate than his earlier estimates.  My task is to determine what would seem a reasonable amount of security which might be provided for the defendant’s costs. 

40.  Mr Chan SC also asks me to have regard to the plaintiff’s own estimated costs of the action amounting to approximately $7.2 million as at the date of the estimate in August 2010.  I can and do have regard to that estimate, but I do not think it greatly assists the defendant on this application.  Whilst I do not intend to approach the question of a reasonable amount of the security simply by any comparison of estimates of costs, the enormous disparity in the estimates is obvious. 

41.  One clear difference between the earlier estimate of costs in the original draft bill and the August 2010 estimate arises from the significant increase in counsel’s fees. Mr Chan SC submits that since counsel’s fees as disbursements are on taxation normally allowed in the full amount claimed unless there are good reasons to suggest the rate is excessive, that of itself would justify a significant increase in the amount of security or protection to be afforded to the defendant.  Even assuming it to be correct that counsel’s fees are normally allowed in full on taxation, I am not presently engaged in any taxation exercise. 

42.  I think it I also correct, as Mr Lam has submitted, that for the purposes of an application for security for costs of the quantum of counsel’s fees can be considered by taking a rough estimate of what the court considers suitable counsel who might be employed and who is competent to do the case on behalf the defendant might justifiably charge, and where the measure of such hypothetical counsel’s fees can bear in mind that he or she or they do not insist on the particularly high fees sometimes demanded and obtained by “fashionable” Counsel.

43.  For the purposes of considering what would be sufficient security, I consider that I am entitled to take into account questions of proportionality. Like Poon J, I consider that the nature of the disputes and the issues involved in these proceedings would not justify exorbitant or disproportionate costs in figures of tens of millions of dollars. 

44.  In addition to the fact that the “discount” to the $7 million sum which the defendant would accept as security appears to have been made on a fairly arbitrary basis, I take into account insofar as it is necessary to do so the points made by Mr Lam as to the total figure for the defendant’s costs not having been reduced to reflect, for example, the overlap in expenditure arising from the counterclaim (and surely counsel’s  fees must include those fees attributable to pursuing the counterclaim) and the inability of the defendant to make any recovery of his own costs in respect of applications which he has lost and on which he has been ordered to pay costs to the plaintiff (whether they have been paid already or are payable in any event). 

45.  I have taken into account that these proceedings have progressed beyond the failed mediation, so that it might be said that the prospects of settlement are slim.  Nevertheless, the trial is still one year or so away and the prospects of further settlement considerations as the trial approaches cannot be wholly out of the question. 

46.  Taking the matters on the broad brush approach identified in the authorities, and in the exercise of the broad discretion given to me under the applicable principles, I am satisfied that a sum of $5 million would provide sufficient security for the defendant’s costs of defending the claim in this action. 

Whether credible evidence that the plaintiff will not be able to pay

47.  The concerns arising from the 2010 Accounts (viewed in the context of the plaintiff’s conduct) are set out in some detail in the 11^th and 12^th affirmations of the defendant, which lead this application.  They have been spoken to by Mr Chan SC in his written skeleton and oral submissions.  The overall thrust of the concerns, as described by Mr Chan SC, is that the financial information now available (to be viewed against the plaintiff’s conduct) identifies that the Current Undertakings are proven to be insufficient to provide any real comfort that the plaintiff would be able to meet an order for costs against it. 

48.  Mr Chan SC says that the 2010 Accounts raise more questions than answers to the questions which had been previously posed on behalf of the defendant.  He also says that further queries raised on the materials in the 2010 Accounts have not been satisfactorily answered. 

49.  Though I have of course had regard to the detail, I do not think I need to set out each of the particular concerns or queries expressed, as (in summary) the main point is that the assets of the company are not really in a sufficient sum, because :

(1)     the total amount said to be due to shareholders is approximately $5.4 million;

(2)     the accounts record as a “non-current asset” securities investments with a value of approximately $4.1 million;

(3)     but another “current asset” recorded as a “pre-payment” in the sum of approximately $2.1 million is a reference to payment by the plaintiff of legal costs, intended to be reversed against income when received, so that this cannot properly be regarded as an asset of the plaintiff and should be deleted from the total;

(4)     and when account is also taken of the other costs which the plaintiff says it has paid, but which are not apparently reflected in the accounts, the total net assets would be reduced as low as around $674,000. 

50.  While these concerns may have some merit, they relate to accounting information which is now more than one year old.  Indeed, by his recent 14^th affirmation, Mr Chen has provided the audited accounts of the plaintiff for the period to 31 March 2011 (“the 2011 Accounts”). 

51.  The plaintiff says that the 2011 Accounts demonstrate it has net assets of approximately $7.1 million.  The increase in net assets over the previous accounting period is effectively a result of the revaluation of bonds and securities held by the plaintiff. 

52.  Mr Chan SC made submissions intended to cast doubt on the reliability of the various valuations, in particular by suggesting that the rates of returns and value increases would not on their face appear justified.  However, the accounts are audited, and I am not prepared for the purpose of this application to work on the basis that the accounts do not present a fair view of the financial position of the plaintiff as at 31 March 2011. 

53.  Mr Chan SC goes on to submit that the alleged financial strength of the plaintiff is in any event largely predicated on the values of listed securities which are subject to great fluctuation, and the value of a bond which is questionable.  However, I agree with Mr Lam that I must work on the materials I have and not speculate as to the future.  Indeed, as he points out, fluctuating values can go up as well as down, and the undertakings offered provide for the situation of the reduction in value below the relevant threshold.  

54.  As I indicated in introduction, the plaintiff has sought to meet this application by offering revised undertakings (“the Revised Undertakings”) in the following terms :

(1)     The plaintiff undertakes that it would have a net tangible asset value not less than HK$5,000,000 excluding any prepayments (“the Net Assets”) until the conclusion of these proceedings. 

(2)     That the plaintiff will not undertake any other business until the conclusion of these proceedings part from investment in securities. 

(3)     If at any time the value of the Net Assets falls below HK$5,000,000 before the conclusion of these proceedings :

(a)     the plaintiff would inform the defendant in writing within 10 days or such event;

(b)     Mr Chen Aun Li Andrew (“Mr Chen”), director of the plaintiff, shall make additional deposit into the plaintiff’s bank account within 30 days of such event so that the Net Assets shall exceed HK$5,000,000. 

          Provided always that the plaintiff may at any time repay Mr Chen any sum in excess of the Net Assets;

(c)      Upon the making of the additional deposit the plaintiff shall provide the defendant with the relevant copy bank statement or records evidencing the said deposit; and

(4)     Mr Chen further undertakes that until the payment of any costs orders in favour of the defendant in these proceedings :

(a)     all legal costs and expenses of the plaintiff incurred or to be incurred by the plaintiff in these proceedings will be funded by him personally; and

(b)     any amount he provided to the plaintiff for the above purpose will be subordinated in favour of any costs orders in the defendant’s favour. 

55.  (Though that is not strictly necessary, the plaintiff also seeks liberty to apply.)

56.  I accept Mr Lam’s submission that any legitimate concerns held by the defendant that the plaintiff may not be able to pay its costs, due to the serious possibilities posited by the defendant, are sufficiently addressed by the Revised Undertakings. 

57.  I also note that in addition to the offered undertaking by Mr Chen to subordinate his right to claim repayment of the shareholder as loans, he has now executed a deed to that effect (though it contains the obvious typographic error as to the number of this action, which I am told will be rectified). 

58.  The defendant’s concerns were articulated by Mr Chan SC as including that the Deed of Subordination could be revoked at any time by Mr Chen as he is in control of the plaintiff and the Deed is not expressly stated to be irrevocable.  But, as Mr Lam points out the Deed is in similar terms to the proffered undertaking and a revocation of the Deed would amount to a breach of the Revised Undertakings. 

59.  Mr Chan SC’s further criticisms of the Revised Undertakings as being unacceptable are not in my view apt.  For example, I do not think that the Revised Undertakings need contain any disclosure obligation much beyond that which is expressed; if the relevant assets fall below the relevant threshold, there is the undertaking to inform the defendant or that fact within 10 days coupled with the undertaking that Mr Chen will make good any shortfall, following which the plaintiff shall provide the relevant evidence. 

60.  But, as Mr Chen and the plaintiff must monitor the value of the investments to see whether or not the Net Assets fall in value below the $5 million threshold, I see no difficulty in the defendant being provided on a monthly basis with a statement of the market value of the listed share investments and bonds.  I raised this point at the hearing, and I understand the plaintiff to have offered through Mr Lam this additional undertaking. 

61.  Any other concerns about how the plaintiff might deal with its own assets are also met by the terms of the Revised Undertakings, for if any such dealings create liabilities as take the assets below the threshold figure, notice of that fact must be given and the threshold must be re-established.  On the other hand, there is some force in the concern expressed by Mr Chan SC that the deed does not deal with liabilities created by debts incurred to anyone other than Mr Chen, so I think an additional undertaking should be given that the Net Assets should be unencumbered. 

62.  Similarly, whilst it is correct that Mr Chen has not provided particulars of his own financial position, I take the same view as was apparently taken by the then Deputy Judge Harris SC and Poon J that Mr Chen’s undertaking is sufficient without prior substantiation of his financial capability.  I accept that Mr Chen must have been advised as to the serious consequences of breaching any undertaking given to the court, and that in the absence of credible evidence suggesting the contrary, it is to be assumed that Mr Chen has offered the undertaking on the basis that he has the ability to honour it. 

63.  Also, if there is no claim to risk of the claim being stifled — as Mr Chan SC has pointed out — a corollary of that would seem to be the assumption that Mr Chen has the resources to make good his undertaking. 

Conclusion

64.  Though I have not previously said so expressly, I have of course entertained this application on the assumption that there has been a sufficiently significant change of circumstances to allow its being entertained.  This was actually conceded by Mr Lam in any event. 

65.  Like Poon J (and I think then Deputy Judge Harris SC), the acceptance of proffered undertakings is tantamount to the provision of security for the defendant’s costs because the rationale is to make sure that the plaintiff will set aside sufficient funds and preserve those funds in such a way that the plaintiff will be able to meet an adverse costs order made in favour of the defendant should he succeed after trial. 

66.  With the additions to the Revised Undertakings that I have identified, I am satisfied in the exercise of my discretion that those Revised Undertakings will create a situation where it cannot be said that there is credible evidence that the plaintiff will not be able to pay the defendant’s costs.  If it is analytically necessary to put it in a different way, I would state that those Revised Undertakings would provide sufficient comfort or security to the defendant that a costs order in his favour would be met. 

67.  As to the form of the order, I propose to adopt the form of order thus far adopted in these proceedings. Upon the giving of the Revised Undertakings by the plaintiff and Mr Chen, the defendant’s application is dismissed. 

68.  I give specific liberty to apply to deal with any questions as might arise on the settling of the Revised Undertakings to include the additions I have required.  I can no doubt deal with any such point on short notice, and probably in writing. 

69.  I shall now hear the parties on costs.

[Submissions on costs]

70.  Mr Chan SC asks me to order the costs of this application to be in the cause of the action.  He says that albeit that I have formally dismissed his application for security, I have in substance required the provision of security, and the formal dismissal was only on the basis of the undertakings having been offered and accepted.  He also says that I have required additional undertakings to those offered, so that it would not be correct to view the plaintiff as having succeeded in the opposition to the application.  Further, he points to the fact that I have referred to and placed reliance upon the Deed of Subordination and the 2011 Accounts, both of which documents were provided only as exhibits to Mr Chen’s 14th affidavit on around 24 May 2011 (by which time the costs relating to this hearing must all have been incurred). 

71.  Mr Lam asks me to award costs in favour of the plaintiff, on the basis that the defendant’s application was dismissed, and because that was the approach similarly taken in similar circumstances by then Deputy Judge Harris SC. He also relies on the fact that the Revised Undertakings were originally offered as long ago as 1 March 2011, but rejected by the defendant through his solicitors’ letter of 15 March 2011.  In response to a question from me, Mr Lam accepted that it might be thought appropriate for the defendant to have his costs of the application up to 15 March 2011, but thereafter the costs should be payable to the plaintiff. 

72.  Though originally attracted to some form of split costs order, I think that a more simple form of order is more appropriate. I accept that whether the application of the security has been dismissed because of the undertakings, or whether the undertakings are the provision of security, is a fine point. It is also correct that some of the materials on which I based my decision were not available (indeed, for the legitimate reason that they had not yet come into existence) until only a week or so before this hearing.  Nevertheless, the undertakings which have led to my order had been offered in substantially the form that I have accepted them several weeks before that. 

73.  Ultimately, I am persuaded that in the exercise of my discretion as to costs the appropriate costs order is for the costs of the application to be in the cause. 

74.  I will grant a certificate for two counsel, in the light of the rather complicated procedural history and the rather unusual way in which applications for security have been dealt with, as is set out in this judgment.