XCHRX CAR PO LTD. v. CHAN PIK KUEN

HCA13517/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 13517 OF 1998

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J U D G M E N T

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1. The Master ordered security for costs in the sum of $120,000 to be paid by the Plaintiff. The Plaintiff now appeals.

2. The basis of the Defendant's application is that the Plaintiff is a limited company and there is reason to believe that the Plaintiff will be unable to pay the costs of the Defendant if the Defendant is successful in defending this action.

3. The Plaintiff is the tenant of the Defendant. It entered into a tenancy agreement with the Defendant on 16th April 1998. It has not paid rent or rates since 1st July 1998. The Order for interim payment has not been observed by the Plaintiff. The Plaintiff has a paid-up capital of $10,000. It admits that it is unable to pay the security for cost.

4. The Defendant has clearly satisfied the requirement that the Plaintiff would be unlikely to pay the costs in the event that the Defendant is successful in defending this action. The Plaintiff, however, argued that the discretion should not be exercised in favour of the Defendant. It is said that the Defendant had misrepresented the user of the property and as a result the Plaintiff could not obtain the liquor licence and the light refreshment restaurant licence for the operation of the restaurant and that it has suffered loss of profits in the business carried on by it in the property. The Defendant denies any representation as to the user. In my view, the Plaintiff's chance of success in this case is not so obvious that I ought to consider this in the exercise of my discretion.

5. The Plaintiff further argues that it has a genuine claim against the Defendant and its claim should not be stifled at this stage by the order for security. The case of Europa Holdings Limited v. Circle Industrial UK Plc [1993] BCLC 320 is referred to. In this case, the Plaintiff is not claiming, for example, under a cheque or bill of exchange drawn by the Defendant. It is claiming loss of profits from the Defendant because it could not carry a light refreshment restaurant at the property. I must say that I am taken aback by the Plaintiff's attitude. Notwithstanding the failure to obtain the proper licences, there is no attempt to terminate the tenancy agreement by the Plaintiff, or to remove the illegal structure so that the position could be rectified. However, at this stage, I need to say no more beyond that the Plaintiff's case is not so overwhelming that I should take this into account in considering my discretion.

6. Likewise on the facts of this case, it just cannot be said that the Plaintiff's lack of resources is contributed by the Defendant's conduct.

7. In my view, the Master is correct in ordering security. $120,000 is correct for a two days' case. Although securities could be ordered in stages of the proceedings, in this case substantial costs have been incurred in view of the interlocutory applications that have taken place and will take place soon. In the circumstances, the $120,000 is indeed a modest sum, and the actual costs incurred in this trial may far exceed the $120,000. Accordingly, I will not disturb the Order made by the Master. The appeal is dismissed with costs to the Defendant in any event.