LIM YEW CHENG (suing in a personal capacity and derivatively on behalf of himself as a shareholder of KENORA CORPORATION LTD) AND OTHERS v. COSIMO BORRELLI AND OTHERS

HCA 1976/2023

[2026] HKCFI 4937

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1976 OF 2023

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D E C I S I O N

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1.  This is the hearing for the determination of the respective security for costs application taken out by the 1^st and 2^nd Defendants (“Receivers”) and the 3^rd, 4^th and 7^th Defendants.  In their application, the Receivers seek an amount of HK$25,092,322 for security for costs up to the conclusion of the trial.  Similarly, the 3^rd, 4^th and 7^th Defendants seek an amount of HK$25,099,445 for security for costs also up to the conclusion of the trial.

2.  There is no issue that the court may order the Plaintiffs to provide security for costs as they are ordinarily resident out of the jurisdiction: RHC O.23 r.1(1)(a).  Further, the Plaintiffs’ solicitors have previously accepted in correspondence that the Plaintiffs were agreeable in principle to provide further security for costs, subject to an appropriate amount.

3.  The Plaintiffs’ current position is that they oppose the security for costs applications.  It appears that they changed their position shortly before today’s hearing and I shall say more about this later.  The Plaintiffs now submit that the court should dismiss the security for costs applications because their claims are genuine and strong, and have a high degree of probability of success.  Alternatively, the Plaintiffs submit that if the court is minded to order further security, the amount for the Receivers should be no more than HK$9,139,772.50, and the amount for the 3^rd, 4^th and 7^th Defendants should be no more than HK$9,402,685.

4.  There is no dispute on the legal principles.  For the purpose of the present case, the relevant principles may be summarised as follows.

(1)  The court has a complete discretion whether to order security, and will accordingly act in the light of all the relevant circumstances: Wing Hing Provision, Wine & Spirits Trading Co Ltd v Hanjin Shipping Co Ltd [1998] 4 HKC 461 at 464A‑B (Godfrey JA).

(2)  In considering all the circumstances, the court will have regard to the plaintiff’s prospects of success.  But it should not go into the merits in detail unless it can clearly be demonstrated that there is a high degree of probability of success or failure.  See Wing Hing Provision (above) at 464C‑D (Godfrey JA).

(3)  In assessing the appropriate amount for security for costs, the court normally takes a broad brush approach and does not conduct a taxation of the respondent’s costs.  Instead, the exercise on which it is engaged is to arrive at an appropriate estimation of the likely amount of costs which would be ordered to be paid by the applicant to the respondent on a party and party taxation.  See First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd [2021] HKCA 122 at [21] (Lam VP).

Merits of the Plaintiffs’ Claims

5.  I mentioned earlier about the Plaintiffs’ change of stance in relation to the Security for Costs Summonses.  The parties were in correspondence in December 2025 and early January 2026 regarding the Plaintiffs’ provision of further security for costs.  It was indicated by the Plaintiffs’ solicitors back then that the Plaintiffs were agreeable in principle to provide additional security, subject to quantum.  The Plaintiffs made an offer to pay HK$8 million to the Receivers and HK$8.5 million to the 3^rd, 4^th and 7^th Defendants as further security.  These offers were not accepted and led to the taking out of the Security for Costs Summonses at the end of January 2026.  The supporting affirmation for the respective Security for Costs Summonses was short and reflected the parties’ then position that the only issue between them was in relation to quantum for the additional security.

6.  In March 2026, the court made a consent order that the Security for Costs Summonses would be heard together and that updated skeleton bills and lists of objections would be filed before the substantive hearing.  The Plaintiffs did not seek leave to file any affirmation in opposition to the Security for Costs Summonses, and none has been filed.

7.  In their skeleton submissions filed shortly before the substantive hearing, the Plaintiffs contend that the merits of their claim are genuine and strong, and seek to demonstrate this by reference to a decision of Wallbank J in the BVI Commercial Court made on 26 June 2025 (“Wallbank J’s Decision”), the decision of the BVI Court of Appeal dated 3 July 2026 (“BVICA’s Decision”), and the witness statements filed herein.  Wallbank J’s Decision and the BVICA Decision were first exhibited to the 1^st Plaintiff’s unsworn affirmation used to support the Plaintiffs’ adjournment application taken out on 14 August 2026, which has now been withdrawn.

8.  Because of the lack of any affidavit evidence filed by the Plaintiffs to oppose the Security for Costs Summonses, and the way in which Wallbank J’s Decision and the BVICA’s Decision have been put before this Court by the Plaintiffs, the Receivers and the 3^rd, 4^th and 7^th Defendants have not had any opportunity to file affidavit evidence to respond to the Plaintiffs’ contentions on the merits.

9.  The Receivers and the 3^rd, 4^th and 7^th Defendants submit that because the BVI Decisions were exhibited to an affirmation for an application which has now been withdrawn, the Plaintiffs should not be entitled to refer to them.  I believe that their submission is correct.  Nonetheless, I have already read them before today’s hearing and am prepared to allow the Plaintiffs to make reference to them for the purpose of the Security for Costs Summonses.

10.  The Plaintiffs rely on the observations and conclusions made in Wallbank J’s Decision and the BVICA’s Decision to seek to show that they have strong merits in their claims against the Defendants in these proceedings.

(1)  The issue in Wallbank J’s Decision was whether leave should be granted to the 3^rd Plaintiff to commence a derivative action in Hong Kong on behalf of the 6^th Defendant, which is a BVI company, under s.184C of the BVI Business Companies Act 2004.  

(2)  On 26 June 2025, Wallbank J considered the materials and submissions before him and concluded that the 3^rd Defendant has a “very strong case” against the Receivers, and that the 3^rd Defendant’s claim has “a good likelihood of success” (see transcript at pp 225 and 227). 

(3)  On 3 July 2026, the BVI Court of Appeal dismissed the 6^th Defendant’s appeal.  The court concluded, amongst other things, that Wallbank J had dealt with each of the causes of action in the proposed derivative claims and that he was satisfied that each of them had been shown to be likely to succeed (see [251]).

11.  I disagree with the Plaintiffs’ submission that the “findings” made in Wallbank J’s Decision and the BVICA’s Decision should be taken to mean that the Plaintiffs’ claims herein are strong or have a high degree of probability of success.

(1)  It is right to point out that the observations made in Wallbank J’s Decision regarding the strength of the 3^rd Plaintiff’s intended derivative claims were not findings of fact.  Such observations were made in the context of an application for leave to commence a derivative action under s.184C of the BVI Business Companies Act 2004. 

(2)  Insofar as the Plaintiffs ask this court to simply follow or adopt the opinions of the BVI courts on the merits of the 3^rd Plaintiff’s complaints, I respectfully decline to do so.  It is the duty of the courts to form their own opinion by making their own evaluation of the evidence placed before them, and not on the basis of the opinions of someone else however reliable that person’s opinion is likely to be: Bank of Huludao Co Ltd v Zhongying Int’l Holding Group Limited [2025] HKCA 978 at [26] (P Ng J sitting in the Court of Appeal) & China Medical Technologies Inc v Bi Xiao Qiong [2020] HKCA 541 at [19] and [27] (Lam VP).

(3)  As mentioned earlier, the Plaintiffs have not filed any affidavit evidence to oppose the Security for Costs Summonses.  No proper evidence has been adduced by the Plaintiffs in the context of the present applications to demonstrate that their claims have a high degree of probability of success. 

(4)  Although the parties’ witness statements have been included in the hearing bundles, their contents should not be taken as evidence for the purpose of the present interlocutory applications.  It is trite that the written statement of a witness is not in itself evidence in the proceedings; it will only become evidence when the witness attends the trial to adopt it. 

(5)  Significantly, because the Plaintiffs have only alleged that they have a high degree of probability of success in their skeleton submissions filed a few days before the substantive hearing, the Receivers and the 3^rd, 4^th and 7^th Defendants have not had the chance to file any evidence to rebut the allegations.  Specifically, the materials which the Plaintiffs rely on to demonstrate merits have not been identified until the Plaintiffs’ skeleton submissions were served on 20 August 2026.  In these circumstances, it would wholly unfair for the Plaintiffs to ask the court to only have regard to the materials highlighted by them (namely certain extracts of the evidence placed before the BVI Commercial Court as recorded in the BVI decisions) to determine whether the Plaintiffs’ claims have merits.

(6)  For the same reasons, I am also not prepared to scrutinise the matters referred to in the BVI decisions for the purpose of deciding whether the Plaintiffs’ claims are strong or have a high degree of probability of success.

12.  Accordingly, it has not been clearly and fairly demonstrated by the Plaintiffs that there is a high degree of probability of success in their claims at trial.  In any event, having regard to the matters pleaded in the Amended Defence filed respectively by the Receivers and the 3^rd, 4^th, and 7^th Defendants, I am unable to conclude at this stage that the Plaintiffs’ claims are so strong such that the court’s discretion should be exercised to refuse ordering any further security for costs.

Quantum

13.  In determining the appropriate amount to order in the present case, I take a broad brush approach to try to arrive at an appropriate estimation of the likely amount of costs which would be ordered to be paid on a party-and-party taxation.  I take into account the complexity and magnitude of the respective claims against each of the Receivers and the 3^rd, 4^th and 7^th Defendants.

14.  In my view, the likely amount of costs which would be ordered to be paid on a party-to-party taxation will be lower than the amounts sought by the Receivers and the 3^rd, 4^th and 7^th Defendants.  This is because I take the view that the amounts in the skeleton bills of costs are excessive in respect of (1) the costs which have already been incurred, (2) the costs for the management and conduct of the respective Defendant’s case, and the preparation of witness statements and expert reports, and (3) the experts’ fees.

15.  Taking a broad brush approach, I order a sum of HK$14.5 million as the further security for costs ordered for each of the Receivers and the 3^rd, 4^th and 7^th Defendants.

16.  The Plaintiffs submit that the sums to be paid into court should be by way of staged payments, with 30% of the security for costs to be paid within 56 days from the date of the order, and the remaining 70% to be paid no later than 6 months prior to the trial, i.e. by 19 December 2027.  I am unable to agree with the Plaintiffs’ proposed manner of payment.

(1)  Although the trial is scheduled to commence in May 2028, it does not mean that the bulk of the costs will only be incurred by the Defendants when it is close to the trial.  Up to now, the parties have completed discovery, and the witness statements and expert reports have been exchanged.  I am told that the remaining interlocutory steps are for a joint meeting of experts to take place in September 2026 and for a joint report to be filed in October 2026.  The Plaintiffs also say that they may take out some interlocutory applications between now and the date of the trial.

(2)  The Plaintiffs have only provided security for costs to the Receivers and the 3^rd and 4^th Defendants up to the completion of discovery for HK$1.5 million and HK$1.16 million respectively.

(3)  In these circumstances, it seems to me that there is little basis to justify the payment of 70% of the further security to be made only 6 months before the trial.  In my view, I consider that it is just to order the entirety of the further security to be paid by the Plaintiffs in the near future.

(4)  I am also not satisfied that the payment should only be made within 56 days from the date of the order.  No evidence has been filed by the Plaintiffs to suggest why a longer period is required.

17.  At the hearing, the Plaintiffs request that they are allowed to make the payment for further security by way of the provision of bank guarantee in the event that an order is made by the court.  They propose that the similar terms as those set out in paragraphs 1 and 2 of the consent order by Tam J on 19 December 2024 be adopted.  Neither the Receivers nor the 3^rd, 4^th and 7^th Defendants object to the Plaintiffs’ proposal.

Disposition

18.  The orders I make are as follows.

(1)  The Plaintiffs do provide further security for the 1^st and 2^nd Defendants’ costs in this action up to the completion of the trial in the sum of HK$14.5 million by lodging in court of the said sum by cash or bankers draft, or by the provision of a bank guarantee of the said amount to be issued by the Bank of China (Hong Kong) Limited or DBS Bank (Hong Kong) Limited or United Overseas Bank Limited, Hong Kong Branch, which guarantee shall have been approved by the Registrar of the High Court, within 28 days from the date of this order, and time shall run during the Summer Vacation.

(2)  In default of the Plaintiffs providing such security within the time specified, the action against the 1^st and 2^nd Defendants be dismissed without further order, with costs of this action to be paid by the Plaintiffs to the 1^st and 2^nd Defendants to be taxed if not agreed.

(3)  The Plaintiffs do provide further security for the 3^rd, 4^th and 7^th Defendants’ costs in this action up to the completion of the trial in the sum of HK$14.5 million by lodging in court of the said sum by cash or bankers draft, or by the provision of a bank guarantee of the said amount to be issued by the Bank of China (Hong Kong) Limited or DBS Bank (Hong Kong) Limited or United Overseas Bank Limited, Hong Kong Branch, which guarantee shall have been approved by the Registrar of the High Court, within 28 days from the date of this order, and time shall run during the Summer Vacation.

(4)  In default of the Plaintiffs providing such security within the time specified, the action against the 3^rd, 4^th and 7^th Defendants be dismissed without further order, with costs of this action to be paid by the Plaintiffs to the 3^rd, 4^th and 7^th Defendants to be taxed if not agreed.

19.  I will now hear the parties on costs.

[Submissions on Costs]

20.  In view of the Plaintiffs’ adjournment application (which has now been withdrawn), there was no scope for the parties to try to agree on an appropriate amount for the security to be ordered prior to the substantive hearing.  The Receivers and 3^rd, 4^th and 7^th Defendants would have had to come to court to obtain an order for the putting up of further security.  In these circumstances, I think it is right to order the Plaintiffs to pay the Receivers and 3^rd, 4^th and 7^th Defendants the costs of these applications.  I order that (1) the costs of and occasioned by the Receivers’ summons dated 26 January 2026, and (2) the costs of and occasioned by the 3^rd, 4^th and 7^th Defendants’ summons dated 23 January 2026, be paid by the Plaintiffs to the Receivers and 3^rd, 4^th and 7^th Defendants to be summarily assessed.

[Submissions on summary assessment]

21.  Taking a broad brush approach, I summarily assess the Receivers’ costs at HK$280,000 and the 3^rd, 4^th and 7^th Defendants’ costs at HK$270,000 for their respective Security for Costs Summons.

22.  Also taking a broad brush approach, I summarily assess the assess the Receivers’ costs at HK$130,000 and the 3^rd, 4^th and 7^th Defendants’ costs at HK$120,000 for the Adjournment Summons.