EMIGRA INC AND ANOTHER v. STEPHEN DARYL BARNES

                   HCA 2806/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2806 OF 2006

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J U D G M E N T

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1. This is a security for costs application made under Order 23.  Last written submission by way of letter from the applicant reached this court on 12 June 2008.

2. The summons was wrongly drafted when filed on 5 February 2008.  The application was made in the names of the 1^st and 2^nd Plaintiffs for an order against the defendant.  Order 23 Rule 1 of the Rules of the High Court does not permit a plaintiff in an action to seek security for costs against a defendant.

3. At the hearing on 29 April 2008 Mr. Payne of Messrs. Tanner De Witt informed this court he was only making this application on behalf of the 2^nd plaintiff who is the 4^th defendant in the counterclaim.  Mr Barnes  (the defendant in the main action and plaintiff in the counterclaim) did not object to amendments to be made by Mr. Payne to rectify his error in the drafting of the summons. Leave was granted to Mr. Payne to amend his summons.

4. An amended summons was filed on 7 May 2008.  In this amended summons the 4^th defendant in the counterclaim is seeking an order for security for costs against Mr. Barnes, the plaintiff in the counterclaim who is the defendant in the original action.

5. The 1^st plaintiff Emigra Inc (hereinafter called “Emigra Inc.” for short) is a company incorporated under the laws of Virginia of USA.  The 2^nd plaintiff Emigra Asia Limited (hereinafter called “Emigra Asia” for short) is a company incorporated under the laws of Hong Kong.

6. Currently Emigra Inc. and Emigra Asia are associated companies and are the subsidiary companies of Emigra Group LL.C. (hereinafter called “Emigar Group”).  Emigra Group is an American company.

7. According to the pleadings Mr. Barnes (hereinafter referred as “Barnes” for short) started to operate a trading vehicle known as LLB Consultancy Limited in 1994.  Barnes was a major shareholder of LLB Consultancy Limited. In course of time Barnes came to know Mr. Bradley Henry Cary (hereinafter called “Cary”) and Mr. Arthur Pendleton Dupuis (hereinafter called “Dupuis”).

8. In the year of 2003 LLB Consultancy Limited was renamed Emigra Asia Limited.  Between the years of 2003 and 2004 Barnes secured the transfer of the shares of Emigra Asia to Cary and Dupuis.  Round about the same period of time Cary, Dupuis and Emigra Inc transferred their shares in Emigra Asia to Emigra Group. Since 2004 Barnes was no longer a shareholder of Emigra Asia.

9. In Barnes’ contention, the share transfer of Emigra Asia to Cary and Dupuis was premised on an agreement that Barnes would be allowed to acquire a portion of the shares of the Emigra Group.

10. Between 1 January 2005 and 15 April 2006 Barnes was a director of Emigra Asia.  The working relationship between Barnes and other members of Emigra Group apparently went on the rocks in the year of 2006 for details not yet disclosed to the Court.  The employment of Barnes with Emigra Asia came to an end on 15 April 2006.  Barnes resigned from his director appointment with Emigra Asia on 12 June 2006.

11. In the month of July 2006 dispute erupted between Barnes and Emigra Inc concerning the use of a domain name www.visa-immigration-online.net.  After the exchange of a couple of correspondence the dispute came to an end on 17 August 2006 when Barnes relinquished his claim over the domain name.

12. On 27 July 2006 Emigra Asia further issued a written request to Barnes to seek the return of a laptop computer used by Barnes whilst Barnes was in the employment of Emigra Asia.  The laptop computer was returned on 27 September 2006.  It was Emigra Asia’s contention that data had been deleted from the returned laptop computer.

13. On 20 December 2006 Emigra Inc. and Emigra Asia took out the writ in the present proceeding to sue Barnes in damages for: -

(i)  wrongful conversion of the internet domain between 11 July 2006 and 17 August 2006; and

(ii)  wrongful conversion of a laptop computer belonging to the 2^nd Plaintiff from 8 April 2006 until the return of the computer.  When the computer was returned it was damaged and the data contained therein were deleted.

14. Barnes, on a contention of failure of consideration of the share transfer agreement, filed his counterclaims in November 2007 (a) against Cary, Dupuis and Emigra Group for the delivery of 624,000 shares of Emigra Asia; (b) for a declaration that Emigra Group is holding 624,000 shares of Emigra Asia on trust for Barnes; and (c) for an order to compel Emigra Asia to change its share register back to its pre-July 2003 position.

15. The dispute between the parties first reached court in 2006 as an employment dispute in the Labour Tribunal in LBTC 5910/2006 when Barnes filed an employment claim against Emigra Asia. On application of Emigra Asia the Labour Tribunal proceeding was transferred to the District Court.  Barnes abandoned the District Court claim on account of costs implication.

16. To invoke the Court’s jurisdiction under O.23 r.1 for a security for costs order Emigra Asia needs to satisfy this court the following issues: -

(i) the plaintiff is ordinarily resident out of the jurisdiction; and

(ii) having regard to all the circumstances of the case, the Court finds it just to do so.

17. Whether Barnes resides ordinarily out of Hong Kong is a question of fact.  A person is “ordinarily resident” in a place if he habitually and normally resides lawfully in such place from choice and for a settled purpose, apart from temporary or occasional absences, even if his permanent residence or real home is elsewhere.

18. Barnes is a British citizen. He said in his affirmation he has been given a right of abode in Hong Kong. In 1987 he married an airhostess of Cathay Pacific Airline, Japanese by nationality.  They held their marriage ceremony in Hong Kong. Between 1989 and 1993 Barnes went back to study in the UK but he came back to Hong Kong to stay with his Japanese wife regularly.  Their 2 daughters were born in Hong Kong in 1994 and 1996.

19. In 2000 Barnes and his wife decided Australia is a better place for the upbringing of their children.  Barnes bought a house in Australia and relocated his family there since December 2000. His children received their education in Australia since 2001 and Barnes’ wife remains in Australia with the children.

20. To enhance his occupational image Barnes delivered talks in Hong Kong about immigration matters intermittently. Barnes made arrangement with his working partners that he would be allowed to work primarily at his home in Western Australia.  To avoid tax implication Barnes made it a point that he would not stay in Hong Kong for more than 59 days within a year.  Barnes stated in no unclear terms his intention to stay in Australia for the purpose of obtaining permanent residence in Australia in his letter to Cary in April 2006.

21. In his Labour Tribunal representation of 5 February 07 Barnes stated “Let it be known that I am resident in Australia.  … I am an international businessman with an extremely busy schedule, traveling widely around the world.  I necessarily need to travel back to Hong Kong for each hearing and to progress my case through the Tribunal.”

22. In his application for adjournment by way of letter addressed to the High Court on 21 August 2007 Barnes wrote “… I am resident in Australia. I returned to Hong Kong only infrequently.”

23. Barnes currently used a small apartment in the Wanchai area amongst the entertainment premises as his place of contact in Hong Kong.

24. Despite what was said by Barnes in his affirmation that he has every intention to keep Hong Kong as his place of ordinary residence, I found factually Barnes resides ordinarily in Australia from choice and for a settled purpose of acquiring and maintaining an Australian resident status.  He remains in Australia for the regular order of his ordinary life with his family.  He only comes to Hong Kong on transient occasions for ad hoc commercial or litigation purposes.

25. Security would not be ordered as a matter of course just because a plaintiff has acquired a foreign residence.  The Court has to bear reference to all the circumstances of the case, to strike a balance between what would be too oppressive to the plaintiff and what would give the defendant a measure of security.

26. The pleadings and the affidavit did not provide details about the circumstances under which the parties entered into their arrangement.  It is quite impossible for this court to form a view on the merits of Barnes’ counterclaim and his likely chance of success or failure.  Further the court should not engage in a protracted analysis of the evidence at this stage to determine the chances of success of the parties.

27. I do not accept Barnes’ suggestion that his counterclaim is closely associated with his defence and ought to be viewed as part and parcel of his defence.  Such an argument runs against the very nature of a counterclaim as a counterclaim is a claim which subsists independently of the defence.

28. Emigra Asia was never a contracting nor tortious party to the events surrounding the share transfer.  The focal individuals involved are Cary, Depuis, Emigra Group and Barnes.  Emigra Asia is joined as a party for the purpose of complying with court orders made should Barnes succeed in his counterclaim against Cary, Depuis and the Emigra Group.  Hence the reasonable costs to be incurred by Emigra Asia would simply be the filing of an acknowledgement notice and the filing of a nominal defence, leaving the ultimate factual issues to be litigated between Cary, Dupuis, Emigra Group and Barnes.  I do not feel Emigra Asia in its nominal role of the 4^th defendant in the counterclaim would likely incur costs beyond HK$20,000 for the filing of its acknowledgement of service and its nominal defence as suggested above.

29. There was the mention of impecuniousity in Barnes’ written submission though Barnes put forward no factual information in support of his contention about poverty.  In light of the quantum I shall impose and Barnes’ ability to support a family in Australia with a decent family house, I do not feel impecuniousity is a point of concern to me in this application.

30. Mr. Payne has wrongly drafted the summons in the first place.  Should Barnes insist on his rights, the summons of 5 February 2008 ought to have been dismissed with costs thrown away.  A fresh summons would have to be taken out again before the application could be entertained.  In light of the procedural irregularity at the commencement of the proceeding, I grant the applicant half of its costs for the present application.  This costs order is an order nisi which would become absolute in 14 days’ time in the absence of application from either party within the 14 days for amendment or variation.

31. This application is granted to the extent that Barnes has to pay a security of HK$20,000 into Court within 14 days from date of the service of this order as security for costs of Emigra Asia; in default of which the counterclaim against Emigra Asia would be stayed.