SANCTUARY SYSTEMS LTD v. ORIENT INTERNATIONAL HOLDINGS HONG KONG CO LTD AND ANOTHER

HCA 479/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 479 OF 2010

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BETWEEN

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D E C I S I O N

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Introduction

1.  This is the 1^st defendant’s third application for security for costs.

2.  Pursuant to 2 orders of Masters, the plaintiff has paid 2 sums totaling HK$1,570,000 into court as security for the 1^st defendant’s costs up to and including the completion of trial (due to start on 12 November 2013). The 1^st defendant now seeks further security in the sum of HK$1,653,400 (or its latest written offer of HK$1,200,000). 

3.  The plaintiff does not dispute liability to give security but has made 2 open offers in the sum of $430,000 and $500,000 respectively.  They were not accepted by the 1^st defendant.

Change of circumstances

4.  This court does have jurisdiction to make a further order for security despite the fact that the previous order was said to cover the completion of trial.  The court will look for, among others, any change of circumstances since the last order for security has been made.

5.  I accept that there has been material change of circumstances in the 19 months since the last order for security made by Master Kwang on 28 November 2011.  The change came as a result of an order on 28 May 2012, on the plaintiff’s application, granting leave to adduce expert evidence on Mainland law.  Pursuant to this order, 3 more factual witnesses are to be called and 8 witness statements or supplemental witness statements are adduced.  There was substantial increase in the amount of work done for this litigation.   The length of trial was increased from 8 to 10 days (ie by 25%).  I accept that there is cause for increasing the quantum of security.

Quantum of further security

6.  The 2^nd additional skeleton bill of costs of the 1^st defendant in fact includes the estimates of costs placed before Master Kwang.  That is an incorrect approach.  As the learned Master has already exercised his discretion based on those prior estimates, it is not for me to revisit those estimates in the present application.  Accordingly I will only take into account the additional costs arising since Master Kwang’s order.

7.  The bulk of the latest bill concerns the fees of senior counsel.  Master Kwang has expressed his view that this case did not warrant the engagement of senior counsel, but of course if there is justification at this stage I can depart from his view in the present application. 

8.  Mr Wou for the 1^st defendant submits that the expert evidence justifies the engagement of senior counsel.  Without disrespect, notwithstanding that the parties have introduced expert evidence pursuant to a master’s order, the pleadings as they stand do not disclose any issue that requires expert evidence.  Even if (as Mr Suen, counsel for the plaintiff, has indicated) the pleadings are to be amended along the lines of the expert evidence already adduced, I can hardly see how the issue disclosed in the expert reports justifies senior counsel to be engaged.  (I say this without prejudice to the grant of certificate for 2 counsel after trial, if a party can justify it then.)

9.  Further, the expert reports only referred to a few articles in the Mainland legislation, eg in the PRC Civil Code, Contract Law, Foreign Trading Law.  The rest of the reports was the experts’ application of those articles to the facts of the case (effectively submission which counsel should be responsible for).  It may thus not even justify cross-examination of the expert witnesses.

10.  I cannot see any justification for allowing for costs of senior counsel.  I do note, however, that the order for expert evidence came as a result of the plaintiff’s application, which was opposed by the 1^st defendant. Accordingly, the 1^st defendant should not be prejudiced in terms of its application for security for costs.

11.  The change in circumstances in this case would not have justified imposing a further security order that is 105% (or 76% by the latest offer) of the amount already paid in as security.  What the court should order the plaintiff to pay is reasonable security and not indemnity for costs.

12.  Taking all circumstances into account, I order that the plaintiff do provide security in the sum of $430,000 to the 1^st defendant by way of payment into court within 21 days failing which all further proceedings be stayed.  This will bring the total amount of security up to $2,000,000. Whether in itself or looked at in totality, the further security appeared to be reasonable.

Costs

13.  Despite having erred in its approach to quantum, I have no doubt that the 1^st defendant has taken out this application in good faith.  The parties have also, in my view, genuinely entered into discussion as to the quantum of further security.  The affirmations generated by this application are reasonable.  The plaintiff has offered to pay $430,000 into court as early as 16 May 2013.  If accepted, that would have disposed of the matter at the call-over hearing.

14.  The costs claimed by the plaintiff are reasonable.  I make an order nisi that the plaintiff shall have the costs of this application, including costs reserved on 29 May 2013, summarily assessed in the sum of $35,000.

15.  I thank counsel and Mr Leung for their assistance.