NG YAT CHI AND ANOTHER v. MAX SHARE LTD AND ANOTHER

1996, No.CWU-321

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

COMPANIES (WINDING UP) No. 321 of 1996

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JUDGMENT

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Security for costs

1. The Petitioners presented a petition seeking the winding up of the 1st Respondent, alternatively an order requiring the Respondents to acquire the shares of the Petitioners.

2. The Respondents applied for security of costs against the 1st Petitioner on the ground that he is a nominal Plaintiff who may not be able to pay for the costs of the proceeding.

Nominal Plaintiff

3. It is clear from O.23, r.1, that a proceeding by way of petition is within the scope of the Order.

4. The 1st Petitioner is the registered owner of the shares in the 1st Respondent.

5. On 9th April 1992, the 2nd Petitioner obtained a charging order over the 1st Petitioner's shares in a High Court action. The 2nd Petitioner on 13th August 1992 purchased the shares at a public auction pursuant to court order.

6. The 2nd Petitioner's attempt to register the shares in his name failed. Hence the 1st Petitioner remains to be the registered owner of the shares.

7. The effect of the charging order and the sales of shares to the 2nd Petitioner means that the 1st Petitioner no longer has any beneficial interest in the shares and he is only holding the shares as a trustee for the benefit of the 2nd Petitioner. Hence the 1st Petitioner is a nominal plaintiff in the proceedings.

Inability to pay costs

8. The 1st Petitioner is an undishcarged bankrupt. The receiving order was made against him on 29th July 1992. He has not paid to the 1st Respondent the costs of a previous winding up petition which was dismissed.

9. The 1st Petitioner has not said that he is able to pay for the costs. In my view the Respondents have also satisfied that there is reason to believe that the 1st Petitioner would be unable to pay the costs which may result in security for costs being ordered against the 1st Petitioner: Greener v. E. Kahn Co. Ltd. [1906] 2 KB 374 and Semler v. Murphy [1968] 1 Ch.183.

Other considerations

10. There are five other matters that need to be considered:

11. Firstly, the 1st Petitioner submitted that as there is a co-petitioner, security for costs should not be ordered. It is clear that the cause of action of the two Petitioners are different. Whereas the 1st Petitioner's complaint was in respect of alleged misconducts of the Respondents prior to the time he disposed of his shares, the 2nd Petitioner's complaint could only arose after he acquired the shares. In the context of co-plaintiffs, one of which is a foreigner, the law is that where the plaintiffs do not rely on identical cause of action, or, even where they do, the outcome as to costs is unpredictable, security may be ordered against the foreign plaintiff: Note 23/1-3/3A of Supreme Court Practice 1997.

12. Likewise in the present proceedings, security for costs should be ordered notwithstanding the presence of a co-petitioner since the causes of action are different. Furthermore, it may well be that costs would only be made against the 1st Petitioner and not the 2nd Petitioner and the 2nd Petitioner may not be responsible for the costs.

13. Secondly, the 1st Petitioner said that the application is in effect an application for security against a defendant because the Respondents have issued a summons to strike out the petition. It is clear that the application for security is in respect of the whole proceedings and in my view there is no question of ordering costs against a defendant.

14. Thirdly, the 1st Plaintiff complained that he remains to be an undischarged bankrupt because of the delay of the Official Receiver. The fact that someone is a bankrupt is not a reason for ordering security. In Thune v. London Properties Ltd. [1990] 1 All ER 973 the Court of Appeal held that this was a matter which the court might consider. The point really is that the 1st Plaintiff is a nominal plaintiff and there is evidence to believe that he is unable to pay for the costs.

15. Fourthly, Regarding the 2nd Petitioner's ability to pay costs in previous proceedings and also in this proceedings, the 2nd Petitioner, apart from referring to the correspondence, did not state in his affidavit his financial position.

16. Fifthly, as to the merits of the striking out application, it is apparent from the authorities that unless the matter is so clear one should not attempt to analysis the strength of the parties' case. In any event, the striking out application is only part of the proceedings.

Quantum

17. The discretion should be exercised against the 1st Petitioner and security for costs should be ordered. As to quantum, the Respondents seek $511,590. This is costs up to and including the hearing to strike out. The costs is by way of estimate only. The appropriate amount should be $350,000 which is about 2/3 of the sums claimed.

Order

18. I will order the 1st Petitioner to furnish the security of costs in the sum of $350,000 by paying the same into court within 14 days. In default, the 1st Petitioner's proceedings against the Respondents is stayed.

19. Costs of the application to be borne by 1st Petitioner.