XCHRX SHENZEN SHEKOU GREAT OCEAN SHIPPING CO. LTD. v. STRIDER 9 LTD.

1996, MP No. 4183

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. On 12 December 1996, the plaintiff issued an originating summons seeking security for costs in arbitration proceedings against the defendant on the basis that the defendant is ordinarily resident out of the jurisdiction. This was preceded by correspondence between the solicitors for the parties in which the plaintiff's solicitors asked for security and the defendant declined to give it. The plaintiff's solicitors provided a draft skeleton bill of costs arriving at a total of about $707,000. The plaintiff's solicitors asked the defendant's solicitors if they were authorised to accept service. The defendant's solicitors said they would take instructions. The plaintiff's solicitors wrote to the defendant's solicitors after this, on 15 October 1996, asking again if they were authorised to receive service. There was no response to this request. Accordingly, on 28 November 1996, the plaintiff applied for and obtained leave to serve the summons out of the jurisdiction.

2. The unchallenged evidence is that the originating summons was served on the defendant at its registered address in Bermuda on 19 December 1996.

3. I heard the matter on 21 February 1997. There was no appearance by the defendant. After hearing argument, I granted the order for security.

4. The defendant now applies by summons dated 1 March 1997 for the summons to be dismissed with costs, or that my order be set aside or varied.

5. Mr Davidson is critical of the plaintiff's solicitors for not telling his firm that they had commenced the proceedings by originating summons. I do not accept that these criticisms are valid. The defendant's solicitors were told that the plaintiff intended to make the application, they were asked if they were able to accept service, and they were told that, if they did not confirm that they were authorised to accept service, the plaintiff would apply to court. The plaintiff did just that. If it were so that the defendant's solicitors wished to know about the originating summons in spite of the fact that they did not respond when asked a second time if they were able to accept service, they should have said so. They did not. The defendant should have anticipated that service would be effected at its registered office, because they did not authorise their solicitors in Hong Kong to accept service. The defendant cannot complain that, in some unexplained manner, the service at their registered office did not come to the attention of those who might have done something about the matter. The plaintiff, in my view, did all that could reasonably be expected of it.

6. That being so, it does appear that something within the defendant's organisation went wrong, and that resulted in it not being heard. I have now heard the defendant through Mr Davidson. He does not now argue strongly that I should not order security, but, he says, this should be in a sum less than I ordered, and should be in the form of guarantee by a company called Sea Containers Asia Limited. In an affidavit, Mr Davidson said "I believe it inconceivable that if a guarantee was given by Sea Containers Asia Limited by way of security for costs for a sum not exceeding HK$1 million that it would not honour its obligations under that guarantee." Mr Davidson now says that the guarantee should be in the sum of $0.5 million only.

7. As to the amount of the security, Mr Davidson says I should not pay too much attention to the skeleton bill of costs. Of course, I accept that the bill represents only an estimate, but it is a proper basis upon which an estimate can be made. The exercise involves some guesswork, but there is perhaps less guesswork when the details are examined in a draft bill. Mr Davidson says that the arbitration may involve no hearing. Mr Houghton disagrees; he says it is likely there will be a hearing. But this appears irrelevant. The bill only covers the period up to and including discovery and exchange of witness statements. Mr Davidson says that the amount I have ordered is about the same as the claim. It is not unusual, of course, for costs to exceed the amount of a claim in litigation.

8. Mr Davidson's own assessment in his affidavit when he spoke of security for a sum not exceeding $1 million does not lead me to think that the estimate already made is over generous.

9. I do not believe that there is any justification for interfering with my original order as to the amount of the security.

10. Regarding the form of security, I have heard nothing that would justify directing that the form of security should be a guarantee by Sea Containers Asia Limited. There is no evidence of the relationship of this company to the defendant. Mr Davidson says that it is "an associated company", but this not convey very much. I do not think that any special circumstances have been disclosed that would justify any departure from the ordinary way of providing security.

11. In the result, the defendant's summons of 1 March 1997 is dismissed with costs.