XCHRX ELPE INTERNATIONAL (FAR EAST) LIMITED v. HEWLETT PACKARD HONG KONG LIMITED

IN THE COURT OF APPEAL

1993, No. 58

(Civil)

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D E C I S I O N

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Litton, J.A.:

1. This is an application under Order 59 rule 10(5) of the Rules of the Supreme Court for security to be provided by the appellant for the respondent's costs in the appeal which is due to be heard at the end of next month. The amount of security sought in the summons is the figure of $326,783 but at the hearing before me it has been amended to the sum of $416,783. The application is based in essence on two grounds: (1) That the appeal is weak or hopeless and (2) that the plaintiff/appellant is impecunious.

2. It is common ground that each of these factors, if established, would constitute special circumstances within the meaning of that expression in O.59 r10(5). The words "a weak or hopeless appeal" are taken from note 59/10/25 in the latest edition of the Supreme Court Practice. Having heard counsel on this point I am not satisfied that this is such a case and I therefore approach this application on the basis that the appellant has some prospect of success; however this is a matter which I have not attempted to weigh more than in a cursory manner in the course of the hearing this afternoon. I take into account however the submission that even if the appellant should be successful on the appeal, it is possible that it might recover no more than nominal damages. In this eventuality, the probability is that whilst not recovering any costs against the respondent the appellant might not be ordered to pay costs of the appeal to the other side.

3. I now turn to the other matter relied upon by the respondent namely impecuniosity.

4. In the court below there was already an order made for security for the costs of the action. Part of the reasons seems to be that the appellant was for a period of about four months in 1989 in receivership and had not traded since that time. The amount which the appellant has paid into court by way of security for those costs is $300,000.

5. There is an affidavit sworn by a director of the plaintiff on 26 June 1993 where he purports to deal with the plaintiff's financial position. The evidence he has put forward is far from satisfactory. The latest financial statement exhibited by him is for the year ending 31 March 1988. In those accounts it shows that as at that date the plaintiff had current assets of $6,023,062 and current liabilities of $7,888,897. Of the figure of $6,023,062 there is a sum of $4,372,602 by way of stock. Mr. Sporn says that the stock consists of watch cases, moulds etc. which have "little or no real market value". This reduces the amount of current assets still further. There is clear evidence before the court of impecuniosity on the part of the appellant. In principle, in my judgment, security should be ordered.

6. I turn now to the question of quantum. The evidence before me suggests that the sum of $300,000 in court is likely to be more than sufficient to discharge any liability which the appellant might have incurred to date.

7. In the court below, only 50% of the respondent's costs were ordered to be paid by the appellant. In the course of the proceedings, the appellant has also obtained orders for costs against the respondent and the sums therefore are likely to cancel each other out in the course of taxation. I therefore approach this application on the basis that out of the $300,000 in court a substantial proportion might well be available to discharge any liability the appellant might incur by way of costs of the appeal.

8. It is important that security ordered under O.59 r10 should not have the effect of gagging a viable appeal. Using the best judgment I can, I have come to the conclusion that the proper sum to be ordered by way of security for the costs of appeal is $150,000. Therefore there will be an order that the appellant within 14 days of today's date pays into court by way of security the sum of $150,000 for the costs of this appeal. I will now hear counsel on the question of the costs of this application.

9. Having heard counsel, my order is that the costs should be costs in the appeal.