NGEI CHEONG HONG INTERNATIONAL LTD v. TOPOCEAN CONSOLIDATION SERVICE LTD AND OTHERS

HCCL 24/2003

 IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERICAL LIST NO. 24 OF 2003

(transferred from HCA 3862/2001)

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J U D G M E N T

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I.       Introduction

1.  The 1st Defendant seeks security for costs against the Plaintiff under Companies Ordinance (Cap.32) (CO) s.357.  That requires the 1st Defendant to show:-

"by credible testimony that there is reason to believe that [the Plaintiff] will be unable to pay the costs of the [1st Defendant] if successful in [its] defence."

II.      Discussion

2.  The Plaintiff's claim is essentially for damages arising from the misdelivery of goods bailed to the 1st Defendant.  The Plaintiff says that the 1st Defendant or its agents caused the goods to be released without presentation of a bill of lading.

3.  The 1st Defendant submits that it is entitled to security for the following reasons:-

(1)     The Plaintiff's claim is not strong.

(2)     The Plaintiff has no known assets within Hong Kong.  having sold its property at the Sungib Industrial Centre (SIC) to Hong Kong Chung Ngei Investment Ltd. on 30 October 2001.  The latter date is suspicious because it was 11 days after the filing of the 1st Defendant's Defence and Counterclaim.

(3)     There is no evidence that the Plaintiff as opposed to its associate Mainland company, Chinese Prosperous International Limited (CPIL), does any trading.

(4)     The Plaintiff's central management and control is based in the Mainland.

(5)     A winding-up petition having been filed against the Plaintiff, the Plaintiff made payments but did not apply to the Court for any validation order.

(6)     The Plaintiff has been late in discharging costs orders in the 1st Defendant's favour.

(7)     The Plaintiff has not settled the fees of its former solicitors.

4.  It is the 1st Defendant's case that the Plaintiff has been dissipating its assets to avoid liability to pay costs in the event that the Plaintiff loses.

5.  The Plaintiff acknowledges that, as with most everyone else's business in Hong Kong, its business was hard hit by the recent economic downturn.  But the Plaintiff has survived with a direct export business from a Mainland base to overseas clients.  The Plaintiff's representative office in Hong Kong exhibits products from time to time. 

6.  More particularly, the Plaintiff responds to the 1st Defendant's allegations as follows:-

(1)     The Plaintiff has a serious arguable case.

(2)     The Plaintiff had to sell its SIC property to cover losses incurred as a result of the 1st Defendant's misdelivery.  The SIC property was sold at a price which accorded with an independent valuation.

(3)     The Plaintiff set up CPIL to take advantage of WTO benefits enjoyed by Mainland companies and to coordinate the Plaintiff's business with a factory in the Mainland.  There is nothing sinister behind the establishment of CPIL.

(4)     The Plaintiff carries out trading in Hong Kong from time to time.  The Plaintiff has exhibited advertisements for its products and a photograph of its factory on the 18th floor of the SIC. 

(5)     There was no obligation to seek a validation order.

(6)     Although admittedly late, the Plaintiff has paid the relevant costs orders.  Such payment shows that the Plaintiff is able to pay costs.

(7)     The Plaintiff has paid its former solicitors prior to the engagement of its present legal advisers.

7.  The Plaintiff strenuously denies that it has been attempting to avoid evade any adverse costs order.  Ms. Kwok Kam Wai, its general manageress, states:-

"It will cost the Plaintiff a lot more expenses and loss of business by moving the officers around just to evade enforcement of judgment....  Up until this day, the Plaintiff's business address remains the same [at 23rd floor, SIC]."

8.  I accept the Plaintiff's points. 

9.  I would only add in respect of the payment of former solicitors' fees that, even if the 1st Defendant is right and the Plaintiff's previous advisers have not been paid, there is no evidence as to the nature of the dispute (if any) between the Plaintiff and its former solicitors.  The solicitors may or may not be unreasonable in disputing fees.  The 1st Defendant's scant material on the matter can hardly be credible evidence on which to order security.

10.  I am accordingly not satisfied that this is an appropriate case in which to order security.  CO s.357 places the burden of proof squarely on the 1st Defendant.  In my view the 1st Defendant has not established by cogent evidence that the Plaintiff will be unable to meet any costs order in the event that the Plaintiff should fail.

III.     Conclusion

11.  The 1st Defendant's summons is dismissed.