LIM YEW CHENG (suing in a personal capacity and derivatively on behalf of himself as a shareholder of KENORA CORPORATION LTD) AND OTHERS v. COSIMO BORRELLI AND OTHERS

HCA 1976/2023

[2025] HKCFI 2085

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1976 OF 2023

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BETWEEN

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DECISION

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Introduction

1.  This is an appeal against a Master’s decision dated 29 August 2024 on the 1^st to 4^th Defendants’ summonses for security for costs. The Master ordered the Plaintiffs to pay security in the sums of HK$1,500,000 for D1 and D2 and of HK$1,160,000 for D3 and D4 by way of payment into court. The Plaintiffs were also ordered to pay the costs of the summonses, summarily assessed at HK$175,000 to D1 and D2 and HK$138,000 to D3 and D4.

2.  On 12 September 2024, the Plaintiffs lodged an appeal against the Master’s decision (by two notices of appeal), not seeking to challenge the quantum ordered by the Master but contending that (i) the Court should have allowed the Plaintiffs to furnish the security by way of banker’s draft or guarantee, and not by paying cash into court (“the form issue”); and (ii) the Court should have made no order as to costs. As to the form issue, the Plaintiffs were essentially seeking to vary the Master’s order so as to allow for an alternative form of security to be provided without affecting the quantum.

3.  The appeal was originally scheduled to be heard by this Court on 10 December 2024 which was later re-fixed to 20 January 2025. It transpired that the Defendants did not object to the alternative form of security and that eventually led to a consent summons being filed on 17 December 2024 by the parties, jointly seeking an order to vary the Master’s order on the form issue. In light of the parties’ agreement, this Court made an order in terms of the consent summons on 19 December 2024 to allow for the alternative form of the security to be provided without affecting the quantum.

4.  Therefore, the only issue which remained to be determined in the appeal was the Master’s order as to the costs of the summonses and the costs of the appeal. This Court thus ordered the costs issue to be dealt with on appeal by way of paper disposal.

Discussion

5.  As this is now essentially an appeal against a costs order, I shall not be lengthy in my reasoning.

6.  The Plaintiffs seek to argue that this is not just a costs-only appeal as the appeal also includes (or included) seeking to vary the order as to the form of security to be given. The Plaintiffs thus submit that this Court may decide the matter as though it came before it for the first time and the Court will give weight it deserves to the previous decision of the Master but it is not bound by it. On the other hand, as contended by the Defendants, as this is a costs-only appeal, it is only when the Master’s costs order is “unreasonable” or that he has “erred in law” that the Court should disturb it.

7.  For the reasons that I will give below, it is my assessment that the costs order was reasonable and the Master did not err in making it. In any event, having looked at the matter myself, I have come to the same conclusion as to the costs of the summonses.

8.  The Plaintiffs are foreign parties with no substantial assets in Hong Kong. As the costs of the proceedings accumulated, in about mid-April 2024, the Defendants requested the Plaintiffs to pay into court security for costs. Initially, the Plaintiffs refused but eventually, on 28 June 2024, they indicated through their lawyers that they were willing to pay HK$818,525 for D1 and D2 and HK$807,900 for D3 and D4 into court but that was expressed to be “without prejudice to our clients’ rights to oppose your clients’ application for security for costs”. Therefore, the Plaintiffs reserved their right to oppose the Defendants’ application.

9.  Such sums were considered to be inadequate by the Defendants. Given the Plaintiffs’ stance, the Defendants took out their summonses on 3 July 2024, seeking security in the sums of HK$3,000,000 for D1 and D2 and of HK$2,634,250 for D3 and D4. Two days later, they indicated to the Plaintiffs that they would accept HK$2,200,000 for D1 and D2 and HK$2,400,000 for D3 and D4.

10.  On 10 July 2024, the Plaintiffs clarified that liability to pay security was not disputed. The Plaintiffs increased their offer to pay HK$860,000 as security for D1 and D2 and HK$850,000 for D3 and D4.

11.  On 24 July 2024, the Defendants took the reasonable step to indicate that they would accept much further decreased sums of HK$1,600,000 as security for D1 and D2 and HK$1,500,000 for D3 and D4. The Plaintiffs did not respond to that offer and made no attempt to further negotiate the quantum.

12.  On 29 August 2024, having heard the Defendants’ summonses, the Master ordered the Plaintiffs to pay security in the sums of HK$1,500,000 for D1 and D2 and of HK$1,160,000 for D3 and D4. Clearly that was well over the sums that the Plaintiffs had been willing to pay as security. The Plaintiffs’ last offer was plainly inadequate to give security for the Defendants’ reasonable costs. Given their stance, the Defendants had had no choice but to proceed with the summonses and seek an order, which they eventually did obtain, from the Master to have sufficient security for their legal costs.

13.  Had the Plaintiffs responded to the Defendants’ last offer, further negotiations could have been possible to reach a compromise very close to the sums ordered by the Master. Had that happened, the hearing before the Master could have been avoided entirely with the saving of costs.

14.  Both sides have cited authorities to support their own respective stance as to whether the costs should be in the cause (as contended by the Plaintiffs) or they should be awarded to the Defendants (as the Defendants maintained). As I see it, there is no general principle to be derived from these authorities involving applications for security for costs, which were often decided on the facts of the individual cases. After all, the decision as to costs is one of a discretion of the Master or the Court, and the guiding principle on costs is fairness and justice in the circumstances. It is my considered view that in light of all the circumstances of the present case, it is fair and just to order costs of the summonses to the Defendants.

15.  Having carefully considered the parties’ respective written submissions, I find in favour of the Defendants and would uphold the costs order made by the Master.

16.  Turning now to the costs of this appeal. The first appeal issue on the alternative form of security (i.e. the form issue) was not seriously argued by the parties at any stage of the appeal. The alternative security does not affect quantum, which was only a form preferred by the Plaintiffs and not objected to by the Defendants on appeal. It appears that at the hearing before the Master, D3 and D4 were already neutral to the alternative form of security proposed by the Plaintiffs; on the other hand, D1 and D2 did not agree to the Plaintiffs’ request for the security to be provided by a bank guarantee because it was raised only three days before the hearing and without details. It appears to me that had the Plaintiffs properly consulted the Defendants as to their attitude before filing the appeal, this form issue could have been readily resolved as it was later agreed and consented to in this Court. In any event, it appears to me that not much legal work would have been done on the issue with few legal costs incurred.

17.  All the appeal written submissions that were filed are focused on the issue of the costs of the summonses, which I have now ruled in the Defendants’ favour. That was the only real contested issue arising from the Master’s decision in this appeal.

18.  Having considered all the circumstances of the present case, I find it fair and reasonable that the entire costs of this appeal be to the Defendants, to be taxed if not agreed. I therefore make the order accordingly.