SUNCHASE INTERNATIONAL GROUP AND ANOTHER v. VINCOR GROUP OF CO (INVESTMENT) LTD

CACV100/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 100 OF 2003

(ON APPEAL FROM HCA NO. 1178 OF 1995)

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(By Counterclaim)

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J U D G M E N T

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Hon Rogers VP:

1. This is an appeal from a decision of Suffiad J which was given on 7 April of this year. It arises in an action which was started as long ago as 9 February 1995. The judge ordered security for costs in the sum of $1 million to cover the costs of the action up until judgment.

2. The claim arises out of a joint venture. The joint venture related to a building in Beijing. In short, the joint venture has collapsed. The result of the collapse has been that the assets of the plaintiffs which were, in effect, single entity companies whose total assets apparently turned around the joint venture, have disappeared. Indeed, there is no dispute this morning as to the fact that the plaintiffs are, on the face of it, impecunious, but that, as the judge below said, does not mean to say that they would not have resources, should they be required, for financing this action.

3. The plaintiffs' claim against the defendants has been summarised by the judge below. Mr Wong, who has appeared for the plaintiffs, said that perhaps in some respects, it does not go as far as the full claim, and he argues that the defendants were responsible by inducing the plaintiffs to enter the joint venture and thereby lose their money because representations, which were made as to various aspects of the joint venture, were wrong. The defendants contest that claim. As Mr Wong has said, the plaintiffs have not actively pursued that claim for some six years, but now it seems that the action is slowly coming to life and, as a result of that, the defendants have sought security for costs.

4. When the judge considered the matter, he said, in paragraph 27 of his judgment:

"Much of the argument before me on this application involved the respective parties going into the merits of their case. Admittedly a large part of the evidence in this case would be documentary in nature. However a large part of the disputed issues are neither contained in nor can be discernible from the documentary evidence. Very much depends on the oral evidence to be adduced and on the credibility of the witnesses at the end of the day. Moreover, the documents involved are both complicated and voluminous."

5. In my view, having seen what I have of the documents which have been filed, the judge's approach is absolutely correct. It is not the function of the court, when faced with an application for security for costs, to make a preliminary run at deciding the ultimate success or failure of the claim. The judge has approached this on the basis that the plaintiffs have a bona fide claim. He has also approached it on the basis that the defendants have a bona fide defence. Mr Wong today says that the judge should have come to the additional conclusion that the plaintiffs had a substantial chance of success. I do not see that that was the judge's function in a case like this. In a simple case that may be so, but here the defendants are contesting the plaintiffs' claim and there is no way that the judge could resolve that contest at this stage.

6. The next point taken by Mr Wong was that the judge should have taken into account that the impecuniosity of the plaintiffs was caused by the defendants. That, it seems to me, is a matter which could only be decided once it has been decided that the plaintiffs have a good claim and that ends up being a circular argument.

7. Finally, the point taken by Mr Wong is that the judge should have taken into account the delay. There are two points to be made on that. First of all, the judge did take into account the question of delay. The second is that, in my view, the argument which turns on delay is clearly wrong. In paragraph 24 of the judgment, the judge said:

"The plaintiffs also point to the delay by the defendants in making this application for security for costs which, says the plaintiffs, had it been made earlier and security for costs was ordered against the plaintiffs, the plaintiffs may well, but not necessarily would, have discontinued this action. However, this application being made at such a late stage, the writ having been issued in 1995, the plaintiffs are prejudiced because of the cost that has already been incurred by them in this matter to date."

8. The judge said no more of the matter. I can quite understand why he said no more of the matter. The argument, to my mind, is entirely erroneous. To say that a plaintiff might have discontinued the action because he was being asked to put up money in respect of a claim which he was making but would have abandoned that claim when he was asked to put money where his mouth was seems to me to be entirely wrong. If the plaintiffs have a good claim, it makes no difference whether the security for costs is asked for at the beginning or later on.

9. In this case, as Mr Wong has readily admitted, because the plaintiffs were not pursuing their case, there was no apparent reason, it seems to me, why the defendants should make an application for security for costs, but now, when it is likely that substantial costs will be incurred in the run-up and over the course of the trial, it is entirely understandable that the defendants should seek security for costs. In my view there is no ground for interfering with the judge's discretion in this matter.

10. The final point is the amount of the security for costs which the judge ordered, which was $1 million. The judge had before him two very short estimates of the costs. They were not bills of cost, they were just rough and ready estimates of the costs. One came to $1.8 million which could be divided as to half which had already been spent and half which was to be spent in the future, namely, the costs of the trial. Then there was a later estimate of some $3 million which apparently the judge disregarded. The judge was not satisfied with either but he used his own experience. He said that he had looked at the court file; he had seen what had been done at the interlocutory stage; he had taken into account that the trial was likely to take five days - and in my view, that is by no means an over-estimate - and in light of all that, he was prepared to order security for costs in the amount of $1 million.

11. In my view, his approach is impeccable. He has done the best he could in the circumstances. In doing so, what he said was that if that amount is on the low side, the defendants have only themselves to blame for failing to provide a properly itemised bill of costs with the necessary breakdown for each item. It is clear that the judge considered that, if anything, his estimate was on the low side. I would not interfere with his estimate in that respect either.

12. In those circumstances, I would dismiss this appeal.

Hon Le Pichon JA:

13. I agree.