DRACCO NETHERLANDS B.V. v. SIMBA TOYS GMBH & CO. KG

HCA 304/2014

[2025] HKCFI 4029

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 304 OF 2014

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D E C I S I O N

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I.  INTRODUCTION

1.  Before me is the Defendant’s application by Summons filed on 23 July 2025 for further security for costs from the Plaintiff. The trial shall commence on 6 October 2025.

2.  On 7 February 2018, the Court of Appeal ordered the Plaintiff to make payment of security for costs.

II.  PLAINTIFF’S GROUND FOR OPPOSING APPLICATION

3.  In giving the judgment ([2018] HKCA 75) for the security for costs, the Court of Appeal reiterated at §3.8 that “the threshold of demonstrating the probability of success” to resist an application for security for costs “is very high indeed”, and that “the Courts have repeatedly said the practice of going into the merits of the case in an application of this kind is to be deplored, unless it can be clearly demonstrated one way or other there is a high probability of success or failure.” I highlight these here because the Plaintiff now opposes the application on the ground that as a result of exchange of documents and witness statements after the Court of Appeal judgment, the circumstances have materially changed such that it is clear that the Plaintiff’s claim is so strong that no security for costs should be ordered or further ordered.

4.  In its affirmation containing only 20 paragraphs in opposition to the application, from paragraphs 5 – 13, the Plaintiff attempts to explain why the Plaintiff’s claim is so strong. In its affirmation containing only 20 paragraphs in opposition to the application, from paragraphs 5 – 13, the Plaintiff attempts to explain why the Plaintiff’s claim is so strong. In their submissions for the Plaintiff, Mr Neville Sarony SC (leading Mr C.C. Ho), submits that on the evidence put before the court now that the Defendant has failed to preserve material documents and the Defendant’s continuous refusal to allow the Plaintiff to perform audit, the Trial Court would likely draw adverse inferences against the Defendant and would disapprove the Defendant’s such conduct thereby enhancing the Plaintiff’s prospects of success.

5.  However, as far as I can see from the court files, there are at least 6 witness statements in total (all substantial), at least 3 Lists of Documents of the Defendant, and even lately on 2 July 2025, the Plaintiff filed the 5^th Supplemental List of Documents. Also, on 29 August 2025, I ordered further and better particulars from the Plaintiff. Even assuming that the trial court would find on the evidence that the Defendant has failed to preserve material documents and the Defendant’s continuous refusal to allow the Plaintiff to perform audit, whether the Trial Court would then draw adverse inference and/or disapprove of the Defendant’s conduct such that the Plaintiff’s claim would probably succeed would depend on what evidence there would be at trial to explain the failure to preserve the material documents and the refusal to allow the Plaintiff’s audit. I have also considered the Defendant’s submissions as well as the Plaintiff’s submissions on the merits. Bearing all these in mind, I am unable to come to a conclusion at this stage that the merits of the Plaintiff can be “clearly demonstrated” in a way that no or no further security for costs should be ordered.

III.  QUANTUM

6.  For quantum, the Defendant asks for HK$4,949,070, and the Plaintiff asks for HK$1,260,000 taking into account the overlap between the Plaintiff’s claim and the Defendant’s counterclaim.

7.  I have considered the skeletal bill of costs submitted by the Defendant, as well as the parties’ submissions. I agree with Mr Sarony that a deduction should be given to reflect the Plaintiff’s likely entitlement to security for costs in respect of the Defendant’s counterclaim. Adopting a broad-brush approach, I would order a further security for costs in the sum of HK$2,850,000.

IV.  TIME FOR PAYMENT OF SECURITY FOR COSTS

8.  Given that the trial shall commence on 6 October 2025, I would only allow a short time for the payment. I think 14 days is appropriate.

V.  CONCLUSION

9.  In the premises, I make the following order:-

(1)  The Plaintiff do pay into Court HK$2,850,000 as further security for costs on or before 16 September 2025;

(2)  The proceedings shall be stayed pending the Plaintiff’s compliance with paragraph (1) above;

(3)  Unless the Plaintiff do comply with paragraph (1) above, the action shall stand dismissed automatically with costs to the Defendant, to be taxed if not agreed; and

(4)  There shall be liberty to apply.

10.  As regards costs, the Defendant has most of the security for costs it asks for, and assessment is a broad-brush exercise. In the premises, I order the Plaintiff to pay the Defendant 90% of costs of the application, to be summarily assessed on paper. For this purpose, the Defendant shall lodge and serve a statement of costs within 3 days from today and the Plaintiff shall lodge and serve a list of objection within 3 days thereafter.