NG YAT CHI v. MAX SHARE LTD. AND ANOTHER

HCCW 321/96

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 321 OF 1996

___________________

D E C I S I O N

___________________

1. This is an application by the Respondents to this Petition for security for costs. This application has been made on the 6th day of the hearing of the Petition. It has been estimated by the parties at the commencement of the hearing that the hearing will last 12 days.

2. The application was made on the basis that the Petitioner is a nominal party. Two previous orders for security for costs have been made on this basis, and this rationale for ordering security for costs has not been disputed by the Petitioner. On 4th November 1996, Cheung J. gave an order that the Petitioner provide security for costs in the sum of HK$350,000.00. On 3rd December 1998, Le Pichon J. increased that to a total amount of HK$790,000.00, specifically not to include the costs of the hearing of the Petition as she was not then in a position to assess the length of hearing. On 6th January 1999, by agreement, a bank guarantee was provided by the Petitioner in the sum of HK$1.25m. on the basis of a 7-day hearing for the Petition.

3. Since 6th January 1999, two applications for discovery have been made. Both of these applications were concluded on 10th June 1999 and both resulted in orders for costs to be in the cause.

4. On 22nd June 1999, the Respondents' solicitors wrote to the Petitioner's solicitors stating amongst other things: -

"We hereby give you notice that our client requires your client to give further security for costs in view of the additional costs which have been and are being incurred in relation to your client's summonses dated 25th January 1999 and 17th March 1999, and the notice of interrogatories dated 16th April 1999 ... As we have now agreed brief fees for trial which are higher than those stated in our last skeleton bill of costs sent to your client on 18th December 1998, our client also requires security for this additional sum ... If security is not provided within 7 days of the date of this letter, our client will apply to court for the appropriate order."

5. A skeleton bill was provided: this was divided into three parts. Part A dealt with solicitors' costs incurred from 18th December 1998 to 14th June 1999 and was in the round figure of HK$250,000.00. Part B dealt with disbursements incurred from 17th December 1998 to 14th June 1999 and was in the total sum of HK$127,000.00. Part C referred to estimated disbursements to be incurred up to and including the hearing of the Petition and was in a sum of HK$60,000.00 providing a grand total of HK$437,000.00.

6. On 24th June 1999, two days after receipt of that letter, the Petitioner's solicitors wrote to the Respondents' solicitors as follows: -

"In regard to Part A of the skeleton bill, please let us have detailed breakdown of work done and a scale of charge so that we can advise our client accordingly. Concerning Part B thereof, the amount of HK$90,000.00 for conference is strikingly high. Whether such amount is taxable is highly questionable especially when a purported brief of HK$450,000.00 is involved. Kindly let us have the time engaged for conference. We reserve our comment on Part C thereof in the meantime pending your supply of better particulars."

7. On 29th June 1999, the Petitioner's solicitors wrote again to the Respondents' solicitors concerning the Respondents' request for providing further security for costs. They said that the Petitioner's solicitors were instructed that if the Respondents were "genuinely considered [sic.] to proceed and ask for further security sums, please let us have the requested particulars for our client's consideration without delay. In any event, we are instructed that our client is willing and able to provide such reasonable further security sums and not intended to dispute on such trivial matters as trial has been fixed to commence in the beginning of September 1999."

8. However, despite that chaser, no correspondence from the Respondents' solicitors on the aspect of security for costs was provided for two months - until 31st August 1999, that is the eve of the commencement of the hearing of the Petition. On 31st August 1999, the Respondents' solicitors wrote to the Petitioner's solicitors stating as follows: -

"We refer to your letter dated 24th June 1999 in which you requested a breakdown of the costs in Part A of the skeleton bill of costs forwarded to you with our letter dated 22nd June 1999. Since the skeleton bill of costs was drafted, the Part A costs have obviously increased, and accordingly, a revised skeleton bill of costs is enclosed together with a breakdown of the Part A costs. In your said letter dated 24th June 1999, you questioned counsel's fees referred to in Part B of our skeleton bill of costs. The conference with counsel in question of two and a half hours duration and the amount and the fee can be explained by the sheer volume of documents which counsel had to consider prior to the conference. Please confirm by close of business today that your client agrees to give security for costs in the amount referred to in the enclosed schedule. As your client has already agreed to give further security (your letter dated 29th June 1999 refers), the only matter in issue is the amount of security to be given. We hope therefore that this matter can be resolved by agreement. Our client is prepared to accept the bank guarantee in the same form as that previously supplied by your client."

9. Before the Court, on Day 6 of the hearing of the Petition, Mr. Reyes, counsel for the Respondents, submitted that the Respondents would accept a sum of about HK$711,000.00 made up of half of the bill delivered on 31st August 1999 together with refreshers and solicitors' costs for the extra 5 days of the hearing of the Petition.

10. Mr. Yip, for the Petitioner, has submitted that this application is oppressive and that it is an abuse of process given the delay by the Respondents in making their application to the Court. Although the Petitioner had on 29th June in his solicitors' letter indicated that the Petitioner would be willing and able to provide a reasonable further sum as security for costs, that must be on the basis that he would be given a reasonable opportunity to consider the breakdown of the sums sought and a reasonable time to raise the funds.

11. It is well-established that an order for security for costs is an exercise of the Court's discretion. It is also clear that amongst the Court's considerations would be the time when the application is made, the time that the party at the receiving end of the application would have to comply with any order, and any delay that would be caused to the Court's administration of justice. I am well aware that there have been cases when additional security for costs has been ordered in the middle of a trial, but of course, every case depends on its own facts.

12. In the present case, I note that on 22nd June 1999, the Respondents' solicitors were aware that orders had been made for discovery and that they would therefore have been aware that costs would have to be incurred in the compliance with those orders. Further, the new estimate of 12 days' hearing (being a re-estimate first suggested by the Respondents' legal advisors) would have been known to the Respondents' solicitors well before the start of the Petition on 1st September. There have been no last minute affidavits such as to increase the issues too much shortly before the start of the Petition.

13. No explanation has been proffered by the Respondents' solicitors as to why no breakdown of the original bill and no new bill had been sent to the Petitioner's solicitors within the two months from June to August. Although the Petitioner's solicitors had in their letter of 29th June stated that the Petitioner was willing and able to provide security in a reasonable sum, they cannot be taken to have accepted by that that they would be able to provide further funds at the drop of a hat. A reasonable time must be afforded to the Petitioner (given that HK$700,000.00 i.e. the sum sought even as reduced is not a small sum) and the Court has to recognise that the Petitioner (or Mr. Bing Choy) is an individual and is not a financial institution.

14. The question here is that if the Petitioner is to be afforded a reasonable time to raise funds for further security, what is to happen to the proceedings in the meantime? If the case is to proceed, the order to pay security for costs would be an exercise in futility, i.e. the order for security providing for stay of the proceedings if security is not provided. If, however, the case is to be stood down for a reasonable period of time to enable the Petitioner to raise funds, that would completely disrupt the flow of the proceedings as well as affect the time allocated for the hearing of other litigants' cases in the near future.

15. I would also add that Mr. Reyes has asked me to consider what he submits to be a lack of merits in the Petitioner's case as revealed so far. I would only indicate that at this stage of the proceedings, my mind remains open as far as merits are concerned.

In all the circumstances, it seems to me that this application has been made far too late, that it would be unfair to deny the Petitioner a reasonable time to consider the request and to raise funds for any further security, and that the due administration of justice requires this court to proceed with the hearing of the Petition now without any delay. The application is dismissed.