P T GRAHA MULTIMULIA CEMERLANG v. SILVER TECH ENTERPRISE LTD

HCCW 883/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 883 OF 2004

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D E C I S I O N

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1.  This is an application for security for costs by a company that is the subject of a creditor’s winding-up petition.

2.  It is not in dispute that the petitioner, P T Graha Multi Mulia Cemerlang, is ordinary resident out of the jurisdiction in that it was incorporated in Indonesia and does not have a place of business in Hong Kong.

3.  It is also not in dispute that the petitioner has no assets within the jurisdiction against which the company, Silver Tech Enterprise Limited (“the Company”), may enforce any award of costs that may be awarded in its favour in these proceedings.

4.  That being the case, the court would usually exercise its discretion to order security for costs to be given, in the absence of any circumstance as would make it unjust to do so.

5.  The petitioner’s counsel, Mr Wayne Hon, submitted that it would be unjust to order security for costs, on the basis that the petitioner has a high degree of probability of success on the hearing of the petition.

6.  It must be borne in mind that the threshold of demonstrating the probability of success in this situation is very high indeed.  As was mentioned by the court in a number of instances, 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 high probability of success or failure (Porzelack KG v Porzelack (UK) Limited [1987] 1 WLR 420 at 423B to F; Leslie Fay Companies, Incorporation trading as Breckenridge Sportswear Division v Cheerio Limited [1990] 1 HKC 463; Re Kwong Hing International (Holdings) Limited, HCCW No. 409 of 1999, 6 October 1999, Sakhrani J).

7.  The petitioner’s claim is for the sum of approximately US$133,000.00, being money paid to the Company for goods which the Company had failed or refused to deliver.  There is no dispute as to the amount that had been paid by the petitioner to the Company and there is no dispute that the Company did not deliver the goods.  In summary, the petitioner says that it has a strong case for the amount claimed for total failure of consideration.

8.  In the evidence filed in opposition of the petition, the Company has asserted that it has a set-off, counterclaim or cross claim against the petitioner in the sums of US$126,000.00 odd and HK$430,000.00.  It denies liability to deliver the goods notwithstanding the sums paid by the petitioner, alleging that the petitioner was in breach of a term in the contract to pay the full price before shipment.  The petitioner’s answer to this is that it was only obliged to pay 75% of the total contract price before shipment and that it had done so.  Each side has produced different proforma invoices containing different payment terms, in support of the version advanced by each, with the petitioner alleging that the revised proforma invoice produced by the Company, which would appear to be a subsequent version containing a hand-written alteration, was not initialled by any representative of the petitioner to indicate its agreement to the alteration in the payment term.  The Company alleges on the other hand that the total amounts actually paid by the petitioner were in excess of 75% of the total price of the goods and this does not appear to support the petitioner’s contention that it was obliged to pay only 75% before shipment.

9.  Next, the submission was made on behalf of the petitioner that the substantial set-off or cross claim raised by the Company was not mentioned or quantified in the letter of the Company’s solicitors dated 11 June 2004, in response to the statutory demand served on the Company on 2 June 2004.

10.  The evidence adduced by the Company in support of its claim for damages of US$126,000.00 odd was also criticised by the petitioner’s counsel, on the basis that all that the Company did was to provide a breakdown of the various heads of losses with no or little documentary evidence to support the contention that such losses were actually incurred.  The Company may or may not seek to bolster its case in this respect by filing yet further evidence in opposition of the petition.

11.  Lastly, as regards the claim for HK$430,000.00 being expenses incurred by the Company for setting up an entity in Hong Kong called Seven Wonders International (HK) Limited at the request of the petitioner and for which the Company seeks reimbursement from the petitioner, it was submitted by Mr Hon that this is irrelevant notwithstanding documentary evidence adduced by the Company that such expenses were incurred and there is no denial by the petitioner in the evidence filed that there was outstanding a sum of HK$430,000.00 for which the Company has not been reimbursed.  As I understand the petitioner’s contention, it is alleged that as this was a separate transaction, this cannot be taken into account.

12.  Taking all the criticisms made of the Company’s grounds of opposition to the petition in totality, I am not persuaded it has been clearly demonstrated there is a very high degree of probability that the Company’s opposition to the petition would fail.  In the exercise of my discretion, this is a proper case to order security for costs to be given.

13.  The amount sought by the Company in its skeleton bill is HK$368,244.99.  The petitioner’s solicitors contended that this amount is grossly inflated and should be reduced to HK$149,181.00.  I take into account that a substantial part of the costs in the skeleton bill would have already been incurred up to this stage.  Without going into minutiae of the items of costs and taking a broad view of the matter, I assess a reasonable amount to cover the costs of the petitioner, up to the conclusion of the hearing of the petition, at HK$200,000.00.

14.  I make the following orders:

(1)	the petitioner is to provide security for costs of the Company in these proceedings by making a payment into court of HK$200,000.00 within 28 days hereof;
(2)	in the event that payment is not made into court within the time as stipulated, all further proceedings herein are to be stayed until security is provided or unless the court otherwise orders and there be liberty to apply in respect of this paragraph;
(3)	in the event that payment is made into court within the time as stipulated, the petition is to be restored to the winding-up petitions call-over list on 7 days’ notice for further directions and the parties are to submit draft directions they wish to seek 3 clear days before the adjourned hearing; and
(4)	the costs of this application be to the Company in any event.