WESTSIDE LTD. v. BENNETT, KIT LING CANNIE AND ANOTHER

HCA 4497/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4497 OF 1998

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J U D G M E N T

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1. This is an application by the defendants to stay the proceedings on the ground that the plaintiff has not paid costs in the amount of $117,007. Alternatively, the defendants ask for security for costs on the ground that the plaintiff will not be able to pay the defendants their costs if they were successful in the action and that the proceedings should be stayed in the meantime.

2. The summons was issued on 18 April 2001 and returnable today which is the first day of trial. The trial was adjourned on 18 September 2000 when the plaintiff put in a late witness statement of a witness. This resulted in an adjournment of the trial with a costs order made against the plaintiff to be taxed on a common fund basis and to be paid forthwith. The taxation of those costs took place on 27 March 2001 and the costs were agreed on that day at $117,007. The allocatur was issued on 10 April 2001 and on 11 April 2001 the defendants' solicitors asked the plaintiff's solicitors for payment on or before 17 April 2001. That payment was not made and hence the summons which was then issued on 18 April 2001.

3. The evidence shows that there was a previous application for security for costs made in May 2000 but that application was withdrawn after evidence was filed on behalf of the plaintiff showing that the plaintiff held 25,000 bearer shares in a BVI company, Cheesman Limited, which was involved in a joint venture with a Shanghai company. The balance sheet of the joint venture company was also produced. On that evidence the defendants were satisfied that the plaintiff had assets and withdrew the application for security for costs. The evidence before the court now shows that the assets of the joint venture company remain more or less the same and that there has been no change in the value of the bearer shares held by the plaintiff.

4. Mr Merry, counsel for the defendants, has submitted that the plaintiff has been in breach of a court order to pay costs and the court should stay the proceedings particularly because of vexatious conduct by the plaintiff. I am not persuaded that there has been vexatious conduct in this case. The costs have not yet been paid because on the evidence the plaintiff asserts that it needs time to sell its bearer shares to meet the costs order. I am not persuaded that merely non-payment of the order for costs within the 7 days period demanded is vexatious conduct on the part of the plaintiff. Also, I cannot say that the proceedings have been conducted vexatiously and I do not stay the proceedings on the ground that the order for costs has not yet been paid.

5. On the application for security for costs, it is true that the plaintiff has not paid the costs order on demand. As such, the company has been unable to pay its debts as they fall due. That is a very recent development as the costs order was taxed on 27 March 2001 with the allocatur being issued on 10 April 2001. On 17 April 2001, the 7 days period as demanded expired. Prima facie, therefore, the plaintiff is unable to pay its debts as and when they fall due and is insolvent. The position has certainly changed from the time that the defendants withdrew their earlier application for security for costs. I am satisfied that the plaintiff is unable to pay its debts as they fall due and that is strong and cogent evidence that it will be unable to pay the costs of the defendants as and when they fall due if successful in their defence. There has been no delay in making the application as it was only recently ascertained that the plaintiff is unable to pay its debts as and when they fell due. The trial has been fixed for five days. The defendants have incurred and will continue to incur substantial costs in defending this claim. I bear in mind that if an order for security for costs is made the trial will have to be adjourned. This will be to the prejudice of the plaintiff as well as to the defendant. But, in my view, it would be manifestly unjust if sufficient security for costs were not provided to the defendants in defending these proceedings. There is no suggestion that the plaintiff's claim would be stifled if an order for security for costs is made. In the exercise of my discretion, I order that sufficient security for costs be provided by the plaintiff.

6. The skeleton bill of costs for a 4 days' trial shows that the costs will be $1,110,996.60. The trial estimate has been revised to 5 days. Without in any way going through the items in the skeleton bill of costs in detail, I would consider that $800,000 would be sufficient security in the circumstances and I order that the said sum be provided as security for the defendants' costs. I see no sufficient reason why the past costs which have been incurred should not form part of the security for costs. The amount to be ordered is in the discretion of the court.