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HCCT000071/1997
1997, No. CON 71
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
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SUPER KEEN INVESTMENTS LIMITED |
Plaintiff |
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GLOBAL TIME INVESTMENTS LIMITED |
Defendant |
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GRAND MILLION DEVELOPMENT LIMITED |
Third Party |
Coram: The Hon Mr Justice Findlay, in Chambers
Date of hearing: 22 June 1998
Date of handing down of judgment: 24 June 1998
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JUDGMENT
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The Application
1. This is an application, under both Order 23, Rule1 and Section 357 of the Companies Ordinance, Chapter 32, by the third party for an order that the defendant do provide security for the costs of the third party proceedings in the sum of $5,343,956.03. The parties are agreed that, if I order such security, it should be fixed at the sum of 75% of that claimed, which, rounded down, is $4 million.
The Grounds
2. Under Order 23, it must appear to the Court that the defendant in this case "is a nominal plaintiff who is suing for the benefit of some other person and that there is reason to believe that he will be unable to pay the costs of the defendant if ordered to do so." Under section 357, I may order security "it appears by credible testimony that there is reason to believe that [the defendant] will be unable to pay the costs of the [third party] if successful in his defence".
3. Under both provisions, whether or not an order should be made is a matter of discretion.
Nominal Plaintiff?
4. I do not know whether or not the defendant is a nominal plaintiff in the third party proceedings. There is reason to believe that both the plaintiff and the defendant are members of the same family, and the defendant has chosen, for its own unexplained reasons, to conceal the true beneficial interests behind these parties. However, it is unnecessary to come to a conclusion on this point because section 357 does not require this.
Inability to Pay
5. The defendant makes little effort to establish that it would be able to pay the costs of the third party if the third party is successful, and Mr Ng did not pretend that is was arguable that it would be able to do so, apart from on one basis. Mr Ng accepts that the evidence discloses that the defendant has only one asset of value. This is the deposit of $100 million paid to the third party. The argument here is that, even if the third party is successful, part of this sum would be returnable to the defendant, and the costs could be paid from this.
6. The defendant argues that the deposit of $100 million is more than the conventional deposit and would not be forfeitable.
7. I do not accept that this is probable. The deposit was made in respect of the sale of an uncompleted commercial building. The agreement was entered into on 11 March 1994 and the building was to be completed by 30 June 1995. This is a special circumstance that may justify a deposit higher than the 10% usual in the case of developed residential properties. This would be to cope with fluctuations in the commercial market over the long period before completion. In any event, the evidence, and common knowledge, is that the property market in Hong Kong has slumped. If the third party succeeds, it is unlikely that the defendant will receive the return of any of its deposit because this will not cover the damages alleged by the third party.
Discretion
8. Nevertheless, says Mr Ng, I should refuse the application as a matter of discretion. He says this for various reasons -
i. the defendant's claim is bona fide;
ii. the defendant has a strong case;
iii. the third party admits that two of the walls of the building are cladded, without a curtain wall;
iv. the application is made very late; and
v. the deposit is higher than a genuine deposit.
9. It is accepted by Mr Miu that he cannot say the defendant's claim is not bona fide.
10. I do not accept that the defendant has a strong case. That cannot be judged until the case is heard. This allegation seems to be based largely on the admission that the walls were fitted with cladding, rather than a curtain wall. This does not make the defendant's case strong. There is doubt as to what the contract required. The defendant's expert points to a part of the contract documents that seem to require a curtain wall, but the drawings to which this expert himself refers dictate that the walls should be clad. There is a contradiction that can be cleared up only at trial.
11. I do not consider that the application is being made very late. Lateness, in this context, is of little relevance if it causes no prejudice to the defendant, and the defendant is unable to point to any prejudice. The application was made some five months before trial. If it had been made much earlier, the security ordered, if any, would probably not have covered the trial, and another application would have been necessary. It seems to me that, in order to avoid two applications for security, the application is made at the right time.
12. I have already dealt with the matter of the alleged excessive deposit.
The Result
13. It seems to me that there is no adequate basis on which I should exercise my discretion to refuse the application.
14. I order that the defendant pay into court the sum of $4 million as security for the costs of the third party proceedings within 28 days, failing which the third party proceedings be stayed and the lis pendens on the property be vacated.
The Costs
15. There seems no reason why costs should not follow the event. I make an order nisi that the defendant pay the costs of this application in any event.
The Second Application
16. The third party also makes application for an order that the defendant serve the provisional expert's report on the issue of extension of time within 14 days, failing which judgment for the third party be entered.
17. There is no doubt that the defendant has failed to comply with court orders in this regard, and without good reason. The conduct of the defendant's solicitors, as revealed by the correspondence, has been most peculiar. In spite of telling the third party's solicitors that the provisional expert's report would be ready at the beginning of May 1998, this report was in respect of one issue only. A report on the extension of time issue was not even instructed until early May 1998, and Mr Ng tells me that another 30 days will be required to complete this.
18. I order that the defendant's provisional expert's reports be served by 15 July 1998, failing which the defendant will be debarred from leading any expert evidence on any issue in respect of which a provisional expert's report has not been served.
19. I make an order nisi that the defendant pay the costs of this application in any event.
Representation:
Mr Lawrence Ng, instructed by Messrs Wilfred KH Lam & Co, for the defendant.
Mr Nelson Miu, instructed by Messrs Victor Ng & Co, for the third party.
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JK FINDLAY |
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Judge of the High Court Court of First Instance |
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