MILLION TOP INTERNATIONAL DEVELOPMENT LTD v. PERSIL DEVELOPMENT LTD

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The parties are in dispute over the terms of the purchase of a property on the ground floor of Chungking Mansions, Kowloon. The purchase price of the property was $63.38 million of which a deposit of $.5 million was paid.

2. On 21 November 1996, the defendant's solicitors wrote to the plaintiff's solicitors saying -

"As your client, the Plaintiff, is a limited company without substantial assets nor caries on business and is unlikely to meet a cost order in the captioned action if one is made against it, we shall be glad to hear from you within the next 7 days whether your client is prepared to provide security for our client's costs of the captioned action. Failing a satisfactory reply we are instructed to apply to the Court for an order."

3. The defendant's solicitors did not receive a satisfactory reply, or, indeed, any reply, so they proceeded by summons dated 28 November 1996 to apply for the security. On 23 December 1996, the Master ordered that the plaintiff furnish security in the sum of $600,000.

4. The plaintiff now appeals against this order.

5. The application for security is brought under Section 357 of the Companies Ordinance (Cap. 32). This section says -

" Where a limited company is plaintiff in any action or other legal proceeding, any judge having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the company will be unable to pay the costs of the defendant if successful in his defence, require sufficient security to be given for those costs, and may stay all proceedings until the security is given."

6. Mr Kat concedes that the plaintiff has financial problems and may not be able to pay an order for costs against it. I am satisfied that there is "credible testimony that there is reason to believe the [plaintiff] will be unable to pay the costs of the defendant". Indeed, the plaintiff's evidence concentrates on seeking to show that the plaintiff's holding companies have substantial assets in Hon Kong, and that is why the defendant need not be worried about a costs order.

7. Mr Kat argues that requiring the plaintiff to provide security would be oppressive, and would have the effect of preventing the plaintiff from continuing the action. Mr Chiu says there is no oppression, and there is no danger of the plaintiff being unable to continue the action. I agree with Mr Chiu. The plaintiff's own evidence is that the plaintiff's holding companies will back it financially. Mr Chiu argues that the words of Saville J. in Flender Werft A,G. v Aegean Maritime Ltd [1990] 2 Lloyd's Reports 27 support him. These words, at 29, are-

          "... where commercial entities are involved, any argument that an order for security will stifle a claim is likely to fail in limine, unless the Court is persuaded that in truth it is at least more likely than not that funds are not available from any source to provide or support the security."

8. Mr Kat says that the Court of Appeal decision in Trident International Freight Services Ltd. v Manchester Ship Canal Co [1990] BCC 964 is against this approach. I do not accept that. In that case, at page 698C, Nourse L.J said-

          "... the judge correctly took into account the fact that TLS had given financial assistance to the plaintiff in the past and thereby, as one of its creditors, had an interest in assisting it further to pursue the action ... having taken [this argument] into account and found it to be an attractive one, the judge did not think, on the evidence, that TLS could be relied upon to provide further assistance with the action. I do not think that this court can say that that was a view of the evidence with he could not properly form."

9. In my view, the Trident case, far from being inconsistent with Flender Werft, as Mr Kat contends, actually supports the approach of Saville J.

10. In the result, I conclude that the defendant has brought its case solidly within section 357. and there is absolutely no basis at all for arguing that the defendant's application is oppressive.

11. That leaves only the question of quantum. The defendant asked the Master for security in the sum of some $1.336 million. Plainly, the Master found this to be unjustified, and ordered the security to be in the sum of $600,000. The defendant's original claim was based on a skeleton bills of costs prepared by the defendant's solicitors. The defendant has now put in evidence another skeleton bill prepared by a costs draftsman. This bill estimates disbursements at about $1.378 million profit costs at about $280,000.

12. The appeal before me is, of course, are-hearing. In Evans v Bartlam [1937] A.C. 473, at 478, Lord Aitken said, in relation to appeals from the Master -

          " ... the judge in Chambers is in no way fettered by the previous exercise of the Master's discretion ... he is entitled to exercise [his discretion] as though the matter came before him for the first time. He will, of course, gibe the weight it deserves to the previous decision of the Master; but he is in no way bound by it."

13. In matters relating to the assessment of cost, the Master's decision deserves to be given considerable weight because the Master ahs much experience in this area; far more than I. However, I have looked afresh at the bills submitted, and I have come to the conclusion that $600,000 is a fair and reasonable figure in all the circumstances.

14. As to costs, Mr Kat submits that, because the letter of demand did not quantify the claim for security and because the defendant relied on a new skeleton bill at the hearing of the appeal, the costs should not follow the vent. I reject these arguments, In my view, there is no reason whatsoever why the plaintiff should not bear the consequences of its unreasonable opposition to the defendant's application from the date when it was invited to discuss the matter of security. The plaintiff will pay the defendant's costs both here and below.