ZHOU FENLI v. WU KWAI YUNG

HCMP 569/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 569 OF 2009

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BETWEEN

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DETERMINATION

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Introduction

1.  I have to decide if Mr. Zhou should provide security under O.23 r.1 of the Rules of the High Court for Mr. Wu’s costs of the action, on the ground[1] that Mr. Zhou, being admittedly a resident of the PRC, is not an ordinarily resident within the jurisdiction of Hong Kong.

Principles

2.  Authorities[2] have been cited by both counsel in their written submissions. Each case depends on its facts. It is trite that a plaintiff who is ordinarily resident abroad may be ordered to give security, and the court has wide discretion in deciding whether security ought to be given.

Discussion

3.  This dispute arises from a Memorandum of agreement signed between the parties for the sale to Mr. Zhou of Mr. Wu’s shares in a BVI company, which in turn holds a 67.5% of shares (“the Shares”) in Sanyuan Group Limited, a listed company in Hong Kong as well as of the HK$30,000,000 worth of convertible bonds (“the Bonds”) issued by the said company. It is alleged that Mr. Wu was in breach of the said Memorandum of Agreement by having failed to take steps to carry effect of the terms of the Memorandum.

4.  In March 2009, Mr. Zhou obtained an ex parte injunction order by, inter alia, restricting Mr. Wu from disposing the assets in respect of the Shares and the Bonds.

5.  Mr. Zhou, as part of his undertaking given to the court for the purpose of obtain the injunction order, has further deposited a sum of HK$500,000 into a Hong Kong bank account as security for damages.

6.  It is the settled principle of law that a court would not embark on a minute detailed examination of the merits of the case in respect of an application of this kind. Although counsel for Mr. Zhou has attempted to do so by, in great details, harping on the strength of Mr. Zhou, I would decline to be drawn into an examination of the merits.

7.  Having considered the background of this case, and the nature of the claim, I would say that Mr. Zhou’s case is genuine, and not frivolous. I decline to exercise my discretion to order security.

8.  The application is therefore refused.

Order

9.  The Defendant’s summons for security for costs is dismissed.

10.  The usual costs order should be for the costs to follow the event, and I so order. Hence, there shall be a costs order nisi that the Defendant do pay the Plaintiff’s costs of the application, including costs reserved, together with certificate for counsel.

11.  I further order that the costs be summarily assessed in lieu of taxation.

12.  Any application to vary the costs order nisi be made by summons within 14 days from the date of handing down of this Determination.

13.  Upon the costs order becoming absolute the parties shall within 7 days (if the costs are not agreed) fix a ½ hour hearing before me for summary assessment of costs. A receiving party shall lodge and serve a statement of costs 7 days before the hearing, and a statement of objections shall be similarly lodged and served 3 days before the hearing.