CUPIDAY (TIANJIN) MOBILE NETWORK TECHNOLOGY CO LTD v. PING AN BANK CO LTD

HCIP 43/2023

[2024] HKCFI 3229

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

INTELLECTUAL PROPERTY PROCEEDINGS NO. 43 OF 2023

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BETWEEN

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D E C I S I O N

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Introduction

1.  This is the Defendant’s application by a summons dated 30 July 2024 for security for costs up to the stage of exchange of the first round of factual witness statements (“Subject Summons”). The application is made pursuant to O.23, rr.1-2 of the Rules of the High Court (Cap. 4A) and section 905 of the Companies Ordinance (Cap. 622). It was heard on 30 October 2024 with the decision reserved to be handed down. This is the Court’s decision.

Background

2.  In gist, this is a passing-off action instituted by the Plaintiff (“P”) against the Defendant (“D”) in relation to D’s use of the names “平安口袋财务” and “平安數字口袋” on D’s mobile phone application. P alleges that it has built up goodwill in its “口袋財富” mobile application in relation to professional financial services. P thus commenced this action against D by the issuance of a Writ of Summons on 3 July 2023 endorsed with a Statement of Claim of 27 pages in length. D filed its Defence of 15 pages on 17 November 2023. The issues raised in this action are not particularly complex but the case has only proceeded to the stage of a list of documents having been filed by P but not yet by D.

3.  On 30 July 2024, D took out the Subject Summons seeking security for costs in the amount of HK$4,584,007 on the grounds that P is ordinarily out of the jurisdiction with no substantial assets in Hong Kong and that there is reason to believe that P will be unable to pay D’s costs if D succeeds in its defence.

4.  P does not oppose D’s application for security for costs but disputes quantum. In particular, P contends that the various types of work included in D’s skeleton bill of costs (both incurred and estimated) as undertaken or to be undertaken by D’s solicitors, and leading and junior counsel respectively are to some extent duplicated and therefore some of such costs should be excluded or at least discounted. P contends that for this application, the security for costs should not exceed HK$500,000.

5.  D maintains that given the scale and ramifications of P’s claim and the substantial reputation enjoyed nation-wide as well as internationally by D and the Ping An Group, D has justifiably engaged leading and junior counsel to have the conduct of these proceedings on its behalf. It is further contended by D that most of the work done and costs incurred thus far have only involved junior counsel. D also makes it clear that the security of HK$4,584,007 that is being sought is only up to the stage of exchange of first round of factual witness statements and D reserves the right to apply for further security in the future. D thus contends that the amount of HK$500,000 being offered by P is woefully inadequate even just to cover the costs that have already been incurred by D (calculated by D to be HK$1,294,235).

Legal principles on security for costs

6.  It is trite law that in an application for security for costs, it is not the function of the court to make a preliminary run at deciding the ultimate success or failure of the claim. The court should not delve into the respective merits of the parties’ cases unless it can clearly be demonstrated one way or the other that there is a high probability of success or failure[1]. The parties in this case were content for this Court to proceed on the basis that P has a bona fide claim and D has a bona fide defence.

7.  The court does not condescend to a line-by-line evaluation of the skeleton bill but will adopt a “broad-brush” approach in assessing quantum for security for costs[2].

8.  A party is only entitled to sufficient (and not complete) security that would be just in all the circumstances, and not necessarily on a full indemnity basis. What constitutes sufficient security depends on the circumstances of each case[3].

9.  Applicants for security for costs must be realistic in their costs estimates. It is not the role of the court to undertake a mini-taxation and vet through each item in the bill of costs. The court has to rely heavily on the applicants and those advising them for an accurate estimate. There is no room for any practice of inflating a bill and then settling for less in anticipation of a “broad-brush” discount by the court[4].

Discussion

10.  Prior to the hearing, the Court noted from D’s skeleton submissions dated 25 October 2024 that Mr Yan SC together with Ms Wong had been briefed to make the application for D. The Court then received and read P’s skeleton submissions on 28 October 2024. The Court considered the matter and came to a provisional view that D’s skeleton bill was clearly excessive for the purpose of security for costs and should at least be cut down to HK$2.5 million. That was a very rough assessment made without the benefit of oral submissions by the parties.

11.  With a view to saving costs of the hearing to be incurred, the Court sent a letter to the parties on 28 October 2024, asking them whether they would consider a compromise and consent to an order for security for costs in the amount of HK$2.5 million. D replied to confirm its agreement to the said amount but P could not agree. Failing agreement between the parties, the hearing of the application was held.

12.  This Court heard and was much assisted by the oral submissions of the parties on 30 October 2024. I will not condescend to a line-by-line evaluation of D’s skeleton bill but will adopt a “broad-brush” approach in assessing the appropriate quantum. I am persuaded that there is indeed substantial duplication of costs between those that were or will be charged by D’s solicitors and those by D’s leading and junior counsel. The estimated costs of engaging an expert in the sum of HK$821,422, which do not even include the production of a report, also appear to me to be highly excessive. The security to be ordered should be sufficient and not necessarily complete, and in the present case, it should certainly not be ordered on a full indemnity basis. Having heard the oral submissions by the parties and considered the matter in the round, the Court took the view that the suggested amount of HK$2.5 million should be further reduced.

13.  It is noteworthy that at the end of the hearing, D’s solicitors produced to the Court a statement of costs for the application in the total sum of HK$932,930 (inclusive of the fees of leading and junior counsel). I will not go into the details of the statement. It suffices for me to say that it is, to put it mildly, surprising to see that just for this application, the partner of D’s solicitors had to spend 15 hours and the junior solicitor another 25 hours on communicating with the client; and the two solicitors spent a total of 8 more hours attending the Court and P, and another 10 hours attending their own counsel, leading to the total costs of HK$245,400 being incurred merely on communications relating to the Subject Summons. Such hours were on top of those charged by the solicitors on professional work (incurring another total sum of HK$201,700) such as drafting the Summons and the two supporting affirmation (24 hours in total by the two solicitors), and perusal of the Writ of Summons, and P’s list of documents and supporting affirmation in reply (13 hours in total by the two solicitors). Again, there is duplication of costs by leading and junior counsel who also charged for, inter alia, drafting, settling and/or reviewing the Summons and/or the two supporting affirmations (another sum of HK$479,000 in total).

14.  When asked whether he would apply for certificate for two counsel for this application, Mr Yan SC quite fairly and appropriately indicated that he would not. In the Court’s view, the solicitors’ statement of costs was also excessive and this application only warranted certificate for junior counsel. Having heard from the parties, I would summarily assess D’s costs of the application to be HK$300,000.

15.  The way D’s solicitors have produced the statement of costs has led the Court to take a similar view on the issue of accuracy of D’s skeleton bill of costs. Upon careful reconsideration of D’s skeleton bill and the available materials in the present proceedings, I am persuaded that a fair and just order for sufficient security for costs (up to and including the stage of exchange of first round of factual witness statements) would be HK$1.7 million.

16.  As P has opposed this application but the security to be ordered well exceeds the sum that P has offered, P should be ordered to pay D the costs of this application.

Conclusion

17.  For the reasons set out above, I make the following orders:-

(1) The Plaintiff do within 28 days from the date of this order give security for the Defendant's costs in the amount of HK$1,700,000 to be paid into court up to and including the stage of exchange of first round of factual witness statements;

(2) Pending provision by the Plaintiff of the security for costs pursuant to paragraph (1) above, all further proceedings in this action be stayed;

(3) In the event that the Plaintiff fails to provide the security for costs pursuant to paragraph (1) above, the Plaintiff's claims against the Defendant in this action be dismissed;

(4) An order nisi that the costs of this application be paid by the Plaintiff to the Defendant, with certificate for junior counsel, such costs being summarily assessed at HK$300,000; and

(5) There be liberty to apply.