Guess ?, Inc. and Others v. Lee Seck Mon and Others

HCA000604/1986

1986, No. A 604

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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BETWEEN

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Coram: The Hon. Mr. Justice Nazareth in Court

Date of Hearing: 17, 18, 19 & 22 May 1989

Date of Delivery of Judgment: 1 June 1989

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J U D G N E N T

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1. The plaintiffs apply by summons for leave to re-amend their re-amended Statement of Claim. The primary and material effect of the proposed amendments is to substitute the 9th defendant ("Gasoline") in lieu of the 2nd to the 5th plaintiffs ("the Marcianos"). The latter originally commenced this derivative action on behalf of Gasoline, which was not itself able to bring proceedings, its management being in the hands of the Nakashes and the board being evenly split between the Marcianos and the Nakashes. That difficulty has now disappeared with Gasoline having gone into liquidation in the State of Delaware and the court and custodian there having given authority for proceedings to be brought by Gasoline itself. The practical effect of that will be that instead of individual plaintiffs of substance, there will be substituted an insolvent company. The defendants do not object to the amendments, but not surprisingly, seek first, security for costs and second, an undertaking for continuous discovery from the Marcianos. Such an undertaking has now been provided and is embodied in a consent order. Accordingly it is only the matter of security for costs that I am concerned with, and, of course, leave for the amendments.

The background to the main action is I think sufficiently stated in my judgment of 2nd October, 1987, upon interlocutory matters. To that must be added the fact that at all material times there has been an indemnity agreement between the Nakashes and the defendants for the former to indemnify the latter in respect of the action; indeed the evidence is that some of the costs of the defendants have already been indemnified. Also it must be mentioned that in court proceedings in California between the Marcianos and the Nakashes, the jury has found for the Marcianos. I shall return to the relevance, if any, of those proceedings and the jury's verdict.

2. Since that matter was raised, I will say that procedurally, I do not think the matter of security has necessarily to be dealt within the context of the plaintiffs' application for leave to amend. But it is not disputed that the court has jurisdiction to do so, and, in any case, the defendants have filed applications for security under Order 23 rule 1. In my judgment it is clearly appropriate that I should deal with the matter of security at the same time as the application for leave to amend. Whether I do so in the context of granting leave to amend, or of the Order 23 rule 1 summonses seeking security taken out by the defendants, makes no difference that I can see.

3. The plaintiffs are all resident outside the jurisdiction. The position is therefore that while the court does have a real discretion whether or not to order security to be provided, the usual ordinary or general practice of the court is to require the foreign plaintiff to give security for costs. (see the Supreme Court Practice 1988, p.398, para 23/1-3/4) The position was helpfully stated by Sir John Donaldson M.R. on 1st November 1988 in De Bry v. Fitzgerald (unreported) in the following passage which I take from the text of the judgment provided by the plaintiffs:

"Under R.S.C. Order 23, r1 (1) (a), it seems to me that I have an entirely general discretion either to award or to refuse security, having regard to all the circumstances of the case. However, it is clear on the authorities that, if other matters are equal, it is normally just to exercise that discretion by ordering security against a non-resident plaintiff. The question is what, in all the circumstances of the case, is the just answer."

4. Mr. Aldous for the plaintiff contends that there are very special circumstances which require security to be refused in the exercise of the court's discretion. He relies in the main upon the following grounds:

Plaintiffs' grounds:

(i)Strength of plaintiffs' prima facie case.

5. The plaintiffs' first ground is the strength of their prima facie case. It is said at p.397 para 23/1-3/2 of the Supreme Court Practice 1988, that in exercising its discretion, "the court will have regard to all the circumstances of the case ...... A major matter for consideration is the likelihood of the plaintiff succeeding. If there is a strong prima facie presumption that the defendant will fail in his defence to the action, the court may refuse him any security for costs (see per Collins J. in Crozat v. Brogden (1894) 2 Q.B. 30)". Also in Sir Lindsay Parkinson & Co. Ltd. v. Triplan Ltd. (1973) Q.B. 609; 626, Lord Denning M.R. said "The court has a discretion which it will exercise considering all the circumstances of the particular case." He implicitly included amongst those circumstances, whether the plaintiff company "has a reasonably good prospect of success".

6. Mr. Aldous claimed that the plaintiffs have a very strong prima facie case. For that he relied on the jury's verdict in the California action. It is clear from the transcript of the opening addresses of the both the Marcianos' and the Nakashes' attorneys that a major allegation was that the Nakashes entered into their agreement to purchase a share of the 1st plaintiff ("Guess") to get their hands on Guess designs and that they did not intend to abide by the terms of the agreement. As I have said the jury found for the Marcianos. But the Nakashes are not themselves parties to the present action which turns on many issues. In my view it does not necessarily follow that the plaintiffs have a strong prima facie case against the defendants. I should add that it is common ground that the plaintiffs do have a prima facie case.

7. Mr. Aldous also relied upon faxes exchanged between the and the defendants and an admission by the 2nd defendant which clearly suggest that the plaintiffs' designs were to be used for the defendants' purposes in breach of the agreement mentioned. That, it seems to me, gives the plaintiffs' case considerable credibility. But that is yet a far cry from establishing the many components of the plaintiffs' case.

8. The two foregoing matters relied upon by Mr. Aldous do not in my view make the plaintiffs' prima facie case so significantly stronger as to be a significant consideration in the exercise of the court's discretion.

(ii) Absence of necessity for security.

9. The plaintiff contends that security is unnecessary because the Marcianos have ample funds and Guess also has plenty of assets. Notwithstanding the scale the security sough i.e. a total of some HK$165 million between the defendants, a matter to which I shall obviously have to return, in my view on the evidence it must be accepted that the Marcianos do have sufficient funds and Guess sufficient assets despite its narrow asset base relative to its high earnings. It is also probable on the evidence that a judgment of this court could be enforced in a a reasonably summary way against the plaintiffs in the United States, in particular against the Marcianos and Guess in California, and Gasoline in Delaware. The possibility of the plaintiffs obstructing or defeating enforcement by bringing in collateral claims against the defendants in those jurisdictions, to which they have not submitted themselves, seems to me to be remote and speculative; likewise the possibility of a dramatic change in the fortunes of the plaintiffs, or worse, deliberate disposal of their assets, in the considerable period that the action may take to its conclusion, variously estimated at 3 to 5 years. Nonetheless, those possibilities cannot be altogether discounted and must be weighed in the balancing exercise that the question of what is just and the exercise of the court's discretion entail, as must be the delay that would be involved and the fact that the costs of such enforcement proceedings in those jurisdictions would not be recoverable.

10. It must also be noted that the impasse between the 3 Marciano directors and the 3 Nakash directors on the board of Guess has been resolved for the time being by the appointment by the court of an additional director who is an ex-judge. However I do not think it realistic to conclude that as a result any judgment debt obtained by the defendants would be promptly paid by Guess.

11. In the present context, Moon v Atherton, reported in (1972) 2 Q.B. 435 and also referred to in the Supreme Court practice 1988 at paras 15/12/7, 15/12/10 and 20/5-8/27, was canvassed by both sides for slightly different purposes. Suffice it to say that I do not find that case of assistance on the question of whether the Marcianos should on "discontinuance" be ordered to pay costs or provide security. The costs already incurred were ordered to be paid in that case by the representative plaintiff of the 11 individual persons (including the representative herself), who were discontinuing their actions altogether. Here the representative action instituted by the Marcianos on behalf of Gasoline is to continue, with that plaintiff itself directly coming on record (which formerly it was in practical terms unable to do because of the Nakash management and the evenly split board). Furthermore as I have already indicated it is open to me to consider the provision of security on the basis of the summonses filed by the defendants under Order 23 rule 1.

12. Mr. Aldous also sought to rely upon an indemnity provided by the Marcianos to the custodian appointed in the liquidation of Gasoline in Delaware. I will say at once that I am not satisfied that that indemnity will avail the defendants.

13. Finally I come to the indemnity agreement. I do not think it renders the security unnecessary any more than does e.g. insurance. However there is another aspect to that indemnity agreement i.e. not that it renders security unnecessary but the effect it should have upon the exercise of the court's discretion. I shall deal with that aspect later.

(iii) Relative unimportance of the Gasoline claim.

14. In practical terms it is clear that Gasoline's claim is a minor one relative to that of Guess. Gasoline only came into being in August 1984. Furthermore it is involved in relatively few of the substantial number of the designs in respect of which relief is sought. This ground would perhaps have been of greater relevance had security been sought solely in the context of the proposed amendments. On the wider independent issue of whether security should be ordered, it is rather more relevant to the apportionment of the amount of security between Guess and Gasoline. Accordingly I do not think the relative importance of the Gasoline claim a significant consideration.

(iv) High cost of providing security.

15. The plaintiffs' evidence is that the cost of providing a bank guarantee for HK$165 million for 5 years would be of the order of $16 million much of which would have to be paid "up-front". This cost is based upon the plaintiffs' bankers in California, presumably upon existing security and relationships, providing acceptable assurance to a Hong Kong banker who would in turn provide the guarantee to the court. It involves a double charge that, it is said, cannot be avoided, but that is nonetheless objected to by the defendants, who are prepared to consent only to reasonable charges being costs in the cause.

16. In the ordinary way security would have to be provided by payment into court of the actual amount assessed, which I have little doubt would in real terms cost even more. In my view, if the plaintiffs do not wish to adopt the normal course, then it must be for them pay for the costs of any alternative of their choosing (which is acceptable to the court). Nonetheless the cost of providing security is in my view a matter to be taken into consideration.

(v) Delay.

17. The legal position in relation to delay is stated thus in the Supreme Court Practice 1988 p.406 para 23/1-3/28:

"Delay in making an application for security for costs ... may be relevant to the exercise of the court's discretion to order security. Although in most cases delay is not a decisive factor, it may be treated as important, especially where it has led, or may have led the plaintiff to act to his detriment, or may cause him hardship in the future conduct of the action (Jenred Properties Ltd. v. Ente Nazionale Italiano per il Turismo, Financial Times, October 29, 1985, CA)"

18. Turning to the facts, the action was commenced in January 1986. The present summonses for security were filed on the 15th and 16th May 1989, although the question of security was raised by the defendants in correspondence in November 1988 following the plaintiffs' application for leave to re-re-amend the writ and statement of claim. Only the 7th defendant had raised the matter earlier, when its solicitors wrote to the plaintiffs' solicitors on 14th October 1987 requesting security for costs in the sum of HK$7 million on the basis of a draft skeleton bill which was enclosed. Initially the plaintiffs solicitors disputed the 7th defendant's entitlement to such security but in January 1988 agreed to provide it in the sum of HK$5 million. Discussion over the wording of a bank guarantee ensued but the matter was not pursued to the actual provision of security.

19. Clearly there has been substantial delay on the part of the first six defendants. But there is no evidence that the delay has or may have led the plaintiffs to act to their detriment; nor does it seem to me that it has caused hardship in the conduct of the action or may do so in the future. On the contrary they claim that there should be no difficulty in the costs being met.

20. It is convenient to mention here that the defendants have sought to rely upon the plaintiffs' offer or agreement to provide security to the 7th defendant and also their counsel's observation at the adjournment of the plaintiffs' application to amend, that some protection for the defendant's costs would be entirely fair, as binding the plaintiffs. I will only say that I am not persuaded that is so whether as an estoppel, or an admission or even in principle. Nonetheless it is a matter that should be taken into consideration in the balancing exercise.

(vi) Security would only benefit the Nakashes.

21. The next ground relied upon is that any order for security would only beneift the Nakashes. In practical terms that is right. There is provision in the indemnity agreement for the defendants to refund to the Nakashes any amount they are able to recover from the plaintiffs. However, as I have already indicated, I am not persuaded that the existence of an indemnity agreement of itself is directly relevant to the issue and would operate to inhibit the making of an order for security. On the other hand, as I have said, there are aspects of the indemnity agreement in this case and related circumstances that I think are relevant to the exercise of the court's discretion.

(vii) Quantum.

22. The plaintiffs claim that the defendant's skeleton bills of costs are grossly inflated and to a large extent speculative. Inevitably, in my view, the estimation of future costs must to some degree be speculative. Nonetheless, once it is determined that security should be ordered, it becomes necessary for the court to determine as best possible what amount would indemnify the defendants in respect of party and party costs, or to put it in another way, to estimate the sum the applicants for security would recover on taxation on a party and party basis (see Procon Ltd. v. Provincial Building Ltd. (C.A.) (1984) W.L.R. 557; 560, 570).

23. The amount of security to be provided, as I have indicated, will fall to be assessed only after it is determined that security is to be provided. In the context of the latter issue it is only necessary of me to say that I do not regard the skeleton bills of costs as so inflated or speculative as to discredit the very claim for security.

Whether an order for security would be just.

24. I turn them to the balancing of the various factors and considerations. A helpful starting point is the "usual ordinary or general rule of practice of the court to require the foreign plaintiff to give security for costs, because it is ordinarily just to do so". That of course does not derogate from the discretion of the court whether or not to order security, nor the necessity to have regard to all the circumstances of the case, both of which matters are plainly spelt out in Order 23 rule 1 of the Rules of the Supreme Court.

25. To begin with it seems to me to be prima facie just that the defendants all of whom incidentally are resident within the jurisdiction, should have security within the jurisdiction for the costs of defending an action brought by non-resident plaintiffs, who have no assets whatever within the jurisdiction. But as Mr. Aldous submits, this is a very unusual case in which there are clearly special circumstances. The question is whether having regard to those circumstances it would still be just to order security to be provided. Turning to those circumstances, as I indicated I do not consider the strength of the plaintiffs' prima facie case as significant, although in a sense the prima facie case may be regarded as providing the necessary foundation which, of course, would need considerable building upon. Nor do I think the ability of Guess to pay, an answer by a non-resident plaintiff to an application for security. The relative importance of Gasoline's claim is of very limited if any relevance to the question of security and, as I have said, bears more upon the question of apportionment between Guess and Gasoline. In my view the cost of providing the security for costs, which the plaintiffs complain is enormous, is also of little relevance. The plaintiffs must certainly have been advised at the outset of the near certainty that security for costs would have to be provided and in the reasonably early stages should have foreseen from the nature of their claims and the complex and voluminous documentary evidence involved that very substantial costs would be incurred. In the normal way, security would have to be provided by paying the appropriate sums into court. That, as I have said, would no doubt be more costly to the plaintiffs than the bank guarantee they seek to provide instead; in those circumstances they can hardly complain of the cost. Furthermore, the complaint seems to me to be substantially met by the defendant's agreement to the reasonable costs of providing such security being costs in the cause.

26. It seems to me that the plaintiffs' real ground lies in the plaintiffs' complaint of the action of the Nakashes, who they say are orchestrating the defendant's conduct in this matter and in particular the application for security to oppress the plaintiffs and put pressure upon them. They point to the indemnity agreement and to joint defence agreements it incorporates, which with much else, have been expurgated, somewhat conveniently for the defendants, by the court in the Californian proceedings, whence the plaintiffs obtained the indemnity agreement. Nonetheless it is a fair assumption that the Nakashes can enforce general if not specific control of the defendant's conduct of their defence in this action. It is really they who are fighting the Marcianos. It is that aspect of the matter that has caused me particular anxiety. That and the fact that the Nakashes own 50% of both Guess and Gasoline! However, even if the Nakahes were themselves parties in the action, I think they would have been entitled to security for costs. Notwithstanding a degree of disquiet, I am not persuaded that their standing behind the defendants, for whose involvment they must largely be responsible, should deprive them or the defendants of security for costs. It is contended for the plaintiffs that they were forced to bring their action here as copyright cannot be enforced in the United States, and that it was the Nakashes who decided to "knock off" the plaintiffs' designs in Hong Kong. That does not seem to me to be a good reason to deny the defendants security for costs that it otherwise seems just to order.

27. The bulk of the costs that may be awarded to the defendants, particularly future costs, will clearly fall to be paid by the Guess. There is no good reason to doubt its, or for that matter the Marcianos' ability to pay those costs. Such ability is, of itself, no reason why security should not be ordered; the question is whether the costs would be paid.

28. As to the Marcianos themselves, the action was always a representative action on behalf of Gasoline, instituted in that way because of the impasse on the board. Now that that difficulty has been removed by the appointment of a custodian, it is possible for the Marcianos to withdraw and for Gasoline itself to continue the action. I can see no reason why the Marcianos should not be permitted to withdraw. That, however, in effect would be a discontinuance by them in respect of their own liability for costs incurred to date, the existence of which liability is clear and not disputed by them. In my judgment it is appropriate and just in all the circumstances that they should provide security for the costs of the defendants up to the present occasioned in resisting the claims of Gasoline.

29. As to Guess, in all the circumstances it seems to me just that it should provide security for both the past and future costs it may have to pay to the defendants.

30. To proceed, Gasoline is insolvent, but it is well established that insolvency or impecuniosity is no ground for ordering security (Supreme Court Practice 1988 p.401 para 23/1-3/13). On the other hand it is a non-resident plaintiff and on the usual ordinary or general rule of practice should be ordered to provide security. There seems to me to be no reason why Gasoline should not be required to provide security for the future costs of the defendants. The only factor that concerns me is that Gasoline is insolvent, and should not be driven from the judgment seat on that account. Impecuniosity is, as I have said, not a ground for ordering security, and although mentioned, it has not been relied upon as such. Equally it has not been suggested on behalf of Gasoline that it will not be able to provide security; on the contrary the suggestion is that there is no shortage of funds and assets and indeed that the defendants have nothing to fear in regard to non-payment of their costs if they become so entitled. In the result, in my judgment, it is just to order Gasoline to give security for future costs attributable to its claim, and at the same time to give liberty to apply should it transpire that it cannot provide such security.

31. Before I proceed to asses the quantum of the security to be provided, it is in my view necessary to consider whether security should be ordered for all future costs or only for such part as is foreseeable and reasonably assessable, i.e. whether a staggered approach should be adopted. In the course of the hearing, it was conceded on behalf of the defendants that they were not pressing for security for costs of the actual trial. It has not been seriously disputed that the action may not be concluded for yet another 5 years or so. Furthermore, although documents amounting to some 100,000 pages have been discovered, it seems that yet another 40,000 will be discovered within the next 9 months or so, by which time the process of discovery is expected to be completed. The parties will then be able to review their respective positions and will no doubt do so. It could well be that the issues, particularly in terms of the numbers of designs, patterns and markers disputed may be narrowed down. In the latter context, the decision of the American courts on recission may well have a significant impact. Likewise although apparently remote at this stage, the possibility of settlement cannot be ruled out. As I have said the defendants have quite rightly decided not to press for security for the costs of the trial at this stage. Assessing them at the present stage is in my view too speculative an exercise, and as I have indicated involves looking too far ahead.

32. I proceed them to the earlier costs i.e. those up to the present, and from the present to the commencement of the trial. Both skeleton bills i.e. those of the 1st six defendants and of the 7th defendant were subjected to a detailed, wide-ranging and plausible attack made on the plaintiffs' behalf both by Mr. Aldous in his submissions and by the plaintiffs' solicitors in their affidavits. They were equally stoutly and no less plausibly defended in the submissions of their solicitors. I am nonetheless persuaded by Mr. Aldous' submission that at this stage security for costs beyond completion of discovery, reckoned to be accomplished in about 9 months' time or so, would not be appropriate. It seems to me that assessment of costs beyond that becomes much more speculative, and moreover is beyond the immediately foreseeable future and would be more appropriately left to the next stage of a staggered program that I consider would be more suitable in the particular circumstances. Needless to say I do not accept the defendant's submission that costs of the order of $2 million for each 4 or 5 day interlocutory hearing, on the analogy of previous such hearings, would be thereby inflicted upon the parties. For only one thing, the issue of whether security should be provided, which occupied most of the time at the hearing of the present summonses, will not have to be repeated.

33. In deference to Mr. Burton's submissions on behalf of the 1st six defendants I would also acknowledge that in my judgment of the 2nd October, 1987, I may have underrated the defendants' difficulties in making discovery against a background of insufficient particulars being furnished by the plaintiffs. On the other hand I remain of the view that there was a certain quality of resistance to discovery that I have no doubt was not related to the lack of particulars; that not only justified the characterization of discovery by the defendants as lamentable, but in my view requires a degree of caution in assuming that discovery will be completed without further difficulties.

34. Finally bearing in mind that it is open to the defendants at any time to make application for further security for costs, and that it would tend to be oppressive in the particular circumstances to order the plaintiffs to provide security for the very large amounts in question so far ahead, it appears to me just at this stage to order security to be provided for the costs of the defendants only up to the completion of discover, and to leave it to the defendants to make application for further security if and when they think fit. That would also have the considerable advantage of providing an opportunity to review the amount of security already provided, which may be desirable having regard to the very general way in which that has to be assessed, as will be seen.

Assessment of quantum.

35. I turn then to the quantum of security to be provided. The skeleton bills of costs of the defendants produce the following totals:

36. Unfortunately the skeleton bills do not readily reveal the estimated costs to completion of discovery. Neither did Mr. Aldous address me upon their quantum in his opening submission, although he did submit that costs beyond the completion of discovery would not be appropriate. When he sought to deal with the matter in his reply, counsel for the defendants objected. In the result I find myself severely handicapped in assessing those costs.

37. Dealing with some specific points in issue, I do not accept the plaintiffs' contention that all the considerable costs of coordination between the advisers of the 1st six defendants on the one hand and those of the 7th defendant on the other, are unreasonable. In my view some coordination is reasonable and should be allowed as proper party and party costs. Nonetheless I have serious doubts whether costs for coordination on the scale claimed is reasonable.

38. It is also apparent from the skeleton bills of costs that the agreement now reached and reflected in one of the consent orders, that discovery in relation to quantum and that relating to liability should be split and the former deferred, has not been reflected in the bills. Not having been provided with the necessary data upon which to make such an apportionment, nor having had the benefit of submissions from counsel on that matter, the possibilities are that some of the costs of discovery relating to liability may be wrongly assessed; in that event they can no doubt be picked up in an application for further security.

39. To proceed, in my view there does not seem to have been sufficient discount made for the contempt proceedings in the 1st six defendants' bill. Again I have found it very difficult to quantify the effect of that.

40. Considerable assistance to the Nakashes has been rendered by the defendants legal teams. I am not satisfied that seepage of some of the costs of that into the two skeleton bills has been effectively avoided. Here, too, I have experienced the same difficulty in quantification of the result.

41. Notwithstanding the not unreasonable explanations made on behalf of the 7th defendant for the quantum disparity between its original skeleton bill totalling $7 million and the present bill totalling $72.9 million, that is of such magnitude that it does reflect in some degree upon the credibility of the latter.

42. On the other hand I accept the defendants' contention that the substantial costs of interlocutory applications has not been included in their skeleton bills, but I am unable to assess to any reasonable degree the extent to which such costs would off-set the over-estimation in respect of the several matters I have mentioned. Also it must be accepted that the two skeleton bills have been professionally prepared by independent costs draftsmen, but I think in that context it must also be borne in mind that several of the basic assumptions upon which they would have had to proceed, particularly in reference to future costs, must have been provided by the defendants' advisers, and are not disclosed. In that regard it must be apparent to the 1st six defendants that the bill of costs they submitted to the Nakashes and upon which they were indemnified is cogent proof of those costs. They have nevertheless chosen not to produce it. I do not think that is entirely offset by the consideration that the plaintiffs have likewise failed to assist the court with a comparison of their own costs. Some allowance must also be made for the likelihood that the total figure of costs put forward would not emerge unscathed in taxation, and for the possibility of settlement; remote as the latter may seem it cannot be ruled out even before completion of discovery given the possible impact of developments in the Californian proceedings. I bear in mind also the other guidance afforded in the Procon case not least that in the following passage in the judgment of Griffith L.J. at p.571E:

".... if very little information is put before the court upon which it can estimate costs, then again it will be reasonable to make a large discount, particularly when it is borne in mind that, if the security proves inadequate as litigation progresses, it is always possible for a further application to be made for more security."

Having regard to all the circumstances and the foregoing matters, in my judgment the amounts in the skeleton bills must be very substantially discounted, particularly in respect of the future costs. Approaching the matter in the broad way necessitated by the incomplete data provided (the responsibility for which must lie on the defendants upon whom the onus rests of establishing the appropriate amount of security to be provided) in my judgment, the costs and therefore the security for them should be of the order of the following amounts. In respect of the costs of the 1st six defendants to date, $13 million, and from the present to the completion of discovery, $15 million. In respect of the 7th defendant's costs to date, $6 million, and from the present to the completion of discovery, $9 million. I hasten to add that no part of the bills have been discounted in pursuance of the one-third discount practice which was discredited in the Procon case, notwithstanding the tenacity with which it has been retained by the Editors of the White Book (see the 1988 Ed. p.406 para 23/1-3/29).

Apportionment of security.

43. To proceed, eventually if the defendants succeed in the action and are awarded costs the court will have to apportion the costs to be paid between the plaintiffs. Notwithstanding the difficulties of anticipating that at the present stage, which were emphasised on behalf of the defendants, I do not think I can evade that apportionment exercise in the form it arises in the present context. As I have said, in my judgment the Marcianos should provide security for the costs to date of the defendants attributable to the claim of Gasoline. As to that I can find nothing before me upon which it is possible for me to reject the submissions of the plaintiffs that it would be of the order of 10% of the defendants total costs, which seems to me to be approximately the right proportion to adopt in all the circumstances. The Marcianos will therefore have to provide security for 10% of the defendant's costs to date; Gasoline 10% of the costs from the present up to the completion of discovery, and Guess the balance of the defendant's costs up to the completion of discovery. In the light of the defendant's concessions, the plaintiffs will be at liberty to provide security not only in the usual may by payment into court, but if they so elect by bank guarantee, in which case the costs of so doing will be costs in the cause.

44. Reverting to the plaintiffs' application for leave to amend, there is clearly no reason why this should not be granted and I will so order. But it seems to me that notwithstanding that the matter of security is procedurally not required to be dealt with in the context of the leave to amend, it is just and proper that the Marcianos should not be permitted in effect to discontinue until the security to be provided by them is in place. Accordingly leave to amend, at any rate in relation to the Marcianos will be conditional upon the security to be provided by them being in place before the amendments are made.

45. To sum up, of the security for costs to date of $13 million in respect of the 1st six defendants, and of $6 million, in respect of the 7th defendant, the Marcianos will provide 10% and Guess the remaining 90%; and of the security for costs from the present up to the completion of discovery of $15 million in respect of the 1st six defendants, and of $9 million in respect of the 7th defendant, likewise Gasoline will be ordered to provide security for 10% and Guess the remaining 90%.

46. There will be leave to the plaintiffs to amend in terms of the amendments indicated in their summons on condition that they first provide the security ordered, subject to liberty to apply. I will now hear counsel on the costs of the summonses and on any further directions that may be sought.

Representation:

Mr. Charles Aldous, Q.C. and Mr. Aarif T. Barma instructed by Messrs. Herbert Smith for plaintiffs.

Mr. Michael Burton Q.C. and Mr. Felix Pao instructed by Iu, Lai & Lai for 1st to 6th defendants.

Mr. Jonathan Sumption Q.C. and Mr. Ray Faulkner instructed by Denton, Hall, Burgin & Warrens for the 7th defendant.