Universal Woolens, Inc. v. First Ocean Knitters Limited

Case No.HCA 6931/1985

Court

High Court CFI

Date—

Judge—

Case Document

100%Judiciary

HCA006931/1985

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Headnote

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Security for costs - Court has a discretion but normal rule is that a foreign plaintiff should give security unless there was a factor present which made it unnecessary or unjust to do so. Certain telex messages did not constitute an admission of partial liability and no other factor present. Order for security made, but as there seemed to be a substantial chance of settlement it would be for 60% of the skeleton bill of costs.

1985 No. A6931

IN THE SUPREME COUROF HONG KONG

HIGH COURT

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BETWEEN

	UNIVERSAL WOOLENS, INC.	Plaintiff
	and
	FIRST OCEAN KNITTERS LIMITED

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Coram: Hon Penlington, J. in Chambers

Date of Hearing: 15th January 1986

Date of delivery of Judgment: 15th January 1986

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JUDGMENT

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1. This is an appeal from the Master's decision whereby he refused to make an order that the Plaintiff, a company registered in the United States of America, give security for the Defendant's costs.

2. It is now quite clear that a plaintiff resident abroad is not always obliged to provide security for costs and that the power to make such an order is entirely discretionary under Order 23(1). There are several matters which the Cot is obliged to take into consideration and each application must be treated entirely on its own facts. The Plaintiff here is a company registered abroad and there is no evidence that it has property or other assets in Hong Kong. Should it be required to provide security for the Defendants costs.

3. There are several matters which the Courts have taken into account in deciding how the discretion should be exercised. While by no means exhaustive, the following appear to be relevant.

1.	Is this a strong claim and, if it is, is there a genuine defense disclosed in the pleadings. If it is a very strong claim to which there seems to be no real defence the Court should not order security. Crozat v. Brogden (1894) 2 Q.B.30 per Collins J at 33. The reverse would also apply and Mr. Woo says there is no application to strike out the claim. Equally there is no Order 14 summons. There seems to be no dispute that the sweaters were supplied and paid for. What is in dispute is whether the Plaintiff was the buyer and whether it has the right to sue and whether and to what extent the goods were defective. These are clearly issues for the trial and I see nothing to suggest that they are not real issues.
2.	Is the application made in good time. Clearly, if an application for security is made at the last moment, it is a factor to be taken into account. Here the application is made in good time, and indeed at a very early stage of the proceedings. Per Denning MS R. in Parkinson and Co. v. Triplan Ltd. (1973) 1 Q.B. at 627.
3.	Is there an admission of partial liability or payment into Court. Where there has been an admission of partial liability or a sum has been paid into Court, in either case sufficient to cover the defendant's costs, no order should be made. In Parkinson and Co. v. Triplan Ltd. an open offer of settlement had been made by the defendants there which would adequately cover their costs in the event of the matter going on. The Court of Appeal upheld an order refusing security for costs. That was despite there being evidence that the plaintiffs were probably not financially able to pay costs if they did not succeed. The Plaintiff here relys on that decision. Certain telexes have been exhibited by the plaintiff here and it is argued that these constitute an admission of partial liability. The dispute is over alleged defective sweaters sent by the Defendant to a firm in America who were apparently acting as agents for the Plaintiff. When the defects were discovered, the plaintiff told the defendant that they would have to sell the defective goods but at a very substantially discounted price. The defendants then sent a telex which read as follows:-
	"	We presume at present are the off season which you difficult to sell the sweaters. We suggest you wait about 2 months time and dispose at your market. If you still involve loss, please inform us by telex at that time."
	This was followed by another message which read:-
	"	Please sell all at your market and send us three samples. We settle with you about your loss after receiving samples."
	There was finally a message which read: -
	"	Your claim amount too large but thinking of our good relationship, we only can adjust 5% of invoice amount for future order until you get full US$21,000."

4. It is suggested that these messages constitute an admission of liability to the extent of US$21,000 which would be ample to cover the defendant's costs. I do not think that is right. There is certainly evidence from the telex messages that the defendants were willing to settle the matter by granting a discount on future orders. They had, however, requested samples of the defective sweaters and there is nothing in the pleadings at the moment whereby they have agreed that the sweaters were so defective or that the selling price was as had been suggested by the plaintiff, US$2 each as against a purchase price of US$12.

5. While the Court do now have a discretion, the general rule of practice is still that a foreign plaintiff should, in the normal course of events, provide security for the defendant's costs. In Aeronave S.P.A. v. Westland Charters Ltd. and others (1971)1 W.L.R. 1445 at 1449 Denning M.R. said:-

"In 1984 in Crozat v. Brogden (1894) 2 Q.B. 30 Lopes L. J. said at p.35 that it was an inflexible rule that if a foreigner sued he should give security for costs. But that is putting it too high. It is the usual practice of the Courts to make a foreign plaintiff give secury or costs. But it does so as a matter of discretion because it is just to do so. "

6. The principle then seems now to be that if a defendant succeeds he should not be forced to go to another jurisdiction to enforce his order for costs and he should have security unless there is a good reason why it is not just to so order. I do not see anything in this case which justifies a departure from that practice.

7. A skeleton bill of costs has been presented which shows a total amount of $100,000 including Counsels' fees. This is a substantial sum in relation to the amount in dispute, which is only about $170,000, but I am satisfied it is a not unreasonable estimate. However this is a very early stage of the proceedings and I think there must be a substantial chance that the matter will be settled. I will make an order that the plaintiff provides security for the defendant's costs to the satisfaction of the Master in the sum of $60,000.

8. The defendant is to have its costs here and before the Master.

(R.G. Penlington)

Judge of the High Court

Representation:

Patrick Woo (Messra. Arthur A & go.) for Plaintiff.

John Leigh of Stephenson Harwood & Lo for Defendant.