Peter Ward v. Harting (HK) Ltd

DCCJ 2744/2004

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2744 OF 2004

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BETWEEN

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Coram:  Deputy District Judge J. Ko in Chambers

Dates of Hearing:  12^th December 2005

Date of Handing Down Judgment:  14^thDecember 2005

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D E C I S I O N

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1.There are 2 summonses before the court, both taken out by the Defendant.

2.The Plaintiff is agreeable to the summons dated 2^nd December 2005 and I make an order in terms of that summons by consent.

3.In the remaining application by the summons dated 26^th August 2005 as amended, the Defendant is applying for security for costs and that all further proceedings be stayed pending the provision of such security.  The application is made on the ground that P is resident outside the jurisdiction.

4.It is common ground that I should adopt the approach set out in the judgment of Peter Gibson LJ in Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534 at 539-540 as follows:

“	1.	The court has a complete discretion whether to order security, and accordingly it will act in the light of all the relevant circumstances.
	2.	The possibility or probability that the plaintiff company will be deterred from pursuing its claim by an order for security is not without more a sufficient reason for not ordering security.
	3.	The court must carry out a balancing exercise. On the one hand it must weigh the injustice to the plaintiff if prevented from pursuing a proper claim by an order for security. Against that, it must weigh the injustice to the defendant if no security is ordered and the defendant finds himself unable to recover costs from the plaintiff in due course.
	4.	In considering all the circumstances, the court will have regard to the plaintiff company's prospects of success. But it should not go into the merits in detail unless it can clearly be demonstrated that there is a high degree of probability of success of failure.
	5.	The court may order any amount up to the full amount claimed by way of security, provided that it is more than a simply nominal sum; it is not bound to order a substantial amount.
	6.	Before refusing to order security on the ground that it would unfairly stifle a valid claim, the court must be satisfied that, in all the circumstances, it is probable that the claim would be stifled. There may be cases where this can properly be inferred without direct evidence. The court should consider not only whether the plaintiff company can provide security out of its own resources to continue the litigation, but also whether it can raise the amount needed from its directors, shareholders or other backers or interested parties. It is for the plaintiff to satisfy the court that it would be prevented by an order for security from continuing the litigation.”

5.The parties have also not disputed the following principles, taken from paragraph 23/3/4 of Hong Kong Civil Procedure 2004, on the meaning of “ordinary resident”:

“In R. v. Barnet LBC, ex p. Shah [1983] 2 A.C. 309; [1983] 1 All E.R. 226, HL, it was held that, in the context of the Education Acts, the phrase "ordinarily resident" should be construed according to its ordinary and natural meaning, and that a person is ordinarily resident in a place if he habitually and normally resides lawfully in such place from choice and for a settled purpose, apart from temporary or occasional absences, even if his permanent residence or "real home" is elsewhere. The relevant dicta in Levene v. I.R.C. [1928] A.C. 217, HL, Lysaght v. I.R.C. [1928] A.C. 234, HL, and R. v. Barnet LBC, ex p. Shah [1983] 2 A.C. 309; [1983] 1 All E.R. 226, HL were applied by the Court of Appeal to an application under O.23, r.1 in Parkinson v. Myer Wolff & Manley, unreported, April 23, 1985, CA. A plaintiff who makes a provisional decision to go and live abroad is not "ordinarily resident" out of the jurisdiction, at any rate so long as he has not left the country  (Appah v. Monseu [1967] 1 W.L.R. 893; [1967] 2 All E.R. 583).  A holder of a Hong Kong identity card is not necessarily ordinarily resident within Hong Kong (Chian Ker Chi Paul v. Super Zone Investment Ltd [1994] 2 H.K.C. 679).”

6.Ms. Kandell, the Defendant’s solicitor, observes that the Plaintiff has consistently given an address in Zhuhai City in the PRC as his place of residence in his witness statement and affidavits filed herein as well as the annual return dated 2^nd July 2005 of the his company, Ward Enterprises (HK) limited.  Indeed the matter is put beyond doubt by the Plaintiff in his 2^nd affidavit filed for the purpose of this application in which he deposed that:

“I normally reside in Zhuzhai or Zhongshan for convenience of my day to day China based business operations and have purchased in Zhuzhai … in addition to other properties in Zhongshan.  Equally I have to spend up to 6 weeks a year in the UK overseeing the development of the UK operations and spend between one/two days to one week each month in Hong Kong for development of the export business.”

7.Mr. Clough, the Plaintiff’s counsel, observes that there is no inflexible rule or practice that a plaintiff resident abroad will be ordered to give security for costs and the power to make such order is entirely discretionary.  Whilst not disputing the fact that the Plaintiff habitually and normally resides lawfully in Zhuzhai or Zhongshan in the PRC from choice and for a settled purpose, he submits that I should also take into account the reason for the Plaintiff’s so doing, the Plaintiff’s substantial connection with Hong Kong through his company incorporated in Hong Kong and his business operations and the fact that the Plaintiff holds bank accounts locally.  In particular, he contrasts the situation of this Plaintiff with that of a hypothetical plaintiff residing in Hong Kong and running his business in the PRC and submits that the Defendant should not have experienced much additional difficulty in terms of enforcing any costs order against the Plaintiff than the hypothetical plaintiff.

8.In reply, Ms. Kandell observes that the Plaintiff (as opposed to his company) is suing in his personal capacity in this action and it does not appear from the evidence that he has any substantial assets in Hong Kong.  Although the Plaintiff may hold bank accounts locally, no information on those accounts such as bank balance is known.  In any event, the Plaintiff can transfer such balance out of the jurisdiction easily.  She also submits that the Defendant would likely encounter undue delay or be put to undue expense in enforcing any order for costs against the Plaintiff’s assets in the PRC as there is yet no reciprocal arrangement for enforcement of judgments between the jurisdictions. 

9.Mr. Clough has, sensibly in my view, not gone into the merits of the Plaintiff’s case in great detail.  Although the likelihood of the Plaintiff succeeding in his claim is relevant, it is clear that the court should not go into a detailed examination of the merits of the case too readily.  After all, it is the Plaintiff’s own assessment that the issue in this case comes to a determination of who is telling the truth as to a series of conversation relating to the contractual basis of his engagement (see paragraph 15 of the Plaintiff’s 2^nd affidavit).

10.The purpose of requiring security from an overseas resident plaintiff is to provide a fund subject to the jurisdiction against which an order for costs can be readily enforced.  As a matter of discretion, it 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 (see Hong Kong Civil Procedure, paragraph 23/3/4).  The Plaintiff has confirmed in his second affidavit that he has means to meet any order of costs made against him.  Having regard to all the circumstances of this case, I am satisfied that this is a proper case to order security for costs to be given.

11.As to quantum, the Defendant asks for $1,037,980 as security for costs up to and including trial.  The trial estimated to last 2 days.  Ms. Kendell has, correctly in my view, conceded that the court should take into account the costs awarded to the Plaintiff by His Honour Judge Muttrie on 27^th September 2004 in assessing the quantum of security to be ordered.  Mr. Clough submits that the figure asked for by the Defendant is grossly inflated and he has made criticisms on some of the items in the updated skeleton bill of costs of the Defendant exhibited as Exhibit “SCAK-8”. 

12.In the circumstances of this case and taking a broad-brush approach, I am of the view that a sum of $450,000 as the costs for the whole action up to and including a 2-day trial and after taking into account the costs order of His Honour Judge Muttrie made on 27^th September 2004 in favour of the Plaintiff seems to be appropriate.

13.I therefore order that the Plaintiff do give security for the Defendant’s costs in this action up to and including trial in the sum of $450,000by paying the said sum into Court within 14 days to be placed in an interest bearing account and the interest thereon to accrue to the credit of the Plaintiff.  It is further ordered that until such security be given all further proceedings be stayed.

Mr. Neal Clough instructed by Messrs Henry HC Wong & Co. for the Plaintiff.

Ms. Susan Kendall of Baker & McKenzie for the Defendant.