Roger Paul Germain Yves Fromentin v. Kim's Yacht Co Ltd and Another

HCA 1226/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1226 OF 2004

BETWEEN

Before : Hon Sakhrani J in Chambers

Date of Hearing : 24 January 2007

Date of Judgment : 24 January 2007

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JUDGMENT

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1.This is an appeal against the order of Master de Souza on the 1^st and 2^nd defendants’ application that the plaintiff do provide security for the defendants’ costs up to the action being set down for trial.  Master de Souza ordered that the plaintiff do provide security in the sum of HK$450,000 by payment into Court or by way of a bank guarantee by a bank in Hong Kong.  He also ordered that all further proceedings be stayed in the interim. 

2.As a matter of discretion, it is the usual ordinary or general rule of practice to require a foreign plaintiff to give security for costs because it is ordinarily just to do so.  However, it is not an inflexible or a rigid rule that a plaintiff resident abroad should provide security for costs.  The Court in its discretion may order security for costs if having regard to all the circumstances of the case the Court thinks it just to do so (O. 23, r. 1(1) RHC).

3.The plaintiff’s claim is for breach of contract in respect of an agreement dated 22 December 2000 as amended in February 2003 for the construction of a yacht.  The plaintiff’s case is that the 1^st defendant breached the agreement and in addition there is a claim for deceit.  The plaintiff’s claim for damages is to the extent of about US$847,000. 

4.There is a counterclaim by the 1^st defendant.  However, it has been made plain that the counterclaim is by way of set-off only.  This is on the basis that if it is found at trial that the 1^st defendant is liable to the plaintiff, then the 1^st defendant counterclaims by way of set-off the sum of US$580,000.  If the defendant is not found to be liable at trial then there is no counterclaim.  And it has been made plain to me that the counterclaim operates by way of set-off only and not as a separate claim. 

5.Here the plaintiff is undoubtedly a foreigner resident abroad.

6.Pursuant to an order made by Yam J the plaintiff on 3 December 2004 paid into court the sum of US$100,000 in order to obtain release of the yacht.  Mr Maurellet submits that the sum of US$100,000 paid in was intended as security for the 1^st defendant’s counterclaim.  However, Mr Sheppard disputes that the money was paid in as security for the counterclaim. 

7.Mr Maurellet made the further point that the US$100,000 represents assets of the plaintiff and as the plaintiff has assets in Hong Kong there should be no order for security for costs.  However, on the material before me I am not satisfied that the US$100,000 is freely available to the plaintiff as it is money paid into court pursuant to an order.  That being so, I am not satisfied that the plaintiff has any assets freely available in Hong Kong. 

8.It seems to me that if, as Mr Maurellet submits, the 1^st defendant does not have a separate counterclaim there is no reason for the money to remain in court.  If that is right then Mr Maurellet’s client should make an application for the release of the sum of US$100,000.  However, it is plain that the sum US$100,000 is not meant to be security for costs. 

9.Mr Maurellet made the point that there was delay in applying for security.  However, the action is nowhere near ready for trial and from what I have been told discovery has been completed. 

10.The master was satisfied that the sum of US$450,000 represented sufficient security up to the action being set down for trial.  I agree with the master that it is a reasonable sum. 

11.The authority of Innovare Displays plc v. Corporate Broking Services Ltd [1991] BCC 174 where a modest sum for security was ordered and relied on by Mr Maurellet is not applicable here.  In that case the application was made very close to trial dates and there was also evidence that if a substantial sum were ordered for security that might well stifle the plaintiff’s claim.  These considerations do not apply here. 

12.It seems to me that the master was right to order security for costs in the amount as he did. 

13.The only other matter that I think I ought to deal with is the order whereby he made an order that all further proceedings be stayed pending the payment of the security for costs.  I am prepared to vary that part of the order to permit the plaintiff to make an application to seek release of the US$100,000.  It seems to me that if the plaintiff is right then there is no reason why the US$100,000 should not be paid out to the plaintiff.  However, before that can be determined the defendants must be given an opportunity to deal with the matter properly with affidavit evidence in opposition if they wish as I have been informed by Mr Sheppard that they wish to file affidavit evidence in opposition. 

14.I will dismiss the appeal but vary the order to the extent that the plaintiff be permitted to make an application for the release of the US$100,000 in court.

Mr José-Antonio Maurellet, instructed by Messrs Robertsons, for the Plaintiff

Mr Andrew Sheppard, instructed by Messrs Minter Ellison, for the 1^st and 2^nd Defendants