Read the full judgment text of CACV 000014/1991 on BabelCite. This Court of Appeal judgment was delivered on 22 February 1991 before Fuad VP, Power JA, Macdougall JA.
Civil procedure – security for costs – limited company as plaintiff in liquidation – application under s.357 Companies Ordinance (Cap 32) – defendant applied for security approximately three and a half years after the writ and only about eight weeks before a ten-week trial, with no explanation for the delay – whether the judge's discretion to refuse the application was properly exercised. The plaintiff, China Underwriters Life and General Insurance Co Ltd (CUL), had been in liquidation since 1984 with the Official Receiver as liquidator, and sued BBMB Finance (Hong Kong) Ltd to recover some HK$450 million said to have been unlawfully appropriated from a HK$230 million deposit. BBMB joined four third parties and ultimately sought security for costs of around HK$45 to HK$50 million. Held, dismissing the appeal (Fuad VP, Power JA and Macdougall JA concurring): the power under s.357 is discretionary; there is no burden of proof either way; and a very late, unexplained application for security is a factor which may be, and on the facts was, decisive. Following Sir Lindsay Parkinson & Co Ltd v Triplan Ltd [1973] QB 609, Pearson v Naydler [1977] 1 WLR 899, Extramoney Ltd v Chan, Lai, Pang & Co [1990] 2 HKLR 268 and Jenred Properties v Ente Nazionale, delay is always a relevant consideration, particularly where it has or might have led the plaintiff to act to its detriment, such as distributing an interim dividend to creditors. The defendants had known of the liquidation from the start but took no steps under s.357 for three and a half years; requiring CUL to give security at that late stage would likely shut it out of a genuine claim and so the judge's discretion was properly exercised against making an order. The Official Receiver's undertaking not to make further distributions was accepted as adequate protection. Appeal dismissed with costs to the respondent on an order nisi basis.
Legal issues: Discretion to refuse security for costs under s.357 Companies Ordinance where defendant's application is very late and unexplained · Burden of proof and allocation of evidential onus where a plaintiff company in liquidation resists security for costs
Outcome: Appeal against the dismissal of the defendant's application for security for costs is dismissed. The defendant retains the benefit of the Official Receiver's undertaking not to make any further distributions to creditors pending resolution of the action.