IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 1974 OF 2009
D E C I S I O N
1. This is a dispute over an alleged partnership in connection with certain business carried out in the Mainland. The plaintiffs areTaiwanese. By a consent order made on the application of the plaintiffs and the 3rd defendant and dated 11 January 2012, the plaintiffs were ordered to provide security for the costs of the 3rd defendant in this action up to the conclusion of trial in the sum of HK$600,000.
2. By a Summons dated 30 July 2013, the 3rd defendant makes a further application for security for costs. The basis for the application is that the trial of this action, whichwas originally scheduled to start on 17 September 2012 with 6 days reserved, was aborted and rescheduled to commence on 22 October2013 with 11 days reserved. As a consequence of the adjournment of the trial, the costs of the 3rd defendant will increase significantly.
3. I have been told by counsel that the reason for the adjournment was that the court took the view that the trial would require considerablymore than 6 days and it was not possible to resume the trial within a short period of time in the event of it being part-heard dueto availability problems.
4. There is no dispute that the original estimate of 6 days was agreed by all parties (except the 2nd defendant who has not participated in this action). Accordingly, the responsibility for the unfortunate adjournment has to be sharedby all the parties.
5. For three reasons, this application should be declined. Firstly, it is not disputed that the court retains a residual discretionto vary an order for security for costs made by consent, or make further orders for security, when the existing security clearlybecomes insufficient and the circumstances justify the exercise of that discretion: see Hong Kong Civil Procedure 2013, vol 1, 23/3/9 at p 521.
6. In my view, when the court is asked to make further orders for security the residual discretion should be exercised sparingly. It should only be exercised with adequate justification. This approach is warranted because a further order for security may havethe effect of re-opening the agreement which underpins the consent order, which can be unfair to the paying party. For instance,the paying party might have decided to abandon a valid ground to resist the security application so as to save costs. Once he hadconsented to an order and paid the security, the matter cannot be reversed. Hence, the court should not lightly entertain an applicationto re-open the matter.
7. I do not believe that there is adequate justification to make a further order for security in this case. The 3rd defendant is partly responsible for the costs inflation. Further, an adjournment is a risk of litigation which must be acceptedby all litigants. Furthermore, it is trite that security for costs should not be treated as an indemnity for the costs of the applicant.
8. Secondly, the evidence relied upon in support of this application is that the costs so far incurred by the 3rd defendant have already exceeded HK$600,000. However, there is no breakdown for such costs so that the court can see how much ofthe same may be recoverable on party and party taxation in the event that this action fails against the 3rd defendant. In the circumstances, I am not satisfied that the existing security is inadequate.
9. Thirdly, I accept that the plaintiffs have a genuine and strong case, which is supported by undisputed or indisputable documentaryevidence. This case will be tried in due course and I need to say no more in this regard.
10. For these reasons, this application is dismissed and I make an order nisi that the costs of the application are to be paid by the 3rd defendant to the plaintiffs to be taxed if not agreed.
Mr Dennis Law, instructed by D S Cheung & Co, for the plaintiffs
Mr Matthew Ho, instructed by W K To & Co, for the 3rd defendant