HUALI FAR EAST LTD v. KBA PLANETA AG AND ANOTHER

HCA008653/1993

HCA 8653 of 1993
IN THE SUPREME COURT OF HONG KONG
HIGH COURT

—————–

BETWEEN
HUALI FAR EAST LIMITED Plaintiff
and
KBA PLANETA AG 1st Defendant
DGH BANG PRINTING INK MANUFACTORY LTD. 2nd Defendant

—————–

Coram: The Hon. Mr. Justice Waung in Chambers

Date of Hearing: 17th December 1996

Date of Handing Down of Reasons for Judgment: 19th December 1996

—————————————————

REASONS FOR JUDGMENT

—————————————————

1. On this application by the 2nd Defendant for security for costs against the Plaintiff, I dismissed the application at the conclusionof the hearing. I now hand down my reasons.

2. This is an Action in which the Plaintiff claims against the 1st and 2nd Defendants arising out of its exclusive rights of sellingthe 1st Defendant’s printing presses in China. The 1st Defendant has settled the Plaintiff’s claim against it and has paid or isabout to pay DM200,000 but the Plaintiff is continuing with its action against the 2nd Defendant. The 2nd Defendant says it willbe incurring costs of something like $3.7 million for the whole case and that therefore the Court should order security for costsin that figure or somewhere around that figure.

3. The first matter which arises for decision is what ought to be the proper recoverable costs of the 2nd Defendant against the Plaintiffin the event that the Plaintiff should fail in its action against the 2nd Defendant. I must say I was shocked by the figure of $3.7million put forward in the Skeleton Bill of the 2nd Defendant. The claim is for $2.4 million and even on the 2nd Defendant’s owncase, the trial is take no more than 3 or 4 days. There is nothing so unusual about this Action which either justifies leading counselor the extravagant high fees put forward in the Skeleton Bill. With the benefit of my past experience in this sort of commercialmatter and taking into account what I have been told at the hearing, I am of the firm view that a proper figure for costs in thissort of case cannot possibly be $3.7 million or $3 million or even $2 million. It should be around $1,000,000, give and take 10%or 15%. Miss Cruden has conceded that there had been a number of applications in which costs orders had been made against the 2ndDefendant and that therefore the already incurred fees figure put forward will have to be drastically reduced. In the circumstances,assuming I come to the view that security for costs ought to be given by the Plaintiff to the 2nd Defendant, I would assess thatquantum at $1,000,000.

4. With that figure of $1,000,000 as the quantum which the 2nd Defendant could properly look to the Plaintiff in the event of the Plaintifffailing in its action, what should the court do. In exercising the discretion, the Court should obviously take into account all thecircumstances, but it seems to me that I should bear in mind amongst other factors, the following:-

(1) The accounts of the Plaintiff do not show a company which is or is likely to be in such poor financial position as to require thespecial order of security for costs. Miss Cruden does not dispute that the audited accounts show the Plaintiff as being worth some$3 million odd at the end of 1995 but she says that is not good enough and made various criticism of the accounts and what Mr. Wilkinsonthe auditor of the Plaintiff said. For me doing the best I can, I just do not share the negative views expressed by Mr. Hill or thevarious criticism or dire risks expressed by Miss Cruden. The financial health of the Plaintiff seemed to have improved from endof 1994 to end of 1995 and there is no reason on the basis of the accounts, why the Court should take the view that the 2nd Defendanthas shown a special need an order of security of $1 million.
(2) The financial position of the Plaintiff in fact had been helped by the recent settlement with the 1st Defendant. The Plaintiff hadjust received or is about to receive the DM200,000 settlement from the 1st Defendant.
(3) The change of the Plaintiff’s business accounts for its improvement and this is not something negative as alleged by the 2nd Defendant.Nor is the sale of the building or the distribution of dividend in any way cause for alarm so as to necessitate the interventionof the Court in making a security for costs order.
(4) The Plaintiff is now in a better and stronger commercial position because the shareholders of the Plaintiff have changed and the Plaintiffhas become part of a very large international Dutch Group employing some 23,000 people, with 1995 sales of NLG 15 billion. The KNPBT shares are listed on the stock exchanges of Amsterdam, Brussels, Zurich, Geneva, Basel, Frankfurt, Dusseldorf, Vienna, Londonand US (ADRs). The fact of such strong Group being behind the Plaintiff is a significant factor for me and is not something whichaccording to Miss Cruden I should effectively ignore or pay no heed to.

5. In a valiant attempt to persuade the Court that some sort of security for costs should be ordered, Miss Cruden has put forward avery attractive case and said everything which could be said in favour of that application. But I remain wholly convinced that nocase had been made out by the 2nd Defendant for an order of security for costs. The application is therefore dismissed with costsagainst the 2nd Defendant.

William Waung
Judge of the High Court

Representation:

Miss Liza Jane Cruden for the 2nd Defendant instructed by Messrs Wilkinson & Grist

Mr. Gilbert Collins of Messrs Boase Cohen & Collins for the Plaintiff