ORDER 23 Security for Costs

1.Security for costs of action, etc. (O.23, r.1) 23/1

2.Manner of giving security (O.23, r.2) 23/2

3.Saving for enactments (O.23, r.3) 23/3

Editorial Introduction

23/0/2

The court has a discretionary power, at any stage of the proceedings, to order a person in
the position of plaintiff to give security for his opponent's costs. But the discretion is not at
large. There are two principal sources of law, O.23 and the Companies Ordinance, s.357.
(Note also O.59, r.10(5) (security for costs on appeal) and Hong Kong Court of Final
Appeal Ordinance (Cap. 484), s.25(1)(a).)

Rule 1(1) states that if, having regard to all the circumstances of the case, the court thinks it
just to do, it may order security for costs in any one of four situations. The first mentioned
(and, from a practical point of view, the most important) is that the plaintiff is ordinarily
resident out of the jurisdiction (r.1(1)(a)).

Section 357 of the Companies Ordinance gives the court power to order security where
there is reason to believe that a plaintiff limited company may be unable to pay the
defendant's costs in the event of his being successful in the action (see paras 23/3/14 et
seq.).

The bulk of the notes in this Order relate to r.1(1)(a) and to s.357 of the Companies
Ordinance (see para. 23/3/14). For information on r.1(1)(b) (nominal plaintiff), see para.
23/3/9, on r.1(1)(c) (misdescription of plaintiff's residence), see para. 23/3/11, and on
r.1(1)(d) (change of plaintiff's address) see para. 23/3/12.

Related Sources

23/0/3

•RHC, O.59, r.10(5) (Security for costs on appeal)

•RHC, O.71 (Reciprocal enforcement of judgments), r.4 (Security for costs)

•Arbitration Ordinance (Cap. 341), s.2GB(1)(a)

•Hong Kong Court of Final Appeal Ordinance (Cap. 484), s.25(1)(a)

Security for costs of action, etc. (O.23, r.1)

23/1
1.--(1) Where, on the application of a defendant to an action or other proceeding in the Court of First
Instance, it appears to the Court-- (25 of 1998 s.2)

(a)that the plaintiff is ordinarily resident out of the jurisdiction, or

(b)that the plaintiff (not being a plaintiff who is suing in a representative capacity) is a nominal
plaintiff who is suing for the benefit of some other person and that there is reason to believe that he will
be unable to pay the costs of the defendant if ordered to do so, or

(c)subject to paragraph (2) that the plaintiff's address is not stated in the writ or other originating
process or is incorrectly stated therein, or

(d)that the plaintiff has changed his address during the course of the proceedings with a view to
evading the consequences of the litigation,

then if, having regard to all the circumstances of the case, the Court thinks it just to do so, it may order
the plaintiff to give such security for the defendant's costs of the action or other proceeding as it thinks
just.

(2) The Court shall not require a plaintiff to give security by reason only of paragraph (1)(c) if he
satisfies the Court that the failure to state his address or the mis-statement thereof was made innocently
and without intention to deceive.

(3) The references in the foregoing paragraphs to a plaintiff and a defendant shall be construed as
references to the person (howsoever described on the record) who is in the position of plaintiff or
defendant, as the case may be, in the proceeding in question, including a proceeding on a counterclaim.

Manner of giving security (O.23, r.2)

23/2
2. Where an order is made requiring any party to give security for costs, the security shall be given in
such manner, at such time, and on such terms (if any) as the Court may direct.

Saving for enactments (O.23, r.3)

23/3
3. This Order is without prejudice to the provisions of any enactment which empowers the Court to
require security to be given for the costs of any proceedings.

23/3/1

Scope of Order (rr.1-3)

This Order must be read subject to the powers of the court to order security for costs
conferred by any enactment, see r.3; the Ordinances referred to by this rule are, the
 Companies Ordinance, s.357; the Arbitration Ordinance (Cap. 341), s.2GB(1)(a) and the
Hong Kong Court of Final Appeal Ordinance (Cap. 484), s.25(1)(a).

Though the power to grant security for costs is derived from the inherent jurisdiction of the
court, the categories set out in r.1 should not be extended (C.T. Bowring & Co. (Insurance)
Ltd v. Corsi & Partners Ltd [1994] 2 Lloyd's Rep. 567) and are indeed exhaustive
(Condliffe v. Hislop, The Times, November 3, 1995).

23/3/2

"Action or other proceeding" (rr.1-3)

The proceedings referred to in r.1 are required to be an action or in the nature of an action
and r.1 is wide enough to include any matter in which the jurisdiction of the court is
invoked by originating process and consequently includes a petition: Re Unisoft Group (No.
1) [1993] B.C.L.C. 528, a case brought under s.726 of the Companies Act, being the
English equivalent of s.357 of the Companies Ordinance. The jurisdiction also applies to
interpleader proceedings, where the court will look at the substance of the dispute to
determine which party is to be regarded as the plaintiff (Brand Farrar Buxbaum LLP v.
Samuel-Rozenbaum Diamond Ltd & Another & Samuel-Rozenbaum HK Ltd (Claimant)
(No. 2) [2003] 1 H.K.L.R.D. 600 and cited and approved in an unreported judgment
between the same parties, namely HCA 5191/1998, November 11, 2003, [2004] H.K.E.C.
7. See also Secretary for Justice v. First Success (HK) Ltd & Another (unrep., HCMP 1196
of 2006) [2007] H.K.E.C. 79). Thus a defendant in an action or other substantive
proceedings who makes an interlocutory application within such proceedings, for example
an application by summons or motion, is not in the position of plaintiff for the purposes of
r.1 in relation to the interlocutory application, and cannot be ordered to give security for the
other party's costs of resisting such application (Re B. (Infants) [1965] 1 W.L.R. 946; [1965]
2 All E.R. 651n.). Similarly there is no jurisdiction to order a plaintiff to give security for a
third party's costs of defending interlocutory applications for specific discovery and
interrogatories made by the plaintiff directly against the third party. The third party is in the
position of a defendant in relation to the third party proceedings brought against him by the
original defendant, but not in relation to the interlocutory proceedings brought against him
by the plaintiff, because the latter proceedings are not an action or in the nature of an action
(Taly N.D.C. International N.V. v. Terra Nova Insurance Co. Ltd [1985] 1 W.L.R. 1359;
[1986] 1 All E.R. 69, CA). The Order does not apply to Labour Tribunal proceedings in
absence of an express provision extending its application (Alagahit v. Wong Fung Lan
[1996] 2 H.K.L.R. 233; [1996] 2 H.K.C. 356); it does not apply to the enforcement
procedures provided for in O.73 (TK Bulkhandling GmbH v. Meridian Success
International Limited, unreported, HCMP 4765 of 1998).

23/3/3

Discretionary power to order security for costs (rr.1-3)

Rule 1(1) provides that the court may order security for costs "if, having regard to all the
circumstances of the case, the court thinks it just to do so". These words have the effect of
conferring upon the court a real discretion, and indeed the court is bound, by virtue thereof,
to consider the circumstances of each case, and in the light thereof to determine whether
and to what extent or for what amount a plaintiff (or the defendant as the case may be) may
be ordered to provide security for costs. It is not an inflexible or rigid rule that a plaintiff
resident abroad should provide security for costs (Lauria v. Le Salon Orient (Hong Kong)
Ltd & Another [1996] 2 H.K.L.R. 37; [1996] 3 H.K.C. 157; Henrik Andersen and Michael
Serring (suing as receiver of the Estate of Huang Kuang Yuan) v. Huang Kuang Yuan &
Another [1997] H.K.L.R.D. 1360; Re Greater Beijing Region Expressways Ltd (No. 3)
[2000] 2 H.K.L.R.D. 776; [2000] 3 H.K.C. 608). The court has to strike the balance
between what would be too oppressive to the plaintiff and what would give the defendant a
measure of security, and will take into account the bona fide nature of the claim and any
element of overlap beween the claim and the counterclaim (Dragages et Travaux Public v.
Hong Kong Chinese Insurance Co. Ltd & Multi Sky Ltd (third party) [1993] 1 H.K.C. 617).

In exercising its discretion under r.1(1) the court will have regard to all the circumstances
of the case. Security cannot now be ordered as of course from a foreign plaintiff, but only if
the court thinks it just to order such security in the circumstances of the case (Lauria v. Le
Salon Orient (Hong Kong) Ltd & Another (above); Re Greater Beijing Region
Expressways Ltd (above)). For the circumstances which the court might take into account
whether to order security for costs, see per Godfrey J.A. in Wing Hing Provision, Wine &
Spirits Trading Co. v. Hanjin Shipping Co. Ltd [1998] 4 H.K.C. 461 at 464; per Lord
Denning M.R. in Sir Lindsay Parkinson & Co. Ltd v. Triplan Ltd [1973] Q.B. 609 at
626-627; [1973] 2 All E.R. 273 at 285-286, and see "Plaintiff a limited company", para.
23/3/14. Also see Henrik Andersen & Another v. Huang Kuang Yuan & Others [1997]
H.K.L.R.D. 1360).

A major matter for consideration is the likelihood of the plaintiff succeeding. In exercising
its discretion, the court may take into account the merits of the plaintiff's claim. If the case
of the plaintiff is genuine and strong, no order for security would be granted (Wong Kwok
Mei Sanrita & Others v. Eversonic Inc. [1992] 2 H.K.C. 62; Re Greater Beijing Region
Expressways Ltd (above); Wing Fai Construction Co. Ltd (in liquidation) v. Benefit
Holdings International Ltd & Others, unreported, HCA No. 810 of 2003, May 10, 2005,
[2005] H.K.E.C. 949; Chen Kang Huang & Another v. Lit Ma (unrep., HCA 218 of 2005)
[2006] H.K.E.C. 1353). On the other hand, an order for security would usually be granted if
the plaintiff cannot clearly demonstrate that it has a high degree of probability of success at
trial (China Smart Properties Ltd v. Mansion Holdings Ltd & John Ho & Others (third
parties), unreported, HCA No. 13913 of 1997, March 12, 2002, [2002] H.K.E.C. 449; PT
Graha Multimulia Cemerlang v. Silver Tech Enterprise Ltd, unreported, HCCW No. 883 of
2004, March 1, 2005, [2005] H.K.E.C. 444). It is also important to take into account
whether the order will stifle a genuine claim (Chian Ker Chi Paul v. Super Zone Investment
Ltd [1994] 2 H.K.C. 679). Where it is shown that the plaintiff is impecunious, and it is
unlikely to have the ability to raise large sums, he does not have the additional onus of
showing that he is unable to obtain help; if there is a real possibility that the justice of the
matter required that no security be ordered, the court will exercise its discretion
accordingly (Owners of the Fishing Vessel "Nan AO 33066" v. The Owners and/or Demise
Charterers of the ship or vessel "Silver Dawn" [1994] H.K.L.Y. 888). However, the
judgment of Litton J.A. in Silver Dawn has now been subject to judicial interpretation and it
appears that the correct position is that even in cases of impecuniousity, the plaintiff should
show that he was unable to raise the amount of the security elsewhere (Wing Hing
Provision, Wine & Spirits Trading Co. v. Hanjin Shipping Co. Ltd (above); China Smart
Properties Ltd v. Mansion Holdings Ltd & John Ho & Others (above); Perfect Best Ltd v.
Yip, Tse & Tang, unreported, HCA No. 9040 of 2000, March 5, 2002, [2002] H.K.E.C.
460); Easy Watch Products Manufactory Co. Ltd v. Epson Precision (Hong Kong) Ltd,
unreported, HCA No. 3943 of 2002, December 4, 2003, [2004] H.K.E.C. 431; Goal Setting
Consulting Co. Ltd v. Unigraphics Solutions Asia/Pacific Inc. [2006] 3 H.K.L.R.D. 678. As
part of its overall discretion with respect to security for costs, the court may exercise some
caution when considering an allegation that the plaintiff's impecuniosity was caused by the
defendant's conduct (Sunchase International Group (Chine) Ltd & Others v. Vincir Group
of Companies (Investment) Ltd & Others, unreported, CACN No. 100 of 2003, [2003]
H.K.E.C. 1289; [2004] 1 H.K.L.R.D. 731).

This is not to say that every application for security for costs should be made the occasion
for a detailed examination of the merits of the case. It is not the function of the court, when
faced with an application for security for costs, to make a "preliminary run" at deciding the
ultimate success or failure of the claim (Sunchase International Group (China) Ltd &
Others v. Vincor Group of Companies (Investment) Ltd & Others, unreported, CACV No.
100 of 2003, [2003] H.K.E.C. 1289; [2004] 1 H.K.L.R.D. 731. Parties should not attempt to
go into the merits of the case unless it can be clearly demonstrated one way or another that
there is a high degree of probability of success or failure (Leslie Fay Companies
Incorporation (t/a Breckenridge Sportswear Division) v. Cheerio Ltd [1990] 1 H.K.C. 463;
Mount Top Management Ltd v. Charter General Holdings Ltd, unreported, DCCJ No.
16001 of 2000, January 23, 2001; China Smart Properties Ltd v. Mansion Holdings Ltd &
John Ho & Others (above)). In the cases which follow, investigaton of the merits was
justified only because the plaintiffs demonstrated a very high probability of success. If
there is a strong prima facie presumption that the defendant will fail in his defence to the
action, the court may refuse him any security for costs (see per Collins J. in Crozat v.
Brogden [1894] 2 Q.B. 30 at 33 (the judgment of the Court of Appeal in that case was in
substance reversed by the former O.65, r.6B of the English Rules of High Court, made in
1920, which in substance is repeated in r.1(1)). See also Mount Top Management Ltd v.
Charter General Holdings Ltd (above) and Trident International Freight Services Ltd v.
Manchester Ship Canal Co. [1990] B.C.L.C. 263, CA. It may be a denial of justice to order
a plaintiff to give security for the costs of a defendant who has no defence to the claim.
Again, if a defendant admits so much of the claim as would be equal to the amount for
which security would have been ordered, the court may refuse him security, for he can
secure himself by paying the admitted amount into court (Hogan v. Hogan (No. 2) [1924] 2
Ir.R. 14). Further, where the defendant admits his liability, the plaintiff will not be ordered
to give security (De St. Martin v. Davis & Co. [1884] W.N. 86) and this may remain the
position despite a counterclaim (Winterfield v. Bradnum (1878) 3 Q.B.D. 324); and see Re
Contract and Agency Corp. (1887) 57 L.J.Ch. 5, where a creditor, having under O.14
recovered judgment against a company, and issued execution, on which a return of nulla
bona had been made, was not required to give security for costs of a petition to wind up the
company, nor will security be required if the plaintiff has an unsatisfied judgment against
the defendant (Bristowe v. Needham (1842) 4 Mac. & G. 906). The pendency of a summons
under O.14 does not in any way affect the right of a defendant to apply for an order for
security for costs either under r.1 or s.357 of the Companies Ordinance. The court in such a
case will only grant security in the exercise its of discretion applying the principles
summarised above and will in particular wish to be satisfied that there is a defence to the
claim. In Mount Top Management Ltd v. Charter General Holdings Ltd (above) the court
refused an application for security, on the basis that the plaintiff's claim on a dishonoured
cheque had a high degree of probability of success, in circumstances where the plaintiff's
O.14 application had failed before a master. And see para. 14/4/30 (above). In Win Source
International Ltd v. William Alvin Hui & Others, unreported, HCA No. 2464 of 2003,
[2006] H.K.E.C. 5, the court found that the plaintiff had such a high probability of success
with respect to liability (although quantum was more questionable) that the defendant's
application for security for costs should be dismissed; the court also considered that the
plaintiff could still demonstrate a high probability of success provided it would recover
more than nominal damages.

In considering an application for security for costs the court must take account of the
plaintiff's prospects of success, admissions by the defendant, open offers and payments into
court; but a defendant should not be adversely affected in seeking security merely because
he has attempted to reach a settlement. Evidence of negotiations conducted "without
prejudice" should not be admitted without his consent (Simaan Contracting Co. v.
Pilkington Glass Ltd [1987] 1 W.L.R. 516; [1987] 1 All E.R. 345).

In KJM Industries Ltd v. JPM Resources (HK) Ltd, unreported, CACV No. 144 of 2005,
[2005] H.K.E.C. 1662 and 1663, a plaintiff's appeal against a judge's order for security for
costs was allowed where the defendant had made a substantial payment into court (with
respect to the plaintiff's claim) which was substantially more than the amount of security
ordered by the judge.

The fact that a defendant's counterclaim arises out of the same matters as a plaintiff's claim
should not affect the court's ability to order security for costs against that plaintiff
(Winghing Investments Ltd v. Lee Hoi Wing & Another, unreported, HCA No. 15600 of
1999, [2005] H.K.E.C. 1629). Nevertheless, the court should be slow to exercise its
discretion to order security against a plaintiff where to do so would effectively be
tantamount to providing security to the defendant for the prosecution of its counterclaim
(Dickson Yoga Co. Ltd v. We Are Enterprises Development Ltd (unrep., DCCJ 1132 of
2006) [2006] H.K.E.C. 1580).

In a minor's case, security for costs against a party who is a parent would only be ordered in
the most exceptional circumstances (Re B. (Infants) [1965] 1 W.L.R. 946; [1965] 2 All E.R.
651n.). A defendant who initiates an interlocutory application does not thereby become a
person "in the position of plaintiff" (ibid.).

In multi-party commercial litigation, each defendant is entitled to ask for security

according to the usual principles; a "global approach" to compare the accumulated amount
of security and the face amount of the claim should not be taken (Zhu Kuan Company of
Zhuhai Sez v. Brickell Ltd (in liq.), Morgan James Chubb, John Robert Lees, Internationale
Nederlande Bank N.V. and Pacific Capital (Finance) Ltd, unreported, CL No. 42 of 1995,
July 4, 1997, [1997] 917 H.K.C.U. 1).
 A plaintiff in a personal injuries action should not be treated as a special category in the
exercise of the court's discretion as to whether to order security for costs (Lauria v. Le
Salon Orient (Hong Kong) Ltd & Another [1996] 2 H.K.L.R. 37; [1996] 3 H.K.C. 157,
Guiseppina Tagliana v. Lee Wai Ying Elvis, unreported, HCPI No. 878 of 2003, [2005]
H.K.E.C. 1415).

In legal aid cases, it would rarely be just in all circumstances for an order for security for
costs to be made if the only costs were those covered by the legal aid certificate, since those
costs would be met out of the Legal Aid Fund if the plaintiff were unsuccessful (Lauria v.
Le Salon Orient (Hong Kong) Ltd & Another [1996] 2 H.K.L.R. 37; [1996] 3 H.K.C. 157).

For the effect of delay in applying for security on the exercise of discretion, see "Time for
making application for security", para. 23/3/31.

23/3/4

Plaintiff resident abroad (rr.1-3)

A plaintiff who is ordinarily resident abroad may be ordered to give security for costs. The
onus is on the defendant to prove that the plaintiff is "ordinarily resident" out of the
jurisdiction. The question is one of fact and of degree; it does not depend upon the duration
of the residence, but upon the way in which a man's life is usually ordered, and it contrasts
with occasional or temporary residence (see Re Greater Beijing Region Expressways Ltd
(No. 3) [2000] 3 H.K.C. 608; and Levene v. I. R. C. [1928] A.C. 217 and Lysaght v. I. R. C.
[1928] A.C. 234, both decided under the Income Tax Acts).

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 English 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] A.C. 309; [1983] 1 All E.R. 226, HL were applied by the English 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). For the purposes of
security for costs, a plaintiff who was formerly resident in Hong Kong (at the time the
alleged cause of action arose) but who is no longer resident should not be in any different
position to that of a plaintiff who has always been non-resident (Guiseppina Tagliani v. Lee
Wai Ying Elvis, unreported, HCPI No. 878 of 2003, [2005] H.K.E.C. 1415).

The test of whether a company is ordinarily resident abroad for the purpose of O.23, r.1 is
by reference to the location of its central management and control (see Insurance Co. of the
State of Pennsylvania v. Grand Union Insurance Co. Ltd & Another [1988] 2 H.K.L.R.
541). This test was followed by Keith J. (as he then was) in Charter View Holdings (BVI)
Ltd v. Corona Investments Ltd & Another [1998] 1 H.K.L.R.D. 469, who in deciding the
matter had regard to the English case of Re Little Olympian Each Ways Ltd (No. 2) [1995] 1
W.L.R. 560, a decision of Lindsay J. Keith J. held that three propositions could be derived
from Lindsay J.'s judgment:

(1)A mere assertion as to where a company's central management and control are located is
unsatisfactory. Evidence is required.

(2)All the circumstances relating to the manner in which the company carries on its
business should be taken into account, though the weight to be applied to each factor will
obviously differ from case to case.

(3)In applying the test to a non-trading company it may be more important than would
otherwise be the case to have regard to the nature of the company's corporate activities (see
also Winvar Investment Inc. v. Southern Mark Ltd, unreported, DCCJ No. 4768 of 2001,
July 18, 2001, [2001] H.K.E.C. 1196).

Also see Jade Harbour Ltd v. Eltones Profits Ltd & Another, HCA No. 19549 of 1998,
February 8, 2005, [2005] 2 H.K.L.R.D. 158, applying Re Little Olympian Each Ways Ltd
(No. 2) and Charter View Holdings (BVI) Ltd v. Corona Investments Ltd & Another (above),
as well as Re Charter View Development Ltd (unrep., HCCW 45 of 2006) [2006] H.K.E.C.
2362.

There is no inflexible rule or practice that a plaintiff resident abroad will be ordered to give
security for costs; the power to make such order is entirely discretionary under r.1(1) (see
Re Greater Beijing Begion Expressways Ltd (No. 3) [2000] 3 H.K.C. 608; Aeronave S.P.A.
v. Westland Charters Ltd [1971] 1 W.L.R. 1445; [1971] 3 All E.R. 531, CA, and reversing
Crozat v. Brogden [1894] 2 Q.B. 30); Re Pretoria Pietersburg Ry (No. 2) [1904] 2 Ch. 359
and see Corfu Navigation Co. v. Mobil Shipping Co. Ltd [1991] 2 Lloyd's Rep. 52. On the
other hand, 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, and this is so, even though by the contract between the parties, the foreign plaintiff is
required to bring the action in the jurisdiction (Montgomery Ward & Co. Inc. v. Evergo
Trading Co. Ltd & Another (unrep., Civ. App. 32 of 1996) [1996] H.K.E.C. 305; Mount
Top Management Ltd v. Charter General Holdings Ltd, unreported, DCCJ No. 16001 of
2000, January 23, 2001, citing Porzelack K.G. v. Porzelack (U.K.) Ltd [1987] 1 W.L.R. 420;
Aeronave S.P.A. v. Westland Charters Ltd [1971] 1 W.L.R. 1445; [1971] 3 All E.R. 531,
CA). Nevertheless, in deciding whether to order a foreign plaintiff to provide security for
costs, the focus should be on the difficulties faced by the defendant in enforcing the
judgment rather than on the status of a particular plaintiff (Izumo Mokko Co. Ltd v. TS Lines
Ltd [2007] 2 H.K.L.R.D. 363). If an overseas plaintiff is required to give security this does
not necessarily amount to being deprived of access to the courts; however, if such security
means that the plaintiff's claim would be stifled then that is a matter the court could take
into account in the exercise of its overall discretion (Giuseppina Tagliani v. Lee Wai Ying
 Elvis, unreported, HCPI No. 878 of 2003, [2005] H.K.E.C. 1415). The court is properly
entitled to take into account the ease of enforcement of an order for security in the
jurisdiction where the plaintiff is ordinarily resident (Jollymex N.V. v. Jollybaby
International Ltd (unrep., HCA 828 of 2006) [2007] H.K.E.C. 585, Thune and Another v.
London Properties Ltd [1990] 1 W.L.R. 562). In Giuseppina Tagliani v. Lee Wai Ying Elvis,
the court also considered that the existence of an agreement for the reciprocal enforcement
of judgments (in this case between Hong Kong and Singapore) was a factor that the court
could take into account in exercising its discretion on an application for security for costs.
If the plaintiff is resident in a jurisdiction which has a common law system similar to that in
Hong Kong, and there is an arrangement for the reciprocal enforcement of judgments
between Hong Kong and that jurisdiction, more evidence about the difficulties in enforcing
a judgment may be required before the court exercises its discretion to order security for
costs (Izumo Mokko Co. Ltd v. TS Lines Ltd (above)). There is no rule or practice that a
plaintiff resident abroad suing on a dishonoured bill of exchange should not be ordered to
give security (Banque du Rhone S.A. v. Fuerst Day Lawson Ltd [1968] 2 Lloyd's Rep. 153,
CA).

Where the sole plaintiff or all the plaintiffs are resident abroad security may be ordered
(Republic of Costa Rica v. Erlanger (1876) 3 Ch.D. 62) and there is no rule that the court
will not grant more than two applications for security (Merton v. The Times Publishing Co.
(1931) 48 T.L.R. 34). Where a plaintiff goes to reside permanently abroad after institution
of the suit, security may be ordered (Green v. Charnock (1791) 1 Ves. Jun. 396; Massey v.
Allen (1879) 12 Ch.D. 807).

A plaintiff who is abroad in an official capacity on the public service will not be required to
give security (Hugh Cecil Rabbetts v. Ta Hing Co. (H.K.) Ltd (1950-51) 34 H.K.L.R. 31).

A foreign claimant in an arbitration in the jurisdiction who is ordinarily resident out of the
jurisdiction is within r.1(1) and may be ordered to give security for the respondent's costs in
the arbitration (Hudson Strumpffabrik G.m.b.H. v. Bentley Engineering Co. Ltd [1962] 2
Q.B. 587; Mavani v. Ralli Bros. Ltd [1973] 1 W.L.R. 468; [1973] 1 All E.R. 555).

To find whether a plaintiff corporation was ordinarily resident out of the jurisdiction the
court had to locate its central management and control (Re Greater Beijing Region
Expressways Ltd (No. 3) [2000] 3 H.K.C. 608; Insurance Co. of the State of Pennsylvania v.
Grand Union Insurance Co. Ltd & Another [1998] 2 H.K.L.R. 541).

23/3/5

Foreign and Hong Kong co-plaintiffs (rr.1-3)

The ordinary rule of practice is that no order for security for costs will be made if there is a
co-plaintiff resident within the jurisdiction (Winthorp v. Royal Exchange Assurance Co.
(1755) 1 Dick. 282; D'Hormusgee v. Gray (1882) 10 Q.B.D. 13). The ordinary rule,
however, is subject to the general discretion of the court; it is not an unvarying rule. Its
application is appropriate where the foreign and Hong Kong co-plaintiffs rely on the same
cause of action, where each of the plaintiffs is bound to be held liable for all of such costs as
 may be ordered to be paid by any of the plaintiffs to the defendants at the conclusion of the
trial, and where one or more of the plaintiffs has funds within the jurisdiction to meet such
liability. Its application is inappropriate where there is a possibility that each of the
plaintiffs may be ordered to pay an aliquot share of the defendant's costs (Slazengers Ltd v.
Seaspeed Ferries Ltd; The Seaspeed Dora [1988] 1 W.L.R. 221; [1987] 2 All E.R. 905,
CA). Where the plaintiffs do not rely on identical causes of action, or, even where they do,
the outcome as to costs is unpredictable, security may be ordered against the foreign
plaintiff (ibid.) (Ng Yat Chi & Another v. Max Share Ltd & Another [1996] 4 H.K.C. 284).
Security may also be ordered where the Hong Kong co-plaintiff is not a genuine
co-plaintiff, but is merely joined to defeat an application for security for costs (Jones v.
Gurney [1913] W.N. 72).

In general the practice may be summarised as follows: there is a well settled rule that orders
for security for costs will not be made against a foreign plaintiff if there are one or more
co-plaintiffs resident in the jurisdiction; but the court has a wide discretion and the
principles on which it is exercised are more important than the semantic analysis of
particular cases; arguments for and against security have to focus on the circumstances and
justice of the particular case, viewed in the light of the wording of O.23, r.1 and the
principle that it is prima facie unjust to allow a foreign plaintiff to proceed without making
funds available in the jurisdiction to cover any order for costs made against him (Corfu
Navigation Co. v. Mobil Shipping Co. [1991] 2 Lloyd's Rep. 52; The Times, February 28,
1991, CA).

For an example of a case where a second plaintiff (being a foreign company with
insufficient funds) was ordered to give security for costs see Okotcha v. Voest Alpine
Intertrading GmbH [1993] B.C.L.C. 474.

23/3/6

Foreign plaintiff with property in the jurisdiction (rr.1-3)

Security will not be required from a person permanently residing out of the jurisdiction, if
he has substantial property, whether real or personal, within it (Redondo v. Chaytor (1879)
4 Q.B.D. 453 at 457; Hamburgher v. Poetting (1882) 47 L.T. 249; Clarke v. Barber (1890)
6 T.L.R. 256; Redfern v. Redfern (1890) 63 L.T. 780); and the same rule applies to a foreign
company (Re Apollinaris Co.'s Trade Marks [1891] 1 Ch. 1); but semble, the property must
be of a fixed and permanent nature, which can certainly be available for costs (Ebrard v.
Gassier (1884) 28 Ch.D. 232); or at any rate such as common sense would consider to be so
(Re Appollinaris Co.'s Trade Marks (1891)); and such person must show that it is so
available (Sacker v. Bessler & Co. (1887) 4 T.L.R. 17). Where the subject-matter of an
action for breach of warranty was a Greek statue, it being alleged that the statue was
spurious, application was made that the plaintiff should give security for costs. The court
had already made an order that the statue, which was deposited within the jurisdiction,
should not be removed without the consent of the defendants or an order of court. Held that
as in the event of the plaintiff being unsuccessful in the action the value of the statue must
be more than any order for costs that could be made against him, there ought to be no order
for security (Kevorkian v. Burney [1937] 4 All E.R. 468). A fortiori where the statue the
 subject-matter of the dispute is said to be by Michelangelo (De Bry v. Fitzgerald [1990] 1
All E.R. 560, CA).

Where the plaintiffs were a foreign corporation having their head office in Amsterdam and
a foreign agency in London, an order was made for security for costs by the English High
Court, the property of the company within the jurisdiction not being of a sufficiently fixed
and permanent character (Buitenlandsche Bankvereeniging v. Marconi's Wireless
Telegraph Co. Ltd, unreported, January 15, 1908, Bigham J., in chambers). Likewise, in Re
Charter View Holdings Ltd, (unrep., HCCW 45 of 2006) [2006] H.K.E.C. 2362, the court
took the view that shares in a Hong Kong private company did not amount to substantial
assets within the jurisdiction readily available for costs, because the value of such shares is
difficult to ascertain and it is uncertain whether a buyer can readily be found for them.

23/3/7

Quasi-plaintiff resident abroad (rr.1-3)

Rule 1(3) has the effect of equating a defendant who is in the position of a plaintiff with that
of a plaintiff for the purposes of security for costs. In each case the court must have regard
to the substantial and not the nominal position of the parties, in order to see whether the
defendant "is in the position of plaintiff in the proceeding in question" (see, e.g. position of
claimants in an interpleader issue, Tomlinson v. Land Finance Corp. (1884) 14 Q.B.D. 539,
and Tudor Furnishers Ltd v. Montague & Co. [1950] Ch. 113).

Where a party to an interpleader issue (not a bailiff's) though nominally a defendant is

really a plaintiff he cannot compel the nominal plaintiff, a foreigner resident abroad, to give
security (Belmonte v. Aynard (1879) 4 C.P.D. 352). So a foreigner who launches a motion
in an action on the basis that he has enforceable rights against the parties must give security
for the costs of his motion (Apollinaris Co. v. Wilson (1886) 31 Ch.D. 632). Where a
foreign company applied to be added as respondents to a motion to expunge a foreign trade
mark, it was held that they were entitled to be so added without giving security for costs (Re
La SociC)tC) Anonyme des Verreries de L'Etoile [1893] W.N. 119) so where adverse
foreign claimants to a debt claimed by the plaintiffs obtained leave to defend and resist the
plaintiffs it was right to refuse to order them to give security for costs (Fondsenbezit v. Shell
Transport Co. [1923] 2 K.B. 166, CA). Where on a petition for revocation of letters patent
notice was given to a person resident abroad, who submitted to the jurisdiction and issued a
summons asking for certain directions, it was held that he was not in the position of a
plaintiff coming to the court to assert his rights and ought not to be ordered to give security
(Re Miller's Patent (1894) 70 L.T. 270) but a defendant foreigner given the conduct of a
cause after decree may be ordered to give security (Mynn v. Hart (1845) 9 Jur. 860). And an
applicant for an order to compel an arbitrator to stage a case is a quasi-plaintiff and must
give security for the costs of the application even though he be a sovereign (Re Duff and
Kelantan Arbitration (1925) 41 T.L.R. 375).

A claimant in a winding up, whether voluntary or under supervision of the court, who is
resident abroad, may be required to give security (Re Pretoria Pietersburg Ry Co. (No. 2)
[1904] 2 Ch. 359).
23/3/8

Counterclaiming defendant resident abroad (rr.1-3)

The mere making of a counterclaim does not put the defendant in the position of plaintiff
under r.1(3); the question is whether, in the particular case, the counterclaim is a
cross-action or operates as a defence.

Where a claim and counterclaim arise out of different matters, so that the counterclaim is
really in the nature of a cross-action, the defendant, if resident out of the jurisdiction, may
be ordered to give security (Sykes v. Sacerdoti (1885) 15 Q.B.D. 423; and see Lake v.
Haseltine (1885) 55 L.J. Q.B. 205; The Julia Fisher (1877) 2 P.D. 115; The Newbattle
(1885) 10 P.D. 33, where he was a foreign sovereign); but where the counterclaim arises
out of the same matter, and is in fact the defence to the action, the court will ordinarily
refuse to order the defendant, resident out of the jurisdiction, to give security for costs
(Neck v. Taylor [1893] 1 Q.B. 560). Thus, where a counterclaim arises out of the same
subject matter as the claim and can properly be relied upon as a set-off, the counterclaiming
defendant ought not to be required to give security for costs of the counterclaim unless
there are exceptional circumstances (Ashworth v. Berkeley-Walbrook Ltd, The Independent,
October 9, 1989, CA). In Mapleson v. Masini (1879) 5 Q.B.D. 144, where a plaintiff sued
for breach of contract, and the defendant, a foreigner resident abroad, counterclaimed in
respect of breaches of the same contract, it was held the defendant could not be compelled
to give security. But each case must be judged on its own merits, and security for costs of a
cross-action may be ordered where the claims therein set up are quite independent of the
matters in question in the original action (New Fenix, etc., Co. v. General Accident, etc.,
Corp. [1911] 2 K.B. 619). See Smarking International Ltd v. Lau Chi Keung George &
Others [1999] 4 H.K.C. 669. As to security for damages in the Admiralty Court, see The
James Westoll [1905] P. 47, CA. As to staying proceedings in collision actions until
security given, see O.75, r.27.

Where the plaintiff obtains a Mareva injunction against defendants resident abroad for a
sum exceeding the amount of the costs of the counterclaim by the defendants, the
defendants are in the same position as a plaintiff resident abroad who has substantial assets
in this country, and therefore the court will refuse to make an order for security for costs in
favour of the plaintiff against the defendants in respect of such counterclaim (Hitachi
Shipbuilding & Engineering Co. Ltd v. Viafiel Compania Naviera S.A. [1981] 2 Lloyd's
Rep. 498, CA).

Where both the plaintiff and the counterclaiming defendant reside out of the jurisdiction,
and the counterclaim arises out of the same transaction and raises the same basic issues as
the claim, both parties should be treated alike in relation to security for costs, since it would
be mere chance which party would be plaintiff and which defendant, and therefore the court
should order the plaintiff to give security for costs in respect of the claim, and also order the
counterclaiming defendant to give security for costs in a similar amount in respect of the
counterclaim (The Silver Fir [1980] 1 Lloyd's Rep. 371, CA).
23/3/9

Nominal plaintiff (r.1(1)(b))

Rule 1(1)(b) empowers the court to order a nominal plaintiff who may be unable to pay the
costs of the defendant to give security for costs. See judgment of Bowen L.J. in Cowell v.
Taylor (1885) 31 Ch.D. 34 at 38. A trustee in bankruptcy suing as such is not a nominal
plaintiff. The trustee of a bankrupt plaintiff is not a necessary party to proceedings relating
to matters which occurred after the bankruptcy, and in such case the bankrupt will not be
treated as a nominal plaintiff, nor ordered to give security for costs (Buchan v. Hill [1888]
W.N. 233; Cook v. Whellock (1890) 24 Q.B.D. 658); nor in an action for his personal
earnings (Affleck v. Hammond [1912] 3 K.B. 162, CA. See, too, The Lake Megantic (1877)
36 L.T. 183; Corp. of Hastings v. Ivall (1874) L.R. 9 Ch. 758). A plaintiff who has assigned
the benefit of the action may be a "nominal plaintiff" (Semler v. Murphy [1968] Ch. 183).
So, an insolvent plaintiff who assigns to a trustee for the benefit of his creditors all his
estate, and covenants to prosecute the action, is merely a nominal plaintiff, and must give
security (Lloyd v. Hathern Station Brick Co. (1901) 85 L.T. 158). And an insolvent plaintiff,
who sues as trustee of a deed executed by a debtor for the benefit of his creditors, and who
is not beneficially interested in the subject-matter, must give security (Greener v. Kahn &
Co. [1906] 2 K.B. 374). Aliter, in the case of trustees of a separation deed (White v. Butt
[1909] 1 K.B. 50, CA). But a person clothed with a representative capacity by a court of
competent jurisdiction, e.g. an administrator, will not be ordered to give security for costs
of an action brought by him though merely a nominee of a person resident abroad (Rainbow
v. Kittoe [1916] 1 Ch. 313).

A bankrupt, to whom the trustee in bankruptcy has assigned the right to claim damages for
negligence against his former accountants, who undertook to receive only 65 per cent of the
net proceeds of the action and to pay to the trustee the remaining 35 per cent is not a
"nominal" plaintiff against whom an order for security for costs would be made and in any
event as a matter of discretion on the ground that the negligence of the defendants had itself
led or contributed to his bankruptcy it would be manifestly unjust to order the plaintiff to
give security for costs (Ramsey v. Hartley [1977] 1 W.L.R. 686; [1977] 2 All E.R. 673,
CA).

In considering whether to order security for costs on an application alleging that the
petitioner is a nominal petitioner, the Court has considered whether (i) the petitioner is a
nominal petitioner; (ii) there is reason to believe that the petitioner is unable to pay the
respondent's costs in the petition; and (iii) it should exercise its discretion to order security
for costs (see Fong Tak Shing v. Greensward Co. Ltd and Another, unreported, HCCW No.
162 of 2004, May 12, 2004, [2004] 596 H.K.C.U. 1).

23/3/10

Next friend (rr.1-3)

The next friend of a person under a disability is not a nominal plaintiff and he cannot be
compelled to give security (Fellows v. Barrett (1836) 1 Keen 119); although impecunious
 and a stranger (Jones v. Evans (1886) 31 S.J. 11; cf.Didisheim v. London, etc. [1900] 2 Ch.
15); but if he appeals and is insolvent he may have to give security. If the next friend of an
infant is ordered to give security for costs and does not do so and the action is dismissed,
proceedings in another action by another next friend, but against the same defendant for the
same purpose, will not be stayed (per Cotton L.J., Re Payne (1883) 23 Ch.D. 288 at 289,
CA).

23/3/11

Misdescription of plaintiff's residence (r.1(1)(c))

Rule 1(1)(c) empowers the court to order a plaintiff whose address is not stated in the writ
or other originating process or is incorrectly stated there to give security for costs.

If, however, the plaintiff fails to state his address or he mis-states his address innocently
and without intention to deceive, he will not be ordered to give security for costs (see
Knight v. Ponsonby [1925] 1 K.B. 545 and Chellew v. Brown [1923] 2 K.B. 844, CA, where
a master mariner with no permanent home gave his sister's address and Re Like Grand
Holdings Ltd, unreported, HCCW No. 603 of 2001, July 11, 2003, [2003] H.K.E.C. 1066,
in which the petitioners had decided not to use their residential addresses, because one of
them could not read English and the other had to travel overseas and they erroneously
thought that they should use a business address so that someone could inform them if
correspondence from their solicitors was sent there).

An American company suing under an English address, at which it could not be found, was
ordered to give security for costs by the English High Court (Pittsburgh Crushed Steel Co.
v. Jacob Marx & Co. [1897] W.N. 36).

23/3/12

Change of address by plaintiff (r.1(1)(d))

Rule 1(1)(d) empowers the court to order a plaintiff who has changed his address during the
course of the proceedings with a view to evading the consequences of the litigation to give
security for costs, but security will not be ordered from a plaintiff who has indorsed a
sufficient address on his writ, and has afterwards removed from that address, and is
prevented by poverty and adversity from acquiring a fresh permanent address.

23/3/13

Insolvency or poverty no ground for security (rr.1-3)

The insolvency or poverty of a plaintiff is no ground for requiring him to give security for
costs (Cowell v. Taylor (1885) 31 Ch.D. 34, and cases there cited; Le Mesurier v. Ferguson
(1903) 20 T.L.R. 32); even though he is an undischarged bankrupt (Ng Yat Chi & Another v.
Max Share Ltd & Another [1996] 4 H.K.C. 284); nor is possible or probable bankruptcy
any ground (Rhodes v. Dawson (1886) 16 Q.B.D. 548). The same rule applies in divorce
 cases (Blackett v. Blackett [1902] P.170). The fact that a corporation (other than a limited
company) is insolvent, and that a receiver of the profits of its undertaking has been
appointed, is no ground for requiring it to give security (Dartmouth Harbour
Commissioners v. Mayor of Dartmouth (1886) 55 L.J.Q.B. 483). The next friend of a minor
cannot on the mere ground of poverty be compelled to give security (Fellows v. Barrett
(1836) 1 Keen 119); but see Wilcox v. Wallis, etc., Co. Ltd [1914] W.N. 107; Masling v.
Motor Hiring, etc., Ltd [1919] 2 K.B. 538, CA. The fact that a plaintiff is a defaulter on the
Stock Exchange is not a sufficient reason for ordering security for costs, though the official
assignee alone would benefit (Hinde v. Haskew (1884) 1 T.L.R. 94). Where a corporate
plaintiff has one major asset, the value of which is surpassed by the value of loans owed to
directors of the plaintiff (who are also co-plaintiffs), it will be balance sheet insolvent; in
order to safeguard the position for the defendants, such loans should not be repaid until it is
finally determined whether any order for costs in favour of the defendants would be made
and to this extent an order for security could be avoided by a plaintiff providing an
undertaking to the court that the loans would not be repaid (see Bodell & Others v. Salter
Projects Ltd & Another & Biocycle (HK) Ltd (third party), unreported, CACV No. 450 of
2002, February 21, 2003, [2003] H.K.E.C. 238).

The fact of a trustee in bankruptcy suing in his official name is no ground for ordering him
to give security for costs (Pooley's Trustee v. Whetham (1884) 28 Ch.D. 38); nor is his
insolvency a sufficient ground (Denston v. Ashton (1869) L.R. 4 Q.B. 590; Cowell v.
Taylor (1885) 31 Ch.D. 34). Where the plaintiff is impecunious (and that was a ground
relied on), he does not have the additional onus to establish that she was unable to borrow
from friends and relatives (Lauria v. Le Salon Orient (Hong Kong) Ltd & Another [1996] 2
H.K.L.R. 37; [1966] 3 H.K.C. 157).

There are, however, certain exceptions to the rule that insolvency or poverty is no ground
for requiring security for costs, e.g. in the case of an appellant (see O.59, r.10(5), "Security
for the costs of an appeal") and of a nominal plaintiff (see "Nominal plaintiff", para.
23/3/9).

23/3/14

Plaintiff a limited company (rr.1-3)

Section 357 of the Companies Ordinance provides:

"Where a limited company is plaintiff in an action or other legal proceeding, any judge
having jurisdiction in the matter may, if it appears by credible testimony that there is reason
to believe that the company will be unable to pay the costs of the defendant if successful in
his defence, require sufficient security to be given for those costs, and may stay all
proceedings until the security is given."

For the meaning of the words "action or other legal proceeding", see "Action or other
proceeding", para. 23/3/2.

The fact that a company is in liquidation is prima facie evidence that it is unable to pay the
costs, unless evidence to the contrary is given (Northampton Coal, Iron & Waggon Co. v.
Midland Waggon Co. (1878) 7 Ch.D. 500, CA; Pure Spirit Co. v. Fowler (1890) 25 Q.B.D.
235). Apart from such a case, the application for security must be supported by an affidavit
which credibly and reasonably shows the inability of the company to pay the costs of the
successful defendant (Dongguan Harris Plastic Products Co. Ltd & Another v. Chan Dai
Chung [2001] 3 H.K.L.R.D. K4). Thus, security was ordered where a banking company in
voluntary liquidation had before bringing the action sold its business to another bank
(National Bank of Wales v. Atkins (1894) 38 S.J. 186) where a small company was suing for
an infringement of patent which was its substratum (Diamond Steel Manufacturing Co. v.
Harrison (1910) 27 R.P.C. 451). But the mere fact that a company has issued a debenture
charging all its assets to secure the repayment of all moneys then or at any time owing to a
particular person was not considered to be a sufficient reason for ordering security
(Universal Aircraft Ltd v. Hickey, unreported, May 4, 1943, Morton J.). The court is not
entitled to ignore the unchallenged evidence of an accountant as to a company's present
ability to pay the costs of an action (Kim Barker v. Aegon Insurance Co. (U.K.) Ltd, The
Times, October 9, 1989, CA).

An applicant for security for costs has to show that the company would not (as opposed to
may not) be able to meet its debts when an order for costs was made against it. This
question had to be answered at the time of the application (see Brand Farrar Buxbaum LLP
v. Samuel-Roxenbaum Diamond Ltd & Another & Samuel-Rozendaum HK Ltd (Claimant)
(No. 2) [2003] 1 H.K.L.R.D. 600) though the court could take into account evidence of
what was to be expected in the future before any order would be made (Re Unisoft Group
(No. 2) [1993] B.C.L.C. 532).

However, the fact that the plaintiff would be unable to pay the costs of the defendant if the
defendant were successful is not necessarily the end of the matter. "Sufficient security"
within the above section ought not to be either illusory or oppressive (Dominion Brewery v.
Foster (1897) 77 L.T. 507; Imperial Bank of China and Japan v. Bank of Hindustan (1866)
L.R. 1 Ch. 437). It should be for the probable amount of costs taking into account the
chance of the case collapsing, but of course the amount of security is in the discretion of the
court.

The court has a discretion under s.357(1) of the Companies Ordinance, just as under r.1,
whether to order security for costs having regard to all the circumstances of the case (Sir
Lindsay Parkinson & Co. Ltd v. Triplan Ltd [1973] Q.B. 609; [1973] 2 All E.R. 273, CA;
Perfect Best Ltd v. Yip, Tse & Tang, unreported, HCA No. 9040 of 2000, March 5, 2002,
[2002] H.K.E.C. 460; Center Optical (Hong Kong) Ltd v. Jardine Transport Services
(China) Ltd & Pronto Cargo Inc. (third party), unreported, HCCL No. 146 of 1999, May
14, 2001, [2001] H.K.E.C. 588; Daimler Chrysler Services China Ltd v. Harbour Union
Investments Ltd, unreported, HCCL No. 34 of 2002, May 7, 2004). Among the
circumstances which the court might take into account are the following: (1) whether the
plaintiff's claim is bona fide and not a sham; (2) whether the plaintiff has a reasonably good
prospect of success; (3) whether there is an admission by the defendants on the pleadings or
elsewhere that money is due; (4) whether there is a substantial payment into court or an
"open offer" of a substantial amount; (5) whether the application for security was being
used oppressively, e.g. so as to stifle a genuine claim; (6) whether the plaintiff's want of
means has been brought about by any conduct by the defendants, such as delay in payment
or in doing their part of the work; (7) whether the application for security is made at a late
stage of the proceedings (ibid. per Lord Denning M.R.). The court may order a plaintiff
company in liquidation to give security for costs, even though it is one of two or more
plaintiffs, especially where there is a comparatively small overlap between its own claims
and those of the other plaintiffs (John Bishop (Caterers) Ltd v. National Union Bank Ltd
[1973] 1 All E.R. 707). In the case of a limited company s.357 applies to all companies
irrespective of whether or not it happens to be suing as plaintiff with a natural person as
co-plaintiff, and the inability of the plaintiff company to pay the defendants' costs is a
substantial factor in the court's decision whether to order security for costs; and while the
court must not allow s.357 to be used as an instrument of oppression, it must equally not
allow an impecunious company to put unfair pressure on a prosperous company (Pearson v.
Naydler [1977] 1 W.L.R. 899; [1977] 3 All E.R. 531). Where an order for security for costs
against a plaintiff company might result in oppression in that the plaintiff company would
be forced to abandon a claim which has a reasonable prospect of success, the court is
entitled to refuse to make that order, notwithstanding that the plaintiff company, if
unsuccessful, will be unable to pay the defendant's costs (Aquila Design (GRB) Products
Ltd v. Cornhill Insurance plc [1988] B.C.L.C. 134, CA). See also Ronia Ltd v. Clarke,
unreported, CACV No. 348 of 2002, February 24, 2003, [2003] H.K.E.C. 244, where the
Court of Appeal exercised its discretion afresh to refuse security where the plaintiff had an
arguable case in negligence against his solicitor which would have been stifled by an order
for security due to the plaintiff's impecuniosity. In this respect it is sufficient for the
plaintiff to show that there is a probability that it will be unable to pursue the action if the
order is granted; it need not show with certainty that it will be unable to do so (Trident
International Freight Services Ltd v. Manchester Ship Canal Co. [1990] B.C.L.C. 263,
CA).

Section 357 of the Companies Ordinance applies only to limited companies and cannot
found an application for security against other corporate bodies or unincorporated
associations against whom an application cannot be made under the general provisions of
r.1.

As to security for costs on an appeal by a company against a winding-up order, see Re

Photographic Artists' Co-operative Supply Association (1883) 23 Ch.D. 370, CA.

Security may be ordered if the plaintiff company goes into liquidation after the trial has
actually commenced (Lydney and Wigpool Iron Co. v. Bird (1883) 23 Ch.D. 358).

In considering whether to exercise its discretion under s.357 to order security for costs in a
case where there may be a risk of stifling a genuine claim the court has to perform a
balancing exercise by weighing the injustice to the plaintiff if prevented from pursuing a
proper claim against the injustice to the defendant if no security is ordered and, on the
plaintiff's claim failing, being unable to recover the costs incurred in defending its claim.

Factors to be taken into account include:

(1)whether the plaintiff company is using its impecuniosity to put pressure on the
 defendant;

(2)the plaintiff's prospects of success (without going into the merits in detail: Porzelack KG
v. Porzelack UK Ltd [1987] 1 W.L.R. 420);

(3)whether the plaintiff's claim would in fact be stifled by considering whether the plaintiff
can raise funds outside its own resources to conduct the litigation, the onus being upon the
plaintiff to satisfy the court that no such resources are available (this includes considering
the possibility of the plaintiff raising funds from directors, shareholders or other backers. If
these backers are unwilling to pay, but not unable to pay, the alleged stifling effect may not
be made out: Hin Fai Ltd v. Longrace Development Ltd & Another, unreported, HCA No.
1788 of 2003, July 18, 2003, [2003] H.K.E.C. 1367);

(4)lateness of the application; whether this factor weighs against the plaintiff or defendant
depends upon whether blame for the delay rests with the plaintiff or defendant.

23/3/15

Defendant a limited company (rr.1-3)

Where a company is defending itself, it must be regarded as, in substance, a defendant, and,
therefore, is not to be called upon to give security (Accidental and Marine Insurance Co. v.
Mercati (1866) L.R. 3 Eq. 200) but if it takes proceedings which go beyond merely
defensive proceedings it may be required to give security (Washoe Mining Co. v. Ferguson
(1866) L.R. 2 Eq. 371; New Fenix Compagnie Anonyme d'Assurances de Madrid v.
General Accident, Fire and Life Assurance Corp. Limited [1911] 2 K.B. 619, CA
(cross-action by foreign company); City of Moscow Gas Co. v. International Financial
Society (1872) 7 Ch.App. 225; Pure Spirit Co. v. Fowler (1890) 25 Q.B.D. 235, and see
Freehold Land Co. v. Spargo [1868] W.N. 94) and so in the case of a counterclaim security
may be ordered (Strong v. Carlyle Press (No. 2) [1893] W.N. 51).

23/3/16

No security for costs against defendant (rr.1-3)

Security for costs cannot be required from a defendant who is exercising his right to defend
himself against attack, though resident out of the jurisdiction (Naamlooze, etc. v. Bank of
England [1948] 1 All E.R. 465, CA), nor from a person seeking to intervene as defendant
(Maatschappij Voor Fondsenbezit v. Shell Transport and Trading Co. [1923] 2 K.B. 166,
CA), nor from a defendant sued on a dishonoured bill who raises a defence under the Bills
of Exchange Ordinance (Banque du Rhone SA v. Fuerst Day Lawson Ltd [1968] 2 Lloyd's
Rep. 153, CA), nor from a person who is compelled to litigate or to take proceedings which
are merely defensive, e.g. by filing a bill to restrain an action at law (Watteen v. Billam
(1841) 3 D. G. & Sm. 516, aliter from an applicant for an order compelling an arbitrator to
state a case (nor to compel him to give reasons for his award under the Arbitration
Ordinance (Cap. 344)); Re Duff and Kelantan Arbitration (1925) 41 T.L.R. 375); nor from
a shareholder of a company who resides out of the jurisdiction and appears to oppose a
 winding-up petition (Re Percy, etc., Iron Mining Co. (1876) 2 Ch.D. 531); and see Re
Barber (1886) 55 L.J.Ch. 624; Accidental & Marine Insurance Co. v. Mercati (1866) L.R.
3 Eq. 200. Security for costs cannot be required from a defendant who raises the issue of
domicile as part of his defence, even though he is made the plaintiff on the trial of a
preliminary issue (Visco v. Minter [1969] P. 82; [1969] 2 All E.R. 714). Co-defendants in a
cross-action who were not parties to the original action may obtain security for the costs of
the cross-suit (Sloggett v. Viant (1842) 13 Sim. 187; Washoe Mining Co. v. Ferguson (1866)
L.R. 2 Eq. 371). But a defendant setting up a counterclaim may be required to give security,
see "Counterclaiming defendant resident abroad" and "Defendant a limited company",
paras 23/3/8 and 23/3/15. When considering whether to order security for costs in respect
of a defendant's counterclaim, the court will exercise its discretion according to similar
principles as apply with respect to a plaintiff's claim (Midland Realty International Ltd v.
Wise Surplus Ltd, unreported, HCA No. 3065 of 2001, [2005] H.K.E.C. 1155). In La
Compagnie GC)nC)rale, etc. [1891] 3 Ch. 451 at 458, an application for rectification of the
register of trademarks, where both parties were out of the jurisdiction, security was ordered
to be given by both. On ordering that the plaintiff's claim be dismissed, in the event that
security is not provided within time, the court should (in the exercise of its discretion) have
regard to the plaintiff's defence to counterclaim (if any) and to the general principle that
security for costs cannot be ordered against a party that is exercising its right to defend a
counterclaim (Winghing Investments Ltd v. Lee Hoi Wing & Another, unreported, CACV
No. 378 of 2005, [2006] H.K.E.C. 378).

23/3/17

Security for costs of appeal (rr.1-3)

See O.59, r.10(5) and notes.

23/3/18

Mode of application for security (rr.1-3)

Application for security for costs is made by summons in chambers. Where time permits a
written demand for security should be made to the plaintiff's solicitor. An affidavit in
support is generally necessary.

23/3/19

Order for security for costs (rr.1-3)

Where the master orders security for costs to be given, he will fix the amount and direct the
mode in which and the time within which such security should be given, and the order will
usually provide that proceedings shall be stayed until such security is given. In a proper
case, the master may dispense with such a stay. Rather than simply granting a stay of the
proceedings (without more) pending payment of security for costs, it is also open to the
court (and it may be more appropriate) to specify a time within which security should be
given, staying all further proceedings in the meantime and providing for the action to be
 dismissed without further order, if security is not given within the time specified (Sunchase
International Group (China) Ltd & Others v. Vincor Group of Companies (Investment) Ltd
& Others, unreported, FAMV No. 21 of 2004, February 22, 2005, [2005] H.K.E.C. 251). It
is also convenient to provide in the order the stage of the proceedings up to which the
security has been awarded and, if necessary, to give liberty to apply for further security. A
provision for general liberty to apply in an order for security for costs may allow the court
to vary the form by which a party provides security (Wing Fai Construction Co. Ltd (In
Liquidation) v. Fitzroya Finance Co. Ltd, unreported, HCA No. 2570 of 2003, [2006]
H.K.E.C. 49).

Where the order contained the usual stay of proceedings, and during such stay defendant
prepared affidavits on a pending motion for injunction, he having given an undertaking to
deliver copies of affidavits within 10 days--held, that he was entitled to the costs of his
affidavits (Whiteley Exerciser Ltd v. Gamage [1898] 2 Ch. 405). As to the form of order in
case of security for costs of appeal, see Hope v. Hope (1902) 86 L.T. 363) CA, and O.59,
r.10 n.).

The circumstances in which security for costs should be ordered in the course of a trial
because of the weakness of the plaintiff's case is rare (Henrik Andersen & Another v.
Huang Kuang Yuan & Others [1997] H.K.L.R.D. 1360, per Keith J.).

It would appear that the court retains a residual discretion to vary an order for security for
costs made by consent, or make further orders for security, when the existing security
clearly becomes insufficient and the circumstances justify the exercise of that discretion
(Cheong Shing Ltd v. Yu Kwan & Others, unreported, HCA No. 12021 of 1998 and No.
2183 of 2001, [2005] H.K.E.C. 2110, Republic of Kazakhstan v. Istil Group Inc. [2005]
E.W.C.A., All E.R. (D) 120 (Nov)). In Wing Fai Construction Co. Ltd (In Liquidation) v.
Fitzroya Finance Co. Ltd, unreported, HCA No. 2570 of 2003, [2006] H.K.E.C. 49, a judge
also allowed an appeal against a master's decision to refuse the plaintiff leave to vary a
consent order by permitting it to provide security by way of a bank guarantee (as opposed
to a payment into court as originally provided for in the consent order); the judge did not
consider such a variation to be material (provided the form of security remained
appropriate and adequate), although the judge doubted whether the court could vary the
actual substance of such a consent order.

23/3/20

Appeal against a master's order

Appeal under O.23 of RHC or s.357 of the Companies Ordinance does not require leave
under s.14(2)(3) of the Supreme Court Ordinance.

In these situations, the court is not concerned with making any order in the exercise of its
discretion relating to the incidence or basis of costs of the parties but is primarily concerned
with exercising its discretion as to whether to require the giving of security to a party in
respect of costs which it might not be awarded at the conclusion of the proceedings
(Extramoney Ltd v. Chan, Lai Pang & Co. [1990] 2 H.K.L.R. 268; [1990] 1 H.K.C. 121).
23/3/21

Effect of refusal to order security (rr.1-3)

If an application for security is refused by a master, and his decision is not appealed from, it
is final. It estops the parties from making a further application on the same facts. Aliter, if
security is ordered. It may then be increased by subsequent order (Hermite v. Allingham,
unreported, January 13, 1936, CA, Greer, Slesser and Scott L.JJ.).

23/3/22

Arbitration proceedings (rr.1-3)

Unless otherwise agreed by the parties, an arbitral tribunal has power to order a claimant to
provide security for the costs of the arbitration (Arbitration Ordinance (Cap. 341),
s.2GB(1)(a)). Where an international arbitration is of a type regularly conducted for many
years and not a one-off arbitration, security for costs should generally be ordered, the more
so if the litigation costs are very high (K/S A/S Bani v. Korea Shipbuilding and Engineering
Corp., The Times, July 15, 1987, CA, applying Bank Mellat v. Helleniki Techniki SA [1984]
Q.B. 291; [1983] 3 All E.R. 428, CA).

Where a foreigner residing out of the jurisdiction applied for the appointment of an
arbitrator under Arbitration Ordinance (Cap. 341), s.12 the court made the giving of
security for costs a condition of assisting him (Re Bjornstad and Ouse Shipbuilding Co. Ltd
[1924] 2 K.B. 673, CA).

In an exceptional case the court can order security for costs in respect of an arbiitration
being held within the jurisdiction under the ICC Rules of Conciliation and Arbitration (SA
Coppee Lavalin NV v. Ken-Ren Chemicals and Fertilisers (in liquidation in Kenya) [1994]
2 All E.R. 449, HL).

The court has jurisdiction to grant a stay of the arbitration pending compliance with a court
order for security; such jurisdiction is derived from s.14(6)(a) of the Arbitration Ordinance
and O.23, r.2 (Yee Sang Metal & Building Supplies Co. Ltd. v. Shanghai Jin Jiang Shipping
Corp. Ltd [1991] 1 H.K.C. 371).

23/3/23

Miscellaneous proceedings (rr.1-3)

In ordering security the judge must not increase the difficulty of enforcing bona fide rights:
he may consider the type of case which usually proves fraudulent, but must remember that
costs are not usually ordered against a bona fide claimant, though he may fail (The Stanton
[1917] A.C. 380). It should also be noted that in actions brought under the Sex
Discrimination Ordinance (Cap. 480), costs will not normally follow the event and
therefore courts will treat applications for security for costs in a different manner from
 normal commercial cases; see Cano-Shearer & Others v. Cathay Pacific Airways Ltd,
unreported, DCEO No. 1 of 2001, January 24, 2003, [2003] H.K.E.C. 118.

A caveator cannot as such be ordered to give security for costs (In the Goods of Emery
[1923] P. 184); he cannot be regarded as being in the position of a plaintiff and his position
cannot be altered by the election of a beneficiary under the will to be joined as a
co-defendant (Rose v. Epstein [1974] 1 W.L.R. 1565; [1974] 3 All E.R. 745, CA).

A petitioner may be required to give security for costs in the same manner as from a
plaintiff (Re Norman (1849) 11 Beav. 401) except where the petition is presented in a cause
to which the petitioner is a defendant (Cochrane v. Fearon (1854) 18 Jur. 568).

A relator bringing an action at the suit of the Secretary for Justice may be required to give
security for costs (Att.-Gen. v. Allman [1906] 1 Ir.R. 473).

Plaintiffs whose persons are privileged from arrest, such as ambassadors' servants, may be
required to give security (Goodwin v. Archer (1727) 2 P.W. 452). See 10 Morg. 542; but an
ambassador will not be required to give security (Duke de Montellano v. Christin (1816) 5
M. & S. 503).

When one of two partners had instituted an action expressly against his partner's wishes he
was ordered to give his partner (who disclaimed any interest in the subject-matter) a full
and complete indemnity coupled with security against all costs, expenses, charges, and
liabilities in respect thereof and the action was stayed till this was done (Davey v. Alby
United Carbide Factories Ltd, unreported, March 19, 1914, Coleridge J. in chambers).

23/3/24

Security for costs of party's own solicitor (rr.1-3)

A party resident out of the jurisdiction who applies for taxation of his own solicitor's bill of
costs may be ordered to give security, unless the solicitor already holds sufficient security,
for the costs which he may be ordered to pay on taxation including the costs of the taxation
(Re Pasmore (1839) 1 Beav. 94, Anon. (1841) 12 Sim. 262).

23/3/25

Bankruptcy (rr.1-3)

Bankruptcy is not, as such, a ground for ordering a plaintiff to give security for costs
(Rhodes v. Dawson (1886) 16 Q.B.D. 548; Cook v. Whellock (1890) 24 Q.B.D. 658) but an
insolvent trustee under a deed of assignment must give security (Greener v. Kahn & Co.
Ltd [1906] 2 K.B. 374). Security for costs on an appeal by a creditor resident out of the
jurisdiction against a rejection of his proof in bankruptcy proceedings will only be ordered
in extreme cases (Re Semenza [1894] 1 Q.B. 15, CA, and see Re Vanderhaege (1887) 20
Q.B.D. 146). Appeals cannot be combined so as to avoid several deposits (Re Smith (1896)
1 M.B.R. 30).
23/3/26

Legal aid (rr.1-3)

The fact that the plaintiff is an assisted person is not a sufficient reason why security should
not be ordered, although (since the object of such an order is to give the defendant security
against such costs as are likely to be awarded him, if successful, at the trial) the amount of
security ordered may be smaller than usual. In a claim for damages for personal injuries an
order for security was made against the plaintiff (an assisted person) who was ordinarily
resident abroad (Jackson v. John Dickinson & Co. (Bolton) Ltd [1952] W.N. 9; [1952] 1 All
E.R. 104, CA; Friedmann v. Austay (London) Ltd [1954] 1 W.L.R. 466; [1954] 1 All E.R.
594; Williams v. Williams [1953] 1 W.L.R. 905; [1953] 2 All E.R. 474).

23/3/27

Security by undertaking to pay costs (rr.1-3)

Where the undertaking of a party or his solicitor to pay the whole or a specified proportion
of the costs or a specified sum in lieu of security for costs is accepted by the other party,
there is no need for any application to the court.

Where such an undertaking is given and is accepted in lieu of security for costs, it lasts as
long as there is no final judgment from which an appeal lies (Hawkins Hill Co. v. Want
(1893) 69 L.T. 297). It will be limited to the amount of the security so given.

23/3/28

Security by payment into court (rr.1-3)

The usual and convenient mode in which to order security for costs is to require a specified
sum to be paid into court within a specified period. This mode saves a great deal of costs
and trouble, as compared with requiring security by bond, and is much to be preferred.

The court cannot order a solicitor, to whom, on the dismissal of an action with costs, money
paid into court by plaintiff as security for costs of defendant, has been paid out in part
payment of defendant's costs as agent for the defendant, to refund such money on the
subsequent reversal of the order for dismissal (Lydney, etc., Co. v. Bird (1886) 33 Ch.D. 85).
See Hood-Barrs v. Crossman [1897] A.C. 172; Re Griffiths Cycle Corp. (1902) 85 L.T. 776,
C.A.

Where a party has been compelled to pay money into court as security for costs, such fund
cannot be looked upon as property recovered or preserved, so as to enable the court to give
the solicitor of the party paying in a charging order upon it for the amount of his costs (Re
Wadsworth (1885) 29 Ch.D. 517).

As to the court's power to vary the form by which a party provides security for costs, see
 Wing Fai Construction Co. Ltd (In Liquidation) v. Fitzroya Finance Co. Ltd, unreported,
HCA No. 2570 of 2003, [2006] H.K.E.C. 49.

23/3/29

Security by bond (rr.1-3)

Security for costs may in special cases be ordered to be given by bond and is usually given
by bond with two sureties, though one obligor is sufficient. The bond has usually to be
approved by the master, but is given to the person requiring the security.

The proposed sureties on the bond must be solvent (Cliffe v. Wilkinson (1830) 4 Sim. 122);
and the plaintiff's solicitor cannot be surety (Panton v. Labertouche (1843) 1 Ph. 265,
where the reason is stated) nor is the solicitor's undertaking sufficient (Re Norman (1849)
11 Beav. 401). If the surety becomes bankrupt, the plaintiff must find a new one, and
proceedings may be stayed in the meantime (Lautour v. Holcombe (1843) 1 Ph. 262; Veitch
v. Irving (1840) 11 Sim. 122). Where there are several defendants separately represented,
each may have a separate security, though only one penalty is recoverable (Lowndes v.
Robertson (1819) 4 Mad. 465).

Security may be given by the bond of a guarantee society, which is made out to the party
entitled to the security and is lodged with their solicitors.

There is no general rule that the bond of a foreign company will not be accepted as security
(Aldrich v. Griffin, etc., Co. [1904] 2 K.B. 850, CA).

A solicitor who takes a guarantee in lieu of an order for security for costs may be liable to
his client in negligence if he fails to ensure that the guarantee is properly secured (Boston v.
Roberts, The Times, March 17, 1995).

23/3/30

Security by charge or otherwise (rr.1-3)

Security for costs may in appropriate cases be ordered by way of charging of the plaintiff's
rights to dividends of a company (Michael Sofaer v. Arral Pacific Management Ltd, [1994]
H.K.C.U. 116) or charging of shares in a company (Re Chime Corp. Ltd, unreported,
HCMP No. 4146 of 2001, October 31, 2003, [2003] H.K.E.C. 1447, which is also an
example of a successful application to convert security, in the form of a letter of guarantee,
into a deposit held in an escrow bank account in the parties' joint names). Security can also
be ordered over goods which are the subject-matter of the claim if still of value and if still in
a defendant's possession (Elecvision Inc. v. Achiever Industries Ltd [2003] 1 H.K.L.R.D.
60).

23/3/31

Time for making application for security (rr.1-3)

The right to security is not waived by service of the defence, and an order for security may
be made at any stage of the proceedings (Re Smith (1896) 75 L.T. 46, CA; and see
Arkwright v. Newbold [1880] W.N. 59; Martano v. Mann (1880) 14 Ch.D. 419, CA; Lydney,
etc. Iron Ore Co. v. Bird (1883) 23 Ch.D. 358).

An application for security may be made after judgment for the costs of further proceedings
directed by the judgment as, e.g. the taking of an account before an Official Referee (Brown
v. Haig [1905] 2 Ch. 379).

Delay in making an application for security for costs, however, may be relevant to the
exercise of the court's discretion to order security. Although in most cases delay is not a
decisive factor, it may be treated as important, especially where it has led, or may have led
the plaintiff to act to his detriment, or may cause him hardship in the future conduct of the
action (Jenred Properties Ltd v. Ente Nazionale Italiano per il Turismo, Financial Times,
October 29, 1985, CA). If the delay in making an application for security for costs was due
to the fact that the plaintiff was not pursuing its case, the court may not hold such delay
against the defendant if it makes the application only after the plaintiff decides to press on
with the proceedings (Sunchase International Group (China) Ltd v. Vincor Group of
Companies (Investment) Ltd, unreported, CACV No. 100 of 2003, October 23, 2003, [2003]
H.K.E.C. 1289). See also Senior Honor Ltd v. Lee Ki Luk and Others, unreported, HCA No.
4043 of 2001, November 14, 2003, [2004] H.K.E.C. 25 in which the Defendants'
application was refused despite having a prima facie case for making an application for
security for costs, because of the lateness of their application. In Anbest Electronic Ltd v.
CGU International Insurance Plc (unrep., HCA 82 of 2000) [2006] H.K.E.C. 2353, the
court held that, had the defendant succeeded in discharging its burden to show the plaintiff's
inability to pay, it would not have exercised its discretion to order security due to the delay
in making the application, at a time when the plaintiff wished to set the case down for trial.

The circumstances in which a court would order security for costs during the course of a
trial would be rare. There would at least have to be a substantial change of circumstances
upon which the party applying had acted promptly as soon as the facts were known
(Cheffick v. J. D. M. Associates (No. 3) (1989) 22 Con.L.R. 36). Confirmation in a pre-trial
checklist that no application for security costs will be made is also a relevant consideration
for the court in deciding whether or not to order security for costs (Senior Honor Ltd v. Lee
Ki Luk & Others (above) and Tse Kai Kit, unreported, HCA No. 1535 of 2003, [2005]
H.K.E.C. 1086). However, in the exercise of its discretion, the court may be more
favourably disposed to grant security where such confirmation in a pre-trial checklist was
not intended to mislead the court (Peconic Industrial Development Ltd & Another v. Chio
Ho Cheong & Others, unreported HCA No. 16255 of 1999, [2005] H.K.E.C. 1745; a case
in which the court granted a late application for security for costs, made less than three
months before trial, noted that delay was not per se fatal to an application for security and
considered (in the exercise of a wide discretion) the prejudice to the plaintiff in allowing
such a late application.

Where a defendant fails to observe a time limit imposed by the court to apply for security
for costs, unless the failure amounts to procedural abuse, or causes prejudice to the plaintiff,
 a defendant should not be deprived of the opportunity to apply for security for costs (Lessy
Sarl v. Pacific Star Development Ltd & Another [1997] H.K.L.R.D. 1248; [1997] 3 H.K.C.
306).

23/3/32

Amount of security (rr.1-3)

The amount of security awarded is in the discretion of the court, which will fix such sum as
it thinks just, having regard to all the circumstances of the case. It is not always the practice
to order security on a full indemnity basis. If security is sought, as it often is, at an early
stage in the proceedings, the court will be faced with an estimate made by a solicitor or his
clerk of the costs likely in the future to be incurred; and probably the costs already incurred
or paid will be only a fraction of the security sought by the applicant. At that stage one of
the features of the future of the action which is relevant is the possibility that it may be
settled, perhaps quite soon. In such a situation it may well be sensible to make an arbitrary
discount of the costs estimated as probable future costs, but there is no hard and fast rule.
On the contrary each case has to be decided on its own circumstances, and it may not
always be appropriate to make such a discount (Procon (Great Britain) Ltd v. Provincial
Building Co. Ltd [1984] 1 W.L.R. 557; [1984] 2 All E.R. 368, CA). It is a great
convenience to the court to be informed what are the estimated costs, and for this purpose a
skeleton bill of costs usually affords a ready guide (cited with approval by Lane J. in T.
Sloyan & Sons (Builders) Ltd v. Brothers of Christian Instruction [1974] 3 All E.R. 715 at
720). It is for the applicant to place materials before the court to enable the court to come to
a view on the quantum to be ordered as security. If the applicant fails to discharge this
obligation, no amount can be ordered notwithstanding that a right for security has been
established (Pete (Dr.) Fashions Co. Ltd v. C&C Textiles Corp., unreported, Civ. App. No.
188 of 1996, February 14, 1997, [1997] H.K.L.Y. 557). If the applicant fails to provide a
properly itemised bill of costs with the necessary breakdown for each item, the judge may
use his own experience to decide on an amount to be ordered as security for costs
(Sunchase International Group (China) Ltd v. Vincor Group of Companies (Investment)
Ltd, unreported, CACV No. 100 of 2003, October 2003, [2003] H.K.E.C. 1289). Even if a
skeleton bill of costs were to be provided by the applicant, the court may not condescend to
a line by line evaluation of the bill but instead may adopt a "broad-brush" approach
(Daimler Chrysler Services China Ltd v. Harbour Union Investments Ltd, unreported,
HCCL No. 34 of 2002, May 7, 2004).

Where the claim of the plaintiff, who may be required to give security for costs, whether
under r.1 or under the Companies Ordinance, s.357, is countered by a cross-claim put
forward by the defendant, the amount by which such cross-claim exceeds the plaintiff's
claim has to be treated as a counter-claim in relation to which the plaintiff is in the position
of a defendant and in respect of which therefore he cannot be ordered to give security for
costs, and accordingly, in such case the appropriate amount of security must be determined
by having regard to the fact that the defence goes to the whole of the plaintiff's claim while
disregarding the excess of the defendant's claim over the plaintiff's claim (Smarking
International Limited v. Lau Chi Keng George & Others [1999] 4 H.K.C. 669; T. Sloyan &
Sons (Builders) Ltd v. Brothers of Christian Instruction [1974] 3 All E.R. 715).
 Security for costs is not necessarily confined to future costs, but may, when applied for
promptly, be extended to costs already incurred in the suit (Brocklebank v. King's Lynn
Steamship Co. (1878) 3 C.P.D. 365); Massey v. Allen (1879) 12 Ch.D. 807; Procon (Great
Britain) Ltd v. Provincial Building Co. Ltd [1984] 1 W.L.R. 557; [1984] 2 All E.R. 368,
CA).

The amount of security awarded may be increased, see Sturla v. Freccia [1877] W.N. 166,
188; [1878] W.N. 161; Republic of Costa Rica v. Erlanger (1876) 3 Ch.D. 62;
Northampton Coal, etc., Co. v. Midland Waggon Co. (1878) 7 Ch.D. 500; Massey v. Allen
(1879) 12 Ch.D. 807; and in Re Feld's Will Trusts, Feld v. Feld, CX L.J. 2, where the
defendants sought security for costs as the costs likely to be incurred were increased,
Wynn-Parry J. directed that an additional amount to that already in the defendants' hands be
lodged in court.

There is no rule that the court will not grant more than two applications for security
(Merton v. Times Publishing Co. (1931) 48 T.L.R. 34). In that case, however, the court
made a final order of £1,000, but without prejudice to a further application for a
commission.

"Sufficient" security or security that in all the circumstances of the case is just does not
mean complete security. Where a defendant was seeking £147,000 by way of security and
the judge ordered £10,000 the Court of Appeal declined to interfere as the judge had
correctly taken into account that the delay by the defendant in making the application had
deprived the plaintiff of time to collect the security and that the plaintiff's strong and
genuine claim would be stifled by ordering a larger sum (Innovare Displays v. Corporate
Booking Services [1991] B.C.C. 174, CA).

It is only in rare cases that the Court of Appeal would interfere with the exercise of the
discretion of the judge below (Cal-Trade Pte Ltd v. Mindo Commodity Trading Co. Ltd
[1989] 2 H.K.C. 112).

23/3/33

Default in giving security (rr.1-3)

If the plaintiff makes default in giving security he may be ordered to give security within a
limited time, and in default the action may be dismissed (Giddings v. Giddings (1847) 10
Beav. 29; Multi Sky Ltd v. Hong Kong Chinese Insurance Co. Ltd & Another [1994] 1
H.K.L.R. 155; [1994] H.K.C. 108 and see La Grange v. McAndrew (1879) 4 Q.B.D. 210,
where action was dismissed after order for security and stay of proceedings meantime). In
Burton v. Holdsworth [1951] 2 K.B. 703; [1951] 2 All E.R. 381, CA, an order for transfer to
the county court was made (against an assisted person) in default of payment for security of
costs into court.

The power to dismiss an action for default by a plaintiff in complying with an order for
security derives from the inherent jurisdiction of the court, and applies as much to an order
 for security made under s.357 of the Companies Ordinance as to one made under O.23, r.1;
the court has power to dismiss the action where it is satisfied that (i) the action is not being
pursued with due diligence, (ii) there is no reasonable prospect that the security will be paid,
or (iii) the time limit prescribed by the court for the giving of security has been disregarded
(Speed Up Holdings Ltd v. Gough & Co. (Handly) Ltd [1986] F.S.R. 330; Multi Sky Ltd v.
Hong Kong Chinese Insurance Co. & Another [1994] 1 H.K.L.R. 155, [1994] H.K.C. 108;
Sunchase International Group (China) Ltd and Others v. Vincor Group of Companies
(Investment) Ltd and Others, unreported, CACV No. 64 of 2004, September 24, 2004). It is
open to the court to provide in the order for security that in the event such security is not
given within the time specified (during which a stay usually operates) the action will be
dismissed (Sunchase International Group (China) Ltd & Others v. Vincor Group of
Companies (Investment) Ltd & Others, unreported, FAMV No. 21 of 2004, February 22,
2005, [2005] H.K.E.C. 251).

Further indulgence may be granted to a plaintiff that failed to comply with order(s) to pay
security (Multi Sky Ltd v. Hong Kong Chinese Insurance Co. Ltd & Another (above) where
indulgence was granted on the considerations of incurred costs, delay and the interest of
justice in settling the claims). On ordering that the plaintiff's claim be dismissed, in the
event that security is not provided within time, the court should (in the exercise of its
discretion) have regard to the plaintiff's defence to counterclaim (if any) and to the general
principle that security for costs cannot be ordered against a party that is exercising its right
to defend a counterclaim (Winghing Investments Ltd v. Lee Hoi Wing & Another,
unreported, CACV No. 378 of 2005, [2006] H.K.E.C. 378).

23/3/34

Return of security (rr.1-3)

Just as a defendant may from time to time make further applications for security in the light
of changed circumstances (in relation to which see e.g. Goal Setting Consulting Co. Ltd v.
Unigraphics Solutions Asia/Pacific Inc. [2006] 3 H.K.L.R.D. 678, where the court held that
the abandonment by the defendant of its counterclaim after an initial unsuccessful
application for security amounted to a material change in circumstances, allowing the court
to consider a second application), so a plaintiff may be entitled to apply for variation or
discharge of an order previously made if his circumstances have changed; whether the
court will accede to such an application will depend on the circumstances, the nature of the
order previously made and any other material considerations. A plaintiff cannot seek to
have an order against him for security for costs varied or set aside by producing fresh
evidence about his affairs at the date of the order. If however, he can show a material
change of circumstances since the date of the order, he may apply for variation or discharge
of the order. Whether such an application will be allowed depends on the circumstances
and is a matter of discretion to be exercised by the court (Gordano Building Contractors
Ltd v. Burgess [1988] 1 W.L.R. 890, CA).

23/3/35

Payment out (rr.1-3)

Successful plaintiffs are entitled to have money paid in by them as security for costs paid
out to them notwithstanding a stay of execution pending appeal (The Bernisse [1920] P. 1;
Comitato Portuario, etc. v. Instone [1922] W.N. 260, CA). However, see Shanghai Tongji
Science & Technology Industrial Co. Ltd v. Casil Clearing Ltd, unreported, HCCL No. 2 of
2002, September 27, 2002, where Stone J. followed the decision of the English Court of
Appeal in Stabilad Ltd v. Stephens & Carter Ltd (No. 1) [1999] 1 W.L.R. 1201 in refusing
a successful plaintiff's application for payment out of money paid in as security.