In the decision handed down by The Honourable Mr Justice Wilson Chan on 20 October 2023 in XY, LLC v Jesse Zhu (also known as Jia-Bei Zhu and Jessie Jia-Bei Zhu) and Grand Network Technology Limited [2023] HKCFI 2686, the Hong Kong Court dismissed the defendant’s application for leave to appeal to the Court of Appeal against the Court of First Instance’s judgment which affirmed the dismissal of the defendant’s application for security for costs against the foreign plaintiff with no assets or presence in Hong Kong. Tanner De Witt’s Dispute Resolution team represented the plaintiff – XY, LLC (“XY”) – in this case.
The 2nd Defendant (“GNT”)’s application against XY for security for costs (for over HK$4 million) was first heard and dismissed by a Master in the First Instance, followed by a dismissal of its appeal against the Master’s decision. Details of XY’s successful resistance against GNT’s appeal of the Master’s decision were reported in our previous post. The dismissal was primarily based on the ground that XY has a “high probability of success” in the action.
Notwithstanding the dismissal, GNT sought leave to appeal the First Instance Judge’s decision to the Court of Appeal. In dismissing GNT’s application for leave to appeal, the Court had the following key rulings:
- The Court confirmed that the threshold for the purpose of the security for costs is “high probability of success”, which is a higher threshold than “good arguable case”. Contrary to GNT’s arguments, the Court did not “conflate” the two different thresholds. In determining that XY has a “high probability of success” in the present action, the Court replied on the “findings and evidence” concerning the merits of XY’s claims by the Court of Appeal and the Leave Committee of the Court of Final Appeal in related litigation proceedings. The determination was not simply based on the “conclusion” previously reached by those Courts.
- When exercising its discretion in deciding whether to order security for costs, the Court is entitled to have regard to all the circumstances of the case, including the fact that there are substantial outstanding costs orders granted in favour of XY against GNT in related proceedings in Hong Kong.
Comments
The decision reaffirms the Hong Kong Courts’ position that security for costs is not an arbitrary weapon to be wielded against foreign plaintiffs. The Court does not order security from a plaintiff simply because it is a foreign entity. Instead, the Court retains a discretion to decide whether it is just to order such security, having considered all the circumstances of the case. A major consideration is the likelihood of the plaintiff succeeding.
Authors: Pamela Mak and Ling Meng