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Security for Costs from Foreign Plaintiff Not Required ?
1 August 2014

It is well established law in Hong Kong legal proceedings that a foreign claimant / plaintiff may be ordered to deposit a sum in Court as “security for costs” of a defendant. The security for costs aims to cover part of the defendant’s estimated litigation costs in defending an action brought by a foreign plaintiff such that when the defendant is successful in defending the action, the part of its legal costs that normally would be payable by the foreign plaintiff, would be secured by the “security for costs”.

It is not infrequent that a foreign claimant who has obtained a foreign judgment against a defendant would wish to enforce it in Hong Kong due to the defendant’s assets here. In such a situation, unless the foreign judgment is obtained in one of the recognized countries where reciprocal enforcement arrangement is available in Hong Kong, the foreign claimant (who is also a judgment creditor under the foreign judgment) would need to commence fresh Hong Kong proceedings against the judgment debtor based on the foreign judgment. This method is more efficient and cost-effective than to reargue the whole claim / debt again in Hong Kong.

Interestingly, in a recent decision from the High Court of Hong Kong, it was held that a foreign plaintiff who commenced proceedings based on a foreign judgment may be in a better position to oppose a defendant’s application for security for costs than if its claim was based only on a foreign debt. Security is not ordered as of right against a foreign plaintiff but only if the court thinks it just to do so in all the circumstances. The matter is one of discretion of the court.

In the case of Desarrollo Inmobiliario Y Negocios Industriales De Alta Technologia De Hermosillo, SA De CV v Kader Holdings Co Ltd, a foreign judgment creditor (“Desarrollo”), ordinarily resident out of the jurisdiction obtained a judgment in Arizona, USA (“Arizona Judgment”) against Kader, a Bermuda incorporated company with assets in the United Kingdom and Hong Kong, after substantive merit of the claim was fully argued. Whilst disputing that the Arizona Court has jurisdiction over Kader and maintaining that position throughout the Arizona proceedings, Kader appealed against the Arizona Judgment at several court levels but failed on all occasions. To enforce the Arizona Judgment, Desarrollo commenced proceedings in the United Kingdom and Bermuda which were being contested by Kader and still ongoing as in November 2013.

When Desarrollo commenced proceedings against Kader in Hong Kong to enforce the Arizona Judgment, Kader applied for a security for costs against Desarrollo as it was a foreign plaintiff that did not have assets or substantial assets in Hong Kong.

For the first time in a Hong Kong reported case, the Court considered that it was unjust for Kader to request for security for costs against Desarrollo when Kader’s legal costs was secured by setting off against Desarrollo’s judgment debt which was established after vigorous contests in a well-recognized Court of law. Desarrollo’s claim against Kader was based on a guarantee agreement which the Court assessed that it would be difficult for Kader to escape. Further, in light of the number of enforcement actions taken by Desarrollo in several jurisdictions to recover its claim, even if Desarrollo failed to enforce the Arizona Judgment in Hong Kong, it had the means and determination to commence fresh proceedings to re-argue the whole claim against Kader in Hong Kong. Therefore, the Court chose not to exercise its discretion to order Desarrollo to pay security for costs to Kader.

It is often the case that foreign judgment is to be enforced in Hong Kong due to the judgment debtor having assets here. This decision would provide foreign creditors with some comfort that they may not be required to set aside a sum of money with the Hong Kong Court before they could continue with their action to enforce a foreign judgment.

If you have any queries regarding the above or any other questions relating to the enforcement of foreign judgments in Hong Kong or other civil claims and enforcement matters, experienced lawyers in our Litigation Practice would be pleased to assist you.

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