Unauthorised Payments Dispute: Significant Reduction in Defendant’s Security for Costs and Costs Awarded
Civil procedure
The Plaintiff faced an application from the Defendant for security for costs exceeding HK$2 million up to the conclusion of trial. The case concerned alleged unauthorised payments made by the Defendant, who was the Plaintiff’s sole Hong Kong employee, through pre-signed blank cheques deposited or withdrawn to her personal accounts.
Abigail Liu, instructed by Henry Wai & Co, Solicitors LLP, represented the successful Plaintiff.
The Judgment can be viewed here.
Background
The Defendant sought security for costs against the Plaintiff asserting the Plaintiff’s central management and control were ordinarily resident abroad in Japan. The Defendant also highlighted the Plaintiff’s financial difficulties, including its cessation of business in around June 2017 and a substantial loss shown in the 2018 tax return. Security for costs was sought for an initial sum of HK$2,230,000, later slightly reduced by HK$221,147, to cover costs up to the conclusion of trial.
The Plaintiff opposed, citing significant delay spanning over five years before the Defendant indicated and then formally applied for security for costs. This delay, the Plaintiff argued, caused serious prejudice because the Plaintiff had already invested heavily in prosecuting its bona fide claim, with completed pleadings, exchanged witness statements, and readiness for trial. The Plaintiff also submitted that the Defendant was substantially indebted to it for costs arising from previous applications, including a Mareva injunction and related summonses. Additionally, the Plaintiff referred to the fact that the counterclaim significantly overlapped with the defence.
Legal Principles
The court reaffirmed that no rigid rule mandates security for costs against a plaintiff resident abroad, emphasising the discretionary nature under the relevant procedural rules. The court noted the key factors in the discretionary exercise include the foreign plaintiff’s financial position and the conduct of the parties.
Regarding the question of delay, Counsel for the Plaintiff cited Tri-Tech Metals Co Ltd v YKK AP Hong Kong Ltd (Unreported, HCCT 60.2024, 30.4.2009), identifying the critical questions: whether there had been a delay, whether an explanation was provided, and whether the plaintiff was prejudiced by the delay.
Court’s Reasoning on Security Quantum and Delay
The court took a holistic view of the case, noting the action’s advanced stage after more than five years, with all key pleadings and evidentiary preparations completed. It accepted the Plaintiff’s submissions and found the Defendant’s delay in seeking security for costs inexcusable and prejudicial, with the Plaintiff having committed significant resources to advance what it maintained was a bona fide claim.
The court also took into account the indebtedness owed by the Defendant to the Plaintiff from previous unsettled costs orders in offsetting the quantum of security in favour of the Defendant.
Taking a broadbrush approach, the judge concluded that a reasonable and just security for costs order should be for HK$250,000—a sizable reduction from the over HK$2 million sought by the Defendant.
Costs Award
Critically, the court also ruled on costs relating to the security for costs application, finding that while the Defendant succeeded in obtaining security, the quantum was that asked for by the Plaintiff, not the Defendant. Taking the matter in the round, the court ordered the Defendant to bear the Plaintiff’s costs incurred for the security for costs summons.
Significance
This judgment showcases effective litigation strategy in challenging excessive security for costs demands through highlighting delay and proportionality. It demonstrates how courts in Hong Kong balance protecting defendants from unmeritorious or potentially insolvent plaintiffs with ensuring plaintiffs’ access to justice. The costs award further underscores that parties seeking procedural advantages must do so timely and reasonably.
Recently in another case HCA 881/2021, Abigail acted for the successful Plaintiff in resisting the Defendant’s application for further security for costs of over 6 million (which was belatedly conceded to around HK$1.8 million before the hearing) by demonstrating that the Defendant failed to show any material change of circumstances.
Abigail Liu
Abigail joined Chambers in 2019 after completing her pupillage with Mr. Graham Harris SC, Mr. Tim Kwok, Ms. Catherine Wong, Mr. Simon Wong and Mr. Jeffrey Tam.
Abigail is developing a broad civil and criminal practice. She has experience in areas such as family and matrimonial matters, public law, land, tort, personal injuries, employee compensation, commercial litigation, trusts, probate and contract.
Abigail has been instructed to appear in the Magistracies, the Lands Tribunal, District Court and High Court. She accepts instructions in all areas of work. She is fluent in English, Cantonese and Putonghua. She is capable of providing written submissions and conducting hearings in both English and Chinese.
Visit Abigail’s profile for more details.
This article was first published on 9 September 2025.
Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case. The photographs which appear in this article are included for decorative purposes only and should not be taken as a depiction of any matter to which the case is related. The views and opinions expressed in this article/material are solely those of the members authoring it and do not necessarily reflect the official policy or position of Denis Chang’s Chambers, or of any other member or members of Denis Chang’s Chambers.