Re Buildtech Enterprise International Ltd & Ors(1) is a recent reminder that when a plaintiff provides an incorrect address in their originating court document (in order to commence proceedings), it does not necessarily follow that a court will make an order for security for costs against them. A failure to provide an address or a correct address is one of several grounds pursuant to which a court may order security for costs, but only where the omission is the result of an intention to deceive. Where there is such an intention, the court's wide discretion to order security for costs is triggered.
The plaintiffs challenged the defendant's trademark registration by issuing an originating summons in the High Court's IP list. The first and second plaintiffs are companies incorporated in Hong Kong. The third plaintiff is the son of the fourth plaintiff and (among other things) they were a director and shareholder of the first and second plaintiffs, respectively. The parties' businesses (including that of the defendant company) involve the supply of construction materials.
In the plaintiffs' originating summons, the registered office address of the first and second plaintiffs was stated to be a numbered lot of land at a certain address in Hong Kong; the residential address of the third and fourth plaintiffs was stated to be a numbered house at an address in the same district. The third plaintiff (the son) appears to have owned another residential property nearby. The first and second plaintiffs changed their registered office address to a new lot of land in late 2020 and confirmed as much by filing notice of change of registered office with the Companies Registry.
The defendant applied for security for costs against the plaintiffs in the sum of HK$1.28 million. The grounds for security for costs were twofold – namely, that:
- the plaintiffs' addresses as specified in their originating summons were incorrect, incomplete or non-existent;(2) and
- the first and second plaintiffs would be unable to pay the defendant's costs if ordered to do so in the event that the defendant was successful at trial.(3)
The Court noted that an order for security for costs is not targeted at the use of an incorrect address which can be properly and innocently explained. The Court stated as follows:
There should be an element of deception in the misstatement in order to justify an order for security for costs.(4)
Plaintiff company unable to pay costs
The Court also noted that the defendant (as the applicant) bore the burden of providing credible evidence to show that the first and second plaintiffs would not be able to pay the defendant's costs should the defence be successful at trial. It was for the first and second plaintiffs to adduce evidence to contradict the defendant's evidence and the Court should assess the respective evidence applying an objective approach:
The court shall decide whether a reasonable person with ordinary experience of daily life would consider the plaintiff unable to pay such costs.(5)
The Court dismissed the defendant's application on both grounds.
Evidence as to address
The Court accepted that the first and second plaintiffs' registered office address had been incorrectly stated in their originating summons. However, they had updated this address to the new lot of land by filing a notice of change of registered office with the Companies Registry. The defendant would have been able to confirm the new address by conducting a company search, which suggested that the plaintiffs had not intended to mislead the defendant.
The Court did not consider that the third and fourth plaintiffs' residential address (being a numbered house at a certain address) was non-existent based on the evidence. The third and fourth plaintiffs had provided documents (including utility bills and correspondence with the Inland Revenue Department and certain banks) confirming that the address was being used by them and that they could be contacted there. As for the third plaintiff's other residential property, the Court accepted his evidence that the property was being refurbished and was not (at the time) his residence. The Court also noted that, as a director, the third plaintiff had informed the Companies Registry of his change of address, which suggested that he had not intended to deceive.
Evidence as to inability to pay costs
The defendant argued that the premises at the first and second plaintiffs' old registered office were little more than "a shack covered by metal sheets" – the implication being that as companies, they were allegedly not worth much.(6) However, the Court noted that the defendant's observations as to the physical condition of the premises did not necessarily reflect the first and second plaintiffs' financial position at the date of the defendant's application for security for costs (in April 2021). Further, the Court appears to have accepted that the plaintiffs' evidence suggested that the state of the premises at the old registered office reflected the nature of the business being carried on there (the supply of construction material and equipment) and the first and second plaintiffs were continuing to carry on a business that was a going concern.
The defendant's application was dismissed by the Court.
Applications for security for costs are common. The earlier a defendant applies for security for costs, the better, although usually a defendant will wait until after having filed their defence. Thereafter, applications for security for costs can be made in stages and, where there is a ground for security, the outcome of an application (if not agreed between the parties) turns on an exercise of the court's wide discretion, which is based on principles that are well settled. Two of the more common grounds for security for costs are that a plaintiff is ordinarily resident out of the jurisdiction or that a plaintiff company is of doubtful solvency.(7) Often with security for costs, the real focus is more on the amount of the security to be ordered.
In Re Buildtech Enterprise International Ltd & Ors, the Court did not need to exercise its discretion because the defendant (on the evidence) had failed to establish either ground on which it sought security. The Court's decision is a useful review of the relevant legal principles that underpin an application which is based on the ground that a plaintiff's address in a writ or originating summons is incorrect. As the Court noted, an order for security for costs on this ground is targeted at plaintiffs that provide an incorrect address with an intention to deceive and not at plaintiffs that provide a proper and innocent explanation for an incorrect address.
In Re Buildtech Enterprise International Ltd & Ors, the plaintiff had not been entirely blameless. For example, the registered office address of the first and second plaintiffs had been incorrectly stated in their originating summons and some of the confusion as to the third plaintiff's residential address appears to have been of his own making. While the Court considered these to be genuine mistakes, they were reflected in the Court's order that there be no order as to the costs of the defendant's application (despite the plaintiffs' success in resisting the application).
For further information on this topic please contact Antony Sassi, Jacky Darsono or David Smyth at RPC by telephone (+852 2216 7000) or email ([email protected], [email protected] or [email protected]). The RPC website can be accessed at www.rpc.co.uk.
(1)  HKCFI 1837, HCIP 14/2021.
(2) Rules of the High Court, Order 23, rule 1(1)(c).
(3) Companies Ordinance (Cap 622), section 905.
(7) Rules of the High Court, Order 23, rule 1(1)(a) and supra note 3.