July 2023

The order for security for costs under Order 23 rule1(1) of Rules of High Court is always a discretion of the court, but it will usually be granted if a foreign plaintiff has no asset within jurisdiction and it cannot demonstrate that there is a high degree of probability of success in the claim at trial. The Honorable Justice Wilson Chan has recently handed down a decision in XY, LLC v Jesse Zhu (also known as Jia-Bei Zhu and Jessie Jia-Bei Zhu) and Grand Network Technology Limited [2023] HKCFI 1317 to dismiss an appeal against the dismissal of an application or security for costs against a foreign plaintiff. This is a rare decision in which a foreign plaintiff with no asset within the jurisdiction has successfully opposed a defendant’s application for security for costs. The court highlighted:

“The court should have regard to all the circumstances of the case in the exercise of its discretion under Order 23, rule 1(1) of the Rules of the High Court. In particular, (i) security cannot now be ordered as of course from a foreign plaintiff, but only if the court thinks it is just to order such security in the circumstances of the case; and (ii) a major consideration is the likelihood of the plaintiff succeeding. If the plaintiff’s claim is “genuine and strong”, no order for security would be granted. 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. The court will also consider the defendant’s prospects of success and whether it has an arguable defence.”

Whether the foreign plaintiff has any asset within the jurisdiction is a factual issue. In assessing the probability of success of the plaintiff’s case, the court will also look at the defendant’s case and whether the defendant has an arguable defence. This indeed amounts to a preliminary trial of the action.

The usual wishful thinking that a foreign plaintiff without any asset within the jurisdiction which cannot show case of high probability of success is usually bound to give security for costs may have to be changed as the defendant has to self-assess the merit of its own defence upon making such application.