POWER LEADER TECHNOLOGY DEVELOPMENT LTD v. ASIA PACIFIC BIOTECH CO LTD AND OTHERS

HCCW 544/2006, HCA 1107/2007
& HCMP 1310/2007

HCCW 544/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS

NO. 544 OF 2006

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D E C I S I O N

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1.  I have before me two applications for security for costs in two separate sets of proceedings.  There are, in fact, three sets of proceedings that are closely interrelated.  The first is HCCW544/2006.  In those proceedings, the Petitioner is a company called Power Leader Technology Development Limited and the company that is the subject of those winding-up proceedings is Asia Pacific Biotech Company Limited.  The other Respondents to that petition are Grant Smart (HK) Limited and Madam Lu Fei, Grant Smart being a shareholder of Asia Pacific Biotech Company Limited and Madam Lu Fei being one of its directors.

2.  The background to that set of proceedings was set out in a judgment in an application for security for costs in those proceedings, given by Kwan J on 16 January 2007.  For present purposes, I think that it suffices to note that Asia Pacific Biotech Company (‘the Company’) was owned as to 50 per cent by Power Leader Technology, a company ultimately controlled by Mr George Ye, and as to the other 50 per cent by Grant Smart (HK) Limited, a company controlled by Madam Lu Fei. 

3.  It appears to be common ground that the purpose of the respective investments into the company was to enable the company, in turn, to invest in a Sino-foreign joint venture for the purpose of developing and exploiting certain medical patents and technology.  It seems that, in the event, the capital in the form of funding was provided substantially by Grant Smart and, through it, by Madam Lu Fei, whereas Dr Ye, through Power Leader, was to procure the injection of certain rights to exploit the technologies in question so that they could be passed on to the Sino-foreign joint venture in due course. 

4.  Dr Ye felt that he had been unfairly treated in certain respects in relation to the affairs of the Company.  The two principal complaints appear to be a failure to account properly for the value of his contribution through Power Leader, the Petitioner, of the medical technology in question and, secondly, the subsequent purported removal of him as a director of the Company by Madam Lu Fei and other members of her family.  That led to the presentation of the petition in HCCW544/2006 in which the leave sought is both winding-up relief pursuant to section 177(1)(f) of the Companies Ordinance and also, as an alternative, orders are sought under section 168A of the Companies Ordinance which deals with unfairly prejudicial conduct on the part of a company or the controlling shareholders and directors against other shareholders.

5.  As I have noted, in those proceedings, an application was made by Grant Smart and Madam Lu Fei for the provision of security for costs.  That application was acceded to by Kwan J in January 2007, when she ordered that a total sum of HK$425,000 should be provided by way of security.  It appears that that amount was ordered as security for the entire costs of those proceedings up to and including trial, at that stage it being estimated that a trial of the petition would last for some five days.

6.  Shortly after that decision was given, the Respondents to the petition say that they became aware of the fact that, in fact, Dr Ye was not in a position to assign the technology in question to the Company to enable it to be injected into the Sino-foreign joint venture.  It is said that Dr Ye was not in fact the sole beneficial owner of the medical technology and the patents and other rights in question, but that he was only a co-owner together with another person.  It was also said that, contrary to what had been represented by Dr Ye, the only right that he had was a right to exploit the technology in question for a limited period of some four years, granted to him by his co-owner, after which, it would seem, the rights in the medical technology in question would revert to them jointly.  It is said that this amounts to a lack of clean hands on the part of Dr Ye so as to disentitle him from the winding-up order which he seeks in the winding-up petition.

7.  Based on this information, the Respondents to the petition also caused separate proceedings to be taken out in the form of a High Court action commenced by the 2nd Respondent, Grant Smart (HK) Limited, against Dr Ye and Power Leader.  In those proceedings, the background to the relationship between Dr Ye and Madam Lu, through their respective companies, Power Leader and Grant Smart, was set out.  It was alleged that Dr Ye made representations as to his ownership of the relevant rights in the medical technology in question, and of his ability to cause transfers of such rights to be made to the Company for onward transmission to the eventual joint venture to be set up on the Mainland.  It is said that these representations were untrue and that, in the circumstances, Grant Smart, by investing in the Company, has suffered loss and damage which it seeks to recover through the medium of the High Court action.

8.  There is, in addition to these two sets of proceedings, one further set of proceedings, these being HCMP1310/2007.  In these proceedings, Dr Ye sought to challenge certain resolutions that were passed by the Directors of the Company, removing him from office as a director of the Company.  He says, for the purpose of those proceedings, that the resolution by which he was removed was invalid and relies, in essence, as I understand it, on two main points, the first being a suggestion that, in fact, the Directors who passed the resolution were no longer Directors at the relevant time when the resolution was passed, as they should have retired from office automatically by virtue of the provisions of the Company’s Articles of Association and the Companies Ordinance, so at the time when the resolution removing him was passed, they were not in fact validly appointed as the Directors of the Company.

9.  Dr Ye also contends that two of the Directors who voted on the resolution, who were Madam Lu’s son and daughter respectively, were appointed as Directors of the Company under a resolution that was assented to by him under the undue influence of Madam Lu. 

10.  As a result of the additional proceedings having been launched, both the Hong Kong action and the High Court miscellaneous proceedings, it is common ground that the trial of the proceedings, all three of which are to be heard together as a result of certain, I think, consent orders that were eventually entered into between the parties given the common underlying background to the three sets of proceedings, it is now accepted that the original estimate for the length of the trial of five days will be likely to be an under-estimate and the new estimate is now that the trial of the three sets of proceedings, which will be heard together, is expected to last for nine days.

11.  It is against this background that Grant Smart has made an application for security for costs in the context of the HCMP proceedings.  The application has been made on the basis that the HCMP proceedings will require a nine-day trial and that certain costs have already been necessarily incurred in relation to those proceedings, in particular, the filing of evidence to respond to the evidence filed by the Plaintiff or Applicant in those proceedings by way of defence on the part of the Respondents.  In addition to the evidence which has already been filed, it is said that the costs of the trial are also matters for which security should be provided. 

12.  The amount of security sought is some HK$900,000-odd.  Of this, about $150,000 is said to be referable to costs already incurred, whereas the balance of some $750,000-odd is said to be referable to the anticipated costs of a nine-day trial, consisting of counsel’s fees of some $250,000 by way of a brief fee and eight days of refreshers at $40,000 per day, coming to a further $320,000, together with $180,000 by way of costs in respect of the solicitors’ attendance at the trial.

13.  It is accepted that, in principle, some security can, and should, be awarded.  However, Mr Lam, who appeared today for Power Leader and Dr Ye, has suggested that the amount of security should be rather less than that claimed.  They say, first, that account should be taken of the $425,000 that has already been provided by way of security.  If this is done, this will reduce the security to be ordered to some $475,000.  It is said also that a further discount of some 25 per cent should be made to that figure to reflect the possibility of a reduction of the costs that are claimed on any eventual taxation.  Mr Lam also suggested that the amount of the costs that have been incurred and that are said to be likely to be incurred are somewhat on the high side, and that allowance should be made for this as well in the form of the 25 per cent reduction proposed.

14.  It seems to me that, in principle, it would be right to order security in these proceedings.  I do not think that it is seriously disputed that the Applicant in the proceedings, Power Leader, is a company of apparently limited financial means.  For much the same reasons as was accepted by Kwan J in considering the similar application in the context of the winding-up proceedings, I would accept that it is shown that there is a risk that if a costs order is made against Power Leader, it will be unable to meet it and that, therefore, the court has jurisdiction to order security for costs in the miscellaneous proceedings, just as it did in the context of the winding-up proceedings.

15.  I think, however, it is important to bear in mind that the costs that are now claimed do in fact cover not just the trial of the miscellaneous proceedings but the associated trial of the High Court action and the High Court winding-up proceedings as well.  It is therefore right, I think, to make a deduction in respect of the security for costs that has already been ordered.

16.  So far as the actual level of costs is concerned, I have to confess that it does seem to me that the costs that are claimed are, I think, somewhat on the high side and it seems to me that it is entirely possible and, indeed, likely that some reduction will be made if and when the matter goes to taxation.  I therefore think that it would be appropriate to adopt the same approach as was adopted by Kwan J in relation to those costs. 

17.  It seems to me that, taking a 25 per cent reduction as proposed for the purposes of this application, it would be appropriate to reduce the costs that have been claimed of $900,000.  I think that the appropriate approach would be to reduce these first by 25 per cent.  That will have the effect of reducing them to, I think, HK$675,000.  It seems to me that the level of security that would otherwise have been ordered in relation to these proceedings should be approximately $675,000.  The costs of $900,000 can, I think, be split into two parts.  $150,000 is referable to costs of the proceedings other than the trial costs; $750,000 would be referable to the costs of the trial.  The costs in relation to the costs already incurred, 75 per cent of $150,000 is $112,500.  In relation to the costs of the trial, $750,000, 75 per cent of that would be $562,500. 

18.  It seemed to me that the approach as proposed in paragraph 10 of the affirmation in support of this application is probably in fact, in principle, the right approach to adopt and that some $252,000 that was allocated as being referable to the costs of the trial of the winding-up proceedings is the amount for which credit should be given.  So at the end of the day, about $112,000-odd should be allowed by way of security for costs already incurred.  As far as the costs of the trial are concerned, the amount of slightly in excess of $300,000 should be allowed. 

19.  Leaving aside the costs of the High Court action, that would suggest that the level of security that should be ordered would be in the region of $420,000.  However, it does seem to me that it would not be appropriate to include the whole of the costs of the trial, given that some part of it will be devoted to the High Court action proceedings, and I would therefore make an approximate reduction in the amount of $40,000 to reflect the length of time that may be attributed to the High Court action in the trial, on the basis that, without the High Court action, the trial might have lasted perhaps a day less.

20.  I think, in all of the circumstances, that the appropriate level of security to be ordered would be HK$380,000.

21.  Turning to Dr Ye’s application for security for costs in respect of the High Court action, Mr Lam, who appears for Dr Ye, points out that the High Court action is an independent set of proceedings which claims distinct relief and that, in those circumstances, Grant Smart is, both in appearance and in fact, the Plaintiff in those proceedings.  It is suggested that Grant Smart, like Power Leader, is a company with limited capital and there, therefore, in the absence of any evidence of its ability to meet an order for costs that may be made against it, the court should conclude, as it did in relation to Power Leader, that Grant Smart would be likely to be unable to meet any order for costs that might be made against it in the event that it fails in its claim.

22.  Although Mr Chong submitted that the evidence did not go far enough to show that Grant Smart would not be likely to be able to meet any order for costs against it, it does seem to me that, in the circumstances of the case, given the capital structure of the Company, in that it has a relatively small capital base, it does not seem to me that the fact that it has been able to put up substantial amounts in support of its investment in the Company as being evidence of its ability to meet any order for costs that might ultimately be made against it. 

23.  It would appear that such funds as it was able to put forward must have been injected by Madam Lu Fei, presumably by way of a shareholder’s loan, into Grant Smart.  Grant Smart’s own assets would appear to be largely illiquid since its assets would consist largely of its investment in the Company and any loans that it might have made to the Company. 

24.  Although Madam Lu Fei may well be in a position to meet any order for costs that might be made at the end of the day, she is not in fact the Plaintiff in the High Court action, whereas Grant Smart is.  There is, therefore, no certainty that, in the event that Grant Smart were to be unsuccessful in the High Court action and was ordered to pay the costs of those proceedings, it would necessarily meet any costs order that would be made against it.  Whether or not it did so would, I suspect, depend on whether or not Madam Lu were prepared to inject further funds into it in order to enable it to meet that obligation. 

25.  Given that there can be no certainty that this will happen, it does seem to me that, on the evidence presently before the Court, there is reason to believe that, in the event that Grant Smart is unsuccessful in its prosecution of the High Court action, it may not be in a position to meet any order for costs that is made against it.

26.  It therefore seems to me that, as a matter of principle, it would be open to the court to order Grant Smart to put up security if it were otherwise right to do so.  The question is, however, as to whether or not that is the case in this situation.  Mr Chong suggests that Grant Smart is really in the position of a counterclaiming defendant and that it is because of the technicality that it is not possible to bring a counterclaim in the context of a winding-up petition, that it has been necessary for Grant Smart to pursue its claims against Dr Ye by way of separate proceedings.

27.  Mr Lam, on the other hand, submits that the position is that the High Court action is in fact a separate proceeding in that it goes further than is necessary for the defence of the winding-up petition.  While Mr Lam accepted that, in principle, it would be open to Grant Smart to raise the matters that are raised in the winding-up petition as a defence to that petition in reliance on a defence of clean hands, he suggested that it would have been possible for Grant Smart to have stopped there and it was not, accordingly, necessary for Grant Smart to have taken out this High Court action. 

28.  I think that there is some force in Mr Lam’s submissions and that the position is somewhat different from that of a counterclaiming defendant where the plaintiff and defendant both make claims against each other arising out of the same contract.  That said, however, it is difficult to see that there is any significant increase or additional costs that are to be incurred in the High Court action proceedings, beyond perhaps the costs of preparing and filing the pleadings in relation to the proceedings and of giving discovery in them.  There might, at most, as I have indicated, be a slight lengthening of the proceedings to deal with the additional aspects of the matter that will not have already been covered in the material relating to the winding-up proceedings, which is the question of damages, if any, to which Grant Smart would be entitled in the event that it succeeds in its allegation of misrepresentation. 

29.  The amount of costs that Grant Smart suggests will be incurred in the High Court action is, I think, some HK$958,000.  It will be apparent from what I have said that a very substantial portion of those costs will relate to matters that would necessarily have had to be dealt with

in the context of the winding-up proceedings, given that Grant Smart has raised the misrepresentations as being evidence of lack of clean hands by way of defence to the petition. 

30.  It seems to me, therefore, that the amount of any security that should be ordered will be very much less than the amount claimed.  In particular, it seems to me that the amount of security that might be attributable by way of trial costs would be no more than some HK$40,000-odd which is the amount that I have estimated, on a rough and ready basis, to be the extent by which the trial will be lengthened by the existence of the High Court action in addition to the other two proceedings.  There will also be some element of costs in relation to pleadings and perhaps discovery.

31.  Doing the best that I can and looking at the breakdown of costs that has been provided, it seems to me that those costs would not be likely, -as claimed, be costs that would be attributable solely to the High Court action, would not be likely to exceed about HK$100,000.  I would apply the same discount of 25 per cent as I have previously applied to Grant Smart’s costs to these costs as well.  That gives a figure of about $75,000 in respect of costs incurred in respect of the High Court action that would not have been covered by the other proceedings and, in addition, some $40,000 in respect of additional trial costs.

32.  In the circumstances, therefore, I think it would be appropriate to order security in the sum of $115,000 to be provided by Grant Smart to the Plaintiffs in the High Court action as security for their costs, bearing in mind that the High Court action is, in my view, a separate set of proceedings which goes beyond a matter of defence to the winding-up proceedings, and that, as a matter of principle, it would be appropriate to order security for costs, reflecting the additional costs that are referable solely to the High Court action against Grant Smart.

33.  The upshot is that I will make an order for security in the sum of $380,000 in favour of the Defendants in the High Court miscellaneous proceedings and $115,000 in favour of the plaintiffs in the High Court action.  That leaves the question of costs of today.

Submissions on costs

34.  In relation to the application by your clients, Mr Chong, bearing in mind that I have awarded substantially less security than you have asked for, and bearing in mind also that there was not entirely an acceptance that some security should be granted, some recognition that some security might appropriately be granted, I will make an order that Mr Lam’s client should pay half your costs of that summons. 

35.  However, in relation to the other application, it seems to me that a similar order would probably be fair, given that although I have acceded in principle to the application which was resisted, there has been a very substantial reduction in the amount of the security sought, from about $950,000-odd down to about $115,000.  In those circumstances, I think that it would be right to reflect that in the costs order and I will order that you should pay half the costs of their application as well.

HCCW 544/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 544 OF 2006

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Before: Hon Kwan J in Chambers

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D E C I S I O N

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1.  This is an application for security for costs in a petition under sections 168A and 177(1)(f) of the Companies Ordinance, Cap. 32.

2.  The petition was presented on 4 October 2006 against Asia Pacific Biotech Co., Limited (“the Company”) by Power Leader Technology Development Limited (“the petitioner”).

3.  The summons seeking security was taken out by the 2^nd and 3^rd respondents on 27 October 2006.  They rely on section 357 of Cap. 32.  Under this provision, the court may, if it appears by credible testimony there is reason to believe that the petitioner, which is a limited company, will be unable to pay the costs of the 2^nd and 3^rd respondents if they are successful in opposing the petition, require the petitioner to give sufficient security for those costs, and stay all proceedings in the petition until security is given.

4.  I will first give the relevant background matters.

5.  The main protagonists in these proceedings are Ye Qing Wei George (“Mr Ye”) and Madam Lu Fei.  The petitioner is mainly owned by Mr Ye.

6.  Madam Lu is the 3^rd respondent.  She and her daughter hold all the shares in the 2^nd respondent.  50% of the shares in the Company is held by the petitioner and the other half by the 2^nd respondent.

7.  The Company was incorporated in Hong Kong in 2000.  It was dormant until October 2002, when it changed its name to its present name and became the corporate vehicle for the purpose of setting up a sino-foreign joint venture biomedical company in Shanghai, known as Shanghai Asia United Antibody Medical Company Limited (“SAUAM”).  The only business of the Company is to hold an interest of slightly over 50% in SAUAM.  The issued share capital of the Company is only $10,000.00.

8.  A shareholders agreement was made on 18 October 2002 between the petitioner, the 2^nd respondent and the Company.

9.  It is alleged by the petitioner that the Company was formed as a quasi-partnership, on the basis that the petitioner and the 2^nd respondent were to contribute to the capital required for setting up SAUAM and that Mr Ye and the 3^rd respondent are entitled to participate in the management of the Company and in turn SAUAM.

10.  On 25 November 2002, the Company entered into a joint venture agreement with 2 companies in the PRC to set up SAUAM, with a registered capital of US$6 million or around RMB50 million.

11.  In 2004, the capital of SAUAM was increased to RMB100 million.

12.  The Company injected capital into SAUAM in cash and by the transfer of the use of the patent and cell lines and technological know-how of various biomedical entities.  The cash was contributed by the 2^nd and 3^rd respondents, in the aggregate sum of RMB30 million.  The biomedical entities technology was contributed by the petitioner.

13.  It is the petitioner’s case that the value of the technological contribution was in the region of US$4 to 5 million.  Whilst the value of the cash contribution of the 2^nd and 3^rd respondents was fully accounted for in the books of SAUAM, the petitioner’s contribution of biomedical entities had not been fully accounted for in that the patent rights were valued at only US$2.4 million.

14.  The petitioner alleges this is unfair and this formed one of its complaints in the petition.

15.  Other allegations of unfairly prejudicial conduct in the amended petition are that the 3^rd respondent appointed her daughter and son as additional directors to the Company and thereby secured control of the board.  In September 2006, Mr Ye was wrongfully removed from his positions as a director in the Company, and as a director, the chairman and legal representative of SAUAM.  An independent director in SAUAM, Zhu Linhai (“Mr Zhu”), was removed as well.  It is alleged that no reason was given by the other directors from removing them from office.

16.  The respondents have not yet filed any evidence in opposition to the petition.  In the evidence they filed in this application, they have alleged that Mr Ye was removed from his positions in the Company and SAUAM for acting in conflict of interest by setting up a rival company and that he had misused the resources of SAUAM to further his private venture.  He was told of these matters well before the petition was filed in October 2006.

17.  An open letter of Mr Ye dated 7 September 2006 was exhibited, showing that Mr Ye was aware of the respondents’ allegations against him.

18.  On the available material, it would seem there are reasonable prospects of success in the petition.

19.  On this application for security for costs, I would need to consider two matters:

(1)     if the condition for the exercise of the power in section 357 is satisfied, namely, if this court is satisfied by credible evidence that the petitioner would be unable to pay the costs of the respondents if it should fail on the petition; and

(2)     if the condition for the exercise of power is satisfied, whether the court should exercise its discretion to order security for costs.

20.  I am satisfied on the evidence there is reason to believe that the petitioner will be unable to pay the costs of the respondents if its petition should fail.

21.  The petitioner has a registered capital of $10,000.00 divided into 10,000 shares, all of which were issued.  7,000 shares in the petitioner are held by Mr Ye.  The registered office of the petitioner is an address in Tseung Kwan O, and I understand the property is a property under the Home Ownership Scheme of the Housing Authority.  That address is apparently used only for correspondence and not for conducting business.

22.  In any event, the petitioner would appear to have no business in Hong Kong other than holding 5,000 shares in the Company.  The only directors of the petitioner are Mr Ye and Mr Zhu.  Mr Ye is a Canadian citizen, Mr Zhu is a lawyer practising in Shanghai.

23.  The audited accounts of the petitioner from its incorporation in 2002 to March 2005 were exhibited by the respondents.  The financial statements stated that the Company was dormant during the entire period.  As at 31 March 2005, the Company recorded net liabilities of $21,060.  The current assets of the petitioner amounted to $28 million being an amount due from an associated company, and its current liabilities stood at $28 million, made up of, inter alia, $28 million due to a related company.

24.  On behalf of the petitioner, it was submitted that the petitioner’s 50% shareholding in the Company and in turn the Company’s substantial interest in SAUAM should be taken into consideration in determining the question if the petitioner could meet its costs liability should it be ordered to pay the costs of the respondents.

25.  I reject this submission.  As stated in Thistle Hotels Ltd v Orb Estates plc & Others [2004] 2 BCLC 174 at 178h, paragraph [11], this issue involves the consideration of the nature and liquidity of the assets of the company concerned.

26.  It is simply not sufficient to point to the substantial capital contributions made by the petitioner and the 2^nd respondent through the Company into SAUAM, or to the assets of SAUAM, most of which are of a non-current nature.  The petitioner’s shares in the Company and, through the Company, an indirect interest in SAUAM, are not readily available assets that could be realised for the purpose of enforcing a costs order against the petitioner.  The Company is not at liberty to withdraw from the joint venture agreement.  Even if SAUAM holds substantial assets, the Company is not entitled to recoup or withdraw at will its investment in specie or in cash.  Its investment has formed part of the assets of SAUAM.  Besides, SAUAM has not been generating income.

27.  On the available evidence, it would appear that there are no current assets directly and readily realizable that would be available to the petitioner.  I agree with the submissions of the respondents’ counsel that the petitioner cannot lay its hands on the assets of SAUAM to meet the petitioner’s liability for costs.

28.  I turn to the question of discretion to order security for costs.  It was contended that the petitioner has reasonable prospects of success on its petition and its claim would be stifled if it should be ordered to put up security.

29.  The court should consider not only whether the petitioner can provide security out of its own resources, but also whether it can raise the amount needed from its directors, shareholders or other backers or interested parties and it is for the petitioner to satisfy the court it would be prevented by an order for security from continuing the litigation (Wing Hing Provision, Wine & Spirits Trading Co Ltd v Hanjin Shipping Co Ltd [1998] 4 HKC 461 at 464E to F; Re Unisoft Group Ltd (No. 2) [1993] BCLC 532 at 535h).

30.  There may be cases where the court can properly infer, without direct evidence, that a company’s claim would be unfairly stifled if it should be ordered to pay security for costs.  An example is in Wing Hing Provision,supra. at 466I.  I do not think the present case is such a case.

31.  The petitioner is mainly owned by Mr Ye, a Canadian citizen.  Nothing is known about his financial resources, except that he is a scientist and immunologist.  It would appear from the amended petition that Mr Ye is the majority shareholder of at least one other company, Yes Biotech Laboratories Ltd, which was incorporated in Ontario Canada and held one of the biomedical entities injected into the capital of SAUAM by the petitioner.

32.  Mr Ye’s earnings from SAUAM at RMB48,000 a month ceased when he was removed from his position in September 2006.  It does not follow that he has no other assets or resources at his disposal such that the petitioner would be unable to pursue legal proceedings.

33.  The petitioner is legally represented in these proceedings.  According to the petition, Mr Ye has issued proceedings in the PRC against SAUAM to challenge the validity of the resolutions to remove him.  The petitioner would also issue proceedings against various parties in the PRC to challenge the validity of the new joint venture agreement entered into by the Company with 4 companies in the PRC in June 2004.  Someone, most likely Mr Ye, has been providing funding to support the petitioner’s litigation in the PRC and Hong Kong.

34.  I am not satisfied on the available material that the claim of the petitioner would probably be stifled if ordered to put up security, nor do I think it unfair to order security for costs against the petitioner in these circumstances.

35.  The respondents have provided a skeleton bill of costs in the sum of $567,000.00.  Mr Tse for the petitioner submitted that the amount of appropriate security should be reduced by 25% to take into account taxation on a party and a party basis.  I think this is a reasonable suggestion.  I will fix the amount of security at $425,000.00.  The order I make is in these terms:

In the event of the petitioner not paying into court $425,000.00 or providing a bank guarantee of the said sum as security for the costs of the 2^nd and 3^rd respondents in these proceedings within 28 days hereof, all further proceedings in this petition are to be stayed until such time as such security for costs is provided.

36.  I see no reason why costs of this application should not follow the event, so I order the petitioner to pay the costs of the 2^nd and 3^rd respondents in this application in any event.