深圳正高金屬製品有限公司 v. IU HO CONSTRUCTION ENGINEERING CO LTD

HCCT 33/2019

[2022] HKCFI 2685

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO.33 OF 2019

(Transferred from HCA 435 of 2018)

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DECISION

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THE APPLICATION

1.  This is the Pre-Trial Review of the trial of this action which is originally scheduled for a 6-day trial commencing on 24 October 2022. 

2.  By summons filed on 3 August 2022 (“The Summons”), the plaintiff seeks, inter alia, the following orders from this Court:-

(1)  leave be granted to the plaintiff to discontinue its claim against the defendant;

(2)  costs of the plaintiff’s claim be paid by the defendant, to be taxed if not agreed;

(3)  the trial dates scheduled for 24 to 28 and 31 October 2022 be vacated; and

(4) the security for costs of $600,000.00 paid into Court by the plaintiff be paid out from the Court and be released to the plaintiff’s solicitors.

BACKGROUND

3.  Before this Court deals with the Summons, it is necessary to set out the background of the case.

4.  The present action arose out of the contractual disputes in relation to sums due and owing in the amount of around $24.85 million by the defendant to the plaintiff in relation to aluminium system formwork supplied by the plaintiff to the defendant for various construction projects in Hong Kong.

5.  In the defendant’s Defence and Counterclaim filed on 31 May 2018, it was pleaded, among other things, that the plaintiff had been in breach of four agreements between the parties under which the plaintiff was engaged to design, manufacture and supply the aluminium system formwork for the construction of reinforced concrete at four different construction sites.  The particulars of the alleged breach were as follows:

(1)  The aluminium system formworks were not of merchantable quality or fit for the purpose of the construction of reinforcement concrete at the defendant’s sites;

(2)  The plaintiff failed to ensure timely delivery of the aluminium system formworks to the defendant’s sites;

(3)  The plaintiff failed to supply all the materials necessary for the installation of the aluminium system formworks;

(4)  The design of the aluminium system formworks was defective;

(5)  Defects in the aluminium system formworks discovered and brought to the plaintiff’s attention during the inspection at the plaintiff’s factories had not been rectified;

(6)  The plaintiff supplied the wrong materials for the installation of staircase at one of the sites.

6.  It was further alleged by the defendant that it had to try to rectify the defects itself by employing more workers and ordering materials from other suppliers, at an estimated cost of some $20.3 million. Notwithstanding these efforts, the main contractor imposed contra‑charges against the defendant by reason of the defects and breaches, estimated in the amount of about $54.08 million.

7.  The defendant therefore counterclaimed damages for such losses estimated in the total sum of around $74.4 million.

8.  The Defence and Counterclaim was subsequently amended on 21 May 2021, pursuant to which the defendant abandoned its counterclaim and only maintained its claims for loss and damage for the purpose of its defence of set-off.

9.  By an order dated 4 January 2021, Mimmie Chan J gave leave to the parties to adduce expert evidence on liability and quantum respectively, both by a single joint expert.  As far as the expert report on liability is concerned, eight expert issues had been identified.

10.  The single joint expert report on liability (“the Expert Report on Liability”) was then filed on 28 February 2022 pursuant to the said Court order.  In the Expert Report on Liability, the single joint expert (“the Liability Expert”) took the view that the aluminium system formworks were of merchantable quality and fit for purpose.  While he agreed that there were indeed Notices of sub-standard performance issued in a number of the construction sites concerned, he opined that those defects were caused by the defendant’s sub-standard work, due to poor workmanship or failure to read the construction drawings properly, and therefore the defendant should be responsible to pay for the rectification costs.

11.  On 12 April 2022, the defendant’s solicitors applied for a declaration that it had ceased to be the solicitor acting for the defendant in this action. 

12.  The “cease to act” order was granted on 28 April 2022, and the defendant’s solicitors formally came off the Court’s record on 13 May 2022 upon the filing of a Certificate of Service pursuant to Order 67 rule 6(1) of the Rules of the High Court (“RHC”).

13.  As the defendant had all along failed to provide the single joint expert on quantum with copies of documents which were disclosed in the defendant’s own lists of documents, the plaintiff applied for an unless order from this Court.  The hearing was held on 20 May 2022, at which the defendant did not turn up.

14.  The order was granted accordingly on 20 May 2022, pursuant to which the defendant had been ordered to provide those documents within 8 days of the service of the order. 

15.  However, the order was not complied with by the defendant.

16.  Apparently, after the defendant’s former solicitors had ceased to act for them, the defendant has not engaged another firm of solicitors, nor has any of its directors applied for leave to represent the defendant in this action.

THE LEGAL PRINCIPLES

17.  Order 21 rule 3(1) of the RHC reads:

“Except as provided by rule 2, a party may not discontinue an action (whether begun by writ or otherwise) or counter-claim, or withdraw any particular claim made by him therein, without the leave of the Court, and the Court hearing an application for the grant of such leave may order the action or counterclaim to be discontinued, or any particular claim made therein to be struck out, as against any or all of the parties against whom it is brought or made on such terms as to costs, the bringing of a subsequent action or otherwise as it thinks just.”

18.  The legal principles governing an application for leave to discontinue an action pursuant to Order 21 rule 3 have been succinctly summarised by To J. in Coqueen Company Limited v Chui Wai Kwan & Others (HCMP 438/2010, unreported, 8 December 2015) as follows:

“37. If a plaintiff wishes to avoid the consequence of having to pay costs for the withdrawal, he may seek the court’s leave to discontinue under Order 21 rule 3(1). Under this rule, the court has complete discretion to grant leave to discontinue on such terms as to costs as it thinks fit. The guiding principle is fairness and justice in the circumstances: Covell Matthews & Partners v French Wools Ltd. Invariably the court takes into account two legal principles when deciding on the terms as to costs. First, Order 62 rule 10(1) provides a convenient starting point. Second, the principle that costs follow event usually applies.

38. A plaintiff applying under this rule has to show he has a good reason to discontinue the action. What is a good reason depends on the circumstances of the case. Examples of good reasons include: that the dispute has become academic; that a crucial witness has died or has otherwise become unavailable; that the subject matter of litigation has ceased to exist; or that the defendant has no means to satisfy any judgment which may be awarded against him. A good reason does not necessarily entitle a plaintiff to unconditional leave to discontinue. It is only the threshold which he must overcome before the court would even consider whether to grant leave to discontinue on terms without costs. Absence of good reason must necessarily mean the starting point applies

39. If a good reason is shown, the second principle comes into play. Because of the starting point and the general rule that costs follow event, plaintiffs are frequently given leave to discontinue or withdraw only on terms of their paying the defendants’ costs, unless the court is satisfied that it has a proper basis for making a different order: Lloyds Bank Ltd v National Westminster Bank Ltd. This principle was confirmed by the English Court of Appeal in that same case. Hence, it was described as the “general rule” by Keith J (as he then was) in Trend Publishing (HK) Ltd v Vivien Chan & Co(a firm) and by Chadwick LJ in BCT Software Solutions Ltd v C Brewers & Sons Ltd.

40. To persuade the court to depart from the general rule, the minimum a plaintiff has to do is to show that the discontinuance is for reasons other than an acknowledgment of defeat or likely defeat.  The most direct way of proof is to show that he will succeed in a postulated trial.  The burden of proof is on the plaintiff and the standard of proof is the usual civil standard.  Proof of a prima facie case is not enough.  The court has to be satisfied on proper factual basis, whether based on agreed fact or determined fact, that the plaintiff will succeed.  Discontinuance under such circumstances is consistent with the underlying objective of Order 1A.  It is also beneficial to the defendant in that further costs to be incurred by him leading to nowhere but his eventual defeat are saved.  The defendant can have no complaint that he was made to incur costs in an action which he is bound to lose but which the plaintiff chooses not to proceed.  If the plaintiff is able to discharge this burden of proof, fairness and justice must require that he be permitted to discontinue his action without costs consequence”

19.  The above principles have been applied in Perrine Chamonix Limited v Star League Limited & Another(HCA 1139/2017, unreported, 13 September 2017), in which the Court awarded the plaintiff the costs of and occasioned by the action despite the fact that leave to discontinue the action was granted.

DISCUSSION

Leave to discontinue and costs of the action

20.  In my view, there are not only good reasons for leave to be granted to the plaintiff herein to discontinue the whole action, there are also exceptional circumstances in the present case which justify the award of costs to the plaintiff:

(1)  Since the time when the Liability Expert made known his expert opinion on the eight expert issues identified by the Court, the defendant has demonstrated that it is no longer interested in participating in this action:  Its solicitors have ceased to act for it and it has not appointed another solicitors’ firm as its legal representative.  Neither has any of its directors applied for leave to represent the company.  The defendant has been absent from hearings in this action since their solicitors have come off the record.  The defendant has also totally ignored the plaintiff’s proposal by letter dated 20 July 2022 that the action be discontinued;

(2)  While the single joint expert on quantum has been appointed since 13 September 2021, the defendant has failed to sign the engagement letter, pay the deposit sum for the engagement of the expert nor to provide the expert with the necessary documents for the purpose of the preparation of the expert report on quantum;

(3)  Judging from the defendant’s recent conduct, it is highly unlikely that it would appear at the trial.  In such circumstances, taking into account the content of the plaintiff’s witness statements and expert opinion expressed in the Expert Report on Liability, the plaintiff shall be bound to succeed at the trial if it proceeds as scheduled;

(4)  Even if the defendant appears at the trial, the result would be the same, given the favourable Expert Report on Liability. While the trial Judge is not bound by the Liability Expert’s opinion, I cannot see any flaw in his reasoning contained in the Expert Report on Liability;

(5)  However, even if the plaintiff succeeds at the trial, it is very likely that any judgment obtained will be an empty judgment.

21.  If the plaintiff goes ahead with the trial, the end result will be that it will have to spend much legal costs but only in exchange for a Judgment which is very likely to be an empty one.  In my view, the Court should take this reality into account.  In the circumstances of the present case, justice cannot be fully done even if the Court makes no order as to costs when it grants leave to discontinue the action, because such an order would only benefit the defendant by exonerating its liability to bear the plaintiff’s costs of the action which it would have to bear if the case goes to trial. 

22.  By reasons of the aforesaid, I grant leave to the plaintiff to discontinue this action and order that the defendant shall bear the plaintiff’s costs of the action (with all costs reserved), to be taxed if not agreed.  Consequentially, I also order that the trial dates scheduled for 24 to 28 and 31 October 2022 be vacated.

Payment out

23.  Pursuant to the Order of G. Lam J. (as his Lordship then was) dated 30 April 2021, the plaintiff had paid into Court the sum of $600,000.00 as security for costs.

24.  In the light of the aforesaid decision, there is no reason why the money shall remain in Court.

25.  I therefore grant the order sought by the plaintiff accordingly.

ORDER

26.  To conclude, I make the following orders:

(1)  Leave be granted to the plaintiff to discontinue this action;

(2)  The defendant shall bear the plaintiff’s costs of the action, (including the costs of this application and all costs reserved), to be taxed if not agreed;

(3)  The trial dates scheduled for 24 to 28 and 31 October 2022 be vacated;

(4)  The security for costs in the sum of $600,000 paid into Court by the plaintiff be paid out and be released to the plaintiff through its solicitors.

Mr Adrian Leung, instructed by Humphrey & Associates, for the plaintiff

The defendant was not represented and did not appear

HCCT 33/2019

[2021] HKCFI 1253

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 33 OF 2019

(TRANSFERRED FROM HCA NO 435 OF 2018)

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REASONS FOR DECISION
AND
DECISION ON COSTS

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1.  This is an application by the defendant for security for costs of the action.  Unusually, the defendant abandoned its counterclaim at the hearing.  On that basis I made an order for security in the sum of $600,000.  These are my reasons for the decision and my decision on the costs of the security for costs application.

2.  The plaintiff’s claim, as pleaded in the statement of claim indorsed on the writ dated 22 February 2018, is exceedingly simple.  It is said that the plaintiff was engaged by the defendant as a supplier for aluminium handset panel system formwork for certain projects and that the plaintiff had completed and supplied works entitling it to payment of a total sum of about $75.8 million, with the following breakdown (in rounded figures): (i) TKO 125 site — $2 million; (ii) KT site — $13.6 million; (iii) TKO 93 and TKO 126 sites — $60.2 million; (iv) miscellaneous and transportation charges — $46,000.  Of the amounts due, only $50.9 million has been paid by the defendant.  The plaintiff therefore claims the outstanding balance in the sum of about $24.9 million.

3.  In its defence and counterclaim filed on 31 May 2018, the defendant says it was the subcontractor in four construction projects at four sites, namely, Tseung Kwan O Town Lot Nos. 93, 125 and 126 (the “TKO sites”) and Shatin Town Lot No. 585 at Kau To Shan (the “KT site”).  For the purposes of performing these subcontracts, the plaintiff needed system formwork (whether made of aluminium or otherwise) for the construction of reinforced concrete.  Between January and May 2016, the defendant entered into four oral agreements with the plaintiff in relation to the four projects respectively, whereby the plaintiff was engaged to design, manufacture and supply aluminium system formwork for the construction of reinforced concrete at the four sites.  The prices of the aluminium panels were agreed at various specified rates per square metre.

4.  The defendant alleges that the plaintiff breached the four oral agreements in a number of ways: (a) the system formworks were not of merchantable quality or fit for purpose, in that the aluminium handset panels could not be fitted with one another, or there were defects in the places reserved for water pipes recess and for welding, or the holes to be used for connecting the aluminium handset panels did not match in position; (b) the design of the system formworks was defective in that the stairway for a tower was in the wrong position and a large number of aluminium handset panels could not be removed after the concrete placing; (c) defects in the system formworks discovered and brought to the plaintiff’s attention during the inspection at the plaintiff’s factories had not been rectified; (d) the plaintiff failed to ensure timely delivery of the system formworks to the sites; (e) the plaintiff failed to supply all the materials necessary for the installation of the system formworks at the sites; and (f) the plaintiff applied the wrong materials for the installation of staircase at the TKO 126 site.

5.  As a result, the defendant alleges, it had to try to rectify the defects itself by employing more workers and ordering materials from other suppliers, at an estimated cost of some $20.3 million.  Notwithstanding these efforts, the main contractor imposed contra‑charges against the defendant by reason of the defects and breaches, estimated in the amount of about $54.1 million. The defendant claims damages for such losses estimated in the total sum of $74.4 million.

6.  In its reply and defence to counterclaim filed on 20 August 2018, the plaintiff disagrees with the defendant on the agreed unit prices of the aluminium panels and denies that there was any breach of contract on its part.

7.  By summons dated 29 January 2019, the defendant applies for security for costs.  The statement of costs exhibited to the supporting affirmation filed at the same time was drawn up to the stage of the filing of witness statements and expert reports.

8.  There is no dispute that the plaintiff is a Mainland company and resident outside the jurisdiction.  The discretionary power to order security for costs under RHC Order 23 is therefore engaged.  The plaintiff has referred to the Arrangements on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the HKSAR signed between the Supreme People’s Court and the HKSAR Government in January 2019.  But as I understand the position these arrangements are not yet in operation and there is no clear indication as to when they will be implemented.  On this basis for present purposes I do not think that a Mainland company such as the plaintiff can resist the requirement for security by reason of these arrangements.

The original position

9.  Until the hearing, the main argument had been whether the court’s discretion should be exercised to order security against the plaintiff, having regard to the fact that the defendant was advancing a substantial counterclaim.  The relevant principles as summarised by Yam J in Ai Zhong & another v Metrofond Ltd [2010] 1 HKLRD 213 at §22 are not in dispute between the parties.  But for the abandonment of the counterclaim as mentioned below, there was much force in the plaintiff’s argument that no security should be ordered, for the reasons stated in §§10 to 22 below.

10.  In the present case the major issues that would arise at trial were mostly those arising from the defence and counterclaim including in particular the alleged defects in the products and breaches of agreement by the plaintiff.  Further, as submitted by Mr Adrian Leung on behalf of the plaintiff, the plaintiff’s claim and the defendant’s counterclaim were intertwined and closely connected to each other.

11.  The defence to the plaintiff’s claim and the defendant’s counterclaim would raise exactly the same issues, since the defence was relied upon and repeated in its entirety for the purpose of the counterclaim.  The counterclaim was relied upon for the defence of set‑off. The issues raised in the defence would have to be tried in any event in the course of determining the counterclaim.  The counterclaim was for an amount estimated on the pleadings at $74.4 million, three times the amount of the plaintiff’s claim.

12.  In these circumstances the following principles mentioned in §22 of Ai Zhong were particularly pertinent:

- At §22(c): “Application should also be refused when the cost[s] incurred by the defendant for the purposes of the defence might equally and perhaps preferably be regarded as costs necessary to prosecute the counterclaim.”

- At §22(e): “It is pertinent to ask whether in the particular case the counterclaim is a cross‑action or operates as a defence, that is to say merely operates as a defence.”

- At §22(f): “In determining the question in (e), the most important factor to consider is whether ‘the claim by the plaintiffs and the cross‑claim by the defendants — raise essentially the same issues and are going to be fully litigated anyway so far as one can tell’.”

- At §22(g): “In determining the question in (e), the marked discrepancy in size between the amount claimed in the action and the very much greater amount claimed by the cross claim is also a relevant factor.”

- At §22(h): “A defendant should not be required to give security for costs if he is only defending himself from the plaintiff’s claim.”

13.  The present case was not unlike the situations in Success Wise Ltd v Dynamic (BVI) Ltd [2006] 1 HKC 149; Goal Setting Consulting Co Ltd v Unigraphics Solutions Asia/Pacific Incorporated (HCA 994/2003, 25 October 2004) and B J Crabtree (Insulation) Ltd v GPT Communication Systems Ltd (1990) 59 BLR 43, where a plaintiff’s claim for unpaid price or fees for goods or services supplied were met by the defendant’s counterclaim for damages for allegedly defective performance of the contract by the plaintiff and reliance on that counterclaim for the defence of set‑off.  In these cases the courts refused to order security, taking into account all the circumstances including in particular the fact that the action and the counterclaim raised essentially the same issues and were going to be fully litigated anyway so far as one could tell.

14.  The independent vitality of the counterclaim in this case could in my view be seen from the nature of the claim and counterclaim.  The plaintiff’s claim is straightforward, being one for the price of goods sold and/or fees for services supplied.  By contrast, the defendant raised various allegations of defects and breaches of contract in its counterclaim which would probably require much factual and expert evidence to resolve.  The fact that the defendant’s detailed case was pleaded in the defence and repeated by reference for the counterclaim was a mere matter of form — the reverse could have been adopted with equivalent effect.  Such a counterclaim was really a cross‑claim and only gave rise to a defence if the conditions for equitable set‑off were satisfied, which could not, on the limited materials I have seen, be assumed.  It seems to me, for example, whether a cross‑claim by the defendant relating to the TKO 125 site may be relied upon as a set‑off against the plaintiff’s claim arising from the KT site may well be open to debate.  There was, in addition, the fact that the counterclaim was treble the amount of the plaintiff’s claim.

15.  The defendant said that it had no intention to bring a claim against the plaintiff and would not have done so had the plaintiff not sued the defendant first.  Whilst self‑serving, I would be prepared to accept this statement for present purposes, but it was in my view not determinative, albeit a relevant factor.  The fact that the plaintiff started the action first did not necessarily mean the defendant was not equally an attacker.  As I have already noted, the defendant had not limited itself to a set‑off, but sought on its counterclaim a much larger sum of damages (as estimated) than the amount the plaintiff claims in the action.  By raising and maintaining the counterclaim, the defendant was clearly seeking to prove the plaintiff had done it a wrong and pursuing the prospects of recovery of very substantial damages from the plaintiff.

16.  Mr Paul Leung tried to make a virtue out of the defendant’s own dilatoriness in the course of this action to contend that it was not an attacker.  I would not place much weight on this, nor was I impressed at all with the defendant’s failure to prosecute its summons for security with diligence.  The fact is that after the evidence in reply on the summons was filed in July 2019, the proceedings had become inactive for over a year.  I cannot speculate the reasons behind this or the alleged “inaction” on the part of the defendant.

17.  The defendant also offered, in counsel’s skeleton submissions (but not before), an undertaking that in the event that the plaintiff was ordered to pay security and fails to do so within the time limit set by the court (as extended, if applicable), the defendant would withdraw its counterclaim in its entirety.  Such an undertaking may be significant in a case where it appears an order for security will stifle the action, and may be offered to counter the principle in Ai Zhong at §22(b), namely:

“ Application for security for cost should be refused if it will prevent the plaintiff from pursuing its claim but in the course of defending the counterclaim all the same matters would be canvassed as would be canvassed if the plaintiff were to pursue its claim.”

But here the evidence from the plaintiff is that it is a solid company involved in numerous projects in Hong Kong from which it continues to derive substantial income.  The defendant had not disputed this and in fact relied on it to contend that an order for security would not stifle the action.

18.  In Apex Engineering & Contracting Ltd v Hong Kong Switchgear Ltd (HCA 1188/2010, 20 November 2012), DHCJ Woo stated (at §23):

“ … if the defendant only agrees to his counterclaim that exceeds his defence to be stayed in case the plaintiff’s claim is stayed by reason of the latter’s failure to comply with the order for security for costs, which means that the conditionally stayed counterclaim can or will be revived upon the plaintiff’s compliance with the order and the defendant in such an event is allowed to pursue his counterclaim against the plaintiff, it will offend the rule that the court will not order security in favour of an attacking defendant. The situation would be very different if the defendant agrees to drop his counterclaim altogether and only maintains his set‑off as a defence. In such a case, the rule of protecting a defendant from an impecunious plaintiff in defending the claim instead of assisting the defendant to recoup costs for pursuing his own claim (by way of a counterclaim or an independent claim separate from the action he faces) will not be traversed.”

19.  Responding to a similar undertaking offered in the case of Hong Kong Zhixin Financial News Agency Ltd v China Maple Leaf Educational Systems Ltd[2019] HKCFI 2921, K Yeung J said (at §37):

“ … the Undertaking will only bite if (1) P is ordered to give security, (2) P fails to put up the security ordered, and (3) P’s claim is stayed or dismissed as a result. But if P is ordered to put up security but is able to do so, both the claim and the counterclaim will proceed. I agree with Mr Li that it will be unfair in that scenario to order only P to put up security when D is ‘at least as much also an attacker or plaintiff’ which has raised issues common to those framed by the RASoC and beyond.”

20.  In the same vein, in Mau I Business Centre Ltd v Tenford Holdings Ltd (DCCJ 731/2008, 26 August 2008), where a similar undertaking was offered by the defendant for the purpose of its application for security for costs, DDJ Richard Khaw said (at §29):

“ … given the conditional undertaking offered by the Defendant, the court still has to decide, as a matter of principle, if discretion should be exercised in favour of ordering security for costs. It is because the court is required to take into account the effect of the Defendant’s counterclaim (which still exists) and cannot second‑guess whether the Plaintiff will comply with an order for security, if granted. Hence, I am of the view that this conditional undertaking does not take the Defendant’s case any further in this application.”

21.  The same reasoning was in my view apposite here.  I did not think therefore that the undertaking offered in the defendant’s skeleton tilted the balance in its favour.

22.  The present case is quite different from that in Autoweld Systems Ltd v Kito Enterprises LLC [2010] EWCA Civ 1469.  That was a case where the defendant was at “very serious risk” of not recovering any damages on their counterclaim even if it was established; and there might well be no continuing litigation if the claimant’s claim were to be dismissed in default of security for costs being provided (see §§59-60); cf.Key Success (Asia) Ltd v Cheung Kong Machinery (HK) Ltd[2020] HKDC 591, §§28‑37. By contrast, I was not satisfied based on the existing materials that in running its counterclaim here the defendant was merely “going through the motions” without any real hope of recovery even if it succeeded.

23.  Taking account of all the matters originally advanced on the defendant’s behalf, I would nevertheless have come to the conclusion that security should not be ordered.

The new position

24.  In the course of his submissions at the hearing, however, Mr Paul Leung surprisingly said, after some vacillation, that the defendant would unconditionally abandon its counterclaim and would only rely on the substantive pleaded allegations for the purpose of its defence.  This, as explained by DHCJ Woo in Apex Engineering, fundamentally changed the picture, so that the defendant can no longer be said to be mounting any attack beyond merely defending itself from the plaintiff’s claim.  What the defendant will henceforth be seeking in the proceedings is merely an order that the plaintiff’s action be dismissed with costs.

25.  It is most unsatisfactory that the defendant had failed to indicate its true position until during the hearing.  Its conduct smacks of a tactical manoeuvre made in the light of comments from the court.  Nevertheless, the plaintiff did not oppose that abandonment.  As Mr Adrian Leung recognised, with the defendant’s new concession, much of his argument fell away.

26.  In the light of the abandonment of the counterclaim, I considered that an order for security would be just, and ordered the plaintiff to give security for the defendant’s costs up to and including the stage of witness statements and expert reports.  In assessing the quantum of security, I considered that much of the past costs should be excluded, both because of the defendant’s delay in prosecuting its own application and because the counterclaim was only abandoned at the hearing.  On that basis, on a broad‑brush approach I ordered security in the amount of $600,000.

27.  I also directed that the defendant file a summons for leave to amend its defence and counterclaim to reflect the abandonment of the counterclaim.

28.  As to the costs of the application, as stated above, but for the abandonment of the counterclaim, the defendant’s application would have failed.  The abandonment was only offered at the very last minute, after virtually all the costs had been incurred.  I consider it just that in these exceptional circumstances, the defendant should be ordered to pay forthwith the costs of the application including the costs of the hearing, to be taxed if not agreed.