GENERIC RELIANCE ON PRC-HONG KONG ENFORCEMENT ARRANGEMENTS INSUFFICIENT TO OPPOSE LIABILITY FOR SECURITY FOR COSTS

In Du Guorong v Bank of China International Limited and BOCI Securities Limited [2022] HKCFI 2777, the Hong Kong Court of First Instance offered its latest guidance on a defendant's entitlement to security for costs in Hong Kong proceedings from a plaintiff ordinarily resident in the PRC.

Notwithstanding the arrangements between the two jurisdictions related to the enforcement of Hong Kong Court judgments or costs orders in the PRC, this decision shows that a generic reference to the existence of these enforcement arrangements without regard to their specific requirements or legislative status is not sufficient for the Court to refuse an application for security for costs.

Background

The Defendants in this action sought further security for costs from the Plaintiff from the deadline for filing further interlocutory applications up to the last day of trial on the ground that the Plaintiff was ordinarily resident out of the jurisdiction. The Plaintiff had also paid security for costs in relation to the earlier stages of the action.

At the outset, the Court was satisfied on the evidence and submissions that the Plaintiff was ordinarily resident in the PRC. It also held the Plaintiff failed to prove with evidence how his claim in the action would be stifled in the event that the order for further security for costs was granted.

Nevertheless, the Plaintiff further argued that the Defendants failed to prove there would be difficulty in enforcing a costs order awarded by the Hong Kong Courts in the PRC.

The Plaintiff's reliance on the enforcement arrangements between Hong Kong and the PRC

To substantiate his opposition against the Defendants' application, the Plaintiff referred to the following three enforcement arrangements between Hong Kong and the PRC:

• the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597);
• the Arrangement of the Supreme People's Court between the Mainland and the Hong Kong Special Administrative Region ("HKSAR") on Reciprocal Recognition and Enforcement of the Decisions on Civil and Commercial Cases under Consensual Jurisdiction in 2008 (the "2008 Arrangement"); and
• the Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the HKSAR in 2019 (the "2019 Arrangement"), which we wrote about here.

The Plaintiff submitted that the existence of these enforcement arrangements showed there would be little difficulty for the Defendants to enforce a costs order made by the Hong Kong Court under the action against the Plaintiff, who was ordinarily resident in the PRC, such that the Defendants' application ought to be refused.

Decision

The Court reiterated that the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597) and the 2008 Arrangement may only be invoked where the parties have entered into a choice of court agreement in writing. The Court was not presented with evidence of any such agreement.

The Court then turned to the Plaintiff's submissions on the 2019 Arrangement. Unlike the other enforcement arrangements cited which are already in force, the 2019 Arrangement has yet to become effective and no date has been appointed for it to become effective at present. While the Plaintiff suggested that the 2019 Arrangement would likely have become effective by the end of the trial, the Court held this submission was "a mere speculation" and observed that no supporting details were provided to substantiate this suggestion.

The Court additionally highlighted that there are currently no details or framework rules on how a Hong Kong Court order may be enforced in the PRC under the 2019 Arrangement. As the PRC is not a common law jurisdiction and given the Hong Kong Courts have as a matter of practice taken the position that there would be difficulty in enforcing a Hong Kong Court order in the PRC, the fact that the 2019 Arrangement has yet to come into effect and the lack of details as to how it would be implemented did not assist the Plaintiff.

For these reasons, the Court held that the Plaintiff was liable to pay the Defendant further security for costs.

Commentary

The existence of arrangements that facilitate the enforcement of Hong Kong Court orders in the PRC (or indeed other jurisdiction) does not provide a plaintiff who is ordinarily resident in the PRC a categorical and complete answer to a defendant's request for security for costs in Hong Kong litigation proceedings. A plaintiff's liability to provide security for costs very much depend on whether the specific facts permit reliance on these arrangements.

The decision also reaffirms the Hong Kong Courts' position that, absent any details or evidence to the contrary, it would generally be difficult for a litigant to enforce a Hong Kong Court order in the PRC. Importantly, the Court made clear that this position may change in the future, as and when the 2019 Arrangement becomes effective and details of how it would be implemented become available.

Herbert Smith Freehills acted for the Defendants in this application, who successfully obtained further security for costs from the Plaintiff.