Re Lin Yifan

CACV 32/2025, [2025] HKCA 649

On appeal from [2024] HKCFI 3666

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 32 OF 2025

(ON APPEAL FROM HCB NO. 721 OF 2024)

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JUDGMENT

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Hon Chu VP (giving the judgment of the Court):

Introduction

1.This is the petitioner’s application by summons dated 28 February 2025 that the debtor provides security for its costs in this appeal.

2.Despite directions given by the Registrar of Civil Appeal, the debtor has not filed evidence or lodged submissions to oppose the application.

3.Having considered the papers, we are of the view that it is appropriate to deal with the application based on the written submissions only without an oral hearing, pursuant to Order 59 rule 14A(1) of the Rules of the High Court, Cap. 4A.

HCB 721/2024

4.In this appeal, the debtor seeks to appeal against a bankruptcy order made against him by Deputy High Court Judge Yee (“the Judge”) on 27 December 2024 [1] upon a petition presented by the petitioner on 30 January 2024.

5.The debt on which the bankruptcy petition is based is in the sum of HK$10,622,908.14 (“the Debt”). It arose out of a consent award made on 8 August 2017, which was consequential upon a settlement agreement dated 4 July 2017 made between, inter alia, the petitioner and the debtor, whereby the debtor guaranteed the payment of the settlement sum stated in the agreement.

6.There was a default in the payment of the settlement sum. The debtor, as the guarantor, failed to pay the outstanding principal and interest, being the amount of the Debt.

7.On 3 October 2023, the petitioner served on the debtor a statutory demand dated 13 September 2023 demanding the payment of the Debt. The debtor failed to comply with the statutory demand.

8.On 30 January 2024, the petitioner presented the bankruptcy petition in HCB 721/2024 on the ground that the debtor has failed to comply with the statutory demand.

9.The debtor opposed the petition on two grounds. First, he contends that the jurisdictional requirements under section 4(1) of the Bankruptcy Ordinance, Cap. 6 was not met in that he was not domiciled in Hong Kong, was not personally present in Hong Kong when the petition was presented, and had not at any time in the period of three years ending with that day been ordinarily resident, had a place of residence or carried on business in Hong Kong. Second, the debtor relies on a global settlement agreement which he said was made in around 2019 to 2020 under which the petitioner agreed to release him from his liabilities relating to, inter alia, the Debt.

The Judge’s decision

10.By his judgment handed down on 27 December 2024, the Judge rejected the two grounds of opposition and made a usual bankruptcy order together with a costs order nisi.

11.On the first ground, the Judge concluded that the debtor was ordinarily resident in Hong Kong at some point of time between 31 January 2021 and 30 January 2024 for the reasons given in [21] to [28] of the judgment. The Judge further held that the jurisdictional requirement of section 4(1)(c)(i) of the Bankruptcy Ordinance is also satisfied for the reasons set out in [31] to [36] of the judgment. On the second ground, for the analysis and reasons given in [57] to [70] of the judgment, the Judge was not satisfied on the evidence that there is a bona fide dispute over the Debt.

The debtor’s appeal

12.By a notice of appeal dated 24 January 2025, the debtor appeals against the bankruptcy order. His grounds of appeal can be broadly summarised as follows:

(1)  The Judge erred in law in holding that the debtor was ordinarily resident in Hong Kong at some point of time during 31 January 2021 to 30 January 2024.

(2)  The Judge erred in holding that the debtor had a place of residence in Hong Kong at some time during 31 January 2021 to 30 January 2024.

(3)  The Judge erred in holding that there is no documentary evidence to support the existence of the global settlement agreement.

13.The petitioner has filed a respondent’s notice dated 13 February 2025 to contend that the judgment should be affirmed on the additional grounds set out in the notice.

The application for security for costs

14.By a letter dated 7 February 2025 to the debtor’s solicitors, the petitioner through its solicitors requested the debtor to provide security for its costs of the appeal in the sum of HK$309,400, enclosing a skeleton bill of costs.

15.The debtor has not responded to the letter or the request for security for costs.

16.On 28 February 2025, the petitioner issued the present summons. The skeleton bill of costs exhibited to the supporting affirmation seeks security in the sum of HK$380,400[2] which includes the costs of the appeal (HK$278,900) and the costs of the present application (HK$101,500[3]).

17.The petitioner’s application is based on the following grounds:

(1)  The debtor is impecunious and there is a real risk of him not being able to pay the petitioner’s costs upon the dismissal of the appeal.

(2)  There is also a real risk that the petitioner will encounter great difficulties and undue delay and expenses in enforcing any cost orders in its favour as the debtor has been adjudicated bankrupt.

(3)  Enforcement of any costs orders would also be difficult in light of the debtor’s evidence in the proceedings below that he intends to reside in the Mainland and had no intention to leave the Mainland.

(4)  The debtor’s appeal has no merits

18.As mentioned above, the debtor has not filed evidence nor lodged any submission to dispute the above.

The applicable legal principles

19.Under Order 59 rule 10(5) of the Rules of the High Court, the Court of Appeal may, in special circumstances, order that such security shall be given for the costs of an appeal as may be just.

20.It is settled practice to require security for costs to be given by an appellant who would be unable through impecuniosity to pay the costs of the appeal, if unsuccessful. Security for costs may also be ordered upon proof that the respondent will be likely to encounter undue delay or put to undue expense in enforcing any order for costs in the appeal. The court, however, has a discretion and is entitled to consider other relevant factors such as the strength of the appeal to determine whether or not it would be just to order that security for costs be provided. But once a case of impecuniosity or some other factor such as difficulty or expense in enforcing a costs order is demonstrated, it is generally up to the appellant to demonstrate countervailing factors militating against an order being made: See Chung Kau v. Hong Kong Housing Authority & Others [2004] 2 HKLRD 650 and Hong Kong Civil Procedure 2023 Vol.1 paras. 59/10/26 & 59/10/27.

Our reasons for decision

(1)  Impecuniosity of the defendant

21.In our view, the petitioner has made out a case for seeking security for costs from the debtor. The debtor’s failure to satisfy the statutory demand and his being adjudicated bankrupt are indicative of his unsatisfactory financial position. It is also of note that the debtor has not sought to dispute this. We are satisfied that the petitioner has demonstrated that the debtor is impecunious and it may encounter undue delay and have to incur expenses to enforce any costs order made against him.

(2)  Countervailing factors

22.The debtor has not put in any opposition to the application. On the materials before us, we do not see any countervailing factors militating against the making of an order for security. In this regard, we have considered the grounds of appeal in the notice of appeal. Our preliminary view is that the debtor is essentially seeking to re-run the bulk of the arguments that had been argued below but rejected by the Judge. Having considered the Judge’s judgment, we are not persuaded that the grounds of appeal have strong merits that justify exercising our discretion against ordering security for costs to be provided.

(3)  Quantum of the security

23.On the quantum of the security to be ordered, it does not appear to us, from reading the Judge’s judgment and the notice of appeal that the appeal is complex or involves difficult questions of law. We believe the papers involved in the appeal would have all been considered in the hearing below and most, if not all, the arguments in the appeal would also have been canvassed. We are of the view that, on party-and-party basis, the time incurred or to be incurred by the solicitor and also the counsel fee for the appeal as set out in the skeleton bill of costs are excessive. Adopting a broad-brush approach, we consider HK$100,000 is an appropriate estimate of the costs of the appeal.

(4)  Costs of the application for security for costs

24.As the debtor has not responded to the petitioner’s request for security for costs, which necessitates the application to court, and applying the usual rule of costs follow the event, the debtor should pay the petitioner the costs of the present application.

25.The petitioner has filed a revised statement of costs. In assessing the costs of the application, we take into account that this is a simple, straightforward application with little papers, and there is no opposition from the debtor. We take the view that, on a party-and-party basis, the time for attendance on the petitioner and counsel (items C1 and C4), and for preparation of documents (which had been settled by counsel) and commenting on counsel’s submissions and authorities (item D1) as well as counsel costs should be reduced. Further, the costs for the perusal of the Judge’s judgment and the notice of appeal (item D2) will be covered by respectively the costs of the action below and of the appeal. The costs for drafting index and compiling application bundle (item D3) should not be separately charged for. We summarily assess the petitioner’s costs at HK$60,000. It will be included in the amount of the security to be provided by the debtor.

Disposition

26.The orders we make are as follows:

(1)  The debtor shall within 30 days from the date of handing down of this judgment give security for the petitioner’s costs of this appeal (inclusive of the costs of the application for security for costs) in the sum of HK$160,000, by making payment into court of the said sum;

(2)  Until the debtor has given the security ordered in (1) above and notice thereof is given to the solicitors for the petitioner (such notice to be given on the same day as the lodgement is made), all proceedings in this appeal are to be stayed;

(3)  In default of the debtor giving security as ordered in (1) above, this appeal do (upon the solicitors for the petitioner certifying such default to the Registrar of High Court) stand dismissed out of this court without further order;

(4)  In the event that the appeal is dismissed in the circumstances provided for in (3) above, the debtor shall pay the petitioner the costs of this appeal, such costs to be summarily assessed or taxed if not agreed; and

(5)  The petitioner’s costs of the application for security for costs summarily assessed at HK$60,000 be paid by the debtor in any event.

Mr Billy Liu, instructed by Kwok Yih & Chan, for the petitioner

C L Chow & Macksion Chan for the debtor