成都圆中侨信商贸有限公司 v. Leung Ka Chun

CACV 467/2024, [2025] HKCA 1052

On Appeal From [2024] HKCFI 3042

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 467 OF 2024

(ON APPEAL FROM HCB NO 2617 OF 2024)

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BETWEEN

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

1.This is the Petitioner’s application for security for costs of the Debtor’s appeal (“the Appeal”)  against a bankruptcy order made by Madam Justice Linda Chan on 14 October 2024.

2.Having considered the evidence and submissions before us, we consider that it is appropriate to deal with the present application on paper without an oral hearing pursuant to Order 59, rule 14A(1)  of the Rules of the High Court, Cap 4A.

THE APPLICATION

3.The basic facts of this case, the Judge’s reasons for making the bankruptcy order against the Debtor, and the Debtor’s grounds of appeal have been summarised in another judgment of this Court handed down today on the Debtor’s application by summons dated 20 May 2025 (“the New Evidence Summons”)  for leave to adduce new evidence in his appeal ([2025] HKCA 1049), and will not be repeated here.  

4.By a summons filed on 23 July 2025 (“the Summons”), the Petitioner applies for security for costs of the Appeal on the ground of the Debtor’s impecuniosity and/or difficulty or undue expense in enforcing any costs order in the Appeal.  The amount of the security sought, as set out in a skeleton bill of costs attached to H Y Leung & Co LLP’s letter of 2 July 2025 (“the Skeleton Bill of Costs”), comes to a total of HK$550,000, comprising the Petitioner’s estimated costs of (i)  the substantive appeal, (ii)  the Debtor’s new evidence application (iii)  the present application for security for costs, in the respective amounts of HK$278,000, HK$125,000 and HK$147,000.

5.In opposing the present application, the Debtor contends that the Petitioner has not established his impecuniosity based on the available evidence.  He further contends that even if proved, his impecuniosity does not automatically lead to an order for security for costs in the present case where there are countervailing factors, namely, (i)  the strong merits of the Appeal, (ii)  the Petitioner’s unexplained delay in taking out the present application, (iii)  the risk of stifling the Appeal, and (iv)  the lack of breakdown of the quantum of the security sought.

DISCUSSION

6.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.  The principles for the exercise of this jurisdiction are well settled.  For the present purpose, “special circumstances” include cases of insolvency or impecuniosity, and difficulty or expense in enforcing costs order. Nevertheless, even in such a case, the court retains a discretion not to order security if the appellant can demonstrate sufficient countervailing factors which would militate against the making of an order of security for costs (see Hong Kong Civil Procedure 2026, Vol 1, at §§59/10/26, 27 & 32).

7.In the present case, it seems to us to be clear that the Debtor is impecunious, and/or there is a high likelihood that the Petitioner will face difficulty or delay in enforcing any costs order that may be made by the Court in its favour in the Appeal, for the following reasons:

(1)  the Debtor is an undischarged bankrupt;

(2)  in his 2^nd Affirmation filed on 20 May 2025 in support of his application for leave to adduce new evidence, the Debtor stated that since he had already been adjudged bankrupt, the issue of settlement of legal fees had become “more complicated”, and the legal fees incurred in relation to that application were in fact settled by his elder sister; and

(3)  in his 4^th Affirmation filed on 20 August 2025 in opposition to the present application, the Debtor stated that being a bankrupt, he would not have the financial ability to make payment into court of a six-digit figure within a short period of time.

8.The Debtor has not stated what amount of security is within his means to provide.  Neither has he provided any information concerning his assets or financial means.

9.The Petitioner has made out a case of special circumstances for seeking security for costs of the Appeal from the Debtor. The next question is whether there are any sufficient countervailing factors which would militate against an order of security for costs being made against him.

10.In relation to the merits of the Appeal, this is not the occasion to examine in depth the grounds of appeal raised by the Debtor in his notice of appeal, which will have to be fully ventilated at the substantive hearing of the Appeal.  On a preliminary basis, we consider the Debtor’s grounds of appeal, even taking a view favourable to the Debtor, to be no more than arguable.  This is so even if we had granted leave to the Debtor to adduce the proposed new evidence in the Appeal.  As a matter of fact, we have refused leave.  In short, we do not consider that the merits of appeal operate in the Debtor’s favour in so far as the Petitioner’s application for security for costs is concerned.

11.In relation to the issue of delay, the Debtor complains that the Petitioner only took out the present application 8 months after the Appeal was set down in November 2024 without providing any satisfactory explanation, and he has suffered prejudice as a result of the exceptional delay.  We do not consider the Debtor’s complaint of delay has any merit.  As pointed out in the recent judgment of this Court in Gurdas Sabhagchand Choithramani v The Hongkong and Shanghai Banking Corporation Ltd [2025] HKCA 921, at §19, although generally speaking, an application for security for costs ought to be made as soon as an appeal is lodged and set down, there is no inflexible rule that delay in so doing is necessarily fatal to an application for security for costs.  It is just one of the relevant factors which the court may take into account when exercising its discretion on whether to make an order, and the weight that may be given to the factor of delay depends on the circumstances.

12.In the present case, the Debtor filed his Notice of Appeal on 8 November 2024 and Notice of Setting Down an Appeal on 12 November 2024.  After that, the Debtor did not take any further steps to prosecute the Appeal.  In fact, it was the Petitioner which took the initiative on 15 April 2025 to point out that the Debtor had taken no further action in the Appeal, and ask whether the Debtor would withdraw this appeal.  On 22 April 2025, the Debtor responded stating that he would not withdraw the appeal, and further informed the Petitioner that he would soon take out a summons to seek leave to adduce new evidence in the Appeal.  On 20 May 2025, the Debtor issued the New Evidence Summons.  In support of that summons, the Debtor filed his 2^nd Affirmation which, as earlier mentioned, disclosed the fact that the legal fees incurred in relation to that application were in fact settled by his elder sister, because the issue of settlement of legal fees had become “more complicated” since he had already been adjudged bankrupt.  It was in the light of that disclosure that on 5 June 2025, the Petitioner wrote to the Debtor asking for security for costs of the Appeal.  This was followed up by a further letter from the Petitioner on 13 June 2025 due to the absence of any reply from the Debtor.  On 18 June 2025, the Debtor finally responded stating that, in view of the fact that the outcome of the New Evidence Summons would have a significant impact on the merits of the Appeal, it would be “in the interests of the parties to withhold any security for costs application until the determination of [the New Evidence Summons]”.  On 2 July 2025, the Petitioner produced the Skeleton Bill of Costs to the Debtor.  On 9 July 2025, the Debtor stated that he would vigorously defend any application for security for costs.  As earlier mentioned, the Summons was issued on 23 July 2025.  Looking at the above chronology as a whole, we do not see that there has been any significant delay on the Petitioner’s part in making the present application.  In any event, even if there was some such delay, we do not consider the delay to be inexcusable in the circumstances of the present case.

13.In relation to the issue of risk of stifling of the Appeal, as mentioned in Gurdas Sabhagchand Choithramani, ante, at §18, it is inherent in an order of security for costs made against an impecunious appellant that the order may operate to prevent the appellant from pursuing an appeal.  If it can be shown that the application is made with a view to stifling a reasonably arguable appeal, it may properly lead the court to conclude that the granting of security for costs will or may result in the denial of justice to the appellant.  We do not consider this to be the position in the present case.

14.Lastly, in relation to the complaint of lack of breakdown of the quantum of the security being sought, we have examined the Skeleton Bill of Costs, and consider that there is no merit in the Debtor’s complaint.  In an application for security for costs, the applicant’s duty is to provide details of the costs already incurred, and a realistic estimate of the time and costs likely to be incurred in each stage of the proceedings which must bear some logical correlation to the complexity of the case and the issues involved (see Thapa Hari Bahadur v Paramount Engineering & Manpower & Anor [2022] HKCA 1516, at §40(3)).  The information provided in the Skeleton Bill of Costs is sufficiently detailed for this Court to be informed of the costs already incurred, and form a view as to the likely amount of the future costs to be incurred, by the Petitioner for the present purpose.

15.There are two other points that we should deal with in relation to the Skeleton Bill of Costs.  First, the Debtor has sought to “expunge” the Skeleton Bill of Costs on the ground that it was marked “without prejudice” on its first page.  However, the letter which enclosed the Skeleton Bill of Costs dated 2 July 2025 was not so marked, and there was nothing in that letter which suggested that any privilege would be attached to the Skeleton Bill of Costs.  Mr Ng submits that the “without prejudice” label was mistakenly added to the first page of the Skeleton Bill of Costs.  We do not attach weight to this submission since it is not supported by evidence. However, having regard to the fact the relevant letters passing between the parties before and after 2 July 2025 were all open correspondence, we have no difficulty in coming to the conclusion that the “without prejudice” label on the first page of the Skeleton Bill of Costs was indeed a mistake and should be ignored.

16.Second, we see no reason in principle why the Skeleton Bill of Costs could not cover the costs incurred/to be incurred in respect of the New Evidence Summons and the Summons.  There is no question of double recovery by the Petitioner as suggested by the Debtor, because the Petitioner has not been paid the costs of the New Evidence Summons or the Summons, and the money paid into court as security would merely stand as a source of fund from which the Petitioner may seek to recover those costs.

17.As regards the quantum of the security, Mr Ng submits that it should be assessed on an indemnity basis for the following reasons: (i)  by analogy with the principle that indemnity costs are appropriate where a company unsuccessfully appeals from a winding-up order against it, because it is not just that any costs occasioned by an unsuccessful appeal from a winding-up order should be thrown upon the assets of the company to the prejudice of the creditors (Re China Silver Asset Management (Hong Kong)  Limited [2021] HKCA 376, at §10, citing Re SY Engineering Co Ltd, CACV 1896/2001 (unreported, 20 February 2002)), and (ii)  the Petitioner has a contractual right to indemnity of the costs against the Debtor under the Guarantee.  It should be noted, however, that the Court is not presently concerned with determining whether the Petitioner should be entitled to costs on an indemnity basis in the event that it should succeed in resisting the Appeal.  The Court is now dealing with an application for security for costs.  Generally speaking, it is not the practice of the court in fixing the quantum of security to give a full indemnity in respect of the likely costs that may be incurred by an applicant in the appeal, and the quantum of security should be premised on the estimated costs that would be allowed on taxation on a party-and-party basis. The court should seek to do practical justice to the applicant by awarding a reasonable amount as security (see TGL v SDC & Anor [2025] HKCA 229, §7; and Hong Kong Civil Procedure 2026, at §59/10/35A).  There is no inflexible rule that a petitioner must always be entitled to an order for indemnity costs in all cases where a company unsuccessfully appeals from a winding-up order against it (see Re Yeung Man [2024] HKCA 451, at §31(2)). Whether the Petitioner ought to be entitled to an order for indemnity costs in the present case will have to be fully argued at the substantive hearing of the Appeal.  The matters relied upon by Mr Ng are no doubt relevant considerations, but are by no means conclusive.  

18.Having considered the Skelton Bill of Costs and adopting a broad brush approach, we fix the amount of the security for costs of the Appeal (including the costs of the New Evidence Summons and the Summons)  at HK$385,000.

DISPOSITION

19.We allow the Petitioner’s application for security for costs, and make the following orders:

(1)  The Debtor do pay into court the sum of HK$385,000 as security for the Petitioner’s costs of the Appeal within 35 days from the date of the order herein.

(2)  Until such payment into court be made and notice thereof given by the Debtor to the Registrar of Civil Appeals and to the solicitors for the Petitioner, all proceedings in the Appeal be stayed.

(3)  In default of making such payment into court within the time aforesaid, the Appeal, upon the solicitors for the Petitioner certifying such default to the Registrar of Civil Appeals, do stand dismissed without further order of the court with costs to be paid by the Debtor to the Petitioner, such costs to be taxed if not agreed.

20.Lastly, the Debtor shall pay the costs of the Petitioner in respect of the present application, to be summarily assessed.  The Debtor shall have leave to file and serve a statement of objections (limited to 2 pages)  to the Petitioner’s statement of costs filed on 2 October 2025 within 14 days from the date of this judgment.  In view of the simple nature of the application, only the fee of one counsel would be allowed.  Once assessed, the Petitioner shall have leave to apply for payment out from the sum paid into court pursuant to §19(1)  above in satisfaction of the assessed costs.

Mr Ernest Ng and Mr Raphael Leung, instructed by H. Y. Leung & Co. LLP, for the Petitioner

Mr Felix H. Y. Tang, instructed by Tung, Ng, Tse & Lam, for the Debtor