Lai Cheong Sing (also known as Lai Chang Xing and 赖昌星) v. Hon Kwok Lung

HCA 1832/2024

[2026] HKCFI 4313

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1832 OF 2024

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D E C I S I O N

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1.Introduction

1.1On 5 January 2026, Master KW Wong ordered the Plaintiff (“P”) to provide security for costs in the sum of HK$1,000,000 within 28 days, failing which P’s claims do stand dismissed with costs without further order (“Security for Costs Order”).

1.2Thereafter, P applied to stay the Security for Costs Order pending appeal, which application was dismissed by the learned Master on 6 March 2026 (“Refusal of Stay Order”).

1.3Before me are the following applications:

(1)  P’s appeal against the Security for Costs Order (“Main Appeal”) and, for that purpose, P’s application (“New Evidence Application”) to adduce (a) a legal opinion on PRC Law from 張起淮先生 (“Mainland Law Opinion”) and the 2^nd Affirmation of P’s eldest son, Mr Lai Chun Wai (“Mr Lai”) dated 16 January 2026 (“Lai 2^nd”);

(2)  P’s appeal against the Refusal of Stay Order (“Stay Refusal Appeal”);

(3)  P’s summons (“Summons”) seeking (a) a stay of the Refusal of Stay Order pending the Stay Refusal Appeal (“Stay Application”), (b) extension of time to comply with the Security for Costs Order (“EOT Application”) and (c) relief from sanction imposed by the Security for Costs Order (“Relief Application”).

1.4At the hearing before me, P was represented by Mr Axis Yu and the Defendant (“D”) by Mr Cedric Yeung.

1.5Were the Main Appeal dismissed and as accepted by counsel, it would follow that the Stay Refusal Appeal and the Stay Application would become academic and should also be dismissed.

1.6As regards the EOT Application and the Relief Application, P’s position has not been entirely consistent. At the outset of the hearing, I asked Mr Yu for clarification. Initially, I was told by Mr Yu that P was unable to provide any security for costs were the Main Appeal dismissed. Given that to be the position, Mr Yu agreed that the EOT Application and the Relief Application were otiose. However, towards the end of the hearing, Mr Yu informed me that Mr Lai was able to provide HK$200,000 within 14 days. As the offered sum is significantly less than that stipulated in the Security for Costs Order, as I understand Mr Yu, he accepts that the EOT Application and the Relief Application will only get off the ground were I to reduce the quantum of security ordered by the learned Master.

2.Background

2.1P has three children, namely Mr Lai, a younger son (“Younger Son”) and a younger daughter (“Younger Daughter”). On the present material, it appears that P’s wife, Madam Tsang Ming Na (“Wife”) divorced P in 2005.

2.2P is perhaps notorious for his involvement in a large-scale operation of smuggling goods into and out of the Mainland and his associated bribery of Mainland officials. As noted in the CFC Judgment (defined below), in early 1999, the Mainland authorities became aware of the smuggling activities and conducted an investigation called the “420 Investigation”, which revealed that the smuggling operation was headed by P, Wife, and the Yuen Hua (遠華) group of companies. In August 1999, upon learning that the Mainland authorities were looking for them, Lai and Wife, together with their children, fled to Canada through Hong Kong.

2.3What followed were well-publicized extradition proceedings in Canada, and eventually, by a judgment of the Canadian Federal Court dated 21 July 2011, P’s application for a stay of his deportation order was dismissed (“CFC Judgment”). P was extradited back to the Mainland on 23 July 2011. As stated in the CFC Judgment, prior to P’s extradition back to the Mainland, Wife and the three children departed Canada (as I understand it voluntarily) between May 2009 and November 2010.

2.4Following P’s extradition back to the Mainland, the Xiamen People’s Procuratorate of the Fujian Province indicted P for the offences of smuggling and bribery. By a judgment of the Fujian Province Xiamen Intermediate People’s Court dated 16 May 2012, P was convicted and sentenced to life imprisonment, deprivation of his political rights for life and confiscation of all his properties (“Confiscation Order”).

2.5P commenced the present action on 11 September 2024. In view of the arguments ventilated by counsel before me, it is only necessary to describe the parties’ respective pleaded case on a high level of generality, since:

(1)  It is not Mr Yu’s submissions that the merits of P’s claim are of such cogency that would, by themselves, defeat an application for security for costs;

(2)  Equally, whilst I have not overlooked D’s criticisms of P’s factual case by reference to the contemporaneous documentary evidence, I do not understand Mr Yeung to have submitted that the merits of P’s claims are so lacking that they fall outside the realm of being bona fide claims.

2.6P’s claims are premised on an express trust agreement allegedly reached between P and D in July 1999 (“Alleged Trust Agreement”), shortly before he fled to Canada. It is P’s case that by the Alleged Trust Agreement, 5,200 shares (“Shares”) in a Hong Kong company called Cheong Ming International Investments Limited were held by D on trust for P. P seeks a declaration to the same effect, and also other relief associated with D’s breaches of the Alleged Trust Agreement.

2.7Conversely, D denies the existence of the Alleged Trust Agreement and contends that he is both the beneficial and legal owner of the Shares, as a result of a Share Transfer Agreement (“STA”) executed between the parties on 4 March 1999, pursuant to which D acquired the Shares at a consideration of RMB 30,000,000 which D had duly paid. Further, D contends that even were the Alleged Trust Agreement in existence, P lacks the locus to sue as a result of the Confiscation Order. Still further, D argues that P’s claims are time-barred.

2.8Prior to D making his application for security for costs, P had offered, including by way of his solicitors’ letter dated 30 June 2025, to pay into court a sum of HK$300,000 as security for D’s costs “up to and including case management conference(s)”. By his summons dated 30 September 2025, D sought security for costs in the sum of HK$1,445,072, up to and including discovery and exchange of witness statements, inclusive of fees of senior counsel (50 hours) and junior counsel (90 hours) up to that stage.

2.9For the purpose of the security for costs hearing before the learned Master, P relied on the 1^st Affirmation of Mr Lai (“Lai 1^st”).

3.The applicable principles and the scope of the Main Appeal

3.1It is common ground that the Main Appeal is in nature a hearing de ∫novo, subject to the restrictions of the Ladd v Marshall criteria applicable to the New Evidence Application.

3.2The principles relevant to an application for security for costs are trite. A summary of them can be found at Wang Husan Han v Cathay Pacific Airways Ltd [20024] HKCFI 386 §5:

(1)  Where a plaintiff is ordinarily resident out of the jurisdiction and has no fixed assets in the jurisdiction, the court would be inclined towards making an order to provide for security for the costs of the defendant;

(2)  Although the merits of a plaintiff’s claim and whether the defendant has an arguable defence may be relevant considerations, these are to be approached in a broad-brush manner. The court shall not attempt to go into the merits of the case unless it can be clearly demonstrated that the plaintiff has a high degree of probability of success. The court should caution against forming any view on the merits simply on paper, especially if the facts are likely to be sensitive to oral evidence;

(3)  Where the plaintiff asserts that an order for security would stifle the claim, the onus is on him to show that it is unable to raise the amount of security from other sources or by other means;

(4)  Where the plaintiff is ordinarily resident out of the jurisdiction, the court will also take into account matters like the ease of registration and enforcement of a costs order in the foreign jurisdiction.

3.3As will be seen below, the central issue which I have to determine is whether P has demonstrated that an order for security would stifle his claim.

3.4It is pertinent to note that:

(1)  Mr Yu has not made any specific submissions on the quantum of the security sought by D, save that I should have regard to P’s alleged impecuniosity in mind;

(2)  Mr Yu has also not made any submission that I should take into account the potential enforceability of any adverse costs order made in these proceedings against P in the Mainland, no doubt recognizing that, by reason of the Confiscation Order, any such attempt by D would be unfruitful.

4.Analysis

4.1I will first deal with a number of matters which are not controversial and then proceed to analyze the core issue in the present case, namely whether P has shown that his claims will be stifled by an order for security.

(i)  Uncontroversial matters

4.2There is no dispute between counsel that (1) P is ordinarily resident outside of the jurisdiction and (2) despite initial suggestion to the contrary, P has not assets in Hong Kong.

4.3As regards the merits of P’s claims, it seems to me that, I should proceed on the basis that P’s claims, as recognized by counsel, are bona fide, for the following brief reasons:

(1)  There is no dispute that the existence of the Alleged Trust Agreement is quintessentially a factual dispute. Insofar as D relies on the STA, Clause 1 thereof imposes a restriction on D’s further transfer of the Shares unless consented to by P[1], which, as observed by Mr Yu, is not entirely consistent with D’s case that he had acquired both the beneficial and legal interests in the Shares;

(2)  As regards D’s reliance on the Confiscation Order, P seeks to adduce the Mainland Law Opinion in support of his argument that the Confiscation Order is criminal in nature and has no effect on assets located outside the Mainland. Irrespective of the correctness of Mainland Law Opinion, it seems to me that there is at least a respectable argument on whether P is prevented by the Confiscation Order to establish his interests in the Shares by way of these proceedings. Whether his interests, if established, is then subject to the Confiscation Order is a separate issue;

(3)  As regards D’s time-bar argument, I accept Mr Yu’s submissions that there is a respectable argument as to whether P’s claims premised on the Alleged Trust Agreement, not being a remedial trust, are or are not subject to a limitation period: Hui Chun Ping v Hui Kau Mo (2024) 27 HKCFAR 634 §§11-35.

(ii)  The stifling issue

4.4Given the above uncontroversial matters, unless P is able to persuade me that his claims will be stifled by an order for security, it seems to me that I should exercise my discretion to order security.

4.5I now turn to the most contentious issue in the present case, namely whether P has demonstrated that his claims will be stifled by an order for security.

4.6I start with the relevant commentary at Hong Kong Civil Procedure 2026 Note 23/3/3:

“In exercising its discretion under order O.23 r.1(1) The court will have regard to all the circumstances of the case. Security cannot now be ordered as of course from a foreign plaintiff, but only if the court thinks it just to order such security in the circumstances of the case…

… It is also important to take into account whether the order will stifle a genuine claim… Where a plaintiff makes such an assertion, he should be candid with the court as to his financial resources as he has the burden of adducing credible evidence to show that it is at least more likely than not that funds are [not] available from any source to provide or support security (Long Hai Hong v Chan Yu Lydia (HCMP 3179. [2016] HKEC 1738). Where it is shown that the plaintiff is impecunious, and it is unlikely to have the ability to raise larger sums, he does not have the additional onus of showing that he is unable to obtain help; if there is a real possibility that the justice of the matter required no security be ordered, the court will exercise its discretion accordingly… Even in cases of impecuniosity, Hong Kong courts have still considered to varying degrees whether the plaintiff is able to raise the amount of the security elsewhere… On the other hand, if a plaintiff is able but unwilling to fund litigation, it is not open to him to argue that his litigation will be stifled by an order for security for cost….”

4.7The underlined words have generated debate between counsel:

(1)  The proposition Mr Yu contends for is that there is “simply no obligation on the part of P to establish that it is impossible for him to procure the sum of security that would otherwise be ordered from relatives, friends and other relations”, relying on Wing Hing Provision, Wine & Spirits Trading Co Ltd v Hanjin Shipping Co Ltd [1998] 4 HKC 461 at 466F-G and Susan Mary Lauria v Le Salon Orient (HK) Ltd [1996] 2 HKLR 37 at 42F-G;

(2)  On the other hand, Mr Yeung argues that where it can be shown that a plaintiff has received financial support to prosecute his claims, evidence must be adduced to show that the backer is unable (rather than unwilling) to put up security, relying on Wing Hong Construction Ltd (In Compulsory Liquidation) v Hui Chi Yung, HCA 1423 of 2015, 18 August 2017 at §18 and Vigers Hong Kong Ltd v Junsa Development Ltd, HCA 5173 of 1998, 28 April 2003 at §§21-22.

4.8I do not agree with Mr Yu. In my view, Wing Hing and Susan Mary Lauris do the stand for the proposition for which he contends, for the following reasons:

(1)  Wing Hing only stands for the proposition that the court is “thrown back on common sense” to assess whether the overall evidence justifies the conclusion that an order for security would stifle a plaintiff’s claim (at 466F-I) and there are cases, but not all of them, in which the probability that a claim will be stifled may be properly inferred without direct evidence;

(2)  In a similar vein, Susan Mary Lauria (at 24F-G) stands for the propositions that the court must first be satisfied that (i) a plaintiff is himself impecunious, and (ii) from all the circumstances the plaintiff is unlikely to have the ability to raise large sums, and only then the plaintiff does not have the additional onus of showing that his friends, relatives and neighbours will not dig into their pockets. In other words, the onus is on the plaintiff to establish impecuniosity but it does not necessarily require the plaintiff to establish that he is unable to borrow from friends and relations. In other words, what evidence is sufficient depends on the facts of each case.

4.9I therefore agree with Mr Yeung. As a matter of common sense, if, as a matter of the overall circumstances, P has received financial assistance from others in the past, one has to look into the cogency of the allegation that the financial assistance previously from others is no longer available or has dried up.

4.10I first examine the evidence contained in Lai 1^st. It is said that:

(1)  P himself is impecunious since he is subject to the Confiscation Order, and has since May 2012 been incarcerated and will be so for life;

(2)  Even prior to May 2012, from 1999 to 2011, P was involved in litigation in Canada. He had expended a large portion of his financial resources in the Canadian legal proceedings, as well as relied upon funds borrowed from friends and family;

(3)  P is unable to raise funds to meet an order for security since his friends and family have been implicated in P’s legal proceedings in the Mainland and Canada and a news article dated 27 February 2002 is adduced to show that P's mother-in-law faced criminal repercussions for bringing to P funds to meet his legal fees in Canada;

(4)  Mr Lai himself attempted to get a bank loan in the Mainland but his application was denied;

(5)  Younger Daughter’s residential property in the Mainland was still subject to a mortgage and she was unlikely to be able to further mortgage the property to raise funds on behalf of P.

4.11In my view, the evidence in Lai 1^st falls short of demonstrating that P’s claims will be stifled by an order for security for the following reasons:

(1)  Whilst I am prepared to proceed on basis that P himself is impecunious given that he has been in custody for an extended period and will remain so, it is plain that he has received financial support from family and friends;

(2)  However, having accepted that P received financial support from “family and friends”, there was no particularization in Lai 1^st of the identities of the “family and friends”;

(3)  Lai 1^st is internally inconsistent. On the one hand, it makes a general statement that P was unable to raise funds as P’s family and friends were wary of being implicated for being involved in P’s affairs, yet the thrust of the evidence in Lai 1^st is that at least Mr Lai and the Younger Daughter were stated to be not adverse to provide funding;

(4)  In any event, the bare assertion that family and friends were unwilling to help is not credible. As pointed out by Mr Yeung, the extradition proceedings and the criminal prosecution against P were concluded a long time ago and it is difficult to see how they would still be residual effect on whether P’s family and friends were willing to provide funds;

(5)  Importantly, there was no mention of the stance of Mother and Younger Son;

(6)  As regards Mr Lai’s unsuccessful attempt to obtain a bank loan, no documentary evidence was adduced in support;

(7)  As regards the alleged difficulties associated with further mortgaging Younger Daughter’s property, it is again not supported by any documentary evidence;

(8)  The above evidential deficiencies have to been considered in the light of the fact that, as stated earlier, there was an offer to pay into court a sum of HK$300,000 as security for D’s costs, and as pointed out by Mr Yeung, P has incurred legal costs in excess of HK$400,000 for the security for costs application[2].

4.12I am therefore not persuaded by the evidence in Lai 1^st that P’s claims will be stifled by an order for security.  On this basis, and were the New Evidence Application refused, the Main Appeal stands to be dismissed.

4.13For the reasons in the following section, I am of the view that the New Evidence Application does not satisfy the Ladd v Marshall conditions. For present purpose, I deal with the evidence in Lai 2^nd on a de bene esse basis.

4.14The evidence in Lai 2^nd sets out the following matters:

(1)  Mr Lai’s financial status: Mr Lai claims that he is the only person willing to support P’s claims given the past history and current status of P and Mr Lai himself only has limited financial means and supporting documentary evidence is adduced. In fear of any implication and association with P, the rest of the family, namely Mother, Younger Son and Younger Daughter “could not care less about father’s claim” and Mother had divorced P back in 2005;

(2)  The current situation of Younger Son and Younger Brother: Lai 2^nd adduced signed statements from them stating that they had refused Mr Lai’s request for financial assistance to support P’s claims;

(3)  The current situation of his paternal uncle (“Uncle Lai”): Uncle Lai had previously funded these proceedings by transferring (directly or indirectly) HK$150,000 and RMB300,000 to P’s solicitors between May and October 2024. However, Mr Lai lost contact with Uncle Lai in October 2025 and eventually learned on 30 December 2005 that Uncle Lai had been detained by the Ningbo police from 25 November 2025. Since October 2025, Mr Lai himself transferred a total sum of RMB116,000 to P’s solicitors.

4.15I do not find that Lai 2^nd assists P. It bears emphasis that, apart from a fleeting mention that Wife divorced P in 2005, there is no specific evidence in either Lai 1^st or Lai 2^nd on Wife’s position. Insofar as it is suggested that Wife could not care less about P’s claims, this is contradicted by the documentary evidence. It needs to be borne in mind that Lai 1^st includes the transcript[3] of a meeting attended by, inter alios, Wife, Mr Lai and D in October 2016, which was 11 years after Wife divorced P. The transcript shows that Wife was very familiar with P’s case as pursued in these proceedings[4] and the discussions were plainly related to what steps might be taken (at that time together with D) to seek recovery from other related parties[5]. In addition, in the course of that meeting, both Wife and Mr Lai suggested that Wife had assets and, as she had not been indicted, the Confiscation Order had no application to her[6].

4.16Where (1) there is no evidence on Wife’s position, (2) Lai 1^st and Lai 2^nd make no mention that any request has been made to Wife for financial assistance, (3) the documentary evidence suggests that Wife was interested in pursuing P’s interest in the Shares, and (4) Wife apparently had assets, as a matter of common sense, the overall circumstances do not justify a conclusion that an order for security would stifle P’s claims.

4.17Viewed against the above, I do not believe P’s own impecuniosity should feature heavily in the assessment of quantum. Indeed, Mr Yu has not made any specific submissions on the quantum assessed by the learned Master, which already represented a significant discount from the sum sought by D. In my view, the quantum of security assessed is reasonable.

5.The New Evidence Application

5.1Pursuant to RHC Order 58 rule (5), no further evidence (“other than evidence as to matters which have occurred after the date on which the judgment, order or decision was given or made”) may be received except on “special grounds”. The conditions in Ladd v Marshall must be satisfied to demonstrate “special grounds” (Hong Kong Civil Procedure 2026 at §58/1/3), namely that:

(1)  The evidence could not have been obtained with reasonable diligence for use at the hearing below (“1^st Condition”);

(2)  The evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive (“2^nd Condition”);

(3)  The evidence must be such as is presumably to be believed (“3^rd Condition”).

5.2As explained at Chan Lap Shun v Cheng Sing & Anor, HCMP 185/2012, 16 April 2012 §26, only evidence which goes to a change of circumstances since the date of the master’s hearing is exempted from the requirement to show special grounds.

5.3The Mainland Law opinion fails to satisfy the 1^st Condition. I do not accept P’s evidence that prior to the hearing before the learned Master P attempted to engage an expert but failed to do so. Not only is there no documentary evidence to support the foregoing, as submitted by Mr Yeung, the idea that not a single PRC lawyer agreed to give evidence for P prior to the hearing before the learned Master, but that one would suddenly be available shortly after the hearing is wholly incredible. In any event, as noted above, the Mainland Law Opinion does not satisfy the 2^nd Condition either as it does not have an important influence on the result of the case.

5.4Lai 2^nd fails to satisfy the 1^st Condition. The evidence described at §4.12 above are all related to matters which transpired prior to the hearing before the learned Master (except one instance of payment by Mr Lai to P’s solicitors on 12 January 2026) and P has failed to show that such evidence could not have been obtained with reasonable diligence prior to the hearing before the learned Master.

5.5For the above reasons, the New Evidence Application is dismissed.

6.Conclusion

6.1By reason of the matters stated above, the Main Appeal is dismissed, principally by reason of the fact that the matters stated in Lai 1^st are not sufficient to demonstrate that P’s claims will be stifled by an order for security. But even were I incorrect on the dismissal of the New Evidence Application, the Main Appeal would still be dismissed even had the Mainland Law Opinion and Lai 2^nd been taken into account.

6.2It therefore follows that the Stay Refusal Appeal and the Summons are also dismissed.

6.3I make a costs order nisi that P is to pay to D the costs of the Main Appeal, the New Evidence Application, the Stay Refusal Appeal and the Summons. P is to lodge and serve its Statements of Objection to D’s Statements of Costs (already provided together with D’s Skeleton Submissions) within 7 days hereof. Summary assessment will thereafter be conducted on the papers.

Mr Axis YU, instructed by Messrs K B Chau & Co., for the Plaintiff

Mr Cedric YEUNG, instructed by Messrs Tony Kan & Co., for the Defendant