Case Document

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CACV 85/2025, [2026] HKCA 1991

On appeal from [2025] HKCFI 344

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 85 OF 2025

(ON APPEAL FROM HCMP NO 2131 OF 2016)

________________________

	IN THE MATTER of the property known as ALL THAT one equal undivided 4^th part or share of and in ALL THAT piece or parcel of ground registered in the Land Registry as RURAL BUILDING LOT NO. 680 And of and in the messuages erections and buildings thereon now known as No. 23 PLANTATION ROAD, HONG KONG (“the Building”) TOGETHER with the sole and exclusive right and privilege to hold use occupy and enjoy ALL THAT the entire GROUND FLOOR of the Building and THE GARDEN appurtenant thereto AND ALSO TOGETHER WITH the sole and exclusive right and privilege to hold use occupy and enjoy ALL THAT GARAGE SPACE “A” on the GROUND FLOOR of the Building (“the Property”)
	and
	IN THE MATTER of a Deed of Legal Charge dated 27^th May 2015 registered in the Land Registry by Memorial No. 15061700570083 (the “Legal Charge”)
	and
	IN THE MATTER of a Deed of Guarantee dated 27 May 2015 executed by Wong Chor Cheung in favour of China Sun Finance Company Limited (“the 1^st Guarantee”)
	and
	IN THE MATTER of a Deed of Guarantee dated 27 May 2015 executed by Wong Chi Hong John in favour of China Sun Finance Company Limited (“the 2^nd Guarantee”)
	and
	IN THE MATTER of Order 88 of the Rules of the High Court, Cap 4A

________________________

BETWEEN

	CHINA SUN FINANCE COMPANY LIMITED	Plaintiff
	and
	MORALITY INTERNATIONAL TRADING LIMITED	1^st Defendant
	WONG CHOR CHEUNG	2^nd Defendant
	WONG CHI HONG JOHN	3^rd Defendant

________________________

Before:

Hon Poon CJHC and Au JA in Court

Dates of Written Submissions:	20 February, 18 May and 18 June 2026
Date of Decision:	28 October 2026

________________________

DECISION

________________________

Hon Poon CJHC (giving the Decision of the Court):

1.This is the plaintiff’s application for security for costs in the sum of HK$700,000 against the 1^st defendant in respect of its appeal against the judgment of Deputy High Court Judge Phoebe Man (“Judge”) dated 24 January 2025 [1] ordering, inter alia (“Orders”):

(1) the 1^st defendant to pay the sum of HK$48 million together with interest at 12% per annum from 27 June 2016 until Judgment, and thereafter at judgment rate until payment; and

(2) in default of payment, delivery of vacant possession of No. 23 Plantation Road, Hong Kong (“Property”).

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

Background

2.The plaintiff is a licensed money lender under the Money Lenders Ordinance (Cap 163) (“MLO”). The 1^st defendant is a company incorporated in Hong Kong and is at all material times the registered owner of the Property. The 2^nd defendant is the manager of the 1^st defendant and the 3^rd defendant is an indirect shareholder of the 1^st defendant. Bankruptcy orders had been issued against the 2^nd defendant and the 3^rd defendant in 2020 and 2017 respectively. The plaintiff would only continue to pursue against the 1^st defendant in this action.

3.By a facility letter dated 6 May 2015 and countersigned by each of the defendants (“Facility Letter”) to signify their acceptance, the plaintiff agreed to extend the loan in the sum of HK$48 million (“Loan”) to the 1^st defendant, on the basis that repayment would be secured by the Legal Charge and the Guarantees. The Facility Letter specified the plaintiff as lender, the 1^st defendant as borrower, and the 2^nd and 3^rd defendants as guarantors. The Loan would be repaid within 12 months from the date of drawdown of the Loan and the interest on the Loan was at 12% per annum. The plaintiff was entitled to charge default interest at the monthly rate of 24% (which can be translated into an annual rate of 288%) (“Default Interest Provision”).

4.On about 27 May 2015, the Loan Agreement and the Legal Charge were executed by the 1^st defendant, and the Guarantees were executed by the 2^nd and 3^rd defendants respectively. The Loan Agreement contained substantially similar terms as the Facility Letter but the Loan Agreement did not contain any Default Interest Provision.

5.On the same date (i.e. 27 May 2015), the 1^st defendant drew down the Loan. The 1^st defendant had apparently paid interests on the Loan to the plaintiff in accordance with the terms of the Loan Agreement up and including 26 June 2016. However, the 1^st defendant failed to repay the plaintiff the principal of the Loan or any part thereof whether on 26 May 2016 (being the agreed maturity date under the Loan Agreement) or at all. Nor did the 1^st defendant continue to make any more interest payment to the plaintiff, whether at the agreed contractual rate at 12% per annum or the default interest rate at 288% per annum.

6.At trial, the parties agreed that the list of issues to be determined are as follows:

(1)  The “Default Interest Issue”: Whether, by reason of the Default Interest Provision in the Facility Letter, the extension of the Loan contravened section 22(2) of the MLO;

(2)  The “Discretion Issue”: If so, whether the court ought to exercise its discretion to allow the plaintiff to recover from the defendants the principal, as well as the agreed contractual interest, of the Loan; and

(3)  The “Collusion Issue”: Whether the plaintiff had, in contravention of section 27 of the MLO, colluded with others to obtain any unlawful payment from the defendants for advancing the Loan that should be set off pursuant to section 27(4) from the 1^st defendant’s liability to the plaintiff.

7.The Judge granted the Orders in favour of the plaintiff, she held that:

(1)  Section 22 of the MLO has been breached by reason of the Default Interest Provision in the Facility Letter which was, together with the Loan Agreement, part of the essential elements of the plaintiff’s claim to assert its rights.

(2)  After taking into account the factors for the exercise of the court’s discretion under section 22(2) of the MLO, it would be inequitable if the plaintiff were unable to enforce its rights under the Loan Agreement, despite the Default Interest Provision having been inserted in the Facility Letter. As a result, the principal loan amount of HK$48 million plus interest at 12% per annum remain enforceable and payable by the 1^st defendant to the plaintiff under the Loan Agreement.

(3)  The court rejected the collusion allegation by the 1^st defendant that two individuals, Ray and Philip, and a firm of solicitors colluded with the plaintiff to participate in a fraudulent scheme to take advantage of the precarious financial position of the defendants.

8.By a notice of appeal dated 20 February 2025 (as amended on 7 April 2025), the 1^st defendant appealed against the Judgment and advanced the following broad grounds of appeal:

(1)  The Judge erred in her conclusion that the court should exercise the discretion under section 22(2) of the MLO to allow the plaintiff to recover the principal amount of the Loan together with the contractual interest rate of 12% per annum.

(2)  Alternatively, even if it is inequitable for the plaintiff to be unable to enforce its rights under the Loan Agreement, the Judge erred in exercising the discretion under section 22(2) of the MLO to enforce the Loan Agreement in its entirety.

(3)  The Judge erred in law in finding that there was no collusion of the plaintiff in obtaining an unlawful payment from the defendants for advancing the Loan that should be set off pursuant to section 27(4) from the 1^st defendant’s liability to the plaintiff.

The present application

9.Under Order 59, rule 10(5), 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”. It is trite that “special circumstances” include cases of insolvency or impecuniosity, and difficulty or expense in enforcing costs order. Even in such cases, 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 Gurdas Sabhagchand Choithramani v The Hongkong and Shanghai Banking Corporation Limited [2025] HKCA 921, [12].

10.A common countervailing factor to resist applications for security is the merits of an appeal. On a consideration of the merits of the appeal, while a detailed examination is not required, the court should form some sort of preliminary view. Where the merits appear to go strongly one way or the other, this may by itself be a decisive factor. However, if the court takes the view that the appeal could really go either way, then generally it will look to the existence of any other factors to tilt the balance, in the absence of which security will be ordered. The overriding consideration for the court is to consider, as the rule requires, whether special circumstances exist making it just to order security: see HWH Holdings Ltd v Stephenson Harwood (A Firm) [2025] HKCA 193, [11], citing Chung Kau v Hong Kong Housing Authority [2004] 2 HKLRD 650, [14].

11.In fixing the amount of the security, the court is not required to carry an exercise similar to a full taxation of a bill. Instead, the court adopts a broad brush approach. On the other hand, it is generally not the practice of the court to give a full indemnity in respect of the likely costs that may be incurred by an applicant in the appeal. The court should seek to do practical justice to the applicant by awarding a reasonable amount as security: see TGL v SDC [2025] HKCA 229, [7].

12.In support of the application, the plaintiff relies on the following grounds:

(1) The 1^st defendant is impecunious as a company. The 1^st defendant has failed to repay the judgment debt and the interests accrued. The value of the Property is not enough to cover the said liability of the 1^st defendant. There is a real risk that the plaintiff will not be able to recover its costs in respect of the appeal.

(2) The 1^st defendant’s appeal has no merits.

13.The 1^st defendant opposes the application for the following reasons:

(1)  The 1^st defendant owns substantial assets within Hong Kong which are more than sufficient to satisfy any costs order made against the 1^st defendant if the appeal is unsuccessful.

(2)  The security for costs in the sum of HK$700,000 would be oppressive, disproportionate and unnecessary. It risks stifling the 1^st defendant’s legitimate appeal which raises genuine and arguable grounds as set out in its amended notice of appeal.

(3)  The application serves no legitimate purpose as the 1^st defendant is a Hong Kong company with enforceable assets within the jurisdiction.

14.We first reject the 1^st defendant’s assertion that it owns substantial assets within Hong Kong which are more than sufficient to repay the judgment debt:

(1)  The 1^st defendant alleges that it owns various antiques or furniture that are of substantial value.

(2)  However, there are all bare allegations without independent valuation or proof of ownership.

(3)  It follows that we reject the 1^st defendant’s contention that the application serves no legitimate purpose.

15.We next consider there is no sufficient countervailing factor which would militate against an order for security for costs being made against the 1^st defendant. In respect of the merits of the appeal, it is not necessary to go into the details of the contentions which have been canvassed in the appeal. All that we need to say is that the appeal is not so meritorious that it will cause us to exercise the discretion against the granting of security. Granting of security would not stifle the 1^st defendant’s appeal in the circumstances.

16.In conclusion, we consider that there exist special circumstances which make it just to order security in favour of the plaintiff. The remaining issue is the quantum of security to be ordered.

17.According to the plaintiff’s skeleton bill of costs, the estimated costs of the appeal are in a total sum of HK$738,600. However, the plaintiff only seeks HK$700,000 as security in the application.

18.Viewing the costs in the round, we consider the sum of HK$460,000, as reasonable estimate for the costs of the appeal on a party-and-party basis.

19.Accordingly, we make the following orders:

(1)  The 1^st defendant do provide security for the plaintiff’s costs of this appeal by making payment into court in the sum of HK$460,000 within 28 days from the date of this decision.

(2)  All further proceedings in the appeal be stayed until such security is provided and notice of payment is given to the Registrar of Civil Appeals and the solicitors for the plaintiff.

(3)  In default of security being given within the time set out in (1) above, the appeal do stand dismissed without further order, with costs to be paid by the 1^st defendant to the plaintiff, to be taxed if not agreed.

(4)  The 1^st defendant do pay the plaintiff the costs of the application to be summarily assessed on papers. The plaintiff shall file and serve its statement of costs (limited to 2 pages) within 14 days from the date of this decision and the 1^st defendant shall file and serve its grounds in opposition within 14 days thereafter (also limited to 2 pages).