Emagist Entertainment Ltd v. Nether Games (Hong Kong) Ltd and Others

On 28 August 2026, the Court of Appeal (Chu VP and G Lam JA) handed down its decision in CACV 160/2022, [2026] HKCA 1615, granting the Respondents' application for security for costs in Emagist Entertainment Ltd v Nether Games (Hong Kong) Ltd and Others, though only in the reduced sum of HK$700,000 rather than the HK$2,000,000 sought. Mr Michael Ng, instructed by Messrs So, Lung & Associates, acted for the successful Respondents. Mr Ian Chau, instructed by Messrs Wong, Hui & Co, appeared for the Appellants.

The underlying dispute concerned Ninja Saga, an online role-playing game developed on Facebook by four individuals, three of whom (collectively 'ART') were held to be Emagist's employees. In August 2012 they removed the source code from Emagist's workstations and migrated it to a newly incorporated company, Nether Games. After an 8-day trial, Lok J found no partnership, that Emagist owned the copyright under section 14 of the Copyright Ordinance (Cap. 528), awarded Emagist US$455,928.39 in damages, and dismissed the two counterclaims (§§77, 126). The Defendants' appeal, lodged in April 2022, is fixed for hearing on 10 November 2026. Earlier attempts to obtain a stay of execution failed at first instance and in [2023] HKCA 1111.

The Respondents then applied for HK$2,000,000 as security under Order 59 rule 10(5). The Court held that: (1) the uncontradicted evidence of the Appellants' impecuniosity and the difficulty of enforcement made out 'special circumstances' justifying security within the principles summarised in First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd [2026] HKCA 564; (2) the burden of showing that an order would stifle the appeal rested on the Appellants, and their failure to put on any evidence of their finances defeated that argument; and (3) the grounds of appeal, which mainly challenged the judge's rejection of the partnership case, were not strong enough to displace the order, this Court having already taken that view at §§20.1-23.3 of [2023] HKCA 1111.

The Court reduced the security figure to HK$700,000, treating the Respondents' estimate of HK$3.7 million as excessive. The wholesale change of solicitors (twice) and counsel team between trial and appeal, with no adequate explanation, was a key reason for the cut, as was the trial judge's refusal of a two-counsel certificate. The Respondents also lost some credit for seeking to rely on affidavits filed in intended bankruptcy proceedings that they had sprung on the Appellants after the time for opposing evidence had expired (§16).

The Court ordered the Appellants to pay HK$700,000 into court within 28 days, with a stay in the meantime and dismissal of the appeal in default. Costs of the security application were summarily assessed at HK$150,000.

The practical takeaway for practitioners is on quantum: an unexplained wholesale change of legal team on appeal will not be allowed to inflate the security figure. Respondents seeking security should still put on the standard evidence of searches, statutory demands, and non-payment of taxed costs promptly, and avoid springing new affidavits on the opposition after the deadline has passed.