MAMMY PANCAKE CO LTD v. CARLA DAY LTD AND OTHERS

CACV 401/2025, [2026] HKCA 1476

ON APPEAL FROM [2025] HKCFI 2218

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 401 OF 2025

(ON APPEAL FROM HCA NO. 1044 OF 2021)

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DECISION

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Hon Cheung JA (giving the Decision of the Court) :

I. Application for security for costs of the appeal

1.  The 1^st and 2^nd defendants appeal against the judgment dated 16 May 2025 of Fung J (‘the 2^nd Judgment’).  The plaintiff now applies for security for costs of the appeal in the sum of $790,760.

2.  We will deal with the application on paper.

II.  Procedural background

3.  On 6 May 2024, Fung J in HCA 1044/2021 gave judgment for the plaintiff against the 1^st and 2^nd defendants after a two‑day trial (‘the 1^st Judgment’). The 1^st and 2^nd defendants were absent from the trial.  The Judge awarded the plaintiff loss of profits of $3,803,782.32 and exemplary damages of $300,000.  The 2^nd defendant is a director of the 1^st defendant.

4.  By a summons dated 8 January 2025, the defendants asked for extension of time to file and serve the Notice of Appeal (‘Extension summons’) against the 1^st Judgment. By another summons dated 30 March 2025, the defendants applied to set aside the 1^st Judgment (‘Set‑aside summons’).

5.  Fung J on 16 May 2025 dismissed the Extension summons and the Set‑aside summons by the 2^nd Judgment.

6.  The defendants then on 30 May 2025 issued a summons (CAMP 108/2025) in this Court to renew their application for extension of time to file and serve the Notice of Appeal against the 1^st Judgment.  This Court (Au JA and Cheng J) on 1 June 2026 granted the defendants extension of time to file and serve the Notice of Appeal against the 1^st Judgment solely against the award of exemplary damages but not on the other grounds of appeal.

7.  The defendants on 13 June 2025 also issued a notice of appeal in CACV 401/2025 to appeal against the 2^nd Judgment in relation to the dismissal of the Set‑aside summons.  This led to the plaintiff issuing the present application. 

III.  Our view

1)  Special circumstances and the defendants’ challenge

8.  The defendants do not dispute that special circumstances to order security are engaged, namely, that they are impecunious and the 2^nd defendant is residing abroad.  They, however, objected to the application on the grounds that (1) they have a real prospect of success at a re‑trial, (2) the 1^st Judgment was irregularly obtained and (3) their appeal will be stifled if security is ordered.

2)  Real prospect of success

9.  On the merits of appeal, this Court in CAMP 108/2025 had considered the grounds of appeal which in substance are the same as the ones relied upon by the defendants in this application.  They involve issues of duty of confidentiality and good faith, pleading on dishonesty, finding of facts and quantum of damages. The Court, apart from the discrete issue of exemplary damages, considered that the other grounds do not have any prospect of success.  We agree and the same view can be said of the grounds of appeal advanced in this case.  The only issue now is whether the issue of exemplary damages would be sufficient to defeat the plaintiff’s application for security.  We do not consider that it would, because the defendants are pursuing not merely the ground on exemplary damages but also on the other grounds in respect of liability and loss of profit which would substantially increase the costs of the appeal.  Since the 1^st June 2026 Decision, the defendants have not indicated that they would abandon the other grounds of appeal and rely solely on the exemplary damages ground.

3)  Irregularity of the 1^st Judgment

10.  In respect of the defendants’ reliance on the irregularity of the 1^st Judgment that was obtained in their absence as set out in Grounds 1 to 4 of the draft Notice of Appeal, it is a challenge to the exercise of discretion by the Judge in not setting aside the 1^st Judgment.  The principle is that this Court would only intervene if the exercise of the discretion is plainly wrong which is a high threshold.  The defendants have failed to overcome this threshold.  The Judge in [13] to [20] had properly addressed the grounds relied upon by the defendants and held :

‘ 19. With the 2^nd Defendant’s own words that she had given instruction to return the mail, it is confirmed the 2^nd Defendant was deliberately absenting herself from taking part in the trial. In any case, the Court was satisfied of the sending of the Notice of Trial with no return of such mail on the Court’s own record.’

4)  Stifling the appeal

11.  It is difficult to understand the defendants’ argument on this point.  As the plaintiff had submitted, the law requires the defendants to prove not only that they are unable to furnish security from their own resources but also that they are unable to raise the money elsewhere.  In Laerdal Medical Limited v Hong Kong Haocheng International Trade Limited, CACV 154/2017, 20 November 2017, this Court held :

‘ 26.    Further, where an appellant contends that security should not be awarded because it would prevent him pursuing his appeal, he has to satisfy the court not only that he is unable to furnish security of the costs from his own resources but also that he is unable to raise the money elsewhere.  And in assessing whether the appellant could raise money elsewhere, the court adopts the same rigorous approach as in the Order 14 case of York Motor v Edwards [1982] 1 WLR 444 at 449 and 450 (Chow Sing Yuet Elton v Carry Express Investment Limited, CACV 5/2011, 26 May 2011 at [10]). …..’

12.  The defendants’ assertion that they are not in a position to raise the money elsewhere are bare assertions, having considered the overdraft account in the joint names of the 2^nd defendant and her husband by which they could withdraw up to about AUD 98,000, the husband owns a house in Australia and the ability of the 2^nd defendant to fund the legal costs of preparing her affirmation to oppose the present application.

5)  Quantum

13.  The amount that the plaintiff seeks is $790,760 inclusive of the costs of counsel and of the present application.  In our view, the appropriate amount for security is $680,000 to reflect the Court’s view on the exemplary damages and the nature of a party and party taxation.

IV.  Conclusion

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

1)  The defendants do pay into Court the sum of $680,000 as security for the plaintiff’s costs of the appeal and the present application within 28 days.

2)  Until such payment into Court be made and notice thereof given by the defendants to the Registrar of Civil Appeals and to the solicitors for the plaintiff, all proceedings in the appeal be stayed.

3)  In default of making such payment into Court within the time as stated, and upon the solicitors for the plaintiff certifying such default to the Registrar of Civil Appeals, the appeal will stand dismissed without further order of the Court with costs of the appeal to be paid by the defendants to the plaintiff, such costs to be taxed if not agreed.

15.  We further order the defendants to pay the plaintiff the costs of this application which are summarily assessed at $180,000.