CHINA EVERGRANDE GROUP (IN LIQUIDATION) v. HUI KA YAN AND OTHERS

HCA 551/2024 and HCMP 1080/2024

[2026] HKCFI 739

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 551 OF 2024 AND

MISCELLANEOUS PROCEEDINGS NO. 1080 OF 2024

________________________

(Consolidated by the Order of the Honourable
Mr Justice Coleman dated 12 February 2025)

________________________

________________________

DECISION

________________________

A.  INTRODUCTION

1.  By a decision dated 16 September 2025 ([2025] HKCFI 4327)  (“the Decision”)[1], this Court made a receivership order against Hui, and ordered him to bear the Group’s costs of the Receivership Summons to be summarily assessed (“the Costs Order”).  Such costs were subsequently assessed on 21 October 2025 as HK$1,200,000 (“the Assessed Costs”).  Pursuant to the order made under the Decision, the Assessed Costs should have been paid by 4 November 2025. However, Hui has failed to pay so far.

2.  By summons filed on 18 December 2025 (“the Summons”), the Group applies for an order that unless Hui pays the Assessed Costs within 5 days, he shall be debarred from defending this consolidated action. 

B.  LEGAL PRINCIPLES

3.  There is no dispute that the Court has discretion to make the sort of order which is now sought by the Group.  In Beijing Songxianghu Architectural Decoration Engineering Co., Ltd v Kitty Kam also known as Wang Yuzhi [2025] HKCA 1134, G Lam JA had the following to say at [62]:

“Whilst the court must exercise caution in making orders that have the potential effect of depriving a litigant of a trial on the merits, it is entitled to take into account whether the litigant’s conduct ‘is liable to subvert the overall fairness of the proceedings.’ The cases show that the courts have readily made unless orders with the sanction of entering judgment, in order to secure compliance with orders that have no direct relation to the fairness of the adjudicatory process in the trial itself, such as orders requiring disclosure of assets ancillary to freezing orders […]”

4.  The jurisdiction extends to the making of unless orders to enforce compliance with costs orders.  There is no dispute that this has been confirmed in Michael Wilson & Partners Ltd v Sinclair and Others [2017] 5 Costs LR 877 in which Sir Richard Field has set out the following principles at [29]:

“In my judgment, the following principles are applicable when dealing with an application that a party to ongoing litigation should be debarred from continuing to participate in the litigation by reason of having failed to pay an order for costs made in the course of the proceedings:

(1)  The imposition of a sanction for non-payment of a costs order involves the exercise of a discretion pursuant to the court’s inherent jurisdiction.

(2)  The court should keep carefully in mind the policy behind the imposition of costs orders made payable within a specified period of time before the end of the litigation, namely, that they serve to discourage irresponsible interlocutory applications or resistance to successful interlocutory applications.

(3)  Consideration must be given to all the relevant circumstances including: (a)  the potential applicability of Article 6 ECHR; (b)  the availability of alternative means of enforcing the costs order through the different mechanisms of execution; (c)  whether the court making the costs order did so notwithstanding a submission that it was inappropriate to make a costs order payable before the conclusion of the proceedings in question; and where no such submission was made whether it ought to have been made or there is no good reason for it not having been made.

(4)  A submission by the party in default that he lacks the means to pay and that therefore a debarring order would be a denial of justice and/or in breach of Article 6 of ECHR should be supported by detailed, cogent and proper evidence which gives full and frank disclosure of the witness’s financial position including his or her prospects of raising the necessary funds where his or her cash resources are insufficient to meet the liability.

(5)  Where the defaulting party appears to have no or markedly insufficient assets in the jurisdiction and has not adduced proper and sufficient evidence of impecuniosity, the court ought generally to require payment of the costs order as the price for being allowed to continue to contest the proceedings unless there are strong reasons for not so ordering.

(6)  If the court decides that a debarring order should be made, the order ought to be an unless order except where there are strong reasons for imposing an immediate order.”

5.  As far as [29(4)] of Michael Wilson & Partners Ltd is concerned, Ms Ha for Hui submitted that the party in default only has the obligation to make full and frank disclosure on his financial position if he is contending that he lacks the means to pay, but he has no such obligation if “lack of means” is not relied on as an explanation of non-compliance.  With greatest respect, I disagree.  In my view, the party in default would always have to give full and frank disclosure in his explanation for the non-compliance of the court order because he is asking for an indulgence of the court.  If he elects to be selective in his disclosure of information and the circumstances leading to his non-compliance of the court order, he should not expect the court to have any mercy on him.

6.  It is also trite that the court, when imposing an unless order, has to bear proportionality in mind.  The sanction has to be commensurate with the gravity of the “crime”: Schenker International (HK)  Limited v Natural Dairy (NZ)  Holdings Limited (HCA 1755/2011, unreported, 22 November 2013), at [49].

C.  DISCUSSION

7.  It is undisputed that Hui has failed to pay the Assessed Costs.  

8.  In such circumstances, and in light of the parties’ respective submissions, the Court has to consider the following questions when dealing with the Summons:

(1)  Is Hui’s explanation of non-payment acceptable?

(2)  If not, should the Court impose an unless order against Hui?

(3)  If an unless order should be made, what should be the appropriate sanction in the event of non-compliance with the unless order?

(4)  Insofar as it is applicable, what should be the deadline for payment?

C1.  Hui’s explanation

9.  By way of the 4^th Affirmation of Chow Justin Ting Fun (“Mr Chow”), Hui’s solicitor gave the following explanation for Hui’s non-compliance with the Costs Order:

(1)  Hui is currently in custody in the PRC. All communications with Hui are strictly scrutinised and he is only able to give instructions generally;

(2)  Hui has HK$20 million costs on account (“the $20m COA”)  with his former solicitors – Messrs. Baker & McKenzie (“B&M”);

(3)  Hui’s current solicitors (“JC LLP”)  have attempted to confirm that the $20m COA is currently with B&M, so that steps can be taken to access the same.  However, B&M has not given any such confirmation so far because JC LLP cannot provide “direct evidence from Mr. Hui showing [JC LLP’s] instructions to make the relevant inquiry with [B&M]”[2].

10.  In gist, it is suggested that Hui would like to use the $20m COA to pay the Assessed Costs, but he has not been able to do so, and that this causes Hui’s non-compliance of the Costs Order.

11.  I do not accept this explanation.

12.  No matter whether the $20m COA exists or not, it can be inferred by the objective facts that Hui has used undisclosed funds to pay off his legal fees:

(1)  Hui has engaged his current solicitors (JC LLP)  since 8 October 2024 to act for him in the present proceedings;

(2)  Since then, he has also engaged:

(a)  Mr Barrie Barlow SC and Mr Vincent Chen to oppose the Group’s Receivership Summons (the substantive hearing was held on 2 September 2025);

(b)  Mr Barrie Barlow SC and Mr Vincent Chen to apply for leave to appeal against the Decision, and they have lodged their written submissions in support on 18 December 2025;

(c)  Ms Terri Ha to oppose the Summons.

(3)  There is no evidence that JC LLP has acted pro bono for Hui.  Mr Chow does not suggest that his firm has not been paid a single cent since the commencement of the engagement more than 14 months ago;

(4)  Neither is there evidence that any of the aforementioned counsel has acted pro bono for Hui.  Indeed, Ms Ha has frankly admitted in Court that she does not so act for Hui;

(5)  It is common ground that solicitors have the obligation to settle counsel’s fee notes within 2 months from the date of issuance;

(6)  There is no evidence that Hui has not been able to settle his own counsel’s fees, in particular, the fees which are payable for Mr Barlow SC and Mr Chen for their attendance at the hearing held on 2 September 2025.  Neither has Mr Chow suggested in his 4^th Affirmation that any of the counsel has withheld the issuance of fee notes to his firm;

(7)  Although Hui is entitled to spend HK$50,000 per month on “legal fees and representation” pursuant to the Injunction Order, it is undisputed that Hui (whether through JC LLP or otherwise)  has never made any request to the Group or the Receivers for the release of any funds for payment of legal fees.

13.  Mr Chow’s allegation that Hui has not been able to give instructions to deal with his assets must therefore be rejected.

14.  If Hui has been able to use undisclosed funds to pay his own legal team, there is no reason why he should not use the same funds to pay the Assessed Costs.

C2.  Should an unless order be made

15.  Ms Ha submitted that there are 3 reasons why an unless order should not be made herein against Hui:

(1)  The Liquidators are in a better position to make applications for the settlement of the Costs Order with Hui’s assets which have been collected by the Receivers.

(2)  There are alternative means to enforce the Costs Order.

(3)  There are pending applications for leave to appeal against the Decision and stay of execution of the order made thereunder.

16.  The 3^rd reason is no longer valid, as this Court has dismissed Hui’s applications for leave to appeal and stay of execution (see [2026] HKCFI 723).  Ms Ha has confirmed at the hearing that she would not rely further on this reason in such event.

17.  The 1^st and 2^nd reasons may be considered together.

18.  In my view, these reasons are made to be rejected.  In the circumstances where it can be inferred that Hui has used undisclosed funds for his own legal costs, it is really not up to him to ask the Group to incur further costs for the recovery of legal costs to which it is entitled.

19.  Considering all the facts in the round, it is clear that Hui has made a deliberate decision not to comply with the Costs Order.

20.  It would be an affront to the Court’s sense of justice not to impose an unless order in the circumstances of the present case.

C3.  The appropriate sanction

21.  The next question is what the appropriate sanction should be if an unless order is made.

22.  Mr Chan SC suggested that the sanction in the event of Hui’s non-compliance with the unless order should be debarring him from defending this consolidated action.

23.  Ms Ha submitted that such a sanction is disproportionate.  However, she has not proposed any alternative sanction.

24.  In my view, such a sanction is proportionate. Although the draconian consequence of non-compliance would be that Hui becomes immediately liable for the full sum of around RMB 43.318 billion irrespective of the substantive merits of his defence, the fact is that he deserves no mercy for deliberately flouting a court order.  As a matter of fact, this is not the first time that he has paid no respect to a court order – he has adopted the same attitude towards the Disclosure Order.

25.  It should also be borne in mind that the policy underpinning the Court’s discretion to order summary assessment and immediate payment of parties’ costs of interlocutory applications is to discourage the irresponsible making of interlocutory applications or resistance to meritorious interlocutory applications: Wing Fai Construction Co Ltd v Yip Kwong Robert (2012)  15 HKCFAR 454 at [5].  It is of utmost importance that, to make good this policy objective and protect its own procedures, the Court must be able to enforce an order for immediate payment which it was thought right to make.  In Falcon Private Bank Ltd v Borry Bernard Edouard Charles Ltd & Another (HCA 1934/2011, unreported, 21 June 2013), To J also has the following to say at [18]:

“As part of the system of justice, court orders are made for the parties to comply. Various orders are made in the course of civil litigation. All orders, including costs orders, are made for the ultimate purpose of achieving justice as between the parties. It is therefore in the interests of justice that all orders are complied with. In JSC BTA Bank v Mukhtar Ablyazov, Rix LJ said in paragraphs 168 and 171, the jurisprudence is replete with confirmation of the court’s power to make such orders as are necessary to make its own orders effective and it is impossible to argue that the court lacks jurisdiction under its own inherent jurisdiction to do what is just and convenient and necessary to protect its own orders and to give effect to the interest of justice. Though the issue in that case was about the court’s power to make ancillary orders to enforce compliance of a disclosure order, I can see no reason why the principle does not apply with the same force in ensuring compliance of a costs order. In JSC BTA Bank v Mukhtar Ablyazov, the sanction of loss of freedom was more draconian than summary judgment. Hence, I think this court has inherent jurisdiction to make ancillary orders to enforce compliance of its costs orders. Such ancillary jurisdiction includes a power to order a party to pay the costs which he was ordered to pay as a condition of his being allowed to continue with the conduct of his defence or claim.”

26.  As pointed out above, Ms Ha has not been able to make any alternative proposal as far as the sanction is concerned.  All she would like to achieve is to have the whole Summons dismissed.  If the Court goes along that route, that means there would be no consequence for Hui’s non-compliance with the Costs Order.  That simply cannot be right.  In the present case, Hui’s conduct is liable to subvert the overall fairness of the proceedings.  Hence, the imposition of the proposed sanction must in my view be fair, necessary and proportionate.

C4.  The deadline for payment

27.  Mr Chan SC for the Group asked the Court to impose a 5-day deadline for the payment of the Assessed Costs.

28.  On that matter, upon this Court’s enquiry, Ms Ha suggested that 42 days should be given.  However, she has very frankly admitted that she does not have any particular reason for picking this number.  She would just want to ask for a period as long as possible so that steps could be taken for the purpose of payment.

29.  In my view, given the draconian effect of the order, the Court should not accede to the Group’s request for imposing a 5-day deadline which is relatively short.

30.  On the other hand, there is no reason why the Court should give a period as long as 42 days for Hui to take further steps in complying with the Costs Order.  After all, he has already had more than 2 months to do so.

31.  In my view, Hui should only be given another 14 days to pay the Assessed Costs.

D.  THE ORDER

32.  For the above reasons, I hereby order that unless Hui pays to the Group the amount of HK$1,200,000 being the summarily assessed costs payable by him to the plaintiff pursuant to paragraph 20 of the Order dated 16 September 2025 by 4pm on 20 February 2026, he shall be debarred from defending this consolidated action.

E.  COSTS

33.  Costs should follow the event.  I make a costs order nisi that Hui shall bear the Group’s costs of the Summons. 

34.  The above order nisi shall become absolute in the absence of application to vary (which, if any, will be disposed of on paper)  within 14 days hereof.

35.  The Group’s costs of the Summons shall be summarily assessed in lieu of taxation.  Unless any application for variation of the aforesaid costs order nisi is made within time, the Group shall lodge and serve its statement of costs within 7 days after the expiry of the said 14-day period.  Hui shall lodge and serve his statement of objection within 7 days thereafter.  Summary assessment of the costs of the Summons will be conducted on paper (no matter whether any statement of objection is lodged by Hui within time)  thereafter.  The costs assessed shall be paid by Hui within 14 days after assessment.

F.  POSTSCRIPTS

36.  By a letter dated 13 January 2026 (which was lodged with the Court on 14 January 2026 at 10:43am)  (“the 13 January Letter”), Hui’s solicitors (JC LLP)  informed this Court that Hui has filed a summons on 9 January 2026 (returnable on 27 March 2026)  (“the Variation Summons”), pursuant to which Hui seeks leave to vary the terms of the Injunction Order, such that he can make use of the $20m COA for the purpose of paying the Assessed Costs.  On that basis, he asks this Court to “take this into consideration for the timeline of the Unless Order (if any is to be granted)  or defer judgment until the Variation Summons is dealt with”.

37.  On 14 January 2026 at 5:04pm, this Court sent a facsimile message to JC LLP and raised the requisition as to whether the 13 January Letter has been copied to the Group’s solicitors.

38.  At 5:33pm on the same day, the Group’s solicitors confirmed by letter (which was copied to JC LLP)  that they have not been served with the 13 January Letter.  They also stated that JC LLP did not serve the Variation Summons until the morning on 14 January 2026.

39.  By another letter dated 15 January 2026:

(1)  JC LLP confirmed that the 13 January Letter was only sent to the Group’s solicitors by fax on 14 January 2026 at 5:38pm.  They further alleged that there was an “inadvertent omission of the Plaintiff’s solicitors from the copy line”;

(2)  JC LLP also alleged that while the Variation Summons was filed on 9 January 2026, they only obtained a sealed copy thereof “from the Court Box in the late afternoon of 12 January 2026”.

40.  The handling of the matter by JC LLP is apparently unsatisfactory:

(1)  There is simply no excuse not to include the name of the solicitors’ firm engaged by the opponent in a letter sent to the Court;

(2)  Neither is there any excuse not to serve the Variation Summons on the Group’s solicitors right away when this is relied on by Hui in his further (uninvited)  submissions (see [36]);

(3)  It has been emphasized time and again by the court that it is inappropriate to make applications by letter (see Holinail H.K. Limited v Matthias Pou & Others [2025] HKCFI 1157 at [36] and [39]).

41.  In any event, given this Court’s findings that Hui has used undisclosed funds to pay off his legal fees, and that there is no reason why he should not use the same funds to pay the Assessed Costs (see [12] and [14] above), the taking out of the Variation Summons has no bearing on the outcome of the Summons.  I therefore do not think it is necessary to withhold the handing down of this Decision.