YUNG MAN TUNG v. ASHURST HONG KONG (A FIRM)

CACV 162/2025, [2026] HKCA 1208

On Appeal From [2025] HKCFI 955

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 162 OF 2025

(ON APPEAL FROM HCSD NO 41 OF 2023)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

1.  There is before the Court an application by the Respondent for security for costs of (i) the Applicant’s appeal (“the Appeal”) against an order made by Deputy High Court Judge Kent Yee (“the Judge”) on 7 March 2025 (“the Order”) refusing to set aside a statutory demand (“the SD”) dated 11 August 2023 issued by the Respondent against the Applicant for the sum of HK$4,860,247.68, and (ii) the Applicant’s renewed application for a stay of execution of the Order pending the outcome of the Appeal.

2.  Having read the documents and the submissions filed by the parties, we consider that it is appropriate to determine the present application on paper without an oral hearing pursuant to Order 59, rule 14A(1) of the Rules of the High Court, Cap 4A.

BRIEF BACKGROUND

3.  The basic facts of this case have been set out in the Decision of the Judge dated 7 March 2025 (“the Decision”), and will not be repeated here. The following brief summary should suffice for the present purpose.

4.  The SD was based on a settlement deed dated 20 February 2023 (“the Settlement Deed”) entered into between the Applicant, the Respondent and a company called Tung Kee Development (Singapore) Pte Ltd (of which the Applicant was a director and 20% shareholder), under which the Applicant agreed to pay to the Respondent, inter alia, the sum of HK$4,860,247.68 on or before 31 July 2023. The Applicant failed to pay the said sum or any part thereof to the Respondent on the due date or at any time thereafter.

5.  On 16 August 2023, the Respondent served the SD on the Applicant.

6.  On 31 August 2023, the Applicant applied to set aside the SD (“the Setting Aside Application”). In support of the application, the Applicant alleged that the Settlement Deed was procured by misrepresentation and/or executed under mistake, he mistakenly believed he would not be personally liable for the debt, and the last instalment would only be paid after the determination of certain legal proceedings in Singapore. He also argued that Schedule 1 to the Settlement Deed wrongly included an invoice which the parties had agreed should be superseded.

7.  On 10 December 2024, the Judge heard the Setting Aside Application, and on 7 March 2025, the Judge gave the Decision dismissing the application.

8.  On 31 March 2025, the Applicant filed and served a notice of appeal against the Order. On 29 May 2025, the Applicant filed and served a revised notice of appeal (“the Notice of Appeal”) pursuant to directions given by the Registrar of Civil Appeals on 9 May 2025. The Notice of Appeal contains 3 grounds of appeal:

(1)  The Judge wrongly failed to exercise his power to correct (糾正) the SD.

(2)  The details of certain invoices giving rise to the amounts payable under the Settlement Deed were erroneous, in particular: (i) they included a sum by way of Singapore tax for which the Applicant was not liable, and (ii) the amount payable in Singapore currency was converted into Hong Kong currency without his agreement or consent, and he did not know how the exchange rate was arrived at.

(3)  The Judge failed to explain the legal procedures, or give him a sufficient opportunity to make submissions, and refused his application to call 3 lawyers as witnesses for the purpose of cross-examination or confrontation.

9.  On 20 June 2025, the Judge refused the Applicant’s application for a stay of execution of the Order pending the Appeal.

10.  On 30 June 2025, the Applicant issued a summons (“the Summons”) in the Court of Appeal to renew his application for a stay of execution of the Order pending the appeal.

11.  On 21 July 2025, Linda Chan J made a bankruptcy order against the Applicant upon the Respondent’s petition presented on 20 March 2025. The bankruptcy petition was based on the Applicant’s failure to comply with the SD.

12.  On 29 December 2025, the Applicant applied for legal aid to prosecute the Appeal. On 11 February 2026, the Applicant’s legal aid application was refused.

THE APPLICATION FOR SECURITY FOR COSTS

13.  On 24 March 2026, the Respondent made the present application for security for costs of the Appeal and the Summons, on the ground of the Applicant’s impecuniosity and the lack of merits of his appeal. Although the Summons is not, strictly speaking, an appeal against the Judge’s order of 20 June 2025 refusing to grant a stay of execution of the Order pending appeal, the Summons is intimately connected with the Appeal, and the costs incurred in relation to the Summons should properly be regarded as part of the costs of the Appeal.

14.  The Applicant resists the application on the grounds that (i) he has a reasonably arguable appeal, (ii) the effect of making an order of security for costs against him would be to stifle the Appeal, (iii) the timing of the application is inappropriate, and (iv) overall unfairness.

DISCUSSION

15.  Under Order 59, rule 10(5) of the Rules of the High Court, Cap 4A, 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. The principles for the exercise of this jurisdiction are well settled. For this purpose, “special circumstances” include cases of insolvency or impecuniosity, or difficulty or expense in enforcing costs orders. However, 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 Hong Kong Civil Procedure 2026, Vol 1, §§59/10/26, 27 and 32).

16.  In the present case, the Applicant has not seriously disputed his impecuniosity. Quite apart from the fact that a bankruptcy order has been made against him on the ground of his failure to comply with the SD, the Official Receiver’s Office has confirmed that his present cash in hand is only HK$10,001.44, while his known liabilities amount to some HK$5,167,137.54. The Applicant has also made a number of applications for legal aid in relation to the Appeal and various related proceedings. The Respondent is not aware of any real properties currently owned or held by the Applicant in Hong Kong. There is nothing to show that the Applicant has any substantial assets in Hong Kong. On the materials before the Court, we have no difficulty in coming to the conclusion that the Applicant is impecunious, and the Respondent will likely face difficulty or delay in seeking to enforce any costs order which may be made against the Applicant in the Appeal.

17.  Insofar as the Applicant’s prospect of success of the Appeal is concerned, this is not the occasion for an in-depth consideration of the merits of the Appeal, which will have to be fully ventilated at the substantive hearing of the Appeal. All that is required at this stage is for the Court to form a preliminary view on the merits of the Appeal. The grounds of appeal raised by the Applicant in the Notice of Appeal have been considered by Linda Chan J in her Reasons for Judgment dated 24 July 2025 ([2025] HKCFI 3216). She took the view that the grounds set out in the Notice of Appeal are not arguable. On a provisional basis, we agree with her views. We are not satisfied that the Applicant has demonstrated that the Appeal has a reasonable prospect of success. The merits of the Appeal fall far short of being sufficient countervailing factors to militate against the making of an order of security for costs in the present case.

18.  In respect of the Applicant’s argument that the effect of making an order of security for costs against him would be to stifle the Appeal, the Applicant has not provided any information about his financial resources, or suggested that he is unable to raise funds from his family members, relatives or friends to provide the security sought by the Respondent (see Lau Kam Sing Dickie v Architects Registration Board HKSAR Inquiry Committee [2025] HKCA 76, at §16). Further, it is important to appreciate that it is inherent in an order of security for costs made against an impecunious appellant that the order may result in the appellant being unable to pursue an appeal. If it can be shown that the application is made with a view to stifling a reasonably arguable appeal, it may properly lead the court to conclude that the granting of security for costs will or may result in a denial of justice to the appellant (see 成都圆中侨信商贸有限公司 v Leung Ka Chun [2025] HKCA 1052, at §13). We do not, however, consider this to be the position in the present case.

19.  As regards the timing of the application for security for costs, it is relevant to take into account the chronology of the proceedings herein. Although the Applicant lodged a notice of appeal as early as 31 March 2025, that notice of appeal failed to comply with the requirements of Practice Direction 4.1, §20, and was plainly not a proper one. This resulted in the Registrar of Civil Appeals’ directions on 9 May 2025 requiring the Applicant to file and serve a revised notice of appeal, which the Applicant did on 29 May 2025. As for the preparation of the appeal bundles, notwithstanding the Registrar’s direction to the Applicant to give his comment on the revised index of the appeal bundles prepared by the Respondent’s solicitors within 14 days from 19 June 2025, the Applicant sought an extension of 3 months to provide his comment. The Respondent objected to the extension of time sought by the Applicant. Eventually, the Registrar directed the Applicant to provide his comment on the revised index of the appeal bundles by 13 August 2025. In the meantime, the parties were engaged in the bankruptcy proceedings against the Applicant, resulting in his bankruptcy on 21 July 2025. Subsequently, the Applicant applied for legal aid to prosecute the Appeal on 29 December 2025. The proceedings herein were stayed as a result for a period of 42 days. By letter dated 10 February 2026, the Respondent requested the Applicant to provide security for costs in the sum of HK$117,072. On 11 February 2026, the Applicant refused to provide the security sought by the Respondent, unless he was ordered by the court to do so. On the same date, the Director of Legal Aid refused the Applicant’s legal aid application. On 24 March 2026, the Respondent made the present application.

20.  While we accept that the application for security for costs could have been made earlier, as held by this Court in Gurdas Sabhagchand Choithramani v The Hongkong and Shanghai Banking Corporation Ltd [2025] HKCA 921, at §19, although generally speaking, an application for security for costs ought to be made as soon as an appeal is lodged and set down, there is no inflexible rule that delay in so doing is necessarily fatal to an application for security for costs. It is one of the relevant factors which the court may take into account when exercising its discretion on whether to make an order, and the weight that may be given to the factor of delay depends on the circumstances. In the present case, as can be seen from the above chronology of events, the Applicant has also contributed to the delay in the disposal of the Appeal. In all the circumstances, we do not consider the Respondent’s delay in making the application should lead to a denial of its application for security for costs.

21.  We see no reason why it would be unfair overall to order the Applicant to provide security for costs in the present case.

22.  Finally, insofar as the quantum of security sought by the Respondent is concerned, the Respondent is merely seeking costs relating to 2 items of disbursements, namely, (i) production of 5 sets of hearing bundles in the sum of HK$3,072, and (ii) counsel’s fees in the sum of HK$114,000, in view of the fact that the Respondent is acting as a “solicitor litigant” in the Appeal. In our view, the total amount of security sought by the Respondent (HK$117,072) is reasonable and should be allowed in full.

23.  Overall, we are satisfied, on the materials before us, that special circumstances exist in the present case which would render it just to make an order that the Applicant do give security for the costs of the Appeal in the sum of HK$117,072.

DISPOSITION

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

(1)  The Applicant do within 14 days from the date of the order herein give security for the Respondent’s costs of the Appeal by paying into court the sum of HK$117,072.

(2)  In default of making such payment into court within the time aforesaid, the Appeal and the Summons, upon the solicitors for the Respondent certifying such default to the Registrar of Civil Appeals, do stand dismissed without further order of the court with costs to be paid by the Applicant to the Respondent, such costs to be taxed if not agreed.

25.  In view of the fact that the Appeal and the Summons have been fixed to be heard on 7 August 2026, we decline to grant any stay of proceedings pending the payment of security by the Applicant.

26.  We make an order that the Applicant shall pay the costs of the Respondent in respect of the present application, to be summarily assessed. The Applicant shall have leave to file and serve a statement of objections (limited to 2 pages) to the Respondent’s statement of costs dated 7 May 2026 within 14 days from the date of this judgment.

27.  This judgment is written in English in view of the fact that the Decision of the Judge is in English. However, the Applicant may, if required, make an appointment with the clerk to this Court for an oral interpretation of the judgment in Chinese on a convenient date in the court’s premises.