CHEUNG SAU YIN v. LAI TAK CHUNG

CACV 321/2024, [2025] HKCA 1132

On Appeal From [2024] HKCFI 1816

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 321 OF 2024

(ON APPEAL FROM HCB NO. 1779 OF 2024)

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D E C I S I O N

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

I.  Security for costs of the Debtor’s appeal

1.  Linda Chan J (‘the Judge’) on 8 July 2024, upon a petition presented by the petitioner on 29 November 2023 made a bankruptcy order against the Debtor. The Judge provided the reasons for her judgment on 11 July 2024. The Debtor appeals. The petitioner now applies for security for costs of the appeal against the debtor in the sum of $122,800.

2.  On 3 February 2025, the debtor filed an affirmation to oppose the application, as well as a summons to adduce new evidence.

3.  Having considered the papers, we are of the view that both of these applications are closely related and that it is appropriate for these applications to be dealt with on paper and proceed to do so.

4.  The relevant background and facts have been summarized by the Judge. In gist, the debt on which the bankruptcy petition is based is in the sum of $160,000 which arose out of a default judgment in the District Court against the debtor (‘the Judgment Debt’).

5.  The debtor has repaid $20,000 with the outstanding amount of $140,000 remained unpaid. The petitioner after serving the statutory demand but receiving no response from the debtor presented the bankruptcy petition on 29 November 2023.

6.  Although the debtor filed an affirmation on 13 June 2024 asserting that 1) he intends to pay the Judgment Debt; 2) he had communicated with the petitioner and his legal representative during the period from August 2023 to December 2023 and proposed a repayment plan, but the same was rejected; and 3) he repaid $20,000 by instalments during the period from October 2022 to February 2023, he did not attend the hearing claiming he was unwell. The Judge proceeded with the hearing in the debtor’s absence and made the bankruptcy order.

7.  The Judge held :

‘ 10. The debtor did not appear at the hearing. Nor did he lodge any submissions in opposition to the petition. Instead, shortly before the hearing, the debtor called the court’s clerk and claimed that he was ill. No document was produced to substantiate his assertion. As the debtor was aware of the hearing and the fact that the petitioner would seek a bankruptcy order against him but chose not to attend the hearing, there was no reason why the court should not hear the petition.

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13. None of the 3 grounds raised by the debtor in his affirmation constitutes a bona fide dispute on substantial ground in respect of the Judgment Debt:

(1) The first ground only states that he intends to pay. This is a tacit acknowledgement that the Judgment Debt remains payable but not paid.

(2) The second ground confirms that the debtor is unable to pay the Judgment Debt. This is reinforced by his failure to comply with the SD, with the result that he is deemed unable to pay his debts.

(3) The repayment of HK$20,000 has already been deducted from the amount owed and did not form part of the Judgment Debt.’

II.  The parties’ case

8.  The petitioner’s application for security for costs is based on the following grounds. First, the debtor will not be able to pay the costs of the appeal and the petitioner anticipates that he will have difficulty recovering the same. Second, the debtor’s appeal is unmeritorious.

9.  In his Notice of Appeal dated 5 August 2024, the debtor states as follows :

‘ 1. Debtor has a sick leave certificate issued by licensed doctor on 8th July 2024;

2. Debtor owns more than the amount of debt (HKD250,000).’

10.  The debtor’s reasons in objecting to the security for costs application can be summarised as follows :

1)  It was unfair to make a bankruptcy order against him in his absence.

2)  He has sufficient assets to pay the debt.

3)  The amount of the security for costs sought is excessive and disproportionate to the amount owed;

4)  Under the restrictions of a bankruptcy order against him, he is unable to pay any security for costs, and that the petitioner’s such request is self-contradictory;[1]

5)  The debtor was acting in person in the bankruptcy proceedings and was ignorant of the law.[2]

11.  He applied to adduce his medical certificates and a commission agreement between himself and a company called Richwell Capital Limited (‘Richwell’).

III.  Principles

12.  Under Order 59, rule 10(5) of the Rules of the High Court, 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. For this purpose, ‘special circumstances’ include cases of insolvency or impecuniosity, and difficulty or expense in enforcing adverse costs order against the appellant (see Hong Kong Civil Procedure 2025, Vol 1, at [59/10/26] and [59/10/27]). An appellant’s bankruptcy or impecuniosity is generally not a bar to an order of security for costs against him : Lau Kam Sing Dickie v Architects Registration Board HKSAR Inquiry Committee CACV 108/2024, [2025] HKCA 76 at [13]‑[16].

13.  The Court, however, has a discretion and is entitled to consider other relevant factors such as the strength of the appeal to determine whether or not it would be just to order security for costs to be provided. But once a special circumstance is shown, it is generally up to the appellant to demonstrate countervailing factors militating against an order being made (see Chung Kau v Hong Kong Housing Authority [2004] 2 HKLRD 650, at [14(2)]) and Excel Courage Holdings Limited v Seto Ming Wai (司徒明慧) CACV 181/2024, [2025] HKCA 91 [16]‑[17].

IV.  Our view

14.  On the materials before this Court, we are satisfied that the petitioner will be put to undue difficulty and expenses in enforcing costs order against the debtor for the following reasons :

1)  The debtor has been adjudged bankrupted;

2)  The petitioner produced a letter from the Official Receiver dated 22 January 2025 showing that the debtor has cash in hand in the sum of about $8,291.11;

3)  Apart from his mere assertions that he has assets that can cover the bankruptcy order, the debtor is unable to show that he has any ability to satisfy his debt or any part thereof.

15.  In terms of the merits of the debtor’s appeal, neither of his two grounds points to any specific error committed by the Judge. He had ample opportunity in the Court below to adduce evidence to show that he had sufficient assets to pay the debt.

16.  We are not prepared to accept the new evidence and will not exercise the discretion in not ordering security against him.

17.  Of the amount of $122,800 for the security, $39,000 is for the present application for security.

18.  We make an order in the following terms :

1)  The debtor shall within 30 days from the date of handing down of this decision give security for the petitioner’s costs of this appeal (inclusive of the costs of the application for security for costs) in the sum of $110,000, by making payment into court of this sum;

2)  Until the debtor has given the security ordered in 1) above and notice thereof is given to the solicitors for the petitioner (such notice to be given on the same day as the lodgement is made), all proceedings in this appeal are to be stayed;

3)  In default of the debtor giving security as ordered in 1) above, this appeal do (upon the solicitors for the petitioner certifying such default to the Registrar of High Court) stand dismissed out of this court without further order;

4)  In the event that the appeal is dismissed in the circumstances provided for in 3) above, the debtor shall pay the petitioner the costs of this appeal, such costs to be summarily assessed or taxed if not agreed; and

5)  The petitioner’s costs of the application for security for costs summarily assessed at $30,000 are to be paid by the debtor in any event.

6)  The debtor’s summons to adduce new evidence is dismissed with costs to the petitioner and the costs are summarily assessed at $15,000.