CHINA CITIC BANK CORPORATION LTD, TIANJIN BRANCH AND OTHERS v. SILVER STARLIGHT LTD

CACV 525/2021
CACV 261, 265 & 266/2022
CAMP 294/2022

[2023] HKCA 365

CACV 525/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 525 OF 2021

(ON AN APPEAL FROM APPLICATION TO SET ASIDE A

STATUTORY DEMAND NO 3 OF 2021)

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CACV 261/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 261 OF 2022

(ON AN APPEAL FROM

BANKRUPTCY PROCEEDINGS NO 6548 OF 2021)

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CACV 265/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 265 OF 2022

(ON AN APPEAL FROM COMPANIES (WINDING-UP)

PROCEEDINGS No 295 OF 2021)

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CACV 266/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 266 OF 2022

(ON AN APPEAL FROM

BANKRUPTCY PROCEEDINGS NO 6548 OF 2021)

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CAMP 294/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 294 OF 2022

(ON AN INTENDED APPEAL FROM COMPANIES (WINDING-UP)

PROCEEDINGS NO 295 OF 2021)

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J U D G M E N T

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Hon G Lam JA (giving the Judgment of the Court):

1.  Five pending sets of proceedings in this court (in addition to one completed appeal) have arisen from disputes between three bank creditors on the one hand, and Mr Pan Sutong (“Pan”) and his company Silver Starlight Ltd (“Silver Starlight”) on the other. The three bank creditors are: (1) China CITIC Bank Corporation Limited, Tianjin Branch; (2) CITIC Bank International (China) Ltd, Beijing Branch; and (3) China CITIC Bank International Ltd. We shall refer to them as the “1^st”, “2^nd” and “3^rd Bank” respectively, and together as the “Banks”.

2.  This judgment is the court’s decision in relation to the following three sets of applications issued in the pending proceedings: (1) Silver Starlight’s application for leave to appeal (CAMP 294/2022) against the decision of Linda Chan J on 29 June 2022 in the winding up proceedings brought by the Banks against Silver Starlight in HCCW 295/2021; (2) the Banks’ applications in CAMP 294/2022 and CACV 261/2022 for leave to adduce new evidence; and (3) the Banks’ composite application for security for costs in all five sets of proceedings.

Background

3.  The relevant general background has been set out in this court’s reasons for judgment[1] given on 25 August 2021 in the completed appeal (CACV 301/2021) between Silver Starlight and the Banks, and is quoted below for ease of reference:

“3.  [Silver Starlight] is a company incorporated in the British Virgin Islands (“BVI”), and wholly owned by Mr Pan Sutong (“Pan”).  [Silver Starlight] holds shares (amounting to 35.59% of the issued share capital) in a company incorporated in Hong Kong called Goldin Properties Holdings Ltd (“Goldin Holdings”).  Goldin Holdings was, until its privatisation and delisting in August 2017, a listed company (stock code 00283.HK) on the Stock Exchange of Hong Kong.  The shares held by [Silver Starlight] were those acquired by it as the offeror from the public shareholders during the privatisation exercise.  The other 64.41% of the shareholding in Goldin Holdings is held by Pan and two other BVI companies which are also wholly owned by him.

4.  Goldin Holdings holds a very substantial property development project in Tianjin which includes both commercial and residential properties (“Project”), through a corporate chain consisting of the following wholly‑owned subsidiaries: (1) Gold Novel Ltd, a BVI company registered in Hong Kong under Part XI of the predecessor Companies Ordinance (Cap 32), (2) Port Rich Ltd, a company incorporated in Hong Kong, (3) Proman International Ltd, another company incorporated in Hong Kong, (4) Goldin Properties (Tianjin) Co Ltd, a company incorporated in the Mainland and registered in Hong Kong under Part XI of the predecessor Companies Ordinance.  Goldin Properties (Tianjin) Co Ltd in turn holds two pieces of land in Tianjin which form part of the site of the Project, as well as four Mainland companies which hold various interests in the Project.

5.  The [Banks] are all banks or bank branches to be treated as separate banks for present purposes.  It is not in dispute that in May 2017, the 1st and 2nd [Banks] lent HK$8 billion to [Silver Starlight] (HK$7.93 billion from the 1st [Bank] and HK$70 million from the 2nd [Bank]) pursuant to a facility agreement dated 15 May 2017, and the 3rd [Bank] lent HK$4 billion to [Silver Starlight] pursuant to another facility agreement of the same date.  As the terms of the two facility agreements are virtually identical, we shall simply refer to them as the “Facility Agreements”.

6.  The two loans were made principally for the purpose of financing the payment by [Silver Starlight] of the consideration for the acquisition of the shares in Goldin Holdings from the public shareholders in the privatisation mentioned above.  The loans were for the term of 3 years, subject to an extension of 12 months at the borrower’s request upon certain conditions being satisfied.  Interest is payable at the specified rate every 3 months.  Upon the occurrence of any event of default (which includes the non‑payment of any amount due including interest), the agent (ie the 3^rd [Bank]) may declare all or part of the loans to be immediately due and payable.

7.  On the same date of the Facility Agreements, Pan executed a personal guarantee in favour of the lenders of the HK$8 billion loan (ie the 1^st and 2^nd [Banks]).  [Silver Starlight] also executed a share charge charging its shares in Goldin Holdings in favour of the 1^st and 2^nd [Banks] as security for the HK$8 billion loan.

8.  Several months after the drawdown of the loans, on 30 November 2017, Goldin Properties (Tianjin) Co Ltd mortgaged the two pieces of land it owns in Tianjin in favour of the 1^st [Bank] as security for the HK$8 billion loan.

9.  Since November 2019, [Silver Starlight] has been in default of payment of interest for both loans.  By solicitors’ letters dated 10 December 2019, the 3rd [Bank], as agent, gave notice to [Silver Starlight] under the Facility Agreement for the HK$8 billion loan that because of the non‑payment of interest, the entire loan of HK$8 billion was immediately due and payable, and also gave notice to Pan as the guarantor.

10.  Following negotiations and other events in 2020, on 24 December 2020 the [Banks’] solicitors issued a statutory demand to [Silver Starlight] for the HK$8 billion loan on behalf of the 1st and 2nd [Banks].  For reasons that are immaterial for present purposes, this was superseded by a subsequent statutory demand issued and served on [Silver Starlight] on 11 January 2021, also in respect of the HK$8 billion loan.

11.  On 22 February 2021, [Silver Starlight] issued its application by originating summons for an injunction to restrain the three [Banks] from presenting a winding‑up petition based on their statutory demand in respect of the HK$8 billion loan.  Two main grounds were advanced in support of the application: first, that the jurisdictional requirements for winding up a foreign company are not satisfied, and secondly, that there was a bona fide dispute of the debt on substantial grounds.

12.  In particular, Pan says that he initially did not wish to lay out as large an amount as HK$12 billion to privatise Goldin Holdings.  It was the CITIC group, which comprised the [Banks], who offered to finance the privatisation with loans and, thereafter, to procure buyers to acquire properties in the Project.  It is said that in the course of the negotiations in around April or May 2017, he and representatives of the CITIC group (in particular, Mr Sun Deshun (“Sun”), the former chairman of the 1st [Bank]) reached a verbal agreement (“Overall Agreement”) that: (1) the CITIC group would provide loan facilities in the aggregate amount of HK$12 billion to [Silver Starlight] for acquiring Goldin Holdings shares in the hands of public investors for the purpose of the privatisation; (2) upon the privatisation of Goldin Holdings, the CITIC group would procure and arrange for buyers and/or investors to acquire land and properties in the Project; and (3) repayments by [Silver Starlight] of its liabilities under the loan facilities extended by the CITIC group shall come from the proceeds of sale of the land and properties in the Project (whether procured and arranged by the CITIC group or otherwise).  It is also said that Sun represented to Pan that the [Banks] would first enforce their security over the mortgaged land for the repayment of their loans, and would only pursue [Silver Starlight] and Pan for any amount outstanding thereafter (“Representation”).  It is said that the [Banks’] intended recovery actions against [Silver Starlight] (including a winding‑up petition) without first exhausting their security rights over the land would be a breach of the Overall Agreement and the Representation.  It is further said that the [Banks] had acted in breach by obstructing the realisation of the mortgaged land.

13.  In his judgment handed down on 3 June 2021, Deputy Judge M K Liu decided both points against the plaintiff and dismissed the originating summons.  The plaintiff appealed against the Judgment, contending it was erroneous on both issues.  The defendants filed a respondents’ notice of additional grounds for upholding the Judgment.  Urgent directions were given for the hearing of the appeal, with an interim order preventing the presentation of a petition pending the determination of the appeal.”

4.  On 10 August 2021, this court dismissed the appeal from that judgment of DHCJ M K Liu.  On the next day, the Banks presented a petition for the winding up of Silver Starlight (HCCW 295/2021) based on its indebtedness under the HK$8 billion loan.

5.  Meanwhile, the Banks had also served a statutory demand on Pan in February 2021 based on the HK$8 billion loan, and Pan had applied to set aside that statutory demand (HCSD 3/2021).  His application was heard by DHCJ Le Pichon in October 2021, who dismissed it in a judgment handed down on 19 November 2021.[2] In the same judgment, DHCJ Le Pichon allowed the Banks’ application to adduce evidence in reply to the first affirmation of Peng Jianyin (“Peng”), and dismissed in part Pan’s application to adduce his third affirmation and a draft second affirmation of Peng in evidence.  DHCJ Le Pichon considered that Pan’s application to set aside the statutory demand was a collateral attack on the earlier proceedings before DHCJ MK Liu and the Court of Appeal referred to above, and that it was an abuse of process for Pan to re-litigate settled issues.  Further, she did not consider that Pan had met the requisite threshold for showing that he had a defence of substance, as the evidence adduced was far from being “sufficiently precise factual evidence which is believable”.

6.  On 24 November 2021, Pan filed an appeal (CACV 525/2021) against DHCJ Le Pichon’s decision.  We shall refer to this as the “statutory demand appeal”.  On the next day, the Banks presented a bankruptcy petition against Pan (HCB 6548/2021) based on the statutory demand.

7.  Both the winding up petition against Silver Starlight and the bankruptcy petition against Pan came on for hearing together before Linda Chan J on 7 June 2022.  The judge reserved her decision at the conclusion of the hearing.

8.  Whilst judgment on the petitions was pending, on 28 June 2022 Silver Starlight and Pan each issued a summons for leave to file and rely on a further affirmation of Pan[3] and for the disposal of the petitions to be postponed to a date not earlier than seven days after 30 September 2022.  The further affirmation of Pan in each case, which was identical in substance, stated that there had been a new development since the hearing of the petitions on 7 June 2022.  In particular, it was said that one of the financiers Pan had approached, namely, Oaktree Capital Management (“Oaktree”), was interested in extending a loan to Silver Starlight (to be guaranteed by Pan) to pay off the Banks’ petition debts, but only if no bankruptcy or winding up order was made against them.  A term sheet dated 28 June 2022 for a proposed loan facility of up to US$1.2 billion was exhibited (“Term Sheet”).  Pan stated that he had every intention to cause Silver Starlight to take out the proposed loan for the purpose of paying off the debts claimed by the Banks, and was not aware of any circumstance which would make it impossible or difficult to comply with the proposed condition precedents which were customary for transactions of this kind.  He therefore believed that he and Silver Starlight should be able to repay the petition debts within “a short period of time”.

9.  The solicitors of Pan and Silver Starlight also wrote to the court asking the judge to hear the two summonses before handing down judgment on the petitions.  This was opposed by the Banks by letter dated 29 June 2022.  On the same date, the judge, by letter, responded as follows:

“ Leave refused. The judgment will be handed down in the usual way unless the Company/Debtor are able to repay the Debt in full.”

This was treated as an order made in each case dismissing Pan’s and Silver Starlight’s summonses of 28 June 2022 respectively.

10.  On 4 July 2022, Pan filed an appeal (CACV 261/2022) against the Judge’s decision of 29 June 2022.  We shall refer to this as the “postponement appeal”.  Likewise, Silver Starlight took steps to appeal, but as it required leave, it filed a summons on 4 July 2022 to apply to the judge for leave to appeal.  On 28 July 2022, the judge heard the summons and dismissed it.  There was no written decision handed down, but the judge’s reasons for refusing leave to appeal may be gleaned from the transcript of the hearing.  In particular, the judge noted that the Term Sheet was non-binding and that the proposed Oaktree loan was subject to due diligence and conditions precedent including the ability to make full repayment of existing indebtedness. 

11.  On 9 August 2022, Silver Starlight filed a summons in the Court of Appeal (CAMP 294/2022) re-applying for leave to appeal against the judge’s decision of 29 June 2022 in HCCW 295/2021.  We shall refer to this as the “postponement leave application”.

12.  Meanwhile, having refused to defer judgment on the petitions, on 8 July 2022 Linda Chan J handed down her judgment, making a winding up order against Silver Starlight and a bankruptcy order against Pan.[4]  The judge held that the relevant determinations and findings made by DHCJ MK Liu and on appeal by the Court of Appeal, and by DHCJ Le Pichon in dismissing Pan’s application to set aside the statutory demand, are binding upon Pan and Silver Starlight who were therefore precluded from re-litigating the same issues.

13.  On 11 July 2022, Silver Starlight and Pan each filed a Notice of Appeal against the winding up order and bankruptcy order respectively (CACV 265/2022 and CACV 266/2022).  We shall refer to these appeals as the “winding up appeal” and the “bankruptcy appeal” respectively, and as the “insolvency appeals” collectively.

14.  On 5 September 2022, the Banks issued a summons in the postponement appeal and the postponement leave application for leave to adduce new evidence that relates primarily to the first meeting of creditors held on 11 August 2022 in the bankruptcy (as described below).

15.  On 9 September 2022, the Banks issued a single combined summons in the five sets of pending proceedings to apply for security for costs.

16.  We consider it appropriate to deal with the applications without an oral hearing based on the written submissions lodged by the parties.

Silver Starlight’s postponement leave application (CAMP 294/2022)

17.  By her decision on 29 June 2022, Linda Chan J decided (1) not to give leave to Silver Starlight to adduce the new evidence regarding the potential loan from Oaktree, and (2) not to postpone the handing down of the judgment on the winding up petition until a date not earlier than seven days after 30 September 2022. 

18.  Given that Silver Starlight’s postponement leave application is mirrored in Pan’s postponement appeal which will be set down for hearing, as a matter of case management we consider it desirable for them to be dealt with together.  It is also obviously desirable for these two matters to be heard together with Pan’s statutory demand appeal and the insolvency appeals.  Accordingly, we direct that there be a rolled-up hearing of Silver Starlight’s postponement leave application (CAMP 294/2022) and, if leave is given, of the appeal itself, to be fixed to be heard together with Pan’s statutory demand appeal, Pan’s postponement appeal, and the insolvency appeals.  The parties’ attention is drawn to the court’s observations in Li Cheong v Lee Kwai Tai [2018] 4 HKLRD 120 on the duties of the parties in relation to a rolled-up hearing.

Directions for the combined hearing

19.  We also take the opportunity to direct that combined hearing bundles be prepared so as to avoid duplication of documents, and that combined skeleton arguments (limited to 25 pages for Silver Starlight and Pan together and 25 pages for the Banks) be lodged.  We give leave for the combined hearing to be set down with an estimate of 1 day.

The Banks’ application for leave to adduce new evidence in the postponement appeal and the postponement leave application

20.  The background to Pan’s postponement appeal (CACV 261/2022) and Silver Starlight’s postponement leave application (CAMP 294/2022) has been set out above.  In each of these two sets of proceedings, the Banks have by summons dated 5 September 2022 applied for leave to file and serve an affidavit of Leung Ping Chiu, a partner of the solicitors firm acting for the Banks.  The contents of the two affidavits are in substance identical.[5] Both state that a first creditors’ meeting was held in Pan’s bankruptcy on 11 August 2022 at which debts totalling about HK$113.7 billion were admitted by the Official Receiver for voting purpose and two trustees in bankruptcy were appointed.  The correspondence between the Banks’ solicitors and the trustees in bankruptcy between 16 and 19 August 2022 are exhibited.

21.  One of the conditions precedent in the Term Sheet of the proposed Oaktree loan is that there should be “evidence showing sufficient capital (including the Facility) to fully repay existing indebtedness”.  The Banks submit that the new evidence shows that there were debts exceeding HK$113 billion admitted for voting purpose at the first creditors’ meeting in Pan’s bankruptcy, and that Pan (as guarantor of the proposed Oaktree loan) would not be able to repay his “existing indebtedness” even with the help of the US$1.2 billion Oaktree loan.  It is submitted that the new evidence is highly relevant to whether the condition precedent for the proposed loan could be satisfied and will therefore have an important bearing on the outcome of the postponement appeal and the postponement leave application.  It is also submitted (in the case of Pan’s postponement appeal) that the total amount of proofs admitted for voting purpose is an important matter for the Court of Appeal to take into account in deciding how its own discretion should be exercised in the event it sets aside the judge’s decision of 29 June 2022.

22.  For their part, Pan and Silver Starlight take a neutral position towards the Banks’ applications.

23.  The first meeting of creditors took place after the decision of the judge, though the evidence goes in substance to the amount of Pan’s existing indebtedness as at the date of the decision.  It is unnecessary in this case to determine whether, as such, the intended further evidence is “evidence as to matters which have occurred after the date of the trial or hearing” within the meaning of RHC Order 59 rule 10(2), as to which principles somewhat different from those laid down in Ladd v Marshall [1954] 1 WLR 1489 are applicable: see Re China Fisheries International Ltd [2020] HKCA 169, §26.  We are satisfied that whichever approach is applicable, the further evidence should be admitted in the postponement appeal because it was not obtainable with reasonable diligence before the date of the decision, and it may well have a significant impact on the premise of the appeal i.e. the prospect of obtaining the Oaktree loan and consequently the prospect of repaying the Banks’ debts with the loan proceeds.  On the Banks’ summons in the postponement appeal (CACV 261/2022), we would therefore grant leave for the Banks to file and serve the affidavit of Leung Ping Chiu and to rely upon it in the appeal.  Costs will be in the cause of the appeal.

24.  As to the Banks’ summons in Silver Starlight’s postponement leave application (CAMP 294/2022), there is as yet no appeal on foot, as leave to appeal has not been granted.  Whether or not this court has jurisdiction to, or should as a matter of proper practice, admit further evidence before an appeal proper comes into existence is a question that has not been addressed by the parties.  In Man Lin Heung, The Administratrix of the Estate of Man Kwai Yin also known as Man Kwai Yin v 梁根林 [2019] HKCA 846 at footnote 1, this court[6] stated that, procedurally, an application for leave to adduce new evidence could not be entertained until after leave to appeal had been granted.  In these circumstances, we consider it appropriate to direct that the Banks’ summons in the postponement leave application be heard at the combined hearing mentioned above.

The Banks’ application for security for costs

25.  The Banks by a composite summons dated 9 September 2022 seek security for costs covering all five sets of proceedings and the application for security itself in the total amount of HK$4,872,350 (reduced from HK$6 million which was the amount stated in the summons).  The ground of the application is that Silver Starlight has been found to be insolvent and Pan has been found to be unable to pay his debts.

26.  As we understand their submissions, Silver Starlight and Pan do not dispute their impecuniosity given the extant winding up and bankruptcy orders, but they oppose the application on the following four grounds:

(1)  Their appeals and application for leave to appeal have strong prospects of success.

(2)  Madam Liu Jianming, Pan’s wife, is willing to be joined as a party to the proceedings for the purpose of being made liable to pay the Banks’ costs should the Bank succeed in the end.

(3)  Requiring security for costs to be paid will stifle the appeals.

(4)  The quantum of security sought is grossly excessive.

27.  We shall deal with these grounds in turn below.

Merits

28.  As to the first ground, strength of an appeal may be a ground for opposing any requirement for security for costs, but there is a high threshold for the appellant to pass.  As stated in Chung Kau v Hong Kong Housing Authority & others [2004] 2 HKLRD 650 at §14(3):

“ On a consideration of the merits of the appeal, while a detailed examination is not required (or desirable, even if possible on the materials before the court at this stage), the court should form some sort of preliminary, even instinctive, view. Where the merits appear to go strongly one way or the other, this may by itself be a decisive factor. Thus, an appeal which is very strong would often be a very good reason not to order security. The converse of course also applies. …”

29.  In their written submissions, Pan and Silver Starlight have essentially simply asserted there are strong grounds of appeal or strong reasons for the grant of leave to appeal and then referred to or summarised the grounds of appeal in their notices of appeal or draft notice of appeal.  There is no attempt specifically to demonstrate such strong prospects as to justify refusing security for costs.  That being the case, we shall not set out any in-depth analysis of the merits.

30.  In relation to the statutory demand appeal, the grounds of appeal are broadly that (1) DHCJ Le Pichon erred in partially disallowing Pan’s application to adduce his third affirmation and Peng’s second affirmation; (2) there are bona fide disputes of the debts on substantial grounds; and (3) Pan had a separate and distinct defence that the Banks had breached their duty owed to him as surety by obstructing the sale of the properties within the Project.  The Banks have filed a respondents’ notice contending that Pan was precluded from running the point alleging breach of duty by the Banks by reason of clauses 7, 8 and/or 10 of the personal guarantee signed by Pan.

31.  Against the backdrop of the rejection of the alleged Overall Agreement by DHCJ MK Liu whose decision was upheld by this court (see §§3-4 above), we are not satisfied that there are obviously such strong prospects in favour of Pan that security for costs should not be ordered.

32.  As to the postponement appeal and the postponement leave application, the decision under attack is that of Linda Chan J on 29 June 2022 (1) not to permit Pan and Silver Starlight to adduce further evidence in relation to the proposed Oaktree loan after the hearing of the petitions, and (2) to refuse to postpone judgment until seven days after 30 September 2022.  The grounds or intended grounds of appeal are broadly that: (1) the judge made the decision without affording Pan and Silver Starlight and opportunity to make submissions in support of their summonses; (2) the further evidence was credible evidence showing prospects of payment of the petition debts within a reasonable time, at the latest by 30 September 2022; and (3) the judge was wrong not to postpone judgment having regard to the prejudice that would be caused by a bankruptcy order and winding up order to Pan and Silver Starlight and the lack of prejudice that would be caused by the postponement to the Banks.  The Banks have filed a respondents’ notice highlighting that the Term Sheet stated that the terms were provided for discussion only and that the petition debts had fallen due on 19 December 2019 and the statutory demand had been served on Pan on 16 February 2021, and contending that to obtain an adjournment it was necessary for Pan to provide evidence not only of his ability to pay the petition debt within a reasonable time but also the debts due to supporting creditors which included the sum of HK$4 billion due to the 3^rd Bank and the sum of RMB 740.78 million due to the Bank of China Ltd Shenzhen Branch.

33.  It should be noted that admitting further evidence post-hearing is an unusual course, and the judge is entitled summarily to deal with such an application as a case management decision.  Similarly, the decision whether to postpone judgment on the insolvency petitions because the debtors claim, after the hearing, that there is a prospect of repayment of the debts, is very much a matter in the judge’s discretion.  There is high threshold for an appellant to pass in order to impugn decisions of these kinds.  We are not satisfied that Pan and Silver Starlight have such promising prospects in this regard that security for costs should be refused even though they have been placed in insolvency.

34.  As to the insolvency appeals, the common grounds of appeal are broadly that: (1) the judge erred in applying the doctrines of res judicata, estoppel and abuse of process to the issues of whether there was a bona fide dispute of the debts and whether the court should exercise its jurisdiction to wind up Silver Starlight which is a foreign company; (2) the judge ought to have found on the basis of the available evidence before her that there was a bona fide dispute of the debts in light of the Overall Agreement; and (3) in any event the judge ought not to have made the winding up order and bankruptcy order in view of the existence of credible evidence that the petition debts may be discharged within a short period of time (with proceeds from the proposed Oaktree loan).  As an additional ground, Silver Starlight contends that the court ought to have refrained from exercising the winding up jurisdiction over it as a foreign company since it has no meaningful assets located in Hong Kong, its assets cannot be realised through the winding up, and its shares in Goldin Holdings were already charged to the Banks.  For their part, the Banks have filed respondents’ notices contending that even if the doctrines of res judicata, estoppel and abuse of process did not apply, the judge should have come to the conclusion that there was no bona fides dispute of the debts and that there was sufficient basis for the Hong Kong court to exercise its winding up jurisdiction over Silver Starlight.

35.  We have considered the contentions raised in the grounds of appeal but do not think that they show such strength in the prospects as to justify refusing security for costs for the Banks.

Joinder of Madam Liu Jianming

36.  In Pan’s affirmation made in opposition to the application for security, it is stated that his wife, Madam Liu Jianming, a resident of Hong Kong, is willing to be joined as a party for the purpose of costs in the relevant proceedings.  It may be mentioned that in the winding up proceedings below (HCCW 295/2021), Madam Liu was joined by order of Linda Chan J on 28 July 2022 for the purpose of being made liable for the costs incurred post-liquidation.

37.  In our view, the fact that a third party may be made liable for the petitioners’ costs through being made a party to the appeal for the purpose of costs may be a relevant factor in the decision whether to order security for costs, but it does not preclude the power to order security.  The appellate proceedings here are brought by and in the name of Pan and Silver Starlight and them only.  They, as appellants that are insolvent, are primarily responsible for putting up security for the respondents’ costs, although it may well have to come from an outside source who is backing these appeals.  Such security is intended not only to enable the petitioners, if ultimately successful in the appeals, to recover their costs but also to do so without difficulty or delay.  We do not think that simply joining Madam Liu, as to whose financial position there is no evidence at all, is a fair substitute for security here if we are otherwise satisfied that security should be ordered.

Stifling the appeals

38.  It has been submitted on behalf of Pan and Silver Starlight that an order for security will stifle their appeals, but there is no evidential basis for this assertion.  In circumstances where the appellants apparently have access to financial resources not only for prosecuting these appeals but also for engaging in litigation elsewhere, and in the absence of clear evidence that funds cannot be raised from their backers, we are not prepared to accept that there is any risk of stifling: see Andersen v Huang Kuang Yuan [1997] HKLRD 1360, 1373-4.

Quantum

39.  The Banks’ solicitors have prepared a skeleton bill of costs covering costs already incurred and costs to be incurred, totalling HK$6 million.  As mentioned above the amount of security sought has been reduced to HK$4,872,350, after deducting the costs relating to the applications for a stay of the winding up and bankruptcy orders which were withdrawn. 

40.  Both sides’ arguments have proceeded on the basis of the global figures without specifying what amount of security is to be paid by Pan and Silver Starlight respectively for which particular proceedings.  We adopt the same approach in deciding the overall figure, but the actual orders for security will have to be made in each set of proceedings and for that purpose we have broadly apportioned the amount ordered between the respective sets of proceedings.

41.  Although there are five sets of proceedings, there is much overlap between the bankruptcy-related appeals and the winding-up-related appeals.  Within the former, there is much overlap between the statutory demand appeal and the bankruptcy appeal.  Given that the appeals have now been directed to be heard together, duplication of preparation should be avoided.  As regards Silver Starlight’s postponement leave application, there is as yet no extant appeal and the Banks have not advanced any reason why security may be applied for in the absence of an appeal.  We shall therefore omit from our assessment that particular matter, though it is essentially mirrored by Pan’s postponement appeal.  Further, we shall make an order for costs forthwith in relation to the application for security for costs, and not include those costs within the security ordered. 

42.  It is trite that the court takes a broad-brush approach in deciding on the amount of security.  In all the circumstances, it seems to us a sum of HK$1.5 million is adequate security for the Banks.  We shall apportion the amount as follows:

-  Pan’s statutory demand appeal – HK$250,000

-  Pan’s postponement appeal – HK$250,000

-  Pan’s bankruptcy appeal – HK$500,000

-  Silver Starlight’s winding up appeal – HK$500,000

43.  In each of these four appeals there will be an order that:

(1)  The appellant do provide security for the Banks’ costs of the appeal in the specified sum by way of payment into court within 28 days from the date hereof (or such further time as may be agreed in writing by the parties or permitted by the court).

(2)  All further proceedings in the appeal be stayed until such security is provided and notice of payment is given to the Registrar of Civil Appeals and the solicitors for the Banks.

(3)  In default of payment into court in compliance with (1) above, and upon the solicitors for the Banks certifying such default to the Registrar of Civil Appeals, the appeal be dismissed without further order of the court with costs to be paid by the appellant to the Banks, to be taxed if not agreed.

44.  Further, we make an order nisi, as sought in the Banks’ summons, that Pan and Silver Starlight do pay the costs of the application for security.  Subject to further directions, those costs will be summarily assessed by this court.  The Banks shall lodge and serve an updated skeleton bill of costs for this purpose that complies with Practice Direction 14.3 within 7 days hereof, to which Pan and Silver Starlight may lodge and serve a statement of objection within 14 days thereafter.  

[1]  [2021] HKCA 1248 (Yuen, G Lam and Chow JJA).

[2]  [2021] HKCFI 3475.

[3]  2ndAffirmation of Pan in HCB 6548/2021 and 3rd Affirmation of Pan in HCCW 295/2021.

[4]  [2022] HKCFI 2076.

[5]  except that in the affidavit made for Pan’s postponement appeal, there is an additional paragraph stating that the fact that proofs in the total sum of HK$113 billion have been admitted for voting purpose is relevant in deciding how the Court of Appeal’s discretion should be exercised in the event the Court of Appeal sets aside any order made by the court below in relation to the bankruptcy proceedings.

[6]  Lam VP and Yuen JA.