LAU CHUNG v. HUI KENG YEE AND ANOTHER

CACV 69/2025, [2026] HKCA 482

On Appeal From [2025] HKCFI 359

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 69 OF 2025

(ON APPEAL FROM HCA NO 561 OF 2019)

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D E C I S I O N

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

A.  INTRODUCTION

1.  This is the 1^st defendant’s application for security for costs in respect of the plaintiff’s appeal against the judgment of Herbert Au-Yeung J (“the Judge”)  dated 21 January 2025 (“the Judgment”). By the Judgment, the Judge refused the plaintiff’s application to restore his claim,[1] and allowed the 1^st defendant’s counterclaim for a declaration that the 1^st defendant is entitled to reside in a property located in Kennedy Town (“the Property”)  rent-free for the remainder of her life and an order for possession against the plaintiff in favour of the 1^st defendant.[2]

2.  Having read the evidence and submissions filed by the parties, we consider that it is appropriate to determine the 1^st defendant’s application on paper without an oral hearing, pursuant to Order 59, rule 14A(1)  of the Rules of the High Court (Cap 4A)  (“the RHC”).

B.  RELEVANT BACKGROUND

3.  The background (taken from the Judgment)  relevant to this application can be briefly summarized as follows.

4.  The 1^st defendant was married to the late Lau Cho Dick (“Father”), and they have two children, namely, the plaintiff and Lau Ming Albert (“Ming”).[3]  Father and the 1^st defendant emigrated to Canada in 1993.[4]  Father was later diagnosed with liver cancer in Canada in 1997,[5] and they then returned to Hong Kong for Father’s medical treatment.[6]

5.  The Property was purchased in 2000 at the price of $4,859,000 under the sole name of the plaintiff.[7]  Nine cheques stubs in the cheque book of the 1^st defendant’s Wing Lung Bank account indicated that payments were made in relation to the purchase and decoration of the Property.[8]  Father passed away in 2001.[9]  Despite paying no rent for living at the Property, the 1^st defendant did pay for the general expenses, utility bills and property management fees and was responsible for the maintenance of the Property.[10]

6.  During his visit to the Property in February 2018, the plaintiff discovered that Ming’s wife and son were also living there.[11]  In May 2018, the plaintiff demanded Ming’s family to move out of the Property.[12]  In June 2018, the 1^st defendant moved out of the Property.[13]

7.  In April 2019, the plaintiff (then legally represented)  took out the proceedings below claiming in his 49-page Re-Amended Statement of Claim against the 1^st defendant essentially for a declaration that she has been holding 833 shares in the 2^nd defendant on trust and for the benefit of the plaintiff and Ming in equal proportion, and for the return of 50% of those shares to the plaintiff, with an account of income (“P’s Claim”).

8.  In her Re-Re-Re-Amended Defence and Counterclaim, the 1^st defendant defended against P’s Claim and counterclaimed for (a)  a declaration that she is entitled to reside in the Property rent-free for the remainder of her life on the basis of proprietary and/or promissory estoppel; and (b)  an order for possession, or alternatively for payment by the plaintiff representing the value of the 1^st defendant’s free accommodation in the Property for life (to be assessed).

9.  The plaintiff later failed to appear at the first and second Pre-Trial Reviews (“PTRs”)  fixed on 30 July 2024 and 7 August 2024 respectively. As a result, the Judge, at the second PTR, provisionally struck out P’s Claim pursuant to Order 25, rule 1C of the RHC.[14]

10.  In his letter to the court dated 6 September 2024, the plaintiff stated he duly noted the terms of the court order and reserved his rights to seek to restore his claim in due course.[15]

11.  The trial commenced on 28 October 2024 as originally fixed.[16]  The plaintiff acted in person.  On 30 October 2024, after the court had heard all the evidence relating to the 1^st defendant’s counterclaim and directed for the exchange of closing submissions, the plaintiff wrote to the Judge and applied for the first time to restore P’s Claim.[17]  The reason he gave for his delay in making the application was that he needed time to re-constitute his legal team and that he had other business commitments in the Mainland.[18]  The Judge rejected these explanations as incredible[19].

12.  In the Judgment, the Judge first held that the plaintiff’s explanations for his absence from the first PTR, the inability to receive the 1^st defendant’s notification about the second PTR, and the need to instruct lawyers did not constitute good reasons.[20] The Judge also found that there were no exceptional circumstances in the case to justify the exercise to discretion to move the milestone date of 28 October 2024, pursuant to Order 25, rule 1B(3)  of the RHC.[21]  Accordingly, the Judge refused to restore P’s Claim under Order 25, rule 1C(6)  of the RHC, and dismissed it with costs.[22]

13.  The Judge then went on to deal with the 1^st defendant’s counterclaim.  In relation to that, the Judge set out the following three issues arising therefrom at [28] of the Judgment:

“28. Having taken into account how the parties ran their respective cases and all the evidence, I am of the view that the 3 main issues which this Court has to resolve are:

(1)  Whether there was any agreement among the plaintiff, Father and the 1^st defendant that the [Property] should be registered under the sole name of the plaintiff on the condition that he would allow the 1^st defendant to reside therein for life rent-free.

(2)  Whether the 1^st defendant had given up her right to reside in the [Property] for life rent-free.

(3)  What relief the Court should grant in the event the 1^st defendant’s case is accepted.”

14.  The Judge found the 1^st defendant and her three other witnesses to be credible and honest and accepted their evidence, and rejected the plaintiff’s evidence finding him an incredible witness.  He therefore held on the facts that, the 1^st defendant had established that (a)  the plaintiff had promised the 1^st defendant she would be allowed to live in the Property for life rent free, as a condition that the Property would be registered under the plaintiff’s sole name[23]; and (b)  she has not given up or waived her right as the plaintiff contended[24].  The Judge therefore allowed the counterclaim and granted a declaration as sought by the 1^st defendant and ordered possession of the Property against the plaintiff in favour of the 1^st defendant.

15.  On 14 February 2025, the plaintiff filed a Notice of Appeal seeking reliefs to set aside the Judgment, restore P’s Claim and dismiss the 1^st defendant’s counterclaim.[25]

C.  THIS APPLICATION FOR SECURITY FOR COSTS

16.  On 5 June 2025, the 1^st defendant took out the present Summons to apply for security for costs of the appeal, in the amount of HK$693,200.[26]

17.  In the affirmation (“Cheung’s Affirmation”)  filed in support of this application and her counsel’s written submissions dated 8 July 2025 (“D1’s 1^st WS”), the 1^st defendant relies on the following grounds in support of the application:

(1)  The plaintiff is ordinarily resident out of jurisdiction and he does not have sufficient assets in Hong Kong to pay costs.[27]

(2)  There would be difficulty in terms of delay and/or expenses in enforcing a costs order against the plaintiff, which is further underlined by the plaintiff’s previous improper conduct in adopting delaying tactics in these proceedings and in not complying with earlier court orders.[28]

(3)  The appeal lacks merits.[29]

18.  The plaintiff opposes the application essentially on the basis that:

(1)  There exist no special circumstances in the present case for making an order for security for costs as he is not ordinarily resident in the Mainland.  This is so as he maintains a “significant and ongoing connection to Hong Kong”, as (a)  although he spends considerable time in the Mainland due to family and business commitments, he has an office address in Hong Kong (“the Hong Kong Office”)  in Wong Chuk Hang through which he has been able to receive correspondence and documents (including for the service of court documents); (b)  he is the registered owner of the Property; and (c)  he also “regularly return[s] to Hong Kong and [has] substantial ties to the jurisdiction through property ownership and banking relationships…”.[30]

(2)  He also has sufficient assets in Hong Kong for the purpose of costs enforcement, being the Property with a minimum equity value of some HK$4.5m; his long standing and active banking relationship with Citibank in Hong Kong, and his own financial capability which was acknowledged by the 1^st defendant in her submissions in the court below (in that he was able to make a lumpsum payment of HK$3.6m odd to her previously).[31]

(3)  There will also be no costs enforcement difficulties for the 1^st defendant as (a)  it would be easy to sell the Property to satisfy any costs order; (b)  he did promptly comply with a previous court order; and (c)  he had not adopted any of the alleged improper conduct in the proceedings.[32]

(4)  The appeal is meritorious.[33]

19.  The plaintiff in any event argues that the quantum sought by the 1^st defendant is manifestly excessive and disproportionate when counsel fee of HK$360,000 is the major component of the proposed security.[34]

20.  In his written submissions in reply dated 30 July 2025, Mr Ng for the 1^st defendant argues that the plaintiff has not fully addressed the 1^st defendant’s concerns as summarized at [17(1) - (2)] above.[35]  He also argues that the plaintiff’s explanations for his misconduct in the court below were unsatisfactory.[36] He further criticizes that the plaintiff has not identified any question of law involved in the appeal, nor has he demonstrated any merits thereof.[37]

C1.  Legal principles

21.  It is trite that this court has a discretion to order security for costs under Order 59, rule 10(5)  of the RHC.

22.  The 1^st defendant’s application is premised on the basis that there will be difficulty and delay for her to enforce a costs order as the exceptional circumstances to justify the order of security for costs.  In this respect, the relevant applicable principles, as submitted by Mr Ng, are as summarized at [10] of Quest Investments Ltd v Lee Wai Tung [2021] HKCA 926 per Chow JA:

“10. Under Order 59, r 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 of 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 where a respondent to an appeal will likely encounter undue delay or be put to undue expense in enforcing any order for costs in respect of the appeal. The fact that the appellant is resident abroad is prima facie proof that there will be difficulty or expense in enforcing a costs order. However, in all cases, the court retains a residual discretion not to order security if the appellant can demonstrate sufficient countervailing factors which would militate against such order being made (see Hong Kong Civil Procedure 2021, at §§59/10/27 and 59/10/28).” (emphasis added)

23.  Bearing this in mind, we now proceed to consider the merits of this application.

C2.  Discussion

C2.1  Plaintiff is ordinarily resident outside Hong Kong

24.  Where the appellant is resident in a jurisdiction outside Hong Kong, the presumption is that enforcement is difficult and security can be ordered unless the appellant proves ease of enforcement.[38]  Whether a person is ordinarily resident out of the jurisdiction is a question of fact and degree; it does not depend on the duration of the residence, but on the way in which a man’s life is usually ordered, and it contrasts with occasional or temporary residence.[39]

25.  We agree with Mr Ng that, for the purpose of considering whether security for costs should be ordered[40], the following evidence and/or matters demonstrate that the plaintiff is ordinarily resident outside Hong Kong:

(1)  He has established a sufficient degree of continuity or permanence in the Mainland, as it is his own evidence or confirmation in letters that he spends considerable time in the Mainland due to business and family commitments, and he usually resides in Huizhou[41]; and

(2)  He has no residential address in Hong Kong.

26.  In this respect, the plaintiff’s reliance on the following matters to contend that he has indeed maintained sufficient connection in Hong Kong and thus is not ordinarily resident outside Hong Kong is without merits:

(1)  The Hong Kong Office address does not assist him, as he is not the registered owner of that office.  It is also his evidence that he uses that address as a service address and to receive correspondence and documents.  This by itself does not demonstrate sufficient connection to and habitual residence in Hong Kong.

(2)  The plaintiff’s assertion that he regularly returns to Hong Kong is without particulars or evidence and remains a mere allegation.  In particular, he has not produced any immigration records to show the length and frequency of these alleged returns say over the past year or so to support his allegation of regular returns and the nature of these returns.  This is also contradicted by his own position that he had to authorize an agent to pay for the transcripts of the trial and collect the same from the court for him, as he did not stay in Hong Kong for any extended period[42].

(3)  The “property ownership” and “banking relationship” as alleged by the plaintiff, even taken to its highest, does not demonstrate that he habitually and normally resides in Hong Kong.

C2.2  Difficulties or delay in enforcing a costs order against the plaintiff

27.  Given that the plaintiff is ordinarily resident outside Hong Kong, this prima facie shows that there would be difficulty and/or delay in enforcing a costs order against the plaintiff in the event that he loses the appeal.

28.  In this respect, the plaintiff contends that the Property with an alleged net equity value of at least $4,503,000[43] constitutes a sufficient and significant asset in Hong Kong, against which a costs order can easily and effectively be enforced and satisfied.

29.  For the following reasons, we disagree:

(1)  The alleged ease of selling the Property for the purpose of enforcement under the usual procedure is misplaced as the Property is subject to the 1^st defendant’s life interest and right to possession as declared under the Judgement.  In the premises, it should be expected that it would be more difficult to find willing purchasers to purchase the Property which is subject to the 1^st defendant’s said interest and right.

(2)  The alleged minimum equity value of the Property asserted by the plaintiff is unreliable.  As rightly submitted by Mr Ng:

(a)  The Property is still subject to a mortgage with Citibank (Hong Kong)  Limited where the actual outstanding amount is unknown.[44]

(b)  Even if the 1^st defendant is willing to give up her life interest and right to possession for value, the Property’s equity value would be much reduced.[45]

(c)  The application of loan-to-value ratio of 70% to the alleged current value of the Property by the plaintiff to calculate his current net equity in the same is fallacious as the online valuation of the Property has not taken into account the “encumbrance” of the 1^st defendant’s said life interest and right to possession.[46]

(d)  The plaintiff’s liability to pay the 1^st defendant’s substantial costs in the court below (some HK$4.7m before taxation)  needs to be taken into account in assessing whether the Property’s equity value could meet also the appeal costs.[47]

(3)  In the premises, the plaintiff has not demonstrated that the Property would serve as a sufficient asset for appeal costs enforcement.

(4)  Finally, the plaintiff’s alleged long standing and active banking relationship (which is a mere assertion)  also does not show that the plaintiff has sufficient funds in Hong Kong that could be subject to costs enforcement, as he has not adduced any evidence showing the actual balance in Citibank.  This is even without considering the fact that funds can be moved out of Hong Kong easily.

30.  In the premises, given that the plaintiff is ordinarily resident outside Hong Kong, and the plaintiff has not demonstrated that he has any significant or sufficient assets in Hong Kong against which an appeal costs order can be enforced, we are satisfied that the 1^st defendant is likely to encounter difficulty and/or delay in seeking to enforce any costs order against the plaintiff in the event that his appeal fails[48].

C2.3  Merits of the appeal

31.  The plaintiff argues that the appeal is neither frivolous, nor an abuse of process.  Rather, it warrants the appellate jurisdiction to consider the substantial and serious questions of law and fact involved, including the proper application of the principles of proprietary and promissory estoppel.[49]

32.  Mr Ng on the other hand contends that the plaintiff has failed to show that the Judge’s refusal to restore his claim or his ruling in favour of the 1^st defendant on the basis of his factual findings is plainly wrong or involves an injustice.[50]  He also states that none of the plaintiff’s grounds of appeal involves any substantial or serious questions of law.[51]

33.  In considering the merits of the appeal for the purpose of security of costs, a detailed examination is not required and the court should only need to form some preliminary, or even instinctive, view on this.  Where the merits appear to go strongly one way or the other, this may, by itself, be a decisive factor.  However, if the court takes the view that the appeal could really go either way, then generally it will look to the existence of any other factors to tilt the balance, in the absence of which security will be ordered: Chung Kau v Hong Kong Housing Authority & Ors [2004] 2 HKLRD 650 per Ma CJHC (as he then was)  at [14].

34.  Adopting this approach, it is clear to us that the merits of the appeal is at best only arguable.

35.  In relation to the challenge against the Judge’s ruling in favour of the counterclaim, all those grounds of appeal (as set out under Grounds A - H of the Notice of Appeal)  are in substance seeking to challenge (a)  the Judge’s findings of fact based on his acceptance of the 1^st defendant and her witnesses’ evidence, together with the relevant documentary evidence, or the weight that the Judge placed on those evidence; and (b)  the Judge’s application of those facts as found to hold that all the requisite constituent elements of proprietary or promissory estoppel had been proved and established as a fact.  To succeed in this challenge on appeal, the plaintiff must meet a very high threshold to show that the Judge’s findings are plainly wrong and/or are ones that no reasonable judge having regard to all the relevant evidence would have come to.  In our preliminary view, these grounds are at best only barely arguable.

36.  In relation to the challenge against the Judge’s refusal to exercise his discretion to restore P’s Claim, again, to succeed in the appeal, the plaintiff must show that the Judge was plainly wrong or no reasonable judge would have exercised the discretion in the same way as the Judge did in the circumstances of this case.

37.  In this respect:

(1)  The Judge refused to restore P’s claim on the principal bases that (a)  he did not accept the plaintiff’s explanations for his absences at the two PTRs as good reasons; (b)  as the plaintiff only applied to restore his claim on the 3^rd day of trial after all the evidence given for the trial of the counterclaim had already been completed, there was no justification to recall all the witnesses to give evidence again in relation to P’s Claim, in particular given that the Judge rejected the plaintiff’s explanations for the delay in making the application as incredible; and (c)  there were no exceptional circumstances to justify moving the milestone date set for P’s Claim (which was on the first day of the trial)[52].  It cannot be possibly suggested that it was not reasonably open to the Judge to take into account these factors in considering how to exercise his discretion.

(2)  The grounds of appeal (as set out under Ground I of the Notice of Appeal)  in substance amount to simply disagreeing with the Judge’s view and seeking to argue that this court should take into account and balance various factors[53] afresh and find that it was justified to restore P’s Claim.

(3)  Even taking those grounds to the highest, we are not convinced on a preliminary basis that there is any good chance to show that the Judge’s exercise of discretion was plainly wrong or wholly unreasonable.

38.  In the premises, the merit of the appeal is far from of such strength that it constitutes a sufficient countervailing factor to militate against the making of an order for security for costs against the plaintiff.

C2.4. Quantum

39.  In Thapa Hari Bahadur v Paramount Engineering & Manpower Services Ltd [2022] HKCA 1516, this court (Au and Chow JJA)  summarised the principles regarding the assessment of the quantum of security for costs at [40(1)-(3)]:

“(1)  First, the court normally takes a broad brush approach and does not conduct a taxation of the respondent’ costs in fixing the quantum of security. Instead, the exercise on which it is engaged is to arrive at an appropriate estimation of the likely amount of costs which would be ordered to be paid by the appellant to the respondent on a party and party taxation: see Great Bill Ltd v JFK Holding Company Ltd and Another (unreported, CACV 53/2012, 13 September 2012), per Fok JA (as he then was)  at paragraph 20.

(2)  Second, one of the factors to bear in mind when fixing the amount is the underlying objectives in Order 1A, rule 1 of the Rules of the High Court (Cap 4A), in particular rule 1(c)  and (d)  which highlight proportionality in conduct of proceedings and fairness between the parties: see Rich Fine (HK)  Investment Ltd and Another v Leung Yiu Chuen [2018] HKCA 965, per Lam VP (as he then was)  at [8] - [12].

(3)  Third, to facilitate the court’s decision on the appropriate amount of security, the applicant’s legal representatives must provide a realistic estimate of the time and costs likely to be incurred in each stage of the proceedings which must bear some logical correlation to the complexity of the case and the issues involved.  Otherwise, the court is deprived of the assistance that it rightly expects: see Re Days International Ltd (unreported, HCCW 299/2011, 26 January 2015)  per Anthony Chan J at [26].”

40.  The 1^st defendant seeks the sum of HK$693,200, which covers both the costs for the security for costs application and the costs of the appeal proper.[54]  The breakdown of the likely costs and disbursement for defending the appeal has been provided in exhibit “CCH-10” to Cheung’s Affirmation.

41.  Adopting a broadbrush approach, and taking into account the facts that (a)  the same solicitors and counsel had previously represented the 1^st defendant at the trial before the Judge and are thus familiar with this matter, and (b)  the appeal does not involve any complicated issues of law or fact, we consider that the estimated costs of HK$693,200 is on the high side.  We would globally reduce it to HK$500,000.

D.  DISPOSITION

42.  For all the above reasons, we allow the 1^st defendant’s security for costs application and make the following orders:

(1)  The plaintiff shall pay into court the sum of HK$500,000 within 28 days from the date of this decision as security for costs of this appeal.

(2)  Until such payment into court be made and notice thereof given by the plaintiff to the Registrar of Civil Appeals and to the 1^st defendant’s solicitors, all proceedings in the appeal herein be stayed.

(3)  In default of making such payment into court within the time aforesaid, the appeal, upon the 1^st defendant’s solicitors certifying such default to the Registrar of Civil Appeals, do stand dismissed without further order of the court.

(4)  Upon such dismissal, the plaintiff shall pay the 1^st defendant the costs of this appeal, such costs are to be taxed if not agreed.

43.  As to the costs of this application, there is no reason why costs should not follow the event.  We further make an order nisi that costs of this application be to the 1^st defendant, to be taxed if not agreed.