JOVIAL PARADISE LTD v. EVER HARMONY ENTERPRISES LTD AND OTHERS

CACV 3/2025, [2026] HKCA 1154

On Appeal From [2024] HKCFI 3500

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 3 OF 2025

(ON APPEAL FROM HCA NO. 1937 OF 2023)

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DECISION

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

I.  The two summonses

1.  There are two summonses before us. The first is the defendants’ summons for leave to adduce new evidence in support of their appeal against the judgment dated 4 December 2024 of  S T Poon J. (‘the Judge’). The second is the plaintiff’s summons requiring the defendants to provide security for costs of their appeal.

2.  Having considered the papers, we are of the view that it is appropriate to deal with these two applications based on the written submissions only, without an oral hearing, pursuant to Order 59, rule 14A(1) of the Rules of the High Court (Cap. 4A) (‘RHC’).

II.  Procedural background

3.  The plaintiff’s claims against the defendants were against the 1^st defendant and the 2^nd defendant as borrowers and against the 3^rd, 4^th and 5^th defendants as guarantors for loans that the plaintiff had lent to the 1^st defendant and the 2^nd defendant.

4.  On 3 July 2024, the plaintiff entered judgment against the defendants by reason of their failure to file and serve their defence prusuant to a unless order dated 4 March 2024. The Judge used the term default judgment which we will adopt as well. By the default judgment, the defendants were required to pay the plaintiff the sum of US$192,311,736.71 together with interests and costs.

5.  The defendants applied to set aside the default judgment before the Judge who upon hearing the parties dismissed the application. The Judge also dismissed the defendants’ application to stay the Hong Kong proceedings on the ground of forum‑non‑conveniens.

6.  The parties confirm that the defendants are now only appealing against the Judge’s dismissal of their summons to set aside the default judgment.

III.  The New Evidence

1)  Principles on adducing new evidence

7.  Order 59, rule 10(2) of the Rules of the High Court provides that the Court of Appeal has power to receive further evidence on special grounds. Special grounds require in general that the three conditions of Ladd v Marshall [1954] 1 WLR 1489 at 1491 be satisfied :

(1)  the evidence could not have been obtained with reasonable diligence for use at the hearing below;

(2)  the evidence must be such that, if given, would probably have an important influence on the result of the case, though it need not be decisive; and

(3)  the evidence must be apparently credible, though it need not be incontrovertible.   

All three conditions must be satisfied for new evidence to be admitted on appeal.

2)  Nature of the new evidence

8.  The new evidence that the defendants intend to adduce are the documents that the plaintiff submitted in the Mainland for the proof of debt in the liquidation proceedings of Gaoyou Jinao Real Estate Development Company Limited (‘Gaoyou Jinao’). They include (1) first creditor’s meeting report of 19 April 2024 (‘Report’); (2) the Administrator (管理人)’s notice dated 2 September 2024; (3) the Notice issued by the Administrator to the plaintiff dated 12 November 2024; (4) the plaintiff’s legal claim against the Administrator dated 22 November 2024; (5) the information of Jiangsu Gaoyou People’s Court confirming the plaintiff’s appeal would be heard on 22 April 2025.

9.  The defendants submit that the new documents (except the Report) were created after the hearing before the Judge on 18 July 2024 and they could not produce the new evidence with reasonable due diligence for use in the hearing. Hence, the first condition is satisfied.

10.  As to the second condition, the defendants submit that the new evidence has an important influence on result of the appeal, though it need not be decisive. The plaintiff submitted its proof of claim in the sum of RMB 1,276,852,131.00 (approximately equivalent to HK$1,359,683,365.00) on 7 April 2024. The affidavits filed by the plaintiff in support of its application for the default judgment did not disclose that it had already submitted this proof to the Administrator in the Mainland insolvency proceedings. The plaintiff also attempted to obtain more under the default judgment in the Hong Kong proceedings in the sum of US$192,311,736.11 (approximately equivalent to HK$1,494,612,714) with interest accrued at the rate of 22.20% per annum. The plaintiff had failed to make full and frank disclosure to Master Lai when it obtained the default judgment. Harris J in Nuoxi Capital Limited v Peking University Founder Group [2021] HKCFI 3817 after referring to Stichting Shell Pensionefonds v Krys [2014] UKPC 41 held at [32] that once a creditor submits to a foreign insolvency process, he cannot seek to improve on the amount he receives by way of dividend in the insolvency by taking separate proceedings in another jurisdiction. At [31], he held: ‘What the creditor cannot do is to attempt to use proceedings outside the foreign insolvency jurisdiction to achieve a result, which is inconsistent with that mandated by the foreign insolvency regime: as its most basis to try and obtain more than he would obtain if he proves in the insolvency proceedings’. Further or alternatively, by way of presenting its proof of debt in the project of Gaoyou Jinao in the insolvency proceeding in the Mainland, the debt has been discharged on the part of the defendants: Glass v Keogh [1867] VicWWABRp 85; (1867) 4 Wyatt W & A’B 189 (2 September 1967).

11.  Further, it cannot be seriously disputed that the Administrator’s written note is inherently probable which satisfies the third condition.

3)  Our view

12.  Gaoyou Jinao was briefly mentioned in the judgment below in respect of the defendants’ application to set aside the default judgment :

‘ 28.  The Default Judgment was regularly entered. To set aside a regular judgment, it is incumbent on [the Defendants] to show a manifestly arguable defence on merits apparent from the papers already before the court.

29.  [The Defendants] did not put forward any substantive defence against [the Plaintiff’s] claims. Instead, [the Defendants] only raised some peripheral attacks on [the Plaintiff’s] claims, namely that [the Plaintiff] failed to submit any proof of claims to two mainland companies [Yangzhou Ya Tai and Gaoyou Jinao] which went into liquidation.

30.  As submitted by Mr Chang, this is not a valid point. The two mainland companies are not borrowers in the Facility Agreement or Amended Facility Agreement but [corporate] guarantor. It is provided in the Facility Agreement that [the Plaintiff] does not have to proceed against any other person before going after [the Defendants] and [the Defendants’] liability would not be affected by any release of any other obligor or any insolvency or similar proceedings [Clauses 14.4 and 14.6].

31.  [The Defendants] have disclosed no valid defence in the evidence.’

13.  We are of the view that the three conditions of Ladd v Mashall are not satisfied. First, as the plaintiff submits, although the defendants seek to adduce five pieces of evidence, they just seek to prove one point – that the plaintiff had filed a proof of debt in the Mainland insolvency proceedings. But the plaintiff did so on 7 April 2024, months before the hearing before the Judge on 18 July 2024. There is no explanation as to why the defendants were unable to locate this piece of information earlier.

14.  The second condition is also not satisified. The Mainland insolvency proceedings do not concern the defendants at all. This is not a case where the plaintiff is participating in a foreign insolvency of one of the defendants and then seeks to recover the same debt in Hong Kong. Stichting and Glass are both concerned with the same company that was being sued and wound up. Further, in the present case, the plaintiff as a creditor has an unfettered choice as to how, and against whom, it should proceed to recover the debt: see Re Nam Ho Kwan [2022] HKCFI 3160 at [9].

15.  Accordingly, the application to adduce new evidence is refused.

IV.  Security for costs

1)  Principles on security for costs

16.  The legal principles regarding security for costs are set out in Chung Kau v Hong Kong Housing Authority [2004] 2 HKLRD 650 at [14], and more recently in T & T Global Trading Ltd v BOE (HK) Group Co Ltd [2022] 4 HKLRD 234 at [12] :

(1)  Under Order 59, rule 10(5) of RHC, 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. ‘Special circumstances’ include impecuniosity and difficulty or expense of enforcing an adverse costs order.

(2)  The burden is on the respondent of the appeal to demonstrate the appellant is impecunious.

(3)  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 that security for costs be provided. But once a case of impecuniosity or some other factor such as difficulty or expense in enforcing a costs order is demonstrated, it is generally up to the appellant to demonstrate countervailing factors militating against an order being made.

(4)  Whilst the burden of showing that the appellant is impecunious, or there are reasons to believe that the appellant is impecunious, rests upon the respondent, it is sufficient for the respondent to point to the surrounding circumstances or adduce some credible evidence in support of his belief that the appellant will be unable to pay the respondent’s costs. It is then up to the appellant to adduce such evidence as he thinks fit to demonstrate his means or to contradict the respondent’s evidence. The Court shall decide whether a reasonable person with ordinary experience of daily life would consider the appellant unable to pay such costs. The threshold is just one of adducing credible evidence for the belief and falls short of proof of lack of means to pay.

(5)  The overriding consideration remains to consider whether ‘special’ (not exceptional) circumstances exist making it ‘just’ to order security.

2)  The plaintiff’s reasons

17.  The plaintiff seeks security for HK$899,800 on the basis that the defendants in these appeals are 1) impecunious, 2) the defendants defaulted on two costs orders from the proceedings below in the sums of HK$400,050 and HK$97,479, 3) the defendants’ lack of assets in Hong Kong, 4) undue delay or substantial expense in enforcement of costs orders in the event of an unsuccessful appeal, as the defendants are foreign domiciled and 5) the defendants’ grounds of appeal are unmeritorious.

3)  Our view

18.  In our view, the plaintiff has discharged its burden of showing that the defendants are impecunious and there is reason to believe that the defendants will be unable to pay the plaintiff’s costs of the appeal if they fail in the appeal.

19.  The evidence shows that the defendants have not paid the plaintiff the two costs orders. The plaintiff has requested the defendants to provide details of their assets in Hong Kong, of which the defendants made no constructive response. The evidence shows that, in substance, all the five defendants have little connection with Hong Kong. We accept the plaintiff’s submission that the plaintiff is likely to encounter undue delay and incur significant expense in enforcing any costs order against the the defendants in their intended appeal. There are special circumstances justifying the granting of security for costs on appeal.

20.  The defendants’ evidence in opposition (as of June 2025) was that the 3^rd defendant has a Hong Kong permanent identity card and, therefore, has strong connection with Hong Kong. They referred to a Hong Kong listed company Keyne Ltd. It is said that the 4^th defendant is a substantial shareholder (via the 2^nd defendant) of Keyne Ltd and, therefore, he has sufficient assets to pay for security.  The shares are worth over HK$26 million.

21.  In our view, the evidence does not assist the defendants. The evidence shows that the shares of Keyne Ltd were suspended from trading. The latest evidence from the defendants showed that Keyne Ltd’s status has changed from being suspended to being delisted. In the 4^th defendant’s affirmation (at [4]‑[9]), the 4^th defendant states that although Keyne Ltd is now a private company, the 2^nd defendant holds 58.1% of its shares which in turn holds substantial shares in another company which is engaged in the business of technology and energy. The 4^th defendant states that Keyne Ltd as of late 2025 is a profitable company. The defendants submit that notwithstanding Keyne Ltd’s delisted status, it does not mean the defendants are not making profits. We are of the view that the updated evidence does not salvage the defendants’ position of being impecunious. Keyne Ltd is not a party to these proceedings. If the defendants are financially strong by reason of Keyne Ltd, one would have expected that the defendants would arrange for Keyne Ltd to pay off the costs orders. They have not done so. Further, even if the plaintiff is able to lay its hands on the shares of Keyne Ltd, which is now a private company, it would have difficulty in realizing them. Further, a winding‑up order has been made against the 1^st defendant in Hong Kong, which further exacerbates the defendants’ financial credibility.

22.  As for the 3^rd defendant having a Hong Kong permanent identity card, this does not mean he is domicile in Hong Kong. In fact, according to the affidavit of the defendants’ solicitor, Ms Lau Kim Ping Rebecca dated 23 April 2024 at [69], it is expressly stated ‘…save and except [the 1^st Defendant] is a Hong Kong company’, all parties in this [HCA Action] are not domiciled in Hong Kong’. According to the Annual Returns of the 1^st defendant, the 3^rd to 5^th defendants who are its directors, all have their addresses in Shanghai. This casts serious doubt on whether the 3^rd defendant truly has any meaningful connection with Hong Kong.

23.  There is sufficient evidence of impecuniosity to support the plaintiff’s application without the need for us to discuss the plaintiff’s further ground that the defendants’ appeal is unmeritorious. All that we need to say is that the merits of the appeal are not such that it will cause us to exercise our discretion against the granting of security.

24.  As to the amount of security, we are of the view that HK$899,800 is too high. The appeal is not complicated and essentially a rehash of the arguments that were made before the Judge. The appropriate amount of security on a party-to-party basis including counsel’s fee is HK$600,000.

V.  Conclusion

25.  Accordingly, we will make the following orders :

1)  The defendants’ summons for new evidence be dismissed;

2)  The defendants are to pay into court within 21 days the sum of HK$600,000 as security for the costs of this appeal;

3)  The appeal is stayed until the sum is paid;

4)  In default of payment and upon the plaintiff’s solicitor informing the Court of the default, the appeal is dismissed without further order together with costs to the plaintiff; and

5)  The plaintiff is to have the costs of the two summonses which are summarily assessed at HK$150,000.