成都圆中侨信商贸有限公司 v. LEUNG KA CHUN

CACV 467/2024, [2025] HKCA 1049

On Appeal From [2024] HKCFI 3042

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 467 OF 2024

(ON APPEAL FROM HCB NO 2617 OF 2024)

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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.  This is the Debtor’s application for leave to adduce new evidence in his appeal against a bankruptcy order made by Madam Justice Linda Chan on 14 October 2024, with Reasons for Judgment given on 28 October 2024 (“the Reasons”).

2.  Having considered the evidence and submissions before us, we consider that it is appropriate to deal with 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.  By a loan agreement (借款合同)  dated 1 September 2021 (“the Loan Agreement”), the Petitioner agreed to advance a loan of RMB 29,000,000 (“the Loan”)  to 廣州國藝匯影影視傳播有限公司 (“the Borrower”)  with interest at the rate of 10% per annum repayable within 12 months from the date of drawing down of the Loan.

4.  The Debtor was formerly a substantial shareholder of National Arts Entertainment and Culture Group Limited (國藝娛樂文化集團有限公司)  (in liquidation)  (“National Arts”), whose shares were previously listed on The Stock Exchange of Hong Kong Limited (Stock Code 8228).  According to the Debtor, Chow Kai Weng (“Mr Chow”)  was formerly the chairman and chief executive officer of National Arts.

5.  The Debtor together with Mr Chow were guarantors of the Borrower’s obligations under the Loan Agreement pursuant to a deed of guarantee dated 1 September 2021 (“the Guarantee”)  in favour of the Petitioner.  As will be seen below, the validity of the Guarantee is disputed by the Debtor in this action.

6.  On 2 September 2021, the Loan was drawn down. It became repayable on 1 September 2022.  The Borrower failed to repay the Loan or the interest thereon in full.  Neither did the Debtor pay the amount fallen due.

7.  On 24 July 2023, the Petitioner served a statutory demand dated 8 June 2023 (“Statutory Demand”)  on the Debtor by way of substituted service, demanding the Debtor to repay the aggregate sum of RMB 30,126,650.84 (consisting of the outstanding principal amount of the Loan together with interest thereon calculated up to 8 June 2023)  due under the Guarantee. 

8.  The Debtor failed to satisfy the Statutory Demand.

9.  On 17 April 2024, the Petitioner presented a bankruptcy petition (“the Petition”)  against the Debtor.

10.  On 12 June 2024, the solicitors for the Debtor filed a Notice to Act and a Notice of Intention to Oppose Petition (“the Notice”).  In the Notice, the Debtor did not identify any substantive ground in opposition to the Petition.

11.  With leave granted by the court on 13 August 2024, the Petition was amended and re-filed on 15 August 2024 (“the Amended Petition”). The amendments made to the Petition were mainly to rectify some typos and athematic errors in the Petition such that the aggregate sum which the Petitioner said was owed by the Debtor (as at 8 June 2023)  became RMB 30,102,650.84 (“the Debt”).  

12.  On 2 September 2024, the Debtor issued a summons to apply for security for costs from the Petitioner in the proceedings below.  The application was supported by an affirmation made by the Debtor’s solicitor.  On 8 October 2024, the Debtor filed his Affirmation (“Leung 1^st”)  in opposition to the Amended Petition.  The Debtor’s case as disclosed in Leung 1^st has been summarised by the Judge at §15 of the Reasons, as follows:

“In Leung 1^st, the Debtor asserts inter alia that:

(1)  In or about August 2021, he was approached by [Mr Chow], the chairman and chief executive officer of [National Arts], who represented that National Arts was seeking a loan of HK$30 million (‘Intended Loan’)  from HK Monkey Securities Limited (金猴證券有限公司)  (‘HK Monkey’)  and requested the Debtor to provide security for the Intended Loan by pledging his shares in National Arts.

(2)  Mr Chow reassured the Debtor that his potential loss would be limited to the shares pledged as security, and he would not be personally liable for any outstanding sum which might remain unpaid.

(3)  At the meeting held in late August 2021, Mr Chow and Ms Rainbow Chan (‘Ms Chan’), a responsible officer of HK Monkey, represented to the Debtor that he would be given several documents to sign to effect the provision of security for the Intended Loan. The Debtor was only presented with a number of signing pages and he signed on those pages.

(4)  Mr Chow and Ms Chan never mentioned that the Debtor would be a guarantor of the Intended Loan or that the signing pages were part of a guarantee for the Intended Loan.

(5)  On 1 September 2021, the Debtor transferred 1,403,400,000 shares in National Arts (‘Shares’)  from his margin account to an escrow account maintained by HK Monkey for the purpose of pledging those shares as security for the Intended Loan.

(6)  The Debtor only became aware he had signed on the Guarantee when the petition came to his notice.  He had no intention to create any legal relationship with the Petitioner and never consented to entering into the Guarantee.”

13.  In short, the Debtor contended that his liabilities in respect of the Loan were not personal but limited to the value of the Shares.

THE JUDGMENT

14.  At the hearing of the Amended Petition on 14 October 2024 (“the Oct Hearing”), the Judge dismissed the Debtor’s application for security for costs and made the usual bankruptcy order against the Debtor with costs to the Petitioner.

15.  In the Reasons, the Judge explained why she held that the Debtor had failed to discharge his burden of showing a bona fide dispute of the Debt on substantial grounds:

“[18] The Debtor admittedly signed the Guarantee and is bound by the terms thereof. Apart from his bare assertions, the Debtor has not been able to adduce any document, contemporaneous or otherwise, in support of the alleged representations or that he only agreed to provide the Shares as security for the Intended Loan. The first time the Debtor raised the assertions was in Leung 1^st, which was only filed 6 days before the hearing. No explanation has been proffered by the Debtor as to why he did not raise the assertions after the Petitioner had demanded for payment of [RMB30,126,650.84] or when he filed the Notice.

[19]  Further, the assertion that the Debtor had no intention to sign a guarantee is flatly contradicted by the fact that on the execution page, the words ‘Name of the Guarantor Leung Ka Chun’ appeared next to the Debtor’s signature.  At the bottom of the same page, there was a note which stated that ‘In the case where there are more than one Guarantor, the Guarantor may elect to sign on the same Guarantee or sign separate Guarantees’.”   

THE APPEAL

16.  In his Notice of Appeal filed on 8 November 2024, the Debtor raised 4 main grounds of appeal, which may be summarised as follows:

(1)  In holding that there was no contemporaneous evidence to support the Debtor’s case that he was misled by Mr Chow or Ms Chan into believing that he was only pledging the Shares as security for the Intended Loan, the Judge erred in failing to give any or sufficient weight to the transfer of the Shares from his margin account to the escrow account maintained by HK Monkey on 1 September 2021 (“Ground 1”).

(2)  In holding that the Debtor only raised his defence for the first time 6 days before the hearing of the Amended Petition, the Judge erred in failing to give any or sufficient weight to (i)  the fact that the gist of his defence had been set out in an affirmation of his solicitor dated 2 September 2024 in support of his application for security for costs, (ii)  the manner in which the Statutory Demand was served, and (iii)  the difficulty he encountered in obtaining the documents relating to the Petition from the Petitioner between 12 June 2024 and 27 August 2024 (“Ground 2”).

(3)  In holding that the assertion that the Debtor had no intention to sign a guarantee was contradicted by the references to “Guarantor” and “Guarantee” on the signing page of the Guarantee, the Judge erred in failing to give any or sufficient weight to the nature of a non-recourse guarantee under which there could be a limit on a guarantor’s liability (“Ground 3”).

(4)  By reasons of the Judge’s failure to give sufficient weight to the matters raised in Grounds 1 to 3 above, the Judge erred in failing to hold that there was at least a bona fide dispute on substantial grounds in respect of the Debt.  The Debtor was mistaken as to the fundamental terms of the Guarantee executed by him pursuant to a prior oral agreement, and the Guarantee was void or voidable and in any event unenforceable against him (“Ground 4”).

THE PRESENT APPLICATION

17.  By a summons filed on 20 May 2025 (“the Summons”), the Debtor seeks leave to adduce an affirmation of Mr Chow affirmed on 11 March 2025 (“the Chow Affirmation”)  as new evidence in support of his appeal.  The Chow Affirmation is produced as an exhibit to the 2^nd Affirmation of the Debtor filed on 20 May 2025 (“Leung 2^nd”).  In the Chow Affirmation, which consists of 21 paragraphs in 5 pages, Mr Chow stated the following:  

(1)  He is the Mr Chow referred to by the Debtor in Leung 1^st, and he opposes the Amended Petition (§§1-3).

(2)  In order to obtain the Intended Loan to be granted by an associated company of HK Monkey for the benefit of the National Arts group in Mainland China, he was requested by HK Monkey to provide securities which included, amongst others, a pledge of the Shares and a personal guarantee by himself but not the Debtor (§§4-10).

(3)  At a meeting with an unidentified staff member of HK Monkey (“the Staff”)  and the Debtor in a coffee shop in late August 2021, there were oral assurances and/or representations given or made by him and the Staff to the Debtor that the latter was required to provide security for the Intended Loan by creating a pledge of the Shares and to sign some documents to give effect to the share pledge arrangement only.  Neither he nor the Staff mentioned anything about the need for the Debtor to provide a personal guarantee (§11-15).

(4)  In the office of HK Monkey which he attended together with the Debtor after the meeting in the coffee shop, the Debtor was only handed a number of signing pages without receiving any explanation as to the documents the Debtor was asked to sign, the identity of the lender of the Intended Loan or the Debtor’s entitlement to seek independent legal advice prior to signing.  The Debtor was also not provided with copies of the documents signed by him.  At that time, he (Mr Chow)  did not object to those irregularities because National Arts would benefit from the pledging of the Shares by the Debtor and he trusted the Staff would handle the Debtor’s signing of the documents properly (§§16-19).

(5)  He believes that it has never been agreed that the Debtor should be a guarantor of the Loan (§§20-21).

DISCUSSION

18.  Generally speaking, the three conditions laid down in Ladd v Marshall [1954] 1 WLR 1489 must be satisfied before new evidence may be admitted in an appeal to the Court of Appeal:

(1)  The evidence could not have been obtained with reasonable diligence for use in the court below.

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

(3)  The evidence must be such as is presumably to be believed, or in other words, it must be apparently credible, though it need not be incontrovertible.

19.  We are not satisfied that the three Ladd v Marshall conditions are satisfied in the present case.  In respect of the 1^stLadd v Marshall condition, the Debtor says that the Chow Affirmation was not available to him prior to the Oct Hearing because (i)  the last batch of the documents relating to the Petition was only provided to him by the Petitioner’s solicitors on 27 August 2024, and he had only around one and a half months to collate evidence before that hearing, and (ii)  although he did approach Mr Chow in or about late August 2024 with a view to obtaining an affirmation from Mr Chow to support his case, he did not receive any “positive reply” from Mr Chow.  According to the Debtor, it was only subsequently, after he had lodged his appeal in November 2024, that he approached Mr Chow again and was told by Mr Chow that he did not give any positive reply earlier because “his mother was required to undergo a major heart surgery and he was occupied by legal proceedings where he himself was a party (including bankruptcy proceedings commenced by the [Petitioner] against [Mr Chow])”[1].  The Debtor also asserts that he did not seek an adjournment of the hearing before the Judge because “the Debtor had not obtained [Mr Chow]’s consent of becoming a witness before [the Oct Hearing] and it [was] unclear whether such consent would be successfully obtained in the future, naturally the Debtor was not in a position to seek for adjournment to obtain evidence”[2].

20.  Mr Felix Tang (on behalf of the Debtor)  submits that taking into account the “tight time frame” faced by the Debtor in preparing for the hearing and the lack of any positive reply from Mr Chow, the reasons for which only became known to the Debtor after the hearing, the Chow Affirmation could not have been obtained with reasonable diligence by the Debtor for use before the hearing.  He also submits that the Debtor acted reasonably in discharging the duty to obtain relevant evidence for the hearing by approaching Mr Chow as early as late August 2024, and it is impossible to ascertain at a post-hearing stage what a reasonably diligent debtor could have done more to obtain evidence from an intended witness who did not respond positively at the time of preparing for the hearing below.  He submits that the 1^stLadd v Marshall condition is satisfied.  

21.  We do not accept Mr Tang’s submission.  First, we do not consider the Debtor was under any “tight time frame” to collate evidence for his case in the proceedings below.  According to the Debtor, he had been legally represented since no later than 11 June 2024, and obtained a copy of the Petition on 12 June 2024, more than 4 months before the Oct Hearing.  His solicitors were provided with copies of the Loan Agreement and the Guarantee on 13 June 2024.  Although it was not until 27 August 2024 that the Debtor’s solicitors received all the requested documents, the last batch of the documents received by the Debtor’s solicitors consisted of only the drawdown and repayment records of the Loan.  The Petitioner’s case against the Debtor had been set out in the Petition with detailed calculation of the outstanding debt, and there had not been any substantial changes to the Petitioner’s case despite the subsequent amendments made to the Petition.  The Debtor’s case was a straight forward one.  If the Debtor genuinely thought that Mr Chow’s evidence was material to his case, he should have started to obtain evidence from Mr Chow once the grounds of the Petition and the material documents supporting the Petition were made available to him in June 2024. There is no acceptable explanation provided as to why he waited until late August 2024 to approach Mr Chow to collate evidence.  Even taking into account the time spent in relation to the Debtor’s application for security for costs below, we do not accept the Debtor’s contention that he and his legal team were facing an “extremely tight timetable” since late August 2024 in preparing for and presenting his case before the Judge at the Oct Hearing.

22.  Second, the Debtor’s explanation that despite his effort, the Chow Affirmation could not have been obtained for use in the hearing below is unsatisfactory.  The Debtor says that when he first approached Mr Chow in late August 2024, he did not receive any “positive reply”.  The Debtor has not given any details about his communication with Mr Chow, for example, whether he communicated with Mr Chow at a meeting, or over the phone, or by electronic means.  If he communicated with Mr Chow by electronic means, he has failed to produce any contemporaneous records of the relevant communication (eg WhatsApp messages, WeChat messages, emails, etc).  Moreover, the Debtor has not explained what he means when he says that he did not receive any “positive reply” from Mr Chow.  In particular, did Mr Chow give any response to his request, and if yes, what exactly did Mr Chow say?  The absence of a “positive” reply may mean that Mr Chow did not give any response at all, or that there was a response from Mr Chow but it was not a “positive” one from the point of view of the Debtor (in the sense that Mr Chow was unwilling or unable to make an affirmation to support the Debtor’s case, or had some difficult(ies)  in making an affirmation).  If Mr Chow gave no response to the Debtor’s request, did the Debtor take any further action to elicit a response from Mr Chow, and what was the outcome of the further action?  It is the duty of the Debtor to be forthcoming in disclosing fully his communication with Mr Chow.  It is not for the Court to speculate what response(s), if any, might have been given by Mr Chow. There are obvious gaps in the Debtor’s explanation, and those gaps are not filled by Mr Chow’s evidence.  Importantly, Mr Chow has not given any evidence which supports the Debtor’s explanation for his failure to produce relevant evidence from Mr Chow prior to the Oct Hearing in support of the Debtor’s case.

23.  As pointed out by Mr Ernest Ng, it was the Debtor’s position below that the evidence submitted to oppose the Amended Petition prior to the hearing already “firmly buttress[ed]” his case[3].  Indeed, in the Skeleton Submissions dated 10 October 2024 put before the Judge by the Debtor’s former counsel, the Debtor expressly invited the court “to dismiss the Amended Petition, with no further directions on filing of evidence”.  If the Debtor believed that the evidence of Mr Chow was important, he could have informed the Judge of the effort that he had made to obtain evidence from Mr Chow, and sought a short adjournment to try one last time to obtain the evidence.

24.  In short, we are not satisfied with the Debtor’s explanation that the proposed new evidence could not have been obtained with reasonable diligence for use in the court below.  The 1^stLadd v Marshall condition is not satisfied in the present case.

25.  Insofar as the 3^rdLadd v Marshall condition is concerned, Mr Chow’s evidence is similar to the evidence of the Debtor.  It consists of a series of bare assertions which are not supported by any contemporaneous documentary evidence.  It is significant that National Arts was at the material time a listed company, and apparently required a loan in the amount of RMB29,000,000 for use in the Mainland.  Having regard to the substantial amount of the loan, it is to be expected that, in the ordinary course of business, there would be some pre-contractual documents setting out or evidencing the commercial terms of the loan, including the securities required by the lender, as well as internal documents (including report(s)  and/or board minutes)  relevant to the loan transaction.  If there was some such documents in existence, Mr Chow could and should have produced them, or explained why they could not be produced.  He failed to do so.  If (contrary to ordinary expectation)  there was in fact no such documentation in existence, Mr Chow could and should have said so.  He did not.  Mr Chow has not explained what (if any)  consideration he had promised or paid to the Debtor for the latter’s agreement to pledge the Shares as security for the Loan.  Plainly, the consideration that had been promised or given to the Debtor would be relevant to an assessment of the extent of the obligations that the Debtor might be prepared to undertake in the transaction.  Mr Chow has also not explained why he did not give any “positive reply” to the Debtor’s request made in about late August 2024 for him to give evidence on behalf of the Debtor (if the Debtor’s evidence is to be believed), even though he now makes an affirmation “in opposition to” the Amended Petition.  The Debtor argues that the Petitioner has failed to identify why it considers the Chow Affirmation to be “clearly and not apparently credible”, and asserts that there is “simply no reason to doubt the credibility of [Mr Chow]”.  This argument puts the matter on its head.  The burden is on the Debtor to show that the proposed new evidence is apparently credible, not on the Petitioner to show that the proposed new evidence is apparently incredible.  In all, the 3^rdLadd v Marshall condition is not satisfied in the present case.

26.  Since we are not satisfied that the evidence contained in the Chow Affirmation is apparently credible, we do not consider that, even if the proposed new evidence is given or admitted, it would probably have an important influence on the result of the case.  In other words, the 2^ndLadd v Marshall condition is also not satisfied.

27.  Where the Ladd v Marshall conditions are not satisfied, the Court of Appeal still has a residual discretion to admit new evidence in exceptional circumstances.  Mr Tang submits that it is in the interest of justice and fairness for this Court to admit the Chow Affirmation because, if it is accepted, there would be consistent and corroborative evidence provided by another key witness to the Debtor’s case who was also involved personally in taking out the Loan.

28.  Effectively, Mr Tang is repeating his submissions made in respect of the Ladd v Marshall conditions, which we have already rejected.  We are far from being satisfied that there is any exceptional circumstance in the present case to justify the exercise of the Court’s residual discretion to admit the Chow Affirmation as new evidence on appeal.

DISPOSITION

29.  The Summons is dismissed with costs to the Petitioner, to be summarily assessed.  The Debtor shall have leave to file and serve a statement of objections (limited to 2 pages)  to the Petitioner’s statement of costs filed on 8 July 2025 within 14 days from the date of this judgment.  In view of the simple nature of the application, only the fee of one counsel would be allowed.

Mr Ernest Ng and Mr Raphael Leung, instructed by H. Y. Leung & Co. LLP, for the Petitioner

Mr Felix H. Y. Tang, instructed by Tung, Ng, Tse & Lam, for the Debtor

CACV 467/2024, [2025] HKCA 1052

On Appeal From [2024] HKCFI 3042

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 467 OF 2024

(ON APPEAL FROM HCB NO 2617 OF 2024)

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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.  This is the Petitioner’s application for security for costs of the Debtor’s appeal (“the Appeal”)  against a bankruptcy order made by Madam Justice Linda Chan on 14 October 2024.

2.  Having considered the evidence and submissions before us, we consider that it is appropriate to deal with 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.

THE APPLICATION

3.  The basic facts of this case, the Judge’s reasons for making the bankruptcy order against the Debtor, and the Debtor’s grounds of appeal have been summarised in another judgment of this Court handed down today on the Debtor’s application by summons dated 20 May 2025 (“the New Evidence Summons”)  for leave to adduce new evidence in his appeal ([2025] HKCA 1049), and will not be repeated here.  

4.  By a summons filed on 23 July 2025 (“the Summons”), the Petitioner applies for security for costs of the Appeal on the ground of the Debtor’s impecuniosity and/or difficulty or undue expense in enforcing any costs order in the Appeal.  The amount of the security sought, as set out in a skeleton bill of costs attached to H Y Leung & Co LLP’s letter of 2 July 2025 (“the Skeleton Bill of Costs”), comes to a total of HK$550,000, comprising the Petitioner’s estimated costs of (i)  the substantive appeal, (ii)  the Debtor’s new evidence application (iii)  the present application for security for costs, in the respective amounts of HK$278,000, HK$125,000 and HK$147,000.

5.  In opposing the present application, the Debtor contends that the Petitioner has not established his impecuniosity based on the available evidence.  He further contends that even if proved, his impecuniosity does not automatically lead to an order for security for costs in the present case where there are countervailing factors, namely, (i)  the strong merits of the Appeal, (ii)  the Petitioner’s unexplained delay in taking out the present application, (iii)  the risk of stifling the Appeal, and (iv)  the lack of breakdown of the quantum of the security sought.

DISCUSSION

6.  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.  The principles for the exercise of this jurisdiction are well settled.  For the present purpose, “special circumstances” include cases of insolvency or impecuniosity, and difficulty or expense in enforcing costs order. Nevertheless, even in such a case, 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, at §§59/10/26, 27 & 32).

7.  In the present case, it seems to us to be clear that the Debtor is impecunious, and/or there is a high likelihood that the Petitioner will face difficulty or delay in enforcing any costs order that may be made by the Court in its favour in the Appeal, for the following reasons:

(1)  the Debtor is an undischarged bankrupt;

(2)  in his 2^nd Affirmation filed on 20 May 2025 in support of his application for leave to adduce new evidence, the Debtor stated that since he had already been adjudged bankrupt, the issue of settlement of legal fees had become “more complicated”, and the legal fees incurred in relation to that application were in fact settled by his elder sister; and

(3)  in his 4^th Affirmation filed on 20 August 2025 in opposition to the present application, the Debtor stated that being a bankrupt, he would not have the financial ability to make payment into court of a six-digit figure within a short period of time.

8.  The Debtor has not stated what amount of security is within his means to provide.  Neither has he provided any information concerning his assets or financial means.

9.  The Petitioner has made out a case of special circumstances for seeking security for costs of the Appeal from the Debtor. The next question is whether there are any sufficient countervailing factors which would militate against an order of security for costs being made against him.

10.  In relation to the merits of the Appeal, this is not the occasion to examine in depth the grounds of appeal raised by the Debtor in his notice of appeal, which will have to be fully ventilated at the substantive hearing of the Appeal.  On a preliminary basis, we consider the Debtor’s grounds of appeal, even taking a view favourable to the Debtor, to be no more than arguable.  This is so even if we had granted leave to the Debtor to adduce the proposed new evidence in the Appeal.  As a matter of fact, we have refused leave.  In short, we do not consider that the merits of appeal operate in the Debtor’s favour in so far as the Petitioner’s application for security for costs is concerned.

11.  In relation to the issue of delay, the Debtor complains that the Petitioner only took out the present application 8 months after the Appeal was set down in November 2024 without providing any satisfactory explanation, and he has suffered prejudice as a result of the exceptional delay.  We do not consider the Debtor’s complaint of delay has any merit.  As pointed out in the recent judgment of 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 just 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.

12.  In the present case, the Debtor filed his Notice of Appeal on 8 November 2024 and Notice of Setting Down an Appeal on 12 November 2024.  After that, the Debtor did not take any further steps to prosecute the Appeal.  In fact, it was the Petitioner which took the initiative on 15 April 2025 to point out that the Debtor had taken no further action in the Appeal, and ask whether the Debtor would withdraw this appeal.  On 22 April 2025, the Debtor responded stating that he would not withdraw the appeal, and further informed the Petitioner that he would soon take out a summons to seek leave to adduce new evidence in the Appeal.  On 20 May 2025, the Debtor issued the New Evidence Summons.  In support of that summons, the Debtor filed his 2^nd Affirmation which, as earlier mentioned, disclosed the fact that the legal fees incurred in relation to that application were in fact settled by his elder sister, because the issue of settlement of legal fees had become “more complicated” since he had already been adjudged bankrupt.  It was in the light of that disclosure that on 5 June 2025, the Petitioner wrote to the Debtor asking for security for costs of the Appeal.  This was followed up by a further letter from the Petitioner on 13 June 2025 due to the absence of any reply from the Debtor.  On 18 June 2025, the Debtor finally responded stating that, in view of the fact that the outcome of the New Evidence Summons would have a significant impact on the merits of the Appeal, it would be “in the interests of the parties to withhold any security for costs application until the determination of [the New Evidence Summons]”.  On 2 July 2025, the Petitioner produced the Skeleton Bill of Costs to the Debtor.  On 9 July 2025, the Debtor stated that he would vigorously defend any application for security for costs.  As earlier mentioned, the Summons was issued on 23 July 2025.  Looking at the above chronology as a whole, we do not see that there has been any significant delay on the Petitioner’s part in making the present application.  In any event, even if there was some such delay, we do not consider the delay to be inexcusable in the circumstances of the present case.

13.  In relation to the issue of risk of stifling of the Appeal, as mentioned in Gurdas Sabhagchand Choithramani, ante, at §18, it is inherent in an order of security for costs made against an impecunious appellant that the order may operate to prevent the appellant from pursuing 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 the denial of justice to the appellant.  We do not consider this to be the position in the present case.

14.  Lastly, in relation to the complaint of lack of breakdown of the quantum of the security being sought, we have examined the Skeleton Bill of Costs, and consider that there is no merit in the Debtor’s complaint.  In an application for security for costs, the applicant’s duty is to provide details of the costs already incurred, and 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 (see Thapa Hari Bahadur v Paramount Engineering & Manpower & Anor[2022] HKCA 1516, at §40(3)).  The information provided in the Skeleton Bill of Costs is sufficiently detailed for this Court to be informed of the costs already incurred, and form a view as to the likely amount of the future costs to be incurred, by the Petitioner for the present purpose.

15.  There are two other points that we should deal with in relation to the Skeleton Bill of Costs.  First, the Debtor has sought to “expunge” the Skeleton Bill of Costs on the ground that it was marked “without prejudice” on its first page.  However, the letter which enclosed the Skeleton Bill of Costs dated 2 July 2025 was not so marked, and there was nothing in that letter which suggested that any privilege would be attached to the Skeleton Bill of Costs.  Mr Ng submits that the “without prejudice” label was mistakenly added to the first page of the Skeleton Bill of Costs.  We do not attach weight to this submission since it is not supported by evidence. However, having regard to the fact the relevant letters passing between the parties before and after 2 July 2025 were all open correspondence, we have no difficulty in coming to the conclusion that the “without prejudice” label on the first page of the Skeleton Bill of Costs was indeed a mistake and should be ignored.

16.  Second, we see no reason in principle why the Skeleton Bill of Costs could not cover the costs incurred/to be incurred in respect of the New Evidence Summons and the Summons.  There is no question of double recovery by the Petitioner as suggested by the Debtor, because the Petitioner has not been paid the costs of the New Evidence Summons or the Summons, and the money paid into court as security would merely stand as a source of fund from which the Petitioner may seek to recover those costs.

17.  As regards the quantum of the security, Mr Ng submits that it should be assessed on an indemnity basis for the following reasons: (i)  by analogy with the principle that indemnity costs are appropriate where a company unsuccessfully appeals from a winding-up order against it, because it is not just that any costs occasioned by an unsuccessful appeal from a winding-up order should be thrown upon the assets of the company to the prejudice of the creditors (Re China Silver Asset Management (Hong Kong)  Limited[2021] HKCA 376, at §10, citing Re SY Engineering Co Ltd, CACV 1896/2001 (unreported, 20 February 2002)), and (ii)  the Petitioner has a contractual right to indemnity of the costs against the Debtor under the Guarantee.  It should be noted, however, that the Court is not presently concerned with determining whether the Petitioner should be entitled to costs on an indemnity basis in the event that it should succeed in resisting the Appeal.  The Court is now dealing with an application for security for costs.  Generally speaking, it is not the practice of the court in fixing the quantum of security to give a full indemnity in respect of the likely costs that may be incurred by an applicant in the appeal, and the quantum of security should be premised on the estimated costs that would be allowed on taxation on a party-and-party basis. The court should seek to do practical justice to the applicant by awarding a reasonable amount as security (see TGL v SDC & Anor[2025] HKCA 229, §7; and Hong Kong Civil Procedure 2026, at §59/10/35A).  There is no inflexible rule that a petitioner must always be entitled to an order for indemnity costs in all cases where a company unsuccessfully appeals from a winding-up order against it (see Re Yeung Man[2024] HKCA 451, at §31(2)). Whether the Petitioner ought to be entitled to an order for indemnity costs in the present case will have to be fully argued at the substantive hearing of the Appeal.  The matters relied upon by Mr Ng are no doubt relevant considerations, but are by no means conclusive.  

18.  Having considered the Skelton Bill of Costs and adopting a broad brush approach, we fix the amount of the security for costs of the Appeal (including the costs of the New Evidence Summons and the Summons)  at HK$385,000.

DISPOSITION

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

(1)  The Debtor do pay into court the sum of HK$385,000 as security for the Petitioner’s costs of the Appeal within 35 days from the date of the order herein.

(2)  Until such payment into court be made and notice thereof given by the Debtor to the Registrar of Civil Appeals and to the solicitors for the Petitioner, all proceedings in the Appeal be stayed.

(3)  In default of making such payment into court within the time aforesaid, the Appeal, upon the solicitors for the Petitioner 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 Debtor to the Petitioner, such costs to be taxed if not agreed.

20.  Lastly, the Debtor shall pay the costs of the Petitioner in respect of the present application, to be summarily assessed.  The Debtor shall have leave to file and serve a statement of objections (limited to 2 pages)  to the Petitioner’s statement of costs filed on 2 October 2025 within 14 days from the date of this judgment.  In view of the simple nature of the application, only the fee of one counsel would be allowed.  Once assessed, the Petitioner shall have leave to apply for payment out from the sum paid into court pursuant to §19(1)  above in satisfaction of the assessed costs.

Mr Ernest Ng and Mr Raphael Leung, instructed by H. Y. Leung & Co. LLP, for the Petitioner

Mr Felix H. Y. Tang, instructed by Tung, Ng, Tse & Lam, for the Debtor