RE SUCCESS LANE DEVELOPMENT LTD

HCCW 3/2025

[2025] HKCFI 4808

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 3 OF 2025

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D E C I S I O N

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I.  INTRODUCTION

1.  For the reasons in §37 of the Reasons for Judgment I handed down on 18 March 2025 ([2025] HKCFI 1121), I ordered Ms Yung to be joined to the proceedings for the purpose of costs only.

II.  SERVICE OF PETITIONER’S WRITTEN SUBMISSIONS

2.  Before I substantively deal with the costs issue, I have to deal with the service of the Petitioner’s written submissions first. Ms Yung alleges that there has no proper service of the Petitioner’s written submissions, and so the application for costs against her personally shall be dismissed for non-compliance.

3.  Pursuant to my directions made on 17 March 2025, on 23 July 2025, the Petitioner filed written submissions. Further, according to the Petitioner’s solicitors’ letter dated 23 July 2025 issued to Ms Yung on 21^st Floor, CMA Building (“Ms Yung’s Correspondence Address”), a clerk of the Petitioner’s solicitors attended Ms Yung’s Correspondence Address attempted to serve the written submissions and other relevant documents (the “Documents”) at the table of Ms Yung’s Correspondence Address but the receptionist there refused to accept the same and to stamp a receipt chop. The clerk then left the Documents at Ms Yung’s Correspondence Address.

4.  On the very same day, that is, 23 July 2025, Ms Yung wrote a letter that in an earlier letter dated 12 February 2025, she had already written:-

“Effective immediately [from 12 February 2025], without a clear understanding of the document in question, we are unable to stamp the ‘receipt chop’ on any letter requesting confirmation of document service. You are required to allow our staff to take a copy of your record for our reference. Without being allowed to record the delivery, we will not stamp the receipt chop. Any documents attempted to be served without providing proper records will not be accepted and returned.”

5.  Ms Yung requested a copy of the record from the server because, according to her letter dated 12 February 2025 sent to the Petitioner’s solicitors:-

“… we were asked to stamp the ‘receipt chop’ on your record; however, your colleague refused to provide us with a copy of the document in question.

This raises serious doubt about your true intentions in ensuring the correct and proper documents are served to us. We cannot rule out the possibility that attempts have been repeatedly made to cause confusion regarding which documents have actually been served.”

6.  From the above, I make the following observations:-

(1)  Ms Yung has never disputed that Ms Yung’s Correspondence Address would be effective for receiving documents for her attention. What she said was that she would refuse to stamp a receipt chop if her staff would not be allowed to take a copy of the “record”.

(2)  Any suggestion that there was any “possibility that attempts have been repeatedly made to cause confusion regarding which documents have actually been served” is baseless. I reject the same as such because first, it is a serious allegation against solicitors that they would deliberately set a trap for the receiver of legal documents to stamp a receipt chop on some other documents; and second, I find no reason why any solicitors firm would do so, and at the very least, I find no reason why the Petitioner’s solicitors would do so. To do so would serve no good purpose to the Petitioner or the Petitioner’s solicitors. Indeed, Ms Yung has no evidence to suggest why the Petitioner or its solicitors would like to do so.

(3)  Service of the written submissions does not require personal service. As a matter of law, under Order 65 rule 5(1) of the Rules of the High Court, service of the written submissions can be effected by leaving the submissions at the proper address of the person to be served. Here, the only dispute is that Ms Yung’s staff could not take a copy of the document for stamping the receipt chop. As said, there is no dispute that Ms Yung’s Correspondence Address would be effective for receiving documents for her attention. There is no dispute that the Documents were left at Ms Yung’s Correspondence Address.

(4)  Based on the above, it is my finding that the service of the Documents, including the Petitioner’s written submission, was duly effected on 23 July 2025 and brought to Ms Yung’s attention. That would be sufficient. Whether Ms Yung would like to stamp a chop and/or open the Documents to read them would be a matter for Ms Yung, but this would have no impact at all on the due service of the Documents in accordance with Order 65 rule 5 of the Rules of the High Court.

7.  On 11 August 2025, Ms Yung wrote a letter to the Court alleging that:-

(1)  She did not receive the Petitioner’s written submissions on 23 July 2025. She had written on 23 July 2025 to the Petitioner’s solicitors for proper service.

(2)  On 24 July 2025, she emailed the Petitioner for delivery of the written submissions, but there was no reply.

(3)  On 29 July 2025, the Petitioner’s solicitors delivered some other documents to Ms Yung’s Correspondence Address, which Ms Yung accepted, but not the written submissions.

(4)  Ms Yung applied to the Court to (a) record that the Petitioner had not properly served its written submissions by 23 July 2025; (b) the Petitioner’s application for personal costs against her be dismissed for non-compliance with the Court’s directions; (c) costs thrown away; and (d) costs of the Petitioner’s non-compliance.

8.  It is trite that the Court does not entertain applications made by way of letter. Ms Yung must have been well versed with this rule. At least for my part, in my dealing with various proceedings involving Ms Yung as a litigant-in-person, I have time and again replied to her letters purportedly making applications to the Court by stating categorically that the Court does not entertain applications by way of letter. Be that as it may, to save time and costs, and to give a last chance to Ms Yung given that the costs order would be a costs order against her personally, with great reluctance, I still dealt with her application on paper, giving the following directions on 13 August 2025:-

“In respect of Ms Yung’s letter dated 11 August 2025, the Court makes the following directions:-

1. Despite the Court’s Order on 17 March 2025, the time for Ms Yung to file and serve her skeleton submissions on personal costs against her be extended until 15 September 2025.

2. There shall be no order on Ms Yung’s application by the said letter to dismiss the Petitioner’s application/opposition for non-compliance with the Court’s directions dated 17 March 2025 be dismissed.

3. The Court shall not entertain any further applications by way of letter. Any applications shall be taken out properly by way of summons supported by affidavit evidence.”

9.  No written submissions were received from Ms Yung even as at today. Instead, on 15 September 2025, the extended deadline for her to file written submissions, she filed a Summons returnable before a Master on 12 November 2025 for the same order she sought in her letter of 11 August 2025 as set out in §7(4) above. Further, on 30 September 2025, she wrote to (1) my clerk; (2) the judge in charge of the Companies Court; and (3) High Court Registry, referring to her telephone conversation with my clerk in the afternoon of 30 September 2025 and alleging that my clerk confirmed to her that the Petitioner did not file and serve its written submissions on 23 July 2025.

10.  While I shall not deal with the Summons here and hopefully my Decision here will be helpful to the Master seized of the Summons, I must state categorically that it was impossible for my clerk to confirm with her that no written submissions were served on her. It was also impossible for my clerk, any staff from the Registry, or the Court to confirm over telephone that certain documents had or had not been served, because service of documents is done by the opposite party but not the Court. As regards filing of the written submissions, from my directions given on 13 August 2025, there was no way for any understanding that the Petitioner had not filed or lodged its written submissions, and in any event, it was for Ms Yung as a party to the proceedings to inspect the court file on her own under Order 63 of the Rules of the High Court and thus it was also impossible for my clerk to confirm to her over the telephone that the written submissions had or had not been filed or lodged, when Ms Yung had (and has) the right to inspect the court files on her own and if necessary, seek leave to inspect any lodged documents. Further and in any event, it is highly inappropriate for any person, whether legally represented or not, to telephone a court clerk to discuss any substantive matter. It is also highly inappropriate for any litigant-in-person to abuse his or her position of not being legally represented to time and again telephone a court clerk to make enquiry. The Court, including any staff of the Court, is not a legal adviser to any party (legally represented or not), and has to act, both actually and apparently, as a neutral umpire. In the present case, a substantive matter in dispute clearly was, well to Ms Yung’s knowledge, whether the Petitioner’s written submissions had been served. Her telephone call to my clerk was highly inappropriate and deplorable. She has no excuse as a litigant-in-person, especially when she has been experienced in various legal proceedings.

11.  Having considered that the Petitioner’s written submissions were duly served on Ms Yung on 23 July 2025, and having received no submissions as directed by my directions on 13 August 2025, I can only take that Ms Yung has chosen not to file any written submissions. On this basis, Ms Yung’s Summons and her telephone call to my clerk are, in my view, an attempt to delay the matter, an attempt to which I should not accede.

III.  MS YUNG’S WRITTEN SUBMISSIONS ON 9 OCTOBER 2025

12.  Just the day before I was to hand down my Decision today, on 9 October 2025, Ms Yung (finally) delivered her written submissions to the Court, making the following submissions:-

(1)  Repeating her stance that the Petitioner has failed to comply with my directions to serve its written submissions on her;

(2)  In giving my directions on 13 August 2025, the Court confirmed that Ms Yung raised the issue of service, but the Petitioner still failed to effect service;

(3)  The Petitioner’s submissions were not found in the Court file;

(4)  The Petitioner’s solicitors have committed irregular and/or improper conduct;

(5)  Ms Yung has kept informing the Court that the Petitioner has failed to serve its written submissions; and

(6)  This Court should withhold handing down Decision on today (10 October 2025) pending the determination of the Summons filed on 15 September 2025 mentioned above.

13.  I shall deal with each of them in turn:-

(1)  In respect of (1), I have dealt with this in §6 above.

(2)  In respect of (2), while there is no doubt that Ms Yung raised the issue of service, it does not follow that there was no effective service, and I repeat §6 above.

(3)  In respect of (3), the Petitioner’s written submissions were lodged with the Court. I repeat §10 above.

(4)  In respect of (4), the alleged irregularities or misconduct were those referred to and dealt with by Anthony Chan J (as he then was) in his Decision of 31 July 2025 ([2025] HKCFI 3409). It has been dealt with by his Lordship and is irrelevant to the present matter before me.

(5)  In respect of (5), I would only say that Ms Yung’s continuous contact with the Court by way of letters is highly undesirable. Leave was given for her to file and serve written submissions, and she should not circumvent such directions by sending letters to the Court.

(6)  In respect of (6), I see no reason why I should withhold handing down the present Decision, especially when Ms Yung has finally made substantive submissions in §§24-29 of her written submissions on why no personal costs order should be made against her.

14.  In particular, from §§24-28 of her written submissions, she responds to the Petitioner’s affirmation dated 9 July 2025, and in §29(a) – (j), she makes submissions on why no personal costs order should be made against her. In deliberating the present Decision, although Ms Yung written submissions were filed very late and well out of time, I still consider them.

15.  Therefore, I now proceed to consider the application of personal costs against Ms Yung below.

IV.  PERSONAL COSTS AGAINST MS YUNG

16.  The legal principles on costs against directors are well-established, summarised in Hong Kong Civil Procedure 2025 Volume 1 §62/6A/16. I only need to highlight that the key issues are (1) whether the action is bona fide pursued; and (2) whether the director is the “real party”.

17.  First, I repeat my observations in §37 of the said Reasons for Judgment.

18.  Second, Ms Yung would benefit personally from opposing the Petition, because the Company was pursuing DCCJ 2192/2023, an action for return of the belonging from the Petitioner including Ms Yung’s own personal belonging. In this regard, I do not accept Ms Yung’s evidence that she would not benefit from the proceedings.

19.  Third, Ms Yung was the director authorised to conduct DCCJ 2191/2023, a related action DCCJ 7537/2024 and the Petition herein. She is the real party.

20.  Fourth, Ms Yung’s opposition (on behalf of the Company) to the Petition was unmeritorious. In this regard, I cannot accept her evidence that she only conducted the proceedings upon the Company’s decisions or instructions. On the evidence, she has not been able to point out anyone else who made decisions for the Company. She was the one who made decisions on behalf of the Company. Essentially, she was carrying out her own decisions.

21.  Fifth, Ms Yung says that she acted upon legal advice of the Company’s lawyers including Senior Counsel’s advice. However, she has not explained what advice she relied upon in deciding to oppose the Petition. Although legal advice is legally privileged, it is trite that if one would like to rely on the contents of the legal advice for a relevant issue, she would have to waive the privilege and set out the relevant contents of the advice. She cannot rely on the contents of legal advice and hide behind legal privilege at the same time. In any event, as the matter has transpired, if her conduct of the proceedings on behalf of the Company were really based upon legal advice, this would still not detract from the fact that the proceedings were conducted on behalf of the Company without merits and for her benefit, and still as between Ms Yung, the Company and the Petitioner, I would still maintain the view that despite such advice, the conduct of the proceedings was still not in good faith, as I do not think that Ms Yung can simply hide behind any legal advice and that the consequence of any advice should be visited upon by the Company or the Petitioner in the present circumstances.

22.  There are other minute and repetitive submissions as well as submissions apparently concerning other proceedings made in Ms Yung’s written submissions. It is not necessary to set them all out here. Suffice to say that I have considered them all.

V.  CONCLUSION

23.  Having considered the above, I think it is appropriate to order costs against Ms Yung personally. For the costs of the Petition, I summarily assessed it at HK$300,000 and for the costs of the present costs proceedings, I summarily assessed at HK$40,000.

Mr Hadrian Leung, of Y. T. Chan & Co, for the Petitioner

Ms Jessie Yung appeared in person

HCCW 3/2025

[2025] HKCFI 3409

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 3 OF 2025

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DECISION

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1.  By a Notice of Appeal filed on 11 June 2025, Ms Yung Mei Chun Jessie, who had been joined as a party to these proceedings for the purpose of costs, appeals against the costs order of Master M Lam dated 28 May 2025 by which the costs of Ms Yung’s Summons filed on 6 May 2025, summarily assessed at HK$20,000, was awarded against her.

2.  Since this is a costs only appeal, the court must be satisfied that the costs order is unreasonable or the Master erred in law before it will allow the appeal: see Hong Kong Civil Procedure2025, vol 1, [58/1/6].

3.  I first set out the relevant procedural chronology. On 17 March 2025, a winding up order was made against the Company (Success Lane Development Ltd). By another order of the same date, Ms Yung, who was at all material times a director of the Company, was joined as a party to the proceedings for the purpose of costs, and she was granted leave to file evidence to explain why she should not bear costs personally.

4.  On 7 April 2025, the deadline for Ms Yung to file her evidence, she filed a Summons seeking an extension of 28 days to do so. On 14 April 2025, the Company filed a Notice of Appeal against the winding up order as well as the joinder order.

5.  On 23 April 2025, Master M Leung made an order extending the time for Ms Yung to file her evidence to 6 May 2025, as well as ordering that any further time extension application will be “visited by an unless order with a short period of extension”.

6.  By her Summons filed on 6 May 2025 (the extended deadline for filing her evidence), Ms Yung sought to (a) stay the filing of her evidence pending the final determination of the Company’s appeal; and (b) an extension, if necessary, of 28 days pending the final determination of (a).

7.  On 27 May 2025, the day before the return date of the 6 May 2025 Summons, a Notice to Act was filed by Ms Yung’s solicitors. In the morning of 28 May 2025 (at around 10:30am), a speaking note and authorities of Ms Yung’s counsel was served on the Petitioner’s solicitors.

8.  The hearing before Master M Lam on 28 May 2025 was contentious. The Petitioner was represented by solicitors and Ms Yung was represented by counsel. Having rejected Ms Yung’s case, an order was made by the learned Master for her to file of her evidence by 4pm on 18 June 2025, failing which she shall be deemed to have elected not to oppose the costs order against her personally and be debarred from filing any evidence in that regard.

9.  After considering the statement of costs of the Petitioner, by way of summary assessment costs in the sum of HK$20,000 (reduced from HK$25,728 claimed in the statement of costs) was ordered against Ms Yung in favour of the Petitioner.

10.  In respect of the grounds relied upon for this appeal. Ms Yung submitted that, firstly, the Petitioner’s solicitors had made false statements to the court at the hearing on 28 May 2025, namely, (a) a personal costs order had been made against her on 17 March 2025; and (b) no appeal had been lodged by her against the personal costs order. Secondly, the time costs claimed in the Petitioner’s statement of costs were inflated.

11.  Before dealing with these grounds, I remind myself of the following dicta of the Court of Appeal in Success Lane Development Ltd v Ferguson Hong Kong Ltd, [2024] HKCA 926, [15] :

“…There is a large measure of discretion left to the court conducting the summary assessment, using a broad brush rather than carrying out a mini-taxation. The Court of Appeal will not interfere with the quantum of assessment unless there is something that strikes one as clearly outside the wide range of acceptable outcomes. The judge heard the arguments and saw the written evidence filed below and accordingly has a distinct advantage over this court in deciding whether there were costs that were unreasonable or unreasonably [incurred[1]]…”

12.  In respect of the first ground, Mr Leung, who appeared for the Petitioner, accepted that he had made an error that a personal costs order had been made against Ms Yung. However, it appears to this court that it was an obvious error which, most probably, was innocently made. The reason being that the issue before the court below was whether Ms Yung should be granted a stay or an extension of time for filing her evidence on why she should not bear costs personally. Plainly, the costs order had yet to be determined. I disagree with Ms Yung that the Master was misled by the error because he granted an extension of time to Ms Yung for filing her evidence (on unless basis).

13.  As regards the lack of appeal on Ms Yung’s part, it is strictly speaking correct. The appeal on foot is that of the Company, albeit that the joinder order is part of the appeal. In any case, the appeal was brought to the notice of the court on 28 May 2025, and I am unable to see how the alleged erroneous statement was relevant to the decision below on costs. It was simply a case where Ms Yung failed on both of the relief sought under her Summons and she had to bear the costs of it which was summarily assessed.

14.  The allegation of overstating the time costs is based on the premise that the Petitioner had only 4 hours to prepare for the hearing on 28 May 2025 because the speaking note of Ms Yung’s counsel was only served on the petitioner at 10:30am for a hearing which took place at 14:30pm. It is clearly a misconception given that Ms Yung’s Summons was filed on 6 May 2025, and there is no reason to doubt that the Petitioner’s solicitors had prepared for the hearing prior to 28 May 2025.

15.  I find no merit with either of the two grounds. In any case, I see no legitimate reason to interfere with the summary assessment of the Master by which the claimed costs had been reduced by over 22%.

16.  Accordingly, this appeal is dismissed with costs to the Petitioner, which are summarily assessed at HK$20,000.

Mr H Y Leung, of Y.T. Chan & Co., for the Petitioner

The former director of the Company appeared in person

HCCW 3/2025

[2025] HKCFI 1121

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) PROCEEDINGS NO 3 OF 2025

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REASONS FOR JUDGMENT

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I.  INTRODUCTION

1.  Having considered counsel’s submissions, the main crux of which was on whether a cross-claim based on Success Lane Development Limited (the “Company”)’s ongoing legal proceedings claiming for damages against the Petitioner could be raised to resist the latter’s winding up petition presented herein on 3 January 2025 (the “Petition”) based on payable costs orders made in interlocutory applications in the Petitioner’s favour against the Company in the same ongoing proceedings, at the end of the hearing on 17 March 2025, I made a usual winding up order against the Company. I also ordered that the Company’s director Ms Yung Mei Chun Jessie (“Ms Yung”) be joined to these proceedings for the purpose of costs only. These are the reasons for my judgment.

II.  BACKGROUND

2.  The Petitioner operates a hotel named New World Millennium Hong Kong Hotel (the “Hotel”). The Petitioner and the Company entered into a “Long Stay Room Contract” (the “Long Stay Contract”) whereby the Company would rent a hotel room of the Petitioner for storage of various items (the “Stored Items”) 12 April 2022 to 11 July 2022. Based on the alleged breach of the contract as well as other causes of action, the Company (as plaintiff) commenced DCCJ 2191/2023 against the Petitioner (as defendant) claiming for damages, the value of which is said to be at least HK$3,000,000.

3.  I do not need to go into the details of the factual matrix here. Suffice to say that the Company made or opposed various applications in the District Court which resulted in various costs orders against it (the “Costs Orders”) all payable forthwith in the sum of HK$697,534.66 with judgment interest at judgment rates.

4.  The Costs Orders are either orders not appealed against, or orders against which leave to appeal has been refused by the Court of Appeal (in [2024] HKCA 839 and [2024] HKCA 926).

5.  On 24 October 2024, the Petitioner served the Statutory Demand in respect of the judgment debts under the Costs Order (the “Judgment Debts”) and the interest thereon (the “Judgment Interest”). As at the date of the Statutory Demand, the Judgment Debts together with the Judgment Interest amounted to HK$734,667.58 (collectively, the “Judgment Sum”). As none of the Judgment Debts has been paid, the Judgment Interest continued to accrue since 25 October 2024.

6.  One would have thought that after the Court of Appeal’s refusal to grant leave to appeal, the Company would have to accept that it had to comply with the Costs Orders, which are court orders. However, not only the Company still failed to comply with the court orders, but shortly after the expiry of the Statutory Demand, on 20 December 2024, the Company commenced DCCJ 7537/2024 seeking relief to set aside, among others, the Costs Orders. The basis for seeking such relief was that in those applications where the Costs Orders were awarded, the Petitioner failed or had failed to make full and frank disclosure to the Court that the Long Stay Contract was tainted by illegality and thus any of the Court’s rulings on the Petitioner’s Counterclaim for lien in favour of the Petitioner against the Company (based on the validity and enforceability of the Long Stay Contract), as well as any Costs Orders based on such rulings, was wrong.

7.  Equipped with DCCJ 7537/2024, the Company applied in DCCJ 2191/2023 for a stay of, inter alia, the Costs Orders (allegedly) urgently, so urgently that the Company issued the application in the afternoon of 31 December 2024 and insisted on having a hearing the next working day, that is, 2 January 2025. The ground of the alleged urgency was that without the stay, the Petitioner would, based on the Costs Orders, present a winding up petition.

8.  That stay application was dismissed on 2 January 2025 after the hearing: see [2025] HKDC 17. The Company filed a summons in DCCJ 2191/2023 on 16 January 2025 for leave to appeal against the dismissal. The parties shall file and serve written submissions in the coming weeks, and the Court has directed that the decision will be handed down on 10 April 2025. There is no further application for any order to stay the Costs Orders.

9.  There being no stay of the Costs Orders and the Statutory Demand having expired, the Petitioner presented the Petition herein pursuant to sections 177(1)(f) and 178(1)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap 32).

III.  SET-ASIDE GROUND

10.  The first ground raised by the Company in its affirmation, namely, Affirmation of Ms Yung, in opposition to the Petition is that the Costs Orders are liable to be set aside for the reasons set out in DCCJ 7537/2024. These reasons were also essentially the very same reasons raised in the dismissed application to stay the Costs Orders at the hearing on 2 January 2025 in DCCJ 2191/2023 mentioned above.

11.  I note that Mr Alvin Cheung, counsel for the Company, rightly in my view, does not make any submissions on this ground, though the Company did not abandon this ground. In any event, I reject this ground for the following reasons:-

(1)  For the reasons explained in §§11-16 of [2025] HKDC 17, DCCJ 7537/2024 is unmeritorious, so unmeritorious that the Court refused to stay the Costs Orders.

(2)  Although the Company is applying for leave to appeal against that decision and the Court has yet to hand down its decision on the leave application, on the materials before me now, I see no real prospects of success of the intended appeal. First, the decision was a discretionary decision, and the threshold for a successful appeal against discretion is high; second, on the materials before me now (including the draft notice of appeal for the application for leave to appeal), I fail to see any error in relation to the discussion in the decision on the substantive merits of DCCJ 7537/2024.

(3)  In any event, as Mr Cedric Yeung, counsel for the Petitioner, submitted, even if the Company would succeed in DCCJ 7537/2024, only those Costs Orders relating to the Counterclaim would be set aside, because, as mentioned above, the full and frank disclosure, even on the Company’s case, went to the Counterclaim only. Therefore, as summarised in Annex to Mr Yeung’s Skeleton Submissions, at least HK$113,457.04 would remain extant. This is sufficient to wind up the Company: see Excellent Asia (BVI) Ltd v Mas Media Group Ltd[2021] HKCFI 3605 at §2.

IV.  CROSS-CLAIM GROUND

12.  The second ground in opposition raised by the Company, being the focus of the counsel’s submissions, is that its claim for damages in DCCJ 2192/2023 would amount to at least HK$3,000,000 and this constitutes a defence of set-off or cross-claim to resist the Petition based on the Costs Orders. For convenience, I shall refer to the claim in the ongoing proceedings as the main claim.

13.  At the outset, to put the matter in context, I should make it clear that the Costs Orders here are costs order for interlocutory applications. Such costs orders after Civil Justice Reform are almost invariably made payable forthwith or within 14 days upon summary assessment by virtue of Order 62 rule 9B. Further, the cross-claim or set-off raised by the Company is one based on the ongoing main claim, which the Company would have yet to prove at trial.

14.  Mr Yeung (for the Petitioner) relies on Bio-Chem Technology (HK) Ltd v Rich Leaf International (HK) Ltd [2019] 2 HKLRD 1087 at §§13-14 per ST Poon J and submits that a party is not permitted to set off costs orders payable forthwith against the subject claim even in the same action. At §14, his Lordship said:-

“In my view, it would be an abuse of process to allow the plaintiff to do this as otherwise a party who failed in an interlocutory application and is liable to pay costs forthwith would be required to pay the actual amount by merely pleading that the costs be set off from part of his claim or counterclaim. This cannot be right.”

15.  For my part, I would not go so far as to say that reliance on the main claim as a cross-claim against a claim or a winding up petition based on costs orders is always abusive. Whether there is an abuse depends on the facts of the particular case. That said, that it is not necessarily an abuse does not mean that a cross-claim would constitute a good ground to resist a winding up petition based on such costs orders.

16.  Mr Cheung (for the Company) goes so far as to submit that Bio-Chem “implicitly and wrongly assumes that there is no other recourse against the Company other than by a winding up petition” and that “ample methods of enforcement for non-compliance with costs orders” are available. However, Mr Chueng was unable to tell me what other means would be available in the present circumstances, for example, whether the Company has property of sufficient value for a charging order or cash in bank account sufficient for a garnishee order. He fairly accepted that there is no such evidence. In any event, the Petitioner is entitled to seek immediate payment of the Judgment Sum: see Re Wintac (Hong Kong) Ltd[2023] HKCFI 2323 at §15(3) per Linda Chan J, and is perfectly entitled to present the Petition: see Shandong Chenming Paper Holdings Ltd v Arjowiggins HKK 2 Ltd (2022) 25 HKCFAR 98 at §34 per Fok and Lam PJJ (delivering the unanimous judgment). It is unnecessary to exhaust other means before a winding up petition can be presented.

17.  As regards whether an ongoing main claim could constitute a cross-claim against costs orders, Mr Cheung relies on Discreet Ltd v Wing Bo Building Construction Co Ltd, HCCW 49/2017, 14 November 2017 at §§2-3 ,6-9, 13 and 17 and Zebra Industries (Orogenesis Nova) Ltd v Wah Tong Paper Products Group Ltd, HCMP 436/2013, 27 October 2014 at §11 as examples where the Court did not question the validity of the respective company’s reliance on the main claim as a cross-claim to resist a winding up petition based on payable costs orders arising out of the main claim.

18.  I note, however, that in the two decisions relied upon by Mr Cheung, no issue was actually taken on whether a cross-claim based on the main claim could resist a winding up petition based on such costs orders. Therefore, I do not think those two decisions gave Mr Cheung any mileage.

19.  I have no qualm that a claim based on a costs order payable forthwith, or payable within 14 days by virtue of Order 62 rule 9B upon summary assessment, could constitute a cross-claim: see Popely v Popely [2004] EWCA Civ 463 at §§113-114, and similarly, a main claim could constitute a cross-claim in a petition based on such costs orders. However, Popely v Popely is not a case on how the Court should exercise its jurisdiction in relation to a cross-claim based main action in a winding up (or bankruptcy) petition based on such costs orders.

20.  In my view, the legal principles in relation to a winding up petition based on cheques and cross-claims based on separate matters, set out by Linda Chan J in §§32-41 of Re Silver Base International Co Ltd[2022] HKCFI 1793, are enlightening in respect of a winding up petition based on such payable interlocutory costs orders. In that case, having taken through various Hong Kong and English authorities, her Ladyship confirmed the following approach set out in §§32-33 of the judgment:-

“32… as a matter of principle, the Company’s cross-claim is no answer to its liability on the Cheque for the following reasons:-

(1) A cheque, being a bill of exchange, is a separate contract from the underlying transaction. An unliquidated cross-claim under the underlying agreement is no defence to an action on the bill, and it is to be treated as equivalent of cash generally…

(2) The Companies Court consistently held that the failure on the part of the company to pay the amount due under a cheque was a sufficient ground to wind up the company; and a cross-claim for unliquidated damages does not constitute a valid ground in opposition to a winding up petition;

(a) In Golden City Electronic Industries Company Ltd v PCR Electronics Manufacturing Ltd [1996] 2 HKLR 257, Rogers J (as he then was) held that in accordance with the standard O.14 rules, the petitioner is entitled to payment on that cheque and any counterclaim by the respondent should be dealt with separately. Where there is no legitimate dispute on the debt, ‘a winding up petition is a perfectly proper remedy for enforcing payment of a just debt’…

(b) In Re Kwong Yuen Construction Co Ltd, HCCW 336/2001, 22 June 2001, §30, Kwan J (as she then was) held that a cheque is a separate contract and oral evidence to qualify the nature or tenor of the cheque is inadmissible (§25). Even if the company is able to establish its cross-claim to some extent, ‘a free-standing cross-claim would not have constituted a reason why the petitioner should not be paid on the cheques. If there are valid cross-claims against the petitioner, they may still be pursued by the company in liquidation’. There are no exceptional circumstances for the court to grant a stay of execution of judgment on the cheques, pending determination of the cross-claim (§30).

(c) Recently this court in Re EUREKA Manufacturing Company Ltd[2020] HKCFI 2032 considered the principles governing a bill of exchange and held that the cheque constituted a contract separate from the underlying contract of sale and purchase of goods; and the burden is on the company to displace the presumption that there was unconditional delivery of the cheque and total failure of consideration for the cheque (§§33-39). As the amount represented by the cheque exceeded the statutory minimum, and the cheque was referred to in the statutory demand and the petition, the failure to pay the amount represented by the cheque was sufficient for the court to make a winding up order against the company (§§46-47).” (emphasis added)

21.  In relation to a cross-claim based on separate matters, her Ladyship had the following to say at §41 of her judgment:-

“41. In any event, I do not consider that the mere fact that the Company ash a cross-claim for unliquidated damages against P arising out of a separate contract is a valid ground for refusing to repay the Deposit.

(1) In many of the cases in which the court has to consider whether the company has a serious cross-claim, the claim arose out of the same contract which gave rise to the petition debt. One can see that it would be unjust or inequitableto allow the petitioner to seek a winding up order against the company when the company has a serious cross-claim against the petitioner under the same contract. However, it seems to me that the same consideration does not apply, at any rate with the same force, when the cross-claim arose out of separate contract and has nothing to do with the debt in question.

(2) In Re Hongkong Bai Yuan International Business Co., Ltd [2002] HKCFI 960, §40, I held that even if the company has a serious cross-claim against the petitioner for breach of other contracts.. it does not provide a valid basis for the company not to pay the petitioning debt admittedly owed to the petitioner pursuant to the subject contracts… until after determination of the company’s cross-claim. There are 2 reasons for this: (a) it would be tantamount to conferring a right on the company to retain the petitioner’s money as a security for the company’s cross-claim; and (b) the cross-claim arose out of different contracts and had nothing to do with the contract which gave rise to the debt.” (emphasis added)

22.  Thus, the ultimate question is one posed by her Ladyship in Re Silver Base International Co Ltd at §41(1), namely, whether it would be “unjust or inequitable to allow the petitioner to seek a winding up order against the company”.

23.  In my view, to answer this question, the approach adopted towards petitions based on cheques and cross-claims on separate matters, as applied in Re Silver Base International Co Ltd, should be adopted towards petitions based on such costs orders, for the following reasons.

24.  The underlying policy of costs payable upon summary assessment has been set out by Lord Phillips in a Law Society Civil Litigation Conference held in England on 24 January 2002, adopted in §27(b) of Section 2 of the Civil Justice Reform – Final Report:-

“There was a fear that the new rules would lead to a proliferation of interlocutory in-fighting. This fear has not been realised. I believe that this is largely attributable to what has been described as a ‘pay as you go’ system of awarding costs. Under CPR 44 the court is required to make a summary assessment of costs on giving judgment on an interlocutory application and those costs had to be paid within 14 days. In the old days interlocutory costs orders would not normally have to be paid until conclusion of the litigation. The fear of having to call upon one’s client to write a cheque for costs incurred in an interlocutory skirmish must be a powerful disincentive to interlocutory proceedings unless success seems certain. The reduction of interlocutory in-fighting and, in particular, of interlocutory appeals is one of the major success stories of the Woolf reforms.” (emphasis added)

25.  In order to ensure that this purpose of discouraging unmeritorious interlocutory skirmishes would be achieved, the Court has strictly to keep the distinction between “costs in any event” and “costs payable forthwith” or “costs payable upon 14 days” for interlocutory applications. To keep such distinction, how the Court would allow such costs orders to be enforced is key. For this, it is important, in my view, that as a general rule, like cheques and separate claims, the Court should regard such costs orders as free-standing, and though such costs orders are not equivalent of cash, it should be as readily enforceable almost as readily cash-able as cheques. Further, to achieve this purpose, such costs orders, though made in the same proceedings, should be regarded as separate matters from the main claim in the same proceedings.

26.  There would be no injustice done to the company, because if the company would have a valid claim, the company in liquidation could still pursue it. This also addresses Mr Cheung (for the Company)’s submissions that if the Company would be wound up, then another objective under the Civil Justice Reform to resolve disputes in accordance with the parties’ substantive rights would be defeated. If the claim is valuable and worth pursuing, the liquidators would continue the claim in the interest of the Company. In any event, in my view, I do not see how requesting or demanding a paying party to pay costs under costs orders would compromise the paying party’s rights – it could just pay and proceed to trial.

27.  On the contrary, it would be unjust if the company could rely on the main claim as a cross-claim based on the main claim to resist a winding up order based on such costs orders, because:-

(1)  It would in effect confer a right on the company to retain the petitioner’s money as a security for its main claim;

(2)  It would be contrary to the purpose of such costs orders under Civil Justice Reform; and

(3)  Such costs orders, being free-standing and supposed to be readily enforceable, would have nothing to do with the main claim, in the sense that even if the company wins the main claim at the end, the company will still have to pay the costs orders.

28.  Therefore, while I would not go so far as to say that a cross-claim or set-off based on main claim would necessarily be abusive (depending on the circumstances of the particular case), the Court’s general approach toward a cross-claim based the main claim should be that such a cross-claim is not sufficient to resist a winding up petition on such costs orders, payable forthwith or within 14 days upon summary assessment for interlocutory applications.

29.  In the present case, I see no reason to depart from this general approach. Therefore, I do not need to examine the merits of the main claim, and reject this second ground in opposition to the Petition.

30.  It remains for me to emphasise that my view above is reached in the present context, namely, that the petition is based on costs orders payable forthwith or payable within 14 days upon summary assessment in interlocutory applications and a cross-claim is raised based on a claim for damages in an ongoing legal proceedings. It seems that there may be different considerations where the legal proceedings are not ongoing but finally concluded (and the receiving party may be to blame for not enforcing any immediately payable costs orders earlier), or where the situation is reversed, that is, the petition is based on the main claim and a cross-claim is based on such costs order. However, this is not an appropriate occasion to for me to express any view here on such scenarios.

31.  For the sake of completeness, the above is based on the assumption that the Company’s main claim has substance. In gist, the Company’s claim is based on the Petitioner’s damage of the Stored Items. However, although the Company started its action in DCCJ 2191/2023 back in mid-2023, the Company still has not provided any particulars of the Stored Items, despite the Court Order therein made on 27 March 2024 that the Company had, in essence, to provide such particulars by way of discovery, and there is, of course, not yet any evidence on the value of such Stored Items. On 13 March 2025, an Unless Order was made therein for the Company to make such discovery next week or so, but it is incumbent on the Company to present sufficient evidence before the Companies Court to resist the winding up petition, rather than asking this Court to wait until the Company’s compliance with the Unless Order in the other case. On the materials presented before me, I was not satisfied that the Company has raised any cross-claim of substance. Therefore, even assuming that a cross-claim based on the main claim, as a matter of law, could constitute a good ground for resisting the petition, the Company’s cross-claim could not.

V.  ABUSE OF PROCESS

32.  The last ground raised by the Company is abuse of process. With the Company’s other grounds rejected above, I see no abuse here. I reiterate that the Petitioner is entitled to seek immediate payment of the Judgment Sums: see Re Wintac (Hong Kong) Ltd, supra at §15(3), and is perfectly entitled to present the Petition: see Shandong Chenming Paper Holdings Ltd v Arjowiggins HKK 2 Ltd, supra at §34.

33.  I reject this ground as well.

VI.  LATE UNDERTAKINGS

34.  It remains for me to say that during the hearing, for the first time, the Company offered a solicitors’ undertaking to pay the Judgment Sums within a short period of time. After taking instructions, Mr Yeung (for the Petitioner) rejected the proposal during the hearing. Immediately after rejection, Mr Cheung then said that it was his instructions that the period for payment for the undertaking could be shortened to the end of the same day. Mr Yeung, of course, rejected it.

35.  I would think that the Court would be very cautious against accepting undertakings made in manner. I would not accept such undertakings in the present case.

VII.  COSTS AGAINST MS YUNG

36.  For the above reasons, the Company’s opposition was totally unmeritorious. I found it appropriate to wind up the Company.

37.  Also, I found it appropriate to join Ms Yung to the proceedings for the purpose of costs only for the following reasons:-

(1)  The Company’s opposition was totally unmeritorious.

(2)  Ms Yung has been the Company’s director responsible for or handling the litigation in DCCJ 2191/2023. She must have known that there is no merit in setting aside the Costs Orders.

(3)  Ms Yung still makes the affirmation in opposition in the present proceedings, spending a very substantial part regurgitating the Company’s unmeritorious grounds for setting aside the Costs Orders.

(4)  It would be unfair for the Company and its creditors to bear the costs of such unmeritorious opposition apparently orchestrated by Ms Yung: see Re Tianji Holding Ltd[2025] HKCFI 765 at §§1 and 36; Re Carnival Group International Holdings Ltd[2022] HKCFI 2668 at §§30-31.

(5)  The Court of Appeal has reminded the plaintiff twice (in [2024] HKCA 839 at §64 and [2024] HKCA 926 at §34) of the Court’s power to order costs against the Company’s directors, after characterising the Company’s applications there as “wholly unmeritorious”, “pointless”, “baseless” and “indiscriminate”: see [2024] HKCA 839 at §64.

VIII.  CONCLUSION

38.  In the circumstances, I saw fit to make a usual winding up order at the end of the hearing. I also saw fit to order that Ms Yung be joined to the present proceedings, with directions for filing affirmations and submissions for disposal on paper.

39.  I thank Mr Yeung and Mr Cheung for their assistance.

Mr Cedric Yeung, instructed by Y. T. Chan & Co., for the Petitioner

Mr Alvin Cheung, instructed by H. Y. Leung & Co. LLP, for the Company

Ms Rebecca Leung, of the Official Receiver