CACV542/2021 RE STANLEY CHANG t/a HONG KONG INSTECH TRADING CO - LawHero
CACV542/2021
上訴法庭（民事）Yuen and Au JJA5/9/2023[2023] HKCA 1029
CACV542/2021
A A
B B
CACV 542/2021
[2023] HKCA 1029
C C
IN THE HIGH COURT OF THE
D D
HONG KONG SPECIAL ADMINISTRATIVE REGION
E COURT OF APPEAL E
CIVIL APPEAL NO 542 OF 2021
F F
(ON APPEAL FROM HCB NO 1454 OF 2015)
__________________
G G
H RE: STANLEY CHANG (張鴻元) TRADING Debtor H
AS HONG INSTECH TRADING CO.
I I
JOTRON AS (formerly known as JOTRON Applicant
ELECTRONICS AS)
J J
MAT NG AND JOHN LEES JOINT AND Respondent
K SEVERAL TRUSTEES OF THE K
PROPERTY OF CHANG STANLEY
L L
__________________
M M
and
N HCA 2428/2019 N
IN THE HIGH COURT OF THE
O O
HONG KONG SPECIAL ADMINISTRATIVE REGION
P
COURT OF FIRST INSTANCE
P
ACTION NO 2428 OF 2019
Q __________________ Q
R BETWEEN R
CHANG STANLEY (張鴻元) 1st Plaintiff
S S
nd
CHEUNG WAI MING (張惠明) 2 Plaintiff
T T
CHEONG PAK IOK (張白玉) 3rd Plaintiff
U U
V V
A -2- A
B and B
C MAT NG JOINT AND SEVERAL Defendant C
TRUSTEES OF THE PROPERTY OF
CHANG STANLEY
D D
__________________
E E
F Before: Hon Yuen and Au JJA in Court F
Dates of Written Submissions: 9 November 2022 and 7 December 2022
G G
Date of Judgment: 6 September 2023
H H
________________________
I I
JUDGMENT
J ________________________ J
K
Hon Yuen JA (giving the Judgment of the Court): K
L 1. This is an application for security for costs of L
CACV542/2021. On 12 November 2021, Recorder William Wong SC
M M
(“the Recorder”) gave a decision (“the Decision”) in HCB1454/2015 and
N HCA2428/2019. N
O O
2. On 3 December 2021, Chang Stanley 張鴻元 (“Mr Chang”)
P trading as Hong Kong Instech Trading Company filed a Notice of Appeal P
against the Decision. The Notice of Appeal was served on Jotron AS
Q Q
(“Jotron”) and on Mat Ng (“Mr Ng”) and John Lees (“Mr Lees”), the
R Joint and Several Trustees of Mr Chang’s property (“the Trustees”). R
S S
3. On 28 October 2022, Jotron filed a summons for an order that
T Mr Chang provide security for costs of the appeal. This was supported by T
an affirmation of its solicitor Cheng Ka Lee Cathy (“Ms Cheng”) filed on
U U
V V
A -3- A
B 28 October 2022 (“Ms Cheng’s 2022 affirmation”). Mr Chang did not B
file any evidence in opposition.
C C
D 4. On 22 September 2022, Jotron’s solicitors had filed an appeal D
bundle (“Appl B”) and on 8 December 2022, they filed an application
E E
bundle (“AB”) for the summons for security for costs.
F F
5. Both parties have filed skeleton submissions for the
G G
application, which we have considered. As the background is quite
H
complex, it would be helpful to set out a brief narrative. H
I Background I
J Judgment debts (4 Costs Orders emanating from HCA378/2010) J
K K
6.1. In DCCJ3369/2009, Jotron sued Mr Chang for the price of
L goods sold and delivered. Judgment on admission was entered on that L
claim, but Mr Chang filed a counterclaim against Jotron for libel. The
M M
action was transferred to the High Court as HCA378/2010.
N N
6.2. On 19 February 2014, G Lam J (as he then was) handed down
O judgment in HCA378/20101. Mr Chang’s counterclaim was dismissed O
with an order nisi that he pay a part of Jotron’s costs2. The costs came up
P P
to nearly $1.8 million (“the 1 Costs Order”).
3 st
Q Q
7. Mr Chang’s intended appeal from this judgment led to two
R R
other costs orders against him, one summarily assessed at $30,0004 (“the
S S
1
AB p.274.
T T
2
G Lam J’s Judgment, §93.
3
AB p.187.
U U
4
AB p.190.
V V
A -4- A
B 2nd Costs Order”), and the other summarily assessed at just short of B
$55,0005 (“the 3rd Costs Order”).
C C
D 8. Jotron then took out charging order proceedings against D
Mr Chang in respect of a property which he owned as joint tenant. On
E E
10 December 2014, a master made a charging order absolute, with costs to
F be paid by Mr Chang, assessed at $7,0006 (“the 4th Costs Order”). F
G G
Bankruptcy Order (HCB1454/2015)
H H
9.1. As Mr Chang failed to pay the 4 Costs Orders, Jotron
I commenced bankruptcy proceedings against him in HCB1454/20157. I
J J
9.2. On 29 July 2015, a master made a bankruptcy order 8. On
K 13 November 2015, the Trustees were appointed Joint and Several K
Trustees of his property with immediate effect9. Three creditors submitted
L L
proofs of debt, viz. Jotron, Orix Asia Ltd (“Orix”) and the Inland Revenue
M Department (“IRD”)10. On 23 June 2021 Jotron submitted an amended M
proof of debt to include interest 11. On the basis of the amended proof of
N N
debt, Jotron holds 91% of the total indebtedness12.
O O
10. Meanwhile, on 11 July 2016, the charged property was sold
P
by the Trustees and the joint owner. Mr Chang’s share of the proceeds P
Q Q
5
AB p.193.
6
R AB p.196. R
7
AB p.182.
8
S AB p.175. S
9
AB p.178.
10
T App B p.92. This is disputed by Mr Chang, see §30.1 below. T
11
It would appear that at first the Trustees did not respond to this amended proof: see Ms Cheng’s
2021 affirmation §12.
U U
12
The Decision §1, and see §30.1 below.
V V
A -5- A
B amounted to $1.113 million, so (according to Jotron’s amended proof of B
debt) he remained indebted to it in the sum of about $980,00013, as well as
C C
to Orix and IRD.
D D
The Property
E E
F
11.1. On 10 April 2018 (before his discharge from bankruptcy), F
Mr Chang became the owner of a flat (“the Property”) in a Housing
G G
Authority (“HA”) estate.
H H
11.2. The original purchaser of the Property was Mr Chang’s
I mother (“the Mother”) who had died on 25 June 201014 without I
completing the purchase.
J J
K 11.3. Some 7 years later, Letters of Administration to the Mother’s K
estate were granted to Mr Chang on 9 August 201715.
L L
11.4. By a letter dated 15 March 201816, the HA instructed WK To
M M
& Co to serve a final notice on the administrator of the Mother’s estate
N (Mr Chang) to complete the purchase, failing which the sale and purchase N
would be terminated and the intention money would be forfeited.
O O
P 11.5. In a letter dated 28 March 2018 to the District Tenancy P
Management Office17, WK To & Co stated:
Q Q
“We write to inform you that all beneficiaries of the estate of the
R [Mother], being [Mr Chang], Zhang Xiaoli (張小莉), Cheong R
Pak Iok (張白玉), Zhang Jingang (張金鋼) and Zhang Hongbo
S S
13
AB p.224.
14
AB p.342.
T T
15
AB p.341.
16
AB p.208.
U U
17
AB p.338.
V V
A -6- A
B (張 洪 波), the lawful and natural sons and daughters of the B
[Mother], have executed a Deed of Family Arrangement
C [“DFA”]18 on 28 March 2018 whereby the said Zhang Xiaoli C
(張小莉), Cheong Pak Iok (張白玉), Zhang Jingang (張金鋼)
and Zhang Hongbo (張 洪 波) respectively disclaimed their
D interest of and in the Property and they all agreed that ... our D
client [Mr Chang] be entitled to and shall have all the estate,
E right, title, benefit and interest of and in the Property absolutely. E
In the premises, [Mr Chang] is the only person entitled to
acquire and take up the assignment of the Property from the [HA]
F and his capacity to take up the assignment of the Property is F
established.
G G
We are further instructed to inform you that our client
[Mr Chang] will be able to complete the purchase of the property
H on 10 April 2018”. (Emphasis added). H
I The balance of purchase price for the Property (excluding interest) was I
$291,700.
J J
11.6. Mr Chang was assigned the Property on 10 April 2018
K K
(before his discharge from bankruptcy).
L L
Section 43A BO
M M
12. Pausing here, s.43A Bankruptcy Ordinance Cap. 6 (“BO”)
N N
provides (where material) as follows:
O O
“43A. After-acquired property
P P
(1) Subject to this section, the trustee may by notice in writing
claim for the bankrupt’s estate any property which has
Q been acquired by, or has devolved upon, the bankrupt Q
since the commencement of the bankruptcy.
R ... R
(3) ... upon the service on the bankrupt of a notice under this
S S
section the property to which the notice relates shall vest
in the trustee as part of the bankrupt’s estate; and the
T trustee’s title to that property has relation back to the time T
U U
18
No copy has been provided: see Ms Cheng’s 2022 affirmation §17.
V V
A -7- A
B at which the property was acquired by, or devolved upon, B
the bankrupt.
C C
...
D (6) For the purposes of this section, an undischarged bankrupt D
shall submit to the trustee on each anniversary of the
making of the bankruptcy order against him, a statement
E of his earnings during the preceding year and details of E
any property he acquired during that period.
F F
(7) A bankrupt who fails or refuses to comply with subsection
(6) is guilty of an offence and is liable to imprisonment
G for 6 months. G
(8) The court may refuse to discharge a bankrupt who has not
H complied with subsection (6)”. (Emphasis added). H
I Trustees’ claim for the Property I
J J
13.1. In January 2019 (before his discharge from bankruptcy),
K
Mr Chang applied for a loan from a finance company offering the Property K
as security. When the finance company did a bankruptcy search on
L L
Mr Chang, they contacted the Trustees19.
M M
13.2. Accordingly, on 9 January 2019, the Trustees wrote to
N Mr Chang20: N
O (a) informing him that they regarded the Property as after- O
acquired property under s.43A BO;
P P
(b) demanding that he provide the title deeds and other relevant
Q Q
documents of the Property, information relating to (among
R other things) the source of funds for the purchase, and deliver R
up vacant possession thereof; and
S S
T
(c) requesting an interview with him. T
19
Ms Cheng’s affirmation filed on 24 June 2021 (“Ms Cheng’s 2021 affirmation”) §4.
U U
20
AB p.322.
V V
A -8- A
B 13.3. In the letter, the Trustees also warned Mr Chang that B
C (d) they would consider taking legal action to take possession of C
the Property;
D D
E
(e) they would report his conduct to the Official Receiver who E
would take action against him; and
F F
(f) they would consider objecting to discharge of his bankruptcy
G G
upon the expiry of the 4-year period under s.30A(1) BO.
H H
13.4. At a meeting on 28 January 2019, Mr Chang provided the
I title deeds of the Property to the Trustees. I
J J
13.5. Subsequently, one Cheung Wai Ming 張惠明 (“CWM”),
K Mr Chang’s aunt, signed a declaration dated 11 March 201921 which was K
provided to the Trustees. In this declaration, she alleged that:
L L
- the Property was purchased with her funds;
M M
- the title deeds were in Mr Chang’s name primarily because of
N N
a judgment of the High Court of Hong Kong22 that the
O Property had to be purchased in his name; O
P - as she provided the purchase price, the beneficial interest in P
the Property belonged to her.
Q Q
R 14. Notwithstanding the Trustees’ indication that they would R
consider objecting to discharge of bankruptcy, Mr Chang was
S S
T T
21
AB p.396.
U U
22
Not identified.
V V
A -9- A
B automatically discharged from bankruptcy on 29 July 201923. Prior to this, B
the Trustees had already in January 2019 served the s.43A BO notice on
C C
him on the ground that the Property had been acquired by or devolved upon
D D
him before discharge.
E E
15. On 17 September 2019, Mr Chang filed a joint affirmation24
F (“the Joint affirmation”) in the bankruptcy proceedings together with F
CWM and Cheong Pak Iok (“CPI”) one of his siblings. In the Joint
G G
affirmation, the following was alleged:
H H
- on 18 March 2018, Mr Chang received from WK To & Co a
I letter25 indicating that the High Court had “agreed” to I
Mr Chang purchasing the Property, which purchase the HA
J J
stipulated had to be completed by 9 April 2018;
K K
- Mr Chang was unable to purchase the Property as he had not
L been discharged from bankruptcy, and he asked his siblings L
CPI and Zhang Hongbo (“ZHB”), who lived in Zhuhai, for
M M
assistance;
N N
- as CPI and her husband considered that the Property was the
O “last property that Mr Chang owned”26 and he would have O
P
nowhere else to live, CPI and her husband decided to P
mortgage their property in Macau to pay the purchase price of
Q Q
about $450,00027 for the property;
R R
23
S This is acknowledged by the Trustees: see §17(b) of the Defence & Counterclaim in HCA2428/2019 S
referred to below.
24
AB p.203.
T T
25
AB p.208.
26
Joint affirmation, §2.
U U
27
The balance of purchase price ($291,700) together with interest thereon: AB p.336.
V V
A - 10 - A
B - however, as the mortgage process would take time, ZHB B
C
obtained a loan from his friend Cheung Fai Ming (張輝明); C
D - on 20 March 2018, Cheung Fai Ming transferred D
RMB400,000 to ZHB, who converted the sum into HKD in
E E
tranches for transfer to CPI;
F F
- as CPI was a resident of Macau and could not open a bank
G account in Hong Kong, she brought $450,000 in tranches in G
cash to CWM, who deposited it into her Hong Kong bank
H H
account between 27 March 2018 and 6 April 2018;
I I
- on 9 April 2018, CWM paid the sum of $450,520 to the HA
J by way of a cashier order drawn on her Hong Kong bank J
account;
K K
- on 11 April 201828, a bank in Macau approved a mortgage
L L
loan to CPI and her husband; on 8 May 2018, CPI and her
M husband received a sum of $700,000 by way of the mortgage M
loan; and on 16 May 2018, CPI and her husband withdrew
N N
$500,000 which they brought in tranches in cash to Zhuhai for
O conversion into RMB for ZHB to repay the sum of O
RMB400,000 to Cheung Fai Ming.
P P
Q 16. On 19 December 2019, DHCJ MK Liu heard Mr Chang’s Q
application29 to reverse the Trustees’ decision. The deputy judge
R R
considered that as there were factual disputes which may require live
S evidence, it was appropriate for writ proceedings to be commenced. S
T T
28
AB p.210.
U U
29
Presumably taken to have been made under s.83 BO.
V V
A - 11 - A
B HCA2428/2019 B
C C
17.1. Accordingly, on 31 December 2019, Mr Chang, CWM and
D CPI commenced HCA2428/2019 against Mr Ng D
E (1) objecting to the Trustees’ sale of the Property; E
F (2) requesting the Trustees to return the title deeds for the F
Property, and
G G
(3) demanding costs for each plaintiff in the sum of $20,000.
H H
I Mr Lees was not made a party. I
J 17.2. The Statement of Claim (“SOC”) contained allegations more J
or less similar to the Joint affirmation, with these additional allegations:
K K
- at a meeting in July 2015, Mr Chang had mentioned to (among
L L
others) Ms Chan Bo Mei from the OR’s Office that he was
M applying to purchase the Property, that Ms Chan had said that M
if the High Court agreed with his application, he would only
N N
need to inform the OR’s Office, and as long as he did not pay
O for the Property himself, the OR’s Office would not stop him O
acquiring it (§16 SOC);
P P
Q
- Mr Chang had thought: Q
R
- the bankruptcy period would expire in July 2018; R
S
- the purchase process would take a few months to S
complete and would only be finalized after July 2018;
T T
U U
V V
A - 12 - A
B - the High Court judge30 who had given the judgment31 B
agreeing to his purchase would have been aware of his
C C
bankruptcy and had taken into account the “few months”
D D
needed to finalize the purchase process, such that by
E
that time, he would have been discharged from E
bankruptcy (§§16 - 17);
F F
- on 28 January 2019, Ms Heidi Li of Ernst & Young
G G
Transactions Ltd, a representative of the Trustees, had
H
requested a declaration from CWM that she (CWM) was the H
beneficial owner of the Property, and informed Mr Chang that
I I
unless he obtained an order from the High Court to that effect,
J the Trustees would sell the Property to repay his debts (§20); J
K - on 26 June 2019, he was informed that unless he provided K
documents showing he had made an application to the High
L L
Court, the Trustees would sell the Property to repay his debts
M (§21). M
N 17.3. The relief sought included an order that as the purchase price N
for the Property came from CWM’s bank account, she was the beneficial
O O
32
owner thereof during the period of his bankruptcy (§22(2)) .
P P
18. Mr Ng filed his Defence and Counterclaim in person on
Q Q
10 March 2020, in which he pleaded (among other things) that:
R R
S S
30
Unidentified in the SOC.
T 31 T
No case number or date of judgment was identified in the SOC.
32
It would appear that a summons was filed on 19 October 2021 to amend the SOC, which was dealt
U with by Master Dick Ho on 28 October 2021, and the plaintiffs appealed the master’s order. The U
appeal before K Yeung J was adjourned pending determination of CACV542/2021.
V V
A - 13 - A
B - Mr Chang had admitted in the SOC that the Property “is the B
last asset he [possesses]” (§6(b));
C C
- the Property was an after-acquired property within s.43A BO,
D D
for which the Trustees had served notice on Mr Chang in
E E
January 2019 (§6(c));
F F
- if Mr Chang had borrowed money from CPI during his
G
bankruptcy period, it was not provable in the original G
bankruptcy under s.34 BO (§8(d)); and
H H
- as CWM merely acted as a channel for the funds for the
I I
purchase, Mr Chang was the owner of the Property (§8(f)).
J J
Mr Ng counterclaimed for an order that Mr Chang deliver vacant
K possession of the Property to the Trustees so that they would realise the K
Property for the benefit of the creditors.
L L
M 19. In July 2020, the Trustees contacted Jotron asking if it would M
be interested in funding the litigation (HCA2428/2019)33.
N N
20. On 17 March 2021, Mr Ng sent a circular to the creditors
O O
copied to Mr Chang, stating that he has tendered his resignation and would
P P
be leaving his then firm on 31 March 2021.
Q Q
21. On 7 June 2021, the Trustees reported to the court in a letter
R (copied to Jotron and Mr Chang) that as there were no funds in the R
bankruptcy estate to engage solicitors to handle HCA2428/2019, they
S S
T T
U U
33
Ms Cheng’s 2022 affirmation §8.
V V
A - 14 - A
B proposed to settle the case with Mr Chang by returning the title deeds to B
Mr Chang and not proceeding with the Defence and Counterclaim34.
C C
D Jotron’s summons under s.83 BO D
E
22.1. As Jotron did not agree with the Trustees’ proposed course E
F
of action, it issued a summons on 16 June 2021 under s.83 BO (which F
provides that if, among others, any creditor is aggrieved by any act or
G G
decision of the trustee in bankruptcy, it may apply to the court which may,
H
among other things, reverse the act or decision and make such other order H
in the premises as it thinks just).
I I
22.2. The summons sought an order allowing the Trustees to assign
J J
to Jotron their cause of action under s.43A BO and/or as pleaded in the
K Defence and Counterclaim in HCA2428/2019. Ms Cheng’s 2021 K
affirmation was filed in support.
L L
M 23.1. The matter was first heard by the Recorder on 30 June 2021. M
Jotron, the Trustees and Mr Chang appeared.
N N
23.2. The matter was heard by the Recorder again on 25 August
O O
35
2021. Mr Chang provided written submissions dated 22 August 2021 .
P P
The Recorder adjourned the matter but directed that a fresh summons be
Q
prepared. On 3 September 2021, Jotron’s solicitors prepared a fresh Q
36
summons in HCA2428/2019 under Order 15 rule 6 RHC , as well as in
R R
the bankruptcy proceedings under s.83 BO37.
S S
34
Ms Cheng’s 2021 affirmation, §7.
T T
35
Appl B p.168.
36
Appl B p.173.
U U
37
Appl B p.179.
V V
A - 15 - A
B 23.3. The matter was then dealt with by way of written submissions. B
Mr Chang provided written submissions on 18 September 202138.
C C
D The Recorder’s Decision D
E E
24.1. On 12 November 2021, the Recorder handed down his
F
Decision which was in both HCA2428/2019 as well as the bankruptcy F
proceedings. Since the Recorder referred to Jotron as holding 91% of the
G G
total indebtedness (§1), (a) the amended proof of debt must have been
H
accepted by the Trustees, and (b) the Recorder obviously rejected H
Mr Chang’s submissions that there were other creditors than Jotron, IRD
I I
and Orix (see §30.1 below). The Recorder decided to sanction the
J assignment for the following reasons: J
K (1) a cause of action is assignable, the Trustees were willing to K
assign their rights (under the Defence and Counterclaim in
L L
HCA2428/2019) and Jotron was willing to take them over
M (§7); M
N (2) as for the other creditors, the IRD had by letter indicated no N
comment39, and there was no response from Orix (§§8-9);
O O
(3) Jotron has reassured the court that it would recognize the
P P
priority of the IRD as preferential creditor and would treat
Q Orix pari passu with its own claim. Q
R R
24.2. Accordingly, the Recorder ordered:
S S
T T
38
Appl B p.170.
U U
39
Appl B p.187.
V V
A - 16 - A
B (1) that the assignment from the Trustees to Jotron of the Trustees’ B
cause of action under s.43A BO and as pleaded in the Defence
C C
and Counterclaim in HCA2428/2019 be sanctioned;
D D
(2) the title deeds of the Property be delivered to Jotron upon
E E
execution of the Deed of Assignment;
F F
(3) Jotron be joined as an additional defendant in
G
HCA2428/201940; and G
H
(4) Jotron do satisfy any orders or judgments for costs and H
damages or compensation to the plaintiffs (viz. Mr Chang,
I I
CWM and CPI) in that action incurred at any time (prior to
J and after the date of the Decision). J
K Appeal from the Recorder’s Decision K
L L
25. On 3 December 2021, Mr Chang (but not CWM or CPI) filed
M a notice of appeal in this Appeal (CACV542/2021). The grounds of appeal M
may be summarised as follows:
N N
(1) Jotron was not holding 91% of the total indebtedness, as his
O O
other creditors included HSBC ($300,000), United Asia
P Finance Ltd ($200,000), Prime HK Investment Ltd ($100,000) P
and Hang Seng Bank ($25,000) (“the Other creditors”). The
Q Q
reason for Jotron not mentioning the Other creditors was to
R increase its own proportion of indebtedness in order to obtain R
the assignment from the Trustees and the lion’s share of the
S S
proceeds of sale of the Property;
T T
40
U The Recorder explained that he did not see fit to substitute Jotron in place of Mr Ng as defendant in U
HCA2428/2019 in case Mr Chang, CWM and CPI had any specific claims against him (§11).
V V
A - 17 - A
B (2) (according to Mr Chang), s.43A BO stipulated that the B
consent of 80% of the creditors was required, but Jotron held
C C
less than 50% of the total indebtedness if the Other creditors
D D
were included;
E
(3) (according to Mr Chang), Mr Collins, Jotron’s solicitor, was E
F
disreputable; F
G
(4) the addition of Jotron as an additional defendant in G
HCA2428/2019 was not in the best interests of the
H H
administration of the bankruptcy.
I I
Jotron’s Summons for security for costs
J J
26. In Jotron’s application for security, the amount of security in
K K
the draft bill is $197,41641. Ms Cheng has in her 2022 affirmation in
L support referred to Mr Chang’s own allegations that he is impecunious. L
M 27. Mr Chang has not made any affirmation to challenge M
Ms Cheng’s assertion. However, he has in his written submission dated
N N
9 November 2022 alleged that the market value of the Property is
O $3.6 million which he said should cover the costs of the appeal should his O
P
appeal be unsuccessful. P
Q Discussion Q
R R
28.1. Although Mr Chang has not provided any evidence that the
S
market value of the Property is $3.6 million, we shall assume for present S
purposes that this is correct. However, his suggestion (not deposed to on
T T
affirmation) that the Property is available for enforcement of an order for
U U
41
AB p.390.
V V
A - 18 - A
B costs against him is inconsistent with his own case as co-plaintiff in B
HCA2428/2019, and deposed to in his affirmation filed on 17 September
C C
2019, that:
D D
- the beneficial owner of the Property is CWM;
E E
- the Property had been acquired with funds from CPI and her
F F
husband (thereby raising the possibility of a resulting trust
G
argument in their favour). G
H 28.2. Further, it is undisputed that the Property originally belonged H
to the Mother, and unless the other beneficiaries of the Mother’s estate have
I I
disclaimed their interests, Mr Chang would not be the sole owner.
J However, the DFA (under which the other beneficiaries purportedly J
disclaimed their interests) has not been provided.
K K
L 28.3. In light of the matters above, unless and until the court L
determines the beneficial ownership of the Property, it cannot be assumed
M M
that the beneficial ownership of the Property belongs to Mr Chang, such
N that Jotron can enforce a costs order against it. N
O 29. Secondly, as Mr Chang has not deposed to having any other O
P
assets, he would need to satisfy the court that the merits of his appeal are P
such that we should exercise our discretion not to order security for costs.
Q Q
It is well-established that at this stage, a detailed examination of the merits
R
is neither required nor desirable, and the court should form a preliminary, R
42
even instinctive, view , which we set out below.
S S
T T
U U
42
Chung Kau v Hong Kong Housing Authority [2004] 2 HKLRD 650.
V V
A - 19 - A
B 30.1. In respect of Ground of appeal (1), the OR Office’s Proof of B
Debt Index dated 5 January 201743 shows that there were only 3 creditors
C C
in the bankruptcy HCB1454/2015, viz Jotron, IRD and Orix. Mr Chang
D D
has not provided any evidence that the Other creditors had submitted proofs
E
after January 2017 in relation to debts incurred before the bankruptcy order E
(which order had been made as long ago as July 2015), which would be an
F F
unlikely delay on the part of these financial institutions.
G G
30.2. As for Ground (2), contrary to Mr Chang’s submissions,
H s.43A BO does not stipulate an 80% requirement for any course of action. H
I I
30.3. As for Ground (3), we do not see how the allegations relating
J to Mr Collins affect the merits of Mr Chang’s intended appeal against the J
Recorder’s Decision. The Recorder did not rely on any act of Mr Collins
K K
in his Decision.
L L
30.4. As for Ground (4), we do not see how the addition of Jotron
M as an additional defendant in HCA2428/2019 was not in the best interests M
of the administration of the bankruptcy. The Recorder’s decision to add
N N
Jotron as a defendant in HCA2428/2019 rather than to substitute it for the
O Trustees was to preserve the rights of the plaintiffs in case they had any O
P
personal claim against the Trustee(s). P
Q 31. For these reasons, at this stage we do not consider that the Q
merits of Mr Chang’s appeal are so strong as to militate against an order
R R
for security for costs.
S S
32. As for the quantum of costs, we have considered the draft bill
T T
and consider that $120,000 would be appropriate.
U U
43
Appl B p.92.
V V
A - 20 - A
B Order B
C C
33.1. We order that unless the appellant in CACV542/2021
D (Mr Chang) pay into court $120,000 by way of security for the costs of the D
respondent Jotron AS within 28 days of the date of this Judgment, the
E E
appeal against Jotron shall stand dismissed without further order, with
F costs of the appeal to be assessed. F
G G
33.2. As for the costs of the application for security for costs, we
H
would make no order. First, the AB contained irrelevant materials such as H
the 39-page Judgment of G Lam J, when all that was required was the
I I
3-page sealed order. Secondly, there was no reference in Ms Cheng’s 2022
J affirmation or Jotron’s written submissions to the Appl B which contained J
many documents which were relevant to the court’s assessment of the
K K
merits in respect of the application for security.
L L
M M
N N
O O
(Maria Yuen) (Thomas Au)
P Justice of Appeal Justice of Appeal P
Q Q
The debtor in HCB 1454/2015 was unrepresented
R R
Ernest Li & Co, Solicitors for the applicant in HCB 1454/2015
S The respondent in HCB 1454/2015 was unrepresented S
T T
U U
V V
A A
B B
CACV 542/2021
[2023] HKCA 1029
C C
IN THE HIGH COURT OF THE
D D
HONG KONG SPECIAL ADMINISTRATIVE REGION
E COURT OF APPEAL E
CIVIL APPEAL NO 542 OF 2021
F F
(ON APPEAL FROM HCB NO 1454 OF 2015)
__________________
G G
H RE: STANLEY CHANG (張鴻元) TRADING Debtor H
AS HONG INSTECH TRADING CO.
I I
JOTRON AS (formerly known as JOTRON Applicant
ELECTRONICS AS)
J J
MAT NG AND JOHN LEES JOINT AND Respondent
K SEVERAL TRUSTEES OF THE K
PROPERTY OF CHANG STANLEY
L L
__________________
M M
and
N HCA 2428/2019 N
IN THE HIGH COURT OF THE
O O
HONG KONG SPECIAL ADMINISTRATIVE REGION
P
COURT OF FIRST INSTANCE
P
ACTION NO 2428 OF 2019
Q __________________ Q
R BETWEEN R
CHANG STANLEY (張鴻元) 1st Plaintiff
S S
nd
CHEUNG WAI MING (張惠明) 2 Plaintiff
T T
CHEONG PAK IOK (張白玉) 3rd Plaintiff
U U
V V
A -2- A
B and B
C MAT NG JOINT AND SEVERAL Defendant C
TRUSTEES OF THE PROPERTY OF
CHANG STANLEY
D D
__________________
E E
F Before: Hon Yuen and Au JJA in Court F
Dates of Written Submissions: 9 November 2022 and 7 December 2022
G G
Date of Judgment: 6 September 2023
H H
________________________
I I
JUDGMENT
J ________________________ J
K
Hon Yuen JA (giving the Judgment of the Court): K
L 1. This is an application for security for costs of L
CACV542/2021. On 12 November 2021, Recorder William Wong SC
M M
(“the Recorder”) gave a decision (“the Decision”) in HCB1454/2015 and
N HCA2428/2019. N
O O
2. On 3 December 2021, Chang Stanley 張鴻元 (“Mr Chang”)
P trading as Hong Kong Instech Trading Company filed a Notice of Appeal P
against the Decision. The Notice of Appeal was served on Jotron AS
Q Q
(“Jotron”) and on Mat Ng (“Mr Ng”) and John Lees (“Mr Lees”), the
R Joint and Several Trustees of Mr Chang’s property (“the Trustees”). R
S S
3. On 28 October 2022, Jotron filed a summons for an order that
T Mr Chang provide security for costs of the appeal. This was supported by T
an affirmation of its solicitor Cheng Ka Lee Cathy (“Ms Cheng”) filed on
U U
V V
A -3- A
B 28 October 2022 (“Ms Cheng’s 2022 affirmation”). Mr Chang did not B
file any evidence in opposition.
C C
D 4. On 22 September 2022, Jotron’s solicitors had filed an appeal D
bundle (“Appl B”) and on 8 December 2022, they filed an application
E E
bundle (“AB”) for the summons for security for costs.
F F
5. Both parties have filed skeleton submissions for the
G G
application, which we have considered. As the background is quite
H
complex, it would be helpful to set out a brief narrative. H
I Background I
J Judgment debts (4 Costs Orders emanating from HCA378/2010) J
K K
6.1. In DCCJ3369/2009, Jotron sued Mr Chang for the price of
L goods sold and delivered. Judgment on admission was entered on that L
claim, but Mr Chang filed a counterclaim against Jotron for libel. The
M M
action was transferred to the High Court as HCA378/2010.
N N
6.2. On 19 February 2014, G Lam J (as he then was) handed down
O judgment in HCA378/20101. Mr Chang’s counterclaim was dismissed O
with an order nisi that he pay a part of Jotron’s costs2. The costs came up
P P
to nearly $1.8 million (“the 1 Costs Order”).
3 st
Q Q
7. Mr Chang’s intended appeal from this judgment led to two
R R
other costs orders against him, one summarily assessed at $30,0004 (“the
S S
1
AB p.274.
T T
2
G Lam J’s Judgment, §93.
3
AB p.187.
U U
4
AB p.190.
V V
A -4- A
B 2nd Costs Order”), and the other summarily assessed at just short of B
$55,0005 (“the 3rd Costs Order”).
C C
D 8. Jotron then took out charging order proceedings against D
Mr Chang in respect of a property which he owned as joint tenant. On
E E
10 December 2014, a master made a charging order absolute, with costs to
F be paid by Mr Chang, assessed at $7,0006 (“the 4th Costs Order”). F
G G
Bankruptcy Order (HCB1454/2015)
H H
9.1. As Mr Chang failed to pay the 4 Costs Orders, Jotron
I commenced bankruptcy proceedings against him in HCB1454/20157. I
J J
9.2. On 29 July 2015, a master made a bankruptcy order 8. On
K 13 November 2015, the Trustees were appointed Joint and Several K
Trustees of his property with immediate effect9. Three creditors submitted
L L
proofs of debt, viz. Jotron, Orix Asia Ltd (“Orix”) and the Inland Revenue
M Department (“IRD”)10. On 23 June 2021 Jotron submitted an amended M
proof of debt to include interest 11. On the basis of the amended proof of
N N
debt, Jotron holds 91% of the total indebtedness12.
O O
10. Meanwhile, on 11 July 2016, the charged property was sold
P
by the Trustees and the joint owner. Mr Chang’s share of the proceeds P
Q Q
5
AB p.193.
6
R AB p.196. R
7
AB p.182.
8
S AB p.175. S
9
AB p.178.
10
T App B p.92. This is disputed by Mr Chang, see §30.1 below. T
11
It would appear that at first the Trustees did not respond to this amended proof: see Ms Cheng’s
2021 affirmation §12.
U U
12
The Decision §1, and see §30.1 below.
V V
A -5- A
B amounted to $1.113 million, so (according to Jotron’s amended proof of B
debt) he remained indebted to it in the sum of about $980,00013, as well as
C C
to Orix and IRD.
D D
The Property
E E
F
11.1. On 10 April 2018 (before his discharge from bankruptcy), F
Mr Chang became the owner of a flat (“the Property”) in a Housing
G G
Authority (“HA”) estate.
H H
11.2. The original purchaser of the Property was Mr Chang’s
I mother (“the Mother”) who had died on 25 June 201014 without I
completing the purchase.
J J
K 11.3. Some 7 years later, Letters of Administration to the Mother’s K
estate were granted to Mr Chang on 9 August 201715.
L L
11.4. By a letter dated 15 March 201816, the HA instructed WK To
M M
& Co to serve a final notice on the administrator of the Mother’s estate
N (Mr Chang) to complete the purchase, failing which the sale and purchase N
would be terminated and the intention money would be forfeited.
O O
P 11.5. In a letter dated 28 March 2018 to the District Tenancy P
Management Office17, WK To & Co stated:
Q Q
“We write to inform you that all beneficiaries of the estate of the
R [Mother], being [Mr Chang], Zhang Xiaoli (張小莉), Cheong R
Pak Iok (張白玉), Zhang Jingang (張金鋼) and Zhang Hongbo
S S
13
AB p.224.
14
AB p.342.
T T
15
AB p.341.
16
AB p.208.
U U
17
AB p.338.
V V
A -6- A
B (張 洪 波), the lawful and natural sons and daughters of the B
[Mother], have executed a Deed of Family Arrangement
C [“DFA”]18 on 28 March 2018 whereby the said Zhang Xiaoli C
(張小莉), Cheong Pak Iok (張白玉), Zhang Jingang (張金鋼)
and Zhang Hongbo (張 洪 波) respectively disclaimed their
D interest of and in the Property and they all agreed that ... our D
client [Mr Chang] be entitled to and shall have all the estate,
E right, title, benefit and interest of and in the Property absolutely. E
In the premises, [Mr Chang] is the only person entitled to
acquire and take up the assignment of the Property from the [HA]
F and his capacity to take up the assignment of the Property is F
established.
G G
We are further instructed to inform you that our client
[Mr Chang] will be able to complete the purchase of the property
H on 10 April 2018”. (Emphasis added). H
I The balance of purchase price for the Property (excluding interest) was I
$291,700.
J J
11.6. Mr Chang was assigned the Property on 10 April 2018
K K
(before his discharge from bankruptcy).
L L
Section 43A BO
M M
12. Pausing here, s.43A Bankruptcy Ordinance Cap. 6 (“BO”)
N N
provides (where material) as follows:
O O
“43A. After-acquired property
P P
(1) Subject to this section, the trustee may by notice in writing
claim for the bankrupt’s estate any property which has
Q been acquired by, or has devolved upon, the bankrupt Q
since the commencement of the bankruptcy.
R ... R
(3) ... upon the service on the bankrupt of a notice under this
S S
section the property to which the notice relates shall vest
in the trustee as part of the bankrupt’s estate; and the
T trustee’s title to that property has relation back to the time T
U U
18
No copy has been provided: see Ms Cheng’s 2022 affirmation §17.
V V
A -7- A
B at which the property was acquired by, or devolved upon, B
the bankrupt.
C C
...
D (6) For the purposes of this section, an undischarged bankrupt D
shall submit to the trustee on each anniversary of the
making of the bankruptcy order against him, a statement
E of his earnings during the preceding year and details of E
any property he acquired during that period.
F F
(7) A bankrupt who fails or refuses to comply with subsection
(6) is guilty of an offence and is liable to imprisonment
G for 6 months. G
(8) The court may refuse to discharge a bankrupt who has not
H complied with subsection (6)”. (Emphasis added). H
I Trustees’ claim for the Property I
J J
13.1. In January 2019 (before his discharge from bankruptcy),
K
Mr Chang applied for a loan from a finance company offering the Property K
as security. When the finance company did a bankruptcy search on
L L
Mr Chang, they contacted the Trustees19.
M M
13.2. Accordingly, on 9 January 2019, the Trustees wrote to
N Mr Chang20: N
O (a) informing him that they regarded the Property as after- O
acquired property under s.43A BO;
P P
(b) demanding that he provide the title deeds and other relevant
Q Q
documents of the Property, information relating to (among
R other things) the source of funds for the purchase, and deliver R
up vacant possession thereof; and
S S
T
(c) requesting an interview with him. T
19
Ms Cheng’s affirmation filed on 24 June 2021 (“Ms Cheng’s 2021 affirmation”) §4.
U U
20
AB p.322.
V V
A -8- A
B 13.3. In the letter, the Trustees also warned Mr Chang that B
C (d) they would consider taking legal action to take possession of C
the Property;
D D
E
(e) they would report his conduct to the Official Receiver who E
would take action against him; and
F F
(f) they would consider objecting to discharge of his bankruptcy
G G
upon the expiry of the 4-year period under s.30A(1) BO.
H H
13.4. At a meeting on 28 January 2019, Mr Chang provided the
I title deeds of the Property to the Trustees. I
J J
13.5. Subsequently, one Cheung Wai Ming 張惠明 (“CWM”),
K Mr Chang’s aunt, signed a declaration dated 11 March 201921 which was K
provided to the Trustees. In this declaration, she alleged that:
L L
- the Property was purchased with her funds;
M M
- the title deeds were in Mr Chang’s name primarily because of
N N
a judgment of the High Court of Hong Kong22 that the
O Property had to be purchased in his name; O
P - as she provided the purchase price, the beneficial interest in P
the Property belonged to her.
Q Q
R 14. Notwithstanding the Trustees’ indication that they would R
consider objecting to discharge of bankruptcy, Mr Chang was
S S
T T
21
AB p.396.
U U
22
Not identified.
V V
A -9- A
B automatically discharged from bankruptcy on 29 July 201923. Prior to this, B
the Trustees had already in January 2019 served the s.43A BO notice on
C C
him on the ground that the Property had been acquired by or devolved upon
D D
him before discharge.
E E
15. On 17 September 2019, Mr Chang filed a joint affirmation24
F (“the Joint affirmation”) in the bankruptcy proceedings together with F
CWM and Cheong Pak Iok (“CPI”) one of his siblings. In the Joint
G G
affirmation, the following was alleged:
H H
- on 18 March 2018, Mr Chang received from WK To & Co a
I letter25 indicating that the High Court had “agreed” to I
Mr Chang purchasing the Property, which purchase the HA
J J
stipulated had to be completed by 9 April 2018;
K K
- Mr Chang was unable to purchase the Property as he had not
L been discharged from bankruptcy, and he asked his siblings L
CPI and Zhang Hongbo (“ZHB”), who lived in Zhuhai, for
M M
assistance;
N N
- as CPI and her husband considered that the Property was the
O “last property that Mr Chang owned”26 and he would have O
P
nowhere else to live, CPI and her husband decided to P
mortgage their property in Macau to pay the purchase price of
Q Q
about $450,00027 for the property;
R R
23
S This is acknowledged by the Trustees: see §17(b) of the Defence & Counterclaim in HCA2428/2019 S
referred to below.
24
AB p.203.
T T
25
AB p.208.
26
Joint affirmation, §2.
U U
27
The balance of purchase price ($291,700) together with interest thereon: AB p.336.
V V
A - 10 - A
B - however, as the mortgage process would take time, ZHB B
C
obtained a loan from his friend Cheung Fai Ming (張輝明); C
D - on 20 March 2018, Cheung Fai Ming transferred D
RMB400,000 to ZHB, who converted the sum into HKD in
E E
tranches for transfer to CPI;
F F
- as CPI was a resident of Macau and could not open a bank
G account in Hong Kong, she brought $450,000 in tranches in G
cash to CWM, who deposited it into her Hong Kong bank
H H
account between 27 March 2018 and 6 April 2018;
I I
- on 9 April 2018, CWM paid the sum of $450,520 to the HA
J by way of a cashier order drawn on her Hong Kong bank J
account;
K K
- on 11 April 201828, a bank in Macau approved a mortgage
L L
loan to CPI and her husband; on 8 May 2018, CPI and her
M husband received a sum of $700,000 by way of the mortgage M
loan; and on 16 May 2018, CPI and her husband withdrew
N N
$500,000 which they brought in tranches in cash to Zhuhai for
O conversion into RMB for ZHB to repay the sum of O
RMB400,000 to Cheung Fai Ming.
P P
Q 16. On 19 December 2019, DHCJ MK Liu heard Mr Chang’s Q
application29 to reverse the Trustees’ decision. The deputy judge
R R
considered that as there were factual disputes which may require live
S evidence, it was appropriate for writ proceedings to be commenced. S
T T
28
AB p.210.
U U
29
Presumably taken to have been made under s.83 BO.
V V
A - 11 - A
B HCA2428/2019 B
C C
17.1. Accordingly, on 31 December 2019, Mr Chang, CWM and
D CPI commenced HCA2428/2019 against Mr Ng D
E (1) objecting to the Trustees’ sale of the Property; E
F (2) requesting the Trustees to return the title deeds for the F
Property, and
G G
(3) demanding costs for each plaintiff in the sum of $20,000.
H H
I Mr Lees was not made a party. I
J 17.2. The Statement of Claim (“SOC”) contained allegations more J
or less similar to the Joint affirmation, with these additional allegations:
K K
- at a meeting in July 2015, Mr Chang had mentioned to (among
L L
others) Ms Chan Bo Mei from the OR’s Office that he was
M applying to purchase the Property, that Ms Chan had said that M
if the High Court agreed with his application, he would only
N N
need to inform the OR’s Office, and as long as he did not pay
O for the Property himself, the OR’s Office would not stop him O
acquiring it (§16 SOC);
P P
Q
- Mr Chang had thought: Q
R
- the bankruptcy period would expire in July 2018; R
S
- the purchase process would take a few months to S
complete and would only be finalized after July 2018;
T T
U U
V V
A - 12 - A
B - the High Court judge30 who had given the judgment31 B
agreeing to his purchase would have been aware of his
C C
bankruptcy and had taken into account the “few months”
D D
needed to finalize the purchase process, such that by
E
that time, he would have been discharged from E
bankruptcy (§§16 - 17);
F F
- on 28 January 2019, Ms Heidi Li of Ernst & Young
G G
Transactions Ltd, a representative of the Trustees, had
H
requested a declaration from CWM that she (CWM) was the H
beneficial owner of the Property, and informed Mr Chang that
I I
unless he obtained an order from the High Court to that effect,
J the Trustees would sell the Property to repay his debts (§20); J
K - on 26 June 2019, he was informed that unless he provided K
documents showing he had made an application to the High
L L
Court, the Trustees would sell the Property to repay his debts
M (§21). M
N 17.3. The relief sought included an order that as the purchase price N
for the Property came from CWM’s bank account, she was the beneficial
O O
32
owner thereof during the period of his bankruptcy (§22(2)) .
P P
18. Mr Ng filed his Defence and Counterclaim in person on
Q Q
10 March 2020, in which he pleaded (among other things) that:
R R
S S
30
Unidentified in the SOC.
T 31 T
No case number or date of judgment was identified in the SOC.
32
It would appear that a summons was filed on 19 October 2021 to amend the SOC, which was dealt
U with by Master Dick Ho on 28 October 2021, and the plaintiffs appealed the master’s order. The U
appeal before K Yeung J was adjourned pending determination of CACV542/2021.
V V
A - 13 - A
B - Mr Chang had admitted in the SOC that the Property “is the B
last asset he [possesses]” (§6(b));
C C
- the Property was an after-acquired property within s.43A BO,
D D
for which the Trustees had served notice on Mr Chang in
E E
January 2019 (§6(c));
F F
- if Mr Chang had borrowed money from CPI during his
G
bankruptcy period, it was not provable in the original G
bankruptcy under s.34 BO (§8(d)); and
H H
- as CWM merely acted as a channel for the funds for the
I I
purchase, Mr Chang was the owner of the Property (§8(f)).
J J
Mr Ng counterclaimed for an order that Mr Chang deliver vacant
K possession of the Property to the Trustees so that they would realise the K
Property for the benefit of the creditors.
L L
M 19. In July 2020, the Trustees contacted Jotron asking if it would M
be interested in funding the litigation (HCA2428/2019)33.
N N
20. On 17 March 2021, Mr Ng sent a circular to the creditors
O O
copied to Mr Chang, stating that he has tendered his resignation and would
P P
be leaving his then firm on 31 March 2021.
Q Q
21. On 7 June 2021, the Trustees reported to the court in a letter
R (copied to Jotron and Mr Chang) that as there were no funds in the R
bankruptcy estate to engage solicitors to handle HCA2428/2019, they
S S
T T
U U
33
Ms Cheng’s 2022 affirmation §8.
V V
A - 14 - A
B proposed to settle the case with Mr Chang by returning the title deeds to B
Mr Chang and not proceeding with the Defence and Counterclaim34.
C C
D Jotron’s summons under s.83 BO D
E
22.1. As Jotron did not agree with the Trustees’ proposed course E
F
of action, it issued a summons on 16 June 2021 under s.83 BO (which F
provides that if, among others, any creditor is aggrieved by any act or
G G
decision of the trustee in bankruptcy, it may apply to the court which may,
H
among other things, reverse the act or decision and make such other order H
in the premises as it thinks just).
I I
22.2. The summons sought an order allowing the Trustees to assign
J J
to Jotron their cause of action under s.43A BO and/or as pleaded in the
K Defence and Counterclaim in HCA2428/2019. Ms Cheng’s 2021 K
affirmation was filed in support.
L L
M 23.1. The matter was first heard by the Recorder on 30 June 2021. M
Jotron, the Trustees and Mr Chang appeared.
N N
23.2. The matter was heard by the Recorder again on 25 August
O O
35
2021. Mr Chang provided written submissions dated 22 August 2021 .
P P
The Recorder adjourned the matter but directed that a fresh summons be
Q
prepared. On 3 September 2021, Jotron’s solicitors prepared a fresh Q
36
summons in HCA2428/2019 under Order 15 rule 6 RHC , as well as in
R R
the bankruptcy proceedings under s.83 BO37.
S S
34
Ms Cheng’s 2021 affirmation, §7.
T T
35
Appl B p.168.
36
Appl B p.173.
U U
37
Appl B p.179.
V V
A - 15 - A
B 23.3. The matter was then dealt with by way of written submissions. B
Mr Chang provided written submissions on 18 September 202138.
C C
D The Recorder’s Decision D
E E
24.1. On 12 November 2021, the Recorder handed down his
F
Decision which was in both HCA2428/2019 as well as the bankruptcy F
proceedings. Since the Recorder referred to Jotron as holding 91% of the
G G
total indebtedness (§1), (a) the amended proof of debt must have been
H
accepted by the Trustees, and (b) the Recorder obviously rejected H
Mr Chang’s submissions that there were other creditors than Jotron, IRD
I I
and Orix (see §30.1 below). The Recorder decided to sanction the
J assignment for the following reasons: J
K (1) a cause of action is assignable, the Trustees were willing to K
assign their rights (under the Defence and Counterclaim in
L L
HCA2428/2019) and Jotron was willing to take them over
M (§7); M
N (2) as for the other creditors, the IRD had by letter indicated no N
comment39, and there was no response from Orix (§§8-9);
O O
(3) Jotron has reassured the court that it would recognize the
P P
priority of the IRD as preferential creditor and would treat
Q Orix pari passu with its own claim. Q
R R
24.2. Accordingly, the Recorder ordered:
S S
T T
38
Appl B p.170.
U U
39
Appl B p.187.
V V
A - 16 - A
B (1) that the assignment from the Trustees to Jotron of the Trustees’ B
cause of action under s.43A BO and as pleaded in the Defence
C C
and Counterclaim in HCA2428/2019 be sanctioned;
D D
(2) the title deeds of the Property be delivered to Jotron upon
E E
execution of the Deed of Assignment;
F F
(3) Jotron be joined as an additional defendant in
G
HCA2428/201940; and G
H
(4) Jotron do satisfy any orders or judgments for costs and H
damages or compensation to the plaintiffs (viz. Mr Chang,
I I
CWM and CPI) in that action incurred at any time (prior to
J and after the date of the Decision). J
K Appeal from the Recorder’s Decision K
L L
25. On 3 December 2021, Mr Chang (but not CWM or CPI) filed
M a notice of appeal in this Appeal (CACV542/2021). The grounds of appeal M
may be summarised as follows:
N N
(1) Jotron was not holding 91% of the total indebtedness, as his
O O
other creditors included HSBC ($300,000), United Asia
P Finance Ltd ($200,000), Prime HK Investment Ltd ($100,000) P
and Hang Seng Bank ($25,000) (“the Other creditors”). The
Q Q
reason for Jotron not mentioning the Other creditors was to
R increase its own proportion of indebtedness in order to obtain R
the assignment from the Trustees and the lion’s share of the
S S
proceeds of sale of the Property;
T T
40
U The Recorder explained that he did not see fit to substitute Jotron in place of Mr Ng as defendant in U
HCA2428/2019 in case Mr Chang, CWM and CPI had any specific claims against him (§11).
V V
A - 17 - A
B (2) (according to Mr Chang), s.43A BO stipulated that the B
consent of 80% of the creditors was required, but Jotron held
C C
less than 50% of the total indebtedness if the Other creditors
D D
were included;
E
(3) (according to Mr Chang), Mr Collins, Jotron’s solicitor, was E
F
disreputable; F
G
(4) the addition of Jotron as an additional defendant in G
HCA2428/2019 was not in the best interests of the
H H
administration of the bankruptcy.
I I
Jotron’s Summons for security for costs
J J
26. In Jotron’s application for security, the amount of security in
K K
the draft bill is $197,41641. Ms Cheng has in her 2022 affirmation in
L support referred to Mr Chang’s own allegations that he is impecunious. L
M 27. Mr Chang has not made any affirmation to challenge M
Ms Cheng’s assertion. However, he has in his written submission dated
N N
9 November 2022 alleged that the market value of the Property is
O $3.6 million which he said should cover the costs of the appeal should his O
P
appeal be unsuccessful. P
Q Discussion Q
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28.1. Although Mr Chang has not provided any evidence that the
S
market value of the Property is $3.6 million, we shall assume for present S
purposes that this is correct. However, his suggestion (not deposed to on
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affirmation) that the Property is available for enforcement of an order for
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41
AB p.390.
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A - 18 - A
B costs against him is inconsistent with his own case as co-plaintiff in B
HCA2428/2019, and deposed to in his affirmation filed on 17 September
C C
2019, that:
D D
- the beneficial owner of the Property is CWM;
E E
- the Property had been acquired with funds from CPI and her
F F
husband (thereby raising the possibility of a resulting trust
G
argument in their favour). G
H 28.2. Further, it is undisputed that the Property originally belonged H
to the Mother, and unless the other beneficiaries of the Mother’s estate have
I I
disclaimed their interests, Mr Chang would not be the sole owner.
J However, the DFA (under which the other beneficiaries purportedly J
disclaimed their interests) has not been provided.
K K
L 28.3. In light of the matters above, unless and until the court L
determines the beneficial ownership of the Property, it cannot be assumed
M M
that the beneficial ownership of the Property belongs to Mr Chang, such
N that Jotron can enforce a costs order against it. N
O 29. Secondly, as Mr Chang has not deposed to having any other O
P
assets, he would need to satisfy the court that the merits of his appeal are P
such that we should exercise our discretion not to order security for costs.
Q Q
It is well-established that at this stage, a detailed examination of the merits
R
is neither required nor desirable, and the court should form a preliminary, R
42
even instinctive, view , which we set out below.
S S
T T
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42
Chung Kau v Hong Kong Housing Authority [2004] 2 HKLRD 650.
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A - 19 - A
B 30.1. In respect of Ground of appeal (1), the OR Office’s Proof of B
Debt Index dated 5 January 201743 shows that there were only 3 creditors
C C
in the bankruptcy HCB1454/2015, viz Jotron, IRD and Orix. Mr Chang
D D
has not provided any evidence that the Other creditors had submitted proofs
E
after January 2017 in relation to debts incurred before the bankruptcy order E
(which order had been made as long ago as July 2015), which would be an
F F
unlikely delay on the part of these financial institutions.
G G
30.2. As for Ground (2), contrary to Mr Chang’s submissions,
H s.43A BO does not stipulate an 80% requirement for any course of action. H
I I
30.3. As for Ground (3), we do not see how the allegations relating
J to Mr Collins affect the merits of Mr Chang’s intended appeal against the J
Recorder’s Decision. The Recorder did not rely on any act of Mr Collins
K K
in his Decision.
L L
30.4. As for Ground (4), we do not see how the addition of Jotron
M as an additional defendant in HCA2428/2019 was not in the best interests M
of the administration of the bankruptcy. The Recorder’s decision to add
N N
Jotron as a defendant in HCA2428/2019 rather than to substitute it for the
O Trustees was to preserve the rights of the plaintiffs in case they had any O
P
personal claim against the Trustee(s). P
Q 31. For these reasons, at this stage we do not consider that the Q
merits of Mr Chang’s appeal are so strong as to militate against an order
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for security for costs.
S S
32. As for the quantum of costs, we have considered the draft bill
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and consider that $120,000 would be appropriate.
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43
Appl B p.92.
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A - 20 - A
B Order B
C C
33.1. We order that unless the appellant in CACV542/2021
D (Mr Chang) pay into court $120,000 by way of security for the costs of the D
respondent Jotron AS within 28 days of the date of this Judgment, the
E E
appeal against Jotron shall stand dismissed without further order, with
F costs of the appeal to be assessed. F
G G
33.2. As for the costs of the application for security for costs, we
H
would make no order. First, the AB contained irrelevant materials such as H
the 39-page Judgment of G Lam J, when all that was required was the
I I
3-page sealed order. Secondly, there was no reference in Ms Cheng’s 2022
J affirmation or Jotron’s written submissions to the Appl B which contained J
many documents which were relevant to the court’s assessment of the
K K
merits in respect of the application for security.
L L
M M
N N
O O
(Maria Yuen) (Thomas Au)
P Justice of Appeal Justice of Appeal P
Q Q
The debtor in HCB 1454/2015 was unrepresented
R R
Ernest Li & Co, Solicitors for the applicant in HCB 1454/2015
S The respondent in HCB 1454/2015 was unrepresented S
T T
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