Unprecedented Rethinking of Section 68A of the Mental Health Ordinance: How the Common Law Secured Procedural Rights for Conditionally Discharged Mental Health Patients

(A) Introduction

Ha Che Wai v. Medical Superintendent of the Pamela Youde Nethersole Eastern Psychiatric Observation Unit and others, HCAL 2374/ 2023, date of judgment: 24 November 2025 [1] is a landmark judicial review application concerning the rights of “patients” in Hong Kong, which is defined in Section 2 of the Mental Health Ordinance, Cap. 136 (“MHO”) as “a person suffering from or appearing to suffer from mental disorder”.

The main issue was whether the Medical Superintendent of the Pamela Youde Nethersole Eastern Psychiatric Observation Unit (the “Superintendent”), the Hospital Authority (the “HA”) and the Mental Health Review Tribunal (the “Tribunal”) were under a duty to take steps to ensure that the patients and their relatives understood their rights to representation, legal representation and legal aid on applications to the Tribunal for the review of their cases and in respect of their detention.

The Court held that while no such duty arose under Section 68A of the MHO for conditional discharge patients, the common law imposed a duty on the HA and the medical superintendents of mental hospitals to take reasonably practicable steps to ensure that the patients subject to a conditional discharge order under Section 42B of the MHO understand their rights to make an application to the Tribunal for discharge or review under Section 59B of the MHO. 

This case provides useful guidelines on the procedural rights of individuals defined as “a person suffering from or appearing to suffer from mental disorder” and affirms the role of the common law in ensuring their rights are “practical and effective” for this vulnerable group in our society. 

(B) Facts

The Applicant is a “patient” defined under Section 2 of the MHO. He had a long history of mental illness and was first diagnosed with paranoid schizophrenia with referential delusion in 1995. [2]

In 2010, the Applicant was detained at the Pamela Youde Nethersole Eastern Hospital (the “Hospital”) under Section 31, then Section 32 and later Section 36 of the MHO. He was subsequently conditionally discharged (“CD”) under Section 42B of the MHO. [3]

The Applicant remained unaware of his right to apply to the Tribunal to challenge his status until 2014, when a social worker informed him that he could apply to the Tribunal for a review. Between 2014 and 2019, he made four separate applications to the Tribunal without legal representation, all of which were unsuccessful. [4]

A main issue in the judicial review was that, between 2010 and 2014, the Applicant was never informed of his right to apply to the Tribunal concerning his CD. [5] His challenge, set out in an Amended Form 86 (“AF 86”), alleged that the Superintendent, the Hospital Authority and the Tribunal had failed to take steps to ensure that he, other patients and their relatives understood their rights to representation, legal representation and legal aid for Tribunal proceedings. As the Applicant's case was not an isolated incident, the challenge was framed as a systemic one, alleging breaches of both statutory and common law duties that undermined procedural fairness, the right to liberty and a fair hearing. [6]

The AF 86 set out two “umbrella” grounds of judicial review: [7]

(1) Ground 1: Breach of statutory duty under section 68A of the MHO and section 4 of the Hospital Authority Ordinance Cap 113  / Illegality. This ground was directed at the acts or omissions of the Hospital and the HA.

(2) Ground 2: Procedural unfairness / impropriety, breach of natural justice. This ground was aimed at the acts or omissions of the Tribunal.

(C) Decision

Statutory Interpretation of Section 68A of the MHO

The Court framed the case as a question of statutory interpretation concerning Section 68A of the MHO, which centered on two essential contests: [8]

(1) Whether the duty to provide information applies to patients subject to a CD Order.

(2) Whether the scope of the required information extends to notifying patients of their rights to representation, legal representation, and the ability to obtain legal aid. 

Section 68A of the MHO Does Not Apply to Conditionally Discharged Patients

The Court held that Section 68A applies only to patients in detention and not to those who have been absolutely or conditionally discharged on the following grounds: [9]

(1) The MHO draws a clear distinction between (a) a patient who is detained, or who is liable to detention, and (b) a patient who has been discharged from detention, or who is no longer liable to detention (evident in Sections 42A, 42B, and 59E of the MHO).

(2) The ordinary meaning of “detention” and “discharge” are mutually exclusive. A conditionally discharged patient is legally regarded as discharged, not detained, unless recalled.

(3) The legislative history and purpose of Section 68A of the MHO confirm that it was intended to inform every patient “being detained” of their rights.

(4) The wording of Section 68A(a) of the MHO refers to the provision under which “the patient is for the time being detained”, which is inapplicable to a discharged patient.

(5) The duty is triggered “as soon as practicable after the commencement of the patient’s detention”, tying it to the start of detention, not its end via discharge.

No Duty to Inform about Representation or Legal Aid under Section of 68A of MHO

As the Court held that Section 68A of the MHO did not apply to CD patients, it was strictly unnecessary to decide the scope of information. [10] 

However, it clarified that, on its proper construction, Section 68A does not impose a positive duty on the Hospital or HA to inform patients or their relatives of the patient’s right to representation, to legal representation, or the availability of legal aid on an application to the Tribunal. [11]

The Common Law Imposes a Duty to Inform CD Patients of Tribunal Rights

The Court held that the common law fills the gap left by the statute. [12] To ensure procedural fairness, the common law imposes a duty on the HA and medical superintendents to take reasonably practicable steps to ensure that a patient subject to a CD Order understands his right to apply to the Tribunal pursuant to Section 59B of the MHO. [13] The Court noted that the current relevant forms (found at Appendices II and IV to the 2023 CD Guidelines) should be amended to provide this information clearly. [14]

No Positive Duty on the Tribunal

The Court found that the Mental Health Review Tribunal Rules (“MHRT Rules”) provided sufficient procedural safeguards for the fairness of the procedures and that there was no positive duty on the Tribunal itself to advise applicants of their rights to representation or legal aid. [15]

Extension of Time Granted

Although there was a significant delay for the Applicant to commence proceedings, the Court granted an extension of time. It found good reason to do so because the application raised questions of general public importance regarding effective access to an independent review of detention, or release from detention upon the imposition of certain conditions, where the patients affected are intrinsically likely to suffer some degree of incapacity in the procedural process.  [16]

Relief

In light of the above, the Court granted a declaration that the HA and the medical superintendents of mental hospitals are under a duty to take such steps as are reasonably practicable to ensure that patients the subject of an order for conditional discharge under Section 42B of the MHO understand their rights under Section 59B of the MHO to make an application to the Tribunal for discharge or review. [17]

(D) Key Takeaways

This case provides helpful guidance on the rights of mental health patients and the interplay between statute and common law. Its significance lies in the following key principles:

(1) Common Law Supplements Statutory Gaps for Fairness: This case is an important example of the common law filling a legislative gap to ensure fundamental fairness. The Court held that where the statute (Section 68A) was silent regarding conditionally discharged patients, the common law would step in to protect their rights to the same extent.

(2) Clear Distinction Between Detained and Discharged Patients: The Court affirmed that the MHO draws a clear distinction between detained patients and those who have been conditionally discharged. As such, the statutory duties under Section 68A apply only to detained patients and do not extend to those who are conditionally discharged.

(3) The Common Law Duty for CD Patients: While Section 68A does not apply to conditionally discharged patients, the common law imposes a duty on the HA and the medical superintendents of mental hospitals to take reasonably practicable steps to ensure those patients understand their right to apply to the Tribunal under Section 59B of the MHO.

(4) Clarification of the Scope of the Duty: This case clarified the limits of the duty. The Court found that there was no positive duty on the Tribunal itself to advise applicants of their rights to representation or legal aid as the MHRT Rules provided sufficient procedural safeguards for the fairness of the procedures.

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[1] https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=174744

[2] Ha Che Wai v. Medical Superintendent of the Pamela Youde Nethersole Eastern Psychiatric Observation Unit and others, HCAL 2374/ 2023, date of judgment: 24 November 2025, §2

[3] Ibid, §3

[4] Ibid, §4

[5] Ibid, §5

[6] Ibid, §6

[7] Ibid, §47-§48

[8] Ibid, §139, §141

[9] Ibid, §161

[10] Ibid, §164

[11] Ibid, §179

[12] Ibid, §196

[13] Ibid, §198

[14] Ibid, §201

[15] Ibid, §202, §207

[16] Ibid, §212 -§213

[17] Ibid, §217

Upholding Arbitration: Hong Kong Court Granted Anti-Suit Injunction Binding Non-Signatory and Penalized "Game-Playing"

 (A) Introduction

In P v. D, HCCT 107/2025, date of judgment: 11 November 2025, [1] the Hong Kong Court addressed an application for an anti-suit injunction (“ASI”) against a defendant who was not a formal signatory to the underlying arbitration agreements.

The Plaintiff (“P”) sought to restrain the Defendant (“D”) from pursuing proceedings (“Dongguan Proceedings”) in the Dongguan Intermediate People’s Court (“IPC”) on the ground that the underlying dispute was subject to an arbitration agreement. [2] The Court granted an interim ASI on the ground that D sought to enforce a right derived from a settlement related to the main agreements and hence was bound by the arbitration agreement contained within them. The Court also dismissed D’s application to set aside the substituted service of the Originating Summons filed on 29 July 2025 (“OS”) and the Summons dated 11 August 2025 (the “Summons”) (“Substituted Service Order”) on the ground that D had engaged in “game-playing” to evade service of the OS and the Summons. 

This case provides valuable guidance on granting interim ASIs against non-signatories and on the consequences of tactical litigation conduct. It further reaffirms the Hong Kong court’s pro-arbitration stance and its readiness to use robust procedural measures to prevent parties from frustrating proceedings.

(B) Facts

P is an investment holding company. [3] D is the ultimate beneficial owner of B International (B) Ltd (“B Parent”) and the 60% majority shareholder of B International Science Industrial Parks Holdings Ltd (“B”, collectively with B Parent the “B Parties”). D is also the Chairman of the Board and CEO of B, which holds a group of companies (“B Group”). [4]

In around 2016 or 2017, P invested US$200 million in B Group under a series of agreements (“Agreements”). [5] Each of the Agreements is governed by Hong Kong law and incorporated identical arbitration clauses in favour of HKIAC arbitration. [6]

P alleged that the B Parties breached the Agreements because the B Parties failed to pay the “Minimum Net Consideration” from the sale of “Out of Group Assets” to B as contractually required. [7]

D alleged that a binding settlement was reached at a meeting on 11 October 2022 (the “Alleged Settlement Agreement”). Clause 6 of the Alleged Settlement Agreement stated that the Out of Group Assets were to be given to D personally. [8]

On 6 October 2023, P commenced arbitration proceedings against the B Parties in Hong Kong. [9] In their defence, the B Parties claimed that the Alleged Settlement Agreement was binding between P and B Parent. [10]

In April 2025, D commenced the Dongguan Proceedings, seeking declarations that (a) the Alleged Settlement Agreement is valid and binding between P and D and (b) D holds the sole right to dispose of the Out of Group Assets and retain the sale proceeds. [11]

Subsequently, P applied to the Hong Kong court for an ASI to restrain D from continuing the Dongguan Proceedings by way of OS. [12] Thereafter, by the Summons, P sought an interim ASI pending the final resolution of the OS. [13]

At the hearing of the Summons, the Court granted Substituted Service Order. [14] On 10 September 2025, D applied to set aside the Substituted Service Order or in the alternative, for an extension of time to put in his evidence in opposition to the Summons. [15]

At the hearing on 26 September 2025, the Court dismissed D’s application to set aside the Substituted Service Order but granted an extension of time for D to file his evidence in opposition. [16]

(C) Decision

The Court began by reaffirming two established grounds for granting an ASI in Hong Kong (Ever Judger Holding Co Ltd v Kroman Celik Sanayii Anonim Sirkeit [2015] 2 HKLRD 866 §§38-45 and Liaoyang Shunfeng Iron and Steel Co Ltd v Yeung Tsz Wang, CACV 234/2011, 14 June 2012 §§83-89): [17]

(1) Where the foreign proceedings involve a breach of contract (whether exclusive jurisdiction clause or arbitration clause) (“Contractual Ground”); 

(2) Where it can be shown that the foreign proceedings are vexatious or oppressive (“Vexatious and Oppressive Ground”).

Legal Framework for the ASI

On the Contractual Ground, the Court applied the principles from GM1 v KC (Interim Injunction) [2020] 1 HKLRD 132, which stipulate that the Court should feel no diffidence in granting an ASI to uphold an arbitration agreement, provided the application is prompt. The construction of an arbitration clause is guided by the Fiona Trust “one-stop adjudication” principle: the parties, as rational businesspeople, are presumed to have intended all disputes arising from their relationship to be decided by a single tribunal. [18] 

Given the above framework, the Court identified two issues: [19]

(1) Whether P is able to meet the requisite merit threshold to show that the disputes arising out of or in connection with the Alleged Settlement Agreement (“Relevant Disputes”) are within the ambit of the arbitration clauses in the Agreements (“Issue 1”);

(2) If the answer to the foregoing is yes, whether there are good reasons (including comity considerations) why the court should not exercise its discretion to grant an ASI (“Issue 2”).

Court's Ruling on the ASI

The Court granted the interim ASI on the following grounds:

(1) Issue 1: The Court held that P had established a strong prima facie case that the Relevant Disputes were within the scope of the arbitration clauses in the Agreements. [20] The Court rejected D’s argument that the Alleged Settlement Agreement was an entirely separate contract and found that it was intrinsically connected to the Agreements and was intended to settle disputes arising under them. [21] Applying the Fiona Trust principle, the Court found that it was commercially logical for a dispute about settling a contractual issue (i.e. the Out of Group Assets) to be decided in the same forum as the Agreements. The Court also held that D’s claimed personal right under Clause 6 of the Alleged Settlement Agreement arose out of or was related to the Agreements and was a conditional right derived from the promise made by P in the context of settling the disputes between P, B Parent and B. [22]

(2) Issue 2: The Court found no “good reason” to decline an ASI. [23] P had applied for the ASI promptly and without delay. [24] The ASI is an in personam order against D, not a dictate to a foreign court and hence did not usurp the IPC's jurisdiction. [25] The fact that P simultaneously challenging jurisdiction in the IPC was not an abuse of process. [26]

The Court found that it was unnecessary to rule on the Vexatious and Oppressive Ground because this case could be decided entirely on the Contractual Ground. [27]

Court’s Ruling on the Substituted Service Order

The Court upheld the Substituted Service Order on the ground that D was “game-playing” and evaded service. The key findings are as follows: [28]

(1) D used a Hong Kong address (Tai Tam) in the Dongguan Proceedings but claimed to be ordinarily resident in Mainland China to avoid service in Hong Kong.

(2) The solicitors for the B Parties initially accepted the OS without comment but refused to accept the Summons once the hearing was imminent. 

(3) The Court rejected D’s argument that P should have attempted service at all 16 of his science parks in Mainland China as it was not a sensible or practical approach, especially in the light of the then perceived urgency that the IPC would hold the substantive hearing of the Dongguan Proceedings in October 2025.
 
(D) Key Takeaways

This case is significant on the following grounds:

(1) Anti-Suit Injunction Against a Non-Signatory: The Court will grant an ASI against an individual who was not a formal party to the main arbitration agreement if the right he seeks to enforce is derived from and conditional upon a contract containing an arbitration clause. 

(2) Consequences of “Game Playing”: The Court found that D was "game playing" to evade service of the Hong Kong court documents. Tactical evasion of service, for example, maintaining inconsistent addresses or instructing lawyers to refuse service, can justify substituted service.

(3) Reinforcement of the Fiona Trust “One-Stop Adjudication” Principle: This case confirms that arbitration clauses will be construed widely to cover disputes arising from related agreements, such as a settlement intended to resolve claims under the original contract. Even if the settlement agreement is silent on dispute resolution, the presumption is that the parties, as rational businessmen, intended for a single tribunal to settle all interconnected disputes.

(4) Upholding Party Autonomy: The Court reaffirmed the importance of upholding party autonomy. It will not hesitate to grant an ASI to enforce the agreement, even after a foreign court has asserted jurisdiction. This case clarifies that comity carries less weight in such contractual cases, as the injunction is an order to a party, not a challenge to the foreign court. The key for applicants is to act promptly before the foreign proceedings become too advanced.

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[1] https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=174745

[2]  P v. D, HCCT 107/2025, date of judgment: 11 November 2025, §1.1

[3] Ibid, §2.2

[4] Ibid, §2.3

[5] Ibid, §2.6

[6] Ibid, §2.8

[7] Ibid, §2.9-§2.10

[8] Ibid, §5.4 

[9] Ibid, §2.9

[10] Ibid, §2.13

[11] Ibid, §3.8-§3.9

[12] Ibid, §1.1

[13] Ibid, §1.2

[14] Ibid, §1.3

[15] Ibid, §1.4

[16] Ibid

[17] Ibid, §6.1

[18] Ibid, §6.2

[19] Ibid, §6.15

[20] Ibid, §7.5

[21] Ibid, §7.13

[22] Ibid

[23] Ibid, §8.2

[24] Ibid

[25] Ibid, §8.4

[26] Ibid, §8.5

[27] Ibid, §6.14

[28] Ibid, §10.13, §10.15

Landmark Ruling: Hong Kong Court Expands Enforcement Regime to Include Payment Orders from Criminal Proceedings

 (A) Introduction

In HD Hyundai Infracore China Co Ltd v. Li Zhiwei, HCMP 785/2024 and HCRE 84/2024, date of judgment: 24 November 2025, [1] the Court addressed a novel issue under the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 645) (the “Ordinance”): whether a payment order from a Mainland criminal enforcement ruling was registrable in Hong Kong. The Court allowed the appeal and granted registration.

This landmark decision confirms that the scope of the Ordinance extends to payment orders arising from criminal proceedings. This creates a powerful new mechanism for victims to trace and recover the proceeds of crime located in Hong Kong as well as paves the way for more robust cross-border enforcement. 

(B) Facts

In around November 2014, HD Hyundai Infracore China Co., Ltd. (“HD Hyundai”) was defrauded by Mr. Li Zhiwei (“Li”) and his accomplices (collectively “Fraudsters”). [2]

The Fraudsters were convicted in December 2017 by (2021) 内03刑初3号刑事判决书 (“2021 IPC Criminal Judgment”). [3] Subsequently, the Higher People’s Court of the Inner Mongolia Autonomous Region dismissed Li’s appeal in (2022) 内刑终132号《刑事裁定书》(“2022 Final Criminal Judgment”), which sentenced Li to prison and ordered the Fraudsters to jointly repay RMB 190 million to HD Hyundai. [4]

Initial enforcement proceedings in the Mainland recovered only around RMB 27.9 million. As no further assets could be located, the court terminated these proceedings in July 2023. [5]

Following the commencement of the Ordinance in January 2024, HD Hyundai applied to the Mainland court to resume enforcement. On 23 October 2024, the Mainland court issued a new enforcement ruling ("2024 Criminal Enforcement Ruling”), which ordered Li to compensate HD Hyundai RMB162,061,811.37 (the “Relevant Part”). [6]

After that, HD Hyundai commenced HCRE 84/2024 against Li, seeking to register the Relevant Part in Hong Kong under the Ordinance. [7] On 12 March 2025, Master Hui dismissed the said application (“12/3/25 Order”) on the ground that the 2024 Criminal Enforcement Ruling was merely a procedural step in enforcing the original 2022 criminal judgment, not a standalone and registrable judgment. HD Hyundai appealed the 12/3/25 Order. [8]

Separately, in HCMP 785/2024, HD Hyundai sought and was granted an interlocutory Mareva injunction against Li’s assets. The interlocutory injunction was first granted on 17 May 2024 and continued thereafter. The Court also addressed whether this interlocutory injunction should be continued. [9]

(C) Issues

The Court identified two issues for determination: [10]

(1) Whether the Relevant Part was an operative part of the 2024 Criminal Enforcement Ruling since, on its face, the order that was made was simply the imposition of freezing and asset-preservation measures; and

(2) Whether the 2024 Criminal Enforcement Ruling is a standalone ruling independent of the 2021 IPC Criminal Judgment and 2022 Final Criminal Judgment (collectively “Underlying Criminal Judgments”).

(D) Decision

The Court allowed the appeal and granted the registration order on the following grounds:

(1) Admission of New Evidence: The Court accepted new evidence, including an explanatory note from the Mainland court dated 4 August 2025 and an expert report prepared by Mr. Jiang Zhe, a partner at Zhong Lun Law Firm in Beijing, which clarified that the 2024 Criminal Enforcement Ruling was an independent, standalone and legally effective judgment under the Arrangement of the Supreme People’s Court on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region and that the Relevant Part is a court order directly enforceable on Li. [11]

(2) Nature of the Ruling: The Court found that the 2024 Criminal Enforcement Ruling was not only a “preservation ruling”. It included an order for the transfer (划拨) of assets belonging to Li, which shows that it was a substantive enforcement measure, not an interim preservation step. [12]

(3) Independence from Underlying Criminal Judgments: The Court found that the Relevant Part was an independent and standalone ruling. Under the Mainland law, the enforcement procedure is independent of the trial procedure and an enforcement ruling takes effect upon its issuance or service and is not automatically invalidated by subsequent challenges to the underlying judgment. [13]

(4) The Relevant Part as an Operative Order: The Court found the Relevant Part was an operative part of the 2024 Criminal Enforcement Ruling. Applying standard interpretative methods, the Court found that the language was self-evidently an order for payment (textual interpretation), was made for the purpose of enforcing a judgment debt (purposive interpretation), and must be read as part of the holistic document without drawing a formalistic distinction based on its position relative to the words "裁定如下" (systematic interpretation). [14]

Procedural and Ancillary Orders

Upon granting the registration order, the Court also addressed two procedure issues. 

(1) Exchange Rate: The Court directed the Applicant to provide evidence of the prevailing exchange rate as of the date of the decision pursuant to PD 38 §9 [15] and Section 19(2) of the Ordinance [16]. [17]

(2) Costs: The Court held that the reasonable costs of, or incidental to, the registration should also be registered as part of the registration order under Section 18(2) (d) of the Ordinance. [18] [19]

Finally, given that the Court acceded to the registration of the Relevant Part, the Court ordered the continuation of the Mareva injunction granted in aid of the 2024 Criminal Enforcement Proceedings. [20]

(E) Key Takeaways

This decision is significant on the following grounds:

(1) Precedent on Payment Orders from Mainland criminal proceedings: As one of the first cases on the registration of a PRC ruling under the Ordinance, especially one where the relevant ruling is a payment order given in Mainland criminal proceedings to which the intended recipient is not a party, [21] it establishes a crucial precedent that an order for payment from Mainland criminal proceedings is registrable judgment in Hong Kong.

(2) Significant Expansion of the Scope of the Ordinance: The Court confirmed that the definition of a registrable “judgment” under the Ordinance extends to payment orders embedded in criminal rulings, even where the judgment creditor was the victim, not a formal party to the case. This provides a powerful new tool for recovering the proceeds of crime located in Hong Kong.

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[1] https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=174754

[2] HD Hyundai Infracore China Co Ltd v. Li Zhiwei, HCMP 785/2024 and HCRE 84/2024, date of judgment: 24 November 2025, §2.1

[3] Ibid, §2.3

[4] Ibid, §2.4

[5] Ibid, §2.6

[6] Ibid, §2.7

[7] Ibid, §1.1

[8] Ibid, §1.3, §4.9 

[9] Ibid, §1.5

[10] Ibid, §6.1

[11] Ibid, §6.2-§6.5

[12] Ibid, §6.6

[13] Ibid, §6.7

[14] Ibid, §6.8

[15] If the sum payable under the Mainland Judgment is in a currency other than the Hong Kong dollar, the applicant is required to provide the exchange rate prevailing on the date of registration (see section 19(2) of the Ordinance).  Accordingly, if the application for registration is granted, the applicant shall provide evidence of the prevailing exchange rate at the time the draft order is re-submitted for the Court’s approval to effect the registration.

[16]  The Judgment or part, when registered in accordance with a registration order, must be registered as if the Judgment or part required the payment of a sum of money denominated in Hong Kong dollars that, on the basis of the rate of exchange prevailing at the day of registration of the Judgment or part, is equivalent to the sum payable under the Judgment or part.

[17] HD Hyundai Infracore China Co Ltd v. Li Zhiwei, HCMP 785/2024 and HCRE 84/2024, date of judgment: 24 November 2025, §8.3

[18] The Judgment or part must also be registered for the following sums as if they were required to be paid under the Judgment or part—any reasonable costs of, or incidental to, the registration of the Judgment or part, including the costs of obtaining a copy of the Judgment duly sealed by the original Mainland court.

[19] HD Hyundai Infracore China Co Ltd v. Li Zhiwei, HCMP 785/2024 and HCRE 84/2024, date of judgment: 24 November 2025, §8.4

[20] Ibid, §9.1

[21] Ibid, §7.2

Personal Liability for Costs: When Hong Kong Courts Pierce the Corporate Veil

(A) Introduction
 
The Court has jurisdiction and the discretion to order costs against a non-party under Section 52A(1)-(2) of the High Court Ordinance (Cap.4) [1] and Order 62, rule 6A of the Rules of the High Court (Cap. 4A) [2]. Such an order is exceptional and will only be made if it is just to do so in all the circumstance of the case.
 
In the context of corporate litigations, the Court's discretion is exercised cautiously, given the fundamental principle of corporate limited liability, which protects company directors and shareholders from personal liability for corporate debts.
 
This article analyzes two recent Hong Kong cases which reached divergent outcomes on substantively similar applications for non-party costs orders. In Billion Well Construction Engineering Company Limited v Long Faith Engineering Limited and others  (HCA 805/2021, HCCW 466/2021 and HCCW 32/2022, date of judgment: 27 December 2024), [3] the application for costs against the company's directors and shareholders failed. In contrast, in Target Insurance Company Ltd (in compulsory liquidation) v Nerico Brothers Ltd (CACV 223/2022, date of judgment: 17 November 2025), [4] the application for costs against the company's director succeeded. By comparing these judgments, we can identify the critical factors that the Courts weigh when deciding whether to pierce the corporate veil in the context of costs.
 
(B)  Facts
 
Case 1: Billion Well Construction Engineering Company Limited v Long Faith Engineering Limited and others  (HCA 805/2021, HCCW 32/2022 and HCCW 466/2021, date of judgment: 27 December 2024)
 
The dispute arose out of a winding-up petition presented by the Petitioner against Billion Well Construction Engineering Company Ltd (“BW”). [5] BW was a sub-contractor of a construction project undertaken by the Petitioner.  Koo and Chu were (and still are) the only shareholders and directors of BW. [6]
 
The Petitioner’s winding-up petition against BW was heard on 25 July 2022. At the hearing, the Court granted a winding-up order against BW and ordered that the costs of the Petition to be taxed and paid out of the assets of BW. [7]
 
At that time, the Petitioner’s Counsel did not seek a costs order against Koo and Chu, nor did they reserve the right to do so later, despite being aware of BW's insolvency. [8]
 
Subsequently, on 21 September 2022, the Petitioner applied to seek costs against Chu and Koo personally. This application was made: (i) 2 months after the Court made a usual winding-up order against BW; (ii) 7 months after the costs order made in HCCW 32/2022; and (iii) one month after the Petitioner had obtained an order for security for costs against BW. [9] The Court joined them as parties for the purpose of costs only on 1 November 2022. [10]
 
At a hearing on 18 April 2023, the Court raised the concern whether it was open to the Petitioner to re-open the question of costs of the Petition when it had the opportunity to ask the court to depart from the usual costs order and give directions for the purpose of ordering costs against third parties. The Petitioner’s Counsel could not provide a substantive response. [11]
 
The Petitioner advanced the following grounds in support of its application for costs against Chu and Koo: [12]
 
(1) Koo/Chu are the “real parties behind the proceedings”, given that BW had no funds in its bank accounts and they must have funded the Proceedings;
 
(2) The proceedings were conducted for Chu and Koo’s personal benefit;
 
(3) The manner by which Chu/Koo conducted the proceedings was “improper, dishonest, and oppressive in the sense that the defences put forward were all obviously bound to fail or not of sound legal basis”;
 
(4) The “singular objective” by Chu/Koo was to delay the Petitioner's enforcement of the judgment while continuing to run BW for their benefit as shareholders; and
 
(5) BW was clearly insolvent throughout this period. 
 
Case 2: Target Insurance Company Ltd (in compulsory liquidation) v Nerico Brothers Ltd (CACV 223/2022, date of judgment: 17 November 2025)

Nerico Brother Ltd (“NB”) was wound up by the Court under an order dated 3 May 2022 (the “Winding Up Order”) based on the winding-up petition presented by the Petitioner. [13] After that, NB filed a Notice of Appeal dated 30 May 2022 to appeal against the Winding Up Order. By then, Mr. Lee Cheuk Fung Jerff (“Mr. Lee”) was the sole director of NB. [14]
 
On 15 July 2022, the Petitioner applied to strike out the Notice of Appeal on the ground that the appeal disclosed no reasonable ground of appeal, and/or was an abuse of process as it was frivolous or vexatious. [15] 

Pursuant to the Judgment dated 13 April 2023, the Court of Appeal struck out the Notice of Appeal as it disclosed no reasonable ground of appeal or was an abuse of process. [16]
 
The Petitioner applied for a non-party costs order against Mr. Lee. Pursuant to the judgment dated 28 December 2023, the Court of Appeal ordered that Mr. Lee be joined as a party for the purposes of costs only, and directed that a further hearing should be fixed to finally determine the incidence of costs liability on the part of Mr. Lee. [17]
 
(C) Decisions

Same Legal Principles

In both cases, the Courts applied the same well-established legal principles governing non-party costs orders against company directors. These principles, which have been set out in Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807 and summarized by Coulson LJ in Goknur v Aytacli [2021] 4 WLR 101 at [40] ‑ [41] as follows:

“40 Without in any way suggesting that these authorities give rise to a sort of mandatory checklist applicable to a company director or shareholder against whom a section 51 order is sought, I consider that the relevant guidance can usefully be summarised in this way:

  (a) An order against a non-party is exceptional and it will only be made if it is just to do so in all the circumstances of the case (Gardiner, Dymocks, Threlfall).

  (b) The touchstone is whether, despite not being a party to the litigation, the director can fairly be described as ‘the real party to the litigation’ (Dymocks, Goodwood, Threlfall).

  (c) In the case of an insolvent company involved in litigation which has resulted in a costs liability that the company cannot pay, a director of that company may be made the subject of such an order. Although such instances will necessarily be rare (Taylor v Pace), section 51 orders may be made to avoid the injustice of an individual director hiding behind a corporate identity, so as to engage in risk-free litigation for his own purposes (North West Holdings). Such an order does not impinge on the principle of limited liability (Dymocks, Goodwood, Threlfall).

  (d) In order to assess whether the director was the real party to the litigation, the court may look to see if the director controlled or funded the company’s pursuit or defence of the litigation. But what will probably matter most in such a situation is whether it can be said that the individual director was seeking to benefit personally from the litigation. If the proceedings were pursued for the benefit of the company, then usually the company is the real party (Metalloy). But if the company’s stance was dictated by the real or perceived benefit to the individual director (whether financial, reputational or otherwise), then it might be said that the director, not the company, was the ‘real party’, and could justly be made the subject of a section 51 order (North West Holdings, Dymocks, Goodwood).

  (e) In this way, matters such as the control and/or funding of the litigation, and particularly the alleged personal benefit to the director of so doing, are helpful indicia as to whether or not a section 51 order would be just. But they remain merely elements of the guidance given by the authorities, not a checklist that needs to be completed in every case (SystemCare).

  (f) If the litigation was pursued or maintained for the benefit of the company, then common sense dictates that a party seeking a non-party costs order against the director will need to show some other reason why it is just to make such an order. That will commonly be some form of impropriety or bad faith on the part of the director in connection with the litigation (Symphony, Gardiner, Goodwood, Threlfall).

  (g) Such impropriety or bad faith will need to be of a serious nature (Gardiner, Threlfall) and, I would suggest, would ordinarily have to be causatively linked to the applicant unnecessarily incurring costs in the litigation.

41 Therefore, without being in any way prescriptive, the reality in practice is that, in order to persuade a court to make a non-party costs order against a controlling/funding director, the applicant will usually need to establish, either that the director was seeking to benefit personally from the company’s pursuit of or stance in the litigation, or that he or she was guilty of impropriety or bad faith. Without one or the other in a case involving a director, it will be very difficult to persuade the court that a section 51 order is just. Mr Benson identified no authority in which a section 51 order was made against the director of a company in the absence of either personal benefit or bad faith/impropriety. Conversely, there is no practice or principle that requires both individual benefit and bad faith/impropriety on the part of the director in order to justify a non-party costs order. Depending on the facts, as the authorities show, one or the other will often suffice.” (emphasis added)

Different Outcomes

Despite this common legal framework, the outcomes diverged due to the application of these principles to the facts.
 
Case 1: Billion Well Construction Engineering Company Limited v Long Faith Engineering Limited and others  (HCA 805/2021, HCCW 32/2022 and HCCW 466/2021, date of judgment: 27 December 2024)
 
The Court dismissed the Petitioner’s application for non-party costs orders against Chu and Koo on the following grounds:
 
(1) Inexcusable Delay and Lack of Warning: The Court found the Petitioner’s delay in seeking costs against the directors was “inexcusable”. [18] The application was filed around 2 months after the winding-up order. The Petitioner failed to warn the directors of its intention at the hearing for the Petition on 25 July 2022 or to ask the Court to reserve the question of costs. This delay deprived the directors of a reasonable opportunity to conduct the litigation differently and was contrary to the “exceptional” nature of the jurisdiction.
 
(2) Invalid Claim for Costs: The Court found that, even if the Petitioner’s delay was excused, the Petitioner had no valid grounds to seek the costs occasioned by the application for security for costs in HCA 805 after the winding-up order was made. [19] This is because the winding-up order triggered an automatic stay of HCA 805, and the Petitioner could not proceed with the application without obtaining leave from the Court.
 
(3) Failure to Prove Personal Benefit: The Petitioner failed to show that Chu and Koo were the “real parties” litigating for their personal benefit. The Court held that the evidence, at its highest, showed the proceedings were conducted for the benefit of BW. [20] The Petitioner’s argument that the directors likely benefited from company funds was speculative, and the Court noted that any such misappropriation was a matter for the liquidators to pursue, not a basis for a non-party costs order.
 
Case 2: Target Insurance Company Ltd (in compulsory liquidation) v Nerico Brothers Ltd (CACV 223/2022, date of judgment: 17 November 2025)
 
The Court allowed the Petitioner’s application for a non-party costs order against Mr. Lee on the following grounds:
 
(1) Lack of Bona Fide Belief in the Appeal’s Merits: The Court found that Mr. Lee could not have held a genuine belief that the appeal had any arguable merit. [21] This was because the grounds of appeal directly contradicted NB's consistent prior position, advanced by Mr. Lee himself, that the debt was due and payable. The Court rejected Mr. Lee’s claimed reliance on legal advice was not credible.
 
(2) Failure to Consider Creditors’ Interests: The Court found that Mr. Lee could not have a bona fide belief that it was in the best interests of NB to pursue the appeal. [22] As the director of an insolvent company, he had a duty to consider the interests of creditors. There was no evidence to show that he considered the interests of the Petitioner, NB's largest creditor, when deciding to file the appeal. His actions were for an improper purpose and not in the best interests of NB.
 
(3) Lack of Warning Not Determinative: The Court held that the Petitioner’s failure to give an early/timely warning to Mr. Lee did not render the costs order unjust. [23] There was no evidence to show that Mr. Lee would have acted differently had he been warned.
 
(D) Key Takeaways
 
The contrasting outcomes in the above cases provide helpful guidance for litigants and company directors:

(1) For Applicants: Timing is Important: An unexplained delay in applying for a non-party costs order can be fatal. The Court views this jurisdiction as exceptional and will not allow a successful party to re-open costs issues long after the fact. Further, to strengthen its position, a successful party should warn the director at the earliest opportunity and, if necessary, asking the Court to reserve the question of costs at the main hearing.

(2) For Applicants: Evidence of Impropriety Trumps Speculation: The Court will not pierce the corporate veil based on mere suspicion. Applicants must provide sufficient evidence to demonstrate that the director's conduct involved serious impropriety or that the litigation was pursued for their personal benefit, rather than for the benefit of the company.

(3) For Directors: Act in the best interests of the Company/ Creditors: The shield of limited liability is not absolute. When a company is insolvent or near insolvent, a director’s duty shift to acting in the interests of its creditors. A director who can demonstrate a genuine belief in the merits of the litigation and that it serves the interests of the company and/or its creditors is likely protected from personal costs orders. However, reliance on legal advice is not an absolute defence if the case is plainly unarguable. Pursuing litigation that harms company and/or its creditors for the benefit of the shareholders or the directors themselves constitutes serious impropriety and will attract personal liability for costs. 

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[1] https://www.elegislation.gov.hk/hk/cap4?xpid=ID_1438403154629_002

[2] https://www.elegislation.gov.hk/hk/cap4A?xpid=ID_1438403276590_001

[3] https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=165308

[4] https://legalref.judiciary.hk/lrs/common/ju/ju_frame.jsp?DIS=174496

[5] Billion Well Construction Engineering Company Limited v Long Faith Engineering Limited and others (HCA 805/2021, HCCW 32/2022 and HCCW 466/2021, date of judgment: 27 December 2024), §2

[6] Ibid, §3

[7] Ibid, §11

[8] Ibid

[9] Ibid, §35

[10] Ibid, §15

[11] Ibid, §16

[12] Ibid, §20

[13] Target Insurance Company Ltd (in compulsory liquidation) v Nerico Brothers Ltd (CACV 223/2022, date of judgment: 17 November 2025), §1

[14] Ibid, §2

[15] Ibid, §3

[16] Ibid, §4

[17] Ibid, §5

[18] Billion Well Construction Engineering Company Limited v Long Faith Engineering Limited and others (HCA 805/2021, HCCW 32/2022 and HCCW 466/2021, date of judgment: 27 December 2024), §36

[19] Ibid, §39

[20] Ibid, §40

[21] Target Insurance Company Ltd (in compulsory liquidation) v Nerico Brothers Ltd (CACV 223/2022, date of judgment: 17 November 2025), §29-35

[22] Ibid, §36-40

[23] Ibid, §44