CANDEY defeats application for security for costs brought by Hong Kong billionaire in Cross Border Insolvency Proceedings in respect of his £14.24 billion bankruptcy

On 28 February 2025, Deputy ICC Judge Frith sitting in the High Court in London gave Judgment in favour of CANDEY’s clients in ongoing cross-border insolvency proceedings.

CANDEY acts for the Trustees in bankruptcy in one of the world’s largest ever bankruptcies. The Trustees were appointed over the estate of Mr Pan Sutong, a billionaire who was made bankrupt in Hong Kong in July 2022 with proof of debts totalling £14.24 billion.

In November 2024, the Trustees issued applications pursuant to the Insolvency Act 1986 and the Cross Border Insolvency Regulations 2006 to recognise the Hong Kong bankruptcy in the UK (having already secured recognition of the bankruptcy in Australia, BVI and Singapore). The Trustees believe that Mr Pan has an interest in substantial assets in the UK, including an apartment in One Hyde Park via a shareholding in a BVI company. The apartment, in respect of which the Trustees obtained an injunction in the BVI in October 2024 preventing its disposal, is estimated to be worth in the region of £55 million.

Mr Pan intends to oppose the Recognition Applications. As part of that opposition, he issued an application for security for costs against the Trustees on the basis that they are based in Hong Kong and are unable to meet an order for adverse cost (i.e. the test set out in the English Civil Procedure Rules). The Trustees opposed the application on the basis that, in fact, the test the Court must apply when considering an application for security against a foreign officeholder in these circumstances is as set out in the leading authority of Re Dalnyaya Step LLC i.e., whether the application is “exceptional”.

Dalnyaya was an exceptional case. Not only was the foreign representative located in the Russian Federation, where it was conceded that it would be practically impossible to enforce a costs order against him, but also the creditors in question were challenging the grant of the recognition order on public policy grounds and the foreign representative admitted the creditors’ challenge had a reasonable prospect of success.

Counsel for Mr Pan argued that it was the Trustees’ conduct which brought the case within the “exceptional” rule in Dalnyaya because they had “stonewalled” Mr Pan’s requests for financial information, and were trying to “railroad” the Recognition Applications. In response, Counsel for the Trustees argued that the “pejorative” allegations made against the Trustees were wrong and that, in any event, nothing within the evidence filed by Mr Pan came close to the threshold of “exceptional” circumstances. Counsel for the Trustees also queried why Mr Pan was making the application and challenging the Recognition Applications in circumstances where he had no “economic interest” in a “catastrophically insolvent” estate.

Deputy ICC Judge Frith dismissed the application. He agreed that Dalnyaya was exceptional, but that Mr Pan’s application was not. The Judge also found that the Trustees’ conduct did not fall within the exceptional criteria. The Judge was concerned that such a finding could disrupt the operation of the Cross Border Insolvency Regulations. In dismissing the application, the Judge awarded the Trustees their costs on the indemnity basis.

The CANDEY team acting for the Trustees are Richard Singleton (Partner), Emily Higgins (Senior Solicitor), Dainyah Mason (Pupil Barrister) and Damian Remias (Paralegal).

CANDEY instructed Donald Lilly (4 Stone Buildings).

Seladore Legal acted for Mr Pan and instructed Daniel Thorpe (Radcliffe Chambers)