CHINA REAL ESTATES INVESTMENT HOLDINGS LTD v. GOLD BLESS INTERNATIONAL INVEST LTD

HCCT 46/2017

[2018] HKCFI 1868

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 46 OF 2017

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D E C I S I O N

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1.  Under O 24 r 7A (3), and application for an order under s 42 (1) of the High Court Ordinance must be supported by an affidavit, which must specify or describe the documents in respect of which the order is sought; and show that the documents are relevant to an issue arising or likely to arise in the proceedings, and that the person against whom the order for discovery is sought is likely to have or have had such documents in his possession, custody or power.

2.  It is essential to bear in mind that these proceedings were commenced for leave of the court to enforce an arbitral award made on 26 September 2016.  An order was already granted on 11 September 2017, for leave to enforce the award in the same manner as a judgment of this Court. Under the Award, the Respondent is to pay to the Applicant the sum of HK$25.3 million. 

3.  No application to set aside the order granting leave (“9/17 Order”) has ever been made, and the time to set aside the 9/17 Order has already expired. 

4.  On 6 November 2017, a charging order nisi was made by the court, whereby the Respondent’s interests in the shares in Green International Holdings Limited, were charged.

5.  I have heard submissions made by the parties, and I have reviewed the evidence filed in support and in opposition to the application made in the name of the Respondent for discovery against a 3rd party named in these proceedings, namely Mr Yang who is a shareholder and director of the Respondent.  I am not satisfied that an order for discovery should be made under O 24 r 7A (2), and the following are my brief reasons. 

6.  Any application to set aside an arbitral award, and any application to refuse enforcement of an arbitral award, can only be made on the exclusive grounds set out in the Arbitration Ordinance (“Ordinance”). In this case, the relevant section for refusing enforcement of the Mainland Award is s 95 of the Ordinance.

7.  Nowhere in the evidence filed on behalf of Mr Yu, who claims to be acting on behalf of the Respondent, has he or his representatives specified the precise ground on which the 9/17 Order should be set aside and enforcement of the Award can be refused.  The Respondent has only been able to make broad, bare and unparticularized assertions: that there may be “suspicious features in dealings between Mr Yang (the director of the Respondent) and the Applicant” (in whose favor the Award was made), that there is a “strong scent of foul play”, that there are “potential breaches” on the part of Mr Yang in relation to various transactions, and that there is some unparticularized collusion between the Applicant and Mr Yang against the Respondent.  Mr Yu in fact conceded and admitted in his affirmation that as at April 2018, he was still “unable to raise more concrete evidence that there is collusion or fraud involved in the dealings between (the Applicant), Green (through Mr Yang), the Respondent (through Mr Yang) and Mr Zhan”. 

8.  Moreover, it has not been shown how any suspicious features which may affect the so-called Acquisition between the Applicant and Green Capital would necessarily affect the underlying transaction between the Applicant and the Respondent, in relation to which the Award was made.  All that can be said by Mr Yu’s solicitor in his affirmation is that the Award “may be set aside”, on unspecified grounds, as there is the need for explanation and investigation into the “possibility of hidden schemes under the table”.  Without any particulars of the suspected wrongdoing or the mala fide and fraud speculated to have possibly taken place, I cannot see how the documents sought can be said to be relevant to “any issue arising or likely to arise” in these proceedings for enforcement of the Award, whether as to the existence of any ground to set aside the 9/17 Order, or as to the Respondent’s beneficial interests in the shares sought to be charged. 

9.  Essentially, what Mr Yu is saying is: I want to find out if there was any possible wrongdoing by the director of the Respondent which can be raised to constitute an arguable defence to the claims made by the Applicant under the agreement which is the subject matter of the arbitration leading to the Award, which is now being enforced.  That is clearly impermissible fishing, and cannot be the basis of a discovery order.  To borrow the phrase used in Lady Anne Tennant v Associated Newspapers Group Ltd which was in the context of O 14 proceedings, Mr Yu is only seeking to investigate alleged obscurities in the hope that something will turn up on the investigation, and his case at this stage remains in the realm of mere surmise.

10.  Further, Mr Yu already obtained from the BVI court, the forum where the Respondent is incorporated, an order for documents to be provided by Mr Yang, which covers the same scope of the documents sought in these proceedings.  Mr Yang has made disclosure of some of the documents and has filed an affirmation to state that he is not in possession of any other documents.  As Mr Yang rightly pointed out, if Mr Yu contends (and can establish) that there are further documents in existence and in Mr Yang’s possession, he can take further action in the BVI court to compel discovery or for contempt. Bearing in mind the underlying objectives of the CJR, I am not satisfied that an order for discovery of the type now sought is either necessary in these proceedings for disposing fairly of the cause or matter, or for saving costs, or is in any way proportionate, or procedurally economical.

11.  I agree that the wide and unwarranted scope of the discovery sought, on suspicion and speculation, lacking in particulars of the fraud, collusion and breach of fiduciary duties alleged, shows that the application made is an unwarranted fishing expedition and an abuse of process, which is dismissed with costs, to be paid by Mr Yu.