LI YIDONG AND ANOTHER v. CHEN PING AND OTHERS

HCA 2495/2024

[2026] HKCFI 2563

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2495 OF 2024

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BETWEEN

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DECISION

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Introduction and Background

1.  This is my decision in respect of the following three Summonses:

(1) An application by the 1^st Defendant (“D1”), the 2^nd Defendant (“D2”) and the 5^th Defendant (“D5”) (collectively, “D1,2&5”) to discharge the ex parte injunction order obtained by the Plaintiffs (“Ps”) from Andrew Chan J (“the Judge”) on 17 December 2024 as varied and continued by Recorder William Wong SC on 27 December 2024 by Summons dated 17 July 2025 (“Discharge Summons”)[1];

(2) An application by Ps for an order that judgment be entered against D1,2&5 by Summons dated 2 September 2025 (“Default Judgment Summons”); and

(3) An application by D1,2&5 for leave to apply out of time for relief from the sanction imposed by the unless order granted by Master Ho on 4 July 2025 (“Unless Order”) and for relief from the sanction imposed that unless by 18 July 2025, D1,2&5 do file and serve their Defence and Counterclaim or an application under O. 12, r. 8 of the Rules of the High Court, Cap. 4A (“RHC”) they be debarred from doing so and Ps be at liberty to apply for judgment to be entered with costs by Summons dated 10 September 2025 (“Relief Summons”).

2.  The background and a summary of Ps’ claim were set out at paragraphs 2 to 5 of my Decision dated 30 September 2025 (see [2025] HKCFI 5963) and will not be repeated herein.

3.  The following procedural history are relevant for present purposes:

(1) On 17 December 2024, Ps made an ex parte application for and obtained from the Judge a worldwide Mareva and proprietary injunction (“Ex Parte Order”) against the Defendants (“Ds”);

(2) On 18 December 2025, Ps issued the Writ of Summons against Ds;

(3) By Inter-Partes Summons dated 20 December 2024 (“Variation and Continuation Summons”), Ps sought to vary the Ex Parte Order and for continuation of the varied Ex Parte Order until trial and disclosure under s. 21 of the Evidence Ordinance, Cap. 8;

(4) On 27 December 2024, following a hearing whereby Ds were absent but being satisfied that valid service had been effected, Recorder William Wong SC varied and continued the Ex Parte Order and made disclosure orders in terms of the Variation and Continuation Summons (“Varied Injunction Order”);

(5) On 4 February 2025, LP filed an acknowledgment of service for D1,2&5;

(6) On 13 March 2025, Ps filed the Statement of Claim (“SOC”);

(7) On 26 March 2025, Ps issued a Summons for the issue of letters of request against D1 and D2 (which was dismissed by me on 30 September 2025);

(8) By letter dated 9 April 2025, LP wrote to AH to seek Ps’ consent to an extension of time of 42 days for the filing and serving of a Defence and Counterclaim (“DCC”) but no response was given by AH;

(9) On 10 April 2025, D1,2&5 applied by Summons for an extension of time of 42 days to file and serve their DCC but did not attend the hearing scheduled on 23 April 2025 and the Summons was dismissed by Master C K Chan;

(10) On 24 April 2025, D1,2&5 applied by another Summons for an extension of time of 21 days to file and serve their DCC;

(11) On 6 May 2025, Master Hui extended time for D1,2&5 to file and serve their DCC by 14 days from the date of the order;

(12) By letter dated 20 May 2025, LP sought Ps’ consent for an extension of time of 28 days for D1,2&5 to file their DCC;

(13) On the same day, D1,2&5 applied by another Summons for an extension of time of 28 days to file and serve their DCC or take out an application under O. 12, r. 8 of RHC;

(14) By Order dated 29 May 2025, Master Matthew Leung extended time to D1,2&5 to file and serve their DCC by 28 days from the date of the order;

(15) On 11 June 2025, Ausvic GP applied to intervene in these proceedings and to stay the same as between it and P1 (which was dismissed by me on 30 September 2025);

(16) On 26 June 2025, D1,2&5 applied by Summons for yet another extension of time to file and serve their DCC or to take out an application under O. 12, r. 8 of RHC by 28 days from the order;

(17) On 4 July 2025, Master Ho made the Unless Order;

(18) On 17 July 2025, D1,2&5 took out the Discharge Summons;

(19) On 2 September 2025, Ps took out the Default Judgment Summons;

(20) On 3 September 2025, I gave directions for the filing of evidence in respect of the Discharge Summons and adjourned the hearing of the Discharge Summons for substantive argument;

(21) On 10 September 2025, D1,2&5 took out the Relief Summons;

(22) On 25 September 2025, by consent, I gave directions for the filing of evidence in respect of the Default Judgment Summons and Relief Summons and that both Summonses be adjourned for substantive argument to be heard together;

(23) By a joint letter dated 23 October 2025, LP and AH proposed that the Default Judgment Summons and the Relief Summons be heard together with the Discharge Summons; and

(24) On 28 October 2025, I directed the Discharge Summons be listed to be heard together with the Default Judgment Summons and Relief Summons.

4.  No DCC has been filed by D1,2&5 (although a draft DCC has been exhibited in the affirmations filed in respect of the Discharge Summons and Relief Summons) and this is the basis for Ps’ application for default judgment.

5.  In respect of the Discharge Summons, the following affirmations were filed:

(1) 5^th Affirmation of Chung Ting Hin Alex dated 17 July 2025;

(2) 7^th Affirmation of Chen Ping dated 29 July 2025;

(3) 8^th Affirmation of Li Yidong dated 8 December 2025; and

(4) 10^th Affirmation of Chen Ping dated 20 January 2026.

6.  In respect of the Default Judgment Summons, the following affirmations were filed:

(1) 5^th Affirmation of Li Yidong dated 2 September 2025;

(2) 3^rd Affirmation of Chong Moon Hing dated 23 October 2025; and

(3) 12^th Affirmation of Wong Chun Ho Jonathan dated 17 December 2025.

7.  In respect of the Relief Summons, the following affirmations were filed:

(1) 2^nd Affirmation of Chong Moon Hing dated 10 September 2025 (“Chong 2^nd”);

(2) 7^th Affirmation of Li Yidong dated 23 October 2025; and

(3) 4^th Affirmation of Chong Moon Hing dated 19 November 2025 (“Chong 4^th”).

8.  At the hearing of the three Summonses, Mr Wong, counsel, appeared for Ps and Mr Phang and Mr Tse, counsel, appeared for D1,2&5.

Discussion

9.  Logically, the Relief Summons and the Default Judgment Summons should be considered together. If D1,2&5 succeed in seeking relief against the sanction imposed by the Unless Order, it follows that default judgment cannot be entered against D1,2&5. On the other hand, if D1,2&5 fails to obtain relief against sanction, in default of any defence, the court will scrutinize whether the matters as pleaded in the SOC (which are impliedly admitted) entitle Ps to the judgment sought.

10.  The Discharge Summons can be considered separately.

Re: Relief Summons and Default Judgment Summons

11.  It is undisputed that by the deadline stipulated in the Unless Order, D1,2&5 did not file any DCC. However, it was submitted by Mr Phang that by taking out the case management stay application in paragraph 2 of the Discharge Summons, for all intents and purposes, there was compliance with the Unless Order. Essentially, it was contended that an application for case management stay is equivalent to an application for a stay under O. 12, r. 8 of RHC. Mr Phang also relied upon that the fact that LP has said on oath that reference to taking out an application under O. 12, r. 8 of RHC was intended to refer to the case management stay as proposed in their letters dated 16 May 2025 to AP. However, that latter argument can be disposed of quickly. What was subjectively intended is clearly neither here nor there when the fact of the matter is that in their own Summons they expressly sought for an extension of time to file and serve their DCC or take out an application under O. 12, r. 8 of RHC. There was never any application to amend the Discharge Summons or vary the Unless Order.

12.  Neither do I accept the submissions that D1,2&5 could have obtained a case management stay under O. 12, r. 8 of RHC or that the breach of the Unless Order was only technical.

13.  Firstly, it is clear that the jurisdictional basis of a case management stay (which is under the court’s inherent jurisdiction, O. 1B, r. 1(2) of RHC and s. 16(3) of the High Court Ordinance, Cap. 4) is totally different to a stay under O. 12, r. 8(2) of RHC.

14.  Secondly, it is also clear that the primary purpose of each is very different. The purpose of a case management stay is for the control of parallel proceedings. Whereas O. 12, r. 8 is concerned with whether the court has jurisdiction over the defendants. See the explanation by K Yeung J in China Shanshui Cement Group Limited & Ors v Tianrui (International) Holding Company Limited & Ors [2020] HKCFI 3043 at §§74-77.

15.  Thirdly, the duration of a case management stay and stay under O. 12, r. 8 of RHC is different. A stay pursuant to O. 12, r. 8 of RHC is ordinarily permanent whereas a case management stay is usually temporary.

16.  As a result, the legal test and considerations are different. With such obvious difference, it would be disingenuous for LP to say that by paragraph 2 of the Discharge Summons they have complied with the Unless Order.

17.  There was plainly a breach of the Unless Order and the effect of the sanction takes effect immediately such that D1,2&5 have been debarred from filing any defence if no relief is granted.

18.  O. 2, r. 4 of RHC provides that:

“Where a party has failed to comply with a rule or court order, any sanction for failure to comply imposed by the rule or court order has effect unless the party in default applies to the Court for and obtains relief from the sanction within 14 days of the failure.”

19.  Undisputedly, the Relief Summons was not taken out within 14 days of the failure to comply with the Unless Order. The court in considering whether to extend time will consider all relevant factors in particular: (1) the length and reason of the delay; (2) the merits of the proposed application for relief from sanction; and (3) the degree of prejudice to the other party. See Cybernetics 1 Ltd v Success Development Information Technology Company Limited & Ors [2025] HKCFI 1349 at §20 per Lok J.

20.  For the purposes of considering the merits of the proposed application for relief, O. 2, r. 5 of RHC provides that the court shall consider all the circumstances of the case including the following:

(a) The interest of the administration of justice;

(b) Whether the application for relief has been made promptly;

(c) Whether the failure to comply was intentional;

(d) Whether there is a good explanation for the failure to comply;

(e) The extent to which the party in default has complied with other rules and court orders;

(f) Whether the failure to comply was caused by the party in default or his legal representative;

(g) In the case where the party in default is not legally represented, whether he was unaware of the rule or court order, or if he was aware of it, whether he was able to comply with it without legal assistance;

(h) Whether the trial date or the likely trial date can still be met if relief is granted;

(i) The effect which the failure to comply had on each party; and

(j) The effect which the granting of relief would have on each party.

21.  I am aware that the above factors are not exhaustive but it is helpful as a checklist of relevant factors. They serve to highlight the grant of relief is discretionary and one must have regard to facts and circumstances of the case in the exercise of discretion bearing in mind the different interest and different factors involved. It is a multi-faceted balancing exercise with no single factor being conclusive. See: The Incorporated Owners of Yue Sun Mansion v Lake Side Elderly Centre Limited (unrep) HCMP 556/2017, 25 October 2017 per Lam VP (as he then was) at §12 and China Medical Technologies, Inc. & Ors v The Bank of East Asia, Limited [2023] HKCFI 2156 per Ng J at §§85-86.

22.  Going through the relevant factors:

(a) The interests of the administration of justice require that orders of the court must be complied with and the parties are held to their obligation to assist the court in furthering the underlying objectives in O. 1A of RHC. It is not in the interests of justice to relieve a party from his obligation under an unless order in circumstances where he has consciously decided not to comply with it. That said, I bear in mind that under O. 1A, r. 2, the court shall always recognize that the primary aim in exercising the powers of the court is to secure the just resolution of disputes in accordance with the substantive rights of the parties. If relief is not granted and given Ps’ application for default judgment, the dispute between the parties will not go to trial and judgment will be entered against D1,2&5 with serious allegations against them deemed admitted;

(b) The application for relief has not been made promptly. The deadline for filing the DCC or taking out an application under O. 12, r. 8 was 18 July 2025 and no application for relief from sanction was made until 10 September 2025. This is not a case where a party has missed the deadline by a few days. There is no explanation for the delay of 7 to 8 weeks since the expiry of the deadline in Chong 2^nd save the assertion that the delay was not intentional, was excusable and there was no prejudice caused to Ps. In Chong 4^th, it was also explained that D1,2&5 believed they had complied with the Unless Order until it was suggested otherwise by Ps on 1 September 2025. Plainly, as explained above, there are evidently clear differences between a case management stay and a stay under O. 12, r. 8(2) which should have been known by LP without AH pointing it out. In any event, there is no explanation why they waited a further 9 days to take out the Relief Summons. I am not persuaded that there was any good excuse for the delay;

(c) I am not prepared to accept the non-compliance of the Unless Order was not intentional. At the very least, there was a conscious and intentional failure to take out the application for relief from sanction after AH’s stance was indicated by taking out the Default Judgment Summons on behalf of Ps;

(d) An explanation has been given by LP but as mentioned above, given the clear differences between a case management stay and a stay under O. 12, r. 8, I do not regard it as a good explanation;

(e) There has been other failures to comply with court orders or procedures including: (i) D1,2&5 were aware of the Ex Parte Order by 20 December 2024 but did not attend the return date on 27 December 2024; (ii) the acknowledgment of service was only filed by D1,2&5 on 4 February 2025; (iii) there was no attempt to comply with the disclosure order under the Varied Injunction Order until 8 April 2025, following the making of an unless order on 7 April 2025 by consent; (iv) LP failed to attend the hearing for D1,2&5’s time summons for extending time to file their DCC on 23 April 2025; and (v) the Relief Summons was not taken out within 14 days;

(f) The failure to comply with the Unless Order was caused by the legal representatives;

(g) This factor is not applicable;

(h) I take into account that no trial date has been fixed and the proceedings are at an early stage;

(i) The failure to comply with Unless Order no doubt has caused delay to these proceedings. Given Ps are the victim of fraud, I accept that delay may affect the ability for Ps to trace their monies. However, in this case I also note that the transfers of Ps’ funds were made between July 2019 and October 2021 so Ps has always faced this difficulty even if Ds had not failed to comply with the Unless Order. I also bear in mind that although not filed Ps had sight of the draft DCC as early as 17 July 2025 just before the deadline imposed by the Unless Order; and

(j) The refusal to grant relief would mean that judgment would be entered against Ds without a trial when serious allegations of fraud and misappropriation of trust money is made against them which no doubt is a draconian consequence. It has been held that the question of proportionality of the sanction in the circumstances of the case is a weighty factor. On the other hand, to grant relief would be to deprive Ps of a substantive advantage which has come about by reason of the sanction imposed by the Unless Order and D1,2&5 can have their defence tested at trial.

23.  Overall, considering all the circumstances and relevant factors, I would grant extension of time to seek relief and grant the relief from sanction to D1,2&5. There was no doubt substantial delay in seeking relief for which I am not satisfied good reasons were given to explain the delay. However, I have born in mind the merits of the application for relief from sanction, in particular the draconian consequences to D1,2&5 (whose draft DCC is not merely a bare denial and should go to trial) which is a weighty factor, and thus substantial prejudice if an extension of time to apply for relief was not granted.

24.  It therefore follows that default judgment cannot be entered against D1,2&5.

Re: Discharge Summons

25.  The applicable legal principles for the discharge of an ex parte order was comprehensively set out by DHCJ Au-Yeung (as she then was) in Velatel Global Communications Inc & Anor v Chinacomm Limited & Ors (unrep) HCA 1978/2011, 26 October 2012, at §§25-31. I would gratefully adopt the summary of the key points by DHCJ Alexander Stock SC in Platinum Century Limited & Ors v Sunfund Asia Capital Holdings Company Limited & Ors [2022] HKCFI 3334 at §28:

(1) On an ex parte application, the applicant must proceed with the highest good faith;

(2) The applicant’s duty is to make a full and fair disclosure of all the material facts. The material facts are those which it is material for the judge to know in dealing with the application. Materiality is decided objectively by the court and not by the assessment of the applicant or his legal advisers;

(3) In considering what matters should be disclosed, the test is whether the facts are relevant to the exercise of the court’s discretion, regardless of whether they are relevant to the merits of the claim, and irrespective of whether the matters, if disclosed, would have caused the court to refuse the ex parte order. The test is whether the court should have had the matters in the weighing scales;

(4) The applicant must make proper inquiries before making the application. The duty of disclosure applies not only to material facts known to the applicant, but also to any additional facts which would have been known following such inquiries;

(5) The duty to disclose cannot be fulfilled by simply exhibiting voluminous documents mentioned in the supporting affidavit, without making any distinct reference to the points in the body of the affidavit itself or when addressing the judge at the hearing;

(6) If material non-disclosure is established, the court will be astute to ensure that a plaintiff who obtains an ex parte injunction without full disclosure is deprived of any advantage he may have derived by breach of duty;

(7) Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge. Whether the non-disclosure was innocent (in the sense that the fact was not known to the applicant or its relevance was not perceived), is an important consideration, but not decisive; due to the applicant’s duty to make all proper inquiries and give careful consideration to the case being presented; and

(8) It is not for every omission that the injunction will be automatically discharged. A locus poenitentiae may sometimes be afforded. The court has a discretion, notwithstanding material non-disclosure which justifies or requires immediate discharge of the ex parte order, nevertheless to continue the order or make a new order on terms.

26.  The duty of full and frank disclosure extends to matters of law, encompassing significant factual, legal and procedural aspects of the case: see ibid at §29.

27.  I would also agree with the following observations of the Deputy Judge ibid at §40:

“… The requirements of an applicant at an ex parte hearing are, of course, stringent, as summarised above. They have, however, to be tempered by realism and commonsense, bearing in mind features such as the urgency of preparations; the number of different issues which fall to be canvassed at the hearing (and disclosed to the court); the difficulty of anticipating the precise arguments which will be run by the opposite side, precisely how they will be run, and the emphasis which will be attached to each such argument; and the danger of the principles becoming an instrument of injustice or an unattainable counsel of perfection, by reference to criticism levelled at the hands of a meticulous opposing legal team with the benefit of hindsight and time. …”

28.  As for whether to exercise the discretion to grant a fresh injunction notwithstanding the ex parte order was obtained in breach of the duty of full and frank disclosure, as set out by the Court of Appeal in Excel Courage Holdings Ltd v Wong Sin Lai [2014] 3 HKLRD 642 at §§56-58, these were summarized ibid at §30:

(1) If the court finds that there have been breaches of the duty of full and fair disclosure, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial;

(2) Notwithstanding that general rule, the court has jurisdiction to continue or re-grant the order;

(3) That jurisdiction should be exercised sparingly, and should take account of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure;

(4) The court should assess the degree and extent of the culpability with regard to non-disclosure. It is relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge. Equally, there is no general rule that a deliberate breach will attract that sanction;

(5) The court should assess the importance and significance to the outcome of the matters which were not disclosed. The fact that the judge might have made the order anyway is of little if any importance;

(6) The court can weigh the merits of the plaintiff’s claim, but should not conduct a simple balancing exercise in which the strength of the plaintiff’s case is allowed to undermine the policy objective of the principle;

(7) The application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice;

(8) The jurisdiction is penal in nature and the court should therefore have regard to the proportionality between the punishment and the offence;

(9) There is a tension between two kinds of public interest in this situation. First, the court should take account of the need to protect the administration of justice and uphold the requirement of full and fair disclosure. So if material non-disclosure is established, the court will be astute to ensure that a plaintiff is deprived of any advantage to bring home to litigants the serious consequences of non-disclosure (sometimes described as “the golden rule”). The second is the general duty to do justice so that the application of the golden rule must not be allowed to become the instrument of injustice in a particular case;

(10) There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the court should take into account all relevant circumstances. Each case turns very much on its facts; and

(11) In exercising this discretion, the court looks both backwards and forwards. The overriding question for the court is what is in the interests of justice in the particular circumstances of the case.

29.  It was submitted by Mr Phang that there were 8 material non-disclosure. In gist, these were the failure to disclose to the Judge that:

(1) Despite their claim for rescission of the Subscription Agreement, the counterparty was Ausvic GP who was not a party (“MND1”);

(2) No allegation was made and no evidence was adduced by Ps that Ausvic GP was responsible for the representations made by D1/D2 and had the Judge been made aware would have made inquiries as to the legal basis on which Ps could rescind the Subscription Agreement (“MND2”);

(3) No evidence was adduced by Ps on reliance on Ds’ representation and the Judge’s attention was not drawn to a no-reliance clause in the Subscription Agreement which precluded P1 from asserting reliance on any pre-contractual statements (“MND3”);

(4) Ps have no case of fraudulent misrepresentation against D2 (“MND4”);

(5) There was no allegation or evidence that the alleged representations made by D1 were false (“MND5”);

(6) The purported admission by D1 at best suggests that he misappropriated some US$3M for another investment but not the entirety of Ps’ investment funds (“MND6”);

(7) There was an arbitration agreement in the Subscription Agreement and when seeking rescission of the Subscription Agreement there can be no dispute that such claim falls within the scope of the arbitration agreement (“MND7”); and

(8) D3 to D5 no longer retained or held Ps’ funds for the purposes of seeking a proprietary injunction (“MND8”).

30.  In Mr Phang’s oral submissions, he accepted that MND1, MND2, MND3 and MND7 relate to the relief for rescission and can be considered together.

31.  As I had observed to Mr Phang at the hearing, rescission is only one of the many reliefs claimed by Ps in the draft Writ placed before the Judge. What Ps had to demonstrate to the Judge was a serious issue to be tried or good arguable case on the merits of at least one cause of action which can give rise to monetary relief (for the purposes of seeking a Mareva injunction) and proprietary relief (for the purposes of seeking a proprietary injunction). Even if not each and every relief is sustainable (because say it is plainly unmeritorious or they are alternative remedies for which Ps must elect), that does not mean that there was material non-disclosure or misrepresentation.

32.  Besides, in the present case, it is clear from the Skeleton Submissions of Ps placed before the Judge, highlighted in bold in the very first paragraph, Ps claim that there was a fraud and misappropriation of money held on trust. There were various references to “fraud” and “fraudulent scheme” throughout. In particular, under the heading of “good arguable case/serious issue to be tried”, it was stated that Ps primarily assert a proprietary claim against Ds given: (1) the very strong indications that P1 was a victim of a fraudulent scheme and was induced to transfer various sums of money as per D1’s and/or D2’s instructions; (2) the clear admission on the part of D1 during the phone calls of 15 November 2024 and 16 November 2024 (collectively, “the 15 and 16 Nov Calls”) that Ps’ monies were misappropriated for investment in Binance and were defrauded of investment funds; (3) there was also clear evidence of fraudulent conduct by D2; and (4) multiple indicators point to the Ausvic Fund and/or D1’s purported investments of P1’s funds were fraudulent and non-existent (see paragraph 20). The fact that Ds had acted fraudulently and P1 was a victim of investment fraud were relied upon to establish a risk of dissipation and cases involving fraud were cited (see paragraphs 29-30). In the Supplemental Skeleton Submissions, in the very first paragraph, it was stated that the submissions were filed to further assist the Judge on the specific issue of fraud in a situation where there was a purported “investment agreement” under which the funds were transferred and such “investment agreement” contained an arbitration clause. There was also the further citations of two cases at paragraph 4 (巨展皮具香港有限公司 v 上海兄弟海運有限公司 & Anor [2018] HKCFI 53 and Mesirow Financial Administrative Corporation v Best Link Industrial Co., Limited (unrep) HCMP 1846/2015, 25 January 2016) both involving victims of fraud to support the contention that constructive trust directly attaches against Ds insofar as they have been fraudulent receipt of the Sum, rendering proprietary interest in such sums recoverable and traceable in equity and that this was regardless of the purported Subscription Agreement and/or Loan Agreement.

33.  Reading the Skeleton Submissions and the Supplemental Skeleton Submissions of Ps placed before the Judge (collectively, “Ps’ Skeletons”) there can be no doubt that Ps’ primary case was based on: (1) fraud for which equity will impose a constructive trust over funds held by fraudulent recipients; and (2) that D1 and D2 misappropriated Ps’ monies in breach of trust. The relief of rescission of the Subscription Agreement was only first mentioned in the Supplemental Skeleton Submissions. Even so, it was made clear that the primary case of Ps was that the “purported agreements” were signed after the transfer of funds and were not genuine (see paragraphs 7.4 and 35 of Skeleton Submissions) and were void ab initio given the fraudulent scheme by Ds to procure funds from P1 (see ibid paragraph 40.2 and paragraph 3.3 of Supplemental Skeleton Submissions).

34.  In light of the above, I do not accept, as submitted by Mr Phang, that Ps’ proprietary claims are further to or consequential upon the rescission of the Subscription Agreement. On the authorities submitted to the Judge (巨展皮具香港有限公司and Mesirow Financial Administrative Corporation), and as is well-established, the alleged fraud are independent basis for a proprietary claim to be brought and not consequential for a claim for restitution. Mr Phang relied heavily upon China Cruise Line Ltd v Star Yield Corporation Ltd [2021] HKCFI 2970 for the proposition that upon rescission of a contract induced by fraudulent misrepresentation, the defendant would hold his legal title of the transferred property on resulting trust for the victim of a fraudulent misrepresentation but not before because as explained by Recorder Victor Dawes SC at §38, a contract obtained by a fraudulent misrepresentation is voidable not void. However, that case is clearly distinguishable when in that case the funds were advanced to the defendants pursuant to an agreement. Even in that case, at §38(2), the learned Recorder accepted that there is an exception, “where a contract is not merely induced by fraudulent misrepresentation but is itself the instrument of fraud and no more than a vehicle for obtaining fraud by false pretences”, “akin to theft”, then the contract is not only vitiated but is wholly fictitious and devoid of any legal effect. Whilst he said that the party seeking to rely on this exception faces a very steep hurdle, that is the case at trial where fraud has to be proven to a high standard of proof. However, for the purposes of obtaining a Mareva and proprietary injunction, the standard is merely a good arguable case and a serious issue to be tried respectively.

35.  As for MND4 and MND5, which Mr Phang in oral submissions said related to the causes of action based on the tort of deceit and fraudulent misrepresentation, they can also be considered together. Although in the draft Writ and the Affirmation of Li (“Li 1^st”) filed in support of the Ex Parte Order, Ps claimed that there were fraudulent misrepresentations and an unlawful means conspiracy by D1 and D2, dishonest assistance by D3-D5 and sought restitution, fraud and misappropriation of trust assets were also relied upon: see sections B3 and C of Li 1^st. When the application was made before the Judge, as evident from Ps’ Skeletons, no real reliance was placed on the causes of action based on tort of deceit/fraudulent misrepresentation or unlawful means conspiracy. I do not regard any failure to refer to these causes of action and to conduct a full analysis of the merits of Ps’ claim under those causes of action would amount to material non-disclosure when as mentioned, as clearly indicated, Ps’ primary case was based on fraud and misappropriation of Ps’ monies in breach of trust.

36.  As for MND6, Mr Phang submitted that there was material non-disclosure to draw to the Judge’s attention to the admission by D1 during the 15 and 16 Nov Calls was for misappropriation of only US$3M. In the Skeleton Submissions at paragraph 10.2, reference was made to Li 1^st, §§51.2-51.3. Whilst no other figure other than $3M were expressly mentioned in those paragraphs, there is at least an arguable case that D1 did admit to using P1’s funds for a purpose other than for investment in the Ausvic Fund. Even if there was no express reference to $9M, there can be no complaint that there was material non-disclosure of that matter when the relevant conversation relied upon was set out in the body of Li 1^st, §§51.2 -51.3, which one can have expected the Judge to have read and formed his own views. Mr Wong also confirmed that in fact at the hearing, the Judge was taken to the actual transcripts of the telephone conversation in the exhibits of Li 1^st. Having taken the Judge to the transcripts, there can be no complaint that the Judge’s attention was not drawn to what was admitted or not admitted by D1 when he had those transcripts to read for himself.

37.  In any event, in Li 1^st at §52, it was stated that the above recordings constituted clear and unequivocal evidence that the funds or at least part thereof were not invested in Ausvic Fund and that P1 had been defrauded of his investment funds. The Judge must have read at least the body of Li 1^st and would not have been misled or not have known what Ps’ case was.

38.  Lastly, in respect of MND8, it was submitted that there was a failure to disclose that there was no reasonable evidence that D3 to D5 still retained or held Ps’ funds for the purposes of seeking a proprietary injunction. However, in the Skeleton Submissions at §13.4, the Judge was informed of the principle that to justify the grant of a proprietary injunction, the plaintiff should ordinarily adduce some reasonable evidence of the existence of the specific asset or its traceable proceeds and the same is being held by or under the control of the defendant but if it has been dissipated and can no longer be traced a proprietary injunction cannot ordinarily be granted which was taken from Americhip Inc v Zhu Hongling & Ors [2021] HKCFI 2073 which at §5 had referred to Zhang Yan & Ors v ASA Bullion Limited [2019] HKCFI 179. Furthermore, in Li 1^st at §64.10, the Judge was informed that it may be that Ps’ investment funds have all been dissipated already, and Ps had stated that “in order to justify the grant of a proprietary injunction, the plaintiff should ordinarily adduce some reasonable evidence of the existence of the specific assets… being held by or under the control of the defendant.”

39.  In all, I do not find any material non-disclosure and would not discharge the Varied Injunction Order. That said, given the admission in SOC that the balance of the accounts of D3-D5 are zero, which was known following the disclosure made pursuant to the Varied Injunction Order, the proprietary injunction against D3-D5 should now be discharged.

40.  For completeness, I should say that even if I was wrong and there was material non-disclosure, I would have re-granted the Mareva injunction. I cannot see how any of the alleged non-disclosure were material and even if they were, they were not serious, significant and could not have been deliberate. Given that there has been an admission of the misappropriation of at least some of Ps’ funds by D1 coupled with the delays to account for Ps’ funds and to file a defence despite court orders which demonstrates a serious risk of dissipation, to not re-grant the Mareva injunction would be a disproportionate penalty to any non-disclosure by Ps. I have not overlooked the alleged breach of the undertaking to serve on Ds the affidavits and exhibits and skeleton submissions but Ps explained that they were left at the reception due to the inability to physically fit them into the letter boxes of D1 and D2. Besides, when Ds chose not to attend the inter-parte hearing, there can be no prejudice to them and these documents have now been served on them.

Disposition

41.  Accordingly, I would allow the Relief Summons but dismiss the Default Judgment Summons and Discharge Summons (save as mentioned in paragraph 39 above).

42.  I make a costs order nisi that D1,2&5 should pay to Ps the costs of the Relief Summons, Default Judgment Summons and Discharge Summons to be taxed if not agreed. Any application to vary the costs order nisi should be made within 14 days from the handing down of this Decision failing which it shall become absolute.