HCA 3391/2016
[2019] HKCFI 1488
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 3391 OF 2016
________________________
BETWEEN
CHINA MEDICAL TECHNOLOGIES, INC.
1st Plaintiff
CMED TECHNOLOGIES LTD
2nd Plaintiff
COSIMO BORRELLI AND YUEN LAI YEE IN
3rd Plaintiffs
and
WU XIAODONG
1st Defendant
SAMSON TSANG TAK YUNG
2nd Defendant
CHEN ZHONG
3rd Defendant
CHONG WING HIP
5th Defendant
BI XIAOQIONG (IN HER PERSONAL CAPACITY
13th Defendant
and
CHUI SAU KUEN
Interested Party
________________________
Before: Hon Ng J in Chambers
Date of Hearing: 30 April 2019
Date of Judgment: 17 June 2019
__________________
J U D G M E N T
__________________
Introduction
1. Upon the ex parte applications without notice of the Plaintiffs, a worldwide Mareva injunction was granted by L Chan J on 11 December 2017 and amended by the Learned Judge on 8 January 2018 (“Injunction ”). The Injunction was granted against the 1st Defendant (“Mr Wu ”), 2nd Defendant (“Mr Tsang ”), 3rd Defendant (“Dr Chen ”), 5th Defendant (“Mr Chong ”) and 13th Defendant (“Ms Bi ”). The Injunction was continued by Chow J on 12 January 2018 pending the substantive arguments of the Plaintiffs’ application to continue the Injunction.
2. Paragraph 4 of the Injunction was directed against Mr Tsang. Listed under paragraph 4(2) of the Injunction were inter alia the following 3 properties (“Tsang Properties ”):
“ (a) the property known as Flat G, 10th Floor, One Island Place, Island Place, No. 51 Tanner Road, Hong Kong, or the net sale proceeds thereof after payment of any mortgages if it has been sold;
(b) the property known as Unit C, 51st Floor, Tower 1, Les Saisons, 28 Tai On Street, Hong Kong, or the net sale proceeds thereof after payment of any mortgages if it has been sold;
(c) the property known as Flat G, 5th Floor, Block 6, Kenswood Court, Kingswood Villas, No. 2 Tin Lung Road, Tin Shui Wai, Yuen Long, New Territories, Hong Kong, or the net sale proceeds thereof after payment of any mortgages if it has been sold…”
3. By way of amendment on 8 January 2018, a sub‑paragraph (f) was added to paragraph 4(2) of the Injunction:
“ (f) any money held by Ms Chui Sau Kuen (Hong Kong ID Number H423128(9)) (“Ms Chui ”), whether in bank accounts or otherwise comprising the net sale proceeds of sale of any of the Tsang Properties after payment of any mortgages.”
4. By a judgment handed down on 22 May 2019 in these proceedings (“May Judgment ”), this court set aside and discharged the Injunction against Mr Tsang, Mr Chong and Ms Bi (“Opposing Defendants ”). One of the reasons for setting aside and discharging the Injunction, as stated in paragraphs 66 to 75 of the May Judgment, was that the Plaintiffs had failed to show a real risk of dissipation of assets by any of the Opposing Defendants.
5. This is the application of the Interested Party, Ms Chui, by way of summons dated 8 June 2018 (“Summons ”) (i) to discharge or vary the Injunction so as to remove paragraph 4(2)(a) to (c) and (f) set out above, and (ii) for payment out of the sums of HK$1,398,000 and HK$12,582,000 paid by her into Court on 16 and 18 January 2018 respectively, upon her undertaking as set out in paragraph 11A of the Order of Chow J dated 12 January 2018.
6. In Ms Chan SC’s skeleton argument, the Plaintiffs indicate they do not oppose removing paragraph 4(2)(a), since One Island Place has already been sold, and paragraph 4(2)(f), presumably because the net sale proceeds of One Island Place have already been paid into Court pursuant to Ms Chui’s undertaking aforesaid.
The Parties’ cases
7. The Plaintiffs’ substantive case against Mr Tsang and the other relevant Defendants has been set out in the May Judgment and shall not be repeated here. This judgment should be read in conjunction with the May Judgment for ease of comprehension.
8. As far as Ms Chui is concerned, she is not a Defendant and the Plaintiffs assert no substantive claim against her in these proceedings. Paragraph 4 of the Injunction is not directed against Ms Chui personally but, on her case, affected her properties and monies and hence the present application.
9. Ms Chui’s relationship with Mr Tsang is that they were married in November 1999 with a daughter but were divorced in September 2011.
10. On Ms Chui’s own evidence, between 1994 and 2007, she was a marketing manager and subsequently a senior manager of foreign‑funded companies (except in 1994‑1995), earning a gross income of over HK$6.5 million after tax. Since 1997, Ms Chui has also been actively engaged in property investment:
(1) In July 1997 and June 2002 respectively, Mr Tsang and Ms Chui jointly purchased 2 properties viz (i) Flat B, 9/F, Maid Shine Court, 428 Ma Tau Wai Road, Kowloon, and (ii) Unit 1, 1/F, Block 26, Heng Fa Chuen, Hong Kong.
(2) In November 2005, Ms Chui purchased another property in her sole name viz Flat D, 5/F, Block 6, Kenswood Court, Kingswood Villas, No. 2 Tin Lung Road, Tin Shui Wai, New Territories.
11. As for the Tsang Properties, the circumstances of their purchase and subsequent transfer to Ms Chui, according to her evidence, are set out below. For convenience, they are hereinafter referred to as “One Island Place ”, “Les Saisons ” and “Kenswood Court 5G ”.
12. One Island Place was purchased by Mr Tsang and Ms Chui in November 2006 at the price of HK$4.78 million with the aid of a mortgage loan of HK$3,346,000. Ms Chui paid around HK$717,000 as part of the down payment and other related expenses. She also contributed to the repayment of mortgage instalments until discharge in June 2011.
13. Les Saisons was purchased by Mr Tsang and Ms Chui in October 2007 at the price of HK$7.88 million with the aid of a mortgage loan of HK$5,516,000. Ms Chui paid HK$1,083,500 as part of the down payment and other related expenses. She also contributed to the repayment of mortgage instalments until discharge in October 2011.
14. Kenswood Court 5G was purchased together with its adjoining unit, Flat 5H (“Kenswood Court 5H ”) in September 2008, at the prices of HK$1,428,000 and HK$1,415,000. The two properties were intended to be used as a “twin unit” and served as the family home of Mr Tsang, Ms Chui and their daughter. Upon the advice of estate agents in order to pre‑empt the vendor raising the prices of the 2 properties if used as a “twin unit”, Kenswood Court 5H was purchased by and registered in the name of Ms Chui and Kenswood Court 5G was purchased by and registered in the name of Mr Tsang, holding beneficially for Ms Chui. Kenswood Court 5G was subsequently transferred back to Ms Chui when they agreed to divorce in 2011.
15. Ms Chui mortgaged Kenswood Court 5G and Kenswood Court 5H to secure 2 loans of HK$500,000 each. Mr Tsang’s name appeared in the mortgage documents for Kenswood Court 5G for the simple reason that he was the registered owner. Ms Chui paid HK$928,000 and HK$915,000 as down payments and other related expenses. She also repaid all mortgage instalments until discharge in March 2011.
16. In 2011, Mr Tsang and Ms Chui agreed to divorce. As part of the divorce financial arrangement (“Divorce Arrangement ”), they agreed inter alia as follows:
(1) Kenswood 5G & 5H would continue to be the family home for Ms Chui and their daughter, and Mr Tsang would transfer the legal title of Kenswood Court 5G back to her.
(2) Ms Chui would acquire Mr Tsang’s interest in One Island Place and Les Saisons at the price of HK$3 million and HK$3.98 million.
(3) Other than the monthly maintenance, Mr Tsang would pay Ms Chui a lump sum maintenance of HK$3 million which was used to set off against the acquisition price of Mr Tsang’s interest in One Island Place of HK$3 million.
17. Upon the joint application of Ms Chui and Mr Tsang, the Court granted a Consent Order dated 15 July 2011. Ms Chui would not claim distribution of any of Mr Tsang’s assets and properties other than seeking maintenance of HK$6,000 per month for herself and HK$12,000 per month for their daughter.
18. The transfer of Kenswood 5G to Ms Chui took place in March 2011, the transfer of One Island Place to her took place in June 2011 and the transfer of Les Saisons to her took place in October 2011. Regarding the transfer of Les Saisons, Ms Chui paid the agreed sum of HK$3.98 million to Mr Tsang with the aid of a new mortgage from Hang Seng Bank in the sum of HK$3 millionwhich Ms Chui is still making monthly repayments.
19. As far as One Island Place is concerned, Ms Chui entered into a preliminary sale and purchase agreement on 20 November 2017 at the price of HK$13.98 million and then the formal sale and purchase agreement on 4 December 2017. Completion of the sale and purchase was set at 17 January 2018.
20. Given the existence of the Injunction, at the hearing before Chow J on 12 January 2018, Ms Chui offered an undertaking to pay into Court the initial deposits as well as the net completion proceeds from the sale of One Island Place in return for the Injunction to be so varied as to allow her to complete the sale on 17 January 2018. Ms Chui duly did so on 16 and 18 January 2018.
21. Naturally, the Plaintiffs do not accept most of Ms Chui’s version of events. Judging from section E[1] of the Plaintiffs’ skeleton argument, the long and short of it is that Ms Chui only had modest income and savings, the purchase of the Tsang Properties were in fact funded by Mr Tsang and the Divorce Arrangement is unsupported by contemporaneous documents and is inherently incredible.
Deliberation
22. Given that this court has set aside and discharged the Injunction against inter alia Mr Tsang for reasons stated in the May Judgment, it goes without saying that paragraph 4(2)(a) to (c) and (f) of the Injunction cannot stand alone and must be removed and the monies Ms Chui paid into court should be returned to her.
23. However, since the Plaintiffs have indicated their intention to take the May Judgment further, this court will go on to consider the parties’ submissions made at this hearing.
24. As set out in paragraph 42 of Ms Wu’s skeleton submissions, the grounds for Ms Chui’s application are as follows:
(1) There was no basis to grant the Injunction against the Tsang Properties and the sale proceeds/money belonging to Ms Chui.
(2) There was serious material non‑disclosure by the Plaintiffs at the ex parte stage.
(3) There was no good reason to suppose that the Tsang Properties or the sale proceeds would be amenable to any judgment which the Plaintiffs might obtain against Mr Tsang.
(4) There was no real risk of dissipation by Ms Chui.
(5) It was not just and convenient to grant the Injunction against the Tsang Properties and the sale proceeds belonging to Ms Chui.
25. Of these 5 grounds, (3) to (5) are actually covered by (1). It is therefore only necessary to go into (1) and briefly into (2).
No basis to grant the Injunction
26. In light of Ms Wu’s criticism at paragraph 5 of her skeleton submissions, Ms Chan SC was at pains to emphasize to this court that at the ex parte hearing before L Chan J, the Plaintiffs did not apply for a proprietary injunction with regard to the Tsang Properties — instead they were applying for a mareva injunction against Mr Tsang and did so on the basis that the Tsang Properties were in truth Mr Tsang’s assets.
27. That may or may not have been the Plaintiffs’ intention but the evidence in this regard before the Learned Judge, principally the 1st affidavit of Mr Borrelli dated 8 December 2017 (“Borrelli 1 ”), was conflicting and did suggest the Plaintiffs were asserting a proprietary interest over the Tsang Properties. For ease of reference, this court shall set out an extract of the relevant parts of paragraphs 74 to 80 of Borrelli 1 below:
“ 74. The Liquidators are not aware of any real property presently registered in Mr Tsang’s name. However, the Liquidators’ investigations reveal that Mr Tsang solely or together with his wife or former wife, Ms Chui San Kuen (“Ms Chui ”), purchased the following real properties in Hong Kong at the times after he and/or the Tsang Entities had received the stolen funds (“Tsang Properties ”).
Property
Purchase by and Assignment to Mr Tsang
Receipts by Mr Tsang/ Tsang Entities at time of purchase
Subsequent Assignment to Ms Chui
Unit C, 51st Floor, Tower 1, Les Saisons, 28 Tai On Street, Hong Kong
Purchased on 6.11.2007 by Mr Tsang and assigned on 18.12.2007 to Mr Tsang and Ms Chui as joint tenants
US$3.265m into Mr Tsang BOCHK Account between 30 March 2007 to 4 October 2007 (App 2, items 2.1-2.6)
18.10.2011
Flat G, 5th Floor, Block 6, Kenswood Court, Kingswood Villas, No. 2 Tin Lung Road, Tin Shui Wai, Yuen Long, New Territories, Hong Kong
Purchased on 3.10.2008 solely by Mr Tsang
US$3,534,231 in cash and into Mr Tsang BOCHK Account between 30 March 2007 to 19 February 2008 (App 2, items 2.1-2.7)
21.03.2011
75. The Hong Kong Land Registry’s records show that each of the Tsang Properties was purchased without any mortgage. The Liquidators estimate the current market value of the Tsang Properties to be a total of US$4.7 million, based on valuations obtained by the Liquidators from HSBC on 4 December 2017…
76. While the information currently available to the Liquidators does not allow them to identify the source of the funds used to purchase the Tsang Properties, at the time that each of them was purchased either solely by Mr Tsang and/or jointly by Mr Tsang and Ms Chui, Mr Tsang and the Tsang Entities had already received many millions of US dollars of the cash stolen from the Plaintiff Companies. Those receipts well exceeded the prices paid for the Tsang Properties, and the properties were purchased without registered mortgage loans. Accordingly, the Liquidators have reasonable grounds to believe that those properties were purchased by Mr Tsang using the stolen funds, and that they represent traceable proceeds of the Fraud in which the Plaintiff Companies have a proprietary interest.
…
78. The Hong Kong Land Registry’s records show that from March to October 2011, namely in the months prior to the Company’s collapse and Mr Tsang’s resignation, and subsequent to receipt of the Anonymous Letter, Mr Tsang transferred his interests in the Tsang Properties to Ms Chui. The Hong Kong Land Registry’s records indicate that consideration was paid by Ms Chui in respect of those transfers, although the Liquidators are unable to verify whether those amounts were in fact paid.
…
80. Having regard to the severe circumstances facing the Company and Mr Tsang at the time of the transfers of the Tsang Properties, including the risk that the Fraud and its perpetrators would be exposed and litigation pursued against Mr Tsang, the Liquidators consider there to be strong grounds to suspect that the transfers were made in an attempt to place Mr Tsang’s assets out of reach of judgment on claims which may be made against him. This suspicion is heightened by the refusal of Mr Tsang and Ms Chui to provide any documents to substantiate their asserted divorce or property settlement. The Liquidators consider that they have at least good reason to suppose the Tsang Properties may in truth be assets of Mr Tsang or assets in which he has a beneficial interest, and that the Tsang Properties would be amendable to execution of a judgment obtained against Mr Tsang in the Action. The Liquidators intend to serve any injunction made by this Honourable Court on Ms Chui to ensure that she does not assist Mr Tsang in dissipating the Tsang Properties .” (emphasis added)
28. It can be seen from the above extract that, on the one hand, the Plaintiffs claim at paragraph 76 to have reasonable grounds to believe they have a proprietary interest in the Tsang Properties on the basis that the properties were purchased by Mr Tsang with stolen funds. But on the other, at paragraph 80, the Plaintiffs consider that they have good reason to suppose the Tsang Property may indeed be the assets of Mr Tsang or assets in which he has a beneficial interest and hence would be amendable to execution of a judgment obtained against him in these proceedings, which is a key requirement for invoking the Court’s jurisdiction to grant a mareva injunction against the properties of a non‑party to the proceedings, commonly known as Chabra jurisdiction.
29. At paragraphs 38 and 44 of the Plaintiffs’ skeleton argument for the hearing on 11 December 2017, they again referred to inter alia the above paragraphs and their conflicting claims to the Tsang Properties:
“ 38. The injunction sought extends to the real properties currently held in the name of Mr Tsang’s wife or former wife, Ms Chui Sau Kuen (“Ms Chui”), on the bases that there are good reasons to believe that such properties were acquired through the use of the funds misappropriated from P1-P2 pursuant to the Fraud (Borrelli 1, [74] - [83] [A/3/23 +]).
…
44. Ps have good reasons to suppose that the Tsang Properties are beneficially owned by Mr Tsang, but were transferred to Ms Chui so as to put them beyond the reach of Ps around the time of P1’s demise . Despite Ps’ repeated requests, neither Mr Tsang nor Ms Chui has provided any evidence regarding their assertions that the transfers to Ms Chui were legitimate transfers pursuant to their purported divorce settlement (Borrelli 1, [79] [A/3/25]).” (emphasis added)
30. The same conflicting claims were in fact repeated in paragraph 9 of the Plaintiffs’ skeleton argument for the 8 January 2018 hearing before L Chan J.
31. In light of the conflicting claims made in Borrelli 1 and the skeleton argument, and in view of the Plaintiffs disowning any proprietary claim over the Tsang Properties on the basis they were purchased with funds fraudulently misappropriated from the 1st and 2nd Plaintiffs, it was prudent of, if not incumbent on, them to emphasise to L Chan J at the hearing on 11 December 2017 that they did not have and were not asserting a proprietary claim to those properties. According to the transcript of that hearing, which lasted slightly longer than 15 minutes, it did not appear they had done so.
32. Further, and importantly, if the Plaintiffs disown any proprietary claim over the Tsang Properties and rely solely on the Chabra jurisdiction, they should have clearly explained to L Chan J the significance[2] and requirements of the Chabra jurisdiction and how those requirements were met or arguably not met. This, according to the transcript of that hearing, the Plaintiffs again did not appear to have done, which is the gist of the complaint made by Ms Wu in her skeleton submissions.
33. On the principles applicable to the Chabra jurisdiction, this court need only refer to 2 cases.
34. First, in XY, LLC v Jesse Zhu [2017] 5 HKC 479, Kwan JA observed at [24] that:
“ 24. A convenient starting point is a summary of the Chabra jurisdiction taken from the judgment of Popplewell J in PJSC Vseukrainskyi Aktsionernyl Bank v Maksimov [2013] EWHC 422 (Comm) at §7 as approved by Tomlinson LJ in Lakatamia Shipping at §32:
‘ (1) The Chabra jurisdiction may be exercised where there is good reason to suppose that assets held in the name of a defendant against whom the claimant asserts no cause of action (the NCAD) would be amenable to some process, ultimately enforceable by the courts, by which the assets would be available to satisfy a judgment against a defendant whom the claimant asserts to be liable on his substantive claim (the CAD).
(2) The test of ‘good reason to suppose’ is to be equated with a good arguable case, that is to say one which is more than barely capable of serious argument, but yet not necessarily one which the judge believes to have a better than 50% chance of success.
(3) In such cases the jurisdiction will be exercised where it is just and convenient to do so. The jurisdiction is exceptional and should be exercised with caution, taking care that it should not operate oppressively to innocent third parties who are not substantive defendants and have not acted to frustrate the administration of justice .
(4) A common example of assets falling within the Chabra jurisdiction is where there is good reason to suppose that the assets in the name of the NCAD are in truth the assets of the CAD. Such assets will be treated as in truth the assets of the CAD if they are held as nominee or trustee for the CAD as the ultimate beneficial owner.
(5) Substantial control by the CAD over the assets in the name of the NCAD is often a relevant consideration, but substantial control is not the test for the existence and exercise of the Chabra jurisdiction . Establishing such substantial control will not necessarily justify the freezing of the assets in the hands of the NCAD. Substantial control may be relevant in two ways . First, evidence that the CAD exercises substantial control over the assets may be evidence from which the court will infer that the assets are held as nominee or trustee for the NCAD as the ultimate beneficial owner. Secondly, such evidence may establish that there is a real risk of dissipation of the assets in the absence of a freezing order, which the claimant will have to establish in order for it to be just and convenient to make the order. But the establishment of substantial control over the assets by the CAD will not necessarily be sufficient: a parent company may exercise substantial control over a wholly owned subsidiary, but the principles of separate corporate personality require the assets to be treated as those of the subsidiary not the parent. The ultimate test is always whether there is good reason to suppose that the assets would be amenable to execution of a judgment obtained against the CAD.’ ”
35. Second, in Company A & Ors v Company D & Ors unrep, HCCT 31 of 2018, 15 February 2019 at [71], [83] and [86], Recorder Eugene Fung SC summarised the key requirements of the Chabra jurisdiction as follows:
“ 71. Therefore, where a plaintiff seeks a Mareva injunction in aid of arbitral proceedings under section 45 and against a third party invoking the Chabra jurisdiction, it seems to me that the following requirements must be satisfied:
(1) There is good reason to suppose that:
(a) a defendant against whom the plaintiff asserts no cause of action (the NCAD) holds, is using, or has exercised, or is exercising a power of disposition over, or is otherwise in possession of, assets of the defendant whom the plaintiff asserts to be liable on his substantive claim in arbitration (the CAD) (“the 1st Limb ”): XY, LLC (above) at §§25, 27 and 39; or alternatively
(b) the assets held in the name of the NCAD would be amenable to execution of some process, ultimately enforceable by the courts, by which the assets would be available to satisfy an award against the CAD (“the 2nd Limb ”): XY, LLC (above) at §24(1).
(2) There is a real risk of dissipation of the assets: XY, LLC (above) at §§24(5) and 26.
(3) It is just and convenient to grant the injunction: XY, LLC (above) at §24(3) and (5).
…
83. Where a plaintiff seeks a Mareva injunction on the Chabra basis, it seems to me that the risk of dissipation factor should principally focus on the NCAD’s conduct as regards the NCAD’s assets :
(1) The underlying premise of a Mareva injunction on the Chabra basis is that there is good reason to suppose that assets held in the NCAD’s name would be amenable to some process, ultimately enforceable by the courts, by which the assets would be available to satisfy a judgment or award against the CAD. The plaintiff’s ability to enforce the judgment or award against the CAD would necessarily be impaired if the effect of NCAD’s conduct would be to frustrate the enforcement of any judgment or award, or the NCAD’s assets are no longer available to be enforced against. In considering the risk of dissipation of assets, the principal focus should therefore be on NCAD’s conduct and his assets.
(2) In cases where there is substantial control by the CAD over the assets in the name of the NCAD, it may become relevant to examine the conduct of the CAD to determine whether there is a risk of dissipation of NCAD’s assets. “[Evidence that the CAD exercises substantial control over the assets] may establish that there is a real risk of dissipation of the assets in the absence of a freezing order, which the claimant will have to establish in order for it to be just and convenient to make the order”: XY, LLC (above) at §24(5).
…
86. The standard of proving a real risk of dissipation is relatively high, and the plaintiff must establish that risk by reference to solid or cogent evidence: Re Chau Cham Wong Patrick [2016] 2 HKLRD 278 at §32 (P Ng J).”
36. In the present case, Ms Chan SC and Ms Wu differ on (i) whether it is necessary to show real risk of dissipation of the Tsang Properties in order to invoke the Chabra jurisdiction and (ii) if yes, whether the court should only look at the conduct of Ms Chui (as Ms Wu contends) or Mr Tsang (as Ms Chan SC contends).
37. At paragraph 55.2 of the Plaintiffs’ skeleton argument, it is submitted that all the authorities cited by Ms Chui (and which Recorder Fung SC referred to) state that the only requirementthat needs to be satisfied is that there is good reason to suppose the assets would be amenable to execution of a judgment against the CAD (assuming a case of Mareva is made good against the CAD). There is no additional requirement to show risk of dissipation on the part of NCAD.
38. With respect, that submission is fallacious for a number of reasons.
39. First, it blatantly ignores paragraphs 71(2) and 83(1) and (2) of Recorder Fung SC’s Judgment quoted above with which this court respectfully agrees.
40. Second, it also conveniently ignores the warning of Popplewell J that the Chabra jurisdiction should not operate oppressively to innocent third parties who “have not acted to frustrate the administration of justice”. In the present case, if the Plaintiffs cannot show a real risk of dissipation of the Tsang Properties by Ms Chui, the Chabra jurisdiction would indeed operate oppressively to her.
41. Third, it is based on a misunderstanding of Popplewell J’s judgment in PJSC Vseukrainskyi Aktsionernyl Bank v Maksimov, cited with approval by Kwan JA at paragraph 24(1) of XY, LLC v Jesse Zhu quoted above. It is true the fact that a plaintiff can show good reason to suppose assets held in the name of a third party would be amenable to some process by which the assets would be available to satisfy a judgment against the substantive defendant may enable the plaintiff to invoke the Chabra jurisdiction; however, that is not the same as saying it is the only requirement for the exercise of that jurisdiction.
42. Another well‑established requirement for the exercise of the Chabra jurisdiction, as with the exercise of any jurisdiction to grant injunctive relief, is that it is just and convenient to do so. In the present case, if the Plaintiffs cannot show a real risk of dissipation of the Tsang Properties by Ms Chui, it is difficult to see why it is just and convenient for the Court to exercise the jurisdiction over the Tsang Properties which after all were and are held in her sole name. Similarly, if the Plaintiffs cannot show a real risk of dissipation of the Tsang Properties by Mr Tsang eg by proving he has substantial control over the Tsang Properties, again it is difficult to see why it is just and convenient for the Court to exercise the jurisdiction over them.
43. For these reasons, this court is of the firm view that the Plaintiffs must be required to demonstrate a real risk of dissipation of the Tsang Properties by Ms Chui and/or by Mr Tsang.
44. As far as Ms Chui is concerned, there is no attempt on the Plaintiffs’ part to demonstrate that there is a real risk of dissipation of the Tsang Properties by her. In section F of their skeleton argument, the Plaintiffs only seek to argue, as a matter of law, that is not required for the purpose of the Chabra jurisdiction.
45. In any event, the evidence before this court does not justify an inference that there is a real risk of dissipation of the Tsang Properties by Ms Chui. The Tsang Properties were all transferred to her sole name in 2011. This is not in dispute. The Plaintiffs’ theory is that the transfer was done (by Mr Tsang and Ms Chui acting in collusion) in order to put the Tsang Properties out of reach of any judgment that the Plaintiffs may obtain against Mr Tsang. If that theory is sound, the logical next step must be for Ms Chui to put the Tsang Properties up for sale as soon as possible and then hide the sale proceeds. But that was not what happened. Ms Chui only entered into a preliminary sale and purchase agreement in respect of One Island Place on 20 November 2017, 6 years after the transfer to her and almost 1 year after the Writ in the present proceedings was issued on 23 December 2016. In this court’s view, that is not the sort of conduct of someone who colludes with Mr Tsang in order to dissipate what is allegedly Mr Tsang’s assets.
46. As far as Mr Tsang is concerned, this court has already ruled that it is not satisfied the Plaintiffs have shown a real risk of dissipation of assets by any of the Opposing Defendants, including Mr Tsang himself, for reasons stated in paragraphs 66‑75 of the May Judgment. Just to re‑cap the part concerning Mr Tsang, this court said this in the May Judgment:
“ 71. If the Liquidators truly believe the Opposing Defendants have exhibited “an unacceptably low standard of commercial morality” or are of “questionable integrity” by reason of their alleged role in the Fraud, they would have applied for a mareva injunction against them long ago and well before alerting them of a potential or actual claim against them. Yet, the Liquidators have done the opposite.
72. In the case of Mr Tsang, he was alerted to the 1417 Writ on 2 August 2013 and was served with the 3391 Writ on 28 November 2017, having instructed his lawyers to accept service…
73. The fact that the Plaintiffs waited until December 2017 to apply for the Injunction against the Opposing Defendants raises “a large question mark” as to whether there was indeed a real risk of dissipation, which has not been satisfactorily answered by the Plaintiffs in their written Reply. All that the Plaintiffs did was to repeat their reliance on Honsaico and Standard Chartered Securities and the Opposing Defendants’ alleged involvement in the Fraud. But even if this court accepts there is a good arguable case of fraud or dishonesty against the Opposing Defendants, (as to which see the next section), this court may more readily but is not bound to infer a real risk of dissipation — this court still has to consider that risk in light of all the evidence before it.
74. In this court’s view, there is no solid or cogent evidence to justify an inference that the Opposing Defendants would, given the opportunity, dissipate their assets so as to evade the due process of the law. They have been given ample opportunity to do so but notwithstanding the vigorous and extensive investigation carried out by the Liquidators over the years, the evidence now before this court fails to show they had dissipated their assets after having been alerted to the potential/actual claims against them.”
47. While the Plaintiffs assert, at paragraph 56 of their skeleton argument, that he has substantial control over the Tsang Properties, this is nothing but a bare assertion. Assuming for the sake of argument that Mr Tsang did have substantial control over the Tsang Properties, it seems to this court he would have put them up for sale or procured Ms Chui to do so as soon as possible in 2011 and the Tsang Properties would have been sold well before the present proceedings were issued. That did not happen.
48. To conclude, for the above reasons, this court agrees with Ms Wu that there was and is no basis for granting the Injunction on the Chabra basis over the Tsang Properties or the One Island Place sale proceeds.
Material non‑disclosure and misrepresentation
49. It is well‑established that any applicant to the Court for relief without notice must act in the utmost good faith and disclose to the Court all matters which are material to be taken into account in deciding whether or not to grant relief without notice. The same principles apply to material misrepresentations as to material non‑disclosure. It applies not just to disclosure of facts but to absolutely anything which the judge should consider, as part of the duty of the applicant to present the application fairly: Gee Commercial Injunctions 6th Ed para 9‑001.
50. Matters going to the jurisdiction of the Court to entertain the application are material: Gee Commercial Injunctions 6th Ed para 9‑011. In this regard, as this court noted above, the Plaintiffs had failed to explain to L Chan J the significance and requirements of invoking the Chabra jurisdiction and how those requirements were met or could be argued by Ms Chui as not met. This is a serious material non‑disclosure. On this ground alone, the Injunction covering the Tsang Properties and the sale proceeds in question should be discharged.
51. As far as material misrepresentation is concerned, the Plaintiffs have frankly and very properly accepted that there was a misstatement in Borrelli 1 that the Tsang Properties were purchased without mortgage. This is clearly a material fact since it bolstered the Plaintiffs’ submission that Ms Chui did not have the necessary funds to contribute to the purchase price of the Tsang Properties whereas Mr Tsang did — hence the properties are in truth his assets and hence the propriety of invoking the Chabra jurisdiction.
52. However, this court wishes to put on record that it is satisfied that this was due to an inadvertent oversight rather than a deliberate attempt to mislead L Chan J. Mortgages over real properties are invariably registered with the Land Registry and it only takes a simple land search to find out whether the Tsang Properties were or were not subject to mortgage. It is unthinkable that the Liquidators or their legal advisers would deliberately mislead L Chan J on something like this. Nevertheless, given the materiality of the misstatement, on this ground also, the Injunction covering the Tsang Properties and the sale proceeds in question should be discharged.
53. Whether or not there should be a re‑grant of the Injunction is entirely academic, given this court’s conclusion that there was and is no basis for granting the Injunction on the Chabra basis over the Tsang Properties or the sale proceeds in question.
Disposition and costs order nisi
54. There shall be an Order in terms of paragraphs 1 and 2 of the Summons and an order nisi that costs of and occasioned by the Summons be to the Interested Party, to be taxed if not agreed, and paid forthwith, with Certificate for 2 Counsel.
55. Lastly, this court thanks the legal representatives of the parties for their helpful assistance.
(Peter Ng)
Judge of the Court of First Instance
Ms Linda Chan SC and Mr Danny Tang, instructed by Lipman Karas, for the Plaintiffs
Ms Teresa Wu and Ms Eva Leung, instructed by Fairbairn Catley Low & Kong, for the Interested Party
[1] The 1st section E - there are 2 section E in the skeleton argument.
[2] Significant because that was the only basis on which the Plaintiffs could seek a mareva injunction covering properties in Ms Chui’s sole name.