LEAD GOOD GROUP LTD v. CREDITLAND GROUP LTD AND OTHERS

HCCT 2/2024

[2024] HKCFI 3591

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO. 2 OF 2024

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DECISION

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1.  This is the Applicant’s Summons filed on 3 September 2024 (“Summons”) seeking further disclosure from the 2^nd and 3^rd Respondents of their assets in aid of (a) a worldwide Mareva Injunction granted against the Respondents on 27 May 2024 (“Injunction”) in favour of the Applicant; and (b) the Applicant’s enforcement of an arbitral award dated 8 December 2023 (“Award”) which was obtained by it against the Respondents.

Issues

2.  The issues in this application are quite simple, namely, (1) whether the 2^nd and 3^rd Respondents had complied with the existing order for asset disclosure made against them by Yeung J on 6 June 2024 (“1^st Disclosure Order”); and (2) whether there is any utility in granting the relief sought by the Applicant.

Background

3.  The relevant background facts are as follows. Leave to enforce the Award was granted ex parte by M Chan J on 11 January 2024. The Respondents’ application to set aside the order of M Chan J was dismissed consequential upon their failure to make payment of security by 24 May 2024.

4.  After obtaining the Injunction on 27 May 2024, the Applicant applied on 28 May 2024 for continuation of the Injunction as well as disclosure by the Respondents of their assets. On 6 June 2024, Yeung J adjourned the continuation summons for argument with directions for filing of evidence, and continued the Injunction until determination of the summons. In respect of disclosure, the learned Judge ordered :

“Each of the 1^st to 3^rd Respondents do inform the Applicant of all its assets of an individual value of HK$1,000,000 or more, … giving the value, location and details of all such assets by way of affidavit within 28 days from the date hereof.” (the 1^st Disclosure Order)

“The deponents of such affidavits must be persons properly authorized by the board of directors of the 1^st to 3^rd Respondents respectively and the contents of such affidavits must be confirmed to be true by the boards of directors of the 1^st to 3^rd Respondents respectively. …” (“Affidavit Requirement”)

5.  On 26 July 2024, M Chan J ordered that unless the Respondents file evidence in compliance with the evidential directions and the 1^st Disclosure Order by 8 August 2024 (“Deadline”), they be debarred from filing any evidence in opposition to the continuation summons.

6.  On 6 August 2024, the 1^st Respondent filed an affidavit in opposition to the continuation Summons. It also filed an affidavit alleging that it had no assets of value of HK$1,000,000 or more.

7.  The 2^nd and 3^rd Respondents did not file any affidavit to comply with the 1^st Disclosure Order by the Deadline. Instead :

(1)  By a letter dated 8 August 2024, their solicitors (“PMT”) wrote to the Applicant’s solicitors, enclosing two unsigned but stamped attachments.

(2)  The first attachment is a statement from the 2^nd Respondent dated 8 August 2024 (“1^st Attachment”) that its sole director was unable to make an affirmation before the Deadline or authorise a third party to do so. A list of assets with some supporting documents was attached (“R2’s List of Assets”).

(3)  The second attachment is a statement from the 3^rd Respondent dated 8 August 2024 (“2^nd Attachment”) that its sole director was unable to make an affirmation before the Deadline or authorise a third party to do so. A list of assets with some supporting documents was attached (“R3’s List of Assets”).

8.  On 3 September 2024, PMT filed an affirmation by one of its solicitors (“Li”) with the authorisation of the 2^nd Respondent purporting to, inter alia, comply with the 1^st Disclosure Order. Li exhibited a notarized affirmation of Sun Jiateng (“Sun”) dated 30 August 2024.

9.  Sun’s affirmation in turn exhibited two signed but unaffirmed “affirmations” of Ou Zongrong (“Ou”), the sole director of the 2^nd Respondent, dated 28 August 2024 (“Ou 1^st” and “Ou 2^nd”). Although Ou 2^nd was made for the purpose of resisting the continuation summons, some of its contents are relevant for the present purpose.

10.  According to Sun’s affirmation, he acted as Ou’s PRC lawyer. He confirmed that Ou 1^st and Ou 2^nd were signed by Ou.

11.  According to Ou 1^st, it was made pursuant to the 1^st Disclosure Order. Paragraph 3 of Ou 1^st went on to set out the 2^nd Respondent’s assets of an individual value not less than HK$1 million. In short, they were (a) shares in Zhenro Properties Group Ltd; (b) shares in 祥生控股(集團)有限公司 and (c) account receivables (“Receivables”) from a number of companies (“Debtors”).

12.  According to Ou 2^nd :

(1)  Ou was under cooperation with PRC Government agency (the details of which could not be disclosed) and did not have the freedom to make an affirmation in Hong Kong or have his affirmation notarized in the Mainland. He was only allowed to sign Ou 1^st and Ou 2^nd in front of a PRC lawyer.

(2)  The disclosure of the 2^nd Respondent’s assets was made by Ou earlier by way of PMT’s letter dated 8 August 2024 to the Applicant’s solicitors, together with its attachments.

(3)  The 2^nd Respondent was incorporated in the BVI, and on 6 June 2024, Mr Glenn Harrigan of CCP Financial Consultants Ltd and Ms Ivy Chua of Crowe (HK) CPA Ltd were appointed as joint provisional liquidators of the 2^nd Respondent (“JPL”).

13.  In relation to the 3^rd Respondent’s disclosure of assets, it is confined to PMT’s letter dated 8 August 2024 (see para 7 above). The 2^nd Attachment indicated that :

(1)  The only director and statutory representative of the 3^rd Respondent, Mr Li, had suffered a stroke and could not make an affirmation.

(2)  Doing its best to comply with the 1^st Disclosure Order, R3’s List of Assets was provided. In short, they consisted of (a) two landed properties in the Mainland with ownership documents; and (b) shares in 7 non-listed PRC companies. In respect of these companies, apart from their Chinese names, two pages of screenshots of online search results were included, which were intended to provide information about them.

Compliance with the 1^st Disclosure Order

14.  Plainly, the 2^nd and 3^rd Respondents had failed to fulfil their obligations under the 1^st Disclosure Order by the Deadline. In particular, the Affidavit Requirement was not met.

15.  In respect of the alleged reason for failure to comply, it was stated in the 1^st Attachment that Ou, the sole director of the 2^nd Respondent, was under cooperation with PRC Government agency (the details of which could not be disclosed) and he was unable to make an affirmation or sign any document. Nor was he able to authorise any person to make an affirmation. The allegation is nothing but a bare assertion. It was not stated whether Ou was cooperating on a matter concerning himself or the 2^nd Respondent. It is difficult to understand why cooperation with Government agency would hinder the 2^nd Respondent’s compliance with a court order. Such allegation cannot be accepted at face value. The allegation was largely repeated in Ou 2^nd without any evidential support.

16.  The 2^nd Attachment was drafted in the same style as the 1^st Attachment. It alleged that the sole executive director and legal representative of the 3^rd Respondent, Mr Li, was unable to comply with the 1^st Disclosure Order due to his health condition. He was in the course of recovery from a stroke. He was also unable to authorise anyone to make the requisite affirmation. The allegation was not supported by any documentary evidence of Mr Li’s health issue. There was no explanation whether there was other non-executive director(s) or why Mr Li was unable to authorise another person, such as a senior staff, to make the affirmation. Again, the bare assertion cannot be accepted at face value.

Utility

17.  Given the non-compliance of the 1^st Disclosure Order, the Applicant is entitled to apply for another disclosure order for the purpose of policing the Injunction and to aid the enforcement of the Award.

18.  The materials produced by the 2^nd Respondent so far (R2’s List of Assets, the attached supporting documents, Ou 1^st and Ou 2^nd) do not provide sufficient information to allow the policing of the Injunction. Further, without a verifying affidavit, there is no assurance that the information provided is accurate or complete.

19.  I accept the submission of Mr Chui, who appeared for the Applicant, that the Applicant is in the dark as to the registered office address and location of the Debtors; the nature and particulars of the Receivables; and whether the Receivables are subject to any set-off. Pursuant to the 1^st Disclosure Order, the Respondents are obligated to provide “details” of their assets.

20.  As regards the asset information provided by the 3^rd Respondent, I agree with Mr Chiu that basic information such as registered office address, location of share register and whether the shares in the 7 PRC companies are held through third parties should be supplied.

21.  It should be said that the details required for the disclosed assets should be made clear. A further disclosure order can serve this purpose.

22.  Finally, I do not believe that the appointment of JPL for the 2^nd Respondent affects this application. First, as pointed out by Mr Chiu, the JPL have not sought recognition in Hong Kong. Absent an order of recognition and assistance to them, the JPL do not presently have leave or power to take possession or control of assets within Hong Kong where some of the 2^nd Respondent’s assets are situated.

23.  Second, the JPL were only appointed after the Injunction was granted. I see no good reason why the Applicant should not take step to obtain relief for the non-compliance of the 1^st Disclosure Order or to leave the matter of policing the Injunction entirely in the hands of the JPL.

Disposition

24.  For these reasons, I grant the order sought in the Summons, save for the minor drafting issues in respect of paras 2(b), (d) and (f), which were discussed at the hearing.

25.  The parties are in agreement that costs should follow the event. I order that the costs of and occasioned by the Summons be to the Applicant.

26.  As per its statement of costs, the amount sought by the Applicant is over HK$460,000. I agree with Mr Ko, who appeared for the 2^nd and 3^rd Respondents, that it is very high for a simple application. The time charges of the Applicant’s solicitors are very high, bearing in mind especially the involvement of counsel. The hearing was much shorter than expected. On a broad brush view, I assess the Applicant’s costs summarily at HK$200,000 (with counsel’s fee allowed at HK$90,000).

27.  I am grateful to counsel for their assistance.