LEE CHI YUEN ARCTIC v. LAU SIU MING AND ANOTHER

HCMP 778/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 778 OF 2016

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D E C I S I O N

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Introduction

1.  The plaintiff (“P”) and the 1^st defendant (“D1”) are the directors and registered shareholders of the 2^nd defendant (“D2”), a Hong Kong company incorporated on 9 October 2007. Since 31 March 2010, P and D1 had been and continued to be 2 equal registered shareholders (each holding 50% of the shareholding) and the only 2 directors of D2.

2.  On 1 April 2016, P commenced the present proceedings against D1 and D2 for inter alia the following reliefs:

(a) a declaration that the resolution purportedly passed by D1 to remove P as director of D2 (“Alleged Resolution”) during a purported general meeting of D2 held on 25 February 2016 (“Alleged Meeting”) was null and void and of no legal effect;

(b) an order restraining D1 and D2, whether by himself/itself or his/its proxy or agent or servant or howsoever from acting on, implementing or carrying into effect the Alleged Resolution;

(c) insofar as it is necessary, an order re-instating P to his office as director of D2.

3.  On the same day, P by an inter partes summons (“Summons”) applied for (a) an interim injunction to restrain D1 and D2 from acting on, implementing or carrying into effect the Alleged Resolution during the Alleged Meeting, and (b) insofar as it is necessary, an order re-instating P to his office as director of D2, and he filed his 1^st affirmation (“P 1^st Aff”) in support.

4.  P served the originating summons in the present action, Summons and P 1^st Aff on D2. But D2 did not file any acknowledgment of service. On 8 April 2016, D1 (who was self-represented) filed acknowledgment of service to give notice of intention to defend. On the same day, DHCJ Wilson Chan granted an interim injunction in terms of paragraph 3(a) above until 5:00pm on 29 April 2016 or further order (“Interim Injunction”), gave leave for D1 to file/serve his affidavit to oppose the Summons on/before 22 April 2016, and adjourned the Summons to be heard before the Summons Judge at 10:00am on 29 April 2016 (“Hearing”) for further directions (with 30 minutes reserved) (“Chan Order”).

5.  On 22 April 2016, D1 filed his affirmation in opposition (“D1 Aff”). On 27 April 2016, P filed his affirmation in reply (“P 2^nd Aff”). D1 appeared in person at the Hearing before me, but D2 was absent. However, the Chan Order and the P 2^nd Aff had been served on D2.

6.  Although the Chan Order directed that the Hearing be a directions hearing, Mr Lam, counsel for P, invited this court to hear the substantive argument in respect of the Summons (ie continuation of the Interim Injunction until judgment in the present proceedings or further order) as the affidavit evidence was complete. Initially D1 had no objection, but he later wanted to adjourn the hearing for argument as he wished to further respond to the P 2^nd Aff. I will return to deal with D1’s application for leave to file/serve further affirmation below, but suffice to note here it was not further pursued at the Hearing and I heard substantive argument submissions from Mr Lam and D1. At the end of the Hearing, I reserved my decision and granted an interim extension of the Interim Injunction until the handing down of this Decision or further order.

7.  In summary, P claimed the Alleged Meeting was not properly convened in accordance with the legal requirements and was inquorate, so the Alleged Resolution was invalid, but D1 expressly indicated he intended to act upon the Alleged Resolution to remove P from D2’s board of directors (“Board”), audit D2’s books/records and wind-up D2 in his capacity as D2’s sole director, so P found it necessary to commence the present proceedings and to apply for an interlocutory quia timet injunction to prevent D1 from carrying out his threatened acts.

Legal principles

8.  As Mr Lam submitted, this court has jurisdiction under sections 728-730 of the Companies Ordinance Cap 622 (“CO”) to restrain breaches of the CO or a company’s articles of association:

“728. Application of section 729

(1) Section 729 applies if, in relation to a company-

(a) A person has engaged, is engaging, is proposing to engage in conduct that constituted, constitutes or would constitute-

(i) a contravention of this Ordinance;

(ii) a default relating to a contravention of this Ordinance; or

(iii) a breach specified in subsection (4); or

(b) a person has refused or failed, is refusing or failing, or is proposing to refuse or fail, to do an act or thing that the person is required by this Ordinance to do.

……

(4) The breach specified for the purpose of subsection (1)(a)(iii) …… is-

(a) a breach of the person’s fiduciary duties owed to the company in any capacity other than as a director of the company;

(b) a breach of the person’s fiduciary or other duties as a director of the company owed to the company;

(c) a breach of the company’s articles.

729. Court may order remedies

(1) The court may, on application by a member …… of the company whose interests have been, are or would be affected by the conduct or by the refusal or failure, do any or all of the following-

(a) grant an injunction, on the terms that the Court thinks fit-

(i) in the case of section 728(1)(a) ……, restraining the person from engaging in the conduct of requiring the person to do any act or thing; or

(ii) in the case of section 728(1)(b) ……, requiring the person to do any act or thing;

……

(3) The Court may grant an injunction under subsection (1)(a)(i) …… restraining a person from engaging in conduct –

(a) whether or not it appears to the Court that the person intends to engage again, or to continue to engage, in the conduct;

(b) whether or not the person has previously engaged in the conduct; and

(c) whether or not there is an imminent danger of substantial damage to any other person if the person engages in the conduct.

730. Provisions supplementary to section 729

(1) The Court may grant an interim injunction…… on the terms and conditions that it thinks fit pending the determination of an application under section 729(1) ……

(2) The Court may discharge or vary an injunction granted under subsection (1) or section 729(1) ……”

9.  It is clear from the above provisions in the CO that the jurisdiction to grant injunctions extended to restraining proposed conduct that would be in breach of the CO and/or a company’s articles of association. Mr Lam submitted this is in line with the previous position under the Companies (Winding Up and Miscellaneous Provisions) Ordinance Cap 32 (“Old CO”). In Re Tysan Holdings Ltd,[1] there was an application under the Old CO for an injunction to restrain the defendant directors from engaging in certain act/conduct in relation to an agreement and a supplemental agreement to sell certain shareholding in its wholly owned subsidiary. It was held that so long as the court was satisfied the defendant directors were about to commit a misfeasance, or that a wrongful act was imminent, the court had jurisdiction and power to grant a quia timet injunction to restrain the wrongful act or misfeasance which was imminent but had not commenced, if it was necessary and just to do so.

10.  It is trite that an applicant seeking an interlocutory injunction has to show a serious question to be tried on the merits, that damages are not an adequate remedy, and if there is doubt on the adequacy of damages, that the balance of convenience favours the granting of the injunction.[2] For quia timet injunctions, Fok JA (as he then was) in Billion Star Development Ltd v Wong Tak Chuen[3]  referred to the principles summarised in Spry, Equitable Remedies: Specific Performance, Injunctions, Rectification and Equitable Damages as follows:[4]

(a) the plaintiff has the burden of proving that it is reasonably certain that what the defendant is threatening and intending to do will cause imminent and substantial damage to him;

(b) the criterion by which the degree of probability of future injury must be established depends on all the relevant circumstances and are not fixed; the greater the prejudice or inconvenience that may be caused by the apprehended injury (if it occurs), the more readily will the court intervene despite uncertainties and deficiencies of proof;

(c) in ascertaining the probability, one of the most important indications of the defendant’s intentions is ordinarily found in his own statements and actions;

(d) even in the absence of an express threat, the actions of the defendant may give a sufficiently clear indication of an intention to act unlawfully, and if the defendant has undertaken not to commit a breach, that is an evidentiary matter that weighs against the need for an injunction;

(e) likewise, even if there is no express threat, it may be of importance that the defendant has stated that it is within his rights to do the particular acts complained against.

Alleged Meeting and Alleged Resolution

11.  In respect of the Alleged Meeting and Alleged Resolution, P essentially relied on written communications with D1, copies of which were exhibited to P 1^st Aff and D1 Aff. 

12.  On 14 December 2015, D1 issued a written notice to P to convene a shareholders’ general meeting of D2 (“EGM”) to be held on 5 January 2016 to deal with verification of D2’s financial accounts to date, verification of D2’s bank transfer records, and proposal to liquidate D2. P’s stance was that since D1 was in charge of D2’s operations before cessation of such operations, so it was D1 who had possession of the documents he sought. On 4 January 2016, P’s then solicitors Howse Williams Bowers (“HWB”) wrote to D1 to postpone the EGM pending provision by D1 of (a) D2’s financial accounts, records and/or reports in his possession/control, and (b) a proper reason for the proposed liquidation of D2.

13.  On 6 January 2016, D1 wrote to HWB denying possession/control of the requested documents and claiming P as the Board’s chairman was legally obliged to provide the requested documents. P maintained he was not involved in the operation of D2 and did not have possession of the requested documents/information.

14.  On the same day, D1 as 50% registered shareholder of D2 issued a written notice to P to convene an EGM to be held on 19 January 2016 to deal with disclosure of D2’s documents such as tax records and audited financial statements up to 14 December 2015, disclosure of D2’s bank transfer records, disclosure of D2’s operation report(s) and financial report(s), and proposal(s) for winding up D2. On 12 January 2016, D1 gave further written notice to P to postpone the proposed EGM.

15.  On 20 January 2016, D1 wrote to HWB to reiterate his intention to convene an EGM to deal with the items of business set out in his notice dated 6 January 2016, reiterate that D2’s documents were not in his possession, and accuse P of refusing to disclose documents/ information for fear that legal proceedings that might be initiated against him. P felt it was meaningless to attend the proposed EGM as D1 refused to acknowledge D2’s financial documents were with him. So on 26 January 2016, HWB wrote to D1 to reiterate P’s stance and to propose postponement of the proposed EGM subject to D1’s provision of D2’s financial documents.

16.  There was plainly a stalemate between P and D1 as to who had possession/control of D2’s financial documents with each alleging the other party had possession/control of the same.

17.  On 28 January 2016, D1 as 50% registered shareholder of D2 wrote to P with copy to HWB seeking inter alia to convene an EGM to be held on 25 February 2016 (which eventually became the Alleged Meeting) to deal with a proposal to “terminate” the business of D2, verification of D2’s financial records and assets, and removal of P as director and chairman of the Board. On 5 and 16 February 2016, D1 wrote to P with copy to HWB to make clear his intention to pass a resolution at the proposed EGM on 25 February 2016 to remove P as director and chairman of the Board.

18.  Given D1’s threat to remove P from the Board, P felt he had to take proactive steps to counter D1’s further actions that might be detrimental to him (and also to D2). So on 23 February 2016, P’s new solicitors Symth & Co (“S&C”) wrote to D1 stating D1 failed to meet the legal requirements for calling an EGM contrary to section 566 of the CO,[5] and in any event the meeting was not called in good faith. By such letter, S&C also advised that P would not attend the proposed EGM as no valid notice had been given, but P would consider attending a future EGM convened in accordance with the proper procedure set out in the CO and D2’s articles of association (“Articles”).

19.  On 29 February 2016, D1 wrote to P with copy to S&C stating that at the Alleged Meeting held on 25 February 2016 a resolution was passed to the effect that P was removed from the Board with immediate effect (ie the Alleged Resolution), and enclosing a copy of the alleged minutes of the Alleged Meeting (“Alleged Minutes”). It appeared from the Alleged Minutes that only D1 attended the Alleged Meeting, and P was not present. P considered the Alleged Meeting was not validly convened and in any event not quorate, so the Alleged Resolution was void, invalid and of no legal effect, with the consequence that P did not accept he had been validly removed as a director of D2 (and/or as the chairman of the Board).

20.  D1’s letter dated 29 February 2016 plainly showed he wholly disregarded P’s objections. The Alleged Minutes went on to make further accusations against P (which P denied), including (a) an alleged misappropriation by P of US$381,644 from D2 on 22 September 2011, (b) an alleged failure by P to maintain proper records of D2’s financial accounts, and (c) alleged attempt(s) by P to conceal misappropriation of funds and/or other assets from D2.

21.  On 8 March 2016, S&C replied to highlight that the Alleged Meeting was not properly convened and was inquorate, so the Alleged Resolution was void and invalid. D1 was requested to acknowledge and confirm these matters, and that he would not (a) represent to any third party the Alleged Meeting was properly convened/held and/or the Alleged Resolution was valid and/or (b) take any action in reliance on the Alleged Resolution, failing which an injunction would be sought against him.

22.  P was concerned about D1’s actions, and feared D1 would seize control of D2’s financial records, so P felt D1 should be removed as a director of D2. On 8 March 2016, P as 50% registered shareholder of D2 wrote to the Board (with copy to D1) to requisition for an EGM to propose the passing of a resolution that D1 be removed as a director of D2.

23.  On 14 March 2016, D1 wrote to S&C refusing to acknowledge the Alleged Meeting was not properly convened/held and/or the Alleged Resolution was void/invalid. He expressly stated he would act upon the Alleged Resolution to remove P as a director of D2, audit D2’s books and wind-up D2 in the event P did not put forward any settlement proposal:

“如在本函發出後14天内沒有收到李志源的解決建議作深入商討，本人將按照2016年2月25日的股東會議起動罷免李志源在“源智”公司所有職位及職能，核對“源智”公司所有賬目及進行公司清盤工作。”

24.  On 21 March 2016, S&C wrote to D1 in a final attempt to address the needs of the parties so as to avoid the necessity of the injunction application by proposing that an EGM be convened to address all resolution(s) and business item(s) which D1 and P intended to address. By an email dated 31 March 2016, S&C sought D1’s response to their letter. But D1 failed to respond to P’s suggestions.

Serious question to be tried

25.  In my view, whatever might have been the disputes between the parties (and there was history of such disputes as evident from the discussion below), the subject matter of the present proceedings fell within a narrow compass, ie the validity or otherwise of the Alleged Meeting and the Alleged Resolution. Hence, I shall focus on such matter.

26.  Mr Lam submitted that as a matter of law D1 did not have any right to convene an EGM in the way he did since the only right which D1 as shareholder had was to request the directors of D2 to call an EGM pursuant to section 566(1) of the CO, ie “[the] members of a company may request the directors to call a general meeting of the company”. Section 566(2) of the CO provides that the directors are required to call a general meeting if the company has received requests to do so from members of the company representing at least 5% of the total voting rights of all the members having a right to vote at general meetings. Pursuant to section 567(1) of the CO, the directors are then required to call a general meeting within 21 days after the date on which they become subject to the requirement (ie within 21 days of the request). Further, section 568(1) of the CO provides as follows:

“If the directors-

(a) are required under section 566 to call a general meeting; and

(b) do not do so in accordance with section 567,

the members who requested the meeting, or any of them representing more than one half of the total voting rights of all of them, may themselves call a general meeting.”

So it appeared that the members themselves can call a general meeting only if the directors do not call a general meeting as required.

27.  In light of the above statutory provisions, I find there is a serious question to be tried as to whether the attempt by D1 as 50% registered shareholder of D2 to call for an EGM without invoking the requisition procedure under the CO is improper and in breach of the CO.

28.  Mr Lam next submitted the Alleged Meeting was inquorate either under the CO or the Articles since the Alleged Minutes showed D1 alone attended the Alleged Meeting:

(a) Section 585(3) of the CO provides inter alia that “[s]ubject to subsection (1) [concerning one member companies] and the provisions of a company’s articles, 2 members present in person or by proxy is a quorum of a general meeting of the company”.

(b) Article 10(a) of the Articles provides that “[t]he quorum for the transaction of business at any General Meeting shall be two members present in person or by proxy……”

29.  Since “[it] is a generally accepted principle that business transacted at a meeting at which a quorum is not present is invalid ……”,[6] I am satisfied there is a serious question to be tried as to whether the Alleged Meeting was inquorate either under the CO or the Articles, which had impact on whether the Alleged Resolution was invalid.

30.  D1 failed to deal with these 2 key issues in the D1 Aff and in his oral submissions. D1 complained that in April 2015 he had called for an EGM but P refused to attend, but I am unable to see the relevance of these matters to the propriety of the Alleged Meeting and Alleged Resolution. Paragraphs 13-16 of the D1 Aff referred to the above chronology of events that led to the Alleged Meeting and Alleged Resolution.  In my view, it was of significance that D1 did not dispute that he as 50% registered shareholder of D2 did not requisition the Board to convene the Alleged Meeting and/or that he acknowledged he alone attended the Alleged Meeting, which undisputed facts gave rise to the aforesaid serious issue to be tried.

31.  D1 submitted he wanted to have a “clean break” with P and put an end to their business relationship, so he was anxious to liquidate D2 and/or (if P agreed) to sell/transfer all his shares in D2 to P. He cast doubt over P’s delay in producing D2’s financial accounts and documents (when, according to him, P was the sole person in charge of D2’s finances and accounts), and over P’s excuses in not attending the EGMs he proposed. He claimed he had no alternative but to convene the Alleged Meeting to pass the Alleged Resolution as he did. But, in my view, none of these matters address or challenge P’s contentions that D1 had adopted improper procedure to convene the Alleged Meeting and there was lack of sufficient quorum for passing the Alleged Resolution. In all the circumstances, I am satisfied there was a serious question to be tried as to the validity of the Alleged Resolution.

32.  In relation to D1’s complaint that it was P who failed to address his proposals for convening an EGM, I note P did make a positive suggestion for a properly convened EGM to deal with matters to be raised by both D1 and P, but D1 failed to respond to the same. Further, I have found there was a serious issue to be tried as to whether D1 adopted an improper procedure for unilaterally convening the Alleged Meeting in breach of the CO, so it was an open question whether P actually failed to address D1’s proposal.

Adequacy of damages and balance of convenience

33.  On the question of adequacy of damages and whether a quia timet interlocutory injunction ought to be granted, I note the purpose of a quia timet injunction is to restrain threatened wrongful conduct. Although P did not know whether D1 had acted on the Alleged Resolution, I am satisfied a quia timet injunction in the terms set out in the Summons was warranted since D1 expressly stated it was his intention to rely on the Alleged Resolution to inter alia remove P from the Board and to wind up D2. If such interlocutory injunction was not granted, D1 would be free to present himself as the sole director of D2 and carry out acts purportedly on D2’s behalf to P’s (and possibly D2’s) detriment, eg obtain and remove books/records of D2 and/or wind up D2, which acts might be irreversible and any harm so caused could not be compensated by any order for damages. But on the other hand, the prejudice that potentially might be caused by such interlocutory injunction would be minimal since it merely required D1 and D2 to conduct their affairs in accordance with the CO and the Articles, which they should have complied with anyway. Insofar as D1 wished to deal with or handle any business or matter of D2, this could also be dealt with at a properly convened EGM, and I note P had suggested an EGM be properly convened, but D1 failed/refused to respond to such invitation. In all the circumstances, I find damages would not be an adequate remedy, and balance of convenience favoured P. The interlocutory injunctive relief that P sought is appropriate, and P confirmed he was willing to provide an undertaking as to damages.

Other matters

34.  As explained above, there was dispute between P and D1 as to they came to be shareholders/directors of D2 and there was history of litigation involving inter alia P, D1 and D2. The D1 Aff raised a series of allegations against P. In my view, given the narrow compass of P’s claim in the present proceedings, these allegations and counter-allegations concerning other disputes were largely irrelevant for the present purpose. Indeed, at the Hearing, Mr Lam and D1 confined themselves to submissions pertaining to the Alleged Meeting and Alleged Resolution without delving into these other matters. However, for completeness, I have considered those other matters to see there if there was anything that would dissuade me from the above conclusion, but find there was none that would assist D1 in resisting the Summons.

(a) D1’s role in D2

35.  In the P 1^st Aff, P claimed he and D1 established D2 to carry on business as a commercial trader in copper rods, and both had equal beneficial interest in D2 even though initially P was D2’s sole registered shareholder, sole director and bank account signatory and he signed various documents on behalf of D2 (but with negotiations and preparation of documents done by D1). P further claimed D2 was under the full control of D1 as primary operator of its business, and P did not participate in the operation of D2 and had no active involvement in its business/ dealings. At D1’s request, he was formally made a registered shareholder holding a 50% shareholding in D2 and was appointed as a director of D2 on 31 March 2010. Shortly thereafter, it was agreed that P would become the chairman of the Board.

36.  P explained that on/about 20 September 2011 he was suddenly approached by numerous customers/suppliers of D2 over unpaid invoices and/or undelivered cargo as they could not contact D1. Several days later, D2 was sued by its suppliers in HCA1687/2011 (and D1 was also a named defendant) (“2011 Action”). P claimed D went into hiding between 20 September 2011 and 19 March 2012, and in the course of handling claims by D2’s suppliers and customers it transpired that all along D1 implemented a fraudulent scheme to deceive D2. By 19 March 2012, P found and met with D1 who prepared and signed various written statements that described how he manipulated supplies and abused his position (“Confession Statements”) in order to facilitate inter alia D2 to defend the claims in the 2011 Action. But in 2012-2103, D1 attempted to circumvent liability by changing his stance and coming up with a new version of events to portray P as the fraudster, and D1 presented such new version to the plaintiffs in the 2011 Action. Such plaintiffs commenced another action against inter alia D2 and P in HCA454/2013 (“2013 Action”), and D1 filed affidavits in support of the plaintiffs’ application for a mareva injunction. It transpired that the plaintiffs in the 2011 Action had struck a deal with D1, ie that judgment be entered against D1 in the 2011 Action but was not enforced on the condition that D1 would provide full assistance to the plaintiffs in their recovery of losses from inter alia D2 and P. On 21 October 2014, the 2011 and 2013 Actions were ultimately settled, but D2 suffered significant financial losses and its business operations were paralysed.

37.  On the other hand, D1 claimed that in 2007 P established D2 without involvement or contribution on D1’s part. At the end of 2007, D1 became involved in D2 after accepting P’s invitation to work as an employee of D2, which employment was governed by the terms of an employment contract dated 2 January 2008 (“Contract”). In 2010, P on his own initiative gave D1 50% of D2’s shareholding to facilitate the application for a loan and to reimburse D1 for outstanding salary, but at all material times P refused to add D1 as signatory to D2’s bank account and refused to provide D1 access to D2’s financial statements.

38.  On 7 May 2014, D1 initiated LBTC1365/2014 in the Labour Tribunal (“Tribunal”) against D2 and put forward the aforesaid assertions in such proceedings, but such assertions had been rejected by the Tribunal. The Tribunal considered D1 to be an unreliable witness and preferred the evidence of P. The Tribunal found the Contract was not legally binding, and D1 was not an employee of D2. D1’s evidence and statements in those proceedings were described by the Tribunal as follows:

“本席認為[D1]的證供錯漏百出，而當[D1]被指出證供中前後不一和自相矛盾時，[D1]的解釋極之牽強。正如上文所述，[D1]的案情本身也不合常理。本席認為[D1]是一個不誠實和不可靠的證人，本席不會接納[D1]的證供。”

D1 applied for leave to appeal against the decision of the Tribunal, which was refused by G Lam J on 24 March 2016 in HCLA2/2016.

39.  In the D1 Aff, D1 did not inform the court of the unfavourable findings by the Tribunal nor the decision by G Lam J in upholding the decision of the Tribunal. P claimed that the incomplete picture D1 presented to the court cast doubt on the reliability of D1’s assertions, and lent force to P’s claim that D1 was in control of D2’s operations and even gave written instructions to P regarding remittance of funds. There is no need for me to go so far. Suffice for me to say the affirmation evidence before me demonstrated that the parties were in dispute over the above matters, and the findings of the Tribunal and the decision by G Lam J did not smile kindly on D1’s credibility. These matters were plainly removed from the “issue” in the present proceedings, and there was nothing in these matters to aid D1’s contentions before me.

(b) Confession statements and alleged misappropriated funds

40.  Au-Yeung J in her decision on 1 November 2013 in the 2013 Action to refuse the plaintiffs’ application for mareva injunction against P and 3 other defendants described D1 as a “self-confessed fraudster”.[7] Whilst the learned judge said she did not have to resolve inconsistencies in D1’s evidence at that stage of the 2013 Action, she found it troubling that D1 never disclaimed the contents of the Confession Statements or his previous affirmations in the 2011 Action, which were quite different from D1’s affirmations in the 2013 Action. Since it was a term of D1’s settlement agreement with the plaintiffs in the 2011 Action that he would cooperate fully to assist them in their efforts to recover the losses they suffered due to the alleged fraud that was the heart of the application before the learned judge and the proceedings in the 2013 Action against the defendants, the learned judge was concerned that D1 never filed any affidavit in reply to address those vexed matters:

“75. …… [D1’s] failure to file an affidavit in reply starkly poses the question as to why he would have done so, risking the breach of the Settlement Agreement? Was it because there were some unlawful acts of TEC/TGH [ie the plaintiffs in the 2013 Action] that he wanted to hide? ……

76. Further, [P’s] 2^nd affirmation mentioned that on 27 October 2012, [D1] had filed a police report alleging that [P] had misappropriated US$381,644.34 from [D2’s] HSBC account (808-649412-274). However, that complaint was withdrawn on 19 November 2012. [D1’s] failure to explain the withdrawal of the complaint undermines TGH’s case on the Everlong transaction.

77. In summary, the failure of [D1] to file a reply affidavit and withdrawal of [D1’s] report to the police create doubt in my mind as to the truthfulness and strength of TGH’s case. The Confession Statements, if true, would mean that TGH had been involved in unlawful conduct in allocating funds or unlawfully collecting payment under letters of credit. It suffered loss for reasons unconnected to [P] or [D1]. There is no reason why the court should lend its assistance to such a plaintiff. I am of the view that TGH has not shown a good arguable case to justify the grant of a draconian relief against [P], [D2] and Winful.

……

96. I have alluded to the doubts created as a result of [D1’s] failure to file an affidavit in reply. On that ground alone, the balance will be tipped against the granting of a Mareva injunction.

……

109. I am not satisfied that a good arguable case has been made out, without [D1’s] evidence in reply. There are inconsistencies in his Confession Statements and affirmations in 2011 Action. Even if there is a good arguable case, the balance of convenience is against making an injunction, and the potential damage to D5’s business. I dismiss TGH’s application.”

41.  The nature of the Confession Statements was extensively evaluated by Au-Yeung J in the 2013 Action, and it troubled the learned judge that D1 “never disclaimed the contents of his Confession Statements ……” And yet D1 asserted in the D1 Aff that he signed the Confession Statements under “威嚇及利誘” by P, and that he was in no position to prepare the Confession Statements due to his incompetency in the English language. P said such assertions were improbable as D1 in fact worked for Korean‑based companies for extended periods after 1998, hence D1’s language of communication (by email or otherwise) with these companies was necessarily English. More significantly, if D1’s allegations were true (ie P forced or tempted him to make the Confession Statements), D1 did not offer any reason why he did not raise this at all in the previous proceedings. Insofar as D1 relied on a video footage as evidence of the alleged duress, this was already done in LBTC1365/2014, and the Tribunal dismissed his evidence.

42.  In relation to the alleged misappropriation of funds by P, D1 alleged in both the previous proceedings and in the D1 Aff he had reported the matter to the police. But in neither the 2013 Action nor the D1 Aff did D1 seek to rebut evidence (as Au-Yeung J noted in her decision in the 2013 Action) that D1 in fact gave a further police statement to withdraw his complaint against P. At the Hearing, D1 suggested P should discover/produce the alleged further police statement because he had no idea about it, but Mr Lam made clear it was sufficient for the present purpose for P to rely on the decision of Au-Yeung J referred to above. At the Hearing, D1 also made a tentative application (which was eventually not pursued) for leave to adduce further affirmation evidence in further reply to P’s response allegations on this topic. Had such application been pursued, I would have refused it on the basis that (a) it would not have been appropriate to allow further round of affidavits on a peripheral matter (no matter how serious the allegation) that did not address the core issue in dispute, and (b) it was D1 who first raised the alleged misappropriation of funds in the D1 Aff and had he wished to do so he could have dealt with the concern expressed by Au-Yeung J in her decision in the 2013 Action in the D1 Aff.

43.  In my view, these matters were likewise removed from the core “issue” in the present proceedings, and there was nothing in these matters to aid D1’s contentions before me.

Conclusion

44.  For all the above reasons, on the basis of the undertaking as to damages that P gave to the court as recorded in the Chan Order, I order that the Interim Injunction as extended by this court at the Hearing be continued until judgment in the present proceedings or until further order. Mr Lam did not pursue paragraph 2 of the Summons, and it is unnecessary for me to make order in respect thereof.

45.  Mr Lam in his oral/written submissions did not seek any order for costs against D2, but he submitted that costs of the Summons should be paid by D1 to P to be summarily assessed and payable forthwith as D1 had no grounds to insist on carrying out the Alleged Resolution and to resist the Summons.[8] It was suggested that the court was entitled and should look at the merits of the injunction itself to decide what should be the proper costs order for that the Summons in all the circumstances, which would not necessarily depend on the outcome of the trial. As explained above, the matter concerning the propriety of the Alleged Meeting and Alleged Resolution fell within a small compass, and the evidence filed so far in this respect (set against the provisions in the CO and the Articles) showed strong merits to support the application for the interlocutory injunction sought and granted, and the balance of convenience was clearly in favour of P.

46.  I therefore grant a costs order nisi that (i) there be no order as to costs as between P and D2, and (ii) D1 do pay P costs of the Summons (including all costs reserved if any) to be summarily assessed. For the purpose of the summary assessment of costs between P and D1, I grant the following directions:

(a) P do within 7 days from the date hereof lodge and serve statement of costs not exceeding one page pursuant to Practice Direction 14.3;

(b) D1 do within 7 days thereafter lodge and serve succinct summary of objections of not more than one page in respect of P’s statement of costs (“Objection Summary”)

(c) if no application is made to vary the costs order nisi within 14 days from the date hereof, the summary assessment of costs will be by paper disposal (unless otherwise directed);

(d) if application is made to vary the costs order nisi within 14 days from the date hereof, the party(ies) seeking variation of the costs order nisi do within 14 days from the date hereof fix a date with the Listing Clerk for the hearing of the application for variation of the costs order nisi and summary assessment of costs before me in chambers (open to the public) on a date not before 28 days from the date hereof with half hour reserved.

47.  My clerk will inform D1 that if he so requires, a court translator will be arranged to verbally translate this Decision into the punti language for him at the High Court Building at a mutually convenient date and time.