章晶历 v. 吴联模

HCCT 48/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS NO 48 OF 2017

____________

____________

___________________

D E C I S I O N

___________________

1.  The issue for decision is whether the court should grant an interim injunction pending the substantive determination of the applicant’s inter partes summons dated 18 October 2017 seeking a Mareva injunction against the respondent.

2.  The applicant is the award creditor of an arbitration award dated 16 June 2016 (“the Award”) made by the Beijing Arbitration Commission of the People’s Republic of China against (i) a PRC company called 第五季國際投資控股有限公司 (“DNK”) and (ii) the respondent, being the guarantor of the obligations of DNK.  According to the applicant, the respondent is also the controlling shareholder of DNK.  The Award is for the principal total sum of CNY65,000,000, arbitration fees of CNY323,091, and interest thereon.

3.  On 29 September 2017, the applicant obtained an order (“the Enforcement Order”) from Madam Justice Mimmie Chan permitting him to enforce the Award in the same manner as a judgment or order of this court pursuant to sections 84 and 92 of the Arbitration Ordinance (Cap 609) against the respondent.

4.  On 12 October 2017, the applicant made an ex parte application to this court seeking a Mareva injunction against (i) the respondent to freeze and/or preserve the sum of HK$77,502,581.30 (being the amount of the Award in Hong Kong dollars), and (ii) the respondent and a company called Kai De International Holdings Ltd (“Kai De”) to restrain the disposition of certain shares held by them in a listed company called Bright Future Mining Holdings Limited (“Bright Future”) in aid of the Enforcement Order.  According to the applicant, Kai De was a company wholly owned by the respondent.  The ex parte application was supported by the applicant’s 2^nd affirmation made on 12 October 2017.  In that affirmation, it was stated that the respondent and Kai De held around 15 million and 612 million shares in Bright Future (as at 3 October 2017).

5.  As can be seen from paragraph 3 of the skeleton submissions of Mr Wong on behalf of the applicant dated 12 October 2017, the need for an urgent injunction was put on the basis that the respondent disclosed on 9 October 2017 that he had disposed of 150,035,000 shares in Bright Future on 3 October 2018, which disposition the applicant said he came to know only on 11 October 2017.

6.  In support of the ex parte application, Mr Wong argued that there was a real risk of dissipation of assets by the respondent on the basis of the following matters:-

(1) DNK was un-cooperative when the applicant sought to enforce the Award against it in the PRC court.  I pause to observe that at that time, only scanty particulars were given of the alleged un-cooperation on the part of DNK.

(2) As earlier mentioned, the respondent disposed of 150,035,000 shares in Bright Future on 3 October 2017.

(3) The respondent also disposed of 148,000,000 shares in another listed company called China Financial Leasing Group Limited (representing some 16.63% of the shareholding of that company) on 21 September 2017.

7.  The ex parte application was dismissed by me because I was not satisfied that the applicant had produced sufficient evidence of a real risk of dissipation of assets.

(1) In respect of the alleged un-cooperation of DNK, I took the view that the fact that an award or judgment debtor did not cooperate in the execution of the award or judgment against him was hardly surprising and could not be regarded as evidence of a risk of dissipation of assets.

(2) In respect of the disposals of the shares in the two listed companies, I was informed that at the time of the ex parte application, the applicant had not yet served the Enforcement Order on the respondent.  It could not therefore be said that the alleged disposals were prompted by the making of the Enforcement Order.  Neither could it be said that the disposals were prompted by the Award, which was made nearly 16 months previously in June 2016.

8.  In addition, I was not satisfied that there was sufficient evidence to show that the shares in Bright Future held in the name of Kai De belonged beneficially to the respondent such as to justify the exercise of the so called Chabra jurisdiction to grant a Mareva injunction over assets held in the name of a third party.  I took the view that the fact that under the relevant listing rules, the respondent was treated as being interested, or deemed to be interested, in the shares held by Kai De could not be regarded as evidence that the respondent was the beneficial owner of those shares.

9.  On 18 October 2017, the applicant took out the present inter‑partes summons seeking substantially the same Mareva injunction against the respondent.  As confirmed by Mr Wong this morning, the applicant no longer seeks any injunction against Kai De to restrain it from disposing of its shares in Bright Future.  The application is supported by the applicant’s 3^rd affirmation made on 18 October 2017.

10.  In relation to the issue of risk of dissipation of assets, the applicant no longer relies on the alleged disposals of shares by the respondent referred to in paragraph 6(2) and (3) above.  Instead, the applicant now relies solely on the un-cooperation of the respondent and DNK in relation to the applicant’s attempted enforcement of the Award in the PRC court, referring in particular to a report issued by 浙江省杭州市中级人民法院 (Zhejiang Hangzhou Intermediate People’s Court) dated 13 October 2017 (“the Report”).  I shall come back to the contents of this report later in this decision. 

11.  There was no mention at all in the applicant’s 3^rd affirmation, or in Mr Wong’s skeleton submissions dated 23 October 2017 filed in support of the present inter-partes application, of the fact that the court had dismissed the previous ex parte application on 12 October 2017 or the court’s reasons for dismissing that application.  In this regard, it may be noted that the present inter-partes application was originally fixed for hearing before another judge, and counsel’s skeleton submissions were submitted to that judge.  The failure to refer to the aforesaid matters in the papers for the present application is, to say the least, unsatisfactory because the evidence, the submissions and the court’s reasons for dismissing the ex parte application could be relevant to the respondent’s submissions on, and the court’s consideration of, whether an interim injunction should be granted.

12.  For this reason, I granted a short adjournment of the hearing so that Mr Man, who appeared for the respondent this morning, could read the applicant’s 2^nd affirmation.  I also informed Mr Man of a part of my reasons for dismissing the ex parte application which I considered to be relevant to the submissions that he made to the court.

13.  On behalf of the respondent, Mr Man seeks directions from the court for the filing of evidence in opposition to the application.  Mr Wong does not object to the respondent’s application for directions regarding the filing of evidence (save in relation to the actual timetable), but seeks an interim injunction pending the substantive hearing of the application.

14.  The main issue for consideration is whether there is before the court sufficient evidence of a risk of dissipation of assets by the respondent.  As earlier mentioned, the applicant now relies solely on the un-cooperation of the respondent and DNK in relation to the applicant’s attempted enforcement of the Award in the PRC court, in particular the following matters stated in the Report:-

“本院于2016年7月22日依照仲裁书中的地址向二被执行人发出执行通知书及报告财产令，责令被执行人7日内自动履行，但本院以特快专递方式送达的法律文书均无人签收被退回，现被执行人至今未履行生效法律文书确定的义务。执行中，本院于2016年8月已将二被执行人列入最高人民法院失信被执行人名单。… 至今未执行到任何财产。根据你们的申请，本院于2017年3月31日将被执行人吴联模以拒不执行判决、裁定罪移送上城区分安分局，该局以未提供第五季实业有限公司的评估材料等为由，至今未立案审查。”

15.  Mr Man submits that the mere fact that the respondent and his company DNK failed to cooperate in the execution process is not evidence of a risk of dissipation of assets.  Mr Man also submits that before the court may grant a Mareva injunction, there must be “solid evidence” of a risk of dissipation of assets, and the standard of proof of the risk of dissipation is “relatively high”.  This submission is supported by the judgment of DHCJ Winner Tam SC in Eastman Chemical Ltd v Heyro Chemical Co Ltd (No 2) [2012] 3 HKLRD 307, at paragraph 26 (quoted with approval by Au-Yeung J in Arrow ECS Norway AS v Xin Cheng Holdings (International) Company Limited, HCA 239/2016 (12 May 2016), at paragraph 47):

“(1) Mareva injunctions put the recipient party in a seriously disadvantaged position right from the start, from which it may never recover. It is therefore essential for the Court to carefully and critically scrutinise the materials placed before it before making such an order.

(2) When considering whether there was unacceptably low commercial morality to infer a risk of dissipation of assets, the Court should scrutinise the evidence with care and should not too readily infer a real risk of dissipation from the defendant’s conduct or commercial morality: Hornor Resources (International) Co Ltd v Savvy Resources Ltd [2010] 4 HKC 50, 57.

(3) There must be “solid evidence” of the risk of dissipation of assets. The order, being a very serious infringement of rights and liberties of the defendant, can only be justified on appropriately clear and strong facts and risks. The standard of proof of the risk of dissipation is relatively high.

…

(5) The plaintiff cannot beforehand prevent the defendant from disposing of his assets merely because he fears that there will be nothing against which to enforce his judgment nor can he be given a secured position against other creditors. The dissipation of assets must be shown to be with an intention or for the purpose of defeating the plaintiff’s claim, or otherwise “improper”.

(6) The plaintiff is required to show that at least objectively, the effect of the defendant's conduct would be to frustrate the enforcement of any judgment. The conduct in question must be unjustifiable. There must be a risk that the asset will be used otherwise than for normal and proper commercial purposes.”

16.  In paragraph 48 of her judgment in Arrow ECS, ante, Au‑Yeung J also referred to the following passage in the judgment of the Court of Appeal of Ontario in Chitel v Robart [1982] 39 OR (2d) 513 at 532-533:-

“The applicant must persuade the court by his material that the defendant is removing or there is a real risk that he is about to remove his assets from the jurisdiction to avoid the possibility of judgment, or that the defendant is otherwise dissipating or disposing of its assets, in a manner clearly distinct from his usual or ordinary course of business or living, so as to render the possibility of future tracing of the assets remote, if not impossible in fact or in law.”

17.  In my reasons for dismissing the ex parte application on 12 October 2017, I expressed the view that the fact that an award or judgment debtor did not cooperate in the execution of the award or judgment against him could not be regarded as evidence of a risk of dissipation of assets.  What is stated in the Report is, essentially, clearer or more detailed evidence that the respondent and DNK failed to cooperate in the execution process against them, but the nature of the allegation against the respondent remains the same.  It seems clear that the respondent and DNK are not willing to voluntarily pay the sums which they have been ordered to pay to the applicant under the Award, but I do not consider that to be “solid evidence” of a risk of dissipation of assets for the purpose of granting a Mareva injunction.

18.  For the above reasons, I am not prepared to grant the interim injunction sought by the applicant.

19.  I give the following directions for the further conduct of the applicant’s summons dated 18 October 2017:-

(1) leave to the respondent to file and serve evidence within 21 days of the date hereof;

(2) leave to the applicant to file and serve evidence in reply within 21 days thereafter;

(3) no further evidence be filed without leave of the court;

(4) the summons be adjourned to a date to be fixed for substantive argument, with 3 hours reserved; and

(5) costs of today be reserved.