安徽四建控股團有限公司(formerly known as 安徽新基建有限公司) v. 江蘇金昇實股份有限公司

HCA 160/2024

[2024] HKCFI 3657

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 160 OF 2024

________________________

________________________

________________________

D E C I S I O N

________________________

1.  The plaintiff has applied to continue the Mareva injunction granted on 25 January 2024, as continued on 2 February and 3 March 2024. The application is opposed by the defendant. The defendant makes two principal arguments to say that the injunction should not be continued. First, the defendant argues that the plaintiff has failed to show a good arguable case. Second, the defendant argues that the plaintiff cannot demonstrate a solid basis for inferring a risk of dissipation on the defendant’s part.

2.  I have come to the view that there is a good arguable case, but I do not think there is a solid basis for concluding that there is a real risk of unjustified dissipation of the defendant’s assets. I am therefore minded not to continue the injunction. Here are my reasons.

GOOD ARGUABLE CASE

3.  For the purpose of establishing a good arguable case for obtaining a Mareva injunction, the plaintiff must show that his case is one that is more than barely capable of serious argument. In the context of this case, the plaintiff must show that its claim, which is based on a foreign judgment as a course of action, is more than barely capable of a serious argument.

4.  The defendant submits that any debt due under the Hefei judgment is no longer currently due and payable by reason of the settlement agreement. Therefore, argues the defendant, the plaintiff does not have a good arguable case.

5.  With respect to the defendant, I am unable to agree with this submission. On a plain reading of the settlement agreement, no reference is made to the Hefei judgment. It seems to me that the settlement agreement simply provides a mechanism for satisfying the defendant’s payment obligations in favour of the plaintiff. The settlement agreement does not appear to stay or extinguish the plaintiff’s present right to be paid under the Hefei judgment.

6.  Mr Lai refers to certain words in the settlement agreement to contend that restraints were put on the plaintiff so that the plaintiff could not make an immediate demand. These words are “由於外部環境影響，美西方打壓，乙方目前經營比較困難.” With respect, I am unable to read these words as having the meaning put on by Mr Lai.

7.  Despite the execution of the settlement agreement, the judgment debt under the Hefei judgment in my view remains due and enforceable. The fact that the settlement agreement is a legally enforceable document does not necessarily mean that the plaintiff has no presently enforceable debt under the Hefei judgment.

8.  My reading of the settlement agreement is further supported by the expert opinion on PRC law adduced by the plaintiff. According to the plaintiff’s expert on PRC law, the settlement agreement as a matter of PRC law does not “change, replace, discontinue or affect” the validity of the Hefei judgment. Mr Lai referred the court to Article 1 of a piece of Mainland legislation in bundle A, pages 47-76 to submit that what the expert concludes is wrong. However, given that the defendant has not adduced any expert opinion on PRC law to the contrary, I am not prepared to ignore the plaintiff’s expert opinion on the effect of the settlement agreement simply because the expert makes no reference to Article 1 of that piece of legislation.

RISK OF DISSIPATION

9.  It seems to me that despite the signing of the settlement agreement, the defendant’s obligation to pay the judgment debt under the Hefei judgment has not been compromised by the settlement agreement. Moreover, the plaintiff remains to have a good arguable cause of action to sue for any outstanding sums under the Hefei judgment. I am therefore of the view that the plaintiff has a good arguable case in its claim for the enforcement of the Hefei judgment in Hong Kong.

10.  I now turn to the risk of dissipation. On this issue, I have borne in mind what Lam VP said in Convoy Collateral Ltd v Cho Kwai Chee [2020] 6 HKC 81 at [37], [53]. That is, to satisfy the requirement of showing a real risk of dissipation of assets, the burden is on the plaintiff to show objectively that there is a solid basis for concluding that there is a real risk of unjustified dissipation of assets by the defendant.

11.  I am also conscious that this is an exercise of an evaluative and predictive judgment, and it usually is a matter of drawing proper inference from a holistic consideration of all the circumstantial materials that are indicative of risk.

12.  The plaintiff principally relies on the execution of the AIA and the share pledge agreement executed in August 2022, and the subsequent sale by Heberlein Ceramic Technology Limited of its 1,000 shares in Heberlein AG, as the events to support the inference. Heberlein Ceramic is a wholly-owned subsidiary of the defendant. The plaintiff points out that the sale of the Heberlein AG shares was completed after the Hefei judgment took effect.

13.  The defendant argues that the sale of the Heberlein AG shares was conducted pursuant to a bona fide commercial settlement with a view to avert potential litigation, and that the plaintiff cannot challenge the propriety of such a settlement. The defendant submits there is therefore no basis to infer a risk of dissipation from the sale of the Heberlein AG shares.

14.  I am conscious of the fact that the sale of the Heberlein AG shares took place against the background facts as set out in the defendant’s skeleton, paragraphs 13 to 23, and in particular I note that the execution of the AIA and the share pledge agreement was a precondition for the defendant to avoid being sued in relation to an earlier pledge, and for the lenders to provide a group of financing in the sum of €425 million.

15.  I further note that the eventual sale of the Heberlein AG shares was outside the control of the defendant. In August and September 2023, Heberlein Ceramic did in fact seek to stop the sale of the shares but its efforts were in vain.

16.  Having taken a holistic view of the background facts, which are not in dispute, I am unable to infer from the execution of the AIA and the share pledge agreement that the defendant intended to put its assets out of reach of the plaintiff and that there is a real risk of dissipation of the defendant’s assets.

17.  The plaintiff further relies on the preservation order granted by the Hefei court against, amongst other things, the defendant’s bank deposit and assets of equivalent value of up to RMB 106 million-odd. The plaintiff argues that the execution of the AIA and the share pledge agreement was prohibited under this Hefei preservation order and has diminished the value of the Heberlein AG shares.

18.  First, it is not entirely clear to me that the Hefei preservation order expressly prohibits the matters set out in the AIA or the share pledge agreement. As Mr Tam acknowledged, the preservation order is not the same as an injunction in Hong Kong which restrains a defendant from dealing with his or her assets.

19.  Moreover, even assuming that the AIA and the share pledge agreement have the effect of diminishing the value of the Heberlein AG shares, as the plaintiff contends, those agreements have to be looked at bearing in mind the relevant factual background. As I said earlier, I am unable to infer from those facts that there is a real risk of dissipation of the defendant’s assets.

20.  The plaintiff further submits that the defendant’s deliberate refusal to satisfy the judgment debt should give rise to an inference that there is a real risk of dissipation. I note that there is no evidential basis to show that the defendant has the means at the material times, but deliberately avoided paying the judgment debt. I therefore cannot accept this submission of the plaintiff.

21.  Finally, the plaintiff relies on two administrative penalty decisions issued by the China Securities Regulatory Commission to argue that the defendant has a total disregard of the regulatory and disclosure requirements, and therefore has a low commercial morality. Having read the two decisions and having noted the issued therein, I do not believe that the relevant events would give rise to an inference that there is real risk of dissipation of the defendant’s assets.

DISPOSITION

22.  For all of these reasons, I am not satisfied that there is a solid basis for concluding that there is a real risk of unjustified dissipation of assets by the defendant. For the reasons that I have given, I am not prepared to continue the injunction, and I would therefore dismiss the summons taken out by the plaintiff dated 11 January 2024.

(Submissions re costs)

23.  I make an order that the costs of and occasioned by the plaintiff’s summons dated 25 January 2024 be to the defendant, to be taxed if not agreed.