GREAT SILVER INVESTMENT LTD v. SKY TREND GLOBAL LTD AND ANOTHER

HCA 1275/2020

[2020] HKCFI 2987

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1275 OF 2020

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DECISION

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1.  This is the application by the defendants (“D1”, “D2” and collectively “Ds”) to vary the Injunction granted by Deputy Judge To against them on 12 August 2020 (the “Injunction”). It comes before me as the Summons Judge today.

2.  D2 is the sole shareholder and director of D1.  D1 is the sole shareholder of a company called Max Era Properties Limited (“Max Era”). Max Era solely owned 2 properties at Mei Foo Sun Chuen (the “Properties”).

3.  The underlying claim relates to an aborted sale by D1 to P of D1’s entire shareholding in Max Era and the shareholder loan Max Era owed to D1.

4.  For the purpose of the sale and purchase, a provisional sale and purchase agreement was signed.  Deposit in the total sum of HK$70,000,000 has been paid by P.  P subsequently claims that D1 has failed to answer certain requisitions on title relating to the Properties.  The intended sale fell through.  Both sides say that the other side has been in breach.

5.  By the present action, P is suing for return of the deposit.  It subsequently obtained the Injunction.

6.  In respect of the Injunction, I note:

 (a)     the enjoined amount is up to HK$79,050,000;

 (b)     whilst Max Era is not a party to this action, the Injunction covers its assets, on the basis that the value of its assets bears upon the value of D1’s and D2’s assets;

 (c)     the Injunction is a Mareva type injunction but not a proprietary injunction;

 (d)     I do not accept that the Injunction has the effect of preserving the net proceeds of the sale of the Properties to the third party or otherwise has the effect of enjoining Ds from using those proceeds irrespective of the total unencumbered value of D1 and D2’s assets, as Mr Lin for P is submitting. That is inconsistent with the clear wording of §1(2) of the Injunction, which stipulates that:

“ If the total unencumbered value of the [D1 and D2’s] assets in Hong Kong exceeds HK$79,050,000.00, [D1] and [D2] may remove any of those assets from Hong Kong or may dispose of or deal with them so long as the total unencumbered value of this assets still in Hong Kong remains above HK$79,050,000.00.”

 (e)     In reaching the views above, I have considered the Reasons for Decisions handed down by Deputy Judge To for granting the Injunction (“Reasons (No.1)”) and ordering disclosure in aid against Ds (“Reasons (No.2)”). I have in particular considered §44 of Reasons (No.1) and §3 of Reasons (No.2). In my view, what the learned Deputy Judge has stated in those paragraphs merely confirm that the net proceeds (which were thought not to have been received at the time when the Injunction was granted, and that when received, would strictly speaking be the property of Max Era) are to be within the scope of the Injunction as being “assets” of Ds.  I do not believe that the learned Deputy Judge can be taken as meaning to override the clear meaning of §1(2) of the Injunction in the sense as argued by Mr Lin.  I have also considered those paragraphs when interpreting the Injunction, which do not lead me to any different conclusion;

 (f)     Mr Lin has raised the question of lien in opposition of the present application.  But lien was not part of the considerations leading to the grant of the Injunction.  

7.  Ds are seeking the present variations so as to enable the following obligations to be met:

 (a)     the estate agency fees incurred by Max Era when Ds subsequently sold the Properties to a third party, in the sum of HK$12m;

 (b)     a judgment debt owed by D2 to Aria Resort & Casino Holdings, LLC in HCA 1090/2020, in the sum of about HK$8.434m; and

 (c)     another judgment debt owed by D2 to Nevada Property 1 LLC dba The Cosmopolitan of Las Vegas in HCA 2252/2019, in the sum of about HK$14.792m.

The total amount of the above is HK$35.226m (the “Payment Obligations”).

8.  Ms Lee, counsel for Ds, raises 2 main grounds: (1) the total unencumbered value of the assets of Ds and Max Era substantially exceeds the enjoined amount, and (ii) on the basis of the Court’s Angel Bell jurisdiction[1].

9.  The present application is supported by D2’s 3^rd affirmation, which I have read.

10.  On the evidence, I am satisfied that the total current value of the assets of Ds is about HK$136m.  In reaching that view, I have considered the adverse observations on D2’s credibility made by Deputy Judge To in Reasons (No.1) and (No.2).  I however accept D2’s evidence on the value of Ds’ assets because his evidence is by and large supported by bank statements and what appears to be independent valuation evidence.  The valuations are not perfect, but are in my view sufficient for the present purpose.

11.  The total unencumbered value of the assets of D1 and D2 exceeds the enjoined ceiling by about HK$57m.  The meeting of the Payment Obligations will not cause the unencumbered value of Ds’ assets in Hong Kong to drop below the enjoined amount. §1(2) of the Injunction is applicable and is triggered.

12.  Within the terms of §1(2) of the Injunction, Ds have the right to deal with their own assets in ways they choose to.

13.  Mr Lin has referred me to Wharf Ltd v Lau Yuen How [2010] 3 HKC 108 on the principles applicable to variation of injunctions.  However, given my view that the Injunction is not proprietary in nature, my view on the effect of §1(2) of the Injunction, and my acceptance of the evidence that the total unencumbered value of the assets of D1 and D2 exceeds the enjoined ceiling, Wharf Ltd in my view has no application.

14.  Mr Lin takes the point that D2 should not be permitted to utilize the assets of Max Era to repay the judgment debts owed by D2 personally.  I do not take that point as being relevant.  If the Ds and Max Era can rely on §1(2) of the Injunction to deal with their assets, the purpose for which the assets are to be used is a matter for them and is beyond the scope of the present application.  Not irrelevant is also the fact that D2 is the sole director and shareholder of D1.

15.  For the reasons above, and on the first ground raised by Ms Lee, I allow the application. 

16.  It is in the circumstances not necessary for me to deal with the Angel Bell principles.  I say only this.  I would if necessary also have allowed the application on the Angel Bell ground.  The purpose of the Mareva jurisdiction was not to improve the position of any claimants to the property of the insolvent debtor but to prevent abuse through unwarranted dissipation of assets.  The liabilities which ground the 2 judgment debts here were all incurred before the aborted sale of the Properties that has led to the present action.  Mr Lin fairly does not strongly oppose the payment of the estate agency fee but says that he would leave that to this Court.  The debts appear all to be genuine, sufficiently important, and are pressing.  This is particularly so when the judgment creditors have been threatening bankruptcy proceedings.  

17.  In all, I allow the application.

18.  Having heard counsel, I order that the costs of this summons be Ds’ costs in the cause of the action.