VASILY TRUBNIKOV v. EVGENY VOLOSOV AND OTHERS

HCA 139/2024

[2025] HKCFI 1576

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 139 OF 2024

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D E C I S I O N

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Introduction and Background

1.  The Plaintiff (“P”)  and the 1^st Defendant (“D1”)  are both Russian nationals.

2.  The 2^nd Defendant (“D2”)  is a company incorporated in Hong Kong.

3.  The 3^rd Defendant (“D3”)  is an Armenian national.  D3 is the sole shareholder of D2.  From 5 March 2015 to 8 March 2023, he was also the sole director of D2 and thereafter one of two directors.

4.  By Writ of Summons (“the Writ”)  issued on 23 January 2024, P commenced the present action initially against D1 and D2 only.  By amendment to the Writ on 21 March 2024, P also claimed against D3.  

5.  In the Amended Indorsement of Claim, P claimed inter alia:

(1)  Declarations that: (a)  there is a joint and equal partnership between P and D1 on the ownership, management and control of the business of exploration, mining, extraction, production, shipping, marketing and sale of mineral sands extracted from Mozambique through four concessionary licenses held by Tazetta Resources Limitada (“the Partnership”)[1]; (b)  the shares or assets of D2 constitute an asset of the Partnership[2]; or alternatively, (c)  D1 and/or D2 and/or D3 do hold on constructive trust those assets belonging to the Partnership which were misappropriated and/or diverted from the Partnership by unlawful means conspiracy between D1 and/or D2 and/or D3[3];

(2)  Orders for D1 to procure the allotment or transfer of half of all of D2’s shares to P and to appoint P to the board of directors of all companies owned or controlled by the Partnership including D2[4];

(3)  Various orders and relief on the basis that D1 had breached: (a)  his agreement with P concerning the ownership, management and control of the Partnership and its assets; and (b)  his fiduciary duties as a partner (e.g. damages, accounts and inquiries, appointment of receivership over all the assets of the Partnership and the dissolution of the Partnership)[5];

(4)  Various other orders and relief for tracing, account and inquiries etc, in respect of the assets belonging to the Partnership which were misappropriated and diverted by D1 and/or D2 and/or D3 by unlawful means conspiracy, including an injunction restraining each of D1, D2 and D3 from transferring, disposing of, diminishing the value of or otherwise dealing with those assets or traceable proceeds found to belong to the Partnership[6].

6.  On 16 May 2024, P filed the Statement of Claim (“SOC”).

7.  As to the formation of the Partnership, in gist, P’s pleaded case in the SOC is that:

(1)  In about late 2016, D1 contacted P by telephone to inform him of an opportunity to acquire, invest in and operate a business involving the exploration, mining, production, shipping, marketing and sale of mineral sands extracted from Pebane and Maganja de Costa in Mozambique (“the Business”), operated under 4 concessionary mining licences granted by the Ministry of Mineral Resources and Energy in Mozambique, held by Tazetta Resources Limitada (“Tazetta”)[7];

(2)  At that time, the issued share capital of Tazetta was held as to 99.85% by Avant Exploration Limited (“Avant”)  and 0.15% by Inforcom Invest Limitada (“Inforcom Invest”). The entire issued share capital of Avant was held by Brimwood Holdings Limited (“Brimwood”)[8];

(3)  D1 proposed that he and P should jointly acquire and operate the Business by purchasing the entire issued share capital of Avant from Brimwood.  Further, he represented to P that the shares in Inforcom Invest were held on trust for Brimwood and that Brimwood was the sole ultimate beneficial owner and controller of Tazetta[9];

(4)  In late 2016 and throughout 2017, P and D1: (a)  investigated and discussed the economic viability of acquiring and investing in and operating the Business; (b)  negotiated with Brimwood the terms and price on which P and D1 would acquire the Business from Brimwood; and (c)  during their discussions agreed or fully understood that each of P and D1 would participate equally in ownership, management and control of the Business and would share equally in the profits and loss, P would oversee those matters relating to planning and construction of infrastructure and shipping and logistics and D1 would oversee those matters relating to mining, production and marketing and sale of the minerals[10];

(5)  By early February 2018, P and D1 determined to proceed to acquire the entire issued share capital of Tazetta from Brimwood and to acquire, invest in and operate the Business[11];

(6)  At first, P and D1 agreed to nominate a special purpose vehicle by the name of East Coal Investment Limited (“East Coal BVI”)  as prospective purchaser in their negotiations with Brimwood and a Term Sheet dated 13 February 2018 (“Term Sheet”)  was signed by Brimwood as seller and East Coal BVI as buyer whereby Brimwood agreed in principle the terms on which they would sell and purchase the shares in Avant[12];

(7)  By about early May 2018, P and D1 agreed to substitute D2 as buyer in place of East Coal BVI as Brimwood preferred to deal with a Hong Kong company and D2 had an existing operational bank account to which P and D1 were able to remit monies for the purpose of acquiring Tazetta[13];

(8)  By a sale and purchase agreement dated 14 May 2018 between Brimwood as seller and D2 as buyer, D2 agreed to purchase from Brimwood the entire issued share capital of Avant for USD 2.5M (“the SPA”).  By an agreement on Assignment of Right of Demand No.02/2018 dated 14 May 2018 between Brimwood as assignor and D2 as assignee and Avant as debtor, D2 agreed to pay the sum of USD 500,000 as consideration for the assignment by Brimwood of all debts owed by Avant and Tazetta to Brimwood and its affiliates (“the Assignment”).  The SPA and the Assignment were respectively amended by agreement of the parties on 6 June 2018 (“the Amended SPA” and “the Amended Assignment” respectively)[14];

(9)  The completion of the SPA took place on 20 June 2018 whereby all the shares of Avant, and thereby the indirect 99.85% shareholding in Tazetta, were transferred from Brimwood to D2[15];

(10)  By the express terms of the Partnership orally agreed in late 2016 and early 2017 and the execution of the Term Sheet, the SPA, the Assignment, the Amended SPA, the Amended Assignment, and P and D1 each paying USD 1.5M to D2, P and D1 evinced their intention to carry on the Business with a view of profit and became partners in the Business[16];

(11)  With the acquisition of Avant’s shares with the funds provided by P and D1, Avant’s shares became an asset of the Partnership which D2 held on trust for the Partnership and D2 came under an obligation to hold and operate the Business on behalf of P and D1 and to distribute the profits generated by the Business to them in equal shares[17];

(12)  As throughout the Partnership it was intended by P and D1 that Avant’s shares and shares of other companies forming part of the Business of the Partnership would be transferred to a company owned and controlled by P and D1, on 1 March 2021, all shares of Avant were transferred to Julimar Management Limited (“Julimar HK”), a Hong Kong company incorporated for that purpose.  P and East Minerals Limited, a Hong Kong company of which D1 is the sole shareholder and director, are equal shareholders of Julimar HK.  At the time of incorporation of Julimar HK, D3 was the sole director[18].

8.  As for P’s pleaded case on the wrongful acts of Ds, these are pleaded in the SOC, §§72-96[19]. For present purposes, I believe it suffices to set out the summary of P’s pleaded case in P’s Skeleton Submissions dated 20 February 2025 (“P’s Skel”), §§40-43:

(1)  D1 has acted in breach of the terms of the Partnership, fiduciary duties as a partner and in breach of a shareholder’s agreement on 11 November 2023 (“SHA”)  and/or acted in pursuance of an unlawful means conspiracy;

(2)  In particular, D1 is claiming that D2 is an independent trading arm, thus denying that it is operating the Business as a trustee for the Partnership, or that the net profits accumulated belong to the Partnership.  D1 is thus misappropriating or diverting the assets of the Partnership to himself, D2 and/or D3;

(3)  D2 and/or D3 are liable for knowing receipt and dishonest assistance by: (1)  operating the business and receiving sale proceeds knowing of the existence of the Partnership and knowing that the net profits are owned by the Partnership; and (2)  agreeing dishonestly to procure or assist in the breach of trust or D1’s fiduciary duties owed to P; and

(4)  Further, by wrongfully misappropriating the minerals or sale proceeds, and by wrongfully excluding the same from the assets of the Partnership, D1, D2 and D3 had acted in breach of trust and engaged in an unlawful means conspiracy.

9.  By Summons dated 3 June 2024 (“the Summons”), P sought an interlocutory proprietary injunction and ancillary disclosure order against D2.  In the Summons, P sought to prohibit D2 from transferring, disposing of, dealing with or diminishing the value of the monies held in its bank accounts up to the sum of USD 211,007,604[20].

10.  At the first hearing of the Summons on 7 June 2024 before K Yeung J, upon D2’s undertaking to maintain a sum of no less than USD 60.5M in D2’s bank account with China Minsheng Banking Corp Ltd, Hong Kong (“the Undertaking”), the Summons was adjourned for substantive argument and directions given for filing of evidence.

11.  The following affirmations have been filed in relation to the Summons:

(1)  Affidavit of P dated 27 June 2024 (“P’s 1^st Aff ”);

(2)  Affidavit of D3 dated 20 September 2024 (“D3’s Aff”)

(3)  Affidavit of D1 dated 24 September 2024 (“D1’s Aff”); and

(4)  2^nd Affidavit of P dated 7 January 2025 (“P’s 2^nd Aff”)[21].

12.  At the adjourned hearing of the Summons:

(1)  Mr Paul Shieh SC leading Mr Harrison Miao appeared for P;

(2)  Ms Rachel Lam SC leading Mr Cedric Yeung appeared for D1; and

(3)  Mr William Wong SC leading Mr Lai Chun Ho appeared for D2 and D3.

13.  As stated in P’s Skel at §65 and from the draft order annexed thereto, P now only seeks an injunction up to the amount of USD 170,916,635.

Applicable Legal Principles

14.  The legal principles governing proprietary injunction are well-established and were not seriously disputed.  These include:

(1)  For the grant of a proprietary injunction, there are three requirements: (a)  there is a serious issue to be tried on the merits; (b)  that the balance of convenience lies in favour of the injunction; and (c)  it is just and convenient to grant the injunction; 

(2)  The threshold of “serious issue to be tried” is not a very steep hurdle but if the opposing party seeks to show that there is no serious issue to be tried, the threshold is high as it would be necessary to demonstrate that the claim should be struck out;

(3)  It is not necessary to show any risk of dissipation of assets;

(4)  Nor is it necessary to show that damages would not be an adequate remedy.  However, it remains necessary to demonstrate that the balance of convenience favours the granting of the injunction, and that it would be just and convenient to do so; and

(5)  As a fundamental principle, the Court at the interlocutory stage would take whichever course that appears to carry the lower risk of injustice if it should turn out that it is wrong.

See e.g.: Gentle Soar Limited v CMBC Capital Finance Limited & Ors [2021] HKCFI 3450 at §36 per K Yeung J; Wason Holdings Limited & Ors v BHP International Markets Limited & Anor [2018] HKCA 113 per Barma JA at §37; and Heitkamp & Thumann KG v Living Profit Trading Develop Limited & Ors [2018] HKCFI 1006 per DHCJ Marlene Ng (as she then was)  at §§55-57.

15.  With these principles in mind, I turn to whether the three requirements for grant of proprietary injunction are made out, bearing in mind ultimately, the court should take the course which appears to carry the lower risk of injustice should it turns out to be wrong.

Serious issue to be tried on the merits?

16.  Mr Shieh relied on the “black and white” contemporaneous documents, which he said was indisputable, to support that there is a least a serious issue to be tried on P’s proprietary claim that the profits in D2’s bank accounts are held on trust for P and D1 as partners of the Partnership.  In particular, he strongly relied on four key points that he submitted could not be overcome by Ds.

17.  Firstly, Mr Shieh relied on the emails from D3 to P and D1 containing Excel spreadsheets which he submitted acknowledged that P and D1’s respective share of investment was 50% and they contributed to the cost of acquisition of USD 1.5M each (which was exactly one half of the purchase price of Avant’s  shares)[22]. Apart from saying that D3 has not regularly provided P with reports of the Business’ financial status, in the emails relied upon D3 would occasionally copy P in on some emails to enable him to consult as P was brought on board as a consultant for the loading operations of the Business, and they do not make reference to D2’s bank account or that P and D1 have a 50-50 stake in any business[23], he submitted that there is no substantive answer from Ds regarding those emails.

18.  Secondly, Mr Shieh relied on P’s contribution of USD 1.5M to D2 for the purchase of Avant’s shares and Avant’s debts.  The remittance advice demonstrates that P’s wife remitted USD 1.5M to D2 on 22 May 2018[24]. Although there was reference therein to “Granting of Loan Loan Contract 1-4/2018 date 18 April 2018” in the remittance information and there was in fact a Loan Contract No.1-4/2018 between P’s wife and D2[25], P says that it was in substance and reality a payment of his half share in the Business[26]. There was a text message between P and D1 on 17 April 2018 whereby D1 said that: “It is better to throw money in with a loan agreement”; which P said was for convenience and to avoid questions from the banks[27]. P also relies on the proximity in time of the remittance from the SPA and the Assignment on 14 May 2018, as well as the fact that the amount was exactly half of the total consideration (USD 3M).  On the other hand, he submitted that D1’s explanation that he had requested P to give to D2 a USD 1.5M interest bearing loan to ensure P was committed to work for the Business[28] was a flimsy one and made no commercial sense.

19.  Thirdly, Mr Shieh relied on the allocation of 50% of the shares in Julimar HK (to which the Avant shares were transferred)  to P.  Mr Shieh submitted that Ds had claimed that the transfer was made for a consideration of USD 2.5M but there is no suggestion that it has been paid or P was expected to contribute to the consideration.  It was also submitted that D1’s claim that he agreed to grant P a 50% share in Julimar HK as P had promised to develop a successful bulk shipping business with another of Julimar HK’s subsidiary, Vema International[29], is unbelievable.  He submitted that no documents or evidence had been produced by D1 to show how it was estimated or projected such business would be worth about 50% of the value of Julimar HK.

20.  Fourthly, Mr Shieh relied on the SHA which acknowledged P as 50% beneficiary of Julimar HK and his entitlement to information, management and profits of the Business.  The SHA[30] contained clauses inter alia to the effect that:

(1)  Dividends in the amount of USD 100M would be distributed within 90 day;

(2)  Parties will make effort to open a bank account for Julimar HK to deposit the total funds received from the activities of the Mozambique project.  If it is not possible to open a bank account for Julimar HK, the parties shall establish another joint venture and open accounts for this purpose.  If it is not possible to open a company the parties may appoint representatives as nominee shareholders;

(3)  They would have the right to appoint representatives on the boards of “joint companies included in the general list of companies in order to exercise control functions and make key decisions regarding the activities of joint companies”;

(4)  The operating and investment capital of the group of companies shall be placed in the accounts of joint ventures or in the accounts of third companies by their mutual agreement;

(5)  The parties shall refrain from actions that violate the shareholders rights of the parties, or that are detrimental to the joint ventures and the project as a whole;

(6)  They shall agree on the distribution of powers in case of continued joint work; and

(7)  They shall provide reasonable assistance to each other to providing access to and obtaining information and documents relating to the activities of the joint venture.

21.  Apart from the submissions that the USD 1.5M paid to D2 was a loan which was repaid together with interest[31], Ms Lam did not make any other submissions in response on these 4 matters relied upon by Mr Shieh.  Given the low threshold of serious issue to be tried, in my view, Ms Lam rightly did not devote much time in her oral submissions to respond to these matters.  Plainly, the matters relied upon by Mr Shieh raise a serious issue to be tried on P’s proprietary claim.

22.  Ms Lam, however, placed great emphasis on her argument that as a matter of law, on P’s pleaded case, there can be no sustainable case of a partnership between P and D1.  She submitted that it is clear from the SOC (see paragraph 7 above)  that P’s pleaded case was that there was to be an acquisition of corporate entities by corporate entities and the Business was held and carried on by corporate entities.  She submitted that based on the authorities and elementary principles of partnership law that this was fatal to P’s case on the Partnership.

23.  Ms Lam submitted that in order for a partnership to exist, there has to be a concluded agreement that the partners should carry on business personally themselves.  An agreement that they should merely have an economic interest in a business carried on by an entity, such as a company, is insufficient. 

24.  Ms Lam referred me to the case of Dutia v Geldof & Ors [2016] EWHC 547.  In Dutia, the claimant (Mr Dutia)  alleged that he and the defendants had agreed to carry on a private equity business in common with a view to profit and claimed various relief in relation to the partnership.  The partnership claim was struck out in the first instance by Chief Master Marsh whose decision was upheld by Nugee J.  Ms Lam relied on the following paragraphs:

“6. There is one other point worth noting at the outset, which is that [the Partnership Act 1890] requires an agreement that the putative partners should carry on business themselves. An agreement that they should merely have an economic interest in a business to be carried on by some other entity is plainly insufficient. Indeed s.1(2)  of [the Partnership Act 1890] itself provides that the relation between the members of any company or association registered under the Companies Act or incorporated in pursuance of any other Act of Parliament is not a partnership within the meaning of the Act. This is no more than an application of the fundamental principles applicable to companies and other corporate bodies that the company or body corporate is a separate legal entity from its members, with the result that a business carried on by the corporate body is not carried on by its members.

…

30. … But even assuming that there was an enforceable contract between them to that effect, it does not seem to me that anything has been pointed to which suggests that this was more than an agreement, as Mr Dutia puts it himself, as to their having an ownership stake in the venture by becoming members of the LLP (and no doubt also owners or members of the separate carried interest vehicle). No doubt also that ownership was with a view to them personally benefiting from the profits of the business. But I do not see that anything in this begins to suggest that what was envisaged or agreed is that the individuals should carry on business together. What it suggests is that (at most)  they agreed that they should together own an entity which would carry on a business. As I have already pointed out, that is not an agreement that by itself gives rise to the relation of partnership, because s.1(1)  of the [Partnership Act 1890] requires the partners to be ‘carrying on a business in common’, and having an ownership stake in an equity that carries on a business is not the same as carrying on a business oneself.

31. To anticipate, this same fallacy underlies the entirety of Mr Dutia’s Partnership Claim: however much it was agreed that he should become involved in the project, and however much it was agreed that he would have an equal stake to the others (something that is in dispute), and however much this was with a view to him and the others making large personal gains from the venture, nothing begins to establish that what was intended, let alone agreed, was that the means by which they would reap such rewards would be by carrying on business themselves rather than by having an ownership stake in the vehicles through which the business was to be carried on and the profits delivered to them.

…

82. What is missing in any of this is any evidence that the parties intended or agreed to carry on business themselves rather than through the LLP. As the Chief Master put it (at [99] of his judgment):

‘There is no conceptual difficulty with a partnership coming into being during the twilight period, as I have described it [that is a period during which the legal relationships to be entered into in the future were being determined]. If the parties intend to operate their business through a corporate entity but have in fact commenced their business before incorporation a partnership may be inferred as they are operating a business together with a view of profit. Where, however, the parties have already incorporated the principal trading vehicle, it seems to be that it is far less likely that a partnership can be inferred pending the date upon which the full structure is set up. Here, the parties’ intentions were expressed in some detail in the documents I have summarised. The consultancy agreements and the subsequent offer of membership (which comprised a number of detailed documents)  are the principal documents which are not just contrary to the Claimant’s case but wholly inconsistent with it.’

I agree.” [my emphasis in bold]

25.  With greatest respect, I cannot agree with Mr Shieh that Dutia was decided on the facts and intention of the parties in that particular case and should not be held to lay down any immutable principles of law.  The words highlighted by me in bold above clearly support the proposition of law laid down that for there to be a partnership under the Partnership Act 1890 there is a requirement for an agreement that the putative partners should carry on business themselves rather than through a corporate vehicle which they may have an ownership stake.

26.  Section 3(1)  of the Partnership Ordinance, Cap. 38 (“PO”), like the Partnership Act 1890, also provides, “Partnership is the relation which subsists between persons carrying on a business in common with a view of profit”.  Section 3(2), similar to s.1(2)  of the Partnership Act 1890, also provides: “But the relation between members of any company or association which is- (a)  registered as a company under any Ordinance relating to the registration of joint-stock companies; or (b)  formed or incorporated by or in pursuance of any other Ordinance, or any enactment or instrument, is not a partnership within the meaning of this Ordinance.”  I see no reason why the principle of law laid down in Dutia should not be applicable to PO.  In the SOC, P has pleaded that the Partnership between P and D1 is a Hong Kong partnership governed by the terms of PO[32].

27.  Mr Shieh also relied on Lindley & Banks on Partnership, 21^st Edn, at §2-13: “The fact that the business is, ultimately, intended to be carried on through a company or other vehicle will not prevent the existence of a partnership in the interim, but much will depend on the facts and the parties’ intentions as to whether a partnership will be inferred”. However, that passage does not assist Mr Shieh when he submitted that it was not his client’s pleaded case that the parties agreed at the outset for corporate vehicles to be incorporated but rather they started off as a partnership.

28.  Furthermore, although Mr Shieh relied on Rosenberg v Nazarov & Ors [2008] EWHC 812 (Ch)  at §6 which stated that the partnership in that case traded through two companies, as submitted by Ms Lam, this issue was not argued in Rosenberg.  I also take note of Lindley & Banks on Partnership at §24-96: “It should be noted that there are other reported instances in which the business of a partnership has been carried on through a company without the existence of the partnership even being called into question.”  A number of cases including Rosenberg were cited in the footnote therein.  However, I do not find these of assistance when apparently no issue was taken on this issue.

29.  Nonetheless, I accept that it is arguable, at least sufficient to survive a strike-out, that P’s pleaded case is that from the very initial discussions between P and D1, they discussed and agreed that they themselves (as opposed to through corporate vehicles): (1)  should jointly acquire, invest and operate the Business by purchasing the entire issued share of Avant from Brimwood[33]; and (2)  would participate equally in the ownership, management and control of the Business[34].

30.  In particular, P would oversee those matters relating to planning and construction of infrastructure and D1 would oversee those matters relating to mining, production, marketing and sale of the minerals[35]. Whilst the acquisition of the shares of Avant, which owned 99.85% of the shares of Tazetta (which owned the mining licenses)  was part of their agreement to own and invest in the Business, arguably it is also pleaded that P and D1 also agreed to participate in managing and control the Business by their different respective roles in the Business.  In other words, their agreement was not solely to acquire the shares of Avant from Brimwood for ownership of the Business.

31.  As to subsequently, when it was agreed that the entire issued share capital of Tazetta from Brimwood would be acquired by corporate vehicles, East Coal but later D2 was substituted in place of East Coal[36], and despite Ms Lam’s submissions that following the analysis in Ness Training Ltd v Triage Central Ltd & Ors 2002 SLT 675 at §19 it is not open for P to revert back to the Partnership or for it to continue as a substratum, P’s pleaded case is not that the acquisition of the issued share capital of Tazetta was the only business of the Partnership.  As to whether the other business of the Partnership has been transferred to and has been carried out by the various companies, as pleaded to have been used in the operation of the Business of the Partnership[37], to preclude there being a partnership, this is a matter of fact which should be tried.  It is not plain and obvious that the Partnership claim is bound to fail.

32.  I therefore do not accept that P’s pleaded case discloses no serious issues to be tried and is liable to be struck out. 

33.  Mr Wong, who also did not make any substantive submissions on the four key points relied upon by Mr Shieh, submitted that a serious issue to be tried may be negated if a party puts forward a case that is in abuse of the court’s process.  In particular, he submitted that it was an abuse of process for P to have advanced a plea in this action that the money in D2’s bank accounts belong to the Partnership which is diametrically opposed to P’s position in HCMP 523/2024 (“HCMP 523”)  and in Mozambique proceedings that the money in D2’s bank accounts belonged to Julimar HK.

34.  In HCMP 523, a petition was filed on 28 March 2024 by P, as the Petitioner, whereby it was alleged that the affairs of Julimar HK have been conducted in an unfairly prejudicial manner (“the Petition”).  In the Petition, it was pleaded inter alia:

(1)  At §37:

“The profits of the Mining Business (also representing the profits of the [Julimar HK] were and continues to be held in the bank account of [D2]. The Petitioner did object to this previously, as the Petitioner was led by [D1] to believe (a)  that [D2] is a part of the Mining Business; and (b)  that the Petitioner is a 50/50 beneficial owner of [D2] together with [D1].”;

(2)  At §45(b):

“The profits of [Julimar HK], which were held in D2, have to date not been transferred to a company’s bank account that is jointly owned and controlled by the Petitioner and [D1]”; and

(3)  At §50:

“To date, [D1] (as director of [Julimar HK] acting in concert with [D3] (as director of [D2])  have continued to unlawfully keep the profits of the Mining Business (i.e. the profits of [Julimar HK])  in D2.”

35.  By amendments to the Petition on 14 November 2024 inter alia:

(1)  §37 of the Petition was deleted;

(2)  The words “[Julimar HK] and its subsidiaries” were deleted and replaced by “the Mining Business” in §45(b)  (which became §44(b)); and

(3)  §50 (which became §49)  was amended to plea that the profits of the Business were kept in D2 and/or in companies controlled by D1 and/or D3 with deletion of the words “(i.e. the profits of [Julimar HK])”.

36.  The effect of the above amendments to the Petition is that it was no longer maintained by P that the profits in D2’s bank accounts were profits of Julimar HK.  However, Mr Wong submitted that the amendments cannot mitigate the abusive implication of P’s conduct (that his stance in this action and HCMP 523 are irreconcilable with each other).  In any event, Mr Wong submitted even if the amendments cured this abuse, in proceedings in Mozambique, after the SOC was filed on 16 May 2024, P claimed on 28 May 2024 that “the profits from the mining business (which also represents the profits of [Julimar HK] have been and continue to be deposited into the bank account of [D2]”[38].

37.  Mr Shieh’s response to Mr Wong’s argument on abuse of court is to submit that there is no authority for the proposition of law that it is an abuse of process to assert a claim which has since been withdrawn. P cannot be said to have allowed two inconsistent claims hanging over Ds.  He further queried how in those circumstances there can be any compromise to the administration of justice.

38.  However, Mr Wong relied upon the Court of Appeal decision in Chu Yue Bun v Lai Shiu Woon [2021] HKCA 1929.  In that case, the Court of Appeal dismissed an appeal against the decision of DHCJ Maurellet SC which affirmed the master’s decision to strike out the plaintiff’s statement of claim and dismiss the action as it is frivolous, vexatious and amounts to an abuse of process of the court.  In that action, the plaintiff pleaded that the defendant held 30% shares in a company on trust for him which was contrary and inconsistent with what he previously stated on oath in an earlier action.  

39.  At §35(2), Kwan VP (giving the reasons for the Court of Appeal)  held:

“It may be an abuse of process for a party, with full knowledge of the facts, to advance a claim that is diametrically opposed to its position taken in an earlier set of proceedings. The abuse lies in its effect on the integrity of the administration of justice, which would be no less compromised even if the previous inconsistent allegation was not followed through to judgment, particularly when such previous allegation was of some significance. (Chan Chun Chuen v Kao, Lee & Yip [(unrep)  HCA 597/2015, 12 October 2017] at §§30 and 78)”.

40.  The learned judge went on to hold at §35(3):

“What constitute an abuse of process in the type of case referred to in (2)  may vary with the circumstances of each case. An important factor in determining whether it is an abuse of process is to see whether there is any explanation why diametrically inconsistent cases have been advanced by a party in different proceedings. (Chan Chun Chuen v Kao, Lee & Yip at §§30(3), 68; Jim Chiu Yuen v C L Chow & Macksion Chan (a firm)  & Ors [2018] HKCFI 154 at §33)”.

41.  What can be gathered from Chu Yue Bun is that whilst it may be an abuse of process for a party with full knowledge of the facts to advance a claim that is diametrically opposed to its position taken in an earlier proceedings, whether it amounts to an abuse depends on all the circumstances of the case and importantly, on the explanation advanced by the party.

42.  Furthermore, whilst the Court of Appeal held that the effect on the integrity of administration of justice would not be less compromised even if the inconsistent allegation was not followed through, this ought to only be one matter to be considered.  As held at §35(3), what constitutes an abuse of process may vary with the circumstances of each case.

43.  Turning to the explanation for the inconsistent stance, essentially P stated that he and D1 had agreed in about late 2020 that the corporate structure of the Business should be formalized and over time the assets of the Partnership relating to the Business to be transferred into the corporate structure of Julimar HK.  By the time dispute broke out between them, assets have remained outside the corporate structure of Julimar HK which included the profits kept in the bank accounts of D2.  Although I agree with Mr Wong, to the extent that P’s explanation is plainly an admission that at all times when HCMP 523 and the present action were ongoing, he knew the profits in the bank accounts of D2 did not belong to Julimar HK, he has explained why he has to take action in these proceedings to recover these assets.  He has not explained why he maintained the incorrect position in HCMP 523, prior to the amendments to the Petition, when he knew the profits in the bank accounts of D2 did not belong to Julimar HK.  However, for present purposes, what is important is his explanation for his inconsistent stance in this action. 

44.  Whilst it could be said that the plea in HCMP 523 and in the Mozambique proceedings that the profits in D2’s bank accounts belonged to Julimar HK would have “no solid basis capable of proof and is a myth with no substantial foundation” or “presents a tissue of improbabilities which ought not to be sent to proof” (as held by G Lam J, as he then was, in Lam Kit Sing v Chungshan Commercial Association, Hong Kong & Ors (unrep)  HCA 2011/2014, 29 June 2016, §18 quoted in Chu Yue Bun at §35(1)), an explanation has been given for the inconsistent stance in this action. 

45.  I also have regard to that caution should also be exercised when the effect of striking out a claim as an abuse is to shut out a party from putting forward a case without having a full hearing on its merits (particularly one which otherwise I have found to raise a serious issue for trial).  In all the circumstances of this case, I am not satisfied there is a plain and obvious case of abuse by advancing a claim in this action that is diametrically opposed to P’s position that was once maintained but now withdrawn in HCMP 523 and subsequently put forward in the Mozambique proceedings. 

46.  Accordingly, I am satisfied that there is a serious issue to be tried. 

Balance of convenience lies in favour of injunction?

47.  Ms Lam and Mr Wong both submitted that the balance of convenience does not lie in favour of the grant of injunction even if there was a serious issue to be tried. 

48.  Mr Shieh has not disputed that even in a case where the injunction sought is proprietary in nature, where the injunction essentially required the defendant to set aside money in order to pay the plaintiff in the event his claim was successful, unless there is reason to think that the defendant will be unable to meet such a claim, a proprietary injunction may be refused.  See e.g.: Wason Holdings Limited & Ors at §38; DBS Bank (Hong Kong)  Limited v Tian Wen Quan (unrep)  HCA 3228/2016, 12 October 2017 per Anthony Chan J at §§14-15 and Essilor Manufacturing (Thailand)  Co Ltd v G Doulatram and Sons (HK)  Ltd & Ors [2021] 3 HKC 167 per Recorder Stewart Wong SC at §59.

49.  Firstly, Mr Shieh submitted that there is no transparency in the assets that D1 and D3 have in Hong Kong being Russian and Armenian nationals respectively.  However, from the mere fact they may not have much in way of assets in Hong Kong, it does not follow that Ds’ assets are not adequate to enable P’s claims to be met.  See Wason Holdings Limited & Ors, §38. 

50.  In any event, there is evidence that D1 owns an international portfolio of mining businesses[39]. Furthermore, even on P’s case, the net profits in D2’s bank accounts belonged to the Partnership of which he and D1 were joint and equal partners.  If P succeeds in his claim, there is no reason why D1 could not use his half share of the net profits to pay P.  Furthermore, P has claimed that D2 is in fact controlled by D1 and that D3 is acting as D1’s nominee, so in the event that D2 and D3 are not able to satisfy any money judgment against them, P could pursue D1.

51.  Secondly, Mr Shieh relied on two matters to demonstrate that there was a risk of dissipation by D1 and therefore the money in D2’s bank accounts may be gone if an injunction is not granted: (1)  for a shipment of minerals on board the “TAN BINH 136” in or about May 2023, Ds diverted: (a)  5,000 MT to GPM Bin Thuan Company Limited (a Vietnamese company beneficially owned and controlled by D1); and (b)  1,000 MT of Zircon to Than Gia Mineral Processing Co Ltd without accounting to him[40]; and (2)  D1 had falsified the sale contract and letters of credits for the cargo that was loaded on “UNIVERSE WEALTHY”[41].

52.  Mr Wong and Ms Lam submitted that Linda Chan J (“the Judge”)  found that there was insufficient evidence which can substantiate any risk of dissipation on the part of D1 in an earlier application by P for interim receivers and managers over Julimar HK in HMCP 523: see Decision of the Judge dated 6 February 2025 ([2025] HKCFI 575)  (“the Decision”).  They submitted that as there has been no material change of circumstances since the Decision, it would be abuse of process for P to seek to re-open this issue.  As for any matter which are now raised which were not raised before Linda Chan J, this would be impermissible and amount to an abuse of process.  See Compania Sud Americana De Vapores SA v Hin-Pro International Logistics Ltd [2015] 2 HKLRD 458, §§16-17; and Chu Kong v Lau Wing Yan [2023] HKCLC 781, §§62-66. 

53.  In the Decision, in considering whether to exercise the power to appoint an interim receiver and manager, which the Judge held is similar to that of an interlocutory injunction and the principles of American Cyanamid apply[42], the Judge also considered where there was a real risk of dissipation: see Decision, §§33-52.  The then counsel for P had relied on 6 matters to demonstrate a risk of dissipation which were all roundly rejected by the Judge.  One of which included the alleged fictitious documents in relation to the Universe Wealthy shipment: see Decision, §§36, 43-44. 

54.  Mr Shieh criticized the Judge’s acceptance of D1’s explanation that the alleged discrepancies in the TB245 and TB279 shipping documents were because they pertained to different stages of the sale of the same bulk of minerals in the Decision at §§44(2)  and (3).  However, there was no appeal against the Judge’s findings.  I agree with Ms Lam that as evidently the matters that were presented by P on the issue of risk of dissipation was even wider and broader, and included the very same matter now raised again by Mr Shieh, it would be an abuse to raise this matter before me when this matter has already been decided by the Judge.  As for the other matter which was not raised before the Judge (the shipment on TAN BINH 136), plainly it could have been raised with the Judge.

55.  Besides, as held by the Court of Appeal in Convoy Collateral Limited v Cho Kwai Chee (also known as Cho Kwai Chee Roy)  & Ors [2020] HKCA 537 at §§37-53, the onus is on P to demonstrate by solid evidence the risk of dissipation.  In relation to the shipment on board TAN BINH 136 which P alleged was not accounted for, according to D1, P had since May 2023 known of the shipment as he was the one who had loaded those minerals onto TAN BINH 136 on 11 May 2023 and he received the mates receipts (which P himself had exhibited in P’s 1^st Aff)[43]. Taking into account this arguable answer to the allegation, together with the other allegation concerning the discrepancy in the letters of credits that had been rejected by the Judge, examined holistically, I am not satisfied that a real risk of dissipation by D1 has been demonstrated by P. 

56.  Furthermore, like the Judge in the Decision at §48, I would also find that the staleness to these complaints and the corresponding lack of explanation militate against any real risk of dissipation: see Convoy Collateral Limited, §54.

57.  There being no reason to think that Ds cannot satisfy P’s claim against them and no real risk of dissipation by Ds being demonstrated, I am not satisfied that the balance of convenience lies in favour of the grant of the interlocutory injunction.

Just and convenient to grant the injunction?

58.  Since I have taken the view that the balance of convenience lies does not lie in favour of the grant, I shall only briefly express my views on the submissions made by Mr Wong why the injunction should not be granted (or should be refused)  as it would not be just and convenient to do so.

59.  Mr Wong submitted that as a result of P’s deliberate and false representation of the Undertaking and the proceedings before K Yeung J to the Mozambique authorities, it is just and convenient to refuse the injunction.  He submitted that this amounts to an abuse of process and contempt of court by P.

60.  Mr Wong submitted, as demonstrated from the transcript of what took place on 7 June 2024 before K Yeung J, that D2 had offered the Undertaking in the sum of USD 60.5M being half of what leading counsel for P (Mr Charles Sussex SC)  had proposed to be paid into court without affecting the operations of Tazetta.  From the transcript of the hearing, it can be seen that Mr Sussex had submitted that as stated in the affidavit evidence, D2 does not require capital in excess of USD 50M to operate its business and taking away USD 50M from USD 171M one gets USD 121M[44]. In fact, Mr Wong confirmed to the judge that the Undertaking was “based on Mr Sussex’s calculation taking away the 50 million for operating expenses which we have not feature in our calculation which about 120 million which is – this is calculation divide by two”[45].

61.  I therefore accept, as submitted by Mr Shieh, that built into the amount of USD 60.5M was USD 50M which was not required to be ring-fenced.  This is consistent with how P’s solicitors had explained to P what had took place at the hearing before K Yeung J on 7 June 2024 in stating that the sum of USD 50M “have been set aside”[46].

62.  However, even so, plainly the statement by P in its letter to the Inspector General of Mineral Resources and Energy by letter dated 23 September 2024 (“the Complaint Letter”)  that “as a result of the actions taking place in Hong Kong, and at the request of [P], the Hong Kong Court seized from those bank accounts USD 50,000,000.00 (Fifty Million US Dollars)  that are exclusively intended to cover the operating expenses of [Tazetta] including the salaries of its employee”[47] is untrue.  There was never any order for the “seizure” of USD 50M.  If anything, to the contrary, the USD 50M was not ring-fenced or “frozen’ by the Undertaking.

63.  That said, in order for there to be contempt, it has to be demonstrated that P deliberately or recklessly misrepresented the order or nature of proceedings to gain some advantages.  See Steven Gee QC, Commercial Injunctions, 7^th Edn, §20-027 and Gillette Safety Razor Company v A. W. Gamage Ld (1907)  24 RPC 1 at 6 (lines 36-47).  I accept Mr Shieh’s submissions that if contempt is relied upon, Ds would have to demonstrate deliberate falsehood which is a heavy burden.  I am not satisfied that I could infer deliberate falsehood or recklessness on the basis of what P’s solicitors had informed P about what took place at the hearing before K Yeung J and from what is set out in the Complaint Letter.

64.  Another matter, which was raised in the written submissions of Mr Wong but not pursued in oral submissions, was that P has not come to the court with clean hands and the equitable remedy of injunction should not be granted to P. In particular, he had submitted that P acquired a new company named Inforcom Lda to pass off as indirect shareholders of Tazetta, and procured that company to make an application before the Mozambique court to reconstitute the board of Tazetta and to appoint P as a director of Tazetta[48]. It was submitted that as a result of P’s fraudulent conduct, P is currently being criminally indicted in Mozambique[49].

65.  Mr Shieh however submitted that there was no determination by the Mozambique courts that Inforcom Lda, as opposed to Inforcom Invest, was “Fake Inforcom” as was so defined in Ms Lam’s Skeleton Submissions[50]. He referred to the judgment of the Mozambique court dated 10 September 2024 that the allegation that Inforcom Lda is not a partner of Tazetta because Inforcom Invest was, had not been proven[51].

66.  In reply submissions, Ms Lam maintained her written submissions that P had misused Inforcom Lda to mislead the Mozambique Court and said she relied on the criminal indictment.

67.  However, it seems to me that this issue has not been finally resolved and is not beyond reasonable doubt in order to establish fraud on the part of P.

68.  Besides, even if I was wrong, it is necessary to demonstrate that the grime on the hands of P are sufficiently closely connected with the equitable remedy that is sought so that it would be unjust to grant that relief: see Poon Ka Man Jason v Cheng Wai Tao & Ors (unrep)  CACV 135/2013, 21 January 2015 per Cheung JA at §§6.7.1-6.7.2 and Hau Cho Shing v Hau Chi Wing & Ors [2018] HKCFI 686 at §§44-46 per DHCJ Keith Yeung SC (as he then was).  It is not readily apparent to me that the alleged vexatious campaign by P in other jurisdictions said to be directed at the operations of Tazetta is sufficiently closely connected to the equitable remedy sought.

69.  Accordingly, had I found the balance of convenience lies in favour of grant of the injunction, I would not have found these matters relied on by Mr Wong made it not just and convenient to grant the injunction.

Conclusion and Orders

70.  For the above reasons, I would not grant the interlocutory proprietary injunction sought by P.  It therefore follows that no ancillary disclosure order should be granted.  The Summons should be dismissed.

71.  Costs should follow the event.

72.  Both Ms Lam and Mr Wong sought indemnity costs against P:

(1)  Ms Lam sought to justify indemnity costs on three grounds: (a)  the application is wholly misconceived and should not have been brought because the Partnership claim disclosed no serious issue to be tried; (b)  the abuse and underhanded approach by P to litigation both in Hong Kong and abroad, in particular the use of “Fake Inforcom”; and (c)  P made serious but wholly unfounded allegations of fraud against D1 (including that D1 caused shares in E&N Mozambique to be transferred to Julimar BVI without P’s knowledge and consent, and the fabrication of sale contracts and letters of credit)  which had been rejected by the Judge; and

(2)  Mr Wong similarly relied on the fact that this application should never had been brought and P’s misrepresentation of the Undertaking to the Mozambique authorities as basis for seeking costs on an indemnity basis.

73.  Given that I have found that there are serious issues to be tried on P’s proprietary claim and abuse of court has not been established, although serious allegations were raised by P in support of the alleged risk of dissipation which has wholly failed, I do not consider indemnity costs to be justified in all the circumstances of this case.  Therefore, I will make a costs order nisi that P should pay to Ds the costs of the Summons, on a party to party basis, with certificate for two counsel, to be taxed if not agreed.  If no application is made to vary the costs order nisi within 14 days from the date of handing down of this Decision the costs order nisi shall become absolute.

74.  Lastly, it remains for me to thank all counsel for their helpful assistance in this case.