PEKING UNIVERSITY RESOURCES (HOLDINGS) COMPANY LTD v. PEKING UNIVERSITY RESOURCES GROUP CO., LTD AND OTHERS

HCA 1470/2022

[2025] HKCFI 2642

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1470 OF 2022

________________________

________________________

________________________

D E C I S I O N

________________________

A. INTRODUCTION

1.  The Plaintiff commenced this action on 3 November 2022.

2.  Upon the Plaintiff’s ex parte application[1], on 7 December 2022, Master Matthew Leung granted leave for the Plaintiff to (i)  issue a concurrent amended writ of summons against the Defendants[2]; and (ii)  serve the same on the Defendants[3] out of jurisdiction in the Mainland.

3.  By summons dated 2 January 2024, the 1^st, 2^nd and 4^th Defendants applied for (i)  an order that the concurrent amended writ of summons herein and the service thereof be set aside; and (ii)  a declaration that the court in Hong Kong has no jurisdiction over them in respect of the subject matter in the present action.

4.  On 14 August 2024, Master MK Liu (the learned “Master”):-

(1)  acceded to the 1^st, 2^nd and 4^th Defendants’ application under their summons dated 2 January 2024; and

(2)  dismissed the Plaintiff’s application by summons dated 9 August 2024 seeking leave to adduce the 5^th affirmation of Luk Ka Yan, which enclosed a further expert report on Mainland law.

5.  This is the substantive hearing in respect of the Plaintiff’s appeal against the learned Master’s decision on 14 August 2024[4].

6.  It is trite that:-

(1)  An appeal from a master’s decision to a judge in chambers is a de novo hearing, and the judge will deal with the matter in question as if it came before him or her for the first time: see Hong Kong Civil Procedure (2025) at para 58/1/2.

(2)  However, a judge will not lightly intervene a master’s case management decision, unless there are good reasons to do so: see X v Dr Hung Cheung Tsui & Anor (HCPI 67/2014, 23 May 2017)  at para 10 (per Chow J (as Chow JA then was); B K Armit v G-Cladds Ltd & Anor [2022] HKCFI 585 at para 138 (per Marlene Ng J); Tin Kun Sin as executor of the estate of Tin Ka Kung (deceased)  v Tin Chun Nei Jenny [2023] HKCFI 2975 at para 13 (per DHCJ Herbert Au-Yeung, as Herbert Au-Yeung J then was).

B.   MATERIAL BACKGROUND

7.  The factual matters relating to the Plaintiff’s claims in this action are complicated.  For present purposes, it suffices to set out the following matters succinctly. 

B1.  The Relevant Companies

8.  The Plaintiff is a Bermuda company whose shares have been listed on the Main Board of the Hong Kong Stock Exchange Ltd since 1991 (stock code: 618).

9.  The 1^st Defendant is a company incorporated in the Mainland.  It was indirectly owned and/or controlled by Peking University, which has been under the supervision of the Education Ministry in the Mainland.

10.  Prior to 2021, the 1^st Defendant, via a wholly owned subsidiary[5], owned 60.1% of the shareholding in the Plaintiff.

11.  Meanwhile, the following Mainland companies (which were associated with the 1^st Defendant and interconnected with each other)  also controlled the shareholding in the Plaintiff:-

(1)  北京方正集團有限公司 (hereinafter “Peking Founder”);

(2)  方正產業控股有限公司;

(3)  北大醫療產業集團; and

(4)  北大方正訊息產業集團有限公司.

(the aforesaid companies together with the 1^st Defendant are hereinafter collectively referred to as the “Restructuring Companies”).

12.  By a civil judgment under (2020)京01破申530號民事裁定書, on 31 July 2020, Beijing No 1 Intermediate People’s Court found that Peking Founder dominated and dictated the affairs of other Restructuring Companies.  Whilst there was no separate corporate personality, their financial affairs were in disarray.

13.  Against this background, Beijing No 1 Intermediate People’s Court:-

(1)  ordered that the Restructuring Companies be restructured in a substantive consolidated manner (實質合併重整)  (the Consolidated Restructure”); and

(2)  appointed administrators (the “Administrators”)  to oversee the process of the Consolidated Restructure.

14.  As shown by the corporate charts prepared by the parties, the Plaintiff and the Restructuring Companies are part of a gigantic conglomerate.

15.  However, for present purposes, it suffices to say that the bulk of the Plaintiff’s complaints in this action are concerned with the affairs of the following indirectly owned subsidiary companies, which were incorporated in the Mainland:-

(1)  北大資源(湖北)資產管理有限公司 (hereinafter “Resources Hubei”);

(2)  北大資源集團投資有限公司 (hereinafter “Resources Investment”);

(3)  崑山高科電子藝術創意產業發展有限公司 (hereinafter “Kunshan Hi-Tech”);

(4)  青島博雅置業有限公司(hereinafter “Qingdao Boya”); and

(5)  北京方正世紀信息系統有限公司 (hereinafter “Founder Century”).

(Resources Hubei, Resources Investment, Kunshan Hi-Tech, Qindao Boya and Founder Century are hereinafter collectively referred to as the “PRC Subsidiaries”.)

16.  It is not in dispute that:-

(1)  Prior to March 2022:-

(a)  the Plaintiff wholly owned the interest in Resources Hubei Resources Investment via 香港琥諮有限公司 (hereinafter “Hong Kong Huzi”)[6];

(b)  the Plaintiff owned 51% shareholding in Kunshan Hi-Tech and 70% shareholding in Qingdao Boya via Hong Kong Huzi[7].

(2)  Prior to October 2022, the Plaintiff wholly owned the interest in Founder Century via 方正數碼國際有限公司 (hereinafter “Founder Data”)[8].

17.  It is also not in dispute that:-

(1)  On 25 March 2022[9], the Plaintiff disposed of its shareholding and interest in Hong Kong Huzi in favour of a company named Wealth Elite Group Investment Ltd.

(2)  On 19 October 2022, the Plaintiff disposed of its shareholding and interest in Founder Data in favour of a person named Zhao Ge.

(Hong Kong Huzi and Founder Data are hereinafter referred to as the “Disposed Companies”.)

B2.  The Plaintiff’s Complaints in this Action

18.  As mentioned, the 1^st Defendant indirectly owned 60.1% of the Plaintiff’s shareholding prior to October 2021.

19.  The 2^nd Defendant:-

(1)  was the Plaintiff’s (i)  executive director and authorized representative from 25 July 2016 to 12 November 2021; and (ii)  president from 25 July 2016 to 8 October 2021;

(2)  has been the 1^st Defendant’s director since 2016; and

(3)  was Resources Investment’s director and legal representative from 15 April 2016 to 17 October 2021.

20.  The 3^rd Defendant was the Plaintiff’s (i)  executive director from 29 October 2015 to 10 November 2021; and (ii)  chairman and authorized representative from 29 October 2015 to 8 October 2021.

21.  The 4^th Defendant:-

(1)  has been the 1^st Defendant’s executive vice president; and

(2)  was Resources Investment’s director from 19 June 2018 to 27 October 2021.

22.  In the present action, the Plaintiff complains that when the 1^st Defendant was still in control of the Plaintiff, the Defendants conspired together to commit the following wrongdoings against the PRC Subsidiaries and insofar as the 2^nd and 3^rd Defendants are concerned, their conduct also constituted breach of fiduciary duties[10]:-

(1)  From 2 December 2016 to 25 March 2021, various transactions occurred, as a result of which Resources Investment incurred liability to pay Kunshan Hi-Tech a sum of RMB1,943,982,163, and Resources Hubei incurred liability to pay Kunshan Hi-Tech a sum of RMB140,523,837.  The Plaintiff says that these transactions had no commercial rationale, and the indebtedness should have been borne by the 1^st Defendant[11].  (hereinafter the “Kunshan Debts Claim”)

(2)  From 24 April 2020 to 17 March 2021, Resources Investment incurred liability to pay Qingdao Boya a sum of RMB462,904,219.81.  The Plaintiff says that the arrangement had no commercial rationale, and the indebtedness should have been borne by the 1^st Defendant[12].  (hereinafter the “Qingdao Debts Claim”)

(3)  From January 2019 to March 2022, Founder Century incurred liability to pay an outstanding sum of RMB1,068,900,000 (as of 31 March 2022)  owed to CITIC Trust.  The Plaintiff says that the arrangement had no commercial rationale, and the indebtedness should have been borne by the 1^st Defendant[13]. (hereinafter the “CITIC Loan Claim”)

(4)  From 2015 to 2020, Resources Investment was caused to incur expenses for the 1^st Defendant and 21 of its associated companies in regard to, inter alios, salaries, social insurance, housing provident funds, property management fees and tenancy deposits.  The Plaintiff says that the arrangement had unjustifiably benefited the 1^st Defendant to the extent of RMB1,135,738,214[14].  (hereinafter the “Centralized Fund Claim”)

(The Kunshan Debts Claim, the Qingdao Debts Claim, the CITIC Loan Claim and the Centralized Fund Claim are hereinafter collectively referred to as the “PRC Subsidiary Companies Claims”.)

23.  The Plaintiff also alleges that from 2018 to 2021, the 2^nd and 3^rd Defendants caused the Plaintiff to invest in a project in respect of various office units in Chengdu (the “Boya City Plaza Project”).  It transpired that the office units under the Boya City Plaza Project were sold or leased out at a contractual price (ie RMB26,652,920.55 annually)  that was substantially lower than the market price, and the loss was estimated to be around RMB4.5 million per month.  (hereinafter the “Boya City Plaza Project Claim”)

24.  Furthermore, the Plaintiff complains that the 2^nd and 3^rd Defendants deliberately caused delay when there were 3 requisitions in June and August 2021 requesting that special general meetings of the Plaintiff be held.  The special general meeting of the Plaintiff was only held on 8 October 2021.  The Plaintiff says that the 2^nd and 3^rd Defendants deliberately caused the delay in order to enable the 1^st Defendant to buy time to commence a legal action in the Beijing court on 3 September 2021 (the “Beijing Action”)  against Resources Investment for repayment of RMB7.926 billion pursuant to the restructuring plan[15]. (hereinafter the “SGM Claim”)

C.   LEGAL PRINCIPLES ON SERVICE OUT

25.  In order to obtain leave for effecting service out of jurisdiction pursuant to Order 11, rule 1, the Plaintiff must satisfy the court that:-

(1)  There is a serious issue to be tried on the merits of the case;

(2)  There is a good arguable case that the case comes within at least one of the gateways under Order 11, rule 1; and

(3)  Hong Kong is the appropriate forum under the legal principles governing forum conveniens.

See Dynasty Line Ltd v Sukamto Sia [2009] 4 HKLRD 454 at §29 (per Cheung JA); and Tremendous Success Holdings Ltd & Anor v Sinosoft Technology Group Ltd (HCA 1613, 2345 & 2423 of 2013, 11 July 2016)  at para 14 (per DHCJ Anita Yip SC).

D.   SERIOUS ISSUES TO BE TRIED 

26.  As mentioned, the Plaintiff’s claims in this action can be categorized as follows:

(1)  the PRC Subsidiary Companies Claims;

(2)  the Boya City Plaza Project Claim; and

(3)  the SGM Claim.

27.  I will deal with each of them in turn.

D1.  The PRC Subsidiary Companies Claims

28.  Mr Norman Nip SC leading Mr Clark Wang (for the 1^st, 2^nd and 4^th Defendants)  submitted that the PRC Subsidiary Companies Claims are barred by the rule against reflective loss.

D1(a)  Legal Principles on the Rule against Reflective Loss

29.  The legal principles on the rule against reflective loss are well-established.

30.  A useful starting point is Johnson v Gore Wood [2002] 2 AC 1:

(1)  At 35E-G, Lord Bingham stated:

“Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss. No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholder’s shareholding where that merely reflects the loss suffered by the company. A claim will not lie by a shareholder to make good a loss which would be made good if the company’s assets were replenished through action against the party responsible for the loss, even if the company, acting through its constitutional organs, has declined or failed to make good that loss.…

(2)  At 62E-G, Lord Millet stated:

“The position is, however, different where the company suffers loss caused by the breach of a duty owed both to the company and to the shareholder.  In such a case the shareholder’s loss, in so far as this is measured by the diminution in value of his shareholding or the loss of dividends, merely reflects the loss suffered by the company in respect of which the company has its own cause of action.  If the shareholder is allowed to recover in respect of such loss, then either there will be double recovery at the expense of the defendant or the shareholder will recover at the expense of the company and its creditors and other shareholders.  Neither course can be permitted.  This is a matter of principle; there is no discretion involved.  Justice to the defendant requires the exclusion of one claim or the other; protection of the interests of the company’s creditors requires that it is the company which is allowed to recover to the exclusion of the shareholder.”

31.  The principle was affirmed by the Court of Final Appeal in Waddington Ltd v Chan Chun Hoo (2008)  11 HKCFAR 370.  As Lord Millett NPJ explained at paras 47 and 74:

“A company is a legal entity separate and distinct from its members. It has its own assets and liabilities and its own creditors. The company’s property belongs to the company and not to its shareholders. If the company has a cause of action, this represents a legal chose in action which represents part of its assets. Accordingly, where a company suffers loss as a result of an actionable wrong done to it, the cause of action is vested in the company and the company alone can sue. This is the first rule in Foss v. Harbottle (1843)  2 Hare 461. No action lies at the suit of a shareholder suing as such, though exceptionally he may be permitted to bring a derivative action in right of the company and recover damages on its behalf ……” (para 47)

“[The rule] is a matter of legal policy. It is not because the law does not recognise the loss [of the shareholder] as a real loss; it is because if creditors are not to be prejudiced the loss must be recouped by the subsidiary [ie the company in that case] and not recovered by its shareholders.” (para 74)

32.  In Power Securities Co Ltd v Sin Kwok Lam & Ors [2023] HKCA 594 at para 33, Yuen JA, referring to Basab Inc v Superb Glory Holdings Ltd (2017)  20 HKCFAR 384 at para 8, pointed out that:-

“the focus is upon the type of loss suffered, the critical question being whether the shareholder’s loss could be made good if the company enforced against the wrongdoer. The principle applied even if the wrongdoer’s obligations to the company and the shareholder were wholly distinct and unrelated, and even if the company had chosen not to sue the wrongdoer, so that there would be no issue of double recover if the shareholder did.”

33.  In Power Securities (supra), Yuen JA examined the English Supreme Court’s decision in Sevilleja Garcia v Marex Financial Ltd [2021] AC 39.  In that case, the majority[16] took the view that the rationale of the principle against reflective loss is the rule in Foss v Harbottle (ie the only party who can seek relief for an injury done to a company is the company itself)  and the avoidance of double recovery does not justify the principle[17].  Whilst the minority[18] agreed with the conclusion of the majority, they took the view that the issue of double recovery is still important[19].  In light of the Court of Final Appeal’s ruling in Waddington (supra)  at para 82 (per Lord Millet NPJ), Yuen JA concluded that as a matter of Hong Kong law, the avoidance of double recovery is still a justification for the principle against reflective loss (see paras 70.1 to 70.2).

D1(b)  Analysis 

34.  In my view, the PRC Subsidiary Companies Claims fall squarely within the principles against reflective loss.

35.  The crux of the Plaintiff’s complaint is that its PRC Subsidiaries in the Mainland (ie Resources Investment, Resources Hubei and Founder Century)  were wrongfully procured to take up debts, liabilities and expenses/payments for which they should not be responsible: see paragraph 22 above.

36.  It is plain that the loss arising from the alleged wrongdoings of the Defendants was suffered by the PRC Subsidiaries, not the Plaintiff.  There is no question that the causes of action are vested in the PRC Subsidiaries.  Thus, only the PRC Subsidiaries may sue for the loss arising from the alleged wrongdoings: see Waddington (supra)at para 47; Johnson (supra)at 35E-G; Power Securities (supra)at para 52

37.  In their submissions, Mr Bernard Mak together with Mr Ernest Ng (for the Plaintiff)  did not shy away from accepting that “the major loss suffered was the lowered consideration received by [the Plaintiff] as a seller” when the shareholding in the Disposed Companies (which owned the PRC Subsidiaries)  was sold to Wealth Elite Group Investment Ltd and Zhao Ge. 

38.  The Plaintiff’s claims are exactly what the rule against reflective loss prohibits.  As pointed out, the rule bars a shareholder from bringing a claim in respect of diminution in the value of his shareholding, which is merely the result of the company’s loss arising from a wrong done to the company: see Johnson (supra)  at 35E-G and 62E-G;Prudential Assurance Ltd v Newman Industries Ltd (No 2)  [1982] Ch 204, 210.

39.  Bearing in mind the underlying rationales are (i)  that only the company may seek relief for an injury done to itself[20] and (ii)  avoidance of double recovery[21], I cannot see how the Plaintiff might circumvent the rule against reflective loss.

40.  However, Mr Mak and Mr Ng stressed that the Plaintiff had already disposed of the indirect interest in the PRC Subsidiaries by selling away the shareholding in the Disposed Companies (which owned the PRC Subsidiaries).

41.  The fact that the PRC Subsidiaries had been disposed of subsequently would not avail the Plaintiff at all.

42.  In Power Securities (supra), at paras 66.1 and 66.1, Yuen JA referred to the Privy Council’s decision in Primeo Fund (in official liquidation)  v Bank of Bermuda (Cayman)  Limited [2021] UKPC 22 at paras 59 and 61.  There, Lord Kitchin and Lord Sales stated:-

“In the Board’s view, since the [reflective loss] rule is substantive rather than procedural in character, the relevant time to assess whether it applies or not is when the loss which is said by the claimant to be recoverable at law is suffered by it. The timing of the bringing of a claim and the circumstances which may pertain at that point in time are adventitious happenstance and have nothing to do with the operation of the rule”. (para 59)

“A shareholder which suffers a loss in the form of a diminution in value of its shareholding which is not recoverable as a result of the application of the reflective loss rule cannot later convert that loss into one which is recoverable simply by selling its shareholding. It is necessary to focus on the nature of the loss in respect of which the shareholder’s claim is made. It is not enough to consider the position as at the date of the issue of proceedings without regard to the nature of the loss and a consideration of whether it is, in the eyes of the law, separate and distinct from that of the company”. (para 61)

(emphasis added)

Having considered the rationale behind the rule against reflective loss, Yuen JA held the fact that the shareholder sold the shares in the company after the wrongdoing was committed would not make any difference to the nature of his loss.  At para 72, Her Ladyship stated:-

“In our case, the loss Mr Sin claims was the diminution in value of the shares of Best Year and EPL, caused by the alleged wrongdoers’ market manipulation of the First Credit share price in September 2017. As the diminution must have crystallised before trading in First Credit was suspended in November 2017 (before Mr Sin sold his shares in Best Year and EPL), the nature of his loss was clearly reflective loss. The judge was clearly right in so finding. The subsequent sales did not make any difference to the nature of Mr Sin’s loss. In selling his shares, he was only liquidating or quantifying the loss which he had suffered.” (emphasis added)

43.  In the premises, it is clear that the Plaintiff cannot seek to circumvent the rule against reflective loss by disposing of the PRC Subsidiaries.  As explained by Yuen JA as well as Lord Kitchin and Lord Sales, a subsequent sale or disposal is incapable of (i)  changing the nature of the loss; and (ii)  reviving a claim for diminution in value of shares that is barred by the rule against reflective loss. 

44.  In his oral submissions, Mr Mak further contended that until and unless the PRC Subsidiaries paid the indebtedness in question, their loss did not crystalize.  As such, the PRC Subsidiaries did not suffer any loss at all and were not in a position to sue the Defendants.  On this basis, Mr Mak sought to rely on Lord Bingham’s 2^nd proposition in Johnson (supra)  at 35 (per Lord Bingham).  As Kwan VP summarized in Topping Chance Development Ltd v CCIF CPA Ltd [2020] HKCA 478 at para 20, Lord Bingham’s 2^nd proposition is as follows:

“Where a company suffers loss but has no cause of action to recover such loss, if the shareholder has a cause of action do so, he may sue in respect thereof even though the loss is a diminution in the value of the shareholding.”

45.  For the following reasons, I am unable to accept Mr Mak’s submissions:-

(1)  The Plaintiff’s case was advanced on the basis that the PRC Subsidiaries had already (i)  incurred the liabilities to pay various parties that had nothing to do with themselves; (ii)  incurred expenses that had nothing to do with themselves; (iii)  lost the opportunities to use their own funds; and (iv)  taken up the risk of not being able to recover the funds.  These were the loss and damage that the PRC Subsidiaries had suffered already.

(2)  It is pertinent to refer to the following pleas in the statement of claim:-

(a)  In paragraphs 22.1 to 22.2, it was pleaded that:-

“Resources Investment, without any commercial rationale, incurred liability to pay Kunshan Hi-Tech the sum of RMB1,943,982,163 (with interest thereon), and Resources Hubei incurred liability to pay Kunshan Hi-Tech the sum of RMB140,523,837 (with interest thereon), both of which should have been borne by the 1^st Defendant.” (para 22.1)  (emphasis added)

“Consequently, Resources Investment and Resources Hubei were deprived of the use of the value of those funds and the costs of those funds in their ordinary cause of business, and was further put into therisk of having difficulties to recover those funds from the 1^st Defendant.” (para 22.2)  (emphasis added)

(b)  In paragraph 28, it was pleaded that:-

“Resources Investment, without any commercial rationale, incurred liability to pay Qingdao Boya the sums due to Qingdao Boya (with interest thereon), which should have been borne by the 1^st Defendant.” (emphasis added)

“Consequently, Resources Investment was deprived of the use of the value of those funds and the costs of those funds in their ordinary cause of business, and was further put into therisk of having difficulties to recover those funds from the 1^st Defendant.” (emphasis added)

(c)  In paragraph 38, it was pleaded that:-

“Founder Century, without any commercial rationale, incurred liability to pay CITIC Trust the sums due to it (with interest thereon), which should have been borne by the 1^st Defendant.” (emphasis added)

“Consequently, Founder Century was deprived of the use of the value of those funds and the costs of those funds in their ordinary cause of business, and was further put into therisk of having difficulties to recover those funds from the 1^st Defendant.” (emphasis added)

(d)  In paragraph 39, it was pleaded that:-

“Between 2015 to 2020, unbeknown to the Plaintiff, Resources Investment incurred expenses for the 1^st Defendant and 21 of its associated companies, including but not limited to salaries, social insurance, housing provident funds, property management fees and tenancy deposits.” (emphasis added)

(3)  In light of the way in which the Plaintiff’s case is pleaded, I am not of the view that it is open to Mr Mak to contend that the PRC Subsidiaries’ loss has not yet been suffered or crystalized.  This suggestion is contradicted by the pleas in the statement of claim.

(4)  Whilst Mr Nip accepted that Lord Bingham’s 2^nd proposition in Johnson (supra)  at 35 is correct, he pertinently referred me to East Asia Satellite Television (Holdings)  Ltd v New Cotai LLC (HCA 2189 of 2009, 16 July 2010)  at para 141.  There, Reyes J pointed out that:-

“the facts and matters said to give rise to a claim for reflective loss under Lord Bingham’s 2^nd proposition are material averments that need to be set out in one’s pleading with precision and rigour”[22].

(5)  It is clear to me that based on the facts pleaded in statement of claim, there is no room for the Plaintiff to seek relying on Lord Bingham’s 2^nd proposition in Johnson (supra).  There are simply no pleas suggesting that the liabilities in question had not yet been suffered or crystalized.

(6)  On the contrary, the statement of claim expressly avers that PRC Subsidiaries had already suffered loss as a result of the alleged wrongdoings of the Defendants.  On the pleaded facts, the loss was suffered by the PRC Subsidiaries and the causes of action are vested in the PRC Subsidiaries.  There is no reason why the PRC Subsidiaries may not sue the Defendants for the loss.

(7)  In my view, there is plainly no room to apply Lord Bingham’s 2^nd proposition in Johnson (supra).

D1(c)  Other Miscellaneous Assertions

46.  For completeness, I should also address the following miscellaneous assertions made by the Plaintiff.

47.  In their statement of claim[23], the Plaintiff also alleges that it has suffered loss as a result of:-

(1)  the suspension on the trading of its shares from 26 April 2021 and 11 August 2022; and 

(2)  incurring expenses in carrying out investigation.

48.  I am unable to accept the Plaintiff’s assertions:-

(1)  Whilst I appreciate that some of the Plaintiff’s shareholders might have suffered loss as a result of not being able to dispose of their shares in the Plaintiff, I cannot understand how the Plaintiff might have suffered loss as a result of the fact the trading of its own shares was suspended.  This was impossible as the Plaintiff did not own its own shares.

(2)  As pointed out, the loss arising from the alleged wrongdoings committed by the Defendants was suffered by the PRC Subsidiaries, and only the PRC Subsidiaries might take action in respect of the alleged injury that they suffered.  Bearing in mind that the Plaintiff is a separate legal entity, I see no reason why instead of using the PRC Subsidiaries’ resources to carry out investigation, the Plaintiff’s resources should be utilized.

(3)  In this connection, Mr Nip also pertinently pointed out that the Plaintiff has failed to adduce a shred of evidence on the alleged investigation expenses.  Whilst the amount of investigation expenses incurred is unknown, it is also uncertain as to who paid (or was liable to pay)  the investigation expenses and when the payment(s)  (if any)  was/were made.  Put simply, the Plaintiff’s case on investigation expenses is completely hollow.

D1(d)  Sum Up 

49.  For all the above reasons, I am not of the view there are serious issues to be tried in regard to the PRC Subsidiary Companies Claims.

D2.  The Boya Plaza Project Claim

50.  As mentioned, it is the Plaintiff’s pleaded case that the 2^nd and 3^rd Defendants caused the Plaintiff to invest in the Boya City Plaza Project, but the office units were sold and/or leased at a contractual price that was substantially below the market price[24].

51.  I am satisfied that the Boya Plaza Project Claim (as pleaded in the statement of claim)  does not fall foul of the rule against reflective loss.  There is no suggestion that the loss was suffered by a subsidiary company.

52.  However, with no disrespect to the pleaders (who are not Mr Mak and Mr Ng), I am of the view that the Boya Plaza Project Claim is defective in multiple respects.

53.  First of all, whilst the Plaintiff emphasizes that office units under the Boya City Plaza Project were sold or leased at a contractual price that was undervalued, there is no plea suggesting that the Defendants were the person who (i)  managed or operated the Boya City Plaza Project; and/or (ii)  caused the properties under the Boya City Plaza Project to be sold or leased at a contractual price that was undervalued.

54.  Second, there is no plea suggesting that the Defendants were negligent in causing or advising the Plaintiff to invest in the Boya Plaza Project.  In this connection, it is not even pleaded that the Plaintiff has suffered loss as a result of the investment.

55.  Putting the Plaintiff’s case to the highest, the Plaintiff merely suggests that the Boya City Plaza Project could have generated more return had the properties thereunder been sold or leased at the market price.  However, the Plaintiff is unable to plead that there was any wrongdoing and/or breach of duties on the part of the Defendants (such as mismanaging Boya City Plaza Project or negligently causing or advising the Plaintiff to make a bad or failed investment).

56.  In the premises, I am not satisfied that the Plaintiff has shown a serious issue to be tried in respect of the Boya Plaza Project Claim.  In my view, no reasonable cause of action has been disclosed.

D3.  The SGM Claim

57.  It is the Plaintiff’s case the 2^nd and 3^rd Defendants refused to convene the Plaintiff’s special general meeting in a timely manner and this was done in order to enable the 1^st Defendant to buy time to commence the Beijing Action against Resources Investment.

58.  First of all, I fail to see how the commencement of the Beijing Action could ipso facto constitute a wrongdoing.   In any event, it is open to Resources Investment to defend the 1^st Defendant’s claims in the Beijing Action.  In this connection, Beijing No 1 People’s Court handed down a judgment dated 28 June 2024 under (2021)京01民初858號[25]. It ruled in favour of the 1^st Defendant and against Resources Investment. In light of this conclusion, the claims under the Beijing Action were justified and legitimate.

59.  Second, more fundamentally, even assuming that the 1^st Defendant “wrongfully” commenced the Beijing Action with an ulterior or mala fide motive (which is contrary to the findings under the aforesaid judgment), the party that suffered loss as a result of the 1^st Defendant’s “wrongful” prosecution was Resources Investment, not the Plaintiff.  For the reasons set out in section D1 above, the Plaintiff is not in a position to pursue the claim, which is plainly barred by the rule against reflective loss.

D4.  Conclusion 

60.  For all the above reasons, I conclude that the Plaintiff has failed to show that there are serious issues to be tried as to its claims in these proceedings.

E.   GATEWAYS

61.  Whilst Master Leung granted leave for effecting service out of jurisdiction based on the gateway under Order 11, rule 1(f), the Plaintiff also sought to rely on the gateway under Order 11, rule 1(c).

E1.  Gateway (f)

62.  Under Order 11, rule 1(f), the court may grant leave for effecting service out of jurisdiction if:-

“the claim is found on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction”

63.  In order to invoke gateway (f), the Plaintiff has to show that (i)  some tortious or wrongful acts were committed in Hong Kong; or (ii)  the damage arising from the tortious or wrongful acts was sustained in Hong Kong.

E1(a)  No Wrongful Act committed in Hong Kong

64.  In its statement of claim and supporting affirmation[26], the Plaintiff was unable to pinpoint any wrongful or tortious act that was committed in Hong Kong.

65.  Insofar as the PRC Subsidiary Companies Claims are concerned, as mentioned, the crux of the Plaintiff’s complaint is that the PRC Subsidiaries were wrongfully procured to take up debts, liabilities and expenses/payments.  The PRC Companies were located in the Mainland.  Unsurprisingly, there is no suggestion from the Plaintiff that the relevant accounting exercises took place in Hong Kong, rather than the Mainland.

66.  As regards the Boya City Plaza Project Claim, it is the Plaintiff’s pleaded case that the Boya City Plaza Project was in Chengdu. Unsurprisingly, there is no suggestion that:-

(1)  the investment took place in Hong Kong;

(2)  the Defendants procured or advised the Plaintiff to make the investment decision in Hong Kong;

(3)  the sale of the office units under the Boya City Plaza Project took place in Hong Kong; and

(4)  the Defendants managed or orchestrated the Boya City Plaza Project in Hong Kong.

67.  As regards the SGM Claim:-

(1)  The delay in respect of convening the special general meeting had nothing to do with the 1^st and 4^th Defendants, who were not directors of the Plaintiff.

(2)  Whilst the 2^nd Defendant was a director of the Plaintiff at the material times, it is his un-contradicted evidence that he was not in Hong Kong throughout 2021.  In the premises, the 2^nd Defendant could not have caused any delay in Hong Kong at all.

(3)  The same applies to the 3^rd Defendant.  There is no evidence showing that the 3^rd Defendant was in Hong Kong at the material times and that he did anything in Hong Kong to cause the delay.

(4)  In any event, the crux of the Plaintiff’s case is that the Defendants orchestrated the delay in order for the 1^st Defendant to buy time to commence the Beijing Action against Resources Investment.  The Beijing Action took place in Beijing, not Hong Kong.  More fundamentally, the suggestion that the commencement and prosecution of the Beijing Action constituted wrongdoing is flatly contradicted by Beijing No 1 Intermediate People Court’s findings in favour of the 1^st Defendant under the judgment dated 28 June 2024 in (2021)京01民初858號[27]).

68.  For the above reasons, I am not of the view the Plaintiff has made out a good arguable case that some tortious acts or wrongdoings were committed in Hong Kong.

E1(b)  No Loss Sustained in Hong Kong

69.  As pleaded in paragraph 69 of its statement of claim, the alleged loss and damage that were suffered by the Plaintiff were as follows:-

(1)  “diminished” consideration in respect of the sale of the shareholding in the Disposed Companies (which owned the PRC Subsidiaries)  in favour of Wealth Elite Group Investment Ltd and Zhao Ge;

(2)  loss arising as a result of the suspension of the trading of the Plaintiff’s shares; and

(3)  loss in respect of expenses incurred in investigation.

70.  Insofar as the “diminished consideration” is concerned:-

(1)  I repeat the analysis set out in section D1 above.

(2)  I am of the view that the “diminished consideration” was merely “reflective” of the loss suffered by the PRC Subsidiaries, which were entitled to sue the Defendants.  The loss in respect of the “diminished consideration” is not recoverable by the Plaintiff under the rule against reflective loss.  I fail to see how the Plaintiff may seek to rely on gateway(f)  to sue some foreign parties in respect of a loss that is not recoverable in Hong Kong.

(3)  In any event, as pointed out by Mr Nip and Mr Wang in their written submissions, there is no evidence showing that the consideration in respect of the sales of the shareholding in the Disposed Companies was received in Hong Kong.  As such, it could not even be said that the Plaintiff suffered the “reflective” loss in Hong Kong.

(4)  For completeness, it should also be pointed out that the PRC Subsidiaries that were wrongfully procured to take up debts, liabilities and expenses/payments were in the Mainland.  It is not in dispute that the relevant accounting exercises took place in the Mainland, and there is no suggestion that the said exercises took place in Hong Kong.  In the premises, the loss under the PRC Subsidiary Companies Claims was sustained in the Mainland, rather than Hong Kong.

(5)  The same analysis applies to the SGM Claim. The Plaintiff appears to suggest that Resources Investment was wrongfully or illegitimately sued under the Beijing Action. Be that as it may, the Beijing Action took place in Beijing. Thus, it could not be said that Resources Investment suffered any loss in Hong Kong.

(6)  Further, the loss in respect of the Boya City Plaza Project Claim was sustained in the Mainland.  As mentioned, whilst there is no evidence showing that the Plaintiff made (or was procured or advised to make)  the investment in Hong Kong, the Boya City Plaza Project was in Chengdu and the office units under the Boya City Plaza Project were also sold or leased out in Chengdu.  Thus, if any loss had been suffered as a result of the Defendants’ wrongdoings (which had not been pleaded and identified), the same must have been sustained in Chengdu, rather than Hong Kong.

71.  As regards the alleged loss arising from the suspension of the trading of the Plaintiff’s shares, as mentioned in paragraph 48(1)  above, the Plaintiff did not own its shares.  Thus, the loss, if any, was suffered by the Plaintiff’s shareholders, not the Plaintiff.  I am not of the view the Plaintiff has shown a good arguable case that it has suffered loss (whether in Hong Kong or otherwise)  as a result of the suspension of the trading of its own shares.

72.  As regards the loss in respect of the expenses incurred in investigation, for the reasons explained in paragraphs 48(2)  to (3)  above:-

(1)  I am of the view that the investigation expenses should be incurred by the PRC Subsidiaries, not the Plaintiff; and

(2)  there is not a shred of evidence showing that the Plaintiff had paid for or was liable to pay for the investigation expenses, and the Plaintiff’s case is completely hollow.

In the premises, I am not of the view Plaintiff has shown a good arguable case that it has actually suffered loss as a result of the investigation (whether in Hong Kong or otherwise).

73.  For the above reasons, I am not of the view the Plaintiff has made out a good arguable case that loss and damage were sustained in Hong Kong.

74.  I accordingly conclude that gateway (f)  is not available to the Plaintiff.

E2.  Gateway (c)

75.  Under Order 11, rule 1(c), the court may grant leave for effecting service out of jurisdiction if:-

“the claim is bought against a person duly served within or out of the jurisdiction and a person out of the jurisdiction is a necessary or proper party thereto” (emphasis added)

76.  For the reasons set out in section E1 above, I am of the view that the Plaintiff was not entitled to rely on gateway (f)  to effect service out of the jurisdiction on any of the Defendants, including the 3^rd Defendant.  Further, for the reasons elaborated in section D above as well as sections F and G below, I am of the view that the leave granted by Master Leung for service out of jurisdiction is liable to be set aside.

77.  Be that as it may, pursuant to the leave granted by Master Leung on 7 December 2022, the Plaintiff did purportedly effect service on the 3^rd Defendant out of jurisdiction in the Mainland.  The 3^rd Defendant (who was separately represented and who was not involved in the present application and appeal)  then voluntarily submitted to the jurisdiction of Hong Kong court and a substantive defence was filed.

78.  In the premises, the Plaintiff contended that (i)  the 3^rd Defendant was an anchor defendant; and (ii)  the 1^st, 2^nd and 4^th Defendants, being co-conspirators, were “necessary or proper” parties to these proceedings.  Thus, gateway (c)  is available.

79.  Put simply, the Plaintiff relies on the 3^rd Defendant’s voluntary submission to Hong Kong’s jurisdiction as the anchor to bring in the 1^st, 2^nd and 4^th Defendants.

80.  The courts repeatedly emphasized that gateway(c)  was anomalous, and caution must be exercised in bringing foreign defendants within the jurisdiction under that head.  In Fong Chak Kwan v Ascentic Ltd [2020] HKCFI 679 at para 79, Marlene Ng J, referring to Nilon Limited v Royal Westminster Investments S.A. [2015] UKPC 2 at para 15 (per Lord Collins)  and AK Investment CJSC v Kyrguz Mobile Tel Ltd [2011] UKPC 7 at para 73 (per Lord Collins), stated:-

“(1)  The necessary or proper party head of jurisdiction was anomalous, in that, by contrast with the other heads, it was not founded upon any territorial connection between the claim, the subject matter of the relevant action and the jurisdiction of the…courts.

(2)  Caution must always be exercised in bringing foreign defendants within the jurisdiction under that head, and in particular it should never become the practice to bring in foreign defendants as a matter of course, on the ground that the only alternative requires more than one suit in more than one different jurisdiction.” (emphasis added)

81.  For the following reasons, I am not of the view that it is open to the Plaintiff to invoke gateway (c).

82.  In ID v LU [2021] 1 WLR 4992 at paras 47 to 49 (see also headnote at 4492F-G), Judge Pelling QC held that a claimant could not rely on the English equivalent of gateway (c)  where the anchor defendant had voluntarily submitted to the jurisdiction.  It was held that the anchor defendant must be served within the jurisdiction or out of the jurisdiction under one of the recognized gateways.  As explained by the learned judge, permitting service out of the jurisdiction based on an anchor defendant who had voluntarily submitted to the jurisdiction would defeat the provisions in the English equivalent of Order 11, rule 1, which constituted a carefully calibrated list of exceptions to the general rule that required service to be effected on a defendant within the jurisdiction.

83.  The learned authors of Hong Kong Civil Procedure (2025) at para 11/1/270.1 (at p.237)  also pointed out that:-

“Service on a first defendant who submitted to the jurisdiction voluntarily is not enough under this rule if that defendant is outside Hong Kong and leave to serve out on that defendant could not have been obtained under Order 11”.

84.  The conclusion of Judge Pelling QC and the views expressed by the authors of Hong Kong Civil Procedure (2025) are plainly consistent with the words in Order 11, rule 1(c), which provides that the anchor defendant must be “a person duly served within or out of the jurisdiction”. In this connection:-

(1)  When none of the gateways under Order 11 rule is available, it cannot be said that the overseas anchor defendant who voluntarily submitted to the jurisdiction (ie the 3^rd Defendant in the present case)  is a person who was “duly served…out of the jurisdiction”. 

(2)  Likewise, if the leave pursuant to which the overseas anchor defendant was served is liable to be set aside, it cannot be said that the overseas anchor defendant is a person who was “duly served…out of the jurisdiction”. I cannot see how the plaintiff may establish jurisdiction against other foreign defendants by misleading the court to grant leave to effect service on the overseas anchor defendant when the leave should never have been granted.  There is plainly no room for the plaintiff to take benefit from his improper conduct.

85.  In Chen Hongqing v The persons whose names are set out in the second column of the Schedule to the Re-amended writ of summons filed on 26 March 2018 [2019] HKCFI 2121 at para 58, Keith Yeung J emphasized that:-

“an application for leave to issue a writ for service out of the jurisdiction ought to be made with great care, and be looked at strictly”

“the court should scrutinize most jealously any factor which actually provides justification”.

(emphasis added)

86.  With the said caution in mind, I agree with Judge Pelling QC’s analysis in ID v LU (supra).  Where all the defendants are not within the jurisdiction and none of the gateways under Order 11 is applicable, the implication is that the Plaintiff’s claims against the defendants have no connection with Hong Kong, and the rules do not envisage that the proceedings should take place in Hong Kong.  In my view, there is no good reason to expand the scope of gateway (c)  to this situation.  There could be various strategic or personal reasons why the anchor defendant (ie the 3^rd Defendant in the present case)  submits to the jurisdiction.  I cannot see any good reason why the strategic or personal decision on the part of the anchor defendant should affect the position of other foreign defendants when the claims in question have no connection with Hong Kong and thus do not fall within one of the gateways under Order 11, rule 1. 

87.  For the above reasons, I conclude that gateway(c)  is not available to the Plaintiff.

E3.  Conclusion 

88.  In the premises, the Plaintiff has failed to show a good arguable case that its claims in the present proceedings fall within one of the gateways under Order 11, rule 1.

F.   FORUM CONVENIENS

89.  Whilst the Plaintiff contended that Hong Kong is the natural forum, the 1^st, 2^nd and 4^th Defendants contended that the natural forum is Beijing No 1 Intermediate People’s Court.

F1.  Legal Principles

90.  The question is “[i]s there some other available forum, having competent jurisdiction, which is the appropriate forum for the trial of the action, in which the case may be tried suitable for the interest of all the parties and the ends of justice”.  It has been suggested that the question should be answered through a 3-stage test:-

(1)  Whether prima facie Hong Kong is a distinctly more appropriate forum than the other available forum;

(2)  If the answer to (1)  is “yes”, whether there is any personal or judicial advantage to the defendant for the proceedings not to proceed in Hong Kong; and

(3)  If the answer to (2)  is “yes”, where the balance of justice lies.

See The Adhiguna Merani [1987] HKLRD 904 at 907 (per Hunter JA), applying Spiliada Maritime Corp v Cansulex Ltd [1986] 3 WLR 972, 985-987 (per Lord Goff); and Tremendous Success Holdings Ltd (supra)  at paras 95 to 105.

F2.  Key Issue

91.  It is not in dispute that the Consolidated Restructure took place pursuant to the judgment of Beijing No 1 Intermediate People’s Court under “(2020)京01破申530號民事裁定書”, and the Administrators were appointed to oversee the process.

92.  It is the 1^st, 3^rd and 4^th Defendants’ case that the transactions or arrangements under the PRC Subsidiary Companies Claims were part of the internal netting and offsetting process that was conducted in light of the Consolidated Restructure.  The same was supervised by the Administrators appointed by Beijing No 1 Intermediate People’s Court.

93.  Having considered the evidence filed on behalf of the 1^st, 3^rd and 4^th Defendants, I accept Mr Nip and Mr Wang’s submissions that the key issue in dispute is whether the relevant transactions were commercially justifiable.  In resolving the dispute, the following matters, inter alios, will have to be considered: (i)  whether there was a legitimate commercial rationale behind the relevant transactions or arrangements; (ii)  whether the internal financial netting and offsetting process was justifiable and legitimate; (iii)  what was the role of the Administrators in the relevant transactions or arrangements and whether they approved the same.

94.  Bearing in mind the nature of the parties’ dispute, I am of the view that the connecting factors lie overwhelmingly in favour of Beijing No 1 Intermediate People’s Court.

F3.  The Connecting Factors

F3(a)  the locations where the material events took place

95.  The material events that gave rise to the Plaintiff’s claims in these proceedings took place in the Mainland.

96.  Insofar as the PRC Subsidiary Companies Claims are concerned:-

(1)  The PRC Subsidiaries that were wrongfully procured to take up debts, liabilities and expenses/payments are located in the Mainland.

(2)  The internal financial netting and offsetting exercises took place in the Mainland.  There is no suggestion that the relevant exercises took place in Hong Kong.

97.  Insofar as the Boya Plaza Project Claim is concerned:-

(1)  As mentioned, there is no suggestion that the Plaintiff’s investment was made in Hong Kong or that the Defendants procured or advised the Plaintiff to make the investment in Hong Kong.

(2)  Meanwhile, it is the Plaintiff’s pleaded case that (i)  the Boya Plaza Project was in Chengdu; and (ii)  the office units under the Boya Plaza Project were sold or leased in Chengdu. 

98.  As regards the SGM Claim:-

(1)  As pointed out in paragraph 78 above:-

(a)  the delay in respect of convening the special general meeting had nothing to do with the 1^st and 4^th Defendants;  

(b)  since the 2^nd Defendant was not in Hong Kong throughout 2021, he could not have caused any delay in Hong Kong; and

(c)  there was no evidence showing that the 3^rd Defendant was in Hong Kong at the material times and that he did anything in Hong Kong to cause the delay.

(2)  Meanwhile, the Plaintiff’s complaint is that the delay was orchestrated in order for the 1^st Defendant to buy time to commence the Beijing Action against Resources Investment.  This was done in Beijing. 

99.  In the premises, it does not appear to me that Hong Kong has a natural connection with the material events that gave rise to the present dispute.

F3(b)  the location of the parties and the relevant companies

100.  As regards the locations of the parties and the relevant entities:-

(1)  All the Defendants are located in the Mainland.

(2)  The PRC Subsidiary Companies and the related entities[28] that were involved in the internal financial netting and offsetting process are also located in the Mainland.

(3)  The Plaintiff whose shares are listed on the Hong Kong Stock Exchange Limited has a place of business in Hong Kong.  However, whilst the Plaintiff only has 7 staff in Hong Kong, it has 500 staff in the Mainland[29]. In other words, the Plaintiff does have a substantive presence in the Mainland.

101.  There is no question that Beijing is the more “convenient” forum for the parties.

F3(c)  enforcement

102.  There is no evidence showing that the 1^st, 3^rd and 4^th Defendants have assets in Hong Kong.  Having said the 1^st, 3^rd and 4^th Defendants are located in the Mainland, it is envisaged that if they are found liable, the enforcement action will take place in the Mainland.

F3(d)  location of the witnesses

103.  It has been suggested that in the search for the appropriate forum, the question of the location of witnesses will be an important factor: see VTB Capital Plc v Nutritek International Corp [2013] UKSC 5 at para 5 (per Lord Mance).

104.  In this connection:-

(1)  The 2^nd, 3^rd and 4^th Defendants, who are said to be the main culprits and the co-conspirators, will be important witnesses.  They are in Beijing[30].

(2)  The 1^st, 2^nd and 4^th Defendants intend to adduce evidence from 6 witnesses who were involved in the internal financial netting and offsetting exercises. They were staff working for companies associated with the Plaintiff.  Whilst 5 of them are in Beijing, 1 of them is in Kunming[31].

(3)  Meanwhile, the Plaintiff has failed to identify any witness or potential witness who resides in Hong Kong.

105.  I accept that witnesses may, depending on the circumstances, be allowed to give evidence by way of video conference facilities.  However, it remains the case that Beijing is the more convenient forum for the witnesses (who are expected to have physical meetings and verbal communication with the parties and their legal representatives in the normal course of events). 

F3(e)  related proceedings: the Beijing Action

106.  For the following reasons, I am of the view that the existence of the Beijing Action is a factor that this court has to bear in mind, and it points towards the direction that Beijing No 1 Intermediate People’s Court is the more appropriate and convenient forum.

107.  First of all:-

(1)  Under the SGM Claim, it is the Plaintiff’s case that the Defendants delayed in convening the special general meeting in order to enable the 1^st Defendant to buy time to commence the Beijing Action against Resources Investment.  The Plaintiff appears to suggest that the Beijing Action was illegitimate and unjustifiable.

(2)  In my view, it is for Beijing No 1 Intermediate People’s Court (and the appellate courts in the Mainland)  to decide whether the 1^st Defendant’s claims in the Beijing Action could be made out or not[32]. The court in Hong Kong is not in a position to make findings as to whether the judicial process in the Mainland has been abused or not.  As a matter of judicial comity, the court in Hong Kong should not usurp the function of Beijing No 1 Intermediate People’s Court (and the appellate courts in the Mainland)  in determining whether the judicial process in the Mainland has been abused or not.

108.  Second:-

(1)  More fundamentally, it appears that the issues in dispute under the Beijing Action substantially overlap with the issues in dispute under the present action.

(2)  As pointed out by the 1^st, 3^rd and 4^th Defendants’ expert on Mainland law[33], Resources Investment disputes the 1^st Defendant’s claims under the Beijing Action on the grounds that itself and/or Founder Century were wrongfully procured to take up the liability to pay Kunshan High-Tech (ie the Kunshan Debts Claim), Qingdao Boya (ie the Qingdao Debts Claim)  and CITIC Trust (ie the CITIC Loan Claim)  and to pay the expenses of the 1^st Defendant and its associated companies (ie the Centralized Fund Claim).

(3)  Put simply, Resources Investment’s line of defences in the Beijing Action mirrors the Plaintiff’s PRC Subsidiary Companies Claims in the present proceedings.

(4)  There is no dispute that Beijing No 1 Intermediate People’s Court has seized of the Beijing Action.  Whilst the present action is still in an infancy stage, the proceedings in the Beijing Action have progressed to an advanced stage where a first instance judgment dated 28 June 2024 under (2021)京01民初858號[34] was entered in favour of the 1^st Defendant and against Resources Investment.

(5)  In the premises, it would be convenient for Beijing No 1 Intermediate People’s Court to deal with the disputes between the parties (at least insofar as the PRC Subsidiary Companies Claims are concerned).  The dispute under the Beijing Action and the dispute relating to the PRC Subsidiary Companies Claims under the present action undoubtedly arose from the same factual background and the facts involved are substantially the same.  Having disposed of the Beijing Action, Beijing No 1 Intermediate People’s Court is familiar with the matters relating to PRC Subsidiary Companies Claims and hence could expeditiously and conveniently resolve the same.

F3(f)  other considerations

109.  As mentioned, it is the 1^st, 3^rd and 4^th Defendants’ case that the transactions or arrangements under the PRC Subsidiary Companies Claims were part of the internal netting and offsetting process that was supervised by the Administrators appointed by Beijing No 1 Intermediate People’s Court.

110.  In the Beijing Action, the Administrators lodged a written opinion dated 8 December 2022 to Beijing No 1 Intermediate People’s Court[35]. In this document, the Administrators addressed the commercial rationale regarding the transactions or arrangements under the PRC Subsidiary Companies Claims, in respect of which (i)  Resources Investment takes issue in the Beijing Action and (ii)  the Plaintiff takes issue in the present action.

111.  I have no doubt that the transactions or arrangements under the PRC Subsidiary Companies Claims are covered by the Consolidated Restructure that was ordered by Beijing No 1 Intermediate People’s Court pursuant to the judgment dated 31 July 2020 under (2020)京01破申530號民事裁定書.  Otherwise, the Administrators would not have addressed the commercial rationale regarding these transactions or arrangements in their written opinion lodged to Beijing No 1 Intermediate People’s Court.

112.  Since the Plaintiff is disputing the legitimacy of the transactions or arrangements covered by the Consolidated Restructure, it should litigate the matter in Beijing No 1 Intermediate People’s Court, which is plainly the most natural forum for resolving the dispute.

113.  After all:-

(1)  the Consolidated Restructure was ordered by Beijing No 1 Intermediate People’s Court;

(2)  the Corporate Restructuring was supervised by the Administrators, who were appointed by Beijing No 1 Intermediate People’s Court; and

(3)  pointed out by the 1^st, 2^nd and 4^th Defendants’ expert on Mainland law[36], under the Corporate Insolvency Code (企業破產法):-

(a)  the Administrators have to report their works to the People’s Court and are subject to the supervision of the creditors’ committee in the Mainland[37];

(b)  the People’s Court may authorize the Administrators to take actions that materially affect the interest of the creditors[38]; and

(c)  if the Administrators are guilty of misfeasance, the People’s Court may punish them and order them to compensate the injured parties[39].

114.  I am not of the view that it is appropriate for Hong Kong court to meddle with matters relating to the Consolidated Restructure.  The disputes in relation thereto should be resolved by Beijing No 1 Intermediate People’s Court.

F3(g)  The Plaintiff’s submissions

115.  Mr Mak, doing the best he could, submitted that Hong Kong is the more appropriate forum as (i)  there were breaches of fiduciary duties on the part of the 2^nd, 3^rd and 4^th Defendants and the Plaintiff’s shares are listed on the Hong Kong Stock Exchange Ltd; and (ii)  there were breaches of the Listing Rule in Hong Kong. 

116.  Putting aside the fact that the Plaintiff is a Bermuda company, I am of the view that this is an artificial way of analyzing the nature of the parties’ dispute.

117.  In my view, there is no question that the substance of the parties’ dispute is intractably tied to the Mainland.  The PRC Subsidiary Companies Claim are concerned with some alleged wrongs that were done to the PRC Subsidiaries and the legitimacy of internal netting and offsetting exercises carried out under the Consolidated Restructure, which Beijing No 1 Intermediate People’s Court ordered.  The Boya Plaza Project Claim concerns a project in Chengdu.  Even the SGM Claim concerns the legitimacy of the Beijing Action that was commenced in the Beijing No 1 Intermediate People’s Court.

118.  I am not of the view that Hong Kong is, in substance, connected with the parties’ dispute.

F4.  Conclusion

119.  For all the above reasons, I conclude that:-

(1)  Hong Kong is not the natural, appropriate or convenient forum for resolving the parties’ dispute; and

(2)  Beijing No 1 Intermediate People’s Court is distinctly the more natural, appropriate or convenient forum for resolving the parties’ dispute.

G.   MATERIAL NON-DISCLOSURE

G1.  Legal Principles

120.  Since the application to effect service out of jurisdiction on the 1^st, 2^nd and 4^th Defendants was made ex parte, it was incumbent on the Plaintiff to comply with the duty to make full and frank disclosure: see Chen Hongqing (supra)  at paras 56 to 57 (per Keith Yeung J).

121.  It has been suggested that the duty to make full and frank disclosure is one of the utmost or highest good faith, and it is not open to the Plaintiff to argue that had the relevant matters been drawn to the court’s attention, the decision would have been the same: see Fong Chak Kwan (supra)  at para 59 (per Marlene Ng J).

122.  In Tremendous Success Holdings Ltd (supra)  at para 191 (which was referred to in Fong Chak Kwan (supra)  at para 65), DHCJ Anita Yip SC stated:-

“Obviously, it is the applicant’s duty under an Order 11 application to show serious issue to be tried. A defence which is or may be fatal to the applicant’s case or which may go to demolish the applicant’s cause of action and hence no serious issue to be tried, is almost certainly material matter which influences the court’s discretion on granting or refusing leave, and therefore must be disclosed and drawn to the court’s attention.”

G2.  Deliberation 

G2(a)  the rule against reflective loss

123.  In the affirmations filed in support of its application for effecting service out of the jurisdiction on the 1^st, 2^nd and 4^th Defendants, the Plaintiff did not address the court with regard to the question of reflective loss.

124.  In my view, this constituted an egregious material non-disclosure.  For the reasons set out in section D1 above, the operation of the rule against reflective loss is fatal to the bulk of the Plaintiff’s claims in the present action (ie the PRC Subsidiary Companies Claim and the SGM Claim).

125.  The Plaintiff may have some counter arguments that the rule against reflective loss is not engaged.  Be that as it may, there is no reason why the Plaintiff did not even draw the court’s attention to the matter at all.  This was inexcusable.

G2(b)  no wrongdoings relating to the Boya Plaza Project Claim

126.  Insofar as the Boya Plaza Project Claim is concerned, the Plaintiff did not draw the court’s attention to the fact that the statement of claim did not identify any wrongdoing on the part of the Defendants.  As mentioned (see paragraphs 50 to 56 above), it was not pleaded that the Defendants were negligent in procuring or advising the Plaintiff to invest; nor was it pleaded that the Defendants were the ones who operated or orchestrated the Boya Plaza Project.

127.  In my view, this also constituted an egregious material non-disclosure.  It is hard to see how the Boya Plaza Project Claim could take off the ground.

G2(c)  Beijing Action

128.  Although the Plaintiff disclosed the existence of the Beijing Action and the Consolidated Restructure, the Plaintiff did not address the court as to the significance thereof.

129.  As pointed out by Mr Nip and Mr Wang in their written submissions, the Plaintiff did not mention the central role played by the Administrators in supervising the internal netting and offsetting exercises (which is at the heart of the dispute relating to the PRC Subsidiary Companies Claims).

130.  For the reasons elaborated in sections F3(e)  to (f)  above, this is plainly relevant to the issue of forum conveniens.

G3.  No Re-grant

131.  I remind myself not to examine the Plaintiff’s conduct with the benefit of hindsight.  Nonetheless, I still come to the view that the aforesaid material non-disclosure was egregious and inexcusable.  In my view, the matters canvassed in section G2 above were so obvious that they could not have escaped the attention of the Plaintiff and/or its legal representatives.

132.  More fundamentally, for the reasons set out in sections D and F3 above, I am not of the view that the Plaintiff has valid answers to the 1^st, 2^nd and 4^th Defendants’ contentions.  I am of the view that:-

(1)  the Plaintiff’s pleaded claims are fundamentally defective and there are no serious issues to be tried; and

(2)  bearing in mind the role of Administrators (who were appointed by Beijing No 1 Intermediate People’s Court)  in the internal netting and offsetting exercise (which was part of the Consolidated Restructure ordered by Beijing No 1 Intermediate People’s Court)  as well as other factors that are canvassed in section F3 above, the appropriate forum is clearly Beijing No 1 Intermediate People’s Court.

133.  In the premises, whilst I am minded to set aside Master Leung’s order dated 7 December 2022 on the basis of material non-disclosure, I am not minded to exercise my discretion to re-grant leave for the Plaintiff to effect service on the 1^st, 2^nd and 4^th Defendants out of jurisdiction.  In this connection, I also take into account that none of the gateways under Order 11, rule 1 is available: see section E above.

H.   OTHER PROCEDURAL MATTERS

134.  For completeness, I should also deal with the following procedural matters.

H1.  Application to Amend the Statement of Claim

135.  I do not lose sight that the Plaintiff has taken out an application to amend its statement of claim.

136.  The relevant procedural history can be summarized as follows:-

(1)  On 14 August 2024, the learned Master (ie Master MK Liu)  set aside the leave for service out of the jurisdiction granted by Master Leung pursuant to the order dated 7 December 2022.

(2)  On 28 August 2024, the Plaintiff took out a notice of appeal.

(3)  On 29 April 2025, the Plaintiff took out a summons seeking to amend the statement of claim.

(4)  At the hearing on 8 May 2025, Master Joycelyn Leung ordered that the Plaintiff’s application to amend the statement of claim be adjourned sine die.

137.  For the following reasons, I have no doubt that the court should deal with the application based on the statement of claim, rather than the draft amended statement of claim annexed to the Plaintiff’s summons dated 29 April 2025:

(1)  First of all, the Plaintiff’s amendment application has been adjourned sine die.  There has been no appeal against Master Joyceln Leung’s order dated 8 May 2025.  Thus, the correctness thereof cannot be doubted.

(2)  Second, more fundamentally, the statement of claim (not the draft amended statement of claim)  was annexed to the concurrent writ of summons that was served out of the jurisdiction on the 1^st, 3^rd and 4^th Defendants.  Thus, the subject matter before the court now is whether the 1^st, 3^rd and 4^th Defendants should be brought to Hong Kong to face the claims set out in the statement of claim, not the draft amended statement of claim.  I cannot see how the Plaintiff may seek to move the goalposts by taking out an amendment application belatedly.

138.  In any event, I have considered the contents of the draft amended statement of claim on a de bene esse basis.  I am not of the view that the proposed amendments are capable of salvaging the defective case of the Plaintiff.  The PRC Subsidiary Companies Claim and the SGM Claim still flout the rule against reflective loss.  As regards Boya Plaza Project Claim, the Plaintiff still fails to plead that the Defendants were privy to some wrongdoings (such as negligently advising the Plaintiff to invest or fraudulently operating the Boya Plaza Project).  Worse still, in the proposed amendments, the Plaintiff appears to suggest that the party which invested in the Boya Plaza Project was a 51% indirect subsidiary in Chengdu.  If this was the case, it appears that the Boya Plaza Project Claim will be caught by the rule against reflective loss as well.

H2.  Application to New Expert Evidence Shortly before the Substantive Hearing before the Learned Master

139.  On 9 August 2024 (ie 3 work days before the scheduled hearing before the learned Master on 14 August 2024 took place), the Plaintiff belatedly took out a summons seeking to adduce a new expert report on Mainland law[40].

140.  Order 32 rule 11A provides that:-

“Where the determination of the application is adjourned for the hearing of the summons, no further evidence may be adduced unless it appears to the Court that there are exceptional circumstances making it desirable that further evidence should be adduced.”

141.  According to Hong Kong Civil Procedure (2025)  at para 32/11A/3:-

“The Ladd v Marshall rule is a relevant factor in the Court’s consideration as to whether exceptional circumstances envisaged under r.11A(4)  exist...”

142.  There is no evidence showing that some “exceptional circumstances” existed.

143.  Meanwhile, the Plaintiff’s application to adduce new expert evidence came very late.  The 1^st, 2^nd and 4^th Defendants were obviously not in a position to respond.  In the circumstances, it was perfectly understandable as to why the learned Master dismissed the Plaintiff’s summons dated 9 August 2024.

144.  With great respect, I am of the view that the learned Master’s exercise of case management powers was perfectly sensible and correct.  I do not see any reason, not to mention good reason, for intervention: see X v Dr Hung (supra)  at para 10; B K Armit (supra)  at para 138; Tin Kun Sin (supra)  at para 13.

I.   DISPOSITION

145.  In conclusion, I find that:-

(1)  The Plaintiff has failed to raise a serious issue to be tried in the present action: see Section D above.

(2)  None of the gateways under Order 11, rule 1 is available: see Section E above.

(3)  Hong Kong is not the appropriate and convenient forum for resolving the dispute in this action, and Beijing No 1 Intermediate People’s Court is distinctly the more appropriate and convenient forum: see Section F above.

(4)  The leave granted by Master Leung on 7 December 2022 for service out of the jurisdiction against the 1^st, 2^nd and 4^th Defendants is liable to be set aside on the basis of material non-disclosure: see Section G above.

146.  Accordingly, I dismissed the Plaintiff’s appeal against the learned Master’s decision on 14 August 2024.

147.  Costs should follow the event.

148.  I make a costs order nisi that the Plaintiff should pay the 1^st, 2^nd and 4^th Defendants’ costs in respect of the present appeal to be taxed if not agreed on a party-to-party basis (with certificate for 2 counsel).

149.  Mr Bernard Mak, Mr Ernest Ng, Mr Norman Nip SC and Mr Clark Wang rendered very helpful assistance to me.  I express my gratitude to them.