ZL v. WY AND OTHERS

CAMP 321/2023, [2024] HKCA 159

On An Intended Appeal From [2023] HKCFI 2105 &

[2023] HKCFI 2447

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 321 OF 2023

(ON AN INTENDED APPEAL FROM HCMP NO 948 OF 2020)

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J U D G M E N T

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Hon Chow JA (giving the Judgment of the Court):

INTRODUCTION

1.  There are the following matters before the Court:

(1)  the Plaintiff (“Wife”[1])’s further application by a summons filed on 10 October 2023 (“the Leave Application”) seeking leave to appeal against the order of Deputy High Court Judge M K Liu dated 15 August 2023 (“the Order”) dismissing the Wife’s application for continuation of the 2023 HK Injunction against the 1^st, 2^nd and 3^rd Defendants (“Husband”, “Brother”[2] and “Company”[3] respectively) and discharging the 2023 HK Injunction, leave to appeal having been refused by the Judge by his written decision dated 26 September 2023 (“the Leave Decision”); and

(2)  the Wife’s application by a summons filed on 20 October 2023 (“the Stay Application”) seeking a stay of execution of the Order pending the determination of the Leave Summons and, if leave to appeal is granted, the Wife’s substantive appeal.

2.  The basic facts of this case and the Judge’s reasons for making the Order are set out in his written decision dated 15 August 2023 (“the Decision”), and will not be repeated here. In this judgment, we shall adopt the expressions and abbreviations as defined in the Decision.

3.  In summary, the Judge refused to continue the 2023 HK Injunction, which the Wife obtained from Fung J upon an ex parte application without notice on 13 March 2023 pursuant to s 21M of the High Court Ordinance (Cap 4) in aid of property settlement proceedings commenced by the Wife against the Husband in the Family Court of Australia, and discharged the 2023 HK Injunction on the following grounds:

(1)  public policy considerations;

(2)  no real risk of dissipation;

(3)  impropriety of ex parte without notice application; and

(4)  material non-disclosure.

4.  On 24 October 2023, the Court, upon the Wife’s urgent application for a determination of the Stay Summons and having considered the papers before it, granted an interim stay of execution of the Order pending the determination of the Leave Application and Stay Application, with liberty to the Defendants to apply to lift the interim stay upon reasonable notice to the Wife. None of the Defendants has applied to lift the interim stay.

5.  Having considered the papers before us, we consider that it is appropriate to deal with the present applications on the basis of written submissions only without an oral hearing pursuant to Order 59, rules 2A(5)(a) and 14A(1) of the Rules of the High Court (Cap 4A).

THE LEAVE APPLICATION

6.  Before we consider the merits of the Leave Application, there is a preliminary matter that we wish to mention. By a summons filed on 30 August 2023 and returnable before the Judge, the Wife applied for, inter alia, a direction as to whether leave to appeal against the Order was or was not required. In the Leave Decision, at §14, the Judge ruled against the position taken by the Wife and held that leave to appeal was required. In the present application, the Wife no longer maintains the position that leave to appeal is not required. Accordingly, we shall proceed on the basis that leave to appeal against the Order is required, and consider the Leave Application accordingly.

7.  The test for granting leave to appeal against an interlocutory order of the Court of First Instance is well settled. Under s 14AA(4) of the High Court Ordinance (Cap 4), leave to appeal shall not be granted unless the court is satisfied that the appeal has a reasonable prospect of success, or there is some other reason in the interests of justice why the appeal should be heard. For this purpose, reasonable prospects of success involve the notion that the prospects of succeeding must be “reasonable”, and therefore more than “fanciful”, without having to be “probable”. However, merely showing that the appeal is “arguable” is not sufficient.

8.  Attached to the Wife’s summons dated 10 October 2023 is a draft Notice of Appeal containing 5 broad grounds of appeal, namely:

(A)  Hearing Should Have Been Adjourned – §1;

(B)  “Separate Corporate Personality” Irrelevant / Not Contrary to the Australian Ex Parte Injunction – §§2 to 6;

(C)  There is a Risk of Dissipation – §§7 to 11;

(D)  Ex Parte Application Without Notice Justified – §§12 to 14; and

(E)  No Material Non-Disclosure – §§15 to 17.

9.  Essentially, the Wife is seeking to re-argue every point raised before, but held against her, by the Judge. For the purpose of disposing of the Leave Application, it is not necessary to deal with all the substantive grounds of appeal (ie Grounds B to E), which correspond to the substantive grounds on which the Judge decided to refuse to continue and/or discharge the 2023 HK Injunction mentioned in §3 above. This is because each of the substantive grounds provided a sufficient basis for the Judge to refuse to continue and/or discharge the 2023 HK Injunction. Thus, as correctly pointed out by the Judge at §58 of the Leave Decision, in order to show a reasonable prospect of success in the intended appeal, the Wife will have to demonstrate that each of the substantive grounds of appeal has a reasonable prospect of success.

10.  In what follows, we shall consider the Wife’s grounds of appeal in the following order: A, C, D, E and B.

11.  Under Ground A, the Wife argues that the Judge erred in law and/or was plainly wrong in refusing to adjourn the Continuation Summons and the Company’s Summons (collectively “the Summonses”) pending the substantive determination of the BCAA by the Australian Court. She contends that the merits of the Australian Ex Parte Injunction ought to be primarily considered in Australia without pre-emption by the Hong Kong Court, and the Judge ought to have adjourned the Summonses with a “holding” injunction until the BCAA is determined in Australia (Refco Inc v Eastern Trading Co Ltd [1999] 1 Lloyd’s Rep 159, at 164, 170 and 172).

12.  The Judge’s decision not to adjourn the hearing of the Summonses pending the substantive determination of the BCAA by the Australian Court is a case management decision. The Court of Appeal’s approach to an appeal against a case management decision is well established: “The appellant faces a ‘very high hurdle’ and must show that the Judge ‘has gone clearly wrong and made orders which will clearly involve an injustice or an inability for the trial court to carry out its task’, or if the Judge ‘erred in principle or the order was irrational having regard to the issues that had to be resolved’. It need hardly be emphasised that generally, an appellate court will not interfere with a judge’s exercise of discretion unless the Judge has misunderstood the law or the evidence or the exercise of his discretion was plainly wrong such that it was outside the generous ambit within which a reasonable disagreement is possible” (Wong Kar Gee Mimi v Severn Villa Ltd [2012] 1 HKLRD 887, at §31).

13.  The Judge decided not to adjourn the hearing of the Summonses for the reasons given at §§37 to 38 of the Decision. The Judge did not err in principle, and his decision was not plainly wrong. In this regard, it is significant that the Judge refused to continue the 2023 HK Injunction and discharged it because he considered, inter alia, that the Wife should not have applied for the 2023 HK Injunction on an ex parte without notice basis, and also because she was guilty of material non-disclosure. These are issues which properly belong to the proceedings in Hong Kong and ought to be resolved by the Hong Kong Court regardless of the Australian Court’s decision on the BCAA. It is also important to bear in mind that, generally speaking, an application for continuation or discharge of a Mareva injunction ought to be heard and disposed of as soon as practicable because of the draconian nature of the order. In all the circumstances, we have no hesitation in rejecting Ground A as being not reasonably arguable.

14.  Under Ground C:

(1)  the Wife argues that the Judge misunderstood and/or was not properly assisted on the true nature of her claims in the Australian Proceedings: rather than claiming a percentage of the “matrimonial pot” (AUD 897 million), the substantial relief sought by her are for (i) a transfer of certain identifiable Australian property to the Wife, and (ii) a cash payment from the Husband which thus far cannot be satisfied by any Australian assets identified by the Wife[4]; and

(2)  she also challenges the Judge’s finding that there was no, or no sufficient, risk of dissipation of assets by the Brother and the Company[5].

15.  In respect of §14(1) above, the Judge did not consider that he misunderstood the Wife’s case, based on the evidence before him and the submissions made to him at the hearing on 9 August 2023[6]. As recorded by the Judge at §55 of the Decision: “In the hearing, in response to the enquiry from the Court, Mr Jeremy Chan told me that the Wife’s position in the Australian Proceedings is that the matrimonial assets should be divided between her and the Husband equally, or the Wife should have slightly more than 50% of the matrimonial assets. Mr Jeremy Chan has confirmed that the Wife definitely is not saying that nearly all the matrimonial assets should be given to her.” It is also relevant that in the draft Notice of Appeal, at footnote 6, the following is stated: “Insofar as necessary, the Wife will take out a summons to file further evidence to clarify her claim in the Australian Proceedings. §4 of Altobelli J’s Reasons for Judgment dated 29 April 2022 in the Australian Proceedings … states that the Wife’s substantive reliefs in the Australian Proceedings are for transfer of property and cash payment. The Wife’s monetary claim presently amounts to AUD 25 million …” [emphasis added]. This statement is a clear recognition by the Wife that she failed to make clear the nature of her case at the hearing before the Judge on 9 August 2023, and thus she now wishes to file further evidence to “clarify” her case. In our view, there is nothing in the point that the Judge did not properly understand the Wife’s case as presented at the hearing on 9 August 2023.

16.  In respect of §14(2) above, the Wife argues that there was no evidence to support various findings made by the Judge[7]:

(1)  “[t]here is no evidence before me showing that the Wife would have any difficulty in levying execution on the 97% of the matrimonial assets which are not in Hong Kong” – the burden was on the Wife, rather than the Defendants, to show that she would face some genuine difficulty in levying execution on the foreign assets;

(2)  the Brother “would definitely act in accordance with the undertaking” given to the Australian Court – given that the Brother was a resident in Australia, the Judge was entitled to take the view that he would act in accordance with the Brother’s Undertaking[8]; and

(3)  “[w]ith the protection of the Brother’s Undertaking, the Wife can certainly get her share if she is able to obtain a judgment in her favour in the Australian Proceedings” – the Wife has failed to produce any evidence to show that she will not be able to levy execution on the shares in the Company to enforce any judgment that she may obtain against the Husband in the Australian Proceedings if she can make good her case that the shares in the Company, held in the name of the Brother, are in fact beneficially owned by the Husband.

As regards other matters raised in §§9 to 10 of the draft Notice of Appeal alleging, inter alia, that the Defendants had previously failed to comply with orders made by the Australian Court (including disclosure orders) and the Company had or might have dissipated assets since the grant of the Australian Ex Parte Injunction (in particular in relation to an account in Taiwan), they do not answer the Judge’s view that since (i) the Hong Kong assets constituted no more than 3% of the total matrimonial pot, (ii) there was no evidence that the Wife would have any difficulty in levying execution on 97% of the matrimonial assets which were not in Hong Kong, and (iii) around 73% of the matrimonial assets (consisting of shares in the Company) were well protected by the Brother’s Undertaking, even if the Hong Kong assets should suddenly disappear, the balance of the assets would be more than sufficient to satisfy any judgment that the Wife might obtain in the Australian Proceedings, and thus there was no risk of dissipation of assets “so as to render the plaintiff’s judgment of no effect”[9].

17.  Under Ground D, the Wife argues that the Judge erred in law and was plainly wrong in holding that because there had been legal proceedings against the Husband since 2020, there was no extreme urgency or secrecy justifying an ex parte without notice application. She contends that, given the Defendants’ attempt to dissipate assets since the commencement of the proceedings between the Husband and the Wife, the Judge ought to have found that further dissipation of assets might be triggered by notice of an application for the 2023 HK Injunction[10].

18.  The fact that proceedings (including injunction proceedings) had been on foot between the Wife and the Husband/Brother/Company since 2020 was a matter which the Judge could properly take into account in deciding whether there was sufficient urgency or secrecy to justify an ex parte without notice application. The Wife’s reliance on the judgment of the Court of Appeal in China Medical Technologies Inc v Sam Tsang Tak Yung [2022] HKCA 41, at §54, is misplaced. That was a case involving an alleged massive fraud committed by the defendants against the plaintiff companies, and the Court’s view that an ex parte without notice application was justified must be read in that light.

19.  Further, the Judge did not merely rely on the long history of the proceedings between Wife and the Husband/Brother/Company preceding the ex parte application for the 2023 HK Injunction in March 2023. He also took into account the fact that the majority of the Brother’s assets targeted by the 2023 HK Injunction consisted of securities in the Brother’s Securities A/C which could not be disposed of outside normal banking hours, and the Wife could have made an ex parte application with notice to the Brother at a time outside the banking hours[11].

20.  At §16 of the Plaintiff’s Statement [Leave to Appeal], the Wife argues that she cannot be adequately protected by an application made outside the banking hours because the injunction also targeted the Company’s general banking account, withdrawals from which could be made outside banking hours. However, as pointed out by the Judge at §49 of the Leave Decision, the only justification put forward on behalf of the Wife at the hearing on 9 August 2023 for proceeding on an ex parte without notice basis was that the Wife had given an undertaking to the Australian Court precluding her from giving any notice of the Hong Kong application to the Brother and the Company prior to making the application on 13 March 2023. That justification was rejected by the Judge at §65 of the Decision, and is no longer relied upon by the Wife in the present application. The point now relied upon, namely, that monies could be withdrawn from the Company’s A/C outside the normal banking hours, was not raised either before the ex parte judge on 13 March 2023 or the Judge at the inter partes hearing on 9 August 2023. The Judge was not satisfied that was the real reason why the Wife chose to make the ex parte application without notice in the first place. The Judge also considered, correctly in our view, that even if it was justifiable to seek an injunction on an ex parte without notice basis in respect of the Brother’s A/C and Company’s A/C, that could not justify lumping the Brother’s Securities A/C and the balances in the bank accounts together and getting an injunction to freeze all those assets in one single ex parte without notice application[12].

21.  The Wife also relies on the matters raised in §§9 and 10 of the draft Notice of Appeal (concerning risk of dissipation) in support of Ground D. We do not see that they can assist the Wife in relation to the issue of whether she was justified to apply for an ex parte injunction without notice insofar as the Brother’s Securities A/C is concerned.

22.  Under Ground E, the Wife argues that the Judge erred in law and/or was plainly wrong in concluding that she had committed material non-disclosures in obtaining the 2023 HK Injunction[13], and further that even if there were any material non-disclosures, there was no evidence and/or the Judge was plainly wrong in finding that the material non-disclosures were deliberate and not mere oversight. She contends that the 2023 HK Injunction should not have been discharged or, alternatively, should have been re-granted on the same terms[14].

23.  The Judge found that the Wife was guilty of the material non-disclosures complained of by the Brother (referred to as “MND A”, “MND B” and “MND C”[15]), and those complained of by the Company (referred to as “MND 1” to “MND 6”[16]). In the Wife’s Statement [Leave to Appeal] dated 10 October 2023, Mr David Chen specifically addresses the Judge’s findings in respect of (i) MND A and MND 3, (ii) MND B and MND 1, and (iii) MND C and MND 6.

24.  MND A and MND 3 concern the Wife’s failure to draw the ex parte judge’s attention to the following matters: (i) the Hong Kong assets (with a value of about AUD 26.63 million) only constituted less than 3% of the total matrimonial assets (with a value of about AUD 897 million), and (ii) her case in the Australian Proceedings was that she was only entitled to 50% or slightly more than 50% of the total matrimonial assets[17]. The Wife argues that the Judge’s finding of material non-disclosure was based on his misunderstanding of the true nature of her claims in the Australian Proceedings. We have already dealt with the argument that the Judge misunderstood the nature of her claims at §15 above. In our view, the question of whether the Judge was correct to find material non-disclosures by the Wife ought to be assessed by reference to the evidence and submissions before him, not on further evidence which the Wife may wish to adduce to “clarify” her case, in respect of which no application has been made and no leave has been granted.

25.  Mr Chen also submits that the Judge failed to have regard to the fact that (i) the figure of AUD 897 million was only the Wife’s estimated amount of the matrimonial pot, and (ii) the Husband’s estimate would likely be substantially lower (approximately AUD 22.5 million). It has not been suggested, however, the Wife’s estimate is likely to be substantially incorrect. We also fail to see the relevance of the Husband’s own estimate (which the Wife plainly did not accept) for the purpose of determining whether the Wife was guilty of material non-disclosure.

26.  MND B and MND 1 concern the Wife’s failure to draw the ex parte judge’s attention to the information contained in the Brother’s 1^st Affirmation relating to the background and business of the Company and the needs of the Company to use its accounts in its day-to-day business, and his evidence that the Husband did not have any beneficial interest in the Company, or any involvement in the running of the Company[18]. These are matters relevant to the question of whether the court should grant a Mareva injunction over assets held by or in the name of the Company. The fact that the Wife disputed some of the matters affirmed to by the Brother[19] did not mean that those matters became irrelevant or did not have to be disclosed, as contended by the Wife[20]. They were matters which should be fairly presented to the ex parte judge for his consideration.

27.  MND C and MND 6 concern the undertaking in damages given by the Wife, the complaint being that she had failed to fully and frankly disclose to the ex parte judge that she had no connection with Hong Kong and no assets in Hong Kong[21]. The Wife argues that her lack of assets in Hong Kong is entirely irrelevant to her cross-undertaking in damages because (i) she has given a valid undertaking to the Australian Court when she obtained the Australian Ex Parte Injunction, (ii) a Hong Kong judgment is enforceable in Australia under s 6(7) of the Australian Foreign Judgment Act 1991, and (iii) hence, any damages suffered by the Defendants arising from the 2023 HK Injunction can be claimed under the Australian Undertaking[22].

28.  As pointed out by the Judge at §54(6)(a) of the Leave Decision, the argument that a Hong Kong judgment is enforceable in Australia under s.6(7) of the Australian Foreign Act 1991 was not raised at the hearing on 9 August 2023, and thus the Brother and the Company did not have any opportunity to adduce expert evidence on foreign law in response to that argument. In any event, where an interlocutory injunction is sought by a foreign claimant, an important consideration for determining whether some form of fortification of the undertaking in damages should be given is the ease with which the undertaking can be enforced in Hong Kong. Where existence of assets is relied upon by the foreign claimant, it is necessary to consider the location of the assets and their ready availability to answer the undertaking. The Australian Undertaking is plainly not an asset which can be readily realised to answer the undertaking. We also agree with the Judge that if the Wife had intended to rely on the Australian Undertaking, she ought to have raised it at the ex parte hearing on 13 March 2023 so that the ex parte judge could consider whether it provided sufficient support for her undertaking in damages in Hong Kong and thus fortification of the undertaking was not necessary[23].

29.  MND 5 concerns the Wife’s failure to draw the ex parte judge’s attention to her pleaded case in the Australian Proceedings that what should be regarded as being in the matrimonial pot was the shares in the Company, not the assets of the Company[24]. The Wife argues that this finding of material non-disclosure is based on the Judge’s misunderstanding of the true nature of her claims in the Australian Proceedings. The argument that the Judge misunderstood the true nature of the Wife’s claims in the Australian Proceedings has already been dealt with at §15 above. We also do not see that the Wife’s pleaded case in the Australian Proceedings that it was the shares in the Company, not the assets of the Company, which formed part of the matrimonial pot could in any way be affected by the nature of her claims in those proceedings.

30.  In all, we do not consider the Wife’s contention that the Judge erred in law and/or was plainly wrong to find that she had committed material non-disclosures is reasonably arguable. The Judge took the view that the non-disclosures were serious, and some of them could not be mere oversight and there was an element of deliberation in those non-disclosures. Thus, the 2023 HK Injunction must be discharged without a re-grant. In our view, this conclusion was well open to the Judge.

31.  The above conclusions in respect of Grounds A, C, D and E are sufficient to dispose of the Leave Application, and it thus becomes unnecessary for us to deal with Ground B, suffice it for us to make the following observations:

(1)  It is clear that the Wife’s pleaded case in the Australian Proceedings is that the shares in the Company held by the Brother, not the assets of the Company, are held on trust for the Husband[25]. In other words, her pleaded case is that the Husband is the beneficial owner of the shares in the Company, not the assets of the Company. While there may be some materials which could support an argument that the Company is the Husband’s nominee or holds some assets for him, that is not her pleaded case in Australia[26].

(2)  In the Ex Parte Skeleton put before the ex parte judge on 13 March 2023, it was submitted on her behalf that “the funds held in … [the Company’s A/C] form part of the matrimonial pool available for division in the Australian Proceedings”[27].

(3)  At the hearing before the Judge on 9 August 2023, the Wife argued that because the Brother held all the shares in the Company on trust for the Husband, the Husband was “accordingly” the beneficial owner of the assets held by the Company (including the cash in the Company’s A/C) and such assets should be regarded as being included in the matrimonial pot available for division in the property settlement proceedings[28].

(4)  The above argument of the Wife is plainly contrary to the well-established legal principle that a company is a separate legal entity and its assets do not belong to the sharesholders beneficially, and the Judge was correct to reject the argument.

(5)  Insofar as the Wife is now seeking to rely on the Court’s jurisdiction to grant a Chabra injunction[29], as mentioned by the Judge, that was never raised at the hearing on 9 August 2023[30].

32.  We have considerable reservation on the merits of Ground B. In any event, even if we assume in the Wife’s favour that Ground B has a reasonable prospect of success, we do not consider that her intended appeal as a whole has a reasonable prospect of success given our conclusions on Grounds A, C, D and E. Neither do we see that there is any other reason in the interests of justice why the appeal should be heard. Accordingly, the Wife’s application for leave to appeal against the Order is refused.

33.  In passing, we should mention that at §21 of the Plaintiff’s Statement [Leave to Appeal], the Wife complains that the Judge wrongly disregarded some previous evidence (namely, 1^st Zheng to 4^th Zheng and the exhibit thereto) filed in support of the 2021 HK Injunction in the Leave Decision. Since this matter has not been raised in the draft Notice of Appeal, it is not necessary to deal with it in the present judgment.

THE STAY APPLICATION

34.  Having reached the conclusion that the Leave Application should be refused, there would be no basis to grant any stay of execution of the Order.

DISPOSITION

35.  The Leave Application and Stay Application are dismissed. Accordingly, the question of whether the Wife ought to bear the costs, or be deprived of the costs, of the Stay Application, regardless of the outcome of the applications foreshadowed in the Court’s directions dated 24 October 2023 will probably fall by the wayside. We make an order nisi that the Brother and the Company shall have the costs of the Leave Application and Stay Application, to be summarily assessed. The Wife shall have leave to file and serve statements of objections (limited to 2 pages each) to the Brother and Company’s respective costs statements dated 24 October 2023. Subject to such further directions as may be given, the Court will assess the Brother and the Company’s costs summarily without further reference to the parties. The above costs order shall become absolute unless an application is made to vary the same within 14 days from the date of this judgment.

36.  The interim stay of execution of the Order granted by the Court on 24 October 2023 is lifted.

37.  Lastly, as the Leave Application is totally without merit, we make an order that no party may request the present determination to be reconsidered at an oral hearing inter partes pursuant to Order 59, rule 2A(8) of the Rules of the High Court.