YUEN TSZ CHUN FRANK and CHAN HOI YAN, the Joint and Several Liquidators of RZ3262019 LTD (in Liquidation) v. ZHOU YING INVESTMENTS GROUP LTD AND OTHERS

HCMP 1589/2024

[2025] HKCFI 4350

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1589 OF 2024

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D E C I S I O N

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I.  INTRODUCTION

1.  On 6 and 8 November 2024 respectively, the 1^st Defendant and the 2^nd, 4^th and 5^th Defendants filed Summonses for, among others, striking out the Originating Summons filed on 23 August 2024 (the “Originating Summons”) on the ground that a foreign court[1] has determined the identical issue and thus issue estoppel bars the Plaintiffs from issuing the Originating Summons. This raises a question of how to identify the issues for the purpose of issue estoppel where the foreign court has a different standard of proof and/or places the burden of proof on a different party.

2.  In the event that I would not strike out the Originating Summons, the 1^st Defendant also applies for various orders which I shall deal with below after disposing of the striking out application.

3.  By the Originating Summons, invoking sections 266, 266A and 266B of the Companies (Winding up and Miscellaneous Provisions) Ordinance (Cap. 32) (the “Ordinance”), the Plaintiffs seek, among others, the following order:-

(1)  A declaration that:-

(a)  the two letters of guarantees issued by the 3^rd Defendant on 24 November 2021 (the “1^st Guarantee” and the “|2^nd Guarantee” and collectively, “Guarantees”) to guarantee the Company’s liabilities to the 1^st Defendant under:-

(i)  a Loan Agreement between the Company and the 1^st Defendant dated 19 July 2021 (the “Zhou Ying Loan Agreement”); and

(ii)  two Intercompany Loan Agreements both dated 22 July 2020 (the “Yuzhou Loan Agreements”) between the Company and the 1^st Defendant (as assigned pursuant to a Deed of Assignment dated 12 November 2021 (the “Deed of Assignment”) between the 2^nd Defendant as assignor and the 1^st Defendant as assignee); and

(b)  the sums received by the 1^st Defendant in connection with the Guarantees (the “Received Sums”), including but not limited to any sums received by way of (i) the judicial auction of the 3^rd Defendant’s properties (the PRC Judicial Auction as defined below); or (ii) any other enforcement orders in relation to the Mainland proceedings (2021) 川01民初 10747号 (the “PRC 10747 Claim”) and (2021) 川01民初 10748号 (the “PRC 10748 Claim”);

constitute an unfair preference under sections 266, 266A and 266B of the Ordinance.

(2)  The 1^st, 2^nd, 4^th and 5^th Defendants do jointly and severally pay to the Plaintiff the Received Sums or any amount that the Court thinks fit.

4.  On 25 April 2025, the Plaintiffs filed Notice of Withdrawal of their claims against the 4^th and 5^th Defendants. Thus, the dispute now is between the Plaintiffs on the one hand and the 1^st and 2^nd Defendants on the other.

II.  PARTIES

5.  The Plaintiffs are the joint and several liquidators of RZ3262019 Limited (the “Company”), a limited company incorporated under the laws of British Virgin Islands (“BVI”) on 17 April 2019.

(1)  On 8 July 2022, Happy Lion Ventures Ltd (“Happy Lion”) and Chinex Limited (“Chinex”) (collectively, the “Petitioners”) presented a winding-up petition in the BVI Court. On 13 July 2022, the BVI Court appointed provisional liquidators (the “BVI Provisional Liquidators”). On 31 May 2023, the BVI Court made a winding-up order against the Company (the “BVI Winding-up Order”) and appointed liquidators.

(2)  On 8 June 2023 in the Hong Kong Court, the Petitioners presented a winding-up petition (in HCCW 244/2023). On 29 June 2023, the Plaintiffs were appointed as provisional liquidators. On 24 October 2023, Linda Chan J made a winding-up order against the Company as an ancillary relief to the BVI winding-up order. On 26 January 2024, Linda Chan J appointed the Plaintiffs as the joint and several liquidators of the Company.

6.  The 1^st Defendant (“Zhou Ying”) is a HK$1 company incorporated under the laws of Hong Kong, with the only issued share capital at all times owned by Dong Shuling (“Dong”). It invests in real estate projects in Mainland China. Before 29 August 2022, Dong was the sole director and on 29 August 2022, two new directors were appointed.

7.  The 2^nd Defendant (“Yuzhou”) is a company incorporated under the laws of Cayman Islands and is listed on the Stock Exchange of Hong Kong. Its current Chairman is the 4^th Defendant (“Kwok”) and one of its non-executive directors and its major shareholder is the 5^th Defendant (“Lam”). Kwok and Lam together own, directly and indirectly, 59.09% of the issued share capital of Yuzhou.

8.  The 3^rd Defendant (the “PRC Project Company”) is a company incorporated in Mainland China. It owns a real estate project in Chengdu (the “Project”). Initially, Happy Lion and Chinex indirectly, through Happy Magic Enterprises Inc. (“Happy Magic”) (in turn through Shun Hong Limited (“Shun Hong”)) and Carton International Limited (“Carton”), owned the PRC Project Company. In turn, Happy Lion and Chinex were both indirectly owned by CK Assets Holdings Limited (“CK Holdings”).

9.  The Company was incorporated for the acquisition (the “Acquisition”) of the PRC Project Company and the Project from CK Holdings, by replacing Happy Lion and Chinex (as vendors) to indirectly own the PRC Project Company.

10.  As at the time of the Acquisition completed on 23 July 2020:-

(1)  Chengdu Ruizhuo Real Estate Co., Ltd (“Ruizhuo”), a company incorporated in the PRC, held a 50% interest in the Company.

(2)  Chengdu Zhuozhou Real Estate Company Limited (“Zhuozhou”), a company incorporated in the PRC, held the other 50% in the Company.

(3)  Zhuozhou was owned by Nanjing Kunhao Hardware Trading Co., Ltd. (“Nanjing Kunhao”), a company incorporated in the PRC, which was in turn in directly held by Yuzhou as to 80% and a Huang Shuqing as to the remaining 20%.

11.  Back in April 2020, for the Acquisition (yet to take place at that time), Ruizhuo, Zhuozhou and Nanjing Kunhao entered into a joint control cooperation agreement dated 27 April 2020 (the “Joint Control Cooperation Agreement”), supplemented by two supplemental agreements also dated 27 April 2020 and one supplemental agreement dated 17 July 2020. Clause 8.7 thereof provides that the corporate seal (the “Corporate Seal”) of the PRC Project Company and its licences shall be kept jointly by Ruizhuo and Nanjing Kunhao at the Nanjing Kunhao’s office in Chengdu.

III.  LOANS TO FINANCE THE ACQUISITION

12.  To finance the Acquisition, a number of loans were advanced:-

(1)  A loan (the “Vendor Loan”) of approximately US$343 million advanced by the Petitioners to the Company under a loan agreement dated 29 August 2019, subsequently amended on 17 and 23 July 2020 (the “Vendor Loan Agreement”). As securities, by various share charges (the “Share Charges”), the shares in Happy Magic, Shun Hong and Carton were charged and the equity interest in the PRC Project Company held in the name of Shun Hong and Carton were pledged;

(2)  A loan (the “Guotai Loan”) of approximately US$310 million under the arrangement by Guotai Junan Securities (Hong Kong) Limited advanced to the Company and guaranteed by Yuzhou on or about 21 July 2020;

(3)  Loans (“Yuzhou Loans”) totaling approximately US$427 million advanced to the Company under the Yuzhou Loan Agreements; and

(4)  Shareholder loans of US$84 million from two companies affiliated with Ruizhuo.

IV.  THE GUARANTEES AND OTHER SECURITIES

13.  On 14 July 2021, the Petitioners, as vendors to the Vendor Loan Agreement, declared that an “Event of Default” had occurred. Further, by letter dated 15 July 2021 issued to the Company (the “Petitioners’ Demand Letter to the Company”), the Petitioners declared the principal and interest of the Vendor Loan to be immediately due and payable, and demand the Company to pay the Petitioners accordingly.

14.  On 19 July 2021, the Company and Zhou Ying entered into the Zhou Ying Loan Agreement. On 20 July 2021, under the Zhou Ying Loan Agreement, Zhou Ying made a payment of US$310 million to discharge the Guotai Loan. I pause here to note that despite the Petitioners’ Demand Letter to the Company, the Company’s response was to procure the Zhou Ying Loan Agreement to discharge the Guotai Loan, even though, on the evidence, there had not been any demand against the Company to repay this Guotai Loan shortly or at all.

15.  On 3 August 2021, the shareholders of the Company executed a share charge (the “Zhou Ying Share Charge”) in respect of their shares in the Company as security for the Zhou Ying Loan Agreement.

16.  On 12 November 2021, Zhou Ying and Yuzhou entered into the Deed of Assignment, whereby Yuzhou assigned the outstanding balance of the Yuzhou Loans to Zhou Ying, the outstanding balance being US$318,851,202.07.

17.  On 24 November 2021, the PRC Project Company issued the Guarantees in respect of the Company’s liabilities to Zhou Ying under the Zhou Ying Loan Agreement and the Deed of Assignment respectively.

18.  Shortly thereafter, on 2 December 2021, Zhou Ying sent two demand letters to each of the Company and the PRC Project Company, stating that the loans in questions had been due and demanding payments to settle the loans. On the very same day, the Company acknowledged its liability in its written reply.

19.  In respect of the execution of the Guarantees, both were affixed with the Corporate Seal of the PRC Project Company and the personal chop of Wang Tingting (“Wang”). Wang was a director of the Company from 13 August 2021 to 18 March 2022, and also a director of the PRC Project Company from 31 July 2020 to 11 March 2022. In other words, when the Guarantees were issued, Wang was the common director of the Company and the PRC Project Company. Both Guarantees were approved by the shareholders and the board of the PRC Project Company. There is, however, dispute over whether the Corporate Seal of the PRC Project had been properly procured. As mentioned above, it should be kept jointly by Ruizhuo and Nanjing Kunhao at the Nanjing Kunhao’s office in Chengdu. On this, the Plaintiffs say that Nanjing Kunhao and Zhuozhou (in turn, under the control of Yuzhou) removed the Corporate Seal without Ruizhuo’s consent.

V.  ENFORCEMENT OF THE GUARANTEES AND SECURITIES

20.  On 15 December 2021, Zhou Ying commenced the PRC 10747 Claim and the PRC 10748 Claim (collectively, the “Zhou Ying’s PRC Proceedings”) in Chengdu Court against the PRC Project Company for the purpose of enforcing the Guarantees against the PRC Project Company.

21.  On 21 December 2021, the Company, the PRC Project Company, Zhou Ying, Everlast Bloosom Investments Limited (“Ever Bloosom”), Yuzhou, Carton and Shun Hong entered into a Supervision Agreement (the “Supervision Agreement”). By the Supervision Agreement, the Corporate Seal shall be kept by Everlast Bloosom until the Company’s full repayment of the Zhou Ying Loan.

22.  On 2 March 2022, Zhou Ying enforced the Zhou Ying Share Charge. Zhou Ying thus became the Company’s sole shareholder.

23.  On 8 March 2022, the Petitioners appointed receivers (the “Receivers”) over the shares in Happy Magic and Carton. As a result, the Receivers have all the shares in Happy Magic and Carton registered in their names. In other words, the Receivers indirectly own the PRC Project Company and the Company no longer owns, directly or indirectly, the PRC Project Company.

24.  In an attempt to gain control over the PRC Project Company, on 13 March 2022, the Receivers procured the PRC Project Company to pass a board resolution (the “PRC Project Company Reconstitution Resolution”) to replace its legal representative Wang with Cai Weikang (“Cai”) nominated by the Receivers, and to replace its board of directors, general manager and supervisors. However, without the Corporate Seal, which, however, had been kept by Everlast Bloosom, the PRC Project Company Reconstitution Resolution could not be put into effect.

25.  On 16 March 2022, clearly as an attempt to resist the Receivers’ attempt to gain control of the PRC Project Company, Zhou Ying and Everlast Bloosom commenced proceedings against the PRC Project Company, Carton and Shun Hong, the Company and Yuzhou in Qianhai Court based on the Supervision Agreement, claiming that the Receivers were not entitled to take control of the PRC Project Company’s Corporate Seal, thereby putting, among others, the appointment of Cai as the legal representative in dispute.

26.  On 21 April 2022, upon the application by Zhou Ying and Everlast Bloosom, the Qianhai Court granted a preservation order restraining any change of the legal representative and chairman of the PRC Project Company.

27.  On 30 May 2022, the hearing of the Zhou Ying’s PRC Proceedings took place. Wang represented the PRC Project Company. The Plaintiffs’ case is that the PRC Project Company was under the control of Zhou Ying and did not defend Zhou Ying’s PRC Proceedings properly or at all.

28.  Subsequently, Ruan Ce, a director appointed by Yuzhou to the board of the PRC Project Company, applied to challenge the validity of the PRC Project Company Reconstitution Resolution, thereby putting, among others, the appointment of Cai as the legal representative in dispute.

29.  Pending the handing down of the judgment in the Zhou Ying’s PRC Proceedings, on 13 September 2022, Cai on behalf of the PRC Project Company applied to intervene in the Zhou Ying’s PRC Proceedings, and on 10 November 2022, the BVI Provisional Liquidators on behalf of the Company also applied to intervene. Both applications were refused.

30.  On 21 December 2022, in the Zhou Ying’s PRC Proceedings, the Chengdu Court gave judgments (the “PRC Judgments for Zhou Ying”) in favour of Zhou Ying against the PRC Project Company.

31.  In April 2023, Zhou Ying commenced proceedings to enforce the PRC Judgments for Zhou Ying (the “Zhou Ying’s PRC Enforcement Proceedings”). As a result, various judicial auctions (the “PRC Judicial Auctions”) took place in April to July 2024, whereby certain assets of the PRC Project Company were sold for proceeds eventually paid to Zhou Ying.

VI.  LEGAL PROCEEDINGS TAKEN BY THE RECEIVERS AND THE LIQUIDATORS

32.  As mentioned above, on 8 June 2023, the Petitioners presented a winding-up petition in Hong Kong Court. On 29 June 2023, the Plaintiffs were appointed as the joint and several provisional liquidators of the Company.

33.  On 19 June 2023, the legal representative of the PRC Project Company appointed by the Receivers made two applications (which can be treated as identical for the present purposes) against Zhou Ying in Sichuan Higher People’s Court for a retrial of Zhou Ying’s PRC Proceedings (the “Retrial Application”) on the ground, among others, that the Zhou Ying Loan Agreement, the Deed of Assignment and the Guarantees were impugnable as part of a scheme orchestrated by Yuzhou to defraud the creditors of the Company. The originating papers for the Retrial Application are essentially the same, stating, in essence:-

(1)  The Share Charges prohibited the PRC Project Company from giving guarantees to any third party and Zhou Ying as an associate of the PRC Project Company (Yuzhou being an indirect owner of the Company which in turned indirectly owned the PRC Project Company, as a result of the Acquisition mentioned above): see pages 9 and 10 of the application paper for the Retrial Application concerning the PRC 10747 Claim;

(2)  The prohibition still governs the Zhou Ying Loans despite the Deed of Assignment assigning the Loans to Zhou Ying, and as a result, the PRC Project Company could not give the Guarantees in favour of Zhou Ying: see page 10 of the application paper;

(3)  The Guarantees were given in breach of the Share Charges: see page 11 of the application paper;

(4)  The Deed of Assignment was a means whereby Yuzhou circumvented the prohibition of the PRC Project Company from giving guarantees to Yuzhou by assigning the Yuzhou Loans to its “white gloves” Zhou Ying, which on the face of it did not own any interest in the PRC Project Company: see page 11 of the application paper;

(5)  The Guarantees did not reflect the true intention of the PRC Project Company because the Corporate Seal had been unilaterally used by Zhou Ying or its subsidiary Nanjing Kunhao without the consent of Ruizhuo as required under the Joint Control Cooperation Agreement: see pages 14-15 of the application paper;

(6)  Zhou Ying was controlled by and was the alter ego (人格混同) of Yuzhou. In Zhou Ying’s PRC Proceedings, Yuzhou, controlling the PRC Project Company, caused the PRC Project Company not properly defend: see page 20 of the application paper;

(7)  Cai elected by the shareholders’ resolution of the PRC Project Company, represented the true intention of the PRC Project Company but was not allowed to join Zhou Ying’s PRC Proceedings: page 22 of the application paper; and

(8)  The execution of the Guarantees and the defence of Zhou Ying’s PRC Proceedings were acts carried out pursuant to malicious conspiracy (惡意串通) to prejudice other people’s rights. Such acts, by virtue of Article 154 of the Civil Code of the People’s Republic of China (the “PRC Civil Code”), are invalid: see pages 30-31 of the application paper.

34.  While the Retrial Application had yet to be heard, on 14 July 2023, the Plaintiffs commenced a Norwich Pharmacal application against The Bank of China (Hong Kong) in HCMP 1113/2023. On 26 July 2023, DHCJ Jason Pow SC granted the disclosure order as the Plaintiffs sought (the “HCMP 1113/2023 Disclosure Order”).

35.  At the oral hearing of the Retrial Application on 7 December 2023, the Receivers made similar contentions as in the Retrial Application papers as quoted above. Further, the evidence obtained by the Plaintiffs through the HCMP 1113/2023 Disclosure Order had been supplied by the Plaintiffs to the Receivers for use at the hearing. On 22 December 2023, the Plaintiffs filed a Summons in HCMP 1113/2023 (the “HCMP 1113/2023 Summons”) seeking further disclosure and retrospective release of the implied undertaking for use of the information obtained in HCMP 1113/2023 in the Retrial Application. Such order was granted on 16 April 2023.

36.  On 31 January 2024, the Higher People’s Court issued judgments (the “PRC Retrial Judgments”) dismissing the Retrial Application.

37.  On page 2 of the PRC Retrial Judgments, the Higher People’s Court summarised the Receivers’ arguments into two points:-

(1)  There was serious procedural breaches of the Zhou Ying’s PRC Proceedings; and

(2)  “二、本案一审判决存在《中华人民共和国民事诉讼法》第二百一十一条第二项、第三项、第六项等问题，导致判决认定的基本事实错误，并进而导致存在严重的法律适用错误。综上， 舜鸿地产公司依照《中华人民共和国民事诉讼法》第二百一十一条第二项、第三项、第六项、第八项、第九项的规定申请再审。

38.  I pause here to note that the Higher People’s Court did not include in the summary the Receivers’ submissions on the “malicious conspiracy” and the legal consequence of the application of article 154 of the PRC Civil Code.

39.  Then, on pages 3 and 4 of the PRC Retrial Judgments, the Higher People’s Court states, in essence, that:-

(1)  Wang was the registered legal representative of the PRC Project Company, while the validity of the shareholders’ resolution electing Cai was an issue in an ongoing legal proceedings. Thus, there was nothing improper for the Court to recognise Cai’s right in Zhou Ying’s PRC Proceedings.

(2)  The internal shareholder dispute in the PRC Project Company did not affect its liability vis-à-vis outsiders.

(3)  “本案的审理核心在于舜鸿地产公司 [the PRC Project Company] 是否对外承担担保责任。一审法院虽未准许蔡伟康 [Cai] 参加诉讼，但已就担保合同 [the Guarantees] 效力和内容进行全面审理。本案中，案涉《公司间贷款协议》 [the Intercompany Loan Agreement]《债权转让契据》[the Deed of Assignment] 为合同当事人真实意思表示，内容不违反法律、行政法规的强制性规定，应当认定为合法有效…舜鸿地产公司为RZ 公司 [the Company] 的债务提供担保，已严格按照公司法相关程序性和实体性规定作出股东会决议。卓颖公司 [Zhou Ying] 在保证期间内诉请舜鸿地产公司承担连带保证责任具有事实和法律依据。因此，在公司对外负债成立的情况下，一审判决舜鸿地产公司履行清偿贵任，并无不当 , 本案裁判结果不因蔡伟康是否参加诉讼而受到影响。”

40.  It remains for me to add that according to the PRC legal opinion prepared by Grandall Law Firm (Chengdu) on 16 June 2023 (the “Grandall PRC Legal Opinion”) for the Plaintiffs’ application in HCMP 1113/2023, referring to article 109 of an interpretation issued by the Supreme People’s Court, the standard of proof of a malicious conspiracy (惡意串通) is beyond reasonable doubt, higher than balance of probabilities:-

“《最高人民法院关于适用〈中华人民共和国民事诉讼法〉的解释》第一百零九条规定：“当事人对欺诈、胁迫、恶意串通事实的证明，以及对口头遗嘱或者赠与事实的证明，人民法院确信该待证事实存在的可能性能够排除合理怀疑的，应当认定该事实存在。” 因此，恶意串通事实的证明标准要达到“确信该待证事实存在的可能性能够排除合理怀疑＂的程度，高于民事诉讼中高度盖然性的一般标准。” (emphasis added)

41.  While the Grandall PRC Legal Opinion was prepared for the Plaintiffs’ application in HCMP 1113/2023, in the present proceedings, it was Zhou Ying, via the Affirmation of Dong in support of Zhou Ying’s present striking out application, who produced it. This PRC Legal Opinion was also relied upon in the Skeleton Submissions of Mr Anson Wong SC (leading Mr Lai Chun Ho and Mr Charlie Liu), counsel for Zhou Ying. Zhou Ying, in producing this legal opinion and making submissions thereon, does not take any issue on the accuracy of the opinion or qualify its reliance on the opinion, for example, relying on certain parts and disavowing the remaining parts as inaccurate. It is fair for me to say that the whole Grandall PRC Opinion was and is placed before me for my consideration.

VII.  UNFAIR PREFERENCE AND THE PARTIES’ RESPECTIVE CASES

42.  To establish unfair preference, the following elements have to be established:-

(1)  A preference was given to a creditor, surety or guarantor (section 266A (1)(a) of the Ordinance);

(2)  The preference was given or suffered by the company (section 266A(1)(b) of the Ordinance);

(3)  The preference was given within the relevant time as defined by section 266B of the Ordinance;

(4)  The company was influenced by a desire to improve the position of the person to whom the preference was given (section 266(4) of the Ordinance); and

(5)  The company was unable to pay debts at the time of giving the preference or became insolvent in consequence of the preference (sections 266(2) and 266B(2) of the Ordinance).

A.  Plaintiffs’ case

43.  The Plaintiffs’ case of unfair preference is detailed in §§107-158 of the written submissions of their counsel, Mr Bernard Man SC (leading Mr Danny Tang). In summary:-

(1)  Zhou Ying’s position was improved by the Guarantees in that it would fully recover the Zhou Ying Loan and the Yuzhou Loans by effectively gaining priority over the assets of the PRC Project Company at the expense of the general creditors of the Company (whose assets were diminished given that its subsidiary the PRC Project Company would have to discharge its liability under the Guarantees in respect of the Company’s debts);

(2)  The Guarantees and the PRC proceedings commenced by Zhou Ying to enforce the Guarantees were suffered by the Company in that the Company (then under the control of Yuzhou) passively defended the proceedings against it;

(3)  The Guarantees were given on 24 November 2021, within the two years from the winding up of the Company on 24 October 2023, while Zhou Ying and Yuzhou were the Company’s associate (see section 265C of the Ordinance), as the Company was under Yuzhou’s control and the majority of the Company’s directors were accustomed to act in accordance with Yuzhou’s directions and instructions. The evidence the Plaintiffs rely on is that:-

(a)  Kwok, who has been the sole signatory of Zhou Ying’s bank account, Kwok being the Chairman and a majority shareholder of Yuzhou but neither a shareholder nor a director of Zhou Ying;

(b)  The address of the principal place of business of Yuzhou in Hong Kong has been used as he correspondence address of Zhou Ying in the customer information amendment form dated 23 July 2021 and the account opening form in respect of Zhou Ying’s bank accounts;

(c)  A significant amount of funds in the bank account of Zhou Ying, whether for the Zhou Ying Loan Agreement or settling legal fees of Zhou Ying in the Zhou Ying PRC Proceedings, appear to come from corporate entities controlled by Kwok and/or associated with Yuzhou. The details are set out in Annex 2 to the Affirmation of Chan Hoi Yan; and

(d)  The bank statements recorded similar remittances out of and deposits of similar amounts in the bank accounts of Zhou Ying in close proximity to each other with recipients and remitting parties associated, related, and/or connected to Yuzhou and/or Kwok.

(4)  By virtue of section 266(5) of the Ordinance, the Company was presumed to have been influenced by a desire to give the preference, and Zhou Ying would not be able to rebut this presumption because, broadly speaking:-

(a)  Despite demands from other creditors of the Company such as the Petitioners’ Demand, the Company and Zhou Ying entered into the Zhou Ying Loan Agreement for payment of the Guotai Loan;

(b)  Despite Yuzhou being a guarantor of the Guotai Loan, which means that Yuzhou (but not the Company) could have borrowed from Zhou Ying for the payment of the Guotai Laon thereby becoming the creditor of the Company being its own subsidiary, Yuzhou did not do so but instead let Zhou Ying become the creditor of the Company which on the face of it was not associated with the Company at all;

(c)  Despite demands from other creditors of the Company such as the Petitioners’ Demand, the Guarantees were given to Zhou Ying;

(d)  The Guarantees per se were uncommercial and unusual, especially when (i) by the time the Guarantees were given on 24 November 2021, an event of default under the Vendor Loan Agreement had already occurred on 14 July 2021 and (ii) the Guotai Loan was not guaranteed by the PRC Project Company;

(e)  There was no credible explanation as to why Zhou Ying would agree under the Deed of Assignment to pay consideration of the same amount as the amount of the debt (principal plus interest) being assigned;

(f)  There was no credible explanation as to why upon the Deed of Assignment, the Yuzhou Loan so assigned to Zhou Ying would have to be guaranteed by the 2^nd Guarantee;

(g)  Zhou Ying was controlled by Yuzhou and “Zhou Ying was a façade and a front man of Yuzhou, Kwok and Lam”: see §104 of the 1^st Affirmation of Chan Hoi Yan filed for the Plaintiffs in support of the present application; and

(h)  Even if the above would not be sufficient to infer a desire to prefer Zhou Ying, the presumed desire to prefer Zhou Ying would still be consistent with any purported desire to fulfil contractual obligations: see Re Fowlds (A Bankrupt) [2020] EWHC 1200 (Ch) at §65 per Jones J.

(5)  The Company was unable to pay debts at the time of giving the Guarantees and at the time of failing to defend itself properly against Zhou Ying’s PRC Proceedings.

44.  Pausing here, I note that the grounds set out in §(4)(a)-(g) above, though not formulated in the same terms, are, broadly speaking, similar to the grounds run by the Receivers in support of the Retrial Application (as summarised in §33 above). The main thrust, as Mr Anson Wong, for Zhou Ying, with whom Mr William Wong SC (leading Mr Martin Kok), counsel for Yuzhou, summarised in his written submissions, consists of:-

(1)  an allegation of conspiracy (the “Allegation of Conspiracy”), that is, the Guarantees were executed pursuant to a conspiracy between Zhou Ying and Yuzhou to defraud creditors of the Company; and

(2)  an allegation of control (the “Allegation of Control”), that is, Zhou Ying was under the control of Yuzhou, which in turn controlled the Company and the PRC Project Company.

B.  Defence

45.  Zhou Ying and Yuzhou’s defence presented before me is focused on the existence or non-existence of a desire to give preference. In summary:-

(1)  Zhou Ying has never been under Yuzhou’s control;

(2)  There was no conspiracy between Zhou Ying and Yuzhou;

(3)  Zhou Ying and Yuzhou are two separate legal entities; and

(4)  Zhou Ying and Yuzhou had entered into three business cooperation agreements dated 11 October 2016, 18 June 2021 and 28 December 2021 (collectively, the “Business Cooperation Agreements”), which explains the close relationship between Zhou Ying and Yuzhou and the appointment of Kwok as the sole signatory of Zhou Ying’s bank account.

VIII.  ISSUE ESTOPPEL

46.  The first and the main ground in support of the striking out application is issue estoppel, that is, the Plaintiffs are barred by issue estoppel from running the same issues already determined by the PRC Retrial Judgments.

47.  To establish an issue estoppel, the following conditions have to be satisfied:-

(1)  The same issue has previously been determined by a judicial decision (whether by Hong Kong Courts or foreign courts);

(2)  The judicial decision is made by a court of competent jurisdiction and is final; and

(3)  The parties to that judicial decision (or their privies) are the same persons as the parties to the subsequent proceedings (or their privies).

See Chu Kong v Lau Wing Yan [2023] HKCFI 2703 at §55 per Au-Yeung J.

48.  For the present purpose, in dispute are conditions (1) and (3) only.

A.  Condition (1): Same issues?

49.  To determine whether the issue in the Retrial Application is the same as the issue now raised by the Plaintiffs in the Originating Summons, Cockerill J’s exposition of the relevant principles in Alexander Brothers Ltd (Hong Kong S.A.R.) v Alstom Transport SA & Anor [2020] EWHC 1584 (Comm) is instructive. That case was a case of arbitration enforcement proceedings. The respondent had refused to make payment pursuant to a contract with the claimant governed by the Swiss law. The claimant commenced arbitration proceedings in Switzerland for the payment, and the respondent defended by raising that there was suspicion that the claimant had corruption practice which would entitle it not to pay. Under the Swiss law, “a contract may be tainted by corruption if one of the parties has engaged in corrupt practices in the execution of the contract” (§40), and this may discharge the obligation to pay. The burden of proof of corrupt practice lied upon the respondent in that case (§41), and the standard of proof was a high one (§45). Since the respondent only raised that there was suspicion of corrupt practice, the tribunal rejected the respondent’s defence effectively in limine, and did not proceed to consider the evidence of the suspicious corrupt practice (§46), and eventually made an arbitral award in favour of the claimant.

50.  Before Cockerill J was the claimant’s enforcement proceedings, where the respondent applied to set aside the enforcement of the arbitral award. One of the issues the learned judge had to resolve was, as set out in §110:-

“… what attitude this court takes to a determination by a foreign court or the parties’ chosen tribunal according to a system of law which recognizes the same issue but applies a significantly higher burden of proof than this court would. In other words, does the requirement for identity of issue [for the purpose of issue estoppel] require the issue to be defined in a way which includes the standard of proof?”

51.  The reasoning of the learned judge is worth extensive quoting:-

“111… there is an at least balancing requirement for caution that one does not equate issues which are not truly equivalent. This is for two reasons. The first is that the authorities on issue estoppel are clear that care must be taken in establishing that the issue is the same… ‘The courts must be cautious before concluding that the foreign court made a clear decision on the relevant issue because the procedures of the court may be different and it may not be easy to determine the precise identity of the issues being determined.’…

112. The second is that this approach to identification may well be thought to be the more important where what is in issue is not simply a contractual argument but the question of public policy…

113. A further point is that while none of the authorities casts the question of identity of issues in terms of one which includes, as a necessary component for identity of issue, the standard of proof, and while it is obviously possible that to recognize a distinction based on standard of proof might in some cases seem to offend against comity, such that one would not expect broadly similar standards of proof to prevent an issue being recognized as the same; there comes a point at which an issue subject to a significantly different standard of proof becomes a different issue.

114. So if a particular governing law required proof to a standard of 99% certainty in cases of bribery, and a tribunal found bribery proved to a 60% level but not to a 99% level, would it be right from this court’s perspective to say that the issue of bribery had been decided against the party? Such a conclusion would appear very uncomfortable… Perhaps equally so would be the case where because of the requirement for 99% certainty, the Tribunal rejected the argument without detailed evaluation of the evidence…

115. In this case the Tribunal identified (broadly) the issue of bribery (‘if there is evidence or arguments for corruption’) as one which it had to determine. Plainly bribery in a broad sense was in issue. But the issue was not clearly the same. The difference is that the question… was not squarely whether on the facts there was bribery. Hence the witnesses were not cross-examined on that issue.

116…

117… It is true that the Tribunal plainly considered that it was its duty to evaluate whether Swiss Law gave rise to a defence based on illegality… It also considered it was its duty to consider what evidence there was which could be relevant to such a decision. However, there was no detailed consideration of the evidence…

118. The absence of detailed consideration of the evidence was simply because it was apparent, without going further, that… the suspicions and inferences relied on could not meet the high standard of proof under Swiss Law…

…

122. Here, because of the consequences [of issue estoppel], precision is centrally important. There are two aspects of concern: the actual issue considered and the standard of proof. As to the first, the submissions nowhere accept that the Tribunal evaluated the bribery argument as a positive argument on the facts. A detailed consideration of the issues demonstrates a cross-over of concept but not true identity of issues. As to second, there is an indication in the Award that to the extent the Tribunal was considering bribery, it was applying a significantly higher standard of proof.

123. Thus, despite these points, I regard the conclusion that the same point was determined ‘on the facts’ by the Tribunal as unrealistic and, for the reasons given above, contrary to principle. Bearing in mind the need for caution, the requirement of showing the requisite identity of issues it not made out.

124. This view may gain some support, albeit tangential, from the authorities noted by Sir Michael Burton GBE in Super Max v Malhotra [2020] EWHC 1023 (Comm) at [122]:

‘A negative finding in the foreign court, such as a failure to establish something on the balance of probabilities, may not be as readily determined to create res judicata or an issue estoppel as a positive finding…’” (emphasis added)

52.  The reasoning is as compelling as logical and eminent of common sense. Mr Anson Wong, for Zhou Ying, however, urges me to adopt the academic opinion expressed in Phipson on Evidence (20^th ed) §44-11, where the learned authors, after referring to Alexander Brothers Ltd v Alstom Transport, supra, and another case where issues were not held to be the same because the foreign court applied a different test, expressed their learned opinion as follows:-

“To the extent the decision decided that the issues could not be treated as the same because different legal tests were applied, it is submitted that this may be too strict an approach to identifying what qualifies as the ‘same issue’. Although it is important to retain some flexibility when applying the test for issue estoppel, the better approach is one that does not readily elevate differences in legal tests as material to deciding the non-identity of an issue otherwise it would be a rare case where a foreign judgment or award (which will often apply a different legal test to the issue in question) could be the basis of an issue estoppel.”

53.  There is a footnote at the end of the above passage, referring to Justice KR Handley, Spencer Bower and Handley, Res Judicata, 5^th ed (2019) §8.28 and First Laser Ltd v Fujian Enterprises (2012) 12 HKCFAR 569 at §§36-56. However, with respect, I do not see how those two authorities can be read as supporting the learned authors’ comments. The opinion is, to me, not inconsistent with Alexander Brothers Ltd (Hong Kong S.A.R.) v Alstom Transport SA, supra. While “caution” should be exercised in identifying issues determined by a foreign court, the Court should at the same time not be too ready to find that the issue is different simply because of the application of different legal tests. It is a matter of degree. In any event, if there were any material difference between Alexander Brothers Ltd (Hong Kong S.A.R.) v Alstom Transport SA, supra and the learned authors’ opinion, I adopt the former as logical and eminent of common sense, and reject the latter as not supported by any authorities, overseas or local.

54.  I venture to summarise the legal principles in Alexander Brothers Ltd (Hong Kong S.A.R.) v Alstom Transport SA, supra based on the reasoning in relation to identification of issues as follows:-

(1)  “The courts must be cautious before concluding that the foreign court made a clear decision on the relevant issue because the procedures of the court may be different and it may not be easy to determine the precise identity of the issues being determined.”

(2)  In identifying the issue, the standard of proof is a relevant factor. There may be situation where the difference in the standard of proof is so much as to make the issue a different issue.

(3)  A negative finding in the foreign court may not be readily regarded as an issue determined as a positive finding.

(4)  I add that if the standard of proof and negative-vs-positive findings are relevant factors, on whom the burden of proof lies should also be. In appropriate circumstances, the issue of whether Party A proves that Party B has done an act can be a different issue of whether Party B proves whether it has not done an act. This is one of the considerations the Court has to take into account when assessing the situation holistically.

55.  In the present case, the Defendants’ identification of the issue in the Retrial Application as whether the Allegation of Conspiracy and the Allegation of Control were true, and the issue in the present Originating Summons also as whether the Allegation of Conspiracy and the Allegation of Control were true, is, with respect, too simplistic and without the proper caution required in the identification.

56.  Adopting the legal principles as summarised in §54 above, my analysis is as follows. In the present case, there are at least three permutations I can envisage:-

(1)  The Plaintiffs prove the Allegation of Control on balance of probabilities, and the presumption of a desire to give preference arises by virtue of sections 265C and 266(5) of the Ordinance, so that the burden lies upon the Defendants to prove on balance that there was no desire to give an unfair preference.

(2)  The Plaintiffs prove on balance of probabilities both the Allegation of Control and the Allegation of Conspiracy.

(3)  The Plaintiffs prove on balance of probabilities the Allegation of Conspiracy. I am, however, aware that in the circumstances of the present case, if the Allegation of Control cannot be made out, the Allegation of Conspiracy would unlikely be made out. That said, in principle, it could be that only the Allegation of Conspiracy would be proved.

57.  Thus, the broad issues in the present proceedings can be framed as:-

(1)  (a) Whether the Plaintiffs can prove on balance of probabilities the Allegation of Control and (b) if so, whether in the light of the evidence in support of the Allegation of Conspiracy, the Defendants could disprove on balance of probabilities the presumed desire to give unfair preference; and/or

(2)  Whether the Plaintiffs can prove on balance of probabilities the Allegation of Conspiracy.

58.  It would appear that from a mere reading of the Grandall PRC Legal Opinion quoted in §40 above, the standard of proof in the Retrial Application was “beyond reasonable doubt”. If this is the case, then applying the legal principles set out in §54 above, there would be no identity of issues for the purpose of Condition (1). However, since the Grandall PRC Legal Opinion was produced not for the standard of proof point in the context of issue estoppel and the points arising from Alexander Brothers Ltd (Hong Kong S.A.R.) v Alstom Transport SA, supra were raised by me only a few days before the hearing having read the Grandall PRC Legal Opinion, to be fair to both parties, at the end of the hearing, upon Mr Anson Wong’s application followed by Mr Man’s application, I granted leave to the parties to file PRC legal opinion on this standard of proof point.

59.  According to the Plaintiff’s PRC legal opinion prepared by Wang Jing and GH Law Firm, the standard of proof in the Retrial Application is even higher than beyond reasonable doubt. His reasoning is this:-

(1)  Under article 211 of “中华人民共和国民事诉讼法(2023 修正)”, the PRC Court may order retrial only in 13 specified situations.

(2)  In the trial proper which the Retrial Application was made to set aside, the standard of proof of the allegation of malicious conspiracy was beyond reasonable doubt, and the allegation was not accepted because there was no proof of the allegation beyond reasonable doubt.

(3)  In a retrial application, the standard of review is whether the basis for retrial is established (再审事由是否成立). In relation to reviewing whether the allegation of malicious conspiracy was established, the PRC Court would adopt the same standard of proof of beyond reasonable doubt.

(4)  However, mere proof of allegation of malicious conspiracy may not be sufficient. The PRC Court has to be satisfied that with the establishment of malicious conspiracy, one of the grounds for retrial is established. Therefore, the standard of proof in a retrial application is higher in this sense: see §11 of Wang Jing’s opinion. In this regard, with respect, I disagree with Mr Anson Wong’s reading that Wang Jing’s opinion is that the proof of allegation of malicious conspiracy requires a standard even higher than beyond reasonable doubt.

60.  In reply, only Zhou Ying filed PRC legal opinion on this point. Yuzhou did not. In essence, Zhou Ying’s PRC legal opinion, prepared by Luo Jingrong (“Luo”), takes the view that the standard of proof in the Retrial Application is lower than beyond reasonable doubt and is or is similar to on balance of probabilities. His reasoning is that:-

(1)  Referring to Clause 1(5) of “第一次全民事再审审查工作会议纪要”, Luo points out that there is a distinction between an application for retrial and a retrial itself. For an application for retrial, the PRC Court has to examine whether there may have been error in the fact-finding, legal principles and procedures;

(2)  For usual civil cases (普通民事案件), the standard of proof is on balance of probabilities;

(3)  For an application for retrial, the standard of proof is the same as in a usual civil case (see §21 of Luo’s opinion);

(4)  An application for retrial is just a prelude to a retrial proper. The review standard in an application for retrial should therefore be “likely” or “may be” (盖然性…可能推翻), rather than a higher standard of “bound to be”, that the outcome of the trial will be set aside – otherwise, the purpose of the review conducted in an application for retrial would be defeated, namely, to review whether any ground for ordering a retrial is established. Luo refers to a passage in the book “最高人民法院新民事诉讼法司法解释理解与适用” prepared by the People’s Supreme Court. Luo fairly points out that that passage concerns one of the grounds for retrial, namely, there is new evidence sufficient to set aside the original judgment or ruling, but Luo opines that the same treatment should be accorded to other grounds for retrial (see §§27-29).

(5)  I note that at §27 of Luo’s Opinion, he seems to suggest that “likely” or “may be” (盖然性…可能推翻) is lower than beyond reasonable doubt, but stops short of saying that it is the same as on balance.

(6)  I must say Luo’s opinion on the standard of proof of the allegation of malicious conspiracy in an application for retrial is not very clear. Luo seems to reason that because the review standard is “likely” or “may”, the standard of proof of the allegation of malicious conspiracy in an application for retrial is therefore lowered to “on balance of probabilities”. He also seems to say that because in an application for retrial, the standard of proof is “盖然性…可能推翻”, for the allegation of malicious conspiracy, it must be the same. (see §§30-34)

61.  The two experts’ opinion is clearly conflicting. I am of course entitled to and should examine the opinion and come to my own view exercising my independent faculty: see 黄书建 v 代威 [2020] 1 HKC 309 at §§33-36 per Lok J applied recently by DHCJ Jonathan Wong in 信达澳亚基金管理有限公司 v 宜华生活科技份有限公司 [2024] HKCFI 1957 at §6.8. Both experts’ opinion is based on reasoning and primary as well as secondary materials which I do not think I can reject at this interlocutory stage. For my part, I note the oddity that the standard of proof of the allegation of malicious conspiracy would be lower in an application for retrial when even the proof of such allegation itself may not be sufficient to be a ground for retrial. The oddity, in my view, is this: when the trial proper would exact a standard of beyond reasonable doubt, I would think that at least at the retrial application stage, the evidence would be taken all in favour of the applicant and on this basis, there should be proof beyond reasonable doubt so that there would be some meaning for the retrial. Otherwise, at the retrial itself, where the trial court could disbelieve the evidence adduced at the retrial application stage after considering all the evidence refresh at the trial stage, there would be no chance for the allegation to be made out.

62.  I, however, stress that I am not making any finding on this matter. I would just like to point out that on the expert opinion presented before me and exercising my independent faculty, I cannot come to any definitive view on the matter. I do not need to do so in a striking out application. Suffice to say that having considered the above, exercising caution in identifying issues while bearing in mind that I should not be too ready to find difference, I find that the issue in the present Originating Summons, as I identified above, and the issue in the Retrial Applications, as I identified above, are not plainly and obviously identical for the purpose of issue estoppel. Thus, Condition (1) is not satisfied for issue estoppel in the present striking out application.

63.  This is sufficient for me to deal with Condition (1). For the sake of completeness, I also conclude that I am not satisfied that it is plain and obvious that the PRC Retrial Application Judgment made any determination on the Allegation of Control and the Allegation of Conspiracy. While extensive evidence was presented and detailed submissions were made in the Retrial Application papers, in the PRC Retrial Judgment, in summarising the Receivers’ contentions, the Sichuan Higher People’s Court did not refer to any of such evidence and submissions, but instead only referred to the other submissions made by the Receivers mainly concerning the status of Cai. In its findings, it also did not refer to any of such evidence and submissions and did not make any findings on the Allegation of Control and the Allegation of Conspiracy. In the light of the extensive evidence and submissions in the Retrial Application, while I am aware that in general, the Hong Kong Courts should not lightly find that a foreign court has omitted important points and I agree that the Defendants have reasonable ground to say that the Allegation of Control and the Allegation of Conspiracy were determined implicitly in the Retrial Judgment, however, the Retrial Judgment can also be read to mean that it was simply because the Sichuan Higher People’s Court having expressly found that the PRC Project Company had been properly represented in the previous proceedings by its legal representative recognised by the PRC law, the Allegation of Control and the Allegation of Conspiracy simply became irrelevant as points not taken previously by the recognised legal representative, and so the Higher People’s Court did not have to deal with them at all. Thus, on the face of it, the Retrial Judgment could reasonably mean either way. There is, however, no legal opinion adduced by any side to explain what this Retrial Judgment, not referring to the extensive evidence and submissions and not even summarising the relevant submissions, actually meant in such circumstances and/or the PRC Court’s practice. In the circumstances, I take the view that it is not plain and obvious that any determination of the Allegation of Control and Allegation of Conspiracy was made, and so, the Defendants have failed to discharge their burden in applying for striking out on issue estoppel.

B.  Condition (3): Same parties or privies?

64.  My finding above that Condition (1) is not satisfied is sufficient for me to dismiss the Defendants’ striking out on issue estoppel. Since the parties have also made extensive submissions on Condition (3), to do justice to the parties, I should also express my view here.

65.  To determine whether a party is a privy, the Court has to bear the following principles in mind, drawn from Lo Kai Shui v HSBC International Trustee Limited [2023] HKCA 983 at §§54-70 per Kwan JA:-

(1)  The starting point is that in general only parties to proceedings are bound by the outcome;

(2)  The doctrine of privity for the purpose of issue estoppel is narrow, given the automatic effect of barring a party from pursuing a claim if that party is found to be a privy (other Conditions being satisfied);

(3)  “A defendant ought to be able to put his own defence in his own way, and to call his own evidence. He ought not to be concluded by the failure of the defence and evidence adduced by another defendant in other proceedings unless his standing in those other proceedings justifies the conclusion that a decision against the defendant in them ought fairly and truly to be said to be in substance against him”;

(4)  “The required commonality [of interest] is a direct interest in the subject matter of the litigation, a parallel or corresponding interest in that subject matter and not simply a financial interest in the result of the action”;

(5)  That a party is content to stand by to allow the other party sharing the common interest to fight is best to be left for consideration in determining whether there is any collateral attack or Henderson v Henderson abuse of process;

(6)  Insofar as “standing by” is regarded as a consideration in determining privy for the purpose of issue estoppel, this should be regarded as “a very narrow exception to the general rule”, and “[s]trong and exceptional facts would be required before the conclusion could be reached that an issue estoppel would arise by the conduct of standing by and allowing another to fight the battle in earlier litigation”.

66.  Mr Man, for the Plaintiffs, emphasises that whether the subsequent party had the access to the right to litigate in the previous proceedings should be the litmus test. I do not take this factor as conclusive, although I agree that given the rationale of the doctrine of privity, this is a significant factor to take into account.

67.  Au-Yeung J in Chu Kong v Lau Wing Yan, supra, mentioned other relevant factors:-

“56… where the companies that are parties to the 2 sets of proceedings are wholly owned holding company and subsidiary such that they may be regarded as alter egos of each other, or as companies within the same group they have a direct interest in establishing the existence or otherwise of a matter which may impact the business or operations of the group, that would be sufficient to establish privity of interest for the purpose of abuse.

57. Merely having some commercial interest in the litigation is insufficient to establish privy of interest. The corporate relationship between parent and subsidiary and financial interest cannot be sufficient to establish privity of interest. A mere commercial interest in the outcome is also in sufficient…

58. The supply of witnesses could not in any way make a party a privy…” (emphasis added)

68.  Further, privy may also be established where, given the commonality of the interest, the party has played an active role in the previous proceedings and/or could have joined the previous proceedings: see Lo Kai Shui v HSBC International Trustee Ltd, supra at §136; Healthy Living Products International Ltd v Murray [2012] 1 HKLRD 49 at §§40, 54-60. Although in those cases, this factor was considered in the collateral attack or Henderson v Henderson abuse of process, I tend to think that this factor should also be a consideration in determination of privy.

69.  In respect of liquidators, in general, liquidators are regarded as a privy to the company: see Re GT [2022] 4 HKLRD 339 at §11 per Linda Chan J, but are not necessarily a privy to a sole proving creditor of the company: see Re Pheonix Tech Ltd [2024] EWHC 1130 (Ch) at §41 per ICC Judge Mullen.

70.  In the present case:-

(1)  While the Plaintiffs, being liquidators of the Company, are generally regarded as privy to the Company, I do not accept that simply by its role, the Plaintiffs would also be a privy to the Receivers in the Retrial Application.

(2)  However, I should bear in mind that the Receivers were receivers appointed by the Petitioners, while the Plaintiffs were appointed in winding-up proceedings commenced also by the Petitioners. The receivership and the winding-up proceedings are related to the same subject matter.

(3)  It is clear that the Company and the Plaintiffs had identical interest as the Receivers in the Retrial Application.

(4)  In the light of (1) – (3) above, it is not surprising that there existed some degree of cooperation between the Receivers and the Plaintiffs, as evidenced by the Plaintiffs’ supply of the evidence the Plaintiffs obtained from HCMP 1113/2023 to the Receivers for the latter’s use in the Retrial Application.

(5)  I accept that there was good reason why the Plaintiffs could not have joined the Retrial Application or commenced such application as an application for retrial of the Zhou Ying PRC Proceedings or setting aside the PRC Judgment for Zhou Ying, given that the BVI Provisional Liquidators’ application on 10 November 2022 to intervene the Zhou Ying PRC Proceedings had been refused (see §29 above). It would, in my view, be unrealistic to say that the Plaintiffs, as provisional liquidators appointed on 29 June 2023 and as liquidators appointed on 26 January 2024, could still have applied for intervening, or retrial, or setting aside.

(6)  While, with the presence of the good reason, I would not say that the Plaintiffs were “content to stand by and see [their] battle fought by [the Receivers] in the same interest”, there is nothing to suggest that the Receivers could have conducted the litigation in some other way that would lead to a different result.

71.  Having considered all the above holistically, despite the inability of the Company and the Plaintiffs to join the Retrial Application, I would find (were the issues were identical in Condition (1)), exceptionally, that the Plaintiffs are privies to the Retrial Application.

C.  Conclusion

72.  To conclude, since the issues are not identical for the purpose of issue estoppel, the Defendants fail to establish issue estoppel as a ground for striking out.

IX.  COLLATERAL ATTACK AND/OR HENDERSON V HENDERSON ABUSE OF PROCESS

73.  The Defendants also rely on collateral attack or Henderson v Henderson abuse of process. By my finding that the issues in the Retrial Application and in the present Originating Summons are not the same, I find that the Plaintiffs’ Originating Summons does not amount to any collateral attack on the Retrial Application or Henderson v Henderson abuse of process as the Defendants submit.

X.  IS RELIEF (2) A RESTORATIVE RELIEF?

74.  In their submissions, the 1^st and 2^nd Defendants seek, as an alternative relief to an order striking out the whole Originating Summons, an order to strike out relief (2) of the Originating Summons. Relief (2) is:-

“[Zhou Ying and Yuzhou]… do jointly and severally pay to the Plaintiff[s] the Received Sums or any amount that the Court thinks fit.” (emphasis added)

75.  Mr Anson Wong, for Zhou Ying and Mr William Wong, for Yuzhou, both contend that Relief (2) should be struck out because while the Court’s jurisdiction under section 266 of the Ordinance is restorative in nature, this relief is not restorative in nature as it was the PRC Project Company which gave the unfair preference, but not the Company to which now Relief (2) would order Zhou Ying and/or Yuzhou to pay.

76.  Mr William Wong, for Yuzhou, also contends, specifically to Yuzhou, that Yuzhou did not receive the Received Sum and thus the relief ordering Yuzhou to pay the Plaintiffs cannot be restorative in nature.

77.  As the parties agree, it is well established that the Court’s jurisdiction under section 266 of the Ordinance is restorative in nature. I set out the relevant legal principles below:-

(1)  Section 266(3) provides that:-

“the court may make an order that it thinks fit for restoring the position to what it would have been if the company had not given that unfair preference.”

(2)  Sections 266 and 266C of the Ordinance give wide discretion to the Court as to what remedy to grant the applicant. The underlying rationale is thus to restore to the state of affairs to what it would be had the unfair preference not been given: Company Law in Hong Kong – Insolvency (2023) §9.026; Butterworths Property Insolvency (1^st ed) §6.15.

(3)  In Reid v Ramlort Ltd [2005] 1 BCLC 331 at §125, Jonathan Parker LJ had this to say:-

“…in my judgment, in considering what is the appropriate remedy on the facts of any particular case the court should not start from any a priori position. Each case will turn on its particular facts, and the task of the court in every case is to fashion the most appropriate remedy with a view to restoring, so far as it is practicable and just to do so, the position as it ‘would have been if the [debtor] had not entered into the transaction.”

(4)  In Johnson v Arden [2019] 2 BCLC 215, Deputy ICC Judge Kyriakides said:-

“92… The exercise, therefore, that the court must carry out is restitutionary in its nature, not compensatory.

93… in exercising its discretion, the court is not bound to restore the position to exactly that which existed prior to the relevant transaction or preference. It may make orders which in substance achieve that result but achieve it in a different way.

94…

95… the primary person at which these provisions are aimed and who is clearly within the court’s jurisdiction to make an order, is the counter-party to the transaction with the company…

…

99… it is also clear from the provisions of ss 241 and 425 that the court’s jurisdiction to make an order is not limited to the counter-parties of a transaction (in the cases of ss 238 and 423) or to preferred creditors, guarantors or sureties, in the case of s 239. Having regard to these provisions, the court clearly also has jurisdiction to make orders against parties who have subsequently received the property (including money), which was the subject of the transaction at an undervalue or preference (whether or not they continue to hold it or have sold it) and against parties who have otherwise received a benefit from the transaction or preference.” (emphasis added)

78.  Therefore, the general position is that in making such restitutionary order, the asset or its value given by a subsidiary company as an unfair preference should be restored to that subsidiary company, but not the parent company. This general position is underpinned by the fundamental doctrine of separate legal entities and the fact that the subsidiary company would have its own creditors to satisfy and thus its assets cannot be equated as the parent company’s asset.

79.  However, as Deputy ICC Judge Kyriakides said at §93 of Johnson v Arden, supra quoted above, the Court “may make orders which in substance achieve that result [of restoration] but achieve it in a different way.” While the general position must be observed, I can see that there can arguably be exceptions where the Court, without violating the fundamental doctrine of separate legal entities, may still be able to restore the position “in a different way”. The present case may arguably serve as an example of exception.

80.  The exceptional circumstances in the present case lie in the inability of the Company to control the PRC Project Company, despite the Company being the shareholder of the PRC Project Company. Although it is the Plaintiffs’ own evidence (Chan Hoi Yan’s Affirmation §26) that on 30 June 2024, the PRC Court recognised Cai’s appointment as the legal representative of the PRC Project Company, it is also the Plaintiffs’ evidence that “it is inaccurate to say that the Receivers have already been in control of the Company since March 2022”. With respect to the latter, despite the recognition of Cai’s appointment as the legal representative of the PRC Project Company, there is no evidence that the Corporate Seal has been returned and the board has been reconstituted so that the Receivers have gained back the control. Therefore, for the purpose of the present striking out application, I assume that Zhou Ying and/or Yuzhou still retain control of the PRC Project Company and it was their control over it that enabled it to give the unfair preference. In such circumstances, it would be absurd and an affront to justice to say that in such circumstances, the unfair preference could and should be returned only to the PRC Project Company.

81.  Mr Man, for the Plaintiffs, contends that the Plaintiffs, as liquidators, could be directed as to how to apply the payment under the restorative order in the Plaintiffs’ favour so as to ensure that any such interest of the interest of the PRC Project Company and its creditors would be properly taken care of. For my part, I could also think of ordering the value lost as a result of the diminished value of the shares held by the Company (directly or indirectly) in the PRC Project Company to be paid to the Company. However, I do not need to decide on how the remedy should be fashioned. This would depend on the evidence and the fact-findings. At the very least, I would think that the exceptional circumstances in the present case would arguably lead to developing legal principles in the area.

82.  Lastly, in relation to Mr William Wong’s argument specific to Yuzhou, namely, Yuzhou did not receive the unfair preference, it can be summarised as follows:-

(1)  By their solicitors’ letter dated 25 April 2025, the Plaintiffs have conceded that Yuzhou’s position has not been improved.

(2)  A condition for the Court to exercise its jurisdiction under the statutory regime for unfair preference is that the person must have received some benefit or his position must have been improved as a result of the unfair preference. If he has received no benefit or his position has not been improved, “he has nothing to restore”: see Johnson v Arden, supra at §101.

(3)  Therefore, with the Plaintiffs’ concession, the condition cannot be satisfied and thus the Court has no jurisdiction over Yuzhou.

83.  I agree with §(2) as a general proposition of the law. The issue is what concession the Plaintiffs have really made by their solicitors’ letter dated 25 April 2025. The relevant concession was made in the following terms:-

“… please be informed that our clients shall no longer contend for the purposes of their claims set out in the Originating Summons that the 2^nd Defendant’s position has been improved as guarantor of the Zhou Ying Loan and a creditor of the [Yuzhou Loans] (as explained in paragraphs 88.2 and 88.3 of the [Affirmation of Chan filed in support of the Originating Summons]); and/or that the Company was influenced by a desire to prefer the 2^nd Defendant over the Company’s creditors in the event of its insolvent liquidation at the time the Unfair Preference was given…” (emphasis added)

84.  It is clear from the emphasised part above that the concession was limited to there being no improvement “as guarantor of the Zhou Ying Loan and a creditor of the [Yuzhou Loans]”. The question then is whether in the Plaintiffs’ evidence, Yuzhou’s position has been improved some other way. §§104-106 of the Affirmation of Chan Hoi Yan filed in support of the Originating Summons state that:-

“104. As to Yuzhou, Kwok and Lam, it is clear by now that Zhou Ying was a façade and a front man of Yuzhou, Kwok and Lam. The real instigators of the scheme which gave rise to the Unfair Preference were Yuzhou, Kwok… and Lam… instead. I have been advised and believe that liability can be attached to Yuzhou, Kwok and Lam.

105. There are reasons to believe that Zhou Ying is an empty shell and a façade. Zhou Ying is a shell company with $1 equity. Admittedly, it appears to have certain joint venture investments with Yuzhou… but we have no access to information showing the particulars or worth of these investments, or the precise arrangement between Zhou Ying and Yuzhou, to be satisfied that Zhou Ying itself holds substantial assets.

106. There is a significant risk of dissipation as most of the funds of Zhou Ying originated from corporations controlled by Kwok and/or associated with Yuzhou… There is also a pattern of significant fund movements between Zhou Ying and these corporations, including but not limited to the Further Transactions, which shows that Zhou Ying is merely a shell company and for the purposes of channeling funds.” (emphasis added)

85.  Further, §60.3 of the 2^nd Affirmation of Chan Hoi Yan filed in opposition to the Defendants’ Summonses states that:-

“As to an order under s.266C(1)(d) of [the Ordinance], [without] prejudice to the submissions that will be made by my legal representatives:

(i) I am advised and verily believe that the Court has discretion to dispense with the need to show that certain individuals personally received benefits from the scheme because (inter alia) the direct recipient (i.e. Zhou Ying) was merely used as a façade for the scheme…

(ii) To this end, by reason of the matters in paragraphs 47 to 48 above, there is no good reason why the funds of Zhou Ying originated from corporations associated with Yuzhou. It follows that there is also no good explanation for why Zhou Ying has all along acted as a façade and front man of Yuzhou. I refer to paragraph 96 of Chan 1^st [that is, the Affirmation of Chan Hoi Yan filed in support of the Originating Summons, that “Yuzhou also had control of Zhou Ying].” (emphasis added)

86.  The “funds” mentioned there refer to the 14 fund flows between Zhou Ying and Yuzou or its connected entities shown in Annex 2 to the Affirmation of Chan Hoi Yan. Admittedly, one cannot pinpoint any of such funds specifically as the unfair preference or any part thereof, and there is not an express allegation in the filed affirmations that Yuzhou received any benefit from the unfair preference given to Zhou Ying. The allegation that Yuzhou received benefit from the unfair preference is, in all fairness to Mr William Wong, only made in Mr Man’s written submissions (see §§9.5 and 201-204 of his Skeleton Submissions dated 30 April 2025). In this regard, Mr Man also makes it clear that he does not ask for lifting up the corporate veil, and it is sufficient for the Plaintiffs’ case that the two companies are treated as they are separately.

87.  It is trite that if it were a Statement of Claim, a pre-application letter pursuant to Practice Directions 19.1 §5 would have been sent to the Plaintiffs stating broadly that the element of receipt of benefit was missing and such defect would have been readily cured, given the evidence I shall set out below, by adding the sentence in the evidence that based on the same evidence, the Plaintiffs would believe or ask the Court to infer that Yuzhou received benefit from the unfair preference, as Mr Man now essentially states in his written submissions. Further and in any event, in an application to strike out a winding up petition, the test is that unless it is clear that the petition will not succeed, it would not be struck out, and it is inappropriate to strike out a petition based on pleading points if such deficiencies are capable of being cured by amendment: see Hong Kong Civil Procedure 2025 Vol 1 §18/19/4. The same, in my view, applies to an unfair preference proceedings begun by Originating Summonses, because in both a winding-up petition and an unfair preference originating summons, it is the supporting evidence that really forms the claim, and this is even stronger for originating summons proceedings because unlike a petition, it is not possible to “plead” in the originating summons.

88.  Therefore, the question for me to answer at this stage is whether it is plain and obvious that the Plaintiffs’ case, now set out in Mr Man’s written submissions, that Yuzhou made use of Zhou Ying as its front man to receive the benefit from the unfair preference cannot be made out from the evidence. In my view:-

(1)  The Court is entitled to consider all the relevant circumstances and draw permissible inferences to reach a conclusion that despite absence of evidence of receipt by Party B of benefit of unfair preference from the directly preferred creditor, on balance, Party B did receive such benefit and the Court has jurisdiction to order Party B to make payment to the company: see Integral Petroleum SA v Petrogat Fze [2023] EWHC 44 (Comm) at §§93-121.

(2)  The evidence in support is circumstantial, among that listed out in §43(3) to §43(4)(a) – (g) above.

(3)  In §9.5 of his written submissions, Mr Man submits that (a) “there are good reasons to believe that Yuzhou received sums from the direct recipient of the preference (i.e. Zhou Ying in this case) otherwise than in good faith” or (b) “where the direct recipient is only the vehicle or agent for the instigators of a scheme, such that the instigators of the scheme would be regarded as a party to the relevant transactions”.

(4)  In response, Yuzhou relies on the Cooperation Agreements. These Agreements, however, were not produced in the Retrial Application or HCCW 244/2023 when Dong, in her affirmation, tried to explain the relationship between Zhou Ying and Yuzhou, but are produced in the present proceedings for the first time. In §177.2 of Mr Man’s written submissions, the Plaintiffs make it clear that they challenge the authenticity of the Cooperation Agreements, and I think the challenge is, in the circumstances, not without basis (the validity of which will be a matter for the substantive hearing or trial).

(5)  Mr William Wong points out that §18 of the Affirmation of Chan deposing that Yuzhou’s provision of HK$310 million to Zhou Ying was completely set off and deducted from the investment funds Yuzhou held on behalf of Zhou Ying was a false exaggeration because the relevant agreement shows that the investment funds were far more than HK$310 million. I agree with him on the reading of the relevant agreement. However, this, in my view, is not sufficient to constitute a knock-out point for the present striking out application.

(6)  Mr William Wong also highlights that Yuzhou is a listed company, with strict rules governing its corporate governance, and therefore it would be a serious allegation that Yuzhou somehow colluded with Zhou Ying to receive unfair preference. I agree that this is a relevant consideration, but I would not elevate this consideration as if no listed company would commit any wrongful act. It depends on the evidence and the circumstances.

(7)  I bear in mind that it is not just the fund flow and close relationship between Zhou Ying and Yuzhou from which the Plaintiffs would like the Court to draw inferences. It is also the Allegation of Control and the Allegation of Conspiracy as well as the un-commerciality of the Guarantees and the various uncommercial transactions leading to the Guarantees that the Plaintiffs also rely upon.

(8)  All the above considered, I do not find it plain and obvious on the evidence that Yuzhou did not receive any part of the Received Sum from Zhou Ying and/or that Zhou Ying was simply a vehicle or agent for Yuzhou to receive the Received Sum.

89.  In the circumstances, I refuse to exercise my discretion to strike out relief (2) on the ground that it is not restorative in nature. However, as I pointed out above, in the evidence, the Plaintiffs never expressly mention that Yuzhou received any benefit from the unfair preference, but only as late as in Mr Man’s written submissions. This situation is no different from a situation where an application to strike out a statement of claim is met with a late application for amendment to cure the statement of claim. Therefore, costs should be borne by the Plaintiffs, which I shall deal with at the end of this Decision.

90.  For the sake of completeness, Mr Man, for the Plaintiffs submits that even if Yuzhou did not receive any benefit from the unfair preference, I should refuse the striking out application on the ground that the law on whether under the statutory regime of unfair preference, the Court has jurisdiction to order the mastermind of the unfair preference who has not received any benefit therefrom to make payment was deliberately left open for development by Deputy Judge David Edwards KC in Integral Petroleum SA v Petrogat Fze [2023] EWHC 44 (Comm) at §110, despite the judgments in Johnson v Arden [2018] EWHC 2633 (Ch) and Wilson v Masters International Limited [2009] EWHC 1753 (Ch) mentioned in §109 held that the Court had no such jurisdiction. With no disrespect, there was not much reasoning discernible from the learned judge’s judgment in Integral Petroleum SA v Petrogat Fze why despite Johnson v Arden and Wilson v Masters International Limited and the wording of the relevant statutory provisions (after all, this is a question of interpretation of the relevant statutory provision and if there is any loophole, it is for the legislature but not the court to address it), the law should be left open for development. The learned judge may, understandably, have concern that a mastermind should not be left uncaught, but I would think that, as pointed out by Mr William Wong, some other causes of action would be available against the mastermind, such as conspiracy to commit a tort, and in any event, given the clear statutory wording, if there is any loophole, it would be for the Legislature, not the Judiciary, to close the loophole. Fortunately for me, given my finding above, I do not have to express any definitive view here.

XI.  RELIEF (2)’S LACK OF SUFFICIENT CONNECTION WITH HONG KONG

91.  As an alternative ground for striking out relief (2), Mr Anson Wong submits that relief (2) lacks sufficient connection with Hong Kong and thus it is plain and obvious that the Court substantively dealing with the Originating Summons would not grant relief (2). Mr William Wong does not run this ground.

92.  Where a foreign element is involved, the Court has to be satisfied that the defendant and the claim are sufficiently connected with Hong Kong for it to be just and proper to make the order against the defendant: see Re Paramount Airways [1993] Ch 223 at 239H per Sir Donald Nicholls VC. To determine whether there is sufficient connection, the Court has to consider all the relevant circumstances holistically, among which the residence (as opposed to mere presence) of the defendant within jurisdiction is an important factor showing sufficient connection. As Nicholls VC explains at 240A:-

“This connection might be sufficiently shown by the residence of the defendant. If he is resident in England, or the defendants is an English company, the fact that the transaction concerned movable or even immovable property abroad would by itself be unlikely to carry much weight. Likewise if the defendant carries on business here and the transaction related to that business. Or the connection might be shown by the situation of the property, such as land, in this country. In such a case, the foreign nationality or resident of the defendant would not by itself normally be a weighty factor against the court exercising its jurisdiction under the sections. Conversely, the presence of the defendant in this country, either at the time of the transaction or when proceedings were initiated, will not necessarily mean that he has a sufficient connection with this country in respect of the relief sought against him. His presence might be coincidental and unrelated to the transaction. Or the defendant may be a multinational bank, carrying on business here, but all the dealings in question may have taken place at an overseas branch.” (emphasis added)

93.  In the present case, while the transactions in question took place in the PRC, the Guarantees are governed by the PRC laws, and the Guarantees have been held by PRC Court to be valid, however, Zhou Ying is a company incorporated under the laws of Hong Kong; Yuzhou, though incorporated in Cayman Islands, is listed in Hong Kong; and the Hong Kong Court saw fit to exercise its jurisdiction in Hong Kong to wind up the Company thereby making the Ordinance applicable. Relief (2) is seeking neither a declaration or an order to invalidate the Guarantees nor an order for payment of the specific Received Sum or any part thereof. It is simply seeking an order of payment.

94.  Having considered all these, I find that there is sufficient connection with Hong Kong. Thus, I dismiss the ground of lack of sufficient connection with Hong Kong as a ground for Zhou Ying’s striking out application, and do not strike out relief (2) on the ground of lack of sufficient connection with Hong Kong.

XII.  ZHOU YING’S STRIKING OUT §§94.2 AND 94.4 OF PLAINTIFFS’ SUPPORTING AFFIRMATION

95.  Zhou Ying applies, in the event that I would not strike out the whole Originating Summons, to strike out §§94.2 and 94.4 of the Affirmation of Chan Hoi Yan filed on behalf of the Plaintiffs in support of the Originating Summons. The two paragraphs read:-

“94.2 Second, Kwok, the former vice-chairman, current chairman, Chief Executive Officer and major shareholder of Yuzhou appeared to be acting on behalf of the Company and Zhou Ying in the settlement negotiations with the Vendors [that is, the Petitioners] upon the default of the Vendor Loan.

“94.4. I have also been advised by the Receivers and verily believe that on 30 August 2022, Messrs. Stephenson Harwood (“SH”), acting for Kwok, sent a settlement proposal to the Receivers clearly stating that the proposal was in relation to the outstanding indebtedness under the Vendor Loan owed by the Company to the Vendors, which on the face of it is unrelated to Yuzhou or Kwok. There is no conceivable reason why Kwok would be in a position to put forward any settlement proposal to settle a dispute on behalf of the Company unless she has control or influence over the Company. This suggests that both the Company and Zhou Ying are accustomed to act in accordance with Yuzhou’s directions or instructions, including entering into settlement negotiations with the Vendors.”

96.  Mr Anson Wong submits that these two paragraphs should be struck out on the ground that they are covered by without prejudice privilege. It is noted that no contents of the negotiation are mentioned in those paragraphs. It is the identity of who acted for the Company, namely, Kwok, is mentioned, and Mr Anson Wong submits that the without prejudice privilege should cover the identity as well.

97.  The legal principles in relation to without prejudice privilege are well-established:-

(1)  “[A]s a general rule the ‘without prejudice’ rule renders inadmissible in any subsequent litigation connected with the same subject matter proof of any admissions made in a genuine attempt to reach a settlement”: see Rush & Tompkins v Greater London Council [1989] AC 1280 at 1301C-D per Lord Griffiths.

(2)  The reason is “because it would discourage settlement if he believed that the admissions might be held against him. But it would surely be equally discouraging if the [party making admissions or concessions] knew that if he achieved a settlement those admissions [or concessions] could then be used against him by any other [party related to the same subject matter] with whom he might also be in dispute”: see Rush & Tompkins v Greater London Council, supra at 1301B.

(3)  From the above, I add that:-

(a)  It is the contents of the negotiation that are protected; and

(b)  Whether the identity of the negotiator is part of the contents depends on the context of the dispute. For example, if the dispute covers who has the authority to act for Party A, the identity of the negotiator for Party A may form part of the contents. This is in essence a facet of whether the negotiation is connected with “the same subject matter”.

(4)  For a claim of privilege to succeed, the communication in question must be made (a) “in a bona fide attempt to settle a dispute between the parites” and (b) “with the intention that, if negotiations failed, it could not be disclosed without the consent of the parties”: see Secretary for Justice v Wong Lai Yin [2021] HKCA 1982 at §23 per Godfrey Lam and Chow JJA.

(5)  To establish (a) above, it must be shown that “at the time the communication was made, a dispute existed between the parties in respect of which legal proceedings had commenced or were contemplated and the communication was made in a genuine attempt to further negotiations to settle that dispute”: see Secretary for Justice v Wong Lai Yin, supra at §23.

(6)  The fact that a communication concerns a dispute between the parties, but not in furtherance of the settlement of the dispute, is not sufficient: see Secretary for Justice v Wong Lai Yin, supra at §23.

(7)  Whether the dispute exists is to be determined objectively: see Secretary for Justice v Wong Lai Yin, supra at §24.

(8)  The underlying objective of giving protection to the parties is to allow the parties to speak freely about all issues in the litigation when seeking a settlement, including making statements of mixed natures including assertions as well as admissions. They cannot speak so freely if they would have to constantly monitor every sentence they would like to say. It would also be difficult to determine the nature of the negotiations if only certain sentences are or are not to be considered. Thus, the discussion as a whole will be protected, and the parties cannot cherry-pick or dissect certain parts out of the protection: see Poon Loi Tak v Poon Loi Cheung Desmond [2020] 1 HKLRD 511 at §§22 and 47 per Wilson Chan J.

98.  Mr Anson Wong submits that I cannot dissect the identity of Kwok acting for the Company from the rest of the negotiation. He would be right if the identity formed part of the contents of the negotiation, or the identity was part of the subject matter in dispute during the negotiation. However, there is no such evidence at all to show that the identity formed part of the contents or was the subject matter in the negotiation. Therefore, Zhou Ying has failed to discharge its burden to satisfy me that the identity formed part of the contents of the privileged negotiation, or was related to the subject matter to which the privileged negotiation related.

99.  As the identify is not part of the contents, despite Mr Anson Wong’s eloquent submissions that it would defeat the policy of without prejudice privilege if the negotiator would have to think how to represent a party or whether to represent a party, and what to say, worrying what would happen in the future, I do not see how such eloquent submissions would assist Zhou Ying given that the identity is something in the first place not intended to by covered by the privilege.

100.  Therefore, I refuse to strike out §§94.2 and 94.4 of the Affirmation of Chan Hoi Yan.

XIII.  ZHOU YING’S APPLICATION FOR CASE-MANAGEMENT STAY

101.  The last relief Zhou Ying seeks in its Summons is a case-management stay pending the intended appeal to the Privy Council against the BVI Winding-up Order.

102.  The discretion to grant a case-management stay is broad, to be exercised in a logical, fair and cost-efficient manner upon consideration of the balance of convenience and fairness as between the parties: see Lok Man Sin v Lam Chi Wing [2019] HKCFI 56 at §20 per Recorder Eugene Fung SC.

103.  At the time of filing its Summons, Zhou Ying, in Dong’s Affirmation filed on 18 November 2024 in support, mentioned that Zhou Ying’s appeal against the Winding-up Order on the ground that there was bona fide dispute over the debt had been dismissed by the Eastern Caribbean Court of Appeal on 26 July 2024. In its reply affirmation, namely the 2^nd Affirmation of Dong filed on 28 April 2025, Zhou Ying deposes that the application for special leave to appeal to the Privy Council had been dismissed by the Eastern Caribbean Court of Appeal on 24 March 2025. Zhou Ying further deposes that it had instructed lawyers to prepare the application to the Privy Council for special leave, estimated to be submitted by 19 May 2025, and estimates that if the Privy Council would grant special leave, then the outcome of the appeal proper would be in about six months to two years’ time.

104.  Against this background, Mr Anson Wong, for Zhou Ying, submits that:-

(1)  If the Privy Council would allow the intended appeal and set aside the BVI Winding-up Order, the winding-up order made in HCCW 244/2023, being ancillary to the BVI Winding-up Order, would also be set aside. As such, the present unfair preference claim would fall away.

(2)  In such circumstances, with a stay, judicial resources as well as the parties’ legal costs would be saved and would not be wasted.

(3)  The intended appeal has “sufficient merits”, with reference to the written submissions of the King’s Counsel submitted for the Company to the Eastern Caribbean Court of Appeal (which dismissed the appeal and the application for special leave).

105.  With respect, I should refuse to grant the case-management stay because:-

(1)  When Linda Chan J made the winding-up order in HCCW 244/2023, she was well aware of the ongoing appeal to the Eastern Caribbean Court of Appeal and thus of the possibility that the BVI Winding-up Order would be reversed.

(2)  There is no application to stay the winding-up order in HCCW 244/2023. Therefore, the case-management stay here does not cease the process of the liquidation.

(3)  The statutory regime of the winding-up and liquidation process is to protect the creditors as a whole, and part of this process is the unfair preference regime. Given that the winding-up order is not stayed, there is no reason to stay the present unfair preference proceedings.

(4)  While costs may be saved by a stay, the creditors’ interest should also be taken into account.

(5)  I cannot ignore the fact that the Company’s appeal and its application for special leave had been dismissed by the Eastern Caribbean Court of Appeal, and that there is no proper legal opinion on the merits of the application to the Privy Council for special leave.

(6)  Balancing the interests, I exercise my discretion to refuse the stay application.

XIV.  CONCLUSION ON THE DEFENDANTS’ SUMMONSES

106.  For the above reasons, I dismiss the whole of the 1^st Defendant (Zhou Ying)’s Summons and the whole of the 2^nd Defendant (Yuzhou)’s Summons.

107.  For costs, all the parties agree that I should make costs order nisi, given the possibility of various permutations of my decision. I make the following costs order nisi:-

(1)  Zhou Ying shall pay the Plaintiffs the costs of Zhou Ying’s Summons to be summarily assessed, with certificate for two counsel;

(2)  The Plaintiffs shall pay 50% of Yuzhou the costs of Yuzhou’s Summons to be summarily assessed, with certificate for two counsel. (The reason for the Plaintiffs to pay the costs is the Plaintiffs’ failure by deposing to their belief of Yuzhou’s receipt of benefit out of the alleged unfair preference, only to be made out by counsel’s written submissions, although the evidence from which such a case could be drawn is all there, and for this part, I adopt a broad-brush approach to apportion 50%.)

XV.  CONSEQUENTIAL DIRECTIONS

108.  All the parties agree that in the event that I would not strike out the Originating Summons, pleadings should be ordered in the light of the serious allegations and the factual disputes in the present case, and the parties agree to the following timetable for filing. So, I direct that:-

(1)  The Plaintiffs shall file and serve Statement of Claim within 28 days from today;

(2)  The 1^st and 2^nd Defendants shall file and serve their respective Defences within 28 days thereafter;

(3)  The Plaintiffs shall file and serve Reply, if any, within 28 days thereafter; and

(4)  A Case Management Conference shall be fixed on a date no earlier than 5 months from today, with 1 hour reserved. 7 clear days prior to the Case Management Conference, parties shall file and serve submissions to propose directions to be made and explain why any special directions (for example, expert directions) would be necessary.

109.  Lastly, I thank Mr Anson Wong SC, Mr Lai Chun Ho and Mr Charlie Liu, counsel for Zhou Ying; Mr William Wong SC and Mr Martin Kok, counsel for Yuzhou; and Mr Bernard Man SC and Mr Danny Tang, counsel for the Plaintiffs, for their thorough and able assistance to the Court.