CHINA ART BANK CO LTD v. XU ZHIQIANG

HCA 2543/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2543 OF 2015

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D E C I S I O N

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1.  There are three applications here, all by the defendant. The defendant wants to have the disclosure of assets order stayed. If he should fail in that, he also wants to have the scope of disclosure to be reduced from being worldwide to just limited to Hong Kong and Macau, which would be in line with the scope of the Mareva injunction. Thirdly, he wants to increase the living expenses to $40,000 a week and legal expenses to $1 million.

2.  For the first application, it is a matter of my discretion on whether to stay the asset disclosure order.  The plaintiff asked me to consider that this is a case of fraud.  Prima facie, the defendant has, in perpetration of his fraud against the plaintiff, uttered forged documents including bank statements in relation to astronomical sums.  He also forged company documents and documents purportedly emanated from mainland authorities.

3.  The defendant has been arrested by the Hong Kong Police and the investigation is still ongoing.  The plaintiff has given statements to the police in April, May and August this year.  The defendant has been out of touch to the plaintiff since February this year. 

4.  In answer to these submissions, Mr Wong, counsel for the defendant, submitted that the plaintiff has not complied with his undertaking given to the court when before Madam Justice Mimmie Chan in the ex-parte hearing.  Secondly, he submitted that there is no evidence of actual dissipation of assets by the defendant.  Thirdly, he says that the plaintiff has relied on low commercial morality, the assets being liquid and the defendant being out of touch as the grounds in his affirmation, but his counsel only referred to low commercial morality in his skeleton argument.

5.  Whether the plaintiff has or has not complied with his undertaking is disputed and I am not in a position to decide it one way or the other. 

6.  Regarding the absence of evidence given by the plaintiff to establish actual dissipation of assets by the defendant, this is a case of fraud.  If the defendant should have hidden and disposed of his assets, it is unlikely that he would have revealed the same to the plaintiff.  If the plaintiff has no means of detecting such dissipation, then he would not be able to give any actual evidence.  Such evidence is also not the only ground that the court would rely upon.  The fact that there are serious allegations of use by the defendant of forged documents and the fact that he has been arrested by the Hong Kong Police are matters that would favour the maintenance of the disclosure order.

7.  Regarding the argument that counsel for the plaintiff had not adopted all three grounds used by the plaintiff to support the Mareva injunction and the disclosure order, I do not think that counsel, in not mentioning the asset being in liquid form and that the defendant was out of touch since February this year, was abandoning them.  Since these are matters of fact, the court can act on them even if counsel has not referred to them explicitly.

8.  On the grounds advanced by the plaintiff, I think I should, and I do, exercise my discretion in favour of the plaintiff and maintain the disclosure order.

9.  Regarding the scope of the disclosure order, I agree with Mr Wong that if the Mareva injunction only covers assets in Hong Kong and Macau and nowhere else, then there is no reason to require the defendant to make disclosure of assets which may situate elsewhere.  To require the defendant to do so would be to assist the plaintiff in fishing for his assets situated elsewhere.  The plaintiff can only ask for such order if the defendant’s assets situated elsewhere are subject to Mareva injunction as well.  If there is no such injunction, there is no basis to order disclosure. The reason being that the defendant is at liberty to dispose of such other assets not subject to the injunction.  To require disclosure of such assets would also be futile because the defendant can make disclosure at this moment but dispose of them in the next.

10.  Finally, on the application for increase of living expenses and legal expenses, there is no evidence, documentary or otherwise, to justify the increase and I would not make any order on it but leave it to the defendant to make a proper application to be supported with proper evidence.