CHAN PING PING v. VIO ENTERPRISE LTD

DCZZ 2/2018

[2018] HKDC 708

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

INTENDED ACTION NO 2 OF 2018

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DECISION

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Introduction

1.  By an inter-partes summons dated 6 June 2018 (“the summons”), the intended plaintiff (“Chan”) herein seeks a Mareva injunction to restrain the intended defendant (“the company”) from disposing HKD750,000 until final determination of the action against the company which would be taken out soon or until a further order made by the court.  The summons is supported by an affirmation made by Chan on 6 June 2018 (“the supporting affirmation”).  The summons, the supporting affirmation, and a copy of Chan’s skeleton submissions were served on the company on 11 June 2018.

2.  On 14 June 2018, the company filed an affirmation (“Lai’s affirmation”) of Lai Chung Him (“Lai”) in opposition to the summons.  Lai is a director and a shareholder of the company.

The parties’ respective cases

3.  Chan’s case as per the supporting affirmation is as follows:-

(1)  Chan was and is a business manager residing in Hong Kong.

(2)  The company was and is a limited company in Hong Kong in the business of providing shopping mall mapping software and/or machines.

(3)  In or about 2017, Chan, through her friend Woo Yat Hung (“Woo”), came to know Lai.  Lai was a director and the biggest shareholder of the company.

(4)  From July 2017 to May 2018, Lai on behalf of the company, through Woo represented to Chan that the company was in need of investment capital for operation, and persuaded Chan to place multiple sums with the company.  Details are as follows:-

(a) In or about the end of July 2017, Chan placed HKD100,000 with the company as an interest-free loan (“the 1^st loan”) repayable in early 2018.

(b) In early 2018, the company failed to repay the aforesaid loan.

(c) In or about late March 2018, Chan placed HKD50,000 with the company as another interest-free loan (“the 2^nd loan”) repayable on demand.

(d) In or about May 2018, it was agreed between Chan and Lai on behalf of the company that Chan (“the investment agreement”) would inject HKD600,000 into the company, and in return Chan would be a shareholder of the company and own 12% of the company’s share capital.  Pursuant to the investment agreement, Chan paid HKD600,000 to the company.

(5)  Shortly after Chan made the last transfer of money to the company, Lai on behalf of the company and through Woo informed Chan that the directors and/or the shareholders of the company did not intend to continue its operation and would wind up the company and distribute the company’s assets among the shareholders very soon.

(6)  Very recently, Chan was informed that the directors of the company had announced publicly to the company’s employees on 31 May 2018 that the company would cease operation very soon and termination payments were paid to the employees on the same date.

(7)  Despite repeated demands made by Chan, Chan has not received any repayment of the 1^st and the 2^nd loans, and has not received any shares allotted by the company pursuant to the investment agreement.

4.  In Lai’s affirmation, Lai denies that the company has ever entered into any loan agreement with Chan to borrow the 1^st loan and the 2^nd loan from Chan. Further, the company has not entered into the investment agreement as contended by Chan.  Lai also denies that the company is being wound up.  Lai says that the company is still in operation, having its own staff and providing services to shopping malls in various cities in Mainland China.  Lai further states that the company is not dissipating its assets.

5.  It would not be necessary or appropriate for me to resolve the factual disputes between the parties at this stage.  However, I am of the view that even if all the disputed facts are taken in favour of Chan, her application as per the summons cannot succeed, for real risk of dissipation of assets has not been shown.

Real risk of dissipation of assets not shown

6.  An applicant for a Mareva injunction must show, inter alia, that there would be a real risk of dissipation of assets in the absence of the injunction.  See Hong Kong Civil Procedure 2018, Vol 1, para 29/1/65.

7.  As said by DHCJ Winnie Tam SC in Eastman Chemical Ltd v Heyro Chemical Co Ltd (No 2) [2012] 3 HKLRD 307 at [26(3)] and [26(4)], there must be solid evidence of the risk of dissipation of assets, and the fact that a defendant may be short of money to pay his debt is not itself a good reason for a Mareva injunction.

8.  Assuming that all the factual disputes are resolved in favour of Chan, the evidence at best can only show that the company is in financial difficulties.  Having financial difficulties cannot be treated as dissipation of assets.

9.  Although Chan has adduced hearsay evidence showing that the directors and/or shareholders of the company intend to wind up the company and distribute the company’s assets among the shareholders, there is no evidence showing that the company is not prepared to repay the debts due to its creditors (including repaying Chan) before distributing the assets among the shareholders.  In fact, as a matter of law, there can only be distribution of assets among the shareholders if there is anything left after repaying all the debts owed by the company.

10.  Accordingly, even if I take all the matters deposed in the supporting affirmation as true and correct, no real risk of dissipation of assets has in fact been shown.  Therefore, Chan’s application as per the summons must fail.

Disposition

11.  I dismiss the summons.

12.  I have heard submissions on costs.  In my view, costs should follow the event.  I order that costs of the summons be to the company forthwith, to be taxed if not agreed.

13.  I thank the parties for the assistance provided to the court.