LI YIDONG AND ANOTHER v. CHEN PING AND OTHERS

HCA 2495/2024

[2025] HKCFI 5963

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2495 OF 2024

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D E C I S I O N

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Introduction and Procedural Background

1.  This is the substantive hearing of two Summonses:

(1)  By Summons dated 11 June 2025, Ausvic Capital GP I Limited (“the Intervener”) seeks inter alia an order that: (a) leave be granted to the Intervener to be joined as an Interested Party in this action; (b) all further proceedings in this action as between the 1^st Plaintiff (“P1”) and the Intervener be stayed and referred to arbitration pursuant to the arbitration agreement contained in the Subscription Agreement dated 9 June 2020 (“SA”) entered into between P1 and the Intervener; and (c) certain consequential orders upon the order of joinder (“Intervener’s Summons”);

(2)  By Summons dated 26 March 2025, P1 and the 2^nd Plaintiff (“P2”), seeks issuance of letters of requests to: (a) the proper judicial authority in Seychelles for the production of documents by Nest Services Limited (“Binance”) in relation to a Binance account (“Binance Account”); and (b) the proper judicial authority in the Cayman Islands for the production of documents by Gate.io (“Gate.io”) in relation to a Gate.io account (“Gate.io Account”) (“Letter of Request Summons”).

2.  On 17 December 2024, following the Plaintiffs’ (“Ps”) ex parte application, Andrew Chan J granted a Mareva injunction against Chen Ping (“D1”) and Chen Tai Heng (“D2”) and proprietary injunctions against Ausvic Capital Limited (a Cayman Islands Company) (“D3”), Ausvic Capital Limited (a BVI Company) (“D4”) and King World Group Limited (“D5”) (“Ex Parte Order”).

3.  On 20 December 2024, Ps took out a Summons for continuation and variation of the Ex Parte Order, ancillary disclosure order and orders under s.21 of the Evidence Ordinance, Cap. 8 (“s.21 EO”).

4.  On 27 December 2024, the Ex Parte Order was varied (to include various disclosure orders against the Defendants) and continued until trial, and separately, an order against the Bank of Communications (Hong Kong) Limited (“the Bank”) was made under s.21 EO by Recorder William Wong SC.

5.  On 13 March 2025, Ps filed their Statement of Claim (“SOC”). In gist, Ps claims that:

(1)  P1 is the founder and director of a PRC company whose main business is in copyright operation, contents production and sales of sports;

(2)  P1 is the 70% shareholder of P2, a company incorporated in Hong Kong operating a business connected to and/or in association with the business of the PRC company;

(3)  D1 is a Hong Kong resident who portrayed himself as a founding partner of Ausvic Capital Limited which purportedly set up an equity fund named Ausvic Capital Fund I LP (“the Fund”) and is a rich, well-connected and knowledgeable person with extensive experience in equity investment, venture capital and future technology including crypto-currency and blockchain;

(4)  D1 is the sole director of D3 and D5;

(5)  D2 is D1’s son;

(6)  D1 and D2 conspired together to perpetrate a fraud on Ps by causing them to transfer a total amount of USD 9M (“the Sum”) to D3 and D5 as corporate vehicles as investment funds for the Fund over the course of July 2019 to October 2021;

(7)  In around June 2022, P1 was fraudulently misled to sign various documents including the SA;

(8)  By reason of the above matters, the Sum and/or proceeds were held on trust by the Defendants (“Ds”) as trustees on behalf of P1 and/or P2;

(9)  Ds owed and still owe Ps various fiduciary duties;

(10)  It was later discovered by Ps that Ds never and/or never properly invested the Sum for and on behalf of Ps;

(11)  On 14 November 2024, when P1 met with D2, D2 admitted that he never managed the accounts containing Ps’ investment monies and did not know where the Sum had gone;

(12)  On 15 and 16 November 2024, in phone calls, D1 admitted misappropriating Ps’ funds for investing in Binance and cryptocurrencies for his own benefit which Ps never authorised;

(13)  On 7 December 2024, P1 reported the matter to the Hong Kong Police;

(14)  The present action was commenced on 18 December 2024; and

(15)  In the prayer of relief, Ps claim inter alia: (a) against D1 and D2, damages for conspiracy or alternatively, for fraudulent misrepresentation; (b) against D3 and D4, rescission of various agreements including the SA; (c) against Ds, a declaration that Ds hold on trust for Ps or are liable to account for all sums, incomes, profits, assets, properties and interest and/or their traceable substitutes now or previously in their possession acquired directly or indirectly with P’s payment of the Sum, accounts and inquiries to enable Ps to trace and recover all such sums, return or restitution of the sums received from Ps or any traceable proceeds, alternatively, a declaration that Ds are liable to account to P to sums they received as constructive trustee on grounds of their dishonest assistance and/or knowing receipt and an order for Ds to pay to Ps such sums received.

Discussion and Disposition

Re: Intervener’s Summons

6.  The applicable principles on joinder under O.15, r.6(2)(b) of RHC were summarised by K Yeung J in Chen Hongqing v Liu Yiu Keung Stephen & Ors [2021] HKCFI 440 at §26 as follows:

(1)  A liberal approach should be given to this rule so as to ensure that, as far as possible, all matters in dispute between the parties are completely and finally determined, and all multiplicity of legal proceedings with respect to any of those matters is avoided;

(2)  Under Limb 1, a party may be added if his rights against or liabilities to any party to the action in respect of the subject matter of the action may be directly affected by any order which may be made in the action;

(3)  Specifically, under O.15, r.6(2)(b)(ii), the intervener is required to show that he has some interest which in some way directly related to the subject matter of the action. A mere commercial interest in its outcome, divorced from the subject matter of the action, is not enough;

(4)  Whilst some interest which in some way directly related to the subject matter of the action is necessary, the existence of a cause of action between the intervener and one of the parties is not a necessary perquisite for the purpose of joinder; and

(5)  Even where the interest in the subject matter alleged by the intervener is doubtful, the court is nevertheless prepared to exercise its discretion to allow the joinder so that the alleged interest can be properly tested at trial.

7.  However, the existence of legitimate interest in the outcome of the proceedings is only the minimum requirement that has to be shown before a court can be required to make an order. The court still retains a discretion and the exercise of the court’s discretion in any given case depends on a number of factors which may include: (1) the individual prejudice to the parties in the event an order is or is not made; (2) the stage that the action has reached when the application is made; and (3) any delay in making the application and any delay that may be caused should an order be made. Ultimately, the discretion is exercised bearing in mind the object of O.15, r.6(2)(b) and orders should only be made where necessary, just and convenient. See China Medical Technologies, Inc (in Liquidation) & Ors v Wu Xiaodong & Ors [2023] HKCFI 2350 at §11 per Ng J.

8.  The court will not exercise its discretion in favour of joinder if it is plain and obvious that the joinder of the proposed intervener would be pointless and futile: see Chen Honqing, §28.

9.  Mr Phang and Mr Tse, counsel appearing for D1, D2 and the Intervener, relied on the just and convenient limb of O.15, r.6(2)(b)(ii) of RHC. In essence, Mr Phang submitted that as the Intervener is P1’s contractual counterparty to the SA which he seeks to rescind, there is a common issue arising out of or related to or connected with relief claimed between it and P1, as well as between the parties to this action, i.e. whether the alleged misrepresentations made by D1 were false/fraudulent which induced P1 to sign the SA.

10.  Whilst Mr Wong, counsel for Ps, submitted that the rescission of SA is directed solely against D3 and D4 and does not affect the Intervener, I am not persuaded that there can be rescission of the SA only as between D3 and D4 and P1 and not as between the Intervener and P1. As pointed out by Mr Wong, Ps have claimed restitution of the Sum and the rescission of the SA is necessary: see Goff & Jones on Unjust Enrichment (10^th Edn), §§3‑09 and 3-12. As for rescission of the SA, rescission in only available against the other party to the contract: see Chitty on Contracts (35^th Edn), Vol.1, §10‑132. It is common ground that the only parties to the SA are P1 and the Intervener. I am satisfied that the Intervener has shown it has interest which in some way directly related to the subject matter of the action.

11.  Whilst Mr Wong had also submitted that the joinder application is not advanced to safeguard any legitimate purpose or to facilitate the just and expeditious resolution of all matters in dispute, when the Intervener had not commenced any arbitration against P1, and it has no real intention to commence or participate in such arbitration, I accept that by taking out the Intervener’s Summons seeking an order for proceedings as between P1 and the Intervener to be referred to arbitration, it does intend to participate in the arbitration. I also accept Mr Phang’s explanation that the intended purpose of the Intervener’s Summons was to enable an order be made to require the dispute between P1 and the Intervener be referred to arbitration.

12.  Nonetheless, I take the view that in the circumstances of this case an order for joinder is not necessary, just and convenient:

(1)  If the Intervener is correct, any claim between it and P1 can and should be determined by arbitration so there is no prejudice to the Intervener if an order for joinder is not made;

(2)  There is no utility to order the Intervener to be joined as a party simply for the claim as between P1 and the Intervener to be stayed in favour of arbitration;

(3)  Joinder of the Intervener would involve additional costs and possibly delay to this action and the various outstanding interlocutory applications already taken out (e.g. the application for default judgment by P, the application to seek relief from sanction out of time by D1, D2 and D5, and the application to discharge the Ex Parte Order and stay by D1, D2 and D5) given the additional party;

(4)  Even if the claim between P1 and the Intervener is stayed in favour of arbitration, there being no suggestion that the other defendants are subject to any arbitration agreement with P, the present action still has to go ahead in parallel with the arbitration. There is no saving of costs or judicial resources nor can the parallel proceedings be avoided;

(5)  On the other hand, there is no prejudice to the Intervener if not joined as an interested party, when on the submissions of Mr Phang, the legal viability of seeking rescission of the SA against D3 and D4 is questionable given they are not parties and the counterparty, the Intervener, is not sued as a defendant in this action;

(6)  To join the Intervener as an interested party when on the Intervener’s case, the claims as between P1 and the Intervener is to be and should be arbitrated, would lead to multiplicity of proceedings and risk of inconsistent findings; and

(7)  There is also unexplained delay in taking out the application for joinder. The Writ indicating that Ps were seeking rescission was known to the Intervener when it was served on D1, the Intervener’s director, on 20 December 2024 and the Intervener’s Summons was only taken out on 11 June 2025.

13.  Since I will dismiss the joinder application, counsel were agreed that it is not for me necessary to consider whether there should be a stay as that application should also be dismissed.

Re: Letter of Request Summons

14.  The applicable principles are also not disputed. The court has an inherent jurisdiction to issue a letter of request to another court for assistance in obtaining evidence, but whether or not to do so involves an exercise of discretion: see China Metal Recycling (Holdings) Limited (In Liquidation) v Deloitte Touche Tohmatsu (A Firm) [2024] 4 HKC 410 at §13 per Cheng J.

15.  The following factors have been held to be relevant in the exercise of the court’s discretion:

(1)  Whether there is reason to suppose that the foreign court would be receptive to the request although it is not necessary that there be complete certainty as to what will happen in the foreign court;

(2)  Whether it is necessary and in the interests of justice to obtain the documents. This includes a consideration of whether the evidence is relevant and material;

(3)  Whether reasonable attempts have been made to obtain the evidence in other ways;

(4)  Whether the application is made bona fide with such promptness as not to cause unreasonable delay;

(5)  Whether the documents sought are sufficiently precisely identified (rather than being a general request for discovery); and

(6)  Whether the documents exist and are likely to be in the possession of person from whom production is sought.

See ibid, §§14-16.

16.  At today’s hearing Mr Phang, on behalf of D1 and D2, confirmed that the primary basis of his objection to the Letter of Requests Summons was that the documents sought are unnecessary and not in the interest of justice given the s.21 EO order made against the Bank which enabled Ps to plead their case of the transfer of P’s funds to the accounts of D3-D5 which were then onward transferred to other accounts in the Bank, none of which were to the Binance Account or Gate.io Account in the SOC.

17.  However, Mr Wong submitted that given the Mareva Injunction against D1 and D2 included the Binance Account and Gate.io Account, and there were clear breaches of the ancillary disclosure order made against D1 and D2 to disclose their assets in or outside Hong Kong of an individual value of HK$20,000 or more, the Letter of Request was necessary to police the orders made by the Court. He relied on the various affirmations filed on behalf of D5 which demonstrate the value of Partisia Blockchain also known by the name of MPC, a type of cryptocurrency, which D1 admittedly owned over 4 million units, but took the view they were worth less than HK$20,000 and were not required to be disclosed. Mr Wong also relied on the lack of substantive response to the allegations of fraud against D1 and D2 including the non-disclosure as matters to consider in the exercise of my discretion.

18.  Even leaving aside the question of whether there is jurisdiction and it is proper to issue a Letter of Request to police an injunction as opposed to secure evidence for Ps’ tracing claim and whether the documents sought must be directly material to the issues in the action as opposed to seeking discovery (see Panayiotou & Ors v Sony Music Entertainment (UK) Ltd [1994] 1 Ch 142 at 153 per Sir Donald Nicholls VC and Tenwow International Holdings Limited (in Liquidation) & Anor v Pricewaterhousecoopers (A Frim) & Anor [2025] HKCA 296 at §6[1]), I am not satisfied that I should exercise my discretion to issue the letters of request sought.

19.  The disclosure order required D1 and D2 to “inform Ps in writing at once all their assets of an individual value of HK$20,000 or more, whether in or outside Hong Kong… and this information must be confirmed in an affidavit which must be served on [Ps’] solicitors within 7 days after this Order has been served on [Ds].”  This was a one-off disclosure order. Whilst I can see that if there had been an order against D1 and D2 to disclose the documents sought in the letters of request, including the account statements and transactions history of the two accounts (which they had not) and that was a continuing duty, I can see there may be necessity and utility for the letters of request to police or ensure compliance with court orders.

20.  In so far as there is on Ps’ case a clear breach of the disclosure order, there is no need for the documents sought. Notwithstanding Mr Wong’s submissions that the information sought would disclose the extent of breach or other breaches by D1 and D2, I am not satisfied that it is necessary and in the interest of justice to justify the issuance of the letters of request sought.

21.  For the above reasons, I will also dismiss the Letter of Request Summons.

[Submissions on Costs]

Costs

22.  Having heard counsel’s submissions on costs, I further order:

(1)  The Intervener shall pay forthwith Ps’ costs of the Intervener’s Summons on a party to party basis to be summarily assessed on paper; and

(2)  Ps shall pay forthwith D1’s and D2’s costs of the Letter of Request Summons on a party to party basis to be summarily assessed on paper.

23.  Directions have been given for the lodging and service of Statements of Costs by the receiving party and any objections by the paying party.