WEALTHY ACHIEVERS LTD v. LUI HON CHING AND OTHERS

HCA 840 /2020

[2020] HKCFI 1713

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 840 OF 2020

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REASONS FOR DECISION

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BACKGROUND

1.  The Plaintiff is a company incorporated in the British Virgin Islands (BVI) of which Mr Peng Dongmiao (“Mr Peng”) was the sole shareholder and director.  At the material time, the Plaintiff was the holder of 25.62% shares in Mobile Internet (China) Holding Limited, which was and still is listed on the Main Board of the Stock Exchange of Hong Kong (the “Mobile Internet”).

2.  “Novel Blaze”, another BVI company, was also a substantial shareholder of Mobile Network to the extent of 29.62%.  Mr Sun Shao Hua (“Mr Sun”) was the sole director of Novel Blaze.

3.  On 28 May 2020, the Plaintiff, represented by Mr Howard Wong of Counsel, obtained a pre-action mareva injunction granted by The Honourable Mr Justice Anthony Chan (the “Injunction”):

(a)  in respect of the proprietary rights in 40,000,000 shares of Mobile Network, which was part of the 100,000,000 shares borrowed by the 2^nd Defendant from the Plaintiff under a “Stock Borrowing Agreement” (dated 31 January 2020) with the 1^st Defendant acting as the guarantor;

(b)  against the 2^nd Defendant for a sum of HK$18,700,000 being the outstanding balance of the purchase price for 50,000,000 shares of Mobile Internet (at HK$0.4 per share) under a “Share Purchaser Agreement” (dated 5 November 2019) entered into between the 1^st Defendant and the Plaintiff, which was guaranteed by the 2^nd Defendant by virtue of a separate Deed of Guarantee.

4.  Before me, Mr Wong, again appearing for the Plaintiff, advised the Court that the Injunction did not cover liability of the 1^st Defendant (as the Purchaser) under the Share Purchase Agreement by reason of the fact that it was governed by an arbitration clause.

5.  The application for the Injunction was primarily granted on the strength of the 1^st Affirmation of Peng, which was also confirmed in its entirely by the 1^st Affirmation of Sun. Thereafter, on 29 May 2020, the Writ of Summons herein was issued. In due course a Statement of Claim was filed on 13 July 2020.  Meanwhile, on 5 June 2020, upon hearing Mr Wong, DHCJ Douglas Lam SC granted (1) an order to continue the Injunction; and (2) an order against Oriental Patron Securities Limited (“Oriental Patron”), a stock broker, for disclosure of the details as to what had become of the borrowed shares.

6.  On 13 July 2020, the Plaintiff brought yet another ex parte application for injunction on the strength of the additional information obtained from Oriental Patron deposed to in the 2^nd Affirmation of Peng, which, for the reasons set out hereinbelow, was adjourned to 15 July 2020 to be heard together with a summons issued by the 1^st Defendant on 22 June 2020 to stay the Injunction (the “Summons”).

7.  The salient facts as discernible from the Statement of Claim and the 1^st and 2^nd Affirmations of Peng are as follows:

(1)  In around April to May 2019, Peng and Sun, as the sole directors of the two largest shareholders of Mobile Internet, were asked to help Mobile Internet to secure funding to repay a loan of around HK$30M owed to China Construction Bank (the “bank loan”).

(2)  In about October 2019, Mr Sun was first introduced to the 2^nd Defendant by a friend. In turn, the 2^nd Defendant introduced Mr Sun to the 1^st Defendant as the Chief Executive Officer of Esport International Group Ltd (“EIG”).  It was stated that Mr Sun acted for and on behalf of the Plaintiff in his dealings with the 1^st and 2^nd Defendants (see Paragraph 13 of the Statement of Claim and Paragraph 21 of 1^st Affirmation of Peng).

(3)  The 1^st and 2^nd Defendant claimed that they had identified a potential investor who would be able to advance HK$30M  to Mobile Internet in order to repay the bank loan and put together a proposal for business co-operation between Mobile Internet and EIG.

(4)  To show his sincerity, the 1^st Defendant agreed to purchase 50,000,000 shares of Mobile Internet from the Plaintiff at HK$0.4 (ie HK$0.2 above market value of HK$0.2/share). Hence, the Share Purchase Agreement was entered into on 5 November 2019.  The purchase price of HK$20,000,000 was to be paid by two equal instalments on 15 January 2020 and 20 February 2020.

(5)  On 6 January 2020, Mobile Internet entered into a Memorandum of Understanding (“MOU”) with EIG for potential business cooperation and a “Voluntary Announcement” was issued by Mobile Internet accordingly.

(6)  The 1^st Defendant failed to pay for the first HK$10,000,000 under the Share Purchase Agreement, which fell due on 15 January 2020, and threatened to call off the proposed business co‑operation. Peng said he was anxious to keep the potential deal and was pressurised into lending 100,000,000 shares of Mobile Internet owed by the Plaintiff, as demanded by the 1^st and 2^nd Defendants claiming that it was necessary for soliciting support and funding from the potential investor.

(7)  Initially, the borrowing of the 100,000,000 shares were effected against two acknowledgements of loan of shares respectively dated 16 and 17 January 2020 signed by the 2^nd Defendant.

(8)  On the strength of the two acknowledgements (1) 60,000,000 shares were transferred to the 3^rd Defendant (as nominee) on 16 January 2020 at a consideration of HK$17,700,000 (ie HK$0.295/share); and (2) 40,000,000 shares were transferred to 4^th Defendant (as nominee) on 17 January 2020 at a consideration of HK$10,800,000 (ie HK$0.27/share).  The unit prices were the respective closing prices of Mobile Internet shares on the two relevant days.  The transferred shares were put in the respective accounts of the 3^rd and 4^th Defendants maintained with Oriental Patron.

(9)  The borrowing of the shares as foresaid was then formalised in the Share Borrowing Agreement on 31 January 2020 which provided, inter alia, that (1) the shares or Equivalent Securities were to be redelivered to the Plaintiff by 16 February 2020; (2) in the alternative, the 2^nd Defendant was to paid for the borrowed share at HK$0.3/share (ie HK$30,000,000); (3) in the event of default of redelivery of the shares or Equivalent Securities or non-payment therefor, default interest was to accrue on a day-to-day basis on any outstanding amount at the rate of 60% per annum (Clause 5A.1 of the Share Borrowing Agreement).

(10)  Thereafter, on 10 February 2020 when the first instalment of the payment under the Share Purchaser Agreement was still not forthcoming, the Plaintiff (acting through Messrs Winston & Strawn) issued a letter before action to the 1^st Defendant (as Purchaser) and the 2^nd Defendant (as Guarantor) but to no avail.

(11)  On 26 February 2020, a meeting was held with the 1^st and 2^nd Defendant in which the Plaintiff was represented by Chan Fan (the Chief Financial Officer of Mobile Internet). During the meeting, a draft Supplemental Agreement was discussed. This was followed by another meeting held on 5 March 2020 during which the 1^st and 2^nd Defendants represented that they had found another new investor but was evasive in concluding the terms of the Supplemental Agreement.

(12)  In order to prevent disposal of the borrowed shares, the Plaintiff intended to apply to the court for issuing of stop notices but was prevented from during so due to the General Adjourned Period imposed by the Court.  The Plaintiff resorted to issuing informal stop notice on 10 March 2020 to Oriental Patron in respect of the borrowed shares.

(13)  Between March and May 2020, Sun (acting for the Plaintiff) continued to chase after the 1^st and 2^nd Defendants for progress of the proposed business co-operation and/or identification of the new investor but was met with delay and procrastination.

(14)  On 7 May 2020, the Plaintiff applied for various Stop Notices to be issued by the Court, of which the relevant one was served on Oriental Patron on 13 May 2020 (HCSN 4 of 2020).

(15)  On 19 May 2020, the Plaintiff was orally informed by Miss Lai of Oriental Patron that the 60,000,000 shares had been disposed of and the 40,000,000 shares were still being held in their custody.

(16)  Pursuant to the Order of DHCJ Douglas Lam SC, an affirmation of Chan Lap Tak Jeffrey (of Oriental Patron) was served on 12 June 2020 wherein it was revealed that the 60,000,000 shares were sold in two tranches of 27,050,000 (at HK$0.09155/share) and 32,950,000 (at HK$0.09681/share) on 17 and 20 January 2020 respectively upon telephone instructions of the 3^rd Defendant.

8.  In essence, the Plaintiff’s claims against the respective Defendants were framed on the basis of (1) contract; (2) guarantee; (3) constructive trust and dishonest assistance; (4) restitution and unjust enrichment; (5) economic tort and conspiracy; and (6) misrepresentation.  

THE APPLICATIONS

9.  By the Summons, the 1^st Defendant (acting in person) applied for a so-called “Temporary Suspension” of the Injunction, which was regarded as an application for a stay of execution as a matter of law. The hearing of the Summons was scheduled for 9:30 am on 15 July 2020.

10.  Meanwhile, in the afternoon on 13 July 2020, the Plaintiff took out another ex parte application for injunctive relief against the 1^st, 3^rd and 4^th Defendants on the strength of the 2^nd Affirmation of Peng deposing to the further evidence and information disclosed by Oriental Patron pertinent to (1) disposal by the 3^rd Defendant of the 60,000,000 shares; (2) deposit of the proceeds thereof into the account maintained by the 3^rd Defendant with the Bank of China: (3) other particulars including the addresses of the 3^rd and 4^th Defendants in the People’s Republic of China (PRC).

11.  The Plaintiff’s application first came before me at 4:30 pm on 13 July 2020. In Paragraph 6(1) of the 2^nd Affirmation of Peng, it was stated that at the hearing on 28 May 2020 before Mr Justice Anthony Chan “the Plaintiff was not granted Mareva relief as against [the 1^st , 3^rd and 4^th Defendants]”.  However, the reason for the refusal was not mentioned in the 2^nd Affirmation of Peng. Nor was it referred to in the written submissions of Mr Wong.

12.  More fundamentally, I found it rather glaring that the person(s) who allegedly asked the Plaintiff and Novel Blaze to assist in obtaining finance to repay bank loan owed by Mobile Internet was not identified in any of Peng’s affirmations.  I raised an eyebrow since this part of the history was expressed in passive voice which was not entirely satisfactory in the circumstances (see Paragraph 7(1) hereinabove).

13.  At the start of his submission, I enquired of Mr Wong as to how the state of affairs came about, Mr Wong said there was nothing unusual as to the circumstances leading to the transactions and that the Plaintiff and Novel Blaze assisted to obtain finance in their capacity as shareholders of Mobile Internet.  At a glance, this seemed to tally with the 1^st Affirmation of Pang that:

“14. In around April to May 2019, Sun and I, as sole directors of the two largest shareholders of Mobile Internet (through our respective corporate vehicle), were asked to help Mobile Internet to secure funding to pay off the CCB Loan …

18. Both Sun and I considered the Proposed Cooperation to be in the interest of Mobile Internet …”

14.  Upon further enquiry, I was informed by Mr Wong that the reason why, apart from the proprietary injunction in respect of the 40,000,000 shares, no injunctive relief was granted on 28 May 2020 in respect of the 60,000,000 shares disposed of by 3^rd Defendant or the proceeds thereof was that Mr Justice Anthony Chan raised concerns as to:

(a)  the reasons why the Plaintiff agreed to enter into the Stock Borrowing Agreement with the 1^st and 2^nd Defendant;

(b)  Whether there were any considerations of illegality and/or public policy in connection with the Stock Borrowing Agreement which might impinge on the Plaintiff’s application for injunctive relief.

15.  It is lamentable that this Court was not informed of such concerns expressed by the learned judge in the first place by way of the 2^nd Affirmation of Peng.  Notwithstanding that the Plaintiff’s claim arising from the Stock Borrowing Agreement seemed meritorious and real risk of dissipation was demonstrated on the evidence, the duty for full and frank disclosure on the part of the Plaintiff ought properly to have been discharged.

16.  Instead of dismissing the application altogether, I directed that the application be adjourned to be heard together with the Summons on 15 July 2020 so that the Plaintiff could have the opportunity to address the foregoing raised by Mr Justice Anthony Chan, which I respectfully shared.

THE HEARING ON 15 JULY 2020

17.  Since the fixture on 15 July 2020 was primarily listed for hearing of the Summons, I directed that the same be dealt with first.

18.  In essence, the 1^st Defendant’s application was directed at Paragraph 5 of the Injunction ordering the him (along with the 2^nd and 3^rd Defendant) to disclose details pertinent to the disposal of the 60,000,000 by the 3^rd Defendant and the whereabouts of what have become of such shares and their proceeds and/or substitutes.

19.  In support of the Summons, the 1^st Defendant filed an affirmation dated 22 June 2020 exhibiting a document entitled “Reply to the Plaintiff’s Endorsement of Claim dated on 29^th May 2020”.  Instead of putting forward positive facts in support of his defence, all that the 1^st Defendant did by way of the “Reply” was to cast doubt on the Plaintiff’s case and/or raise questions as to why the Plaintiff failed to give a full account of the circumstances and dealings between the parties culminating in the Share Purchase Agreement and the Share Borrowing Agreement.

20.  At the hearing, the 1^st Defendant indicated that he was only the guarantor of the 2^nd Defendant under the Stock Borrowing Agreement and did not even know the 3^rd Defendant (the nominee of the 2^nd Defendant). Since there was no positive case put forward by the 1^st Defendant, I did not see any merits in the application under the Summons and dismissed the same accordingly.

21.  However, given the unenviabe position in which the Court was put by reasons of the non-disclosure on the part of the Plaintiff of matters identified in Paragraph 14 above, I reserved the costs of the Summons.  Thereafter, the 1^st Defendant indicated that he would attend the resumed hearing of the Plaintiff’s ex parte application in respect whereof he had been given notice on 10 July 2020.

22.  Prior to the resumed hearing, the Plaintiff filed the 3^rd Affirmation of Peng to address the concerns of the Court as identified in Paragraph 14 hereinabove.  In essence, Peng deposed to the fact that (1) the lending of the 60,000,000 and 40,000,000 shares under the Share Borrowing Agreement were subject matter of two electronic returns filed with the Stock Exchange of Hong Kong; (2) the Plaintiff did not know of any irregularity whether with reference to the Securities and Futures Ordinance or the Rules Government the Listing Securities of The Stock Exchange of Hong Kong Limited (the “Listing Rules”).

23.  Mr Wong also furnished a 2^nd Supplemental Submissions which was of the same effect as the 3^rd Affirmation of Peng. However, the Plaintiff still did not quite explain why they (along with Novel Blaze) made it their business to try to secure finance for Mobile Internet.

24.  During the course of the short adjournment since 13 July 2020, I discovered that Sun was in fact an Executive Director of Mobile Internet (see Voluntary Announcement of the MOU dated 6 January 2020). Upon a cursory reading of the Listing Rules, which was publicly available, I ascertained that Paragraph 13.17 of thereof provides that:

“Chapter 1 – GENERAL

1.01

“controlling shareholder”: any person … who is or group of persons … who are together entitled to exercise or control the exercise of 30% … or more of the voting power at general meetings of the issuer or who is or are in a position to control the composition of a majority of the board of directors of the issuer.

…

Chapter 13 – EQUITY SECURITIES – CONTINUING OBLIGATIONS

Pledging of shares by the controlling shareholder

13.17 Where the issuer’s controlling shareholder has pledged all or part of its interest in the issuer’s shares to secure the issuer’s debts or to secure guarantees or other support of its obligations, the issuer must announce the following information as soon as reasonably practicable:

(1) the number and class of shares being pledged;

(2) the amounts of debts, guarantees or other support for which the pledge is made;

(3) any other details that are considered necessary for an understanding of the arrangements.”

25.  The foregoing matters were duly brought to the attention of Mr Wong at the resumed hearing. It would appear that he either received no instructions on such matters or the same had escaped his attention.

26.  Mr Wong accepted that Sun was at all material times an Executive Director of Mobile Internet.  However, he sought to distinguish the case on the fact by arguing that the Plaintiff and Novel Blaze were not acting “together” and therefore they did not constitute a “controlling shareholder” of Mobile Internet for the purpose of the Listing Rules. Hence, the obligation to make public announcement was not triggered.

27.  I have no hesitation in rejecting Mr Wong’s argument.  Quite apart from the evidence identified in Paragraph 13 hereinabove, even in the 3^rd Affirmation of Peng, it is said “9. In particular, the reason why Sun and I agreed (on behalf of the Plaintiff) to enter into the stock borrowing and lending agreement were entirely explicable …”.

28.  It is patently clear that the Plaintiff and Novel Blaze were acting in concert in their effort to procure financial support for Mobile Internet by pledging (albeit characterised as “borrowing” or “lending”) the 100,000,000 Mobile Internet shares held by the Plaintiff.  It gave rise to the obligation to make a voluntary announcement as required by Paragraph 13.17 of the Listing Rules.  The rationale is that:

(a)  minority shareholders and potential investors were entitled to know the unsatisfactory financial position of Mobile Internet, which was a listed company;

(b)  the failure to make appropriate announcement might have the effect of artificially propping up the share price to the detriment of the minority shareholders and potential investors.

29.  In this respect, the electronic returns filed with the Stock Exchange only referring to the lending of the 60,000,000 and 40,000,000 without giving the other particulars as required by Paragraph 13.17 of the Listing Rules is insufficient.

30.  In an effort to dilute the effect of the apparent breach of the Listing Rules, Mr Wong sought to rely on the observation of Mr Justice Li in Wong Yuk Kwan v Secretary for Justice, HCAL No 71 of 2015, unrep., 22 June 2016 that:

“51. Section 24(8) of the Securities and Futures Ordinance, Cap 571, stated that the Listing Rules are not subsidiary legislation. So far as I understand, a breach of the Listing Rules may lead to disciplinary proceedings and sanction by the HKEX. The Listing Rules do not create any criminal act or criminal offence.”

31.  With respect, that is totally beside the point. Regardless of the legal effect of the apparent breach of the Listing Rules on the part of Mobile Internet, the fact that Mr Justice Anthony Chan had refused to grant some of the injunctive relief sought by the Plaintiff arising from the alledged breach of the Shares Borrowing Agreement on the ground of “public policy” or “illegality” ought to be brought to the attention of this Court at the forefront.  The one liner hidden in the 1^st Affirmation of Peng (referred to in Paragraph 11 hereinabove) is clearly insufficient and inadequate.

32.  Mr Wong also addressed the Court on various obligation of disclosure under the Securities and Futures Commission Ordinance (Cap 571) and sought to distinguish them.  Without the benefits of full submission in an inter parte hearing, I do not see fit to deal with this part of Mr Wong’s submission.

33.  An admirable summary of the legal principles pertinent to full and frank disclosure in the context of an ex parte application for injunctive relief can be found in the judgment of Madam Justice Queeny Au-Yeung in Velanel Global Communication Inc & Anor. v Chinacomm Limited, HCA 1978 of 2011, unrep., 26 October 2012.  The observations of the learned judge therein are most apposite and refreshing.  It is succinctly expressed in the following terms:

“The legal principles

25. There is no dispute on principles. An applicant must make full and frank disclosure in an ex parte application.

“On any ex parte application, the applicant must proceed with the highest good faith. The fact that the court is asked to grant relief without the person against whom the relief is sought having the opportunity to be heard makes it imperative that the applicant should make full and frank disclosure of all material facts …” Hong Kong Civil Procedure 2012, Vol 1, para 29/1/39.

26. What is material is for the judge to decide. Suppression of material facts will cause the court to discharge an ex parte order without going into the merits.

“(1) The duty of the applicant is to make “a full and fair disclosure of all the material facts:” sec Rex v Kensington Income Tax Commissioners, Ex parte Princess Edmond de Polignac [1917] 1 K.B. 486, 514, per Scrutton L.J.

(2) The material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers: see Rex v Kensington Income Tax Commissioners, per Lord Cozens-Hardy M.R., at p. 504, citing Dalglish v Jarvie (1850) 2 Mac. & G. 231, 238, and Browne‑Wilkinson J. in Thermax Ltd. v Schott Industrial Glass Ltd. [1981] F.S.R. 289, 295.

(3) The applicant must make proper inquiries before making the application: see Bank Mellat v Nikpour [1985] F.S.R. 87. The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries.

(4) The extent of the inquiries which will be held to be proper, and therefore necessary, must depend on all the circumstances of the case including (a) the nature of the case which the applicant is making when he makes the application; and (b) the order for which application is made and the probable effect of the order on the defendant: see, for example, the examination by Scott J. of the possible effect of an Anton Piller order in Columbia Picture Industries Inc. v Robinson [1987] Ch. 38; and (c) the degree of legitimate urgency and the time available for the making of inquiries: see per Slade L.J. in Bank Mellat v Nikpour [1985] F.S.R. 87, 92-93.

(5) If material non-disclosure is established the court will be “astute to ensure that a plaintiff who obtains [an ex parte injunction] without full disclosure ... is deprived of any advantage he may have derived by that breach of duty:” see per Donaldson L.J. in Bank Mellat v Nikpour, at p. 91, citing Warrington L.J. in the Kensington Income Tax Commissioners’ case [1917] 1 K.B. 486, 509.

(6) Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application. The answer to the question whether the non-disclosure was innocent, in the sense that the fact was not known to the applicant or that its relevance was not perceived, is an important consideration but not decisive by reason of the duty on the applicant to make all proper inquiries and to give careful consideration to the case being presented.

(7) Finally, it ‘is not for every omission that the injunction will be automatically discharged. A locus poenitentiae may sometimes be afforded’: per Lord Denning M.R. in Bank Mellat v Nikpour [1985] F.S.R. 87, 90. The court has a discretion, notwithstanding proof of material non‑disclosure which justifies or requires the immediate discharge of the ex parte order, nevertheless to continue the order, or to make a new order on terms

‘when the whole of the facts, including that of the original non-disclosure, are before [the court, it] may well grant … a second injunction if the original non-disclosure was innocent and if an injunction could properly be granted even had the facts been disclosed:’ per Glidewell L.J. in Lloyds Bowmaker Ltd. v Britannia Arrow Holdings Plc.”

In Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350, at 1356F‑1357F, per Gibson LJ.  See also Gee on Commercial Injunctions,5^th ed, at p 241.

27.  In considering what matters should be disclosed to the court, the test is whether the facts are relevant to the exercise of the discretion, regardless of whether they are relevant to the merits of the claim, and irrespective of whether the matters, if disclosed, would have caused the court to refuse to grant the ex parte application.  The court was not concerned with whether the matters not disclosed would, if they had been disclosed, have caused it to refuse to grant the ex parte order.  The test was whether the court should have these matters in the weighing scales: Standard Chartered Securities Ltd v Lai Arthur & ors [1993] 1 HKC 375,at 380-381.

28.  The test of materiality is objective.

“The duty extends to placing before the court all matters which are relevant to the court’s assessment of the application, and it is no answer to a complaint of non-disclosure that if the relevant matters had been placed before the court, the decision would have been the same. The test as to materiality is an objective one, and it is not for the applicant or his advisers to decide the question; hence it is no excuse of the applicant subsequently to say that he was genuinely unaware, or did not believe, that the facts were relevant or important. All matters which are relevant to the ‘weighing operation’ that the court has to make in deciding whether or not to grant the order must be disclosed.”

(Gee on Commercial Injunctions, 5^th ed at para 9.002)

29.     The materiality of matters undisclosed or misstated, if relevant, will depend on the importance of the facts to the issues which were to be decided by the judge on the ex parte application: Pacific Base Services Ltd & Anor v Silver Gain Development Ltd & ors [1996] 1 HKC 610at 617I-618A.

30.  The duty to disclose cannot be fulfilled by simply exhibiting voluminous documents mentioned in the supporting affidavit without making any distinct reference to the points in the body of the affidavit itself or when addressing the judge at the hearing: Standard Chartered Securities Ltd v Lai Arthur, page 388Gfollowed in Rever (AMA) Salon Ltd v Kung Wai For Danny & others [2001] 1 HKC 241, 246E-F.

31.  Where there has been material non-disclosure in an ex parte application, the practice of the court is to discharge the order without going into the merits: R v Kensington Income Tax Commissioners, ex parte de Poliganc [1917] 1 KB 486, 514‑515; Manor Electronics Ltd & Anor v Dickson & ors [1988] RPC 618 at 624.” (emphasis added)

34.  On the face of the evidence of affirmations, the Plaintiff has a strong arguable case and there is a real risk of dissipation.  However, that does not dispense with full and frank disclosure of the detailed circumstances as to how the Share Purchase Agreement and Share Borrowing Agreement came into being. There seems more to it than what the Plaintiff was prepared to disclose to the Court.  The concerns expressed by Mr Justice Anthony Chan on public policy considerations are well-founded.  It may affect enforceability of the two agreements, although I am in no position to express any firm view at this stage.

35.  Having said all that, the non-disclosure, in my view, did not justify dismissal of the application altogether. The balance of convenience was in favour of preserving the borrowed shares and/or the proceeds in question.  In all circumstances, I took the view that the equitable jurisdiction of the Court should only be invoked towards preservation and disclosures of the proceeds arising from the sales of the 60,000,000 shares made by the 3^rd Defendant, who was a mere nominee.

36.  Accordingly, I granted the order in terms of the draft order as amended.  I also granted leave for issuing a concurrent writ to be served on the 3^rd and 4^th Defendants in their respective addresses in the PRC as well as leave for substitute service as set out in the draft order.  The intended injunctive relief against the 1^st and 4^th Defendants were dismissed.

37.  There was also an application for disclosure against the Bank of China in relation to the proceeds of sales of the 60,000,000 shares, which had been deposited into the account of the 3^rd Defendant.  I granted an order in terms upon production of a letter dated 14 July 2020 issued by Messrs Stevenson Wong & Co (acting on behalf of the Bank of China) indicating that they had no objection.

COSTS

38.  The 1^st Defendant, acting in person, was present during the hearing of the ex parte application on 15 July 2020.  He repeated the same point as in the hearing of the Summons that the Plaintiff had not given full details of the circumstances surrounding the transactions culminating in the Share Purchase Agreement and the Share Borrowing Agreement.  However, he was unable to advance any positive case.  Looking at the case in the round, I ordered costs of the ex-parte application be in the cause.

39.  Further, in light of the matters canvassed in the ex parte application as to the background of the transaction, I took the view that it was not unreasonable for the 1^st Defendant to take out the Summons.  Accordingly, I ordered that the costs of the Summons be the Plaintiff’s costs in the cause notwithstanding that I had dismissed the 1^st Defendant’s application thereunder.