JACKY ZONG AND OTHERS v. KELLY FULI ZONG AND ANOTHER

HCMP 2772/2024 [2025] HKCFI 3355

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2772 OF 2024

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BETWEEN

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DECISION

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I. INTRODUCTION

1.  Before me are:-

(1) the Originating Summons (the “Originating Summons”) filed by the 1^st to 3^rd Plaintiffs (the “Plaintiffs”) on 30 December 2024 seeking an order under section 21M of the High Court Ordinance (Cap.4) (the “HCO”) restraining the 1^st and 2^nd Defendants (the “Defendants”) from disposing of or dealing with certain assets in a Hong Kong bank account in aid of proceedings commenced or to be commenced in Hangzhou, PRC; and

(2) an inter-partes Summons (the “Interlocutory Summons”) filed by the Plaintiffs on 30 December 2024 seeking an interlocutory injunction pending the substantive disposal of the Originating Summons.

2.  At the hearing of the Interlocutory Summons on 3 January 2025 before DHCJ Grace Chow, the Defendants offered an undertaking not to withdraw or encumber the assets in question until the substantive determination of the Interlocutory Summons, upon the acceptance of which no interim injunction was ordered.

3.  For the present purpose, the disposal of the Originating Summons herein will dispose of the Interlocutory Summons as well.

II. PARTIES

4.  The parties essentially are from two families under the same father, the late Zong Qinghou (“Zong Senior”), who passed away on 25 February 2024. Zong Senior was the founding chairman and CEO of Hangzhou Wahaha Group Co Ltd (“Wahaha Group”), a beverage producer in China.

5.  The 1^st, 2^nd and 3^rd Plaintiffs (“Jacky”, “Jessie” and “Jerry” respectively) are the three children Zong Senior had with Madam Du Jianying (“Madam Du”).

6.  The 1^st Defendant (“Kelly”) is the daughter Zong Senior had with Madam Shi Youzhen (“Madam Shi”). She is the chairman of Wahaha Group. The 2^nd Defendant (“Jian Hao”) is a BVI company, whose sole registered shareholder has since 2 February 2024 been Kelly, and whose sole director was Zong Senior prior to his demise on 25 February 2024, thereafter replaced by Kelly.

7.  Jian Hao holds various assets in Hong Kong, among which is the net assets of US$1,799,062,412.25 as at 31 May 2024 held in its account maintained with HSBC (the “HSBC Account”), consisting mainly of bonds and other fixed income assets and some cash and time deposits. The subject assets for the preservation order now the Plaintiffs seek are these assets in the HSBC Account (the “HSBC Account Assets”). For convenience, I shall refer to the other assets held by Jian Hao than the HSBC Account Assets as the “Other Assets”.

8.  Zong Senior left two wills executed on 2 February 2024 (the “Wills”), one of which concerned his specific offshore assets but did not cover Jian Hao and its assets, and the other of which concerned his onshore assets in Mainland China. The Wills did not name any of the Plaintiffs or Madam Du, but named, among others, Kelly, Madam Shi and Zong Senior’s mother Wang Shuzhen (“Madam Wang”), as beneficiaries. The executors named by both Wills are Chen Han 陳漢 (a lawyer of Han Kun Law Offices) and Guo Hong 郭虹. I hasten to add that the present proceedings do not in any aspect concern the administration of the estate of Zong Senior. This just provides the background to understand the agreements between the parties mentioned below, which refer to the Wills.

III. PLAINTIFFS’ EVIDENCE

9.  The Plaintiffs’ case relies primarily on three documents. The first is an undated handwritten document (the “Handwritten Instructions”) which, according to the Plaintiffs, was handwritten by Zong Senior himself in about late January 2024. The Handwritten Instructions was addressed to Guo Hong.

10.  The Handwritten Instructions stated:-

“郭虹

准备去香港办理三个人的信托，在汇丰办，每人七亿美金，需办理下列工作：

1、我的信托就是拿利息，要求汇丰银行给予较优惠的利息，我们长期不动，仅能收取利息使用。

2、按香港法律要求，签订信托合同，并请香港公证处公证。

3、受益人仅是其本人与子孙，与配偶没有关系，系婚前财产。

4、汇丰账目美金尚不够，请把人民币换成美金。

5、先办理继昌/婕莉的，若美金募足了，请继盛请假回来办理好。

宗庆后” (emphasis added)

11.  On about 2 February 2024, Zong Senior executed a document entitled “委托書” dated 2 February 2024 (the “Letter of Entrustment”). This is the second document the Plaintiffs rely on. It stated that:-

“委托书

甲方：宗庆后（ “委托人” ）

…

乙方：宗馥莉（Zong, Kelly Fuli）（ “受托人” ）

…

鉴于：

1. Jian Hao Ventured Limit （建浩創投有限公司）为一家根据BVI法律注册成立的公司…公司经登记的股东为乙方，甲方为唯一董事；

2. Jian Hao Ventured Limit 持有两部份资产，包括 (1) 于香港上海汇丰银行有限公司（HSBC Hongkong）开设的账号下的资产（下称 “标的财产” ）；(2) 在高盛、渣打、瑞银、工银、中银等其他银行开设的账户内的资产（下称 “其他银行的财产”）；

3. 双方确认乙方为替甲方代持上述资产，包括公司股权及资产；

现甲方和乙方本着自愿、诚信的原则，经充分协商，就甲方委托乙方运用上述标的财产设立境外信托的相关事宜达成如下协议，以资共同遵守。

一、甲方委托乙方以乙方作为设立人分别设立三个境外信托（三个信托单独简称为 ‘信托A’ ‘信托B’‘信托C’，合称为宗氏境外家族信托），信托A以宗继昌 [Jacky] 及其子女作为信托受益人；信托B以宗婕莉 [Jessie] 及其子女作为信托受益人；信托C以宗继盛 [Jerry] 及其子女作为信托受益人。

二、本协议第一条所约定之宗氏家族信托受益人仅包括宗继昌、宗婕莉、宗继盛及其子女，信托利益为他们的婚前个人财产，受益人不包括该等人士的配偶。

三、甲方委托乙方设立的宗氏家族信托为不动本信托，即信托资产继续在HSBC Hongkong进行固定收益投资，只就利息收益进行分配，任何人士不得主张动用信托财产本金向受益人作分配。

四、在完成上述 “三” 项之后，对于其他银行存放的财产，甲方确定将所有资产利益归属于乙方，由乙方自行处理。” (original emphasis)

12.  Also on 2 February 2024, Kelly signed a Chinese confirmation letter (the “Confirmation Letter”) confirming her agreement to the Letter of Entrustment. It is also on this day when Kelly became the sole shareholder of Jian Hao.

13.  On 25 February 2024, Zong Senior passed away.

14.  On 14 March 2024, Kelly, Jacky, Jessie and Jerry entered into an agreement titled “協議” (the “Agreement”) in relation to the matters arising from Zong Senior’s demise. This is the third document the Plaintiffs rely on. It provided that:-

“协议

甲方：宗馥莉

…

乙方一：宗继昌

…

乙方二：宗婕莉

…

乙方三：宗继盛

…

三位乙方合称 “乙方”，甲方、乙方合称 “各方”。

2024年2月25日，宗庆后先生…因病逝世…现各方就宗庆后先生之遗产处置事宜，经协商达成一致约定如下：

1. 各方确认，宗庆后先生于2024年2月2日订立的遗嘱合法有效，各方认可宗庆后先生在公证遗嘱中的所有安排。

2. 乙方确认，宗馥莉、施幼珍、王树珍三位继承人具有办理宗庆后先生继承权公证及其他资产承继相关程序的全部权限，乙方承认前述继承人完成的相关遗产继承程序合法有效，承诺不以任何形式挑战相关程序之效力。

3. 甲方承诺，将以Jian Hao Ventures Limited (建浩創投有限公司) 在汇丰银行香港特别行政区开立的账户内的资产之权益，依据本协议第4条的内容为三位乙方设立一个信托（共设三个信托）。甲方已聘请适格的律师事务所及相关专业人士开展相关信托的设立工作。

4. 根据宗庆后先生的意愿，上述信托初始规模为每个信托美金柒亿元整（总金额为二十一亿美金整），为不可撤销的不动本信托，即信托资产继续在HSBC Hong Kong进行固定收益投资，只就利息收益进行分配，任何人士不得主张动用信托财产本金向受益人作分配。

5. 信托设立预计以一个PTC（Private Trust Company）模式过渡到专业受托人阶段，在PTC过渡阶段，甲方担任受托人的股东，信托架构中的其他角色由郭虹女士及陈汉先生根据实际情况并咨询相关专业意见后担任；在过渡期结束后，则由乙方指定的人士来担任。

6. 信托过渡期结束之后（即进入专业受托人阶段），甲方不再参与信托的任何管理，全部由乙方来管理。初始信托财产完整交付之后，甲方解除其责任。

7. 甲方应当按照本协议约定完成Jian Hao Ventures Limited（建浩創投有限公司）资产的信托设立工作，甲方不得以作为或不作为的方式阻碍信托的设立工作或资产交付。

8. 乙方应当按照本协议约定配合完成遗产继承、分割、分配等环节相关手续，乙方不得以作为或不作为方式妨碍遗嘱的执行或公司经营。

9…

10. 凡因本协议所发生的或与本协议有关的一切争议，本协议各方可通过友好协商解决。在协商不能解决或一方不愿通过协商解决时，任何一方应向浙江省杭州市有管辖权的人民法院提起诉讼。” (emphasis added)

15.  It is clear that there was quid pro quo under the Agreement, namely, the Plaintiff shall recgonise the Wills and shall not hinder the administration thereunder, and Kelly shall set up offshore trusts for the Plaintiffs.

16.  Further, from the Handwritten Instructions, the Letter of Entrustment and the Agreement (collectively, the “Documents”), it is reasonably clear that the HSBC Account Assets shall be for offshore trusts for the Plaintiffs, while the Other Assets shall be for Kelly.

17.  In the Plaintiffs’ supporting affirmation, Jacky mentions the following matters in respect of how Kelly has handled Zong Senior’s assets. First, he mentions that there have been unauthorised withdrawals by Kelly from the HSBC Account without the Plaintiffs’ knowledge and consent. He explains that they have received only two monthly bank statements in respect of the HSBC Account. One is as at 31 January 2024 (the “January 2024 Statement”) and the other is as at 31 May 2024 (the “May 2024 Statement”). The former was provided to Madam Du by Guo Hong in around May 2024, and the latter was provided to Madam Du by Hong Chanchan (“Hong”) (who was a director of Wahaha Group and a subordinate of Kelly) in around July 2024. By comparison, they observe some unauthorised withdrawals. They refer to the following as “examples”:-

(1) The value of the assets held in USD, CAD, AUD, GBP, EUR and JPY all decreased, and the value of assets in HKD and CNY increased;

(2) US$5,244,600.17 was withdrawn between 1 January 2024 and 30 April 2024; and

(3) US$1,085,120 had since 30 April 2024 been withdrawn.

18.  Second, Jacky mentions that Kelly has failed or refused to sign the relevant documents to set up the three offshore trusts (the “Offshore Trusts”) as instructed by the Letter of Entrustment and agreed under the Agreement.

19.  It is the Plaintiffs’ understanding from Madam Du that Zong Senior had, prior to his demise, indicated orally that Trident Trust Company (HK) Limited (“Trident Trust”) should be engaged as the trust company for the Offshore Trust. On 18 June 2024, Chen Han emailed Kelly, her PRC lawyer Sun Shiqi (“Sun”) of Jingtian & Gongcheng (“JTGC”) and Madam Du informing that Chen Han’s team had prepared the documents necessary for setting up the Offshore Trusts and suggesting that Kelly should (1) first set up the trust structure; (2) open a bank account with HSBC; and (3) transfer the property into the trusts. However, on the same day, Sun replied on behalf of Kelly, saying that the parties had not agreed on these points. Sun stated that the first step to take would be to determine trust property and for the parties to agree to the value of the HSBC Account Assets. Sun also warned Chen Han not to interfere with the trust work and that he should stay as a neutral estate administrator.

20.  On 25 June 2024, Yan Wensheng (“Yan”) of Trident Trust emailed draft trust deeds for the Offshore Trusts and other documents to Sun for Kelly’s signature. Further, on 22 and 23 July 2024, Yan sent a transfer instruction form from HSBC for the transfer of assets into the Offshore Trusts to Sun for Kelly signing. However, Kelly failed or refused to sign the documents. On 13 August 2024, in an email reply to Madam Du’s email of 7 August 2024 enquiring about the progress of setting up the trusts, Sun stated that Kelly had engaged TMF Group (“TMF”) for setting up the trusts and attached to the reply email the fee proposal, and explained that the engagement of TMF to replace Trident Trust was due to the unsatisfactory quality of its service. Sun also indicated in the email that she would contact the beneficiaries as soon as possible for documents and sending them documents for execution.

21.  Dispute then followed between Sun (on behalf of Kelly) and Madam Du in relation to the choice between Trident Trust and TMF. Eventually, in September 2024, Jacky, Jessie and Jerry decided not to object to Kelly’s insistence on TMF for the avoidance of incurring time and dispute. As a result, from late September to early November 2024, the representatives of the parties (including Yelu Xu (“Xu”) and Chen Li (“Li”) of the Plaintiffs’ lawyers Beijing Dacheng Law Offices, LLP (Shanghai) (“Dacheng”)) and the representative of TMF, Cindy Huang (“Cindy”), engaged in various discussions via WeChat and an online conference on 12 November 2024. Various draft documents (including draft Deed of Trust) were circulated for signing, but Kelly refused to sign. The Plaintiffs’ case is that from the discussions, it is reasonably clear that Kelly “continued to drag her feet in signing the relevant documentation”, or evinced no intention to be bound by the Agreement, or took inaction (不作为) in breach of Clause 7 of the Agreement.

22.  As not much progress had been made, on 30 November 2024, Sun relayed Kelly’s confirmation that the assets remained there and the Plaintiffs had nothing to be concerned about.

23.  Further communication continued and revised draft trust deeds circulated. In the email sent on 14 December 2024, another lawyer of JTGC, Zhang Congcong (“Zhang”), on Kelly’s behalf, stated that:-

(1) Kelly did not recognise the validity of the Handwritten Instructions;

(2) Kelly would not agree to any further changes to the draft trust deed;

(3) Kelly would continue to set up the Offshore Trust at an appropriate pace;

(4) Kelly had no obligation to respond to Dacheng’s information requests other than regarding the contents of the trust document; and

(5) If the Plaintiffs would harm Kelly’s interests such as commencing litigation, Kelly had the right to immediately stop setting up the Offshore Trusts.

24.  The Plaintiffs also highlight the evidence that:-

(1) While Clause 5 of the Agreement provides that:-

“信托设立预计以一个PTC (Private Trust Company) 模式过渡到专业受托人阶段，在PTC过渡阶段，[Kelly]担任受托人的股东，信托架构中的其他角色由郭虹女士及陈汉先生根据实际情况并咨询相关专业意见后担任；在过渡期结束后，则由[Plaintiffs]指定的人士来担任。”

Kelly insisted upon a provision (Clause 5 of the draft) in the draft Deed of Trust appointing her to be the protector of the trust with the power to determine the trust period (Clause 11 of the draft); and

(2) While Clauses 1 and 2 of the Letter of Entrustment provide clearly that only the Plaintiffs and the Plaintiffs’ issues would be the beneficiaries of the Offshore Trusts, Kelly proposed provisions in the draft Deed of Trust (Clause 9 of the draft) that Kelly’s issue may also be the beneficiaries.

25.  Third, based on the above, the Plaintiffs make the following complaints at §55 of Jacky’s Affirmation filed on 30 December 2024:-

“In short, despite many months of negotiation, Kelly (i) still has not set up the three Offshore Trusts or the private trust company; (ii) has refused to recognise the validity of the Handwritten Instructions; (iii) has refused to provide any information relating to the HSBC Account (save for the January 2024 Statement and the May 2024 Statement) to us; and (iv) on the contrary, has caused funds (of at least US$1,085,120) to be transferred away from the HSBC Account for unknown purposes (and apparently not for the purposes of the Offshore Trust).”

26.  Fourth, in Jacky’s 2^nd Affirmation filed on 16 June 2025, being a reply Affirmation, the Plaintiffs raised for the first time that Kelly bears “serious animosity” towards the Plaintiffs’ side of the family and has been engaged in a systematic battle for control over the family assets against the Plaintiffs’ side of the family, including 10 factory companies under Wahaha Group and stripping Wahaha Group of its assets in her own favour. While I can see the point made by Mr William Wong SC (leading Ms Sharon Yuen and Mr Charlie Liu) for the Plaintiffs that such particularised evidence is still evidence in reply to the Defendants’ allegation in Kelly’s opposing evidence (as alluded to below) that she always honours Zong Senior’s wishes, the Defendants should, as a matter of fairness, be afforded opportunity to respond to such particulars raised for the first time. This was the reason why at the outset of the hearing, I granted leave for the Defendants to rely on Kelly’s 2^nd Affirmation. All that said, in the overall scheme of things, these particularised evidence does not play any determinative role in my judgment.

IV. DEFENDANTS’ EVIDENCE

27.  In respect of the Plaintiffs’ complaint of unauthorised withdrawals, Kelly explains that the withdrawals were all legitimate transactions:-

(1) As to the decrease in the foreign currencies and increase in HKD and CNY, these resulted from currency fluctuations and portfolio shifts.

(2) The net change of approximately US$5.24 million primarily resulted from repayments in March and April 2024 of loans and interests due and owing by Jian Hao to HSBC. The loans were incurred in the following manner:-

(a) On 27 December 2023 (prior to the Letter of Entrustment and the Agreement), Jian Hao (Zong Senior still the sole director) borrowed a fixed loan from HSBC in the amount of HK$318,491,601.59 (the “1^st Loan”) to finance its investment in “certain financial products”;

(b) On 27 February 2024 (subsequent to the Letter of Entrustment and prior to the Agreement), to refinance the 1^st Loan and the interest accrued thereon, Jian Hao drew a second loan of HK$321,681,875.25 (the “2^nd Loan”);

(c) On 5 April 2024 (subsequent to the Letter of Entrustment and the Agreement), to refinance the outstanding principal of the 2^nd Loan and the interest, Jian Hao drew a third loan of HK$233,778,513.60 (the “3^rd Loan”); and

(d) On 12 April 2024 (subsequent to the Letter of Entrustment and the Agreement), Jian Hao drew a fourth loan of HK$233,681,657.69 (the “4^th Loan”) to discharge the outstanding of the 3^rd Loan and the interest accrued thereon as at 12 April 2024; and

(3) The withdrawal of US$1,085,120 was used to settle capital calls issued by the funds named New Era Capital Partners, L.P. and New Era Capital Partners II, L.P. (collectively, the “Funds”) (“which is not part of the HSBC Account” on the Defendants’ own evidence: see §31 of Kelly’s 1^st Affirmation) on 22 January 2024 and 14 March 2024 respectively. Jian Hao (Zong Senior being the sole director) invested in the Funds in August 2017 and early 2022 respectively.

28.  I pause to note that while by the time of the 2^nd Loan and the second withdrawal to settle the calls issued by the Funds, the HSBC Account Assets had arguably been designated for the Offshore Trusts to be set up for fixed-income investments, such withdrawals were still made. In particular, in relation to the calls issued by the Funds, the Funds are “not part of the HSBC Account”. In other words, the HSBC Account Assets were used for an investment not related to the Plaintiffs at all. Kelly’s response, in essence, is that this had been the practice in the past when Zong Senior was still the director of Jian Hao.

29.  Kelly also gives answers to the Plaintiffs’ complaint that she has dragged on her feet in setting up the Offshore Trusts. She states that her discussions or negotiations with the Plaintiffs on the terms of the draft documents were genuine.

30.  First, Kelly contends that Clause 3 of the Letter of Entrustment (quoted in §11 above) means that only the interest on the fixed capital would be the trust assets, but not the capital itself. She highlights this because it appears to her that the Plaintiffs have been labouring under an impression which she thinks is wrong that the capital should also be part of the trust assets.

31.  Secondly, relatedly, Kelly contends that she should not be treated by the Plaintiffs as a mere entrustee as if she had no say in the terms of the documents setting up the Offshore Trusts. She refers to Clauses 5 and 6 of the Agreement (quoted in §14 above). In particular, Clause 5 states that in the transition of the Offshore Trusts to the private trust company, Kelly would be “受托人的股東”.

32.  Third, in relation to her insistence on the valuation of the assets, she refers to Clause 4 of the Agreement (quoted in §14 above). In gist, Kelly contends that the value of the assets in the HSBC Account has never attained US$2.1 billion and thus there is no basis for the Plaintiffs to assert their respective entitlement to an offshore trust of US$700 million each before the parties could find a way to make up a shortfall. Kelly further contends that the figure of US$700 million for each was aspirational only, and in any event, she does not recognise the validity of the Handwritten Instructions. Therefore, the Plaintiffs’ insistence that cash of US$700 million shall be injected into each of the Offshore Trusts is unrealistic and infeasible.

33.  Fourth, in relation to her proposal to include her issue to be the beneficiaries of the Offshore Trusts, Mr Benjamin Yu SC (leading Mr Bernard Mak), counsel for the Defendants, seems to contend that her issues would be excluded by the definition of “Excluded Persons” in the draft Deed of Trust. With respect, such contention cannot be maintained, because “Excluded Persons” was defined as the spouse of Kelly, or any spouse of any children or remoter issue of Kelly; in other words, Kelly’s issues would not be excluded. Further, during his oral submissions, Mr Yu suggested that the inclusion of Kelly’s issue and appointment of Kelly as protector with power to terminate the trust period might be due to the lawyers’ template. I rejected this suggestion outright because I cannot take judicial notice in this regard, and there is no evidence from the Defendants to explain that such terms were included because Kelly’s lawyers blindly used a template as if this would be fit-for-all without exercising any professional judgment to their client’s needs.

34.  The differences between the two camps, according to Kelly, became sources of disagreement in the discussions and negotiations that have prevented execution of documents necessary to set up the Offshore Trusts. In other words, Kelly is saying that she has evinced no intention not to be bound by the Letter of Entrustment and the Agreement, that she was not taking any action or inaction (in breach of Clause 7 of the Agreement) to prevent the establishment of the Offshore Trusts, and that the Plaintiffs are simply jumping the gun.

35.  Kelly emphasises that she always honours Zong Senior’s wishes. In response to the Plaintiffs’ accusation that she does not, Kelly gives explanation in her 2^nd Affirmation the details of which I do not need to delve into for the present purposes.

V. PLAINTIFFS’ CASE

36.  The Plaintiffs’ case is that:-

(1) The Agreement is governed by Hong Kong law (which the Defendants do not have evidence to dispute for the present purpose, though Mr Yu expressly reserves the position for any subsequent proceedings, whether in Hong Kong or the PRC);

(2) Kelly has breached the Agreement by failing to set up the Offshore Trusts, and breached the Agreement by her “inaction” contrary to Clause 7 of the Agreement; and

(3) Kelly is a constructive trustee and/or fiduciary in relation to the HSBC Account Assets.

VI. HANGZHOU PROCEEDINGS

37.  Although the Plaintiffs’ case is that the Agreement is governed by Hong Kong law, because of the jurisdictional clause in the Agreement (namely, Clause 10), the Plaintiffs have to commence proceedings in the Hangzhou Court. Accordingly, on 27 December 2024, the Plaintiffs submitted an application with a Statement of Complaint (民事起訴狀) to the Hangzhou Intermediate People’s Court (the “Hangzhou Court”) (the “Application to Hangzhou Court”) for the case filing and registration (立案) so as to commence proceedings against Kelly (the “Hangzhou Proceedings”) and Jian Hao as the third party. In the Hangzhou Proceedings, the Plaintiffs would seek, among others, the following relief:-

“1. 判决确认Jian Hao Ventures Limited 建浩創投有限公司（下称「建浩公司」）名下在香港上海汇丰银行有限公司…的银行账户中的资产是三位原告享有受益权的信托财产（下称「信托财产」）;

2. 请求确认被告就信托财产对原告负有受信责任，需就信托财产的去向作出解释;

3. 请求判令被告在28天或法院认为合适的任何其他期限内，根据[Handwritten Instructions]、[Letter of Entrustment]、[Agreement]，履行 [Agreement] 第3、4、5、6、7条约定的义务;

4. 请求判令被告支付原告利息收益，以21亿美元为基数…

5. 请求判令被告向原告赔偿擅自转移的信托财产损失（暂计为1,085,120美元）…”

38.  Mr Wong, for the Plaintiffs, underscores that the Hangzhou Proceedings claim that the HSBC Account Assets, not just the income generated therefrom, are the subject assets in the proceedings.

39.  On 28 February 2025, upon Hangzhou Court’s request, the Plaintiffs submitted a revised Statement of Complaint to the Hangzhou Court (the “Revised Statement of Complaint”). As at 16 June 2025, when the Jacky’s 2^nd Affirmation was filed on behalf of the Plaintiffs, the Application to Hangzhou Court was still being processed, yet to be “filed and registered” (立案). At that point of time, there seemed to be dispute on the evidence between the parties whether the Hangzhou Proceedings could have been regarded as existent for the purpose of section 21M of the HCO, although Mr Yu fairly pointed out during the oral submissions that section 21M of the HCO covers also proceedings “to be commenced”, and therefore, he would not take this point. In any event, just a few days prior to the hearing, on 8 July 2025, the Higher People’s Court of Zhejiang Province informed the Plaintiffs by a Notice of Acceptance（受理案件通知書）that the Hangzhou Proceedings have been “filed and registered”. Mr Yu made a complaint that the case number in the exhibited copy of the Notice of Acceptance was redacted and thus the evidence is not clear whether this Notice of Acceptance is in respect of the Hangzhou Proceedings, given that the Hangzhou Proceedings were lodged with the Hangzhou Court but not the Zhejiang Higher People’s Court. The Plaintiffs explain that the redaction was made upon the request of the Hangzhou Court to minimise public attention. Irrespective of the reason for the redaction, looking at the content of the Notice of Acceptance referring to the Plaintiffs as the claimants therein, Kelly as the Defendant therein and Jian Hao as the third party therein, it is clear to me that the Notice of Acceptance is in relation to the Hangzhou Proceedings. Further, for convenience, whichever PRC Court is now seized of the Hangzhou Proceedings, I shall refer to the relevant PRC Court as the “PRC Court”.

VII. TWO-STAGE APPROACH IN SECTION 21M APPLICATION

40.  The approach towards section 21M is well-settled by the Court of Final Appeal in Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd (2016) 19 HKCFAR 586 at §§47-54 per Lord Phillips NPJ. I only need to refer to the following legal principles by summarised by Lisa Wong J at §48 of Jiang Xi An Fa Da Wine Co. Ltd v Zhan King [2019] HKCFI 2411:-

“(1) In the first stage, the court firstly asks whether, if the proceedings that have been or are to be commenced in the foreign court result in a judgment, that judgment is one that the Hong Kong court may enforce. If the judgment resulting from the foreign proceedings may be enforced by the Hong Kong court, then the court asks the same questions as it would if the interim relief were sought in support of a Hong Kong action, save that the strength of the plaintiff’s substantive claim against the defendant (if material) should be considered from the standpoint of the foreign court, and not under the law of Hong Kong.

(2) In the second stage, as required by s 21M(4), the court should consider whether the fact that the court has no jurisdiction apart from s 21M in relation to the subject matter of the proceedings concerned makes it unjust or inconvenient for the court to grant the application.”

VIII. FIRST STAGE

41.  For the first stage, Mr Yu, for the Defendants, rightly does not take issue on the enforceability of the judgment that may be given in the Hangzhou Proceedings. However, Mr Yu submits that whether the injunction being sought in aid is a Mareva injunction or a proprietary injunction or a preservation order, the threshold must be a good arguable case. He refers me to Hin-Pro, supra, itself. He points out that the threshold there for the first stage was also a good arguable case. In addition, he submitted one more case during the hearing, namely, Convoy Collateral Ltd v Broad Idea International Ltd [2023] AC 389 a Privy Council’s appeal from BVI, in reliance on §101 of which Mr Yu emphasises that the Court’s equitable or statutory jurisdiction to grant injunction can be exercised only upon the threshold of a good arguable case.

42.  With respect, I cannot see how those cases assist Mr Yu’s proposition on threshold. Those cases were cases of Mareva Injunction or freezing injunction, the threshold for which is a good arguable case even domestically. As pointed out by DHCJ Queeny Au-Yeung (as she then was) in Narian Samtani v Chandersen Tikamdas Samtani [2012] 4 HKLRD 872 at §76, there exists an essential distinction between a preservation order and a Mareva injunction, namely:-

“[Mareva injunction] goes well beyond [a proprietary injunction or preservation order] and enables the court to grant the plaintiff an interlocutory injunction restraining the defendant from disposing of or even dealing with his assets, being assets over which the plaintiff asserts no proprietary claim but which after judgment may be attached to satisfy a money judgment…”

43.  It is this distinction (a Mareva injunction having a more extensive effect) that warrants an enhanced threshold for Mareva injunction.

44.  In my view, the purpose of the first stage is clear – if the Hong Kong Court would not have granted the order, there would be no point in considering whether to grant such an order in aid of foreign proceedings, since granting an order which the Hong Kong Court would not have granted to aid foreign proceedings seems to be lacking in comity. I tend to think that it would also be lacking in comity if the Hong Kong Court would have granted the order but refused to grant it in aid simply because it presumptuously thought that the threshold should be enhanced. During my oral exchange with Mr Yu, I made enquiry of the reason why for the first stage, the threshold should be enhanced. Mr Yu’s answer was, in essence, that because it is a statutory jurisdiction (in reliance on Convoy, supra) and because the parties chose the foreign forum to resolve their disputes, the Hong Kong Court should be very cautious to exercise such jurisdiction. I agree that I should be very cautious to exercise such jurisdiction, and as to how to exercise such jurisdiction cautiously, I should turn to the authorities binding upon me for guidance. As regards the parties’ choice of forum, while it may be a reason for the cautious approach, it is, in my view, more a factor in a forum non conveniens consideration, with which I am not concerned here. An application under section 21M, by its very nature, means that the applicant recognises that the Hong Kong Court is not an appropriate forum to resolve the substantive dispute, but takes the view that the Hong Kong Court may grant certain relief in aid only.

45.  Further, if statutory jurisdiction and/or parties’ choice of foreign forum should or would lead to an enhanced threshold, then in all the cases cited by Mr Yu on this threshold point, all in relation to Mareva or freezing injunctions in aid of foreign proceedings, a threshold higher than a good arguable case should or would have been adopted. However, on the contrary, those cases only show that the same threshold adopted domestically for Mareva injunction were applied at the first stage. With respect, I see no reason why, if Mr Yu’s reason were right, no enhanced threshold was applied for Mareva injunction but for other interlocutory injunctions, an enhanced threshold should be applied as submitted by Mr Yu.

46.  In gist, I cannot see how the parties’ choice of forum and/or the cautious approach can be translated into an enhanced threshold for the first stage. In my view, the Hong Kong Court’s caution and any “foreign” or comity consideration are operative in the second stage, but not in the first stage.

47.  It remains for me to add that the suggestion, that the threshold for an injunction or a preservation order, if considered in the context of section 21M of the HCO, should be elevated to good arguable case, conflates the first and the second stage. It is, in my view, the second stage which would take care of this foreign element by reference to “unjust” and/or “inconvenient”. Therefore, I find that the threshold for the present purpose of determining whether a preservation order should be granted should be serious issues to be tried.

48.  In the same vein, Mr Yu suggests that whatever kind of injunction or preservation order is being sought in aid of foreign proceedings, a real risk of dissipation should be a necessary requirement. It is not entirely clear to me whether Mr Yu suggests that the real risk of dissipation is a requirement for the first stage or the second stage. He seems to suggest both, or seems to suggest that it does not really matter whether it should be for the first stage or the second stage. Insofar as he suggests that it is a requirement for the first stage, for the same reason on which I reject his proposition on an enhanced threshold, I also reject such suggestion.

49.  From the evidence and the parties’ respective cases set out above, it is clear to me that there are serious issues to be tried in relation to the Plaintiffs’ claim on breach of contract. Mr Yu also fairly accepts this. In any event, I take the view that the Plaintiffs have also established a good arguable case on their claim on breach of contract.

50.  In relation to the constructive trust and/or fiduciary relationship over the HSBC Account Assets, Mr Wong reasons as follows:-

(1) The Letter of Entrustment itself creates an express trust for Kelly to hold the shares in Jian Hao and the assets of Jian Hao for Zong Senior. Mr Wong submits that this means that Kelly and Jian Hao do not hold any beneficial interest in the HSBC Account Assets.

(2) The Agreement gives rise to a constructive trust. By the Agreement, Kelly agrees to set up the Offshore Trusts with the HSBC Account Assets and in consideration, the Plaintiffs agree not to contest the validity of the Wills in favour of Kelly (Recital 2 of the Agreement).

(3) As Kelly does not have any interest in the HSBC Account Assets but has control over them and shall deliver (交付) the same for setting up the Offshore Trusts (Clause 6 of the Agreement), she is subject to fiduciary duty of agency type to those who have interest in them: see Libertarian Investments Ltd v Hall (2013) 16 HKCFAR 681 at §§64-65 per Ribeiro PJ.

(4) Therefore, while the Letter of Entrustment and the Agreement may confer upon Kelly and Jian Hao a power to create a new trust, it does not follow that no trust has been set up by the same documents: see Lewin on Trusts (20^th ed), §§3-054.

(5) While the legal owner of the HSBC Account Assets is Jian Hao, in circumstances where the corporate vehicle is solely controlled by a person, “it is possible for the court to infer a declaration of trust in circumstances where the directors of a company create a settlement and then treat the company as a corporate trustee carrying on the business formerly carried on by the company for the benefit of a constituted settlement”: see Lewin on Trusts, supra, §3-004. It is, in my view, a mixed question of fact and law.

51.  Built upon the above, Mr Wong further submits that the Plaintiffs have proprietary interest in the HSBC Account Assets and the income generated therefrom.

52.  Mr Yu disagrees. He submits that the Plaintiffs do not have any proprietary interest in the entirety of the HSBC Account Assets, but at most Kelly may have fiduciary duties in respect of the income generated on the HSBC Account Assets. He reasons that the HSBC Account still runs short of sufficient fund up to US$2.1 billion, trusts have yet to be set up, and the HSBC Account Assets are maintained for investment, while the decision as to how to make investment rests with Jian Hao, the legal owner of the HSBC Account Assets. He even goes as far as to suggest that there is issue over the enforceability of the Agreement itself to set up any trusts.

53.  Mr Yu also seems to submit that there can be no trust until the value of the assets in the HSBC Account would reach US$2.1 billion, or he submits that there is one of such questions that have to be resolved. However, that has to be construed against Clause 5 of the Handwritten Instructions, which provided that:-

“先办理继昌/婕莉的，若美金募足了，请继盛请假回来办理好。”

54.  While the Defendants do not admit the authenticity and/or validity of the Handwritten Instructions, it is fair to say that this still constitutes at least a serious issue to be tried, and therefore, there is also a serious issue to be tried over whether the Agreement would have to be read with the Handwritten Instructions for proper contractual construction as to when to set up the Offshore Trusts. I also add that while there is no direct evidence to say that Kelly had knowledge of the Handwritten Instructions, which were addressed to Guo Hong rather than her, there is a serious issue to be tried that in the circumstances, the Handwritten Instructions was brought to Kelly’s attention upon Jacky’s belief (which is, in my view, inherently probable) that Guo Hong conveyed the Handwritten Instructions to Kelly, given that Kely was Zong Senior’s nominee shareholder in respect of Jian Hao (see Recital 3 of the Letter of Entrustment).

55.  In any event, it is not necessary for me to express any definitive view on the merits of the parties’ respective submissions on this trust-and-fiduciary issue. Suffice to say that it is a serious issue to be tried.

56.  Further and in any event, if the threshold were a good arguable case, on the strength of the Documents and the evidence as well as the arguments put before me, I am of the view that there is also a good arguable case on this trust-and-fiduciary issue.

57.  As to the balance of convenience, I must point out that the preservation order now being sought by the Plaintiffs is not a Mareva injunction. Therefore, the existence of a real risk of dissipation is not a necessary condition, though still relevant. Instead, the test is whether there is a need for security, and where damages would be adequate, the Court may refuse to grant any preservation order: see Narian Samtani v Chandersen Tikamdas Samtani, supra at §§78-79 per DHCJ Queeny Au-Yeung (as she then was). In my view, for the following reasons, I see such a need:-

(1) As explained by Coleman J in Sky Motion Holdings Ltd v China Create Capital Ltd [2019] HKCFI 2408 at §79:-

“[W]here there is at least a serious issue to be tried on the proprietary claim, the balance of convenience would normally favour the preservation of the subject matter of the action at an interlocutory stage. Into the mix might be added that the subject matter are tradeable assets, hence the risk of dissipation…”

As I have found above, there is a serious issue to be tried over the trust-and-fiduciary issue, and thus on the Plaintiffs’ proprietary claim.

(2) Despite the Plaintiffs’ entitlement to the income generated on the HSBC Account Assets, no distribution has been made yet, and no trusts have been set up. While Kelly has proffered explanation for why the trusts have not been set up, her explanation hinges upon her understanding of the Agreement and as I have mentioned above, there are serious issues to be tried in this regard.

(3) Whether Kelly truly believes that she has any fiduciary duty or not, given that the Plaintiffs are entitled to the income generated on the HSBC Account Assets, and one would have thought that if Kelly is true to her responsibility, even if she really believes that she has no legal responsibility, she would have been more willing than she has appeared (if at all) to provide information to the Plaintiffs in relation to the HSBC Account. However, on the contrary, she has all along maintained that she has no legal obligation to do so and has not provided any such information to the Plaintiffs. A fortiori, where the trust-and-fiduciary issue is a serious issue to be tried, there is also a serious issue to be tried over whether the Defendants have legal obligation to provide such information to the Plaintiffs concerning the trust assets or the assets subject to the fiduciary’s management or control: see Libertarian Investments Ltd v Hall, supra at §167 per Lord Millett NPJ; Lewin on Trusts, supra §21-035. All these beg for the question why the Defendants have appeared reluctant to provide the information.

(4) Kelly’s proposal for a provision in the draft Deed of Trust to include her own issue contrary to the Agreement, coupled with her arguable breach of the Agreement and inexplicable reluctance to provide information to the Plaintiffs, points to some risk (though not necessarily a real risk) of dissipation.

(5) The value of the HSBC Account Assets run up to US$1.8 billion as at 31 May 2024. It is inherently probable, in the absence of any evidence to the contrary, that the Defendants would not be able to make good any order for compensation in the light of this substantial amount, and there is no evidence to suggest the contrary.

58.  In the circumstances, I would grant the preservation order if the application would be made to Hong Kong Court, subject to one modification.

59.  The HSBC Account is an investment account. Even by the Agreement, the HSBC Account Assets are for fixed-income investments. Therefore, I agree with Mr Yu that it is inappropriate to prohibit “disposing of” or “dealing with”. Further, the investments fluctuate in value. Therefore, I also agree with Mr Yu that it is also inappropriate to prohibit any diminution of value. What then should be the terms of the injunction?

60.  During the oral exchange between the bench and the bar, exploration was made into whether certain mechanism could be put in place so that only fixed-income investments envisaged in the Agreement could be made. However, upon consideration, I think providing only for fixed-income investments would be in a sense recognising the Agreement the enforceability of which is in dispute and an issue for the Hangzhou Court to decide. Bearing in mind that the preservation order is to preserve the HSBC Account Assets for the Hangzhou Court’s determination, the order should be to maintain the status quo. Since the HSBC Account is by nature an investment account, the status quo of the HSBC Account Assets must be for investment. Nevertheless, to only allow fixed-income investment may not be feasible. The bank may simply not allow any kind of investment to avoid being accused of allowing non fixed-income investments unless both parties would agree the same to be fixed-income investments. This would effectively give a veto power to the Plaintiffs which they do not have even under the Agreement. All in all, I think a prohibition of “withdrawal” and “encumbrance” strikes the right balance between the preservation of the HSBC Account Assets and avoidance of interference with the case management of the PRC Court (which is a consideration I have to bear in mind in the second stage as explained below).

61.  In conclusion, the first stage is passed.

IX. SECOND STAGE

62.  While in Hin-Pro, supra, the Court of Final Appeal at §54 said that “it does not seem to me to be very helpful to try to formulate a list of circumstances where it will be unjust or inconvenient to grant” the relief in aid, I was referred to the five considerations set out in Motorala Credit Corporation v Uzan (No 2) [2004] 1 WLR 113 at §115 (a case referred to in Hin-Pro §54 as well):-

“[(1)] whether the making of the order will interfere with the management of the case in the primary court, e.g. where the order is inconsistent with an order in the primary court or overlaps with it;

[(2)] whether it is the policy in the primary jurisdiction not itself to make worldwide freezing/disclosure orders;

[(3)] whether there is a danger that the orders made will give rise to disharmony or confusion and/or risk of conflicting inconsistent or overlapping orders in other jurisdictions, in particular the courts of the state where the person enjoined resides or where the assets affected are located. If so, then respect for territorial jurisdiction of that state should discourage the English court from using its unusually wide powers against a foreign defendant;

[(4)] whether at the time the order is sought there is likely to be a potential conflict as to jurisdiction rendering it inappropriate and inexpedient to make a worldwide order; and

[(5)] whether, in a case where jurisdiction is resisted and disobedience to be expected, the Court will be making an order which it cannot enforce.”

63.  This list is not exhaustive, and cannot be regarded as a checklist as if more (or less) ticks means more (or less) unjust or inconvenient. Each case depends on its own fact and context.

64.  Despite its non-exhaustiveness, I refer to this list for one reason. Mr Yu seems to submit that a real risk of dissipation should be a requirement for this second stage. It seems to me that the reason he advanced is the same as that he advanced for an enhanced threshold for the first stage, namely, it is the parties’ choice of forum and thus the Court should be cautious. However, even from this concrete list I cannot distil any principle or guidance for a proposition that a real risk of dissipation would be required for the second stage. The test, in my view, must be that made clear by the Court of Final Appeal in Hin-Pro, namely, whether it would be unjust or inconvenient to grant the order in aid. Therefore, with respect, I do not accept Mr Yu’s submissions that a real risk of dissipation should be a requirement for the second stage.

65.  The Hangzhou Proceedings are, as Mr Yu rightly points out, mainly concerned with the declaratory relief that there has existed the trust over the HSBC Account Assets. If I were to grant the preservation order, I see no reason why there would be any inconsistency with the Hangzhou jurisdiction or interference with the case management of the Hangzhou Proceedings. Such a preservation order would clearly assist the PRC Court by making sure that the subject asset would still be available so that the Hangzhou Proceedings would not be rendered redundant. Such a preservation order, in my view, would also clearly mean comity to the PRC Court – by ensuring that the assets located in Hong Kong would still be available for the disposition of the PRC Court.

66.  Mr Yu submits that the Hong Kong Court should not be left to speculate what the PRC Court would think. His submissions are that if an application is made to the PRC Court, the Hong Kong Court would then know what order to grant (or what not) would be unjust and/or inconvenient. He submits, attractively, that the Plaintiffs should not ask me to speculate; instead, the Plaintiffs should make the application to the PRC Court; and the Plaintiffs have put me into an unenviable situation by not making such an application to the PRC Court on the one hand but coming direct to the Hong Kong Court on the other hand saying, without even trying, that the PRC Court would not grant an injunction in respect of overseas assets (see the expert opinion below), thereby forcing me to speculate. He further submits, in reliance on Motorola Credit Corporation v Uzan (No 2), supra, at §119, that in general, only in international fraud cases, no application would need to be made to the foreign court.

67.  In my view, Mr Yu almost puts forward a proposition that an application to the foreign court is a precondition for the exercise of the jurisdiction under section 21M of the HCO. In response, Mr Wong underscores, and I agree, that those cases which seem to suggest such a precondition were cases of ex parte applications where the applicant would be expected, in discharging their duty of full and frank disclosure, to apply to the foreign court or if not, to explain why not. More fundamentally, such a precondition would be inconsistent with the wording of the statutory provision properly construed. For this, I only need to refer to The Export-Import Bank of China v Liu Qingpin [2018] HKCFI 1840, where Lisa Wong J said at §113 that the purpose of section 21M is to facilitate “the process of execution or enforcement of the foreign judgment, which may potentially have to move to Hong Kong because of the location of the judgement debtor’s assets in Hong Kong”. Bearing this purpose in mind, an application to the foreign court, though a relevant factor, should not be a precondition.

68.  To put rest any fleeting suggestion that an application to the foreign court is or virtually a precondition, Mr Wong refers me to a few examples.

69.  First, in Chow Steel Industries Public Co Ltd v Ko Sung [2020] HKCFI 483, no application for a freezing order had been made to the Thai Court, and K Yeung J, accepting the evidence that it was not the Thai Court’s policy or practice to grant any extra-territorial freezing orders, held that a grant of Mareva injunction in Hong Kong in aid would not be inexpedient. Eventually, he did grant the Mareva injunction.

70.  Second, in JSC VTB Bank v Pavel Skurikhin [2014] WEHC 2254 (QB), Eder J accepted at §15 that “the Russian courts very rarely issue freezing injunctions in respect of assets located outside of Russian Federation, although they can and sometimes do grant freezing injunctions against defendant’s assets outside of the Russian jurisdictions which are subject to international agreement with Russia” (emphasis added). No application had been made to the Russian Court for any freezing order. Eder J still granted a worldwide freezing order except for those jurisdictions “which are subject to international agreement with Russia”. Mr Yu cautions me that in this case, the respondent was not legally represented and there was no contrary expert evidence filed. Be that as it may, this case still stands an example of exercise of similar section 21M jurisdiction in the absence of any application to the foreign court.

71.  Third, in Anan Kasei Co Ltd v Molycorp Chemicals & Oxides (Europe) Ltd [2017] FSR 13, the Court’s opinion on the expediency to grant an injunction in aid of foreign proceedings was obiter only (§§43-49), in case that the matter would go further (§42). In the obiter at §§48-49, Arnold J dismissed an argument that an application should have been made to the foreign court before an application can be made to the domestic court for an interim order in aid of the foreign court. While Mr Yu eloquently argues that this case is materially distinguishable on the specific European patent regime in that case not applicable in Hong Kong, I think the general principle in this obiter is still of some referential value as consistent with the broad test of “just” and “convenient”.

72.  To sum up, these examples do show that an application to the foreign court is not a precondition. Further, “practice and policy” not to grant, or “very rare” to grant, as demonstrated by these examples, is a significant indicator of no injustice and no inconvenience.

73.  All that said, I agree that whether the applicant has made an application to the foreign court, and if not, the explanation for why not, are important considerations.

74.  The explanation has been given in the Plaintiffs’ reply affirmation. At §38 of Jacky’s 2^nd Affirmation, he explained that:-

“I wish to make clear that we did not apply in the first instance to the Hangzhou Court, because we were advised by our PRC lawyers [named to be Beijing Dacheng Law Offices, LLP at §28] that we would not be able to obtain such orders from the Hangzhou Court due to practical limitations (in particular the fact that the subject matter assets are located outside of Mainland China, i.e. situated in Hong Kong), and also, for that reason such orders (even if they could be obtained) could not be enforced against Kelly or Jian Hao.” (emphasis added)

75.  In this regard, Mr Yu submits that at the time of the commencement of the present proceedings and the issuance of the Summons, the Plaintiffs simply did not give any thought to whether the PRC Courts would or would not grant a preservation order on the HSBC Account Assets, as a matter of law, practice or policy, or otherwise. He points out that there was no explanation offered at the first hearing of the Summons on 3 January 2025 before DHCJ Grace Chow, and that the above explanation only came as an afterthought. Mr Yu submits, therefore, that first, the Plaintiffs did not put their application in proper order in the first place, and second, the Plaintiffs was forum-shopping for the preservation order. He urges me not to allow the Hong Kong Court to be utilised or abused in such way. With respect, although the Plaintiffs could have done better by giving the explanation in their supporting affirmation, however, on the affirmation evidence put before me, I cannot reject the above explanation as an afterthought. To do so would almost (if not virtually) amount to a finding that Jacky did not tell the truth on oath. There is no sufficient evidence to sustain such finding.

76.  Consistent with this advice by the Plaintiffs’ PRC lawyers, Mr Wong submits, in reliance on the expert opinion adduced by the Plaintiffs as an independent expert opinion, that while PRC Courts have jurisdiction to grant the preservation order even in respect of the assets outside jurisdiction, as a matter of practice and policy, they very rarely grant such order. The Plaintiffs expert asserts that he is not aware of any such preservation order and having checked the cases accessible by the public, he cannot find any such cases either.

77.  As a policy and practice, there almost always are exceptions. In this regard, the Defendants’ expert refers to one case where such preservation order was apparently granted. According to the Defendants’ expert, it is a confidential case not accessible by the public, but a case which the Defendants’ expert himself handled in the past, although he did not specify the date or even give any idea of the year of the case. He exhibited the case report to his expert report, but the case report is heavily redacted. The main body of the case report is only 3.5 pages, with page 5 being an annexure setting out the relevant statutory provisions. The name of the Court is redacted. The date is redacted. Out of 3.5 pages, pages 1 and 2 are almost wholly redacted. No reason can be ascertained from the case report. It is not even clear from the case report whether the asset in question was situated outside the PRC, although in the expert report itself, the Defendants’ expert himself supplements that the asset was. For all this, the Plaintiffs simply have no way to verify. In my view, the value of such case report is little, if any. If I would have to make a ruling, I would prefer the Plaintiffs’ expert opinion.

78.  Mr Yu submits further that the Defendants’ expert relies on article 103 of the Civil Procedure Law of the PRC amended in 2023, and therefore (1) the Plaintiffs’ expert’s reliance on the Civil Procedure Law pre-2023 is not appropriate; and (2) it is not fair to say that under the 2023 amendment, the grant of such order has been rare, given that it has only been two years since the amendment. With respect, the Defendants’ expert has not taken this timing point and therefore, the Plaintiffs’ expert simply has not had any chance to reply on this timing issue. I should record that in Mr Wong’s oral reply submissions, he seemed to invite me to search the Internet to check whether there was any material amendment in 2023. I rejected his such invitation outright.

79.  In any event, put to the highest for the Defendants, the fact that the Defendants’ expert has to resort to such a confidential, heavily redacted case report, only reinforces the Plaintiffs’ expert opinion that it is a matter of practice and policy not to grant such preservation order, with exception which it is fair for me to say is very rare, even assuming that the relevant time period started in 2023 but not earlier.

80.  In the circumstances, I see it just and convenient to grant the preservation order in favour of the Plaintiff, with the modification of the terms mentioned in §60 above.

81.  It remains for me to make it clear that if there are material changes of circumstances like some decisions made by the PRC Court touching on the merits of the parties’ respective cases that would render the preservation no longer just or convenient, the parties should promptly inform the Hong Kong Court and there and then for the Hong Kong Court to consider how to proceed with the preservation order.

X. DISCLSOURE ORDER

82.  The Plaintiffs seek a disclosure order disclosing the following information:-

“a. The latest balance of the HSBC Account;

b. If assets in the HSBC Account have been disposed of or transferred to third party/ies on or after 2 February 2024, what has become of such assets and the location of such assets or their substitute/traceable proceeds, and to whom, to where, and under what circumstances such assets were disposed of or transferred out of the HSBC Account;

c. In respect of the sum of US$1,085,120 (“Sum”) which was shown to have been transferred out of the HSBC Account in the bank statement as at 31 May 2024, what has become of the said Sum or its substitute/traceable proceeds, and to whom, to where, and under what circumstances the Sum was disposed of or transferred out of the HSBC Account; and

d. A full account of the movement of assets, income and expenditure in respect of the assets in the HSBC Account from 2 February 2024 until the date of service of the Order on the relevant Defendant.”

83.  Before I proceed to substantive analysis, I point out that (c) is unnecessary now, given that as mentioned above, the Defendants have already explained in affirmation that the US$1,085,120 was used to satisfy the calls issued by the Funds.

84.  For the application for the disclosure order, I have two main considerations. My first consideration arises from Relief 2 sought in the Hangzhou Proceedings, as quoted in §37 above:-

“请求确认被告就信托财产对原告负有受信责任，需就信托财产的去向作出解释”

85.  There must be the disclosure before any explanation can be made. Therefore, I have concern that if I am to make the disclosure order now being sought by the Plaintiffs from me, the disclosure order may constitute, or may be regarded as, interference with the case management of the Hangzhou Proceedings or may even be regarded as a decision on merits on Relief 2.

86.  My second consideration is that a disclosure order is usually made hand-in-hand with a preservation order or proprietary injunction as a policing device to ensure that the preservation order or the proprietary injunction is effective: see Carmon Reestrutura-engenharia E Servicos Tecnicos Especiais (Su) Limitada v Carmon Restrutura Ltd [2024] HKCFI 435 at §18 per DHCJ Le Pichon. The reason is clear: at the time of the preservation order or the proprietary injunction, the subject property or part of it may have already been removed to somewhere else. If the preservation order or the proprietary injunction is to serve its purpose, namely, to preserve the subject property, the applicant has to know the whereabouts of the subject property, hence the necessity for the disclosure order.

87.  My two considerations above, in my view, can be reconciled. I make the disclosure order as sought by the Plaintiffs and at the same time, as I now do, make it clear that:-

(1) The disclosure order is made here solely for the purpose of ensuring that the preservation order I make is effective, and by this, the subject asset can still be preserved for the PRC Court to conduct the Hangzhou Proceedings meaningfully. The order is thus in this sense reflective of the Hong Kong Court’s comity to the PRC Court, as in the grant of the preservation order. If I grant the preservation order but its effectiveness cannot be ensured by an ancillary disclosure order, this would seem to be a mockery of the aid the Hong Kong Court intends to provide to the PRC Court and ultimately non-comity to the PRC Court.

(2) The disclosure order is by no means made upon any consideration of the merits of the parties’ respective cases (save and except for the purpose of finding serious issues to be tried or a good arguable case at the first stage), and is by no means related to the merits for seeking Relief 2 in the Hangzhou Proceedings whatsoever. The PRC Court can and should by no means be affected by this disclosure order in determination of whether to grant Relief 2 and any other relief, final or interlocutory in nature.

XI. CONCLUSION

88.  In the circumstances, I make an order in terms of the draft order at Hearing Bundle A pages 4-12 with the following modifications:-

(1) The phrase in §§1 and 2 of the draft order “dispose of or deal with or diminish the value of” should be replaced by “withdraw or encumber”;

(2) §3(c) of the draft order is deleted;

(3) §5 of the draft order shall become, as proposed by the Plaintiffs’ revised draft order submitted during the hearing:-

“This Order will remain in force until the final disposal of the claim by the Plaintiffs against the 1^st Defendant (with the 2^nd Defendant named as a third party) as applied to be commenced in the Hangzhou Intermediate People’s Court (and accepted and registered by the Zhejiang Higher People’s Court on 4 July 2025)”;

and I add “or until further order of the Court”;

(4) §10 (for service out) shall be deleted, as proposed by the Plaintiffs’ revised draft order submitted during the hearing;

(5) There shall be liberty to apply; and

(6) Schedule 1 of the draft order shall be updated to include all the affirmations duly filed in the proceedings and should make it clear that I have not read the parts of §§32 and 37 of Jacky’s 2^nd Affirmation which I struck out at the outset of the hearing upon My Yu’s application.

89.  Since I have granted the relief sought in the Originating Summons, it is unnecessary for me to make any order on the Interlocutory Summons. I therefore make no order on the Interlocutory Summons.

90.  As regards costs of the Originating Summons and the Interlocutory Summons, I make a costs order nisi that the Defendants shall pay the Plaintiffs the costs (including all costs reserved), to be summarily assessed on paper, with certificate for two counsel. For the summary assessment, the Plaintiffs shall lodge and serve their statement of costs within 3 days upon the costs order nisi becoming absolute, and the Defendants shall lodge and serve their list of objection within 7 days thereafter.

91.  Lastly, I thank the Plaintiffs’ counsel (Mr Wong, Ms Yuen and Mr Liu) and the Defendants’ counsel (Mr Yu and Mr Mak) for their thorough and able assistance.