GREEN ELITE LTD (IN LIQUIDATION) v. FANG ANKONG AND ANOTHER

HCA 1779/2022

[2024] HKCFI 1191

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1779 OF 2022

________________________

________________

_____________

D E C I S I O N

_____________

A.  Introduction

1.  The Plaintiff (“Green Elite”) makes an application for a Mareva injunction, argued today on the last day of April 2024, but on an inter partes summons issued over one year ago on 24 April 2023, arising out of these proceedings commenced four months before that on 16 December 2022, seeking to enforce by way of common law enforcement a judgment (“BVI Judgment”) made by the British Virgin Islands Court (“BVI Court”) almost one year before that on 26 January 2022.

2.  On that chronology alone, it might be thought that the application faces inevitable difficulties.

3.  An added hurdle arises from the fact that the identified Hong Kong assets which trigger the making of enforcement proceedings in Hong Kong (“HK Funds”) are already in effect ‘frozen’ and incapable of dissipation, at least pending a decision awaited following a trial in Hong Kong in other proceedings involving the 1^st and 2^nd defendants (“Fang” and “HWH” respectively).

4.  The summons first came on for hearing before Lisa Wong J on 28 April 2023, when the only point of contention between the parties was whether Green Elite was entitled to interim-interim protection during the period of adjournment pending the substantive argument to be fixed before me.

5.  In her Decision dated 2 June 2023, Lisa Wong J declined to grant Green Elite any interim-interim Mareva relief, as she was not persuaded that the threshold had been met for the grant of such relief against either Fang or HWH. In particular, she was not satisfied as to the existence of a real risk of dissipation, an essential element that an applicant for Mareva relief must establish by cogent evidence.

6.  Ms Esther Mak, Counsel for Green Elite, rightly points out that Lisa Wong J’s Decision is no bar to the grant of remedy at this substantive argument. I agree that the argument needs to be considered in its present circumstances, which may include matters which have occurred over the past 12 months or so, since the hearing before Lisa Wong J.

7.  Ms Mak has also addressed the five main points of opposition raised by Mr William Wong SC, leading Mr Roger Phang of Counsel, who act for Fang and HWH, to which I shall return as necessary.

8.  This is my Decision.

B.  Background

9.  The necessary background can be set out quite shortly.

10.  The BVI Judgment was given against (amongst others) Fang and HWH after a nine-day trial at which Fang and HWH were represented. Ms Mak submits that the BVI proceedings provide important context of the risk of dissipation, and I agree that the context is capable of being taken into account in the assessment of that risk now.

11.  The proceedings – incidentally, commenced as long ago as 14 December 2018, by the then recently appointed Liquidators – concerned Green Elite’s claims for payments of the sums of (1) the HK$150 million sales proceeds of certain shares (together with interest of around HK$20.6 million accruing) (“Sales Proceeds”); (2) a debt owed as a director (“Director’s Debt”) in the aggregate sum of around HK$10.22 million (inclusive of interest accruing); and (3) dividend payments plus interest in the aggregate sum of about HK$4 million (“Dividend Payments”).

12.  The claim was based upon allegations, amongst other things, that Fang had breached his fiduciary duties as director of Green Elite, and that he distributed the Sales Proceeds for an improper purpose, and further or alternatively failed to comply with the approval and authorisations required in the relevant BVI statute.

13.  In the BVI Judgment, the BVI Court found that:

(1)  The relevant distributions were not properly authorised by Green Elite, having never been approved at Board level, formally or informally.

(2)  Fang is liable for the money as a loan which appeared in Green Elite’s accounts.

(3)  HWH is liable for the Dividend Payments – but not the claim to the Sales Proceeds and the Director’s Debt.

14.  The BVI Judgment was subsequently upheld in its entirety on appeal, though Fang and HWH have been granted leave to appeal to the Privy Council. I understand the grant of leave was effectively automatic, and gives no indication as to any view of the merits of the appeal, which may not be strong against the concurrent findings of the two lower courts.

15.  Nevertheless, it is in the face of that further appeal that Fang has chosen not to satisfy the BVI Judgment.

16.  In January 2022, leading to an order dated 23 February 2022, but entered on 17 March 2022, Green Elite applied for and obtained injunctions in the BVI. The BVI Court ordered Fang (1) not to dispose of, deal with, or diminish the value of any of its assets in the PRC (apparently intended as a reference to include Hong Kong) up to the value of HK$195 million, and (2) not to deal with or diminish the value of any his assets up to the value of almost US$25 million, whether they are in or outside BVI (which does not apply to Fang’s assets in the PRC).

17.  The BVI Court also ordered Fang to give ancillary asset disclosure, and to identify Green Elite’s legal representatives of the amount concerned and the source of monies used by him within the ordered allowance for ordinary living expenses and a reasonable amount for legal advice and representation.

18.  The current proceedings were commenced on 16 December 2022. The current summons was issued on 24 April 2023. By the summons, Green Elite seeks domestic Mareva injunctions against each of (1) Fang up to HK$180,890,529.70 and (2) HWH up to the same ceiling or alternatively HK$4,040,186.30. The application against HWH is made invoking the so-called Chabra jurisdiction, where Fang is the sole owner and director of HWH.

C.  The Battleground

19.  It is, perhaps, helpful first to set out the battleground between the parties. The five points to which I have already made reference raised by Mr Wong as grounds of opposition to the application are as follows:

(1)  there is no risk of dissipation of assets including, in particular, the HK funds sitting in court or being held in escrow;

(2)  Green Elite refuses and is unable to give the usual unlimited cross-undertaking as to damages;

(3)  the terms of the injunction sought are not ancillary or back to back with the injunction order granted by the BVI court, but conflict with it and seek to obtain what the BVI court refused to grant;

(4)  the ancillary disclosure order sought against Mr Fang is vexatious and unnecessary as he has already been ordered by the BVI court to disclose his assets and has complied with that order, and the ancillary disclosure order sought against HWH must fall together with the injunction sought against it which was refused by the BVI court; and

(5)  the application smacks of an attempt by Delco to have a second bite at the cherry in the event that the court rejects its earlier application for similar orders.

D.  Applicable Principles

20.  The principles for the grant of injunctions in aid of or ancillary to a foreign judgment are well settled. While the present application for an injunction is brought in the action for the common law enforcement of the judgment, the BVI judgment, the case law for section 21M of the High Court Ordinance applications is relevant to the present injunctive relief sought in aid of the enforcement of a foreign judgment.

21.  As Ms Mak submits, and I accept to be correct, first, the courts have in the past stated that the most appropriate place to make orders affecting assets is where the assets are located: see, for example, Crédit Suisse Fides Trust S.A. v Cuoghi [1998] QB 818 at 827C-D. Essentially, the idea is to bring those assets within the power of the court of the place where the assets are located.

22.  Secondly, a back-to-back Mareva injunction can be granted even if a worldwide Mareva injunction was granted in the primary court.

23.  Thirdly, though there is no exhaustive list of considerations which may cause it to be thought expedient for the court to grant back‑to‑back relief, one factor to bear in mind is whether the making of the order would interfere with the management of the case in the primary court in the sense that it would give rise to disharmony, confusion, or the risk of conflicting, inconsistent, or overlapping orders in other jurisdictions.

24.  Fourthly, there is no hard and fast rule that the applicant must seek injunctive relief which completely mirrors the relief sought in the primary court before it can apply for an injunction in aid of foreign proceedings, and here I remember that the assets which are the main trigger for the application include the HK Funds, but reference has been made to other assets of Fang and HWH which either are or may be in Hong Kong.

25.  As regards the principles relevant for the grant of a domestic Mareva injunction in Hong Kong, they are also well settled. It falls upon the applicant to satisfy the court that: (1) there is a good arguable case; (2) there is a real risk of dissipation or removal of assets so as to render any judgment nugatory; (3) the balance of convenience lies in favour of granting a Mareva injunction; and (4) there are assets within the jurisdiction.

26.  As to whether there is a risk of dissipation, that may be inferred from, to adopt a phrase which is commonly used, ‘unacceptably low standards of commercial morality’ on the part of the defendant. But that has, perhaps, been better explained by the Court of Appeal in Convoy Collateral Ltd v Cho Kwai Chee [2020] 6 HKC 81, at §§35 to 53.

27.  The ultimate question is whether the applicant succeeds in showing objectively there is a solid basis for concluding that there is a real risk of unjustified dissipation of assets by a defendant. That question is to be answered by examining the evidence holistically.

28.  Evidence of dishonest and fraudulent conduct or other serious wrongdoings which form the basis of the claims, and which reflect adversely on the integrity of the defendant, could point powerfully towards an inference of such risk. Since the assessment is in respect of the risk of dissipation as opposed to the fact of actual dissipation the exercise necessarily involves an evaluative and predictive judgment. Thus, the evidential burden can be satisfied by drawing proper inferences from a holistic consideration of all the circumstantial materials that are indicative of risk.

29.  Of course, it is also well settled that where a judgment has already been entered against a defendant, the court will be more ready to grant what is called a post-judgment Mareva injunction than in circumstances prior to judgment, because not least the first limb of the requirements for the grant of a domestic Mareva injunction is well satisfied by a prior judgment in favour of the plaintiff.

E.  Risk of Dissipation

30.  The main battleground in the argument between the parties relates to whether there is or is not a real risk of dissipation.

31.  Ms Mak says there is a solid basis for concluding that there is, indeed, a real risk. First, she points to the fact of the BVI injunction order which shows that the BVI Court, as the primary trier of fact with the closest contact with Fang and HWH, was satisfied that there is a risk of dissipation when it granted the injunctions there.

32.  Reference has been made to the passage in the decision of Jack J when granting the injunctions, where he said that:

Although I have acquitted Mr Fang of dishonesty in the judgment which I delivered after the trial, nonetheless there were significant criticisms to be made of his behaviour, and that although I found him not to be a dishonest man that does not mean that I should proceed on the basis that he is going to happily pay his judgment debts.

33.  Secondly, Ms Mak relies on the fact that Fang has refused to satisfy the judgment when he has the apparent ability to do so and that, she says, is a significant factor indicative of risk of dissipation. The refusal to satisfy the debt at least identifies a refusal to recognise an immediate liability. Notwithstanding that, she says Fang and HWH must recognise that the chances of successfully appealing the judgment are, on current evidence, at least slim – and where the making of the appeal does not operate as a stay. Indeed, Fang has twice attempted to obtain a stay in the BVI, but both attempts were unsuccessful.

34.  Thirdly, she points to the matters giving rise to the subject matter of the BVI proceedings themselves, which she says are identified as having been suspicious and where, for example, Jack J concluded that there had been a cover-up and there would have been no need for a cover-up if there was nothing to hide.

35.  Fourthly, Ms Mak relies on various acts which she says indicate Fang’s intention to take advantage of every opportunity to resist enforcement of judgment and evade responsibility to pay a judgment creditor what has been found to be due.

36.  She points to the refusal to provide an undertaking which merely sought to confirm that the HK Funds would not be dissipated in the event that the Hong Kong proceedings were determined in Fang and HWH’s favour. Of course, Mr Fang says it is precisely because the BVI injunction has been made in worldwide terms that any further undertaking is pointless, but Ms Mak says the opposite should be the case: because it was given, he should have agreed to the further injunction in Hong Kong.

37.  Ms Mak also refers to what are clearly at least strongly arguable pieces of evidence to show a degree of evasion in accepting service of these proceedings by Mr Fang.

38.  As to the so-called ‘stable door’ argument, where Fang has argued that there is no real risk of dissipation because he would have dissipated the assets a long time ago if he wished to, Ms Mak says that the remarks made in Lisa Wong J’s judgment were made in the context of the then only live question of whether an interim-interim injunction should be given as an urgent temporary stop-gap measure, and that those comments have no weight in the present proceedings. In any event, a real risk of dissipation is not determined by whether there could have been dissipation, but whether the evaluative and predictive judgment identifies that there is a real risk of dissipation.

39.  As to the HK Funds, Ms Mak identifies that they could not have been dealt with or dissipated in any event But that seems to me to be an argument that must cut at least both ways.

40.  For his part, Mr Wong says the court should place great weight on the fact that it is not disputed by Green Elite that the HK Funds are currently not subject to any risk of dissipation, and that what Green Elite is really arguing is that there either will be or could be a real risk of dissipation once the trial judgment in the Hong Kong proceedings is handed down, if the outcome is in favour of Mr Fang and HWH. But, says Mr Wong, that is a speculative contention.

41.  But, more importantly, irrespective of the outcome of the Hong Kong proceedings, there are real practical hurdles in at least any immediate dissipation steps taking place. Firstly, as regards the sum of HK$41.9 million paid into court in one of the actions dealt with at that trial, those moneys cannot come out of court without an order of the court. Secondly, as for the funds held in escrow by the solicitors, they are being placed into successive time deposits with the consent of Fang, HWH, Delco, and Green Elite, and cannot be withdrawn at any time without regard to the maturity date and/or without penalty. Further, the solicitors, of course, know of the terms of the BVI injunction order which is in worldwide terms and would cover Mr Fang’s assets in Hong Kong, a point which seems to me to have real weight.

42.  I also take into account that Green Elite is not relying on any actual act of dissipation, notwithstanding the lengthy period of many years over which relevant litigation has been going. Further, I take into account the points also relied upon by Lisa Wong J in relation to the timing of and, to an extent, the delay in the making of this current application.

43.  Less weight seems to me should be given to the other matters relied upon by Mr Wong. But in the overall assessment it seems to me that Green Elite has not established a real risk of dissipation of assets.

44.  Ultimately, it is making what can be described as a contingent application (1) in circumstances where the assets over which it makes that application are, in any event, a subset of assets already frozen in the foreign jurisdiction, and (2) in circumstances where the court is less concerned in Hong Kong to be in a position to take control over those assets insofar as it does not already have effective practical control over those assets.

45.  That finding having been made by me, that is effectively determinative of the application, but I will deal with the other points shortly.

F.  Other Points

46.  On the point relating to balance of convenience and whether, as Mr Wong argues, Green Elite would be overprotected if an injunction in Hong Kong were to be given in addition to the injunction orders already granted in the BVI, I accept Ms Mak’s submissions that the degree of additional security interest, if that is the proper term for it, is but the inevitable consequence of the making of a mirroring or back-to-back order, which would not in any way be improper.

47.  I do not think there are real as opposed to theoretical problems as regards the amounts frozen and/or as would be used to satisfy any judgment, if it is maintained on the Privy Council appeal, where there are various mechanisms for dealing with those circumstances so as to ensure that the judgment would be satisfied only once from whatever assets it is appropriate to seek that satisfaction. I bear in mind, again, that this is an application that is being made in the post-judgment context.

48.  As to the point about cross-undertaking on damages, there is no real dispute that the question of any cross-undertaking is a matter within the discretion of the court. Ultimately, the test whether a cross-undertaking or a limited form of cross-undertaking should be taken is a matter of fairness. Again, it seems to me to be highly relevant in this context that the application is being made post-judgment and, indeed, as part of a step to seek to be able to enforce that judgment.

49.  I take into account also that in the BVI proceedings, the court there accepted what seemed to be common ground between the parties that it was appropriate that a cross-undertaking be given by Green Elite, but limited to its net realisable assets. In the overall circumstances of the matter, taking those features into account, had I granted an injunction, I would not have required any cross‑undertaking from Green Elite or its liquidators in Hong Kong.

50.  As regards the question of any ancillary disclosure order, it seems to me to follow that if I were persuaded that it is appropriate to grant a Hong Kong Mareva injunction in order to bring Hong Kong assets within the overall control of the Hong Kong court – notwithstanding that they are a subset of the assets subject to the worldwide Mareva granted in the BVI – I would order disclosure in Hong Kong to ensure that the Hong Kong court is in the best position to carry out the relevant function.

51.  Of course, I see the argument that there is no point in giving – and it would be vexatious to Mr Fang to be required to give – disclosure where he has already given that disclosure in the BVI and where there is at present no suggestion that there has been a failure to comply with the requirements for disclosure of the Hong Kong assets within the overall disclosure required by the BVI injunction order. But, on the other hand, it seems to me in the exercise of my discretion that the contrary argument is more persuasive: if he has already given that disclosure, and it is said to be accurate, then there is little difficulty in providing it again to the Hong Kong court as an ancillary adjunct to ensure the policing of and proper enforcement of an injunction which the Hong Kong court would, on that hypothesis, have decided should be granted.

52.  As to Mr Wong’s last point about the second bite of the cherry, I do not think that that would have been determinative in any event, although I see little merit in that particular argument. It seems to me that there are differences between the application made by Delco and the application now made by Green Elite. But I have taken into account in my assessment, in particular as regards to the real risk of dissipation, that the Delco application has been made and what are the potential consequences of that application are dependent upon the potential consequences of my judgment in the trial of the three actions which judgment is, I know, eagerly awaited as it, unfortunately, has been for some time.

G.  Result

53.  In conclusion, I dismiss the application, albeit that I do so without prejudice to any future circumstances where a similar or related application might be felt to be appropriate in future, in any contingent circumstances as may then arise.

(Submissions re on costs)

H.  Costs

54.  As to costs, Mr Wong submits that the appropriate costs order is that the costs should be paid by the plaintiff to the defendants on an indemnity basis with certificate for two Counsel, whereas Ms Mak suggests that the correct order to make is that the costs should be the defendants’ costs in the cause without certificate for two counsel, that is that taxation would proceed on the basis of only one Counsel.

55.  The argument between the parties is essentially in relation to three points.

56.  The first point arises because Mr Wong says that in the undertakings given by Green Elite to the BVI Court as what might be called part of the ‘price’ of obtaining the BVI injunction orders, Green Elite gave, amongst others, the following undertaking, namely, that it would not, without the permission of the court, seek to enforce the order in any country outside BVI, or seek an order of a similar nature, including orders conferring a charge or other security against the defendants or the defendants’ assets – provided that, for the avoidance of doubt, nothing in the order or undertakings prevents the claimant from taking steps to execute or enforce the trial order save as prohibited by paragraph 1 of the order.

57.  Mr Wong submits that the proviso obviously does not bite on an application such as the present domestic Mareva application. Therefore, he says, Green Elite has acted in breach of the undertaking given to the BVI Court in making an application outside BVI to seek an order of a similar nature to the order obtained in the BVI.

58.  Ms Mak points to the fact that this is a relatively new point raised by Fang and HWH in one of the affirmations and, in particular, in the skeleton argument filed by Mr Wong, and that no steps have been taken by them in the BVI if it is really thought that Green Elite has acted in breach of the order or undertakings given so as to obtain that order. She also makes the submission that, in any event, the application here is to be considered on its own merits, not least where what was being sought was an order in relation to what is, in effect, a subset of the matters dealt with within the BVI injunction order.

59.  It seems to me that whether or not there has been a breach of the undertaking given to the BVI Court is a matter for the BVI Court to determine. But, if I were to form the firm view that there has been a breach, I might take that into my discretionary consideration when dealing with costs in the very broad discretion that arises on a decision relating to costs. But my preliminary view would be, even if there was a breach of that undertaking where what is being sought was a mirror order over a subset of the matters covered by that order, it is difficult to imagine that the BVI Court, if asked, would not have granted permission to make this application. Of itself, I do not think that is a matter which weighs heavily in pointing towards an indemnity basis of a costs order in these proceedings.

60.  The second point relates to the first undertaking given to the BVI Court, namely, in effect, as to the extent of the cross‑undertaking that was given. I have already decided that point against Mr Wong and the practical reality is that the cross-undertaking given in the BVI proceedings could only be to the extent of Green Elite’s assets at the time that any cross-undertaking would be acted upon or any claim for compensation under that cross-undertaking would be made.

61.  I have borne in mind a point that was made in argument earlier, that the practical reality is that Green Elite’s assets are essentially reflected in the value of the BVI Judgment so that if the appeal to the Privy Council fails, then the likelihood of any cross-undertaking being activated would be nil, and if the appeal to the Privy Council succeeds then Green Elite’s assets are, in practical terms, reduced to zero or almost zero.

62.  As to the third point, Mr Wong strongly makes the submission that Lisa Wong J gave due warning to Green Elite when she decided not to grant interim-interim relief largely on the basis of her being not satisfied that there was a real risk of dissipation because of the delay in the making of the application.

63.  I do not think it is necessary for me to go back to the individual parts of Lisa Wong J’s reasoning in her Decision. But I think it is fair to say that obviously the timing of matters weighed heavily in her consideration. Further, of course, the absence of any evidence of there having been any actual dissipation at least up until that point weighed heavily in her decision making, albeit that she was applying the relevant test for the grant or refusal of interim-interim relief at that time, which may not be exactly same test as is applicable on the substantive argument which I have heard today.

64.  Ultimately, I am not persuaded that there has been such abuse or other circumstances as warrant an indemnity costs order. But I am persuaded that it is entirely appropriate that the costs should include a certificate for two Counsel in the circumstances of the case and the way in which it has been argued.

65.  Mr Wong has invited me to engage in a gross sum assessment, which I am content to do. This is a standalone application which has been dealt with on a basis which gives rise to an immediate costs order, and the sooner that the costs assessment is dealt with in an appropriate way the better.

66.  Therefore, I suggest that Mr Wong’s side put forward a skeleton bill or a statement of costs for summary assessment within 14 days from today, and that Ms Mak's side have 14 days to list out any objections. I will then deal with the summary assessment on the usual relatively broad-brush basis on paper without any further submission, unless I invite it.