INNA BAZHENOVA AND ANOTHER v. OOO SECURITIES (HK) GROUP LTD

HCA 2569/2024

[2025] HKCFI 2745

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2569 OF 2024

______________

______________

_______________

D E C I S I O N

_______________

Introduction

1.  By Inter-Partes Summons dated 27 December 2024 (“the Summons”), 1^st Plaintiff (“P1”) and the 2^nd Plaintiff (“P2”) (collectively, “Ps”) apply for:

(1)  an asset preservation order pursuant to O.29, r.2 of the Rules of High Court, Cap.4A (“RHC”) against the Defendant (“D”) in respect of: (a) 2,896,175 class A ordinary shares of AMTD IDEA Group Digital Shares (“Digital Shares”); and (b) 121,908 class A ordinary shares of AMTD Digital Inc. Idea Digital Shares (“Idea Shares”) (collectively, “the Shares”); and

(2)  ancillary disclosure order for the current whereabouts of the Shares and all D’s dealing with the same.

2.  On 3 January 2025, upon the undertaking by D not to dispose of or deal with or diminish the value of the Shares until the substantive hearing of the Summons, directions were given by Au-Yeung J for the filing of evidence and the Summons was adjourned for substantive argument. The ancillary disclosure order was made by the learned Judge which leaves only the application for the asset preservation order under paragraph 1 of the Summons. The 1^st Affirmation of He Chuan (“He 1^st”)[1], the managing director of D, was filed pursuant to the ancillary disclosure order.

3.  The main affirmations filed in respect of the Summons are:

(1)  The 1^st Affirmation of Inna Bazhenova (“Bazhenova 1^st”)[2] and 2^nd Affirmation of Inna Bazhenova (“Bazhenova 2^nd”)[3] on behalf of Ps; and

(2)  The 2^nd Affirmation of He Chuan (“He 2^nd”)[4] on behalf of D.

4.  Today is substantive hearing of the Summons. Mr Ng and Mr Tam, counsel, appear for the Ps and Mr Chan SC and Mr Chiu, counsel, appear for D.

Background Facts

5.  In this action, essentially, Ps claim that:

(1)  P1, prior to around 20 October 2023, was the registered sole shareholder of The Art Newspaper SA (“the Company”)[5];

(2)  P2 was at all material times P1’s business partner[6];

(3)  On around 14 May 2023, P1, the Company and AMTD Group Inc. (“AMTD”) entered into a sale and purchase agreement (“SPA”) whereby P1 agreed to sell and AMTD agreed to purchase all the issued shares capital of the Company for the consideration as provided for in the SPA[7];

(4)  On around 12 October 2023, P1, AMTD and the Company entered into a deed of amendment of the SPA (“the Deed”) which provided that: (a) the consideration to be provided by AMTD were partly cash and partly shares; (b) the shares were to be deposited with D; (c) the shares were to be Digital Shares and Idea Shares; (d) for some of those shares, there are specified lock-up periods for which P1 is not permitted to sell; (e) AMTD has an obligation of “make-whole adjustment” which applies in the event that the sale proceeds from the disposal of Idea Shares and Digital Shares subject to the lock-up period are less than a specified amount; (f) the obligation on AMTD is to procure AMTD Idea Group and/or AMTD Digital Inc. to issue more shares to make up the shortfall; and (g) AMTD’s obligation only applies if P1 disposes of the shares through P1’s or P2’s account maintained with D and not otherwise[8];

(5)  On 15 May 2023, Ps went to AMTD’s main office and were given application forms to open accounts with D. These were filled out and signed. P1 and P2 opened an account with D (“P1 Account” and “P2 Account” respectively) on 18 May 2023. On 8 August 2023, P1 and P2 received formal confirmation of the opening of the P1 Account and the P2 Account, and were granted online access to D’s online directory[9];

(6)  On 20 October 2023, pursuant to the Deed, AMTD made cash payment to P1 and issued to P1 and P2, 380,065 Digital Shares and 8,688,525 Idea Shares. On the same day, the shares that were not subject to any lock-up requirement were sold and the proceeds wired to P1 and P2. Those shares that were subject to a lock-up period were deposited into the P1 Account and the P2 Account: (a) 115,812 Digital Shares and 2,751,368 Idea Shares were deposited into the P1 Account; and (b) 6,096 Digital Shares and 144,807 Idea Shares were deposited into the P2 Account (collectively, “Lock Up Shares)[10];

(7)  From March 2024, P1 and P2 lost or were otherwise denied access to D’s online directory[11];

(8)  Pursuant to the SPA, the lock-up period of Idea Shares expired on 1 June 2024 and the lock-up period of Digital Shares expired on 20 April 2025[12];

(9)  Despite demands and requests by P1 and P2, D refused, neglected or otherwise failed to respond to their request to sell or otherwise deal with the Lock Up Shares. To date, contrary to P1’s instructions, the Lock Up Shares has yet been disposed of by D and remain in the P1 Account and P2 Account[13];

(10)  Ps claim that D has breached various duties owed to P[14]; and

(11)  By reason of the breaches of D, Ps claim to have suffered loss and damages and claims inter alia the following relief: (a) a declaration that D has failed to obey the lawful and reasonable instruments of Ps; (b) an order that D do sell the Lock Up Shares; (c) damages to be assessed; and (d) equitable compensation to be assessed.[15]

Applicable Principles

6.  O.29, r.2(1) of RHC provides:

“On the application of any party to a cause or matter the Court may make an order for the detention, custody or preservation of any property which is the subject-matter of the cause or matter, or as to which any question may arise therein, or for the inspection of any such property in the possession of a party to the cause or matter”.

7.  The applicable principles under O.29, r.2 are set out in Hong Kong Civil Procedure 2025, Vol.1, §29/8/7. These include the following:

(1)  It has to be shown: (a) that there is property which bona fide is the subject matter of the cause or matter, or as to which any question may arise; and (b) something ought to be done for the security of that property. Part of this inquiry will involve showing that damages may not be an adequate remedy;

(2)  However, the court will refuse to grant a preservation order if damages will be an adequate remedy;

(3)  An enquiry into the relative merits of rival claims is not necessary. In respect of merits of the claim, the party seeking the preservation order only needs to show that there is a serious issue to be tried on the normal American Cyanamid principles; and

(4)  Unlike an application for Mareva injunction, the applicant does not need to show a risk of dissipation of assets and even if there is delay, a preservation order may be granted.

Discussion

8.  The above principles are not in dispute.

9.  However, Mr Chan has submitted that the present application is misguided and should be dismissed. Two main grounds are relied upon: (1) the Shares are not in the possession of D (“the Not in Possession Ground”); and (2) damages will plainly be an adequate remedy (“Damages are Adequate Ground”).

10.  In respect of the Not in Possession Ground, Mr Chan submitted, which was not contested by Mr Ng, that on the plain wording of O.29, r.2(1) of RHC, that the Court may make an order under O.29, r.2(1) of any property which is subject matter of the cause or matter in the possession of a party to the cause or matter. Mr Chan drew analogy with proprietary injunctions which are not ordinarily granted where the relevant asset is not or no longer held by the defendant. I agree with this submissions and indeed it is consistent with my recent Decision in Siraj Ahmed v Rafeeq Ahmed & Ors [2025] HKCFI 2472 (see §39). I do not believe Mr Ng contested that an analogy could be drawn with proprietary injunctions.

11.  Mr Chan relied on He 2^nd at §8[16], where it was deposed that the Shares are presently registered in Ps’ own names and “not through intermediaries, such as D or CCASS, or any depository bank such as Deutsche Bank”. He expressly stated that as D is not the registered shareholder and does not have “direct access to the share certificates or any electronic form of the subject shares”, D has no authority or power to deal with such shares. Whilst Mr Ng took issue whether Mr He had stated on affirmation that he does not have possession of the Shares, I think whilst the word “possession” was not used, in effect that is what he was saying when he stated that he has no direct access to the share certificates.

12.  It was further clarified at He 2^nd, §10[17] that the assertion in Bazhenova 1^st that the Shares were deposited into Ps’ brokerage accounts with D is factually incorrect. In particular, it was stated that the screenshots exhibited in Bazhenova 1^st do not reflect the true factual position and the screenshots were not provided or endorsed by the current management or directors of D. It was suggested that the incorrect screenshots may have been a direct result of some misconduct of Mr Issac See, a former employee of AMTD (but was dismissed in April 2024) who was responsible for handling the transaction under the SPA on behalf of AMTD and liaising with D. The screenshots that were exhibited show (as deposed to in Bazhenova 1^st, §26)[18] as at 20 October 2023: (1) 115,812 Digital Shares and 2,751,368 Idea Shares were deposited into P1 Account[19]; and (2) 6,096 Digital Shares and 144,807 Idea Shares were deposited into P2 Account[20].

13.  Mr Chan in his written skeleton submissions had submitted that given what was stated in He 1^st and He 2^nd, namely, that the Shares are not presently in D’s possession, that is conclusive at the interlocutory stage. He referred to Hong Kong Civil Procedure 2025, Vol.1, §24/7/1 but that paragraph is in relation to the conclusiveness of an affirmation of whether a party has or has had any documents other than those disclosed in the context of an application for specific discovery. At the hearing, I believe that Mr Chan agreed with me that the threshold was a serious issue to be tried and that what the defendant states on affirmation on possession of property, in a case where a proprietary injunction and by analogy asset preservation order is sought, is not conclusive.

14.  For the purposes of a preservation order, akin to proprietary injunction, it is for Ps to adduce some reasonable evidence of the Shares being held by or under the control of D. See Zhang Yan & Ors v ASA Bullion Limited [2019] HKCFI 179 at §§11(4) per Recorder Eugene Fung SC and 13-16 and Welly Grace Limited & Ors v Keung Yee Man & Ors [2023] HKCFI 3082 at §30 per Recorder Eugene Fung SC. As noted by the learned Recorder in Welly Grace Limited at §27, the function of a proprietary injunction is to preserve the property in the defendant’s hands which is said to belong to the plaintiff. The same is apposite to the preservation order sought by Ps in the present case. Moreover, the court is not concerned with the relative merits of the rival claims. Rather, the party seeking the preservation order has to demonstrate a serious issue to be tried on the merits which include whether the property is in the possession of the defendant.

15.  In the present case, I am plainly satisfied that there is reasonable evidence adduced by Ps that there is a serious issue to be tried that the Shares are in the possession of D as they were deposited in the P1 Account and P2 Account by AMTD on 20 October 2023 and has remained in the “Designated Securities Account”:

(1)  According to the Deed, AMTD was to deposit the 8,688,525 Idea Shares and 380,065 Digital Shares in the “Designated Securities Account” at the First Closing (clause 4.1.2(b) and (c))[21];

(2)  According to the Deed, at the Second Closing, in order to complete the sale stipulated in clause 4.2.1, P1 was to instruct the Designated Broker to transfer 258,157 Digital Shares from the Securities Account to the purchaser of such Digital Shares (see clauses 4.2.1 and 4.2.2(a))[22];

(3)  According to the Deed, at the Third Closing, in order to complete the sale in clause 4.3.1, P1 was to instruct the Designated Broker to transfer 5,792,350 Idea Shares from the Designated Securities Account to the purchaser of such Idea Shares (see clause 4.3.1 and 4.3.2 (a))[23];

(4)  By letter from Clifford Chance, solicitors of AMTD dated 20 December 2024, it was stated that AMTD had fulfilled its obligations under the SPA and the Deed including the “transfer by [AMTD] of 2,896,175 Idea Shares and 121,908 Digital Shares”[24];

(5)  By email from Mr Sun Yau, a Managing Director of D, dated 1 July 2024, it was stated on behalf of D they were delighted to have Ps as their customers and that AMTD Digital Shares in their accounts were still in lock up stage and not available to dispose[25]; and

(6)  D has confirmed that it has not dealt with the Shares since the execution of the SPA[26].

16.  Although it is undisputed that the Shares were registered in Ps’ name, and that is the latest position as confirmed by Conyers, the registrar of the Shares, on 17 January 2025[27], I cannot agree with the bare assertion as they were not registered in D’s name, D does not have possession of the Shares. Besides, this is only one piece of evidence I will have regard to but in light of the matters in the preceding paragraph, I take the view that there is a serious issue to be tried on possession of the Shares by D.

17.  As I am not satisfied that there is no serious issue to be tried that the Shares are in the possession of D and consequentially, I do not accept Mr Chan’s submissions that no preservation order under O.29, r.2 can be made and/or it will be futile and/or there is no practical utility to make such an order.

18.  In respect of the Damages are Adequate Ground, there is no dispute that if damages are plainly adequate then the preservation order should not be granted: see Samtani v Samtani [2012] 4 HKLRD 872 at §79 applying Feng Loy Chuen v Lim Yiong Lin [1977] HKLR 471. See also Shih Rick Ju-Feng & Ors v Lo Yueh-Li & Ors [2022] HKCFI 1272 at §8.

19.  From the SOC, it is plain that Ps are seeking damages against D and has not made any proprietary claim to the Shares. Ps are also seeking for the sale of the Shares by D. Whilst Mr Ng had submitted that Ps had no choice to commence this action to compel D to dispose of the Shares and the wrongful refusal has debarred Ps from triggering AMTD’s make-whole adjustment obligation, so it is not just about damages, but ultimately any inability to trigger the AMTD’s make-whole adjustment plainly sound in damages.

20.  In oral submissions, Mr Ng further pointed to evidence that it is highly doubtful whether D operated any substantial and legitimate business given that D never answered Ps’ queries, have gone silent since 28 July 2024, no one answered the door to D’s registered office or answered the phone etc: see Bazhenova 1^st, §§59-69[28] and 76 and 2^nd Affirmation of Marrin, §5[29]. He had further submitted a supplemental authority, Steven Gee QC, Commercial Injunction, 7^th Edn, §2-025, to the effect that where the defendant has no assets or assets against which a judgment could be readily enforced, this can itself be a strong factor in favour of granting an injunction.

21.  Mr Chan however objected to Mr Ng raising this ground as it was not raised in the evidence filed nor in Ps’ Skeleton Submissions, and it would be unfair for this court to consider this ground when D could have filed evidence on its financial means and assets’ position. I have sympathy with this submissions.

22.  In any event, I am of the view that the matters relied on by Mr Ng viewed against the evidence that D, a Hong Kong incorporated company, remains a licensed entity regulated by the Securities and Futures Ordinance to carry out Type 1, 4 and 9 regulated activities (see He 2^nd, §15[30]) is not sufficient to demonstrate that D has no assets to execute any judgment against.

23.  Given that I am satisfied that damages would be an adequate remedy and there is no basis to contend that D will not be able to satisfy the Ps’ monetary claim against it, I am not satisfied that something ought to be done for the preservation of the Shares. In all the circumstances of this case, I would not exercise my discretion to make an order under O.29, r.2 of RHC.

Disposition and Orders

24.  Accordingly, I will dismiss paragraph 1 of the Summons.

25.  I shall now hear the parties on costs.

[Submissions on Costs]

26.  Notwithstanding Mr Ng’s submissions that I should order no order as to costs in view of the conduct of D in not answering their enquiries as to the whereabouts of the Shares which necessitated commencement of this action, I was not persuaded that costs should not follow the event.

27.  Having considered D’s Statement of Costs submitted to me at the hearing and Mr Ng’s objections (which I agreed with to some extent as there would be some duplication of the work by three fee earners of D’s solicitors with the involvement of counsel, and some time spent were on the high side), adopting a broadbrush approach, I have summarily assessed D’s costs of the Summons at HK$773,000.[31]