CARMON REESTRUTURA-ENGENHARIA E SERVICOS TÉCNICOS ESPECIAIS(SU) LIMITADA v. CARMON RESTRUTURA LTD AND ANOTHER

HCA 1812/2022

[2025] HKCFI 2163

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1812 OF 2022

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D E C I S I O N

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A. INTRODUCTION

1.  There are two applications before me:

(1)  the 1^st and the 2^nd Defendants’ (“D1” and “D2” respectively, and “Ds” collectively) application by their summons dated 2 December 2024 for security for costs (“Ds’ Security Application”); and

(2)  D2’s application by his summons dated 29 November 2024 for an order setting aside the ex parte leave granted to the plaintiff (“P”) on 5 September 2024 to issue committal proceedings against D2 (“D2’s Setting Aside Application”) on the ground of material non-disclosure (“MND”).

2.  Pursuant to the Order of Fung J dated 4 December 2024, these two applications are heard by the same judge.

3.  In these two applications, P is represented by Mr Norman Hui and Ms Natalie So, and Ds are represented by Mr Toby Brown.

B. BACKGROUND

4.  On 22 February 2024, DHCJ Le Pichon dismissed Ds’ application for an order to discharge the injunction orders made by

5.  P is an Angolan company carrying on business in construction, civil engineering and public works in Angola.

6.  D1 is a company limited incorporated in Hong Kong on 1 December 2016, with D2 being its sole shareholder and sole director.  D1 maintains an account with DBS Bank (Hong Kong) Limited (“DBS A/C”).

7.  Until August 2022, D2 was a “Director General” and “director” of P.

8.  In 2016, P’s engineering director was introduced to a Chinese company known as CR20.  D2, in his capacity as a director and/or P’s employee, together with P’s engineering director, had discussions with CR20.  As a result of the discussions, P and CR20 entered into 2 memoranda of cooperation (“MOCs”) respectively dated 11 February 2016 and 17 October 2016 for cooperation in public tender for construction projects relating to access to a new airport in Luanda.

9.  P’s case is as follows:

(1)  Since the majority of payments by CR20 would be in USD, in view of the difficulties with international remittances outwards from Angola, P decided to set up a subsidiary in Hong Kong (ie D1) to maintain an offshore account in USD and receive relevant project fees from CR20.

(2)  At that time, D2 was an employee trusted by P, and hence P named D2 as the sole shareholder and the sole director of D1.  P also instructed D2 to cause D1 to open the DBS A/C.

(3)  In view of P’s need to settle the costs incurred in rendering the relevant construction services vis-à-vis CR20, and D1’s role as designated payee, on 30 January 2017, P and D1 entered into a consortium agreement (“the Consortium Agreement”) which defined and delineated their respective roles.

(4)  In May 2022, in order to maintain control over D1 held in D2’s name by setting up a bank account with Compagnie d’Investissements et de Gestion Privée in Switzerland, P was asked to justify the transfer of funds from D1 to P.  As a result, to evidence the arrangement amongst P, D1 and D2, a Nominee Services Agreement (“NSA”) was executed in or around May 2022 (and backdated to 16 November 2016).

(5)  From June 2022 onwards, the relationship between P and D2 turned sour.  D2 resigned as both an employee and director on 9 August 2022.  Despite P’s repeated requests, D2 refused to transfer back the shareholding in D1 to P.  In early November 2022, D2 also refused to facilitate transfers from the DBS A/C as he had done previously.

(6)  On or about 7 December 2022, P’s Director of Accounting and Finance, Ms Adelina Marisa Dos Anjos Faria Martins (“Ms Martins”), discovered that she was unable to access the DBS A/C at all.

(7)  D2 had changed the online banking log-in details and then caused transfers totalling USD 22,549,975 from the DBS A/C to his personal accounts on various dates from 19 to 30 December 2022.

10.  On 21 December 2022, P issued the writ of summons herein.

11.  On 30 December 2022, P obtained an ex parte injunction order against Ds (“the December 2022 Injunction Order”) before Recorder William Wong SC, viz. a domestic proprietary injunction over the funds in the DBS A/C (“the Funds”) and a domestic Mareva injunction up to the value of USD 23,679,195.60.  §1(b) of the Order required Ds to inform P’s solicitors of the location, nature and value of all assets which represented in whole or in part or are derived from the proceeds or fruits of the Subject Funds within 7 calendar days of service of a copy of the Order.

12.  On 13 January 2023, P obtained an order before Fung J continuing the December 2022 Injunction Order until 17 March 2023.

13.  On 19 January 2022, P obtained a further ex parte worldwide injunction order against Ds (“the January 2023 Injunction Order”) before Peter Ng J, targeting the traceable proceeds of the Funds, including the funds in D2’s two bank accounts (“401 A/C” and “402 A/C”, collectively “the Emirates A/Cs”) held with Emirates NBD Bank PJSC.  §1(b) of the Order required D2 to inform P’s solicitors of the location, nature and value of all assets which represented in whole or in part or are derived from the proceeds or fruits of the Funds within 7 calendar days of service of a copy of the Order.

14.  Thereafter, there was correspondence passing between P’s solicitors Messrs Lau, Horton & Wise LLP (“LHW”) and Ds’ then solicitors Messrs Cheung & Liu (“CL”).  In their letter dated 22 February 2023, Cl said they had “certainly have advised [Ds] to comply with the discovery Orders and the consequences of contempt of Court”.

15.  By their letter dated 28 February 2023, which was issued “in compliance with paragraph 1(b) of the Orders”, CL said that various assets were “money withdrawn from or still remains at [DBS A/C]”, including (a) AED 3.7 million (approximately USD 1 million) in the 401 Account; and (b) USD 17 million in the 402 Account.

16.  On 10 March 2023, P filed the statement of claim, in which P claims:

(1)  against D1, breach of trust by effecting transfers of approximately USD 22.6 million to D2’s various accounts;

(2)  against D2, (a) breach of the NSA and/or director’s duties; (b) breach of trust by failing to transfer the shareholding in D1 to the Plaintiff; (c) knowing receipt and/or dishonest receipt of the monies transferred out of D1 DBS Account into his various personal accounts; and (d) unjust enrichment.

17.  On 14 March 2023, D2 filed his 1^st Affidavit (“D2’s 1^st Aff”), in which he said:

(1)  As of the date of D2’s 1^st Aff (ie 14 March 2023), around USD 1.18 million remained in the DBS A/C.

(2)  Around USD 899,000 (AED 3.3 million) had been transferred from the DBS A/C to the 401 Account; and USD 17.4 million had been transferred from the DBS A/C to the 402 Account.

18.  On 16 March 2023, P obtained the March 2023 Injunction Orders, by which D2 is prohibited from disposing of or diminishing the value of the funds up to the value of approximately USD 23.6 million held in the DBS A/C or traceable proceeds thereof until final judgment or until further order of the Court.

19.  Subsequently, P came to know that as of 14 March 2023, the balances in the Emirates A/Cs were much less than the amounts stated in D2’s 1^st Aff.  The position was summarized by DHCJ Le Pichon in at §17 of the Reasons for Decision dated 5 February 2024[1]:

	Balance
	14 March 2023 (per D2’s 1st Aff)	14 March 2023 (actual position)	End July 2023
401 A/C	AED 3,300,000 (~USD 899,000)	AED 1,058,415.14	AED 82,120,68
402 A/C	USD 17,400,000	~USD 4,000,000	USD 848,046.08

20.  On 6 November 2023, P issued a summons seeking an ancillary disclosure order against D2 in respect of proceeds of the funds in the Emirates A/Cs (“the Further Disclosure Application”).

21.  On 29 January 2024, DHCJ Le Pichon allowed the Further Disclosure Application and ordered D2 to provide further disclosure on inter alia the location, nature and value of traceable proceeds of funds in the Emirates A/Cs within 14 days (“the Further Disclosure Order”).

22.  On 22 February 2024, DHCJ Le Pichon made an unless order (“the Unless Order”) extending the time for compliance with the Further Disclosure Order by 7 days.  The material terms of the Unless Order are as follows:

“1. Unless [D2] do file and serve an affidavit/affirmation in compliance with paragraph 1 of [the Further Disclosure Order] within 7 days from the date hereof, D1 and D2 may fact contempt proceedings;

2. Unless [D2] do produce copies of the documents in compliance with paragraph 2 of [the Further Disclosure Order] within 7 days from the date hereof, [D1] and [D2] may face contempt proceedings”

23.  On 29 February 2024:

(1)  CL provided further bank statements (“the Dubai Bank Statements”) in respect of several Dubai bank accounts held by D2 (including the bank statements of the Emirates A/Cs, covering the period from 20 December 2022 to 29 January 2024) to LHW.

(2)  CL also ceased to act for Ds

24.  On 1 March 2024, Ds started to be represented by Gall in these proceedings.  An affirmation made by Ds’ solicitors was filed, exhibiting a notarised copy of D2’s 5^th Affidavit (“D2’s 5^th Aff”). The purpose of D2’s 5^th Aff is to comply with the Further Disclosure Order.  In D2’s 5^th Aff,

(1)  D2 admitted that that certain payments were made out of the Emirates A/Cs notwithstanding the injunction orders, albeit it was not D2’s intention to breach the injunction orders, and those transfers were not deliberate.

(2)  D2 said that he was in the process of arranging for sums to be repaid back into the Emirates A/Cs.

(3)  He could not give a full explanation given the limited time.

25.  On 21 March 2024, D2’s 6^th Affidavit (“D2’s 6^th Aff”) was filed (under the cover of a solicitor’s affirmation).  In that affidavit, D2 said that he had an honest belief and made a mistake as to the scope of the Hong Kong injunction orders, and that he was actively taking steps to arrange for funds to be repaid back into the Emirates A/Cs.  He also said that he had arranged to credit USD 1 million to the 401 Account as of 20 March 2024.

26.  On 22 May 2024, P made an ex parte application for leave to commence committal proceedings against D2.  According to the Order 52 Statement filed, which was verified by Ms Martins’ affidavit filed on 6 June 2024 (mistakenly under a new HCMP number, instead of within HCA 1812/2022), the application is made on the basis of D2:

(1)  making false statements in D2’s 1^st Aff as to the balances of the Emirates A/Cs;

(2)  failing to comply with the ancillary disclosure obligations in the December 2022 Injunction Order and January 2023 Injunction Order (given the inaccuracy in D2’s 1^st Aff);

(3)  breaching the abovementioned injunction orders by dissipating proceeds of the Funds, including in particular by disposing of and dissipating monies transferred to the Emirates A/Cs;  and

(4)  breaching the Further Disclosure Order due to, inter alia, D2’s still inadequate disclosure, since at least some USD 16.9 million of funds which were transferred out of the Emirates A/Cs remains unaccounted for.

27.  On 27 June 2024, Registrar KW Wong directed P to re-submit the relevant papers under the proper procedure and action number.

28.  On 28 June 2024, D2’s 7^th Affidavit (“D2’s 7^th Aff”) was filed (again under the cover of a solicitor’s affirmation).  In that affidavit, D2 said that he had replenished a total of some USD 7.24 million odd into the Emirates A/Cs.

29.  On 5 July 2024, the same papers in support of P’s application for leave to commence committal proceedings against D2 were re-filed in HCA 1812/2022.

30.  On 2 September 2024, P filed the 5^th Affirmation of Chen Mengyi[2] (“Chen 5^th Aff”) to provide an update to the Court, including informing the Court the filing of D2’s 7^th Aff.

31.  On 5 September 2024, Fung J granted leave to P to commence committal proceedings against D2.

32.  On 19 September 2024, pursuant to the leave granted by the Court, P commenced committal proceedings against D2 under HCMP 1803/2024.

33.  On 29 November 2024, D2 took out D2’s Setting Aside Application.

34.  On 2 December 2024, Ds took out Ds’ Security Application.

35.  In these proceedings, Ds’ case is that D2 is the sole owner of D1.  D2 denies that he held D1 on trust for P, and he also denies that the monies in DBS A/C are being held on trust for P.  D2’s stance is that at all time, he has been the ultimate owner of D1, which was set up by him on his own volition and pursuant to the business arrangement that D2 himself had made with CR20.  D2 also challenges the authenticity of the NSA.  He denies that he ever signed the same or agreed to the terms thereof in any way.

36.  By the Order of DHCJ Kenneth Wong dated 29 April 2025, it is directed that there be a speedy trial in this case, and the trial will commence on 26 January 2026, with 9 days reserved.

C. Ds’ SECURITY APPLICATION

37.  Since Mr Brown made submissions on Ds’ Security Application first in the hearing, I would first deal with this application.

38.  In Ds’ Security Application, Ds are seeking an order requiring P to offer security for Ds’ costs incurred in these proceedings up to and including the exchange of factual witness statements by paying a sum into court. According to the updated bill of costs submitted by Ds in the hearing, the sum proposed by Ds is HKD 2,493,895.  Ds say that since P is ordinarily resident out of Hong Kong, P ought to provide security for Ds’ costs incurred in these proceedings.

39.  There is no dispute that P is ordinarily resident out of Hong Kong.  P’s position is that Ds’ Security Application should be refused, for there are strong merits in P’s case.  Alternatively, the sum to be paid into court as security as proposed by Ds is excessive, and should be significantly reduced.

C1. The parties’ respective submissions

40.  While a plaintiff is trying to oppose an application for an order security for costs on the ground that it has strong merits in its case, the plaintiff would need to demonstrate that it has a high degree of probability of success, and the Court should approach the matter in a broad-brush manner.  The relevant principles have been set out by B Chu J in Hannelore de Lasala-Debring v Ernest Ferdinand Perez de La Sala[3], in which the learned judge said (footnotes omitted):

“8. Although the merits of a plaintiff’s claim may be a relevant consideration in deciding whether security should be ordered, this is to be approached in a broad-brush manner. It is not the function of the court to make a preliminary run at deciding the ultimate success or failure of the claim and parties shall not attempt to go into the merits of the case unless it can be clearly demonstrated that the plaintiff has a high degree of probability of success.

9. In Lim Yi Shen v. Wong Yuen Yee [2012] 3 HKLRD 505, Recorder Horace Wong SC has cautioned against forming any view on the merits simply on paper, especially if the facts are likely to be sensitive to oral evidence, and he held that the threshold of demonstrating probability of success in the context of a security for costs application is “very high”, and that the practice of going into the merits of the case in such application is “to be deplored” unless the merits are clear.

10. Similarly, although the Court will also consider whether the defendant has an arguable defence, this should also be approached in a broad-brush manner rather than embarking on an assessment exercise as though it were considering an application for summary judgment.” (Emphasis in original)

41.  Mr Brown for D submits that:

(1)  The only ground relying upon by P in opposing Ds’ Security Application is that P is having strong merits in its case.  Bearing the relevant principles in mind, unless P can show that clearly it has a high degree of probability of success at the trial, P’s objection should be overruled.  The Court should not go into the details of the evidence to examine the merits of P’s case.

(2)  It is an indisputable fact that D2 is the sole shareholder and the sole director of P. It is presumed that the beneficial interest would follow the legal title. Hence, it is presumed that D1 is beneficially owned by D2.  The burden to rebut this presumption is on P.  Clearly, by a broad-brush approach, it cannot be said that it is so clear that P would succeed in its claim against Ds in the trial.

(3)  Ds are disputing the authenticity of the NSA.  Accordingly, in assessing whether it is plain that P has a strong case and hence P is not required to provide any security for Ds’ costs, no weight should be given to the NSA.

(4)  P cannot rely upon the comments made in the March 2024 Reasons in support of its opposition to Ds’ Security Application.  The March 2024 Reasons are the reasons for the decision dealing with Ds’ application for discharging the March 2023 Injunction Orders and Ds’ challenge as to the jurisdiction of the Hong Kong Court.  In those applications, it would not be necessary to assess whether P has a very high degree of probability of success at the trial.

(5)  In any event, in the March 2024 Reasons, the learned judge pointed out that there is evidence in support of either side’s case.  The evidence is not overwhelmingly one way. See March 2024 Reasons §§32-34.  

(6)  The fact that P has never made an application for summary judgment against Ds in these proceedings shows that P does not regard that its case against Ds is so strong.

(7)  For all these reasons, P’s opposition to Ds’ Security Application must be overruled.

(8)  Regarding the quantum, the Court may summarily assess the appropriate sum to be paid into court as security for Ds’ costs.

42.  Mr Hui for P submits that:

(1)  It is clear that P has a high degree of probability of success at the trial.

(2)  P’s case is clearly supported by various provisions in the Consortium Agreement (which was signed by D2 on behalf of D1)[4]:

(a)  Clause 1.3

“Under this Agreement, [D1] may contract in its own name, any engineering services, once executed in the Angolan market, acting as on international platform of [P].” (Emphasis added)

(b)  Clause 1.4

“[D1] may also, within the scope of the Consortium, make payments of [P] invoices in any territory, on account and on behalf of [P], without any tax or contractual liability for those payments.” (Emphasis added)

(c)  Clause 1.5

“This Agreement authorizes [D1] to assume obligations for and on behalf [P] by delegation, except those that are expressly prohibited on this agreement or on a specific document.” (Emphasis added)

(d)  Clause 1.7

“[P] is identified as the leader of this CONSORTIUM.”

(e)  Clause 3.2

“All technical and commercial decisions of the CONSORTIUM AGREEMENT shall be taken by [P].”

Clause 6.2

“The Head of the CONSORTIUM will be the one who issues the invoices by the global value and will receive the total amount, but should only report in the accounting the value that reflects their percentage of participation. Likewise, the consortium member, by means of a credit note (received) issued by the head of the consortium, shall record in its accounts the income related to its percentage of participation.” (Emphasis added)

(3)  That the Consortium Agreement is clearly in support of P’s case is also highlighted by DHCJ Le Pichon in §§29 and 30 of the March 2024 Reasons.

(4)  The NSA is another document in support of P’s case.

(5)  Ds’ case is inherently improbable.  It is inherently improbable that D2, being a high-ranking employee and director of P, was allowed to set up, own and operate D1 in order to independently maintain business relations and negotiations with CR20, with which P was also doing business.

(6)  In view of the strong merits in P’s case, Ds’ Security Application should be refused.

(7)  Without prejudice to the above and if security is ordered, the quantum proposed by Ds is excessive and should be reduced significantly.

C2. Discussion

43.  I bear the principles as set out in §40 above in mind.

44.  In my view, even putting aside the NSA, P’s case is clearly supported by the provisions in the Consortium Agreement as submitted by Mr Hui.

45.  Further, as pointed out by DHCJ Le Pichon in the March 2024 Reasons, there are indeed strong merits in P’s case.  In the March 2024 Reasons, the learned judge said:

“25. [P] and CR20 are parties to the MOCs and not D2. §15 of D2’s 2^nd affirmation dated 16 August 2023 (“D2 2^nd”) set out what D2 described is the business strategy and arrangements he had made with CR20 (“the Arrangement”). One feature of the Arrangement involved D2 setting up an independent company vehicle (which according to D2 later became D1) to maintain business relations and negotiations with CR20.

26. D2 did not adduce any evidence (other than his bald assertions) to substantiate the existence of the Arrangement.

27. Mr Norman Hui and Ms Natalie So, counsel for [P], referred to §14 of the 1st affidavit of Ms Martins dated 15 February 2023 (“Martins 1^st ”) which explained how the expenses incurred for setting up D1 were settled. Ms Martins also exhibited a letter from CR20 to [P] dated 30 January 2018 together with D1’s incorporation documents. They show that CR20 (and not D2) had arranged for the incorporation of D1 and settled the expenses incurred for setting up D1.

28. The matters set out in the preceding paragraph contradict and undermine a key element of the Arrangement. Further, D2 remained [P]’s employee until sometime in August 2022. It is, to say the least, far from clear how his duties and obligations as an employee can be reconciled with his being party to the Arrangement.

29. As regards the consortium agreement (to which D2 is also not a party), the Plaintiff invited attention to §§1.7, 3.2 and 5.4 which provide as follows:

‘1.7 [P] is identified as the leader of this CONSORTIUM.

…

3.2 All technical and commercial decisions of the CONSORTIUM AGREEMENT shall be taken by [P].

…

5.4 The payments that must be provided by [D1] shall have previous approval of the shareholders of [P], under the presentation of a formal budget that might list all the transfers and payments requested by the Chief of the Consortium.’

30. The consortium agreement was made between [P] and D1 approximately 2 months after D1’s incorporation. It is clear from the provisions set out in the preceding paragraph that [P] had the ultimate say in all matters concerning the consortium and whose prior approval is required for payments to be made by D1. That arrangement shows that D1 had to abide by [P]’s decisions. That does not support D2’s claim to be the sole owner of D1.

……

32. One of the factors D2 relied to show his control over D1 is the operation of the D1 DBS Account. D2 exhibited messages exchanged between the Ms Martins, [P]’s CFO and D2. Completion of each transaction required a code, that being the modus operandi for the account. For each transaction, D2 provided the code and Ms Martins carried out the transaction.

33. [P] submitted that what the exchanges actually show is that D2 was merely a conduit for payments to service providers, wages etc.

34.     The messages themselves are ambiguous and could support either reading.  That D2 as director of D1 was in control of the code is hardly surprising since he was the authorised signatory of that account.  That fact of itself is not determinative: it has to be evaluated against the backdrop of the provisions in the consortium agreement set out in §29 above.  Against that backdrop the Plaintiff’s reading is the more probable.”

46.  Reading the March 2024 Reasons as a whole, I do not think that the learned judge was saying that the evidence would support either side’s case. On the contrary, I am of the view that the learned judge is clearly of the view that P’s case is meritorious, and Ds have not put forward a plausible case.

47.  I have asked Mr Brown whether any observation made on the merits of the parties’ respective cases by the learned judge in the March 2024 Reasons should be revisited in the light of the evidence now before me and the submissions made by the parties in this hearing.  Mr Brown has not invited me to revisit any observation made by the learned judge on the merits of the parties’ respective cases.

48.  I have independently considered the evidence before me and the submissions made by the parties, and I come to the conclusion that by reason of the provisions of the Consortium Agreement as identified in Mr Hui’s submissions, and by reason of the matters set out in §§25 to 34 of the March 2024 Reasons, P has clearly demonstrated that it has a high degree of probability of success at the trial.  I am also in agreement with Mr Hui that Ds’ case is inherently improbable.  In the circumstances, I would refuse Ds’ Security Application.

49.  As a matter of completeness and without prejudice to the above, if I were wrong in refusing Ds’ Security Application, I am of the view that the appropriate quantum of the sum to be paid into court as security should be HKD 700,000.

(1)  Even if security for costs is ordered, a party would only be entitled to sufficient security, not complete security.[5]

(2)  If Ds succeed at the trial, costs awarded to Ds would be taxed on party and party basis only. Ds have not suggested any reason that costs would be taxed on any other basis.

(3)  In the updated bill of costs produced by Ds[6]:

(a)  The hourly rates of the partner and the associate should be reduced to HKD 5,200 and HKD 3,200 respectively.

(b)  In Part A, costs in relation to the pleadings are set out.  Since counsel is involved, the time costs of the solicitors should be substantially reduced.

(c)  In Part B, costs in relation to disclosure are set out.  Given that counsel is involved, the time costs of the solicitors should also be substantially reduced.  Further, only the fees of one counsel is allowed.

(d)  In Part C and Part D, the time costs claimed by the solicitors is excessive and should be substantially reduced.

(e)  Part E and Part H are costs of D2’s Setting Aside Application.  Those costs would be taken care of by the costs order made in that setting aside application.

(f)  Part F, Item 11(1) – the time costs of the solicitors are clearly excessive and should be reduced.

(g)  Part F, Item 11(2) is “Taking out interlocutory application(s) including but not limited to specific discovery (if so advised)”.  Mr Brown has fairly told me that Ds are not minded to take out further interlocutory application(s).  That being the case, I would ignore this item.

(h)  Part G, Item 12(4) is “Time incurred by Jacquemoud Stanislas, [Ds]’ global advisors …” In response to the question from the Court, Mr Brown told me that Ds’ global advisors are some lawyers in Switzerland.  Mr Brown has confirmed that there would be no issue on Switzerland law in this case.  In the circumstances, I am of the view that there is no basis in support of Ds’ claim for the costs in this item.

(i)  In Part G, in the other items, since counsel is involved, the time costs of the solicitors should be significantly reduced.

(4)  Bearing all the aforesaid in mind, and by a broad-brush approach, I am of the view that the appropriate amount to be paid into court as security for Ds’ costs (assuming that Ds are entitled to have security for costs) should be HKD 700,000.

C3. Conclusion on Ds’ Security Application

50.  For the reasons above, I would dismiss Ds’ Security Application.  Costs should follow the event.  There is no doubt that Mr Hui and Ms So have provided me very helpful assistance.  However, the complexity of Ds’ Security Application would not be sufficient for the purpose of justifying a certificate for 2 counsel.  There be a costs order nisi that costs of Ds’ Security Application be to P forthwith, and those costs be summarily assessed on paper without an oral hearing.  There be leave to P to lodge and to serve a bill of costs for summary assessment (limited to 3 pages) within 7 days after the costs order nisi becoming absolute, and leave to Ds to lodge and serve a list of objections (limited to 3 pages) within 7 days thereafter.

D. D2’s SETTIG ASIDE APPLICATION

D1. The principles

51.  The principles concerning MND have been set out by DHCJ Le Pichon in the March 2024 Reasons at §55, where the learned judge adopted the formulation of Coleman J in Hwang Joon Sang v Golden Electronics Inc[7]. The principles are as follows:

(1)  An applicant making an ex parte application must act fairly in all material aspects when preparing and presenting the application.

(2)  This includes the duty to disclose to the Court all matters which are material, meaning those matters material to the court’s assessment and decision whether or not to grant the relief without notice, and if so on what terms.

(3)  The test as to materiality is an objective one, and ultimately a question for the court. Hence, it is no excuse for an applicant subsequently to say that he was generally unaware, or did not believe, that the facts were relevant or important.

(4)  Non-disclosure may be material even if its effect is just to give a seriously different ‘flavour’ to the case.

(5)  The duty of full and frank disclosure is a stringent one, designed to protect the absent party.

(6)  Therefore, if material non-disclosure has occurred at the ex parte application, the order obtained at such an application would likely be set aside automatically without going into the merits.

(7)  Nevertheless, there is a discretion to re-grant the same order.  That jurisdiction should be only sparingly exercised, taking into account the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.

(8)  Hence, an assessment will be made as to the degree and extent of the culpability with regards to the non-disclosure.  The more serious or culpable the non-disclosure, the more likely the court is to set its order aside and not renew it, however prejudicial the consequences.

(9)  It is therefore relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge.  Nor is there a general rule that a deliberate breach will attract that sanction.

(10)  The application of principles which seek to uphold the integrity of the judicial process should not be carried to such lengths as will allow them to become the instrument of injustice.

(11)  Because of the penal nature of the jurisdiction, the court should have regard to the proportionality between the punishment and offence.

(12)  When exercising the discretion whether to re-grant the order, the court should take into account all relevant circumstances.

D2. Grounds of the Application

52.  Mr Brown submits that the leave granted to P to commence committal proceedings should be set aside by reason of P failed to disclose the following in the ex parte application:

(1)  D2’s 7^th Aff, in which D2 has set out the steps taken by him to purge any inadvertent breaches of the injunction orders;

(2)  the fact that the ex parte freezing order obtained by P in the Dubai International Financial Centre Court (“DIFC proceedings”) on 24 July 2023 was set aside on 27 December 2023, and P had withdrawn its complaint of contempt against D2 in the Dubai Court on the same basis;

(3)  that P wrongly alleged D2 of breaching the Unless Order; and

(4)  the remedial steps taken by D2 to purge the breaches of the injunction orders.

53.  In the hearing before me, Mr Brown has helpfully confirmed that the grounds relied upon by D2 are confined to those set out in counsel’s submissions.

54.  Mr Hui submits that there is no merit in these grounds, and the ex parte leave should not be set aside by reason of these matters.

D2.1 Ground 1 – D2’s 7^th Aff

55.  Mr Brown submits that:

(1)  P did not include D2’s 7^th Aff in the papers placed before the Court in the ex parte application for leave.  D2’s 7^th Aff is of paramount importance, in which D2 has clearly stated:

(a)  D2’s honest mistake that the December 2022 and the January 2023 Injunction Orders did not prevent him from dealing within his own bank accounts;

(b)  D2’s immediate efforts in purging the breaches as soon as he learned of his error;

(c)  D2’s replenishment of the Emirates A/Cs in the sum of USD7,244,023.97 on his own accord and initiative; and

(d)  D2 volunteering further information to P in regard to his other frozen assets to provide P full security of its claims including his various global assets, bank account details, remaining balances and estimated value of other non-cash assets.

(2)  P only drew the Court’s attention to D2’s 7^th Aff on 2 September 2024 (66 days after D2’s 7^th Aff was first provided to P) and only then by a brief reference in Chen 5^th Aff.

56.  Mr Hui submits that:

(1)  The Order 52 Statement was prepared and originally filed with the Court on 22 May 2024, before the filing of D2’s 7^th Aff on 28 June 2024.  Due to an inadvertent mistake, when P refiled the papers on 5 July 2024 (as directed by Registrar KW Wong on 27 June 2024), P did not revise the Order 52 Statement to mention D2’s 7^th Aff therein.

(2)  However, P did file Chen’s 5^th Aff on 2 September 2024 to provide the Court an update, including informing the Court the existence of D2’s 7^th Aff and the points made by D2 in that affirmation.

(3)  Leave was granted by the Court on 5 September 2024.  Prior to the granting of the leave, the Court had already been provided all the relevant information material to P’s application.

57.  I agree with Mr Hui and accept his submissions.

(1)  In Chen’s 5^th Aff, it is stated:

“5. In [D2’s 7^th Aff], [D2] claims that, among other things:-

a. he has now replenished the 401, 402, 403, 404 and 405 Accounts (the “Dubai Accounts”) to an amount totalling approximately USD7,244,023.97. Copies of these Dubai Accounts as of 11 June 2024 were exhibited to [D2’s 7^th Aff]; and

b. he made an “inadvertent error” in the calculation of the total amount of assets subject to various freezes and that the amount is actually in the approximate range of USD l7,295,107.00 to USD 17,303,l07.00 (rather than USD 12,404,7l7.00 as previously stated in [D2’s 6^th Affirmation]). This error was apparently caused by an omission of the aggregate value of assets owned by him in Angola and subject to seizure warrants by the Angolan authorities. [D2’s 7^th Aff] provides a summary of these properties and their respective value.

6. As a result of the inclusion of the additional properties, Cuenda now avers he has provided full security in the range of USD 24,539,130.97 to USD 24,547,130.97 in purported compliance of the Jan 2023 Injunction Order.

7. Subsequently, Gall sent a letter dated 28 June 2024 to LHW (“Gall’s 28 June 2024 Letter") requesting that the Dec 2022 Injunction Order and Jan 2023 Injunction Order be varied having regard to [D2’s 7^th Aff].

8. LHW responded to Gal1’s 28 June 2024 Letter on 27 August 2024 disagreeing to the request on the basis that it is pre-mature and not appropriate in the circumstances for the reasons stated therein. Copies of these correspondence are exhibited at pages 1 to 5 of CM-8.

9. [P] a takes the view that the assertions in [D2’s 7^th Aff] do not change the three breaches identified in Section F of the Statement of Contempt in that:

a. [D2]’s assertion that he had made an “inadvertent error” in the calculation of the total assets is unconvincing and implausible. At all material times, [D2] was advised by CL and Gall in Hong Kong as well as various other law firms in other jurisdictions.

b. The properties seized in Angola are in relation to local criminal proceedings in respect of, inter alia, [D2]’s wrongful conduct as a former director of [P]. These proceedings and the relevant properties are separate from the Action. In this regard, the properties were seized pending potential confiscation/forfeiture of the Angolan government, rather than as “security” that can be enforced by [P] in Angola. Meanwhile, the purported value of the properties set out in [D2’s 7^th Aff] is without basis or justification. The purported value of the properties is mere conjecture without any supporting documents.

c.   Gall’s 28 June 2024 Letter alludes to Switzerland bank accounts of [D2].  However, no bank statements have been disclosed or exhibited in [D2’s 7^th Aff] verifying or corroborating the figures stated in the aforesaid letter.”

(2)  As submitted by Mr Hui, all the points made by D2 in D2’s 7^th Aff have been mentioned in Chen’s 5^th Aff.  D2 in fact has not identified any salient parts of D2’s 7^th Aff, which according to him, ought to have been, but were not drawn to the Court’s attention.

(3)  Regarding the other assets mentioned in D2’s 7^th Aff, those assets in fact are the properties seized by the Angolan government and the alleged deposits in the Switzerland bank account.  All these have been mentioned in Chen’s 5^th Aff.

(4)  Chen’s 5^th Aff was filed on 2 September 2024, before the Court granting leave on 5 September 2024.  The existence of D2’s 7^th Aff and the points made by D2 in that affirmation had been drawn to the Court’s attention before the Court making a decision on P’s ex parte application for leave.

(5)  In the circumstances, in my view, it would not be reasonable to say that there is a MND because D2’s 7^th Aff is not mentioned in the Order 52 Statement.

58.  There is no substance in Ground 1.

D2.2 Ground 2 - DIFC Proceedings

59.  Mr Brown submits that:

(1)  In the Order 52 Statement, P relied upon the DIFC proceedings and emphasized that P had successfully obtained an ex parte freezing order from the Dubai Court against D2 in respect of the funds in the Emirate A/Cs.  However, P failed to mention that the freezing order was set aside on 27 December 2024.

(2)  P also failed to mention that in the DIFC proceedings, P complained to the Dubai Court on 28 June 2024 that D2 had breached the freezing order made by the court.  However, once P was provided with the documents from D2, including D2’s Dubai bank account statements, D2’s 6^th Aff and D2’s 7^th Aff, P withdrew the complaint from the Dubai Court.  These events are crucial in demonstrating P’s continuously oppressive behavior throughout its allegations of contempt against D2, and ought to be disclosed in the ex parte application for leave to commence committal proceedings against D2.  See Tiong King Sing v Sam Boon Peng Yee[8], §27.

60.  Mr Hui submits that:

(1)  The DIFC proceedings, including the freezing order in those proceedings, are not material to the Court’s decision to grant leave to issue committal proceedings against D2.  The existence of the DIFC proceedings is only mentioned in the Order 52 Statement at §§27-28 as background to the Further Disclosure Application, for the fact that D2 had given contrary evidence as to the balance of the Emirates A/Cs as of March 2023 and for shedding light on the remaining funds as of July 2023.  P has never relied on any order(s) or developments in the DIFC proceedings as part of its case against D2 for the committal proceedings in the Hong Kong Court.

(2)  In the circumstances, it cannot be said that there has been a MND by P since the setting aside of the freezing order in the DIFC proceedings is not mentioned in the ex parte application.

(3)  Regarding D2’s complaint that P did not mention the withdrawn statement of alleged contempt in the DIFC proceedings, the DIFC proceedings are independent of the present action, and the orders made in the two jurisdictions are different.  An allegation of breach of an order made in the DIFC proceedings (withdrawn or otherwise) has nothing to do with whether D2 may have committed breaches of various Hong Kong orders mentioned in the Order 52 Statement.

(4)  In circumstances where P does not rely on breach of any order made against D2 in the DIFC proceedings in support of P’s application for leave to issue contempt proceedings against D2 in Hong Kong, the alleged contempt and the subsequent withdrawal of the same in the DIFC proceedings is simply irrelevant and not material.  It is plainly not material to consideration of whether P’s application for leave in the Hong Kong proceedings was oppressive.

61.  Having considered the parties’ respective submissions, I am in agreement with Mr Hui.

(1)  The DIFC proceedings are only mentioned in §§27 and 28 of the Order 52 Statement, the contents of which are as follows:

“27. Separately, on 24 July 2023, [P] applied, and obtained, an ex parte freezing order from the Dubai International Financial Centre (“DIFC”) Court in respect of funds in the Emirates Accounts held by [D2].  ln such order, [D2] was also required to inform [P]’s legal representatives within 7 days of service of such order the balance of funds held in the Emirates Accounts and details of any transfers made therefrom since 19 January 2023.

28. At the return date hearing of the said ex parte freezing order on 4 August 2023, inter alia, [D2]’s legal representatives in Dubai served an unsigned witness statement from him together with copies of bank statements relating to various accounts held by him with the Emirates Bank, which revealed:

(1) As of July 2023, the balance of Account 401 had been reduced to some AED 82, l 20.68; and the balance of Account 402 had been reduced to some USD 848,046.08.

(2) Significant amounts had already been withdrawn from both the Emirates Accounts as of 14 March 2023.”

(2) Mr Hui is correct in saying that P only mentioning the DIFC proceedings in the Order 52 Statement as background to the Further Disclosure Application.  P is not relying upon any order made in the DIFC proceedings in support of its ex parte application for leave to commence committal proceedings against D2.

(3) Save and except alleging that P’s conduct in the DIFC proceedings is oppressive, D2 is unable to say that there is anything in the DIFC proceedings which may be relied upon by him in resisting the contempt proceedings proposed by P, and hence would need to be drawn to the Court’s attention in the ex parte application.

(4) As to D2’s complaint that P’s conduct in the DIFC proceedings is oppressive, I am unable to agree.  Once the necessary information and documents were provided to P, P withdrew the complaint of contempt in the DIFC proceedings without delay and did not pursue the same.

(5) In my judgment, D2 cannot make out a case of MND by relying upon the DIFC proceedings.

62.  There is no merit in Ground 2.

D2.3 Ground 3 – wrongly alleged D2 of breaching the Unless Order

63.  §§34 and 53 of the Order 52 Statement is relevant to the parties’ respective arguments under this head, which is as follows:

“34. On 22 February 2024, DHCJ Le Pichon made an Order extending time for compliance with the Further Disclosure Order by 7 days, on an unless basis (the “Unless Order”).

……

F3. Breach of paragraph 1(a) of the Further Disclosure Order and the Unless Order – failure to provide further disclosure.

53. Particulars of breach:

(1) By paragraph 1(a) of the Further Disclosure Order, [D2] was required to file and serve an affidavit/affirmation stating with full particulars the location, nature and value of all assets representing or derived from the traceable proceeds of funds held in the Emirates Accounts (which in turn constitute traceable proceeds of funds in the [DBS A/C]).  The time for such compliance was extended by the Unless Order to 29 February 2024.

(2) However, in breach of paragraph 1(a) of the Further Disclosure Order and the time limit imposed by the Unless Order:

(i) [D2] did not file or serve any such affidavit as of 29 February 2024.  Instead, it was only on 1 March 2024 that a notarized version of [D2’s 5^th Aff] was purportedly filed and served under cover of the Affirmation of Wong Ronald Ka Long.  Notably, no further remedial steps to rectify the foregoing shortcomings of only filing the Affirmation of Wong Ronald Ka Long have been taken to date.

(ii) On 29 February 2024, only the Disclosed Dubai Bank Statements were provided to LHW under cover of [CL]’s letter, but without any covering or verifying Affidavit by [D2] or otherwise.  Again, no further remedial steps to rectify the foregoing shortcomings of only filing the Disclosed Dubai Bank Statements without any Affidavit by [D2] or otherwise have been taken to date.

Further, and in any event, the information purportedly disclosed by [D2] in [D2’s 5^th Aff] (read together with the Disclosed Dubai Bank Statements) has failed to disclose with full particulars the location(s) and/or present nature and value of all traceable proceeds of funds in the Emirates Accounts constituting traceable proceeds of funds in the [DBS A/C]:

(i) The total aggregate value of funds held in the accounts held with Emirates Bank disclosed by [D2] to date is approximately USD 1.1 million.

(ii) However, the total traceable proceeds transferred to the Emirates Accounts from the [DBS A/C] are some USD 18 million ……

(iii) In other words, there is a balance of at least some USD 16.9 million which had been paid out of or otherwise disposed from the Emirates Accounts which remains unaccounted for, the location and/or value of which has not been disclosed by [D2].”

64.  Mr Brown submits that:

(1)  P included a factually incorrect statement in §53(1) of the Order 52 Statement, which stated “the time for such compliance [of the Further Disclosure Order] was extended by the Unless Order to 29 February 2024.”  P then, based on its own wrong calculation of the deadline, wrongly accused D2 of breaching the Unless Order in the Order 52 Statement.

(2)  In the Order 52 Statement, P failed to disclose that on 6 March 2024, Gall wrote to LWH and pointed out that the deadline for complying with the Unless Order should be 1 March 2024.

(3)  P did not update the Court at any time after realizing that it made a mistake in computing the time pursuant to its ongoing duty of full and frank disclosure.

65.  In the hearing before me, there is no dispute that the deadline for complying the Unless Order should be 1 March 2024.  However, Mr Hui submits that:

(1)  The crux of the breach set out at §53(2)-(3) of the Order 52 Statement is that D2’s 5^th Aff and/or the Dubai Bank Statements produced on 29 February 2024  did not provide full disclosure of the traceable proceeds of funds in the Emirates A/Cs as required in the Further Disclosure Order.

(2)  Further, even on the basis of a 1 March 2024 deadline, D2 had not filed any further affidavit by that date, as D2’s 5^th Aff was only filed on 4 March 2024.

(3)  After all, in the Order 52 Statement, P had set out the contents of the Unless Order made on 22 February 2024, which extended time for compliance by 7 days;  and the precise dates of (a) CL’s disclosure of bank statements; and (b) the filing of the solicitor’s Affirmation exhibiting D2’s 5^th Aff.  The duty of giving full and frank disclosure of material facts has been done.

(4)  Even if the inaccuracy of the deadline imposed by the Unless Order as stated in the Order 52 Statement is potentially relevant, this would not justify setting aside the ex parte leave, as it is at most a pure technicality that has not caused any prejudice to D2 in any way.  D2 has not been affected in any way by the reference to 29 February 2024 as a deadline or to the omission of Gall’s letter dated 6 March 2024 in the Order 52 Statement.  The point now being put forward by D2 is an example of nit-picking.

66.  In my view, reading §53 of the Order 52 Statement as a whole, the real complaint made by P is that D2 has not fully complied with the Further Disclosure Order at any time.  The true meaning of the complaint has been clearly set out in §53(3).  The crux of the breach is not late disclosure, but no full compliance with the Further Disclosure Order at any time.  In the circumstances, I would not regard the wrong reference to the deadline imposed by the Unless Order in the Order 52 Statement, and the omission of Gall’s letter dated 6 March 2024 in the Order 52 Statement, as material matters in P’s ex parte application.

67.  I do not accept Ground 3.

D2.4 Ground 4 – failure to mention the remedial steps taken by D2 to   purge the breaches of the injunction orders

68.  Mr Brown refers me to RACP Pharmaceutical Holdings Ltd v Li Xiaobo[9], in which DHCJ Gill said:

“5. The application being made ex parte it behoves the applicant to make full and frank disclosure of all pertinent issues. If there is material non-disclosure that will amount to strong grounds for setting aside leave already granted, the more so in the case of an application for leave to bring committal proceedings. This also applies to the situation where information comes to light post the application and before the substantive hearing; for instance, where the threat of disposition has been removed by steps taken by the contemnor to purge his contempt.” (Emphasis added by counsel)

69.  Mr Brown submits that:

(1)  In March 2024, Gall replaced CL as solicitors acting for Ds.  D2 was then immediately advised by Gall that his actions (of transferring funds within his own accounts) would amount to breaches of the injunction orders and since then, D2 has made continuous efforts to take remedial steps and purge these breaches.

(2)  D2 disclosed Dubai Bank Statements by exhibiting these to D2’s 6^th Aff, which was filed and served under the cover of the 2^nd Affirmation of Wong Ronald Ka Long on 21 March 2024 and the original notarised version was filed and served on 28 March 2024.  P has wrongly stated in §53 of the Order 52 Statement that the Dubai Bank Statements were filed without any affidavit by D2 or otherwise.

70.  With respect, there is no substance in Ground 4.  In my view, what D2 has done and has not done have been accurately summarized in the Order 52 Statement and Chen’s 5^th Aff.  It is clear that D2 has not purged all his breaches of the injunction orders. 

71.  Regarding the Dubai Bank Statement, D2 said in §4 of D2’s 6^th Aff that he produced “the documents [CL] provided to [LHW] under cover of their letter dated 29 February 2024” as an exhibit.  The Dubai Bank Statements are among the documents under the cover of that letter.  However, P’s complaint in §53(2)(ii) of the Order 52 Statement is that there has been no affidavit made by D2 verifying the disclosed Dubai Bank Statements.  I do not read §4 of D2’s 6^th Aff as a paragraph verifying the disclosed Dubai Bank Statements.  In my view, what has been said by P in §53(2)(ii) of the Order 52 Statement is correct.

D3. Conclusion on D2’s Setting Aside Application

72.  In my judgment, there is no merit in any of the grounds in support of D2’s Setting Aside Application.  The application ought to be dismissed with costs.

73.  For the reasons above, I would dismiss D2’s Setting Aside Application. Costs should follow the event.  Again, the assistance rendered by Mr Hui and Ms So to this Court is much appreciated.  However, there is no sufficient complexity in this application justifying a certificate for 2 counsel. There be a costs order nisi that costs of D2’s Setting Aside Application be to P forthwith, and those costs be summarily assessed on paper without an oral hearing.  There be leave to P to lodge and to serve a bill of costs for summary assessment (limited to 3 pages) within 7 days after the costs order nisi becoming absolute, and leave to D2 to lodge and serve a list of objections (limited to 3 pages) within 7 days thereafter.

E. DISPOSITION

74.  I make the orders as set out in §§50 and 73 above.

75.  Lastly, it remains for me to thank all counsel for the helpful assistance rendered to the Court.