ANGOLA GROUP HOLDINGS LTD v. ZHONG XIN ORE-MATERIAL HOLDING COMPANY LTD

HCA 1496/2023

[2025] HKCFI [2517]

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1496 OF 2023

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J U D G M E N T

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A.  INTRODUCTION

1.  This is the substantive hearing for the following Summonses:

(a)  The Plaintiff’s (“ Angola” or “P”) application for summary judgment dated 23 May 2024 (“O14 Application”);

(b)  The 1^st Defendant’s (“ Zhong Xin” or “D1”) application for security for costs dated 29 August 2024; and

(c)  The 2^nd Defendant’s (“Bai Jun” or “D2”) application for security for costs dated 16 November 2023 (together with (b) above, the “Security Applications”).

2.  By the O14 Application, Angola seeks summary judgment of the following claims:

(a)  unjust enrichment claim against D1 for payment of new or replacement interim receiver fees (“New IR Fees”) in the sum of HK$9,150,000, and simple/or compound interest at either 12% per annum or prime +1%; and

(b)  unjust enrichment claim against D2 for payment of legal fees (“Legal Fees”) in the sum of HK$2,950,304.03, and simple/or compound interest at either 12% per annum or prime +1%.

3.  At the outset, it is worth highlighting several features.

4.  First, there has been protracted legal proceedings between the Angola camp and the Bai Jun camp in Hong Kong, the Mainland and the British Virgin Islands (“BVI”). The dispute in Hong Kong arose from the proceedings in HCA 1987/2005 (“1987 Action”). In the 1987 Action, Angola’s associate company (i.e. Achieve Goal Buildings Limited) claimed against Bai Jun for repayment of loans, whereas the Bai Jun camp (comprising Bai Jun and Clarigain Enterprises Limited (“Clarigain”)) counterclaimed against inter alia Angola for transfer of 50% shareholding in Zhong Xin (“Relevant Shares”). Insofar as the Hong Kong courts are concerned, the following are the key judgments:

(a)  the first instance judgment of Au-Yeung J dated 15 December 2018 in [2018] HKCFI 2718 (“CFI Judgment”);

(b)  the appeal judgment of the Court of Appeal dated 17 January 2020 in [2020] HKCA 51 (“CA Judgment”);

(c)  the judgment of Wilson Chan J dated 26 August 2022 in [2022] HKCFI 2638 granting anti-suit injunction (“Anti-suit Injunction”) against Angola (“Injunction Judgment”).

5.  The salient background of the disputes between the two camps has been detailed in the aforesaid judgments. Further, the “Agreed Flow Chart” included as Annex to the CFI Judgment has set out the relevant parties and transactions features in the 1987 Action. For present purposes, I will outline the following (taking into account recent developments):

(a)  In December 2004, Angola and Bai Jun (owned by Xie Heping (“Xie”) and Gao Haiyan (“Gao”)) entered into a joint venture agreement. Angola became the registered shareholder of 50% of Zhong Xin’s shares (i.e. the Relevant Shares) whilst Clarigain (also owned by Xie and Gao) held the other 50% shares in Zhong Xin as trustee for Bai Jun.

(b)  In turn, Zhong Xin entered into a joint venture agreement with Yulin City Yu Yang District Changle Industrial and Trading Ltd (“Chengle I&T”). Zhong Xin’s main asset is its 70% shareholding in Yulin Changlebao Mining Corporation Ltd (“CLB”) and the coal mine it operated pursuant to the joint venture with Chengle I&T.

(c)  In 2005, the 1987 Action was commenced, whereby Bai Jun counterclaimed against Angola for the Relevant Shares.

(d)  On 15 July 2008, Xie and Gao transferred their 100% shares in Bai Jun to Keeneye Holdings Ltd (“Keeneye”) and New Purple Golden Resources Dev Ltd (“New Purple” and, together with Keeneye, the “Keeneye Group”). Disputes arose over the ownership of Bai Jun (but not Clarigain) between August 2008 and December 2016. Eventually, the relevant transfer agreements were revoked pursuant to an arbitral award of the Xi’an Arbitration Commission dated 3 June 2010 which was enforced in Hong Kong on 22 March 2012. These disputes further triggered the action of HCA 1315/2009 (“1315 Action”) which was commenced in June 2009 and only finally resolved on 8 December 2016 pursuant to the Judgment of To J ordering that all shares of Bai Jun be transferred back to Xie and Gao.

(e)  As a result of inter alia the disputes over the Relevant Shares and/or ownership of Bai Jun, the operation of Zhong Xin came to a deadlock since at least 2008 (if not 2005).

(f)  Meanwhile, on 17 July 2008, Changle I&T issued actions in the Mainland challenging the validity of certain capital injection made by Zhong Xin and asked to acquire 42% shareholding of CLB on the basis that such capital injection was invalid (“Mainland Proceedings”).

(g)  As the operation of Zhong Xin was in a deadlock and to safeguard the interest of Zhong Xin, the Court appointed Mr Fok Hei Yu Vincent and Mr Desmond Chiong Chung Seng of Ferrier Hodgson as interim receivers (“Old IRs”) by the Order dated 7 November 2008 (“2008 Order”) to manage the business and undertakings of Zhong Xin including, in particular, to defend the Mainland Proceedings.

(h)  On 19 May 2015, following an oral hearing before Au-Yeung J (“IR Hearing”), the Old IRs (who sought to be discharged) were replaced by Mr James Wardell and Mr Jackson Ip of Baker Tilley (“New IRs”) pursuant to the Order of Au-Yeung J (“2015 Order”).

(i)  By the CFI Judgment dated 15 December 2018, Au-Yeung J dismissed Bai Jun’s claim for the Relevant Shares.

(j)  Upon appeal, the Court of Appeal reversed the CFI Judgment. Pursuant to the CA Judgment dated 17 January 2020 and a further order of the Court of Appeal dated 4 March 2020, Angola was ordered to (i) return the Relevant Shares to Bai Jun and (ii) pay damages in the total amount of RMB 2 million plus interest to Bai Jun (“Damages Order”). Angola sought leave to appeal to the Court of Final Appeal but that was refused by the Court of Appeal on 10 July 2020 and the Court of Final Appeal on 31 May 2021 (together with the CFI and CA Judgments, the “Hong Kong Decisions”).

(k)  On 20 August 2021, Bai Jun regained control of the Relevant Shares from Angola. Shortly thereafter, on 27 October 2021, Zhong Xin and CLB commenced HCA 1650/2021 against the New IRs for breaches of duty.

(l)  Notwithstanding the binding Hong Kong Decisions, Angola commenced proceedings on 19 October 2021 against Bai Jun in Xi-an Intermediate People’s Court (“Xi’an Proceedings”). Worse still, Angola acted contrary to the Anti-suit Injunction granted against it on 26 August 2022 and continued with the Xi’an Proceedings, culminating in three judgments handed down by the Xi-an Intermediate People’s Court on 1 December 2024 (“Xi’an Judgments”) (which are now on appeal). The Xi’an Judgments made findings directly contrary to the Hong Kong Decisions.

(m)  In particular, shortly before the original trial of the 1987 Action scheduled to start in 2009, the Angola camp came up with two alleged settlement agreements dated 20 May 2009 between Angola and Bai Jun (“Settlement Agreement”). It was held by the Hong Kong Decisions that that the Settlement Agreement was a conspiracy designed and presented by the Angola camp to defraud the Hong Kong Court, the Mainland Court and the relevant parties including the Bai Jun camp. Yet, the Xi’an Judgments made findings that the Settlement Agreement was valid and effective.

(n)  Separately, despite the Damages Order, Angola refused to pay anything. As a result, Bai Jun first issued a statutory demand against Angola in Hong Kong on 29 June 2020. As Angola is a BVI company, Bai Jun also issued a statutory demand in the BVI against Angola on 3 April 2023 (“BVI Demand”).

(o)  On 17 April 2023, Angola applied to set aside the BVI Demand on the basis that there is a valid counterclaim. On 15 September 2023, Angola started the present action. Nevertheless, the BVI Court rejected Angola’s application to set aside the BVI Demand on the basis that none of Angola’s claims has a reasonable prospect of being established.

(p)  In addition, various costs orders, including indemnity costs orders, were made in the Hong Kong Decisions against Angola in favour of Bai Jun in the total amount of over HK$17 million and yet none of them has been paid so far. As a result, Bai Jun has applied to pursue Zeng Wei (“Zeng”) personally for those costs. Zeng was the owner of Angola during the period from 26 October 2007 to 10 June 2009 and from 5 October 2009 to 16 March 2022.

6.  In short, the present proceedings are only a tip of the iceberg. Indeed, it is apparent that they were prompted by the action in the BVI.

7.  Second, Angola pursues claims against Zhong Xin and Bai Jun under various heads of claim herein, including contractual claims based on (i) an alleged oral agreement reached in the IR Hearing on 19 May 2015 in relation to the payment of the New IR Fees (the “Alleged 2015 Oral Agreement”) and (ii) two alleged oral agreements between Angola (via Zeng) and Bai Jun (via Zhang Xintian (“Zhang”)) in relation to the payment of the Legal Fees of HK$1.95 million odd on 13 October 2009 and HK$1 million on 11 March 2011 (respectively the “Alleged 2009 Oral Agreement” and the “Alleged 2011 Oral Agreement”) (collectively the “Alleged Oral Agreements”). As to Zhang, he was (i) representative of Changle I&T, (ii) former owner of the Keeneye Group between 16 May 2009 and 18 May 2011, and (iii) purchaser of Angola on 30 May 2009. Whilst Angola confirms that it is not seeking summary judgment under its contractual claims based on the Alleged Oral Agreements, this may have bearing on Angola’s unjust enrichment claims for the New IR Fees and the Legal Fees. Importantly, Angola accepts that its claims for the Alleged Oral Agreements are not suitable for summary determination. If so and to the extent Angola’s claims for unjust enrichment involve overlapping factual disputes, they may not be suitable for summary determination either.

8.  Third, even if Angola is to succeed in its application for summary judgment, there remains outstanding claims or issues including Angola’s claim against Bai Jun for the New IR Fees (as Angola only seeks summary judgment against Zhong Xin here) as well as Angola’s claims for interests. Thus, the O14 Application will not resolve all the claims or issues herein. Whilst Angola proposes that there be a stay in relation to the outstanding claims if it succeeds in obtaining summary judgment, this is objected to by Zhong Xin and Bai Jun.

9.  For the avoidance of doubt, I mention the above as they may be relevant to the background or the scope of the O14 Application. I will consider further issues germane to the O14 Application and the Security Applications in the latter part of this Judgment.

10.  Suffice it to say that, having considered the relevant evidence and the arguments from both sides, I ultimately reach my view in this Judgment to dismiss the O14 Application and accede to the Security Applications (with reduced quantum). As the matter has to proceed to trial, I will keep my reasoning on the O14 Application relatively succinct, and the mere fact that I do not mention or address all the arguments does not mean that I have not considered the same. For the avoidance of doubt, since the matter has to be tried, I would refrain from expressing any final or conclusive view on the matter. Therefore, what I say in this Judgment are tentative views of the Court (which are not binding on the trial judge).

B.  RELEVANT PRINCIPLES

B1.  Summary Judgment

11.  The general principles on summary judgment under Order 14 are trite. The parties have referred this Court to various authorities, viz. Charm Master Enterprises Limited v Grand T G Gold Holdings Limited [2020] HKCFI 2820 at §§17-18; Construction Guangdong Overseas Corporation v Yi Feng Petrochemical Ltd (unreported, HCCT 62/2010, 3 November 2011) at §13; Menfond Electronic Art & Computer Design Co Ltd v Wong Wang Tat Victor (unreported, HCA 293/2011, 3 January 2013) at §61; Barbara Pui Yung Lynn (Administratrix) v Yeung Keung Chi & Ors [2023] HKCFI 3351 at §35; Hong Kong Civil Procedure 2025, Vol. 1, §§14/4/8, 9, 9B, 10, 21, 22. Whilst the formulation may appear slightly different (depending on whether one is looking at it from the perspective of a plaintiff or a defendant), the underlying theme is rather consistent. Without doing injustice to the submissions from Counsel, I will try to summarise the key principles as follows:

(a)  As a starting point, if the plaintiff’s application is properly constituted, it is prima facie entitled to judgment unless the defendant shows cause to the contrary;

(b)  The threshold imposed on a defendant is not high, as the defendant is only required to discharge the burden of showing a real or bona fide defence or some other reason for a trial;

(c)  Nevertheless, it remains a meaningful threshold, in the sense that the mere assertion in an affidavit of a given situation by the defendant does not, ipso facto, ground leave to defend. The defendant should condescend to particulars in his defence, and must satisfy the Court that his evidence is capable of being believed and that on the basis of such evidence, there is a fair or reasonable probability of the defendant having a real or bona fide defence. If the defendant’s evidence is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence;

(d)  There is no inflexible rule on the Court’s approach. On the one hand, the Court will not shy away from forming a view where appropriate. In particular:- (i) the Court should look at the whole situation (rather than isolate each factual issue to consider credibility); (ii) the Court is not obliged to suspend its critical faculties and assume that the defendant’s evidence is accurate; and (iii) if having regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, the defence is not credible, the Court should say so;

(e)  On the other hand, the Court will not embark upon a mini-trial on affidavit evidence, as the issue is not whether the defendant’s assertions are to be believed, but whether those assertions are believable;

(f)  Specifically, where an oral contract is relevant and its terms are in dispute, summary judgment should be refused unless the plaintiff can satisfy the court that on the defendant’s version, he is entitled to judgment or that the defendant’s version is not “capable of belief”;

(g)  Where the plaintiff seeks equitable relief, summary judgment may not be appropriate even if there is no defence as the question of whether the Court should grant equitable relief may depend on fact-sensitive issues;

(h)  A trial may also be warranted when there may be “some other reason” such as special circumstances which require close investigation.

12.  As mentioned above, Angola accepts that its claims for the Alleged Oral Agreements are not suitable for summary determination. I will examine below whether Angola can nevertheless get around this by seeking summary judgment for claims of unjust enrichment independently.

B2.  Unjust enrichment claims based on failure of basis

13.  There is no serious dispute between the parties on the general governing principles of unjust enrichment. It is well settled that the cause of action for unjust enrichment requires the claim to answer four questions, as formulated by Ribeiro PJ in Shanghai Tongji Science & Technology Industrial Co Ltd v Casil Clearing Ltd (2004) 7 HKCFAR 79 at §67:

(a)  Was the defendant enriched?

(b)  Was the enrichment at the plaintiff ’s expense?

(c)  Was the enrichment unjust?

(d)  Are any of the defences applicable?

14.  In relation to the third question, it appears that whilst Angola’s pleaded case is articulated on the basis of mistake, it is more precisely premised on the failure of basis as elucidated in Angola’s submissions. The juridical basis is explained in Goff & Jones: The Law of Unjust Enrichment (10^th Ed), §§13-02 – 13-04 as follows:

“The basis of the transfer must be jointly understood as such by both parties. It must be ascertained objectively, and the parties’ uncommunicated subjective thoughts are irrelevant. Hence, if only one of the parties has a particular basis in mind, and that basis fails, no claim arises in unjust enrichment …. The joint basis of the transfer should be assessed objectively—a purely subjective assessment would be both impractical and undermine the parties’ legitimate expectations. If, therefore, one party voices his understanding of the basis of a transfer, and the other apparently assents, that basis can be taken to be an agreed basis, whether or not the other party has some private reservations about it.”

15.  On behalf of Angola, Mr Deng also refers this Court to the decision of the English Court of Appeal in Dargamo Holdings Ltd v Avonwick Holdings Ltd [2022] 2 C.L.C 583 at §§79 – 80:

“79. The core concept of ‘failure of basis’ is that a benefit has been conferred on a joint understanding that the recipient’s right to retain it is conditional. If the condition is not fulfilled, the recipient must return the benefit (see Goff & Jones at 12 - 01). Whilst failure of basis ranks alongside the unjust factors of mistake, duress and undue influence as a factor negativing consent, it differs in that it is concerned with qualification of consent, as opposed to impaired or vitiated consent (see Burrows The Law of Restitution (3^rd edn, 2011)).

80. It is common ground that the meaning of failure of basis extends beyond failure of promissory consideration payable under a contract or a failure of contractual counter-performance (see Fibrosa Spolka Akcyjna v Fairbairn Lawson Combe Barbour Ltd… [1943] AC 32 at 48). … The extended meaning is supported in An Introduction to the Law of Restitution (at p 223) (cited with approval by the Court of Appeal in Sharma v Simposh Ltd… [2013] Ch 23 (at [24])) where it is stated that: ‘Failure of consideration for a payment… means that the state of affairs contemplated as the basis or reason for the payment has failed to materialise or, if it did exist, has failed to sustain itself .”

16.  Mr Deng further refers to a case concerning payment for interim receiver services, in Barnes v Eastenders Cash & Carry plc & Ors [2015] AC 1, where Lord Toulson said at §§114 – 115 that:-

“114. Similarly, in the present case the receiver agreed to accept the burden of management of the companies on the basis that he would be entitled to take his remuneration and expenses from the companies’ assets, and that state of affairs which was fundamental to the agreement has failed to sustain itself. …

115. In the present case there was a total failure of consideration in relation to the receiver’s rights over the companies’ assets, which was fundamental to the basis on which the receiver was requested by the CPS and agreed to act. I use the expression “fundamental to the basis” because it should not be thought that mere failure of an expectation which motivated a party to enter into a contract may give rise to a restitutionary claim. Most contracts are entered into with intentions or expectations which may not be fulfilled, and the allocation of the risk of their non-fulfilment is a function of the contract. But in the present case the expectation that the receiver would have a legal right to recover his remuneration and expenses was not just a motivating factor. Nobody envisaged that the receiver should provide his services in managing the companies as a volunteer; those services were to be in return for his right to recover his remuneration and expenses from the assets of the companies, such as they might be. The agreement between the CPS and the receiver so provided, and that provision was incorporated into the order of the court.”

17.  On the other hand, Mr Wang refers this Court to the following principles by reference to Goff & Jones: The Law of Unjust Enrichment (10^th Ed):

(a)  The Court should consider if the claimant’s mistake “cause” the benefit to be conferred (at §§9-28 – 9-29);

(b)  The defence of change of position would exist if the defendant’s “position has so changed that it would be inequitable in all the circumstances to require him to make restitution, or alternatively restitution in full” (at §27-01);

(c)  In any event, any unjust enrichment claim would be time-barred with the lapse of the 6-year limitation period (at §§33-04 – 33-08).

C.  NEW IR FEES

C1.  Basis of Angola’s Claim

18.  There is no dispute that Angola paid HK$9,150,000 to the New IRs to cover their fees and expenses. Angola seeks to recover the same from Zhong Xin in the O14 Application based on unjust enrichment.

19.  The factual matrix leading to the discharge of the Old IRs and the appointment of the New IRs is not in serious dispute, and has been set out in §15 of Angola’s Amended Statement of Claim (“ASoC”), viz:

(a)  In or around 2015, Zhong Xin ran out of funds and failed to settle outstanding fees owed to the Old IRs;

(b)  The Old IRs applied to the Court of First Instance, seeking to discharge themselves from their duties;

(c)  The Old IRs’ application was heard by Au-Yeung J on 19 May 2015 (i.e. the IR Hearing) and the following issues arose for consideration:-

(i)  Which of the new interim receivers nominated by the parties should be chosen;

(ii)  The funding arrangement for the new interim receiver(s); and

(iii)  The settlement of fees owed to the Old IRs;

(d)  At the IR Hearing,

(i)  Clarigain was represented by Messrs. CL Chow & Macksion Chan instructing Mr. Laurence Li;

(ii)  Bai Jun by Messrs. Li & Partners;

(iii)  Angola by Messrs. Stevenson, Wong & Co. instructing Mr. Victor Dawes SC and Mr. James Man; and 


(iv)  The Old IRs by Messrs. J. Chan Yip, So & Partners instructing Mr. Jeffrey Chau.

20.  At §16 of the ASoC, Angola has pleaded the Alleged 2015 Oral Agreement (which is strenuously disputed) as follows:

“16. At the IR Hearing, the Court required parties to address it on the issues pleaded at Paragraph 15(3) above and as a result, an oral agreement (as evidenced by the parties’ submissions at the IR Hearing and the Court order dated 19 May 2015) was reached between the Plaintiff and the 2^nd Defendant (who represented Clarigain’s interests):-

Particulars of Oral Agreement

(1) The professional fees of Second IR to be incurred in the future shall first be discharged from the assets of the 1^st Defendant;

(2) In the event the 1^st Defendant does not have sufficient assets or liquid cash to settle such professional fees, the Plaintiff and the 2^nd Defendant, as the ultimate shareholders of the 1^st Defendant at the material time, shall both settle the said fees on behalf of the 1^st Defendant;

(3) For the time being, the party who proposed the interim receiver(s) chosen by the Court shall pay such professional fees first, including costs on account, on behalf of itself and the other ultimate shareholder;

(4) Any professional fees for the Second IR paid by either the Plaintiff or the 2^nd Defendant shall be reimbursed by the 1^st Defendant and in accordance with the outcome of HCA 1987/2005; and

(5) In the event the 1^st Defendant does not reimburse the Plaintiff or the 2^nd Defendant for any of the Second IR professional fees paid upon reasonable demand, the Plaintiff and the 2^nd Defendant shall reimburse each other all sums paid for the professional fees of the Second IR and in accordance with the outcome of HCA 1987/2005.

(the “Oral Agreement”)”

21.  At §17 of the ASoC, Angola has further pleaded that, insofar as they were not expressly agreed, the terms set out in §16(4) – (5) of the ASoC are implied by reason of necessity and business efficacy (which are hotly disputed).

22.  Significantly, for the purpose of the O14 Application, Angola does not seek to rely on the Alleged 2015 Oral Agreement (whether its express or implied terms). Instead, Angola seeks to limit itself to the claim of unjust enrichment against Zhong Xin. As summarised in §20 of Angola’s submissions, Angola has pleaded unjust enrichment of Zhong Xin at §§30 – 37 of the ASoC on the basis that:-

(a)  P did pay a total sum of HK$9,150,000 to the New IRs who were appointed as interim receivers of D1 by the Court;

(b)  P advanced on the mistaken basis that it was a shareholder of D1;

(c)  P advanced on a mistaken belief that it was in P’s interest to ensure that D1 was a going concern pending the resolution of HCA 1987/2005; and

(d)  P was under a mistaken assumption and/or belief that D1 did not at that time have funds to discharge the Old IRs and New IRs fees.

23.  As summarised in §21 of Angola’s submissions, the Defendants deny Angola’s case and plead specifically that:

(a)  there was no mistake that P believed it had any interest in D1;

(b)  P’s claim may be rejected in HCA 1987/2005;

(c)  the alleged New IRs’ misconduct resulted in D1 suffering loss and damage;

(d)  an allegation of collusion between P and the New IRs to mismanage D1; and

(e)  the necessity of interim receivers was due to the gross litigation misconduct that started since 2 July 2009 latest.

24.  In its written and oral submissions, Mr Deng stresses that there can be no dispute about the first two questions of unjust enrichment in that D1 was enriched and it was at P’s expense, and therefore the focus is on questions 3 and 4, namely whether the enrichment was unjust and whether any of the defences are applicable.

25.  On question 3, Mr Deng relies heavily on the transcript of the IR Hearing (“Transcript”) to contend the following:

(a)  Parties had agreed expressly that if their choice of interim receivers (“IRs”) was picked by the Court, they would underwrite the fees as shareholders;

(b)  The fees were to be paid otherwise by the normal route, i.e. out of D1’s assets but if there were none, then there would be costs on account; and

(c)  Parties would at the point where the IRs were discharged at the end of the action, recover the fees paid.

26.  Mr Deng argues that since D2’s (i.e. Bai Jun) counsel did not oppose at all or make its concerns known that parties paying were entitled to recover the fees paid, it is therefore clear that the entire basis upon which P made payments to the New IRs were:-

(a)  It was to get things moving, and to ensure a new IRs could be appointed;

(b)  It was on the basis that it was a shareholder of D1 as a shareholders loan, i.e. P was in fact a shareholder;

(c)  It was not a gratuitous gift (and in the context of highly hostile litigation between parties it would be completely contrary to the circumstance in addition to the fact that this is a commercial decision); and

(d)  It was to be recovered at the end of the proceedings.

27.  Premised on the foregoing, Mr Deng then argues that upon the CA Judgment allowing the appeal, P was no longer a shareholder of D1. The entire basis for which P had extended a shareholders loan, in effect, was completely gone and it follows that D1 was enriched at the expense of P.

C2.  Analysis

28.  Having considered the relevant evidence and the arguments from both sides, I am not satisfied that Angola should be entitled to summary judgment for the New IR Fees. The basis of Angola’s claim is subject to dispute and should properly be resolved at trial. Further and in any event, Bai Jun has discharged the burden of showing a real or bona fide defence or some other reason for a trial. As mentioned, since the matter will have to go to trial, I will be relatively succinct in my reasoning.

29.  First of all, there are substantial overlap between Angola’s contractual claim (based on the Alleged 2015 Oral Agreement) and unjust enrichment claim for the New IR Fees. Both claims are substantially premised on the alleged agreement or understanding of the parties reached in the IR Hearing, being (i) the express and/or implied terms of the alleged oral agreement under the contractual claim, and (ii) the entire basis upon which Angola made payments to the New IRs under the unjust enrichment claim. Even if Angola seeks to limit itself to its unjust enrichment claim, it is inevitable for the Court to examine the circumstances under which Angola paid for the New IR Fees, including the oral submissions made in the IR Hearing as reflected in the Transcript.

30.  In the circumstances, inasmuch as Angola accepts that its claims under the Alleged 2015 Oral Agreement is not suitable for summary determination, the same would appear to apply to the unjust enrichment claim in that the very basis upon which Angola made payments to the New IRs is hotly in dispute, including in particular whether it was not a gratuitous gift as alleged by Angola, or whether it was merely voluntary payment as alleged by the defendants. Put simply, the basis upon which Angola made payments to the New IRs, including in particular the construction of the Transcript, ought to be a common issue to be resolved for Angola’s contractual and unjust enrichment claims.

31.  Second, the overlap in the factual circumstances for Angola’s contractual and unjust enrichment claim has another potential implication. As a matter of law, a plaintiff cannot claim restitution of a sum which was paid pursuant to a subsisting contractual obligation. As Ribeiro PJ put it in Shanghai Tongji (supra) at §92:

“92. While a contract continues to subsist between the parties, one party who makes a payment to the other party in accordance with his obligations under that contract cannot be allowed to mount a claim in restitution for the return of that sum since such a claim would be inconsistent with what the parties had agreed. It is in this sense that the contract would be “undermined” or, as Professor Birks puts it, that the restitutionary claim would “subvert bargains” (Birks, An Introduction to the Law of Restitution (1989 Rev ed.) p.47).”

32.  Therefore, if there were indeed an oral agreement for the New IR Fees and Angola made payment in accordance with its obligation under that oral agreement, it would appear that Angola could only pursue a claim in contract and cannot be allowed to mount a claim in restitution for the return of that sum. If so, insofar as Angola made the payment pursuant to an oral agreement and yet such oral agreement contains no express or implied term entitling Angola to recover payment from Zhong Xin (or Bai Jun), Angola may not be able to recover such sum after all (and it may not be able to mount any alternative claim of unjust enrichment). In this regard, whilst Angola limits itself to its unjust enrichment claim for the purpose of the O14 Application and confirms that it will not pursue its contractual claim if it succeeds in its claim of unjust enrichment, that does not address the concern. This is because the concern is not merely one of double recovery, but rather a fundamental question as to whether Angola’s contractual claim may preclude Angola from pursuing its claim of unjust enrichment. Simply put, Angola’s entitlement to mount a claim in unjust enrichment is predicated upon the absence of a subsisting contract. If there was in fact no oral agreement as alleged (or if any alleged oral agreement is void), then it should be open to Angola to pursue a claim in unjust enrichment (but not otherwise if there was a subsisting contract). Plainly, whether there was an oral agreement and if so, the terms thereof, is a matter for trial. Angola cannot brush this aside and ask the Court to proceed on the basis as if there were no contract when it has not abandoned its contractual claim (albeit not pursued under its O14 Application). Nor can the Court turn a blind eye to the possibility of a subsisting contract, which remains part of Angola’s pleaded case. If so, this is another reason why the entire case should go to trial, particularly given Angola’s stance that its contractual claim is not suitable for summary determination anyway.

33.  Third, there is force in Mr Wang’s argument that, by 2015, Angola’s status as shareholder was a matter hotly in dispute in the 1987 Action and hence Angola could not be labouring under any mistake that it was a shareholder of Zhong Xin when it made payments to the New IRs. As submitted by Mr Wang, Angola and Bai Jun had been in dispute and litigation for the ownership of the Relevant Shares for over 9 years by the time of 2015 and Angola knew full well about all the details and particulars of the dispute over the ownership of the Relevant Shares and is the last person to allege any mistake that the Relevant Shares belonged to it. It seems reasonably arguable that Angola was fully aware of such dispute and it nevertheless made the payments with full knowledge or understanding that Bai Jun may ultimately succeed in its counterclaim, whereupon Angola would lose its status as a shareholder of Zhong Xin, i.e. on the basis that the ownership of the Relevant Shares was in dispute and may not be resolved in Angola’s favour (cf the different basis pleaded by Angola for its unjust enrichment claim). If so, any alleged belief in Angola’s interest in the Relevant Shares could not “cause” any benefit to be conferred.

34.  As Mr Wang put it, that is the very reason why the New IRs were necessary in the first place. In other words, it seems arguable that, despite the counterclaim of Bai Jun, Angola made an informed choice to make voluntary payments for the New IR Fees to preserve the interest and value of Zhong Xin, such that Angola’s indirect interest as tentative 50% shareholder of Zhong Xin (subject to the outcome of the 1987 Action) would not be prejudiced or injured in the interim. Using the terminology in Angola’s ASoC, the New IR Fees were paid by Angola to ensure that Zhong Xin was a going concern pending resolution of the 1987 Action. It is at least arguable that it was not advanced on the basis of a shareholders loan, as opposed to voluntary payment made by a tentative shareholder.

35.  In that sense, the appointment of the IRs was necessitated due to the dispute over the Relevant Shares as between Angola and Bai Jun. But for Angola’s resistance to Bai Jun’s counterclaim, Bai Jun should be in full control of Zhong Xin (via Clarigain and itself) and there would have been no need for the appointment of the IRs (let alone IRs nominated by Angola) to preserve the interest and value of Zhong Xin. As such, the IRs were put in place to preserve Angola’s potential interest pending litigation, and it seems ludicrous for Angola to suggest that simply because it lost in the 1987 Action (as opposed to succeeding in it), that it need not bear the costs of the New IRs but should instead be allowed to recover the same from Zhong Xin, when such costs of the New IRs need not be incurred but for Angola’s (unsuccessful) resistance of Bai Jun’s counterclaim.

36.  Indeed, one would have thought (albeit without expressing any final view here) that, given that Angola lost in the 1987 Action, if the fees for the New IRs were paid by Bai Jun camp instead, Bai Jun camp could probably apply in the 1987 Action for the recovery of such costs against Angola, on the basis that such costs were necessitated as interim measures pending resolution of the 1987 Action and should be borne by the losing party in accordance with the final outcome of the 1987 Action. The corollary of this is that, where the fees for the New IRs were paid by Angola, it would unlikely be open to Angola as the losing party to seek to recover such costs against the Bai Jun camp in the 1987 Action.

37.  Fourth, on behalf of Angola, Mr Deng has placed great reliance on the Transcript, particularly the part suggesting that the parties merely agreed to “underwrite” the fees of the new IRs. As contended by Mr Deng, the word “underwrite” means that the parties merely agreed to pay where Zhong Xin was not in a position to pay, but it does not mean that the parties agreed to assume ultimate responsibility for the fees. In my view, the Transcript is far from clear and does not necessarily lend support to Angola’s position. Without being exhaustive:

(a)  Whilst there were references that the Court should go for the set of new IRs where the Court has comfort that someone will underwrite their fees, including future fees beyond the initial HK$5 million to be paid (see Transcript at 5T, 15J-N), it is not entirely clear what it entails. It seems to be common ground that under the arrangement, the new IRs will get paid out of the assets of Zhong Xin first and if that is not enough they will resort to a particular party who would place HK$5 million as costs on account. However, nothing was said as to whether after a particular party has underwritten and paid for the fees, such party can recoup the same from Zhong Xin (particularly in the absence of a court order or a contractual agreement).

(b)  The word “underwrite” should be interpreted in context and against the entirety of the oral submissions. As explained by Mr Dawes SC in the course of his oral submissions, “we are both bound by instructions” and “there is an issue as to whether the court can actually order shareholders to fund an IR, because that is something that has never been done before” (Transcript at 14O-Q). If the Court cannot compel shareholders to fund an IR, it must follow that such payments would be voluntary by nature. This was expressly accepted by Mr Dawes SC for Angola. Whilst acknowledging it is for the company (i.e. Zhong Xin) to pay, he went on to say that “we [i.e. Angola and Clarigain] are both prepared to do it voluntarily” and “It is just that they are only prepared to cough up the funds for the person they nominate” (see Transcript at 14R-T). Arguably, if the payment is voluntary, it does not make much difference whether it is paid by a shareholder, a tentative shareholder, or indeed an outsider. This reinforces Mr Wang’s argument that the payments made by Angola were voluntary and could have been made for a number of commercial reasons, e.g. (i) to preserve Zhong Xin as a going concern pending litigation, (ii) to remove the Old IRs that Angola was dissatisfied with, or (iii) to cause Zhong Xin to act in a way favoured by Angola, etc (as otherwise even if Angola succeeds in the end, the Relevant Shares may have become worthless in the interim), with full knowledge that Angola may or may not succeed in the 1987 Action eventually.

(c)  There were repeated references that Angola was only willing to pay for the IRs it nominated, and would not pay for the fees of IRs nominated by Clarigain, and vice versa (see Transcript at 4T-5F, 8H-I, 14A-D, 14R-T). This appears to reinforce the voluntary (and indeed gratuitous) nature of the payment, i.e. they are prepared to pay (even if not obliged to) if they are comfortable with the choice of the new IRs, but not otherwise. Coupled with the parties’ insistence not to pay for IRs nominated by the opposing parties (as they are not obliged to do so to begin with), this militates against Angola’s alleged basis that the payment was not a gratuitous gift.

(d)  Mr Dawes SC initially suggested on behalf of Angola that, beyond the payment of HK$5 million, there may be room for equal payments by both sides subject to taking instructions (see Transcript at 15S-U) but ultimately the matter rested on the basis of just one party paying without reaching consent on anything beyond HK$5 million (see Transcript at 16K-T, 17J-K). If anything, this seems to point to the lack of agreement for the initial HK$5 million (and a fortiori anything beyond it) to be borne by anyone other than the nominating party.

(e)  In particular, Au-Yeung J said to Mr Dawes SC “You are suggesting that I actually cannot say that the receivers be paid in the first instance by both parties which can be recoverable at the end of the action. Can I do that?” and Mr Dawes SC replied “No” (Transcript at 16A-E). Whilst Mr Deng argues that Mr Dawes SC merely said “No” to funding by both parties but not recoverability at the end of the action, this is far from clear. Moreover, even if it can be recoverable at the end of the action, it is at least arguable that this was intended to be achieved via recovery of the fees under the 1987 Action, as opposed to Angola’s present claim of unjust enrichment.

(f)  There was an agreement by Angola and Clarigain that each of them would pay HK$300,000 into Court to cover the costs of the Old IRs for one month for handover (see Transcript at 12P-R). First, this stood in contrast with the arrangement on the New IRs where only one party (either Angola or Clarigain, but not both) would pay. Second, even for the Old IRs, there is no suggestion that Angola and Clarigain could subsequently sue Zhong Xin to recover such payment of HK$300,000 – indeed if Angola were right, there is no reason why Angola should not seek repayment of such HK$300,000 from Zhong Xin based on unjust enrichment (which it has not done so far).

38.  Fifth, it is also important to consider the terms of the 2015 Order. Among others:

(a)  The New IRs were appointed on the same terms as the 2008 Order, and HK$5 million was expressly stated to be provided by Angola as costs on account (at §1);

(b)  Angola and Clarigain were further specifically ordered to provide a sum of HK$300,000 each to settle the outstanding fees of the Old IRs (at §3);

(c)  The Old IRs are further entitled to seek indemnity from Zhong Xin with priority (at §§4 and 7; also §11 of the 2008 Order);

(d)  The New IRs are also entitled to be indemnified out of the assets of Zhong Xin in the same manner as the Old IRs (at §1; also §11 of the 2008 Order).

39.  In this regard, there is force in Mr Wang’s submissions that, not only did the 2015 Order contain no trace of the Alleged 2015 Oral Agreement, there was also no express provision dealing with Angola’s entitlement (if any) to seek repayment of HK$5 million, or any other amount that it may pay to the New IRs from either Bai Jun or Zhong Xin.

40.  Apart from the above, Zhong Xin has also relied on various other arguments or defences. Given my views above, it is not strictly necessary to go into all of them. As such, I would only express my tentative views briefly:

(a)  As to the argument on the New IRs’ alleged misconduct or mismanagement, I have reservation whether Zhong Xin could argue that it was not enriched or that there is change of position as a result. It seems to me (without expressing any final view) that this does not detract from the fact that Zhong Xin did receive the services from the New IRs and hence was enriched. That could be so without prejudice to the right of Zhong Xin to challenge the costs, charges and expenses of the New IRs (or to claim damages) on account of the alleged misconduct or mismanagement, as foreshadowed by §1 of the 2015 Order and §11 of the 2008 Order. As such, if Angola does have a right to recoup the New IR Fees from Zhong Xin, it would appear that the proper way should be for Zhong Xin to repay such fees without prejudice to its right to challenge such fees or claim damages vis-à-vis the New IRs such that if it succeeds in such claim, the New IRs should repay the excess fees or otherwise pay damages to Zhong Xin (on the basis that Zhong Xin has ultimately paid for the fees);

(b)  As to the allegation of collusion between Angola and the New IRs to mismanage D1, again it seems to me that the proper way is not for Zhong Xin to resist payment, but that it may pursue such claim against the New IRs (and where appropriate Angola as well) and claim damages including repayment of fees and any other further loss if it succeeds in such claim;

(c)  As to the necessity of interim receivers being due to the gross litigation misconduct that started since 2 July 2009 latest, it seems to me that this echoes my observations above that the parties may seek to recover the costs of the New IRs as part of the costs of the 1987 Action, in which event the Court would likely take into account the outcome of the 1987 Action and the conduct of the parties in deciding whether and how such costs may be recovered. To some extent this reinforces my (tentative) view that it is not really for Angola to seek repayment of such costs by way of unjust enrichment in a new action (let alone summary judgment), as opposed to doing so in the original 1987 Action;

(d)  As to the argument that Angola’s unjust enrichment claim is time-barred, Mr Deng stresses that such defence is simply not pleaded. Whilst the Court may still consider unpleaded defence for the purpose of summary judgment, it is fair to say that Mr Wang has not fully developed his argument on such prospective defence whether in his written or oral submissions. For instance, should time start to run from the date of advancement, or should time only start to run from the date when there was failure of basis and, if so, would that be the CA Judgment (in which case the 6-year limitation period has not yet lapsed)? For such reasons, I do not intend to attach much weight to such potential (yet undeveloped) defence.

41.  For all these reasons, I am not satisfied that Angola should be entitled to summary judgment for the New IR Fees. For the avoidance of doubt, I am not suggesting that there is no logic or merit in advocating that the payments of the New IR Fees were advanced on the basis that the primary responsibility of payment rests on Zhong Xin and hence insofar as Angola underwrote and paid the same, Angola should be entitled (whether by express or implied term of any agreement, or unjust enrichment) to recoup the same from Zhong Xin (and potentially others). Nevertheless, for the reasons canvassed above, that is a matter to be pursued at trial.

42.  In the circumstances, it is not necessary for the Court to deal with the further issue whether, had Angola succeeded in obtaining summary judgment for the New IR Fees, Angola should be entitled to compound interest as well as 12% interest (which, as accepted by Angola, may be triable issues and may have to be adjourned for trial).

43.  Separately, insofar as Angola paid the New IR Fees for which Zhong Xin should be primarily responsible, Angola may have a right to claim repayment from Zhong Xin by way of subrogation but this is apparently not the type of claim being pursued by way of unjust enrichment here. Further, if Angola is pursuing a claim by way of subrogation, it would seem to me that Zhong Xin might be able to rely on defences which it could mount in response to a claim for fees by the New IRs, including the claims based on the alleged misconduct, mismanagement or collusion of the New IRs.

D.  LEGAL FEES

D1.  Basis of Angola’s claim

44.  Angola has pleaded in §§9 – 10 of the ASoC that Bai Jun had owed legal fees to its solicitors and there were the Alleged 2009 and 2011 Oral Agreements between Angola and Bai Jun for Angola to assist Bai Jun to discharge its outstanding legal fees.

45.  On behalf of Angola, Mr Deng argues that Angola’s case of unjust enrichment is straightforward – the funds belonged to Angola, and they were used to discharge Bai Jun’s legal fees. Angola accepts that there are real issues as to authority and whether those directors and representatives of Bai Jun at the time could enter into a contract. Yet, that should not affect Angola’s claim for unjust enrichment, which is akin to the situation in Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752, where the contract was found void but nonetheless the claimant was entitled to restitutionary relief under a claim of unjust enrichment.

46.  In response to Angola’s claim, the defendants not only deny that there were any such agreements but also positively deny that Angola has paid any legal fees for Bai Jun (see §10 of the Defence). Mr Deng argues that it is a bare defence, as Bai Jun merely seeks to raise queries in respect of the evidence placed before the Court, namely:

(a)  The oral agreements were made many years ago yet none were raised or hinted by P until 2023;

(b)  The alleged oral agreements on the Legal Fees were never raised in the BVI proceedings in Zeng’s 2^nd Affirmation to the BVI Court on 7 July 2023 and only in the Statement of Claim herein on 15 September 2023;

(c)  The alleged oral agreements on the Legal Fees are fabrications and amount to change of positions;

(d)  The officers of D2 at the time were not in any actual or ostensible position to enter into any oral agreement with third parties (as confirmed by the CFI and CA Judgments);

(e)  The evidence of the cheque and receipt of Messrs. Cheng & Lo dated 13 October 2009 raises more questions than answers in that D2 was a nominal defendant to the proceedings and therefore could not have incurred such costs (as mentioned above already); and

(f)  The identity of the payor of the HK$1.95 million, Mr. Chan Kai Ming (“Chan”), was not explained in Zeng’s affirmation.

47.  Importantly, Mr Deng argues that the four questions posed in Shanghai Tongji (supra) are satisfied here:

(a)  Bai Jun was enriched as the objective evidence is that Bai Jun’s solicitors at the material time were paid in 2009 and 2011 and when it was not fully under control of Xie/Gao;

(b)  Payment through an intermediary is sufficient. Angola has explained the funds were from intermediaries paid directly to Bai Jun’s solicitors accounts. Bai Jun has been unable to positively show that those funds were not paid by Angola;

(c)  The enrichment was unjust, as there was no consideration in the sense that the legal services were wholly for Bai Jun and not for Angola’s gain;

(d)  Bai Jun has not pleaded any positive defence.

48.  In relation to defences, Bai Jun has raised a limitation point in affirmation without particulars as to why the limitation point arises or when time starts to run. Mr Deng stresses that such defence is yet to be pleaded.

D2.  Analysis

49.  Having considered the relevant evidence and the arguments from both sides, I am not satisfied that Angola should be entitled to summary judgment for the Legal Fees. Again, since the matter will have to go to trial, I will be relatively succinct in my reasoning.

50.  First, in relation to the Legal Fees, Angola pursues both contractual and unjust enrichment claims against Bai Jun, even though it seeks to limit itself to its unjust enrichment claim for the purpose of the O14 Application. Specifically, for the purpose of its contractual claims, Angola relies on the Alleged 2009 and 2011 Oral Agreements entered into between Zeng on behalf of Angola and Zhang on behalf of Bai Jun.

51.  As mentioned above, as a matter of law, a plaintiff cannot claim restitution of a sum which was paid pursuant to a subsisting contractual obligation. As such, my analysis above in relation to the New IR Fees would apply, mutatis mutandis, to Angola’s claim for the Legal Fees. Hence, whether Angola can pursue a claim in unjust enrichment for the Legal Fees is dependent on the outcome of its contractual claim in relation to the same. Insofar as Angola advanced HK$1.95 million in 2009 and HK$1 million in 2011 in accordance with its contractual obligations under the Alleged 2009 and 2011 Oral Agreements, it would appear that Angola could only seek repayment in contract but cannot mount a claim in restitution for the return of such sums.

52.  Moreover, if Angola had advanced payments for the Legal Fees as loans to Bai Jun under the alleged oral agreements, there is a real possibility that such loans are time-barred. It is trite that, at common law, where no time for repayment was specified in a contract of loan, or where the loan was expressed simply to be repayable on demand, the lender’s cause of action in general accrued when the loan was made and time began to run from that moment (see e.g. Mary v Ngai Yee Chai [2006] 1 HKC 157 at §10 per Cheung JA). If so, Angola may not be able to recover such sums by a contractual claim after all and, more importantly, it may not be able to mount any alternative claim of unjust enrichment either. In the premises and for similar reasons as explained above in relation to the New IR Fees, the proper course is for the entire case to go to trial, particularly given Angola’s stance that its contractual claim (based on the Alleged 2009 and 2011 Oral Agreements) is not suitable for summary determination.

53.  Second, in terms of the relevant evidence on payment, Angola relies on the following:

(a)  In relation to the sum of HK$1,950,304.03, there is a cheque dated 13 October 2009 drawn from an account of Chan and the receipt of Messrs. Cheng & Lo also dated 13 October 2009 acknowledging payment by Bai Jun and stating that the money was in relation to the 1315 Action and for “c/d” (i.e. costs and disbursements) to Anthony Siu & Co., who was Bai Jun’s legal representative from March 2006 to July 2009.

(b)  As to the sum of HK$1 million, there is a payment slip dated 11 March 2011 evidencing payment of HK$1 million to the client’s account of Li & Partners, and an email dated 14 March 2011 from Li & Partners acknowledging receipt of the same. Base on the evidence, the sum of HK$1 million was paid as costs on account for apparently the subject title HCCT 41/2010 which was Xie/Gao’s litigation against Keeneye Group to enforce the Xi’an Arbitration award and return Bai Jun’s shares to Xie/Gao, and Li & Partners were engaged to act for Bai Jun in the 1987 Action at the material time.

54.  Notwithstanding the foregoing, there are triable issues raised by Bai Jun, including for instance the queries mentioned above. There is also a serious question to be tried whether the payments were made on behalf of Angola, and whether they were in fact for the benefit of Bai Jun.

55.  In relation to the sum of HK$1,950,304.03 paid in 2009 (without being exhaustive):

(a)  Much of the evidence adduced by Angola relates to the Alleged 2009 Oral Agreement which, as accepted by Angola, is not suitable for summary determination. As submitted by Mr Wang, the credibility of Zeng’s affirmation evidence on the genesis of the Alleged 2009 Oral Agreement is plainly in issue, particularly as his account (i.e. the oral agreement was reached in October 2009 when Zhang signed the documents for re-transferring the shares of Angola) is contradictory to binding findings in the CFI Judgment that Zhang pre-signed the reversal documents in June 2009.

(b)  Moreover, as submitted further by Mr Wang, if the payment of HK$1.95m odd was indeed to alleviate Zhang’s temporary financial difficulty, there is no reason why Zeng or Angola did not request for its repayment, or to deduct such sum from the money that Zeng paid to Zhang being the return of the deposit of RMB 30 million on 4 December 2009. Whilst Zeng now alleges (in §29 of his 3^rd Affirmation) that this deposit was already returned before the payment of HK$1.95m odd on 13 October 2009, this is contrary to Zeng’s previous statement.

(c)  All these put in issue the credibility of Zeng’s evidence (on behalf of Angola) on the Alleged 2009 Oral Agreement. Significantly, if Zeng’s evidence is incredible, this could have bearing on other aspects of Zeng’s evidence including, for instance, the fund flow and the allegation that the payment of HK$1.95 million odd was made on behalf of Angola.

(d)  To begin with, there is no clear or satisfactory documentary evidence tracing the source of funds from Angola. There is serious question as to whether the funds were advanced by Chan on behalf of another entity and, if so, a further question whether it is advanced on behalf of Zeng personally or Angola.

(e)  In an attempt to unravel this, Zeng alleged in §§57 – 58 of his 1^st Affirmation that he arranged for an intermediary, Chan, to make the payment. However, Zeng provided no details, not to mention evidence about the exact arrangement he had with Chan. The receipt issued by Messrs Cheng & Lo also mentioned nothing about the source of the payment, whether it was Angola, Zeng or Chan.

(f)  Whilst Angola argues there is no evidence by Bai Jun to contradict Zeng’s evidence, one must not forget that the payment dated back to over 15 years ago. Importantly, given the unsatisfactory state of evidence, there is no reason why Bai Jun could not challenge the veracity of Angola’s case at trial, even if Bai Jun may not be able to proffer positive evidence (e.g. due to the lapse of time since 2009).

(g)  Significantly, on Angola’s own case, Zeng alleged in §§52-53 of his 1^st Affirmation that Zhang approached him privately, but not the other two directors of Angola because he got along better with Zeng and Zeng agreed to help alleviate Zhang’s financial difficulty. There is no mention of any discussion amongst the then directors of Angola (let alone board resolution). There is no document showing the approval or authorisation of Angola. As such, there is force in Mr Wang’s argument that Zeng had no authority to act on behalf of Angola alone, and Angola’s case is consistent with a private dealing between Zeng and Zhang, rather than any dealing between Angola and Bai Jun.

(h)  The above is reinforced in part by Zeng’s 5^th Affirmation dated 9 February 2012 in the 1987 Action where he stated at §19 that “At the request of Mr. Zhang, I helped Bai Jun to settle the legal bill. I transferred HK$1.95 million to Messrs Cheng & Lo, the then solicitors acting for Bai Jun, for the settlement of the legal bill for Bai Jun”. Whilst Zeng now suggests (at §18 of his 3^rd Affirmation) that he told Angola’s then solicitors “我幫它付律師費用” without elaborating on the meaning of “我”, this remains an ex post facto explanation, the veracity of which ought to be tested at trial. There is, to say the least, a genuine doubt whether the sum was paid by Zeng himself or, as now alleged, on behalf of Angola.

(i)  Moreover, there is force in Bai Jun’s argument that, given that it was a nominal defendant to the 1315 Action (being a contest about the shareholding of Bai Jun between (i) Xie and Gao and (ii) the Keeneye Group), it is unlikely that such a huge amount of costs could have been incurred by Bai Jun. In any case, Bai Jun would have little reason to incur such substantial costs for the benefit of Bai Jun itself.

(j)  In addition, Bai Jun’s legal representative in the 1315 Action at that time was neither Messrs. Cheng & Lo nor Messrs. Anthony Siu & Co, but another firm Messrs. Tsui & Co. Whilst Messrs. Anthony Siu & Co were legal representatives of Bai Jun in the 1987 Action for a certain period of time, the fact remains that the receipt issued by Messrs. Cheng & Lo recorded the matter to be the 1315 Action, not the 1987 Action.

56.  In relation to the sum of HK$1 million paid in 2011:

(a)  The above observations on the credibility of Zeng’s evidence, lack of documents and lack of involvement of Angola should apply, mutatis mutandis, to the Alleged 2011 Oral Agreement. As accepted by Angola, its claim based on the Alleged 2011 Oral Agreement is not suitable for summary determination. If Angola’s case or Zeng’s evidence is incredible, this could have bearing on other aspects of their evidence including, for instance, the fund flow and the allegation that the payment of HK$1 million was made on behalf of Angola.

(b)  There is no clear evidence as to the ultimate source of funds, particularly evidence tracing the source of funds from Angola.

(c)  There is also force in Mr Wang’s argument that the payment of HK$1 million was irrelevant to Bai Jun (or would not benefit Bai Jun). According to §§60-69 of Zeng’s 1^st Affirmation, such payment was for the purpose of settling the legal fees for the attendance of the hearing on 30 March 2011 to set aside the Order of Saunders J, which must be referring to the hearing in HCCT 41/2010 before Reyes J. Yet, Bai Jun is not a party to this action or this hearing and the fees were apparently for the two respondents, Keeneye and New Purple. As submitted by Mr Wang, at the most the money was lent to Zhang or the Keeneye Group to settle legal fees of the Keeneye Group, which would not benefit Bai Jun.

(d)  Indeed, as Mr Deng seems to envisage at §75 of his written submissions, the Court may well take the view that the sum of HK$1 million was not for the benefit of Bai Jun but rather its owner. To say the least, there is a real doubt whether the sum of HK$1 million was paid for the benefit of Bai Jun or could otherwise enrich Bai Jun, as the real battle was between Gao/Xie and the Keeneye Group, and Bai Jun was a nominal party to such fight between the two camps over its ownership.

57.  Thirdly, as to the argument that Angola’s unjust enrichment claim for the Legal Fees is time-barred, again such defence is simply not pleaded, and Mr Wang has not fully developed his argument on the same. That said, the situation is different from Angola’s unjust enrichment claim for the New IR Fees. In relation to that, it seems arguable that time should start to run from the CA Judgment whereupon the alleged basis for paying the New IR Fees was gone. Yet, in relation to the Legal Fees, there is no such similar event which renders the original basis of payment gone. If so, there is a genuine concern as to when time should start to run for Angola’s unjust enrichment claim for the Legal Fees, given that they were paid back in 2009 and 2011. In my view, whilst I acknowledge that the defence of limitation has not been pleaded, on the whole this prospective defence does reinforce my conclusion that the matter should go to trial such that the issue of limitation could be properly ventilated and determined.

58.  For all these reasons, I am not satisfied that Angola should be entitled to summary judgment for the Legal Fees.

59.  In the circumstances, it is not necessary for the Court to deal with the further issue whether, had Angola succeeded in obtaining summary judgment for the Legal Fees, Angola should be entitled to compound interest as well as 12% interest (which, as accepted by Angola, may be triable issues and may have to be adjourned for trial).

E.  SECURITY APPLICATIONS

E1.  Applicable principles

60.  Bearing in mind that Angola is a company incorporated in the BVI, the applicable principles on security for costs are well established:

(a)  A company may generally be ordered to give security for costs if (i) it is ordinarily resident abroad, by reference to the location of the central management and control; or (ii) there is reason to believe that the company will be unable to pay the defendant’s costs if the defendant succeeds in the defence.

(b)  In relation to the latter, the fact that there is a funder is a weighty factor: “Where a funder is funding the legal action of an impecunious plaintiff, this is likely to be a weighty factor in favour of ordering security, as there is a real likelihood that the funder will simply walk away if the action is dismissed.”

(c)  The amount of security awarded is at the discretion of the court which will fix such sum as it thinks just, having regard to all the circumstances of the case such as the skeleton bill of costs and arrive at a figure adopting a “broad-brush” approach.

See: Hong Kong Civil Procedure 2025, Vol. 1, §§23/3/4, 14, 32.

61.  On behalf of Angola, Mr Deng further submits that:

(a)  The burden is on the applicant seeking security to produce evidence of the plaintiff’s impecuniosity;

(b)  Impecuniosity is not limited to the plaintiff itself but whether such funds would be available to it whether by its shareholders or other closely associated persons. Thus, if a plaintiff relies on impecuniosity to assert that a meritorious claim would be stifled, the plaintiff must “show not only that he does not have the money himself, but that he is unable to raise the money from anywhere else”: Ceto Shipping Corporation v Savory Shipping Inc [2023] EWHC 2995 (Comm);

(c)  In general, the mere failure by a party to pay the costs of an action is not, in the absence of facts showing his inability to pay them, sufficient grounds for making an order for security: see Siu Wai Ming v Shiu Wai Hong [2021] HKCA 1802 at §11.

62.  In my view, one should not conflate the propositions in §61(a) and (b) above. It would appear that the proposition in §61(a) relates to one of the circumstances where security for costs may be sought against a plaintiff, as impecuniosity of the plaintiff does pose risk to the defendant in recovery of legal costs. On the other hand, the proposition in §61(b) goes to situation where a plaintiff may resist security on the basis that it would otherwise stifle its claim. Hence, it is incumbent on the plaintiff to demonstrate not only that it is impecunious, but also that it cannot raise funds from others. Yet, as far as a defendant is concerned, it suffices to demonstrate that the plaintiff is impecunious and it is not strictly necessary for the defendant to establish whether the plaintiff can raise funds from others, although the fact that there is a funder would reinforce the defendant’s need for security given the real likelihood that the funder will simply walk away if the action is dismissed. Indeed, this seems to be the position of the 1987 Action as Angola has not satisfied the adverse costs orders in that action.

E2.  Analysis

63.  On behalf of the defendants, Mr Wang submits that security for costs should be ordered against Angola on two main grounds.

64.  First of all, he points to the total lack of merits of Angola’s case. Indeed, Mr Wang has devoted the bulk of his submissions to attack the merits of Angola’s case on the Alleged Oral Agreements. Whilst I agree that Angola’s case on the Alleged Oral Agreements is susceptible to challenge on many fronts, the Court would not usually go into the merits in details at this stage. That said, in the light of my views expressed above (albeit in the context of the O14 Application), they would tend to favour the ordering of security against Angola (as one of the factors).

65.  Second and more importantly, Mr Wang contends that, given the history and conduct of Angola as demonstrated in the 1987 Action, the risk of Angola’s refusal or failure to pay any costs order to be made in the present action is particularly high if not certain when:

(a)  Angola is determined not to pay the Damages Order;

(b)  Angola is already liable to pay, and refusing to pay outstanding costs orders including those in the 1987 Action and the Injunction Judgment totalling over HK$ 18 million;

(c)  Angola is a proven fraudster who has committed gross litigation misconduct, resorted to abusive and oppressive tactics, and continues to flout court orders including the Anti-Suit Injunction; and

(d)  Angola admittedly has no assets and relies on the funding of its funders who could simply walk away.

66.  In my view, the above are relevant factors which support the defendants’ case for security for costs.

67.  In response, Mr Deng clarifies that, whilst the original basis of resisting an order for security was that Angola was impecunious and such an order would stifle an otherwise meritorious claim, Angola is no longer in a position to assert that it is impecunious as it is now, under Mainland law, entitled to 50% shareholding of Zhong Xin (as a result of the Xi’an Judgments) which all parties agree has significant commercial value.

68.  Mr Deng further argues that the flipside is that the defendants have the burden to prove that Angola is not able to pay its costs and would leave the defendants out of pocket, and that the defendants are not able to do so because:

(a)  P and Ds have now been engaging in multi-jurisdictional litigation over the course of 19 years and P has been able to access funding whenever needed to discharge its costs liabilities;

(b)  P has been involved in the BVI proceedings, the Xi’an proceedings and even in the Hong Kong proceedings recently;

(c)  The mere fact that P has outstanding taxed costs orders against it, absence of facts that it is unable to pay it, is not a ground for ordering security. The reason for not paying the costs is because P claims under the present proceedings for restitution of significant sums paid underwriting D1’s costs of receivership and also D2’s legal fees which it is entitled to set off against any adverse costs orders outstanding.

69.  In my view, there are little merits in Angola’s arguments:

(a)  Angola’s suggestion that it is now able to pay costs order is, at best, uncertain. The findings of the Xi’an Judgments are directly contrary to the Hong Kong Decisions which are binding between Angola and Bai Jun under Hong Kong law. In any case, the Xi’an Judgments are now on appeal.

(b)  It is neither here nor there that Angola has been able to access funding whenever needed to discharge its costs liabilities. If anything, the fact that there are funders backing up Angola but Angola has not settled any part of the Damages Order or outstanding costs order, only reinforces the defendants’ case that there is particularly high risk of Angola’s refusal or failure to pay any costs order to be made in the present action.

(c)  It is hardly an excuse for Angola to claim that it did not pay outstanding costs due to its claims in the present action. Since 2020, Angola refused to satisfy the Damages Order and despite Bai Jun issuing a statutory demand against Angola in Hong Kong. At that time, Angola has not raised or pursued the claims herein.

(d)  Further, it would appear that the present action was brought as a result of the statutory demand issued by Bai Jun against Angola in the BVI in 2023. The suggestion that Angola did not settle any of the costs order or the Damages Order due to set-off strikes one as an afterthought.

(e)  Based on the factors relied upon by the defendants, there is a real risk that, if Angola ultimately fails in the present action, its funders could simply walk away such that Angola would not settle the outstanding costs orders (whether in the 1987 Action, the Injunction Judgment, or the present action).

70.  For all these reasons, I am satisfied that Angola should be ordered to provide security for costs to both Zhong Xin and Bai Jun.

71.  In terms of quantum, the defendants seek security of costs in the sum of HK$2,568,600 (i.e. HK$1,085,100 for Zhong Xin and HK$1,483,500 for Bai Jun) up to discovery stage. Taking a broad brush approach and bearing in mind proportionality in conduct of proceedings and fairness between the parties, I would order Angola to provide security for costs up to discovery stage in the sum of HK$1,000,000, comprising HK$400,000 for Zhong Xin and HK$600,000 for Bai Jun.

F.  CONCLUSION

72.  In the circumstances and for the reasons set out above:

(a)  Angola’s application for summary judgment dated 23 May 2024 is dismissed;

(b)  Zhong Xin’s application for security for costs is allowed, with a reduced quantum of HK$400,000 up to discovery stage; and

(c)  Bai Jun’s application for security for costs is allowed, with a reduced quantum of HK$600,000 up to discovery stage.

73.  Further, I would make a costs order nisi that the costs of the above applications (including the costs of the hearing on 21 March 2025) be paid by Angola to the defendants forthwith, to be taxed if not agreed.

74.  It remains for this Court to thank Mr Deng for the plaintiff and Mr Wang for the defendants for their assistance to the Court.