LIN CHIEN CHENG v. HUI CHI KEUNG

HCMP 2058/2021

[2022] HKCFI 440

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2058 OF 2021

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BETWEEN

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DECISION

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INTRODUCTION

1.  This Court handed down a decision on 21 December 2021 concerning the Defendant’s application to strike out the Plaintiff’s Writ of Summons with Statement of Claim in HCA 2680 of 2018 (“the Decision”).

2.  The background facts of the disputes between the Plaintiff and the Defendant were set out in the Decision and should not be repeated here.

3.  On 8 December 2021, the Plaintiff took out an originating summons (“the Originating Summons”) for an application under Section 21M of the High Court Ordinance, Cap.4A (“the Ordinance”) for an injunction order against the Defendant to restrain and/or prevent him from dissipating his assets in Hong Kong, in terms identical to the orders made by Recorder Manzoni SC on 31 October 2019 in HCA 2680 of 2018. The Plaintiff took out the Originating Summons as this Court had indicated that it intended to strike out the action in HCA 2680 of 2018 and together with it the injunction orders granted by Recorder Manzoni SC.

4.  The Plaintiff filed an affirmation in support of his application on 21 December 2021. The Defendant filed the Affirmation of Ng Man Ah in opposition on 30 December 2021.

APPLICABLE LEGAL PRINCIPLES

5.  The relevant applicable legal principles were set out by Lord Phillips NPJ in Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd (2016) 19 HKCFAR 586:

(1) At to the first stage:

(a) The starting point is to consider whether, if the proceedings that have been or are to be commenced in the foreign court result in a judgment, that judgment is one that the Hong Kong court may enforce. If the nature of the foreign proceedings is such that the Hong Kong court will not enforce any judgment to which they give rise, e.g., because the exercise of the foreign jurisdiction is exorbitant or for some other reason of public policy, then there can be no question of granting relief under Section 21M of the Ordinance. (§§47-48)

(b) Next the court should ask itself the same questions as it would if a Mareva were sought in support of an action proceeding in the Hong Kong court, namely: (i) has the plaintiff got a good arguable case; and (ii) is there a real risk that the defendant will dissipate his assets if the Mareva is not granted? (§49); and

(c) The question that the Hong Kong court has to consider is whether the plaintiff has a good arguable case in the foreign court (§52).

(2) As to the second stage:

(a) The court needs to consider whether the fact that the court has no jurisdiction apart from this section in relation to the subject matter of the proceedings concerned makes it “unjust” or “inconvenient” for the court to grant the application (§54);

(b) It is unhelpful to try to formulate a list of circumstances where it will be unjust or inconvenient to grant the Mareva sought. The Court has a wide discretion (§54).

ANALYSIS

6.  It is not disputed that there is a current legal proceedings in the Mainland where the Plaintiff’s claim for loss of profit will be re-tried. There is a dispute as to whether the re-trial only goes to quantum or both quantum and liability. However, that is irrelevant. Although Mr Law for the Defendant submitted that the Plaintiff has not outlined its cause of action in the Mainland proceedings and chooses not to attach a draft Statement of Claim to the Originating Summons, I am of the view that it is obvious that the appellant court in the Mainland considered that the Plaintiff’s case merits a re-trial. The appellant court in the Mainland did not dismiss or strike out the Plaintiff’s claims in the Mainland proceedings.

7.  Mr Law submitted that the Court is unable to even start consider what the Plaintiff’s cause of action is. The Plaintiff could not possibly satisfy the first stage to demonstrate a good arguable case, especially where the Hong Kong court has to consider whether the Plaintiff has a good arguable case in the foreign court which usually needs foreign expert evidence on law.

8.  Whilst it is correct that normally parties do adduce foreign expert evidence on the law to assist the Court to determine whether there exists a good arguable case before the relevant foreign court, it is not an inflexible rule or practice. On the facts of the present case, the Court can take into consideration of the undisputed material fact that the appellant court in the Mainland has, after hearing submissions, directly a full re-trial of the Plaintiff’s claims. Mr Law might well be right that the Defendant has a perfect defence to the Plaintiff’s claim in the sense that the Plaintiff is never entitled to any profit sharing. However, that is an issue to be determined by the re-trial court.

9.  Hence, I am of the view that looking at the matter pragmatically, it cannot be said that the Plaintiff does not have a good arguable case before the Mainland Court. I am also of the view that it is highly likely that if the re-trial goes to the Plaintiff’s favour, it will result in a monetary judgment that prima facie courts in this jurisdiction will enforce.

10.  Secondly, the Court has to consider whether there is a real risk of dissipation of assets to merit an injunctive relief at this stage bearing in mind that a Mareva injunction is itself a draconian order. Mr Lai for the Plaintiff correctly did not rely on the disposal of the Defendant’s property in Hong Kong as the Defendant’s wife, Madam Ng Man Ah did give a credible explanation for the selling of their matrimonial home in Hong Kong. This Court notes that the sole basis upon which Mr Recorder Manzoni SC granted the injunction order in HCA 2680 of 2018 is precisely the Defendant’s disposal of his property in Hong Kong.

11.  However, on balance, I do consider that there is a real risk of dissipation of assets by the Defendant. As a matter of fact, Yangzhou Intermediate People’s Court issued an investigation order against the Defendant on 29 November 2021. The said order results in a finding that the Defendant only maintains a deposit of RMB233.80 in his bank accounts.

12.  In an investigation order issued by Yangzhou Imtermediate People’s Court against Chang Jiang Real Estate Development Company Limited (2021) Su 10 Investigation Orders No.101 on 29 November 2021. All 21 bank accounts in 8 banks of the company only have an aggregate deposit balance of RMB541,146.58.

13.  I am of the view that the Plaintiff has a legitimate concern that given the business profits made by the Defendant in the real estate development projects, it is inexplicable that the Defendant only maintains such small sums on his and his related company’s bank accounts.

14.  Further, the Defendant is now subject to an exit restriction order by the Yangzhou Intermediate People’s Court, so the Defendant could not leave the borders of Mainland China due to his litigation and enforcement issues. Mr Lai, in my view, rightly submitted that it is puzzling as to how the Defendant could have sustained his daily living expenses in Mainland China in this extended period of time with his RMB233.80 bank deposit balance. Mr Lai submitted that there is an exceptionally strong inference that the Defendant has the audacity and capability of hiding or dissipating his assets notwithstanding the investigation orders issued by Yangzhou Intermediate People’s Court. I agree.

15.  Mr Law for the Defendant submitted that the basis of the investigation orders is now gone as there is no longer any enforcement issue pending the re-trial. That may be technically correct. However, the fact is that as a matter of past record, there is evidence pointing to the propensity of the Defendant to make arrangements to evade enforcement of court orders. The Court cannot turn a blind eye to this fact.

16.  Mr Lai for the Plaintiff further submitted that the Defendant is still subject to an exit restriction from Mainland China. Yangzhou Intermediate People’s Court obviously considers that there is a real risk of enforcement if the Defendant were allowed to leave Mainland China. Otherwise, the exit restrictions would not be imposed against the Defendant. I agree.

17.  Finally, I do not consider that it is unjust or inconvenient to grant interim injunction orders pursuant to Section 21M of the Ordinance in the present factual circumstances.

18.  Mr Law for the Defendant submitted that the Court needs to know whether the order will interfere with the management of the case in the Mainland Courts, for example, where the order is inconsistent with an order in the primary court or overlaps with it. It is not disputed that the Defendant is already subject to certain asset preservation measures in the Mainland. It is incumbent upon the Plaintiff to explain with cogent evidence why such measures would not overlap or interfere with the Plaintiff’s current application.

19.  However, the Defendant has not adduced any evidence to that effect. In fact, it is commonsense that the asset preservation measures ordered by Yangzhou Intermediate People’s Court will not have any extra-territorial effects. Hence, injunction orders made by this Court will compliment rather than in conflict with the asset preservation measures in the Mainland.

20.  At the end of the day, the Court has to consider what interim orders will cause less injustice and promote justice.

21.  I am told that the re-trial is likely to take place within 2022. Given the history of enforcement in Mainland China, I am of the view that both in terms of justice and comity, an interim injunction order should be made. The ceiling figure should be set at RMB49 million.

22.  The Plaintiff also undertakes to compensate the Defendant any damages that he may suffer if it is finally proved that the injunction order is wrongly granted. However, to a strike a balance, I am of the view that the Plaintiff should fortify its undertaking as to damages in the sum of HK$2.5 million.

DISPOSITION

23.  For all the reasons stated above, this Court will make an order in terms of the Originating Summons save and except that:

(1) The maximum amount of the injunction is RMB49 million;

(2) The Plaintiff is to make arrangements to fortify his undertaking as to damages by paying the sum of HK$2.5 million into Court within 21 days herein failing which the injunction orders will be automatically discharged.

24.  I also make an order nisi that the Defendant shall pay the Plaintiff’s costs of and occasioned by this action, to be taxed on a party and party basis, if not agreed. The above costs order nisi will be made absolute within 14 days herein hereof unless the parties take out an application to vary the same within 14 days.

25.  I thank counsel for their assistance to this Court.