CHINA EVERGRANDE GROUP (IN LIQUIDATION) v. HUI KA YAN AND OTHERS

HCMP 1080/2024

[2025] HKCFI 1644

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1080 OF 2024

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AND

HCA 551/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 551 OF 2024

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(Consolidated pursuant to the Order of Honourable Mr Justice Coleman

dated 12^nd February 2025)

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REASONS FOR DECISION

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A.  Introduction

1.  A defendant to a claim made in civil proceedings who wishes actively to defend the proceedings (including, perhaps, by an application to strike out the claim) cannot pick and choose which rules of procedure and which Court orders he is minded to obey. The 2^nd defendant to these consolidated proceedings (“Xia”) seems to believe otherwise. Any such belief is entirely mistaken.

2.  The need to make that clear arises in the broad circumstances following the making of a Mareva Injunction Order first made against Xia on 24 June 2024, which also required him to provide ancillary asset disclosure (“Asset Disclosure Order”). Xia later made applications (1) to discharge the Injunction Order made against him (“Discharge Summons”), and (2) to oppose continuation of the Asset Disclosure Order, alternatively to seek an extension of time within which to comply.

3.  By my decision dated 12 July 2024, with Reasons for Decision dated 18 July 2024 [2024] HKCFI 1854, I fixed a hearing date of 2 October 2024 for the determination of the Discharge Summons, and I extended the time for compliance by Xia with the Asset Disclosure Order until a new compliance date to be set on 2 October 2024, or until further order.

4.  On the timetable following the Statement of Claim, Xia was due to file his Defence on 30 September 2024. On that date, Xia filed a summons seeking to strike out the Statement of Claim and entire action (“Strike-out Summons”), and also seeking an extension of time to file any Defence until after 28 days after the determination of the Strike-out Summons. Obviously, the logic of seeking that extension was because Xia should not be required to file a Defence to a Statement of Claim which he said should be, and so might be, struck out. Subsequently, and over the objection made by CEG, I extended the time for filing any Defence as requested.

5.  By my Decision dated 12 February 2025 [2025] HKCFI 689 (“Discharge Decision”), I dismissed Xia’s application to discharge the Injunction Order, and I set 21 February 2025 as the extended date for compliance with the Asset Disclosure Order. Xia did not comply with that order.

6.  On 21 February 2025, Xia issued a summons (“1^st LTA Summons”), seeking leave to appeal from, and a stay of, the Discharge Decision.

7.  On 7 March 2025, CEG issued a summons seeking an ‘unless order’. I heard that summons on 14 March 2025. On 19 March 2025, I gave my ruling that unless Xia were to comply with the Asset Disclosure Order by 28 March 2025, Xia should be debarred from filing a Defence in this action (“Unless Ruling”). Xia did not comply with that order.

8.  However, on 27 March 2025, Xia filed a Defence, but at the time it had no Statement of Truth. Indeed, only later was a Statement of Truth dated 1 April 2025 provided, and it was filed on 8 April 2025.

9.  On 28 March 2025, Xia issued a summons (“2^nd LTA Summons”), seeking leave to appeal from, and a stay of, the Unless Ruling.

10.  On 31 March 2025, CEG issued a summons seeking (1) to strike out the Defence as having been filed without verification by Statement of Truth and/or as an abuse of the Court’s process, and (2) a further unless order that unless Xia comply with the Asset Disclosure Order within 48 hours, he should be debarred from defending this action (“Further Unless Summons”).

11.  It is worth noting at this juncture that it cannot be gainsaid that, throughout this procedural chronology and continuing to date, Xia (1) has refused to provide his current address to the Court, and (2) has chosen deliberately not to comply with the Asset Disclosure Order.

12.  Because of the clear overlap between the 1^st LTA Summons, the 2^nd LTA Summons and the Further Unless Summons, I brought the three matters together and directed that they be heard on 17 April 2025.

13.  At the hearing, CEG was represented by Mr Jordan Moulds of Karas So LLP (in part adopting and relying on written skeleton submissions signed by Mr Charles Manzoni SC), and Xia was represented by Mr Barrie Barlow SC leading Ms Terri Ha of Counsel (who had also filed written skeleton submissions).

14.  At the end of the hearing on 17 April 2025, I indicated that I would give my decision on each of the Summonses on the next working day, namely 22 April 2025 – and that the decisions might be fully reasoned, or might be decisions with reasons to be provided later.

15.  This is my reasoned Decision.

B.  Relevant Background

16.  Patterns can be persuasive.

17.  Under the terms of the Injunction Order as granted on 24 June 2024, Xia was required to comply with the Asset Disclosure Order by 5 July 2024. Xia did not do so, and instead, on the last day for compliance, he issued the Discharge Summons and the application to oppose or extend the time for compliance with the Asset Disclosure Order.

18.  Under the terms of the procedural rules relating to the timing of pleadings, Xia was required to file his Defence by 30 September 2024. Xia did not do so, and instead, on the last day for compliance, he issued the Strike-out Summons, which also sought the extension of time to file any Defence until after the determination of the Strike-out Summons.

19.  Under the terms of the Discharge Decision, Xia was required to comply with the Asset Disclosure Order by 21 February 2025. Xia did not do so, and instead, on the last day for compliance, he issued the 1^st LTA.

20.  Under the terms of the Unless Ruling, Xia was required to comply with the Asset Disclosure Order by 28 March 2025. Xia did not do so, and instead, on the last day for compliance, he issued the 2^nd LTA.

21.  Of course, it can be said that Xia has simply made applications open to him to make, within the times for so doing. But I think the pattern persuasively identifies a defendant consistently choosing not to comply with the requirements of rules or court orders, and awaiting the last possible date for compliance before issuing an application which in part is intended at least to put off or further delay compliance.

22.  This is not inconsistent with Xia’s approach to compliance with the mandatory requirements for the form of affidavit/affirmation evidence set out in Rules of the High Court (“RHC”) Order 41 rule 1(4), except in this regard Xia has not even acted within the rule.

23.  That rule requires that every affidavit/affirmation must, unless the Court otherwise directs, state the place of residence of the deponent and his occupation. However, without even seeking – let alone obtaining – a direction from the Court otherwise, Xia has simply chosen to ignore that mandatory requirement. Instead, in his 1^st affirmation dated 30 August 2024, filed in support of his Discharge Summons, he stated that he is “formerly of 32A, Tower 6, Pavilia Hill, 18A Tin Hau Temple Road, Hong Kong, but presently living outside of Hong Kong”. He has made a similar statement in his signed but unattested “2^nd affirmation” filed in support of the 1^st and 2^nd LTAs and to oppose the Further Unless Summons.

24.  Whilst Order 41 rule 4 permits the Court to take into account an affirmation notwithstanding its irregularity or defective nature, and I have done so, though no formal leave has been sought as the rule requires. But that does not cure nor excuse the irregularity or defective nature. I put down the marker now that I will almost certainly not grant such leave in future, or permit the use of an irregular affirmation.

C.  Hadkinson Order

25.  It is convenient first to deal with the question of a potential so-called Hadkinson order, which was sought by CEG on the basis that, where Xia is in clear contempt of the Disclosure Orders, the Court ought not to hear or entertain applications or submissions made on his behalf.

26.  By my listing of the two LTAs together with the Further Unless Order Summons, and at the beginning of the hearing itself, I made clear that I did not think it appropriate in the present circumstances to shut out Xia from being heard on the LTAs. Indeed, full argument on them was then dealt with by me (with the benefit of the written skeleton submissions filed by the parties in advance).

27.  In those circumstances, I do not think there is any great need to engage with the principles relating to the circumstances in which a Hadkinson order might be made.

D.  1^st LTA Summons

28.  There is no dispute that an applicant for leave to appeal must establish that the appeal has a reasonable prospect of success, or that there is some other reason in the interests of justice why the appeal should be heard. The test does not require success to be probable, but does require that the prospects of success are more than fanciful.

29.  In the context of decisions involving the exercise of discretion in deciding whether to grant, continue or set aside an injunction, or the exercise of case management discretion, it is also important that an appellate court will only interfere with the exercise of a judge’s discretion where either: (1) the judge has misdirected himself with regard to the applicable principles; (2) the judge has taken into account matters which he ought not to have done, or failed to take into account matters which he ought to have done; or (3) the judge’s decision is plainly wrong.

30.  The 1^st LTA Summons seeks leave to appeal from, and a stay of, the Discharge Decision.

31.  As explained by Mr Barlow in his submissions, though in a greater number of paragraphs, the draft notice of appeal from the Discharge Decision proposes the following three broad grounds of appeal:

(1)  the absence of an ex parte “good arguable case”;

(2)  CEG’s ex parte abuses of process; and

(3)  the absence of an inter partes “good arguable case”.

32.  However, there is some force in Mr Moulds’ submission that stripped of “appellate” language, the draft notice of appeal plainly seeks to reargue afresh the same arguments run unsuccessfully at first instance – when the Discharge Decision is a detailed 67-page judgment setting out at length the arguments raised by both sides, with analysis of those arguments by reference to the law and the evidence before the Court.

33.  As to the suggested absence of a good arguable case at the ex parte stage, Mr Barlow again referred to Fourie v Le Roux [2007] 1 WLR 320, and suggested that: (1) CEG had advanced no formulated claim or cause of action against Xia; (2) the Court confused the issue by citing materials which were not before the Court at the ex parte hearing; and (3) there was no admissible supporting evidence advanced where reliance was placed on the CSRC Report (rightly ruled inadmissible) and the inadmissible opinions of an agent of CEG.

34.  However, with respect, I subjected the Fourie case to detailed analysis, and distinguished it on what I saw in the exercise of my discretion were the materials available to the Court. I did indeed hold the CSRC Report to be inadmissible. But I held that the statements of information and belief advanced by the Liquidators were not merely inadmissible “opinions”, but rather constituted admissible and relevant evidence to which appropriate weight could be accorded as I saw fit. I thought the claim was sufficiently formulated.

35.  As to the suggested ex parte abuses of process, Mr Barlow suggested the Court had distracted itself with the legally irrelevant consideration of whether or not it perceived that there had been any tactical advantage to be gained or sought from not giving notice to Xia, when the absence of any tactical advantage would provide no justification for proceeding on a wholly ex parte basis, if that course cannot be justified by extreme urgency or secrecy.

36.  However, in fact I approached the question of lack of prior notice by reference to well-settled principles which are not challenged on the proposed appeal, and where I acknowledged the force in the submissions made on behalf of Xia but balanced them against the overall circumstances as seemed to me to be necessary to weigh in the discretionary balance. With respect, I do not think it is fair to suggest that I concentrated only on – or based my decision solely on – whether there was or was not any tactical advantage to be gained or sought from not giving notice to Xia. Further, I made express that, even had I thought that there was such procedural error as should lead to the ex parte order being set aside, I would in the overall exercise of my discretion nevertheless have re-imposed a fresh injunction order, so as to achieve the right balance of fairness between the overall interests of the parties to the case, including in light of the other matters dealt with by me in the Discharge Decision.

37.  Mr Barlow also submitted that Xia would reasonably contend on the proposed appeal that there were various material misrepresentations, in particular about the nature of the cause of action, and whether Xia was actually or physically involved in the drawing up of the consolidated financial statements. In that regard, where each director is to be judged separately and the extent of and potential breach of a director’s duty of care is dependent upon the facts, Mr Barlow submitted that the subjective factual circumstances of Xia’s role were material and ought to have been disclosed.

38.  Firstly, the principles relating to questions of materiality are well-settled, and were applied by me. Secondly, that latter submission itself seems to identify that the ultimate question is a factual one, suitable for determination at trial. At the stage of grant or refusal of interlocutory injunctive relief, no final determination is either possible nor required. Indeed, on the Discharge Summons, it was no part of the Court’s function to try to resolve conflicts of evidence on affidavit, nor to decide difficult questions of law which call for detailed argument and mature consideration. Instead, my focus was that – even if it be correct that Xia had no actual or physical involvement in the preparation of the consolidated financial statements (a matter which was not accepted by CEG) – nevertheless the crux of the case turned on Xia’s knowledge, experience and position as CEO and director of the company consolidating the accounts. In the exercise of my discretion, and by reference to legal principles which are settled and would not be challenged on appeal, including that the statutory provisions do not require direct or physical involvement in the compilation of accounts for a director to be under a relevant duty, I held that there was at least a good arguable case that Xia both owed and had breached the duty to exercise reasonable skill, care and diligence.

39.  As to the absence of a good arguable inter partes case, Mr Barlow submitted that the Discharge Decision mis-stated the law concerning the statutory responsibility of company directors. In particular, he submitted that the lawfulness or otherwise of a dividend distribution is governed by the objectively-ascertainable criteria set out in the Companies Ordinance, and expressly determined by the provisions of sections 291, 297, 302 and 304.

40.  The main element of that argument was not actually run at first instance on the hearing of Discharge Summons, and so was not addressed in the Discharge Decision. It is an argument that has been run on the Strike-out Summons, and so will be dealt with by me in my decision on that application (yet to be handed down). Nevertheless, my preliminary view is that the argument based on those sections would not lead to a strike-out of the claim, nor would it remove the good arguable case. It seems to me that the statutory provisions relied on by Mr Barlow presuppose that the relevant financial statements represent a true and fair view, and were not materially misstated. But it is CEG’s case, which I have held to be a good arguable case, that the financial statements did not represent a true and fair view and were materially misstated for the reasons advanced. In any event, I held that there was at least persuasive authority to the effect that breaching a director’s duty, in failing to ensure accurate financial statements and then paying out dividends on the profits stated in those accounts, is strict.

41.  I have also borne in mind that the fact that a defendant may raise viable defences, which mainly and ultimately succeed after trial, does not necessarily mean that there is no good arguable case on the claim. Indeed, these points seem to me to be found also in the authority on which Mr Barlow sought to place some reliance, In Re Burnden Holdings (UK) Ltd (in liquidation) [2019] Bus LR 2878. In a lengthy analysis of director’s duties, and potential liability for payment of unlawful dividends, Zacaroli J concluded at §139 that, by 1901, the law had been established as follows:

First, directors, although not trustees, were to be treated as if they were trustees in relation to the company’s funds. Second, if they knew the facts which constituted an unlawful dividend, then they would be liable as if for breach of trust irrespective of whether they knew that the dividend was unlawful. Third, however, if they were unaware of the facts which rendered the dividend unlawful then provided they had taken reasonable care to secure the preparation of accounts so as to establish the availability of sufficient profits to render the dividend lawful, they would not be personally liable if it turned out that there were in fact insufficient profits for that purpose. Fourth, they were entitled to rely in this respect upon the opinion of others, in particular auditors, as to the accuracy of statements appearing in the company’s accounts. Fifth, nothing in the authorities cited as the leading authorities for the strict-liability view … undermines that conclusion.

42.  It seems to me that the second and third points in particular emphasise the argument may turn on the actual state of knowledge of the director and whether the director had indeed taken reasonable care to secure the preparation of accounts so as to establish the availability of sufficient profits to render the dividend lawful. At §158 of the same decision, it was identified that the question whether there were sufficient distributable profits may turn on fine questions of accounting judgment. Of course, directors are not required to be accountants, and the entitlement to rely on the judgment of others whom they appoint to carry out specialist financial roles within the company remains pertinent, but whether the director’s duty has been met in the particular circumstances is ultimately a trial issue, and an argument to the contrary does not mean that there is no good arguable case. Indeed, the judgment in the Burnden case itself followed a 10-day trial.

43.  In the circumstances, I respectfully refuse to grant the requested leave to appeal from the Discharge Decision.

44.  As I have determined paragraph 1 of the 1^st LTA Summons against Xia, paragraph 2 falls away. However, I would make express the following two points.

45.  First, it is trite that the making of an application for leave to appeal, even if it also requests a stay of the order the subject of the intended appeal, does not operate as a stay of the order. Therefore, there has been no stay of the Asset Disclosure Order in place flowing merely from the making of the 1^st LTA.

46.  Secondly, even had I been minded to grant leave to appeal, I would have refused to grant a stay of the Asset Disclosure Order. This is for reasons which I think are apparent from my Unless Ruling, perhaps in particular at §17(9), where I noted that the fact that there is a pending challenge to a Mareva/freezing order is not of itself a ground for suspending the operation of the disclosure of assets order in the interim, so that still less so would be the existence of a proposed appeal from the dismissal of a discharge application after full argument. For similar reasons, I do not think it is correct to suggest that the proposed appeal from the Discharge Decision would be rendered nugatory if the operation of the Asset Disclosure Order is not stayed. In short, against the circumstances already canvassed, and had it been necessary to say so, I would still have been of the view that the greater risk of prejudice lies in putting off any further the asset disclosure required, even if there is to be an appeal from the Discharge Decision.

E.  2^nd LTA Summons

47.  The 2^nd LTA Summons primarily seeks leave to appeal from, and a stay of, the Unless Ruling. In the alternative, it seeks an extension of 28 days from the date of the order to be made, for Xia to comply with the Asset Disclosure Order, and relief to be granted from the sanction imposed under the Unless Order. It also seeks – as has happened anyway – for the matter to be dealt with at the same time as the 1^st LTA Summons.

48.  As explained by Mr Barlow in his submissions, the draft notice of appeal from the Unless Ruling proposes grounds of appeal which in summary are that:

(1)  the Court made a summary ruling upon the basis of the judicial misapprehension that Xia’s solicitors had delayed the fixing of the hearing date for the 1^st LTA Summons, when it was the Court’s office that had done so;

(2)  in the absence of evidence, there was no legitimate basis upon which the Court could infer or conclude that the 1^st LTA Summons was not made in good faith, or that the interim failure to comply with the Asset Disclosure Order constituted contumelious disobedience of that order;

(3)  contrary to the Court’s criticism, it has always been Xia’s case that, in the absence of any good arguable case against him, the requirements of the Ancillary Disclosure Order are unreasonable and disproportionate to him because of the extreme danger that the Liquidators’ Mainland associates would leak any disclosure revealing Xia’s whereabouts to the Mainland Authorities who would like to detain him; and

(4)  the Court erred in adopting CEG’s improper proposals that Xia be denied the opportunity of adducing evidence and being provided a meaningful hearing in respect of the claim that Xia’s interim non-compliance with the Asset Disclosure Order constituted contumelious disobedience, and in precipitously making the summary Unless Ruling.

49.  With respect, not least in the context of a case management decision, none of these points seem to me to identify any reasonably arguable grounds of appeal, or any other reason why there ought to be an appeal.

50.  As to the first proposed ground of appeal, it is not correct to suggest that I made the Unless Ruling on the basis of a judicial misapprehension that Xia’s solicitors had delayed the fixing of the hearing date for the 1^st LTA Summons. All I stated, in the context of the various other matters I took into account in the exercise of my discretion, was that Xia had taken no steps to expedite addressing the questions raised by the 1^st LTA Summons, when he and his solicitors must have known that the mere issue of the summons did not operate to extend time or as a stay. Even if the explanation now proffered is correct, namely that when issuing the summons the solicitors had sought an early date but had been told to await the direction of the Court, they took no further step in the subsequent 3 weeks between that date of issue and the hearing on 14 March 2025. I do not think it was unfair for me to say that it did not seem as if Xia was pushing for an early resolution of the matter. In any event, where applications for leave to appeal are ordinarily dealt with on paper, had expedition been requested, the appropriate course would have been to write to the Court directly drawing attention to the issue of the summons and requesting that it be dealt with expeditiously. That is particularly so where this litigation has in effect been reserved to or docketed with me, and none of the parties have shown any reticence about writing to the Court directly.

51.  As to the second proposed ground of appeal, there was no necessity to infer nor conclude an absence of good faith. Indeed, I did not make the Unless Ruling on any basis relating to the absence of good faith. Instead, I simply pointed out that the extended deadline had expired without any request for an extension of time within which to comply, and without Xia having identified any practical difficulty in having performed the task of disclosure, whether within that time or at all. This was all against the timeline that the disclosure was originally required by 5 July 2024, some seven months prior to the extended deadline of 21 February 2025, and Xia must have contemplated at least the possibility that the Court might not discharge the Injunction Order and ancillary Asset Disclosure Order. I would also push back against Mr Barlow’s use of the phrase “interim failure to comply with” the Asset Disclosure Order. There was nothing “interim” about the failure. Compliance with the Asset Disclosure was required by the deadline set, and there was no such compliance. That was a failure in compliance – quite clearly deliberately so – and it is not open to a litigant to think he can ignore the Court’s order for some supposed self-created and self-defined “interim” period.

52.  Indeed, in the absence of any further explanation – and my having ordered disclosure after having considered Xia’s evidence filed as long ago as August 2024 – it was and remains obvious that the non-compliance was deliberate. As it happens, on Xia’s own evidence now advanced, he has revealed that he deliberately chose not to make even a start to collating the materials necessary for compliance with the Asset Disclosure Order until 19 March 2025 (i.e. the date of the Unless Ruling itself). If nothing else, that demonstrates that Xia felt he could ignore the Court’s order with impunity, until the making of the unless order showed the Court ‘meant business’. Where a party intentionally flouts a court order, he can ordinarily expect little mercy. Xia has plainly chosen deliberately not to comply with the Asset Disclosure Order, merely on the basis that he says there is a reasonable reason for him to choose not to do so, or for him not to be forced to do so. On that, I have disagreed.

53.  As to the third proposed ground of appeal, I had found a good arguable case against Xia in the Discharge Decision. I had also concluded that ancillary asset disclosure was appropriate in the circumstances, notwithstanding the matters advanced by Xia in his evidence. I explained why I did not think the matters advanced by Xia, on my assessment of the materials either in his original evidence or in the materials filed in support of the 1^st LTA Summons (which essentially repeated or expanded on the same points already made), were based largely upon media reports, speculative and somewhat vague. The weight to be given to Xia’s expressed concerns did not seem to me to come close to overbalancing the requirement for the Asset Disclosure Order.

54.  As to the fourth proposed ground of appeal, I explained in the Unless Ruling why, in the exercise of my discretion, I dealt with the application over the objections of Mr Barlow. First, it should be trite that it does not necessarily follow that the first hearing of any summons, even one marked for 15 minutes, is merely a directions hearing with the substantive hearing to be deferred until sometime later. Secondly, I explained that I saw no reason to adjourn the matter, or to await any evidence, in the circumstances that: (1) they could be no misunderstanding as to the deadline for compliance by Xia with the Asset Disclosure Order; (2) it was an incontrovertible fact that Xia had not complied with the order, within the deadline set or at all; (3) Xia had not made any application for further time needed to effect compliance; and (4) the 1^st LTA Summons did not operate either to extend time or as a stay.

55.  Further, none of the applicable legal principles now advanced by Mr Barlow reasonably arguably suggest that an incorrect legal approach was adopted in the Unless Ruling. I specifically, if broadly, identified the applicable principles relating to the use of unless orders, which are themselves well-settled and need no lengthy rehearsal (though I can touch on them again below). I also dealt with the principles applicable to whether or not to stay or extend time for compliance with an asset disclosure order. Lastly, from §19 of the Unless Ruling, it is clear that I had considered potential alternative sanctions, but formed the view that in the present circumstances the only sensible sanction would be to debar Xia from filing a Defence, should he fail to comply with the Court’s order.

56.  In the circumstances, I respectfully refuse to grant the requested leave to appeal from the Unless Ruling.

57.  I would also again make express that, even had I thought it appropriate to grant leave to appeal from that ruling, I would nevertheless not have granted some general extension of time or stay for compliance with the Asset Disclosure Order. In my view, any grant of leave to appeal would only have been as to the use of an unless order in an attempt by the Court to ensure compliance with its own prior order, where no practical difficulty in compliance with that order has been offered.

E.  Further Unless Summons

58.  The Further Unless Summons seeks an order that Xia’s Defence filed on 27 March 2025 be struck out pursuant to RHC Order 41A rule 6 and/or Order 18 rule 19. It also seeks a further unless order that, unless Xia complies with the Asset Disclosure Order within two days after the order to be made, he should be debarred from defending the action.

59.  The Unless Ruling set 28 March 2025 as the deadline for Xia to comply with the Asset Disclosure Order, failing which the sanction would be triggered that he would be debarred from filing any Defence. On 27 March 2025, Xia filed a Defence, but it was not verified by a Statement of Truth as required by Order 18 rule 20A and Order 41A rule 2.

60.  Only after Xia filed the Further Unless Summons on 31 March 2025 did Xia’s solicitors send a letter to CEG’s solicitors enclosing a signed Statement of Truth in respect of the Defence. That Statement of Truth was dated only 1 April 2025, and it was subsequently filed on 8 April 2025.

61.  It is argued on behalf of Xia that the subsequent, albeit late, provision of the Statement of Truth satisfactorily deals with paragraph 1.1 of the Further Unless Summons. Mr Moulds argues otherwise. Of course, he accepts that in an ordinary case without the overlay of an intentional breach of an unless order, the filing of a Defence and a later filing of a Statement of Truth may be excused, and the Defence may nevertheless be taken as procedurally compliant. But, he submits, the present case is quite different. This is because it has the additional factor that the Statement of Truth, without which the Defence is liable to be struck out under Order 41A rule 2, was provided and filed only after the coming into effect of the prohibition on filing the Defence contained in the unless order (when there was such non-compliance as triggered the sanction). Mr Moulds submits that the coming into effect of the sanction severed any link that the Court might otherwise be able to use to excuse the non-compliance with Order 41A. To put it another way, the Statement of Truth dated 1 April 2025, and filed only on 8 April 2025, cannot save a defective act after the sanction built into the unless order had already been activated.

62.  I agree. But, in any event, I have no doubt that the filing of the Defence on 27 March 2025 was an abuse of process.

63.  First, the fact that it did not have a Statement of Truth – and that one was not even signed until four days later – suggests that the filing of the Defence was done in a rush, to beat an apparent deadline. But, secondly, the only relevant deadline for filing the Defence had been specifically extended at the request of Xia himself, until after the determination of his Strike-out Summons. As stated, the logic for extending the deadline until after the determination of the Strike-out Summons was because it was Xia’s position that he ought not be put to the trouble and expense of filing a Defence to a Statement of Claim which he said should and would be struck out.

64.  In the circumstances, it is plain that the only reason to file a Defence on 27 March 2025 was to seek to render nugatory the sanction which would be triggered the very next day upon Xia’s failure to comply with the unless order set by the Unless Ruling, in circumstances when (1) Xia knew that he had no intention whatsoever to comply with the Asset Disclosure Order by that deadline (if at all), and (2) he had already been in breach of previous orders. That was a deliberate and calculated decision to seek to circumvent the effect of the unless order.

65.  That seems to me to be a clear abuse of the process, and in circumstances that the Court should have no hesitation summarily to prevent its machinery from being abused. It is properly recognised that there is an immense public interest in protecting the court system from being abused, and in ensuring that orders are complied with. The Court’s powers are necessarily extensive so as to be truly effective.

66.  Mr Barlow submits that it is not an abuse to file a defence “within time” and which is not demurrable, and he focuses on the “it” in RHC Order 18 rule 19 to make the submission that “it” is the defence which must be by its content itself an abuse. I disagree, as that seems to me to read the rule too narrowly, because a defence may be an abuse in the particular circumstances in which it was filed. But, whether or not this abuse is one which strictly falls under Order 18 rule 19 – and, as said, I think it does – the Court can deploy its powers under its inherent jurisdiction to deal with what might be an infinite variety of abuses, and to do so in a timely manner as soon as the abuse arises.

67.  I accept that striking out is a remedy of last resort and should only occur in plain and obvious cases. This is, to my mind, a plain and obvious case. I expressly take into account that, on his own evidence, Xia had made no attempt whatsoever to seek to comply with the Asset Disclosure Order until after the Unless Ruling, and instead chose deliberately not to comply with it. I also take into account that Xia may still seek to re-file a Defence, if he makes an application to seek relief from sanction. But, any such application will be dealt with on its merits in the circumstances then pertaining – including taking into account whether the breach which triggered the sanction has been cured (a point relevant to the appropriate sanction if there is to be any further unless order).

68.  Hence, I strike out the Defence filed by Xia. I can turn then to the next aspect of the Further Unless Summons.

69.  In my Unless Ruling, I briefly canvassed what I think are well-settled principles relating to when the Court will make an unless order – and I did so also in the context of the well-recognised importance and purposes of asset disclosure ancillary to a Mareva/freezing order. There is no need for me to rehearse at length those principles again in this Decision.

70.  It may be possible to identify previous cases where unless orders were or were not granted on the individual facts, or where any particular sanction was imposed upon a default. But each case is always decided on its own particular set of facts and considerations, with the Court being guided by the general principles and assessing those facts and considerations as appears appropriate to the circumstances.

71.  Mr Barlow submitted that an unless order should not be made in the absence of a breach so serious that it would give rise to a risk of injustice in the adjudication of the trial of the issues in the action, such as might make a fair trial impossible, citing cases including Raja v Hoogstraten [2004] EWCA Civ 968 at §§112-113. However, I agree with the analysis of Popplewell J in ORB arl v Ruhan [2016] EWHC 850 (Comm) at §178, when he stated that the proposition is unsound in principle and unsupported by the authority cited. I also do not think that the other cases cited by Mr Barlow change the analysis.

72.  Essentially, focusing only on the trial itself may be too narrow a focus. Of course, the Court’s orders are made with a view to promoting a fair and effective trial, as well as a fair and effective interlocutory process to get to the trial. But, in the context of Mareva/freezing orders, the Court’s orders are made with an emphasis on an effective trial so as to enable the applicant’s rights to be vindicated by enforcement, not merely judgment. The interest of a party in seeking an effective and realistic outcome to his litigation, if he succeeds, may be as important in the balance of things as the interest of the other party in preserving his right of access to trial despite his refusal to abide by orders of the Court. Moreover, the Court’s orders are to be obeyed, and the proper administration of justice depends on that. Hence, maintaining public confidence in the Court’s ability and willingness to secure compliance with its orders is an important and legitimate objective of an unless order in itself.

73.  Indeed, the Court regularly makes debarring orders where the failure which triggers the debarring does not directly impact on the substantive issues which fall to be decided at trial. The classic examples may be when proceedings are stayed for failure to provide security for costs, or striking out for want of prosecution. There are also many authorities, for example as referred to in the ORB case, which show it to be well established that unless or debarring orders may be justified by failure to comply with a freezing order and ancillary disclosure order. Similarly, such debarring orders may be made without there being any need for a prior finding of contempt under the Order 52 procedure.

74.  I also agree with the comments made by DHCJ KC Chan in Beijing Songxianghu Architectural Decoration Engineering Co Ltd v Kitty Kam [2024] HKCFI 3614 at §§10-11, that when it comes to proportionality in this context, it is not be measured by merely comparing ‘dollar to dollar’ (as he put it). The Court can look at the overall circumstances of the case, and need not impose an unless order with a sanction so narrowly restricted to merely ensuring that there would be a fair trial procedurally. Rather, the use of an unless order is to ensure and attain overall justice, including as an important and equally material part of it, whether the party aggrieved would have an effective and realistic outcome and real recovery. In any given case – and this case is one of them – those considerations may be weighty factors.

75.  I accept that it can be ordinarily recognised that it is not in the interests of the administration of justice that serious findings go by way of default against a party. After all, RHC Order 1 rule 2(2) requires the Court to exercise its powers with the primary aim of securing the just resolution of disputes in accordance with the substantive rights of the parties. But the just resolution does not seem to me to be narrowly limited to having a fair procedural trial. It would obviously not be acceptable, and it would not be correct, if a party were to think that he or she is entitled to a trial of his or her substantive rights, notwithstanding that the party has chosen to be in consistent breach of procedural rules or Court orders. Nor does it matter that the party can say he has complied with some rules or orders at the same time as choosing to be in breach of others.

76.  As I have already stated, each case must turn on its own facts and circumstances, and the test in every case must be what is just and proportionate. It is perfectly possible for a party to act in such a way as will forfeit the right to have a claim or defence determined.

77.  In this case, the only offered alternative to an order debarring defending the action was the suggestion from Mr Barlow that there could be contempt proceedings. But I do not see that as a suitable and realistic alternative in the present circumstances, where Xia is not only not present in Hong Kong, he refuses even to state where he is present or ordinarily resident. Further, Xia’s involvement so far has been to challenge the Injunction Order and Asset Disclosure Order, and to seek to strike out the entire action against him. Though it can be said that he has filed a Defence, I have found that step was taken in an attempt to thwart the requirement for compliance with the Asset Disclosure Order.

78.  I have taken into account Mr Barlow’s point that numerous contempt proceedings are brought against persons not physically present in Hong Kong. However, in the exercise of my discretion in the present circumstances, I do not think the possibility of contempt proceedings being conducted in the absence of the alleged contemnor really suggests that this is a realistic alternative remedy as might compel Xia to comply with the Asset Disclosure Order, or might provide sufficient enforcement ‘encouragement’ as will properly demonstrate the Court’s resolve that its orders must be obeyed for the proper administration of justice.

79.  It seems to me that the threshold for granting a debarring order is essentially repeated non-compliance, in circumstances where that non-compliance is deliberate or may be deemed contumelious. I have considered other possible sanctions, but I remain of the view that the appropriate sanction to be triggered by Xia’s continued non-compliance with the Asset Disclosure Order is that he be debarred from defending the proceedings. That seems to me to be proportionate, in the circumstances of this case, and to strike the appropriate balance amongst the various and competing interests.

80.  I have, of course, also taken into account the evidence filed by Xia, or on his behalf by his solicitor, which seeks to raise his own justification for non-compliance, and proposed alternatives to full compliance (although those alternatives are not sought in the 1^st and 2^nd LTA Summonses). In doing so, I keep in mind the well-established principle in private international law that allegations of political, governmental or judicial impropriety in other jurisdictions should not be made and will be rejected out of hand unless there is clear and cogent evidence to support them: see Dornoch Ltd v Mauritius Union Assurance Co Ltd [2005] EWHC 1887 (Comm) at §97 (affirmed on appeal). But, in any event, I do not accept the materials offered by or on behalf of Xia amount to or evidence genuine and grave concerns as might justify not making, or revoking, the Asset Disclosure Order.

81.  The suggestion based upon an alleged connection between the Liquidators and Mainland Authorities is simply misplaced, as has been fully explained. There is insufficient basis to conflate the current CEG Group management with the Mainland authorities, or to identify any improper cooperation between the Liquidators and CEG staff. Insofar as Xia complains that certain Mainland Property assets of his have been appropriated or frozen without due process, the evidence is insufficient to support those assertions. Further, there is no proper basis to impute the knowledge of whoever conducted those actions (if they happened) to the Liquidators of CEG – not least where it seems that Xia had not sought to hide his ownership of those assets, held in his own name. Repeating the allegations about the CSRC investigation, and the detention of CEO Hui do not add to their merit, and I considered that merit (or lack or merit) in my previous decisions. Lastly, I give no weight to the materials produced by Mr Yan in his 6^th affirmation, which is said to reproduce information given to him by Mr Chen Fen (the maker of another affirmation in these proceedings). On Mr Yan’s own evidence, Mr Chen refused to swear or affirm to the truth of the matters, and even refused to consent to permit Mr Yan to relay them to the Court. Indeed, I confess I find it surprising that Mr Yan somehow felt it appropriate to include that material, and then say that he believes it to be true. In any event, what is said is not sufficiently precise (or with any sufficient reference to named individuals) as to be given any real weight.

82.  As to Xia’s alternative proposal, offered by him as an alternative to actual compliance with the Asset Disclosure Order, I reject the offered undertaking as inappropriate and insufficient. The proposal is that Xia would undertake to provide disclosure to the Court, but placed in a sealed envelope not available for inspection by anyone until after resolution of all the appeals in relation to the Discharge Decision and Unless Decision, together with further obligations of confidentiality thereafter. As I understood it, even though Mr Barlow said that the Court would be able to look inside a sealed envelope, Xia would still not provide his address in his affirmation of disclosure – though he says the disclosure will reveal his whereabouts.

83.  I accept Mr Moulds’ submissions that (1) there is no justification for such a modification to the obligations under the Asset Disclosure Order in circumstances where I have not accepted that Xia’s purported fears are genuine and cogently advanced, and (2) there is no application to vary the terms of the Injunction Order in this way. Further, proceeding in this way would deprive CEG from seeing any asset disclosure (full or otherwise) for even longer than the substantial delay already suffered, and it would deprive CEG and its legal representatives from assessing the adequacy of the disclosure and/or the ability effectively to police the Injunction Order.

84.  I also take into account that the undertaking is for all practical purposes of little value. Even if the Court were to look inside the sealed envelope, it is difficult to see how the Court would be able to form any real view as to whether disclosure has been proper or not. If it is discovered, likely only possibly by CEG after exhaustion of any attempted appeals, that the disclosure given to the Court was inadequate, it may be too late to do anything about it. Further, if the view is taken that that was a breach of the undertaking offered, any steps to deal with that breach of undertaking appear unlikely to have any practical value in the present or likely future circumstances.

85.  I am prepared to allow a little further time for compliance with the Asset Disclosure Order than the two days as was suggested in the Further Unless Summons. As I indicated at the hearing, and as was in effect offered by Mr Barlow when pressed by me, that additional time would if granted be an extension of 7 days running from the time of the hearing (and not this Decision). Hence, the new deadline under the Further Unless Order which I grant is 12 noon on 25 April 2025. Therefore, unless Xia complies with the Asset Disclosure Order by that deadline, he shall (without further order) be debarred from defending the action.

F.  Costs

86.  I make the following costs orders on a nisi basis, which will become absolute if no variation application is made within 14 days. Any variation application will be dealt with on paper.

87.  I see no reason why the costs of the 1^st and 2^nd LTA Summonses should not be payable to CEG, to be taxed and paid forthwith. The applications have failed.

88.  I see no reason why the costs of the Further Unless Summons should not be payable to CEG, to be taxed and payable on the indemnity basis forthwith. The opposition to the application has failed, and Xia has been granted the indulgence of a further extension within which to comply with the Asset Disclosure Order.