XY, LLC v. JESSE ZHU (also known as JIA-BEI ZHU and JESSE JIA-BEI ZHU) AND ANOTHER

HCA 3039/2016

[2023] HKCFI 2686

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3039 OF 2016

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D E C I S I O N

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A.  INTRODUCTION

1.  By the Judgment dated 16 May 2023 (the “Judgment”)[1], this court: (i) affirmed the decision of Master Dick Ho of 29 December 2022 dismissing GNT’s application under Order 23, rule 1(1)(a) RHC for security for costs up to the Case Management Summons hearing; and (ii) awarded the costs thereof to the plaintiff.

2.  By its summons dated 30 May 2023 (the “Summons”), GNT applies for leave to appeal against the Judgment on the 2 grounds set out in the draft Notice of Appeal (the “draft NoA”).

3.  On 15 June 2023, this court directed that the Summons be dealt with by paper disposal.

4.  The relevant legal principles on an application for leave to appeal to the Court of Appeal are not in dispute.

5.  By virtue of section 14AA(4) of the High Court Ordinance, Cap 4, leave to appeal an interlocutory judgment or order of the Court of First Instance to the Court of Appeal shall not be granted unless the court is satisfied that: (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal should be heard.

6.  “Reasonable prospect of success” involves the notion that the prospects of succeeding must be “reasonable” and therefore more than “fanciful” without having to be “probable”: SMSE v KL [2009] 4 HKLRD 125 per Le Pichon JA at §17.

7.  Where (as in this case) the intended appeal is an appeal against the exercise of the discretion of the judge below, the applicant (GNT in this case) has to show that it has an arguable case with reasonable chances of success that the relevant decision: “exceeds the generous ambit within which reasonable disagreement is possible, and is in fact plainly wrong”: RK v YS, HCMP 1969/2012 (unrep, 1/11/2012) at §6.

B.  GROUND 1

8.  Ground 1 is based on two contentions, namely that the court:

(1)  “…erred on principle in simply equating the previous interlocutory observations on good arguable case with a ‘finding’ that [the plaintiff’s] case has a high probability of success”, with the consequence the Judgment “conflated” the “good arguable case” threshold for the grant of a Mareva injunction with the “high probability of success” threshold for non-grant of security for costs (draft NoA: §2); and

(2)  failed to take into account relevant matters that should have caused it to conclude that the plaintiff had not met the “very high” threshold of showing that the plaintiff has a “high probability of success” (draft NoA: §3).

9.  Regarding paragraph 8(1) above, GNT accepts in §2(a) of the draft NoA that the court correctly directed itself as to the threshold of “high probability of success” for the purpose of the security for costs decision (§§18 and 19 of the Judgment) and the fact that a different threshold was involved in upholding the Mareva injunction against GNT (up to and including before the Leave Committee of the Court of Final Appeal): §31 of the Judgment.

10.  As submitted by the plaintiff, contrary to what GNT contends, the fact that the court relied on findings in the Court of First Instance, the Court of Appeal and the Leave Committee of the Court of Final Appeal when upholding the Mareva injunction against the GNT in concluding that the plaintiff has a “high probability of success” does not equate to “conflating” the two thresholds.

11.  It was within “the generous ambit within which reasonable disagreement is possible” and not “plainly wrong” for this court to conclude in §31 of the Judgment that the findings of the Court of Appeal and the evidence referred to in the Appeal Decision (especially at §§44, 45, 47 and 48 thereof), which were affirmed by the Leave Committee of the Court of Final Appeal, would entitle this court to be satisfied on the higher threshold of “high probability of success”. It was not just the conclusion but the findings and evidence leading to the conclusion that was relied upon.

12.  GNT’s second main contention, namely that the court failed to take into account relevant matters, essentially relies on assertions that:

(1)  the credibility of the plaintiff’s witness, Ms Selen Zhou (“Ms Zhou”), is “in serious issue in the light of the adverse findings against her in the [Monetary Judgment]” and the incentive for her to assist the plaintiff “to recover as much as possible on the the [Monetary Judgment] in order to reduce her own liability” (draft NoA: §3(b)); and

(2)  documentary evidence discovered by GNT “such as bank statements and document (sic) involving independent third party” that are alleged to show that the funds in GNT’s HK Account are the sale proceeds of shares in IND DairyTech Ltd registered in GNT’s name (the “Shares”) (draft NoA: §3(c)).

13.  Taking these complaints in turn, while it is the case that Ms Zhou’s evidence as a co-defendant with Zhu was criticised in the Monetary Judgment of the Supreme Court of British Columbia, this was prior to her settling with the plaintiff. Thereafter, Ms Zhou’s evidence was fully accepted in that court notwithstanding the financial incentive GNT refers to.

14.  As referred to in §29(1) of the Judgment, the Court of Appeal expressly found at §42 of the Appeal Decision that, in the Discharge Decision, Au-Yeung J was entitled to conclude that there was no basis for her to take a different view from the Canadian court of Ms Zhou’s evidence and she “was entitled to give such weight to Ms Zhou’s evidence as she saw fit, including the clear statement from Ms Zhou that Jesse Zhu [the 1^st defendant] was at all material times the beneficial owner of the assets of GNT.”

15.  As to GNT’s reliance on the funds flow documentary evidence, it is of little assistance to the analysis when it is Ms Zhou’s evidence that the assets of GNT (including the Shares) were at all material times, and are, beneficially owned by Zhu, ie GNT was interposed by Zhu to conceal his ownership of the assets concerned.

C.  GROUND 2

16.  Ground 2 is directed at the court’s statement in §32 of the Judgment that the plaintiff’s “position is strengthened” by the Outstanding Costs Orders obtained by it against GNT in Hong Kong, including taxed costs orders that GNT has failed to pay. The contention in Ground 2 (draft NoA: §4) is that if this is a standalone reason for refusing security for costs, then reliance on it is an error in principle.

17.  Plainly, however, when §32 of the Judgment is read in context, the court’s statement is saying no more than that the Outstanding Costs Orders are one of the circumstances that the court is entitled to have regard to when exercising its discretion as to whether or not it is just to order security for costs having “regard to all the circumstances of the case” as required by Order 23, rule 1(1) RHC.

D.  CONCLUSION

18.  For the reasons set out above, the Summons is dismissed.

19.  I see no reason why costs should not follow the event. Accordingly, I order that the costs of and occasioned by the Summons be paid by the 2^nd defendant to the plaintiff, such costs are to be taxed if not agreed.