ALPHA & LEADER ASSOCIATES LTD v. VICTORY MEGA TRADING LTD

HCA 212/2021

[2023] HKCFI 2322

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 212 OF 2021

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DECISION

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INTRODUCTION

1.  On 4 February 2021, the plaintiff took out an inter partes summons seeking an interlocutory injunction against the defendant to restrain it from dealing with or disposing of its assets which comprise 18 direct creditor’s rights of Guangdong International Trust and Investment Corporation (廣東國際信託投資公司) (“GITIC”).  These rights have a total face value of RMB320,396,231.35 and are registered in the name of the defendant.

2.  The summons came before me seven days later on 11 February 2021 (“the return day hearing”).  On that day, I granted an interim mareva injunction up to that amount and adjourned the summons for substantive argument: see my decision at [2021] HKCFI 461.

3.  Then, by letter dated 13 July 2021, the defendant gave notice to the plaintiff that at the substantive hearing, it would apply for an order that the interim mareva injunction be discharged on the ground of material non-disclosure.  The letter referred to affidavit evidence already filed by then by the defendant opposing the injunction summons.

4.  The substantive hearing took place on 11 August 2021.  Two days before the hearing (9 August 2021), the defendant filed a summons seeking to rely on further affidavits.  That was followed by the plaintiff’s summons filed on the following day (10 August 2021) which sought to rely on yet further affidavits in reply.  At the substantive hearing, the court heard arguments on both the plaintiff’s injunction summons and the defendant’s discharge application.  The further affidavits were received on a de bene esse basis.  (At that hearing, I also granted leave to amend the interim mareva injunction.  The amendments are not presently relevant.  The amended injunction was then filed on 13 August 2021.)

5.  The hearing was adjourned part-heard to 20 September 2021, with 21 September also reserved.  Shortly before the adjourned hearing, parties filed three further summonses seeking leave to file further affidavits.  The dates of the summonses are 25 August 2021, 9 September 2021 and 20 September 2021.  At the adjourned hearing, I allowed these summonses. At the conclusion of the hearing on the second day, I reserved my decision.

6.  On 6 June 2022, the court issued a notice informing the parties that the decision would be handed down on 20 July 2022.  As it turned out, on the same day and unknown to the court, the defendant took out a summons for leave to file further affidavit evidence in support of its discharge application.  I shall refer to this latest application as “the new evidence summons” below.

7.  By consent of the parties, the new evidence summons was adjourned for substantive argument.  Due to this latest development, the handing down date was cancelled.  The summons was heard on 6 December 2022. 

8.  This judgment contains my decision on:

(1)  the plaintiff’s injunction summons,

(2)  the defendant’s discharge application,

(3)  the parties’ summonses taken out on 9 and 10 August 2021 for the filing of further affidavits, and

(4)  the defendant’s new evidence summons.

9.  Para (3) can be dealt with quickly.  As can be seen from the procedural history recited above, these further affidavits were subsequently addressed or replied to by the latest batch of further affidavits which I admitted at the adjourned hearing in September 2021.  In light of this, the affidavits referred to in para (3) ought to be admitted as well. 

10.  Mr John Yan, SC, appearing with Ms Shannon Leung for the defendant, submits that the logical sequence of dealing with the remaining applications should be, first, the discharge application and, then, the injunction summons.  This is because if the court is satisfied that the material non-disclosure ground is made out, it should discharge the interim mareva injunction, and further refuse to even consider a regrant of any mareva or other injunctive relief against the defendant: see Excel Courage Holdings Ltd v Wong Sin Lai [2014] 3 HKLRD 642 paras 56 to 57.  That would be the end of the matter.  Conversely, if the court is not so satisfied, it should proceed to deal with the injunction summons. 

11.  I would follow the suggested approach.  In addition, I shall deal with the new evidence summons in the course of dealing with the discharge application and the injunction summons. 

12.  Extensive evidence has been filed by the parties. There are about 20 substantive affidavits in total.  The exhibits are voluminous and run to over 2,600 pages.  The evidence discloses many factual disputes.  I should say at the outset that at this interlocutory stage, it is not possible or proper for me to make any factual finding on these disputes.  They can only be resolved at trial when oral evidence will be adduced and the parties’ cases tested by cross-examination. 

13.  At this stage, I should approach and evaluate the evidence with a view to determining whether the plaintiff and the defendant have adduced sufficient evidence to meet the legal threshold which they need to satisfy in their respective applications.  Where appropriate, the relative strengths of the parties’ respective evidence should be taken into account.  As such, it is generally unnecessary for me to set out all the evidence in full, go into the details, or deal with all the forensic points made by counsel on the credibility of the factual evidence.

14.  This action arises from a contract entitled “合作協議” and dated 26 December 2011.  It is referred to as “the Cooperation Agreement” in the pleadings. 

15.  The plaintiff says that the parties to the Cooperation Agreement were itself and Nation Field Ltd and that under its terms, the plaintiff agreed to provide services to Nation Field to acquire certain creditor’s rights (債權) of GITIC in the total face value of about RMB 5.4 billion from a fund which I shall simply call “Spinnaker” here.  In return, the plaintiff would receive a percentage of profits upon the successful purchase of the Spinnaker rights.  GITIC was adjudged bankrupt in 2003.  Broadly speaking, the profits would be calculated by reference to the amounts eventually distributed by the liquidation unit of GITIC (廣東國際信託投資公司破產清算組) (“the Liquidation Unit”) to the rights holder, which is referred to as “the Recovery Returns Share” in the pleadings.

16.  The plaintiff’s causes of action arise from what it describes in the statement of claim as “the Asset Stripping Exercise”, which took place in about January 2017.  The plaintiff says that Nation Field and the defendant conspired together to unlawfully dispose of the 35 direct creditor’s rights owned by Nation Field to the defendant without the plaintiff’s knowledge or consent.  The purpose was to denude Nation Field of the ability to honour its obligations under the Cooperation Agreement and to prevent the plaintiff from recovering the Recovery Returns Share.  The plaintiff claims against the defendant for, among other things, (1) conspiracy with Nation Field to injure the plaintiff by unlawful means, and (2) procuring or inducing Nation Field’s breach of the Cooperation Agreement.

17.  At present, the defendant still holds 18 direct creditor’s rights.  They form the subject matter of the injunction summons. The plaintiff contends that the defendant should be injuncted from disposing of them pending trial.  For a broad idea of the quantum involved, shortly after the signing of the Cooperation Agreement, the GITIC rights were acquired by Nation Field from Spinnaker at not more than 4.75% of their face value.  In March 2019, according to a working report issued by the Liquidation Unit, there had been five distributions and the creditors had so far received 18.52% of the face value and the remaining 81.48% would shortly be distributed.

18.  The defence, on the other hand, is that the plaintiff was not a party to the Cooperation Agreement and that the real party was in fact another company with the same name as the plaintiff.  In any event, the transfer of the direct creditor’s rights from Nation Field to the defendant in about January 2017 was, the defendant contends, a genuine commercial transaction and the defendant was a bona fide purchaser for value without notice.  

19.  The time frame for the material events in this action spans from about 2011 to about 2017.

DRAMATIS PERSONAE

20.  I shall first introduce the background of the plaintiff and the defendant, and the individuals and corporate entities associated with them.

The plaintiff

21.  The plaintiff, Alpha & Leader Associates Ltd, is a company incorporated in Samoa in 2008.  Mr Ma Zhangkai (馬章凱) is at present one of its shareholders.  It is his evidence that at the time of the Cooperation Agreement, he in effect owned its entire shareholding and the plaintiff was under his control.  He was its sole director from October 2008 to August 2020.

22.  Ma is a lawyer in the mainland and has been practising law since 2000.  It is his evidence that apart from his legal practice, he also specialises in commercial investment dealings and often acts as a middle man in setting up investment opportunities for investors based in Hong Kong and the mainland.  In those cases, he would make use of the plaintiff to enter into investment agreements or profit sharing agreements with potential investors.  The plaintiff would be remunerated by receiving a percentage of profits earned from the investments.  The Cooperation Agreement is one such example.

23.  As noted above, there is another company which has the same name as the plaintiff.  That company is central to the defence and the material non-disclosure contention made by the defendant.  It is a company incorporated in Hong Kong.  I shall call it “Alpha & Leader Hong Kong” below. 

24.  Ma made a total of four affirmations for the plaintiff. 

25.  The plaintiff also relies on an affirmation made by Mr Lu Yongde (盧永德). 

26.  Lu was one of the three investors in Nation Field, although he was not formally a shareholder. 

27.  Lu was the plaintiff in another High Court action commenced in 2017, HCA 1501/2017, claiming against a number of parties, including the defendant in this action.  The subject matter of that action overlaps with that of the present action.  It revolved around, among other things, the same transfer of the direct creditor’s rights of GITIC by Nation Field to the defendant in about January 2017.  In that action, Lu complained that the assets were divested away from Nation Field with a view to defrauding him as a beneficial owner of the direct creditor’s rights.  Upon discovery of the fraud, he applied for, and was granted, an interlocutory injunction against, among others, the defendant restraining the latter from disposing of the direct creditor’s rights. 

28.  In the present action, the plaintiff also relies on the affirmation evidence filed by Lu in HCA 1501/2017.

The defendant

29.  The defendant is a company incorporated in Hong Kong.  At all material times, Mr Luo Yibing (羅奕炳) was its sole shareholder and director. 

30.  Nation Field is a BVI company.  From April 2008 to November 2016 (ie shortly before the alleged Asset Stripping Exercise took place), Mr Allan Yap (葉家海) was its sole shareholder and director.  From November 2016, Mr Ng Chok Lung (吳作麟) took his place and has been its sole shareholder and director since then.

31.  According to the defendant’s case, while Yap was its sole shareholder, Nation Field was in fact beneficially owned by three investors, namely Lu (35%), Yap (45%) and Mr Hong Shunyao (洪舜堯) (20%). 

32.  According to the plaintiff’s case, the mastermind behind the Asset Stripping Exercise was Hong and that Luo and Ng were merely acting as his nominees.  On the other hand, the defendant says that the transfer of the direct creditor’s rights in about January 2017 was a genuine commercial transaction.  It was executed to deal with the debts owed by Yap to 深圳市泰銀投資發展有限公司 (“Tai Ngan”) at the time, using the interests owned by Yap in the GITIC rights in the process.  Ng was acting as a representative of Tai Ngan.  He and Luo were not nominees of Hong.  Involved in the commercial transaction arising out of the debts of Yap was Ms Virginia Szeto, a Hong Kong solicitor.  She had previously assisted Yap in the legal documentation in relation to the Cooperation Agreement.

33.  In short, the transfer of the direct creditor’s rights from Nation Field to the defendant in about January 2017 has given rise to two actions, namely HCA 1501/2017 and the present action.  The causes of action are, however, formulated differently.  In the former, Lu claimed against, among others, Yap, Ng, Hong, Luo and the defendant for conspiracy to defraud in relation to his beneficial interests in Nation Field.  In the latter, the plaintiff claims against the defendant alone in relation to the Cooperation Agreement.

34.  It will be recalled that the first ground of defence is that the plaintiff was in fact not a party to the Cooperation Agreement.  The defendant contends that Alpha & Leader Hong Kong was the party instead.

35.  It is the defendant’s case that Alpha & Leader Hong Kong was part of the Alpha & Leader Group in the mainland, which was founded by four partners in 2004.  One of the partners was Mr Pan Weisi (潘衛思). Also in the group was Alpha & Leader Law Firm.  Ma was an attorney at that law firm from 2004 to 2012.  The group from time to time provided services which were not purely mainland based legal services.  In these cases, the group would use Alpha & Leader Hong Kong to enter into contracts with clients. It is now the defendant’s case that Alpha & Leader Hong Kong, not the plaintiff, was the party to the Cooperation Agreement.  At the time of the Cooperation Agreement, Pan was its director.

36.  The defendant relies on affirmations made by, among others, Hong, Luo, Ng, Yap, Szeto and Pan.

37.  To complete the background facts, in September 2020, the plaintiff filed a notice of commencement of arbitration at the HKIAC in HKIAC/A20214 against Nation Field and the defendant in relation to the Cooperation Agreement.  In the following month, the plaintiff obtained an injunction order from a mainland court against the assets of Nation Field in the sum of about RMB 174 million.  Nation Field and the defendant filed their respective replies to the arbitration notice in October 2020.  In January 2021, the HKIAC informed the parties that the intended application against the defendant would not be proceeded with unless the parties reach an agreement or the arbitral tribunal to be constituted decides otherwise.

38.  It was shortly after this that the plaintiff commenced the present action.

THE PLAINTIFF’S CLAIM

39.  The plaintiff’s case is as follows.

Prior to the Cooperation Agreement

40.  In around mid-2011, an investment opportunity arose regarding the purchase of the creditor’s rights of GITIC owned by Spinnaker.  Those rights had a face value of about RMB 5.4 billion and included direct creditor’s rights with a face value of about RMB 2.6 billion.

41.  Through a middle man called Chung Kwok Cheung (鍾國祥), Ma was introduced to Yap.  In a meeting held at Yap’s yacht in Hong Kong, Yap expressed interest in purchasing the GITIC rights held by Spinnaker.  He told Ma that he intended to use Nation Field, which was then wholly owned by him, to purchase them.  He authorised Chung to sign documents on behalf of Nation Field.  Emails were exchanged between Ma and a Mr Charles Li of Spinnaker between October and early December 2011 regarding the intended purchase.

42.  On 8 December 2011, a framework agreement was entered into by Spinnaker and Nation Field for the sale of the GITIC rights (“the 1^st Framework Agreement”).  That was however not proceeded with as Nation Field did not have sufficient funds at that stage.

The Cooperation Agreement

43.  Then, in mid-December 2011, Ma had further discussions with Yap and Chung.  It was agreed that the plaintiff would be involved in setting up a new deal with Spinnaker to purchase the GITIC rights. This culminated in the signing of the Cooperation Agreement on 26 December 2011.  At that time, the plaintiff was wholly owned and controlled by Ma.

44.  Ma signed the Cooperation Agreement on behalf of the plaintiff and Chung signed on behalf of Nation Field. 

45.  The relevant provisions of the Cooperation Agreement are:

(1)  The plaintiff’s obligation was to, among other things, discuss and negotiate with Spinnaker and assist Nation Field in purchasing the GITIC rights at not more than 4.75% of the face value: clause 1.1.

(2)  The plaintiff would be entitled to a share of the recovery returns (回收利潤) based on the distribution face value (處置收益) of the GITIC rights.  In particular, if the distribution face value was over RMB 2.5 billion, the plaintiff would be entitled to a share of 20% of the recovery returns (ie, the Recovery Returns Share): clause 2.1.  The recovery returns would be the distribution face value deducted by the costs of the acquisition and recovery: clause 2.3.

(3)  If the distribution face value was in the form of cash, Nation Field would pay in cash.  If the distribution face value was not in the form of cash, Nation Field would transfer the non-cash assets to the plaintiff: clause 2.4.

46.  I must highlight here the following description of the party at the beginning of the Cooperation Agreement.  This is a central issue in the discharge application.

“本《合作協議》由下列雙方於2011年12月26日簽訂：

(a) Nation Field Limited (以下稱“甲方”) …;

(b) Alpha & Leader associates Limited (以下稱“乙方”)，一家在香港註冊並有效存續的有限責任公司。” (underline added)

47.  In his first affirmation, Ma said that the above description was erroneous.  He said, at para 20(1):

“It was erroneously stated at page 1 of the Cooperation Agreement that Alpha [ie the plaintiff] is a company incorporated in Hong Kong. In fact, as mentioned above, Alpha is a company incorporated in Samoa.”

48.  Subsequently, Yap asked Lu to join in the purchase of the GITIC rights from Spinnaker.  On 30 April 2012, an investment agreement was entered into between Yap, Lu and Chung (“the Investment Agreement”) during a meeting attended by them together with Ma.

49.  The plaintiff highlights here that clause 5 of the Investment Agreement expressly referred to the Cooperation Agreement and acknowledged the role of the plaintiff as one of the service providers for the purchase of the GITIC rights and that a copy of the Cooperation Agreement was annexed to the Investment Agreement.

50.  Lu and Yap also entered into a shareholders agreement dated 2 May 2012, which expressly referred to the Investment Agreement and annexed a copy of it, which copy in turn included a copy of the Cooperation Agreement as an annex.

The plaintiff performed under the Cooperation Agreement

51.  In performance of its obligations under the Cooperation Agreement, the plaintiff negotiated with Spinnaker and assisted Nation Field to purchase the GITIC rights at a price of not more than 4.75% of their face value.  Emails were exchanged between Ma and Li (of Spinnaker) regarding the payment of deposit for the purchase.  The plaintiff’s works culminated in the signing of a framework agreement signed by Spinnaker and Nation Filed on 14 May 2012 (“the 2^nd Framework Agreement”).  This had the effect of superseding the 1^st Framework Agreement which had lapsed by then.  Ma attended the Hong Kong office of Spinnaker with Yap on that occasion.

52.  After the signing of the 2^nd Framework Agreement, the plaintiff, through Ma, continued to perform its obligations under the Cooperation Agreement.  This included setting up a custodian account and brokerage account to receive the GITIC rights and the payment of the balance of the purchase price.

53.  Eventually, Nation Field completed the purchase, which included, among other things, 35 direct creditor’s rights with a face value of about RMB 2.4 billion. 

Subsequent communication between Ma and Nation Field

54.  Subsequently, on two occasions, the plaintiff, through Ma, sent letters to Nation Field, Yap, Lu, Hong and Chung referring to the good news that the Liquidation Unit would be paying the holders of the creditor’s rights in full and reminding them about the Cooperation Agreement and the plaintiff’s entitlement to the Recovery Returns Share. 

55.  First, a letter dated 16 June 2017.  It was signed in the name of Ma for and on behalf of the plaintiff.  Relevantly, it read:

“ 本人，特代表Alpha & Leader associates Limited及權益擁有人，致函貴司以及貴司各股東或投資人，

…

我們過往一直以來向各位通報的：隨着廣信房產名下土地價值的上升，GITIC債權的回收預期亦提升至債權餘額的全部，意即除了在我們協助貴司完成收購之前由其他權益人享有的18.52%分配外，剩餘金額可獲得全額分配。

我們為此感到十分高興，恭喜各位的投資即將實現高額回報，我們也為向貴司推薦了這樣優質的投資機會而感到自豪。

同時，我們也希望我們之間簽署的合作協議可得以順利履行，從而我們也可從中得到豐厚回報。” (underline added)

56.  Second, an email sent on 23 April 2019 by Ma to Yap and Hong attaching a copy of the above letter and a letter dated 19 April 2019.  The latter was again signed in the name of Ma for and on behalf of the plaintiff.  It read:

“ 本人，特代表Alpha & Leader associates Limited及權益擁有人，致函貴司以及貴司各股東或投資人，

我們十分高興的通知貴司以及各位，GITIC清算組已經於近期開始向債權人通知第六次破產財產分配事宜。我們為此十分欣喜，恭喜各位的投資即將實現回報。

2011年，我們協助貴司從Spinnaker收購了GITIC的債權，經過多年努力，如今貴司即將獲得高額收益，作為服務提供方，我們倍感榮幸。按照我們與貴司簽署的《合作協議》，貴司取得Spinnaker債權的收益時，應當向我們給付一定比例的利潤。我們特此提醒貴司及各位投資人，在取得收益後依據《合作協議》約定將我們應得的利潤付至我們的賬戶。不勝感激！

我們的收款賬戶如下：…” (underline added)

57.  There was no reply to the above two letters by any of the recipients. 

The Asset Stripping Exercise

58.  According to the Cooperation Agreement, the plaintiff is entitled to a share of 20% of the recovery returns received by Nation Field. 

59.  However, in about January 2017, Nation Field transferred and dissipated the 35 direct creditor’s rights to the defendant without any notice to the plaintiff.  (In the same exercise, Nation Field also transferred other GITIC rights to another entity called Million Victory Corporation Ltd.)  Notwithstanding that the plaintiff sent the letter dated 16 June 2017 to Nation Field reminding it of the plaintiff’s entitlement under the Cooperation Agreement, Nation Field did not respond or make any mention of the transfer which had taken place about six months earlier.  The plaintiff contends that it is clear that Nation Field never intended to perform its obligations under the Cooperation Agreement.  The purpose of the transfer was to denude Nation Field of the ability to honour those obligations and to prevent the plaintiff from receiving the Recovery Returns Share.

60.  To demonstrate the fraudulent nature of the transfer under the Asset Stripping Exercise, the plaintiff relies on the affirmation evidence of Lu filed in HCA 1501/2017.

61.  In that action, Lu claimed that Hong, Ng, Luo and the defendant, among others, conspired together to defraud him by causing Nation Field to unlawfully dispose of the 35 direct creditor’s rights to the defendant without Lu’s knowledge or consent for the purpose of depriving Lu of his beneficial interests in them. 

62.  In June 2017, Lu successfully applied for an ex parte interlocutory injunction restraining the defendant from dealing with the 35 direct creditor’s rights (and also an injunction restraining Million Victory with respect to other GITIC rights transferred to it by Nation Field). In his supporting affirmation, he made serious allegations of fraud against Hong, Ng and Luo, alleging that Ng and Luo were nominees of Hong and acted according to his instructions and that they conspired together to defraud him and to misappropriate his assets. 

63.  In the affirmation, Lu recounted how he, Yap and Hong came to invest in the GITIC rights through Nation Field.  It was in fact Lu who invited Hong to join in the investment, as they were involved in other investment projects at that time and he considered Hong to be a trustworthy partner.  According to the arrangement, Lu, Hong and Yap owned 35%, 20% and 45% of the interests in the GITIC rights, respectively. 

64.  In about August 2016, a contact told Lu that Nation Field had transferred some of the GITIC rights to Million Victory.  He then had a conversation with Hong about it.  Then, in about March 2017, the same contact told Lu that Nation Field had made an application to the Liquidation Unit for the transfer of the direct creditor’s rights to the defendant.  Gravely concerned with this second transfer of assets by Nation Field, Lu confronted Hong, and Hong told him that he would give him back what he was entitled to.  They were then engaged in negotiation of documentation for that purpose.  But Lu found out at the end that Hong had never intended to settle the matter with him and had conspired with the others to defraud him of his interests in the GITIC rights.  

65.  He said:

“At this stage, I finally realized that I have fallen victim to a conspiracy masterminded by [Hong]. I verily believe that [Hong] had caused or procured (1) his nominee [Ng] to received 100% shareholding of Nation Field from [Yap]; (2) his nominee [Luo] to receive on behalf of the [defendant] the Second Tranche of the Assets, both without my knowledge or consent.”

66.  Notwithstanding the serious allegations made by Lu, Million Victory and the defendant in that action reached a settlement with Lu.  They agreed to return to Lu the assets owned by Lu and those assets were in fact subsequently returned.  Hong, Ng, Luo and the defendant did not come up with any evidence to rebut the fraud allegations in that action. 

67.  In the present action, Lu filed an affirmation re-confirming his evidence in HCA 1501/2017.  He also re-confirmed that Hong was the mastermind of the conspiracy and both Ng and Luo were his nominees and acted according to his instructions.

The plaintiff’s causes of action against the defendant

68.  On the above factual basis, the plaintiff claims against the defendant for, among other things, (1) conspiracy with Nation Field to injure the plaintiff by unlawful means, and (2) procuring or inducing Nation Field’s breach of the Cooperation Agreement.  It seeks damages, injunctive and declaratory relief.

THE DEFENCE

69.  The defendant raises two grounds of defence.

The plaintiff was not a party to the Cooperation Agreement

70.  The primary defence raised by the defendant is that the plaintiff was in fact not the “Party B” (乙方) named in the Cooperation Agreement and that Alpha & Leader Hong Kong was the actual party who entered into the Cooperation Agreement with Nation Field.  The plaintiff’s present claim being premised entirely upon the Cooperation Agreement, the defendant says that such claim must therefore fail.

71.  The defendant’s factual case is more specifically as follows.

72.  Alpha & Leader Law Firm was founded in 2004.  Alpha & Leader Hong Kong was set up at the same time.  Throughout the years, this company would be used to enter into contracts with clients in relation to non-mainland Chinese law related services.

73.  Ma was employed as an attorney by Alpha & Leader Law Firm from 2004.  He left in January 2012.  Although he was at a later stage of his time with the firm given the title “Partner” and/or “Senior Partner”, he was all along an employee and had no equity interest in the firm. He was a sub-ordinate of Pan.  During his employment, Ma was very familiar with the Alpha & Leader Group and Alpha & Leader Hong Kong and its role and function in the group.

74.  Chung had been a long time client of Pan and Alpha & Leader Law Firm.  Chung had got to know Ma through being Pan’s client. Ma had assisted Pan to do some work for Chung.

75.  In 2011, Ma introduced to Chung an investment opportunity regarding the GITIC rights held by Spinnaker at a meeting held in the offices of Alpha & Leader Law Firm.  The introduction was made by Ma in the course of his employment by the firm. 

76.  In around November and December of the same year, Ma and Alpha & Leader Law Firm advised Nation Field in relation to the 1^st Framework Agreement and participated in its drafting.  In around December 2011, Yap and Ma agreed that Alpha & Leader Law Firm would continue to provide services to Nation Field under the 1^st Framework Agreement. 

77.  On 26 December 2011, the Cooperation Agreement was entered into.  Chung signed the agreement on behalf of Nation Field and Ma signed on behalf of Alpha & Leader Hong Kong.  The agreement on its face stated that “Party B” was a company incorporated in Hong Kong.

78.  At the time of signing, Ma told Chung that Alpha & Leader Hong Kong was a Hong Kong company incorporated by Pan and his partners of Alpha & Leader Law Firm.  At that time, Ma and his team, including a Ms Annie Zhou, were still working at the offices of Alpha & Leader Law Firm.  Chung and Yap considered that they were dealing with Ma in his capacity as an employee of Alpha & Leader Law Firm.  The plaintiff was not known to Chung or Yap at all.

79.  Then, in January 2012, Ma left the employment of Alpha & Leader Law Firm.

80.  Meanwhile, the 1^st Framework Agreement was terminated by a letter dated 21 February 2012 from Spinnaker.

81.  Given the above timeline, the defendant denies that there was any discussion between Ma, Yap and Chung regarding setting up a new deal with Spinnaker in mid-December 2011, as at that time the 1^st Framework Agreement was still in effect.

82.  The defendant further says that the plaintiff did not perform any obligation under the Cooperation Agreement as it was not a party to it.  As to the 2^nd Framework Agreement, the defendant has no knowledge as to the exact circumstances under which it was executed.  Nevertheless it denies that it was the plaintiff’s performance of the Cooperation Agreement which led to the signing of the 2^nd Framework Agreement.

83.  After the 2^nd Framework Agreement had been signed and payments made by Nation Field under its terms, Ma had very little further involvement in the matter.  However, he would still occasionally contact Hong, including trying to interest him in other investments.

The transfer of GITIC rights to the defendant was a genuine transaction

84.  In any event, the defendant says that the transfer of the GITIC rights by Nation Field to Million Victory and the defendant in late 2016 and early 2017 were genuine commercial transactions carried out at arm’s length.  It denies that they were carried out with any fraudulent intent to defraud Lu or the plaintiff.

85.  The action in HCA 1501/2017 was commenced by Lu as he had misunderstood the arrangements.  The action was settled soon after it was commenced.  The settlement agreement expressly provided that the defendants in that action did not admit any liability.  Accordingly, Hong, Ng and Luo did not produce any evidence to rebut the allegations made against them. 

86.  More specifically, the defendant’s case on the transfer is as follows.

87.  In around April 2014, Yap sought Hong’s assistance to help him obtain a loan of HK$300 million.  Hong made enquiries and ascertained that Tai Ngan would be prepared to lend this amount to Yap but would require security for the loan.  Yap agreed to mortgage his 45% share in the GITIC rights to Tai Ngan.  Szeto assisted in drawing up the loan and mortgage documents for Yap.  The loan was advanced by Tai Ngan.  The parties to the loan were, however, Yap and Ng.  Ng was an employee and representative of Tai Ngan.  Yap signed in blank an instrument of transfer and bought and sold notes in respect of shares in Nation Field. 

88.  Hong informed Lu about Yap’s loan.  Both of them agreed that something needed to be done to safeguard their 55% interests in the GITIC rights.  In the end, the GITIC rights held by Nation Field were split into two lots.  One lot represented Yap’s 45% shares which were used as security for his loan.  The other lot represented the 55% interests owned by Hong and Lu.  That lot was transferred by Nation Field to Million Victory for the latter to hold on trust for Lu and Hong.

89.  From about September 2014 onwards, Yap started to default on the loan.  On the instructions of Ng, Szeto sent demand letters to Yap chasing for repayment. 

90.  In November 2016, Tai Ngan decided to enforce the security and sell Yap’s 45% share in the GITIC rights.  Hong told Lu about this and Lu said that he did not object to Tai Ngan enforcing the security so long as his own interest would continue to be safeguarded.

91.  Ng then requested Hong to try to look for a purchaser for the GITIC rights, the subject matter of the loan security.  Hong eventually managed to draw interest from Luo.  Luo made use of his company, the defendant, to enter into an agreement with Nation Field to purchase the GITIC rights representing the 45% share of Yap.

92.  On 30 December 2016, Nation Field and the defendant entered into an agreement for the purchase.  It was entitled “債權轉讓協議” (“the Assignment Agreement”).  The consideration was about RMB 118 million.

93.  Between 3 and 7 January 2017, Luo paid the purchase price to Ng in different tranches, which in total add up to the total purchase price as stated in the Assignment Agreement.  Copies of eight bank payment advice slips were produced in Luo’s affirmation.  The slips show that payments were made by Luo to Ng.  (But one of the payment slips exhibited appears to show the date of transfer to be in July 2017.)

94.  On the above factual premise, the defendant says that the transfer of the GITIC rights by Nation Field to the defendant was executed as part of the enforcement by Tai Ngan, through Ng, of the security given by Yap for his loan, and that the defendant was a bona fide purchaser for value without notice.  Ng was acting for Tai Ngan and Luo was acting for himself.  They were not nominees of Hong.  There was no conspiracy among the three of them and the defendant.  The defendant accordingly denies that the transfer was an asset stripping exercise as alleged by the plaintiff.

THE PLAINTIFF’S REPLY

95.  In reply to the above two defences, the plaintiff makes a host of counter-allegations.  As remarked at the outset, it is unnecessary for me to set them out in full.  I would highlight the following.

The plaintiff was “Party B” in the Cooperation Agreement

96.  The plaintiff says that the defence that it was not a party to the Cooperation Agreement is wholly unmeritorious and must be rejected.

97.  First, it says that the defence is a recent fabrication, which was only belatedly raised by the defendant in its affirmations and its defence filed in June 2021.  This was more than almost 9½ years after the Cooperation Agreement was signed.  Furthermore, this was more than eight months after the plaintiff filed the arbitration notice in September 2020.  In the notice, it was specifically stated that the plaintiff is a company incorporated in Samoa.  The defendant filed its reply to the arbitration notice in October 2020.  Yet, it made no such allegation in its reply.  Mr Lawrence Ng, appearing with Mr Victor Lui for the plaintiff, highlights that the defendant was legally advised all along, including at the time when it filed its reply in the arbitration proceedings.  He submits that it is inconceivable and inexplicable that the defendant would not have raised the same defence in the arbitration if the defence had been true.

98.  Secondly, the plaintiff relies on a number of contemporaneous documents in an effort to show that Ma, via the plaintiff, entered into the Cooperation Agreement in his personal capacity as a middle man, as opposed to being an attorney of Alpha & Leader Law Firm.  He also subsequently performed the obligations under the Cooperation Agreement in his personal capacity after he left the law firm.  Yap, Chung and Hong were all well aware of that.

99.  It is not necessary to enumerate all these documents in this decision.  The material ones are those which show that Ma was still in communication with the others, including Yap, Chung and Hong, in relation to the GITIC rights after January 2012, ie after he left the employment of Alpha & Leader Law Firm.  The plaintiff’s contention is that if Alpha & Leader Hong Kong had been the party to the Cooperation Agreement instead of the plaintiff, there would have been no reason for Ma to continue working on it after he left Alpha & Leader Law Firm.  

100.  There were emails exchanged between Ma and, among others, Yap and Li (of Spinnaker) in May 2012 from Ma’s personal email addresses and from his email address at another law firm.

101.  There was another email dated 31 August 2012 from Ma to Yap, Chung and Hong.  In that email, Ma reminded them that although Nation Field had already completed the payments to Spinnaker, there were still various important works to be carried out.  He expressly referred to “Alpha & Leader” as representing his interests.  He wrote:

“Allan Yap、鍾老板、盧老板、洪老板，

恭喜各位老板，終於通過Nationel field完成了與Spinnaker交易的付款工作。

接下來，有更為重要的工作要完成：就是馬上盡一切努力盡快完成交割。

我的一些投行的朋友提醒我，鬼佬並不見得是一定會履行合同的，如果他們提前知道了債權可能的回收結果 — 或者是可能的一些推測或者預測，那麼，有可能會違約，甚至都有可能在交易完成後提出訴訟。我想各位老板都不希望有任何意外發生，當然，我也不想，因為這也關係到與各位簽署《合作協議》的Alpha&leader公司所代表的我的利益。

我特此提醒各位老板，建議盡快完成如下工作：…” (underline added)

102.  It is the plaintiff’s case that Yap, Chung and Hong were well aware that it was Ma’s company, the plaintiff, which signed the Cooperation Agreement.

The payments allegedly made by Luo to Ng under the Assignment Agreement are open to serious doubt

103.  As regards the contention that the defendant is a bona fide purchaser for value without notice of the GITIC rights transferred to it by Nation Field, the plaintiff says that it is wholly unmeritorious.  This is because the Assignment Agreement is a sham and the authenticity of the alleged payments made by Luo (on behalf of the defendant) to Ng (on behalf of Nation Field) are open to serious doubt as the evidence shows that these payments formed part of a series of circular fund transactions, the net effect of which was that no consideration was in effect paid by the defendant to Nation Field at all.

104.  The plaintiff relies on Lu’s evidence. According to Lu, a meeting took place between him, Hong and others in a hotel in Shatin in around March or April 2017.  Hong admitted to him that the payments from Luo to Ng were in fact a series of circular fund transactions arranged by Hong.  Lu said:

“此外，還有一個重要事實，那就是在沙田會談尾聲的時候，因為條件談不攏 (詳見《盧的誓詞》第56段)，洪舜堯一如既往般得意洋洋，囂張和語帶威嚇地向我展示他的代名人吳作麟和羅奕炳的一張銀行轉賬存根，說他一早已經做好安排，Nation Field和被告人之間的轉讓交易，他安排羅奕炳與吳作麟兩人之間互相將所謂轉讓價款進行來回的流水轉賬，並說使用不同款項，來回從羅奕炳的賬戶轉到吳作麟的賬戶中，然後把款項轉回來給羅奕炳，如是者此動作重複多次，於是我悄悄地用手機把這張轉賬紀錄拍照留作紀錄。現向本人展示及出示，並標記為證物“LYD-7”是該吳作麟與羅奕炳的銀行轉賬存根的彩色照片。”

105.  In his affirmation, Lu reiterated his assertion that both Ng and Luo were the nominees of Hong and Hong was the mastermind of the conspiracy.  In fact, Hong admitted that much to Lu himself.  It was only after Lu obtained the injunction in HCA 1501/2017 that Hong realised that he might need to face criminal charges that Hong, together with others, agreed to settle with him.  Lu said:

“另外，洪舜堯在我向他提告1501案件之前，從來不諱言他自己是整件事的主腦，而羅奕炳、吳作麟、司徒惠玲是與他合謀人士，在發現了洪舜堯的其他合謀人盜取了我的資產後，在我提出1501案件之前，我曾經與他多次談判，他都極其囂張和語帶威嚇，直到我在1501案件之中取得禁制令，和提交了《盧的誓詞》和證據之後，洪舜堯才意識到他可能需要負上的刑事責任，便馬上帶領他的合謀人士與我達成和解。”

106.  To demonstrate that the circular fund transactions in fact took place, Ma produced copies of what appear to be bank statements showing the movement of funds moving in and out of (1) Luo’s bank account with Ping An Bank and (2) Ng’s bank account with the same bank in 2017.

107.  The statements appear to show a pattern whereby during the period from 3 to 9 January 2017, funds would first be transferred from individuals whom the plaintiff says are associated with Hong (eg his wife and relatives) to Luo’s account.  Luo would then pay the funds to Ng.  But within the same day or shortly afterwards, Ng would transfer the funds back to individuals associated with Hong.  Furthermore, those funds would go through the same cycle again, ie from Hong’s associates to Luo, then from Luo to Ng, and then from Ng to Hong’s associates.  The purpose of these transactions would appear to be to create the façade that there were real payments made by Luo to Ng when in fact there were not and no real money changed hands between the two of them.

108.  Ma described these transactions as “循環流水轉賬安排”.  He observed:

“在其後的轉賬羅奕炳與吳作麟之間的均有同一個模式，即吳作麟收到羅奕炳的轉賬後，會在短時間內把該些款項轉到第三者的戶口，然後該些款項輾轉之間又會透過關連的第三者返回羅奕炳的戶口，羅奕炳又會再把其轉賬予吳作麟，如是者不斷製造羅奕炳付錢予吳作麟的假象 (實際上只是一個循環流水轉賬安排)”

109.  Mr Ng highlights in his submissions that faced with such serious allegations concerning the circular fund transactions, the defendant did not put forward any evidence by Hong, Luo or Ng disputing the same.  The silence, Mr Ng submits, must be proof that such circular fund transactions in fact existed.

THE INJUNCTION SUMMONS

110.  The plaintiff now seeks a continuation of the interim mareva injunction until trial.

111.  Based on the evidence before the court, it contends that it has demonstrated a good arguable case that (1) the defendant has conspired with Nation Field to injure the plaintiff by unlawful means, namely the Asset Stripping Exercise, and (2) that it has procured or induced Nation Field’s breach of the Cooperation Agreement for the same reason. 

112.  The plaintiff says that there is a real risk that the defendant will dissipate the direct creditor’s rights or its distribution proceeds if it is not restrained from doing so by the court in the meantime.  The defendant has shown an unacceptably low standard of commercial morality in its dealings with the plaintiff.  It should drive the court to conclude that there is a danger that the defendant would not shrink from attempting to defeat any judgment which the plaintiff may obtain at the conclusion of this action by dissipating its assets.

113.  The balance of convenience lies in favour of the grant of the injunction, as it would preserve the status quo pending trial.  There is no evidence that the defendant is operating any commercial business or is in possession of any valuable assets other than the GITIC rights.

114.  Lastly, the requirement that there are assets within the jurisdiction is not in dispute.

THE DISCHARGE APPLICATION

115.  In the discharge application, the defendant seeks a discharge of the interim mareva injunction granted at the return day hearing on 11 February 2021 on the ground of material non-disclosure. 

116.  It will be recalled that that hearing proceeded on an inter partes basis. 

Duty to make full and frank disclosure at an inter partes hearing in some cases

117.  It is well-established that a party making an ex parte application is under a duty to make full and frank disclosure of all material matters and that failure to abide by such duty may result in the discharge of the order obtained.  It is Mr Yan’s submission that it is also now well-established that such duty of full and frank disclosure extends not only to an applicant making an ex parte application but also to situations where the court only has the evidence presented by one side, and the other party who may be notified and is present at the hearing has not had a fair and reasonable opportunity to present its evidence and arguments in opposition.

118.  For the above principle, Mr Yan relies on the decisions in Muginoho Co Ltd v Vimiu HK Co Ltd HCMP 107/2012, 24 February 2012 and Chen Lingxia v 中國金谷國際信託有限責任公司 [2019] HKCFI 379.

119.  In Muginoho, Deputy High Court Judge Mimmie Chan (as she then was) held:

“5. Even if the hearing on 20 January 2012 and the order made that day can be said to be inter‑partes in the sense that due notice had been given to the defendant, and arguments had been presented on the defendant’s behalf, I would not go on to say that the plaintiff did not have the duty to make disclosure to the court of material facts of which it had knowledge. When the interim injunction order was made on 20 January, the court only had the evidence of the plaintiff before it. A party which comes to court for relief, particularly discretionary or equitable relief, has the obligation to place before the court all matters which are relevant to the court’s determination of the issues and the cause before it. The Civil Justice Reform makes it clear that the parties have the duty to assist the court to further the objectives of the rules, and the court’s just resolution of the dispute in accordance with the parties’ substantive legal rights.

6. The plaintiff therefore has the duty to disclose all matters which are material for the judge to know, to enable him to exercise his discretion properly. It is clear that the correct test for materiality is as set out in Wardle Fabrics Limited v G Myristics Limited 84 FSR 263: It is not simply whether, if the non‑disclosure had not occurred, the ex‑parte judge would nevertheless have made the order, but whether the facts not disclosed, being relevant, should have been put in the scales.” (underline added)

120.  The judge repeated the same view in Chen Lingxia, at paras 40 to 42.

“41. The Summons was an inter-partes summons, giving the requisite 2 clear days’ notice of the hearing of the application for relief (as required under Order 32 rule 3 RHC). The intention of the rule is to ensure that the respondents to an application have proper notice of both the hearing and the material upon which the applicant intends to rely (para 32/3/1 HK Civil Procedure, PCCW-HKT Telephone Ltd v Telecommunications Authority, unreported, CACV 274/2003, 7 September 2004). By the time of the hearing on 31 August 2018, JI, JH, the 4^th Defendant, South Asia and the 8^th Defendant had been served with the Summons and attended by their lawyers (save and except the 8^th Defendant whose attendance was excused), but none of the Defendants had been able within the limited time to prepare any evidence in opposition.

42. Although the Summons was inter-partes, Chen was not absolved from her duty to make frank disclosure of all facts known to her and which are material to the Court’s determination of whether to exercise its discretion to grant the interim relief which she sought, on the evidence she presented unilaterally …” (underline added)

121.  Hence, even where an injunction was granted at an inter partes hearing, Mr Yan submits, it is liable to be discharged if the applicant failed to make full and frank disclosure at the hearing when the respondent did not have a fair and reasonable opportunity to present its evidence and arguments in opposition.

The plaintiff had a duty to make full and frank disclosure at the return day hearing

122.  Mr Yan recounts the following events to show that the defendant did not have a fair opportunity to present its case at the return day hearing.

123.  The injunction summons was served on the defendant at its registered office on 5 February 2021.  The return day hearing took place six days later on 11 February 2021. 

124.  At the hearing, the defendant was present and represented by Mr Yan and Ms Leung.  The defendant says that it had not been able to file full or proper affidavit evidence in opposition to the injunction summons.  However, during the short space of time, it had produced an opposing affirmation in advance of the hearing.  However, the plaintiff’s counsel, ie Mr Ng and Mr Lui, objected to the defendant relying on it.  Mr Yan then proceeded to make his submissions without placing any reliance on that affirmation.  He invited the court to dismiss the summons in limine as the plaintiff’s own evidence had failed to demonstrate that it has a proprietary claim against the defendant.

125.  Mr Yan stresses that at the hearing, there was no application by the plaintiff for a mareva injunction.  In its written submissions, the plaintiff only sought a proprietary injunction.  In the course of the oral submissions, I indicated my view that the plaintiff did not appear to have a viable proprietary claim.  I asked Mr Ng if the plaintiff had a fallback position.  It was only after I gave my indication that the plaintiff applied for a mareva injunction instead.

126.  Given the above procedural history, Mr Yan submits that the defendant did not have a fair opportunity to present its evidence and arguments at the return day hearing.  In the circumstances, the plaintiff came under a duty to make full and frank disclosure.

The plaintiff failed to discharge the duty

127.  The defendant says that the Cooperation Agreement is undoubtedly the single most important document in the present action.  This is because the plaintiff’s causes of action are all premised upon it and upon it being the “Party B” named in it.

128.  However, at the return day hearing, the plaintiff failed to disclose the following highly material facts concerning the Cooperation Agreement and the identity of its contracting parties.

129.  Most importantly, there existed a company with the same name as the plaintiff, namely Alpha & Leader Hong Kong, and that this company is incorporated in Hong Kong.  This company was part of the Alpha & Leader Group.  At the time of the signing of the Cooperation Agreement, Ma was in the employment of Alpha & Leader Law Firm.  And he knew about the existence of this Hong Kong company. 

130.  Furthermore, the 1^st Framework Agreement was in fact terminated by a letter from Spinnaker dated 21 February 2012.  The letter was addressed to Yap of Nation Field.  It referred to the 1^st Framework Agreement and stated that under its terms, Nation Field was required to make payment of a deposit upon its execution.  It further stated that as no such payment was made, Spinnaker treated the agreement as terminated with immediate effect.

131.  Mr Yan submits that the termination letter is an important document as it shows that the 1^st Framework Agreement was not yet terminated before the Cooperation Agreement was entered into on 26 December 2011.  This in turn casts doubt on the plaintiff’s allegation that in mid-December 2011, Ma had further discussions with Yap and Chung in which it was agreed that the plaintiff would be involved in setting up a new deal with Spinnaker.

132.  All the above facts were not mentioned by the plaintiff at the return day hearing.  All that Ma said about the identity of the party to the Cooperation Agreement was that there was an error in the description of “Party B” in the agreement – the plaintiff was incorporated in Samoa but it was mistakenly stated to be in incorporated in Hong Kong in the agreement.  See paras 46 and 47 above.

133.  Mr Yan submits that the above facts are all highly material and significant when it comes to assessing the fundamental premise of the plaintiff’s case, namely that it was the party to the Cooperation Agreement.  These facts have the effect of undermining, if not totally destroying, the plaintiff’s case.

134.  In fact, all along, Ma knew that the plaintiff might have a problem claiming under the Cooperation Agreement. 

135.  It is Pan’s evidence that in 2019 Ma approached him and tried to get him to have Alpha & Leader Hong Kong sign a declaration.  The purpose was to confirm that the latter and the plaintiff had no connection with each other and that Alpha & Leader Hong Kong had not signed the Cooperation Agreement and did not know anything about it. 

136.  The relevant parts of the declaration read:

“ Alpha & Leader Associates Limited (HK) 應Alpha & Leader Associates Limited (Samoa) 要求，聲明如下：

1. 本公司 (Alpha & Leader Associates Limited (HK)) 與Alpha & Leader Associates Limited (Samoa) 並無任何業務聯係。

2. Alpha & Leader Associates Limited (Samoa) 聲稱其與Nation Field Limited (BVI) 及其授權代表鍾國祥先生於2011年12月26日簽署有《合作合同》，本公司對此並不知情，但本公司確認與Nation Field Limited (BVI) 並無簽署該份合同、協議或書面文件、且並無任何業務往來。”

137.  Pan refused to do so.

138.  Mr Yan argues that this piece of evidence clearly demonstrates the falsity of the plaintiff’s case.  Ma knew that it was Alpha & Leader Hong Kong who entered into the Cooperation Agreement.  He told a lie in his affirmation evidence, when he said that it was in fact the plaintiff who was the party.

139.  In any event, even if Ma genuinely believed that the plaintiff was the party instead, his request to Pan to sign the declaration shows that the omission to mention Alpha & Leader Hong Kong at all in his affirmation was a deliberate decision on his part.  It was something with which he was obviously concerned, as otherwise he would not have approached Pan to sign the declaration.  Yet, when he applied to the court for an interlocutory injunction, he chose not to mention it at all. 

140.  The fact that there may be doubt over whether the plaintiff was the party to the Cooperation Agreement is, Mr Yan submits, plainly a matter which should go into the weighing scales when the court considered whether to exercise its discretion to grant interim relief.  By deliberately concealing this from the court, the plaintiff was in breach of its duty of full and frank disclosure.  It was a serious breach.  Mr Yan contends that the court should discharge the interim mareva injunction and refuse to renew it until trial. 

Discussion

141.  The plaintiff’s stance is that the discharge application is wholly misconceived and must be dismissed on a number of grounds.  

Procedural ground

142.  First, the plaintiff contends that the application suffers from a fatal procedural flaw as the defendant did not take out any summons for the application.  An application by letter should not be entertained by the court: see AXA China Region Insurance Co Ltd v Leong Fong Cheng [2016] 6 HKC 220 at para 53.

143.  I do not understand why the defendant did not take out a summons in the usual way.  However, as noted above, when its solicitors issued the letter dated 13 July 2021 notifying the plaintiff of the defendant’s intention to discharge the interim mareva injunction, the relevant affidavit evidence had been filed.  And the parties were in a position to argue the application at the substantive hearing. 

144.  In the circumstances, while I agree with the plaintiff that the discharge application ought to have been taken out by a summons, for the court to dismiss it solely for want of a summons would be a disproportionate response.  Accordingly, I disagree that the discharge application should be dismissed on this procedural ground.

Did the plaintiff have a duty to make full and frank disclosure at the hearing?

145.  Secondly, Mr Ng argues that the return day hearing was an inter partes hearing and that the defendant had a fair and reasonable opportunity to present its evidence and arguments in opposition. Hence, the duty of full and frank disclosure did not apply to the plaintiff.

146.  I would start my analysis by considering whether the legal proposition stated in Muginoho and Chen Lingxia is correct. In my view, there is something to be said for not extending the duty of full and frank disclosure to inter partes applications.

147.  The starting point of the discussion must be the procedural time frame stipulated in Order 32, rule 3 of the Rules of the High Court.  Generally speaking, it requires a summons to be served not less than two clear days before its return day.  The intention of this rule is to ensure that the respondent to an application has proper notice of both the hearing and the materials upon which the applicant intends to rely: Chen Lingxia at para 41; Hong Kong Civil Procedure 2023 at 32/6/7.

148.  Where the above time frame for service is observed, the hearing would be an inter partes hearing.  As held in Chu Shu Ho David v Lam Hon Lit Harry HCA 3525/2002 and HCA 3618/2002, 30 October 2002, a hearing is an inter partes hearing if due notice of it had been given to the respondent: see para 15.  The classification of whether a hearing is ex parte or inter partes would be relevant to how an aggrieved party may challenge the order made at the hearing, whether by an appeal (if inter partes) or by an application to the first instance judge to discharge or vary (if ex parte). 

149.  Prima facie, in an inter partes hearing, an applicant does not come under a duty to make full and frank disclosure. 

150.  The duty arises in ex parte applications.  The rationale is that where an ex parte order is granted, it is granted in the absence of the party affected by it.  It is prima facie in conflict with one of the cardinal rules of our legal system that one hears both sides.  To compensate for that, the court requires an ex parte applicant to make known to the court all material matters fully and frankly before it makes its decision.  This is the mechanism by which the court strives to achieve a fair result in the administration of justice where the practical circumstances require an application to be heard without notice to the affected party or without hearing him.

151.  In Brink’s Mat Ltd v Elcombe [1998] 1 WLR 1350, the Court of Appeal explained:

“On any ex parte application, the fact that the court is asked to grant relief without the person against whom the relief is sought having the opportunity to be heard makes it imperative that the applicant should make full and frank disclosure of all facts known to him or which should have been known to him had he made all such inquiries as were reasonable and proper in the circumstances.” (underline added)

152.  I have doubt over the proposition that the duty of full and frank disclosure should apply to an inter partes application in certain situations.  I say so for a number of reasons.

153.  First, the rationale for imposing such a duty does not in principle apply to an inter partes application.  We have express rules providing for the time frame for service of a summons.  Where that time frame is observed, it should be taken that the respondent has been given proper notice of the application under our rules.  The application should then be dealt with procedurally on that footing.  In our adversarial litigation system, it is then for the respondent to adduce evidence and make submissions in order to resist the application.  As a matter of principle, the duty of full and frank disclosure, ie the mechanism by which the court strives to achieve a fair result when it can only hear one side, has no part to play in an inter partes setting.

154.  Secondly, to introduce a duty of full and frank disclosure in an inter partes application would introduce uncertainty into our procedural framework.  If that duty applies, even if an applicant has properly served the application within the time frame under the rules, he would still not know precisely where he stands on the issue of disclosure at the hearing.  This is because whether the duty arises will no longer depend on whether the applicant himself has complied with the rules.  Instead it will depend on whether the respondent has had a chance to prepare his evidence and arguments at the hearing.  This is not something which the applicant would usually have control over or was necessarily able to foresee. 

155.  In that case, practically speaking, for an applicant who takes out an inter partes application intending to serve it with full notice, how are he and his legal representatives supposed to prepare the evidence and arguments in the first place, without knowing at the outset whether the duty of full and frank disclosure will subsequently apply?

156.  It must be borne in mind that the duty to make full and frank disclosure in an ex parte context is an onerous one.  If an applicant fails in that duty, he potentially faces the penalty that the order may later be discharged for that reason alone, without the court looking into the substantive merits.  This is a dire consequence.  For that reason, our procedural regime should operate in such a way that parties and their legal representatives should know precisely when that duty arises and when it does not. 

157.  In my view, this consideration would weigh heavily against imposing the duty of full and frank disclosure in the inter partes context.

158.  Thirdly, where in an inter partes hearing, an applicant does not bring to the court’s attention relevant matters which would weigh in the scales, it is always for the respondent to bring these matters up himself.  If it cannot be done at the first hearing because the respondent has not had time to compile his evidence, the court may adjourn the matter for the respondent to do so without making any substantive order.  Where there is a need for immediate interim relief, the respondent will still have the chance to rebut the case later at the adjourned hearing.  The court can then make an appropriate order, based on the latest evidence.

159.  For instance, in the context of interlocutory injunctions, while the court will not be able to discharge the injunction on the ground of material non-disclosure (because no duty of full and frank disclosure applies), it may refuse to continue the injunction until trial.  In any event, it remains to be the case that the applicant is under a duty not to mislead the court. 

160.  In sum, not imposing a duty of full and frank disclosure in an inter partes hearing does not mean that the court cannot do justice to the case.  Where the court finds that the respondent is genuinely not in a position to argue the case at the first hearing because of shortness of time and yet it is asked by the applicant to grant immediate interim relief, no doubt the court would be vigilant and be particularly alert to points that may potentially be in the respondent’s favour.  For the same reason, the applicant would be expected to present his case fairly.  However, conceptually speaking, this is a totally different thing from imposing on the applicant a full-blown duty of full and frank disclosure with its attendant severe penal consequence.

161.  For all of the above reasons, I would be inclined to the view that the duty of full and frank disclosure should not apply to an inter partes application which has been served in accordance with the rules.  If that is correct, the discharge application ought to be dismissed outright because the plaintiff had no duty to make full and frank disclosure at the return day hearing. 

162.  However, I am conscious that this is not the ground on which the plaintiff resists the discharge application in the present case.  Although I briefly raised the issue with Mr Yan in the course of his submissions, the above arguments were not fully explored. 

163.  In the circumstances, I am prepared to proceed on the basis that the legal proposition put forward by Mr Yan is correct.  That is to say, in an inter partes application, where the court only has the evidence presented by one side, and the other party has not had a fair and reasonable opportunity to present his evidence and arguments in opposition, the duty of full and frank disclosure would arise.

164.  On this basis, however, I am equally of the view that the discharge application should be dismissed because this is a case where the defendant had had a fair and reasonable opportunity to present its case for the purpose of interim injunction at the return day hearing.

165.  The following facts are relevant:

(1)  The injunction summons was served on the defendant six days before the hearing.

(2)  The defendant attended the hearing by leading and junior counsel. 

(3)  The hearing lasted for about five hours in total.  I delivered my oral ruling on interim mareva injunction after hearing submissions from both sides.

(4)  The plaintiff lodged skeleton submissions in advance of the hearing. There, the plaintiff sought a proprietary injunction.  There was no application for a mareva injunction, whether in addition or in the alternative.

(5)  Before the hearing, the defendant had prepared an affirmation made by its handling solicitor, which had seven exhibits running to over 120 pages. 

(6)  At the hearing, Mr Yan invited the court to dismiss the summons straight away on the ground that the plaintiff’s own evidence had failed to demonstrate that it has a proprietary claim. 

(7)  The defendant wished to rely on its opposing affirmation. 

(8)  In response, Mr Ng sought leave to file reply affirmation evidence and asked the court to adjourn the summons.  Mr Ng’s point was that it would not be fair for its summons to be dismissed there and then when it had not yet had a chance to reply to the defendant’s affirmation.

(9)  In the end, Mr Yan informed the court that he would proceed to invite the court to dismiss the summons on the spot without relying on the defendant’s opposing affirmation.  He took the view that the plaintiff’s application failed on its own evidence. 

166.  Given the above, in my view, this is plainly not a case where the defendant was not able to produce evidence because of the shortness of time.  The facts are that it had produced evidence but leading counsel elected not to use it at the hearing.

167.  Separately, it is true that in its written submissions, the plaintiff did not apply for a mareva injunction.  However, Mr Yan himself had in fact anticipated that there might be a chance that a mareva injunction would be relevant.  This is because in his own written submissions, he addressed the court on both proprietary injunction and mareva injunction. In fact, it is worth pointing out that in the opposing affirmation, it was expressly stated at the beginning that it was made “in opposition to the application taken out by the Plaintiff by way of [injunction summons] for Mareva injunction …”.  In other words, the defendant had prepared its case, anticipating that a mareva injunction might be sought.

168.  All the above shows that the defendant had had a fair and reasonable opportunity to resist the injunction summons and the interim mareva relief at the hearing.

169.  On this issue, I should add that the defendant stresses that it did not become aware of the material facts about Alpha & Leader Hong Kong until May 2021 when Hong spoke to Pan about the litigation. It could not therefore have pointed it out at the return day hearing in February 2021.  This is precisely why, Mr Yan contends, it was incumbent on the plaintiff, who was privy to the facts, to disclose them to the court instead. To this, I would simply observe that the reason why the defendant had not had the chance to present this evidence was because such evidence was not available to it until much later, but not because the defendant did not have a fair and reasonable opportunity to present its case in general.

If applicable, would the plaintiff have breached the duty of full and frank disclosure?

170.  In light of my conclusion that the duty of full and frank disclosure did not arise, it is unnecessary to consider whether there was any breach.  However, as parties have made extensive submissions on this issue, I shall state my conclusion below.

171.  I do not agree with Mr Yan’s submission that the evidence before me now shows definitively that the plaintiff’s case that it was the party to the Cooperation Agreement is false.  There is evidence for and against that case.  The dispute can only be resolved at trial. 

172.  However, I agree with his submission that the facts concerning Alpha & Leader Hong Kong are material facts which ought to have been disclosed if the duty of full and frank disclosure applied. 

173.  The plaintiff’s claim is premised on it being the party to the Cooperation Agreement.  The fact that Alpha & Leader Hong Kong had the same name as the plaintiff, that it was used by the Alpha & Leader Group, and that Ma was at that time employed by the group and knew of the existence of the company should have been drawn to the court’s attention.  The agreement explicitly stated that Party B was incorporated in Hong Kong.  At the return day hearing, the plaintiff’s case was that that description was a mistake.  For the court to evaluate whether that was indeed a mistake, it fell upon Ma to disclose the above matters, which plainly should be put in the scales for the court to weigh.

174.  The issue of materiality is to be judged objectively.  These facts about Alpha & Leader Hong Kong go to the fundamental basis of the plaintiff’s claim.  If it was not the party to the Cooperation Agreement, its conspiracy claims must fail.  It was therefore a serious case of material non-disclosure.  In any event, the issue about the identity of the party to the Cooperation Agreement was a matter which plainly weighed in Ma’s own mind, as the evidence before me suggests that he did make a point of going to Pan to seek a declaration to sort out the issue in 2019.

The new evidence summons

175.  By the new evidence summons, the defendant seeks to adduce further evidence in support of the discharge application and in opposition to the continuation of the interim mareva injunction.

176.  The new evidence comes in the form of the 8^th affirmation of Mr Choy Man, the defendant’s handling solicitor, and the 4^th affirmation of Pan.  Briefly, in the latter, Pan recounted an incident which took place in late 2011 and early 2012 concerning Ma.  That was around the time shortly before and after the signing of the Cooperation Agreement. 

177.  Ma was caught diverting funds belonging to Alpha & Leader Hong Kong to the plaintiff.  As a result, he was forced to resign from Alpha & Leader Law Firm in January 2012.  In order to divert the funds, Ma was found to have prepared and made use of documentation which showed to the payor of the funds the name of Alpha & Leader Hong Kong as the payee but stated the bank account number of the plaintiff as the payee account.  Upon being discovered, Ma returned the money which the plaintiff had received. 

178.  Mr Choy explained that the defendant was only able to get hold of this latest piece of evidence from Pan in May 2022, ie after the substantive hearing was concluded in September 2021.  Pan revealed the incident when Nation Field was preparing its defence in the arbitration proceedings.  Previously, Pan had refused to agree to provide such information to the defendant and that was why the defendant had not been able to rely on this incident when it argued the case back in September 2021.

179.  In opposing the new evidence summons, Ma has filed evidence strenuously denying that he had misappropriated the funds of Alpha & Leader Hong Kong.  He said that he had prepared the documentation on the instructions of Pan.  At that time, Pan told Ma that he did not want the funds to be transferred to Alpha & Leader Hong Kong.  Ma simply followed Pan’s directions as he was his senior.  In fact, after the transfer, Pan further requested Ma to transfer the funds to a company designated by him. 

180.  Furthermore, Ma said in his affirmation that Pan is not an honest or reliable witness.  In support, he pointed out the following:

(1)  Pan is sued by various parties in different courts in the mainland, including a company controlled by Hong.  As a result of the latter claim, Pan was placed on the “list of dishonest debtors” and Hong’s company obtained an “order restricting high consumption of judgment debtor” against Pan.  In the circumstances, Ma said that Pan could easily be controlled by Hong.

(2)  Pan’s practising certificate as a lawyer was cancelled and retrieved by the Guangdong Department of Justice in September 2021.  To Ma’s knowledge, Pan did not dispute that decision.

181.  The defendant accepts that the question of whether Ma had diverted the funds from Alpha & Leader Hong Kong for his own benefit or on Pan’s instruction cannot be resolved at this stage.  However, it contends that the evidence is presently significant as it shows that at the time the Cooperation Agreement was signed, Ma was fully alert to the existence of Alpha & Leader Hong Kong.  This further goes to support the contention that the plaintiff ought to have disclosed facts concerning this company when it sought interim interim relief.

182.  The legal principles governing an application to adduce further evidence post-hearing are not in dispute. 

183.  Post-hearing, the court retains the discretion to admit new evidence and even to reverse its decision at any time before an order is drawn up and perfected if there are exceptional circumstances or strong reasons for doing so.  Leave to file further evidence would not be granted in the absence of genuine extenuating circumstances, meaning circumstances that would normally fall within the rule in Ladd v Marshall. In exercising its discretion, the court is bound to have regard to the underlying objectives of the Civil Justice Reform set out in Order 1A, rule 1 and to seek to promote the attainment of such objectives: see Lui Wai Yee Eunice v Sun David Tse Chien [2022] HKCFI 2585 paras 23 to 24, citing Jose Miranda Da Costa Junior v Lorenzo Yih HCA 156/2010, 28 April 2014 at paras 9 to 10. 

184.  Furthermore, there must be a strong public interest in finality of litigation.  Prima facie to allow the adducing of fresh evidence too readily after a hearing was concluded goes against that public interest.  See the remark made by the Court of Appeal in the context of an application to adduce fresh evidence at an appeal in Chong Hing Bank Ltd v Fairview City Ltd [2019] HKCA 1033 at para 19.

185.  In my judgment, insofar as the discharge application is concerned, the new evidence ought not to be admitted.  The defendant wishes to rely on it to support its case that the plaintiff was in breach of the duty of full and frank disclosure.  I have already ruled above that the plaintiff did not owe such a duty.  In the circumstances, it would serve no purpose at all to admit the new evidence.  It would not affect the outcome of the discharge application.  Therefore I would not exercise my discretion to admit it for the purpose of that application. 

186.  I shall deal with the issue of whether the new evidence should be admitted for the purpose of the injunction summons below.

DISCUSSION – INJUNCTION SUMMONS

187.  I now turn to the issue whether the interim mareva injunction should be continued until trial.  Three of the requisite requirements are in dispute.

Good arguable case

188.  The plaintiff’s causes of action are based on the Asset Stripping Exercise.  That forms the crux of the alleged wrongdoing and fraudulent intent on the part of the defendant.

189.  As remarked at the outset, parties have filed voluminous evidence, which in turn reveals extensive factual disputes as to what happened during the material period from 2011 to 2017 and why the alleged events happened.  I have set out above what I consider to be the key evidence which should be presently taken into account.  It must be emphasised once again that the factual disputes cannot be resolved at this stage and there is no point in engaging in any forensic discussion (which both sides have sought to do in their written submissions) in order to evaluate the credibility of the deponents of the affirmations.  Their credibility and the conflicting evidence can only be properly evaluated after trial.  In terms of the evidence, therefore, it would not be proper for me to say anything more than what is sufficient for me to deal with the injunction summons.

190.  In order to show a good arguable case, a plaintiff need not go so far as to persuade the court that he is likely to win but he must show that his case is one that is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success.

191.  On the basis of the materials before me, I am of the view that the plaintiff has demonstrated a good arguable case on the two causes of action as identified in para 68 bove.  It has also made out a good arguable case that the Asset Stripping Exercise took place and that it was done with a fraudulent intent to divest assets away from Nation Field. 

192.  In this regard, I repeat the observations which I made in paras 12 to 19 in the decision at [2021] HKCFI 461.  I reproduce them below:

“12. First, it seems to follow from the commercial arrangement between the plaintiff and Nation Field that the plaintiff would look to the actual GITIC rights held by Nation Field for satisfaction of its claims under the Cooperation Agreement. This would appear to be borne out by the second part of Clause 2.4 of the Cooperation Agreement. Under that provision, in the event of a non-cash distribution by GITIC, the plaintiff would share the profits by receiving a portion of the non-cash assets. Therefore, it seems to be the contemplation of the parties that Nation Field would continue to hold on to the GITIC assets.

13. Second, notwithstanding that, Nation Field transferred the GITIC rights to the defendant and another entity in late 2016 and early 2017 without any notice to the plaintiff.

14. Third, despite that the plaintiff sent a letter to Nation Field in July 2017 reminding the latter of its promise to share the profits in the GITIC rights, Nation Field did not respond or make any mention of the transfer.

15. Fourth, the evidence filed in support of the injunction granted against, among others, the defendant in HCA 1501/2017 suggests that Nation Field and the defendant are related parties, both controlled by a Mr Heng.

16. Fifth, the above evidence also suggests that the transfer from Nation Field to the defendant was wrongful and fraudulent with a view to divesting the assets away from a Mr Lu, an alleged beneficial owner.

17. Sixth, the defendant adduced no evidence to rebut the above suggestions. In the end, settlement was reached in that action and the settlement terms would appear to be to the effect that the assets alleged to be owned by Mr Lu were to be returned to him. They were in fact subsequently returned to him. This seems to reinforce the conclusion that there was a wrongful and fraudulent appropriation of assets from the rightful owner by Nation Field and the defendant.

18. These are matters which would go to support a claim for conspiracy as against the defendant. I consider that the plaintiff is quite entitled to rely on them to seek to make out a good arguable case at the substantive hearing.

19.  I am conscious of the fact that the evidence filed in the HCA 1501/2017 action all pointed to fraud against Mr Lu, not the plaintiff in this action. But at the very least, they are evidence pointing to the fraudulent character of a number of parties.  One of them is the defendant in the present action. As commented in Binchuang Resources Co Ltd v Lockwood Group Ltd [2020] HKCFI 2941, fraud is often difficult to uncover and prove. I am of the view that the evidence in the HCA 1501/2017 action can be taken into account to evaluate the present claim of conspiracy to injure the plaintiff by unlawful means.”

193.  At the return day hearing, the plaintiff relied on the affirmation made by Lu in HCA 1501/2017. Lu has now come forward and made an affirmation in the present action re-confirming what he had said in that previous action.  Whether Lu’s evidence is to be accepted as true is a matter for trial.  However, on the strength of his evidence, I am of the view that the plaintiff has made out a good prima facie case against the defendant.

194.  As for the two defences raised by the defendant, they appear also to be arguable on the face of the evidence. 

195.  First, the defence that the plaintiff was not the party to the Cooperation Agreement. 

196.  Here, the description of “Party B” in the Cooperation Agreement explicitly stated that Party B was incorporated in Hong Kong.  That would fit Alpha & Leader Hong Kong, rather than the plaintiff. Further, the objective fact is that when the Cooperation Agreement was signed, Ma was an employee of the Alpha & Leader Group and that Alpha & Leader Hong Kong was part of the group.  The evidence therefore suggests that Ma was conscious of the existence of Alpha & Leader Hong Kong at the time and as a lawyer, one would have expected him to put in a correct party description in a legal document.  These evidence would go to support the defence.

197.  On the other hand, Mr Ng submits that the defence was a recent fabrication as this defence was not even raised by the defendant when it filed its reply in the arbitration proceedings in October 2020.  Furthermore, the plaintiff has now put forward emails which show that Ma was still working on the Cooperation Agreement by communicating with Yap, Chung, Hong and others after he left the employ of Alpha & Leader Law Firm.  See paras 97 to 101 above.  The argument here is of course that he would not have continued to work on it after he left if Alpha & Leader Hong Kong had indeed been the party to the Cooperation Agreement.

198.  In sum, there is evidence both in support of the plaintiff’s case and in support of the defendant’s case on this issue.  Having considered the relative strengths of the parties’ cases, I come to the conclusion that the plaintiff has demonstrated a good arguable case that it was the party to the Cooperation Agreement. 

199.  As for the defence that the transfer of the GITIC rights from Nation Field to the defendant in 2017 was a genuine commercial transaction, the primary dispute is whether the consideration was in fact paid by Luo (on behalf of the defendant) to Ng (on behalf of Nation Field) pursuant to the Assignment Agreement, as alleged by the defendant.  Or is it the case, as contended by the plaintiff, that no real money changed hands and the consideration was paid under the façade of a series of circular fund transactions between Luo, Ng and other individuals associated with Hong such that Nation Field did not receive any of the consideration at all?

200.  In this regard, the plaintiff has produced bank statements of both Luo and Ng to support that such circular fund transactions in fact took place.  They were produced in the affirmation filed in August 2021, ie just before the first day of the substantive hearing.  These are documents which I must take into account because in the absence of any rebuttal or explanation, they cast serious doubt over the defence that the transfer was a genuine transaction. 

201.  What is striking here is that the defendant did not even try to put forward any evidence to rebut the allegation concerning the circular fund transactions.  Subsequently, the defendant sought leave to file further affirmation evidence but it related to other matters.  Separately, Mr Yan did not make any submission at all on these circular fund transactions save to say that the allegation concerning such transactions is “patently a recent fabrication as there is no such allegation made in the affirmation made by Lu in [HCA 1501/207]”. 

202.  Of course, at this stage I cannot conclude from such silence that the circular fund transactions in fact took place or that no consideration was in fact paid by the defendant to acquire the assets from Nation Field in 2017.  I should say no more on this issue.  However, I consider that I can safely conclude that the plaintiff has made out a good arguable case on the Asset Stripping Exercise.

The new evidence summons

203.  It would be convenient to now deal with the new evidence summons insofar as the defendant wishes to rely on the new evidence to oppose the injunction summons.  I would refuse to admit it for that purpose. 

204.  As submitted by Mr Yan, the significance of the new evidence is that it shows that at the time of the Cooperation Agreement, Ma was fully alert to the existence of Alpha & Leader Hong Kong and that it was used by the Alpha & Leader Group in its business.  Hence it would be relevant to the defence of whether that company, not the plaintiff, was in fact the party to the Cooperation Agreement. 

205.  However, as remarked above, the evidence which the defendant had adduced prior to the substantive hearing has already demonstrated that Ma was aware of the existence of Alpha & Leader Hong Kong.  The admission of the new evidence would not add anything to the defendant’s case and would not have any material impact on the court’s evaluation of whether the plaintiff has a good arguable case.  That being the case, the second condition in Ladd v Marshall is not satisfied.  Also, bearing in mind that there should be finality of litigation, I would not exercise my discretion to admit the new evidence post-hearing.

206.  For this reason and for the reason stated in para 185 above, I disallow the new evidence summons.

Real risk of dissipation

207.  It is common ground that in assessing whether there is a real risk of dissipation, I should apply the principles set out by the Court of Appeal in Convoy Collateral Ltd v Cho Kwai Chee [2020] HKCA 537.

208.  I have concluded above that the plaintiff has made out a good arguable case that Nation Field and the defendant had conspired together in the Asset Stripping Exercise so as to denude Nation Field of the ability to honour its obligations under the Cooperation Agreement and to prevent the plaintiff from recovering the Recovery Returns Share.  In my view, the nature of the alleged conduct of the defendant, ie to deny the plaintiff what is contractually due to it by removing assets from Nation Field, is such as to point to the conclusion that assets may be dissipated by the defendant if it is not restrained by a court order. 

209.  In this regard, I should also take into account the defendant’s answer to such a claim.  The defendant now says that the transfer was genuinely executed pursuant to the Assignment Agreement.  As seen above, this answer is problematic (at least at this stage) as the bank statements of Luo and Ng, when read together with Lu’s evidence, appear to show that no money actually changed hands and instead the money went through a series of circular fund transactions, which cast doubt on whether Nation Field in fact received any consideration for the transfer at all.  So far, the defendant has made no rebuttal to this serious allegation.  This piece of evidence is highly relevant to the issue of risk of dissipation.  This is because, if proved to be true at trial, it shows that the defendant had been actively engaging in blatantly dishonest acts to remove assets from Nation Field so as to deny the plaintiff of what should be due to it under the Cooperation Agreement.  This evidence therefore reinforces the conclusion that there is a real risk of dissipation.

210.  As observed in Convoy, the assessment in respect of risk of dissipation necessarily involves an evaluative and predictive judgment.  The court should arrive at that judgment after scrutinising with care the plaintiff’s allegations in respect of the claim alleging dishonesty, and drawing proper inferences from a holistic consideration of all the circumstantial materials that are indicative of risk: paras 35(4), 40, 42 and 46. 

211.  Having gone through that exercise, I am of the view that there exists a real risk that if not restrained, the defendant would dissipate its assets such that there would be nothing left for the plaintiff to enforce if it succeeds in obtaining a judgment in the future.

212.  I should state here that on the issue of risk of dissipation, the plaintiff has sought to demonstrate that there is a long history of incidents where Luo had attempted to dissipate the assets of the defendant, including an attempt to utilise the distribution proceeds of the direct creditor’s rights to guarantee repayment of debts owed by companies controlled by Hong.  This is hotly disputed by the defendant.  The disputes are not capable of being resolved at this stage.  I wish to state here that I have not placed any weight on such allegations when assessing the risk of dissipation.

Balance of convenience

213.  The plaintiff submits that the balance of convenience lies in favour of continuing the mareva injunction pending trial. This would preserve the status quo. 

214.  On the other hand, in his affirmation, Luo said that as a businessman and investor, he is in need of large amounts of capital. Hence the continuation of the injunction would deprive him of the use of funds which the defendant could otherwise receive from the distribution proceeds. And he has to resort to obtaining loan financing to support his business.

215.  In my view, this factor should also be taken into account when considering the balance of convenience.  However, the defendant has not put forward any concrete argument as to why that cannot be compensated for by the undertaking given by the plaintiff and Ma personally in support of the interlocutory injunction. 

216.  On the whole, I consider that the balance comes down in favour of continuing the mareva injunction. 

ORDERS

217.  I make the following orders:

(1)  The discharge application be dismissed;

(2)  The new evidence summons be dismissed;

(3)  The interim mareva injunction, as amended, be continued until trial or further order of the court; and

(4)  Save for costs, an order be made in terms of the defendant’s summons filed on 9 August 2021 and the plaintiff’s summons filed on 10 August 2021.

218.  On costs, I make the following nisi orders:

(1)  The plaintiff do have costs of the discharge application and the new evidence summons.

(2)  The costs of the injunction summons be the plaintiff’s costs in the cause.

(3)  The costs of the two summonses set out in para 217(4) above be in the cause of the injunction summons. 

(4)  All costs include costs previously reserved and be taxed if not agreed.

(5)  A certificate for two counsel be granted.