HANSEN INTERNATIONAL LTD v. HIGH FASHION APPAREL LTD AND OTHERS

HCA 1724/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO. 1724 OF 2014

_______________

_______________

______________________________

REASONS FOR DECISION
______________________________

(in respect of summons dated 27 April 2015)

1.  Pursuant to paragraph 2 of the Order of Recorder L Wong SC dated 11 September 2014 and paragraph 3 of the Order of Deputy High Court Judge B Chu (as she then was) dated 8 October 2014, an interim arrangement (“the Stakeholding Arrangement”) regarding the custody of various items (“the Stakeholding Items”) belonging to Shenzhen Huijian Fashion Co Ltd (“Huijian”) were handed over to the plaintiff’s former solicitors as stakeholder pending the hearing of the 1^st and 2^nd injunction summonses dated 3 and 4 September 2014 respectively.  Pursuant to paragraph 91 of this court’s decision handed down on 4 December 2014, the interim arrangement has been continued until further order of the court.

2.  By summons taken out on 27 April 2015 (“the Stakeholding Summons”), the 1^st to 3^rd defendants seek an order that the Stakeholding Arrangement be discharged and the Stakeholding Items be released to the 3^rd defendant, being the current legal representative of Huijian.  In addition, the 1^st to 3^rd defendants seek an order that the plaintiff do hand over to the 3^rd defendant the company chop of Huijian.

3.  The Stakeholding Arrangement was imposed at a time when there was a dispute as to whether Madam Leong was or should remain in charge of the business of (amongst other companies) Huijian.  It is not in dispute, however, that Madam Leong has been replaced by the 3^rd defendant as the legal representative of Huijian since 2 September 2014, and she has been removed as the CEO of High Fashion New Media Corporation Limited (ie the 4^th defendant), the indirect holding company of Huijian, in May this year.  In the circumstances, it seems clear to me that the Stakeholding Arrangement ought to come to an end.  This is not seriously disputed by Mr Chain (for the plaintiff).  At paragraph 4(i) of his skeleton submissions dated 17 November 2015, Mr Chain recognizes that, in light of the undisputed further deterioration of the relationship between the parties, the plaintiff has elected not to advance any positive case in opposition to the Stakeholding Summons, and will leave it to the court to decide whether the Stakeholding Arrangement ought to be discharged.

4.  Mr Chain argues, however, that instead of releasing the Stakeholding Items to the 3^rd defendant, they ought to be released to the Shenzhen Tax Bureau, which is currently investigating into the tax affairs of the High Fashion Group, including Huijian.  Madam Leong says that she has been requested by the Shenzhen Tax Bureau to hand over and account for all seals, documents and records of Huijian, and that if and when this court discharges the Stakeholding Arrangement, she believes that she is under an ongoing personal duty to hand over the Stakeholding Items to the Shenzhen Tax Bureau; otherwise she could get into trouble.

5.  As pointed out by Mr Maurellet (for the 1^st to 3^rd defendants), there is no evidence that Madam Leong, as the former legal representative of Huijian, is under any legal duty to hand over the relevant items to the Shenzhen Tax Bureau, or would be subject to any legal liability for failing to ensure that the Stakeholding Items are handed over to the Shenzhen Tax Bureau.

6.  It seems to me that since the Stakeholding Items belong to Huijian, prima facie they ought to be returned to Huijian (through the 3^rd defendant as its legal representative). Madam Leong is at liberty to inform the Shenzhen Tax Bureau of the fact that the Stakeholding Items have been released to the 3^rd defendant as the legal representative of Huijian pursuant to a court order.  If the Shenzhen Tax Bureau wishes to get hold of the Stakeholding Items, they could demand them from the 3^rd defendant, and it would then be up to the 3^rd defendant to comply with whatever lawful demands that may be made by the Shenzhen Tax Bureau.  I am unable to see at the moment what risk Madam Leong would face in such circumstances.

7.  For the above reasons, I make an order in terms of paragraphs 1 and 2 of the Stakeholding Summons.  As for paragraph 3 of that summons, I understand from the parties that no order is required to be made.

8.  I shall hear the parties on the question of costs.