AXHT COMPANY LTD v. 王一诚

HCMP 1257/2024 and HCMP 1258/2024
(Heard Together)

[2025] HKCFI 4568

HCMP 1257/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1257 OF 2024

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AND

HCMP 1258/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1258 OF 2024

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______________________

(Heard Together)

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D E C I S I O N

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1.  This is the hearing of the Plaintiff’s inter partes Summons for a Mareva Injunction in each of the above proceedings.

Introduction

2.1.  By an Originating Summons (“OS”) issued on 19 July 2024 in HCMP1257/2024, AXHT Co Ltd (the Plaintiff) sued the defendant (“Mr Wang”) for repayment of a loan said to be owed by him under a Loan Agreement dated 7 November 2019.

2.2.  By an OS issued on the same day in HCMP 1258/2024, the Plaintiff sued the defendant (“Mr Li”) for repayment of a loan said to be owed by him under a Loan Agreement dated 3 October 2019.

3.  Mr Wang and Mr Li acknowledged service through solicitors on 23 and 24 September 2024 respectively.

4.  On 18 November 2024, the Plaintiff filed an affirmation of Wong King Wai (“WKW”) in support of the OS in each proceeding.

5.  On 11 December 2024, the Plaintiff issued a Summons for a Mareva Injunction in each proceeding. This was supported by the 2^nd affirmation of WKW filed on the same day.

6.  On 17 December 2024, Mr Wang made an affirmation in Hong Kong in opposition to the application for a Mareva Injunction. As for Mr Li, he signed an affirmation on the mainland which was exhibited to an affirmation of his solicitor filed on the same day.

Deputy High Court Judge Andrew Li’s Order

7.  On 20 December 2024, Deputy High Court Judge Andrew Li gave an interim-interim order in:

(1)  HCMP1257 restraining Mr Wang from disposing of his assets within Hong Kong up to the sum of HK$13,494,535.52 including funds and securities held at a securities company Anli Securities Ltd (“ASL”) in account no. P003187, and requiring him to disclose other assets;

(2)  HCMP1258 restraining Mr Li from disposing of his assets within Hong Kong up to the sum of HK$4,318,251.37 including funds and securities held with ASL in account no. P003165, and requiring him to disclose other assets.

8.1.  After the interim-interim order, further evidence was filed. In HCMP1257,

(1)  on 18 February 2025, Mr Wang’s solicitor filed an affirmation exhibiting Mr Wang’s 2^nd affirmation;

(2)  on 28 February 2025, the solicitor filed another affirmation exhibiting Mr Wang’s 3^rd affirmation;

(3)  on 20 March 2025, the Plaintiff filed WKW’s 3^rd affirmation;

(4)  on 22 April 2025, the Plaintiff filed WKW’s 4^th affirmation.

8.2.  Similar evidence was filed in HCMP1258 with Mr Li’s 2^nd and 3^rd affirmations exhibited to his solicitor’s affirmations.

9.  The Summonses were adjourned to 11 September 2025, when I heard both inter partes Summonses at the same time. By reason of the Plaintiff’s submissions discussed later in this Decision, it is necessary to go into a little detail on the factual background.

Background

10.  The Plaintiff is a licensed money-lender. One of its founding directors in 2015 was Andrew Wong Wai Hong (“Andrew WWH”). Andrew WWH was also a director of ASL from 2013 until 2022.

11.  Mr Wang says that through Andrew WWH’s introduction, he opened an account with the Plaintiff to obtain loans and an account with ASL to trade in securities in 2016 - 2017. The modus operandi was that securities in the ASL account were charged to the Plaintiff, and interest payable on loans from the Plaintiff was deducted from the ASL account.

12.1.  Mr Wang also said in his affirmation that Mr Li was his agent for the above purpose.

12.2.  In Mr Li’s 3^rd affirmation, he said that Mr Wang sometimes asked him to act as his agent to enter into loan agreements on his behalf, and he usually agreed. Apart from disputing that the subject loan (see below) was made, he said that he only acted as agent for Mr Wang.

13.1.  The Plaintiff says that on 7 November 2019, Mr Wang as borrower signed a Loan Agreement for Loan No. D-00083-04, which stated:

(1)  it was consolidated with Loan Agreements No. D-00083-02 and D-00083-03, and

(2)  the loan amount was HK$12.5 million.

13.2.  The Plaintiff says that on 3 October 2019, Mr Li as borrower signed a Loan Agreement for Loan No. SM-00059-05, which stated:

(1)  it was consolidated with Loan Agreement No. SM-00059-04, and

(2)  the loan amount was HK$4 million.

13.3.  Both Loan Agreements stated that:

(1)  the interest rate was 13% pa,

(2)  the loan date was 1 October 2019,

(3)  the 1^st repayment date was 1 November 2019,

(4)  the tenor was 3 months,

(5)  the guarantor was Andrew WWH, and

(6)  the security was the borrower’s respective securities account with ASL.

13.4.  In both cases, on the same day, there were executed:

(1)  a Facility Agreement between the borrower and the Plaintiff for a term loan facility in the maximum sum of the loan amount,

(2)  a Charge Agreement under which the borrower charged his securities trading account with ASL to the Plaintiff to secure liabilities under the loan agreement (a blank day in October 2019 in Mr Li’s case),

(3)  a Notice of Charge under which the borrower gave notice to ASL that he had charged his interest in his account with ASL to the Plaintiff. ASL signed the document to signify agreement.

14.  The Plaintiff has also exhibited a document bearing only the year 2019 addressed to ASL signed by each borrower authorising ASL, upon receiving the Plaintiff’s written notice, to repay all amounts outstanding to the Plaintiff from the borrower’s account with ASL.

15.  No documents similar to the above after 2019 have been exhibited, but there is a document in Chinese dated 22 December 2023 (“the co-signed document”) referring to:

(1)  a loan of HK$4 million to Mr Li under Loan Agreement No. SM-00059-18 (for which Andrew WWH was guarantor);

(2)  a loan of HK$12.5 million to Mr Wang under Loan Agreement No. D-000813-17 (for which Andrew WWH was guarantor); and

(3)  a loan of HK$6 million to Anli Holdings Ltd under Loan Agreement No. D-00116-44 and No. D-00116-48 (for which one Song Rui was guarantor).

The borrowers stated that although they had earlier undertaken to repay the total sum of HK$22.5 million to the Plaintiff by 31 December 2023, due to the adverse global economy, they requested an extension of the repayment date to 31 March 2024. It was signed by Mr Li, Mr Wang and apparently by Andrew WWH as an authorised signatory of Anli Holdings. Anli Holdings was a shareholder of ASL.

16.  I shall refer to the alleged loans in 15 (1) and 15 (2) above as “the subject loans”.

17.  The Plaintiff’s case is that there was default in repayment of the subject loans on 1 May 2024. On 3 July 2024, the Plaintiff sent a demand letter for HK$12,772,232.34 to Mr Wang and a demand letter for HK$4,087,124.66 to Mr Li, followed by the issue of the OS in each proceeding on 19 July 2024.

Evidence before the interim-interim order

18.  As mentioned above, the OS were supported by the 1^st affirmation of WKW. It did not mention any risk of dissipation of assets. It was only on 11 December 2024 (5 months after the demand letters and more than 4 and a half months after the OS were issued) that the Plaintiff filed the Summonses for Mareva Injunctions. The affirmation in support stated:

(1)  the Plaintiff did not have full knowledge of the defendant’s assets apart from the ASL account, and he “may only have limited assets in Hong Kong”,

(2)  regarding the requirement to show a real risk of dissipation, that (i) the defendant was not “willing to act sensibly and co-operatively” and make proposals for repayment; (ii) the defendant and ASL were not willing to provide an undertaking not to dissipate assets; and (iii) Andrew WWH who was “the contact point” between the Plaintiff and the defendant, and the guarantor for the loans, “without any good reason and justification, … applied for self-bankruptcy to evade repayment obligations on his part”.

19.  The 1^st affirmation of Mr Wang and Mr Li stated first that it was “without prejudice to my right to put forward my substantive defence at trial” and that the focus was on the Plaintiff’s failure to demonstrate any real risk of dissipation.

20.  Mr Wang and Mr Li said they had no knowledge of Andrew WWH’s bankruptcy.

21.1.  As for assets,

(1)  Mr Wang exhibited the statements of his ASL account which showed that from November 2023 to November 2024 (i.e. even after the demand letters and the issue of the OS in July 2024), there had never been any withdrawal of funds, and that reductions in the value of the assets (standing at HK$8.9 million as at November 2024) were due to fluctuations in the value of securities;

(2)  Mr Li exhibited the statements of his ASL account which showed that from November 2023 to November 2024, the value of the assets (standing at HK$5.3 million as at November 2024) throughout the period was higher than the sum demanded by the Plaintiff (HK$4.08 million).

21.2.  Mr Wang also exhibited statements of his integrated account with HSBC which showed that even after the demand letters and the issue of the OS, there had not been a substantial net reduction in the value of his investments, which stood at HK$2.4 million as at November 2024.

22.  Notwithstanding the above, an interim-interim order was made against both Mr Wang and Mr Li.

Evidence after the interim-interim order

23.  As mentioned above, further evidence was filed by both sides after the interim-interim order.

24.  Apart from updating the financial documents to include December 2024 statements, the defendants’ evidence related to their defence that they are not liable to the Plaintiff because of an arrangement made between Mr Wang (for himself and on behalf of Mr Li his agent) and Andrew WWH in 2019 for a “loan swap arrangement” or “plan” (“the arrangement”) whereby in consideration for Mr Wang making payments to, or on behalf of, Andrew WWH, Andrew WWH became the borrower of the subject loans and thus became responsible for their repayment. Although described initially as an “assignment of liabilities”, in the course of submissions before me, counsel for the defendants identified the arrangement in legal terms as a novation. I shall discuss the evidence relating to the arrangement later in this Decision.

Principles governing applications for Mareva Injunctions

25.  The principles governing applications for Mareva Injunctions are well known and it is not necessary to reproduce them in detail here. The Plaintiff accepts (§11 of its skeleton submissions) that it has the burden of satisfying the following requirements:

(1)  “the plaintiff has a good arguable case on a substantive claim;

(2)  the defendant has assets within the jurisdiction;

(3)  the balance of convenience is in favour of granting the injunction;

(4)  there is a real risk of dissipation or removal of assets, which would render the plaintiff’s judgment of no effect”.

26.1.  The court’s approach on Requirement (4) above was discussed by the Court of Appeal in Convoy Collateral Ltd v Cho Kwai Chee & ors [2020] HKCA 537, and it is this requirement that was the focus of the hearing before me.

26.2.  In Convoy, the CA held that the burden should be described as a “solid basis for concluding that there was a real risk of dissipation”. The court’s assessment necessarily involved an evaluative and predictive judgment, the question to be answered by examining the evidence holistically. Evidence of dishonest and fraudulent conduct or other serious wrongdoings which formed the basis of the claims, and which reflected adversely on the integrity of the defendant, could point powerfully towards an inference of such risk. Delay on the part of the plaintiff after the defendant knew about the claim could militate against the risk of dissipation, but delay per se would not necessarily bar relief, and must be considered on its own circumstances, the ultimate question still being whether the plaintiff could show a real risk of dissipation despite its delay.

Discussion

27.  Applying the above principles, I am not satisfied that the Plaintiff has discharged the burden of Requirement (4) as discussed by the CA in Convoy.

28.1.  First, the demand letters were sent more than 5 months and the OS were issued more than 4 and a half months before the applications for the Mareva Injunction were made. The time was not taken up by mutual proposals for settlement, as the Plaintiff deposed that the defendants were not willing to make proposals or provide undertakings, and ASL also was not willing to provide any undertakings to the Plaintiff.

28.2.  The point here is not just delay (which per se would not bar relief). Apart from the unexplained delay, the point here is that during this period of 5 months, there was nothing to stop the defendants from realizing the securities in the ASL accounts and transferring the proceeds away. The same applies to Mr Wang’s cash at ASL and the securities in his integrated account at HSBC (although Swiss francs equivalent to HK$1 million was withdrawn from HSBC on 28 November 2024 apparently for payment of HK$1 million to China Best the next day, about 2 weeks before the application for Mareva Injunction). The statements of the ASL accounts and the HSBC account generally showed no substantial realizations or transfers despite the letters of demand and the issue of legal proceedings 5 months previously, or in the period between the service of the application for the Mareva Injunction and the hearing before DHCJ A Li. Indeed, there were occasional increases in the value of the assets in the securities accounts, and monetary deposits were sometimes made into the HSBC account.

29.  Second, there is nothing to support the Plaintiff’s allegation that Andrew WWH’s bankruptcy was “without any good reason and justification” or was “to evade repayment obligations on his part”.

30.  Third, I am not satisfied that there is evidence of dishonest and fraudulent conduct or other serious wrongdoings which formed the basis of the claims, and which reflected adversely on the integrity of the defendants. The term “low commercial morality” is not some sort of cure-all. The court has said that even sharp commercial practice cannot by itself give rise to the inference of a real risk of dissipation, and as was held in Convoy, it must examine with care allegations of dishonesty before inferring therefrom a real risk of dissipation (§43).

31.  I do not accept the Plaintiff’s submission that the defendants have had a change of case as they had not mentioned the arrangement in their first affirmations challenging the application for Mareva Injunctions. I note that each defendant said specifically that the affirmation (filed only 4 working days after the Plaintiff’s application for a hearing 7 working days after the application) was “without prejudice to my right to put forward my substantive defence at trial” and that the focus was on the Plaintiff’s failure to demonstrate any real risk of dissipation.

32.  I have taken into account the documents signed in 2019, Mr Li’s authorisation letter to ASL on 30 March 2022 allowing the Plaintiff to control his securities account in the event of default in payment of Loan Agreement No. SM-00059-15, the co-signed document, and screenshots of Wechat messages in 2024 in a group comprising WKW, Mr Wang and Andrew WWH.

33.  However, there is also documentary evidence from the defendants in support of the arrangement. Mr Wang has exhibited cheques showing that on 29 October 2019, he made a payment of HK$6.36 million to Andrew WWH, and on 27 December 2019 he made another payment to him of HK$10.2 million and a payment of HK$8 million to a finance company China Best Finance Ltd which he says was made on behalf of Andrew WWH.

34.  Moreover, the defendants have exhibited a document showing that on the first page of a copy of the co-signed document, Andrew WWH signed an endorsement (I note it was dated 31 March 2023) stating that the 3 loans had all been repaid by Mr Li, Mr Wang and Song Rui, that he (Andrew WWH) was the actual borrower and user of the 3 loans, and he would repay the sums owing and be responsible in the event of all legal and financial disputes.

35.  Of more weight is the evidence that after the arrangement alleged by the defendants, interest payable to the Plaintiff previously deducted from the defendants’ securities accounts at ASL was no longer deducted from those accounts. The Plaintiff has exhibited its own general journal indicating payments of instalments in Mr Wang’s account, and also certain cheques (some apparently drawn by ASL) some of which sums do, and some of which do not, correspond with the instalments. WKW said the Plaintiff had no part to play in the change in the mode of payment. Be that as it may, it is notable that counsel for the Plaintiff accepted at the hearing before me that the payments by ASL to the Plaintiff were not reflected in the defendants’ securities accounts with ASL, unlike the pre-arrangement modus operandi. In other words, the defendants were not debited by ASL with the payments it made to the Plaintiff. The Plaintiff could not provide evidence to suggest why that was so. The above is some corroboration for the defendants’ case that after the arrangement, Andrew WWH had stepped into their shoes as debtor to the Plaintiff, so that the defendants no longer needed to make repayments to the Plaintiff. As was held in Convoy, the Plaintiff’s allegations of dishonesty against the defendants must be examined with care before the court could infer a real risk of dissipation (§43).

36.  I must emphasize that the above considerations do not go towards Requirement (1), but to Requirement (4) in the context of rejecting the Plaintiff’s submission that there is evidence of dishonest and fraudulent conduct or other serious wrongdoings which formed the basis of the claims, and which reflected adversely on the integrity of the defendants, with which it sought to bolster its arguments regarding a real risk of dissipation of assets which I have rejected above. If the defendants were persons of “low commercial morality”, they would have realized and transferred all the assets out of Hong Kong during the 5 months between the demand letters and the issue of the OS in July 2024 and the issue of the application for the Mareva Injunction in December 2024.

37.  As the courts have noted, the purpose of a Mareva Injunction is not to provide a plaintiff with preferential security for its claim (Lakatamia Shipping Co Ltd v Toshiko Morimoto [2019] EWCA Civ 2203, [34] quoted in Convoy §35). Requirement (4) is a stand-alone requirement which I find the Plaintiff has not satisfied. There were ample opportunities for the defendants to transfer their assets away which they did not do in the 5 months before the application for the Mareva Injunction, and in light of the matters discussed above, there is insufficient evidence from which the court should infer a real risk of dissipation.

Order

38.  For the reasons above, I would dismiss the Summons issued on 11 December 2024 in both proceedings with an order nisi that the Plaintiff pay the costs of the Defendants including the costs reserved by DHCJ A Li on 20 December 2024.