HAYWARD INDUSTRIES, INC. v. NINGBO C.F. ELECTRONIC TECH CO., LTD AND OTHERS

HCA 2340/2024

[2025] HKCFI 5252

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2340 OF 2024

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D E C I S I O N

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A.  Introduction

1.  There are 4 summonses before the court:-

(1)  By summons dated 13 June 2025, the Plaintiff seeks summary judgment against the 1^st and 2^nd Defendants (the “Summary Judgment Application”).

(2)  By summons dated 1 August 2025, the 1^st, 2^nd, and 3^rd Defendants seek security for costs against the Plaintiff (the “Security for Costs Application”).

(3)  By summons dated 1 September 2025, the Plaintiff seeks to stay the execution of the costs order made by DHCJ Gary CC Lam on 6 June 2025 in respect of its application for continuing a Mareva injunction[1] (the “Stay Application in respect of the Costs Order dated 6 June 2025”).

(4)  By summons dated 19 September 2025, the 1^st, 2^nd, and 3^rd Defendants seek to stay the execution of the costs order made by DHCJ Reyes SC on 4 July 2025 in respect of an application for payment into court[2] (the “Stay Application in respect of the Costs Order dated 6 August 2025”).

B.  Material Background

B1.  The Parties

2.  The Plaintiff is a company incorporated in New Jersey pursuant to the law of the United States of America.

3.  The 1^st Defendant is a wholly foreign-owned enterprise incorporated pursuant to the law of the People’s Republic of China.

4.  The 2^nd Defendant is a company incorporated pursuant to the law of Hong Kong.

5.  The 3^rd Defendant:-

(1)  holds 49% of the shareholding in the 1^st Defendant; and

(2)  is the sole director and sole shareholder of the 2^nd Defendant.

B2.  The US Litigation and the US Judgment

6.  On 18 December 2020, the Plaintiff commenced legal proceedings (the “US Litigation”) in the District Court for the Western District of North Carolina (the “North Carolina Court”) against (i) Blueworks Corporation; (ii) Blueworks Innovation Corporation; (iii) the 1^st Defendant; and (iv) Ningbo Yishang Import and Export Co Ltd.

7.  As stated in its first amended complaint dated 7 October 2021, the Plaintiff sued the defendants in the US Litigation based on, inter alios[3], the following causes of action[4]:-

(1)  false advertising in violation of section 43(a) of the Lanham Act, 15 United States Code, para 1125(a)[5];

(2)  violation of North Caroline Unfair and Deceptive Practices Act, para 75-1.1[6]; and

(3)  copyright infringement in violation of 17 United States Code, para 501[7].

8.  After a trial with jury, on 28 May 2024, the North Carolina Court entered judgment (the “US Judgment”) against the defendants in the US Litigation (including the 1^st Defendant) in respect of the causes of action set out in the paragraph immediately hereinabove. The relevant parts of the US Judgment read as follows:-

“IT IS ORDERED, ADJUDGED, AND DECREED that:

3. Plaintiff proved that Defendants made false or misleading statements in commercial advertising that deceived or were likely to deceive consumers in a material way that harmed Plaintiff, in violation of 15 U.S.C. §1125(a)…

4. Plaintiff proved that Defendants violated the North Carolina Unfair and Deceptive Trade Practices Act…

5. The jury found, and the Court now orders, that Plaintiff is entitled to and should recover from Defendants actual damages (lost profits) in the amount of $4,900,000.00 Defendants’ false advertising and North Carolina Unfair and Deceptive Trade Practices Act claims…

The jury’s award of $4.9 million is automatically trebled to $14.7 million…

Plaintiff is further entitled to pre-judgment interest on its $4.9 million actual damage award… at the North Carolina statutory rate of 8% per annum…

As of May 01, 2024, Plaintiff is therefore entitled to $1,320,986.30 in pre-judgment interest, for a total award of $16,020,986.30 on Plaintiff’s false advertising and North Carolina Unfair and Deceptive Trade Practices Act claims.

6… Plaintiff did prove that Defendant Ningbo C.F. infringed that same copyrighted work in violation of 15 U.S.C. §501…

7. The jury found, and the Court now orders, that Plaintiff is entitled to and should recover from Defendants statutory damages in the amount of $750.00 for Defendant Ningbo C.F.’s copyright infringement…

IT IS, THEREFORE, ORDERED that based on the jury verdict Plaintiff Hayward Industries, Inc., shall recover from Defendants… the amount of… ($16,021,736.30). Because the four Defendants are alter egos, Defendants are jointly and severally liable for this amount.”

9.  By a separate judgment dated 22 August 2024, the North Carolina Court further made a costs order (the “US Costs Order”) requiring the defendants in the US Litigation (including the 1^st Defendant) to pay attorneys’ fees in the amount of US$1,195,000.28 to the Plaintiff. This only concerned the attorneys’ fees in respect of the cause of action based on false advertising in violation of section 43(a) of the Lanham Act, 15 United States Code, para 1125(a).

B3.  The Present Proceedings

10.  Upon the Plaintiff’s ex parte application, on 25 November 2024, DHCJ Ismail SC granted a Mareva injunction (the “Mareva Injunction”) restraining each of the 1^st, 2^nd, and 3^rd Defendants from removing their assets up to the value of US$7,888,405.25.

11.  On 27 November 2024, the Plaintiff commenced the present proceedings against the 1^st, 2^nd, and 3^rd Defendants, and its statement of claim was filed on 3 March 2025.

12.  In short:-

(1)  The Plaintiff sues the 1^st Defendant on the US Judgment and the US Costs Order.

(2)  The Plaintiff further alleges that with a view to evading the US Judgment and the US Costs Order, the 1^st Defendant diverted its funds to the 2^nd Defendant by directing its customers to make payments into a bank account maintained with HSBC under the 2^nd Defendant’s name (the “HSBC Account”). As such, the Plaintiff seeks the following reliefs against the 2^nd Defendant:-

(a)  declarations that (i) the 2^nd Defendant is holding assets of the 1^st Defendant as nominee and/or trustee; (ii) the 2^nd Defendant is the 1^st Defendant’s alter ego in holding assets on trust for the 1^st Defendant; (iii) the 2^nd Defendant was set up by the 1^st and/or 3^rd Defendant as a sham and a façade for the illegitimate purpose of assisting the 1^st Defendant in evading its liabilities, including the liabilities under the US Judgment and the US Costs Order; (iv) the 2^nd Defendant is jointly and severally liable to the Plaintiff in respect of the liabilities under the US Judgment and the US Costs Order; and

(b)  damages in the sum of US$17,216,736.58 (ie the indebtedness under the US Judgment and the US Costs Order)

(3)  The Plaintiff also alleges that the 3^rd Defendant is the controlling mind of the 1^st and 2^nd Defendants. As such, the Plaintiff seeks the following reliefs against him:-

(a)  declarations that (i) the 3^rd Defendant is the controlling mind of the 1^st and 2^nd Defendants; (ii) the 3^rd Defendant alone or together with the 1^st Defendant set up the 2^nd Defendant to hold assets of the 1^st Defendant as a nominee and/or as a sham and façade for the illegitimate purpose of assisting the 1^st Defendant in evading its liabilities, including the liabilities under the US Judgment and the US Costs Order; (iii) the 3^rd Defendant is jointly and severally liable to the Plaintiff in respect of the liabilities under the US Judgment and the US Costs Order; and

(b)  damages in the sum of US$17,216,736.58 (ie the indebtedness under the US Judgment and the US Costs Order)

13.  By decision dated 6 June 2025 (see [2025] HKCFI 2350), DHCJ Gary CC Lam discharged the Mareva Injunction granted by DHCJ Ismail on 25 November 2024 on the ground of material non-disclosure. However, the learned Judge re-granted the Mareva Injunction on materially the same terms (the “Re-granted Injunction”), with costs to the 1^st, 2^nd, and 3^rd Defendants summarily assessed at HK$700,000[8].

14.  Shortly after DHCJ Gary CC Lam’s decision dated 6 June 2025 was handed down, on 13 June 2025, the Plaintiff took out the Summary Judgment Application against the 1^st and 2^nd Defendants:

(1)  The Plaintiff does not seek summary judgment on the entirety of the indebtedness under the US Judgment and the US Costs Order. Instead, the Plaintiff only seeks summary judgment in respect of (i) actual damages awarded in the amount of US$4.9 million; (ii) pre-judgment interest of US$1,320,986.30; (iii) damages in respect of copyright infringement in the amount of US$750; and (iv) the attorneys’ fee under the US Costs Order in the amount of US$1,195,000.28 (collectively the “Compensatory Judgment Debt”). For the reasons elaborated below, the Plaintiff correctly accepts that it is not in a position to seek summary judgment in respect of the additional sum of US$9.8 million (hereinafter the “Punitive Judgment Debt”), which arose as a result of the trebling of the award from US$4.9 million to US$14.7 million based on the North Caroline Unfair and Deceptive Practices Act. This additional sum was plainly punitive in nature and hence not recoverable under Hong Kong law.

(2)  Meanwhile, the Plaintiff also seeks summary judgment in respect of the declarations set out in paragraph 12(2)(a) above.

15.  On 4 July 2025, DHCJ Reyes SC ordered that upon the Defendants paying US$7,888,406 into court, the Re-granted Injunction be discharged. The learned Judge further ordered the 1^st, 2^nd, and 3^rd Defendants to pay the costs of the application, summarily assessed at HK$177,220[9].

16.  It is not in dispute that a sum of US$7,888,406 has been paid into court. In their skeleton submissions[10], Mr Tony Ko, together with Mr Sean O’ Reilly, (for the 1^st, 2^nd and 3^rd Defendants) indicated that the sum in court “fully secured” the Plaintiff’s claims under the Summary Judgment Application.

17.  On 1 August 2025, the 1^st, 2^nd, and 3^rd Defendants took out the Security for Costs Application. It is asked that security in the amount of HK$2,843,270 up to the stage of discovery and the 1^st case management conference be paid into court within 14 days, failing which the Plaintiff’s claims in these proceedings be dismissed.

18.  On 1 September 2025, the Plaintiff took out the Stay Application in respect of the Costs Order dated 6 June 2025 made by DHCJ Gary CC Lam.

19.  On 19 September 2025, the 1^st, 2^nd, and 3^rd Defendants took out the Stay Application in respect of the Costs Order dated 4 July 2025 made by DHCJ Reyes SC.

C.  The Summary Judgment Application

C1.  Legal Principles

20.  Once the plaintiff can show a prima facie case, the defendant is vested with the burden of establishing an arguable defence or triable issue. There shall be no mini-trial on affidavits as genuine factual disputes ought to be resolved at trial, and summary judgment application is only for clear cases: see Hong Kong Civil Procedure (2025), para 14/4/9.

C2.  Deliberation: the Claims against the 1^st Defendant

21.  As Lord Collins explained in Rubin v Eurofinance SA [2013] 1 AC 236 at para 9:-

“the theoretical basis for the enforcement of a foreign judgment at common law is that where a court of competent jurisdiction has adjudicated a certain sum to be due from one person to another, a legal obligation arises to pay that sum, on which an action of debt to enforce the judgment may be maintained”. (emphasis added)

22.  In Lu Yongliang v Bank of China Ltd, Dongguan Branch & Anor [2021] HKCA 1048 at para 48, Lam VP (as Lam PJ then was) stated:-

“The common law in Hong Kong has always given recognition in at least three ways to Mainland judgments which are final and conclusive: (a) through the doctrine of res judicata, see First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd, supra; (b) foreign judgment as a cause of action on its own, see China NPL Holdings v Mo Haidan [2021] 1 HKLRD 344; (c) foreign judgment as evidence of foreign law on a particular issue between the same parties, see Guangzhou Green-Enhan Bio-Engineering Co Ltd v Green Power Health Products [2004] 3 HKLRD 223. ” (emphasis added)

Section 7 of the PTIO

23.  Mr Ko and Mr O’Reilly did not dispute the Plaintiff’s entitlement to sue on the US Judgment and the US Costs Order at common law. However, they contended that by virtue of section 7 of the Protection of Trading Interests Ordinance (Cap 471) (the “PTIO”), the entirety of the US Judgment and the US Costs Order are not enforceable in Hong Kong.

24.  The relevant parts of section 7 of the PTIO (which is equivalent to section 5 of the Protection of Trading Interests Act 1980 in the United Kingdom) read as follows:-

“7. Restriction on enforcement of certain overseas judgments

(1) A judgment to which this section applies shall not be registered under the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap. 319) and no court in Hong Kong shall entertain proceedings at common law for the recovery of any sum payable under such a judgment.

(2) This section applies to any judgment given by a court of a place outside Hong Kong, being a judgment-

(a) for multiple damages within the meaning of subsection …

(3) In subjection (2)(a), a judgment for multiple damages means a judgment for an amount arrived at by doubling, trebling or otherwise multiplying a sum assessed as compensation for the loss or damage sustained by the party in whose favour the judgment is given.”

25.  In light of DHCJ Gary CC Lam’s decision dated 6 June 2025, the Plaintiff appreciates that it is not entitled to seek summary judgment in respect of the Punitive Judgment Debt under the US Judgment. As such, the Plaintiff only seeks summary judgment in respect of the Compensatory Judgment Debt under the US Judgment and the US Costs Order.

26.  Contrary to Mr Ko and Mr O’Reilly’s submissions, Mr Randall Arthur (for the Plaintiff) submitted that it is open to the Plaintiff to enforce the Compensatory Judgment Debt only, and the Punitive Judgment Debt can be split. Mr Arthur relied on Re Grande Holdings Ltd [2013] 4 HKLRD 353 at para 54. There, DHCJ Le Pichon, referring to Lewis v Eliades [2004] 1 WLR 692, stated:-

“judgments which contained elements of multiple damages and elements of compensatory damages could be split so as to allow enforcement of the compensatory part”

27.  DHCJ Gary CC Lam extensively canvassed and analyzed this point in paragraphs 22 to 30 of his decision dated 6 June 2025 (see [2025] HKCFI 2350). The learned Judge stated:-

“22. The only Hong Kong case on the application of section 7 of PTIO is Re Grande Holdings Ltd [2013] 4 HKLRD 353. In that case, DHCJ Le Pichon, by way of obiter, held:-

‘53. On the hypothesis that the 2011 Judgment falls foul of s.7 of the PTIO, the question would then arise whether any, and if so what, part of the 2011 Judgment that remains outstanding… is enforceable, being in respect of the compensatory element of the award, interest, costs and attorneys fees.

54. In Lewis v Eliades [2004] 1 WLR 692 the English Court of Appeal had to consider s.5 of the Protection of Trading Interests Act 1980 on which s.7 of PTIO was modelled. Potter LJ considered that judgments which contained elements of multiple damages and elements of compensatory damages could be split so as to allow enforcement of the compensatory part:

[53] In my view the robust and sensible approach to section 5 of the 1980 Act in relation to a composite judgment… is not to treat the multiple damages element of the judgment as definitive of, or “infecting”, its character as a whole, but to read section 5(1) as precluding proceedings for recovery at common law only to the extent that the judgment sought to be enforced is for any amount arrived at by multiplying a sum assessed as compensation for the loss or damage sustained by the person in whose favour the judgment was given.

55. That purposive approach was adopted in Lucasfilm Ltd v Ainsworth [2009] FSR 2. In his judgment, Mann J stated as follows:

[229] … disregard for pure form meant that the wrapping up of the sums did not prevent separating out… equally importantly, the Court considered that there was no reason in policy why the untainted compensatory elements should be rendered irrecoverable, and good reasons in policy why they should be recoverable.

[230] I would respectfully agree with that, and would go further. I think that the same purposive reasoning leads to the conclusion that the genuinely compensatory elements of an award subject to multiplication should be equally recoverable. I struggle to find a reason why they should not be… Take a case like the present, where the claimant chooses to claim the benefits of multiplication. Why should that fact now deprive him of enforcing the genuinely compensatory element? The only reason for doing so would be to express disapproval, to the extent of removing what was otherwise a plain entitlement. That would in my view smack of a penalty, and would require clearer words that appear in the statute to justify its imposition. I do not think that the wording is sufficiently clear. The purpose of the Act is plainly to prevent something in the nature of a penalty (the multiple damages); it is not at all plain that that should be at the expense of imposing another one. I hold that it does not do so…

For my part, I agree with the approach and reasoning of Potter LJ and Mann J.’ (emphasis added)

23. Probably because there would not be much argument on the issue given that section 7 of the PTIO was not the main issue and because this issue formed an obiter only, her Ladyship did not have as much assistance I have from counsel. In my view, with respect, when reading the cases closely, Potter LJ’s dicta in Lewis v Eliades and Mann J’s obiter in Lucasfilm Ltd v Ainsworth do not see eye to eye with each other, and may not support what her Ladyship seemed to think it would support.

24. In Lewis v Eliades, the issue was whether the presence of a clearly identifiable award under the US legislation Racketeer Influenced and Corrupt Organization Act (the “RICO Act”) (US$396,082 trebled to add a further US$792,164 to make total RICO damages of US$1,188,246) rendered the whole judgment of US$8,065,805 unenforceable. In the course of the argument, a concession was made that all the treble damages award, including the basic award, were irrecoverable. The English Court of Appeal held that the other, non-RICO compensatory damages could be enforced. Therefore, there was simply no attempt there to split out the compensatory element from the non-compensatory element in the RICO award. When Potter LJ, at §53 quoted by her Ladyship in Re Grande Holding Ltd, supra, mentioned “infecting”, properly understood in such context, Potter LJ meant that an award consisting of non-compensatory element based on one claim should not “infect” an award consisting of compensatory element only based on another “unconnected” claim (“unconnected” being the word used by Jacob LJ at §60). Such understanding is more consistent with what Potter LJ said earlier at §41 in the same case:-

‘I accept, and indeed it is not in issue between the parties, that the 1980 Act makes clear its hostility to awards of multiple damages by barring enforcement in the United Kingdom of any part of such award including the basic compensatory award to which ha multiple element has been applied and superadded. The wording of the definition in section 5(3) makes that clear.’ (emphasis added)

25. What Potter LJ said at §53, quoted by her Ladyship in Re Grande Holding Ltd, supra, has to be understood with reference to the phrase “a composite judgment”, which, understood in the context of that case with the concession made, must mean one single judgment setting out all the awards in the same litigation though based on different causes of action.

26. So understood, Mann J’s obiter, if taken to mean that the non-compensatory element could be separated out from a single judgment even based on a single cause of action, would be inconsistent with Potter LJ’s judgement.

27. To complete the picture, I should also refer to SAS Institute Inc v World Programming Ltd [2019] FSR 30 and Motorola Solutions Inc v Hytera Communications Corporation Ltd [2025] Bus LR 133.

28. In SAS Institute Inc v World Programming Ltd, supra, the claimant obtained judgment on its claim against the defendant commenced in North Carolina based on breach of contract/fraudulent inducement to contract, tortious interference and a statutory claim for breach of the North Carolina Unfair and Deceptive Trade Practices Act (the “UDTPA Claim”). The judgment separated out the non-compensatory element of the UDTPA award. The claimant sought to enforce in the UK the compensatory damages only. In reaching the conclusion that the whole judgment on a single claim would be rendered unenforceable, Cockerill J made extensive explanation of the previous cases, which is worth quoting in some length:-

238… I do not consider that the US Judgment takes the form that it does, with the non-compensatory element of the UPDTA award separated out, makes any difference to outcome. To find that it did so would be to elevate form over substance impermissibly; and such an approach is not justified by the authorities which indicate that where there is a valid and an invalid part of the judgment, the valid part can be saved so long as the relevant elements of the damages are “readily identifiable…

239. That however begs the question of whether a judgment under UPDTA or a similar Act which contains a compensatory and a non-compensatory element should as a matter of principle be treated as the Court of Appeal treated the judgment on the separate causes of action in the Lewis v Eliades case – or rather as the parties and the Court treated the RICO element of the claim in that case.

240. This essentially involves deciding whether the line indicated more strongly in Lewis v Eliades and taken up by Lord Hodge in Service Temps (supported by the weight of academic authority) is to be preferred over the carefully considered obiter dictum of Mann J in Lucasfilm [2009] F.S.R. 2.

241. Ultimately, I have concluded that it is… I do not read it as saying that the statute is to be construed purposively. Potter LJ was clear at [41] that the consensus as to the approach to the RICO claim was correct. His later references to compensatory elements are probably best read as expressing his view in the particular context, i.e. that of grappling with other purely compensatory claims…

242. As for Lucasfilm [2009] F.S.R. 2, although Mann J at [224]-[231] engaged in a fairly lengthy discussion it is obiter and it is certainly not binding on me…

243. It seems to me that with the greatest of respect to the learned judge in Lucasfilm [2009] F.S.R. 2… he paid insufficient regard to the actual wording of the Act. When one goes back to the Act one finds that the prohibition (“no court in the United Kingdom shall entertain proceedings at common law for recovery of any sum payable under such a judgment”) relates to “a judgment for multiple damages”. That is defined as meaning

‘a judgment for an amount arrived at by doubling, trebling, or otherwise multiplying a sum assessed as compensation for the loss or damage sustained by the person in whose favour the judgment is given.’

244. The judgment relates therefore to the cause of action. The statue does not distinguish between different elements of an order entered under a judgment. If there is a judgment based on multiplication, then no part of it may be enforced. That is given support by the preamble to the Act which states:

‘An Act to provide protection from requirements, prohibitions and judgments imposed or given under the laws of countries outside the United Kingdom and affecting the trading or other interests of persons in the United Kingdom.’

This demonstrates that it is focused on causes of action which attract punitive or multiple damages such as those that are found under UPTPA.

245. This is exactly what Lord Hodge found in [a Scottish case Service Temps Inc v MacLeod [2013] CSOH 162; 2014 SLT 375] at [13]:

‘This remarkable Act was enacted to discourage the United States from seeking to enforce its competition policies by, among other means, making awards of multiple damages against persons in the United Kingdom.’…

246. This is consistent not just with how Potter LJ (and the parties in Lewis v Eliades [2004] 1 W.L.R. 692) understood the Act to work, but also with what was said in British Airways v Laker Airways [1984] Q.B 142: “[it] is aimed directly at judgments in antitrust actions and goes to the whole of the judgment not merely the multiple or penal part of it”.

247. It is also consistent with how the academic authorities… understood the matter… the answer is in my judgment in the wording of what Lord Hodge rightly calls a “remarkable” Act and in the forceful policy which underpins the legislation.

248. I therefore conclude that s.5 PTIA would prevent recovery of the UDPTA claim.” (emphasis added)

29. SAS Institute Inc v World Programming Ltd was followed by Calver J in Motorola Solutions Inc v Hytera Communications Corporation Ltd, supra at §§49-65.

30. After all, the scope of section 7 of the PTIO is a matter of statutory construction. In construing statutory provisions, the court “construes the relevant words having regard to their context and purpose”: see Town Planning Board v Town Planning Appeal Board (2017) 20 HKCFAR 196 at §29 per Ma CJ delivering the judgment of the majority (with whom Tang PJ dissenting on other matters). Bearing this in mind, I find that Cockerill J’s view expressed in SAS Institute Inc v World Programming Ltd is more consistent with this approach of statutory construction, especially when the purpose of the PTIO is properly understood and taken into account. Therefore, I agree that under section 7 of the PTIO, the court cannot only enforce the compensatory component but not the non-compensatory component of a judgment, a “judgment” meaning a judgment based on one cause of action, but has to refuse to entertain any proceedings to enforce the judgment. It also follows that where there are several causes of action based on which several awards are made separately but those awards happen to be granted in the same document titled “judgment” or “decision” or the like, for the purpose of section 7 of the PTIO, those awards are regarded as separate judgments and are isolate-able in that those judgments purely of compensatory nature can be enforced.” (emphasis added)

28.  Like the learned Judge, I am inclined to the view that it would be difficult to refute Cockerill J’s analysis in SAS Institute Inc v World Programming Ltd [2019] FSR 30 at paras 238 to 248, and it appears that the focus is on the cause of action. If the compensatory component and the punitive component of a judgment are based on the same cause of action, the court will have to refuse to entertain the enforcement proceedings as it cannot only enforce the compensatory component of the judgment but not the non-compensatory component of the same judgment. However, if the compensatory award and the punitive award are based on separate causes of action, it can be said that there are “separate” judgments that are “isolate-able”, such that the compensatory award can be enforced.

29.  In the premises, the real issue in dispute is whether there are separate causes of action that gave rise to the awards in respect of the Compensatory Judgment Debt and the award in respect of the Punitive Judgment Debt.

30.  This issue was canvassed in detail in paragraphs 31 to 40 of DHCJ Gary CC Lam’s decision dated 6 June 2025 (see [2025] HKCFI 2350). The learned Judge stated:-

“31. Based on the legal principles above, Mr Ko, for the Defendants, argues that:-

(1) The award of US$14,700,000 itself is a single judgment based on the UDPTA, and the compensatory element of US$4,900,000 cannot be separated.

(2) The award is therefore unenforceable by virtue of section 7 of the PTIO….

32. For proposition (1), is the award of US$4,900,000 only based on the UDPTA? It is useful to recite the relevant paragraphs of the US Judgment here:-

‘5. [(1)]The jury found, and the Court now orders, that Plaintiff is entitled to and should recover from Defendants actual damages (lost profits) in the amount of $4,900,000.00 for Defendants’ false advertising and North Carolina Unfair and Deceptive Trade Practices Act claims…

[(2)] The jury’s award of $4.9 million is automatically trebled to $14.7 million. See N.C. GEN. STAT. §75-16.

[(3)] Plaintiff is further entitled to pre-judgment interest on its $4.9 million actual damage award… at the North Carolina statutory rate of 8% per annum…’

33. So, the US$4,900,000 was “actual damages” for the false advertising, which was Count I of the First Amended Claim, and for the UDTPA claim, which was Count XIX of the First Amended Claim (both counts already quoted in §5 above). From the US Judgment, it is not clear whether the damages were based jointly, or jointly and severally, on the two Counts. It seems from the contents of the two Counts that once false advertisement is established, there is violation of the UDTPA, as apparent from §273 under Count XIX of the First Amended Claim. It also seems that there was no independent award of damages under Count I because the total amount of award does not include any US$4,900,000 in addition to the trebled amount of US$14.7 million and thus one can safely assume that any award under Count I is subsumed under Count XIX, whereas the ultimate sum is just the trebled damages. At least, if it is otherwise (as now suggested by Mr Randall with reference to an order made by the North Carolina Court denying the defendants’ motion for a new trial (the “Order Denying a Retrial”), I would expect that the Plaintiff would have adduced evidence to properly explain the matter, and/or that Mr Randall would draw this matter to the ex parte judge’s attention in discharge of the obligation to make full and frank disclosure. There was no such evidence, and there was no such submission before the ex parte judge.

34. As mentioned above, the Order Denying a Retrial was not put before the ex parte judge. In fact, it was not in the evidence, but was attached to Mr Randall’s Reply Skeleton Submissions dated 22 May 2025, and a Summons for leave to file an affirmation to exhibit the Order Denying a Retrial was issued on 23 May 2025. There was no good explanation for this delay, and as I have opined above, it should have been disclosed to the ex parte judge. However, given the materiality of the Order Denying a Retrial and in the absence of any realistic challenge that could be mounted to its authenticity, I gave leave for filing the affirmation at the outset of the hearing, with costs to the Defendants. In response, the Plaintiff filed a Summons on 26 May 2025 for leave to file an affirmation to exhibit a copy of the Verdict Form (the “Verdict Form”) so that the Order Denying a Retrial could be properly understood. I also gave leave for filing this affirmation.

35. The materiality of the Order Denying a Retrial is this: at page 7 of the Order Denying a Retrial, the North Carolina Court explained:-

“Moreover, Defendants’ conduct for which they are liable under the Lanham Act [in Count I] – their false or deceptive advertising – is the same conduct for which they are liable under the UDPTA, and the Court correctly instructed the jury as such… As the Court found, Plaintiff proved that Defendants’ false statements in their advertising rendered Defendants liable for Lanham Act false advertising and, by extension, for violating the UDTPA.” (emphasis added)

36. In other words, the actual damages for US$4,900,000 was awarded on Count I. The same actual damages was awarded on Count XIX, which was proved by extension by proving Count I. Then by the UDPTA, the damages was trebled. In my view, by the rule against double compensation, the award would not be US$4,900,000 plus HK$14.7 million, but only the latter. However, viewed in terms of causes of action, there is, in my opinion, a good arguable case that there was an award of US$4,900,000 independently based on Count I only. It follows that there is a good arguable case that there is a judgment of US$4,900,000 based on Count I only, and this judgment is purely compensatory.

37. The Verdict Form does not contradict this understanding. The Verdict Form was a form for the jury to fill in for their findings and awards. Question 10 is the question Mr Ko for the Defendants relies upon:-

‘10. If you find for Plaintiff Hayward on its claim for trademark infringement, false advertising, and/or the North Carolina Unfair and Deceptive Trade Practices Act what amount of Plaintiff Hayward’s lost profits do you find should be awarded to Plaintiff Hayward?

$4,900,000 (enter an amount)’

38. Mr Ko relies on this to say that the award of US$4,900,000 is a composite award, from which one cannot segregate the award under the Lanham Act in Count I for enforcement. In my view, this was just a form for the jury to fill in without showing how the amount was arrived at. It is the Court’s instructions to the jury, as recounted in the Order Denying a Retrial quoted above, that is more material.

39. Mr Ko also refers me to “Request for Relief F” in the First Amended Complaint, which sought a “three-fold increase in damages under 15 U.S.C. §1117 and/or other applicable law”. “15 U.S.C.” is the citation for the Lanham Act, as one can see from Count I, and so Mr Ko submits that the treble damages was made under the Lanham Act as well. However, when one read §5(2) of the US Judgment, the reference there to “N.C. GEN. STAT.” is a reference to the UDPTA, and “N.C. GEN. STAT. §75-16” there is the very same reference in “Request for Relief I” for treble damages under the UDTPA. There is no reference to “15 U.S.C.” for the treble damages. So, in my view, at least there is a good arguable case, despite Mr Ko’s submissions in this regard, that the treble damages was awarded only under the UDPTA.

40. Therefore, for proposition (1), my view is that on the evidence now before me (not before the ex parte judge), there is a good arguable case that there is a judgment awarding US$4,900,000 to the Plaintiff based on Count I only which is purely compensatory.

41. As such, under section 7 of the PTIO, the Plaintiff still has at least a good arguable case that the award of US$4,900,000 is enforceable.

31.  The learned Judge’s analysis of the evidence was meticulous and convincing. In light of the learned Judge’s analysis, I am skeptical about the Defendants’ suggestion that the awards in respect of the Compensatory Judgment Debt and the award in respect of the Punitive Judgment Debt derived from the same cause of action. It is doubtful whether this was the case. It appears that the trebling of the award of US$4,900,000 was purely based on the 1^st Defendant’s violation of the North Caroline Unfair and Deceptive Practices Act. This appears to be separable from (i) the Plaintiff’s causes of action based on false advertising in violation of section 43(a) of the Lanham Act as well as copyright infringement; and (ii) the US Costs Order.

32.  After the proceedings in respect of the Mareva Injunction were concluded, on 1 September 2025, the Plaintiff further filed an affirmation made by Professor Deborah Gerhardt[11], which supported the learned Judge’s analysis of the evidence on the proceedings in the US Litigation. In her affirmation, Professor Gerhardt pointed out that:-

“27…. the same facts underlying the Lanham Act claim were the basis for the UDTPA[12] claim.”

39. If a jury awards compensatory damages for unfair competition or false advertising in violation of UDTPA, North Carolina law requires the judge [to] “treble the amount”…

40. Once the jury found the US Defendants liable based on multiple theories arising from the same sets of facts, the Verdict Form provided the opportunity to insert only one amount of compensatory damages for the entire course of conduct. The jury followed this instruction by specifying compensatory damages in the amount of US$4,900,000. Solely for the purposes of the UDTPA claim, Judge Cogburn trebled the compensatory damages as required under UDTPA only, to US$14,700,000. [The Plaintiff] was awarded US$4,900,000 in compensatory damages for misconduct that is independently prohibited by both the federal Lanham Act and the state UDTPA. Therefore, even if Hayward dropped the UDTPA claim, it would still be entitled to recover US$4,900,000 only in compensatory damages under the Langham Act without any multiplier applied…

46d…the US$4,900,000 award under the Lanham Act claims stands as an independent award of compensatory damages and therefore is not and cannot be tainted by the trebling of compensatory damages under the UDTPA claim because it is not dependent on or connected to the UDTPA claim.”

(emphasis added)

33.  Mr Ko and Mr O’Reilly submitted that as Professor Gerhardt’s assertions are expert evidence, the Plaintiff should have sought leave under Order 38, rule 36 for adducing Professor Gerhardt’s affirmation, failing which the same is inadmissible.

34.  I disagree with this submission.

35.  In Chen Ha Ping Hepburn & Anor v Loong San Investment Co Ltd & Anor [2014] 2 HKLRD 1116 at paras 12 to 13, Anthony Chan J (as Anthony Chan JA then was) pointed out that:-

“12. I believe that the objection is misconceived. O 38, r 37C(1) refers to “An expert report disclosed under these rules…”. The disclosure of expert report is provided for under O 38, r 37 as a requirement to be satisfied when an application is made under O 38, r 36(1) for adducing oral expert evidence. Rule 36(1) serves to render the production of expert evidence under the control of the court (save where it is agreed by all parties) by requiring an application to be made. However, r 36(2) provides that “Nothing in paragraph (1) shall apply to evidence which is permitted to be given by affidavit …”.

13. Under O 38, r 2(3), “In any cause of matter begun by originating summons …, evidence may be given by affidavit unless … any provision of these rules otherwise provides or the Court otherwise directs, …””

(emphasis added)

36.  Further, in Re Jinro (HK) International Ltd (HCCW 1352/2001, 26 July 2002) at para 23, Kwan J (as Kwan VP then was) stated that:-

“…if I were wrong about this in that the evidence given is opinion evidence, such evidence is admissible, either under section 58(2) of the Evidence Ordinance, Cap. 8 (if Mr Fergus is not an expert) or by virtue of O. 38 r. 36(2) (if Mr Fergus is an expert). Section 58(2) provides that "where a person is called as a witness in any civil proceedings a statement of opinion by him on any relevant matter on which he is not qualified to give expert evidence, if made as a way of conveying relevant facts personally perceived by him, is admissible as evidence of what he perceived. O. 38 r. 36(2) provides that the restrictions on adducing expert evidence in O. 38 r. 36(1) do not apply to evidence which is permitted to be given by affidavit. It is provided in O. 38 r. 2(3) that in any cause begun by petition, evidence may be given by affidavit unless the court otherwise directs and subject to any direction as to cross-examination.”

(emphasis added)

37.  In the present case:-

(1)  The Plaintiff’s Application for Summary Judgment was made pursuant to a summons dated 13 June 2025.

(2)  Under Order 38, rule 2(3):-

“…on any application made by summons…, evidence may be given by affidavit…”

(3)  As pointed out by Kwan J (as she then was) in Re Jinro (supra) at para 23 and Anthony Chan J (as he then was) in Hepburn Chen (supra) at para 12, Order 38, rule 36(1), which requires litigants to obtain leave for filing expert evidence, is not applicable to a situation where it is permissible to give evidence by affidavit: see Order 38, rule 36(2).

(4)  In the premises, it follows that it is unnecessary for the Plaintiff to seek leave for adducing Professor Gerhardt’s expert evidence pursuant to Order 38, rule 36(1).

38.  However, it is important not to lose sight of the fact that Professor Gerhardt’s affirmation was only filed belatedly on 1 September 2025. In my view, instead of filing Professor Gerhardt’s affirmation as a reply to the Defendants’ affirmation in opposition, the Plaintiff should have filed the same in support of its Summary Judgment Application at the outset, such that, as a matter of fairness, the 1^st Defendant would be in a position to respond to the observations made by Professor Gerhardt.

39.  For the reasons elaborated hereinbelow, I am of the view that Hong Kong court should address the 1^st Defendant’s complaint that the US Judgment was obtained in breach of the rules of natural justice after the US Appeal Court (defined below) handed down the US Appeal Judgment (defined below). Adopting a pragmatic approach and bearing in mind the need for effective case management as well as the need to ensure that the 1^st Defendant is being treated fairly, I am of the view that the appropriate course to take is to grant leave to the 1^st Defendant to file a further affirmation for the purpose of addressing Professor Gerhardt’s views and observations.

The US Judgment was procured in breach of Natural Justice?

40.  It is not in dispute that the court will not permit the enforcement of a foreign judgment that was procured in breach of the rules of natural justice: see Adams v Cape Industries plc [1990] BCC 786 at 851D-G; and Dicey, Morris & Collins: The Conflict of Laws (16^th Ed) at para 14-163.

41.  Mr Ko and Mr O’Reilly contended that the US Judgment was procured in breach of natural justice, in that:-

(1)  Only on the last day of the trial in the US Litigation did the Plaintiff raise the point that all the defendants were alter egos of each other. Whilst the North Carolina Court found that all the defendants (including the 1^st Defendant) were liable to the Plaintiff on such basis, they had no opportunity to respond to the assertion.

(2)  The Plaintiff’s pleaded case in the US Litigation was based on the “Compatibility Theory”. The Plaintiff only raised the “Geographical Origin Theory” after the close of evidence. This shifted the focus of the trial and influenced the verdict of the jury as well as the damages awarded.

42.  On 28 May 2024, the defendants in the US Litigation lodged an appeal (the “US Appeal”) against the US Judgment at the United States Court of Appeals for the Fourth Circuit (the “US Appeal Court”). The parties will soon lodge their submissions by the end of October 2025, and it is expected that the substantive hearing in respect of the US Appeal will be heard in the first half of 2026.

43.  For the following reasons, I am of the view that as a matter of effective case management, the appropriate course to take is to adjourn the Plaintiff’s Summary Judgment Application against the 1^st Defendant pending the outcome of the US Appeal. I take this view for the following reasons.

44.  First of all, it is obvious that if the US Appeal Court allows the US Appeal and sets aside the US Judgment, the Plaintiff’s claims against the 1^st Defendant in these proceedings will fall away.

45.  Second, insofar as the determination of the issue in respect of breach of natural justice is concerned, there is no reason why Hong Kong court may not wish to take into account the findings and analysis of the US Appeal Court, which has the advantages of (i) being familiar with the applicable procedural rules as well as the relevant proceedings; and (ii) hearing the full submissions of the attorneys who practice in the United States of America. In my view, the US Appeal Court is in the most ideal position to address the 1^st Defendant’s complaint, and Hong Kong court has every reason to consider and take into account its findings and analysis.

46.  Third, as a matter of judicial comity, if possible, Hong Kong court would wish to avoid making findings that are inconsistent with those made by the US Appeal Court. In this connection, there is even a possibility that the judgment of the US Appeal Court would give rise to an issue estoppel that binds the parties.

47.  Fourth, having said that the Plaintiff’s claim against the 1^st Defendant under the Summary Judgment Application is fully secured by the sum of US$7,888,406 that has been paid into court, I am of the view that the interests of the Plaintiff are adequately safeguarded. In fact, the sum in court (ie US$7,888,406) exceeds the amount claimed by the Plaintiff (ie US$7,416,736.58).

Sum Up

48.  To sum up:-

(1)  Based on the materials available to this court, I am skeptical about the 1^st Defendant’s defence based on section 7 of the PTIO. However, as a matter of fairness, the 1^st Defendant should be given sufficient opportunities to address Professor Gerhardt’s views and observations.

(2)  As a matter of effective case management, I am of the view that the issue in respect of breach of natural justice should be dealt with after the judgment of the US Appeal is handed down.

49.  In the premises, I order that:-

(1)  leave be given to the Plaintiff to file and serve a further affirmation from Professor Gerhardt within 21 days;

(2)  leave be given to the 1^st Defendant to file and serve affirmation(s) in response to the affirmation(s) made by Professor Gerhardt within 42 days thereafter;

(3)  leave be given to the Plaintiff to file and serve affirmation(s) in reply within 28 days thereafter; and

(4)  the Plaintiff’s Summary Judgment Application against the 1^st Defendant be adjourned pending the resolution of the US Appeal, and the parties are at liberty to restore the proceedings after the judgment of the US Appeal is handed down.

C3.  Deliberation: the Claims against the 2^nd Defendant

The 2^nd Defendant is Liable for the Compensatory Judgment Debt?

50.  The Plaintiff seeks summary judgment against the 2^nd Defendant for damages of US$7,416,736.50. This is the amount of the Compensatory Judgment Debt.

51.  The 2^nd Defendant is not even a party to the US Judgment and the US Costs Order. As such, there is no basis for the Plaintiff to take enforcement action against the 2^nd Defendant.

52.  It appears that the Plaintiff’s basis for holding the 2^nd Defendant liable for Compensatory Judgment Debt is that the 1^st Defendant illegitimately transferred its funds to the 2^nd Defendant by directing its customers to make payments into the 2^nd Defendant’s HSBC Account.

53.  However, even if the Plaintiff’s assertion (which is disputed) were true, it simply does not follow that the 2^nd Defendant is liable for the Compensatory Judgment Debt.

54.  In this scenario, what the Plaintiff may do is to commence garnishee proceedings against the 2^nd Defendant after it obtains judgment against the 1^st Defendant, and the basis of the garnishee proceedings is that the 2^nd Defendant is liable to the 1^st Defendant for the sums in question as a trustee or agent.

55.  The Plaintiff cannot, out of the blue, seek to hold the 2^nd Defendant liable for the Compensatory Judgment Debt. The Plaintiff has failed to plead any valid factual basis for alleging that the 2^nd Defendant is liable for the Compensatory Judgment Debt. As pointed out, the 2^nd Defendant is not a party to the US Judgment and the US Costs Order at all.

56.  The Plaintiff’s claim against the 2^nd Defendant for damages in respect of the Compensatory Judgment Debt is completely groundless.

Declaratory Reliefs

57.  The Plaintiff also seeks summary judgment for substantive declaratory relief along the line that the 2^nd Defendant is the 1^st Defendant’s alter ego in holding assets, and that the 2^nd Defendant was set up as a sham and a façade for the illegitimate purpose of assisting the 1^st Defendant to evade liabilities.

58.  As Kwan VP pointed out in Convoy Global Holdings Ltd v Kwok Hiu Kwan [2021] HKCA 1594 at para 29, a party who seeks declaratory reliefs has to satisfy the court that (i) he has a real interest in the subject matter of the declaration; (ii) he has a real interest in obtaining the declaration from the court against an adverse party; and (iii) the adverse party is a proper contradictor with a true interest to oppose the declaration sought.

59.  In my view, it is, to say the least, highly arguable that the Plaintiff has failed to satisfy the first two requirements. As mentioned, the Plaintiff’s claim for the Compensatory Judgment Debt is fully secured by the sum of US$7,888,406 that has been paid into court. Thus, if the Plaintiff’s claim succeeds, the Plaintiff will be entitled to payment upon taking out a straightforward application for payment out.

60.  In the premises, I do not see any good reason why the Plaintiff should dwell on the question of whether the 1^st Defendant’s funds were held by another party on its behalf.

61.  In this connection, I do not lose sight of the fact that in its statement of claim, the Plaintiff also claims against the 1^st Defendant for the Punitive Judgment Debt. However, in light of section 7 of PTIO, this claim is obviously unsustainable. On the evidence, I am not satisfied it is likely that the Plaintiff may need to take enforcement action against the 2^nd Defendant under a set of garnishee proceedings.

62.  Even if it may be necessary for the Plaintiff to take enforcement action against the 2^nd Defendant, this is a matter to be dealt with at the stage of enforcement after liability is established. In my view, the substantive declaratory relief sought by the Plaintiff is for the ancillary purpose of facilitating enforcement against the 1^st Defendant in the future. Arguably, it is abusive and inappropriate for the Plaintiff to ask the court to dwell on matters relating to future enforcement under the guise of seeking declaratory relief when liability is yet to be established. This is not an efficient way to deploy judicial resources. Thus, it is, to say the least, highly arguable that the court would not wish to exercise its discretion in granting the declarations sought by the Plaintiff.

63.  Furthermore, it is the Defendants’ case that:-

(1)  The 2^nd Defendant has been carrying on business activities of sourcing new products, engaging in market research, customer acquisition, product planning, and providing customer service.

(2)  For administrative and practical purposes, the 2^nd Defendant (which is a Hong Kong company) did receive payments from customers on behalf of the 1^st Defendant (which is a Mainland company). The 1^st and 2^nd Defendants would perform periodic account reconciliation, and the 2^nd Defendant would, from time to time, remit funds to the 1^st Defendant’s account maintained with another entity named “Ningbo China-Base Landhau Foreign Trade Co Ltd”. The practice has been ongoing for years, and the same has continued after the US Litigation was concluded.

64.  On the available evidence, I am unable to conclude whether the arrangement adopted by the 1^st and 2^nd Defendants is legitimate or not. The matter can only be resolved at trial upon examining the historical accounting records and assessing the credibility of the Defendants’ witnesses.

65.  I am not of the view that it is appropriate for the Plaintiff to seek a summary determination that the arrangement between the 1^st and 2^nd Defendants is a sham or façade designed for achieving the illegitimate purpose of facilitating the 1^st Defendant to evade liability.

66.  Lastly, it is also, to say the least, highly arguable that the declarations sought by the Plaintiff are unduly wide and not appropriately formulated. The Plaintiff has failed to identify the specific funds or sums that are said to be held on trust for the 1^st Defendant. In the premises, putting aside the point that it may not be appropriate for the Plaintiff to seek substantive declaratory relief for the ancillary purpose of future enforcement, I cannot see how the declarations sought would avail the Plaintiff in terms of future enforcement.

67.  For all the above reasons, I am not of the view that there are merits in Plaintiff’s Summary Judgment Application in respect of the declaratory reliefs sought against the 2^nd Defendant.

Sum Up

68.  In my view, the Plaintiff should not have taken out the Summary Judgment Application against the 2^nd Defendant, and the appropriate course to take is to dismiss the Application insofar as the 2^nd Defendant is concerned.

D.  The Security for Costs Application

D1.  Legal Principles

69.  The court has wide discretion in considering whether to order security for costs. The discretion has to be exercised judicially, and the court will consider “all the circumstances of the case” in determining whether it is just to order security for costs: see Hong Kong Civil Procedure (2025) Vol 1 at para 23/3/3.

70.  It has been suggested that where a plaintiff is ordinarily resident outside of Hong Kong with no assets within the jurisdiction, the court will usually exercise its discretion to order security for costs, unless there are circumstances that would make it unjust to do so. This is the starting point: see The National Trust Ltd v Tahoe Investment Group Co Ltd [2021] HKCFI 2617 at para 24 (per Keith Yeung J).

71.  In Sunchase International Group (China) Ltd & Ors v Vincor Group of Companies (Investment) Ltd (CACV 100/2003, 23 October 2003), Rogers VP stated:-

“It is not the function of the court, when faced with an application for security for costs, to make a preliminary run at deciding the ultimate success or failure of the claim. The judge has approached this on the basis that the plaintiffs have a bona fide claim. He has also approached it on the basis that the defendants have a bona fide defence. Mr Wong today says that the judge should have come to the additional conclusion that the plaintiffs had a substantial chance of success. I do not see that that was the judge's function in a case like this. In a simple case that may be so, but here the defendants are contesting the plaintiffs' claim and there is no way that the judge could resolve that contest at this stage.”

See also: Chinacast Education Corp & Ors v Chan Tze Ngon & Ors (HCA 1062/2012, 26 September 2014) at para 20 (per Anthony Chan J, as Anthony Chan JA then was)

D2.  Deliberation: Security for Costs in respect of the Claims against the 1^st Defendant

72.  For the reasons elaborated in Section C2 above, I order that the Application for Summary Judgment against the 1^st Defendant be adjourned pending the resolution of the US Appeal.

73.  If the Plaintiff is able to enter summary judgment against the 1^st Defendant, the Application for Security for Costs in respect of the claims against the 1^st Defendant will simply fall away.

74.  In the premises, as a matter of case management, I will also order that the Security for Costs Application in respect of the claims against the 1^st Defendant be adjourned pending the resolution of the US Appeal.

D3.  Deliberation: Security for Costs in respect of the Claims against the 2^nd and 3^rd Defendants

75.  For the reasons elaborated in Section C3 above, I am of the view that the Plaintiff’s claims against the 2^nd Defendant contain various problems and defects. My observations are applicable to the claims against the 3^rd Defendant.

76.  If the Plaintiff insists on pursuing its claims against the 2^nd and 3^rd Defendants, it appears to me that it would be just and fair to order the Plaintiff to pay security for costs.

77.  First of all, there is no dispute that the Plaintiff is a foreign company with no assets and no business operation in Hong Kong. Thus, the 2^nd and 3^rd Defendants will face considerable difficulty in enforcing the costs order against the Plaintiff in the event that the Plaintiff’s claims against them fail at the end of the day.

78.  Second, there is no suggestion that the Plaintiff, which has been legally represented all along, is impecunious, such that its claims against the 2^nd and 3^rd Defendants will be stifled if an order for security for costs is made.

79.  Third, for the reasons explained hereinabove, I am of the view that the Plaintiff’s claims against the 2^nd and 3^rd Defendants are problematic in multiple respects. It does not appear to me that the Plaintiff has a high probability of success insofar as the claims against the 2^nd and 3^rd Defendants are concerned.

80.  Fourth, whilst Mr Arthur emphasized that the Plaintiff is a judgment creditor, it is important not to lose sight of the fact that the 2^nd and 3^rd Defendants are not parties to the US Judgment and the US Costs Order. For the reasons elaborated above, I am not inclined to the view that it is open to the Plaintiff to hold the 2^nd Defendant liable for the Compensatory Judgment Debt. The same observations apply to the 3^rd Defendant.

81.  I have reviewed the skeleton bill of costs prepared by the Defendants’ solicitors, and I bear in mind that the costs in respect of the claims against the 1^st Defendant should be carved out. Adopting a broad-brush approach, I am of the view that it would be fair and proportionate to order the Plaintiff to provide security for costs up to the stage of discovery and the 1^st case management conference in the sum of HK$1,200,000.

E.  The Stay Applications in respect of the Costs Orders dated 6 June 2025 and 4 July 2025

82.  It would be convenient to deal with (i) the Plaintiff’s Stay Application in respect of the Costs Order dated 6 June 2025 and (ii) the Defendants’ Stay Application in respect of the Costs Order dated 4 July 2025 together.

83.  It is not in dispute that the said Costs Orders were meant to be payable forthwith. I do not see any good reason why this court should stay the execution of the Costs Orders. In my view, it is open to the parties to enforce these Costs Orders if they take the view that it would be feasible and advisable to do so.

84.  Whilst the parties have made extensive submissions on the principles on equitable set-off, in my view, the present case involves the application of the doctrine of legal set-off. The sums under the Costs Orders in question and the sum under the Compensatory Judgment Debt have been liquidated or ascertained with certainty and precision: see Karpex (HK) Ltd v Yasmine Printing (China) Ltd [2008] 1 HKLRD 199 at §§9-10 per Cheung JA (as he then was). I do not see any reason why the parties may not conduct an offsetting exercise themselves.

85.  In the premises, I will dismiss the respective Stay Applications taken out by the Plaintiff and the Defendants.

F.  Order and Disposition

F1.  Summary Judgment Application

86.  For the reasons elaborated in Section C2 above, I order that:-

(1)  leave be given to the Plaintiff to file and serve a further affirmation from Professor Gerhardt within 21 days;

(2)  leave be given to the 1^st Defendant to file and serve affirmation(s) in response to the affirmation(s) made by Professor Gerhardt within 42 days thereafter;

(3)  leave be given to the Plaintiff to file and serve affirmation(s) in reply within 28 days thereafter;

(4)  the Summary Judgment Application against the 1^st Defendant be adjourned pending the resolution of the US Appeal; and

(5)  the parties be at liberty to restore the proceedings before a Judge after the judgment of the US Appeal is handed down.

87.  For the reasons elaborated in Section C3 above, I order that the Summary Judgment Application against the 2^nd Defendant be dismissed.

F2.  The Security for Costs Application

88.  For the reasons elaborated in Section D2 above, I order that:-

(1)  the Security for Costs Application in respect of the claims against the 1^st Defendant be adjourned pending the resolution of the US Appeal; and

(2)  the parties be at liberty to restore the proceedings before a Judge after the judgment of the US Appeal is handed down, and the same should be heard together with the proceedings in respect of the Summary Judgment Application against the 1^st Defendant.

89.  For the reasons elaborated in Section D3 above, I order that:-

(1)  the Security for Costs Application in respect of the claims against the 2^nd and 3^rd Defendants in these proceedings be allowed;

(2)  unless the Plaintiff do within 42 days pay into court a sum of HK$1,200,000 as security for the 2^nd and 3^rd Defendants’ costs up to the stage of discovery and the 1^st case management conference, the proceedings herein against the 2^nd and 3^rd Defendants be wholly dismissed forthwith without further order, with costs be paid by the Plaintiff to the 2^nd and 3^rd Defendants to be taxed forthwith if not agreed; and

(3)  the proceedings herein against the 2^nd and 3^rd Defendants be stayed until the said security of HK$1,200,000 is given by the Plaintiff in compliance with sub-paragraph (2) above.

F3.  The Stay Applications in respect of the Costs Order dated 6 June 2025 and 4 July 2025

90.  For the reasons elaborated in Section E above, I order that:-

(1)  the Plaintiff’s Stay Application in respect of the Costs Order dated 6 June 2025 be dismissed; and

(2)  the Defendants’ Stay Application in respect of the Costs Order dated 4 July 2025 be dismissed.

F4.  Costs

91.  I make a costs order nisi that:-

(1)  the costs of the Summary Judgment Application against the 1^st Defendant be reserved;

(2)  the costs of the Security for Costs Application in respect of the claims against the 1^st Defendant be reserved;

(3)  the costs of (i) the Summary Judgment Application against the 2^nd Defendant and (ii) Security for Costs Application in respect of the claims against the 2^nd and 3^rd Defendants be paid by the Plaintiff, to be summarily assessed by this court;

(4)  the 2^nd and 3^rd Defendants should lodge their statement of costs within 14 days, and the Plaintiff should lodge its statement of opposition within 14 days thereafter; and

(5)  there be no order as to costs in respect of (i) the Plaintiff’s Stay Application in respect of the Costs Order dated 6 June 2025 and (ii) the Defendants’ Stay Application in respect of the Costs Order dated 4 July 2025.

92.  I thank Mr Randall Arthur, Mr Tony Ko, and Mr Sean O’Reilly for their helpful assistance.