CHEN YUNG NGAI KENNETH AND ANOTHER v. CHINA NEW INVESTMENTS LTD AND OTHERS

HCB 3819/2011

[2024] HKCFI 3169

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

BANKRUPTCY PROCEEDINGS NO 3819 OF 2011

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Re: HO YUK WAH DAVID (the “Discharged Bankrupt”)

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BETWEEN

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D E C I S I O N

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A. INTRODUCTION

1.  Before the Court is Summons filed by the Trustees-in-Bankruptcy of David Ho (“Trustees”) on 5 May 2022 and amended and re-filed on 11 January 2023 (“Amended Summons”) for an order for disclosure (1) under section 29 of the Bankruptcy Ordinance, Cap 6 (“BO”) (“s.29 Order”) and (ii) section 21 of the Evidence Ordinance, Cap 8, against the 4 respondents (“CNIL”, “Mr Cheung”, “HSB” and “CMB” respectively and “Respondents” collectively).

2.  The Trustees initially ask that each of CNIL and Mr Cheung do produce documents and information set out in the Schedule to the Summons (“Schedule”), by way of affirmation, and that Mr Cheung do undergo examination concerning all relevant matters and transactions as set out in the affirmation to be filed by him.

3.  The documents and information sought by the Trustees against CNIL and Mr Cheung relate to the following actions funded by CNIL, in which the Trustees suspect David Ho is/was involved:

(1) HCA 806/2006 (“806 Action”);

(2) The personal bankruptcy of Lee Siu Fung Siegfried (“LSF”); and

(3) The liquidation of Siu Fung Ceramics Holdings Limited (“SFC”) (“SFC Liquidation”).

4.  The documents and information pertain to:

(1) CNIL’s relationship with Asia-Pac Infrastructure Development Limited (in Creditors' Voluntary Liquidation) (“APIDL”), and/or its liquidators, Alan Chung Wah Tang (“Tang”) and Hou Chung Man (“Hou”) (together, “the APIDL Liquidators”) in the context of the Respondents' funding of APIDL's claim against its former legal advisors in the 806 Action;

(2) CNIL’s relationship with True Treasure Enterprises Ltd (“TTEL”) who was involved in the funding arrangements of the 806 Action;

(3) Correspondence and documents regarding the consultancy services of 北京廣宇天華房地產信息資詢有限公司(“GYTH”) to assist the APIDL Liquidators in the 806 Action;

(4) CNIL’s relationship with Fidelity Insurance Co. Ltd. (“FICL”) who was (as alleged by the Trustees) also involved in the funding arrangements of the 806 Action;

(5) Any correspondence with David Ho in relation to the funding arrangements of the 806 Action and other litigation involving him; and

(6) Correspondence between CNIL/Mr Cheung with certain email addresses in relation to the funding arrangements of the 806 Action and other related litigation.

5.  The Summons was opposed by CNIL and Mr Cheung, who claimed that they were innocent and independent litigation funders unrelated to David Ho.

6.  The Summons was later amended to its present form to bring in HSB and CMB, requiring them to preserve books and records relating to accounts held by CNIL and Mr Cheung respectively. HSB and CMB remain neutral to the Amended Summons.

B. BACKGROUND

7.  The facts have been aptly summarized by Mr Wong, counsel for the Trustees, and I adopt the same.

B1. The Parties

8.  On 2 August 2011, a bankruptcy order was made on David Ho’s own petition and his bankruptcy was discharged in 2019.

9.  The current Trustees were appointed in January 2020. Before that, the trustees-in-bankruptcy were Ip Pui Lam Arthur and Ip Pui Sum (“Former Trustees”), who were appointed on 30 September 2011.

10.  APIDL was a company incorporated in Hong Kong. By a judgment in HCA 971/2012 (“971 Action”) dated 28 September 2020, Ng J held that APIDL was and is beneficially owned and controlled by David Ho: [2020] HKCFI 2518 (“971 Judgment”). APIDL went into creditors’ voluntary liquidation on 5 April 2013. Tang and Hou were appointed as its liquidators.

11.  As for CNIL:

(1) It was incorporated in the British Virgin Islands (“BVI”) on 18 September 2009.

(2) Its sole director and sole shareholder, has at all material times, been Mr Cheung.

(3) According to Mr Cheung, CNIL has been used by him as an investment vehicle.

(4) CNIL was struck off on 1 May 2014 for failing to pay its annual fees since 2013, and was restored to the register on 19 January 2015.

B2. The 806 Action

12.  By the 806 Action, APIDL and 3 other companies in the Asia-Pac Group (controlled by David Ho) namely, Asia-Pac Infrastructure Finance Limited (“APIFL”), Asia-Pac Group Investments Limited (“APGIL”) and Greater Beijing Region Expressways Limited (“GBRE”) (“Other 806 Plaintiffs” collectively), commenced legal proceedings in 2006 against their former legal advisers for negligence and breach of duty.

13.  After APIDL was put into creditors’ voluntary liquidation in April 2013, the APIDL Liquidators decided to continue the 806 Action.

14.  At this hearing, the Court was informed that APIDL’s claim in the 806 Action was dismissed pursuant to a consent order dated 18 May 2023.

B3. The LSF Debts

15.  By way of background, both Keentrade Investments Limited (“Keentrade”) and Heartbest Commercial Company Limited (“Heartbest”) were at all material times companies incorporated in the BVI. Keentrade was incorporated on 6 January 2005 and was struck off the BVI Register of Companies on 1 November 2011 for non-payment for administrative fees. Meanwhile, Heartbest was incorporated on 29 February 2012 but was also struck off the BVI Register of Companies on 3 November 2020 for non-payment of administrative fees.

16.  Pursuant to a funding agreement entered into in around August 2005, Keentrade purchased part of the personal debts of LSF (“LSF Debts”) from HSBC.

17.  Keentrade received a settlement sum from the liquidation of CWT Textile Supplies Company Limited (“CWT”), which was said to have been funded by David Ho, and part of it was used to fund the bankruptcy proceedings of LSF in HCB 345/2011 (“LSF Actions”).

18.  The funding agreement entered into by Keentrade for the LSF Actions was, however, terminated on 25 March 2013.

19.  Prior to 10 June 2013, Keentrade assigned the LSF Debts to Heartbest, which had agreed to fund the LSF Actions.

20.  In 2015, Heartbest in turn assigned the LSF Debts to CNIL, which had agreed to fund the LSF Actions.

B4. The SFC Debts

21.  On or around 28 February 2006, David Ho purchased, through Keentrade, the debts of SFC and its subsidiaries (“SFC Debts”) from HSBC for a sum of HK$3 million:-

(1) David Ho remitted a total sum of HK$3.4 million from his Standard Chartered bank account to Top Adventure Limited (“Top Adventure’) on 23 and 24 February 2006.

(2) Top Adventure then remitted (i) a total of HK$1.9 million to King Ocean Development Inc. (“King Ocean”), a company ruled to be a nominee of David Ho in the 971 Judgment, on 2 and 27 February 2006; and (ii) HK$1.5 million to Sunridge Property Consulting Ltd (“Sunridge”) on 24 February 2006;

(3) Sunridge remitted HK$1.5 million to Hawthorn Agents Limited (“Hawthorn”) on 27 February 2006;

(4) King Ocean remitted a total of HK$1.9 million to Hawthorn on 27 and 28 February 2006;

(5) Hawthorn on 3 March 2006 ordered a cashier’s order in the sum of HK$3 million as consideration for Keentrade’s purchase of the LSF Debts and SFC Debts from HSBC.

22.  The relevant bank documents show that HK$3 million was originated from David Ho by channeling the sum through a few layers of his corporate nominees and ultimately was transferred from Hawthorn to HSBC by a cashier’s order dated 3 March 2006.

23.  Then, on 9 July 2012, Keentrade assigned the SFC Debts to Heartbest on 9 July 2012 (“First Assignment of the SFC Debts”).

24.  Heartbest subsequently assigned the SFC Debts to CNIL on 10 February 2015 (“Second Assignment of the SFC Debts”).

C. THE TRUSTEES’ CASE

25.  The Trustees submit that they have ample and strong evidence which demonstrates at least a reasonable suspicion that CNIL’s funding of APIDL in (i) the 806 Action; (ii) the LSF Debts; and (iii) the SFC Debts were all related to David Ho.

26.  In respect of the 806 Action, the Trustees rely upon, amongst others, the following matters:

(1) Involvement of David Ho in the action;

(2) Funds flowing to other litigations relating to David Ho despite funds being provided pursuant to the Funding Agreement for the 806 Action dated 10 February 2015 (“the 806 Funding Agreement”);

(3) Lack of proper due diligence in the investment;

(4) Suspicious timing of the start and end of CNIL’s funding in the 806 Action;

(5) Lack of commercial rationale in the terms of CNIL’s litigation funding; and

(6) Involvement of David Ho’s nominees.

27.  Meanwhile, in respect of the LSF Debts and the SFC Debts, the Trustees rely upon, amongst others, the following, matters:

(1) Alignment of interests with David Ho;

(2) Lack of proper due diligence in the investment;

(3) Suspicious timings;

(4) Lack of commercial rationale;

(5) Substantial involvement of David Ho’s nominees; and

(6) Curious features of the assignment of the SFC Debts.

28.  In essence, the Trustees’ case is that the subject funding was David Ho’s money and was provided by him.

29.  The Trustees submit that they have shown at least a prima facie case that CNIL and Mr Cheung are capable of giving the information sought. The documents sought and the proposed examination are not onerous or oppressive as the subject matter is specific and limited in scope as relating to the litigation funding which CNIL and Mr Cheung must have ready access to. The information and examination are reasonably required for the Trustees to carry out their functions, in particular for the purpose of tracing the fund source of the litigation funding arrangements.

D. CNIL AND MR CHEUNG’S CASE AND GROUNDS OF OBJECTION

30.  The case of CNIL and Mr Cheung essentially is that:

(1) Mr Cheung has accumulated wealth throughout his career and from successful private investments. All funding provided by CNIL came from his own sources, and CNIL and himself were not in any way related to or connected with David Ho and were definitely not David Ho’s nominee. CNIL and Mr Cheung were innocent and independent litigation funders.

(2) Mr Cheung and Tang were primary school classmates and had established a close relationship. Tang offered litigation funding opportunities in the 806 Action and HCB 345/2001 (i.e. one of the LSF Actions) to Mr Cheung during a causal social occasion in mid-December 2014.

(3) In late December 2014, he met David Ho for the first time in Beijing to discuss about the 806 Action.

(4) In respect of the 806 Action, he at first approached his family friend, Mr Chan Ping Che (“Chan”), a billionaire who has been highly successful in both the manufacturing and investment sectors and a director at FICL, to co-invest in the funding of the 806 Action. Initially, Chan indicated that he may be interested in taking up 50% of the project, but changed his mind a few days later.

(5) After conducting due diligence work, CNIL formally signed the 806 Funding Agreement in February 2015 and became the sole funder of the 806 Action. The 806 Funding Agreement was terminated on or about 15 January 2021 after CNIL noted repeated defeats of the APIDL Liquidators in various interlocutory applications filed by the Defendants in the 806 Action. CNIL incurred a total loss of HK$14.74 million in the funding project.

31.  The main grounds put forward by CNIL and Mr Cheung in opposition to the Summons may be summarized as follows:

(1) Ground 1: The main theme of the Trustees’ case is that David Ho’s money had been channelled through his nominees to find various pieces of litigation. However, there appears to be no bases to suggest that David Ho was hiding funds which he could use for litigation funding purposes.

(2) Ground 2: The objective and undisputed evidence demonstrates that CNIL and Mr Cheung were bona fide funders who were/are not under the control of David Ho and/or his nominees, and had acted contrary to the interests of David Ho.

(3) Ground 3: The Trustees should enforce the s.29 BO order made in CACV 83/2020 against the APIDL Liquidators rather than burdening innocent parties and outsiders with a substantial application.

(4) Ground 4: Any order to be made is wholly unreasonable, unnecessary or oppressive in light of the dismissal of the 806 Action.

E. RELEVANT LEGAL PRINCIPLES

32.  The applicable legal principles have been summarized in the decision of this Court in Re Ho Yuk Wah David (Bankrupt) (No. 5) [2020] 2 HKLRD 608 at §§22, 31 and 47, Au-Yeung J; affirmed on appeal in Chen Yung Ngai Kenneth v Alan Chung Wah Tang, CACV 83/2020, 19 January 2022 (“CA Judgment”) at §12. In gist, the Trustees must satisfy the Court that the information or documents “relate to the bankrupt, his dealings or property”; that the provision of information or documents is reasonably required for them to carry out the Trustees’ functions; and that the respondent is able to provide such information or documents. The standard of proof is reasonable suspicion. The trustee is not entitled to embark on expeditions that ignore costs and proportionality, or to extract information from persons in respect of a matter when there is no well-founded ground upon which to consider him prima facie capable of giving information, or to conduct an examination without any clear suspicions and to conduct it to determine if matters or facts might emerge which may be of interest or assistance.

33.  Applications for oral examination are more oppressive than those for disclosure of documents, and the Court should be cautious when considering such applications: The Joint and Several Trustees of the Property of So Ching Wan v Assen Ltd (in liq.) & others [2019] HKCFI 1491 at §24 per DHCJ William Wong SC.

F. ANALYSES OF THE TRUSTEES’ CASE

F1. The Funding of the 806 Action

F1.1 David Ho’s involvement in the 806 Action

34.  It is well-documented from previous Court proceedings that David Ho has been providing assistance to the APIDL Liquidators in the conduct of the 806 Action. See APIDL v Shearman and Sterling [2018] 1 HKLRD 113, §19, Anthony Chan J.

35.  The Trustees rely, amongst others, various email accounts as evidencing David Ho’s involvement in the 806 Action:

(1) A Gmail account address at acmehkgroup@gmail.com (“Gmail Account”) in which CNIL communicated on behalf of Mr Cheung;

(2) A davidho@global-alliance.com.cn

(3) Mr Cheung’s email address at tonycheung@acmehk.com

(4) A headman69@163.com email address (“Headman Account”)

36.  These accounts showed that substantial communications between the APIDL Liquidators, ONC Lawyers (“ONC”) who represented APIDL in the 806 Action, CNIL/Mr Cheung were copied to David Ho and/or the Headman Account. In particular, Mr Michael Szeto of ONC’s email to the APIDL Liquidators relating to the brief fee of counsel for a hearing for the 806 Action was copied to the Headman Account. That hearing was related to determination of the preliminary issue of whether the deeds of assignment of the Other 806 Plaintiffs to APIDL in the 806 Action were void for being champertous as it involved the assignment of a bare right to litigate (“Preliminary Issue”).

37.  The Trustees submit that they have a reasonable suspicion that the Headman Account was related to David Ho as important emails regarding the communications with APIDL Liquidators’ lawyers regarding the 806 Action were always copied to it. In any event, the Headman Account could not belong to some “nobody”. CNIL/Mr Cheung must know the identity of the person behind it as it was copied in communications between CNIL/Mr Cheung and the lawyers.

38.  Mr Cheung did not address the Headman Account at all in any of his affirmations; Whilst he claimed in Cheung-2^{nd [1]}, §16, that the Gmail Account was for the use of the email domain of FICL “for convenience sake as suggested by [Chan]”, FICL decided against co-funding the 806 Action after agreeing to it for a few days and the email was always signed off by the words “for and on behalf of Tony Cheung”. The Trustee find it highly suspicious why Mr Cheung would continue to use that email with FICL’s email domain despite FICL’s interest in the project lasted for only a few days.

39.  One should remember that David Ho was a member of the former management of APIDL who should have first-hand knowledge of the claims under the 806 Action. Hence, even a bona fide third party funder may genuinely require his assistance. However, I find that the Trustees do have reasonable suspicion justifying their investigation into the Gmail Account and Headman Account, given the contents of the emails.

F1.2 Funds flowing to other litigations/matters relating to David Ho

40.  Despite the fact that the 806 Funding Agreement only provided for CNIL to fund the 806 Action, CNIL also provided payments to other actions relating to David Ho:

(1) A deposit of HK$500,000.00 was paid on or around 2 March 2017 to ONC as “Costs on account for 806 and LSF” (as provided in the email from the Gmail Account on 3 March 2017 said to be sent on behalf of Mr Cheung);

(2) A deposit of HK$300,000.00 was paid on or around 9 July 2018 to ONC for the counsel fees of HCB 3819/2011 on 12 July 2018; and

(3) A deposit of HK$185,000.00 was paid on or around 25 July 2019 for the counsel fees for the summons in HCMP 2719/2017 taken out by the defendants in the 806 Action to remove the APIDL Liquidators.

41.  Apart from APIFL, CNIL / Mr Cheung also:

(1) Made payments for and on behalf of Other 806 Plaintiffs, namely, APGIL and GBRE, including a remittance from CNIL of HK$5,700.00 to APIDL on 6 March 2018, which was then drawn by Hou, one of the APIDL Liquidators on 8 March 2018 to pay for obtaining the certificates of incumbency for APGIL, APIFL and GBRE, to Portcullis (Hong Kong) Limited, APGIL’s BVI agent, in the sum of US$200.00 on 7 March 2018;

(2) Funded for the restoration of APIFL.

42.  In relation to the above matters, the explanation offered by Mr Cheung is that those payments were ancillary to the 806 Action. The reference to “806 and LSF” was plainly an inadvertent mistake as the subject invoice from ONC indicated that the request for costs on account was for the 806 Action only.

43.  The Trustees submit that the payments being ancillary to the 806 Action give rise to reasonable suspicion:

(1) First, the 806 Funding Agreement did not require CNIL to finance other actions, which were ancillary to the 806 Action. Clause 1.1 provided that CNIL only agreed to finance the 806 Action up to a maximum amount of HK$30,000,000. Clause 1.5 also provided that CNIL was under no obligation to provide any other assistance (legal or otherwise) to the APIDL Liquidators in pursuit of the 806 Action.

(2) Second, as pointed out by Mr Wong, the funding of restoration of APIFL by CNIL lacked commercial rationale:

(a) The restoration of APIFL could not provide any benefit to APIDL as the Other 806 Plaintiffs had already assigned all causes of action to APIDL. The Other 806 Plaintiffs would not have any claim against the defendants of the 806 Action if the Assignments were ruled to be valid and enforceable, as the claims had been assigned to APIFL.

(b) The Trustees say that the more probable rationale for the restoration appears to be that if the Assignments were ruled to be void and champertous, attempts could be made for the causes of action to be re-assigned to the other plaintiffs (including APIFL) such that the action could be revived. This would only make sense if David Ho was “calling the shots” on all the Plaintiffs of the 806 Action behind the scenes.

(c) Further, APIFL was subsequently transferred to Liu Shu (whose role should only be limited to that of a minor creditor of APIDL) according to the addressee for the certificate of incumbency invoice of 2018 and the company search report of the addressee: Beijing Huan Shang Zong Heng Co. Ltd (which appears to be a reference to a PRC company named 环商纵横（北京）房屋租赁有限公司 (Global Alliance (Beijing) Property Leasing Co Ltd) (“Global Alliance’), which was at the material time held by Sun Li Hua, a suspected nominee of David Ho (see Re Ho Yuk Wah David (No. 6) [2023] 2 HKLRD 586 at §§26-27, Au-Yeung J).

F1.3 Lack of proper due diligence in the investment

44.  Mr Cheung asserts that he had conducted due diligence work for the 806 Action. Tang provided him with “substantial volumes of papers regarding the 806 Action, including Counsel’s opinion from a QC from London on merits of the 806 Action…” However, he seems to acknowledge that although he was told to seek independent legal opinion in respect of the matter, he did not do so, basing his personal trust in Tang. The Trustees considered such conduct of a claimed independent funder, who had to commit to fund up to a maximum amount of HK$30,000,000, to be commercially inecplicable.

F1.4 Suspicious timing of the start and end of CNIL’s funding

45.  CNIL’s funding commenced in January / February 2015 and terminated in January 2021.

46.  In respect of the timing of the commencement of the funding:

(1) True Treasure Enterprises Ltd (“TTEL”) was involved in the 806 Action and provided funding up to 9 January 2015.

(2) By a letter dated 18 December 2014, TTEL stated that it was willing to provide funding upon the successful approval of the latest application to amend. By a letter dated 6 January 2015, it claimed that its decision to fund was on the basis that the proposed amendments would be approved, and that it needed more time, including to seek independent legal advice, and to assess the prospect of the 806 Action before committing to further substantial funding.

(3) On 9 January 2015, TTEL entered into the Ninth Supplemental Initial Funding Agreement.

(4) Then, at the hearing before DHCJ B Chu (as she then was) on 14 January 2015 (when the learned judge considered APIDL’s application for extension of time to pay security for costs), TTEL produced a letter dated 12 January 2015 indicating that it would be willing to fund HK$6.5 million security for costs once they received a substantial sum from a business deal in February 2015, and that TTEL would continue funding APIDL’s claim in the action to trial.

(5) However, one day before the hearing, TTEL had already entered into the Deed of Lockout Agreement with CNIL on 13 January 2015 (“Deed of Lockout”) and that CNIL (through FICL) would remit the HK$6.5 million security for costs on 3 February 2015. At that time, CNIL was still a company that was struck off.

(6) Then, on 2 February 2015, TTEL entered into the Tenth Supplemental agreement to the Initial Funding Agreement (for HK$20,000). Eight days later, on 10 February 2015, CNIL was to buy out TTEL’s funding position for the 806 Action under the 806 Funding Agreement, up to a maximum amount of HK$30,000,000.

(7) Despite the fact that, on 3 February 2015, CNIL had (through FICL) remitted a sum of HK$6.5 million to Cheng, Yeung & Co (“CYC”) (the then instructing solicitors of APIDL Liquidators and the Other 806 Plaintiffs), the APIDL Committee of Inspection only resolved to approve the funding from CNIL and the entering into of the 806 Funding Agreement on 10 February 2015.

(8) In view of the above, the Trustees say that there was a complete lack of rationale that CNIL would risk releasing litigation funds which would be locked up in Court as security for costs before the Committee of Inspection gave its formal approval.

47.  Incidentally, it also appeared highly suspicious that FICL would indicate its interest to co-fund “Project 806” by a letter dated 5 January 2015 just in time for the hearing on 14 January 2015, in particular when Mr Cheung claimed that FICL had changed its mind “a few days” after late December 2014.

48.  In respect of the timing of the termination of the funding:

(1) Between 15 and 16 April 2021, the trial of the Preliminary Issue in the 806 Action took place, and the judgment was handed down by A Chan J on 18 May 2021: [2018] 1 HKLRD 113.

(2) If the Deeds of Assignment were ruled invalid (which were ultimately held to be so by A Chan J), then the Other 806 Plaintiffs’ funding in the 806 Action would be champertous and void, meaning that the Defendants of the 806 Action could request a substantial amount of security for costs against the Plaintiffs given that the Other 806 Plaintiffs were BVI companies.

(3) In this regard, the Trustees submit that it made no sense for a genuine litigation funder to stop funding just before the trial of the Preliminary Issue without recourse for remuneration of its funding. By that time, CNIL had already funded and lost approximately HK$14.74 million (almost half of its commitment under the Funding Agreement). Tang had to fund the total of HK$1.09 million to continue the 806 Action for the hearing of the Preliminary Issue.

(4) The reason given in Cheung 2^nd, §39, for the termination of the 806 Funding Agreement was the “repeated defeats of the [APIDL Liquidators] in various interlocutory proceedings filed by the Defendants in the 806 Action”. The Trustees say that this was a vague reason, and was done at a point which was “most critical” without any investigations as to whether there was any negligent handling of the project, any demand for explanations, or any questions as to who should be held accountable for such failure. An independent commercial funder would not have come to such a decision.

F1.5 Lack of commercial rationale in the terms of the CNIL’s litigation funding in the 806 Action

49.  The Trustees’ case is that the 806 Funding Agreement entered into by CNIL lacked commercial rationale:

(1) According to Clause 4.1.2(b) of the 806 Funding Agreement, CNIL would distribute 30% of the final amount to be received by APIDL / APIDL Liquidators in the 806 Action to a PRC company, GYTH, based on providing some undefined consultancy services. In the Trustees’ submission, it was suspicious as to what consultancy services a PRC company could provide to the APIDL Liquidators, who had already engaged qualified lawyers for proper legal advice and had David Ho himself providing assistance in a litigation based in Hong Kong.

(2) In fact, GYTH is a creditor of APIDL according to the Statement of Affairs of APIDL dated 5 April 2023. It, together with 北京觉先行咨询有限公司 (Beijing Jue Xian Hang Consulting Co Ltd) (“JXH”), another alleged creditor of APIDL), was Yu Yang’s “Beijing entrusted companies” according to the active defendants in the 971 Action. Yu Yang was held to be a nominee of David Ho under the 971 Judgment. David Ho’s own affirmation filed in CACV 242/2009 on 14 December 2010 disclosed that David Ho was employed by GYTH sometime in May 2010 for a salary of RMB10,000. As such, GYTH is either David Ho’s company or at least one which is closely connected to David Ho, and it is unsurprising that CNIL would be “sharing” 30% of the recovered fees with GYTH.

(3) Under Clause 6.2 of the 806 Funding Agreement, TTEL was entitled to seek HK$15 million past costs from CNIL’s future recovery regardless of the amount of CNIL’s future recovery.  The Trustees say that it was inconsistent with the notion that CNIL was an independent funder.

F1.6 Involvement of David Ho’s nominees

50.  Lastly, David Ho’s nominees were involved in the 806 Action:

(1) The Trustees believe that GYTH, was a corporate nominee of David Ho, or at least a company closely associated with him.

(2) Tang, one of the APIDL Liquidators, was held to have placed himself in conflict of interests in funding APIDL through Aim Best Group Limited and acting as a liquidator of APIDL at the same time (see Re Ho Yuk Wah David (No. 6) at §§28-31 per Au-Yeung J). Tang was heavily involved as (i) a liquidator of APIDL in the 806 Action; (ii) a liquidator of CWT; (iii) a liquidator of SFC; and (iv) a trustee in bankruptcy in the LSF Actions.

F1.7 Summary

51.  The reasons given in Section F1 do support the Trustees having reasonable suspicion that CNIL’s funding of the 806 Action was related to David Ho.

F2. The LSF Actions and the SFC Liquidation

F2.1 Alignment of interests with David Ho

52.  The Trustees submit that, given David Ho’s continuing beneficial interest in the LSF Debts and the SFC Debts, David Ho has an interest in the LSF Actions and the SFC Liquidation.

F2.2 Lack of proper due diligence in the investment

53.  Mr Cheung did not conduct any due diligence as to who was the ultimate beneficial owner of the LSF Debts and the SFC Debts before they were assigned to CNIL.

54.  Unlike the funding for the 806 Action (of which Mr Cheung has given a mere assertion that he had done due diligence – see §44 above), there was not even an assertion from CNIL/Mr Cheung that they had conducted due diligence on the LSF Debts and the SFC Debts.

F2.3 Suspicious timing

55.  The Trustees submit that the timing of the assignments of the SFC Debts was suspicious.

56.  In relation to the First Assignment of the SFC Debt from Keentrade to Heartbest on 9 July 2012:

(1) The date of assignment was just days after David Ho’s various corporate nominees in the 971 Action received notice of the 971 Action on 29 June 2012. The Trustees believe that it was an attempt to protect the SFC Debt from the reach of the Trustees.

(2) The First Assignment took place 7 months after Keentrade was struck off the BVI Register of Companies on 1 November 2011. If Heartbest was a genuine bona fide purchaser of the SFC Debts, there was no reason why it would have purchased from a company which was already struck off. Given that Heartbest’s actions were conducted by Sun Li Hua and Sun Bo (persons who appeared to be nominees of David Ho), the fact that Keentrade was struck off before the First Assignment made it more likely that the assignment was not for genuine commercial reasons.

57.  In respect of the initial funding of the SFC Debt by David Ho in February 2006, the Trustees are now able to trace from bank documents that the HK$3 million originated from David Ho, was channeled through a few layers of his various corporate nominees (with his nominees Nina Jia, Peter Lo and Kellie Chan being the signatories), and ultimately was transferred from Hawthorn to HSBC by a Cashier’s Order dated 3 March 2006. But the Court notes that all these happened before the bankruptcy of David Ho.

58.  In relation to the Second Assignment of the SFC Debt, the Trustees say as follows:

(1) The assignment was entered into on the same date as the 806 Funding Agreement was entered into by CNIL, and after CNIL was restored on 19 January 2015, 8 months after it was struck off.

(2) At the hearing before DHCJ B Chu (as she then was) in the 806 Action on 14 January 2015, when applying for extension of time to make payment into court as security, Hou indicated that CNIL would be a potential funder for APIDL in the 806 Action. However, at that time, CNIL was not even restored to the register. It was only restored 5 days later, “just in time to fund the 806 Action” and such timing could not be explained away as mere coincidence.

(3) Therefore, the restoration of CNIL was simply to fund David Ho’s legal proceedings against LSF and the 806 Defendants. Otherwise, it would have made no sense for a continuing investment vehicle to be struck off for non-payment of its annual fees since 2013 just in time for the assignment of the debt.

59.  However, Mr Cheung explained that the striking off of CNIL on 1 May 2014 was due to inadvertent delayed payment of the annual fees and he had no intention to discontinue the operations of CNIL at that time. This is supported by the fact that, after the termination of the 806 Funding Agreement, he continued to pay further annual fees for CNIL on 3 November 2021 and 12 October 2022. In particular, the payment on 3 November 2021 was made before the Trustees took out the present summons on 5 May 2022. If Mr Cheung had the intention to discontinue the operations of CNIL, he would have ceased paying the annual fees after termination of the 806 Funding Agreement, but he did not do so. Further, the LSF bankruptcy and the SFC liquidation were still ongoing. CNIL was a funder of the LSF Action and creditor of both LSF and SFC. There was no reason for CNIL to discontinue its operation.

60.  These explanations were logical and I accept the same.

F2.4 Lack of commercial rationale

61.  The Trustees say that there was no commercial reason why CNIL would have purchased the SFC Debts, other than its being related to David Ho. Despite the fact that there seemed to be no activity or no court proceedings in relation to the SFC Liquidation for the purposes of recovering further monies for its creditors, CNIL still purchased the SFC Debts. Any recovery from the LSF Actions was related to LSF only and was independent of the creditors’ positions in the SFC liquidation. Therefore, the Trustees claim that they reasonably believe that one of the main considerations why the SFC Debts were purchased (together with the appointment of Tang as its liquidator) was because of their access to information relating to the SFC companies in order to assist David Ho’s pursuit of the LSF Actions.

F2.5 Substantial involvement of David Ho’s nominees

62.  David Ho’s nominees were involved in the Assignments of the LSF Debts and the SFC Debts:

(1) The Assignments were conducted and executed by David Ho’s nominees and/or persons closely associated with him on both sides of the transaction in Keentrade and Heartbest, including: (i) Peter Lo; (ii) Fong King Yiu; (iii) Sun Li Hua; and (iv) Sun Bo.

(2) In particular, Sun Li Hua signed the First Assignment of the SFC Debts on behalf of Keentrade as assignor, and the Second Assignment of the SFC Debts on behalf of Heartbest as assignor. The Trustees say that this was compelling evidence that the First Assignment was a sham.

(3) Other nominees involved include (i) Nina Jia (also known as Jia Yin); (ii) Yu Yang; and (iii) Chan Hau Yu.

(4) The heavy involvement of Tang and David Ho in the 806 Action, the LSF Actions and the SFC Liquidation gave rise to at least a reasonable suspicion that CNIL’s funding of APIDL, LSF and SFC was related to David Ho.

63.  The roles of the nominees mentioned in §62 above have been summarized in Mr Wong’s submission §§65-82.

64.  As regards Peter Lo, apart from having been held to be David Ho’s nominee and was accustomed to acting in accordance with David Ho’s instructions under the 971 Judgment, he also:

(1) was a director of Keentrade at the material times before and after the First Assignment of the SFC Debts;

(2) a member of the Committee of Inspection in respect of SFC with effect from 8 April 2013;

(3) one of the signatories of cheques facilitating the convoluted fund flows from David Ho into HSBC for assignment of the SFC Debts in February 2006;

(4) a member of the Committee of Inspection in respect of the bankruptcy estate of LSF after the assignment of the LSF Debts in around August 2005.

65.  As regards Fong King Yiu, apart from having been held to be David Ho’s nominee and was accustomed to act in accordance with David Ho’s instructions under the 971 Judgment, he was also a director of Keentrade and was said to have signed letters on behalf of Keentrade to the then SFC liquidators in around 2006 to 2007.

66.  As regards Nina Jia/Jia Yin, apart from having been held to be a person closely associated with David Ho under the 971 Judgment, she was also one of the signatories of cheques for the fund flows from David Ho into HSBC for the assignment of the SFC Debts in February 2006.

67.  As regards Yu Yang, he was a former brother-in-law of David Ho who has been held under the 971 Judgment to be David Ho’s nominee acting under his instructions. Further, in his witness statement filed in the 971 Action, he claimed that Hawthorn (i.e. the company which paid for assignment of the SFC Debt on 3 March 2006) was one of his Hong Kong companies acquired from the investment by him and his sister (i.e. David Ho’s former wife) in around 2008. These showed the involvement of the same nominees and entities closely connected to David Ho.

68.  As regards Chan Hau Yu (“Kellie Chan”), she:

(1) was the person who signed the cashier order in the sum of HK$43 million from Hawthorn in favour of HSBC for assignment of the SFC Debts on 3 March 2006;

(2) employed by David YW Ho & Co (a sole proprietorship set up by David Ho and allegedly sold to his sister Jade Ho in November 2004, and later renamed as YK Ho & Co) as an executive secretary from 15 February 1995 to 22 December 2004, and then as executive secretary by Pacific Shine Limited from 23 December 2004 to 30 June 2011;

(3) acted as bank signatory of various corporate nominees of David Ho including Hawthorn; and

(4) admitted herself that she was strictly following orders and instructions from David Ho and the law firm’s management in acting as bank signatories and dealing with transactions.

69.  As regards Sun Li Hua:

(1) she had signed the First Assignment of the SFC Debts on behalf of Keentrade on 8 April 2013 and the Second Assignment of the SFC Debts on behalf of Heartbest on 23 February 2015 (using a Chinese signature);

(2) Yu Yang claimed in his statement filed in the 971 Action that Sun was his employee at APIDL and had arranged for remittance of funds to Hong Kong under his instructions;

(3) she had previously remitted HK$305,011.21 in November 2011 to Wendy Yim, an accounts supervisor of David YW Ho & Co. Yim had admitted that she had been instructed by her employer to transfer monies in and out of her own bank account.

(4) she was the Chairman of Meeting of Creditors of APIDL’s voluntary liquidation in 2013. She, together with Liu Shu (another person found to be a person closely associated with David Ho in the 971 Judgment), had confirmed the appointment of Tang as one of the APIDL Liquidators.

(5) she is said to be knowledgeable of David Ho’s transactions in the transactions, dealings, background and personal life of David Ho, as evidenced by her affirmation evidence in the discontinued action in HCA 2752/2012. She also signed the Statement of Truth in the original defence filed in that action. There was a reference to a class of persons defined as David Ho’s “UK Relatives and Friends” in the original defence, which was only removed from the amended defence after the Former Trustees had taken out a request for further and better particulars regarding such “UK Relatives and Friends”.

(6) JXH, the creditor who was said to have assigned APIDL debt to TTEL, shared the same official registered address with Global Alliance of which Nina Jia was its shareholder until 6 April 2017 and Sun Li Hua was its sole shareholder from 6 April 2017 to 29 September 2018. Sun also represented TTEL, and hence the Trustees say that the alleged assignment of loan from JXH to TTEL would “just be passing the APIDL debt from one hand to another” and would make “no commercial sense”.

70.  As regards Sun Bo, she:

(1) was the person who signed the First Assignment of the SFC Debts on behalf of Heartbest on 8 April 2013 and who replaced Peter Lo as a member of the Committee of Inspection of SFC on the same date;

(2) was the sole shareholder and director of Luck Creation Limited, a company that entered into a share purchase agreement dated 16 July 2012 for the sale of the sole share of Grassmere Services Limited (“Grassmere”) and thereafter appointed as a director of Grassmere, replacing Yu Yang. Sun Bo was thereafter appointed as a director of Grassmere (together with Sun Li Hua) on 17 June 2016, and both of them resigned as directors together on 18 July 2019. The Trustees say that these matters show that Sun Bo, Yu Yang and Sun Li Hua are closely connected to each other and David Ho; and

(3) was the sole shareholder and director of TTEL, which previously funded the 806 Action from April 2013 to February 2015 before CNIL came into the picture.

F2.6 Curious features of the SFC Debts

71.  The SFC debt has the following curious features suggesting that the SFC Debts were related to David Ho:

(1) The address of Heartbest as stated in the First Assignment of the SFC Debts was “Room 112G, No. 59 Chaibang Hutong, Dongcheng District, Beijing, People’s Republic of China, postal code: 100009”, which was the same address as TTEL as stated in the Notice to Borrower (from JXH (Assignor) & TTEL (Assignee) to Shinewing (Liquidators of APIDL) dated 24 April 2013.

(2) The Notice to Borrower (from Keentrade (Assignor) & Heartbest (Assignee) to KPMG (liquidators of the SFC Group) dated 8 April 2013 shared the same format and wordings as the Notice to Borrower referred to in sub-paragraph (1) above.

F2.7 Summary of the LSF Actions and the SFC Liquidation

72.  Subject to what I have stated about the struck off of CNIL in §§59-60 above, the facts in Section F2 above support the Trustees having reasonable suspicion that CNIL/Mr Cheung are in possession of information that relate to David Ho, his dealings or property.

G. GROUNDS OF OBJECTION RAISED BY CNIL AND MR CHEUNG

73.  A few facts must be borne in mind before analyzing the grounds of objection.

(1) Till the present application, the only persons found to be nominees of David Ho had been his subordinates or family members.

(2) It is fair to say that the subject funding was related to David Ho, but what is the purpose of this application? The main basis of the Trustees is the flow of funds, with a source from David Ho, to CNIL/Mr Cheung, who were suspected to be his nominees. Allegedly David Ho’s strategy with CNIL was to hide either the fund flow to the various actions that CNIL funded or the receipt of the funds are to end up in David Ho’s pockets (Chen-19^th, §62).

(3) A bona fide funder would have common interest with the person/party funded. Both would look to the fruits of the litigation. Hence, it would not be surprising for CNIL/Mr Cheung to have communications with David Ho and the APIDL Liquidators. However, that is far from establishing that the funder and the party funded were related in the sense of one being a nominee of the other, or that the funds had come from David Ho.

G1. Ground 1 – No bases to suggest that David Ho was hiding funds for litigation funding purposes

74.  In gist, Mr Szeto, counsel for CNIL/Mr Cheung, contends that the effect of the 971 Judgment is, amongst others, that David Ho used nominees to cover up his ultimate beneficial ownership in APIDL and has nothing to do with his having nominees in respect of the litigation funding arrangement. As stated in the 971 Judgment:

(1) David Ho had been in an unfavourable financial position after a number of litigation involving him and/or his corporate nominees ended unfavourably to him in 2004 and 2011 (§10);

(2) By the end of 2007, David Ho had run out of funds for his litigation projects and had to rely on funding from Yu Yang and David Ho’s other relatives to finance his (or APIDL’s) litigation projects (§§57-58);

(3) By the end of 2007, APIDL itself was in serious financial difficulties (§132); and

(4) David Ho attempted to recapitalize APIDL in order to strengthen its balance sheet when faced with security for costs application in the 806 Action (§§105-112) although the recapitalization exercise of APIDL was held to be a sham by Ng J (§143).

75.  Further, Mr Szeto submits that the Trustees had taken out numerous section 29 applications but they have not been able to show any evidence that David Ho has had any funds since his bankruptcy in 2011 to be recouped by the Trustees.

76.  Similar arguments were raised by Mr Szeto in an earlier s.29 application in respect of David Ho’s estate, which led to Chen Yung Ngai Kenneth & Anor v Indo-Sino Manufacturing & Trading Institute Ltd & Ors [2023] HKCFI 1462. At §125 of that Decision, this Court stated:

“125. I do not think these affect the overall view of the present Summons. Matters in §122 above [i.e. matters in §74 of this Decision] were not findings of Ng J that David Ho was impecunious but were just background facts. As the 971 Judgment shows, David Ho put his assets into a complicated corporate web. It has taken about 10 years for the Trustees to obtain the 971 Judgment. It has not been an easy case of administration of David Ho’s estate. The fact that the Trustees have not been successful so far in recouping assets affects the discretion to be exercised but not jurisdiction of the Court in this Summons.”

77.  Mr Szeto relies upon an even earlier decision in [2019] 1 HKLRD 961 at §§30-33, involving the Former Trustees applying for a s.29 Order against the trustees in bankruptcy of LSF’s estate for discovery of documents, including the funding agreements and related documents in relation to the LSF Actions (“Recorder Fung SC’s Decision”). Recorder Eugene Fung SC held that the Former Trustees had no evidence to show any reasonable suspicion that David Ho was related to or connected with CNIL in relation to the LSF/SFC matters.

78.  Likewise, this Court found that the Former Trustees had no basis to assert that David Ho was related to the funders, TTEL, CNIL and FICL: Ip Pui Lam Arthur v Alan Chung Wah Tang [2020] HKCFI 578, 8 April 2020, Au-Yeung J, §§18-19, 38-43, 49-50.

79.  It was this clear that even in 2019, funding by CNIL of the LSF and SFC Actions was no secret to the Trustees.

80.  Four years have lapsed since Recorder Fung SC’s Decision till the present hearing. The Trustees have no better evidence than the position before Recorder Fung SC. Suspicious source and flow of the litigation funding (despite documented transfers from CNIL/Mr Cheung) are the foundations of the Trustees’ application. If CNIL/Mr Cheung can show the source of funding not to be from David Ho, that would be the end of this application. This leads to Ground 2.

G2. Ground 2 – Bona fide funders not under the control of David Ho

81.  This is the main ground of opposition of CNIL/Mr Cheung. In gist, Mr Szeto submits that the objective and undisputed evidence demonstrates that CNIL and Mr Cheung were not nominees of David Ho nor under his control. Mr Cheung was and is a man of means. CNIL has been his company. The funding came (in chronological order) from TTEL, potentially from FICL and then CNIL and Mr Cheung. The subject funds flowed from FICL (on behalf of CNIL), or from CNIL to the APIDL Liquidators or its designated payees. These funders had, on various occasions, acted contrary to the interests of David Ho, and could not be his nominees.

82.  First of all, Mr Cheung was not David Ho’s subordinate or family members but was and is a man of means. He was and is a chairman of a publicly listed company on the Hong Kong Stock Exchange, with investments in real and personal assets, including landed properties in Hong Kong, corporate bonds and cash savings in various banks, and shares in various public and private companies.

83.  In this regard, the Trustees complain that the evidence provided by Mr Cheung in showing his financial means is unsatisfactory, as the evidence adduced by him only demonstrated his financial means in 2010 or 2014, when the 806 Funding Agreement was between around February 2015 and January 2021.

84.  With respect, this complaint misses the effect of the evidence. CNIL was incorporated in BVI in 2009 as an investment vehicle. David Ho has never been a shareholder or director and the Trustees have not challenged this. Mr Cheung’s financial means in 2010 or 2014 supported Mr Cheung’s case that he had been a man of means who could afford the funding. There was no reason for him to act as nominee of a bankrupt whom he did not know until about December 2014 (i.e. 2 months before the Funding Agreement was signed.)

85.  Secondly, the change of funder from TTEL to CNIL/Mr Cheung was important to show that CNIL/Mr Cheung was not a nominee of David Ho for the following reasons:

(1) By an order dated 19 November 2014, APIDL was ordered to pay further security for costs in the sum of HK$6.5 million on or before 19 January 2015, failing which APIDL’s claims would be struck out without further order. As such, it was vital for such funds to be raised as soon as possible by David Ho, if TTEL was indeed his nominee, so as to save the 806 Action. If David Ho had hidden funds, he would not have let the deadline lapse.

(2) APIDL took out an extension of time application on 6 January 2015 to extend the deadline for payment by 2 months to 19 March 2015. That application was heard by DHCJ B Chu (as she then was) on 14 January 2015.

(3) In resisting the original application for security and the application for extension of time, the Court was informed that TTEL was no longer willing to fund the litigation. Subsequently, TTEL produced a letter to the Court at the “eleventh hour” indicating that it would continue to fund the litigation if and when TTEL were to receive a substantial sum of investment in February 2015. Such a conditional stance of TTEL was simply not in the interest of David Ho, as it risked dismissal of the 806 Action.

(4) As pointed out by Mr Szeto, if TTEL was David Ho’s nominee, what APIDL would have done to buy time would be to focus on the evidence of the investment return for TTEL in February 2015 with solid proof so as to persuade the Court to extend time. And yet, in the light of such a substantial claim in the 806 Action which David Ho was allegedly funding, David Ho took the risky step of tendering unsworn evidence at the eleventh hour. He also allegedly changed to or brought in a new nominee at this moment. APIDL had to rely on the evidence of funding coming from 2 potential funders, namely, CNIL and FICL, in support of the extension of time application. Such evidence was in fact rejected by DHCJ B Chu for the reason that the evidence did not show any commitment of funding by CNIL and FICL.

(5) The entity who eventually provided the security for costs was not TTEL but CNIL.

86.  Thirdly, before CNIL stepped in, FICL in fact took an interest at one stage in co-funding with CNIL/Mr Cheung but changed its mind.

(1) Through previous s.29 applications, the Trustees knew that FICL was the direct payor of over HK$7 million prior to this application, ie HK$6,500,000 + HK$659,000 to Cheng Yeung & Co; and HK$500,000 to Shinewing Specialist Advisory Service Ltd.

(2) By a letter dated 31 March 2022 (“FICL’s Letter”), upon the Trustees’ enquiries, FICL informed the Trustees of the following:

“2. In around December 2014, CNIL invited FICL to co-fund the project. Although FICL had seriously considered the proposal, we eventually refused to participate due to the high-risk nature of the project.

3. FICL has been a regular business partner of CNIL and its director Mr. Cheung. FICL made the Payments according to Mr. Cheung’s specific instruction. According to our record, these payments were refunds for previous payments made to FICL prior to 2015. The Payments therefore are completely unrelated to any commercial interest on our part in the Case.

4. No funding agreement or agreement of any kind in relation to the Case has been signed by FICL with CNIL or any other parties.

5. FICL has no interest in the Case and is an unrelated party hence we are unable to reply any of your enquiries.

6. We confirm that none of the shareholders or directors of FICL know Ho Yuk Wah David (“David”) either in person, written correspondence or any other forms of communication.

…” (emphasis added)

(3) The Bank of China reference letter showing positive bank balance of over HK$500 million in FICL’s account was provided to CNIL when FICL and CNIL were considering co-funding of the 806 Action.

(4) CNIL/Mr Cheung had investment of over HK$14 million in FICL in 2014 and had asked FICL to withdraw the same on behalf of CNIL to fund the 806 Action.

(5) The Trustees did not make further enquiries with FICL nor take out any section 29 application against FICL. The Trustees did not even allege that money of FICL/CNIL came from David Ho.

(6) FICL’s position was exactly what CNIL and Mr Cheung told the Trustees. However, the Trustees complained that Mr Cheung failed to provide proof that the payments made by FICL on behalf of CNIL came from refunds for his previous payments except FICL’s say so in the FICL Letter. In my view, if CNIL/Mr Cheung was indeed David Ho’s nominee and knew that the funding project was part of his “unlawful scheme” to divert his assets out of the reach of his creditors, Mr Cheung would not have approached its regular business partner and an innocent third party, FICL, to co-invest in the 806 Action (using its own monies).

(7) If CNIL and Mr Cheung were indeed the nominees of David Ho, there was no reason why Mr Cheung had to withdraw his investment with FICL to fund the 806 Action, instead of using money from David Ho.

87.  The funding for 6 years caused CNIL/Mr Cheung to suffer a total loss of HK$14.74 million. The funding included what the Trustees called “7 dubious transfers” coming from Mr Cheung. However, Mr Szeto has demonstrated, with documents, that the source of HK$14.74 million was CNIL/Mr Cheung (Cheung-3^rd, §§35-36, A80-89, §25-40) and that the vast majority of payees were lawyers. Contrary to the Trustees’ submission, the source of funds for the “7 dubious transfers” had been established by Mr Cheung’s bank statements (§37 of Cheung-2^nd; B2/611-613, 615-618, 630, 632-633). I agree with Mr Szeto that each payment out to the APIDL Liquidators or their nominated payees need not be matched with an exact amount of payment-in to FICL or CNIL’s account, so long as it is shown that the payments-in were from sources unrelated to David Ho, which was the case here.

88.  The 806 Funding Agreement was terminated at a crucial stage in January 2021 when the trial on the Preliminary Issue for the 806 Action was scheduled to take place on 15 and 16 April 2021 (i.e. within 3 months). Indisputably, the determination of the Preliminary Issue was important, as it may affect the future conduct of the 806 Action. Therefore, if CNIL/Mr Cheung were indeed David Ho’s nominees, David Ho would have done everything he could to ensure that there would be funding for that trial. However, CNIL terminated the 806 Funding Agreement. Tang eventually had to personally pay legal costs allegedly of HK$1.09 million for the 806 Action himself.

89.  The Trustees then point out that, after termination of the 806 Funding Agreement, there was a surplus of HK$3,442,834.52. If CNIL was a bona fide funder, one would have expected Mr Cheung to have injected funds to CNIL on a needs basis and would not have run up such a huge surplus in CNIL’s account.

90.  With respect, I fail to see what weight could be attached to this argument. Whether as between CNIL and the APIDL Liquidators funds were provided on a needs basis depended on the terms of the Funding Agreement. Any surplus is still to be accounted for by the APIDL Liquidators to CNIL.

91.  I also accept Mr Szeto’s submission that, even if the funding provided by it eventually went to David Ho from the APIDL Liquidators’ hands, that would be a matter beyond the control of CNIL/Mr Cheung and was for the APIDL Liquidators to explain.

92.  The Trustees are unable to rebut the above points in Ground 2. Based on the evidence under Ground 2 and on the balance of probabilities, I am satisfied that CNIL/Mr Cheung were bona fide funders not under the control of David Ho and had acted against David Ho’s interest at a critical moment. Once that is established, the suspicions on the part of the Trustees as to fund flow can no longer be regarded as “reasonable”. The s.29 application should be dismissed.

93.  For completeness, I will also deal with other grounds of objection raised by Mr Szeto briefly.

G3. Ground 3 – The trustees should enforce the s.29 Order made in CACV 83/2020

94.  In the CA Judgment, the Court of Appeal held that the APIDL Liquidators were required under s.29 BO to produce information and documents relating to litigation funding in the 806 Action and other proceedings in which APIDL was a party.

95.  The only explanation offered by the Trustees as to why they pursued the present application is that the APIDL Liquidators have failed to fully comply with the CA Judgment. Therefore, they have “no choice” but to ask CNIL and Mr Cheung to provide such information instead. The Trustees rely on the authority of Nanik Dayaram HCB 7651/2011, 6 November 2015, §77, wherein Ng J held that there was no requirement that the person summoned was and no other persons were, capable of giving the information sought. If there are a number of persons deemed capable of giving such information, the Trustees may go after only one such person but not the others, or they may go after one such person first and, depending on the outcome of their pursuit, decide whether they need to go after the others.

96.  However, it has been held that the Court may not grant a s.29 BO order if the trustee has not exhausted available alternative sources of information or documents which he can readily obtain without incurring trouble or expense appreciably greater than would be incurred under s.29 of BO. In Re Castle New Homes Ltd [1979] 1 WLR 1075, at 1093, Slade J held that: -

“The second principal reason advanced by the banks as to why the court should not exercise its discretion by making an order pursuant to section 268, at least at the present time, is that the liquidator has not yet exhausted all the possible alternative sources of information available to him in relation to the principal questions which concern him. …, I accept that this could be a relevant factor, at least in a case where the person against whom the order was sought demonstrated to the court that (a) there existed alternative sources available to the liquidator, which would afford the information which he sought; (b) he could readily obtain all such information from these sources, without incurring trouble or expense appreciably greater than would be incurred in the desired examination; (c) he had not chosen to avail himself of such alternative sources.”

This authority was not cited to Ng J.

97.  The present situation is where the Trustees, depending on the outcome of the pursuit, decided to go against CNIL despite the s.29 Order against APIDL. If the Trustees had to incur expenses in e.g. committal proceedings to enforce the s.29 Order appreciably greater than the present Amended Summons, there may be justification for the present application, but there is no such evidence before the Court.

98.  More importantly, the APIDL Liquidators have not completely refused to provide further documents/information. By a letter dated 11 April 2022, they asked the Trustees to justify their “new requests” for additional documents. The Trustees therefore should have at least addressed such query before considering taking out the present application. There is no evidence that they have done so. The Court should exercise its discretion to decline relief. Ground 3 is made out.

G4. Ground 4 – Dismissal of the 806 Action should be taken into account

99.  The Trustees’ case has always been that, if David Ho was involved in the funding of the 806 Action, then if APIDL were successful in prosecuting the 806 Action, the fruits of the 806 Action would form part of David Ho’s estate.

100.  Dismissal of the 806 Action means that that Action would not bring in value for David Ho’s estate. It would be an abuse of the Trustees’ powers to insist on the discovery under s.29 BO.

101.  It was all the more so because the Trustees have not ascertained the progress of the 806 Action before this hearing. They say that they were not privy to the 806 Action. With respect, they were interested in the outcome to that Action. There was an application to strike out the 806 Action to be heard in March 2023. CNIL/Mr Cheung had enquired about the outcome of the 806 Action before this hearing and so had Mr Szeto in his written submission. And yet it was in midst of this hearing, upon being pressed by the Court, that the Trustees discovered that the 806 Action had been dismissed by consent.

102.  The Court should exercise its powers effectively, but not so as to support over-zealousness of a trustee or cause oppression. The Court must do what, all things considered, appears at the time to be just and proper: The Joint and Several Trustees of the Property of So Ching Wan v Assen Ltd (in liq.) & others [2019] HKCFI 1491 at §§8.10. It would not be fair and just to CNIL/Mr Cheung for a s.29 Order to be made against them in the light of the dismissal of the 806 Action and their evidence that the source of money for funding came from them.

H. DISCOVERY AS REGARDS THE LSF AND SFC ACTIONS

103.  I only need to deal with the discovery regarding the LSF and SFC Actions briefly. The fundamental bases of the Trustee’s application is that CNIL was funding the 806 Action, the LSF and SFC Actions. It was too much of a coincidence and the reasonable inference to draw is that CNIL is related to David Ho.

104.  Funding by CNIL of the LSF and SFC Actions was no secret to the Trustees. Recorder Fung SC’s Decision (in 2019) found the Former Trustees to have provided sufficient evidence to support the belief that David Ho had all along been involved in the LSF Actions (§§18, 19 and 21 of that Decision). That has not changed, in my view. I repeat §77 above.

105.  However, given the analyses under Grounds 1 and 2 above, there is no bases to draw the inference that CNIL was related to David Ho. Four years have lapsed since Recorder Fung SC’s Decision and the Trustees are still not able to show the nominee relationship between David Ho and CNIL. I see no basis for making a s.29 Order against CNIL/Mr Cheung.

I. CONCLUSION AND COSTS

106.  CNIL/Mr Cheung have shown themselves to be bona fide funders instead of nominees of David Ho. They have at a critical time acted against David Ho’s interest. There was no better evidence before Recorder Fung SC than before this Court in relation to the relationship between CNIL and David Ho. Any suspicion that the Trustees hold about David Ho providing, through CNIL, the funding for the 806 Action (now dismissed) and LSF/SFC Actions is accordingly not reasonable. There are no bases for making a s.29 Order against CNIL/Mr Cheung. The Trustees’ application for preservation orders against HSB and CMB also falls away as a result. The Amended Summons is thus dismissed.

107.  I accept that the Trustees had a prima facie case to invoke s.29 BO. On the other hand, CNIL and Mr Cheung virtually have to prove their innocence in opposing this substantial application involving over a thousand pages of documents, covering a period of 6 years of funding.

108.  Costs should follow the event and be to CNIL/Mr Cheung. Based on their costs statement and adopting a broad brush approach, I summarily assess their costs with certificate for 2 counsel at HK$650,000. I make an order nisi along the terms of this paragraph.

109.  I thank Mr Wong and Mr Szeto for their thorough preparation and assistance to the Court.