LI LI HONG v. CHEN DI AND ANOTHER

HCA 2091/2024

[2025] HKCFI 3885

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 2091 OF 2024

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D E C I S I O N

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INTRODUCTION

1.  This decision involves 2 summonses issued by the plaintiff Mr Li Lihong (李立鴻) (“P”) against the 1^st defendant Mr Chen Di (陳滌) (“D1”) and the 2^nd defendant Mr Li Chaobo (李朝波) (“D2”).

2.  The first summons was dated 21 October 2024 where P seeks the following:

(a)  to continue the Mareva injunction made by Lisa Wong J dated 19 October 2024 against each of D1 and D2; and

(b)  for ancillary disclosure orders pursuant to the Mareva against each of D1 and D2;

(“the Mareva Injunction Summons”)

3.  The second summons was dated 22 November 2024 where P seeks the following:

(a)  summary judgment against each of D1 and D2;

(b)  post-judgment Mareva injunctive relief against each of D1 and D2;

(c)  ancillary disclosure orders pursuant to the Mareva against each of D1 and D2.

(“the Summary Judgment Summons”)

BACKGROUND

Background facts according to P

4.  Mr Daniel Fung SC, leading Mr David Chen, for P in his skeleton submissions (“P’s Submissions”) has summarized the background facts according to P’s case as follows.

5.  Since around 2005, P has at all material times been a developer and operator of golf courses and other sport and recreational real estate facilities together with accompanying residential accommodation including villas and apartments in Mainland China, establishing himself as one of the biggest golf club owner operators on the Mainland until 2017 when he commenced selling completed developments and channeling proceeds into investments made in his own name and/or through corporate vehicles in commercial and residential real estate in the United States and Australia.

6.  P has at all material times been assisted by three personal assistants (PAs) being respectively 施萍瑜 (“Shih”) based in Hong Kong, 伍朵雲 (“Wu”) based in Beijing and 馬捷 (“Ma”) based in Guangzhou including, in particular, the implementation of investment decisions, preparation of contractual documents and in communications with co-investors, guarantors and debtors.

7.  According to P, D1:

(a)  Principally:

(i)  is and was at all material times the CEO of a Hong Kong registered company known as Harvest Global Capital Investments Ltd (嘉實國際投資有限公司) (“Harvest Capital”); and

(ii)  was from 2014 to 2020 the Responsible Officer of Harvest Global Investments Ltd (嘉實國際資產管理有限公司) (“Harvest Investments”)

both being operating subsidiaries of one of Mainland China’s largest institutional fund managers with HK$207 billion assets under management (“AUM”) known as Harvest Fund Management Co Ltd (“Harvest Fund”);

(b)  is in addition respectively:

(i)  a non-executive director (“NED”) of Shandong Hi-Speed Holdings Group Ltd; and

(ii)  an independent NED (“INED”) of Desun Real Estate Investment Services Group Co Ltd

each being a publicly listed company quoted on the Stock Exchange of Hong Kong (“SEHK”) under respective stock codes 412 and 2270.

8.  According to P, D2 is:

(a)  the Chairman, Executive Director and CEO of China City Infrastructure Group Ltd (“China City”) being a publicly listed company quoted on the SEHK under stock code 2349; and

(b)  the controlling shareholder as well as largest single shareholder of China City, holding around 22% of its issued share capital.

The Guarantee

9.  P first met D2 in or around 2015 whereafter the latter introduced from time to time various investment opportunities for P to consider.

10.  In or around March 2018, D2 introduced P to D1 whereafter:

(a)  D1:

(i)  proposed a reverse takeover of a listed shell then known as Food Wise Holdings Ltd being a publicly listed company quoted on the SEHK under stock code 1632 (“the ListCo”) by implementing a backdoor listing of a new technology venture, injecting such venture together with new capital into the ListCo;

(ii)  invited P to participate in such venture by providing the requisite new capital for injection into the ListCo.

(b)  P expressed interest to participate subject to and conditional upon D1 and D2 guaranteeing a specific minimal return on his proposed capital injection.

(c)  In or around April 2018, D1 and D2 expressly orally agreed to provide such guarantee pegged to a minimum 8% return per annum, such express oral agreement being subsequently – on 20 April 2018 – reduced to writing signed by all parties.

11.  On or around 20 April 2018, D1 introduced P to one Mr Cai Weiheng (蔡偉恆) (“Cai”) who, expressing a bullish view on the ListCo’s prospects following a putative injection of new capital by P into the ListCo, represented to P that if the latter were to acquire an interest in the ListCo following such capital injection, Cai would be prepared to acquire such interest from P within 6 to 12 months at a premium.

12.  On or around 20 April 2018, P of the one part and D1 and D2 of the other part executed and signed a written investment guarantee dated 20 April 2018 (“the Guarantee”) expressly providing that:

(a)  P would inject HK$100 million into the ListCo by way of new capital investment (“the Capital Investment”);

(b)  P of the one part and D1 and D2 of the other part would respectively be entitled to 50% of the profits from the Capital Investment; and

(c)  D1 and D2 jointly guaranteed to P a minimum 8% annual return on the Capital Investment.

D1 and D2 would inject no capital into the ListCo.

13.  On or around 25 April 2018, P acting in reliance on D1 and D2’s Guarantee injected HK$100 million into the ListCo and acquired in return unlisted equity derivatives in the ListCo (“the Derivatives”) carrying a right to convert the same into 24,301,337 publicly listed shares in the ListCo.

14.  Discussions over Cai’s prospective acquisition of the P’s interest ensued over the period from April to August 2018 among P, Cai, D1 and D2.

15.  On 21 August 2018, P converted the Derivatives into 24,301,337 publicly listed shares in the ListCo.

16.  On 22 August 2018, P and Cai acting through his wife’s wholly-owned corporate vehicle Kilmorey International Holdings Limited (“Kilmorey”) entered into a written share sale and purchase agreement (referred to as the “Former Agreement” in Deputy High Court Judge A Ho SC’s Decision dated 5 March 2020 (“the Decision”) in HCA 1166/2019 entering summary judgment in favour of P as against Kilmorey and Cai, from which summary judgment there has been no appeal) whereby P agreed to sell 24,301,337 shares in the ListCo to Kilmorey for HK$200 million: see §11 of the Decision.

17.  On 24 August 2018, the ListCo divided its shares (each with a par value of HK$0.01) into four shares each with a par value of HK$0.0025. Following such share split, the 24,301,337 shares held by P in the ListCo became 97,205,348 new shares in the ListCo.

18.  On 29 August 2018, P transferred out of goodwill 58,005,348 shares in the ListCo to Kilmorey pursuant to the Former Agreement, leaving P with 39,200,000 shares in the ListCo to be transferred to Kilmorey upon the latter’s payment of HK$200 million to P under the Former Agreement.

19.  On 7 September 2018, following the backdoor listing / reverse takeover, the ListCo was renamed Minshang Creative Technology Holdings Ltd.

20.  P claims that each of Kilmorey and Cai acting through Kilmorey failed to discharge the latter’s payment obligations owed to P under the Former Agreement, fulfilling only a minor portion of such obligations culminating by 8 May 2019 in payments aggregating HK$37 million amounting to a mere 18.5% of the debt owed to P, leaving the vast majority being 81.5% of such debt amounting to HK$163 million unpaid to this day (as referred to in §§14 & 22 of the Decision ordering summary judgment against Kilmorey and Cai in favour of P, from which Decision no appeal has ever been launched).

21.  Kilmorey and Cai’s outstanding indebtedness to P comprising 81.5% of their original indebtedness to P aggregating HK$163 million gave rise to negotiations between P, Cai and Kilmorey, resulting in the execution of five successive further agreements by P, Cai and Kilmorey (“the Superseding Agreements”) all of which superseded the Former Agreement (as referred to in §20 of Shih 1^st and §§8-9 of the Decision).

22.  On 2 July 2019, P commenced HCA 1166/2019 against Kilmorey and Cai and obtained from Deputy High Court Judge K Wong ex parte Mareva injunctive relief restraining Kilmorey from dealing with its assets in Hong Kong up to the value of HK$136,052,849.

23.  On 5 March 2020, following a contested hearing, Deputy High Court Judge A Ho SC granted summary judgment for P against Kilmorey and Cai, ordering them to pay P HK$162,057,480 plus contractual interest at 30% per annum together with costs (“the Judgment”).

24.  P claims that Kilmorey and Cai completely failed to satisfy the Judgment debt and:

(a)  Kilmorey was wound up in late December 2020; but

(b)  P is unable to locate Cai;

(c)  Judgment remains to this day wholly unsatisfied by either Kilmorey or Cai; and

(d)  No appeal against the Judgment has ever been launched.

25.  In the premises, P says that he has suffered substantial loss and damage, having paid HK$100 million for the Derivatives but receiving in return:

(a)  only HK$37 million (being a mere 18.5% of the debt owed) from Kilmorey and/or Cai; and

(b)  39,200,000 shares in the ListCo (with a market value of around HK$6.2 million today).

26.  According to P, under the Guarantee, D1 and D2 guaranteed a minimum 8% annual return on P’s Capital Investment of HK$100 million. Accordingly, based on P’s case, D1 and D2 remain liable under the Guarantee to pay P:

(a)  HK$63 million (HK$100 million less HK$37 million);

(b)  plus a minimum 8% annual return on the Capital Investment.

D1 and D2 have completely failed to discharge such liability.

27.  Further negotiations ensued between P, D1 and D2, culminating in P’s agreement in principle in early October 2020 to waive 50% of D1 and D2’s liability under the Guarantee, whereupon the parties proceeded to record their new agreement in writing as a supplemental agreement to the Guarantee (投資擔保協議之補充協議) detailed below.

Supplemental Agreement

28.  On or around 12 November 2020, P, D1 and D2 executed a written tripartite supplemental agreement to the Guarantee (投資擔保協議之補充協議) dated 12 November 2020 (“the Supplemental Agreement”) providing:

(a)  Under Clause 1, P, D1 and D2 agreed that as of 31 October 2020:

(i)  Of the Capital Investment of HK$100 million injected by P, HK$63 million remained unrecouped and outstanding;

(ii)  The minimum 8% return due to P jointly guaranteed by D1 and D2 under the Guarantee aggregated HK$10,100,466, of which P agreed to waive 50% leaving D1 and D2 liable to repay to P HK$5,050,233; and

(iii)  The introduction and legal fees incurred in the investment aggregated HK$8,088,312, as to which D1 and D2 would jointly bear 50% responsibility, namely, HK$4,044,156, leaving P responsible for the balance.

(b)  Under Clause 2, the parties agreed and confirmed that:

(i)  Of the HK$63 million in unrecouped capital investment, P would write off 50% of such loss amounting to HK$31,500,000, leaving the balance to be treated as a loan extended by P to D1 and D2 jointly;

(ii)  The 8% guaranteed minimum annual return (HK$5,050,233) and the introduction and legal fees (HK$4,044,156) for which D1 and D2 were responsible, aggregating HK$9,094,389, would be treated as a loan extended by P to D1 and D2 jointly;

(iii)  The loan extended to D1 and D2 jointly aggregated HK$40,594,389 (HK$31,500,000 + HK$9,094,389).

(c)  Under Clause 4, the term of the loan was defined as running from 1 November 2020 to 31 October 2021, with interest accruing at 8% per annum.

(d)  Under Clause 5, P, D1 and D2 agreed that out of the 39,200,000 shares in the ListCo held by P, P of the one part and D1 and D2 of the other part would respectively be entitled to 19,600,000 shares, and that D1 and D2’s shares would be held by P as custodian.

29.  P’s case is that neither D1 nor D2 had fulfilled any of their contractual obligations or paid P a single dollar under the Supplemental Agreement.

30.  On 2 November 2021, P’s solicitors Foo, Leung & Yeung (“FLY”) issued written demands to each of D1 and D2 demanding payment within 14 days of the outstanding debt of HK$40,594,389 together with accrued interest of HK$3,247,551.12.

31.  In around mid-November 2021, P agreed to extend the payment deadline to the end of December 2021. Again, P says that neither D1 nor D2 paid a single dollar to P by the extended deadline.

32.  On 4 January 2022 or 5 January 2022, D1 proposed an alternative payment proposal (“Alternative Payment Proposal”) in the following terms:

(a)  D1 and D2 would repay P HK$6 million by 20 January 2022, whereupon P would transfer to a party designated by D1 four million shares out of the 39,200,000 shares held by P in the ListCo;

(b)  D1 and D2 would repay P an additional HK$54 million by 31 March 2022, whereupon P would transfer his remaining 35,200,000 shares in the ListCo to a party designated by D1; and

(c)  Upon performance by D1 and D2 of the above, P would release D1 and D2 from all their obligations under the Supplemental Agreement.

33.  P orally accepted the Alternative Payment Proposal subject to and conditional upon D1 and D2 remaining liable to P under the Supplemental Agreement in the event of failure by D1 and D2 to fulfil the Alternative Payment Proposal. D1 agreed.

34.  D1 and D2 failed to pay P anything by 20 January 2022 or otherwise fulfil any of the provisions of the Alternative Payment Proposal but made partial payment on 10 February 2022 with consequences as follows:

(a)  On 10 February 2022, D1 on behalf of himself and D2 paid to P HK$3.2 million;

(b)  On the following day being 11 February 2022, P transferred four million shares in the ListCo to a party designated by D1 and received HK$2.8 million in return;

(c)  The parties thereupon regarded P as having received a total of HK$6 million from D1 and D2 by 11 February 2022.

35.  D1 and D2 failed to pay P the balance of HK$54 million or any part thereof by 31 March 22 leaving D1 and D2 liable to pay P such amount together with interest under the Supplemental Agreement.

D1 and D2’s Outstanding Obligations

36.  Over the period April to December 2023, P says that D1 and D2 made further partial repayments to P aggregating HK$6.01 million.

Date	Amount Repaid	Note
12 Apr 2023	HK$500,000	Cash transfer on behalf of D1 and D2 to P
5 May 2023	HK$500,000	Cash transfer on behalf of D1 and D2 to P
19 May 2023	HK$500,000	Cash transfer on behalf of D1 and D2 to P
2 Jun 2023	HK$1,750,000	Cash transfer on behalf of D1 and D2 to P
9 Jun 2023	HK$2,000,000	Cash transfer on behalf of D1 and D2 to P
28 Dec 2023	HK$760,000	P’s sale of four million shares in ListCo (upon D1’s suggestion)
Total:	HK$6,010,000

37.  P treats D1 and D2 as having repaid a total of HK$12,010,000 (“Partial Repayments”) comprising by way of consolidation of the respective partial repayments:[1]

Date	Amount Repaid	Note
10 Feb 2022	HK$3,200,000	Cash transfer on behalf of D1 and D2 to P
11 Feb 2022	HK$2,800,000	P’s sale of four million shares in ListCo
12 Apr 2023	HK$500,000	Cash transfer on behalf of D1 and D2 to P
5 May 2023	HK$500,000	Cash transfer on behalf of D1 and D2 to P
19 May 2023	HK$500,000	Cash transfer on behalf of D1 and D2 to P
2 Jun 2023	HK$1,750,000	Cash transfer on behalf of D1 and D2 to P
9 Jun 2023	HK$2,000,000	Cash transfer on behalf of D1 and D2 to P
28 Dec 2023	HK$760,000	P’s sale of four million shares in ListCo (upon D1’s suggestion)
Total:	HK$12,010,000

38.  Accordingly, as of 17 October 2024 (the day before P applied for ex parte Mareva relief), P says that D1 and D2 owed P HK$28,584,389 in principal and HK$10,948,861.56 in accrued interest, aggregating HK$39,533,250.56.

D1’s Case

39.  Mr Laurence Li SC, leading Ms Astina Au, for D1 is his skeleton submissions (“D1’s Submissions”) agree with most of the basic background facts as summarized by Mr Fung in P’s Submissions: §§7-22 of D1’s Submissions.

40.  Significantly, D1 claims that D2, based on a “template” guarantee which he had previously used in another investment project, prepared and executed with P the Guarantee. It is D1’s case that he later signed on the Guarantee as “witness” (as someone who knew both parties, P and D2): §12.2 of D1’s Submissions.

41.  Mr Li has highlighted the following clauses in the introduction service agreement entered into between P and Harvest Capital dated 20 April 2018 (“Service Agreement”) and the Guarantee in D1’s Submissions in support of D1’s case.

42.  The Service Agreement provides that:

(a)  Harvest Capital will introduce to P the contacts in relation to a prospective project and investment opportunity regarding investment in shares of a listed company including the contacts of relevant parties (Clause 1(a));

(b)  P shall conduct its own assessment and make its own investment based on the information and materials provided by the relevant parties in the prospective project (Clause 1(b));

(c)  Harvest Capital will only act as an introducer in the prospective project. Harvest Capital will not be involved in the dealing between P and the relevant parties in the prospective project and shall not be liable for any loss and damages in respect of the investment (Clause 1(c));

(d)  In consideration of the referral and introduction of the prospective project to P by Harvest Capital, the parties agree that P shall pay Harvest Capital a service fee of HK$2,000,000 for the prospective project (Clause 3(a)).

43.  The Guarantee is stated to be entered into between P (as “Party A”) and, according to D1, D2 (as “Party B”). It provides that:

(a)  Party B shall be responsible for conducting due diligence on the investment opportunity and ensure its success (Clause 1);

(b)  Party A shall inject HK$100 million as Capital Investment (Clause 2);

(c)  Party A and Party B shall be entitled to an equal share of the profits derived from the Capital Investment upon the end of the investment or exit from the same (Clause 3);

(d)  Party B guarantees for a period of 1 year that the total profits derived from HK$100 million Capital Investment would not be less than 8% per annum at the time of settlement; if such profits (calculated on a pro rata basis) do not meet the guaranteed level of 8%, any shortfall shall be paid by Party B (Clause 4).

(e)  Party B guarantees that, upon the end of the investment or exit from the same, it would pay to Party A profits calculated at 8% per annum based on the principal sum of HK$50m on the basis of the number of days of the investment (Clause 5).

44.  On the Supplemental Agreement, while D1 admits that P, D1 and D2 had all signed the document which, inter alia, P purportedly agreed to waive 50% of D1 and D2’s liability under the Guarantee, and treat the remainder as a “loan” to D1 & D2 with interest at 8% per annum, D1 says that there is no basis for any such “loan” insofar as D1 is concerned, as D1 was not a party under the Guarantee” §22 of D1’s Submissions.

45.  On the Summary Judgment Summons, D1’s primary case is that no summary judgment should be granted due to the following defences raised by D1:

(a)  First, given D1 was not a party to the Guarantee, the Supplemental Agreement is unenforceable against D1 for want of consideration.

(b)  Second, even if D1 (which is denied) is found to be a party to the Guarantee, the Supplemental Agreement is void by reason of common mistake.

(c)  Third, further or alternatively, D1’s liability as surety has been discharged by reason of P’s conduct.

46.  On the Mareva Injunction Summons, D1’s case is that at best P’s case is “arguable” and does not meet the threshold of a “good arguable case”: §50 of D1’s Submissions.

47.  Further, D1 says that the matters relied on by P for the injunction do not satisfy the “relatively high” standard required for establishing a “real risk of dissipation of assets”: See §51 of D1’s Submissions.

48.  In his oral submissions, Mr Li started with the position that while there is some overlap between D1 and D2’s respective case, there is a “cut throat” defence between them. Where their defence overlaps, Mr Li is content to adopt Mr Khaw’s submissions. However, where there is a “cut throat” defence, ie that D1 was not a party to the Guarantee, he would rely on his own submissions. For the defence of mistake, Mr Li says that he is content to place himself entirely in Mr Khaw’s hands and would adopt D2’s submissions on that issue. For the defence of discharge on either or both of the Guarantee and Supplemental Agreement, Mr Li says that while there is some overlap between D1 and D2’s case on this topic, the emphasis of their respective case on this is slightly different and he shall concentrate on the difference in his client’s case. Insofar as the Mareva Injunction is concerned, he would make submissions on both the pre and post judgment injunction.

49.  During his oral submissions, Mr Li took the court through a lot of the WeChat records between P, D1 and D2, and tried to make the point that there were a lot of history predating the Guarantee and the Supplemental Agreement and the court should be slow to enter summary judgment against Ds only upon one round of affirmations between the parties. Mr Li also emphasized the fact that D1 must have been placed under a lot of pressure by P to sign the Guarantee, including the fact that P might report him to his seniors in the headquarters of his company in the Mainland.

D2’s Case

50.  Mr Richard Khaw SC, leading Mr Au Lut Chi and Ms Natasha Yu, in D2’s skeleton submissions lodged with the court (“D2’s Submissions”) has basically summarized D2’s defences as follows.

51.  First, Mr Khaw highlighted the fact that there was no mention in the Guarantee about the return of P’s Capital Investment of HK$100 million. In fact, he says the Guarantee could hardly be intended to secure repayment of the P’s Capital Investment when such sum was actually used for P’s acquisition of equity derivatives which were subsequently converted into publicly listed shares: (§1 of D2’s Submissions).

52.  Second, D2 claims that for the sale and purchase agreement entered into between P and Kilmorey in August 2018 under which P agreed to sell 24,301,337 shares in the ListCo to Kilmorey for HK$200 million, while Kilmorey failed to honour its payment obligations and various cheques issued by it were also dishonoured, contrary to the terms of the agreement, P somehow had allowed 58,005,548 shares (ie 60% of the total shares of the transaction) to be transferred to Kilmorey before any payment was received. It was against such background that a series of recovery actions were taken by P against Kilmorey and Cai: (§2 of D2’s Submissions).

53.  It was in the midst of such recovery actions that the idea of entering into the Supplemental Agreement had emerged. D2 says that although the Supplemental Agreement made specific reference to the Guarantee and was premised upon D1 and D2 being liable for the original investment principal (原始投資本金) under the Guarantee, D2 says that such liability simply does not exist under the Guarantee or any other documents. Mr Khaw emphasized the fact that D2 has signed the Supplemental Agreement on the basis of his mistaken belief in relation to his liability. Thus, D2’s case is that the Supplemental Agreement should be set aside on the grounds of common and/or lateral mistake which Mr Khaw says “is clearly evidenced by the inconsistency relating to the extent of D2’s liability between the Guarantee and the Supplemental Agreement”: (§3 of D2’s Submissions).

54.  In addition, D2 relies on the “mistake regarding the factual circumstances in which the Supplemental Agreement was signed”: (§4 of D2’s Submissions).

55.  Further, D2 says that P’s dealing with Kilmorey in unilaterally transferring a significant number of the shares in the ListCo contrary to the terms of the sale and purchase agreement and also their protracted negotiations on further agreements have caused substantial prejudice to D2’s position under the Guarantee. This Mr Khaw says gives rise to at least a triable issue as to “whether the Guarantee shall be discharged as a matter of law and also whether such discharge (if established) would render the Supplemental Agreement (which is premised upon Ds’ liability under the Guarantee) unenforceable”: (§5 of D2’s Submissions).

56.  There are also other minor and/or technical grounds relied on by D2 to resist P’s applications: (§§6 to 9 of D2’s Submissions). They included the allegation that during the critical juncture of these applications, P was in fact detained at Yancheng Detention Centre in Jiangsu Province in the Mainland (“the Detention Centre”) in relation to criminal offences concerning issuance of false invoices from around September 2022 to January 2025. D2 says that according to PRC law, P could not have been able to make affirmations and gave instructions while he was being detained by the authorities.

57.  For the Mareva Injunction Summons, Mr Khaw says that this case could not possibly justify any Mareva injunction being granted. D2 says that P’s initial application for an ex parte Mareva injunction and the present summonses for continuation and/or post-judgment Mareva injunction, are both misconceived, made without proper legal foundation and ought to be dismissed in limine: (§9 of D2’s Submissions).

Evidence filed by the Parties

58.  The evidence supporting P’s applications together with D1 and D2’s evidence in opposition comprise of the following:

Evidence in support of Mareva Injunction application

Shih Ping Yu (P’s PA)’s Affirmation dated 18.10.24 (“Shih 1st”)

Shih Ping Yu’s 2nd Affirmation dated 18.10.24 (“Shih 2nd”)

Evidence in support of O.14 application

Shih Ping Yu’s 3rd Affirmation dated 22.11.24 (“Shih 3rd”)

Evidence in opposition to both applications

D1’s Affirmation dated 10.2.25 (“D1 1st”)

D2’s Affirmation dated 10.2.25 (“D2 1st”)

Evidence in reply in both applications

P’s Affirmation dated 25.3.25 (“P 1st”) (notarized copy exhibited to Shih Ping Yu’s 4th Affirmation dated 28.3.25)

DISCUSSION

(I)   The Summary Judgment Summons

Applicable Principles

59.  The applicable principles for Order 14 applications are trite. They have been succinctly summarized by Mr Fung in §39 of P’s Submissions. As they are not disputed by D1 and D2, I do not intend to repeat them here save to say that I have taken those principles into consideration when writing this Decision.

60.  In addition to the above, Mr Li and Mr Khaw have drawn the following well established principles to the court’s attention.

61.  Order 14 is for clear cases; that is, cases in which there is no serious material factual dispute and, if a legal issue, then no more than a crisp legal question as well decided summarily as otherwise. The procedure is entirely inappropriate where the plaintiff’s entitlement to recover any sum is the subject of any serious dispute, whether of law or fact.

62.  The defence set up need only show that there is a triable issue or question or that for some other reason there ought to be a trial. The issue is not whether the defendant’s assertions are to be believed; it is whether those assertions are believable. There should not be a mini-trial on affidavits.

63.  Where there are unexplained features of both the claim and the defence which are disturbing because they bear the appearance of falsity and disreputable business dealings and questionable conduct, the court should not make tentative assessment of the respective chances of success of the parties or the relative strengths of their good or bad faith, and should not on such an examination grant the defendant conditional leave to defend, but should grant unconditional leave to defend.

See: Hong Kong Civil Procedure 2025 (“HKCP”) at §§14/4/9-9B.

64.  Where a dispute over contractual interpretation arises in a summary judgment application, the court should decline to construe the contract summarily if there are reasonable grounds for supposing that a fuller investigation of the facts as to the background might make a difference to the construction: Asia Equity Value Limited v HQX (Group) Limited and Others [2021] HKCFI 2593 at §§13, 89.

65.  Further, the court must not embark on a mini trial on affidavits. Rather:-

(a)  Leave to defend ought to be given unless it is obvious that the defence is “frivolous and practically moonshine”;

(b)  Where the defendant raises any substantial question of fact which ought to be tried, or there is a fair dispute to be tried as to the meaning of the document on which the claim is based, leave to defend should be given;

(c)  Even if there are unexplained features of both the claim and the defence which are disturbing because they bear the appearance of falsity and disreputable business dealings and questionable conduct, the court should not make tentative assessments of their good or bad faith, and should give unconditional leave to defend; and

(d)  Where Order 14 is sought based on a claim which turns on the construction of a written contract, the court should not entertain such an application where there is conflict on a relevant point of the background matrix.

Whether preliminary requirements are satisfied

66.  According to Mr Fung, P’s claim against D1 and D2 arises from breach of contract, specifically, their failure to pay P under the Supplemental Agreement, quantified as $39,533,250.56 comprising HK$28,584,389 in principal together with HK$10,948,861.56 in accrued interest as at 17 October 2024, calculated as follows:

Item	Amount
Principal amount due under Supplemental Agreement	HK$40,594,389
Less partial repayments by D1 and D2 and credits treated as such by P over the period Feb 2022 to Dec 2023	- HK$12,010,000
Outstanding principal:	HK$28,5894,389
Accrued interest (as of 17.10.24)	HK$10,948,861.56
Total:	HK$39,533,250.56

67.  P claims it is a salient feature of this case that until these proceedings D1 and D2 had never disputed but on the contrary have repeatedly and expressly acknowledged both orally as well as, more significantly, in contemporaneous writing – in repeated and copious WeChat communications – adduced in evidence before the Court their liability owed to P.

68.  As such, P says that it has fully satisfied the preliminary requirements set out under Order 14, rules 1-2 of the Rules of the High Court (“RHC”):

(a)  D1 and D2 have given notice of intention to defend;

(b)  P has served the statement of claim on D1 and D2;

(c)  Shih made the affirmation in support of the Order 14 application and stated that in her belief neither D1 nor D2 has any defence to P’s claim in these proceedings.

69.  The burden has therefore shifted to D1 and D2 to satisfy the court why judgment should not be entered against them. In other words, whether any of the defences raised by Ds are arguable.

Authorisation Letters and Statement of Truth

70.  Before going into the defences raised by Ds, there is a side issue about the authorisation letters and statement of truth raised by Ds in their submissions which I would like to deal with briefly here first.

71.  In October 2022, P was brought into and held under “soft restrictions” at the Detention Centre to assist in the investigation of possible offences concerning the issuance of invoices. The trial concerning the offences took place on 19 December 2024 and P was released on 8 January 2025.

72.  Whilst he was held under soft restrictions, P instructed FLY to commence these proceedings and signed:

(a)  an authorisation letter dated 23 September 2024 authorising his long-serving PA Shih to give instructions to FLY and to make an affirmation on P’s behalf in respect of the intended Mareva injunction application against D1 and D2;

(b)  an authorisation letter dated 15 November 2024 authorising Shih to give instructions to FLY in relation to these proceedings and to make an affirmation on P’s behalf in respect of the intended application for summary judgment against D1 and D2; and

(c)  a statement of truth dated 1 November 2024 to verify the contents of the statement of claim.

73.  D1 and D2 have respectively adduced opinions on PRC law to the effect that under the applicable PRC laws, only P’s immediate family members and P’s criminal defence lawyers could visit him while P was held under custody. Given that FLY and Shih are not P’s criminal defence lawyers in the Mainland, D1 and D2 allege that either the aforesaid documents were not signed by P, or the documents were passed to P for his signature and returned to FLY in breach of the applicable PRC laws.

74.  I agree with Mr Fung that this point is a complete red herring. As confirmed by P on oath, the aforesaid documents were prepared by FLY, then passed by his PAs (respectively Shih in Hong Kong and Wu in the Mainland) to P’s Mainland criminal defence attorneys (being Mr He Gang賀剛 of 湖南崇民律师事务所), who passed the same to P for his review and signature when they visited him at the Detention Centre. The Mainland criminal defence attorneys thereafter sent the signed documents to P’s PAs who thereupon passed the originals to FLY.

75.  In my judgment, there is no substance in Ds’ accusation that P was not in the position to provide the necessary authorizations to FLY to issue the proceedings.

76.  In any event, as Mr Fung submits, P has following his release from custody on 8 January 2025 sworn in P 1^st on 25 March 2025 to confirm the truth of the contents of Shih 1^st.

77.  Thus, I find there is nothing in these technical objections of Ds. Therefore, insofar as Ds’ defence is relying on the technical objections to the unauthorized letters and statement of truth, that must fail.

D1 and D2’s Defences

78.  I would like to firstly summarise D1 and D2’s defences below and would then deal with them under several different headings.

D1’s Defences

79.  Mr Li in D1’s Submissions has summarized D1’s defences under the following headings:

(a)  D1 was not a party to the Guarantee: (§§27-33 of D1’s Submissions);

(b)  The Supplemental Agreement is void for common mistake: (§§34-40 of D1’s Submissions);

(c)  D1’s liability as surety (if any) should have been discharged by reason of P’s conduct: (§§41-46 of D1’s Submissions); and

(d)  No Mareva injunction should be granted due to (i) no good arguable case; and (ii) no risk of dissipation: (§§50-56 of D1’s Submissions).

80.  Mr Li has supplemented the above arguments contained in D1’s Submissions in his oral submissions during the 2-day hearing in court.

D2’s Defences

81.  As mentioned above, Mr Khaw has summarised D2’s defences in D2’s Submissions which perhaps can be conveniently grouped under the following headings:

(a)  The Supplemental Agreement should be set aside on the grounds of common and/or unilateral mistake based on the terms of the Supplemental Agreement;

(b)  The Supplemental Agreement should be set aside due to the mistake regarding the factual circumstances in which the Supplemental Agreement was signed;

(c)  The Guarantee should be discharged as a matter of law and whether such discharge (if established) would render the Supplemental Agreement unenforceable;

(d)  P has failed to demonstrate a real risk of unjustified dissipation or removal of assets from the jurisdiction on the part of D2 which would justify a continuation of the ex parte Mareva injunction and/or post-judgment Mareva injunction.

82.  Besides the above defences raised by Mr Khaw on behalf of D2, he has also mentioned a side issue of whether the letters of authorization and statement of truth while he was still under detention in the Mainland was valid and have any legal effect.

83.  I have already dealt with that side issue above.

Issues to be determined by the Court

84.  I shall deal with the above defences put forward by Mr Li on behalf of D1 and Mr Khaw on behalf of D2 in the ensuring paragraphs.

(A)  Was D1 a party to the Guarantee?

85.  This is a defence unique to D1 and not relied on by D2. In Mr Li’s words, it is a “cut throat” defence of D1 vis-à-vis D2.

86.  D1 alleges in his affirmation that he “was not a party to the [Guarantee]” such that “even though [D1] had signed the [Supplemental Agreement], the same is unenforceable against [him] for want of consideration”.[2]

87.  In his oral submissions, Mr Li pointed out that in the Guarantee itself, only the name of D2 was printed next to the title of Party B (乙方) on the first page of the document but not that of D1. As D1’s name was never printed in the document as Guarantor (擔保方) or Party B (乙方), Mr Li submits therefore that it is most likely that he was signing in the capacity of that of a witness rather than a guarantor.

88.  Contrary to Mr Li’s observation, I noticed that D1 has signed on page 1 of the Guarantee in between the words “Party B” and the words “Guarantor” (擔保方) and next to the printed name of D2 (李朝波). D2, like P, had signed his name at the top right hand corner of the document. On page 2 of the Guarantee, neither P nor D2’s names were printed on the documents, only the words Party A (甲方) and Party B (乙方) were. This time, D2 signed immediately next to the words Party B (乙方) and D1 signed next to him, on the same line.

89.  In my judgment, this defence of D1 is clearly unarguable and not capable of belief for, inter alia, the following reasons highlighted by Mr Fung:

(a)  The indisputable documentary evidence shows that not only has D1 signed the Guarantee, he signed it twice (first one on page 1 at the beginning of the document and the second one on page 2 at the end of the document).

(b)  D1 signed the Guarantee twice clearly and unequivocally as “乙方” and not as a witness.

(c)  The evidence shows that D1 is a sophisticated financial professional who must know exactly what he was doing when he signed the Guarantee.

(d)  Following the execution of the Guarantee on 20 April 2018, neither D1 nor D2 ever once disputed their personal liability in regard to:

(i)  the Guarantee or

(ii)  the Supplemental Agreement

until February 2025 (when D1 filed D1 1^st) being 4 months after P commenced these proceedings.

(e)  On the contrary, as Mr Fung has pointed out, D1 and D2 expressly affirmed and confirmed their liability to P in writing as evidenced by the extensive WeChat communication inter partes over an extremely long period namely 2019 to 2022.

(f)  D1 signed and initialed each page of the Supplemental Agreement including, in particular, page 1 of the Supplemental Agreement containing Recital 3 expressly providing that D1 voluntarily signed the Guarantee qua guarantor (擔保方) and not as a witness (於2018年4月20日，投資方與擔保方在平等自願的基礎上共同簽署了《投資擔保協議》).

(g)  Following the signing of the Supplemental Agreement in November 2020, D1 and D2 have made HK$12,010,000 in Partial Repayments to P, each time clearly and unequivocally acknowledging, at the very least by conduct, their liability under the Guarantee and the Supplemental Agreement.

90.  Thus, in my judgment, insofar as D1 relies on the defence that he is not a party to the Guarantee, it must fail. I find D1 has signed his name as a party to the Guarantee and not as a witness.

(B)  Should the Supplemental Agreement be set aside due to common and/or unilateral mistake based on the terms and/or factual circumstances of the Supplemental Agreement

D1’s defence based on common / unilateral mistake

91.  Mr Li in D1’s Submissions argues the Supplemental Agreement is void for common mistake.

92.  D1 says that the loan amount has three components: (i) 50% of loss of Capital Investment (HK$31.5 million); (ii) 50% of loss of the 8% expected return (~HK$5.05 million); and (iii) 50% of related fees and expenses (~HK$4.04 million). However, Mr Li submits that, on a proper construction of Clauses 4-5 of the Guarantee, Party B only guaranteed a minimum return of 8%. The Guarantee was silent on the Capital Investment (HK$100 million).

93.  D1 says that P’s contention it was guaranteed a “net profit” of at least 8% per annum on P’s Capital Investment is unsupported, and even contradicted, by the text of the Guarantee:

(a)  Clause 4 of the Guarantee states that “乙方承诺甲方的总投资款10000 万港币在退出结算时总收益不低于年化 8%”. This is a reference to “total profits”, not “net profits” (净收益).

(b)  Clause 5 of the Guarantee is even clearer. It only requires Party B to pay profits calculated at 8% per annum on the basis of the principal sum of HK$50 million (being half of total investment capital contributed by P) based on the actual number of days in the investment period (“乙方承诺在投资退出结算时，根据5000万港币的使用期限，按照年化 8% 的固定收益支付給甲方，固定收益按照实际使用天数计算”).

(c)  Nothing in the Guarantee states that Party B would guarantee the entire amount of P’s Capital Investment, ie HK$100 million.

94.  Mr Li submits that judging from the language of the Guarantee, and considering the fact that the parties had a positive outlook of the ListCo’s prospects at the time, it was more likely than not that P only focused his minds on the expected return, and therefore did not consider it necessary to seek protection in respect of his capital contribution. In any event, Mr Li says that interpretation of contract is an objective exercise. If in spite of linguistic problems the meaning of the terms are clear, it is the meaning which must prevail. The court will not rewrite the parties’ bargain for them just because one of them turns out to have made a bad bargain: Jumbo King Ltd v Faithful Properties Ltd & Ors (1999) 2 HKCFAR 279 at 296H-I.

95.  D1 says that if Ds’ interpretation of the Guarantee is accepted, it follows that the Supplemental Agreement was entered into on the basis of a common mistake: both parties misunderstood the scope and effect of the Guarantee as covering the Capital Investment of HK$100 million, and agreed on the purported Loan Amount on a fundamentally erroneous basis. This is a mistake which goes to the root of the Supplemental Agreement. Thus, it would render the agreement void.

96.  As Mr Li has indicated in his oral submissions, he is content to place himself and his client’s case entirely in the hands of Mr Khaw when it comes to the defence of mistake.

97.  This is where I would like to explore Mr Khaw’s arguments in greater details and why in my view D1 and D2 may have an arguable defence based on mistake in this case.

D2’s defence based on common / unilateral mistake

Relationship between P and Ds

98.  In order to understand why D2 claims there may be a common and/or unilateral mistake as to the terms of the Supplemental Agreement as well as the factual circumstances in which the Supplemental Agreement was signed, I think it is important to understand the alleged relationship between P on one end and D1 and D2 on the other and the circumstances leading up to the signing of the Guarantee, at least seeing them from D2’s point of view.

99.  It is not seriously disputed amongst the parties that P and D2 first met in around 2015 and later became close friends. In turn, D2 came to know D1 through a work occasion in or around 2002.

100.  According to D2, having sold his 3 real estate facilities in the Mainland and realized significant profit, P was keen to explore investment opportunities to diversify his portfolios and further consolidate his financial position: (D2 1^st §§5, 10).

101.  It was on 11 April 2018 that D1 proposed an investment opportunity to D2, which involved the sale of convertible bond/equity derivatives in the ListCo. As the investment required a substantial capital outlay and D2 had already invested in another project, D2 declined D1’s invitation to join him.

102.  Since D1 asked D2 if others such as P would be interested in the said investment opportunity, D2 subsequently informed P of the same. P immediately expressed a keen interest in the same. D2 thus passed on the information received from D1 and told P that he could contact and discuss with D1 directly: (D2 1^st §§19-21).

103.  P decided to invest HK$100 million into the ListCo. As he was not familiar with D1, P required D1 and D2 to provide a guarantee in relation to the anticipated return of the investment. At the same time, P also suggested that D2 would be entitled to share the profits in the transaction as a way of expressing gratitude to him for the support he provided during P’s challenging times: (D2 1^st §§21-23).

104.  In respect of the Guarantee, it was very broadly discussed that D1 and D2 would guarantee 8% of the investment return, the guaranteed period being 1 year within the investment. It is not disputed by P that the parties never actually discussed any guarantee of the Capital Investment (ie HK$100 million) whether prior to or during the signing of the Guarantee: (D2 1^st §§24, 28).

The terms of the Guarantee

105.  The Guarantee was a short document with 6 clauses only. They are:

(a)  “鉴于甲方全额出资购买嘉实基金提供的膳源控股(01632)的股票投资收益权，而乙方作为项目推荐方和担保方享有总投资额50%的投资收益权，甲乙双方经友好协商，达成如下条款：

(1)  乙方提供通过购买嘉实基金的SVP收益权参与膳源控股的股票投资机会，负责尽职调查并确保投资成功；

(2)  甲方全额出资总投资款10000万港币投资本金，200万港币为认购费(1%) 以及1年的基金管理费(1%)；

(3)  甲乙双方同意在投资退出时，甲方享有总投资款10000万港币中5000万港币的全部收益，乙方享有总投资款中另外5000万港币的全部收益；

(4)  乙方承诺甲方的总投资款10000万港币在退出结算时总收益不低于年化8%，保证期限为1 年，如果低于年化8%，差额部分由乙方全额补齐，收益部分按照实际使用天数计算；

(5)  乙方承诺在投资退出结算时，根据5000万港币的使用期限，按照年化8%的固定收益支付给甲方，固定收益按照实际使用天数计算；

(6)  乙方同意为甲方的投资提供个人无限责任担保。”

106.  Mr Khaw has helpfully summarised the terms of the Guarantee in English as follows:

(a)  Party A would contribute HK$100 million to acquire shares in the ListCo;

(b)  Party B would conduct due diligence and ensure that Party A could successfully acquire HK$100 million’s worth of shares in the ListCo;

(c)  Party B would be entitled to the investment return derived from half of the HK$100 million (ie HK$50 million)’s worth of shares to be acquired by Party A;

(d)  Upon the end of the investment or exit from the same (退出结算), Party B would guarantee 8% of the investment return, the guaranteed period being 1 year within the investment. If the investment ended in less than 1 year and the return was less than 8%, Party B would pay to Party A the shortfall, calculated at HK$50 million x (8% – actual percentage of investment return) x number of days of investment ÷ 365 days.

107.  Contrary to P’s contention in P 1^st §19 and P’s Submissions at §54, I agree with Mr Khaw that it is clear from the contents of the Guarantee that the maximum guaranteed amount was limited to Party A’s (ie P’s) share of the investment returns as specified in the Guarantee. There was never any mention in the document that the return of the amount of P’s Capital Investment (ie HK$100 million) would be guaranteed. In fact, it would not be possible for P to expect such return since the principal sum was actually used by P to acquire the equity derivatives which were converted into publicly listed shares.

P’s sale of the shares in the ListCo to Kilmorey

108.  In my view, it is also important to understand the following events prior to the signing of the Supplemental Agreement and the context in which it was signed.

109.  It is obvious that the signing of the Supplemental Agreement are closely related to P’s sale of the shares in the ListCo to Kilmorey.

110.  On or about 20 April 2018, D1 introduced P to Cai, who purportedly intended to acquire the shares in the ListCo from P at a premium. D2 was not involved in that transaction: (See D2 1^st §30).

111.  On or about 25 April 2018, P invested HK$100 million (ie the sum mentioned in the Guarantee) into the ListCo and acquired the unlisted equity derivatives (“the Derivatives”) carrying a right to convert the same into 24,301,337 publicly listed shares in the ListCo.

112.  On 21 August 2018, P converted the Derivatives into 24,301,337 publicly listed shares in the ListCo.

113.  As mentioned above, on 22 August 2018, P and Kilmorey (being a corporate vehicle wholly beneficially owned and controlled by Cai’s wife) entered into a sale and purchase agreement (“SPA”), under which P agreed to sell 24,301,337 shares in the ListCo to Kilmorey for HK$200 million.

114.  According to the SPA entered into between P and Kilmorey:

(a)  The total consideration for P’s sale of 24,301,337 shares in the ListCo to Kilmorey was HK$200 million (Clause 3.1);

(b)  On or before 28 August 2018, Kilmorey shall pay a 10% non-refundable deposit (ie HK$20,000,000) to P (Clause 3.2);

(c)  Completion shall take place on 10 November 2018 (Clause 1.1);

(d)  On completion, Kilmorey shall pay HK$180,000,000 (ie the balance of the total consideration) to P, and P shall transfer the shares to Kilmorey (Clause 4.1).

115.  On 24 August 2018, the shares of the ListCo were split, with each share with a par value of $0.01 being split into four shares with a par value of $0.0025 each (“Share Split”). Following the Share Split, the 24,301,337 shares in the ListCo then held by P were split into 97,205,348 shares.

116.  However, contrary to the terms of the SPA and without D2’s prior knowledge or consent, P unilaterally transferred 58,005,548 shares (“Shares”) (the aggregate value of which was about HK$85,848,211.04) in the ListCo to Kilmorey on 29 August 2018 before the completion date and without receiving the total consideration from Kilmorey. Further, the cheque of HK$20,000,000 provided by Kilmorey for the non-refundable deposit was dishonoured: (D2 1^st §§36-37).

117.  Upon being told by P in around September 2018 of the said developments, D2 was stunned by P’s transfer of the Shares to Kilmorey and also suggested that P should report the matter to the Police. However, upon the HK$20,000,000 payment later made by Kilmorey, P declined to report the matter to the Police: (D2 1^st §§36-38).

118.  On around 12 November 2018, Cai gave P a cheque for the sum of HK$180 million issued by Kilmorey to P (“the Cheque”) and stated that when the matter regarding the ListCo was resolved, he would notify P to present the Cheque: (D2 1^st §39).

119.  However, the Cheque given by Cai was dishonoured on 29 April 2019, leaving the outstanding balance of HK$180 million unpaid: (D2 1^st §40).

120.  In disregard of D2’s suggestion that the matter be reported to the Police once again, P chose to further negotiate with Cai and Kilmorey, resulting in their execution of certain “Superseding Agreements” to replace the SPA: (D2 1^st §41).

121.  Finally, P commenced HCA 1166/2019 against Kilmorey and Cai whereby DHCJ A Ho SC entered judgment in the sum of $162,057,480 with interest and costs in favour of P.

122.  Even though P was granted judgment against Kilmorey and Cai, P continued to engage in settlement negotiations with Cai and D1, to which D2 was not privy. Meanwhile, P requested D2 to exert pressure on D1 to secure repayment by Cai: (D1 1^st §43).

123.  However, Cai and/or Kilmorey still failed to perform a substantial part of the “Superseding Agreements”, leaving the remaining principal balance of around HK$163 million and the outstanding interest unpaid: (D1 1^st §44).

124.  I accept it was against the above background and in the above context that the Supplemental Agreement was entered into between the parties in this case.

The Supplemental Agreement

125.  In my view, it is quite clear that it was against the failure of Cai and/or Kilmorey to repay P (despite the judgment obtained by P against them), that P, D1 and D2 discussed how to resolve the matter. While D2 suggested P should commence further enforcement actions against Cai promptly, D1 proposed that D1 and D2 could sign a supplemental agreement with P in the event that Cai failed to repay by 30 September 2020: (see WeChat records between the parties at [C2/22/135, 138] and [C2/22/139]).

126.  As Cai failed to repay by the said date, in October 2020, P sent D1 and D2 a draft supplemental agreement prepared by his company in Hong Kong.

127.  D2 alleges (which is not challenged by P) that as the parties were unable to meet in person due to the pandemic during that particular period, P reached out to D2 on several occasions by way of telephone. P told D2 that as Cai was introduced by D1 and they were friends, he was hoping D1 to negotiate more actively with Cai so that all parties could not only recoup P’s losses but could share investment profits instead. According to D2’s case, it was for such reason that P suggested signing a Supplemental Agreement.

128.  Meanwhile, there was substantial hope that P would be repaid because at least enforcement actions could be taken against the shares in the ListCo held by Kilmorey and its affiliates. At all material times, P held 39,200,000 shares in the ListCo. Further, P and his personal assistant Shih represented to D2, and D2 believed, that the 58,005,548 shares in the ListCo (transferred by P to Kilmorey earlier on 29 August 2018) were deposited with the securities firm and nominees of Cai/Kilmorey and that the disposal of these shares was always subject to the instructions of Shih and/or P: (See D2 1^st §§47, 49-52].

129.  I agree with Mr Khaw that P’s bare denial in his affirmation (P 1^st §32) of having represented to D2 as set out above is contradicted by the letter of authorisation issued to P by Kilmorey dated 27 May 2019 in which Kilmorey declared itself to be the actual beneficial owner of 80,730,643 shares in the ListCo through the accounts held by various specified individuals or entities. It further stipulated that Shih would have the right to dispose of the said shares in the ListCo (which means that P still had control over those shares via Shih):-

“为保证和解契约和担保契约的履行，现金力 [ie Kilmorey] 及其最终收益人在此不可撤销的声明，上述上市公司80,730,643股股票金力为实际受益人，金力全权授权Shih Ping Yu 小姐作为上述股票交易的有效签字人及无任何附加条件承担由此授权而导致的所有法律责任，且在没有Shih Ping Yu小姐书面同意的前提下不会进行上述上市公司股票的任何交易，包括但不限于卖出、转仓、质押、抵押及孖展等交易，直至金力支付于和解契约项下欠李先生之剩余本金及利息后方会解除Shih Ping Yu小姐之授权。”

130.  Based on the above, I consider it is reasonable to assume that, at the time, all parties including D2 had reasons to believe that there were good prospects for recovery and restructuring opportunities for the ListCo before the Supplemental Agreement was entered into.

131.  In the circumstances, D2, as shown in his evidence, expressed his willingness to assist P by signing the Supplemental Agreement and also to be a facilitator and communicator to help smoothen the exchanges between P and D1. D2 did not pay close attention to the exact terms of the Supplemental Agreement or go back to review the terms of the Guarantee. He believed what P and Shih represented to him in relation to the outstanding amount under the Guarantee to be accurate and proceeded to sign the Supplemental Agreement accordingly.

132.  In my judgment, the fact that D2 did not verify such information was understandable since the parties at that time simply did not anticipate that the Supplemental Agreement would eventually need to be invoked.

133.  However, it has since come to light that contrary to the parties or Ds’ belief as at the time when the Supplemental Agreement was signed, the alleged outstanding amount under the Guarantee (being the underlying basis of the “loan” referred to in the Supplemental Agreement) was in fact mistaken. Specifically, the Supplemental Agreement was erroneously premised upon D1 and D2 being liable for the “原始投资本金” (original Capital Investment) under the Guarantee, which however had actually never appeared or featured in the terms of the Guarantee itself: (D2 1^st §§54-55, 57).

134.  Further, as submitted by Mr Khaw, contrary to the parties’ or Ds’ belief (as at the time when the Supplemental Agreement was signed) that a substantial number of shares in the ListCo (encompassing at least 58,005,548 shares previously transferred by P to Kilmorey) were deposited with the securities firm and nominees of Cai and/or Kilmorey and that their disposal was always subject to the instructions of Shih and/or P, it transpired to the parties after the signing of the Supplemental Agreement that the shares had already been sold by Cai and/or Kilmorey to third parties for about HK$78 million: (See the Client Transaction Report of Kilmorey Securities Ltd and a summary of the various dissipation of the shares in the ListCo by Cai and/or Kilmorey prepared based on information from, inter alia, Kilmorey’s liquidators).

135.  It is perhaps not surprising that the parties were astonished by such discovery, which at least goes to show that the parties’ risk evaluation before the signing of the Supplemental Agreement was also incorrect.

136.  It is D2’s case that but for the mistaken belief of the parties or Ds as at the time when the Supplemental Agreement was signed, the parties or Ds would not have signed the Supplemental Agreement.

137.  I consider that it is a perfectly reasonable conclusion to draw given the changed circumstances leading to the signing of the Supplemental Agreement.

138.  In any event, I think it is at least arguable to say that P was in breach of his obligations under the Supplemental Agreement by failing to set up a debt recovery group and take necessary steps to recover the outstanding liability from Kilmorey and Cai.

139.  It is D2’s case that on a proper construction or as a matter of implied term, P is only entitled to claim from Ds after the parties have taken the necessary actions against Kilmorey and Cai. In any event, given P’s breach of the Supplemental Agreement, D2 is entitled to raise a counterclaim against P and to rely on a set-off.

140.  Given the events happened prior to the signing of the Supplemental Agreement, I consider that the above matters submitted by Mr Khaw on behalf of D2 (which Mr Li for D1 adopts) are clearly arguable.

Was there any mistake in respect of the terms of the Supplemental Agreement

141.  Further, in my judgment, there are at least several major problems / defects with the terms of the Supplemental Agreement which would make Ds’ defence on common and/or unilateral mistake reasonably arguable.

142.  First and foremost, the terms of the Guarantee and the Supplemental Agreement are clearly very different.

143.  As Mr Khaw has pointed out in his submissions, the terms of the Supplemental Agreement and the terms of the Guarantee are quite different, making it open for the argument whether Ds had mistaken whether they were signing the same thing as they thought they did at the time.

144.  For example, under the Guarantee, the term “原始投資本金” was only mentioned once and only under Clause 2 when it talked about P (as Party A) being the party who had invested HK$100 million as Capital Investment. Under Clause 4, it mentioned that Party B promise that the HK$100 million Capital Investment would yield an annualized return of 8% and for a period of 1 year only. However, the term “原始投資本金” does not appear under Clause 4 nor Clause 5 of the Guarantee. Therefore, on the surface of the documents, it appears that Ds had only guaranteed the 8% annualized return on the HK$100 million Capital Investment paid by P and not the principal sum itself.

145.  However, when it came to the Supplemental Agreement, the terms are quite different. Under paragraph 2 of the recital (《投资担保协议》之补充协议), the following was stated “金力公司承诺自2018 年4 月25 日起半年内无条件以港币200,000,000 元购回上市公司股份，并且担保方自愿对该原始投资本金及最低保证回报(8%/年)等提供个人无限责任担保” These 2 very important elements of “原始投資本金” (Capital Investment) and “最低保證回報 (8%/年)” (minimum guaranteed return (at 8% per annum) are here. As Mr Khaw has submitted, one obvious question to ask is why the Guarantee, for which the Supplemental Agreement was supposed to be based on, did not contain the same term as the Supplemental Agreement if it was intended that Ds were asked to guarantee the Capital Investment as well as the 8% annualized return. The second question to ask is, in the absence of reference to the Capital Investment sum in the Guarantee, why the Supplemental Agreement suddenly and specifically referred to these 2 separate elements.

146.  I agree with Mr Khaw that P has failed to provide a satisfactory explanation in P’s Submissions on this matter.

147.  P’s claims in the present proceedings and application for summary judgment are both premised upon the “loan” allegedly owed by D1 and D2 to P under the Supplemental Agreement: see SOC §§21-25; Shih 3^rd §23. However, as submitted by Mr Khaw, the “loan” as referred to in the Supplemental Agreement was in fact attributable to the parties’ or Ds’ then mistaken belief as to D1 and D2’s obligation under the Guarantee.

148.  Given the above glaring difference in the terms contained in the Guarantee and the Supplemental Agreement, in my judgment, there are triable issues that the Supplemental Agreement is liable to be set aside on the grounds of common and/or unilateral mistake.

Whether mistake was arguable as a matter of law

149.  Mr Khaw submits that D2’s defence grounded on mistake in respect of the Supplemental Agreement is also substantiated in law.

150.  I agree with him.

151.  In Sealegend Holdings Ltd v China Taiping Insurance (HK) Co Ltd & Ors (HCAJ 95/2012, 24 October 2014), Au-Yeung J summarised the doctrine of mistake at §54 as follows:-

(a)  A vital distinction has to be drawn between (a) mistakes as to the factual circumstances in which a contract is made, and (b) mistakes as to the terms of the contract such as the price or contractual description of what was sold. For type (a), only a mistake that is common and fundamental can be relied upon to avoid a contract. A unilateral mistake can only be relied upon to avoid a contract where the mistake is of type (b).

(b)  A mistake is “fundamental” if it “lies at the basis of the contract” and “is so fundamental that it makes the ‘contractual adventure’ impossible, or makes performance essentially different to what the parties anticipated”.

(c)  A “mistake” refers to a positive belief in something which is not in fact true. It does not encompass the situation where a party has simply not thought about a particular issue.

152.  In the present case, for reasons stated above, the Supplemental Agreement was signed by the parties or Ds under a mistaken belief which is plainly fundamental and relates to both the terms of the Supplemental Agreement and also the factual circumstances in which the Supplemental Agreement was made. Insofar as the mistaken belief concerns the terms of the Supplemental Agreement, D2 relies on the matters stated in his submissions regarding the inconsistencies between Ds’ liability under the Guarantee and that under the Supplemental Agreement (which was expressly stated to arise from the Guarantee). Insofar as the mistake belief concerns the factual matrix surrounding the Supplemental Agreement, D2 relies on the matters which I have summed up.

153.  Further, as Mr Khaw has submitted, it is a trite principle of law that any material variation to the terms of the principal contract between the creditor and principal will discharge the guarantor unless the wording of the guarantee prevents so. The guarantor will remain liable only where the alteration to the principal contract is obviously unsubstantial, with no possible prejudice to the guarantor resulting, or where the alteration is inevitably for the benefit of the guarantor. The threshold is very high. The guarantee is discharged when the alteration can potentially cause prejudice or increase the risk borne by the guarantor: Shun Hing Electronic Trading Company Limited v Sunrise Air-Conditioning Company Limited & Ors at §54; and Chitty on Contracts at §48-112.

154.  In the present case, I agree with Mr Khaw that P’s unilateral transfer of a significant number of shares in the ListCo to Kilmorey contrary to the terms of the SPA well before the completion date and without receiving the total consideration from Kilmorey “out of goodwill” (P’s Submissions §18) has clearly diminished the number of shares from which the guaranteed investment return could be derived, and has caused (or can potentially cause) substantial prejudice and risks to D1 and D2 as guarantors. This is further exacerbated by P’s unilateral protracted negotiations and execution of certain “Superseding Agreements” with Kilmorey and Cai to replace the SPA, which have delayed and hindered any timely enforcement actions for the return of the Shares and/or the total consideration under the SPA. By reason of the material departure as submitted above, I agree with Mr Khaw that there is at least a triable issue that the Guarantee shall be discharged as a matter of law, and the parties’ then belief as to D1 and D2’s obligation under the Guarantee when entering into the Supplemental Agreement is fundamentally mistaken. Further, on the basis that the Guarantee shall be discharged, the question which naturally follows is whether the Supplemental Agreement is unenforceable against D1 and D2 for want of consideration.

155.  In this case, I think it is important to bear in mind that the Supplemental Agreement is not a “stand-alone” agreement, which can be independent of or separated from the Guarantee. In fact, it ties in closely with the Guarantee as the title of the document itself suggests. It says 《投资担保协议》之补充协议.

156.  In my view, if the guarantee for the Capital Investment did not appear in the original Guarantee, then it is at least arguable for Ds to say that the liability under the Capital Investment was mistakenly stated in the Supplemental Agreement. In other words, if the original Guarantee did not contain any guarantee regarding the return of the最低保證回報 (minimum guarantee return) on the Capital Investment, then it is at least arguable to say that the liability stated therein cannot stand.

(C)  Discharge by reason of P’s conduct

157.  In D1’s Submissions, Mr Li also relies on the defence that D1’s liability as surety (if any) would have been discharged by reason of P’s conduct.

158.  This line of defence runs as follows according to D1.

159.  The subject matter of the Guarantee started off as a rather safe investment:

(a)  the Guarantee was executed against the context of the expected sale of ListCo shares between P and Cai/Kilmorey. As D1 explained, although the SPA was only signed in August 2018, the broad outline of the deal was already reached between P and Cai/Kilmorey back in April 2018.

(b)  an important expectation (as is common ground between the parties) under the deal was that P would selling the ListCo shares to Cai/Kilmorey at a premium. In other words, a profit was practically guaranteed.

(c)  D1/D2 agreed to provide a personal guarantee in respect of the intended investment against this context.

160.  However, the investment eventually fell through, not through any fault on D1/D2’s part, but a series of highly irregular and inexplicable conduct on P’s part:

(a)  First, P transferred 58,005,348 ListCo shares to Kilmorey on 29 August 2018 without having received their corresponding consideration. In fact, P only received a 10% deposit (HK$20 million) on 3 September 2018, after the first cheque delivered by Kilmorey was dishonoured.

(b)  Second, even after Kilmorey’s default, P made no attempt to recover the lost shares. Instead, P blindly accepted an “authorisation letter” dated 27 May 2019 signed by Cai’s wife with purported to authorise Ms Shih (P’s agent) to operate accounts in which the ListCo shares were held, without conducting due diligence or taking any steps to verify if the purported account holders did hold the ListCo shares.[3] As it transpired, the ListCo shares were dissipated beyond P’s reach.[4]

(c)  Third, Cai is known to have substantial assets, including properties in the PRC worth around RMB 271 million and properties in Hong Kong worth around HK$300 to 400 million.[5] The fact that some of these properties may not be registered in Cai’s name (but in the names of his family members)[6] is not a complete answer given that P seems to also acknowledge that they were (in substance) “held” by Cai.[7] P provided no satisfactory explanation for not going after those registered owners (which are likely holding those properties as mere nominees/ trustees for Cai).

161.  Mr Li submits that based on the above there is at least a triable issue as to whether P was guilty of conduct amounting to connivance such that D1’s liability as surety (if any) ought to be discharged. In his submission, it is unsafe and unfair to summarily hold D1 liable for all of P’s loss (even if the Guarantee and the Supplemental Agreement are otherwise found to be enforceable against him).

162.  The above defence has been further expanded under D1’s 1^st in the following manner.

163.  D1 suggests that the Supplemental Agreement is unenforceable “by reason of [P’s] failure to disclose material facts about the unusual arrangements between [P], Kilmorey and Cai”: (D1 1^st §55), such “unusual arrangements” comprising:

(a)  “First, under the [Former Agreement], […] [P] agreed to transfer the 58,005,348 ListCo shares (nearly 60% of the total number of shares to be transferred to Kilmorey) when Kilmorey had only paid a deposit in the sum of HK$20,000,000 (approximately 16.7% of the agreed consideration). This arrangement defies commercial sense as it exposes [P] to unnecessary risks and complications in the event of Kilmorey’s failure to pay”: (D1 1^st §43);

(b)  “Second, the Authorisation Regime (to be defined below) and [P’s] reliance thereupon were concealed from [D1] when [D1] was asked to sign the [Supplemental Agreement]”: (D1 1^st §44).

164.  Mr Khaw made similar submissions on the issue of discharge in D2’s Submissions. Some of the points I have already mentioned above. I shall not repeat them here.

165.  Mr Fung submits that D1’s suggestion is untenable as a matter of law due to the following:

(a)  The law does not impose on parties who are negotiating for a contract a general obligation to disclose information. The starting point is that each negotiating party may remain silent, even as to facts which he believes would be operative on the mind of the other: Cartwright on Misrepresentation, Mistake and Non-disclosure (6^th edition) at §16-02.

(b)  Parties negotiating a contractual compromise, such as the Supplemental Agreement which compromised P’s claim against D1 and D2 under the Guarantee, do not in general owe each other duties to disclose information relating to the claim: Cartwright at §17-33.

166.  With greatest respect to Mr Fung, I am afraid I do not share his views on this matter.

167.  First, I think Mr Khaw was right when he submitted that the aforestated principle cited by Mr Fung does not apply in our case. As stated in §15-10 of Cartwright, having cited the case of Smith v Hughes (1871) L.R. 6 Q.B. 597 at 603, the learned author went on to say that “a mistake made by the claimant relating to the factual qualities or characteristics of the subject-matter, which is not provided for expressly or impliedly in the contract and where the other party has not contributed to the mistake, has no legal consequence. The claimant is simply bound by the contract.”

168.  Thus, I agree with Mr Khaw that this passage, including the passage cited by Mr Fung at §17-33 of Cartwright is about a party’s understanding of the qualities or characteristics of the subject matter and not the terms of the agreement. However, in this case, as Mr Khaw has repeatedly emphasized in his submissions, Ds are relying on both the mistake as to terms of the agreement as well as the mistake to the de facto circumstances of the case. I agree with Mr Khaw that if the mistake is so fundamental that it lies at the basis of the contact, it will make the contractual adventure impossible or makes performance essentially different to what the parties have anticipated.

169.  Hence, I consider it is arguable for Ds to say that the Guarantee and the Supplemental Agreement ought to be discharged based on the above submissions made by D1 and D2.

Conclusion on Summary Judgment Summons

170.  In conclusion, based on the above discussions, I am of the view that there are triable issues in this case and unconditional leave should be given to D1 and D2 to defend the action.

(II)  The Mareva Injunction Summons

Applicable principles

171.  P submits that, in order to obtain Mareva relief, a plaintiff must show:

(a)  a good arguable case on its substantive claims;

(b)  the defendant has assets within the jurisdiction;

(c)  the balance of convenience favours the grant of the injunction; and

(d)  there is a real risk of dissipation or removal of assets from the jurisdiction which would render plaintiff’s judgment of no effect.

HKCP §29/1/65.

172.  Mr Fung submits that the court is more ready to grant post-judgment Mareva injunctions than before judgment: Beijing Renji Real Estate Development Group Co Ltd v Zhu Min [2022] 4 HKC 116 at §69 per G Lam JA, citing with approval China Citic Bank Corporation Ltd (Quanzhou Branch) v Li Kwan Chun [2018] HKCFI 1800 at §§26-32 per DHCJ Keith Yeung SC (as he then was).

Good arguable case

173.  P says that to establish a good arguable case, it is sufficient for P to show a case which is “more than barely capable of serious argument, and yet not necessarily one that the judge believes to have a better than 50% chance of success”. P is not required to show a “much better case, or argument, than the defendant”. Thus, the existence of a good arguable defence does not negate a good arguable case: HKCP §29/1/66.

174.  Mr Fung submits that P enjoys unquestionably a good arguable case against D1 and D2.

Assets within the jurisdiction

175.  For establishing assets within the jurisdiction, Mr Fung submits the following.

176.  D1:

(a)  maintains an account with HSBC in Hong Kong from which he transferred HK$500,000 to P in December 2020;

(b)  is the CEO of Harvest Capital;

(c)  was the Responsible Officer of Harvest Investments, a wholly-owned operating subsidiary of Harvest Fund, one of the largest Chinese institutional asset managers managing HK$207 billion in AUM;

(d)  is a NED and an INED of two publicly listed companies quoted on the SEHK respectively, and enjoys therefrom annual director’s fee incomes of respectively HK$300,000 and HK$100,000;

(e)  resides in a flat in Imperial Cullinan, 10 Hoi Fai Road, next to Olympic Station in Kowloon.

177.  D2:

(a)  is the Chairman, Executive Director and CEO of China City being a publicly listed company quoted on SEHK;

(b)  holds 678,592,000 publicly listed shares (around 22%) in China City with a market value of around HK$30 million as of today;[8]

(c)  maintains an account with HSBC in Hong Kong from which he transferred HK$800,000 to P in November 2020.

Risk of dissipation

178.  On risk of dissipation, Mr Fung has cited the following leading authorities.

179.  In Convoy Collateral Ltd v Cho Kwai Chee & Ors [2020] 6 HKC 81 (CA), Lam VP (as he then was) restated the principles relating to the assessment of risk of dissipation as follows:

“[53] […] The ultimate question is whether [Plaintiff] succeeds in showing objectively there is a solid basis for concluding that there is a real risk of unjustified dissipation of assets by a defendant. That question is to be answered by examining the evidence holistically. Evidence of dishonest and fraudulent conducts or other serious wrongdoings which form the basis of the claims, and which reflect adversely on the integrity of the defendant could point powerfully towards an inference of such risk” [emphases added].

180.  In China Medical Technologies, Inc (in liquidation) & Ors v Samson Tsang Tak Yung & Ors [2022] HKCA 41 (CA), Chow JA further emphasised at §38 that:

“[…] conduct which may be regarded as being of “low commercial morality” is not necessarily relevant to risk of dissipation, eg putting up poor excuses to get out of a bargain in Crete Maritime Corp v Emirates Shipping Line [2017] 5 HKLRD 345, breach of contract without solid evidence pointing to dishonesty or any attempts to conceal inventory or proceeds in Eastman Chemical Ltd v Heyro Chemical Co Ltd (No 2) [2012] 3 HKLRD 307, or coercion and duress in Holyoake v Candy [2018] Ch 297. Where the underlying claim advanced against a defendant involves dishonest or fraudulent conduct or other serious wrongdoings, it is necessary to examine whether the conduct or wrongdoings in question is itself indicative of, or relevant to, the risk of dissipation” [emphases added].

181.  Mr. Fung therefore submits that it is unnecessary to show that a defendant intends to deal with his assets with any nefarious (wicked or criminal) intent, or with the purpose or object of ensuring that any judgment will not be met. The test is an objective one – whether there is a risk that a judgment may not be satisfied because of a risk of unjustified dealing with asset. In the rare occasion where the existence of nefarious intent can be established, the inference that there is real risk of dissipation will no doubt be much stronger: China Citic Bank, supra, at §§19-25 per DHCJ Keith Yeung SC (as he then was).

D1 and D2’s risk of dissipation

182.  Further, Mr Fung invites the court to assess D1 and D2’s risk of dissipation under the following factual matrix.

183.  First, D1 and D2 have repeatedly and expressly assured P in writing that they would perform their payment obligations under the Guarantee.

184.  Second, the terms of the Supplemental Agreement were finalized with each of D1 and D2’s input.[9] D1 and D2’s repeated and express assurances concerning the Guarantee therefore apply equally to the Supplemental Agreement.

185.  Third, P has already made substantial concessions of his rights, unilaterally waiving over HK$36 million of D1 and D2’s liability under the Guarantee.

186.  Fourth, P has made repeated demands for repayment by sending different letters / documents to each of D1 and D2. D1 and D2 acknowledged receipt of these demand letters, never once disputing their contractual payment obligation under the Supplemental Agreement. In other words, D1 and D2 by conduct admit liability under the Supplemental Agreement.

187.  Fifth, in relation to P’s claim against Kilmorey and Cai in HCA 1166/2019, D2 considered an asset protection order to be appropriate (expressly admitted on WeChat) given Cai’s repeated assurances and failure to pay P. D1 never once disputed his liability to P. Nor did D1 ever contradict D2’s suggestion that P should seek an asset protection order against Cai. D2’s assessment applies equally to himself and D1 in the present case.

188.  Mr Fung submits that against the above factual matrix, D1 and D2’s repeated and express assurances of payment, followed invariably by abject failure to pay, evidence a real risk of dissipation, in that:

(a)  Either D1 and D2 had no financial ability to pay P when they entered into the Guarantee and/or Supplemental Agreement, in which case they would be liable for fraudulent misrepresentation in that they had no intention of carrying out their obligations when they entered into the contract (see Re Eastgate [1905] 1 KB 465 at 467 per Bingham J; Leung Ping Shing Roger v Lee Kwok Kei (Unrep., HCA 778/2007, 16.6.11) at §119 per Recorder Shieh SC); or

(b)  D1 and D2 are able to pay P, but deliberately chose to spend their money on something which they regard as more important (see Shepherd Construction Ltd v Berners (BVI) Ltd [2010] EWHC 763 (TCC) at §§9-12 per Coulson J).

189.  Whichever be the case, Mr Fung submits that there is a real risk that the judgment obtained by P in this Action (similar to the Judgment obtained in HCA 1166/2019) will not be satisfied because of a risk of unjustified dealing with assets:

(a)  If D1 and D2 never intended to perform their contractual obligations, they would be liable for fraudulent misrepresentation. Their fraud would be sufficient for the court to infer a risk of dissipation;

(b)  If they deliberately chose to spend their money elsewhere instead of performing their contractual obligations, there is a real risk that they would do the same in respect of the judgment obtained by P in this Action. D1 and D2 would simply spend their money elsewhere, instead of paying the judgment debt.

190.  Sixth, D1 and D2 have now “rais[ed] thin defences after admitting liability” under the Guarantee and the Supplemental Agreement: Gee on Commercial Injunctions (7^th ed) at §12-041(9). This underscores D1 and D2’s deliberate attempt to evade their contractual obligations.

Risk of dissipation specific to D1 & D2

191.  In addition, Mr Fung has summarized the risk of dissipation specific to D1 and D2 in §§84 to 91 of P’s Submissions.

192.  I do not propose to repeat them here save to say that those incidents in my view more point to the fact that Ds were trying to avoid facing the music and paying P under the Guarantee and / or the Supplemental Agreement than trying to dissipate their assets.

Balance of convenience

193.  Under this heading, Mr Fung submits that if Mareva injunctive relief is granted against D1 and D2, while they will be restrained from dealing with their respective assets up to the restraint value, they will not be prevented from paying ordinary and legal expenses, given the standard exceptions in a Mareva injunction order.

194.  D1 and D2 are also protected by P’s undertaking in damages. P still holds 31,200,000 shares in the ListCo, 19,600,000 beneficially and 11,600,000 as custodian on behalf of D1 and D2. Given the current share price of ListCo (around $0.16 per share), the shares beneficially owned by the P have a market value of around HK$3.1 million.

195.  On the other hand, if Mareva injunctive relief is refused, there is a real risk that any judgment obtained in these proceedings (similar to Judgment in HCA 1166/2019) might be unsatisfied, leaving P with yet another empty judgment despite his substantial concessions already made to D1 and D2 and their repeated admissions of liability.

196.  In the circumstances, P submits that if the court is satisfied that a real risk of dissipation exists, the balance of convenience tilts strongly in favour of granting the injunctive relief.

(D)  Whether the Mareva Injunction should be continued and / or post-judgment Mareva injunction should be granted?

The relatively high standard required as a matter of law

197.  As Mr Li submits, a Mareva injunction is a draconian remedy and a weapon of last resort. It should not be granted in the absence of a clear basis on which the court can conclude that there is a real risk of dissipation of assets. The standard of proof is “relatively high”: see Re Chau Cham Wong Patrick (A Bankrupt) [2016] 2 HKLRD 278 at §§31-32.

198.  The relevant principles governing the approach to assessing risk of dissipation have been summarised by Cheng J in 浙江大通輕紡有限公司v He Bin & Anor [2022] HKCFI 1987 at §11:

(a)  The ultimate question is whether a claimant succeeds in showing, objectively, a solid basis for concluding that there is a real risk of unjustified dissipation of assets by a defendant.

(b)  What must be threatened is unjustified dissipation; the purpose of a Mareva injunction is not to provide a claimant with security.

(c)  In order to establish a sufficient risk of dissipation, it is not enough merely to establish a good arguable case that the defendant has been guilty of dishonesty; the question is whether such dishonesty points to the conclusion that assets may be dissipated. It is also necessary to take account of whether there appears to be properly arguable answers to the allegations of dishonesty.

(d)  The courts have been vigilant in scrutinizing the allegations in a claim with care before drawing the inferences of risk of dissipation.

(e)  Dishonest or wrongful acts are themselves not acts of dissipation may nevertheless be relevant to the issue of dissipation.

(f)  Evidence of dishonest and fraudulent conduct or other serious wrongdoing which form the basis of the claims, and which reflect adversely on the integrity of the defendant, may point powerfully towards an inference of such risk.

199.  Further, unexplained delay in bringing an application for Mareva injunction is always a relevant consideration when assessing whether there is a real risk of dissipation: Re Chau Cham Wong Patrick at §33.

The standard required to demonstrate real risk of dissipation

200.  It is a common ground between the parties that before any Mareva relief can be granted, it is incumbent upon the applicant to demonstrate a solid basis that there is a real risk of unjustified dissipation or removal of assets from the jurisdiction on the part of the defendant: Convoy at §53.

201.  As further held by Anthony Chan J in Crete Maritime Corp v Emirates Shipping Line DMCEST [2017] 5 HKLRD 345 at §§21-24, it would not be right to infer a real risk of dissipation unless the defendant’s conduct is at or very close to fraud or dishonesty. In The Export-Import Bank of China v Liu Qingping [2018] HKCFI 1840, Lisa Wong J also pointed out at §120 that “unacceptably low standard of commercial morality” or “questionable integrity” is a “very serious allegation, for which the Court would expect nothing less than cogent proof”.

Whether any risk of dissipation on the part of D1?

202.  First, as Mr Li for D1 has submitted, this is an ordinary contractual claim. No allegation of fraudulent misrepresentation or fraud has been pleaded against Ds in the SOC. Only damages for breach of the Supplemental Agreement has been claimed as relief under the SOC.

203.  Second, I agree with Mr Li that P’s reliance on D1’s failure to pay despite “repeated and express assurances” must be seen in the light of D1’s concerns over his own perceived threats from P, which allegedly led him in signing the Supplemental Agreement in the first place.

204.  Third, I think one must not equate a mere failure to pay or unwilling to pay by a defendant as a risk of him dissipating his assets. They are two different things. Where there is evidence pointing to the defendant’s willingness to engage in continuous negotiation, this would negate any suggestion of risk of dissipation of assets: see eg Eastman Chemical Ltd v Heyro Chemical Co Ltd (No 2) [2012] 3 HKLRD 307 §§36-38. In the case of D1, the evidence shows that D1, rather than distancing himself from P in his perceived threats from him, D1 tried his best to find a purchaser (ie綠景（中國）地產投資有限公司) to acquire the remaining 39,200,000 ListCo shares held by P to mitigate P’s loss, which led to P receiving approximately HK$12 million from the purchaser. Further, according to P’s own case, D1 was in continuous discussions and negotiations with P at least up to September 2024 (Shih 1^st §63(4)), ie one month before P applied for the ex parte Mareva injunction. While the content of such discussions is disputed by the parties, I agree with Mr Li that the very fact that D1 was willing to participate in such discussions does not sit well with P’s suggestion that there is any real risk of dissipation by D1.

205.  Fourth, D1 says that P’s substantial delay in applying for the Mareva relief negates any risk of dissipation. D1 submits that P’s cause of action has accrued since as early as October 2021, there was no valid explanation for why P only saw fit to apply for Mareva relief, on an ex parte basis in October 2024. Mr Li submits that in this case, there was neither any urgency nor secrecy to justify an ex parte application. I agree with him.

206.  In the circumstances, I find P has failed to demonstrate that there is any real risk of dissipation on the part of D1 in this case.

Whether any risk of dissipation on the part of D2?

207.  First, I agree with Mr Khaw’s submissions that, in the present case, P’s underlying cause of action against D2 is only based on breach of contract. P’s claim does not involve any allegation of dishonesty or fraud against D2. Hence, there is simply no basis to infer that there is a real risk of unjustified dissipation of assets beyond P’s reach on the part of D2. I also agree with Mr Khaw that insofar as P relies on D2’s WeChat messages to allege that D2 had acknowledged his obligations, such evidence could not show any element of fraud or dishonesty or anything close to such conduct on D2’s part. In any event, such messages must be understood in view of the circumstances relating to the mistaken belief on which the Supplemental Agreement was entered into, the details of which have already been analysed above.

208.  Second, I think there is much force in Mr Khaw’s submissions that Shih’s bare allegation that D2 had not responded to any of the WeChat messages sent to him by P’s staff since April 2024 might not be correct. As shown in the WeChat communications between Ma and D2 from 1 February to 23 October 2024 and the WeChat communications between Wu and D2 from 29 November 2022 to 28 November 2023, even when P was detained in Mainland China, D2 had been reachable by P’s staff. Notably, Wu reached out to D2 in around late August 2023 to seek his assistance in securing a PRC lawyer for P’s criminal case in the Mainland. There is also nothing to substantiate Shih’s bare assertion (as firmly denied by D2) that D2 had ever represented to Ma that there was a possibility that he would be detained by the Mainland legal authorities. Even assuming (for the sake of argument) that such representation was made (which is denied), it only shows that D2 was willing and prepared to inform Ma of any change of circumstances.

209.  Third, D2 is the Chairman, Executive Director and CEO of the Group, being a publicly listed company quoted on SEHK. As a permanent resident of Hong Kong, D2 holds no citizenship in any other city or country. He is able to travel from time to time in Mainland China over the years without encountering any obstruction. As noted in Shih 1^st §8(3), D2 has since 8 April 2024 further served as an independent non-executive director of Allegro Culture Ltd, a company principally engaged in train media business and advertising agency business and listed on the SEHK.

210.  Moreover, D2 has been the controlling shareholder as well as the largest single shareholder of the Group, holding 728,912,000 shares (ie around 23.3%)[10] in the same. Given his substantial stake in the Group, it is D2’s undisputed evidence that any attempt to dispose of his shares would be subject to the strict regulations under Part XV of the Securities and Futures Ordinance (Cap 571), which mandates public disclosure of significant transactions if:-

(a)  A substantial shareholder disposes of 5% or more of his shares;

(b)  A director of a listed company disposes of any of his shares.

The public disclosure should be made within three days by publishing to the HKEx website after completing the DI forms.

211.  As both a substantial shareholder and director of the Group, any decision by D2 to sell any of his shares in the Group would have to be made public, including to P. However, as pointed out by Mr Khaw, despite receiving P’s demand letter on 25 October 2021, D2 has not made any disposition of his shares in the Group. As also acknowledged by P in his affirmation §36(1), there is no public record of any disclosure regarding the sale of D2’s shares.

212.  I further accept Mr Khaw’s submissions that it is well-established that evidence of delay is relevant in the assessment of risk of dissipation. Delay after a defendant gained knowledge of a plaintiff’s claim can militate against the risk of dissipation as such defendant would already have the opportunity to dispose of assets should he be inclined to do so: Convoy at §54 per Lam VP (as he then was). In this case, it is obvious that had D2 really intended to dissipate or remove his assets from the jurisdiction, he simply would not have chosen to wait for more than 4 years after receiving P’s demand letter on 25 October 2021 in order to do so. I agree that this further shows that there is no “real risk” of unjustified dissipation or removal of assets by D2.

213.  In my view, all the above are strong evidence to suggest that there is no real risk of dissipation on the part of D2 in this case.

214.  In the circumstances, I find P has fallen far short of demonstrating a real risk of dissipation on the part of D2. As such, I am of the view that no Mareva injunction (or any ancillary relief) ought to have been granted in the first place and hence, the continuation of such injunction as sought by P also could not stand.

Whether a post-judgment Mareva injunction is appropriate?

215.  Given my conclusion on the lack of real risk of dissipation on the part of D1 and D2 above, this issue will now become academic. However, for the sake of completeness, I should add that any judgment of the court does not by and of itself justify a Mareva injunction. Although the court is more prepared to grant post-judgment Mareva injunction than before a judgment as submitted by Mr Fung, it does not do away with the applicant’s burden to adduce adequate evidence of a real risk of dissipation. There must still be such evidence from which the court may infer that the respondent might be disposing of its assets to avoid or delay execution: Seatrans Solution Pte Ltd v China Railway (HK) Trading Ltd [2024] HKCFI 2521 at §6 per DHCJ Yuen.

216.  By reason of the matters aforesaid, and also for the reason that no summary judgment should be granted in the first place, I am of the view that no post-judgment Mareva injunction (or any ancillary relief) ought to be granted by this court.

Balance of convenience

217.  Given P’s failure to establish any real risk of dissipation, I find the balance of convenience clearly lies against the granting of any Mareva injunction against D1 and D2 in this case.

Whether there was unjustifiable use of the ex parte procedure?

218.  Echoing what Mr Li has submitted on the lack of urgency and secrecy for making the ex parte Mareva application in the first place in this case, Mr Khaw has made similar submissions.

219.  In Cheng Pei Xiong v Convoy Global Holdings Limited & Ors [2021] HKCFI 836, Coleman J emphasised the fundamental and stringent requirement of urgency which must be satisfied before the Court would exceptionally allow an application to proceed ex parte (whether without notice or with limited notice):-

“112. It cannot be in dispute that ex parte applications should be regarded as exceptional, and the court should not entertain such applications unless there are cogent justifications for doing so, usually by reference to one or both of extreme urgency or the need for secrecy.

113. It is frequently repeated – albeit depressingly frequently overlooked or ignored – that ex parte orders are only made “where the situation is of such extreme urgency that there is literally no time to warn the defendant of what is proposed or where the purpose of the injunction will or may be frustrated if the defendant is informed”: see, for that original phrasing, Brand, Farrar Buxbaum v Samuel- Rozenbaum (unreported, HCA 5191/1998, 8 May 2002) at §24.

114. It is also trite that where there is no justification to make an ex parte application, either on the ground of urgency or the need for secrecy, the court can set aside any order obtained on that ground alone: see, for a recent example, China Medical Technologies Inc (in liquidation) v Wu Xiaodong [2019] HKCFI 1266 at §26.”

220.  In the present case, I agree with Mr Khaw that there is no proper justification whatsoever as to why P had to apply for an urgent ex parte Mareva injunction on 18 October 2024, without affording D2 any opportunity to make submissions to the court. This is particularly so when there has been a long delay of almost 3 years (from the date of P’s demand letter dated 25 October 2021) before P took out the ex parte application for Mareva injunction. I agree with Mr Khaw that P has intended to make use of the injunction for the purpose of stealing a march on D2 and making himself a secured creditor. This is not permitted by the court as the following authorities have demonstrated: Yeung Siu Yung v Fan Pui Wan Margaret & Ors [2022] HKCFI 847 at §13 per DHCJ Le Pichon; and Ninemia Maritime Corp v Trave Schiffahrtsgesellschaft mbH & Co KG, The Nidersachsen [1984] 1 All ER 398 at 419C-E per Kerr LJ.

221.  There being no justification to make the ex parte application, I am of the view that the court can and should set aside any order obtained on this ground alone, and in the present circumstances, clearly should not continue the injunction which in my view has been wrongly obtained.

Material non-disclosure

222.  It is trite that P has a duty of full and frank disclosure in making an ex parte application for Mareva injunction, and such duty would require P to set out the potential lines of defence available to D2. Non-disclosure may be material even if its effect is just to give a seriously different “flavour” to the case: Han Jaejoon v Lee Sang Young [2023] HKCFI 2202 at §§39-40 per DHCJ MK Liu.

223.  I agree with Mr Khaw that P has failed to draw the ex parte judge’s attention to any of the potential lines of defence articulated in D1 and D2’s Submissions. There may also be potential arguments that there are material non-disclosure on the part of P when he obtained the ex parte Mareva injunction before the ex parte judge (§§107-110 of D2’s Submissions). However, given my conclusion on the lack of solid evidence of real risk of unjustified dissipation, this issue has become academic. I do not need to go into this matter.

Conclusion on the Mareva Injunction Summons

224.  In conclusion, based on the above reasons, I am of the view that the Mareva injunction should be set aside and the continuation of such injunction should be dismissed. Hence, P’s Mareva Injunction Summons is dismissed.

DISPOSITION AND ORDERS

225.  In the aforestated premises, I would dismiss the Summary Judgment Summons and the Mareva Injunction Summons.

226.  Costs should follow the event. As Ds are the effective winners on both summonses,they should be entitled to costs on both summonses. I therefore order that P to pay D1 and D2’s costs of the two summonses, such costs to be taxed if not agreed, with certificate for 2 counsel.

227.  However, as part of the time was spent for D1 to argue on the issue that he was not a party to the Guarantee (which I have rejected), I consider that D1 should be entitled to 80% of his costs on the Summary Judgment Summons only. This is calculated on the basis that roughly about 20% of the time was spent in arguing that issue under the Order 14 application.

228.  Further, on the side issue of the unauthorized letters and the statement of costs raised by D1 and D2, they have lost on that issue. Costs in relation to that issue, including the costs of obtaining legal opinions from PRC lawyers, should be borne by D1 and D2. I propose 10% of the costs of D1 and D2 should be deducted from their costs entitlement.

229.  Thus, I am of the opinion that D1 is entitled to 70% of this costs while D2 is entitled to 90% of the costs on the 2 summonses.

230.  I shall make the above costs order on a nisi basis. Any party who would like to vary the above costs order should apply by way of summons within 14 days after the handing down of this decision. The court will deal with such application by way of paper disposal.

231.  It remains for me to thank the 3 leading counsel and their juniors in this case for their very helpful assistance.