盛京銀行股份有限公司（北京中關村支行） v. ZHANG HONGWEI

HCA 597/2025

[2025] HKCFI 1753

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 597 OF 2025

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REASONS FOR DECISION

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I.  INTRODUCTION

1.  At the end of the hearing, on the Defendant’s Summons filed on 22 April 2025, I set aside my Order made on 28 March 2025 as continued by H Au-Yeung J on 3 April 2025 (the “Injunction Order”). These are my reasons.

II.  BACKGROUND

2.  The Plaintiff had not (and still has not) filed any Statement of Claim. According to the general indorsement in the Writ of Summons issued on 25 March 2025, the Plaintiff is a Beijing branch of Shengjing Bank. The cause of action against the Defendant is the Defendant’s fraudulent misrepresentation in reliance on which the Plaintiff granted credit facility to a business group 東方集團股份有限公司 (the “Group”) controlled by the Defendant. The particulars of the fraudulent misrepresentation are set out in full below:-

“(1) The Defendant has directed falsification of the audited accounts of a subsidiary of 東方集團股份有限公司 which falsified accounts, containing substantial exaggeration of revenues, were merged into the Consolidated Audited Accounts of the Group for the years 2020 to 2023.

(2) In the process of applying for loan and credit facility from the Plaintiff, the Defendant, as guarantor of the loans and credit facility, has warranted and represented to the Plaintiff regarding the truthfulness of the Consolidated Audited Accounts, whilst knowing the representation to be untrue.

(3) The falsified Consolidated Accounts were intended by the Defendant to be relied on by the Plaintiff in the Group’s application for credit facilities and loans from the Plaintiff.

(4) The Plaintiff did rely on the falsified Consolidated Accounts and granted credit facilities to the Group with total outstanding principal sum of RMB1,691,031,126.49.”

3.  The Plaintiff claims for damages.

4.  On the same day, that is, 25 March 2025, the Plaintiff filed a Summons for a Mareva injunction returnable before me as a Summons Judge on 28 March 2025, being a Summons Day.

5.  At the return hearing on 28 March 2025 (the “28 March 2025 Hearing”), I made it clear to the Plaintiff that because according to the affirmation of service, the papers were served after 4pm on 25 March 2025, the service was counted as a service on 26 March 2025 by virtue of Order 65 rule 7(1), and thus there was no two clear days’ notice for the Summons. I therefore granted an interim order until the next Summons day only, for the Plaintiff to effect service properly. I add that the Plaintiff’s Counsel at that hearing informed me that he had been aware of the service problem, and thus, this service problem had already surfaced to the Plaintiff’s legal team even before I raised it during that hearing.

6.  Since there was no two clear days’ notice of the Summons, the 28 March 2025 Hearing was for all purposes an ex parte hearing (I note that the Defendant contended that he did not receive any papers and thus whether the ex parte hearing was on notice or not was something to be debated if necessary on some other occasions). As such, as Mr William Wong SC (leading Mr Martin Kok) submitted, the Plaintiff had duty to make full and frank disclosure: see Willwin Development (Asia) Co Ltd v Wei Xing, HCA 797/2012, 15 October 2012 at §1 per Mimmie Chan J, following Chu J in Chu Shu Ho David and Mission Hills Golf Club Ltd v Lam Hon Lit Harry HCA 3525/2002 and HCA 3618/2002, 30 October 2002, and Ming Yang Capital Ltd v China Vered Asset Management (Hong Kong) Ltd [2024] HKCFI 1444 at §§36, 74-75 per DHCJ Norman Nip SC.

7.  On 3 April 2025, H Au-Yeung J continued my Order until further order of the Court. Even if I took (without deciding) that hearing as an inter partes hearing, it was trite that the obligation to make full and frank disclosure was still continuing. That the Defendant chose not to attend that hearing would not absolve the Plaintiff from such continuing obligation when applying to continue the Order I made at the ex parte hearing.

8.  On 22 April 2025, the Defendant filed the Summons herein for:-

(1)  setting aside the Writ of Summons and the service thereof and dismissing the Action;

(2)  alternatively, a declaration that the Writ had not been properly served and therefore the Court had no jurisdiction over the Defendant; or

(3)  alternatively, setting aside the Injunction Order.

9.  The grounds for setting aside were, broadly:-

(1)  the Writ had not been properly served and thus the whole action should be dismissed, and that would include setting aside the Injunction Order;

(2)  there was no good arguable case of fraudulent misrepresentation and the quantum;

(3)  there was no evidence of assets within jurisdiction;

(4)  there was no real risk of dissipation; and

(5)  there were material non-disclosures.

10.  At the hearing and in his skeleton submissions, Mr Stefano Mariani, Solicitor-Advocate for the Plaintiff, submitted that the Plaintiff should be afforded sufficient opportunity to file evidence in response and more time to argue and that I should not grant any order sought by the Defendant’s Summons immediately. I agreed with him insofar as the evidence was controversial and the matter was not cut-and-dry, and therefore, I adjourned the relief of the Defendant’s Summons set out in §8(1) and (2) above for substantive argument with directions for filing evidence. However, there was one area which in my view was so cut-and-dry that I found myself able to deal with immediately.

11.  In order to understand this matter, it is necessary to set out the cause of action as explained by the Plaintiff’s counsel (not Mr Mariani) in his skeleton submissions for the 28 March 2025 Hearing, when the Statement of Claim had not (and still has not) been filed.

III.  PLAINITFF’S SKELETON SUBMISSIONS FOR 28 MARCH 2025 HEARING

12.  The representation relied upon by the Plaintiff’s counsel in the skeleton submissions was explained under the heading “Fraudulent Misrepresentation by the Defendant”:-

“Fraudulent Misrepresentation by the Defendant

7. In the 2023 Guarantee given by the Defendant personally for the purpose of obtaining credit facility from the Plaintiff [B/49], the Defendant expressly represented and warranted that:

5.6 [The Defendant] 知悉並同意主合同全部條款，知曉主合同債務人 [the Group] 經營情況、財務狀況、融資資金的真實用途及融資所涉及的貿易背景。甲方認可其真實合法性，自愿為主合同債務人提供担保，並保証按本合同約定履行担保義務。[B/52]

8. Among the terms of the 2023 Credit Facility [B/25], i.e. the 主合同, it was stipulated that:

5.4 [The Group] 向 [the Plaintiff] 提供的所有文件、資料均真實、[準]確、合法、有效。[B/29]

9. The falsified accounts… were presented to the Plaintiff for consideration. Relying and believing in the truthfulness of the [accounts], the Plaintiff approved and granted credit facilities to the Group.”

13.  In other words, while the Plaintiff’s cause of action was fraudulent misrepresentation in tort, the representation it relied upon was made in a contract, namely, the 2023 Guarantee.

IV.  PRC PROCEEDINGS ON THE 2023 GUARANTEE

14.  What I set out in this Part about two sets of PRC Proceedings were not in dispute.

15.  In the Shenyang Intermediate People’s Court (the “Shenyang Court”), on 17 July 2024 the Plaintiff commenced a civil action numbered “(2024) 辽01 民初1499号” (the “1499 PRC Proceedings”) and on 4 November 2024 the Plaintiff commenced a civil action numbered “(2024) 辽01 民初2059号” (the “2059 PRC Proceedings”), both on, among others, the 2023 Credit Facility against the debtor and the 2023 Guarantee against, among other guarantors, the Defendant herein. These two sets of PRC Proceedings covered the credit facilities mentioned in the Plaintiff’s Skeleton Submissions for the 25 March 2025 Hearing.

16.  On 19 July 2024, in the 1499 PRC Proceedings, the Shenyang Court granted a preservation order (the “PRC Preservation Order”) against, among others, the Defendant for assets up to RMB578,406,847.02.

17.  On 20 March 2025, the Shenyang Court entered judgment (the “PRC Judgment”) in favour of the Plaintiff against, among others, the Defendant on his guarantee’s liability.

18.  Although these matters were not in dispute, none of it was drawn to my attention at the 28 March 2025 Hearing. More accurately, none of it was even in the evidence.

V.  RELEVANCE OF THE PRC PROCEEDINGS

19.  Mr Mariani, for the Plaintiff, submitted in §32 of his Skeleton Submissions that:-

“… there were, in any event, good reasons for P not to refer to the PRC Proceedings in the application for the Injunction Order because its proceedings against D in the PRC are substantially different proceedings from the present Action: they arise from fundamentally different causes of action. The PRC Proceedings were constituted as a contractual claim by P against D under the 2023 Guarantee; conversely, this Action is constituted as a claim in tort for fraudulent misrepresentation and does not amount to P suing D for breach of the 2023 Guarantee (or any other agreement) as a matter of contract law.” (emphasis added)

20.  Such submission must be rejected. The relevance of the PRC Proceedings was obvious at least for the following reasons.

21.  First, the PRC Proceedings covered the same credit facilities which the Plaintiff alleged to have granted in reliance upon the alleged fraudulent misrepresentation by the Defendant. Any amounts recovered or to be recovered by the Plaintiff in those PRC Proceedings would mean a reduction of the loss and damages in the present action in Hong Kong. However, there was no explanation on the extent of such reduction of the loss and damages.

22.  Second, with the PRC Preservation Order, absent any evidence to the contrary, the Plaintiff should have been reasonably sufficiently covered, and thus the Plaintiff would have suffered substantially less damages. If this were not the case, the burden would fall upon the Plaintiff to explain why not.

23.  The above two were related to the amount of damages, which would of course have significant impact upon the value of the assets to be covered by the Injunction Order.

24.  Third, having commenced the PRC Proceedings and having proceeded substantively and substantially so much so that a judgment had been obtained, the Plaintiff would have to explain:-

(1)  why the claim of fraudulent misrepresentation here, also based on the 2023 Guarantee, should not have been brought under those PRC Proceedings, especially in the light of the jurisdiction clause of the 2023 Guarantee which on the face of it suggests that the Shenyang Courts have the exclusive jurisdiction in matter arising from or in connection with the 2023 Guarantee (“因本合同發生的訴訟”), and prima facie, while the claim of fraudulent misrepresentation was tortious in nature, it was still arguably to be a claim arising from the 2023 Guarantee;

(2)  relatedly, why the claim of fraudulent misrepresentation was not brought as a contractual claim of breach of Clause 5.6 of the Guarantee in those PRC Proceedings; and

(3)  whether there would be any multiplicity of proceedings that would warrant a stay of the proceedings in Hong Kong.

25.  This third matter went to the root of the action here in Hong Kong.

26.  Had the existence of the PRC Proceedings been drawn to my attention at the 28 March 2025 Hearing, I would certainly have asked those questions in §§22-24 above and would not grant any injunction before I would be satisfied with proper answers to such questions. Unfortunately, since the PRC Proceedings were not in evidence and not mentioned to me at the 28 March 2025 Hearing, there was of course no such answers at all.

27.  Even at the hearing now before me, the Plaintiff had not been able to give any answer at all, and seemed to suggest that PRC legal opinion may be necessary. If such legal opinion was really necessary, the burden lied upon the Plaintiff to collate such evidence to support its application for the injunction in the first place. It would lie ill in the Plaintiff’s mouth to say, effectively, that because of the urgency, their burden would somehow be lightened.

28.  Mr Mariani, for the Plaintiff, also drew my attention to the fact that the Defendant had lodged an appeal against the PRC Judgment. However, the existence of the appeal did not at any rate have any impact on the questions I would have asked above.

29.  Therefore, had the existence of the PRC Proceedings been drawn to my attention at the 28 March 2025 Hearing, I would not have granted the Order as I did. The Plaintiff’s failure to make full and frank disclosure of the existence and relevance of the PRC Proceedings was a material non-disclosure.

VI.  SHOULD I SET ASIDE THE INJUNCTION ORDER?

30.  Upon my finding of the Plaintiff’s material non-disclosure of the existence and relevance of the PRC Proceedings, the next question I asked myself was, should I set aside the Injunction Order?

31.  I answered the question in the affirmative, for the following reasons:-

(1)  The material non-disclosure of the existence of the PRC Proceedings was deliberate, as clear from §32 of Mr Mariani’s Skeleton Submissions quoted in §19 above, that the Plaintiff had “good reasons” not to refer to the PRC Proceedings. In any event, irrespective of §32 of the Skeleton Submissions, given the obviousness of the relevance of the PRC Proceedings, the failure to mention them could only in all likelihood be conscious. I do not accept Mr Mariani’s submission that the Plaintiff’s Counsel at the 28 March 2025 Hearing misunderstood the hearing to be an inter partes hearing. The legal proposition about the nature of such a hearing as explained in §6 above, at least tracing back to Chu Shu Ho David and Mission Hills Golf Club Ltd v Lam Hon Lit Harry, which was decided in October 2002, is well-known. Insofar as there was any suggestion that the Plaintiff’s Counsel or the whole legal team was not prepared to address the Court on an ex parte basis, I would not accept such suggestion because as I mentioned in §5 above, the Plaintiff’s Counsel had already been aware of the service problem even before I raised this matter, and in any event, whether I raised it or not, the Plaintiff’s legal team would of course have known the service problem, which was an obvious problem by virtue of Order 65 rule 7(1);

(2)  The relevance of the existence of the PRC Proceedings was, as I mentioned above, obvious. Following my finding that the material non-disclosure of the existence of the PRC Proceedings was deliberate, the material non-disclosure of the relevance of the PRC Proceeding was also deliberate;

(3)  Even at the hearing now before me, the Plaintiff had still not been able to give any proper answers to the questions above. As I said, without proper answers to the questions above, I would not have granted the Order at the 28 March 2025 Hearing. I did not see why I would grant the Order now in the absence of such answers; and

(4)  Mr Mariani, for the Plaintiff, urged me to allow time for the Plaintiff to file evidence to explain the material non-disclosure before I would set aside the Injunction Order. I refused. In Mr Wong’s Skeleton Submissions of 23 April 2025 for the Defendant, he made it clear that he applied to set aside the Injunction Order immediately. It would therefore be the Plaintiff’s call as to whether to file evidence before the hearing. But the Plaintiff’s call not to file any evidence before the hearing would not mean that the Court, having assessed all the relevant matters, would have to be dictated by the Plaintiff’s call. That there may be urgent matters to be dealt with was one of the reasons why the Summons Day mechanism was provided, and the Plaintiff could not say that it was the first hearing of the Defendant’s Summons and so it was not prepared to argue the matter substantively. In any event, in my view, the evidence of deliberate material non-disclosure as analysed in §§(1) and (2) above was overwhelming, and any evidence that the non-disclosure was inadvertent or merely negligent but not deliberate would only be self-serving and would not help the Plaintiff for resisting the immediate setting aside of the Injunction Order.

VII.  CONCLUSION

32.  For the above reasons, I set aside the Injunction Order at the end of the hearing.

33.  For costs, given my finding that the material non-disclosure was deliberate, I saw fit to order that the Plaintiff should pay the costs of application to set aside the Injunction Order on an indemnity basis, with certificate for two counsel, to be summarily assessed on paper upon lodging and serving a statement of costs limited to this application to set aside within 3 days from the date of the hearing and a list of objection within 3 days thereafter.

34.  Lastly, I thank Mr Wong and Mr Kok (for the Defendant) and Mr Mariani (for the Plaintiff) for their assistance.