ALLIED WELI DEVELOPMENT LTD (In Liquidation) AND ANOTHER v. CHUANG YUE CHIEN, EUGENE AND OTHERS

HCA 57/2018

[2021] HKCFI 854

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 57 OF 2018

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DECISION

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Introduction

1.  This is the application of the 1^st defendant Chuang Yue-Chien Eugene (“D1”) for leave to appeal the Decision handed down on 27 October 2020 (“the Decision”) dismissing D1’s application to set aside the ex parte order of Master Grace Chan dated 31 December 2018 (“the Extension Order”) renewing the validity of the unserved writ in this action until 8 January 2020.

2.  The unserved writ renewed by the Extension Order was issued by the 1^st plaintiff (an investment holding company founded by D1) (“the Company”) and the 2^nd plaintiffs, the joint and several liquidators of the Company appointed on 8 July 2016 (“the Liquidators”), to preserve potential claims identified by the Liquidators.

3.  The backdrop to the present writ is set out in the Decision (§§2-22). In outline it is as follows:

(a)     in January 2012, the Company was sued under a deed of guarantee by an investor;

(b)    the audited accounts of the Company as at 31 March 2012 showed net assets of HK$2.86 billion but by the time the Liquidators were appointed in July 2016, they found zero assets;

(c)     their investigations revealed a reorganisation of the Company in March and April 2012 followed by series of transactions in May 2012 through which the Company substantially divested itself of all its assets.

4.  The potential causes of action the Liquidators have identified are breaches of directors’ duty, dishonest assistance, knowing receipt, and unjust enrichment, conspiracy and negligence as appears from the current writ issued on 9 January 2018 against, inter alia, D1.  

5.  D1 advanced 2 grounds for setting aside the Extension Order, namely that: (1) no good grounds were provided for the grant of the Extension Order; and (2) there was material non-disclosure.

6.  D1’s summons to set aside was dismissed for the reasons set out at length in the Decision to which reference should be made.

D1’s draft notice of appeal (“the draft notice”)

(1)    Application of the principles set out in the China Medical case

7.  Although the draft notice sets out no fewer than 8 grounds of appeal, many of those grounds relate to the core issue which is whether this court correctly applied the principles laid down by of Court of Appeal in China Medical Technologies Inc (In Liquidation) v Bank of China (Hong Kong) Limited [2019] 2 HKLRD 710.  

8.  Having reviewed the Decision and the Court of Appeal’s decision, I see no reason to depart from what is stated in §§44-58 of the Decision where the China Medical principles were considered and applied.

9.  I see no basis for the submission that this Court failed to apply the China Medical principles or that they were incorrectly applied.

10.  As appears from §51 of the Decision, there are material differences between the facts in China Medical and those in the present case. When the “central point” to be considered is the adequacy of information for the liquidators to make an informed decision whether to proceed with the claims against the defendants, it is the facts of the particular case before the court and not those of what might appear to be a similar case (but involving a different set of facts) that are material.

11.  I remain of the view that “good reason” was made out to engage the exercise of the court’s discretion to grant an extension and an appeal based on those grounds has no reasonable prospects of success.

(2)    Material non-disclosure

12.  The submissions amount to nothing more than a re-argument of the matters raised at the hearing which have been fully considered and rejected for the reasons stated.

13.  No reasonable prospects of success have been shown for an appeal on this ground.

(3)  Failure to consider the balance of hardship

14.  This is one of several factors that the court takes into account in the balancing exercise performed when exercising its discretion. The court was well aware of D1’s hardship submissions which with all other relevant matters were taken into consideration.

15.  I can discern no prospect of success of an appeal based on this ground.

Conclusion and order

16.  D1’s application for leave is dismissed with costs to the plaintiffs, such costs to be summarily assessed and payable forthwith. Separate directions will be given for summary assessment.