HAN JAEJOON v. LEE SANG YOUNG

HCA 1484/2022

[2023] HKCFI 2202

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1484 OF 2022

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REASONS FOR DECISION

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A. INTRODUCTION

1.  This is the substantive hearing of the following applications:

(1)  P’s application by his summons dated 9 January 2023 for an order to continue the ex parte injunction granted by DHCJ H Au-Yeung (“the ex parte Judge”)  on 16 December 2022 and subsequently amended and continued by K Yeung J (“the Injunction”)  on an interim basis on 13 January 2023 until the conclusion of the trial or a further order made by this Court (“the Continuation Application”);

(2)  D’s summons dated 5 May 2023 for an order discharging the Injunction on the ground of material non-disclosures and misrepresentations (“the Discharge Application”).

2.  Shortly before the hearing today, each party has taken out a summons for leave to adduce further evidence for the purpose of this hearing:

(1)  D’s summons dated 9 August 2023 for leave to file and serve the 3^rd Affirmation of Chan Ho Yan, the purpose of which is to produce some judgments made by the Korean Courts (“D’s Summons”); and

(2)  P’s summons dated 18 August 2023 for leave to file and serve the Affirmation of Wong Ting Chun (“P’s Summons”).

3.  In the hearing before me, P is represented by Mr Lavesh Kirpalani, and D is represented by Mr Patrick Chong. 

4.  At the end of the hearing, I allowed the Discharge Application and dismissed the Continuation Application, with costs on an indemnity basis to D forthwith.  I also dismissed D’s Summons with costs to P forthwith, and granted leave to P to withdraw P’s Summons with costs to D forthwith.  These are my reasons.

5.  For ease of reference, unless otherwise indicated, the abbreviations used by K Yeung J in the Decision handed down on 13 January 2023 (“the January Decision”)[1] are adopted herein.

B.  BACKGROUND

6.  JL is a company incorporated in Hong Kong.  D is now the only registered shareholder of JL.  In other words, 100% of the shareholding in JL is now registered under D’s name.  JL is a 56.6% shareholder of DW, a company incorporated in the Republic of Korea.

7.  The essence of P’s case is as follows:

(1)  P and D were business partners before their relationship fell out.

(2)  In 2010, P made substantial profits from an investment deal in Mainland China (“the Aoyuan Deal”), which involved the purchase of the right to use a piece of valuable land in the Mainland.  Since D was part of the family which owned Fenghua Group (an influential group of companies in Mainland China), P intended to bring D into the deal so as to leverage on his family connection.

(3)  However, D’s involvement in the Aoyuan Deal was nominal.  D was lending his name in the transaction as a guarantor.  According to P, “to expedite the potential transaction …, I considered that it would be beneficial to bring in someone with influential connections in Mainland China …… It is only for this reason that I proposed to [D] that he could take up the nominal role as a “guarantor” despite the fact that [D] never actually had the financial capability or backing from the Fenghua Group at the time.”[2]

(4)  P planned to use the profits derived from the Aoyuan Deal to purchase DW, which he did. In 2011, JL was incorporated in Hong Kong (as a more tax efficient jurisdiction)  for the purposes of acquiring DW.  Acquisition of DW was also completed in 2011.

(5)  Initially, P and D agreed that their respective shareholdings in JL were 75% and 25%.  Later, they agreed to change their respective shareholdings to 65% (P’s share)  and 35% (D’s share).  Subsequently, they further agreed to modify the respective shareholdings to 64% (P’s share)  and 36% (D’s share).  At all times, P has been the majority shareholder of JL.

(6)  Since its incorporation, P has been the sole director of JL and has never resigned from the directorship of the Company.  In his own words, “[D] alleged that I resigned from the directorship of [JL] by an D2A form dated 12 May 2014 ……  The D2A form was fabricated.  I have never signed nor seen the said D2A form.”[3] D has never been a director of JL.

(7)  In August 2022, P discovered that the documents registered in the Companies Registry showed that P owned only 25% of the shares in JL, while D owned 75%.  P also said that there were forged documents registered in the Companies Registry showing P’s resignation as sole director of JL and the appointment of D to the same role. P says that D has used these means to seize the control of JL, and in turn the control of DW.

8.  D has put forward the following in his case:

(1)  P was merely D’s personal assistant or secretary, and has never been his business partner.

(2)  P was mere D’s assistant in the Aoyuan Deal and in the acquisition of DW.  It was D himself who was responsible for procuring the Aoyuan Deal.  According to D, “[a]ll [P] has done was assisting me by handling the liaison work and arranging for all the necessary documentation to facilitate the entire Aoyuan Deal”.[4]

(3)  At all times, D was and is the sole beneficial owner of JL.

9.  Before making the ex parte application on 16 December 2022, P has made two unsuccessful ex parte applications for injunctions against D, and P has procured DW to make an unsuccessful ex parte application for an injunction against D.  In all these unsuccessful ex parte applications, and in the application before the ex parte Judge on 16 December 2022, P or DW was represented by the same law firm (“Fongs”).  Details of these unsuccessful ex parte applications are set out below.

B1. 1^st ex parte application before me on 25 November 2022

10.  This is the first ex parte without notice application made in these proceedings.  P is represented by Mr Edward Chin of counsel in this hearing.  The application is supported by P’s 1^st Affidavit.

11.  In this ex parte application, P sought a proprietary injunction and a Mareva injunction to restrain D from disposing 65% of the shareholding in JL.

12.  P tried to justify the ex parte application on the ground of urgency.  In [5] of his 1^st Affidavit, P said:

“I have been advised by Fongs and I believe that this an urgent application as I am unable to gain access to [DW]’s office in Korea. I believe and confirm that [D] has hired triads to block the entrance of [DW] so that I am unable to enter my office. Upon investigation by my Koren lawyers, it was revealed that they are disguised as “service companies” but are in truth members of Korean triad gang. This matter is currently being reported to the Korean Police. These men have been continued to be present at [DW], and the number of men in suits have increased and become more aggressive, especially when I attended [DW]’s office yesterday. The men in suits now only allow certain employees to enter [DW]. Given the aggressive nature of the current situation and concrete evidence of [D]’s illegal acts to dissipate the assets of [DW], I truly believe that [D] may attempt to dissipate the shareholdings of [JL] which may inevitability affect my stake in [DW]. ……”

13.  In [36] of his 1^st Affidavit, P said:

“Most crucially, the Korean Court … (action to prohibit me from managing [JL] and [DW])  ruled after a contested hearing (and after considering the forensic evidence)  that:

‘We conclude, based on the forensic materials and circumstantial evidence, that LEE SANG YOUNG does not have authority to represent, manage or direct the creditor/company. The present application is therefore inappropriate as having been commenced by someone who does not have the authority.’” (“the Korean Judgment”)

14.  In the hearing, counsel confirmed that in [36] of P’s 1^st Affidavit as set out in the above, “LEE SANG YOUNG” was D in this case, and “the creditor/company” was DW.  Counsel also confirmed that the Korean Judgment was a ruling made by the Korean Court in an action commenced by D against P.

15.  In other words, in that hearing, according to P’s own evidence, the Korean Court has made a ruling that notwithstanding D’s shareholding in JL, D does not have the authority to represent, manage or direct DW.

16.  In that hearing, counsel has also confirmed that the only valuable asset of JL is its shareholding in DW.

17.  After hearing submissions, I dismissed the application.  I pronounced the following judgment at the end of the hearing:

“This is my judgment. This is an ex parte application for an injunction without notice to the defendant．The plaintiff is relying upon extreme urgency to justify this ex parte application. I am not satisfied that there is any extreme urgency in this case. As a result of the judgment made by the Korean Court, the defendant in this case, Lee Sang Young, in fact, cannot procure the Korean subsidiary to do anything in Korea through JL Global.

The plaintiff is saying that the defendant is now hiring some people to block the entrance to the Korean subsidiary. If that is the case, an injunction granted by the Hong Kong Court cannot help. Only the authorities in Korea can help. Further, any potential buyer of the shares in JL Global would do due diligence before buying in the shares. The due diligence exercise would reveal the proceedings in Korea, including the judgment made by the Korean Court． In these circumstances, any reasonable potential buyer would not proceed to buy the shares from the defendant． Counsel has suggested that the defendant may do something improper to sell the shares. Suffice to say that if there is any collusion between the defendant and the buyer of the shares, the transaction is liable to be set aside.

I am of the view that there is no sufficient urgency justifying the ex parte application. The application is dismissed.  No order as to costs. Thank you.”

B2. 2^nd ex parte application before me on 30 November 2022

18.  This is again an ex parte without notice application made in these proceedings.[5] P is represented by Mr Fergus Chan of counsel in this hearing.  The application is supported by P’s 2^nd Affidavit.

19.  In this ex parte application, P again sought a proprietary injunction and a Mareva injunction to restrain D from disposing 65% of the shareholding in JL.  P also sought an injunction to restrain D from exercising his voting /shareholder right stemmed from the 65% shareholding in JL.

20.  At the beginning of the hearing, I asked counsel to identify the extreme urgency justifying the ex parte application.  Counsel submitted that the extreme urgency was due to the fact that D was embezzling money from DW.  I invited counsel to identify the evidence in support of this point.  Counsel then referred me to a newspaper article dated 26 April 2022.

21.  I refused the application and gave the following reason:

“…… The newspaper, first of all, it is problematic to rely upon a Report in the newspaper as evidence. Secondly, even if you may do so, the newspaper was published in April, long time ago. If you are saying that because of newspaper published in April, therefore I now have extreme urgency to make this ex parte without notice application, I cannot accept this. ……”

22.  At the end of that hearing, I made some comments.  One of the comments made by me is as follows:

“…… if the plaintiff wants to make a second ex parte application, the plaintiff should produce the transcript of the first hearing to the court so that the court can understand what has exactly happened in the first hearing. At the very least, there should be a summary of what happened in the first hearing. ……”

B3. 3^rd ex parte application before DHCJ W Tsui on 6 December 2022

23.  This is an ex parte without notice application made by DW against Lee Sang Young (ie D in the present proceedings, “Lee”)  in an intended action[6]. This application is in fact an application made by Han Jaejoon (ie P in the present proceedings, “Han”)  purportedly on behalf of DW against Lee.  DW is represented by Mr Fergus Chan of counsel in this hearing. 

24.  Regarding the transcript of the ex parte hearing before DHCJ W Tsui on 6 December 2022 (“the 6 Dec Transcript”), there has been a debate on whether the said transcript can be referred to in this hearing.

(1)  On 4 May 2023, D’s solicitors wrote to the learned judge to seek leave to refer to the 6 Dec Transcript in these proceedings.  On 1 June 2023, the learned judge made the following directions:

“If the intended defendant wishes to rely on or refer to the transcript obtained in this intended action in HCA 1484/2022 or any other action, he should seek the consent of the intended plaintiff herein and obtain leave of the court before doing so.”

(2)  On 16 August 2023, D’s solicitors wrote to me, telling the Court that DW had consented to the use of the 6 Dec Transcript in this case.  D’s solicitors had produced a copy of a letter dated 16 August 2023, with DW’s company chop thereon.  In that said letter, DW has given the necessary consent (“the Written Consent”). D’s solicitors sought leave to enable them to refer to the 6 Dec Transcript in this case.

(3)  Having considered D’s solicitors’ letter dated 16 August 2023, I granted leave on 17 August 2023.

(4)  On 18 August 2023, P’s solicitors[7] wrote to me and telling the Court the following:

(a)  The Korean Court has made an injunction, and as a result of the injunction, “all registered directors of DW are currently restrained from acting on behalf of DW”.

(b)  “The interim (temporary)  director of DW appointed by the Korean Court has recently resigned from the position of directorship of DW on 7 August 2023, leaving the management position of DW currently vacant.”

(c)  “This means that there is and was no-one who was legally permitted or could have had the authority to procure the Written Consent on behalf of DW on 16 August 2023.”

(d)  “If either the Defendant himself or any of his agent(s)  procured the Written Consent on behalf of DW, it is invalid as having been produced without proper legal authority and/or procured in breach of the Korean Injunction.”

(5)  At the beginning of the hearing before me, I asked Mr Kirpalani who was making decisions on behalf of DW at the moment.  DW was carrying on business, and obviously it would be necessary to have someone to make decisions on behalf of DW.  For example, DW might need to consider whether it would accept an offer made by a potential customer, or whether it would enter into a particular contract.  It would be impossible that while no one could make any decision on behalf of DW, DW could still carry on business.  In response to these enquiries, Mr Kirpalani told me that he did not have instructions as to what exactly is occurring now in Korea.

25.  In my view, while the situation in Korea is not clear, I cannot attach much weight to the matters set out in P’s solicitors’ letter dated 18 August 2023.  I cannot reach a conclusion that the Written Consent is not a consent validly given by DW by just relying upon the matters stated in that letter.

26.  On the other hand, I appreciate that some new order(s)  may have been made by the Korean Courts.  There is also no evidence showing that the Written Consent is a document duly executed by DW.

27.  Having considered the matter, I decided that without prejudice to DW’s rights, and only for the purpose of this hearing, leave be granted to the parties to refer to the 6 Dec Transcript.  In my view, the ex parte hearing on 6 December 2022 forms an essential part of the background relevant to the Discharge Application and the Continuation Application.  In the interest of justice, the parties should be allowed to refer to that transcript in this hearing.  I appreciate that it is not known whether DW has consented to the use of the 6 Dec Transcript in this hearing.  However, with the aforesaid caveats in place, I am of the view that DW’s rights have been sufficiently protected.

28.  From the 6 Dec Transcript, the following features of that hearing can be noted:

(1)  In that hearing, Han on behalf of DW was making an ex parte without notice application for an injunction restraining Lee from exercising the rights stemmed from his shareholding in JL.  It was said that there had been extreme urgency and secrecy justifying the application being made ex parte without notice.

(2)  Counsel for Han in fact called the Duty Judge in the evening on 5 December 2022 and said that an application would be made.  Upon the inquiry made by the clerk to the judge on 5 December 2022, counsel confirmed that there was no urgency for the application to be heard on 5 December 2022 and the application could be heard on 6 December 2022.

(3)  However, in the hearing on 6 December, counsel submitted that there was urgency in the application because an extraordinary general meeting of DW (“EGM”)  would take place soon.  In that EGM, D would through JL procure to pass a resolution to remove P’s directorship in DW.

(4)  Upon the inquiry made by the learned judge in the hearing, counsel conceded that he had consciously decided not to mention the two previous unsuccessful ex parte applications made by Han in these proceedings in his skeleton submissions placed before the learned judge.  In particular, counsel accepted that it was his conscious decision not to mention the 2^nd ex parte application, in which one of the reliefs sought by Han was same as the order sought by Han on behalf of DW in the application before the learned judge.  The learned judge held that this was a material non-disclosure, and the application should be dismissed on this basis alone.

(5)  The learned judge also discussed urgency with counsel.  Counsel submitted that Lee was embezzling money from DW, and an EGM would take place on 16 December 2022.  The learned judge rejected these submissions for (a)  the alleged embezzlement, based upon the evidence before the judge, started as early as September 2022; (b)  the EGM would only take place on 16 December 2022, which would be 10 days after the hearing before the judge.

(6)  Counsel also tried to persuade the learned judge on the ground of secrecy.  According to counsel, the secrecy was that Han did not want to alert Lee that Han was going to commence proceedings in Hong Kong against Lee.  Han wanted to obtain an injunction first, before letting Lee know that there would be proceedings against him in Hong Kong.  The learned judge rejected these submissions for (a)  the disputes between Han and Lee have already been litigated openly in Korea; (b)  Han has also made a report to the Korean police.  

(7)  The learned judge also pointed out that Han had obtained a ruling from the Korean Court that Lee was not the true owner of JL, and that would serve the very purpose of Han.

(8)  At the end of the hearing, the learned judge gave the following ruling:

“I’ve already said that your ex-parte application should be dismissed. First of all, because you are in blatant breach of the duty to make full and frank disclosure and, secondly, there is no justification for you to proceed in an ex-parte way.”

B4.  4^th ex parte application before DHCJ H Au-Yeung on 16 December 2022

29.  On 9 December 2022, Fongs wrote to D, informing D that P had commenced these proceedings against him.  Fongs told D that P was claiming, inter alia, a declaratory relief that P was the rightful owner of 65% of the shareholding in JL, and an injunction restraining D from acting inconsistently with the shareholding rights of P and/or holding himself out as an authorized representative of JL.  Fongs provided the Amended Writ of Summons, a draft summons and a draft order to D by this letter.  Fongs demanded D to give an undertaking in terms of the draft order by 10 am on 12 December 2022, otherwise P would make an ex parte on notice application for an injunction on 16 December 2022.  The letter and the enclosures were sent to D by email and by hand to an address in Korea.  D accepts that he received the letter and the documents enclosed therewith by email on 9 December 2022.

30.  On 12 December 2022, Fongs wrote to D again.  Fongs said that since no undertaking had been offered by D, P would make an ex parte on notice application for an injunction on 16 December 2022.  Fongs also provided the draft skeleton submissions and the hearing bundle for the hearing on 16 December 2022 to D.  The letter and the enclosures were also sent to D by email and by hand to an address in Korea.  D accepts that he received the letter and the documents enclosed therewith by email on 12 December 2022.  However, according to D, most documents in the hearing bundle which are in Korean have only been either partially translated or have not been translated to English at all.

31.  In the hearing before the ex parte Judge, P is represented by Mr Edward Alder and Mr Kevin Lee.  At the end of the hearing, P is able to obtain an injunction which contains the following terms:

“1. [D], by himself, his employees and/or agents, or howsoever, be restrained, in Hong Kong and the Republic of Korea until 13 January 2023 or further Order of the Court, from in any way (without the prior written consent of [P]):

(1)  effecting, causing, procuring, authorising or allowing the disposing of, dealing in, parting with, encumbering or diminishing the value of 650,000 shares in, or 65% of the issued share capital of [JL] whether held or purportedly held in [D]’s name or not (“Enjoined 65% Shareholding”);

(2)  taking any other steps for the purpose of changing the ownership of shares in [JL] comprising the Enjoined 65% Shareholding; and/or

(3)  filing any further documents at the Companies Registry of the Hong Kong SAR purportedly on behalf of or in respect of [JL].

2. [D], by himself, his employees and/or agents, or howsoever, be restrained, in Hong Kong and the Republic of Korea until 13 January 2023 or further Order of the Court, from in any way exercising or purporting to exercise, or causing, procuring, authorizing or allowing the exercise of, any shareholder's rights in respect of shares comprising the Enjoined 65% Shareholding.

3. [D], by himself, his employees and/or agents, or howsoever, be restrained, in Hong Kong and the Republic of Korea until 13 January 2023 or further Order of the Court, from in any way:

(1)  holding himself out as (a)  a majority or controlling shareholder of, and/or (b)  a managing director, sole director, chief executive officer, employee and/or authorised agent of [JL], including (without limitation to)  any person associated with [DW] whether as associated as shareholder, director, employee, committee member, advisor, agent, service provider, debtor or creditor of DW or however else associated with DW;

(2)  making or communicating to third parties decisions or other communications purporting to be on behalf of [JL] and/or on behalf of its board of directors and/or of its shareholders in general meeting, including (without limitation to)  any such person however associated with DW;

(3)  issuing to any third party any communication to the effect that [P] has ceased to be a majority shareholder, shareholder, director or manager of [JL], including (without limitation to)  any such person however associated with DW;

(4)  effecting, causing, procuring, authorising or allowing the disposing of, dealing in, parting with, encumbering or diminishing the value of [JL] 's shareholding in DW or purporting to do so;

(5)  exercising or purporting to exercise, or causing, procuring, authorising or allowing, formally or informally, the exercise of the rights attached to [JL] 's shares in DW; and/or

(6)  without limiting the generality of sub-paragraphs (2)  and (5)  hereof, calling or purporting to call purportedly on behalf of [JL] as a shareholder of DW any meeting of the shareholders, directors or audit committee of DW or communicating with any other shareholder, director or audit committee member of DW purportedly on behalf of [JL].”

32.  According to D, there have been various material

B5. Hearing on 13 January 2023 (ie the Return Date)  before K Yeung J

33.  This is an inter partes hearing on the return date.  In this hearing, P is represented by Mr Edward Alder and Mr Kevin Lee.  D is represented by Mr Patrick Chong.  After hearing submissions from the parties, K Yeung J decided to continue the injunction made on 16 December 2022 as interim interim measures, but with some amendments.  In the January Decision, the learned judge said (footnotes omitted):

“8.  In the present case, the crux of the dispute relates to the ownership of 65% of the shares in JL Global Co Limited (“JL”).

9.  That claim is proprietary in nature. 

10.  On the evidence, I am satisfied that a serious issue to be tried has been demonstrated.

11.  In my view, it is just and convenient to have those shares preserved.

12.  Mr Chong has pointed to some non-disclosure arising from the appeal judgment handed down by the Seoul High Court on 5 January 2023 (the “Korean Appeal Judgment”).

13.  To start with Mr Alder objects to this court referring to that judgment and to the WhatsApp messages referred to therein (included in the Supplemental Bundle).

14.  That judgment was handed down on 5 January 2023.  P himself refers to it in his latest affidavit.  But for reasons which have not been adequately explained, he has not produced that judgment.

15.  As I have mentioned above, the present summons was filed late, leaving D little time to respond.

16.  In the circumstances, I find it fair for me to refer to the judgment and to the messages, without prejudice to P subsequently if deemed necessary producing his own translated version.  I mention also that Mr Lee, Mr Alder’s co-counsel for P, is a native Korean speaker.

17.  The Korean Appeal Judgment appears to focus upon the management of [DW] and P’s status therein.  The focus is less on the dispute of the 65% shares in JL. 

18.  JL is a Hong Kong company.  The preservation of its shares is squarely a matter within the jurisdiction of the Hong Kong Courts.

19.  Despite Mr Chong’s objections, I am of the view that on the American Cyanamid criteria, and on the balance of fairness, interim interim measures should be in place to preserve the shares.

20.  I accept Mr Alder’s submissions that if there is such need, it will make a mockery of the Injunction if its effect is to be confined domestically, thereby opening up the possibility of disposal, dealing in, parting with or encumbering of the shares by acts undertaken beyond the seas.  

21.  Paragraphs 2 and 3 of the Injunction are however of different nature.  They concern acts of holding out in relation to the ownership of the shares in JL, their voting rights, and may even interfere with the management and operation of DW.

22.  DW is a company in Korea.  As can be seen from the Korean Appeal Judgment, the Korean Courts have seized upon the matter, and have granted an injunction against P in respect of inter alia acts “disposing of, altering, modifying, using or consuming [DW’s] assets or existing contractual or legal relationships.”

23.  Given the above, this court needs to exercise its jurisdiction in relation to the operation of DW in circumspection.

24.  There is indeed serious dispute between the parties as to P’s role in the DW. Certain aspects of his conduct in that regard are subject of an injunction in Korea.

25.  Preserving the Shares in JL does not necessarily require this court to impose injunctive relief in relation to JL’s operation in Korea.

26.  On a balance of fairness basis, I am going to confine §§2 and 3 of the Injunction to conduct in Hong Kong, in the way as suggested by Mr Chong.  I will also as suggested by Mr Chong take out §§3(4)  to 3(6).

27.  In the absence of opposition, I order P to make fortification by a payment into court in the sum of HK$1,000,000 within 21 days.

28.  I continue the Injunction to the extent explained above till disposition of the summons, and will hear parties on its exact terms.”

34.  The injunction as amended contains the following terms:

“5. [D], by himself, his employees and/or agents, or howsoever, be restrained, in Hong Kong and the Republic of Korea, until final disposal of the Summons or further Order of the Court, from in any way (without the prior written consent of [P]):

(1)  effecting, causing, procuring, authorising or allowing the disposing of, dealing in, parting with or encumbering 650,000 shares in, or 65% of the issued share capital of [JL] whether held or purportedly held in [D] 's name or not ("Enjoined 65% Shareholding");

(2)  taking any other steps for the purpose of changing the ownership of shares in [JL] comprising the Enjoined 65% Shareholding; and/or

(3)  filing any further documents at the Companies Registry of the Hong Kong SAR purportedly on behalf of or in respect of the Company;

6. [D], by himself, his employees and/or agents, or howsoever, be restrained in Hong Kong until final disposal of the Summons or further Order of the Court, from in any way exercising or purporting to exercise, or causing, procuring, authorising or allowing the exercise of, any shareholder's rights in respect of shares comprising the Enjoined 65% Shareholding;

7. [D], by himself, his employees and/or agents, or howsoever, be restrained in Hong Kong until final disposal of the Summons or further Order of the Court, from in any way:

(1)  holding himself out as (a)  a majority or controlling shareholder of, and/or (b)  a managing director, sole director, chief executive officer, employee and/or authorised agent of [JL] in Hong Kong;

(2)  making or communicating to third parties decisions or other communications purporting to be on behalf of [JL] and/or on behalf of its board of directors and/or of its shareholders in general meeting in Hong Kong;

(3)  issuing to any third party any communication to the effect that [P] has ceased to be a majority shareholder, shareholder, director or manager of [JL] in Hong Kong;

8. Nothing in this Order prevents [D] from:

(1)  filing any evidence or making any oral or written submissions to any Court; or

(2)  doing any act in relation to or on behalf of [DW] for which [D] has obtained the permission of the Courts of the Republic of Korea”

35.  The injunction granted on 16 December 2022 and amended on 13 January 2023 is the subject matter in the Discharge Application and the Continuation Application.

C.  DISCHARGE APPLICATION

36.  I would first discuss the Discharge Application.

37.  D has given particulars of his complaint based upon material non-disclosure (“MND”)  in [111] of his 1^st Affirmation.  P has been given an opportunity to respond to D’s 1^st Affirmation, and P has done so by filing his 6^th Affidavit.  In the circumstances, there would be no unfairness to P if any order is made against P based upon MNDs raised in D’s 1^st Affirmation.

38.  Mr Chong has focused on some of the MNDs raised by D in his 1^st Affirmation. 

C1.  Material non-disclosure - the principles

39.  The principles concerning material non-disclosure have been summarized by Coleman J in Hwang Joon Sang v. Golden Electronics Inc[8], in which the learned judge said:

“37. The guiding principles on material disclosure are well-established. For present purposes they can be summarised as follows, without reference to previous authority:

(1)  An applicant making an ex parte application must act fairly in all material aspects when preparing and presenting the application.

(2)  This includes the duty to disclose to the Court all matters which are material, meaning those matters material to the court’s assessment and decision whether or not to grant the relief without notice, and if so on what terms.

(3)  The test as to materiality is an objective one, and ultimately a question for the court. Hence, it is no excuse for an applicant subsequently to say that he was generally unaware, or did not believe, that the facts were relevant or important.

(4)  Non-disclosure may be material even if its effect is just to give a seriously different ‘flavour’ to the case.

(5)  The duty of full and frank disclosure is a stringent one, designed to protect the absent party.

(6)  Therefore, if material non-disclosure has occurred at the ex parte application, the order obtained at such an application would likely be set aside automatically without going into the merits.

(7)  Nevertheless, there is a discretion to re-grant the same order. That jurisdiction should be only sparingly exercised, taking into account the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.

(8)  Hence, an assessment will be made as to the degree and extent of the culpability with regards to the
non-disclosure. The more serious or culpable the
non-disclosure, the more likely the court is to set its order aside and not renew it, however prejudicial the consequences.

(9)  It is therefore relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge. Nor is there a general rule that a deliberate breach will attract that sanction.

(10)  The application of principles which seek to uphold the integrity of the judicial process should not be carried to such lengths as will allow them to become the instrument of injustice.

(11)  Because of the penal nature of the jurisdiction, the court should have regard to the proportionality between the punishment and offence.

(12)  When exercising the discretion whether to re-grant the order, the court should take into account all relevant circumstances.”

40.  The duty of making full and frank disclosure cannot be discharged by merely placing a document in the bundle(s)  before the Court.  The applicant making the ex parte application should specifically draw the Court’s attention to a particular matter in the document, and should do so fully and frankly.  In A1 v R1[9], Coleman J said:

“33. The particular importance of any particular page or pages (or anything on them)  may not always ‘leap off the page’ to the Judge as being important on just the reading through of materials in the time available. Where an application is put forward as being urgent, the time available is itself necessarily limited. It must also be remembered that urgent applications frequently interrupt what other work the assigned Judge might otherwise have intended to do at that particular time. That is why the courts rely upon the parties and their representatives specifically to bring to the attention of the court those matters which the court must, or likely will wish, to take into account in the context of the particular application.

34. It has been said on many previous occasions that full and frank disclosure of the contents or purport of a document is not made simply by placing the document somewhere in a bundle of exhibits to an affidavit, even if there is some glancing reference to that document in the affidavit itself. The greater the amount of material placed before the court, the more likely the court will need – and is entitled to – clear sign-posting to the various aspects of that material (which, hopefully, also has been organised in a logical way, making it easier to find, follow and understand).

35. That is all the more important when an application is made ex parte, which triggers the requirement specifically to make full and frank disclosure – meaning specifically drawing the attention of the court to those matters, and doing so fully as well as frankly. The requirement is neither removed nor watered-down simply because the application is, or is said to be, urgent.” (Emphasis added)

41.  As to the principles on the discretion to re-grant injunctions after finding material non-disclosures, guidance has been given by the Court of Appeal in Excel Courage Holdings Ltd v Wong Sin Lai[10]. In that case, Kwan JA (as she then was)  said:

“Applicable principles on the discretion to re-grant injunctions

56. The parties have cited to us quite a number of authorities on the relevant principles governing the court’s discretion whether to re-grant an interlocutory injunction where the injunction is discharged for material non-disclosure. The principles are well established and well recognised. As with all discretionary considerations, each case turns very much on its facts. So we do not propose to quote extensively from these authorities except for one of them, which is an unreported decision of Deputy Judge Alan Boyle, QC in The Arena Corporation Ltd v Schroeder [2003] EWHC 1089 (Ch), in which he carried out a thorough review of the authorities in this area. This decision has since been cited in a number of cases. At [213] he made a useful summary of the main principles which should guide the court in the exercise of its discretion as follows:

‘(1)  If the court finds that there have been breaches of the duty of full and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial.

(2)  Notwithstanding that general rule, the court has jurisdiction to continue or re-grant the order.

(3)  That jurisdiction should be exercised sparingly, and should take account of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.

(4)  The court should assess the degree and extent of the culpability with regard to non-disclosure. It is relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge of the order. Equally, there is no general rule that a deliberate breach will attract that sanction.

(5)  The court should assess the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the court. In making this assessment, the fact that the judge might have made the order anyway is of little if any importance.

(6)  The court can weigh the merits of the plaintiff’s claim, but should not conduct a simple balancing exercise in which the strength of the plaintiff’s case is allowed to undermine the policy objective of the principle.

(7)  The application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice.

(8)  The jurisdiction is penal in nature and the court should therefore have regard to the proportionality between the punishment and the offence.

(9)  There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the court should take into account all relevant circumstances.’

57. There is a tension between two kinds of public interest in this situation (Sita UK Group Holdings Ltd & Anr v Serruys & Ors [2010] EWHC 698 (QB)  at [15]). The first is that the court should take account of the need to protect the administration of justice and uphold the requirement of full and fair disclosure in an ex parte application. So if material non-disclosure is established, the court will be astute to ensure that a plaintiff who obtains an ex parte injunction without full disclosure is deprived of any advantage he may have derived by that breach of duty, to bring home to litigants the serious consequences of non-disclosure. This is what was described as “the golden rule” in some cases. The other public interest is the general duty to do justice so that the application of the golden rule must not be allowed to become the instrument of injustice in a particular case. So the court would have regard to the principle of proportionality in the exercise of its penal jurisdiction to impose sanctions for non-disclosure.

58.  As Christopher Clarke J said in Re OJSC Ank Yugraneft [2009] 1 BCLC 298 at §[103], in exercising this discretion, the court, like Janus, looks both backwards and forwards.  The overriding question for the court is what is in the interests of justice in the particular circumstances of the case.”

C2.1    MND 1 – Failure to draw to the ex parte Judge’s attention the reasons given by the Court in previous ex parte applications made by P, or by Han on behalf of DW

42.  Mr Chong submits that in the hearing on 16 December 2022, P has failed to draw the ex parte Judge’s attention to the reasons given by the Court in the 1^st, the 2^nd and the 3^rd ex parte hearings as set out in the above.  The failure is in fact a material non-disclosure.  After examining the materials before me, I agree with Mr Chong.  P has referred to these unsuccessful ex parte applications in the hearing on 16 December 2022.  However, P has not drawn the ex parte Judge’s attention to the details of these unsuccessful applications, in particular, the reasons given by the Court in each of these applications.

43.  In P’s written submissions placed before the ex parte Judge, P said at [7]:

“This application for ‘interim interim’ relief (pending the hearing of an inter partes Summons is made ex parte on notice for reasons of substantive urgency. Urgency in the sense that [JL]’s assets are currently at significant risk due to D’s ongoing course of dishonest conduct aimed at depriving P of his property. P cannot await the orderly grant of leave to serve out of the jurisdiction and the orderly issuing and resolution of an inter partes Summons (which together would take many months)  before seeking relief. P therefore seeks ‘interim interim’ relief to ‘hold the ring’ pending the hearing of an orderly inter partes Summons to continue such relief pending trial.” (Emphasis added)

44.  It is not entirely clear by saying “his property”, P is referring to his alleged beneficial shareholding in JL, or DW’s assets.  No matter what, the reasons pronounced by me in the 1^st ex parte hearing (see [17] above)  are directly relevant to the alleged urgency put forward by P in [7] of his written submissions placed before the ex parte Judge.  These reasons should be brought to the ex parte Judge’s attention.  Yet this has not been done.  This is indeed a material non-disclosure.  Regrettably, P has completely ignored the reminder given by me to him in the 2^nd ex parte hearing (see [22] above), and has committed this material non-disclosure in the hearing before the ex parte Judge.

45.  In the judgment pronounced by me in the 1^st ex parte application, I have explained that by reason of the Korean Judgment, D in fact could not procure DW to do anything in Korea.  Further, given that D has been prohibited by the Korean Judgment to procure DW to do anything through JL, no reasonable buyer would proceed to buy the shares held by D.  If D has done something improper to sell the shares, the transaction is liable to be set aside.  P’s alleged shareholding in JL in fact would not be at risk in these circumstances.  All these have not been mentioned to the ex parte Judge.

46.  As to the EGM issue, in [43] of P’s written submissions placed before the ex parte Judge, P said:

“……critically for the purposes of [the application made on 16 December 2022], P discovered on 5 December 2022 that D is currently attempting to use his purported control of [JL]’s majority shareholding qua shareholder in [DW] to convene an EGM of the Korean Subsidiary in the forthcoming weeks for the purposes of removing P as a director ……” (Emphasis added)

47.  However, P did not draw the ex parte Judge’s attention to the fact that in the hearing before DHCJ W Tsui on 6 December 2022, P[11] told the Court that the EGM would take place on 16 December 2022.   P has also failed to explain to the ex parte Judge why there would be no EGM on 16 December 2022 as previously suggested by him.  P has also not explained why he changed his case and said that the EGM would take place in the forthcoming weeks (counting from 16 December 2022), and not on 16 December 2022 as previously alleged by him.  P did not explain to the ex parte Judge whether the information as to the date of the EGM given by him to the Court in the hearing on 6 December 2022 was a misrepresentation, and if yes, whether the misrepresentation was mistakenly or deliberately made in the hearing on 6 December 2022.

48.  In [43] of P’s written submissions placed before the ex parte Judge, the EGM issue is said to be “critically” for the purpose of that application.  There is materiality in the EGM issue.

49.  In my judgment, the aforesaid matters are material to the assessment of P’s application made on 16 December 2022, and ought to be disclosed by specifically drawing the ex parte Judge’s attention to these matters.

50.  MND 1 is proved.

C2.2    MND2 – WhatsApp Messages showing that P voluntarily resigned from his directorship in DW on 22 August 2022

51.  Mr Chong submits that:

(1)  P relied upon, inter alia, his 3^rd Affidavit in support of the application before the ex parte Judge.  The following picture was painted to the ex parte Judge in his 3^rd Affidavit:

(a)  D had a “premeditated scheme to illegally take control of [DW]” to force P out of office since late August 2022.[12]

(b)  D had been telling the employees in Korea that D was a 100% “majority shareholder” of [JL], “persuading a number of employees who believed his false claims to do things according to his instruction.”[13]

(c)  On or around 22 August 2022, when P returned to his office, D asked P whether P could let D become a director.  P refused.  At around that time, he “realised that I had lost authority over some of employees in [DW].”[14]

(2)  The “favour” P was seeking to present to the Court was that P was involuntarily removed from his office, hence, he lost the control in DW.  The real intention behind P’s ex parte injunction application is to seek control of [DW], and hence this part of the evidence is material.

(3)  However, there are Whatsapp messages sent by P on 22 August 2022 (“the WhatsApp Messages”), showing that he voluntarily resigned as a director of DW.  The Whatsapp Messages show that P happily resigned, and P asked the staff members to support the Chairman, ie D.  The WhatsApp Messages clearly contradict P’s evidence as set out in his 3^rd Affidavit.

(4)  In his 6^th Affidavit, P did not dispute that the WhatsApp Messages identified by D were sent out by P on 22 and 23 August 2022.  P said that he had attached a condition to his resignation, ie D had to repay the money embezzled by him to DW.  P also said that it was later decided by the Korean Court that he had never resigned from directorship of DW.

(5)  To say the very least, the fact that based upon the WhatsApp Messages, there would be potential arguments that (a)  P had voluntarily resigned from his directorship in DW; and (b)  the fact that his affidavit evidence at [22] to [24] of his 3^rd Affidavit could be subject to challenge, are matters ought to have been fully and frankly disclosed.

52.  I agree with Mr Chong.  MND 2 is also proved.

C2.3  MND 3 – Failure to disclose evidence against P’s case

53.  Mr Chong further submits that P has failed to draw the ex parte Judge’s attention to the evidence contradicting P’s case that he is a majority beneficial shareholder of JL.

54.  First, P has failed to draw the ex parte Judge’s attention to the statement given by him to the Korean police on 2 September 2022 (“P’s Police Statement”)[15], in which P said:

“Around 2010, I met [D] at a time when I struggled because of economic situations. As we worked together in real estate development related business and hotel management in China, I received financial support from him and thought it was a blessing. In addition, as part of the management, [D] suggested that we share the [JL] half and half. I’ve come to think that he treats me like his family. However, in July 2018, by stealing my signature, he changed the stake in [JL] to 75% (Lee)  and 25% (myself), and I heard about it from a Chinese acquaintance on August 30, 2022, the day before yesterday.” (Emphasis added)

55.  P’s Police Statement is highly relevant to the core issue in these proceedings, ie whether P is a 65% beneficial shareholder of JL as claimed by him.  As shown in that statement:

(1)  P was not wealthy and not financial sound when he met D in around 2010.  In fact, P received financial support from D.

(2)  D suggested to P, that as part of the management, JL would be shared between them half and half. In context, the true meaning of D's suggestion could be that P would hold 50% of the shares in JL in name only, and those shares would be held by P on trust for D.  In any event, pursuant to the agreement between P and D, P’s shareholding in JL should only be 50%.

56.  Second, D has produced some payment records showing that from 2010 to 2012, D has continuously made some salary payments to P.  These payments would be relevant to show that P was not D’s business partner, but was merely D’s employee.

57.  In P’s 6^th Affidavit, P said that those payments were not salaries.  P said that D transferred those payments to him merely because D would need P to help him to convert those payments into cash Renminbi for D’s business dealings in Mainland China.

58.  It would not be necessary to decide which version is the truth at this stage.  However, as submitted by Mr Chong, the fact that there were regular payments from D to P from 2010 to 2012 ought to be disclosed to the ex parte Judge, as this fact would be relevant in assessing the true relationship between P and D.

59.  Third, P has not disclosed the text messages exchanged between himself and D on 23 August 2022, in which P admitted that he was “just a paid employee” in DW.  In his 6^th Affidavit, P tried to explain that he was using the term “employee” in a very loose sense in the text message, and he actually meant that he was employed as a director of DW.

60.  Again, it would not be necessary to determine whether P’s explanation as to the term “employee” in his text message is satisfactory or not.  As submitted by Mr Chong, P’s text message is a document ought to be disclosed to the ex parte Judge, for this document is relevant to the assessment of P’s actual role in DW.

61.  Fourth, P has failed to disclose a telephone conversation between himself and D on 29 June 2022, in which he admitted that D was the sole beneficial shareholder of JL.  In his 6^th Affidavit, P said that in that conversation, he was referring to a Korean company called JL Global Korea, not JL.  However, as submitted by Mr Chong, in the telephone conversation, P said that the company in question was “registered as such in Hong Kong institutions”.

62.  Having read the English translation of that telephone conversation, I am inclined to agree with Mr Chong that P was referring to JL, not a Korean company in that telephone conversation.  However, it would not be necessary for me to make a definite ruling on this matter for the present purpose.  Whether P was actually referring to JL in that telephone conversation is not the issue to be determined by the Court at the moment.  The real issue is this telephone conversation is clearly a material matter which ought to be disclosed to the ex parte Judge.  I note that in his 6^th Affidavit, the explanation offered by P as to the non-disclosure is not that P has forgotten this telephone conversation, but the one as stated in the aforesaid paragraph. Bearing in mind the similarities between the name of JL and the name of the Korean company mentioned by P in his 6^th Affidavit, while P could still clearly remember the telephone conversation, P should disclose the telephone conversation to the ex parte Judge, and told the ex parte Judge that D might rely upon the telephone conversation to support D’s case.  The explanation as to the non-disclosure offered by P in his 6^th Affidavit is unsatisfactory.

63.  All the aforesaid are evidence which may contradict or cast doubt on P’s case.  I agree with Mr Chong that failure to mention all these to the ex parte Judge constitutes material non-disclosure.

C3.  Failure to draw the ex parte Judge’s attention to the fact that P has no valuable assets in Hong Kong

64.  At [82] of his 3^rd Affidavit, in relation to the undertaking as to damages offered by him in support of his application for an injunction, P said that he has some landed properties in Korea.  However, P did not say whether those landed properties are subject to any encumbrances.  Further, P also did not say apart from the disputed shares in JL, whether he had any valuable assets in Hong Kong which could support the undertaking as to damages.

65.  D has adduced evidence to show that the landed properties owned by P in Korea in fact are subject to encumbrances, and D said that the landed properties owned by P in fact do not have any net value (ie the liabilities secured by the encumbrances are greater than the market values of these properties).  In P’s 6^th Affidavit, P said that market values of the landed properties are greater than the liabilities secured by the encumbrances.  However, the undeniable fact is that the landed properties are subject to encumbrances, and this fact has not been disclosed to the ex parte Judge at all.

66.  That the landed properties owned by P in Korea are subject to encumbrances is a material fact which ought to be disclosed to the ex parte Judge.  Had this been disclosed, the ex parte Judge might require P to adduce evidence to show the net worth of those properties, and might not grant an injunction to P without requiring any fortification from P.

67.  P’s alleged shareholding in JL cannot be counted as assets which can support the undertaking as to damages.  In the event that P fails and D succeeds in the trial, P would be required to honour the undertaking as to damages, and at that time there would already be a ruling saying that P has no interest in the shares in JL at all.

68.  Importantly, P has not drawn the ex parte Judge’s attention to the fact that apart from the disputed shares in JL, he in fact does not have any valuable assets in Hong Kong.

69.  It is essentially for a plaintiff to give a meaningful undertaking as to damages in an application for an interlocutory injunction.  If the plaintiff’s financial position is that, objectively, there are realistic doubts as to the plaintiff’s ability to honour the cross-undertaking, this fact must be disclosed to the Court in the ex parte hearing.  In Wah Nam Holdings Co Ltd v Excel Noble Development Ltd[16], Ribeiro J (as he then was)  said in the Court of Appeal:

“The requirement that a Plaintiff must provide a cross-undertaking in damages is therefore a necessary part of the mechanism for granting interlocutory injunctions. It is a safeguard for the Defendant which enables the court to grant the Plaintiff an order for interim restraint without the merits having been canvassed. ……

It follows that the merits argument, involving the contention that Yuen J should have undertaken an assessment of the merits of the Plaintiffs’ case with a view to absolving them from providing an undertaking in damages or from the consequences of any non-disclosure or with a view to assessing the likelihood of the undertaking being called upon, turns the true principle on its head.

…………

It follows that if a Plaintiff’s financial position is such that, viewed fairly, it may be said to raise realistic doubts as to the Plaintiff’s ability to honour the cross-undertaking, it becomes incumbent upon the Plaintiff to make full and frank disclosure of his financial position to the ex parte judge so as to permit the judge to determine for himself the correct order to make in the light of such disclosures. The judge in such cases has various options. He may consider it proper to refuse the injunction altogether. Or, he may decide to require some degree of fortification of the cross-undertaking as a condition for the grant of the injunction. Alternatively, he may simply decide to grant the injunction against the cross-undertaking notwithstanding the risk that it may not be honoured or fully honoured if called upon. It is however crucial that all relevant material be placed before the judge so that he can make the decision for himself ……

If the facts were such that the Plaintiff came under a duty to make disclosure, it does not avail him to say that his non-disclosure was inadvertent. ……” (Emphasis added)

70.  In Pinpoint Multi-Strategy Master Fund v Gangtai Group Co Ltd[17], Anthony Chan J discharged the injunction in that case.  One of the reasons for discharging the injunction is that the plaintiff had failed to disclose to the ex parte judge that the plaintiff was a foreign company and there was no evidence showing its liabilities or general financial wealth.  In particular, the plaintiff also did not disclose the fact that it had no asset in Hong Kong.  In that case, the learned judge said:

“58. …… It is uncontroversial that the Judge did not require the Plaintiff to provide any fortification for its undertaking as to damages. [Senior Counsel for the Respondents] submitted that without providing information as to the Plaintiff’s assets within jurisdiction or confirming that it did not have any assets within jurisdiction, the Judge would not have been in a position to consider the necessity of fortification. This amounted to MND on the Plaintiff’s part: see Co A v Co D [2019] HKCFI 367, §61.

59. I have no difficulty accepting the proposition that in an ex parte application, which normally involves an undertaking as to damages, the court should be provided with some evidence to enable it to consider whether fortification would be required.

…………

61. …… I accept also that the Plaintiff was guilty of MND in that the Judge was not provided with relevant information of its financial position so as to enable her to evaluate the need for fortification of the undertaking as to damages. However, I do not regard this MND as serious or deliberate.

…………

65. I remind myself of the principles set out by the Court of Appeal in Excel Courage Holdings Ltd v Wong Sin Lai [2014] 3 HKLRD 642, §56-58.

66.  In my view, the Plaintiff was misguided, and not intentional, in respect of the MNDs found to be established above.  However, I see no reason why the Injunction should not be discharged as a matter of general rule.”

71.  The non-disclosure as to the financial conditions of P, in particular the non-disclosure of the fact that the landed properties owned by P in Korea are subject to encumbrances, and the fact that he has no valuable assets within Hong Kong apart from the disputed shares, are indeed material.

C4.  Discharging the Injunction on the ground of material non-disclosure

72.  All the material non-disclosures as stated in the above concern facts which are within P’s knowledge.  P has not put forward any evidence to try to explain that the non-disclosures are merely oversight on his part.  I hold that there is an element of deliberation in these non-disclosures.

73.  By reason of the material non-disclosures as stated in the above (which contain an element of deliberation), the Injunction must be discharged.  This ground alone would be sufficient for allowing the Discharge Application.

74.  D has raised some other non-disclosures in his 1^st Affirmation.  Suffice for me to say that the above would be sufficient for disposing the Discharge Application.  In respect of the other non-disclosures raised by D, it would not be necessary for me to go into those matters.

D.  CONTINUATION APPLICATION

75.  By reason of the aforesaid, the Continuation Application must be dismissed.

76.  For the sake of completeness, I would also say that even without the material non-disclosures as stated in the above, I would also dismiss the Continuation Application for the reasons below.

77.  The Injunction is a proprietary injunction.  The principles concerning proprietary injunctions have been summarized by DHCJ Marlene Ng J (as she then was)  in Heitkamp & Thumann KG v Living Profit Trading Development Ltd[18], in which the learned judge said (footnotes omitted):

“55.  For an interim injunction to protect a claim for trust property, the Amercian Cyanamid principles apply, ie an applicant must show (a)  there is a serious question to be tried on the merits of the claims, (b)  the balance of convenience is in favour of granting an interlocutory injunction, and (c)  it is just and convenient to grant the injunction “although irremediable damage need not necessarily be shown and the court will readily find that the balance of convenience favours the preservation of the fund pending trial. See eg Lewin (supra) at §38-14; A v C [1981] QB 956; CY Foundation Group v Cheng Chee Tock & Ors [2012] 1 HKLRD 532 at §§14, 37”.

56.  As to the substantive merits of the claim, “the court need only be satisfied that the claim “is not frivolous or vexatious, in other words, that there is a serious question to be tried.” (American Cyanamid (supra) at 407). If the opposing party seeks to show there is no serious issue to be tried, the threshold is high, as it would be necessary to demonstrate that the claim should be struck out. See eg Yifung Properties Ltd & Ors v Manchester Securities Corp and Ors (unreported)  CACV258/2015, 9 September 2016, at §20.”

57.  In Zimmer Sweden AB v KPN Hong Kong Limited & anor, DHCJ Kent Yee concurred with To J’s observations in Falcon Private Bank Ltd v Borry Bernard Edouard Charles Limited & anor that the application does not have to show risk of dissipation of assets:

“…… A claimant’s right to a proprietary injunction is different. It is issued to preserve assets which a claimant has a proprietary claim so that they can be turned over to the claimant if he is successful in the action. A proprietary injunction is easier to obtain and not subject to the usual liberties inserted into Mareva relief and there is no need to prove risk of dissipation. It is a better relief than Mareva injunction, provided that the property has not been dissipated. ……” (my emphasis)

58.  In Samtani v Samtani, DHCJ Au-Yeung (as she then was)  summarised what has to be shown for the grant of a preservation order:

(a)  there is property which is bona fide the subject matter of the cause or matter, or as to which any question may arise, which means the plaintiff must demonstrate a proprietary claim on which there is a serious question to be tried;

(b)  something ought to be done for the security of that property, but the court will refuse to grant a preservation order if damages will be an adequate remedy for the plaintiff;

(c)  on the matter of balance of convenience, “[what] is involved is an exercise in salvage, pending and for the purpose of, the ultimate determination. It is, therefore, relevant to consider what will be involved in that determination, and how it relates to the property sought to be preserved, and what justice demands in the way of making an order for the preservation of the property so as to prevent a determination one way or the other proving abortive”.

78.  For the reasons above, I am of the view that in the circumstances as shown by the evidence before me, it would not be necessary to continue the Injunction for the purpose of holding the ring between the parties pending trial.

(1)  There is no dispute that the only valuable asset of JL is the 56.6% shareholding in DW.

(2)  DW’s assets are now under the watchful eyes of the Korean Courts.  There have been proceedings between P and D concerning the control and management of DW in Korea, and the Korean Courts have seized the matters.  P has also reported his allegations against D to the police in Korea.

(3)  Further, JL is only holding about 56% of the shares in DW.  There are some other shareholders.  If D is indeed embezzling the assets of DW as alleged by P or doing anything to prejudice DW’s interests, the other shareholders would certainly take appropriate actions to protect themselves.  P is also in direct communication with some of the minority shareholders.

(4)  There is no evidence showing that D is going to dispose of any part of the JL shares registered under his name.  Further, given the legal proceedings between P and D in Korea and in Hong Kong, any reasonable potential purchaser (who would certainly carry out a due diligence exercise before purchasing the shares)  would not be interested in buying the shares in the circumstances.

(5)  If D improperly transfers the shares of JL to anyone, the transfer is liable to be set aside. The wrong is not something irreversible. 

79.  Insofar as may be necessary, I would refuse to continue and discharge the Injunction for the additional reasons as stated in the above.

E.  NO RE-GRANT

80.  I have also considered whether I should exercise my discretion to re-grant an injunction with same or similar terms to P.  Having considered the matter, I refused to do so.  The deliberate material non-disclosures are serious matters.  The Court must send out a clear message that this kind of litigation conduct is not a matter which would be tolerated by this Court. Further, as stated in [78] above, even without the material non-disclosures, the Injunction ought to be discharged.  In these circumstances, I see no reason to exercise my discretion in favour of re-granting an injunction to P.

F.  OTHER MATTERS

81.  As mentioned [2] above, both parties have sought leave to adduce further evidence in this hearing.  However, at the end of the hearing, the new evidence proposed by the parties in their respective summonses in fact have not been referred to at all in the hearing.  In the circumstances, I am of the view that there is no point to admit the proposed evidence as evidence before me in the hearing.

G.  DISPOSITION

82.  For the reasons above, I dismissed the Continuation Application and allowed the Discharge Application.  I also refused to re-grant an injunction with terms same as or similar to the terms of the Injunction to P.

83.  This is the 3^rd application for an injunction in these proceedings heard by me.  Since I have read the papers and are now familiar with the parties’ respective cases, for the better deployment of judicial resources, I direct that if there is any further application for an injunction in these proceedings, the matter be listed before me if practicable.

84.  Costs should follow the event.  Since the material non-disclosures as identified in the above are not mere oversights but with an element of deliberation therein, indemnity costs should be ordered.[19]  I therefore ordered that costs of the Continuation Application and the Discharge Application (including all costs reserved)  be paid by P to D forthwith on an indemnity basis, and those costs are to be summarily assessed.

85.  For the reason set out in [81] above, I dismissed D’s Summons.  I also acceded to P’s request for leave to withdraw P’s Summons.  Costs should follow the event.  Accordingly, costs of D’s Summons be to P forthwith, and costs of P’s Summons be to D forthwith.  All these costs are to be summarily assessed on party and party basis.

86.  Lastly, it remains for me to thank Mr Kirpalani and Mr Chong for the assistance rendered to the Court.