JACKY ZONG AND OTHERS v. KELLY FULI ZONG AND ANOTHER

HCMP 2772/2024

[2025] HKCFI 4525

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2772 OF 2024

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D E C I S I O N

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I.  INTRODUCTION

1.  After the substantive hearing of the Originating Summons and the Interlocutory Summons (the “Hearing”), on 1 August 2025 I handed down my decision ([2025] HKCFI 3355) (the “Decision”) granting an injunction and ancillary disclosure order in aid of the PRC Proceedings (as defined in the Decision) under section 21M of the High Court Ordinance (Cap. 4). By their Summons filed on 15 August 2025 (the “Summons”), the 1^st and 2^nd Defendants (the “Defendants”) apply for leave to appeal on the grounds set out in the draft Notice of Appeal attached to the Summons, supported by written submissions (the “Defendants’ Written Submissions”) filed at the same time. I directed paper disposal of the Summons with directions for filing written submissions, pursuant to which the Plaintiffs filed written submissions in opposition (the “Plaintiffs’ Written Submissions”) on 1 September 2025, followed by the Defendants’ reply submissions (the “Defendants’ Reply Submissions”) filed on 8 September 2025.

2.  There are five grounds set out in the draft Notice of Appeal. I shall deal with them in turn below.

II.  GROUND 1

3.  In Ground 1, Mr Benjamin Yu SC (leading Mr Jonathan Chang SC[1] and Mr Bernard Mak), counsel for the Defendants, submits that the purpose of the relief granted under section 21M is narrow and specific – preventing asset dissipation in Hong Kong to facilitate the enforcement of foreign judgments. Mr Yu submits that (1) because the relief in the PRC Proceedings is mainly declaratory, namely, a declaration that the 1^st to 3^rd Plaintiffs (the “Plaintiffs”) are the beneficiaries of the trust in the HSBC Account Assets (see §37 of the Decision), (2) because the Hong Kong Court cannot under section 21M give effect to such declaratory relief and can only grant in personam order to enforce foreign judgments, and/or (3) because the jurisdiction under section 21M is statutory (relying on Convoy Collateral Ltd v Broad Idea International Ltd [2023] AC 389 at §101), therefore (a) the threshold for determining whether to grant the injunction should be a good arguable case rather than a serious issued to be tried, and (b) the element of a real risk of dissipation is necessary. Mr Yu submits that this is at least an arguable question of law of great general or public importance, given that cross-border interactions have been increasing and so section 21M application for interim relief has become increasingly common.

4.  I note that Mr Yu does not submit that because the relief sought in the PRC Court is a declaratory relief, the Hong Kong Court cannot grant any interim relief in aid. His submissions are really that because of (1) – (3) above, the threshold should be heightened and a real risk of dissipation should exist, though it is not entirely clear to me whether (1), (2) and (3) are cumulative or individual reasons.

5.  In my view, a declaratory relief granted by the PRC Court would mean that the Plaintiffs have certain rights as beneficiaries in relation to the trust assets, for example, a right to trace the assets, a right to account, a right to demand payment according to the terms of the trust, etc. If there is any dispute over such rights, then the Plaintiffs could rely on the declaratory relief – the declaratory relief is therefore “enforced” in this sense, if “enforcement” is the only purpose to be served. If there is a need to secure the subject asset but the subject asset is, despite the need for security, not properly preserved and is gone, the declaratory relief granted by the PRC Court would largely, if not wholly, be rendered redundant. In this regard, relief 3 sought in the PRC Proceedings, namely, to order the Defendants to perform the Documents (see §37 of the Decision), would also be rendered redundant. The aid the Hong Kong Court gave to the PRC Proceedings was given in the sense of preserving the subject matter for the PRC Proceedings to proceed meaningfully: see §65 of the Decision. In the circumstances, I did not (and still do not) see any reason why different treatment should be accorded in such circumstances (distinguished by Mr Yu from circumstances, for example, where the relief in the foreign court is monetary and the interim relief sought in aid in Hong Kong is injunctive). For the avoidance of doubt, when I say I do not see any reason for different treatment, I confine myself to Stage 1 only. I say this because it appears that Mr Yu submits that I applied Order 29 rule 2 directly to the grant of injunction under section 21M. With respect, I am unable to accept such submissions. After Stage 1 (Part VIII of the Decision), I went on to consider the relevant matters in Stage 2 (Part IX of the Decision), which would otherwise not be necessary in an Order 29 rule 2 application in a domestic context.

6.  In my view, with respect, it would cause difficulty to the application of section 21M if in certain scenarios, the threshold would be heightened and/or an element of real risk of dissipation would be added. Any “foreign element” could be dealt with in stage 2: see §47 of the Decision, and any caution which the Court should exercise the statutory jurisdiction with can be sufficiently addressed in stage 2.

7.  On the above basis, I dealt with the submissions on threshold in §§41-48 and 64-65 of the Decision. I do not see any answer to my reasoning in §45 of the Decision, namely, the threshold for a Mareva injunction in aid of foreign proceedings should have been, but is not, higher than a good arguable case if Mr Yu is right. Nor do I see any answer to my reasoning in §65 of the Decision.

8.  There is another point made in Ground 1. Mr Yu submits that I should have appreciated that though labelled as a “preservation order” by Mr William Wong SC (leading Ms Sharon Yuen and Mr Charlie Liu), counsel for the Plaintiffs at the Hearing (and also now), the substance of the order being sought was a freezing order, and therefore, a good arguable case and a real risk of dissipation were necessary. With respect, the order was in substance a preservation order. The order was to bite the assets in the HSBC Account specifically. It was not like a freezing order which covers any assets up to an amount (rather than specific assets) to ensure that that certain amount (not specific assets) would be available to satisfy a judgment, contra a preservation order being an order to ensure that the same specific asset in question would be available for judgment. The difference is well explained in Narian Samtani v Chandersen Tikamdas Samtani [2012] 4 HKLRD 872 at §76, quoted in §42 of the Decision. While the Plaintiffs in their affirmation expressed their view that there was a “clear risk” of dissipation: see Jacky Zong’s 1^st Affirmation §64, it did not follow, as apparently suggested in §5 of the Defendants’ Reply Submissions, that the order sought was a Mareva injunction. A risk, clear or real or otherwise, is still relevant in considering whether to grant a preservation order or not.

9.  All in all, while Ground 1 raises a question of law, I do not see any authorities or reasons that would make this question of law reasonably arguable and/or fall within “other reasons in the interest of justice”.

10.  In the circumstances, I see no reasonable prospect of success or any other reason in the interests of justice to grant leave on Ground 1.

III  GROUND 2

11.  Ground 2 consists of two aspects: the first is a matter of law. Mr Yu complains that at §67 of the Decision I mischaracterised his submissions as arguing that a prior application to the foreign court was a precondition. Mr Yu submits at §20 of the Defendants’ Written Submissions that his position was “more nuanced: if a genuine dispute exists about whether the foreign court would grant similar relief, the Hong Kong Court should not be left to speculate…”

12.  I was aware of Mr Yu’s submissions that he did not put it as a pre-condition, and that was why I used the word “almost” in §67 of the Decision to reflect this nuanced position. I was also aware of Mr Yu’s submissions that I should not be left to speculate and even went so far as to describe his such submissions “attractive”: see §66 of the Decision, and equally aware of his submissions that the Plaintiffs were forum-shopping: see §75 of the Decision. With respect, effectively, Mr Yu in Ground 2 re-runs his submissions before me at the Hearing, which I dealt with in §§62-73 of the Decision.

13.  Further, on Mr Yu’s submissions that an application to the foreign court is not a precondition, I see nothing wrong to say at §73 of the Decision that “whether the applicant has made an application to the foreign court, and if not, the explanation for why not, are important considerations”. Relatedly, on this view, in an ex parte application, in discharge of the duty to make full and frank disclosure, disclosure of such important considerations, that is, whether such an application has been made and if not, why not, must be made. Therefore, with respect, I see no reasonable argument here as submitted at §22 of the Defendants’ Written Submissions that my observation at §67 of the Decision was erroneous.

14.  The second aspect in Ground 2 is a matter of fact. Mr Yu submits that I should not give any weight to the Plaintiffs’ assertion that they filed the Originating Summons and the Summons having obtained advice that the PRC Court would unlikely grant the interim relief sought in Hong Kong Court. His submissions here are a re-run of arguments which I dealt with at §§74-75 of the Decision. In respect of Mr Yu’s submissions that there was no evidence that Beijing Dacheng Law Offices, LLP (Shanghai) was the one responsible for providing the advice, with respect, as pointed out by Mr Wong during the Hearing, §28 of Jacky Zong’s 2^nd Affirmation referred to “our PRC lawyers” as “Dacheng”, and therefore, in reading §38 of the same Affirmation, I read, in context, “our PRC lawyers” as meaning “Dacheng” as well. My such reading was specifically made known in §74 of the Decision where I quoted §38 of Jacky Zong’s 2^nd Affirmation with “[named to be Beijing Dacheng Law Offices, LLP at §28]” inserted. I cannot see how this reading can be said to be wrong.

15.  On the whole, while the “more nuanced” position may be a question of law, I see no authorities or reasons that make this question of law reasonably arguable and/or fall within “other reasons in the interest of justice”.

16.  In the circumstances, I see no reasonable prospect of success or any other reason in the interests of justice to grant leave on Ground 2.

IV.  GROUND 3

17.  As an overview of Ground 3, the thrust of the Defendants’ arguments is that there cannot be any serious issue to be tried, let alone a good arguable case, over the existence of trust and proprietary interest in the HSBC Account Assets. There are a few general points I would like to make before analysing the Defendants’ submissions.

18.  First and foremost, I was aware that Mr Yu’s position of there being an issue to be tried over the fiduciary issue did not include any concession on the trust issue. During the Hearing, Mr Yu was very careful to answer my question whether there was any serious issue to be tried over trust issue – his answer was that there were issues over the fiduciary issue but did not cover the issue of trust. Therefore, in all fairness to Mr Yu, I do not agree with Mr Wong that Mr Yu conceded at the Hearing that there was a serious issue to be tried over the trust issue. This was the reason why I phrased the issue as “trust-and-fiduciary issue” and went some length at §§50-55 of the Decision to analyse the issue, though I did not deal with every single point expressly.

19.  Second, a serious issue to be tried is a low threshold. Given that the threshold is a low one, I did not find it necessary expressly to analyse every point on the issues which I held to be serious issues to be tried. Now, the subheadings of the Defendants’ Written Submissions for Ground 3 (§§27-39) are essentially corresponding to §§50 and 51 of the Decision, with quite some more authorities cited (not cited for the Hearing) and more elaborate submissions made by Mr Yu for the present application for leave, followed by further authorities cited (also not cited for the Hearing) and more elaborate submissions by Mr Wong. In my view, it would only do justice to the parties’ current efforts by detailing my analysis here. At the risk of stating the obvious, I stress that here I am not altering my reasons for finding serious issues to be tried, as altering reasons is not permissible. I am here now explaining expressly why I found there were serious issues and good arguable case in general and specifically in §§50 and 51 of the Decision. As an overview, in the light of the three Documents, including the Agreement whereby Kelly herself agreed to set up the Offshore Trusts (and for that purpose, Kelly went so far as to engage in correspondence and circulating drafts Deed of Trust), and in the light of the serious issue (and even a good arguable case) to be tried over breach of the Agreement (as fairly conceded by Mr Yu at least in respect of a serious issue to be tried), there were serious issues to be tried and a good arguable case over the trust-and-fiduciary issue. Whether a trust was set up would depend materially upon the relevant parties’ intention, and the relevant parties’ intention would be ascertained objectively largely by construction of the Letter of Entrustment read with the Handwritten Instructions (the authenticity and relevance of which will be a matter for trial) and the construction of the Agreement read together with the Letter of Entrustment and the Handwritten Instructions: see §54 of the Decision. It may be found that the intention was not to create any trust or even any fiduciary relationship at all. However, this was a serious issue for trial.

20.  In this regard, while the question of whether a proprietary interest arises turns on the construction of the Documents, which is a question of law, I should bear in mind that the Hong Kong Court here is not to resolve this question of law finally related to the merits and demerits of the parties’ respective cases put in the foreign court, before it could exercise its discretion to grant or not grant the interim relief in aid of the PRC Proceedings. Thus, there being questions of law raised (newly raised now or not) on the merits or demerits of the Plaintiffs’ claim does not necessarily mean that the Hong Kong Court would have to resolve these questions of law finally in an section 21M application, because such resolution of the questions of law in the factual matrix yet to be determined would be a subject matter for the PRC Court to resolve, even though the governing law appeared to be Hong Kong law (but it must be noted that Mr Yu at the Hearing only conceded Hong Kong law to be the governing law for the purpose of the present proceedings only (see §36(1) of the Decision)). The aid given under section 21M is by way of interim relief, but not by way of answering questions of law in factual matrix yet to be determined by the foreign court, or in vacuum, howsoever tempting it may be for the Hong Kong Court to do so when the substantive governing law happens to be Hong Kong law. The primary court would have its own procedures to determine what the foreign law is and how the foreign law is to be applied to the factual matrix to be determined also by the primary court.

21.  Third, Mr Yu submits that in finding that there was a good arguable case at §§49 and 56 of the Decision, I failed to evaluate which party had “the better of the argument”, referring to Kaefer Aislamientos SA de CV v AMS Drilling Mexico SA de CV [2019] 1 WLR 3514 at §80. I have to say that in the light of my ruling that a serious issue to be tried should be the correct threshold, I did not find it necessary to explain in any detail why I also thought that there was a good arguable case. In any event, as Mr Wong points out, “the better of the argument” is not the correct test in a Mareva injunction context and insofar as interim injunction applications are concerned, there is no perceptible difference between a serious issue to be tried and a good arguable case: see the English Court of Appeal’s recent judgment in Unitel SA v Dos Santos [2025] KB 438 at §§96-106, 122-132, which I respectfully adopt for its extensive review and analysis of the relevant authorities.

22.  Lastly, I would like to quote three paragraphs of submissions in the Defendants’ Submissions for the Hearing which I considered, among others, for the Decision:-

“75. These fundamental uncertainties belie Ps’ characterisation of a straightforward trust arrangement. Such complex legal questions require determination by the Primary Court…

82. Hence the aforesaid illustrate that the alleged trust arrangement is not as straightforward as Ps claim. Rather, there are difficult questions of law involved which should be canvassed in the primary court…

85. In [Kelly’s 1^st Affirmation §5], D1 has pointed out that there are questions which would require consideration, and, if necessary, resolution (presumably by the Hangzhou Court). Questions include who has the beneficial interests in the assets of the HSBC Account… As has been noted above, Ps’ interest is at most that of a potential beneficiary under a trust yet to be established in respect of the income only of the assets in the HSBC Account…” (emphasis added)

23.  I now turn to the Defendants’ submissions made on a few specific areas in the Decision under the subheadings of the Defendants’ Written Submissions for Ground 3.

A. The Letter of Entrustment did not create a trust?

24.  The first set of the specific submissions are §§29-31 of the Defendants’ Written Submissions under the subheading “The Letter of Entrustment Did Not Create a Trust”, corresponding to §50(1) of the Decision.

25.  First, Mr Yu submits that I erred in finding at §12 of the Decision that Kelly became the sole shareholder of Jian Hao Ventures Limited (“Jian Hao”) on 2 February 2024, relying on Recital 1 of the Letter of Entrustment. In my view:-

(1)  Recital 1 just recites that Jian Hao was a BVI company, and that:-

“公司经登记的股东为乙方，甲方为唯一董事”.

(2)  Since it was in Chinese, there was no temporal tense in Recital 1. It does not really tell when Kelly became the registered shareholder.

(3)  Had Kelly run the point, as apparently now run by her, that because Kelly had prior to 2 February 2024 already been the registered shareholder and therefore as a matter of law no trust could be created over Jian Hao’s shares and assets (see §29 of the Defendants’ Written Submissions), then in the light of Jacky Zong’s 1^st Affirmation §8 that “[t]he sole registered shareholder of Jian Hao has been Kelly at least since 2 February 2024 if not earlier…” and in the light of Mr Wong’s submissions at §27 of the Plaintiffs’ Submissions for the Hearing that “[i]t is… indisputable that Kelly has no beneficial interest in the assets in the HSBC Account”, Kelly would and should have adduced proper evidence in answer (for example, evidence of the circumstances where she became the registered shareholder), and if necessary, sought adjournment for that purpose. In gist, whether Kelly had become the registered shareholder prior to, on, or subsequent to, 2 February 2024 did not appear to be an issue thought to affect the Defendants’ submissions at the Hearing.

(4)  While the burden lied upon the Plaintiffs to prove the factual matters in support of their application, on the evidence laid before me, it cannot be said that I was plainly wrong to come to the finding that Kelly became the sole shareholder of Jian Hao on 2 February 2024.

26.  Second, on the assumption that this point of fact-finding could be challenged now, Mr Yu’s submissions that I made an erroneous finding of fact in this aspect are the building block for his submissions that I erred in finding a serious issue to be tried regarding an express trust for Kelly to hold the shares in Jian Hao and the assets of Jian Hao for Zong Senior. He submits that:-

(1)  “Properly construed, the Letter of Entrustment only acknowledges Kelly’s pre-existing shareholding and instructs her to undertake future actions to establish the Offshore Trusts over the future income from the HSBC Account…”: see §30 of the Defendants’ Written Submissions; and

(2)  “In addition, it is clear from the Letter of Entrustment that Zong Senior intended to make a future gift to Ps. He planned to do so by entrusting Kelly to set up the future Offshore Trusts. It is trite that a gift is not enforceable: see Pennington v Waine [2002] 1 WLR 2075 at para 58…”: see §31 of the Defendants’ Written Submissions.

27.  The above two submissions would depend on how the Letter of Entrustment should be construed, and there could be no dispute that it would have to be construed in context, and that the context would include the Handwritten Instructions (which was said to be issued in late January 2024: see §9 of the Decision, and the authenticity and relevance of which would be a triable issue itself: see §54 of the Decision). What Arden LJ said in §§60 and 61 of Pennington v Waine, supra, the case Mr Yu now relies upon, is pertinent:-

“60… an imperfect gift is not saved by being treated as a declaration of trust. But where a court of equity is satisfied that the donor had an intention to make an immediate gift, the court will construe the words which the donor used as words effecting a gift or declaring a trust if they can fairly bear that meaning and otherwise the gift will fail…

61. Accordingly the principle that, where a gift is imperfectly constituted, the court will not hold it to operate as a declaration of trust, does not prevent the court from construing it to be a trust if that interpretation is permissible as a matter of construction, which may be a benevolent construction…” (emphasis added)

28.  In essence, whether or not the Letter of Entrustment created trust was a fact-sensitive issue.

29.  As regards the suggestion that because Kelly had prior to 2 February 2024 already been the sole shareholder, therefore, she had prior to 2 February 2024 already been the absolute owner of the shares in Jian Hao and hence the Letter of Entrustment could at most be Zong Senior’s instructions to Kelly what to do with Kelly’s property in the future, such suggestion does not advance the Defendants’ position of no serious issue to be tried and no good arguable case, because:-

(1)  Kelly never mentioned that she had been such absolute owner in her evidence; and

(2)  Further and in any event, assuming that this suggestion could be run in the absence of Kelly’s evidence in this regard, it would still be a matter of proper construction of the Letter of Entrustment properly in context (including the Handwritten Instructions) – whether the Letter of Entrustment was a set of unilateral instructions by Zong Senior or whether the Letter of Entrustment was an agreement or instrument between Zong Senior and Kelly or otherwise whereby Kelly agreed that a trust would be created over her property (if she owned the property).

30.  For the sake of completeness, I agree with Mr Wong’s submissions that there were serious issues to be tried over:-

(1)  whether the Letter of Entrustment resembled “a classic case where the original absolute beneficiary directs the trustee to hold the trust property for other beneficiaries” (see Plaintiffs’ Written Submissions §28(d)(ii), citing Re Chrimes [1917] 1 Ch 30 at 36-37 per Sargant J and Yang Foo Oi v Wai Wai Chen, HCA 1739/2010, 29 November 2016 at §§151-155 per Anthony Chan J); and

(2)  a Quistclose trust may have been set up and the Plaintiffs may have acquired beneficial interests therein (see Plaintiff’s Written Submissions §28(d)(iii)), citing Ad Hoc Committee v China Life Trustees Ltd (2024) 27 HKCFAR 359 at §20 and Lewin on Trusts (20^th ed) at §§9-051 and 9-059).

31.  Mr Yu submits that these are new points. With respect, these cases are only to show that a trust could arise under the Letter of Entrustment, a point Mr Wong already made in §§82(a) and 86 of the Plaintiffs’ Submissions for the Hearing. In any event, these cases are cited in response to Mr Yu’s submissions based on the assumption now raised that Kelly had acquired the shares prior to 2 February 2024. Mr Yu also tries to distinguish these cases on facts, but facts in the present case are yet to be determined by the PRC Court. The threshold for Stage 1 in a section 21M application is a serious issue to be tried or at most a good arguable case.

32.  Thus viewed, whether Kelly became the sole shareholder of Jian Hao on or before 2 February 2024, there was still a serious issue to be tried and a good arguable case over whether the Letter of Entrustment created an express trust for Kelly to hold the shares in Jian Hao and/or the assets of Jian Hao for Zong Senior.

B.  The Agreement cannot create constructive trusts?

33.  The second set of specific submissions are §§32-33 of the Defendants’ Written Submissions under the subheading “The Agreement Cannot Create Constructive Trusts”, corresponding to §50(2) of the Decision. Referring to Clause 3 of the Agreement, Mr Yu submits that the Agreement did not create trust but “a personal obligation on Kelly” to establish trust in the future, without any present disposition of property and immediate vesting of equitable interests in the Plaintiffs. Mr Yu further submits that Zong Senior was not a party to the Agreement and so no trusts could be created in favour of the Plaintiffs.

34.  As I explained in §54 of the Decision, the proper approach to construing the Agreement was to construe them in context, but not in isolation. The context would include the Handwritten Instructions and the Letter of Entrustment and the existence of “quid pro quo under the Agreement” (see §15 of the Decision). In my view, there was a serious issue and a good arguable case upon proper construction in context that the Agreement created trusts.

C.  Failure to take into account the uncertainties on Plaintiffs’ interests in the HSBC Account Assets?

35.  The third set of specific submissions are in §§34-36 of the Defendants’ Written Submissions under the subheading “Failure to Take into Account the Uncertainties on Ps’ Interest in the HSBC Account Assets”, corresponding to §§50 and 51 of the Decision as a whole and also any finding of serious issue and good arguable case over trust. At §34 of the Defendants’ Written Submissions, Mr Yu submits that I failed to address his submissions on the following uncertainties made during the Hearing:-

(1)  There was no mechanism in the Documents to provide for the shortfall of US$1.8 billion, nor prioritisation between the proposed trust, nor any basis for pro-rata constitution, going to the identity and sufficiency of the substantive property to be settled.

(2)  Because Clause 3 of the Letter of Entrustment provided that “只就利息收益进行分配，任何人士不得主张动用信托财产本金向受益人作分配”, but there was no provision as to whether the Plaintiffs would be income-only beneficiaries, who would take the capital and on what terms and whether the capital should fall into a resulting trust.

(3)  Given the uncertainties, the Agreement was not specifically enforceable. Clause 5 of the Handwritten Instructions (suggesting establishment of the Offshore Trusts for two of the Plaintiffs first) would not be sufficient to address the above uncertainties.

36.  One had to, as I did, scrutinise such submissions in proper context. The context I would like specifically to highlight here is this: as Mr Wong emphasised during the Hearing, the exchange of detailed correspondence shows clearly that both sides, including Kelly herself, did not float any idea that any of the Letter of Entrustment and the Agreement would be unenforceable for uncertainties or lack of details or difficulty in performance. On the contrary, both parties, including Kelly advised by lawyers, went at length to circulate and comment on drafts for setting up the Offshore Trusts. There might be practical difficulty in setting up the Offshore Trusts (for example, due to the shortfall); however, it would be another thing to say that there was uncertainty that would render a trust void, as it is trite that practical difficulty (distinct from “linguistic or semantic uncertainty”) would not render a trust void: see McPhail v Doulton [1970] AC 424 at 457 per Lord Wilberforce, or another thing to say that there was uncertainty that would render the Agreement unenforceable (as it is trite that the Court would not expect legal precision in the terms used: see Chitty on Contracts (35^th ed) §4-187)), as opposed to a complete agreement despite lack of details, which would still be enforceable: see Chitty on Contracts, supra, §4-147.

37.  I add that this is entirely supported by the Defendants’ own general observation on the uncertainties at §75 of the Defendants’ Skeleton Submissions, which I quoted at §22 above, worth quoting again here:-

“These fundamental uncertainties belie Ps’ characterisation of a straightforward trust arrangement. Such complex legal questions require determination by the Primary Court…” (emphasis added)

38.  Specifically, the uncertainties could broadly be put into two main categories. First, the shortfall of capital; and second, what to do with the capital and the income generated on the capital. For the first category, I addressed it expressly at §53 of the Decision – in gist, it was a matter of construction of the Documents. As regards the suggestion that no enforceable obligation would arise until the capital would reach US$2.1 billion, even assuming that this suggestion was correct, it would still be an issue to be tried over whether the capital had ever reached US$2.1 billion at any point of time (as it must be remembered that only the January 2024 Statement and the May 2024 Statements were available to the Plaintiffs: see §17 of the Decision), and thus whether such enforceable obligation had ever arisen.

39.  For the second category, though I had considered it for the Decision, I did not find the need expressly to address it in the Decision, as it did not appear to be as a main point run for the Defendants as the shortfall point. That said, in all fairness to Mr Yu, during the Hearing and in the Defendants’ Submissions for the Hearing, he did briefly refer to the other uncertainties. In any event, in my view, the minimum was that there was a serious issue or a good arguable case over the Plaintiffs’ beneficial interests in the income generated by the capital (see also §85 of the Defendants’ Submissions for the Hearing quoted in §22 above). On this minimum, the Plaintiffs would arguably or “good-arguably” have proprietary interest at least to ensure that the capital would be there to generate income – without the capital, there would not be any income. As to what would happen to the capital at the end, I did not see this as any uncertainty that would render a trust void but more as practical questions that one would attempt to address by, for example, working out detailed terms of the declaration of trust as both sides, including Kelly herself, attempted to do in the correspondence.

40.  In any event, for both categories, it was clear to me that there were serious issued to be tried and good arguable case over whether there were such uncertainties, or incompleteness, or difficulty that would render the trust and/or contracts void. These may include “difficult questions of law… which should be canvassed in the primary court” (see §82 of the Defendants’ Submissions for the Hearing) and would “require determination by the Primary Court” (see §75 of the Defendants’ Submissions for the Hearing).

D.  Fiduciary duties or breach of contract do not create proprietary interests?

41.  The last set of specific submissions are §§37-39 of the Defendants’ Written Submissions under the subheading “Fiduciary Duties or Breach of Contract Do Not Create Proprietary Interests”, largely corresponding to §§50(3) and 51 of the Decision.

42.  In essence, Mr Yu submits (1) that I conflated fiduciary duties with proprietary interests at §50(3) of the Decision, (2) that the premise that Kelly might owe fiduciary duties as agent to the Plaintiffs is not equated with proprietary interests in the assets controlled by her and (3) that Kelly received the HSBC Account Assets prior to 2 February 2024 (the date of the Letter of Entrustment), referring Angove’s Pty Ltd v Bailey [2016] 1 WLRD 3179 at §§18-20 and 24-33. Therefore, he submits, there was no basis for me to find any serious issue that the Plaintiffs had proprietary interest.

43.  The reasoning that led to my finding of a serious issue and a good arguable case on proprietary interest was set out in §§50-56 of the Decision. In relation to Mr Yu’s submissions summarised above, in my view, first, as explained in §25 above, there was no evidence that Kelly received the HSBC Account Assets prior to 2 February 2024. Second and in any event, whether or not there was proprietary interest would still depend on the parties’ intention (objectively ascertained by the construction of the Documents and other relevant circumstances) and perhaps also their conduct: see Angove’s Pty Ltd v Bailey, supra at §19. Therefore, there was a serious issue and a good arguable case.

44.  Lastly, Mr Yu also submits that even if there was a serious issue to be tried in relation to the Plaintiffs’ claim on breach of the Agreement, the Agreement could not create proprietary obligations over assets already under Kelly’s control (see §39 of the Defendants’ Written Submissions). Again, it would be a matter for the trial court to ascertain the parties’ intention by proper construction of the Documents in context and by reference to all the relevant circumstances.

E.  Conclusion on Ground 3

45.  In the premises, I see no reasonable prospect of success or other reasons in the interests of justice in Ground 3.

V.  GROUND 4

46.  In Ground 4, Mr Yu submits that there was no need for security.

47.  At §57 of the Decision, I explained with reference to five considerations why I thought there was such need. I had these five considerations cumulatively rather than individually. This was an exercise of discretion upon evaluative assessment of various factors, which the Court of Appeal would not lightly interfere with. I do not see how my view based on such considerations is plainly wrong that the Court of Appeal would interfere with.

48.  I would like specifically to address two of the submissions made by Mr Yu.

49.  First, Mr Yu submits that my finding that there was only “some risk (though not necessarily a real risk) of dissipation at §57(4) of the Decision is clear recognition that the evidence fell short of establishing any need for security”.

50.  However, the test was whether there was a need for security: see §57 of the Decision, and for that purpose, a real risk of dissipation was not a prerequisite. I also repeat my view, with respect, that a real risk of dissipation was not necessary for the injunction sought by the Plaintiffs in aid of the PRC Proceedings. But that a real risk of dissipation is not a prerequisite does not mean that some risk of dissipation would be irrelevant. Some risk, though not as high as real, would still be relevant.

51.  Second, Mr Yu submits that my reliance on the inherent probability that the Defendants could not satisfy substantial judgments at §57(5) was a pure speculation and the Plaintiffs did not raise this point. While the Plaintiffs did not put this point as I put it in §57(7) of the Decision, Mr Wong did make this point in the Plaintiffs’ Submissions for the Hearing at §79(c) – (d). This is not a speculation but an inference I drew from the inherent probability (arising from the fact that US$1.8 billion was a very substantial amount) and absence of evidence to the contrary. In doing so, I of course had in mind that the burden lied upon the Plaintiffs to prove the factual basis in support of their application.

52.  In the circumstances, I see no reasonable prospect of success or other reasons in the interests of justice in Ground 4.

VI.  GROUND 5

53.  In Ground 5, concerning the Disclosure Order, there are two limbs of argument:-

(1)  the Disclosure Order I made pre-empts the PRC Court’s determination in relation to Relief 2; and

(2)  I erred in relying at §86 of the Decision on Carmon Reestrutura-engenharia E Servicos Tecnicos Especiais (Su) Limitada v Carmon Restrutura Ltd [2024] HKCFI 435 because unlike that case, there was no unexplained transaction and no real risk of dissipation in the present case.

54.  For the first limb, the pre-emption was indeed one of my considerations (see §§84, 85 and 87 of the Decision). However, in balancing this consideration against the consideration of policing the injunction I granted, I exercised my discretion to grant the Disclosure Order (see §87 of the Decision). I do not think the exercise of discretion can be said to be plainly wrong.

55.  For the second limb, though explanation of transactions and/or a real risk of dissipation would be important factors, I do not see Carmon Reestrutura-engenharia E Servicos Tecnicos Especiais (Su) Limitada v Carmon Restrutura Ltd, supra and the cases cited in footnote 3 of the Defendants’ Written Submissions as supporting a proposition that there must be unexplained transaction and/or a real risk of dissipation for ordering disclosure order in aid. The purpose of a disclosure order is to police the enforcement of the injunction. It is to ensure that the whereabouts of all the assets covered by the injunction would be made known to the Plaintiffs. In the present case, an important feature was that only two statements (not even up-to-date) were made available to the Plaintiffs, namely, the January 2024 Statement and the May 2024 Statement (see §17 of the Decision). So, for example, without the other statements of the HSBC Account, tor even with the latest balance only, the Plaintiff simply would not know whether all the HSBC Account Assets are still in the HSBC Account, and therefore, the purpose of the injunction to hold the ring in respect of the HSBC Account Assets may not be fully achieved.

56.  Mr Yu emphasises that in the present case, there were no unexplained transactions. However, one must bear in mind that only two statements, namely, the January 2024 Statement and the May 2024 Statement, were available: see §17 of the Decision. By the only two statements were there already some transactions that called for explanation, and the Plaintiffs were only able to identify transactions which they thought called for explanation from these two statements only. The “no unexplained transactions” submissions should be understood in this context. So understood, the “no unexplained transactions” submissions could not be taken as a reason to refuse the Disclosure Order.

57.  I should also deal with the cases cited in footnote 3 of the Defendants’ Written Submissions for the proposition that the Court would order disclosure only when there is evidence of dissipation:-

(1)  HMRC v Malde [2021] EWHC 100 (Ch) is a case on freezing injunction. In the footnote, §§25-32 of the judgment was referred to, but the application there was for a “further disclosure” order. An ancillary disclosure order was already made at the same time of the grant of the injunction: see §§5-6.

(2)  Harrington & Charles Trading Company Ltd v Mehta [2024] EWHC 2674 (Ch) is again a case for “further disclosure” order. In any event, in §314 which is referred to in the footnote, the Court there also listed out other examples than a real risk of dissipation as bases for disclosure: “to enable the claimant to identify the true nature of the defendant’s interest in such assets” and “to allow the claimant to decide whether or not further steps should be taken to protect its position”. Further, in §300, the Court referred to Angola v Perfectbit Limited [2018] 3 WLUK 76 at §8, where Popplewell J explained that:-

“Disclosure is, in almost all cases, essential in order to render effective a worldwide freezing order. The importance of disclosure is reinforced where a claimant has a proprietary claim and is seeking to recover specific sums or their traceable proceeds. Again, an order freezing such sums will be ineffective if the claimant cannot know what has happened to them. It is essential to the protection of the claimant’s rights to pursue its proprietary claim…” (emphasis added)

(3)  The Public Institution for Social Security v Fahad Maziad Rajaan Al Rajaan and others [2020] EWHC 1498 (Comm) and Isbilen v Truk [2021] EWHC 3425 (Ch) are cited in the footnote for the proposition that disclosure may be ordered where there are apparent discrepancies between the assets previously held by the defendant and those disclosed in compliance in a disclosure order. So, for this proposition, there must be a disclosure order in the first place. Also, as explained above, in the present case, there were only two Statements available to the Plaintiffs and so it would be a non-starter to say whether there were any discrepancies without any further statements to be disclosed.

(4)  Therefore, in my view, these cases cited in the footnote do not assist the Defendants.

58.  In the Defendants’ Reply Submissions, the point is raised that at the Hearing, Mr Wong, on behalf of the Plaintiffs, conceded that the Plaintiffs did not need any explanation but only the bank statements in the Disclosure Order and thus I should not make the Disclosure Order as wide as I made. My understanding on this bit of exchange was that Mr Wong was making submissions on his request for the minimum in the event that I would not grant all the Disclosure Order he was seeking. My understanding was that it was on this “minimum” basis that Mr Wong then submitted that they would not be seeking explanation of the movements. As shown at page 130F of the transcript, in response to my indication to make some amendment to the draft Disclosure Order, Mr Wong said that “at least we should have the latest balance of the HSBC account which is not controversial” (emphasis added). I did not understand this to be a concession or abandonment of any part of the draft Disclosure Order handed up during the Hearing. In any event, in §86 of the Decision, I already explained that the Disclosure Order in aid should enable the Plaintiffs to know the whereabouts of the subject property to be preserved. If I would just grant a disclosure order of bank statements, the purpose to ensure the effectiveness of the preservation order granted in aid could not be achieved. The disclosure of bank statements without more would be more a discovery order (for example, to see if the amount in the HSBC Account has ever reached US$2.1 billion at any point of time) rather than a disclosure order in aid of the preservation order.

59.  Lastly, in the Defendants’ Reply Submissions, another point is raised that I should have followed my observation made towards the end of the Hearing that the Disclosure Order was “essentially seeking discovery application as if the action is commenced in Hong Kong”. My observation must be understood in context. I made this observation after Mr Wong made submissions at page 130L (on his “at least” position) that the disclosure of bank statements was necessary because the disclosure would enable the Plaintiffs to check whether there was any point of time that the HSBC Account Assets reached the threshold of US$2.1 billion in the light of Mr Yu’s submissions that no trust could arise when the HSBC Account Assets fell short from US$2.1 billion. It was upon such submissions that I made my observation that this would be “essentially seeking discovery application as if the action is commenced in Hong Kong” because in my view, such disclosure could not facilitate the policing of the preservation order but would go to the substance of the Plaintiffs’ claim and the Defendants’ defence on the shortfall. Further and in any event, the observation was only my preliminary view voiced out for the counsel to know my concern (rightly or wrongly conceived at the Hearing) and an invitation for counsel to address me in proper context.

60.  In the circumstances, I see no reasonable prospect of success or other reasons in the interests of justice in Ground 5.

VII.  CONCLUSION ON LEAVE TO APPEAL

61.  For the reasons given above, I dismiss the Defendants’ application for leave to appeal in the Summons.

VIII.  INTERIM STAY OF THE DISCLOSURE ORDER

62.  In the Summons, the Defendants also seek an interim stay of §§3(b) and (c) of the Disclosure Order pending their intended renewed application to the Court of Appeal for leave to appeal. It is a matter of where the practical justice lies. On the one hand are Mr Wong’s submissions that there should be no prejudice to the Defendants to comply with the Disclosure Order given, among others, Kelly’s own allegation that she had been acting properly and above the board. On the other hand are Mr Yu’s submissions that without an interim stay, the appeal in relation to the Disclosure Order would be rendered nugatory.

63.  Having considered the parties’ submissions, I shall grant the interim stay of §§3(b) and (c) of the Disclosure Order until the determination of the Defendants’ intended renewed application for leave to appeal or further order of the Court (including the Court of Appeal). In the unlikely event that the Defendants would decide not to renew an application to the Court of Appeal for leave to appeal, the parties should inform the Court in writing as soon as possible for a formal discharge of the interim stay.

IX.  COSTS

64.  For costs, I order the Defendants to pay the Plaintiffs costs of the Defendants’ application, with certificate for two counsel.

65.  As regards taxation, after I handed down the Decision, the parties jointly applied to me on paper for taxation instead of summary assessment as provided in my costs order nisi in the Decision. The grounds for their joint application were that the costs are substantial, there were complex issues, and the costs order for the first hearing of the Interlocutory Summons on 3 January 2025 also provided for taxation rather than assessment. Upon consideration, with some reluctance, I acceded to the joint application. Therefore, for the present application (most of the arguments on which overlap with those made at the Hearing), I think it is also appropriate to order taxation rather than summary assessment.

66.  It remains for me to thank the Plaintiffs’ counsel (Mr Wong leading Ms Yuen and Mr Liu) and the Defendants’ counsel (Mr Yu leading Mr Chang and Mr Mak) for their thorough and able assistance.