廣西宏桂匯康食品有限公司 v. 廣州市國鼎貿易有限公司 AND OTHERS

HCMP 55/2025

[2025] HKCFI 714

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS No 55 OF 2025

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BETWEEN

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REASONS FOR DECISION

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INTRODUCTION

1.  By this Summons filed on 14 January 2025 (“the Summons”), the Plaintiff sought continuation of a post-judgment Mareva injunction, granted ex parte on notice on 17 January 2025, in aid of the enforcement of Mainland Judgments against all the 4 Defendants (“Interlocutory Injunction Order”) until further order.

2.  The Originating Summons (“OS”), the Interlocutory Injunction Order and the Summons have not been validly served on D1 and D2, who were out of jurisdiction; but validly served on D3 and D4, by leaving at their 2 last known addresses on 15 January 2025, as evidenced by the affirmation of service of Hon Shu Min dated 16 January 2025.

3.  Accordingly, the application in respect of the application as regards D1 and D2 remained a hearing on ex parte on notice basis.

4.  At this hearing, I ordered that:

(1) The Interlocutory Injunction Order be continued as regards D3 and D4 subject to a variation in §1(4)—that clerical changes be made such that the phrase “his shares” shall be “her/his shares” wherever it appeared in that sub-paragraph.

(2) The Interlocutory Injunction Order as regards D1 and D2 shall continue pending proper service of the OS, the Interlocutory Injunction Order, the Summons and the present order on D1 and D2, out of jurisdiction.

(a) For the avoidance of doubt, this Court granted leave to serve the OS, the Interlocutory Injunction Order, the Summons and the present order on D1 and D2 out of jurisdiction [at the addresses provided by the Plaintiff];

(b) The Plaintiff’s solicitors shall report on service of D1 and D2 on or before 9 May 2025 by letter to Au-Yeung J.

(3) The hearing date of the OS on 19 February 2025 was vacated, with liberty to restore, within 14 days of the making of the order granting leave to register/enforce the Nanning Judgment and Qingxiu Judgment (defined below) under HCRE1/2025.

(4) Costs be reserved.

5.  Here are my reasons for continuing the Interlocutory Injunction Order. The rest of my order was self-explanatory.

FACTUAL BACKGROUND

6.  The Plaintiff is a state-owned enterprise located in Nanning, Guangxi Autonomous Region, Mainland.

7.  D1 was and is a trading company and D2 was and is a company. Both were and are located in Guangzhou, Guangdong, Mainland China.

8.  D3 and D4 were and are each an executive director and the general manager and hence the controller of D1 and D2, respectively.

9.  D3 and D4 are husband and wife. Apart from their Mainland residency, both of them have Hong Kong ID cards. Apart from their Mainland address, both of them have Hong Kong addresses, one at an industrial building; another at the Bank of America Tower in Central.

10.  The Plaintiff obtained a judgment from the first instance court, namely Qingxiu District People’s Court of Nanning Municipality of Guangxi Autonomous Region, Mainland, against all the 4 Defendants in the PRC proceedings numbered (2022) 桂0103民初16014號 (“Qingxiu Judgment”). That Judgment was dated 17 April 2023.

11.  On appeal by the 1^st and 2^nd Defendants, the Intermediate People’s Court of Nanning Municipality of Guangxi Autonomous Region, Mainland (“Nanning IPC”), in the proceedings numbered (2023) 桂01民終10884號, upheld the Qingxiu Judgment by a ruling (民事裁定書) dated 27 September 2023 (“Nanning Judgment”). Both Judgments will be collectively referred to as “the Mainland Judgments” below.

12.  All the 4 Defendants are hence judgment debtors of the Plaintiff under the Mainland Judgments.

13.  During the course of the PRC proceedings, the Plaintiff obtained an asset preservation order against all 4 Defendants on 20 July 2020, freezing the assets under each of their names for a value not exceeding RMB12,731,526.05.

14.  On or around 20 October 2023, that is, after the effective date of the Nanning Judgment, the Plaintiff applied to Qingxiu District Court for the enforcement of the Mainland Judgments. As of 4 December 2024, the Plaintiff only managed to recover RMB16,410 from all the Defendants in the PRC enforcement proceedings. Such domestic proceedings are currently stayed with the consent of the Plaintiff but can be restored upon the application of the Plaintiff.

15.  During the course of the PRC proceedings and the enforcement of the Mainland Judgments in the Mainland, the Defendants, with D3 and D4 in particular, did not disclose that they were shareholders of 5 companies in Hong Kong, or the whereabouts of their assets in Hong Kong. Nor did D3 and D4 disclose that they had Hong Kong residency, which they took advantage of, to conduct investments and asset restructuring in Hong Kong.

16.  The Qingxiu District Court has imposed on the Defendants “Restriction of High Consumption Orders” (限制消費措施) and the Defendants have all been listed and ordered as失信懲戒對象 and/or 失信被執行人in other proceedings in the Mainland. The common grounds for such orders were refusal to perform the obligations confirmed by effective legal documents notwithstanding that they were able to perform the same; breach of asset disclosure order and other instances of evading the enforcement of judgments.

17.  The Plaintiff took out enforcement proceedings in Hong Kong on 2 January 2025 under the Mainland Judgments (Reciprocal Enforcement) Ordinance, Cap 597 (“MJREO”). The Plaintiff is in the course of answering requisitions of Master Hui.

18.  Separately, the Plaintiff issued the OS in this case on 10 January 2025 for interim injunction application in aid of enforcement of the Mainland Judgments.

19.  The Plaintiff obtained the Interlocutory Injunction Order ex parte on notice before DHCJ Andrew Li on 17 January 2025.

20.  In compliance with the undertakings given by the Plaintiff, the Plaintiff has purportedly served all the Defendants with the OS, the Summons and supporting documents, on 15 January 2025 and the Interlocutory Injunction Order on 20^th. D1 and D2 were served by leaving with D3 (the director of both companies) and by email. However that was purportedly in accordance with Mainland Chinese law and not Hong Kong law, and hence invalid. D3 and D4 were served on their 2 last known addresses by leaving.

LEGAL PRINCIPLES

21.  In order to obtain a Mareva injunction, it is for the Plaintiff to show that it has a good arguable case on the claim, that there are assets within the jurisdiction, that there is a real risk of dissipation and that the balance of convenience is in favour of the grant of an injunction. See Hong Kong Civil Procedure 2025, Vol 1, §29/1/65.

22.  Hong Kong courts are more ready to grant post-judgment Mareva injunctions than before judgment because it is easier to infer a risk of dissipation before execution: Beijing Renji Real Estate Development v. Zhu Min [2022] 4 HKC 116, at §69, G Lam JA (as he then was); and China Citic Bank Corporation Ltd (Quanzhou Branch) v Li Kwan Chun [2018] HKCFI 1800, DHCJ Keith Yeung SC (as he then was) §§26-32.

GOOD ARGUABLE CASE

23.  In an application for Mareva injunctions in aid of or in the enforcement of a Mainland judgment, the Court will ask whether the Mainland judgment a plaintiff sought to enforce (a) is registrable under the MJREO; or (b) is recognisable under the common law of Hong Kong. The plaintiff’s success on either of these two questions would suffice to establish that he has a good arguable case for the enforcement of such Mainland judgment. See China Everbright Bank Co Ltd Beijing Pilot Free Trade Zone Business Centre Sub Branch v. China Kingho Energy Group Ltd and Others [2024] HKCFI 3586, §§28-30 and §§36-38, K Yeung J.

24.  Section 5 of MJREO provides as follows:

“5. Application for registration of Mainland judgments

(1) A judgment creditor under a Mainland judgment may apply to the Court of First Instance within the time limit specified in section 7 to have the judgment registered in the Court of First Instance.

(2) On an application made under subsection (1), the Court of First Instance shall order the Mainland judgment to be registered in accordance with this Ordinance if the judgment creditor has proved to the satisfaction of the Court of First Instance that the following requirements are satisfied—

(a) the judgment is given on or after the date of the commencement* of this Ordinance by—

(i) a chosen court which is a designated court;

(ii) a designated court upon a transfer of the case under the law of the Mainland from a chosen court;

(iii) a designated court upon an appeal against a judgment of the case given by—

(A) a chosen court; or

(B) a court to which the case has been transferred under the law of the Mainland from a chosen court; or

(iv) a designated court upon a retrial of the case which has been tried in—

(A) a chosen court; or

(B) a court to which the case has been transferred under the law of the Mainland from a chosen court;

(b) the relevant choice of Mainland court agreement is made on or after the commencement date of this Ordinance (1 August 2008) but before the commencement date of the Mainland Judgments in Civil and Commercial Matters (Reciprocal Enforcement) Ordinance (Cap. 645) (29 January 2024).

(c) the judgment is final and conclusive as between the parties to the judgment;

(d) the judgment is enforceable in the Mainland; and

(e) the judgment orders the payment of a sum of money (not being a sum payable in respect of taxes or other charges of a like nature or in respect of a fine or other penalty).”

25.  Section 5(1) of MJREO was satisfied as the Plaintiff has applied to the Court of First Instance to have the Mainland Judgments registered in the Court of First Instance under HCRE1/2025. It was within 2 years from the date each of the Mainland Judgments took effect.

26.  Section 5(2)(a) of MJREO was satisfied.

(1) The Mainland Judgments were given on 17 April 2023 and 27 September 2023. The Nanning Judgment took effect on 9 October 2023, after the date of commencement of MJREO.

(2) The Mainland Judgments were given by a designated court (Nanning IPC) on appeal from a judgment of the chosen court (Qingxiu District Court), which was a recognized Primary People’s Court.

27.  Sections 5(2)(b) and 3 of MJREO were satisfied. The sale of goods agreements (購銷合同、銷售合同), 2 supplementary agreements and 2 guarantee agreements (“the 6 Agreements”) formed the subject matter of the Mainland Judgments. Each of the 6 Agreements (a) contained a “choice of Mainland court agreement”, stating that disputes thereunder could be litigated at the court where each of the 6 Agreements was signed, ie Qingxiu District of Nanning, Guangxi; and (b) were made in 2020, after commencement of MJREO but before Cap 645.

28.  Section 5(2)(c) of MJREO was satisfied. The Nanning Judgment was a second instance judgment given by a designated count. It was final and conclusive as between the Plaintiff and D1.

29.  The fact that D3 and D4 did not appeal against the Qingxiu Judgment would not affect the effect of the Nanning Judgment on them. See §§11, 15 and 31 of the PRC Legal Opinion.

30.  As guarantors, D3 and D4 were jointly and severally liable with D1 under the sale of goods agreements. Without the final determination of D1’s liability by the Nanning Judgment, the Plaintiff’s claims against D3 and D4 as guarantors could not be supported. See §§19-22 of the PRC Legal Opinion.

31.  Section 5(2)(d) of MJREO was satisfied as the Mainland Judgments were valid and enforceable within 2 years in the Mainland.

32.  Section 5(2)(e) of MJREO was satisfied as the Nanning Judgment upheld the Qingxiu Judgment thereby affirming the order for payment of money in a civil or commercial matter. This was supported by §11 of the PRC Legal Opinion.

33.  By virtue of §§25-32 above, the Mainland Judgments are registrable under the MJREO.

34.  Even if the Court were to find that the Nanning Judgment could not have impact on D3 and D4, the Plaintiff could still rely on the common law regime to enforce the Qingxiu Judgment. See China Everbright Bank Co Ltd Beijing Pilot Free Trade Zone Business Centre Sub Branch v China Kingho Energy Group Limited [2024] HKCFI 3586, K Yeung J §38 and §§48-49 of Lu Yongliang v. Bank of China Ltd, Dongguan Branch [2021] 6 HKC 46 (CA):

“48. Thus, as specifically stated in sub-ss (1) and (3), there are instances where unregistered Mainland judgments are given recognition and effect in the courts in Hong Kong. Under the scheme of the MJREO, recognition and enforcement are two different concepts. The common law in Hong Kong has always given recognition in at least three ways to Mainland judgments which are final and conclusive: (a) through the doctrine of res judicata, see First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd, supra; (b) foreign judgment as a cause of action on its own, see China NPL Holdings v Mo Haidan [2021] 1 HKLRD 344 ; (c) foreign judgment as evidence of foreign law on a particular issue between the same parties, see Guangzhou Green-Enhan Bio-Engineering Co Ltd v Green Power Health Products [2004] 3 HKLRD 223 .

49. In light of Section 16, the restriction in Section 22(2) of the MJREO cannot be construed in such a way to preclude recognition being given to unregistered Mainland judgments under our common law.”

35.  D1 and D2 (with D3 and D4 as controllers) had taken part in the appeal. All the 4 Defendants had resolutely failed to comply with the Mainland Judgments. The Plaintiff has shown a good arguable case on the merits.

ASSETS WITHIN THE JURISDICTION

36.  D3 and D4 were and are shareholders or controllers of 5 companies in Hong Kong. Each of them were and are holders of Hong Kong identity cards and have Hong Kong addresses in an industrial centre. It was likely that they maintain substantial assets in Hong Kong.

REAL RISK OF DISSIPATION

37.  The Defendants had repeatedly breached their promises and contractual obligations through D1’s failure to deliver goods under the sale of goods agreement, and supplementary agreements and failure of D2 to D4 to keep their promises to guarantee the debts and liabilities of D1. They failed to comply with the Mainland Judgments.

38.  In breach of the disclosure order under the asset preservation order in Mainland China, the Defendants have failed to report on their asset position (which would include the assets in Hong Kong and any changes).

39.  Notwithstanding the asset preservation order, D3 had shares transferred to her in one of the 5 companies that she failed to disclose. Further, one of those 5 companies (ie Hong Kong Chinese Herbs Limited) had borrowed RMB 55 million from Macao Chinese Bank and created a floating charge of up to RMB 66 million in 2023.

40.  Such repeated breaches constituted solid evidence of dissipation: China Everbright Bank Co Ltd Beijing Pilot Free Trade Zone Business Centre Sub Branch v. China Kingho Energy Group Ltd and Others [2024] HKCFI 3586, at §§42(a) and 42(b) K Yeung J; and Shepherd Construction Ltd v Berners (BVI) Ltd & Anor [2010] EWHC 763 (TCC) at §§9-11, 13.

41.  D3 and D4 plainly had notice of this hearing but chose not to appear.

42.  The Defendants’ conduct pre- and post-judgment created difficulty for the Plaintiff in enforcement and in identifying the Defendants’ assets. It also gave rise to reasonable inference of risk of dissipation of assets on the part of the Defendants.

43.  The Plaintiff further relied on these facts to invite the Court to infer a real risk of the Defendants to dissipate their assets in Hong Kong:-

(1) The 4 Defendants has had “Restriction of High Consumption Orders” imposed on them and their names were publicized as 失信懲戒對象 and/or 失信被執行人: §§37-40 of PRC Legal Opinion; The nature of those Orders and publication implied the low commercial morality of the Defendants.

(2) The 3^rd and 4^th Defendants retain residency respectively in Mainland and Hong Kong to conduct business in the two jurisdictions. Such conduct made it difficult for the Plaintiff to trace them or identify their assets.

(3) The Defendants have been evasive and obstructive towards the enforcement of Mainland Judgments domestically in the PRC. They took the same attitude in other cases in the PRC. Specifically, the Defendants refused to perform their obligations confirmed by effective legal documents (e.g. judgments from competent PRC courts), notwithstanding the fact that they were able to perform the same; and during the course of PRC proceedings and the domestic enforcement of Mainland Judgments, the 3^rd and 4^th Defendant took advantage of their Hong Kong identities and conducted investments and assets restructuring in Hong Kong.

44.  Holistically considering these above facts, I agree that there was a real risk of dissipation on the part of Defendants.

BALANCE OF CONVENIENCE

45.  At the interlocutory injunction stage, the principal concern of the Court was that it might make a wrong decision, in the sense that after trial, the party to whom an interlocutory injunction has been granted may lose or the party who has been refused one may win. The Court was concerned to take whatever course as appeared to carry the lower risk of injustice, if it should turn out that the Court was wrong: Music Advance Ltd & Anor v IO of Argyle Centre Phase 1 [2010] 2 HKLRD 1041 at §12(d).

46.  Given that the Defendants were judgment debtors, that the Plaintiff’s enforcement application under MJREO was under way, that there was a real risk of dissipation of assets, the balance of convenience lay in favour of the continuation of the Interlocutory Injunction Order. This would preserve the assets of the Defendants, protect the Plaintiff as a judgment creditor and to facilitate the future enforcement of the Mainland Judgments in Hong Kong. The Defendants would be protected from any prejudice by the Plaintiff’s cross undertaking as to damages. The Plaintiff has registered capital of RMB 230 million.

47.  For post-judgment Mareva injunction, delay will be of less weight in negating the risk of dissipation especially since the present application is to enforce valid judgments. In any event, the mere fact that there was a delay in bringing an injunction application is rarely fatal to such application unless the defendant can show such delay has caused prejudice to him.

48.  In this case the Plaintiff has actively pursued enforcement in the Mainland and subsequently in Hong Kong. The Summons is to aid enforcement of the Mainland Judgments. No prejudice to the Defendant has been shown.

TERMS OF THE INTERLOCUTORY INJUNCTION ORDER

49.  The terms sought were quite standard and appropriate. There was also an order sought for disclosure to be supported by documents. It is well established that for the purpose of rendering an injunction effective, the Court may make orders requiring the defendant to make a statement disclosing his assets, giving discovery of documents and answering interrogatories. Such orders can assist in determining the existence, nature and location of assets, clarifying questions of title concerning assets and identifying third parties to whom notice of the injunction should be given for the purpose of ensuring that they do not advertently or inadvertently assist the defendant in the removal or disposal of assets: Bekhor & Co Ltd v. Bilton [1981] QB 923, at 949A-B.

50.  According to the legal expert of the Plaintiff, pursuant to《最高人民法院關於民事執行中財產調查若干問題的規定》, the Defendants were obliged to make comprehensive disclosure of their assets and any changes in asset positon within a year of the notice of enforcement. I am satisfied that the disclosure order to be supported by documents was in accordance with the obligations already imposed on the Defendants under the asset preservation order of the Mainland courts.

FORTIFICATION OF UNDERTAKING

51.  The Plaintiff has provided the usual undertaking as to damages. Given that the merits of this application weighed heavily in the Plaintiff’s favour as a judgment creditor, I made no order as to fortification of damages. It remains open to the Defendants to apply for fortification where there is a likelihood of a significant loss arising from the grant of the injunction and there is a basis for the belief that the Plaintiff would be unable to make good the loss: Hui Chi Ming v Koon Wing Yee [2011] 1 HKLRD 260, §§30-34, Recorder Coleman SC (as he then was).

52.  For the reasons given, I therefore ordered that there be a continuation of the Interlocutory Injunction Order in terms subject to the clerical variations mentioned alone.

53.  I thank Mr Zhu for his assistance.