CHINA EVERGRANDE GROUP (IN LIQUIDATION) v. HUI KA YAN AND OTHERS

HCMP 1080/2024

[2025] HKCFI 898

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1080 OF 2024

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AND

HCA 551/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 551 OF 2024

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R U L I N G

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A. Introduction

1.  On 24 June 2024, I granted to the plaintiff (“CEG”) an ex parte order for a Mareva/freezing injunction and ancillary asset disclosure orders against two defendants, including the 2^nd defendant (“Xia”).  The order was slightly amended on 26 June 2024. 

2.  Those orders were made in the HCMP proceedings, which have subsequently been consolidated with the HCA proceedings on 12 February 2025, as the title to this Decision identifies.  But nothing turns on that point. 

3.  On 12 July 2024, I dealt with the first return date of CEG’s inter partes application for continuation of the orders made ex parte.  Prior to that, on 5 July 2024 – the last day of the deadline set by the ex parte order for Xia to provide asset disclosure – Xia issued an application seeking the discharge of the orders made against him (“Discharge Application)”, as well as interim variations of the orders pending the substantive hearing of the discharge application.  The interim variations sought included the stay of, or an extension of time for compliance with, the asset disclosure obligations until 21 days after the determination of the Discharge Application. 

4.  Amongst the orders I made at the hearing were: (1) fixing the hearing date of 2 October 2024 for the determination of the Discharge Application, and giving directions for a timetable of evidence and skeleton arguments prior to that hearing; and (2) extending the time for compliance by Xia with the asset disclosure obligations until a new compliance date would be set on 2 October 2024, or until further order. 

5.  My Reasons for Decision dated 18 July 2024 [2024] HKCFI 1854 (“Disclosure EOT Decision”), set out the reasons why I thought it appropriate in the then prevailing circumstances to extend the asset disclosure deadline. 

6.  I heard the Discharge Application on the date fixed, 2 October 2024.  Somewhat later than I had originally envisaged or intended, I gave my decision on 12 February 2025 [2025] HKCFI 689 (“Discharge Decision”).  For the reasons explained in the Discharge Decision, I dismissed the Discharge Application and reinstated Xia’s disclosure obligations under the Injunction Order, with such disclosure to be made on or before the extended deadline of 21 February 2025.  Against the chronology of the proceedings, and as I stated, I worked on the basis that Xia and those acting for him must have contemplated the potential need to provide this disclosure, and so should have been gathering the necessary materials.  Obviously, I remained of the view that ancillary asset disclosure was appropriate to the circumstances, albeit by reference to an extended deadline, and I saw no reason to grant any longer period of time. 

7.  Xia has made no application to extend that time.  He has simply failed to comply with my order. 

8.  Instead of complying with my order, Xia issued an application – again on the last day for compliance, 21 February 2025 – seeking leave to appeal from the Discharge Decision.  The summons also seeks an order that, pending the determination of the application for leave to appeal and/or the appeal, the asset disclosure order is to be stayed.  Nevertheless, no date has been set for the application – nor has it been agreed that it can be dealt with on paper – and it does not seem as if Xia is pushing for an early resolution of the matter.  Anyway, it is trite that neither the application for leave to appeal nor the paragraph of the summons seeking a stay actually operate as a stay.  Therefore, Xia remains in breach of my disclosure order, and obviously deliberately so. 

9.  In the circumstances, CEG issued a summons dated 7 March 2025 (“Unless Order Application”) seeking an ‘unless order’, that unless by 4pm on the day which is five days from the date of the order to be made, Xia complies with the disclosure obligations to be performed under the terms of the Injunction Order, Xia be debarred from filing a Defence in this action. 

10.  I heard the Unless Order Application on 14 March 2025, after the conclusion of the argument on Xia’s application to strike out the entire claim against him.  As with that argument, Mr Charles Manzoni SC acted for CEG, and Mr Barrie Barlow SC (leading Ms Terri Ha) acted for Xia. 

11.  I heard the Unless Order Application over the objections of Mr Barlow, who asked me instead to direct a timetable for evidence and to adjourn the Unless Order Application for hearing in the future.  However, I saw no reason to adjourn the matter, or to await any evidence, in the circumstances that: (1) there can be no misunderstanding as to the deadline for compliance by Xia with the asset disclosure order; (2) it is an incontrovertible fact that Xia has not complied with the asset disclosure order, either within that deadline or at all; (3) Xia has not made any application for further time needed to effect compliance; and (4) Xia’s application for leave to appeal and a stay pending appeal, issued on the last date for compliance, does not operate either to extend time or as a stay.

12.  This is my Ruling. 

B.     Consideration

13.  The applicable principles which underpin the use of ‘unless orders’ are well-settled, and need not be rehearsed at length.  The essence is that such orders are made when there is a history of failure to comply with earlier orders, and where the potential imposition of a sanction is a necessary forensic weapon which the broader interests of the administration of justice require to be deployed.  If an unless order is made, but there is still no compliance with it, then the identified sanction will occur, unless the most compelling arguments are advanced to exonerate the failure.  It is almost axiomatic that if a party intentionally flouts such an order, that party can expect no mercy, and sufficient exoneration would almost invariably require the Court to be satisfied that something beyond that party’s control had caused the failure. 

14.  The applicable principles relating to whether to stay or extend time for compliance with an asset disclosure order are, it seems to me, also well-settled – and I ventilated my own attempted summary of them in my Stay of Disclosure Decision, as follows:

(1)     Asset disclosure ancillary to a Mareva/freezing order is properly recognised as the normal provision, so that the freezing order can be properly policed and effective. 

(2)     Indeed, the disclosure requirement is intimately involved in the effectiveness of the Mareva/freezing order, and gives it teeth.

(3)     Hence, the fact that there is a pending challenge to the Mareva/freezing order is not of itself a ground for suspending the operation of the disclosure of assets order in the interim. 

(4)     This is in part because an interim injunction may be granted on assumptions of fact and law, so that it follows that an interlocutory injunction may be granted on an assumption that there is jurisdiction or a proper basis for it – such as the inherent jurisdiction to grant an asset disclosure order ancillary to and in furtherance of another order. 

(5)     Though an asset disclosure order is, as a matter of legal principle, ancillary to the Mareva/freezing order, there can be a different link in practice. 

(6)     In many cases – in particular in international cases leading to a worldwide Mareva/freezing order – it is likely to be the disclosure order which will be the most useful in practical terms. 

(7)     In such cases, it may be that the disclosure order made in Hong Kong will be the main remedy in Hong Kong, and the Mareva/freezing order can be seen as a ‘holding’ injunction, to give the plaintiff time to apply to the relevant foreign court for appropriate orders relating to the foreign assets disclosed. 

(8)     But the Hong Kong Court is given the power to control the plaintiff’s exercise of his right to seek appropriate orders in foreign countries, by taking the standard form undertakings from the plaintiff that he will not without leave of the Court either (a) begin proceedings against the defendant in any other jurisdiction or use information obtained as a result of an order of the Court in Hong Kong for the purpose of civil or criminal proceedings in any other jurisdiction, and (b) seek to enforce the Hong Kong order or seek an order of a similar nature including orders conferring a charge or other security against the defendant or the defendant’s assets. 

(9)     So, a defendant has no general entitlement to a stay of an asset disclosure obligation ancillary to a Mareva/freezing order pending the determination of the defendant’s application to discharge that order. 

(10)     However, there is no authority to support a proposition that a defendant will always be refused a stay of the obligation to make disclosure pending the final determination of his application to set aside the Mareva/freezing order. 

(11)     In a normal case, a stay of the disclosure obligations pending the determination whether the freezing order is to stand is likely to be refused. 

(12)     But, each case must be judged by reference to its own particular situation. 

(13)     There will inevitably be situations where a view may be taken with regard to the appropriateness of the freezing order remaining in place during the interim period pending determination of the discharge application, yet for a stay to be granted on the disclosure order. 

(14)     The Court must strike a balance between (a) the prejudice to the defendant if he is required (incorrectly, as it may turn out) to disclose assets and (b) the prejudice to the plaintiff if the defendant is not required (incorrectly, as it may turn out) to disclose assets. 

(15)     This is similar to the ordinary balancing exercise when considering interim orders, in assessing where the greater risk of prejudice lies. 

(16)     When dealing with an interim application, a broad brush approach necessarily has to be taken – lest on the application for a stay the Court determines the very issues which are to be determined later. 

(17)     Relevant to the discretionary balancing exercise will be matters including (but not limited to):

(a)     the fact that disclosure obligations can be onerous and, in some cases, potentially damaging to the defendant;

(b)     the length of time that a discharge application is likely to take to be determined (being the period of time the plaintiff will be without the information it needs to police the order, if the order is ultimately not discharged);

(c)     whether there is a good arguable case that a fraud has been perpetrated; and

(d)     whether the defendant has at least an arguable case that the injunction will be discharged. 

(18)     Lastly, there is no authority for any general proposition that a defendant who has made a timely application should not be heard on that application (or on the question of an interim stay) until he has first made the disclosure to which he objects.

15.  Though time has moved on, I think those principles remain broadly applicable.  They identify the appropriate balancing exercise to be performed.  But, of course, a significant change to the previous circumstances is that I have now heard and dismissed the Discharge Application. That necessarily changes the balancing exercise, or the weight which might be attached to individual elements of that exercise.  Further, the dismissal of the Discharge Application has brought to an end the extension of time previously granted for complying with the asset disclosure order, which extension was dependant on the determination of the Discharge Application. 

16.  Though I have taken the view that dealing with this Unless Order Application need not await further evidence, I have taken the trouble to look at the evidence filed on behalf of Xia in support of the application for leave to appeal and the stay pending appeal.  The following matters are apparent:

(1)     Xia is not seeking to explain why he should have more time than already allowed for the purposes of compliance with the asset disclosure order. 

(2)     Indeed, Xia simply does not address any potential practical difficulty in complying with, or having already complied with, the asset disclosure order. 

(3)     Instead, Xia is in effect opposing the making of any asset disclosure at all. 

(4)     This is on the basis that it would render Xia’s proposed appeal from my Discharge Decision nugatory, and that it would cause him serious and disproportionate prejudice. 

(5)     The prejudice identified stems from the fact that disclosure of the precise locations and details of his worldwide assets “would reveal his current location”, and his stated “genuine and grave concerns about making any disclosure which could reveal [his] current whereabouts”. 

(6)     Without going into the detail, which I have read and considered, the thrust of the stated concerns is that (a) Xia may suffer the same fate as he says has befallen the 1^st defendant (“Chairman Hui”), who widespread media reports describe as being in indefinite detention in Mainland China, despite his not having been charged with any crime, and (b) Xia may be seized outside of mainland China, but having ended up (without due process being followed) in detention in Mainland China. 

(7)     The thrust of these points was made in Xia’s affidavit dated 30 August 2024 filed in the HCMP action as part of his Discharge Application, and was available for consideration in reaching the decision on that application. 

(8)     There would be little prejudice to CEG if disclosure is not provided, since the Injunction Order will continue to be in place and the Pavilia Hill Proceeds (as defined, for example, in the Discharge Decision) will continue to be frozen in safe custody within Hong Kong. 

17.  However, in addition to the principles I have set out above, it seems to me that:

(1)     When I first granted the Injunction Order, albeit on the ex parte basis, it seemed to me to be appropriate also to grant the typical ancillary asset disclosure order. 

(2)     I was prepared to extend the time for compliance with that ancillary asset disclosure order pending the determination of the Discharge Application, on the basis and for the reasons given by me in the Discharge Decision. 

(3)     Logically, once the Discharge Application was dismissed, the ancillary asset disclosure order once again fell to be complied with, within the extension of time then set. 

(4)     By the extended deadline of 21 February 2025, Xia had had at least seven months within which to have compiled the necessary materials for disclosure. 

(5)     Xia has not identified any practical difficulty in having performed that task, whether within that time or at all. 

(6)     Xia chose not to apply for any extension of time within which to comply. 

(7)     Whilst Xia chose instead to seek leave to appeal from the Discharge Decision, and to seek a stay of the disclosure obligation pending the proposed appeal, the issuing of that application does not operate to extend time or as a stay. 

(8)     Xia has taken no steps to expedite addressing those questions. 

(9)     The fact that there was a pending challenge to the Mareva/freezing order was not of itself a ground for suspending the operation of the disclosure of assets order in the interim.  Still less so is the existence of a proposed appeal from the dismissal of the Discharge Application after full argument. 

(10)     Indeed, where in a normal case a stay of the disclosure obligations pending the first instance determination whether the freezing order is to stand is likely to be refused, that must be a fortiori where the challenge to the order has been dismissed (notwithstanding any right of appeal). 

(11)     This case is indeed an international case leading to a worldwide Mareva/freezing order.  Here, it is likely to be the disclosure order which will be the most useful in practical terms, where proper identification of assets through disclosure may give time to apply to any relevant foreign court for appropriate orders relating to the foreign assets disclosed. 

(12)     Here, I assess that the greater risk of prejudice lies in putting off any further the asset disclosure required:

(a)     Xia is not complaining about the onerous nature of actually providing the required disclosure. 

(b)     There has already been a significant passage of time – a period of 8 months since the asset disclosure order was originally made – during which CEG has been without the information it needs to police the order. 

(c)     I have already determined that the asset disclosure order should not be discharged. 

(d)     The length of time before the conclusion of the intended next steps is unknown, and may be significant. 

(e)     The suggested prejudice to Xia is largely based upon media reports, speculative and somewhat vague.  (For example, where Xia refuses even to tell the Court where he is currently located, it is impossible fairly to assess any likelihood or degree of the risks upon which he seeks to rely.)

18.  Perhaps put more simply, as matters presently stand:

(1)     the asset disclosure obligation remains in place;

(2)     the issue of the application for leave to appeal and a stay does not operate to grant any extension of time, nor as a stay;

(3)     no practical difficulty in compliance has been identified; and

(4)     the deployment of a potential sanction to seek to encourage or ensure compliance with the Court’s order is appropriate to the circumstances of this case, as well as to the broader interests of the administration of justice. 

19.  The appropriate sanction in the present circumstances can only sensibly be to debar Xia from filing a Defence, should he fail to comply with the Court’s order. 

20.  I have taken into account the possibility that Xia may be granted leave to appeal from the Discharge Decision (if not by me, by the Court of Appeal upon a renewed application), and also that I have reserved my decision on the Strike-Out Application (which might – though, on my present preliminary view, unlikely would – lead to an order striking out the entire action as brought against Xia).  Neither of those points seems to me to change the balance in favour of refusing to grant the ‘unless order’ sought. 

C.     Result

21.  In the circumstances, I grant an order in the terms of paragraphs 1 and 2 of the Unless Order Summons, with the deadline set under paragraph 2 as 4pm on 28 March 2025. 

22.  I see no reason why cost should not follow the event, and therefore the costs of the application are to be payable by Xia to CEG, to be summarily assessed.  The summary assessment will be conducted by me on paper in accordance with a timetable which I leave to be agreed between Mr Manzoni and Mr Barlow.