BANK OF HULUDAO CO., LTD v. ZHONGYING INT'L HOLDING GROUP LTD

CAMP 59/2025, [2025] HKCA 978

On intended Appeal From [2025] HKCFI 729

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 59 OF 2025

(ON INTENDED APPEAL FROM HIGH COURT ACTION NO 1656 OF 2022)

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BETWEEN

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JUDGMENT

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Hon Ng J (giving the judgment of the court) :

A. Introduction

1.  This is the Defendant’s renewed application by Summons with a draft Notice of Appeal dated 19 March 2025 (“Leave Summons”) for leave to appeal against the order (“Order”) of DHCJ Grace Chow (“Judge”) dated 5 February 2025.

2.  By the Order, the Judge dismissed the Defendant’s appeal against the order of Master Lewis Law dated 13 August 2024 dismissing the Defendant’s application to debar the Plaintiff from adducing a PRC criminal judgment dated 22 August 2023 (“PRC Judgement”) as evidence in general in this action, whether by way of discovery of documents, affidavit evidence, witness statements or any other mode or manner.

3.  The Judge’s reasons were set out in her written decision also dated 5 February 2025 (“Main Decision”).

4.  The Defendant then sought leave to appeal against the Order before the Judge by Summons with a draft Notice of Appeal dated 17 February 2025. The proposed grounds of appeal were the same as those in the Leave Summons before us. On 6 March 2025, the Judge refused leave to appeal. The reasons can be found in her decision dated 6 March 2025 (“Leave Decision”).

5.  Both the Defendant and the Plaintiff have filed their respective written statements. Having considered the papers before us, we are of the view that it is appropriate to deal with the Leave Summons on paper without an oral hearing pursuant to Order 59 rule 2A(5)(a) of the Rules of the High Court, Cap 4A.

6.  This action and another action ie HCA 1903/2021 had been ordered to be tried together before the same judge. Originally, the two actions were set down for trial in October 2025. That trial date had since been vacated by DHCJ Alan Kwong and would be refixed pending inter alia the disposal of the present application.

B. Background

7.  The following background to the underlying disputes between the Plaintiff and the Defendant is taken largely from the Main Decision, with some additions from the pleadings in this Action and HCA 1903/2021.

8.  The Plaintiff is a bank established in the PRC and carries on business mainly in the Liaoning Province of the PRC.

9.  The Plaintiff’s case is that it was the victim of a fraud perpetuated by Duan Hongtao (段洪濤) (“Duan HT”), Zhao Zhilong (周志龍) (“Zhao”) and those associated with him. Duan HT was the chairman and sole beneficial shareholder of the Plaintiff’s largest shareholder viz Zhongying Holdings Group Limited (“Zhongying Holdings”). Duan HT was at the material time also a director of the Plaintiff and a member of its Compliance and Risk Management Committee whose function was to oversee and approve large amount credit and investment plans of the Plaintiff.

10.  From July to September 2020, Duan HT and Zhao (through themselves or their associates) represented to the Plaintiff’s executives that Duan HT would assist the Plaintiff to resolve its problem of non-performing loans if RMB 2.6B was transferred from the Plaintiff to Duan HT for the purpose of acquiring the shares of Hana Bank China (“Hana Bank”). The funds would first be transferred from the Plaintiff to Guotai Yuanxin Asset Management Co Ltd (“Guotai”) for asset management and then transferred to Ningxia Shunyi Asset Management Co Ltd (“Shunyi”), a company owned and controlled by Zhao, for the purpose of acquiring the shares of Hana Bank.

11.  Relying on the said representations, the Plaintiff’s executives were induced to and did transfer RMB 2.6B to Guotai on 25 September 2020. On 29 September 2020, RMB 2.55B out of the said RMB 2.6B were transferred to Shunyi.

12.  In about September 2021, the Plaintiff discovered the fraud and that the RMB 2.6B had not been used to acquire the shares of Hana Bank. Instead the funds were dissipated by Duan HT and Zhao for their personal use and benefit.

13.  The Defendant is a company incorporated in Hong Kong. Duan HT and his uncle Duan Chunchao (“Duan CC”) were its shareholders. Duan CC was also the sole director of the Defendant.

14.  Zinda Hong Kong Co Ltd (“Zinda”) is a company incorporated in Hong Kong and authorized by the Plaintiff to retrieve and retain the misappropriated funds on its behalf in Hong Kong.

15.  The Plaintiff’s investigation revealed that the Defendant was used to and had received USD 87,000,000 (“Sum”) being part of the proceeds from the fraudulent scheme. The Sum was transferred from the Defendant to Zinda on 16 December 2021 by Madam Liu Wenjia, the Defendant’s financial controller, who claimed to have been physically detained in Dalian, Liaoning Province, and under extreme stress and pressure by local police officers.

16.  In this Action, the Plaintiff claims for a declaration that the Sum received by the Defendant and held by Zinda was at all times and remains the property of the Plaintiff and was received by the Defendant and held by Zinda on constructive trust for the Plaintiff.

17.  The Defendant’s defence is that neither it, Duan CC nor Duan HT had any knowledge of or participated in, consented to, approved or acquiesced to the alleged fraud or fraudulent misrepresentation.

18.  On 20 December 2021, by HCA 1903/2021, the Defendant, claiming (wrongfully according to the Plaintiff) to be the beneficiary of the Sum, commenced proceedings against Zinda for recovery of the Sum.

C. The PRC Judgment

19.  The PRC Judgment entitled “上海市寶山區人民法院刑事判決書” (case No. (2023) 沪0113刑初712號) was one in which 9 defendants were convicted of and sentenced for 3 criminal offences, 6 of those were convicted of the most prominent offence of money laundering. The Defendant was not a defendant in the Shanghai proceedings. Nor Duan HT and Zhao were defendants but they were mentioned in one paragraph (“Paragraph”) to be found on page 4 of the PRC Judgment. The Paragraph reads:-

“經審理查明: 2020年8月, 李玉林 (原葫蘆島銀行黨委書記, 另案處理) 伙同李曉東 (原葫蘆島銀行行長, 另案處理), 勾結段洪濤 (原葫蘆島銀行股東, 另案處理) 和周志龍 (另案處理), 以化解葫蘆島銀行不良資產為由, 虛構投資資管計劃, 挪用葫蘆島銀行資金共計人民幣26億元, 供段洪濤揮霍使用。2020年9月, 周志龍與被告人項瀟瀟商定將其中人民幣18億餘元非法匯兌成外幣轉至段洪濤控制的香港公司賬戶內。”

20.  The Paragraph, described by counsel for the Defendant as the key paragraph in the PRC Judgment, is the only paragraph in the entire Judgment which contained references to “段洪涛”[1]. There is no suggestion that the Defendant was mentioned in the PRC Judgment at all.

21.  The paragraphs preceding the Paragraph merely set out some of the background of each of the 9 defendants and that they were prosecuted and tried before the Shanghai Court. The Paragraph was followed by what appeared to be a summary of the evidence against the 9 defendants. In the first sentence of the last paragraph on page 5, the Court recorded that all the facts referred therein above was uncontested by all the defendants ie “上述事實, 各被告人在開庭審理中亦無異議”. In the same paragraph, the Court went on to list out the other evidence adduced in the proceedings.

22.  After having summarized the evidence, in the first complete paragraph on page 6 (beginning with “本院認為”), the Shanghai Court set out its findings and verdict that each of the 9 defendants was guilty as charged. The first full sentence of that paragraph reads:

“本院認為, 被告人項瀟瀟﹑陳鏝旭﹑鄭煒琦﹑徐挺﹑孔佳樂﹑項立與人結伙, 明知他人資金系來源於銀行的犯罪所得, 仍幫助轉化成虛擬貨幣轉移至境外換成外幣, 情節嚴重, 其行為已構成洗錢罪; 被告人楊少磊非法持有他人信用卡, 數量較大, 其行為已構成妨害信用卡管理罪; 被告人郦鷗﹑楊明明知他人利用信息網絡實施犯罪, 為犯罪提供支付結算等幫助, 其行為已構成幫助信息網絡犯罪活動罪, 對各被告人均應依法予以懲處。公訴機關指控的罪名成立。”

23.  The Shanghai Court then went on to discuss the role played by the 9 defendants and decided on the appropriate sentence to be passed against each of them.

D. The “Hollington principle” and the Main Decision

24.  The Defendant sought to debar the Plaintiff from adducing the PRC Judgment as evidence in the Action on the basis of what might be called the “Hollington principle”, being the rule arising from the namesake case of Hollington v F. Hewthorn & Co. Ltd [1943] KB 587.

25.  The Hollington principle is well settled. Briefly stated, a judgment and factual findings of another court or tribunal in earlier proceedings, whether civil or criminal, are inadmissible in subsequent proceedings, unless the party against whom the finding is sought to be deployed is bound by them by reason of an estoppel per rem judicatam: Capital Century Textile Company Limited v Li Dianxiao & Anor [2018] HKCFI 729, per Lisa Wong J at §23; Jin Jiang Investment Limited & Anor v & 深圳市威廉金融控股有限公司 & Ors [2022] HKCFI 378, per Coleman J at §44.

26.  The underlying rationale of the Hollington principle is that it is the duty of a court to form its own opinion on the basis of the evidence placed before it; and that it would not be proper for the court in forming that opinion to be influenced by the opinion of someone else, however reliable that person’s opinion is likely to be. In so far as the evidence before the later court is the same as the evidence before the earlier court, the later court is in as good a position to draw inferences and conclusions from the evidence. In so far as the evidence is different, the opinion of the earlier court does not assist the court’s task. The true justification for the Hollington principle lies in the requirements for a fair trial: Rogers v Hoyle [2013] EWHC 1409 (QB), per Leggatt J (as he then was) at §93 and §104.

27.  On the other hand, the Hollington principle does not apply to the evidence referred to in an earlier judgment such as the contents of documents or the evidence of witnesses: Capital Century Textile at §29. Putting it generally, statements or reported statements of the factual evidence before the previous court are not excluded by the Hollington principle: Jin Jiang Investment at §45.

28.  In Rogers v Hoyle, the statements or reported statements of fact in the AAIB report, even those unattributed, were admitted in evidence as not falling foul of the Hollington principle.

29.  In Jin Jiang Investment at §45, Coleman J recorded that “Mr Chong said his reliance on the PRC Judgment does not fall foul of the Hollington principle, because he did not seek to rely on the findings of the PRC Court. He sought only to rely on the statement or reported statements in the PRC Judgment of the factual evidence before that court.” Coleman J agreed that such materials were not excluded by the operation of the Hollington principle.

30.  At the appeal hearing before the Judge, the Defendant argued that the Paragraph contained “factual findings” against Duan HT and Zhao, such that the PRC Judgment should be excluded by the Hollington principle. On the other hand, the Plaintiff contended that the Paragraph only contained “factual evidence” such that it should not be excluded by the Hollington principle.

31.  The Judge dealt with Counsel’s submission in this way.

“15. Counsel for P and D accepts the only issue I need to decide today is whether the PRC Judgment is not excluded by the Hollington principle because they contain statements or reported statements of the factual evidence before that court and not factual findings.

16. Mr Wong, counsel on behalf of D, confirmed that the basis of D’s application and this appeal is based on the Hollington principle. He submitted that it is clear that P is seeking to rely on the PRC Judgment for its factual findings against Duan HT and Zhao which appears at the first complete paragraph at p.4 of the PRC Judgment. Although he accepted that the paragraphs following “经审理查明” up to the paragraph before the words “上述事实” at p.5, recited the evidence which was not contested and thereafter set out the source of the evidence, he submitted that there were also factual findings of the alleged fraud which was the basis of the conviction and sentencing of the defendants by the PRC court.

17. From a plain reading of the PRC Judgment as a whole, I agree with Mr Cheung, counsel for P, that those paragraphs merely recited the uncontested evidence before the court before proceeding to sentence the defendants for the convicted crimes of inter alia money laundering. It did not make any finding one way or the other on the evidence recited.

18. Although it was mentioned at p.4 to the effect that Duan HT, Zhao and others purportedly on the ground of resolving the non-performing loans of P used P’s funds totaling RMB2.6B which the defendants illegally exchanged into foreign currency and transferred to a Hong Kong company account controlled by Duan HT, this was only a summary of the evidence. It was expressly stated that there were other proceedings against Duan HT and Zhao (“另案处理”). Plainly, the PRC Judgment could not and did not make any factual findings on their alleged involvement in the fraud. They were not defendants in the PRC Judgment.” (emphasis added)

E. Discussion

32.  It is well established that leave to appeal will only be granted if (a) the appeal has a reasonable prospect of success; or (b) there is some other reason in the interests of justice why the appeal should be heard: section 14AA of the High Court Ordinance, Cap 4. Counsel for the Defendant relies on both limbs, as he did before the Judge in the leave application below.

33.  The meaning of “a reasonable prospect of success” is uncontroversial – it need not be probable but must be more than fanciful: SMSE v KL [2009] 4 HKLRD 125 at §17. As for the “some other reason in the interests of justice” limb, the Court of Appeal may grant leave if the question is one of general principle, decided for the first time; or a question of importance upon which further argument and a decision of the Court of Appeal would be to the public advantage: §59/2A/4, Volume 1, Hong Kong Civil Procedure 2025.

34.  It is pertinent to note that the renewed leave application before us is the second filtering exercise, the first having been conducted by the Judge. It is not a mechanical exercise, to be pursued automatically having failed to obtain leave in the court below. The Defendant is expected to demonstrate to the Court of Appeal that leave should be granted notwithstanding the reasons given by the court below in refusing leave. The starting point for the Court of Appeal is the leave decision below and it is incumbent on the applicant to point to palpable errors in that decision to justify a renewed application. The burden of showing that the threshold requirements are met is not discharged by repeating the arguments in the leave application below, without demonstrating in what way the judge went wrong in rejecting the arguments: Re Up Energy Development Group Limited (In Liquidation) [2023] HKCA 536 per Kwan VP at §12.

35.  For reasons to be explained below, we are of the view that the Defendant has not met that burden – it is largely if not exclusively repeating the arguments in the leave application below which were rejected by the Judge. There is little attempt to demonstrate in what way the Judge went wrong in rejecting the arguments.

E1. Reasonable prospect of success

36.  On this limb, counsel for the Defendant advanced three major proposed grounds of appeal. As set out in the draft Notice of Appeal and the Defendant’s written statements, the Defendant’s focus is on whether the Paragraph contains a factual finding or simply factual evidence.

37.  First, counsel for the Defendant submits that the Judge erred in finding that the Paragraph merely contained a summary of the uncontested evidence before the Shanghai Court. Rather, the Paragraph contained a factual finding directly in support of the 6 relevant defendants’ conviction of money laundering since the convictions were founded upon the factual finding of fraud in the Paragraph. That factual finding of fraud was essential and necessary for the convictions of money laundering against the relevant defendants.

38.  We do not find this proposed ground to have a reasonable prospect of success.

39.  The Judge had dealt with this proposed ground in the Leave Decision at para 5 and we agree with what the Judge said ie (i) the Defendant has not adduced any evidence on PRC laws to support the assertion that a factual finding of fraud was essential and necessary for the convictions of money laundering against the relevant defendants and (ii) importantly, as stated in the Main Decision at para 17, there was no factual finding at all because the defendants were convicted and sentenced on the basis of uncontested evidence.

40.  That the Paragraph all the way down to the penultimate paragraph on page 5 contained a summary of uncontested evidence of the defendants was expressly said so in the PRC Judgment: see the last paragraph on page 5 beginning with the sentence “上述事實, 各被告人在開庭審理中亦無異議”.

41.  We agree with the Judge that from a plain reading of the PRC Judgment, the factual findings in support of the convictions and sentences were contained in another part of the Judgment instead, i.e. the paragraph beginning with “本院認為” on page 6. The part relevant to the conviction of money laundering is reproduced again for convenience:

“本院認為, 被告人項瀟瀟﹑陳鏝旭﹑鄭煒琦﹑徐挺﹑孔佳樂﹑項立與人結伙, 明知他人資金系來源於銀行的犯罪所得, 仍幫助轉化成虛擬貨幣轉移至境外換成外幣, 情節嚴重, 其行為已構成洗錢罪…”

42.  We take the view that the factual finding in support of the conviction of money laundering (“洗錢罪”) is that the 6 defendants knew the fund was proceeds of crime but still assisted in exchanging the fund into cryptocurrency, transferring it out of the territory and exchanging it into foreign currency. An ordinary reading of the PRC Judgement would suggest that factual finding made by the Shanghai Court was considered to be sufficient to support the conviction of money laundering. In that sentence “明知…外幣”, there was no reference to Duan HT (or Zhao) having committed any fraud.

43.  Counsel for the Defendant submits that it does not matter whether the factual finding in the Paragraph was adopted from another set of proceedings or not (from one reading of the words “另案处理”).

44.  It seems to us counsel for the Defendant has misinterpreted the Judge’s reference to the existence of other proceedings against Duan HT and Zhao (“另案处理”). It is wholly unclear whether those other proceedings have or have not concluded and if concluded what findings were made against Duan HT and Zhao in those other proceedings. It is pure speculation, as the Defendant seems to suggest, that what was stated in the Paragraph was adopted from the fact findings in those other proceedings against Duan HT and Zhao.

45.  Second, counsel for the Defendant submits that the Judge erred in finding the PRC Judgment was merely a Judgment on sentencing when it is clearly a Judgment on both conviction and sentencing and emphasizes the sentence “公訴機關指控的罪名成立” in the paragraph beginning with “本院認為” on page 6.

46.  The same argument was made and rejected by the Judge in the Defendant’s leave application below. We agree with the Judge at para 4 of the Leave Decision that nothing turns on whether the PRC Judgment was a judgment on sentencing or a judgment on both conviction and sentencing. A judgment is a judgment – the important point is whether the Paragraph contained any factual finding or simply factual evidence. The Judge found it contained factual evidence only and we agree.

47.  Third, counsel for the Defendant submits that the Judge erred in finding that the PRC court could not and did not make any factual findings against inter alia Duan HT for fraud given that he was not a party to the PRC proceedings. He submits that the Hollington principle is often applied to situations where a foreign court (in the present case the Shanghai Court) made findings against certain non-parties (in the present case Duan HT) who were then parties to the local subject action, citing Calyon v Michailaidis [2009] UKPC 34, which was referred to and explained in Rogers v Hoyle at §89.

48.  Counsel for the Defendant then repeats his submission that the Shanghai Court “had to make, and did make, findings of fraud against inter alia Duan HT in order for them to establish the convictions of money laundering against the defendants therein”.

49.  This proposed ground has no reasonable prospect of success.

50.  To start with, in Calyon v Michailaidis, reliance was placed in proceedings in Gibraltar on a judgment of a Greek Court which had found that the claimants were the lawful owners of an art collection. The defendant in the Gibraltar proceedings had not been a party to the Greek proceedings. The Gibraltar Court of Appeal nevertheless held that the Greek judgment was conclusive of the question of ownership. On appeal to the Privy Council the Board held, following Hollington v Hewthorn, that the Greek judgment was not admissible as evidence at all.

51.  But Calyon v Michailaidis is of no assistance to the Defendant at all for 2 reasons.

52.  The simple reason is that Duan HT (a non-party to the Shanghai proceedings) is not a defendant in this Action. Counsel for the Defendant seems to have equated Duan HT with his own client.

53.  The other reason is that in Calyon v Michailaidis the earlier Greek Court had actually “found” the claimants were the lawful owners of an art collection. In the present case, whether the Shanghai Court had made any findings of fact in the Paragraph is the very issue to be decided by the Judge. The Judge found no. Since we agree with the Judge that the Paragraph did not contain any factual findings, Calyon v Michailaidis is simply irrelevant.

54.  Further, the submission that Shanghai Court had to make, and did make, findings of fraud against Duan HT had been rightly dismissed by the Judge in the Leave Decision at paragraph 8. The Judge’s reasoning was that if the submission was correct, there would not be a need for other proceedings to be taken against Duan HT (and Zhao) ie “另案处理”. We agree with the Judge.

55.  Lastly, Counsel’s submission is based on the premise that proof of the underlying crime ie fraud by inter alia Duan HT which generated the money laundered is a necessary ingredient of the offence of money laundering under PRC laws. As the Judge pointed out in the Leave Decision and as we point out earlier in this Judgment, there is no expert evidence on PRC laws to make good that premise.

56.  To conclude, we find none of the proposed grounds of appeal to have any reasonable prospect of success.

E2. Other reason in the interest of justice

57.  Counsel for the Defendant also puts forward three grounds in support of this limb, viz:

(1) The Paragraph in the PRC Judgment is open to interpretation and could on one view be interpreted as being both records of uncontested evidence and factual findings in support of the verdicts. The general public would benefit from a higher authority setting out the application of the Hollington principle in the present context.

(2) If the party against which a foreign judgment is intended to be used is not a party to the foreign judgment itself, there is a legitimate question as to whether the Hollington principle is ever applicable if the foreign judgment makes any findings which would impeach that party (but without making any findings against that party as a defendant therein).

(3) The Judge relied upon first instance decisions for the proposition that “statements or reported statements of factual evidence” would not be caught by the Hollington principle. Such a proposition has never been tested or ruled upon in the higher courts. The general public would benefit from a decision of a higher court to clarify and explain the scope of the Hollington principle.

58.  In our view, none of the grounds are meritorious.

59.  The first ground is but a re-run of the argument that the Paragraph contains factual findings, which we have already rejected when dealing with the “reasonable prospect of success” limb. There is nothing more for us to set out the application of the Hollington principle in the present context. In any event, we agree with the Judge’s view expressed in the Leave Decision that the application of the Hollington principle to the particular PRC judgment in this case by a higher court can advance no public interest.

60.  The second ground is based on the Privy Council decision of Calyon v Michailaidis as explained in Rogers v Hoyle at §89. The answer to that so-called legitimate question seems to be yes although we would not express any firm view on this, the reason being that Calyon v Michailaidis is irrelevant to the present application for the two reasons given above. Courts do not decide on academic questions.

61.  As for the third ground, the Hollington principle is well established, albeit controversial, and it is accepted and settled by authorities in both Hong Kong and England. In the court below, there was no dispute between parties as to the correct legal position as explained in the Main Decision. Similarly, in the Draft Notice of Appeal, the Defendant does not seek to challenge the correctness of the legal principles as set out in the Main Decision. As a matter of fact, both parties were and are content to refer to the Judge and us first instance decisions viz Capital Century Textile, Jin Jiang Investment and Rogers v Hoyle in order to explain the Hollington principle. Unless counsel for the Defendant submits those decisions were wrongly decided which he does not, we do not see any need for further clarifications or explanation from us.

62.  To conclude, we do not find any reason why the proposed appeal should be heard in the interests of justice.

F. Disposition and costs order nisi

63.  For all the above reasons, we would not grant leave to the Defendant to appeal. The Summons dated 19 March 2025 is hereby dismissed.

64.  We do not see any reason why costs should not follow the event. The Defendant should pay to the Plaintiff the costs of this application to be summarily assessed.

65.  The Plaintiff is directed to file and serve its statement of costs within 5 days. Leave to the Defendant to file its statement of objections (not exceeding 3 pages) within 5 days thereafter. Costs will be summarily assessed on paper.

66.  As this application is totally without merit, we further make an order under Order 59, rule 2A(8) of the RHC that no party may under rule 2A(7) request the determination to be reconsidered at an oral hearing inter partes.