CYBERLAND (CHINA) LTD v. ZHANG WEI BING AND ANOTHER

HCA 776/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 776 OF 2013

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J U D G M E N T

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1.  This is the Plaintiff’s Summons for an order that the sum of HK$51,230,137.00 paid into court by the 2nd Defendant pursuant on an order dated the 15 April 2013 in HCCW 31/2013 should not be paid out to the 1st Defendant.

2.  This order was made by Harris J. during the course of winding up proceedings relating to the 2nd Defendant.

3.  It was quite understandable that the learned judge made the order he did as it was evident that there was a substantial dispute between the Plaintiff and the 1st Defendant over his entitlement to receive commission on fees in relation of services he had allegedly performed.  These issues could more conveniently be ventilated in separate legal proceedings hence the institution of the present action.

4.  By the instant Summons the Plaintiff is seeking injunctive relief.

5.  It is their contention that there is a genuine dispute between themselves and the 1st Defendant and if the relief is not granted and D1 is able to obtain the money in court there is a great risk that D1, who is not a resident of Hong Kong, will remove the money from the jurisdiction of the court.  In that event the whole substratum of the present action is likely to be rendered nugatory as the prospects of being able to enforce any judgment in their favour would be indeed remote.

6.  In this connection although D1 claims to be a person of considerable wealth and substance there is no solid evidence that he possesses any substantial assets in Hong Kong.

7.  Exhibited to an affirmation affirmed by D1 is a letter from an officer in Citibank dated the 10 June 2013 which states that on that day there was a balance “in the low 8 digit of HK dollars” in the D1’s account.

8.  This is not very helpful.

9.  There is no information provided concerning how this account has been operated nor is there is any assurance that the money being referred to could not be withdrawn at any time in the future.

10.  D1 appears to be a resident of the Peoples Republic of China and to have various business interests there.

11.  However the Plaintiff is not in possession of any information as to where he could be contacted if the case is continued.

12.  D2 at the commencement of the hearing before me filed a Notice of Discontinuance and accordingly will not participate further in the case.

13.  I am satisfied that the correct approach to adopt on this Summons is to treat it in a similar manner to a Mareva injunction save that the target of the proceedings is the money paid into court rather than freezing D1’s assets generally.

14.  The principles governing applications of this nature were most helpfully laid down in the judgment of Ma J as he then was at 1046 of Music Advance Limited and Incorporated owners of Argyle Centre Phase I [2010] HKLRD 1041:

"(c) The basic approach to interlocutory injunctions, whether mandatory or prohibitory, is the same.  Section 21L of the High Court Ordinance (Cap.4) makes no distinction between these two types of injunctions and simply states that interlocutory injunctions may be granted if it appears to be just or convenient to do so.

(d) At the interlocutory injunction stage, the principal concern of the court is 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 will therefore take whichever course appears to carry the lower risk of injustice if it should turn out that it is wrong.  This “fundamental” principle is the source of the guidelines that have evolved for the determination of interlocutory injunctions (included are, of course, the American Cyanamid guidelines) and therefore, in the application of any guidelines, sight must not be lost of this principle.  See: Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR 670, 680D-G, in a passage from the judgment of Hoffmann J which was approved by the House of Lords in R v Secretary of State for Transport, ex p Factortame Ltd (No 2) [1991] 1 AC 603 and recently reiterated in the English Court of Appeal decision of Zockoll Group Ltd v Mercury Communications Ltd [1998] FSR 354 (which Mr Au was kind enough to place before me).

(e) Two common guidelines are of course the consideration of the merits of the plaintiffs’ claim and the balance of convenience.  Here, it is of course easy to see at once how they are linked to the fundamental principle: there must be a risk of injustice if the plaintiff cannot even establish a serious question to be tried or that one or the other party will be put to substantial inconvenience or prejudice if an interlocutory injunction were or were not granted.”

15.  I am satisfied that these are the principles I must follow in the present case.

16.  The main issue I have to determine on this application is whether on the evidence before me the Plaintiff has made out a case where there is a serious question to be tried.

17.  D2 which is a listed company on the GEM Board of the Hong Kong Stock Exchange issued a Convertible Bond of HK$1,098,000,000.00 to the Plaintiff the purpose of which was the acquisition of Kang Yuan Universal Investment Limited.

18.  This Convertible Bond was cancelled by D2 and replaced by 2 Convertible Bonds, one for HK$1,048,000,000.00 to the Plaintiff and the other for HK$50,000,000.00 to D1.

19.  It is the Plaintiff’s case that this Convertible Bond was issued to D1 pursuant to an agreement entered into in July 2010.  It was intended by this agreement that D1 would provide his expert services in assisting the Plaintiff in raising funds and would not be used by him and be returned to the Plaintiff in due course.

20.  The Agreement came to an end in November 2010 as D1 was unable to raise the required funds for the Plaintiff.

21.  D1 refused to return the Convertible Bond to the Plaintiff.

22.  Mr. Kenny Lin for the Plaintiff and Mr. Simon Westbrook  SC for D1 both made lengthy submissions which were aimed at undermining the respective contentions being advanced by their adversaries.

23.  They both advanced cogent arguments in criticising the cases they had to meet.

24.  However it became very obvious to me that justice could only be done if the deponents of the various affirmations could be cross examined in open court.

25.  In other words what I must refrain from doing is making an attempt to judge the disputes between the parties on affidavit evidence.

26.  I am however satisfied that the Plaintiff’s case has not been destroyed completely and they have a real prospect of success if the case goes to trial.

27.  On the question of the balance of convenience it would appear to me that the balance is nearly all in one direction.

28.  If I fail to grant the injunction sought there is a considerable risk that the money in court will be removed by D1.

29.  It is not unlikely that in that event the Plaintiff will conclude that in the absence of assets being available they would not feel justified in incurring the cost of taking the case to trial and thus obtaining  any advantage from the litigation.

30.  On the other hand if I grant the Order sought the only detriment which would be suffered by D1 would be that he would be kept out of any money which may be due and owing to him until the completion of the case.  This, however could be compensated by the Trial Judge ordering that interest be paid on the money.

31.  This being the case I make an Order in the terms prayed for in the Summons.

32.  Both counsels have made written submissions to me concerning the Order I should made on costs contingent upon both alternative Orders I may make.

33.  I have considered these and make an Order that D1 shall pay to the Plaintiff the costs of and occasioned by this application (including the costs of the hearing on the 26 September) with a certificate for one counsel to be taxed and paid forthwith.