FIRST LASER LTD AND ANOTHER v. FUJIAN ENTERPRISES (HOLDINGS) COMPANY LTD AND ANOTHER

HCMP 1077/2024

[2025] HKCFI 1940

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1077 OF 2024

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J U D G M E N T

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A.  INTRODUCTION

1.  There has been a long legal battle between First Laser Ltd (“First Laser”) on the one hand and Fujian Enterprises (Holdings) Co Ltd (“FEHC”) on the other hand in Hong Kong and in Mainland for more than 2 decades.  At one time, one might have thought that the legal battle had come to an end after the Court of Final Appeal (“CFA”) handing down its judgment on 21 November 2023 (“CFA Remitter Judgment”).  However, it has turned out that this is not the case.

2.  On 20 June 2024, First Laser and Mr Ngan In Leng (“Ngan”) commenced legal proceedings (“the New Mainland Action”) against FEHC, Jian An Investment Limited (“Jian An”) and Fuzhou Casix Limited (福建华科光电有限公司) (“FCL”)[1] in the Fuzhou Intermediate People’s Court (福建省福州市中级人民法院) (“Fuzhou IPC”).  In the New Mainland Action, Ps claim against FEHC, Jian An and FCL for 不当得利 (improper profits) for over RMB 906 million in respect of the investments made by them (namely USD 410,000 and RMB1 million) back in 1997 in relation to one optronics project 无源光纤项目 (“the Project”).

3.  In these proceedings, First Laser and Ngan are the plaintiffs (“Ps”), and FEHC and Jian An are the defendants (“Ds”).  The summonses before me in this hearing are as follows:

(1)  Ps’ application by the Originating Summons herein (“OS”) and by the Summons under s.21M of the High Court Ordinance (Cap. 4) (“HCO”) (“S.21M Summons”) both dated 25 June 2024 for an order to continue the interim-interim Mareva injunction granted by Wilson Chan J on 28 June 2024 (“the interim-interim injunction”) to restrain Ds from disposing of the assets in Hong Kong up to the value of USD 34.41 million, in aid of the New Mainland Action (“the S.21M Application”).

(2)  Ds’ application by the Summons dated 5 August 2024 (“the ASI Summons”) for an anti-suit injunction (“ASI”) to restrain Ps from commencing, pursuing and/or continuing any proceedings relating to the disputes, differences or claims arising out of the investment in the 无源光纤项目及其增资收益所获得的利益, including taking any further steps in the New Mainland Action on the ground that it constitutes an attempt to re-litigate the claims in HCA 4414/2001 (“the HK Proceedings”) and/or is an abuse of process (“the ASI Application”).

4.  In the hearing before me, Mr Derek JY Chan (together with Mr Fergus Tam) represent Ps.  Mr Benjamin Yu SC (leading Mr Law Man Chung SC) represent Ds.

5.  Each aside has provided me very detailed written and oral submissions, and each side has cited numerous authorities in these applications.[2] In this judgment, I would give my conclusion on the applications made by the parties, and I would provide succinct reasons for that conclusion.  For avoidance of doubt, the points put forward by the parties in their respective submissions (both written and oral submissions) and the authorities referred to in their submissions which have not been mentioned in this judgment have also been considered by the Court.  Some points raised and some authorities cited by the parties are not mentioned in this judgment simply because for the purpose of this judgment, the matters stated herein would be sufficient.

B.  BACKGROUND

6.  These proceedings are closely connected with the disputes in the HK Proceedings.  The disputes have a long history, which arose from a joint venture between Macau and Fujian interests which was entered into in 1996.  There were disputes between the parties, followed by litigations in Hong Kong and in Mainland.

7.  In 2001 (ie 24 years ago), First Laser commenced proceedings (ie HCA 4414/2001) in Hong Kong against Ds in 2001.  First Laser is a company incorporated in Macau and is under the control of Ngan.  FEHC is incorporated in Hong Kong and is a window company of the Fujian Provincial People’s Government.  Jian An is also incorporated in Hong Kong and is FEHC’s nominee, and it has no active role in the facts giving rise to the proceedings.

8.  At about the same time, FEHC also commenced an action in the Fujian Higher People’s Court (“Fujian Court”) seeking, inter alia, a declaration that the various agreements were of no effect.  The disputes have been finally adjudicated, both in Mainland and in Hong Kong.

9.  In the HK Proceedings, the Hong Kong Courts have given the following judgments:

(1)  Judgment of DHCJ Anthony To (“the Judge”) in the Court of First Instance (“CFI”) handed down on 5 February 2008 given after the trial in HCA 4414/2001 (“CFI Judgment”);

(2)  Judgment of the Court of Appeal (“CA”) in CACV 126/2008 handed down on 4 January 2011 (“CA Judgment”)[3];

(3)  Judgment of the CFA in FACV 6/2011 handed down on 6 July 2012 (“CFA Judgment”, in which the main judgment was given by Lord Collins NPJ)[4];

(4)  Judgment of the Judge in the CFI on the remitter issue handed down on 8 April 2020 (“CFI Remitter Judgment”)[5];

(5)  Judgment of the CA in CACV 97/2020 on the remitter issue handed down on 31 March 2023 (“CA Remitter Judgment”)[6]; and

(6)  Judgment of the CFA in FAMV 299/2023 on the remitter issue handed down on 21 November 2023 (“CFA Remitter Judgment”, given by Ribeiro PJ)[7].

10.  In this judgment, for ease of reference, the proceedings covered by the CFI Judgment, the CA Judgment and the CFA Judgment are referred to as the “Main Action”.  The proceedings covered by the CFI Remitter Judgment, the CA Remitter Judgment and the CFA Remitter Judgment are referred to as “the Remitter Proceedings”.

11.  The factual background leading to the CFA Remitter Judgment has been succinctly set out by Ribeiro PJ in that judgment.  Below is a summary of the facts as set out in the CFA Remitter Judgment:

(1)  First Laser is a Macau company controlled by Ngan, Hang Wo Properties Investment and Management Co Ltd (“Hang Wo”) and Casix Optronic Manufacturing Ltd (“COM”).

(2)  FEHC is a Hong Kong company owned by the Fujian Provincial People’s Government involved in the production of crystals for use in the field of optronics.  Its operating subsidiaries were Fujian Casix Laser Inc (“FCL”) and Fuzhou Casix Optronics Inc (“FCO”), both incorporated in Mainland.

(3)  In December 1996, Ngan and FEHC entered into three agreements involving the abovementioned companies, for the purpose of forming a joint venture for the production of optronics crystals in Macau.  However, subsequently those agreements were superseded (“the Superseded Agreements”) by an agreement called “the First Laser Agreement” dated 28 December 1996 (“FLA”), which was the subject-matter of the dispute.

(4)  The FLA was an agreement for FEHC to sell to First Laser 51% of its shares in FCL (“the FCL Shares”) and FCO (“the FCO Shares”) for USD 3.1875 million (equivalent to HKD 24.64 million), representing 51% of the net asset value of those companies.  The contractual price had been paid by First Laser in full.

(5)  Although all the FCO Shares were transferred to COM, the FCL Shares were not because the Mainland regulatory approval of the intended transfer of those shares was refused on the ground that FCL’s registered capital was not fully paid up.  This was recorded in a Memorandum signed by the parties dated 13 March 1998 (“the 1998 Memorandum”), in which it stated that the share transfers could not be completed, and that FEHC temporarily held FCL, and that COM temporarily held FCO.  It also stated that the position would be regularised and in the meantime, the parties’ relationship would be governed by the above-mentioned agreements.  Ngan, through COM, had meanwhile invested USD 410,000 and RMB 1 million in a project (“the Project”) undertaken by a subsidiary of FCL named Casix Inc in the USA.  The Project was successful, enhancing the value of FCL.

(6)  After May 1998, after a change in personnel at FEHC, the parties’ relationship deteriorated.  On 29 February 2000, FEHC sold all its FCL shares to JDS Uniphase China Holdings Company (“JDS”) for USD 60 million (“the JDS Transfer”). FEHC reduced FCL’s registered capital and paid up the same in full, and thereafter obtained the necessary regulatory approval for the JDS Transfer. The JDS Transfer led to the litigation between the parties.

(7)  FEHC brought proceedings in the Fujian Court and obtained a declaration against Hang Wo, COM and First Laser that the Superseded Agreements, the FLA and the 1998 Memorandum were all invalid.  Ngan lodged an appeal, but the appeal was dismissed by the Supreme People’s Court (“SPC”) on 3 December 2004.  The SPC upheld the lower court’s finding that the FLA was invalid (“the SPC Judgment”).

(8)  First Laser claimed that the FLA was governed by Hong Kong law and commenced HCA 4414/2001 in Hong Kong.  In HCA 4414/2001, First Laser claimed that FEHC had breached the FLA by not obtaining the necessary approval for the transfer of the FCL Shares and by the JDS Transfer.  First Laser sought damages and a proprietary remedy based on constructive trust over the FCL Shares and the proceeds of the sale to JDS. FEHC’s defence was that the FLA was void and was governed by Mainland law, which prevented performance of the FLA because approval for transfer of the FCL Shares had been refused.

(9)  FEHC made an open offer (“FEHC’s Offer”) to return the HKD 20 million[8] paid by First Laser under the FLA with interest and to forego the return of the FCO Shares transferred to COM as well as its claim to a share of the dividends declared by FCO.  First Laser refused to accept that offer.

(10)  In the CFI Judgment, the Judge held that the FLA was governed by Hong Kong law and valid.  Applying Hong Kong law, the Judge held that FEHC had committed a repudiatory breach of the FLA, and hence First Laser was entitled to damages quantified by reference to the sale price in the JDS Transfer.  The Judge further held that First Laser had acquired an equitable interest in the FCL Shares held by FEHC on a constructive trust for First Laser’s benefit.  The Judge also held that First Laser was entitled to compensation in the sum of USD 30.6 million (equivalent to 51% of USD 60 million, the sale price in the JDS Transfer).

(11)  In the CA Judgment, the CA set aside the CFI Judgment.  The CA held that the FLA was governed by Mainland law and the SPC Judgment on the validity of the FLA gave rise to an issue estoppel in the HK Proceedings.  The CA held that invalidity of the FLA under Mainland law (which was the governing law of the contract) gave rise to two remedies: (a) restitution and (b) compensation from the party at fault.  No proprietary remedy should be granted because under Mainland law, there was no constructive trusteeship nor obligation to disgorge a benefit.  The CA held that if First Laser were to accept FEHC’s Offer, judgment on such terms would be entered; if not, the issue of restitution would be remitted to the Judge for determination in accordance with Mainland law.  The CA declined to remit the issue of compensation since the only compensation claimed by First Laser was disgorgement of profits, which was unavailable under Mainland law.

(12)  In the CFA Judgment, the CFA agreed with the CA and pointed out that the subject matter of the FLA was the sale of shares in the relevant Mainland companies, with the Mainland being the only possible place of performance.  So, quite apart from issue estoppel, the FLA was governed by Mainland law.  The CFA held that the issue of restitution would have to be remitted to the CFI for determination under Mainland law.

(13)  In the CFI Remitter Judgment, the Judge allowed First Laser to introduce a claim for restitution based on a new agreement referred to as a “nominee investment contract” (“NIC”).  That claim was based on a judicial interpretation by the SPC (referred to as “Provisions (I)”) issued on 17 May 2010 and took effect on 16 August 2010, about 2½ years after the CFI Judgment.  The Judge allowed First Laser to file fresh Mainland law evidence and to re-amend the pleadings.

(a)  By relying upon Article 18 of the Provisions (I), First Laser put forward a primary claim that it was the “actual investor” and that FEHC was the “nominee shareholder” holding the FCL Shares as its nominee so that, upon the NIC between First Laser and FEHC being declared invalid, First Laser became entitled to an award representing 51% of the enhanced value of the shares of FCL reflected in the USD 60 million, the sale price in the JDS Transfer.

(b)  First Laser also put forward an alternative claim for restitution based on the invalidity of the FLA, invoking various Mainland laws in support of an award based on “improper profits” and “principle of fairness”.  First Laser claimed that based on these concepts, it should be entitled to “other benefits generated from the original subject matter received by FEHC”, yielding “more or less the same result as the primary claim under Article 18 of Provisions (I)”.

(c)  The Judge allowed the primary claim made by First Laser and held that First Laser was entitled to restitution in the net sum of HKD 250,168,048 with interest.  The Judge also agreed with First Laser on its alternative claim and held that restitution under the alternative claim would entitle First Laser to an award in the same amount as for the primary claim.

(14)  In the CA Remitter Judgment, the CA set aside the CFI Remitter Judgment and held that the restitution award to First Laser should be a sum of HKD 5,288,716.61.

(a)  On First Laser’s primary claim, Yuen JA held that the finding of an NIC was both inconsistent with the facts accepted by the CFA and unsupported by the evidence.  Her ladyship also held that even if an NIC had been established, there had been no determination that it was void so that Article 18 of Provisions (I) would not apply.

(b)  Regarding First Laser’s alternative claim, Kwan VP disagreed with the Judge that by adopting the concept of “improper profits” and the “principle of fairness”, First Laser would be entitled to a restitutionary award in the same amount as for the primary claim.  Her Ladyship held that that a fundamental difficulty with the Judge’s approach was his failure to identify the property to be returned by way of restitution.  The aim of restitution under Mainland law was to restore the parties to their pre-contract position.  Under the FLA, the only property acquired by FEHC was the share purchase price paid by First Laser, namely HKD 24,640,000.  The return of such property along with “the fruits arising” therefrom could only involve the return of the purchase price plus interest.  It did not involve “returning” the FCL Shares or their enhanced value realised by their sale to JDS.  They were not the property relevant to the restitution claim and the proceeds of the JDS Transfer were not “profits” attributable to the relevant transaction.  The correct award was for the return of the price paid for the FCL Shares plus interest.  Taking into FEHC’s claim for counter-restitution[9], Kwan VP held that after netting off, the restitution award to First Laser should be (HKD 24,640,000 – HKD 19,351,283.39) = HKD 5,288,716.61.

(15)  In the CFA Remitter Judgment, the CFA dismissed First Laser’s application for leave to appeal.

12.  There are 2 funds (“the Funds”) in the Hong Kong Court:

(1)  a sum of around USD 9 million and interest accrued thereon[10], being part of the proceeds of sale of the FCL Shares, which Ds paid into Court pending the determination of the Main Action (“the USD Fund”); and

(2)  a sum of HKD 9,084,304.64[11], which First Laser paid into Court pursuant to an unless order for the costs owed by First Laser under the allocaturs in the Main Action (“the HKD Fund”).

The Funds are Ds’ only assets in Hong Kong.

13.  After the conclusion of the HK Proceedings in November 2023, First Laser owes substantial costs to Ds.

(1)  In the Main Action, the amount of costs and interest accrued thereon owed by First Laser to Ds exceeds HKD 12.2 million.

(2)  In the Remitter Proceedings, the total of the costs claimed by Ds is around HKD 28-29 million (to be taxed).

14.  After the handing down of the CFA Remitter Judgment on 21 November 2023, Ds’ solicitors started to discuss the payment out of the Funds with First Laser’s solicitors through correspondence.  No agreement can be reached.

15.  On 2 February 2024, Ds took out a summons for payment out of the Funds (“Ds’ Payment-out Summons”), which was heard by DHCJ KC Chan on 27 June 2024.

16.  On 20 June 2024, First Laser and Ngan commenced the Mainland Action in Fuzhou IPC against FEHC[12], Jian An[13] and FCL[14].  In the民事起诉状 filed by Ps in the New Mainland Action:

(1)  Ps’ claims are for “就无源光纤项目及其增资收益所获得的利益(包括被告一和被告二获得的华科公司股权转让收益) 没有合法根据，构成不当得利”.

(2)  Ps claim for improper profits of RMB 400 million and interest of RMB 500 million.

(3)  Ps claim that “…… 最终香港终审法院于2023年11 月作出终审判决，认为原重审一审法官原裁断超出了发还重审的审理范围。该案仅应就案涉及三份协议无效后的返还问题进行处理。并认为该返还限于股权购买价款和利息。并不涉及返还华科公司的股份因出售华科公司的股份给[JDS]而实现的增值。”

17.  On 25 June 2024, Ps issued the OS to commence these proceedings in aid of the New Mainland Action, seeking a Mareva injunction to freeze, inter alia, the Funds, pending the determination of the New Mainland Action.  The S.21M Summons was returnable before Wilson Chan J on the summons day on 28 June 2024.

18.  On 27 June 2024, DHCJ KC Chan heard and allowed Ds’ Payment-out Summons in part (“the Payment-Out Order”).  The payment-out allowed would not be effected on or before 4 pm on 4 July 2024.

19.  On 28 June 2024, Wilson Chan J granted the interim-interim injunction pending the final determination of the S.21M Application.

20.  In July 2024, FCL and Ds made jurisdictional challenges in the New Mainland Action.

21.  On 5 August 2024, Ds took out the ASI Summons, seeking an ASI to restrain Ps from re-litigation of any claims relating to the Project and the resulting profits from the investment (including the claim in the New Mainland Action).

22.  On 9 August 2024, DHCJ Jonathan Wong granted an interim ASI (“the interim ASI”) pending the final determination of the ASI Summons.  The interim ASI restrained Ps from commencing, pursuing and/or continuing any proceedings relating to the dispute, differences or claims arising out of the investment in the 无源光纤项目及其增资收益所获得的利益, including the legal proceedings in the New Mainland Action, save that Ps may take steps in the New Mainland Action for opposing Ds’ application disputing the jurisdiction of the Fuzhou Court.

23.  On 30 August 2024, the Fuzhou IPC handed down judgment, allowing the jurisdictional challenges made by Ds and FCL, and dismissing the New Mainland Action.

24.  On 19 September 2024, Ps lodged an appeal against the dismissal of the New Mainland Action.[15]

25.  On 7 January 2025, the Fujian Province High People’s Court (“Fujian HPC”) heard Ps’ appeal, with judgment reserved.

C.  FINAL OR INTERLOCUTOPRY?

26.  During the hearing, I invited counsel to make submissions on the issue that the application made by each side is an application for a final order, or an application for an interlocutory order.

27.  Regarding the S.21M Application, after some exchanges between the bench and counsel, Mr Chan accepted that the injunction sought by Ps in the S.21M Application is an interlocutory injunction.  In my view, this is the correct position.

(1)  As pointed out by Mr Yu SC, the relief granted by the Court under s.21M of the HCO must be an interim relief.  The is plain and obvious by reading s.21M(1), which is as follows:

“…… the Court of First Instance may by order appoint a receiver or grant other interim relief in relation to proceedings which —

(a) have been or are to be commenced in a place outside Hong Kong; and

(b) are capable of giving rise to a judgment which may be enforced in Hong Kong under any Ordinance or at common law.” (Emphasis added)

(2) In ZL v MY and Others[16], I explained and held that an application made under s.21M of the HCO for a Mareva injunction is an application for an interlocutory order. I maintain the same view.

28.  Regarding the ASI Application, notwithstanding the form of the ASI Summons, Mr Yu SC has clarified that Ds are in fact seeking a permanent and final ASI against Ps.  Mr Chan has no objection to treating Ds’ application made by the ASI Summons as an application for a final injunction.  Accordingly, I would proceed on that basis.

D. ; ASI APPLICATION

29.  I would consider the ASI Application first.  If the ASI Application is allowed, Ps would be restrained from, inter alia, pursuing or continuing the legal proceedings in the New Mainland Action.  Naturally, if the ASI is granted, the s.21M Application would be dismissed.

D1.  The principles

30.  There is public interest in the finality of litigation and a court would grant an injunction restraining persons properly amenable to its jurisdiction from relitigating matters which have already been the subject of a judgment of the court of the forum.[17] It is uncontroversial that[18]:

(1)  the jurisdiction to grant an ASI is to be exercised when the “ends of justice” require it;

(2)  where a court decides to grant an injunction restraining proceedings in a foreign court, its order is directed not against the  foreign court but against the parties so proceeding or threatening to proceed;

(3)  an ASI would be issued restraining a party who is amenable to the jurisdiction of the court, against whom an injunction would be an effective remedy; and

(4)  since such an order would indirectly affect the foreign court, the jurisdiction is one which must be exercised with caution.

31.  In Raphael QC, The Anti-Suit Injunction (2^nd ed), the learned author stated at §4.66:

“An [ASI] may also be granted if the foreign proceedings are an illegitimate interference with the processes, jurisdiction, or judgments of the English court, or if an injunction is necessary for the protection of the processes, jurisdiction, and judgments of the English court, provided, of course, that it is in the interests of justice to do so. If an [ASI] is justified on this basis it is not necessary independently to show vexation or oppression, and although vexation and oppression will often overlap in practice with illegitimate interference, they are not the same conceptually.”

32.  The instances in which an ASI may be granted on the basis of an abuse of the forum court’s process include where the defendant seeks to relitigate abroad a case in which judgment has already been obtained against him in the forum court.[19]

33.  When an ASI is considered necessary for the protection of the processes, jurisdiction and judgments of the Hong Kong Court, it is not generally necessary separately to demonstrate that Hong Kong is the natural forum.  The logical basis of the injunction is that when the Hong Kong Court’s jurisdiction needs to be protected, the injunction is legitimate whether or not the Hong Kong Court is the natural forum for the underlying litigation.  The Hong Kong Court is the only appropriate court to assess the question of whether its processes need protection, and clearly has a sufficient interest in doing so.[20]

D2.  Ps’ preliminary challenge

34.  Mr Chan has raised a preliminary challenge to the ASI Application.  Mr Chan, relies upon The Sumitomo Bank Ltd v Xin Hua Estate Ltd & Ors[21], submits that this Court should not entertain the ASI Application at all in light of Ds’ jurisdictional challenge in the Fuzhou Court.  In Sumitomo, Stone J, following the decision of the Supreme Court of Canada in Amchem Products Inc v Workers’ Compensation Board[22], held that the plaintiff’s application for an anti-suit injunction against the 1^st defendant should be adjourned pending the outcome of the jurisdictional challenge made by the plaintiff in the Mainland proceedings.

35.  Mr Chan has fairly told me that the Sumitomo approach has not been universally accepted, and he has drawn my attention to Choi Sai Yiu & Ors v Widepower Ltd v Ors[23], and Achieve Goal Holdings Ltd v Zhong Xin ore Material Holding Co Ltd[24].

(1)  In Choi Sai Yiu, DHCJ Cheung (as he then was), after setting out the principles laid down by the Privy Council in Societe Nationale Industrielle Aerospatiale v Lee Kui-jak and Anor[25], said at 190:

“The Aerospatiale approach was adopted by the Supreme Court of Canada in Amchem Products Inc v Workers’ Compensation Board (1993) 102 DLR (4th Ed.) 96 (“Amchem”).  The Supreme Court of Canada further suggested that it is preferable that the decision of the foreign court should not be pre-empted until a proceeding has been launched in that court and the applicant for an injunction in the domestic court has sought from the foreign court a stay or other termination of the foreign proceedings and failed.  It is suggested that this additional step is consistent with the principle of comity. While the decision of the Supreme Court of Canada should be accorded with the greatest respect, it remains to be a persuasive authority only. The additional step is not an requirement enunciated in Aerospatiale and I would decline to adopt this additional requirement in deciding whether an injunction should be granted.”

(2)  In Achieve Goal, Wilson Chan J said:

“54. …… the Sumitomo case did not adopt the wait and see approach in Amchem Products Inc v British Columbia (Workers’ Compensation Board) (1993) 102 DLR (4^th ) 96 as a matter of general principle, but was decided “with the very particular factual situation” of its own:

(1)  In that case, the jurisdiction challenge had already been mounted in the PRC court, fully argued both orally and in writing and the PRC court was already “deliberating upon the jurisdiction issue” before the anti-suit injunction was issued (pp 2, 6).

(2)  The Hong Kong action issued was at its most embryonic stage started together with the anti-suit injunction and long after the PRC proceedings had been started and the jurisdiction challenge had been raised and argued in PRC for the deliberation of the PRC court (p 2).

……

56. In Choi Sai-yiu and Ors v Widepower Ltd and Ors [1995] 1 HKLR 186 at 190, Deputy High Court Judge Cheung (as he then was), expressly refused to follow the Amchem approach as a matter of general rule, being an additional step that is not enunciated in the binding Privy Council decision of Societe Nationale Industrielle Aerospatiale v Lee Kui-jak and Anor [1987] 1 AC 871.

57. In The “Angelic Grace” [1995] 1 Lloyd’s Rep 87 at 95, Leggatt LJ most forcefully pointed out the irony that such proposed general approach may lead to a greater affront to comity:

‘I can think of nothing more patronising than for the English Court to adopt the attitude that if the Italian Court declines jurisdiction, that would meet with the approval of the English Court, whereas if the Italian Court assumed jurisdiction, the English Court would then consider whether at that stage to intervene by injunction. That would be not only invidious but the reverse of comity. …’

58. This is further supported by Dicey, Morris & Collins, The Conflict of Laws (15th ed 2012) §12-090 commenting that such practice is particularly inapt “if the court has already ascertained that England is clearly the natural forum for the resolution of the dispute.”

……

60.  If whenever an action has commenced in a foreign court on an issue which should be decided in Hong Kong, or worse still which has already been decided in Hong Kong, the Hong Kong Court must wait for the result of a challenge to the jurisdiction in the foreign court before considering any anti-suit injunction, that would make the whole anti-suit injunction jurisdiction pointless.”

36.  I am in respectful agreement with the analysis in Choi Sai Yiu and Achieve Goal.  The “wait and see” approach in Amchem has not been adopted as a general principle in Sumitomo.  Further, that approach should not be adopted for the reasons given by the learned judges in Choi Sai Yiu and Achieve Goal.

37.  Unlike the factual scenario in Sumitomo, the HK Proceedings is a protracted legal battle lasting for more than 2 decades.  As to whether Ps’ commencement and pursuance of the New Mainland Action is an abuse of the process of the Hong Kong Court by reason of what happened in the HK Proceedings and hence the ASI claimed by Ds should be granted, I am of the view that the Hong Kong Court should proceed to consider the same, without waiting for the final outcome of the jurisdictional challenge in the Fuzhou Court, bearing in mind that the Hong Kong Court is the only appropriate court to consider whether its process had been abused. 

38.  I dismiss the preliminary challenge mounted by Ps.

D3.  Grounds of the ASI Application

39.  Mr Yu SC on behalf of Ds has put forward the following grounds in support of the ASI Application:

(1)  Ps’ claim concerning the Project in the New Mainland Action is res judicata by reason of cause of action estoppel;

(2)  The New Mainland Action is an abuse of process in the Henderson v Henderson sens; and

(3)  issue estoppel.

40.  There is no dispute that Ps are subject to the jurisdiction of the Hong Kong Court.

D3.1  Ground 1 – Cause of action estoppel

41.  Mr Yu SC submits that Ps’ claim concerning the Project in the New Mainland Action is res judicata by reason of cause of action estoppel. 

42.  The principles are not in dispute.

(1)  A cause of action estoppel arises where the cause of action in the latter proceedings is identical to that in the earlier proceedings, the parties in the two set of proceedings are the same or their privies.  In such a case, the bar is absolute in relation to all points decided unless fraud or collision is alleged to justify setting aside the earlier judgment.[26]

(2)  The constituent elements of a cause of action estoppel are as follows[27]:

(a)  the decision, whether domestic or foreign, was judicial in the relevant sense;

(b)  it was pronounced;

(c)  the tribunal had jurisdiction over the parties and the subject matter;

(d)  the decision was (i) final and (ii) on the merits;

(e)  it determined a question raised in the later litigation; and

(f)  the parties are the same or their privies or the earlier decision was in rem.

(3)  To determine whether the cause of action in the New Mainland Action and the cause of action in the Hong Kong proceedings are the same, one has to examine the minimum facts which in each system needed to be pleaded and proved to justify the relief sought.  The relief and the legal basis for it, provide no part of the “cause of action” for this purpose.[28]

(4)  Cause of action estoppel is absolute in relation to all points which had to be and were decided in order to establish the existence or non-existence of a cause of action.  Cause of action estoppel also bars the raising in subsequent proceedings of points essential to the existence or non-existence of a cause of action which were not decided because they were not raised in the earlier proceedings, if they could with reasonable diligence and should in all the circumstances have been raised.[29]

43.  Ds’ case is that Ps’ cause of action in the HK Proceedings and Ps’ cause of action in the New Mainland Action are the same.  Mr Yu SC submits the following:

(1)  In the HK Proceedings, First Laser made claims in respect of the investment of the Project, including claiming for restitution and for improper/unjust profits; and the enhancement of the value of the FCL Shares as a result of the investment in the Project.

(2)  The facts pleaded by First Laser in support of its claim in the Main Action are as follows:

(a)  First Laser invested in the Project via remitting to FCL RMB 1,000,000 and to Casix Inc USD 410,000.  The Project enhanced the value of FCL and the value of the shares in FCL.

(b)  First Laser claimed restitution of the funds invested in the Project, being money had and received by FEHC who was unjustly enriched; and that First Laser claimed to trace into the assets including the Project.

(c)  First Laser also claimed for the return of its contribution, namely (i) using dividends to purchase staff quarters for FCL and (ii) COM paying additional salary to Wang Hongrui at HKD 8,000 per month (for a total of 26 months, the total amount being HKD 208,000).

(3)  In the CFI Judgment, the Judgment held that:

(1)  “126. [First Laser]’s claim in respect of the Project is that it invested US$410,000 and RMB 1,000,000 in the Project and it paid Wang Hongrui additional remuneration of HK$8,000 per month for his work in the Project. ……

127. Mr Warren Chan SC’s submission is that the proper defendant to the claim in respect of the Project is FCL and not [FEHC], though [FEHC] was at the material time the sole shareholder of FCL.  It is true that as the sole legal owner of FCL, [FEHC] had the benefit of [First Laser]’s investment in the Project and it realised the fruit of [First Laser]’s investment when it sold all the shares in FCL to JDS.  However, the money was received by FCL and the Project was held by FCL.  The trustee of [First Laser]’s funds and investment in the Project was FCL and not [FEHC].  I find Mr Warren Chan SC’s submission unanswerable.  [First Laser]’s claim in respect of the Project must be dismissed.

128. However, [First Laser] could find comfort in that the award under the proprietary claim or contractual claim would also include 51% of the enhancement in the value of the FCL shares as a result of [First Laser]’s investment in the Project. ……”

(4)  There is no cross-appeal by First Laser against the ruling made by the Judge at the CFI Judgment §§126-128.

(5)  In the Remitter Proceedings, First Laser sued for improper profits under Mainland law, claiming for the increase in the value of the FCL Shares arising out of the investment in the Project.  First Laser’s claim was allowed by the Judge, but was later rejected by CA.

(6)  In the New Mainland Action, as shown in the 民事起诉状, Ps are claiming for “就无源光纤项目及其增资收益所获得的利益(包括[FEHC]和[Jian An]获得的华科公司股权转让收益) 没有合法根据，构成不当得利”.  Ps’ claim is same as the one relating to the investment in the Project in the HK Proceedings.  The minimum facts that need to be pleaded and proved in the New Mainland Action are same as those in the HK Proceedings, ie that First Laser’s investment in the Project enhanced the value of FCL and the value of the FCL Shares, such that Ds had obtained higher proceeds of sale in the JDS Transfer.

(7)  In the New Mainland Action, Ps pleaded the following in the 民事起诉状:

“ 从香港法院的判决内容可知：目前，香港法院生效的判决仅支持了第一激光要求返还其根据之前签订的三份协议而支付的股权投资款2.464万元 (扣减华闽公司主张第一激光返还科腾公司股权价值19,351,283.39港币后，实际判决返还5,288,716.61港元及利息) 的要求，但对于原告方投资的光纤无源器件项目，尽管法院已经查明该项目是由原告单方投入且该投入使华科公司获得了增值，并使华闽公司及被告二获得了股份价值的高额增值收益，但是香港法院在重审程序中并未就原告方的该项投入及其收益的返还问题进行处理。”

(8)  It is wrong and misleading for Ps to allege that “香港法院在重审程序中并未就原告方的该项投入及其收益的返还问题进行处理”.

(a)  First Laser’s investment in the Project has been dealt with by the Judge in the CFI Judgment at §§126-128.  In the trial in the Main Action before the Judge, First Laser also relied upon the HKD 208,000 paid to Wang Hongrui and argued that this was part of First Laser’s investment in the Project.

(b)  In the Remitter Proceedings, First Laser’s investment in the Project leading to the enhancement in the value of the FCL Shares was relied upon by First Laser in seeking restitution.  First Laser’s claim in the Remitter Proceedings is that Ds must be regarded as having obtained the enhanced value of the FCL Shares consequential upon the invalidity of the FLA.

(9)  In the New Mainland Action, Ps are trying to re-litigate the claims which have been argued and rejected in the Hong Kong Proceedings.  By reason of cause of action estoppel, Ps should not be allowed to do so.  It is vexatious and oppressive for Ps to re-litigate the same cause of action in another jurisdiction with a view to obtaining further sums against Ds.  There should be an ASI restraining Ps from proceeding with the New Mainland Action.

44.  Mr Chan submits that Ps’ claim in the New Mainland Action is not barred by cause of action estoppel.  The main plank of Mr Chan’s submissions is that the claim in the New Mainland Action has not been determined in the HK Proceedings.  Mr Chan submits that:

(1)  In the HK Proceedings, First Laser’s claim in respect of the investment in the Project is that it was an alternative claim based on the invalidity of the FLA.

(2)  CFI Judgment §§126-128 relied upon by Ds would not give rise to res judicata. In considering whether a judicial decision gives rise to res judicata, it is the sealed judgment or order which is binding and against which an appeal lies, rather than the reasons for the judgment.  A party can only appeal against the judgment or order made by the Court, not the reasons for the judgment.[30] The dismissal of First Laser’s claim in respect of the investment in the Project at the CFI Judgment §§126-128 is not recorded in the sealed judgment.  Since the Judge allowed First Laser’s claim based on breach of the FLA and entered judgment in favour of First Laser for damages and proprietary remedies, which included the enhancement of value of FCL Shares and the corresponding sale proceeds in the JDS Transfer, it would not be necessary for First Laser to appeal against the CFI Judgment §§126-128 of the CFI Judgment.  It would also be not open to First Laser to appeal against the reasons in those paragraphs.

(3)  The CA Remitter Judgment did not reject Ps’ claim for improper profits in respect of the investment in the Project on its merits.  The CA merely found that such claim fell outside the subject matter of restitution in consequence of the invalidity of the FLA.

(4)  The claim in the New Mainland Action is a standalone cause of action in “improper profits” (不当得利) arising solely from Ps’ investment in the Project.  This claim has not been adjudicated in the HK Proceedings. The claim adjudicated in the HK Proceedings is a claim consequently upon the invalidity of the FLA.  The CA did not reject any standalone “improper profits” claim by First Laser based on investment in the Project on its merits, or disturb the Judge’s factual findings on Ps’ contributions to the Project and the consequential enhancement of value of the FCL Shares, but merely found that under Article 58 of Contract Law in the Mainland, the subject matter of a claim for restitution consequent upon the invalidity of the FLA was limited to the purchase price paid with interest.

(5)  The invalidity of the FLA is a “minimum fact” necessary for the cause of action in the HK Proceedings, but is not a fact relevant to the claim in the New Mainland Action Claim based on improper profits.  The basis on which the investment in the Project was dismissed in the CA Remitter Judgment (ie that it did not fall within the scope of restitution in consequence of an invalid contract under Article 58 Contract Law) has no application in the claim in the New Mainland Action, which does not depend upon the invalidity of the FLA.

(6)  Ds’ complaint of re-litigation is not made out, since the cause of action in the HK Proceedings and the cause of action in the New Mainland Action are different.

45.  In my judgment, the cause of action based upon improper profits in the HK Proceedings and the cause of action in the New Mainland Action are indeed the same.

(1)  In the CFA Remitter Judgment, Ribeiro PJ gave a summary of how the First Laser’s alternative claim was dealt with by the CA in the CA Remitter Judgment (footnotes omitted)[31]:

“53. Kwan V-P dealt with First Laser’s alternative claim for restitution consequential upon invalidity of the FLA. As noted above, relying upon the specified PRC provisions, the Judge held that on this alternative claim, adopting the concept of “improper profits” and the “principle of fairness”, First Laser was entitled to a restitutionary award in the same amount as for the primary claim.

54. Kwan V-P disagreed. She pointed out that a fundamental difficulty with the Judge’s approach was his failure to identify the property to be returned by way of restitution. The aim of restitution under Mainland law was to restore the parties to their pre-contract position. Under the FLA, the only property acquired by FEHC was the share purchase price paid by First Laser, namely HK$24,640,000. The return of such property along with “the fruits arising” therefrom could only involve the return of the purchase price plus interest. It did not involve “returning” the FCL shares or their enhanced value realised by their sale to JDS. They were not the property relevant to the restitution claim and the proceeds of their sale were not “profits” attributable to the relevant transaction. Thus, Kwan V-P held that “the award made on the alternative claim in the sum of HK$265,996,414, which is the same as the amount made on the primary claim” could not be upheld. The correct award was for the return of the price paid for the FCL shares plus interest. The contrary does not seem to us to be reasonably arguable.

55. Her Ladyship then turned to FEHC’s claim for counter-restitution, that is, its mirror claim for restitution flowing from the invalidity of the FLA. Her Ladyship held that on the evidence, the balance of the cross-claims should be calculated as follows:

‘To restore the parties to their respective pre-contract position, leaving aside the interest on the amount to be returned, the amount that should be returned to First Laser would be HK$24,640,000 and the amount that should be returned to FEHC would be HK$19,351,283.39. After netting off, First Laser should receive an amount of HK$5,288,716.61.’

56. The Judge’s award of HK$265,996,414 was thus replaced by an award of HK$5,288,716.61.  Taking into account substantial delays in First Laser’s prosecution of the proceedings, First Laser was denied interest in respect of certain periods of delay.”

(2)  The CA set aside the Judge’s ruling on First Laser’s alternative claim in the CFI Remitter Judgment.  In the CFI Remitter Judgment, on First Laser’s alternative claim, the Judge said (such ruling was subsequently set aside by the CA)[32]:

“317. As for the scope of restitution, I adopt my findings in relation to First Laser’s primary case. The property acquired as result of the arrangement or contract which was held to be void was the property transferred to FEHC, ie the price of HK$46,400,000 paid by First Laser and COM on the direction and behalf of First Laser. As regards the portion of the investment relating to FCL, the property to be returned under article 58 of 《Contract Law》or article 61 of 《GPCL》includes the original subject matter which was the price; and the fruits arising from the original subject matter, namely the dividends and enhancement in value of the shares in FCL. All these properties are in the possession of FEHC by reason of its status as the shareholder of FCL on record. FECL’s contributions towards making of these fruits and enhancement in value consisted of its share of the equity, i.e. 49% interest in FCL and its management. What First Laser contributed which FEHC did not were such part of the purchase price apportioned to its intended 51% interest in FCL; its management; its capital investment in the Project and subsidy to Wang for his management of the Project. The value of FCL was greatly enhanced. FEHC sold FCL for a huge profit. For the same reasons as given by the authors of 《Provisions (I) U&A》, the keeping by FEHC of the entirety of the fruits of the joint investment is improper because FEHC has not provided the entirety of the capital needed to generate those fruits. The principle of fairness requires that these fruits be distributed between First Laser and FEHC regardless whether there was any nominee investment contract or the nature of the agreement or arrangement between them. If there was a nominee investment contract which was void, First Laser would be entitled to a reasonable distribution under article 18 of 《 Provisions (I)》as it sought in the primary case. If there is no, First Laser is entitled to restitution under article 58 of 《Contract Law》and/or article 61 of 《GPCL》, article 92 of《GPCL》as construed under article 131 of 《GPCL Opinion 》considered in the light of the principle of fairness.

……

319. The principle of fairness also requires First Laser to return what FEHC had contributed to FCO and a reasonable distribution of the fruits from FCO, i.e. the dividends and the 49% of the equity value of FCO as at 31 December 2008, there being no enhancement in value.” (Emphasis added)

(3) Clearly, in the HK Proceedings, First Laser has put forward an alternative claim arising from First Laser’s investment in the Project consequential upon invalidity of the FLA based on “improper profits”, and that claim has been adjudicated by the Hong Kong Courts.

(4) The minimum facts which First Laser would need to plead and prove in support of its alternative claim based on “improper profits” in the HK Proceedings are (a) First Laser’s investment in the Project; (b) the enhancement in the value of the FCL Shares as a result of First Laser’s investment; and (c) the subsequent sale of the FCL Shares to JDS in the JDS Transfer.

(5) In the hearing, Mr Chan confirmed that if the CFI Remitter Judgment had not been overturned, there would be no need for Ps to commence the New Mainland Action. The relevant exchanges in the hearing are as follows:

“MR CHAN: Now, if the CFI remitted judgement had not been overturned on appeal, then we would, of course, not need to pursue the mainland action, because the claim in respect of the project would have been subsumed under the award for restitution in consequence of an invalid contract under mainland law. So that would have been included in the award in consequence of an invalid contract under mainland law. But that is, of course, not what happened.

COURT: Because you was not successful in the Hong Kong Court, you go to the mainland court.

MR CHAN: No, because we were found to have wrongly formulated our claim. So therefore, we have to get our house in order and to formulate the court.

COURT: Because I just follow your submissions. You say that if the CFI judgement is not overturned, then you would have no need to go to the mainland court.

MR CHAN: Indeed, because we would have...

COURT: Indeed, all right.

MR CHAN: ...because the claim would have been subsumed under the rubric of a claim under Article 58 and 61. And there would be no need to pursue a separate action for the same amount. ……” (Emphasis added)

Clearly, Ps are not saying that there would be any difference between the facts in the HK Proceedings and the facts in the New Mainland Action. The facts in the two set of proceedings are the same. Ps just want to reformulate the claim in the New Mainland Action and to get their house in order. Bearing in mind the principle as set out in §42(3) above, the cause of action in support of First Laser’s alternative claim in the HK Proceedings and the cause of action in support of Ps’ claim in the New Mainland Action are indeed the same.

(6)  In the 民事起诉状 in the New Mainland Action, Ps pleaded:

“原告方获知[FEHC]将[FCL] 100%股权出售后, 曾多次与被告方沟通要求解决双方争议, 但未能达成共识。为维护自身合法权益, 2001 年10 月, [First Laser]在香港对[FEHC]和[Jian An]提起诉讼: 香港法院经过长达23 年的审理,经过香港高等法院原讼法庭, 上诉法庭以及香港终审法院多次审理(包括发回重审程序), 最终香港终审法院于2023 年11 月作出终审重审判决, 认为原重审一审法官原裁断超出了发还重市的审理范围。该案仪应就案涉三份协议无效后的返还问题进行处理 并认为该返还限于返还股权购买价软和利息, 并不涉及返还华科公司的股份或因出侪华科公司的股份给[JDS]而实现的增值。

从香港法院的判决内容可知: 目前, 香港法院生效的判决仅支持了[First Laser] 要求返还其根据之前签订的三份协议而支付的股权投资款2,464 万元(扣减[FEHC]主张[First Laser]返还[FCO]股权价值19,351,283.39 港币后, 实际判决返还5,288,716.61 港元及利息)的诉求,但对于原告方投资的[the Project], 尽管法院已经查明该项目是由原告单方投入且该投入使[FCL]获得了增值。并使[FEHC]及[Jian An]获得了股份价值的高倾增值收益, 但是香港法院在重审程序中并未就原告方的该项投入及其收益的返还问题进行处理。

基于上述, 原告方认为:原告方在[the Project]中实际投资了100 万元人民币、41 万关元和20.8 万港币, 该款项已实际支付给了[FCL]及其全资子公司casix, 并被实际用于无源光纤项目的设施设备采购、购买知识产权和技术以及其他研究开发等成本开支, 且该项目是在[FEHC]不同意投入的悄况下由原告方单独投入, 并在[FCL]研发、试制、生产并出口销售。此后, 该项目资产一直留在[FCL]内。虽经原告方讷求归还, 但是遭到被告方的拒绝 …… 正是因为原告方对于[the Project]的投入及该项目的巨大成功, 且由于被告方未同意将原告的该项投资及由此形成的相关资产从[FCL]搬走成剥离。使得[FCL]的价值显著增值。事实上, [JDS]之所以支付高倾价款收购[FCL], 其唯一或最主要的目的就是为了[the Project], 而被告方在香港法院的诉讼中亦承认, [the Project]的投资来源于原告方。该项目是成功的并且极大的提高了[FCL]的价值, 因此, [the Project]使[FCL]得到极大增值, [FCL]的增值也使得[FEHC]获得了高倾股东利益 …… 而前已述及, 无源光纤项目系“三份协议’和《1998 年备忘录》履行过程中, 在该等协议之外, 由原告方另行进行的投资, 且该项投入是在[FEHC]拒绝投资的情况下原告方单独投入的。被告方在明知[the Project]系原告方单独投资的情况下, 却以各种借口一再拒绝了原告方要求归还[the Project]的设施设备及相关投资的请求, 并烧开原告, 将包含了[the Project]资产在内的[FCL] 100%股权转让给了案外第三人, 三被告因此就[the Project] 及其增资收益所获得的利益(包括[FEHC]和[Jian An]获得的[FCL]股权转让收益)没有合法根据, 构成不当得利, 根据我国相关法律法规的规定,被告方负有连带返还义务。” (Emphasis added)

(7) Invalidity of the FLA is a scenario in which First Laser put forward its alternative claim in the HK Proceedings, and it is not a minimum fact in support of the alternative claim. In the New Mainland Action, according to P’s pleaded case in the 民事起诉状 (see the quotation in the subparagraph above), Ps are putting forward their claim in the same scenario, ie no valid contract between the parties (在该等协议之外). For the sake of arguments, if invalidity of the FLA should not be regarded as a scenario and should be treated as a minimum fact in support of First Laser’s alternative claim in the HK Proceedings, the same should also be regarded as a minimum fact in support of Ps’ claim in the New Mainland Action.

46.  In my judgment, Ps’ claim in the New Mainland Action is barred by the cause of action estoppel.  Ground 1 is made out.

D3.2  Ground 2 – Henderson v Henderson abuse of process

47.  The Henderson v Henderson abuse of process was first formulated by Wigram V-C in Henderson v Henderson[33], in which the learned judge said:

“…… where a given matter becomes the subject of litigation in, and of adjudication by, a Court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the Court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time.”

48.  The Henderson v Henderson principle precludes a party from raising in subsequent proceedings matters which were not, but could and should have been raised in the earlier ones, unless there are some special circumstances.

49.  As to Henderson v Henderson abuse of process, in Johnson v Gore Wood[34], Lord Bingham said:

“But Henderson v Henderson abuse of process, as now understood, although separate and distinct from cause of action estoppel and issue estoppel, has much in common with them. The underlying public interest is the same: that there should be finality in litigation and that a party should not be twice vexed in the same subject matter. This public interest is reinforced by the current emphasis on efficiency and economy in the conduct of litigation, in the interests of the parties and the public as a whole. The bringing of a claim or the raising of a defence in later proceedings may, without more, amount to abuse if the court is satisfied (the onus being on the party alleging abuse) that the claim or defence should have been raised in the earlier proceedings if it was to be raised at all. I would not accept that it is necessary, before abuse may be found, to identify any additional element such as a collateral attack on a previous decision or some dishonesty, but where those elements are present the later proceedings will be much more obviously abusive, and there will rarely be a finding of abuse unless the later proceedings involves what the court regards as unjust harassment of a party. It is, however, wrong to hold that because a matter could have been raised in earlier proceedings it should have been, so as to render the raising of it in later proceedings necessarily abusive. That is to adopt too dogmatic an approach to what should in my opinion be a broad, merits-based judgment which takes account of the public and private interests involved and also takes account of all the facts of the case, focusing attention on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before. As one cannot comprehensively list all possible forms of abuse, so one cannot formulate any hard and fast rule to determine whether, on given facts, abuse is to be found or not. Thus, whilst I would accept that lack of funds would not ordinarily excuse a failure to raise in earlier proceedings an issue which could and should have been raised then, I would not regard it as necessarily irrelevant, particular if it appears that the lack of funds has been caused by the party against whom it is sought to claim. While the result may often be the same, it is in my view preferable to ask whether in all the circumstances a party’s conduct is an abuse than to ask whether the conduct is an abuse and then if it is, to ask whether the abuse is excused or justified by special circumstances. Properly applied, and whatever the legitimacy of its descent, the rule has in my view a valuable part to play in protecting the interests of justice.” (Emphasis added)

50.  In SJ v FTCW[35], Lam VP (as he then was) has set out the following propositions in relation to Henderson v Henderson abuse of process:

(1)  Under the extended doctrine of res judicata, the court has the power to strike out attempts to re-litigate a decided issue as an abuse of process of the court, even where the parties to the subsequent proceedings are not the same and cannot be described as privies of the original parties.

(2)  The exercise of this power is based on the jurisdiction of the court to prevent abuse of process and it is a separate principle from the admissibility of judicial findings in earlier proceedings as evidence in subsequent proceedings.

(3)  The burden of establishing abuse rests upon the party who relies on the earlier decision and it is highly fact sensitive.

(4)  The jurisdiction would not be engaged simply because there is a re-litigation of an issue previously decided between different parties.

(5)  The jurisdiction would be engaged if it is shown to the satisfaction of the court that permitting a party to re-litigate would either be manifestly unfair to the other party or would bring the administration of justice into disrepute.  If either of these conditions is satisfied (and the onus is on the party contending that there is an abuse), there is no need to show any further special circumstances.

(6)  There is no requirement to show that the subsequent re-litigation would have the effect of reversing the outcome of the earlier litigation.

(7)  Re-litigation based on substantially the same evidence would bring the administration of justice into disrepute and the jurisdiction can be invoked on that ground.

(8)  A litigant’s disadvantage in previous proceedings may weigh against a conclusion that re-litigation of an issue is an abuse of process.

(9)  A court should not deprive a litigant his day in court lightly and should only exercise such jurisdiction by way of striking out in a plain and obvious case.

51.  Although the Henderson v Henderson jurisdiction would not be engaged simply because there is a re-litigation of an issue previously decided between different parties, the jurisdiction would be engaged if it would be manifestly unfair to a party in the later proceedings that the same issues should be relitigated or there is an element of vexation in the use of litigation for an improper purpose.  In Lo Kai Shui v HSBC International Trustees Ltd[36], Kwan VP said (footnotes omitted):

“102. Unlike res judicata which is a rule of substantive law, abuse of process is a concept which informs the exercise of the court’s procedural powers. To constitute abuse of process, the court must be satisfied, having made a ‘broad merits-based judgment’ that takes account of the public interest (that there should be finality in litigation and a person should not be sued twice in the same matter) and the private interest (that a party should have access to justice to vindicate his rights) and all the circumstances of the case, that it is not just for an action to proceed.

103. The essence of the Henderson v Henderson abuse is that a party ought generally not to be permitted to raise in subsequent proceedings matters which that party could and should have raised in earlier proceedings. The court is concerned with balancing the interests not just of the litigants before it, but also other interests involved in the administration of justice such as other litigants in the court process, to ensure that the resources of the court are distributed fairly. The abuse can also take the form of bringing the administration of justice into disrepute.

104. It is not necessary to establish that the parties to the two sets of proceedings were the same or were privies, since the circumstances may be such as to bring the case within the ‘spirit of the rules’, if it would be manifestly unfair to a party in the later proceedings that the same issues should be relitigated or there is an element of vexation in the use of litigation for an improper purpose. It will be a rare case where the litigation of an issue which has not previously been decided between the same parties or their privies will amount to an abuse of process.” (Emphasis added)

52.  In Ko Hon Yue v Chiu Pik Yuk[37], Ma CJ highlighted the following facets of the doctrine of the Henderson v Henderson abuse of process:

(1)  The doctrine is founded on an abuse of process.  It ought only to be applied when the facts are such as to amount to an abuse.  Otherwise, there is a danger of a party being shut out from bringing forward a genuine subject of litigation.

(2)  It must therefore be essential when striking out a claim on this basis (and thus preventing a litigation of that claim) that an abuse is found to exist in seeking to raise in subsequent proceedings claims or issues which could and should have been raised in earlier proceedings.  This abuse will usually take the form of the other party being “vexed” by the subsequent set of proceedings.

(3)  The abuse can also take the form of the administration of justice being brought into disrepute.

(4)  In examining aspects such as abuse, the Court is concerned with balancing interests: not just those of the litigants before it, but also taking into account the other interests involved in the administration of justice.  When the court is dealing with the Henderson v Henderson type of abuse, it is not looking at an absolute bar to litigation such as issue estoppel or cause of action estoppel. On the contrary, in considering this type of abuse, the Court is required to assess a number of factors and balance competing interests.

(a)  There is conceptually an important distinction between absolute bars such as issue estoppel and Henderson v Henderson type of abuse.  In the former situation, the party who seeks to re-litigate an issue or cause of action has already had his day in Court, whereas in the latter situation, that party has not.

(b)  The assessment of different factors and balancing competing interests can be said to be an exercise of a discretion.  An important point to bear in mind is that an appellate court is obliged to pay sufficient regard to the decision of the court below and should be reluctant to interfere where the decision is based on the assessment or balancing of a number of factors. 

53.  Mr Yu SC submits that, even assuming that the cause of action estoppel does not apply, an ASI should be granted restraining Ps from pursuing the New Mainland Action, for the New Mainland Action is clearly an abuse of process in the Henderson v Henderson sense.  Mr Yu SC submits that:

(1)  In the HK Proceedings, First Laser has out forward its arguments for restitution arising from its investment in the Project, based upon the concept of “improper profits” in Mainland law.  That claim has been finally adjudicated in the HK Proceedings.  The HK Proceedings lasted for 22 years.  In the circumstances, it would be manifestly unfair to Ds, and would also bring the administration of justice into disrepute if Ps are allowed to advance arguments also for restitution arising from its investment in the Project in the New Mainland Action.

(2)  Further or alternatively, Ps are seeking to re-litigate the restitution claim on the basis of the same evidence in the New Mainland Action, namely:

(a)  the investment made to the Project;

(b)  the resulting increase in the value of the FCL Shares; and

(c)  the payment of the monthly remuneration to Wang Hongrui.

Re-litigation based on the same evidence would bring the administration of justice into disrepute.

54.  Mr Chan submits that:

(1)  Although First Laser’s efforts to recover the fruits of its investment in the Project have been unsuccessful in the HK Proceedings, First Laser succeeded in establishing the factual basis of its claim in respect of the investment in the Project.  First Laser only failed on jurisdictional grounds in that (a) in the Main Action, it was eventually held that Mainland law rather than Hong Kong law applied such that the FLA was invalid; and (b) in the Remitter Proceedings, it was held that the “improper profits” arising from the investment in the Project fell outside the scope of the remitter.

(2)  There would be no “re-litigation” of facts and evidence in the New Mainland Action, since the factual basis of Ps’ claim in the New Mainland Action is consistent with the facts as found by the Hong Kong Courts in the Main Action.

(3)  “First Laser’s previous unsuccessful attempts, with the benefit of hindsight, even though wrongly formulated in law when viewed with benefit of hindsight, cannot be said to be abusive.”[38] Its position was not unreasonable or untenable given that it was at least successful at first instance in the Main Action and in the Remitter Proceedings.  First Laser has paid the price for its unsuccessful efforts in the HK Proceedings in the form of substantial adverse cost orders and the long time spent on waiting for the recovery of the fruits of its investment in the Project, plus the fact that First Laser would not be able to have full recovery in any event, for the only known assets of Ds are the USD Fund and the HKD Fund.

(4)  A fact which cannot be ignored is that Ds have pocketed the windfall from the proceeds in the JDS Transfer, which remains wholly unremedied.  The Fuzhou Court should be allowed to adjudicate Ps’s claim based on “improper profits” on its merits.

55.  Mr Chan relies upon the following authorities in support of his submissions:

(1)  Total Lubricants HK Ltd v De Chanterac (No 2)[39]

(a)  In Total Lubricants, the CFI held that there was no reasonable cause of action in the plaintiff’s pleaded case based on, inter alia, unlawful means conspiracy against the 5^th and the 6^th defendants and struck out the claims against these defendants (the 2009 Judgment).  Subsequently, the CFI dismissed the action against the 5^th and the 6^th defendants (the 2010 Judgment).  Later, the plaintiffs successfully sought leave to amend their statement of claim by adding a properly pleaded claim of, inter alia, unlawful means conspiracy against the 1^st to the 6^th defendants, such that the 5^th and the 6^th defendants were brought back into the action.  The CFI rejected the 5^th and the 6^th defendants’ objection to the amendments based on abuse of process and res judicata, namely that the plaintiffs were trying to resurrect the same claim of conspiracy which had been dismissed in the earlier judgments (the 2012 Judgment)[40].  In the 2012 Judgment, Poon J (as he then was) said:

“17. [Counsel for the 5^th and the 6^th defendants] submitted that the plaintiffs’ present application is an abuse of process. He argued that the court had already struck out and dismissed the plaintiffs’ claim of conspiracy against the 5th and 6th defendants. It would be an abuse of process if they are now allowed to resurrect the claim. He referred to the well known cases such as Yat Tung Investment Co Ltd v Dao Heng Bank Ltd & Ors [1975] AC 581 and Johnson v Gore Wood & Co (a firm) [2002] 2 AC 1 in support. I need not go into the cases in detail. Plainly, what the plaintiffs have done here is not an abuse of process. I previously struck out and dismissed their claim against the 5^th and 6^th defendants purely on a pleading point. That is to say, their cause of action as then pleaded was deficient. What they do now is to formulate their claim properly. They are not trying to resurrect the exact plea, which had been struck out, without improvement. If that is what they are doing, then the principle of res judicata or abuse of process would apply. I reject [counsel]’s submission.

18.  [Counsel] then submitted that the present application offends the CJR imperatives enshrined in Order 1A and 1B of the Rules of the High Court.  I note that the plaintiffs have taken almost 3 years to properly formulate their claims against the 5th and 6th defendants.  The delay on any view is highly unsatisfactory.  But I do not think the court should penalize the plaintiffs by striking out.  It is too drastic a step to take.  Any prejudice caused to the 5^th and 6^th defendants can be properly compensated by costs and if necessary, an appropriate adjustment on interest on any judgment sum that may be awarded against them after trial.”

(b)  The CA dismissed the 5^th and the 6^th defendants’ appeal. On Henderson v Henderson abuse of process, in the CA, Kwan JA (as she then was) said:

“32. The defendants’ objections based on the Henderson v Henderson type of abuse were fully canvassed before Poon J, who determined this in para.18 of the 2012 Judgment. Bearing in mind the above principles, this Court is obliged to pay sufficient regard to the decision of the Judge, who had balanced the competing interests and came down in favour of the plaintiffs refusing to strike out their claim as reformulated. We should be slow to interfere with his discretion based on the assessment or balancing of a number of factors. ……” (Emphasis added)

(c)  The CFA refused to grant leave to appeal to the 5^th and the 6^th defendants.  In the CFA, Fok PJ said:

“10. The decision that there was no abuse (res judicata in the wider Henderson v Henderson sense) was an exercise of judicial discretion applying well-established principles and, in any event, cannot be said to be plainly wrong.” (Emphasis added)

(2)  Kwok Hong Yee Jesse (T/A Jesse HY Kwok & Co) v Tso Hong Leung & Anor[41]

(a)  In Jesse Kwok, the plaintiff was a solicitor practising as a sole proprietor and was retained by the defendants to act in a High Court action.  The defendants failed to pay the plaintiff’s bill of costs dated 26 June 2015 (“the first bill”) and the plaintiff commenced a High Court action in November 2015 (“the second High Court action”) for the recovery of the amount in the bill.  The High Court granted the application of the defendants for taxation of the first bill and in the course of taxation proceedings, a master ruled that two items (“the Two Items”, concerning counsel fees, which had not been paid at that time) could not be included in the first bill.  The plaintiff then paid the counsel fees and applied for re-introduce the Two Items into the first bill.  That application was refused by a master.  The plaintiff then delivered to the defendants a second bill comprising only the Two Items.  An application for leave to tax the second bill was dismissed on the basis that the cause of action arising from second bill accrued after the date of the writ.  The plaintiff thereafter commenced an action in the District Court to recover the Two Items and obtained a default judgment against the defendants.

(b)  In the District Court, HHJ Winnie Tsui (as she then was) refused to set aside the default judgment.  The learned judge held that the plaintiff’s commencement of the District Court action is not an abuse of process in the Henderson v Henderson sense.  The learned judge said:

“113. When examining whether there is abuse, the court is concerned with balancing interests: not just those of the litigants before it, but also taking into account the other interests involved in the administration of justice. The court is required to assess a number of factors and balance competing interests … It involves a broad, merits-based judgment on the crucial question whether, in all the circumstances, a party is misusing or abusing the process of the court by seeking to raise before it the issue which could have been raised before ……

114. Here, I find it difficult to conclude that the plaintiff’s bringing of the present action amounts to abuse in the proper sense of the word.

115. In the second High Court action, the plaintiff had made repeated attempts to try to recover the Two Items. When he commenced that action, the Two Items were included as part of the first bill. Hence, from the very beginning, those items formed part of the claim. Master Chow ruled that the Two Items ought to be excluded because they had not been paid. In order to rectify his mistake, the plaintiff paid the Two Items before the taxation hearing before Master Wong. He applied to the master to reinstate the Two Items. It is his second effort to claim for the Two Items. His application failed. Master Wong commented that if he wanted to pursue the claim, he should deliver a fresh bill. This the plaintiff promptly did. He then sought leave to have that bill taxed. This is his third attempt to recover the Two Items. That application failed too, this time on a procedural ground. To rectify that, the plaintiff commenced the present action to claim the Two Items.

116. According to this chronology, this is hardly a case in which the plaintiff is making a claim in a later action which he could and should have raised in earlier proceedings but did not. On the contrary, as a matter of fact, prior to the present action, he took multiple steps to recover the Two Items at different stages of the second High Court action. But each time he failed for a different reason.

117. In Henderson v Henderson (1843) 3 Hare 100, Wigram VC said:-

‘… the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case.’ (at 114-115) (italics added)

118. Here, it is not the case that the plaintiff failed to bring forward his whole case in the three hearings before masters. In my view, on each occasion, he did bring forward and present to the court his whole factual case as it existed at the time. But each time the factual case was not good enough to support his application which therefore failed. At the hearing before Master Chow, he was bound by the factual case that he had not yet settled counsel’s fees. At the first hearing before Master Wong, the plaintiff brought forward his whole factual case and there was nothing further which he might have put forward in order to persuade the master to reinstate the Two Items in the first bill. At the second hearing before Master Wong, again, he brought forward his whole factual case but was defeated by a procedural point, which he could not have rectified in the same action.

119. In my view, therefore, the present action cannot be characterised as a misuse or an abuse of the court’s process.” (Italics in original)

(c) The CA dismissed the defendants’ application for leave to appeal. The grounds of appeal out forward by the defendants have been summarized at §26 of the judgment handed down by the CA. From that summary, it can be seen that the defendants have not put forward any ground to challenge the ruling of the court below on Henderson v Henderson abuse.

(3) Barakot Ltd v Epiette Ltd[42]

(a) In Barakot, in 1987, Mr Bell incorporated the plaintiff as a vehicle for his investments. In 1988, Mr Bell was interested in a proposal for investing in a property development in Portugal and gave £200,000 as a deposit to the vendor of the land. Subsequently he paid further sums to individuals or lawyers connected with the project. In January 1989 the defendant was incorporated (apparently by the proposed developers) as a vehicle for the development. Throughout the course of 1989, Mr Bell paid to the defendant sums amounting to £853,000 in total. A written agreement between the defendant and the plaintiff as drawn up in April 1989 (“the 1989 written agreement”) to record the terms of the loan. At the end, £1.24m was advanced by Mr Bell, none of which was repaid. In 1992, Mr Bell commenced proceedings against the defendant for recovery of the sum of £1.24m with interest. The claim was based on an alleged oral agreement made between Mr Bell and an agent for the defendant in December 1988. Those proceedings were dismissed when it became apparent that the defendant had not been incorporated at the date of the alleged oral agreement. In January 1993, the plaintiff commenced the present proceedings against the defendant for recovery of the loan and interest based on the 1989 written agreement. The defendant applied to strike out the plaintiff’s claim and was successful at the first instance.

(b) The English Court of Appeal allowed the appeal. On Henderson v Henderson abuse, the English Court of Appel held that in the circumstances of that case, Mr Bell and the plaintiff should not be regarded as privies should not be regarded as privies for the purpose of res judicata. Further, the circumstances in which the earlier action by Mr Bell was disposed of amounted to special circumstances, and hence there is no abuse in Henderson v Henderson sense.

56.  As pointed out by Ma CJ in Ko Hon Yue[43], in considering whether a party ought not be permitted to raise a claim in subsequent proceedings by reason of the Henderson v Henderson abuse, it is an exercise of a discretion.  Therefore, the outcome of each case would depend upon its own facts.  In the circumstances of this case, having considered the parties’ respective submissions, I am of the view that the discretion should be exercised in favour of granting the ASI sought by Ds. 

(1)  In the present case, in the HK Proceedings, the CA Remitter Judgment is a judgment on the merits of First Laser’s claim concerning “improper profits”.  First Laser’s claim for “improper profits” has been finally adjudicated by the Hong Kong Courts in the HK Proceedings.  Ds have fought against First Laser’s claim in the HK Proceedings for more than 2 decades, and First Laser’s claim has been adjudicated by the Hong Kong Courts at all levels twice in those 2 decades.

(2)  At all times in the HK Proceedings, First Laser was legally represented.

(3)  First Laser had every opportunity to formulate its claim in the HK Proceedings.  In the Remitter Proceedings, both the CFI and CA allowed First Laser to put forward its restitution claim based upon NIC, although the claim based upon NIC was in fact outside the scope of the outside the scope of the remitter.[44]

(4)  In Total Lubricants, Jesse Kwok, and Barakot, the judgments in previous proceedings are not judgments on the merits of the plaintiffs’ claims.  The circumstances in those cases are materially different from the circumstances in the present case.

(5)  First Laser has already had its day in court in the HK Proceedings.  In my judgment, in the circumstances of this case, to allow Ps to re-litigate the claim concerning “improper profits” in the New Mainland Action would be manifestly unfair to Ds.

(6)  Mr Chan submits that First Laser’s previous unsuccessful attempts in the HK Proceedings were due to the fact that First Laser wrongly formulated its case in law in the HK Proceedings.[45] With respect, it is unheard of that a party after losing his case on merits in the final appellate court due to wrongly formulating his case in law can start another action to make his claim based upon the same evidence and the same facts.  To allow that party to do so would be depriving the successful party a final judgment on merits in his favour, and that would be manifestly unfair to the successful party.  Further, the court system would grind to a halt if such a proposed course is permitted.

(7)  Mr Chan also argues that restraining Ps from proceeding in the New Mainland Action would be unfair to Ps, for Ds have pocked the windfall from the proceedings in the JDS Transfer, and that wrong has not been remedied.  With respect, in Mr Chan’s submissions, First Laser’s previous unsuccessful attempts in the HK Proceedings were due to the fact that First Laser wrongly formulated its case in law.  As to how to formulate its case in the HK Proceedings, that would be a decision made by First Laser with the benefit of the legal advice from its lawyers, bearing in mind that First Laser was legally represented at all times in the HK Proceedings.  In the circumstances, First Laser should face the consequences of its informed choice.  If First Laser is unhappy with the advice given by its own lawyers, its remedies lay in proceedings against the lawyers.  I do not see any unfairness to First Laser in the circumstances of this case if the ASI is granted.

(8)  For the reasons above, I am of the view that allowing Ps to proceed in the New Mainland Action would be manifestly unfair to Ds.

(9)  In any event, it is indisputable that in the New Mainland Action, Ps are trying to run a case based upon the evidence same as the evidence in the HK Proceedings.  There would be no new evidence and no new fact in the New Mainland Action.  As said by Lam VP in SJ v FTCW[46], re-litigation based upon substantially the same evidence would bring the administration of justice into disrepute.  This is a further or an alternative reason in support of granting the ASI sought by Ds by reason of the Henderson v Henderson abuse.

(10)  Ps have not demonstrated any special circumstances by reason of which the Court should not invoke the Henderson v Henderson jurisdiction to restraining them from proceeding in the New Mainland Action.

57.  Ground 2 is made out.

D3.3  Ground 3 – Issue estoppel

58.  As set out by Lord Sumption in Virgin Atlantic[47]:

(1)  Even where the cause of action is not the same in the later action as it was in the earlier one, some issue which is necessarily common to both was decided on the earlier occasion and is binding on the parties.  Issue estoppel may arise where a particular issue forming a necessary ingredient in a cause of action has been litigated and decided and in subsequent proceedings between the same parties involving a different cause of action to which the same issue is relevant one of the parties seeks to reopen that issue.

(2)  Except in special circumstances where this would cause injustice, issue estoppel bars the raising in subsequent proceedings of points which (a) were not raised in the earlier proceedings or (b) were raised but unsuccessfully.  If the relevant point was not raised, the bar will usually be absolute if it could with reasonable diligence and should in all the circumstances have been raised.

59.  Mr Yu SC submits that as to whether First Laser may claim the increase in the value of the FCL Shares as a result of its investment in the Project under Mainland law in the absence of a valid contract between the parties, the CA has given a ruling on this issue in the CA Remitter Judgment.  First Laser now is not allowed to put forward the same issue in the New Mainland Action, which is the core issue in the New Mainland Action.  In the CA Remitter Judgment, Kwan VP said:

“88. The greater and fundamental difficulty about the judge’s ruling is this.  The alternative claim is premised on First Laser being entitled under Article 58 of the Contract Law and Article 61 of GPCL to the return of the actual investment sum of HK$24,640,000 as property acquired by FEHC by reason of the First Laser Agreement, which is found to be void and of no effect.  This claim is on the basis that the contract found to be void is the First Laser Agreement, not the nominee investment contract.  In the former situation, what FEHC had acquired as a result of the void contract would be the purchase price.  In the latter situation, the FCL shares would be the property which FEHC had acquired as a result of the void contract.  This distinction should be borne in mind when one comes to apply the various articles invoked in the alternative claim.  As rightly submitted by Mr Yu, it is first necessary to identify what is the “property” that required restitution.  And the parties are to be restored to their pre-contract position.

89. Thus, in applying Article 58 (“Property acquired as a result of a contract”; 因该合同取得的财产) or Article 61 (property acquired as a result of a civil act determined to be null and void; 因该行为取得的财产) in this instance, the property acquired would be the purchase price.  In applying Article 92 of the GPCL and Article 131 of the GPCL Opinion in this instance, the original subject matter (原物) and the fruits arising therefrom (原物所生的孳息) as part of the improper profits to be returned (返还的不当利益) would be the purchase price and the fruits arising from the purchase price such as interest.  Mr Jat submitted that the above expressions should not be so narrowly construed and contended that the enhanced value of the FCL shares should be regarded as property acquired by FEHC as a result of the contract declared void.  But in this instance, enhancement in value of the shares cannot come within the meaning of the fruits arising from the original subject matter being the purchase price.”

60.  Mr Chan submits that the claim in the New Mainland Action is not based upon the invalidity of the FLA, and hence the issue determined in the CA Remitter Judgment §§88 and 89 does not arise in the New Mainland Action.  With respect, for the reasons stated in §45 above, I am unable to agree with Mr Chan.  In my judgment, the claim in the New Mainland Action is also made in the scenario that there has not been any valid contract between the parties.  The core issue in the New Mainland Action, ie whether First Laser may claim the increase in the value of the FCL Shares as a result of its investment in the Project while there has not been any valid contract between the parties, has indeed been determined in the CA Remitter Judgment.  By the operation of issue estoppel, First Laser is not allowed to raise the same issue in the New Mainland Action.  I do not see any special circumstances by reason of which the doctrine of issue estoppel should not operate in this case.

61.  In the HK Proceedings, the factual case put forward by First Laser at all times was that the investment in the Project was from First Laser.  First Laser had never alleged that any part of the investment was not from First Laser but from Ngan.  I do not see any ground upon which Ps may run a different factual case in the New Mainland Action.  Accordingly, while First Laser is prevented from raising the issue concerning the increase in the value of the FCL Shares as a result of its investment in the Project, I do not see any reason why Ngan himself should be allowed to run the New Mainland Action. 

62.  Ground 3 is also made out.

D4.  Ground 3 – Issue estoppel

63.  For the reasons above, I would allow the ASI Application and grant the final ASI sought by Ds.

E.  S.21M APPLICATION

E1.  Dismissal of the S.21M Application - necessary consequence after allowing the ASI Application

64.  Since I have decided to allow the ASI Application and Ps are restrained from, inter alia, proceeding further in the New Mainland Action, there should not be any interim relief in aid of the proceedings commenced by Ps in the New Mainland Action.  Accordingly, the S.21M Application must be dismissed.

E2.  Alternative reasons for refusing the S.21M Application

65.  ;As a matter of completeness, even if I were wrong in allowing the ASI Application, I would still exercise my discretion against Ps and dismiss the S.21M Application for the following reasons:

(1)  Ps have failed to demonstrate a good arguable case against Ds in the New Mainland Action; and/or

(2)  There is no real risk of unjustified dissipation of assets.

E2.1  No good arguable case

66.  In an application for a Mareva injunction pursuant to s.21M of the HCO, the plaintiff has to demonstrate a good arguable case in the foreign court.[48] Given the Fuzhou IPC has dismissed the New Mainland Action, it is clear that Ps has failed to demonstrate a good arguable case in the Mainland Court in support of the S.21M Application.

67.  Mr Chan submits that Ps are appealing against the judgment given by the Fuzhou IPC, and interim relief in aid of foreign proceedings should generally only be discharged after avenues of appeal in the foreign court are exhausted. Mr Chan relies upon Ly Eco Ltd v Thomas Karim Bellehchili[49], Jewrim Ltd & Anor v S&C Ltd & Anor[50], and Great River Corporation Ltd & Ors v China NTG Gansu Gas Ltd & Anor[51] in support of his submission.  With respect, as submitted by Mr Yu SC, the proposition advanced by Mr Chan is not supported by these cases.

(1)  In Ly Eco Ltd, Lisa Wong J discharged the s.21M injunction when the substantive French proceedings had been dismissed on a jurisdictional ground.  The plaintiffs could have but failed to have applied for a Mareva injunction under in support of local proceedings to be commenced in Hong Kong.

(2)  In Jewrim Ltd, the question is whether the plaintiff ought to have come back to the Court to discharge the s.21M injunction, when it had lost the substantive proceedings in Russia.  Recorder Rachel Lam SC never ruled that the s.21M injunction should be continued pending the determination of the appeal in Russia.

(3)  In Great River Corporation Ltd, DHCJ Kent Yee ruled that the s.21M injunction must go when the corresponding BVI injunction had been discharged.

68.  Mr Chan submits that the judgment of the Fuzhou IPC is not final.  Ps have lodged an appeal to the Fujian HPC.  Even if the appeal is rejected by the Fujian IPC, Ps would still have the right to petition for a retrial.  Mr Chan submits that given the fact that Ps are seeking to overturn the judgment of the Fuzhou IPC, there should be a s.21M  injunction pending the final outcome of Ps’ challenge.  Mr Chan relies upon Registrar of Hong Kong Institute of Certified Public Accountants v X[52]; Metropolitan Housing Trust Ltd v Taylor & Ors[53]; and Gee on Commercial Injunctions (7^th ed), §6-028, §§24-039, 24-041 in support of his submissions.  As pointed out by Mr Yu SC, none of these authorities concern whether the Court should grant or should continue a s.21M relief when the plaintiff has lost in the substantive proceedings in the foreign court but is appealing against the judgment dismissing his claim.

69.  Ps have filed expert evidence to try to show that Ps’ appeal in the Fujian HPC has a real prospect of success.  However, it is well established that such expert evidence is not admissible.  As said by Lam J (as he then was) in Guangzhou Green-Enhan Bio-Engineering Co Ltd v Green Power Health Products International Co Ltd[54]

“17. …… the fact that there is [an appeal in Mainland] does not provide any justification for admitting expert evidence on PRC law on the issues decided in [the judgment given by the Guangzhou Intermediate Court]. As I said in the course of submissions, if the appellate court delivered its judgment prior to the end of this trial, this Court expects the parties to produce that judgment before this Court as soon as possible. There is simply no need nor room for the experts to rehash the submissions that were put before the High People’s Court in Guangzhou in that appeal before this Court in the context of this trial. If the points set out in the expert reports were not advanced in the appeal, given that they are points on PRC law that should have been addressed in the appeal before a PRC court, there is no reason why this Court should entertain the same. Otherwise, it would be tantamount to the arrogation of this Court into a court of appeal from the Intermediate Court. It would be presumptuous for this Court to hear such evidence and to pre-empt whatever decision the High People’s Court may reach in that appeal. That would be wholly inappropriate and against international judicial comity.”

70.  Mr Chan submits that the situation in the present case is different from the situation in the Green-Enhan case.  He submits that in Green-Enhan case, Lam J was considering whether expert evidence on Mainland law should be admissible for the purpose of the trial before him.  In this case, the question is whether Ps would have a good arguable case in the New Mainland Action.  Ps are not asking this Court to arrogate itself to the Mainland Court’s jurisdiction by usurping it, somehow determining the merits of Ps’ case in the New Mainland Action prematurely.  Ps are only inviting this Court to decide a threshold question on whether there are sufficient merits justify granting the injunction.

71.  With respect, notwithstanding Mr Chan’s submissions, I do not see any reason why the point made by Lam J in Green-Enhan at §17 should not apply in this case.  There is no valid reason to say that the principle laid down by the learned judge in that case only applies in a trial.  In my view, the principle in the Green-Enhan case applies to admissibility of expert evidence on foreign law in a trial, and admissibility of expert evidence on foreign law in an interlocutory application as well.

72.  The fact remains, based upon the admissible evidence before this Court, Ps have not demonstrated a good arguable case in the New Mainland Action.  On the contrary, the evidence shows (by reason of the Fuzhou IPC’s judgment) that Ps do not have a good arguable case in the New Mainland Action.  That being the case, there is no room for this Court to grant the s.21M injunction to Ps.

73.  Mr Chan relies upon Pinpoint Multi-Strategy Fund v Gangtai Group Co Ltd and Others[55] and submits that this Court should not regard Ps not having a good arguable case simply because Ps’ claim in the New Mainland Action has been dismissed by the Fuzhou IPC.  In my view, Ps cannot derive assistance from the Pinpoint case.

(1)  In Pinpoint, the plaintiff obtained a judgment against the defendant in the Supreme Court of the State of New York (“NY Court”) after the defendant failed to appear in the proceedings.  That judgment was subsequently set aside (“the NY Setting Aside Decision”).  Anthony Chan J held that in the circumstances, it could not be said that in the s.21M application for a Mareva injunction made by the plaintiff in the Hong Kong Court, the plaintiff did not have a good arguable case.  The learned judge said:

“63. …… in the circumstances of this case, I am unable to agree with the Respondents that the vacation of the Judgment means that the Injunction should be discharged. It is in the nature of adversarial legal proceedings that they may have a life of their own. Procedural battles may be won and lost. Battles lost may be overturned on appeal. The real relevance is whether the development in the NY proceedings affects the merits of the Plaintiff’s case.

64. I fail to see how the vacation of the Judgment affects the merits of the Plaintiff’s case. In particular, there is a distinct case of dissipation of assets. I therefore disagree with the Respondents that the Injunction should be discharged on this ground.” (Emphasis added)

(2) In Pinpoint, the NY Setting Aside Decision is an interlocutory judgment and does not have the effect of putting the plaintiff’s case in that case to an end. In other words, it cannot be said that by reason of the NY Setting Aside Decision, the plaintiff in that case did not have a good arguable case in the NY Court in the s.21M application. Unlike Pinpoint, the Fuzhou IPC’s judgment is a final judgment, having the effect of ending Ps’ claim in the New Mainland Action. While Ps’ case in the New Mainland Action has been put to an end by the Fuzhou IPC’s judgment, it follows that Ps would not have a good arguable case in the New Mainland Action. The circumstances in Pinpoint are materially different from the circumstances in the present case.

E2.2 No real risk of unjustified dissipation of assets

74.  In the context of a Mareva injunction, one of the questions to be considered is whether there is a real risk of unjustified dissipation of assets by a defendant. That question is to be answered by examining the evidence holistically.[56]

75.  What must be threatened is unjustified dissipation. The purpose of a Mareva injunction is not to provide the plaintiff with security. It is to restrain a defendant from evading justice by disposing of, or concealing, assets other than in the normal course of business in a way which will have the effect of making it judgment proof. A Mareva injunction is not intended to stop a corporate defendant from dealing with its assets in the normal course of its business. Similarly, it is not intended to constrain an individual defendant from conducting his personal affairs in the way he has always conducted them, providing of course that such conduct is legitimate.[57]

76.  Mr Yu SC submits that if Ds repatriate the money released pursuant to the Payment-Out Order to the Mainland, that would not be any unjustified dissipation of assets. The HK Proceedings have concluded, and the money covered by the Payment-Out Order are Ds’ money. Bearing in mind that Ds are the window companies of the Fuzhou Provincial Government, the assets of these companies are state assets. Repatriation of state assets back to Mainland cannot be unjustified dissipation of assets in any sense. I agree and accept Mr Yu SC’s submissions. In my view, notwithstanding the eloquent submissions made by Mr Chan, there is no valid answer from Ps to the points made by Mr Yu SC. I am also of the view that repatriating the money to Mainland would not have the effect of making the money judgment proof, for Ps are seeking reliefs against Ds in the New Mainland Action. If the money is remitted back to Mainland and Ps are allowed to proceed further in the New Mainland Action, Ps could certainly make whatever application(s) they deem fit to target the money in the Mainland Court.

E3. Conclusion on the S.21M Application

77.  By reason of the ASI granted by me, the S.21M Application must be dismissed.  Alternatively, for the reasons given in §§65 to 76 above, I am of the view that it would not be just and convenient to grant the s.21M injunction sought by Ps.  I would dismiss the S.21M Application.  For avoidance of any doubt, the interim-interim injunction is also discharged.

F.  DISPOSITION

78.  I make the order concerning the ASI Application and the S.21M Application as indicated in the above.

79.  Costs should follow the event.  As held by this Court, the commencement and pursuance of the New Mainland Action by Ps is an abuse of the process of the Hong Kong Court.  Accordingly, there be a costs order nisi that costs of these proceedings (including costs of the S.21M Application, costs of the ASI Application, and all costs reserved) be to Ds on an indemnity basis. There be a certificate for two senior counsel.[58] Those costs are to be taxed if not agreed.

80.  Lastly, it remains for me to thank all counsel for the very helpful assistance rendered to the Court.