WEN YUZHOU AND OTHERS v. MAN SHU KWAN

HCCT 84/2020

[2021] HKCFI 2510

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 84 OF 2020

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REASONS
FOR
DECISION

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The hearing

1.  This is the second hearing of the Originating Summons taken out by the plaintiffs (“P1”, “P2” “P3”, and collectively “Ps”) on 25 November 2020 against the defendant (“D”) for a Mareva injunction in aid of arbitration, pursuant to Section 45 of the Arbitration Ordinance. 

2.  D has not acknowledged service of the Originating Summons.

3.  On 24 November 2020, upon Ps’ application on an ex parte basis, S T Poon J granted an interlocutory injunction (the “Injunction”) in terms similar to the one that P is seeking via the Originating Summons.

4.  On the return day of 4 December 2020, D was absent.  G Lam J (as he then was) continued the Injunction.

5.  During the first hearing of the Originating Summons on 10 February 2021, D turned up without prior notice before Anthony Chan J.  His Lordship gave directions on the filing of evidence.  The substantive hearing of the Originating Summons was then adjourned.

6.  Despite those directions on the filing of evidence, D has filed none.  Despite D’s appearance before Anthony Chan J, it remains the case that no acknowledgment of service of the Originating Summons has been filed.

7.  The matter now came back before this Court on 19 August 2021.

8.  During the hearing, Mr Adrian Wong appeared for Ps.  D appeared in person.

9.  Having heard parties, I granted Ps’ application in terms of the draft order placed before me, subject to the insertion of a new paragraph on the duration of the Mareva Injunction.  These are my reasons[1].

The arbitration

10.  The arbitration which this application is made in aid of (the “Arbitration Proceedings”) was commenced on 14 December 2020.  It was commenced before the Shenzhen Court of International Arbitration (“SCIA”).

11.  The hearing of the Arbitration Proceedings took place on 20 July 2021.  The awards are pending.

The disputes

12.  In gist, the disputes between the parties concern the pre‑sale of residential houses at Lake One Garden estate in Qingyuan, Guangdong, the PRC (“Lake One Estate”).  Ps were amongst the purchasers.  They have paid purchase price in full or in part to慧峰(清遠)房地產有限公司 (“Huifeng Properties”), a company controlled by D.  It has subsequently been discovered that the residential houses concerned had, unbeknownst to Ps, variably either before or after the sales to Ps, been sold and / or mortgaged to other third parties.

13.  On 26 August 2020, P2 and P3 had a meeting with D.  Upon discussions, D personally executed agreements with inter alios Ps for the refund of purchase monies paid to Huifeng Properties for some of the properties (“Refund Agreements”).  All those agreements contain provisions to the effect that:

(a)   the liabilities of D and Huifeng Properties to refund are joint;

(b)   issues relating to the signing, execution, enforcement, dispute resolution, interpretation and all other related matters shall be governed by Mainland law; and

(c)   disputes arising out of or in connection with the agreements shall be referred to arbitration in the SCIA.

14.  According to the evidence adduced by Ps, D has been in breach of the Refund Agreements and failed to effect the refunds.  Ps are seeking to enforce their rights through the Arbitration Proceedings.  They are seeking thereby to recover all principal and interest due under the Refund Agreements, in the sum of RMB 34,830,400 as of 23 November 2020.

Discussion

15.  I am satisfied on the evidence that D has failed to file any acknowledgement of service of the Originating Summons — Order 28 rule 6.

16.  D was aware of these proceedings.  He attended the hearing before Anthony Chan J.  He has chosen not to file any evidence.  I am satisfied that the application should be proceeded with summarily at this stage.

17.  During the hearing, D appeared in person.  On 17 August 2021, D wrote in and indicated that he would not object to the application.  During the hearing, D confirmed that that remained his position.

18.  Despite D’s position, I have nonetheless considered the evidence before me to satisfy myself that the application should be granted.

19.  I have considered the various authorities cited to me, which include Top Gains Minerals Macao Commercial Offshore Ltd v TL Resources Pte Ltd [2016] 3 HKC 44 [P#4] at §§18-20 and 43.  This Court has the jurisdiction to grant the Mareva Injunction sought.

20.  On the evidence before me, I am satisfied that Ps have established a good arguable case against D.  D has not filed any evidence to the contrary.

21.  From D’s conduct and the manner in which the relevant properties were “sold” to Ps, low commercial morality and risk of dissipation can be inferred.

22.  The evidence (the disclosure made by D as ordered by the Injunction) shows that D has insufficient assets within the jurisdiction to satisfy Ps’ claim.

23.  There is before me no other matters which weigh against the grant of the Mareva Injunction sought.

24.  My only reservation relates to the duration of the Mareva Injunction sought.  I am not prepared to grant an open‑ended Mareva Injunction, as Mr Wong was seeking to persuade me to do.  Having invited submissions, I decided that a new paragraph should be added, in the following terms:

“ Duration of this Order

This Order will remain in force up to the date when the Shenzhen Court of International Arbitration hands down the awards (or the last awards if the awards are not handed down at the same time) in the SCIA Arbitration Proceedings (case no: (2021)深囯仲涉外受382号-6, (2021)深囯仲涉外受383号-5, and (2021)深囯仲涉外受384号-5).

If the Plaintiffs fail to obtain any award, this Order will be discharged forthwith.

If the Plaintiffs are successful in the SCIA Arbitration Proceedings in a total amount equal or above the amount enjoined herein, this Order will remain valid until the expiry of 180 days counting from the date immediately after the awards (or the last awards if the awards are not handed down at the same time).

If the Plaintiffs are successful in the SCIA Arbitration Proceedings in a total amount lower than the amount enjoined herein, this Order will remain valid until the expiry of 180 days counting from the date immediately after the awards (or the last awards if the awards are not handed down at the same time), but that the enjoined amount would be lowered to the amount of the total award.”

25.  For the above reasons, I granted an order in terms of the draft placed before me with the insertion of the paragraph.  For the avoidance of doubt, parties have liberty to apply.

26.  On the question of costs, Mr Wong sought costs in terms of paragraph 17 of the draft order, which includes the costs of the hearing before this Court on 19 August 2021.

27.  D submitted that as he had indicated that he had no objection to the application, he should not be ordered to bear the costs of the hearing.

28.  D relies on the correspondence between “his” solicitors Messrs Pansy Leung Tang & Chua (“PLT”) and Ps’ solicitors Wellington Legal (“WL”).

29.  I put “his” in quotation for a reason.  In PLT’s letter of 23 July 2021 to WL (the caption of which mentioned the present action number and a property), PLT said:

“ While we make it clear that we do not have instructions from MAN Shu‑kwan of our clients to act for him in those proceedings, we are instructed that he has in principle no objection to the relief sought by your clients. To save time and costs but not otherwise, we suggest the matter be dealt with by consent summons, and would be grateful if you would send us a draft for his consideration.”

30.  WL in reply said on 3 August 2021 that as PLT did not have instructions to act for D, it would be inappropriate at that stage for them to provide PLT with any draft consent summons.

31.  In reply, PLT disagreed with WL on their view, but said that:

“ That said, as we do not act for MAN Shu‑kwan of our clients in the above proceedings, we refrain from making further comments.”

32.  PLT do not act for D in the present proceedings.  They have not clarified in what capacity they were writing those letters and seeking a consent summons from WL.  Nor have they indicated whether they have any authority to discuss with WL on D’s behalf on the conduct of the proceedings, or to agree upon a consent summons with WL.  In the context of these proceedings, D has remained acting in person.  Any discussion with PLT was potentially a waste of time and costs.

33.  It was not until 17 August 2021 when D wrote in in person and indicated his stance.  By then, it was less than 2 days before the hearing, and was far too late for any costs be saved.

34.  In the circumstances, I ordered that D should also bear the costs of the hearing on 19 August 2021.