CHINA SINGKONG INVESTMENT HOLDINGS LTD AND ANOTHER v. YU TAI KAN

HCA 1636/2017

[2021] HKCFI 210

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1636 OF 2017

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D E C I S I O N

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APPLICATION

1.  Before the court was the plaintiffs’ application[1] for an interlocutory injunction that the defendant must not (whether by himself, his servants or agents or otherwise howsoever), pending either

(i)  the transfer or conveyance to the 2^nd plaintiff (or such nominee as the 1^st plaintiff may absolutely direct) of the “DMM Shares” (being 73% of the registered share capital in 北京新港干混砂漿建材有限公司 Beijing Singkong Dry Mortar Construction Materials Company Limited (“DMM”) currently registered in the Defendant’s name); or

(ii)  the transfer or remittance to the 2^nd plaintiff (or such nominee as the 1^st plaintiff may absolutely direct) of the “Cash” (being 73% of RMB17,000,000, or any part thereof as held in the banks accounts in (b) below and/or such sums having been assigned or distributed to the defendant by resolution of the board of DMM and/or the liquidation committee of DMM (comprised of the defendant and Beijing State-owned Assets Management Company Limited (北京京門國有資產經營中心) (“BSAM”)) or otherwise,

dispose of or deal with or diminish the value of:

(a)  the DMM Shares;

(b)  the Cash together with any credit balances in bank accounts in DMM’s name with the Shanghai Pudong Development Bank (上海浦東發展銀行北京分行) (account number, 91190155300000223) and the 農商行門頭溝支行 (account number, 0501000103000021892) (“DMM Accounts” collectively), and/or such sums having been assigned or distributed to the defendant by resolution of the board of DMM and/or the liquidation committee of DMM (comprised of the Defendant and BSAM) or otherwise.

BACKGROUND

The China Singkong group of companies

2.  The 1^st plaintiff China Singkong Investment Holdings Limited (中國新港投資控股有限公司) and the 2^nd plaintiff China Singkong Mentougou Cement Inv’t Limited (中國新港門頭溝水泥投資有限公司) were incorporated in the British Virgin Islands on 16 June 1993 and 5 July 1993 respectively.  The 2^nd plaintiff was a wholly owned subsidiary of the 1^st plaintiff.  Both companies were members of the China Singkong group of companies.

3.  On around 10 November 1993, Beijing Singkong Cement Co Ltd (北京新港水泥製造有限公司) (“BSCC”) was incorporated in the People’s Republic of China (“PRC”) pursuant to a joint venture agreement between the 2^nd plaintiff and a state-owned cement factory called Beijing Yong Ding Cement Factory (北京永定水泥廠) (“Beijing Yong Ding”).  The only asset owned by BSCC was a cement plant and the piece of land upon which it was located in the Mentougou District, Beijing (“Cement Plant”).  The 2^nd plaintiff and Beijing Yong Ding respectively held 70% and 30% of the shares in BSCC.

4.  On around 4 February 2005, DMM was established in the PRC pursuant to a joint venture agreement dated 18 December 2004 between the 2^nd plaintiff and BSAM for the purposes of, inter alia, engaging in the research, development, production, sales and provision of technical advisory services in relation to a new type of building material, namely dry mortar, produced by using the waste and/or by products of the Cement Plant. DMM’s main business was to produce, distribute and sell dry mortar, which was a natural extension of BSCC’s business and expansion of the China Singkong Group’s investment in the cement industry in the PRC.  The 2^nd plaintiff and BSAM respectively owned 73% and 27% of the shares in DMM.

The defendant

5.  Insofar as it is material, the defendant Yu Tai Kan (余大根) was the 1^st plaintiff’s employee.  He commenced his employment as the general manager of the 1^st plaintiff from 6 March 1995 and was based in Beijing.  He was also appointed as the general manager cum factory manager of BSCC from the same date.  Since DMM’s establishment on 4 February 2005, the defendant was made the chairman of DMM’s board of directors and DMM’s legal representative.  He was one of the plaintiffs’ representatives on DMM’s board.

6.  The defendant has also been the sole signatory of the DMM Accounts and has had custody of DMM’s finance department chop (財務章) required for the operation of the DMM Accounts.

Cessation of the businesses of the Cement Plant and DMM and negotiations for compensation

7.  In early 2010, due to the PRC Government’s policy relating to environmental control, the Beijing City Mentogou District People’s Government (“District Government”) resolved that the Cement Plant should stop operation by the end of 2010, which the Cement Plant did in about December 2010.  With the shutdown of the Cement Plant due to the PRC Government’s policy, negotiations to discuss the compensation to be paid by the District Government to all stakeholders of BSCC including the 2^nd plaintiff began.  For this purpose, the State-owned Assets Supervision and Administration Commission of the State Council of the District Government (門頭溝區人民政府國有資產監督管理委員會) (“Commission”) was authorised or assigned by the District Government to handle the formalities of the exit plan (including negotiating the payment of compensation) for all stakeholders of BSCC (including the 2^nd plaintiff). 

8.  With the shutdown of the Cement Plant as a result of the PRC Government’s policy relating to environmental control, at a meeting on 19 January 2011 between the Commission, BSCC and the defendant on behalf of the plaintiffs, an agreement was reached that DMM should also cease its business activities and that the amount of compensation to be made to the 2^nd plaintiff as a shareholder of BSCC and DMM would be negotiated and resolved at a later stage.

9.  Between January 2011 and November 2014, there was negotiation with the Commission as regards the compensation to be received by the 2^nd plaintiff.  For present purpose, it is unnecessary to go into the details of the discussion, save to mention that after years of such negotiation, the Commission suggested that the 2^nd plaintiff should consider selling its shares in BSCC to a Chinese state-owned enterprise at a consideration of not more than RMB150 million so as to achieve a speedy exit with cash payment and to prevent any further loss.  

Transfer of the DMM Shares to the defendant

10.  It was not disputed that the 2^nd plaintiff transferred its 73% shareholding in DMM (i.e. the “DMM Shares”) to the defendant on 8 July 2015.  There was, however, a disagreement as to the circumstances leading to such transfer.

11.  On one hand, it was the plaintiffs’ case that:

(1)  In about November or December 2014, the defendant suggested to Mr Chia Siong Lim (“Mr Chia”), then a director of the plaintiffs, and the defendant’s superior, based in Singapore, that if Mr Chia caused the DMM Shares held by the 2^nd plaintiff to be transferred to the defendant, this would facilitate the 2^nd plaintiff’s exit deal negotiation with the Commission.  The defendant explained to Mr Chia that after the 2^nd plaintiff’s shares in DMM were transferred to him, the outstanding issues for the 2^nd plaintiff in Beijing would only be trivial matters arising from DMM’s cessation of business.  In short, if the 2^nd plaintiff transferred the DMM Shares to him, the defendant could more conveniently negotiate and implement the plan for the 2^nd plaintiff’s exit from BSCC and DMM.  Also, Mr Chia would not need to travel to Beijing to attend to any more DMM matters.

(2)  The defendant verbally assured Mr Chia that he so proposed purely for convenience and that he would not retain the DMM Shares for his own account and/or for his own use, and that the DMM Shares would be held by him on trust for the 1^st plaintiff and/or the 2^nd plaintiff.

(3)  At that time, Mr Chia felt exhausted by the negotiation process.  Given the defendant’s good performance during the negotiation process and in reliance on his said assurances, Mr Chia agreed to the defendant’s proposal. 

(4)  As a matter of appreciation for the defendant’s assistance to the 2^nd plaintiff in negotiating the exit deal, Mr Chia proposed to the defendant that part of the sums remaining in the DMM Accounts could be shared between all the personnel who were rendering assistance, including the defendant.  However, this part of the discussion was at a very initial stage and they had not come up with any exact figure for the sum to be distributed.

12.  In contrast, it was the defendant’s case that the DMM Shares were transferred to him as an outright gift and that he did not hold the DMM Shares on trust for anyone.

(1)  In paragraphs 13 and 14 of the defendant’s 1^st affirmation dated 19 October 2017, the defendant alleged that the reason for the transfer was to avoid “unforeseeable risks” to the 2^nd plaintiff and to encourage/ incentivise the defendant to collect payment of the consideration to be paid by BSAM to the 2^nd plaintiff for the 70% shares in BSCC.

(2)  In paragraph 13 of the defence, the defendant alleged that he had been verbally informed over phone by Mr Chia who was then in Singapore that the 2^nd plaintiff would transfer the DMM Shares to the defendant as a reward for his participation in the negotiation with, among others, the Commission.

(3)  Then, in paragraph 14 of the defence, the defendant said:

“as the 2^nd Plaintiff did not wish the progress of receiving the compensation of RMB¥170 millions from BSAM on the successful completion of the aforesaid purchase deal would be hampered by any unexpected events occurring in DMM after it ceased operation, Mr. Chia told the Defendant that the shareholders resolved to segregate its relation with DMM. To achieve this segregation, Mr Chia decided to transfer the DMM Shares to the Defendant, for avoiding risks”.

13.  Whether the transfer was to effect a trust of the DMM Shares by the defendant for the benefit of the plaintiffs or an outright gift of such shares by the 2^nd plaintiff to the defendant, it was common ground that on 20 January 2015, the board of DMM noted that the 2^nd plaintiff would transfer the DMM Shares to the defendant for “nil consideration”.  Paragraphs 1 and 2 of the board minutes read as follows:

“1.  外方股東中國新港門頭溝水泥投資有限公司(以下統稱為“外方股東”)同意將持有公司的全部73%股份無償轉讓給余大根董事長。余大根董事長同意受讓外方股東出讓持有公司的全部73%股份。中方股東北京京門國有資產經營中心同意外方股東向余大根董事長轉讓全部73%股份，放棄優先受讓權。

2.  外方股東出讓全部73%股份後，自股權轉讓協議薟訂之日起公司設立後的一切債權債務再與外方股東無關。”

14.  On the same date, the defendant provided a handwritten undertaking (“Undertaking”) to the 2^nd plaintiff, which stated as follows:

“北京新港干混砂漿建材有限公司第四屆董事會決議貴司將持有73%的股權無償轉讓給本人，本人同意貴司提出該無償轉讓以北京京門國有資產經營中心或其指定單位以壹億柒仟萬元人民幣受讓貴司持有北京新港水泥製造有限公司全部70%股權為前提。”

15.  According to Mr Chia, the Undertaking was given at the request of one Koon Dow Ho (a senior officer within the China Singkong Group) as a kind of precaution against losing the DMM Shares.  Insofar as the Undertaking did not mention any trust arrangement, Mr Chia explained that he did not pay attention to the matter, as he was used to leaving the details to be dealt with by the defendant after deciding matters at a high level or on a general basis.  He trusted the defendant to handle the matter and all documentation properly.

16.  On 8 July 2015, Mr Chia signed a share transfer agreement whereby the 2^nd plaintiff agreed to transfer its 70% shares in BSCC to BSAM (being the required “state-owned” enterprise) for a consideration of RMB170 million payable by 4 instalments.

17.  Also on 8 July 2015, Mr Chia signed a share transfer agreement whereby the 2^nd plaintiff agreed to transfer its 73% shares in DMM to the defendant for nil consideration.  Clause 1 of such agreement stated as follows:

“一、甲方無償向乙方轉讓持有公司的全部73%股權，乙方同意受讓。”

18.  Having executed such agreements, the defendant’s remaining tasks were to collect the outstanding payments from BSAM to the 2^nd plaintiff and to work with BSAM to deal with various outstanding matters regarding DMM.

19.  From around July 2015 to around April 2017, the defendant (1) regularly reported to Mr Chia as regards the monies collected and received from BSAM; (2) seemingly followed Mr Chia’s instructions in dealing with DMM issues; and (3) regularly reported BSAM’s requests in respect of DMM matters to Mr Chia.  In this connection, Mr Chia referred to a report prepared by the defendant dated 27 March 2017, by which the defendant, among other things:

(1)  reported to Mr Chia that BSAM was withholding the third instalment and the follow-up actions that he proposed to take; and

(2)  also mentioned that he and his team had been working very hard and asked the shareholders of the plaintiffs to recognise his team’s effort and to give them a “one time special award” in the sum of RMB1 million upon receipt of the fourth instalment from BSAM.

Defendant’s refusal to return the DMM Shares to 2^nd plaintiff

20.  When the 2^nd plaintiff was about to receive the fourth (i.e. final) instalment of the consideration from BSAM, in around 4 May 2017, Mr Chia requested the defendant to return the DMM Shares to the 2^nd plaintiff.

21.  According to Mr Chia, at that time, DMM’s main asset was the cash remaining in its abovementioned account with the Shanghai Pudong Development Bank in the amount of around RMB17 million.  In this regard, Mr Chia referred to and relied on a cash balance report prepared by a staff named Jing Chun Di (荊春地).  Mr Chia requested the defendant to allow the plaintiffs access to a sum equivalent to 73% of the RMB17 million.  I note that the said cash balance report showed that DMM actually had around RMB15 million in cash and around RMB17 million in account receivables.  Mr Chia clarified this too in paragraph 17 of his 2^nd affidavit dated 9 January 2018.  However, both the plaintiffs’ summonses dated 11 October 2017 and 15 January 2018 as well as the skeleton submission for the plaintiffs still referred to cash in the amount of RMB17 million.

22.  Despite the request, the defendant said to Mr Chia firmly that he should be entitled to receive the entirety of the Cash as his “bonus” for successfully negotiating and implementing the exit plan for the 2^nd plaintiff.  The defendant further alleged that as Mr Chia had agreed to pay him such “bonus”, he would not return the DMM Shares to the 2^nd plaintiff.

23.  By a letter dated 15 August 2017, the defendant was summarily dismissed from his employment with the 1^st plaintiff with immediate effect.

THE PRESENT ACTION

24.  The defendant’s refusal to return the DMM Shares and the Cash led to the present action, by which the plaintiffs claimed against the defendant, inter alia:

(1)  a declaration that the defendant holds the DMM Shares and the Cash on trust for the plaintiffs;

(2)  an order that the defendant do transfer or convey the DMM Shares to the 2^nd plaintiff or such nominee(s) as the 1^st plaintiff may direct;

(3)  an order that the defendant do transfer or remit the Cash to the 2^nd plaintiff or such nominee(s) as the 1^st plaintiff may direct;

(4)  an injunction restraining the defendant (pending the transfers of the DMM Shares and the Cash to the 1^st plaintiff/the 2^nd plaintiff) from disposing of, dealing with or diminishing the value of the DMM Shares or the Cash; and

(5)  damages for breach of contract and/or breach of trust.

LIQUIDATION OF DMM AFTER THE WRIT

25.  Before turning to the application before me, I should mention that DMM was in liquidation and appeared to have been deregistered in the PRC.

26.  According to the legal opinion dated 12 January 2018 prepared by the defendant’s PRC legal advisors:

(1)  On 1 July 2017, DMM’s board of directors resolved, inter alia, to deregister DMM and to form a liquidation committee (清算組).  The defendant was appointed as the person in charge of such liquidation committee (清算組負責人) (who, according to the plaintiffs’ PRC legal advisor, is responsible under the PRC law to take lead in all activities conducted by the liquidation committee including but not limited to sorting out the assets of the company, clearing debts and recovering credits, disposing of remaining assets during the winding-up process and to sign relevant documents on behalf of the company.

(2)  On 27 December 2017, the liquidation committee applied for the deregistration of DMM, which application was accepted on the same date by the Mentougou District Branch of the Beijing City Administration of Industry and Commerce Bureau, as evidenced by a <<受理通知書>>.

(3)  On 12 January 2018, the Beijing City Mentougou District Branch of the Administration of Industry and Commerce Bureau issued a <<外商投資企業注銷登記証明>>, and DMM was deregistered.

27.  According to Mr Zhang Kehua, the plaintiffs’ PRC legal advisor, once the business licence of DMM had been officially deregistered, DMM would no longer exist as an entity.

28.  In his 2^nd affirmation dated 17 January 2018 (i.e. after the deregistration of DMM), the defendant said that the balance in DMM’s bank accounts would be distributed to its shareholders after the deduction of all administration fees, legal fees, employee compensation and other operation expenses; but that he had not received any amount, and that he did not know how much DMM’s shareholders would receive.

29.  As to the amount in the Accounts, the defendant stated that:

(1)  In 2011 when DMM ceased production, there was around RMB17 million remaining in the Accounts.

(2)  However, as DMM had to continue operation until its deregistration, as of October 2017 when the defendant filed his 1^st affirmation, the amount had been reduced to: (a) RMB5.1 million in the bank account with the Shanghai Pudong Development Bank; and (ii) RMB220,000 in the bank account with the 農商行門頭溝支行.

(3)  The defendant provided the same figures in paragraph 5 of his 2^nd affirmation. 

However, the defendant has not provided any documentary evidence in support of these alleged reduced figures.

30.  Mr Chia doubted the veracity of the defendant’s assertion that DMM had to continue operation and incur costs, pointing out that even according to the defendant, DMM had already ceased production (“停產”) since January 2011.  Further, he referred to the said cash balance report prepared by Jing Chun Di, which showed that as of May 2017, there was around RMB15 million in cash and RMB17 million in account receivables.  He said that it is “simply incredible” that DMM would have used up as much as RMB10 million during the 5-month period between May and October 2017.

31.  What is noteworthy from the abovementioned evidence is that notwithstanding the deregistration of DMM, on the defendant’s own case, there remained substantial assets of DMM pending distribution to the shareholders of DMM after deduction of all administration fees, legal fees, employees’ compensation and other operating expenses.  The issue of entitlement to the DMM Shares therefore did not become academic with the deregistration of DMM. 

APPLICABLE LEGAL PRINCIPLES

32.  The principles governing the grant of a proprietary injunction are well-established.  In DBS Bank (Hong Kong) Ltd v Tian Wen Qian, HCA 3228/2016, unreported, 12 October 2017, A Chan J summarised the principles at [11]-[13] as follows:

“11. There is no controversy that the American Cyanamid principles apply to the grant of a proprietary injunction, namely, an applicant must show that: (a) there is a serious issue to be tried on the merits of his claims; (b) the balance of convenience is in favour of granting an interlocutory injunction; and (c) it is just and convenient to grant the injunction.

12. The modern approach is to weigh the strength of the cases and the impact granting or not granting an injunction will cause, and to determine which course is likely to cause the least irremediable prejudice to one party or the other. Lord Hoffman explained in National Commercial Bank Jamaica Ltd v Olint Corpn Ltd [2009] 1 WLR 1405, §§16-18:

‘… The purpose of such an injunction is to improve the chance of the court being able to do justice after a determination of the merits at the trial. At the interlocutory stage, the court must therefore assess whether granting or withholding an injunction is more likely to produce a just result. … that means that if damages will be an adequate remedy for the plaintiff, there are no grounds for interference with the defendant’s freedom of action …

… The basic principle is that the court should take whichever course seems likely to cause the least irremediable prejudice to one party or the other. …

Among the matters which the court may take into account are the prejudice which the plaintiff may suffer if no injunction is granted or the defendant may suffer if it is; the likelihood of such prejudice actually occurring; the extent to which it may be compensated by an award of damages or enforcement of the cross-undertaking; the likelihood of either party being able to satisfy such an award; and the likelihood that the injunction will turn out to have been wrongly granted or withheld, that is to say, the court’s opinion of the relative strength of the parties’ cases.’

13. There is no dispute that serious issue to be tried is not a high threshold. Further, the court does not resolve in interlocutory injunction applications conflicts of evidence on affidavit, or decide difficult questions of law which call for detailed arguments and mature consideration.”

33.  Recorder Eugene Fung SC also provided a helpful summary in Zhang Yan v ASA Bullion Ltd [2019] HKCFI 179, HCA 1555/2018, unreported, 23 January 2019, at [11]:

“(1)  Where a plaintiff asserts title to property or seeks to trace property which belongs to him, the Court has jurisdiction to grant a proprietary injunction restraining the disposal of that property: see A v C [1981] 1 QB 956 at 958D – 959D (Robert Goff J).

(2)  For the grant of a proprietary injunction, there are three elements which the plaintiff has to demonstrate, following the American Cyanamid approach: (a) that there is a serious issue to be tried on the merits; (b) that the balance of convenience is in favour of granting an injunction and (c) that it is just and convenient to grant the injunction. It is not necessary to show any risk of dissipation of assets. See eg Madoff Securities International Ltd v Raven [2012] 2 All ER (Comm) 634 at §§127-128 (Flaux J).

(3)  A proprietary injunction must relate to a specific asset held by or under the control of the defendant, or its traceable proceeds, in respect of which a proprietary claim is raised by the plaintiff: see任俊國v Chin Choi Ming (unreported, HCA 2017/2017, 6 November 2017) §20 (Chow J).

(4)  In order to justify the grant of a proprietary injunction, the plaintiff should ordinarily adduce some reasonable evidence of the existence of the specific asset (or its traceable proceeds) and that the same is being held by or under the control of the defendant. Where the asset forming the subject matter of the proprietary claim has been dissipated and can no longer be traced, a proprietary injunction cannot ordinarily be granted. See 任俊國v Chin Choi Ming (above) §§21 – 22 (Chow J).”

34.  In the present case, there is no suggestion that the requirements mentioned in [11(3)] and [11(4)] of Recorder Eugene Fung SC’s summary pose any problem.  It is undisputed that the DMM Shares are held by the defendant and registered in his name.  As to the Cash, the defendant’s case is that the Cash had not been distributed to the shareholders, including him.  The defendant, as the chairman of the board of DDM, the legal representative of the DDM and the person in charge of the liquidation committee of DMM, more importantly, the sole signatory of the DDM Accounts in custody of the finance department chop required for the operation of such accounts, has control over the Cash in the DMM Accounts. 

DISCUSSION

Serious issues to be tried

35.  Mr Calvin LM Chow, counsel for the defendant, questioned the lack of a single document which evidenced the trust of the DMM Shares alleged by the plaintiffs.  To the contrary, counsel said there were documents which revealed that there was an arrangement to transfer the DMM Shares by Mr Chia on behalf of the 2^nd plaintiff to the defendant as a gift.  In support, Mr Chow referred to and relied on: (1) clauses 1 and 2 of the said DMM board meeting minutes dated 20 January 2015; (2) clause 1 of the share transfer agreement dated 8 July 2015 between the 2^nd plaintiff and the defendant; (3) a “授權承諾函” between the 2^nd plaintiff and the defendant dated 1 January 2016 (which also stated, inter alia, that the 2^nd plaintiff transferred the DMM Shares to the defendant for nil consideration).

36.  On the other hand, Mr Sanjay Sakhrani, counsel for the plaintiffs, pointed out that in the defendant’s said report dated 27 March 2017, he asked Mr Chia for a “one time special award” in the sum of RMB1 million upon receipt of the fourth and final instalment from BSAM to recognise his team’s effort.  This report was written after the DMM Shares had been transferred to the defendant.  I agree with Mr Sakhrani that such a request suggested that the defendant was mindful that he was not entitled to any reward or “bonus” including the DMM Shares and the remaining cash in the DDM Accounts (and hence he had to ask for a “one time special award”).

37.  I also observe that paragraph 3 of the email exchange on 13 April 2017 between the defendant and the said Koon Dow Ho also refers to a “monetary award” to the defendant.

38.  Although the Court is entitled to have regard to the strength of the parties’ competing factual claims based on the totality of the evidence (Maitri Trust v Hong Fei Sheng (HK) Trading Co Ltd, supra, at [13]), at this stage the court does not resolve conflicts of evidence on affidavit (DBS Bank (Hong Kong) Ltd v Tian Wen Qian, supra, at [13]).

39.  The threshold of “serious issue to be tried” is not a high one. All that a plaintiff has to show is that his claim is not “frivolous or vexatious”.  A defendant has a heavy burden of showing that there is no serious issue to be tried, since to succeed it will have to show that the claim ought to be struck out (Pacific Rainbow International Inc v Shenzhen Wolverine Tech Ltd, HCA 3023/2016, unreported, 2 May 2017) at [39]; Maitri Trust v Hong Fei Sheng (HK) Trading Co Ltd [2020] HKCFI 2764, HCA 1984/2019, unreported, 30 October 2020, at [13]).

40.  In the present case, the question whether the transfer of the DMM Shares by the 2^nd plaintiff to the defendant on 8 July 2015 was to effect a trust of the DMM Shares by the defendant for the benefit of the plaintiffs or an outright gift of such shares by the 2^nd plaintiff to the defendant is clearly a serious issue to be tried.  

Balance of convenience

41.  With the deregistration of DMM, the beneficial ownership of the DMM Shares would determine who, the 2^nd plaintiff or the defendant, should receive the corresponding portion in the final distribution of DMM’s surplus assets (which appears to be primarily the Cash being RMB12.41 million, i.e. 73% of the RMB17 million in the DMM Accounts, on the plaintiffs’ case).  That being the case, at first glance, damages would be an adequate remedy for the plaintiffs, which is a reason for not granting the injunction sought.  As observed by A Chan J in DBS Bank (Hong Kong) Ltd v Tian Wen Qian, supra, at [14], money is probably the most fungible asset, and a proprietary claim over cash is to be distinguished with, for example, a proprietary claim over a wedding ring or any property of a unique character.

42.  Notwithstanding, as submitted by Mr Sakhrani, the question is whether the defendant would be able to repay a sum to the tune of RMB12.41 million.  On the defendant’s own evidence in paragraph 7 of his 2^nd affirmation, he was unable to afford making any promise regarding money to the plaintiffs as he had not received any distribution as DMM’s shareholder (“本人目前並未收取到任何分配給股東的金錢，在財力上不能[負]擔向原告人作出任何金錢的承諾”).  It is therefore clear that, on his own admission, the defendant would not have any or any sufficient personal resources to pay damages to the plaintiffs should he be allowed to intermeddle with and, possibly, dissipate the Cash which the defendant would be able to do as the sole signatory of DMM Accounts and the person in charge of DMM’s liquidation committee.

43.  Any award of damages would be illusory and hence inadequate if the defendant is not sound for damages or is judgment proved.  See Union (V-Tex) Shirt Factory Ltd (in liquidation) v Union V-Tex Realty Ltd [1985] 2 HKC 617 and Yeko Trading Ltd v Choi Sai Cheong Tony [2000] 2 HKC 612.

44.  On the other hand, in view of the 2^nd plaintiff’s investments in BSCC and DMM and the 1^st plaintiff’s whole ownership of the 2^nd plaintiff, the plaintiffs seem to be companies of substance which would be good for the customary cross-undertaking as to damages.  Further, as of 1 September 2017, the balance of the 1^st plaintiff’s bank account with The Hongkong and Shanghai Banking Corporation Limited was HK$511,687.59, which Mr Chia said was unencumbered.  Also, as of 1 September 2017, the balance of the 2^nd plaintiff’s bank account with DBS Bank (Hong Kong) Limited was HK$371,246.04.  While these are not enormous sums, there is, however no or no coherent evidence that the defendant would suffer any loss or damages if he be in the meantime prohibited from dealing with the Cash until the determination of the beneficial ownership of the DMM Shares, and therefore the Cash.

45.  Given the adequacy/inadequacy of the respective remedies of damages to the parties, the balance of convenience is, in my view, in favour of maintaining the status quo by the grant of the injunction sought.

Injunction just and convenient

46.  For these reasons, I believe it is just and convenient to grant the injunction sought.

DISPOSITION

47.  In conclusion, upon the plaintiffs giving the usual cross-undertaking as to damages, I grant an injunction as per paragraph 1 of the draft amended summons attached to the plaintiffs’ summons dated 15 January 2018.

48.  I also make an order nisi that the defendant shall pay the plaintiffs’ costs of and occasioned by the application (including costs previously reserved) on a party and party basis to be taxed if not agreed, with a certificate for counsel.