Read the full judgment text of HCA 1412/2013 on BabelCite. This Court of First Instance judgment was delivered on 10 March 2016 before Deputy High Court Judge Kent Yee.
Insolvency – compulsory liquidation – Mareva injunction – appointment of interim receivers – ex parte application without notice – stay of receivership order – inherent jurisdiction to stay – arguable case of material non-disclosure – balance of convenience – receivership in aid of Mareva injunction where real risk of dissipation of assets – China Metal Recycling (Holdings) Limited placed in compulsory liquidation following alleged fraud on a massive scale by Mr Chun Chi Wai, founder, Chairman and CEO, and others – over HK$5 billion misappropriated from China Metal and Central Steel through fictitious transactions – Mr Chun and his wife Madam Lai were the controlling parties of the China Metal Group – provisional liquidators obtained ex parte Mareva injunctions in July-August 2013 against Mr Chun, Madam Lai, Wellrun, and 12 other defendants up to HK$1,682,198,420 – Mareva injunctions extended by Ng J in June 2014 to 13 further companies including the five respondents – defendants' defence struck out for non-compliance with disclosure obligations in aid of the Mareva injunctions – the 1st Receivership Application heard inter partes before DHCJ Keith on 5 February 2016 and adjourned – the 2nd Receivership Application granted ex parte without notice on 19 February 2016 over the assets of the five respondents after the Liquidators discovered the dissolution of the Partnership – Mr Chun held 99.98% interest in the Partnership and signed a resolution to dissolve it on 13 July 2015 with the Partnership eventually dissolved on 23 October 2015 – dissolution concealed from the Liquidators and not disclosed when the parties argued about the liquidation of the Jiangsu Company before DHCJ Keith – whether the court has inherent jurisdiction to stay the ex parte Receivership Order pending determination of the Discharge and Continuation Applications – held, the court has such inherent jurisdiction to do justice in the particular circumstances of the case, but any exercise of the power must be done judicially and on a principled basis – whether the 2nd Receivership Application was properly made ex parte without notice – held, the ex parte application was proper as receivership may be granted where a Mareva injunction is breached or there is a real risk of breach (Akai Holding Ltd v Ho Wing On Christopher, HCCL 37/2005) – whether there was material non-disclosure about the paid-up capital of the Partnership – held, there is an arguable case of material non-disclosure to be tested at the hearing of the Discharge Application, as Mr Chun's solicitors had stated his interest was below HK$50,000 and Mr Chun had asserted the Partnership was dormant with no capital paid in, none of which was drawn to the court's attention at the ex parte hearing – whether the balance of convenience favours granting a stay – held, the balance of convenience is against granting a stay because the defendants adduced no evidence of serious disruption to any going concern or of irreparable loss, while the plaintiffs demonstrated a genuine risk of further dissipation of assets in breach of the Mareva injunctions – Stay Application dismissed – Receivership Order continued – time for compliance with disclosure obligations under the Receivership Order extended to 21 March 2016 – Ds to pay Ps' costs of the application forthwith, to be taxed if not agreed.
Legal issues: Inherent jurisdiction to stay ex parte receivership order · Arguable case of material non-disclosure in ex parte application · Propriety of ex parte without notice application for receivership · Balance of convenience for granting a stay
Outcome: Stay Application dismissed; the ex parte Receivership Order granted on 19 February 2016 is to be continued pending the determination of the Discharge and Continuation Applications.
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