Read the full judgment text of HCMP 1797/2015 on BabelCite. This Court of First Instance judgment was delivered on 29 April 2016 before Hon To J.
Civil procedure – Mareva injunction – interim relief in aid of foreign proceedings under section 21M of the High Court Ordinance (Cap 4) – five PRC actions commenced by Bank of China Limited (Rizhao Branch) against Lianghe Group, Chenghua Group and the Defendant guarantor Yang Fan under two loan agreements (Lianghe Agreement and Chenghua Agreement) and corresponding guarantees – Defendant's alleged default under the guarantees and disposal of NURH shares – application to continue ex parte Mareva injunction granted by Chow J and extended by Mimmie Chan J – Defendant's cross-application to discharge the injunction – choice of Mainland court agreement under section 3(2) of the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap 597) – whether clause 13 of the Lianghe Agreement and clause 15 of the Chenghua Agreement confer exclusive jurisdiction on PRC courts – held: the word '可以' should be construed as imperative ('shall') in context, applying the construction principles in Investors Compensation Scheme Ltd v West Bromwich Building Society and Jumbo King Ltd v Faithful Properties Ltd; the clauses are exclusive jurisdiction clauses, and the guarantee clauses expressly adopt the same means – finality and conclusiveness of PRC judgment under section 5(2)(c) of the Ordinance – whether the protest regime under the 2012 Civil Procedure Law renders PRC judgments not final and conclusive – held: the Plaintiff has shown a good arguable case that the PRC judgment will be final and conclusive; article 211 of the 2012 Code materially changes the protest regime such that a re-trial is not automatic and resembles an appellate regime, distinguishing Chiyu Banking Corp Ltd v Chan Tin Kwun, Lee Yau Wing and Lee Shui Kwan, and Wu Wei v Liu Yi Ping – locus to sue under PRC law – whether the Rizhao Branch, as agent for Rizhao Steel (the ultimate assignee of the Subject Debts), can maintain the PRC actions – held: yes; the First Authorisation, though pre-dating the Subject Debts Assignment, was ratified by the Second Authorisation under article 51 of the PRC Contract Law; the assignment is binding only as between assignor and assignee, and Green's 1st Affidavit does not constitute notice of assignment to the borrowers – locus to sue under Hong Kong law – whether the Plaintiff can obtain Mareva relief without joining Rizhao Steel – held: yes; section 21M proceedings are ancillary, and the substantive dispute is being tried in the PRC – risk of dissipation – whether the Defendant's disposal of 55,770,000 NURH shares (reducing his shareholding from 18.69% to 9.496%) between March and June 2015 demonstrates a real risk of dissipation – held: yes; the disposal was in breach of clause 10.2(11) of the Chenghua Agreement (which required prior approval and application of proceeds to Chenghua's debts), suggesting low commercial morality, and the Defendant could easily withdraw the cash balance of about $59.59 million from his margin account – balance of convenience – Defendant advanced no substantive defence, and no significant assets have been identified in the PRC to satisfy the claims – held: balance favours maintaining the injunction – non-disclosure – complaints regarding the Plaintiff's failure to address enforceability in depth before the ex parte judge, the late disclosure of the assignment, and the exaggeration of the share disposal reduction – held: the non-disclosure was trivial, unintentional, without impact, and ought fairly to be excused; in the interests of justice, the injunction was discharged and a new injunction re-granted on similar terms – Discharge Summons allowed; Continuation Summons allowed; no order as to costs on the Discharge Summons; costs to the Plaintiff on the Continuation Summons.
Legal issues: Whether the parties entered into a choice of Mainland court agreement · Whether a PRC judgment will be final and conclusive · Plaintiff's locus to sue under PRC law · Plaintiff's locus to sue under Hong Kong law · Risk of dissipation of assets · Balance of convenience · Material non-disclosure and discharge of the injunction
Outcome: The Defendant's Discharge Summons was allowed and the Mareva injunction was discharged; the Plaintiff's Continuation Summons was allowed and a new injunction was granted on similar terms.
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