Primus Pacific Partners (Gp1) Lp and Another v. Li, Wenlei and Another

HCA 3373/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 3373 OF 2016

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DECISION ON VARIATION OF ORDER

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1.In a decision handed down on 12 May 2017, the Mareva injunction sought by, and granted to, the plaintiffs on their ex parte application on 21 December 2016 against both defendants was discharged. Their inter partes application for a similar injunction was also refused (“the 12 May order”).

2.This is the plaintiffs’ application for a variation of the 12 May order as against the 1^st defendant (“Mr Li”).  They earlier indicated they would rely on RHC Ord 20 r 11 (the “slip” rule) to seek the variation (letter dated 24 May 2017 of the plaintiffs’ solicitors).

3.For ease of reference, the same abbreviations used in the 12 May 2017 decision will be used below.

4.Subsequent to the 12 May 2017 decision, Mr Chen’s solicitors provided the draft order for the court’s approval on 12 May 2017.  The relevant parts of the draft order read:

“The Injunction Order … dated 21 December 2016 as varied … be discharged”.

That part was apparently drafted based on (among other paragraphs) para 37 and 38, 12 May 2017 decision.  The language used clearly indicates the Dec 2016 injunction against both defendants would be discharged.

5.The first ground in support of this application (to vary the 12 May order) is that the plaintiffs’ case only focused on Mr Chen, and did not address the case concerning Mr Li.  This ground can be disposed of briefly below.

6.As will be made clearer below, the principal part of the plaintiffs’ case in support of the Mareva injunction was that the defendants jointly, and wrongfully, misled them into investing into a worthless project, thereby occasioning loss to them (namely, the amount of the investment sum).

7.Such being the case, the assertion that the plaintiffs only focused their attention on Mr Chen but not Mr Li is in truth nothing more than an attempted red-herring.  In any event, any justifiable sense of grievance arising out of the lack of an opportunity to make full submissions should be adequately redressed by the court now permitting the plaintiffs to lodge further written submissions in the context of this application.

8.So far as the court’s jurisdiction to consider, and determine, the plaintiffs’ case against Mr Li is concerned:

(a)   the order being discharged was in the nature of an interlocutory injunction.  It is trite law the court, after having granted the injunction, has jurisdiction to further consider the matter: Hong Kong Civil Procedure 2017, Vol 1, para 29/1/34;

(b)   this is particularly so where the interlocutory injunction was granted on ex parte basis (as has happened in this instance in Mr Li’s case, where it is undisputed he has been incarcerated outside the jurisdiction, and has informed the court (and through the court the plaintiffs) that he could not attend court as a result).  Insofar as it may be necessary to do so, reference is made to Ord 13 rr 5 and/or 6.

9.The plaintiffs’ main case put forth in support of their claim against the defendants (and hence in support of the Mareva injunction) is in short that:

(1)   the defendants were employed by the investment advisor arm of the plaintiffs to provide investment advice for the consideration of the plaintiffs’ investment committee (para 6, 7(4), 7(7) to 7(8), 10(a) to 10(b) and 11, 12 May 2017 decision);

(2)   the defendants have breached their duties owed to the plaintiffs when they provided misleading materials and opinions in the investment memo which they prepared (para 10(d) and 11, 12 May 2017 decision);

(3)   further, the defendants have wrongfully presented the investment memo to the plaintiffs’ investment committee which was relied upon for the decision to invest into a Mainland project (para 10(c) and 11, 12 May 2017 decision);

(4)   the Mainland project was of no investment value (para 10(f) and 10(g) and 11, 12 May 2017 decision).

10.Despite having been afforded an opportunity to fully address the court, for example, as to:

(a)   whether they disagreed (and still disagree) with the summary given in para 9 above;

(b)   whether the court’s discretion should somehow be exercised differently between the two defendants even though the above alleged wrongful act was common between the defendants,

the plaintiffs have not done so (save as summerized in para 11 below).  (In fact, not only have the plaintiffs been afforded the opportunity, in a letter dated 25 May 2017, they were in effect specifically requested to explain why their case against the defendants should be looked at differently.)

11.The plaintiffs’ written submission lodged with court for this application focuses instead on the alleged conflict of interest on the defendants’ part.  This matter has been dealt with in the 12 May 2017 decision: para 10(e), 14(2) and 35.  The parts of para 35 relevant to the discussion below read:

“The plaintiffs’ case concerning the defendants’ alleged ‘conflict of interest’ (by registering their mothers’ names as shareholders (para 10(e) above)) is not easy to understand in the light of their [primary case] that ‘China Sports II’ was an investment which was worth nothing … (para 10(a), (b) and (f) above) … In any event, this is not a matter which is weighty enough to ‘tip the balance’ in these applications”.

12.The above observation is important because the interlocutory injunction in question is the Mareva type.  It is settled that a Mareva injunction is aimed at:

“… [enabling] the court to grant the plaintiff an interlocutory injunction restraining the defendant from disposing of, … his assets, being assets ... which after judgment may be attached to satisfy a money judgment. … a defendant is not to be permitted to thwart in advance orders which the court may make” (Hong Kong Civil Procedure 2017, Vol 1, para 29/1/58).

Thus, one condition necessary for a Mareva injunction is the likelihood of a money judgment being made later.

13.As has been quoted in para 11 above, the plaintiffs have not stated at the earlier hearing the loss (especially monetary loss) flowing purely from the alleged conflict of interest (that is, the registration of the defendants’ mothers as two shareholders of a worthless company). Despite the court’s observation made in the 12 May 2017 decision, the plaintiffs’ written submissions lodged for this application have still not responded to this point at all.  It is therefore a matter which militates against the grant of a Mareva injunction.

14.By reason of the matters set out above, the 12 May order is to stand.

15.Because this application is unsuccessful, the plaintiffs are not entitled to seek the costs concerned from the defendants.

Mr John Hui, instructed by Peter Yuen & Associates (in association with Fangda Partners), for the plaintiffs

The 1^st defendant was not represented

Howse Williams Bowers, for the 2^nd defendant