Grand Network Technology Ltd v. Xy, Llc

FAMV No. 21 of 2017

IN THE COURT OF FINAL APPEAL OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 21 OF 2017 (CIVIL)

(ON APPLICATION FOR LEAVE TO APPEAL FROM

CACV NO. 11 OF 2016)

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Between

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REASONS FOR DETERMINATION

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Mr Justice Ribeiro PJ:

1.This application for leave to appeal was dismissed with costs at the hearing with reasons to follow.  These are our reasons.

2.The plaintiff (“XY”) obtained a Mareva injunction against the defendants Jesse Zhu (“Zhu”) and Grand Network Technology Ltd (“GNT”) which was upheld inter partes by Au-Yeung J[1] and on appeal by the Court of Appeal.[2]  Zhu did not appear in these proceedings and the challenge to the injunction was mounted by GNT.

3.The Mareva injunction was granted in aid of proceedings brought by XY in the Supreme Court of British Columbia in which it obtained final judgment against Zhu for damages in the sum of CAD8,507,891 for conspiracy, deceit and other causes of action.  Au-Yeung J described it as a judgment relating to “a widespread fraud of epic proportions”.  The British Columbia Court also granted XY a Mareva injunction in aid of execution against Zhu and GNT restraining them from dealing with, etc, assets including, as against GNT, funds in its Hong Kong bank account with a credit balance exceeding HK$37 million.  No substantive cause of action is alleged as against GNT.

4.The Hong Kong Mareva injunction has been granted against GNT on the basis of sections 21M and 21N of High Court Ordinance which empower the Court to grant interim relief in aid of proceedings in a foreign court having primary jurisdiction, against a party against whom no substantive proceedings are brought.  This was referred to below and in argument before the Appeal Committee as a Mareva injunction in “the Chabra jurisdiction”.[3]

5.XY contends (for these interim purposes) that it has a good arguable case that both GNT and the funds in its Hong Kong bank account (which represent its sole asset) are beneficially owned by Zhu and are therefore assets against which it is able to enforce the British Columbia judgment obtained against Zhu.  It has commenced separate proceedings for declarations to that effect.

6.It is not in dispute that there is a good arguable case that Zhu beneficially owns GNT, a BVI company.  However, GNT contends that no such arguable case had been made out regarding the bank account funds, seeking to distinguish between Zhu’s ownership of GNT and his alleged non-ownership of GNT’s assets.  That argument failed below for impeccable reasons given by Au-Yeung J[4] and the Court of Appeal,[5] both of whom found that there was ample evidence to support the existence of the good arguable case in question. 

7.Leave to appeal was sought on the basis that the following two questions said to be of great general or public importance arise, namely:

Question 1: “Whether it is necessary for a plaintiff, in applying for a Chabra type injunction, to first identify some process or procedure of enforcement which would (or might) lead to the assets of a defendant whom the plaintiff does not have a substantive cause of action (‘the NCAD’) becoming available to satisfy the judgment which the plaintiff may obtain against a defendant whom the plaintiff has a cause of action (‘the CAD’); and then to show a good arguable case that such assets are susceptible or amenable to such process or procedure?”

Question 2: “Whether it is necessary for a plaintiff, in applying for a Chabra injunction, to identify the legal basis upon which it is asserted that the assets of the NCAD are in truth the assets of the CA?”

8.Neither of these questions raises a point of any public importance.  The discretionary basis for the grant of Mareva relief and relief under sections 21M and 21N is well-known.  The operation of those sections was recently reviewed by the Court of Final Appeal in Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd.[6] If the good arguable case that the assets in question are in truth the assets of the judgment debtor is eventually made out, alternative means of levying execution are likely to be available.  As the Court of Appeal held in its judgment refusing leave to appeal,[7] adopting the premise for interlocutory purposes that the assets are “in truth those of the CAD[8]”, it is appropriate to approach the case on the basis that “... there will ipso facto be good reason to suppose that the assets held by the NCAD[9] would be amenable to some process, ultimately enforceable by the courts”.  The suggestion in the applicants’ two questions that the Court ought to impose some requirement for the plaintiff to identify the precise mode of enforcement and the legal basis thereof at the time of applying for interim relief is without basis.  The questions raised are not reasonably arguable.  The application for leave was accordingly refused.

Mr Paul Lam SC and Ms Kay Seto, instructed by W.K. To & Co., for the Applicant

Mr Robin McLeish, instructed by Tanner De Witt, for the Respondent