The Export- Import Bank of China v. Taifeng Textile Group Co Ltd and Another
Read the full judgment text of HCMP 3012/2015 on BabelCite. This High Court CFI judgment was delivered on 3 August 2018.
1. Pursuant to a loan agreement dated 18 October 2103 (“Loan Agreement”), The Export-Import Bank of China (“Bank”), a licensed bank in Mainland China, extended export credit in the amount of RMB100,000,000 (“Loan”) to Taifeng Textile Group Company Limited (“TTG”), a company incorporated and carrying on business in Mainland China, for a term of 12 months. The Loan Agreement contained express provisions on governing law and dispute resolution as follows:
Cited by 11 cases · Cites 17 cases
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HCMP 3012/2015 & HCMP 1684/2015 (HEARD TOGETHER) [2018] HKCFI 1840 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 3012 OF 2015 ______________
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AND IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 1684 OF 2015 ____________________
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____________________ (HEARD TOGETHER)
_____________________ D E C I S I O N _____________________ BACKGROUND The dispute 1.Pursuant to a loan agreement dated 18 October 2103 (“Loan Agreement”), The Export-Import Bank of China (“Bank”), a licensed bank in Mainland China, extended export credit in the amount of RMB100,000,000 (“Loan”) to Taifeng Textile Group Company Limited (“TTG”), a company incorporated and carrying on business in Mainland China, for a term of 12 months. The Loan Agreement contained express provisions on governing law and dispute resolution as follows:
2.As security for the Loan, by an earlier pledge dated 15 October 2012 (“Pledge”), TTG had agreed to pledge certain landed properties in Mainland China to the Bank to secure the timely repayment of its indebtedness to the Bank arising under any contract signed between them from 15 October 2012 to 15 November 2014. The Pledge contained express provisions on governing law and dispute resolution as follows:
3.By a guarantee dated 17 October 2013 (“Guarantee”), Mr Liu Qingping (“Liu”), a Mainland Chinese citizen, agreed to assume joint and several liability not exceeding RMB100,000,000 for TTG’s indebtedness to the Bank arising under any contract signed between them from 17 October 2013 to 17 October 2014. The Guarantee contained express provisions on governing law and dispute resolution as follows:
4.The Loan became due on 17 October 2014. TTG failed to repay any part of the Loan or any contractual interest thereon. As of 9 January 2015, a sum of RMB103,956,822.05 was due from TTG to the Bank in principal and interest under the Loan Agreement. Proceedings against TTG and Liu in the Mainland 5.On 9 February 2015, the Bank commenced legal proceedings (“Mainland Proceedings”) in the Beijing No 4 Intermediate People’s Court (“Beijing Court”) against (1) TTG as borrower for repayment of the Loan and performance of the Pledge and (2) Liu as guarantor for repayment of the Loan. 6.On 26 February 2015, upon the Bank’s application, the Beijing Court made an asset preservation order in the Mainland Proceedings, freezing TTG’s assets (comprising mainly of factory premises in a remote part of Laiwu some of which are already “pending attachment” in proceedings by other creditors) up to the value of RMB103,956,822.05 pending the determination of the Mainland Proceedings. 7.Neither TTG nor Liu entered an appearance in the Mainland Proceedings. On 12 June 2015, after trial from which TTG and Liu were absent, the Beijing Court entered judgment in favour of the Bank. The judgment included the following orders for payment of money (“Mainland Judgment”):
8.The Mainland Judgment became effective on 27 June 2015, there being no appeal from the same within the prescribed 15 days limited for appeal. 9.As of 2 July 2015,the Mainland Judgment Debt (for principal, interests and costs) added up to RMB106,842,727.31. 10.On 9 July 2015, the Bank applied to the Beijing Court for execution of the Mainland Judgment against TTG and Liu. 11.On 9 October 2015, the Beijing Court issued to the Bank a document entitled “執行案件立案通知書” (“Mainland Enforcement Notice”) which stated as follows:
12.On 10 October 2015, the Beijing Court issued a “執行通知書” to each of TTG and Liu, directing them to comply with the Mainland Judgment. 13.Upon TTG and Liu’s continuing default, on 12 November 2015, the Beijing Court delivered an “enforcement ruling” (“執行裁定書”), with immediate effect, to freeze, appropriate and authorise the realisation of TTG and Liu’s bank deposits, income and other assets up to the value of RMB104,523,406.05 plus further interest and costs. PROCEEDINGS IN HONG KONG 14.The applications with which the court is presently concerned arise from the proceedings taken by the Bank to enforce the Mainland Judgment in Hong Kong. Under s 21M of the High Court Ordinance (Cap 4)(“HCO”) 15.Taking the Hong Kong proceedings chronologically, firstly, by an originating summons issued in HCMP 1684/2015 on 10 July 2015 (“Injunction Proceedings”), the Bank applies against Liu under s 21M of the HCO for Mareva relief, in aid of the Mainland Proceedings, to restrain him from removing from Hong Kong or in anyway disposing of, dealing with or diminishing the value of, any of his assets within Hong Kong up to the value of RMB106,842,727.31 including in particular:
(The trading of which has been suspended since 26 February 2015 with a closing price of HK$1.08 per share, initially at Taifeng’s pending the release of an announcement in relation to a very substantial acquisition of Taifeng. Although the acquisition eventually fell through in late 2015, the suspension has continued pending fulfillment of the resumption conditions imposed by The Stock Exchange of Hong Kong Limited (“HKEx”).) 16.On 17 July 2015, upon the Bank’s application (dealt with on an ex parte on notice basis), Madam Justice Au-Yeung granted a Mareva injunction against Liu (but specifically excluding Fu Sun’s Shares) (“Injunction Order”) until 21 August 2015, the return date of the Bank’s inter partes summons. 17.The Injunction Order was continued by Mr Justice Anthony Chan on 21 August 2015. His Lordship declined the Bank’s application (dealt with on an ex parte basis) to vary the Injunction Order to include Fu Sun’s Shares. The Injunction Order was further continued by Mr Justice To on 1 September 2015. Pursuant to Au-Yeung J’s order dated 7 January 2016, the Injunction Order is to be continued and remain in force until further order of the Court. Under the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap 597) (“MJREO”) 18.Secondly, by an application made ex parte on affidavit on 11 November 2015 in HCMP 3012/2015 (“Registration Proceedings”), the Bank applies against both TTG and Liu for registration of the Mainland Judgment as a judgment in the Court of First Instance (“CFI”) of the Hong Kong Special Administrative Region pursuant to the MJREO. 19.In support of the application:
20.On 18 December 2015, Master Hui made an order in the Registration Proceedings for the Mainland Judgment to be registered as a CFI judgment pursuant to the MJREO (“Registration Order”). APPLICATIONS BEFORE THE COURT 21.Against this background, before the court are:
REGISTRATION PROCEEDINGS - SETTING ASIDE SUMMONS Relevant statutory provisions Under the MJREO 22.To put Liu’s grounds for setting aside the Registration Order in context, under s 18(1)(a) of the MJREO, the registration of a Mainland judgment shall be set aside if “the [CFI] is satisfied that the judgment is not a Mainland judgment which satisfies the requirements specified in section 5(2)(a) to (e)”. 23.Liu questions the Bank’s compliance with 2 such requirements. 24.First, s 5(2)(b) requires the applicant for registration to prove to the satisfaction of the CFI that “the relevant choice of Mainland court agreement is made on or after the date of commencement of [the MJREO]”[2]. The expression “choice of Mainland court agreement” (“選用內地法院協議”) is defined in s 3(2) to mean:
25.Second, s 5(2)(d) requires the applicant for registration to prove to the satisfaction of the CFI that “the judgment is enforceable in the Mainland”. To facilitate proof of this condition, s 6(2) reads:
26.To assist in her interpretation of §5(2)(d) and 6(2), Ms Po Wing Kay (leading Mr Matthew H H Lai), counsel for Liu, has also drawn my attention to s 21 of the MJREO under which a court in Hong Kong issues to the judgment creditor under a monetary judgment given by the court who intends to enforce the judgment in the Mainland (1) a certified copy of the judgment and (2) a certificate certifying that the judgment can be enforced by execution in Hong Kong. Under Order 71A 27.Pursuant to s 23(1)(c) of the MJREO, the powers to make rules of court under s 54 of the HCO shall include power to make rules for “prescribing the matters to be proved on an application for registration of a Mainland judgment and for regulating the mode of proving those matters”. Order 71A was introduced for inter alia such purpose. 28.Insofar as it is material to Liu’s second ground for setting aside the Registration Order, Order 71A rule 3(1)(a)(iii) and 3(4) provides:
Liu’s 1st ground for setting aside the Registration Order 29.By paragraph 1(a) of the Setting Aside Summons, supported by paragraph 6 of the Affirmation of Cheung Oi Man Amelia dated 12 February 2016, Liu contends that the registration of the Mainland Judgment contravenes §5(2)(b) and 18(1)(a) of the MJREO in that the Guarantee, on the basis of which the Mainland Judgment was obtained by the Bank against Liu, did not constitute or otherwise contain a “choice of Mainland court agreement” within the meaning of s 3(2) of the MJREO.[3] 30.In support of such ground, the argument advanced by Ms Po in her written submission dated 19 May 2017 runs along the line:
31.There was no suggestion that Clause 32, otherwise properly construed according to PRC law, was not in substance/effect an exclusive jurisdiction clause. The impression that one gets from such written submission is that the only reason why Liu says that Clause 32 is not a choice of Mainland court agreement is that it did not use words or expressions like “sole”, “exclusive”, “to the exclusion of” or “no other court shall have jurisdiction” etc. 32.However, by paragraph 12 of her written reply submission dated 23 May 2017 (i.e. the date before the hearing), Ms Po asserts for the first time that the Bank has also failed to discharge its burden of proving a choice of Mainland court agreement. This is so because the 2 legal opinions dated 27 May 2015 and 26 April 2016[4] (“PRC Legal Opinions” collectively) by Ms Zhou Ruohong, a partner of Z&D Partners (北京市志德律師事務所), a PRC law firm in Beijing and the Bank’s legal representative in the Mainland Proceedings, to the effect that under PRC law, by electing the courts in Beijing having jurisdiction over any dispute arising from the Guarantee, Clause 32 excludes the exercise of jurisdiction by courts outside Beijing or in other countries or jurisdictions, are “not properly adduced” and no weight should be placed on them. Proper construction of s 3(2) 33.Leaving aside the late point of construction of Clause 32, the first question raised by Liu’s first ground for setting aside the Registration Order is one of the proper construction of the definition of “choice of Mainland court agreement’ in s 3(2) of the MJREO. Liu’s contention and analysis 34.Ms Po’s detailed submission can be summarised as follows. 35.First, according to the Oxford English Dictionary, to “specify” means to “identify clearly and definitely”. The word, read with what follows, connotes a requirement for a provision under which the jurisdiction of the Mainland courts is expressly exclusive. This construction is said to be borne out by a plain reading of the Chinese version of s 3(2) too. 36.Second, as stated in the long title, the MJREO gives effect to the “Arrangement on Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of the Mainland and of the Hong Kong Special Administrative Region pursuant to Choice of Court Agreements between Parties Concerned made between the Supreme People’s Court of the People’s Republic of China and the Government of the Hong Kong Special Administrative Region” (as amended from time to time) (“Arrangement”).[5] 37.That being the case, it is legitimate to look to the article in the Arrangement that the respective definitions of “choice of Hong Kong court agreement” and “choice of Mainland court agreement” in s 3(1) and (2) of the MJREO are intended to give effect. 38.In this regard, article 3 of the Arrangement stipulates:
39.The version in Chinese reads:
40.Ms Po considers it clear from the words underlined that the “choice of court agreement” envisaged by article 3 is one that expressly states the exclusive nature of the jurisdiction of the court designated by the parties for dispute resolution between them. 41.Third, it is suggested the construction in favour of a requirement for an express conferment of sole jurisdiction on the Mainland courts is consistent with the intention behind the MJREO to establish a summary mechanism for the reciprocal enforcement of judgments made by the courts of the Mainland China in Hong Kong, as explained by the Secretary of Justice (“SJ”) at the second reading of the Mainland Judgments Reciprocal Enforcement Bill (“Bill”) on 7 March 2007:[6]
42.Ms Po reasons that it must have been the intention of the legislature to ensure certainty and clarity in the “choice of court agreement” which can only be achieved by a jurisdiction clause that is expressly exclusive and therefore free from argument. As stated in Dicey, Morris & Collins on The Conflict of Laws, 15th edition, §12-105:
The process of construction of a jurisdiction clause is otherwise anything but simple or expeditious and has the potential to create unnecessary satellite litigation and isinimical to the summary mechanism intended to be put in place by the MJREO. 43.Fourth, this construction is said to be further supported by comparing MJREO s 3(2) with the parallel provision in article 3 of the Hague Convention on Choice of Court Agreements concluded on 30 June 2005, upon which s 3(2) was modelled. Article 3 of the Hague Convention provides:
44.Ms Po invites the court to note the omission of the deeming provision in article 3(b) of the Hague Convention from the definition of “choice of Mainland court agreement” under s 3(2) of the MJREO, from which she deduces the legislature’s intention to mandate express exclusive jurisdiction clauses for the purpose of the MJREO. 45.For these reasons, Ms Po suggests that the court in Bank of China v Yang Fan[2016] 3 HKLRD 7 (see paragraphs 50 to 52 below) asked the wrong question (i.e. whether, as a matter of construction of contract, the respective jurisdiction clauses gave the Mainland court exclusive jurisdiction) and should not be followed. The Bank’s contention and analysis 46.In contrast, it is the Bank’s submission that a clause specifying the courts in the Mainland or any of them as the court to determine a dispute which has arisen or may arise in connection with the contract falls within the definition of a “choice of Mainland court agreement’ in s 3(2) if such clause, properly construed in accordance with the governing law of the contract, confers exclusive jurisdiction on the courts in the Mainland. 47.In support, Mr Jonathan Wong, counsel for the Bank, has reminded me that whether or not a jurisdiction clause confers exclusive jurisdiction is a matter of interpretation, governed by the law applicable to the contract. See Dicey, Morris and Collins on the Conflict of Laws,supra,§12-105. 48.The Bank has put forward the PRC Legal Opinions to prove that, under PRC law, Clause 32 excludes the exercise of jurisdiction by courts outside Beijing or in other countries or jurisdictions. Liu has not adduced any contrary PRC legal opinion. 49.Mr Wong also deals with the nature and effect of Clause 32 under Hong Kong law.
50.Mr Wong relies on Bank of China v Yang Fan,supra, which he urges me to follow. In that case, the plaintiff bank obtained an ex parte Mareva injunction restraining the defendant from disposing of his assets in Hong Kong up to RMB500 million under s 21M of the HCO in aid of 5 actions commenced by the plaintiff in the PRC. Before the court were the plaintiff’s application to continue the injunction and the defendant’s cross-application to discharge it. One of the requirements of s 21M is that proceedings have been or are to be commenced outside Hong Kong which are capable of giving rise to a judgment which can be enforced in Hong Kong. It was the plaintiff’s case that the 5 actions brought by it against the defendant in the PRC courts would give rise to a judgment which may be enforced in Hong Kong under the MJREO or at common law. In defence, the defendant argued that they were not because of the lack of an exclusive jurisdiction clause in favour of any PRC courts. The question therefore arose as to whether the parties had entered into a “choice of Mainland court agreement” within the meaning of s 3(2) of the MJREO. 51.The relevant jurisdiction clauses relied on by the plaintiff in Yang Fan were to the effect that the parties “may” or “can” (“可以”) resort to litigation if attempts to resolve the dispute by negotiation or mediation had failed. They specified 3 means of litigation at the option of the parties: submission to arbitration, institution of legal proceedings against the plaintiff in a PRC court (which was available only to the defendant) and institution of legal proceedings in a people’s court with jurisdiction. 52.Mr Justice Anthony To treated the question before him as one of construction of the jurisdiction clauses: see [30]. While accepting that “可以” is prima facie permissive, his Lordship proceeded to ascertain the intention of the parties who drafted the documents in accordance with the established principles for the construction of documents[7] (see [31]-[32]). To J held the relevant jurisdiction clauses to be exclusive jurisdiction clauses, having regard to the factual matrix: (1) that the parties were all PRC parties; (2) the 2 loan agreements and the 2 guarantees were all executed in the PRC; (3) that the contractual place of performance and the place of breach were in the PRC; and (4) that the governing law of the loan agreements and the guarantees was PRC law. To litigate outside the PRC did not make sense in light of the factual matrix. Against this factual matrix, the parties must have intended the third means (i.e. action in a PRC court with jurisdiction) to be the only means of dispute resolution agreed between them if they could not resolve their dispute by mediation. Principles of statutory interpretation 53.The issue raised by these rival contentions is one of the proper construction of s 3(2), i.e. whether the stipulation relied upon as the “choice of Mainland court agreement” has to confer exclusive jurisdiction on the Mainland court(s) in express terms or in effect only. 54.The proper approach for statutory interpretation, which is well established, can be summarised as follows:
See, for example, HKSAR v Cheung Kwun Yin (2009) 12 HKCFAR 568, per Li CJ at [11]-[14]; Moulin Global Eyecare Trading Ltd (in liquidation) v Commissioner of Inland Revenue [2012] 2 HKLRD 911 (CA), per Kwan JAat [31]-[32]; T v Commissioner of Police (2014) 17 HKCFAR 593, per Fok PJ at [194]-[195]; Good Mark Industrial Ltd v Commissioner of Inland Revenue [2015] 2 HKLRD 16, per Cheung JA at [4.1]-[4.2]; andHo Kwok Tai v Collector of Stamp Revenue [2016] 5 HKLRD 713, per Anderson Chow J at [20]-[26]. Discussion 55.I start with the words of s 3(2) (in both English and Chinese). I do not share the same degree of clarity as Ms Po in reading s 3(2). In my view, read on its own and even with the emphasis put by counsel, the section is open to either of the interpretations advanced by the parties. 56.Article 3 of the Arrangement is likewise liable to be construed either way. 57.To properly construe s 3(2), it is essential to ascertain:
58.The purpose of the MJREO, giving effect to the Arrangement, is ultimately to facilitate the recognisation and enforcement, by registration (as opposed to action) in Hong Kong, of monetary judgments given by courts in the Mainland in civil and commercial matters over which the courts in the Mainland have exclusive jurisdiction by agreement between the parties. 59.A jurisdiction clause may in substance and effect confer exclusive jurisdiction on the court nominated, irrespective of whether “exclusive” (or like words) is used. 60.Adopting the literal approach advocated on behalf of Liu will frustrate or defeat the purpose of the MJREO in a case where the jurisdiction clause does not contain “exclusive” (or like words) but in substance and effect confers sole jurisdiction on the court chosen on a proper construction under PRC law. A legislative intent to prefer form over substance should not be found in the absence of clear evidence, especially when this may potentially affect a significant number of cases where the jurisdiction clause was not professionally drafted with any awareness that s 3(2) of the MJREO is to be construed as suggested on behalf of Liu. 61.In this connection, the SJ’s statement that the Bill establishes a summary mechanism for the enforcement of judgments given by the Mainland courts should be taken in its proper context. As explained by the SJ on the same occasion before such statement:
See again page 4914 of the official record of proceedings in the Legislative Council dated 7 March 2007. 62.It is with reference to this explanation of the context and purpose of the Arrangement that one should understand the SJ’s said later statement on the same occasion that the Bill establishes a summary mechanism for the enforcement of judgments given by the Mainland courts. The mechanism is summary because it allows a judgment creditor under a judgment given by a court in the Mainland to enforce the judgment in Hong Kong by registering the Mainland judgment in Hong Kong as a CFI judgment, without having to commence a new action in debt at common law in a court of Hong Kong. 63.That Mainland judgments can be enforced in Hong Kong through the summary process of registration does not mean that it is intended that the masters or judges of the CFI seized of an application to register a Mainland judgment should merely have to mechanically tick boxes and should not have to exercise any professional judgment. To the contrary, s 5 of the MJREO expressly requires the CFI to be satisfied that the conditions for registration laid down in sub-s (2) (including the existence of a choice of Mainland court agreement made at or after the commencement of the MJREO under sub-s (2)(b)) are met. 64.As for the specific requirement for an exclusive “choice of Mainland court agreement”, as explained in paragraph 28 of the Report of the Bills Committee on the Bill dated 21 April 2008 (“Bills Committee Report”):
65.The purpose of minimizing the risk of parallel proceedings being instituted in the courts of both the Mainland and Hong Kong can be achieved by jurisdiction clauses which do not use the word “exclusive” but which are exclusive in substance and effect on a proper construction according to the relevant governing law. 66.Hence, neither the context or purpose of the Arrangement nor the context or purpose of the specific requirement of an (exclusive) choice of Mainland court agreement, properly understood, necessitates the exclusivity requirement to be met in the literal way advocated on behalf of Liu. 67.This, I believe, is further made clear by the Administration’s following answer to members of the Bills Committee on the Bill, recorded in paragraph 37 of the Bills Committee Report, as to how the exclusivity requirement can be satisfied:
68.Ms Po objects to the use of such statement by the Administration on the ground that, citing HKSAR v Cheung Kwun Yin, supra, per Li CJ at [15], it is impermissible to use extrinsic materials such as statements by government officials to ascertain the meaning of words in a statute. With respect, paragraph 37 of the Bills Committee Report is deployed to confirm that the purpose of the exclusivity requirement of the choice of Mainland court agreement is not to eliminate arguments on construction. 69.For these reasons, I am not with Ms Po on the construction of s 3(2). In my opinion, the requirement for a choice of Mainland court agreement under s 5(2)(b) as defined in s 3(2) is fulfilled if the jurisdiction clause, properly construed in accordance with the governing law of the contract, confers exclusive jurisdiction on the courts in the Mainland or any of them. Proper construction of Clause 32 70.The point belatedly taken by Ms Po is that the governing law of the Guarantee is PRC law but no expert evidence on PRC law on the construction of Clause 32 has been properly adduced before the court. 71.The manner in which the issue of construction of Clause 32 is raised is regrettable.
72.Further, the point is made in 1 paragraph of counsel’s said written reply submission (i.e. paragraph 12), by which counsel simply says that she relies on張才奎所託管中國山水投資有限公司股份相關員工 v 張才奎, HCA 623/2015, unreported, 20 May 2015 and Full Wisdom Holdings Ltd v Traffic Stream Infrastructure Co Ltd [2004] 2 HKLRD 1016 and draws the court’s attention in 2 footnotes to the facts that:
Counsel then jumps to invite the court to attach no weight to the PRC Legal Opinions because they are not properly adduced before the court, without pinpointing in what specific aspects these opinions have failed any formal or substantive requirements. With respect, the requirement in paragraph 7 of Practice Direction 5.4 for a party’s skeleton argument to summarise the argument on each of the points taken by him has not been complied with. 73.In short, the court is left with a point raised in late written submission without full argument in breach of the practice direction. There is no application for leave to pursue the point of construction of Clause 32 at the hearing. Indeed the point has not been picked up again in counsel’s oral submission in court. I do not think the court is obliged to work out for itself the argument on each and every point that a party cares to mention, especially in a case where the party is represented by counsel with experience. In these circumstances, I believe I am entitled to, and I do, refuse to entertain the issue of construction of Clause 32 as a matter of case management. 74.However, just in case this matter goes further and it is thought that I should have considered the construction of Clause 32, then doing the best I can without proper assistance from the parties, the point appears to me to be a bad one.
75.The PRC Legal Opinions are therefore not inadmissible or improperly before the court. Nor do I find anything lacking in Ms Zhou’s reasoning or analysis that has led her to the conclusion that Clause 32 conferred exclusive jurisdiction over any dispute arising under the Guarantee on the Beijing Court. 76.Indeed, while it is understandable that Ms Zhou has zoomed in on the jurisdiction of the Beijing Court, it is worthy of note that the definition of a choice of Mainland court agreement in s 3(2) does not require parties to a choice of Mainland court agreement to limit their choice to a specified designated court. A general choice of the courts of the Mainland would suffice. 77.In this connection, Ms Zhou has in her opinions identified the relevant PRC law including, in particular:
78.Applying article 34 to the facts of the present case (i.e. where both the Bank and Liu are domiciled in the PRC; the Guarantee was signed and to be performed in the PRC and there is no place outside the PRC with any connection to the dispute), it appears to me that the court which the parties could choose to litigate over any dispute under the Guarantee would have to be a Mainland court in order to comply with article 34. Liu’s 2nd ground for setting aside the Registration Order 79.By her written submission dated 19 May 2017, Ms Po takes the further point for the first time that the Registration Order should also be set aside for having been granted upon an “incompletely constituted application”, in that the Bank failed to exhibit to the supporting affidavit a “certificate issued by the original court certifying that the judgment is final and enforceable in the Mainland” (“Original Court Certificate”), as required under Order 71A rule 3(1)(a)(iii). It is even suggested that the Bank had deliberately omitted to disclose the requirement for an Original Court Certificate under the rules and the absence of such certificate in its application and had misled the court into granting the Registration Order notwithstanding that this requirement of the application was not satisfied. 80.The Mainland Enforcement Notice (see paragraph 11 above) appears to be a court document issued by the Beijing Court in the process of enforcement of the Mainland Judgment upon the Bank’s application for enforcement action. I agree with Ms Po that as a matter of form, it does not seem to be the Original Court Certificate contemplated by s 6(2) of the MJREO or Order 71A rule 3(1)(a)(iii).[8] 81.However, given that its purpose is to inform the Bank that its application to enforce the Mainland Judgment against TTG and Liu complies with the regulations concerning enforcement under Chapter 21 of the Civil Procedure Law of the PRC and that a case for enforcement was established, there can be no question that the Mainland Enforcement Notice evidences that the Mainland Judgment is enforceable, and will be enforced, in the Mainland. I also refer to the steps taken by the Beijing Court following the issue of the Mainland Enforcement Notice (see paragraphs 12 and 13 above). There is no question that the Mainland Judgment is enforceable (and is being enforced) in the Mainland. 82.The issue raised is whether the condition of enforceability of the Mainland Judgment in the Mainland under s 5(2)(d) of the MJREO can be satisfied by means other than the production of an Original Court Certificate. 83.Ms Po relies on the mandatory language (“shall”) of Order 71A rule 3(1) in support of the submission that the production of an Original Court Certificate is a mandatory requirement, failing which registration has to be refused. On a literal reading, it does seem to be the prima facie meaning of rule 3(1). 84.However, Order 71A was introduced pursuant to the rule-making powers under s 23 of the MJREO. It is trite that in construing a subsidiary legislation, the intention of the legislature, as indicated in the enabling statute, is the prime guide to the meaning of the subsidiary legislation. In particular, the court will prefer a construction that results in the subsidiary legislation being lawful (as opposed to being ultra vires), and that avoids conflict between the enabling statute and the subsidiary legislation made under it. See Bennion on Statutory Interpretation, 7th Edition, section 3.13. 85.I start by observing that had the legislature wished to make an Original Court Certificate the only permissible evidence in proof of the enforceability of a Mainland judgment sought to be registered, it could have easily so provided. The provision of the MJREO dealing with proof of the enforceability of the Mainland judgment in the Mainland is s 6(2). It does not say that s 5(2)(d) shall be satisfied and only satisfied by an Original Court Certificate. The language used is not consistent with an intention to exclude evidence other than such a certificate. Otherwise, s 6(2) could have plainly said so. Rather, the production of an Original Court Certificate merely creates a presumption that the Mainland judgment is enforceable in the Mainland, upon which the CFI will act and be satisfied with the fulfillment of s 5(2)(d), until there is proof to the contrary. 86.In my opinion, Order 71A rule 3(1)(a)(iii) should be construed with regard to s 6(2) of the MJREO so that the inclusion of an Original Court Certificate is merely directory in nature. The ultimate question is whether the Hong Kong court is satisfied that the Mainland judgment is enforceable in the Mainland. 87.That the Hong Kong courts will under s 21(3)(a) issue a certificate certifying that a Hong Kong judgment can be enforced by execution in Hong Kong to facilitate the enforcement of such judgment in the Mainland is neither here nor there. There is no question that it is envisaged by the MJREO that the enforceability of a Mainland judgment in the Mainland would be proved by a s 6(2) certificate. However, the question that I have to decide is whether s 6(2) thereby excludes all other forms of evidence irrespective of the strength of the evidence. In any event, I have not been shown the judicial interpretation promulgated by the Supreme People’s Court of the Mainland in consequence of the signing of the Arrangement. 88.For the avoidance of doubt, practitioners representing an applicant for registration of a Mainland judgment under the MJREO are well advised to obtain a s 6(2) certificate to prevent unnecessary argument. 89.I have not overlooked the Bank’s objection to having such new ground for setting aside the Registration Order sprung upon it at the eleventh hour. However, I do not find it necessary to prolong this already lengthy judgment by dealing with such complaint in light of my aforesaid conclusion. Conclusion in respect of the Setting Aside Summons 90.The Setting Aside Summons should be dismissed. INJUNCTION PROCEEDINGS 91.That the Registration Order remains undisturbed will impact upon the Injunction Proceedings. This is because it may be said that the proceedings under s 21M of the HCO would necessarily be overtaken by the conversion of the Mainland Judgment into a CFI judgment, so that any Mareva injunction, if now granted, would be post-judgment in aid of the execution of a CFI judgment under s 21L. It is, however, unnecessary for me to decide whether this is so in light of the views that I have taken on the merits of the Injunction OS. The Injunction OS 92.In opposition to the Injunction OS, Liu first contests the enforceability of the Mainland Judgment under the MJREO. The same argument is set up to oppose the Injunction OS because s 21M requires the proceedings that have been or to be commenced outside Hong Kong to be capable of giving rise to a judgment that may be enforced in Hong Kong under any Ordinance or at common. It is Liu’s contention that this requirement is not met because the Mainland Judgment is incapable of registration under the MJREO for want of a choice of Mainland court agreement. This contention essentially falls away with the dismissal of the Setting Aside Summons. In any event, even if not enforceable by registration under the MJREO, the Mainland Judgment may well be otherwise enforceable in Hong Kong by action in debt at common law. 93.In opposition to the Injunction OS, it is further contended on behalf of Liu that:
Proper construction of s 21M of the HCO Relevant statutory provisions 94.Insofar as it is material, s 21M of the HCO provides:
95.Supplemental provisions for exercise of the power to grant interim relief in the absence of substantive proceedings under s 21M(1) can be found in s 21N:
96.Prior to the enactment of s 21M in 2008, the only source of the CFI’s jurisdiction and power to appoint a receiver and/or grant other interim relief is s 21L which, insofar as it is material, reads: “Injunction and receiver
Liu’s construction and analysis 97.Ms Po contends on behalf of Liu that ss 21L and 21M (together with s 21N), on a proper construction, provide for 2 separate and distinct regimes for the High Court of Hong Kong to grant interim relief to assist a party to foreign proceedings as follows:
As the Bank obtained the Mainland Judgment on 12 June 2015, the CFI had no jurisdiction at any time thereafter to grant any interim relief in aid of the Mainland Judgment under s 21M. 98.Ms Po has made very detailed submission in support of such construction in her written submission in support of the Discharge Summons dated 19 May 2017 and her undated written submission in opposition to the Injunction OS as well as in court. I have considered all such submission and shall do my best to summarise them below. 99.First, Ms Po highlights the wording of §21M and 21N. In particular:
100.Second, Ms Po draws my attention to the relevant parts of the Final Report (“Report”) of the Chief Justice’s Working Party on Civil Justice Reform (“Working Party”). More particularly:
It is submitted that it is clear from the above passages in the Report that the relief intended to be provided by s 21M is available whilst foreign proceedings that are on-going (or will be commenced) before judgment. 101.Ms Po also places reliance on §29/8A/1 of Hong Kong Civil Procedure 2018, Volume 1 whichparaphrases s 21M:
102.Third, reference is made to JSC BTA Bank v Mukhtar Kabulovich Ablyazov [2014] 5 HKC 209, in which Zervos J (as he then was), in discussing the origin and purpose of §21M and 21N, said at [15] that the proceedings under s 21M were intended to be ancillary to proceedings “taking place” in the foreign jurisdiction:
103.Fourth, in considering an application under s 21M, if the answer to the question whether, if the plaintiff succeeds in the primary jurisdiction the resultant judgment is one that the Hong Kong court will enforce is yes, the court has to form a view, on all the available material, including any findings of the foreign court itself, whether the plaintiff has a good arguable case before the foreign court and whether there is a real risk that the defendant will dissipate his assets if he is not restrained by a Mareva injunction. See Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd (2016) 19 HKCFAR 586, per Lord Philips NPJ at [53]. Ms Po reasons that the requirement to consider whether the plaintiff to the foreign proceedings has a good arguable case would be “redundant” if it is intended that s 21M relief is available post-judgment. 104.Fifth, Ms Po points out that it is the Bank’s case, and it was accepted by Au-Yeung J, that the Mainland Judgment is “final and conclusive”. Counsel argues that the finality of the Mainland Judgment means that the Mainland Proceedings had been “concluded”. She even suggests that the Beijing Court had become functus officio, as explained by Keith JA in Andayani v Chan Oi Ling [2000] 4 HKC 233 at 237.[12] Accordingly, upon the Mainland Judgment being granted in the Mainland Proceedings on 12 June 2015, there was no further “proceedings” in the Mainland to which the power of the Hong Kong court can be “ancillary” and there was no further “process” that the Hong Kong court may exercise its power to “aid” or “facilitate”. As from the date of the Mainland Judgment, the Hong Kong court had, and still has, no jurisdiction to grant any interim relief (including the Injunction Order) under s 21M “in aid” of what had become historicalproceedings in the Mainland. The Bank should have made the application for Mareva relief under s 21L after making the application for registration under the MJREO.[13] Discussion 105.For the sake of completeness, I start by noting that a similar argument was raised in Fabiano Hotels Limited v Profitmas Holdings Inc, HCA 3428/2016 & HCMP 2825/2016, unreported, 14 September 2017. In that case, the plaintiff commenced legal proceedings against the defendants in England and Wales on 14 August 2015. On 19 August 2016, interlocutory judgment was entered with damages and interest to be assessed. On 18 October 2016, the plaintiff applied ex parte and obtained a Mareva injunction against the defendant under s 21M of the HCO in HCMP 2825/2016. On 2 December 2016, the plaintiff obtained final judgment after assessment in the sum of £4,240,142.75 in the English action. On 29 December 2019, the plaintiff commenced HCA 3428/2016 to enforce the English judgment by action in debt at common law. On 16 January 2017, it took out a summons for summary judgment against the defendants for the sum awarded under the English judgment. The plaintiff’s applications for summary judgment in HCA 3428/2016 and for continuation of the Mareva injunction granted under s 21M in HCMP 2825/2016 were heard before Deputy High Court Judge To on 29 May 2017. By a decision handed down on 14 September 2017, the learned deputy judge entered summary judgment against the defendants (at [55]), whereupon he considered the application to continue the Mareva injunction with a view to giving it effect to enable execution to be effected on the defendants’ assets in Hong Kong. 106.Counsel for the defendants argued that once HCA 3428/2016 was commenced to enforce the English judgment, the case ceased to be within s 21M, as the injunction would be in aid of local proceedings, rather than foreign proceedings and hence s 21M ceased to be applicable. The proper course for the plaintiff was to seek a fresh injunction order under HCA 3428/2016 and the court should make no order under HCMP 2825/2016 other than ordering costs in those proceedings to be in the cause of HCA 3428/2016. See [61]. 107.Such argument was dismissed by DHCJ To who said at [62]-[64]:
108.Fabiano Hotels Limited v Profitmas Holdings Inc was decided after the hearing before me on 24 May 2017. I stumbled upon it after I have independently come to the conclusion based on the submissions before me and drafted paragraphs 109 to 117 below. I have thought of calling for further submissions from the parties. I decided against such course because, for the reason that I have just explained, it has not affected the outcome in this case and because I do not wish to further delay the handing down of this decision. 109.On this note, I return to Ms Po’s submission. I am not persuaded. 110.In my view, counsel has read §21M and 21N, and the above-mentioned research materials on them, too literally and with a misunderstanding of some of the concepts/principles that she seeks to deploy. 111.While no doubt the majority of applications under s 21M are made before the plaintiff has obtained judgment in the foreign proceedings, I do not read the wording of §21M and 21N as precluding an application after judgment in the foreign proceedings but before substantive proceedings have been commenced in Hong Kong for the recognition and enforcement of the judgment.
112.The Interpretation and General Clauses Ordinance (Cap 1) provides, by s 19, that an Ordinance shall be deemed to be remedial and shall receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the Ordinance according to its true intent, meaning and spirit. The true construction of s 21M depends on a proper understanding of the gap that it is intended to bridge. This has been discussed by the Hong Kong courts on a number of occasions. See, for example, JSC BTA Bank v Mukhtar Kabulovich Ablyazov, supra, per Zervos J at [15]-[16]; and Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd, supra, per Lord Philips NPJ at [40]-[45]. 113.In gist, s 21M enables the CFI to grant interim relief such as a Mareva injunction or appoint a receiver despite the absence of substantive proceedings in Hong Kong where there are or will be proceedings outside Hong Kong yielding a judgment which may be recognised and enforced in Hong Kong. Such interim relief is said to be in aid of the foreign proceedings. What is being facilitated is the process of execution or enforcement of the foreign judgment, which may potentially have to move to Hong Kong because of the location of the judgment debtor’s assets in Hong Kong. It would therefore be ironical if s 21M is restricted in its application to any time before the actual commencement of enforcement proceedings in Hong Kong. Any such interpretation would result in assistance being deprived of when it is most needed. 114.Ms Po’s construction that the assistance that the CFI can provide under s 21M in aid of foreign proceedings has to cease the minute judgment is obtained in the foreign proceedings is premised upon the judgment creditor being able to seamlessly commence proceedings in Hong Kong for the enforcement of the foreign judgment. Such suggestion is divorced from reality. As can be seen from the above discussion on the Setting Aside Summons, registration under the MJREO is subject to a number of conditions and the application therefor has to be supported by evidence, some of which may take time to gather. See s 5 of the MJREO and Order 71A rule 3 of the RHC. The same goes for an application for registration under the FJREO. See s 4(1) of the FJREO and Order 71, rule 3 of the RHC. 115.And why should the foreign judgment creditor be compelled to rush to take enforcement proceedings in Hong Kong right away, failing which he would lose the protection of interim relief in Hong Kong under s 21M? First, there may be any number of legitimate reasons why he would not want or need not do so. For instance, he may quite properly wish to exhaust all avenues of execution in the original jurisdiction. Second, a judgment creditor under a foreign judgment enforceable by registration under the FJREO has 6 years from the date of the judgment to apply for registration. See s 4(1) of the FJREO. A judgment creditor under a Mainland judgment enforceable by registration under the MJREO has 2 years from the date from which the judgment takes effect or, where a period for performance of the Mainland judgment has been specified in the judgment, from the last day of the period. See s 7 of the MJREO. Where a foreign judgment creditor cannot take advantage of either the FJREO or the MJREO, he should have 6 years to sue in debt at common law. Ms Po’s construction would have the effect of curtailing the limitation period for proceedings for the enforcement of foreign judgment in every case where the judgment creditor requires interim relief. I cannot detect from s 21M any such legislative intention. 116.For these reasons, I am not with Ms Po on her construction of s 21M. 117.Before I leave this topic, I have not overlooked that in Fabiano Hotels Limited, supra, DHCJ To held that s 21M can continue to apply even after commencement of enforcement proceedings in Hong Kong. I have so far considered the applicability of s 21M up to the time just before the foreign judgment creditor commences enforcement proceedings in Hong Kong. As a result of the view that I have formed on the next issue, it is unnecessary for me to, and I do not, go any further. Any risk of dissipation 118.The test for and approach to the assessment of a risk of dissipation of assets has been set out by Madam Justice Mimmie Chan in Great Wall Pan Asia International Investment Co Ltd v Cervera Holdings Limited, HCCT 13/2016, unreported, 1 June 2016 at [18]-[21], which I gratefully adopt:
119.The Bank has not pointed to any actual transactions by which Liu has dissipated or removed assets. It is essentially inviting the court to infer a risk of dissipation of assets from evidence that Liu is a person of an “unacceptably low standard of commercial morality” (Honsaico Trading Co v Hong Yiah Seng Co Ltd [1990] 1 HKLR 235 at 240H) or “questionable integrity” (Standard Chartered Securities v Lai [1993] 1 HKC 375 at 394B). 120.As I have said in Nicholas V A Schebek-Fuerstenberg v Yiap Wai Sang, HCA 221/2017, unreported, 31 May 2017, at [33], the description of a person as being of an “unacceptably low standard of commercial morality” or “questionable integrity” is a very serious allegation for which the court would expect nothing less than cogent proof. 121.The cause of action underlying the Mainland Proceedings leading to the Mainland Judgment against Liu did not involve any allegation of fraud or dishonesty. The Bank relies on the following 3 matters before the ex parte judge:
122.Au-Yeung J found Liu to be a person of low commercial morality on the basis of the evidence on the third point. Whilst the first point was not in and of itself evidence of dissipation, her Ladyship found a risk of Liu dissipating assets in order to frustrate his judgment creditor after taking into account Liu’s lack of candour regarding his ownership of shares in Shandong Taifeng. See [25]. 123.The Bank invites the court to revisit all three bases with the benefit of the full evidence that is now before the court. I will do so. 124.On the first ground, the relevant part of Liu’s disclosure to the Bank reads as follows:
125.The explanation given by Liu in paragraphs 8 and 9 of his affirmation made on 24 December 2015 is that he believed that he was indeed the beneficial owner of approximately 30% of Shandong Taifeng’s shares by virtue of his shareholdings in Taifeng and that he understood the asset disclosure required was for him to disclose the assets he had in the PRC (which he did). 126.I do not find Liu’s explanation incredible. According to the corporate organisation chart of the Taifeng group produced by Ms Jiang, Shandong Taifeng is a wholly owned subsidiary of Taifeng through 2 intervening corporate vehicles. As stated in paragraph 16 above, Liu owns (1) directly a 1.62% shareholding in Taifeng (i.e. Liu’s Shares); and (2) indirectly a 7.5% shareholding in Taifeng through Fu Sun (i.e. Fu Sun’s Shares). Further, he also has a 48.6% shareholding in one Harvest Sun Enterprises Limited which in turn holds a 48% shareholding in Taifeng. Such 48.6% ownership of Harvest Sun would correspond to a 23.33% indirect interest in Taifeng. So leaving aside the strict legal position that a shareholder does not own the assets of the company in which he holds shares, a layman in the position of Liu could well think that roughly he has a 30% beneficial interest in Taifeng and its wholly owned subsidiaries including Shandong Taifeng. 127.The evidence in support of the second ground is contained in paragraph 19(1) of Ms Jiang’s affirmation:
128.On the ex parte occasion, in support of this ground, counsel for the Bank referred to paragraph 12.039(9) of the then current edition of Steven Gee, Commercial Injunction, 5th Ed. The same paragraph can be found in the paragraph 12.033(9) of the latest edition under the heading “Solid evidence of risk of dissipation by the defendant”. The material parts read as follows:
129.Save for the reference to a pattern of evasiveness, no authority is cited on these instances of litigation behaviour. And the case mentioned to support the inclusion of a pattern of evasiveness is Global Maritime Investments Cyprus Ltd v Gorgonia Di Navagazione SRL [2014] EWHC 706 (Comm) at [9] in which the defendant lacked frankness in answering questions about whether its vessel was at risk of being arrested, which is very different from the situation in this case. 130.I believe much depends on context. In this case, Liu was merely unresponsive to the Mainland Proceedings. There could be any number of reasons for such an attitude. For instance, Liu might have refrained from appearing because he had no defence to the claim against him. Nor can I find any evidence that such approach was adopted to evade or delay proceedings. The Mainland Proceedings was commenced on 9 February 2015. The trial took place on 12 May 2015 in the absence of TTG and Liu with the Mainland Judgment handed down on 12 June 2015. 131.Before me, Mr Wong also places reliance on Liu’s failure to comply with paragraph 2 of the Injunction Order which requires him to disclose on affirmation all his assets of an individual value of HK$50,000 or more in Hong Kong. Counsel has not cited any authority in support. 132.I note that the paragraph from Steven Gee, Commercial Injunction (6th Ed) ends with the sentence: “Failure to give proper disclosure of assets under a court order is indicative of risk” of dissipation. Reference is then made in footnote 179 to Antonio Gramsci Shipping Corp v Recoletos Ltd [2011] EWHC 2242 (QB) at [25] as supporting this proposition. 133.However, the same footnote also refers to Bouvier v Accent Delight International Ltd [2015] SGCA 45, in which the Singapore Court of Appeal generally questioned the fairness of taking into account a failure to give proper disclosure of assets under a court order as indicative of a risk of dissipation except in obvious cases of non-compliance because if the injunction were discharged the disclosure order would fall with the injunction. See [98]-[106]. The court’s conclusion at [104] seems pertinent to the instant case:
134.This case may at first glance appear to fall within the first-mentioned situation as Liu has made no attempt to comply with paragraph 2 of the Injunction Order. It is therefore necessary for me to look at the cases in which the court is said to have inferred a risk of dissipation from the defendant’s refusal to disclose assets in breach of the Mareva order. 135.What Lord Denning MR said in Z Ltd v A [1982] 1 All ER 556 at 566B-566C under the heading “Discovery” is:
It can be seen that his Lordship was discussing the desirability of requiring the defendant to disclose his assets to enable the Mareva injunction to be policed, and not the finding of a risk of dissipation of assets which is essential to ground the grant of a Mareva injunction. 136.In Jarvis Field Press Limited v Chelton [2003] EWHC 2674 (Ch), Patten J said at [14]:
137.In Madoff Securities International Limited v Stephen Ernest John Raven [2011] EWHC 3102, Flaux J said at [172]-[173]:
138.It appears from reading these authorities that whether a risk of dissipation can be inferred by taking into account a refusal to disclose assets is a fact-sensitive question depending on the facts and circumstances of each case. In Jarvis Field Press Limited and Madoff Securities International Limited, the court did not find a risk of dissipation solely on the basis of the defendant’s refusal to disclose assets. 139.In the present case, I am unable to overlook the fact that Liu is seeking to have the Injunction Order discharged on various grounds some of which are of substance and do find favour with the court. 140.I am certainly not comfortable with inferring a risk of dissipation from non-compliance with paragraph 2 of the Injunction Order alone. 141.As for the third ground, Taifeng has issued various public announcements, disclosing that:
142.Her Ladyship dealt with the third ground in paragraphs 23 to 25 of her decision dated 17 July 2015:
143.Not all of the announcements identified in the preceding paragraph were before the ex parte judge. In particular, the announcement dated 12 December 2014 by which Taifeng first issued a profit warning and explained the reasons for the business loss in 2014 (see paragraph 141(1)) was not included in the Bank’s evidence. That appears to me to be the reason why she was given the wrong impression that the assets of Taifeng have been whittled down for no apparent reason or for reasons not said to be related to market conditions. 144.While there is no doubt that Taifeng has corporate governance issues, there is no suggestion of fraud or other forms of dishonesty underlying such issues. Poor corporate governance cannot, without more, be equated with an “unacceptably low standard of commercial morality” or “questionable integrity”. 145.Nor is there evidence that the corporate governance issues of Taifeng could or should be attributed entirely or substantially to Liu. I do not agree that an inference can be drawn simply because Liu is the Chairman and an executive director of Taifeng “responsible for strategic planning, business development and overall management of the Group”. As Ms Po submits, Taifeng is public company governed by a board of directors with collective responsibility. It is not shown or even suggested that the board or management of Taifeng has been overborne by Liu. 146.In short, I do not see sufficient evidence to justify a finding of risk of dissipation. This is particularly so where, on the evidence available to me, TTG appears to have assets of sufficient value against which Liu would able to exercise his right of recourse (see paragraph 165 below). Conclusion on Injunction OS 147.As stated above, in considering an application under s 21M, if the answer to the question whether, if the plaintiff succeeds in the primary jurisdiction the resultant judgment is one that the Hong Kong court will enforce is yes, the court has to form a view as to, inter alia, whether there is a real risk that the defendant will dissipate his assets if he is not restrained by a Mareva injunction. 148.Hence, the Injunction OS should be dismissed for want of evidence of risk of dissipation alone even if the court could continue to exercise jurisdiction under s 21M after the commencement of the Registration Proceedings and the making of the Registration Order. Discharge Summons 149.Given my decision on the Injunction OS, it is strictly unnecessary for me to deal with the Discharge Summons. Nevertheless, I shall address the issues raised by Ms Po under the Discharge Summons, which I suspect I would have to do in any event for costs purposes. 150.In addition to the issues about the enforceability of the Mainland Judgment in Hong Kong under the MJREO and the court’s jurisdiction under s 21M after the pronouncement of the Mainland Judgment dealt with above, in support of the Discharge Application, it is also Liu’s case that the Bank was guilty of material non-disclosure before the ex parte judge in that it had understated the valuation of TTG’s assets in the PRC that are available to satisfy the Mainland Judgment Debt in seeking the Injunction Order against Liu. The evidence and submission before Au-Yeung J 151.Before Au-Yeung J, the Bank adduced evidence under the heading of “balance of convenience” that 3 unattached landed properties in the Mainland belonging to TTG namely,
(“Available TTG Properties” collectively), which were assessed in June 2013 to have respective open market values of RMB48,654,300, RMB68,443,800 and RMB53,101,300, had been preserved by order of the Beijing Court for enforcement of the Mainland Judgment in the PRC. Valuation reports dated 13 June 2013 commissioned by TTG itself were also exhibited. 152.The Bank’s in-house counsel, Ms Jiang Shasha (“Ms Jiang”), also deposed as follows:
153.The net effect is that Au-Yeung J was given the impression that the Bank’s interest could only be protected by the grant of the Injunction Order. 154.The TTG Available Properties were mentioned in 2 sub-paragraphs of paragraph 31 of the skeleton argument of counsel for the Bank which dealt with full and frank disclosure:
Au-Yeung J’s consideration of the TTG Available Properties 155.In paragraph 28 of her decision dated 17 July 2015, Au-Yeung said the following about the TTG Available Properties under the heading “balance of convenience”:
Liu’s complaints 156.It can be seen that the aggregate value of the Available TTG Properties as at June 2013 should be RMB170,199,400 so that there should be an excess of some RMB60 million over the amount of the Mainland Judgment Debt. However, the incorrect total figure of RMB121,545,100 (which is just the values of the second and third of the TTG Available Properties) was given and used before Au-Yeung J. This is the first complaint of Liu. 157.Liu’s second complaint is that the Bank understated the value of the first of the TTG Available Properties (i.e. 房權證字第001745-1號). The Bank did not have any valuation of this property alone. It arrived at the figure of RMB48,654,300 by dividing by 3 the aggregate value of RMB145,962,900 given to a larger property of which房權證字第001745-1號 forms part (i.e. 房權證字第001745-1號, 第001745-2號 and第001745-3號). Liu disagrees with such an approach as房權證字第001745-1號 is much larger in area than房權證字第001745-2號 and第001745-3號. According to the updated valuation adduced by Liu, 房權證字第001745-1號 on its own was worth RMB115,247,000 as at September 2015, which is some RMB60 million more than the value of RMB48,654,300 put on it by the Bank. 158.In response to the Discharge Summons, the Bank has exhibited an updated valuation of 房權證字第001745-1號, which gives the following values to the property as at 6 April 2016:
The immediate realisation value is based on 60% of the market value to reflect adverse assumptions including the lack of reasonable time for the parties to negotiate (雙方無合理的談判周期), the payment method associated with an immediate realisation etc (快速變現的付款方式).[14] The net immediate realisation value is arrived at after deducting taxes applicable upon sale. In defending the charge of material non-disclosure, the Bank highlights the net immediate realisation value of RMB48,472,900. However, I observe that the June 2013 valuation report talked in terms of open market value so that the comparable value in the April 2016 valuation report should be the open market value of RMB96,176,200. 159.It can be seen from the September 2015 and April 2016 valuation reports produced respectively by Liu and the Bank that the buildings identified as房權證字第001745-1號 take up about 78% of the total area of房權證字第001745-1號; 第001745-2號 and 第001745-3號 added together.[15] 160.Liu’s third complaint is that the Bank should have obtained, but did not obtain, updated valuation of the Available TTG Properties. Had it done so, it would have realised that their values had in fact increased substantially. Apart from房權證字第001745-1號, Liu has also obtained updated valuations of 土地使用權證號：萊蕪市國用2005第0158號 and土地使用權證號：萊蕪市國用2007第0444號 to the effect that they had the respective values of RMB68,728,700 and RMB53,262,500 as at September 2015. 161.The net effect, according to Liu, is that the Bank understated the aggregate value of the TTG Available Properties before Au-Yeung J as follows:
162.Liu’s fourth complaint is that such updated valuation of the TTG Available Properties also shows that the Bank’s assertion that their values could not be maintained is wrong. Materiality of the value of the TTG Available Properties 163.The material facts to be disclosed by the applicant on an ex parte application are all matters which are material for the judge to know and which are necessary to enable him to exercise his discretion properly. Materiality is to be decided by the court and not by the assessment of the applicant or their advisers: Thermax Ltd v Schott Industrial Glass Limited [1981] FSR 289, per Browne-Wilkinson J at 295. 164.In an application for a Mareva injunction in aid of foreign proceedings, the court has to ask the same questions as it would if the injunction were sought in support of action proceeding in the Hong Kong court. As summarised in the Hong Kong Civil Procedure 2018, volume 1, paragraph 29/1/65, to obtain domestic Mareva relief, the plaintiff must demonstrate, inter alia,
165.In the instant case which involves an application for a Mareva injunction in aid of the execution of a Mainland judgment to which there is a co-defendant under joint and several liability and against whom the defendant targeted by the application before the Hong Kong court has a right of recourse upon paying off the plaintiff, the accurate value of the assets of the co-defendant that have been preserved for satisfaction of the judgment is in my opinion material to 2 issues:
166.It is therefore not an answer for the Bank to say that the liability of TTG and Liu is joint and several in nature and that the Bank is entitled to pursue against Liu without having recourse against TTG. In any event, the Bank has in fact been enforcing the Mainland Judgment against TTG in the Mainland. 167.The evidence presented by the Bank on the individual and aggregate values of the TTG Available Properties is erroneous in a number of aspects.
168.The errors mentioned in paragraph 167(2) to (6) above arose firstly because the Bank saw fit to use the June 2013 valuation of房權證字第001745-1號, 第001745-2號 and 第001745-3號provided to it by TTG without really looking into the nature and particulars of the 3 properties. The assumption that they are equal is without basis. 169.Second, the Bank has done itself a disservice by not updating the values of the TTG Available Assets before making statements that the June 2013 values could not be maintained; that those would also have to be discounted in a forced sale in execution of judgment (without identifying the discount); and that the net proceeds of realisation would likely be lower than the Mainland Judgment Debt. 170.Material facts include not only facts known to the applicant but also any additional facts which would have been known if proper inquiries had been made. The applicant must therefore make proper inquiries before making the application. The extent of such inquiries depends on all the circumstances of the case, including (1) the nature of the case which the applicant is making when he makes the application; (2) the order sought or the probable effect of the order on the defendant; (3) the degree of legitimate urgency and the time available for making inquiries. See Bank Mellat v Nikpour [1985] FSR 87 (CA), per Slade LJ at 92-93. 171.In this case, the Bank obtained the Mainland Judgment on 12 June 2015. The application for the Injunction Order was not made and heard until 10 and 17 July 2015 respectively. The Bank has taken almost a month to put together the application, during which it should have been able to commission a current valuation of the TTG Available Properties. 172.Further, unlike cases in which the plaintiff applies for a Mareva injunction at (or even before) the commencement of the foreign proceedings, the Bank did not consider it necessary to move when it commenced the Mainland Proceedings against TTG and Liu on 9 February 2015. This may have to do with the facts that the only asset that Liu is known to have within the jurisdiction are the shares in Taifeng that he directly and indirectly holds and that trading in the shares in Taifeng has been suspended since 26 February 2015. Given this peculiar circumstance about the asset that is sought to be preserved, it may be well thought that there was no urgency. 173.In conclusion, there was material non-disclosure by the Bank before the ex parte judge. 174.The question therefore arises as to whether the Injunction Order (which was last continued until further order) should have been discharged or not for material non-disclosure. 175.Where material non-disclosure is established, the court has a discretion whether to discharge the injunction or, where full disclosure is made at the inter partes hearing, to continue the injunction or to discharge and immediately re-grant substantially the same injunction. It will consider factors including: whether the non disclosure was innocent or deliberate; the excuse or reason for the material non-disclosure; and the importance of the omitted fact to the issues which were to be decided by the judge, in particular whether the non-disclosure would have resulted in the original order not being made in the first place. See, for example, Yau Chiu Wah v Gold Chief Investment Ltd, HCA 807/2001, unreported, 15 May 2001, per Recorder G Ma SC (as the Chief Justice then was) at pages 23-24. 176.The only evidence filed by the Bank in response to the Discharge Application is the 5th Affirmation of Kan Kin Hang Michael, an associate of the Bank’s solicitors, filed on 14 April 2016. The issue of the value of the TTG Available Properties is dealt with in paragraphs 14 to 19, by which the Bank:
177.In view of what I have said in paragraph 167 above, I cannot agree that the Bank has not misrepresented the value of the TTG Available Properties to the ex parte judge. That the Bank has done so seems to me to be very clear, which makes the Bank’s denial unacceptable. 178.More importantly, the Bank’s said denial has deprived the court of an explanation for the errors or omissions identified in paragraph 167 above and, consequently, of evidence as to whether they were innocent or deliberate. It would, in my opinion, be an exceptional course for the court to continue, or re-grant, the injunction without any such evidence. This is more so in this case where the disparity between the true value of the TTG Available Properties and that presented to the ex parte judge is substantial. 179.For these reasons, I would have discharged the Injunction Order for material non-disclosure had it been necessary for me to do so. DISPOSITION 180.I dismiss the Setting Aside Summons and make an order nisi that Liu should pay the Bank’s costs of and occasioned by the Setting Aside Summons to be taxed if not agreed on a party and party basis with certificate for counsel. 181.I dismiss the Injunction OS and make an order nisi that the Bank should pay 30% of Liu’s costs of and occasioned by the Injunction OS to be taxed if not agreed on a party and party basis with certificate for counsel. I disallow 70% of Liu’s costs to reflect the outcome of the issue of the construction of s 21M. 182.I make no order on the Discharge Summons save an order nisi that Bank should pay Liu’s costs of and occasioned by the issue of material non-disclosure under the Discharge Summons to be taxed if not agreed on a party and party basis with certificate for counsel.
Mr Jonathan Wong instructed by Dentons Hong Kong LLP, for the plaintiff in both actions Ms Po Wing Kay and Mr Matthew H H Lai instructed by Amelia Cheung & Co, for the 2nd defendant in HCMP 3012/2015 and the defendant in HCMP 1684/2015 [1] TTG has not entered an appearance in the Registration Proceedings. [2] The MJREO commenced operation on 2 August 2008. [3] For the sake of completeness, the Setting Aside Summons also mentions 2 additional grounds for setting aside the Registration Order:
[4] The supplemental opinion is adduced in opposition to the Setting Aside Summons. [5] Which was concluded on 14 July 2006. [6] See page 4914 of the official record of proceedings in the Legislative Council dated 7 March 2007. [7] As summarised by Lord Hoffmann in Investors Compensation Scheme Ltd v West Bromwich Building Society (No 1) [1998] 1 WLR 896 at 912-913. [8]Ms Po has referred to吳作程 v 梁儷, HCMP 2080/2015, unreported, 16 February 2016, in which the plaintiff (who sought the registration of a Mainland judgment) provided the court with both a notice of the case number for the enforcement proceedings in the Mainland as well as a certificate from the Shenzhen Court certifying that the Mainland judgment was final and enforceable in the Mainland. [9] See page 163 of the Report. [10] Citing Lord Mustill in Mercedes Benz AG v Leiduck [1996] 1 AC 284 (PC) at 299. [11] Citing Lord Nicholls, ibid, at 306. [12] Where Keith JA said, “There must, of course, come a time in any proceedings when the court must be regarded as having completed its task. When that time is reached, the court is said to be functus officio. Once that stage has arrived, the court has no further jurisdiction over the case. But when does that stage arrive? The answer given by the common law is when the judge's order has been drawn up, entered or otherwise perfected.” (Ms Po’s emphasis) [13]Ms Po surmises that the reason why the Bank did not do so was because it had failed to obtain an Original Court Certificate, without which its application under the MJREO for registration of the Mainland Judgment would have been “incompletely constituted”. And if the Bank had applied for a Mareva injunction under s 21L after making the (incompletely constituted) application for registration under the MJREO, it would not have been possible for it to demonstrate that it had a good arguable case for registration so that, more likely than not, the application for injunction under s 21L would have failed too. [14] See paragraph 2 of the section entitled “估價假設和限制條件” (Valuation assumptions and limitations). [15] (57078.33 / 73389.45) m2. [16] As stated in paragraph 23 of the Affirmation of Jiang Shasha, the Bank’s in-house counsel and paragraph 31(1) of the skeleton argument of counsel for the Bank before Au-Yeung J. [17] Correct total value of the TTG Available Assets as at June 2013. [18] This was the discount adopted by the Bank’s own valuer to arrive at the immediate realisation value of 房權證字第001745-1號. [19] (RMB57,705,800 – RMB48,472,900/RMB57,705,800). | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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