Gu Zhuoheng and Another v. Huang Wei Cheng and Others
Read the full judgment text of HCA 2509/2017 on BabelCite. This High Court CFI judgment was delivered on 13 February 2019.
1. On 10 November 2017, upon an application by the plaintiffs, Gu Zhuoheng (谷卓恒) and Korchina Culture Investment Limited (韓中文化投資有限公司) (“Gu” and “Korchina” respectively and “Plaintiffs” collectively), which I treated as having been made ex parte [1] and subject to the Plaintiffs’ reciprocal undertaking not to deal with the assets of the 2 nd defendant, All Faith Corporation Limited (信全有限公司) (“All Faith”), including its shareholding (“Alishan Shares”) in 新豐縣阿里山味食品有限公司 (“Alishan”), I granted an int
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HCA 2509/2017 [2019] HKCFI [381] IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE CIVIL ACTION NO 2509 OF 2017 __________________________
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_________________________ J U D G M E N T _________________________ A. APPLICATIONS AND RELEVANT PROCEDURAL HISTORY 1.On 10 November 2017, upon an application by the plaintiffs, Gu Zhuoheng (谷卓恒) and Korchina Culture Investment Limited (韓中文化投資有限公司) (“Gu” and “Korchina” respectively and “Plaintiffs” collectively), which I treated as having been made ex parte[1] and subject to the Plaintiffs’ reciprocal undertaking not to deal with the assets of the 2nd defendant, All Faith Corporation Limited (信全有限公司) (“All Faith”), including its shareholding (“Alishan Shares”) in 新豐縣阿里山味食品有限公司 (“Alishan”), I granted an interim interlocutory injunction (“Injunction”) restraining:
2.In support of the application, by paragraph 49 of the 1st affirmation dated 1 November 2017 of Sharon Kwan (“Kwan”) (who identifies herself as a director of Korchina) and paragraph 23 of Gu’s 1st affirmation dated 7 November 2017, the Plaintiffs offered to give the usual cross-undertaking as to damages. While Gu asserted the Plaintiffs’ ability to honour such undertaking, he did not give any particulars of the means available to him or Korchina to do so. I therefore required a further undertaking by Gu to file an affirmation within 14 days to disclose the financial means and resources that the Plaintiffs have for fulfilling the cross-undertaking as to damages. Such undertaking was purportedly complied with by the filing of Gu’s 2nd affirmation on 29 November 2017 which deposed to Gu’s holding of 129,606,000 shares in one Ding He Mining Holdings Limited (stock code: 705) (“Ding He Mining Shares”) in a securities account (“Kingston Account”) with Kingston Securities Limited (“Kingston”), which shares had a market value of HK$5,573,058 as at 7 November 2017, having closed at HK$0.043 on that day. 3.By a summons issued on 17 November 2017, the Plaintiffs applied for continuation of the Injunction against Huang, Wang and Chen until judgment or further order. 4.In the meantime, it had come to the Plaintiffs’ notice that the Alishan Shares had already been transferred from All Faith to one Shuangchuang International (HK) Co., Limited (雙創國際 (香港) 有限公司) (“Shuangchuang”). So, by another summons issued on 22 November 2017, the Plaintiffs applied for leave to join Shuangchuang as the 6th defendant to this action and for amendment of paragraphs 1 and 3 of the Injunction so that those paragraphs would extend to Shuangchuang. 5.The Plaintiffs’ summonses dated 17 and 22 November 2017 (“Summonses”) first came before me on 24 November 2017. Shuangchuang attended by counsel instructed by CP. Other than allowing the joinder of Shuangchuang as the 6th defendant and making consequential directions, I adjourned the Summonses for substantive argument, pending which I continued the Injunction as against Huang, Wang and Chen and, upon the Plaintiffs’ application, I also granted another interim interlocutory injunction restraining Shuangchuang, whether by itself, its servants, agents, employees or otherwise, from howsoever selling, disposing of, transferring away, assigning or charging any interests, benefits or ownership in All Faith’s assets, including the Alishan Shares. 6.On 18 January 2018, with Huang, Chen and Shuangchuang attending by counsel instructed by CP and Wang represented by counsel instructed by Edward Lau, Wong & Lou (“ELWL”), I further adjourned the substantive hearing of the Summonses to permit the filing of further evidence and:
7.The substantive hearing of the Summonses took place on 7 May 2018, with opposition from Huang, Chen and Shuangchuang (“Opposing Defendants”) who invited the court to discharge or not to continue the Injunction on the grounds of failure to show any serious issue to be tried or material non-disclosure at the hearing on 10 November 2017 by the Plaintiffs (although the Opposing Defendants had not taken out a formal summons for discharge). 8.To complete the procedural history, I should mention that, pending the delivery of this judgment, by a letter dated 6 December 2018 from their solicitors, CP, to the court, the Opposing Defendants indicated their intention to make an urgent application for a variation of paragraph 1(d) of the Injunction to allow Huang to appoint PRC legal representative to appear for All Faith before the People’s Court at the Longgang District, Shenzhen (深圳市龍崗區人民法院) (“Longgang Court”) on 27 December 2018 at the trial of the 2015 PRC Proceedings and sought the court’s directions. In view of the apparent urgency of the matter, instead of directing the issuance of a summons, I treated the Opposing Defendants as having made the proposed application by CP’s said letter. After considering the parties’ respective written submissions, I varied paragraph 1(d) of the Injunction to allow Huang to appoint PRC legal representative to appear for All Faith before the Longgang Court on 27 December 2018 at the trial of the 2015 PRC Proceedings, but only for the limited purposes of:
B. SUBJECT MATTER OF THIS ACTION 9.It should be clear from the terms of the Injunction that it seeks to protect and preserve the assets of All Faith and Korchina pending determination of the shareholdings and directorships of these 2 companies in this action. 10.In this connection, All Faith is supposed to hold the entire shareholding in Alishan. Alishan is, in turn, supposed to own a piece of land of over 170,000 square metres together with the factories, offices, staff accommodation and various associated facilities thereon at Pingshan, Longgang District, Shenzhen (深圳市龍崗區坪山) with land parcel number G11201–1739 and registration number 深房地字第6000334782號 (“Shenzhen Land”). C. PARTIES C1. Gu and Wang 11.Both Gu and Wang are Mainland citizens. They were both implicated in what has become known as the “Mei Dai cyber fraud case” (美貸網詐騙案), which reportedly involved RMB2.4 billion and 350 victims who had complained to the police. Gu was found by the Mainland court to be the mastermind behind such fraud. Before that, Gu had left China.[2] He entered the USA on 27 March 2016 and sought asylum there in May 2017. Wang was employed by Gu and/or his companies. She was detained on 13 May 2015, formally arrested on 16 June 2015 and convicted upon her own guilty plea and sentenced on 13 May 2016 in the Mainland for offences arising from the said fraud. She is currently serving a 7-year sentence at a prison in Guangzhou. C2. Korchina 12.Korchina was incorporated in Hong Kong on 24 May 2013. It was acquired by Wang on 4 December 2013 as sole director and sole shareholder holding 10,000,000 shares of HK$1 each (“Korchina Shares”). 13.Gu asserts his claim to All Faith (and therefore indirectly to the Alishan Shares and the Shenzhen Land) through Korchina. More particularly, Gu claims to have acquired the entire shareholding of Korchina from Wang on 16January 2017 in the following circumstances:
14.Gu further explains that he refrained from stamping the 16/1/2017 Transfer Documents or informing the Companies Registry (“CR”) of his acquisition of Korchina because he was aware of the appeal from HCMP 894/2015 under CACV 23/2017 which concerned the ownership and control of All Faith and which was fixed to be heard on 21 November 2017 (see paragraph 36 below) and he did not want to get involved in such legal proceedings.[4] 15.However, the discovery of the settlement of CACV 23/2017 on terms that returned the ownership and control of All Faith to the Huang family (see paragraphs 37 and 38 below) thereby depriving Korchina of the All Faith Shares, its only valuable asset, forced Gu to (1) appoint Kwan[5] as a director of Korchina on 23 October 2017; (2) have the 16/1/2017 Transfer Documents stamped and an updating annual return of Korchina filed at the CR on 24 October 2017; and (3) have Wang removed as a director of Korchina on 7 November 2017. C3. Huang and Chen 16.Chen is the widow of the late Huang Wen Tsai (黃文財) (“Huang Senior”). They have 3 children: Huang Yi Chen (黃怡甄), Huang Pin Ching (黃品靜) and Huang. Save that Huang Senior had business interests in the Mainland since the 1990’s and that Huang Pin Ching had assisted Huang Senior in the clerical and bookkeeping aspects of his Mainland business after graduating from university, Huang Senior, Chen and their 3 children (“Huangs” or “Huang Family”) are and were at all material times Taiwanese citizens and based in Taiwan. C4. Shuangchuang 17.Shuangchuang is a company incorporated in Hong Kong on 25 March 2009. Zhang Chong (張沖), husband of Huang Pin Ching, was the sole shareholder and director of Shuangchuang until his shares were transferred to Chen and Huang Pin Ching on an unknown date and until he resigned, and Huang was appointed, as a director on 26 August 2017.[6] 18.The transfer of the Alishan Shares from All Faith to Shuangchuang, which led to the joinder of Shuangchuang in this action, took place on 23 October 2017, i.e. before the grant of the Injunction. Shuangchuang does not appear to have any business other than holding the Alishan Shares. D. HUANG FAMILY’S INITIAL CONTROL OF ALL FAITH AND ALISHAN 19.Alishan, a Mainland company, was founded by Huang Senior on 9 December 1999. 20.Alishan acquired the Shenzhen Land in April 2009. 21.Prior to October 2012, the Alishan Shares were held by a Taiwanese company called榮倫涼椅工業股份有限公司 owned and controlled by Huang Senior. Huang Senior was and remained the legal representative of Alishan until 6 August 2013. 22.All Faith, a Hong Kong company, was set up by Huang Senior later on 10July 2012. Prior to 5 December 2013, Huang Yi Chen and Huang Pin Ching (“Huang Sisters” collectively) were arranged by Huang Senior to hold all the issued shares in All Faith (which are 10,000 shares of HK$1 each) (“All Faith Shares”) in equal shares. Huang Senior was and remained the sole director of All Faith until 11 July 2013. 23.Regarding the establishment of All Faith, according to Huang Pin Ching,[7] Huang Senior had since 2012 been approached by various developers offering to buy the Shenzhen Land. It was Huang Senior’s plan to dispose of the Shenzhen Land indirectly through a sale of the All Faith Shares. Hence, after All Faith’s formation, on 11 October 2012, Huang Senior caused the Alishan Shares to be transferred into All Faith’s name. 24.After he was diagnosed with liver cancer in July 2013 and before he passed away in September 2013, Huang Senior caused Huang to replace him as the sole director of All Faith on 11 July 2013 and as the legal representative of Alishan on 6 August 2013. E. DEALINGS, DISPUTES AND LITIGATIONS 25.There have since 2013 been numerous dealings with the All Faith Shares, the Alishan Shares and the Shenzhen Land that have given rise to a myriad of legal proceedings in both Hong Kong and the Mainland. E1. Concerning the All Faith Shares E1.1 Dealing by Huang Senior himself before his death 26.Dealing first with the All Faith Shares, first of all, prior to his being diagnosed with liver cancer, Huang Senior (acting for himself and for All Faith) entered into a deposit agreement and a formal agreement respectively dated 25 April 2013 and 24 May 2013 (“Zhang Agreements”) with one Zhang Yanjin (張炎錦) (“Zhang”) for the sale of the All Faith Shares and the landed properties under All Faith’s name to Zhang at RMB530 million, 10% of which had been paid by Zhang as deposit. E1.2 HCA 1533/2014 & HCA 30/2018 27.The sale to Zhang was never completed. Dispute arose as to which party was in breach of contract. This transaction between Zhang and Huang Senior back in 2013 has given rise to 2 sets of proceedings taken by Zhang in Hong Kong:
for, inter alia, specific performance of the Zhang Agreements. There were/are also claims against the Huang Daughters and Korchina for declarations that they held the All Faith Shares and against Shuangchuang that it holds the Alishan Shares as constructive trustees for Zhang pending completion of the Zhang Agreements. Zhang further claimed/claims against the Huang Sisters in HCA 1533/2014 and against Korchina, All Faith, Shuangchuang and Huang in HCA 30/2018 damages for procurement/inducement of breach of contract. HCA 1533/2014 had in May 2016 proceeded to the entry of interlocutory judgment in default against the Huang Daughters with damages to be assessed. E1.3 Dealings with Korchina after Huang Senior’s death 28.After the dispute between Zhang and the Huang Family had arisen, under disputed circumstances:
29.Despite the transfer from Korchina to Chen, on 21 February 2015, Korchina (still acting as the sole shareholder of All Faith) removed Huang from All Faith’s board of directors and appointed Wang and one Liu Hui (劉輝) (“Liu”) as directors of All Faith. On 27 February 2015, statutory forms signed by Wang, including a Form ND2A showing the replacement of Huang by Liu as a director of All Faith, were submitted to the CR. E1.4 HCMP 894/2015 30.The transfers of the All Faith Shares from the Huang Sisters to Korchina and from Korchina to Chen and the removal of Huang, and the appointment of Wang and Liu, as directors of All Faith became the subject matters of the claims and cross-claims in HCMP 894/2015. Such proceedings was commenced by Chen and Huang (asserting their respective capacities as sole shareholder and sole director of All Faith) on 16April 2015 against the Registrar of Companies (“Registrar”), All Faith, Wang, Liu and Korchina to claim for (1) rectification of All Faith’s share register and (2) declarations that Chen and Huang were respectively All Faith’s sole shareholder and sole director and that the statutory forms (regarding All Faith’s register of directors and registered office address) presented by Wang and Liu to the CR were forgeries. 31.It was Chen and Huang’s case in HCMP 894/2015[8] that:
32.Korchina denied the existence of any trust of the All Faith Shares or the Declaration of Trust. The Huang Sisters transferred the All Faith Shares to Korchina in repayment of a loan of RMB 95 million advanced to Alishan by one 深圳航美房地產開發有限公司 (“SZ Hang Mei”), a Mainland company of which Wang was then the legal representative and general manager. Korchina further claimed that Wang’s signatures and Korchina’s company chops on the Security Documents used in the transfer from Korchina to Chen were forged. It counterclaimed for a declaration that the transfer of the All Faith Shares to Chen was void and an injunction restraining Chen and Huang from representing that they were the shareholder or director of All Faith. 33.HCMP 894/2015 was tried before Madam Justice Au-Yeung in October 2016. Huang Pin Ching was the only witness as to fact who gave evidence viva voce before her Ladyship. She was found to be untruthful and unreliable. Au-Yeung J was not satisfied on a balance of probabilities:
34.Her Ladyship dismissed Chen and Huang’s claim, declared that the transfer of the All Faith Shares from Korchina to Chen was null and void and granted a permanent injunction restraining Chen and Huang and their servants and agents from representing to anyone that she/he was All Faith’s shareholder/director (“HCMP 894/2015 Judgment”). See Au-Yeung J’s judgment dated 30 December 2016. 35.The effect of the HCMP 894/2015 Judgment is that Korchina remained the sole owner of the All Faith Shares. E1.5 CACV 23/2017 36.On 27 January 2017, Chen and Huang appealed against the HCMP 894/2015 Judgment under CACV 23/2017. A respondent’s notice was filed on behalf of Wang, Liu and Korchina, represented by Wong & Lawyers (“W&L”), on 17 February 2017. CACV 23/2017 was fixed to be heard on 21 November 2017. 37.However, before such hearing date:
38.Although All Faith’s annual return for the year ending 10 July 2018 was not yet due by the time of the hearing on 7 May 2018, according to paragraph 21 of the Opposing Defendants’ defence in this action, the All Faith Shares were transferred from Korchina to the Huang Sisters pursuant to the Settlement Agreement on 18 August 2017. In other words, with effect from 18 August 2017, the Huang Sisters and Huang have respectively been the registered shareholders and sole director of All Faith. 39.It is the Plaintiffs’ case herein that the Settlement Agreement was “an unlawful and dishonest scheme” orchestrated by Huang/Chen “to create a false pretence that their dispute with Korchina has been settled (which is untrue and implausible)” and “to defeat and/or nullify the HCMP 894/2015 Judgment”.[11] The discovery of the settlement of CACV 23/2017 on terms that returned the ownership and control of All Faith to the Huang Family caused Korchina, at Gu’s instigation, to issue a summons in CACV 23/2017 on 2 November 2017 to set aside LWL’s notice of change of solicitors and the Consent Order (“CA Setting Aside Summons”). It is also the immediate cause for this action (see section F below). Upon the grant of the Injunction herein on 10 November 2017, Korchina invited the Court of Appeal, initially by letter, to stay or adjourn the hearing of the CA Setting Aside Summons pending the determination of this action. A formal summons for that purpose (“CA Stay Summons”) was taken out on 20 December 2017. The CA Setting Aside Summons and the CA Stay Summons were both dismissed by the Court of Appeal with costs against Korchina on 3 January 2018. E1.6 HCA 2602/2017 40.Wang herself and Korchina, instigated by Wang, had commenced proceedings under HCA 2602/2017 on 14 November 2017, i.e. about a week after the issue of the writ of summons herein, against the Opposing Defendants seeking, inter alia, to set aside the transfer of the All Faith Shares by Korchina and her resignation as director of All Faith under the Settlement Agreement. HCA 2602/2017 was discontinued very shortly after its commencement on 4 December 2017. E2. Concerning the Alishan Shares 41.Moving onto the Alishan Shares, on 1 April 2014, All Faith acting by and through Huang, its sole director, and one China HK and Macao News Media Holding Limited (中國港澳新聞傳媒控股有限公司) (“News Media”), a Hong Kong company held as to 50% by Gu’s wife, Shen Wei (沈威) (“Shen”), signed an agreement for the transfer of the Alishan Shares by All Faith to News Media for US$500,000 (“News Media Agreement”). 42.It was Chen and Huang’s case in HCMP 894/2015[12] that:
43.In September 2014, the Administrative Bureau for Industry and Commerce of Shaoguan (韶關市工商行政管理局) (“Shaoguan Bureau”) registered the change of Alishan’s shareholder from All Faith to News Media as well as Gu’s appointment as the legal representative of Alishan in place of Huang upon an application filed by Alishan at Gu’s instigation, which was based on the News Media Agreement and supported by corporate documents of Alishan bearing what purported to be Huang’s signatures. 44.On 22 January 2015, Huang as director of All Faith caused it to start the 2015 PRC Proceedings (which included an application for a pre-trial asset preservation order in connection with the assets owned by Alishan, which was mainly the Shenzhen Land, then valued at RMB 26,046,469) in the Longgang Court against News Media for a declaration that the Shenzhen Land beneficially belonged to All Faith. On 10 and 18 March 2015, i.e. after Liu was appointed as a director of All Faith on 21February 2015, Liu acting for and on behalf of All Faith applied to the Longgang Court to discontinue/withdraw the 2015 PRC Proceedings on the basis that All Faith wished to explore alternative means of dispute resolution. It is the Opposing Defendants’ case that Liu’s appointment as a director of All Faith was made to put him in a position to interfere in this way in the 2015 PRC Proceedings in the name of All Faith. There is no direct evidence of any rulings or directions by the Longgang Court on such applications. However, enclosed to CP’s letter dated 6 December 2018 to the court mentioned in paragraph 8 above was a notice dated 27 June 2018 issued by the Longgang Court for the trial of the 2015 PRC Proceedings on 27 December 2018, which suggests that the applications for discontinuance/withdrawal made by Liu for All Faith did not succeed. 45.While the 2015 PRC Proceedings was pending, on 21 September 2016,[13] Huang and All Faith commenced an administrative action (“Shaoguan Administrative Action”) under the reference (2016) 粵2050行初49號against the Shaoguan Bureau at the People’s Court at the Qujiang District, Shaoguan (韶關市曲江區人民法院) (“Qujiang Court”) to set aside the respective registration of News Media and Gu as the shareholder and legal representative of Alishan on the ground that what purported to be Huang’s signatures on the News Media Agreement and the other documents submitted in support of the registration were forgeries.[14] Although Gu and News Media were joined as third parties, neither took any part in the proceedings.[15] 46.By a decision dated 29 March 2017, the Qujiang Court found in favour of Huang and All Faith and set aside News Media and Gu’s respective registration as the shareholder and legal representative of Alishan in reliance on the opinion of the court-appointed handwriting expert who concluded that the purported signatures of Huang on the impugned documents were forged. 47.The Alishan Shares were transferred back from News Media to All Faith on 28 August 2017 and then from All Faith to Shuangchuang on 23 October 2017. Huang Pin Ching explained the latter transfer in paragraph 63 of her 1st affirmation herein as follows:
48.News Media’s application for a re-trial of the Shaoguan Administrative Action was dismissed on 29 December 2017. 49.Also rising from the News Media Agreement is an action commenced by News Media in 2017 at the People’s Court at the Wujiang District, Shaoguan (韶關市武江區人民法院) under the reference (2017) 粵0203民初2597號against Alishan and Shuangchuang with All Faith and Huang as third parties. There is no evidence before me as to the contents, disposal or status of these proceedings save that it is apparently still going on. E3. Concerning the Shenzhen Land 50.Lastly, in relation to the Shenzhen Land, on 26 January 2014, i.e. prior to the News Media Agreement, Alishan entered into a written agreement (“SZ Hang Mei Agreement”) with SZ Hang Mei and深圳市鼎和投资担保有限公司 (“SZ Ding He Investment”) under which, in return for RMB 1.5 billion, Alishan agreed to transfer the Shenzhen Land to SZ Hang Mei for development by SZ Hang Mei. SZ Ding He Investment guaranteed both parties’ performance. 51.Then, on 18 May 2016, i.e. after the date of the News Media Agreement, Alishan entered into (1) a supplemental agreement to the SZ Hang Mei Agreement and (2) another agreement (“SZ Ao Xin Agreement”) with SZ Hang Mei, SZ Ding He Investment and深圳市澳新房地產開發有限公司 (“SZ Ao Xin”) under which SZ Hang Mei assigned all its rights to develop the Shenzhen Land under the SZ Hang Mei Agreement to SZ Ao Xin for RMB 100 million. 52.According to the Opposing Defendants, these 3 agreements were all signed by Gu purportedly for and on behalf of Alishan without having been authorised to do so by Alishan and using a forged company chop of Alishan. 53.In November 2017, SZ Ao Xin commenced proceedings against Alishan before the Guangdong Higher People’s Court under the reference (2017) 粤民初90號 for specific performance of the SZ Ao Xin Agreement. This case is apparently still going on. F. THIS ACTION F1. Plaintiffs’ claim 54.Against the aforesaid background, the gist of the Plaintiffs’ case in this action is that:
55.The Plaintiffs claim the following declarations:
56.The Plaintiffs also seek (1) an order for the Registrar to rectify the information on the Companies Register as it relates to All Faith so that it is consistent with the above declarations as well as (2) permanent injunctions in the same terms as the Injunction. F2. Opposing Defendants’ grounds of defence 57.Insofar as it is material for present purposes and in gist, the Opposing Defendants:
58.Huang Pin Ching elaborated on the settlement of CACV 23/2017 in paragraphs 68 to 70 of her 1st affirmation herein[17] that after Gu fled to the USA, the public security authority in the Mainland began to investigate into his dealings outside of the Mei Dai cyber fraud case. Such investigation led to Wang, who was serving a sentence of imprisonment because of the Mei Dai cyber fraud case, being approached by public security officers for information about Gu, including the transactions concerning All Faith, Korchina, Alishan, News Media and the Shenzhen Land. Wang became worried that such investigation would reveal her own role in Gu’s activities outside of the Mei Dai cyber fraud case and lead to further criminal charges being laid against her. Wang therefore contacted the Huangs through Li Chengwu with a view to returning the ownership and control of All Faith held by Korchina to the Huangs in the hope of severing her connection with these matters so as to avoid any further prosecution or a heavy sentence, if prosecuted. Wang also got in touch with Liu who had been appointed a director of All Faith, again through Li Chengwu, to ascertain his position. After contacting the Huangs, on 12 May 2017, Li Chengwu visited Wang in prison to obtain Wang’s signature on various documents including a confession of the same date handwritten by Wang (“Wang’s Confession”) whereby she admitted that Korchina had not given consideration for the All Faith Shares; that the All Faith Shares did not belong to Korchina or Wang; that her boss Gu arranged for Korchina to hold the All Faith Shares on trust for the Huang Sisters; that Wang did sign the Security Documents because the transfer of the All Faith Shares from the Huang Sisters to Korchina was not “a real share transfer”; that Gu subsequently told her to assert that the All Faith Shares were hers and not to return them to the Huang Sisters; that the witness statement(s) that she had given in HCMP 894/2015 were not true; that she was following instructions in tendering such evidence; that she had since reflected on the matter; that she wished to redeem herself by returning the All Faith Shares to the Huang Sisters; and that she would co-operate by signing all necessary documents for such purpose. Li Chengwu passed Wang’s Confession to Huang Pin Ching. LWL also obtained Liu’s instruction to settle CACV 23/2017. In about mid to end June 2017, the parties’ solicitors completed the drafting of the settlement documents, which LWL then asked Li Chengwu to bring to Wang in prison for her consideration. On 8 August 2017, the Huangs’ solicitors reported to Huang Pin Ching that, after some delay for reasons that are not relevant for present purposes, Li Chengwu had visited Wang that day. The draft settlement documents were left with Wang so that she could read and consider them carefully. Wang further requested that Liu should sign the documents first. A few days later, the Huangs’ solicitors reported to Huang Pin Ching that, in response to Wang’s request, Liu had signed the settlement documents first and that Li Chengwu had on 15 August 2017 visited Wang in prison again with the documents with Liu’s signature and that Wang had also signed on the same. On 18 August 2017, the Huangs’ solicitors received all the settlement documents with Wang and Liu’s signatures. The Huangs themselves appended their signatures on the same day. (While on the Opposing Defendants’ account of how the Settlement Agreement and the documents relating thereto came to be proposed and signed, I pause to mention that they have not included a copy of the Settlement Agreement in their evidence in opposition to the Summonses. The significance of this document is apparent. The Plaintiffs[18] have demanded its disclosure. I am puzzled by the Opposing Defendants’ steadfast refusal/failure to produce this piece of evidence, which certainly does not assist in their attempt to persuade the court that the Plaintiffs have failed to raise a serious issue to be tried regarding the Settlement Agreement.) 59.The Opposing Defendants also deny that Shuangchuang was or is Huang’s alter ego or nominee or that the transfer of the Alishan Shares by All Faith to Shuangchuang on 23 October 2017 was made or caused to be made by Huang. Further, the HCMP 894/2015 Judgment ceased to have effect on Huang and Chen once the Settlement Agreement was concluded and implemented. The transfer of the Alishan Shares by All Faith to Shuangchuang, which took place after the conclusion and implementation of the Settlement Agreement when Wang and Korchina no longer had any interest in All Faith, could not have been effected in breach of the HCMP 894/2015 Judgment. F3. Wang’s position 60.Although Wang had not filed any defence in this action by the hearing on 7 May 2018, one Li Yanjun (李炎君), a PRC lawyer, has made an affirmation herein on Wang’s behalf to which the following documents were exhibited:
61.Further, as said earlier, Wang had in her own name and that of Korchina commenced proceedings under HCA 2602/2017 against the Opposing Defendants to set aside the transfer of the All Faith Shares by Korchina and her resignation as a director of All Faith under the Settlement Agreement. They had, before the discontinuance of HCA 2602/2017, applied for an interlocutory injunction. That application was supported by an affirmation of Li Yanjun dated 14 November 2017 setting out Wang and Korchina’s case in HCA 2602/2017, which has also been adduced as part of the evidence before me. 62.According to Li Yanjun’s said affirmations herein and in HCA 2602/2017 and the exhibits thereto that emanated from Wang (see paragraph 60 above), Wang claims to have signed all the documents relating to the Settlement Agreement under duress exerted upon her in 2017 by Li Chengwu and others. The threats were that her prison term could be extended by another 10 years and that she would encounter a lot of trouble in prison if she did not co-operate by signing the documents presented to her by Li Chengwu. Wang says she believed that Li Chengwu and the others who exerted pressure on her were sent by Huang and Huang Pin Ching to do so. Regarding who else had coerced her, in HCA 2602/2017, the Shenzhen police was mentioned as a source of duress whereas, in this action, Huang Pin Ching and Zhang Chong are said to have threatened Wang and her parents. Wang alleges that, as a result of such threats, she signed the documents asked of her by Li Chengwu but only under extreme fear that if she did not do so, her sentence might be extended for 10 years and she might even be abused in prison and her personal safety would be jeopardised. In this regard, in addition to the Settlement Implementation Documents, she also signed Wang’s Confession which she first had to copy in her own hand from a draft shown to her by Li Chengwu and a letter of appointment issued in the name of Korchina for the retention of LWL to handle the litigations in Hong Kong concerning All Faith and Korchina. 63.As for Gu’s allegation that she had on 16 January 2017 transferred the Korchina Shares to him, Wang has not in the evidence filed on her behalf so far directly dealt with such assertion. See further paragraph 80 below. G. QUESTIONS TO ASK IN DECIDING WHETHER TO GRANT OR REFUSE INTERLOCUTORY INJUNCTION 64.The principles governing the grant or refusal of interlocutory injunctive relief are well established. I start with Lord Diplock’s speech in American Cyanamid Co v Eithicon Ltd [1975] AC 396 (HL) at 407F-409D which, as explained by Ribeiro JA (as he then was) in Wah Nam Holdings Co Ltd v Excel Noble Development Ltd [2000] 3 HKC 118 at [28]-[32], guides the court to ask the following questions in deciding whether it is just or convenient to grant an interlocutory injunction:
H. SERIOUS ISSUE TO BE TRIED 65.In assessing whether there is a serious issue to be tried, the prospects of the plaintiff’s success are to be investigated to a limited extent only. The demonstration of a serious issue to be tried is not “a very steep hurdle”: Re Full Billion Shipping Ltd [2003] 2 HKLRD 674, per Chu J (as she then was) at [28]. All that is required is the plaintiff has prospects of success which, in substance and reality, exist. It does not matter whether the court thinks that the plaintiff’s chance of success at trial are 90% or 20%: AXA China Region Insurance Co Ltd v Pacific Century Insurance Co Ltd [2003] 3 HKC 1, per Deputy High Court Judge To (as he then was) at [24]. Odds against success do not defeat the plaintiff, unless they are so long that he can have no expectation of success, but only a hope. 66.Conversely, if the opposing party argues there is no series issue to be tried, the threshold is high, as it would be necessary to demonstrate that the claim should be struck out: Yifung Properties Ltd v Manchester Securities Corp, CACV 258/2015, unreported, 9 September 2016, per Kwan JA at [20]. 67.While the threshold of establishing a serious issue to be tried is not high, Mr Paul Shieh SC (leading Ms Gekko Lan) for the Opposing Defendants stressed that there must be proper evidential basis to support the plaintiff’s claim. Reference was made to Commercial Litigation: Pre-emptive Remedies, §A1-046:
68.Mr Shieh also reminded me of what I said in Golden Miles Group Holdings Ltd v Jacob & Co Ltd[2018] HKCFI 441at [89],
69.By way of illustration, in Golden Miles, the plaintiff sought a permanent injunction to restrain the defendant from acting in breach of the distribution agreement between them, thereby raising an issue as to whether the defendant’s termination of such agreement was wrongful. The defendant invited the court to hold that there was no serious issue that the plaintiff would succeed in its claim for wrongful termination of the agreement or for a permanent injunction because the defendant was entitled to and did exercise its common law right to terminate the agreement by accepting the plaintiff’s repudiation of the same. The plaintiff was said to have repudiated the agreement by dishonestly providing the defendant with fraudulent, bogus or exaggerated claims for marketing expenses to attempt to extract payment from, or deny payment due from it to, the defendant. I found that the problems identified by the defendant in respect of some of the plaintiff’s claims for marketing expenses did appear to be supported by direct objective evidence or information obtained from identified third parties through enquiries made by the defendant’s solicitors who had gone on oath to verify such enquiries and the results thereof. However, the plaintiff had not adduced any specific contradictory evidence save in relation to one claim. All that the court was left with was the plaintiff’s standard statement in the opening paragraphs of its affirmation in reply that any allegations by the defendant that had not been specifically responded or objected to by the plaintiff should not be construed as an admission. On such state of the evidence, I came to the conclusion that the evidence placed before me by the plaintiff did not disclose a serious issue that it had submitted false marketing expenses claims to the defendant.[19] 70.Whether the threshold for a serious issue to be tried has been crossed in each case essentially depends on its own facts, circumstances and evidence. 71.Turning to the present case, the Plaintiffs question:
72.It is unnecessary for me to discuss whether a serious issue to be tried is raised by each of the said 3 premises underlying the Plaintiffs’ case. I propose to focus just on the 16/1/2017 Transfer as it goes, not only to one of the bases upon which the Plaintiffs seek to upset the Settlement Agreement, but also to the more fundamental question as to whether this action has been properly authorised insofar as Korchina is concerned. 73.Indeed, the main plank of the Opposing Defendants’ submission that the present application for interlocutory injunction fails in limine because the Plaintiffs fail to raise a serious question to be tried was the inherent incredibility of, and the poor quality of the evidence on, the Plaintiffs’ allegation of the 16/1/2017 Transfer. 74.The detailed points made by Mr Shieh in support of such submission can be summarised as follows. First, the Plaintiffs’ case on the Loans, Wang’s guarantee, the Repayment Agreement and the 16/1/2017 Transfer rests entirely on Kwan’s bare, and essentially hearsay, assertions.
75.Second, Sing Pao defaulted on the Loans from Korchina back in 2015. There is no reason why it would only occur to Gu in 2017 to try to recover the Loans. 76.Third, regarding the Repayment Agreement:
77.Fourth:
78.Fifth, Gu did not cause the 16/1/2017 Transfer Documents to be stamped and registered with CR until 10 months later on 24 October 2017. His explanations are that he “did not want to get involved” in, and was prepared to wait until the conclusion of, CACV 23/2017 and that, given Wang and Korchina’s success in HCMP 894/ 2015, he had no reason to get involved in the appeal therefrom. Such explanations defy common sense and are thus unbelievable. First, as said earlier, the notice of appeal in CACV 23/2017 was not lodged until 11 days after the 16/1/2017 Transfer. Second, after the appeal was lodged, it would be even more crucial for Gu to take steps to protect his interest in Korchina. If Huang and Chen were to succeed in the appeal, Korchina would have to return its only valuable asset, namely the All Faith shares, back to the Huangs. If what Gu said was true, there is no reason why he would have left CACV 23/2017 to be handled by Wang who had, by reason of the 16/1/2017 Transfer, ceased to have any interest in Korchina and thus the appeal and who, being in jail in the Mainland, should be the last person Gu would have trusted to handle CACV 23/2017 in Hong Kong. 79.Sixth, the Plaintiffs’ case on the 16/1/2017 Transfer is contradicted by Wang’s repeated assertions that she was the shareholder of Korchina, and attempts to act for Korchina, after 16 January 2017. For instance:
80.These are all criticisms/questions that one can legitimately and fairly make against/raise on the Plaintiffs’ case and evidence on the 16/1/2017 Transfer. However, while they may provide ample material for the Opposing Defendants to cross-examine Gu and Wang on the 16/1/017 Transfer and while Gu would have to address these points at the trial of this action, at this stage and on the state of the evidence before me, I do not see them as so forceful as to support the conclusion that the Plaintiffs’ claim is liable to be struck out (see paragraph 66 above). 81.Whether or not there is a serious issue to be tried must be assessed in the light of the whole body of evidence before the court. Here, in particular, one cannot ignore what Wang, the other party to Wang’s guarantee, the Repayment Agreement and the 16/1/2017 Transfer, has said or, rather conspicuously not said. I have already mentioned in paragraph 63 above that Wang has not in the evidence filed on her behalf directly dealt with Gu’s allegation that she had on 16 January 2017 transferred the Korchina Shares to him. Instead, in Wang’s Statement, she touched upon the matter of the Korchina Shares only as follows:
82.Ms Audrey Eu SC (leading Messrs Alan Kwong and Martin Kok), counsel for the Plaintiffs, read the above emphasised words of paragraph 23 of Wang’s Statement as evidence from Wang confirming the 16/1/2017 Transfer. 83.I beg to differ. I agree with Mr Shieh that, read plainly and naturally, Wang was there just stating what she understood, after Li Yanjun’s explanation, to be the case made against her by Gu in this action. If Wang were asserting the primary fact of the 16/1/2017 Transfer, she would not preface it by saying that Li Yanjun has explained to her such matter. 84.However, what does strike me as peculiar about Wang’s Statement is that it was expressly spelt out in paragraphs 23, 24 and 29 thereof that it had been explained to Wang, and she understood, that one of the issues in this action is who owns the Korchina Shares and that such issue arises because of Gu’s allegation that she had on 16 January 2017 transferred the Korchina Shares to him in settlement of certain loans due from Korchina to Gu. One would expect Wang to take the opportunity to put on the record her disagreement if this part of the Plaintiffs’ case were not true. She did not do so. She merely said she understood the Plaintiffs’ case. Indeed, the words in brackets in the last sentence of paragraph 29 of Wang’s Statement, i.e. (或曾經是), seem to me to leave open the possibility that Wang had ceased to hold the Korchina Shares. 85.Likewise, none of the questions or answers in the 14/12/2017 Interview Record referred to the 16/1/2017 Transfer. Quite to the contrary, the following question (pre-typed) and answer (handwritten) were recorded:
86.It can be seen that Wang was specifically asked by Li Yanjun about her shares in Korchina and All Faith with reference to (1) a 委托書 dated 21 April 2015 and (2) certain 代持協議及轉讓書and買賣單據 which she signed on 31 October 2017 and which she confirmed to be documents for a transfer in favour of Shen, Gu’s wife, and reflecting her true intention. These transactions had apparently been made known to Li Yanjun before the interview on 14 December 2017. Otherwise, the said question could not have been prepared in advance. Such question and answer do not appear to me to sit well with Wang having transferred the Korchina Shares to Gu on 16 January 2017, as alleged by the Plaintiffs. 87.On the other hand, as mentioned in paragraph 60(1) above, Wang added certain comments on a handwritten copy of Wang’s Confession to disown such document on 29 November 2017. They were:
88.I read the expressions “公司”, “老闆” and “老闆娘” in the underlined sentences to be references to Korchina, Gu and Shen respectively. The statement by Wang that she had no knowledge of any of the operations of Korchina which were all handled by Gu and Shen may suggest that Wang actually has had no beneficial interest in Korchina. At the same time, I am mindful that it is not the Plaintiffs’ case that Wang holds or at any material times held the Korchina Shares only on trust for Gu.o 89.In short, the evidence emanating from Wang, which raises more questions that it answers, reinforces that there is a serious issue to be tried as to the 16/1/2017 Transfer. 90.Golden Miles, supra, upon which the Opposing Defendants relied, is in my view distinguishable on the facts. 91.This should be sufficient to satisfy the “serious issue to be tried” aspect of the test. I. ADEQUACY OF DAMAGES & BALANCE OF CONVENIENCE 92.In considering the adequacy of damages and then weighing the balance of convenience:
See Fellowes & Son v Fisher [1976] 1 QB 122, per Browne LJ at 137, cited in Hong Kong Civil Procedure 2019, Volume 1, paragraph 29/1/11. 93.Ultimately, the court should take whichever course which appears to carry “the lower risk of injustice if it should turn out that it is wrong” in granting an interlocutory injunction: Music Advance Ltd v Incorporated owners of Argyle Centre Phase I [2010] 2 HKLRD 1041, per Ma J (as the Chief Justice then was) at [12(d)]. 94.As noted above, the value of the All Faith Shares lies in All Faith’s holding of the Alishan Shares. The worth of the Alishan Shares, in turn, lies in Alishan’s holding of the Shenzhen Land. Paragraph 63 of Huang Pin Ching’s 1st affirmation (quoted in paragraph 47 above), which explained that the transfer of the Alishan Shares from All Faith to Shuangchuang was effected so as to facilitate the Opposing Defendants’ negotiations relating to the Shenzhen Land with interested developers before the conclusion of the legal proceedings about the Alishan Shares and the Shenzhen Land in Hong Kong and the Mainland, strongly suggests that, without the restraint of interlocutory injunctive relief, the Plaintiffs would be exposed to a risk of loss of the Shenzhen Land through further dealings with the All Faith Shares or the Alishan Shares by the Opposing Defendants before the end of these proceedings. And on the Opposing Defendants’ own evidence (contained in paragraph 4 of Huang Pin Ching’s 1st affirmation), the Shenzhen Land has a current market value of RMB 1.9 billion.[22] Although this figure was given without the support of any professional valuation, the Plaintiffs do not appear to dispute the Opposing Defendants’ estimate of the value of the Shenzhen Land. 95.There is however no evidence of any of the Opposing Defendants’ financial position in Hong Kong. None of them have deposed to ownership of any assets in Hong Kong against which an award of damages in favour of the Plaintiffs after trial could be enforced through the process of this court. Damages may be an illusory remedy if there is any doubt about the defendant’s ability to pay damages (Union (V-Tex) Shirt Factory Ltd (in liquidation) v Union V-Tex Realty Ltd [1985] 2 HKC 617 and Yeko Trading Ltd v Chow Sai Cheong Tony [2000] 2 HKC 612). 96.On the other hand, from the Opposing Defendants’ point of view, interlocutory injunctive relief in the terms of the Injunction would prevent them from immediately realising the Shenzhen Land either by a direct disposition or via a sale of the Alishan Shares, which may expose them to a risk of loss of part of the value of such propriety should the Shenzhen property market turn downwards by the time this action is resolved. While no one has a crystal ball, property markets do go up and down. 97.I have already mentioned in paragraph 2 above that Gu has, in compliance with the undertaking given to the court at the hearing on 10 November 2017 to substantiate the assertion that he is good for the cross-undertaking of damages, by his 2nd affirmation disclosed his holding of the Ding He Mining Shares which are Hong Kong listed shares with a market value of HK$5,573,058 on 17 November 2017. Moreover, Gu has offered not to remove the Ding He Mining Shares out of the Kingston Account or otherwise dispose of or deal with such shares while the Injunction is in place. See paragraph 7 of Gu’s 2nd affirmation. 98.This is, unfortunately, a very one-sided, if not misleading, presentation of Gu’s financial position in Hong Kong. Leaving aside the dispute of whether the Kingston Account is a margin account so that the Ding He Mining Shares are in any event pledged to secure Gu’s liability for margin facilities advanced to him by Kingston, the Opposing Defendants have unearthed the writs of summons in following 3 actions in Hong Kong in which Gu is being sued for repayment of outstanding debts totalling HK$113 million in principal:
99.In response, Gu only saw fit to volunteer:[23]
100.I find the said way in which Gu has dealt with these 3 sizable monetary claims against him not helpful at all. The court is often not in a position to make a finding that an interlocutory injunction has caused loss to the defendant or come to a decision that the defendant should be compensated for such loss until after the trial of the action. The purpose of Gu’s 2nd affirmation is to inform and satisfy the court that Gu has the necessary financial standing to honour the cross-undertaking of damages, if called upon to do so. The fact that Gu might potentially be adjudged liable under other pending lawsuits for repayment of principals and interests in sums far in excess of the value of the Ding He Mining Shares, his only disclosed asset within the jurisdiction, creates the appreciable risk that other judgment creditors of Gu might get to such shares first before the Opposing Defendants could obtain an award of damages in their favour under the Plaintiffs’ cross-undertaking of damages after the trial of this action. The plaintiff’s undertaking as to damages may be an illusory remedy for the defendant if there is any doubt about the plaintiff’s ability to pay damages. 101.Given the considerable doubt as to the adequacy of the respective remedies of damages, the question of balance of convenience does arise. 102.Given the wide disparity in the extent of the uncompensatable disadvantage to each party (i.e. loss of the Shenzhen Land for the Plaintiffs versus possible drop in value of the Shenzhen Land in the event of a downward market for the Opposing Defendants) and the complete absence of any or any known asset whatsoever of the Opposing Defendants within the jurisdiction that may be amenable to enforcement of an award of damages to bridge the gap between the uncompensatable disadvantage to each party to any extent, subject to the following discussion on material non-disclosure and subject to a consideration of whether fortification of the Plaintiffs’ cross-undertaking as to damages should be required in light of their questionable financial standing in Hong Kong, the balance of convenience lies in favour of a continuation of interim interlocutory injunctions against the Opposing Defendants. 103.That this is so is reinforced by the fact that the continuation of the injunctions against the Opposing Defendants would preserve the status quo, even though this is not a case where the balance is even. J. MATERIAL NON-DISCLOSURE 104.As stated in paragraph 1 above, in the absence of service on, or notice to, the targeted defendants, the hearing on 10 November 2017 proceeded on an ex parte basis. It is trite that parties seeking ex parte relief must make full and frank disclosure of all material facts. The material facts are those that it is material for the judge to know in dealing with the application as made. Materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers. See Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350, per Ralph Gibson LJ at 1356G-1357B, applied, for instance, by Madam Justice Au-Yeung in XY, LLC v Jesse Zhu, HCMP 869/2014, unreported, 13 November 2015, at [38]. However, it is not necessary to demonstrate that had the alleged material facts been disclosed to the court, the court would necessarily or likely have arrived at a different decision. The requirement of materiality does not require that the disclosure of the relevant facts would have altered the decision of the Court. See, again, XY, LLC v Jesse Zhu, at [41], following Behbehani v Salem [1989] 1 WLR 723 at 729E-F. 105.A major complaint of the Opposing Defendants under this heading is the Plaintiffs’ failure to disclose the fact that he is only worth HK$5,000,000 odd in the form of the Ding He Mining Shares and, more seriously, the 3 pending claims against Gu listed in paragraph 98 above which facts, Mr Shieh said, were material to the court’s assessment of the Gu’s financial ability to give a credible undertaking for damages.[24] 106.It is well settled that information relevant to assessing if the plaintiff is good for damages on the cross-undertaking is a material fact which must be disclosed on an ex parte application: see Gee, Commercial Injunctions, 6th edition, §11-023. 107.In Wah Nam holdings Co Ltd v Excel Noble Development Ltd, supra, the Court of Appeal upheld a decision by the judge at first instance releasing the defendants from certain undertakings in lieu of injunctions given by them at a hearing which was effectively ex parte although nominally on notice, on the ground that they had been obtained in circumstances involving material non-disclosure on the part of the plaintiffs regarding their adverse financial condition, material to their ability to honour the cross-undertaking in damages. As explained by Ribeiro JA, at 126A-129I, the requirement that a plaintiff must provide a cross-undertaking in damages is a necessary part of the mechanism for granting interlocutory injunctions. It is a safeguard for the defendant that enables the court to grant the plaintiff an order for interim restraint without the merits having been canvassed. For such safeguard to be real and not illusory, the plaintiff must obviously be able to honour it if required. Where a cross-undertaking is given to the court, if nothing further is said, the court will take the plaintiff to be impliedly representing that his financial position allows him to meet his potential liability thereunder. Hence, if a plaintiff’s financial position is such that, viewed fairly, it may be said to raise realistic doubts as to his ability to honour the cross-undertaking, it becomes incumbent upon the plaintiff to make full and frank disclosure of his financial position to the ex parte judge so as to permit the judge to determine for himself the correct order to make in the light of such disclosures. The judge in such cases has various options. He may consider it proper to refuse to grant the injunction altogether. Or, he may decide to require fortification of the cross-undertaking as a condition for the grant of the injunction. Or, he may simply grant the injunction against the cross-undertaking notwithstanding the risk that it may not be honoured or fully honoured if called upon. It is however crucial that all relevant material be placed before the judge so that he can make the decision for himself. It does not avail a plaintiff under a duty to make disclosure, to say that his non-disclosure was inadvertent or that if the ex parte judge had been told of his financial difficulties, he would nonetheless have granted the ex parte injunction. What matters is that full disclosure is made to enable the judge to make the decision for himself. 108.See also Cheung Kam Wah v Cheung Hon Wah[2005] 1 HKC 136, in which Woo VP said at [28]:
109.It should be apparent from paragraph 100 above that I take the view that the existence and pendency of the 3 claims against Gu listed in paragraph 98 above, viewed fairly, raises realistic doubts about the credibility of the Plaintiffs’ cross-undertaking in damages. They should have been, but were not, disclosed by the Plaintiffs at or before the ex parte hearing on 10 November 2017. 110.In answer, in paragraph 27.1 of her skeleton argument dated 2 May 2017, Ms Eu highlighted the following 2 matters:
111.Neither of these matters assists the Plaintiffs.
112.On material non-disclosure, Ms Eu also referred to Sir Nicholas Browne-Wilkinson VC’s judgment in Dormeuill Frères SA v Nicholian Ltd [1988] 1 WLR 1362, in which his Lordship advised at 1369G-1370E that in the ordinary case it was wrong on the hearing of an inter partes motion to go into the huge complexities involved in seeking to disentangle at that stage whether there was full disclosure when the ex parte order was obtained and that an application to set aside an ex parte order on the ground of material non-disclosure should normally be adjourned to be dealt with at the trial. 113.In Dormeuill Frères SA, the ex parte order sought to be set aside for material non-disclosure was an executed Anton Piller order. The allegedly non-disclosed material facts included principally that it was impossible to tell whether or not the goods in question were genuine. The total evidence of allegation and cross allegation amounted to some 750 pages. The defendant accepted that there would have to be some form of injunctive relief until trial. The only relevance of the question as to whether or not the ex parte order should be set aside was to determine whether the plaintiffs were liable on their cross undertakings in damages. 114.In contrast, in the present case, the Plaintiffs clearly failed to disclose their questionable financial standing. There is simply no point in delaying the decision on the question whether they were guilty of material non-disclosure in the making the ex parte application for the Injunction by adjourning it to the trial judge. 115.As a general rule, the court will discharge an injunction and refuse to renew order until trial upon finding material non-disclosure: see, for instance, China Shanshui Cement Group v Zhang Caikui, HCA 2880/2015, unreported, 18 July 2017, per G Lam J at [47]. As explained by Scott J in Manor Electronics Ltd v Dickson [1988] RPC 618 at 623:
And at 624:
116.That said, where material non-disclosure is established, the court does have 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. 117.Given Gu’s attitude, as summarised in paragraph 99 above, the court is not at all assisted on whether the non-disclosure was innocent or deliberate or provided with any acceptable excuse or reason for the non-disclosure. But for a peculiar twist in the present case, I am satisfied that the Injunction, as against Huang and Chen, should be discharged for material non-disclosure and not be re-granted. 118.The twist is that the material non-disclosure only tainted the ex parte hearing on 10 November 2017 and the Injunction granted thereat against Huang and Chen. However, the court has, at the subsequent inter partes hearing on 24 November 2017 and 18 January 2018, also granted identical/similar interim interlocutory injunctive relief against Shuangchuang. All the Opposing Defendants were represented by counsel at the second-mentioned inter partes hearing. And they had, by Huang Pin Ching’s 1st affirmation, laid the 3 pending lawsuits against Gu before the court before such hearing. 119.The subject matter of protection under the first paragraph of the Injunction, i.e. the Alishan Shares, are now vested in Shuangchuang, and not All Faith. It should be clear from the discussion above that I am of the opinion that the interlocutory injunctive relief against Shuangchuang should be continued until trial. However, Shuangchuang is owned and controlled by the Huangs. In particular, Huang and Chen are respectively the sole director and a shareholder of Shuangchuang and therefore in the position to cause Shuangchuang to act in relation to the Alishan Shares. To enhance, if not ensure, the effectiveness of the interlocutory injunctive relief against Shuangchuang, I believe it is necessary to continue to enjoin Huang and Chen from disposing of or dealing with the Alishan Shares or from causing Shuangchuang to do so. However, it is unclear to me whether it is still meaningful to restrain Huang in respect of the 2015 PRC Proceedings given that All Faith’s interest in Alishan and indirect interest in the Shenzhen Land should cease with the transfer of the Alishan Shares to Shuangchuang. K. FORTIFICATION OF UNDERTAKING AS TO DAMAGES 120.As stated in paragraph 110(2) above, Gu has confirmed that he will fortify the Plaintiffs’ undertaking as to damages, if so required by the court. See paragraph 28 of his 3rd affirmation. 121.The principles applicable to an application for a fortification of an undertaking as to damages are well settled. It is for the defendants who seek fortification to show that (1) there is a likelihood of significant loss arising as a result of the injunction and (2) a sound basis for the belief that the undertaking as to damages is insufficient. Generally, a court can order fortification where it appears to be “just and proper to protect the defendant” by making the order. See Hui Chi Ming v Koon Wing Yee[2011] 1 HKLRD 260, per Recorder Coleman SC at [30]-[34]. 122.First, as discussed in paragraph 96 above, interlocutory injunctive relief restraining the Opposing Defendants from realising the Alishan Shares and therefore the Shenzhen Land might expose them to a risk of loss of part of the value of such property in the event of a falling property market before the trial. 123.Second, a basis for believing that the undertaking as to damages would be insufficient is where the plaintiff might be unable to make good the loss. See Hong Kong Civil Procedure 2019, Volume 1, paragraph 29/1/24. Given that Gu (as the 1st plaintiff) has only some shares worth HK$5 million odd in Hong Kong but is potentially exposed to liabilities far in excess of the value of such shares and also given that Korchina (as the 2nd plaintiff) has no asset other than the All Faith Shares which are not only the subject matter the ownership of which is in issue in this action, but which have become valueless following the transfer of the Alishan Shares to Shuangchuang, there is certainly reason for one to query whether the Plaintiffs would be able to make good the Opposing Defendants’ loss should it occur. 124.In the circumstances, I consider this a “just and proper” case to order fortification from the Plaintiffs in the form of either a payment into court or a guarantee from a bank in Hong Kong. 125.In view of the value of the Shenzhen Land and the nature of the potential loss that might be sustained by the Opposing Defendants (i.e. loss of profit in a downward market) but giving the Plaintiffs credit for the value of the De Hing Mining Shares which Gu has undertaken to keep in the Kingston Account, I believe HK$5 million would afford the Opposing Defendants sufficient protection at this stage. L. DISPOSITION 126.For these reasons, upon the Plaintiffs’ undertaking to comply with any order the court may make if it later finds that this order has caused loss to the Opposing Defendants and decides that the Opposing Defendants should be compensated for that loss and further undertakings (1) not to in any way dispose of or dealing with the Ding He Mining Shares or remove them out of the Kingston Account; (2) within 14 days from today, to either pay into court HK$5 million or cause a written guarantee in the sum of HK$5 million to be issued by a bank having a place of business in Hong Kong in favour of the Opposing Defendants, such payment/guarantee being in respect of any order the court may make pursuant to the Plaintiffs’ aforesaid undertaking as to damages; and (3) to cause a copy of the guarantee to be served on the Opposing Defendants’ solicitors forthwith upon its issue:
127.I will entertain the parties’ written submissions on costs. The Plaintiffs shall have 14 days from today to file and serve such submission. The Opposing Defendants shall have 14 days thereafter to respond with a right of reply within another 14 days to the Plaintiffs.
Ms Audrey Eu SC, Mr Alan Kwong and Mr Martin Kok, instructed by Johnnie Yam, Jacky Lee & Co, for the plaintiffs Mr Paul Shieh SC and Ms Gekko Lan, instructed by Chong & Partners LLP, for the 1st, 5th and 6th defendants The 2nd defendant absent The 4th defendant excused from attendance and absent. [1] Because the Plaintiffs’ summons dated 2 November 2017, which was originally issued against the 1st defendant only but was amended on 10 November 2017 to include the 4th and 5th defendants, had not been served upon any of the targeted defendants. [2] There is a dispute, which I do not have to resolve, as to whether Gu is the subject of an Interpol red notice. [3] See paragraph 18 of the re-amended statement of claim and paragraph 5 of Gu’s 1st affirmation. [4] See paragraph 7 of Gu’s 1st affirmation. [5] The Opposing Defendants describe Kwan as Gu’s fiancée. She made a number of the Plaintiffs’ affirmations in support of the Summonses. [6] According to paragraph 5 of Huang’s affirmation dated 15 December 2017, his directorship in Shuangchuang was arranged by Huang Pin Ching. [7] See paragraph 5 of Huang Pin Ching’s 1st affirmation dated 5 December 2017. [8] Notwithstanding having been disbelieved by Madam Justice Au-Yeung at the trial of HCMP 894/2015 (see paragraph 33 below), Huang Pin Ching maintains the same factual case in the affirmations in opposition that she has made on behalf of the Opposing Defendants in this action. [9] According to paragraph 26 of the 1st affirmation of Huang Pin Ching, Gu had told her that Korchina was also his company at the meeting on 5 December 2013. See also paragraph 5 of Chen and Huang’s reply in HCMP 894/2015. [10] The Registrar has however not exhibited this copy document to her statement pursuant to s 43(2) of the Companies Ordinance (Cap 622) because it was claimed in certain affirmations filed on behalf of Huang and Chen in CACV 23/2017 that the terms of the Settlement Agreement are confidential. For the same reason, the Registrar has redacted parts of the parties’ solicitors’ letters to her that disclose the terms of the Settlement agreement. [11] See paragraphs 2 and 3 of the skeleton submission of the Plaintiffs for the hearing on 10 November 2017, which was still relied on by the Plaintiffs at the hearing on 7 May 2018. [12] See paragraph 4 of Chen and Huang’s reply in HCMP 894/2015. [13] It is a contention of the Plaintiffs that the initiation of the Shaoguan Administrative Action by Huang and All Faith was in breach of the injunction under HCMP 894/2015 Judgment. This is technically not correct as the Shaoguan Administrative Action, which was commenced on 21September 2016, predates the HCMP 894/2015 Judgment which was handed down on 30 December 2016. However, it does appear to me that the continuous prosecution of such action in the name of All Faith after 30 December 2016 would be in breach of the injunction under the HCMP 894/2015 Judgment. And the supposed reversal of the HCMP 894/2015 Judgment by the Settlement Agreement in August 2017, even if valid as contended by the Opposing Defendants, would not assist the Opposing Defendants because the Shaoguan Administrative Action had been concluded before that on 29 March 2017 when the Qujiang Court gave judgment. [14] The allegation of forgery of Huang’s signature on the News Media Agreement by All Faith acting by and/or through Huang in the Shaoguan Administrative Action seems to me to be inconsistent with the position taken by Chen and Huang on the validity of the News Media Agreement in HCMP 894/ 2015 (as summarised in paragraph 42 above). [15] According to Gu, he was not aware of the Shaoguan Administrative Action and therefore did not enter an appearance. [16] There is a dispute, which I do not have to decide, as to whether Li Chengwu was licensed to practise as a lawyer in the Mainland after 2015. The question that involves Li Chengwu is whether he did, as alleged by Wang, exert duress on her thereby causing her to submit to the Settlement Agreement and sign the Settlement Implementation Documents (see paragraph 62 below). Whether he was licensed to practise law at the time appears to me to be beside the point. [17] See also the affirmation dated 17 November 2017 of Chiu Sze Wai Wilfred, LWL’s partner, in CACV 23/2017 in opposition to the CA Setting Aside Summons and the affirmation dated 18 October 2017 of Li Chengwu exhibited thereto as “CSW-6”. Wilfred Chiu’s said affirmation was filed on behalf of Wang, Liu and Korchina. In making such affirmation, the solicitor claimed he was authorised by Wang through her agent namely, Li Chengwu. [18] See the plaintiff’s solicitors’ letter dated 8 November 2017. [19] While making clear that I was not making any final finding of fraud or dishonesty against the plaintiff but merely assessing the sufficiency of the evidence for the threshold question before me. [20] The Plaintiffs ask rhetorically why, having succeeded comprehensively in HCMP 894/2015, Wang and Korchina would enter into the Settlement Agreement which effectively conceded CACV 23/2017. [21] “黃品靜的誓章第79(4)、(5)段所聲稱由於阿里山的股權在2014年9月份已轉到港澳新聞，因此韓中文化及信全在2017年1月份的時候資產為零的說法是不正確的。黃品靜等人很清楚，由於信全與阿里山的股權問題一直都是香港與內地訴訟的焦點，股權的不確定性致使我收購韓中文化能夠在日後的訴訟裡掌握主動。” [22] On the other hand, Li Yanjun acting for Wang and Korchina had, in paragraph 5(d) of her affirmation in HCA 2602/2017, estimated the Shenzhen Land to be worth around RMB 800 million, but without producing any supporting professional assessment. [23] See paragraphs 33 and 34 of Gu’s 3rd affirmation. [24]For the sake of completeness, I should also mention that the Opposing Defendants also contended that Gu should have disclosed but had failed to disclose (1) that he was the former chairman of Sing Pao which is relevant to the veracity of the alleged Loans (which was said to originate from Gu but to be used for investment back into Sing Pao through advances by Korchina guaranteed by Wang; and (2) the Shaoguan Administrative Action, Gu’s part therein and his association with News Media. It was submitted the fact that an attempt to convey Alishan to News Media was reversed shows that there have been previous efforts to obtain the ownership by entities associated with Gu and by improper means (forgery). It is unnecessary for me to deliberate whether the Plaintiffs were guilty of further material non-disclosure as alleged by the Opposing Defendants in light of the conclusion I reach below under this heading. |
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