Great Silver Investment Ltd v. Sky Trend Global Ltd and Another

HCA 1275/2020

[2020] HKCFI 2090

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1275 OF 2020

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Before:  Deputy High Court Judge To in Chambers

Written Submissions of the Plaintiff:  5 and 11 August 2020

Written Submissions of the Defendants: 7, 10 and 11 August 2020

Date of Decision:  12 August 2020

Date of Reasons for Decision (No. 1):  17 August 2020

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REASONS FOR DECISION (NO.1)

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Introduction

1.This is the determination of the Plaintiff’s application by summons dated 3 August 2020 ordered to be determined on paper without a hearing, pursuant to the order of Au Yeung J made on 7 August 2020.  On 12 August 2020, I granted the injunction order and reserved decision.  Hereunder are the reasons for my decision.

2.This is the Plaintiffs application for a Mareva injunction restraining the 1^st and 2^nd Defendants from dealing with or disposing of their assets and the assets of Max Era Properties Limited (the “Company”) up to the value of HK$79,050,000 and from causing or authorising the Company to deal with or dispose of the balance of the proceeds of sale of two properties in Mei Foo Sun Chuen (the “Properties”) under the sale and purchase agreement entered into between the Company and Apex Billion Limited (“Apex”) dated 5 June 2020 (the “Apex SPA”) also up to the value of HK$79,050,000.

3.The Plaintiff is a company with one issued share and a paid up capital of HK$1.  Its sole shareholder is Tang Shing Bor (“Tang”), a well-known property tycoon who ranked 293^rd in Forbes’ List of Billionaires 2020 whom the Defendants allege, quoting some newspaper cuttings, is struggling in financial difficulties and borrowing heavily.   Apple Daily reported that Tang failed to complete purchase of Langham Hotel in 2019 resulting in forfeiture of deposit in the sum of HK$32.8 million and has been attempting to sell some of his properties at a discount in 2020.  Tang’s son is the sole director of the Plaintiff.    

4.The 1^st Defendant is a company incorporated in the British Virgin Islands (“BVI”) and the sole shareholder of the Company.  The Company is the registered owner of the Properties which are its major and meaningful assets.  It has no subsidiaries.  The 2^nd Defendant is the sole shareholder of the 1^st Defendant.  Thus, in effect, the 2^nd Defendant is the sole controlling mind of the 1^st Defendant and the Company.

5.On 19 November 2019, the Plaintiff as purchaser and the 1^st Defendant as vendor with the 2^nd Defendant as guarantor entered into an agreement for sale and purchase of all the issued shares in the Company at a price of HK$350 million to be completed on or before 28 April 2020, subject to usual right to make requisitions on title of the Properties and due diligent investigations of the Company (the “Agreement”).  The parties did not enter into a formal sale and purchase agreement.  The Plaintiff paid total deposits in the sum of HK$70 million.  The Plaintiff was represented by Messrs Mayer Brown (“MB”) and the Defendants were represented by Messrs Lo, Wong & Tsui (“LWT”). 

6.Disputes arose as to whether the requisitions on title and due diligence investigations were adequately answered and within time.  On 28 April 2020, MB wrote to LWT to cancel the sale and purchase and demanded return of the deposit.  LWT replied on the same date alleging that they had fulfilled all their obligations under the Agreement and stated that they would forfeit the deposits.  The sale and purchase did not complete.  Within less than four weeks, the Company and Apex entered into an unwritten agreement for the sale and purchase of the Properties on 22 May 2020 at a price of HK$300 million for completion on 17 August 2020, followed by the formal written Apex SPA.  Upon learning the Apex SPA, the Plaintiff commenced the present action and by summons dated 3 August 2020 applied for Mareva injunction against the Defendants and the Company.

Legal principles applicable to Mareva injunctions

7.The legal principles applicable to Mareva injunctions is summarised in Hong Kong Civil Procedures 2020[1]. There are five elements to be satisfied by the plaintiff for a local Mareva injunction: 

(1)  a good arguable case over which the court has jurisdiction;

(2)  presence of assets within the jurisdiction;

(3)  balance of convenience in favour of the grant of injunction;

(4)  a real risk of dissipation of assets or removal of assets from jurisdiction which would render the plaintiff’s judgment nugatory; and

(5)  compliance with the strict duty of full and frank disclosure.

There is no dispute that the grant of injunction is an exercise of the discretion of the court and it is the invariable practice of the court to require an applicant for interlocutory injunction including a Mareva injunction to give an undertaking for damages.

8.Mr Chan SC, counsel for the Defendants, indicated that the Defendants do not take issue with requirements (1) and (2) and that the question of balance of convenience will probably merge into the issue of dissipation.  The issue of full and frank disclosure is mitigated in this case by the fact that the application was not made ex-parte.  The non-disclosure relied on by the Defendants is the Plaintiff’s failure to inform the court that it is a HK$1 company with no assets but liability to the extent of the HK$70 million deposits paid. Despite their position that the Defendants have answered the requisitions and have a valid defence to the Plaintiff’s claim, there is no argument that the Plaintiff has raised a good arguable case. Thus, the focus for this application is on risk of dissipation, full and frank disclosure and adequacy of the Plaintiff’s undertaking.

Legal principles applicable to dissipation

9.In the recent case of Convoy Collateral Limited v Cho Kwai Chee and others[2], the Court of Appeal adopted the following approach in assessing the risk of dissipation as set out by Popplewell J (as he then was) in Fundo Soberano de Angola v dos Santos[3]:

(1)  The claimant must show a real risk, judged objectively, that a future judgment would not be met because of an unjustified dissipation of assets rendering the assets out of reach of a judgment whether by concealment or transfer.

(2)  The risk of dissipation must be established by solid evidence; mere inference or generalised assertion is not sufficient.

(3)  The risk of dissipation must be established separately against each respondent.

(4)  It is not enough to establish a sufficient risk of dissipation merely to establish a good arguable case that the defendant has been guilty of dishonesty; it is necessary to scrutinise the evidence to see whether the dishonesty in question points to the conclusion that assets may be dissipated. It is also necessary to take account of whether there appears at the interlocutory stage to be properly arguable answers to the allegations of dishonesty.

(5)  The respondent's former use of offshore structures is relevant but does not itself equate to a risk of dissipation.  Businesses and individuals often use offshore structures as part of the normal and legitimate way in which they deal with their assets. Such legitimate reasons may properly include tax planning, privacy and the use of limited liability structures.

(6)  What must be threatened is unjustified dissipation.  The purpose of a world freezing order is not to provide the claimant with security; it is to restrain a defendant from evading justice by disposing of, or concealing, assets otherwise than in the normal course of business in a way which will have the effect of making it judgment proof.  A world freezing order is not intended to stop a corporate defendant from dealing with its assets in the normal course of its business.  Similarly, it is not intended to constrain an individual defendant from conducting his personal affairs in the way he has always conducted them, providing of course that such conduct is legitimate.  If the defendant is not threatening to change the existing way of handling their assets, it will not be sufficient to show that such continued conduct would prejudice the claimant's ability to enforce a judgment.  That would be contrary to the purpose of the world freezing order jurisdiction because it would require defendants to change their legitimate behaviour in order to provide preferential security for the claim which the claimant would not otherwise enjoy.

(7)  Each case is fact specific and relevant factors must be looked at cumulatively.

In paragraphs 39 to 41, the Court of Appeal added the following considerations:

(8)  Each case depends on its own facts and it is impossible to lay down any general guidelines on satisfying the evidential burden[4].  Various factors could be relevant.  Most factors are not direct evidence on dissipation as such.  Matters like the nature of assets held by the defendant, nature and financial standing of the defendant, past or existing credit history, defendant’s behaviour in respect of the claim can be indicative of the risk of dissipation. 

(9)  Assessing risk of dissipation necessarily involves an evaluative and predictive judgment[5].  The evidential burden can be satisfied by drawing proper inferences from a holistic consideration of all the circumstantial materials that are indicative of risk, including matters which point against such risk.  Such holistic approach is alluded to by Kerr LJ in Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft[6] and Mortimer V-P in CAC Brake Co v Bene Manufacturing Co Ltd[7].

(10)  A solid basis to support an inference of risk of dissipation is to be contrasted with unsupported or bare statements of fear which would carry little weight[8].

10.In conclusion, the Court of Appeal said that the above approach provides good guidance; but the ultimate question is whether the applicant succeeds in showing objectively there is a solid basis for concluding that there is a real risk of unjustified dissipation of assets by a defendant.  That question is to be answered by examining the evidence holistically.  Evidence of dishonest and fraudulent conducts or other serious wrongdoings which form the basis of the claims, and which reflect adversely on the integrity of the defendant could point powerfully towards an inference of such risk.

Assessment of risk of dissipation – overall view

11.The bases on which the Plaintiff relies to suggest that there is a real risk of dissipation of assets are:

(1)  the urgent sale of the Properties to Apex;

(2)  the 2^nd Defendant’s indulging in heavy gambling;

(3)  the 1^st Defendant being a BVI company; and

(4)  whether the Defendants have any other assets within the jurisdiction sufficient to satisfy the Plaintiff’s claim.

12.In essence, the Defendants’ case is that the purpose of the injunction is not to provide the plaintiff with a security for its claim or to restrain the defendant from conducting its normal course of business; it is to restrain a defendant from evading justice by unjustified dissipation of its assets.  The thrust of their argument is that their conduct does not amount to unjustified dissipation.  On the other hand, the Plaintiff argues that the court has to take a holistic approach when assessing the risk of dissipation.  It would be convenient to consider these factors in the reverse order.

The Defendants’ assets

13.Mr Chan SC argues that the fourth basis advanced by the Plaintiff is a non-point as the burden is on the Plaintiff to prove a real risk of dissipation of assets.  Be that as it may, as suggested by the Court of Appeal in Convoy Collateral Limited, “matters like the nature of assets held by the defendant, nature and financial standing of the defendant, past or existing credit history, defendant’s behaviour in respect of the claim can be indicative of the risk of dissipation”.  By themselves, these factors are not direct evidence on dissipation as such.  But they do not cease to be relevant when the court takes a holistic approach in assessing the risk. While Mr Chan SC is definitely right that the burden of proof is on the Plaintiff, absence of evidence from the Defendants prove nothing.  But the absence of evidence of the Defendants’ means in the face of evidence of its impecuniosity or indebtedness is something to be put in the weighing scale.  Coupled with other damaging evidence, it will strengthen the inference of dissipation which the Plaintiff seeks to draw.  As was held by Lawton LJ in Dellborg v Corix Properties and Blissfield Corporation NV[9], if in the face suspicious behaviour, a defendant does not see fit to put any information before the court as to the commercial experience and assets of those who are behind them, it would lead the court to the inference that there is a risk of dissipation.

14.The Defendants chose not to disclose their financial standing.  The 2^nd Defendant is heavily in debt.  Four claims have been filed against him in the High Court, two of which have been settled in June and July 2020.  There are two outstanding writs in the combined sum of about HK$19 million.  The 2^nd Defendant said in his affirmation that if the injunction is granted, it “will seriously prejudice my financial position and I may not be able to come up with any meaningful settlement proposals acceptable to the plaintiffs” (of those writs).  While there is no evidence of the 2^nd Defendant’s means, the inference to be drawn from his statement is that he is heavily in debt and could not pay the debt without completing the sale of the Properties.  If he had any meaningful or substantial assets, he would not have found himself in such a position.

15.There is no dispute that the Company’s only meaningful assets are the Properties which it has contracted to sell for HK$300 million under the Apex SPA.  A deposit of HK$70 million had been paid to the Company under the Agreement.  That deposit has disappeared.  The 2^nd Defendant said, without any supporting proof, that it had been applied to reduce the indebtedness of the Company.  Another deposit of HK$30 million had been paid to the Company under the Apex SPA.  But the 2^nd Defendant mentioned nothing about it.  The 2^nd Defendant said that upon completion of the sale to Apex, the Company would receive the balance of the purchase price in the sum of HK$270 million, but had to discharge a debt of HK$217,353,485.49 before it can complete the sale.  Hence, according to the 2^nd Defendant, at the highest the net asset value of the Company would be HK$52,646,514.51.

16.Nothing is known about the financial standing of the 1^st Defendant other than that it is the holding company of the Company which would have a net asset of HK$52,646,514.51 upon completion of the sale to Apex.  On the other hand, according to the Statement of Financial Position of the Company as at 31 December 2019, it owed the 1^st Defendant HK$110,557,387.  The Company would not be able to repay this debt to the 1^st Defendant.  The 2^nd Defendant did not account for this debt in his affirmation. Thus, the inference is that the combined assets of the Company and the 1^st Defendant is at the highest HK$52,646,514.51. 

The 1^st Defendant being a BVI company

17.The 1^st Defendant is a BVI company. Mr Chan SC argues that that does not itself equate to a risk of dissipation.  Mr Lin, counsel for the Plaintiff, does not seek to dispute that proposition, but argues that it is a factor to be taken into account. 

18.In my view, businesses and individuals often use offshore structures as part of the normal and legitimate way in which they deal with their assets.  The 1^st Defendant was incorporated in September 2004.  It is the holding company of the Company which acquired the Properties in 2005.  Against such a background, it is probable that this offshore structure was chosen by the 2^nd Defendant for any of the legitimate reasons suggested in Convoy Collateral Limited,such as tax planning, privacy and the use of limited liability structures.  I do not think any adverse inference may be drawn against the Defendants arising from the mere fact that the 1^st Defendant is a BVI company. 

The 2^nd Defendant’s indulgence in heavy gambling

19.The strongest ground relied on by the Plaintiff is the 2^nd Defendant’s history of heavy gambling.  Anyone has the right to gamble.  Gambling is a game of chance, not a business other than for the operator of the gambling establishment.  For the gambler, placing bets is not the ordinary course of business.  One must be just to others before generous to oneself.  If a person uses funds which should be set aside for paying his just debts to gamble, he is dissipating assets under circumstances which makes such dissipation unjust.  The following observations from Mortimer JA in Ng Chun Fai Stephen v Tamco Electrical and Electronics (Hong Kong) Ltd[10]is pertinent:

“Mr Chain submits that the judge was wrong to rely upon the gambling. He says that the plaintiff must take the defendant as he finds him and if a defendant has enjoyed a lavish lifestyle before as well as after the beginning of proceedings, or has been a heavy gambler before and after, these are not matters which establish a risk of dissipation. With respect we disagree. The speed with which these large sums have been credited to and then removed from the account produced is evidence of a risk of dissipation to be put into the scales. Bearing this in mind, together with all the other evidence of the 1^st defendant’s dealings when running the plaintiff’s business, a real risk of dissipation was demonstrated …”

20.There were four writs issued against the Defendant in 2019 and 2020, namely, HCA 1844/2019, HCA 1814/2019, HCA 2252/2019 and HCA 1090/2020.  The first writ is a moneylender’s action.  The other three writs are for gambling debts incurred in 2018 and 2019.  The first two were settled. 

21.HCA 1844/2019 is a moneylender’s writ issued on 4 October 2019 for a debt of HK$3,315,571.  The plaintiff was a moneylender and not a banking institution, suggesting that the 2^nd Defendant was quite a desperate borrower short of quality collateral.  That writ was settled in July 2020.  In terms of timing, that coincidentally was shortly after the Company received the deposit from the Apex SPA.

22.HCA 1814/2019 was an action to recover a debt in the amount of HK$4,467,446 commenced on 30 September 2019, presumably for gambling debt arising in that year.  There were no details about that claim in the exhibits.  That action was settled in June 2020, also shortly after receiving the deposit from the Apex SPA.

23.In HCA  2252/2019, the statement of claim showed that the 2^nd Defendant entered into a credit agreement with a casino in the State of Delaware on 3 June 2017.  Within seven days from 29 July 2018 and 4 August 2018, he signed gaming chips in the sum of US$1.5 million.  He made partial payments in April 2019, leaving an outstanding balance of US$1,350,000.  On 21 May 2020, he issued a cheque in Hong Kong in the sum of HK$10,590,750 in purported settlement of the outstanding debt.  That cheque was dishonoured.  A warrant of arrest was issued against him by the District Attorney of the State of Nevada.

24.In HCA 1090/2020, the 2^nd Defendant executed two credit instruments in the total sum of US$1 million on 28 December 2018 in favour of the casino.  They were dishonoured on presentment on 5 September 2019.  The casino claims US$1,041,544.

25.The four writs, though two of which had been settled, is evidence of the 2^nd Defendant’s gambling habit and indulgence in gambling during the last two quarters of 2018.  The amount borrowed for gambling during that half year totalled HK$24 million, which is a very huge sum for that purpose by any standard.  While a person’s appetite and capacity for gambling depend very much on his station in life, the fact that one cannot repay within more than reasonable time is evidence that he has indulged himself in a gambling habit beyond his station in life.  The 2^nd Defendant denied he was a habitual gambling arguing that he never travelled to the United States since 2019.  As submitted by Mr Lin, that was most probably because of the warrant of arrest issued against him and the obvious fact that in 2019 he was short of money for gambling, rather than that he has quit his gambling habit.  The situation will be very different when the Apex SPA is completed.  If funds become available to the 2^nd Defendant for him to settle the two outstanding writs and have the warrant of arrest discharged, he will indulge in his gambling habit.  Being a heavy gambler as he has demonstrated himself, there is a heightened risk of dissipation of the sales proceeds. 

26.Another observation from these three gambling cases is the 2^nd Defendant’s readiness in issuing credit instruments and cheques.  These cheques and credit instruments were not for small sums which one would readily issue without taking care to check if funds were available. Absent any explanation, the inference is that the 2^nd Defendant knew those cheques and credit instruments would not be honoured upon presentation.  This reflects adversely on his integrity and heightens the risk of dissipation.

Sale of the Properties to Apex

27.The thrust of the Plaintiff’s case is that in less than four weeks after the Plaintiff rescinded the Agreement, the Defendants caused the Company to sell the Properties at a price which is HK$50 million less than the purchase price of HK$350 million under the Agreement and paying an agency commission of 4%.  The substantial discount, excessive commission and the speed at which the Properties were disposed of are evidence on which the risk of dissipation could be inferred. 

28.The 2^nd Defendant explained that at the time the first mortgagee had exerted pressure on him to repay the loan and interest on the loan was high and accumulating.  He said that the property market had been falling since the Agreement was signed.  Hence, the speedy sale was occasioned by his anxiety to mitigate loss in a plummeting property market. The 2^nd Defendant said that he entered the Apex SPA on 5 June 2020. This is not entirely correct.  Item (G) of The Third Schedule to the Apex SPA showed that the parties had entered into a preceding unwritten agreement on the same terms on 22 May 2020, ie less than four weeks after the Plaintiff cancelled the Agreement.

29.I think it is common knowledge that there has been a downturn in the property market since the beginning of 2020, presumably caused by the political and epidemic situation in Hong Kong.  There is no evidence that the sale was undervalued, though the excessively high commission is something of a concern.  The anxiety of the 2^nd Defendant as the person in ultimate control of the 1^st Defendant and the Company to sell the Properties to ease his own financial problem could be well understood.  However, the urgent sale and the excessively high commission are evidence on which risk of dissipation of assets may be inferred.  This is particularly so when the proceeds of sale are placed in the hands of the Company subject to the control of the 2^nd Defendant who is a heavy gambler.

Merits of the parties’ case

30.For the purpose of these proceedings, the court should not be engaged with arguments on the merits of the Plaintiff’s underlying claim, but focusing on the risk of dissipation.  That does not mean the court may not form any provisional views on merits to enable the court to determine on a holistic approach where the justice lies.  In this regard, it is important to note that there is no dispute that the Plaintiff has a good arguable case.  This takes away any suggestion by the 2^nd Defendant that the Plaintiff was trying to wriggle out of the Agreement using the requisitions as a pretext while in fact its controlling mind, ie Tang, was not in a position to enable the Company to complete the purchase because he was struggling in his own financial difficulties.  

31.Though the substance of the Agreement was sale and purchase of the Properties, the Agreement was for sale and purchase of the entire shareholding in the Company.  The Defendants’ ability to answer the requisitions raised in respect of accounting matters of the Company is as important as the requisitions relating to title of the Properties.  The Defendants did not respond to the Plaintiff’s complaints about these failures. The Defendants cannot shy away on those failures by conceding there is a good arguable case and saying that the court should not go into arguments about the merits.     

32.The Plaintiff found inconsistent accounting treatment and incorrect tax provisions made to the draft 2018 Audited Accounts.  For such reason, the Plaintiff was not in the position to agree or disagree to (1) the draft 2018 Audited Financial Statements of the Company, (2) the draft tax computation of the Company for the year of assessment 2018/2019 and (3) the profits tax return – final assessment for 2018/2019 and provisional payment for 2019/2020.

33.More importantly is the Defendant’s failure to answer the requisition about a tax litigation in DCTC 875/2019.  In that case, the Commissioner of Inland Revenue pursued the Company for outstanding balance of profits tax payable by the Company.  Upon the requisition of MB, LWT produced a copy of consent order and judgment of Master Jacqueline Lee dated 13 January 2020 under which the Company consented to pay the entire outstanding balance of profits tax in the sum of HK$3,418,082 with interest.  However, when MB requested for the usual written confirmation of closure of the case from the Inland Revenue Department, LWT failed to provide.  A consent order is not evidence of payment and discharge of the liability.  LWT neither disputed Inland Revenue Department’s usual practice of issuing written confirmation nor produced evidence of payment of the sum agreed to be paid.  Had the sum been paid, LWT could have no difficulties obtaining confirmation from the Inland Revenue Department or bank confirmation of payment.  LWT’s failure cast serious doubts on whether the requisition has been properly answered and the solvency of the Defendants and the Company.   This potential liability is not insignificant.

34.The Defendants were late in producing the draft 2019 Audited Accounts.  LWT emailed the draft to MB on 16 April 2020 when it should have been provided to the Plaintiff by 29 March 2020, pursuant to clause 15 of Schedule 2 of the Agreement of which time should be of the essence.  More importantly, in breach of the Agreement, the 1^st Defendant failed to arrange for the issuance of the final 2019 Audited Accounts on or before the completion date pursuant to clause 15 of Schedule 2 of the Agreement.

35.Taking a broad brush approach, the parties may be even on the merits in respect of the property requisitions, but the Plaintiff, at the very least, has a strong case for cancelling the Agreement based on the Defendants’ failure in satisfying the Plaintiff’s due diligence investigation. 

Risk of dissipation of assets

36.In summary, the combined financial position of the Defendants and the Company is as follows.  At the highest, the combined assets of the Company and the 1^st Defendant is HK$52,646,514.51. The 2^nd Defendant is heavily in debt, at least to the extent of HK$19 million under the two outstanding writs.

37.The 2^nd Defendant is the controlling mind of the Company and the 1^st Defendant.  He has demonstrated himself to be heavy gambler and a person who readily issued cheques and credit instruments knowing that they will not be honoured upon presentation.  He is a person of doubtful integrity.  Against that background, he chose not to disclose his and the 1^st Defendant’s financial position.  He is precisely the type of person who has a propensity to dissipate assets when they fall into his hands in order to satisfy his gambling habits.  The Company under his control is about to receive HK$270 million proceeds of sale of the Properties.

38.The 2^nd Defendant has given an affirmation asserting that the Company had to pay HK$217,353,485.49 out of the proceeds of sale to discharge mortgages and expenses relating to the Properties.  He said that the deposits of HK$70 million received from the Plaintiff had been used to repay the amount outstanding to the mortgagees to reduce the mortgage loans otherwise the outstanding loans would be higher.  He was silent about the deposit of HK$30 million received from Apex.

39.I have grave doubts about the credibility of his evidence.  He took the position that he has no burden to disclose his financial position.  He may be right on the issue of burden, but his failure to adduce evidence does not help improve his credibility, but instead enables inference to be drawn against him.  His assertion about what he had to pay to discharge the mortgages and expenses before completion of the sale is unsupported by documentary evidence.  There is no evidence to support his assertion that the deposits of HK$70 million from the Plaintiff had been applied to reduce the mortgage loans.  He also fails to explain why the deposit from Apex did not reduce that liability.  He had received deposits from the Plaintiff and Apex in the sum of HK$100 million.  His assertion that he had to pay HK$217 million before completion does not sit well with the deposits of HK$100 million he had received and the 2019 Audited Accounts of the Company.  His evidence in this respect impressed me that he is an insincere and evasive witness with money to hide and the truth to hide.  That enhances the risk of dissipation.

40.In paragraph 11 of his affirmation, the 2^nd Defendant said, may be inadvertently, that “if this court were to allow the application, the injunction will seriously prejudice my financial position and I may not be able to come up with any meaningful settlement proposals acceptable to the plaintiffs” in the two outstanding writs.  Impliedly, it is his intention to apply the proceeds of sale to pay his gambling debts of HK$19 million.  I clearly understand that the 1^st Defendant and the Company are his assets at his disposal.  But these companies have their own corporate identities.  The Properties are to be sold by the Company.  The proceeds of sale are to be paid to the Company.  The 1^st and 2^nd Defendants’ potential liability to the Plaintiff are not liabilities of the Company.  It is not open to the 2^nd Defendant to cause the 1^st Defendant and the Company to apply the proceeds of sale to be received to discharge his personal liabilities owed to the casino.  The time-honoured principle in Salomon v Salomon[11] has to be respected.  The 2^nd Defendant may argue that as the sole owner and controller of the Company and the 2^nd Defendant it is open to him to cause the Company to declare dividends or to reduce its capital or to take whatever steps to release the funds to him.  Not until that is done, the proceeds of sale are assets of the Company, his and the 1^st Defendant’s potential liabilities to the Plaintiff are his and the 1^st Defendant’s.  In attempting to use a third party’s (the Company’s) assets to discharge his personal liability is unjustified dissipation of assets.  This paragraph of his affirmation betrayed him.

41.In conclusion, taking a holistic approach I am well-satisfied that the risk of dissipation of assets is extremely high.

The Plaintiff’s undertaking

42.Mr Chan SC attacks the adequacy of the Plaintiff's undertaking for damages.  The Plaintiff is a HK$1 company with no assets but an obvious liability for a loan of HK$70 million presumably from its director or shareholder.  In reply, Tang offered to give an undertaking on behalf of the Plaintiff.  There are suggestions from the 2^nd Defendant that Tang is struggling with his own financial problems as a result of the plummeting property market.  The likely damages, according to the 2^nd Defendant’s own affirmation, would be in the region of HK$50 million.  Tang appears to be a businessman and property investor of some substance.  It is not disputed that he has a large property portfolio, though it is suggested that he is heavily in debt.  His net asset value should be good enough for the likely damages.  Further, on my provisional view, the Plaintiff has shown a strong case.  The chance of Tang having to be called upon to perform his undertaking is relatively low.  In the circumstances, I consider Tang’s undertaking adequate.

Conclusion

43.For the above reasons, I am satisfied that risk of dissipation of assets in the hands of the Company and the 1^st Defendant under the control of the 2^nd Defendant is extremely high.  An injunction should be granted restraining the Defendants from removing their assets, including the assets of the Company in the manner as sought by the Plaintiff.

44.Though the 2^nd Defendant contended that the net proceeds under the Apex SPA will be about HK$52 million.  For reasons as I have explained, I do not think it is true.  Though a guesstimate, I believe the proceeds should be good enough to cover the amount sought to be restrained by the Plaintiff.  This will be known in a couple of days. Disclosure is a rather draconian order to make.  It causes inconvenience and adds on costs of the litigation.  More importantly, to a certain degree it is an infringement of privacy.  In view of the above, I shall defer making an order of disclosure pending information about the net proceeds which will be restrained.  This is a very accommodating gesture of the court which is not to be misinterpreted or taken advantage of.  The Defendants are invited to inform the Plaintiff’s solicitors by 1 pm on 18 August 2020 the account or accounts into which the proceeds of sale are deposited and the amount available to be restrained under the injunction with a schedule of receipts and payments to be made.  Failing that or where the amount advised is less than HK$79,050,000, the Plaintiff is at liberty to apply by affidavit for disclosure order in the term as set out in the draft amended injunction order attached to their summons dated 3 August 2020. I shall not invite affidavit in opposition by the Defendants.  The disclosure order will be granted automatically.  All that needs to be considered has been considered.  The special procedure set out above is to avoid any unnecessary costs, inconvenience and infringement of privacy in the likely event that the amount available for injunction is sufficient.

45.I therefore make the following orders:

(1)  a Mareva injunction in terms of the draft amended order attached to the Plaintiff’s summons dated 3 August 2020, with the deletion of paragraph 2 on page 2;

(2)  there be liberty to apply; and

(3)  costs in the cause.

Mr Kenny Lin, instructed by Messrs. Vincent T. K. Cheung, Yap & Co, for the Plaintiff

Mr Edward Chan, SC, instructed by Messrs. Lo, Wong & Tsui, for the 1^st and 2^nd Defendants