Zhao Zhi Qiang v. Zhao Zhiguang and Another

HCA 1614/2019

[2020] HKCFI 2990

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1614 OF 2019

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Before: Deputy High Court Judge MK Liu (Paper Disposal)

Dates of Plaintiff’s Written Submissions:  10 and 13 November 2020

Dates of Defendant’s Written Submissions:  10 and 16 November 2020

Date of Decision:  27 November 2020

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DECISION

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1.In these proceedings, the dispute is between two brothers (the plaintiff (“P”) and the 1^st defendant (“D1”)) over the ownership of a garment business, and specifically over the shares in the 2^nd defendant (“ATL”). The most valuable asset of D2 is its 96.25% shareholding in Kunshan Hoza Garment Manufacturing Company Limited (昆山厚實製衣有限公司) (“Kunshan Hoza”), which in turn owns a valuable piece of land in Kunshan, Jiangsu Province (“the Land”). The current value of the Land is between RMB50-80 million. There is a factory of the garment business on the Land.

2.There are 3 summonses before this court, namely the Continuation Summons, the Discharge Summons and the Expunge Summons.  Details of these summonses are set out below.

3.By summons dated 5 September 2019 (“the Continuation Summons”), P applies for an order to continue the ex parte proprietary injunction granted by G Lam J on 29 August 2019, as amended pursuant to the order of K Yeung J on 13 September 2019 (“the Injunction Order”).  By the Injunction Order, D1 is restrained from:

(1)  acting or holding himself out as shareholder of ATL and doing any acts qua shareholder including:

(a)  disposing of or dealing with or diminishing the value of any of the 10,000 issued shares of (or the equivalent 100% shareholding in) ATL (“the Shares”); and/or

(b)  changing the structure of the board of directors and the management of ATL;

(2)  acting or holding himself out as director of D2, doing any act on behalf of D2 including disposing of any asset of D2.

4.By the Continuation Summons, P also seeks an ancillary disclosure order against D1.

5.On 13 September 2019, in the absence of D1 but in the presence of ATL who was represented by counsel instructed by D1’s present solicitors, K Yeung J continued the Injunction Order until the call-over hearing fixed on 17 January 2020.

6.On 18 December 2019, the Injunction Order was further continued by Mimmie Chan J with consent from D1 until the substantive hearing, which was fixed on 16 June 2020.

7.On 10 March 2020, D1 took out a summons (“the Discharge Summons”) to apply for an order to discharge or to vary the Injunction Order.

8.On 12 June 2020, the Injunction Order was further continued by me with consent from D1 again until the determination (on paper without an oral hearing) of the Continuation Summons and the Discharge Summons.

9.Subsequently, on 7 July 2020, D1 issued a summons (“the Expunge Summons”) to apply for an order to debar P from making various references in the pleadings and affirmations to a meeting between the parties and their brother Zhao Zhiwei in April 2019 (“the First Meeting”) and a meeting between the parties and their common friend Jiang Han on about 3 July 2019 (“the Second Meeting”) and expunge/strike out those references therein.

10.On 16 July 2020, I directed that Expunge Summons be determined on paper without an oral hearing immediately before the Continuation Summons and the Discharge Summons.

11.I have considered the written submissions provided by the parties concerning all the 3 summonses.  After considering those submissions and the documents before me, I reach the conclusion that the Expunge Summons should be adjourned to the trial and be determined by the trial judge at the trial.  I would make an order in terms of the Injunction Summons and dismiss the Discharge Summons.  My reasons are set out in the paragraphs below.

THE PARTIES’ RESPECTIVE CASES

12.I would first set out the respective cases of P and D1.

P’s case

13.P claims that he is and was at all material times, the sole beneficial owner of ATL and Kunshan Hoza.  P is having a garment business (“P’s Garment Business”).

14.D1 is the younger brother of P.  D1 is and was at all the material times living in Mainland China.

15.ATL was incorporated in Hong Kong on 28 September 2001 and was a shell company acquired by P via D1 in or about January 2002 for P’s Garment Business.

16.P is based in the US.  He first started to develop his garment business in the 1990s, initially in New York and then in Shanghai.  It was then that P began to enlist the help of D1, who was and still is based in Mainland China.  P delegated to D1 the task of managing the Mainland China side of P’s Garment Business.

17.P operated his Garment Business through the Hoza Group companies, of which P was at all material times the sole beneficial owner (with the exception of International Direct Group Inc (“IDG”)[1]).  The Mainland China companies are generally registered in the name of P’s employees and being held on trust for P, because it was complicated for P as a US citizen to have Mainland China companies registered in his name.

18.In early 2002, at P’s instruction and request:

(1)  D1 acquired ATL as a shell company to hold P’s investments in relation to the Mainland China side of P’s Garment Business.  D1 held 99.99% of the Shares in ATL on trust for P, and the remaining 0.01% was held by P’s BVI company, Simple Style Limited (“SSL”).  SSL is owned by P.

(2)  D1 arranged for Kunshan Hoza to be incorporated, using P’s funds as the initial capital. Upon incorporation, the shares in Kunshan Hoza were held by D1, P and their mother (“the Mother”).  D1 and the Mother were holding the shares on trust for P.

(3)  In 2002-2003, P procured D1 to acquire the leasehold interest and/or use rights in the Land from the Kunshan Government and register it in the name of Kunshan Hoza, for the purposes of housing a factory and related facilities (“the Factory”) for P’s Garment Business.  The total consideration for the Land, in the sum of RMB5,629,930, was paid by using P’s funds routed through Hoza Group companies, namely 上海厚實時裝貿易有限公司 (“Shanghai Houshi”) and Kunshan Hoza.  Subsequently, the Factory was constructed on the Land using P’s funds, and the construction works were completed in 2005.

19.In the meantime, in order to assume direct control over the company holding the Land, P effected the following transfers of shares:

(1)  On 12 December 2002, 99% of the Shares in ATL were transferred to P, leaving 1% to be held by D1 on trust for P.  At the same time, P was appointed director of ATL, in place of SSL.

(2)  On 19 August 2004, 90% of the shares in Kunshan Hoza were transferred from D1 and the Mother to ATL, leaving 10% to be held by D1 on trust for P.  At the same time, P was appointed the Legal Representative and Chairman of Kunshan Hoza, until he was wrongfully removed in 2013.

(3)  As a result, between 2002 and 2014, P was the registered shareholder of 9,900 Shares in ATL, with the other 100 Shares held by D1 on trust for P. ATL in turn held 90% and subsequently 96.25% of Kunshan Hoza, which itself held the Land.

20.In 2009, P accepted D1’s proposal and agreed to transfer the Shares to D1 to hold on trust for P (“the Trust Arrangement”), in anticipation of divorce proceedings between P and his ex-wife. P therefore executed undated transfer documents to transfer the 9,900 Shares to D1.

21.D1 did not register the transfer of the said 9,900 Shares in 2009.  However, in 2013-2014, D1 made the following moves to take control of ATL and Kunshan Hoza:

(1)  In or about December 2013, P was purportedly removed and replaced by D1 as Legal Representative and Chairman of Kunshan Hoza, by the use of corporate documents containing forged signatures of P.

(2)  On 29 July 2014, D1 suddenly registered himself as the shareholder of the 9,900 Shares. P was not notified beforehand, and has no recollection of having instructed or approved the registration of the transfer.  Thereafter, D1 became sole registered shareholder and appointed himself as sole director of D1.

(3)  On the face of the documents, the consideration for the transfer of the 9,900 Shares was HK$1 per share (ie par value), which was not even paid by D1.

22.In or around October 2018, P and D1 fell out over P’s current wife, Guo Yan (“Guo”).  D1 distrusted Guo, disapproved of her low educational background, and found her manipulative and opportunistic. Guo alleged that D1 had been misappropriating funds from P’s companies and had been having various affairs.  D1 left P’s Garment Business shortly thereafter.

23.Since then, P has repeatedly asked D1 to transfer the Shares back to P.  However, D1 has all along delayed and refused to do so, on the pretext that the Garment Business had to be kept out of the hands of Guo and that P and Guo had badmouthed D1 about his business and personal conduct.  Nevertheless, in the course of discussing the matter, D1 acknowledged on more than one occasion that P had paid for the Land, and that D1 had been holding the assets of the Hoza Group on P’s behalf.  During the Second Meeting, D1 further demanded that P should give him 30% of the Shares as a condition for returning the rest of the Shares to P.

24.At a later time, D1 attempted to transfer away ATL’s most valuable assets, namely its shareholding in Kunshan Hoza (and therefore D2’s indirect interest in the Land), to D1’s own name.  This was discovered by P on 4 August 2019.  The change of shareholding would be effected as and when D1 provided the necessary notarised transfer documents to the Market Supervision Administration in Kunshan (昆山市場監管局).

25.P says that in view of this development, there was and still is a clear need to restrain D1 from disposing of the Shares which he held on trust for P, and/or from disposing of ATL’s shareholding in Kunshan Hoza.  The Injunction Order was obtained on this basis.

D1’s case

26.D1’s case is that he was and is the sole beneficial owner of ATL.  He acquired ATL as a shell company in Hong Kong on 29 January 2002.  He acquired ATL for future investment purpose and to pay and/or receive cash for garment business owned and operated by D1 through his various companies in Hong Kong and in Mainland China.

27.D1’s Hong Kong companies would receive purchase orders from IDC[2], and then would ask D1’s Mainland China companies to do the manufacturing works.  From about 2015 onwards, the manufacturing works were carried out by Kunshan Hoza, after D1 caused and personally funded the building of the Factory on the Land.  In about August 2019, D1 caused Kunshan Hoza to cease to manufacturing garments for P’s Garment Business, for a company in P’s Garment Business (昆山欣錦榮貿易有限公司Kunshan Xinjinrong Trade Company Limited (“Xinjinrong”)) had defaulted to make payments for 3 months.

28.Kunshan Hoza was incorporated by D1 on or about 9 February 2002.  Prior to the incorporation, on or about 6 February 2002, D1 paid a total registered capital of RMB 3 million.  To satisfy the requirement of having at least 2 shareholders, D1 caused the Mother to be a registered shareholder to hold 50% of the shares on trust for D1, and D1 himself was the other registered shareholder.

29.D1 incorporated Kunshan Hoza as his investment holding company to acquire and hold the Land.  The Land was purchased by using D1’s own funds.

30.In ATL, P (an American citizen) was holding 99% of the shares on trust for D1.

(1)  In about 2002, P intended to purchase a property in Shanghai and asked D1 to permit P to use ATL as an investment vehicle to purchase the property. D1 agreed and transferred 9,899 shares to P, and SSL transferred 1 share to P.  D1 remained to have 100 shares and remained to be a director of ATL after the transfer. P held the 9,900 shares on trust for D1.

(2)  In December 2002, D1 provided a loan to P to facilitate P to purchase the Property in Shanghai.  On or about 19 December 2002, ATL purchased the property and held the property on trust for P.

(3)  On 4 February 2005, P sold the property.  However, P remained holding the 9,900 shares in ATL on trust for D1.

31.In about 2004, to avoid the Land being forfeited by the Mainland Government by reason of being left idle, D1 personally funded and arranged for the building of the Factory thereon. 

32.In 2004, with a view to obtain the benefit under a tax scheme in Mainland China at that time, D1 caused Kunshan Hoza to transfer 90% of its shares to ATL.  This caused Kunshan Hoza to become a Chinese-Foreign joint venture and could have a benefit under a tax scheme in Mainland China at that time.  D1 also caused P to be a director of Kunshan Hoza to make it appearing to be a Chinese-Foreign joint venture.  D1 also transferred US$850,000 of his funds to ATL so that ATL could inject the funds to Kunshan Hoza to increase its share capital and cash flow.  All these were done for the purpose of enabling Kunshan Hoza to have the tax benefit under the relevant scheme in Mainland China at that time.

33.In 2013, the tax benefit scheme came to an end. In 2014, D1 requested P to transfer all his shares in ATL back to D1.  As a result, documents for transferring the shares back to D1 were prepared.  In about May or June 2014, P signed the transfer documents.

34.The relationship between P and D1 broke down in about June 2019.  The disputes between P and D1 include matters concerning Guo.

EXPUNGE SUMMONS

35.By the Expunge Summons, D1 seeks to expunge or strike out and to debar P from referring to the First and Second Meetings.  According to P, D1 has made some acknowledgement as to P’s entitlement to the Land and/or the Shares in these meetings.  The basis of D1’s application is that the First and Second Meetings involve settlement negotiations regarding the disputes raised in these proceedings, and hence these meetings are protected by the without prejudice privilege. 

36.The summons is opposed by P.  P submits that:

(1)  The without prejudice privilege is inapplicable because:

(a)  no disputes existed between P and D1 in relation to the Shares at the time of the meetings;

(b)  the meetings are not bona fide attempts to settle any dispute; and

(c)  the meetings involve unambiguous impropriety.

(2)  In any event, D1 has waived the privilege by referring extensively to the meetings in his pleadings and affirmations without raising any objection based on privilege or otherwise.

37.Transcripts of the First Meeting and the Second Meeting have been produced.  Having considered those transcripts and the submissions made by the parties, I am of the view that the Expunge Summons should not be determined now and should be adjourned to the trial and be determined by the trial judge after hearing all the evidence.

(1)  The First Meeting and the Second Meeting must be viewed in context.  In order to determine the subject matters being discussed in these meetings and the nature of these meetings, the context must be considered.  What occurred immediately or shortly before and after each meeting may well be part of the context.

(2)  Although the transcripts can show the words said by the persons participated in the First Meeting and in the Second Meeting, the tone of the utterances and the manner of the speaker when he was speaking those words cannot be shown in the transcripts.  The tone of the utterances and the manner of the speaker when he was uttering those words would be relevant in considering what message the speaker in fact intended to convey by those utterances.

(3)  The transcripts show that some of the words uttered by the speakers in the meetings are inaudible.  It is not known whether the inaudible words would bear any significance.

(4)  The transcript of the Second Meeting show that P and D1 were discussing a document in that meeting[3]. At present, the nature and the contents of that document are unclear.  That document may affect the determination of the Expunge Summons.

(5)  All the aforesaid cannot be ascertained by the court now based upon affidavit evidence before the court.  All these matters can only be properly investigated by the court at the trial.

38.Since I have decided to adjourn the Expunge Summons to the trial and that summons would be determined by the trial judge, I would not take the First Meeting and the Second Meeting into account while I am considering the Continuation Summons and the Discharge Summons.

CONTINUATION SUMMONS & DISCHARGE SUMMONS

39.Counsel for D1 submits that the Injunction Order should not be continued and should be discharged without a re-grant by reason of the following:

(1)  There is no serious question to be tried.

(2)  P has made a number of serious material non-disclosures in the ex parte application.

(3)  The Injunction Order is interfering the internal management of ATL, which is something that this court should not do.

I would examine these objections in turn.

Serious issue to be tried

40.It is well established that “a serious question to be tried” is not a steep hurdle.  All that has to be shown is that the claimant has prospects of success which in substance and reality exist, and odds against success do not defeat him.  As long as there is a serious question, it matters not whether the court thinks that the chances of success at trial is 90% or 20%[4]. If the opposing party seeks to show that there is no serious issue to be tried, the threshold is high, as it would be necessary to demonstrate that the claim should be struck out[5].

41.As to interlocutory proprietary injunctions, as held by DHCJ Douglas Lam SC in Pacific Rainbow International Inc v. Shenzhen Wolverine Tech Ltd^[6]:-

(1)  The principles in American Cyanamid Co v Ethicon Ltd^[7] apply, although irremediable damage need not necessarily be shown and the court will readily find that the balance of convenience favours the preservation of the fund pending trial^[8].

(2)  The court need only be satisfied that the claim is not frivolous or vexatious, in other words, that there is a serious question to be tried. If the opposing party seeks to show there is no serious issue to be tried, the threshold is high, as it would be necessary to demonstrate that the claim should be struck out^[9].

(3)  It should be noted that the existence of a good arguable defence does not necessarily negate a good arguable case^[10].

42.In respect of disputes between family members, the following have to be borne in mind:

(1)  In Chen Tek Yee & Ors v. Chan Moon Shing[11], Yuen JA said:-

“29. …… when the parties are in a personal relationship (as contrasted with parties in a commercial transaction), it would be unrealistic to expect written records of assurances ……”

(2)  Similarly, in Cheung Lai Mui v. Cheung Wai Shing & Ors[12]^, Wilson Chan J said:

“95. …… Members of the family dealt with each other on the basis of trust, not mistrust. They could not have envisaged litigation in the future, and they would not have generated records to protect themselves out of the blue.”

43.Counsel for D1 submits that there is no serious question to be tried.  Counsel argues that:

(1)  There is no declaration of trust or any written document evidencing the Trust Arrangement as alleged by P.

(2)  There is no independent corroboration that the alleged Trust Arrangement was made in anticipation of the divorce proceedings between P and his ex-wife.  In any event, P’s explanation that the alleged Trust Arrangement arose as a precautionary measure is inherently implausible.

(3)  There is no evidence to suggest that Kunshan Hoza has been set up by P other than P’s bare assertions.

(4)  Further, the forgery complaints made by P have no merit.

(5)  P claims that D1 was merely an employee in P’s group.  This allegation is not supported by credible evidence.

44.I would not and should not conduct a mini-trial on affidavit evidence.  The issue before me is whether there is a serious question to be tried.  That issue should be approached by applying the principles set out in [40] – [42] above.

45.In order to succeed in arguing that there is no serious question to be tried, D has to demonstrate that P’s claim is frivolous or vexatious and is liable to be struck out.  That is a high threshold.  With respect to counsel for D1, in my view, this threshold is not met.  On the contrary, I agree with counsel for P that there is ample evidence showing a serious question to be tried in these proceedings.

46.Since P and D1 are brothers, it cannot be said that there is no serious question to be tried merely because of the absence of a declaration of trust or a written instrument recording the Trust Arrangement in P’s case.  As submitted by counsel for P, there is ample evidence in support of the trust claimed by P:

(1)  In the emails passing between P and D1 on 6 and 7 December 2018:

(a)  D1 did not deny or take any issue with P’s statement that “你94年到我這裡，陳剛是95年到我這裡”.  Read in context, it is arguable that the words “我這裡” are referring to P’s Garment Business and the Hoza Group founded by P.

(b)  D1 acknowledged in his reply email that P’s company did not belong to him, but that because of P’s care and nurture for D1, D1 worked for the company as if it were his own (“首先感謝我從小到今的關心和栽培，給我我這樣一個平台鍛鍊和工作... 也正因為如此我把公司當自己的事來做”). D1 recognized and accepted that the company was not his own, but was owned by P.

(c)  The reference to “公司” is not specific.  It is arguable that the term used is a referring to the Hoza Group as a whole.  D1 says that “公司” in that email only means Xinjinrong.  However, Xinjinrong was only set up in 2015, but in those emails P and D1 were discussing the “company” where D1 had worked since 1994.  D1’s argument does not appear to be a convincing argument.

(d)  D1 acknowledged that he was holding assets belonging to P, which he would sort out in due course (“你說你的東西跟我理清我會的”).  It is arguable that P’s assets would have included the Shares in ATL, which according to P, are all beneficially owned by P.

(e)  D1 contends that “東西” only means P’s house in the US (“the Wheatley Road Property”).  It would be sufficient for me to say at this stage that this may not be a natural reading in the context of the email.

(2)  In a Wechat message from D1 to P dated 16 October 2018 at 12:25 am:

(a)  D1 stated “你寄放在我這裡的一切權利，這次你回來我交還給你，難道說錯了，你要看東西誰敢不給，只是等你回來把一切弄清楚，我也有個交代”.  P argues that this is an acknowledgement by D1 that he was holding certain “rights” on behalf of P, and would return them to P upon P’s request. There is force in this submission.

(b)  D1 argues that he was only referring to Xinjinrong and the Wheatley Road Property in the message.  However, this is nothing in the message showing that the message should be read in this way.

(c)  It is arguable that the “rights” mentioned by D1 in this message include the Shares.

(3)  There is documentary evidence showing that P periodically injected funds into Hoza Group companies for settling business expenses of the companies.  The monies belonging to the Hoza Group companies were freely at P’s disposal and P could use them how he wished. For example, upon P’s request, D1 and Chen Qi (an accountant working in the Hoza Group) would procure funds to be transferred from the Hoza Group companies to P’s personal use.  This evidence would provide support to P’s contention that he is the sole beneficial owner of the Hoza Group companies.

(4)  The historic shareholding structure of D2, prior to the Trust Arrangement, also provides support to P’s case:

(a)  ATL was acquired by D1 and SSL in equal shares. There is no dispute that SSL is a company beneficially owned by P.

(b)  Soon after ATL was acquired as a shelf company, 99% of its shares were transferred to P, and P became a director of ATL.  The transfer was at no consideration.  That would be consistent with P already being the beneficial owner of the Shares.

(c)  P remained the registered legal shareholder of 99% of the Shares for a period of over 10 years, from 2002 to 2014.  During most of that period, the principal asset of ATL was its shareholding in Kunshan Hoza, of which P was Legal Representative and Chairman.

(d)  The transfer of the 99% Shares from P to D1 under the Trust Arrangement was at a consideration of HK$1 per share. P could not have intended to transfer the beneficial interest in those Shares, which would be worth a substantial amount, to D1 for such nominal consideration.

(5)  There is also evidence showing that P and D1 were not equal partners in a joint venture.  Although D1 was a manager with responsibility over the Mainland China side of the business, he was nevertheless a subordinate of P.

(a)  Accounting reports, salary records and other payments of the Hoza Group companies had to be reported to P by email on a regular basis.  These reports and records had been sent to P since at least 2010, long before Xinjinrong was set up in 2015.

(b)  D1 had to obtain P’s approval on the amount of bonuses to be issued to various employees, including himself.

(c)  Bonuses of certain senior employees such as D1, William Zhong Xun, Chen Qi and Zhao Yue were paid from P’s personal accounts.

(d)  D1 and other employees of the Hoza Group would seek instructions and directions from P in relation to business operations, including the transfer of funds between the group companies.

(e)  P often reprimanded D1 and other employees if they did not follow P’s instructions, including:

(i)    By an email dated 21 July 2015 to Chen Qi, P reprimanded him for having stopped sending to P the Hoza monthly expenses report. P indicated that he had been receiving the report every month for decades, and wanted to find out why the expenses of the Hoza Group in June 2015 were “historically high”.

(ii)   By an email dated 25 May 2016 to D1, P criticised D1 for repeatedly issuing Hoza invoices containing errors, and berated D1 for always going out drinking with Chen Qi.

(f)  P was consistently called “老板” in all the correspondence within the Hoza Group, whereas D1 was called as “趙總”.  D1 has never been called as “老板” in the correspondence.

(g)  In the messages passing among D1, Chen Qi and P in the “Hoza finance” Wechat group, the message from D1 to P on 1 April 2018 at 1:06 am stating “至於公司狀況，你是老闆得出這樣的結論，我不會爭辯，只有再努力”.

(h)  In the email dated 7 December 2018 (see [46(1)] above), D1 acknowledged that P had cared for and nurtured D1 from when he was young, and provided him with a platform to train and work in P’s company (“首先感謝我從小到今的關心和栽培，給我我這樣一個平台鍛煉和工作…也正因為如此我把公司當自己的事來做…”).

47.Counsel for D1 has put forward various submissions to argue that there is no serious question to be tried.  With respect, I am unable to accept these submissions.

(1)  In P’s 1^st affirmation dated 27 August 2019, P said that the Trust Arrangement arose as a precautionary measure in case P’s ex-wife breached a settlement agreement reached in 2005.  It is argued that P’s explanation is inherently implausible, for there is no documentary evidence showing the existence of the said 2005 settlement agreement.  As to this, P’s answer is that the 2005 settlement agreement is an oral agreement. Originally, P planned to reduce the same into writing.  However, P’s ex-wife reneged on the 2005 settlement and refused to sign a separation agreement.  As a result of change of stance of P’s ex-wife, no document was executed to record the 2005 settlement.  At this stage, I would say that P’s answer to D1’s point is an arguably satisfactory answer.

(2)  Counsel for D1 heavily relies upon P’s answer to the ex-wife’s question in the divorce proceedings to say that P’s case must fail.  D1 submits that the answer is an admission by P that ATL is owned by D1 and purchased by D1 by using D1’s own funds.  With respect, I am unable to reach this conclusion.

(a)  The said answer in fact is contained in an attachment to an email from P to D1 dated 5 October 2014.  By that email, P provided some draft answers to the ex-wife’s questions in the divorce proceedings to D1. The answer relied upon by D1 in fact is a draft answer which has not yet been finalized. Since the answer is only a draft, how much weight should be given to this draft answer would be an issue to be investigated in the trial.

(b)  Further, as submitted by counsel for P, the fact that P sent the email to D1 fits with P’s version of events, which is that the idea of having the Trust Arrangement came from D1, and D1 proposed it as a way for P to avoid exposing his assets to the claims of his ex-wife. 

(3)  In D1’s submissions, there is documentary evidence showing that it was D1 who advanced money in setting up Kunshan Hoza, and it was D1 entering into various agreements with the Kunshan Government in acquiring the Land.  However, as pointed out by counsel for P, the documentary evidence does not show that D1 advanced his own money in setting up Kunshan Hoza.  The records cannot show the ultimate source of funds.

(4)  D1 has also made some complaints against the allegation of forgery raised by P.  For the purpose of this decision, it would not be necessary for me to set out the details of those complaints.  Suffice for me to say that, notwithstanding the complaints made by D1, I am of the view that P’s allegation of forgery is a triable issue and should be resolved at the trial.

(5)  D1 has also put forward arguments that he is not an employee in the Hoza Group.  D1 has also produced affirmations made by Chen Qi, Zhao Yue and Hu Youzhen[13] in support of his contention.  On the other hand, P has produced affirmations made by David Haynes Holding and William Zhong Xun in support of his case.  I would not conduct a mini-trial on affidavit evidence.  It would not be necessary for me make a final determination on this issue.  Suffice for me to say that, for the reasons set out in [46(5)] above, in my view, it is arguable that D1 is not the boss but an employee in the Hoza Group.

48.The submissions put forward on behalf of D1 at best can only show that D1 has an arguable defence to P’s claim.  However, those submissions cannot lead to the conclusion that there is no serious question to be tried.

49.In my view, the evidence before me has shown a serious question to be tried in these proceedings.  D1’s objection based upon this ground fails.  For avoidance of doubt, I have not made any final adjudication on any factual dispute between P and D1.  A final adjudication on those factual disputes can only be made at the trial.  All I say is that there is a serious question to be tried.

Material non-disclosure

50.The principles concerning material non-disclosure are well established.

51.The material facts to be disclosed are all matters which are material for the ex parte judge to know and which are necessary to enable him to exercise his discretion properly. Materiality is to be decided by the court, not by the assessment of the applicant or his legal advisers. A matter is not material merely because it might have been set out more fully[14].

52.In assessing materiality, the court must not be influenced by what has since been known subsequent to the ex parte application[15].

53.A realistic view should be taken and the applicant should not be required to disclose every conceivable point, however fanciful, which might be raised by the respondent.  In Sky Motion Holdings Ltd v China Create Capital Ltd[16], Coleman J said: at §88:

“Where I have held that the allegations… are essentially bare allegations, with little if any merit, it cannot have been material non-disclosure not to have anticipated and made reference to such matters. It does not amount to a material non-disclosure if an applicant fails to posit and canvas every conceivable argument which a creative respondent might conjure up in the face of a claim.”

54.The question of non-disclosure only concerns matters which are relevant to the judge’s weighing operation at the ex parte stage. otherwise “an impossible burden would be placed on applicants and their advisers and the court may get itself in a position of what might be called ‘counter-abuse’…”^[17].  See also Xie Li Xin v Law Ka Yan, Thompson, in which DHCJ R Ismail SC said[18]:

“…… in laying down principles concerning disclosure of all material facts, the courts have not intended to give active encouragement to undeserving defendants to search ingeniously for facts which a plaintiff might innocently have failed to disclose, in the hope that a judge may consider them material and so discharge the injunction; common sense must prevail; and the heavy burden cast on a plaintiff must not be allowed to become so onerous as to be intolerable.”

55.The role of the court in the inter partes hearing is not to conduct a mini-trial in relation to the disputed subject matters of any alleged material non-disclosure, and the court should resist the temptation to do so.  A dispute about whether full and frank disclosure has been made should generally be left to be investigated at trial, rather than at the inter partes hearing.  As said by DHCJ A Cheung (as he then was) in Sino Wood:

“27. There are more difficulties facing the Defendant than that. The alleged subject matters of material non-disclosure are hotly disputed by the Plaintiff. I have four bundles of documents of over 1,200 pages from both sides disputing with each other over all matters, big or small. Mr Walter Lau, appearing for the Defendant, very wisely accepted that there is no way this Court can conduct a mini-trial in relation to the disputed subject matters of the alleged material non-disclosure. Indeed, the Plaintiff strenuously disputes the Defendant’s version in relation to the subject matters of the alleged material non-disclosure ……

28. Mr Lau has tried hard in seeking to persuade me that the Defendant's story is inherently more credible than that of Mr Yaw’s, despite his submission that the Court should not and cannot conduct a mini-trial. Whilst I appreciate Mr Lau’s good effort, it does not really assist his client's case in the present context ……

31. I cannot decide the substantial disputes between the parties in relation to the subject matters of the alleged material non-disclosure on paper. Not only must I resist the temptation of conducting a min-trial, I must not, on the incomplete evidence that has been placed by the parties before me, seek to evaluate the “inherent probabilities” of the respective competing versions of the parties. ……”

56.See also Cheer Signal Development Ltd v Wong Siu Fan[19], in which Au-Yeung J said:

“48. Where the alleged subject matters of material non-disclosure are hotly disputed by the plaintiff, the court should not and could not conduct a mini-trial to decide which party’s story is inherently more credible. Whether or not a plaintiff has made full and frank disclosure in obtaining an ex parte Mareva injunction should be investigated at the trial: Sino Wood Investment Ltd v Wong Kam Yin, at §§27-28.

49. No doubt, on the Defendants’ case, Cheer Signal has not disclosed documents or information which the Defendants consider to be material. However, that was due to different explanations for many underlying matters given by the parties. There was no pre-action correspondence setting out the Defendants’ case. Looking at things at the ex parte stage, it would have been impossible for Cheer Signal to anticipate a defence which in its eyes is concoction.

50.      Moreover, the defences are hotly disputed by Cheer Signal on many aspects, big and small. There is a mass of documents (14 bundles with 4,000 pages) to support the allegations and cross-allegations.  Even a document could be read both ways by the Consultants and Cheer Signal respectively.  Discovery is complete and each party’s version has not yet been tested by cross-examination.  It is simply impossible to resolve all disputes in this decision.  Subject to the next paragraph, whether Cheer Signal was guilty of material non-disclosure is best left to the trial.”

57.As to re-granting an injunction after discharge based upon material non-disclosure, the relevant principles have been summarized by Kwan JA (as she then was) in Excel Courage Holdings Ltd v Wong Sin Lai[20]:

(1)  If the court finds that there have been breaches of the duty of full and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial.

(2)  Notwithstanding that general rule, the court has jurisdiction to continue or re-grant the order.

(3)  That jurisdiction should be exercised sparingly, and should take account of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.

(4)  The court should assess the degree and extent of the culpability with regard to non-disclosure.  It is relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge of the order.  Equally, there is no general rule that a deliberate breach will attract that sanction.

(5)  The court should assess the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the court.  In making this assessment, the fact that the judge might have made the order anyway is of little if any importance.

(6)  The court can weigh the merits of the plaintiff's claim, but should not conduct a simple balancing exercise in which the strength of the plaintiff's case is allowed to undermine the policy objective of the principle.

(7)  The application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice.

(8)  The jurisdiction is penal in nature and the court should therefore have regard to the proportionality between the punishment and the offence.

(9)  There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the court should take into account all relevant circumstances

58.Counsel for D1 submits that P has committed material non-disclosure at the ex parte stage by failing to draw the court’s attention to the following:

(1)  P failed to disclose that he borrowed US$2,953,867 from D1 at the time when D1 transferred ATL to P, all for the purpose of P’s investment in a property in China.

(2)  P concealed the fact that the full purchase price of the Land and the construction costs of the Factory was paid by D1.

(3)  P did not draw to the court’s attention that the accounting report relied on for alleged misappropriation by D1 was from an accountant frim that had never audited Kunshan Hoza’s books and therefore it has incomplete information.  Also, the report is heavily qualified to the extent that it cannot be relied upon to draw any conclusion.

(4)  P concealed that the records of Kunshan Hoza shows that the initial setup capital was paid by D1.

(5)  P failed to disclose the events concerning the transfer of the shares in Kunshan Hoza to ATL in 2004 as summarized in [32] above.

(6)  The increase in share capital of Kunshan Hoza on 2014 in the sum of RMB 5 million was funded by D1.

(7)  P failed to disclose the fact that there is no documentary evidence proving the alleged settlement agreement between P and P’s ex-wife in 2005.  P also failed to draw the ex parte judge’s attention to P’s email dated 5 October 2014 to his solicitors for a US divorce with his ex-wife confirmed that he has no interest in Kunshan Hoza and/or ATL.

(8)  Xinjinrong had been paying rent to Kunshan Hoza for the use of part of the Factory.

(9)  Xinjinrong has outstanding unpaid garment debt due to Kunshan Hoza for garment that were manufactured and P has signed an agreement with D1 on 8 August 2019 agreeing to pay those debts owed by Xinjinrong to D1.

(10)  On 28 August 2019, the Mainland Court granted an injunction against Xinjinrong in a civil litigation commenced by a Zhuoyi against Xinjinrong.  It was D1 who caused Zhuoyi to commence this litigation against Xinjinrong.  P did not draw the court’s attention to this injunction in the ex parte hearing.

(11)  P failed to disclose the written agreement signed by P and D1 in 2019, in which P agreed to settle the outstanding payments regarding orders placed by P’s companies with the Factory of Kunshan Hoza.

(12)  P falsely claimed that Frances Cheung[21] knew of the Trust Arrangement, and thereby gave the ex parte judge an impression that there was evidence from an independent third party supporting P’s claim.

59.I agree with counsel for P that the matters being complained by D1 under “material non-disclosure” in fact are the controversial factual disputes between P and D1 in these proceedings.  The parties’ substantive cases are diametrically opposed on nearly every single issue, as is evident from the pleadings and the multiple rounds of very lengthy affirmations filed by the sides.  There are 9 bundles and over 2,000 pages of underlying documents in support of the allegations and cross-allegations by both parties.  Each and every document is read by the parties in different ways, to support their respective substantive cases. The emails dated 6-7 December 2018 can be used as an example to illustrate the point.  As stated in the above, P submits that “公司” in those emails should be the Hoza Group, whereas D1 argues that it means Xinjinrong.  P submits that the term “東西” in the phrase “你說的東西跟我理清我會的” refers to P’s assets including the Shares in ATL.  D1 disagrees and put forward another interpretation.  The same goes for many underlying documents in these proceedings.

60.Assuming that P’s case is the truth, at the ex parte stage, it would not be possible for P to anticipate D1 to interpret the documents in these proceedings in the way now being argued by D1, which in P’s eyes is a complete untrue story made up by D1.

61.Whether the material non-disclosure now raised by D1 can be established depends on which side is telling the truth, and this can only be resolved at the trial.  I cannot and would not resolve the factual disputes between the parties on paper.   In the premises, in my view, D1 cannot rely upon the alleged material non-disclosure to discharge the Injunction Order now.  Whether the alleged material non-disclosure can be established should be left to be decided at the trial.

62.Without prejudice to the aforesaid, I observe that there may be no or little merits in the “material non-disclosure” arguments raised by D1.

(1)  As to the loan of US$2,953,867 alleged by D1, P’s case is that no such loan has ever existed.  P further argues that even if the alleged loan is true, that would not have any bearing on the Trust Arrangement asserted by P.  Accordingly, not mentioning this alleged loan in the ex parte hearing cannot be a material non-disclosure.  I am of the view that there is force in this argument.

(2)  There is no clear documentary evidence showing that D1 himself has used his own funds to pay the purchase price of the Land and the construction costs of the Factory.

(3)  As to the point that the accounting report regarding D1’s alleged misappropriation was qualified and prepared by an accountant who has never audited Kunshan Hoza books before, P submits that the point is not relevant to the issues to be resolved in these proceedings.  I agree.

(4)  There is in fact no record showing that the initial capital of Kunshan Hoza was paid by D1 using his own funds.  The available record only shows that the initial capital was paid in the name of D1 and the Mother from a bank account.  Even on D1’s own case, the record does not reflect the source of the initial capital – D1’s own case is that all the money was paid by him, and the Mother did not pay any part of the initial capital.  There is no document showing the ultimate source of the initial capital.

(5)  P’s case is that the “tax benefit” appoint raised by D1 is a complete red herring.  It was never anticipated that Kunshan Hoza would benefit from the tax scheme, for Kunshan Hoza was just the manufacturing arm of the Hoza group and was never intended to generate any profit.  Since 2004, Kunshan Hoza continuously suffered losses, save and except for 3 years (2011, 2014 and 2017).  P submits that the “tax benefit” point is a mere concoction made up by D1, and P has no obligation to disclose the same in the ex parte hearing.  In my view, this is a forceful submission.

(6)  There is no documentary evidence showing that the sum of RMB 5 million injected to Kunshan Hoza in 2014 was from D1’s own funds.  In any event, the increase in share capital of Kunshan Hoza in 2014 does not appear to be relevant to the beneficial ownership of ATL or the Shares.

(7)  As to the alleged settlement agreement between P and P’s ex-wife in 2005 and P’s draft answers to his ex-wife questions in the divorce proceedings, P and D1 have put forward their respective arguments concerning these matters.  For the reasons set out in [47(1) and (2)] above, whether there is any material non-disclosure by P on these matters should be resolved at the trial.

(8)  The fact that Xinjinrong had been paying rent to Kunshan Hoza is immaterial.  It has nothing to do with the beneficial ownership of ATL.  Further, this fact also does not necessarily inconsistent with P’s case.  If P’s case is true, both Xinjinrong and Kunshan Hoza would be owned by P.  Companies within the same group can make payments to each other for various commercial purposes.

(9)  The fact that Xinjinrong had outstanding unpaid garment debt due to Kunshan Hoza is also immaterial.  Reasons are same as those as set out in the aforesaid subparagraph.

(10)  The injunction granted by the Mainland Court mentioned by D1 is irrelevant.  The litigation in the Mainland is a separate litigation involving different parties and issues.

(11)  As to the written agreement signed between P and D1 in 2019, I agree with counsel for P that the agreement concerns events long after the trust has been constituted, which cannot shed light on whether there was in fact a trust in the first place.  As to why P would enter into the written agreement, P’s answer is that D1 has forcibly taken control of Kunshan Hoza without any legal right to do so.  D1 essentially committed extortion against P by preventing P’s workers from taking delivery of the goods from the Factory, knowing that P needed these goods to fulfil shipments to the US, thus forcing P to enter into the agreement and agreeing to pay significant amounts of money to D1 thereunder.  All these may have to be investigated at the trial.

(12)  As to the claim that Frances Cheung knew of the Trust Arrangement, P agreed that he made a mistake on this point but the mistake was an honest mistake.  P submits that the mistake concerning Frances Cheung’s knowledge would not be material, for there is clearly sufficient evidence demonstrating a serious question to be tried that P is the beneficial owner of ATL, regardless of whether there is any corroboration from Frances Cheung.  I am of the view that P’s submission is persuasive.

63.If I were wrong in the analysis concerning material non-disclosure as set out in the above and D1 had in fact made out a case of material non-disclosure against P, I would be prepared to exercise my discretion against the discharge of the Injunction Order.  Further, if I were again wrong and the Injunction Order should be discharged, I would be prepared to exercise my discretion to re-grant an injunction to P, the terms of which would be same as the Injunction Order in substance.  My reasons are as follows:

(1)  There is a serious question to be tried.

(2)  Given that D1 is prepared to transfer away ATL’s most valuable assets to himself, ie ATL’s shareholding in Kunshan Hoza, and ATL’s indirect interest in the Land, it would be necessary to have an injunction to prevent D1 from doing so until the outcome of the trial is known.

(3)  The Land is a unique asset.  If there is no injunction and P ultimately succeeds at the trial, P may not be able to get back the Land, and the loss suffered by P may not be compensated by damages.

(4)  With all these in mind, even if P has committed material non-disclosure at the ex parte hearing as submitted by D1, I am of the view that depriving P from having the protection of the injunction sought by P before the conclusion of the trial would be a disproportionate punishment to P.

64.For all these reasons, I refuse to discharge the Injunction Order on the ground of material non-disclosure raised by D1.  The Discharge Summons should be dismissed.

Internal Management

65.Counsel for D1 takes issue with §1(1)(a)(ii) of the Injunction Order, which is as follows:

“(1) [D1] must not act, whether by himself, his servants, agents, or otherwise howsoever, in any way:

(a) Act or hold himself as shareholder of [ATL] and do any acts qua shareholder including:

……

(ii) Changing the structure of the board of directors and the management of [ATL].”

66.Relying upon Kwok Ping Sheung Walter v Sun Hung Kai Properties Ltd[22], counsel for D1 submits that §1(1)(a)(ii) offends the principle enunciated by the Court of Appeal in that case as it is attempting to force D1 to refrain from changing the structure of the board of directors and management of ATL.  Further, the wording of the Injunction Order is far too wide and restrains D2 from carrying out the daily management of the company at all.

67.With respect, I am unable to accept these submissions.

(1)  In my view, in the Kwok case, the Court of Appeal did not lay down a principle that there could not be an interlocutory injunction concerning the internal management of a company in any situation. Each case must depend upon its own facts.

(2)  The Injunction Order is a proprietary injunction, for the purpose of protecting the Shares to which P has a proprietary claim.  The court would not hesitate to use the strongest powers to protect and preserve assets to which a party has a proprietary claim[23]. Any reduction in its scope would carry the real risk of defeating the very purpose of having the injunction, ie preventing D1 from transferring away the most valuable assets of the ATL, namely its shareholding in Kunshan Hoza and its indirect interest in the Land.

(3)  ATL is an asset holding company with no substantial business.  There are minimal, if any, operations that would require active management.  In any event, if any necessary step is necessary for the purpose of keeping ATL alive, D1 can have discussion with P and seek consent from P.

(4)  The facts in the Kwok case are very much different from the facts in the present case:

(a)  In the Kwok case, the injunction sought by the plaintiff was against the company and all its directors, to restrain them from voting to terminate the plaintiff as chairman and re-designate him as non-executive director.  No injunction was sought against the shareholder(s) of the company.  The Court of Appeal was of the view that the matter sought to be enjoined by the injunction was a matter of internal management by the board, and refused to grant the injunction.

(b)  The Injunction Order in the present case restrains D1 from “hold[ing] himself out as shareholder of [ATL] or do[ing] any acts qua shareholder including” changing the structure of the board or management of ATL.  The matter enjoined by the injunction is not a matter of internal management by the board.

(c)  The injunction sought in the Kwok case is an interim injunction based upon personal claims.  However, the Injunction Order in the present case is a proprietary injunction.

(d)  Further, in the Kwok case, the subject company is a company having substantial business operation.  ATL is not such a company.  As said before, ATL is merely an asset-holding company.  

68.I am not persuaded by D1’s arguments.  In my judgment, §1(1)(a)(ii) of the Injunction Order should remain in the order without any change.

Continuation of the Injunction Order

69.With respect to counsel for D1, for the reasons set out in the above, I am not persuaded that there is any valid objection to the continuation of the Injunction Order.  In my judgment, the Injunction Order should be continued until the conclusion of the trial or a further order made by this court.  The Discharge Summons should be dismissed.

70.P also seeks an ancillary disclosure order in terms of [2] of the Continuation Summons. I agree that the disclosure order sought relates to the assets over which P has a proprietary claim, and is necessary for the purpose of giving effect to the Injunction Order.  In order to enable P to ascertain the whereabouts of the assets subject to the proprietary claim, I would make an order in terms of [2] of the Continuation Summons[24].

SPEEDY TRIAL

71.The parties have reached a consensus and they are jointly seeking directions for having a speedy trial in this case.  The proposed directions are as follows:

(1)  The parties do file their list of documents within 28, with inspection to be done within 14 days thereafter.

(2)  The parties do exchange witness statements within 56 days thereafter.

(3)  All further interlocutory application(s), if any, be taken out by the parties within 14 days thereafter.

(4)  The action be set down for speedy trial at the earliest possible date, but not earlier than April 2021 with 6 days reserved, to be fixed in consultation with counsel’s diary.

(5)  A case management conference be fixed to be heard no earlier than April 2021 in consultation with counsel’s diary.

(6)  There shall be a pre-trial review before the trial judge not later than 28 days before the trial commences.

(7)  The parties must inform each other and the court forthwith if they or any of them should become aware of any matter or development that may affect the above estimated length of trial or the holding of the trial on the dates fixed.

72.The principles concerning speedy trial have been discussed in detail by DHCJ Yeung SC (as he then was) in Qianhai Xinhuakang Financial Holdings (Shenzhen) Ltd v Chen Jiarong[25].  In that case, the learned judge said:

“20. The question of expedition is essentially one for the discretion of the Court. In exercising that discretion, the Court should take into account four factors, namely: (1) whether the applicants have shown good reason for expedition; (2) whether expedition would interfere with the good administration of justice; (3) whether expedition would cause prejudice to the other party; and (4) whether there are any other special factors — WL Gore & Associates GmbH v Geox SpA [2008] EWCA Civ 622 , per Lord Neuberger at paragraph 25), and JW Spear & Sons Ltd v Zynga Inc [2013] FSR 15, per Henderson J at paragraph 20.

21. When considering an application for expedition, Factor 1 is the most important factor. It has been rightly described as the “threshold issue”—see JW Spear & Sons Ltd v Zynga Inc [2013] FSR 15, where Henderson J observes at paragraph 20 that:

‘ … it is emphasised that the first question which always has to be answered is whether urgency is justified at all. That may aptly be termed a threshold issue, and it is only if it is answered in the applicant’s favour that one gets on to the next stage of considering what degree of expedition would be appropriate. It can be seen, therefore, that the question is not simply one of comparing competing timetables which are put before the court, and expedition will be granted only if the threshold test is duly satisfied.’

22. The onus is on the party making the application to make out a clear case that there is real and objective urgency which justifies expedition:

(a) I respectfully adopt the observations made by Mann J at paragraph 8 of his judgment in Intervet (UK) Ltd v Merial [2009] EWHC 1065 (Pat), which Mr Dawes relied upon, that:

‘It behoves a litigant who wishes to have his or her trial on quickly and, therefore, to leapfrog other litigants (leaving aside the difficulties it causes to the other side) to make a clear case to the court. If a case is to be made on commercial uncertainty, then the court is entitled to expect some details—I would say some more details, but in fact there are virtually none—of what that commercial uncertainty is, how it operates and how it is that the three months which would be saved between November and February is somehow a degree of commercial uncertainty on top of the existing uncertainty which justifies the leapfrogging.’

(b) In Daltel Europe Ltd v Makki [2004] EWHC 1631 (Ch) (also cited and relied upon by Mr Dawes), Lloyd J (as he then was) observed at paragraph 13 of his judgment that:

‘Expedition is not a question of choosing a slightly faster over a slightly slower method of the proceeding to trial. Expedition involves an application and, if granted, an order that the case should proceed to trial on a seriously accelerated timetable and can only be justified on the basis of real, objectively viewed, urgency of the case, which justifies, first of all, giving preference in the allocation of court time to this case over the other cases in the court’s list and, correspondingly, requiring the lawyers to drop everything else and devote their time to the expedited case.’

(c) In this regard, I also accept Ms Sit’s submission that in considering an application for expedition, a principled approach should be adopted. The Rules of the High Court contains comprehensive sets of procedural timetable for all litigants to follow. To displace their application, good reason has to be shown, and the onus to do so has to be on the party seeking expedition.

23. In respect of Factor 2, and as explained by Lord Neuberger in WL Gore (at paragraph 30), it includes having a sensible timetable leading up to the hearing, and it also includes the interests of parties to other cases. On the latter point, the Court will have to bear in mind that there are parties to other cases in the queue waiting for trials, and ordering expedition means that the parties in the instant case are permitted to jump the queue. This is the consideration of “leapfrogging” discussed by Mann J in Intervet. That should, as a matter of fairness and good administration of justice, only be permitted with good reason.”

73.I would not order a speedy trial merely because the parties intend to have a speedy trial.  There are parties to many other cases in the queue waiting for trial dates.  If a speedy trial is ordered in this case, that would mean that the parties herein would be permitted to jump the queue.  I would only give such a permission to the parties in this case if a good reason is shown.  In my view, the parties have not sufficient addressed the court why a speedy trial should be ordered in this case.  I decline to order a speedy trial at the present stage.

74.If the parties wish, they may take out a summons at a later time to apply for an order for speedy trial.  The application must be supported by evidence and submissions addressing the concerns as set out in the Qianhai case.

75.At present, I would only give the directions as set out in [71(1) to (3)] in the above.

DISPOSITION

76.I allow P’s application as per the Continuation Summons.  I make an order that the Injunction Order be continued until the determination of this action or a further order made by the court.  I also make a disclosure order in terms of [2] of the summons.

77.I dismiss the Discharge Summons.

78.D1 has vigorously opposed P’s application for an order continuing the Injunction Order and has sought an order to discharge the Injunction Order, but D1 failed in all these.  Costs should follow the event. The documents relating to these 2 summonses are voluminous and various issues are involved in the arguments concerning these 2 summonses.  I am minded to grant a certificate for 2 counsel in these circumstances.  There be a costs order nisi that costs of these 2 summonses be paid by D1 to P forthwith and be summarily assessed.  There be leave to P to file and serve a bill of costs for summary assessment within 7 days after the costs order nisi becoming absolute, and there be leave to D1 to file and serve a written reply to the said bill within 7 days thereafter.

79.I stand over the Expunge Summons and direct that the summons be determined by the trial judge at the trial.  Costs of that summons be reserved.

80.Lastly, it remains for me to thank all counsel for the helpful assistance rendered to the court.

Written submissions of Mr Victor Dawes SC leading Mr Alan C Y Yung, instructed by Hastings & Co, for the Plaintiff

Written submissions of Mr Tony Ko and Ms Dorothy Cheung, instructed by Jun He Law Offices, for the 1^st Defendant