Lu Yongde v. Allan Yap and Others

HCA 1501/2017

[2021] HKCFI 474

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1501 OF 2017

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Before: Deputy High Court Judge Winnie Tsui in Chambers

Date of Hearing: 11 February 2021

Date of Decision: 11 February 2021

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DECISION

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Introduction

1.Before me this morning is an application taken out by the 4^th, 5^th, 6^th and 8^th defendants to discharge the injunction granted on 23 June 2017, as continued by a subsequent order on 30 June 2017 and varied by order dated 16 October 2017 (“the Injunction”).  The Injunction is against the 7^th and 8^th defendants. 

2.In these proceedings, the 7^th defendant, together with the 2^nd and 3^rd defendants, are separately legally represented from the 4^th, 5^th, 6^th and 8^th defendants.

3.There is a similar discharge application taken out by the 7^th defendant’s camp also returnable before me today.  I just granted leave for them to withdraw their application for reasons that are not presently relevant.

4.Hence the application before me concerns the plaintiff on the one hand and the 4^th, 5^th, 6^th and 8^th defendants on the other.  I shall refer to them as “the defendants” below.  And the application is to discharge the Injunction as against the 8^th defendant only.

5.The plaintiff filed a notice to act in person yesterday.  Before that, he was represented by Messrs Sun Lawyers LLP.  Mr John Yan, SC, appearing for the defendants, confirmed to the court that the summons was served on Messrs Sun Lawyers LLP on 20 January 2021.  The plaintiff is therefore taken to have had notice of today’s hearing.  I have therefore proceeded with the application in his absence.

6.The ground of the defendants’ application is straightforward.  After the Injunction was granted in June 2017, the parties entered into settlement negotiations, which led to the signing of a settlement agreement dated 27 September 2017.  Pursuant to a consent order dated 12 October 2017, the action was stayed on the agreed terms of the settlement agreement.

7.The defendants say that they have performed all their obligations under the settlement agreement.  The plaintiff should therefore comply with the agreement and cause a consent summons to be taken out to discharge the Injunction and file a notice of discontinuance to discontinue his claim against all the defendants in this action.

8.The plaintiff has failed to do so to date. Hence the defendants’ application.

9.I would add here that the defendants’ application has prompted another High Court action, HCA 212/2021, which was commenced by a company called Alpha & Leader Associates Limited against the 8^th defendant as the sole defendant.  The writ was issued on 4 February 2021.  On the same day, Alpha took out a summons in that action against the 8^th defendant seeking to restrain the latter from dealing with certain assets.  At present, those assets are subject to the Injunction.

10.Alpha says that if the court accedes to the defendants’ discharge application, the 8^th defendant will be in a position to dissipate their assets as soon as the Injunction is lifted. Therefore Alpha takes out the summons on an urgent basis and asks for it to be heard at the same time as the defendants’ discharge summons.

Factual background

11.The dispute in this action arises out of the alleged acquisition by the plaintiff, the 1^st and 5^th defendants in 2012 of certain rights against Guangdong International Trust and Investment Corporation (“GITIC”), a company adjudged bankrupt in Mainland China in 2003.  The three individuals acquired the GITIC rights through a company called Nation Field Limited.  These GITIC rights had a face value of RMB 5.4 billion. 

12.According to the plaintiff’s case, their respective shares in the GITIC rights should have been reflected by their shareholding in Nation Field, namely in the proportion of 35%, 20% and 45% for the plaintiff, the 5^th defendant and the 1^st defendant respectively.  The plaintiff’s case is that without his knowledge, his portion of shares in Nation Field which should have been transferred to him were never transferred to him. 

13.Further, without his knowledge, the GITIC rights held by Nation Field were wrongfully transferred to the 7^th and 8^th defendants in late 2016 and early 2017.  The 8^th defendant’s sole director and shareholder is the 6^th defendant, who in turn (the plaintiff says) is a nominee of the 5^th defendant.  In the circumstances, the plaintiff contends that he had been deprived of his 35% share in the GITIC rights and he therefore has a proprietary claim against the 7^th and 8^th defendants accordingly.  

14.Under the Injunction, the 8^th defendant is restrained from dealing with or disposing of the GITIC rights transferred to it by Nation Field. 

15.Eventually, in September 2017, the parties reached settlement.  No opposing affidavit evidence was filed in these proceedings. 

16.Pursuant to the settlement agreement, the parties applied to the court by consent summons to vary the Injunction so as to allow, among other things, the 8^th defendant to transfer to the plaintiff GITIC rights with a total face value of about RMB 1.7 billion.  This resulted in the variation order made on 16 October 2017.  Upon the grant of such order, the 8^th defendant should then take steps to effect the transfer of those GITIC rights to the plaintiff: see clause 4.  The 5^th defendant should also pay the plaintiff the sum of RMB 2 million within 14 days of the settlement agreement: clause 8.

The evidence in support of the discharge application

17.The defendants have now adduced documentary evidence showing that they have complied with the above obligations under the settlement agreement.

18.The transfer of the GITIC rights is evidenced by the Notices of Confirmation of Assignment of the Claim issued by the Liquidation Committee of GITIC on 27 December 2019.  The payment of RMB 2 million is evidenced by, among other things, a cashier order issued to Messrs Sun Lawyers.

19.According to clause 9(b) of the settlement agreement, the plaintiff should proceed to cause a consent summons to be taken out for the Injunction to be discharged and to file a notice of discontinuance to discontinue all his claims against every defendant in the action.

20.Notwithstanding a demand made by the defendants by letter dated 14 February 2020, the plaintiff has failed to comply with his obligations under the settlement agreement.  The plaintiff is not present today.  The evidence of the defendants clearly supports their contention.

21.I should therefore accede to the defendants’ application. 

Conclusion

22.As mentioned at the outset, there is a pending injunction application made by Alpha in HCA 212/2021 against the assets presently frozen by the Injunction.  In theory, as soon as I lift the Injunction against the 8^th defendant, it is immediately free to dispose of the GITIC rights.

23.I think the proper and cautious thing for me to do, and also as a matter of proper case management, is to withhold making a formal order for the discharge of the Injunction pending the hearing of the application in HCA 212/2021.  If I am minded to grant injunctive relief in that action today, I will discharge the Injunction here and at the same time grant the injunctive relief there.  If no injunctive relief should be granted there, I will proceed to make the formal order for discharge here.

24.I shall now hear the parties in HCA 212/2021.

[Case stood down]

[Interim interim injunctive relief granted in HCA 212/2021: see [2021] HKCFI 461]

25.I make an order in terms of the defendants’ summons save that the words “set aside and/or” be deleted.

The plaintiff was not represented and did not appear

Mr John MY Yan, SC, instructed by Cheung & Choy, for the 4^th, 5^th, 6^th and 8^th defendants