Zl v. Wy and Others

REDACTED VERSION PUBLISHED WITH CONSENT OF THE PARTIES

HCMP 948/2020

[2023] HKCFI 2105

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 948 OF 2020

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D E C I S I O N

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A.  INTRODUCTION

1.The disputes in these proceedings stem from the divorce between the plaintiff (“the Wife”) and the 1^st defendant (“the Husband”).

2.This is the substantive hearing of the following summonses:

(1)  the Wife’s summons dated 17 March 2023 (“the Continuation Summons”) for the continuation of the ex parte Mareva injunctions against Ds obtained on 13 March 2023 and continued on 12 May 2023 (“the 2023 HK Injunction”) pursuant to s.21M of the High Court Ordinance (“HCO”) in aid of proceedings commenced by the Wife against, inter alios, the Husband, the 2^nd defendant (the Husband’s younger brother, “the Brother”, who is the sole director and shareholder of the Company) and the 3^rd defendant (a company limited incorporated in the British Virgin Islands, “the Company”) in Australia in June 2020; and

(2)  the Company’s summons dated 8 May 2023 (“the Company’s Summons”) to set aside, discharge or vary the 2023 HK Injunction.

3.There is also a summons taken out by the Brother on 12 July 2023 (“the Brother’s Summons”) for an order to set aside, discharge or vary the 2023 HK Injunction. Since this summons was only taken out shortly before this hearing, on 20 July 2023, I directed that the Brother’s Summons would be for directions only in this hearing. For avoidance of doubt, the affirmations filed by the Brother in support of the Brother’s Summons are not evidence in the substantive hearing of the Continuation Summons and the Company’s Summons.

4.In the hearing before me, Mr Jeremy SK Chan represents the Wife, Mr Lai Chun Ho (together with Mr Jonathan Lee) represent the Brother, and Mr Frederick HF Chan represents the Company. The Husband is absent.

B.  BACKGROUND

5.The undisputed or indisputable background facts are as follows.

6.In February 2005, the Brother incorporated the Company for the purpose of carrying out the business of wholesale supply of XXXXXXXXXXXXXXXX. From the very beginning and until now, the Brother has been and remains as the sole shareholder and director of the Company.

7.Over the years, certain corporate restructurings were carried out, including the following:

(1)  In or about 2007, the Company’s employees moved to work in Shanghai Detao International Trading Co Ltd (“Service Agent”), a company run by the Husband. As of 2023, the Husband and the Brother held respectively 68% and 5% in the Service Agent.

(2)  In or about 2008, the Company and the Service Agent signed a service agreement, pursuant to which the Service Agent would manage the customer relationship on behalf of the Company.

8.Since incorporation, the Company has been a trading company, and is still actively carrying on business.

9.In September 2012, the Husband and the Wife married in Mainland China.

10.In June 2018, the Husband and the Wife separated.

11.Since June 2020, the Wife has commenced various sets of proceedings in multiple jurisdictions.

12.On about 9 June 2020, the Wife issued a divorce lawsuit against the husband in the XXXXXXXXXCourt in XXXXXX[Mainland China].

13.On about 23 June 2020, the Wife made an application to preserve family assets against the Husband in Mainland China (“the Mainland Proceedings”).

14.On about 30 June 2020, P commenced property settlement proceedings against the Husband in the Family Court of Australia (“the Australian Proceedings”) with an application for interim orders for preservation of family assets, joining the Brother and the Brother’s wife as respondents.

15.On 1 July 2020, the Wife obtained an ex parte injunction against the Husband from disposing of his assets in Hong Kong (“the 2020 HK Injunction”) and commenced the proceedings herein.

16.On 7 July 2020, the Wife obtained an ex parte injunction (“the 2020 Australian Injunction”) in the Australian Court against the Husband restraining him from, inter alia, disposing his real properties within and outside Australia and reducing his total balances in his 3 Australian bank accounts to below AUD3.8m.

17.On 10 July 2020, the 2020 HK Injunction was continued in a hearing in which the Husband was absent, until final determination of the Australian Proceedings or until further order of the Hong Kong Court.

18.On 22 February 2021, the Wife obtained an ex parte injunction order (“2021 HK Injunction”) against, inter alia, the Company in respect of a sum of US$443,000, which the Husband has directed a property developer to be paid to the Company as a refund.

19.On 26 March 2021, the 2021 HK Injunction came before B Chu J on a return date hearing. The Company’s case was that it never knew and authorised that the Husband would direct such sum to be paid to it, and undertook to pay the US$443,000 into Court in the event that such sum was received. The 2021 HK Injunction was discontinued on such basis.

20.On 6 October 2021, the Wife sought to join the Company to the Australian Proceedings.

21.On 19 July 2022, the Wife filed her Points of Claim (“the P/C”) against the Husband, the Brother, the Company, and the Brother’s wife in the Australian Proceedings. In the P/C, the Wife’s pleaded case is that the Brother is holding all the shares in the Company (not the assets of the Company) on trust for the Husband. At the beginning of the P/C, the Wife has set out some material facts. Thereafter, the Wife pleaded:

“33. By reason of the matters pleaded above, the husband created an express trust in which the title to the shares in [the Company] is held on trust by [the Brother] as trustee for the sole benefit of the husband.

34. Alternatively, by reason of the matters pleaded, [the Brother] holds the title to the shares in [the Company] on trust for the sole benefit of the husband pursuant to:

a. a resulting trust; or

b. a constructive trust.

35. Alternatively, by reason of the matters pleaded, the Court declare that [the Brother]’s holding of the shares in [the Company] is a sham.

By reason of the matters pleaded, [the Company] should be required to amend its register of shareholders so as to register the husband in lieu of [the Brother] as its sole shareholder, with retrospective effect.”

22.On 2 August 2022, the Brother (who is a resident in Australia) gave the following written undertakings to the Australian Court in the Australian Proceedings on a without admission basis (“the Brother’s Undertaking”):

“On a without admission basis, I, … will provide 28 days written notice to [the Wife] of any intention to:

a. sell, transfer, mortgage, assign, dispose, alienate, further encumber or adversely deal with my shareholdings in [the Company];

b. cause the present directors, shareholders, trustees, beneficiaries and/or appointors of [the Company] to be changed;

c. dispose of any business conducted and assets of any of the entities including but not limited to intellectual property and goodwill;

d. apply the income of [the Company] for purposes other than meeting the ordinary course of business;

e. increase the liabilities of [the Company] for purposes other than meeting the ordinary course of business; and

f. do anything by way of intentional act or omission to diminish the net assets of [the Company] and/or income earned by [the Company].”

23.On 10 August 2022, the Company was formally joined as a party to the Australian Proceedings.

24.On 2 December 2022, the Brother and the Company filed their Points of Defence in response to the P/C in the Australian Proceedings.

25.On 10 March 2023, the Wife obtained an ex parte injunction in the Australian Court (“the Australian Ex Parte Injunction”). There is no evidence showing that any reasoned judgment has been pronounced or handed down by the Australian Court.

26.According to [26] of the 1^st Affirmation of XXXXXXXXXX[Madam L] (the Australian lawyer representing the Wife in the Australian proceedings, “Madam XXXX[L]”), in the hearing on 10 March 2023, the Brother’s Undertaking was drawn to the Australian’s Court’s attention, but the Australian Court was satisfied that the Australian Ex Parte Injunction should be made.

27.On 13 March 2023, based upon the Australian Ex Parte Injunction, the Wife made an ex parte application under s.21M of the HCO for an injunction under in aid of the Australian Proceedings. That application was supported by the 1^st Affirmation of Madam XXXX[L], and a Skeleton Submissions (“the Ex Parte Skeleton”). In her 1^st Affirmation, Madam XXXX[L] said:

“15. Whilst the proceedings have been on foot since 2020, they still remain at very much a preliminary stage. The matrimonial pool available for division has not yet been completely established. The Wife continues to undertake the process of obtaining disclosure from the Husband and various Respondents as well as discovery through subpoenas. Furthermore, the value of various assets already identified have not yet been valued. By way of example, single expert valuations have not yet been undertaken for the various real properties or entities forming part of the matrimonial pool. Based on what can be ascertained to date, it is estimated by the Wife that the matrimonial pool is in the range of AUD 897 million of which it is believed some AUD 687 million held in Hong Kong, Australia and the British Virgin Islands is held or controlled by the Respondents (being primarily comprised of the Wife's belief as to the value of the [Company], the funds held in [the Company]’s accounts, real properties held in Australia and funds in accounts held by [the Brother]).

……

17. On 10 March 2023, by way of urgent Ex Parte hearing, the Federal Circuit and Family Court of Australia (“the Australian Court”) made Orders restraining the Husband, [the Brother], [the Company] and their servants or agents from diminishing the balances or otherwise disposing securities held in the following accounts

17.1 the HSBC Hong Kong Bank account in the name of [the Brother] with account number …… [“the Brother’s A/C”];

17.2 …… an investment sub-account [“the Brother’s Securities A/C”] held under [the Brother’s A/C]; and

17.3 the following accounts, collectively referred to as [“the Company’s A/Cs”]

……

19. By way of brief summary, the Wife’s basis for seeking and successfully obtaining the Australian Injunction Orders the Orders made 10 March 2023 are as follows:

19.1 The Husband is the beneficial owner of [the Company];

19.2 The source of the funds in [the Brother’s Account] is from [the Company]. ……

19.3 With respect to [the Company’s A/Cs], these accounts are in [the Company]’s name. ……

19.4 The Wife otherwise contends the funds held in [the Brother’s A/C] and [the Company’s A/Cs] form part of the matrimonial pool available for division in the Australian Proceedings.” (Emphasis added)

28.Apart from freezing the assets in the Brother’s A/C, the Brother’s Securities A/C, and the Company’s A/Cs, the Australian Ex Parte Injunction also contains the following provisions:

“12. That a copy of this Application, the Orders of the Court, Affidavit of [the Wife] and Affidavit of XXXXXX[Mr B] filed contemporaneously with this Application be served on the solicitors for the Respondents within 24 hours of the Hong Kong Special Administrative Region Court of First Instance making orders pursuant to the wife's proposed application under section 21M of the High Court Ordinance, Cap. 4 …

13. The listing of this Application in a Proceeding, all supporting documents and these Orders are to be suppressed pending further Order of the Court.”

29.In the Ex Parte Skeleton, it is stated:

“11. As explained in the supporting affidavit by the Wife's Australian lawyer XXXX[Madam L]:-

(a) The Wife's case is that the Husband is the beneficial owner of the Company.

(b) This is significant because inter alia Paragraph 8 of the Australian Order restricts “the following bank accounts held with HSBC Hong Kong in the name of [the Company] from being reduced below HKD$51,663,853”.

(c) It is also the Wife's case that the source of funds in [the Brother’s] bank accounts in Hong Kong are from [the Company].

(d) Hence Paragraphs 6 & 7 of the Australian Order restrict Hong Kong bank accounts "in the name of [the Brother]".

(e) It is the Wife's case that she has a good claim in Australia as a result of which she will obtain property division awards, including inter alia in respect of these injuncted Hong Kong based assets.

(f) The total family pot is currently estimated to be AUD897 million; the Hong Kong based assets are in the region of AUD26.63 million. ……” (Emphasis added)

30.On 13 March 2023, the Wife made an ex parte without notice application in this Court, and obtained the 2023 HK Injunction. Insofar as the Brother and the Company are concerned, the assets frozen by the 2023 HK Injunction are as follows:

(1)  the balance of HK$1,135,840 in the Brother’s A/C;

(2)  the securities in the Brother’s Securities A/C (“the Securities”);

(3)  the total of all the balances in the Company’s A/C, being HK$51,663,853.

31.On 17 March 2023, the Wife issued the Continuation Summons, which was fixed to be heard by DHCJ Alexander Stock SC on 12 May 2023.

32.On 8 May 2023, the Company issued the Company’s Summons.

33.On 12 May 2023, in the hearing before DHCJ Alexander Stock SC, the learned judge directed that, inter alia, the Continuation Summons and the Company’s Summons be adjourned for arguments, and the 2023 HK Injunction be continued pending the determination of these summonses.

34.On 12 July 2023, the Brother issued the Brother’s Summons.

35.On 18 July 2023, the Brother and the Company filed an application in the Australian Proceedings to discharge or to vary the Australian Ex Parte Injunction (the Brother’s and the Company’s Australian Application, “BCAA”).

36.On 20 July 2023, I directed that the Brother’s Summons would be heard in this hearing for directions only.

C.  NO ADJOURNMENT

37.In the Wife’s written reply submissions dated 2 August 2023, the Wife informed this Court that the BCAA would be substantively heard by the Australian Court on 11 August 2023, and the Australian Court might pronounce a decision after the hearing, or might reserve judgment.

38.In view of this recent development, I invited the parties to comment on whether this hearing should be adjourned pending the outcome of the BCAA in the Australian Court. Having considered the parties’ respective submissions on this issue, I come to the conclusion that this hearing should proceed as scheduled. My reasons are as follows:

(1)  Both the Brother and the Company are opposing the continuation of the 2023 HK Injunction. Unless the Australian Ex Parte Injunction (which is the basis of the 2023 HK Injunction) is entirely set aside by the Australian Court, the Brother’s and the Company’s objections to the 2023 HK Injunction have to be dealt with by this Court as soon as practicable.

(2)  Although the BCAA would be heard on 11 August 2023, it cannot be known when the Australian Court will make a decision on that application.

(3)  Even if the Brother and the Company are entirely successful in the BCAA and the Australian Ex Parte Injunction is set aside, the Wife may lodge an appeal against the setting aside order and may apply for staying the setting aside order pending the outcome of the appeal. It cannot be known when the appeal process would come to a conclusion.

(4)  If this hearing is adjourned for the purpose of waiting for the outcome of the BCAA, the adjourned period may not be a short period. Bearing in mind the Brother’s and the Company’s objections to the continuation of the 2023 HK Injunction, an adjournment for an indefinite period would not be fair to them.

(5)  The parties have already prepared for this hearing and costs have been incurred. An adjournment would not have the effect of substantially saving time and costs.

(6)  Mr Jeremy Chan submits that, notwithstanding the above, this hearing should be adjourned and the 2023 HK Injunction be continued in the meantime, pending the outcome of the BCAA. He submits that:

(a)  In the scenario that before the handing down of a decision on the Continuation Summons and the Company’s Summons by this Court, the Australian Court has given a reasoned judgment on the BCAA and ordered continuation of the Australian Ex Parte Injunction (with or without modifications), this Court may need to take into account the findings made by the Australian Court, for those findings would be binding upon the Brother and the Company.

(b)  In the scenario that this Court makes a decision to discharge the 2023 HK Injunction, and thereafter the Australian Court gives a decision maintaining the Australian Ex Parte Injunction, the Wife may come back to this Court to seek a new injunction based upon the decision made by the Australian Court.

(c)  This Court should wait for the decision to be made by the Australian Court on the BCAA. Otherwise, there would be a risk that the Hong Kong Court and the Australian Court may make different and inconsistent findings on same issues.

(7)  With respect, in my view, the matters submitted by Mr Jeremy Chan do not constitute a sufficient or a good reason for adjourning the substantive hearing of the Continuation Summons and the Company’s Summons.

(a)  In the first scenario mentioned by Mr Jeremy Chan, if the Australian Court has made any finding which may have an impact on the outcome of the Continuation Summons and the Company’s Summons, any party may seek leave to put in further evidence and/or further submissions. I would duly consider the leave application. If leave is granted, I would consider the further evidence and/or the further submissions before making my decision on these two summonses.

(b)  In the second scenario mentioned by Mr Jeremy Chan, the Wife may make whatever applications as she deems fit. If an application for a new injunction is made by the Wife, whether there is any merit in that application is a matter to be decided by the Court there and then.

(c)  In respect of the risk of having inconsistent findings from the Hong Kong Court and from the Australian Court, I agree that inconsistent findings on the same issues by different courts are undesirable. However, in my view, it does not necessarily follow that the Hong Kong Court should refrain from making a decision on the Continuation Summons and the Company’s Summons, and must wait for the Australian Court to make a decision on the BCAA first. If the Hong Kong Court gives a decision on the Continuation Summons and the Company’s Summons first, I am sure that the Australian Court would duly consider the reasons given by the Hong Kong Court and give appropriate weight to the findings made by this Court in the decision.

(d)  After all, the Brother and the Company have waited for this substantive hearing for several months. Bearing in mind the matters set out in subparagraphs (1) to (4) above, there is no reason to keep the Brother and the Company to continue to wait for an indefinite period.

D. THE PRINCIPLES

39.The principles concerning applications made under s.21M of the HCO have been authoritatively stated by the Court of Final Appeal in Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd[1], in which Lord Philips NPJ said (footnotes omitted):

“The First Question

39. The first question raised by this appeal is what are the legal principles applicable on this section 21M application and, in particular, whether the Court of Appeal was right to apply the first stage test in Refco and, if so, whether it applied that test correctly. The starting point is to consider the origin and object of section 21M.

……

The correct approach to the first stage

47. The starting point is to consider whether, if the proceedings that have been or are to be commenced in the foreign court result in a judgment, that judgment is one that the Hong Kong court may enforce. This is a precondition to the exercise of the jurisdiction and is underlined by section 21N of the High Court Ordinance, which provides:

(1) In exercising the power under section 21M(1), the Court of First Instance shall have regard to the fact that the power is-

(a) ancillary to proceedings that have been or are to be commenced in a place outside Hong Kong; and

(b) for the purpose of facilitating the process of a court outside Hong Kong that has primary jurisdiction over such proceedings.’

48. If the nature of the foreign proceedings is such that the Hong Kong court will not enforce any judgment to which they give rise – eg because the exercise of the foreign jurisdiction is exorbitant or for some other reason of public policy, then there can be no question of granting relief under section 21M.

49. Next the court should ask itself the same questions as it would if a Mareva were sought in support of an action proceeding in the Hong Kong court, namely (i) has the plaintiff a good arguable case and (ii) is there a real risk that the defendant will dissipate his assets if the Mareva is not granted? It is this, no more and no less, that Morritt LJ had in mind in the passage of his judgment in Refco that I have cited at para 32 above. This is apparent from the passage in his judgment that immediately followed:

‘Accordingly, the first issue is whether if the substantive proceedings were pending in this Court the conditions for the grant of the Mareva relief sought have been satisfied. There is no dispute that there is a properly arguable case…The crucial question is, therefore, whether there is sufficient evidence of a risk of dissipation of assets so that any judgment obtained by Refco will go unsatisfied.’

50. The Court of Appeal in para 32 of its judgment, cited at para 33 above, misinterpreted Morritt LJ’s judgment in Refco in postulating that it was necessary to consider the strength of the substantive claim under the law of Hong Kong. As Lord Nicholls observed in Mercedes Benz v Leiduck the underlying cause of action has little significance. Foreign judgments will be enforced in Hong Kong even though the claim is one that would not have succeeded under the law of Hong Kong. There is no reason in principle why the prospect of such a judgment should not receive the protection of a Mareva injunction.

51. Before considering Refco, the Court of Appeal had observed that in exercising the power under section 21M the court was required to abide by the general principles governing interim relief, including, where a Mareva was sought, the need for the plaintiff to show a good arguable case . In that context the Court of Appeal cited with approval the following passage from the judgment of the English Court of Appeal in Motorola Credit Corporation v Uzant (No 2):

‘Mr Leggatt argues that, in the context of proceedings under section 25 of the 1982 Act, where (as here) the foreign court in interlocutory proceedings has itself determined that a good arguable case exists against the defendants, that is, or falls to be treated as, a final decision upon that issue for the purposes of the section 25 jurisdiction of this court. We do not think that is correct. The requirement that the claimant must establish that Mareva-type relief would be granted if the substantive proceedings were brought in England requires a decision of the judge based on English procedures and the approach of the English court to the nature and sufficiency of the evidence in a situation where the claimant has come to England to obtain a remedy unavailable to him in the substantive foreign proceedings. It is frequently, indeed usually, the position that section 25 proceedings are brought following issue and service of the foreign proceedings but before there has been any decision of the foreign court which examines the strength or arguability of the claimant’s substantive case. However, whether or not that is the position, in our view the English court is required, once issue is joined in the section 25 proceedings, to make a separate exercise of judgment rather than a simple acceptance of the decision of the foreign court in interlocutory proceedings decided on the principles applicable, the evidence then available, and the levels of proof required in that jurisdiction.’

52. This passage must, in my view, be treated with caution if applied to proceedings under section 21M. A Mareva injunction can have serious consequences for a defendant. It is a remedy that is open to abuse. A court must always exercise caution before granting this relief. But as section 21N(1)(b) states, the object of the exercise is to facilitate the process of the foreign court that has primary jurisdiction. The question that the Hong Court has to consider is whether the plaintiff has a good arguable case in the foreign court. Section 21M relief can be sought in a wide variety of circumstances – sometimes before proceedings have even been commenced in the primary jurisdiction, often when they have been commenced but where that court has not considered the strength of the plaintiff’s case. Where the court of primary jurisdiction has carried out that exercise, however, its conclusions will normally carry weight with the Hong Kong court. Indeed, this was recognized by the Court of Appeal in Motorola Credit v Uzan, for it stated:

‘Where there is available to the judge on an application under section 25 a reasoned judgment of a foreign court at an interlocutory stage upon the merits or arguability of the defendant’s [sic] claim, that judgment will inevitably form the judge’s starting point in relation to the question of “good arguable case” and, depending upon the apparent cogency of the reasoning and the force of any arguments raised by the defendant, is likely to prove conclusive.’

53. In summary, in section 21M proceedings the court has first to consider whether, if the plaintiff succeeds in the primary jurisdiction the resultant judgment is one that the Hong Kong court will enforce. If the answer to that is yes, the court has to form a view, on all the available material, including any findings of the foreign court itself, whether the plaintiff has a good arguable case before the foreign court and whether there is a real risk that the defendant will dissipate his assets if the Mareva is not granted.

The second stage

54. The second stage of consideration of a section 21M application requires the court to consider whether “the fact that the court has no jurisdiction apart from this section in relation to the subject matter of the proceedings concerned” makes it “unjust” or “inconvenient” for the court to grant the application.” Mareva relief is discretionary in any event, but this provision in section 21M(4) underlines the fact that the court has a wide discretion to refuse to make the order sought if the fact that the substantive claim is being litigated in a foreign court has consequences that make the grant of a Mareva “unjust” or “inconvenient”. It does not seem to me to be very helpful to try to formulate a list of circumstances where it will be unjust or inconvenient to grant the Mareva sought. ……” (Emphasis added)

40.It is trite that a plaintiff must establish the following in order to obtain a Mareva injunction[2]:

(1)  the plaintiff has a good arguable case against the defendant;

(2)  the defendant has assets within the jurisdiction;

(3)  that the balance of convenience is in favour of granting the injunction;

(4)  there is a real risk of dissipation of assets, or removal of assets from the jurisdiction, so as to render the plaintiff’s judgment of no effect; and

(5)  the plaintiff must also comply with a strict duty of full and frank disclosure.

E.  DISCUSSION

  E1.  Public Policy Consideration

41.The essence of the Wife’s arguments is as follows:

(1)  The Brother is holding all the shares in the Company on trust for the Husband. Thus, the Husband is the sole beneficial owner of the all the shares in the Company.

(2)  The Wife then says, accordingly, the Husband is the beneficial owner of the assets held by the Company. Hence, those assets should be within the matrimonial pot and should be available for division in the property settlement proceedings in Australia (ie “the Australian Proceedings”) between the Wife and the Husband.

(3)  The assets would include the cash in the Company’s A/Cs, which should be regarded as assets beneficially owned by the Husband, and should be included in the matrimonial pot and available for division in the property settlement proceedings.

(4)  The cash in the Brother’s A/C, and the securities in the Brother’s Securities A/C (“the Securities”), are originated from the Company. Hence, these assets should also be regarded as the assets beneficially owned by the Husband, which should be in the matrimonial pot and available for division in the property settlement proceedings.

42.The Australian Ex Parte Injunction was obtained on the basis of these arguments.

43.With great respect, in the circumstances of this case, I am driven to the conclusion for the reason of public policy, this Court should not enforce the Australian Ex Parte Injunction. In my view, enforcing that order would be completely disregarding the interests of the creditors of the Company, which is a matter that this Court should not do.

44.It is trite that a company is a separate legal entity. It has its own assets and liabilities, and it has its own creditors. The shareholders of the company do not have any beneficial interest in the assets of the Company.

45.In Waddington Ltd v Chan Chun Ho[3], Lord Millet NPJ said:

“47. A company is a legal entity separate and distinct from its members. It has its own assets and liabilities and its own creditors. The company’s property belongs to the company and not to its shareholders. If the company has a cause of action, this represents a legal chose in action which represents part of its assets. Accordingly, where a company suffers loss as a result of an actionable wrong done to it, the cause of action is vested in the company and the company alone can sue. This is the first rule in Foss v. Harbottle (1843) 2 Hare 461. No action lies at the suit of a shareholder suing as such, though exceptionally he may be permitted to bring a derivative action in right of the company and recover damages on its behalf ……

…………

Reflective loss

81. If multiple derivative actions are not maintainable in Hong Kong, then the plaintiff wishes to bring a single derivative action on behalf of Playmates to recover the losses which it is alleged to have suffered as a result of the breaches of fiduciary duty which the appellant owed to it as a director. The plaintiff concedes that such losses are merely reflective of the losses allegedly suffered by the sub-subsidiaries and are accordingly prima facie not recoverable by Playmates. But it submits that the present case falls within the exception described by the English Court of Appeal in Giles v. Rhind [2003] Ch 618.

82. I explained the rationale of the principle in Johnson v. Gore Wood & Co. (supra) at p.62, where I said :

‘If the shareholder is allowed to recover in respect of such loss, then either there will be double recovery at the expense of the defendant or the shareholder will recover at the expense of the company and its creditors and other shareholders. Neither course can be permitted. This is a matter of principle; there is no discretion involved. Justice to the defendant requires the exclusion of one claim or the other; protection of the interests of the company’s creditors requires that it is the company which is allowed to recover to the exclusion of the shareholder.’ ” (Emphasis added)

46.The reflective loss principle as stated by the Court of Final Appeal in Waddington has been considered recently by the Court of Appeal in Power Securities Co Ltd v Sin Kwok Lam[4]. In that case, after considering the recent decision by the UK Supreme Court in Sevilleja Garcia v Marex Financial Ltd[5], Yuen JA concluded that the avoidance of double recovery as a justification for the reflective loss principle as stated by the Court of Final Appeal in Waddington remains as the law in Hong Kong.

47.In Power Securities, at [54.1], Yuen JA pointed out that there are two types of cases:

(1)  cases where claims are brought by a shareholder in respect of loss which he has suffered in that capacity, in the form of a diminution in share value or in distributions, and which is the consequence of loss sustained by the company, in respect of which the company has a cause of action against the same wrongdoers (“Type 1 Cases”); and

(2)  cases where claims are brought, whether by a shareholder or by anyone else, in respect of loss which does not fall within that description, but where the company has a right of action in respect of substantially the same loss (“Type 2 Cases”).

The learned judge then said (footnotes omitted):

“70.1. In the present case, the CFA had pronounced on the reflective loss rule in Hong Kong in Waddington and [Basab v Superb Glory Holdings Ltd (2017) 20 HKCFAR 384], and did not simply follow Johnson as a matter of stare decisis. In Waddington, Lord Millett referred to his judgment in Johnson and the avoidance of double recovery. Nevertheless, he held that the reflective loss rule was “a matter of principle” (§82). In Basab, Tang PJ giving the judgment of the appellate committee refused leave to appeal, applying the reflective loss rule and referring to the avoidance of double recovery (§8).

70.2. Accordingly, I am of the view that in the present case, where there is a difference between Waddington and Marex (whether the avoidance of double recovery does or does not justify the reflective loss rule), this court remains bound by Waddington.

70.3. Be that as it may, the decision of the UKSC to overturn double recovery as one justification for the reflective loss rule only affects claims under the general law of damages (eg by creditors), not claims for diminution in value of shares under company law, where the barring of such claims is justified essentially by the rule in Foss v Harbottle (§52 above) which is engaged by the nature of the claimant’s loss. It is clear to me that our case would fall within case (1) of Marex (see §54.1 - 54.2 above).”

48.It is clear that in respect of both Type 1 Cases and Type 2 Cases identified in Power Securities, the reflective loss principle would apply. The very basis of the reflective loss principle is those fundamental concepts stated by Lord Millet NPJ at [47] in Waddington, ie a company is a legal entity separate and distinct from its members. It has its own assets and liabilities and its own creditors.

49.With respect, the Wife’s arguments would be directly contradicting those fundamental legal concepts reiterated by the Court of Final Appeal in [47] of Waddington, and would be completely ignoring the interest of the creditors of the Company. In my view, bearing in mind that Hong Kong is an international financial centre, those fundamental legal concepts must be observed in Hong Kong, and the interest of the creditors of a company must be protected.

50.Mr Jeremy Chan has referred me to the UKSC’s decision in Prest v Petrodel Resources Ltd and Others[6] and Thorpe J’s decision in Poon v Poon[7]. With respect, in my view, the Wife cannot derive any assistance from these cases.

51.In Prest v Petrodel, the UKSC held that, in the circumstances of that case, the companies in questions were holding the legal titles to some properties on trust for the husband, and hence those properties should be regarded as the family assets in the matrimonial proceedings. In my view, the situation in this case is very different from the situation in Prest v Petrodel.

(1)  According to the Wife’s pleaded case in the Australian Proceedings (see [21] above), the Husband only has beneficial interest in the shares of the Company, not beneficial interest in the assets of the Company. The arguments put forward by the Wife in fact are not in line with and are contradicted by the Wife’s pleaded case in the Australian Proceedings. In view of the position pleaded by the Wife in the P/C, the Wife cannot rely upon Prest v Petrodel.

(2)  Further, unlike Prest v Petrodel, in this case, the Company is not an asset-holding company, merely holding an asset with no business activity. On the contrary, the Company is a trading company, actively carrying on business. The Company would have some creditors in the ordinary course of business. For example, after a supplier supplying some goods to the Company, before settling the bill, the supplier is a creditor of the Company. The interests of the creditors of the Company should be protected and cannot be ignored.

52.The facts in Poon v Poon bear no resemblance to the facts in this case. In Poon v Poon, both the husband and the wife were directors and shareholders of the company. The wife effectively was the majority shareholder and intended to convene an extraordinary meeting to expel the husband from the management of the husband. The husband successfully obtained an injunction preventing the wife from doing so. Obviously, that case concerns the internal management of a family company. In this case, there is no issue in respect of the internal management of the Company.

53.In my view, in this particular case, bearing the Wife’s pleaded case in the Australian Proceedings in mind, endorsing the Wife’s arguments as set out in the above by granting an injunction under s.21M of the HCO on the basis of the Australian Ex Parte Injunction would be incompatible to the fundamental matters as set out in [43] to [49] above. For this reason, I would refuse to enforce the Australian Ex Parte Injunction in Hong Kong. For the avoidance of doubt, what I have said here is limited to the particular circumstances of this case.

  E2.  Risk of Dissipation

54.Risk of dissipation is a real risk of dissipation of assets, so as to render the plaintiff’s judgment of no effect. See [40] above.

55.In the hearing, in response to the enquiry from the Court, Mr Jeremy Chan told me that the Wife’s position in the Australian Proceedings is that the matrimonial assets should be divided between her and the Husband equally, or the Wife should have slightly more than 50% of the matrimonial assets. Mr Jeremy Chan has confirmed that the Wife definitely is not saying that nearly all the matrimonial assets should be given to her.

56.I referred Mr Jeremy Chan to [29(f)] of the Ex Parte Skeleton, in which he said that the total of the family pot would be about AUD 897 million, and value of the Hong Kong assets would be about AUD 26.63 million. Based upon these figures, my calculation is that the Hong Kong assets would be less than 3% of the total of the matrimonial assets. I therefore asked Mr. Jeremy Chan the following question: Since the Wife’s case is that her entitlement would be 50% (or slightly more than 50%) of the matrimonial assets, while the Hong Kong assets are merely less than 3% of the total of the matrimonial assets, in what way it can be said that the dissipation of the Hong Kong assets would have the effect of rendering the Wife’s judgment (assuming that the Wife can ultimately obtain a property settlement in accordance with her case in the Australian Proceedings) of no effect.

57.In response to the aforesaid question, Mr Jeremy Chan has fairly told me that the Wife has not said and would not say that she is entitled to have more than 97% of the matrimonial assets. After giving this confirmation to me, Mr Jeremy Chan has tried to answer my question concerning risk of dissipation of assets. I have considered Mr Chan’s submissions carefully. With respect, I am of the view that the question asked has not been satisfactorily answered.

58.There is no evidence before me showing that the Wife would have any difficulty in levying execution on the 97% of the matrimonial assets which are not in Hong Kong. The 97% would be more than sufficient in satisfying any judgment obtained by the Wife in the Australian Proceedings. Put it in another way, taking the Wife’s case in the Australian Proceedings at its highest, the Wife’s entitlement is only 50% or slightly more than 50% of the total of the matrimonial assets. Even if all the Hong Kong assets (ie the assets being now frozen by the 2023 HK Injunction, which amount to no more than 3% of the total of the matrimonial assets) suddenly disappear, there is no evidence showing that the Wife would not be able to get her entitlement in this scenario. In the circumstances, it would be plainly wrong to say that there is a risk of dissipation of assets.

59.Further, Mr Lai for the Brother has pointed out that based upon the evidence before this Court, around 73% of the matrimonial assets would be the shares in the Company. Those shares have been well protected by the Brother’s Undertaking offered to the Australian Court. The Brother is a resident in Australia[8] and would definitely act in accordance with the undertaking. With the protection of the Brother’s Undertaking, the Wife can certainly get her share if she is able to obtain a judgment in her favour in the Australian Proceedings. I agree with Mr Lai.

60.Mr Frederick Chan for the Company has also made a point. Mr Frederick Chan submits that the evidence shows that the total of the balances in the Company’s A/Cs in November 2022, December 2022, January 2023 and February 2023 are about HK$31 million, HK$32 million, HK$51 million and HK$47 million respectively. As at the date of the 2023 HK Injunction, the total is about HK$51 million. Bearing in mind that the Company is a trading company actively carrying on business, looking at these figures, there cannot be any reasonable inference that the Company is dissipating its assets. In my view, this is also a point in respect of which the Wife does not have a satisfactory answer.

61.For the reasons above, in my judgment, the Wife has failed to show a risk of dissipation if no injunction is made by the Hong Kong Court. Based upon this reason alone, the 2023 HK Injunction should be discharged without a re-grant.

E3.  Ex Parte Application Not Justified

62.In Chen Pei Xiong v. Convoy Global Holdings[9], Coleman J said:

“112. It cannot be in dispute that ex parte applications should be regarded as exceptional, and the court should not entertain such applications unless there are cogent justifications for doing so, usually by reference to one or both of extreme urgency or the need for secrecy.

113. It is frequently repeated – albeit depressingly frequently overlooked or ignored – that ex parte orders are only made “where the situation is of such extreme urgency that there is literally no time to warn the defendant of what is proposed or where the purpose of the injunction will or may be frustrated if the defendant is informed”: see, for that original phrasing, Brand, Farrar Buxbaum v Samuel-Rozenbaum (unreported, HCA 5191/1998, 8 May 2002) at §24.

114. It is also trite that where there is no justification to make an ex parte application, either on the ground of urgency or the need for secrecy, the court can set aside any order obtained on that ground alone: see, for a recent example, China Medical Technologies Inc (in liquidation) v Wu Xiaodong [2019] HKCFI 1266 at §26.”

63.Mr Lai submits that there is no justification in urgency or secrecy in support of the ex parte without notice application for an injunction made on 13 March 2023. There have been legal proceedings between the Wife and the Husband in various jurisdictions for a number of years, and this case in Hong Kong has been in place since 2020. In view of the long contentious litigation history between the Wife and the Husband, it cannot really be said that there is any extreme urgency or secrecy justifying the ex parte without notice application made by the Wife on 13 March 2023. In particular, the bulk of the Brother’s assets targeted by the 2023 HK Injunction is the Securities in the Brother’s Securities A/C with the bank, which could not be traded outside of banking hours. Mr Lai argues that by choosing to proceed on ex parte without notice basis, the Wife is abusing the process of this Court, and the 2023 HK Injunction must be discharged without a re-grant.

64.Mr Jeremy Chan relies upon the [12] and [13] of the Australian Ex Parte Injunction (see [28] above). He submits that the Wife is bound by these terms of the Australian Ex Parte Injunction and cannot give any notice of the Hong Kong application to the Brother and the Company before making the application on 13 March 2023. To make that application on an inter partes basis, or on an ex partes on notice basis, would be in breach of the terms of the Australian Ex Parte Injunction.

65.With respect, I have no hesitation in rejecting this submission. While, in accordance with the Hong Kong law, it is necessary to give prior notice of the application of the Hong Kong application to the Brother and the Company, what the Wife should do is to seek the necessary variation of the Australian Ex Parte Injunction from the Australian Court first, and then make the Hong Kong application with prior notice to the Brother and the Company. The Wife cannot use the terms of the Australian Ex Parte Injunction as an excuse justifying the ex parte without notice application made by her on 13 March 2023.

66.Without prejudice to the above, I am in agreement with Mr Lai that the majority of the Brother’s assets targeted by the 2023 HK Injunction is the Securities in the Brother’s Securities A/C with the bank[10], and the Wife in fact can make an ex parte application with notice to the Brother at a time outside of the banking hours. By this arrangement, the Wife’s interest would be protected, and the Brother would have an opportunity to address the Court in the ex parte hearing.

67.What has been suggested by Mr Lai is clearly something which could be done by the Wife. At any time outside the normal working hours, the Duty Judge of the High Court would answer urgent telephone calls and would deal with really urgent applications. With respect, there is no satisfactory answer from the Wife to the point made by Mr Lai.

68.In my judgment, the ex parte without notice application made by the Wife on 13 March 2023 is unjustified. I agree with Mr Lai that the said application is an abuse of the process of this Court. This point alone would be sufficient for discharging the 2023 HK Injunction without any re-grant.

  E4.  Material Non-Disclosure

69.The principles concerning material non-disclosure have been summarized by Coleman J in Hwang Joon Sang v. Golden Electronics Inc[11], in which the learned judge said:

“37. The guiding principles on material disclosure are well-established. For present purposes they can be summarised as follows, without reference to previous authority:

(1) An applicant making an ex parte application must act fairly in all material aspects when preparing and presenting the application.

(2) This includes the duty to disclose to the Court all matters which are material, meaning those matters material to the court’s assessment and decision whether or not to grant the relief without notice, and if so on what terms.

(3) The test as to materiality is an objective one, and ultimately a question for the court. Hence, it is no excuse for an applicant subsequently to say that he was generally unaware, or did not believe, that the facts were relevant or important.

(4) Non-disclosure may be material even if its effect is just to give a seriously different ‘flavour’ to the case.

(5) The duty of full and frank disclosure is a stringent one, designed to protect the absent party.

(6) Therefore, if material non-disclosure has occurred at the ex parte application, the order obtained at such an application would likely be set aside automatically without going into the merits.

(7) Nevertheless, there is a discretion to re-grant the same order. That jurisdiction should be only sparingly exercised, taking into account the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.

(8) Hence, an assessment will be made as to the degree and extent of the culpability with regards to the non-disclosure. The more serious or culpable the non-disclosure, the more likely the court is to set its order aside and not renew it, however prejudicial the consequences.

(9) It is therefore relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge. Nor is there a general rule that a deliberate breach will attract that sanction.

(10) The application of principles which seek to uphold the integrity of the judicial process should not be carried to such lengths as will allow them to become the instrument of injustice.

(11) Because of the penal nature of the jurisdiction, the court should have regard to the proportionality between the punishment and offence.

(12) When exercising the discretion whether to re-grant the order, the court should take into account all relevant circumstances.”

70.The duty of making full and frank disclosure cannot be discharged by merely placing a document in the bundle(s) before the Court. The applicant making the ex parte application should specifically draw the Court’s attention to a particular matter in the document, and should do so fully and frankly. In A1 v R1[12], Coleman J said:

“33. The particular importance of any particular page or pages (or anything on them) may not always ‘leap off the page’ to the Judge as being important on just the reading through of materials in the time available. Where an application is put forward as being urgent, the time available is itself necessarily limited. It must also be remembered that urgent applications frequently interrupt what other work the assigned Judge might otherwise have intended to do at that particular time. That is why the courts rely upon the parties and their representatives specifically to bring to the attention of the court those matters which the court must, or likely will wish, to take into account in the context of the particular application.

34. It has been said on many previous occasions that full and frank disclosure of the contents or purport of a document is not made simply by placing the document somewhere in a bundle of exhibits to an affidavit, even if there is some glancing reference to that document in the affidavit itself. The greater the amount of material placed before the court, the more likely the court will need – and is entitled to – clear sign-posting to the various aspects of that material (which, hopefully, also has been organised in a logical way, making it easier to find, follow and understand).

35. That is all the more important when an application is made ex parte, which triggers the requirement specifically to make full and frank disclosure – meaning specifically drawing the attention of the court to those matters, and doing so fully as well as frankly. The requirement is neither removed nor watered-down simply because the application is, or is said to be, urgent.”

71.The duty of full and frank disclosure covers not just matters of fact but extends also to material points of law.[13]

72.Both Mr Lai and Mr Frederick Chan have submitted the Wife has committed various material non-disclosures in the ex parte application. Mr Lai relies upon the material non-disclosures raised by the Brother in his 2^nd Affirmation filed on 17 May 2023, which is an affirmation in support of the Company’s Summons. Mr Frederick Chan relies upon the material non-disclosures set out in [5] of his skeleton submissions dated 9 May 2023 (“the May Skeleton”), which was placed before the Court in the hearing on 12 May 2023.

73.Pursuant to the leave given by the Court in the hearing on 12 May 2023, the Wife has made her 5^th Affirmation in response to the Company’s Summons. In other words, the Wife has been given an opportunity to respond to the matters in support of the Company’s Summons, including the alleged material non-disclosures set out in the Brother’s 2^nd Affirmation and in the May Skeleton, and the Wife has done so by her 5^th Affirmation. In the circumstances, there would be no unfairness to the Wife if any order is made against the Wife based upon the material non-disclosures raised in the Brother’s 2^nd Affirmation or in the May Skeleton.

74.In the Brother’s 2^nd Affirmation, in respect of material non-disclosure, the Brother said:

“39. …… I would like to highlight the following points:-

(a) [The Wife’s] s skeletons and [the 1^st Affirmation of Madam XXXXX[L]] did not make any reference and/or any explanation as to the real risks of dissipation on the part of [the Company];

(b) [The Wife’s] skeleton and [the 1^st Affirmation of Madam XXXXX[L]] did not make any reference or referred the Court to my 1^st Affirmation filed herein, which provided the background information of [the Company] and where I have deposed that [the Husband] had nothing to do with [the Company];

(c) [The Wife] as the applicant of the ex parte application did not disclose to the Court of her financial position and the fact that she has no substantial connection with Hong Kong and have no assets here and she is unable to honour her cross undertaking on damages.”

75.For ease of reference, I would call the material non-disclosures alleged in [39(a)], [39(b)] and [39(c)] of the Brother’s 2^nd Affirmation as “MND A”, “MND B” and “MND C” respectively.

76.In the May Skeleton, Mr Frederick Chan submitted that the Wife had committed 7 material non-disclosures in the ex parte without notice hearing on 13 March 2023:

(1)  Failure to disclose that the Company had put forward a defence by filing the 1^st Affirmation of the Brother on 7 April 2021 (ie almost two years before the Wife making the ex parte without notice application on 13 March 2023) in these proceedings. As per that affirmation, the Company’s case is that its sole shareholder and director is only the Brother, and the Husband does not have any legal and beneficial ownership in the shares and business of the Company. (“MND 1”)

(2)  Failure to draw the ex parte Judge’s attention that there is no explanation in the supporting affirmation (ie the 1^st Affirmation of Madam XXXXXX[L]) why the Wife’s application must proceed on an ex parte basis and cannot be made inter partes given the procedural history of the litigation between the Wife and the Husband. (“MND 2”)

(3)  Failure to draw the ex parte Judge’s attention to the absence of evidence on the risk of dissipation of assets in respect of the amounts in the Company’s A/Cs. (“MND 3”)

(4)  At [12] of the Ex Parte Skeleton, it is stated:

“The situation is akin or roughly analogous to TL v ML scenarios in Hong Kong Family Court proceedings.”

The mere reference to TL v ML (without any citation) and the submission that this case is “akin or roughly analogous” to TL v ML is a material non-disclosure. In TL v ML[14], DHCJ Nicholas Mostyn QC (as he then was) in fact set aside the freezing injunction that was obtained by the ex-wife against 2 specific companies against which she alleged the ex-husband were the true owner of the shares therein. (“MND 4”)

(5)  Failure to invite the ex parte Judge to consider the trite principles on company law that even if the Wife were to succeed in arguing that the shares in the Company are beneficially owned by the Husband and not by the Brother, the Wife’s entitlement to the shares of the Company would not give her any entitlement to any of the assets and properties of the Company, including the amounts in the Company’s A/Cs. (“MND 5”)

(6)  Failure to disclose to the ex parte Judge that the Wife is not a Hong Kong resident and she has no assets and properties in Hong Kong, and she has not provided adequate evidence to show that she is financially capable of giving the cross-undertaking on damages in support of the injunction sought by her in Hong Kong. (“MND 6”)

77.The transcript of the hearing on 13 March 2023 before the ex parte Judge has been produced and included in the hearing bundles before me, and I have considered the same.

78.Having considered the papers (including the transcript of the ex parte hearing) and Mr Jeremy Chan’s submissions (both written and oral submissions), I come to the conclusion that there is no satisfactory answer to each and every point based upon material non-disclosure raised by the Brother and the Company. Without prejudice to this conclusion, I would also say a few words in respect of some material non-disclosures raised by the Brother and the Company, which are, regrettably, cannot be treated as mere oversights by the Wife. There is an element of deliberation in these non-disclosures.

(1)  As to MND A and MND 3, the Wife ought to mention to the ex parte Judge that in fact the Hong Kong assets only constitute less than 3% of the matrimonial assets, and the Wife’s case in the Australian Proceedings is that the Wife is entitled to have 50%, or slightly more than 50% of the matrimonial assets. The Wife has to remind the ex parte Judge to bear all these in mind in assessing whether there is a risk of dissipation of assets. As all these matters are factual matters which must be within the Wife’s knowledge, these material non-disclosures cannot be regarded as mere oversight.

(2)  As to MND B and MND 1, it is plain and obvious that there is no reason why the material contents of the Brother’s 1^st Affirmation have not been drawn to the ex parte Judge’s attention[15], which include the following:

(a)  The Company was incorporated by the Brother in 2005, ie 7 years before the marriage between the Husband and the Wife in 2012. Since the incorporation of the Company, the Brother has been the sole shareholder and the sole director of the Company.

(b)  Since incorporation, the Company has been an actively trading company with primary business in the manufacture and wholesale of home accessories.

(c)  The Company uses the Company’s A/Cs frequently to receive payments from business partners and to make payments to various suppliers and manufacturers in the course of its trade and businesses. It is important that the Company should have unrestricted use of those accounts.

(d)  The Husband does not have any beneficial interest in the Company, nor has he been involved in running the Company.

(e)  At the time of incorporating the Company, the Brother chose the word XXXX, not because it was the English name of the Husband, but just because the word word XXXXXformed a catchy combination with the words XXXXX. As shown by the searches done at the Hong Kong Companies Registry and at the Australian Business Registry, the companies with the word word XXXXXXin their names are not uncommon.

As said in the above, it is plain and obvious that these matters should be drawn to the ex parte Judge’s attention. The non-disclosure cannot be a mere oversight.

(3)  As to MND C and MND 6, the complaint raised is not met by any satisfactory answer.

(a)  It is important for a plaintiff to give a meaningful undertaking as to damages in an application for an interlocutory injunction. If the plaintiff’s financial position is that, objectively, there are realistic doubts as to the plaintiff’s ability to honour the cross-undertaking, this fact must be disclosed to the Court in the ex parte hearing. In Wah Nam Holdings Co Ltd v Excel Noble Development Ltd[16], Ribeiro J (as he then was) said in the Court of Appeal:

“The requirement that a Plaintiff must provide a cross-undertaking in damages is therefore a necessary part of the mechanism for granting interlocutory injunctions. It is a safeguard for the Defendant which enables the court to grant the Plaintiff an order for interim restraint without the merits having been canvassed. ……

It follows that the merits argument, involving the contention that Yuen J should have undertaken an assessment of the merits of the Plaintiffs’ case with a view to absolving them from providing an undertaking in damages or from the consequences of any non-disclosure or with a view to assessing the likelihood of the undertaking being called upon, turns the true principle on its head.

…………

It follows that if a Plaintiff’s financial position is such that, viewed fairly, it may be said to raise realistic doubts as to the Plaintiff’s ability to honour the cross-undertaking, it becomes incumbent upon the Plaintiff to make full and frank disclosure of his financial position to the ex parte judge so as to permit the judge to determine for himself the correct order to make in the light of such disclosures. The judge in such cases has various options. He may consider it proper to refuse the injunction altogether. Or, he may decide to require some degree of fortification of the cross-undertaking as a condition for the grant of the injunction. Alternatively, he may simply decide to grant the injunction against the cross-undertaking notwithstanding the risk that it may not be honoured or fully honoured if called upon. It is however crucial that all relevant material be placed before the judge so that he can make the decision for himself ……

If the facts were such that the Plaintiff came under a duty to make disclosure, it does not avail him to say that his non-disclosure was inadvertent. ……” (Emphasis added)

(b)  In Pinpoint Multi-Strategy Master Fund v Gangtai Group Co Ltd[17], Anthony Chan J discharged an injunction made under s.21M of the HCO. One of the reasons for discharging the injunction is that the plaintiff had failed to disclose to the ex parte judge that the plaintiff was a foreign company and there was no evidence showing its liabilities or general financial wealth. In that case, the learned judge said:

“58. …… It is uncontroversial that the Judge did not require the Plaintiff to provide any fortification for its undertaking as to damages. [Senior Counsel for the Respondents] submitted that without providing information as to the Plaintiff’s assets within jurisdiction or confirming that it did not have any assets within jurisdiction, the Judge would not have been in a position to consider the necessity of fortification. This amounted to MND on the Plaintiff’s part: see Co A v Co D [2019] HKCFI 367, §61.

59. I have no difficulty accepting the proposition that in an ex parte application, which normally involves an undertaking as to damages, the court should be provided with some evidence to enable it to consider whether fortification would be required.

…………

61. …… I accept also that the Plaintiff was guilty of MND in that the Judge was not provided with relevant information of its financial position so as to enable her to evaluate the need for fortification of the undertaking as to damages. However, I do not regard this MND as serious or deliberate.

…………

65. I remind myself of the principles set out by the Court of Appeal in Excel Courage Holdings Ltd v Wong Sin Lai [2014] 3 HKLRD 642, §56-58.

66. In my view, the Plaintiff was misguided, and not intentional, in respect of the MNDs found to be established above. However, I see no reason why the Injunction should not be discharged as a matter of general rule.”

(c)  At [63] and [64] of the Wife’s 5^th Affirmation, the Wife said that she had offered an undertaking as to damages in the Australian Proceedings, and that undertaking cannot be enforced in Australia. She also said that the Company has the burden to demonstrate why the Company would believe that she would not be able to fulfill the undertaking as to damages. With respect, these are contrary to the authorities mentioned in the above. The Wife has the duty to tell the Hong Kong Court fully and frankly that she has no connection with Hong Kong and no asset in Hong Kong in her ex parte application in the Hong Kong Court, so that the ex parte Judge can assess whether the Wife’s application should be allowed, and whether any fortification from the Wife is required.

(d)  Having considered the evidence, I do not accept MND C and MND 6 as mere oversights.

(4)  As to MND 5, in my view, the Wife ought to draw the ex parte Judge’s attention to the case as pleaded by the Wife in the P/C, telling the ex parte Judge that according to the Wife’s pleaded case in the Australian Proceedings, what should be regarded in the matrimonial pot is the shares in the Company, not the assets of the Company. The Wife should invite the ex parte Judge to bear this in mind in considering whether the Wife’s ex parte application for an injunction should be allowed. It is out of imagination that the Wife would have forgotten her pleaded case in the Australian Proceedings. MND 5 is not a mere oversight.

79.In my view, the Brother and the Company have made good their complaints based upon the material non-disclosures raised in the Brother’s 2^nd Affirmation and in the May Skeleton. The material non-disclosures are serious. In particular, some of the non-disclosures cannot be mere oversights and there is an element of deliberation in those non-disclosures. In these circumstances, the 2023 HK Injunction must be discharged without a re-grant.

F.  DISPOSITION

80.For the reasons above, I dismiss the Continuation Summons and discharge the 2023 HK Injunction. I refuse to re-grant an injunction with same or similar terms to the Wife.

81.For the record, I also make an order in terms of [1] of the Company’s Summons, discharging the 2023 HK Injunction.

82.In the hearing before me, I have not heard submissions concerning directions for the disposal of the Brother’s Summons. At the moment, I am of the view that since the 2023 HK Injunction has been discharged, there would be no need for the Court to further consider the Brother’s Summons. There be an order nisi that leave to the Brother to withdraw the Brother’s Summons.

83.There be liberty to the Brother and the Company to pursue an inquiry against the Wife as to damages caused by the 2023 HK Injunction.

84.I am aware that the discharge of the 2023 HK Injunction would have an impact on the Wife. I would grant a short-term stay to give some leeway to the Wife to consider the way forward and to take any necessary steps as the Wife deems fit. I therefore stay the aforesaid order and would continue the 2023 HK Injunction for 14 days. During the 14-day period, the 2023 HK Injunction would still be in place. However, after the expiration of the 14-day period, the stay would expire and the 2023 HK Injunction would be discharged without a further order.

85.At the moment, I am of the view that costs should follow the event. By reason of the abuse of process as set out in Section E3 and the material non-disclosures set out in Section E4 above (some of which are deliberate non-disclosures), I am of the view that indemnity costs should be paid by the Wife to the Brother and the Company. In my view:

(1)  Costs of the Continuation Summons should be paid by the Wife to the Brother and the Company.

(2)  Costs of the Company’s Summons should be paid by the Wife to the Company.

(3)  Regarding costs of the Brother’s Summons, that summons is withdrawn because the Wife has failed to obtain an order to continue the 2023 HK Injunction. In the circumstances, notwithstanding the withdrawal of the summons, costs of that summons should still be paid by the Wife to the Brother.

(4)  In view of the complexity of these matters, I am minded to grant a certificate for 2 counsel.

(5)  All costs are to be summarily assessed on an indemnity basis, and the assessment be done on paper without an oral hearing.

I make a costs order nisi in accordance with the above accordingly.

86.Unless there is an application by an inter partes summons seeking a variation of the order nisi as stated in [82] above and/or the costs order nisi stated in [85] above within 14 days, the said orders nisi shall become absolute without a further order.

87.Unless the Court directs otherwise, each receiving party shall lodge and serve a bill of costs for summary assessment within 7 days after the costs order nisi becoming absolute, and the Wife shall lodge and serve a written reply to each bill within 7 days thereafter.

88.I am minded to publish a redacted version of this decision for the development of the law. Tentatively, in the redacted version, I am prepared to name the plaintiff, the 1^st defendant, the 2^nd defendant, and the 3^rd defendant as “ZL”, “WY”, “WH” and “WHD” respectively. The parties are directed to provide an agreed draft redacted version to the Court for my consideration within 28 days. The parties shall use their best endeavours to try to reach an agreement on the proposed redacted version. If there is any disagreement, the parties shall also inform the Court the disagreed matters and the reasons in support of the parties’ respective positions within the same timeframe. For avoidance of doubt, the order pronounced in this decision takes effect from the date of this decision, not from the publication of the redacted version of the decision.

89.Time shall run during the Summer Vacation. For avoidance of doubt, the time stipulated in [86] to [88] is not affected by the stay granted in [84], and shall start to run from the date of this decision.

90.Lastly, it remains for me to thank all counsel for the helpful assistance rendered to the Court.

Mr Jeremy SK Chan, instructed by CRB, for the Plaintiff

The 1^st Defendant being absent

Mr Lai Chun Ho and Mr Jonathan Lee, instructed by Lawrence Chan & Co, for the 2^nd Defendant

Mr Frederick HF Chan, instructed by Nixon Peabody CWL, for the 3^rd Defendant