Yoichi Kuga v. Saronic Holdings Ltd

HCMP 1180/2018

[2021] HKCFI 1335

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1180 OF 2018

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BETWEEN

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DECISION
(On Release of Fortification
re Undertaking as to Damages)

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INTRODUCTION

1.There are presently two summonses before this Court, a summons issued by P for release of the fortification of his cross-undertaking as to damages of USD 1m paid into court (together with interest accrued thereon) (“Release Summons”), and a summons issued by D for leave to file Hopkins’ 4^th affidavit (“Leave Summons”).

2.P issued the originating summons in these proceedings on 1 August 2018 for injunctive relief under section 21M of the High Court Ordinance, Cap 4 in aid of proceedings in Luxembourg, in which P alleges he is the beneficial owner of the entire issued share capital of a company incorporated in Luxembourg, Pacific Opportunities Holdings SARL (“POH”) which is now being held by D, and P seeks a declaration that the transfer to D of the shares in POH (“POH Shares”) to be declared void.

3.After the issue of the originating summons, on 10 August 2018, at the 1^st hearing before Anthony Chan J (“1^st Hearing”), pending substantive argument, D gave certain undertakings, amongst other things, to preserve the status quo of the POH Shares, and assets and personnel of POH or its subsidiaries and not to divulge financial and confidential and/or privileged information belonging to POH or its subsidiaries to JTrust Asia Pte Ltd (“JTrust”), upon P’s cross-undertaking to provide within 14 days of the order a guarantee in the sum of USD 1m as fortification of his undertaking as to damages (“Chan Order”)[1].  P’s cross-undertaking was subsequently varied on 28 August 2018 by consent that P was to pay by 31 August 2018 the sum of USD 1m into Court as fortification[2].  The said sum of USD 1m has since been paid into Court and placed in an interest bearing account.

4.The originating summons (as later amended) was fixed for a substantive argument on 14 November 2019 (“Substantive Hearing”). As a result of an application for adjournment by D, the amended originating summons was adjourned sine die pursuant to revised undertakings from D. Essentially, D’s undertaking in the Chan Order regarding the divulging of financial information was replaced by an undertaking not to take any step to diminish the assets and/or increase the liabilities of POH and its subsidiaries and an undertaking not to take any steps to procure the liquidation of POH and its subsidiaries (“2019 Order”)[3].  D’s other undertakings in the Chan Order have remained unchanged, and P’s cross undertaking as to damages including the fortification of USD 1m has also remained unchanged.

5.Costs were reserved pursuant to the 2019 Order.  Subsequent thereto, this Court handed down a decision on costs on 11 December 2019 (“Costs Decision”).  I will continue to adopt the abbreviations in the Costs Decision, unless otherwise indicated herein.

6.There have been multi jurisdictional disputes and litigations between JTrust, which is the Singapore investment company of J Trust Co Ltd (a Japan public company) and P’s friend MK and companies controlled by MK including the Group Lease group of companies of which Group Lease Thailand (a Thai public company) and Group Lease Singapore are part of.  The primary forum of the litigation has been in Singapore.  The proceedings in Singapore (“Singapore Proceedings”) consisted of Suit 1212/2017 issued by by JTrust, and Suit 899/2018 issued by P. The Luxembourg Proceedings are related to the Singapore Proceedings.

7.Prior to the Singapore Proceedings, JTrust had also commenced proceedings in BVI on 17 December 2017 against MK and another company (“BVI Proceedings”).  Suit 1212/2017 was issued by JTrust on 26 December 2017 against Group Lease Singapore, MK, Cougar Pacific Ptd Ltd (“Cougar SG”) and 4 Cyprus companies said to be controlled by MK (“Cyprus Borrowers”).

8.Suit 1212/2017 was based on the allegation of JTrust of a conspiracy between those 7 defendants involving sham loans and perpetrated by MK to defraud JTrust of its investments.  After the commencement of Suit 1212/2017, JTrust had obtained a domestic Mareva injunction against the defendants which was later set aside by a judge of the High Court of Singapore and JTrust then appealed to the Singapore Court of Appeal.  The appeal was allowed as seen in a judgment handed down on 1 June 2018, namely [2018] SGCA 27, and the domestic Mareva injunction was reinstated and further the injunctions were expanded by the Singapore Court of Appeal to worldwide Mareva injunctions against Group Lease Singapore and Cougar SG (“SGCA Injunction Judgment”)[4].

9.At the time of the 1^st Hearing, D’s then Senior Counsel Mr Jin Pao had attached a copy of the SGCA Injunction Judgment to his Skeleton Submissions[5] for the attention of the Court.

10.After the Chan Order, P joined Suit 1212/2017 as the 8^th defendant on 8 May 2019, claiming to be the beneficial owner of Cougar SG[6].

11.As said earlier, there was no change to the fortification at the time of the Substantive Hearing and/or in the 2019 Order.

12.Two months after the 2019 Order, on 12 February 2020, the Singapore High Court delivered its judgment in Suit 1212/2017 after a trial of some 10 days and dismissed all “conspiracy to defraud” claims brought by JTrust against the defendants therein (“SGHC Judgment”)[7].  It was found therein that  after joining as the 8^th defendant, P had affiliated himself with MK and the other defendants, although Cougar SG later took a neutral stance in that action[8].  As further seen in the judgment, after D obtained control of Cougar SG through POH, Cougar SG was said to be under the control, indirect or otherwise, of JTrust which had funded D’s role in the litigation[9].

13.A day after the delivery of the above judgment, on 13 February 2020, JTrust filed a Notice of Appeal and the appeal was heard by the Singapore Court of Appeal on 7 July 2020 with judgment reserved.

14.The Release Summons was issued on 17 August 2020 by P after the hearing of the appeal but prior to judgment being handed down by the Singapore Court of Appeal.  P has relied on various findings in the SGHC Judgment and Hopkins’ evidence during the trial in support of the Release Summons.

15.On 6 October 2020, the SG Court of Appeal handed down its judgment under [2020] SGCA 95 (“SGCA Final Judgment”)[10] allowing the appeal of JTrust and reversing the High Court decision in the SGHC Judgment.  The SGCA Final Judgment has brought Suit 1212/2017 to conclusion.

16.Notwithstanding that Suit 1212/2017 has been finally concluded, the Luxemburg Proceedings are still ongoing.

17.Counsel Mr David Fong represented P at the hearing before this Court and Ms Eva Sit SC represented D.

THE LEAVE SUMMONS

18.D sought leave to filed a 4^th affidavit by Hopkins in which Hopkins had summarised the heads of loss or damage which D and/or the affected third parties (including but not limited to POH, Cougar SG and KR (a company in Brazil)) had suffered and/or would continue to suffer as a consequence of P’s actions and D’s undertakings in the Chan Order and/or the 2019 Order, and Hopkins provided an estimate of the quantum of in excess of USD 500,000.

19.The evidence summarised by Hopkins was from various affidavits filed in both the present proceedings and the Singapore proceedings.  As to the quantum, it was only an estimate on the part of Hopkins/D.

20.In paragraph 49 of his 4^th affirmation, P had stated that D as a trustee could not have suffered any damage from D’s undertakings and for damages that might potentially suffered by the UBO, D as a constructive trustee would be personally liable for such damages, it was only paragraph 54 of his 5^th affirmation that P then raised the issue that no particulars were given by D as to the kind of damages the third parties could suffer.  It was in response to this that D sought leave to file his 4^th affidavit.

21.Although the Leave Summons was issued late and there was no explanation for delay, the summary provided by Hopkins was of evidence in affidavits which had already been filed whether in these proceedings or in the Singapore Proceedings.  Thus, P should not be taken by surprise.  Insofar as the quantum was concerned, it was no more than an estimate and there was no documentary evidence in support thereof, as submitted by Mr Fong.

22.Having considered the above, in my view, the summary provided by Hopkins was relevant and there was no evidence of any real prejudice suffered by P by the late filing of the affidavit.  I am prepared to grant the order sought.

THE LEGAL PRINCIPLES ON RELEASE OF FORTIFICATION

23.Mr Fong had referred this Court to the judgment of DHCJ Douglas Lam SC in Emagist Entertainment Ltd v Nether Games (Hong Kong) Ltd and Others [2020] HKCFI 638 , in which the Deputy High Court Judge had summarised the legal principles in relation to the reduction of the amount of fortification, namely that as in the case of a defendant seeking further fortification when he will usually be required to show a change in circumstances which justify further fortification, similar principles apply to an application to reduce the amount of fortification.  It was held by DHCJ Douglas Lam SC that for the application before him, the issue was whether there had been a significant change of circumstances and if so, whether such change warranted the reduction in the fortification sought[11].

24.There was no dispute to the above legal principles.

GROUNDS FOR THE RELEASE SUMMONS

25.P’s ground for the Release Summons was that due to D’s deliberate concealment of the Material Facts ( as defined below) , there has been a significant change of circumstances.  P relied on (i) the discovery that D is a constructive trustee for dishonest assistance and/or knowing receipt (“Constructive Trustee Ground”) and (ii) the fact that D cannot and will not suffer any damage from the voluntary undertaking given (“No Damage Ground”).

CONSTRUCTIVE TRUSTEE GROUND

P’s case

26.POH was a shelf company in Luxembourg which was acquired on 30 January 2015 by Tep, a well-connected businessman in Cambodia[12] and at that time a close friend of MK, on instructions of MK and Group Lease Singapore.  Upon POH being acquired, Tep became its sole director and sole shareholder holding the POH Shares.  On 30 June 2015, POH acquired 100% of the Brazilian company KR (said to own the Brazil Land) from Cougar SG and later on 5 August 2015, POH further acquired 100% of Cougar SG and on the same day, Tep was appointed as a director of Cougar SG.

27.P’s case is that although the acquisition of POH by Tep was on instructions of MK and Group Lease Singapore, the acquisition was with P’s knowledge and approval and Tep held the POH Shares in trust for P and that P is the ultimate beneficial owner (“UBO”) thereof.

28.Pursuant to a share transfer agreement dated 12 June 2018 (“Share Transfer Agreement”)[13], Tep transferred the POH Shares to D in consideration of USD 1 (“Transfer”).

29.It was submitted by Mr Fong on behalf of P that there was a clear case of breach of trust by Tep as the Transfer was without any form of authorization from the UBO, namely P.  Further, Hopkins knew before D was incorporated that D would be used for holding trust property, namely the POH Shares, and the Transfer was in breach of trust, and in consideration for this service, JTrust would pay service fees to Perun Consultants Limited (“Perun”) of which Hopkins was the founder, and that these were material facts (“Material Facts”) which D failed to disclose at the 1^st Hearing to the Court; instead, D’s then Senior Counsel in both his Skeleton Submissions and at the 1^st Hearing, sought fortification of P’s undertaking as to damages of USD 30m, and Mr Fong submitted that by D’s conduct, D had misrepresented itself to the Court to be the UBO[14].

Whether any misrepresentation or non-disclosure of Material Facts

30.As set out, P’s complaint was that the Transfer was without his knowledge and/or authorisation.  P said after the Transfer he found out that D was only incorporated on 29 May 2018, about two weeks prior to the Transfer and Hopkins was and is the sole shareholder and director of D, and that within days after the Transfer, D had, amongst other things, appointed itself as a corporate director of POH and removed the then existing directors of Cougar SG and appointed 3 new directors including Hopkins himself.

31.However, as pointed out by Ms Sit on behalf of D, there was no secret in the Transfer.  The company secretary of POH was immediately informed on 13 June 2018 the next day of the Transfer.  Further, on 14 June 2018 Group Lease Singapore was informed of the Transfer and according to P’s own evidence, he discovered the Transfer on 14 June 2018.  Also on 10 July 2018, Cougar SG notified the parties in Suit 1212/2017 of its change of solicitors[15].

32.At the 1^st Hearing, Hopkins/D had not yet had an opportunity to file any affidavit in response to P’s originating summons.  However, D’s then Senior Counsel had in his Skeleton Submissions[16] attached a copy of the SGCA Injunction Judgment for the information of the Court.

33.As seen in the SGCA Injunction Judgment, between March 2015 and December 2016, JTrust made a number of investments in Group Lease Thailand of some USD 210m upon reviewing and relying on the accuracy of the accounts of Group Lease Thailand.  In March 2017, the Stock Exchange of Thailand started investigating into loans extended by Group Lease Thailand to various borrowers.  Subsequent thereto, there was a press release on 16 October 2017 by the Thailand Securities and Exchange Commission (“Thai SEC”) that it found that Group Lease Singapore in 2016 had, under MK’s directions issued loans to 4 registered companies in Cyprus, namely the Cyprus Borrowers and to Cougar SG, and that MK was the “controller and ultimate benefactor” of all those companies and that the principal of those loans had been used by the borrower companies to repay the interest on those loans to Group Lease Singapore.  The interests were then in turn recorded as income in Group Lease Singapore’s financial statements thus artificially inflating operating results of Group Lease Thailand. As a result of the “round-tripping” of funds, the Thai SEC had decided to lodge a criminal complaint against Group Lease Thailand and had banned MK from occupying directorships in Thai companies.

34.After the news release of the Thai SEC, JTrust had tried to explore its options for potential recovery of its investments but negotiations with MK were unsuccessful.  Suit 1212/2017 was then issued by JTrust against Group Lease Singapore, MK, Cougar SG and the 4 Cyprus Borrowers based on its allegations of the defendants’ conspiracy to defraud JTrust.

35.D’s then Senior Counsel Mr Jin Pao had informed the Court at the 1^st Hearing that D is a Hong Kong incorporated entity and Hopkins, is a forensic accountant and insolvency practitioner with over 20 years of experience, is the sole director of D and one of the new directors of Couger SG.  Upon the Transfer of the POH Shares by Tep, D became the sole shareholder of POH.  The Court was also informed at the 1^st Hearing that the purpose of the Transfer (and the appointment of D as a director) was to provide independent and objective management of POH and its subsidiaries as a consequence of the very serious allegations of fraud alleged by JTrust to have committed against it by MK and his associated entities[17]. It was also made known to the Court at the 1^st Hearing that D disputes P’s entitlement to the relief sought by him in the originating summons given the conflicting evidence regarding the actual beneficial ownership of POH prior to the Transfer to D.

36.Having considered the submissions at the 1^st Hearing by Mr Jin Pao SC and also the SGCA Injunction Judgment, there was no sufficient evidence that there was misrepresentation in the part of D or that Anthony Chan J was misled by D at the 1^st Hearing into thinking that D was/is the UBO of the POH Shares, nor was there any non-disclosure of D’s role or services.

37.Hopkins’s 1^st affidavit was subsequently filed on 10 October 2018.  Hopkins made it clear therein that Perun is a Hong Kong based professional services firm specialising in the areas of forensic accounting, corporate advisory, restructuring, turnaround and liquidation appointments and Hopkins’s services had included undertaking engagements as independent trustee or director and he had included a copy of his professional CV.  Hopkins’s evidence in his 1^st affidavit was that D purchased the POH Shares from Tep who wished to divest himself of the POH Shares held in his name, and the purpose of this sale by Tep and the appointment of D as a director of POH was to provide independent and objective management of POH and its subsidiaries as a consequence of Tep’s discovery of the very serious allegations concerning a very substantial fraud as reported by the Thai SEC in its news release on 16 October 2017, and as alleged by JTrust in his litigation against MK and his associated entities.  Hopkins had made clear in paragraph 28 of his 1^st affidavit that any associated costs if not met by the companies in question would be met by JTrust[18].

38.Mr Fong had set out in a table the events which led to the acquisition of D of the Shares in POH, which referred to those documents disclosed by D/Hopkins pursuant to a specific disclosure order in Suit 1212/2017, including in particular (i) the Letter of Engagement dated 23 May 2018 issued by Perun to JTrust (“Letter of Engagement”)[19] and (ii) the Deed of Indemnity executed on 11 June 2018 by JTrust and Perun (“Deed of Indemnity”)[20].

39.Although Hopkins did not reveal in his 1^st affidavit the above documents and/or details as to how he came to be instructed by Harneys, the legal representatives of JTrust in the BVI proceedings[21], Hopkins had produced a copy of the Share Transfer Agreement.  Further, Hopkins’s evidence in his 1^st affidavit clearly showed that Tep was only holding the legal title of the POH Shares, and thus, the Transfer by Tep to D or the “purchase” or “acquisition” of the POH Shares by D could only be of Tep’s legal title to the POH Shares.

40.Hopkins had in his 2^nd affidavit filed on 23 October 2019 herein exhibited a copy of his affidavit filed in Suit 1212/2017 on 11 December 2018 in which he had repeated his evidence that Perun was brought in to provide independent director services in respect of POH and any associated costs if not met by the companies in question would be met by JTrust[22].

41.In fact, the Letter of Engagement and Deed of Indemnity given by JTrust were exhibited by P in his own 3^rd affirmation filed in these proceedings[23].

42.All the above had been disclosed by Hopkins on behalf of D prior to the Substantive Hearing.  As pointed out by Ms Sit, it is clear from MK’s 1^st affirmation herein that it is P’s own position that at the time of the originating summons that D was a nominee and JTrust was behind the Transfer[24].  There was no sufficient evidence of any misrepresentation by Hopkins/D to the Court or non-disclosure of the Material Facts at the Substantive Hearing, when there was no objection to the 2019 Order being made, with continued fortification of P’s cross undertaking.

Whether D had knowledge of any breach of trust

43.As said, P’s case is that there was a clear case of breach of trust on the part of Tep as he had transferred the POH Shares to D without any form of authorization from the UBO and that D had knowledge of this.  It was submitted by Mr Fong on behalf of P that Hopkins had admitted during his cross examination in Suit 1212/2017 that he did not know who the UBO of the POH Shares were and therefore logically it would follow that there was no authorization from the UBO for transferring the POH Shares to D and that this was known to Hopkins/D.  It was further pointed out by Mr Fong that from June 2018 to August 2019, JTrust had paid approximately USD 695,000 professional fees to Perun.

44.It was also pointed out on behalf of P that there was no affirmation from Tep (i) to rebut the evidence of P and MK that Tep had met with them MK in December 2015 for dinner at the New York Steak House in Phnom Penh and that during the dinner, P told Tep to hold the POH Shares on trust for P to which Tep agreed and (ii) to explain the circumstances leading to the sale and purchase of the POH Shares to D knowing that he only held the POH Shares on trust for P.

45.MK had in his 1^st affirmation filed herein[25] produced a copy of a statutory declaration made by Tep on 12 June 2018 in the BVI Proceedings (“ Tep Statutory Declaration”).  In the Tep Statutory Declaration, Tep had set out how he came to meet MK and his dealings with MK and the events of October 2017 when he learnt of MK being accused of fraud by the Thai SEC.  Tep stated that thereafter, he was trying to extricate himself from the companies which he then knew were the vehicles of MK’s fraud, and he confirmed that he was used as an innocent agent by MK and that he had cut all personal ties with ML in an effort to protect his reputation and integrity.

46.It was Hopkins’ evidence in his 1^st affidavit that at the time of the Transfer, Tep did not inform him or D that P was, or that P claimed to be, the UBO of POH, and that Hopkins further pointed out that while the question of ownership is a matter for the Luxembourg Court to decide, the material submitted by P did not appear to support his contention that he was the true UBO of the Shares. Hopkins had referred to the Tep Statutory Declaration in which Tep had stated that he dealt with MK and that there was no mention of P at all.  Hopkins pointed out that this contradicted P’s contention that Tep knew he was P’s willing and knowing nominee.  There was no sufficient evidence that Tep knew that the UBO of the POH Shares was P.

47.Hopkins had made it clear in his 1^st affidavit that he/D does not accept P’s assertion that he is the UOB of the POH Shares.  Hopkins had further pointed out that the first mention of Kuga Corporation (of which P is the President and CEO) being the alleged beneficial owner of POH was only made on 24 January 2018 the day after MK, Group Lease Singapore and Cougar SG applied to the Singapore Court to set aside the Mareva Injunction obtained by JTrust.

48.What can be seen in the SGCA Final Judgment is that it was found by the Singapore Court of Appeal on a balance of probabilities that the “Borrowers” which included Cougar SG and the 4 Cyprus Borrowers were beneficially owned by MK[26] and the reasons were set out in paragraphs 101 to 110 of the SGCA Final Judgment[27].

49.Ms Sit submitted that there was nothing untoward or inappropriate in D’s involvement and had referred to proceedings in Cambodia.  Group Lease Singapore and/or MK had brought a complaint against Tep in Cambodia accusing Tep had used a “bad faith trick/trickery, fake position, in breaching on the real title which has affected the interest of [Group Lease Singapore]”.[28]

50.As seen in the Dismissal Ruling of the Criminal Case by the Cambodian Court on 18 April 2019 (“Cambodian Ruling”), Tep had requested Group Lease Singapore to replace him as Chairman of the Board of Directors/director of POH or from all title/positions and Tep had requested and applied for resignation from being the company director of POH and he had asked Group Lease Singapore to seek a new person for his replacement.[29]  It was only thereafter that Tep had cooperated with the Chairman of JTrust and Hopkins to establish/set up D and to transfer the Shares from POH to D and to have Hopkins to be the Chairman of POH.  As seen in the Cambodian Ruling, Tep was interrogated by the Prosecutor of the Cambodian Court[30].

51.It would appear in the Cambodian Ruling that after the finding of Thai SEC was published on 16 October 2017, Tep was “strongly surprised and horrified by [MK] and his associated friends having committed a fraudulent and bad faith act in using the public money”[31], and on 17 October 2017, Tep sought to meet with MK at his office in Phnom Penh, and on that day, MK’s explanation was that there was a Thai billionaire who was wanting to expel MK from Thailand and using the power and influence of the Thai SEC to remove MK as CEO of Group Lease Thailand under the unfair accusation against him.  Thereafter, Tep resigned as director of Cougar SG on 28 November 2017 and on 1 February 2018, Tep resigned from the position/title as “share manager” of POH and that MK ended his relation/contact with Tep at that time immediately.  Between December 2017 and April 2018, Tep had communicated with Group Lease Singapore through his lawyer and MK’s lawyer to prepare transfer of the POH Shares to one Mr Khith Sipin appointed by Group Lease Singapore and that Mr Sipin had agreed to receive the POH Shares but Group Lease Singapore did not allow Tep to transfer the POH Shares to Mr Sipin.  It was after having consultation with his own lawyer and consultation with the lawyer of JTrust (which was registered in the commercial register in Singapore as financing provider to Group Lease Thailand) and “to substitute his fear that he is involved with the act of MK and his associated friends”[32], on 12 June 2018, Tep entered into the Share Transfer Agreement with D.

52.The Cambodian Court appeared to have also referred to a “Statute of Company” as it was stated in the Cambodian Ruling that “Pursuant to the Statute of Company in Article 6.2 stated that ‘the single shareholder has a full right to transfer all shares to the third party without having an objection from any person”’[33].  Anyway, it was ultimately held by the Cambodian Court that Tep and accomplices [ie the Chairman, and the head of legislation unit of JTrust, and Hopkins] did not commit any act of fraud, collusion, breach of trust, or unauthorized selling the Shares of POH and MK’s complaint was dismissed on 18 April 2019[34].

53.Mr Fong had referred to the defendants’ arguments in Suit 1212/2017 that JTrust’s act of taking control of Cougar SG was an abuse of process.  Although the High Court Judge in the SGHC Judgment found that Cougar SG was under the control, indirect or otherwise, of JTrust, which had funded D’s role in Suit 1212/2017 and that after D obtained control of Cougar SG, D capitulated to JTrust’s demands and maintained a neutral stance during that trial, insofar as this Court can see, there was no finding in the SGHC Judgment that there was an abuse of process on the part of JTrust in taking control of Cougar SG[35].

54.Having considered all the above, in my view, there was no sufficient evidence that there was a breach of trust or fiduciary duty by Tep in wanting to resign as trustee/nominee holder of the POH Shares and cooperating with JTrust, after the findings of fraud by the Thai SEC and fearing he may be implicated and having requested and applied to MK/Group Lease Singapore unsuccessfully for his resignation.

55.Hopkins had in his affidavit of 11 December 2018 filed in Suit 1212/2017 set out the circumstances leading up to the Transfer[36], and stated, amongst other things, it was Tep who sought to extricate himself from POH and its subsidiaries (including Cougar SG) which had been implicated in allegations of fraud associated with MK, and that Hopkins was not party to any discussion between Tep, Tep’s solicitors or any other parties that led to Tep selling the POH Shares, nor was Hopkins a party to any agreements reached between Tep and JTrust.  Hopkins had said he was simply informed by JTrust that (i) Tep wanted to extricate himself from POH and its subsidiaries and (ii) costs associated with the provision of independent director services in respect of POH and its subsidiaries if not met by the assets of the companies would be met by JTrust[37].

56.There was no sufficient evidence to contradict Hopkins’ above evidence.

57.Mr Fong had referred to Hopkins’s evidence that he did not know who was the UBO and/or he did not enquire into the beneficial ownership of the POH Shares.  Mr Fong submitted that Hopkins was in breach of the Guidelines on Anti-Money Laundering and Counter-Terrorist Financing for Professional Accountant issued by HKIPCA effective on 1 March 2018, namely paragraphs 610.2.5, 620.1(b), 620.2.4 etc, and that pursuant to thereto, Hopkins should have carried out customer due diligence and  verified who the UBO of the POH Shares was.

58.However, in the present case, the beneficial ownership of the POH Shares is a matter pending the determination of the Luxembourg Court.  As submitted by Ms Sit, the Letter of Engagement and the Deed of Indemnity indicated that the situation was no different from a receiver of a company involving shareholders’ dispute and that D was only holding the ring pending the final determination of the ultimate beneficial ownership of the POH Shares in the Luxembourg Proceedings.  I accept Ms Sit’s submission in this respect.

Whether D was/is a constructive trustee

59.To summarise, having regard to all above said, in my view, there was no sufficient evidence that there was a breach of trust on the part of Tep and there was no sufficient evidence that there was any deliberate concealment of the Material Facts on the part of D.  In any event, there was no sufficient evidence of any dishonest assistance and/or knowing receipt on the part of D, or that D was/is a constructive trustee of the POH Shares, as alleged by P.

NO DAMAGE GROUND

60.Mr Fong submitted that the utility of providing fortification of undertaking as to damages is to protect the defendant, and not any other third party and that the burden is on the defendant to show “the likelihood of a significant loss arising as a result of the injunction”: at paragraph 11, per To J in Sung Yan v Superb Jade Ltd and Others HCA 813/2014, unrep 23.10.15.

61.Thus, it was submitted that, as D did/does not beneficially own the POH Shares, it could not suffer any damage/loss from the voluntary undertakings given by D to this Court.

62.Further, as neither D nor JTrust, the paymaster of Perun claims to be the UBO of the POH Shares in the Luxembourg Proceedings, there are only two potential UBOs, namely in P’s case, it is P, and in D’s case, it is MK.  As MK had stated in his 2^nd affirmation that he would not seek any damages from P and/or take any action against P to recover any damages arising out of the present proceedings[38], it was therefore submitted that, even if the Luxembourg Court were to find MK to be the UBO of the POH Shares, there would not be a claim from MK against P for any damages arising out of the present proceedings.

63.As pointed out by Ms Sit, in Schedule 1 of the Chan Order, it is clear that P’s cross undertaking as to damages and the fortification thereof extends to D or any other party and that undertaking as to damages was a voluntary undertaking by P at the time.  This was again repeated in Schedule 1 of the 2019 Order of this Court.

64.As seen in the submissions of Mr Jin Pao SC at the 1^st Hearing, it was submitted to the Court at that time that P was resident overseas in Japan, and whilst he alleged that he was of substantial means, there was no actual evidence of this and there was no evidence that P had assets of any value within this jurisdiction.  It was further submitted at that time that the fortification should be in the region of USD 30m on the basis that P himself had estimated that the damages he could suffer in the Luxembourg Proceedings were in the region of USD 30m[39].

65.Upon the Court’s indication that fortification of his undertaking as to damages was required, P offered USD 1m as fortification and that was accepted by the Court at the 1^st Hearing.  As said, there was no change in the 2019 Order.

66.Even though there was no supporting documentary evidence as to the quantum of damages in Hopkins’ 4^th affidavit, having considered the summary of the evidence in various affidavits, I am of the view that there could be substantial damages suffered by D and any other affected party arising out of D being restrained under its undertakings under the Chan order and/or the 2019 Order.

67.In any event, I do not find that P’s No Damage Ground has been made out, namely that D (and/or its subsidiaries) or any party affected by D’s undertakings will not suffer any damage arising out of those undertakings.

WHETHER SIGNIFICANT CHANGE IN CIRCUMSTANCES

68.As pointed out by Ms Sit, the fortification is to safeguard D’s position if P were to turn out to be wrong and D has been restrained.  At the 1^st Hearing, D offered undertakings and P offered the cross undertaking as to damages voluntarily with fortification, which was continued at the Substantive Hearing, and that the burden is now on P to show good reason why the fortification should be released.

69.As mentioned earlier, there was no sufficient evidence to support P’s allegations.  In my view, P has not been able to discharge the burden on him to show that there has been any significant or material change of circumstances which justifies the release of the fortification being sought by P.  There are also no other grounds in the interests of justice as alleged by P which justifies such release.

ORDER

70.Having regard to all above said, I dismiss P’s Release Summons with costs to D, to be summarily assessed and to be paid within 14 days of summary assessment.  D is to submit a statement of costs within 7 days and P his list of objections within 7 days thereafter.

71.As for the Leave Summons, D should pay costs of the issue of the summons in seeking indulgence of the Court, but P had unsuccessfully opposed the application.  The time taken on the argument of the Leave Summons was insubstantial.  Having considered all the circumstances, I make no order as to costs.

Mr David Fong, instructed by Lau Kwong & Hung, for the Plaintiff

Ms Eva Sit SC, instructed by Hogan Lovells, for the Defendant