張才奎所託管中國山水投資有限公司股份相關員工 and Others v. 張才奎 and Another
Read the full judgment text of HCA 1661/2014 on BabelCite. This High Court CFI judgment was delivered on 23 June 2021.
1. I call this decision the “ FR Lien Decision ”. It may be read in context together with two other related decisions this Court hands down at the same time (namely the “ Leave & Directions Decision ” [1] and the “ CHQ Injunction Decision ” [2] ).
Cited by 3 cases · Cites 14 cases
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HCA 1661, 1766, 2191/2014 & [2021] HKCFI 1805 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NOS 1661, 1766 & 2191 OF 2014 AND 623, 939 & 1564 OF 2015 ________________________ BETWEEN
_______________ (Consolidated pursuant to the Order of The Honourable Mr Justice G Lam dated 20 August 2015) _______________ AND HCA 1282/2017 ACTION NO 1282 OF 2017 _______________ BETWEEN
_______________ (Heard together) Before: Hon K Yeung J in Chambers Date of Hearing: 11 August 2020 Date of Decision: 23 June 2021 ______________ D E C I S I O N ______________ The “FR Lien Decision” A. The Three Decisions 1.I call this decision the “FR Lien Decision”. It may be read in context together with two other related decisions this Court hands down at the same time (namely the “Leave & Directions Decision”[1] and the “CHQ Injunction Decision”[2]). B. The present hearing 2.This is the hearing of the Lien Summonses (as defined below) taken out by the Former Receivers. C. The Trust Actions and HCA 2648 3.These matters relate to HCA 1661, 1766, 2191/2014 and HCA 623, 939, 1564/2015 (Consolidated) (the “Trust Actions”), and HCA 1282/2017 (“HCA 1282”). They have a complicated history. For background, I refer to the main Judgment of G Lam J (as he then was) in the Trust Actions handed down on 31 January 2018[3] (the “Trust Actions Judgment”). I refer also to His Lordship’s Decision handed down at the same time[4] discharging the receivers (the “EY Receivers” or the “Former Receivers”, and “Trust Actions Discharge Decision”). I also, unless specified otherwise, adopt the same terms used by His Lordship in those Judgments and Decisions. 4.I refer also to the Jurisdiction Decision[5], the Receivership Decision[6] and the SHD Injunction Decision[7] this Court handed down on 30 August 2019. 5.To recapitulate the gist so as to set the scene:
D. The Lien Summonses 6.There are 4 summonses before me. Two of them are substantive, and the other two procedural. They are all taken out by the Former Receivers:
D.1. Liu /13th Aff 7.The purpose of Liu/13th Aff is to inform the Court that the board of CSI has served a notice to convene an EGM for the purpose of considering and if thought fit passing ordinary resolutions for inter alia the allotment of 80,000 ordinary shares in CSI to one Deyee International Company Limited. The point sought to be made is Mr Liu’s belief that there is still a keen demand for CSI shares, and that should the Shares be released and transferred to the nominees of the Employee Plaintiffs, there is a real possibility that they may be sold to bona fide purchasers. 8.Mr Maurellet, leading counsel for the SHPs, does not object to the same. 9.I on 11 August 2020 granted the Former Receivers leave to rely on Liu/13th Aff. D.2. The affirmatory evidence 10.Two same sets (1 set under the Trust Actions and 1 set under HCA 1282) have been filed. I need only refer to 1 set. The main affirmations (excluding those earlier ones produced as exhibits) are:
E. The hearing on 18 October 2019 11.For the reasons set out in the Jurisdiction Decision and the Receivership Decision, I made a number of Orders against Chen HQ. In particular, I set aside the Service Out Order, the concurrent Writ and concurrent Amended Writ issued pursuant thereto and the service out permitted thereby. I discharged the ASI. I also dismissed Chen HQ’s Receivership Summons. 12.Chen HQ subsequently sought leave to appeal against those Orders. The SHDs and Jinan Group on the other hand sought directions for inter alia release of the CSI Shares. 13.After a call-over on 8 October 2019, the substantive hearing of those applications took place on 18 October 2019 before this Court. 14.In the meantime, the Former Receivers on 15 October 2019 took out the Lien Summonses, returnable on 14 November 2019. 15.The Former Receivers claimed entitlement to a lien formed one of the reasons the Former Receivers relied upon in opposition of the directions sought by the SHDs and the Jinan Group. Certain submissions made for the purpose of the hearing on 18 October 2019 are therefore relevant to the present hearing, and have been placed before this Court for the present hearing:
F. The factual background 16.I refer to the Trust Actions Judgment and the Trust Actions Discharge Decision for the relevant facts. 17.The Former Receivers were appointed by Orders granted between May and July 2015. Their entitlement to remuneration under the Orders was the same, that[14]:
18.The status of the relevant shares as at 27 March 2019 when Liu filed his 8th affirmation in the Trust Actions has been explained at §10 thereof[15]. The majority of them have been deposited with the Court. Relevantly, of the 456,325 shares which formed the subject matter of the Trust Actions:
19.There is no dispute that the Former Receivers did conduct work as receivers. On 8 May 2018, the EY Receivers submitted an invoice for their fees and expenses in the total sum of HK$28,191,956.95 to the Registrar of the High Court for assessment. In July 2018, the Taxing Master proposed a 10% reduction to the profit costs of the EY Receivers and to the profit costs of the EY Receivers’ solicitors. G. The issue 20.The main issue is whether this Court should on the evidence before me exercise its discretion so as to make a declaration that the Former Receivers are entitled to a lien over the Receiver Shares. H. The applicable law 21.A court appointed receiver is entitled to be indemnified out of the assets over which he is appointed receiver for all his costs, charges, expenses and remuneration. The entitlement is not possession based, and does not terminate upon the receiver’s discharge — see Mellor v Mellor [1992] 1 WLR 517 at 526G-527E, Glatt v Sinclair [2013] 1 WLR 3602 at 3612C-D, Hughes v Customs and Excise Commissioners [2003] 1 WLR 177 at §64, and International Finance Corporation v DSNL [2007] 2 All ER (Comm) 305, §[42]. As summarized in Kerr & Hunter on Receivers and Administrators (20th ed) at §10-8:
22.A court appointed receiver’s lien is an equitable one — Snell’s Equity (34th ed), §44-037. It is a right against property which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness — see Hewett v Court (1982-1983) 149 CLR 639 at 663. 23.A lien can be enforced by an action seeking a declaration. As stated in Snell’s §44-011:
24.The receiver may waive the right to indemnity — see Kerr & Hunter (21st ed) §11-16. On the elements to be established by a party seeking to rely on waiver, Mr Chen refers to Hua Tyan Development Ltd v Zurich Insurance Ltd (2014) 17 HKCFAR 493 at §18, they being, in gist (1) a clear and unequivocal representation; (2) reliance by the representee; and (3) it would be inequitable for the representor to go back on the representation. 25.Waiver will however not be implied except in a plain case — Kerr & Hunter (21st ed) §11-16. I have also considered the approach adopted by Stone J in Miruvor Ltd v Panamawong-Globe Steamer Lines S.A. [2006] 2 HKC 617 (at p 628, wavier in the context of submission to jurisdiction), and the objective test applied by Kwan J (as she then was) in Re Kong Wah Holdings Limited, unrep, HCCW 49/2000, 20 July 2007 (at §12, in the context of waiver of legal professional privilege), which Mr Maurellet has cited to me. I. SHPs’ opposition 26.Mr Maurellet does not seek to dispute that the Former Receivers had as court appointed receivers conducted certain work. Nor is there any serious dispute on the law. 27.Mr Maurellet summarizes the SHPs’ opposition as follows[16] (with original emphasis):
28.In the course of the hearing, Mr Maurellet focused as his main point his submission summarized at §2.2 of his written submissions. I will hence consider that submission first. J. Whether the Former Receivers have proved that they are owed fees J.1. What need to be established 29.The first question to be considered is this: what the Former Receivers have to establish in order to get the declaration of lien which they are seeking. 30.Mr Maurellet submits that the avowed purpose of the lien is to protect the Former Receivers’ entitlement to their unpaid fees. So as to justify the court’s equitable jurisdiction to grant the declaration of lien sought, it is incumbent on the Former Receivers to prove that they are owed fees. 31.As a matter of principle, that must be right. 32.On that issue, Mr Chen relies on Hewett v Court. At p 668 of the judgment, Deane J observed that:
33.Relying on that passage, in so far as relevant to the present applications, and with the necessary modifications given the facts of the present case, Mr Chen in the course of the hearing submitted that it is sufficient for the Former Receivers to establish that there is an actual or potential indebtedness in respect of their fees[17]. The focus is “actual or potential indebtedness”. 34.On the authorities cited before me, I am prepared to accept that. J.2. The applicable threshold of proof 35.The next question is the threshold which the Former Receivers are required to overcome to establish the existence of “actual or potential indebtedness.” Should it be “prima facie case”, or “serious issue to be tried”, or “good arguable case”, or “balance of probabilities”. 36.I sought Mr Chen’s assistance in this regard in the course of the hearing. Mr Chen at some stage suggested that all the Former Receivers are required to establish is a serious issue to be tried that there is an actual or potential indebtedness in respect of their fees. 37.I do not accept that. This is not an application for an interlocutory injunction. This is an application by the Former Receivers for a binding declaration in their favour of the existence of a lien over the Receiver Shares. I do not see why those thresholds which are normally only applicable to applications for interlocutory orders should apply. I am of the view that the Former Receivers have to establish on the balance of probabilities the existence of an actual or potential indebtedness in respect of their fees. In the end, Mr Chen accepted that to be the position. He submitted that the evidence adduced by the Former Receivers is good enough to support that. 38.I now turn to the evidence. J.3. The evidence 39.Both Mr Maurellet and Mr Chen have taken me through the relevant documents and affirmations evidence. I discuss them as follows. 40.The Former Receivers have conducted work in their capacity as the court-appointed receivers. In that capacity, the evidence suggests that they have incurred costs and disbursements. 41.The evidence suggests that they have been “in fund” for that. 42.The questions are: who have been providing the funds, and what terms there were for the provision of those funds. 43.In early 2018, 5 of the Employee Plaintiffs initiated HCA 86/2018 (“HCA 86”)[18] against 2 of the EY Receivers. One allegation is that the Former Receivers had been funded by Tianrui or its related party. 44.Liu denied having been funded by Tianrui. In an affirmation filed in HCA 86 on 29 June 2018[19], Liu stated at §84[20] that:
45.Whilst Liu’s said affirmation filed in HCA 86 was placed before me on the purpose of these applications, the exhibits adduced were not. Mr Chen at one stage of the hearing sought to place the letters from Wong & Lawyers before me, but ultimately it was not pursued further. 46.I have however in the HCA 86 Decision set out the material contents of those letters from Wong & Lawyers[21]. Reference could be made to them if necessary. 47.In any event, the 4th affirmation of Zhao Dongwei dated 26 September 2018 filed in HCA 86 on behalf of the plaintiffs is before me. He made reference to those letters, that[22]:
48.Then, on 9 November 2018, Liu filed his 7th affirmation in the Trust Actions in support of the Former Receivers’ application for interim payment. At §42 thereof, Liu says:
49.On 27 March 2019, Liu filed his 8th affirmation in the Trust Actions in support of the Former Receivers’ application for interim payment. He saw the need to make certain clarifications therein, that[23]:
50.In Liu/11th Aff, Liu says at §14 that:
51.What is significant from the above are these:
52.The Former Receivers ought to be in the position to provide much more detailed evidence on the source and terms of the funding. They have chosen not to. 53.One added consideration is that the Former Receivers are seeking a binding declaration. It is a discretionary relief. Where the factual basis on which one is sought is hypothetical, or if the declaration serves no practical purpose, none will be granted. 54.In all the circumstances, and on the evidence before me, I am not satisfied that the Former Receivers have established on balance of probabilities the existence of any actual or potential indebtedness in relation to their unpaid fees. 55.To the above, I add this. Mr Chen seeks further to rely on the following matters:
56.In respect of the alleged loan to CSI, I repeat my discussions above, and in particular paragraph 51(k). 57.In respect of the further fees of half a million, the sum is not particularized, and is insignificant compared with the values of the Receiver Shares. I bear in mind the discretionary nature of the declaration sought. I also bear in mind the passage from Hewett v Court cited above, and in particular circumstance (iii) thereof which engages concept of unconscionability and unfairness. I am not minded to grant the declaration sought on that basis. K. Waiver? 58.The other objections raised by Mr Maurellet, whilst not abandoned, have not been developed in the course of Mr Maurellet’s oral submissions. 59.In deference to submissions made, and despite my decision above, I deal with them as follows. 60.In submitting waiver, Mr Maurellet relies principally on the 1st and 2nd Transfers. 61.I accept Mr Chen’s submissions that lien not being possession based, those Transfers do not constitute any clear and unequivocal representation required to establish waiver. I note also that by the 1st Transfer, the Former Receivers were only depositing the relevant shares with Court, and in relation to the 2nd Transfer, the Former Receivers have expressly reserved their rights[24] — see Large Land Investments Ltd v Cheung Siu Kwai [2003] 1 HKLRD 313 at §39. 62.The other matters and conduct relied on, namely the failure to seek any declaration of lien when making the application for interim payment, and the lateness of the present action, are at best equivocal. 63.Mr Maurellet next relies on a number of authorities on guarantees[25] and put forward the proposition of “waiver of all by waiver of part”. He submits that as the Former Receivers have in any event clearly waived their lien in respect of the 72,522 shares, that waiver of lien over part of the shares constitutes a waiver of lien over all the shares. 64.I have reservations as to whether those cases on guarantees are applicable to a case of lien. I will not however enter the debate on law. As Mr Chen has submitted, this alternative limb of Mr Maurellet’s submission is premised upon the Former Receivers having waived lien over part of the shares. I am not satisfied that they have. This alternative submission is therefore not engaged. L. Abuse? 65.Mr Maurellet complains that the present application could and should have been made earlier. He submits that the Former Receivers’ conduct in “pulling its punches” is an abuse of process. 66.I have considered whether the conduct complained of constitutes any Henderson v Henderson type of abuse. I however regard as important, as Mr Chen has highlighted, that there are no successive actions, no earlier concluded proceedings, and that the present application is in fact made under the Trust Actions. I have undertaken the balancing exercise explained by Ma CJ in Ko Hon Yue v Chu Pik Yuk (2012) 15 HKCFAR 72, at 82(5). I am not satisfied that there has been any abuse. M. §3 of the Lien Summonses 67.§3 of the Lien Summonses asks that those shares that have been deposited with Court shall remain so deposited. It is intended to be an ancillary order, so that should this Court grant the Lien sought, the Lien will be effective. Given my discussion above, I refuse §3 also. This dismissal is however without derogation from the effects of my decisions in the Leave & Directions Decision and the CHQ Injunction Decision. N. Disposition 68.I have considered, given the state of the evidence, whether I should adjourn the applications so that further evidence may be filed, or simply dismiss them. In the course of his submissions, Mr Maurellet submitted that either course is open to this Court. 69.I have considered both courses. It is for the Former Receivers to put forward sufficient and appropriate evidence to support their applications. I have formed the view that they have failed to. In my view, the appropriate course is to dismiss the applications. As to whether they may under the liberty to apply clause, and given the fact that they were court-appointed receivers, come back, I will leave the point open for further submissions should the point arise. O. Costs 70.I make a costs order nisi that the SHPs shall have their costs of the applications, to be taxed if not agreed, with certificate for 2 counsel. Any application for variation shall be made within 14 days from the date hereof, upon which further directions for the same will be given.
Mr José-Antonio Maurellet SC, leading Mr Alexander Tang and Mr Kevin Lau, instructed by Stephenson Harwood, for the SH Plaintiffs Mr David Chen, instructed by P C Woo & Co, for the EY Receivers (Former Receivers) [5] [2019] HKCFI 2121 in HCA 2648/2017. [6] [2019] HKCFI 2122 in HCA 2648/2017 and HCA 1282/2017. [7] [2019] HKCFI 2123 in HCA 2648/2017. [8] Tabs 1 and 2 of [A]. [9] Tabs 10A and 10B of [A]. [10] [A/60-65]. [11] [A/66-71]. [12] [A/72-74]. [13] [A/75-78]. [14] [B3/508]. [15] and see in particular the table at §10(4) thereof [B4/770]. [16] §2 of his written submissions. [17] See also §17 of his written submissions. [18] I on 28 October 2020 handed down my Decision ([2020] HKCFI 2708, the “HCA 86 Decision”). I dismissed the defendants’ application seeking to strike out the claim, and allowed the plaintiffs’ application for retrospective leave to commence HCA 86 against the defendants. [19] In opposition of the application by the plaintiffs for retrospective leave. [20] [B3/695]. [21] See §115(c) thereof. [22] [B3/729-730]. [23] [B4/771]. [24] See the relevant covering letters at [B1/2], [B1/5] and [B1/8]. [25] Eg O’Donovan and Phillips, The Modern Contract of Guarantee (3rd Ed.), at §§8-021 to 8-022, and Andrews and Millett, Law of Guarantees (7th Ed) at §12-021. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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