廣東順德展煒商貿有限公司 v. Sun Fung Timber Co Ltd

HCCT 25/2019

[2021] HKCFI 3823

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO 25 OF 2019

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Before: Hon Mimmie Chan J in Chambers

Date of Hearing: 30 August 2021

Date of Decision: 29 December 2021

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D E C I S I O N

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Background

1.This is an application to set aside an Order of the Court made on 28 June 2019 (“Enforcement Order”) granting leave to the Applicant (“GD”) to enforce an arbitral award made by the Zhanjiang Arbitration Commission (“Tribunal”) on 19 May 2017, for payment by the Respondent (“Company”) to GD of the sum of RMB 59 million, with costs (“Award”).  The Award was made in an arbitration commenced by GD against the Company (“Arbitration”) on the basis of the Company’s breach of a contract dated 14 April 2017(“Contract”), entered into by the Company for the sale of marble to GD, which is a company incorporated on the Mainland.  The application to set aside was made on the grounds that the Contract was null and void and invalid; that the Company was not given notice of the arbitral proceedings and was unable to present its case; that enforcement of the Award would be contrary to public policy; and that GD was guilty of material non‑disclosure in its application to obtain the leave of the court to enforce the Award in Hong Kong.

2.The Company was incorporated in Hong Kong in 1989.  50% of its shares are held by Simon Tsang (“ST”) and 50% by a company, NI, of which Dany Lee (“DL”) is the majority shareholder and director.  ST and DL are the only 2 directors of the Company.

3.The Company carried on a timber retail business at Shop C on the lower ground floor and open yard of 174-178 Wellington Street (“Property”), at least until August 2017 when the Property was sold.  The registered office address of the Company was also recorded to be the Property address, until much later, in November 2020.

4.ST’s wife and DL’s wife are sisters, and it is not disputed that at all material times until disputes arose in late 2016/2017, DL had entrusted the daily operation of the business of the Company to ST. ST and his wife were the only full time employees of the Company.

5.As stated in the Decision of this Court on the application for security, this is a shareholders’ dispute at the core, although GD is embroiled as an alleged third party.  Counsel for GD emphasized the fact that considering the matter in context, it has to be borne in mind that the Company is a family run business.  Matters would not be formal.  However, family quarrels also render the dispute within the Company more personal and emotive, to the extent of being bitter and unreasonable in the eyes of outsiders.  If matters have to be considered in context, the nature of the family dispute is also part of the context and background.

6.The gist of NI’s complaint is that the Contract made in the name of the Company and signed by ST was not authorized, and was hence invalid, that the Contract was made by ST in collusion with GD in an attempt to strip the Company of its assets, by their agreeing on an onerous Contract, admitting to the Company’s breach and liability in the Arbitration brought by GD on the Contract, agreeing to the Award and enabling GD under the Award to obtain the proceeds of sale of the Property and other assets of the Company via enforcement of the Award.  NI claims that the Company had not been given proper notice of the commencement of the Arbitration, nor of the Award, as all relevant documents relating to the Arbitration were served on the Company at the Property, and the Property had been sold since May 2017, to the knowledge of ST.  DL and NI as shareholder of the Company only became aware of the Award when GD commenced winding-up proceedings against the Company in October 2017 on the basis of the debt under the Award.  In April 2020, NI applied for and in March 2021 obtained leave of the Court to intervene in these proceedings to set aside the Award.

7.The winding-up proceedings have been dismissed by the Court, on the basis of a bona fide dispute on the debt.  In the meantime, a derivative action has been commenced by NI for the Company, on the basis of the alleged breaches of duty of ST as a director of the Company.  That is to be resolved by the Court in HCA 673/2019.

8.In issue in these proceedings is whether there is a binding Contract under which GD claims to be entitled to commence the Arbitration, whether the Company had proper notice of the Arbitration and the Award, and whether enforcement of the Award made in favor of GD can be refused on the grounds provided for in s 95 of the Arbitration Ordinance (“Ordinance”).

Whether Contract was valid

9.The Contract was entered into by ST in the name of the Company on 14 April 2017.  By late 2016, the family members were already in disagreement, as to whether the Company should enter into further financial commitments and loans from the Company’s bankers.  DL had expressed his intention to withdraw from the guarantee he had given to the bank, as a result of which the Company had not been able to obtain increased facilities from its banks.  According to DL, the Company had commenced to wind down its operations from late 2016, with talks between DL and ST of selling the Property.

10.In the winding-up proceedings, and in the Decision on security, the Court has remarked on the many unusual features of the Contract.  It was for the sale by the Company to GD of a substantial amount of marble, for a significant sum of RMB 220 million.  The purchaser, GD, had only been incorporated 3 months before the Contract.  The Contract sum was equivalent to 62 times larger than the Company’s entire sales revenue in 2015. The marble was stated in the Contract to be for delivery by the Company within 6 days of the Contract, in respect of which the Company was liable under a penalty clause in the Contract, for up to RMB 2.2 million for each day of delay in delivery.  In the context of the size of the Contract, DL pointed out that during the years 2011 to 2015, the annual business turnover for the Company was only in the range of between HK$4.3 million in 2015 to HK$5.7 million in 2011, with an average monthly turnover of no more than HK$360,000.  The cash and bank balances maintained by the Company over the years had been less than HK$12,000. Under the Contract, the deposit of RMB 22 million, which GD as purchaser was supposed to pay to the Company as a deposit of the price payable for the marble, was expressed to be discharged by GD’s mere deposit of a cheque for the amount.  It is not disputed that the cheque was never banked in or cashed by the Company.

11.DL claims that the Contract was never authorized by the Company through its board, no meeting had ever been held and no resolution passed for the signing of the Contract, which was a sham.  Counsel highlighted the fact that despite the very significant size and value of the Contract, no contemporaneous correspondence or documents in the form of letters, whatsapp or email has ever been produced by GD or ST, in which the Contract or the transaction had been referred to, which is highly unusual.

12.On its part, GD relies on the implied authority of ST in entering into the Contract with GD.  It claims that NI/DL had entrusted the daily management of the Company’s business to ST, that ST was in fact the de facto managing director of the Company, and GD should not be concerned or affected by any internal irregularity in the management of the Company.  It claims that as the de facto managing director who had been conducting the business of the Company for the past 20 years, ST had the authority to enter into the Contract and to conduct the Arbitration leading to the Award.

13.GD further relies on s 117 of the Companies Ordinance, and claims that as a party dealing with the Company in good faith, the power of the Company’s directors to bind the Company is to be regarded as free of any limitations under any relevant document of the Company, and further, that it is not required to inquire into the limitations on the power of the Company’s directors.

14.NI claims that as a matter of PRC law, which is the governing law of the Contract, the Contract is invalid when GD clearly knew or ought to have known that ST lacked the authority to act for the Company when he made the Contract. Counsel highlighted the fact that the alleged verification by GD’s Mainland lawyer of ST’s authority to sign the Contract was totally inadequate and lacking in basis (which will be elaborated below at paragraph 42), such that GD must have known, or ought to have known, that ST did not have the authority to sign the Contract, as no proof of his authority had been produced apart from some irrelevant board minutes.

15.On behalf of GD, Counsel argued that the question of ST’s authority, and whether the Company is bound by the acts of its director (ST), is a matter of Hong Kong law, as the Company is incorporated under the laws of Hong Kong. Counsel further relies on the fact that the Contract provides in clause 10:

“Mainland laws of the People’s Republic of China shall be applicable in resolving all disputes arising from or relating to this Contract. Yet, in the event that the application of the laws of Hong Kong is more favorable to the complying party, the Hong Kong laws shall be applied.”

16.Mr Yuen argued that the application of Hong Kong law with regard to the implied or usual authority of ST is more favorable to GD, which is the party complying with the Contract, and as such, Hong Kong law should be the relevant law.

Authority of ST

17.Although Hong Kong law may apply as being more favourable to GD in that it is wider in scope in terms of permitting or covering the usual and implied authority of the person signing the Contract, the application of Hong Kong law does not in my judgment assist GD or ST in this case.

18.The fact that ST held office as a director does not confer on him any actual, implied or usual authority to enter into contracts on behalf of the Company (Law of Companies in Hong Kong (3^rd ed), para 12.013).  Directors have power under the articles only when they act together collectively as the board. 

19.It was not in fact argued at the hearing that ST had actual authority to enter into the Contract.

20.In relation to GD’s reliance on ST’s implied authority as de facto managing director of the Company to enter into the Contract, any such implication of authority can only arise from the course of dealings between ST and GD (PEC Limited v Asia Golden Rice [2014] EWHC 1583 (Comm) at paras 62 and 67).  On the facts and evidence in this case, and as elaborated upon below, I am not satisfied that ST had the implied authority to enter into the Contract.

21.In relying on ST’s implied or usual authority, GD initially claimed that it had over 20 years’ business dealings with ST, and that it was entitled to rely on ST’s authority to sign the Contract on the Company’s behalf.  When it was revealed that GD had only been incorporated 3 months before the date of the Contract, GD then sought to explain that its director, Stanley Wu (“SW”), had previously operated his business through another entity (“LT”), and that it was SW who had had the course of dealings with ST.

22.Despite GD’s purported claim that the Contract was part of the usual business dealings which had been conducted between SW and ST for over 20 years, the evidence clearly does not support this.  The Company’s usual and normal business was trading in timber, as opposed to marble stones.  Although SW attempted to refute this by claiming that he had had previous dealings with ST on marble, and further, that the Company’s business was not confined to timber, SW and GD had only been able to produce evidence of two transactions which were conducted with the Company in marble, one in November 2010 and one in July 2013, the value of which was under $1 million, which is incomparable in terms of size to that of the Contract, of RMB 220 million.  I am not satisfied on the evidence that there was a course of dealings between ST and GD/SW in marble.

23.Even if it can be said that SW, as opposed to GD, had had a course of dealings with the Company, I am not satisfied on the evidence that ST’s authority can be inferred from the course of such dealings between SW and the Company, as the Contract was of a totally different nature and scale from the previous ones between the Company and SW/GD in terms of quantity, products involved, and the price involved.

24.I also accept the submissions made on behalf of NI, that ST had no apparent authority to act for the Company in entering into the Contract. For the purposes of apparent authority, any representation of ST’s authority must be made by the board of directors, acting collectively, or by a person with actual authority. On the evidence in this case, there is no clear and unequivocal representation of authority of this nature.

Whether Contract was a sham/collusion

25.The terms of the transaction cast serious doubt on the genuineness of the dealing between ST and GD.  As Counsel has highlighted, the supply of the marble under the Contract was of a value of 62 times the Company’s entire sales revenue for 2015.  Bearing in mind the cash and bank balances maintained by the Company, I agree that the Company did not have the financial resources to purchase the massive quantity of the marble from any supplier which ST might have located for the Contract.  This made it more essential that GD’s payment under the Contract should have been secured, and it was simply incredible that the Contract could have provided that GD’s deposit of a cheque, without clearance, would be deemed sufficient security or guarantee of payment.

26.The Contract provided for delivery of the marble to be made within 6 days, and for a daily penalty to be payable by the Company if delivery should be delayed.  GD sought to explain that although the Contract was formally concluded and made on 14 April 2017, the agreement for sale and purchase had been made and the order was placed in September 2016, with the price to be fixed at a date closer to delivery, to minimize the risk of price fluctuation.  As Counsel for NI pointed out, if the Contract had been negotiated months before April 2017, it is extraordinary that neither GD, SW nor ST has been able to produce any contemporaneous documents or records to evidence the negotiations.  Nor is there any contemporaneous record of the alleged “understanding” or agreement between SW and ST, that the Company would only be entitled to draw funds from the cheque, if the first batch of marble stones delivered was accepted – which was inconsistent with the express terms of the alleged Contract.

27.It is true, and I bear in mind, that allegations of fraud and collusion are serious, and have to be established by cogent evidence.  Despite the fact that NI/DL had claimed from the start that the Contract was a sham, entered into through the collusion of ST and GD, GD has only given extremely limited evidence to refute the allegation, apart from a bare denial. 

28.The timing of the Contract, in the interim when the shareholders of the Company had begun discussions and were in contemplation of winding down the operations before dividing the assets or business, and the extraordinary terms of the Contract, have to be considered in conjunction with events which took place after the conclusion of the Contract and which led to the making of the Award of RMB 59 million in favor of GD, and the steps taken by GD by way of enforcement of the Award.

29.The Contract provided for delivery of the marble on 20 April 2017.  On 19 April 2017, GD allegedly complained of cracks detected in the first batch of marble supplied by the Company, and rejected same.  The Arbitration was commenced shortly after, on 15 May 2017.  The Award was issued 4 days thereafter, on 19 May 2017.  There is no dispute that it was ST who had dealt with the Arbitration on behalf of the Company.  The Award recorded that the parties were in agreement that the Company had not complied with its obligation to deliver the goods under the Contract, and was in breach.  According to the Award, the parties had mediated the dispute and were in agreement that the Company should pay damages to GD in the sum of RMB 59 million.

30.Despite having admitted the Company’s breach of the Contract, and having agreed on behalf of the Company to the Award being entered against it for the substantial sum of RMB 59 million, neither DL as director nor NI as shareholder of the Company was informed by ST of the Contract, the Arbitration or the Award until January 2018, as elaborated below. This is again surprising, given that having accepted liability and mediated with GD on the sum payable under the Award, it would have been reasonable and natural for ST to have notified DL and discussed with him how the Company would be able to make payment under the Award made against it. ST instead kept DL/NI completely in the dark with regard to the Company’s commitments and liabilities assumed.

31.NI has highlighted the fact that almost at around the same time as the Arbitration, ST entered into a preliminary agreement in the name of the Company for the sale of the Property on 31 May 2017.  The sale was completed on 31 August 2017.  Notwithstanding this, ST did not take any steps on behalf of the Company to change its registered office address, which remained at the address of the Property.

32.After the Award was handed down in May 2017, and in orchestrated sync, steps of enforcement and execution of the judgment on the Award were taken. Apart from completing the sale of the Property on 31 August 2017, ST agreed with GD on about 14 August 2017 to assign to GD the Company’s rights under a contract valued at HK$7.5 million as partial settlement of the Award sum. GD then applied in October 2017 to wind up the Company on the basis of the Award and the judgment entered on the Award.

33.Notably, and despite seeking and obtaining charging orders and garnishee orders against the Company’s landed property and bank accounts by way of enforcement of the judgment entered on the Award in August and September 2019, GD did not take any garnishee or other proceedings to seek recovery from ST, a creditor of the Company for over $6.2 million.

34.It was in the course of GD’s winding-up proceedings, notice of which was served by the Official Receiver on NI as a contributory of the Company, that NI and DL became aware of not only the Petition, but the Contract and the Award, both of which were disclosed to NI/DL for the first time in the course of the winding-up proceedings, respectively on 15 January 2018 (for the Contract) and 8 January 2018 (for the Award).

35.The Petition was served by GD at the Property.  On NI’s case, the Company did not have proper notice of the Petition as the documents served at the Property could not have been properly brought to the attention of the Company or those properly representing it, when the Property had already been sold.

36.After the Petition was dismissed by the Court in December 2018, GD applied in these proceedings in April 2019 for leave to enforce the Award (“Enforcement Proceedings”).  The application was likewise served by GD on the Company at the Property.

37.Of significance is the fact that when GD applied ex parte in these Enforcement Proceedings in April 2019 for leave to enforce the Award, GD already had notice (via the disputed winding-up proceedings) of the sale of the Property in August 2017 and the dispute raised by NI/DL as to the validity of service of documents at the Property.  However, GD did not disclose to the Court in the ex parte application that the Property had been sold, nor did it disclose the fact that service of documents at the Property had already been, and might well be, disputed by the Company. GD cannot claim that by simply exhibiting the documents filed in the Petition, the Court should have been made aware of the disputes raised by NI, including the references to the sale of the Property. 

38.What is more disturbing to the Court is that despite expressly informing the Court in the affirmation filed in support of the Enforcement Proceedings that GD would be serving a copy of the order granting leave to enforce the Award on NI, it did not in fact do so.  Obviously, this was to avoid giving notice of the Enforcement Proceedings to NI, and to avoid NI/DL taking steps to resist enforcement of the Award.  Such objective was apparently achieved, as the Enforcement Order was made by the Court on 28 June 2019 without any resistance from the Company, and GD was able by virtue of the Award and the Enforcement Order to obtain HK$32.9 million from the proceeds of the sale of the Property by way of a garnishee order, as well as a charging order on another landed property of the Company, with relative speed by September and October 2019.

39.GD has emphasized, and I accept, that claims of fraud must be proved by cogent evidence and that inferences of dishonesty must be found in primary facts. However, the courts do not lose sight of the fact that direct evidence of fraud is relatively rare, and that fraudsters would be skilled at hiding their tracks. As Arden LJ observed at paragraph 89 of her judgment in Dadourian Group International Inc and ors v Paul Francis Simms, Jack Dadourian, Helga Dadourian [2009] EWCA Civ 169:

“Fraudsters rarely sit down and reduce their dishonest agreement to writing. Frauds are commonly proved on the basis of inviting the fact-finder to draw proper inferences from the primary facts.”

40.The learned editors of Grant QC and Mumford QC, Civil Fraud: Law Practice & Procedure also stated at paragraph 34-072:

“In proving fraud or dishonesty, it is usually necessary to persuade the court to draw inferences from primary facts; direct evidence of fraud is relatively rare. The requirement for a claimant in proving fraud is that the primary facts proved give rise to an inference of dishonesty or fraud which is more probable than an innocent explanation. It is important to have in mind that it is of the essence of establishing a case based on inference from circumstantial evidence that the whole is greater than the individual parts: an allegation of (for example) a dishonest state of mind can therefore be made out by inference from an accumulation of primary facts, none of which on their own would prove the allegation to the requisite standard.”

41.From a holistic consideration of all the circumstantial materials and on the entirety of the evidence adduced, including the timing of the Contract, its terms, and the Company’s usual business pattern and financial situation at the time of the Contract, I conclude that it is more probable that GD was a party to ST’s plan to orchestrate an Award whereby the Company would be made liable for a debt under the Contract, which was part of the scheme to enable ST to enforce the debt by winding- up and other recovery proceedings, and otherwise to enable ST and GD to receive valuable assets of the Company, and to avoid ST’s need to share such assets with NI should the Company be dissolved in the usual way.

42.In an attempt to explain the query raised by the Court in the winding-up proceedings as to ST’s authority in signing the Contract for the Company, GD had claimed in the winding-up proceedings that ST had shown to a Mainland lawyer, who had witnessed ST’s execution of the Contract, a copy of the minutes of a board meeting of the Company, and the seal of the Company, and that the lawyer had been satisfied that ST had the authority to sign the Contract. However, the purported minutes were not exhibited to SW’s affirmation. It was only when DL filed his affirmation in NI’s opposition to the Petition that the relevant minutes relied upon by GD were produced, and it was revealed that those minutes of 31 August 2016 were for approving the financial statements and directors’ report of the Company for the year ended 31 December 2015, and had nothing to do with the execution of the Contract by ST. SW’s evidence in this regard demonstrates that GD had either tried to portray an appearance that the Company had produced evidence of ST’s authority to sign the Contract, when in fact such evidence turns out to be old minutes which had nothing to do with the transaction; or it demonstrates that GD or its lawyer had in fact questioned and sought evidence of ST’s authority to sign the Contract, and their turning a blind eye to the query as to ST’s actual authority, by accepting the old minutes.

43.In my judgment, SW’s affirmation and partial disclosure further show that he is a totally unreliable witness who was not forthright in his evidence to the Court, and I have grave reservations in accepting his evidence as truthful.

44.As Counsel for NI pointed out, notwithstanding the fact that it was SW who had dealt with ST in relation to the Contract, and it was SW who had filed evidence on behalf of GD in the winding-up proceedings, GD has not procured SW to file any further affidavit in these proceedings to resist NI’s application made in March 2021 to set aside the Enforcement Order. The only affirmation of SW was the one filed in support of GD’s ex parte application in April 2019. It was another Mr Wu who filed the evidence in response to NI’s setting aside application. I agree with Counsel, that in all the circumstances of this case, an adverse inference can be drawn against GD, that SW’s evidence would not assist GD’s case in opposition to the application for setting aside.

Conclusion on ST’s authority and validity of Contract

45.Having considered the totality of the evidence in this case, the reasonable and proper inference is that when ST made the Contract with GD and consented to the Award in favour of GD, he was acting entirely in furtherance of his own personal interests, rather than in the interests of the Company. On this basis, his acts cannot fall within the scope of any apparent authority which ST may arguably have, to bind the Company as alleged principal (para 8-062, Bowstead & Reynolds on Agency (22^nd edn)). On the evidence, I am not satisfied that SW acted in good faith when he was dealing with ST/the Company in relation to the alleged Contract, and accordingly find that GD cannot rely on section 117 of the Companies Ordinance.

46.Nor am I satisfied that first, there was any course of dealings between GD and the Company, and secondly, that the Contract was of the usual kind of trading in timber in which the Company had normally been engaged.

47.To conclude, ST had no actual, implied, or apparent authority under Hong Kong law to enter into the Contract for the Company.  If PRC law is applicable, I am also satisfied on the evidence that GD/SW knew or ought to have known that ST lacked authority to act for the Company when he made the Contract.

Whether the Company was party to the arbitration agreement

48.Having found that the Contract was entered into by ST without any authority of the Company, such that the Company is not a party to the Contract at all, it follows that the Company was never a party to the arbitration agreement contained in the Contract.

49.There can be no dispute that an arbitration agreement is separate to and severable from its underlying contract. In this case, however, the underlying agreement for sale and purchase and the arbitration agreement are contained in the same document, ie the Contract. Having found and accepted the Company’s claim (made through NI) that ST who purported to sign as agent for the Company had no authority to conclude any agreement on behalf of the Company with GD, I accept NI’s submission and find that the contract to arbitrate had not been agreed to by the Company, and is likewise impeached (see para 17 of the judgment of Lord Hoffman in Fiona Trust Corp v Privalov [2005] 1 Lloyd’s Rep 192).

Whether the Company was unable to present its case in the Arbitration

50.On behalf of the Company, NI claims that ST never had the authority of the board of directors to accept notice of and conduct the Arbitration on its behalf, nor to concede to the Award on the basis of the unauthorized Contract. It was emphasized that the Company never had proper notice of the Arbitration when the notice to arbitrate had been served at the Property, after the Property had been sold.

51.On behalf of GD, it was argued that ST, as the de facto managing director of the Company, had the implied or usual authority to make decisions for the Company in the ordinary course of its business, and such broad authority includes authorizing the commencement and defence of legal proceedings (which should extend to arbitral proceedings) on behalf of the Company. Counsel relies on Bowstead & Reynolds on Agency (22^nd Ed), para 3-030 (4).

52.I have already found that ST was not acting in good faith, but for his own personal interests, when he agreed to and procured the Contract, admitted to its breach, and consented to the Award in favour of GD for the significant sum payable by the Company. Hence, he cannot be said to have any implied or usual authority to bind the Company by his conduct of the Arbitration.

53.Nor can it be said that there had been “proper” notice of the Arbitration on the Company, when the Property had been sold by ST, and documents served at the registered office address there could not be brought to the proper attention of the Company.

54.Notably, there is no evidence of the service of the notice of Arbitration on the Company. SW’s evidence in the winding-up proceedings only stated that he had no personal knowledge as to how the Arbitration documents had been served, but that GD’s application for Arbitration had stated the Property to be the address of the Company in Hong Kong.  The Award itself does not refer to the fact, details or manner of service of the Arbitration documents on the Company.  It only refers to the Company’s address at the Property, the Company being represented by ST in the Arbitration hearing, and the Company’s consenting to the summary procedure for the Arbitration as well as to the claims of breach of contract and payment of damages to GD.

55.What section 95 of the Arbitration Ordinance specifies as a ground of refusal of enforcement of an arbitral award is that the party was not given “proper notice” of the arbitral proceedings, or was unable to present its case.

56.If ST had no authority to act on behalf of the Company in his conduct of the Arbitration, there is no other evidence, nor claim, that DL, NI or anyone else of the Company had been notified of the commencement of the Arbitration, or of the claims made by GD in the Arbitration, to be given the opportunity to present the Company’s case in opposition to the claims made in the Arbitration.  Whether it had a defence, if the Contract was valid, is of course a separate matter.

57.To conclude, I accept that the Company had not been given proper notice of the Arbitration, and was unable to present its case.

Whether it would be contrary to public policy to enforce the Award

58.On the particular facts and evidence in this case, I consider that it would indeed be shocking to the conscience of the Court to permit GD to enforce the Award which I find was procured by ST in collusion with GD, or SW acting on its behalf. The arbitral process and the Award had been misused by ST with the assistance of GD, and it would be contrary to the public policy of Hong Kong to permit enforcement of such an Award.

Whether there was material non-disclosure

59.In the light of my findings, that the grounds set out in sections 95 (2) (b), 95 (2) (c) and 95 (3) (b) of the Ordinance have been established, it is not necessary to elaborate on the ground that the Enforcement Order should be set aside for GD’s material non-disclosure. On behalf of GD, Counsel argued that GD had relied on its solicitors on matters relating to service, and that it should not be blamed. Further, it was argued that to set aside the Enforcement Order for material non-disclosure and not to re-grant same on inter-partes basis would be disproportionate and unjust.

60.I would make it clear that the failure to disclose the sale of the Property, and that service of documents at the Property had been and is very likely to be disputed, was serious, deliberate and intentional, and material. The representations made to the Court (and referred to in this Court’s Decision on security) were misleading to the Court.  There was clearly material non-disclosure, and it follows that the Enforcement Order must be set aside. There is no basis to re-grant the Enforcement Order, in view of my findings on the other issues, as explained above.

Disposition

61.For all the above reasons, the Enforcement Order is set aside.  The orders made on the basis of the Enforcement Order by way of enforcement are likewise set aside. Orders in terms of paragraphs 1 to 4 of the Summons of 26 March 2021 are granted.

62.The costs of the application (including all costs reserved) are to be paid by GD on indemnity basis, with certificate for 2 Counsel.  Such order is to be made absolute unless application to vary same is made within 14 days.

Mr Rimsky Yuen SC leading Mr Kenny Lin, instructed by Howell & Co, for the applicant

Mr Anson Wong SC leading Mr Martin Kok, instructed by Yu & Associates, for the respondent