Read the full judgment text of HCMP 83/2020 and HCMP 361/2020 on BabelCite. This Court of First Instance judgment was delivered on 7 April 2022 before Hon G Lam JA (sitting as an additional Judge of the Court of First Instance).
Civil procedure – Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap 597) – registration of Mainland judgment – choice of Mainland court agreement – MJREO s.3(2), s.5(2)(b) and s.18(1)(j) – common law enforcement of foreign money judgments – finality of Mainland judgment under trial supervision system – Mareva injunction – risk of dissipation of assets – material non-disclosure in ex parte application – public policy – natural justice. The plaintiff, a Mainland real estate company, invested RMB 150 million in 2011 into a Fishery Centre in Hainan via a Partnership Agreement with Hainan Zhongtou, a Supplemental Agreement guaranteeing return of investment, and a Guarantee from the defendant and Hangzhou Cybernaut. A 2011 storm damaged the Fishery Centre, allegedly rendering the intended IPO impossible. In 2013, the plaintiff's officer Liu, bribed by Shang, allegedly defrauded the plaintiff into executing documents transferring the plaintiff's interest for only RMB 50 million and executing an Undertaking releasing the defendant from the Guarantee. The plaintiff obtained a Beijing Arbitral Award in November 2016 setting aside the 2013 documents. In subsequent Mainland civil proceedings, the Higher People's Court of Beijing in its BHPC Judgment ((2019) 京民終161號) of 13 August 2019 held Hainan Zhongtou, the defendant, and Hangzhou Cybernaut jointly and severally liable for RMB 150 million plus interest (capped at RMB 60 million and later calculated to be RMB 51,769,932), totalling RMB 201,769,932. The plaintiff registered the BHPC Judgment in Hong Kong under the MJREO and obtained an ex parte Mareva injunction. The defendant applied to set aside the registration and discharge the injunction. The court held that clause 90 of the Partnership Agreement, which designates the courts where the contract was signed (Huairou District, Beijing) as having jurisdiction, applied to the dispute under the Guarantee under Mainland law as the governing law of the Guarantee, following the BHPC Jurisdiction Decision ((2017) 京民轄終472號). However, the court held that incorporation of clause 90 by operation of Mainland law did not satisfy the MJREO's requirement of a 'choice of Mainland court agreement' under s.3(2), because the Guarantee itself is silent on choice of court and the MJREO is a consent-based regime requiring the parties' written agreement to specify the Mainland courts. The court further held that clause 90, although using the permissive word '可', conferred exclusive jurisdiction on the Beijing courts to the exclusion of other jurisdictions, applying the construction principles in Bank of China Ltd v Yang Fan [2016] 3 HKLRD 7 and Huang Shu Jian v Dai Wei [2020] 1 HKC 309. On the public policy defence under s.18(1)(j), the court rejected the defendant's argument that the Higher People's Court breached natural justice by treating the defendant as bound by the Arbitral Award; the defendant was not a party to the Arbitration but had full opportunity to defend himself, and the Higher People's Court made its own independent finding that the plaintiff was defrauded into issuing the Undertaking. On the common law enforcement route, the court held that the BHPC Judgment was final and conclusive notwithstanding the trial supervision system, following Bank of China Ltd v Yang Fan, as the procuratorial objection procedure operates as an appellate-type regime analogous to an appeal. On the Mareva injunction, the court held there was a real risk of dissipation of assets based on the defendant's refusal to satisfy the long-outstanding judgment, failure to comply with Mainland asset disclosure, the failure to procure proper disclosure under Listing Rules 13.51(2)(k) and 13.51B, and the suspicious pre-injunction transfer of substantial Listco shares to the defendant's wholly owned Cybernaut International in return for a debt owed by an opaque private company. The court rejected the material non-disclosure complaint, finding that the trial supervision system, the defendant's non-party status to the Arbitration, and the alleged inconsistencies between the Liu Judgment and Withdrawal Decision were either expressly raised or were arguments on the merits that the plaintiff was not obliged to volunteer. The registration was set aside under MJREO s.18(1)(a), but the Mareva injunction was continued until judgment in any common law action on the BHPC Judgment or further order, with no order as to costs on a provisional basis.
Legal issues: Applicability of clause 90 Partnership Agreement to dispute under the Guarantee · Whether incorporation of clause 90 by operation of Mainland law satisfies MJREO s.3(2) 'choice of Mainland court agreement' · Whether clause 90 confers exclusive jurisdiction on the Beijing courts · Whether enforcement of the BHPC Judgment is contrary to public policy under MJREO s.18(1)(j) · Whether the BHPC Judgment is final and conclusive for common law enforcement · Whether there is a real risk of dissipation of assets warranting a Mareva injunction · Whether there was material non-disclosure in the ex parte Mareva application
Outcome: Registration of the BHPC Judgment under the MJREO is set aside. The Mareva injunction is continued until judgment in the action on the BHPC Judgment or further order. No order as to costs is made provisionally.
Cites 5 cases