Jacky Zong and Others v. Kelly Fuli Zong and Another
Read the full judgment text of HCMP 2772/2024 on BabelCite. This High Court CFI judgment was delivered on 1 August 2025.
2. At the hearing of the Interlocutory Summons on 3 January 2025 before DHCJ Grace Chow, the Defendants offered an undertaking not to withdraw or encumber the assets in question until the substantive determination of the Interlocutory Summons, upon the acceptance of which no interim injunction was ordered.
Cited by 2 cases · Cites 9 cases
|
HCMP 2772/2024 [2025] HKCFI 3355 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 2772 OF 2024 ________________
________________ BETWEEN
________________
________________ DECISION ________________ I. INTRODUCTION 1.Before me are:-
2.At the hearing of the Interlocutory Summons on 3 January 2025 before DHCJ Grace Chow, the Defendants offered an undertaking not to withdraw or encumber the assets in question until the substantive determination of the Interlocutory Summons, upon the acceptance of which no interim injunction was ordered. 3.For the present purpose, the disposal of the Originating Summons herein will dispose of the Interlocutory Summons as well. II. PARTIES 4.The parties essentially are from two families under the same father, the late Zong Qinghou (“Zong Senior”), who passed away on 25 February 2024. Zong Senior was the founding chairman and CEO of Hangzhou Wahaha Group Co Ltd (“Wahaha Group”), a beverage producer in China. 5.The 1st, 2nd and 3rd Plaintiffs (“Jacky”, “Jessie” and “Jerry” respectively) are the three children Zong Senior had with Madam Du Jianying (“Madam Du”). 6.The 1st Defendant (“Kelly”) is the daughter Zong Senior had with Madam Shi Youzhen (“Madam Shi”). She is the chairman of Wahaha Group. The 2nd Defendant (“Jian Hao”) is a BVI company, whose sole registered shareholder has since 2 February 2024 been Kelly, and whose sole director was Zong Senior prior to his demise on 25 February 2024, thereafter replaced by Kelly. 7.Jian Hao holds various assets in Hong Kong, among which is the net assets of US$1,799,062,412.25 as at 31 May 2024 held in its account maintained with HSBC (the “HSBC Account”), consisting mainly of bonds and other fixed income assets and some cash and time deposits. The subject assets for the preservation order now the Plaintiffs seek are these assets in the HSBC Account (the “HSBC Account Assets”). For convenience, I shall refer to the other assets held by Jian Hao than the HSBC Account Assets as the “Other Assets”. 8.Zong Senior left two wills executed on 2 February 2024 (the “Wills”), one of which concerned his specific offshore assets but did not cover Jian Hao and its assets, and the other of which concerned his onshore assets in Mainland China. The Wills did not name any of the Plaintiffs or Madam Du, but named, among others, Kelly, Madam Shi and Zong Senior’s mother Wang Shuzhen (“Madam Wang”), as beneficiaries. The executors named by both Wills are Chen Han 陳漢 (a lawyer of Han Kun Law Offices) and Guo Hong 郭虹. I hasten to add that the present proceedings do not in any aspect concern the administration of the estate of Zong Senior. This just provides the background to understand the agreements between the parties mentioned below, which refer to the Wills. III. PLAINTIFFS’ EVIDENCE 9.The Plaintiffs’ case relies primarily on three documents. The first is an undated handwritten document (the “Handwritten Instructions”) which, according to the Plaintiffs, was handwritten by Zong Senior himself in about late January 2024. The Handwritten Instructions was addressed to Guo Hong. 10.The Handwritten Instructions stated:-
11.On about 2 February 2024, Zong Senior executed a document entitled “委托書” dated 2 February 2024 (the “Letter of Entrustment”). This is the second document the Plaintiffs rely on. It stated that:-
12.Also on 2 February 2024, Kelly signed a Chinese confirmation letter (the “Confirmation Letter”) confirming her agreement to the Letter of Entrustment. It is also on this day when Kelly became the sole shareholder of Jian Hao. 13.On 25 February 2024, Zong Senior passed away. 14.On 14 March 2024, Kelly, Jacky, Jessie and Jerry entered into an agreement titled “協議” (the “Agreement”) in relation to the matters arising from Zong Senior’s demise. This is the third document the Plaintiffs rely on. It provided that:-
15.It is clear that there was quid pro quo under the Agreement, namely, the Plaintiff shall recgonise the Wills and shall not hinder the administration thereunder, and Kelly shall set up offshore trusts for the Plaintiffs. 16.Further, from the Handwritten Instructions, the Letter of Entrustment and the Agreement (collectively, the “Documents”), it is reasonably clear that the HSBC Account Assets shall be for offshore trusts for the Plaintiffs, while the Other Assets shall be for Kelly. 17.In the Plaintiffs’ supporting affirmation, Jacky mentions the following matters in respect of how Kelly has handled Zong Senior’s assets. First, he mentions that there have been unauthorised withdrawals by Kelly from the HSBC Account without the Plaintiffs’ knowledge and consent. He explains that they have received only two monthly bank statements in respect of the HSBC Account. One is as at 31 January 2024 (the “January 2024 Statement”) and the other is as at 31 May 2024 (the “May 2024 Statement”). The former was provided to Madam Du by Guo Hong in around May 2024, and the latter was provided to Madam Du by Hong Chanchan (“Hong”) (who was a director of Wahaha Group and a subordinate of Kelly) in around July 2024. By comparison, they observe some unauthorised withdrawals. They refer to the following as “examples”:-
18.Second, Jacky mentions that Kelly has failed or refused to sign the relevant documents to set up the three offshore trusts (the “Offshore Trusts”) as instructed by the Letter of Entrustment and agreed under the Agreement. 19.It is the Plaintiffs’ understanding from Madam Du that Zong Senior had, prior to his demise, indicated orally that Trident Trust Company (HK) Limited (“Trident Trust”) should be engaged as the trust company for the Offshore Trust. On 18 June 2024, Chen Han emailed Kelly, her PRC lawyer Sun Shiqi (“Sun”) of Jingtian & Gongcheng (“JTGC”) and Madam Du informing that Chen Han’s team had prepared the documents necessary for setting up the Offshore Trusts and suggesting that Kelly should (1) first set up the trust structure; (2) open a bank account with HSBC; and (3) transfer the property into the trusts. However, on the same day, Sun replied on behalf of Kelly, saying that the parties had not agreed on these points. Sun stated that the first step to take would be to determine trust property and for the parties to agree to the value of the HSBC Account Assets. Sun also warned Chen Han not to interfere with the trust work and that he should stay as a neutral estate administrator. 20.On 25 June 2024, Yan Wensheng (“Yan”) of Trident Trust emailed draft trust deeds for the Offshore Trusts and other documents to Sun for Kelly’s signature. Further, on 22 and 23 July 2024, Yan sent a transfer instruction form from HSBC for the transfer of assets into the Offshore Trusts to Sun for Kelly signing. However, Kelly failed or refused to sign the documents. On 13 August 2024, in an email reply to Madam Du’s email of 7 August 2024 enquiring about the progress of setting up the trusts, Sun stated that Kelly had engaged TMF Group (“TMF”) for setting up the trusts and attached to the reply email the fee proposal, and explained that the engagement of TMF to replace Trident Trust was due to the unsatisfactory quality of its service. Sun also indicated in the email that she would contact the beneficiaries as soon as possible for documents and sending them documents for execution. 21.Dispute then followed between Sun (on behalf of Kelly) and Madam Du in relation to the choice between Trident Trust and TMF. Eventually, in September 2024, Jacky, Jessie and Jerry decided not to object to Kelly’s insistence on TMF for the avoidance of incurring time and dispute. As a result, from late September to early November 2024, the representatives of the parties (including Yelu Xu (“Xu”) and Chen Li (“Li”) of the Plaintiffs’ lawyers Beijing Dacheng Law Offices, LLP (Shanghai) (“Dacheng”)) and the representative of TMF, Cindy Huang (“Cindy”), engaged in various discussions via WeChat and an online conference on 12 November 2024. Various draft documents (including draft Deed of Trust) were circulated for signing, but Kelly refused to sign. The Plaintiffs’ case is that from the discussions, it is reasonably clear that Kelly “continued to drag her feet in signing the relevant documentation”, or evinced no intention to be bound by the Agreement, or took inaction (不作为) in breach of Clause 7 of the Agreement. 22.As not much progress had been made, on 30 November 2024, Sun relayed Kelly’s confirmation that the assets remained there and the Plaintiffs had nothing to be concerned about. 23.Further communication continued and revised draft trust deeds circulated. In the email sent on 14 December 2024, another lawyer of JTGC, Zhang Congcong (“Zhang”), on Kelly’s behalf, stated that:-
24.The Plaintiffs also highlight the evidence that:-
25.Third, based on the above, the Plaintiffs make the following complaints at §55 of Jacky’s Affirmation filed on 30 December 2024:-
26.Fourth, in Jacky’s 2nd Affirmation filed on 16 June 2025, being a reply Affirmation, the Plaintiffs raised for the first time that Kelly bears “serious animosity” towards the Plaintiffs’ side of the family and has been engaged in a systematic battle for control over the family assets against the Plaintiffs’ side of the family, including 10 factory companies under Wahaha Group and stripping Wahaha Group of its assets in her own favour. While I can see the point made by Mr William Wong SC (leading Ms Sharon Yuen and Mr Charlie Liu) for the Plaintiffs that such particularised evidence is still evidence in reply to the Defendants’ allegation in Kelly’s opposing evidence (as alluded to below) that she always honours Zong Senior’s wishes, the Defendants should, as a matter of fairness, be afforded opportunity to respond to such particulars raised for the first time. This was the reason why at the outset of the hearing, I granted leave for the Defendants to rely on Kelly’s 2nd Affirmation. All that said, in the overall scheme of things, these particularised evidence does not play any determinative role in my judgment. IV. DEFENDANTS’ EVIDENCE 27.In respect of the Plaintiffs’ complaint of unauthorised withdrawals, Kelly explains that the withdrawals were all legitimate transactions:-
28.I pause to note that while by the time of the 2nd Loan and the second withdrawal to settle the calls issued by the Funds, the HSBC Account Assets had arguably been designated for the Offshore Trusts to be set up for fixed-income investments, such withdrawals were still made. In particular, in relation to the calls issued by the Funds, the Funds are “not part of the HSBC Account”. In other words, the HSBC Account Assets were used for an investment not related to the Plaintiffs at all. Kelly’s response, in essence, is that this had been the practice in the past when Zong Senior was still the director of Jian Hao. 29.Kelly also gives answers to the Plaintiffs’ complaint that she has dragged on her feet in setting up the Offshore Trusts. She states that her discussions or negotiations with the Plaintiffs on the terms of the draft documents were genuine. 30.First, Kelly contends that Clause 3 of the Letter of Entrustment (quoted in §11 above) means that only the interest on the fixed capital would be the trust assets, but not the capital itself. She highlights this because it appears to her that the Plaintiffs have been labouring under an impression which she thinks is wrong that the capital should also be part of the trust assets. 31.Secondly, relatedly, Kelly contends that she should not be treated by the Plaintiffs as a mere entrustee as if she had no say in the terms of the documents setting up the Offshore Trusts. She refers to Clauses 5 and 6 of the Agreement (quoted in §14 above). In particular, Clause 5 states that in the transition of the Offshore Trusts to the private trust company, Kelly would be “受托人的股東”. 32.Third, in relation to her insistence on the valuation of the assets, she refers to Clause 4 of the Agreement (quoted in §14 above). In gist, Kelly contends that the value of the assets in the HSBC Account has never attained US$2.1 billion and thus there is no basis for the Plaintiffs to assert their respective entitlement to an offshore trust of US$700 million each before the parties could find a way to make up a shortfall. Kelly further contends that the figure of US$700 million for each was aspirational only, and in any event, she does not recognise the validity of the Handwritten Instructions. Therefore, the Plaintiffs’ insistence that cash of US$700 million shall be injected into each of the Offshore Trusts is unrealistic and infeasible. 33.Fourth, in relation to her proposal to include her issue to be the beneficiaries of the Offshore Trusts, Mr Benjamin Yu SC (leading Mr Bernard Mak), counsel for the Defendants, seems to contend that her issues would be excluded by the definition of “Excluded Persons” in the draft Deed of Trust. With respect, such contention cannot be maintained, because “Excluded Persons” was defined as the spouse of Kelly, or any spouse of any children or remoter issue of Kelly; in other words, Kelly’s issues would not be excluded. Further, during his oral submissions, Mr Yu suggested that the inclusion of Kelly’s issue and appointment of Kelly as protector with power to terminate the trust period might be due to the lawyers’ template. I rejected this suggestion outright because I cannot take judicial notice in this regard, and there is no evidence from the Defendants to explain that such terms were included because Kelly’s lawyers blindly used a template as if this would be fit-for-all without exercising any professional judgment to their client’s needs. 34.The differences between the two camps, according to Kelly, became sources of disagreement in the discussions and negotiations that have prevented execution of documents necessary to set up the Offshore Trusts. In other words, Kelly is saying that she has evinced no intention not to be bound by the Letter of Entrustment and the Agreement, that she was not taking any action or inaction (in breach of Clause 7 of the Agreement) to prevent the establishment of the Offshore Trusts, and that the Plaintiffs are simply jumping the gun. 35.Kelly emphasises that she always honours Zong Senior’s wishes. In response to the Plaintiffs’ accusation that she does not, Kelly gives explanation in her 2nd Affirmation the details of which I do not need to delve into for the present purposes. V. PLAINTIFFS’ CASE 36.The Plaintiffs’ case is that:-
VI. HANGZHOU PROCEEDINGS 37.Although the Plaintiffs’ case is that the Agreement is governed by Hong Kong law, because of the jurisdictional clause in the Agreement (namely, Clause 10), the Plaintiffs have to commence proceedings in the Hangzhou Court. Accordingly, on 27 December 2024, the Plaintiffs submitted an application with a Statement of Complaint (民事起訴狀) to the Hangzhou Intermediate People’s Court (the “Hangzhou Court”) (the “Application to Hangzhou Court”) for the case filing and registration (立案) so as to commence proceedings against Kelly (the “Hangzhou Proceedings”) and Jian Hao as the third party. In the Hangzhou Proceedings, the Plaintiffs would seek, among others, the following relief:-
38.Mr Wong, for the Plaintiffs, underscores that the Hangzhou Proceedings claim that the HSBC Account Assets, not just the income generated therefrom, are the subject assets in the proceedings. 39.On 28 February 2025, upon Hangzhou Court’s request, the Plaintiffs submitted a revised Statement of Complaint to the Hangzhou Court (the “Revised Statement of Complaint”). As at 16 June 2025, when the Jacky’s 2nd Affirmation was filed on behalf of the Plaintiffs, the Application to Hangzhou Court was still being processed, yet to be “filed and registered” (立案). At that point of time, there seemed to be dispute on the evidence between the parties whether the Hangzhou Proceedings could have been regarded as existent for the purpose of section 21M of the HCO, although Mr Yu fairly pointed out during the oral submissions that section 21M of the HCO covers also proceedings “to be commenced”, and therefore, he would not take this point. In any event, just a few days prior to the hearing, on 8 July 2025, the Higher People’s Court of Zhejiang Province informed the Plaintiffs by a Notice of Acceptance（受理案件通知書）that the Hangzhou Proceedings have been “filed and registered”. Mr Yu made a complaint that the case number in the exhibited copy of the Notice of Acceptance was redacted and thus the evidence is not clear whether this Notice of Acceptance is in respect of the Hangzhou Proceedings, given that the Hangzhou Proceedings were lodged with the Hangzhou Court but not the Zhejiang Higher People’s Court. The Plaintiffs explain that the redaction was made upon the request of the Hangzhou Court to minimise public attention. Irrespective of the reason for the redaction, looking at the content of the Notice of Acceptance referring to the Plaintiffs as the claimants therein, Kelly as the Defendant therein and Jian Hao as the third party therein, it is clear to me that the Notice of Acceptance is in relation to the Hangzhou Proceedings. Further, for convenience, whichever PRC Court is now seized of the Hangzhou Proceedings, I shall refer to the relevant PRC Court as the “PRC Court”. VII. TWO-STAGE APPROACH IN SECTION 21M APPLICATION 40.The approach towards section 21M is well-settled by the Court of Final Appeal in Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd (2016) 19 HKCFAR 586 at §§47-54 per Lord Phillips NPJ. I only need to refer to the following legal principles by summarised by Lisa Wong J at §48 of Jiang Xi An Fa Da Wine Co. Ltd v Zhan King [2019] HKCFI 2411:-
VIII. FIRST STAGE 41.For the first stage, Mr Yu, for the Defendants, rightly does not take issue on the enforceability of the judgment that may be given in the Hangzhou Proceedings. However, Mr Yu submits that whether the injunction being sought in aid is a Mareva injunction or a proprietary injunction or a preservation order, the threshold must be a good arguable case. He refers me to Hin-Pro, supra, itself. He points out that the threshold there for the first stage was also a good arguable case. In addition, he submitted one more case during the hearing, namely, Convoy Collateral Ltd v Broad Idea International Ltd [2023] AC 389 a Privy Council’s appeal from BVI, in reliance on §101 of which Mr Yu emphasises that the Court’s equitable or statutory jurisdiction to grant injunction can be exercised only upon the threshold of a good arguable case. 42.With respect, I cannot see how those cases assist Mr Yu’s proposition on threshold. Those cases were cases of Mareva Injunction or freezing injunction, the threshold for which is a good arguable case even domestically. As pointed out by DHCJ Queeny Au-Yeung (as she then was) in Narian Samtani v Chandersen Tikamdas Samtani [2012] 4 HKLRD 872 at §76, there exists an essential distinction between a preservation order and a Mareva injunction, namely:-
43.It is this distinction (a Mareva injunction having a more extensive effect) that warrants an enhanced threshold for Mareva injunction. 44.In my view, the purpose of the first stage is clear – if the Hong Kong Court would not have granted the order, there would be no point in considering whether to grant such an order in aid of foreign proceedings, since granting an order which the Hong Kong Court would not have granted to aid foreign proceedings seems to be lacking in comity. I tend to think that it would also be lacking in comity if the Hong Kong Court would have granted the order but refused to grant it in aid simply because it presumptuously thought that the threshold should be enhanced. During my oral exchange with Mr Yu, I made enquiry of the reason why for the first stage, the threshold should be enhanced. Mr Yu’s answer was, in essence, that because it is a statutory jurisdiction (in reliance on Convoy, supra) and because the parties chose the foreign forum to resolve their disputes, the Hong Kong Court should be very cautious to exercise such jurisdiction. I agree that I should be very cautious to exercise such jurisdiction, and as to how to exercise such jurisdiction cautiously, I should turn to the authorities binding upon me for guidance. As regards the parties’ choice of forum, while it may be a reason for the cautious approach, it is, in my view, more a factor in a forum non conveniens consideration, with which I am not concerned here. An application under section 21M, by its very nature, means that the applicant recognises that the Hong Kong Court is not an appropriate forum to resolve the substantive dispute, but takes the view that the Hong Kong Court may grant certain relief in aid only. 45.Further, if statutory jurisdiction and/or parties’ choice of foreign forum should or would lead to an enhanced threshold, then in all the cases cited by Mr Yu on this threshold point, all in relation to Mareva or freezing injunctions in aid of foreign proceedings, a threshold higher than a good arguable case should or would have been adopted. However, on the contrary, those cases only show that the same threshold adopted domestically for Mareva injunction were applied at the first stage. With respect, I see no reason why, if Mr Yu’s reason were right, no enhanced threshold was applied for Mareva injunction but for other interlocutory injunctions, an enhanced threshold should be applied as submitted by Mr Yu. 46.In gist, I cannot see how the parties’ choice of forum and/or the cautious approach can be translated into an enhanced threshold for the first stage. In my view, the Hong Kong Court’s caution and any “foreign” or comity consideration are operative in the second stage, but not in the first stage. 47.It remains for me to add that the suggestion, that the threshold for an injunction or a preservation order, if considered in the context of section 21M of the HCO, should be elevated to good arguable case, conflates the first and the second stage. It is, in my view, the second stage which would take care of this foreign element by reference to “unjust” and/or “inconvenient”. Therefore, I find that the threshold for the present purpose of determining whether a preservation order should be granted should be serious issues to be tried. 48.In the same vein, Mr Yu suggests that whatever kind of injunction or preservation order is being sought in aid of foreign proceedings, a real risk of dissipation should be a necessary requirement. It is not entirely clear to me whether Mr Yu suggests that the real risk of dissipation is a requirement for the first stage or the second stage. He seems to suggest both, or seems to suggest that it does not really matter whether it should be for the first stage or the second stage. Insofar as he suggests that it is a requirement for the first stage, for the same reason on which I reject his proposition on an enhanced threshold, I also reject such suggestion. 49.From the evidence and the parties’ respective cases set out above, it is clear to me that there are serious issues to be tried in relation to the Plaintiffs’ claim on breach of contract. Mr Yu also fairly accepts this. In any event, I take the view that the Plaintiffs have also established a good arguable case on their claim on breach of contract. 50.In relation to the constructive trust and/or fiduciary relationship over the HSBC Account Assets, Mr Wong reasons as follows:-
51.Built upon the above, Mr Wong further submits that the Plaintiffs have proprietary interest in the HSBC Account Assets and the income generated therefrom. 52.Mr Yu disagrees. He submits that the Plaintiffs do not have any proprietary interest in the entirety of the HSBC Account Assets, but at most Kelly may have fiduciary duties in respect of the income generated on the HSBC Account Assets. He reasons that the HSBC Account still runs short of sufficient fund up to US$2.1 billion, trusts have yet to be set up, and the HSBC Account Assets are maintained for investment, while the decision as to how to make investment rests with Jian Hao, the legal owner of the HSBC Account Assets. He even goes as far as to suggest that there is issue over the enforceability of the Agreement itself to set up any trusts. 53.Mr Yu also seems to submit that there can be no trust until the value of the assets in the HSBC Account would reach US$2.1 billion, or he submits that there is one of such questions that have to be resolved. However, that has to be construed against Clause 5 of the Handwritten Instructions, which provided that:-
54.While the Defendants do not admit the authenticity and/or validity of the Handwritten Instructions, it is fair to say that this still constitutes at least a serious issue to be tried, and therefore, there is also a serious issue to be tried over whether the Agreement would have to be read with the Handwritten Instructions for proper contractual construction as to when to set up the Offshore Trusts. I also add that while there is no direct evidence to say that Kelly had knowledge of the Handwritten Instructions, which were addressed to Guo Hong rather than her, there is a serious issue to be tried that in the circumstances, the Handwritten Instructions was brought to Kelly’s attention upon Jacky’s belief (which is, in my view, inherently probable) that Guo Hong conveyed the Handwritten Instructions to Kelly, given that Kely was Zong Senior’s nominee shareholder in respect of Jian Hao (see Recital 3 of the Letter of Entrustment). 55.In any event, it is not necessary for me to express any definitive view on the merits of the parties’ respective submissions on this trust-and-fiduciary issue. Suffice to say that it is a serious issue to be tried. 56.Further and in any event, if the threshold were a good arguable case, on the strength of the Documents and the evidence as well as the arguments put before me, I am of the view that there is also a good arguable case on this trust-and-fiduciary issue. 57.As to the balance of convenience, I must point out that the preservation order now being sought by the Plaintiffs is not a Mareva injunction. Therefore, the existence of a real risk of dissipation is not a necessary condition, though still relevant. Instead, the test is whether there is a need for security, and where damages would be adequate, the Court may refuse to grant any preservation order: see Narian Samtani v Chandersen Tikamdas Samtani, supra at §§78-79 per DHCJ Queeny Au-Yeung (as she then was). In my view, for the following reasons, I see such a need:-
58.In the circumstances, I would grant the preservation order if the application would be made to Hong Kong Court, subject to one modification. 59.The HSBC Account is an investment account. Even by the Agreement, the HSBC Account Assets are for fixed-income investments. Therefore, I agree with Mr Yu that it is inappropriate to prohibit “disposing of” or “dealing with”. Further, the investments fluctuate in value. Therefore, I also agree with Mr Yu that it is also inappropriate to prohibit any diminution of value. What then should be the terms of the injunction? 60.During the oral exchange between the bench and the bar, exploration was made into whether certain mechanism could be put in place so that only fixed-income investments envisaged in the Agreement could be made. However, upon consideration, I think providing only for fixed-income investments would be in a sense recognising the Agreement the enforceability of which is in dispute and an issue for the Hangzhou Court to decide. Bearing in mind that the preservation order is to preserve the HSBC Account Assets for the Hangzhou Court’s determination, the order should be to maintain the status quo. Since the HSBC Account is by nature an investment account, the status quo of the HSBC Account Assets must be for investment. Nevertheless, to only allow fixed-income investment may not be feasible. The bank may simply not allow any kind of investment to avoid being accused of allowing non fixed-income investments unless both parties would agree the same to be fixed-income investments. This would effectively give a veto power to the Plaintiffs which they do not have even under the Agreement. All in all, I think a prohibition of “withdrawal” and “encumbrance” strikes the right balance between the preservation of the HSBC Account Assets and avoidance of interference with the case management of the PRC Court (which is a consideration I have to bear in mind in the second stage as explained below). 61.In conclusion, the first stage is passed. IX. SECOND STAGE 62.While in Hin-Pro, supra, the Court of Final Appeal at §54 said that “it does not seem to me to be very helpful to try to formulate a list of circumstances where it will be unjust or inconvenient to grant” the relief in aid, I was referred to the five considerations set out in Motorala Credit Corporation v Uzan (No 2) [2004] 1 WLR 113 at §115 (a case referred to in Hin-Pro §54 as well):-
63.This list is not exhaustive, and cannot be regarded as a checklist as if more (or less) ticks means more (or less) unjust or inconvenient. Each case depends on its own fact and context. 64.Despite its non-exhaustiveness, I refer to this list for one reason. Mr Yu seems to submit that a real risk of dissipation should be a requirement for this second stage. It seems to me that the reason he advanced is the same as that he advanced for an enhanced threshold for the first stage, namely, it is the parties’ choice of forum and thus the Court should be cautious. However, even from this concrete list I cannot distil any principle or guidance for a proposition that a real risk of dissipation would be required for the second stage. The test, in my view, must be that made clear by the Court of Final Appeal in Hin-Pro, namely, whether it would be unjust or inconvenient to grant the order in aid. Therefore, with respect, I do not accept Mr Yu’s submissions that a real risk of dissipation should be a requirement for the second stage. 65.The Hangzhou Proceedings are, as Mr Yu rightly points out, mainly concerned with the declaratory relief that there has existed the trust over the HSBC Account Assets. If I were to grant the preservation order, I see no reason why there would be any inconsistency with the Hangzhou jurisdiction or interference with the case management of the Hangzhou Proceedings. Such a preservation order would clearly assist the PRC Court by making sure that the subject asset would still be available so that the Hangzhou Proceedings would not be rendered redundant. Such a preservation order, in my view, would also clearly mean comity to the PRC Court – by ensuring that the assets located in Hong Kong would still be available for the disposition of the PRC Court. 66.Mr Yu submits that the Hong Kong Court should not be left to speculate what the PRC Court would think. His submissions are that if an application is made to the PRC Court, the Hong Kong Court would then know what order to grant (or what not) would be unjust and/or inconvenient. He submits, attractively, that the Plaintiffs should not ask me to speculate; instead, the Plaintiffs should make the application to the PRC Court; and the Plaintiffs have put me into an unenviable situation by not making such an application to the PRC Court on the one hand but coming direct to the Hong Kong Court on the other hand saying, without even trying, that the PRC Court would not grant an injunction in respect of overseas assets (see the expert opinion below), thereby forcing me to speculate. He further submits, in reliance on Motorola Credit Corporation v Uzan (No 2), supra, at §119, that in general, only in international fraud cases, no application would need to be made to the foreign court. 67.In my view, Mr Yu almost puts forward a proposition that an application to the foreign court is a precondition for the exercise of the jurisdiction under section 21M of the HCO. In response, Mr Wong underscores, and I agree, that those cases which seem to suggest such a precondition were cases of ex parte applications where the applicant would be expected, in discharging their duty of full and frank disclosure, to apply to the foreign court or if not, to explain why not. More fundamentally, such a precondition would be inconsistent with the wording of the statutory provision properly construed. For this, I only need to refer to The Export-Import Bank of China v Liu Qingpin [2018] HKCFI 1840, where Lisa Wong J said at §113 that the purpose of section 21M is to facilitate “the process of execution or enforcement of the foreign judgment, which may potentially have to move to Hong Kong because of the location of the judgement debtor’s assets in Hong Kong”. Bearing this purpose in mind, an application to the foreign court, though a relevant factor, should not be a precondition. 68.To put rest any fleeting suggestion that an application to the foreign court is or virtually a precondition, Mr Wong refers me to a few examples. 69.First, in Chow Steel Industries Public Co Ltd v Ko Sung [2020] HKCFI 483, no application for a freezing order had been made to the Thai Court, and K Yeung J, accepting the evidence that it was not the Thai Court’s policy or practice to grant any extra-territorial freezing orders, held that a grant of Mareva injunction in Hong Kong in aid would not be inexpedient. Eventually, he did grant the Mareva injunction. 70.Second, in JSC VTB Bank v Pavel Skurikhin [2014] WEHC 2254 (QB), Eder J accepted at §15 that “the Russian courts very rarely issue freezing injunctions in respect of assets located outside of Russian Federation, although they can and sometimes do grant freezing injunctions against defendant’s assets outside of the Russian jurisdictions which are subject to international agreement with Russia” (emphasis added). No application had been made to the Russian Court for any freezing order. Eder J still granted a worldwide freezing order except for those jurisdictions “which are subject to international agreement with Russia”. Mr Yu cautions me that in this case, the respondent was not legally represented and there was no contrary expert evidence filed. Be that as it may, this case still stands an example of exercise of similar section 21M jurisdiction in the absence of any application to the foreign court. 71.Third, in Anan Kasei Co Ltd v Molycorp Chemicals & Oxides (Europe) Ltd [2017] FSR 13, the Court’s opinion on the expediency to grant an injunction in aid of foreign proceedings was obiter only (§§43-49), in case that the matter would go further (§42). In the obiter at §§48-49, Arnold J dismissed an argument that an application should have been made to the foreign court before an application can be made to the domestic court for an interim order in aid of the foreign court. While Mr Yu eloquently argues that this case is materially distinguishable on the specific European patent regime in that case not applicable in Hong Kong, I think the general principle in this obiter is still of some referential value as consistent with the broad test of “just” and “convenient”. 72.To sum up, these examples do show that an application to the foreign court is not a precondition. Further, “practice and policy” not to grant, or “very rare” to grant, as demonstrated by these examples, is a significant indicator of no injustice and no inconvenience. 73.All that said, I agree that whether the applicant has made an application to the foreign court, and if not, the explanation for why not, are important considerations. 74.The explanation has been given in the Plaintiffs’ reply affirmation. At §38 of Jacky’s 2nd Affirmation, he explained that:-
75.In this regard, Mr Yu submits that at the time of the commencement of the present proceedings and the issuance of the Summons, the Plaintiffs simply did not give any thought to whether the PRC Courts would or would not grant a preservation order on the HSBC Account Assets, as a matter of law, practice or policy, or otherwise. He points out that there was no explanation offered at the first hearing of the Summons on 3 January 2025 before DHCJ Grace Chow, and that the above explanation only came as an afterthought. Mr Yu submits, therefore, that first, the Plaintiffs did not put their application in proper order in the first place, and second, the Plaintiffs was forum-shopping for the preservation order. He urges me not to allow the Hong Kong Court to be utilised or abused in such way. With respect, although the Plaintiffs could have done better by giving the explanation in their supporting affirmation, however, on the affirmation evidence put before me, I cannot reject the above explanation as an afterthought. To do so would almost (if not virtually) amount to a finding that Jacky did not tell the truth on oath. There is no sufficient evidence to sustain such finding. 76.Consistent with this advice by the Plaintiffs’ PRC lawyers, Mr Wong submits, in reliance on the expert opinion adduced by the Plaintiffs as an independent expert opinion, that while PRC Courts have jurisdiction to grant the preservation order even in respect of the assets outside jurisdiction, as a matter of practice and policy, they very rarely grant such order. The Plaintiffs expert asserts that he is not aware of any such preservation order and having checked the cases accessible by the public, he cannot find any such cases either. 77.As a policy and practice, there almost always are exceptions. In this regard, the Defendants’ expert refers to one case where such preservation order was apparently granted. According to the Defendants’ expert, it is a confidential case not accessible by the public, but a case which the Defendants’ expert himself handled in the past, although he did not specify the date or even give any idea of the year of the case. He exhibited the case report to his expert report, but the case report is heavily redacted. The main body of the case report is only 3.5 pages, with page 5 being an annexure setting out the relevant statutory provisions. The name of the Court is redacted. The date is redacted. Out of 3.5 pages, pages 1 and 2 are almost wholly redacted. No reason can be ascertained from the case report. It is not even clear from the case report whether the asset in question was situated outside the PRC, although in the expert report itself, the Defendants’ expert himself supplements that the asset was. For all this, the Plaintiffs simply have no way to verify. In my view, the value of such case report is little, if any. If I would have to make a ruling, I would prefer the Plaintiffs’ expert opinion. 78.Mr Yu submits further that the Defendants’ expert relies on article 103 of the Civil Procedure Law of the PRC amended in 2023, and therefore (1) the Plaintiffs’ expert’s reliance on the Civil Procedure Law pre-2023 is not appropriate; and (2) it is not fair to say that under the 2023 amendment, the grant of such order has been rare, given that it has only been two years since the amendment. With respect, the Defendants’ expert has not taken this timing point and therefore, the Plaintiffs’ expert simply has not had any chance to reply on this timing issue. I should record that in Mr Wong’s oral reply submissions, he seemed to invite me to search the Internet to check whether there was any material amendment in 2023. I rejected his such invitation outright. 79.In any event, put to the highest for the Defendants, the fact that the Defendants’ expert has to resort to such a confidential, heavily redacted case report, only reinforces the Plaintiffs’ expert opinion that it is a matter of practice and policy not to grant such preservation order, with exception which it is fair for me to say is very rare, even assuming that the relevant time period started in 2023 but not earlier. 80.In the circumstances, I see it just and convenient to grant the preservation order in favour of the Plaintiff, with the modification of the terms mentioned in §60 above. 81.It remains for me to make it clear that if there are material changes of circumstances like some decisions made by the PRC Court touching on the merits of the parties’ respective cases that would render the preservation no longer just or convenient, the parties should promptly inform the Hong Kong Court and there and then for the Hong Kong Court to consider how to proceed with the preservation order. X. DISCLSOURE ORDER 82.The Plaintiffs seek a disclosure order disclosing the following information:-
83.Before I proceed to substantive analysis, I point out that (c) is unnecessary now, given that as mentioned above, the Defendants have already explained in affirmation that the US$1,085,120 was used to satisfy the calls issued by the Funds. 84.For the application for the disclosure order, I have two main considerations. My first consideration arises from Relief 2 sought in the Hangzhou Proceedings, as quoted in §37 above:-
85.There must be the disclosure before any explanation can be made. Therefore, I have concern that if I am to make the disclosure order now being sought by the Plaintiffs from me, the disclosure order may constitute, or may be regarded as, interference with the case management of the Hangzhou Proceedings or may even be regarded as a decision on merits on Relief 2. 86.My second consideration is that a disclosure order is usually made hand-in-hand with a preservation order or proprietary injunction as a policing device to ensure that the preservation order or the proprietary injunction is effective: see Carmon Reestrutura-engenharia E Servicos Tecnicos Especiais (Su) Limitada v Carmon Restrutura Ltd [2024] HKCFI 435 at §18 per DHCJ Le Pichon. The reason is clear: at the time of the preservation order or the proprietary injunction, the subject property or part of it may have already been removed to somewhere else. If the preservation order or the proprietary injunction is to serve its purpose, namely, to preserve the subject property, the applicant has to know the whereabouts of the subject property, hence the necessity for the disclosure order. 87.My two considerations above, in my view, can be reconciled. I make the disclosure order as sought by the Plaintiffs and at the same time, as I now do, make it clear that:-
XI. CONCLUSION 88.In the circumstances, I make an order in terms of the draft order at Hearing Bundle A pages 4-12 with the following modifications:-
89.Since I have granted the relief sought in the Originating Summons, it is unnecessary for me to make any order on the Interlocutory Summons. I therefore make no order on the Interlocutory Summons. 90.As regards costs of the Originating Summons and the Interlocutory Summons, I make a costs order nisi that the Defendants shall pay the Plaintiffs the costs (including all costs reserved), to be summarily assessed on paper, with certificate for two counsel. For the summary assessment, the Plaintiffs shall lodge and serve their statement of costs within 3 days upon the costs order nisi becoming absolute, and the Defendants shall lodge and serve their list of objection within 7 days thereafter. 91.Lastly, I thank the Plaintiffs’ counsel (Mr Wong, Ms Yuen and Mr Liu) and the Defendants’ counsel (Mr Yu and Mr Mak) for their thorough and able assistance.
Mr William Wong SC, leading Ms Sharon Yuen and Mr Charlie Liu, instructed by Karas So LLP, for the 1st – 3rd Plaintiffs Mr Benjamin Yu SC, leading Mr Bernard Mak, instructed by Anthony Siu & Co., for the 1st – 2nd Defendants | ||||||||||||||||||||||||||||||
Cases cited in this judgment
Other judgments that cite this case
Further hearings and rulings under HCMP 2772/2024