China Evergrande Group (in Liquidation) v. Hui Ka Yan and Others

HCA 551/2024 and HCMP 1080/2024

[2025] HKCFI 4327

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 551 OF 2024 AND

MISCELLANEOUS PROCEEDINGS NO.1080 OF 2024

_________________

BETWEEN

(Consolidated by the Order of the Honourable
Mr Justice Coleman dated 12 February 2025)

_________________

_________________

DECISION

_________________

A.  INTRODUCTION

1.The background of the present case has been set out in a number of Decisions including China Evergrande Group v Hui Ka Yan & Others [2025] HKCFI 689 and Re China Evergrande Group [2024] 1 HKLRD 1128, [2024] HKCFI 363.

2.In gist, China Evergrande Group (“the Group”) was ordered to be wound up by Linda Chan J on 29 January 2024, and upon which Mr Edward Simon Middleton and Ms Wing Sze Tiffany Wong were appointed joint and several liquidators thereof (“the Liquidators”). On 22 March 2024, the Group commenced HCA 551/2024 against the 1^st defendant (“Hui”) and others. On 24 June 2024, Coleman J made a Mareva injunction against Hui, which prohibited him from disposing of, inter alia, his assets worldwide up to the sum of US$7.7 billion (“the Injunction Order”). Hui was also ordered to inform the Group, inter alia, of the following information, to be confirmed in an affidavit filed within 7 days:

“all [of his assets] of an individual value of HK$50,000 or more, whether in or outside Hong Kong, whether in [his] own name or not, and whether solely or jointly owned, giving the value, location and details of all such assets”

(“the Disclosure Order”)

3.There is no dispute that the Disclosure Order had not been complied with by Hui at all.

4.The Group therefore took out a summons on 3 April 2025 (“the Receivership Summons”), and applied for, inter alia, an order that the Liquidators of the Group be appointed as the joint and several receivers and managers over the entire assets and undertaking of Hui on the terms set out in the draft order attached to the Receivership Summons.

B.  LEGAL PRINCIPLES

5.Section 21L(1) of the High Court Ordinance (Cap. 4, Laws of Hong Kong) (“the Ordinance”) stipulates that:

“The Court of First Instance may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the Court of First Instance to be just or convenient to do so.”

6.Mr Abraham Chan SC submitted that, as to what would amount to “just or convenient”, this Court should follow the approach adopted by Stone J in Akai Holdings Limited & Others v Ho Wing On, Christopher & Others (HCCL 37/2005 and HCCL 40/2005, unreported, 1 September 2009) as follows:

“41. I accept the proposition that there is long and well-established authority that where a Mareva Order is breached, or there is a real risk of such breach, the appropriate remedy is the appointment of a receiver over assets which are subject to the Mareva order: see Derby v Weldon (No’s 3 & 4) [1990] Ch 65 and Derby v Weldon (No 6) [1990] 1 WLR 1139.

42. As Gee on Commercial Injunctions (5^th ed) expresses the position, at paragraph 16.08:

‘If (1) assets are liable to be dissipated or are otherwise in jeopardy and (2) cannot satisfactorily be preserved by injunction, then it may be appropriate to appoint a receiver. This arises where the defendant controls a network of overseas trusts or companies and it appears that he has arranged his affairs in such a complicated way that if the step were not to be taken he might be judgment proof. The appointment of a receiver would be effective relief when an injunction, on its own, would not be…  Other examples of situation calling for the appointment of a receiver are where the defendants are likely to act in disregard of an injunction or have already done so…’ ”

7.In my view, the following parts of the Judgment in Akai are also relevant:

“44. It is also appropriate to record that Mr Wright has argued strongly that there is a fundamental difference between the principles applicable to the grant of Mareva relief and an application for the appointment of a receiver in a case such as this: ‘the American Cyanamid approach should not be taken’, and that there must be considerable emphasis upon an ‘umbrella principle’ of justice and convenience, particularly in instances in which the court has not yet had the opportunity finally to determine factual matters.

45. With respect, I disagree, at least in terms of disavowing a primary American Cyanamid approach. In this regard I respectfully agree with the views of Kwan J in Re Chime Corporation, HCMP 4146 of 2001, judgment dated 25 June 2003, wherein the learned judge was considering the power to appoint receivers upon interlocutory application; she observed as follows:

‘39. The power to appoint receivers on an interlocutory application is a discretionary power to be exercised flexibly on a similar basis to that of an interlocutory injunction, and the principles in American Cyanamid Co v Ethicon Ltd [1975] AC 396 apply (Chinese United Establishments Ltd v Cheung Siu Ki [1997] 2 HKC 212 at 223; Re Niceline Co. Ltd, HCCW No. 423 of 2002, 22 January 2003, paras 50 to 53; Re Full Bullion Shipping Ltd, HCMP No. 2423 of 2002, 28 March 2003, paras 17 and 18).

40. The approach I adopt here… is to assess and balance the following matters:

(a) If there is a serious question to be tried;

(b) the alleged risk of dissipation of assets of the estate;

(c) the current protective regime and its efficacy; and

(d) the risk of damage to the Chime Group and Mrs Wang’s interest if the appointment is made, and whether it can be adequately compensated by a cross-undertaking in damages.’ ”

8.Mr Chan SC also relied on the case of China Metal Recycling (Holdings) Limited (in compulsory liquidation) & Another v Chun Chi Wai & Others (HCA 1412/2013, unreported, 5 February 2016). In this case, the plaintiffs were in compulsory liquidation, and their action against the defendants therein was continued by the plaintiffs’ liquidators, who alleged that, inter alia, the 1^st and 13^th defendants had fraudulently conspired with other defendants to inflate the value of the plaintiffs’ business by the creation of a series of fictitious transactions and a fictitious flow of funds. As a result of this fraud, it was said that the plaintiffs had suffered loss and damage in excess of HK$5 billion. What was in issue before the court was the plaintiffs’ application for the appointment of interim receivers over the assets of a particular company, together with three of its subsidiaries and its parent company, on the basis that the company had been used to dissipate the assets of the said 1^st and 13^th defendants. In his Decision, Deputy High Court Judge Keith had the following to say:

“16. […] The power may be exercised when it is just or convenient to do so (see section 21L(1) of the High Court Ordinance (Cap 4)), and the court would usually regard it as just or convenient to do so if there is good evidence of a failure to comply with a Mareva injunction.[…]

17. The evidential test which the court applies, rightly in my opinion, is the conventional American Cyanamid test. That was confirmed by Kwan J (as she then was) in Tan Man Kou v Chime Corporation Ltd and others (HCMP 4146/2001), unreported, 25 June 2003, and followed by Stone J in Akai Holdings Limited (in compulsory liquidation) and others v Ho Wing On Christopher and others (HCCL 37/2005), unreported, 1 September 2009. Accordingly, the court will determine whether there is a serious issue to be tried and a risk of dissipation of assets, it will take into account the efficacy of the current regime for protecting the interests of the party seeking the appointment of a receiver, it will assess the risk of damage to any party if a receiver is appointed and whether that damage can be adequately compensated for by a cross‑undertaking as to damages, and whether a less drastic remedy is suitable in the particular circumstances of the case. On that last issue, Stone J in Akai held that where a defendant has deliberately withheld disclosure such as to deny the plaintiff information about its assets which the plaintiff is otherwise entitled to under the Mareva injunction as a means to police it, the court will be unlikely to entertain any suggestion that a lesser remedy or partial receivership will suffice, since (i) the court and the plaintiff are simply not in a position to assess, given the lack of disclosure, whether the lesser remedy is sufficient to protect the plaintiff’s interests, and (ii) it is entirely within the power of the defendant to put an end to the receivership by giving full disclosure or putting up security.”

(emphasis added)

9.However, despite the above authorities, Mr Barrie Barlow SC (together with Mr Vincent Chen) submitted that the conventional American Cyanamid test is not the correct test to be adopted. It was contended that the applicant for an appointment of interim receiver has to satisfy the Court that such an appointment is necessary and that there is an imminent danger of loss or dissipation of assets.

10.To support their submission, they firstly referred to the Singapore Court of Appeal case of Wallace Kevin James v. Merrill Lynch International Bank Ltd [1998] 1 SLR 785, in which it was held at [18] that:

“[…] The additional remedy of appointment of a receiver would only be justified if, notwithstanding the considerable protection already afforded by the worldwide Mareva injunctions, there, nonetheless, was an imminent danger of loss or dissipation of the assets of the appellant and/or his wife, if a receiver was not appointed. The whole purpose was to prevent the dissipation of any assets by the appellant and preserve them until the outcome of the proceedings. The granting of a worldwide Mareva injunction, pre-judgment, is in itself a draconian measure to be ordered in very exceptional circumstances: Republic of Haiti & Ors v Duvalier & Ors [1990] 1 QB 202 at p 215; SSAB Oxelosund AB v Xendral Trading Pte Ltd [1992] 1 SLR 600 at p 607; and an order of appointment of receivers is even the more exceptional.”

(counsel’s emphasis)

11.The Singapore Court of Appeal cited a decision of the full court of the Supreme Court of Victoria in National Australia Bank Ltd & Others v Bond Brewing Holdings Ltd & Others [1991] 1 VR 386 in which it was held at 541 that:

“The drastic nature of the power to appoint a receiver is emphasised in the decisions mentioned in 65 American Jurisprudence (2d) para 20, where authority is cited for the propositions that the power is a drastic, harsh and dangerous one and should be exercised with care and caution, that receivership is a drastic course allowed only under pressing circumstances and granted only with reluctance and caution and that the appointment of a receiver is an extraordinary and drastic remedy, to be exercised with utmost care and caution and only where the court is satisfied there is an imminent danger of loss if it is not exercised.”

(counsel’s emphasis)

12.As the Singapore Court of Appeal took the view that there was no imminent danger of loss or dissipation of any assets in that case, it was ultimately held that receivers should not have been appointed by the court below.

13.It cannot be disputed that an appointment of receiver is drastic and that the power to do so should be exercised by the Court with care and caution. However, I do not think such a power can only be exercised if “imminent danger of loss or dissipation of assets” is proved.  In my view, the Singapore Court of Appeal had referred to such “imminent danger” because it was considering, on the facts of that case, whether the exercise of discretion on appointment of receiver was justified in the circumstances of that case. At the end of the day, the court should consider whether further steps should be taken for the purpose of preserving the respondent’s assets. That is the reason why the Singapore Court considered whether “the considerable protection already afforded by the worldwide Mareva injunctions” was sufficient (see [18] of the Judgment as quoted in [10] above).

14.It should also be noted that the Singapore Court of Appeal had also quoted the case of Derby & Co Ltd & Others v Weldon & Others (15 November 1988) (which was described in their Judgment as “well known”) in which Nicolas Browne-Wilkinson VC said at page 27:

“The first question of law, which does not give me much trouble … is whether a receiver can be appointed in aid of Mareva injunction. In my judgment, it plainly can be done. If the proper preservation of the assets frozen under Mareva order requires the introduction of a receiver to hold certain assets, I can see no reason why such a receiver should not be appointed as a matter of law.”

(emphasis added)

15.It can therefore be seen that the question is whether proper preservation of assets can be achieved without the appointment of a receiver.

16.Hui’s counsel then referred to Macau First Universal International Limited v Ding Xiaohong & Others (CACV 193/2011, unreported, 31 July 2012) which was an appeal from a then Deputy Judge’s order to appoint receiver ([2011] 3 HKLRD 27).

17.In the Court of First Instance’s Decision, it was held by the learned Deputy Judge that:

“10. In substance, the Application [for the appointment of a receiver and manager to preserve the assets pending final determination of the disputes] was premised on [the applicant]’s assertion that he, instead of DG, provided the funding and has been the sole beneficial owner of the Land, Citigroup Tower and the Companies. The Application is necessary to guard against the clear risk of dissipation of assets by DG despite the existence of the DG Undertakings.

[…]

35. [The applicant for the appointment of a receiver and manager to preserve the assets pending final determination of the disputes] relies on the following heads of risk of dissipation of the assets of Shanghai Bading and/or mismanagement of the Companies or Shanghai Bading in support of his application:

[…]

38. The Court has jurisdiction under section 21L(1) of the High Court Ordinance, Cap.4, to appoint a receiver ‘in all cases in which it appears to the Court of First Instance to be just or convenient to do so’.

39. The power to appoint receivers on an interlocutory application is a discretionary power to be exercised flexibly on similar principles to grant an interlocutory injunction and the principles in American Cyanamid apply. Chinese United Establishments Ltd v. Cheung Siu Ki & Anr [1997] 2 HKC 212; Re Niceline Co. Ltd. [2003] 2 HKLRD 725. In other words, the court needs to consider the following question:

(i) Whether there is a serious question to be tried;

(ii) Whether there is a real risk of dissipation of assets;

(iii) Whether there is no or no current effective protective regime and some form of interim protection should be given to preserve the status quo;

(iv) The risk of damage to the company if the appointment is made, and whether it can be adequately compensated by a cross-undertaking in damages.”

(emphasis added)

18.Heavy reliance had been placed by Hui’s counsel on what Yuen JA stated in the Judgment by which the learned Deputy Judge’s order of appointment was set aside:

“42. It is well-established law that the appointment of receivers is a remedy of last resort. As the judge rightly said (and Mr Chan SC has not challenged this), the appointment of receivers would only be justified if ‘notwithstanding the considerable protection the DG Undertakings already afforded, there nonetheless was an imminent danger of loss or dissipation of the assets if a receiver was not appointed’ (para. 46).”

(Yuen JA’s emphasis)

19.It was submitted that the above Court of Appeal’s Judgment shows that “imminent danger of loss or dissipation of assets” is a prerequisite which must be in existent before a receiver may be appointed.

20.With respect, I disagree.

21.In my view, what was said by Yuen JA should not be interpreted in isolation and out of context. One must bear in mind, as pointed out in [10] and [35] of the Court of First Instance’s Decision (quoted and highlighted in [17] above), that “risk of dissipation of assets” was relied on as the ground in support of the application for appointment of receiver in that case. That is the reason why Yuen JA focused on that particular aspect of the case.

22.The Court of Appeal’s Judgment in Macau First Universal International Limited also shows that there is no merit in the defendant’s submission that the American Cyanamid principles are inapplicable, for it did not doubt the learned Deputy Judge’s formulation of the test as quoted in [17] above. The first instance decision was set aside only because the Court of Appeal took the view that the learned first instance Judge had failed to take a relevant matter into account when considering whether effective protection was in place.

23.Lastly, Hui relied on Wong Luen Hang & Another v Chan Yuk Lung & Others (HCMP 2906/2016, unreported, 12 January 2017), in which Kwan JA (as she then was) had the following to say:

“19. The plaintiffs contended that the judge was wrong in principle to hold that interim receivers should be appointed only if the court is convinced of its necessity and not otherwise (ground 5). They submitted this is far too stringent and the test is not necessity but whether it is ‘just or convenient’ to do so, applying the wording in section 21L(1) of the High Court Ordinance, Cap.4.

20. We do not accept this submission. Section 21L(1) is a general provision relating to the granting of an injunction and the appointment of receivers, whether on an interlocutory or final basis. For further guidance on the application of this provision to specific situations, it is necessary to look to decided cases. We are here concerned with the appointment of an interim receiver, not of a particular asset, but over the entire assets and undertaking of 3 companies and at least one of them is a trading company. It is well established by authorities that for such an extremely drastic remedy to be granted, the court’s jurisdiction is to be exercised with great circumspection and only when it is convinced of the necessity of making such an order instead of other forms of less intrusive and more reversible relief. Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445 at 456 to 458 has often been cited by our courts in this regard. See also Macau First Universal International Ltd v Ding Xiaohong & Ors, CACV 193/2011, 31 July 2012, §42; Wong Luen Hang & Anr v Chan Yuk Lung & Ors, HCMP 2481/2015, 5 November 2015, §13.”

(counsel’s emphasis)

24.With respect, I cannot see how the Wong Luen Hang case may assist Hui’s argument that the Group has put forward a wrong test for the Court to consider. To the contrary, I am of the view that this case authority further supports the Group’s submission on the applicable legal principles, as it can be seen that Kwan JA had expressly referred (without any adverse comment) to Deputy High Court Judge Le Pichon’s adoption of the American Cyanamid test[1].

25.Having considered the authorities cited by the parties, I accept Mr Chan SC’s submissions that they in fact are consistent in terms of adopting the applicable legal principles for appointment of receivers.

26.I summarise the applicable legal principles as follows:

(1)  Pursuant to section 21L(1) of the Ordinance, the Court of First Instance may appoint a receiver if it is just or convenient to do so;

(2)  The power to appoint receivers on an interlocutory application is a discretionary power to be exercised flexibly on similar principles to grant an interlocutory injunction and the principles in American Cyanamid apply;

(3)  Hence, the Court would consider the following questions:

(1)  whether there is a serious question to be tried;

(2)  whether there is a real risk of dissipation of assets;

(3)  whether there is no or no current effective protective regime, and some form of interim protection should be given to preserve the status quo; and

(4)  the risk of damage to the respondent if the appointment is made, and whether it can be adequately compensated by a cross-undertaking in damages.

27.It was submitted on behalf of Hui that appointing receivers and managers of his assets is a drastic measure to adopt, and that the Court should therefore exercise this discretion carefully, and make an appointment only if it is necessary. I agree. Having said that, I am of the view that the so-called requirement of “necessity” has already been covered by the 3^rd question under the American Cyanamid principles (see [26(3)] above). The question is whether the current protective regime is effective enough to preserve the status quo, which is the original purpose of the Mareva injunction.

C.  SHOULD RECEIVERS BE APPOINTED

C1.  Serious question to be tried and real risk of dissipation

28.In granting the Injunction Order and continuing the same subsequently against Hui, the Court has been satisfied that there is serious question to be tried, and that there is a real risk of dissipation on his part. Hui has not appealed against the Injunction Order. I therefore do not have to say anything further on these two criteria.

C2. Effectiveness of the current protective regime

29.It is trite that a disclosure order may be made as an ancillary order of the Mareva injunction so as to render the injunction effective.

30.However, in the present case, it is undisputed that there is a total failure on the part of Hui to comply with the Disclosure Order. There is therefore a breach of the court order.

31.As a result, it is submitted on behalf of the Group (which I accept) that there is no way to police the Injunction Order, and that appointing receivers is the only way the Group can obtain the information that should otherwise have been disclosed by Hui.

32.Hui has made a number of points to counter the above arguments.

33.Firstly, it was said that while Hui has admittedly failed to comply with the Disclosure Order, it is common ground that that is because he has been detained in the Mainland. Hence, his non-compliance was not “wilful” and therefore not culpable.

34.The foundation of such submissions was the affirmation of Hui’s solicitor, Mr Justin Chow, who deposed on the basis of what he had been told by allegedly Hui’s PRC lawyer (who was not even named), inter alia, that, since Hui has been detained, he has not been able to deal with any of his assets or assets under his control, and is prohibited by the Mainland authorities from discussing with anyone about the same at all. I am afraid I cannot accept such evidence for the following reasons:

(1)  While Mr Chow’s evidence was hearsay evidence, he did not name the source of the information other than saying that he had been informed about the matter by “Hui’s PRC lawyer”, and it is unclear how that PRC lawyer obtained the alleged information;

(2)  Assuming that Mr Chow had been properly authorised by Hui to defend this application and to make his affirmation (there is no reason why I should assume otherwise), it is difficult to understand (and Mr Chow has failed to explain) why Hui would be prohibited from discussing about his assets.

35.In any event, I do not think the culpability on the part of Hui is relevant. After all, the question is whether it is necessary to make the appointment in the present circumstances where there has been absolutely no disclosure provided by Hui, for the purpose of making the Injunction Order effective in maintaining the status quo.

36.Secondly, it was submitted on behalf of Hui that the appointment of receivers is not necessary, because despite the non-disclosure, the Liquidators have been able to identify quite a number of assets belonging to Hui.

37.I am afraid this argument is made to be rejected. While a number of assets have indeed been identified, the Group simply has no idea what Hui’s total assets are (insofar as the value thereof does not exceed the ceiling of the Injunction Order).

38.Thirdly, as far as real properties and bank accounts are concerned, it was submitted by Hui’s counsel that once the property registries and the banks were served with the Injunction Order, the scope for any dissipation of those assets must effectively be non-existent, therefore appointment of receivers is unnecessary.

39.In this regard, I agree with Mr Chan SC for the Group that:

(1)  Simply serving the property registries would be of no effect, as the present action does not concern any claim relating to land or interest therein;

(2)  Hui’s argument presupposes that all his bank accounts are held under his own name. However, according to the evidence of Mr Middleton, the Liquidators’ investigation have revealed a clear pattern of Hui and his associates using nominee companies to hold assets. Indeed, it can be seen that a large number of bank accounts of which Hui is not the registered holder have also been freezed by the Injunction Order.

40.Fourthly, as far as the BVI companies are concerned, although they have been struck off, it was submitted that their restoration can be done even without a receivership order.

41.However, in order to preserve Hui’s assets, restoring the BVI companies back to the BVI company register is not enough. This is particularly so when it is evident that Hui is not in a position to maintain those companies. Steps should therefore be taken so as to avoid those companies being struck off again.

42.Furthermore, these BVI companies are all “Schedule 1 Companies” (see [55] – [56] below). Investigation into the affairs of these companies is justified and necessary.

43.Having considered the arguments advanced by the parties, I am satisfied that, in the circumstances where Hui has totally failed to disclose his assets, it is necessary to appoint receivers as a last resort, otherwise the Injunction Order cannot be effective enough for preserving the status quo.

44.In fact, it seems to me that the submission made on behalf of Hui are contrary to the terms of the Disclosure Order in that it is now alleged that despite the total non-compliance thereof, the Court needs not do anything about it. If that submission is accepted, then it is equivalent to saying that the Disclosure Order needs not be made in the first place. That plainly cannot be right.

C3. Balance of convenience

45.The question here is the risk of damage to Hui if the appointment is made, and whether he can be adequately compensated by a cross-undertaking in damages.

46.As I see it, even if Hui would suffer any damage by reason of the proposed appointment of receivers, he can be adequately compensated by the Group’s cross-undertaking in damages.

47.Hui’s solicitor, Mr Justin Chow, deposed that, given the powers to be conferred upon the Liquidators, Hui’s ability to defend this action would be seriously prejudiced.

48.It was further alleged that:

“[…] insofar as our firm is concerned, given the Liquidators’ power under [4.11] of the draft Receivership Order, there would be difficult issues concerning legal professional privilege between our firm and Mr Hui/his PRC lawyer and compliance with the relevant PRC laws if the Liquidators do invoke such power to give our firm ‘instructions’ pursuant to the same.”[2]

49.While Hui’s counsel did submit that “within hostile civil litigation like this, it is practically unthinkable that the Court would appoint [Hui]’s hostile litigation adversaries to be Receivers of all his (remaining) assets”[3], counsel did not see fit to go further and rely on the prejudice as alleged by Mr Chow.

50.Be that as it may, for the sake of completeness, I should emphasise that I do not agree that Hui’s defence of this action would be prejudiced at all by the proposed receivership order. Even if receivers are appointed, they would only be empowered to identify, secure and preserve Hui’s assets, but would not have power to interfere with Hui’s defence herein. In my view, Mr Chow’s concern over paragraph 4.11 of the draft receivership order stemmed from his incorrect interpretation of the said sub-paragraph which should be read together with paragraph 2 and the main part of paragraph 4 of the draft order, which in turn have made it clear that the purpose of the appointment is to preserve and secure the assets pending the determination of the action herein, and to ensure compliance of the Injunction Order.

51.Hui’s counsel also submitted that the proposed appointment is intrusive in nature. It was even suggested that the receivership order, if made, would amount to a breach of Article 105 of the Basic Law which, inter alia, “protects the right of individuals and legal persons to the acquisition, use, disposal and inheritance of property”.  

52.The intrusive nature of the proposed receivership order is always recognised by the Court. That is the reason why it is trite that such an order should only be made as a last resort, and that the Court should consider whether a lesser remedy would suffice. However, the problem here is that Hui has not given any disclosure at all. There is no way that the Group can effectively police the compliance of the Mareva injunction.

53.As to Hui’s right under the Basic Law, the short answer to such an argument is that his right is not absolute. Indeed, his right to deal with his own properties has been ordered to be curtailed by virtue of the Injunction Order, which he has not appealed against.

54.To conclude, I hold that receivers should be appointed in principle. The remaining issues are the scope of the receivership order and the identity of the receivers, which I will further deal with below.

D.  SCOPE OF THE ORDER

55.As far as the scope of the receivership order is concerned, in gist, it is Hui’s argument that:

(1)  The Injunction Order was made against Hui, the 2^nd defendant, the 5^th defendant and the 8^th defendant only;

(2)  The Court has exercised Chabra jurisdiction only over the 5^th defendant (Hui’s ex-wife);

(3)  No Mareva injunction has been made against the 4^th defendant nor any of the other 14 companies listed under Schedule 1 of the Receivership Summons (together, “the Schedule 1 Companies”);

(4)  Therefore, the Court should not appoint receivers in respect of the 4^th defendant’s own assets and charged them with the management and affairs of the 4^th defendant;

(5)  The Court should also refrain from appointing receivers to exercise rights or powers which go beyond the scope of the Injunction Order, such as:

(1)  To investigate the affairs of the Schedule 1 Companies;

(2)  To register in the names of the receivers or their nominee all or any part of the Schedule 1 Companies’ assets;

(3)  To seize the books, records and documents of the Schedule 1 Companies;

(4)  To do whatsoever they think “necessary or desirable” in respect of the foregoing.

56.Hui’s arguments are rejected, because, contrary to his counsel’s submissions, the Schedule 1 Companies (which include the 4^th defendant) have all been defined as “companies associated with [Hui]” under “Annexure C” of the Injunction Order, and, importantly, it has been provided in paragraph 1 of the Injunction Order that:

“The 1^st Defendant […] must not, whether by himself or through his servants or agents:-

(1) […]

(2) in any way dispose of or deal with or diminish the value of any of his assets, whether within or outside Hong Kong, whether in his own name or not, and whether solely or jointly owned, up to the value of [HKD60,000,000,000]. This prohibition includes, but is not limited to, the following assets:

(a) […]

(b) […]

(c) the properties and assets of the companies listed in Annexure C herein, or the sale proceeds thereof if any of them have been sold;

(d) any money in the bank accounts listed in Annexure D herein.”

(emphasis added)

57.Further, as far as the Disclosure Order is concerned, Hui together with the 2^nd defendant have been ordered under paragraph 7 of the Injunction Order to:

“[…] inform the Plaintiff in writing at once of all their assets of an individual value of HK$50,000 or more, whether in or outside Hong Kong, whether in their own name or not, and whether solely or jointly owned, giving the value, location and details of all such assets including, but not limited to:

(a) […]

(b) the assets of the companies listed in Annexure C herein, or the current whereabouts of the sale proceeds thereof if any of them have been sold.

[…]”

(emphasis added)

58.It can therefore be seen that the Injunction Order clearly covers the Schedule 1 Companies (including the 4^th defendant). The Group is therefore, pursuant to the Injunction Order, entitled to know what have become of the assets of the Schedule 1 Companies. In the circumstances where there has been complete non-disclosure of the assets of those companies, it is necessary for the receivers to be granted power to look into the papers of those companies so as to ensure that the Injunction Order has been complied with. In short, the powers sought are not beyond the scope of the Injunction Order as alleged, and Hui’s arguments on “party autonomy” is misconceived in the circumstances of the present case.

59.My attention has also been drawn to the following views expressed by Deputy Judge Edward Bartley Jones QC in Dadourian Group & Others v Azuri Ltd [2005] EWHC 1768 which have been referred to by the Court of Appeal in its Reasons for Judgment in Akai (HCMP 1718, 1720 & 1722/2009, unreported, 24 September 2009) (which dismissed the application for leave to appeal against the receivership order made by Stone J):

“26 The jurisdiction to make a freezing injunction against a third party is undoubted. The jurisdiction is exercised as, in effect, ancillary relief granted by the court in aid of, and as part of, the freezing relief granted against the defendant to the substantive claim. Exercise of the jurisdiction can occur where there is good reason to suppose that the assets of the third party are, in truth, the assets of the injuncted defendant (see, eg, SCF Finance Co Limited v Masri [1985] 1 WLR 876 per Lloyd LJ at 884 B-F). A classic case where there would be good reason for supposing that the assets are, in truth, the assets of the defendant is where there is good reason for supposing that the assets are held by the third party on bare trust (or as nominee) for the defendant. But I would reject any suggestion that the ‘Chabra’ jurisdiction is limited to such a case. In International Credit and Investment Co (Overseas) Limited v Adham [1998] BCC 134 at 136 Robert Walker J pointed out that it had become increasingly clear, as the English High Court regrettably had to deal more and more often with major international fraud, that the court would, on appropriate occasions, take drastic action and would not allow its orders to he evaded by the manipulation of shadowy offshore trusts and companies formed in jurisdictions where secrecy was highly prized and official regulation was at a low level. The present is undoubtedly a case of shadowy trusts and companies (although I hasten to add that I make no adverse comment, whatsoever, about the level of official regulation or level of secrecy in a country such as Liechtenstein). Robert Walker J went on to indicate that a freezing injunction may indeed, in appropriate circumstances, be justified and necessary where parties have the ability to switch real assets from one shadowy hand to another in such a way that it is difficult to keep track of where they are. That, he said, was the justification for orders which looked through offshore companies in order to find the real assets -- or which did, if you looked, pierce the corporate veil (to use that vivid, but imprecise, metaphor which is sometimes used). Robert Walker J then went on to consider the decision in Re a Company [1985] BCLC333 where Cumming-Bruce LJ (at 337-38) indicated that the court would use its powers to pierce the corporate veil if it were necessary to achieve justice, irrespective of the legal efficacy of the corporate structure under consideration.”

“30 For my part, I do not believe it is necessary to establish beneficial ownership in a strict trust law sense. Clearly, if assets are held on a bare trust then the Chabra jurisdiction can be exercised. But, in my judgment, even if the relevant defendant to the substantive claim has no legal or equitable right to the assets in question (in the strict trust law sense) the Chabra jurisdiction can still be exercised if the defendant has some right in respect of, or control over, or other rights of access to, the assets. The important issue, to my mind, is substantive control. The view expressed in Gee on Commercial Injunctions 5th Edition 2004 at 13.007 is that if a network of trusts and companies has been set up by a defendant to hold assets over which that defendant has control and that this has, apparently, been done to make himself judgment-proof, then such would be an appropriate case for the granting of freezing relief against a relevant non-party. I agree. What needs to be considered is the substantive reality of control, not a strict trust law analysis as to whether the third party is a bare trustee. Thus, in my judgment, placing assets in a discretionary trust would not prevent the Chabra jurisdiction being exercised against that discretionary trust if the substantive reality were that the relevant defendant controlled the exercise of the discretionary trust. Any other analysis 'would entirely defeat the ability of the English courts to take drastic action and would allow the court's orders to be evaded by manipulations, entirely contrary to the court's powers and duties as identified by Robert Walker J in International Credit and Investment Co (Overseas) Limited v Adham (above). Whether this be described as identifying the discretionary trust as a ‘sham’, as piercing the corporate veil, or as seeking to identify a controlled discretionary trust as a bare trust does not, to my mind, particularly matter. Certainly, at the interim stage, all that matters is to ascertain whether there is good reason to suppose that the relevant defendant controlled the assets in the discretionary trust.”

60.In the present case, it should be noted that all the Schedule 1 Companies are 100% beneficially owned by Hui. I am therefore not surprised that, as a matter of justice, the assets of those companies have all been caught by the Injunction Order. For the same reason, it must be equally just and convenient for the receivers to be given powers in relation to those assets.

61.For the sake of completeness, I should also mention about the bank accounts listed under Schedule 2 of the Receivership Summons. Some of those bank accounts are not held under the name of Hui but some limited companies (“the Other Account Holders”). Be that as it may, it is noted that:

(1)  Those accounts were included in Annexure D of the Injunction Order and therefore have been freezed as a result (see [56] above);

(2)  The Other Account Holders are all listed under Annexure C of the Injunction Order.

62.Another complaint made by Mr Barlow SC is in relation to paragraph 5.7 of the draft receivership order which provides that:

“5. In order to pursue the purpose identified in paragraph 2 above, and to the extent to which it is reasonably necessary for them to do so, the Receivers shall be authorised to:-

[…]

5.7 do all other acts and things which they may consider necessary or desirable for realising any of the Assets or incidental or conducive to any of the rights, powers and discretions conferred on them by virtue of this Order.”

63.He has quite rightly raised the concern that this sub-paragraphs will give the receivers power to dispose of Hui’s assets.

64.In reply, Mr Chan SC for the Group informed this Court that he is happy to have this sub-paragraph deleted from the final order to be made. I will therefore not grant such a power to the receivers to be appointed by the Court.

E.  IDENTITY OF THE RECEIVERS

65.The Group proposed that the Liquidators be appointed as the receivers for the following reasons:

(1)  Hui’s personal affairs appear to have been closely entwined with those of the Group, and a significant proportion of Hui’s personal wealth has evidently been derived from the Group;

(2)  The Liquidators have actively investigated into the Group’s affairs (which are exceedingly complex) for nearly 2 years;

(3)  Given the Liquidators’ accumulated knowledge on the case:

(a)  They will be able to commence work immediately given their familiarity with the relevant background;

(b)  Duplication of investigation costs to date can be avoided;

(c)  Duplication of future work can also be avoided.

66.The proposed identity of the receivers is met with strong objection from Hui. It was submitted that it is inappropriate to appoint Hui’s hostile litigation adversaries to be receivers of all his remaining assets.

67.Reliance has been placed by Mr Barlow SC and Mr Chen on Kerr & Hunter on Receivership and Administration (22^nd edition), in which the learned authors stated in paragraph 2.1 that:

“Overview A court-appointed receiver is:

(a) an impartial individual, independent from the parties to a dispute; [The general rule is that ‘some entirely indifferent person ought to be appointed’: Fripp v. Chard Railway (1853) 11 Hare 241 at 260 per Page Wood VC; See further Chapter 4.]

(b) appointed by the court on the application of a party;

(c) before proceedings, during proceedings, or after judgment;

(d) to collect, protect, and receive assets of the respondent.”

(counsel’s emphasis)

68.While it is recognised that the aforesaid is described as the “general rule”, I do not think it should be treated as if it is an inflexible rule as such. After all, the appointment of receivers involves the Court’s exercise of discretion. The Court should consider the whole circumstances and decide what order suits the case most. Indeed, in Kerr & Hunter, the learned authors also stated at paragraph 4-4 that it is open to the court, in a proper case, to appoint as receiver a person who is interested in the subject-matter of the claim, if it is satisfied that the appointment will be attended with benefit to the estate.

69.In Re Orient Power Holdings Ltd [2008] 2 HKLRD 494, Kwan J (as she then was) faced a situation regarding appointment of liquidator, and the issue which her Ladyship had to resolve was whether a Mr Sutton who was one of the receivers and managers of the company appointed by the secured creditors should be appointed a liquidator in conjunction with two proposed independent appointees of a different firm of accountants. The Official Receiver opposed to the proposed appointment, as it was considered that the potential for conflict of interest was too great and it would set a bad precedent. Her Ladyship had the following to say in [34] of her Judgment:

“In large group insolvencies, the potential for conflicts of interest may arise in a variety of matters, such as inter-company balances, competing claims to assets, allocation of liabilities, guarantee and indemnity claims, issues of set-off or double proof, the validity of security, tax and avoidance or recovery actions. It is recognised that by and large, it is prima facie in the interests of the general body of creditors to appoint a common liquidator for the companies in the group than to have a separate liquidator for each. Instead of a rigid requirement to avoid conflict and not allowing the same individual to act, the courts have taken a common sense approach and made appointments where it is possible to manage the conflict effectively by appropriate measures depending on the circumstances of each case. Examples of such measures include obtaining independent legal advice, the appointment of an additional partner from the same firm, the appointment of an independent partner from a different firm. It matters not if the conflict is potential or actual; the question is whether such conflict is capable of being effectively managed. If it cannot be managed, then the appointment would not be made. The above is a summary of the discussion in Sisu Capital Fund Ltd. & Ors. v. Tucker & Ors. [2005] EWHC 2170 (Ch) at paras. 91 to 120.”

70.Although we are not dealing with exactly the same situation in the present case, I cannot see why the same “common sense” approach should not be adopted herein. In the circumstances where there are obvious advantages for the Liquidators to be appointed as receivers, the questions are whether it is likely that any conflict of interest would arise upon such appointments, and even if so, whether such conflict is manageable.

71.In my view, it is not likely that there would be any conflict of interest as such. This is because the powers to be given to the receivers are only to identify, secure and preserve the assets pursuant to the Injunction Order. They will not be in a position to interfere with Hui’s defence of the present action in any way. For example, if Hui makes a request for release of fund for settlement of his legal expenses pursuant to the terms of the Injunction Order, there is no reason why (neither did Hui’s counsel make such a suggestion) that the receivers, who are officers of the court, would refuse his request.

72.In any event, even if there would be any conflict, that can be managed by the appointment of a “supervising solicitor” as proposed by the Group. According to the draft order, the receivers would be required to report to the “supervising solicitor” on a regular basis and answer all questions reasonably raised by the “supervising solicitor”. If any conflict of interest or potential conflict of interest is identified, the receivers and the “supervising solicitor” would have to agree on the steps which should be taken to address such (potential) conflict. If they cannot reach consensus on the matter, the receivers shall be entitled to take the matter to the court for directions. Most importantly, it is proposed that the receivers shall not take any further steps in respect of the matter before the (potential) conflict is resolved.

73.I therefore conclude that the Liquidators should be appointed.

74.As to the identity of the “supervising solicitor”, the Group has put forward 4 names for this Court to choose from. It seems that it has no preference as to who should be appointed. On the other hand, Hui’s counsel did not make any adverse comment against any of those candidates.

75.Out of those 4 candidates, the appointment of one of them is not at all straight forward, as further clearance (which may or may not be forthcoming) has to be obtained from some of that particular solicitor’s current clients. Given the Court has been given 3 other candidates to choose from, I prefer not to select that particular solicitor.

76.In relation to the remaining candidates, they are all very experienced solicitors, and their expertise is not doubted. Having considered their background and seniority, I am of the view that Mr Keith Ho of Messrs. Wilkinson & Grist should be appointed.

77.Hui’s counsel further contended that Hui should not be exposed to the possibility that he may be required to pay for the entire receivership. That is not a matter which Hui should be worrying at the moment, because the Group’s proposal is that the remuneration of the receivers shall be paid out of the assets of the Group. While it is also proposed that the Group would be at liberty to apply to vary this arrangement, the matter can be further debated when there is such an application.

F.  ORDER

78.For the above reasons, I make an order in terms of the draft receivership order[4] (except paragraph 5.7 thereof). Particulars of the “supervising solicitor” should be filled in in paragraph 7 thereof accordingly.

G.  COSTS

79.Costs should follow the event. I make a costs order nisi that Hui shall bear the Group’s costs of the Receivership Summons.

80.The above order nisi shall become absolute in the absence of application to vary (which, if any, will be disposed of on paper) within 14 days hereof.

81.The Group’s costs of the Receivership Summons shall be summarily assessed in lieu of taxation. Unless any application for variation of the aforesaid costs order nisi is made within time, the Group shall lodge and serve its statement of costs within 7 days after the expiry of the said 14-day period. Hui shall lodge and serve his statement of objection within 7 days thereafter. Summary assessment of the costs of the Receivership Summons will be conducted on paper (no matter whether any statement of objection is lodged by Hui within time) thereafter. The costs assessed shall be paid by Hui within 14 days after assessment.

Mr Abraham Chan SC, instructed by Karas So LLP, for the plaintiff

Mr Barrie Barlow SC leading Mr Vincent Chen, instructed by Justin Chow & de Bedin Solicitors LLP, for the 1^st defendant