U. K. Prolific Petroleum Group Company Ltd v. 鑫都集團有限公司
Read the full judgment text of HCMP 546/2024 on BabelCite. This High Court CFI judgment was delivered on 9 October 2025.
1. These proceedings raise (among others) a novel issue concerning the Court’s jurisdiction on stop notices and stop orders under O.50 rr.11-15 of the Rules of the High Court (“ RHC ”). On the facts here, such reliefs are pursued in effect as interim measures to hold the ring over shares and convertible bonds (“ CBs ”) of a listed company pending arbitration in the Shenzhen Court of International Arbitration (“ SCIA ”). On one view, it raises the question whether the Court has jurisdiction to gr
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HCMP 546/2024 [2025] HKCFI 4769 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 546 OF 2024 __________________
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__________________ AND HCMP 630/2024 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 630 OF 2024 __________________
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_______________ J U D G M E N T _______________ A. Introduction 1.These proceedings raise (among others) a novel issue concerning the Court’s jurisdiction on stop notices and stop orders under O.50 rr.11-15 of the Rules of the High Court (“RHC”). On the facts here, such reliefs are pursued in effect as interim measures to hold the ring over shares and convertible bonds (“CBs”) of a listed company pending arbitration in the Shenzhen Court of International Arbitration (“SCIA”). On one view, it raises the question whether the Court has jurisdiction to grant relief under RHC O.50 rr.11-15 in the absence of substantive proceedings in Hong Kong. On another view, such question is simply not engaged as RHC O.50 rr.11-15 constitute a statutory regime of its own; alternatively the Court should in any event have jurisdiction under such regime to grant relief in aid of foreign proceedings and arbitrations, having regard to recent case law developments on the Court’s jurisdiction to grant injunctions. I will address this further in my judgment. 2.The parties have also raised other issues and arguments. Whilst I will address them in my judgment, I will not go into them in details, bearing in mind that these proceedings are not the forum for substantive determination of the underlying dispute, which is pending arbitration in the SCIA. 3.By way of procedural background, the following matters came before the Court during the hearings on 23 September and 2 October 2024:
4.Xindu says that the Fortification Summons was merely listed on 23 September 2024 as a call-over hearing whilst UKPPGC invites the court to nevertheless deal with it. As I will explain, I eventually reach the view that the Fortification Summons should not be dealt with at this stage given (i) the need for further evidence and (ii) the potential impact by my ruling herein. 5.After the hearings on 23 September and 2 October 2024, UKPPGC became aware of the following documents (“New Documents”):-
6.On 25 November 2024, UKPPGC took out Summonses for leave to adduce the New Documents and to re-open the hearing (“Post-hearing Evidence Summonses”), together with affirmations in support. 7.Thereafter, I ordered that the Post-hearing Evidence Summonses are to be heard together with the reopened hearing on the same occasion, should leave be granted for hearing to be reopened. Directions were also given for the filing of evidence. A further hearing was fixed for 29 May 2025. 8.On 16 May 2025, UKPPGC took out Summonses (“EOT Summonses”) for leave to adduce further documents which show that the SCIA arbitration has been stayed (“Stay Documents”), namely:-
9.On 21 May 2025, Xindu applies to this Court for an adjournment of the Post-hearing Evidence Summons sine die and the vacation of the hearing on 29 May 2025 pending the final determination of the SZ Court Application. Nevertheless, as such application cannot be dealt with prior to 29 May 2025, Xindu no longer pursued it. At the hearing on 29 May 2025, I ordered Xindu to pay to UKPPGC the costs thrown away, summarily assessed at HK$13,000. 10.Xindu has made submissions on the New Documents and the Stay Documents. Save for that, Xindu did not oppose the Post-hearing Evidence Summonses and the EOT Summonses (which I would allow, with costs in the cause). 11.Thus, the matters which require determination are (i) UKPPGC’s Discharge OS and (ii) Xindu’s Stop Order OS and Stop Order Summons, having regard to the New Documents and the Stay Documents. B. Brief background and issues 12.The present dispute arises out of a memorandum executed in January 2015 (“2015 Memorandum”) among (on its face) inter alia (i) Xindu, (ii) UKPPGC, (iii) WYK and (iv) Wong Hanning (“Hanning”), the son of WYK. Xindu relies on clause 四(二)2 thereof (“Clause 4(2)(2)”):
13.Xindu’s case is that, under the 2015 Memorandum, it agreed to give up certain claims and entitlements (pursued in litigation in 2014) and, in return, UKPPGC and its related parties agreed that Xindu is entitled to (1) 20% of the shareholding in UKPPGC as of January 2011, (2) 20% of the shares and CBs in China Energy Development Holdings Limited, the 1st Defendant herein (i.e. ListCo), initially owned by UKPPGC, and (3) 20% of other rights and benefits owned by UKPPGC. 14.Xindu contends that it may trace its 20% entitlement as at January 2011 (i.e. HK$511,600,000, being 20% of HK$2,558,000,000) by claiming (i) 1.86 billion shares in ListCo (being HK$312,480,000) (i.e. Subject Shares) in full and (ii) the remainder by way of CBs with a principal amount of HK$199,120,000 (being HK$511,600,000 – HK$312,480,000) issued by ListCo (i.e. Subject CBs) (collectively “Subject Securities”). 15.In November 2023, Xindu applied for and obtained within HCSN 6/2023 a stop notice over the Subject Securities (i.e. the Stop Notice). 16.On 2 April 2024, UKPPGC commenced HCMP 546/2024 to discharge the Stop Notice contending, inter alia, that Xindu is not beneficially entitled to the Subject Securities. 17.By letter dated 10 April 2024, ListCo gave notice to Xindu that:
18.On 16 April 2024, Xindu commenced HCMP 630/2024 pursuant to RHC O.50 r.15 and applied for urgent interim-interim relief to protect its interest in the Subject Securities. It should be noted that the scope of the Subject Securities exceeds the scope of the Cypress Securities. 19.On 19 April 2024, DHCJ KC Chan heard Xindu’s application for interim-interim relief, which was opposed by UKPPGC. The Court granted relief in favour of Xindu, restraining the registration of the Transfers and the issuance of new shares and bond certificates pending substantive determination of the Stop Order OS/ Summons. Again, it should be noted that the scope of the Transfers is greater than that of the Cypress Transfers. 20.On 13 May 2024, the Court ordered that the Discharge OS be adjourned for substantive argument to be heard together with the Stop Order OS on 23 September 2024. 21.On 20 May 2024 (or 29 May 2024 as per UKPGCC), Xindu commenced arbitration in the SCIA (“Arbitration”) in compliance with the undertaking given to the Court on 19 April 2024, seeking inter alia (i) declaratory relief of Xindu’s entitlement to 20% of UKPPGC’s shareholding (inclusive of its interest in ListCo) and (ii) an order for the transfer of, among others, the shares in ListCo presently held by UKPPGC (including the Subject Shares) to Xindu. 22.As mentioned, the matter came before this Court on 23 September 2024 and 2 October 2024. A further hearing took place on 29 May 2025. 23.As a preliminary point, UKPPGC says that the affidavit evidence filed by Xindu shall be inadmissible as they are unnotarized and in breach of the Court’s unless orders. By the deadline of the unless orders, Xindu filed affirmation by its solicitors which exhibited unnotarized (or even undated and unsigned) affirmations. According to UKPPGC, the defect cannot be subsequently cured. On the other hand, Xindu argues that it has not breached the unless orders as it did file affirmation by its solicitors within time, and that if necessary the Court has an inherent discretion to act in reliance upon the parties’ undertakings, treating what they have undertaken to do as done. On the whole, I find Xindu’s conduct unsatisfactory, particularly as there was substantial delay in respect of the signing and/or notarisation of the underlying affirmations after the expiry of the unless orders. However, I am not ultimately persuaded that I should disregard Xindu’s evidence altogether, although the Court would mark its disapproval of such conduct by appropriate costs order. 24.Subject to that, UKPPGC’s key arguments (in support of the Discharge OS and in opposition to Stop Order OS/ Summons) are as follows:
25.I will consider the above in turn. C. Analysis C1. Jurisdiction 26.UKPPGC contends that the Court has no jurisdiction to accept the filing of affidavit evidence or seal the Stop Notice under RHC O.50 r.11(2), nor to grant a stop order under RHC O.50 r.15 for the following reasons:
27.With respect, I do not agree that the Court has no jurisdiction, or that the Court’s jurisdiction should be so limited as contended by UKPPGC. 28.First and foremost, the statutory restrictions of the stop notice/ stop order regime are that (i) such regime applies to prescribed securities and (ii) the regime may be invoked by a person claiming to be entitled to an interest in prescribed securities. The statute does not impose a restriction by reference to the territorial jurisdiction over the person in whose name the prescribed securities are held. There is no proper basis for UKPPGC to superimpose an unwritten restriction as alleged. 29.To begin with, s.55C of the HCO provides:
30.Section 55C of the HCO envisages rules to be made for the Court to make a stop order on the application of, and for the service of a stop notice by, “any person claiming to be entitled to an interest in prescribed securities”. 31.In relation to stop notice, RHC O.50 r.11(1) provides:
32.In relation to stop order, RHC O.50 r.15(1) provides:
33.Section 20A(2)(b) of the HCO in turn provides:
34.Therefore, the only restrictions imposed by the statute relate to (i) the type of securities and (ii) the locus of an applicant, being any person claiming to be entitled to an interest in such securities. It may be said that the restrictions on the type of securities did take into account territorial jurisdiction, such that the regime may only be invoked in relation to stock of any body incorporated in Hong Kong, stock of any body incorporated outside Hong Kong but registered in a register kept within Hong Kong, etc. As the legislature has seen fit to impose restrictions on territorial jurisdiction by reference to the type of securities (as opposed to other aspects), there is no proper basis to read in further unwritten restriction on territorial jurisdiction. 35.Second, UKPPGC’s argument that the Court has no jurisdiction in respect of stop notice/ stop order pending resolution of claims or disputes as to entitlement to shares in foreign proceedings and arbitrations, would frustrate the rationale and purpose of such regime. As observed by Laffoy J in Lee v Buckle [2004] 3 IR 544 at §38:
36.As the regime seeks to preserve the shares in specie while there is an unresolved claim or dispute as to the entitlement to the shares in specie, an applicant falling within the ambit of the regime (i.e. “any person claiming to be entitled to an interest in prescribed securities”) should be eligible to invoke the protection by the regime as long as there is an unresolved claim or a dispute as to the entitlement to the prescribed securities. In principle, such protection is needed regardless of where and how such claim or dispute is to be resolved. 37.Notably, UKPPGC suggests in §10.4(2) of its submissions that “a stop notice must be supported by a claim/ dispute, although it does not have to be one pursued in litigation (e.g. arbitration or other forms of dispute resolution)”. As UKPPGC accepts that the regime is available pending the resolution of a claim or dispute in arbitration or other forms of dispute resolution, there is no good reason why such regime is not available simply because such arbitration or dispute resolution is conducted outside Hong Kong. Indeed, UKPPGC’s stance runs contrary to the adaptive flexibility inherent in the court’s equitable jurisdiction to grant injunctions (as examined below). 38.Third, the stop notice/ stop order regime is directed against a person who has power to register the transfer of the prescribed securities (i.e. ListCo or Tricor), as opposed to a person in whose name the prescribed securities are held (i.e. UKPPGC). The authorities cited by UKPPGC are not engaged, as the Court is not making orders against a person outside its territorial jurisdiction such as UKPPGC. 39.Fourth, The Siskina and Leiduck (both considered by the Court of Final Appeal in Hin-Pro) are distinguishable. In Sir Elly Kadoorie & Sons Ltd v Samantha Jane Bradley [2024] 4 HKLRD 428, the defendant relied on The Siskina and Leiduck to contend that an injunction must be founded on a cause of action. The Court of Appeal rejected such argument at §§44-52, finding that they do not establish such a wide proposition:
40.As The Siskina and Leiduck were decided on the basis of the true construction of O.11 r.1(1) of the Rules of the Supreme Court 1965, they do not apply to the construction of the different statutory regime of stop notice/ stop order. Indeed, in Securities and Futures Commission v C [2009] 4 HKLRD 315, the Court of Appeal also distinguished The Siskina and Leiduck and decided on the basis of the true construction of s.213(2)(c) of the Securities and Futures Ordinance that an order under such section was free-standing and did not require an underlying claim. This dovetails my view which is based on the true construction of HCO s.55C and RHC O.50 rr.11-15. 41.For the avoidance of doubt, following the Court of Appeal’s decision in Sir Elly Kadoorie & Sons Ltd, the Appeal Committee of the Court of Final Appeal has granted leave to appeal in [2025] HKCFA 13 on inter alia the question “Whether a “free-standing” injunction can be granted to a corporate plaintiff if it could not pursue a claim for the tort of harassment as a matter of law?” As explained by the Appeal Committee at §5:
42.For present purposes, I need only rely on the Court of Appeal’s reasoning that The Siskina and Leiduck were decided on the basis of the true construction of O.11 r.1(1) of the Rules of the Supreme Court 1965 and are thus distinguishable. I need not go so far to rely on any proposition that a plaintiff may pursue a “free-standing injunction” even if it actually had no cause of action (in respect of the underlying tort in that case). 43.Fifth, insofar as it is necessary, it would appear that The Siskina and Leiduck are overtaken by case law and that, where the Court has personal jurisdiction over a party, the Court has power – and there is no principle or practice which prevents the exercise of the power – to grant a freezing injunction or other interim injunction against that party to assist enforcement through the court’s process of a prospective (or existing) foreign judgment (or arbitral award): Convoy Collateral Ltd v Broad Idea International Ltd [2023] AC 389 at §121 (also §§31, 76-120). 44.Importantly, at §118, the majority of the Privy Council opined that there is no inconsistency between legislation such as s.25 of the 1982 Act (being a specific provision on injunction in aid of foreign proceedings akin to s.21M of the HCO) and their conclusion about the extent of the court’s power under s.37 of the 1981 Act (being a generic provision on injunction akin to s.21L of the HCO). 45.By analogy, in the context of the stop notice/ stop order regime, where the Court has personal jurisdiction over the ListCo and Tricor, the Court has power to grant an interim injunction against them to assist enforcement through the Court’s process of a prospective foreign arbitral award. Such power exists independently and there is no inconsistency with s.21M of the HCO or s.45 of the AO. 46.Sixth, my construction is reinforced by the jurisprudence on the wide and flexible powers of the Court to grant injunctions. In Wolverhampton City Council v London Gypsies and Travellers [2024] AC 983, the UK Supreme Court explained that the jurisdiction to grant injunctions is (i) rooted in equity, (ii) remains so despite its statutory confirmation (such as s.21L(1) of the HCO in Hong Kong) and (iii) subject to any relevant statutory restrictions, unlimited (at §17). Specifically, the UK Supreme Court referred to Broad Idea as rejecting the rigid doctrine that an injunction must be founded on an existing cause of action against the person enjoined, and said that “[i]t is now well established that the grant of injunctive relief is not always conditional on the existence of a cause of action” (§43). Examples cited included (i) an application by the Attorney General, acting either ex officio or through another person known as a relator, to ensure that the defendant obeys the law, (ii) a Mareva or freezing injunction, (iii) a Norwich Pharmacal order, (iv) a Bankers Trust order, and (v) an internet blocking order (at §§44-49). 47.At §§147-153, the UK Supreme Court reaffirmed the following first principles concerning the exercise of the court’s jurisdiction to grant injunctions:
48.The above principles were cited with approval by the Hong Kong Court of Appeal in Secretary for Justice v Persons Conducting Themselves in Any of the Acts Prohibited under Paragraph 1(a), (b), (c) or (d) of the Indorsement of Claim [2024] 3 HKLRD 905 at §§20-21, and Sir Elly Kadoorie & Sons Ltd at §§34-37. As Poon CJHC put it in the former at §21, “the developments underscore the adaptive flexibility inherent in the equitable jurisdiction which enables the court, so long as it acts in accordance with established principles or any logical extension of them, to grant injunctions in new circumstances as justice and convenience dictate”. 49.Similarly, the jurisdiction under s.55C of the HCO and RHC O.50 rr.11-15 is, subject to any relevant statutory restrictions, unlimited. In line with the adaptive flexibility inherent in its equitable jurisdiction, the Court should have wide and flexible powers over stop notice and stop order falling within the ambit of prescribed securities, without superimposing any further limitation on jurisdiction in the absence of statutory restriction to such effect. 50.For all these reasons, I am satisfied that the Court has jurisdiction in the present case to accept the filing of affidavit evidence or seal the Stop Notice under RHC O.50 r.11(2), and to grant a stop order under RHC O.50 r.15. It follows that there is no need to consider the further questions whether (i) interim relief/ measure referred to in s.21M of the HCO or s.45 of the AO may include a stop notice under RHC O.50 r.11 and (ii) if so, whether the relevant requirements under such provisions have been satisfied here. C2. Discretion 51.Next, UKPPGC contends that the circumstances of this case do not justify any discretion to be exercised in favour of Xindu. 52.UKPPGC’s submissions on exercise of discretion are interwoven with its submissions on jurisdiction. They boil down to the following points:
53.On the first point, whether the principles of a Mareva injunction are applicable (or applicable in full) should depend on the nature of the claim or dispute. For instance, if an applicant’s case is that he would recover judgment for a certain sum and that steps might be taken to dissipate the assets (including prescribed securities) to frustrate the judgment, then this is akin to a Mareva injunction and those principles ought to apply. However, in the present case, Xindu claims a beneficial or proprietary interest in the Subject Securities and, as such, the stop order sought is akin to a proprietary injunction. Indeed, UKPPGC suggests in §12.3 of its submissions that “The substantive effect of the Stop Notice, combined with the stop order sought, is tantamount to a Mareva / proprietary injunction operating against UKPPGC”. As such, UKPPGC seems to accept that a stop order could, depending on the circumstances, operate like a proprietary injunction. It is well-established that, in the case of a proprietary injunction, it is not necessary to demonstrate a real risk of dissipation of assets. 54.On the second point, I disagree that there is no utility here.
55.On the third point, one must again appreciate the different nature and targets of the reliefs. A stop order is directed against the person who has power to register the transfer of the prescribed securities (such as ListCo and Tricor), whereas the interim measures alluded to by UKPPGC are primarily directed against the transferor (such as UKPPGC) and transferee (such as Cypress) of such securities. Given that one is concerned with securities of a company listed for trading in Hong Kong (which falls within the scope of prescribed securities), it is not at all surprising that Xindu would seek to invoke the readily available regime of stop notice/ stop order which apply to the same. In any event, as mentioned, these reliefs (including those covered by the PRC Enforcement Documents) are not inconsistent or mutually exclusive. 56.On the fourth point, even assuming that Xindu could readily acquire shares in ListCo in the open market, it does not mean that injunctive relief is unnecessary. Xindu’s case is that it has beneficial or proprietary interest in the Subject Securities held in the name of UKPPGC and it is on such basis that Xindu seeks injunctive relief against ListCo and Tricor under RHC O.50 r.15 to preserve the status quo. This is akin to a proprietary injunction. I agree with Xindu’s submissions that, where an interim injunction is sought to protect a claim for trust property, irremediable damage need not necessarily be shown and the Court will readily find that the balance of convenience favours the preservation of the property pending trial: Pacific Rainbow International Inc v Shenzhen Wolverine Tech Ltd (Unrep., HCA 3023/2016, 2 May 2017) at §37 per DHCJ Douglas Lam SC. 57.In any event, given the low trading volume of shares in the ListCo, there is at least a question whether damages are adequate relief (even putting aside the proprietary nature of Xindu’s claim). 58.On the fifth point, I agree that the Stop Order OS is not properly framed as it seeks a stop order lasting until the determination of HCMP 546/2024 (i.e. Discharge OS) or further order, rather than determination of the Arbitration in the SCIA. Xindu recognises such deficiency and suggests in footnote 2 of its submissions that (i) at the time when the Stop Order OS was issued, Xindu had not yet commenced the Arbitration and (ii) Xindu will seek leave to amend the Stop Order OS accordingly. In response, UKPPGC says there is no reason why such amendment was not made earlier and reserves its right to make further submissions should such application be made. 59.In my view, the Court should adopt a pragmatic approach. Despite the wording of the Stop Order OS, it seems fair to say that both sides have advanced arguments on the basis that Xindu’s claim is to be resolved by the Arbitration (subject to the SZ Court Application). Indeed, the Stop Order OS refers to “further order” which provides built-in flexibility where necessary. As such, I fail to see any material prejudice if the Court is to approach the matter on that basis. In any case and for the avoidance of doubt, I grant leave to Xindu to amend the Stop Order OS accordingly within 14 days of the date of this Judgment. 60.On a separate note, Xindu argues that UKPPGC’s Discharge OS is academic because (i) the ListCo has given notice to Xindu for registration pursuant to RHC O.50 r.12 and (ii) the interim-interim relief has superseded the Stop Notice. UKPPGC disagrees and emphasises there is nothing to suggest that a stop notice would lose its effect and the ListCo may give a second notice to Xindu. In my view, it very much depends on the outcome of the Stop Order OS. If the Court grants a stop order which covers all the shares in the Stop Notice, the Discharge OS may be said to be academic. However, if a stop order is granted only in respect of some of the shares, then in the absence of any discharge (or variation) the Stop Notice would have a wider scope (and hence not academic in that sense). That said, nothing really turns on this because in practice, the Court would consider the Discharge OS and the Stop Order OS together and reach a consistent decision over the same. 61.On the whole, I do not think that there is any material factor which militates against the exercise of discretion in favour of Xindu. 62.The above is subject to UKPPGC’s further arguments below which primarily go to merits. In this regard, Xindu says that the requirements for the grant of an interlocutory injunction are applicable, namely there must be a serious issue to be tried, and the balance of convenience must lie in favour of granting the injunction. Such test is not seriously disputed by UKPPGC. C3. Whether 2015 Memorandum binding on UKPPGC 63.UKPPGC contends that the 2015 Memorandum is not binding on it for lack of any valid affixation of its seal and/or signature by its authorized representative(s) (at Section E1 of its submissions). In gist:
64.In response, Xindu argues inter alia that:
65.UKPPGC has made detailed submissions why Xindu’s arguments are invalid. Nevertheless, having considered the arguments, I am satisfied there is a serious issue to be tried. As the matter will be determined by the Arbitration in the SCIA, I would set out my key observations without going into all the details or otherwise deciding the matter. 66.First, UKPPGC argues that there is nothing to show that WYK was the beneficial owner and controller of UKPPGC at the time when the 2015 Memorandum was signed. Yet, it would appear that:
67.If WYK has been beneficial owner of UKPPGC pre-November 2014 and post-January 2018, there is at least a triable issue whether WYK (by himself or through his son, Hanning) remained as beneficial owner and de facto controller of UKPPGC during the period in between (including January 2015 when the 2015 Memorandum was executed by WYK and Hanning). Notably:
68.There is thus at least a triable issue as to the actual beneficial ownership and control over UKPPGC. This is particularly so as Hanning has not made any affirmation in support of UKPPGC’s case herein. 69.Further, UKPPGC says that WYK signed the 2015 Memorandum in his personal capacity only. UKPPGC distinguished the Mainland cases cited by Xindu’s expert on the ground that in those cases, the de facto controller signed the relevant documents on behalf of the companies in question. 70.In my view, whether WYK and/or Hanning signed the 2015 Memorandum in his personal capacity only is a question for trial. Notably, both WYK and Hanning signed the 2015 Memorandum with full knowledge that UKPPGC was (purportedly) a party to the 2015 Memorandum. None of them questioned at the time if UKPPGC is bound, or whether they (or either of them) had authority to bind UKPPGC. Nor did they suggest at the time that somebody else should sign the 2015 Memorandum on behalf of UKPPGC. 71.Second, as regards the Custodial Agreements and the Discharge Agreements, UKPPGC argues that it is not a party to any of these agreements and there is no basis to suggest that UKPPGC is bound by the same. Further, UKPPGC says that in any event, these agreements do not alter the fact that Hanning was neither a shareholder nor director of UKPPGC at the time when the 2015 Memorandum was signed. Yet, the position is far from clear. Indeed:
72.Third, UKPPGC argues that the Concert Agreement is undated and has not been signed, as Xindu is still trying to locate the signed copy. Further, even if signed, the confirmation by UKPPGC/ its shareholder(s) under Clause (一)(2)(c) of the Concert Agreement is limited to the authority of signing the Concert Agreement rather than the 2015 Memorandum. However:
73.All in all, I am satisfied that there is at least a serious issue to be tried as to whether the 2015 Memorandum is binding on UKPPGC. C4. Whether Xindu’s claim is time-barred 74.UKPPGC contends that Xindu’s claim is time barred under Mainland laws. UKPPGC’s expert opinion relies on Article 188 of the Civil Code of the People’s Republic of China（《中華人民共和國民法典》）(“Civil Code”) which provides for a limitation period of 3 years as follows:
75.UKPPGC’s expert opinion further prays in aid Article 195 of the Civil Code which provides for events (such as requests for enforcement) which could enable time to run afresh:
76.Under Mainland laws, the above is applicable to arbitration in the absence of stipulations to the contrary. Hence, UKPPGC argues that time started to run when the 2015 Memorandum was signed and lapsed in January 2018. As there is no (credible) evidence that Xindu had sought to enforce the 2015 Memorandum against UKPPGC before the expiry of such limitation period (such that time can run afresh), Xindu’s claim is time-barred. 77.Whilst there is force in UKPPGC’s argument, I must take note of Xindu’s expert opinion on Mainland laws. In essence, Xindu contends that its property claim (物權請求) is not subject to any limitation period. Xindu further suggests that only claims for debt are subject to the issue of limitation. UKPPGC disagrees and says that Articles 188 and 195 of the Civil Code stipulate that limitation period applies to all types of civil claims. 78.With respect, the position is far from clear. Whilst limitation period may apply to all types of civil claims under Mainland laws, it may be said that time would only start to run for a property claim when a request is made for the transfer of the property. On one view, the 2015 Memorandum merely set out the parties’ agreement as to Xindu’s interests without any immediate request for transfer. That may find support from Clause (一)(4) of the Discharge Agreements (signed by WYK and Hanning respectively) which recites that, on 14 January 2015, the parties (as specified there) had executed the 2015 Memorandum which affirms Xindu’s relevant interests or rights (“確認了鑫都集團有限公司的相關權益”). 79.All in all, I am satisfied that there is at least a serious issue to be tried as to whether Xindu’s claim is time-barred. C5. Whether 2015 Memorandum procured by duress 80.UKPPGC argues that the 2015 Memorandum is invalid under Mainland laws as it was procured by duress. In gist:
81.Having considered the arguments, I am satisfied there is a serious issue to be tried. Again, as the matter will be determined by the Arbitration before the SCIA, I would set out my key observations without going into all the details or otherwise deciding the matter. 82.First and foremost, UKPPGC’s allegation of duress does not sit well with contemporaneous documentary evidence. 83.Under the Concert Agreement supposedly executed in January 2015 (although Xindu has not yet located a signed copy), UKPPGC expressly acknowledged and confirmed the validity of the 2015 Memorandum. In particular, the recital of the Concert Agreement provides as follows:
84.Further, the Discharge Agreements in respect of UKPPGC and Giant Crystal were executed by Hanning and WYK respectively on 16 August 2017. There is no suggestion by UKPPGC that the Discharge Agreements were procured by duress. Importantly, Clause (一)(4) of each of the Discharge Agreements recites that (among others) Xindu, WYK, Hanning and UKPPGC executed the 2015 Memorandum on 14 January 2015 which affirms Xindu’s relevant rights and interests (“確認了鑫都集團有限公司的相關權益”):
85.The fact that both WYK and Hanning executed the Discharge Agreements (reaffirming Xindu’s relevant rights and interests under the 2015 Memorandum) on 16 August 2017 (after WYK was released in July 2017), militates against UKPPGC’s case of duress. 86.Second, it is not in dispute that Xindu had pursued litigation in 2014 which culminated in orders by the BVI court in Xindu’s favour. Against such context, there is force in Xindu’s argument that the 2015 Memorandum is a settlement agreement whereby all parties simultaneously gave up and received certain rights, claims and/or assets, and its terms were fair to both sides. UKPPGC disagrees and says that the issue is whether the 2015 Memorandum was procured by duress, and hence the fairness or reasonableness of the terms is irrelevant. However, whilst this may be so in terms of strict legal analysis, the factual analysis is more nuanced. If the terms were objectively fair, it tends to undermine UKPPGC’s factual assertion that the 2015 Memorandum was procured by duress. Put simply, if the terms were objectively fair, the chance is that WYK and/or Hanning did agree to sign it, and there was no need for one party to coerce another into executing the same. 87.Third, WYK signed the 2015 Memorandum on 14 January 2015 in the presence of two members of the Hubei Province, Yichang City Notary Office. Xindu submits that the 2015 Memorandum would not be notarised if WYK had executed it under duress. Whilst this may be putting Xindu’s case too high, depending on the role played by the notary public, this could well undermine UKPPGC’s case of duress. 88.Fourth, it appears that WYK was put in custody for matters unrelated to Xindu’s claim in the Subject Securities. There is force in Xindu’s contention that the Mainland police had nothing to gain from the 2015 Memorandum, and thus there is no plausible reason for them to have coerced WYK and Hanning into signing it. UKPPGC argues that this is irrelevant, as it is not required to prove the police’s motive. Again, whilst this may be so in terms of strict legal analysis, the factual analysis is more nuanced. If there is no obvious motive, or if there is nothing to suggest that the police colluded with Xindu, it tends to undermine UKPPGC’s factual assertion that WYK and Hanning were compelled by the police to sign. 89.Fifth, UKPPGC says there is no positive evidence from Xindu rebutting the case of duress. I am not sure this is a fair way of putting it. Xindu relies upon circumstantial evidence which may undermine UKPPGC’s case. It may be right to say that Xindu has not put forth positive evidence to prove the negative but one should bear in mind that:
90.For all these reasons, I am satisfied that there is at least a serious issue to be tried as to whether the 2015 Memorandum was procured by duress. C6. Whether Xindu has proprietary or beneficial interest in the Subject Securities 91.UKPPGC contends that the 2015 Memorandum does not give Xindu any proprietary or beneficial interest in the Subject Securities anyway:-
92.Having considered the arguments, I am of the view that there is a serious issue to be tried as to whether Xindu has proprietary or beneficial interest in the Subject Securities, although the New Documents do have impact on the computation of shares (which I will examine under the next point). 93.First, it is open to argument whether Xindu’s claim for the Subject Securities is governed by Mainland law (alone) as alleged by UKPPGC. It is reasonably arguable that such issue should be governed by the lex situs of the Subject Securities, with benefit of the construction of the 2015 Memorandum under Mainland laws, which is in essence Xindu’s stance. 94.Xindu submits that, pursuant to Hong Kong conflict of laws rules, the principles laid down by Lord Sumption NPJ in Xiamen Xinjingdi Group Co Ltd v Eton Properties Ltd (2020) 23 HKCFAR 348 at §175 should apply to the Court’s determination of the beneficial interest in the Subject Securities:
95.On the one hand, it seems open to UKPPGC to contend that the Hong Kong conflict of laws rule should not apply, as one is concerned with the Arbitration in the SCIA in the Mainland. On the other hand, one must not forget that both the Discharge OS and the Stop Order OS are to be determined by the Hong Kong Court. In my view, it is at least arguable that Hong Kong Court should adopt Hong Kong conflict of laws rule to determine, for the purpose of the Discharge OS and the Stop Order OS, whether there is a serious issue to be tried on Xindu’s beneficial entitlement to the Subject Securities. 96.Second, assuming that Hong Kong conflict of laws rule should apply, it is at least arguable that Xindu has a proprietary interest in the Subject Securities. 97.The lex situs here is the law of Cayman Islands, being the place of incorporation of ListCo. Xindu submits that (i) Hong Kong law recognises the existence of equitable proprietary interests if a contract is specifically enforceable and (ii) as there is no expert evidence on Cayman law, it is assumed to be the same as Hong Kong law. It follows that an equitable proprietary interest is legally capable of existing under the lex situs (Cayman law) which would, in turn, refer to the proper law of the contract (Mainland law) for the proper interpretation of Clause 4(2)(2) of the 2015 Memorandum. 98.There is force in Xindu’s argument, which may also find support in the latter part of §175 of Xiamen Xinjingdi Group as follows:
99.The crux of the matter turns on whether the 2015 Memorandum (upon its proper interpretation under Mainland law) has the characteristics which make it specifically enforceable in the lex situs (which is presumed to be the same as the law of Hong Kong). In this regard, it is UKPPGC’s own submissions that Clause 4(2)(2) of the 2015 Memorandum provides Xindu with a contractual right to ask for the transfer of securities, and that Xindu can assert a claim against UKPPGC for a proportional allocation of 20% of the shares and CBs initially held by UKPPGC. As UKPPGC says that Xindu has a contractual right to ask for the transfer of securities, it appears that UKPPGC accepts that the 2015 Memorandum has characteristics which enable Xindu to seek specific performance. At the very least, there is a serious issue to be tried on the same. 100.For completeness, I should mention that Xindu has argued, based on its expert opinion on Mainland laws, that the proper interpretation of Clause 4(2)(2) is that UKPPGC has already transferred 20% of its ListCo shares and CBs to Xindu, such that Xindu enjoys all the substantive rights and interests in the shares and CBs. I must confess that I have some difficulties in understanding such argument. On the face of it, the Subject Securities remain held in the name of UKPPGC. Moreover, UKPPGC had transferred some of them (i.e. Cypress Securities) to Cypress, even though such transfers have not yet been registered. Indeed, it seems inconsistent to suggest that UKPPGC has already transferred the interests to Xindu, when it remains Xindu’s case that it is seeking relief in the Arbitration for the transfer of the Subject Securities. Therefore, it seems to me that the better argument which may be deployed by Xindu is that the 2015 Memorandum has characteristics which enable Xindu to seek specific performance (as examined above). 101.Third, as regards UKPPGC’s contention that Xindu has breached the 2015 Memorandum by failing to honour its promise under Clause 4(1)(3) thereof to deliver/ return a form signed by the Registrar of the BVI Court, Xindu has provided a response in the 2nd Affirmation of Zhang Yanjun, Vice-President of Xindu, at §26(2):- “For completeness, since the BVI Proceedings have been withdrawn by [Xindu] following their settlement pursuant to the 2015 Memorandum, [Xindu] has given up its rights to pursue the same and is not required and is not under any obligation to submit any form pursuant to clause 4(1)(3) of the 2015 Memorandum”. Given that the apparent objective of Clause 4(1)(3) is to ensure that Xindu cannot invoke or enforce the order for transfer of shares granted by BVI Court in Xindu’s favour, there is force in Xindu’s argument that there is no point to insist on this once Xindu has withdrawn the BVI proceedings. Further, there is also a question whether a breach (if any) is repudiatory, and whether repudiation (if any) was accepted by UKPPGC. There is thus at least a serious issue to be tried on this. 102.Fourth, Xindu contends that its proprietary interest in 20% of UKPPGC’s interest in ListCo is in turn traceable into shares subsequently issued to UKPPGC as a result of its conversion of CBs and that, in the tracing process, Xindu has the right to choose whichever presumption produces the best result for it and trace in the manner which is most advantageous to it: Americhip Inc v Zhu Hongling [2021] 4 HKLRD 490 at §19 per M Chan J (which should also apply under Mainland law in the absence of expert evidence on Mainland law showing to the contrary: Wang Qian Wei v 郭文雨 and Anor [2018] HKCFI 2253 at §§37-39). 103.On the facts, Xindu claims to be entitled to 20% of the shares in and CBs issued by ListCo “initially” owned by UKPPGC (“UK公司最初擁有的”). Since UKPPGC was initially interested in 15,226,190,476 shares (both issued and underlying) in ListCo with a principal amount of HK$2,558,000,000 as of 3 January 2011, Xindu’s 20% interest amounts to 3,045,238,095 shares with a principal amount of HK$511,600,000. 104.Applying the principle above, Xindu says it is at liberty to choose how best it wishes to trace its interest in these 3,045,238,095 shares in ListCo. As UKPPGC was issued 1.86 billion shares in ListCo on 5 January 2011 after converting part of its CBs into ListCo shares, Xindu claims to be entitled to trace its interest into:
105.There is force in Xindu’s argument on tracing. It is supported by case law, and UKPPGC has not adduced evidence on Mainland law pointing to the contrary. 106.Accordingly, subject to the New Documents and UKPPGC’s submissions on computation, I agree with Xindu’s submissions that there is at least a serious issue to be tried that its initial interest is traceable to the Subject Securities, i.e. 1.86 billion issued shares in ListCo and CBs in the principal amount of HK$199,120,000 (convertible into 1,185,238,095 shares). C7. Xindu’s Computation of Subject Securities and the New Documents 107.It is not in dispute that:
108.Xindu’s computation of its entitlement is premised on 20% of the initial interests held by UKPPGC, i.e. 20% of HK$2,558,000,000, being the principal amount of Tranche 1 Convertible Bonds initially issued to UKPPGC in January 2011. Xindu’s case has not taken into account developments after January 2011. 109.On the other hand, UKPPGC relies on subsequent events and says that Xindu’s computation is wrong. However, it is fair to say that UKPPGC only relies on the cancellation of CBs (but not the Cypress Transfer or the Xinjiang Transaction) during the hearings on 23 September and 2 October 2024. In a nutshell:
110.Whilst there is force in UKPPGC’s argument, one cannot ignore Xindu’s argument, which is premised on Clause 4(2)(2) whose language makes specific reference to UKPPGC’s initial entitlement as at January 2011. 111.Moreover, UKPPGC’s calculation has not taken into account Xindu’s tracing argument. As mentioned above, Xindu argues that it has the right to choose whichever presumption produces the best result for it and trace in the manner which is most advantageous to it. Hence, it is Xindu’s case that its 20% interest is traceable to the Subject Securities, being (i) 1.86 billion issued shares in ListCo in full and (ii) CBs in the principal amount of HK$199,120,000 (convertible into 1,185,238,095 shares) making up the remainder of its entitlement. 112.At the time of the hearings on 23 September and 2 October 2024, the original relief no.2 in Xindu’s Notice of Arbitration is not inconsistent with Xindu’s case. It provides generically as follows:
113.Whilst it may be said that the original relief no.2 has not given much particulars of the precise relief sought, one can hardly suggest that it is inherently inconsistent with the tracing argument advanced by Xindu herein. Had the matter rested there, I may well come to the view that it is at least arguable that Xindu can claim entitlement to the Subject Securities in full based on its tracing argument. 114.Nevertheless, the landscape has changed as a result of the New Documents. One of them is the Amendment Application (“變更仲裁請求申請書”) filed by Xindu with the arbitral tribunal dated 12 October 2024, shortly after the hearings on 23 September and 2 October 2024. Whilst Xindu argues that they remain proposed amendments and the arbitral tribunal may or may not approve the same, I agree with UKPPGC’s submissions that the Court should approach the matter on the basis of the proposed amendments put forth by Xindu itself. There is no sound reason why the Court should grant any relief herein which goes beyond what is sought (or proposed to be sought) before the arbitral tribunal. It is neither here nor there that the arbitral tribunal may or may not approve the proposed amendments, or that Xindu may or may not seek to further amend its case in the Arbitration in future. The Court simply should not speculate. Instead, the Court should approach the matter based on the latest position before it. 115.UKPPGC has made detailed submissions on the New Documents, including the Amendment Application, the Claim Breakdown and the PRC Enforcement Documents. Whilst I have considered them, I do not think it is necessary to deal with each and every argument in details. 116.In particular, I do not think one can gain much mileage from the quantification of the claim or the valuation of the shares or CBs, whether in the Amendment Application or the Claim Breakdown. Such quantification or valuation may be done for various legitimate reasons in an arbitration (as contended by Xindu), and are thus far from conclusive. 117.Nor can one rely too much on the PRC Enforcement Documents. UKPPGC says they show that Xindu has only sought and obtained injunctive reliefs before the Mainland Courts against Hanning and WYK, evidencing that Xindu does not pursue any proprietary relief. With respect, this does not necessarily follow; in any event this could well be due to the fact that Xindu has obtained other interim reliefs in Hong Kong. 118.Instead, the real issue is the relief sought (or proposed to be sought) by Xindu in the Arbitration. For such purpose, the Court should adopt a holistic approach, and focus on the relevant proposed amended relief, namely:
119.I will deal with the above in turn. 120.First, as explained by Xindu (particularly in oral submissions on 29 May 2025), Amended Relief No.2 relates to the Xinjiang Transaction, whereby UKPPGC transferred CBs with a principal amount of HK$446,880,000 to another entity. The consideration of RMB411,129,600 stated in Amended Relief No.2 was computed by applying the conversion rate of 0.92 to HK$446,880,000. 121.It is clear from Amended Relief No.2 that Xindu claims to be entitled to 20% of such consideration received by UKPPGC in the Xinjiang Transaction, with the specific relief that UKPPGC should pay RMB82,225,900 to Xindu (“第一被申請人應向申請人支付人民幣8222.59 萬元”). This is a monetary relief premised on 20% of the consideration received by UKPPGC. As such, Xindu is no longer seeking proprietary relief in respect of its 20% entitlement for such portion. Adjustment should be made accordingly. 122.Second, Amended Relief No.5 relates to 20% of the 1.86 billion issued shares in ListCo held by UKPPGC, which is equivalent to 372,000,000 shares. Contrary to its position on tracing herein, Xindu is not claiming entitlement to the 1.86 billion issued shares in full in the Arbitration. Instead, Xindu only seeks relief for the transfer of 20% thereof, namely 372,000,000 shares. As such, Xindu’s proprietary relief in relation to the 1.86 billion issues shares is now limited to 20% thereof. Adjustment should be made accordingly. 123.Third, Amended Relief No.6 seeks the transfer of CBs in the principal amount of HK$103,928,000 (being 20% of HK$519,640,000). It would appear that such amount is derived as follows:
124.As such, other than 372,000,000 issued shares sought to be transferred under Amended Relief No.5, Xindu seeks proprietary relief in respect of CBs in the principal amount of HK$103,928,000 only. Adjustment should be made accordingly. 125.Fourth, Amended Relief No.7 seeks compensation for the cancellation of CBs in the sum of HK$255,800,000, which is equivalent to 20% of the cancellation of CBs in the principal amount of HK$1,279,000,000 in May 2015. As Xindu seeks monetary compensation attributable to 20% of its entitlement, it is clear that Xindu is not seeking proprietary relief of the same. Adjustment should be made accordingly. 126.Fifth, Amended Relief No.8 seeks a ruling that Xindu should enjoy a pre-emptive right (“優先購買權”) in respect of (i) 80% of the 1.86 billion issued shares and (ii) 80% of the remaining CBs in the principal amount of HK$415,712,000, i.e. HK$519,640,000 – HK$103,928,000 (covered by Amended Relief No.6). Xindu has not seriously argued that it is entitled to proprietary relief by reason of such pre-emptive right. Indeed, Xindu’s case herein has always focused on 20% of UKPPGC’s entitlement (without extending to the remaining 80%, however the latter is computed). Moreover, given that Xindu has not positively confirmed or otherwise adduced evidence as to its willingness and ability to purchase such 80% stake, it would seem lucrative to suggest that Xindu can assert a proprietary claim and obtain a Stop Order in respect of such 80% stake. 127.All in all, whilst Xindu maintains in its submissions for the reopened hearing that it has not abandoned any part of its proprietary claim in respect of the Subject Securities, Xindu has to accept (albeit in the alternative) that it has given up part of its proprietary claim. The reality is that, by the Amendment Application, Xindu is now asserting proprietary claim in respect of (i) 372,000,000 issued shares held by UKPPGC and (ii) CBs in the principal amount of HK$103,928,000 held by UKPPGC only. In view of the above, there should be adjustments made to the computation of the Subject Securities. C8. Fortification Summons 128.In my view, the Fortification Summons should be adjourned sine die for two reasons. 129.First, given that the Fortification Summons was only taken out by UKPPGC on 31 July 2024 (less than 2 months before the hearing on 23 September 2024), the parties have not had a chance to file full evidence. 130.Second, I have decided that the Stop Notice and the stop order to be granted should be limited to (i) 372,000,000 issued shares held by UKPPGC and (ii) CBs in the principal amount of HK$103,928,000 held by UKPPGC. As the scope has narrowed down substantially, the alleged prejudice suffered by UKPPGC would not be the same. Further or different evidence may have to be adduced accordingly. D. Disposition 131.For all these reasons, I am of the view that:
132.In terms of disposition, I have considered whether the Court has power under RHC O.50 r.14 to discharge the Stop Notice in part or vary the same. On balance, such avenue does not appear to be available:
133.Instead, RHC O.50 r.13 provides as follows:
134.Accordingly, if the securities are incorrectly stated in the Stop Notice, the proper remedy is for an amended stop notice to be filed and served. 135.In the premises, I will make the following orders. 136.First, under the Discharge OS, I would order that:
137.Second, under the Stop Order OS, I would grant the Stop Order, limited to (i) 372,000,000 issued shares held by UKPPGC and (ii) CBs in the principal amount of HK$103,928,000 held by UKPPGC. In this regard, Xindu has submitted a draft Order for HCMP 630/2024 (i.e. Stop Order OS) at the hearing on 29 May 2025. Subject to amending the introductory phrase of paragraphs 1 and 2 of the draft Order to read “Until the substantive determination of the dispute in the [Arbitration] or the [SZ Court Application] (as the case may be) or until further order of the Court …”, I make an order in terms of the following paragraphs of such draft Order:
138.Third, I adjourn the Fortification Summons sine die, with liberty to restore. 139.Fourth, as regards costs, I take the view that Xindu should be deprived of part of its costs to mark the Court’s disapproval of its conduct in exhibiting unnotarized (or even undated and/or unsigned) affirmations to the affirmations of Xindu’s solicitors. Accordingly, I make a costs order nisi (which should become absolute within 14 days) as follows:
140.Last but not least, it remains for me to thank Mr Chen and Ms Wong for Xindu and Mr Yau for UKPPGC for the helpful assistance given to the Court.
Mr David Chen and Ms Clara Wong, instructed by Li & Partners, for the Defendant in HCMP 546/2024 and the Plaintiff in HCMP 630/2024 Mr Jeff Yau, instructed by Chiu Liang & Co., for the Plaintiff in HCMP 546/2024 and the 3rd Defendant in HCMP 630/2024 The 1st and 2nd Defendants in HCMP 630/2024 being absent |
Cases cited in this judgment
Further hearings and rulings under HCMP 546/2024