Wang Weiqing v. Zhuo Yihao and Others
Read the full judgment text of HCA 1657/2022 on BabelCite. This Court of First Instance judgment was delivered on 17 October 2025 before Deputy High Court Judge MC Law, SC.
Civil procedure – interlocutory injunctions – proprietary injunction – worldwide Mareva injunction – cryptocurrency theft – ex parte application – duty of full and frank disclosure – material non-disclosure – whether ex parte application justified – whether injunction should be re-granted – Bankers Trust jurisdiction – disclosure against third party cryptocurrency exchange – Plaintiff is Mainland Chinese holding Vanuatu passport whose wallets were hacked on 14 November 2022 with cryptocurrencies worth approximately HK$112,879,805.4 transferred to various recipient addresses – 5,918,806.41 USDT traced to TV6 Address, a Binance TRC pooled funds hot wallet – whether Plaintiff justified in proceeding ex parte without notice to Binance – held no, ex parte applications require exceptional circumstances of extreme urgency or secrecy and neither was made out – whether material non-disclosure established – held yes, Plaintiff failed to disclose pre-action correspondence with Binance from 20 November 2022 onwards including Binance's express objections to freezing the TV6 Address and the nature of the TV6 Address as a pooled hot wallet – duty of full and frank disclosure extends to factual, legal and procedural aspects and is not discharged by partial disclosure or half-truths – whether proprietary injunction should be re-granted – held no, discretion to re-grant must be exercised sparingly and Plaintiff failed to demonstrate innocent non-disclosure or ability to honour cross-undertaking as to damages – Plaintiff is foreign party with only correspondence address in Portugal and provided no evidence of assets in Hong Kong – eleventh-hour application to adduce evidence of financial means dismissed – whether disclosure should be ordered against unknown 2nd Defendants – held yes, Bankers Trust jurisdiction can be invoked following Tippawan Boonyaem – whether disclosure should be ordered against Nest as 3rd Defendant – held yes, disclosure ordered in terms of paragraph 1.3 of Plaintiff's Summons dated 16 September 2024 with Plaintiff undertaking to indemnify Nest for costs of compliance – proprietary injunction against TV6 Address discharged insofar as Nest is concerned with 14-day stay – costs orders nisi made in favour of 3rd Defendant.
Legal issues: Whether the proprietary injunction should be set aside for lack of justification to proceed ex parte · Whether there was material non-disclosure by the Plaintiff at the ex parte hearing · Whether the interlocutory proprietary injunction should be re-granted after discharge · Whether disclosure should be ordered against the unknown 2nd Defendants · Whether disclosure should be ordered against Nest as the 3rd Defendant
Outcome: The Plaintiff's Amended Summons for continuation of the proprietary injunction against the TV6 Address was dismissed; the proprietary injunction against the TV6 Address was discharged insofar as Nest is concerned. Disclosure was ordered against Nest in terms of paragraph 1.3 of the Plaintiff's Summons dated 16 September 2024.
Cited by 1 case · Cites 25 cases
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HCA 1657/2022 [2025] HKCFI 4941 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1657 OF 2022 ____________ BETWEEN
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____________ DECISION ____________ 1.This judgment relates to various summonses taken out by the Plaintiff for, inter alia, the continuation of the worldwide Mareva injunction and proprietary injunction that he obtained on an ex parte basis in respect of certain cryptocurrency and the joinder of certain parties in respect of the cryptocurrency exchange platform known as Binance (“Binance”). B1. The Plaintiff and his Wallets 2.The Plaintiff is a Mainland Chinese holding a Vanuatu passport.[1] In the Writ of Summons, the Plaintiff provides a correspondence address in Portugal. 3.The Plaintiff is the owner of various cryptocurrencies, ranging from USDT, APECoin, ETH, DOT Polkadot and TRX. The Plaintiff, like other owners of cryptocurrencies, stores his cryptocurrencies in wallets. These wallets are essentially computer accounts. Each wallet would be identified with a “wallet address”. The Plaintiff’s wallets (“Wallets”) involved in the theft and their corresponding addresses are as follows:-
4.The Plaintiff claims that he was a victim of fraud when his wallets were hacked / that the key to the Wallets was stolen. 5.The Plaintiff engaged UDomain Web Holsing Company Ltd (“UDomain”), a crypto-asset security company, to monitor the activities of his Wallets. In support of the Plaintiff’s ex parte application, the Plaintiff relied upon the Affirmation of Mr Leung Tsz King (“Leung”) dated 25 November 2022 (“Leung’s Affirmation”). Leung was at all material times a business analyst employed by UDomain and was responsible for monitoring the Wallets in question. 6.At around 8.40 am on 14 November 2022, UDomain’s monitoring system detected 7 transactions (“Transactions”) from the Plaintiff’s Wallets whereby cryptocurrencies held therein were transferred to various third-party addresses (“Recipient Addresses”). It is the Plaintiff’s case that cryptocurrencies that were transferred out of the Wallets were in the sum of around HK$112,879,805.4 in total. 7.Following the alert, Leung immediately contacted the Plaintiff, who confirmed that he did not execute or authorize any of the Transactions. The Plaintiff also told Leung that he did not recognise any of the Recipient Addresses to which the cryptocurrencies in his Wallets were sent. 8.The Plaintiff noted that the 1st Defendant, his assistant in Hong Kong, had access to the Wallets. After the discovery of the theft, the Plaintiff did try to contact the 1st Defendant but to no avail. The Plaintiff suspected the 1st Defendant as the perpetrator of the theft, although UDomain has not ruled out the possibility of hacking pending further investigation. In the circumstances, the Plaintiff commenced this Action against the 1st Defendant. 9.On 22 November 2022, UDomain reported the theft to the Hong Kong Police. 10.After the discovery of the theft, UDomain took steps to trace the stolen cryptocurrencies. According to Leung, the tracing exercise is possible, as the blockchain is a ledger system, and every transaction of address will be recorded in the blockchain. The staff in UDomain entered the Recipient Addresses of the Transactions in the blockchain to trace the flow of the cryptocurrencies. 11.There are 7 Transactions in question. For present purposes, it is pertinent to note what is described as “Transaction 5”. It involved the transfer of 7,482,876,9814 USDT out from Trust Wallet Address 3 Blockchain 1. Then, there were 4 further layers of transfer. Eventually an aggregate of 5,918,806.41 USDT were transferred to the TV6 Address (as defined in §25 below). 12.According to the Plaintiff’s evidence, as of 25 November 2022, there was a total of 5,918,806,406 USDT in the TV6 Address, equivalent to about HK$46,166,689.97. B4. Exchange between the Plaintiff’s legal representatives and Binance before the ex parte application 13.Following the tracing exercise, it is Leung’s evidence that UDomain communicated with various cryptocurrencies platforms, including Tether (the operator of USDT) and Binance, a cryptocurrency exchange platform. At this juncture, it is pertinent to note that, in Leung’s Affirmation, he did not set out any details or particulars of any such communication. Neither did he exhibit any exchange of correspondence between the Plaintiff’s camp on the one hand and Binance on the other. 14.As a matter of fact, from 20 November 2022 onwards, there have been exchange of emails between Jacque Law LLC (“Jacque Law”), a law firm in Singapore acting for the Plaintiff and the legal department of Binance. The relevant emails may be summarized as follows. 15.On 20 November 2022 (12:00 pm), Jacque Law sent to Binance an email notifying that they acted for a client whose crypto wallet had been hacked. They stated that a significant amount of hacked DOT had been deposited into a Binance wallet. They also provided the TXID (i.e. the transaction ID) in respect of the deposit transactions. In the said email, Jacque Law requested Binance to take action immediately to freeze the movement of the funds in the relevant account. 16.On 21 November 2022 (11.25 am), Binance replied to Jacque Law by email, which reads, inter alia, as follows:-
17.On 22 November 2022 (at 1.19 am), Jacque Law wrote back to Binance. In this email:-
18.On 22 November 2022 (12.24 pm), Binance reverted to Jacque Law, stating that the freezing of the TV6 Address was not possible, for it was Binance TRX pooled funds hot wallet address; and the address did not belong to and/or was not associated with any particular user. In the said email, Binance explained the operation of the hot wallet address and why it was not possible to freeze the hot wallet address as follows:-
19.After 22 November 2022, the Plaintiff did not reach out to Binance again until 25 November 2022. 20.In an email from Jacque Law dated 25 November 2022 (5.03 pm), Jacque Law informed Binance that the Plaintiff was applying to the Hong Kong court for injunction and his counsel in Hong Kong expected that the Hong Kong Courts would grant the injunction in favour of the Plaintiff. Leung’s Affirmation (together with its exhibits) was attached to this email. Yet no other application papers such as the draft order was attached. As such, prior to the ex parte application, Binance was never informed that the Plaintiff was in fact pursuing an injunction application to restrain the dealing of assets in the TV6 Address. Instead, Jacque Law asked Binance to “extend the freeze on the identified accounts for a further period of 3 weeks until 16 December 2022”. 21.On 25 November 2022, the Plaintiff made the ex parte application to Deputy High Court Judge MK Liu (the “Duty Judge”). But in fact the correspondence still continued between Jacque Law and Binance. 22.On 25 November 2022 (5.37 pm), Binance wrote back to Jacque Law, asking for a copy of the Plaintiff’s summons for the application for injunction taken out in the Hong Kong courts – for the purpose of considering the Plaintiff’s request to extend the courtesy freezes until 16 December 2022. C1. Ex parte hearing before DHCJ MK Liu on 25 November 2022 23.On 25 November 2022, the Plaintiff made an ex parte application to the Duty Judge for a proprietary injunction and a worldwide Mareva injunction against the 1st Defendant and the 2nd Defendants, to cover the original cryptocurrencies in the Plaintiff’s Wallets and those traced cryptocurrencies. 24.It is significant to note that, in the Writ of Summons, the 2nd Defendants were described as “an unknown person or person(s) who has access to or operates the addresses as per Part 2 of Schedule 1 of the Indorsement of Claim”. Part 2 of Schedule 1 of the Indorsement of Claim covers the traced cryptocurrencies and 15 addresses were listed out and the 12th address in question is the TV6 Address. 25.At the hearing, the Duty Judge made an Order (the “Ex Parte Order”), granting in favour of the Plaintiff the worldwide Mareva injunction and the proprietary injunction sought against the 1st and 2nd Defendants. The traced cryptocurrencies are set out in Part 2 of Schedule 3 to the Ex Parte Order. They include, inter alia, the 5,918,806.41 of USDT in the “TV6 Address”. It reads, inter alia, as follows:-
26.At the hearing, the Duty Judge asked if the return date should be 2 December 2022, the Friday in the following week. Mr Laurence Li SC, Leading Counsel for the Plaintiff, submitted to the Duty Judge that, for email fraud cases, the experience was that the defendants may not turn up within the week; and that there was a practice to have the return date to be fixed on the Friday in the second week after the ex parte hearing. As such, the Duty Judge acceded to the suggestion and fixed the return date as 9 December 2022; and the ex parte Injunction was stated to remain in force up to and including 9 December 2022 (the “Return Date”). 27.For present purposes, it is significant to note the following. 28.First, the Plaintiff did give the usual undertakings, including the undertaking to effect service of the court documents (including the Order) on the Defendants. In the Ex Parte Order, paragraph 3 of Schedule 2 reads this:-
29.Second, at the ex parte hearing, Leading Counsel for the Plaintiff also requested for leave to serve the Writ and the various court documents on the 1st and 2nd Defendants by way of substituted service. As such, the Duty Judge granted the Plaintiff leave to serve the court documents on the 1st Defendant by sending him an electronic copy by way of WeChat; and to serve the court documents on the 2nd Defendants by attaching a message to a cryptocurrency transfer to each of the respective addresses in respect of the traced cryptocurrencies, including a link to access an electronic copy of the Writ and the Ex Parte Order. 30.Third, insofar as Binance is concerned:-
C2. Exchange of correspondence after the Ex Parte Hearing 31.On 26 November 2022, Jacque Law send an email to Binance, attaching a copy of the Ex Parte Order granting the Mareva injunction. However, the said email made no mention of the proprietary injunction; and that the email never drew the attention of Binance of the fact that the Ex Parte Order consisted of a proprietary injunction over the TV6 Address. 32.On 27 November 2022, Henry Yu & Associates (“HYA”), the Plaintiff’s solicitors in this Action, sent to Binance a letter (transmitted through online submission platform). In this letter, HYA informed Binance that the Ex Parte Order was granted by the Duty Judge and that a sealed copy of the Ex Parte Order would be sent on the next working day, i.e. 28 November 2022. In this letter, the Plaintiff demanded Binance to freeze all transactions relating to the TV6 Address of and up to 5,918,806.406 units of USDT. 33.On 28 November 2022, Binance wrote back to Jacque Law and HYA. In this letter, Binance complained, inter alia, that the Plaintiff omitted to place before the Duty Judge the material communications between the Plaintiff’s camp and Binance; and that the Plaintiff failed to make full and frank disclosure before the Duty Judge. Binance also invited the Plaintiff to confirm by 30 November 2022 that the Plaintiff will not require the assets in the TV6 Address to be frozen; and that the Plaintiff will take the necessary steps to vary and/or discharge the Order insofar as it relates to the TV6 Address, failing which Binance will take out any necessary application. C3. Inter-partes Summons dated 6 December 2022 34.Whilst the Plaintiff had obtained the Ex Parte Order on 25 November 2022 (Friday) and he undertook to effect service of the court documents as soon as practicable, for reasons which still remain unknown, the Plaintiff only took out the inter-partes summons on 6 December 2022. The hearing was fixed to be heard before Madam Justice Cheng on 9 December 2022 (Friday). 35.In the Plaintiff’s Summons dated 6 December 2022, he applied for the continuation of the Ex Parte Injunction. In addition:-
36.For the purpose of the hearing on the Return Date, the Plaintiff filed Leung’s 2nd Affirmation on 7 December 2022 (“Leung 2nd”). It is significant to note the following:-
37.On 7 December 2022, the Plaintiff also filed the Affirmation of Chong Man Yee (“Chong 1st”), the solicitor acting for the Plaintiff. Chong 1st was filed in support of the Plaintiff’s application for joinder of the “Binance Operators” and discovery against them. Amongst other things, it is pertinent to note that it was exhibited to Chong 1st as “CMY-4” certain correspondence between the Plaintiff’s solicitors and Binance from 27 November 2022 to 30 November 2022 in respect of the Plaintiff’s request made to Binance for discovery. I will come back to this exhibit, when, at the hearing on 9 December 2022, Cheng J raised her concern that the Plaintiff failed to make full and frank disclosure before the Duty Judge in respect of the pre-action correspondence between Jacque Law and Binance. C4. Hearing before Cheng J on 9 December 2022 38.The Plaintiff’s Summons dated 6 December 2022 was heard before Cheng J on 9 December 2022. At this hearing, the Plaintiff was represented by Mr Laurence Li SC, leading Mr Sik Chee-ching. The 1st and 2nd Defendants were not represented and did not appear. Ms Sharon Yuen appeared for Binance Holdings Ltd (“BHL”). BHL was at all material times and is still a company incorporated in the Cayman Islands. It is BHL’s case that it can procure the platform of Binance to comply with any order of the Court. 39.I was provided with a transcript of the said hearing. For present purposes, it is necessary to set out in some detail as to what had happened at this hearing, as Cheng J raised some serious concerns about the Plaintiff’s ex parte application before the Duty Judge. 40.First, Cheng J raised the concern about service.
41.Second, Cheng J was concerned about the question of whether there was material non-disclosure about service at the ex parte hearing. When the Duty Judge was asked to grant to the Plaintiff leave for substituted service on the basis that the 1st and the unknown 2nd Defendants could not be located, the Duty Judge was not told that there would not be service on some of the Defendants. 42.Third, insofar as the platform Binance is concerned, Her Ladyship raised the concern that there was material non-disclosure on the part of the Plaintiff.
43.In those circumstances, Her Ladyship made an order for the Plaintiff to file affirmation evidence to explain the matters as indicated in the hearing; and that the Plaintiff’s Summons dated 6 December 2022 was adjourned to 23 December 2022 before the Summons Judge. As BHL did not raise any objection, Cheng J also made an order that the ex parte worldwide Mareva and proprietary injunction be continued until 23 December 2022. C5. The Plaintiff’s Summons dated 19 December 2022 to amend the 6 December 2022 Summons 44.Shortly before the hearing on 23 December 2022, the Plaintiff took out another summons on 19 December 2022 for leave to amend the 6 December 2022 Summons. In this summons, the Plaintiff sought leave to amend the scope of discovery sought against the 3rd Defendants (should leave be granted to join the “Binance Operators” as the 3rd Defendants). 45.On 19 December 2022, the Plaintiff filed the 3rd Affirmation of Chong Man Yee (“Chong 3rd”) in support of this summons for leave to amend and to address the matters as indicated at the Hearing before Cheng J. 46.On 21 December 2022, the Plaintiff filed his own Affirmation (“Wang 1st”) to address those matters raised at the hearing before Cheng J.
47.Later, on 22 December 2022, the Plaintiff also filed Chong’s 4th, stating that the 1st Defendant was served the Court Documents on 19 December 2022. Subsequently, Chong’s colleagues received a message from the 1st Defendant via wechat on 22 December 2022, indicating that he would not attend the hearing on 23 December 2022. C6. Hearing before Au-Yeung J on 23 December 2022 48.On 23 December 2022, the Plaintiff and BHL attended before Madam Justice Au Yeung sitting as the Summons Judge. At this hearing, BHL was represented by Ms Elizabeth Cheung and Ms Sharon Yuen. 49.At this hearing, the Plaintiff applied for leave to amend the 6 December 2022 Summons; for leave to join the “Binance Operators” as the 3rd Defendants in this Action; and for the continuation of the Ex Parte Injunction until further order. The Plaintiff also applied for ancillary orders for disclosure against the 2nd and 3rd Defendants. 50.BHL sought to intervene and to oppose the continuation of the proprietary injunction and the mareva injunction, insofar as the same relates to the TV6 Address. 51.Having heard the submissions from Counsel for the Plaintiff and for Counsel for BHL:-
52.Eventually, the hearing of the substantive arguments of the Plaintiff’s Amended Summons was adjourned to 24 April 2024 with 1 day reserved. 53.Pursuant to the Order of Au-Yeung J, the parties have filed affirmations. C7. The Plaintiff’s Summons dated 8 April 2024 54.On 8 April 2024, the Plaintiff took out yet another summons for leave to file the 3rd Affirmation of Wong Man Yee (“Wong”) dated 5 April 2024 (“Wong 3rd”). Wong was at the material times the chief executive officer of UDomain. In summary, the Plaintiff sought to adduce, inter alia, evidence relating to some proceedings in the United States brought by the US Securities and Exchange Commission against BHL and its chief executive officer Zhao Changpeng and some articles on some websites relating to Binance. D. Hearing before this Court on 24 April 2024 55.At the hearing before this Court on 24 April 2024, the Plaintiff was represented by Mr. Laurence Li SC, leading Mr. Sik Chee Ching. BHL was represented by Ms. Elizabeth Cheung and Ms. Sharon Yuen. 56.After receiving the parties’ skeleton submissions, I drew the parties’ attention to a few cases in connection with the Plaintiff’s applications for leave to file Wong 3rd, the Plaintiff’s application for joinder of the “Binance Operators” and the Plaintiff’s application for continuation of the worldwide Mareva injunction application. D1. The problem relating to the Plaintiff’s Summons for leave to adduce Wong 3rd 57.On the Plaintiff’s application for leave to file Wong 3rd, Mr Li SC argued that such evidence was uncontroversial and that BHL had no locus to make any opposition. 58.The Plaintiff’s application was opposed by BHL, contending that there was unexplained gross delay on the part of the Plaintiff in adducing such evidence; and that the evidence is irrelevant and immaterial. Ms Cheung cited Jose Miranda DA Costa Junior v Lorenzo Yih (unrep) HCA 156/2010, 28 April 2014, at §§8-13, per DHCJ Le Pichon and argued that, in the post-CJR era, it is inconceivable that leave would be granted in the absence of any genuine extenuating circumstances. 59.Irrespective of whether BHL had any locus to be heard, before the hearing, I had referred the parties to a recent decision of Deputy High Court Judge H. Au-Yeung (as he then was) in Tian Hongmei v. Zhang Wei [2023] HKCFI 2675. In Tian Hongmei (above), it was held that, in cases where a party sought to admit further evidence when there was an order prohibiting the filing of further evidence without leave of the court, Order 32 rule 11A(4) applied and hence an applicant who sought to admit further evidence would have to satisfy the 3 requirements in Ladd v. Marshall [1954] 1 WLR 1489. I raised with Mr Li SC if Tian Hongmei applies to the present case in light of the Order made by Madam Justice Au-Yeung on 9 December 2022 (when Her Ladyship made an order that there be no further affirmation without leave of the court); and if so, whether the Plaintiff could satisfy the 3 requirements set out in Ladd v Marshall. 60.After taking instructions, Mr Li SC asked for leave to withdraw the Plaintiff’s Summons dated 8 April 2024 with costs reserved. D2. The Plaintiff’s application for joinder of “Binance Operators” 61.On the Plaintiff’s application for joinder of the “Binance Operators”, Mr Li SC submitted that Binance[3] had been evasive about the legal entities operating the Binance platform and the whereabouts of those entities. Mr Li SC also complained that Binance had deliberately avoided defining the entity which was responsible for its operations. 62.Mr Li SC further argued that BHL should not be entitled to intervene in this Action, when BHL’s connection with Binance was unknown and BHL has not adduced any evidence to show why it has interest to intervene. Mr Li SC argued that it is not BHL’s position that it falls within the definition of the 2nd Defendants. Instead, BHL’s position is merely that it can procure the Binance platform to comply with the injunction order. 63.On the other hand, Ms Cheung argues that the Plaintiff’s application to join “Binance Operators” should be dismissed, for the description of “Binance Operators” was incapable of accurately referring to a specific entity or company; and that BHL has voluntarily come forward and identified itself as an entity which can procure Binance to comply with orders made by the Court. 64.Whilst I see the force in Mr Li SC’s submissions that BHL should not be entitled to intervene (when it has not adduced any evidence to show why it has the legal interest to justify intervention in this Action), I expressed my concern about the Plaintiff’s joinder application. 65.First, even if Mr Li SC was right that BHL has no interest to seek to be joined as the 2nd Defendants, that may not be end of the matter, for the Plaintiff would still want to proceed with his application for joinder of the “Binance Operators”. Assuming if I were to allow the Plaintiff’s application for joinder of the “Binance Operators” as the 3rd Defendants, BHL may subsequently come back and seek to intervene by demonstrating that it is one of the “Binance Operators”. 66.Second and more importantly, I expressed to Mr Li SC about the difficulties of the Plaintiff’s joinder application. 67.In the Plaintiff’s Amended Summons, the 3rd Defendants that the Plaintiff sought to join were described as “Binance Operators (being all parties that run Binance, including but not limited to legal persons (including Binance UAB), Unincorporated Organisations and Teams that provide Biance Services and are responsible for such services)”. The addresses of these Binance Operators were stated in the Draft Amended Writ as unknown. I believe that the Plaintiff’s description of the 3rd Defendants is based upon the terms of use (“Terms of Use”) of Binance, which reads, inter alia, as follows:-
68.In light of that, before the hearing, I referred the parties to the Hong Kong Court of Appeal’s decision in Billion Star Development Ltd v Wong Tak Chuen [2013] 2 HKLRD 714, §§69-75, per Lam JA (as Lam PJ then was); and also the English Court of Appeal’s decision in Canada Goose UK Retail Ltd v Persons Unknown [2020] 1 WLR 2802. In particular, the English Court of Appeal (Sir Terence Ehterton MR, David Richards and Coulson LJJ) set out the procedural guidelines applicable to proceedings for interim relief against “persons unknown”. At paragraph 82[1], [2] and [4], the English Court of Appeal said this:-
69.At the hearing, I raised with Mr Li SC as to how the Plaintiff can join the “Binance Operators” as unknown defendants, when in fact at least the identity of “Binance UAB” was known and identified in Binance’s Terms of Use. Mr Li SC did not dispute that “UAB” was the abbreviation of the Lithuanian words for a private limited company; and “Binance UAB” in Binance’s Terms of Use was a limited company incorporated in Lithuania. 70.After taking instructions from the Plaintiff, Mr Li SC informed this Court that the Plaintiff would seek leave to withdraw his application for joinder of the “Binance Operators” and the consequential disclosure application against them. Instead, the Plaintiff asked the Court for a direction that the Plaintiff would within 14 days from the date of the order to be made to take out a new application for joinder and the disclosure application. I acceded to Mr Li SC’s request that the costs be reserved. D3. Concerns about the worldwide mareva injunction relating to the TV6 Address 71.On the Plaintiff’s application for the continuation of the worldwide mareva injunction (relating to the TV6 Address), before this hearing, I had also drawn the parties’ attention to the judgment of HH Judge Pelling QC (sitting as a Judge of the Commercial List in the English High Court) in Fetch.AI Ltd & Anr v. Persons Unknown Category A & Ors [2021] EWHC 2254 (Comm). 72.Similar to the present case, in Fetch.AI Ltd (above), the claimants made an Ex Parte application against certain unknown persons and entities including Binance Holdings Ltd and Binance Markets Ltd for a proprietary injunction, a worldwide freezing injunction and ancillary information disclosure. The first respondents were described as the “unknown persons”. HH Judge Pelling QC said this at [5]-[6]:-
73.In light of the aforesaid observations in Fetch.AI (above)[4], I raised with Mr Li SC as to why a worldwide mareva injunction could be made against the unknown 2nd Defendants in the present case. As rightly submitted by Ms Elizabeth Cheung for BHL, in the skeleton argument dated 19 April 2024 filed for the Plaintiff, the Plaintiff has not even developed any arguments as to why the ex parte worldwide Mareva injunction should be continued against the TV6 Address. Further, insofar as the TV6 Address is concerned, it is not clear as to the evidence showing that there were risks of dissipation of assets. 74.After taking instructions from the Plaintiff, Mr Li SC informed this Court that the Plaintiff accepted that the worldwide Mareva injunction Order (as contained in paragraph 6 of the Duty Judge’s Order) should be set aside and discharged. I acceded to Mr Li SC’s request with costs reserved. D4. Adjournment of the hearing to 19 September 2024 75.As the parties had taken time for taking instructions on various matters, there was not sufficient time for hearing the substantive arguments. As such, the parties agreed that the substantive arguments should be adjourned to a date to be fixed. 76.Eventually, as per the parties’ requests, I adjourned the hearing to 19 September 2024 and gave further directions for the further conduct of the matter, so as to allow the Plaintiff time to take out the new application for joinder and discovery and for the parties to file evidence in that connection. E. Nest Services Ltd (“Nest”) sought to intervene and the Plaintiff’s application to join Nest 77.After the 24 April 2024 hearing, the Plaintiff applied for and obtained extension of time for taking out the joinder application. However, despite the grant of the time extension, for reasons unknown, the Plaintiff eventually did not take out any application for joinder of any additional defendant. 78.On 12 September 2024, Nest Services Ltd (“Nest”) took out a Summons leave to be heard at the hearing on 19 September 2024. An Affirmation of Lee Yin Lok Enoch dated 12 September 2024 was filed in support of Nest’s Summons. 79.Nest is a company incorporated in the Republic of Seychelles on 31 May 2023. It is Nest’s case that it meets the definition of the 2nd Defendants, when, after certain corporate restructuring of the group of companies operating the Binance platform, it has become an operator of the Binance platform. Nest’s application for leave to intervene was not opposed by the Plaintiff. 80.On 16 September 2024, the Plaintiff took out a summons for leave to join Nest as the 3rd Defendant. Under the summons, the Plaintiff also sought against Nest disclosure of certain information, effectively the same as those that the Plaintiff previously sought against the “Binance Operators”. F. Hearing before this Court on 19-20 September 2024 81.At this hearing, the Plaintiff was represented by a new team of counsel, with Mr. Wayne Walsh SC leading Mr Fergus Tam. Mr. Walsh SC adopted the skeleton submissions prepared by Mr. Laurence Li SC and Mr. Sik Chee Ching filed at the hearing on 24 April 2024. Ms. Elizabeth Cheung and Ms. Sharon Yuen appeared for Nest. 82.Nest did not oppose to the Plaintiff’s Summons for joinder. As such, I granted the Plaintiff leave to join Nest as the 3rd Defendant and to leave to amend the Writ accordingly. 83.Similar to the position of BHL, Nest opposed the continuation of the proprietary injunction insofar as the TV6 Address is concerned and it further contended that the said proprietary injunction should be discharged, when there was no justification for the Plaintiff to proceed on an ex parte basis and that the Plaintiff was guilty of serious material non-disclosure. 84.As such, the matters that require determination are:-
G. Interlocutory proprietary injunctions 85.It is common ground between the parties that an applicant for a proprietary injunction has to show (1) that there is a serious issue to be tried in respect of his proprietary claim; (2) that the balance of convenience favours the grant of an injunction and (3) it is just and convenient to grant the injunction. It is not necessary to show that there is a risk of dissipation: Zhang Yan & Ors v ASA Bullion Ltd & Ors [2019] HKCFI 179 at §11, per Recorder Fung SC (as he then was). 86.The Plaintiff further argues that, in the context of a proprietary claims, the Court should readily find that the balance of convenience favours the preservation of property, including funds. The Plaintiff relies upon Pacific Rainbow International Inc v Shenzhen Wolverine Tech Ltd (unrep) HCA 3023/2016, 2 May 2017, at §37, per Deputy High Court Judge Douglas Lam SC. 87.However, recently in 李明實, 方壘 and 史洪源 G2. Serious issues to be tried 88.For the Plaintiff, Mr Walsh SC submitted that there is at least a serious issue to be tried that the stolen cryptocurrencies in the TV6 Address was held on constructive trust for the Plaintiff. It is the Plaintiff’s case that he can either trace or follow the stolen cryptocurrencies in the TV6 Address. 89.On the other hand, Ms Cheung on behalf of Nest argued that following is not possible because of how the Binance platform operates. It is the case of Nest that it has the defence of bona fide purchaser for value without notice. 90.Both parties have advanced serious arguments. I agree with Mr Walsh SC that there are serious issues to be tried, such as whether the Plaintiff is entitled to follow or trace into the TV6 Address and also whether Binance is entitled to rely on the defence of bona fide purchaser for value without notice. 91.Nonetheless, that is not the end of the matter, for the real question in this case remains whether the proprietary injunction against the TV6 Address should be discharged and set aside on the basis that the Plaintiff should not proceed with the application on an ex parte basis without giving notice to Binance; and whether the proprietary injunction against the TV6 Address should be set aside (insofar as Binance is concerned) on the basis of material non-disclosure on the part of the Plaintiff. 92.I now come to address these important questions. I would also address the question of balance of convenience when it comes to the question of whether the proprietary injunction, if discharged, should be regranted. H. Whether the proprietary injunction should be set aside H1. Ex parte application: the applicable principles 93.The applicable principles on when an ex parte application can be made are well established. The relevant ones may be summarized as follows. 94.It is trite that ex parte without notice applications are only justified in the most exceptional circumstances, where extreme secrecy or extreme urgency (such that five minutes notice cannot be given) so requires. In Slik Hong Kong v. Gerald Evans (unrep) HCA 1424/2005, 25 July 2005, Mr Justice Lam (as Lam PJ then was) helpfully summarized the principles as follows:-
95.When there is no justification to make the application ex parte, the Court may set aside the order obtained ex parte on this ground alone: Luck Continent Ltd v Leonora Yung (unrep) CACV 42/2010, 22 October 2010, at §19; Nico Constantin Antonius Samara v. Stive Jean-Paul Dan also known as Steve Jean-Paul Dan, Stive Jean Paul Dan and Steve Jean Paul Dan [2018] HKCFI 1022, at §§22-26, per Recorder Yvonne Cheng SC (as Cheng J then was). H2. The duty to make full and frank disclosure: applicable principles 96.It is trite law that, if one proceeds to make an ex parte application, the applicant has the duty to make full and frank disclosure. The duty of full and frank disclosure extends but only to factual but also to legal and procedural aspects of the case: Memory Corporation Plc v. Sidhu (No. 2) [2000] 1 WLR 1443 at 1454H-1455E, 1460A; East Asia Satellite Television (Holdings) Ltd v. New Cotai LLC [2011] 3 HKLRD 734 at §82, per Tang Acting CJHC. 97.In Aleksandr Narimanovich Kushaev v Greenly Holdings Ltd (in liq) [2019] HKCFI 2745, Recorder Manzoni SC helpfully summarized the principles in §69 of his judgment:-
98.Further, material non-disclosure is not about the subjective intent of the applicant but the objective fact of non-disclosure. In Yau Ka Po v Town Planning Board (unrep) HCAL 67/2015, 14 June 2016, Au-Yeung J said this at §§31-32:-
99.Having said that, the duty to disclose material facts and identify possible defences does not extend to a detailed analysis of every possible point which may arise. The defendant must identify with clarity, and if necessary restraint, the failures of which it complains, rather than adopting a scatter gun approach: Tsai Lee Ting & Anr v. Best Leader Precious Metals Ltd & Ors [2023] HKCFI 2124, at §72, per Cheng J, quoting National Bank Trust v. Yurov & Ors [2016] EWHC 1913 (Comm) at [19]. 100.Further, in A1 v R1 [2021] HKCFI 650, Colman J emphasised that full and frank disclosure is not made simply by placing the document somewhere in a bundle of exhibits to an affidavit, even if there is some glancing reference to that document in the affidavit itself. The greater the amount of material placed before the court, the more likely the court will need – and is entitled to – clear sign-posting to the various aspects of that material (which has been organised in a logical way, making it easier to find, follow and understand). That is all the more important when an applicant is made ex parte. The duty means that the party should specifically draw the attention of the court those matters, and do so fully as well as frankly. 101.On the question of material non-disclosure, Leading Counsel for the Plaintiff argued that the Court should bear in mind that legal proceedings relating to cryptocurrency are still novel and there was urgency involved. Yet, these are no justification for any lesser standard to apply in the present case. This is illustrated in the recent decision in Jahangir Piroozzadeh v. Persons Unknown & Ors [2023] EWHC 1024 (Ch). 102.In Jahangir Piroozzadeh (above), a without notice application was made by the claimants restraining defendants from dealing with the claimant’s cryptocurrencies transferred into the eighth and ninth defendant exchanges’ hop wallets. Apart from certain unknown defendants, BHL was named as the 8th defendant; and an ex parte order was made requiring BHL to preserve the claimant’s cryptocurrencies or its traceable proceeds. In holding that the injunction should be discharged against BHL, Trower J said as follows:-
103.In any event, as I shall elaborate below, it is my ruling that any urgency in the present case is no justification for the Plaintiff to proceed on an ex parte basis without giving notice to Binance. H3. No justification for the Plaintiff to proceed on ex parte basis vis-à-vis Binance 104.Bearing in mind the legal principles set out above, I shall first consider the question of whether the Plaintiff was justified in proceeding with the application to the Duty Judge on an ex parte basis. 105.In Leung’s Affirmation, the Plaintiff sought to justify that the application was made ex parte on the basis of secrecy and urgency. 106.First, the Plaintiff prayed in aid the fact that there was theft of the cryptocurrencies from the Plaintiff’s Wallets and that called for secrecy. I disagree. The fact that the Plaintiff may wish to proceed on an ex parte basis against the 1st Defendant itself is no justification for the Plaintiff not to give notice to Binance about its application for interlocutory injunction. Further, there was no evidence or argument before the Duty Judge to suggest that tipping off was a material risk. In Jahangir Piroozzadeh (above) at §§15-18, Trower J observed that one solution to any such problem was to proceed against the fraudsters and serve any order on the exchange as a non-respondent first; and if specific relief was later needed, it could have been sought later in response to any reaction from the exchange. 107.Second, the Plaintiff contended that there was urgency in the matter, when Binance’s temporary freezing measures would only expire on 28 November 2022. There is no substance in this argument. Whilst Binance stated in the email that any temporary measures would expire on 28 November 2022, the urgency was not such that the Plaintiff can choose to proceed without giving any advanced notice to Binance: cf Slik Hong Kong (above) at §§5-6. 108.Third, the Plaintiff also contended that it was impracticable to take out an inter partes summons when the identifies of the recipients were not known. I disagree. This is no justification for the Plaintiff to proceed with ex parte without notice to Binance, when the Plaintiff knew from the pre-action correspondence with Binance that the TV6 Address was a hot wallet, which consisted of pooled funds deposited by various users of the Binance platform. 109.At the hearing, Mr Walsh SC fairly accepted that the Plaintiff should not have proceeded with the application before the Duty Judge on an ex parte basis. 110.I now come to the question of material non-disclosure. In the present case, I accept the arguments of Ms Cheung that there was material non-disclosure on the part of the Plaintiff. 111.First, both Leading Counsel acting for the Plaintiff accepted that the pre-injunction correspondence between Jacque Law and Binance was material and the Plaintiff should have disclosed to the Duty Judge such correspondence. 112.Second, there was material non-disclosure about the fact that the nature of the TV6 Address. Whilst Mr Walsh SC argued that it was not material, I disagree. This is highly relevant and material to the Court in considering if any injunction should be granted against the TV6 Address, when that address consisted of pooled funds deposited by various users of the Binance platform. 113.Third, Ms Cheung submitted that there was material non-disclosure in respect of the possible defences of Binance. I agree. As a matter of fairness, it would have been incumbent upon the Plaintiff to make full and frank disclosure about the nature of the hot wallet; and the legal defence of bona fide purchaser for value without notice that Binance had advanced. 114.In Jahangir Piroozzadeh (above) at §§26-37, Trower J held that the failure to present this at the without notice hearing amounted to “very important non-disclosure”. Further, there was no sufficient distinction drawn between the defendants (who misappropriated the cryptos) on the one hand and the exchanges on the other, which would make it easy for a court on an application of this sort to allow all the defendants to be lumped into the same box. Trower J emphasized that it is of particular importance for the claimant to ensure that the court should be fully apprised of the clear distinction between the separate positions of the various defendants. 115.Fourth, there is force in Ms. Cheung’s submission that the material non-disclosure here was serious and extensive. There was material non-disclosure not only before the Duty Judge, but also at the hearing before Cheng J.
116.The abuse of process of the ex parte procedure and the material non-disclosure on the part of the Plaintiff demonstrates that the proprietary injunction should be set aside. The remaining question is whether an interlocutory proprietary injunction should be re-granted. I. Whether the interlocutory proprietary injunction should be re-granted 117.On the discretion to regrant injunctions, the applicable principles are set out in Excel Courage Holdings Ltd v Wong Sin Lai [2014] 3 HKLRD 642 (Lam VP and Kwan JA, as they were). At §§56-58, Kwan JA (as she then was) said this:-
118.In Fantastic State Ltd v. Tien’s Organic Farm [2019] 3 HKLRD 438 at §40, Lam VP held that it was relevant to consider if the non-disclosure was innocent or deliberate; and the excuse for such non-disclosure. Normally, a court would expect affidavit evidence to account for the non-disclosure. 119.Mr Walsh SC has no disputes on those principles. In fact, he cited Platinum Century Ltd & Ors v. Sunfund Asia Capital Holdings Co Ltd & Ors [2022] HKCFI 3334 at §30, when DHCJ Alexander Stock SC applied those principles summarized in Excel Courage (above). 120.In considering whether the injunction should be re-granted, I bear in mind that the general rule is the Court should discharge the order obtained in breach and refuse to renew the order until trial; and that the jurisdiction to continue or re-grant the order should be exercised sparingly. 121.On whether I should exercise the discretion to regrant the proprietary injunction, at the hearing, I asked Mr Walsh SC to specifically identify those matters that the Plaintiff relied upon to justify the re-grant. Mr Walsh SC contended that the injunction should be re-granted on the basis of 3 matters:-
122.This is opposed by Ms Cheung. She argued that no proprietary injunction should be re-granted, when the Plaintiff has no reasonable explanation that the non-disclosure was innocent; and that the Plaintiff has no means to make good his undertaking as to damages, when the Plaintiff (a foreign party) has only provided a correspondence address in Portugal and did not give any evidence on his financial means or assets in Hong Kong (so as to show that he would be good for his undertaking as to damages). 123.Dealing with Mr Walsh SC’s third point first, I do not think that the mere fact that the matter involves a theft by itself would justify the re-grant. 124.On Mr Walsh’s second point, whilst the discharge of the injunction would have serious consequences for the Plaintiff, this is not the end of the matter, for the Court has to balance it against the public interest in the administration of justice. As reminded in Excel Courage, the court should not allow the merits of the applicant’s case to undermine the policy objective of the principle in requiring full and frank disclosure. Further, as Ms Cheung submitted, there is no reason why a party abusing the process of the court is entitled to keep the fruits obtained as a result of the abuse. 125.That is the reason why it is important to consider the degree and extent of the culpability with regard to non-disclosure. Mr Walsh SC argued that the non-disclosure was innocent.
126.Ms Cheung argued that there was no satisfactory explanation as to why such correspondence was not drawn before the Duty Judge at the hearing on 25 November 2022 or Cheng J at the hearing on 9 December 2022. 127.With respect, I disagree with Mr Walsh SC. I am not satisfied that the Plaintiff has provided sufficient evidence or reasonable explanation to persuade me that the non-disclosure was innocent.
128.In addition, in approaching the question of regrant, it is inevitable for the Court to consider the question of balance of convenience. In the present case, when the Plaintiff is a foreign plaintiff, one would expect that there should be evidence of his assets and means to demonstrate that he is good for his undertaking as to damages. In fact, one would expect normally that there should be such evidence before the Duty Judge. Yet, there was still no such evidence before this Court even at the hearing on 19 September 2024.[5] 129.Faced with this argument advanced by Ms Cheung, the Plaintiff belatedly took out yet another summons on 20 September 2024 for leave to file Chong 5th Affirmation (which exhibits a draft of the Plaintiff’s 4th Affirmation), purporting to give evidence on the financial means of the Plaintiff in making good the undertaking as to damages. This application was opposed by Nest. After hearing the parties’ submissions, I had no hesitation in dismissing this application:-
130.As such, there is nothing before the Court to demonstrate that the Plaintiff is good for his undertaking as to damages. Nor is there any offer from the Plaintiff to provide any fortification of any undertakings. This is yet another powerful factor that militates against the exercise of the discretion to re-grant the injunction sought by the Plaintiff. 131.The general rule is that the injunction should be discharged for material non-disclosure. The discretion to re-grant is to be exercised sparingly. As explained above, despite the valiant attempt on the part of Mr Walsh SC, I am not prepared to exercise the discretion to re-grant the proprietary interlocutory injunction in favour of the Plaintiff. 132.At the hearing, Mr Walsh SC asked that the Plaintiff may pursue the matter further should I discharge the proprietary injunction; and he requested that some interim measures be imposed should I discharge the injunction. 133.With some reluctance, I would make an order that the discharge of the proprietary injunction would not come into effect until the expiry of 14 days from the date of this judgment or further order. This would give some time for the Plaintiff to pursue the matter further if so advised. J. Disposition and Conclusion on the proprietary injunction 134.In conclusion, I make the following Order:-
K. Whether disclosure should be ordered in favour of the Plaintiff against Nest 135.The remaining question is whether discovery should be ordered in favour of the Plaintiff against the unknown 2nd Defendants and also Nest. 136.The jurisdiction that the Plaintiff invoked is the Bankers Trust jurisdiction. The Plaintiff’s submissions can be found in the skeleton argument dated 20 December 2022 for the hearing on 23 December 2022 before Au-Yeung J. K1. Disclosure against the unknown 2nd Defendants 137.The Plaintiff’s application is made on the basis that the Court can grant ancillary disclosure order to enable the Plaintiff to administer and enforce the proprietary injunction; alternatively that the Plaintiff can invoke the Bankers Trust jurisdiction. 138.The principles for the grant of a Bankers Trust orders are set out in A Co v B Co [2002] 3 HKLRD 111 at 117F-118B:-
139.Insofar as the 2nd Defendants are concerned, I raised with Mr Walsh SC as to how the jurisdiction is to be exercised here against the 2nd Defendants when their identity remains unknown. It is also not clear if any of those unknown 2nd Defendants would comply with the order. In this connection, Mr Walsh SC referred me to the decision of DHCJ Richard Salter KC in Tippawan Boonyaem v Persons Unknown Category (A) and Ors [2023] EWHC 3180 (Comm). The learned judge initially shared the same scepticism about the usefulness of making such order. But eventually His Lordship made such disclosure order against those unknown defendants. With some reluctance, I am prepared to make an Order in terms of paragraph 4 of the Plaintiff’s Amended Summons dated 25 April 2024. K2. Disclosure sought against Nest as the 3rd Defendant 140.Insofar as Nest is concerned, the Plaintiff seeks discovery against Nest in respect of the following addresses (“Binance Deposit Addresses”) the following information:-
141.It was argued for the Plaintiff that such orders would enable the Plaintiff to trace his assets: Bankers Trust v. Shapira (above) at 1282B-E. The Plaintiff also cited Ion Science Ltd v. Persons Unknown (unrep), 21 December 2020, in which a Bankers Trust Order was granted against Binance in the capacity of a cryptocurrency exchange. 142.At the hearing, Ms Cheung raised some objection – contending that the disclosure should not be ordered when the interlocutory proprietary injunction is to be discharged. However, with respect, even if the proprietary injunction is to be discharged and that the Plaintiff may not have any basis to seek any disclosure ancillary to the injunction, that is not the end of the matter, for the Plaintiff could still invoke the Bankers Trust jurisdiction. In fact, as transpired from the parties’ correspondence placed before the Court, the position hitherto adopted by BHL (represented by the same team of counsel and solicitors) has been that it has been amenable to provide the bulk of the disclosure sought by the Plaintiff, save and except the information in respect of the Sixth Address. The objection is that the Sixth Address concerns dealings of funds of another exchange. Ms Cheung argued that provision of advance notice to that other exchange is crucial, when bona fide parties such as banks are asked to give disclosure to assist victims of asset recovery, citing Asia Asset Management (Cayman) Ltd v. Dipper Trading Co Ltd [2019] 3 HKC 145 at §§11-26, per DHCJ Maurellet SC. 143.However, I agree with Mr Walsh SC’s submission that, insofar as the Sixth Address is concerned, its position here is effectively the same as the other 5 addresses against which disclosure is sought. 144.In the circumstances, I am minded to grant the disclosure sought by the Plaintiff. Previously, there were some disputes about the wordings of the order. But Mr Walsh SC confirmed in his supplemental skeleton that the Plaintiff is amenable to the changes previously proposed – that the relevant wordings be changed to “use the best endeavours and to the extent the information is available”. In the premises, on the basis of the undertaking of the Plaintiff to indemnify Nest in respect of its costs of complying with any disclosure order as per the usual practice, I direct that an order be made in terms of para 1.3 of the Plaintiff’s Summons dated 16 September 2024. I also give the parties liberty to apply. 145.Lastly, it remains for me to thank counsel for their assistance.
On 24 April 2024 Mr Laurence Li SC, leading Mr Sik Chee-Ching, instructed by Henry Yu & Associates, for the Plaintiff The 1st Defendant: Zhuo Yihao (卓一灝), unrepresented and absent The 2nd Defendant: An unknown person or persons who has access to or operates the addresses as per part 2 of schedule 1 of the indorsement of claim, Absent Ms Elizabeth Cheung and Ms Sharon Yuen, instructed by Herbert Smith Freehills, for Binance Holdings Ltd On 19-20 September 2024 Mr Wayne Walsh SC, leading Mr Fergus Tam, instructed by Henry Yu & Associates, for the Plaintiff The 1st Defendant, unrepresented and absent The 2nd Defendants, unrepresented and absent Ms Elizabeth Cheung and Ms Sharon Yuen, instructed by Herbert Smith Freehills, for the 3rd Defendant [1] According to the report made to the Hong Kong Police, the Plaintiff holds a Vanuatu passport. But in the email from Jacque Law (his Singapore lawyers, as defined below) dated 22 November 2022 (1.19 am), the Plaintiff was said to be a holder of a Cambodian passport. [2] The Plaintiff’s 6 December 2022 Summons was only amended on 25 April 2024 (the “Amended Summons”). [3] At this hearing, without joining any particular parties, Mr Li SC simply used the abbreviation of “Binance” to refer to the Binance platform. [4] For the sake of completeness, I should also add that, in Fetch.AI Ltd (above), in considering if a Bankers Trust order should be made against BHL, HH Judge Pelling QC observed at §26 that the material generated by the Binance Group concerning which entities conduct what business was remarkably opaque, and that it was outside the scope of any regulatory regime in England and Wales. However, it is not the Plaintiff’s case here that any such matters could justify any ex parte application against Binance. In fact, in Jahangir Piroozzadeh v Persons Unknown [2023] EWHC 1024 (Ch) at §§17-18, Trower J was of the view that this did not justify any without notice application against BHL on the facts of that case. [5] I note that there is a line of cases that, if an applicant’s financial position is such that, viewed fairly, it may be said to raise realistic doubts as to his ability to honor the cross-undertaking, it is incumbent upon the applicant to make full and frank disclosure of his financial position to the ex parte judge. But as Nest’s discharge application did not cover this ground, I say no more about it. But this remains relevant to the Court’s consideration as to whether the injunction should be regranted. |
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