Beijing Songxianghu Architectural Decoration Engineering Co Ltd v. Kitty Kam also known as Wang Yuzhi

CACV 495/2024 & CAMP 247/2024

(Heard together)

On appeal from [2024] HKCFI 3068

[2025] HKCA 1134

CACV 495/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 495 OF 2024

(ON APPEAL FROM HCA NO 1289 OF 2022)

____________

____________

CAMP 247/2024

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 247 OF 2024

(ON AN INTENDED APPEAL FROM HCA NO 1289 OF 2022)

____________

____________

(Heard together)

_______________________________________

R E A S O N S    F O R    J U D G M E N T

________________________________________

Hon G Lam JA (giving the Judgment of the Court):

Introduction

1.This is the defendant’s appeal against an unless order and the partial judgment entered in the action against her upon non-compliance with the unless order. The unless order required the defendant to pay into court a sum of HK$170.96m kept in a bank account of the defendant in Singapore. The plaintiff asserts a proprietary claim to the money.

2.The defendant brought an appeal (CACV 495/2024) against both the unless order and the judgment. On a contingent basis, in case leave to appeal was needed in relation to the unless order, she also made an application for leave in this court (CAMP 247/2024), having failed to obtain leave from the judge. Directions were given for a combined rolled-up hearing. At the conclusion of the arguments, we dismissed the appeal with costs and made no order on the leave application. We reserved the question of the basis of taxation of costs, which is dealt with at the end of these reasons for judgment.

Background

3.To put the appeal in context, it is necessary to set out the background to the litigation and some procedural history.

The parties and the transactions

4.The plaintiff is a company incorporated in Mainland China. In the dealings with the defendant described below, it was represented by Mr Wang Guiwu, said to be its overseas investment consultant and authorised representative.

5.The defendant, Ms Kitty Kam (“Kam”), whose former name was Wang Yuzhi, is a businesswoman and the daughter of Mr Wang Bin, a prominent businessman in Mainland China prior to his conviction there on 12 September 2023 for serious bribery and money laundering.

6.Sunshine Success Global Inc (“SSGI”) and Sunshine Success International LP (“SSILP”) are, respectively, a company incorporated and an exempted partnership registered in the Cayman Islands, both in July 2018. Kam has been SSGI’s sole director since its incorporation, and also wholly owns it through a BVI company (Sunshine Success Global Ltd). SSGI in turn is the General Partner of SSILP and, as such, in a position to manage SSILP. The plaintiff alleges, but Kam does not accept, that SSGI and SSILP are her alter egos.

7.The plaintiff’s case is that:

(1)  In 2019 the plaintiff was introduced by a common acquaintance, Mr Zhi Xinfu, to Mr Wang Bin and Kam, and became interested in a new investment fund being promoted by Kam.

(2)  At a meeting in September or October 2019 to discuss potential investment by the plaintiff, Kam made oral representations to the plaintiff that the fund would invest in newly developed real estate properties in, inter alia, London, Japan and Australia; that by investing in the fund, the plaintiff would acquire an interest as a limited partner in SSILP; that SSGI was the General Partner of SSILP and Kam was its manager, responsible for managing all of SSILP’s operations; and that Kam would provide information about the investments to be made by SSILP after the relevant agreements were signed. Kam suggested that the plaintiff invest RMB 500 million in 2 instalments, with the first tranche being RMB 191 million to be paid within 4 months of the signing of agreements.

(3)  Relying on those representations, the plaintiff arranged for a sum of HK$220,548,682, equivalent to RMB 191 million, to be remitted to a bank account of SSGI with Chiyu Bank in Hong Kong on 1 November 2019. We shall follow the nomenclature below and refer to this sum as “Sum A”.

(4)  Relying on these and further representations, on 15 December 2019, the plaintiff signed 2 agreements for the purposes of the investment, namely, a Partnership Agreement and a Subscription Agreement, both backdated to 1 August 2019.

(5)  In around early February 2020, Kam made further oral representations to the plaintiff that she needed funds to repay her personal debts overseas and would like to ask the plaintiff for financial assistance, and that Kam would treat the funds provided as the plaintiff’s capital contribution for subscription for additional interest in SSILP, and would procure SSGI and SSILP to make arrangements to increase the plaintiff’s interest in SSILP by a proportionate amount. As a result, on 20 February 2020, the plaintiff arranged for money to be paid into 2 bank accounts designated by Kam, held by 2 companies called Redstone Capital Holding Corporation and Wise Bravo Ltd respectively, totalling HK$32,500,000. We shall refer to this sum as “Sum B”.

8.The plaintiff complains that despite repeated requests to Kam for copies of the executed agreements and information about SSGI, the projects invested and the value of the investments, Kam put up various excuses not to meet the requests. In April 2022, the plaintiff instructed solicitors to write to both SSGI and SSILP for information, but received no response.

9.On 13 May 2022, the plaintiff obtained a Norwich Pharmacal order against Chiyu Bank for disclosure, by which it discovered that on 13 November 2019, SSGI transferred HK$420.5 million, which included Sum A, into its savings account. Sum A, mixed with other funds, might have gone back into the original account in tranches, but the funds were swiftly transferred out. By 4 January 2022, there was no money left in the Chiyu Bank account.

10.There was some exchange of correspondence between the plaintiff’s solicitors and SSGI’s solicitors between May and June 2022, in which the latter stated that what the plaintiff had invested in was a 15-year Cayman Islands fund and that the investment was secure, but little further information was provided.

11.On 9 September 2022, pursuant to a Cayman Islands court order, the plaintiff obtained disclosure of SSILP’s records from its corporate secretarial services provider. The register of SSILP thus obtained, certified by the secretarial firm as of 16 August 2022, suggested that the plaintiff had not been made a limited partner of SSILP.

The Action and other proceedings

12.On 5 October 2022, the plaintiff commenced the action below against Kam (HCA 1289/2022) (“Action”) and another set of proceedings by originating summons (in the HCCT list) against SSGI for a proprietary injunction to restrain it from disposing of Sum A. On the next day, the plaintiff took out a summons in the Action for a Mareva injunction and disclosure order against Kam.

13.On 10 October 2022, the plaintiff commenced an arbitration against SSGI (“Arbitration”). On 14 December 2022, Kam took out a summons in the Action for an order staying further proceedings pending the resolution of the Arbitration.

14.The plaintiff’s pleaded case in the Action, as set out in its Amended Statement of Claim dated 11 August 2024, is that:

(1)  Kam made oral representations to the plaintiff in reliance on which the plaintiff paid Sum A and Sum B respectively, as summarised in §7 above.

(2)  Those oral representations were false, in that Kam never intended to perform or to procure SSGI to perform the matters concerned. The plaintiff never acquired any interest in SSILP; HK$170,962,682 out of Sum A was transferred to an account of Kam in Singapore (“Kam’s SCB Account” as defined below) with the remainder of HK$49,586,000 purportedly paid as management fees to SSGI; Kam never intended to invest either Sum A or Sum B in any real estate or any investment at all. Further or alternatively, SSILP is not a genuine investment fund but a device or façade used by Kam to perpetrate a fraud on the plaintiff. Kam dishonestly intended from the outset to treat Sum A and Sum B as money for her own use and benefit. She never intended to apply Sum B to acquire any additional interest in SSILP for the plaintiff.

(3)  Kam made those representations knowing they were false or being reckless as to whether they were false or not.

(4)  The Partnership Agreement and the Subscription Agreement are null and void ab initio. Alternatively, the plaintiff seeks their rescission as at the date of the writ. Kam held upon receipt and still holds Sum A and Sum B or their traceable proceeds on constructive trust in favour of the plaintiff.

(5)  The plaintiff makes further or alternative claims that Kam is liable in damages for deceit in the amounts of Sum A and Sum B, that by receiving Sum A or part thereof into Kam’s SCB Account, Kam is liable for dishonest assistance of SSGI’s breach of the constructive trust on which it held Sum A or for knowing receipt, and that Kam is liable for conspiring with SSGI to defraud the plaintiff with unlawful means causing damage in the amount of Sum A.

15.Kam’s case, as pleaded in her Amended Defence dated 5 December 2023, is in summary as follows:

(1)  In 2019 it was Mr Zhi Xinfu who initially discussed with Kam and eventually decided to invest in the fund promoted by her. The plaintiff was Mr Zhi’s nominee or the corporate vehicle used by him for such investment, and only came into the picture on 15 December 2019.

(2)  Kam did not make the alleged oral representations before payment of Sum A. Any representations made by Kam were only made to Mr Zhi personally and only for and on behalf of SSGI. The alleged representations were in any event substantially true: it was true that SSILP would invest in real estate properties though the opportunities did not ultimately come to fruition due to the COVID-19 pandemic; as a matter of Cayman Islands law, the plaintiff did become a limited partner in SSILP; SSGI was indeed the General Partner of SSILP and, as a director of SSGI, Kam managed SSILP’s operations; SSGI was obliged to provide the plaintiff with information about SSILP in accordance with the Partnership Agreement and did in fact provide regular updates via Mr and Mrs Wang Bin to Mr Zhi from early 2020 to end of 2021.

(3)  SSGI did receive Sum A on 1 November 2019, but it is denied that Sum A was paid for or on behalf of, or was contributed to by, the plaintiff. It is also denied that it was paid in reliance on the alleged oral representations. After the plaintiff executed the Partnership Agreement and Subscription Agreement on 15 December 2019, in around January 2020 SSGI caused the plaintiff to be registered as a limited partner of SSILP. The Partnership Agreement and Subscription Agreement were and are valid and subsisting instruments and the plaintiff had duly acquired an interest as a limited partner of SSILP by 15 December 2019 at the latest.

(4)  It is denied that Kam made the second set of alleged oral representations before payment of Sum B. Neither Kam nor SSGI had any connection with or was aware of the existence of Redstone Capital Holding Corporation and Wise Bravo Ltd, the recipients of Sum B. Neither Kam, SSGI nor SSILP had received Sum B or any part of it. Mr Zhi and Mr Wang Guiwu confirmed to Kam in early 2022 that the payment of Sum B had no connection with Kam or SSILP or any investment therein. It is denied that Sum B was paid for or on behalf of, or was contributed to by, the plaintiff. It is also denied that the plaintiff could have reasonably relied on the alleged oral representations in making payment of Sum B.

The Mareva injunction and disclosure order

16.The plaintiff’s summons for Mareva injunction and disclosure order and Kam’s summons for stay pending arbitration were heard before Anthony Chan J on 12 January 2023. On the next day his Lordship gave his decision:[1]

(1)  granting a Mareva injunction (“Mareva Injunction”) restraining Kam from (a) removing from Hong Kong any of her assets up to the value of HK$253,048,682 (i.e. Sums A and B combined); and (b) disposing of, dealing with or diminishing the value of any of her assets in Hong Kong up to the same value, including in particular a property at Larvotto in Ap Lei Chau and any money in a specified HSBC account;

(2)  ordering Kam to inform the plaintiff, in writing within 48 hours from the service of the order (to be confirmed by affidavit 3 days thereafter), of the location and recipient(s) of Sum A and Sum B and the location, nature and value of all assets which represent in whole or in part or are derived from the proceeds of those 2 sums; and

(3)  dismissing Kam’s summons for stay pending arbitration, observing that there was evidence that SSGI (under Kam’s instruction) had been dragging its feet in the Arbitration.[2]

17.Also on 13 January 2023, a proprietary injunction was granted in favour of the plaintiff in respect of Sum A in the HCCT proceedings in aid of the Arbitration. We shall refer to this as the “HCCT Proprietary Injunction”.

18.Pursuant to the disclosure order, Kam stated in her solicitors’ letter dated 17 January 2023 and confirmed by her 3^rd affirmation filed on 19 January 2023 that:

(1)  “HK$170,962,682 of Sum A [i.e. Sum A less HK$49,586,000] is currently maintained and will remain in the bank account (account no. xxxxxx) at Standard Chartered Bank Singapore Ltd of 8 Marina Boulevard, Marina Bay Financial Centre Tower 1, Singapore in the name of Ms. Kitty Kam held for and on behalf of the Partnership …”. We shall refer to this account as “Kam’s SCB Account”;

(2)  “the balance of Sum A in the amount of HK$49,586,000 has been applied to cover the management fee paid by the Partnership to [SSGI] (being the General Partner of the Partnership)”;

(3)  “steps have now been taken to arrange for a sum of HK$49,586,000 to be transferred into [Kam’s SCB Account] shortly. We shall notify you once the said sum has been transferred into the said bank account”;

(4)  “[Kam] and [SSGI] have no knowledge with respect to Sum B and therefore, they remain unable to inform the Plaintiff of the location and the recipient(s) of Sum B”.

19.By a further letter dated 31 January 2023 in response to the plaintiff’s enquiry on the whereabouts of the HK$49,586,000, Kam’s solicitors said they were instructed that “a sum equivalent to the amount of management fee applied will be paid into [Kam’s SCB Account] by 3 February 2023”, without disclosing where the money had gone. On 21 February, the plaintiff’s solicitors chased for confirmation. On 24 February, Kam’s solicitors replied: “You will note from the enclosed record HK$170,962,700 and US$6,300,000 are maintained in [Kam’s SCB Account]”, attaching a heavily redacted bank statement which showed that HK$170,962,700 and another sum of US$6,300,000 (equivalent to HK$49,140,000) were kept in that account, but no further information or explanation was given. As subsequent correspondence made clear, Kam’s position was that US$6,300,000 was from a different source and not part of or traceable to Sum A.

The strike-out application

20.On 20 November 2023, Kam issued a summons in the Action seeking an order that the plaintiff’s Statement of Claim be struck out or alternatively an order to discharge the Mareva Injunction. The strike-out application was made on the ground that as a matter of Cayman Islands law, the plaintiff had indeed acquired an interest as a limited partner in SSILP, and that the investment agreement was fulfilled and there was no fraud practised on the plaintiff. On 30 May 2024, DHCJ K C Chan dismissed the strike-out application with indemnity costs,[3] principally on the basis that whether the plaintiff had under Cayman Islands law been accepted as a limited partner of SSILP is an arguable matter for trial and that even if it had, there were other alleged representations said to have been made by Kam fraudulently. Upon the strike-out application being dismissed, Kam withdrew her application for an order to discharge the Mareva Injunction.

The proprietary injunction and repatriation order

21.Meanwhile, the plaintiff had on 8 February 2024 issued a summons in the Action for (1) a proprietary injunction to restrain Kam from dealing with Sums A and B or their traceable proceeds, (2) an order requiring Kam to pay into court Sums A and B, and (3) an order requiring Kam to make disclosure in relation to the balance of Sum A in the amount of HK$49,586,000. This summons was heard and determined by DHCJ K C Chan on 9 August 2024, with Reasons for Decision handed down on 22 August 2024.[4]

22.The judge noted that Kam had not fully complied with the disclosure order made by Anthony Chan J on 13 January 2023 in that she did not disclose what happened to the balance of Sum A in the amount of HK$49,586,000. The judge also noted that despite US$6,300,000 was subsequently deposited into Kam’s SCB Account, there was still a shortfall of about HK$446,000 unaccounted for.[5]  The judge took the view that he “could not regard Kam as a litigant who was sufficiently serious over complying with court orders.” [6]

23.Kam opposed any requirement for her to repatriate the money. One of her main grounds was her contention that the Mareva Injunction and the HCCT Proprietary Injunction already afforded sufficient and effective injunctive relief – an assurance that was seriously called into question by subsequent events. Thus, in her 10^th affirmation filed on 5 August 2024 in opposition to the plaintiff’s application for, inter alia, the Repatriation Order, Kam said:

“ 44. Mr Wang also says that there is no arbitration ongoing between the Plaintiff and myself … This does not mean that the HCA Mareva Injunction and HCCT Proprietary Injunction, which have been subsisting all along, are not effective. The HCCT Proprietary Injunction binds all directors, officers, employees, servants or agents of SSGI, which is obviously a broad category of people that I fall into. This is why [my solicitors] made it clear in its letter to [the plaintiff’s solicitors] on 17 January 2023 that the sums in the SCB Account are secured pending the outcome of the Arbitration and this action. I repeated such assurance …

45. For the same reasons in the preceding paragraph, I deny the unfounded accusation … that there is a risk of dissipation on my part. I have given repeated assurances, and repeatedly provided copies of bank statements of the SCB Account to show that the sums of HK$170,962,682 and US$6,300,000 continue to remain in that account pending the outcome of the Arbitration and this action.

…

52. In any case, SSGI is prepared to provide an undertaking to Court in the terms set out in [SSGI’s solicitors’ (who were also Kam’s solicitors)] letter to [the plaintiff’s solicitors] on 29 March 2023, namely that SSGI shall not and shall procure that I shall not operate the SCB Account pending the outcome of the Arbitration or further order of the Court.

…

54. I am advised and believe that the Repatriation Application is without basis and unnecessary. As already mentioned, the HCA Mareva and HCCT Proprietary Injunctions remain subsisting and effective; the HKIAC Injunction Application is pending in the Arbitration; and I have given repeated assurances that the monies in the SCB Account shall not be dissipated pending the outcome of the Arbitration and this action. There is no reason why the Repatriation Application is needed at all.” (emphasis added)

24.Unpersuaded by Kam’s contention, the judge noted that the Mareva Injunction was directed only at assets in Hong Kong and that there was legal difficulty in securing compliance overseas with the HCCT Proprietary Injunction.[7] The judge also observed that the plaintiff’s attempt to secure the money had been met with “full scale resistance” from Kam and SSGI.[8]  The judge concluded that there was evidence “which calls into question the willingness of [Kam] to meet the judgment or that she would still keep the money in [Kam’s SCB Account] later on when circumstances change.” [9]

25.In the result, the judge made, inter alia, the following orders:

(1)  a “Proprietary Injunction” that Kam be restrained from disposing of or dealing with the sum of HK$170,962,682 held in Kam’s SCB Account as of 22 February 2023 (the judge however declined to extend the injunction to the sum of US$6,300,000 as there was no evidence it represented the proceeds of Sums A or B);

(2)  a “Repatriation Order” that Kam do within 14 days pay into the High Court the sum of HK$170,962,682 held in Kam’s SCB Account;

(3)  a “Renewed Disclosure Order” by way of enforcing the disclosure order made by Anthony Chan J, that Kam do, within 28 days, file and serve on the plaintiff an affirmation stating the location and recipient(s) of the sum of HK$49,586,000, and the recipient(s), location, nature and value of all assets which represent in whole or in part or are derived from the proceeds of that sum.

26.Kam did not pay the sum of HK$170,962,682 or any part thereof into the Hong Kong court. On 23 August 2024, being the last of the 14 days allowed for compliance with the Repatriation Order, Kam took out a summons seeking leave to appeal against the orders made on 9 August 2024 and another summons for stay of their execution pending appeal. However, a month later, by her solicitors’ letter dated 23 September 2024, Kam stated she would withdraw these 2 summonses. A summons for leave to withdraw was subsequently filed, which the judge granted on 27 September with indemnity costs against Kam. There was therefore no appeal against the Proprietary Injunction or the Repatriation Order, and their effect had never been stayed or suspended. The judge came to the view that those 2 summonses of Kam were not taken out in good faith but were merely ploys to buy time.[10]

The unless order and the judgment entered in default of compliance

27.On 26 August 2024, the plaintiff issued a summons for an order that unless Kam paid into court the sum of HK$170,962,682 within 3 days, her Amended Defence be struck out and judgement be entered against her for the claims in the action including both Sum A and Sum B. This is the summons that gave rise to the present appeal.

28.What happened on the first return date of this summons, 29 August, can be gleaned from the Reasons for Decision given by DHCJ K C Chan on 1 November 2024 (for his decision on 27 September 2024) at §7:

“ On that occasion, without offering any explanation whatsoever as to why she had failed to comply with the Repatriation Order, Kam through her counsel Mr Acorn Lam urged that directions be given for her to file evidence to oppose (but was unable to indicate the nature or broad effect of the evidence when enquired by the bench) and that the 1^st Unless Summons be heard together with Kam’s Appeal and Stay Summonses, which was scheduled to be heard on 28 October 2024. Mr Acorn Lam relied heavily on the fact that there was a pending application for leave to appeal and stay pending appeal. Upon taking that into account and the fact that Mr Acorn Lam indicated, after having stood down the matter for him to confirm instructions from Kam, that Kam would be able to file a short affirmation on or before 4:00pm on 5 September 2024 (‘Kam’s Assurance Affirmation’) confirming that the HK$170,962,682 currently still remained in D’s Account and exhibiting documentary proof thereto, including bank statements, I acceded to Kam’s proposed directions, but gave liberty to P to restore the 1^st Unless Summons for hearing at an early date if Kam filed to file Kam’s Assurance Affirmation in time.”

29.Despite the indication given on 29 August, Kam failed to file the promised “Kam’s Assurance Affirmation” by 5 September or subsequently. No explanation was offered. Kam also failed to comply with the Renewed Disclosure Order by 6 September (i.e. 28 days from 9 August) or subsequently. In response, the plaintiff restored its summons for unless order for hearing before the judge on 12 September. What happened at this hearing was described by the judge in his Reasons for Decision dated 1 November 2024 at §10 as follows:

“ The 1^st Unless Summons was then restored to be heard before me on 12 September 2024. Kam this time appeared by Mr Abraham Chan SC (leading Mr Lam and Mr Lau). Mr Chan essentially submitted that (a) the sanction applied to be imposed by the 1^st Unless Summons[11] was draconian, (b) the time directed by me on 29 August 2024 for Kam to file her affirmation in opposition, which was on or before 19 September 2024, has not expired, (c) despite again unable to proffer any information as to what Kam might depose to, Kam should be given a chance to file her evidence, and (d) the matter should be adjourned for a substantive hearing for Kam to argue whether such sanction ought to be imposed, and if so, on what terms. Having also heard Mr Lam SC, counsel for P, this Court accepted Mr Chan’s submissions. Having discussed with counsel for both sides who agreed to such directions, I directed under an unless order that Kam do file her affirmation in opposition to the 1^st Unless Summons and in support of Kam’s Appeal and Stay Summonses (which she has not yet filed despite time to do so has expired) on or before 4:00 pm on 17 September 2024 and that the hearing date of the 1^st Unless Summons and Kam’s Appeal and Stay Summonses be moved up to 27 September 2024.”

30.On 17 September, the deadline under the unless order for filing the affirmation, a solicitor acting for Kam filed his own affirmation exhibiting a draft undated and unsigned 11^th affirmation of Kam which stated in paragraph 4 as follows:

“ 4. 關於港幣 170,962,682元款項，在原告人多次去信渣打銀行(新加坡)有限公司提出質詢及要求後，該行關閉了戶口號碼為 652xxxxxxx的戶口。由于該筆款項一直由本人代Sunshine Success International LP (‘SSLP’)[12] 持有，本人在無可奈何的情況下將該筆款項交回SSLP。然而，基於本人目前已不再參與SSLP及SSGI的任何事務，本人無法了解該筆款項的去向。”

Translation:

“ Regarding the sum of HK$170,962,682, after the Plaintiff had written repeatedly to Standard Chartered Bank (Singapore) Limited to make inquiries and demands, the Bank closed the account numbered 652xxxxxxx. As I had all along been holding that sum of money on behalf of Sunshine Success International LP (‘SSLP’), I had no alternative but to return the money to SSLP. As I am no longer involved in any affairs concerning SSLP or SSGI, I am unable to trace the whereabouts of the sum.”

31.Paragraph 5 of that draft 11^th affirmation listed the address and estimated value of 10 properties in the Mainland said to be owned by Kam with an aggregate value of RMB 210,000,000, and stated that the plaintiff could enforce in the Mainland any judgment it might eventually obtain in the Action. Paragraph 6 sought to explain that the Renewed Disclosure Order relating to the sum of HK$49,586,000 had not yet been complied with because Kam’s new legal team had only recently been appointed, and asked for more time for compliance.

32.On 27 September, DHCJ K C Chan heard arguments at the adjourned hearing of the plaintiff’s summons for unless order, and made, inter alia, an unless order at the end as follows (“Unless Order”):

“ Unless on or before 4:00 p.m. on 25 October 2024 the Defendant do pay into Court the sum of HK$170,962,682 in compliance with paragraph 2 of the Order of Deputy High Court Judge K C Chan dated 9 August 2024, the Defendant’s Amended Defence dated 6 December 2023 in relation to the sum of HK$220,548,682 be struck out and judgment be entered against the Defendant in the form of the judgment and next to this Order.”

33.Kam failed to make the required payment into court, and judgment was accordingly entered on 25 October 2024 for the sum of HK$220,548,682 (i.e. Sum A) with interest from 1 November 2019 together with an injunction restraining her from disposing of, dealing with, or diminishing the value of Sum A or any part thereof or its traceable proceeds, and an order that she account to the plaintiff for Sum A (“Judgment”).

34.On 10 October 2024, Kam filed an application with the judge for leave to appeal against the Unless Order (though her primary stance was that leave was not required). On 22 November, she filed a notice of appeal (CACV 495/2024) against both the Unless Order and the Judgment.

35.On 16 December 2024, based on written submissions without an oral hearing, DHCJ K C Chan gave his written decision refusing leave to appeal against the Unless Order, on the ground that there was no reasonable prospect of success, without going into the question of whether Kam could appeal as of right or needed leave.[13] On 30 December 2024, Kam issued a summons in this court (CAMP 247/2024) seeking leave to appeal against the Unless Order (on a contingent basis assuming leave was required).

The judge’s reasons for making the Unless Order

36.DHCJ K C Chan explained his reasons for making the Unless Order in his Reasons for Decision handed down on 1 November 2024.[14]  In the first place, the judge formed the clear view that “Kam has consciously decided not to comply with the Repatriation Order” and that “her breach was flagrant, inexcusable, contumelious, and her litigation conducts were abusive and evident of litigation gamesmanship”.[15] In this connection the judge highlighted 8 matters:[16]

(1)  Kam had repeatedly given the court and the plaintiff express assurances that (a) the sums of HK$170,962,682 and US$6,300,000 remained and would remain in Kam’s SCB Account pending the outcome of the Arbitration and the Action, and (b) she was already subject to the Mareva Injunction and the HCCT Proprietary Injunction not to remove the money from Kam’s SCB Account. By way of example, the judge referred to Kam’s statements in her 10^th affirmation (see §23 above) and similar assurances given by her through counsel at the hearings on 9 and 29 August 2024.

(2)  Despite being afforded ample opportunity to explain her failure, Kam did not file any evidence, but only on the last day put forward a draft 11^th affirmation, the form and content of which was “appalling”. It was only a draft exhibited to her solicitor’s affirmation, and inexplicably it was not even signed. Seen against the background of Kam’s frequent changes of representation (4 different firms of solicitors and 5 different teams of counsel in the hearings since 30 May 2024), it was of particular importance that factual matters relied on by Kam are properly affirmed by her.

(3)  The draft 11^th affirmation not only did not offer any explanation for non-compliance with the Repatriation Order, but stated that the money had been dissipated from Kam’s SCB Account.

(4)  Such dissipation of the money was contrary to the assurances Kam gave and, on its face, a direct breach of the Proprietary Injunction and a potential breach of the HCCT Proprietary Injunction. It clearly called for a detailed and full explanation.

(5)  Yet what was said in paragraph 4 of the draft 11^th affirmation was “disingenuous and hardly believable, and clearly not a full or even meaningful disclosure”. Given the account was in Kam’s name, the bank could not have transferred money away without her authority. It was “completely disingenuous and unbelievable” for her to claim she was “unable to trace the whereabouts of the sum” (本人無法了解該筆款項的去向). There were no details given of the date the account was closed and how, or when and to whom the money was sent. There must have been relevant documentation but none was produced, the only possible inference being that Kam suppressed it, even though she must have been apprised of the need and importance to produce documentary proof. Kam claimed the account was closed because the plaintiff raised enquiries with the bank, but those enquiries were made in 2023. There was no explanation why Kam felt compelled to return the money to SSILP.

(6)  Kam had complained in her draft Notice of Appeal against the Repatriation Order that the court erred in failing “to consider the less oppressive option of transferring the sum into the Defendant’s own bank account within the jurisdiction”, which implied that such option was open as at 23 August 2024 when her summons for leave to appeal was filed. This is wholly inconsistent with the stance in her draft 11^th affirmation that the money had been transferred away beyond her control before she could have complied with the Repatriation Order.

(7)  Similarly, Kam counsel’s indication on 29 August 2024 that Kam was prepared to file an affirmation confirming that HK$170,962,682 still remained in Kam’s SCB Account suggested that the money was then still there, and therefore that Kam had intentionally flouted the Repatriation Order (and breached the Proprietary Injunction) and that what was stated in the draft 11^th affirmation was simply a feeble excuse she made up.

(8)  Despite being given time to file evidence in support of her summonses for leave to appeal and stay of execution pending appeal, Kam never filed any, and withdrew the summonses at a late stage. Taken together with her other conduct, it showed that those summonses were not taken out in good faith but were merely ploys to buy time. Such conduct was abusive.

37.The judge then referred to the importance of having effective powers and sanctions to ensure compliance with court orders. The judge made it clear whether to grant an unless order backed by the sanction of striking out the defence and entering judgment is a fact-sensitive and nuanced question, and that each case must be considered on its own facts.[17]  He set out the general principles that were not in dispute, including those laying down a “more calibrated” approach.[18]

38.The judge considered that when one refers to an unless order being an order of last resort, it is a reference to the last resort to ensure compliance with the court order in question. He took the view that the other sanctions suggested by Kam’s counsel are clearly inappropriate, including initiating contempt proceedings, debarring Kam from proffering further evidence, and imposing indemnity costs. Ultimately the judge considered that the Unless Order, limited to Sum A, was “just, appropriate and proportionate”, in view of Kam’s contumelious and flagrant breach and the manner in which the plaintiff’s substantive rights were thereby affected.[19]

Whether leave is required to appeal against the Unless Order

39.We shall deal first with the question whether leave to appeal is required.

40.The application for the Unless Order was not one that would, upon either success or failure, determine the entire action. The substance of it was to enforce the Repatriation Order, so that the money in question could be brought into the jurisdiction pending the determination of the Action. As such, based on established principles, the Unless Order is an interlocutory order: Bright Shipping Ltd v Changhong Group (HK) Ltd [2019] 2 HKLRD 220 (CA). Leave to appeal is therefore required unless an exception under rules of court applies: see section 14AA(1) and (2) of the High Court Ordinance (Cap 4).

41.Kam relied on Order 59 rule 21(1)(a) of the Rules of the High Court (Cap 4A), contending that she could appeal as of right from the Unless Order because it was an “order determining in a summary way the substantive rights of a party to an action”. It was submitted that the Unless Order provided for the striking out of her defence and the entry of judgment against her, being sanctions that would take effect immediately and automatically upon default. As such, the Unless Order was in the same category as a strike-out order or a judgment on admission.

42.We do not entirely agree with Kam’s submission but we accept in the circumstances of this case that she was entitled to appeal as of right against both the Unless Order and the Judgment.

43.As explained in Securities and Futures Commission v Lu Ruifeng [2022] 1 HKLRD 1349 at §33, in approaching rule 21(1)(a), one has to examine what the order actually determines, rather than its collateral practical effect. By the Unless Order, the judge decided that the specified sanction, i.e. the defence being struck out and the entry of judgment, should apply if, but only if, Kam still failed to comply with the Repatriation Order by the renewed deadline. It is not an order that in itself necessarily determined her substantive rights. Before the expiry of the time specified for compliance, the sanction of strike-out and judgment had not taken effect. Clearly her substantive rights had not been determined in a summary way, so that leave to appeal would be required, and Kam had to apply for leave within 14 days under Order 59 rule 2B(1). In the present case, Kam’s continued non-compliance beyond the deadline resulted in the sanction taking effect, but it was her default coupled with the Unless Order that led to her defence being struck out and judgment being entered against her. Viewed in isolation, therefore, we do not think the Unless Order falls within rule 21(1)(a).

44.But the Unless Order was eventually flouted, and the sanction took effect automatically upon default, i.e. immediately after 4:00 p.m. on 25 October 2024, without any need for the plaintiff to apply for a further order: see Order 2 rule 4; Daimler AG v Leiduck [2012] 3 HKLRD 119, §§47-48. The Judgment thus entered, as “a judgment obtained pursuant to an ‘unless’ order”, is expressly deemed by rule 21(2)(g) to be one that determines in a summary way the substantive rights of a party, from which an appeal lies as of right by virtue of rule 21(1)(a); see Elijah Saatori v Raffles Medical Group (Hong Kong) Ltd [2018] HKCA 732, §21.

45.The appeal in CACV 495/2024 had therefore been brought properly as of right. In such an appeal it would in our view be artificial to separate the unless order from the judgment and to say that the appellant could only attack the latter but not the former, for the judgment, being the sanction, automatically and immediately took effect pursuant to the unless order upon default. It would indeed be difficult to see any ground for appealing against the judgment in isolation without attacking the unless order at the same time. Thus in Elijah Saatori, the plaintiff separately sought leave from the judge and the Court of Appeal[20] to appeal against the unless order, and failed. In his appeal brought as of right against the judgment entered pursuant to the unless order, this court[21] held that as the plaintiff could no longer challenge the unless order, there was no legal basis for him to challenge the judgment entered.[22]  In contrast, in the present case there has not yet been any determination by this court of an application for leave to appeal against the Unless Order alone. In our opinion, it is open to this court in the appeal brought as of right (CACV 495/2024) to hear arguments not only against the Judgment, but also against the Unless Order, and to set aside both if proper grounds are made out.

46.The plaintiff referred to First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd [2016] 4 HKLRD 360 in which the court proceeded on the basis that leave is required for an appeal from an unless order like the present one. The plaintiff also referred to Wah Sun Hong Ltd v Wong Lee Yuk Ping Agnes (HCMP 3276/2016, 30 December 2016), where certain parts of the defence were struck out upon default in compliance with an unless order for particulars to be provided. It is however unclear in these cases whether there was judgment entered pursuant to the unless order, and it also appears that the question whether leave was required was not argued. They are therefore of limited assistance on the present question.

47.For these reasons, we consider that Kam was entitled to appeal against both the Judgment and the Unless Order in CACV 495/2024. Her application for leave to appeal in CAMP 247/2024 was therefore unnecessary, and we simply made no order on it, including costs.

The appeal

48.Kam’s contentions on the appeal fall into 3 main grounds:

(1)  It was wrong in principle for the judge to make the Unless Order which only served to punish Kam for her inability to comply with the Repatriation Order, rather than to secure her compliance with it.

(2)  It was also wrong in principle and in law for the judge to make the Unless Order for the purposes of protecting the plaintiff’s interests in enforcing any eventual judgment that it might obtain, rather than for the purposes of securing a fair trial with due process.

(3)  In any event, the Unless Order was disproportionate, illogical and inimical to the interests of justice, having regard to the fact that there were alternatives available; the Judgment sum far exceeds any conceivable penalty for contempt; the Unless Order resulted in deemed admissions of fraud when the Action remains on foot in relation to Sum B; the Judgment would not improve the plaintiff’s prospects of recovery; and the Judgment was for the entire Sum A (HK$220.55m) when the Repatriation Order was only for HK$170.96m.

49.Kam sought an order that the Unless Order and the Judgment be set aside and the plaintiff’s summons for unless order be dismissed. As an alternative, Kam proposed an unless order with a lesser sanction: unless she complies with the Repatriation Order, she be debarred from giving factual evidence at trial either in respect of Sum A only or altogether, and shall pay 50% of the costs of the Action in any event.

50.We deal with the 3 grounds in turn below.

Whether Unless Order wrong in principle for being made for punishing Kam

51.It was submitted on Kam’s behalf that it is a cardinal principle that the purpose of an unless order is not to punish misconduct but to secure a fair trial in accordance with the due process of law: Bruce James Stinson v Gu Ming Gao [2018] HKCA 10, §58. The judge’s focus throughout however was whether the sanction was proportionate to Kam’s existing breaches. There was no consideration whether the Unless Order was likely to result in her compliance with the Repatriation Order.

52.It was further submitted that the judge could not have expected Kam to comply when she had already explained in her evidence (the draft 11^th affirmation) that she had no choice but to return the money to SSILP due to the closure of the account by the bank and that she had no way of knowing the present whereabouts of the money. If the judge had misgivings about the veracity of that evidence, the proper course was to permit the plaintiff to cross-examine Kam or bring contempt proceedings. The Unless Order served only to punish Kam for her inability to comply, instead of securing her compliance in future.

53.We do not think this ground of appeal was made out. As is evident from his reasons,[23] the judge was plainly cognisant that the proper purpose of an unless order is to ensure compliance with a court order rather than to punish a party for past non-compliance, and he did impose the Unless Order for the purpose of enforcing compliance with the Repatriation Order. Thus the judge referred to an unless order being “the last resort to ensure compliance [with] that court order”. In rejecting other suggested options such as ordering indemnity costs, the judge noted that such orders did not seem to have effect with Kam “insofar as ensuring compliance [with] court orders” was concerned. In other words, the judge considered the Unless Order to be the best way to exert on Kam all the pressure that could appropriately be exerted, with a view to persuading her to comply with the Repatriation Order.

54.Reliance was placed on certain comments made by the judge during the hearing below that, Mr Jat SC submitted, suggest the judge took the view that Kam would simply not comply with the Repatriation Order. We do not think they assist Kam. Those comments must be seen in context. Earlier in the hearing the judge had made clear that he did not think an unless order should be imposed simply because of a party’s contumelious conduct, but that there needed to be some sort of measure to make sure there was compliance. The comments relied on by Kam were made by the judge in addressing the alternative sanction suggested by Kam’s counsel, namely, debarring her from filing witness statements. They show that the judge was sceptical that this lesser sanction would be effective to bring about compliance. They do not show that the judge was convinced there would be no compliance even with the threat of the sanction of judgment or that the sanction was imposed as a punishment.

55.Nor do we accept that on the evidence, the judge could not have expected Kam to comply with the Repatriation Order. Kam relied on her draft 11^th affirmation to argue, inter alia, that she had no further control over or even knowledge about the money and was therefore incapable of complying. But the judge did not accept that evidence. He said it was “disingenuous and hardly believable, and clearly not a full or even meaningful disclosure”, and did not merit belief.[24]  His reasons for taking this view are summarised in §36 above and need not be repeated here. The judge considered it “of particular importance” in light of the history of the case that factual matters relied on by Kam should be properly affirmed to on oath by her.[25] Strictly speaking the draft 11^th affirmation was not even admissible, since it was not an affirmation filed by the deadline imposed by the unless order made on 12 September 2024 (see §§29-30 above) but “slipped in” at the last minute as an un-sworn and unsigned exhibit to a solicitor’s affirmation, without applying for any extension of time or for relief against sanction under that unless order. A draft affirmation was held inadmissible in similar circumstances in China Shanshui Cement Group Ltd v Zhang Caikui (HCMP 863/2017, 10 May 2017).[26]  In fact the 11^th affirmation was not sworn until 6 November 2024 and not filed with the court until 13 November 2024, well after the judge handed down his reasons.

56.Before us there was no real challenge against the judge’s rejection of the draft 11^th affirmation. Nor can we see any grounds for impugning the judge’s factual assessment of whether the assertions in that draft affirmation were credible. Instead, counsel took 3 points. First, it was said that the draft 11^th affirmation had since been sworn. Strictly speaking the sworn affirmation is a piece of new evidence not before the judge, but no attempt has been made to adduce it as such in the appeal. In any event, it still only consisted of Kam’s bare assertions that she was “no longer involved in any affairs concerning SSLP or SSGI” and “unable to trace the whereabouts of the sum”. In light of the matters referred to by the judge, he was entitled not to accept these bald assertions as sufficient evidence to show that it had become beyond Kam’s capacity to cause the money to be transferred to Hong Kong.

57.Secondly, it was submitted that the judge could not have expected Kam to comply with the Repatriation Order even if he disbelieved her draft 11^th affirmation, because “if what she said was false she would have contradicted her affirmation evidence by paying the [sum concerned] into Court.”  We are not persuaded. If the money was subsequently repatriated to Hong Kong, it does not follow that Kam would have contradicted her own evidence. Anyhow, the judge was not bound to think that Kam would prefer to suffer the sanction under the Unless Order than to contradict her unsigned draft affirmation.

58.Thirdly, it was submitted that if the judge had misgivings about the veracity of Kam’s evidence, the proper course was to allow the plaintiff to cross-examine her or commence contempt proceedings. We also reject this submission. Since the judge considered Kam’s assertions in the draft 11^th affirmation to be incredible – and there is no appeal against this conclusion – there was nothing erroneous for him to reject it instead of ordering cross-examination of Kam who was in any event not within the jurisdiction. As for contempt proceedings, we deal with it below in the context of the suggested alternatives to the Unless Order.

Whether Unless Order wrong in principle for not being for securing a fair trial

59.It was submitted that it was erroneous in law to impose the Unless Order for the purposes of protecting the plaintiff’s interests in enforcing any eventual judgment that it might obtain rather than for the purposes of securing a fair trial with due process. The Unless Order is far removed from the usual kinds of unless orders designed to ensure a fair trial, such as an unless order for compliance with timetables in order to avoid delay to the trial or an unless order for discovery designed to ensure that the full evidence is placed before the trial court. The courts resort to unless orders in those situations because contempt proceedings are generally inappropriate and unavailable. The Repatriation Order is entirely different in nature, with nothing to do with the fairness of the trial and being directed at assisting the plaintiff to enforce any eventual judgment it might obtain after trial. A fair trial is possible even if the Repatriation Order is not complied with. It can also be enforced by contempt proceedings.

60.Further, it was submitted that it was wrong for the judge to make the Unless Order on the basis that Kam’s breach of the Repatriation Order would require the plaintiff to expend more time and costs in enforcing its rights, ending up with an empty judgment, such that the trial would be “just a show”. The risk of empty judgment is one which all plaintiffs take, and cannot be the basis for an unless order. The court has an armoury of powers for the enforcement process. An unless order with the sanction of entering judgment peremptorily should not be imposed on a party unless his conduct has rendered it impossible for a fair trial to be conducted. Reliance was placed on Raja v van Hoogstraten [2004] 4 All ER 793, which concerned an unless order that required disclosure in aid of a freezing order. There Chadwick LJ said (at §112):

“ … striking out his defence and counterclaim was not an appropriate response to his failure to make adequate disclosure. It must be kept in mind that the disclosure which Mr van Hoogstraten was required to make was not disclosure in the action; in the sense that it was necessary in order that there be a fair trial of the issues in the action. It was disclosure in aid of a freezing order made in anticipation of the claimant’s success in the action. In that context the observations of Millett J in Logicrose Ltd v Southend United Football Club Ltd [1988] 1 WLR 1256, cited and applied in this Court in Arrow Nominees Inc v Blackledge [2001] BCC 591 and by Sir Andrew Morritt VC, in Douglas v Hello! Ltd (No 3) [2003] EWHC 55 (Ch), [2003] EMLR 29, are directly in point. Millett J said:

‘ I do not think that it would be right to drive a litigant from the judgment seat without a determination of the issues as a punishment for his conduct, however deplorable, unless there was a real risk that that conduct would render further conduct of the proceedings unsatisfactory. The court must always guard itself against the temptation of allowing its indignation to lead to a miscarriage of justice.’ ”

61.We do not accept Kam’s submissions. An unless order with the sanction of striking out a party’s pleading and entering judgment against him is without doubt a draconian order, and great care should be taken in imposing it. But it is not confined to the case where the trial process itself will be irremediably prejudiced by the failure to comply. The cases demonstrate that the basis of the jurisdiction is wider. In Logicrose Millett J referred broadly to conduct that rendered “further conduct of the proceedings unsatisfactory”. In Raja itself Chadwick LJ said (in §113) that failure to make disclosure in aid of the freezing order might lead to the claimant’s success in the action being rendered nugatory by the dissipation of assets which ought to have remained available to meet any judgment which he obtained and that “[i]n that sense it might, perhaps, be said that inability adequately to police the freezing order ‘would render further conduct of the proceedings unsatisfactory’.” 

62.Whilst the court must exercise caution in making orders that have the potential effect of depriving a litigant of a trial on the merits, it is entitled to take into account whether the litigant’s conduct “is liable to subvert the overall fairness of the proceedings.”[27] The cases show that the courts have readily made unless orders with the sanction of entering judgment, in order to secure compliance with orders that have no direct relation to the fairness of the adjudicatory process in the trial itself, such as orders requiring disclosure of assets ancillary to freezing orders: see e.g. Stolzenberg v CIBC Mellon Trust Co Ltd [2004] EWCA Civ 827; Lexi Holdings plc v Luqman [2007] EWCA Civ 1501; Tarn Insurance Services Ltd v Kirby [2009] CP Rep 22; JSC BTA Bank v Ablyazov [2013] 1 WLR 1331; China Metal Recycling (Holdings) Ltd (in prov liq) v Chun Chi Wai (HCA 1412/2013, 17 November 2014); ORB v Ruhan [2016] EWHC 850 (Comm) at §§175-191 (Popplewell J). The reasoning of the courts in those cases is summarised by Coleman J in China Evergrande Group (in liq) v Hui Ka Yan [2025] 3 HKLRD 66 at §§72-73 as follows:

“ 72. Essentially, focusing only on the trial itself may be too narrow a focus. Of course, the Court’s orders are made with a view to promoting a fair and effective trial, as well as a fair and effective interlocutory process to get to the trial. But, in the context of Mareva/freezing orders, the Court’s orders are made with an emphasis on an effective trial so as to enable the applicant’s rights to be vindicated by enforcement, not merely judgment. The interest of a party in seeking an effective and realistic outcome to his litigation, if he succeeds, may be as important in the balance of things as the interest of the other party in preserving his right of access to trial despite his refusal to abide by orders of the Court. Moreover, the Court’s orders are to be obeyed, and the proper administration of justice depends on that. Hence, maintaining public confidence in the Court’s ability and willingness to secure compliance with its orders is an important and legitimate objective of an unless order in itself.

73. Indeed, the Court regularly makes debarring orders where the failure which triggers the debarring does not directly impact on the substantive issues which fall to be decided at trial. The classic examples may be when proceedings are stayed for failure to provide security for costs, or striking out for want of prosecution. There are also many authorities, for example as referred to in the ORB case, which show it to be well established that unless or debarring orders may be justified by failure to comply with a freezing order and ancillary disclosure order. Similarly, such debarring orders may be made without there being any need for a prior finding of contempt under the Order 52 procedure.

74. I also agree with the comments made by DHCJ KC Chan in Beijing Songxianghu Architectural Decoration Engineering Co Ltd v Kitty Kam [2024] HKCFI 3614 at §§10-11, that when it comes to proportionality in this context, it is not be measured by merely comparing ‘dollar to dollar’ (as he put it). The Court can look at the overall circumstances of the case, and need not impose an unless order with a sanction so narrowly restricted to merely ensuring that there would be a fair trial procedurally. Rather, the use of an unless order is to ensure and attain overall justice, including as an important and equally material part of it, whether the party aggrieved would have an effective and realistic outcome and real recovery. In any given case – and this case is one of them – those considerations may be weighty factors.”

63.Kam’s reliance on Schenker International (HK) Ltd v Natural Dairy (NZ) Holdings Ltd [2013] 1 HKLRD 274 at §48 does not assist her.[28] There Deputy High Court Judge Le Pichon was simply summarising the holding in Logicrose and could not have intended to lay down any different principle from those developed in the cases since. That case concerned an order made by a master giving relief from sanction under an unless order that required the defendant to file and serve its list of documents, but the master imposed a condition that the defendant pay into court the full amount claimed by the plaintiff. The judge set aside the condition as being wholly out of proportion to the breaches that had occurred, even though the failure to give discovery could have an impact on the fairness of the trial itself. Thus it can be seen that the facts were entirely different and the court did not have to deal with a situation of the kind that arises in the present case.

64.The types of orders that can properly be enforced by an unless order with the sanction of entering judgment are not limited to orders requiring disclosure of assets. For example, in First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd (HCA 4414/2001, 28 January 2016, To J) at §40, and [2016] 4 HKLRD 360 (CA) at §14, the judge made an order that unless the plaintiff paid into court all outstanding taxed costs together with interest thereon by a specified deadline, its claim be struck out and dismissed. This court[29] refused leave to appeal.

65.There is no merit in Kam’s contention that because the Repatriation Order is an order of a kind that could be enforced by contempt proceedings, it was wrong in principle to make the Unless Order. It is true that a distinction has been drawn between orders, the breach of which is a contempt of court, and orders or rules which merely give rise to a default: see Prudential Assurance Co Ltd v Fountain Page Ltd [1991] 1 WLR 756 at 765H. A party subject to the latter (such as orders or rules for the service of pleadings, witness statements and expert reports) is free to elect to suffer the procedural consequence rather than comply, and the court does not commit him for contempt for failure to comply: see Zuckerman on Civil Procedure (4^th ed), §§11.266-11.267. It does not, however, follow from the fact that breach of the Repatriation Order could be punished as contempt, that it could not be enforced by an unless order with the sanction of judgment being entered. On the contrary, it has been said: “Whenever there is a reasonable alternative available instead of committal to prison, that alternative must be taken”: Danchevsky v Danchevsky [1975] Fam 17, 22A. It is open to the court, in an appropriate case, to impose the potential consequence of a party’s case being struck out upon default of compliance, instead of leaving enforcement entirely to contempt proceedings.

Whether Unless Order disproportionate, illogical or inimical to the interests of justice

66.There are several points made on Kam’s behalf under this ground. Before dealing with them, it should be made clear that where an unless order with the stipulated sanction is neither made without jurisdiction (either in the strict sense or in the sense of the court’s settled practice[30]) nor wrong in law or in principle, the question whether it is a proportionate response for enforcement is largely a matter of the exercise of the court’s discretion, with which the appellate court cannot interfere unless the court below was plainly wrong in its decision or has taken irrelevant matters into account or ignored relevant matters.

67.The first point taken is that contempt proceedings were an available alternative to enforce the Repatriation Order. This was considered by the judge, and dismissed primarily on the ground that given Kam had stayed out of the jurisdiction throughout the litigation, contempt proceedings would be likely to end up as “another fruitless but expensive chase” by the plaintiff.[31] Mr Jat submitted that a sentence for contempt against an overseas litigant is “not a futile exercise”, for it serves to publicly record the litigant’s disobedience with court orders and may have reputational or business consequences for him, and a fine imposed can be executed against local assets. There is nothing to show that the judge failed to take account of these matters. In the present case it was open to the judge to doubt the efficacy of the contempt route. We can see no reviewable error for the judge to think that an application for contempt against Kam would be likely to be of little value.

68.It was submitted that the amount of the Judgment entered far exceeded any fine which might conceivably be imposed on Kam in contempt proceedings. We do not think the comparison is apposite. A fine is a pecuniary penalty paid into public funds and its imposition does not affect the underlying civil liabilities contested in the action. Here the Judgment sum is not a penalty, but represents a sum to which the plaintiff has made a proprietary claim.

69.It was also submitted that there were alternatives to address the risk of the plaintiff being left with an empty judgment, such as steps that the plaintiff could take in Singapore to trace the money, and steps that could be taken to enforce any eventual judgment against Kam’s assets in Hong Kong or the Mainland properties disclosed by her in the draft 11^th affirmation. However, as Mr Lam SC pointed out on behalf of the plaintiff, these are not alternatives for the enforcement of the Repatriation Order (which was not appealed and remained extant), but steps that might well be attended with great difficulties which the Repatriation Order was designed to avoid in the first place.

70.In fact, attempts by the plaintiff to enforce a costs order against a Hong Kong residential property held in Kam’s name had already met with opposition from Kam’s mother who claimed she was its sole beneficial owner: see Beijing Songxianghu Architectural Decoration Engineering Co Ltd v Kitty Kam [2025] HKCFI 3356. A mere list of 10 Mainland addresses, which appeared for the first time in the draft 11^th affirmation without any supporting documentation, could hardly provide any comfort that any of those properties had sufficient equity actually belonging to Kam or would remain available to satisfy any eventual judgment obtained by the plaintiff. It is notable that Kam has not offered to pay into court any funds raised from these properties and applied for relief from sanction on that basis.

71.Mr Jat also stressed that the Judgment was for a very substantial sum and that the plaintiff’s claims were based on serious allegations of fraud, dishonest assistance and unlawful means conspiracy. The judge was well aware of and took into account these matters.[32]  But it is equally relevant to take into account, as the judge also did, the obverse, i.e. the interests of the plaintiff “in securing an effective and realistic outcome to his litigation”.[33] After all, the plaintiff is allegedly the victim of fraud and other wrongs which had allegedly caused it to lose that substantial sum. As Christopher Clarke J said in JSC BTA Bank v Ablyazov [2011] EWHC 2506 (Comm) at §179, the size of the claim and seriousness of the allegations should make the defendant, if innocent, all the more eager to refute the claim with evidence and to comply with the orders of the court. As his Lordship also said:

“ The armoury of the Court in cases of very large international fraud is likely to be seriously weakened if, when it makes orders which are not obeyed and grant relief against sanction the conditions for which are not complied with, the size of the claim and the alleged iniquity of the alleged participants is likely to preclude the Court from giving effect to the sanction.”

72.It was submitted that it was inimical to the interests of justice for serious allegations of dishonesty to go by default against Kam in the absence of a trial, and especially so when the other part of the Action, as relates to Sum B, would remain on foot. As a general statement, it is of course true that it is not in the interests of the administration of justice for serious findings to go by way of default against a party, as stated by Fok JA in Daimler AG v Leiduck [2012] 3 HKLRD 119, §58. But there is no rule that default judgment cannot be entered on a claim for fraud, and the previous rule barring summary judgment on a claim based on an allegation of fraud (Order 14, rule 1(2)(b)) was repealed in 2021. It is clear that judgment can be entered in default of compliance within an unless order, even in an action for fraud, where the interests of justice so demand. Whether it is appropriate depends on the circumstances of the case. Daimler concerned an unless order that required the party in question to answer interrogatories. The answers were in fact provided, albeit late by a matter of hours, and certain answers claiming privilege were held to be mistaken. This court[34] specifically found that it was not a case of intentional and contumelious disregard of the court’s order,[35] and granted relief against the sanction of striking out the defence, subject to an order that the party provide further answers. It is clearly a fundamentally different case from the present one, where Kam’s breach of the Repatriation Order was found to be “flagrant, inexcusable, contumelious” and her litigation conduct “abusive”.[36]  There is no attempt to comply by bringing in the funds in Kam’s SCB Account and no offer to bring in equivalent funds from an alternative source subsequent to the deadline.

73.The fact that the Action remains on foot as far as Sum B is concerned is, in our view, a point against Kam. It means that she can still seek to refute that part of the plaintiff’s claim with evidence to show that she committed no fraud. We are not persuaded that there will be insuperable difficulties concerning the effect of the “deemed admissions” in relation to Sum A on the Sum B claim. We have not heard argument on this and do not express any views. Suffice it for us to note that this may require examination of Order 18 rule 13,[37] under which deemed admissions arise insofar as an allegation of fact is not traversed, and the extent to which the Judgment, as a judgment entered by default, gives rise to any estoppel: see e.g. Kok Hoong v Leong Cheong Kweng Mines Ltd [1964] AC 993; Au Yeung Siu Tung v Tung Shing Ho (a firm) [1974] HKLR 157; Gridway Knitters Ltd v Tak Lam Hong Ltd [1989] 1 HKLR 363.

74.The next point taken by Mr Jat under this ground is that the sanction was not logically connected to the prejudice that the plaintiff might suffer as a result of Kam’s non-compliance with the Repatriation Order. It was argued that since the judge’s concern was that the plaintiff might obtain an empty judgment at the end, there was “little utility” in imposing an unless order with the sanction of giving an equally empty judgment. Conversely, it was submitted, if at the end the plaintiff is able to make recovery based on the Judgment, this will falsify the original premise that the plaintiff would suffer prejudice due to Kam’s non-compliance with the Repatriation Order.

75.This argument is, with respect, devoid of merits. The Repatriation Order was intended to protect the plaintiff from the risk of empty judgment and in particular to secure the very funds to which the plaintiff makes a proprietary claim, avoiding the need to hunt for assets for execution if the plaintiff obtains judgment at the end. The Unless Order was intended to procure compliance with the Repatriation Order. In the event it is disobeyed, the sanction, in the form of the Judgment, saves the plaintiff from having to prosecute the proceedings in the ordinary course at great expense and length.

76.Finally, it was submitted that it was disproportionate and wrong in principle for the judge to impose the sanction of judgment for the entirety of Sum A (HK$220,548,682), when the Repatriation Order, and therefore Kam’s breach of it, only related to the sum of HK$170,962,682. It was argued that the judge should have applied his own reasoning for not imposing a sanction that would give judgment for the entire Action including Sum B, to arrive at the logical conclusion that the sanction should be limited to the sum that was the subject matter of the Repatriation Order.

77.We do not accept this submission. The plaintiff makes a proprietary claim for the whole of Sum A. The sum of HK$170,962,682 is part of it. Only this part was ordered to be repatriated because the excess, in the amount of HK$49,586,000, had already been removed by Kam and replaced with a sum of US$6,300,000 which, the judge accepted, had not been shown by evidence to be traceable to the HK$49,586,000.[38]  Kam was required to make disclosure relating to this sum of HK$49,586,000 but had thus far flouted the order. The 2 sums (HK$170,962,682 and HK$49,586,000) are comprised in the same cause of action, unlike Sum B which is the subject matter of a separate tort. In these circumstances, it was open to the judge, and not wrong in principle, to impose a sanction that extended to the entire Sum A.

Conclusion

78.For the above reasons, the appeal was dismissed.

Costs

79.There is no dispute that costs should follow the event. The plaintiff asked for the costs of the appeal to be awarded on the indemnity basis. We agree, principally for 2 reasons. First, the appeal had no merits at all. Secondly, the appeal has arisen directly from Kam’s breach of the requirement under court order for her to repatriate the money, which, as found by the judge and not challenged before us, was flagrant, intentional and contumelious. Kam has remained in breach of that order.

80.On behalf of the plaintiff, Mr Lam accepted that the costs attributable to the leave application in CAMP 247/2024 (on which we make no order) should be deducted from its overall costs and was content with 20% as an estimate. The order we make is therefore that the defendant do pay 80% of the plaintiff’s costs to be taxed on the indemnity basis if not agreed.

Mr Douglas Lam SC, Ms Sabrina Ho, Mr Arthur Poon, and Mr Alex Yeung , instructed by M/s P.C. Woo & Co., for the Plaintiff

Mr Jat Sew-Tong SC and Mr Jonathan Fung, instructed by M/s Bowers, for the Defendant