Li Wai Chun Transportation Company Ltd v. Chang Man Shan Yvette and Others

HCA 198/2023

[2025] HKCFI 6303

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 198 OF 2023

________________________

BETWEEN

________________________

________________________

D E C I S I O N

________________________

1.This is the 1^st Defendant’s application to vary the domestic Mareva injunction dated 14 March 2023 and the worldwide Mareva injunction dated 11 August 2023 so as to permit her to have money paid out of court for her legal costs.

2.There is currently an amount of HK$1,669,985.78 in court (“the Net Proceeds”), which was derived from the net proceeds of sale of a flat in Hong Kong known as the Artisan Property previously owned by the 1^st Defendant.  The 1^st Defendant asks that a total HK$1,360,000 be paid out of the Net Proceeds to settle her legal fees incurred and to be incurred in these proceedings and other proceedings in Hong Kong.  According to her, the HK$1,360,000 comprises (1)  the legal costs which have been incurred so far in the total amount of HK$1,085,255, (2)  the legal costs which are to be incurred up to the stage of discovery in the region of HK$110,230, (3)  the legal costs for seeking legal advice in the total amount of $160,000 in two other sets of proceedings. 

3.In determining whether funds subject to an injunction should be released to a defendant, the court draws a distinction between cases where the plaintiff has made a proprietary claim against the defendant and cases where he has not.  As explained by Sir Thomas Bingham MR in Sundt Wrigley Co Ltd v Wrigley (unreported, 23 June 1993):

“In the Mareva case, since the money is the defendant’s subject to his demonstrating that he has no other assets with which to fund the litigation, the ordinary rule is that he should have resort to the frozen funds in order to finance his defence. In the proprietary case, however, the judgment is a more difficult one because in the plaintiff’s contention the money on which the defendant wishes to rely to finance his litigation is not the defendant’s money at all but represents money which is held on trust for the plaintiff. That of course, gives rise to an obvious risk of injustice if the plaintiff, successful at the end of the day, finds that his own money has been used to finance an unsuccessful defence.”

A.   RELEVANCE OF THE PLAINTIFF’S PROPRIETARY CLAIM

4.The Plaintiff submits that it has a strong proprietary claim for HK$701,358 and that the 1^st Defendant should not be allowed to spend the Plaintiff’s money on her legal fees.

5.The court should ask the following four questions to determine whether funds should be released from an injunction where there is a proprietary claim by the plaintiff.

(1)  Does the plaintiff have an arguable proprietary claim to the funds in issue?

(2)  If yes, does the defendant have arguable grounds for denying that claim?

(3)  If yes, has the defendant demonstrated that, without the release of the funds in issue, he cannot effectively defend the proceedings?

(4)  If yes, where does the balance of justice lie as between, on the one hand, permitting the defendant to expend funds which might belong to the plaintiff and, on the other hand, refusing to allow the defendant to expend funds which might belong to him?

See Marino v FM Capital Partners [2016] EWCA Civ 1301 at [23] (Sales LJ); Koze Investments LLC v Fantune International (HK)  Co Ltd [2025] HKCFI 4786 at [14] (DHCJ Le Pichon).

6.It is right to point out that the Plaintiff has only pleaded a proprietary claim against the 1^st Defendant for part of the Net Proceeds.  This claim was only added to the Plaintiff’s Re-Re-Amended Statement of Claim (“RRASOC”)  just over two weeks before today’s hearing on 25 November 2025.  The Plaintiff effectively asserts that it was able to follow and trace HK$701,358 from its funds to the Artisan Property, and then into the sale proceeds from the Artisan Property.  Even assuming this assertion to be arguable, as recognised in paragraph 25A of the RRASOC, this would not give the Plaintiff a proprietary interest in the entirety of the Net Proceeds in court.  This is because the Artisan Property was purchased by the 1^st Defendant for HK$5,815,000.  The Plaintiff can only arguably assert a proprietary claim to the extent of HK$701,358 that was allegedly used to purchase the Artisan Property.  This means the Plaintiff can at most be entitled to a proportionate interest in the Artisan Property, i.e. 12% (HK$701,358 / HK$5,815,000 x 100), and can only assert a proprietary claim in respect of 12% of the Net Proceeds, which equals to HK$200,398. 

7.In other words, 88% of the Net Proceeds, or about HK$1,470,000 odd, is not subject to any proprietary claim by the Plaintiff.  This exceeds the amount sought by the 1^st Defendant in her present application.  The 1^st Defendant’s application for the release of HK$1,360,000 can therefore be viewed as targeting the part of the Net Proceeds which is not subject to the Plaintiff’s proprietary claim.

8.Relying on Foskett v McKeown [2001] 1 AC 102 at 130-131, the Plaintiff submits that it can elect by enforcing an equitable lien on the sale proceeds of the Artisan Property, as opposed to taking a proportionate part of them.  This does not in my view advance the Plaintiff’s position any further.  It does not appear from its RRASOC that the Plaintiff has properly pleaded its election for an equitable lien.  In any event, the Plaintiff’s enforcement of a lien would only secure a personal claim against the 1^st Defendant (Foskett at 130A-B & 131G-H).  It would not give rise to a proprietary claim as asserted by the Plaintiff.

9.For these reasons, and on the particular facts of this case, it is unnecessary for the court to consider the four questions in relation to the Plaintiff’s proprietary claim for the purpose of determining whether the funds in court should be released to pay the 1^st Defendant’s legal costs. 

B.  WHETHER THE 1^ST DEFENDANT HAS OTHER ASSETS AND PURPOSE OF APPLICATION

10.Where the defendant seeks the release of funds, which are subject to a Mareva injunction but which are not subject to a proprietary claim, to meet certain expenses, the court should consider whether the defendant has shown by sufficient evidence that (1)  he does not have other assets available to meet those expenses; and (2)  the purpose of the application is not an attempt to dissipate the assets to frustrate the plaintiff’s enforcement of a judgment: Wharf Ltd v Lau Yuen How [2010] 1 HKLRD 783 at [14] (Au J).

B1.  Whether There Are Other Available Assets

11.As stated in S Gee KC, Commercial Injunctions (7^th ed, 2022)  §21-053, “[b]ecause a real risk of dissipation has already been established by the evidence, judges are entitled to have a ‘very healthy scepticism’ about assertions made by the party against whom the Mareva injunction has been granted, about what is needed to maintain the pre-freezing order standard of expenditure, and this should be borne in mind in deciding whether further evidence is required.”

12.The 1^st Defendant is currently residing in the UK.  She has filed 5 affirmations to support her application and to disclose her assets.  According to her, she has produced all of her bank statements in Hong Kong and the UK that she can retrieve from her banks.  She has provided some detailed explanations of where the money that she received from the Plaintiff between 2006 and 2021 had been incurred.  They include (1)  education expenses for her children, (2)  family’s living, household and medical expenses, (3)  provision of funds to her former husband (a current director of the Plaintiff)  to support his personal ventures, (4)  purchase of 4 landed properties in Hong Kong between 2008 and 2011, (5)  purchases and investments between 2019 and 2022, and (6)  expenditures for the Plaintiff’s business or repayments to the Plaintiff.  She also explains that part of what she received from the Plaintiff were in fact reimbursements of the expenses previously incurred by her for the Plaintiff’s business.

13.The Plaintiff’s position is that there is a significant gap between the amounts of funds allegedly misappropriated by the 1^st Defendant from the Plaintiff (some HK$28.7 million)  and the assets currently disclosed by her (worth around HK$5 million only), which remains unexplained.

14.Looking at the detailed evidence adduced by the 1^st Defendant, I am unable to agree with the Plaintiff’s submissions that there is “an obvious disconnect between the amount of funds misappropriated from P and the value of assets now said by D1 to be under her name”, and that the significant gap between the total amounts of money withdrawn from the Plaintiff and the value of the 1^st Defendant’s current assets is unexplained.  In particular, the 1^st Defendant has given detailed explanations in her affirmations on how she had incurred substantial expenses for her two children.  As the Plaintiff’s counsel acknowledges in his skeleton submission, the Plaintiff “has no way of testing D1’s assertions as to the nature of her dealings with her family members and other associates”. 

15.The Plaintiff relies on two payments the 1^st Defendant allegedly made to a third party and submits that the 1^st Defendant’s explanations are not credible.  These two payments only form part of many extensive explanations given by the 1^st Defendant, which do not appear to be challenged by the Plaintiff. 

16.The Plaintiff further relies on a report of an accounting expert who has extracted the significant transactions from the 1^st Defendant’s bank statements and compared the amount of net inflows and outflows with amounts that the 1^st Defendant has explained.  The expert is of the view that there is at least a net cashflow of some HK$3.9 million which has been withdrawn from the 1^st Defendant’s bank accounts and is unaccounted for.  It is necessary to bear in mind the 1^st Defendant’s bank statements were primarily produced for the purpose of responding to the ancillary disclosure order dated March 2025.  That ancillary disclosure order was sought by the Plaintiff to police the worldwide Mareva injunction.  In other words, the 1^st Defendant’s purpose of the disclosure of bank statements was not the same as the objectives of the Plaintiff’s accounting expert.  In any event, I note that the 1^st Defendant has sought to provide further explanations in her latest affirmation to deal with some of the accounting expert’s observations.  For the purpose of the present application, I do not attach much weight to the opinions of the Plaintiff’s accounting expert.

17.The Plaintiff also points to the fact that the 1^st Defendant is able to maintain two residences in the UK.  There is evidence to show that the 1^st Defendant gave evidence in the UK in April 2025 to say that she resided in Sheffield.  However, in all her affirmations in these proceedings, she gave a residential address in Manchester.  In the 1^st Defendant’s solicitors’ letter to the Plaintiff’s solicitors in June 2025, it was stated that the 1^st Defendant only tentatively resided in Sheffield in April 2025 and would stay in Manchester from time to time.  There is also some evidence to suggest that the Sheffield property was provided by the employer of the 6^th Defendant.  Importantly, there is presently no evidence that the 1^st Defendant owns a separate property in Sheffield.  I am not persuaded that the 1^st Defendant’s evidence in the UK provides a sufficient basis for the court to cast doubt on the 1^st Defendant’s financial means.

18.Finally, the Plaintiff submits that the 1^st Defendant has failed to prove that there are no viable alternative sources of funds. 

19.In considering whether a defendant has other assets available to meet his expenses, the court should not limit its consideration to funds to which the party concerned has a legal right, if there are reasonable grounds for believing that it can obtain money otherwise: Atlas Maritime SA v Avalon Ltd (No 3) [1991] 1 WLR 917 at 927B (Lord Donaldson MR). 

20.Accordingly, it is relevant to consider not only the defendant’s own assets, but whether there are others who may be willing to assist the defendant to obtain legal advice and representation.  As observed by Males J in Tidewater Marine International Inc v Phoenixtide Offshore Nigeria Ltd [2015] EWHC 2748 (Comm)  at [43], the position in this context is similar to that which obtains when the court is considering an argument that security for costs should not be ordered on the ground that it would stifle the claim (cf. Keary Developments Ltd v Tarmac Construction Ltd [1995] 3 All ER 534 where Peter Gibson LJ referred to consideration of whether a plaintiff “can raise the money needed from its directors, shareholders or other backers or interested investors”). 

21.The 1^st Defendant has adduced evidence to explain (1)  how a legal bill from her former solicitors for about HK$69,000 was settled with the help of her daughter, (2)  how she borrowed HK$91,200 from her cousin and friends to deposit with her current solicitors as costs on account, (3) why it is not feasible to seek financial assistance from her parents, the 6^th Defendant or her daughter, and (4)  why it is unrealistic to expect her relatives and friends to advance any substantial sum to her to fund her defence.  The 1^st Defendant has also explained that her current solicitors are willing to allow her to settle their bill until the conclusion of the present application.

22.The Plaintiff, however, disputes the 1^st Defendant’s position and submits that the 1^st Defendant has not discharged her burden of proof to explain why she cannot obtain funds from the 1^st Defendant’s daughter, her parents, the 6^th Defendant and one Mr Leung.  Essentially, the Plaintiff contends that the 1^st Defendant has not adduced sufficient evidence to show that each of these individuals has no sufficient resources to provide financial assistance to the 1^st Defendant.

23.Looking holistically at all the evidence adduced by the 1^st Defendant, it is my view that she has just about discharged her burden to show that there are no others who are willing to assist her to obtain legal advice and representation.  Insofar as the Plaintiff suggests that the 1^st Defendant’s daughter is merely a nominee of the 1^st Defendant, this is not something the court is in a position to determine at this stage.

24.On the basis of the evidence so far adduced by the 1^st Defendant, I am unable to say that her explanations should be treated as incredible.  I cannot simply reject them outright at this interlocutory stage.  For the purpose of this application, I think the 1^st Defendant has shown that she does not have other assets available to meet the legal expenses.

B2.  Purpose of Application

25.S Gee KC, Commercial Injunctions (7^th ed, 2022)  §21-052 states that “the fact that the defendant’s purpose in applying for the variation is not deliberately to frustrate enforcement of a judgment does not mean that the variation is to be permitted … The test is to consider objectively the overall justice of allowing the payment to be made including the likely consequences of permitting it on the prospects of a future judgment being left unsatisfied, and bearing in mind that the assets belong to the defendant and that the injunction is not intended to provide the [plaintiff] with security for his claim or to create an untouchable pot which will be available to satisfy an eventual judgment.” 

26.The 1^st Defendant’s summons for variation of the two injunctions was issued on 19 March 2024.  At the time, the 1^st Defendant only asked for HK$750,000 to be paid out of the Net Proceeds for her legal expenses.  The 1^st Defendant has applied to amend that summons to increase the amount to HK$1,360,000.  According to the 1^st Defendant, the increase of HK$610,000 is the result of the 11 interlocutory applications taken out by the Plaintiff involving the 1^st Defendant since March 2024 which have significantly escalated her legal expenses.  Having considered the evidence filed by the parties, it is my view that the objective purpose of the present application is to enable the 1^st Defendant to have some resources to settle her legal expenses, and not to frustrate the enforcement of an eventual judgment in these proceedings. 

C.  JUSTICE AND CONVENIENCE

27.“In exercising the discretion the question whether to grant the variation is the same as whether an injunction should be granted to prevent assets being used in this way.  That question is whether on the evidence before the court, it is just and convenient to maintain the injunction or to grant the variation.  The Mareva injunction jurisdiction should not be used so as to have the effect of interfering with the defendant having a fair trial.  It would be unjust for the injunction to have this consequence and therefore contrary to [s. 21L(1)  of the High Court Ordinance (Cap 4)].”: S Gee KC, Commercial Injunctions (7^th ed, 2022)  §21-048.

28.The Plaintiff points to the fact that the 1^st Defendant had failed to comply with the disclosure order in the domestic Mareva injunction and that it has commenced committal proceedings in HCMP 1187/2025 against the 1^st Defendant.  The 1^st Defendant is currently acting in person in the committal proceedings.  The substantive hearing of the committal proceedings will take place on 19 December 2025.  In the present application, it is relevant to mention that the total sum which the 1^st Defendant seeks to release from court includes a sum of HK$80,000 to cover her legal expenses in the committal proceedings.

29.The Plaintiff relies on National Bank of Greece v Constantinos Dimitriouloanna (unreported, 10 November 1987)  to contend that where a defendant is in breach of an injunction sought to be varied (including its disclosure provisions), the court may in its discretion refuse to entertain any application for its variation so long as the defendant remains in contempt of court.  In National Bank of Greece, a Mareva injunction was granted against a defendant in respect of assets within the jurisdiction, and a disclosure order was made in respect of all of his assets.  The Mareva order was varied to allow for the cost of defending the case on the basis that there were no available unfrozen funds. Subsequently, it had emerged that, contrary to the defendant’s affidavit, he had large amount of unfrozen assets outside the jurisdiction from which he could pay his solicitors if he wished.  Kennedy J at first instance set aside the variation order.  The defendant appealed to the English Court of Appeal, which dismissed the appeal.  Parker LJ said that “the general circumstances indicate that this defendant is doing everything he can to conceal what assets he has got, to preserve his assets overseas and to pay his solicitors out of the funds in this country, thereby, at any rate, prima facie, defeating the purpose of the Mareva injunction”, and that the defendant was abusing the process of the court and in contempt of court. 

30.I do not believe that whenever a defendant remains in contempt of court of an ancillary disclosure order for a Mareva injunction, the court would invariably exercise its discretion against varying the injunction.  A similar view was expressed in Jademan (Holdings)  Ltd v Tony Wong Chun Loong [1990] 2 HKLR 577. At p 581, Sir Derek Cons VP, after referring to a number of authorities including the National Bank of Greece case, said that the first instance judge was mistaken because he “took the view that once satisfied that full disclosure had not been made in accordance with the order of Barnes J he was precluded as a matter of law from consideration of any application to vary”. Indeed, in Assets Investments Pte Ltd v The United Islamic Investments Foundation [1995] 1 HKC 560, Mortimer JA at 564A-B referred to Jademan and said that “a defendant who has not obeyed an order to disclosure is not shut out from making an application of this kind [i.e. an application to vary the provision for legal and other expenses in a Mareva injunction]”. 

31.In the present application, it seems to me that the fact that the 1^st Defendant did not comply with the disclosure order in the domestic Mareva injunction is only one of the matters to be taken into account when exercising the court’s discretion.  Further, I do not derive much assistance from the National Bank of Greece case as there is no sufficient evidence before the court to indicate that the 1^st Defendant has hidden away substantial assets in Hong Kong or abroad.

32.On the evidence before the court, I have come to the view that it is just and convenient to vary the domestic and worldwide Mareva injunctions to permit the 1^st Defendant to use part of the Net Proceeds that is not subject to the Plaintiff’s proprietary claim for her legal expenses in these proceedings and two other sets of proceedings.  I believe the overall justice lies in allowing the variation to be made so that the 1^st Defendant would not be impeded from defending herself in these proceedings and the other proceedings. 

33.As far as quantum is concerned, I recognise that the court in a Mareva case will not ordinarily concern itself with the quantum of individual items of costs, and will not act as a form of provisional taxing body for the purpose of scrutinising the defendant’s legal fees: S Gee KC, Commercial Injunctions (7^th ed, 2022)  §21-058.  It would appear from the authorities cited in the text that this general position is concerned with future expenses, rather than incurred expenses.  That is why Neuberger J in Anglo Eastern Trust Ltd v Kermanshahchi [2002] EWHC 3152 at [53] said “I deprecate strongly the notion that the court should be required to act as a pre-emptive costs judge, from time to time deciding what the defendant’s solicitors should be allowed to spend”.

34.In the present case, the bulk of the 1^st Defendant’s legal expenses in question are incurred costs.  They come to a total of HK$1,085,255, which is shown and itemised in the updated skeleton bill of costs of the 1^st Defendant’s solicitors.  HK$232,640 of this total relates to costs of the present application, which should be carved out to be dealt with separately.  In my view, the 1^st Defendant should only be allowed to spend a reasonable amount on her incurred legal costs.  As Neuberger J said in Anglo Eastern Trust Ltd (above)  at [7], “the normal course in a case such as this, where a freezing order of a non-proprietary nature has been obtained in favour of the claimant, is to permit the defendant, without any express limitation, to spend a reasonable sum on his legal costs” [emphasis added].  Having looked at the updated skeleton bill of costs, it seems to me that a reasonable sum should be around HK$600,000. 

35.In respect of future legal expenses, the 1^st Defendant seeks a total of HK$270,230.  This is made up of HK$110,230 as expenses to be incurred in the proceedings up to discovery, HK$80,000 as legal expenses in each of the committal proceedings, and in HCMP 2434/2024 (a related action commenced by Mr Lam against the 1^st Defendant).  The sum of HK$110,230 in fact includes HK$107,400 which comprises 1^st Defendant’s counsel’s fee and solicitors’ work done for the present application.  Such expenses will be dealt with separately.  I therefore reduce the 1^st Defendant’s future legal expenses (up to discovery)  in these proceedings and those in the other two sets of proceedings to HK$162,830.

36.I exercise my discretion to vary the two injunctions to permit the 1^st Defendant to have HK$762,830 (HK$600,000 + HK$162,830)  paid out of court for her legal expenses.

37.I understand that the Plaintiff has also obtained a worldwide freezing order from the High Court of Justice in England (“the English Freezing Order”)  against the 1^st Defendant, in which the 1^st Defendant has been ordered, amongst other things, not to dispose of, deal with or diminish the value of any of her assets which they are in or outside England up to HK$34,460,508.50.  It is not a matter for this court to express any view on whether the 1^st Defendant is required to seek a variation of the English Freezing Order in order for any money to be paid out of the Net Proceeds in Hong Kong.  Nonetheless, any payment out order of this court should be made subject to either a variation of the English Freezing Order to permit the release of HK$762,830 to the 1^st Defendant, or alternatively an agreement signed by the Plaintiff and the 1^st Defendant to confirm that no such variation is required.

D.  CONCLUSION

38.For all of the above reasons, I accede to the 1^st Defendant’s application for variation.  I make the following orders.

(1)  The Mareva injunction made by Fung J on 14 March 2023 (as subsequently continued by Cheng J on 24 March 2023)  and the worldwide Mareva injunction made by Remedios J on 11 August 2023 (as subsequently continued by DHCJ MK Liu on 4 September 2023 and varied by DHCJ Gary CC Lam on 28 March and 10 April 2025)  be further varied so as to permit HK$762,830 out of the sum of HK$1,669,985.78 paid into court on or around 11 April 2023 (“the Sum”)  to be paid out to the 1^st Defendant for her legal advice and representation.

(2)  Subject to the variation of the English Freezing Order to permit the release of HK$762,830 to the 1^st Defendant, or alternatively an agreement signed by the Plaintiff and the 1^st Defendant to confirm that no such variation is required, a sum of HK$762,830 be paid out of the Sum to the 1^st Defendant’s solicitors for the 1^st Defendant’s legal advice and representation.

39.I also give the parties liberty to apply.

40.I will now hear the parties on costs.

[Submissions on costs]

41.I make an order that the costs occasioned by the Plaintiff’s opposition to the 1^st Defendant’s Summons dated 19 March 2024 (as amended on 10 December 2025)  are to be paid by the Plaintiff to the 1^st Defendant to be summarily assessed, and the remaining costs are to be in the cause of the action.

[Submissions on summary assessment]

42.Adopting a broad-brush approach, (1)  I summarily assess the 1^st Defendant’s costs occasioned by the Plaintiff’s opposition at HK$101,400 and (2)  I summarily assess the 1^st Defendant’s remaining costs occasioned by the 1^st Defendant’s Summons at HK$200,000. 

43.Given that the costs associated with the present application were carved out from the 1^st Defendant’s skeleton bill of costs, the amount of HK$200,000 should now be added to the sum of HK$762,830 whenever that sum is mentioned in the orders made earlier.  For the avoidance of doubt, when drawing up the court’s order, the sum of HK$962,830 should be used instead of the sum of HK$762,830.

Mr Zenith Chan, instructed by Edward Lau Phoebe Ng Solicitors LLP, for the Plaintiff

Mr Bache Sit, instructed by Ivan Tang & Co., for the 1^st Defendant