庄跃进 and Others v. 白平

DCCJ 324/2025

[2026] HKDC 1100

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 324 OF 2025

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BETWEEN

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REASONS FOR DECISION

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A. Introduction

1.This is the hearing of two summonses issued by the Defendant (“D”). First, by summons dated 29 May 2026 (“the Interim Stay Summons”), D seeks an interim interim stay of execution of a default judgment granted by DDJ Gekko Lan on 23 April 2026 ([2026] HKDC 673) (“the Default Judgment”) which:―

(1) declared that D held shares in Kingstar (Hong Kong) Holdings Limited (皇星(香港)集團有限公司) (formerly known as Joystar (Hong Kong) Holdings Limited (怡星(香港)集團有限公司) (“the Company”) on trust for the respective Plaintiffs (collectively “Ps” and respectively “P1” to “P6”) in the proportions as explained below; and

(2) ordered that D do execute all necessary documents to transfer the said shares to Ps, failing which a consultant of P’s solicitors be appointed to execute the same under section 38A of the District Court Ordinance, Cap 336 (“DCO”),

pending the determination of D’s summons dated 7 May 2026 for setting aside that judgment and to stay its execution (“Setting Aside and Stay Summons”).

2.Second, by summons dated 12 June 2026 (“Further Affirmation Summons”), D seeks leave to file and serve the 3^rd Affirmation of Pak Ping dated 12 June 2026 (“D 3rd Aff”) in support of the Setting Aside and Stay Summons.

3.At the conclusion of the hearing, I granted both summonses. These are the reasons for my decision.

B. Factual and procedural background

4.The factual background is taken from the judgment of the learned deputy judge: [2026] HKDC 673 §2.

5.P1 invited D to assist him in managing certain businesses to be carried out via a company. A consensus and common intention were formed between them that:―

(1) P1 would form a Hong Kong company to do business in Mainland through its subsidiaries to be formed;

(2) D would assist P1 to run the company and its businesses, and would act as a nominee shareholder and a nominee director of the company for P1; and

(3) D would hold the company’s shares as a bare trustee for and on behalf of P1.

6.On the basis of the above, the Company was incorporated in 2004, with P1 and the D becoming the two subscribers holding 9,900 (99%) and 100 (1%) shares respectively, and the directors of the Company. The costs for setting up the Company and the paid-up capital in the sum of HK$10,000 were paid by P1.

7.In or about 2006, P1 commenced two businesses in Mainland, each to be run under a new subsidiary company incorporated in Mainland, namely 亿安(厦门)无纺布有限公司 and 裕兴通(厦门)汽车内饰材料有限公司 (“Subsidiaries”) which were wholly owned by the Company. In order for the Subsidiaries to be treated as wholly foreign-owned enterprises in Mainland (“WFOE”), the entire shareholding of the Company had to be held by Hong Kong or foreign residents.

8.As P1 was not a Hong Kong or foreign resident, he intended to transfer all his shares in the Company to D, who was then, and remains, a Hong Kong resident, in order to comply with the WFOE requirements.

9.In or about June 2006, upon P1’s invitation, eight other investors (P2 to P6 and three others) agreed to invest in the Company. By a written confirmation (“2006 Confirmation”) dated 6 June 2006, these nine individuals, the Company and the Subsidiaries confirmed that the change in registered shareholders in the Company was to comply with the WFOE requirements, and that the shareholding would be changed in due course to reflect the actual beneficial ownership of the investors in the Company and the Subsidiaries as follows:―

(1) 65% by P1;

(2) 24% by 黄紫终;

(3) 6% by P2;

(4) 1% by 欧秀銮;

(5) 1% by P3;

(6) 1% by P4;

(7) 1% by 林慕达;

(8) 0.5% by P5; and

(9) 0.5% by P6.

10.Pursuant to the 2006 Confirmation, on 15 June 2006, P1 transferred his 9,900 shares in the Company to D, who then became its sole registered shareholder. On 4 February 2010, P1 resigned as a director of the Company, leaving D as its sole director since that date.

11.Ps allege that, in or about 2022, D acted in breach of his fiduciary duties by, inter alia, causing the Company to commence Mainland proceedings against Ps’ wishes and interests.

12.P1 brought an action in Mainland against D. By a civil judgment dated 10 December 2023, the Jimei District People’s Court of Xiamen Municipality (厦门市集美区人民法院) declared that D held a 65% shareholding in the Company on trust for P1. By a civil judgment under case number (2024)闽02民终1217号 dated 15 March 2024, the Xiamen Intermediate People’s Court of Fujian Province (福建省厦门市中级人民法院) dismissed D’s appeal (“Xiamen Proceedings”).

13.On 16 January 2025, Ps issued the writ indorsed with the Statement of Claim. It is not in dispute that D neither responded nor filed any acknowledgment of service.

14.By summons dated 30 April 2025, Ps sought default judgment under Order 19, rule 7 of the Rules of the District Court, Cap 336H (“RDC”). Following a hearing on 25 February 2026, the Default Judgment was granted against D on 23 April 2026.

15.On 7 May 2026, D appeared for the first time by issuing the Setting Aside and Stay Summons (supported by the 1^st Affirmation of Pak Ping, “D 1^st Aff”). His solicitors simultaneously requested Ps to “refrain from executing any documents … in respect of the transfer of shares in [the Company] to [Ps]”, with proposed directions for disposing of that summons.

16.By letter dated 13 May 2026, Ps’ solicitors agreed in principle to the aforesaid proposed directions but did not respond to the request to refrain from executing the share transfers under the Default Judgment.

17.By letter dated 27 May 2026, Ps’ solicitors requested the execution of the share transfer documents under the Default Judgment. D responded by issuing the Interim Stay Summons on 29 May 2026 pursuant to section 6(2) of the DCO, Order 13, rules 8 to 9, and Order 45, rule 11 of the RDC, supported by the 2^nd Affirmation of Pak Ping (“D 2^nd Aff”).

18.By order dated 1 June 2026, pursuant to consent summons dated 19 May 2026, DDJ Val Chow gave directions for filing evidence regarding the Setting Aside and Stay Summons.

C. D’s evidence

19.In D 1^st Aff (which is summarised in D 2^nd Aff), D admits the 2006 Confirmation and his original status as a bare trustee. However, his case is that the trust arrangement “collapsed” (§21) in or about early 2010 under the following circumstances.

20.The cooperation between P1 and D dates back to the 1980s. They “set up and/or managed”: (1) the Subsidiaries in 2002 and 2006 respectively; and (2) 怡星(無錫)汽車內飾件有限公司 (“Wuxi Company”), which was incorporated in Mainland on 12 December 2003 (§§5(b), 5(f) and 8).

21.On 28 April 2004, the Company was incorporated in Hong Kong, and it subsequently acquired the Subsidiaries (§§5(f) and 8(d)).

22.The 2006 Confirmation aimed to restructure the Company and the Subsidiaries as WFOEs. D states this was “a rather risky document” because in substance the Company was not wholly owned by a Hong Kong resident as required by Mainland laws, and Mainland authorities “may go after individuals who knowingly made incorrect representations” to them (§12).

23.D was one of the founders of China Automotive Interior Decoration Holdings Limited (then 8321.HK, now 48.HK) (“Listco”), incorporated in the Cayman Islands on 9 December 2009, with the Wuxi Company as the main operating company. D became an executive director of the Listco on 12 April 2010 (§5).

24.In or about 2009 or 2010, an opportunity arose for the Listco to be listed on the GEM of the Stock Exchange of Hong Kong Limited (§14).

25.Through discussions with P1, D understood that the Company’s shareholders had agreed to “cancel” the 2006 Confirmation, and to use the Listco (then further to be listed) to consolidate various companies, such that the Company and the Subsidiaries “could step back and move separately” (§15(b)). Therefore, in or about early 2010, all of the shareholders of the Company agreed to let D become its sole beneficial owner (§16).

26.Since D was already the sole registered shareholder of the Company, no document was prepared to implement the above. The parties involved “did not think that it was proper for them to sign any further documents, which might bring more troubles” to them during the listing process of the Listco (§17).

27.The above arrangement had been recorded on page 126 of the prospectus of the Listco (of which P1 was the chairman, an executive director and Chief Executive Officer; and D was an executive director) dated 21 September 2010 (“the Prospectus”) (§18) as follows:

“一名執行董事白平先生可能經營與本集團形成競爭的業務。白先生全資擁有皇星（香港）集團有限公司，而皇星（香港）集團有限公司全資擁有廈門材料及擁有億安（廈門）75% 股權。億安（廈門）餘下 25% 股權由白先生的妻子黃紫終女士擁有。白先生於億安（廈門）及廈門材料概無擔任任何董事職務。

除於本節所披露以外，董事或彼等各自之聯繫人概無從事直接或間接與本集團業務形成競爭或可能形成競爭的任何業務”

(“One of the executive Directors, Mr Pak Ping, may have a competing business with the Group. Mr Pak wholly owns Kingstar (Hong Kong) Holdings Limited (皇星(香港)集團有限公司), which in turn wholly owns Xiamen Material and owns a 75% equity interest in Yian (Xiamen). The remaining 25% equity interest in Yian (Xiamen) is owned by Ms Wong Tsz Chung (黃紫終), who is the wife of Mr Pak. Mr Pak has no directorship in Yian (Xiamen) or Xiamen Material.

Save as disclosed in this section, none of the Directors or their respective associates are engaged in any business that, directly or indirectly, competes or may compete with the Group’s business.”)

D. Applicable principles on interim interim stay

28.In Aggressive Construction Co Ltd v Director of Buildings [2025] 3 HKLRD 596, which concerned an interim interim stay of execution pending the determination of a summons for stay of execution pending a statutory appeal against an administrative decision, Cheng J at §§19-20 applied the principles governing an application for a stay of execution of a judgment pending appeal summarised in Fung Shing Chung v Choi King Hung [2024] HKCA 1021 at §20 by Cheung JA (with whom G Lam JA agreed) as follows:

(1) The applicant is required to demonstrate a good reason for a stay of execution.

(2) Generally speaking, the existence of merely an arguable appeal cannot by itself amount to a sufficient reason to justify a stay. It is the minimum requirement before a court would even begin to consider granting a stay.

(3) In other words, if the Court is not convinced that there exist arguable grounds of appeal, no stay will be granted however exceptional the circumstances may otherwise be justifying a stay of execution.

(4) On the other hand, the existence of a strong appeal or a strong likelihood of success will usually by itself enable a stay to be granted because this would constitute a good reason for a stay.

(5) In most cases, where the Court is faced with simply the existence of an arguable appeal, it becomes necessary for the applicant to provide additional reasons as to why a stay is justified.

(6) Commonly, this is done by demonstrating that without a stay the appeal would be rendered nugatory, for example, because of an appreciable risk that the respondent to the appeal would not be able to repay in the event of a successful appeal against a money judgment, or because the failure to grant a stay would have a serious deleterious effect on the applicant.

(7) In considering an application for a stay pending appeal, it would be impractical and even undesirable for the Court to go deeply into the merits or strengths of the appeal, although the Court must still form a preliminary view of these aspects.

(8) While the existence of a strong appeal would tend to lead the Court to exercise its discretion in favour of granting a stay, the threshold is a high one. For there to be a “strong appeal” such as would justify the grant of a stay without more, the situation must be one which would lead the Court to conclude that something has grievously gone wrong with the process of law in the Court below, or that the appellant is 'almost bound to succeed'. Absent such a case, something more needs to be demonstrated.

(9) Interim-interim relief is meant to be an urgent temporary stop-gap measure, in circumstances such that the court has to do practical justice on the balance of fairness even though it may not have sufficient time or a fair opportunity to consider an application for interlocutory relief fully. The Court conducts a multi-faceted assessment; factors that may be taken into account include the merits, the effect of the grant or refusal of the relief, and the subject matter at stake. The Court will take whichever course appears to carry the lower risk of injustice if it should turn out to be wrong.

29.In the context of this case, the references to “appeal” must be read as referring to an application to set aside a regular default judgment, the relevant principles of which are comprehensively set out by DHCJ William Wong SC in Wong Ling Pan v Team Building Ltd [2021] HKCFI 336 §§18-22. The relevant propositions are distilled as follows:

(1) Where there has been a regular default judgment, the court has an unrestricted discretion to be exercised in accordance with the authorities.

(2) The primary or dominant consideration of the court is whether the defendant can discharge the burden to demonstrate that he has a defence on the merits which has a real prospect of success, or carries with it some degree of conviction, as disclosed in potentially credible affidavit evidence. It is generally not sufficient for a defendant merely to show an arguable defence, although that alone would justify leave to defend being given under Order 14.

(3) To prove the merits factor, the defendant must condescend to particulars. The mere assertion in an affidavit of a given situation by the defendant does not, ipso facto, prove merits.

(4) The court has to form a provisional view as to whether or not the defendant has a realistic prospect of successfully defending the action with the following guidance in mind:

(a) The exercise involves assessing whether or not the defendant’s evidence on disputed factual matters has a realistic prospect of being accepted and, if it has, that the defendant has a realistic prospect of establishing a defence in law.

(b) The court should be mindful of the interlocutory nature of the application and act with a sense of proportionality.

(c) The court must look at the whole situation having regard to inherent plausibility, inconsistency with contemporaneous documents and other compelling evidence, as opposed to isolating each factual issue and considering whether it is possible that the defendant’s story on that issue is credible.

(d) While the court must not undertake a mini-trial on the affidavit, it is not obliged to suspend its critical faculties and assume that the defendant’s evidence is accurate. If the defendant’s defence is incredible in any material respect, it cannot be said that there is a fair or reasonable probability that the defendant has a real or bona fide defence.

(5) Where merits are proved, justice will often demand that the default judgment be set aside. However, this does not create an automatic entitlement. The court is obliged to exercise its discretion with regard to all the relevant circumstances.

(6) Other relevant factors to be weighed against the merits factor, which may tip a case one way or the other, include the defendant’s explanation of why he allowed default judgment to occur, his conduct after proceedings were served on him, any delay on his part in applying to set aside and any prejudice that would be caused to the plaintiff or to third parties if the default judgment were to be set aside.

30.Mr Ng submitted that the “starting point” is that a successful party should not be deprived of the fruits of its success, citing Ngan Pui Chi v Bao Quan [2018] HKCFI 1383 §19(4), Au-Yeung J. However, that case involved a stay of execution after trial pending appeal. This is juridically distinct from the instant case.

E. Application to the facts

31.In support of the Interim Stay Summons, Mr Cheung, appearing for D, contended that the Setting Aside and Stay Summons:

(1) has a reasonable prospect of success or is at least arguable based on the Prospectus; and

(2) would be rendered nugatory without an interim interim stay because D would lose control of the Company’s subsidiaries.

32.Mr Ng, appearing for Ps, submitted that D has failed to show the above because:―

(1) the Prospectus “merely reflects the position on paper, as what would be revealed by conducting a company search of the Company”; and

(2) D has failed to adduce evidence to show that the Setting Aside and Stay Summons would be rendered nugatory.

33.I broadly accept Mr Cheung’s submissions. Given the interim nature of the relief sought, the analysis below is strictly confined to that narrow purpose.

34.First, the Prospectus demonstrates that the Setting Aside and Stay Summons is at least arguable.

35.Ps’ claim contradicts the Prospectus. Mr Ng’s contention that the ownership statement denotes a mere “position on paper” is untenable, given the strict disclosure requirements under the listing framework.

36.Rule 11.04, note 3 of the GEM Listing Rules provides:

“Full and accurate disclosure of any business or interest of each director, controlling shareholder and, in relation only to the initial listing document, substantial shareholder and the respective close associates of each that competes or may compete with the business of the group and any other conflicts of interest which any such person has or may have with the group must be disclosed in each listing document and circular required pursuant to the GEM Listing Rules (excluding any Explanatory Statement issued pursuant to rule 13.08) and in the annual report and accounts and interim report of the listed issuer.

[…]

Notes 3: Of the interests required to be disclosed pursuant to this rule, a director or substantial shareholder must include any directorship or ownership of an entity engaged in a business which competes or is likely to compete with the business of the group. The disclosure should include the name of each such entity, the nature of its business and details of the directorship and/or ownership of the issuer’s directors and substantial shareholders and their respective close associates in such entity.” (emphasis added)

37.Rule 14.08(7) of the GEM Listing Rules provides:

“[A] listing document is required to include […] (7) such particulars and information which, according to the particular nature of the applicant and the securities for which listing is sought, is necessary to enable an investor to make an informed assessment of:—

(a) the activities, profits and losses, assets and liabilities, financial position, management and prospects of the applicant; and

(b) the rights and trading arrangements attaching to such securities.”

38.Rule 17.56(2) of the GEM Listing Rules provides:

“[T]he information contained in [corporation communication required pursuant to the GEM Listing Rules] must be accurate and complete in all material respects and not be misleading or deceptive”.

39.Making a false statement in a prospectus attracts criminal liability under section 384 of the Securities and Futures Ordinance, Cap 571 and section 342F of the Companies (Winding Up and Miscellaneous Provisions) Ordinance, Cap 32: Securities and Futures Commission v Qunxing Paper Holdings Co Ltd (No 2) [2018] 1 HKLRD 1060 §§29-33, G Lam J (as he then was).

40.Second, absent an interim interim stay, the Setting Aside and Stay Summons would be rendered nugatory. The potential prejudice to D stems from the fact that the Default Judgment would give Ps complete control over the Company’s wholly-owned subsidiaries: Wong Pui Yin Georgeanna v Hiroshi Technologies Ltd [2024] HKCA 489 §21, G Lam JA.

41.Mr Ng contended that D failed to adduce sufficient evidence of prejudice, relying on Huang Qingzhan v China Ding Yi Feng Holdings Ltd [2020] HKCFI 689 §4(5) (Linda Chan J) (appeal dismissed: [2021] HKCA 1492) and Indian Overseas Bank v Seabulk Systems Inc [2023] 4 HKLRD 125 §32 (Chow JA). However, those authorities address the defendants’ alleged financial impacts of enforcing money judgments. They are inapplicable here where execution admittedly strips D of control over the Company’s subsidiaries.

42.Mr Cheung prayed in aid the fact that, in obtaining the Default Judgment, Ps failed to disclose the Prospectus.

43.In Sky Joy Investment Ltd v Zheng Dunmu HCA 395/2016 (unreported, 16 August 2017), DHCJ William Wong SC held (§50):

“[G]iven the nature of an application for default judgment, akin to an ex parte application, the plaintiff must make a full and frank disclosure of matters which militates against the grant of declaratory relief to the court so that the court can properly assess the merits of granting the same without the benefit of full submissions from both sides.”

44.In Bluesun Capital Ltd v Tewoo Group Finance No 3 Limited & Ors [2021] HKCFI 2040, Recorder Manzoni SC held (§53):

“As a matter of practice it is clear that a material non disclosure is sufficient to set aside a default judgment. Generally speaking the plaintiff would not have to make disclosure of possible defences to the underlying action, because those defences are generally not relevant to a default judgment. But the matters to which I have alluded go beyond simply being a defence to the action. They relate to the plaintiff’s standing and locus to bring the action, and to the validity of the service that the plaintiff relied upon.”

45.In the light of the above, it is unnecessary to express any view on this submission, which requires a consideration of whether the alleged non-disclosure militates against the grant of the Default Judgment.

F. Further Affirmation Summons

46.By a civil judgment under case number (2024)闽0625民初1579号dated 27 June 2025, the Changtai District People’s Court of Zhangzhou City (福建省漳州市长泰区人民法院) dismissed the Company’s claim (acting through D) that a transfer of the 100% shareholding in its wholly-owned subsidiary, 諾奧(福建)環保家居用品有限公司, to another entity was invalid. On 24 October 2025, the Intermediate People’s Court of Zhangzhou City (漳州市中级人民法院) heard the appeal, and the judgment remains pending under case number (2025)闽06民终2505号 (“Zhangzhou Proceedings”).

47.D 3^rd Aff seeks to adduce a Mainland legal opinion, explaining the merits of D’s intended application for civil procuratorial supervision (民事检察监督) to be submitted to the Xiamen Municipal People’s Procuratorate (廈門市人民檢察院) against the appeal judgment in the Xiamen Proceedings pursuant to Articles 212 and 216 of the Civil Procedure Law (《民事诉讼法》), apparently with a view to overturning the finding in the Xiamen Proceedings that P1 owned 65% shareholding of the Company.

48.Mr Ng submitted that D 3^rd Aff is irrelevant to the determination of the Setting Aside and Stay Summons because the issues in the Xiamen Proceedings are different from those in this action.

49.However, since Ps specifically pleaded the Xiamen Proceedings, sound and fair case management dictates exercising discretion to admit this affirmation. This ensures the court adjudicating the Setting Aside and Stay Summons has the full narrative picture.

50.For the avoidance of doubt, I express no view on the relevance of the Xiamen Proceedings. As G Lam J (as he then was) observed in Wei Xing v Willwin Development (Asia) Co Ltd HCMP 1922/2016 (unreported, 13 April 2017) §14:

“The rule in Hollington v Hewthorn [1943] 1 KB 587 means that those Mainland judgments are not admissible in Hong Kong as evidence of the facts found therein […]”

G. Disposition

51.Taking into account all the relevant factors, granting an interim interim stay pending the determination of the Setting Aside and Stay Summons carries the lower risk of injustice if it should turn out to be wrong. Leave is granted for D 3^rd Aff to be filed.

52.Costs of both summonses are reserved.

53.I thank counsel for their helpful submissions.

Mr Isaac Ng, instructed by Guantao & Chow Solicitors and Notaries, for the 1^st to 6^th Plaintiffs

Mr Tommy Cheung, instructed by Hui Doe & Sum Law Firm LLP, for the Defendant