China Financial Services Holdings Ltd v. Zou Muxin

HCMP 473/2024

[2026] HKCFI 3837

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 473 OF 2024

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D E C I S I O N

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Background Facts

1.On 29 February 2024, the Defendant (Mr Zou) served a statutory demand (Statutory Demand) on the Plaintiff (CFSH) based on two judgments of the Beijing Higher People’s Court for RMB 7,885,102.46 dated 29 December 2023 (Mainland Judgments).[1] CFSH is a publicly listed company whose shares are traded on the Hong Kong Stock Exchange and carries on business in financial services.

2.The underlying claim is made on guarantees made by CFSH in respect of investments made by Mr Zou in an investment scheme. The Fourth Intermediate People’s Court of Beijing Municipality found in favour of Mr Zou at first instance. CFSH appealed to the Beijing Higher People’s Court who delivered the Mainland Judgments. The Mainland Judgments were not registered in Hong Kong under the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap. 597) (MJREO).

3.On 21 March 2024, CFSH commenced these proceedings by originating summons to restrain Mr Zou from presenting a winding-up petition (Originating Summons). CFSH’s position was that there was a bona fide dispute of the debt. It was said that the Mainland Judgments are not recognised since they were not registered under the MJREO and that they were not final and conclusive since the time limit to make a re-trial application[2] to the Supreme People’s Court (SPC) had yet to expire. CFSH also stated that the enforcement of the Mainland Judgments was contrary to public policy, and that it was a solvent company.

4.The next day CFSH took out a summons for interim relief to the same effect (Summons). By a consent order dated 25 March 2024, directions were given and the Summons was adjourned to a date to be fixed for substantive argument. Mr Zou undertook not to present a winding-up petition pending the determination of the Summons against CFSH undertaking to pay RMB 1,577,020.50 into court by 27 March 2024. CFSH duly made the payment into court in Hong Kong dollars.

5.In April 2024, the SPC issued notifications that it would hear CFSH’s retrial applications. On 20 September 2024, CFSH applied to adjourn the hearing of the Summons for 6 months on the basis that its retrial application was pending before the SPC (Adjournment Summons). At that time, dates had yet to be fixed for the retrial application to be heard by the SPC. The matter was heard before Recorder Suen SC on 26 September 2024. Against CFSH’s undertaking to pay a further HK$2.65 million into court, Mr Zou undertook not to present a winding-up petition against CFSH on the basis of the SD. The Summons was adjourned sine die with liberty to restore not earlier than 6 months later.

6.There is no dispute that the amounts payable to Mr Zou under the Mainland Judgments, including interest, were fully settled in March 2025. On 30 June 2025 and 14 July 2025, CFSH’s retrial applications were dismissed by the SPC. Starting in October 2025, Mr Zou’s solicitors requested CFSH’s solicitors to inform the court about the result of the retrial applications. On 12 November 2025, Huen & Partners responded refusing to do so and by saying that Mr Zou had the responsibility to withdraw the Statutory Demand.

7.This impasse led to the present applications. On 19 November 2025, Mr Zou issued a summons seeking a dismissal of the Summons, a withdrawal of the Statutory Demand, that the payment into court made by CFSH be released, and that costs of the proceedings be paid to Mr Zou on an indemnity basis. Mr Zou sought to amend this application by seeking a dismissal of the Originating Summons as well, and by deleting the request for a withdrawal of the Statutory Demand.[3] This is not controversial so I made an order in terms of the amendment summons.

8.There is no dispute that these proceedings are academic, save as to costs, since the Mainland Judgments have now been paid up in full. As a result of full payment, the underlying debt claimed in the Statutory Demand has been discharged. As such, an injunction to restrain the presentation of a winding-up petition is unnecessary. It is clear to me that these proceedings should now be dismissed. What divides the parties is the question of costs which have been incurred in these proceedings, which is the issue I will presently turn to.

Legal Principles

9.The governing principles in determining the question of costs in the winding-up context were not in dispute. The relevant principles helpfully summarized by Recorder Suen SC in Alis Academic Limited v Ares Academic Limited [2024] HKCFI 2701 at [6].

10.Relevantly, the winding-up procedure is intended only to be used in straightforward cases. It is not a means of asserting pressure on a company, which the creditor knows is probably solvent, for payment of a disputed debt. It is an abuse of process of the court to make a statutory demand based on a claim to which there is a triable defence. Moreover, where a case is resolved without the need for substantive argument, the starting point is to ask which party succeeded. Where it can fairly readily be said that a party has either been successful or unsuccessful in attempting to obtain what was sought, costs should be determined by reference to whether that party was successful. The court should not be required to spend time dealing with speculative arguments about what might or might not have happened if one or other of the parties had dealt with the matter differently. Only if it was unclear which side had succeeded was it necessary for the court to consider the substantive issues. In short, costs will follow the event. Where the case has become academic and a claim is withdrawn, the discontinuing party will be entitled to costs if it is the effective winner, and a broad brush approach can be taken by referring to all matters already paid before the court.

The Arguments of the Parties

11.Mr Zou submits that he should be entitled to his costs in these proceedings because he is clearly the winning party since the Mainland Judgments have been paid in full, and also because CFSH did not have a viable basis to oppose a winding-up order being made against it. The grounds raised by CFSH were without merit. Mr Zou also sought costs of these proceedings on an indemnity basis.

12.CFSH submits that it should be entitled to costs of these proceedings on the basis that it was inappropriate for Mr Zou to have served the Statutory Demand. This was a case where the procedure was used to put commercial pressure on a company which was likely solvent. Moreover, there were triable issues as to whether Mr Zou could rely on the Mainland Judgment given that it was not registered under the MJREO and in light of CFSH’s re-trial application to the SPC. CFSH also says that the mere fact that the Mainland Judgments were eventually fully paid up does not mean that the Statutory Demand was properly served in the first place. CFSH submits that it had only made a commercial decision to pay up on the Mainland Judgments.

Discussion

13.In my view, the starting point is that CFSH has now fully settled the amounts owing to Mr Zou under the Mainland Judgments. As a direct result of CFSH’s own decision to settle the amounts owing to Mr Zou under the Mainland Judgments, the Originating Summons has been rendered academic because there is no longer any need to restrain Mr Zou from presenting a winding-up petition. Mr Zou has now been fully paid. Where a debtor has had to serve a statutory demand in order to obtain payment of the debt owed, simple fairness may dictate that the debtor should be entitled to the costs of the proceedings: Kate Gaskell Richdale v Eugene Oh Jae-Hoon, HCB 5869/2006, 25 September 2006 at [13] per Barma J (as he then was). Ms Leung submitted that CFSH only made a commercial decision to settle the Mainland Judgments. However, there is no evidence as to the reason why it paid and I am unable to speculate as to its actual reasons. CFSH applied for a retrial before the SPC was not successful. From this broad vantagepoint, I agree with Mr Chow’s submission that it can be fairly said that Mr Zou is the effective winner of these proceedings.

14.On the contrary, Ms Leung submitted that CFSH was the effective winner because it sought to restrain winding-up proceedings, and it achieved that objective because a winding-up petition was never presented against CFSH. I am unable to accept this submission. Ultimately, the reason why no winding-up petition was presented was because CFSH paid up the entirety of the amount due under the Mainland Judgments. Moreover, in the interim period, although Mr Zou did give undertakings in these proceedings not to present a winding-up petition, this was against undertakings given by CFSH to make fairly substantial payments into court which it complied with. Those payments into court are, in a very real and practical sense, the price that CFSH had to pay in order to prevent winding-up proceedings being commenced against it. More than HK$4 million was paid into court by CFSH. In the circumstances, I am unable to agree that CFSH is the effective winner of these proceedings.

15.In the exercise of my discretion as to costs, and insofar as necessary to do so, I have further considered the major contentions of the parties on the merits. CFSH submitted that the mere fact that the Mainland Judgments were eventually settled does not mean that the Statutory Demand procedure was properly invoked in the first place. CFSH’s submission was that there were triable issues which made the service of the Statutory Demand inappropriate.

16.The first contention was that the Mainland Judgments should not be recognised because they were not registered under the MJREO. CFSH submitted that it was inappropriate for Mr Zou to bypass the registration regime under the MJREO by serving the Statutory Demand without first registering the Mainland Judgment.

17.In response, Mr Zou relied on the Court of Appeal decision in Lu Yongliang v Bank of China Limited, Dongguan Branch [2021] 6 HKC 46 to contend that an unregistered Mainland judgment may still be recognised in Hong Kong and could form the basis of a valid statutory demand. Since Lu Yongliang is a Court of Appeal decision, it is binding on me and it is necessary to identify the essential reasons for its decision.

18.First, the Court of Appeal confirmed that there are instances where an unregistered Mainland judgment is given recognition and effect in the Hong Kong courts. At §48, Lam VP held: -

“… there are instances where unregistered Mainland judgments are given recognition and effect in the courts in Hong Kong. Under the scheme of the MJREO, recognition and enforcement are two different concepts. The common law in Hong Kong has always given recognition in at least three ways to Mainland judgments which are final and conclusive: (a) through the doctrine of res judicata, see First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd, supra; (b) foreign judgment as a cause of action on its own, see China NPL Holdings v Mo Haidan [2021] 1 HKLRD 344; (c) foreign judgment as evidence of foreign law on a particular issue between the same parties, see Guangzhou Green-Enhan Bio‑Engineering Co Ltd v Green Power Health Products [2004] 3 HKLRD 223.”

19.Second, the Court of Appeal decided that bankruptcy proceedings did not constitute “proceedings for the recovery of a sum payable under a Mainland Judgment” under MJREO s22(2) so as to preclude proceedings being brought except by way of registration of the judgment (at §§51-58). The very nature of bankruptcy proceedings was not for the recovery of a sum of money, but a class right available to all the creditors. MJREO s22(2) provides:

“No proceedings for the recovery of a sum payable under a Mainland judgment which would satisfy the requirements specified in section 5(2)(a) to (e) in an application for registration of the judgment under section 5(1), other than proceedings by way of registration of the judgment, shall be entertained in any court in Hong Kong.”

20.Accordingly, the Court of Appeal decided that MJREO s.22(2) did not have the effect of precluding bankruptcy proceedings based on an unregistered Mainland judgment.

21.Attempting to distinguish that decision, Ms Leung pointed out that the statutory demand in Lu Yongliang relied on the underlying debt on guarantees, as opposed to the relevant judgments. I do not think that this is a material distinction for present purposes because it is clear that the Court of Appeal’s ruling on the scope of MJREO s22(2) is of general application which did not turn on whether the statutory demand was based on the guarantee or the underlying judgment. Further, although its observations were made in the bankruptcy context, there is no reason evident to me why they should not apply to the winding-up of companies. Accordingly, the prohibition does not have the effect of precluding bankruptcy proceedings being commenced in this case.

22.Third, the Court of Appeal decided that MJREO s22(2) cannot be construed in a way to preclude recognition from being given to Mainland judgments under our common law. In Lu Yongliang, it was decided that the Guangdong and SPC judgments could be relied upon under the doctrine of res judicata to establish liability under the guarantee (§49).

23.For completeness, I would mention that there is no issue regarding the 2-year time limit for registration of the Mainland Judgments under the MJREO having expired. Mr Zou was well within time when the Statutory Demand was served. Accordingly, the issue that was considered by Keith Yeung J in China Everbright Bank Co Ltd v China Kingho Energy Group Ltd [2025] 2 HKC 863 and Q Au-Yeung J in Huarong Huaqiao Asset Management Co Ltd v Li Xiaopeng [2026] 2 HKLRD 69 did not arise on the present facts for consideration.

24.Accordingly, having regard to Lu Yongliang, I am unable to accept CFSH’s submission that it was inappropriate for Mr Zou to rely on the Mainland Judgments as the foundation for the Statutory Demand merely because they had not been registered under the MJREO.

25.I next to turn to the issue of whether the Mainland Judgments were final and conclusive. On this front, CFSH’s main argument was that the time to make a retrial application to the SPC had not yet expired when the Statutory Demand was served in February 2024. Moreover, CFSH did in fact make a retrial application which the SPC did hear although it was eventually unsuccessful. Against this background, it was suggested that the Mainland Judgments were not final and conclusive.

26.On the expert evidence, CFSH contends Mainland Judgments were not final and conclusive because according to Article 216 of the PRC Civil Procedure Law that it had 6 months to make a retrial application. However, as Mr Chow submitted, the actual expert evidence submitted by CFSH accepted that an application for retrial does not stay the enforcement of the underlying judgment or ruling.

27.This is very much in line with MJREO s6(1)(c) which provides that a Mainland judgment is final and conclusive if it is a judgment of the second instance given by a designated court. MJREO s6(1) was specifically enacted to address the common law requirement that the judgment is final and conclusive and to avoid the disputes that might arise in that context given the special trial supervision system in Mainland law: Huzhou Shenghua Financial Services Company Limited v Hang Pin Living Technology Company Limited [2025] 3 HKLRD 44 at §66 per G Lam JA.

28.Further, the Mainland trial supervision system does not in itself render a Mainland judgment not final and conclusive, and the paramount consideration is the likelihood of a retrial being ordered under the retrial procedure: Sunsco International Holdings v Liu Chunrong [2025] HKCFI 5238 at §12.1 & §13.2(4) per DHCJ Jonathan Wong. One of the relevant considerations identified by the learned judge is whether the party has already made an application under the retrial procedure, whether the application has been decided and the outcome of the application. This is a primarily a factual matter.

29.In the present case, at the time when the Statutory Demand was served, CFSH had yet to make any retrial application. It only did so at around the time these proceedings were commenced. During the course of these proceedings, CFSH paid money into court to fend off the presentation of the winding-up petition, and in the ultimate event, it was unsuccessful before the SPC. It has not been suggested before me that the prospect of success of the retrial application was high, and in any event, the reality is that CFSH’s application has been dismissed.

30.Ms Leung submits that Mr Zou should have appreciated that when the Statutory Demand was served that CFSH would continue to contest the Mainland Judgments. This was on the basis that CFSH had contested the case in the Mainland at every level of the Beijing proceedings. I am unable to accept this argument. Mr Zou was successful before the second instance court in Beijing, and it would be speculative for him to assume that further steps would be taken by CFSH to challenge the Mainland Judgments. As I mentioned above, there was no retrial application made when the Statutory Demand was served.

31.She also submitted that there were legitimate questions surrounding the enforceability of Mainland judgments that are subject to the retrial procedures. Lee Yau Wing v Lee Shui Kwan [2007] 2 HKLRD 749 and Lin Chien Cheng v Hui Chi Keung [2019] HKCFI 2686 were relied on to contend that issues regarding the finality of Mainland judgments were not suitable for summary determination. However, these decisions were made at the interlocutory stage, and must I think now be read in the light of Sunsco International Holdings which is a decision made after trial, contains an analysis of Lee Yau Wing, and has more recently since been followed at first instance: Beijing Renji Real Estate Development Group Co., Ltd v Zhu Min [2026] HKCFI 197. In any event, Mr Zou has in this case adduced Mainland expert evidence on the issue of whether the Mainland Judgments are final and conclusive, which I accept.

32.Ms Leung also pointed to the fact that there appears to be evidence that Mr Zou’s solicitors acted for 27 other creditors of CFSH who also issued statutory demands, and who confirmed that their statutory demands would be withdrawn. In my judgment, that is decision made by the other creditors and does not have a material impact of my analysis.

33.For completeness, I do not consider that either the ‘public policy’ or ‘solvency’ grounds assists CFSH. In my view, the public policy ground is hopeless and I do not need to say anything more about it. This is far from a case which would reach the very high threshold for a public policy challenge. This point was, rightly, not pressed by Ms Leung in her submissions. For the ‘solvency’ ground, it is well-established that CFSH will be deemed to be insolvent if it does not comply with the Statutory Demand, and actual solvency is not a defence. As mentioned above, I do not consider that there was any bona fide dispute of the debt in the present case.

34.Having regard to all the circumstances I have discussed above, I consider that it is appropriate that Mr Zou be awarded costs of these proceedings.

35.Lastly, I turn to Mr Zou’s submissions on indemnity costs. Mr Zou relies on CFSH’s unreasonable refusal to respond and dispose of this action, and that these proceedings were used to ‘buy time’ and stave off insolvency consequences. I have given careful consideration to the arguments raised by Mr Chow both orally and in writing, but at the end of the day, I am not satisfied that indemnity costs should be ordered whether in whole or for a portion of these proceedings.

Postscript

36.Both skeleton arguments were filed late.[4] I am not satisfied that there was a satisfactory explanation for lateness. The efficient administration of justice depends on proper compliance with the timetable governing the time for lodging and serving skeleton arguments. The practice of late skeletons is singularly unfair to other court users who strictly adhere to court deadlines, and also limits the time that the other parties and the court have to read materials in advance of the hearing. As explained at the hearing, I have decided that under Practice Direction 5.4 that the successful party should be deprived of part of his costs as a result.

Orders

37.I dismiss both the Originating Summons and the Summons.

38.I order that all payments into court made by CFSH in these proceedings be released forthwith.

39.I make an order that CFSH pays Mr Zou the costs of these proceedings, including all costs reserved, to be taxed if not agreed. These costs shall include the Originating Summons, the Summons, the Adjournment Summons and Mr Zou’s summons of 19 November 2025, as amended.

40.Mr Zou shall only be entitled to 85% of his costs of the hearing before me due to the late filing of skeleton arguments.

Ms Sabrina Leung instructed by Huen & Partners, for the Plaintiff

Mr Ulysses Chow instructed by Leung & Wan, for the Defendant