China Construction Realty Ltd v. Lucky Dragon Ltd and Others

HCA 1237/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1237 OF 2012

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D E C I S I O N

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1.This is an application by the plaintiff to amend its Statement of Claim. The background of this action has been set out in a decision of Poon J dated 12 April 2013 which dismissed the 4th defendant’s application to discharge an injunction granted to the plaintiff by Deputy Judge Sakhrani and a decision of interrogatory appeals given by me on 19 December 2014. I am not going to repeat the background here.

2.The plaintiff in this action seeks to set aside the sales of 60% of the shares of two Dalian companies to the 4th defendant. The two Dalian companies hold a piece of land in Dalian.  The plaintiff claims that the transfers of shares to the 4th defendant were dispositions of property with intent to defraud the plaintiff.  The plaintiff thus seeks to set aside the transfers under section 60 of the Conveyancing and Property Ordinance, Cap 219.

3.The plaintiff also claims that the transfers were acts of a conspiracy to injure the plaintiff by putting the said shares of the Dalian companies beyond the plaintiff’s reach. 

4.After the institution of this action, the plaintiff obtained an injunction from Deputy Judge Sakhrani enjoining the 4th defendant from disposing of the shares or assets of the two Dalian companies or to change their shareholders, directors or legal representative.

5.Regrettably, the 4th defendant has breached the injunction by mortgaging the land and land use rights held by the two companies and the shares of one of them in return for some loans purportedly advanced to and applied for the benefit of the two companies.  There were also changes of directors of the two companies.  The 4th defendant admitted these breaches and had intimated in the beginning of 2014 that it would apply to vary the injunction so that the breaches could be legitimised retrospectively.  However, no such application has been made, even up to now.

6.The plaintiff has sought to obtain discovery and apply interrogatories on the 4th defendant in relation to these breaches of injunction, but failed, as there is no pleading of the breaches in support of its claim.

7.The plaintiff now applies to plead the injunction and the breaches of it in support of its claims.  The plaintiff says that the breaches of the injunction are, in fact, actions taken by the 4th defendant in pursuance of the conspiracy.  The purpose was to siphon away the asset worth of the two Dalian companies so as to deprive the value of the shares of these two companies in case the plaintiff should succeed in this action.

8.The 4th defendant opposes this application on the ground that the breaches of injunction are post-writ allegations and constitute allegations of a fresh conspiracy taking place post-writ.

9.Furthermore, Mr Ling for the 4th defendant, also referred me to Kuwait Oil Tanker Co SAK v Al Bader [2000] 2 All ER (Comm) 271 at 32(h) to 321(b) and drew the analogy that the alleged conspiracy now the plaintiff seeks to plead is something that happened separately from what the plaintiff has alleged to have happened prior to the issuance of the writ of this action. 

10.I agree with the plaintiff that these allegations that the plaintiff now seeks to plead are allegations of further steps of the conspiracy already pleaded.  It is the plaintiff’s case that these breaches of injunctions are steps taken in perpetration of the alleged conspiracy and they are not a separate conspiracy as in the case of Kuwait Oil Tanker.  I accept that one may regard these allegations as steps taken in perpetration of the conspiracy and they took place whilst the plaintiff was in the chase for the shares of the two companies which started from the plaintiff’s institution of the Australian litigation, followed by the Hong Kong action which merged in the judgment of Suffiad J and continued in the present action. 

11.Hence, I take the view that these allegations are not averments of a fresh post-writ conspiracy and I allow the plaintiff’s application.

Ms Sara Tong, instructed by Winston Chu & Co, for the plaintiff

Mr C W Ling, instructed by Edwards Wildman Palmer, for the 4th defendant