PERFECT AWARD HOLDINGS LTD v. OUYANG YIDA AND OTHERS

HCA 349/2018

[2023] HKCFI 2498

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 349 OF 2018

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J U D G M E N T

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INTRODUCTION

1.  This was the trial of the action brought by the Plaintiff (“P”), Perfect Award Holdings Limited, against the 1^st to 6^th Defendants (“Ds”; and respectively, “D1”, “D2”, “D3”, “D4”, “D5” and “D6”).

2.  The claim is in respect of a sum of RMB27,000,000, which P says is due pursuant to 9 Promissory Notes (“the Notes”)  made jointly and severally by Ds.  D1, D5 and D6 had pleaded a number of counterclaims, but by reason of their non-attendance at trial, these became moot.

3.  Prior to service of the writ, on 5 December 2019, the action had been discontinued against D2 to D4.

4.  At trial, P was represented by counsel Mr Derek J Y Chan, and D1, D5 and D6 were absent, their solicitors having come off the record shortly before trial commenced.

5.  D5 had been dissolved by striking off on 21 July 2023.  In consequence, by summons dated 22 August 2023, P sought leave to discontinue the claim against D5, there being no reasonable prospect of recovery from it (see 深圳正高金屬製品有限公司v Iu Ho Construction Engineering Co Ltd[2022] HKCFI 2685 at §§17-19).  I granted an order in terms of the summons at the outset of trial.

6.  It was in those circumstances that P proceeded with the trial against D1 and D6.  In circumstances such as this, where the defendants are absent, the plaintiff is still required to prove its claim (and call evidence accordingly), having regard to the pleaded defence where appropriate.  However, as the defendants are not present and there is no evidence to be tendered on their behalf, the Court will not have regard to their filed witness statements (Jotz Klaus-Bernhard Markus v Hamawy Tarek Mahmoud, HCA 345/2014 (unrep., 30 Jun 2017)  at §4; O.35, r.1(2), RHC).

BACKGROUND

7.  The following is undisputed or not readily disputable.

8.  P is a BVI company, incorporated as a special purpose vehicle for investment in D3 ("Feichi International")  and managed by China Renaissance Capital Investment Inc.  ("CRCI"), a private equity investment management company.

9.  Feichi International (D3)  was incorporated in the Cayman Islands and holds a chain of Cayman, Hong Kong and PRC subsidiaries, namely D4 ("Feichi Machinery"), D5 ("Feichi HK") and D6 ("Fujian Feichi").

10.  D1 was the founder of Feichi International and the person managing the affairs of Feichi International and its subsidiaries. D1 indirectly held a majority interest in Feichi International through his BVI corporate vehicle, D2("Plateau").

11.  Following a Subscription Agreement dated 8 September 2011, P became a 37.96% holder of Series A Preferred Shares in Feichi International ("Preferred Shares").

12.  In anticipation of the intended listing of Fujian Feichi on the NEEQ in China, Profitee International Limited (益盟國際有限公司), a company incorporated in Hong Kong, was nominated by P and allocated 39.96% of the shares in Fujian Feichi to represent P’s investment in Feichi International.

13.  P had a right of redemption in respect of the Preferred Shares under the amended memorandum and articles of association of Feichi International.

14.  On 22 October 2014, P issued a redemption notice to Feichi International to exercise its right of redemption over all of the Preferred Shares whereupon D1, Plateau and Feichi International became jointly and severally liable to P for RMB453,434,886 ("Redemption Amount")  with interest.

15.  On 20 December 2014, D1 representing himself, Plateau, and Feichi International signed a written Acknowledgement in favour of P acknowledging that D1 to D3 were jointly and severally liable for the redemption obligation and requested a grace period of up to 30 June 2015 to make full payment in respect of the share redemption.

16.  On 26 June 2015, Ds entered into a Payment Agreement with P ("Payment Agreement")  whereupon they jointly and severally agreed to pay the sum of RMB27,000,000 ("Extension Consideration")  on top of the Redemption Amount in exchange for a further extension to 30 December 2015.  Clause 2 of the Payment Agreement provides that the Extension Consideration is to be paid by way of nine(9)promissory notes in the form annexed as Attachment 1 therein.

17.  On the same day, Ds executed and delivered the nine Promissory Notes (i.e. "the Notes")  to P.  The Notes are in identical terms save for the maturity date and amounts (totalling RMB27,000,000).

18.  Payment terms for the Notes were referable to whether or not Fujian Feichi (D6)  was successfully listed on the NEEQ on or before 31 January 2016.  The relevant terms state as follows:

“1.  到期日: 票据金额于福建省飞驰机械工业有限公司(‘福建飞驰’)于全国中小企业股份转让系统股票挂牌成功且适用于欧阳怡达或 (HK)  MACHINERY HOLDINGS LIMITED 的第一批福建飞驰股票转让锁定期届满之后的第三十(30)日到期偿付。

2.  付款地点: 香港中环雪厂街2号圣佐治大厦305室 China Renaissance Capital Investment Limited, 或由 PERFECT AWARD HOLDINGS LIMITED 或其承让人书面指定的位于中国境外的其他地点。

…

5.  特别约定: 尽管有本票据第1条对到期日的安排，如果福建省飞驰机械工业有限公司未能在2016年1月31日之前于全国中小企业股份转让系统股票挂牌，则本票据的到期日转为2016年2月28日，本票据的票据金额将在当日自动全部转为可凭票要求付款，本票据各签法人在见票后需实时支付。如任何签发人或发生或遭遇任何形式的破产、资不抵债、债务重组等情形，本票据视作实时到期偿付。

6.  支付义务: 本票据项下各签发人的付款义务及其他责任均无需 PERFECT AWARD HOLDINGS LIMITED 或其指定人士或承让人提出付款要求，出示本票据或发出其他付款通知等形式确立支持。PERFECT AWARD HOLDINGS LIMITED可转让本票据之全部或部分。”

English Translation:

“1.  Due Date: The Principal shall become due and payable on the thirtieth (30^th)  day after the successful listing of Fujian Feichi Machinery Industry Co., Ltd. (‘Fujian Feichi’)  on the National Equities Exchange and Quotations (hereinafter the ‘NEE!’)  and the expiration of the transfer lockup period for the first batch of Fujian Feichi shares applicable to Ouyang Yida or Feichi (HK)  Machinery Holdings Limited.

2.  Place of Payment: China Renaissance Capital Investment Limited, Room 305, St. George’s Building, 2 Ice House Street, Central, Hong Kong, or other places outside of China that are designated in writing by PERFECT AWARD HOLDINGS LIMITED or its assignee.

…

5.  Special Covenants: Notwithstanding the arrangement pertaining to the due date in Clause 1 hereof, should Fujian Feichi Machinery Industry Co., Ltd. Fail to have its shares listed on the NEEQ before 31 January 2026, the due date of the Note shall be changed to 28 February 2016, and the Principal shall automatically become payable, on demand, on even date, and, the issuers of the Note must proceed to pay the Principal in real time upon presentation thereof. If bankruptcy, insolvency, debt restructuring, etc. in any form occurs or befalls any of the issuers, the Note shall be deemed to have become immediately due and payable.

6.  Payment Obligations: The payment obligations and other liabilities of the issuers hereunder are established and endorsed without requiring any payment demand, presentation of the Note or the sending of other payment notice by PERFECT AWARD HOLDINGS LIMITED or its designee or assignee, PERFECT AWARD HOLDINGS LIMITED may assign all or part of the Note.”

19.  Fujian Feichi was ultimately not listed (whether on the NEEQ or at all)  by the stipulated deadline.

THE CLAIM AND THE DEFENCES

20.  On the basis of the above, P says that the Promissory Notes became due and payable on 28 February 2016.

21.  P’s claim commenced as a relatively straightforward one.  As set out in the Statement of Claim filed on 13 March 2018, the subject matter of the action was strictly based on the Notes, and in the prayer, the relief sought is for the sum of RMB27,000,000, together with interest and costs.

22.  By the defences (D1 and D5 filed a Defence and Counterclaim on 5 June 2018; D6 filed a Defence and Counterclaim on 15 July 2019), Ds’ version of the alleged background to the entry into the Notes was brought in.

23.  D1, D5 and D6 put forward a number of defences:

(1)  They averred that contrary to the requirement in Clause 5 of the Notes, there had been no presentment (ISSUE 1: PRESENTMENT).

(2)  They averred that the Notes were not valid promissory notes, owing to the maturity date being dependent on contingencies (including the failure to list shares of D6, and the bankruptcy, insolvency or debt restructuring of any of the Ds)  (ISSUE 2: PAYMENT DEPENDENT ON CONTINGENCIES?).

(3)  They say that there had been a prior agreement whereby P and “China Renaissance” offered to D1 and/or D6 (and their associated companies)  to provide capital, give advice and assist them in order to explore whether the shares of D6 could be listed in Hong Kong or the United States of America (“Alleged Advisory Agreement”)  (ISSUE 4: ALLEGED ADVISORY AGREEMENT); and that after various developments, the Notes were compensation for the difference in valuation if the shares were listed on NEEQ as opposed to listing in Hong Kong or the United States of America.  They further say that because there had never been any listing, there was no difference in valuation, and hence, there was a total failure of consideration on the part of P (ISSUE 3: TOTAL FAILURE OF CONSIDERATION).

(4)  They further say that any such arrangement (viz. the Notes being part of a “series of acts” by which China Renaissance provided corporate finance advice to Ds)  was contrary to section 114 of the Securities and Futures Ordinance (Cap. 571), and therefore, unenforceable by reason of illegality (ISSUE 8: BREACH OF SFO).

(5)  Yet further, they allege that there had been misrepresentation in the course of entry into the Notes, and/or that P was in breach of an implied term (that P would exercise reasonable skill and care in advising D1 and/or D6 in the course of the Alleged Advisory Agreement)  (ISSUES 5 TO 7: ALLEGED BREACH OF IMPLIED TERMS AND MISREPRESENTATION)).

24.  These are addressed in turn below.

DISCUSSION

25.  The starting point is the definition of “promissory notes” within section 89(1)  of the Bills of Exchange Ordinance (Cap. 19)  ("BEO"), which states:

"A promissory note is an unconditional promise in writing made by one person to another signed by the maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money to, or to the order of a specified person or to bearer."

26.  Promissory notes are themselves independent contracts separate from the underlying transactions between the parties.  As bills of exchange, promissory notes are treated as good as cash and are to be honoured unless there is some good reason to the contrary.  A counterclaim or set-off in the underlying transaction is no defence to a claim on a promissory note: see Xu Ziming v Ruifeng Petroleum Chemical Holdings Ltd, HCA 450/2013(unrep., 6 May 2015) at §§15,49.

27.  Pursuant to section 91 BEO:

"A promissory note may be made by two or more makers, and they may be liable thereon jointly, or jointly and severally, according to its tenor."

ISSUE 1: PRESENTMENT

28.  The contention is that Clause 5 of the Notes requires payment only upon presentment, and that no liability to pay arises as there was no presentment.

29.  P presented inter alia the following arguments to address the pleaded defence.

30.  First, Clause 6 of the Notes (paragraph 18 above), is framed broadly and operates as a waiver of any requirement of presentment.  This is consistent with section 46(2)(e), BEO.  It is not expressed to be limited in its application, and would presumably include Clause 5.

31.  Whilst there is a rule of construction that an earlier provision overrides a later inconsistent provision, it is clear from the discussion in Lewison, The Interpretation of Contracts(7^th ed.)at[9.77] that this is a rule of “last resort only” and that it applies in cases of clear irreconcilable difference.  See also Holloway v Damianus BV [2015]IECA 19 at §§21-23.

32.  However, in this case, it is possible to read the clauses in a way which are not inconsistent.  Notably, Clause 5 does not use words requiring formal presentment at the place for payment and cannot be said to be clearly and irreconcilably inconsistent with Clause 6.

33.  In any event, even if Clause 6 can be said to be inconsistent with the language of Clause 5, it is notable that Clause 6 deals specifically with the necessity for presentment (or more accurately, the lack of requirement thereof),and should prevail over Clause 5(which is primarily concerned with accelerating the time for payment on the occurrence of specified events)  by virtue of the maxim generalia specialibus non derogant: Holloway v Damianus BV at §§24-36.

34.  Second, and by way of fallback, even in the absence of formal presentment, P argues that the requirement for payment is dispensed with under section 46(2)(a)  BEO in that D1 (whether by himself or his authorised representative)  was not present at the Place for Payment to make payment, whether on the maturity dates of the Promissory Notes or thereafter:

s.46(2)(a)  BEO:

"Presentment for payment is dispensed with-

(a)  where, after the exercise of reasonable diligence, presentment, as required by this Ordinance, cannot be effected. "

35.  P refers to Clause 2 of the Notes, which specified CRCI’s Hong Kong office as the place for payment.  It is P’s argument that there is no suggestion that Ds or any person authorised to make or refuse payment on Ds' behalf could possibly be found at the place for payment (i.e. CRCI's Hong Kong office)  on the maturity dates.  Accordingly, presentment under section 93(1)  BEO could not have been effected by P even after the exercise of reasonable diligence, and is dispensed with.

36.   I am persuaded by the construction of Clauses 5 and 6 proffered by P (discussed at paragraphs 30 to 33 above), and thus find in P’s favour on this basis.  It is unnecessary in the circumstances to make any findings on the fallback argument.

ISSUE 2: PAYMENT DEPENDENT ON CONTINGENCIES?

37.  The contention, in essence, is that the Notes are not valid promissory notes as they do not provide for payment “at a fixed or determinable future time” in that the maturity date is dependent upon whether Fujian Feichi is listed before 31 January 2016 (thus, Ds would say, falling foul of section 89(1), BEO).

38.  P disagrees with the contention, and puts forward the argument that as a matter of construction, payment is in fact to be made “at a fixed or determinable future time”.   In essence, the point is that Clause 5 does not create a contingency (because the Notes must be paid regardless of listing)  but simply provides a mechanism by which the fixed or determinable future date for payment is to be ascertained (i.e. different dates of payment apply depending on whether or not listing takes place by the deadline).

39.  In support of this argument, P refers to:

(1)  The dicta of To J in Golden Garden Management Ltd v Grand TG Gold Holdings Ltd [2012] I HKLRD 934 at §17:

“By way of initial observation, the issue raised by this appeal is one of construction of the Note. It is very largely a matter of first impression whether the Note, particularly in the light of conditions 1 to 4 of the Terms and Conditions, came within the definition of s.89 of the Bills of Exchange Ordinance, that is, whether it was a promise to pay on demand or at a fixed or determinable future time. Construction of a document is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of making of the document.”

(2)  Hong Kong& Shanghai Banking Corp Ltd v G D Trade Co Ltd[1998] CLC 238, where the English Court of Appeal stated:

“[A bill] was a document in daily use in hundreds of commercial transactions and, in the case of an instrument which had been drawn as a bill with the plain intention that it should take effect as such, the court should lean in favour of a construction which upheld its validity as a bill where that was reasonably possible.”(see headnote 2)

(3)  The commentary in Chalmers & Guest on Bills of Exchange and Cheques (18^th ed., 2017)  at [2-087], which supports the proposition that a bill may be payable on or at a fixed period after the occurrence of a specified event which is certain to happen, though the time of happening may be uncertain.

(4)  And finally, and very fairly, Mr Chan drew my attention to the case of Williamson v Rider [1962] 2 All ER 268 (CA), noting that the Hong Kong Courts have elected to follow the minority opinion of Ormerod LJ in that case in coming to the view along the lines as set out in Chalmers.

40.  P’s position is to be distinguished from the situation where payment is dependent on a contingency which may or may not happen (e.g. payable only if listing takes place)  (see section 11, BEO; Chalmers at [2-088].  In this type of scenario, it would be unclear if payment would ever take place.  The present scenario, however, is not a contingency, since it simply specifies different dates depending on what happens.

41.  I am persuaded by P’s arguments in relation to the construction of Clause 5, and thus, would reject the pleaded defence that the engagement to pay was dependent on contingencies.

ISSUE 4: ALLEGED ADVISORY AGREEMENT

42.  This contention rests on factual assertion.  No one was present for any of the Ds to put forward any evidence in support.  I accept P’s case, as spoken to by P’s witnesses, that such agreement never existed, also taking into account the following points put forward by P:

(1)  P (under CRCI)  was at all material times merely an investor in Fujian Feichi and did not take up any advisory role or duties regarding its listing.

(2)  As an investor, P’s (or CRCI’s)  concern and responsibility was to maximize the return on their investment and as such was interested in the success of Fujian Feichi.  However, this does not mean that P (or CRCI)  agreed to provide any financial advisory or asset management services or undertook any such duties.

(3)  CRC Advisors was a separate entity and never participated in the project.  Nor did any of CRCI’s representatives hold themselves out as acting for CRC Advisors. Indeed, the name of CRC Advisors had never even appeared in any of the documents involved in the subject transaction.

(4)  Quite to the contrary, the contemporaneous documents indicate that even before CRCI’s involvement in the project in late 2011, Fujian Feichi had entered into written financial advisory agreements with Riemann Investment Holdings Limited (“Riemann”) and later Primary Capital LLC (“Primary Capital”) for advising on listing matters in 2010. No such advisory agreement had been entered into with P, CRCI or CRC Advisors.

43.  Moreover, the pleadings by D1, D5 and D6 are themselves woefully deficient in failing to identify credible particulars of the alleged agreement.  It was not even clear on the face of the pleadings whether the agreement was made orally or in writing, when precisely it was made, and who it was that acted on behalf of Ds or P in reaching such alleged agreement.

44.  The defence must fail.

ISSUE 3: TOTAL FAILURE OF CONSIDERATION

45.  The contention is that the Notes were somehow compensation for the valuation in listing on NEEQ as opposed to potential listings in Hong Kong or the United States of America.  This issue rested at least in part on the factual background as asserted by D1, D5 and D6.

46.  Given the finding above, it follows it must also fail.

47.  In any event, such contention is contrary to the express terms of the documents before the Court.  In particular, Clause 1 of the Payment Agreement expressly provides that the sum of RMB 27 million (i.e. the Extension Consideration)  was payable in consideration of P agreeing to defer enforcing recovery of the Redemption Amount (“作為 PERFECT 同意延遲追討有關欠款的代價”).

ISSUES 5 TO 7: ALLEGED BREACH OF IMPLIED TERMS AND MISREPRESENTATION AND ISSUE 8: BREACH OF SFO

48.  Again, the contentions rest on factual assertions.  These all similarly fail, given the finding regarding the Alleged Advisory Agreement.

RELIEFS

49.  In the circumstances, P succeeds in its claim.  Judgment is granted against D1 and D6, who are jointly and severally for:

(1)  Payment on the Notes in the aggregate principal sum of RMB27,000,000;

(2)  Compound interest, under Clause 4 of the Notes, on the principal amount payable from 28 February 2016 at the rate of 18% per annum until full payment; and

(3)  Costs of the action, to be assessed on an indemnity basis.

50.  As to costs, with reference to Take Point Investment Holdings Ltd v Ngai Lok Kei[2020] HKCFI 1709 at §§137-139, the Court was invited to order costs on an indemnity basis in view of D1 and D6’s poor and/or irresponsible conduct of the action.  I agree that their conduct of the action has been lacking.  D1 and D6 had maintained the action, and their defence containing serious allegations against P (viz. including misrepresentation, breach of the SFO and the like), all the way throughout until shortly before trial.  They had not given any indication that they would not be pursuing the defence and/or counterclaim, necessitating P’s attendance and full preparation.  This resulted in the wastage of time and costs.  No explanation has been proffered.  Costs are therefore ordered in favour of P on an indemnity basis.

51.  In support of the judgment, I also continue the Mareva injunction order originally granted against D1 on 8 February 2018 (and continued on 6 December 2018)  for a period of 18 months from the date of judgment or until further order.

52.  I thank counsel for his assistance.

Mr Derek JY Chan, instructed by Bird & Bird, for the Plaintiff

The 1^st, 5^th and 6^th Defendants were not represented and did not appear

HCA 349/2018

[2018] HKCFI 2654

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 349 OF 2018

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D E C I S I O N

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INTRODUCTION

1.  This is the decision concerning:

(a)   the plaintiff’s application to continue the Mareva injunction order granted ex parte on 8 February 2018 against the 1^st defendant (“Ouyang”) (“the ex parte order”);

(b)   Ouyang’s application to discharge the ex parte order.

BACKGROUND

2.  The plaintiff commenced this action in February 2018 against Ouyang and the other defendants, which in effect are said to be corporate vehicles managed or controlled by Ouyang.

3.  This action is based on 9 promissory notes executed and delivered by the defendants jointly and severally (“the said notes”).

4.  The transaction underlying the said notes was, in very brief terms, the plaintiff’s investment into one of the corporate defendants, which was intended to be listed in the Mainland.  The said investment was by way of the subscription of preferred shares.

5.  The plaintiff has a right of redemption in respect of the subscribed shares (exercisable (among other things) for the failure of the said public listing).  On 22 October 2014, the plaintiff issued a redemption notice; as a result, Ouyang and two other defendants became liable for about RMB453.4 million.

6.  Without going into other details, on 26 June 2015, Ouyang and all the other defendants entered into a payment agreement pursuant to which they are to pay RMB27 million for extending the payment time.  Clause 2 of the payment agreement provided for payment by the said notes.  The said notes were executed and delivered on the same day (26 June 2015).

7.  The public listing did not take place as the parties intended, the plaintiff contends in this action the said notes became due and payable on 28 February 2016.

MAIN ISSUES IN THIS APPLICATION

8.  Ouyang raises two main issues: the first pertains to whether the plaintiff has shown a good arguable case, the second pertains to whether the plaintiff has established a real risk of dissipation. There is also a dispute regarding an alleged failure to make full and frank disclosure.  This will be dealt with briefly towards the later part of this decision.

9.  As regards the first main issue, Ouyang contends that the said notes were:

(1) void and/or unenforceable for illegality (namely, they were given in consideration of an illegal underlying transaction);

(2) not “bills of exchange” within the meaning of the Bills of Exchange Ordinance (Cap 19);

(3) the said notes were not actionable at the time of writ because there was no presentment (s 93, Cap 19).

(a)   Good arguable case

10.  The first matter relied upon by Ouyang (para 9(1) above) is that the plaintiff has breached s 114(1), Securities and Futures Ordinance (Cap 571).  That provision in effect prohibits anyone from carrying on a business in a regulated activity without licence or registration (as the case may be) (that is, in the present context, the business of advising on corporate finance, such as advising on an offer to dispose of securities to the public).

11.  Ouyang has adduced affirmation evidence trying to show that the plaintiff has carried on such prohibited activity in the plaintiff’s said dealings with Ouyang/the defendants.

12.  This, however, is denied by the plaintiff, which has adduced affirmation evidence to show that the plaintiff’s said dealings with the defendants were nothing more than in the capacity of an investor.  It has never taken up any advisory role:

(a) even before the plaintiff dealt with the defendants, the defendants have already entered into financial advisory agreements with third parties for advising on public listing.  Further, the defendants have already engaged their own legal advisors (on top of its own financial advisors);

(b) whatever concern or interest the plaintiff might have in the public listing (as shown by some of the emails and social network messages relied on by Ouyang), it was the concern and interest of the plaintiff as an investor to see to it the listing would bring about maximum return for the plaintiff.

13.  The second matter relied upon by Ouyang (no valid bills of exchange) (para 9(2) above) relates to the following terms of the said notes.

14.  Clause 1 thereof provided that the said notes were due and payable 30 days after the (public listing) “lockup” period.

15.  Clause 5 thereof provided that, despite clause 1 thereof, if the listing did not take place by 31 January 2016, the said notes would become due and payable on 28 February 2016.  This clause also provided that the said notes would become due and payable immediately upon bankruptcy, insolvency or debt restructuring.

16.  Based on the above, Ouyang contends that the said notes were in law not bills of exchange (Williamson v Rider [1963] 1 QB 89; Claydon v Bradley [1987] 1 WLR 521; Chalmers & Guest on Bills of Exchange, Cheques and Promissory Notes (2017) 18^th Ed, para 2-085).  These alternative dates render the said notes not being a written order payable “at a fixed or determinable future time” prescribed by s 89(1) (cp s 3(1)), Cap 19.

17.  This contention is refuted by the plaintiff:

(1) the Williamson decision was considered, but not followed, in Golden Garden Management Ltd v Grand TG Gold Holdings Ltd [2012] 1 HKLRD 934;

(2) a bill may be payable depending on the occurrence of a specified event which, though the time of happening is uncertain, is certain to happen (although a contingent event will not suffice): Chalmers & Guest, para 2-087 (see also (and cp) s 11, Cap 19);

(3) none of the terms of the said notes (whether when read separately or together) can be understood to create a contingency: there is a specific payment date whether or not the public listing takes place (clause 1 thereof was to take effects when there was a public listing; clause 5 thereof was to take effect when there was no public listing).  Thus, these terms are but the mechanism for fixing the said notes’ payment date.

18.  The third matter relied upon by Ouyang (para 9(3) above) is that the said notes were not presented for payment, and hence, Ouyang was not liable for payment of the said notes at the time of the writ herein (s 93(1), Cap 19).

19.  The plaintiff’s counter-argument about this aspect is as follows.  First, clause 6 of the said notes stipulates that the plaintiff does not need to present the said notes for payment in order to render Ouyang liable (the parties disagree over whether clause 6 was of general application, or was inapplicable to a “clause 5 situation” (namely, the intended public listing did not take place)).

20.  Secondly, the “proper place” for presentment was an address related to the plaintiff (clause 2, the said notes).  Ouyang could not be found there.  In these circumstances, there was no need for the plaintiff to present the said notes (Cap 19, ss 45(e) [no person can be found at the proper place], and/or 46(2)(a) [presentment cannot be effected], read together with s 95 [presentment applies with modifications to promissory notes]).

21.  Apart from the above, Ouyang also asserts that the amount claimed herein includes a compensation the plaintiff for the reduced share value upon public listing in the Mainland (compared to the expected share value).  There being no public listing at the end, Ouyang argues that the consideration for the said notes has totally failed.

22.  The plaintiff denies the said assertion, pointing out that the said notes were drawn in purported performance of the payment agreement (para 6 above).  As stated in para 6 above, the payment was stated in the payment agreement to be for extending the payment time.

23.  There is no need to analyse in detail the relative merits of the parties’ respective case (summarized above) (in fact, in view that this action has yet to proceed to trial, it is undesirable to do so).  Suffice it to say this: having taken into account the overall circumstance, as well as the contemporaneous records and documents which may be viewed as supportive of the plaintiff’s case, I find the plaintiff has more than sufficiently demonstrated that there is a good arguable case in relation to the issues outlined in para 9 above.

(b)   Real risk of dissipation of assets

24.  The circumstances which the plaintiff has put forth as supporting its case that there is a real risk Ouyang may dissipate its assets are set out in the plaintiff’s skeleton argument (para 77 thereof). In brief:

(a) Ouyang repeatedly used forged documents to dispose of tranches of shares without the plaintiff’s consent.  Ouyang’s denial of forgery is a bare assertion without supporting evidence (there was also a written apology signed by Ouyang);

(b) the evasive and dilatory tactics adopted by Ouyang and his corporate vehicles to acknowledge liability to pay was followed by a refusal to pay.  Ouyang explains that he merely asked for time extension; that was not being evasive;

(c) Ouyang’s name appeared in the December 2017 list of dishonest persons subject to enforcement in the Mainland (his name was later removed);

(d) Ouyang repeatedly attempted to sell a Mainland building to pay tax despite the plaintiff’s objection.  Ouyang points to contemporaneous correspondence where the plaintiff was informed of this (and no action has in fact been taken by him);

(e) Ouyang indicated he was thinking of using a new corporate vehicle to take over the defendants’ business; this would seriously harm the plaintiff’s interest. Similar to sub-para (d) above, the plaintiff was informed of this (with no actual action by him);

(f) Ouyang refused to sell his property in Hong Kong (a subject-matter of the ex parte order) to settle the debts owed to the plaintiff.  This is denied by Ouyang;

(g) Ouyang might increase the amount of the current mortgage loan of the Hong Kong property;

(h) despite Ouyang’s need to use the Hong Kong property (until May 2019) for investment immigration to Hong Kong, the risk of Ouyang losing the property in the event the plaintiff succeeds in this action may prompt Ouyang to dispose of it.

25.  In relation to 24(c) to (e) above, I agree with Ouyang that, when considered individually, they do not constitute circumstances which show a real risk of dissipation of assets.  This is because they can also be viewed as innocent conduct of a debtor who was in financial difficulties.

26.  However, I disagree with Ouyang that the matters set out in para 24(a) and (b) above can have an innocent explanation.  The plaintiff already expressed concern as to how Ouyang could meet his liabilities.  It is therefore obvious Ouyang was facing immense financial pressure.  When this is considered with para 24(a) above (conduct the bona fide of which is questionable), one cannot but conclude that there is a real risk of dissipation.  I also agree with the plaintiff that para 24(f) to (h) above should not be considered separately from para 24(a) and (b) above. When so considered, para 24(f) to (h) above can properly be included as part of the supportive circumstance (and not pure speculation).  In particular, in relation to para 24(h) above, Ouyang’s investment immigration status cannot prevent him from satisfying the immigration criteria through other means.

27.  Ouyang complains that the plaintiff has failed to make full and frank disclosure of the matters set out in para 9(1) and 10 to 11 above.  As has been pointed out in decision in Sino Wood Investment Ltd v Wong Kam Yin, HCA 307/2002 (23 December 2002), it is usually not fruitful to examine whether there has been such failure where the matters allegedly not disclosed are in fact matters the existence of which is hotly disputed (para 27 to 33 thereof).

28.  Finally, Ouyang argues that the delay in seeking the ex parte order shows that there was no real risk of dissipation.  As the plaintiff has pointed out before the ex parte judge, whether there has been a delay has to be determined in the light of the action of Ouyang which prompted the plaintiff to make the ex parte application apply (para 49, plaintiff’s skeleton argument for use at the ex parte hearing).

29.  Taking into account the matters set out above, I am satisfied that the plaintiff has established that there is a real risk of dissipation of assets.

CONCLUSION

30.  To conclude, in light of the circumstances set out above, my discretion should be exercised in continuing the ex parte order; Ouyang’s application to have it discharged is consequently refused.

31.  In this connection, I agree with the plaintiff:

(1) Ouyang has not said that he needs to dispose of the enjoined assets within a short time;

(2) in any event, the plaintiff is willing to consent to an arms-length sale of the Hong Kong property in good faith.

Accordingly, the risk of the continuation of the ex parte order causing injustice or prejudice to Ouyang is low.

OTHER MATTERS

32.  The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the decision and its easier comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

COSTS ORDER

33.  The plaintiff having succeeded in this application (and in accordance with the parties’ agreement in such event), the costs of this application (including any reserved costs) should be the plaintiff’s costs in the cause of this action.