CONVOY COLLATERAL LTD v. CHO KWAI CHEE (also known as CHO KWAI CHEE ROY) AND OTHERS

HCA 399/2018

[2024] HKCFI 1510

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 399 OF 2018

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D E C I S I O N

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A. Introduction

1.  The Plaintiff company (“CCL”)  obtained a Mareva or ‘freezing’ injunction (“Injunction Order”)  against the 1^st Defendant (“Dr Cho”).  The Injunction Order was granted by the Court of Appeal by its decision dated 16 June 2020: see [2020] HKCA 537 – a decision subsequently frequently quoted as authority for the correct approach to the assessment of risk of dissipation of assets in the context of an application for such an injunction.  The ‘ceiling figure’ in the Injunction Order is a little under HK$770 million.

2.  By summons dated 25 April 2024 (“Discharge Summons”), Dr Cho has applied to discharge the Injunction Order.  He has done so on the main basis that there has been a failure and delay of CCL to prosecute this claim against Dr Cho.  There are other grounds in support of alternative relief of variation of the Injunction Order and fortification of CCL’s cross-undertaking as to damages, which damages are also intended to be pursued.

3.  As it happens, Dr Cho also promised to make a discharge application or an application to vary the terms of the Injunction Order, in agreements dated 27 September 2023 made with Best Grade Ltd and Early Light Industrial Ltd (“Applicants”)  in the context of the Applicants’ pursuit of Dr Cho for repayment of the principal and interest due to them under a loan agreement dated 1 August 2016, the terms of which Dr Cho had failed to honour.

4.  As a result of Dr Cho’s failure to make repayment, the Applicants first commenced Hong Kong proceedings HCA 532/2018 against him on 8 March 2018.  In the absence of any notice of intention to defend that claim, judgment was entered against Dr Cho on 21 December 2018 for the sum of HK$309 million plus interest (“HK Judgment”).  Subsequently, on 21 August 2023, the Applicants commenced proceedings in the British Virgin Islands (“BVI”), which Dr Cho also chose not to defend.  Judgment was entered against him on 24 November 2023 for the US dollar equivalent of the HK Judgment (“BVI Judgment”).

5.  The BVI Judgment was pursued and obtained because Dr Cho’s assets include a substantial (50.1%)  direct shareholding in Broad Idea International Ltd (a BVI incorporated company)  (“Broad Idea”).  It is to be noted that that shareholding in Broad Idea is an asset expressly identified as a particular asset on which the prohibition imposed by the Injunction Order bites.

6.  In a Framework Deed and another Deed dated 27 September 2023 made between himself and Choi Chee Ming as owner of the Applicants, Dr Cho amongst other things (1)  unequivocally and irrevocably confirmed that he still owed debts, including the debt giving rise to the Judgments, (2)  confirmed that he does not have any legal grounds to contest the relevant recovery and enforcement procedures relating to the underlying debt and the HK Judgment, and (3)  undertook to use his best endeavours to apply for the discharge of the Injunction Order in order to let Mr Choi lawfully obtain or sell the Broad Idea shares for repayment of the debts.

7.  By their summons filed in these proceedings on 23 April 2024 (“Variation Summons”), the Applicants seek to vary the Injunction Order for the purpose of allowing them to enforce the HK Judgment and the BVI Judgment (together “Judgments”).  The terms of the variation sought are in the addition of the proposed following paragraph (using the definitions and abbreviations as adopted in this Decision):

The [Injunction Order] made herein against [Dr Cho] does not in any way prohibit or prevent [the Applicants] (being [Dr Cho’s] judgment creditors)  from taking such actions or steps against [Dr Cho] and/or his assets (whether in Hong Kong or otherwise)  as may be necessary (whether by way of legal proceedings or otherwise, and whether in Hong Kong or otherwise)  to enforce the [Judgments] and/or to recover the judgment debts covered by the [Judgments].

8.  Prior to issuing the Variation Summons, the Applicants had obtained CCL’s consent to the proposed variation.  However, the Variation Summons was issued because of Dr Cho’s stated opposition to the making of the proposed variation.  The return date of the Variation Summons was for a hearing at 9:30am on 3 June 2024, with a time estimate of 30 minutes.

9.  Without consultation of other parties, Dr Cho then issued the Discharge Summons and made it returnable at the same time, also with a time estimate of 30 minutes.  However, CCL and Dr Cho subsequently entered into agreed terms for the further conduct of the Discharge Summons – with a timetable for the filing of evidence and for a substantive hearing to be fixed – later made an Order of Court by consent.  As a result, the hearing of the Discharge Summons fixed for 3 June 2024 was vacated, and (with my consent)  CCL neither appeared nor was represented at the hearing which took place to deal with the Variation Summons.  Indeed, CCL had confirmed its consent to the making of the proposed variation, and had expressed its neutrality on any issue relating to the procedural conduct of the Variation Summons.

10.  At that hearing, the Applicants were represented by Mr Rimsky Yuen SC leading Mr Val Chow of Counsel, and Dr Cho was represented by Mr CY Li SC leading Mr Jonathan Tai and Mr Kenny Kwok of Counsel (the former of whom had signed the skeleton submissions, but was otherwise unable to attend the hearing as a result of official duties).

11.  At the end of the hearing, I reserved my decision, to be handed down the following day.  This is my Decision.

B.  Variation Summons Battleground

12.  In short:

(1)  Mr Yuen submitted that the application made by the Variation Summons is unanswerable, and the application should be allowed; whereas

(2)  Mr Li submitted that the application made by the Variation Summons is misconceived and unnecessary, and so the application should be dismissed, or alternatively it should be adjourned to be dealt with after the substantive hearing of the Discharge Summons (though perhaps on the same day fixed for that hearing).

13.  Perhaps unusually, that battle between the parties is fought over almost entirely common ground.  Both from the written submissions filed, and from the further oral submissions made, it is clear that it is actually agreed between Mr Yuen and Mr Li that:

(1)  The question to be determined on the Discharge Summons is different from, and wholly unconnected to, the question to be determined on the Variation Summons.

(2)  A Mareva injunction is an order in personam restraining the party to whom it is directed from disposing of assets.

(3)  The purpose of such an order is to prevent the risk that a defendant would render himself judgment proof against a plaintiff.

(4)  Such an order does not deprive the restrained party of title to nor possession of the property to which the prohibition of the order extends.

(5)  Nor does it create any security interest, priority or in any sense rewrite insolvency law.

(6)  The administration of the property the subject of the prohibition is not placed in the hands of a receiver, trustee or other officer of the court, nor assumed by the court itself.

(7)  A Mareva injunction does not prohibit a creditor of the party subject to the restraint from exercising its creditor’s rights, including by execution, where no dealing by the restrained party is required to effect it.

(8)  Allowing a defendant to meet a genuine and bona fide commitment such as a loan is not contrary to the policy underlying a Mareva injunction.

(9)  Courts readily vary the terms of injunctions to permit a third party bona fide creditor to recover a debt owed by a defendant whose assets are restrained (even if that would leave insufficient assets to satisfy the plaintiff’s claim).

(10)  Enforcement actions by a judgment creditor would not normally involve any breach of a Mareva injunction as such by the person restraint, because it is not the defendant doing anything to produce diminution in the value of his assets.

(11)  However, enforcement action by a judgment creditor may face accusations of collusion, abuse of process or contempt of court on the ground that the enforcement constitutes a deliberate attempt to frustrate the purpose of the Mareva injunction.

(12)  Apparently with a view to protect themselves, non-parties not infrequently make variation applications to the courts seeking permission to dispose of charged or mortgaged properties caught by the terms of Mareva injunctions.

(13)  Therefore, there may be some circumstances where it is reasonable, sensible or advisable for a third party to act cautiously and/or to seek a variation of a Mareva injunction.

(14)  A distinction can be drawn between (a)  an application seeking liberty to proceed with enforcement steps, and (b)  the potential future taking of enforcement steps.  The Variation Summons is the former.

(15)  Hence, the interests of any other actual or potential creditors of the party restrained by the Mareva injunction (i.e. Dr Cho)  do not fall for consideration at present and might only fall to be considered in the context of future enforcement proceedings.

(16)  Even upon enforcement steps such as seeking a garnishee order, the starting point is that a judgment creditor is entitled to enforce the judgment he has secured against the judgment debtor, usually without considering the interests of non-parties except in circumstances such as where the judgment debtor was in the process of being wound up or where liquidation or some form of scheme of arrangement was imminent.

(17)  The Applicants have no legal interest in the matters in dispute in these proceedings (or in the Injunction Order), nor is there any question or issue to be determined as between the Applicants on the one hand, and CCL or Dr Cho on the other hand.

(18)  Dr Cho has never applied for, or obtained, the stay of execution of the HK Judgment or the BVI Judgment.

(19)  Rather, Dr Cho has never disputed the underlying debt or the HK Judgment or BVI Judgment.

(20)  Indeed, Dr Cho has in fact fairly recently acknowledged liability for the underlying debt and the HK Judgment (on which the BVI Judgment is based).

(21)  The debt owed under the underlying loan agreement and the HK Judgment – and hence the Applicants’ adjudged entitlement to repayment – pre-dated the making of the Injunction Order.

(22)  In this case, CCL also does not deny the existence of the underlying debt, and has consented to the proposed variation of the Injunction Order.

14.  I do not think it necessary to traverse the various authorities referred to by the parties in support of some of the legal propositions above, which seem to me to be sufficiently straightforward (as well as common ground)  as not to require reference to authority. 

15.  For completeness, I note that Dr Cho has filed additional evidence to identify that he has total debts which cannot be covered by the value of his assets, so that he is unable to repay his debts and is “clearly insolvent”.  He has stated that there is a serious risk that he may be declared bankrupt by the bankruptcy court in near future if any of the other creditors file a bankruptcy petition against him.  However, in light of the agreement as to the relevant principles, I think Mr Li was correct not to push this point too far.

16.  At one time, a further point seemed to arise as to whether the Applicants needed to have sought to intervene as parties to this action, before they might apply for variation of the Injunction Order. However, as the argument developed and clarified, this point fell away.  It became common ground that the Applicants could apply for variation of the Injunction Order under the liberty to apply provision contained within it.  Mr Li’s point was actually more subtle: he merely identified that if there was no proper basis for the Applicants to make their application – because it was simply unnecessary – there was no other basis upon which they might have any stance in the proceedings under the provisions of RHC Order 15.  That is obviously a red herring.

17.  Lastly, for the purposes of making the necessary decision on the Variation Summons, I do not think I need to delve into the correspondence between the parties – whether to resolve the question as to whether Dr Cho had given any reason or identified any legal basis for declining to give consent to the application when invited to do so, or for any other purpose.

C.  Conclusion

18.  Despite the extensive common ground, the difference between the parties – as noted above – is stark. 

19.  For his part, Mr Li has essentially put forward what might be described as a principled stance, namely that if there is no impediment to the Applicants in seeking to enforce the Judgments, caused by the Injunction Order, there is neither need nor proper legal basis to grant the variations sought by the Variation Summons.  But Mr Li also emphasised in submission that Dr Cho had a real concern that if he were to consent to the variation, that might give rise to the perception that he was in some way permitting, facilitating or intending to prefer one creditor over his other creditors which he has identified.  Mr Li even submitted that it was inappropriate to have made the application to seek to “force consent” to it from Dr Cho.

20.  For his part, Mr Yuen has submitted that the picture is clear.  There is no dispute over the Judgments, nor any stay of execution, and there is no basis to resist enforcement.  Therefore, where CCL has consented to the Variation Summons, Dr Cho’s resistance to it – and his alternate attempt to adjourn the hearing of it – appears plainly to be a tactical attempt to delay enforcement, which the Court should view with suspicion.  In the overall circumstances, Mr Yuen submitted, it was perfectly reasonable, prudent and appropriate for the Variation Summons to be made, and the variations sought to be granted.

21.  Ultimately, I accept that it is appropriate in the particular circumstances of this case for the variation sought by the Variation Summons to be granted.  I give particular weight to the following matters:

(1)  There is no common question arising on the Discharge Summons and the Variation Summons, so that there is no logical basis upon which to delay dealing with the Variation Summons until after dealing with the Discharge Summons. 

(2)  Dr Cho’s debt leading to, and underpinning, the Judgments – and the HK Judgment itself – has not been disputed and pre-dated the making of the Injunction Order.

(3)  The time taken between the HK Judgment and the issuing of the Variation Summons is largely explained by the intervening attempts to persuade Dr Cho to meet his debt obligations, culminating in the two Deeds entered into in September 2023.

(4)  The target for the proposed enforcement steps is, or includes, a shareholding expressly identified in the Injunction Order as being subject to the prohibition imposed by it.

(5)  Where Dr Cho has undertaken to use his best endeavours to apply for the discharge of the Injunction Order in order to let Mr Choi lawfully obtain or sell the Broad Idea shares for repayment of the debts, there can be little inherent basis for opposing a variation to permit the same aim – not least where the merits of the Discharge Summons are at present far from clear, and will not likely be determined until many months from now.

(6)  The position or interests of other or other potential creditors of Dr Cho are not relevant in the context of deciding whether or not to grant the variation sought – though they may become relevant on any actual enforcement steps subsequently taken.

(7)  CCL has consented to the order sought by the Variation Summons.

(8)  Part of Dr Cho’s opposition to the Variation Summons arises in part from a stated concern that if he were to consent to it, that might give the perception to his other creditors that he is seeking to prefer the Applicants over those other creditors.

(9)  If there is any uncertainty as to whether the Applicants can commence enforcement steps notwithstanding the existence of the Injunction Order (and perhaps the fact that the enforcement ‘target’ is expressly identified in it), the sooner that uncertainty is removed the better.

(10)  Better still if that uncertainty can be removed in the form of a clear expression by the Court.

(11)  Therefore, granting the Variation Summons is the clearest way of signalling the correct position.

(12)  It is also a way to afford some protection to Dr Cho against the stated concern that he might be perceived to have facilitated or intended preference amongst his creditors.

22.  I acknowledge that the fall-back position adopted by Mr Yuen, and not resisted by Mr Li, was that the Court – if it did not grant the Variation Summons – might make plain in this Decision that the refusal to grant the variation sought was simply because such a variation is unnecessary, and that would thereby avoid unnecessary controversies in future. However, on balance, it seems to me that my discretion should be exercised by the grant of variation sought by the Variation Summons.

23.  On the common ground as to the applicable principles and factual matters which I have canvassed above, I think the decision on the Variation Summons was somewhat finely balanced.  Further, my decision is intended to reflect and to deal in part with expressions of concern expressed by both sides, in what I think is the best and clearest way to do so.  Therefore, as to costs, it seems to me that it is appropriate to make no order as to costs.  However, I make that order in the first instance on a nisi basis, to become absolute if neither party applies for variation within 14 days.  Any such variation application (if made)  should be made by paper application, and will be dealt with on the papers.

The plaintiff and 1^st respondent was excused from court attendance

Mr C. Y. Li SC, Mr Jonathan Tai and Mr Kenny Kwok, instructed by KCL & Partners, for the 1^st defendant and 2^nd respondent

Mr Rimsky Yuen SC and Mr Val Chow, instructed by Kenneth Chong Law Office, for the applicants

HCA 399/2018

[2022] HKCFI 3406

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 399 OF 2018

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AND

HCA 463/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 463 OF 2021

________________________

________________________

(Heard together)

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D E C I S I O N

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A. Introduction

1.  This application concerns two pieces of litigation in the Convoy litigation saga:

(1)  HCA 399/2018, in which the plaintiff (“CCL”)  claims against the 1^st defendant (“Cho”)  and the other defendants, seeking remedies arising from various transactions in which all or some of the defendants were involved.

(2)  HCA 463/2021, in which Cho as plaintiff claims in defamation against the 1^st defendant in that action (“Convoy”)  – the indirect parent of CCL – and the other defendants (all, together, “463 Defendants”).

2.  By summons dated 1 June 2022, CCL and the 463 Defendants seek orders that: (1) HCA 463/2021 be tried immediately after the trial of HCA 399/2018 before the same judge or to be directed by the trial judge; and (2) the evidence in HCA 399/2018 be admissible in the trial of HCA 463/2021.

3.  Whilst most of the other parties take a neutral position, the application is opposed by Cho.  His opposition is formally put forward in HCA 463/2021, and he has been excused from attending the hearing in HCA 399/2018.

4.  The application requires a case management decision, based on the application of settled principles which can be briefly canvassed below, but which ultimately to seek to ensure the efficient and just resolution of disputes before the Court.

5.  At the hearing, CCL and the 463 Defendants were represented by Mr Tom Ng of Counsel, and Cho was represented by Mr CY Li SC leading Mr Jonathan Tai of Counsel.

6.  This is my Decision.

B.  The Competing Stances

7.  In broad terms, the contest on this application is as follows.

8.  On behalf of CCL and the 463 Defendants, Mr Ng submits that the actions should be tried one immediately after the other before the same judge because:

(1)  there is a high degree of overlap in the issues between the two actions;

(2)  the two actions have progressed to a similar stage, so that case management considerations point to the proposed order; and

(3)  the proposed order would avoid any inconsistent findings, so as to avoid argument on whether findings in one action are binding on the other.

9.  On behalf of Cho, Mr Li submits that:

(1)  there is very limited overlapping of issues in the two actions;

(2)  the limited overlapping does not bear sufficient importance in proportion to the rest of the subject matter of those actions, so that the proposed order cannot be shown to save time and costs;

(3)  the proposed order would bring undue complexity and overloading of issues to the trials of the action; and

(4)  the proposed order would cause substantial and undue delay in HCA 463/2021, which is unfair to Cho.

10.  Therefore, so as to resolve the appropriate case management directions, it is helpful to look at the issues in the two actions and the degree of overlap, and the practical benefit or detriment in hearing one action immediately after the other (or, perhaps, of staying one action pending the other).

C.  Applicable Principles

11.  The application is made under RHC Order 4 rule 9(1), which provides that:

Where two or more causes or matters are pending, then, if it appears to the Court –

(a)  that some common question of law or fact arises in both or all of them, or

(b)  that the rights to relief claimed therein are in respect of or arise out of the same transaction or series of transactions, or

(c)  that for some other reason it is desirable to make an order under this rule,

the Court may order those causes all matters to be consolidated on such terms as it thinks just or may order them to be tried at the same time, or one immediately after another, or may order any of them to be stayed until after the determination of any other of them.

12.  As already stated, the principles applicable under this rule are well-settled, and probably need no reference to authority. The key principles are that:

(1)  The Court has an unfettered discretion in deciding whether to make a consolidation order, and the power is to be exercised in a flexible way with regard to the particular circumstances of the situation.

(2)  The Court must nevertheless be satisfied that it would be proper and expedient to make the order, having regard in particular that:

(a)  one primary objective of such an order is to save time and costs;

(b)  where there is a substantial overlapping of issues in parties, it is desirable to resolve the disputes in the different actions on one occasion by the same judge;

(c)  the Court is seeking the avoidance of unnecessary delay, undue complexity and overloading of issues; and

(d)  the Court is seeking the avoidance of creating a risk of irreconcilable decisions which would arise from trying actions separately.

(3)  There is no hard and fast rule that, just because the parties are identical and some common question of fact or law is involved in both actions, it would be expedient and proper to order consolidation.

(4)  The Court should take a practical and common sense approach to meet the justice of the particular situation, in light of the underlying objectives in Order 1A of the RHC.

(5)  The emphasis is on ensuring the efficient and just resolution of disputes before the Courts.

13.  It is pertinent to note that, of the four possible options identified within the rule, CCL and the 463 Defendant have in the summons canvassed only the option that one matter be tried immediately after the other (though in his written and oral argument Mr Ng also canvassed the possibility that one matter might be stayed until after the determination of the other).  Cho opposes either option.

14.  Therefore, whilst the authorities frequently deal with the situation of a potential order for consolidation, such an order is not the same as an order for the trial of one action to follow the other, or an order to stay one action pending the trial of another.  Different considerations may apply depending on which potential order is sought or in focus.  This emphasises the flexibility in the consideration, as the Court seeks in the exercise of its discretion to identify the case management decision which promotes the efficient and just resolution of the disputes before it.

D.  The Two Actions

D.1  Principal Action

15.  Before turning to a description of the two actions relevant to the current application, mention should first be made of HCA 2922/2017, which has been defined as the “Principal Action”.  Cho is the 1^st defendant, and there are now (I think, following various amendments)  38 defendants.

16.  According to Convoy’s pleaded case in the Principal Action, Cho was the mastermind in Convoy who engineered a scheme (“Cho’s Scheme”)  – which included but was not limited to (a) an open offer made by Convoy on 6 February 2015, (b) an allotment or placing of Convoy shares on 29 October 2015, and (c) a circular financing arrangement by which CCL and CSL (another subsidiary)  advanced loans and margin finance to enable and/or assist the placees to subscribe for the allotted shares – for the improper motives of (1) entrenching his secret control in Convoy, (2) causing price manipulation of Convoy’s share price resulting in loss and damage to Convoy and its legitimate shareholders, (3) allowing himself and his associates to subscribe shares of Convoy with Convoy’s money, and (4) secretly securing the control of Convoy for his own and his associates’ benefits (together “Improper Motives”).

D.2  HCA 399/2018

17.  As stated, HCA 399/2018 is an action commenced by CCL against Cho and others, seeking remedies arising from various transactions in which all or some of them were involved.

18.  A broad description of CCL’s claim and Cho’s defence is set out in the introductory part of the Court of Appeal (“CA”)  judgment granting a Mareva injunction on 16 June 2020 (“CA Judgment”): see §§1-6, which can be read but need not be recited in this Decision.

19.  Amongst the allegations made by CCL in the action, Mr Ng has sought to emphasise the following points:

(1)  Cho assumed the role of de facto and/or shadow director of CCL and Convoy and manipulated the corporate affairs of the Convoy Group and other listed companies for the benefit of himself and/or his associates.

(2)  Further, capitalising on his wealth and influence on the stock market, Cho actively hid his control and/or ownership of assets and shareholdings behind elaborate nominee arrangements and complex corporate structures.

(3)  In breach of his fiduciary duties, Cho caused and/or procured CCL to enter into five highly problematic transactions (“399 Transactions”).

(4)  On 25 June 2019, CCL took out an inter partes summons seeking a worldwide Mareva injunction against Cho.

(5)  The CA Judgment, when the CA found a real risk of unjustified dissipation of assets on Cho’s part, on the basis of his low commercial morality and CCL’s good arguable case on its substantive claims against him.  The worldwide assets restrained were up to the value of approximately HK$770 million.

20.  Mr Ng specifically drew my attention to the Section C in the Amended Statement of Claim in HCA 399/2018, which is headed ‘Roy Cho’s Control over CCL as de facto and shadow director’, comprising §§25-37.  Particular reference was made to §26(3)  which pleads (bold and italics in original):

Procuring Convoy to make open offer for Quincy Wong and Mark Mak (D14)  to profit – In February 2015, Roy Cho caused Convoy to make an open offer to its shareholders, the effect of which was to allow (i) Quincy Wong to turn his shareholding in Convoy worth HK$12,940,671.24 as of 1 April 2015 into cash proceeds of HK$3,643,820.59 and a new shareholding in Convoy worth HK$72,535,867.54 as of 11 May 2015; and (ii) Mark Mak (D14)  to turn his shareholding in Convoy worth HK$12,277,388.08 as of 1 April 2015 into cash proceeds of HK$4,933,515 and a new shareholding in Convoy worth HK$68,817,991.08 as of 11 May 2015.  Relevantly, on the basis of these matters, Convoy is seeking an account of profits against Quincy Wong and Mark Mak (D14)  in HCA 2922 of 2017 [i.e. the Principal Action].

21.  Mr Ng also took me to that part of the pleading in the claim which identifies the claim against other defendants on the basis that they well knew or turned a blind eye to or were recklessly indifferent to the fact that Cho had substantial control over CCL as its de facto and/or shadow director.

22.  Mr Ng also took me to Cho’s Defence, which includes: (1) at §2, the categorical denial of any suggestion that he was able to direct or control his alleged associates, nominees and/or agents or that he acted as they facto or shadow director of Convoy, CCL or CSL; and (2) at §30.3, the non-admission to §26(3)  of the claim, save to deny that Cho caused Convoy to make an open offer to its shareholders, and to aver that Cho did not have the power to make any decisions to offer or in fact allot shares to Convoy’s shareholders.

23.  Reference was also made to CCL’s Reply to Cho’s Defence, Section II of which is headed ‘Particulars on Roy Cho’s Control and/or Influence over Convoy, CCL and CSL’, and which includes the denial of the pleading in §30.3 of the Defence.  On the basis of these pleadings, Mr Ng submits that an issue as to the control by Cho is definitely raised.

24.  For his part, Mr Li has sought to emphasise (1) the nature of the claim in HCA 339/2018 by reference to the five particular 399 Transactions, where the claim is based upon alleged breaches of fiduciary duties, and (2) the point that CCL does not plead that any of the 399 Transactions was entered pursuant either (a) to Cho’s Scheme or (b) to the Improper Motive pleaded in the Principal Action.

D.3  HCA 463/2021

25.  HCA 463/2021 is a claim by Cho in defamation, the subject matter being an announcement published by Convoy on 3 or 4 January 2021 (“Announcement”)  on the websites of the Stock Exchange of Hong Kong Ltd and Convoy.  The defendants to the action are Convoy and the members of the Board of Directors which authorised and/or made the Announcement.

26.  The pleaded defamatory words (“Words”)  found in the Announcement are set out in the Schedule to the Statement of Claim.  In essence, the Words are Convoy’s summary of its case against Cho in the Principal Action – namely that he had behaved dishonestly/unlawfully by engineering the Cho Scheme – and the summary given of the CA Judgment in §9(g)  of the Announcement.

27.  The ‘sting’ alleged in the meaning of the Words is that the CA made findings in the CA Judgment against the conduct of Cho, namely that (1) the CA was critical of his conduct and (2) the CA acknowledged or confirmed that Cho had dishonestly and fraudulently committed serious wrongdoings against Convoy and other listed companies and also the shareholders of those companies.  Cho pleads that the Words are false in that (1) in the Principal Action, Cho has already denied Convoy’s claims based on the alleged Cho’s Scheme, and (2) on a correct reading of the CA Judgment, the CA has not made the alleged court findings.

28.  Mr Ng has sought to emphasise that the part of the pleading relating to the natural and ordinary meaning of the Words specifically includes a reference to (part of)  the Improper Motives, namely of entrenching Cho’s secret control of Convoy to conceal and enable his wrongdoings.  He also points to §7(e)  of the claim which references the CA Judgment, which was of course on an appeal from a decision in HCA 399/2018.

29.  As to defences, the 463 Defendants plead defences of justification and fair comment, and also rely on qualified privilege.  In response, Cho asserts malice.

30.  In relation to the defences of “justification” and “fair comment”, the 463 Defendants plead that they will rely on the facts pleaded in the Re-Re-Re-Amended Statement of Claim in the Principal Action and the Statement of Claim in HCA 399/2018.  In his Reply, Cho pleads that “in so far as is necessary” he will rely on his Defences filed in those two actions.

31.  On the face of the pleadings, the other issues in HCA 463/2021 are not otherwise related to the subject matters of the Principal Action and HCA 399/2018.

E.  Degree of Overlap

32.  Mr Ng submits that it is at least common ground that there is a common question of law and fact involved in both HCA 399/2018 and HCA 463/2023, namely whether or not the facts pleaded by CCL in the Statement of Claim in HCA 399/2018 provide justification to the publication of the Words in issue in the Announcement.  He also says (in a summary of his Annex 1)  that if the allegations in HCA 399/2018 are found to be true:

(1)  Cho’s reliance on his Defence in HCA 463/2021 will fall away;

(2)  the falsity of elements (in so far as the Announcements refer to facts found in HCA 399/2018)  will fall away;

(3)  that would reinforce the argument that Convoy had the duty or interest to inform its shareholders and the investing public of the matters stated in the Announcement, giving rise to a defence of qualified privilege;

(4)  the premise of Cho’s malice plea will fall away (in so far as the Announcement referred to facts found in HCA 399/2018), and where “malice” is a subjective test;

(5)  there would or could be an impact on the quantum of any damages payable to Cho to compensate for his alleged loss, because (even if a defence of justification cannot be established on proved sufficient facts)  a defendant may be able to rely on such facts as he has proved to reduce the damages, perhaps almost to vanishing point.

33.  Mr Ng also submits that Cho has himself acknowledged the relevance of HCA 399/2018 by including the pleadings and the CA Judgment from that action in his List of Documents in HCA 463/2021. However, I agree with Mr Li that is only an acknowledgement of the relevance in the discovery sense, and does not of itself identify any significant degree of overlap.

34.  There is perhaps more force in Mr Ng’s submission that, by Cho’s statement in his timetabling questionnaire in HCA 463/2021, Cho has in effect acknowledged that the determination of the sustainability of the liability of the claims in HCA 399/2018 is necessary for the Court in HCA 463/2021.

35.  On the other hand, Mr Li submits that the degree of overlap between the actions is in fact very limited.  He says that:

(1)  the two actions concerned different and distinct transactions;

(2)  CCL does not plead in HCA 399/2021 that Cho’s Scheme or the Principal Action’s Improper Motive is material in support of CCL’s claim relating to the 399 Transactions, which are rather based upon breaches of duty (or dishonest assistance)  by reference to commercial irrationality of the transactions;

(3)  not only are the core transactions and material facts in support different in the two actions, the alleged wrongdoers in causing those transactions are not the same;

(4)  out of over 100 pages of the Amended Statement of Claim in HCA 399/2018, CCL and the 463 Defendants are able to identify references to the alleged Cho’s Scheme in only two insignificant sub-paragraphs (both of which themselves refer to various examples, suggesting that the Cho’s Scheme is independent and distinct from CCL’s case on the 399 Transactions);

(5)  in the Announcement, HCA 399/2018 is referred to in only two sub-paragraphs;

(6)  in any event, the real issue in HCA 463/2021 relates to the truth or falsity in the description in the Announcement of the CA Judgment, and the veracity of CCL’s claim in HCA 399/2018 is not an issue to be resolved in HCA 463/2021.

36.  Mr Li further submits that the Court has to look at all the issues raised in both actions as a whole, and determine the practical implications of hearing the trials one after the other.  So far, it remains unclear whether and to what extent the facts pleaded in HCA 399/2018 would be relevant to HCA 463/2021, and they would at best be relevant only to the particular defences of justification and fair comment.  Mr Li submits that the overlapping issues suggested by Mr Ng are not really very overlapping when properly understood in the context of the defamation claim.

37.  More importantly, Mr Li submits, any degree of overlapping – which is primarily limited to the damages point in HCA 463/2021 – is not of sufficient importance in proportion to the rest of the subject matters of the actions to show that hearing one trial after the other would save time and costs.

F.  Analysis

38.  I agree with Mr Li that it is telling that CCL and 463 Defendants have not identified the names and numbers of any suggested common witnesses between the two actions, and the nature and volume of any common documents.  This may in part be a reflection that, despite been commenced more than four years ago, HCA 399/2018 does not appear to have proceeded even as far as discovery by lists of documents, and there is certainly no indication as to the identity or scope of likely evidence from any particular witness.  In HCA 463/2021, the 463 Defendants have not identified the name of any witnesses, and have also been so far unable to find a list of documents.

39.  As a result, Mr Li is correct when he says that the Court cannot realistically assess the true degree of commonality, or how the use of witnesses and documents could save time or costs by the proposed order.  That seems to me to identify that the application is either premature, or one which simply cannot be made good.

40.  There is also force in Mr Li’s submission that the proposed order might bring further complexity and overloading of issues to the trials of the two actions.  There is further some potential inconsistency in Mr Ng’s assertion that there is significant overlapping between the two actions, with the further suggestion that it would not be necessary for the defendants in HCA 399/2018 to participate in the trial of HCA 463/2021.  I note that the application (perhaps unusually)  seeks only that the evidence in HCA 399/2018 stand as evidence in HCA 463/2021 – and not vice versa.

41.  I take into account Mr Li’s submission that HCA 463/2021 as a defamation action, in which one or both parties might elect a jury trial.  Though, as I understand it, any such election would not bind a Court to hold a jury trial, the simple fact is that neither party has yet made an election one way or the other.  If there were to be a jury trial, which must remain at least a possibility, that would seem to me to give rise to at least potentially significant further difficulties, of the sort identified and taken into account by Poon J (as the CJHC then was)  in Chui Pui Kun v Chui Wai Kwan (unreported, HCA 2339/2009, HCMP 438/2010, HCMP and 97/2010, 7 July 2011), at §23.

42.  I further take into account that, ordinarily, a claimant in a defamation action would prefer to seek an early trial and court judgment, to clear his name, and (if successful)  to lessen the damage caused by the defamatory words until that judgment.  In this particular case, on the order proposed by CCL and the 463 Defendants, the relevant trial would be delayed until whenever the trial in HCA 399/2018 can be brought on (in proceedings which have so far proceeded at almost glacial pace).  I note that Mr Ng himself recognises that, if the two actions are not somehow joined together, it would probably be expected that HCA 463/2021 would come to trial before HCA 399/2018.

43.  The strongest point for any procedural linkage between the two actions seems to me to be in relation to the quantum of damages in HCA 463/2021.  I accept, and I think it is common ground, that the quantum of any damages might be affected by findings on matters which are in issue on HCA 399/2018.  But that degree of overlap does not seem to me to be sufficiently substantial to justify an order at this stage that there be a trial of HCA 463/2021 immediately after the trial in HCA 399/2018. Nor does it seem to me to justify an order at this stage either that (a) there should be a stay of HCA 463/2021 pending the trial in HCA 399/20 2018 or (b) there should be some split trial direction given in HCA 463/2021, to hive off the question of any damages.

44.  I have not forgotten the risk of inconsistent decisions, where the same or similar questions might arise for determination in two or more than two actions.  But, even factoring that risk into account, I am not persuaded that it tips the balance in favour of the proposed order.

45.  My view on this point is not significantly affected by Mr Li’s submission which was made strictly as a legal point (and was expressly not made on instructions, and was not intended to be a concession by Cho)  that there will or may be an issue estoppel between at least Convoy/CCL and their privies and Cho arising from any action between them which goes to a trial and judgment.  Therefore, it does not seem to me to be necessary to decide whether Cho should or should not have offered an undertaking to be bound by findings in one action for the purposes of the other.

46.  In conclusion, I am not satisfied that it is appropriate at this stage to make the proposed order as sought by the application.  I expressly do so without prejudice to any future case management directions which may be felt appropriate on circumstances as may in future arise (see, further, below).

47.  I dismiss the application.

G.  Costs

48.  I see no reason why costs should not follow the event of the dismissal of the application.  On that basis, I order CCL and 463 Defendants to pay Cho’s costs of and occasioned by the application, to be taxed if not agreed, but without a certificate for two Counsel.

49.  However, as I indicated at the hearing, I make that order in the first instance on a nisi basis.  The order will become absolute if no party makes any variation application within 14 days.  Any variation application will be dealt with on paper submissions.

H.  Postscript on Further Case Management

50.  I have looked at matters expressly in the context of how they appear “at this stage”.  I have also done so in light of the wider potential case management questions which I canvassed with the parties at the hearing.  In particular, the relevant degree of overlap between actions seems likely most impactful by reference to the Principal Action. Indeed, it is probably fair to say that the central allegations in the Principal Action relating to the Cho’s Scheme and the Improper Motives provide at least context for many of the cases in what I have described above as the Convoy litigation saga.

51.  To that end, I think it is probably unhelpful – or, at least not sufficiently helpful – for there to be consideration of case management questions only by reference to one or two out of the total number of cases, and in particular if divorced from what seems to me to be properly described as the Principal Action.

52.  Where the Convoy litigation has in effect become docketed to a single judge, it seems to me appropriate that the judge (who is expected to have some overall knowledge of and oversight of those various cases)  should at least consider some overall case management for those cases.  Where large-scale multi-action litigation of this nature makes a potentially significant call on judicial and other resources, the Court is justified in taking a more active case management role.  To that end, it seems to me that it might be useful for there to be a multi-action case management hearing.

53.  Therefore, I direct Convoy (and any relevant subsidiary)  and Cho to seek to agree, and provide to the Court within 21 days, a list of all relevant Convoy litigation by reference to (a) the action number, (b) the parties, (c) a brief description of the claim and defence(s), and (d) the stage of proceedings reached.  I will then consider directing a combined case management hearing for such of those cases as seems to me to be appropriate in light of that information.  Though I do not direct it, I am also content to receive suggestions as to which cases might be usefully managed as a group.

54.  Though further thought can be given to the types of case management orders open to consideration, it may be that an appropriate approach to the various pieces of litigation is to identify a series of issues which might be tried.  In other words, appropriate case management may involve a trial or trials of specific issues across a number of actions, rather than trials of actions as a whole.

Mr Tom Ng, instructed by Charles Chu & Kenneth Sit, for the plaintiff in HCA 399/2018 and the defendants in HCA 463/2021

Mr CY Li SC and Mr Jonathan Tai, instructed by KCL & Partners, for the plaintiff in HCA 463/2021 and 1^st defendant in HCA 399/2018

The 1^st to 9^th, 13^th and 14^th defendants in HCA 399/2018 were excused from court attendance

HCA 399/2018

[2020] HKCFI 690

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 399 OF 2018

________________

BETWEEN

________________

________________

D E C I S I O N

________________

1.  On 30 October 2019 I heard the Plaintiff’s application for an order restraining the 1^st Defendant from disposing of his assets within or outside Hong Kong up to the value of $654,057,954. I delivered my judgment dismissing the application on the 11 March 2020. The first defendant has sought leave to appeal that decision.

2.  An unusual feature of this application is that the Plaintiff has already obtained similar relief to that sought in Hong Kong in the British Virgin Islands (“BVI”) for reasons explained in my decision.  The relevant orders remain in place pending decisions of the Court of Appeal in the BVI, which were awaited at the time of the application was made and  I understand have not yet been handed down.

3.  As the Plaintiff acknowledges, in order to obtain leave to appeal it has to show a reasonable prospect of success [1]. As my decision involved the exercise of a discretion, the Plaintiff needs to demonstrate that I exercised the discretion under a mistake of law [2] or my conclusion was outside the generous ambit within which reasonable disagreement is possible [3].

4.  Although neither the Notice of Appeal nor the Plaintiff’s skeleton acknowledge this, what the Plaintiff wants the opportunity to argue is that the test, which it is required to satisfy in respect of the risk of dissipation of assets, is lower than it accepted was the case before me and then re-argue the application based on that lower threshold.

5.  In [12]–[13] of my decision I set out what I understood to be the criteria, which need to be satisfied in respect of the risk of dissipation of assets.  For convenience I quote these paragraphs:

“12. The purpose of granting a freezing order is to restrain a defendant from evading justice by disposing of assets otherwise than in the normal course of his affairs with the result that a defendant becomes judgment proof. It is not to provide security for the plaintiff [4]. There must be concrete evidence that there is a real risk of dissipation of assets in the sense which I have described [5]. It is not sufficient to show that a defendant has a reason or the opportunity to dissipate assets. Gloster LJ explains this in [59] of Holyoake v Candy[6]:

‘59(ii). However, the mere possibility of a party using a complex corporate structure or corporate reorganisation to dissipate assets, without more, does not equate to a risk of dissipation. Otherwise, the burden of proof would be reversed: parties subject to a freezing order application would be compelled to show that they would not dissipate assets in that way.

59(iii). This emphasis is important. An applicant must show a risk of dissipation as opposed to it merely being possible (without more) that the claimant could dissipate in that way: (a) In Mediterranean Feeders LP v Bernd Meyering Schiffahrts (unreported) 5 June 1997 the Court of Appeal approved Tuckey J’s rejection of the proposition that a freezing order was appropriate where there might be a temptation to dissipate assets—but no evidence whatsoever that the claimant to the application would yield to it. Evans LJ said:

“Given the nature of the Mareva jurisdiction and given the fact that it is not, as the judge says: “a means of obtaining advance security for a claim”, it is inevitable that before the court can be satisfied that there is a risk of dissipation, in the sense in which that term has been used, the court must consider whether there is any evidence that in the particular case the asset will be dissipated rather than otherwise. If there is no such evidence then, in my view, it would be wrong for the injunction to be granted.”

(b) Several cases have emphasized that there is nothing implicit in complex, offshore corporate structure which evidences an unjustifiable risk of dissipation…’

13. There is no presumption either that a defendant will make himself judgment proof if he is able or that a defendant who can be shown to have the means and wherewithal to do so.  Otherwise, as Gloster LJ observes, the burden of proof would be reversed.  It is necessary for the risk to be proved and in assessing whether or not it has been proved the court will have regard to all relevant background matters that provide an aid to determining whether the risk has been demonstrated.  Commonly it is argued that evidence of dishonesty or low commercial ethics is capable of justifying the inference that a defendant will attempt to make himself judgment proof.  However, the evidence must be relevant to the risk of dissipation, not simply the underlying claim [7].”

6.  This was consistent with the Plaintiff’s submission on the law (which was very limited [8]) in which it appears to accept that it is necessary for the Plaintiff to establish a real risk of dissipation.  The 1^st Defendant’s counsel, Linda Chan SC (as she then was) made more comprehensive submissions, which were not disputed by the Plaintiff’s counsel either in written reply submissions or so far as I can recall in oral submissions.

7.  The Plaintiff now seeks to argue (at least as I understand the Plaintiff’s notice of appeal[9] and written submission in support of the application for leave) on the basis of a recent decision of the English Court of Appeal in Lakatamia Shipping Company Limited v Toshiko Morimoto [10], that it is not necessary to prove on the balance of probabilities a real risk of dissipation.  It is sufficient, so the Plaintiff now argues, to show a good arguable case of a risk of dissipation and that, this being the criteria, if there is a good arguable case that the defendant has been involved in             wrong-doing this is of itself close to sufficient to establish a risk of dissipation.

8.  The Plaintiff wants to re-argue its application before the Court of Appeal assisted by what, in practice, it is contending is a lowering of the test that it needs to satisfy.

9.  The principal judgment in Lakatamia was given by      Haddon-Cave LJ.  He summaries his conclusion, with which the other judges agreed, although in the case of McCombe LJ with what he describes as “with some hesitation”, in [51].  He says this:

“51. In my view, in the light of the authorities which I consider in detail below, the correct approach in law should be formulated in the following two propositions:

(1) Where the court accepts that there is a good arguable case that a respondent engaged in wrongdoing against the applicant relevant to the issue of dissipation, that holding will point powerfully in favour of a risk of dissipation.

(2) In such circumstances, it may not be necessary to adduce any significant further evidence in support of a real risk of dissipation; but each case will depend upon its own particular facts and evidence.”

10.  It seems to me that in the present context the important component of this approach is that the alleged wrong-doing is relevant to the issue of dissipation.  This cannot in my view mean, as the Plaintiff appears to suggest, that if the alleged wrong-doing involves impropriety or possibly unlawful conduct that it follows a form of presumption arises that the defendant will dissipate their assets unless restrained.  In my view, what Lakatamia is explaining is that if the wrong-doing involves activities, which are consistent with dissipation, for example misappropriation of assets, the court may accept that this points to a material risk of dissipation.  I do not read Lakatamia as saying simply because the wrong-doing involves allegations of dishonesty the Court should assume a defendant will try and hide their assets.

11.  In the present case, in my view the allegations of wrong-doing are not of themselves relevant to the risk of dissipation.  It is correct that the nature of the claims that are described in my earlier decision involve impropriety, but the nature of the impropriety does not of itself point powerfully to a risk of dissipation.

12.  I am not satisfied that it can be said that I misapprehended the legal principles or that my decision fell outside the range of reasonable decisions open to me on the basis of the evidence and the argument before me in October.  It seems to me that the Plaintiff simply want to have the opportunity to re-argue the application.  I, therefore, decline to give leave.  I dismiss the application.  The Plaintiff shall pay the 1^st Defendant’s costs with a certificate for two counsel forthwith.

Mr José Maurellet SC, Mr John Hui and Mr Howard Wong, instructed by Charles Chu & Kenneth Sit, for the plaintiff (intended appellant)

Mr Jonathan Chang and Mr Peter Dong, instructed by Raymond Siu & Lawyers, for the 1^st defendant (intended respondent)

HCA 399/2018

[2020] HKCFI 429

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 399 OF 2018

________________

________________

________________

D E C I S I O N

________________

1.  On 25 June 2019 the Plaintiff, Convoy Collateral Limited (“CCL”) issued a summons for an order restraining the 1^st Defendant, Roy Cho, from disposing of his assets within or outside Hong Kong up to the value of $654,057,954. The summons came on before me on 11 July 2019 and I made directions for the substantive determination of the summons on 30 October 2019 [1].

2.  CCL is an indirect wholly-owned subsidiary of Convoy Global Holdings Limited (“Convoy Holdings”), which is listed on the Main Board of the Hong Kong Stock  Exchange.  Convoy Holdings is the apex of a financial services group.  CCL is a money lender.  CCL’s business is largely funded by Convoy Holdings.

3.  The writ was issued on 14 February 2018 and a 87-page Statement of Claim served on 31 May 2018.  There are five heads of claim for loss and damages pursued against Roy Cho and other of the Defendants:

(1)     Loss arising from the wrongful acquisition of shares in First Credit shares and manipulation of the First Credit share price: $259,869,800.

(2)     Loss arising from manipulation of the share price of China Green and dishonest conspiracy in failing to convert China Green convertible notes at a profit: $81,967,000 (not the larger figure in the general indorsement on the writ).

(3)     Loss arising from the wrongful acquisition of True Surplus: $89,388,153,80.

(4)     Loss arising from the wrongful grant of an unsecured loan to Athena Power on uncommercial and disadvantageous terms: $34,600,000.

(5)     Loss arising from the misappropriation of Checkmate: $33,212,800.

The total loss claimed in the General Indorsement is $715,070,754.80.

4.  The Defence was served on 26 February 2019 and the Reply on 23 October 2019.

5.  CCL did not at the time these proceedings were commenced apply for an ex parte injunction against Roy Cho in Hong Kong.  Instead CCL proceeded as follows.  CCL applied on an ex parte basis in the      British Virgin Islands (“BVI”) for an ex parte freezing order over Roy Cho and Broad Idea Limited’s (“Broad Idea”, which is beneficially owned by Roy Cho) assets.  On 9 February 2018 an order was granted by Chivers J:

(1)     Restraining Broad Idea from disposing of or encumbering shares it held in Town Health International Medical Group Limited (“Town Health”) or the proceeds of the sale of such shares to the value of US$75,583,490.03.

(2)     Restraining Roy Cho from disposing of or dealing with his assets in the British Virgin Islands up to the value of US$75,583,490.03 or disposing of or encumbering shares in Broad Idea.

6.  The return date for the inter partes summons was 6 March 2018.  Counsel for Roy Cho objected to the Order against him on the grounds that the BVI court did not have in personam jurisdiction over him.  Roy Cho applied to have the Order set aside and after a contested hearing before Adderley J in early April 2019 the Order as against Roy Cho was set aside.  Adderley J held in his decision:

(1)     There is binding authority of the Privy Council in Mercedes Benz AG v Leiduck [1996] AC 284 and Siskina [1979] AC 210 that the BVI court has “no power to grant a free-standing injunction in aid of foreign proceedings for service outside the jurisdiction on a person who is not subject to the territorial or in personam jurisdiction of the BVI court”: [64]–[65].

(2)     There was non-disclosure to the ex parte Judge since      his attention was not drawn to the leading decision of Mercedes Benz AG and other authorities on the issue: [54].

(3)     Leave for service on Roy Cho out of jurisdiction was set aside and the BVI freezing order was discharged: [71].

7.  Ten weeks then passed during which Roy Cho was not subject to a freezing order.  CCL filed a notice of appeal and applied for a stay on 2 May 2019, which was dismissed on the same day. CCL then applied for a stay from the BVI Court of Appeal.  A stay was granted on 25 June 2019.  On 25 June 2019 CCL applied for a mareva injunction (“freezing order”) in these proceedings.  When the matter came on before me on 11 July 2019 it was agreed that a freezing order was not necessary until the BVI Court of Appeal had disposed of the appeal, which was listed for hearing on 18 October 2019.  CCL’s application before me was adjourned until 30 October 2019 on the understanding that if the BVI Court of Appeal dismissed the appeal before 30 October 2019 it might be necessary for CCL to apply for an interim order pending determination of the application before me.  As far as I am aware at the time of writing the Court of Appeal’s judgment has not been delivered.

8.  On 26 June 2019 Adderley J heard the inter partes application for the continuation of the Order granted by Chivers J on 9 February 2018 against Broad Idea.  Adderley J gave judgment in favour of CCL continuing the order.

9.  Roy Cho opposes the present application on the following grounds:

(1)     CCL claims that the five impugned transactions have caused it loss of the $769.6 million.  However, CCL has elected to retain three of the assets acquired under the three impugned transactions involving First Credit Acquisitions, China Green and True Surplus and cannot claim that it has suffered any loss in respect of these three transactions.

(2)     As for the two other transactions relating to Checkmate      and Athena Power, at the highest CCL incurred a loss of $33.2 million and $34.6 million respectively, totalling $67.8 million, which is the maximum amount in respect of which a freezing order should be granted.

(3)     CCL is asking this Court to grant a freezing order in the event that the BVI Court of Appeal does not allow CCL’s appeal.  If it does the order sought from this Court becomes unnecessary.  In effect, CCL is asking this Court to re-grant an order which the BVI court considered to have been wrongly granted.  CCL does not dispute that this is the reason for the application [2].

10.  Ms Chan submitted that in these circumstances this Court should not exercise its jurisdiction in favour of CCL:

(1)     CCL elected to seek the BVI freezing order, knowing full well that the BVI court is not seised of the substantive dispute and does not have in personam jurisdiction over Roy Cho.

(2)     There is no explanation as to why no application was made to the Hong Kong Court for any injunctive relief against Roy Cho.

(3)     This is not surprising because had the application been brought in the Hong Kong Court, it would have been obvious that there was neither urgency nor need for secrecy to justify an ex parte application, as CCL had already commenced a substantial claim against Roy Cho in (HCA 2922/2017) two months earlier, and no injunction was sought.

(4)     CCL was guilty of material non-disclosure at the ex parte application in that it failed to draw to the Court’s attention to the highest authorities, binding on BVI court, to the effect that the BVI court has no power to grant a self-standing injunction in aid of foreign proceedings where it does not have in personam jurisdiction against such person.

(5)     CCL should not be allowed to rely on its own wrong and asks the Hong Kong Court to exercise its jurisdiction in its favour, still less to grant an injunction which is even more draconian than the BVI freezing order.

11.  In addition Ms Chan argued that there was no real risk of dissipation and all the time that the Broad Idea injunction remained in place (it is under appeal) there is no need for a further order.  I shall deal first with the risk of dissipation and need for an order.

12.  The purpose of granting a freezing order is to restrain a defendant from evading justice by disposing of assets otherwise than in the normal course of his affairs with the result that a defendant becomes judgment proof.  It is not to provide security for the plaintiff [3]. There must be concrete evidence that there is a real risk of dissipation of assets in the sense which I have described [4]. It is not sufficient to show that a defendant has a reason or the opportunity to dissipate assets.  Gloster LJ explains this in [59] of Holyoake v Candy [5]:

“59(ii). However, the mere possibility of a party using a complex corporate structure or corporate reorganisation to dissipate assets, without more, does not equate to a risk of dissipation. Otherwise, the burden of proof would be reversed: parties subject to a freezing order application would be compelled to show that they would not dissipate assets in that way.

59(iii). This emphasis is important. An applicant must show a risk of dissipation as opposed to it merely being possible (without more) that the claimant could dissipate in that way: (a) In Mediterranean Feeders LP v Bernd Meyering Schiffahrts (unreported) 5 June 1997 the Court of Appeal approved Tuckey J’s rejection of the proposition that a freezing order was appropriate where there might be a temptation to dissipate assets—but no evidence whatsoever that the claimant to the application would yield to it. Evans LJ said:

‘Given the nature of the Mareva jurisdiction and given the fact that it is not, as the judge says: “a means of obtaining advance security for a claim”, it is inevitable that before the court can be satisfied that there is a risk of dissipation, in the sense in which that term has been used, the court must consider whether there is any evidence that in the particular case the asset will be dissipated rather than otherwise. If there is no such evidence then, in my view, it would be wrong for the injunction to be granted.’

(b) Several cases have emphasized that there is nothing implicit in complex, offshore corporate structure which evidences an unjustifiable risk of dissipation…”

13.  There is no presumption either that a defendant will make himself judgment proof if he is able or that a defendant who can be shown to have the means and wherewithal to do so.  Otherwise, as Gloster LJ observes, the burden of proof would be reversed.  It is necessary for the risk to be proved and in assessing whether or not it has been proved the court will have regard to all relevant background matters that provide an aid to determining whether the risk has been demonstrated.  Commonly it is argued that evidence of dishonesty or low commercial ethics is capable of justifying the inference that a defendant will attempt to make himself judgment proof.  However, the evidence must be relevant to the risk of dissipation, not simply the underlying claim [6].

14.  Amongst the matters to be considered is delay, which tends to be inconsistent with a risk of dissipation and, therefore, needs to be explained [7].

15.  This case is unusual.  Despite CCL being aware of matters, which as evidenced by its application in the BVI, it believed justified seeking a freezing order at the time the writ was issued, it has waited 16 months before making the application.  CCL explains this by reference to the BVI proceedings.  I accept that CCL believed in early 2018 that there was a risk of Roy Cho disposing of his assets.  By that time the authorities were investigating the affairs of the Company and Roy Cho appeared to have fled Hong Kong.  At the time the application was made to Chivers J in the BVI, CCL had obtained evidence that suggested Roy Cho was beginning to dissipate his assets [8]. It would appear that CCL was advised that the best way of preventing further dissipation was to apply for freezing orders in the BVI against both Broad Idea and Roy Cho.  The fact that Chivers J was not informed by counsel of the jurisdictional issue that Roy Cho’s non-residence gave rise to indicates that CCL’s legal team did not recognise the jurisdictional difficulty and that the better course was to apply for an order against Roy Cho in Hong Kong.  Although, the way in which the attempts to freeze Roy Cho’s assets has been cumbersome it seems to me that the delay in applying to the Hong Kong court is understandable and of little weight.  More important are the submissions that CCL has not demonstrated an arguable cause of action for three of its five claims or a current risk of dissipation of assets.

16.  The issue is a narrow one.  Can CCL claim loss in respect of transactions if it retains the assets Roy Cho caused CCL to buy.  The three transactions are as follows:

(1)     It is pleaded in section D2 of the Statement of Claim that between August and September 2016 Roy Cho and other Defendants caused CCL to acquire a 19.5% stake in First Credit Acquisitions. Initially the share price rose and then it began to fall steeply until trading in the share was suspended by the Securities and Futures Commission on 23 November 2017. In paragraph 60 of the Statement of Claim CCL claim $259,869,800:

Total number of First Credit shares acquired by CCL	1,070,400,000
Total costs of acquisition	HK$375,473,000
Market value of the shares before suspension of trading in      First Credit shares	HK$115,603,200 (ie HK$0.108 x 1,070,400,000)
Total Loss suffered by CCL	HK$259,869,800

(2)     In section F of the Statement of Claim is pleaded a claim for loss caused by a failure to exercise conversion rights to obtain shares in China Green.  In [117(1) & (2)] CCL pleads the loss it claims:

(1)     Substantial loss of at least HK$81,967,000, representing the fair value loss of acquiring the 2^nd Convertible Notes from CCL;

(2)     alternatively, substantial loss of up to around HK$298,000,000, representing the profit which could have been made by CCL, had CCL exercised conversion rights:

(i)     If CCL exercised the conversion rights, it would have acquired 1,418,666,666 China Green shares.

(ii)     If CCL sold the conversion shares when the share price of China Green shares was significantly higher than the conversion price, CCL would have obtained a significant profit.

(3)     In Section H of the Statement of Claim is pleaded a claim for self-dealing by Roy Cho.  It is alleged that Roy Cho had a substantial interest (55%) in True Surplus.  In [142] of the Statement of Claim it pleaded that by an agreement dated 5 September 2016 CCL agreed to acquire True Surplus from Roy Cho and the owner of the remaining 45% of the shares.  The purchase price was $68,062,199.90 and $21,325,953.90 for the respective shareholdings totalling $89,388,153.80.  In [157] of the Statement of Claim, CCL claims repayment of the purchase price.

17.  Ms Chan did not argue that the Statement of Claim and evidence filed in support of CCL’s application did not show an arguable case of breach of duty.  Ms Chan took various points in relation to the quantification of the claims.

18.  In relation to First Credit Acquisitions Ms Chan submitted that having elected to retain the Shares, CCL was bound by the consequences.  I accept for present purposes that if having discovered the breach of duty of which it complains CCL (in the form of its new board, which was not controlled by Roy Cho or directors aligned with him) continued to hold shares it may not be able to claim loss attributable to the shares’ retention. However, [60] of the Statement of Claim makes it clear that the loss is calculated as at the date of suspension of shares on 23 November 2017.  Roy Cho’s affirmation does not deal with the claims at all.  It is largely limited to the risk of dissipation and, what he suggests, is the unjustness of making a freezing order against him.  There is nothing to suggest that CCL’s new board appointed after the complaints against Roy Cho came to light, knew of the matters said to give rise to impropriety in respect of the First Credit Acquisition prior to November 2017 and could reasonably have been expected to take action to mitigate the loss caused by the transaction.  Questions were first raised about the activities of a group of companies including Convoy Holdings by David Webb in a report published by him dated 15 May 2017.  It was during the second half of 2017 that investigations began to be carried out by the SFC and the ICAC, and towards the end of 2017 Convoy Holdings, that revealed the matters, which led to action being taken against various people,including Roy Cho, involved with CCL and other Convoy group companies.  Mr Yap explains in his affirmation filed in the BVI injunction proceedings that the directors associated with Roy Cho and the conduct of which CCL complains, were removed, new Board members appointed and investigation of the affairs  of the Convoy group commenced on about 7 and 8 December 2018.  I, therefore, do not accept that CCL has failed to demonstrate a good arguable case in the amount sought; which I agree with Ms Chan is the relevant test [9].

19.  On 18 November 2015, CCL advanced an unsecured loan of $190 million to China Green.  The loan was replaced by convertible notes on 22 August 2016.  The first series of convertible notes was replaced by a second series on 15 December 2016, which did not carry interest, but lowered the conversion price from $0.15 to $0.10.  From 22 August 2016 the share price was consistently higher than the conversion price, but CCL failed to exercise the conversion rights.  It is this loss of profit that is claimed.  It seems to me that the position in respect of this claim is the same as that in respect of the First Credit Acquisition. Roy Cho has not demonstrated that the decision not to exercise the option to convert was made by CCL’s new board at time when they knew of the matters founding the claim against him.

20.  In respect of the True Surplus acquisition Ms Chan takes different points.  First, Ms Chan says that as CCL acquired True Surplus it must give credit in calculating loss to the value of what it has obtained, ie, the value of the True Surplus.  In [157] of the Statement of Claim, CCL claims, further or in the alternative, rescission and recovery of the purchase price of $89,388,153.80.  This is also apparent from [1(vi)] of the Prayer.  It seems to me that this is arguably the amount that CCL is entitled to recover if it is successful in its claim for rescission.

21.  I am satisfied that CCL has shown a good arguable case for the $654 million.

22.  Ms Chan argued that in the event that I took this view, I should still not grant a freezing order because:

(1)     There is no basis for CCL to seek a re-grant.

(2)     There is no real risk of dissipation.

(3)     It is not just and convenient to grant an order.

23.  In my view it is inaccurate to characterise what CCL is trying to achieve as seeking a re-grant.  The issue is whether having tried to obtain a freezing order in the BVI and encountered the difficulties I have explained earlier, CCL has lost the right, which it would otherwise have had, to obtain a freezing order from the Hong Kong court.  I have already addressed the associated issue of delay in [15].  The submissions that I am addressing can be summarised as this: CCL having elected to apply for an order in the BVI knowing that the BVI court is not seized of the substantive dispute it should not be permitted to apply for an order here unless there is legitimate reason.

24.  Ms Chan argues that it is well-established that the court seised of the substantive dispute is most suited to determining questions of injunctive relief [10]. Consistent with this principle, the Hong Kong court expects an applicant seeking injunctive relief in aid of foreign proceedings to first apply to the primary court and, if the primary court accedes to such an application, to apply to the local court for an ancillary injunction [11]. I agree.  It does not necessarily follow, however, that by choosing to go straight to a foreign jurisdiction rather than start in Hong Kong, a plaintiff loses the right to seek interim relief in Hong Kong.  It depends on why a plaintiff chose to proceed as they did and whether the reasons in some relevant way call into question the propriety or fairness of subsequently granting an injunction in the jurisdiction seized of the substantive dispute.

25.  The reason CCL gives for having proceeded as it did is simple.  In about November 2017 Roy Cho disappeared and was generally believed to have fled Hong Kong, because of the investigations by the authorities into the matters I have referred to earlier in this decision.  In early 2018 CCL were principally concerned to freeze and protect the one unencumbered asset [12] that they were aware of Roy Cho owning, namely, shares in Broad Idea through which he held his interest in Town Health.  Broad Idea was incorporated in the BVI, therefore, the decision was made to apply for an order in the BVI enjoining Broad Idea and Roy Cho from disposing of or encumbering Roy Cho’s interest in Broad Idea and Broad Idea’s interest in Town Health.  Although I agree that proceeding as CCL did against Roy Cho in the BVI was probably a mistake, it does not seem to me that it is a mistake, which of itself deprives or fetters CCL’s right to seek a freezing order against Roy Cho in Hong Kong.

26.  Next Ms Chan argued that no risk of dissipation has been shown.  I have explained in [11]–[13] above the principles by reference to which the Court assesses whether or not a risk of dissipation has been shown.

27.  It would seem to me quite clear that Roy Cho left Hong Kong in November 2017 for Australia in order to avoid the investigations commenced by the authorities and the Convoy group in Hong Kong.  I find his evidence that his reason for spending time incommunicado in Australia was because he and his Family were in the process of emigrating to Australia at the time and that nothing adverse can be read into his disappearance, for that is what it was, entirely unconvincing.  I also take into account the inconsistencies in Roy Cho’s evidence about the reasons for his departure for Australia.  I accept that his Family may have been in the process of emigrating to Australia, but it does not follow that this is why Roy Cho left in November 2017; or why on his own case he spent far longer in Australia than was necessary to satisfy the requisite residency requirements or why he remained incommunicado in Australia until he decided to return to Hong Kong in September 2018 and surrender to the ICAC.  It seems to me a compelling inference that he decided to avoid the investigations until such time as he had decided how best to respond to them and it is against this backdrop that the question of the risk of dissipation of assets is to be considered.

28.  Ms Chan argues that CCL cannot show that since the middle of 2017 Roy Cho has been dealing in his assets in a way, which suggests that he is trying to make himself judgment proof.  On CCL’s own case Roy Cho is a wealthy investor and one would expect that in managing his affairs he bought and sold investments and varied his financing of transactions.  I accept that what is relevant is what he can be shown to have done from about the time one would expect him to have become alive to the investigations into Convoy and the possibility of him being implicated in wrongdoing involving Convoy and other members of the Enigma Group.

29.  It is CCL’s case that the first transaction, which suggests Roy Cho was beginning to manage his affairs in order to protect himself from possible judgment was his sale in May 2017, shortly after the Webb report was published, of his Convoy shares to people associated with the Enigma Group companies.  It is Roy Cho’s explanation that the sale took place in order to repay a loan by Credit Suisse to Broad Idea, which he had guaranteed and that the timing was a coincidence.

30.  In May 2019 CCL became aware as a result of an article in Eastweek magazine that Roy Cho has an interest in various properties in addition to one in Providence Bay of which CCL was already aware and that he was selling a shop in Tsuen Wan for $33,000,000 to fund the litigation he is embroiled in.  On the assumption that it is correct that Roy Cho is selling a shop for $33,000,000 to fund his legal costs it does not seem to me that of itself that constitutes evidence of dissipation in the sense discussed in [11]–[13].  The litigation, which Roy Cho faces will no doubt be expensive (and likely cost in excess of $33,000,000) and it seems to me that selling a property (particularly if it is in order to assist in financing his legal costs) is not evidence of dissipation.

31.  CCL also refer to the re-mortgaging of the Providence Bay property.  Replacing one mortgage which secured an all monies facility, which CCL says it assumed meant Roy Cho had no equity in the property and was one of the reasons that CCL decided to apply for an order in the BVI, with another is not evidence of dissipation.  CCLs suggest that the fact the new lender is Pure Stellar Limited, which has a director who appears to be an independent non-executive director of China Environmental Energy Investment Limited, which is a member of the Enigma Group makes the arrangement suspicious.  However, CCL does not explain how it demonstrates dissipation.

32.  CCL also point to the fact that an article in Eastweek magazine refers to three properties, which are owned by offshore companies in some way associated with Roy Cho.  In the case of two of those properties (Harmony Garden and Kaiseng) they are ultimately owned by Town Health which is listed on the Main Board of the Hong Kong Stock Exchange in which Roy Cho has an indirect minority interest.  Clearly these properties are not Roy Cho’s assets and there is no evidence that he has the ability to direct their sale and then the distribution of the proceeds to himself.  The third (Garden Rivera) is owned by Bright Dignity, which is incorporated in the BVI.  Its ultimate beneficial owner is not known.

33.  The final specific matter CCL rely on is Broad Idea closing its margin account at CSL Securities Ltd transferring the balance to Broad Idea’s account with Dah Sing Bank.  I do not see how this can be characterised as a dissipation or why there is anything unusual in it which justifies drawing an inference that it was part of a plan to make Roy Cho judgment proof.

34.  CCL’s case on dissipation boils down to this.  Roy Cho is central to the allegations of dishonest dealing involving the Convoy group, which have given rise to the present action and the investigations by the authorities which has led to the ICAC charging Roy Cho in connection with the True Surplus transaction.  This suggests that Roy Cho has low commercial ethics and cannot be trusted, a conclusion, which is made more compelling by his disappearance in November 2017 for 10 months. Against this background the Court should view the purpose of the transactions that I have just described with appropriate scepticism and conclude that they evidence a real risk of dissipation.

35.  As I have explained in [15], what CCL has to demonstrate is a concrete risk of dissipation and this threshold cannot be met, particularly in the case of businessman, who CCL itself has characterised as sophisticated, by pointing to largely unremarkable changes in his financial affairs, or the affairs of companies with which he is associated, and inviting the Court to draw the conclusion that he should be assumed to be trying to make himself judgment proof.  It would be wrong, as Mr Wong invites me in [35] of his reply submissions, to draw an adverse inference from Roy Cho’s failure to file evidence detailing his assets and where they are located.  This would be to reverse the burden of proof.  Neither do I think that I can properly draw much assistance from Adderley J’s conclusion that there was a real risk of dissipation in the case of Broad Idea.

36.  Although I understand CCL’s concern and scepticism I am unable to find amongst CCL’s evidence sufficient to allow me properly to conclude that there is a concrete risk of dissipation of assets. If I had reached the alternative conclusion I would have made a worldwide freezing order in the first instance in the amount of $654,057,954 and allowed Roy Cho to file evidence if he wished demonstrating to the court that he did not have any assets in excess of this amount and that he needed the order to be qualified to cover his legal and personal expenses.

37.  I dismiss CCL’s summons and make a costs order nisi that CCL pays Roy Cho’s costs forthwith with a certificate for two counsel, such costs to be taxed if not agreed.