ACT RESOURCES INTERNATIONAL LTD v. HONG KONG ENERGY RESOURCES LTD AND ANOTHER

HCA 411/2019

[2023] HKCFI 85

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 411 OF 2019

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BETWEEN

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J U D G M E N T

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A. INTRODUCTION

1.  The Plaintiff claims the sum of US$410,956.19 against the 1st Defendant for failure to repay a debt due under a written contract dated 14th September 2017 (“the 4th Supplemental Contract”), being a contract to supplement and modify the main contract between the parties of 2nd November 2016, the 1st supplemental contract of 11th December 2016, the 2nd supplemental contract of 25th February 2017, and the 3rd supplemental contract of 14th March 2017.

2.  The Plaintiff claims damages of US$322,000.00 against the 2nd Defendant for breach of a contract of guarantee and indemnity made orally on or around 14th July 2017; alternatively, for fraudulent or negligent misrepresentation inducing the Plaintiff to enter into the same.

3.  The Defendants counterclaim for the return of US$346,734 shipping fees which were paid by the 1st Defendant to an account designated by the Plaintiff on 3rd March 2017, US$40,000 paid by the 1st Defendant to the Plaintiff on 14th March 2017, and US$10,000 paid by the 1st Defendant to the Plaintiff on 16th March 2017.

B. THE DEFENDANTS’ STATUS

4.  The 2nd Defendant was declared bankrupt on 1st November 2022. By an order of 11th November 2022, the Plaintiff was given leave to proceed against the 2nd Defendant in these proceedings, subject to certain conditions.

5.  By a letter of 10th November 2022, the Official Receiver (“the OR”), as provisional trustee of the estate of the 2nd Defendant, indicated that (1) no consent was being given to the 2nd Defendant to defend the Plaintiff’s claim, (2) the OR would not participate in the trial, and (3) the OR would not assign the right of action to the 2nd Defendant to continue with his counterclaim, which right vested in the OR pursuant to s.58 of the Bankruptcy Ordinance, Cap. 6.

6.  Both Defendants were absent from the trial. No evidence has been given on their behalf.

C. THE PLAINTIFF’S EVIDENCE

7.  The Plaintiff called its Executive Consultant and authorised representative Cheong How Kei Paul (“Mr Cheong”) to give evidence at the trial. The Defendants being absent, Mr Cheong’s evidence was not challenged at trial and I accept it as being truthful.

8.  The Plaintiff also issued a subpoena duces tecum dated 22nd July 2022 to Cheng Suk Ching (“Ms Cheng”) of the Bank of China (Hong Kong) Limited (“BOC”). Ms Cheng attended the trial and testified that a remittance document dated 4th Aril 2017 in respect of a remittance from Bond Street Capital Limited to Er Zhou Energy Limited, marked for the attention of Ms Cheng and claiming on its face that the remittance was received by BOC (“the Remittance Document”), had not been seen by Ms Cheng prior to the receipt of the subpoena, and had not been received by BOC on 4th April 2017.

D. THE BACKGROUND

9.  The following facts appear from the documentary evidence placed before the court and I find them as facts.

10.  The Plaintiff is a company incorporated in Macau. It is in the business of, inter alia, arranging shipments of fuel oil products from overseas to the PRC.

11.  The 1st Defendant is a limited company incorporated in Hong Kong. The 2nd Defendant was at all material times the sole director and 50% shareholder in the 1st Defendant.

12.  In substance, by a main contract and four supplemental contracts (collectively, “the Contracts”), the Plaintiff[1] and the 1st Defendant agreed to facilitate the sale of fuel oil from Russia to a purchaser in the PRC.

13.  On or around 2nd November 2016, the Plaintiff entered into a written agreement with Hong Kong Energy International Limited (“the Main Contract”). The Main Contract provided that the Plaintiff and Hong Kong Energy International Limited would facilitate the sale and purchase of 50,000 metric tons of fuel oil, with Hong Kong Energy International Limited paying for the shipping expenses of US$449,476 and gaining the right to share the commission fees to be paid by the purchaser.

14.  On 11th December 2016, the Plaintiff and the 1st Defendant entered into a supplemental contract, supplementing and amending the Main Contract (“the 1st Supplemental Contract”). The 1st Defendant was substituted for Hong Kong Energy International Limited. The 1st Defendant was to pay for the shipping fees of US$449,476 and earn the right to share the commission fees to be paid by the purchaser. The US$449,476 was to be deposited into the Plaintiff’s bank account.

15.  On 25th February 2017, the Plaintiff and the 1st Defendant entered into a supplemental contract, supplementing the Main Contract and the 1st Supplemental Contract (“the 2nd Supplemental Contract”). The 2nd Supplemental Contract concerned additional storage fees and shipping fees to be paid, and made provision as to how this was to be done. Amongst other things, the 1st Defendant agreed to repay US$238,744 to the Plaintiff, which represented the 1st Defendant’s 50% share of the fees paid by the Plaintiff.

16.  On 14th March 2017, the Plaintiff and the 1st Defendant entered into a supplemental contract, supplementing the Main Contract, 1st Supplemental Contract and the 2nd Supplemental Contract (“the 3rd Supplemental Contract”). The 3rd Supplemental Contract concerned additional shipping fees to be paid, and made provision as to how this was to be done. The Plaintiff was to pay the additional fees of US$180,156 to the supplier, and the 1st Defendant was to repay half of this (US$90,078) to the Plaintiff.

17.  On 14th September 2017, the Plaintiff and the 1st Defendant entered into a supplemental contract, supplementing the Main Contract, 1st Supplemental Contract, 2nd Supplemental Contract and the 3rd Supplemental Contract (this is the 4th Supplemental Contract). The 4th Supplemental Contract recited the dealings between the parties, the parties’ agreement to share the expenses and profits of their business endeavour, and the expenses paid by each party up to the date of the 4th Supplemental Contract. The 1st Defendant expressly acknowledged that the Plaintiff had paid a total of US$1,480,817, that it owed US$517,042 to the Plaintiff, and it undertook to repay the US$517,042 to the Plaintiff as soon as possible.[2]

E. THE ISSUES

18.  Miss Athena Wong, counsel for the Plaintiff, set out a list of the issues which arise for my consideration.

E1. Whether the Defendants intended to deal with the Plaintiff

19.  The Plaintiff says that by reason of an oversight, the Plaintiff’s name was incorrectly written in the Contracts as “ACT International Resources Ltd” rather than “ACT Resources International Ltd”. The Defendants put the Plaintiff to proof of its identity. I accept the Plaintiff’s unchallenged evidence as to how the Plaintiff’s name came to be mistakenly stated in the Contracts.

20.  There can be no serious dispute that the Defendants intended to deal with the Plaintiff, and I so find.

20.1 There is no company in Hong Kong or Macau with the name ACT International Resources Ltd.

20.2 The name of the Plaintiff’s representative Mr Paul Cheong was printed on all the Contracts, and he signed all of the Contracts.

20.3 The Plaintiff’s address was printed on all of the Contracts.

E2. Whether the 1st Defendant owes a debt of US$410,956.19 to the Plaintiff under the Contracts

21.  Under the 4th Supplemental Contract, the 2nd Defendant acknowledged that it owed US$517,042 to the Plaintiff.

22.  Of the shipping expenses paid out by the Plaintiff to shipping companies, the evidence is that the Plaintiff has been able to recover US$212,171.62 in HCA 2161/2017. Giving credit for 50% of this amount to the 2nd Defendant (ie. US$106,085.81), the 2nd Defendant owes US$410,956.19 to the Plaintiff.

D3. Whether the 2nd Defendant was in breach of contract to guarantee repayment of the loan of US$322,000 made by the Plaintiff to the 1st Defendant

23.  Mr Cheong’s evidence (in his witness statement and as supplemented by his oral evidence at trial) is that after the making of the 3rd Supplemental Contract, and after the Plaintiff paid a shipping fee, the intended shipping company claimed that it did not receive the fee. The supplier therefore suggested using a different shipping company, which asked for a fee of US$322,000. The Plaintiff did not want to make the payment and Mr Cheong told the 2nd Defendant that if he wanted to proceed with the new shipping company, he would need to pay the whole of the US$322,000, bearing in mind that the 1st Defendant had so far not paid all of its share of the shipping expenses. In a conversation on about 17th April 2017, the 2nd Defendant agreed that the 1st Defendant would pay the whole amount, but said that the 1st Defendant did not have the liquidity to make the payment, and requested a loan to the 1st Defendant of the amount. The Plaintiff was reluctant to do so, but the 2nd Defendant told the Plaintiff that he would guarantee repayment of the loan within three weeks, as he would be receiving a large sum of approximately US$20m, in two to three weeks’ time, as evidenced by the Remittance Document. When questioned about the conversation in his oral evidence, Mr Cheong said that was sure that the 2nd Defendant said that he promised and guaranteed that the 1st Defendant’s debt would be repaid, using the words “我保證”. On the strength of the 2nd Defendant’s guarantee, Mr Cheong agreed on behalf of the Plaintiff to make the loan, on the basis that the 1st and/or 2nd Defendants would repay it within three weeks. The loan was advanced on 17th April 2017, so that repayment ought to have been made by 8th May 2017. The parties recorded the fact of the contract of guarantee and indemnity in the 4th Supplemental Contract.

24.  For completeness, I also note that the letters before action of 28th December 2018 from the Plaintiff’s solicitors to each of the 1st and 2nd Defendants set out the date and contents of the 2nd Defendant’s guarantee as part of the basis for the demand for payment against the 1st and 2nd Defendants. Neither Defendant ever responded to the letters to deny the making of the guarantee.

25.  I accept Mr Cheong’s evidence and find that the 2nd Defendant guaranteed the repayment of the requested loan of US$322,000 to the 1st Defendant, with repayment to be made by 8th May 2017. On the evidence, I find that the 2nd Defendant agreed to assume both a primary liability and a secondary liability to make repayment.

26.  The 1st Defendant did not make any repayment of the loan. Nor has the 2nd Defendant paid pursuant to the guarantee given.

27.  Accordingly, I find that the 2nd Defendant is in breach of the guarantee given to the Plaintiff.

D4. Whether the 2nd Defendant negligently or fraudulently misrepresented that he would receive a large sum as evidenced by the Remittance Document

28.  In the light of my findings regarding the 2nd Defendant and as confirmed by Miss Wong, it is not necessary to consider the issue of whether the 2nd Defendant made a misrepresentation to Mr Cheong that the 2nd Defendant would receive a large sum of approximately US$20m.

D5. Whether any of the Contracts are void by virtue of fraud, misrepresentation, economic duress, undue influence or unconscionable pressure

29.  There are various allegations in the Defence and Counterclaim that one or more of the Contracts was affected by a vitiating factor. As the Defendants have not given any evidence at trial in support of these allegations, I do not find them to be established.

D6. Whether the Plaintiff is liable to return US$396,734

30.  The Defence and Counterclaim claims that the 1st Defendant is entitled to restitution of various amounts paid by the 1st Defendant to the Plaintiff or at the Plaintiff’s direction. The basis for the claim turns on the same complaints of fraud, misrepresentation, economic duress, undue influence and unconscionable pressure, and therefore is not established.

E. DISPOSITION

31.  I give judgment in favour of the Plaintiff:

31.1 against the 1st Defendant in the sum of US$410,956.19, together with pre-judgment interest from 14th September 2017 up to the date of judgment at prime rate (as quoted by HSBC) plus 1% per annum, and post-judgment interest from the date of judgment up to the date of full payment;

31.2 against the 2nd Defendant for damages in the sum of US$322,000, together with pre-judgment interest from 8th May 2017 up to the date of judgment at prime rate (as quoted by HSBC) plus 1% per annum, and post-judgment interest from the date of judgment up to the date of full payment;

32.  I dismiss the Defendants’ counterclaim.

33.  I further make a costs order nisi that the costs of the action be paid by the Defendants to the Plaintiff, to be taxed if not agreed.

Miss Athena Wong, instructed by Payne Clermont Velasco, for the Plaintiff

The 1^st and 2^nd Defendants were not represented and did not appear

HCA 411/2019

[2020] HKCFI 232

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 411 OF 2019

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DECISION

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1.  The plaintiff (“ACT”) commenced the present action against the 1^st defendant (“HKERL”) for unpaid debt, and its shareholder and director, the 2^nd defendant (“Yeung”), for damages for breach of guarantee and misrepresentation. This is ACT’s application for mareva injunction against Yeung.

Background

2.  ACT is a company incorporated in Macau.  At the material times, it carried on the business of, amongst others, arranging shipment of fuel oil products from overseas suppliers to buyers in Mainland China.

3.  Whilst it was explained in pleading and evidence the different compositions of the company name as registered in Portuguese and represented in English, no real issue was taken in respect of the identity of the plaintiff in the relevant dealings at all material times.  I would therefore not spend time in this decision on what ACT describes as misnomer of it in the parties’ agreements referred to below.

4.  Mr Cheong How Kei Paul (“Cheong”), executive consultant of ACT, was the person who liaised with Yeung, shareholder and director of HKERL.  The two came to know each other through a common friend sometime in 2015.

5.  Irrespective of the apparent dispute as to which party took the initiative, there is no dispute that the parties came to a business deal in October 2016, whereby ACT would arrange a Russian supplier (“Diteco”) to supply and sell “Mazut M100” crude oil (“M100”) while HKERL would arrange a PRC buyer (“China Petro”) to buy the crude oil.  The parties entered into a Main Contract on 2 November 2016 (“Main Contract”).

6.  Pursuant to the Main Contract, the parties agreed to facilitate the sale and purchase of 50,000 metric tons of M100 between Diteco and China Petro.  HKERL would be responsible for the shipping expenses, and would share the commission fees payable by the seller to ACT.

7.  Due to subsequent developments of various nature, the parties have entered into the following agreements modifying or supplementing the previous ones:

(1)    Supplemental Agreement dated 11 December 2016;

(2)    2^nd Supplemental Agreement dated 25 February 2017; and

(3)    3^rd Supplemental Agreement dated 14 March 2017.

8.  By then, ACT had been funding most of the US$1.5 million shipping costs already paid, while HKERL had been in arrears in funding its agreed share of such fees pursuant to the parties’ agreements.  The M100 had yet to be shipped.

9.  Suspicion arose when the shipping company (“Rusbaltpetroleum”) claimed that it did not receive the payment made by ACT in late March 2017.  ACT therefore contacted the Hong Kong Police at the end of March 2017.  In the meantime, Diteco proposed and referred ACT to another shipping company (“Terminal Iskander”) which demanded a shipping fee of US$322,000.

10.  It was against the above background that ACT, it says, insisted that HKERL should pay the further shipping fee of US$322,000.  According to ACT, there was a telephone conversation between Cheong and Yeung on 17 April 2017, during which ACT made known its stance and HKERL agreed to pay the above shipping fee. Yeung allegedly told Cheong that HKERL did not have the liquidity and asked if ACT could make the payment first, and HKERL would repay it in 2 to 3 weeks, whether or not their business venture concerning the sale and purchase of the M100 succeeded.

11.  According to ACT, Yeung represented that he expected to receive a transmission of income in the approximate sum of US$2 million, and could therefore put HKERL in funds to repay ACT, in 2 to 3 weeks.  Yeung also allegedly showed Cheong the image of the front page of a remittance document issued by Barclays Bank to Bank of China in this regard (“the Barclays Document”).  ACT claims that induced by such representation, it acceded to the request for it to make the payment for HKERL.  It claims that Yeung personally guaranteed the repayment.

12.  The parties met again in June 2017, when Yeung allegedly reported that HKERL would be unable to make the repayment.  Further source of finance previously suggested by Yeung also did not materialize.  In August 2017, Yeung allegedly even informed Cheong that the Barclays Document was suspected to be false.

13.  On 14 September 2017, the parties entered into the 4^th Supplemental Agreement.  The preamble setting out the background took up most part of this supplemental agreement.  It was followed by a table of account between the parties.  According to the table, a total sum of US$1,827,551 had so far been paid for the parties’ business venture, and HKERL owed its outstanding share in the total sum of US$517,042 to ACT.  The parties signed the agreement, whereby (i) they acknowledged the recital of the background in the agreement to be accurate; (ii) they acknowledged the table of account to be accurate; and (iii) HKERL agreed to pay to ACT its outstanding share of contribution as soon as possible.

14.  With the information from the police, the payment by ACT in late March 2017 mentioned above was traced into a bank account in Hong Kong.  ACT commenced HCA 2161/2017 and obtained judgment against the bank account holder in November 2017.  As such, ACT managed to recover (net of legal costs) a sum of US$212,326.12.  Giving credit to 50% of such recovered sum representing HKERL’s share, its indebtedness under the 4^th Supplemental Agreement mentioned above was thus reduced to US$410,956.19.

15.  Apparently pursuant to the complaint lodged by Cheong, Yeung attended an interview by the police in late November 2017 in connection with the business venture and the use of the Barclays Document.  A statement was given, but there is no evidence of further criminal investigation concerning Yeung.

16.  So far, HKERL has not paid any part of the sum pursuant to the 4^th Supplemental Agreement.

17.  In late December 2018, ACT issued letters of demand to HKERL and Yeung.

18.  On 12 March 2019, ACT commenced the present action.  The claim against HKERL is for the sum of US$410,956.19 mentioned above or alternatively damages.  The claim against Yeung is for damages in the sum of US$322,000 for (i) breach of guarantee; and (ii) misrepresentation.

19.  On the same day, ACT filed its summons for mareva injunction against Yeung essentially to restrain him from disposing of his assets, including his landed property, in Hong Kong up to the amount of US$322,000.  It also seeks an asset disclosure order against Yeung.

The principles

20.  Pursuant to section 21L(1) of the High Court Ordinance, Cap 4, the court has the discretion to grant an injunction if it appears to be just and convenient to do so. Subsection (3) empowers the court to grant an interlocutory mareva injunction.

21.  The principles are trite.  The plaintiff must establish that: (i) he has a good arguable case on a substantive claim; (ii) there are assets within the jurisdiction; (iii) there is a real risk of dissipation of assets rendering the plaintiff’s judgment of no effect; (iv) the balance of convenience is in favour of the grant of the order.  A good arguable case is one where there is a serious question to be tried:  see American Cyanamid Co v Ethicon Ltd [1975] AC 396 at 407.

22.  The basis for the claim against HKERL and Yeung was formulated by the statement of claim, which was filed after the factual allegations have been rehearsed in Cheong’s affidavit in support of the present application.  The alleged misrepresentation and oral guarantee were premised on what Yeung allegedly said to Cheong during their telephone conversation on 17 April 2017 mentioned above.  The representation (explained in §11 above) is said to be false in that Yeung in fact did not receive such income and the Barclays Document was in fact false or did not evidence such income.  ACT is enforcing the alleged oral guarantee and claiming damages for misrepresentation.

The alleged oral personal guarantee

23.  Heavy reliance is placed by ACT on the 4^th Supplemental Agreement.  As mentioned, the document is in Chinese.  English translation was prepared but not certified.  As a bilingual court, I need only examine the original Chinese version for its terms.

24.  There is no dispute that the parties signed this agreement.  However, by his affirmation, Yeung alleged that Cheong represented to him that shipment of the M100 had been arranged and ready, and, more importantly, all the payments made by the parties would be reimbursed from the profits, and the remaining profits would be distributed to the parties in equal shares upon completion.  That suggestion seems to be that HKERL would not be required to make any further payment.  Allegedly against such background, Yeung signed the 4^th Supplemental Agreement on behalf of HKERL.  The agreement was prepared by ACT.  Yeung said that he signed it without reading it.

25.  Insofar as Yeung contends that he signed the 4^th Supplemental Agreement without any or sufficient knowledge about its content, the contention is unattractive.  The agreement was in Chinese, which Yeung was perfectively capable of reading and understanding, given his background and experience as a businessman.  No issue was ever raised as to his understanding of the supplemental agreements prior to this one.  When asked about this agreement during the police interview, Yeung only suggested that he signed it in a rush.  In these circumstances, the principle that he who signed the document is generally bound still operates against Yeung: see Ming Shiu Chung & Ors v Ming Shiu Sum & Ors (2006) 9 HKCFAR 334.

26.  Insofar as Yeung contends that he signed the 4^th Supplemental Agreement without realizing that its terms regarding the account between the parties and the agreement by HKERL to repay ACT differed from, or actually contradicted, his alleged understanding mentioned above, this is equally an unattractive contention for the reasons explained in the preceding paragraph.

27.  That Yeung may have no reasonable excuse from being bound by the terms of the 4^th Supplemental Agreement, however, does not gain much mileage for ACT’s case though.  The two parties (A and B) to the agreement were expressly defined as ACT and HKERL.  Cheong and Yeung were expressly stated to be the parties’ representatives respectively.  Indeed, Yeung signed it, but rather clearly as the representative for and on behalf of HKERL.  Yeung acknowledged the debt upon the account set out in the agreement, and undertook to repay the same to ACT as soon as possible.  However, he did so consistently for and on behalf of HKERL.  Nowhere in the agreement was there actual provision that Yeung undertook any obligation, including that to repay ACT, in his personal capacity.

28.  The 4^th Supplemental Agreement was drafted by ACT.  This came about well after all the events between April and September 2017 recorded in the agreement.  The content was not sketchy but meticulous. There is no reason why ACT would have neglected to put on record in the agreement Yeung’s promise to repay personally in case of default of his company allegedly made during the conversation with Cheong in April 2017.  This is particularly so, when ACT cared to expressly and repeatedly set out in the agreement the parties’ acknowledgement of it as an accurate record of the events.  In the circumstances, the rationale behind the construction rule of contra proferentum operates against ACT.

29.  Insofar as the alleged personal guarantee by Yeung is concerned, I am not satisfied, for the purpose of the present application, that there is serious question to be tried in respect of such cause. This is not a good arguable claim.

The alleged misrepresentation

30.  ACT is claiming against Yeung for damages on the basis that the abovementioned alleged misrepresentation during the telephone conversation with Cheong on 17 April 2017 was made fraudulently or negligently by Yeung.  Yeung denies having made such representation at all.  According to him, it was during a meeting with Cheong in early April or May 2017 when Cheong asked him about his other businesses. It was in such context that Yeung referred to his other company and business involving financial products.  A week later, upon Cheong’s further enquiry about his such other business, Yeung sent Cheong the image of the Barclays Document in such connection.

31.  The alleged representation was that about Yeung’s expected financial ability to put HKERL in funds to repay ACT.  That did not therefore render the alleged representation merely that of ACT.  It was Yeung’s alleged representation which allegedly induced Cheong (for ACT) to agree to pay for HKERL the new transport fees charged by Terminal Iskander. Whether Yeung is personally liable for the alleged misrepresentation is at least seriously arguable.  So is whether ACT was indeed so induced, and thus the incurring of loss by making the payment for HKERL to Terminal Iskander.

32.  I am satisfied that there is serious question to be tried in respect of the claim for misrepresentation against Yeung.

33.  The question is whether or not it is just and convenient to grant the mareva injunction against him in respect of the amount of such claim.

Real risk of dissipation

34.  Reference was made to the charging order that Yeung’s residence at Apleichau (“the Property”) is subject to.  Yeung is one of the two joint tenants of the Property.  The charging order was made pursuant to a judgment entered against Yeung for the principal sum of HK$750,000 on 10 January 2019 in DCCJ 5110/2018, apparently an action commenced by a finance company[1].  The land search reveals that there was a loan agreement between the finance company and Yeung, presumably secured by the Property.  The agreement was dated 26 October 2018, which was before the letter of demand from the solicitors for ACT in December 2018.  In view of the date of that judgment, it is also unlikely that that District Court action against Yeung was commenced after such letter of demand.

35.  In the circumstances, any suggestion that Yeung allowed the creation of the above encumbrance on the Property with a view to dissipating his assets and thus frustrating any judgment that ACT is seeking in the present action lacks factual basis.  Further, the Property was at all material times already subject to prior mortgage, which has yet to be discharged.  During the present hearing, Mr Hughes (with Mr Kirpalani) for ACT indicated that he would not press on with the argument by connecting such encumbrance of the Property with the risk of dissipation of assets.

36.  There is also suggestion that Yeung has business connections overseas and the resources to dissipate his assets out of Hong Kong.  Again, that is more speculation than concrete suggestion, not to mention the lack of evidence of dissipation in such manner.

37.  What remains as the major justification put forward by ACT for the mareva injunction is the inferring of the real risk of dissipation from the alleged misrepresentation and failure to respond to ACT’s demands, which is described as conduct of low commercial morality on the part of Yeung.

38.  I am reminded of the realistic approach and caution explained by Hon Chu J (as she then was) in Horner Resources (International) Co Ltd v Savvy Resources Ltd [2010] 4 HKC 50 at §27:

“…the court should examine with care allegations that a defendant has acted dishonestly and should not too readily infer a real risk of dissipation from the conduct or commercial morality of a defendant. It is important to bear in mind that ultimately the question is whether the evidence, which includes the evidence of the defendant’s conduct in its dealings with the plaintiff, a refusal of injunction will involve a real risk that the judgment in favour of the plaintiff would remain unsatisfied.”

39.  In Crete Maritime Corp v Emirates Shipping Line DMCEST [2017] 5 HKLRD 345, Hon Anthony Chan J said:

“21. …in the context of unacceptably low commercial morality, the court deals with a spectrum of conduct. At one end, there are clear cases of fraud…

22. At the other end of the spectrum may be causes of sharp commercial practice. Whilst such conduct is reprehensible, it cannot by itself give rise to the inference of real risk of dissipation.

…

24. …where there is nothing more than propensity evidence, it would not be right to infer from it a real risk of dissipation unless the conduct of the defendant is at or very close to the fraud or dishonesty end of the spectrum.”

40.  The basic nature of the alleged misrepresentation in the present case was Yeung’s expected receipt of income from his other business venture, which would have enabled him to put HKERL in funds to repay ACT in 2 to 3 weeks.  If the account contained in the 4^th Supplemental Agreement, which the parties acknowledged to be accurate by signing the agreement, is relied on, Yeung did not live up to such alleged representation in respect of the financial ability of his and his company.

41.  On top of that, Yeung showed Cheong the Barclays Document.  Whether or not the Barclays Document was a false document is still uncertain at this stage.  In his statement to the police in November 2017, Yeung answered that the Barclays Document was true.  However, counsel for both parties ask this court not to take such statement at its face value, albeit for different reasons.  Mr Hughes submits that the alleged genuineness of the document is not actually verified by affirmation for the present purpose.  Cheong also pointed out in his evidence what were said to be suspicious wordings of the document, which he has subsequently discovered.  Mr Lau for Yeung submits that Yeung could only be answering the police’s question about the document to the best of his knowledge and belief at that stage.

42.  Again, if reliance is placed on the account of events recorded in the 4^th Supplemental Agreement, then it was Yeung who allegedly told Cheong by mid-2017 that the Barclays Document might be false.  If that was an accurate record, which the parties apparently acknowledged that it was by signing it, that would mean Yeung’s own revelation of the suspected falsity of the Barclays Document to Cheong.  Such circumstances do not naturally sit well with the inference of (knowing) deceit on the part of Yeung when he relied on the document earlier.

43.  There is also contemporaneous document that reflects the understanding and stance of ACT about that.  By the email dated 11 November 2017, Cheong informed Yeung that the Russian lawyers engaged by him reported that both he and Yeung had been deceived by the conspiracy amongst the oil supplier, Diteco, and the two shipping companies, Rusbaltpetroleum and Terminal Islanker.  In the email, Cheong also referred to Yeung’s earlier information that the Barclays Document might be false and therefore Yeung was also deceived.  On this basis, Cheong categorized himself and Yeung as both victims, and invited Yeung to file a report with the Commercial Crime Bureau in accordance with legal advice that he had obtained.

44.  By alleging now that Yeung was fraudulent in using the Barclays Document, Cheong (ACT)’s stance has apparently changed from that suggested in the abovementioned email.  That also accounted for its report to the police that led to the interview of Yeung in late November 2017, and eventually ACT’s demand and the present action against Yeung.  Nevertheless, Cheong has not actually adduced materials that suggest that Yeung was in fact involved in or had knowledge about the falsity, if at all, of the Barclays Document at the time when he referred to it.

45.  Bearing in mind what was said in Crete Maritime Corp (above), I further endorse what Recorder Stewart Wong SC said in Feng Lishe v Xu Zhiqiang, HCA 2178/2015 said (at §41):

“I accept that if there is a good arguable case in support of an allegation that the defendant has acted fraudulently or dishonestly, or with unacceptably low standards of morality giving rise to a feeling of uneasiness about the defendant, then a risk of dissipation may be inferred by the Court even without specific evidence in that regard…However, that is not an invariable rule, and the Court has to consider all the evidence before it to decide whether a risk of dissipation is shown or can be inferred.”

46.  In the circumstances, it cannot be said that the basis for inferring conduct of low commercial morality from the above events, and without more, and thus the risk of dissipation of assets by Yeung, is strong.

Delay, balance of convenience, etc

47.  If the hurdle of convincing this court the existence of a real risk of dissipation of assets by Yeung does not stand in ACT’s way in the present application, the indisputable delay on its part will.

48.  Delay is relevant to the assessment of whether the defendant has had the opportunity to dissipate his assets, whether there is sufficient risk of dissipation to justify the mareva injunction, and whether the discretion should be exercised to grant the injunction: see Steven Gee QC, Commercial Injunctions (6^th ed) at 2-022.  The applicant for the mareva relief must act promptly in the circumstances, as equity does not act in vain when dissipation would have taken place long ago: see (for instance) Hsin Chong Construction (Asia) Ltd v Henble Ltd [2005] 3 HKC 27 at 29; Re Chau Cham Wong Patrick (a bankrupt) [2016] 2 HKLRD 278 at §34; Feng Lishe (above) at §42.

49.  According to ACT, Yeung did not respond to Cheong’s attempts to contact him since October 2017.  ACT commenced HCA 2161/2017 in relation to its payment made to Rusbaltpetroleum, which landed in the bank account of a third party in Hong Kong, and managed to obtain judgment in November 2017.  Meanwhile, ACT made report to the Hong Kong Police in relation to Yeung’s use of the Barclays Document, which led to the police interview of him in November 2017.  Yet letter of demand was sent only a year later in December 2018.  The present action was commenced in March 2019, when the present application was also taken out.

50.  Had ACT/Cheong perceived a real risk of dissipation of assets on the basis of what they must have considered by December 2017 to be the conduct of low commercial morality on the part of Yeung, ACT owes this court an explanation for not having taken out any application for mareva relief over a complete year prior to the letter of demand or even prior to the commencement of the present action.

51.  By Cheong’s affidavit, ACT’s explanation is that they were concerned about the risk of litigation and thus costs, and therefore they were left with no choice but to deal with HCA 2161/2017 before taking action against HKERL and Yeung.  They also claim that the delay caused no prejudice.  After the present application has been taken out, ACT has also proposed to settle it with Yeung.

52.  I do not accept that ACT was helpless as alleged or that the above explanation justifies the delay. In court, Mr Hughes acknowledged that the reason for his client’s delay is not strong.  In my view, and more importantly, such explanation, even if accepted, would not alter the objective assessment of whether or not a real risk of dissipation is established.  Further, any perceived risk of dissipation of assets, if ever real, would have materialized by the time of the present application.

53.  Delay itself may not be fatal, as there could be factual basis for perceiving the real risk of dissipation now, despite the past delay.  Whilst ACT may not at this stage possess sufficient information about the assets of Yeung, it nevertheless remains its burden in the present application to adduce evidence of the factual basis for perceiving such risk now, notwithstanding the delay.  However, there is no suggestion or material before this court that suggests such factual basis that justifies the present application.

54.  It is not so much a matter of prejudice to Yeung as a result of the delay, but the significance of the delay to the overall assessment of the risk of dissipation to begin with.  The reference to the negotiation for settlement of the present application has no material bearing in this respect.

Conclusion

55.  In view of the above discussion, I need say no more about the balance of convenience.

56.  All materials and submissions considered, I am not satisfied that it is just and convenient to grant the mareva injunction sought.  It follows that the application for the asset disclosure order is refused.

Order

57.  The application is dismissed with, on a nisi basis, costs to Yeung (including any costs reserved) in any event, to be taxed, if not agreed.  In the absence of application in 14 days for variation, the nisi costs order will become absolute without further order of the court.

Mr Sebastian Hughes, Mr Lavesh Kirpalani instructed by Payne Clermont Velasco for the Plaintiff

Mr Raymond Lau instructed by Damien Shea & Co. for the Defendants