WU JUN v. CAPTAIN HOLDINGS LTD (In Compulsory Liquidation) AND OTHERS

HCA 106/2022

[2026] HKCFI 1063

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 106 OF 2022

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BETWEEN

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DECISION

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A.  INTRODUCTION

1.  By summons filed on 11 March 2025 (“the Summons”), the plaintiff applies to:

(1)  exclude the witness statement of Hu Hongwei (“Hu”);

(2)  strike out certain paragraphs of the witness statement of Chan Cheuk Him Paul (“Chan”).

B.  BACKGROUND OF THE ACTION

2.  For the purpose of the Summons, it suffices to mention, as a matter of background of the present action, that the plaintiff claims that he is the victim of a scam disguised as a gold bar purchase and leaseback scheme (“the Scheme”) involving the defendants, which defrauded him of over HK$22 million. In relation to the 7^th defendant, it is alleged that it assisted in the Scheme by serving as a party to strengthen the plaintiff’s trust of the Scheme[1]:

(1)  On 5 June 2018, the 7^th defendant (acting by the 9^th defendant (its CEO and executive director)) entered into a strategic cooperation relating to a gold leasing arrangement with the 1^st defendant for a term of 18 months (“the Strategic Cooperation”);

(2)  An announcement on the Strategic Cooperation was made in June 2018 (“the Announcement”);

(3)  The Strategic Cooperation and the Announcement purported to support the Scheme;

(4)  However, the 7^th defendant in truth never entered into any gold leasing arrangement with the 1^st defendant. Neither had there been any intention to do so;

(5)  The 8^th defendant was the substantial shareholder of the 7^th defendant and had de facto control over it, as a number of the 7^th defendant’s directors back then (including the 9^th defendant) were the 8^th defendant’s board representatives in the 7^th defendant and would act in accordance with the 8^th defendant’s direction/instruction. The 8^th defendant (together with the 2^nd defendant) were the masterminds behind the Scheme.

3.  In gist, the 7^th defendant’s defence is that[2]:

(1)  all acts in connection with the Scheme were procured to be done by the 9^th defendant without authorization of the 7^th defendant’s Board of Directors (“the Board”);

(2)  the 7^th defendant’s Board had no knowledge of the Scheme or whatever unauthorized acts done by the 9^th defendant;

(3)  The 7^th defendant cannot be bound by the 9^th defendant’s act;

(4)  The 7^th defendant accordingly has not joined the conspiracy.

4.  The 7^th defendant has filed 2 witness statements in support of its case, by Hu and Chan respectively.

5.  Hu’s witness statement was signed on 2 June 2023 and filed on 5 June 2023, whereas Chan’s witness statement was signed more than a year later on 4 October 2024, and filed on 7 October 2024.

6.  As aforesaid, the Summons was taken out on 11 March 2025.

7.  On 24 March 2025, the 7^th defendant filed a hearsay notice which covers Hu’s witness statement.

C.  HU’S WITNESS STATEMENT

8.  The first limb of the plaintiff’s application relates to Hu’s witness statement, which is made on the basis of Chan’s witness statement, in which Chan stated at paragraph 4 thereof that:

“Since the filing of [Hu’s witness statement] on 2 June 2023, Mr Hu, along with all the then existing directors, have tendered his resignation as a non-executive director of the [7^th defendant]. As such, he is no longer able to testify on behalf of the [7^th defendant].”

9.  In the 4^th Affirmation of Leung Hon Wai filed by the plaintiff in support of the Summons, it was said that:

“3. I note from paragraph 4 of Chan WS that Mr. Hu, who according to paragraphs (sic) 7 of Hu WS joined the 7^th Defendant as a non-executive director on 29^th March 2019, will not testify on behalf of the 7^th Defendant. On this basis, as I understand, the trite legal principles dictate that Hu WS is inadmissible and ought not form part of the evidence at trial. On 17^th February 2025, I have caused my firm to make enquiries with the 7^th Defendant’s legal representative (“Jones Day”) on whether the 7^th Defendant would adduce Hu WS […]. Unfortunately, we have heard nothing from Jones Day or the 7^th Defendant. I therefore verily believe that it is necessary to take out an application to exclude Hu WS as hearsay evidence to protect and preserve the interests of justice.”

10.  In the submission of the plaintiff’s counsel, it was further argued that excluding Hu’s witness statement is appropriate in the present case because:

(1)  “Hu’s attendance at trial is not ensured”[3];

(2)  “when the plaintiff pressed for a confirmation that the 7^th defendant would take action to secure Hu’s attendance, the 7^th defendant refuses to do so”[4];

(3)  The 7^th defendant’s refusal to undertake to take appropriate steps for the purpose of securing Hu’s attendance at the trial “speaks volumes about the unlikelihood of Hu’s attendance”[5];

(4)  “Hu’s attendance at trial is something that cannot be taken for granted, and in fact is rather unlikely”[6].

11.  With greatest respect, the plaintiff’s application to “exclude” Hu’s witness statement on the above bases is totally misconceived. Although the 7^th defendant cannot confirm whether Hu would attend the trial and give evidence for the 7^th defendant, it has never been the 7^th defendant’s stance that it shall not call Hu to give evidence at the trial. Taking the plaintiff’s case to the highest, it can only be said that it is uncertain that Hu would attend the trial. Having said that, it is still possible that he will attend voluntarily, or under a subpoena. To “exclude” or strike out Hu’s witness statement under such circumstances is simply unfair and pre-mature.

12.  The plaintiff further submitted that Hu’s witness statement should be excluded on the ground that it is hearsay pursuant to section 47(1) of the Evidence Ordinance (Cap.8, Laws of Hong Kong), since, it was said, its exclusion is not prejudicial to the interests of justice. It was also argued that this witness statement cannot provide assistance to the trial judge anyway because he only joined the 7^th defendant in March 2019 whereas the Scheme had already started no later than 2018.

13.  I must say that the plaintiff has adopted quite an aggressive approach by asking the court to make a decision at the pre-trial stage on the merit of a witness’ evidence. With respect, this should not be done. The matter should be left to be decided by the trial judge.

14.  In any event, although the 7^th defendant has filed a hearsay notice in relation to Hu’s witness statement, at the end of the day, it is unknown as to whether his evidence would be adduced as hearsay evidence, which depends on whether Hu would attend the trial for cross-examination purpose. For that reason, it is in my view inappropriate for the Court to make any ruling at this stage as to whether the witness statement should be excluded on the basis that it is hearsay evidence. Neither should the court make a ruling on the question of whether the witness statement should be struck out on the basis that it is “unhelpful”.

15.  The plaintiff’s application in relation to Hu’s witness statement should therefore be dismissed.

D.  CHAN’S WITNESS STATEMENT

D1. The plaintiff’s grounds

16.  The plaintiff seeks to strike out paragraphs 2(b) and 11 – 21 of Chan’s witness statement on the following grounds:

(1)  Given Hu will not testify, his witness statement is inadmissible. As a result, it is impermissible for Chan to refer to Hu’s witness statement;

(2)  The plaintiff’s claim concerns matters which occurred in around March and April 2019[7], whereas Chan only joined the 7^th defendant in 2024. Therefore, Chan does not have personal knowledge of what happened back in 2019. As a result, he cannot adopt Hu’s witness statement nor the 7^th defendant’s Amended Defence as his own evidence;

(3)  Paragraphs 11 to 21 of Chan’s witness statement are not factual evidence but Chan’s analysis, opinion, belief, submission and/or commentary/recitation of documents which he has reviewed.

D2.  Applicable approach

17.  As a matter of general principle, a witness statement should cover only such material facts which the witness is able to prove of his own knowledge (Hong Kong Civil Procedure 2026, Vol.1, paragraph 38/2A/6). It is not the function of a witness statement to provide a commentary on the documents in the trial bundle, to set out quotations from such documents, to engage in matters of argument or to deal with other matters merely because they arise in the course of the trial: Sunni International Limited v Kao Wai Ho Francis & Others[2021] HKCFI 2418, at [7].

18.  Service of witness statements pursuant to Order 38 rule 2A of the Rules of the High Court (Cap.4A, Laws of Hong Kong) (“RHC”) would not render evidence which is otherwise inadmissible admissible: Order 38 rule 2A(8) of the RHC.

19.  If a witness statement contains inadmissible materials, the court has a discretion to strike out such materials.

20.  However, the rules as to witness statements and their contents are not rigid statutes and it is conceivable that in particular circumstances they may properly be relaxed in order to achieve the overriding objectives of the CJR. When the court considers whether to strike out certain contents of a witness statement, it should take into account, inter alia, the question of whether doing so would be conducive to securing the just resolution of disputes in accordance with the substantive rights of the parties and whether it would prevent the case from being dealt with as expeditiously as is reasonably practicable: Sunni International Limited v Kao Wai Ho Francis & Others (supra), at [7] and [27].

D3.  Discussion

21.  The only substantive purpose of sub-paragraph 2(b) of Chan’s witness statement is to adopt Hu’s witness statement and the 7^th defendant’s Amended Defence as Chan’s own evidence.

22.  As aforesaid, the plaintiff argued that since Hu will not testify in court, Chan should not be permitted to refer to Hu’s witness statement. As explained above, such an argument is pre-maturely made, and it collapses upon the court’s decision made under Section C above.

23.  Insofar as it is submitted that Chan is not eligible to adopt the contents of the 7^th defendant’s Amended Defence (which primarily pleads that the Board had never authorised/approved the 9^th defendant to participate in the Scheme on behalf of the 7^th defendant, nor did the Board have any knowledge thereon) since he does not have personal knowledge of what happened in 2019, such an objection may be considered together with the objections raised in relation to paragraphs 11 – 21 of Chan’s witness statement, in respect of which it was argued that such contents are at best Chan’s analysis, opinion, belief, submission and/or commentary/recitation of documents which he has reviewed, which is not allowed in witness statements.

24.  In this regard, it must be borne in mind that what the Court is considering at this stage is the admissibility of Chan’s evidence rather than the weight which should be attached to such evidence.

25.  In his witness statement, Chan explains that he has perused various materials, including but not limited to the documents and evidence in his possession, power and/or control. He also confirms that he has been provided with documents disclosed in the present action. By virtue of these documents, he gives evidence that, among other things, the 8^th and 9^th defendants have never been authorised by the 7^th defendant to act on behalf of the 7^th defendant in relation to the Scheme.

26.  On my part, I cannot see how it can be said that Chan should not even be allowed to give evidence on such matters.  On the face of it, Chan may be able to give evidence on what he perceives to be the situation on authority after he has perused the 7^th defendant’s documents such as the Board documents.

27.  In his witness statement, Chan has also referred to the 7^th defendant’s then applicable bye-law which appears to be the company’s constitution governing, inter alia, the management and control of the company. Such bye-law runs up to 68 pages with 170 articles. As aforesaid, while normally it is not the function of a witness statement to provide a commentary on documents, the rules as to witness statements and their contents may properly be relaxed in order to achieve the overriding objectives of the CJR. In my view, allowing Chan to give evidence on the bye-law would be conducive to the efficient and fair disposal of the trial since he can draw the court’s and all parties’ attention to the relevant parts of the documents which will be relied on in the 7^th defendant’s defence of the claim.

28.  It is true that Chan has also included materials such as opinion and submissions in his witness statements. However, I hesitate to exercise my discretion and strike those parts out. Firstly, it seems that those contents give the context in which his other evidence is given. Secondly, I do not think it would worth the while for further time and costs to be incurred on filtering out line by line and paragraph by paragraph the problematic parts of the witness statements. After all, it is trite that Judges are capable of excluding these materials from their mind if necessary. In other words, despite the breach of the rules (if any), the inclusion of such materials would not be prejudicial to the plaintiff’s interest.

29.  I also take the view that it would be much better for the trial judge to determine whether or not to exclude evidence on the ground that it is hearsay at the conclusion of the trial pursuant to section 47(2)(b) of the Evidence Ordinance.

30.  As Mr Yeung accepted, the law is to assist but not to hinder the expeditious and just resolution of disputes. However, the exercise which the plaintiff is asking the court to conduct is not conducive to that purpose.

31.  I would therefore also refuse to strike out any part of Chan’s witness statement.

E.  ORDER

32.  For reasons of the aforesaid, the Summons is hereby dismissed.

F.  COSTS

33.  Mr Yeung argued that the plaintiff would not have taken out the Summons but for Chan’s representation in his witness statement that Hu will not testify at the trial. It was also suggested that the 7^th defendant has only had a change of stance by saying in Chan’s affirmation filed in opposition of the Summons that it would reserve the right to adduce him as a witness at the trial upon the taking out of the Summons. It was therefore suggested that the 7^th defendant should bear the plaintiff’s costs from the date of the filing of the Summons up to the date of the filing of the 7^th defendant’s Affirmation in opposition.

34.  With respect, I do not accept this submission. In my view, this is a very aggressive application by which the plaintiff attempted to secure victory over the 7^th defendant by one knock-out blow, and it should not have been taken out in the first place. Further, by the time when the Summons was taken out, the 7^th defendant has not indicated that it would rely on Hu’s witness statement as hearsay evidence yet.

35.  I therefore take the view that costs should follow the event. Hence, the plaintiff shall bear the 7^th defendant’s costs of the Summons (including all costs reserved), which is summarily assessed at $200,000. It shall be paid no later than 26 February 2026.

Mr Mike Yeung, instructed by Hugo Leung & Lawyers, for the plaintiff

Mr Lincoln Cheung and Mr Jason Tang, instructed by Jones Day, for the 7^th defendant

HCA 106/2022

[2025] HKCFI 5787

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 106 OF 2022

________________________

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DECISION

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INTRODUCTION

1.  This Decision deals with the costs of the summons filed by the 4^th defendant on 30 April 2025 for discovery against the plaintiff (“the Summons”), which has been withdrawn pursuant to leave granted by this Court on 12 September 2025.

BACKGROUND

2.  As far as the parties’ respective cases in this action are concerned, for the purpose of this Decision, it suffices for me to state that, in gist, the plaintiff claims that he is the victim of a scam disguised as a gold bar purchase and leaseback scheme (“the Scheme”)  involving the defendants, which defrauded him of over HK$22 million.  It is his case that the Scheme never existed.  On the other hand, the 4^th defendant denies that he had any knowledge of the alleged fraudulent design, and he alleged that he believed the Scheme was genuine at all material times.

3.  In support of his case, the plaintiff has filed the witness statements of himself, Mr So Ho Ming (i.e. the 5^th defendant)[1], Mr Kau Ma Shing (i.e. the 6^th defendant)[2] and Mr Li Wing Cheung on 5 June 2023:

(1)  In the plaintiff’s own witness statement, having alleged that “the defendants were obviously under an agreement to combine together to conduct fraudulent misrepresentation against [him] to defraud [him]”[3] and that he had made a report to the police on 23 April 2020[4], he added:

“41. There were news reports dated 4 November 2020 relating to action taken by police to arrest individuals including shareholders of listed companies for fraudulent scheme involving gold bar purchase and lease-back for onward lease to listed companies. I have verified with the police that this relates to the report made by me.

42.  I made a further report to the police in Hong Kong on around 24 August 2021 to supplement information.”

(2)  In the 5^th defendant’s witness statement, he stated at paragraphs 69 and 71 that:

“69. 2019年11月7日，本人到荃灣警署就嘉柏倫控股 ([i.e. the 1^st defendant])  的事情報警，希望由警方處理該事件，但報案室表示因為本人並不是受害者，所以不能立案。2020年4月26日，本人就嘉柏倫 “金尊1號” 事件於網上電子報案系統報案 (電子報案編號ERC2004262040225)  。”

“71. 本人願意就上述證言出庭作證，或者上述事宜在法庭上開展進一步調查時，並提供相關的證據文件、語音和材料等。”

(3)  In the 6^th defendant’s witness statement, he stated that:

“14. 本人是在2020年的年末 (大約11月份時)，被商業犯罪調查科拘捕才知道嘉柏倫控股、堅固金業及其關聯公司和資源控股涉嫌欺詐，本人在接受調查時，如實向商業犯罪調查科的警員陳述了本人所有知曉的資訊。

15.  本人願意就上述證言出庭作證，或者上述事宜在法庭上開展進一步調查時，並提供相關的證據文件、語音和材料等。”

(4)  In Mr Li Wing Cheung’s witness statement, he asserted that:

“17. 我是在2020年11月，被商業犯罪調查科拘捕調查時，才證實了我心中的猜測，嘉柏倫控股、資源控股、堅固金業及其關聯公司的確經過精心設計，編制了虛假投資產品、虛假的實物黃金交易、虛假的實物黃金租賃以及虛假的宣傳和陳述 ，以虛假聲明及／或宣傳等手段騙取投資人資金為目的 ，涉嫌欺詐犯罪。我在接受調查時，如實向商業犯罪調查科的警員陳述和提供了所有我所知曉的資訊。

18.  我願意就上述證言出庭作證，或者上述事宜在法庭上開展進一步調查時，並提供相關的證據文件、語音和材料等。”

4.  On 30 December 2024, the 4^th defendant’s solicitors wrote to the plaintiff’s solicitors and sought production of, inter alia, various witness statements made to the police by the 5^th defendant, the 6^th defendant and Mr Li Wing Cheung (collectively, “the Statements to Police”).

5.  By letter dated 7 January 2025, the plaintiff’s solicitors declined the 4^th defendant’s requests, on the grounds that:

(1)  the Statements to Police were neither relevant nor necessary for fairly disposing of the matter in issue or for saving costs, for the relevant witnesses had already set out in their respective witness statements in the present action all that they knew concerning the dispute, and it was expected that they would have revealed to the police substantially what they set out in those witness statements (if not less);

(2)  the 4^th defendant’s requests were no more than fishing expedition;

(3)  discovery which solely relates to credit is not allowed;

(4)  the plaintiff has not seen nor had in his possession any Statements to Police, nor were those statements in the plaintiff’s custody or power. 

6.  On 5 March 2025, Master Hui imposed an unless order on the 4^th defendant, and directed that he shall be debarred from taking out any specific discovery application against the plaintiff for disclosure of witness statements given to the Police unless he did so by 4pm on 30 April 2025 (“the Unless Order”).

7.  On the same day, the 4^th defendant requested the plaintiff’s solicitors for the disclosure of the Statements to Police of the 5^th and 6^th defendants again together with the further police report made by the plaintiff (“the plaintiff’s Report to Police”), and cited, among other things, paragraph 24/10/1 of volume 1 of Hong Kong Civil Procedure 2025 in support.

8.  On 12 March 2025, the 4^th defendant’s solicitors wrote to the 5^th and 6^th defendants separately and asked for production of their respective Statements to Police.

9.  On 28 March 2025, the plaintiff’s solicitors informed the 4^th defendant’s solicitors that the police had rejected the plaintiff’s requests for copies of the plaintiff’s Report to Police and the Statements to Police of the 5^th defendant and the 6^th defendant.

10.  On 10 April 2025, the 4^th defendant’s solicitors requested the plaintiff’s solicitors to provide copies of the plaintiff’s Report to Police and Mr Li Wing Cheung’s Statement to Police, and expressly referred to Order 24 rules 10 and 11A in support.  Letters of similar content were also sent to the 5^th and 6^th defendants.

11.  On 24 April 2025, the 4^th defendant’s solicitors wrote further to the plaintiff’s solicitors, and requested for production of the Statements to Police of the 5^th and 6^th defendants within 7 days from the date of this letter.  This letter reads:

“Further to our letter dated 10 April 2025 and for avoidance of doubt and pursuant to O.24 rr.10 and 11A of the Rules of the High Court (Cap.4A), we write to request copies of the following documents : -

1. The report made by the 5^th Defendant via the online electronic reporting system (No. ERC2004262040225)  referred to in §69 of 蘇浩明的證人陳述書dated 11 September 2022; and

2. Records of statement(s)  made by the 6^th Defendant to investigators of the Commercial Crime Bureau of the Hong Kong Police Force in November 2020 referred to in §14 of 裘馬誠的證人陳述書dated 31 January 2023.

Please let us have the said documents within 7 days from the date of this letter. We undertake to pay your reasonable photocopying charges.

In the meantime, our client’s rights are hereby expressly reserved.”

12.  On 30 April 2025, the 4^th defendant took out the Summons, which was served on the plaintiff’s solicitors at around 3pm on that day.  The application under the Summons was made pursuant to, inter alia, Order 24 rule 10 of the Rules of the High Court (“RHC”), and the documents sought were:

(1)  The plaintiff’s Report to Police referred to in paragraph 42 of his witness statement;

(2)  Mr Li Wing Cheung’s Statement to Police referred to in paragraph 17 of his witness statement;

(3)  The 5^th defendant’s Statement to Police referred to in paragraph 69 of his witness statement;

(4)  The 6^th defendant’s Statement to Police referred to in paragraph 14 of his witness statement.

(collectively, “the Requested Documents”)

13.  On the same day, the 4^th defendant also took out a summons against the 5^th defendant and the 6^th defendant respectively (“the D5 Summons” and “the D6 Summons”)  for production of their respective Statements to Police.

14.  The plaintiff’s solicitors faxed a letter to the 4^th defendant’s solicitors at 5:52pm on the same day, to which the plaintiff’s Report to Police was attached.  In the letter, the plaintiff’s solicitors also asserted that the Statements to Police of the 5^th and 6^th defendants were not in the plaintiff’s possession, custody or power.

15.  On 6 May 2025, the plaintiff’s solicitors wrote further to the 4^th defendant’s solicitors and alleged that the application made under the Summons was “an obvious abuse of process” for the following reasons:

(1)  Pursuant to the letter of the 4^th defendant’s solicitors dated 24 April 2025, the plaintiff could reply within 7 days (i.e. by 1 May 2025);

(2)  The 4^th defendant’s solicitors had been informed previously that none of the Statements to Police of the 5^th defendant, 6^th defendant and Mr Li Wing Cheung was in the plaintiff’s possession, custody or power which was not disputed.

16.  In the same letter, while the plaintiff’s solicitors alleged that the plaintiff “had exhausted his means to get hold of” the Statements to Police, they had never referred to any effort on their part (or on the plaintiff’s part)  to ask the 5^th defendant, the 6^th defendant and Mr Li Wing Cheung directly for the documents. 

17.  On 8 May 2025, the 4^th defendant’s solicitors replied to the plaintiff’s solicitors, and pointed out, among other things, that the plaintiff should be able to contact his witnesses and obtain the relevant documents from them.

18.  It was only on 9 May 2025 that the plaintiff’s solicitors informed the 4^th defendant’s solicitors by letter that the plaintiff has approached the 5^th defendant, the 6^th defendant and Mr Li Wing Cheung for the documents requested, and that they had rejected the plaintiff’s requests.

19.  The D5 Summons and the D6 Summons were initially fixed for call-over hearings on 13 May 2025, which were adjourned to 27 May 2025, whereupon an order in terms of those summonses was made by consent.  Their respective Statements to Police were subsequently produced by the 5^th and 6^th defendants pursuant to the said order.

20.  On 27 May 2025, Mr Li Wing Cheung also tendered his Statement to Police to the 4^th defendant.

21.  By consent, leave has been granted on 12 September 2025 to the 4^th defendant to withdraw the Summons. However, the parties could not agree on the costs relating thereto.  Hence this Decision on costs.

LEGAL PRINCIPLES

22.  The legal principles applicable to the determination of costs of a withdrawn summons are trite.

23.  In China Baoli Technologies Holdings Limited (formerly known as Rex Global Entertainment Holdings Limited)  v Orient Equal International Group Limited & Others[2021] HKCA 1609, Barma JA had the following to say:

“It is, of course, trite that costs and the basis of taxation are in the discretion of the court. Generally speaking, upon an application for leave to discontinue, the discontinuing party will be required to pay the costs of the other party, unless exceptional circumstances can be shown to justify a different order. The fact that the discontinuance was caused by the issues becoming academic does not of itself justify departure from this starting point as a matter of discretion: Anmol Kumar Sawlani v Yeshma Gobindram Sawlani (unreported, HCA 2231/2011, 9 May 2013, [10]-[15], per Recorder Shieh SC).”

24.  Barma JA had also referred to the following principles in the same Decision:

“(1)  It has been said that the starting point above may be departed from where the withdrawing/discontinuing party can show, for example, that the proceedings have become academic: Trend Publishing (HK)  Ltd v Vivien Chan & Co (a firm) [1996] 2 HKLR 227, at 230H-J, per Keith J.

(2)  If the withdrawal/discontinuation was due to something done by the defendant, after the issuance of proceedings, which rendered it unnecessary or academic for the plaintiff to proceed with the proceedings, this may justify awarding costs to the plaintiff: Re Peaktop Technologies (USA)  Hong Kong Ltd [2007] 4 HKLRD 207, [8], per Barma J (as he then was).

(3)    One may also depart from the starting point where the withdrawing/discontinuing party shows that he will succeed on the substantive issue: Re Fook Lam Moon Restaurant Ltd (unreported, HCMP 438/2010, 8 December 2015), [40], per To J.  How far the court will be prepared to look into the substantive issues will depend on the circumstances of each case, such as the amount of costs at stake, the conduct of the parties, and whether evidence needs to be adduced.  The court may take a broad brush approach on the basis of the available materials: Re Fook Lam Moon (supra), [41], [45], [50].”

25.  It has also been held that, to persuade the court to depart from the general rule, the minimum a plaintiff has to do is to show that the discontinuance is for reasons other than an acknowledgment of defeat or likely defeat: Re Fook Lam Moon (HCMP 438/2010, unreported, 8 December 2015), at [40].

26.  At the end of the day, the Court has to take into account the circumstances of the particular case which is before it and consider what is just in those circumstances.

THE PARTIES’ RESPECTIVE STANCES

27.  Both the plaintiff and the 4^th defendant asked for costs of the Summons. 

28.  In gist, the plaintiff argued that:

(1)  The Summons was groundless, abusive and improper;

(2)  In any event, there was no basis for the 4^th defendant to seek any of the Statements to Police by Mr Li Wing Cheung, the 5^th defendant and the 6^th defendant against the plaintiff;

(3)  The motive of the 4^th defendant in asking for the Statements to Police by Mr Li Wing Cheung, the 5^th defendant and the 6^th defendant was for harassing the plaintiff and wasting his costs;

(4)  There was no reason of calling upon the plaintiff to bear the consequence of a confusing and problematic timeline of the 4^th defendant’s own making;

(5)  The plaintiff had adopted a fair and reasonable attitude throughout;

(6)  The evidence against the 4^th defendant in the present case is overwhelming;

(7)  The 4^th defendant’s taking out of the Summons was so improper that he should be ordered to bear the costs personally despite the fact that he is a legally-aided person, pursuant to section 17(3)  of the Legal Aid Ordinance (Cap.91, Laws of Hong Kong).

29.  The 4^th defendant’s arguments may be summarised as follows:

(1)  The plaintiff had never at any stage denied that he is required to produce the plaintiff’s Report to Police.  His persistent refusal to disclose it, absent any good cause, justified the issuance of the Summons on this ground alone;

(2)  Since the Requested Documents were referred to in the witness statements filed by the plaintiff, the burden is on the plaintiff to show good cause for refusing to produce such documents, and the plaintiff has failed to discharge such a burden;

(3)  The Requested Documents are plainly relevant in the action;

(4)  The 4^th defendant was at the end of the day successful in terms of obtaining the Requested Documents.

MY VIEW

30.  Before I set out my view, it is important to emphasise that one of the bases of the 4^th defendant’s discovery application is Order 24 rule 10 of the RHC which stipulates that:

“(1)  Any party to a cause or matter shall be entitled at any time to serve a notice on any other party in whose pleadings, affidavits or witness statements served under Order 38, rule 2A, or experts’ reports, reference is made to any document requiring him to produce that document for the inspection of the party giving the notice and to permit him to take copies thereof.

(2)  The party on whom a notice is served under paragraph (1)  must, within 4 days after service of the notice, serve on the party giving the notice a notice stating a time within 7 days after the service thereof at which the documents, or such of them as he does not object to produce, may be inspected at a place specified in the notice, and stating which (if any)  of the documents he objects to produce and on what grounds.”

31.  Under Order 24 rule 11(1)  of the RHC, it is stipulated that:

“If a party who is required by rule 9 to serve such a notice as is therein mentioned or who is served with a notice under rule 10(1)—

(a)  fails to serve a notice under rule 9 or, as the case may be, rule 10(2), or

(b)  objects to produce any document for inspection, or

(c)  offers inspection at a time or place such that, in the opinion of the Court, it is unreasonable to offer inspection then or, as the case may be, there,

then, subject to rule 13(1), the Court may, on the application of the party entitled to inspection, make an order for production of the documents in question for inspection at such time and place, and in such manner, as it thinks fit.”

32.  Order 24 rule 13(1)  further provides that:

“No order for the production of any documents for inspection or to the Court or for the supply of a copy of any document shall be made under any of the foregoing rules unless the Court is of opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.”

33.  The combined effect of the above provisions has been considered in Moulin Global Eyecare Holdings Limited (in liquidation)  formerly known as Moulin International Holdings Limited v Olivia Lee Sin Mei [2013] 3 HKLRD 72 (CA), in which Fok JA (as Fok PJ then was)  had the following to say:

“31. I have set out above the rules of Court relevant to the present appeal. It is clear from those rules and from the authorities that have considered them (or the precursors to those rules)  that there is a distinction between discovery of documents in an action in general and an application for production of documents referred to in pleadings or affidavits: see, in this respect, Quilter v Heatly per Lindley LJ at p. 49 and Shun Kai Finance Co Ltd v Japan Leasing (HK)  Ltd per Rogers VP at pp. 523J-525B.

32. In the latter situation, where a party has referred to a document in his pleading or affidavit, the opposite party has a prima facie entitlement to see it, ‘unless good cause to the contrary is shewn’ (per Jessel MR in Quilter v Heatly at p. 48), or ‘unless there is some sufficient ground for refusing production’ (ibid per Lindley LJ at p. 50), or ‘unless he can shew good cause why he should not’ produce it (ibid per Bowen LJ at p. 51).

33. Nevertheless, it is clear from the rules that any order for production for inspection under O.24 r.11 is expressly ‘subject to rule 13(1)’ and that latter rule plainly places, on an applicant for an order for production, a burden to demonstrate to the court that ‘the order is necessary either for disposing fairly of the cause or matter or for saving costs’.

34. In Dynamic Way, Godfrey VP expressed the position thus (at p. 142B-D):

‘We are concerned here with a document referred to in an affirmation, that is to say, the list of purchase orders mentioned in para 36. Although, prima facie, the party against whom it was sought to be used had a right to inspect this document and take copies of it, the court will not order production of the document for inspection unless the court is of the opinion that such an order is necessary either ‘for disposing fairly of the cause or matter or for saving costs’; see O 24 r 13 of the Rules of the High Court.’

35. There are thus two separate stages to be considered, although in practice these will usually be examined together. First, the party who has referred to the document in a pleading or affidavit bears the burden of showing good cause why an order for production should not be made. As a matter of practicality, at that stage, the fact of reference to a document in a pleading or affidavit will make it difficult for the referring party to contend that the document does not exist and it may also make it difficult for him to contend that it is not relevant. However, that is not the end of the inquiry as there is not then a presumptive rule in favour of an order for production and the referring party may be able to show, for example, that the document is privileged from production. In any event, under O.24 r.13 there remains, secondly, and independent of the first stage, a burden on the applicant for an order for production to show the court that the order is necessary either for disposing fairly of the cause or matter or for saving costs.

[…]

37. The plaintiff’s appeal proceeds on the footing that it was impermissible for the Judge, once he had accepted that the insurance policy was relevant to the defendant’s application to expand the confidentiality club, to conduct any evaluation of the degree of relevance or importance of the document to that matter.

38. I do not accept the validity of that premise for a number of reasons.

39. It is clear that there is no rigid, inflexible rule that production of a document referred to in a pleading or affidavit will always be ordered. On the contrary, the underlying rationale of O.24 r.10 and the theme in the cases both reflect a general rule and, as such, one to which there may be exceptions. That there may be exceptions to the general rule is accepted by the plaintiff itself, albeit that it contends the exceptions are limited to two classes of situation only, viz. irrelevance and privilege.

40.  As I have already noted, the rule providing for an order for production (O.24 r.11)  is expressly subject to O.24 r.13 which requires the court to consider the necessity of an order for production in terms of the fair disposal of the cause or matter or the saving of costs.  That inquiry necessarily imports an evaluation of the circumstances in order to determine whether an order for inspection should be made.”

34.  His Lordship has also endorsed the following approaches adopted by the first instance Judge below[5]:

“21. The Judge accepted that where a document is referred to in an affidavit in support of an application, the court will ordinarily order production because the purpose of requiring production is to give the opposite party the same advantage as if the document had been fully set out: see Matthews & Malek, Disclosure (4^th Ed.)  at §§9.04-9.05.

22. He also considered that it was a theme running through many of the cases cited to him, including Quilter v Heatly (1883)  23 Ch D 42, Zida Technologies Ltd v Tiga Technologies Ltd [2001] 3 HKLRD 698 and Rubin v Expandable Ltd [2008] 1 WLR 1099, that:

‘… for practical purposes, a court is likely to take the view that absent any special factors, where a document has been referred to, it would generally be appropriate to regard its production as being so necessary as being in the interests of fairness and equality of information.’ ”

35.  Although his Lordship’s focus was, in the above authority, on documents referred to in pleadings and affidavit only, I see no reason why the same principles should not be applicable to documents referred to in witness statements.  In this regard, it should be noted that at the time of the old authorities such as Quilter v Heatly (1883)  23 Ch D 42, the relevant rule equivalent to our Order 24 rule 10 did not refer to “witness statement” at all.  However, “witness statement” has since then been added in the said rule.

36.  I venture to reiterate also that the criteria of an application made under Order 24 rule 7 of the RHC are not the same as those required under Order 24 rule 10.  It is trite that the court has no jurisdiction to make an order under Order 24 rule 7 for the production of documents unless, among other things, there is sufficient evidence to show that the subject document is in the possession, custody or power of the respondent of the application.  However, there is no such prerequisite in an application made under Order 24 rule 10, and whether the document is in the possession, custody or power of the respondent is just one of the matters to be taken into account.  In this regard, reference should be made to what Nourse LJ said in Rafidain Bank v Agom Universal Sugar Trading Co. Ltd & Another [1987] 1 WLR 1606.  In that case, having emphasised the lack of wordings of “possession, custody or power” in Order 24 rule 10(1), his Lordship expressed the following view at 1610G – 1611C:

“Looking at those provisions aside from authority, in particular at the contrast in wording between rule 10(1)  on the one hand and rules 11(2)  and (3)  on the other, I find it impossible to hold that rule 10(1)  applies only to documents which are in the possession, custody or power of the party concerned. It seems to me, both as a matter of construction and as one of common sense, that the omission of such a requirement is deliberate. The party who refers to the documents does so by choice, usually because they are either an essential part of his cause of action or defence or of significant probative value to him. Neither of those functions presupposes that they will be in his possession, custody or power. As Lindley L.J. observed in Quitter v. Heatly (1883)  23 Ch.D. 42, 50, a case to which I will refer again later, the material provisions were evidently intended to give the other party the same advantage as if the documents referred to had been fully set out in the pleadings. Why should that advantage be automatically denied to him because the documents are not in the possession, custody or power of the party who refers to them? Moreover, under rule 11(1)  the court is not bound to make an order for production. It has a discretion to do so or not as it sees fit. The authorities establish that an order will not be made if good cause to the contrary is shown. Doubtless the absence of possession, custody or power will sometimes amount to a good cause. But why should it invariably do so? Suppose a case where there was a technical absence of possession, custody or power but nevertheless evidence that the third party who had possession of the document would very likely make it available if only he was asked to do so. I can see no reason for thinking that it was intended that the court should be powerless to make an order whose practical effect would be to require the request to be made to the third party.”

37.  With the above in mind, I hold that the plaintiff should be ordered to bear the 4^th defendant’s costs of the Summons for the following reasons.

38.  Firstly, I am of the view that it was entirely proper for the 4^th defendant to ask for the production of the Requested Documents in the first place, as it is undisputed that the Requested Documents were referred to in the various witness statements filed by the plaintiff.  As established by authorities, the 4^th defendant is prima facie entitled to such documents by reason of Order 24 rule 10 of the RHC.  Furthermore, given those documents were earlier statements made by the witnesses concerned on the Scheme, it must be open to the 4^th defendant to have sight of them as a matter of fairness.  It is not open to the plaintiff to say that it can be assumed that the relevant parts have already been set out in the witness statements filed herein.  The disclosure of the Requested Documents must be relevant and necessary for the fair disposal of the action.

39.  The plaintiff argued that since the Statements to Police “solely relate to credit”, the 4^th defendant’s application for discovery would not be allowed.  With greatest respect, such an argument is misconceived, and had been made upon misunderstanding of the law.  While it is of course trite that specific discovery is not allowed for the sole purpose of discrediting a party or his witness, this principle is not engaged if the document concerned is relevant to the issue of the case (other than on the credibility of the witness)[6]. Here, as aforesaid, the Statements to Police must be relevant to the issue between the plaintiff and the 4^th defendant.

40.  Secondly, it was reasonable for the 4^th defendant to take out the Summons on 30 April 2025. 

41.  Since the receipt of the request from the 4^th defendant’s solicitors on 30 December 2024, the only substantive replies by the plaintiff’s solicitors before the taking out of the Summons were given by way of letters dated 7 January 2025 and 28 March 2025 respectively.

42.  In the letter dated 7 January 2025, the plaintiff’s solicitors alleged that it is not relevant nor necessary for the fair disposal of the matter in issue for the Statements to Police to be disclosed.  I have already explained why I disagree with such a stance. 

43.  The plaintiff’s solicitors also stated that the plaintiff has never seen nor had in his possession any Statements to Police.  I am of the view that this is not an adequate answer in the circumstances of the present case, given it should have been apparent to the plaintiff’s solicitors that the basis of the 4^th defendant’s request was that the documents concerned were referred to in various witness statements filed on behalf of the plaintiff on 5 June 2023.  Hence, the relevant rule should be Order 24 rule 10 of the RHC.  Focusing on whether the Requested Documents were in the plaintiff’s possession, custody or power, as if a negative answer would bring an end to the 4^th defendant’s request, is a wrong approach.

44.  In the letter dated 28 March 2025, the plaintiff’s solicitors stated that the Police had rejected the plaintiff’s request for documents. 

45.  In my view, it was not a sufficient answer either, because the plaintiff’s solicitors simply failed to explain why they could and did not ask the 5^th defendant, the 6^th defendant as well as Mr Li Wing Cheung directly for the documents.  This is particularly when all of them had in their witness statements made it clear that they were willing to provide documentary evidence and materials (see the relevant excerpts quoted in [3] above).

46.  Insofar as it is the plaintiff’s case that his solicitors had asked the 5^th defendant, the 6^th defendant and Mr Li Wing Cheung before 30 April 2025 for the documents (even if that was the case – which is doubtful, see the next paragraph)  but in vain, he had himself to blame for not instructing his solicitors to make this clear to the 4^th defendant’s solicitors forthwith, but to wait until after the 4^th defendant’s taking out of the Summons.

47.  I have some doubts as to whether the plaintiff had indeed approached the 5^th defendant, the 6^th defendant and Mr Li Wing Cheung before 30 April 2025 for the documents, because, if that was the case, there was no reason why the plaintiff’s solicitors would choose to keep silent on this matter all the way until 9 May 2025.  This is inconsistent with the style of the plaintiff’s solicitors in the handling of this matter.  In my view, the plaintiff’s solicitors would have emphasized this in their letter dated 28 March 2025 when they referred to their effort in getting the documents from the Police.  Even if for some reasons they had omitted to do so at the time, it is quite unlikely that they would have forgotten to mention about this in their letter dated 6 May 2025, when they were specifically setting out their stance that the plaintiff had “exhausted all means” to get the documents.

48.  In this regard, I have not lost sight of the statement signed by Mr Li Wing Cheung dated 26 May 2025 (which is not a sworn/affirmed document), in which he stated that the plaintiff had contacted him repeatedly since January 2025 for the purpose of getting his Statement to Police, and that he had rejected the plaintiff’s requests.  However, if the plaintiff had indeed made repeated requests, I wonder why the plaintiff’s solicitors did not mention about it at all before 9 May 2025.

49.  In any event, even if that is true, as aforesaid, the 4^th defendant should not be blamed for insisting on the discovery if the plaintiff chose not to inform him about such efforts earlier.

50.  Thirdly, I do not agree with the plaintiff that the 4^th defendant’s request for the Statements to Police was made for the purpose of harassing and oppressing the plaintiff as well as wasting his costs.  As aforesaid, the 4^th defendant is clearly entitled to such documents.

51.  Fourthly, it was plainly unreasonable on the part of the plaintiff not to provide the 4^th defendant with the plaintiff’s Report to Police upon the request made on 5 March 2025.

52.  The plaintiff argued that the 4^th defendant had failed to provide any evidence which shows that the plaintiff had ever refused to accede to the request.  He even stated in paragraph 13 of his 12^th Affirmation filed on 9 May 2025 that he was puzzling when he found that the 4^th defendant had applied for discovery of his Report to Police by the Summons, because “[he] did not have an issue with furnishing it and have instructed [his solicitors] to provide it to [the 4^th defendant’s solicitors]”.

53.  I do not understand what other evidence could the 4^th defendant provide.  Neither do I understand why the plaintiff was puzzled.  Action clearly speaks louder than words.  The objective fact is that the plaintiff’s solicitors had not provided the 4^th defendant’s solicitors with the plaintiff’s Report to Police as requested, until after the service of the Summons.  Neither did the plaintiff’s solicitors make it clear before 30 April 2025 that they were minded to disclose such a document.  In my view, any reasonable bystander who had knowledge of the content of the correspondence between the parties would have, by the time of the Summons, come to the conclusion that the plaintiff was not going to accede to the 4^th defendant’s request.

54.  I should also make it clear that the Court does not welcome such kind of “game of words”.  To say that “I have never said ‘No’ to your request and therefore you should have known that I am intending to say ‘Yes’” is an approach which legal professionals should not adopt.   It is a waste of time and costs of all parties.  To take this case as an example, if the plaintiff was always minded to provide the 4^th defendant with his Report to Police, why didn’t he make that clear as early as possible?  I regret to say that this kind of approach would only cause delay to the matter and should not have any place in our system. 

55.  Coming back to the plaintiff’s argument, if evidence is really required, one is only required to refer to the letter of the plaintiff’s solicitors dated 28 March 2025, in which they stated that:

“[…] We wrote to the Police again requesting them to provide the police reports and/or statements that you mentioned in your said letter dated 5 March 2025, however, the Police rejected our request.”

This clearly gives others an impression that the plaintiff was unable to disclose the document by reason of the police’s refusal.

56.  The plaintiff then relied on the 7-day period allowed by the 4^th defendant’s solicitors in their letter dated 24 April 2025[7], and submitted that:

“[…] Insofar as D4 attempted to justify the application by referring to an unless order due to expire at 4 pm on 30 April 2025, eclipsing the 7-day window set by D4 himself, P submits that there is simply no reason for calling upon P to bear the consequence of a confusing and problematic timeline of D4’s own making. Nowhere in the [4^th defendant’s solicitors’] letter dated 24 April 2025 indicated the said unless order or its impact or any need to reply by 4 pm on 30 April 2025. To penalise P under the circumstances would be tantamount to putting a burden on P to take care of D4’s case management, which would be grossly unfair. In the premises, there was no proper basis or valid justification for a discovery application for P’s Further Police Report on 30 April 2025. […]”[8]

57.  The plaintiff further argued that:

“Delivery of P’s Further Police Report at any time on or before 1 May 2025 must have been well within the anticipation of anyone in P’s and D4’s position.”[9]

58.  It should be pointed out right away that the plaintiff’s argument that he had complied with the 4^th defendant’s request made on 24 April 2025 by sending the plaintiff’s Report to Police “within the 7-day window” is misconceived, for the said window was only applicable to the 5^th defendant’s and the 6^th defendant’s respective Statements to Police[10].

59.  In any event, the plaintiff’s solicitors, as legal practitioners who have been representing the plaintiff since 10 July 2023, cannot dispute that:

(1)  They were aware of the Unless Order and knew that the 4^th defendant must take out the Summons by 4pm on 30 April 2025 if he was serious about his request for discovery of the Requested Documents;

(2)  It would be a waste of costs to proceed with an application for discovery if the other side has provided (or at least has agreed to provide for)  discovery voluntarily without any court order.

60.  Given the above, even if the 7-day window was applicable to the plaintiff’s Report to Police (which the plaintiff’s solicitors and counsel assumed to be the case), any reasonable and sensible professional in the position of the plaintiff’s solicitors would have no difficulty, upon perusal of the letter of the 4^th defendant’s solicitors dated 24 April 2025, in gathering that the deadline of the plaintiff’s reply cannot be beyond 30 April 2025, and the imposition of a deadline of “7 days” (which would bring the deadline to 1 May 2025 (or arguably 2 May 2025 given 1 May 2025 is a public holiday))  must be a mistake.  To take advantage of an apparent mistake on the part of the 4^th defendant’s solicitors in such circumstances is totally unhelpful, to say the least, and this Court would not allow this to happen.  I should also reiterate that, by saying that the plaintiff should have known that the 4^th defendant was obliged by the Unless Order to take action no later than 30 April 2025 and that as a result the imposition of a deadline of 1 May 2025 must be a mistake, is not “putting a burden on the plaintiff to take care of the 4^th defendant’s case management”[11] at all.  All I am saying is that the plaintiff could and should well anticipate that the 4^th defendant would and could not wait until after 30 April 2025 to take out an application for discovery.  It was therefore up to the plaintiff to take prompt action, if so advised, before the 4^th defendant came to court for an order.  If the plaintiff decided to wait beyond the time of expiry of the Unless Order, and as a result had to deal with the Summons, he has to bear the consequence and cannot blame the 4^th defendant for imposing the 1 May 2025 deadline. 

61.  Moreover, the plaintiff has not explained (nor did his solicitors do so)  why it was decided to leave the positive reply to the 4^th defendant to the last minute.  One should not lose sight of the fact that it would not take long to send the document requested with a simple covering letter to the 4^th defendant’s solicitors.  There was no reason why (and none was suggested)  the matter could not be attended to promptly.  While the plaintiff has in his 12^th affirmation stated that he wanted to move the case expeditiously, as I see it, he was just paying lip service. 

62.  His counsel further suggested that the plaintiff had, out of his good faith for the purpose of saving time and costs, furnished the 4^th defendant with the plaintiff’s Report to Police “within the requested timeframe”.  I do not accept this submission.  If the plaintiff was really trying to save time and costs, he should have provided the 4^th defendant with the document as soon as possible, given it is his alleged stance that he has never disagreed to do so.

63.  Fifthly, the plaintiff alleged that the provision of his Report to Police had nothing to do with the 4^th defendant’s taking out of the Summons.  The timing of the relevant events is such that it is difficult for an objective bystander to accept such an allegation.  In any event, whether the plaintiff were going to disclose the document anyway irrespective of the service of the Summons is neither here nor there, since such an intention had never been communicated to the 4^th defendant before 30 April 2025.  In my view, in the circumstances of the case, a much more important factor which the Court should consider is whether it was reasonable for the 4^th defendant to take out the Summons in the afternoon on 30 April 2025, in light of the plaintiff’s various responses.  The answer must be “yes”.

64.  Sixthly, the plaintiff’s argument that the evidence against the 4^th defendant in this action is overwhelming is not understood.  So long as the action is still pending, the plaintiff would be subject to the same obligation of discovery, no matter whether his case is strong or weak.

65.  Seventhly, having considered the whole circumstances of the present case, I am of the view that the 4^th defendant’s withdrawal of the Summons should not be regarded as his acknowledgement of defeat or likely defeat in the discovery application.  The withdrawal was simply caused by the fact that the 4^th defendant had been able to achieve his purpose by other means.

66.  Looking at all the matters in the round, I am of the view that the Court should exercise its discretion on costs in favour of the 4^th defendant for it is just to do so.

ORDER

67.  By reasons of the aforesaid, I order the plaintiff to bear the 4^th defendant’s costs of the Summons, and the 4^th defendant’s own costs shall be taxed in accordance with Legal Aid Regulations.

COSTS

68.  I make a costs order nisi that the plaintiff shall bear the 4^th defendant’s costs of argument on the costs of the Summons. 

69.  The 4^th defendant’s costs of the Summons (as well as the costs of the arguments thereon)  shall be summarily assessed in lieu of taxation.  Unless any application for variation of the aforesaid costs order nisi is made within time, the 4^th defendant shall lodge and serve his statement of costs within 14 days after the expiry of the 14-day period referred to in the paragraph below.  The plaintiff shall lodge and serve his statement of objection within 7 days thereafter.  Summary assessment of the aforesaid costs will be conducted on paper (no matter whether any statement of objection is lodged by the plaintiff within time)  thereafter. The costs assessed shall be paid by the plaintiff within 14 days after assessment.

70.  The above order nisi shall become absolute in the absence of application to vary (which, if any, will be disposed of on paper)  within 14 days hereof.

Mr Mike Yeung, instructed by Hugo Leung & Lawyers, for the plaintiff

Tony Kan & Co. for the 4^th defendant

HCA 106/2022

[2024] HKCFI 2184

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 106 OF 2022

_________________

________________

________________

JUDGMENT

________________

Introduction

1.  This Judgment should be read together with the Judgment handed down on 22 August 2024 as [2024] HKCFI 2117.

2.  On 19 May 2023, the Plaintiff obtained an ex parte on notice an injunction from Wong J restraining the 2^nd Defendant and the 3^rd Defendant, the 4^th Defendant, the 8^th Defendant and the 9^th Defendant, the 10^th Defendant and the 11^th Defendant, and the 12^th Defendant and the 13^th Defendant[1] from removing from Hong Kong or disposing of his/her/its assets up to the value of HK$22,175,344 (“Injunction”) until the return day ie 25 May 2023.

3.  In accordance with normal practice, the Plaintiff issued a Summons dated 22 May 2023 (“Continuation Summons”) for continuation of the Injunction against those Defendants until final determination of the present Action.

4.  On 25 May 2023, by Order of DHCJ K Wong,

a.  The ex parte Injunction against the 2^nd, 3^rd, 8^th and 9^th Defendants, who were absent at the hearing, was to continue until final determination of the Action.

b.  The Continuation Summons as against the 4^th, 12^th and 13^th Defendants was by consent adjourned for argument while the Injunction against them as varied was continued until the determination of the Continuation Summons or further Order.

c.  The Injunction against the 10^th and 11^th Defendants was by consent discharged upon their undertaking in lieu. Similarly, the Continuation Summons as against them was adjourned for argument.

5.  This is the substantive hearing of the Continuation Summons as against the 10^th and 11^th Defendants. They oppose the Continuation Summons. They also requested the Continuation Summons against them be heard separately from that against the 4^th, 12^th and 13^th Defendants[2].

6.  In a nutshell, the Plaintiff claims he is the victim of an complex scam (“Scam”) involving multiple participants ie the Defendants disguised as a gold bar purchase and leaseback scheme (“Scheme”) in order to defraud him of HK$22,175,344 (“Sum”). The Sum represents the payment made by the Plaintiff purportedly for the purchase of 68 (9999) gold bars (“Gold Bars”).

7.  According to Mr Yeung, his cause of action principally lies in unlawful means conspiracy, the unlawful means being fraudulent misrepresentation, deceit, breach of trust, breach of fiduciary duties, knowing receipt and dishonest assistance.

8.  Evidentially, the Plaintiff’s case is supported by his 4^th affirmation (“Wu 4”) and 10^th affirmation (“Wu 10”). The 11^th Defendant filed a 10-page affirmation (“Gaw 1”) on 1 August 2023 for himself as well as for the 10^th Defendant in opposition.[3]

9.  Importantly, details of the Scam and the role of each of the Defendants, including themselves, are set out in the witness statements of the 5^th and 6^th Defendants dated 11 September 2022 which was filed in Court on 5 June 2023 and dated 31 January 2023 and filed in Court on 5 June 2023 respectively. They have indicated in their witness statements that they are prepared to testify in Court to verify their contents.

10.  To start with, the fraudulent misrepresentation which induced the Plaintiff to purchase the Gold Bars on terms of the Scheme was pleaded at paras 3 and 4 of the Statement of Claim in these terms.

“3. The Plaintiff was introduced by a friend, Ms. Wong Lai Mei, to the 1^st Defendant at the end of March 2019. He was not particularly keen on investing in gold bars. The 5^th Defendant (acting for himself and on behalf of the other Defendants) made the following representations to the Plaintiff in order to induce the Plaintiff to make payments for purchase of gold bars:

3.1. There existed a scheme (the “Purchase and Lease-Back Scheme”) where the 1^st Defendant would provide ‘butler’ service to customers who purchased gold bars from it. The purchased gold bars would be subsequently leased back to the 1^st Defendant with a 12-month fixed term for the designated purpose of allowing the 1^st Defendant to (i) make further onward lease to the 7^th Defendant for its business use; and (ii) receive the rental fee for such use from the 7^th Defendant. On top of that, the 7^th Defendant, as the only end-user of the purchased gold bars, would provide guarantee to the 1^st Defendant to secure its obligations owing to the 1^st Defendant. According to the foregoing process, the customers would receive a fixed monthly rental fee from the 1^st Defendant (“Purchase and Lease-Back Scheme Representation”).

3.2. The 7^th Defendant was a listed company in Hong Kong which operated the widely-known brand “3DG Jewellery (金至尊)” in Hong Kong, Macau and Mainland.

3.3. The customers would also have a put option to sell the gold bars back to the 1^st Defendant at the end of the lease term at same price that the gold bars were purchased.

4. A document titled “金尊1號-實物黃金條租賃保值增值計劃” containing the Purchase and Lease-Back Scheme Representation (the “Proposal”) was shown and passed to the Plaintiff to support the above representation.” (emphasis added)

The 10^th, 11^th, 12^th and 13^th Defendants

11.  The 10^th Defendant is a Hong Kong Company with an office in Hong Kong. It was and is Member No. 160 of the Chinese Gold & Silver Exchange (“CGSE”). The CGSE is the sole exchange in Hong Kong which trades physical gold and silver. The named Executive Manager of Solid Gold on the CGSE is the 11^th Defendant.

12.  The 11^th Defendant was at all material times its sole director and shareholder. In Gaw 1, he says he is a board member of the Gold and Silver Trading Exchange.

13.  The 12^th Defendant is a Hong Kong company whose office is next door to the 10^th Defendant’s on the same floor of the same building. According to the 13^th Defendant’s affirmation (“Mak 2”) dated 8 August 2024 in opposition to the Continuation Summons, the 12^th Defendant did not have any membership with CGSE and did not carry on any bullion trading business, nor did it handle bullion, except for 1 transaction, which is the present case involving the Plaintiff.

14.  The 13^th Defendant was at all material times the sole director and shareholder of the 12^th Defendant.

15.  According to Mak 2, although the 10^th and 12^th Defendants were 2 separate legal entities, they were under the same group of companies and the 11^th Defendant was the ultimate owner of both. This is corroborated by the 5^th Defendant in his witness statement, albeit denied by the 11^th Defendant.

16.  The 13^th Defendant claims that between 2011 to April 2018, she was employed by the 10^th Defendant as an accounting manager. Since March 2018, upon the 11^th Defendant’s instructions, she was reassigned to the 12^th Defendant and became its sole director and shareholder. Nevertheless, she continued to provide her services to the 10^th Defendant as an accounting manager under the name of the 12^th Defendant.

The other Defendants

17.  The 1^st Defendant was a Hong Kong company and purportedly engaged in gold supplies, sales and trading to customers, as well as provision of storage and lease services for gold owners. It was wound up upon the Plaintiff’s petition on 3 February 2021 in HCCW 327 of 2020. The Plaintiff commenced the present Action against it after obtaining leave to do so.

18.  The 2^nd Defendant was the ultimate controller and beneficial owner of the 1^st Defendant. According to the 6^th Defendant’s witness statement, he is an ordinary resident of the PRC.

19.  The 3^rd Defendant was the 1^st Defendant’s sole director and shareholder. According to the annual return of the 1^st Defendant, he is also an ordinary resident of the PRC.

20.  The 4^th Defendant was the Chief Executive Officer responsible for the 1^st Defendant’s business operation and management in Hong Kong. He was at all material times 1 of the 3 directing minds of the 1^st Defendant. The other 2 being the 2^nd and 3^rd Defendants who were residents of the PRC.

21.  The 5^th Defendant was the technical director and the 6^th Defendant was the assistant Customer Service Manager of the 1^st Defendant. Both of them were in one way or another involved in the scam and are able and willing to give details of the scam and the role of the Defendants in their witness statements filed in Court.

22.  The 7^th Defendant was a Hong Kong listed company principally engaged in retailing for gold and jewellery products under the brand “3DG Jewellery” in Hong Kong, Macau and the PRC.

23.  The 8^th Defendant was at the material time a substantial shareholder and director of the 7^th Defendant and its actual controller.

24.  The 9^th Defendant was at the material time an executive director of the 7^th Defendant and one of the principal assistants of the 8^th Defendant.

The Plaintiff’s overall case

25.  The Plaintiff’s detailed case is set out at length in Mr Yeung’s skeleton. Based on the Statement of Claim and the affirmation evidence of all parties and in particular the witness statements of the 5^th and 6^th Defendants, it seems to this court the Plaintiff’s case can be simplified as follows, with a focus on the roles of the 10^th and 11^th Defendants in the scam.

26.  At the direction of the 1^st Defendant, on 29 March 2019, the Plaintiff attended the office of the 10^th Defendant. The 5^th, 6^th and 13^th Defendants were present. The Plaintiff agreed to invest in the Gold Bars and paid the Sum by credit card to the 10^th Defendant. The 13^th Defendant “processed” the payment of the Sum on behalf of the 10^th Defendant.

27.  The 10^th Defendant was the supplier of the Gold Bars and the direct recipient of the Sum at its office. The Gold Bars were inspected by and “delivered” to the Plaintiff at the 10^th Defendant’s office on 4 April 2019.

28.  The Scheme in fact never existed:

a.  The 7^th Defendant in its Defence confirmed that on 5 June 2018, the 9^th Defendant had without authority from its Board, entered into a Strategic Cooperation Framework Agreement on Gold Leasing Business (“Framework Agreement”) with the 1^st Defendant and issued an announcement on the 7^th Defendant’s website about the Framework Agreement. The 7^th Defendant denied it had entered into any gold leasing agreement with the 1^st Defendant. Nor had it leased any gold bars from the 1^st Defendant. Further, it had never provided any guarantee in respect of the leasing gold bars by 1^st Defendant.

b.  The 5^th Defendant, in his witness statement, confirmed the Scheme was a scam devised by the 2^nd and 8^th Defendants. The 4^th Defendant was one of the principal assistants of 2^nd Defendant. He, among others, was well aware of the scam and had actively participated in it.

c.  There existed a WeChat group for the Scheme in as early as June 2018 (“WeChat Group”). The 2^nd, 3^rd, 4^th and 5^th Defendants were participants. From the WeChat Group, they all knew the involvement of the 8^th Defendant in the scam.

d.  In around October[4] 2018, the 3^rd Defendant conveyed in the WeChat Group that the 1^st Defendant would “borrow” gold bars from the 10^th Defendant for client inspection (‘亞Neil [D4]呢你就幫手誒同堅固 [D10]果邊呢同佢傾果個借金吖，借金吖，借金到時俾客戶可以驗金吖 ’).

e.  In his witness statement, the 5^th Defendant confirmed that when the 1^st Defendant had difficulty honoring its rental income payment or returning the gold bars to its other customers under the Scheme, in September 2019, the 4^th Defendant continued to persuade the 5^th Defendant to (i) carry on seeking subscriptions to the Scheme, and (ii) stop existing subscribers from redeeming, and instead to convince them to renew subscriptions.

f.  Under the Scheme and the Proposal, the Gold Bars were scheduled to be delivered to the Plaintiff on 4 April 2019 for leaseback to the 1^st Defendant for onward lease to the 7^th Defendant. As pleaded in paras 8 and 9 of the Statement of Claim:

“8. On around 4 April 2019, the Plaintiff was taken by the 5^th and 6^th Defendants to the office of the 10^th Defendant where he was shown gold bars which the 5^th, 6^th and 13^th Defendants (acting for themselves and on behalf of the other Defendants) represented to be the purportedly purchased Gold Bars for the lease arrangement under the Lease Agreement[5](“Gold Bars Collection Representation”). The Plaintiff also received an invoice and a packing list both dated 4 April 2019 and issued by the 10^th Defendant reflecting purported sale of the Gold Bars to the Plaintiff.

9. Induced by and in reliance of the Gold Bars Collection Representation, and acting on the faith and truth thereof, the Plaintiff on 4 April 2019 signed acknowledgment of receipt of the Gold Bars (in the quantity of 68) from the 10^th Defendant.” (emphasis added)

g.  But then the 1^st Defendant sold the Gold Bars to the 12^th Defendant on 2 April 2019. This is wholly inconsistent and incompatible with the Scheme.

29.  The 2^nd and 8^th Defendants were masterminds behind the scam.

30.  The 4^th Defendant would customarily act in accordance with 2^nd Defendant’s instructions. The 8^th Defendant was the substantial shareholder of the 7^th Defendant and has de facto control over it. The 9^th Defendant, the executive director and CEO of the 7^th Defendant and one of the 8^th Defendant’s representatives in the 7^th Defendant, would act in accordance with the 8^th Defendant’s instructions.

31.  The Purchase and Lease-Back Scheme Representation and the Gold Bars Collection Representation were made by the 5^th, 6^th and 13^th Defendants, the 13 Defendant being a representative of the 10^th Defendant and the sole shareholder and director of the 12^th Defendant.

a.  They were the persons who attended to the Plaintiff when he (i) agreed to purchase and paid for the Gold Bars on 29 March 2019 and (ii) inspected and “collected” the Gold Bars on 4 April 2019. On both occasions, the above took place at the 10^th Defendant’s office.

b.  The 5^th Defendant knew the 1^st Defendant borrowed the Gold Bars from the 10^th Defendant for the Plaintiff’s inspection only, thus the falsity of the Scheme.

c.  The 6^th Defendant, in his witness statement, confirmed he realized shortly after he had joined the 1^st Defendant in August 2018 that gold bars purportedly purchased by customers from the 1^st Defendant under the Scheme would in fact be returned to the 13^th Defendant after presenting to customers for inspection, after which they would be purportedly sold by the 1^st Defendant to the 12^th Defendant or its affiliate, Well Sky International (HK) Limited (佳天國際（香港）有限公司) (“Well Sky”). Well Sky’s sole shareholder and director was also the 13^th Defendant^. The 10^th and 12^th Defendants would receive “service fee” as reward.

d.  The 13^th Defendant confirmed in her affirmation she knew the Plaintiff bought the Gold Bars, scheduled to be delivered on 4 April 2019, for leaseback to the 1^st Defendant. She was actually in the office of the 10^th Defendant on 4 April 2019 when the Plaintiff went there to inspect and “collect” the Gold Bars. Yet, she knew all along that the 1^st Defendant intended to sell the Gold Bars to the 12^th Defendant. She also knew the 12^th Defendant had placed a purchase order for the Gold Bars for the consideration of HK$21,358,859.26 and had paid for them. Out of that part of the purchase price ie HK$11,739,888, the 12^th Defendant paid HK$8,832,912 to the 1^st Defendant and HK$2,906,977 to the 3^rd Defendant on 2 and 3 April 2019 respectively. The balance of the purchase price was paid to the 1^st Defendant on 4 April 2019.

e.  The 13^th Defendant admitted in her affirmation that she provided accounting services to the 10^th Defendant under the name of the 12^th Defendant. As such, she would be in control or at least had access to the accounting records of the 10^th Defendant.

f.  The 13^th Defendant knew the Scheme to be non-existent. She nevertheless endorsed the presentation to the Plaintiff the Gold Bars for inspection and “delivery” on 4 April 2019.

g.  The 11^th Defendant (the sole director and shareholder of the 10^th Defendant) stated in his affirmation that (i) the Plaintiff was introduced to the 10^th Defendant by the 13^th Defendant for gold trading; (ii) the Plaintiff’s purchase of the Gold Bars was handled by the 13^th Defendant.

32.  The 10^th Defendant and the 12^th Defendant rendered assistance in (i) facilitating to the Plaintiff the false picture of “delivery” of the Gold Bars to the Plaintiff and then the 1^st Defendant; and (ii) conjuring up a transaction to conceal the wiring away of the Sum supposedly paid to the 10^th Defendant ie on 2 April 2019, the 1^st Defendant sold the Gold Bars to the 12^th Defendant for HK$21,358,859.26, of which HK$8,832,912 and HK$2,906,977 and were transferred on 2 and 3 April 2019 to the 1^st and 3^rd Defendants respectively, with the balance transferred to the 1^st Defendant on 4 April 2019 and by a credit note on 3 June 2019.

33.  The 4^th Defendant was the person who signed the authorization letter dated 2 April 2019 to direct the 12^th Defendant to transfer part of the Sum ie HK$8,832,912 and HK$2,906,977 to the 1^st and 3^rd Defendants.

34.  The Plaintiff’s case is that the purchase price paid by the 12^th Defendant to the 1^st Defendant came from the Sum and the transaction was to facilitate the dissipation of the Sum.

35.  In the process, the 10^th and 12^th Defendants earned around HK$816,484.74, being the difference between the Sum and HK$21,358,859.26. Such rewards represented the “benefits” for their participation in the Scheme.

36.  The 13^th Defendant must have been a part of the Scam. She knew that the Plaintiff bought the Gold Bars from the 1^st Defendant for leaseback to the 1^st Defendant. On 2 April 2019, she also procured the purchase of the Gold Bars by the 12^th Defendant from the 1^st Defendant. She prayed in aid the Lease Agreement[6] in order to justify her claim that the purchase was bona fide, which means she had seen a copy of the Lease Agreement. When she saw the Plaintiff attended the 10^th Defendant’s office to inspect and accept “delivery” of the Gold Bars on 4 April 2019, she did not raise any enquiry with the Plaintiff. Instead, she procured the 10^th Defendant to issue a receipt to the Plaintiff acknowledging his “collection” of the Gold Bars.

37.  The 13^th Defendant confirmed in her affirmation that the sale of the Gold Bars from the 1^st Defendant to the 12^th Defendant was explained to and endorsed by the 11^th Defendant. The 11^th Defendant must have been a part of the Scam.

38.  The 1^st Defendant defaulted in the payment of the rental fees in breach of the Lease Agreement since October 2019, in respect of which the Plaintiff had obtained default judgment against the 1^st Defendant and ultimately led to its winding up in February 2021.

39.  The Plaintiff progressively uncovered the Scam and officially made a report to the police in April 2020.

40.  The end result of the Scam is that the Plaintiff has lost the Sum and the Gold Bars, the rental income since October 2019 and the profits he would have made had the Gold Bars been returned to him after the 12-month lease period[7].

Deliberation

41.  The applicable legal principles are trite. A plaintiff seeking a domestic mareva injunction must satisfy the Court that:

a.  it has a good arguable case;

b.  there is a real risk of dissipation of assets, or removal of assets from the jurisdiction, which would render the plaintiff’s judgment of no effect;

c.  the balance of convenience is in favour of grant.

42.  The threshold of “a good arguable case” is higher than “a serious issue to be tried”. But the applicant need not go so far as to persuade the Court that it is likely to win but it needs to show a case which is more than barely capable of serious argument, albeit not necessarily one that the judge believes to have a better than 50% chance of success.

43.  Where a party opposes the continuation of the injunction at the interlocutory stage, the burden is on him to put up a defence and evidence of sufficient cogency so as to water down the merits of the applicant’s claim to an extent that it no longer amounts to a good arguable case: Toyota Boshoku Europe N. V. v Kingsville (HK) Enterprises Limited & Others[2023] HKCFI 1393 at [11] per DHCJ Le Pichon.

44.  The court is not to resolve disputes of facts and difficult points of law on an interlocutory basis: Toyota Boshoku Europe N. V. at [12].

45.  The existence of a “good arguable defence” does not necessarily negate a “good arguable case”. It is entirely possible to have, at the interlocutory stage, both the claim and the defence being more than barely capable of serious argument and not necessarily having a better than 50% chance of success. There is no requirement that the applicant of a mareva injunction must show that he has a “much better” case or argument than the opposing party: Toyota Boshoku Europe N. V. at [13] – [14].

Good arguable case vs the 10^th and 11^th Defendants

46.  As far as good arguable case is concerned, Mr Yeung has succinctly set it out in his executive summary.

47.  In gist, the 10^th and 11^th Defendants (as the sole shareholder and director of the 10^th Defendant), knowingly assisted in the Scam:

a.  the 10^th Defendant “lent” the Gold Bars to the 1^st Defendant for inspection by the Plaintiff to conceal the falsity of the Scheme and to complete the Scam. It participated in the Dissipation Arrangement[8] by delivering the Gold Bars to the 1^st Defendant for its sale to the 12^th Defendant (confirmed by the 13^th Defendant in Mak 2 as a sister company of the 10^th Defendant) on 2 April 2019 which is inconsistent and incompatible with the Scheme. The HK$21,358,859.26 out of the Sum were wired back to the 1^st Defendant and the 3^rd Defendant. The 10^th and 12^th Defendants received reward for their participation.

b.  According to Mak 2, the 11^th Defendant knew and endorsed the 10^th Defendant’s participation in the Gold Bars lending arrangement and the Dissipation Arrangement. The 13^th Defendant confirms that the 11^th Defendant was explained about and agreed to the 12^th Defendant’s purchase from the 1^st Defendant of the Plaintiff’s Gold Bars.

48.  In the 10^th and 11^th Defendants’ Defence, their case is one of bare denial.

49.  In Gaw 1, apart from denial of knowledge of the Scam, not knowing the Plaintiff personally or having any association with the Defendants save and except the 12^th and 13^th Defendants, their case is that the 10^th Defendant had sold and delivered the Gold Bars to the Plaintiff and received the Sum, period. This is what the 11^th Defendant said in Gaw 1:

“The Transaction with the Plaintiff

14. Besides providing accounting and management services to Solid Gold, Ms. Mak sometimes would introduce clients to Solid Gold for gold trading.

15. The Plaintiff in this case is one such client introduced by Ms. Mak. I do not know the Plaintiff personally and I have not met him before. In so far as I know, before this case, Solid Gold had no business dealings with the Plaintiff.

16. As for the other defendants in this case, other than Ms. Mak and HK Fortune, I do not know them either.

17. As for the relationship and interactions between the Plaintiff and other defendants in this case, I am completely unaware and have not been involved in any such matters, if there were any.

18. In the present case, Solid Gold sold a batch of approximately 68KGS of gold (Au Gold) to the Plaintiff on or about 29 March 2019. According to the documents of Solid Gold, the plaintiff paid a sum of HKD $23,326,336 to Solid Gold through Union Pay for the purchase of 68KGS of gold bars.

19. Since the Plaintiff was introduced by Ms. Mak, the transaction was handled through her, and I did not have direct contact with the Plaintiff during this transaction. There is now produced and shown to me exhibit marked “GA-2”, copies of the payment records and the acknowledgment of receipt duly signed by, whom I verily believe, the Plaintiff.

20. I categorically deny any involvement or participation, whether by myself and/or by Solid Gold, in the alleged Gold Bars Collection Representation as suggested by the Plaintiff.

21. I crave leave to refer to paragraph 35 of [Wu 4]. I have no knowledge of the alleged Dubious Arrangement[9]. In so far as I know, the involvement of Solid Gold in relation to the Plaintiff in the present case is the sale of the above-mentioned gold bars to the Plaintiff. Other than the said sale of the gold bars to the Plaintiff as introduced by Ms. Mak, Solid Gold and I have never participated and/or involved in any of the alleged dealings and/or representations, which are denied, as suggested by the Plaintiff.

…

27. …The Gold Bars were duly delivered to and received by the Plaintiff on 4 April 2019. In fact, in this transaction, other than selling the Gold Bars to the Plaintiff, neither I nor Solid Gold authorized or participated in any of the matters mentioned by the Plaintiff in his Statement of Claim.” (emphasis added)

50.  The evidence of the 5^th Defendant is particularly damning. In his witness statement filed in Court, he said this of the 10^th and 11^th Defendants:

“10. 第十被告堅固金業是向原告吳先生出售黃金的直接售賣人，是收取原告支付黃金購買款的直接收款人，是福臨集團共享營業和註冊地址的關聯公司，是嘉柏倫控股提供「租黃金 “道具” 」、虛假黃金買賣、虛假驗收黃金和幫助資金收取和轉移資金的黃金供應方和執行人，是幫助嘉柏倫控股向包括原告吳先生在內的其他受害人完成虛假 “購買黃金”和 “驗金”欺詐的黃金供應方。

11. 第十一被告吳金奇先生是堅固金業和福臨集團的實際控制人和投資人、堅固金業的執行董事。

12. 第十二被告福臨集團與堅固金業是關聯公司，辦公場所和職員的共享者。”

51.  To conclude, for the above reasons, this court is satisfied that there is a good and arguable case against the 10^th and 11^th Defendants.

Real Risk of Dissipation

52.  The approach on assessment of risk of dissipation in the context of an application for a mareva injunction was examined by the Court of Appeal in Convoy Collateral Limited v Cho Kwai Chee[2020] HKCA 537. At [35], Lam VP (giving judgment of the Court of Appeal) quoted with approval the judgment of Haddon-Cave LJ in Lakatamia Shipping Co Ltd v Toshiko Morimoto [2019] EWCA Civ 2203 at [34] where his Lordship adopted (with a slight modification) the principles set out by Popplewell J (as he then was) earlier in Fundo Soberano de Angola v dos Santos [2018] EWHC 2199 (Comm) as follows:

“(1) The claimant must show a real risk, judged objectively, that a future judgment would not be met because of an unjustified dissipation of assets. In this context dissipation means putting the assets out of reach of a judgment whether by concealment or transfer.

(2) The risk of dissipation must be established by solid evidence; mere inference or generalised assertion is not sufficient.

(3) The risk of dissipation must be established separately against each respondent.

(4) It is not enough to establish a sufficient risk of dissipation merely to establish a good arguable case that the defendant has been guilty of dishonesty; it is necessary to scrutinise the evidence to see whether the dishonesty in question points to the conclusion that assets may be dissipated. It is also necessary to take account of whether there appear at the interlocutory stage to be properly arguable answers to the allegations of dishonesty.

(5) The respondent's former use of offshore structures is relevant but does not itself equate to a risk of dissipation. Businesses and individuals often use offshore structures as part of the normal and legitimate way in which they deal with their assets. Such legitimate reasons may properly include tax planning, privacy and the use of limited liability structures.

(6) What must be threatened is unjustified dissipation. The purpose of a [World Freezing Order] is not to provide the claimant with security; it is to restrain a defendant from evading justice by disposing of, or concealing, assets otherwise than in the normal course of business in a way which will have the effect of making it judgment proof. A WFO is not intended to stop a corporate defendant from dealing with its assets in the normal course of its business. Similarly, it is not intended to constrain an individual defendant from conducting his personal affairs in the way he has always conducted them, providing of course that such conduct is legitimate. If the defendant is not threatening to change the existing way of handling their assets, it will not be sufficient to show that such continued conduct would prejudice the claimant's ability to enforce a judgment. That would be contrary to the purpose of the WFO jurisdiction because it would require defendants to change their legitimate behaviour in order to provide preferential security for the claim which the claimant would not otherwise enjoy.

(7) Each case is fact specific and relevant factors must be looked at cumulatively.”

53.  Lam VP went on to state that subject to certain elaborations, the aforesaid principles are applicable in Hong Kong:

“37. On the onus borne by a party seeking such draconian relief, whilst there are no doubt respectable authorities referring to the need for a solid evidential basis to establish a real risk of dissipation …we prefer to describe the burden as solid basis for concluding that there is such a real risk.

…

40. Since the assessment is in respect of the risk of dissipation as opposed to the fact of actual dissipation, the exercise necessarily involves an evaluative and predictive judgment. Thus, the evidential burden can be satisfied by drawing proper inferences from a holistic consideration of all the circumstantial materials that are indicative of risk, including matters which point against such risk…

…

42. There are cases where a good arguable case on the underlying substantive claims could also be regarded as supporting a case of real risk of dissipation. As highlighted in proposition (4) in Popplewell J’s summary, the court needs to scrutinise with care whether the allegations in respect of the claims justify the inference of likelihood of dissipation.

43. Notwithstanding the broad statement of Godfrey J in Honsaico Trading Ltd v Hong Yiah Seng Co Ltd [1990] 1 HKLRD 235, Hong Kong judges have been vigilant in scrutinizing the allegations in a claim with care before drawing the inference of risk of dissipation. Chu J (as she then was) in Hornor Resources v Savvy Resources [2010] 4 HKC 50 cautioned that the court must examine with care allegations of dishonesty before inferring therefrom a real risk of dissipation.

…

47. Wrongdoing relevant to the issue of dissipation can be some dishonest or wrongful acts which were not themselves acts of dissipation. In VTB Capital v Nutritek International [2012] 2 CLC 431, the alleged wrong committed by the defendant was the procurement of a loan from CCL by fraudulent misrepresentation as to the value of the assets of the borrower and the disappearance of the proceeds in a complex web of corporate entities. Lloyd LJ said at [177]:

‘… However, where (as here) the dishonesty alleged is at the heart of the claim against the relevant defendant, the court may well find itself able to draw the inference that the making out, to the necessary standard, of that case against the defendant also establishes sufficiently the risk of dissipation of assets.’

…

49. Another illustration is the judgment of Saville LJ in Grupo Torras SA v Al-Sabah (21 March 1997) which was cited in the judgment of Flaux J in Madoff Securities International Ltd v Raven [2011] EWHC 3102 (Comm) . The defendant in that case was an investment adviser in Switzerland. The judge found there was a good arguable case that he was implicated in a scheme of fraud and the nature of the allegation was such that there was a strong fear of dissipation….” (emphasis added)

54.  At [53], Lam VP summed up the position as follows:

“53. To sum up, the approach set out by Haddon-Cave LJ in Lakatamia Shipping Co Ltd v Toshiko Morimoto, supra at [51] provides good guidance. The ultimate question is whether CCL succeeds in showing objectively there is a solid basis for concluding that there is a real risk of unjustified dissipation of assets by a defendant. That question is to be answered by examining the evidence holistically. Evidence of dishonest and fraudulent conducts or other serious wrongdoings which form the basis of the claims, and which reflect adversely on the integrity of the defendant could point powerfully towards an inference of such risk.” (emphasis added)

55.  At [54], Lam VP also pointed out that evidence of delay is relevant in the assessment of risk of dissipation.

“54.…Delay after a defendant gained knowledge of a plaintiff’s claim can militate against the risk of dissipation as such defendant would already have the opportunity to dispose of assets should he be inclined to do so.”

56.  In Mr Yeung’s skeleton, he pointed to (i) the clear involvement of the 10^th and 11^th Defendants, and their association with the 12^th and 13^th Defendants in the Dissipation Arrangement[10], being part and parcel of the complex Scheme to defraud the Plaintiff, as a strong indicator of the serious dishonesty on their part individually, (ii) the hopelessness of their bare denial demonstrated the continuation of their serious dishonesty and fraudulent conduct. In this regard, the 11^th Defendant’s disclaimer of the association between the 10^th and 12^th Defendants notwithstanding what was stated in Mak 2 is an added consideration.

57.  Mr Yeung also submits in his skeleton that the Plaintiff has been trying to trace the whereabouts of the Sum from the 10^th Defendant but in vain. Whereas it was quite clear that the 10^th Defendant received the Sum, confirmed by the 11^th Defendant, the Plaintiff resorted to interrogatories against the 10^th and 11^th Defendants dated 18 December 2023 which were not answered at the time. The Plaintiff had complained to the solicitors of the 10^th and 11^th Defendants about this by letter dated 23 January 2024. It is only on 11 July 2024, the solicitors of the 10^th and 11^th Defendants purported to answer the interrogatories by the 2^nd affirmation of the 11^th Defendant (“Gaw 2”). In para 2 of Gaw 2, he admitted that the Sum had been remitted to the 10^th Defendant’s bank accounts at the Bank of Communication and HSBC and then to the 12^th Defendant’s bank accounts at the DBS Bank and the Bank of Communication. Gaw 2 also confirmed the transfers were made on 2 and 3 April 2024.

58.  Most important of all, where are the Gold Bars which the 10^th Defendant claims had sold and delivered to the Plaintiff while the 13^th Defendant claimed the 1^st Defendant had sold them to the 12^th Defendant? Mr Yeung told this court he did not know.

59.  In Mak 2, at para 71, she suggested that the Gold Bars belonged beneficially to the 12^th Defendant and thus were in the possession of the 12^th Defendant at the material time. However, In Mak 1, she claimed the 12^th Defendant did not have any asset of value of more than HK$10,000. As stated in a letter from the Hong Kong Police to the Legal Aid Department dated 30 August 2023, the Police had not seized any of the Gold Bars. So the question is: where are the Gold Bars now?

60.  In Mr Ng’s skeleton, his submission on no real risk of dissipation is, with respect, perfunctory.

61.  His main point is about the Plaintiff’s delay in applying for the Injunction after issuing the Writ in the present Action in January 2022. Meanwhile, the 10^th Defendant has been conducting business after the incident in April 2019.

62.  On the question of delay, it is true that while the present Action was commenced in January 2022, the application for the Injunction was only made in May 2023. The explanation has been set out in Wu 4 at paras 55 to 59 and further explained in Mr Yeung’s skeleton.

63.  In gist, Mr Yeung submits that (i) the Plaintiff all along considered that there existed a real risk of asset dissipation by the Defendants[11], (ii) with the real risk of asset dissipation in mind, the Plaintiff’s (mis)understanding was that his interest was adequately protected in the interim for so long as the police investigation continued, (iii) in May 2023, the Plaintiff learnt from the police that investigation of his complaint might conclude without any charges against the arrested persons, which would entail the end of the interim protection afforded by the police and which would leave the issue of real risk of asset dissipation unaddressed, (iv) as the police only referred to the freezing of the 10^th Defendant’s bank account[12] during the exchanges with the Plaintiff’s legal advisers, the Plaintiff became uncertain as to whether the bank accounts of those Defendants other than the 10^th Defendant had in fact been frozen – the Plaintiff was unable to obtain further information from the police, and was advised to resort to the Court for interim protection.

64.  This court accepts the Plaintiff’s explanation of the delay as inherently probable and would not count it against him on real risk of dissipation. This is a Scam. The Plaintiff is not expected to know the details of it.

65.  To conclude, taking a holistic of the evidence as a whole, this court is satisfied that for the present purpose, there is a real risk of dissipation in relation to the 10^th and 11^th Defendants.

Balance of convenience

66.  Ultimately, at the interlocutory injunction stage, “the principal concern of the court is that it might make a wrong decision in the sense that after trial, the party to whom an interlocutory injunction has been granted may lose or the party who has been refused one, may win. The court will therefore take whichever course appears to carry the lower risk of injustice if it should turn out that it is wrong. This ‘fundamental’ principle is the source of the guidelines that have evolved for the determination of interlocutory injunctions”: Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR, 670, 680D-G (per Hoffmann J as he then was); Music Advance Ltd. v Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD 1041 at [12 (d)] (per Ma J as he then was).

67.  On the evidence before this court, it seems the course which carries the lower risk of injustice if it should turn out that this court is wrong is to continue instead of discharge the Injunction and this court shall so rule.

Material non disclosure

68.  The 10^th and 11^th Defendants’ complaint is that the Plaintiff had intentionally not drawn the Court’s attention to the 2^nd Clause 7.2 of the Lease Agreement. Mr Ng submits that there is no doubt that the said clause would significantly weaken, if not destroy, the Plaintiff’s alleged misrepresentations of his case. It is difficult to see how the Plaintiff would have believed and/or been induced by the alleged misrepresentations, if Cl.7.2 clearly stipulated that the 1^st Defendant had the right to sell the Gold Bars.

69.  It is really the 2^nd Clause 7.2 which gave the 1^st Defendant full authority to sell the Plaintiff’s Gold Bars and was completely inconsistent and incompatible with the Scheme. However, a plaintiff is only obliged to disclose matters which are or may be adverse to his case and the test of materiality is an objective one: Gee Commercial Injunctions 7^th Ed. para 9-003. This court’s view is that objectively, the existence of the 2^nd Clause 7.2 only strengthens the culpability of the 1^st Defendant and its sale of the Gold Bars to the 12^th Defendant, as well as the 10^th and 11^th Defendants’ acquiescence of it. In other words, it is not and may not be adverse to the Plaintiff’s case.

70.  The fact of the matter is that the 10^th and 11^th Defendants did not apply to set aside the Injunction on the ground of material non-disclosure on the return day[13]. If the point is so straightforward, it is hard to imagine they would not seek to discharge the Injunction on this ground alone. This fact points to their lack of conviction of their material non-disclosure ground.

71.  In any event, given the seriousness of the Scam and the participation of the 10^th and 11^th Defendants in it, this court is not minded to set aside the Injunction on this ground, and even assuming the Injunction is to be set aside, this court has no hesitation in re-granting the Injunction on the same terms.

Disposition and costs order nisi

72.  For all the above reasons, this court is prepared to and shall order that the Injunction be continued against the 10^th and 11^th Defendants until the final determination of the present Action or further Order.

73.  There shall be a cost Order nisi that costs of the Continuation Summons be the Plaintiff’s costs in the cause, to be taxed if not agreed, with certificate for counsel.

Mr Mike Yeung, instructed by M/s Hugo Leung & Lawyers, for the Plaintiff

Mr Tony Ng, instructed by M/s Tang, Wong & Cheung, for the 10^th and 11^th Defendants

HCA 106/2022

[2024] HKCFI 2117

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 106 OF 2022

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J U D G M E N T

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Introduction

1.  On 19 May 2023, the Plaintiff obtained an ex parte on notice an injunction from Wong J restraining the 2^nd Defendant and the 3^rd Defendant, the 4^th Defendant, the 8^th Defendant and the 9^th Defendant, the 10^th Defendant and the 11^th Defendant, and the 12^th Defendant and the 13^th Defendant[1] from removing from Hong Kong or disposing of his/her/its assets up to the value of HK$22,175,344 (“Injunction”) until the return day ie 25 May 2023. In accordance with normal practice, the Plaintiff issued a Summons dated 22 May 2023 (“Continuation Summons”) for continuation of the Injunction against those Defendants until final determination of the present Action.

2.  On 25 May 2023, by Order of DHCJ K Wong,

a.  The ex parte Injunction against the 2^nd, 3^rd, 8^th and 9^th Defendants, who were absent at the hearing, was to continue until final determination of the Action.

b.  The Continuation Summons as against the 4^th, 12^th and 13^th Defendants was by consent adjourned for argument while the Injunction against them as varied was continued until the determination of the Continuation Summons or further Order.

c.  The Injunction against the 10^th and 11^th Defendants was by consent discharged upon their undertaking in lieu. Similarly, the Continuation Summons as against them was adjourned for argument.

3.  This is the substantive hearing of

a.  The Continuation Summons as against the 4^th, 12^th and 13^th Defendants [2].

b.  The 12^th and 13^th Defendants’ Summons dated 10 May 2024 (“Discharge Summons”) for discharge of the Injunction; alternatively, fortification of the Plaintiff’s undertaking in damages.

4.  In a nutshell, the Plaintiff claims he is the victim of an complex scam (“Scam”) involving multiple participants ie the Defendants disguised as a gold bar purchase and leaseback scheme (“Scheme”) in order to defraud him of HK$22,175,344 (“Sum”). The Sum represents the payment made by the Plaintiff purportedly for the purchase of 68 (9999) gold bars (“Gold Bars”).

5.  According to Mr Yeung, his cause of action principally lies in unlawful means conspiracy, the unlawful means being fraudulent misrepresentation, deceit, breach of trust, breach of fiduciary duties, knowing receipt and dishonest assistance.

6.  Evidentially, the Plaintiff’s case is supported by his 4^th affirmation (“Wu 4”) and 10^th affirmation (“Wu 10”). Since the Continuation Application and the Discharge Application are two sides of the same coin, the 2 Wu affirmations both support the Continuation Application and oppose the Discharge Application.

7.  Importantly, details of the scam and the role of each of the Defendants, including themselves, are set out in the witness statements of the 5^th and 6^th Defendants dated 11 September 2022 which was filed in Court on 5 June 2023 and dated 31 January 2023 and filed in Court on 5 June 2023 respectively. They have indicated in their witness statements that they are prepared to testify in Court to verify their contents.

8.  To start with, the fraudulent misrepresentation which induced the Plaintiff to purchase the Gold Bars on terms of the Scheme was pleaded at paras 3 and 4 of the Statement of Claim in these terms.

“3. The Plaintiff was introduced by a friend, Ms. Wong Lai Mei, to the 1^st Defendant at the end of March 2019. He was not particularly keen on investing in gold bars. The 5^th Defendant (acting for himself and on behalf of the other Defendants) made the following representations to the Plaintiff in order to induce the Plaintiff to make payments for purchase of gold bars:

3.1. There existed a scheme (the “Purchase and Lease-Back Scheme”) where the 1^st Defendant would provide ‘butler’ service to customers who purchased gold bars from it. The purchased gold bars would be subsequently leased back to the 1^st Defendant with a 12-month fixed term for the designated purpose of allowing the 1^st Defendant to (i) make further onward lease to the 7^th Defendant for its business use; and (ii) receive the rental fee for such use from the 7^th Defendant. On top of that, the 7^th Defendant, as the only end-user of the purchased gold bars, would provide guarantee to the 1^st Defendant to secure its obligations owing to the 1^st Defendant. According to the foregoing process, the customers would receive a fixed monthly rental fee from the 1^st Defendant (“Purchase and Lease-Back Scheme Representation”).

3.2. The 7^th Defendant was a listed company in Hong Kong which operated the widely-known brand “3DG Jewellery (金至尊)” in Hong Kong, Macau and Mainland.

3.3. The customers would also have a put option to sell the gold bars back to the 1^st Defendant at the end of the lease term at same price that the gold bars were purchased.

4. A document titled “金尊1號-實物黃金條租賃保值增值計劃” containing the Purchase and Lease-Back Scheme Representation (the “Proposal”) was shown and passed to the Plaintiff to support the above representation.” (emphasis added)

The Opposing Defendants

9.  The 4^th Defendant was the Chief Executive Officer responsible for the 1^st Defendant’s business operation and management in Hong Kong. He was at all material times 1 of the 3 directing minds of the 1^st Defendant. The other 2 being the 2^nd and 3^rd Defendants who were residents of the PRC.

10.  The 10^th Defendant is a Hong Kong Company with an office in Hong Kong. It was and is Member No. 160 of the Chinese Gold & Silver Exchange (“CGSE”). The CGSE is the sole exchange in Hong Kong which trades physical gold and silver. The named Executive Manager of Solid Gold on the CGSE is the 11^th Defendant.

11.  The 11^th Defendant was at all material times its sole director and shareholder.

12.  The 12^th Defendant is a Hong Kong company whose office is next door to the 10^th Defendant’s on the same floor of the same building. According to the 13^th Defendant’s affirmation (“Mak 2”) dated 8 August 2024 in opposition to the Continuation Summons and in support of the Discharge Summons, the 12^th Defendant did not have any membership with CGSE and did not carry on any bullion trading business, nor did it handle bullion, except for 1 transaction, which is the present case involving the Plaintiff.

13.  The 13^th Defendant was at all material times the sole director and shareholder of the 12^th Defendant.

14.  Also according to Mak 2, although the 10^th and 12^th Defendants were 2 separate legal entities, they were under the same group of companies and the 11^th Defendant was the ultimate owner of both. This is corroborated by the 5^th Defendant in his witness statement albeit denied by the 11^th Defendant.

15.  The 13^th Defendant claims that between 2011 to April 2018, she was employed by the 10^th Defendant as an accounting manager. Since March 2018, upon the 11^th Defendant’s instructions, she was reassigned to the 12^th Defendant and became its sole director and shareholder. Nevertheless, she continued to provide her services to the 10^th Defendant as an accounting manager under the name of the 12^th Defendant.

The other Defendants

16.  The 1^st Defendant was a Hong Kong company and purportedly engaged in gold supplies, sales and trading to customers, as well as provision of storage and lease services for gold owners. It was wound up upon the Plaintiff’s petition on 3 February 2021 in HCCW327 of 2020. The Plaintiff commenced the present Action against it after obtaining leave to do so.

17.  The 2^nd Defendant was the ultimate controller and beneficial owner of the 1^st Defendant. According to the 6^th Defendant’s witness statement, he is an ordinary resident of the PRC.

18.  The 3^rd Defendant was the 1^st Defendant’s sole director and shareholder. According to the annual return of the 1dt Defendant, he is also an ordinary resident of the PRC.

19.  The 5^th Defendant was the technical director and the 6^th Defendant was the assistant Customer Service Manager of the 1^st Defendant. Both of them were in one way or another involved in the scam and are able and willing to give details of the scam and the role of the Defendants in their witness statements filed in Court.

20.  The 7^th Defendant was a Hong Kong listed company principally engaged in retailing for gold and jewellery products under the brand “3DG Jewellery” in Hong Kong, Macau and the PRC.

21.  The 8^th Defendant was at the material time a substantial shareholder and director of the 7^th Defendant and its actual controller.

22.  The 9^th Defendant was at the material time an executive director of the 7^th Defendant and one of the principal assistants of the 8^th Defendant.

The Plaintiff’s overall case

23.  The Plaintiff’s detailed case is set out at length in Mr Yeung’s skeleton. Based on the Statement of Claim and the affirmation evidence of all parties and in particular the witness statements of the 5^th and 6^th Defendants, it seems to this court the Plaintiff’s case can be simplified as follows, with a focus on the roles of the 4^th, 12^th and 13^th Defendants in the scam.

24.  At the direction of the 1^st Defendant, on 29 March 2019, the Plaintiff attended the office of the 10^th Defendant. The 5^th, 6^th and 13^th Defendants were present. The Plaintiff agreed to invest in the Gold Bars and paid the Sum by credit card to the 10^th Defendant. The 13^th Defendant “processed” the payment of the Sum on behalf of the 10^th Defendant.

25.  The Scheme in fact never existed:

a.  The 7^th Defendant in its Defence confirmed that on 5 June 2018, the 9^th Defendant had without authority from its Board, entered into a Strategic Cooperation Framework Agreement on Gold Leasing Business (“Framework Agreement”) with the 1^st Defendant and issued an announcement on the 7^th Defendant’s website about the Framework Agreement. The 7^th Defendant denied it had entered into any gold leasing agreement with the 1^st Defendant. Nor had it leased any gold bars from the 1^st Defendant. Further, it had never provided any guarantee in respect of the leasing gold bars by 1^st Defendant.

b.  The 5^th Defendant, in his witness statement, confirmed the Scheme was a scam devised by the 2^nd and 8^th Defendants. The 4^th Defendant was one of the principal assistants of 2^nd Defendant. He, among others, was well aware of the scam and had actively participated in it.

c.  There existed a WeChat group for the Scheme in as early as June 2018 (“WeChat Group”). The 2^nd, 3^rd, 4^th and 5^th Defendants were participants. From the WeChat Group, they all knew the involvement of the 8^th Defendant in the scam.

d.  In around October[3] 2018, the 3^rd Defendant conveyed in the WeChat Group that the 1^st Defendant would “borrow” gold bars from the 10^th Defendant for client inspection (‘亞Neil [D4]呢你就幫手誒同堅固 [D10]果邊呢同佢傾果個借金吖，借金吖，借金到時俾客戶可以驗金吖 ’).

e.  In his witness statement, the 5^th Defendant confirmed that when the 1^st Defendant had difficulty honoring its rental income payment or returning the gold bars to its other customers under the Scheme, in September 2019, the 4^th Defendant continued to persuade the 5^th Defendant to (i) carry on seeking subscriptions to the Scheme, and (ii) stop existing subscribers from redeeming, and instead to convince them to renew subscriptions.

f.  Under the Scheme and the Proposal, the Gold Bars were scheduled to be delivered to the Plaintiff on 4 April 2019 for leaseback to the 1^st Defendant for onward lease to the 7^th Defendant. As pleaded in paras 8 and 9 of the Statement of Claim:

“8. On around 4 April 2019, the Plaintiff was taken by the 5^th and 6^th Defendants to the office of the 10^th Defendant where he was shown gold bars which the 5^th, 6^th and 13^th Defendants (acting for themselves and on behalf of the other Defendants) represented to be the purportedly purchased Gold Bars for the lease arrangement under the Lease Agreement[4](“Gold Bars Collection Representation”). The Plaintiff also received an invoice and a packing list both dated 4 April 2019 and issued by the 10^th Defendant reflecting purported sale of the Gold Bars to the Plaintiff.

9.  Induced by and in reliance of the Gold Bars Collection Representation, and acting on the faith and truth thereof, the Plaintiff on 4 April 2019 signed acknowledgment of receipt of the Gold Bars (in the quantity of 68) from the 10^th Defendant.” (emphasis added)

g.  But then the 1^st Defendant sold the Gold Bars to the 12^th Defendant on 2 April 2019. This is wholly inconsistent and incompatible with the Scheme.

26.  The 2^nd and 8^th Defendants were masterminds behind the scam.

27.  The 4^th Defendant would customarily act in accordance with 2^nd Defendant’s instructions. The 8^th Defendant was the substantial shareholder of the 7^th Defendant and has de facto control over it. The 9^th Defendant, the executive director and CEO of the 7^th Defendant and one of the 8^th Defendant’s representatives in the 7^th Defendant, would act in accordance with the 8^th Defendant’s instructions.

28.  The Purchase and Lease-Back Scheme Representation and the Gold Bars Collection Representation were made by the 5^th, 6^th and 13^th Defendants, the 13 Defendant being a representative of the 10^th Defendant and the sole shareholder and director of the 12^th Defendant.

a.  They were the persons who attended to the Plaintiff when he (i) agreed to purchase and paid for the Gold Bars on 29 March 2019 and (ii) inspected and “collected” the Gold Bars on 4 April 2019. On both occasions, the above took place at the 10^th Defendant’s office.

b.  The 5^th Defendant knew the 1^st Defendant borrowed the Gold Bars from the 10^th Defendant for the Plaintiff’s inspection only, thus the falsity of the Scheme.

c.  The 6^th Defendant, in his witness statement, confirmed he realized shortly after he had joined the 1^st Defendant in August 2018 that gold bars purportedly purchased by customers from the 1^st Defendant under the Scheme would in fact be returned to the 13^th Defendant after presenting to customers for inspection, after which they would be purportedly sold by the 1^st Defendant to the 12^th Defendant or its affiliate, Well Sky International (HK) Limited (佳天國際（香港）有限公司) (“Well Sky”). Well Sky’s sole shareholder and director was also the 13^th Defendant^. The 10^th and 12^th Defendants would receive “service fee” as reward.

d.  The 13^th Defendant confirmed in her affirmation she knew the Plaintiff bought the Gold Bars, scheduled to be delivered on 4 April 2019, for leaseback to the 1^st Defendant. She was actually in the office of the 10^th Defendant on 4 April 2019 when the Plaintiff went there to inspect and “collect” the Gold Bars. Yet, she knew all along that the 1^st Defendant intended to sell the Gold Bars to the 12^th Defendant. She also knew the 12^th Defendant had placed a purchase order for the Gold Bars for the consideration of HK$21,358,859.26 and had paid for them. Out of that part of the purchase price ie HK$11,739,888, the 12^th Defendant paid HK$8,832,912 to the 1^st Defendant and HK$2,906,977 to the 3^rd Defendant on 2 and 3 April 2019 respectively. The balance of the purchase price was paid to the 1^st Defendant on 4 April 2019.

e.  The 13^th Defendant admitted in her affirmation that she provided accounting services to the 10^th Defendant under the name of the 12^th Defendant. As such, she would be in control or at least had access to the accounting records of the 10^th Defendant.

f.  The 13^th Defendant knew the Scheme to be non-existent. She nevertheless endorsed the presentation to the Plaintiff the Gold Bars for inspection and “delivery” on 4 April 2019.

g.  The 11^th Defendant (the sole director and shareholder of the 10^th Defendant) stated in his affirmation that (i) the Plaintiff was introduced to the 10^th Defendant by the 13^th Defendant for gold trading; (ii) the Plaintiff’s purchase of the Gold Bars was handled by the 13^th Defendant.

29.  The 10^th Defendant and the 12^th Defendant rendered assistance in (i) facilitating to the Plaintiff the false picture of “delivery” of the Gold Bars to the 1^st Defendant; and (ii) conjuring up a transaction to conceal the wiring away of the Sum supposedly paid to the 10^th Defendant ie On 2 April 2019, the 1^st Defendant sold the Gold Bars to the 12^th Defendant for HK$21,358,859.26, of which HK$8,832,912 and HK$2,906,977 and were transferred on 2 and 3 April 2019 to the 1^st and 3^rd Defendants respectively, with the balance transferred to the 1^st Defendant on 4 April 2019 and by a credit note on 3 June 2019.

30.  The 4^th Defendant was the person who signed the authorization letter dated 2 April 2019 to direct the 12^th Defendant to transfer part of the Sum ie HK$8,832,912 and HK$2,906,977 to the 1^st and 3^rd Defendants.

31.  The Plaintiff’s case is that the purchase price paid by the 12^th Defendant to the 1^st Defendant came from the Sum and the transaction was to facilitate the dissipation of the Sum.

32.  The 13^th Defendant must have been a part of the scam. She knew that the Plaintiff bought the Gold Bars from the 1^st Defendant for leaseback to the 1^st Defendant. On 2 April 2019, she also procured the purchase of the Gold Bars by the 12^th Defendant from the 1^st Defendant. She prayed in aid the Lease Agreement[5] in order to justify her claim that the purchase was bona fide, which means she had seen a copy of the Lease Agreement. When she saw the Plaintiff attended the 10^th Defendant’s office to inspect and accept “delivery” of the Gold Bars on 4 April 2019, she did not raise any enquiry with the Plaintiff. Instead, she procured the 10^th Defendant to issue a receipt to the Plaintiff acknowledging his “collection” of the Gold Bars.

33.  The 13^th Defendant confirms in her affirmation that the sale of the Gold Bars from the 1^st Defendant to the 12^th Defendant was explained to and endorsed by the 11^th Defendant. The 11^th Defendant must have been a part of the scam.

34.  The 1^st Defendant defaulted in the payment of the rental fees in breach of the Lease Agreement since October 2019, in respect of which the Plaintiff had obtained default judgment against the 1^st Defendant and ultimately led to its winding up in February 2021.

35.  The Plaintiff progressively uncovered the scam and officially made a report to the police in April 2020.

36.  The end result of the scam is that the Plaintiff has lost the Sum and the Gold Bars, the rental income since October 2019 and the profits he would have made had the Gold Bars been returned to him after the 12-month lease period.

Deliberation

37.  The applicable legal principles are trite. A plaintiff seeking a domestic mareva injunction must satisfy the Court that:

a.  it has a good arguable case;

b.  there is a real risk of dissipation of assets, or removal of assets from the jurisdiction, which would render the plaintiff’s judgment of no effect;

c.  the balance of convenience is in favour of grant.

38.  The threshold of “a good arguable case” is higher than “a serious issue to be tried”. But the applicant need not go so far as to persuade the Court that it is likely to win but it needs to show a case which is more than barely capable of serious argument, albeit not necessarily one that the judge believes to have a better than 50% chance of success.

39.  Where a party opposes the continuation of the injunction at the interlocutory stage, the burden is on him to put up a defence and evidence of sufficient cogency so as to water down the merits of the applicant’s claim to an extent that it no longer amounts to a good arguable case: Toyota Boshoku Europe N. V. v Kingsville (HK) Enterprises Limited & Others[2023] HKCFI 1393 at [11] per DHCJ Le Pichon.

40.  The court is not to resolve disputes of facts and difficult points of law on an interlocutory basis: Toyota Boshoku Europe N. V. at [12].

41.  The existence of a “good arguable defence” does not necessarily negate a “good arguable case”. It is entirely possible to have, at the interlocutory stage, both the claim and the defence being more than barely capable of serious argument and not necessarily having a better than 50% chance of success. There is no requirement that the applicant of a mareva injunction must show that he has a “much better” case or argument than the opposing party: Toyota Boshoku Europe N. V. at [13] – [14].

Good arguable case vs the 4^th Defendant

42.  As far as good arguable case is concerned, in Ms Law’s skeleton, she goes to great length to analyse all the pleaded causes of action in the Statement of Claim and submits that there is no good arguable case against the 4^th Defendant. This is an unnecessary exercise since in his executive summary, Mr Yeung has already described the role of the 4^th Defendant as knowingly assisted in the scam in that he endorsed the 1^st Defendant’s sale of the Gold Bars to the 12^th Defendant on 2 April 2019 and his instruction to the 12^th Defendant to transfer the purchase price to the 1^st and 3^rd Defendants.

43.  Ms Law submits that any cause of action of conspiracy based on the alleged “unlawful means” of breach of duties, secret profits, knowing receipt and dishonest assistance are bound to fail. She then cites inter alia paras 22 and 29 of the Statement of Claim and submits that no trust or fiduciary duties can arise in so far as the Gold Bars are concerned.

44.  For ease of reference, paras 22 and 29 read as follows.

“22. … on the basis of a true sale by the 1^st Defendant of the Gold Bars to the Plaintiff, then by being in possession and control of the Gold Bars for the purpose of executing the Lease Agreement for and on behalf of the Plaintiff, whether pursuant to the Authorisation Letter or otherwise, the 1^st Defendant was a trustee and/or fiduciary of the Plaintiff and assumes trust/ fiduciary duties to the Plaintiff insofar as the Gold Bars were concerned…

…

29. The 2^nd, 3^rd and 4^th Defendants knew the purported purchase of the Gold Bars by the Plaintiff and the non-existence and infeasibility of the Purchase and Lease-Back Scheme. Each of them however designed, executed and/or approved the 1^st Defendant’s purported sale and delivery of the Gold Bars to the 12^th Defendant and received the proceeds arising from such sale…Each of the 2^nd, 3^rd and 4^th Defendants knew that the 1^st Defendant was trustee/ fiduciary of the Plaintiff in terms of the Gold Bars, and therefore knew that the purported sale by the 1^st Defendant to the 12^th Defendant was conducted in breach of its trust/ fiduciary duties to the Plaintiff. In directing, executing and/or approving the purported sale or remaining silence and receiving the sale proceeds, each of the 2^nd, 3^rd and 4^th Defendants was dishonestly assisting the 1^st Defendant in its misappropriation of the Plaintiff’s assets in breach of its trust/ fiduciary duties set out in paragraph 22 above.”

45.  Ms Law then submits that the “true sale” between the Plaintiff and the 1^st Defendant of the Gold Bars is a pure commercial relationship. Even on the assumption that the 1^st Defendant had been in possession and control of the Gold Bars for the purpose of executing the Lease Agreement for and on behalf of the Plaintiff, that of itself does not create a trust or fiduciary relationship between the two of them.

46.  Assuming for the sake of argument Ms Law is right that the relationship between the Plaintiff and the 1^st Defendant does not involve a trust or fiduciary relationship in the traditional legal sense and any plea of breach of trust/fiduciary duties is untenable, the essence of the Plaintiff’s case is still the same – there is a scam and the 4^th Defendant had participated in it by dishonestly assisting the 1^st Defendant in executing the scam at the expense of the Plaintiff.

47.  Ms Law further submits that the Plaintiff’s misconception is exemplified by the terms of the Lease Agreement. Under the 2^nd Clause 7.2 of the Lease Agreement[6], the 1^st Defendant was authorised to sell, lease and pledge the Gold Bars during the 12-month lease period.

48.  The 1^st Defendant had prepared a Lease Agreement for the Plaintiff to sign and he did sign on 3 April 2019. The Lease Agreement had elaborately set out the terms of the Scheme, including the lease period, the amount of rental payable to the Plaintiff, the exclusive use of the Gold Bars for onward lease to the 7^th Defendant, the emphasis that the Plaintiff had ownership of the Gold Bars while the 1^st Defendant only had the right to use them. Then all of a sudden, the 1^st Defendant added a clause 7.2 which gave the 1^st Defendant the authority to sell the Gold Bars, which is wholly inconsistent with the Scheme as presented to the Plaintiff and all the other terms of the Lease Agreement. That clause reinforces rather than undermines the existence of a good and arguable case of a scam.

49.  In fact, on the evidence, the 4^th Defendant’s role in the scam is much more than endorsing the 1^st Defendant’s sale of the Gold Bars to the 12^th Defendant on 2 April 2019 and his instruction to the 12^th Defendant to transfer the purchase price to the 1^st and 3^rd Defendants. He was the Chief Executive Officer responsible for the 1^st Defendant’s business operation and management in Hong Kong. Since the Scheme was one proffered to investors by the 1^st Defendant, it is reasonable to infer that he had a part, together with 2^nd and 3^rd Defendants, in the design or at least execution of the Scheme, despite his denial. The evidence of the 5^th Defendant is particularly damning. According to the 5^th Defendant, the 4^th Defendant was one of the principal assistants of 2^nd Defendant and he was well aware of the scam and had actively participated in it.

50.  In the 4^th Defendant’s 2^nd affirmation (“Iu 2”), his defence in gist is that he was a mere sales agent of the Gold Bars purchase and leaseback scheme which was introduced to him by the 2^nd and 3^rd Defendants. His title of Chief Executive Officer was merely for convenience in dealing with external investors such that he could not be said to be a directing mind of the 1^st Defendant.

51.  The 4^th Defendant said he understood the 金尊1號product ie the Scheme to be a project involving purchase by clients of physical gold bars followed by arrangement of renting of such gold bars to third parties for rental income in the clients’ favour. More particularly, he knew that, under the Scheme, clients would purchase physical gold bars from the 1^st Defendant sourced from the 10^th Defendant and would earn rental income by leasing them back to the 1^st Defendant for its onward lease to the 7^th Defendant. He was led to have confidence in the Scheme and had no reason to suspect any fraud. He therefore did not know that there was no intention on the part of the 1^st Defendant to put the Scheme into place or that the 7^th Defendant never intended to lease, or actually leased, Gold Bars from the 1^st Defendant.

52.  In other words, his case is that which he was tasked to sell the Scheme to clients and he had no knowledge of the fraud. In this court’s view, this bare denial is hardly a defence and evidence of sufficient cogency so as to water down the merits of the Plaintiff’s claim to an extent that it no longer amounts to a good arguable case.

53.  To conclude, this court is satisfied that there is a good and arguable case against the 4^th Defendant.

Good arguable case vs the 12^th and 13^th Defendants

54.  The Plaintiff’s case against the 12^th and 13^th Defendants can be considered together since the 13^th Defendant was at the material time the sole director and shareholder of the 12^th Defendant.

55.  On the Plaintiff’s evidence, the 13^th Defendant knew the Plaintiff bought the Gold Bars from the 1^st Defendant for leaseback to it. The role of the 13^th Defendant was, apart from being one of the persons who made the Purchase and Lease-Back Scheme Representation and the Gold Bars Collection Representation to the Plaintiff, that she directed the 12^th Defendant to purchase the Gold Bars from the 1^st Defendant on 2 April 2019, which was entirely inconsistent with the Scheme. If the sale was genuine, the inspection and “delivery” of the Gold Bars to the Plaintiff on 4 April 2019 was just a show. After the sale to the 12^th Defendant, there could not be a lease back of the Gold Bars to 1^st Defendant for further onward lease to the 7^th Defendant, unless of course the sale was bogus. She also gave the false impression of “delivery” of the Gold Bars to the Plaintiff when she saw him at the 10^th Defendant’s office on 4 April 2019 knowing full well about the sale of the Gold Bars by the 1^st Defendant to the 12^th Defendant.

56.  In Mr Yeung’s executive summary, he is content to rely on the unlawful means of dishonest assistance against the 12^th and13^th Defendants and this court shall proceed on that basis.

57.  On the other hand, in Mr Tam’s skeleton, he submits that the 12^th and 13^th Defendants are innocent parties caught up in the conspiracy to defraud the Plaintiff. In other words, his clients do not dispute the Scam. He submits that the Plaintiff cannot prove inter alia the 12^th and 13^th Defendants’ intention and knowledge in relation to the Scheme or its falsity.

58.  In the 13^th Defendant’s affirmation (“Mak 2”) at paras 45 and 46 on half of the 12^th Defendant and no doubt on her own behalf, she summed up the relationship between the Plaintiff, the 1^st Defendant, the 12^th Defendant and herself as thus.

“45. Captain Holdings had sold the Gold Bars supplied by Solid Gold (Exhibit WJ-35) to Mr. Wu and Mr. Wu agreed to lease the Gold Bars back to Captain Holdings. Under the Lease Agreement (Exhibit WJ-36), Captain Holdings realised the Gold Bars into cash by selling the Gold Bars to HK Fortune. HK Fortune had purchased the Gold Bars from Captain Holdings as a bona fide purchaser for value without notice.

46. HK Fortune had agreed to be the named purchaser of the Gold Bars, as opposed to, for example, Solid Gold or another entity within the corporate group, for the simple reason that HK Fortune did not have a Bullion Trading Account at that time. From experience, it was not easy or straightforward to open a Bullion Trading Account. I thought this would be a good opportunity to provide a track record in bullion trading for HK Fortune, and to take this opportunity to open a Bullion Trading Account. As HK Fortune was part of the corporate group involved the bullion trading, having another Bullion Trading Account would be convenient. I explained this to Mr. Gaw and he agreed with my idea. As such, it was agreed that HK Fortune would be the named purchasing entity for the Gold Bars.” (emphasis added)

59.  The fact that the 12^th and 13^th Defendants prays in aid the Lease Agreement to show they were bona fide is futile and actually backfires on them. As this court explains earlier, the Lease Agreement had elaborately set out the terms of the Scheme but then all of a sudden, included a clause which gave the 1^st Defendant the authority to sell the Gold Bars, which is wholly inconsistent with the Scheme as presented to the Plaintiff and all the other terms of the Lease Agreement. This clause reinforces rather than undermines the existence of a good and arguable case of a scam and the knowledge of the 12^th and 13^th Defendants of it.

60.  At paras 58 to 62 of Mak 2, the 13^th Defendant further elaborated on the 12^th Defendant’s purchase of the Gold Bars as follows:

“58. On 4 April 2019, Mr. Wu attended the offices of Solid Gold again. The Gold Bars were in the conference room. I deny having made any representations to Mr. Wu as alleged in paragraph 21 of Wu 4^th … In any event, as set out above, the Gold Bars did belong to Mr. Wu, but Captain Holdings had already sold 36 Gold Bars on behalf of Mr. Wu to HK Fortune.

59. On 4 April 2019, Captain Holdings had “officially” sold and delivered the Gold Bars to HK Fortune. In this regard, Captain holdings issued an Invoice No. I90357 for the Gold Bars in the total consideration of HK$21,358,859.26 (cf Exhibit MWN-5) together with Delivery Note No. 300621[7]…

60. On the same day on 4 April 2019, HK Fortune issued a confirmation[8] to Captain Holdings in relation to the Gold Bars …

61. Also on 4 April 2019, HK Fortune paid to Captain Holdings HK$9,358,859.26 by way of a cheque. On 3 June 2019, HK Fortune paid to Captain Holdings the balance of the consideration in the sum of HK$260,111 by way of a credit note[9]…

62. As such, the transaction between D1 and D12 is genuine and supported by contemporaneous documents.” (emphasis added)

61.  In Mr Tam’s skeleton, he recites the legal requirements for the imposition of liability for dishonest assistance in the traditional trust situation in that inter alia there must be a breach of trust or fiduciary duty by someone[10] other than the defendants ie his clients. However, the basis in which the 1^st Defendant stands as a fiduciary vis-à-vis the Plaintiff is unclear. But as this court explains earlier, even assuming for the sake of argument that the relationship between the Plaintiff and the 1^st Defendant does not involve a trust or fiduciary relationship in the legal sense, the essence of the Plaintiff’s case is still the same – there is a scam and the 12^th and 13^th Defendants knowingly participated in it by dishonestly assisting the 1^st Defendant in executing the scam at the expense of the Plaintiff.

62.  The sale of the Gold Bars by the 1^st Defendant to the 12^th Defendant on 2 April 2019 may or may not be genuine. As this court observes, if it were genuine, that would be wholly inconsistent with the Scheme. Otherwise, it would be a bogus transaction, contrary to what the 13^th Defendant had said. The 13^th Defendant must but has failed to explain why she procured the 12^th Defendant to enter into a bogus transaction.

63.  To conclude, for the above reasons, this court is satisfied that there is a good and arguable case against the 12^th and 13^th Defendants.

Real Risk of Dissipation

64.  The approach on assessment of risk of dissipation in the context of an application for a mareva injunction was examined by the Court of Appeal in Convoy Collateral Limited v Cho Kwai Chee[2020] HKCA 537. At [35], Lam VP (giving judgment of the Court of Appeal) quoted with approval the judgment of Haddon-Cave LJ in Lakatamia Shipping Co Ltd v Toshiko Morimoto [2019] EWCA Civ 2203 at [34] where his Lordship adopted (with a slight modification) the principles set out by Popplewell J (as he then was) earlier in Fundo Soberano de Angola v dos Santos [2018] EWHC 2199 (Comm) as follows:

“(1) The claimant must show a real risk, judged objectively, that a future judgment would not be met because of an unjustified dissipation of assets. In this context dissipation means putting the assets out of reach of a judgment whether by concealment or transfer.

(2) The risk of dissipation must be established by solid evidence; mere inference or generalised assertion is not sufficient.

(3) The risk of dissipation must be established separately against each respondent.

(4) It is not enough to establish a sufficient risk of dissipation merely to establish a good arguable case that the defendant has been guilty of dishonesty; it is necessary to scrutinise the evidence to see whether the dishonesty in question points to the conclusion that assets may be dissipated. It is also necessary to take account of whether there appear at the interlocutory stage to be properly arguable answers to the allegations of dishonesty.

(5) The respondent's former use of offshore structures is relevant but does not itself equate to a risk of dissipation. Businesses and individuals often use offshore structures as part of the normal and legitimate way in which they deal with their assets. Such legitimate reasons may properly include tax planning, privacy and the use of limited liability structures.

(6) What must be threatened is unjustified dissipation. The purpose of a [World Freezing Order] is not to provide the claimant with security; it is to restrain a defendant from evading justice by disposing of, or concealing, assets otherwise than in the normal course of business in a way which will have the effect of making it judgment proof. A WFO is not intended to stop a corporate defendant from dealing with its assets in the normal course of its business. Similarly, it is not intended to constrain an individual defendant from conducting his personal affairs in the way he has always conducted them, providing of course that such conduct is legitimate. If the defendant is not threatening to change the existing way of handling their assets, it will not be sufficient to show that such continued conduct would prejudice the claimant's ability to enforce a judgment. That would be contrary to the purpose of the WFO jurisdiction because it would require defendants to change their legitimate behaviour in order to provide preferential security for the claim which the claimant would not otherwise enjoy.

(7) Each case is fact specific and relevant factors must be looked at cumulatively.”

65.  Lam VP went on to state that subject to certain elaborations, the aforesaid principles are applicable in Hong Kong:

“37. On the onus borne by a party seeking such draconian relief, whilst there are no doubt respectable authorities referring to the need for a solid evidential basis to establish a real risk of dissipation …we prefer to describe the burden as solid basis for concluding that there is such a real risk.

…

40. Since the assessment is in respect of the risk of dissipation as opposed to the fact of actual dissipation, the exercise necessarily involves an evaluative and predictive judgment. Thus, the evidential burden can be satisfied by drawing proper inferences from a holistic consideration of all the circumstantial materials that are indicative of risk, including matters which point against such risk…

…

42. There are cases where a good arguable case on the underlying substantive claims could also be regarded as supporting a case of real risk of dissipation. As highlighted in proposition (4) in Popplewell J’s summary, the court needs to scrutinise with care whether the allegations in respect of the claims justify the inference of likelihood of dissipation.

43. Notwithstanding the broad statement of Godfrey J in Honsaico Trading Ltd v Hong Yiah Seng Co Ltd [1990] 1 HKLRD 235, Hong Kong judges have been vigilant in scrutinizing the allegations in a claim with care before drawing the inference of risk of dissipation. Chu J (as she then was) in Hornor Resources v Savvy Resources [2010] 4 HKC 50 cautioned that the court must examine with care allegations of dishonesty before inferring therefrom a real risk of dissipation.

…

47. Wrongdoing relevant to the issue of dissipation can be some dishonest or wrongful acts which were not themselves acts of dissipation. In VTB Capital v Nutritek International [2012] 2 CLC 431, the alleged wrong committed by the defendant was the procurement of a loan from CCL by fraudulent misrepresentation as to the value of the assets of the borrower and the disappearance of the proceeds in a complex web of corporate entities. Lloyd LJ said at [177]:

‘… However, where (as here) the dishonesty alleged is at the heart of the claim against the relevant defendant, the court may well find itself able to draw the inference that the making out, to the necessary standard, of that case against the defendant also establishes sufficiently the risk of dissipation of assets.’

…

49. Another illustration is the judgment of Saville LJ in Grupo Torras SA v Al-Sabah (21 March 1997) which was cited in the judgment of Flaux J in Madoff Securities International Ltd v Raven [2011] EWHC 3102 (Comm) . The defendant in that case was an investment adviser in Switzerland. The judge found there was a good arguable case that he was implicated in a scheme of fraud and the nature of the allegation was such that there was a strong fear of dissipation….” (emphasis added)

66.  At [53], Lam VP summed up the position as follows:

“53. To sum up, the approach set out by Haddon-Cave LJ in Lakatamia Shipping Co Ltd v Toshiko Morimoto, supra at [51] provides good guidance. The ultimate question is whether CCL succeeds in showing objectively there is a solid basis for concluding that there is a real risk of unjustified dissipation of assets by a defendant. That question is to be answered by examining the evidence holistically. Evidence of dishonest and fraudulent conducts or other serious wrongdoings which form the basis of the claims, and which reflect adversely on the integrity of the defendant could point powerfully towards an inference of such risk.” (emphasis added)

67.  At [54], Lam VP also pointed out that evidence of delay is relevant in the assessment of risk of dissipation.

“54.…Delay after a defendant gained knowledge of a plaintiff’s claim can militate against the risk of dissipation as such defendant would already have the opportunity to dispose of assets should he be inclined to do so.”

68.  In Ms Law’s skeleton, her submission on no real risk of dissipation is, with respect, perfunctory. The relevant parts of her submission can be found in the following 3 paras.

“89. The only ground relied on by P against D4 to argue that there is a real risk of dissipation is the allegation that there is serious dishonest, questionable integrity and unacceptably low commercial morality on his part.

90. It is not disputed that the police concluded that there was insufficient evidence to lay any criminal charges against D4.

…

93. For the reasons analyzed above, D4 submits that he is not guilty of those allegations and consequentially there is no real risk of dissipation and the balance of convenience is well in favour of D4.”

69.  All this court needs to say is that, given this court’s analysis on good arguable case, Ms Law’s submission on no real risk of dissipation must be rejected.

70.  In Mr Tam’s skeleton, his submission that there is no real risk of dissipation boils down to (i) the Plaintiff’s case against the 12^th and 13^th Defendants is thin and he cannot rely on the strength of the underlying substantive claim in support of his case of real risk of dissipation, especially where he cannot identify any dishonest or other serious wrongdoings on the part of the 12^th and 13^th Defendants; (ii) the 12^th and 13^th Defendants were, if at all, at the “tail end” of the fraud with hardly any direct involvement with the Plaintiff, and (iii) even if there is a good arguable case against the 12^th and 13^th Defendants, the ground of “low commercial morality” cannot be relied upon in isolation. The Plaintiff cannot put his case any higher than “unsupported statements and expressions of fear”, which would only “carry very little, if any, weight”: Convoy Collateral Ltd at [41].

71.  In this court’s view, the Plaintiff’s good arguable case against the 12^th and 13^th Defendants is not thin and Mr Tam has misunderstood the Plaintiff’s case as simply based on low commercial morality per se.

72.  As Mr Yeung submits, the good and arguable case of the involvement of each of the 4^th, 12^th and 13^th Defendants in the scam to defraud the Plaintiff of the Sum or the Gold Bars and the “sale” of the Plaintiff’s Gold Bars to the 12^th Defendant is a strong indicator of the serious dishonesty and fraudulent conduct on their part individually. This constitutes powerful and solid basis for an inference of real risk of dissipation.

73.  Mr Yeung further emphasis the implication from the 13^th Defendant’s disclosure of the 12^th Defendant’s assets pursuant to the Injunction. In Mak 2, at para 71, she suggested that the Gold Bars belonged beneficially to the 12^th Defendant and thus were in the possession of the 12^th Defendant at the material time. However, In Mak 1, she claimed the 12^th Defendant did not have any asset of value of more than HK$10,000. As stated in a letter from the Hong Kong Police to the Legal Aid Department dated 30 August 2023, the Police had not seized any of the Gold Bars. Since the 13^th Defendant claimed the 12^th Defendant had purchased and obtained delivery of the Gold Bars on 4 April 2019, either the 13^th Defendant was not truthful about the assets of the 12^th Defendant, or the 12^th Defendant’s purported purchase of the Gold Bars was bogus or the 12^th Defendant had either concealed or transferred away the Gold Bars. At the moment, there is no explanation from the 12^th or 13^th Defendant what had happened to them if the purchase was genuine given that they were at least in the 12^th Defendant’s possession at some point in time if the purchase was genuine. If the purchase was bogus, where are the Gold Bars now?

74.  On the question of delay, it is true that while the present Action was commenced in January 2022, the application for the Injunction was only made in May 2023. The explanation has been set out in Wu 4 at paras 55 to 59 and further explained in Mr Yeung’s skeleton. In gist, Mr Yeung submits that (i) the Plaintiff all along considered that there existed a real risk of asset dissipation by the Defendants[11], (ii) with the real risk of asset dissipation in mind, the Plaintiff’s (mis)understanding was that his interest was adequately protected in the interim for so long as the police investigation continued, (iii) in May 2023, the Plaintiff learnt from the police that investigation of his complaint might conclude without any charges against the arrested persons, which would entail the end of the interim protection afforded by the police and which would leave the issue of real risk of asset dissipation unaddressed, (iv) as the police only referred to the freezing of the 10^th Defendant’s bank account during the exchanges with the Plaintiff’s legal advisers, the Plaintiff became uncertain as to whether the bank accounts of those Defendants other than the 10^th Defendant had in fact been frozen – the Plaintiff was unable to obtain further information from the police, and was advised to resort to the Court for interim protection.

75.  This court accepts the Plaintiff’s explanation of the delay as inherently probable and would not count it against his case of real risk of dissipation.

76.  To conclude, this court is satisfied that for the present purpose there is a real risk of dissipation in relation to the 4^th, 12^th and 13^th Defendants.

Balance of convenience

77.  Given the disclosure of assets by the 4^th, 12^th and 13^th Defendants, if the disclosure is truthful, damages would not be an adequate remedy for the Plaintiff if he were to succeed at trial. If the disclosure of assets by them is untruthful, it simply means they are concealing their assets to render them out of reach of the Plaintiff. Either way, without the Injunction, the Plaintiff is likely to get an empty judgment if his case is proven at trial.

78.  On the other hand, the 4^th Defendant had not put forward any evidence of prejudice to him as a result of the Injunction and he had not applied to set aside the Injunction shortly after it was continued on 25 May 2023 or at all.

79.  As for the 12^th and 13^th Defendants, in Mak 2 at paras 72 and 74, she claimed that “Ever since the police arrested me in 2020, the accounts of HK Fortune, other corporate accounts under my name, and my personal bank accounts have all been frozen until April 2023…as HK Fortune’s bank accounts are frozen, HK Fortune cannot receive any remuneration for providing its services to Solid Gold. This in turn also is affecting my own ability to be paid my own salary as my own account is frozen. Moreover, the Injunction has caused and will continue to cause HK Fortune and myself embarrassment, inconvenience, and loss of business opportunities.” While in Mak 2, she had hinted at the very last paragraph that she would invite the Court to discharge the Injunction, their application to discharge the Injunction was only made on 10 May 2024, less than 2 weeks before the substantive hearing.

80.  Ultimately, at the interlocutory injunction stage, “the principal concern of the court is that it might make a wrong decision in the sense that after trial, the party to whom an interlocutory injunction has been granted may lose or the party who has been refused one, may win. The court will therefore take whichever course appears to carry the lower risk of injustice if it should turn out that it is wrong. This ‘fundamental’ principle is the source of the guidelines that have evolved for the determination of interlocutory injunctions”: Films Rover International Ltd v Cannon Film Sales Ltd [1987] 1 WLR, 670, 680D-G (per Hoffmann J as he then was); Music Advance Ltd. v Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD 1041 at [12 (d)] (per Ma J as he then was).

81.  On the evidence before this court, it seems the course which appears to carry the lower risk of injustice if it should turn out that this court is wrong is to continue instead of discharge the Injunction and this court shall so rule.

Material non disclosure

82.  The 4^th Defendant’s complaint is that the Plaintiff had failed to draw the Court’s attention to the Lease Agreement which was only hidden inside a thick pile of documents attached to the Plaintiff’s Statement to the Police. The Lease Agreement was said to contain important Clauses 3, 4, 6 and 7.

83.  This court does not see how Clauses 3, 4 and 6 can assist the 4^th Defendant and be adverse to the Plaintiff. It is really the 2^nd Clause 7.2 which gave the 1^st Defendant full authority to sell the Plaintiff’s Gold Bars and was completely incompatible with the Scheme, which might be relevant for the present discussion. However, a plaintiff is only obliged to disclose matters which are or may be adverse to his case and the test of materiality is an objective one: Gee Commercial Injunction 7^th Ed. para 9-003. As explained above, this court’s view is that objectively, the existence of the 2^nd Clause 7.2 only strengthens the culpability of the 1^st Defendant and its sale of the Gold Bars to the 12^th Defendant. In other words, it is not and may not be adverse to the Plaintiff’s case.

84.  The complaints of the 12^th and 13^th Defendants are that there was (i) no notice of the ex parte application for the Injunction, (ii) failure to disclose the Lease Agreement, similar to that complained by the 4^th Defendant, and (iii) failure to disclose the 2^nd Defendant’s deed of personal guarantee dated 13 March 2020 covering the Lease Agreement.

85.  As far as notice is concerned, in Mr Yeung’s skeleton for the 19 May 2023 hearing at para 1, he only introduced the application as an “ex parte” application rather than “ex parte” on notice application. Again, at para 23 of his skeleton, Mr Yeung emphasised that it was an ex parte application, although he also mentioned that “notice of the present application is given[12] to D4, D8, D10 to D13.” Given that the Plaintiff’s good arguable case is that he is the victim of a complex scam, it is not unreasonable for the Plaintiff to make the application on an “ex parte” basis: Gee Commercial Injunction 7^th Ed. para 8-001. While it is true that at para 1 of Wu 4, he did refer to the application as an “ex parte” (on notice) application, on balance, this court is satisfied that Wong J, having seen Mr Yeung’s skeleton, would not have been misled by the opening para of Wu 4 and that para was merely an innocent mistake.

86.  As far as the 2^nd Defendant’s deed of personal guarantee dated 13 March 2020 is concerned, the simple answer is that the Plaintiff was not aware of its existence: Wu 10 at para 21.3.1. Quite apart from Mr Tam’s failure to clearly explain its relevance in his skeleton, it is difficult to see how the Plaintiff could have disclosed something that he was not aware of at the time of the ex parte application – unless the 12^th and 13^th Defendants claim and can establish that the guarantee was something that the Plaintiff would have found out had he made all necessary inquiries. But that is not what the 12^th and 13^th Defendants claim or can establish.

87.  This is not a case where the Plaintiff knew of the existence of the guarantee but claims he was unaware of its relevance. At para 74 of Mr Tam’s skeleton, he submits that “It is no answer for P to suggest that he was not aware of the existence of the Guarantee… The test as to materiality is an objective one, and ultimately a question for the court. Hence, it is no excuse for an applicant subsequently to say that he was generally unaware, or did not believe, that the facts were relevant or important: Han Jaejoon at [37(2)]. The legal proposition is of course correct but inapplicable to the present case. The point is a complete red herring.

88.  The fact of the matter is that the 4^th Defendant did not apply to set aside the Injunction on the single ground of material non disclosure on the return day[13], and the 12^th and 13^th Defendants only applied for a discharge of the Injunction (as well as fortification of the Plaintiff’s undertaking in damages) in May 2024. These facts point to their lack of conviction of their material non disclosure grounds.

89.  In any event, given the seriousness of the scam and the participation of the 4^th, 12^th and 13^th Defendants in it, this court is not minded to set aside the Injunction on this ground, and even assuming the Injunction is to be set aside, this court has no hesitation in re-granting the Injunction on the same terms.

90.  Lastly, fortification of the Plaintiff’s undertaking in damages should have been a matter raised on the return day before the Summons Judge. There is no suggestion that 12^th and 13^th Defendants had sought it on the return day.

91.  It is in any event not a ground to discharge the Injunction. Further, given the good arguable case that the Plaintiff is the victim of a scam, and the 12^th and 13^th Defendants have not indicated what damages they are likely to suffer, this court is not minded to order fortification of damages.

Disposition and costs order nisi

92.  For all the above reasons, this court is prepared to and shall order that:

a.  The Injunction be continued against the 4^th, 12^th and 13^th Defendants until the final determination of the present Action or further Order.

b.  The 12^th and 13^th Defendants’ Discharge Summons dated 10 May 2024 be dismissed.

93.  There shall be a cost Order nisi that costs of the Continuation Summons and the Discharge Summons be the Plaintiff’s costs in the cause, to be taxed if not agreed, with certificate for counsel. The 4^th Defendant’s own costs (with counsel certificate) is to be taxed in accordance with the Legal Aid Regulations.

Mr Mike Yeung, instructed by M/s Hugo Leung & Lawyers, for the Plaintiff

Ms Deanna Law, instructed by M/s Tony Kan & Co, assigned by Director of Legal Aid for the 4^th Defendant

Mr Keith Tam, instructed by M/s Chong & Yen, for the 12^th and 13^th Defendants