BGA HOLDINGS LTD (IN LIQUIDATION) (formerly known as BEIBU GULF OCEAN SHIPPING (GROUP) LTD AND OTHERS v. CHU KONG AND OTHERS

HCA 631/2022

[2026] HKCFI 2031

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 631 OF 2022

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BETWEEN

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DECISION

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1.   Introduction

1.1  By a decision dated 25 April 2025 (“Decision”)[1], I dismissed the Plaintiffs’ application for a worldwide Mareva injunction against D1. This is my decision on the following applications:

(1) The Plaintiffs’ summons dated 9 May 2025 (“Leave to Appeal Summons”) for leave to appeal against the Decision on the grounds set out in the draft Draft Notice of Appeal annexed thereto (“NOA”);

(2) The Plaintiffs’ summons dated 4 August 2025 (“Leave Summons”) for leave to rely on (1) their Draft Amended Notice of Appeal (“ANOA”) and (2) their draft summons to the Court of Appeal to adduce new evidence at the hearing of the proposed appeal;

(3) The Plaintiffs’ summons dated 18 August 2025 (“Amendment Summons”) for leave to amend the NOA to take into account the costs order made on 4 August 2025 in respect of the Application.

1.2  The Amendment Summons is not controversial. I make an order in terms of §1 thereof and a costs order nisi that the costs of the Amendment summons be in the cause of the Leave to Appeal Summons.

1.3  In respect of the Leave Summons, the new evidence sought to be introduced at the intended appeal is the 2^nd Affidavit of Mr John Nicholas Greenwood (“Greenwood (CA) 2^nd”). The ANOA contains an additional paragraph 2(cc) premised on the new evidence. There is no dispute between counsel that an application for leave to adduce new evidence cannot be entertained until after leave to appeal has been granted and it is a matter for the Court of Appeal to decide whether the new evidence should be admitted. However, an applicant for leave to appeal can support his application by reference to the proposed new evidence if he can demonstrate that it is reasonably arguable that the Court of Appeal would grant leave by reference to the criteria in Ladd v Marshall: Man Lin Heung v梁根林[2019] HKCA 846 at §2 (Footnote 1). It has taken some time for the parties to complete their evidence in respect of the Leave Summons. The 1^st Defendant filed his affirmation in opposition (“Chu 2^nd”) on 10 November 2025 and the Plaintiffs their affidavit in reply on 1 December 2025.

1.4  The proposed grounds of appeal set out in the ANOA make the following complaints:

(1) I had erred in concluding that the Plaintiffs had failed to demonstrate a good arguable case on quantum in respect of the Ausca Transaction (“Ground 1”);

(2) I had erred in concluding that there was no unjustified risk of dissipation by D1 (“Ground 2”);

(3) I had erred in concluding that the balance of convenience was against the grant of the Application (“Ground 3”).

1.5  The new evidence sought to be introduced is principally related to Ground 2. I shall deal with the Leave Summons when I address Ground 2.

2.   The applicable principles

2.1  There is no real quarrel between counsel on the applicable principles.

2.2  To obtain leave to appeal under section 14AA(4)(a) of the High Court Ordinance Cap 4, the prospects of the appeal succeeding must be “reasonable” and thus more than “fanciful”. An applicant does not have to demonstrate that the appeal will probably succeed and the threshold has been described as “not high”: T v W[2021] HKCFI 160 §§4 and 9.

2.3  Counsel for D1 has reminded me of the following principles:

(1) The Court of Appeal will not disturb the court’s exercise of discretion unless one or more of these grounds are established: the judge had misdirected himself with regard to the principles or the evidence in accordance with which his discretion had to be exercised; he had taken into account irrelevant matters; he failed to take into account relevant ones; his exercise of discretion is so plainly wrong that it is outside the generous ambit within which reasonable disagreement is possible: SFC v Leung Anita Fung Yee Maria[2025] HKCA 444 §39;

(2) Further, the Court of Appeal is not the forum for the parties to make a second attempt when they fail in the first instance, just hoping that the Court of Appeal will form different views on the weight to be attached to a particular factor: Cheng Siu Fai v Swenson Global Opportunities Fund SPC[2021] HKCA 1005 §34.

3.   Ground 1

3.1  Ground 1 is directed at Section 7 of the Decision, at which I set out my reasons for concluding that the Plaintiffs had failed to demonstrate a good arguable case on quantum in respect of the Ausca Transaction. The following matters of note:

(1) At Decision §6.3 (at which I dealt with the applicable principles), I referred to the cases cited therein for the propositions that whether an applicant has a good arguable case as to quantum is to be determined qualitatively, and as part of the qualitative assessment, the court may take into account factors such as the time that the applicant has had to formulate its claim;

(2) As referred to at Decision §7.3, D1’s submissions before me were premised, not on a contest between the rival expert evidence, but on the contention that the Plaintiffs’ evidence, namely the FTI Report, was compiled on an indisputably incorrect (or blinkered) premise. D1’s arguments emphasized that the burden was on the Plaintiffs to demonstrate a good arguable claim to a particular figure which might be made the ceiling figure of any Mareva injunction granted, and it was not for the court to arbitrability pluck some figure from the air, in the particular circumstances where the Plaintiffs have had a long time to prepare for and prosecute the Application. The foregoing emphasis was in part based on Universal Entertainment Corporation v Kazuo Okada[2020] HKCFI 1406 §§68-79 and [2020] HKCA §§23-25 referred to at Decision §6.3. As set out at Decision §5.5, D1’s submission was that the FTI Report ignored the “Fundamental Change”, namely the effect of the withdrawal of Guangxi BBG (in early 2016) and the setting up of a competitor, namely BG Shipping (in September 2015)[2];

(3) At Decision §7.5, I pointed out that Ms Tam was instructed to carry out the valuation of BBG Shipping and BBG Resources as at 31 December 2015 (ie Valuation Date), which preceded the Ausca Transaction which took place in May 2016;

(4) At Decision §7.8, I noted that the methodology adopted by Ms Tam for the valuation for BBG Shipping was the income capitalization method, and in doing so, she made a fundamental assessment that BBG Shipping’s historical level of income was representative of future income. However, at Decision §7.6, I pointed out that Ms Tam was only provided with only limited information and she was specifically not provided with any forward-looking information nor was she given access to the management of BBG Shipping.

3.2  The matters stated in the preceding paragraph “set the scene” for my analysis on the reliability of the FTI Report, which I carried out at Decision §§7.10-7.21. In concluding that the FTI Report was not reliable, I took into account the following factors.

3.3  First, the Fundamental Change took place after the Valuation Date and the Plaintiffs’ leading counsel accepted the Fundamental Change would have an effect on the profitability of the Group (Decision §7.11). The concession by the Plaintiffs was clearly correct since (1) the adverse effect was acknowledged in the FTI Report as regards BBG Resources such that the valuation of BBG Resources was done on a cost approach since there were uncertainties about BBG Resources’ ability to operate as a going concern (Decision §§7.12 and 7.13) and (2) the other evidence adduced by the Plaintiffs, namely the Infospectrum Report, also acknowledged that the Fundamental Change also impacted BBG Shipping, in that cargo flow was diverted away from BBG Shipping following the setting up of BG Shipping (Decision §§7.14).

3.4  Secondly, whilst the FTI Report mentioned the BBG Shipping S&P, it did not address at all Appendix B thereto which was the Management Accounts (ie BBG Shipping’s management accounts for the 3-month period ended 31 March 2016). The Management Accounts showed a drastic reduction in BBG Shipping’s turnover in that period compared to the 2015 figures. Relatedly, I also noted that Ms Tam was specifically not provided access to the management and I formed the view that there was no justification for not seeking Mr Lau’s views on the Management Accounts (even if cooperation from D1 was not forthcoming) since Mr Lau was not removed as a director until 10 March 2016 (Decision §7.16).

3.5  Thirdly, whilst the Plaintiffs in their reply evidence sought to factually minimize the effect of the Fundamental Change by reference to the work papers of Moore Stephens, it was unclear to me why Ms Tam was not asked to provide a supplemental report on what effect was to be given to the work papers of Moore Stephens (Decision §7.17).

3.6  Fourthly, insofar as the Plaintiffs further sought to minimize the impact of the Fundamental Change by suggesting D1 and Mr Lau had historically contributed related-party business to the Group, I pointed out that the Plaintiffs were unable to show that Mr Lau had done so after 31 December 2013 which was consistent with his professed stance as recorded in many decisions that there was a corporate divorce effective 1 January 2014[3] (Decision §7.18).

3.7  Fifthly, at Decision §§7.19-7.20, I dealt with the Plaintiffs’ reliance on the success of ASL and pointed out that, on the Plaintiffs’ own evidence, the success of ASL was based in part on new business ventures not previously undertaken by BBG Shipping. I further observed that the value of BBG Shipping was in the business relationships and contacts, which as a result of the corporate divorce, Mr Lau and D1 were pursuing separately from 2014 onwards.

3.8  I then dealt with at Decision §§7.22-7.23 the Plaintiffs’ submissions that I should adopt a broad-brush approach and discount the value of BBG Shipping. I specifically pointed out that the Plaintiffs did not proffer a figure which might be justified on the evidence.

(i) Ground 1(a)

3.9  Ground 1(a) complains that I had erred in placing little or no weight on the FTI Report on the basis that it had not assessed the impact of the alleged Fundamental Change. It is said that the impact of the alleged Fundamental Change is a heavily disputed fact and it is not a matter for Ms Tam to opine on as a valuation expert.

3.10  In my view, Ground 1(a) is not reasonably arguable for the following reasons.

3.11  First, as pointed out by counsel for D1, the question is whether it can arguably be shown that my conclusion on the (lack of) reliability of the FTI Report was plainly wrong. In this regard, there is no appeal against my observation that the FTI Report was based on very limited information. The withdrawal of Guangxi BBG and the setting up of BG Shipping as a competitor are undisputed facts. The FTI Report simply did not take the foregoing into account in proceeding on the basis that BBG Shipping’s historical level of income was representative of future income. In this regard, as pointed out above, the FTI Report, in fact took into account what was the effect of the Fundamental Change in its valuation of BBG Resources, namely with the withdrawal of Guangxi BBG, the relationship with Fangchenggang was terminated.

3.12  Secondly, even accepting the Plaintiffs’ submission that the impact of the Fundamental Change is a factual dispute (as opposed of the existence of the Fundamental Change which is indisputable), a fair presentation of the valuation evidence is for Ms Tam to put forward primary and alternative valuations based on different assumptions. There is simply no justification for the Plaintiffs to present valuation evidence based on its best-case scenario. At the very least, as pointed out by counsel for D1, the FTI Report ought to have analyzed the effect of the undeniable withdrawal of Guangxi BBG and the setting up a BG Shipping as a competitor. This is particularly pertinent given the Plaintiffs’ concession that the Fundamental Change would have an impact on the valuation. Had that been done, the Plaintiffs would have some evidential basis to invite the court the discount the Mareva monetary limit from its primary valuation. As pointed out above, at the hearing, the Plaintiffs were unable to proffer a discounted figure which might be justified on the evidence.

3.13  Thirdly, and relatedly, I do not accept the Plaintiffs’ submissions that the Valuation Date (months before the Ausca Transaction) can be justified on the basis that, in BGAH JLs’ view, the valuation date of 23 May 2016 was not adopted as there was no credible financial information of BBG Shipping, and instead, the Valuation Date was adopted given that the availability of audited financial statements. Even were the foregoing view held by BGAH JLs, that was not a reason for withholding the Management Accounts from Ms Tam. The drastic decrease in revenue shown in the Management Accounts self-evidently has a direct impact on Ms Tam’s adoption of the income capitalization method. It is a matter for Ms Tam to put forward an alternative valuation.

(ii) Ground 1(b)

3.14  Ground 1(b) asserts that in determining the impact of the alleged Fundamental Change on the business of BBG Shipping, I had erred in failing to give any or sufficient weight to (1) the Moore Stephen’s working papers which showed that BBG Shipping’s business was not wholly dependent on Guangxi BBG (“Factor 1”), (2) the fact that considerable income of BBG Shipping was generated from companies controlled by D1 and Mr Lau, as well as other customers which have no known relationship with BBGH (“Factor 2”) and (3) the fact that ASL, as a continuation of BBG Shipping’s business, was a very successful business venture (“Factor 3”).

3.15  Before I deal with the Factors individually, I should state at the outset that, as an overarching observation, I agree with counsel for D1 that the Factors do not establish that the Fundamental Change had no substantial impact on BBG Shipping’s valuation. If it is suggested by the Plaintiffs that I had agreed with the GT Report (which adopted a cost approach on the bases of assumptions made largely premised on D1’s factual case), that is a misunderstanding of my decision: Decision §7.21.

3.16  In relation to Factor 1, as noted above, the Moore Stephen’s work papers were apparently provided to Ms Tam: Decision §7.7. Whilst the Plaintiffs’ reply evidence relied on the Moore Stephen’s work papers as part of the factual case, Ms Tam was not asked to provide an alternative valuation based on what BGAH JLs assert could be shown by the Moore Stephen’s work papers. As already set out at Decision §7.17, the factual case which the Plaintiffs contended could be gleaned from Moore Stephen’s work papers was that they purportedly showed that the key customers which significantly contributed to BBG Shipping’s earnings were unrelated to Guangxi BBG. For present purpose, the Plaintiffs repeat the observation that approximately 44% of BBG Shipping’s revenue did not depend on Guangxi BBG. In my view, the foregoing precisely highlights my observation that, for a fairer presentation of the valuation evidence, the Plaintiffs ought to have provided an alternative valuation because of the clear impact that the foregoing will have on Ms Tam’s assessment that the historical level of income was representative of future income. On the Plaintiffs’ argument, only 44% of the revenue did not depend on Guangxi BBG. How the uncertainty over the remaining 56% of the revenue should be factored into the income capitalization method and what is the resulting valuation is simply not dealt with in the Plaintiffs’ valuation evidence. To be clear, at the hearing, the Plaintiffs did not suggest that the valuation set out in the FTI Report should be discounted based on the information said to be contained in the Moore Stephen’s work papers (or what that discount should be).

3.17  In relation to Factor 2, the assertion that both Mr Lau and D1 contributed to the income of BBG Shipping is not supported by the evidence: §3.6 and Footnote 3 above.

3.18  In relation to Factor 3, the points made at Decision §7.20 are (1) the success of ASL, on the Plaintiffs’ own evidence was based in part on new business ventures not previously undertaken by BBG Shipping, (2) BBG Shipping only had negligible fixed assets comprising computer equipment, furniture, etc (3) the “value” of BBG Shipping was plainly in the business relationships and contacts, which as a result of the corporate divorce, Mr Lau and D1 were pursuing separately from 2014 onwards and (4) importantly, the success of ASL could not be extrapolated as an indication that BBG Shipping was able to continue the business model before the Fundamental Change to justify the assumptions made in the FTI Report. Whatever the weight the Plaintiffs seek to place on the success of ASL, it does not alter the fact that, as stated above, the Plaintiffs had conceded that the Fundamental Change did have an impact on the BBG Shipping’s profitability.

3.19  In my view, Ground 1(b) is not reasonably arguable.

(iii) Grounds 1(c) and (d)

3.20  Grounds 1(c) and (d) complain that I should have adopted a broad-brush approach in determining the appropriate figure which the Plaintiffs merit protection by a Mareva injunction. The Plaintiffs rely on the two cases referred to at Decision §7.22. In addition, the Plaintiffs further rely on Yam Seng Pte Ltd v International Trade Corporation Ltd [2013] 1 All ER (Comm) 1321 §188 and One Step (Support) Ltd v Morris-Garner [2019] AC 649 §38 for the propositions that (1) the court will do its best and will not allow difficulty of estimation to deprive the plaintiff of a remedy, particularly where that difficulty is itself the result of the defendants wrongdoing and (2) the court is aided by the principle of reasonable assumption which err on the side of generosity to the plaintiff where it is the defendant’s wronging which has created uncertainties.

3.21  I agree with counsel for D1 that any professed difficulties or uncertainties in the present case are entirely self-induced on the part of the Plaintiffs in failing to provide reliable valuable evidence (1) by limiting the information which was provided by Ms Tam and (2) in failing to adduce a supplemental report. This may be illustrated by the first of the two alternatives which the Plaintiffs now say are proper discounts.

3.22  Two alternatives are now put forward by the Plaintiffs (neither of which at the hearing).

(1) It is now said that a reasonable percentage is 50% which reflects the fact that Guangxi BBG had exited the original joint venture, which figure is also consistent with the fact that at least 44% of the revenue of BBG Shipping originated from customers unrelated to Guangxi BBG;

(2) Alternatively, by Ground 1(d) it is said that I should impose a monetary limit of US$24,080,871.66 by reference to the declared dividends which had not been properly accounted for: Decision §4.7(4).

3.23  The first alternative is logically flawed. It bears emphasis that the methodology adopted in the FTI Report was the income capitalization method and the fundamental assumption was the historical level of income was representative of future income. As explained at FTI Report §4.7:

“In certain circumstances, cash flows covering an explicit forecast period is not necessary and a terminal value forms the only basis for value. This method, called the income capitalisation method, is a variation of the DCF [discounted cash flow analysis] that is often applied in mature businesses where the business is operating at a stabilised level of growth and profits at the valuation date. Under this method, the economic benefits for a representative single period are converted to value through division by a capitalisation rate…” (emphasis added)

3.24  As set out in at FTI Report §§3.15, the EBITA of BBG Shipping historically ranged between 0.9% and 2.2% of the revenue. The first alternative proposed by the Plaintiffs assumes that BBG Shipping would remain profitable with only 44% of its historical revenue. Given the thin margin of BBG Shipping, I am unable to accept that the first alternative is based on any reasonable premise. The lack of logic of the first alternative proposed highlights the observation made above, namely any professed difficulty or uncertainty is entirely self-induced on the Plaintiffs’ part.

3.25  The second alternative places no reliance on the FTI Report and is an entirely new point. As pointed out by D1, there are a number of difficulties with this new submission. First, it does not concern whether BBG Shipping was sold at an undervalue. If P1 did not receive the dividends, its claim would be for the dividends and such claim was and is not made in the latest version of the Statement of Claim. Secondly, on the Plaintiffs’ own evidence BGAH JLs were still in the process of investigating into the validity of the declaration of dividends (Greenwood (HC) 2^nd §38.9). I agree with D1 that there is therefore no factual or evidential basis for this alternative claim.

3.26  Further, as pointed out by D1, in the Court’s qualitative assessment on the case on quantum, the court may take into account factor such as the time that the applicant has had to formulate its claim: Decision §6.3(2). I am not persuaded that in the light of the Plaintiffs’ deficient evidence, it is reasonably arguable that I should adopt the logically-flawed first alternative or the unpleaded second alternative.

4.   Ground 2

4.1  Ground 2 is directed at my assessment on the risk of dissipation which is set out at Decision §§9.1-9.8. Essentially (1) I pointed out that the only asset identified by the Plaintiffs was D1’s interest in Swatow, (2) the Plaintiffs’ case on risk of dissipation was only premised on an inference to be drawn from the nature of the complaints made against D1, (3) but in the context of the acrimonious corporate divorce between Mr Lau and D1, it was inappropriate to shortcut the assessment on risk of dissipation by simply looking any accusation of low commercial reality or to readily infer a risk of dissipation solely from the nature of the pleaded allegations (Decision §§9.6 and 5.3), (4) instead, I should focus more on whether there was solid evidence to show risk of dissipation (Decision §§9.6) and (5) the Plaintiffs did not adduced any solid evidence on risk of dissipation.

4.2  The following matters bear emphasis. First, as set out at Decision §1.4, although these proceedings were pursued by BGAH JLs, the real protagonists were Mr Lau and D1. At Decision §§9.4 and 9.5, I noted that it is the Plaintiffs’ own evidence that in the context of the acrimonious corporate divorce, it was acknowledged that there were cross-allegations of misappropriation made by the two protagonists against the other and each of the protagonist took unilateral actions to protect his interest. It was in the foregoing context that I formed the view that I should be less ready to infer a risk of dissipation solely from the nature of the pleaded allegations.

(i) Grounds 2(a)

4.3  Ground 2(a) contends that (1) I was wrong in law in failing to consider the Plaintiff’s evidence on the substantive claim against D1 in assessing the risk of dissipation and (2) I was wrongly affected by my conclusion that there was no good arguable case on quantum in respect of the Ausca Transaction.

4.4  The first limb of Ground 2(a) is not reasonably arguable. I had set out at section 4 of the Decision the details on the Ausca Transaction and the Lohas Transaction, noting that they involved allegations of misappropriation of assets, use of nominees, various breaches of fiduciary duties and transactions at under value. Despite the arguments made to the contrary by D1 (set out at sections 5, 7 and 8 of the Decision), I formed the view that there was a good arguable case on liability and quantum on the Lohas Transaction and a good arguable case on liability on the Ausca Transaction. I also did not overlook the principle that a risk of dissipation can be premised on an inference to be drawn from the nature of the complaints made against D1: Decision §9.2

4.5  The second limb of Ground 2(a) is also not reasonably arguable. The Plaintiffs have not identified how I allowed my conclusion that there was no good arguable case on quantum in respect of the Ausca Transaction affect my assessment of risk of dissipation. There is no reference to any specific paragraph of the Decision in either the ANOA itself or in counsel’s submissions.

(ii) Grounds 2(b) and (c)

4.6  Ground 2(b) contends that the nature of the claims made against D1, involving concealment and serious misappropriation of P1’s assets, provides a solid basis for inferring a real risk of dissipation by D1 to avoid the consequences of a judgment against him. Ground 2(c) contends that the fact that these actions were undertaken in the context of an acrimonious corporate divorce in fact aggravate the risk and such background cannot justify any heightened standard of proof or heightened circumspection of P1’s pleading or evidence.

4.7  In the Plaintiffs’ written submissions, the risk aggravation is said to be demonstrated by D1’s willingness to contest every application, including those summarized at Decision §§3.4, 3.5 and 9.8.

4.8  I am not persuaded that Grounds 2(b) and (c) are reasonably arguable. As set out at Convoy Collateral Ltd v Cho Kwai Chee [2020] 6 HKC 81 §53, the question whether the Plaintiffs succeed in showing objectively that there is a solid basis for concluding that there is a real risk of dissipation is to be answered by examining the evidence holistically:

(1) As submitted by D1, the complaints made against D1 are not conduct akin to a straightforward theft of company assets;

(2) As pointed out above, the Plaintiffs’ own evidence acknowledged that Mr Lau and D1 had each made cross-allegations of misappropriation of assets against each other in the acrimonious corporate divorce;

(3) Against the above, the evidence at the substantive hearing was that, in respect of the only assets identified by the Plaintiffs (ie D1’s interest in Swatow) there was no allegation of dissipation.

4.9  As pointed out by D1, the above analysis did not, as a matter of principle, adopt a heightened standard of proof or circumspection. Instead, the above analysis involved a purely factual and evaluative assessment namely, that the acrimonious corporate divorce provides context for D1’s conduct, and subject to the new evidence, there was no other evidence showing dissipation on D1’s part.

(iii) Ground 2(cc)

4.10  Ground 2(cc), which is premised on the new evidence, contends that, in light of matters discovered by the Plaintiffs after the Decision and not available at the time of the Decision, D1’s interest in Swatow should not have been taken into account in assessing the risk of dissipation or supposed lack thereof (Decision §§9.1 and 9.7). The Plaintiffs contend that, contrary to the submissions of Dl advanced to the court, Swatow’s latest corporate records (which was filed 2 days after the issuance of the Notice of Handing Down of the Decision and 1 day before the handing down of the Decision) show that Swatow is not D1’s company: Dl does not hold more than 25% of the issued shares of Swatow and has no de facto control over Swatow.

4.11  At Decision §9.1, I observed as follows:

“The only asset identified by the Plaintiffs in the Application is a property development known as “Swatow Plaza” or “S+ Plaza” in Montreal, Canada held by Swatow Development Inc (“Swatow”). It has not been suggested that D1 has done anything untoward to put his interest in Swatow beyond the reach of the Plaintiffs.”

4.12  At Decision §9.7, I observed as follows:

“… As stated earlier, there is no allegation of dissipation of D1’s interest in Swatow.”

4.13  The new evidence relates to corporate information of Swatow newly discovered by BGAH JLs which shows that D1 no longer holds any substantial interest in Swatow (and that was the case before the Decision). Greenwood (CA) 2^nd sets out the following matters:

(1) Based on the Statement of Information on a Legal Entity in the Register of Companies (“SOI”) for Swatow obtained by BGAH JLs on 24 April 2025 (1 day before the Decision), it was recorded that D1 was the President of Swatow;

(2) Subsequently, on 28 April 2025 (ie 1 working day after the Decision), BGAH JLs discovered that a new SOI has since been published in respect of Swatow (“Swatow’s 28.4.2025 Statement”). The updated information was based on a Current Update Declaration for a Legal Entity filed by Swatow on 24 April 2025;

(3) Swatow’s 28.4.2025 Statement records, inter alia, D1 has ceased to be the President of Swatow since 8 June 2024 and one Hui Ying Wen is the only person identified as an ultimate beneficiary of Swatow from 1 January 2023 onwards;

(4) Under Canadian laws, an ultimate beneficiary refers to any person who controls and holds 25% of the shareholding or voting rights of the company, or who has control in fact;

(5) The Plaintiffs have requested D1 to clarify the nature and extent of his interest in Swatow. Notwithstanding the multiple opportunities afforded to D1, he has failed to provide a straightforward answer and has refused to explain his interest in Swatow with documentary evidence. There is also no explanation as to why the corporate records were filed in April 2025 when they were concerned with changes to corporate information which took place in 2023 and June 2024.

4.14  The 3 conditions in Ladd v Marshall for determining whether new evidence should be admitted for an appeal are: (1) the evidence could not have been obtained with reasonable diligence for use at the hearing below; (2) the evidence must be such that, if given, it would probably have an important influence on the result of the case, though it need not be decisive; and (3) the evidence must be such as is presumably to be believed or it must be apparently credible, though it need not be incontrovertible. All three conditions must be satisfied for new evidence to be admitted on appeal.

4.15  There is no dispute between counsel that Conditions 1 and 3 are satisfied. The debate between counsel is on Condition 2.

4.16  As pointed out by the Plaintiffs, the submissions made by D1 at the substantive hearing were as follows:

“… At least since 2019, [D1] has made known to the public his interest in Swatow. As Greenwood 2^nd states at §109 [D1] confirmed in his affirmation in HCA 2239/2019 that Swatow was ''his companv”

… The serious allegations of asset-stripping have been made against [D1] since 2019 in the P1 WU Petition.

Had [D1] been a person inclined to dissipate his assets, he would have ringfenced from enforcement (or otherwise concealed) his interest in Swatow. He would also have put such interest (or its traceable proceeds) beyond the JIs' reach especially after the P1 WU Petition has been presented. That he did not do so is extremely telling. The JLs have no evidence of any suspected acts of dissipation of assets regarding Swatow since 2019. It clearly negates any inference of risk of dissipation.”

4.17  The above submission was made in response to the Plaintiffs’ submissions that BGAH JLs have been able to identify evidence to suggest that D1 retained a significant interest in Swatow, a large commercial venture in Canada and therefore this was not a case where “the horse has bolted” despite the lapse of time.

4.18  I have considered D1’s evidence filed in opposition to the Leave Summons. In summary, he points out that it was always known to BGAH JLs that he was not the sole shareholder of Swatow and the reference to Swatow being “his company” in his affirmation in HCA 2239/2019 should not be understood as such. He further points out that the new evidence does not show that he has dissipated his interest in Swatow.

4.19  Counsel for D1 added that had there been any evidence that D1 was Swatow’s ultimate beneficiary (as defined under Canadian law) immediately before D1 knew that that he was being pursued by the Plaintiffs, then the new evidence might possibly show dissipation. But there is no such evidence.

4.20  The new evidence, in my view, satisfies Ladd v Marshall condition 2, for the following reasons:

(1) As is plain from the Plaintiffs' evidence (Greenwood (HC) 2nd §26.4.1), D1 was one of the 4 founding members of Swatow and Swatow was one of the corporate vehicles through which D1 held his interests in "Swatow Plaza" or "S+ Plaza";

(2) However, the mere fact that D1 was not the sole shareholder does not dilute the effect of the submission made by D1’s counsel at the substantive hearing, namely that Swatow was “his company” connoting D1 holding a substantial interest in Swatow. In my view, the foregoing is plainly at odds with the fact that one Hui Ying Wen is the only person identified as an ultimate beneficiary of Swatow from 1 January 2023 onwards;

(3) Moreover, the new evidence shows that D1 ceased to be the president of Swatow since 8 June 2024;

(4) As pointed out by the Plaintiffs, D1 has not provided any credible explanation as to why he failed to adduce evidence to clarify his interest in Swatow in 2019 to 2025;

(5) As such, the new evidence would probably have an important influence on the result of the intended appeal – specifically the assessment of whether there is a risk of dissipation by D1. The new evidence shows that D1 did not hold a substantial interest in Swatow since 1 January 2023. The two possibilities are: (a) D1 never held more than 25% shareholding, which scenario is contrary to the submissions made at the substantive hearing or (b) D1 did hold more than 25% shareholding which was subsequently reduced to under 25% by 1 January 2023 at the latest (at unspecified consideration). Either scenario would impact the court’s assessment that there was no real risk of dissipation arrived on the factual premise that there was no allegation that D1’s interest in Swatow had not been dissipated.

4.21  It follows from the above that Ground 2(cc) is reasonably arguable.

(iv) Ground 2(d)

4.22  Ground 2(d) is directed at Decision §9.7 where I took into consideration that there was no suggestion that businesses known to BGAH JLs to be related to D1 were operated surreptitiously. This ground makes the following complaint - the fact that there are still some valuable assets owned by D1 does not negate the risk of dissipation but rather it shows that the injunction sought will not be in vain.

4.23  The Plaintiffs relies on Norwich Union Fire Insurance Society Limited v Eden (LTA/95/7318/E, 25 January 1996) for the proposition that the risk of dissipation heightened as the action gets near to trial.

4.24  In my view, insofar as it is suggested that the existence of valuable assets does not negate the risk of dissipation is undoubtedly correct. Conversely, the existence of valuable assets does not in and of itself support risk of dissipation. Each case depends on its own facts. Norwich Union stands for the general proposition that a judge may infer from that fact that a good arguable case has been made out involving fraud in relation to a defendant of international background that there is a significant risk of dissipation. The point made at Decision §9.7 is that the manner in which the businesses were being operated – not surreptitiously – is a factor against risk of dissipation.

4.25  In my view, Ground 2(d) is not reasonably arguable.

(v) Ground 2(e)

4.26  This ground complains that I had erred in taking into account delay as a factor “militating against any professed concern of risk of dissipation of assets” (Decision §9.8). There is no basis, the Plaintiffs contend, to conclude that BGAH JLs had taken a view that there was no risk of dissipation. Further, such a conclusion would not be relevant or weighty as the Court should be concerned with whether, objectively, whether there is a risk of dissipation, rather than the subjective belief of the BGAH JLs at any given time.

4.27  In my view, the Plaintiffs have unwarrantedly read Decision §9.8 as importing a subjective element on the part of BGAH JLs. The point made at Decision §9.8 is that unexplained delay may militate against the risk of dissipation: China Art Bank Co Ltd v Xu Zhiqiang[2018] HKCA 63 §§23-26 and Convoy §79.

4.28  In my view, Ground 2(e) is not reasonably arguable.

5.   Ground 3

5.1  Ground 3 is directed at my assessment on the balance of convenience. It stands or falls together with Ground 2.

5.2  As stated above, I have declined to grant leave in respect of Ground 1 and only acceded to grant leave in respect of Ground 2(cc). The effect of the foregoing is as follows:

(1) The Application, insofar as it is based on the Ausca Transaction, fails as the Plaintiffs’ failed to demonstrate a good arguable case on quantum;

(2) Therefore, Ground 2(cc) on the appeal against risk of dissipation is only relevant in respect of the Lohas Transaction;

(3) As pointed out at Decision 10.4, the Relevant Vessels (being the subject matter of the Lohas Transaction) have been preserved pending trial upon undertakings offered by D5 and D6.

5.3  Whilst I have taken on board D1’s submission that Decision §10.4 should weigh heavily on the balancing exercise when it comes to the Lohas Transaction, I am unable to say that it is not reasonably arguable that should the Plaintiffs succeed in Ground 2(cc), the Court of Appeal would grant a Mareva injunction against D1 based on the Lohas Transaction. For this reason, I grant leave on Ground 3.

6.   Conclusion

6.1  For the above reasons, I accede to the Leave Summons and make a costs order nisi that the costs be in the cause of the intended appeal.

6.2  In respect of the Leave to Appeal Summons, I granted leave on Grounds 2(cc) and 3 of the ANOA insofar as they relate to the Application premised on the Lohas Transaction. In view of the relative success, I also make a costs order nisi that 60% of the costs be paid by the Plaintiffs to D1 and the remainder in the cause of the intended appeal.

Mr Bernard Man, SC leading Mr Justin Ho and Mr Jonathan Ng, instructed by Messrs Norton Rose Fulbright Hong Kong, for the 1^st - 3^rd Plaintiffs

Mr Julian Lam, instructed by Messrs Iu, Lai & Li, for the 1^st Defendant

HCA 631/2022

[2025] HKCFI 3487

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 631 OF 2022

_____________

_____________

_____________

DECISION

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1.   Introduction

1.1     By my decision dated 25 April 2025 (“Decision”), I dismissed the Plaintiffs’ application for a worldwide Mareva injunction against D1, ie the Application[1]. At Decision §11.2, I directed the parties to lodge their submissions.  This is my decision on the issue of costs.

1.2     D1 seeks an order that the costs of the Application be paid by the Plaintiffs on an indemnity basis and a certificate for 3 counsel[2].  The Plaintiffs agree that D1 is entitled to costs in principle and do not object to a certificate for 3 counsel.  However, the Plaintiffs say that the present case does not attract an order for indemnity costs, and given the relative success of the parties on the issues, there should be an appropriate discount on D1’s costs entitlement.  In any event, the Plaintiffs observe that the quantum claimed, over HK$11 million for an interlocutory application, is excessive by any measure.

2.   Whether discount on D1’s costs entitlement

2.1     As may be seen from Decision §4.1, the Plaintiffs’ overall case of misappropriation of assets against D1 is made by reference to the Ausca Transaction and the Lohas Transaction.  In dismissing the Application:

(1)     I decided that there was no good arguable case on quantum in respect of the Ausca Transaction (Decision §7.24);

(2)     Whilst I came to the view that the Plaintiffs were able to surmount the merit threshold in respect of the Lohas Transaction (Decision §§8.2 to 8.3), I ultimately found that the Plaintiffs were unable to establish a risk of dissipation of assets (§§9.6-9.8) and the balance of convenience lies against the grant of the Application (§§10.2-10.4).

2.2     The only factor which the Plaintiffs rely on as justifying a discount of D1’s costs entitlement is the fact that the D1 failed to persuade me that the Lohas Transaction did not meet the merit threshold of a good arguable case (“Failed Issue”).

2.3     I have considered the parties’ submissions.  There is no dispute between counsel that where, as here, D1 is the successful party, he should be entitled to costs.  The only question is whether a discount is appropriate. Essentially:

(1)     D1 submits that an issue-based costs order should not be so readily made as to undermine the utility of the general rule that costs should follow the event (Pony HK World Ltd v Vand Petro-Chemicals (BVO Co Ltd), FACV 4/2013, 1 March 2014 at §4), and in any event, it cannot be said that the Failed Issue can be characterized as so distinct and separate in itself that the decision of it constitutes an “event” (Hong Kong Kam Lan Koon Ltd v Realray Investment Ltd (No 4) [2005] 4 HKC 162 at §13) nor can it be said that the Failed Issue had caused a significant increase in the length or costs as the Failed Issue was inextricably woven with the issues of risk of dissipation and balance of convenience;

(2)     Conversely, the Plaintiffs disagree with D1’s characterization of the Failed Issue and contend that the Lohas Transaction was one separate from the Ausca Transaction and had significantly increased the length or costs of the proceedings, relying on the observations made at Decision §§8.1 and 8.2, namely that very detailed submissions were made by D1 but the “valiant” attempt ultimately was in vain.  The Plaintiffs say that under RHC Order 62, rules 5(1)(e) and 5(2)(a) and (b), in exercising its discretion as to costs, the court may take into account the conduct of the parties, including whether it was reasonable for, and the manner in which, a party raise or pursue a particular allegation or issue.

2.4     At the end of the day, the court has to exercise its discretion to achieve a just result having regard to the circumstances of the case: Hong Kong Kam Lan Koon §14.

2.5     As regards the Plaintiffs’ submission that D1 did not merely adopt a light-touch attempt to deal with the Lohas Transaction but took a deliberate decision to mount a full-throated and comprehensive attack in the context of an interlocutory application, it seems to me that the following observations made in Chinaplus Wines Ltd v Berry Bos & Rudd Ltd & Ors, HCA 1818 of 2012, 13 December 2012 are apposite:

“[52] I have alluded to the amount of evidence filed in this application in para 22 above. Both Mr Huggins and Mr Burns have fairly agreed that there is an excessive amount of evidence in this application.

[53] With respect, the parties (and their lawyers) appear to have lost sight of the fact that this is an interlocutory application and the court is not required, and indeed will not be able, to make any finding of fact on the disputes before it. It is plainly unhelpful to swamp the court with such a mountain of evidence for an application of this nature. For example, there are no less than 8 affidavits from CWL’s customers to prove how they dealt with CWL in the purchase and storage of their wine. Another example is the detailed evidence on how customer data was input into the computer system. There is simply no chance that all the evidence will be read by the court. During the hearing, it became apparent that counsel also struggled with the details in this case.

[54] Over the years, on countless occasions the court had lamented upon the excessive volume of evidence. I cite, as an example, the observation by Stone J in Jau-Hwa Stewart v E Excel Ltd & Ors, unrep, HCA 2493/01, para 3 :

‘This is a case which is larded with detail. It has attracted a very considerable amount of paper, there being well over 30 affidavits and some 15 box files placed before the court at this inter partes stage, together with skeleton arguments from each camp each in excess of 100 pages. I am reminded of Lord Templeman’s celebrated observation that disputed interlocutory applications should be measured in hours, not days. …’

Advice like this has fallen upon deaf ears and such excesses would no longer be tolerated.

[55] At the risk of explaining the obvious, it should not be forgotten that the court has limited time for pre-hearing preparation. Reading time will have to be found. To put the matter in context, one of the affidavits filed by the defendants is 62 pages in length and it required over 2 hours to read. It should also be remembered that the court has a duty to all the users. Time wasted on irrelevant material means that the court has less time to read the useful material or to deal with other cases. This kind of excess therefore impacts adversely on the system as a whole.

[56] The professionals are obviously not free from blame in this regard. It is the duty of solicitors, and counsel if they are involved, to temper the enthusiasm of the hot-headed litigant and to ensure that the court will be assisted rather than hampered in the performance of its duty. Ironically, in the affidavits of both sides it had been said that some of the material adduced before the court was irrelevant and would therefore not be answered. It is the professionals who should be controlling the conduct of court proceedings. The same applies to other professionals in their fields. If a bridge collapsed, the engineers would have to answer for it. From now on, lawyers should be prepared to answer to the court for the failing of their duty in controlling the amount of evidence filed.

[57] However, it ought to be recognised that it is not always easy to decide what is or is not relevant and how much detail is to be adduced in evidence. Proper consideration will be given to such matters and costs penalty will only be imposed on clear case.

[58] This is one such case. I have given an opportunity to the parties to make submissions on what costs have been wasted and how they should be assessed. However, I am unable to derive any assistance from the correspondence received by the court in this regard.

[59] Doing the best I can with a broad brush approach, and erring on the side of conservatism, I disallow 25% of the total costs of preparing the evidence in this application.” (emphasis added)

2.6     Although the observations made in Chinaplus Wines are directed at the volume of evidence, it seems to me that they are in principle applicable to case preparation generally. 

2.7     I bear in mind the admonition that the discretion to impose costs sanctions should only be exercised in clear cases.

2.8     In the present case, I have no hesitation in coming to the view that D1 should be deprived of some of the costs as a result of the Failed Issue.  I disagree with D1 that the merits of Lohas Transaction were intertwined with the issue of risk of dissipation and balance of convenience:

(1)     As can be seen from Decision §§9.6 and 10.3, my conclusions that the issues of risk of dissipation and balance of convenience should be decided in D1’s favour was reached despite having found that the Plaintiff’s case on the Lohas Transaction met the merit threshold;

(2)     As observed at Chinaplus Wines §53 and is trite, whilst I had commented at Decision §8.2 that the picture painted by D1 “was credible”, the existence of a good arguable defence does not negate a good arguable case (Decision §6.2(4));

(3)     By way of a quantitative indication, of the 146-page Skeleton Submissions (not including appendices) lodged by D1, 40 pages were dedicated to the Lohas Transaction.  Of the 56-page Speaking Note lodged by D1 consisting of 148 paragraphs, §§80-130 were dedicated exclusive to the Lohas Transaction;

(4)     In my view, it is clear that the position adopted by D1 on the Lohas Transaction was ambitious and had unnecessarily increased the length or costs of the hearing.

2.9     Taking a broad-brush approach, I disallow 30% of D1’s costs entitlement.

3.   Whether indemnity costs

3.1     It is common ground that indemnity costs can only be justified by some “special or unusual feature”: Town Planning Board v Society for Protection of the Harbour Ltd (No 2) (2004) 7 HKCFAR 144 §§13-15.  Abuse of process may justify an order for costs to be taxed on an indemnity basis: Overseas Trust Bank Ltd v Coopers & Lybrand (a firm) [1991] 1 HKLR 177 at 183A-B.

3.2     D1 says that the Application amounted to an abuse of process, on the grounds that (1) there was inordinate delay and (2) in view of the indisputable longstanding legal battle between D1 and Mr Lau Wing Yan, the Plaintiffs only made provision for very modest legal fees in the Application.

3.3     I agree with the Plaintiffs that this is not a case justifying the imposition of indemnity costs.  Despite arguments to the contrary made by D1, the Plaintiffs were able to establish a good arguable case on liability in respect of the Ausca Transaction and a good arguable case on both liability and quantum in respect of the Lohas Transaction.  As is plain from the authorities, delay does not as a matter of course defeat an application for a Mareva injunction and the monetary exception sought to be imposed by the Applicant is but an aspect to be argued between the parties, had the Application been successful.

3.4     I decline to accede to D1’s invitation for an order that costs should be taxed on an indemnity basis.

4.   Whether summary assessment

4.1     Whilst Decision §11.2 directed D1 and the Plaintiffs to lodge and serve their Statement of Costs and his Statement of Objection respectively, no order was made for summary assessment.

4.2     Having perused D1’s Statement of Costs by which a sum of over HK$11 million is claimed, I agree with the Plaintiffs that the claimed quantum is on any view excessive. 

4.3     As is stated at Hong Kong Civil Procedure 2025 Note 62/9A/1, whether to carry out summary assessment is discretionary, and in a case whether the costs claimed are substantial, summary assessment may be unsuitable.

4.4      I decline to carry out summary assessment.  It seems to me that the costs claimed by D1, if persisted with, should be subject to the process of taxation and in that process be examined under the scope of the factors enumerated under RHC Order 62, rule 3A.  Should D1 proceed with taxation of the quantum sought, in deciding whether D1 should be entitled to the costs of the taxation, regard will be had to, for example (1) the amount by which the bill of costs has been reduced and (2) whether it is reasonable for a party to claim the costs of a particular item or to dispute that item.

5.   Conclusion

5.1     For the above reasons, I make an order that the Plaintiffs are to pay to D1 70% of the costs of the Application (including the costs of the costs arguments) on a party-and party basis, with a certificate for 3 counsel (except a certificate for 2 counsel is to apply to the costs of the costs arguments) to be taxed if not agreed.

Mr Justin HO and Mr SIK Chee Ching, instructed by Messrs Norton Rose Fulbright Hong Kong, for the 1^st - 3^rd Plaintiffs

Mr WONG Yan Lung, SC leading and Mr Byron CHIU, instructed by Messrs Iu, Lai & Li, for the 1^st Defendant

HCA 631/2022

[2025] HKCFI 1671

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 631 OF 2022

________________

________________________

_______________

D E C I S I O N

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1.  Introduction

1.1  By their summons dated 5 December 2023, the Plaintiffs seek (1) a worldwide Mareva injunction against the 1^st Defendant (“D1”)[1] and his son the Intended 12^th Defendant (“Chu Jr”) and (2) a proprietary injunction against D5 and D6. The monetary limit sought to be imposed against D1 is in a very substantial sum of US$94.2 million, premised on 2 allegedly wrongful transactions termed the “Ausca Transaction” and the “Lohas Transaction”.

1.2  The application against Chu Jr was adjourned sine die with liberty to restore and the application against D5 and D6 was disposed of by way of undertakings.

1.3  This is my decision on the Plaintiffs’ application against D1 (“Application”). At the hearings, the Plaintiffs were represented by Mr Victor Joffe SC (leading Messrs Justin Ho, Jonathan Ng and Sik Chee Ching) and D1 by Mr Wong Yan Lung SC (leading Messrs Julian Lam and Byron Chiu).

1.4  The Application is somewhat usual. The Plaintiffs’ complaints against D1 took place in 2016 and 2017 and they represent one facet of a longstanding and expansive legal battle between D1 and Mr Lau Wing Yan (“Mr Lau”) which has spawned at least 33 sets of legal proceedings and has been described by various judges as an acrimonious corporate divorce. Although these proceedings are pursued by the liquidators of P1 (“BGAH JLs”), it is acknowledged by Mr Joffe that the dynamics of the present proceedings is that D1 and Mr Lau are the 2 protagonists. The Application was taken out on an inter-partes basis in December 2023 when these proceedings were commenced by way of a protective writ issued on 27 May 2022. Whilst it is common ground that the court should not embark upon a mini-trial on affidavit evidence, very extensive submissions were lodged by counsel teams to debate whether a good arguable case has been made out.

1.5  As is trite, the existence of a good arguable defence does not necessarily negate a good arguable case. In my view, it is unnecessary to deal with various aspects of counsel’s submissions in the level of details which counsel might think they deserve. For the reasons set out below, despite the fact that I am of the view that the Plaintiffs have demonstrated a good arguable case on liability, the Application should be dismissed principally on the bases that the Plaintiffs have failed to demonstrate (1) a good arguable case on quantum in relation to the Ausca Transaction to justify the monetary limit of US$94.2 million and (2) generally and perhaps more weightily there is a risk of dissipation of assets.

2.  Background[2]

2.1  Mr Lau and D1 used to be partners in a substantial shipping business. Ocean Sino Ltd (“OSL”) was a company they incorporated in the BVI as equal shareholders and they were its directors. Pacific Bulk Asset Management Ltd (“PBM”), incorporated in Hong Kong, was a wholly-owned subsidiary and they were also the directors of PBM.

2.2  P1 was set up in December 2009 as a joint venture between PBM (49%) and Beibu Gulf Holding (Hong Kong) Co Ltd (“BBGH”). BBGH was the Hong Kong subsidiary of Guangxi Beibu Gulf International Port Group Ltd, a PRC state-owned enterprise (“Guangxi BBG”). To reflect their respective ownerships, at the outset, PBM nominated 2 directors to the board of P1, namely Mr Lau and P1, and 3 directors were nominated by BBGH.

2.3  P1 was formed to carry on 3 lines of businesses, namely (1) investment in dry bulk vessels, (2) dry bulk chartering business which was carried on by a wholly-owned subsidiary Beibu Gulf Shipping Ltd (“BBG Shipping”) and (3) dry bulk trading business which was carried on by another wholly-owned subsidiary Beibu Gulf Resources Ltd (“BBG Resources”).

2.4  In the course of its operations, P1 obtained funds by way of capital injections and loans, the bulk of which was used for daily operation reserve and the acquisition of dry bulk vessels. PBM and BBGH made capital injections into P1 (in the respective sums of US$9,800,000 and US$10,200,000) and advanced additional shareholders’ loans in the respective sums of US$36,298,272 (“PBM Loan”) and US$37,779,833.24 (“BBGH Loan”). Of the foregoing sums, US$5,000,000 was paid to BBG Shipping as its share capital.

2.5  In relation to the acquisition of dry bulk vessels by P1, relevant to the Application are 2 vessels, namely MV BBG Hope and MV BBG Glory (collectively “Relevant Vessels”):

(1)  MV BBG Hope was held by Hope BBG Shipping Ltd (“Hope BBG Shipping”) which was a wholly-owned subsidiary of P2 which was in turn wholly-owned by P1;

(2)  MV BBG Glory was held by Glory BBG Shipping Limited (“Glory BBG Shipping”) which was a wholly-owned subsidiary of P3 which was in turn wholly-owned by P1.

2.6  The acquisition and construction of the Relevant Vessels were financed by, inter alia, banking facilities (“CS Facility”) secured by mortgages over the Relevant Vessels.

2.7  Between 2012 and 2013, in addition to the Relevant Vessels, two other vessels, namely MV BBG Endeavor and MV BBG Bright were completed and delivered to P1. The acquisition and construction of these vessels were financed by loans granted by another bank (“BNP Facility”).

2.8  In late 2013, the relationship between Mr Lau and P1 deteriorated and eventually broke down.

2.9  On 27 May 2015, Mr Lau commenced proceedings in the Commercial Division of the Eastern Caribbean Supreme Court (“BVI Commercial Court”) to wind up OSL on the basis that there was deadlock at the shareholder and director levels and on just and equitable grounds. OSL was ordered to be wound up on 29 June 2017, which order was subsequently set aside on appeal on 17 January 2020 but restored by the Privy Council on 12 October 2020.

2.10  In the meantime, as stated on the website of BG Shipping Co Ltd (“BG Shipping”), it was set up by Guangxi BBG in September 2015, foreshadowing the eventual (and undisputed) “withdrawal” of BBGH/Guangxi BBG from their involvement in P1.

2.11  At a board meeting of P1 held on 15 and 16 December 2015 (“December 2015 Board Meeting”), it was resolved that:

(1)  P1 agreed to sell to BBGH two of the vessel-holding companies holding MV BBG Bright and MV BBG Endeavor, by setting off the BBGH Loan against the purchase price, and any remaining balance of the BBGH Loan would be paid to BBGH;

(2)  P1 agreed to apply the PBM Loan to discharge the CS Facility, with the remaining balance to be paid into an escrow account for the benefit of PBM. After the difference between the PBM Loan and the value of MV BBG Hope and MV BBG Glory was paid by PBM, the shares in Hope BBG Shipping and Glory BBG Shipping would be transferred to PBM.

2.12  The December 2015 Board Meeting was attended by Mr Lau, D1, Mr Zhou Xiaoxi ("Mr Zhou") and Mr Ma Zhengguo ("Mr Ma"). Mr Zhou and Mr Ma were the directors nominated by BBGH[3].

2.13  On 7 January 2016: (1) BBGH acquired the vessel holding companies holding MV BBG Bright and MV BBG Endeavor and (2) Bright Good (Asia) Limited (“Bright Good”) purchased BBGH’s 51% interest in P1 at the consideration of US$21,338,965.08.

2.14  On 5 February 2016, Bright Good transferred 6% of its shareholding in BGAH to Polyrise Team Limited (“Polyrise”). After Bright Good and Polyrise became shareholders of P1:

(1)  D8 and D9 were appointed as directors of P1 and the directors nominated by BBGH resigned on 5 February 2016;

(2)  Mr Lau was removed as a director on 10 March 2016;

(3)  D7 was appointed to replace D9 on 21 June 2016;

(4)  D1 ceased to be a director on 12 June 2017.

3.  Procedural history

3.1  The Application is supported by the 2^nd and 6^th Affidavits of Mr John Nicholas Greenwood (“Mr Greenwood”).

3.2  Mr Greenwood is and was at all material times one of the joint liquidators of OSL (“OSL JLs”). Following their appointment, the OSL JLs took control of PBM and carried out investigations into P1’s affairs.

3.3  On 23 August 2019, upon taking legal advice, PBM issued a petition to wind up P1 (“BGAH Petition”) on insolvency grounds as well as just and equitable grounds, which included pleas relating to the Ausca Transaction and the Lohas Transaction.

3.4  On 22 October 2019, P1 applied to strike out the BGAH Petition, which application was dismissed by Anthony Chan J on 26 November 2021 (“Strike-Out Decision”). BGAH was subsequently wound up on 6 December 2021 on insolvency grounds[4].

3.5  After P1 was wound up, there were disagreements on the identity of the liquidators to be appointed. Eventually, on 13 January 2023, Master Rita So appointed Mr Greenwood (and 2 others) as the BGAH JLs.

3.6  Whilst the appointment of P1’s liquidators was pending, PBM made an urgent application in May 2022 for leave to issue the writ in the present action, which application was allowed on 19 May 2022.

3.7  Following the appointment of the BGAH JLs in January 2023, they have taken control of P2 and P3. The protective writ was served on the Defendants in around May 2023, and the Statement of Claim was filed on 3 November 2023. The Summons was subsequently issued on 5 December 2023.

4.  The Plaintiff’s claims against D1

4.1  As summarized by Mr Joffe, the Plaintiffs’ claims against D1 are premised on an allegation that D1 had misappropriated assets and businesses from P1 and its subsidiaries (“Group”) by reference to Ausca Transaction and the Lohas Transaction. Central to the Plaintiffs’ claim is the allegation that D1 secretly acquired control of BBGH’s 51% interest in P1 behind Mr Lau’s back, and with his newfound control, D1 then populated the board of P1 with his nominees and removed Mr Lau as director.

4.2  Only by way of background (and not for the purpose or raising any estoppel arguments), Mr Joffe refers to a number of observations made by the Privy Council in its judgment restoring the winding-up of OSL:

“ [28] … it was resolved at board level in [P1] in December 2015 [ie the December 2015 Board Meeting] that its four ships would be divided equally between PBM and [BBGH]. Mr Chu [D1] then engineered what he called a re-financing of the two ships due to be transferred to PBM (called the Lohas Transaction) which, although taking place primarily at the [P1] level, involved what the judge held to be a commitment of valuable assets of PBM without authority and behind Mr Lau’s back.

[29] In January 2016 [BBGH] sold its interest in [P1] to [Bright Good] which in February 2016 sub-sold a 6% stake in [P1] to [Polyrise]. Mr Lau claimed, and the judge found, that Mr Chu and associates beneficially owned [Bright Good] and Polyrise, which then combined at shareholder level in [P1] to remove Mr Lau as a director, and then to sell its ship chartering and commodity trading businesses to [D2] [ie the Ausca Transaction], a company beneficially owned by [Chu Jr]. The judge held that the acquisition of control of [P1] by [Bright Good] and Polyrise, without disclosure of his interest, may arguably have amounted to a breach by [D1] of his fiduciary duty to PBM and OSL.

[79] [Reciting the findings of the first instance judge] The judge went on to summarise his relevant findings on just and equitable winding up as follows:

‘ C. [D1] had managed to engineer, in my judgment, a situation whereby he, or associates of his, seized effective overall control of [P1] by [Bright Good] and Polyrise in order to exclude Mr Lau from any participation in management (via OSL and PBM) of PBM’s 49% interest in [P1] and, thereby in its subsidiaries. All this was done or engineered by D1 (in breach, it might well be said, of his fiduciary obligations to his partner in OSL, Mr Lau) without properly or fully informing Mr Lau despite his personal interest via PBM’s 49% share and his own 50% share in OSL. He removed, or secured the removal of Mr Lau as director of [P1] and its subsidiaries, and diverted the two operating subsidiaries (BBG Shipping and BBG Resources) to a company, [D2], which he now accepts is owned by [Chu Jr] and of which he is a director and moreover without any cogent due diligence or any approach or explanation to Mr Lau [ie the Ausca Transaction] …

D. Moreover, he caused PBM, without PBM’s and Mr Lau’s true knowledge or consent, to participate in a re-financing transaction (the Lohas Transaction), to its detriment; …’”

(i)  The Ausca Transaction

4.3  On 23 May 2016, the board of P1 passed resolutions resolving to sell BBG Shipping and BBG Resources to D2 at the consideration of US$5,000,000 and US$100,000 respectively. At that time, Mr Lau had already been removed from the board of P1 and the directors were D1, D8 and D9. D1 abstained and only D8 and D9 voted on the resolutions. It is not in dispute that Chu Jr had an interest in and was a director of D2. According to the relevant minutes, that was the stated reason for D1’s abstention at the meeting.

4.4  The US$5.1 million figure was achieved by a purported accounting treatment (“Purported Accounting Treatment”), involving BBG Shipping and BBG Resources declaring dividends in the amount of US$24,936,070 and US$208,794 respectively (totalling US$25,144,864), which would bring down the “equity” of the 2 companies respectively to US$5,000,000 and US$100,000 (ie to the par value of the registered share capital of the 2 companies).

4.5  The Plaintiffs say that the Ausca Transaction was wrongful for at least 3 reasons. First, there was a clear case of conflict. Secondly, the transaction was structured in an uncommercial way. Thirdly, the transaction was entered into at a serious undervalue.

4.6  In terms of conflict of interest, Mr Joffe elaborates as follows:

(1)  As a director of P1, Mr Chu owed a fiduciary duty to act in the best interests of P1, and in particular, the duties not to place himself in a position where there was real possibility of conflict and not to profit by virtue of his position as a director;

(2)  D2 did not pay the US$5.1 million consideration with its own funds. Instead, the funds came from Pacific Logistics CN‑Net Limited, a company owned and controlled by D1;

(3)  Despite D1’s attempt to suggest that Chu Jr was operating his own business, there is good reason to believe that Chu Jr was merely acting as nominee of D1 and that D2 was in reality a company controlled by D1;

(4)  The evidence shows that D8 and D9 were in fact nominees of D1;

(5)  Despite D1 alleging that the Ausca Transaction was entered into after Chu Jr negotiated with P1, the BGAH JLs have not been able to find any documentary evidence (and none has been provided by D1) showing that P1 had engaged in arm‑length negotiations, or that D2 had conducted any due diligence, or that P1 had obtained any independent legal advice. Given the size and the complexity of the transaction, this is highly irregular. The irresistible inference is that the Ausca Transaction was not a genuine commercial deal, but part of D1’s scheme to divest P1’s businesses to himself / Chu Jr.

4.7  On the allegation that the Ausca Transaction was structured in an uncommercial way, Mr Joffe submits as follows:

(1)  The Purported Accounting Treatment involving a declaration of dividends was highly artificial. BBG Shipping only had US$14,036,749 in the form of available cash as at 31 December 2015. Likewise, BBG Resources only had net equity in the amount of US$138,856 as at 31 December 2015. Declaring the dividends would have had a severe impact on BBG Shipping and BBG Resources’ financial position;

(2)  D1 has no answer as to why the Ausca Transaction was structured this way, ie by declaring substantial dividends. His position is that he did not participate in the decision‑making process;

(3)  It is the Plaintiffs’ case that P1 never received the promised dividend of US$25,144,864. The only evidence on the dividends were two letters dated 31 August 2016, purporting to show that BBG Shipping and BBG Resources had declared dividends in the amount of US$835,199.34 and US$38,856 respectively (totalling US$874,055.34). These letters purported to suggest that the entirety of the US$25,144,864 outstanding dividends had been settled;

(4)  The remaining sum, approximately US$24 million (US$25,144,864 – US$874,055.34) is missing. Despite extensive investigations by the BGAH JLs, it is not clear where the cash went. The BGAH JLs are only in a position to say that this remaining sum was purportedly settled by (i) assigning receivables due to BBG Shipping to P1, (ii) creating a receivable due from BBG Shipping to P1, and (iii) offsetting receivables purportedly due from P1 to BBG Shipping. In other words, a significant sum of cash due to P1 was purportedly settled by a series of accounting treatments moving money on paper, which the BGAH JLs were (and remain) unable to verify.

4.8  As regards the allegation that BBG Shipping and BBG Resources were disposed of at a serious and gross undervalue, Mr Joffe explains as follows:

(1)  In anticipation of the Ausca Transaction, P1 procured a purported valuation report issued by Jones Lang LaSalle Corporate Appraisal and Advisory Limited (“JLL Report”) dated 14 March 2016, which valued BBG Shipping and BBG Resources at US$1,902,570 and US$33,857 respectively;

(2)  The JLL Report did not set out how it arrived at the valuations. It appears to be heavily based on the financial forecast of the two companies provided in Appendix C of the report, that is, projections which were provided by the management. Those forecasts assumed that BBG Shipping would be substantially loss making in the years between 2016 and 2019;

(3)  However, a valuation report dated 20 November 2023 which the BGAH JLs obtained from FTI Consulting (Hong Kong) Ltd (“FTI Report”) valued BBG Shipping at around US$83.1 million as of 31 December 2015, a few months before the Ausca Transaction. This independent valuation report is the clearest evidence that the Ausca Transaction was effected at an undervalue. The net result was that for disposing of two subsidiaries that were worth at an independent valuation over US$83 million to a related party, P1 only received US$5.1 million together with dividends of US$874,055.34;

(4)  In order to justify the result in the JLL Report, D1 tries to say that BBG Shipping had no future; that the company would go downhill because (i) BBGH began its own dry bulk shipping and logistics business in 2015; and that (ii) BBG Shipping and BBG Resources could not have carried on their business model after BBGH’s exit;

(5)  In opposition to the Application, D1 procured a valuation report from Grant Thornton Advisory Services Limited dated 2 May 2024 (“GT Report”), which values: (a) BBG Shipping at US$1,095,557 and US$29,916,071, excluding and including cash and balances due to and from related parties and (b) BBG Resources at nil and US$138,856, excluding and including cash and balances due to and from related parties;

(6)  The GT Report is not helpful in dismissing concerns that the Ausca Transaction was at an undervalue, principally because it takes for granted D1’s assumption of a “Fundamental Change”, namely D1’s own outlook as to why BBG Shipping and BBG Resources were not viable businesses;

(7)  Indeed a key criticism of the FTI report by the GT Report was that it did not take into account the “Fundamental Change”, ie D1’s own view of the outlook of BBG Shipping and BBG Resources;

(8)  He emphasizes that the precise business prospects of BBG Shipping and BBG Resources are not something that can be resolved at the interlocutory stage.

(ii)  The Lohas Transaction

4.9  It is the Plaintiffs’ case that the Lohas Transaction constituted a complex scheme to strip away from P1’s subsidiaries their principal assets, namely MV BBG Hope and MV BBG Glory.

(1)  As stated earlier, the purchase of the Relevant Vessels was financed by the CS Facility;

(2)  On 28 December 2015, a loan agreement was executed between (a) P2, P3, Hope BBG Shipping, and Glory BBG Shipping as borrowers and (b) D3 as lender, whereby D3 agreed to make available a term loan to the borrowers (“Premier Bright Loan”). The purpose of the Premier Bright Loan was to enable repayment of the CS Facility;

(3)  The Premier Bright Loan was initially secured by P2 and P3 mortgaging their respective shares in Hope BBG Shipping and Glory BBG Shipping (“Hope and Glory Share Mortgages”);

(4)  The evidence suggests that there was a drawdown of US$9.1 million (“1^st Drawdown”), and the CS Facility was apparently fully repaid on 29 December 2015;

(5)  Nevertheless, on around 23 May 2016, D3 and the borrowers agreed to another drawdown of US$8.7 million (“2^nd Drawdown”). The parties executed an addendum to the Premier Bright Loan (“Addendum”), whereby the borrowers agreed to grant further security for this 2^nd Drawdown. In this regard, further security was executed, including (i) mortgages over MV BBG Hope and MV BBG Glory (“Ship Mortgages”) in favour of D4, as nominee of D3; and (ii) mortgages over P1’s shares in P2 and P3 in favour of D3 (“Shining and Palace Mortgages”);

(6)  A month later, in around June 2016, the borrowers allegedly defaulted on their minimum repayment obligations under Clause 6.1(a) of the agreement for the Premier Bright Loan, notwithstanding that these only required a payment of US$250,000 (“Clause 6.1(a) Repayment”);

(7)  In June 2017, D4 purported to enforce the Hope and Glory Share Mortgages, thereby obtaining control over Hope BBG Shipping and Glory BBG Shipping;

(8)  In around July 2017, Hope BBG Shipping and Glory BBG Shipping attempted to sell the Relevant Vessels to Raffles Shipping International Pte Ltd (“Raffles”) at US$14.5 million each. The sale fell through in light of Mr Lau’s challenge to the Premier Bright Loan, which was widely reported in the industry;

(9)  Nevertheless, in around August 2017, Hope BBG Shipping and Glory BBG Shipping managed to sell the Relevant Vessels to D5 and D6, at a consideration of US$11 million each.

4.10  In so far as relevant to the Application, the Plaintiffs say that the Lohas Transaction was wrongful for at least the following reasons:

(1)  There was no commercial justifications for entering into the Lohas Transaction;

(2)  The Relevant Vessels were sold to D5 and D6 at a significant undervalue.

4.11  On the allegation of no commercial justification, Mr Joffe’s submissions may be summarized as follows.

4.12  First, there was no sensible commercial rationale to enter into the Premier Bright Loan and the Hope and Glory Share Mortgages in December 2015 since P1 had sufficient funds to discharge the CS Facility. For the year ended 31 December 2015, the Group’s bank balances and cash stood at US$20,048,128 after the CS Facility had been discharged on 29 December 2015. As such, it was unnecessary for P1 to enter into the Premier Bright Loan or apply for the 1^st Drawdown in the sum of US$9.1 million to discharge the CS Facility.

4.13  Secondly, the Addendum, the Shining and Palace Mortgages and the Ship Mortgages and the 2^nd Drawdown in the sum of US$8.7 million in May 2016 were commercially inexplicable. Given that the CS Facility had already been repaid, there was no apparent reason why the borrowers needed the 2^nd Drawdown.

4.14  Thirdly, the purported default in the Clause 6.1(a) Repayment in the sum of US$250,000 by the borrowers on the Premier Bright Loan shortly after the Addendum was executed was artificial and engineered. Given that the borrowers had just applied for the 2^nd Drawdown in the sum of US$8.1 million in May 2016, it is incomprehensible that there would be a default immediately in June 2016.

4.15  Fourthly, there are reasonable grounds to believe that the transactions relating to the Premier Bright Loan were not at arms-length and that D3 only acted as D1’s front.

4.16  Fifthly, it is highly doubtful that the enforcement actions purportedly taken by D3 and/or D4 were in fact genuine. Instead, they evince a dissipation of P1’s assets.

(1)  On around 9 June 2017, a meeting allegedly took place between representatives of P1, D1, D3 and D4, whereby the parties reached an in-principle agreement that, inter alia, Shining and Palace would purportedly be sold by P1 to a company designated by D1. The net effect of the arrangement would be that MV BBG Glory and MV BBG Hope would be transferred to entities under D1’s control, which was highly unusual;

(2)  The foregoing arrangement did not materialize. Instead, shortly after the BVI Commercial Court had circulated a draft judgment in the BVI Winding-Up Proceedings on 21 June 2017, D4 purported to enforce the Hope and Glory Share Mortgages, which ultimately resulted in the divestment of Hope BBG Shipping and Glory BBG Shipping to D3 on or around 30 June 2017. It cannot be a coincidence that the enforcement actions took place immediately after the draft judgment was circulated, when the default on the Premier Bright Loan had purportedly occurred a year previously, in June 2016;

(3)  Almost immediately thereafter, on around 5 July 2017, D3 procured Hope BBG Shipping and Glory BBG Shipping to enter into contracts of sale with Raffles for the sale of the Relevant Vessels at the purchase price of US$14,550,000 per vessel. The extremely short timeframe between the enforcement of the Hope and Glory Share Mortgages and the sale to Raffles is alarming. This is suggestive of an attempt to quickly liquidate the assets, which could then be dissipated with ease;

(4)  However, as a result of Mr Lau’s challenge to the Premier Bright Loan, the sale to Raffles eventually fell through. This was widely reported by Tradewinds, a leading shipping industry publication in July and August 2017;

(5)  The collapse of the deal with Raffles did not deter the plan to immediately dissipate the Relevant Vessels. Shortly thereafter, on or around 15 August 2017, MV BBG Hope and MV BBG Glory were purportedly acquired by D5 and D6 at the consideration of US$11 million each. The bona fides of the sale of the Vessels is highly questionable.

4.17  Sixthly, in order to justify the Lohas Transaction, D1 places heavy emphasis on an alleged tripartite agreement between P1, BBGH and PBM to the effect that, inter alia, PBM would acquire MV BBG Glory and MV BBG Hope (“Alleged Vessel Purchase Agreement” or “Tripartite Agreement”). Mr Joffe says that this argument is devoid of any merit for the following reasons:

(1)  Regardless of whether the Alleged Vessel Purchase Agreement actually existed, or whether there was any breach of the agreement by PBM, the short point is that the Lohas Transaction could not be justified. Even if PBM had not acquired the Relevant Vessels, it was perfectly possible for P1 to dispose of the Relevant Vessels at their fair market value, as opposed to on a mortgagee sale basis;

(2)  Further, D1’s attempt to relitigate the issue of the existence of the Alleged Vessel Purchase Agreement amounts to a collateral attack on the Strike-Out Decision and is impermissible.

4.18  On the allegation that the sale of the Relevant Vessels was at significant undervalue, the BGAH JLs rely on a vessel valuation provided by Mr Paul Willcox dated 31 July 2024 (“Willcox Report”) which opined that the fair market value of the Relevant Vessels as at August 2017 was not less than US$17.9 million each, which is consistent with valuations prepared by Arrow Valuations and Navitaship ApS (which were contemporaneous valuation reports obtained by Mr Lau), which valued the Relevant Vessels at around US$17-18 million each as at June to September 2017. The Willcox Report further opined that the purported sale price of the Relevant Vessels (US$ 11 million each) was considerably lower than (i) the liquidation sale values at around US$16.1-17.5 million each or even (ii) the forced liquidation value at around US$13.5 million each.

4.19  D1 has engaged Mr Jagmeet Singh Makkar as vessel valuation expert. Mr Makkar opined, inter alia, that “normal market value” of the Relevant Vessels would be around US$15-16 million each in around mid‑August 2017; and that it was difficult to say that the mortgagee sale price of US$11 million per vessel was below the reasonable range of prices that could be achieved given the circumstances and market reports.

4.20  Mr Joffe points out that, as noted by Mr Willcox, Mr Makkar had failed to take into account relevant comparables in calculating the “normal market value” as well as “the mortgagee sale price”. As a result, Mr Makkar has given a lower valuation of the Vessels. He submits that, in view of Mr Willcox’s reasoned opinion, there must at least be a good arguable case that the Relevant Vessels were sold at an undervalue.

5.  Overview of D1’s case

5.1  In his very comprehensive submissions, Mr Wong says that the Application should be dismissed for the following reasons.

5.2  First, the Application should be dismissed on the ground of inordinate delay alone and/or the inordinate delay being a powerful reason negating any alleged real risk of dissipation of assets.

5.3  Secondly, the BGAH JLs are unable to demonstrate a real risk of dissipation of assets. There is simply no evidence of D1 putting his assets beyond reach. There is no evidence of any suspected acts of dissipation of assets, not to mention any dissipation with an intention or for the purpose of defeating the plaintiff's claim. The BGAH JLs are relying primarily on alleged low commercial morality based on D1’s conduct as alleged in their substantive pleaded claim to infer a risk of dissipation of assets. In this regard, Mr Wong refers to the observation of the Court of Appeal in Canton Plus Enterprise Ltd v Tong Zhenjun[2021] HKCA 1251, in which it was emphasized that the context of the extensive legal disputes between Mr Lau and D1 should be borne in mind, and cannot be shortcut by the accusation of “extremely low commercial morality”.

5.4  Thirdly, the BGAH JLs have failed to show a good arguable case of their claims on either liability or quantum. Mr Wong in his original written materials made extensive submissions on liability issues. However, as I understand his oral submissions, his focal points are as follows.

5.5  In relation to the Ausca Transaction, Mr Wong’s principal point is that the BGAH JLs have failed to demonstrate a good arguable case that it was transacted at an undervalue. The Plaintiffs’ claim, quantified at approximately US$77 million (§4.8(3) above) rests solely on the valuation in the FTI Report, which was conducted on the basis of the income approach (assuming past performance was to continue) and ignored the “Fundamental Change”, namely the effect of the withdrawal of Guangxi BBG and its new business of BG Shipping on the Group’s dry bulk shipping business including that chartering business of BBG Shipping.

5.6  In relation to the Lohas Transaction, in addition to arguing that the BGAH JLs have failed to demonstrate a good arguable case that it was transacted at an undervalue, Mr Wong further (1) takes a legal point that the claims by P2 and P3 are barred by the rule against reflective loss and (2) contends, factually, the Lohas Transaction was commercially justified and in the interest of P1.

5.7  Fourthly, Mr Wong says that the balance of convenience lies against the granting of the Application, as the monetary limit sought demonstrably has a crippling effect, in particular on D1’s ability to take part in the numerous ongoing legal proceedings with Mr Lau.

6.  The applicable principles

6.1  The principles governing Mareva injunctions are well established. The plaintiff has to establish that he has a good arguable case, that there is a risk of dissipation, and that the balance of convenience lies in favour of granting the injunction.

6.2  In Wu Jun v Captain Holdings Limited[2024] HKCFI 2184, Ng J summarized the relevant principles at §§42-45:

(1)  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;

(2)  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;

(3)  The Court is not to resolve disputes of facts and difficult points of law on an interlocutory basis;

(4)  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 for a Mareva injunction must show that he has a “much better” case or argument than the opposing party.

6.3  It is trite that a Mareva applicant bears the burden to demonstrate a good arguable case on both liability and quantum. In respect of quantum:

(1)  As stated at Ming Hsieh v Xu Zhe, CACV 189/2015, 28 September 2016, at §11, even if it can be shown to the necessary standard that the plaintiff is likely to make out its case on liability, it remains necessary to consider what the plaintiff is able to establish as to the likely level of damages to be awarded, as the injunction to be granted will be limited in its monetary extent by the latter issue;

(2)  Whether the applicant has a good arguable case as to quantum is to be determined qualitatively and not quantitatively (see Agritrade Resources Limited v Ashok Kumar Sahoo[2021] HKCFI 1605 at §§11-12 and [2022] HKCA 280 at §§36-37). As part of the qualitative assessment, the court may take into account factors such as the time that the applicant has had to formulate its claim: Universal Entertainment Corporation v Kazuo Okada[2020] HKCFI 1406 at §§68-79 and [2020] HKCA 995 at §§23-25.

6.4  On the issue of risk of dissipation, the burden is on the plaintiff to show objectively that there is a solid basis for concluding that there is a real risk of dissipation of assets by the 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 can point towards an inference of such risk: Convoy Collateral Ltd v Cho Kwai Chee [2020] 6 HKC 81 at §53. However, it must be emphasized that conduct which may be regarded as being of low commercial morality is not necessarily relevant to risk of dissipation, and where the underlying claim against a defendant involves dishonest or fraudulent conduct or other serious wrongdoings, it is still necessary to examine whether the conduct or wrongdoings in question is indicative of or relevant to the risk of dissipation: China Medical Technologies Inc (In Liquidation) v Samson Tsang Tak Yung & Ors[2022] HKCA 41 at §38. Some examples of low commercial morality which may be regarded as not necessarily relevant to risk of dissipation are: (1) putting up poor excuses to get out of a bargain, (2) breach of contract without solid evidence pointing to dishonesty or any attempts to conceal inventory or proceeds, and (3) coercion and duress.

6.5  As regards the issue of delay, at Convoy §§76-81, it is stated:

“[76] In this appeal, Mr S Wong very properly acknowledged the difficulty in overturning this part of the judgment in terms of the reasonableness on the CCL’s part to pursue such relief in BVI instead of Hong Kong. However, counsel submitted that the objective state of affairs was that Roy Cho was at liberty to dispose of his Hong Kong assets and the stable-door argument should militate against the grant of Mareva relief in Hong Kong. He drew our attention to the fact that other than his holding in Broad Idea, Roy Cho was not subject to any injunction in the BVI proceedings over his assets in Hong Kong.

[77] As identified by P Ng J in Re Chan Cham Wong Patrick [2016] 2 HKLRD 278, [2014] HKCU 1500 at [24], the underlying premise of the stable-door argument is that equity does not act in vain.

[78] It is also clear from the authorities that delay per se would not necessarily bar relief. The ultimate question is still whether the plaintiff could show a real risk of dissipation despite delay. A recent exposition of the relevant law is contained in the judgment of Jacobs J in PJSC National Bank Trust v Boris Mints [2019] EWHC 2061 (Comm) at [48] to [51] where recent English Court of Appeal judgments were discussed. In JSC Mezhdunarodniy Promyshlenniy Bank v Pugachev [2015] EWCA Civ 906 at [34] Bean LJ endorsed the proposition that if the court is satisfied on the evidence that there remains a real risk of dissipation it should grant an order, notwithstanding delay, even if only limited assets are ultimately frozen by it.

[79] Thus, the significance of delay in each case must be considered on its own circumstances. There are no doubt cases where a defendant has little connection with and limited assets within Hong Kong, particularly when the assets could be easily removed. There are also cases where the fact that the assets remain here notwithstanding a defendant has knowledge of the claim for a long period of time can be evidence negating an inference of risk of dissipation. In those cases, an unexplained delay can be fatal. The authority cited by Mr S Wong, China Art Bank Co Ltd v Xu Zhiqiang [2018] HKCA 63, [2018] HKCU 447 is one of such cases.

[80] On the contrary, the delay in this instance is not unexplained and the stable door was not completely opened (secured as it were, at least with regard to Roy Cho’s holding in Broad Idea, by the BVI injunctions). Further, given the fact that the base of the defendant’s business empire is in Hong Kong and the scale and complexity of his financial affairs, we are satisfied that there is still a real risk of unjustified dissipation notwithstanding the lapse of time before the summons was issued on 25 June 2019.

[81] In short, we do not think equity will act in vain by the grant of Mareva relief. For these reasons, we rejected Mr S Wong’s arguments based on delay.” (emphasis added)

7.  The Ausca Transaction: Whether a good arguable case

7.1  As pointed out above, the focal point of Mr Wong’s submissions is BGAH JL’s failure to demonstrate a good arguable case on quantum. For avoidance of doubt, I am of the view that, on the evidence, the Plaintiffs have demonstrated a good arguable case on liability, namely that Bright Good, Polyrise, D8 and D9 were associates of D1 and the Ausca Transaction was not an arm’s length deal. However, as submitted by Mr Wong, the alleged mischief is principally still the disposal of BBG Shipping and BBG Resources at an undervalue.

7.2  Understandably, not much emphasis was placed on the disposal of BBG Resources by Mr Joffe. The FTI Report valued BBG Resources at US$138,856 and it was disposed of at US$100,000.

7.3  As I understand Mr Wong, his attack on the Plaintiffs’ case on quantum is not based on a contest between the relative reliability of the FTI Report (relied on by the Plaintiffs) and the GT Report (adduced by D1), but on the contention that the FTI Report was compiled on an indisputably incorrect (or blinkered) premise and, as such, there can be no good arguable case on the correctness of its valuation. Mr Wong emphasizes that the burden is on the Plaintiffs to demonstrate a good arguable claim to a particular figure which might be made the ceiling figure of any Mareva injunction granted, and it is not for the court arbitrability to pluck some figure from the air, in the particular circumstances where the Plaintiffs have had a long time to prepare for and prosecute the Application.

(i)  The FTI Report

7.4  The FTI Report is dated 20 November 2023 and compiled by Ms Edwina Tam (“Ms Tam”). §§1.5-1.10 thereof are in the following terms:

“[1.5] I am instructed that the essential background to this matter is as follows.

[1.6] BGAH was incorporated in December 2009 as a 49:51 joint venture between PBM and Beibu Gulf Holdings HK respectively.

[1.7] Of the funds injected by PBM and Beibu Gulf Holdings HK, some were used as share capital of BBG Shipping (as defined below) and the remainder to acquire vessels. In addition, BGAH utilised mortgage loans from external banks to acquire vessels. By 2013, BGAH, via its subsidiaries, had acquired and received four vessels (“Vessels”), namely the MV BBG Bright, MV BBG Endeavor, MV BBG Hope and MV BBG Glory.

[1.8] Apart from the four subsidiaries holding ownership of the Vessels, Beibu Gulf Shipping Limited (“BBG Shipping”) and Beibu Gulf Resources Limited (“BBG Resources”) were the main operating entities of BGAH prior to June 2016. BBG Shipping carried out the dry bulk chartering business while BBG Resources carried out dry bulk commodity trading activities. BGAH and its subsidiaries are hereinafter referred to as “BGAH Group”.

[1.9] On 23 May 2016, Cosmic Glory Limited (also known as Ausca Group Limited), purportedly entered into sale and purchase agreements with BGAH to acquire the entire issued share capital of BBG Shipping and BBG Resources for cash considerations of USD 5,000,000 and USD 100,000, respectively. The transaction closed on or around 31 May 2016. The total consideration paid of USD 5,100,000 was purportedly supported by a valuation report dated 14 March 2016 (“JLL Report”) issued by Jones Lang LaSalle Corporate Appraisal and Advisory Limited (“JLL”). The JLL Report assessed BGAH’s entire equity interest in BBG Shipping and BBG Resources as at 31 December 2015 as having market values of USD 33,857 and USD 1,902,570 respectively.

[1.10] On 27 May 2022, BGAH (and others) issued a writ action in HCA 631 /2022 seeking relief on the sale of BBG Shipping and BBG Resources.”

7.5  Despite the fact that the Ausca Transaction took place in May 2016, it is recorded at FTI Report §1.11 that:

“[1.11] For the purpose of HCA 631/2022, I am instructed to perform an independent valuation of BBG Shipping and BBG Resources as at 31 December 2015 (“Valuation Date”).” (emphasis added)

7.6  It is plain that Ms Tam was provided with only limited information:

“[1.12] In respect of the operating and financial performance, position and prospects of the BBG Shipping and BBG Resources, the information currently available is limited. In particular, the information provided was largely limited to historical financial information for a three-year period prior to the Valuation Date. I was not provided with any forward-looking information nor had access to management of BBG Shipping, BBG Resources or BGAH involved in their respective operations to gain further information as at the Valuation Date.

[1.13] I list the documents on which I have relied in the preparation of this report in Appendix 2.” (emphasis added)

7.7  Appendix 2 only includes (1) publicly available materials, (2) the audited reports and financial statements of BGAH, BBG Shipping and BBG Resources for the periods ended 31 December 2014 and 31 December 2015 and (3) audit work papers for BBG Shipping and BBG Resources.

7.8  Ms Tam adopted the income captitalization method as her primary approach in valuing BBG Shipping (FTI Report §2.2) and made a fundamental assessment that BBG’s Shipping’s historical level of income to be representative of future income (FTI Report §5.22).

7.9  It is notable that Ms Tam was made aware of the sale of MV BBG Bright and MV BBG Endeavor (although she did not specify the source of that information):

“[5.21] I also note that the sale of two of the four Vessels owned by BGAH two weeks prior to the Valuation Date. However, I assume that BBG Shipping’s prospects will not be materially impacted by the sale as:

(i) the sale does not preclude BBG Shipping from negotiating lease terms from the new owner of the relevant Vessels; and

(ii) BBG Shipping has leased alternative vessels since its inception and can continue to do so to service its voyage and time charter contracts.”

(ii)  Reliability of the FTI Report

7.10  Very extensive submissions have been made by counsel on the effect of the Fundamental Change, including submissions on whether adverse inference should be drawn. In my view, it is only necessary for me to take onboard the following matters.

7.11  First, the Fundamental Change involved the withdrawal of the majority joint venture partner from BGAH which took place after the Valuation Date. Mr Wong made extensive submissions on what was the business model at the time of the inception of the joint venture which was one which placed substantive reliance on the contribution of cargo flow from Guangxi BBH. Whilst Mr Joffee cautioned that the historical business model might not be representative of the state of affairs as at the May 2016 (ie the date of the disposal of BBG Shipping and BBG Resources), as a matter of common sense, it seems to me that that must have some impact on the Group’s business. Indeed, in his oral address, Mr Joffe accepted that the Fundamental Change would have an effect on the profitability of the Group.

7.12  As highlighted by Mr Wong, BBG Resources was dependent upon Guangxi BBG. As explained in D1’s affirmation:

“[24.2] BBG Resources, which up to the withdrawal of Guangxi Beibu Gulf from the joint-venture, carried on the business of trading of commodities under the BBG Brand in accordance with the JV Business. To the best of my recollection, one side of the vast majority (if not all) of the trading transactions was a Guangxi Beibu Gulf-related entity, including Fangchenggang Maple Grain and Oil Industrial Co., Ltd ("Fangchenggang"), a joint-venture between Guangxi Beibu Gulf and Viterra (later acquired by Glencore), as well as Guangxi Beibu Gulf’s joint ventures with Mitsubishi Corporation (三菱商社) and Kansai Electric Power (關西電力) respectively.”

7.13  The foregoing is acknowledged in the FTI Report:

“[3.26] According to notes contained in the auditor’s work papers for 2015, revenue in 2015 was solely derived from the sale of canola to a related party, Fangchenggang Maple Grain and Oil Industrial Co., Ltd (“Fangchenggang”).

[6.4] Given the lack of future cash flow projections and the high degree of uncertainty in BBG Resources’ future prospects as discussed above, I have adopted the cost approach in determining the market value of BBG Resources. As stated in paragraph 4.8, this approach is commonly adopted for early‑stage start-up companies or where there are uncertainties about the company’s ability to operate as a going concern.”

7.14  Relatedly, on the Plaintiffs’ own evidence, the Fundamental Change did have an impact on BBG Shipping. According to the Infospectrum Rating Report compiled on 6 March 2017 (“Infospectrum Report”):

“Up until mid-2015, a significant portion of the total shipments handled by BGS [BBG Shipping] related to cargo flows contributed by the Chinese state-owned Guangxi Beibu Gulf International Port Group Co., Ltd [Guangxi BBG]. However, this cargo flow was diverted away from BGS following the establishment of its shipping platform, BG Shipping Co., Ltd. This saw the end of the partnership between BGS and Guangxi Beibu Gulf International Port Group Co., Ltd, with control of BGS allegedly resting with Chu Kong and another private investor. Day-to-day ship chartering and operating matters are handled by Wei Lai and Captain Wu.” (emphasis added)

7.15  Mr Wong says that there is no reason for the FTI Report to be compiled on the basis that there would be no impact from the Fundamental Change nor is there any or any proper justification for the instruction to Ms Tam to value BBG Shipping and BBG Resources as at 31 December 2015. I agree.

7.16  Secondly, it is not entirely clear whether Ms Tam was provided with the relevant sale and purchase agreement entered into between P1 and D2 in respect of sale of the shares of BBG Shipping (“BBG Shipping S&P”). Whilst FTI Report §1.9 (reproduced above) mentions the BBG Shipping S&P, Appendix 2 does not enumerate it as part of Ms Tam’s sources of information. Appendix B of the BBG Shipping S&P is BBG Shipping’s Management Accounts for the 3-month period ended 31 March 2016 (“Management Accounts”) which show that the turnover for the period was US$14,320,760 which represented a drastic reduction from the 2015 figures. On the pro-rata basis, the turnover for 2015 for a 3‑month period was [US$374,790,450 /4 =] US$93,697,612.50. The FTI Report does not address the Management Accounts at all. As noted above, Ms Tam was not given any access to the management of P1. However, Mr Lau was only removed as a director of P1 on 10 March 2016 and it seems to me that there is no real justification for brushing aside or refraining from seeking Mr Lau’s view on the Management Accounts. I am unable to accept Mr Joffe’s “short point” that the Management Accounts can be explained away on the basis that D1 already had plans to divert business away from the Group in the first quarter of 2016.

7.17  Thirdly, at Greenwood 6^th §40, the Plaintiffs seek to minimize the effect of the Fundamental Change after it has been squarely raised in D1’s evidence and the GT Report by referring to the work papers of Moore Stephens CPA Limited (“Moore Stephens”), the former auditors of the Group to show that the key customers which significantly contributed to BBG Shipping’s earnings were unrelated to Guangxi BBG. However, as I understand the evidence, Moore Stephens’ work papers were provided to Ms Tam. It is not entirely clear why Ms Tam was not instructed to provide a supplemental valuation report.

7.18  Fourthly, the Plaintiffs further seek to minimize the impact of the Fundamental Change by suggesting D1 and Mr Lau has historically contributed related-party business to the Group. However, Mr Joffe has not been able to show that Mr Lau had done so after 31 December 2013, which is consistent with his professed stance as recorded in many decisions that there was a corporate divorce effective 1 January 2014.

7.19  Fifthly, Mr Joffe relies on the Infospectrum Report to suggest that Ausca Shipping Ltd (“ASL”) (not D2) was a very successful venture even in 2017 and was established to represent the continuation of the shipping business previously undertaken by BBG Shipping. I am unable to place significant weight on that submission. The relevant parts of the Infospectrum Report read as follows:

“ Ausca Shipping Ltd (hereafter referred to as ASL) is a private limited company, which was incorporated in Hong Kong in July 2016. ASL was established to represent the continuation of the shipping business previously undertaken by Beibu Gulf Shipping Ltd (BGS), a well-regarded Hong Kong Panamax grain operator, with a sizeable chartered fleet and cargo book. Upon incorporation, ASL was wholly owned by Cosmic Glory Ltd of the Cayman Islands [(D2)] (with a paid-up capital of just USD 10,000), but following various capital injections by a number of corporate shareholders between late 2016 and early 2017. The subject company's paid-up capital has risen sharply to USD 1.33m at the time of writing. Due to the low-disclosure domiciles of these corporate shareholders, details relating to ASL's ultimate ownership cannot be formally verified. A management representative informed us that ASL is ultimately controlled by Chu Kong and Wei Lai, who, along with Wu Shiping (hereafter Captain Wu), are listed as the subject's directors.

Chu Kong [(D1)] is a well-regarded shipping veteran in Hong Kong shipping circles, being one of two ex-Transfield ER Group employees (the other being Lau Wing Yan) who, alonq with private investors from China, founded the Hong Kong-headquartered Pacific Bulk group in 2000. We understand Chu Kong formally removed himself from the Pacific Bulk group in January 2014, and went on to incorporate a number of ship operating companies from this period onwards, mainly by linking up with Chinese cargo interests. These include the Quadrolink group, Beibu Gulf Shipping Ltd (BGS) (and its cargo partner Guangxi Beibu Gulf International Port Group Co., Ltd), and more recently, BDH Quadro Marine Ltd (and its cargo partner Jiusan group), and now ASL (and its cargo partner Ausca Oils & Grains Industries Co., Ltd, hereafter Ausca)…

Ausca was established in China in June 2013 (company registration number: 91450600070610779J), and is involved in the processing and production of edible oils. The company is owned by Shenzhen Yuexinhai Investment Co., Ltd (80%) and Guangxi Ganglian Trading Co., Ltd (20%). The former is, in turn, owned by Nanning Ningtai Asset Management Co., Ltd (63.75%; this company is controlled by Ning Xuzhan - 90% and Li Min - 10%), Guangxi Ganglian Trading Co., Ltd (26.25%), and Lee Hailiang (10%). We note that Guangxi Ganglian Trading Co., Ltd is owned by two individuals, Zhang Hui (60%) and Zhang Ming (40%). The background and employment experience of these principals are not known.

ASL is active as a charter operator mainly covering cargo commitments arising from Ausca and other significant cargo interests. Specific details relating to ASL's cargo book have not been disclosed, but cargo flows generated by Ausca are estimated to represent a third of shipping volumes. The remainder is mainly contributed by contracts of affreightment (COAs) and forward cargoes of varying terms entered into with third-party cargo owners (reported to include international agricultural commodity trading groups and domestic trading companies), and to a lesser extent, cargoes sourced from the spot market. Management indicated that ASL's annual cargo volumes for 2017 will approximate 15m tonnes, dominated by Panamax shipments of grain, such as canola and soybeans. These cargoes are loaded at ports in the Americas and discharged at Chinese ports. Aside from grain cargoes, BGS is said to also be transporting coal cargoes…

Without specific operational information, and given the company's activation and overlapping activities/clients with BGS in 2016, it is not possible to make meaningful estimates on revenue and profit levels. However, as a rough indication and based on the annual cargo volumes reported, Ausca/BGS would likely have generated total revenues in excess of USD 1bn. We note that ASL/BGS have significant short-term forward tonnage exposures, although this appears to be somewhat hedged by the forward cargo commitments and FFAs; ASL's net profits would be affected by the effectiveness of the physical and paper hedges employed.” (emphasis added)

7.20  It is plain from the reproduced parts of the Infospectrum Report that the success of ASL (even if in fact controlled by D1) was based in part on new business ventures not previously undertaken by BBG Shipping. As pointed out at the hearing, BBG Shipping only had negligible any fixed assets comprising computer equipment, furniture and fixtures, motor vehicle, and leasehold improvements. The “value” of BBG Shipping, it seems to me, was plainly in the business relationships and contacts, which as a result of the corporate divorce (on Mr Lau’s case as submitted by Mr Wong), Mr Lau and D1 were pursuing separately from 2014 onwards. In my view, the success of ASL cannot be extrapolated as an indication that BBG Shipping was able to continue the business model before the Fundamental Change to justify the assumptions made in the FTI Report.

7.21  I would not go so far to agree with Mr Wong that there can be no reasonable disagreement on the different methodologies adopted in the FTI Report (income approach) and the GT Report (cost approach), in that the income approach is demonstrably erroneous. However, I am of the view that valuation in the FTI Report has plainly failed to take into account the Fundamental Change. The fact of the matter is that Guangxi BBG, the majority joint venture partner, had since become a competitor by setting up BG Shipping, and on the Plaintiffs’ own evidence, Guangxi BBG’s business had been “diverted” away from the Group.

7.22  Mr Joffe suggests that, by reference to cases such as Chow Steel Industries Public Company Ltd v Ko Sung[2020] HKCFI 483 and Lam Sik Ying v Lam Sik Shi, HCA 4713/2001, 14 January 2011 that the court should adopt a broad brush approach in determining the appropriate figure which a plaintiff merits protection by a Mareva injunction in the light of all the evidence before the court. He also submits that it is open to the court to adopt a broad bush approach and discount the value of BBG Shipping by a percentage when assessing the monetary limit.

7.23  I agree with Mr Wong that the present arguments on quantum is not one which entails the court conducting a mini-trial. The Plaintiffs have instructed their expert to adopt the Valuation Date which was not the date of the disposal of BBG Shipping and BBG Resources and did not provide FTI with even the basic fact that the majority joint venture partner had since the Valuation Date departed and became a competitor. The expert was not even asked to provide a supplementary report to provide her analysis of the impact of that change. Although Mr Joffe suggests that a discount may be applied, he has not proffered a figure which may be justified on the evidence.

7.24  For the above reasons, I am of the view that the Plaintiffs have failed to demonstrate that there is a good arguable case on the monetary limit in respect of the Ausca Transaction.

8.  The Lohas Transaction

8.1  Mr Wong has made very detailed submissions on why the Plaintiffs have failed to demonstrate that there is a good arguable case on liability. His submissions may be summarized as follows:

(1)  The alleged divestment of assets ultimately is the sale of the Relevant Vessels at significant undervalue (US$11 million each). Whilst the BGAH JLs place heavy emphasis on D1 controlling different corporate vehicles, one indisputable fact is that the first round of mortgage sales of the Relevant Vessels was to Raffles at US$14.5 million each. Raffles was undeniably independent of D1. The Raffles sale was aborted because of Mr Lau’s legal action claiming proprietary interest in the Relevant Vessels. It is absurd to suggest D1 would cause the Relevant Vessels to be sold to Raffles at significant undervalue against his own alleged 75.5% interest in P1 (ie including the 51% acquired from Guangxi BBG), and indeed the US$14.5 million price exceeds the BGAH JLs’ own expert valuation for the forced liquidation value;

(2)  Further, the allegation of undervalue sale ignores the fact that the second round of mortgagee sale to D5 and D6 was not merely a distressed sale, but one with the “risk” of an existing and widely publicized adverse ownership claim by Mr. Lau. Such a risk would otherwise be eliminated in a judicial sale. According to the Plaintiffs’ valuation expert, a judicial sale (which would take at least 2-3 months and would eliminate the risk) could fetch about US$13.5 million each. US$11 million each on a quick sale with the risk could hardly be said to be at significant undervalue (as D1’s expert opined). Furthermore, the claims by P2 and P3 must fail in any event because the alleged loss is reflective loss;

(3)  The genesis of the financing arrangements which ended with the mortgagee sales of the Relevant Vessels lies in the events in 2015, which were not of D1’s making, and cannot be attributed to a premeditated ploy of D1;

(4)  It started off with Mr Lau’s BVI proceedings to wind up OSL triggering the risk of the banks calling the CS Facility and the BNP Facility (“Ship Finance Default Risk”), in particular in the circumstances where, at the material time, there was a drastic decline in shipping market and a drastic drop of the value of the P1 Group’s vessels;

(5)  It was followed by P1’s agreement reached at the December 2015 Board Meeting to divide and sell the 4 vessels to its 2 shareholders (Guangxi BBG and PBM) in order to discharge the bank loans and to terminate the joint venture by returning to the 2 shareholders their respective investments (“Tripartite Agreement”);

(6)  However, PBM’s temporary inability to complete the purchase of the Relevant Vessels and to discharge the relevant bank loan necessitated short-term bridging loans, which were later extended by reason of PBM’s continuing default (beyond 31 January 2016). The correspondence shows that it was Mr Lau who was resistant, and the ball was entirely in his court. Had he agreed for PBM to complete the purchase, that would have been the end of the matter;

(7)  With PBM’s continual default, it was objectively not in P1’s commercial interest to keep the Relevant Vessels as costly “white elephants” indefinitely (when the shipping/vessel‑holding business had already been abandoned). P1 kept the 2 vessels as a matter of accommodating the interest of PBM/Mr Lau pursuant to the Tripartite Agreement. The indulgence lasted for 1.5 years until June 2017 when PBM (Mr Lau) ignored P1’s ultimatum to purchase. P1 thus decided not to service the loan any further and the Relevant Vessels were enforced upon, with a first attempted sale to Raffles at US$14.5 million;

(8)  The above events were not masterminded by D1 as the BGAH JLs allege. If D1 had such a ploy as alleged, there is no reason why D1 and P1 would be pressing Mr Lau for 1.5 years to purchase the Relevant Vessels by PBM (instead of enforcing and selling them to D1’s entity). If D1 had such a ploy there is no reason why he did not orchestrate the enforcement immediately upon the borrowers’ default. The BGAH JLs’ theory that D1 used bogus loan arrangement to acquire the Relevant Vessels cheap for his own gain breaks down completely against the fact that the first mortgagee sale was to an independent third-party (Raffles);

(9)  Even if the BGAH JLs were right that D1 were behind D3/D4, the provision of the bridging loan out of (on the BGAH JLs’ case) his own money to P1 to resolve the Ship Finance Default Risk was plainly in P1’s interest. The net result of all of D1’s alleged conduct on the BGAH JLs’ own case is that the enforcement action against the Relevant Vessels was deferred which is undeniably to P1’s benefit. But for D1’s alleged conduct, the Ship Finance Default Risk (which was recognised as a legitimate risk by all of P1’s directors, including Mr Lau) could well have been realised and the Relevant Vessels would have been sold much earlier by the bank through a liquidation sale for (on own the BGAH JLs’ case) around US$13.5 million each, which was less than the Raffles price. The claim that P1 should have used its own money to pay off the CS Facility is not reasonable and contrary to what the directors themselves had agreed.

8.2  Despite Mr Wong’s valiant attempt, I am not persuaded that the Plaintiffs have not demonstrated a good arguable case on liability and quantum. Whilst I am of the view that the picture painted by Mr Wong is credible, there remains the following features which can only be resolved in cross-examination:

(1)  According to the evidence (Chu 1^st §§97-98), the CS Facility was paid off by (a) the 1^st Drawdown, (b) a bridging loan advanced by P1 in the sum of US$8.7 million and (c) part of the PBM Loan in the sum of US$7.7 million;

(2)  There is a dispute between the parties as to whether the Tripartite Agreement (a) amounts to a collateral attack of the Strike-Out Decision, in which it was found that the Tripartite was not binding upon PBM (and subsequently affirmed on appeal) and (b) envisaged the use of BGAH’s available cash to pay off the CS Facility. But even proceeding on D1’s case, the fact was that BGAH had already advanced a bridging loan of US$8.7 million;

(3)  The bridging loan was settled by way of the 2^nd Drawdown, which took place at the same time in May 2016 as the Ausca Transaction, after Mr Lau had been removed as a director of P1;

(4)  At that time, Guangxi BBG’s 51% share had already been transferred to Bright Good;

(5)  The legitimacy of the 2^nd Drawdown and the subsequent default on the Clause 6.1(a) Repayment a month later, on D1’s explanations that there were other investment opportunities and that there was no benefit to maintain the Relevant Vessels as they had become “white elephants”, cannot be resolved at the interlocutory stage;

(6)  The allegation whether D3 and D4 were D1’s fronts (and therefore whether the Relevant Vessels should be disposed of on any distressed basis), and indeed whether the aborted sale to Raffles and actual sale to D5 and D6 were a result of the circulation of the draft judgment by the BVI Commercial Court cannot be resolved at the interlocutory stage;

(7)  The disagreements between the valuations of Mr Willcox and Mr Makkar are unlike the observations made on the FTI Report set out above;

(8)  I also do not agree with Mr Wong’s argument that the reflective loss argument is so compelling to be a knockout point. As pointed out by Mr Joffe: (a) it is the Plaintiffs’ case that the Premier Bright Loan and the Glory and Hope Share Mortgages should not be entered into in the first place, (b) the resultant loss suffered by P2 and P3 is that the shares in Glory BBG Shipping and Hope BBG Shipping have been wrongfully transferred away and (c) P2 and P3 no longer retain control over the shares in Glory BBG Shipping and Hope BBG Shipping.

8.3  For the above reasons, I am of the view that the Plaintiffs have demonstrated a good arguable case on both liability and quantum on the complaints premised on the Lohas Transaction.

9.  Risk of dissipation

9.1  The only asset identified by the Plaintiffs in the Application is a property development known as “Swatow Plaza” or “S+ Plaza” in Montreal, Canada held by Swatow Development Inc (“Swatow”). It has not been suggested that D1 has done anything untoward to put his interest in Swatow beyond the reach of the Plaintiffs.

9.2  Indeed, the Plaintiffs’ case on risk of dissipation is premised only on an inference to be drawn from the nature of the complaints made against D1, relying on Convoy.

9.3  As stated at Convoy §35(4), 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.

9.4  In the present case, as acknowledged at Greenwood 2^nd §111:

“The BGAH JLs also understand that Mr. Chu has been embroiled in numerous ongoing court actions with Mr. Lau in respect of the ownership of certain shareholdings in various companies (mostly offshore companies). The BGAH JLs understand that all of companies in question are private companies for which valuation is not readily available. The BGAH JLs also understand that allegations of misappropriations against the companies in question have been made by both Mr. Lau and Mr. Chu against the other in some of these court actions.” (emphasis added)

9.5  Indeed, as remarked by Anthony Chan J in his very recent judgment in Pacific Bulk Shipping Ltd v Topmove Limited[2025] HKCFI 532 at §154:

“[Mr Lau] and [D1] set up their separate shipping businesses after January 2014. My understanding of the evidence is that the parties soon ran into an impasse after having agreed in principle to split their business and assets. Serious allegations of misappropriation were made, relationship turned from bad to worse and the intended audit exercise was in a stalemate. Under such circumstances, the parties took unilateral actions to protect their interest….” (emphasis added)

9.6  Whilst I can understand the position adopted by the BGAH JLs, namely one focussed on the interest of P1 (and the Group), it seems to me that in the overall circumstances of present case including especially the context of the acrimonious corporate divorce (as remarked by the Court of Appeal in Canton Plus), I should be less ready to infer a risk of dissipation solely from the nature of the pleaded allegations. Instead, it seems to me that given the extended history of the legal disputes between the parties, I should focus more on whether there is solid evidence to show risk of dissipation.

9.7  The Plaintiffs have not adduced any. Although D2 has been put in liquidation, there is no suggestion that ASL or the Quadrolink Group, have been operated surreptitiously or are anything but successful ventures. As stated earlier, there is no allegation of dissipation of D1’s interest in Swatow.

9.8  It is also in the above context that I take onboard Mr Wong’s argument that the delay in the present case is a weighty factor militating against any professed concern of risk of dissipation of assets. The Ausca Transaction and the Lohas Transaction already featured in the winding-up proceedings of OSL and were already pleaded in the BGAH Petition. Despite various challenges mounted by D1, the BGAH JLs were appointed in January 2023 and Mr Greenwood was also one of the OSL JLs. The Application, however, was only issued on 5 December 2023. In my view, the delay cannot be adequately explained away by the assertion that D1 was litigious, the BGAH JLs had to expend time and effort to deal with the applications pursued by D1 and the need for the BGAH JLs to investigate.

10.  Balance of convenience

10.1  I am also of the view that the balance of convenience lies against the grant of the Application.

10.2  First, D1 and Mr Lau have been embroiled in a longstanding legal battle. The Application only makes provision for very modest legal fees.

10.3  Secondly, where the Plaintiffs have not adduced any solid evidence of risk of dissipation of assets (apart from relying on an inference to the drawn from the nature of the pleaded complaints), it seems to me that weight should be attached to (1) the acrimonious corporate divorce, (2) both Mr Lau and D1 had accused each other of taking matters into their own hands to protect their interests, (3) they have become competitors against each other in the market and (4) the staleness of the Ausca Transaction and the Lohas Transaction. The commercial dynamics are that Mr Lau and D1 are each operating competing lines of business (successfully) after the corporate divorce.

10.4  Thirdly, the Relevant Vessels have been preserved pending trial upon the undertakings offered by D5 and D6.

11.  Conclusion

11.1  For the above reasons, the Application is dismissed.

11.2  D1 is to lodge his submissions on costs (limited to 5 pages) and its statement of costs within 7 days hereof and the Plaintiffs are to lodge their submissions on costs (limited to 5 pages) and their objections to D1’s statement of costs within 7 days thereafter. Subject to further directions, the issue of costs will thereafter be dealt with on the papers.

Mr Victor JOFFE, SC leading Mr Justin HO, Mr Jonathan NG and Mr SIK Chee Ching instructed by Dentons Hong Kong LLP for the 1^st - 3^rd Plaintiffs

Mr WONG Yan Lung, SC leading Mr Julian LAM and Mr Byron CHIU instructed by Iu, Lai & Li for the 1^st Defendant

HCA 631/2022

[2024] HKCFI 2711

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 631 OF 2022

________________________

________________________

________________________

DECISION

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Applications

1.  This is a claim by the plaintiffs (“Ps”) against their former director (de jure, de facto or shadow), Chu Kong (“Chu”) and his associates for misappropriation of assets and businesses from BGA Holdings Ltd. (“P1”) and its subsidiaries for their own personal benefit.

2.  There are 3 summonses before the court:

(1)  summons dated 5 December 2023 issued by Ps seeking leave to join Hope BBG Shipping Ltd. (“Hope BBG Shipping”), Glory BBG Shipping Ltd (“Glory BBG Shipping”) and Chu’s son, Chu Tin Hang (“TH Chu”), as additional defendants to these proceedings; and to make consequential amendments to the Amended Wit of Summons and Statement of Claim to reflect the joinder (the “Joinder Summons”).

(2)  Summons dated 12 July 2024 issued by Ps to amend the Joinder Summons to reflect amendments having been made to the Amended Statement of Claim, such that the draft annexed to the Joinder Summons would become a draft Re-Amended Writ of Summons and Re-Amended Statement of Claim (the “Amendment Summons”).

(3)  Summons dated 4 September 2024 by TH Chu to file evidence for the Joinder Summons (the “Evidence Summons”).

3.  There is evidence before the court that Hope BBG Shipping and Glory BBG Shipping have been properly served with the Joinder Summons and the Amendment Summons. Ps do not have any claims directly against Hope BBG Shipping and Glory BBG Shipping; they are simply joined as nominal defendants to ensure that judgments are binding on them. It is perhaps for this reason that neither of Hope BBG Shipping and Glory BBG Shipping was represented or present at the hearing. As such, the hearing proceeded in their absence.

4.  I see no reason (and parties did not seriously contend otherwise) why the Amendment Summons should not be allowed with fixed costs of HK$1,040 be to TH Chu and I so order. Parties agreed that the Evidence Summons be allowed with costs in the cause of the Joinder Summons and I so order.

Background

5.  The relevant background as set out in the skeleton submissions of Mr Victor Joffe SC, Mr Justin Ho and Mr Jonathan Ng, counsel for Ps and Mr John Hui and Mr Adrian Lee (written submissions only), counsel for TH Chu is as follows:

(1)  Lau Wing Yan (“Lau”) and Chu were ex-business partners who used to run shipping and logistics businesses together. Ocean Sino Ltd (“OSL”) is a BVI company set up by Lau and Chu in 2009, in which they each held a 50% shareholding. PBM Asset Management Ltd (“PBM”) is a wholly-owned subsidiary of OSL.

(2)  PBM and Beibu Gulf Holding (Hong Kong) Co., Ltd are respectively the 49% and 51% shareholders of Beibu Gulf Ocean Shipping (Group) Limited (later renamed as P1).

(3)  P1 and its subsidiaries’ businesses included:

(a)  Dry bulk chartering business, carried on by Beibu Gulf Shipping Ltd (“BBG Shipping”), which was wholly owned by P1;

(b)  Dry bulk trading business, carried on by Beibu Gulf Resources Ltd (“BBG Resources”), which was wholly owned by P1;

(c)  Investments in dry bulk carriers. Two of these carriers were known as MV BBG Hope and MV BBG Glory.

(d)  MV BBG Hope was held by Hope BBG Shipping, which was wholly owned by The Palace Ltd (“P2”), which is in turn wholly owned by P1. MV BBG Glory was held by Glory BBG Shipping, which was wholly owned by Shining Centre Ltd (now in liquidation) (“P3”), which is also wholly owned by P1.

(4)  Lau and Chu fell out. Lau petitioned for OSL to be would up in the BVI Commercial Court in May 2015. A long line of litigation ensued.

(5)  On 31 May 2016, P1 (represented by Chu) transferred BBG Shipping and BBG Resources to Cosmic Glory Ltd (also known as Ausca Group Limited and represented by TH Chu) (the “Ausca Group”) at the consideration of US$5.1 million (the “Ausca Transaction”). It is alleged by Ps that the Ausca Transaction was to divest P1’s interests in BBG Shipping and BBR Resources for the benefit of Chu. Of the many allegations raised by Ps in the present action, of relevance to the present application is only the Ausca Transaction.

(6)  OSL was wound up in June 2017, a decision which was upheld by the Privy Council in October 2020.

(7)  Following the winding-up order, the joint liquidators of OSL (“OSL JLs”) took control of PBM and carried out investigations into P1’s affairs. In August 2019, upon taking legal advice, PBM issued a petition (HCCW 251/2019) (“P1 Petition”) to wind up P1 on insolvency grounds, as well as just and equitable grounds, which included pleas relating to the Ausca Transaction.

(8)  Whilst the appointment of P1’s liquidators was pending, an urgent application was made in May 2022 for leave to issue the Writ in this action. The application was allowed on 19 May 2022, and the Writ was issued by the Official Receiver on 27 May 2022. The timing of the filing of the Writ was such that the complaints in relation to the Ausca Transaction against the original defendants (including Chu) were made within the limitation period of 6 years from the transfer on 31 May 2016.

(9)  However, TH Chu, Hope BBG Shipping and Glory BBG Shipping were not defendants when the Writ was issued on 27 May 2022.

Basis of Claim against TH Chu

6.  In the draft amendments to the Amended Statement of Claim, Ps’ case against TH Chu can be summarised as follows:

(1)  TH Chu was the shareholder and director of the Ausca Group at all material times.

(2)  TH Chu, being Chu’s son, acted as Chu’s nominee and agent.

(3)  TH Chu held shares in the Ausca Group for and on behalf of Chu and procured the Ausca Group to enter into the Ausca Transaction.

(4)  In view of TH Chu’s involvement in the Ausca Transaction (including the execution of various documents), Ps seek to join him as an additional defendant and claim against him for dishonest assistance and unlawful means conspiracy.

Issues

7.  As the involvement and act on the part of TH Chu in relation to the Ausca Transaction occurred on (or arguably before) 31 May 2016, on the face of it, the limitation period for bringing a claim of dishonest assistance and unlawful means conspiracy against him is 6 years and would have expired on 30 May 2022[1]. Not surprisingly therefore, TH Chu is raising a limitation defence to Ps’ application to join him as a defendant.

8.  Mr Joffe submitted that Ps could rely on section 26(1) of the Limitation Ordinance (Cap. 347) (the “LO”) to postpone the accrual of the limitation period as (1) the action is based upon the fraud of TH Chu, and/or (2) any fact relevant to the Ps’ right of action has been deliberately concealed by TH Chu. As such, time would only start to run when Ps had discovered the fraud or concealment, or when Ps could with reasonable diligence have discovered it.

9.  Ps’ primary position is thus that the relevant limitation period has not expired. However, instead of commencing a fresh action, Ps, “for purposes of saving costs and time”, have chosen to apply for joinder of TH Chu into the present proceedings instead. It was submitted that as Ps are prepared to proceed on the basis that TH Chu may have an arguable limitation defence, this does not prejudice TH Chu’s position. As a result, Mr Joffe characterizes the question of whether TH Chu should be joined when the court cannot come to a conclusive view on the availability of a limitation defence as a case management issue.

10.  Mr Hui did not agree that the limitation period in the present case could be postponed under section 26 of LO. Mr Hui also criticized the approach advocated by Mr Joffe (to permit joinder and amendments on terms that it does not benefit Ps of “relation-back”) to be directly contradictory to the statute and Hong Kong case law.

11.  There are thus two issues before the court:

(1)  Can Ps rely on section 26 of LO and postpone the running of the limitation period?

(2)  Can (or should) the court allow an amendment and joinder of a party on the basis that there will be no benefit of “relation-back”?

Postponement of Accrual of Limitation Period

12.  Section 26 of LO provides:

“26. Postponement of limitation period in case of fraud, concealment or mistake

(1) Subject to subsection (4), where in the case of any action for which a period of limitation is prescribed by this Ordinance, either —

(a) the action is based upon the fraud of the defendant;

(b) any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; or

(c) …

the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.

(2) References in subsection (1) to the defendant include references to the defendant’s agent and to any person through whom the defendant claims and his agent.

(3) For the purposes of subsection (1), deliberate commission of a breach of duty in circumstances in which it is unlikely to be discovered for some time amounts to deliberate concealment of the facts involved in that breach of duty.

…”

13.  Mr Joffe submitted that based on the following, Ps are entitled to have the accrual of the limitation period postponed based on section 26 of LO:

(1)  The claims for dishonest assistance and unlawful means conspiracy are claims based upon fraud for the purpose of section 26(1)(a) of LO.

(2)  The deliberate breach of duties by P1’s directors was unlikely to be discovered for some time, given that P1 was controlled by the wrongdoing directors before P1’s liquidation. As such, there was a deliberate concealment of the facts involved in that breach of duty under sections 26(1)(b) and 26(3) of LO.

(3)  Chu and his associates, as opposed to Lau and/or the OSL JLs, were in control of P1 at the material times of the Ausca Transaction.

(4)  The knowledge of Chu and/or his associates should not be attributable to P1, as P1 is pursuing a claim against the wrongdoing directors and their accomplice.

(5)  Accordingly, the 6-year limitation period should not begin to run until Ps discovered the fraud and concealment – i.e. when the P1’s joint liquidators were appointed on 13 January 2023, or alternatively on 6 December 2021 when the Official Receiver was appointed as P1’s provisional liquidator.

14.  Mr Hui submitted that the relevant question to ask when determining if section 26 applies is: whether Ps have discovered or could with reasonable diligence have discovered the alleged fraud or deliberate concealment by Chu or TH Chu.

15.  Before embarking on an analysis on the applicability of section 26 of LO to the present circumstances, it should be noted that both Mr Joffe and Mr Hui agreed that the court need not come to a definitive view on the limitation issue, albeit for different reasons:

(1)  Ps: whether Ps could have discovered the fraud or deliberate concealment is a fact-sensitive issue, which should not be determined at this stage when the relevant evidence is not before the court.

(2)  TH Chu: all that needs to be shown at this stage is that he has a reasonably arguable case on limitation and if so, leave to join him as a party should be refused.

16.  This means that parties agreed that my view expressed herein would not preclude parties from arguing on the limitation issue substantively in future, if there is a need to do so.

17.  The meaning of “could with reasonable diligence have discovered” is explained in Law Society v Sephton & Co (a firm)[2]:

(1)  The question is whether the plaintiff could (not should) have discovered the fraud, concealment or mistake with reasonable diligence.

(2)  The plaintiff must prove that it could not have discovered the fraud without exceptional measures which they could not reasonably have been expected to take.

(3)  The test is how a person carrying on a business of the relevant kind would act if he had adequate but not unlimited staff and resources and were motivated by a reasonable but not excessive sense of urgency.

(4)  The concept of “reasonable diligence” carries with it a notion of a desire to know and to investigate on the part of the plaintiff.

18.  There is no dispute that the burden is on Ps to show that P1 could not have discovered the alleged fraud or deliberate concealment.

19.  Mr Joffe submitted that the starting point for determining when P1 would have discovered the alleged fraud or deliberate concealment is to consider whose act or knowledge would be attributable to it. In this context, it was submitted that any knowledge derived from a fraudulent director should not be attributed to the company, when the intended action is commenced against the fraudulent director or his accomplices[3].

20.  Mr Hui on the other hand, contended that there is no basis for Ps to rely on section 26 of LO:

(1)  It is undesirable to determine if the proposed causes of action against TH Chu was based on fraud for the purposes of section 26 of LO as there is no evidential basis to support the bare allegations in the pleading.

(2)  A reasonable person in the position of Ps must have been able to discover the facts and dispute concerning the Ausca Transaction by June 2017 as the dispute between Chu and Lau over the propriety of the Ausca Transaction was public knowledge by June 2017.

(3)  Where the matters complained has become public knowledge, Ps should have been able to discover the alleged fraud with reasonable diligence[4].

(4)  Time must therefore have begun accruing from June 2017.

(5)  The board of directors of P1 approved the Ausca Transaction on 23 May 2016. The shareholders of P1 were all aware of the Ausca Transaction as it was discussed at the AGM/EGM of P1 on 23 December 2016.

(6)  Chu and Lau each filed affirmations concerning the Ausca Transaction in the BVI proceedings (Lau’s petition to wind up OSL).

21.  It is useful to bear in mind at this juncture that:

“[section 26 of LO] was enacted to reflect the equitable principle that a statute should not be used as an engine of fraud and ‘deliberate concealment’ was merely a species of fraud. This section was construed strictly against plaintiffs; it is for a plaintiff to establish ‘he falls strictly and literally within the exception the benefit of which is given to him by the statute… In the case of a corporate plaintiff, the special rule of attribution should be applied to the substantive rule in this section to give effect to the legislative policy to ensure that a plaintiff is not prejudiced by any period of delay created by fraud, deliberate concealment or mistake, and which the plaintiff had not discovered or could not with reasonable diligence have discovered.”[5]

22.  Parties differed on the issue of whether Chu’s (and his associates’) knowledge should be attributed to P1. Mr Hui contended that no special rule of attribution should be applied in the present case. Mr Joffe contended that the knowledge of Chu and his associates (the alleged rogue directors) should not be attributable to Ps, as the fraud by Chu and his associates is precisely what that Ps now complain about.

23.  There is no dispute that the general rules of attribution is that directors’ knowledge is by virtue of the principles of agency attributed to the company[6]. There are cases where special rules of attribution apply such that the directors’ knowledge is not attributed to the company in “redress cases”[7]. In such cases where a company is seeking to make its own delinquent director or employee or an accomplice of such a person accountable for the loss that the company has suffered, it was held in Moulin Global that it would be absurd and unjust to permit a fraudulent director or employee to be able to use his own serious breach of duty to his corporate employer as a defence.

24.  On the issue of attribution of knowledge, I agree with Mr Joffe’s submission that the knowledge of Chu and his associates should not be attributed to P1 for the purposes of section 26 of LO in its claim against TH Chu. The proposed claim by Ps against TH Chu is a “redress case” and as such a fraudulent director (alleged to be Chu and his associates) should not be allowed to use their own knowledge to defeat a claim.

25.  Despite that, for the following reasons, I am of the view that Ps have failed to show that it could not have discovered the fraud without exceptional measures which they could not reasonably have been expected to take:

(1)  First of all, I reject Mr Joffe’s submission that the question on whether P1 could have discovered the fraud is a “fact-sensitive issue” which cannot or should not be decided by the court at this stage. Whilst there may be situations where such an issue may require a more in-depth investigation by the court, in my view, this is not one of those cases.

(2)  Lau, being the petitioner to wind up OSL, was keenly aware of the Ausca Transaction since P1’s AGM/EGM on 23 December 2016. As such, the shareholders and directors of P1 would have been aware of the transaction by that time. Lau was at all material times a director as well as shareholder of P1. Even if it were true that Lau was kept out of all knowledge in his capacity as a director, it is artificial to suggest the knowledge Lau subsequently acquired was only in his capacity as a shareholder and is thus not attributable to P1.

(3)  Lau would also have been aware of the fact that Ausca Group was owned by TH Chu by 18 April 2017 when Chu filed his 4^th affidavit in the BVI winding up proceedings of OSL.

(4)  With Lau’s knowledge (in his capacity as an innocent director), it is unrealistic to suggest that P1 could not have discovered the fraud of TH Chu without exceptional measures, when P1 was in the centre of a full-fledged dispute between Lau and Chu.

(5)  Leaving aside the imputation of Lau’s knowledge as a director on P1, the requisite knowledge would also have been available to Ps by reason of the Judgment by the BVI Commercial Court dated 29 June 2017 (the “BVI Judgment”), which had set out in paragraph 79:

“… no doubt in an effort to frustrate any order that this court might make, BGAL eventually sold the ship chartering business (supposedly now only consisting of BBG Shipping and BBG Resources) to a company, Ausca Shipping Ltd (“Ausca”) for, so far as I can tell or understood, no discernible commercial benefit or even any kind of proper or cogent due diligence or full and proper knowledge and approval of, or even explanation to, [Lau]. Ausca was seemingly operated by [Chu’s] son and a company of which [Chu] was and is a director …”

In paragraph 81 thereof:

“[Chu] had managed to engineer, in my judgment, a situation whereby he, or associates of his, seized effective overall control [P1] by BGAL and Polyrise in order to exclude [Lau] from any participation in management … of PBM’s 49% interest in [P1] and, thereby in its subsidiaries. All this was done or engineered by [Chu] (in breach, it might well be said, of his fiduciary obligations to his partner in OSL, [Lau]) without properly or fully informing [Lau] despite his personal interest via PBM’s 49% share and his own 50% shares in OSL. He removed, or secured the removal of [Lau] as director of [P1] and its subsidiaries, and diverted the two operating subsidiaries (BBG Shipping and BBG Resources) to a company, Ausca, which he now accepts is owned by his son and of which he is a director and moreover without any cogent due diligence or any approach or explanation to [Lau]. [Chu] failed to explain or justify the commercial reasons for this (by which he had effectively engineered a situation whereby [P1] was stripped of its apparently potentially valuable operating assets, thereby reducing the value of PBM’s interest), but I infer and find it was done directly or indirectly to exclude [Lau] from any benefit.”

(6)  The details of the proposed claim against TH Chu as set out in Annex 2 of the Amended Statement of Claim, which was filed on 11 July 2024, in relation to the Ausca Transaction, were all available or readily inferable latest by the time the BVI Judgment was handed down. In such circumstances, it is unclear what had inhibited a claim to also have been made against TH Chu when the Protective Writ was issued.

(7)  Whether knowledge was attributable from Chu or his associates to P1 is thus irrelevant for present purposes, as Lau clearly had knowledge of TH Chu’s involvement as early as April 2017 and such knowledge had in any event been disseminated by way of a publicly available BVI Judgment in June 2017.

(8)  In such circumstances, I do not accept the submission that the Ausca Transaction was concealed and not discoverable until after the Official Receiver or the provisional liquidators of P1 had been appointed.

(9)  I also do not accept the submission that even if knowledge was available, no action could have been instituted against Chu or TH Chu until liquidators were appointed, as Chu and his associates were in control of P1. A derivative action could have been brought on behalf of P1 by any shareholder. Lau, being a shareholder of P1 could have brought an action on behalf of P1 against Chu and TH Chu.

26.  I am thus of the view that Ps cannot rely on section 26 of LO. As such, I am of the view that Ps have not shown that TH Chu has no reasonably arguable case on limitation.

Amendment or joinder where an issue of limitation arises

27.  When considering an application to amend and/or join a party where a party raises a limitation defence, section 35 of LO comes into play:

“35. New claims in pending actions: rules of court

(1) For the purposes of this Ordinance, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced —

(a) in the case of a new claim made in or by way of third party proceedings, on the date on which those proceedings were commenced; and

(b) in the case of any other new claim, on the same date as the original action.

(2) In this section a new claim means any claim by way of set-off or counterclaim, and any claim involving either —

(a) the addition or substitution of a new cause of action; or

(b) the addition or substitution of a new party,

…

(3) Except as provided by section 30 or by rules of court, the court shall not allow a new claim within subsection (1)(b), other than an original set-off or counterclaim, to be made in the course of any action after the expiry of any time limit under this Ordinance which would affect a new action to enforce that claim.

(4) …

(5) Rules of court may provide for allowing a new claim to which subsection (3) applies to be made as there mentioned, but only if the conditions specified in subsection (6) are satisfied, and subject to any further restrictions the rules may impose.

(6) The conditions referred to in subsection (5) are —

(a) in the case of a claim involving a new cause of action, if the new cause of action arises out of the same facts or substantially the same facts as a cause of action in respect of which relief has already been claimed in the action by the party applying for leave to make the amendment; and

(b) in the case of a claim involving a new party, if the addition or substitution of the new party is necessary for the determination of the original action.

(7) The addition or substitution of a new party shall not be regarded for the purposes of subsection (6)(b) as necessary for the determination of the original action unless either —

(a) the new party is substituted for a party whose name was given in any claim made in the original action in mistake for the new party’s name; or

(b) any claim already made in the original action cannot be maintained by or against an existing party unless the new party is joined or substituted as plaintiff or defendant in that action.

…”

28.  Section 35(1)(b) is the relevant section and is known as the “relation-back” rule. The rule can operate to the prejudice of a defendant so as to deprive him of an accrued limitation defence if a new claim is permitted to be added by amendment after the expiry of the relevant limitation period. It is for this reason that the power of the court to allow such an amendment is circumscribed by subsections (3), (5) and (6)[8]: Akai Holdings Ltd (in compulsory liq) v Everwin Dynasty Ltd & Ors [2012] 3 HKC 485, [2012] 4 HKLRD 248.

29.  Mr Hui submitted that as the condition set out in subsection (6)(b) of “if the addition or substitution of the new party is necessary for the determination of the original action” is not satisfied, leave to add TH Chu as a party to the proceedings should be refused.

30.  Mr Joffe did not seem to have expressly disputed that the condition in subsection (6)(b) is not satisfied, although his primary position is that section 35 is wholly irrelevant since Ps rely on section 26 and as such no issue of limitation arises. However, such primary position lacked conviction as Mr Joffe submitted that for the purposes of the Joinder Summons, Ps would adopt the fall-back position that TH Chu may have a reasonably arguable limitation defence. Hence, Ps would accept (for the purposes of the Joinder Application alone) that if TH Chu is joined to these proceedings, he may have a reasonably arguable case that he would be deprived of a limitation defence as a result of the strict operation of the relation-back doctrine.

31.  On this basis, Mr Joffe invited the court to adopt the following proposals:

(1)  to join TH Chu on the basis that for limitation purposes, Ps’ claim against TH Chu only relates back to the date of the Joinder Summons, or the date of the order to be made, as opposed to the date of the Writ.

(2)  alternatively, to join TH Chu on the basis of Ps’ proposed undertaking not to pursue any claims against TH Chu if the Court finds at trial that the claim against TH Chu has become time-barred as at the date of the Joinder Summons or the date of the determination of the Amended Joinder Summons.

32.  First of all, I consider the proposed undertaking offered by Ps “not to pursue any claims against [TH] Chu if the Court finds at trial that the claim against [TH] Chu has become time-barred as at the date of the Joinder Summons or the date of the determination of the Amended Joinder Summons” to be an empty one: if TH Chu’s limitation defence prevails, Ps would not be entitled to pursue any claims against him anyway.

33.  Essentially, Mr Joffe was suggesting that it is open for the court to “permit an amendment on terms that it does not have benefit of ‘relation-back’”.

34.  Mr Hui submitted that section 35(1) of LO is mandatory and it is not open for parties to override the express provision by way of agreement:

“1) For the purposes of this Ordinance, any new claim made in the course of any action shall be deemed to be a separate action and to have been commenced—

(b) in the case of any other new claim[9], on the same date as the original action.” (emphasis added)

35.  Accordingly, it was submitted by Mr Hui that once a new defendant is joined into the existing proceedings, the new claim relates back to the date of commencement of the original action, and the defendant would lose the time-bar defence forever by the operation of section 35(1)(b).

Hong Kong Authorities

36.  Mr Hui further submitted that Ps’ proposal to join TH Chu despite the existence of a reasonably arguable limitation defence is contrary to stablished authorities in Hong Kong and must be rejected. The relevant Hong Kong authorities are as follows:

(1)  In 1996, in the case of Wong Kam Lee v Shimizu Corp & Ors[10], Woo J (as he then was), upheld a Master’s decision to join a defendant when the court had not reached a conclusion on the issue of limitation due to conflicting evidence, despite the operation of section 35(1). This decision, however, seems to be in conflict with subsequent Court of Appeal decisions as discussed below.

(2)  In 2012, the Court of Appeal has twice held that where the defendant had a reasonably arguable case on limitation, it was wrong to grant leave for joinder and amendment and leave the limitation issue to be determined at trial:

(a)  In Sun Focus Investment Ltd v Tang Shing Bor & Anor[11], the Judge granted leave to the plaintiff to amend to add new claims by filing a fresh statement of claim (after the original statement of claim was struck out previously), despite the defendants’ objection that the claims in the fresh statement of claim were out of time and they had a limitation defence. The Judge held that the plaintiff’s reliance on section 26(1)(b) of LO, which extended the limitation period in cases of deliberate concealment would be a live issue to be resolved at trial. The Judge’s approach was that any potential prejudice to the defendants by reason of the operation of the relation-back rule, notwithstanding the amendment pursuant to the leave granted by him, would be avoided by the fact that limitation would be a live issue at trial. On appeal, Fok JA (as His Lordship then was) held that:

“15. In my opinion, the Judge’s view that limitation would be a live issue at trial notwithstanding the grant of leave to amend was, with respect to the Judge, not correct since, by reason of the relation back rule, the new claims by amendment in the fresh statement of claim would be deemed to have been made on … the date of the original writ. On that basis, the new claims in the fresh statement of claim would have been made within six years of the accrual of the relevant causes of action and so there would be no limitation defence available to the defendants at the trial. The amendment would automatically deprive them of the advantage of the limitation defence and this would be unfair.

16. It follows that the Judge’s exercise of discretion to grant leave to amend was vitiated by this error.”

Fok JA’s analysis seems to support Mr Hui’s contention that the relation-back rule is mandatory and it is not open for the court to derogate from the automatic effect by providing expressly that the limitation issue would be live at trial. The Judge’s rationale, which is similar to that of the one that is being advocated by Ps now, was rejected as erroneous.

(b)  In Global Bridge Assets Ltd v Sun Hung Kai Financial Ltd.[12], the Judge found that the plaintiffs had an arguable case on the new claim not having been time-barred pursuant to section 26 of LO and granted leave to amend on the basis that the dispute as to the time of discovery of fraud would be live at trial. On appeal, Kwan JA (as the vice president then was) held that:

“21. … The approach in Welsh Development Agency and Sun Focus Investment gives effect to and accords with s.35(1)(b) and 35(3). Leave to amend should not be given if the effect of this would be to deprive the defendant of an accrued limitation defence, which would be lost as a result of the operation of the relation-back rule in s.35(1)(b). In that situation, the correct approach is to refuse leave to amend, unless the plaintiff can show that the defendant does not have a reasonably arguable case on limitation …By this means the injustice to the defendant of depriving him of an arguable limitation defence is avoided without denying the plaintiff the right to bring a fresh action to which, if he is correct, there is no limitation defence.

22. For the above reasons, I am satisfied that the approach in Extramoney Ltd v Chan, Lai, Pang & Co (a firm), which is to give leave to amend where there is a triable issue on limitation and leaving this issue to be resolved at trial, is incorrect…

…

24. … Whether the limitation period of six years should run from the date on which the cause of action accrued as provided in s.4(1) or from the date of discovery of the fraud or concealment as provided in s.26(1) is immaterial. What matters is whether the plaintiffs here can show that the defendant has no reasonably arguable defence of limitation to the new claim and so would not be prejudiced by the relation-back rule, irrespective of whether the limitation period is to run from the time provided under s.4(1) or s.26(1)…

…

26. The plaintiffs have not been able to establish that the defendant has no reasonably arguable limitation defence. For the reasons given above, the Judge was in error in the exercise of his discretion in granting leave to amend and his order must be set aside.”

(3)  In 2018, in the case of Sun Tian Gang v Changchun High & New Technology Industries Development Parent Co[13], Deputy High Court Judge Le Pichon, whilst recognizing the effect of the relation-back rule, held that as the plaintiff had an arguable case on deliberate concealment, the court should determine that issue as fairly and justly as circumstances would allow. As it was impossible to decide on the issue simply on affirmation evidence, the Judge held that it would be fairer to direct a trial on the preliminary issue.

(4)  The course adopted by the learned Judge seems to have been against the principles set down by the Court of Appeal that unless the plaintiffs can show that the defendant has no reasonably arguable defence of limitation to the new claim, leave to amend should not be given. In any event, the present case is distinguishable as I am of the opinion that from the available evidence Ps ought to have discovered the alleged fraud latest by June 2017.

(5)  In 2020, in the Court of Appeal Judgment of Delco Participation BV v Chiho Environmental Group Ltd[14], Kwan VP endorsed the approach set out in Global Bridge Assets Ltd to be the correct approach.

(6)  In 2022, the same principles in Sun Focus and Global Bridge Assets Ltd were repeated by G Lam JA in Securities and Futures Commission v Lu Ruifeng & Ors[15] that:

“34. … an amendment that adds a claim based on a new cause of action or against a new defendant in the face of an objection that the applicable limitation period has expired stands on a different footing. Section 35(1)(b) LO means that, once added, the new claim relates back to the date of commencement of the original action. If the limitation period for the new claim had not expired by that earlier date, the time-bar defence would be lost to the defendant forever. This is why before such an amendment is to be permitted, the court has to be satisfied that the limitation defence is not reasonably arguable anyway… As stated in Welsh Development Agency v Redpath Dorman Long Ltd [1994] 1 WLR 1409 at 1425G-H: ‘In such a case, leave to amend by adding a new claim should not be given unless the plaintiff can show that the defendant does not have a reasonably arguable case on limitation which will be prejudiced by the new claim, or can bring himself within R.S.C. Ord. 20 r. 5.’”

37.  As such, I agree with Mr Hui’s submission that the position in Hong Kong is reasonably clear that where a plaintiff has failed to show that a defendant does not have a reasonably arguable case on limitation which will be prejudiced by a new claim, leave to amend and join a new defendant should not be given.

English Authorities

38.  However, Mr Joffe advocated that his proposals are in line with development in the U.K. and the English case law clearly shows that sections 35(1) and (3) are not mandatory and parties are free to agree to proceed differently. It was submitted that it is also open to the Court to permit an amendment on terms that it does not have the benefit of “relation-back”, e.g. for limitation purposes it should not date back to the date of issue of the writ, but only to the date of the application to amend. It was submitted that this would be a useful practice which avoids the need to issue a fresh action with resultant waste of costs.

39.  The relevant English case law began with Welsh Development Agency v Redpath Dorman Long Ltd[16] where the Judge at first instance refused leave to amend due to the limitation period for the proposed new claims had expired. The plaintiff’s appeal was dismissed and it was held that: “… leave to amend by adding a new claim should not be given unless the plaintiff can show that the defendant does not have a reasonably arguable case on limitation which will be prejudiced by the new claim, or can bring himself within R.S.C., Ord. 20, r. 5”. It should be noted at this juncture that the judgment of and the test set out by Purchas L.J. in Grimsby Cold Stores Ltd. v. Jenkins & Potter[17] was expressly approved by Glidewell L.J.:

“Leave to add a new party should not be given unless it can be shown that the defendant did not have a reasonably arguable case on limitation which would be prejudiced by the additional new claim. I agree with Watkins L.J. that, as a result of the new evidence in the form of the report attached to the affidavit, the appellants have at least a strong arguable case that the damage was suffered more than six years before the date of the application to amend and that, therefore, this application should not be granted. Any prejudice to the applicant plaintiff can to a large extent be mitigated, if it exists, by having recourse to the ordinary process of issuing a fresh writ.”

40.  Here it can be seen that the court did not determine the issue of limitation, but simply determined on whether there was a reasonably arguable case on limitation for the defendant. Once that was established, the application to amend should not be granted. It was therefore irrelevant that the court may not be able to arrive at a definitive conclusion on the issue of limitation. The English Court of Appeal therefore did not consider that where a limitation issue is undecided, the issue should be determined at trial. It was also expressed that any prejudice to the applicant plaintiff can to a large extent be mitigated, by adopting the usual curse of issuing a fresh writ.

41.  The cases heavily relied upon by Mr Joffe to be in support of the feasibility and appropriateness of his proposals are WM Morrison Supermarkets plc v MasterCard Incorporated[18], MasterCard Inc v Deutsche Bahn AG[19], and IBM United Kingdom Ltd v LzLabs GmbH[20]:

(1)  WM Morrison Supermarkets plc v MasterCard Incorporated is an English Commercial Court Judgment by Field J in 2013.

(a)  The original claim was issued on 23 May 2012. The existing claims advanced against the defendants were based on concerted practice in breach of competition law from 18 November 2004 onwards. 18 November 2004 was more than 6 years ago from the date that leave to amend was sought (8 October 2013). The new claim consisted of partly claims which were within the limitation period (those from 8 October 2013) and partly claims that were outside the limitation period. The claimants thus submitted that as such the whole claim was not made after the expiry of the limitation period and did not fall foul of section 35(5) and leave to amend should be allowed.

(b)  This submission was rejected by Field J and as a result, the part of the claims for the time period from 23 May 2006 to 8 October 2007 were held to be time-barred. However, since the claim concerns a (i) continuing infringement of a right over a long period, and (ii) there remains infringement concerning a time period which is not time-barred (i.e. infringement since 8 October 2007, 6 years prior to the date of the amendment application), the Court allowed the plaintiff to amend the claim to limit its claims to the infringement to the period that is not time-barred.

(c)  It can thus be seen that the issue of limitation had been decided and no live issue of limitation remained when leave to amend to allow claims within the limitation period to be added. It was on that basis that it was held that the claims within the limitation period could be introduced by way of amendment instead of a fresh action to save costs.

(d)  Even though the wording adopted may be the similar: to “permit an amendment on terms that it does not have benefit of ‘relation back”, the circumstances in WM Morrison Supermarkets are markedly different from the present case where the limitation issue is contested and is still at large. I do not agree that WM Morrison Supermarkets supports the proposition that Mr Joffe advanced, which is unlimited and general in nature for case management for costs savings purposes.

(2)  MasterCard Inc v Deutsche Bahn AG is an English Court of Appeal Judgment where the issue concerned an alleged continuing breach of EU competition law by the legal entities that operated the MasterCard credit schemes in relation to Mastercard’s interchange fee arrangements.

(a)  The decision under challenge on appeal was a decision by the judge to give claimants permission to amend their claim form to introduce a new claim which was to be deemed for limitation purposes to have been commenced on the dates when the proceedings were commenced (being December 2012 and February 2013) under the principle of relation-back set out in section 35(1)((b) of the Limitation Act 1980. The judge did this on the basis that the new claim arose out of the same facts or substantially the same facts as claims that had already been commenced. The defendants submitted that he was wrong to have so held.

(b)  The defendants had agreed that new claim can be introduced by way of amendment to the existing proceedings which related back to 7 August 2015, as it was accepted that those claims would have been within the limitation period. As such, the situation is similar to that in WM Morrison Supermarkets as the defendant had agreed to new claim to be added which was within the limitation period and no issue of limitation remained. This was endorsed by the Court of Appeal to be the proper approach:

“This was the approach adopted by Field J in William Morrison v Mastercard [2013] EWHC 3271 (Comm) to avoid the necessity of the claimants there having to commence a new claim with resultant waste of costs, where he had found that the new claim didnotarise out of the same or substantially the same facts. This result can be achieved either by the court refusing permission for an amendment unless the new pleaded claim itself in terms pleads the new cause of action only from that date or by the court making an order stipulating the relevant date for limitation purposes, which is what both sides invited the judge to do and again invite us to do…” (emphasis added)

(c)  As such, if read in its proper context, I do not consider the above obiter in MasterCard Inc v Deutsche Bahn AG to be in support of Mr Joffe’s assertion that it is (without more) open for the court to accede to parties’ agreement to postpone the issue of limitation and allow amendment on that basis as a matter of “case management” in order to save costs. The courts in MasterCard Inc v Deutsche Bahn AG and WM Morrison Supermarkets clearly acceded to the application to amend only when the relevant limitation period had been agreed and no possibility of deprivation of a defendant’s limitation defence remained.

(3)  In IBM United Kingdom Ltd v LzLabs GmbH, a decision of the English Technology and Construction Court, the claimant applied to join a new defendant and to amend its particulars of claim. The new defendant objected on the basis that the joinder was precluded by section 35 of the Limitation Act 1980. The learned Judge held[21] that:

“71. Thus, the court does not have discretion to allow an amendment to introduce a new claim or add a new party after the expiry of the limitation period unless the express exceptions set out inCPR 17.4and/orCPR 19.6above apply in accordance with the provisions of section 35.

72. Where the merits of a limitation defence are obvious from the pleaded case, or the court is in a position to determine a disputed limitation defence on submissions or following a preliminary issue trial, the court can ascertain whether the proposed amendment is caught bysection 35(3). If the proposed amendment is caught by section 35(3), there is no power to allow it; if it is not so caught, the court must consider the application to amend by reference to the general principles summarised above.

73. Difficulty arises where the court is not in a position to determine the issue of limitation at the date of the application to amend. If the proposed amendment were to be permitted, so as to allow ventilation of the arguments on full evidence at trial, this could have the effect of depriving the other party of an arguable limitation defence by reason of the provision insection 35(1), whereby the amendment would be deemed to have been made when the claim was issued (‘the relation back rule’).

74. One option, where it is arguable that a new claim is statute-barred, is for the court to refuse permission to amend, leaving the claimant to start fresh proceedings:Chandra v Brooke North [2013] EWCA Civ 1559per Jackson LJ at [66]-[68]. That enables the claimant to pursue its new claim without gaining the benefit of relation back undersection 35(1)so as to deprive the defendant of its arguable limitation defence. However, it has the disadvantage of producing a multiplicity of proceedings that are likely to be consolidated, with the attendant wasted costs.

75. The alternative approach, which is proposed by the claimant in this case, is to restrict its new claims against Mr Moores to such claims which are not statute- barred under theLimitation Act 1980so as to ensure that the claimant will gain no advantage from the relation back rule. This practice has been endorsed by the Court of Appeal inMasterCard Inc v Deutsche Bahn AG [2017] EWCA Civ 272per Sales LJ (as he was then) at [4] andLibyan Investment Authority v King [2020] EWCA Civ 1690per Nugee LJ at [22].

…

82. It is clear from the technical particulars that the allegations of breach of the ICA span a period of time of at least between 2013 and 2021. Equally, the pleaded case against Mr Moores is based on actions and documents identified as continuing through to 2020. It would not be appropriate for the court to carry out a detailed analysis of each and every claim in order to determine whether it has a real prospect of success. Indeed, the parties have not suggested that the court should embark on such a mini trial. It follows that, even if the court refused permission for the amendments in respect of which it is arguable that the claims are statute-barred, there would remain other allegations to which such arguments could not apply.

83. This is a paradigm case in which the sensible solution is to allow the proposed new claims against Mr Moores but expressly limited to claims which are not statute-barred under theLimitation Act 1980, as pleaded in paragraph 11A of the draft. Further, the undertaking proffered by Ms Vernon in respect of the contractual time bar should be incorporated into the pleading for the avoidance of any doubt.”

(a)  First of all, I am of the view that the present case falls within the scenario described in paragraph 72: the merits of a limitation defence are obvious from the pleaded case, or the court is in a position to determine a disputed limitation defence on submissions such that the defendants cannot be said to not have an arguable limitation defence. As such, the proper course should be to refuse leave to amend.

(b)  Further, even if the ultimate merit of a limitation defence is unclear or cannot be decided, based on the Hong Kong Court of Appeal case law as analysed above and the principles as set out in WM Morrison Supermarkets, I respectfully decline to follow the solution proposed in paragraph 83 by the learned Judge. I am of the view that the learned Judge might not have appreciated the difference in IBM United Kingdom Ltd v LzLabs GmbH that there was no agreement between parties as to the limitation issue and in those circumstances the proper course would be to refuse leave to joinder/amendment and let the plaintiff commence fresh proceedings.

(c)  On the same bases, I would also respectfully decline to follow the course taken by the learned judges in Libyan Investment Authority v King[22] and Advanced Control Systems Inc v Efacec Engenharia e Sistemas S.A.[23]

42.  I am of the view that in cases where the limitation issue has been determined or agreed by parties (in the sense that the new cause of action will not be defeated by a limitation defence), it is of course open to the court and indeed it would be advisable for the court to exercise its case management powers to limit any costs to be wasted by not insisting separate proceedings to be commenced, only for them to be consolidated afterwards. However, in the absence of any determination by the judge or agreement between the parties on a limitation issue, I am of the view that the court has no discretion in adopting the proposals by Ps in the present case.

43.  I note that the prejudice envisaged to be caused to the plaintiffs in Sun Tian Gang, Wong Kam Lee and IBM United Kingdom Ltd in refusing leave to joinder/amendment can at most be said to be due to costs wasted in commencing fresh proceedings. As mentioned in the above cases, the plaintiff would still be entitled to commence fresh proceedings – it is not the case that in refusing leave to a joinder or amendment application the plaintiff would have lost their right to commence separate proceedings and to object to a defendant’s limitation defence.

44.  Conversely, the prejudice caused by joining a defendant who has a reasonable limitation defence is real. This is particularly the case where Ps here have rejected to TH Chu’s fall-back or alternative position that the issue of limitation be tried as a preliminary issue in the joinder and amendment application. It is not necessary to go into the reasons put forward by Ps in rejecting such preliminary issue to be tried. Even if I were to agree that such were valid reasons (which I do not), it would mean that TH Chu would not be able to raise his limitation defence and have it determined until the main trial and would need to participate in the whole trial with all other defendants and together with other issues, incurring what would no doubt be very substantial legal costs, if the previous legal battles between Lau and Chu were anything to go by. This would clearly be an absurd result when I have come to the view (and Ps were prepared to accept for the purposes of the present application) that TH Chu has a reasonable limitation defence.

Conclusion

45.  Based on the above, the Joinder Summons is dismissed.

46.  I order on a nisi basis that the costs of and occasioned by the Joinder Summons be paid forthwith by Ps to the intended 12^th defendant, with certificate for counsel for the hearing and certificate for 2 counsel for the preparation of written submissions. Such costs to be summarily assessed if not agreed. The intended 12^th defendant do lodge and serve his statement of costs within 14 days hereof. Ps do lodge and serve their list of objections, if any, within 14 days thereafter.

47.  The above costs order nisi shall become absolute in the absence of any application within 14 days to vary the same.

48.  I am grateful to counsel for their able assistance in this matter.

Mr Victor Joffe SC leading Mr Justin Ho and Mr Jonathan Ng, instructed by Dentons Hong Kong LLP, for the 1^st – 3^rd plaintiffs

Mr John Hui and Mr Adrian Lee (written submissions only), instructed by Michael Pang & Co, for the intended 12^th defendant

Attendance of of Iu, Lai & Li for the 1^st defendant was excused

Attendance of Holman Fenwick Willan for the 5^th and 6^th defendant was excused

Attendance of Au & Associates for the 7^th defendant was excused

The intended 10^th defendant was not represented and did not appear

The intended 11^th defendant was not represented and did not appear