A A
B
HCA 1399/2016 B
[2019] HKCFI 288
C C
IN THE HIGH COURT OF THE
D D
HONG KONG SPECIAL ADMINISTRATIVE REGION
E
COURT OF FIRST INSTANCE E
ACTION NO 1399 OF 2016
F ________________________ F
BETWEEN
G G
CHINA BAOLI TECHNOLOGIES HOLDINGS Plaintiff
H H
LIMITED (formerly known as REX GLOBAL
ENTERTAINMENT HOLDINGS LIMITED)
I I
and
J J
ORIENT EQUAL INTERNATIONAL GROUP 1st Defendant
LIMITED
K K
nd
HUANG DONGPO 2 Defendant
L L
HONG KONG ZHONG QING DEVELOPMENT CO 3rd Defendant
LIMITED
M M
and
N N
LANTAU HOLDINGS LIMITED 1st Third Party
O SQUADRON HOLDINGS SPV0164HK, LTD 2nd Third Party O
P SVK CAPITAL MANAGEMENT 3rd Third Party P
WANG LING (JAMES WANG) 4th Third Party
Q Q
_______________________
R R
S S
T T
U U
V V
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A A
Before: Hon B Chu J in Chambers
B B
Date of Hearing: 22 November 2018
C Date of Decision: 1 February 2019 C
D D
_________________
E DECISION E
_________________
F F
G G
Introduction
H H
1. The dispute between the 3rd defendant and a Bahamian
I company named as 2nd Third Party, Squadron Holdings SPV0164HK, Ltd I
(“TP2”), has somewhat eclipsed the main action commenced by plaintiff
J J
against the 3 defendants, respectively D1, D2 and D3.
K K
2. The “tale” concerning the non-existence of the TP2 1 began
L L
when during Ds’ attempted service of the Third Party Notice on TP2
M between 10-12 August 2016 in the Bahamas, Ds discovered that the M
company Squadron Holdings SPV0164HK,Ltd (the named lender of a loan
N N
to D3 on all loan documentations) did not in fact exist, or had not yet been
O incorporated. The company was only incorporated a few days later on O
17 August 2016. To avoid confusion, the pre-incorporation entity has been
P P
referred to as Purported Squadron and the incorporated company has been
Q referred to as New Squadron by other judges in their earlier decisions in this Q
action, and I shall follow where appropriate/applicable.
R R
S S
T T
1
So described in para 4 of D’s Skeleton Arguments
U U
V V
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A A
3. It was/is the position of TP2 that the subsequent incorporation
B B
of the company and adoption of the company’s pre-incorporation acts
C pursuant to section 70 of the International Business Companies Act 2000 in C
the Bahamas (“2000 Act”) would be a complete answer to Ds’ challenges
D D
to its authority or capacity. Ds however disagree. As seen later in this
E judgment, the applicability of section 70 of the 2000 Act to adoption of pre- E
incorporation contracts has yet to be determined by the Bahamian Court.
F F
G 4. The 4 summonses presently before this Court are G
chronologically :
H H
I (1) A summons issued on behalf of D3 on 21 June 2018, for the I
return of a sum of HK$15,628,285 (“Sum”) that has been paid
J J
by D3 into court pursuant to an order of DHCJ Pang SC
K (“Payment Out Summons”); K
(2) A summons issued on behalf of all Ds on 10 October 2018, for
L L
a formal discharge of the Injunction Order (defined below)
M which had expired (“Discharge Summons”); M
(3) A summons issued on behalf of D3 on 14 November 2018, to
N N
seek leave to refer and rely on the 3 affirmation of D3’s
rd
O Bahamian lawyer Christopher J Jenkins, exhibiting therein a O
copy of the Final Judgment (as defined below) and a copy of
P P
D3’s statement of claim in the Writ Action (as defined below);
Q (4) A summons issued on behalf of TP2 on 19 November 2018 to Q
have leave to file and serve the 4th affirmation of Sean Nottage
R R
(“Nottage”), a director of Squadron Holdings Limited
S (“SHL”), the parent company of TP2, and who is said to be a S
promoter of TP2, in opposition to Payment Out Summons.
T T
U U
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A A
5. There was no opposition for D3 to refer and rely on the
B B
3rd affirmation of Christopher J Jenkins, but D3 opposed the filing of
C Nottage’s 4th affirmation. D3 had no objection to the Court considering C
that affirmation on de bene esse basis.
D D
E 6. So far as P is concerned, its stance is that no step or application E
was required to discharge the Injunction Order due to its expiry and P is
F F
neutral in relation to the Discharge Summons. As for the other
G 3 summonses, they concern disputes between D3 and TP2, and again P’s G
position is neutral, save that P should be entitled to costs to follow whatever
H H
event, payable by the losing party, be it D3 or the TP2.
I I
7. TP2 does not oppose the Discharge Summons as such but
J J
New Squadron opposes the Payment Out Summons, and the issues before
K the Court are (i) whether New Squadron has any capacity to be heard on the K
summonses before the court and to oppose the payment out; and (ii) whether
L L
there is a good cause for payment out and/or there are any merits in the
M opposition of New Squadron. M
N N
8. At the hearing before this Court, Mr Barrie Barlow SC leading
O Mr Justin Lam appeared for Ds, Mr William Wong SC leading Mr Michael O
Ng appeared for TP2. Mr But Sun Wai appeared for P.
P P
Q Brief Background Q
R 9. So far in this action, there have been no less than 3 Rulings R
made by DHCJ Robert Pang SC respectively on 23 August 2016,
S S
24 November 2016, and 29 March 2017 (respectively “1 Ruling”,
T “2nd Ruling”, and “3rd Ruling”) in relation to various applications made by T
U U
V V
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A A
the parties. There has also been a decision from DHCJ Le Pichon which
B B
was handed down on 12 June 2017 (“Le Pichon Decision”).
C The background and procedural history can be gleaned from these Rulings C
and the Le Pichon Decision.
D D
E 10. P is a company incorporated in Bermuda and is listed on the E
Main Board of the Stock Exchange of Hong Kong.
F F
G 11. D1 is a company incorporated in Hong Kong and Mr Huang G
Weibin, of an address in Beijing, is its director. Mr Huang Weibin, of an
H H
address in Shenzhen, is the son of D2/Huang Dong Po. The sole
I shareholder and director of D3 has since 20 August 2015 has been one I
Zhang Xiaomeng (“Zhang”). Zhang was/is an Executive Vice President
J J
of ENE-Carbon, a company listed on the Shenzhen Stock Exchange 2.
K K
12. As for the Third Parties, The 1st Third Party, a BVI company,
L L
(“Lantau”) was the lender of the loans to D1 and D2 3. TP2 was the lender
M named on the loan documentations for the loan to D3. The 3rd Third Party M
(“SVK”) is a brokerage firm or financial services firm operating in
N N
United Kingdom, and the 4 th
Third Party (“Wang”) of an address in
O Shenzhen, was the intermediary between Ds and the lenders. O
P P
13. The main action was commenced in May 2016 by P, essentially
Q to claim against Ds for an injunction to restrain Ds’ breach of their respective Q
R R
S S
2
See para 1, Zhang’s 1st affirmation, A1:162
3
Leave was subsequently given to Ds to withdraw the Third Party Notice against Lantau on 14 March
T 2017 as a result of an anti-suit injunction granted by the New York Court, see para 89, Le Pichon T
Decision (as defined later) at A1:144
U U
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A A
lock-up undertaking (“Lock-up Undertaking”) and for a declaration that
B B
Ds were in breach.
C C
14. In October 2015, P entered into a sale and purchase agreement
D D
to purchase an interest in a company incorporated in the Cayman Islands
E called Yota, which was engaged in the smartphone development industry. E
P decided to raise funds for the purchase of Yota by placing new shares to
F F
be issued at a price of HK$0.032 per share, through two securities firms, one
G of which was Haitong International Securities Company Limited G
(“Haitong”),
H H
I 15. Ds were placees of a total of 1,667,000,000 of the P’s placing I
shares (“Placing Shares”) through Haitong, of which 417,000,000 were
J J
subscribed by D1, 500,000,000 were subscribed by Huang Dongpo and
K 750,000,000 were subscribed by D3. The payments by D1, D2 and D3 K
were respectively HK$13,378,387.49 (for D1), HK$16,041,232 (for D2)
L L
4
and HK$24,061,848 (for D3) .
M M
16. There was a condition precedent to the placing, namely that
N N
each placee had to execute the Lock-Up Undertaking to undertake during
O the lock-up period the placee would not, amongst other things, sell or O
otherwise transfer, dispose of or create any right over the Placing Shares or
P P
any interest therein. The lock-up period was for 24 months after the date
Q of allotment and issue of the Placing Shares (“Lock-up Period”). Q
R R
S S
T 4
T
See para 15, A1:165
U U
V V
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A A
17. As seen from the Le Pichon Decision, on about 23 May 2016,
B B
having noticed an unusual spike in trading volume of its shares coupled with
C a sharp fall of about 13% in share price, P made enquiries of the major C
placees as a result of which P came to learn of Ds’ loan transactions and
D D
breach of the Lock-up Undertakings. There was another large spike in
E trading volume coupled with another sharp fall in the share price, on 26 May E
20165.
F F
G 18. The above discovery led P to issue the writ herein on 27 May G
2016 and to seek an ex parte injunction.
H H
I 19. An injunction order was granted by Ng J on 27 May 2016 I
ex parte to restrain Ds from breaching their respective Lock-up
J J
Undertaking, and the ex parte order was subsequently continued on the
K return day, 3 June 2016, by G Lam J until trial or further order (“Injunction K
Order”). The day before the return day, the Clarification Summons
L L
(as defined below) was issued on behalf of TP2. On 3 June 2016, G Lam
M J gave directions for filing of affirmations in respect of the Clarification M
Summons including for it to be set down for an early hearing. At the same
N N
time, G Lam J had also ordered P to provide fortification of its undertaking
O as to damages to TP2, by way of a bank guarantee for HK$7m by P. O
Subsequently, P and TP2 consented to an order that P was to pay HK$7m
P P
into court in place of the bank guarantee.
Q Q
20. As said, one day prior to the hearing before G Lam J, on 2 June
R R
2016, solicitors Messrs Oldham, Li and Nie (“OLN”) issued a summons on
S behalf of TP2 for clarification of the Injunction Order and/or setting aside S
T 5
T
See paras 10, 11 of Le Pichon Decision
U U
V V
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A A
the Injunction Order as against TP2 (“Clarification Summons”). Later,
B B
on 4 July 2016, OLN issued another summons on behalf of TP2 for further
C fortification of P’s undertaking as to damages provided in the Injunction C
Order (“Fortification Summons”) and subsequently, after TP2 was served
D D
with the Third Party Notice, OLN issued a third summons on behalf of TP2
E on 11 August 2016 to set aside the leave for P to serve Third Party Notice E
out of jurisdiction on TP2 (“Setting Aside Service Summons”).
F F
These 3 summonses issued by OLN on behalf of TP2 are collectively
G referred to as “TP2 Summonses”. G
H H
21. So far as D3 is concerned, TP2 and D3 entered into a financing
I arrangement pursuant to which D3 and TP2 executed, amongst other things, I
a loan agreement on 7 May 20166 (“Loan Agreement”) supplemented by
J J
a control agreement dated 11 May 20167 (“Control Agreement”). In the
K Recital of the Loan Agreement, it was stated that the “Borrower” was in K
need of liquidity and was unable to obtain such liquidity through banks and
L L
other traditional lending courses and loan structures; and the “Borrower”
M was the owner of the 750,000,000 shares in P. A “Funding Summary” was M
N
set out in the Loan Agreement. The estimated “Gross Loan Proceeds” N
were stated to be HK$112,500,000 and the 750,000,000 shares were to be
O O
transferred to the “Lender” by 2 tranches, the 1st tranche of 250,000,000
P
shares and the 2nd tranche of 500,000,000 shares8. P
Q 22. Pursuant to the Loan Agreement, the “Borrower” and the Q
R
“Lender” agreed that the shares transferred into the Control Account for R
S S
6
The full title of the Loan Agreement is “Non-Securitized Structured Non-Recourse Loan Agreement”
and bore the date of 6 May 2016, see B1:386-400
7
T B1:410-405 T
8
See “Funding Summary” on B1:387
U U
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A A
each tranche was to fund at a “Loan to Value” (LTV) of 50% as set forth in
B B
the “Funding Summary”. The “LTV” for the loan was to be calculated
C based upon the “Share Base Price” as defined in the Loan Agreement 9, based C
on the low of the one day, or 5 day Volume Weighted Average Price prior
D D
10
to the complete funding for each tranche of the loan .
E E
23. Thereafter, pursuant to the Loan Agreement and the Control
F F
Agreement, on or about 19 May 2016, the 1st tranche of 250,000,000 shares
G (“Shares”) was transferred by D3 out of its 750,000,000 Placing Shares G
from D3’s securities account at Haitong to a “Control Account”, namely a
H H
custodian account at HSBC of SVK, and D3 agreed to give total dominion
I and control over the Shares to TP2. I
J J
24. After the transfer of the Shares, the 1st tranche of the loan of a
K sum of HK$20,454,000 was then remitted to D3’s bank account by TP2. K
It would appear that on 24 May 2016, after the remittance, TP2 learnt of
L L
D3’s breaches of SFC regulations and TP2 instructed solicitors to write to
M D3, alleging that D3 had “stolen” the sum of HK$20,454,000 from TP2 and M
that D3 was involved in a fraudulent scheme to defraud the public in breach
N N
of various provisions under the Securities and Futures Ordinance, and TP2
O further demanded an “Audit Letter” under clause 11.10 of the Loan O
Agreement 11.
P P
Q 25. It is TP2’s case that that under the financial arrangement Q
provided to D3, TP2 had been expressly given the right to sell the Shares
R R
and that it was completely unbeknownst to TP2 at the time of the Loan
S S
9
See clause 1.15
10
T See Clause 2.2, B1:388 T
11
Para 29, A1:168-169
U U
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A A
Agreement that D3 was acting in breach of the Lock-up Undertaking by
B B
entering into the financing arrangement with TP2. Further, since D3 only
C paid HK$8m in subscribing the Shares (250,000,000 @ HK$0.032 each), C
D3 had made a windfall profit in the amount of HK$12,454,000 pursuant to
D D
the financial arrangement/loan transaction.
E E
26. Zhang had filed his 1st affirmation on behalf of Ds in support
F F
of P’s inter-partes summons for the continuation of the Injunction Order
G and to oppose TP2’s Clarification Summons. According to Zhang, D3 is G
one of his investment vehicles set up for the purpose of investing in
H H
Hong Kong stocks, and that in about February 2016, he became aware of the
I opportunity to acquire the Placing Shares and that P’s shares were an I
attractive investment because of the Yota purchase agreement. He then
J J
informed D2/Huang Dongpo and his son Huang Weibin of the investment
K opportunity, and that they were content to proceed with the investment in P K
through subscribing for the Placing Shares and that it was Zhang who
L L
12
handled the applications for subscriptions on behalf of all Ds . Further,
M M
according to Zhang, he was told by his good friend and associate Li Wen
N
Hao in about late April 2016 that Li had been approached by Wang, who N
13
claimed to be able to obtain loan facilities on favourable terms . It was
O O
Wang who then introduced Lantau and/or TP2 to Li Wen Hao and Ds.
P P
27. According to Zhang, Ds were then sent a number of forms and
Q Q
documents to sign, and that although they were unfamiliar with English and
R
could not understand the transaction documents, they trusted Li Wen Hao R
who communicated to them the core terms of the arrangement, namely
S S
T
12
See paras12, 13 of Zhang’s 1st affirmation, A1:164-165 T
13
See paras 18, 19 of Zhang’s 1st affirmation, A1:166
U U
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A A
(i) the amount of the Placing Shares to be used as security, (ii) the term of
B B
the loan, (iii) the interest and (iv) the total amount that could be lent. They
C accordingly signed those loan documentations. C
D D
28. Li Wen Hao had filed his 1st and 2nd affirmations, also to
E support P’s inter-partes summons to continue the Injunction Order, and to E
oppose TP2’s Clarification Summons. It was Li’s evidence that he did not
F F
speak English and that in mid April 2016 he came to know Wang through a
G chat group and that Wang knew that Li was looking for loan facilities for Ds G
through pledging shares. It was also Li’s evidence that Wang was the
H H
agent for the lenders (which Li referred to as Lantau, TP2 and SVK) and
I that Wang was aware of the Lock-up Period, and had assured Li that there I
should be no concern that the collateral could be disposed of on the market
J J
during the Lock-up Period.
K K
29. Thus, Ds’ case is that it was under the above circumstances that
L L
they each executed the loan documentations.
M M
30. In the Third Party Notice, Ds are alleging fraud and/or deceit
N N
practised by the Third Parties on Ds in that D1 and D2 were respectively
O fraudulently induced to assign their portion of the Placing Shares to Lantau, O
and D3 was fraudulently induced to assign the Shares to SVK pursuant to
P P
the Loan Agreement and Control Agreement.
Q Q
31. On the same day of issuing the Third Party Notice, 18 July
R R
2016, Ds also issued a summons against the Third Parties seeking an
S injunction order to restrain them from dealing with the Placing Shares S
T T
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A A
transferred by Ds (“Ds’ Injunction Summons”), which was later adjourned
B B
to the hearing on 22 August 2016.
C C
32. In the meantime, on 9 August 2016, Nottage purported to
D D
commence arbitration proceedings against D3 by a Notice of Arbitration14
E based on an arbitration clause in the Loan Agreement which provided for E
disputes to be referred to arbitration under the law of England and Wales
F F
through the Arbitration Society of England and Wales 15 (“Arbitration
G Proceedings”). G
H H
33. As mentioned earlier, Ds discovered when attempting service
I that the company named as TP2 did not exist. Upon such discovery, they I
immediately sought leave to issue, during court vacation, a summons for an
J J
order that TP2 be struck out for want of authority and not be heard on any
K of the TP2 Summonses (“Authority Summons”). K
L L
34. Ds’ leave application to issue the Authority Summons within
M vacation time, Ds’ Injunction Summons, the TP2 Summonses together with M
two other summonses issued by Lantau were fixed for a hearing before
N N
Deputy Judge Pang on 22 August 2016. 5 days before the hearing, TP2
O Party was incorporated. O
P P
35. The hearing led to the 1st Ruling in which the Deputy Judge
Q Pang granted leave to Ds to issue the Authority Summons within vacation Q
time, which was then fixed to be heard on 10-11 November 2016 as a
R R
preliminary issue. Deputy Judge Pang adjourned all other summonses to a
S S
14
T B1:338 T
15
Clause 15.1, B1:395
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A A
4 day hearing to be fixed not earlier than 28 days from the conclusion of the
B B
hearing of the Authority Summons.
C C
36. At the same time, pursuant to the 1st Ruling and the order of the
D D
same date, ie 23 August 2016, Deputy Judge Pang also ordered that within
E 7 working days after TP2’s provision of sufficient evidence of the amount E
of sale proceeds of the Shares it held, D3 was to make payment into court
F F
the amount of the loan advanced by TP2 to D3 less the amount of the TP2’s
G sale proceeds (“Fortification Order”). The Sum was subsequently paid G
into court by D3 pursuant to the Fortification Order.
H H
I 37. On 24 August 2016, Ds, having obtained leave, formally issued I
the Authority Summons. TP2 also issued a summons for leave to adopt
J J
these proceedings or part thereof issued prior to its incorporation, and also
K for leave for Nottage and the parent company SHL to join as interested party K
and to adopt these proceedings in the name of TP2 (“Joinder Summons”).
L L
M 38. The Authority Summons and the Joinder Summons were heard M
by Deputy Judge Pang on 10 November 2016. This led to the 2nd Ruling
N N
handed down on 24 November 2016 in which Deputy Judge Pang declined
O to make any ruling on the Authority Summons or on the question of s 70 of O
the 2000 Act, since by then, various proceedings had been commenced and
P P
going on in the Bahamas and instead, he adjourned the Authority Summons
Q and the Joinder Summons to the 4 day hearing fixed for the other summonses Q
pursuant to his 1st Ruling. Deputy Judge Pang further granted, amongst
R R
other things, leave to New Squadron to appear and to take part in the hearing
S of TP2 Summonses for the purpose of seeking the same relief and to have S
T T
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A A
leave to rely on the evidence already filed by Purported Squadron
B B
(“Participation Order”)16.
C C
39. After the 2nd Ruling, Ds sought leave to appeal and this led to
D D
the 3rd Ruling in which Deputy Judge Pang refused Ds’ leave application.
E Ds did not renew their leave application before the Court of Appeal. E
F F
40. Pursuant to the 1st Ruling, a 4 day hearing was eventually fixed
G before DHCJ Le Pichon commencing from 9 May 2017. As seen in the G
Le Pichon Decision, there were 8 summonses before her at the time,
H H
including the adjourned Authority Summons, the TP2 Summonses, Ds’
I Injunction Summons and other summonses issued respectively by Lantau I
and SVK.
J J
K 41. On 10 May 2017, Deputy Judge Le Pichon ordered that the TP2 K
Summonses, and Ds’ various summonses including Ds’ Injunction
L L
Summons and the Authority Summons be adjourned pending the
M determination by the Courts of the Commonwealth of the Bahamas on the M
applicability or otherwise of s70 of the 2000 Act and refused the orders
N N
sought in the Joinder Summons on the ground that New Squadron, Nottage
O and SHL (referred to by the judge as ‘Squadron Parties’) lacked locus standi O
pending the aforesaid determination by the Courts of the Commonwealth of
P P
the Bahamas.
Q Q
R R
S S
T 16
T
See para 36, A1:110
U U
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A A
42. The Le Pichon Decision was handed down on 12 June 2017 and
B B
Deputy Judge Le Pichon further ordered that, amongst other things,
C Ds’ Injunction Summons as against TP2 be adjourned pending resolution of C
the Writ Action (as defined later).
D D
E 43. P’s statement of claim herein was eventually filed in E
March 2018 and Ds’ defence was filed in June 2018.
F F
G 44. It is not disputed the date of allotment and issue of the Shares G
to Ds was on about 22 April 2016, and that the Injunction Order has lapsed
H H
since about 22 April 2018 when the Lock-up Period expired. This led to
I D3 issuing the Payment Out Summons for the return of the Sum paid by him I
pursuant to the Fortification Order made by Deputy Judge Pang and later,
J J
Ds issuing the Discharge Summons.
K K
The proceedings in the Bahamas
L L
45. As set out in the Le Pichon Decision, on 26 August 2016, TP2
M M
issued an originating summons in the “Commercial Division” in the
N Supreme Court of the Bahamas under 2016 COM/COM 00059 against P, N
D2 and D317 (“59/16 OS Proceedings”) and on 1 September 2016, TP2
O O
obtained ex parte declarations from Hilton J that TP2 had adopted the
P underlying contracts entered into in its name prior to its incorporation and P
that it could adopt legal proceedings commenced in its name prior to its
Q Q
incorporation.
R R
S S
17
T It appeared that the originating summons was later amended on 31 August 2016, as seen in an order T
dated 13 March 2018, B2:661
U U
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A A
46. This was followed by D3 issuing a writ on 6 September 2016
B B
under 2016 CLE/GEN/01295 (“Writ Action”) against TP2 and Nottage as
C defendants seeking, amongst other things, declarations that Nottage lacked C
the capacity to commence the Arbitration Proceedings on behalf of TP2
D D
prior to its incorporation, challenging the arbitration clause in the loan
E agreement and the applicability of s 70 of the 2000 Act 18. E
F F
47. D3 then applied ex parte to Bahamian Court to restrain Nottage
G and TP2 from taking any further action in the Arbitration Proceedings and G
on 16 September 2016 obtained such injunction (“16.09.16 Injunction”).
H H
I 48. In the meantime, on 23 September 2016, Hilton J set aside his I
earlier ex parte order and also stayed the 59/16 OS Proceedings pending
J J
determination of the Writ Action.
K K
49. D3 filed its statement of claim in the Writ Action on 3 October
L L
2016 claiming 6 declarations against TP2 and/or Nottage and an order that
M the TP2 be struck from the Register of Companies on the grounds that it is M
being used in the furtherance of a fraudulent scheme involving TP2 and
N N
19
other persons .
O O
50. On 2 November 2016, TP2 issued a 2nd originating summons,
P P
this time in the “Common Law and Equity Division” under
Q 2016 CLE/GEN/01458 and against Nottage as defendant only, but seeking Q
the same relief in its originating summons issued in the 59/16 OS
R R
Proceedings and on the same day obtained ex parte declarations sought
S S
18
T See 3rd paragraph, Charles Ruling (as later defined), B2:642 T
19
B2:668-686
U U
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A A
(“1458/16 OS Proceedings”)20. D3 later applied to join in as defendant in
B B
the 1458/16 OS Proceedings on 8 November 2016 and the ex parte order
C was set aside by Chief Justice Isaacs and other applications adjourned sine C
die.
D D
E 51. On 7 November 2016, TP2 and Nottage applied to set aside the E
16.09.16 Injunction and the application was heard by Madam Justice Indra
F F
H Charles on 14 March 2017. The application was dismissed on 4 May
G 2017. In her ruling (“Charles Ruling”)21, Charles J held, amongst other G
things, that (i) a company that does not exist cannot bring legal proceedings
H H
and it cannot be disputed that legal proceedings include arbitration
I proceedings; (ii) Nottage did not have the capacity to commence the I
Arbitration Proceedings on behalf of TP2 prior to its incorporation; (iii) the
J J
Arbitration Proceedings were a nullity; and (iv) s 70 of the 2000 Act had no
K application to the commencement of legal proceedings prior to a company’s K
incorporation22.
L L
M 52. TP2 and Nottage had filed for an appeal which was fixed for M
hearing on 14 November 2017, but due to non observance of rules, the
N N
23
appeal was struck out due to lack of competence .
O O
53. On 27 February 2018, TP2, Nottage and D3 consented to an
P P
order in the 1458/16 OS Proceedings (“Consent Order”) 24
that,
Q irrespective of the contents of the originating summons, the sole substantive Q
R R
20
See paras 16-18 of the 2nd Ruling, and also the Preamble to the Order of Hilton J dated 13 March 2018
S in the 59/16 Proceedings, B2:661 S
21
B2:641-657
22
See para 35, Le Pichon Decision
23
T B2:659 T
24
C3:646-647
U U
V V
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A A
issue (other than costs) to be determined as between the parties in the
B B
originating summons is whether or not Squadron Holdings SPV0164HK,
C Ltd was entitled to and did ratify and adopt the Loan and Control C
Agreements executed on 7th and 11th May 2016 respectively between D3 and
D D
Nottage (for and on behalf of Squadron Holdings SPV0164HK, Ltd) under
E s 70 of the 2000 Act25 (“Agreed Sole Issue”). E
F F
54. On 13 March 2018, upon the application and undertaking of D3
G to provide a copy of the Consent Order to Hilton J, the 59/16 OS Proceedings G
were struck out by Hilton J as abuse of process.
H H
I 55. The Agreed Sole Issue under the Consent Order in 1458/16 OS I
Proceedings was originally fixed to be heard on 23 March 2018 before Chief
J J
Justice Isaacs who unfortunately passed away. The trial was later
K rescheduled to commence on 18 January 2019 before Charles J, for 60 days. K
L L
56. Following the Charles Ruling, on 8 November 2018, Charles J
M gave a final judgment for 2 of the 6 declarations sought by D3 in its M
statement of claim in the Writ Action, namely that (i) Nottage lacked the
N N
capacity under Bahamian law to commence the Arbitration Proceedings on
O 10 August 2016 and the Arbitration Proceedings commenced by Nottage O
purported on behalf of Purported Squadron are a nullity; (ii) the purported
P P
ratification of the directors’ resolution dated 17 August 2016 by
Q New Squadron of the actions of Nottage in purporting to commence Q
Arbitration Proceedings was ineffective as falling outside of the ambit of s
R R
70 of the 2000 Act (“Final Judgment”).
S S
T 25
T
See C3: 645
U U
V V
- 19 -
A A
New Squadron’s capacity to be heard in the present summonses
B B
57. Mr Wong submitted that at the present hearing, OLN acts for
C C
New Squadron.
D D
58. Mr Wong further pointed out that since the hearing on
E E
22 August 2016 before Deputy Judge Pang, OLN has been acting for,
F amongst others, New Squadron, on at least 4 occasions in this action, and on F
each of these prior occasions, D3 was fully aware that OLN acted on behalf
G G
for New Squadron, SHL and/or Nottage and that there is no basis to say that
H OLN has no authority to act for New Squadron. H
I I
59. As for the New Squadron’s locus standi to participate in this
J hearing, Mr Wong submitted that (i) D3 is estopped from repeating its J
arguments previously rejected by the court and (ii) in any event, New
K K
Squadron has indisputable locus standi.
L L
60. For the issue estoppel, Mr Wong relied on the 2nd Ruling
M M
pursuant to which the Deputy Judge Pang granted the Participation Order to
N New Squadron26. As there was no appeal, Mr Wong submitted that D3 is N
therefore bound by the Participation Order made in the 2nd Ruling.
O O
P 61. Mr Barlow however argued that the Participation Order was in P
relation to the Joinder Summons, which was subsequently refused by
Q Q
Deputy Judge Le Pichon.
R R
S S
T 26
T
Paras 36 (1) and (2),
U U
V V
- 20 -
A A
62. In the 2nd Ruling, DHCJ Pang had set out the orders sought by
B B
TP2 in the Joinder Summons, which were for leave to New Squadron, and/or
C alternatively for leave to Nottage or SHL to join as interested party, and to C
have leave to “adopt these proceedings or part thereof”. Deputy Judge
D D
Pang had said he had problems with the way the Joinder Summons was
E formulated in that s70 of the 2000 Act “does not provide any ‘mechanism’ E
to adopt the Hong Kong legal proceedings” 27 . He made, instead, the
F F
Participation Order, for New Squadron, Nottage and SHL to take part in the
G hearing of the TP2 Summonses. G
H H
63. In the 3rd Ruling, Deputy Judge Pang had further explained that
I the Participation Order was to ensure that the necessary parties would be I
before the Court at the substantive hearing, when it was the expressed
J J
intention of Ds to argue on the Authority Summons, and that the evidence
K which New Squadron and/or SHL and/or Nottage would be the same K
evidence filed by the Purported Squadron and no purpose would be achieved
L L
28
to have the same summonses and evidence filed yet again .
M M
64. It would thus appear from his 2 nd and 3rd Rulings that the
N N
Participation Order given by Deputy Judge Pang was not only with reference
O to the Joinder Summons, but also to the Authority Summons and the TP2 O
Summonses which were all fixed to be heard at the 4 day hearing.
P P
Q 65. The Final Judgment is nothing new in that it in fact arose out Q
of and was consequent upon the Charles Ruling and this was quite clear from
R R
D3’s own Bahamian lawyer Mr Jenkin’s 3 affirmation .
rd 29
The Charles
S S
27
See para 35, A1:110
28
T See para 17, A1:117 T
29
See para 8, A2:288.3
U U
V V
- 21 -
A A
Ruling was prior to the hearing before Deputy Judge Le Pichon and was
B B
referred to in the Le Pichon Decision.
C C
66. It is also quite clear that the effect of the Le Pichon Decision
D D
and Deputy Judge Le Pichon’s order of 10 May 2017 is that the Authority
E Summons and the TP2 Summonses have all been adjourned, and E
notwithstanding the Joinder Summons was refused, this was only at the
F F
present stage, pending the determination of the application of s 70 of the
G 2000 Act by the Bahamian Court, namely the determination of the Agreed G
Sole Issue by Charles J.
H H
I 67. At present, the Agreed Sole Issue is still undetermined and the I
Writ Action is still unresolved. In particular, the effect of the
J J
determination of the Agreed Sole Issue will be that either New Squadron
K was entitled and did ratify and adopt the Loan and Control Agreements K
executed by Purported Squadron and D3, or New Squadron was not. If it
L L
was and it did ratify and adopt the Loan Agreement, one of the consequences
M could be that the arbitration clause would come into play again. M
N N
68. Anyway, as said earlier, in my view, the Participation Order
O was not limited or with reference to the Joinder Summons only. Thus, the O
refusal of the Joinder Summons should not affect the Participation Order in
P P
respect of the other summonses.
Q Q
69. Further, if New Squadron has leave to take part in the hearing
R R
of the Authority Summons and TP2 Summonses and to seek like relief and
S the Authority Summons and the TP2 Summonses have not yet been S
determined, I see no reason why New Squadron cannot have the right to
T T
U U
V V
- 22 -
A A
assert its interests in the present summonses, or to take part in the present
B B
hearing. Although no formal summons has been taken out, Mr Wong has
C submitted that, insofar as it is necessary, New Squadron seeks leave from C
the Court to appear and take part in the Payment Out Summons and the
D D
30
Discharge Summons .
E E
70. As submitted by Mr Wong, when the Fortification Order was
F F
granted, the New Squadron was already in existence and that the reference
G by Deputy Judge Pang to “Squadron” in the 1st Ruling when dealing with G
the fortification, he was referring to the New Squadron31. I accept this.
H H
I 71. The undertaking by P as to damages given in the Injunction I
Order was to abide by any order the Court may make as to damages in case
J J
the Court shall hereafter be of opinion that Ds, or any other party, shall have
K sustained any loss by reason of the Injunction Order which P ought to pay32. K
Further, it is stated in the Injunction Order that Ds or anyone notified of the
L L
Injunction Order may apply to the Court at any time to vary or discharge the
M order or so much of it as affects that person. M
N N
nd
72. Deputy Judge Pang had in fact also said in his 2 Ruling, as
O follows33 O
P P
“… It cannot be disputed that Squadron has been incorporated
since 17 August 2016. It cannot be disputed that [Squadron] is
Q potentially affected by the injunction taken out by the plaintiff in Q
this action. As a party affected or potentially affected by an
R
injunction, it would be entitled to apply to the court, R
independently of any acts done in its name prior to its
S S
30
See para 29, pg 10, TP2’s Skeleton Submissions
31
See para 46, 1st Ruling
32
T A1:68 T
33
See para 28, 2nd Ruling
U U
V V
- 23 -
A A
incorporation, to set aside the injunction or so much of the
B injunction as affects it.” B
C C
73. Again, when Deputy Judge Pang referred to “Squadron” above,
D he clearly was referring to the New Squadron. In any event, New Squadron D
was notified of the Injunction Order and, in my view was clearly affected
E E
and/or potentially affected by the continuation of the Injunction Order.
F F
74. Having considered all the above, I accept Mr Wong’s
G G
submissions that New Squadron has locus standi or capacity to appear and
H to participate in this hearing and to rely on the evidence already filed by H
Purported Squadron, and if leave is necessary, such leave is hereby granted.
I I
J The Payment Out Summons J
K 75. Under Order 22A rule 1(1) of RHC, save as provided therein, K
any money paid into court in an action may not be paid out except in
L L
pursuance of an order of the Court which may be made at any time before,
M at or after the trial or hearing of the action. M
N N
76. It is not disputed that the Court has an unfettered discretion
O whether to order payment out so as to achieve justice between the parties. O
As seen in Leader Honour Ltd v Fanling Property Co Ltd, unrep,
P P
DCCJ 3219 & 5342/2005, 28 April 2016, the Court may order the
Q withdrawal of a sum paid into Court if good cause is shown, particularly if Q
there has been a change of circumstances or the discovery of some new
R R
fact34.
S S
T 34
T
At paras 19-22
U U
V V
- 24 -
A A
77. Mr Barlow also referred the Court to Dynasty Line Limited
B B
(Provisional Liquidators Appointed) and Sukamto Sia (also known as
C Sukamto Sukjarman) and Lee Howe Young, unrep, FAMV 38/2009, C
26 November 2009. In this decision, the issue was whether money paid
D D
into court to fortify an undertaking in damages in support of a Mareva
E injunction should be retained in court and made available to satisfy E
outstanding costs orders made in favour of the defendants after the relevant
F F
action had been stayed and the injunction discharged.
G G
78. In the Dynasty Line case, it was common ground that the
H H
plaintiff did not have any assets and that the litigation was funded by
I creditors, and that the money paid into court was provided by a creditor. I
The evidence was that the money was provided for the sole purpose of
J J
providing fortification to meet the Court’s condition for continuing the
K Mareva injunction and that involved setting up a fund in court to be applied K
for the specific contingent purpose of compensating the 2 nd defendant in case
L L
he should later be shown to have suffered damage as a result of the
M M
continuation of the injunction. There was no necessity in principle for such
N
a fund to derive from the assets of the plaintiff giving the undertaking 35. N
nd
It was held by Ribeiro PJ that as it was accepted that the 2 defendant did
O O
not suffer any damage as a result of the continuation of the injunction, the
P
purpose of the payment into court was spent and no reason had been shown P
why it should not be released to the plaintiff’s solicitors .
36
Q Q
R R
S S
35
T At para 13 T
36
At para 14
U U
V V
- 25 -
A A
79. However, in the present case, Mr Wong had argued that the
B B
purpose of the fortification was not spent and it was not accepted that
C New Squadron did not suffer any damage as a result of the then continuation C
of the Injunction Order.
D D
E 80. Whether the 1st fortification of HK$7m ordered by G Lam J to E
be paid by P, or the 2nd fortification of the Sum paid pursuant to the
F F
Fortification Order, the purpose of the fortification was for the purpose of
G compensating TP2 (albeit New Squadron was not incorporated at the time G
of the 1st fortification), in case TP2 should later be shown to have suffered
H H
damage as a result of the continuation of the Injunction Order. In fact, it is
I New Squadron’s case that it has suffered substantial damages as a result of I
the continuation. In the Fortification Summons, TP2 was seeking further
J J
fortification in the sum of HK$69,007,875 in addition to the earlier sum of
K HK$7,000,000 already paid by P as fortification. K
L L
81. At the hearing on 3 June 2016, G Lam J had observed, amongst
M other things, that TP2 seemed to be an innocent party caught up by the M
Injunction Order, in that the then evidence showed that it was both out of
N N
pocket as to the money (loan) and as to the Shares, and the issue was whether
O the Injunction Order should override TP2’s rights in respect of the Shares. O
The relevant parts of the transcript of the hearing before G Lam J were
P P
referred to in Mr Wong’s skeleton submissions of 1 August 2016 which
Q Q
were before Deputy Judge Pang, and Deputy Judge Pang was aware of the
R
effect of the continuation of the Injunction Order on New Squadron. R
S S
T T
U U
V V
- 26 -
A A
82. In the 1st Ruling, Deputy Judge Pang indicated that in light of
B B
the issue over the Authority Summons there would inevitably be delay and
C that such delay would likely to be substantial. Mr Wong, who appeared C
for TP2 at the hearing on 22 August 2016 had asked for fortification to the
D D
extent of the loan outstanding, Deputy Judge Pang said he saw no reason
E why this should not be granted to the extent that TP2 had not already sold E
the Shares, namely the loan minus the sale proceeds of the portion of the
F F
Shares sold. He had also considered Ds’ position, but came to the view
G that the Fortification Order would not create great injustice for D3. G
H H
83. Deputy Judge Pang had further said that he was satisfied that
I TP2 had provided sufficient evidence in the 5th and 6th affirmation of I
Benjamin Holland, the Managing Director of TP2 (“Holland”) as to the
J J
amount of proceeds it received from sale of the Shares it obtained from D3.
K The then evidence from Holland in his 5th and/or 6th affirmation was that K
16,075,000 out of 250,000,000 or 6.43% of the Shares were sold on 23 May
L L
37 38
2016 , and the gross proceeds of sale were HK$4,825,715 . Thus the
M M
Sum was the loan of HK$20,454,000 less HK$4,825,715.
N N
84. D3’s Payment Out Summons was supported by (i) an
O affirmation of Huang Dongpo/D2 filed on 22 June 2018 on behalf of D3, O
and later (ii) an affirmation of Huang Weibin filed on 31 October 2018 on
P P
behalf of D3 in reply to Nottage’s opposing affirmation.
Q Q
R R
S S
T
37
See para 23(iv), Holland’s 5th affirmation, A1:218 T
38
See para 37, Holland’s 5th affirmation, A1:222
U U
V V
- 27 -
A A
85. Huang Weibin has summarised the Payment Out Summons
B B
was based on 2 “supervening events”:-
C C
(i) The lapse or expiry of the Lock-up Undertakings and
D D
consequently the Injunction Order;
E E
(ii) The “false” evidence provided by Purported Squadron which
formed the (false) premise upon which Deputy Judge Pang
F F
made the Fortification Order.
G G
86. The lapse or expiry of the Lock-up Undertakings and the
H H
Injunction Order was not disputed.
I I
87. As for the so-called “false” evidence, Mr Barlow submitted that
J J
Holland had provided no supporting documentary evidence in his 5th and/or
K 6th affirmation and that later evidence showed that Holland’s undocumented K
claims to be false and that TP2/Purported Squadron had sold all of the
L L
Shares before the Injunction Order39.
M M
88. D2/Huang Dongpo had in his affirmation claimed that the
N N
Shares transferred to the HSBC account pursuant to the Loan Agreement
O and/or Control Agreement were never held by the Purported Squadron or O
SVK, rather the HSBC account was held by one Raiffeisen Bank
P P
International AG, as disclosed by HSBC in a related action HCA 923/2018
Q pursuant to a disclosure order, and that it was clear that the Shares were sold Q
or disposed of by Purported Squadron at the outset, contrary to the version
R R
of events presented by Holland in his affirmations.
S S
T T
39
See para 20, D3’s Skeleton Arguments
U U
V V
- 28 -
A A
89. In response to the above, Nottage had in his 3rd affirmation
B B
explained that what D3 said above was based upon a misconceived
C understanding of the “Chain of Custody Arrangement” of the Shares C
(“Chain of Custody Arrangement”). Nottage’s evidence was that as
D D
SVK is a boutique securities firm based in London, it is not a CCASS
E member or participant, and in order for SVK to transact in Hong Kong E
shares, it has a clearing and custody arrangement with various custody
F F
channels; and that the transfer into the HSBC account held by the Raiffeisen
G Bank was pursuant to the Chain of Custody Arrangement. G
H H
90. Thus, according to Nottage, there was no sale or disposal of the
I entirety of the Shares, and the only sale was of 16,075,000 of the Shares as I
deposed in the 5th and/or 6th affirmation of Holland, and that this had been
J J
further confirmed by SVK. Further, Nottage referred to an email from
K Holland to Ms Kennie Cheung of D3 on 16 May 2016 informing D3 that K
there was to be an intermediary bank on SVK’s side called Raiffeisen Bank
L L
International (“16.05.16 Email”) . 40
M M
91. In reply to Nottage’s 3rd affirmation, Huang Weibin said that
N N
there should be detailed contractual documentation governing all the rights
O and obligations of the parties involved in the Chain of Custody O
Arrangement, and that TP2 had not produced any. Huang Weibin
P P
maintained that the entirety of the Shares had been sold and that the buyer
Q Q
had deposited them into the HSBC account held by Raiffeison Bank.
R R
S S
T 40
T
B1:408-411
U U
V V
- 29 -
A A
He then referred to a letter dated 24 May 2016 from HSBC’s solicitors
B B
Deacons and exhibited as “HWB-1” to his affirmation41 (“HSBC Letter”).
C C
92. The HSBC Letter confirmed receipt of a 1st tranche of
D D
410,000,000 shares and 2nd tranche of 250,000,000 shares (which would
E appear to be the Shares transferred from D3 on 19 May 2016) from Haitong E
on 19 May 2016, and a 3rd tranche of 382,000,000 shares from Haitong on
F F
23 May 2016, all pursuant to Settlement Instructions given by Raiffeisen
G Bank to HSBC. Thereafter, on 24 May 2016, one tranche of 24,800,000 G
shares were delivered to BNP, and on 25 May 2016, another tranche of
H H
21,200,000 shares and a 3rd tranche of 16,075,000 shares were delivered to
I BNP pursuant to Settlement Confirmations given by HSBC to Raiffeisen I
Bank.
J J
K 93. As set out in the HSBC Letter, 1,042,000,000 of shares in P K
were transferred into the account at HSBC held by Raiffeisen Bank
L L
(“Raiffeisen Account”) on 19 and on 23 May 2016 and on 24 and 25 May
M 2016, a total of 62,075,000 shares were transferred out of the Raiffeisen M
Account.
N N
O 94. The 16.05.16 Email was headed “Settlement Instructions for O
250MM Shares 164 HK (HKZQ) 17 May 2016”42, and detailed settlement
P P
instructions had been set out therein. As said earlier, there was in fact
Q mention of an intermediary bank on SVK side called Raiffeisen Bank Q
International registered with HSBC, and that the transfer of the Shares to
R R
SVK would initiate on Tuesday 17 May 2016 and that settlement would be
S S
41
T B1:440-489 T
42
B1:408 -411
U U
V V
- 30 -
A A
on Thursday 19 May 2016. The delivering firm was stated to be Haitong
B B
and the account of the receiving firm under “Receiving Firm Information”
C was the Raiffeisen Account, and under the “additional information”, it was C
stated that the settlement was for further credit to SVK.
D D
E 95. Even though it might not have been known by D3 at the time E
that the account for the receiving firm was that of Raiffeisen Account, the
F F
16.05.16 Email had clearly mentioned Raiffeisen Bank being the
G intermediary, and the credit of the Shares into the receiving firm’s account G
was for further credit to SVK.
H H
I 96. Having considered the information provided in the I
HSBC Letter, I do not consider the information therein to be inconsistent
J J
with the evidence of Holland in his 5th and/or 6th affirmation.
K K
97. Further, the information in the HSBC Letter did not show that
L L
TP2 was “dumping” the Shares as alleged by D3. The most it showed was
M a total of 62,075,000 shares were transferred out of the Raiffeison Account M
on 24 and 25 May 2016, which even if they had all come from the Shares
N N
transferred by D3, this would not support D3’s allegation of TP2’s full
O disposal of the Shares from the outset, or that the Raiffeison Account was O
the account of “the buyer”43.
P P
Q 98. Huang Weibin had also produced copies of WeChat messages Q
between 25 May 2016 and 28 May 201644 in his affirmation to show that
R R
Robert Marino of Lantau (“Marino”) had repeatedly stated that the plummet
S S
43
T See para 34, A2:279 T
44
B2:577-639
U U
V V
- 31 -
A A
in P’s shares was due to TP2 “dumping” the Shares as soon as they were
B B
received45.
C C
99. Huang Weibin did not make clear who the participants of the
D D
WeChat messages were, apart from saying that one of them was Marino.
E Insofar as one can make out, the other participants “Winston” and “LWH”46 E
appeared to be from Ds’/borrowers’ side. There were messages from
F F
Marino to Winston on 25 May 2016 in which Marino had said “Looks like
G Squadron is dumping all of Xiaomeng’s stock”47, and later Marino had said G
“Please keep in mind that the more Squadron DUMPS… The more stock we
H H
will need to keep! The price is going lower and lower. Tell them to stop
I dumping…… Squadron must have dumped 40+M”48. I
J J
100. However, the messages also showed that Winston had said that
K Lantau was selling P’s shares as well to which Marino did not deny and K
merely claimed they had hedged 8m shares 49 . Winston subsequently
L L
replied to Marino that they just confirmed Squadron did not sell any shares,
M and that it was all Lantau’s position. However, Marino said Squadron was M
using the same broker SVK as Lantau, and that Marino knew this for a fact50.
N N
Notwithstanding what was said by Marino, Winston was asking Lantau to
O stop dumping from the SVK account51 Marino blamed Squadron and later, O
Marino had also said they had hedged 21M shares on 25 May 2016.
P P
Q Q
R R
45
See para 35, A2:279
46
Not sure whether LWH referred to Li Wenhao
47
S B2:585 S
48
B2:587, 588
49
B2:588
50
T B2:588-589 T
51
B2:593
U U
V V
- 32 -
A A
101. It would appear from the messages that a default event
B B
involving the loan transaction from Lantau to Ds (or D1/D2) had been
C triggered and Winston and Marino were negotiating a discounted settlement C
agreement for the return of the shares held by Lantau. From the messages,
D D
the “dumping” appeared to be from SVK, which according to Marino, both
E Lantau and TP2 were using as broker. Hence, the selling by SVK could be E
for Lantau or TP2 or both. More importantly, there was no evidence in
F F
those WeChat messages that Winston had ever said that neither Lantau nor
G Squadron had the right to sell the Placing Shares pledged with them. G
Winston was clearly aware of the shares in P were being sold by either TP2
H H
or by Lantau, and there was at the same time hedging by Lantau.
I I
102. It appeared in the midst of those messages Winston was fired
J J
and LWH then came into the picture communicating with Marino.
K The messages then indicated Marino accusing the “borrowers” having K
defrauded Lantau and threatening that if no settlement was reached, Lantau
L L
52
would team up with P and SFC . In response, LWH then alleged fraud on
M M
the part of Lantau.
N N
103. As it turned out, it would appear that Ds have “teamed up” with
O P. Anyway, I do not find that those WeChat messages would support D3’s O
case that TP2 had fully disposed of the Shares from the outset, nor do I find
P P
there is at present any sufficient evidence for D3 now to allege that the
Q Q
evidence of Holland in his 5th and/or 6th affirmation about the number of the
R
Shares sold by TP2 was false. In fact, SVK had confirmed the number of R
the Shares sold by TP2.
S S
T 52
T
B2:630
U U
V V
- 33 -
A A
104. Huang Weibin in in his affirmation had also claimed that the
B B
Deputy Judge Pang had no jurisdiction to make the Fortification Order
C against D3. However, D3 did not appeal against the Fortification Order. C
Mr Wong had referred to Gee on Commercial Injunctions, 6th Ed 2016 and
D D
submitted that the court had power to require the undertaking to be fortified
E by someone other than the application 53. I agree with Mr Wong that D3 E
should have appealed against the Fortification Order instead of now
F F
challenging it on jurisdiction through the back door. The Sum was paid in
G pursuant to an order of the Court, and under Order 22A rule (1), D3 had to G
demonstrate good cause for the Sum to be withdrawn. The expiry of the
H H
Lock-up Period or the discharge of the Injunction Order alone would not be
I in my view sufficient. I
J J
105. Mr Barlow submitted that the Sum sitting in court cannot serve
K any useful purpose whatsoever because it can never be availed by any other K
party other than the party that paid it into court, and that party seeks its
L L
release and so there is simply no purpose in the money remaining in court.
M M
Mr Barlow also pointed out that D3 was not the one who gave the
N
undertaking as to damages. N
O 106. As said earlier, New Squadron was affected and/or potentially O
affected by the then continuation of the Injunction Order.
P P
Q 107. Mr Wong had stressed that Deputy Judge Pang granted the Q
Fortification Order for the purpose of affording some comfort to New
R R
Squadron due to substantial delay over the determination of the Authority
S S
T 53
T
See Gee on Commercial injunctions, 6th Ed, 2016, at para 11-027
U U
V V
- 34 -
A A
Summons and/or the TP2 Summonses and any payment out at this juncture
B B
to D3 would defeat the purpose that the Sum intends to serve.
C C
108. The loan was received by D3 and had not been repaid. At the
D D
moment, the trial of the Agreed Sole Issue and the Writ Action is proceeding
E in the Bahamas and the Authority Summons and the TP2 Summonses have E
not yet been dealt with. There has been no material change in
F F
circumstances which warrants the payment out of the Sum to D3, and even
G though the Injunction Order has lapsed, the damages suffered by G
New Squadron as a result of the Injunction Order has not yet been
H H
ascertained. In any event, I find that there is at present no urgency in the
I payment out of the Sum. I
J J
109. Although New Squadron had invited this Court to dismiss the
K Payment Out Summons outright, Mr Wong had in my view rightly pointed K
out that a more appropriate way would be to adjourn the Payment Out
L L
Summons, pending the determination of the Agreed Sole Issue and that upon
M such determination, the parties can then all come back and take stock of the M
issues when all the evidence could then be placed before the court.
N N
O 110. Having considered the circumstances of this case, I have come O
to the view that the Payment Out Summons should be adjourned sine die
P P
with liberty to restore upon the final determination of the Agreed Sole Issue
Q by the Bahamian Courts. I therefore so order and costs to be reserved. Q
R R
Discharge Summons
S S
111. It is not really disputed that P’s undertaking as to damages
T continues beyond the discharge and so the discharge is really a formal T
U U
V V
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A A
exercise. I see no reason why the discharge of the Injunction Order should
B B
not be granted, subject to there being no payment out of the Sum until further
C order. C
D D
112. The matter of the formal discharge could have been dealt with
E by consent between all parties, including P. I am therefore of the view that E
there should be no order as to costs.
F F
G The 3rd affirmation of Christopher J Jenkins G
H 113. There was no objection to D3’s summons to refer to and rely H
on the above affirmation. I will grant leave as sought in paragraph 1 of the
I I
summons issued by D3 on 14 November 2018. There be no order as to
J costs, as the matter could have been dealt with by way of consent. J
K K
The 4th affirmation of Nottage
L L
114. Mr Wong indicated during the hearing that the only evidence
M in the 4th affirmation of Nottage which would be relied on by New Squadron M
in the present hearing was the notice of the trial of the Agreed Sole Issue
N N
before Charles J on 18 January 201954. There was no reason why the notice
O could not be referred to, which was to update the Court as to the then position O
of the proceedings in the Bahamas.
P P
Q 115. Anyway, in light of my decision to adjourn the Payment Out Q
Summons, I am of the view that the summons for leave to file Nottage’s
R R
4th affirmation should also be adjourned sine die with liberty to restore and
S costs to be reserved. I therefore so order. I also order that there be a S
T 54
T
C3:645
U U
V V
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A A
hearing for directions prior to the restoration of the Payment Out Summons,
B B
since parties may wish to file further evidence, in particular updating
C evidence in relation to the Bahamian proceedings. C
D D
E E
F F
G G
H H
I I
(Bebe Pui Ying Chu)
J Judge of the Court of First Instance J
High Court
K K
L L
M M
N N
O O
P P
Mr But Sun Wai, instructed by Michael Li & Co, for the plaintiff
Q Mr Barrie Barlow SC and Mr Justin Lam, instructed by K & L Gates, for the Q
1st to 3rd defendants
R R
Mr William Wong SC and Mr Michael Ng, instructed by Oldham Li & Nie,
for the 2nd third party
S S
T T
U U
V V