HCA1417/2013

A A B B HCA 3391/2016 C & HCA 1417/2013 C [2022] HKCFI 3237 D D HCA 3391/2016 E IN THE HIGH COURT OF THE E HONG KONG SPECIAL ADMINISTRATIVE REGION F F COURT OF FIRST INSTANCE G ACTION NO 3391 OF 2016 G _________________ H H BETWEEN I CHINA MEDICAL TECHNOLOGIES, INC 1st Plaintiff I (IN LIQUIDATION) J J CMED TECHNOLOGIES LTD 2nd Plaintiff K COSIMO BORRELLI AND YUEN LAI YEE 3rd Plaintiffs K IN THEIR CAPACITY AS THE JOINT AND SEVERAL LIQUIDATORS OF CHINA MEDICAL L L TECHNOLOGIES, INC (IN LIQUIDATION) M and M WU XIAODONG 1st Defendant N N SAMSON TSANG TAK YUNG 2nd Defendant O CHEN ZHONG 3rd Defendant O CHONG WING HIP 5th Defendant P P HAO XIAOQING ALLAN 6th Defendant Q BI XIAOQIONG (IN HER PERSONAL CAPACITY 13th Defendant Q AND AS TRUSTEE OF THE XIAO QIONG BI R TRUST AND THE ALISA WU IRREVOCABLE R TRUST) S AND THE OTHER 17 DEFENDANTS LISTED AS S THE 4th, 7th – 12th AND 14th – 23rd DEFENDANTS T IN THE SCHEDULE TO THE AMENDED WRIT T OF SUMMONS U U V V A A -2- B B HCA 1417/2013 C C IN THE HIGH COURT OF THE D HONG KONG SPECIAL ADMINISTRATIVE REGION D COURT OF FIRST INSTANCE E E ACTION NO 1417 OF 2013 F _________________ F BETWEEN G G CHINA MEDICAL TECHNOLOGIES, INC Plaintiff (IN LIQUIDATION) H H and I WU XIAODONG 1st Defendant I SAMSON TSANG TAK YUNG 2nd Defendant J J CHEN ZHONG 3rd Defendant K ZHU FENG (CHARLES) 4th Defendant K SUPREME WELL INVESTMENTS LIMITED 5th Defendant L L M M (Consolidated by Order of Master Chow dated the 23rd day of July 2018) N _________________ N O Before: Hon Ng J in Chambers O Date of Hearing: 29 March 2022 P P Date of Judgment: 21 October 2022 Q Q ________________ R R JUDGMENT S ________________ S T T U U V V A A -3- B B Introduction C C 1. There is before this court an application by summons filed on D D 24 September 2021 by the 2nd Defendant (“Mr Tsang”) for security for E costs against the 1st and 2nd Plaintiffs under RHC O 23 r 1 and section 905 E Companies Ordinance, Cap 622 (“CO”). F F G G 2. Mr Tsang himself did not file any evidence in support of his H application. Instead, the application is supported by his solicitor H Mr Tang Shu Pui Simon (“Tang”) in his 2nd and 4th affidavits (“Tang 2” I I and “Tang 4” respectively). This is unusual since one of the main issues J of the application is about the merits of the Plaintiffs’ claim and J Mr Tsang’s defence and there is no suggestion that Mr Tsang is unable to K K make affirmation(s) or swear affidavit(s) to confirm his version of the facts, L especially those which purportedly in reply to the summary of the Plaintiffs’ L evidence against him in the 18th affidavit of Cosimo Borrelli (“Borrelli M M 18”).1 N N O 3. In Mr Tsang’s witness statement dated 16 June 2021, which O is referred to in Tang 4, again curiously, Mr Tsang did not state his address P P when it is such a basic requirement. The only logical deduction from the Q above is that Mr Tsang does not wish to disclose his whereabouts and his Q unwillingness to state on oath the facts in support of his defence. All these R R will have a bearing when this court examines the merits of the case. S S T T 1 Mr Tsang also did not go on oath to oppose the continuation of the Mareva injunction against inter alia him: see this court’s Judgment in these proceedings U dated 22 May 2019. His solicitor did. U V V A A -4- B B 4. The 1st and 2nd Plaintiffs have filed Borrelli 18 in opposition. C C D 5. There is no dispute that the 1st and 2nd Plaintiffs were D incorporated in the Cayman Islands and the BVI and therefore come within E E RHC O 23 r 1(a). Further, the 1st and 2nd Plaintiffs, being insolvent F companies, are likely to be unable to pay Mr Tsang’s costs from their own F pockets and thus come within s 905(1). The only issue is whether that G G discretion should be exercised in favour of Mr Tsang, and if so, in what H amount. H I I Background J J 6. The 1st Plaintiff, China Medical Technologies, Inc, was K K incorporated in the Cayman Islands in July 2004. Its shares were listed on L NASDAQ in August 2005 and were delisted in February 2012. It was the L holding company of a group whose principal business was said to be M M developing, manufacturing and marketing advanced surgical and medical N N equipment in the PRC. The 1st Plaintiff was grossly insolvent with O provable claims of over US$400 million. In July 2012, it was wound up O by the Grand Court of the Cayman Islands. On 1 September 2014, Harris P P J made an ancillary winding up Order against it in HCCW 435 of 2012. Q Q 7. The 2nd Plaintiff, CMED Technologies Ltd, is the R R 1st Plaintiff’s wholly-owned subsidiary. S S 8. The 3rd Plaintiffs were appointed as the provisional T T liquidators of the 1st Plaintiff by Order of Harris J in November 2012. On U U V V A A -5- B B 5 February 2015, they became the Liquidators of the 1st Plaintiff C C (“Liquidators”). D D 9. The 1st Defendant Mr Wu was at all material times the E E founder, Chairman, CEO, director and the largest shareholder of the F 1st Plaintiff. From January 2006 to July 2012, he was a director of the F 2nd Plaintiff. G G H H 10. Mr Tsang was the 1st Plaintiff’s director from June 2007 to I December 2011 as well as its CFO from January 2005 to January 2012. He I was also a director of the 2nd Plaintiff from January 2006 to December J J 2011. He was the second most senior executive of the 1st Plaintiff after K Mr Wu. Mr Tsang is in contempt of a High Court Order that he should K attend Court in person for examination, has absconded from Hong Kong L L and is subject to an outstanding warrant for his arrest. Mr Tsang is also M said to be a fugitive from the United States criminal justice system. M N N 11. The Plaintiffs claim that the former senior management of the O 1st and 2nd Plaintiffs, assisted by their associates, perpetrated, participated O in and/or benefited from the fraudulent misappropriation of P P US$521.8 million in cash (“Fraud”) through purported acquisitions Q (“Acquisitions”) from the 7th Defendant, Supreme Well Investments Q Limited (“Supreme Well”), and its subsidiaries, of the following alleged R R medical technologies: S S (1) FISH, acquired pursuant to a contract dated 6 February 2007 T T for US$176.8 million; and U U V V A A -6- B B (2) surface plasma resonance technology (“SPR”) acquired C C pursuant to a contract dated on or around 5 October 2008 for D US$345 million. D E E 12. It is the Plaintiffs’ case that: F F (1) the FISH and SPR technologies were worthless in that they G were not new technologies; G H H (2) Supreme Well, the counter-party to the Acquisitions, was in I fact controlled by Mr Tsang, who was the sole authorised I signatory of its bank accounts with Bank of China (Hong J J Kong) Limited (“BOC”) and The Bank of East Asia, Limited K (“BEA”) into which US$355.5 million of the consideration K paid by the 1st and 2nd Plaintiffs were deposited. The balance L L was paid to Supreme Well by other means; M M (3) Mr Tsang authorised the transfer of funds from Supreme Well N to the bank accounts of other persons and entities (“Supreme N Well Payees”) all of whom were associated with or controlled O O by Mr Wu, Mr Tsang and/or their associates; and P P (4) the Supreme Well Payees subsequently transferred all or some Q of the funds to the bank accounts of other persons and entities Q (“Further Supreme Well Payees”), some of whom were R R associated with or controlled by Mr Wu, Mr Tsang and/or S their associates, and thereafter to further recipients. S T T U U V V A A -7- B B 13. Mr Wu orchestrated, participated and conspired in the Fraud. C C The Plaintiffs claim US$524.6 million against Mr Wu: D D (1) US$521.8 million misappropriated from the 1st and E 2nd Plaintiffs by reason of, inter alia, his breaches of duty and E trust and unlawful conspiracy; and F F (2) US$2.8 million, being salary and bonuses paid to him from G January 2006. G H H 14. Mr Tsang acted on both sides of the Acquisitions and directed I payment of the consideration received by Supreme Well to the Supreme I Well Payees. He received US$7.47 million directly and over J J US$379 million through entities controlled by him. The Plaintiffs claim K K US$524.7 million against Mr Tsang: L L (1) US$521.8 million misappropriated from the 1st and M 2nd Plaintiffs by reason of, inter alia, his breaches of duty and M trust and unlawful conspiracy; and N N (2) US$2.9 million, being salary and bonuses paid to him from O O January 2006. P P 15. In this court’s Judgment in these proceedings dated 22 May Q Q 2019 where this court set aside a worldwide Mareva injunction granted R R against inter alia Mr Tsang, this court said at para 76: S S “76. Mr Tsang is, in addition to Mr Wu, said to be the main perpetrator of the Fraud. The pleaded causes of action against T him include fraudulent breach of fiduciary duty/trust, want of T authority, conspiracy to defraud and knowing receipt. In his skeleton argument, there is no serious attempt to contest the good U arguable case against him. Instead, Mr Tsang ‘is content to leave U V V A A -8- B B the matter in the Court’s hands’ for the limited purpose of this C application. On the materials available, this court is satisfied that C a good arguable case based on fraud/dishonesty has been made out.” D D E 16. In CACV 505 of 2019, an appeal from this court’s said E Judgment dated 22 May 2019, the Court of Appeal (Hon Au and Chow JJA) F F had the following observations to make in relation to Mr Tsang at paras 40, G 44 and 48: G H “40. In so far as Mr Tsang is concerned, he was, on the H Plaintiffs’ case, a prime mover behind the Fraud: I (1) He acted on both sides of the Acquisitions. I J (2) Supreme Well was his agent, nominee, trustee, façade or J alter ego, and was used by him for the purpose of perpetrating the Fraud. K K (3) He directly received at least US$7.47 million of funds allegedly stolen from the Company/CMED. L L (4) He controlled Supreme Well (the 7th Defendant), East M Hope International Limited (the 8th Defendant), Cheer M Link Technology Investment Limited (the 9th Defendant), Innovative (the 10th Defendant), Worldpro N Investments Limited (the 14th Defendant), Long Chart N (the 15th Defendant), and Global Flash Limited (the O 23rd Defendant) (collectively ‘the Tsang Entitles’), O which received over US$379.32m of funds allegedly stolen from the Company/CMED. P P (5) He directed payment of the consideration received by Q Supreme Well to the Supreme Well Payees. Q (6) In Re China Medical Technologies, Inc (HCCW R 435/2012, unreported, 28 August 2014), in the context of R an application to re-open the trial of a petition to wind up the Company in Hong Kong based on new evidence, S S Harris J had the following to say about Mr Tsang: T ‘[6] … in the light of the new evidence it was quite T clear that Mr. Tsang’s evidence was self-serving, could not be relied on and that Mr. Tsang, as U opposed to his lawyers, was intent not on assisting U V V A A -9- B B the Court determine the jurisdiction issue properly, C but [on] avoiding his conduct being investigated. C [10] The transaction between the Company and D Supreme Well and Molecular was, according to D public announcements made by the Company at the time, an arm’s length transaction. However, the E E new documents obtained by the liquidators show that the 2 accounts into which US$355,000,000 F was deposited with Bank of China Hong Kong and F the Bank of East Asia respectively, had as their sole authorised signatory Mr. Tsang. The shareholder G of the account opening documents is a Mr. Chen G Zhong, who was allegedly the developer of the H technology sold to the Company. However, H through a series of transfers made initially out of the Supreme Well accounts to various other I accounts the large majority of the proceeds, I US$294,500,000, ended up in accounts controlled by Mr. Tsang and the Company’s former Chairman J J and Chief Executive Officer Mr. Wu… K [14] There is now reason to think that a very large part K of the Company’s assets has been misappropriated through a scheme operated in Hong Kong L L involving various persons who themselves are normally resident here (Mr. Tsang, Mr. Kwan and M Mr. Chong Wing Hip) and using bank accounts in M Hong Kong which were operated personally by Mr. Tsang in Hong Kong. N N [16] In the present case the evidence that has come to O light since July of last year makes it clear there are O strong prima facie grounds for suspecting that a very significant part of the Company’s assets have P been misappropriated in Hong Kong using a P number of Hong Kong bank accounts operated by persons in Hong Kong …’ Q Q 44. The Judge was satisfied that the Plaintiffs had established R a ‘good arguable case’ of fraud against the Opposing R Defendants (see §§76-88 of the Main Judgment). Given this finding, as well as the nature of the Fraud itself, we S S consider that there was clearly a solid basis for concluding a risk of dissipation of assets by the Opposing T Defendants,… T 48. In the present case, the Fraud is in substance a massive U scheme of wrongful misappropriation and dissipation of U V V A A - 10 - B B the Company/CMED’s assets through the extraction of C very substantial funds (in the region of US$524.6m) C belonging to the Company/CMED purportedly as purchase monies for worthless assets sold by Supreme D Well, and the siphoning off of the funds to a large number D of persons (ie Supreme Well, the Supreme Well Payees and the Further Supreme Well Payees) using more than E E 50 bank accounts across at least 5 jurisdictions. Viewed in this light, it seems to us that the nature of the Fraud F itself ought to be regarded as being highly relevant to a F proper assessment of the risk of dissipation…” (emphasis added) G G H Deliberation H I I 17. The applicable principles governing security for costs J applications are well-established. J K K 18. As far as RHC O 23 r 1 is concerned, the principles are L summarized in Hong Kong Civil Procedure 2022 at para 23/3/3. L M M 19. RHC O 23 r 1(1) provides that the court may order security N N for costs “if, having regard to all the circumstances of the case, the court O thinks it just to do so”. These words have the effect of conferring upon the O court a real discretion, and indeed the court is bound, by virtue thereof, to P P consider the circumstances of each case, and in the light thereof to Q determine whether and to what extent or for what amount a plaintiff may Q be ordered to provide security for costs. It is not an inflexible or rigid rule R R that a plaintiff resident abroad should provide security for costs. The court S has to strike a balance between what would be too oppressive to the S plaintiff and what would give the defendant a measure of security. T T U U V V A A - 11 - B B 20. A major matter for consideration is the likelihood of the C C plaintiff succeeding. In exercising its discretion, the court may take into D account the merits of the plaintiff ’s claim. If the case of the plaintiff is D genuine and strong, no order for security would be granted. On the other E E hand, an order for security would usually be granted if the plaintiff cannot F clearly demonstrate that it has a high degree of probability of success at F trial. G G H 21. This is not to say that every application for security for costs H should be made the occasion for a detailed examination of the merits of the I I case. It is not the function of the court, when faced with an application for J security for costs, to make a “preliminary run” at deciding the ultimate J success or failure of the claim. K K L L 22. As for s 905, the court’s jurisdiction is engaged once it is M established that a plaintiff company will be unable to meet an adverse costs M order. The court then has a discretion under s 905, just as under RHC O N N 23 r 1, whether to order security for costs having regard to all the O circumstances. Among the circumstances which the court might take into O account include inter alia whether the plaintiff has a reasonably good P P prospect of success, whether the application for security is being used Q oppressively eg so as to stifle a genuine claim and whether the plaintiff’s Q lack of means has been brought about by any conduct of the defendant: R R Hong Kong Civil Procedure 2022 para 23/3/14 at p 661. S S 23. Mr Manzoni SC’s primary submission in opposing security T T for costs is that the justice of this case demands that no order of security U U should be made because to do so would be to require the victims of a theft V V A A - 12 - B B to pay security in order to protect the interests of the thief. This submission C C must be looked at in light of Mr Manzoni SC’s next submission that the 1st D and 2nd Plaintiffs’ evidence that Mr Tsang breached his fiduciary duties in D respect of the FISH and SPR transactions and his involvement in the theft E E of over US$521.8 million is overwhelming. F F 24. A brief summary of the evidence against Mr Tsang is set out G G at para 14 of Borrelli 18 as follows: H H “14.1. The Liquidators have obtained the banking documents for Supreme Well’s bank accounts at Bank of China and I I Bank of East Asia, which show that Mr Tsang was the sole authorised signatory of these accounts (Borrelli WS J at [30.1]). There was no legitimate reason for Mr Tsang J to be the authorised signatory on Supreme Well’s bank accounts. Indeed, Mr Tsang does not dispute that he was K the account signatory. K L 14.2. The individuals who were recorded in company L documents as the ultimate shareholders of Supreme Well have all confirmed that they knew nothing of the M Supreme Well Group, that their signatures on company M documents were forged, and that their ID documents were used without their knowledge (Borrelli WS at [50]). N N Accordingly, the Supreme Well Group had been set up fraudulently and in a manner that obscured the true O ownership and control of Supreme Well. A witness O statement has been provided by Kwan Po Ming, who was the accountant who filed the documents to set up and P maintain companies involved in the Theft (‘Kwan WS’). P He confirms that it was Mr Tsang who gave him the ID Q documents and who obtained the signatures of these Q individuals (Kwan WS at [20]-[22]). R 14.3. Mr Tsang attended all Board meetings at which the FISH R and SPR transactions were discussed and was one of the S individuals who proposed the FISH and SPR transactions S to the Board (Borrelli WS at Annexure 12 at [13]). Witness statements have been provided by non-executive T directors (‘Crum WS’ and ‘Capener WS’) which T confirm that Mr Tsang never disclosed his involvement in Supreme Well to the Board. U U V V A A - 13 - B B 14.4. All of the payments to Supreme Well for the FISH and C SPR transactions in Hong Kong were made by Mr Tsang C by way of cashier’s order (55 in total), often splitting a single payment into smaller cashier’s orders. There was D no legitimate commercial reason for effecting transfers D in this unusual manner. The only possible purpose for Mr Tsang to make payments in this manner was an E E attempt to conceal the nature and purpose of the payments, including in an attempt to avoid red flags for F money laundering regulations (Borrelli WS at [31.2]). F 14.5. The bank account transaction documents disclose that G Mr Tsang was also the primary individual who laundered G the Stolen Funds, having executed over 140 of the H transactions by which the Stolen Funds were laundered H through numerous companies involved in the Theft (Borrelli WS at [66]). I I 14.6. Mr Kwan also confirms that Mr Tsang provided all instructions and paid all invoices in respect of a number J J of the companies used in the laundering of the Stolen Funds, including East Hope International Ltd (‘East K Hope’) and Cheer Link International Ltd (‘Cheer Link’) K (Kwan WS at [37]-[39]). The banking documents of these companies confirm that Mr Tsang was an account L L signatory on these accounts (Borrelli WS at Annexure 18 at [5.3] and Annexure 19 at [5.3]). M M 14.7. In addition to having laundered hundreds of millions of US dollars through shell corporations beyond the reach N of the Plaintiffs, the banking documents reveal that N Mr Tsang received in his own name at least US$7.61 O million in cash or as funds paid directly into his own O personal bank accounts (see Borrelli WS at Annexure 12 and funds flow chart at Tab 1). P P 14.8. On 20 March 2017, following investigations by the Federal Bureau of Investigation and the United States Q Q District Attorney’s office for the Eastern District of New York, Mr Tsang, along with Mr Wu, was indicted on R three counts of criminal charges in the criminal division R of the United States District Court, Eastern District of New York. The charges relate to the same conduct as is S S alleged in this case. A copy of the indictment is at Tab 2. Mr Tsang tries to undermine the importance of the US T indictment on the basis that the charges are only T allegations (Tang 2 at [24]), however this ignores the fact that the indictment was issued following a hearing before U a Grand Jury (Indictment at page 1). Accordingly, there U V V A A - 14 - B B has been a finding that there is sufficient evidence C obtained by US authorities for Mr Tsang to stand trial if C he can be extradited to the US.” (emphasis added) D D 25. Mr Borrelli went on to say at para 15 that the above summary E E demonstrates that the Plaintiffs have substantial documentary and witness F evidence that establishes Mr Tsang’s primary role in the Theft. There is F no credible alternative explanation for this evidence except that the Theft G G was conducted by Mr Tsang. In this regard, it is important to note that H Mr Alder, very properly, does not dispute the fund flow Diagrams H concerning funds received by Mr Tsang and East Hope which have been I I annexed to Mr Borrelli’s witness statement. The 2 annexures show that the J net amount received by Mr Tsang and East Hope International Ltd (“East J Hope”) was US$7.61 million and US$231.5 million respectively which K K originated from the 1st Plaintiff’s bank accounts. In respect of East Hope’s L bank accounts, Mr Tsang and Mr Wu were authorised signatories. L Mr Alder, also very properly, does not dispute that Mr Tsang did not M M disclose to the 1st and 2nd Plaintiffs his receipt of the US$7.61 million. N N 26. This is not the occasion for a detailed examination of the O O merits of the case and this court is not going to conduct a mini-trial or to P make a “preliminary run” at deciding the ultimate success or failure of the P claim. Indeed, it is quite impossible to conduct a mini-trial or to make a Q Q “preliminary run” given the voluminous evidence (from multiple R independent sources) relied upon by the Plaintiffs in support of their case R against Mr Tsang. But this does not mean that the court will simply ignore S S the merits of the case altogether when the terms of RHC O 23 r (1) and T T s 905 CO mandate the Court to have regard to all the circumstances of the U case and decide whether it is just to order security for costs. Hence, this U V V A A - 15 - B B court is entitled, in the exercise of its discretion, to take into account the C C merits of the Plaintiffs’ claim. In so doing, this court will concentrate on D the evidence filed by the parties in relation to this application. D E E 27. Now that this court has set out a summary from Borrelli 18 of F the evidence against Mr Tsang, this court will next consider Tang 4 in reply. F At paras 6 - 10 of Tang 4, Tang says this: G G “ Plaintiffs’ primary ground based on merits of their case H to refuse to provide security H I 6. The Plaintiffs assert in Borrelli 18 at §7 that they have a I strong claim against Mr. Tsang with a high probability of success and overwhelming evidence which are simply based on their J selected evidence and allegations at §§14.1-14.8 of Borrelli 18 J and their disputes and criticisms on selected facts from Mr. Tsang’s Amended Defence and Witness Statement at §§16-20 of K K Borrelli 18. L 7. The Plaintiffs’ assertion of strong claim against Mr. L Tsang is misconceived when proper consideration has been taken on facts from Mr. Tsang’s Amended Defence at §§3-76 M M and my 2nd Affidavit at §§9-20. N 8. The Plaintiffs’ assertion is further undermined when they N have to rely on selected statements of Mr. Borrelli’s witness statement [Borrelli 18 at §§12, 14.1-14.7], Mr. Crum’s witness O statement [Borrelli 18 at §14.3], Mr. Capener’s witness O statement [Borrelli 18 at §14.3] and Mr. Kwan’s witness P statement [Borrelli 18 at §§14.2 and 14.6] to support their P alleged strong claim with a high probability of success and overwhelming evidence. Q Q 9. Pursuant to rules 1 and 2A(6) of Order 38 of the Rules of the High Court (Cap. 4A), the Plaintiffs must call their witnesses R R at trial to be examined orally to prove the facts contained in their witness statements. It is uncertain whether all the Plaintiffs’ S witnesses will be available to attend before this Court to give oral S evidence at trial. If any of the Plaintiffs’ witnesses will not be available to give oral evidence at trial, the witness statement of T such unavailable witness will be disregarded by this Court and T no other party may put such witness statement in evidence at trial. U As such, it is premature for the Plaintiffs to rely on these witness U V V A A - 16 - B B statements to assert their alleged ‘strong’ claim or to demonstrate C their alleged ‘overwhelming’ evidence when these witness C statements have not been admitted by this Court as evidence. It is also premature for the Plaintiffs to reject Mr. Tsang’s witness D statement before his cross-examination. D 10. Based on the above and my 2nd Affidavit, the Plaintiffs’ E E claims against Mr. Tsang is far from their asserted strong claims. Despite using tactical characterization of ‘Theft’ and ‘Stolen F Funds’ repeatedly in Borrelli 18, the Plaintiffs’ claims are F obviously complicated with substantial disputes of facts by Mr. Tsang in these consolidated proceedings [My 2nd Affidavit at G §§9-20]. As stated at §§12 and 20 of my 2nd Affidavit, these G disputes of facts should only be resolved at trial by the cross- H examination of witnesses in these consolidated proceedings.” H I 28. It would appear from paras 6 and 8 of Tang 4 that Mr Tsang, I through Tang, is complaining that the Plaintiffs are simply relying their J J “selected” paragraphs of Borrelli 18 and the statements of 3 independent K K witnesses for the Plaintiffs, as well as his criticism on the Plaintiffs’ choice L of “selected facts” from Mr Tsang’s Amended Defence and witness L statement. But Mr Tsang fails to explain how the “unselected” parts of the M M Amended Defence or evidence might answer or “neutralize” the Plaintiffs’ N overwhelming and compelling evidence supporting their claims. In this N court’s view, if the “unselected” part of the pleadings or evidence can O O answer or “neutralize” the Plaintiffs’ evidence supporting their claims, P Mr Tsang would have instructed Tang to say so, together with a proper P explanation as to why that is so. Q Q R 29. At para 7 of Tang 4, Tang simply made a bare assertion that R the Plaintiffs’ assertion of strong claim against Mr Tsang is misconceived S S when proper consideration has been taken on the facts from Mr Tsang’s T Amended Defence at paras 3-76 and Tang 2 at 9-20. Tang did not even T bother to identify which paras of Mr Tsang’s Amended Defence and Tang U U V V A A - 17 - B B 2 are able to render the Plaintiffs’ claim misconceived. This is highly C C unsatisfactory as it amounts to telling the Court either to take Mr Tsang’s D words at face value alternatively to look at everything and decide for itself D which paras of Mr Tsang’s Amended Defence and Tang 2 can explain why E E the Plaintiffs’ claims are misconceived. F F 30. At para 9 of Tang 4, Tang makes the point that a finding of a G G high probability of success would be premature because some of the H Plaintiffs’ witnesses may not turn up at trial, and Mr Tsang has not yet been H cross examined and his witness statement should not be rejected. This I I argument is a red herring since in every application for security for costs, J the trial has yet to come up so it cannot be absolutely certain whether the J Plaintiffs’ witnesses would or would not turn up at trial and at that point, K K Mr Tsang obviously has not been cross-examined, if he does turn up at trial. L If Mr Tsang’s argument is sound, then the court will never be able form a L view on the merits and all resistance to an application based on the M M Plaintiffs’ high probabilities of success must fail. The court’s task, as I see N N it, is to examine the merits of the case based on the evidence filed in O support/opposition of the application. O P P 31. At paras 16 - 20 of Borrelli 18, Mr Borrelli says Mr Tsang’s Q purported explanations in his witness statement are internally inconsistent, Q inconsistent with the contemporaneous documents, inconsistent with the R R accounts of the other defendants and witnesses, and/or are inherently S implausible. In particular, Mr Borrelli points out inter alia that, on S Mr Tsang’s case, these FISH and SPR transactions were at arm’s length. T T If that were so, there was no legitimate commercial reason why the 1st U Plaintiff’s money should have gone to him or Mr Wu. However, Mr Tsang U V V A A - 18 - B B accepts that he and Mr Wu received such money: see Mr Tsang’s witness C C statement at [107]. D D 32. Mr Tsang’s explanation for receiving the Stolen Funds is that E E the payments to him related to monetary rewards for respective services to F East Hope and Mr Wu: see Mr Tsang’s witness statement at [107]. Mr F Manzoni SC submits and this court agrees that this is obviously an G G insufficient and incredible explanation, particularly given the serious H allegations against him and his role as CFO and director of a publicly listed H company at the material time. Mr Borrelli then makes the point that the I I absence of any legitimate reason for Mr Tsang and Mr Wu to be the J recipients of millions of US dollars from a purportedly arm’s length J transaction demonstrates that Mr Tsang has no credible defence to this K K claim. L L M 33. Tang has simply failed to respond substantively to paras 16- M 20 of Borrelli 18 in his Tang 4. N N O 34. In Mr Alder’s Skeleton and Reply Skeleton, he has made O some efforts in responding to Borrelli 18 in Annex A of his Skeleton. P P Having considered those points in “rebuttal” of the Plaintiffs’ claims, this Q court does not find them sufficient to undermine the Plaintiffs’ claims in Q any substantial sense. R R S S 35. For instance, in response to para 14.1 of Borrelli 18, T Mr Alder’s rebuttal was that fund transfers from Supreme Well to the bank T U U V V A A - 19 - B B 2 accounts of other companies such as East Hope were commercial C C transactions between them instead of alleged money laundering. But that D still does not answer the point that there was no legitimate commercial D reason for Mr Tsang to act as the sole bank signatory of Supreme Well’s E E accounts with BOC and BEA. F F 36. According to Mr Tsang’s witness statement at para 28, the so- G G called reason was that Mr Tsang agreed to act as the sole bank signatory H for Supreme Well at the request of Mr Wu which in turn was at the request H of the 3rd Defendant in this case viz Dr Chen Zheng. Dr Chen was said to I I consider Mr Tsang an appropriate, trustworthy and helpful person as he J was unconnected to Dr Chen and could be entrusted with substantial J amounts of money in order for Dr Chen to minimize US tax. Mr Tsang also K K says apart from acting as bank signatory under the instructions of a Mr Li L Hongzeng, apparently Supreme Well’s general manager, to operate the L accounts, he did not take part in any business/management decisions of M M Supreme Well Group. In fact, according to Mr Alder’s Annex A, Mr Tsang N N had no other involvement in the Supreme Well Group. In this court’s view, O it is curious to say the least why Dr Chen would entrust substantial amounts O of money to someone who was unconnected to him but did not give him a P P role, such as a full-time or part-time employee or a consultant, in the Q Supreme Well Group when Mr Tsang was such a trustworthy and helpful Q person. R R S S T T 2 Incidentally, Mr Tsang was also an authorised signatory of East Hope’s accounts U with BOC and BEA. U V V A A - 20 - B B 37. Take another example. In response to para 14.4 of Borrelli 18, C C Mr Alder’s rebuttal is that cashier orders were legitimate and all were D payable to Supreme Well. That really does not answer the question why D Mr Tsang did not use some more conventional and convenient method of E E payment to Supreme Well such as bank transfers since both the 1st Plaintiff F and Supreme Well had accounts with BOC. F G G 38. Importantly, the Plaintiffs’ claims are in fact quite simple ie H Mr Tsang breached his fiduciary duties by causing the 1st and 2nd H Plaintiffs to enter into the FISH and SPR Transactions3. The claims are I I supported by evidence from multiple independent sources and documents J obtained from inter alia the banks in question. On the other hand, J Mr Tsang’s “defence” depends on the Court’s acceptance of the K K explanation provided by himself, not on oath, as justification for the L transfer of funds summarised in the fund flow diagrams which Mr Alder L does not dispute. M M N N 39. Further, the Plaintiffs’ claims have been examined over the O years by Harris J in HCCW 435/2012 and this court in the present O proceedings concerning the Mareva application. In the Mareva application P P before this court, Mr Tsang did not even bother to go on oath to challenge Q the Plaintiffs’ claim on the merits. Indeed, he did not go on oath at all to Q oppose the continuation of the Mareva injunction - his main affirmation in R R opposition was made by a partner of Messrs PC Woo & Co viz George Sit. S S T 3 The pleadings in this case are lengthy, primarily because of the number of T Defendants and the misappropriation was conducted and laundered through a substantial number of payments and accounts held in the name of numerous entities U and individuals. U V V A A - 21 - B B Instead he simply conceded there was a good arguable case for the purpose C C of the Mareva application. D D 40. In the hearing before Hon Au and Chow JJA in the present E E proceedings, while the good arguable case requirement was not an issue in F the appeal, it is obvious from the Judgment that the learned Justices had F examined and accepted the nature of the Fraud relied upon by the Plaintiffs G G which led to their decision that there was a real risk of dissipation of assets. H H I 41. The Judgment of Harris J in HCCW 435/2012 quoted above, I especially [6] and [14] are extremely damning on Mr Tsang’s integrity and J J credibility. K K 42. To conclude, looking at the matter in the round, on the L L available evidence filed in this application, this court is of the view that the M case of the Plaintiffs is genuine and strong. If so, there is nothing untoward M with Mr Manzoni SC’s submission that the 1st and 2nd Plaintiffs’ N N impecuniosity is a direct cause of Mr Tsang’s wrongdoing and the justice O of this case demands that no order of security should be made because to O do so would be to require the victims of a theft to pay security in order to P P protect the interests of the thief. Q Q R 43. Lastly, Mr Tsang remains in contempt of an order of the High R Court of Hong Kong dated 15 September 2014 that he should attend before S S a Master in person for a section 221 examination, has absconded from T Hong Kong, and a warrant for his arrest remains outstanding. He is also a T fugitive from the United States criminal justice system, having been U U V V A A - 22 - B B indicted for offences related to the subject matter of these proceedings, by C C the criminal division of the United States District Court for the Eastern D District of New York on 20 March 2017: see Amended Statement of Claim D at para 41.6. In Mr Tsang’s Amended Defence at para 95, his response is E E that he did not return to Hong Kong with justifiable reasons including his F concerns of potential extradition to US from Hong Kong and had offered F an alternative solution to the Liquidators to conduct the examination via G G video link which was unreasonably rejected by the Liquidators. In fact, H examination by video link was rejected by Harris J, hence the warrant of H his arrest. I I J 44. Mr Manzoni SC strongly relies on the fact that Mr Tsang is J currently in contempt of an order of the Court, and there is an extant K K warrant for his arrest to appear before the Court and answer questions about L his conduct in respect of the Theft. Mr Tsang is also wanted in the US L pursuant to a Grand Jury Indictment in respect of the Theft. Mr Tsang’s M M behavior is another factor which this court has taken into account as N N militating against an Order for security for costs. Importantly, Mr Tsang O has failed to come back to Hong Kong to purge his contempt. It is therefore O not unreasonable to think that he might not come back to Hong Kong at all P P to testify at the trial, in which case any defence he has put up in his Q Amended Defence would not be supported by his witness statement. Q R R Disposition and costs order nisi S S 45. Mr Tsang’s summons for security for costs is hereby T T dismissed. U U V V A A - 23 - B B 46. There shall be an order nisi that costs of and occasioned by C C the summons be to the Plaintiffs, to be taxed if not agreed, and paid by D Mr Tsang forthwith, certificate for senior counsel. D E E F F G G (Peter Ng) Judge of the Court of First Instance H High Court H I I J J Mr Charles Manzoni, SC, instructed by and Mr Harley Schumann (solicitor advocate), of Karas LLP, for the Plaintiffs K K Mr Edward Alder, instructed by P C Woo & Co, for the 2nd Defendant L L M M N N O O P P Q Q R R S S T T U U V V