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Dingway Investment Ltd (In Compulsory Liquidation) v China City Construction & Development Co (Hong Kong) Ltd And Others

Judgment Cited authorities 5 Cited in Precedent Map Related
Vincent
JurisdictionHong Kong
Judgment Date29 June 2023
Neutral Citation[2023] HKCFI 1649
Subject MatterCivil Action
Judgement NumberHCA309/2022
Year2023
HCA309E/2022 DINGWAY INVESTMENT LTD (In compulsory Liquidation) v. CHINA CITY CONSTRUCTION & DEVELOPMENT CO (HONG KONG) LTD AND OTHERS

HCA 309/2022

[2023] HKCFI 1649

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 309 OF 2022

________________________

BETWEEN
DINGWAY INVESTMENT LIMITED Plaintiff
(In compulsory Liquidation)
and
CHINA CITY CONSTRUCTION & DEVELOPMENT CO. (HONG KONG) LIMITED 1st Defendant
(中國城市建設開發 (香港) 有限公司)
ZENG YUQI (曾玉琪) 2nd Defendant
SZE WAI SUEN (施慰萱) 3rd Defendant
REGA CENTER LLC 4th Defendant
REGA CENTER MIAMI HOLDINGS LLC 5th Defendant
(formerly known as CCCC INTERNATIONAL USA LLC)
GOLDEN GATE INTERNATIONAL INVESTMENT CO. LIMITED 6th Defendant
(金門國際投資有限公司)
REGA HOLDINGS LIMITED 7th Defendant
CCCC MIAMI BEACH LLC 8th Defendant
MEI LI (also known as LI MEI) 9th Defendant

________________________

Before: Deputy High Court Judge KC Chan in Chambers (Open to Public)
Date of Hearing: 20 June 2023
Date of Decision: 29 June 2023
Date of Handing Down of the Decision: 29 June 2023

_______________

DECISION

_______________

1. This is the contested hearing of an application by the Plaintiff (“Dingway”) for a disclosure order against the 1st Defendant (“D1”) under paragraph 1 of its summons issued on 28 September 2022, the other discovery sought under paragraph 2 having been disposed of earlier by consent.

2. Dingway is represented by Ms Mak and D1 by Mr Fan, both of counsel.

3. Having sorted out a number of matters with D1 at the hearing, the determination of this matter turns out to be rather straight forward. The background though would need a bit of explaining.

4. The disclosure of information and documents sought relates to (a) the receipt by D1 of the proceeds of US$70 million (“the Proceeds”) under a purported sale by D1 of the membership interest in one CCCC Holdings LLC to the 4th Defendant pursuant to an agreement dated 8 November 2019, (“the Shares”, “D4” and “Transfer (2)” respectively), (b) the current whereabouts of the Proceeds and (c) their disposal by D1.

5. The facts of this case are rather complex. These facts and the procedural history herein and in a number of other proceedings have been very succinctly and clearly summarized by Anthony Chan J in §§4 to 34 of his Decision herein dated 29 July 2022 (“the July 2022 Decision”).

6. For the purpose of understanding this application, it is not necessary to go into them at great length. It would suffice for me to refer to the following. In so doing and for ease of reference, I gratefully use as abbreviations in this decision the monikers designated by the learned Judge in the July 2022 Decision (to the extent the subject matters have been so designated).

7. The central dispute in this action concerns two transfers of the Shares and the sale of a valuable piece of land in Miami, USA in December 2021.

8. The two transfers of the Shares happened one shortly after the other. The first one (“Transfer (1)”) occurred on about 15 October 2019 when D2 (then a director of CCCI and Dingway, and a former director of D1) on behalf of Dingway transferred the Shares from Dingway to D1 for no consideration. The second one was Transfer (2). As mentioned, it occurred in November 2019 when D1 transferred the Shares to D4 for a stated consideration of US$70 million, namely the Proceeds.

9. On 24 January 2022, in HCCW 30/2022 CCCI (through its liquidators) by an ex-parte application obtained a proprietary injunction against D1 enjoining it from disposing of the Proceeds whether the same were located inside or outside Hong Kong (“Injunction (1)”).

10. A number of applications, among them the continuation of Injunction (1), were heard and then decided by the learned Judge in the July 2022 Decision.

11. The causes of action Dingway pleaded as against D1 were summarized by the learned Judge in §38 of the July 2022 Decision, and I gratefully quote the part relevant to this decision:

“Dingway’s causes of action

38. Dingway’s case can be found in its Statement of Claim …, can be summarised as follows:

(1) In breach of his fiduciary duties to Dingway, which also constituted breach of trust, D2 caused Transfer (1) to be made;

(2) D1, who received the Shares (trust property), and D3, who signed the transfer document on D1’s behalf, dishonestly assisted D2’s breach of duties;

(3) D1 knowingly received the trust property transferred in breach of D2’s duties;

(4) Transfer (2) was not a genuine sale. D4 was a nominee or corporate vehicle of D1 (or those controlling it). If D1 had received US$70 million from D4 under the Transfer, such proceeds are the traceable substitute of the Shares and recoverable by Dingway;”

12. In §87 of the July 2022 Decision, the learned Judge observed:

“87. Of course, Dingway had proprietary interest in the Shares and there is no dispute that it was (and is) entitled to trace such interest/asset into the US$70 million received by D1 from D4 under Transfer (1) if it was a genuine sale.”

13. In the July 2022 Decision, Injunction (1) was continued albeit being “transferred” from HCCW 30/2022 by discharging it there and continuing it in this action.

Dingway’s application and the applicable principles

14. Dingway seeks the disclosure for the purpose of identifying, preserving and tracing its assets, namely the Shares, which it has been deprived of through a breach of trust and which was received by D1 knowingly and then purportedly disposed of by it by Transfer (2), making the Proceeds the traceable substitute of the Shares. The disclosure would also aid Injunction (1) which is a proprietary injunction.

15. Ms Mak cited The Public Institution for Social Security v Al Rajaan [2020] EWHC 1498 (Comm) in which Jacobs J cited with approval at §18 a passage by Popplewell J in Angola v Perfectbit Ltd [2018] 3 WLUK 76 at §8:

“… The importance of disclosure is reinforced where a claimant has a proprietary claim and is seeking to recover specific sums or their traceable proceeds. Again, an order freezing such sums will be ineffective if the claimant cannot know what has happened to them. It is essential to the protection of the claimant’s rights to pursue its proprietary claim that full disclosure is given...

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