Xy, Llc v Jesse Zhu (A.k.a. Jia-bei Zhu And Jesse Jia-bei Zhu) And Another

Judgment Date05 December 2016
Judgement NumberCACV11/2016
Subject MatterCivil Appeal
CourtCourt of Appeal (Hong Kong)

CACV 11/20 16







IN THE MATTER of Sections 21M and 21N of the High Court Ordinance, Cap 4
IN THE MATTER of Order 29, rule 8A of the Rules of the High Court, Cap 4A


XY, LLC Plaintiff
1st Defendant


Before: Hon Kwan JA and G Lam J in Court
Date of Hearing: 25 November 2016
Date of Judgment: 5 December 2016




Hon Kwan JA:

1. This is an interlocutory appeal brought by the 2nd defendant, Grand Network Technology Limited (“GNT”), against the decision of Au-Yeung J on 13 November 2015 (“the Decision”) dismissing its summons to discharge a Mareva injunction granted by L Chan J on 7 April 2014 (“the HK Mareva”). The 1st defendant, Jesse Zhu, has chosen not to appear in these proceedings and does not take part in this appeal.

2. The HK Mareva, made against Jesse Zhu and GNT, is ancillary to a Mareva injunction granted against them by Fitzpatrick J of the Supreme Court of British Columbia, Canada, on 27 March 2014 (“the Canadian Mareva”). It was made pursuant to sections 21M and 21N of the High Court Ordinance, Cap 4, by which the court is empowered to grant an interlocutory injunction to facilitate foreign proceedings and where no substantive proceedings are contemplated in Hong Kong.

3. The plaintiff, XY LLC (“XY”), only has a cause of action against Jesse Zhu (the cause of action defendant; “the CAD”), it does not have a substantive cause of action against GNT (“the NCAD”). At issue in this appeal is whether the judge was correct to exercise her discretion to grant an injunction of the type in TSB Private Bank International SA v Chabra & Anr [1992] 1 WLR 231, in which a Mareva injunction is granted against an NCAD, to ensure the effectiveness of a freezing injunction in respect of the assets of the CAD and to assist enforcement of any judgment against the CAD.


4. I gratefully adopt the relevant background matters set out by the judge in §§4 to 21 of the Decision:

“ 4. On 20 March 2008, the plaintiff commenced action in Canada against Jesse Zhu and others including one Ms Zhou claiming damages for conspiracy, deceit, breach of confidence, breach of contract, and inducing breach of contract. Thereafter, 2 actions of the plaintiff were consolidated and heard together (“Original Action”).

5. On 2 March 2012, following a 30 day trial of the Original Action, Kelleher J gave judgment for the plaintiff and found Jesse Zhu, Ms Zhou and others liable to the plaintiff in, amongst others, damages in the sum of CAD8,507,891, together with interest and special costs (“the Monetary Judgment”). Jesse Zhu and others had appealed to the Court of Appeal but were unsuccessful. On 20 February 2014, their application for leave to appeal to the Supreme Court was dismissed.

6. Meanwhile, on 30 March 2012, the plaintiff commenced the “Topsires Action” against Jesse Zhu and others upon discovering that Jesse Zhu had set up a new company to make use of the plaintiff’s property and equipment.

7. On 28 February 2014, following the Supreme Court’s dismissal of the application for leave to appeal, the plaintiff and Ms Zhou entered into a Settlement Agreement to limit the liability of Ms Zhou in return for her assistance to the plaintiff in pursuing against Jesse Zhu.

8. Based on information from Ms Zhou, on 25 March 2014, the plaintiff, as judgment creditor, (i) commenced the “Recovery Action” with a view to enforcing the Monetary Judgment against the assets of Jesse Zhu, including GNT; and (ii) made an application in Vancouver for Mareva injunctions on an ex parte basis in the Original Action, the Topsires Action and the Recovery Action.

9. On 27 March 2014, Fitzpatrick J of the Supreme Court of British Columbia granted the Canadian Mareva against, amongst others, Jesse Zhu and GNT restraining them from:

(a) removing from British Columbia or in any way disposing of or diminishing the value of any assets in British Columbia whether in its name or not and whether owned solely or jointly; and

(b) removing or in any way disposing of or diminishing the value of any worldwide assets whether in their own name or not and whether owned solely or jointly.

10. The Canadian Mareva specifically covered an account at HSBC no. 808-735229-838 registered in the name of GNT in Hong Kong (“the HK Account”).

11. It was specifically provided in the Canadian Mareva that:-

(a) it would remain in force up to and including 25 April 2014 unless it was varied or discharged by a further order of the Court before then; and

(b) the Canadian Mareva did not affect any person or legal entity outside the jurisdiction of the Canadian Court until it was declared enforceable or was enforced by a court in the relevant jurisdiction;

12. Clearly, the Canadian Court envisaged that the Hong Kong Court would have to give an order with regard to assets in Hong Kong. In fact, during the application for injunction in Canada, the Supreme Court of British Columbia was told that the plaintiff intended to mount an enforcement action in Hong Kong. The Canadian Court thus sealed up all the materials relating to the Canadian Mareva and the other two orders until 14 April 2014 to maintain secrecy pending the application in Hong Kong. The Canadian Mareva was only served after the plaintiff obtained the HK Mareva.

13. On 7 April 2014, the plaintiff issued the present originating summons and obtained the HK Mareva in aid of the enforcement of the Monetary Judgment. It prohibited Jesse Zhu and GNT from disposing of or diminishing the value of their assets in Hong Kong, whether in their own name or not, and in particular, the HK Account.

14. The HK Mareva was extended until further order on the return date of 17 April 2014, by DHCJ Wilson Chan. That hearing was uncontested despite Jesse Zhu and GNT being served properly.

15. After the HK Mareva was granted, an inter partes hearing took place before the Canadian Court on 22 to 25 April 2014. Some of the defendants (including Jesse Zhu) were legally represented, but not GNT. Following argument, Fitzpatrick J. ordered on 25 April 2014 that, amongst others, (i) the Canadian Mareva would remain in force until further order of the Court; and (ii) Jesse Zhu, GNT and third party banks shall make disclosure in the Recovery Action (“the Canadian Disclosure Order”).

16. On 12 February 2015, the plaintiff issued the present Disclosure Summons[1].

17. On 26 May 2015, an order in terms of the Originating Summons in these proceedings was made against Jesse Zhu, who did not appear despite having been served. GNT entered an appearance by solicitors and counsel but did not “oppose” the application. The Court ordered that there be a further directions hearing of the Originating Summons but, in the meantime, the HK Mareva against GNT be continued until further order.

18. On 6 July 2015, GNT issued the Discharge Summons, and the Release and Fortification Summons.

19. On 28 August 2015, after a contested hearing, Kelleher J of the British Columbia Supreme Court handed down a judgment (“the Contempt Judgment”) finding Jesse Zhu to be in contempt of court orders.

20. On 3 September 2015, the plaintiff obtained, in default, final judgment on liability from McEwan J in the Recovery Action against, amongst others, GNT (“the Canadian Final Judgment”). The material parts provide that:

(1) GNT holds its assets including any funds in trust for Jesse Zhu;

(2) The Plaintiff shall recover judgment from, amongst others, GNT in the amount of CAD$9,980,650;

(3) The Canadian Mareva shall remain in full force and effect until such time as the judgments in the Recovery Action and Original Action have been satisfied.

21. On 5 October 2015 GNT applied in Canada to set aside the Canadian Final Judgment.”

5. GNT was incorporated in the British Virgin Islands on 2 May 2000. Jesse Zhu has never been a shareholder or director. Its first shareholder was Peter Wang Shu Xi, the brother-in-law of Jesse Zhu. On 28 August 2000, Peter Wang and Hui Zong were appointed its first directors. Peter Wang and Hui Zong were employed by companies in the IND Group, a group of companies controlled by Jesse Zhu with operations in Canada and China.

6. Peter Wang was the sole shareholder of GNT until 16 April 2009 when he transferred 50% of his shares to Ms Zhu Qian and his wife Ms Li Hui Ping each. Ms Zhu is a cousin of Jesse Zhu and was employed as a laboratory technician in the IND Group in the PRC. Ms Li was employed as a cleaner at the IND Group in Beijing. Ms Zhu and Ms Li replaced Peter Wang and Hui Zong as the directors on 16 April 2009. In early January 2014, Peter Wang passed away[2]. On 30 September 2014, Ms Li transferred her shares to Ms Wang Zhaoyan. On the same day, Ms Li ceased to be a director and Ms Tong Nini was appointed in her place. Ms Wang was appointed a director on 1 January 2015. The directors who remain on the register of directors of GNT are Ms Zhu Qian, Ms Tong Nini and Ms Wang.

7. Ms Wang has deposed in these proceedings that the funds in the HK Account are the only assets of GNT. As on 17 April 2014, shortly before the HK Mareva was continued by DHCJ Wilson Chan, the balance in the HK Account stood at $38,214,589.45 (about 30% of the judgment sum). After that, $119,373.20 and $700,000 were withdrawn as legal fees for GNT in...

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