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

Judgment Cited authorities 3 Cited in Precedent Map Related
Vincent
Judgment Date04 July 2018
Neutral Citation[2018] HKCFI 1485
Judgement NumberHCMP869/2014
Subject MatterMiscellaneous Proceedings
CourtCourt of First Instance (Hong Kong)
HCMP869B/2014 XY, LLC v. JESSE ZHU (a.k.a JIA BEI ZHU and JESSE JIA BEI ZHU) AND ANOTHER

HCMP 869/2014

[2018] HKCFI 1485

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 869 OF 2014

________________________

IN THE MATTER OF Sections 21M and 21N of the High Court Ordinance, Cap. 4
and
IN THE MATTER OF ORDER 29, Rule 8A of the Rules of the High Court, Cap. 4A

________________________

BETWEEN
XY, LLC Plaintiff
and
JESSE ZHU (a.k.a JIA-BEI ZHU and JESSE JIA-BEI ZHU) 1st Defendant
GRAND NETWORK TECHNOLOGY LTD 2nd Defendant

________________________

Before: Hon Wilson Chan J in Chambers (Open to Public)

Date of Hearing: 17 April 2018

Date of Decision: 4 July 2018

________________________

D E C I S I O N

________________________


A. Introduction

1. By summons issued by the 2nd defendant (“GNT”) dated 29 January 2018 (“GNT’s Summons”), GNT appliesfor variation of the Mareva injunction granted by L Chan J on 7 April 2014 (“the HK Mareva”) such that a sum of HK$1,458,996 is to be released from GNT’s bank account maintained with HSBC (“the HK Account”) directly to Messrs W K To & Co (“WKT”), GNT’s solicitors, for the payment of GNT’s legal costs.

2. The plaintiff (“XY”)’s position on GNT’s Summons in summary is that there are reasonable grounds for believing that GNT can obtain funding for its legal costs elsewhere.

B. Relevant Background

3. The background to this matter is set out in part in paragraphs 4 to 21 of the Judgment of Au-Yeung J dated 13 November 2015 in which the learned judge, inter alia, dismissed GNT’s application to discharge the HK Mareva. That description of the background is reproduced in paragraph 4 of the Judgment of the Court of Appeal dated 5 December 2016 dismissing GNT’s appeal against that decision of Au-Yeung J (the “Appeal Judgment”).

4. Adopting herein the same terminology in those judgments, the key background facts include the following.

5. The HK Mareva is “back to back” with the Canadian Mareva granted by Fitzpatrick J of the Supreme Court of British Columbia on 27 March 2014 in the Recovery Action.

6. The Recovery Action was brought by XY to enforce XY’s Monetary Judgment in the sum of CAD 8,507,891 (over HK$50 million), plus interest and special costs, against Jesse Zhu (and others) on findings in the Original Action of liability for, inter alia, deceit and conspiracy relating (as Au-Yeung J described it) to “a widespread fraud of epic proportions”.

7. The trial judge in the Original Action, Kelleher J, subsequently found Jesse Zhu in contempt for non-payment of the judgment debt and committed him to prison for 6 months. Jesse Zhu did not answer to his committal for contempt, preferring to absent himself from the jurisdiction. His appeals against his conviction and sentence were dismissed by the Court of Appeal of British Columbia for failure to appear.

8. The funds in the HK Account (HK$38,214,589.45 as of 17 April 2014) are specifically identified for freezing in the Canadian Mareva and, consequently, in the back to back HK Mareva.

9. GNT (incorporated in the BVI), and other companies that are (on XY’s case) beneficially owned and controlled by Jesse Zhu, were not defendants in the Original Action (or the subsequent related Topsires Action). They were included as defendants in the Recovery Action in order to enforce the Monetary Judgment against their assets.

10. On 3 September 2015, ie after the HK Mareva was obtained, XY obtained the Canadian Final Judgment against GNT in the Recovery Action, in default of GNT’s appearance, whereby it was ordered and declared, inter alia, that: GNT holds its assets, including any funds, in trust for Jesse Zhu; XY shall recover the Monetary Award (and interest) from GNT; and the Canadian Mareva shall continue in force until satisfaction of the judgments in the Recovery Action and Original Action.

11. On 5 October 2015, a firm of lawyers in British Columbia, Canada, filed a pro forma notice to appeal the Canadian Final Judgment with no grounds engaging its merits on behalf of GNT (and others). On 4 December 2015, GNT filed a notice of intention to act in person. No further steps were taken by GNT in its appeal, which was first placed on the “inactive list” of the British Columbia Court of Appeal and then dismissed for non-prosecution on 4 April 2017.

12. In dismissing GNT’s appeal against Au-Yeung J’s decision not to discharge the HK Mareva, the Court of Appeal found that a “good arguable case had been made out for an appropriate inference to be drawn that the funds in the HK Account are held beneficially for Jesse Zhu”.

13. In dismissing GNT’s application for leave to appeal against the Appeal Judgment, the Appeal Committee of the Court of Final Appeal observed that the finding of a good arguable case on this point was made on “impeccable reasons”.

C. The HK Enforcement Action

14. The Writ in the HK Enforcement Action was issued on 21 November 2016. It is specially endorsed with a full Statement of Claim. GNT’s four-page Defence was eventually filed on 5 February 2018.

15. As against Jesse Zhu, the position in the HK Enforcement Action is straightforward: the Monetary Judgment obtained against him in British Columbia (in respect of which all avenues of appeal by him have been exhausted) is enforceable in Hong Kong at common law. In any event, Mr Zhu failed to acknowledge service of the Writ in the HK Enforcement Action and an application for default judgment against him is pending.

16. With respect to GNT, the position is more complicated because one of the requirements for enforcement of the Canadian Final Judgment obtained against GNT under the common law regime for the enforcement of foreign judgments is not met, as was noted in the Appeal Judgment.

17. Specifically, because GNT chose not to appear in the relevant first instance proceedings in Canada and did not engage the merits of the Canadian Final Judgment in its appeal against it, the requirement under the common law regime for the foreign court to have exercised ad personam jurisdiction is not met. As a result, XY is obliged to litigate with GNT in Hong Kong from scratch its claim that Jesse Zhu is the sole beneficial owner of the funds in the HK Account, thereby entitling XY to execute against them in respect of the Monetary Judgment obtained against him (and others).

D. Relevant Legal Principles

18. As laid down in Derby & Co Ltd v Weldon (Nos 3 and 4) [1990] Ch 65 (at 76-77) and quoted in Atlas Maritime SA v Avalon Ltd (No 3) [1991] 1 WLR 917...

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