張才奎所託管中國山水投資有限公司股份相關員工 AND OTHERS v. 張才奎 AND ANOTHER

張才奎所託管中國山水投資有限公司股份相關員工 AND OTHERS v. 張才奎 AND ANOTHER

The Former Receivers were required to prove on the balance of probabilities the existence of an actual or potential indebtedness in respect of their unpaid fees to obtain a binding declaration of lien. On the evidence before the Court (notably absence of contemporaneous documentation or clear terms of the alleged loans and inadequate particulars of funding flows), the Former Receivers failed to establish such indebtedness on the balance of probabilities. Accordingly the Court refused to grant the declaration of an equitable lien and dismissed the Lien Summonses; ancillary relief to keep court-deposited shares so deposited was also refused.

Citation
[2021] HKCFI 1805
Parties
Plaintiffs: SH Plaintiffs (Relevant employee shareholders of China Shanshui Investment Company Limited); Applicants / Former Receivers: Ernst & Young Receivers (Former Receivers); 1st Defendant: Zhang Caikui; 2nd Defendant: Li Yanmin
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
23 June 2021
Case Number
HCA1766/2014
Procedural Posture
Trust Actions and Lien Summons (consolidated) / Decision at First Instance (hearing of Lien Summonses and Ancillary Applications)
Outcome
Lien Summonses dismissed; declaration of lien refused; ancillary order to keep shares deposited refused; costs ordered
Legal Topics
Receiver's Lien, Waiver, Abuse of Process, Declaration of Equitable Lien, Litigation Funding, Costs
Source Language
EN
Equity Trusts Receivership Civil Procedure Property Receiver's Lien Waiver Abuse of Process +3 more

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Parties

SH Plaintiffs (Relevant employee shareholders of China Shanshui Investment Company Limited)

Plaintiffs

Ernst & Young Receivers (Former Receivers)

Applicants / Former Receivers

Zhang Caikui

1st Defendant

Li Yanmin

2nd Defendant

Procedural Posture

Trust Actions and Lien Summons (consolidated) / Decision at First Instance (hearing of Lien Summonses and Ancillary Applications)

Legal Issues

  1. 1 Whether the court-appointed receivers are entitled to an equitable lien over 456,325 CSI shares
  2. 2 What standard of proof is required to establish actual or potential indebtedness for the purpose of a declaration of lien
  3. 3 Whether the Former Receivers have established on the balance of probabilities that they are owed fees or funded by loans

Ratio Decidendi

The Former Receivers were required to prove on the balance of probabilities the existence of an actual or potential indebtedness in respect of their unpaid fees to obtain a binding declaration of lien. On the evidence before the Court (notably absence of contemporaneous documentation or clear terms of the alleged loans and inadequate particulars of funding flows), the Former Receivers failed to establish such indebtedness on the balance of probabilities. Accordingly the Court refused to grant the declaration of an equitable lien and dismissed the Lien Summonses; ancillary relief to keep court-deposited shares so deposited was also refused.

Court Disposition

Lien Summonses dismissed; declaration of lien refused; ancillary order to keep shares deposited refused; costs ordered

Orders

  • Dismissal of the Lien Summonses brought by the Former Receivers (substantive relief refused)
  • Order refusing §3 ancillary relief that shares deposited with the Court shall remain so deposited