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

HCA 1661, 1766, 2191/2014 & HCA 623, 939, 1564/2015 (Consolidated) and HCA 1282/2017 (Heard together) [2021] HKCFI 1805

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE ACTION NOS 1661, 1766 & 2191 OF 2014 AND 623, 939 & 1564 OF 2015

BETWEEN 張才奎所託管中國山水投資 第一批原告人 有限公司股份相關員工 1st Group of Relevant employees whose shares in Plaintiffs

CHINA SHANSHUI INVESTMENT COMPANY LIMITED were held by ZHANG CAIKUI on trust 李延民所託管中國山水投資 第二批原告人 有限公司股份相關員工 2nd Group of Relevant employees whose shares in Plaintiffs

CHINA SHANSHUI INVESTMENT COMPANY LIMITED were held by LI YANMIN on trust and 張才奎 (ZHANG CAIKUI) 1st Defendant 李延民 (LI YANMIN) 2nd Defendant ___ (Consolidated pursuant to the Order of The Honourable Mr Justice G Lam dated 20 August 2015) ___ AND HCA 1282/2017 ACTION NO 1282 OF 2017 ___

BETWEEN

LI MING (李明) 1st Plaintiff

WU RANTAO (吳然濤) 2nd Plaintiff

ZHAO DONGWEI (趙東偉) 3rd Plaintiff

ZHANG XIN (張信) 4th Plaintiff

ZHOU LI (周立) 5th Plaintiff Relevant Employees whose shares in 6th to 1008th China Shanshui Investment Company Plaintiffs Limited held by Zhang Caikui on trust (Please refer to Schedule 1 of the Re-amended Writ of Summons filed on 13 December 2017 for names of the relevant employees) ( 張才奎 所託管 中國山水投資有限公司股份 相關員工 (其名字詳情見於2017年12月13日存檔的 再修訂的傳‍訊令狀中的附表一)) Relevant Employees whose shares in 1009th to 1084th China Shanshui Investment Company Plaintiffs Limited held by LI YANMIN on trust (Please refer to Schedule 2 of the Re-amended Writ of Summons filed on 13 December 2017 for names of the relevant employees) ( 李延民 所託管 中國山水投資有限公司股份 相關員工 (其名字詳情見於2017年12月13日存檔的 再修訂的傳‍訊令狀中的附表二)) Relevant Employees whose shares in 1085th to 1531st

CHINA SHANSHUI INVESTMENT COMPANY Plaintiffs LIMITED held by ZHANG CAIKUI on trust (Please refer to Schedule 3 of the Re-amended Writ of Summons filed on 13 December 2017 for names of the relevant employees) ( 張才奎 所託管 中國山水投資有限公司股份 相關員工 (其名字詳情見於2017年12月13日存檔的 再修訂的傳‍訊令狀中的附表三)) Relevant Employees whose shares in 1532nd to 2019th

CHINA SHANSHUI INVESTMENT COMPANY Plaintiffs LIMITED held by LI YANMIN on trust (Please refer to Schedule 4 of the Re-amended Writ of Summons filed on 13 December 2017 for names of the relevant employees) ( 李延民 所託管 中國山水投資有限公司股份 相關員工 (其名字詳情見於2017年12月13日存檔的 再修訂的傳‍訊令狀中的附表四)) and

ZHANG CAIKUI (張才奎) 1st Defendant

LI YANMIN (李延民) 2nd Defendant ___ (Heard together) Before: Hon K Yeung J in Chambers Date of Hearing: 11 August 2020 Date of Decision: 23 June 2021 ______

D E C I S I O N ______ The “FR Lien Decision” A. The Three Decisions I call this decision the “FR Lien Decision”. It may be read in context together with two other related decisions this Court hands down at the same time (namely the “Leave & Directions Decision” and the “CHQ Injunction Decision”). B. The present hearing This is the hearing of the Lien Summonses (as defined below) taken out by the Former Receivers. C. The Trust Actions and HCA 2648 These matters relate to HCA 1661, 1766, 2191/2014 and HCA 623, 939, 1564/2015 (Consolidated) (the “Trust Actions”), and HCA 1282/2017 (“HCA 1282”). They have a complicated history. For background, I refer to the main Judgment of G Lam J (as he then was) in the Trust Actions handed down on 31 January 2018 (the “Trust Actions Judgment”). I refer also to His Lordship’s Decision handed down at the same time discharging the receivers (the “EY Receivers” or the “Former Receivers”, and “Trust Actions Discharge Decision”). I also, unless specified otherwise, adopt the same terms used by His Lordship in those Judgments and Decisions. I refer also to the Jurisdiction Decision, the Receivership Decision and the SHD Injunction Decision this Court handed down on 30 August 2019. To recapitulate the gist so as to set the scene: In the Trust Actions, the battle was between Zhang Snr and the Employee Shareholders over the beneficial ownership

of 456,325 CSI Shares. In the end, the Employee Shareholders were successful. G Lam J (as he then was): made a declaration that Zhang Snr held 456,325 shares of and in CSI on trust for the Employee Shareholders; made an order that the EY Receivers do take steps forthwith to transfer the 456,325 shares in CSI currently registered in the EY Receivers’ name to the Employee Shareholders concerned or to persons nominated by them; granted liberty to apply for the purpose of carrying out the orders. Upon his unsuccessful application to be joined in the Trust Actions, Chen HQ on 17 November 2017 issued the Writ in HCA 2648/2017 (“HCA 2648”). That action when started was against 2,261 of the 2,630 Employee Shareholders in the Trust Actions. Chen HQ claimed to be the owner of those Employee Shareholders’ interests in their CSI Shares, so that should those Employee Shareholders become successful in the Trust Actions, the related shares, then held by the EY Receivers, should be passed to him but not the successful Employee Shareholders. D. The Lien Summonses There are 4 summonses before me. Two of them are substantive, and the other two procedural. They are all taken out by the Former Receivers: In respect of the 2 substantive ones, one is taken out under the Trust Actions, and the other one under HCA 1282 (together the “Lien Summonses”). The relief sought is identical, primarily for an

order or declaration that the Former Receivers are entitled to a lien over the 456,325 shares in CSI in respect of which they had been appointed as receivers (the “Receiver Shares”) (§1), that they do stand charged with the amount of their remuneration, disbursement and expenses till full payment thereof (§2), and that those shares that have been deposited with Court shall remain so deposited (§3); and In respect of the 2 procedural ones, again one is taken out under the Trust Actions, and the other one under HCA 1282. Leave is sought for the Former Receivers to rely, for the purpose of the present applications, on the 13th affirmation of Mr Liu Yiu Keung, Stephen filed in the Trust Actions (“Liu” and “Liu/13th Aff”). D.1. Liu /13th Aff The purpose of Liu/13th Aff is to inform the Court that the board of CSI has served a notice to convene an EGM for the purpose of considering and if thought fit passing ordinary resolutions for inter alia the allotment of 80,000 ordinary shares in CSI to one Deyee International Company Limited. The point sought to be made is Mr Liu’s belief that there is still a keen demand for CSI shares, and that should the Shares be released and transferred to the nominees of the Employee Plaintiffs, there is a real possibility that they may be sold to bona fide purchasers. Mr Maurellet, leading counsel for the SHPs, does not object to the same. I on 11

August 2020 granted the Former Receivers leave to rely on Liu/13th Aff. D.2. The affirmatory evidence Two same sets (1 set under the Trust Actions and 1 set under HCA 1282) have been filed. I need only refer to 1 set. The main affirmations (excluding those earlier ones produced as exhibits) are: for the Former Receivers, Liu’s 9th and 11th affirmations filed in the Trust Actions (“Liu/9th Aff” and “Liu/11th Aff” respectively) and Liu/13th Aff; and for the SHPs, the 12th Affirmation of Zhao Dongwei filed in the Trust Actions (“Zhao” and “Zhao/12th Aff”). E. The hearing on 18 October 2019 For the reasons set out in the Jurisdiction Decision and the Receivership Decision, I made a number of Orders against Chen HQ. In particular, I set aside the Service Out Order, the concurrent Writ and concurrent Amended Writ issued pursuant thereto and the service out permitted thereby. I discharged the ASI. I also dismissed Chen HQ’s Receivership Summons. Chen HQ subsequently sought leave to appeal against those Orders. The SHDs and Jinan Group on the other hand sought directions for inter alia release of the CSI Shares. After a callover on 8 October 2019, the substantive hearing of those applications took place on 18 October 2019 before this Court. In the meantime, the Former Receivers on 15 October 2019 took out the Lien Summonses, returnable on 14 November 2019. The Former Receivers claimed

entitlement to a lien formed one of the reasons the Former Receivers relied upon in opposition of the directions sought by the SHDs and the Jinan Group. Certain submissions made for the purpose of the hearing on 18 October 2019 are therefore relevant to the present hearing, and have been placed before this Court for the present hearing: The Former Receivers’ Skeleton Argument of 16 October 2019; the Skeleton Submission of the SHDs of 17 October 2019; Jinan Group’s Note on Equitable Lien of 21 October 2019; and Former Receivers’ Written Submission on Receivers’ Lien of 25 October 2019. F. The factual background I refer to the Trust Actions Judgment and the Trust Actions Discharge Decision for the relevant facts. The Former Receivers were appointed by Orders granted between May and July 2015. Their entitlement to remuneration under the Orders was the same, that: “ Subject to the approval of this Court, the remuneration of the Receivers be charged on a timecost basis and approved by the Court and, subject to leave of the Court, but paid out of the Shares (and/or dividends derived therefrom) in the first instance.” The status of the relevant shares as at 27 March 2019 when Liu filed his 8th affirmation in the Trust Actions has been explained at §10 thereof. The majority of them have been deposited with the Court. Relevantly, of the 456,325 shares which formed the subject matter of

the Trust Actions: 369,002 shares form the subject matter of HCA 2648, which this Court by the Order of 15 February 2018 in that action directed to be deposited with the Court; pursuant to that order, the Former Receivers, restricted however by the number of shares in the issued share certificates, deposited with Court Share Certificate No 29 of CSI in respect of 370,168 shares (being the closest number in excess of 369,002 shares) (the “1st Transfer”); in about March 2018, some 321 SHPs owning 72,522 shares which were not subject to any further dispute demanded that the Former Receivers transfer them to their nominees, which the Former Receivers did (the “2nd Transfer”). There are some technical issues concerning the splitting up of share certificate which we are not concerned with. There is no dispute that the Former Receivers did conduct work as receivers. On 8 May 2018, the EY Receivers submitted an invoice for their fees and expenses in the total sum of HK$28,191,956.95 to the Registrar of the High Court for assessment. In July 2018, the Taxing Master proposed a 10% reduction to the profit costs of the EY Receivers and to the profit costs of the EY Receivers’ solicitors. G. The issue The main issue is whether this Court should on the evidence before me exercise its discretion so as to make a declaration that the Former Receivers are entitled to a lien over the Receiver

Shares. H. The applicable law A court appointed receiver is entitled to be indemnified out of the assets over which he is appointed receiver for all his costs, charges, expenses and remuneration. The entitlement is not possession based, and does not terminate upon the receiver’s discharge — see Mellor v Mellor [1992] 1 WLR 517 at 526G527E, Glatt v Sinclair [2013] 1 WLR 3602 at 3612CD, Hughes v Customs and Excise Commissioners [2003] 1 WLR 177 at §64, and International Finance Corporation v DSNL [2007] 2 All ER (Comm) 305, §[42]. As summarized in Kerr & Hunter on Receivers and Administrators (20th ed) at §108: “ The receiver has a lien for his or her remuneration and expenses, and to secure his or her right of indemnity, which binds the assets bound by the receivership. Its existence is independent of the receiver’s physical possession of any assets, and extends not merely over those assets in his or her actual possession, but also over all the assets so bound. Those rights do not terminate on the receiver’s discharge, nor on the return or delivery of the assets to the parties entitled to them.” A court appointed receiver’s lien is an equitable one — Snell’s Equity (34th ed), §44-037. It is a right against property which arises automatically by implication of equity to secure the discharge of an actual or potential indebtedness — see Hewett v Court (1982-1983) 149 CLR 639 at

663. A lien can be enforced by an action seeking a declaration. As stated in Snell’s §44-011: “ The vendor may enforce his lien by commencing proceedings … claiming a declaration that he is entitled to a lien. On such declaration being made, his [sic.] is entitled to all such remedies for enforcing payment of his purchasemoney and interest as he would have been entitled to under an express mortgage or charge, e.g. sale, or restoration of possession, or the appointment of a receiver. Further, where the contract provides for deferred payment, the court will not compel the vendor to transfer the property without safeguarding his lien.” The receiver may waive the right to indemnity — see Kerr & Hunter (21st ed) §1116. On the elements to be established by a party seeking to rely on waiver, Mr Chen refers to Hua Tyan Development Ltd v Zurich Insurance Ltd (2014) 17 HKCFAR 493 at §18, they being, in gist (1) a clear and unequivocal representation; (2) reliance by the representee; and (3) it would be inequitable for the representor to go back on the representation. Waiver will however not be implied except in a plain case — Kerr & Hunter (21st ed) §11-16. I have also considered the approach adopted by Stone J in Miruvor Ltd v Panamawong-Globe Steamer Lines S.A. [2006] 2 HKC 617 (at p 628, wavier in the context of submission to jurisdiction), and the objective test applied by Kwan J (as

she then was) in Re Kong Wah Holdings Limited, unrep, HCCW 49/2000, 20 July 2007 (at §12, in the context of waiver of legal professional privilege), which Mr Maurellet has cited to me. I. SHPs’ opposition Mr Maurellet does not seek to dispute that the Former Receivers had as court appointed receivers conducted certain work. Nor is there any serious dispute on the law. Mr Maurellet summarizes the SHPs’ opposition as follows (with original emphasis): “ In gist, SHPs’ opposition is based on:- 2.1 the concepts of waiver and abuse. [The Former Receivers] issued their Lien Summons… almost 2 years after they had been discharged, and after they had previously been content to repeatedly release CSI shares from their control. They have therefore waived their entitlement to a lien or charge; and it had been abusive for them not to raise the point earlier. 2.2. the fact that [the Former Receivers] cannot prove they are owed any fees at all. 2.2.1. While [the Former Receivers] did conduct work as receivers (said to be HK$28 million), they did not do it on credit. On their own evidence, they had already pocketed HK$2328 million. While they somehow claim these are only ‘loans’, [the Former Receivers] had put forward contradictory and inconsistent cases as to the funding arrangements with no documentary proof. Until they come forward with clear and comprehensive explanations, there is no

reason for this Court to assist them. 2.2.2. Further, as this Court is well aware, there is a pending action, HCA 86, whereby [the Former Receivers] are being sued for colluding with Tianrui in the course of their receivership, and to deprive them of fees which they charged in relation to such conduct …” In the course of the hearing, Mr Maurellet focused as his main point his submission summarized at §2.2 of his written submissions. I will hence consider that submission first. J. Whether the Former Receivers have proved that they are owed fees J.1. What need to be established The first question to be considered is this: what the Former Receivers have to establish in order to get the declaration of lien which they are seeking. Mr Maurellet submits that the avowed purpose of the lien is to protect the Former Receivers’ entitlement to their unpaid fees. So as to justify the court’s equitable jurisdiction to grant the declaration of lien sought, it is incumbent on the Former Receivers to prove that they are owed fees. As a matter of principle, that must be right. On that issue, Mr Chen relies on Hewett v Court. At p 668 of the judgment, Deane J observed that: “ … I identify what I consider to be the circumstances which are sufficient for the implication, independently of agreement, of an equitable lien between parties in a contractual relationship …They are: (i) that there be an

actual or potential indebtedness on the part of the party who is the owner of the property to the other party arising from a payment or promise of payment either of consideration in relation to the acquisition of the property or of an expense incurred in relation to it … (ii) that that property (or arguably property including that property …) be specifically identified and appropriated to the performance of the contract …; and (iii) that the relationship between the actual or potential indebtedness and the identified and appropriated property be such that the owner would be acting unconscientiously or unfairly if he were to dispose of the property (or, if it be appropriate, more than a particular portion thereof) to a stranger without the consent of the other party or without the actual or potential liability having been discharged.” Relying on that passage, in so far as relevant to the present applications, and with the necessary modifications given the facts of the present case, Mr Chen in the course of the hearing submitted that it is sufficient for the Former Receivers to establish that there is an actual or potential indebtedness in respect of their fees. The focus is “actual or potential indebtedness”. On the authorities cited before me, I am prepared to accept that. J.2. The applicable threshold of proof The next question is the threshold which the Former Receivers are

required to overcome to establish the existence of “actual or potential indebtedness.” Should it be “prima facie case”, or “serious issue to be tried”, or “good arguable case”, or “balance of probabilities”. I sought Mr Chen’s assistance in this regard in the course of the hearing. Mr Chen at some stage suggested that all the Former Receivers are required to establish is a serious issue to be tried that there is an actual or potential indebtedness in respect of their fees. I do not accept that. This is not an application for an interlocutory injunction. This is an application by the Former Receivers for a binding declaration in their favour of the existence of a lien over the Receiver Shares. I do not see why those thresholds which are normally only applicable to applications for interlocutory orders should apply. I am of the view that the Former Receivers have to establish on the balance of probabilities the existence of an actual or potential indebtedness in respect of their fees. In the end, Mr Chen accepted that to be the position. He submitted that the evidence adduced by the Former Receivers is good enough to support that. I now turn to the evidence. J.3. The evidence Both Mr Maurellet and Mr Chen have taken me through the relevant documents and affirmations evidence. I discuss them as follows. The Former Receivers have conducted work in their capacity as the

court-appointed receivers. In that capacity, the evidence suggests that they have incurred costs and disbursements. The evidence suggests that they have been “in fund” for that. The questions are: who have been providing the funds, and what terms there were for the provision of those funds. In early 2018, 5 of the Employee Plaintiffs initiated HCA 86/2018 (“HCA 86”) against 2 of the EY Receivers. One allegation is that the Former Receivers had been funded by Tianrui or its related party. Liu denied having been funded by Tianrui. In an affirmation filed in HCA 86 on 29 June 2018, Liu stated at §84 that: “ … In October 2015, Wong & Lawyers representing a group of minority shareholders in CSI arranged for the funding of the Receivers work by providing total funds of HK$28 million — see Wong & Lawyers’ 19 and 29 October 2015 letters to the Receivers’ solicitors ... According to Mi Jingtian … and Zhao Yongkui …, that funding was secured by 5 representatives of the Employee Plaintiffs, namely, themselves plus Li Maohuan, Yu Yuchuan and Zhao Liping …” Whilst Liu’s said affirmation filed in HCA 86 was placed before me on the purpose of these applications, the exhibits adduced were not. Mr Chen at one stage of the hearing sought to place the letters from Wong & Lawyers before me, but ultimately it was not pursued further. I have however in the HCA 86 Decision set out the material

contents of those letters from Wong & Lawyers. Reference could be made to them if necessary. In any event, the 4th affirmation of Zhao Dongwei dated 26 September 2018 filed in HCA 86 on behalf of the plaintiffs is before me. He made reference to those letters, that: “ 33. The Defendant Receivers deny that they received payment from Tianrui. They referred to two letters from Messrs. Wong & Lawyers in October 2015 and Zhang Sr’s Affirmations, appearing to indirectly hint that their remunerations were paid by the Minority Shareholders. I have since spoken to the 6 Minority Shareholders (apart from Zhao Yongkui) regarding this matter, and they told me that none of them had ever paid any remuneration to the Receivers through Messrs. Wong & Lawyers or any other means.

34. However, the letters from Messrs. Wong & Lawyers referred to above in fact stated that ‘our client’ was prepared to arrange funding for the Receivers. To clarify who was the ‘our client’ which arrange for funding, SH wrote to Messrs. Wong & Lawyers.

35. On 16 August 2018, Messrs. Wong & Lawyers replied, stating that the ‘client’ which arranged funding was Zhao Yongkui, and that due to privilege they were unable to provide any further details. This confirmed that the 6 Minority Shareholders had nothing to do with the funding. Moreover, it is important to note that it was Zhao Yongkui, who defected to and had been closely associated with Tianrui, who arranged for funding, and it is quite clear that he did not himself have the resources to fund the litigation. In fact, and according to his various other affirmations filed in proceedings in Hong Kong, he admitted that employee plaintiffs did not have the resources to fund. As a result, Zhao Yongkui said that they had gone to an anonymous ‘3rd party’ or a ‘litigation funder’ ... I have since asked the Minority Shareholders and was told that this anonymous ‘3rd party’ or ‘litigation funder’ was in fact Tianrui …” Then, on 9 November 2018, Liu filed his 7th affirmation in the Trust Actions in support of the Former Receivers’ application for interim payment. At §42 thereof, Liu says: “ Although the Receivers did not receive a single dollar from the Employee Plaintiffs or Zhang Senior during the receivership, the Receivers did obtain funding from a minority shareholder of CSI, Zhao Yongkui (‘Zhao YK’). Zhao YK provided funding for the Receivers in the total amount of about $23.18

million, $12,750,099.23 of which was paid to the Receivers and the remaining $10,435,137.75 was paid to PCW. The funds are repayable upon the Receivers receiving their remuneration and recovering the costs and disbursements from the Receivership Shares or their rightful owners. Accordingly, Zhao YK’s funding does not affect the amount claimed by and due to the Receivers ($28.19 million).” On 27 March 2019, Liu filed his 8th affirmation in the Trust Actions in support of the Former Receivers’ application for interim payment. He saw the need to make certain clarifications therein, that: “ 11. In HCA 86/2018, I stated that in October 2015, Wong & Lawyers (representing Zhao YK being one of the minority shareholders in CSI) arranged for the funding of the Receivers’ work by providing total funds of HK$28 million. Out of these funds: (a) About HK$23.18 million were used to fund the Receiver’s work by way of loan. The Receivers received about HK$12.75 million and PCW received about HK$10.4 million. (b) The remaining HK$4.82 million were loaned to CSI (treated as a loan from a shareholder) for CSI to discharge its legal fees …. (c) The HK$28 million were not all used to fund the Receivers’ work. A part of it was used to fund CSI’s expenses. I apologize for any confusion caused.

12. In any event, the Receivers’ remuneration and disbursement exceed the HK$23.18 million in funding received by way of loans: (a) As of 31 January 2018, the Receivers’ professional fees were HK$16,899,454, the Receivers’ recoverable disbursements were HK$250,187, and as of 16 March 2018, PCW’s fees were HK$11,042,315 (aggregating HK$28,191,956) … (b) Since 31 January and 16 March 2018, however, the Receivers and PCW respectively have incurred further fees and costs aggregating about half a million.

13. The funding has been provided to the Receivers by way of loan. It is highly undesirable that the Receivers, being professional accountants, should have a substantial liability outstanding for such a long period of time.” In Liu/11th Aff, Liu says at §14 that: “ There is no dispute that the Former Receivers received funding for their work at a time when substantial work had to be carried out and none of the Employee Plaintiffs provided such funding to the Former Receivers. As stated in paragraph 13 of my 8th Affirmation…, the funding was provided to the Former Receivers ‘by way of loan’. The Former Receivers are under an obligation to repay the funding so provided.” What is significant from the above are these: In his affirmation filed in June 2018, Liu stated that funding in the total sum of HK$28 million was arranged and provided. There was no mention of any loan whether to the Former Receivers, or to CSI; Then in November 2018, it was said for the first time that the funding was provided by way of a loan. The only term of the alleged loan which Liu however was minded to reveal is that the “funds are repayable upon the Receivers receiving their remuneration and recovering the costs and disbursements from the Receivership Shares or their rightful owners”; Liu has not revealed whether the alleged loan was made orally or in writing; If it were in writing, the written

agreement has not been produced; If it were the result of oral negotiations, evidence on such oral negotiations have not been provided; No information has been provided by Wong & Lawyers on the basis of privilege; The absence of documentary records is particularly surprising given the fact that the Former Receivers were officers of the court, and they were obtaining the loan whilst and for the purpose of discharging their duties as such. They are “liable to account for all money coming into his or her hands, in the capacity of receiver, at any time” — Kerr & Hunter §102. The Court is entitled to expect that the terms of the alleged loan obtained in such circumstances be carefully negotiated, fully recorded, the Former Receivers’ liabilities thereunder clearly defined, and the related fundflow meticulously charted; As it is, the only disclosed term of the alleged loan is that the “funds are repayable upon the Receivers receiving their remuneration and recovering the costs and disbursements from the Receivership Shares or their rightful owners”. Nothing else is known. Not even whether it was interestbearing; As Mr Maurellet has submitted, on the face of that alleged term, the Former Receivers’ obligation to repay only arise upon they “receiving their remuneration and recovering the costs and disbursements”, but there is on the face of that alleged term no obligation on the part

of the Former Receivers to take step to recover their costs and disbursements. The legitimate question arising is whether the Former Receivers would be liable to repay if those triggering conditions did not materialize; Further, no evidence has been adduced as to whether Zhao YK had ever chased the Former Receivers for the alleged loan. In this regard, I note that Zhao YK has in fact passed away, and there is equally no evidence as to whether his estate has chased for the alleged loan; The same can be said about the alleged loan of HK$4.82 million to CSI. No document has been produced in support. No evidence has been given on how it was negotiated and agreed upon; The upshot is that whilst funds in the total sum of HK$28 million has admittedly been provided, the allegation that they (or part of them) were loaned to the Former Receivers is just Liu’s bare assertion not supported by any contemporaneous records. The Former Receivers ought to be in the position to provide much more detailed evidence on the source and terms of the funding. They have chosen not to. One added consideration is that the Former Receivers are seeking a binding declaration. It is a discretionary relief. Where the factual basis on which one is sought is hypothetical, or if the declaration serves no practical purpose, none will be granted. In all the circumstances, and on the evidence before me, I am not

satisfied that the Former Receivers have established on balance of probabilities the existence of any actual or potential indebtedness in relation to their unpaid fees. To the above, I add this. Mr Chen seeks further to rely on the following matters: given the alleged loan of HK$4.8 million to CSI, the Former Receivers have been shortpaid in any event by about HK$5 million; and a further half a million had been incurred. In respect of the alleged loan to CSI, I repeat my discussions above, and in particular paragraph 51(k). In respect of the further fees of half a million, the sum is not particularized, and is insignificant compared with the values of the Receiver Shares. I bear in mind the discretionary nature of the declaration sought. I also bear in mind the passage from Hewett v Court cited above, and in particular circumstance (iii) thereof which engages concept of unconscionability and unfairness. I am not minded to grant the declaration sought on that basis. K. Waiver? The other objections raised by Mr Maurellet, whilst not abandoned, have not been developed in the course of Mr Maurellet’s oral submissions. In deference to submissions made, and despite my decision above, I deal with them as follows. In submitting waiver, Mr Maurellet relies principally on the 1st and 2nd Transfers. I accept Mr Chen’s submissions that lien not being possession based, those Transfers do

not constitute any clear and unequivocal representation required to establish waiver. I note also that by the 1st Transfer, the Former Receivers were only depositing the relevant shares with Court, and in relation to the 2nd Transfer, the Former Receivers have expressly reserved their rights — see Large Land Investments Ltd v Cheung Siu Kwai [2003] 1 HKLRD 313 at §39. The other matters and conduct relied on, namely the failure to seek any declaration of lien when making the application for interim payment, and the lateness of the present action, are at best equivocal. Mr Maurellet next relies on a number of authorities on guarantees and put forward the proposition of “waiver of all by waiver of part”. He submits that as the Former Receivers have in any event clearly waived their lien in respect of the 72,522 shares, that waiver of lien over part of the shares constitutes a waiver of lien over all the shares. I have reservations as to whether those cases on guarantees are applicable to a case of lien. I will not however enter the debate on law. As Mr Chen has submitted, this alternative limb of Mr Maurellet’s submission is premised upon the Former Receivers having waived lien over part of the shares. I am not satisfied that they have. This alternative submission is therefore not engaged. L. Abuse? Mr Maurellet complains that the present application could and should have been

made earlier. He submits that the Former Receivers’ conduct in “pulling its punches” is an abuse of process. I have considered whether the conduct complained of constitutes any Henderson v Henderson type of abuse. I however regard as important, as Mr Chen has highlighted, that there are no successive actions, no earlier concluded proceedings, and that the present application is in fact made under the Trust Actions. I have undertaken the balancing exercise explained by Ma CJ in Ko Hon Yue v Chu Pik Yuk (2012) 15 HKCFAR 72, at 82(5). I am not satisfied that there has been any abuse. M. §3 of the Lien Summonses §3 of the Lien Summonses asks that those shares that have been deposited with Court shall remain so deposited. It is intended to be an ancillary order, so that should this Court grant the Lien sought, the Lien will be effective. Given my discussion above, I refuse §3 also. This dismissal is however without derogation from the effects of my decisions in the Leave & Directions Decision and the CHQ Injunction Decision. N. Disposition I have considered, given the state of the evidence, whether I should adjourn the applications so that further evidence may be filed, or simply dismiss them. In the course of his submissions, Mr Maurellet submitted that either course is open to this Court. I have considered both courses. It is for the Former Receivers to put forward sufficient and

appropriate evidence to support their applications. I have formed the view that they have failed to. In my view, the appropriate course is to dismiss the applications. As to whether they may under the liberty to apply clause, and given the fact that they were courtappointed receivers, come back, I will leave the point open for further submissions should the point arise. O. Costs I make a costs order nisi that the SHPs shall have their costs of the applications, to be taxed if not agreed, with certificate for 2 counsel. Any application for variation shall be made within 14 days from the date hereof, upon which further directions for the same will be given. (Keith Yeung) Judge of the Court of First Instance High Court Mr José-Antonio Maurellet SC, leading Mr Alexander Tang and Mr Kevin Lau, instructed by Stephenson Harwood, for the SH Plaintiffs Mr David Chen, instructed by P C Woo & Co, for the EY Receivers (Former Receivers)