The Hong Kong Court in Zong and others v Zong and another [2025] HKCFI 3355 has provided important guidance on applications for interim relief under section 21M of the High Court Ordinance (Cap. 4) in support of foreign proceedings, particularly in the context of preservation orders.
Background
The case concerns a family dispute over assets exceeding US$1.8 billion held in a Hong Kong bank account ("Assets"). Three documents were involved:
- Handwritten instructions from the deceased to create three trusts for the Plaintiffs, funded by the Assets.
- A letter of entrustment designating the 1st Defendant to set up the trusts for the Plaintiffs with the Assets as trust property.
- An agreement where the 1st Defendant agreed to set up the trusts and the Plaintiffs agreed to recognise the deceased's wills ("Agreement"), with a jurisdictional clause directing disputes to courts in Hangzhou.
The Plaintiffs claimed that these documents collectively establish the basis for the trusts and their beneficial interests in the Assets. They alleged that the Defendants breached the Agreement by failing to set up the trusts, making unauthorised withdrawals and refusing to provide information about the Hong Kong bank account. The 1st Defendant argued that negotiations over the trust terms were genuine and that the withdrawals were legitimate.
The Plaintiffs commenced proceedings in the Hangzhou Intermediate People's Court ("Hangzhou proceedings"), seeking remedies against the Defendants, including a declaration that the Assets are trust property and compensation for the unauthorised withdrawals. In parallel, the Plaintiffs applied to the Hong Kong Court for interim relief under section 21M to prevent the Defendants from disposing of or dealing with the Assets by way of a preservation order, in support of the Hangzhou proceedings.
Two-stage test for interim relief under section 21M
In determining the Plaintiffs' application, the Court applied a two-stage approach.
- Stage one consideration: whether the judgment rendered by the foreign court is one which can be enforced by the Hong Kong courts
If the answer is yes, the application will be determined as if the interim relief was sought in support of a Hong Kong action, save that the strength of the substantive claim should be considered from the standpoint of the foreign courts, not under the law of Hong Kong.
In this case, the Court considered that there was no issue with the enforceability of the judgment that may be given in the Hangzhou proceedings.
2. Stage two consideration: whether it would be unjust or inconvenient to grant the order
The Court was satisfied that it was just and convenient to grant the preservation order. There was no evidence that a similar order could be obtained in the Hangzhou proceedings or that the order would interfere with the management or progress of those proceedings.
On the contrary, the order would support comity by ensuring that the Assets remain available for the Hangzhou Court's determination of the substantive dispute.
The Court also accepted expert evidence that, as a matter of practice and policy, PRC courts rarely grant preservation orders over assets located outside the PRC, and that an application to the PRC courts was not a precondition to relief in Hong Kong.
Relatedly, the Court granted a disclosure order ancillary to the preservation order, requiring the Defendants to provide information regarding the current balance and movement of the Assets. The judge noted that disclosure orders are usually made "hand-in-hand" with preservation orders as a policing device, and emphasised that this was by no means a determination on the merits of the claims in the Hangzhou proceedings.
Difference between preservation orders and Mareva injunction orders
The appropriate test in Hong Kong for determining whether a preservation order should be granted is the presence of "serious issues to be tried".
In this case, the Court found that the Plaintiffs had established serious issues to be tried regarding their claims for breach of contract and breach of trust/fiduciary duties, including the proper construction and enforceability of the three documents and whether the 1st Defendant had breached the Agreement.
The Court clarified that the threshold for a preservation order is lower than that of a Mareva injunction which restrains dealing with assets over which a plaintiff does not have a proprietary claim and requires a "real risk of dissipation" of assets. For a preservation order, which protects assets over which a proprietary claim is asserted, the Court only needs to be satisfied that there is a "need for security", which was evident in this case based on the substantial value of the Assets and the 1st Defendant's unexplained reluctance to provide information about the Hong Kong bank account to the Plaintiffs.
Comments
This case provides valuable insight into the interaction between Hong Kong and PRC court procedures in cross-border disputes. It emphasises the availability of interim relief granted by Hong Kong Courts to support PRC/foreign proceedings under section 21M, and clarifies that an application to the PRC/foreign court is not a precondition for obtaining interim relief in Hong Kong.
The decision offers crucial guidance on the criteria for granting preservation orders in aid of PRC/foreign proceedings, differentiates between Mareva and proprietary relief, and addresses the handling of cross-border disputes involving Hong Kong assets and ongoing PRC proceedings.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
