Case Commentary

Injunctions — Court of Appeal elucidates approach to assessing risk of dissipation of assets in applications for Mareva injunctions

The Court of Appeal clarified the proper approach in assessing the risk of dissipation of assets in an application for Mareva injunction.

Convoy Collateral Limited v Cho Kwai Chee 

Reference:                  [2020] HKCA 537

Court:                          Court of Appeal

Before:                        Hon Lam VP and Barma JA in Court

Date of Judgment:     9 October 2020


CCL claims against Roy Cho for dishonest dealings involving the Convoy Group including fraudulent misappropriation of funds from CCL, self-dealing transaction, and causing CCL to advance large amount of unsecured loans to other companies.  The total of amounts claimed adds up to HK$715 million.

The allegations of dishonest dealing have led to investigations by ICAC and SFC of Convoy and its management during the relevant times, including Roy Cho.

In November 2017 Roy Cho departed Hong Kong for Australia where he disappeared for 10 months until he decided to return to Hong Kong and surrender himself to the ICAC in September 2018.  In May 2019 the ICAC laid charges against Roy Cho.

Decision of the Court below

On 6 February 2018, CCL applied in BVI and obtained on 9 February 2018 a temporary freezing order over Roy Cho’s assets.  On 2 May 2019, the BVI freezing order was set aside upon Roy Cho’s application on jurisdiction ground.  On 30 March 2020, the BVI Court of Appeal upheld the setting aside of BVI freezing order against Roy Cho.  On 31 March 2020 CCL applied for a stay of that judgment pending an appeal to the Privy Council.

On 25 June 2019, CCL issued summons to apply for a Mareva injunction against Roy Cho in Hong Kong.

At first instance, Harris J refused to grant the injunction as he considered that CCL had failed to show a real risk of dissipation of assets by Roy Cho.  CCL appealed to the Court of Appeal and Roy Cho sought to uphold Harris J’s decision on an additional ground of delay.

Judgment of the Court of Appeal

The Court of Appeal (CA) held that the following principles set out by Haddon-Cave LJ in Lakatamia Shipping Co Ltd v Toshiko Morimoto [2019] EWCA Civ 2203 are applicable in Hong Kong, subject to elaborations:

“(1) The claimant must show a real risk, judged objectively, that a future judgment would not be met because of an unjustified dissipation of assets.  In this context dissipation means putting the assets out of reach of a judgment whether by concealment or transfer.

(2) The risk of dissipation must be established by solid evidence; mere inference or generalised assertion is not sufficient.

(3) The risk of dissipation must be established separately against each respondent.

(4) It is not enough to establish a sufficient risk of dissipation merely to establish a good arguable case that the defendant has been guilty of dishonesty; it is necessary to scrutinise the evidence to see whether the dishonesty in question points to the conclusion that assets may be dissipated.  It is also necessary to take account of whether there appear at the interlocutory stage to be properly arguable answers to the allegations of dishonesty.

(5) The respondent’s former use of offshore structures is relevant but does not itself equate to a risk of dissipation.  Businesses and individuals often use offshore structures as part of the normal and legitimate way in which they deal with their assets.  Such legitimate reasons may properly include tax planning, privacy and the use of limited liability structures.

(6) What must be threatened is unjustified dissipation.  The purpose of a [World Freezing Order] is not to provide the claimant with security; it is to restrain a defendant from evading justice by disposing of, or concealing, assets otherwise than in the normal course of business in a way which will have the effect of making it judgment proof.  A WFO is not intended to stop a corporate defendant from dealing with its assets in the normal course of its business.  Similarly, it is not intended to constrain an individual defendant from conducting his personal affairs in the way he has always conducted them, providing of course that such conduct is legitimate.  If the defendant is not threatening to change the existing way of handling their assets, it will not be sufficient to show that such continued conduct would prejudice the claimant’s ability to enforce a judgment.  That would be contrary to the purpose of the WFO jurisdiction because it would require defendants to change their legitimate behaviour in order to provide preferential security for the claim which the claimant would not otherwise enjoy.

(7) Each case is fact specific and relevant factors must be looked at cumulatively.”

The CA preferred to describe the burden for establishing a real risk of dissipation as “solid basis” instead of a “solid evidential basis” because most relevant factors indicative of the risk of dissipation are not direct evidence on dissipation as such.

After surveying previous English and Hong Kong cases, the CA held that the evidential burden can be satisfied by drawing proper inferences from a holistic consideration of all the circumstantial materials that are indicative of risk.  A good arguable case on the underlying substantive claims could also be regarded as supporting a case of real risk of dissipation.  Wrongdoing relevant to the issue of dissipation can be some dishonest or wrongful acts which were not themselves acts of dissipation.

The ultimate question is whether CCL succeeds in showing objectively there is a solid basis for concluding that there is a real risk of unjustified dissipation of assets by a defendant.  That question is to be answered by examining the evidence holistically.  Evidence of dishonest and fraudulent conducts or other serious wrongdoings which form the basis of the claims, and which reflect adversely on the integrity of the defendant could point powerfully towards an inference of such risk.

Applying these principles, the CA held that:

(1) The judge had erred in law in holding that CCL’s evidence on the substantive claims were not relevant to the risk of dissipation.

(2) The judge had misapplied the law in confining his consideration of the risk by reference to what Roy Cho had done from the time he became alive to the investigations into the affairs of Convoy.

(3) The judge had misapplied the law in failing to assess the disposal of Convoy shares by Roy Cho in light of the evidence on the substantive claims and came to the wrong finding that such disposal was an unremarkable change in his financial affairs.

The CA drew the inference of real risk of dissipation of assets based on the following factors:

(1) the concealment of a person’s actual ownership and control over the affairs of a listed company in the manner Roy Cho allegedly did in order to evade one’s fiduciary obligations to listed companies and side-step compliance with the rules imposed by regulatory authorities designed for the protection of the general investing public is a serious form of dishonest deception;

(2) Roy Cho’s departure and absence from the jurisdiction from November 2017 to September 2018;

(3) Roy Cho’s disposal of his Convoy shares in May 2017 shortly after the publication of the Webb Report.

In respect of Roy Cho’s argument on delay, the CA held that delay in itself would not necessarily bar relief.  The ultimate question is still whether the plaintiff could show a real risk of dissipation despite delay.  In this instance, the delay can be explained by the BVI proceedings.  Given the fact that the base of Roy Cho’s business empire is in Hong Kong and the scale and complexity of his financial affairs, the CA found that there is still a real risk of unjustified dissipation notwithstanding the lapse of time before the summons was issued on 25 June 2019.


The CA judgment provides helpful guidance as to the approach the Hong Kong courts would adopt as to when a respondent’s prior conduct may support a finding that there is a real risk of dissipation of assets and the facts which the court should consider in an application for Mareva injunction.

It is anticipated that this case will be heavily relied on by applicants for Mareva injunction, asking the court to draw an inference of risk of dissipation where the evidence of risk of dissipation is fairly thin.

Considering the facts of this case, in particular Roy Cho facing criminal charges and having previously fled the jurisdiction, it appears that the Court of Appeal is adopting a much more common sense and practical approach in assessing the risk of dissipation.

This case commentary is authored by Albert Wan.

Albert Wan

Prior to joining the Bar in 2017, Albert obtained a Master of Law (LLM) at University of Cambridge and Bachelor of Laws (LLB) at City University of Hong Kong with First Class Honours. He is developing a wide practice with particular emphasis on civil and public law practice, and has been instructed in land, company, probate, contract, tort, commercial, construction, bankruptcy and personal injuries matters as well as judicial reviews. Albert’s experience includes successfully obtaining a quia timet injunction to restrain a winding up petition (HCMP 916/2018) and acted for a contractor to obtain judgment and defend a substantial part of the counterclaim in Sun Cheong Construction Co Ltd v Incorporated Owners of King Fu, Ho Fu, Ki Fu & Ka Fu Buildings [2019] HKCFI 2076. Find out more about Albert’s practice.


Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case.