[2025] EWHC 2648 (Comm)

I am conscious that this claim is listed for trial to be heard in a window in January and February 2026. That is potentially relevant to the question of what order might be “just and convenient” in the event that I determine that the Injunction or any part of it should be set aside on the Discharge Application. However, it is also important to recognise that the decision I have to make at this stage is one which is based on the documentary evidence, including the witness statements of witnesses who have not been subject to cross-examination as they will be at trial. Accordingly, any views that I might express as to the facts will in no way bind the trial judge, who will have the advantage of live evidence and therefore be in a much better position to come to conclusions as to the facts on the full evidence. I will endeavour to set out those facts which appear not to be controversial and indicate where facts are in issue.

Wenda is a company based in Dalian, China that was founded in 1995 by Xiong Wei (“Mr Xiong”),who remains its Chairman and Legal Representative, and which manufactures and trades in food ingredient chemicals. Its main export markets are the Americas and Europe. Historically, its trading involved providing generous credit terms to its purchasers.

Ms Wang joined Wenda as its Chief Financial Officer in 2004. She became a 9% shareholder and director of Wenda in 2009, and remained a director until 2018 (initially it had been pleaded that she remained a director until 2020).

From emails which have been brought to my attention, it seems that by no later than 2011, Mr Xiong and Ms Wang were seeking a way of improving Wenda’s cashflow, which was impacted by the lengthy credit terms it was providing to its purchasers.

By 2012, it was decided to set up an English company to seek to raise finance through discounting of invoices. It is common ground that this was decided upon by Mr Xiong and Ms Wang. As to whose idea it was and what was said in the discussions between Mr Xiong and Ms Wang, in particular as to the terms on which the company would act, they lie at the heart of the dispute and will be determined at the trial. The parties are agreed that the arrangements were settled orally and neither party has produced any documentary evidence that I have been taken to which sets out or records the terms on which this was to operate. It will be a matter for determination at trial whether the arrangements gave rise to purely contractual relations between Wenda and Syner (as Ms Wang and Syner assert) or whether they gave rise to trust and fiduciary relations (as Wenda asserts).

Pursuant to those discussions, Syner was incorporated as a wholly owned subsidiary of Wenda in September 2012. Ms Wang was appointed as its director and remains its director to date. At all times between September 2012 and 2018, she was therefore a director of both Wenda and Syner. Also in 2012, Effs was incorporated in the BVI, for the purposes (it appears) of obtaining financing by way of invoice discounting on sales by Wenda to its own subsidiaries. Ms Wang was again the director of Effs.

As to Syner, it entered into an invoice discounting agreement with HSBC Invoice Financing (UK) Ltd (“HIF”), which was used to finance a large volume of transactions whereby food ingredient chemicals supplied by Wenda were sold to buyers outside China, especially Latin America. It is now clear (although this was not how the case was initially pleaded or presented to Jacobs J) that the buyers were invoiced by Syner, acting as principal. This allowed Syner then to factor the invoice through HIF. I was taken to the executed albeit undated agreement between HIF and Syner. Under that agreement Syner assigned to HIF all Existing Debts, all Future Debts, all Non-Notifiable Debts and agreed that each Debt created after the commencement of the agreement would automatically belong to HIF the moment it was created. There was a £2 million limit on the facility provided, the prepayment percentage was 80% (that is to say that the finance initially advanced would be 80% of the invoice sum) and there was a service charge of 0.40 per cent of the notified value of each debt. The agreement was guaranteed by Wenda.

Accordingly, all sums due in respect of invoices were due to HIF, not to Syner. Syner would send an invoice to the customer, with (as I was told) the details of HIF’s bank account as being where payment should be made. Therefore, Syner would not receive payments directly from customers. Rather it appears that in practice HIF would have maintained a ledger to which the value of all invoices would be credited and all advances to Syner would be debited. As and when a payment was received by HIF from a customer, that would be credited to the account. If there were then unpaid invoices and the sum advanced by HIF to Syner was less than £2,000,000, HIF would then make an advance to Syner, so that the total sum advanced and outstanding would be 80% of the amount of the unpaid invoices. The effect of this is that all of the monies received by Syner would actually be received from HIF. This is potentially relevant to the way in which the claim against the Defendants is pleaded.

There is no similar invoice discounting agreement entered into by Effs with a third party funder, or at least not one which was included in the papers or drawn to my attention at the hearing.

Ms Wang relocated to the United Kingdom in order to be able to run the English part of the business, although she remained as chief financial officer of Wenda until 2014. It seems to be common ground that it was agreed that her rental expenses of living in London would be met by Wenda.

When a new Finance Director, Ms Chou Chunjing was appointed in September 2016 (Ms Wang remaining a director), Ms Chou claimed to have identified a shortfall in the sums which should have been remitted by Syner (and possibly by Effs) under the invoice discounting, which she said was in the region of US$2-3 million. She reported this to Mr Xiong in November 2016. Mr Xiong authorised an investigation and suspended the use of Syner and Effs for invoice financing. In his first affidavit of 22 November 2021, Mr Xiong says that when the use of Syner and Effs was suspended, Ms Wang caused Syner and Effs to cease paying any invoice proceeds to Wenda. By that, he must mean that Ms Wang caused them not to pay any sums received from HIF, although whether there would have been any further sums paid over by HIF once they were no longer being sold new invoices would seem unlikely.

The investigation which was initiated apparently discovered that not only was there a shortfall in the sums which should have been paid over by Syner, but Syner had been remitting some sums to Effs in order to provide the financing it was meant to be providing, rather than Effs having entered into an invoice discounting agreement with a third party. It is an oddity which has been pointed out that Effs paid substantially more (US$19,785,965.99) over to Wenda than the sums of which it was the invoice payee (US$15,996,759.60). Wenda says that this can only be because Effs were receiving funds from Syner, which should have been paid by Syner to Wenda.

Further, in 2020 Wenda’s solicitors discovered that a number of the documents provided by the Defendants in respect of the invoice financing by HIF were said by HSBC not to be recognised by them and not to be consistent with HSBC’s own records.

In addition, it is said that in 2018 after Mr Xiong claims to have seen evidence of Ms Wang’s dishonesty, he undertook a further investigation into rental expenses claimed by Ms Wang for a property at 37 Lewes Road in London. The invoices for the rental that she submitted purported to come from Princess Park Estates, which is a genuine estate agency. Mr Xiong exhibited documents which demonstrated that small subtle changes had been made on the invoices to the name of the website, the post code and the telephone number. He says that this revealed that Ms Wang had been submitting invoices for rental payments for the property for reimbursement by Wenda, as if she was renting it when in fact she had purchased the property in her own name. This, he says, amounted to further dishonesty on her part. He suggests that Ms Wang used some of the shortfall of the sums which were received from HIF and should have been remitted to Wenda to purchase the property. I was not taken to any detail of how this worked. This was relied on before Jacobs J when the injunction was initially granted.

Ms Wang accepts that these invoices were fabricated, but says that they were done so on the instruction of the finance department at Wenda, so that the sums could be reclaimed by Wenda as business expenses. If she is correct and assuming that the instruction was not one that she had caused to be issued (she being the Chief Financial Officer at the time), it is difficult to see how Wenda could have any complaint in that regard. The question of why the invoices were fabricated is a matter for trial and not one on which I can adjudicate. However, it remains a part of Wenda’s case demonstrating dishonesty on the part of Ms Wang, on which they rely.

In addition to the above matters, Wenda claim that there are further illegitimate expenses which had been claimed by Ms Wang, albeit that these were not particularised in the evidence before Jacobs J, nor was any claim in respect of them included in the Particulars of Claim.

One further matter was referred to in the evidence before Jacobs J and appeared in one paragraph of the Particulars of Claim, which relates to a loan for US$3.75 million in April 2017. The issues relating to this did not feature before me and while it remains a matter for trial, it is not something that I need to address further for the purposes of this Judgment, save to note that credit has been given for the US$3.75 million in the table referred to in the following paragraph.

By the time of the hearing before Jacobs J in November 2021, Wenda had produced a table (at paragraph 64 of Mr Xiong’s affidavit of 22 November 2021) setting out the sums it was claiming that the Defendants had not accounted for, which totalled over US$4.35 million, after giving credit for the US$3.75 million.

Wenda launched these proceedings in November 2021. They sought and were granted by Jacobs J without notice proprietary and freezing orders against the Defendants, but not against Mr Petit. The matter was presented to him by Mr Milnes. At that time, Wenda had drafted Particulars of Claim setting out their claim. It is noticeable that in those Particulars of Claim no claim was made by Wenda against Ms Wang on account of any fiduciary duties she owed directly to Wenda by reason of her being a director of Wenda. Nor is any such claim made now, even after the amendment which I will address below. It may be that the concept of directors owing fiduciary duties to companies is not one which exists as a matter of Chinese law, as it otherwise seems odd for such a claim not to have been included.

Jacobs J was understandably concerned by the apparent delay of more than 3 years between the conclusion of the investigation in 2018 and the application for without notice relief. He was of the view that this might be relevant to risk of dissipation, especially in circumstances where Ms Wang, who is now a British citizen, owns a property in London and may well own another in Bristol and is well established in this country. This all indicated a lack of urgency and a lack of a need for the application to be heard without notice. He was, however, persuaded by Mr Milnes that there was sufficient evidence of what he described as “relevant dishonesty in various aspects, which leads me to the conclusion that there is in this case a real risk of dissipation …”. The relevance, for the purposes of the applications before me, is that Wenda having chosen to proceed without notice to the Defendants was under a duty of full and frank disclosure.

Jacobs J considered first the freezing injunction because, as he noted, at that time it was thought that the requirements for a freezing injunction (needing to establish a good arguable case) were more onerous than those for a proprietary injunction (needing to establish a serious issue to be tried). The Court of Appeal has now made clear that the serious issue to be tried test applies both to freezing orders and to other interim injunctions (Unitel SA v. Dos Santos [2025] 2 WLR 255).

Jacobs J described the case advanced before him in the following terms:

“The claimant would direct its buyers to pay Syner. Syner would use the invoice in order to obtain an advance of the agreed percentage of the invoice's face value from an invoice finance company, which Syner would then pay to the claimant. The buyer would in due course pay Syner the full invoice value, and Syner would then repay the advance to the finance company with interest and would remit the balance proceeds to the claimant, net of certain expenses. That is the way in which matters were supposed to proceed, although matters were left largely in the hands of Ms. Wang, who by 2012 had moved to England.”

This was based on the way in which the claim was pleaded at that time. Because of the centrality of the change to the way the case is pleaded to the applications I have to determine, I set out the relevant passages as they stood as at the time of the hearing before Jacobs J:

“The Second Defendant’s role as the Claimant’s agent, nominee and/or trustee

6.

In about 2012, the Claimant incorporated the Second Defendant as its wholly owned subsidiary specifically for the purpose of handling an invoice financing arrangement on behalf of the Claimant.

7.

From 2012 to about January 2017, the Claimant appointed and used the Second Defendant as its agent, nominee and/or trustee to handle monies under that invoice financing arrangement. The legal arrangements between the Claimant and the Second Defendant were not formally documented. The arrangement which the Claimant established and which the First and Second Defendant agreed to implement (and which the First Defendant as director of the Second Defendant was responsible for implementing) was that:

7.1.

For so long as the Claimant chose to continue the arrangement, which the Claimant was free to determine at will, and in relation to such of its sale contracts with buyers located outside China as the Claimant chose to do so, the Claimant instructed its buyers to make payment of the invoiced amount to the Second Defendant.

7.2.

The Second Defendant’s function and duty was:

7.2.1.

To use the invoices (by which the Claimant’s buyers were instructed to pay the Second Defendant) to obtain invoice discounting finance, pursuant to which the financing company would advance an agreed percentage of the invoices’ face value to the Second Defendant;

7.2.2.

To receive payment in due course of the full invoice value from the Claimant’s buyers;

7.2.3.

Thereupon to repay the advance to the financing company together with the interest due under the financing facility; and

7.2.4.

To account to the Claimant for the advances and the payments received from the Claimant’s buyers, net of (i) repayment of the advance to the financing company with interest and (ii) the cost of the First Defendant’s salary, the reasonable travel cost of the First Defendant’s periodic business trips to China as requested or approved by the Claimant, and the cost of preparing the requisite corporate filings to ensure that the Second Defendant remained in good standing to implement the aforesaid arrangement, including the cost of engaging accountants to prepare the Second Defendant’s accounts.

8.

At all material times, subject only to the qualification set out in paragraph 7.3 above, the function and duties set out in paragraph 7.2 above were the sole and exclusive purpose for the Second Defendant’s existence and were the Second Defendant’s only legitimate business activity.

…

10.

In the premises:

10.1.

The Second Defendant was the Claimant’s agent, nominee and/or trustee for the receipt and handling of the Claimant’s invoice proceeds, and owed to the Claimant the obligations of a trustee, alternatively owed fiduciary duties to the Claimant, in respect of its handling of the Claimant’s monies under the arrangements described in paragraph 7 above.

10.2.

The Claimant was the beneficial owner of (1) the advances received by the Second Defendant from the financing company; and (2) the invoice proceeds received by the Second Defendant from the Claimant’s buyers, subject to the Second Defendant’s duty and power to use the same as set out in subparagraph 7.2.4 above.

10.3.

To the extent necessary, the Claimant will say that the Second Defendant was a trustee of the monies referred to in paragraph 7.2 above under an express or implied trust, in that:

10.3.1.

The objective intention of the parties was that the Second Defendant was not free to use those monies for any purpose of its own;

10.3.2.

The only monies being received and handled by the Second Defendant would be monies beneficially owned by the Claimant to which the Second Defendant’s duties referred to in paragraph 7.2 above applied, and any advances and invoice proceeds received and handled by the Second Defendant would be mixed only with other such monies and with the Second Defendant’s initial funding of operating cash (which consisted of US$ 1 million in paid-up capital and US$1.2 million cash injection), which was provided only in order to implement the aforesaid arrangement and which was (unless otherwise instructed by the Claimant, and no contrary instruction was given) to be retained and/or replenished so that about US$2.2 million should remain held by the Second Defendant, and which was subject to the same duty to account for it to the Claimant.

…

The Third Defendant as the Claimant’s agent, nominee and/or trustee

13.

Between 2012 to about January 2017, the First Defendant also caused the Claimant to appoint and use the Third Defendant as its agent, nominee and/or trustee to handle monies under that invoice financing arrangement. As with the Second Defendant, the legal arrangements between the Claimant and the Third Defendant were not formally documented, but were agreed to be on the same basis as described (in relation to the Second Defendant) in paragraph 7 above.

…

15.

In the premises:

15.1.

On those transactions where the Claimant requested its overseas buyers to make payment to the Third Defendant, and on any transactions in respect of which monies paid by the Claimant’s overseas buyers came to be held by the Third Defendant, the Third Defendant was the Claimant’s agent, nominee and/or trustee for the receipt and handling of the Claimant’s invoice proceeds, and owed to the Claimant the obligations of a trustee alternatively owed fiduciary duties to the Claimant in respect of its handling of the Claimant’s monies under the arrangements described in paragraph 13 above.

15.2.

The Claimant was the beneficial owner, of (1) any advances received by the Third Defendant from a financing company; and (2) the invoice proceeds received by the Third Defendant from the Claimant’s buyers, subject to the Third Defendant’s duty and power to use the same as set out in sub-paragraph 7.2.4 above (as repeated mutatis mutandis in paragraph 13 above).

15.3.

To the extent necessary, the Claimant will say that the Third Defendant was a trustee of the monies referred to in paragraph 15.1 – 15.2 above under an express or implied trust, in that the objective intention of the parties was that the Third Defendant was not free to use those monies for any purpose of its own.

15.4.

The First Defendant, as the Third Defendant’s directing mind and will and as the person having actual control over the Third Defendant’s implementation of the arrangement referred to in paragraph 13 above, was a trustee and/or was under a fiduciary duty to the Claimant in respect of that arrangement and in respect of her management and control of the Third Defendant.”

In his affidavit in support of the injunctions, Mr Xiong said at paragraph 16:

“I confirm that the Claimant and Syner established the invoice financing arrangement so as to operate as set out in paragraphs 7 - 8 of the Particulars of Claim, which are based on my instructions. The Claimant also appointed Effs in a similar manner, as set out in paragraph 13 of the Particulars of Claim, based on my instructions. It was mutually agreed and understood that this was how the invoice financing arrangement would be implemented. This was agreed verbally, not in any formal document.”

Therefore, at that stage the case was put on the basis that the “seller” under the contract with the buyers was not Syner or Effs, but rather was Wenda and that Syner and Effs were simply acting as the receiving agent for the purposes of payment. There was an alternative claim on the basis of a purely contractual relationship, but this was very much a secondary case. Jacobs J concluded in respect of the application for a freezing order that there was as good arguable case against the Defendants:

“the case advanced is that money has been taken which belonged to the claimant, or which should have been accounted for to the claimant. The money has, on the claimant’s case, been taken and has not been accounted for either by the first or the second or third defendants, either individually or in combination.”

The Defendants have at all times known that the way the case was advanced was not correct but rather that Syner (and, on one reading of the original Particulars of Claim, Effs, although this was disavowed in corrections submitted by Wenda) were the “sellers” and were not acting as agents as between Wenda and the buyers under the contracts. In the case of Syner, it is difficult to see how if they were merely payment agents HIF would have entered into the invoice discounting agreement as Syner would not have been able to sell to HIF the debts. It would normally be a necessary part of any invoice financing agreement that the company entering into the invoice financing with the bank was the owner of the debts i.e. that it was the seller under the contract with the buyer, rather than acting as an agent for a third party seller. However, that was not how it was presented to Jacobs J who simply had to decide on the evidence before him if there was a good arguable case, which he held that there was.

In addition to the agent/trustee claims advanced, there were claims in dishonest assistance and knowing receipt against each of the Defendants. Along with the breach of trust claims, these were said to give rise to proprietary claims. As to the proprietary claims, Jacobs J concluded:

“the claimant has a perfectly sensible case, that any monies received by the second and third defendant over and above the moneys which were payable by way of finance charges, or on agreed expenses, were indeed monies which should be accounted for to the claimant.”

Jacobs J recorded in his judgment that Mr Milnes had raised a number of points in his submissions by way of full and frank disclosure. He felt that most of them were points as to the merits of the causes of action which could be taken by the Defendants. He did not set them out in his judgment, but was of the view that none were such as to make the granting of the injunctions sought inappropriate.

Jacobs J listed a return date for 10 December 2021 with a time estimate of 1½ hours, recognising that this would, in effect, be a directions hearing for any application by the Defendants to set the injunctions aside. At that return date Jacobs J gave directions to bring the matter back for a fully contested one day hearing on the first available date after 18 February 2022, as well as making a confidentiality ring in respect of information that Ms Wang was required to provide as to her assets, she having said that she was afraid of what might happen if she were to give disclosure of assets which was open to others.

There followed further directions orders by Cockerill J (as she then was) on 17 January 2022 and Andrew Baker J on 28 February 2022 varying the directions and relisting the return date for the first open date after 22 April 2022 again with a time estimate of one day.

In fact the return date never happened. The Defendants did not file any evidence in response to the initial evidence on behalf of Wenda, nor did they take any steps to list the return date. In September 2022 they stated in correspondence that it was their intention to seek the discharge or variation of the freezing order, but did not do so. On 26 January 2024 (after the amendment to the Particulars of Claim I will describe below), the Defendants asked Wenda to consent to the lifting of the injunctions. Wenda not having consented, on 11 April 2024, the Defendants issued the Discharge Application.

In the meantime, the Defendants had filed a Defence to the original Particulars of Claim. In respect of the matter which lies at the heart of the Discharge Application, the Defendants denied any agency agreement as between Syner and Wenda or that Syner was fixed with duties as a trustee. The Defence set out at paragraph 7 the Defendants’ case as to what had been agreed between Wenda and Syner, which was effectively that Syner were to be the vendors of the goods to third parties, selling them on Syner’s own account. Syner were not physically going to deal with the goods, rather that would be done by or on behalf of Wenda. Syner would raise money by way of invoice financing, again for their own account, and had to warrant that they had unencumbered title to the debts. But they would then make a payment to Wenda of a sum said to be derived from Wenda’s standard price-setting formula known as a Cost Table. As to the timing of the payment, Syner pleaded it would pay Wenda a “substantial part” of the relevant sum due under the Cost Table formula within a reasonable period of receiving the initial payment from HIF, with the balance up to the sum due in accordance with the Cost Table within a reasonable period of receiving the remainder due from HIF. At paragraph 8, it was pleaded that the relationship between Wenda and Syner was not a trust relationship or one which involved Syner acting as agent, nominee or trustee for Wenda in the handling of any monies. Rather, it was pleaded it was a purely contractual relationship.

While the Defence went on to address other allegations in the Particulars of Claim, it is not necessary to set those out in any detail. The Defendants deny any wrongdoing or any liability of the sort alleged by Wenda.

In Wenda’s Reply, it was not accepted that the Defendants were right about the arrangements between Wenda and Syner (or those between Wenda and Effs). Rather Wenda doubled down on its position set out in the Particulars of Claim.