In Yuen Tsz Chun Frank and Chan Hoi Yan, the Joint and Several Liquidators of RZ3262019 Ltd (in liq) v. Zhou Ying Investments Group Limited and Others [2025] HKCFI 4350 (Re RZ3262019), the Hong Kong Court decided that the standard of proof is a relevant factor in determining whether an issue has previously been decided by a court of competent jurisdiction.

Background

The liquidators of RZ3262019 Limited (the Company) commenced proceedings seeking to set aside the guarantees given by a subsidiary of the Company (the Subsidiary) to the First Defendant, on the ground that these guarantees and the sums received by the First Defendant pursuant thereto allowed the First Defendant to gain priority at the expense of the general creditors of the Company, which allegedly constituted an unfair preference under sections 266-266B of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) (the Unfair Preference Claim).

The main thrust of the Unfair Preference Claim consisted of an allegation of conspiracy between the First and Second Defendants to defraud the creditors of the Company, involving further assertions of control between the Defendants (the Allegation of Conspiracy and Control). 

In a PRC retrial application initiated by the legal representative of the Subsidiary appointed by receivers (the PRC Retrial Application), there were also allegations similar to the Allegation of Conspiracy and Control. The PRC Retrial Application was dismissed by the Sichuan Higher People’s Court.

In Re RZ3262019, the defendants applied to strike out the Unfair Preference Claim on the ground of issue estoppel, claiming that the PRC Court had already determined the underlying issues in the Allegation of Conspiracy and Control which would bar the liquidators from relitigating the same matter in Hong Kong. 

The central question in this case was how to identify the issues for the purpose of issue estoppel where the foreign court has a different standard of proof and/or places the burden of proof on a different party. In other words, when the same factual matrix is subject to a different standard of proof and/or places the burden of proof on a different party, does it raise the same or a different issue?

The decision of the court

Following the approach in Alexander Brothers Ltd (Hong Kong SAR) v. Alston Transport SA & Anor [2020] EWHC 1584 (Comm), the court decided that: 

• when an issue is subject to a significantly different standard of proof, it might become a different issue;
• a negative finding by a foreign court may not as readily create an issue estoppel as a positive finding; and
• one should be cautious before concluding that a foreign court has decided on the same issue, not least because of the serious consequence that a party will be denied their day in court, but also because differences in procedure will make precise identification of an issue difficult.

In this case, the court factored in the standard of proof in defining the issues in relation to the Allegation of Conspiracy and Control. The PRC Court applied a higher standard of proof of beyond reasonable doubt than the civil standard of proof of balance of probabilities for the liquidators to make the Unfair Preference Claim in Hong Kong. The court found that it was not plain and obvious that the issues in the Unfair Preference Claim and those in the PRC Retrial Application were identical for the purpose of issue estoppel. 

Therefore, the court held that the liquidators are not estopped from raising the Allegation of Conspiracy and Control, and refused to strike out the Unfair Preference Claim.

Key takeaway

The identification of an issue for the purpose of issue estoppel where different legal tests and standards of proof are involved in foreign judgments raises a novel point of law. This is a developing area of law and we will wait to see if the issue will come before the Hong Kong Court of Appeal in the future.

In the meantime, based on Re RZ3262019, when an issue is subject to a standard of proof in a foreign court which is so different from that of the Hong Kong court, it might become a different issue. The decision demonstrates how Hong Kong courts approach issue estoppel with respect to foreign judgments, which underscores the importance of cautious and careful analysis where standards of proof diverge. In considering whether issue estoppel applies when there is a foreign judgment on the same factual matrix, one should have particular regard to the foreign legal procedures, not least the standard of proof and burden of proof. These factors may ultimately have a considerable impact on how a party devises its strategy in parallel proceedings in resolving disputes with a cross-border element. 

Acknowledgements to Trainee Solicitor Alexa Loong for research and contribution to this article.