HCA000416/1995
HCA416/1995
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO.416 OF 1995
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| BETWEEN | | |
| CAI DENING | 1st Plaintiff |
| CAI QIAN | 2nd Plaintiff |
| | |
| AND | |
| | |
| CHIANG CHEW YUNG | 1st Defendant |
| LAU KAM FAI | 2nd Defendant |
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Coram: Deputy High Court Judge S. Kwan in Chambers
Dates of Hearing: 30 October and 3 November 2000
Date of Decision: 3 November 2000
Date of Handing Down Reasons for Decision: 9 November 2000
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REASONS FOR DECISION
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1. This application started as an application taken out by the 1st defendant, Madam Chiang Chew Yung, on 26 January 2000 to discharge a Mareva injunction imposed against her in January 1995 on account of the plaintiffs' delay in proceeding with this action and the prejudice suffered by her due to the restraint of disposal of her assets for over five years.
2. In Madam Chiang's affirmation filed on 4 September 2000, she stated that the application was also made on behalf of her husband Mr Lau Kam Fai, who is the 2nd defendant. It would also appear from that affirmation that Madam Chiang seeks, in the alternative to a complete discharge of the Mareva injunction, a variation of that order to allow her to pay for legal fees and the living expenses of herself and her family. Madam Chiang's application is opposed in total by the plaintiffs.
3. Mr Nigel Bedford appeared on behalf of the defendants on a pro bono basis under the Free Legal Service of the Bar Association. Mr Ambrose Ho, SC appeared on behalf of the plaintiffs, who are legally aided.
4. At the end of the hearing, I made an order varying the Mareva injunction to allow payment of legal fees and living expenses. My reasons appear below.
5. The basis of the plaintiffs' claim against the defendants may be summarized as follows. It is the plaintiffs' case that between 1989 and 1994, the 1st plaintiff had transferred or advanced various sums of money to Madam Chiang for Madam Chiang to make investments on behalf of the 1st plaintiff in foreign exchange, shares, a landed property in Hong Kong and three landed properties in the Mainland. As a result, five joint accounts were opened with various banks in Hong Kong, four of which were in the names of the 1st plaintiff and Madam Chiang and one was in the names of the 2nd plaintiff and Madam Chiang. It is alleged by the plaintiffs that Madam Chiang had misappropriated the monies in the joint bank accounts, that she had made fraudulent representations to the 1st plaintiff regarding the investments allegedly made and the value of the investments, that she had falsified various documents relating to the landed properties, and that she had failed to account to the plaintiffs of the payments made by the 1st plaintiff and of the assets purchased with the plaintiffs' monies. The total amount of the plaintiffs' claim, as appeared from the Re-amended Statement of Claim, is in the region of approximately HK$2.5 million.
6. Madam Chiang admitted that the 1st plaintiff had transferred various amounts to her for the purpose of making investments on behalf of the 1st plaintiff. She claimed that she had rendered an account of the investments to the 1st plaintiff. She denied there was fraudulent representation or forgery of documents regarding the landed properties. She denied there was any misappropriation of the funds in the joint bank accounts and she claimed that the 1st plaintiff had made a gift to her of a particular sum in one of the joint accounts.
7. The dispute between the parties is essentially a dispute as to fact. It is a case of some complexity because of the many transactions between Madam Chiang and the plaintiffs regarding the transfer of funds and the volume of documents involved.
The injunction
8. The Mareva injunction was first granted by Leonard J on an ex parte application on 13 January 1995 restraining disposal of Madam Chiang's assets with a ceiling of HK$1,690,200.00. There was no provision in that order or in subsequent orders allowing Madam Chiang to withdraw money from her bank accounts to pay for legal fees or to cover her living expenses. On 3 May 1995, the injunction was varied by an order of P. Chan J (as he then was) to include a number of bank accounts held in the joint names of Madam Chiang and one or the other of the plaintiffs. On 2 November 1995, the injunction was varied to include a property in the joint names of the defendants at Kingswood Villas, Tin Shui Wai, New Territories ("the Kingswood Villas Property"). On 14 December 1995, the injunction was varied to increase the limit of the restraint to HK$1.9 million.
9. Following the granting of summary judgment of part of the plaintiffs' claim in the sum of NZ$62,106.73 on 28 October 1996, the injunction was varied on 6 December 1996 to allow that sum to be released from one of Madam Chiang's bank accounts in favour of the 2nd plaintiff.
10. On 27 March 1997, upon the undertakings given by the defendants and the defendants' solicitors, the injunction was varied to allow the defendants to sell the Kingswood Villas Property. On 31 October 1997, after the sale of the property, the defendants applied for release of the proceeds of sale to them. On 5 November 1997, Barnett J varied the injunction to provide that HK$300,000.00 out of the sale proceeds was to be held by the defendants' solicitors as stakeholders pending the trial of this action, and that the balance of HK$1,491,000.00 was to be released to the defendants.
11. The net result of the injunction, as varied by various court orders, is that there is a restraint on the disposal of the defendants' assets up to a total of HK$1.9 million (less NZ$62,106.73 which had been paid to the 2nd plaintiff under the summary judgment) and a sum of HK$300,000.00 held in an interest-bearing account by the defendants' former solicitors (they had ceased to act for the defendants subsequent to the order of Barnett J) as stakeholders until judgment or further order.
The delay in proceeding with this action
12. As delay is in the forefront of the defendants' application, I shall give a summary of the steps taken in this action over the five-year period. This is based on the affirmation of the 1st plaintiff filed on 20 April 2000. I should mention that although Madam Chiang has had the benefit of legal service under the Bar's Free Legal Service, with the exception of the last affirmation filed by her on 21 October 2000, the first four affirmations are in Chinese and would not appear to have been professionally prepared. It is difficult to get a full account of the history of these proceedings from Madam Chiang's affirmations.
1995
13. Following the granting of the injunction on 13 January 1995, the Statement of Claim was filed on 27 February 1995. In March 1995, the 2nd plaintiff was added as a party. In May 1995, instructions were sent to a new counsel for amendment of the Statement of Claim. Leave to do so was obtained from the court only four months later. Madam Chiang filed her Defence in October 1995.
14. In November 1995, the plaintiffs made a request for further and better particulars of Madam Chiang's Defence. Madam Chiang provided answers to the request in December 1995. In November and December 1995, applications were made by the plaintiffs to vary the injunction in the manner that I have set out above. It would appear from the 1st plaintiff's affirmation that in the hearing to vary the injunction on 14 December 1995, the judge had raised with the parties whether directions for a speedy trial should be given. In the end, no order was made apparently because it was considered by the plaintiffs that the action was not ready to be set down for trial.
1996
15. After the plaintiffs' counsel had reviewed Madam Chiang's answers to the request for further and better particulars (which were provided in December 1995), counsel advised that the plaintiffs should apply for summary judgment for part of the claim. The application for summary judgment was not taken out until four months later, in April 1996. The substantive hearing took place on 28 October 1996 and the plaintiffs were successful. On 6 December 1996, leave was granted to the plaintiffs to join the 2nd defendant as a party. On 24 December 1996, Madam Chiang filed her Amended Defence.
1997
16. On 10 January 1997, the 2nd defendant filed his Defence and Counterclaim. Pleadings were closed on 21 February 1997 when the plaintiffs filed a Reply and Defence to Counterclaim of the 2nd defendant.
17. On 1 March 1997, the plaintiffs applied to court for an order against Madam Chiang because she had failed to comply with the order in the summary judgment to serve an account of the joint bank account held by her and the 2nd plaintiff. An Unless Order was made by a master on 7 May 1997, which was complied with by Madam Chiang on 28 May 1997.
18. On 10 May 1997, the plaintiffs filed a summons for directions and an order was made by a master on 2 June 1997. Directions for discovery and inspection of documents were given and witness statements were ordered to be filed within 42 days of the order. It was not mentioned in the 1st plaintiff's affirmation when witness statements were filed by the parties but it would appear from a letter of the defendants' solicitors dated 1 March 1999 that it was still not done by the date of that letter.
19. The parties filed their lists of documents in June 1997. On 14 July 1997, the plaintiffs' solicitors wrote to the defendants' solicitors requesting for copies of some of the documents disclosed. There was no response from the defendants' solicitors and the plaintiffs' solicitors did nothing about this until six months later when they sent a letter to the defendants' solicitors in the same terms requesting for copies of documents. There was again no response from the other side. Another six months lapsed before the plaintiffs' solicitors wrote to the other side in similar terms in August 1998. When nothing was heard from the defendants' solicitors, the plaintiffs' solicitors waited another month before they sent a letter to the defendants' solicitors threatening for the first time to issue a summons if the defendants' solicitors should fail to provide copies of the documents requested in the defendants' list. The documents were supplied by the defendants' solicitors within a week of this letter dated 17 September 1998. The defendants' former solicitors were at fault in taking a year to supply the documents requested. However, the plaintiffs' solicitors had clearly been dilatory in the way they went about to obtain copies of the documents disclosed by the defendants.
20. In July 1997, the plaintiffs' solicitors also wrote to the defendants' solicitors stating that the defendants' disclosure of documents was inadequate and threatening to apply for specific discovery if the defendants should fail to file a supplemental list disclosing the documents set out in a schedule prepared by the plaintiffs' solicitors within 14 days. Again, it is indicative of the dilatory manner in which this action was handled by the plaintiffs' solicitors that no follow-up action was taken by them. Eventually, and only in February 1999, the 1st defendant's solicitors filed a supplemental list of documents without any action on the plaintiffs' part.
21. On 12 July 1997, the 1st defendant applied for legal aid and she was granted legal aid on 24 July 1997. On 2 September 1997, the 2nd defendant applied for legal aid and his application was granted on 15 December 1997. On 5 November 1997, the injunction was varied by Barnett J in the manner I have described above.
22. I should mention that in December 1997, the 1st defendant was tried in the magistrate's court at Tsuen Wan on a charge of theft with the 1st plaintiff as the complainant. The 1st defendant was acquitted on a submission of no case to answer.
1998
23. Nothing happened in the first eight months of 1998. In September 1998, the 2nd defendant applied for security for costs against the plaintiffs. On 13 October 1998, the 1st plaintiff applied for legal aid. On 7 December 1998, the 1st plaintiff was granted legal aid restricted to defending the application for security for costs and obtaining counsel's advice on evidence and merits.
1999
24. On 8 February 1999, the 2nd defendant's application for security for costs was dismissed. On 11 February 1999, the 1st defendant's solicitors filed a supplemental list of documents. It was only four months later that the plaintiffs' solicitors wrote to the 1st defendant's solicitors requesting for copies of the documents disclosed in the supplemental list. No response was received and the plaintiffs' solicitors waited another two months before they sent a second letter threatening to issue a summons. There was still no response from the defendants' solicitors and no summons was issued by the plaintiffs' solicitors. In March 2000, after her solicitors had ceased to act for her, Madam Chiang supplied copies of the documents disclosed in her supplemental list.
25. On 1 March 1999, the defendants' solicitors wrote to the plaintiffs complaining of the slow progress of the case and asking if the plaintiffs' solicitors had attended to those parts of the order made by the master on the summons for directions on 2 June 1997 with a view to setting down the case for trial. It is not clear from the evidence placed before me what response, if any, was provided by the plaintiffs' solicitors to this letter.
26. On 12 March 1999, the defendants were discharged from legal aid. On 26 May 1999, Madam Chiang applied again for legal aid. Her application was refused on 16 June 1999, and on 13 August 1999, she filed a notice to act in person. She has been acting in person ever since. It would appear to be the case that the 2nd defendant was not legally represented since his legal aid was discharged in March 1999, although it was only in June 2000 that a notice was filed by the former solicitors that they had ceased to act for the 2nd defendant.
27. Upon the receipt of the supplemental list of documents filed by Madam Chiang, the plaintiffs' solicitors took three months to review the documents and to prepare instructions to counsel to advise on evidence and merits as provided in the legal aid certificate of the 1st plaintiff. Instructions were delivered to counsel in May 1999. Counsel's advice was not provided until 22 February 2000. In the meantime, no action was taken by the plaintiffs' solicitors to press on with the case because they were waiting for counsel's advice on evidence and merits and the Legal Aid Department would not issue a further certificate to cover the conduct of the action, including trial, until counsel had given an advice on evidence and merits. Such a certificate was issued in March 2000.
2000
28. On 12 July 2000, an order was made by the Listing Judge granting leave to set down this action for trial. Trial dates have been fixed and the action is due to start on 28 May 2001 with an estimated length of five days.
29. It is apparent from the account I have given above that the conduct of this action has gone on at a leisurely pace. The 1st plaintiff has explained in her affirmation that she had been suffering from poor health and she had an operation in 1997. She was also distressed by the death of her sister in August 1997. Mr Ambrose Ho, SC submitted that no fault should be attributed to the plaintiffs. He has also submitted that it was the defendants who had caused substantial delay by their applications to discharge or vary the injunction in 1995 and 1996, the failure of Madam Chiang to comply with the order made on summary judgment until the plaintiffs obtained an Unless Order against her, the applications by the defendants for legal aid in 1997 and 1999 which resulted in automatic stays of the proceedings for periods of 42 days, the defendants' failure to supply the documents disclosed despite repeated requests from the plaintiffs' solicitors, and the application of the 2nd defendant for security for costs.
30. I do not agree with Mr Ho's submissions. The defendants had, no doubt, contributed to the delay. However, I do think the plaintiffs are the more culpable of the two in terms of the periods of delay that had been occasioned and in view of the fact that the plaintiffs had obtained a Mareva injunction. A plaintiff in that situation is "under an obligation to press on with his action as rapidly as he can so that if he should fail to establish liability in the defendant, the disadvantage which the injunction imposes upon the defendant will be lessened so far as possible". (Lloyds Bowmaker Ltd v. Britannia Arrow Holding Plc. [1988] 1 WLR 1337 at 1347B-C per Glidewell LJ; see also Sanwa Development Ltd (in Liq.) v. Chan Kar Keung & Anor [1999] 1 HKC 847.)
31. It was submitted by Mr Ho that delay is not the only factor I should be concerned with. There are other factors that the court should also take into account in deciding whether the injunction should be discharged in the situation where there has been delay on the part of the plaintiff in proceeding with the action. He has referred me to "Mareva Injunction and Anton Piller Relief" by Steven Gee, 4th ed., pages 378-9 in which the author set out a number of relevant factors that the court would take into account where there has been delay on the part of the plaintiff. Mr Ho submitted that it would be relevant to take into account these other matters in the exercise of my discretion :
(1) If there had been delay on the part of the plaintiffs, the delay has been rectified by now in that the case has been set down for trial and trial dates in May 2001 have been given.
(2) The plaintiffs would be substantially prejudiced if the injunction is discharged because the only assets of the defendants in Hong Kong are the assets under restraint. It is likely that the defendants would remove their assets out of Hong Kong once the injunction is lifted as they are not ordinarily resident here. The discharge of the injunction would effectively mean that the plaintiffs would be left with an empty judgment if they were to succeed.
(3) The defendants have not shown by credible evidence that they have suffered real prejudice and would continue to do so as a result of the delay.
32. I accept that I have a discretion to exercise whether to discharge the Mareva injunction on the ground of the plaintiffs' delay and that the delay itself is not the only factor I should look at but I should have regard to all the circumstances of the case. There is no need to elaborate on the first of the matters relied on by Mr Ho. The fact that the delay has now been rectified is a matter that I will take into account. I turn to consider the other two matters on which Mr Ho has addressed me.
Prejudice to the plaintiffs
33. I have borne in mind the nature of the allegations made against the defendants that I have summarized above. I have been taken by Mr Ho to some of the documents relied on by the plaintiffs in support of the allegation that Madam Chiang had defrauded them by forged documents, as well as various parts of Madam Chiang's Defence and some of her affirmations showing that she had given inconsistent versions in answer to the plaintiffs' allegations. The fact that the plaintiffs are asserting a proprietary claim over the funds held by the defendants is relevant in considering whether, and if so what, variations should be made to the Mareva injunction to allow the defendant to withdraw funds for legal fees and living expenses (see "Mareva Injunctions and Anton Piller Relief" by Steven Gee, 4th ed., pages 321-2, 326; Fitzgerald v. Williams [1996] QB 657 at 669 G-H).
34. I should mention that I do not take into consideration the point made by Mr Ho that Madam Chiang would appear to have changed her story with regards some of the matters raised in her Defence, nor do I draw any adverse inference at this stage as regards Madam Chiang's credibility.
35. I have also considered the other points made by Mr Ho to demonstrate that Madam Chiang had throughout tried to circumvent the injunction by various acts, namely, by supplying a false address in her affirmations made in 1995; seeking to withdraw money from bank accounts in her sole name and leaving instead the monies in the accounts in joint names to satisfy the injunction; executing a power of attorney in May 1995 in favour of the 2nd defendant to enable him to sell the Kingswood Villas Property. I do not think these acts would necessarily attract the inference that Mr Ho has asked me to draw, having regard to the affirmations filed by the defendants in November and December 1996. I do not attach weight to these acts as alleged.
36. Further, the plaintiffs have also adduced evidence to show that the defendants had used two loan application forms with the forged signatures of the plaintiffs in an attempt to obtain credit reports regarding them through an estate agent in California. These matters are set out in a decision of an Administrative Law Judge of California in a disciplinary action in July 1999 when he revoked the licence of the estate agent who had presented the fictitious loan applications purportedly made by the plaintiffs to the credit reporting agency in breach of professional practices. The credit report on the 1st plaintiff obtained by the defendants using improper means was sent to the Legal Aid Department anonymously. No evidence has been filed by the defendants to answer the plaintiffs' allegations which were made in an affirmation in April 2000. The plaintiffs have asked the court to infer that the credit report was sent by the defendants with a view of stopping them from getting legal aid. I am prepared to draw that inference. I regard this as a serious matter.
37. Taking into account that the defendants do not ordinarily reside in Hong Kong, that they have no assets here apart from the assets covered by the Mareva injunction, and the past behaviour of the defendants, I am satisfied that the prospect of the plaintiffs in recovering anything from the defendants would be substantially diminished if the injunction was to be discharged and that the plaintiffs would suffer serious prejudice.
Prejudice to the defendants
38. The submission here made by Mr Ho is that the defendants have not shown by credible evidence that they have suffered real prejudice on account of the delay and, for that reason, the injunction should not be discharged or varied. The grounds for that submission are as follows :
(1) A substantial sum close to HK$1.5 million was released to the defendants out of the proceeds of sale of the Kingswood Villas Property when the injunction was varied by Barnett J in November 1997.
(2) The defendants have substantial assets in landed properties in the United States and they should use these assets to raise funds for legal fees and pay for their living expenses.
(3) The evidence of Madam Chiang regarding her means and assets is incredible and highly suspect.
I will deal with these grounds in the order as set out above.
39. Regarding the sum of HK$1,491,320.81 released to the defendants on 5 November 1997, Madam Chiang has filed evidence to explain how the proceeds had been spent :
(1) HK$655,652.40 was paid to her former solicitors as legal fees, as borne out in the letter of her former solicitors dated 22 November 1997.
(2) HK$773,500.00 (equivalent to US$100,000.00) was paid to her sister and brother-in-law, Mr and Mrs Kao, for monies owed to them, as shown in the letter of Mrs Kao to Madam Chiang dated 19 July 1997 and the outward remittance customer advice dated 26 November 1997.
(3) HK$29,740.00 was paid to one Ms Chan Tak Lan in repayment of a loan to cover four months' rental and the medical fees of Madam Chiang, as shown in a cashier order payable to Ms Chan and a receipt issued by her.
Hence the balance received by the defendants out of an amount close to HK$1.5 million released to them was only HK$61,859.00. I am satisfied that the defendants have fully accounted for the proceeds received by them and that they would have no money left out of what they had received from the proceeds by now.
40. I turn to consider the second ground relating to the properties in the United States. It is alleged in the latest affirmation of the plaintiffs filed in September 2000 that the defendants still own three properties in California and they are as follows :
(1) 216E Newmark Avenue, Unit B, Monterey Park
41. In Madam Chiang's affirmation of 30 August 2000, she stated that this property was transferred without consideration in 1996 and exhibited a copy of a Quit Claim Deed dated 7 October 1996 showing that the property was transferred by the 2nd defendant to Madam Chiang's brother-in-law, Mr Wei Kao.
42. In the plaintiffs' affirmation in September 2000, further land search documents were produced to show that contrary to Madam Chiang's affirmation, this property is in fact owned by the 2nd defendant. The Quit Claim Deed in October 1996 was not registered until March 1999. Further, in August 1999, Mr Wei Kao had transferred the property back to the 2nd defendant for nil consideration. Then, on 5 May 2000, Madam Chiang executed a Quit Claim Deed transferring any interest she might have in the property as the 2nd defendant's wife in favour of the 2nd defendant. Both the Grant Deed and the Quit Claim Deed in 1999 and 2000 respectively were registered. It would also appear from the land search that the 2nd defendant had mortgaged this property on 6 January 2000 and 10 May 2000. The amount obtained on the two mortgages cannot be ascertained from the search. According to the information obtained by the plaintiffs, this property is worth about US$170,000.00.
43. In the latest affirmation filed by Madam Chiang on 21 October 2000, she explained that this property is a "family property" occupied by her elderly parents. The title of the property is currently held by Madam Chiang's brother, Mr Peter K. Chiang, according to a Grant Deed dated 1 June 2000 whereby the 2nd defendant transferred his interest in the property to Mr Chiang as a bona fide gift. Madam Chiang stated that title to this property has changed a number of times in recent years to "reflect whichever family member is currently able to pay the outstanding mortgage payments on this property as they fall due".
44. The plaintiffs have obtained a declaration of an attorney in California, Mr David Casselman, dated 25 October 2000 making observations on Madam Chiang's affirmation regarding the practice of land search and property transactions in California. I accept what Mr Casselman has stated regarding the need to notify the lender of a change in title where a property was used as security for a loan. If the changes in title were notified to the lender, it may well be that Madam Chiang has omitted to adduce evidence concerning the processing by the lender to obtain approval that would be required in a change in title. However, I am not inclined to disbelieve Madam Chiang in her affirmation that neither she nor the 2nd defendant owns any interest in this property at present.
(2) 4501 Cedros Avenue, No.238 Sherman Oaks, Los Angeles
45. Madam Chiang admits that she owns this property. Initially, she stated that it is occupied by her son as the property is located in an area convenient for her son to attend school. After the plaintiffs had filed evidence alleging that the property was rented out to a tenant, Madam Chiang stated in her latest affirmation that she had allowed a friend of her daughter to stay there rent-free on the basis that the occupant would pay the outgoings and the monthly payment for the SBA loan granted by the U.S. government to assist the Condominium Homeowners Association to rebuild after the earthquake in 1994.
46. It is alleged by the plaintiffs that the property is valued at about US$121,500.00. Madam Chiang has adduced an appraisal report showing that the property was valued at US$80,000,00 in April 1999 on a value by sales comparison approach. She claimed that this property is "heavily mortgaged". Apart from the SBA loan I have mentioned with an instalment payment of US$485.00 a month, there are various mechanic's liens registered against the property. Further, it would appear from the land search documents that Madam Chiang had obtained a mortgage on this property on 3 September 1999, although the amount of the mortgage loan is unknown.
47. I am satisfied on the evidence that there are no or little realistic prospects of realising substantial funds from this property to pay legal fees.
(3) 1213 South 9th Street, Alhambra
48. This property was not disclosed by Madam Chiang in her affirmation of 30 August 2000, and it was found out by the plaintiffs from the land searches conducted by their U.S. lawyer. The plaintiffs have exhibited a Grant Deed dated 10 November 1999 showing that Madam Chiang has become the owner of this property and that a mortgage was taken out for a loan of US$236,550.00 the day before. A further mortgage loan was obtained on 29 February 2000 for the sum of US$33,750.00.
49. In her affirmation in October 2000, Madam Chiang explained that this property was purchased in her name as trustee for the "Shu Hwa Hsieh Family Trust", and she exhibited a Grant Deed dated 6 May 2000 showing that she had transferred the property to herself in the capacity as trustee of the said trust. She has also exhibited a letter from Shu Hwa Hsieh dated 18 October 2000 confirming receipt of the Grant Deed in May 2000.
50. Mr Ho has raised a number of queries regarding Madam Chiang's explanation and submitted that the purported transfer to the said trust is highly suspect in view of the fact that the Grant Deed in May 2000 is not registered. I am not prepared to disbelieve Madam Chiang and Shu Hwa Hsieh on the basis of the documents submitted. I accept Madam Chiang's statement that she has no interest in this property.
51. To sum up, I accept Madam Chiang's evidence, for present purposes, that she does not have substantial assets in the United States as alleged by the plaintiffs, and that the defendants' only landed property in the United States is heavily mortgaged.
52. The remaining point I need deal with is the submission that Madam Chiang's evidence regarding the financial position of the defendants is wholly unreliable and should be rejected. Mr Ho has dealt with this at some length in his supplemental skeleton submission and pointed out various omissions and contradictions in Madam Chiang's affirmations regarding the properties in California. I do not propose to set out the criticisms made by Mr Ho. Suffice it to say that I have considered them but I do not think they are sufficiently serious or compelling to lead me to the conclusion that Madam Chiang's evidence should be rejected in total. I also wish to point out that although Madam Chiang had secured the representation of counsel on a pro bono basis in making this application some time in May 2000, the various affirmations she filed in support of this application, except for the last affirmation in October 2000, were prepared by herself without professional assistance.
53. It is pertinent to point out that in the affirmations filed by Madam Chiang, she has deposed to the fact that she and the 2nd defendant have been living in retirement and they are in poor health. Madam Chiang had a major surgery in 1996 and has been receiving treatment for her liver problem. The 2nd defendant has severe occlusive arterial disease of his legs and a doctor has recommended vascular bypass. Very substantial amounts have been incurred by the defendants towards legal fees up to July 1997 when Madam Chiang was granted legal aid. The total amount, according to the receipts and debit notes of the former solicitors, was in the region of HK$1.7 million. The defendants have relied on loans from relatives and friends, some of which they have repaid out of the proceeds of sale of the Kingswood Villas Property in 1997. It does seem to me on the evidence that the defendants have exhausted a substantial part of their funds in this litigation.
54. Last but not least, I agree with the submission of Mr Nigel Bedford that it is in the interest of justice that the defendants should have legal representation to contest these proceedings, having regard to the nature of the allegations made against them, the history of the transactions between the parties, and the volume of documents involved. It is likely that they would suffer great prejudice if they continue to act in person at the trial.
Exercise of the discretion
55. I have taken into account all the factors I have mentioned above. The delay of the plaintiffs in pursuing this action is substantial. However, that has been rectified now as trial dates for next year have been given. I have weighed the prejudice likely to be suffered by the plaintiffs if the injunction is discharged in total against the prejudice that the defendants have suffered and would continue to suffer if the injunction is allowed to remain. In my judgment, the right thing to do in the circumstances of this case is to decline to discharge the injunction but to vary the injunction to allow the defendants to withdraw money to pay for legal fees and reasonable living expenses.
56. In Madam Chiang's affirmation in August 2000, she has put forward a figure of US$47,000.00 for legal fees and US$60,168.00 for the living expenses of herself and the 2nd defendant for 12 months and the education and living expenses of their two children, also for 12 months. I do not propose to go into the individual items. I would disallow the outgoings in respect of the property at 4501 Cedros Avenue because these amounts have been met by the occupant who is allowed to stay on a rent-free basis. I do not propose to make allowance for the living and education expenses of the two adult children in attending tertiary institutions. As for the remaining items being the living expenses, medical insurance and medical expenses of the defendants, I propose to take the expenses to be incurred over a period of eight months instead of 12 months, to cover the period from now to the trial date in May 2001. After adjustment, I fix the maximum amount that the defendants would be allowed to withdraw from the funds under restraint to pay for legal fees and living expenses at HK$500,000.00.
57. I should mention that Madam Chiang has also stated in her affirmation that she borrowed US$60,000.00 from her brother-in-law in 1996 and she has exhibited a letter dated 22 October 1997 from Mr Wei Kao seeking payment. I do not propose to make any variation in the injunction to allow Madam Chiang to pay off the debt to her brother-in-law which has been outstanding for four years in the light of the evidence and the fact that the plaintiffs are asserting a proprietary claim over the funds in question.
Orders
58. I order that the Mareva injunction granted on 13 January 1995 as varied by the orders made on 3 May 1995, 2 November 1995, 14 December 1995, 6 December 1996, 27 March 1997 and 5 November 1997 be varied by providing that the injunction does not prohibit the defendants from withdrawing up to a total of HK$500,000.00 towards their ordinary living expenses and to pay for legal advice and representation in this action. The withdrawals are to be made in the first place out of the sum of HK$300,000.00 with accrued interest held by the defendants' former solicitors Messrs L.H. Kwan & Co. as stakeholders out of the proceeds of sale of the Kingswood Villas Property under the order made on 5 November 1997 and next out of a time deposit in sterling being deposit no.0051 in the joint account of the 1st and 2nd defendants at the Hang Seng Bank Ltd no.276-109956-888.
59. Mr Ho has sought a stay of the above variation of the injunction for a short period after the handing down of these reasons for decision for the plaintiffs to consider whether an appeal should be brought and, if so, to apply for a stay pending appeal. I order that the above variation of the injunction be stayed for seven days as from the date of handing down of the reasons for decision. If no notice of appeal is lodged and no application for stay pending appeal is filed within that period, the stay I have granted will cease to have effect on the expiry of that period.
60. I further order that there be no order as to costs of this application save that the plaintiffs' own costs are to be taxed in accordance with the Legal Aid Regulations.
| (S. Kwan) |
| Deputy High Court Judge |
Representation:
Mr Ambrose Ho, SC, instructed by Messrs Peter C. Wong, Chow & Chow, for the Plaintiffs
Mr Nigel Bedford, appearing pro bono on the Free Legal Service of the Bar Association, for the Defendants