Civil Action1995

MENNO LEENDERT VOS v. GLOBAL FAIR INDUSTRIAL LTD AND OTHERS

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70962-EN-2010-04-23

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HCA 4200/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4200 OF 1995

____________

BETWEEN

	MENNO LEENDERT VOS	Plaintiff
	(substituted pursuant to the Order of A Cheung, J. dated 18 October 2006)
	and
	GLOBAL FAIR INDUSTRIAL LIMITED	1^st Defendant
	YUNG KA PO	2^nd Defendant
	START WIN LIMITED	3^rd Defendant
	AU KA FAI	4^th Defendant
	NEW CHAMPION TRADING LIMITED	5^th Defendant
	CHEUNG WAI YIN	6^th Defendant
	LEUNG TSUI YU	7^th Defendant
	(by original action)

AND BETWEEN

	GLOBAL FAIR INDUSTRIAL LIMITED	1^st Plaintiff
	YUNG KA PO	2^nd Plaintiff
	START WIN LIMITED	3^rd Plaintiff
	NEW CHAMPION TRADING LIMITED	5^th Plaintiff
	CHEUNG WAI YIN	6^th Plaintiff
	and
	GOLDMARK AGENTS LIMITED	1^st Defendant
	(in liquidation)	(original 1^st Plaintiff)
	WORLD CHAMP LIMITED	2^nd Defendant
	(in liquidation)	(original 2^nd Plaintiff)
	(by counterclaim)

____________

Before: Hon To J in Chambers - Open to Public

Date of Hearing: 23 April 2010

Date of Decision: 23 April 2010

_______________

D E C I S I O N

_______________

INTRODUCTION

1. On 25 March 2010, I granted the Plaintiff’s application for further disclosure sought in aid of an interim post-judgment Mareva injunction against the 1^st, 3^rd and 6^th Defendants (collectively, the “Defendants”) with costs to the Plaintiff and the Plaintiff’s application for amendments to my order dated 7 January 2010 with no order as to costs. The orders made thereunder are referred to as the “Further Disclosure Order” and “Order Amendment Order” respectively. On 15 April 2010, the Defendants applied for leave to appeal against those two orders out of time and for a stay of execution of those orders pending appeal.

2. The background to the parties’ dispute and my judgment in the main action are set out in my judgment dated 1 December 2009 (the “Judgement”). The reasons for my decision in making the Further Disclosure Order and the Order Amendment Order are set out in my decision dated 25 March 2010 (the “Decision”). These will not be repeated here. The issues raised by these applications are whether I have jurisdiction to grant extension of time to apply for leave to appeal against my decision; and if I have, whether the jurisdiction should be exercised on the facts of the present case.

Jurisdiction to grant extension of time to apply for leave to appeal

3. Since the implementation of the Civil Justice Reform (“CJR”), leave is required to appeal against interlocutory and certain other judgments or orders of the court and such application may only be made to the court in the first instance, referred to as the “court below”, within 14 days from the date of the judgment or order being appealed against: Order 59 rule 2B(1) of the Rules of the High Court. The orders being appealed against were made on 25 March 2010. The time to apply for leave to appeal expired on 8 April 2010. The application is therefore out of time by 7 days.

4. Mr Lam, counsel for the Plaintiff, submits that this Court has no jurisdiction to extend time once the 14-day period has expired. He referred to Wynn Resorts (Macau) SA v Mong Henry [2009] 5 HKC 515. At 517, Chu J construed Order 59 rule 2B(1) as follows:

“10.  In my view, the starting point is to consider the wordings in Order 59 rule 2B(1), pursuant to which the application for leave to appeal is made.  The material part of rule 2B(1) provides that: ‘… an application for leave to appeal … may only be made to the Court in the first instance within 14 days from the date of the judgment or order’ (emphasis added).  The language suggests that an application to the court below for leave to appeal its judgment or order can only be made within the 14-day time limit.
11.  There is no other provision in Order 59 enabling the court below to extend time for applying for leave to appeal.  Order 59 rule 15, which deals with extension of time, provides that:
‘Without prejudice to the power of the Court of Appeal or a single judge under Order 3, rule 5, to extend or abridge the time prescribed by any provision of this Order, the period for serving notice of appeal under rule 4 or making application ex parte under rule 14(3) may be extended or abridged by the court below on application made before the expiration of that period.’
12.  Previously, the power under rule 15 to extend time might extend to applications for leave to appeal by reason of the reference to ‘application ex parte under rule 14(3)’.  This is no longer the case as a result of amendments to Order 59 brought about by the Civil Justice Reform.  Order 59 rule 14(2) and rule 14(3), dealing with applications for leave to appeal, had been repealed and applications for leave to appeal are now dealt with under the new rules 2A, 2B and 2C.  The new rule 14(13) further expressly provides that rule 14 does not apply in relation to an application for leave to appeal.  Consequently, the reference in rule 15 to ‘application ex parte under rule 14(3)’ can no longer cover an application for leave to appeal, quite apart from the fact that such application is now generally made inter partes: Order 59 rule 2A(2) and rule 2B(5).  It should also be noted that the power under rule 15 can only be invoked by the court below if the application to extend time is made before the expiration of the time limit, which is not the case here.
13.  Having regard to the wordings of rule 2B together with the legislative intent as appeared from the legislative development and the absence of express provision conferring a power to extend the time for applying for leave to appeal, I am of the view that the court in the first instance, which includes the Court of First Instance, only has power to deal with an application for leave to appeal under Order 59 rule 2B(1) that is made before the expiration of the 14-day time limit.  And that the power to extend time under Order 3 rule 5(1) should not apply to an application for leave to appeal.  Similarly the power under Order 3 rule 5(2) to extend time notwithstanding the application is made after the expiration of the time limit does not apply to an application for leave to appeal.  Such a construction is also consistent with the underlying objective in Order 1A rule 1(b).
14.  Additionally, it is instructive to contrast the position in Rules of the High Court with that in Rules of the District Court.  The new Order 58 rule 2(4) of Rules of the District Court (Cap. 336H), which was introduced at the same time as Order 59 rule 2B(1) of Rules of the High Court, is differently worded.  It merely states that an application for leave to appeal ‘must be made’ within the time limit specified in the sub-rule.  At the same time, Order 58 rule 2(10) of Rules of District Court expressly empowers the District Court to extend the time for applying for leave to appeal and the power may be exercised at any time and notwithstanding the time limit for so doing has expired.  This reinforces the construction stated above.
15.  For these reasons, leave to apply for leave to appeal out of time is refused.”

5. I have quoted the relevant parts of Chu J’s judgment in full. I agree entirely with her Ladyship’s construction of Order 59 rule 2B(1), and have the following observations to add. Under this new scheme introduced by the CJR into Order 59, leave to appeal against an interlocutory judgment or order may be made to the court below and so far as is practicable to the judge or master against whose judgment or order leave to appeal is sought: rule 2B(1) and (2). If that application is refused, the applicant may make a further application for leave to appeal to the Court of Appeal within 14 days from the date of the refusal: rule 2B(3). Where leave is given, whether by the court below or by the Court of Appeal, the appellant has to serve a notice of appeal to all parties to the proceedings specifying the grounds of the appeal and the precise form of the order which the appellant proposes to ask the Court of Appeal to make: rule 3. This notice of appeal must be served within stipulated period, depending on the type of case concerned: rule 4. Rule 15 gives the court below the power to extend or abridge the period for serving notice of appeal under rule 4 on application made before the expiration of that period.

6. The phrase “may only be made” in Order 59 rule 2B(1) is unequivocal, indicating that an application to the court below for leave to appeal against its judgment or order may only be made within the stipulated 14-day period. As observed by Chu J, there is no other provision in Order 59 giving the court below jurisdiction to extend the time for applying for leave to appeal. It should be noted that under this new scheme even where leave to appeal has been granted, rule 15 expressly gives the court below power to grant extension of time for serving notice of appeal. Even then, such application has to be made before the expiration of that period. Thus, a fortiori, in the absence of express provision giving the court below power to grant extension of time to apply for leave to appeal, it must necessarily follow that the court below does not have such power, in the light of the unequivocal language used in rule 2B(1).

7. Two of the underlying objectives of the CJR are to ensure that a case is dealt with as expeditiously as is reasonably practicable and to promote a sense of reasonable proportion and procedural economy in the conduct of proceedings. The construction that rule 2B(1) requires an appellant to apply for leave to appeal against an interlocutory judgment or order of the court within strict time limit without any power in the court to grant extension of time best serves these objectives. A strict time limit is particularly justified for appeals against interlocutory judgments and orders. Such construction enables cases to move forward expeditiously without being dragged behind by delays caused by appeals against interlocutory judgments or orders, especially delays as a result of dilatory conduct of the intending appellant. Such a construction also promotes proportionality and procedural economy. This construction, which is consistent with the unequivocal language used and which best serves these objectives, must have been what was in the contemplation of the legislature when passing the amendments to the new Order 59.

8. For the same reasons as given by Chu J and the above reason, I find that as the court below, I have no jurisdiction to grant extension of time to apply for leave to appeal against my interlocutory order after the stipulated 14-day period has expired.

Application for leave to appeal against the Further Disclosure Order

9. As I have no jurisdiction to grant extension of time to apply for leave to appeal, both the application for extension of time to apply and the application for leave to appeal are to be dismissed. Were the application for leave to appeal made within time, leave should only be granted if the Defendants are able to demonstrate a reasonable prospect of success, i.e. the appeal has merits and ought to be heard: section 14AA of the High Court Ordinance. I shall deal with this briefly.

10. In support of her appeal against the Further Disclosure Order, the 6^th Defendant (“Cheung”) argues on her own behalf and on behalf of the 1^st and 3^rd Defendants that they had made full disclosure of their assets as required by my earlier order of disclosure and there is nothing else to further disclose. She argues that her appeal against the Further Disclosure Order has good chance of success as the Plaintiff was unable to provide any evidence of non-disclosure on her part. While maintaining that I was wrong to have ordered the further disclosure, she argued that there was nothing to be shown by disclosure of the documents I ordered. If that is true, her refusal to comply with my Further Disclosure Order and her appeal against that order is meaningless, frivolous and even abusive of the process of the court. Then she shifted the focal point of her argument to the costs order which I made. She argued that the proper costs order should have been costs in the cause of the appeal and not costs to be paid to the Plaintiff forthwith. She submitted that as she really had no assets there was no way that she could comply with my order that she should pay the costs of the application forthwith and that would enable the Plaintiff to commence bankruptcy proceedings against her resulting in termination of her pending appeal.

11. I have given full reasons for my decision in paragraphs 12 to 25 of my Decision. In essence, Cheung had been a successful medical practitioner who appeared to have accumulated very substantial assets. On the face, this made it incredible that all her assets could have evaporated over the last two years during which she had ceased practice such that she did not have any asset of individual value of over $10,000. Her assertion was so incredible against the factual background that it was reasonable to order her to verify her disclosure on oath which was to be supported by appropriate documentation. Cheung’s argument that the Plaintiff had no evidence of non-disclsoure was only to be rejected in this type of application in the light of the evidence of her means and the fact that the Plaintiff could have no means of knowing what assets she had. Even after reading her further submission contained in her letter dated 30 March 2010 sent after the order had been made, I did not consider there was any merit in her appeal against the Further Disclosure Order.

12. I have also explained in paragraph 24 of my Decision the reasons for ordering costs to be paid forthwith and not in the cause of the appeal. Such costs order is not unusual in a contested application. In essence, regardless of the outcome of the appeal, the Defendants were under a duty to make full disclosure in compliance with the Court’s order. If Cheung had not made full disclosure, she is liable for the costs of this application which was necessitated by her default. If Cheung had made full disclosure, it was meaningless to contest the application. She would suffer no prejudice by complying with the Further Disclosure Order. In either case, there was ample justification for making the costs order as I did. Furthermore, and this is important, having had conduct of this trial, I am satisfied that these Defendants together with the 2^nd, 5^th and 7^th Defendants who are not appealing against my Judgment, had been engaging in a costs wasting exercise in contesting the action. Hitherto, they have caused horrendous amout of costs to be incurred for an action of this nature by the Plaintiff. Cheung said she has no assets and had to borrow from her sisters. Yet she took a trip to North America after the trial of this action and again shortly before the hearing of the two summonses now in issue. The 6^th Defendant, who said that she and the 1^st and 3^rd Defendants had no individual assets in Hong Kong worth more than $10,000, has means to travel around and is now mounting appeals together with the 1^st and 3^rd Defendants against my Judgment and almost all post-judgment interlocutory orders which I made. They are obviously engaging in another costs wasting exercise to make sure that the Plaintiff’s fruits of litigation (i.e. the money paid into Court) will be eaten away by costs which the Plaintiff will never be able to recover from them. This Court shall be astute in identifying litigants who seeks to abuse the process of the court in this way. It is only appropriate that these Defndants should be ordered to pay forthwith all costs of any proceedings which they should not have contested.

13. Cheung submits that the costs order will result in her bankruptcy and will cause the 1^st and 3^rd Defendants to be wound up which will effectively put an end to the pending appeal. If I am wrong in my assessment of the Defendants’ intention and that the Defendants really have no assets whether in Hong Kong or elsewhere to pay the costs I ordered, Cheung, in particular, will most likely be made bankrupt. Under such circumstances, if indeed Cheung has a good ground for appeal against my Judgment, her right to appeal will be taken care of by the Official Receiver and perhaps with the Director of Legal Aid in view of the substantial sum standing in Court. In that event, the appeal will be conducted by the Official Receiver in a proper and not costs wasting manner. If she does not have any good ground for appeal, then it is only right and just that the appeal should be brought to a close by Cheung’s bankruptcy.

14. For the above reasons, even if the application for leave to appeal were made within time, it will be refused for lack of merit.

Application for leave to appeal against the Order Amendment Order

15. I have given full reasons for making theOrder Amendment Order in paragraphs 28 to 33 of my Decision. Cheung argues that she has a good ground of appeal as it was her understanding that only the pure interest element in the ordinary meaning of that word shall not be subject to the order to stay execution. Her argument simply could not stand in the face of the exchanges between the bench and Mr Lam. The Court has inherent jurisdiction to vary its own orders so as to carry out its own meaning and to make its meaning plain. The Court’s intention is manifestly clearfrom reading the transcript of proceedings on 7 January 2010. The Defendants’ appeal has absolutely no chance of success. Besides, even if the Defendants were to succeed, there is nothing to prevent the Plaintiff from making further application for payment out, which will most likely be granted in view of the reasons given in my Decision. The application for leave to appeal is an utterly meaningless exercise. Even if the application for leave to appeal were made within time, it will be refused for lack of merit.

Conclusion

16. This Court has no jurisdiction to extend the time for applying for leave to appeal against its decision. As the applications were made out of time, the applications must be dismissed, together with that the application for leave to appeal and for stay of execution of the orders being appealed against. Furthermore, there is no merit in the intended appeals. Thus, even if I had jurisdiction to extend the time for applying for leave to appeal, leave will be refused and the applications for leave to appeal will be dismissed for want of merit. Accordingly, the applications for extension of time to apply for leave to appeal, for leave to appeal and for stay of execution of the orders are all dismissed with costs.

17. For similar reasons as given in paragraphs 12 and 13 above and paragraph 24 of my Decision, costs should follow the event and be paid forthwith. Mr Lam presented a bill for gross sum assessment in the amount of $60,760 for all the applications. I consider the amount claimed excessive. By reason of the long drawn litigation, the Plaintiff’s solicitors and counsel should be thoroughly familiar with the facts of the case. The amount of time claimed for perusal and preparation of documents should be much less. Accordinly I reduce the costs to $32,500. I apportion the costs to the application to appeal against the Further Disclosure Order and the Order Amendment Order at the ratio of 60:40.

( Anthony To )
Judge of the Court of First Instance
High Court

Mr. Douglas Lam, instructed by M/s T. C. Foo & Co., for the Plaintiff by original action and the 1^st and 2^nd Defendants by counterclaim

1^st Defendant (by original action)/1^st Plaintiff (by counterclaim), in person represented by the 6^th Defendant (by original action)/6^th Plaintiff (by counterclaim)

3^rd Defendant (by original action)/3^rd Plaintiff (by counterclaim), in person represented by the 6^th Defendant (by original action)/6^th Plaintiff (by counterclaim)

6^th Defendant, in person

70692-EN-2010-03-25

MENNO LEENDERT VOS v. GLOBAL FAIR INDUSTRIAL LTD AND OTHERS

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HCA 4200/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4200 OF 1995

____________

BETWEEN

	MENNO LEENDERT VOS	Plaintiff
	(substituted pursuant to the Order of A Cheung, J. dated 18 October 2006)
	and
	GLOBAL FAIR INDUSTRIAL LIMITED	1^st Defendant
	YUNG KA PO	2^nd Defendant
	START WIN LIMITED	3^rd Defendant
	AU KA FAI	4^th Defendant
	NEW CHAMPION TRADING LIMITED	5^th Defendant
	CHEUNG WAI YIN	6^th Defendant
	LEUNG TSUI YU	7^th Defendant

	(by original action)

AND BETWEEN

	GLOBAL FAIR INDUSTRIAL LIMITED	1^st Plaintiff
	YUNG KA PO	2^nd Plaintiff
	START WIN LIMITED	3^rd Plaintiff
	NEW CHAMPION TRADING LIMITED	5^th Plaintiff
	CHEUNG WAI YIN	6^th Plaintiff
	and
	GOLDMARK AGENTS LIMITED	1^st Defendant
	(in liquidation)	(original 1^st Plaintiff)

	WORLD CHAMP LIMITED	2^nd Defendant
	(in liquidation)	(original 2^nd Plaintiff)

	(by counterclaim)

____________

Before: Hon To J in Chambers - Open to Public

Date of Hearing: 25 March 2010

Date of Decision: 25 March 2010

____________________

D E C I S I O N

____________________

INTRODUCTION

1. On 1 December 2009, I handed down judgment in this action (the “Judgment”). I gave judgment in favour of the Plaintiff against the 1^st, 2^nd, 3^rd, 5^th, 6^th and 7^th Defendants. I ordered them to jointly pay the Plaintiff damages in the amount of $2.55 million together with interest from 1993 and costs. I also ordered all payments paid into Court by or on behalf of the 1^st and 3^rd Defendants together with all accrued interest to be paid out to the Official Receiver on behalf of the Plaintiff in partial discharge of the liability of the 1^st and 3^rd Defendants (the “Payment Out Order”).

2. The 1^st, 3^rd and 6^th Defendants (collectively, the “Defendants”) appealed against the Judgment and applied for stay of execution of the Judgment pending the outcome of their appeal to the Court of Appeal. The 6^th Defendant (“Cheung”) is the sole beneficial owner and person in control of the 1^st and 3^rd Defendants. Hence, I treat Cheung as the alter ego of the 1^st and 3^rd Defendants. On 7 January 2010, I granted a partial stay of execution of the Judgment (the “Stay Order”).

3. The Plaintiff had a change of his solicitors. His new solicitors discovered upon a land search that on 8 December 2009 Cheung’s husband filed a petition for divorce by consent and a consent summons to transfer Cheung’s entire interest in her property in Tai Po (the “Property”) to her husband as settlement of their matrimonial property.

4. On 19 January 2010, the Plaintiff issued an inter partes summons (mistakenly dated as 15 January 2010) returnable before me on 4 February 2010 seeking inter alia, post-judgment Mareva relief against the 1^st, 3^rd and 6^th Defendants. On 23 January 2010, he applied and obtained an ex parte interim Mareva injunction before Yam J, sitting as the Duty Judge, restraining those Defendants from dealing with or otherwise disposing of their assets in Hong Kong up to the amount of $9 million.

5. At the hearing before me on the return date, Cheung on behalf of herself and the 1^st and 3^rd Defendants contested the application for Mareva injunction. One of her grounds of objection was that the amount of $9 million sought to be restrained by the Plaintiff was excessive. I adjourned the application for argument, gave directions for filing of affirmations, ordered the interim injunction granted by Yam J to continue until the adjourned hearing subject to some minor amendments to its terms and ordered disclosure by those Defendants of their assets of an individual value of $10,000 or more in Hong Kong (the “Disclosure Order”).

6. Pursuant to the Disclosure Order, Cheung served on the Plaintiff her 27^th Affirmation (not filed in Court) claiming that other than the payments made into Court and funds in her mandatory provident fund account, the Defendants have no assets whatsoever in excess of $10,000. Not being satisfied with this affirmation, the Plaintiff issued a summons on 15 March 2010 seeking further disclosure (the “Further Disclosure Summons”). On the following day, the Plaintiff also issued a summons seeking amendment of the terms of the Stay Order (the “Order Amendment Summons”).

THE FURTHER DISCLOSURE SUMMONS

The further disclosure sought

7. Pursuant to the Disclosure Order, the Defendants were required to make disclosure of all their assets of an individual value of $10,000 or more in Hong Kong. In her 27^th Affirmation, Cheung averred on behalf of the 1^st and 3^rd Defendants that apart from the payment made into Court pursuant to the order of A Cheung J, they have no assets of an individual value of $10,000 or more in Hong Kong. The 1^st and 3^rd Defendants are companies which used to hold the two units in Thomson Commercial Building (the “Units”), which they purchased from Goldmark Agents Limited (“Goldmark”) and World Champ Limited (“World Champ”). The Units were sold by the 1^st and 3^rd Defendantsin October 2006, pursuant to the order of A Cheung J, and a sum of $2.25 million from the proceeds of sale was paid into Court pending the outcome of this trial. Three and half years have since lapsed. It is likely that the 1^st and 3^rd Defendants might have become shell companies with no assets of value.

8. The Further Disclosure Summons is principally targeted at Cheung. In respect of her own assets, Cheung asserted in her 27^th Affirmation that she is the 100% owner of the shares of Avant Garde Limited, the 100% beneficiary owner of the 1^st and 3^rd Defendants and the legal owner of the Property which is a subject matter pending decision of the Matrimonial Court. Apart from those assets, Cheung asserted that she had no other assets in Hong Kong of an individual value of $10,000 or more. Mr Lam, counsel for the Plaintiff, submits that this assertion is incredible. Hence, the Plaintiff seeks the following disclosure:

(1)    name of banks and particulars of all bank accounts held by the Defendants in the past twelve months;
(2)    copies of bank statements of the above bank accounts for the past twelve months;
(3)    name of banks and securities brokerages of all securities accounts held by the Defendants in the past twelve months;
(4)    copies of securities account statements of the above securities accounts for the past twelve months;
(5)    name of credit cards held by the Defendants in the past twelve months;
(6)    copies of credit card statements of the above credit card accounts for the past twelve months;
(7)    particulars of landed properties held by the Defendants in the past twelve months; and
(8)    latest audited accounts of the 1^st and 3^rd Defendants.
The further disclosure sought is very substantial.  By way of passing observation, Cheung has not disclosed her beneficial ownership of Universal Agents Limited which was mentioned in evidence at trial.

The law

9. The nature of Mareva relief is such that the majority of applications are made at a very early stage, sometimes even before commencement of action. However, a Mareva injunction may also be granted to a judgment creditor in aid of execution of his judgment even if he had not applied for or obtained one originally: see Gee on Mareva Injunctions and Anton Piller Relief, 4^th Ed at 26-30 generally and Deutsche Schachtbau-und Tiefbohr-Gesellschaft MBH v Shell International Petroleum Co Ltd [1990] 1 AC 295. The courts are much more ready to grant post-judgment Mareva injunctions because the plaintiff is a judgment creditor entitled to enforce the judgment by executing on the assets of the defendant and even to make him bankrupt or in the case of a corporation to have it wound up. As observed by Sir John Donaldson MR in Deutsche Schachtbau-und Tiefbohrgesellschaft MmbH v R’as Al Khaimah National Oil Company (No 1), [1990] 1 AC 295, such an injunction was not, strictly speaking, an injunction which fell into the Mareva category, but was an injunction granted as protection for a judgment creditor, under a jurisdiction recognised before the emergence of the Mareva jurisdiction.

10. If a plaintiff has obtained a judgment which has become final, Mareva relief is not necessary. He may simply invoke the enforcement procedure. However, where the judgment is subject to appeal, a Mareva injunction is an important tool in the court’s armoury for protecting the judgment creditor in the sense of preserving the status quo pending appeal. The plaintiff, having succeeded at first instance, is entitled to have the fruits of his litigation protected from dissipation by the defendant, so that in the event that the appeal fails, the judgment will not be rendered nugatory. He is all the more entitled to the relief than a plaintiff before commencement of an action. The relief is a discretionary one. The discretion should be exercised in favour of the plaintiff, if he is able to show a likelihood of dissipation of assets liable to execution. Balance of convenience in the American Cyanamid sense does not even come into the equation.

11. In addition, ancillary orders may also be made in aid of a freezing injunction to obtain disclosure of documents or information by a defendant concerning his assets. Usually, the plaintiff has but little information about the assets of the defendant. He may, through his course of dealing with the defendant, have acquired knowledge about some of the defendant’s assets connected with the subject matter. He may have obtained knowledge of the particulars of some of the bank accounts of the defendant into which he made payments or from which the defendant made payments to him. But he may not know what other accounts the defendant has with some other banks. Without such information, there is no way the Mareva injunction could operate properly. In Dadourian Group v Simms (No 2), [2007] 2 All ER 329, Arden LJ said at 335E:

“A freezing order is an important tool in the court’s armoury for the purpose of doing justice between the parties, or more precisely for the purpose of preventing or policing the disposition of assets which would inhibit the enforcement of an order. In the normal situation, failures to provide information about assets subject to a freezing order can be enforced by orders for further information. Litigants who are the subject of an order to produce further information will generally produce it to the best of their ability. But that is not always the case, and the court will in particular be astute to identify those defendants who are deliberately concealing assets …”

Thus, usually a disclosure order is made as part of an order granting or continuing a Mareva injunction. A defendant ordered to disclose or produce information shall do sowith total candour and to the best of his ability. The court will be astute to identify those defendants who are deliberately concealing assets. If a plaintiff is able to show that disclosure is likely to have been incomplete or that a defendant is likely to have concealed assets, the court will order further or specific disclosure.

Discussion

12. At the hearing on 4 February 2010, Cheung did not object to the grant of an interim injunction except as to the amount to be restrained. Hence, the interim injunction ordered by Yam J was continued, the Disclosure Order was granted and directions were given for the hearing of the Mareva injunction application. The Defendants did not appeal against those orders.

13. At the hearing on 25 March 2010, Cheung was represented by counsel, Mr Alwin Chan. Mr Chan submits, quoting The Principles of Equitable Remedies, 7^th edition, that a plaintiff who has obtained judgment should rely on the ordinary process of execution and not Mareva injunction, save in special circumstances. I reject that argument, which I think is confined to the case where the judgment has become final, but not to the present case where an appeal is pending: see paragraphs 9 and 10 above. Mr Chan then argues that the Defendants have complied with the Disclosure Order to the best of their ability and no reasonable inference can be drawn that the Defendants are deliberately concealing assets.

14. Cheung graduated from the University of Hong Kong and practised as a medical practitioner in 1981. She qualified as a specialist in paediatric medicine in 1985. She started private practice in Tuen Mun and Shatin in 1987. She had been a successful medical practitioner at least until the beginning of 2008 when she closed down her practice in preparation for this litigation. To begin with, she had cash of about $550,000 when she financed the purchase of the Units in 1993. She said in evidence that she easily made over $100,000 a month in 1993. She purchased properties, financed her husband’s losses in foreign currency speculation, repaid the money she borrowed from her friends and the wife of the 2^nd Defendant for the purpose of purchasing the Units, paid off the mortgages over the Units purchased by the 1^st and 3^rd Defendants. On the above evidence, Cheung had been a successful medical practitioner with a profitable practice until the beginning of 2008. She must have accumulated very substantial assets over her fifteen years’ practice since 1993, including the Units. Subsequently, the Units were sold for $3.8 million in October 2006 with a net proceeds of $1.55 million after deducting the payment made into Court. Besides, she and her husband owned a guest house inherited from her parents-in-law. Even accepting that Cheung made no income since the beginning of 2008, it is difficult to imagine how those substantial assets could have evaporated within these two years.

15. What arouses suspicion is that one week after Judgment was handed down, Cheung and her husband set in motion the process of disposing of the Property which is held in her sole name. According to the divorce petition filed by her husband, Cheung and her husband had been separated since 2001. Mr Lam submits that it could not have have a mere coincidence that Cheung’s husband could have filed the petition ten years after the separation and that they could have filed the consent summons to transfer the Property to Cheung’s husband one week after the Judgment against her was handed down. The fact that Cheung’s husband has always been in gainful employment adds suspicion to the disposition.

16. Mr Lam further argues that the mere fact that the Defendants were applying for transcripts of the proceedings which would costs tens of thousands of dollars and is now instructing counsel suggests that the assertion that the Defendants have no assets of individual value of $10,000 or more in Hong Kong could not be true. Mr Chan’s answer to that submission is a mild suggestion that Cheung may have assets outside of Hong Kong. I agree with Mr Lam’s submission.

17. Thus, in summary, Cheung had been a successful medical practitioner with a profitable practice and strong earning capability until the beginning of 2008. She appeared to have accumulated very substantial assets, including the proceeds of sale of the Units of $1.55 million net of the payment made into Court. It is difficult to imagine how those substantial assets could have evaporated within these two years. One week after judgment was entered against her, she started to dispose of the Property which is held in her sole name. She is able to afford costly transcripts and to pay legal fees for instructing counsel to represent her at this hearing. All these are inconsistent with her assertions in her 27^th Affirmation that the Defendants have no assets of individual value of $10,000 or above.

18. I have formed an adverse view of the credibility and honesty of Cheung. I said in paragraph 472 of the Judgment:

“This case involves serious breach of fiduciary duty by Yung and dishonest assistance in a serious breach by Cheung and knowing receipt of the Companies’ property by Global Fair and Start Win. Yung and Cheung have been most recalcitrant in their defence. They put forward numerous arguments on the facts, which are frivolous, vexatious and factually incorrect. In particular, Yung gave false evidence and acted with glaring dishonesty. He tried every trick to mislead the Court. Cheung supported him and reinforced his arguments. An order for costs against them to be taxed on an indemnity scale is appropriate.”
Cheung dishonestly assisted the 2^nd Defendant in the breach of fidcuciary duty. The 2^nd Defendant tried every trick to mislead the Court and Cheung supported and reinforced the 2^nd Defendant’s argument. When Cheung’s assertion in her 27^th Affirmation is viewed against the above background, I am more than satisfied that a case has been made out that Cheung on behalf of herself and of the 1^st and 3^rd Defendants have not given full disclosure and are concealing their assets, or that their assets have already been dissipated. In the circumstances, it is appropriate to require the 1^st, 3^rd and 6^th Defendants to make specific disclosure and to verify their disclosure by production of documents.

19. Mr Chan argues that the specific disclosure sought is too wide and production of statements for the past twelve months burdensome. I do not agree. It is usual to order disclosure of particulars of bank accounts, securities accounts, credit card accounts and latest statements of those accounts. It may be burdensome to order disclosure of statements of those accounts for the past twelve months. But on the facts of the present case, where there is likelihood of dissipation, it is only appropriate to make such order, not for the purpose of tracing, but to verify the truthfulness of the disclosure and to identify other assets available for execution. Accordingly, I grant the order sought in terms of the Further Disclosure Summons with costs to the Plaintiff.

20. After the hearing on 25 March 2010, Cheung wrote to me on 30 March 2010 seeking a review of my decision. She explained that she had scheduled for a trip out of Hong Kong between 19 and 28 March 2010. Hence she could not attend the hearing in person. She was fortunate to have been able to enlist the help of counsel at an affordable fee. These matters have no bearing on my decision. In any event, I have no jurisdiction to review my orders. I shall, however, deal with her arguments briefly.

21. Cheung argued that the Plaintiff was unable to provide any evidence of non-disclosure on her part, that my order for further disclosure was ultra vires as it amounted to a tracing exercise and that production of bank statement of the current month would suffice. These issues have already been dealt with in paragraphs 11 to 19 above. Basically, the Plaintiff could have no idea what accounts the Defendants have. In law the Defendants are under a duty to give full disclosure. The inference that Cheung has not made full disclosure which I am able to draw from the indisputable facts is sufficient to enable me to exercise the discretion to grant the ancillary relief to aid in the Mareva injunction. The further disclosure ordered does not amount to a tracing exercise and there is no question that I do not have jurisdiction to grant such relief.

22. Cheung specifically explained that she had no assets of individual value of more than $10,000 because during the two years when she ceased her medical practice she had spent all her saving on her living expenses, travelling expenses as well as medical and funeral expenses of her father. She even said she had to ask for temporary loans from her sisters. These explanations were not before me at the hearing on 25 March 2010. Cheung complained that she had no opportunity to file affirmation to object to the Further Disclosure Summons. She was legally represented at the hearing of that summons. Her solicitors should have taken instructions from her in relation to those matters and presented the evidence in the form of an affirmation. I am mindful that Cheung said that she left Hong Kong on 19 March 2010. However, on her own assertion, she had received the Further Disclosure Summons on 18 March 2010 and had time to respond to the Plaintiff’s solicitors on 19 March 2010. She must have instructed her own solicitors as well before leaving Hong Kong. She must have given full instructions to her solicitors or see to it that they receive her full instructions while she was out of Hong Kong. If she did not do so or that her counsel did not ask for time to do so, she cannot now complain. But even if such evidence had been filed in a proper affirmation, in view of the very strong contrary inference that may be drawn from the indisputable facts, her explanation is not capable of belief unless supported by documentary evidence. There was none. In other words, without the further disclosure I ordered, her explanation is still incapable of belief. Furthermore, one wonders why her father’s medical and funeral expenses had not been shared by her brothers and sisters and what was her source of funds to meet the costs of transcript and her legal representation, which she said were less than $20,000 but must be more than $10,000. In the absence of supporting documentary evidence, my decision would in all events be the same.

23. Cheung also offered an explanation for the disposal of her matrimonial home. That, too, was a matter of evidence. Even if I were to accept her explanation and not to draw any adverse inference in respect of that disposition against her, my decision would still be the same.

24. Cheung argued that the costs of the Further Disclosure Summons should have been in the cause of the appeal. Such a costs order would have been appropriate in an ordinary case and had the application not been contested or contested on more reasonable grounds. But this is not such a case. The inference that Cheung has assets of individual value of over $10,000 within jurisdiction is overwhelming. If indeed she has no such assets, it must be because she has dissipated them after the Judgment was handed down to evade execution or in anticipation of the result of the Judgment. In either event, even if she were successful in the appeal, she is the author of her own misfortune by attempting to evade the due process of the law. The Plaintiff has obtained judgment against the Defendants and an order for disclosure after due legal process. It is the Defendants’ right to appeal against the Judgment but her duty to provide full and frank disclosure pursuant to the Disclosure Order. Such disclosure would not cause any prejudice to her assets for as long as the appeal is still pending. Had she not so attempted to evade the due process of the law, the Plaintiff’s costs would not have been incurred and she could also recover the Defendants’ costs including the costs of complying with the order for further disclosure as her costs of the appeal. Under the circumstances, the Court’s discretion in ordering costs could not have been exercised in any other manner than to follow the event.

25. Cheung’s letter added nothing to what Mr Chan had submitted on her behalf at the hearing on 25 March 2010. Instead, it only reinforced my suspicion that either she had not given full disclosure of her assets or that she has dissipated them or removed them out of jurisdiction in anticipation of the result of the Judgment.

THE ORDER AMENDMENT SUMMONS

The background leading to the Stay Order and the amendment sought

26. In paragraph 476(6) ofthe Judgment, I ordered, inter alia, that all payments paid into Court by or on behalf of the 1^st and 3^rd Defendants together with all accrued interest shall be paid out to the Official Receiver in partial discharge of the liability of the 1^st and 3^rd Defendants after fourteen days (i.e. the Payment Out Order). On 7 January 2010, upon the Defendants’ application for stay of execution of that Judgment, I ordered thatthe Payment Out Order be stayed pending the hearing or other disposal or determination of such appeal or further order of the Court:

“except to the extent that all accrued interests from the Payments into Court by or on behalf of [the 1^st and 3^rd Defendants] be paid out to the Plaintiff’s solicitors, upon the solicitors’ undertaking that such payment out shall not be used otherwise than meeting any legal costs incurred in the said Appeal.”
By the Order Amendment Summons, the Plaintiff effectively seeks two amendments: firstly, to enlarge the exception to cover rental income from the Units paid into Court so that the rental income will be paid out to the Plaintiff and secondly, to permit the payment out to be applied towards meeting legal costs incurred in all applications relating or incidental to the appeal.

The law

27. The Court has jurisdiction to amend or correct any defect or error in any judgment or order under Order 20 rule 11 of the Rules of the High Court. The rule applies only to cases where there is a clerical mistake in a judgment or order or an error arising from an accidental slip or omission, including a case where the judgment did not reflect the clear intention of the court stated elsewhere in the judgment. This is generally refered to as the “slip rule”. Apart from Order 20 rule 11, the court has inherent jurisdiction to vary its own orders so as to carry out its own meaning and to make its meaning plain: see Hong Kong Civil Procedure 2010, paragraph 20/11/1 and cases cited therein. In Hatten v Harris [1892] AC 560, Lord Watson held:

“Where an error of that kind has been committed it is always within the competency of the court, if nothing has intervened which would render it inexpedient or inequitable to do so, to correct the record in order to bring it into harmony with the order which the Judge obviously meant to pronounce.”

Discussion

28. In all fairness to the Defendants, the first amendment is quite substantial, though not the second amendment which could properly be allowed under the “slip rule”. But I am prepared to allow both amendments under my inherent jurisdiction.

29. I categorically affirm that it was my intention that nothing other than the capital sum of $2.25 million ordered to be paid into Court by A Cheung J was to be subject to the Stay Order and that other than that sum all payments made into Court together with accrued interest shall be released to the Plaintiff’s solicitors upon their undertaking that such payment out shall not be used otherwise than for meeting any legal costs to be incurred in the appeal including all applications relating or incidental to the appeal.

30. Such intention is manifestly obvious when reading page 13 line U to page 14 line P of the transcript of the proceedings on 7 January 2010. I was then balancing the right of the Plaintiff to have his fruits of litigation and the interest of the 1^st and 3^rd Defendants over the payments in Court in the event that they are successful in their appeal. I was distinguishing between the capital sum of $2.25 million (mistakenly quoted as $2.55 million) ordered to be paid into Court by A Cheung J and all the other sums standing in the account in Court: see page 14 line A to B. Then I dealt with the balancing process. This is a case of the Defendants assisting in the breach of fiduciary duty of a director of Goldmark and World Champ. The Plaintiff as shareholder of the two companies has been financing the litigation. Very substantial legal costs have been incurred over the years, which far exceeded the damages to be recovered. It appears that those substantial costs were incurred as a result of the 1^st, 2^nd, 3^rd, 5^th and 6^th Defendants deliberately engaging in a costs wasting exercise. Now that the Plaintiff has succeeded in first instance, he is entitled at least to enjoy some of the fruits of his litigation. He should, at least, be released of the burden of financing the on going appeal, which is likely to be another costs wasting exercise which Cheung is particularly capable of. The Plaintiff should be allowed access to funds of a couple of million dollars for the appeal. My intention was that only the capital sum of $2.25 million shall be subject to the Stay Order, i.e. to remain in Court, while all the other sums shall be released subject to the undertaking by the Plaintiff’s solicitors. It was unfortunate that I used the words “interest accrued” or “interest” to describe all the other sums and that my mistake was quickly adopted by Mr Lam. But, it is also clear from page 14 line H to line J that the understanding between Mr Lam and me is that the capital sum of $2.25 million shall remain in Court, while all the other sums amounting to about $3 million shall be released to the Plaintiff’s solicitors and that both I and Mr Lam referred to that sum of about $3 million as “interest”. Then Mr Lam and I continued our exchange from page 14 line J to line P using the word “interest” meaning the sum of about $3 million. The amount of interest, in the normal meaning of that word, which accrued over those four years would be about a hundred thousand dollars which is far from being adequate to cover the likely costs of the appeal and could not be any sum near to $3 million. It was the payment into Court by the Official Receiver in respect of rental income received from the Units which constituted the bulk of that sum. The intention of the Court, Mr Lam as well as Cheung who was in Court was manifestly clear. Cheung must have no misunderstanding of that common intention. Her instructions to contest this application were obviously given in an attempt to benefit from the mistake.

31. It must also be clear that the payment out is to be applied to meet all legal costs to be incurred in all legal processes relating or incidental to the appeal. With hindsight, it would have been clearer had I specified the amount to be subject to the Stay Order instead.

32. Even if I were to step aside and look at the terms of the order and apply the ordinary principles of construction of document as summarised by Lord Hoffmann in Investor’s Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 897 at 912 to 913, the same result is inevitable. Construction of document is to ascertain the meaning which a document would convey to a reasonable man who has knowledge of the factual matrix leading to the making of the document. It is not the same thing as the meaning of its words. The meaning of words is a matter of dictionaries and grammar; the meaning of the document is what the parties using those words against the relevant background would reasonably have been understood to mean. A reasonable man reading the transcript of proceedings must conclude that something must have gone wrong with the language and that the word “interest” means all the other payments including the rental income paid into Court by the Official Receiver as well as accrued interest from all such payments and the interest from the capital sum of $2.25 million.

33. For the above reasons, I allow the Order Amendment Summons and make no order as to costs.

CONCLUSION

34. Accordingly, I grant the further disclosure sought by the Plaintiff in his summons dated 15 March 2010 with costs to the Plaintiff and grant the amendments to my order dated 7 January 2010 sought by the Plaintiff in his summons dated 16 March 2010 with no order as to costs.

( Anthony To )
Judge of the Court of First Instance
High Court

Mr. Douglas Lam, instructed by M/s T. C. Foo & Co., for the Plaintiff by original action and the 1^st and 2^nd Defendants by counterclaim

Mr. Alwin Chan, instructed by M/s Chiu & Partners, for the 1^st, 3^rd and 6^th Defendants

68722-EN-2009-12-01

MENNO LEENDERT VOS v. GLOBAL FAIR INDUSTRIAL LTD AND OTHERS

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20889-EN-2001-06-08

GOLDMARK AGENTS LTD. AND ANOTHER v. GLOBAL FAIR INDUSTRIAL LTD. AND OTHERS

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HCA004200/1995

HCA4200/1995

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4200 OF 1995

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BETWEEN
	GOLDMARK AGENTS LIMITED (in liquidation)	1st Plaintiff
	WORLD CHAMP LIMITED (in liquidation)	2nd Plaintiff

	AND

	GLOBAL FAIR INDUSTRIAL LIMITED	1st Defendant
	YUNG KA PO	2nd Defendant
	START WIN LIMITED	3rd Defendant
	AU KA FAI	4th Defendant
	NEW CHAMPION TRADING LIMITED	5th Defendant
	CHEUNG WAI YIN	6th Defendant
	LEUNG TSUI YU	7th Defendant

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Coram: Mr Recorder Kwok SC in Chambers

Date of Hearing: 8 June 2001

Date of Judgment: 8 June 2001

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J U D G M E N T

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1. This is an appeal against the master's order dated 2 April 2001 dismissing an application made by the 1st, 3rd, 4th and 6th defendants for security of costs. These defendants shall be referred to as "the defendants". The application is made under s.357 of the Companies Ordinance, Cap.32.

2. The facts so far as relevant for present purposes can be stated briefly. This is an action commenced by the Officer Receiver as liquidator of the 1st and 2nd plaintiffs. The plaintiffs seek a declaration that an assignment in July 1993 by the 1st plaintiff to the 1st defendant of a unit in a commercial building ("the 1st property") is voidable under s.60(1) of the Conveyancing and Property Ordinance, Cap.219; a declaration that an assignment in July 1993 by the 2nd plaintiff to the 1st defendant of another unit in the same commercial building ("the 2nd property") is voidable; and a declaration that an assignment by the 1st defendant to the 3rd defendant of the 2nd property is voidable. The plaintiffs' claim against the 4th defendant is that he is liable to account as a constructive trustee. The plaintiffs' case is that the sales by the plaintiffs to the 1st defendant were at an undervalue with a total pleaded loss of $2.55 million.

3. On 2 May 1995, Rogers J (as he then was) granted a Mareva injunction restraining the 1st defendant from dealing with the 1st property, restraining the 3rd defendant from dealing with the 2nd property, and ordering the 4th defendant to account on oath for $1,950,000, being part of the proceeds of sale. The Mareva injunction was varied by consent by an order of Leonard J dated 11 August 1995 to permit the 1st defendant to let out the first property on terms inter alia that the rent less proper outgoings be paid into a joint bank account of the Official Receiver and solicitors for the 1st defendant. The Mareva was further varied by consent by an order of Yeung J dated 21 August 1996 permitting the 3rd defendant to let out the 2nd property on similar terms.

4. The defendants dispute the plaintiffs' claim. They say that the 1st and 3rd defendants were the 6th defendant's investment vehicles and that the two properties were genuine purchases made as part of her investment, partly from borrowed funds. The defendants' case is that the 4th defendant was the 6th defendant's nominee director on the board of the directors of the 1st defendant.

5. This action has reached the stage where directions were given on 11 May 2001 ordering discovery within 35 days, inspection within 21 days from service, and exchange of witness statements within 56 days, with further directions being adjourned sine die with liberty to restore before the listing judge.

6. Counsel has reminded me of the principles applicable in the exercise of the judge's discretion in ordering or refusing to order security for costs and they are set out by Peter Gibson LJ in Keary Developments Ltd v. Tarmac Constructions Ltd [1995] 3 All ER 534 at pp.539H-540J.

7. Mr Paul Shieh, counsel for the plaintiffs, conceded that if the defendants are successful in their defence, the plaintiffs will be unable to pay their costs.

8. Mr Louis Chan, counsel for the defendants, conceded that for the purposes of this application, the plaintiffs had a good arguable case against the defendants.

9. In my judgment, that is a proper concession. With the grant and continuation of the Mareva injunction, there is an issue estoppel and it is not open to the 1st, 3rd and 4th defendants to argue that the plaintiffs did not have a good arguable case against them. The 6th defendant is on the defendants' case the beneficial owner of the 1st and 3rd defendants.

10. With these concessions, the question for my consideration is whether I am satisfied that, in all the circumstances of this case, it is probable that the plaintiffs' admittedly good arguable claim would be stifled by ordering security in any amount other than a nominal sum. The plaintiffs relied on the following affidavit evidence of Dr Vos, a veterinary surgeon, filed on 31 October 2000.

"27. There is now produced and shown to me marked 'MLV-18' an extract from the 1st and 2nd Plaintiffs' accounts. It will be seen that the majority of receipts were payments by me under the funding agreement. I have been informed by the Official Receiver that a total of HK$713,700.42 (including the petitioner's deposit) was recovered in the liquidation of the 1st Plaintiff. None of the 1st Plaintiff's Pet Products stock was recovered. Most of the sum recovered by the Official Receiver came from receivables payable to the 1st Plaintiff. Goldmark currently has cash in hand of HK$91,519.63. World Champ has cash in hand of HK$509.82. The funding of this litigation depends on me.
28. By way of background to my financial circumstances, during 1991 and 1992 I invested HK$1,800,000 in the 1st and 2nd Plaintiffs. I started the business with my own capital of HK$900,000 and personally borrowed HK$900,000 so that the 1st and 2nd Plaintiffs could purchase Units 1A and 1D. The 1st Plaintiff's business was very successful and every indication was that both Yung and I would be well rewarded financially.

29. However, as a result of Yung stripping all the assets of the company, I was left as at July 1993 owing more than HK$1,000,000 being the amount that I had borrowed of HK$900,000 plus part of the costs payable to my solicitors, Johnson, Stokes & Masters, of approximately HK$400,000 (for advising me on Yung's offer to purchase my interest in the Plaintiffs for HK$2,700,000 and the costs of having Official Receiver appointed as provisional liquidator of the 1st and 2nd Plaintiffs).
30. As Yung had also taken away most of the business that I had built up and I was left with a very small customer base which was strictly confined to veterinarian medicines. Essentially my wife and I had at that time no assets and major debts.
31. I have, however, since that time rebuilt my business which supports my wife and two children. I have substantial interests in two companies and an equal partnership in a veterinary clinic (my business assets) which according to the most recent financial accounts are together worth approximately HK$2,400,000. The financial accounts have not placed any value on goodwill because any value arising from my and my co-owners personal goodwill is not regarded as being of significant value. My interest is worth approximately HK$1,200,000. My share of combined yearly profits over past years has been approximately HK$800,000 and in the foreseeable future is most likely to increase. My income and combined share of dividend and other remuneration totals approximately HK$80,000 per month. Apart from my business assets my wife and I have savings of less than HK$350,000 and modest household chattels and do not own any real property nor a car nor any other assets whatsoever.
32. Excluding the costs of my funding this Action my monthly outgoings are approximately HK$35,000 and leaving approximately HK$45,000 per month towards the costs of funding this Action with any balance to be taken from our savings or raised against my business assets.

33. Since the claims were issued by the Official Receiver I have fully funded solicitors and Counsel instructed by the Official Receiver and have to date paid more than HK$1,000,000. I have been able to do this by careful economy in my family's expenses, which has often put my family under financial pressure. I have been unable to build up any major personal assets, other than my interest in the companies and partnership which provide my livelihood. Over the last year the cost of funding this Action has been particularly high and has not been fully met by my surplus income.
34. I believe that I have managed my affairs so that I can fund this Action. However, if security for costs is ordered in the sum requested by the 1st, 3rd and 4th Defendants, then the Official Receiver will look to me under the funding agreement. I do not have sufficient assets or disposable income to provide such security in the sum requested by the 1st, 3rd and 4th Defendants of nearly HK$4,000,000, or even half of that amount. Even to satisfy an order for security of a quarter of that amount, I would probably have to sell all or a substantial part of my interest in the companies and/or my partnership. I may have difficulty in finding a willing purchaser and a third party might not value it in the same way. If I could sell those assets, I would then have lost the source of my income, as those assets provide my livelihood. I would be unable to provide for my family. I do not know whether I would be able to raise money in any way against my interests in those assets. I therefore do not see at present how I could continue with this litigation if an order for security is made against the Plaintiffs. I am gravely concerned that if an order for security for costs is made I will end up in even a worse financial position than I was in at the time that the Official Receiver was appointed provisional liquidator of the Plaintiffs, as the money I have spent so far will have been wasted."

11. There is no contention by Mr Chan that Dr Vos is not forthcoming on his financial position. His only criticism is that Dr Vos had not included the goodwill of his business. I am satisfied that it is not probable that goodwill of his business or of his practice has any material net tangible value. So I am faced with a case where Dr Vos, having invested $1.8 million, half of which was borrowed, and recently spent sums in excess of $1 million to fund the plaintiffs' litigation costs, was left with assets estimated to be worth $1.2 million, savings of $350,000 and a monthly income of $80,000. Deducting expenses of $35,000, he had $45,000 each month to fund the litigation. The defendants are not the only defendants in this action and the plaintiffs will have to fight against the other defendants and costs will have to be incurred.

12. The defendants' skeleton bill totals slightly in excess of $10 million. On the plaintiffs' case, if security for costs is to be ordered, the proper estimate should be about $2.1 million up to the conclusion of trial.

13. On Dr Vos' evidence, I am satisfied that he could just about manage to fund the plaintiffs' litigation costs. He categorically stated that he did not see how he could continue with this litigation if an order for security is made against the plaintiffs, and there is no suggestion that he has any relative, friend or business associate able and willing to fund the litigation.

14. If the defendants' estimate of costs is a genuine one and not intended to stifle the plaintiffs' claim, then it is, in my judgment, inherently improbable that any relative, friend or business associate of Dr Vos would fund Dr Vos' litigation to the extent of $10 million to pursue a claim with a pleaded loss of $2.55 million in 1993.

15. I am not even satisfied that it is probable that Dr Vos had any relative, friend or business associate willing to fund his litigation up to $2 million or any sum other than a nominal sum. Some people may be slightly more willing to fund the defence of a claim than to fund a claim against other parties.

16. I am satisfied that in all the circumstances of this case granting the application for security for costs in any amount other than a nominal sum will stifle the plaintiffs' admittedly good arguable claim against the defendants. I dismiss the defendants' appeal.

17. On the question of costs, I bear in mind that unmeritorious interlocutory applications may have the effect of stifling the plaintiffs' claim unless they are taxed and paid forthwith. For this reason, I see no reason to disturb the master's order on costs. The appeal is dismissed with costs, to be taxed and paid forthwith.

	(Kenneth Kwok)
	Recorder of the Court of First Instance,
	High Court

Representation:

Mr Paul Shieh, instructed by Messrs Stephenson Harwood & Lo, for the Plaintiffs

Mr Louis Chan, instructed by Messrs Tsang & Co., for the Defendants