CAC BRAKE CO. LTD. ZHUHAI v. BENE MANUFACTURING COMPANY LTD. AND OTHERS

HCA003041A/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS. 4666 OF 1997 AND 3041 OF 1998

--------------------

HCA4666/97

BETWEEN
	CAC BRAKE CO. LTD. ZHUHAI	Plaintiff
	AND
	LIANG JIN WEN (also known as LEUNG KAM MAN)	1st Defendant
	LAM CHOI LAN	2nd Defendant
	CHE LAP HONG COMPANY LTD.	3rd Defendant
	POLY-WAYS (FAR EAST LTD.)	4th Defendant
	LUI WAI HUNG	5th Defendant
	ERBAL INTERNATIONAL LTD.	6th Defendant
	WONG TONG MING	7th Defendant
	SOLARWORLD INTERNATIONAL LTD.	8th Defendant

AND

HCA3041/98

BETWEEN
	CAC BRAKE CO. LTD. ZHUHAI	Plaintiff
	AND
	BENE MANUFACTURING COMPANY LTD.	1st Defendant
	LO JOCK HUEN	2nd Defendant
	LOBROS COMPANY LTD.	3rd Defendant

--------------------

(HEARD TOGETHER)

Coram : Deputy Judge Muttrie in Chambers

Date of Hearing : 15 December 1998

Date of Delivery of Reasons for Judgment : 24 December 1998

--------------------------------

REASONS FOR JUDGMENT

--------------------------------

 

1. In High Court Action No.4666 of 1997, by summons dated 7th December 1998, the plaintiff made the following application :

1. The Plaintiff be granted leave to disclose to the Department of Justice all pleadings, affirmations and exhibits filed and served by the 2nd, 3rd and 4th Defendants in this action together with all orders of the Court made therein and for this purpose the Plaintiff be granted leave to disclose to the Department of Justice all pleadings, the Plaintiff be released from

(a) its implied undertaking not to disclose to any person not a party to these proceedings copies of the said documents, and

(b) its express undertaking given to the Court on 1st May 1997 not to make use (save in connection with this action) of any information obtained as a result of the operation of paragraphs 2 and 3 of the order of the Honourable Mr Justice Patrick Chan dated 1st May 1997.

2. The costs of this application be to the Plaintiff in any event.

2. On 15th December 1998, I made an order in terms of the application. I now give my reasons.

3. On 1st May 1997, the Plaintiff obtained a world-wide Mareva injunction against the Defendants, with a disclosure order. The Plaintiff gave an undertaking which included the following :

"H. Not to make use (save in connection with this action) of any information obtained as a result of the operation of paragraph 2 of this Order or to commence any proceedings in other jurisdictions against the defendants without the leave of the Court;

I. Not to make use without the leave of the court of any information obtained as a result of the operation of paragraphs 3 or 4 of this Order other than in connection with

(a) following and tracing the proceeds of the frauds, and

(b) bringing proceedings against any person or persons in relation to the frauds."

4. In compliance with the disclosure order the 2nd Defendant, by himself and on behalf of the 2nd and 3rd Defendants, filed certain affirmations. Mr Mak Shing, as director of the 3rd and 4th Defendants, also filed an affirmation, as did Mr Liu Wai-hung, the 5th Defendant.

5. The 2nd Defendant Mr Lam Choi-lan is presently on trial with one Mr Lo Jock-huen and the 6th Defendant in this action before the District Court on various counts of false accounting and conspiracy to defraud arising out of the same matters as this action. The Plaintiff seeks to be released from its undertakings so that it can disclose the leave of the Court to disclose information obtained in this action to the Secretary for Justice, in order to assist the Prosecution in the District Court case.

6. The 2nd Defendant complains that among the document bundle provided to him by the Prosecution, he found his affirmation dated 22nd May 1997, the affirmation of Mr Mak Shing dated 14th May 1997, and an affirmation by the 5th Defendant. Mr Mak Shing and the 5th Defendant appear on the list of witnesses which he says he received from the Prosecution. He infers that the Plaintiff or its solicitors must have disclosed this information to the Police and the Prosecuting Counsel, which he says is in breach of the undertaking shown above.

7. Mr Rattigan and Mr Lamplough of Herbert Smith, the Plaintiff's solicitors, have filed affirmations denying such disclosure. Correspondence with the Commercial Crime Bureau, also denying such disclosure, has been exhibited. Mr Lamplough affirms that the police officer in charge of the case and the Prosecuting Counsel, Mr McLanachan, have been shown the front pages of the affirmations and have confirmed to him that they are not in possession of copies of the affirmations.

8. There is no explanation as to how these affirmations got into the bundle of witness statements, if indeed they did. It is curious that the 2nd Defendant himself appears as a witness on the list of witnesses which he has exhibited. He is not a witness for the Prosecution, obviously. One would not have expected his name to appear as a witness on the basis that he had given a cautioned statement; normally one would expect the statement taker's name to appear, and the statement itself to be shown as an exhibit. In any event there is no evidence as to how this list came into being, or who is its author.

9. In any event it seems to me that I have to take the present position to be as it appears from Mr Lamplough's affirmation, namely that however the documents may have come into the possession of the 2nd Defendant, neither the Police nor the Prosecuting Counsel is now in possession of them.

10. I can see no reason why these documents should not be made available to the prosecuting authority for use in criminal proceedings. This is obviously what the House of Lords had in mind when it held in Rank Film Ltd. v. Video Information Centre [1982] 1 WLR 380 that the Defendants were entitled to rely on the privilege against self-incrimination by discovery or by answering interrogatories since if they complied with orders of that nature there was in the circumstances, a real and appreciable risk of criminal proceedings for conspiracy to defraud being taken against them. See the dicta of Lord Fraser of Tullybelton at p.446E :

" A restriction by the court making the order would, no doubt, be effective to bind the party who obtained the order, but it can hardly be suggested that it would be effective to prevent a prosecutor in the public interest from using, or an English criminal court (a fortiori a Scottish criminal court if a conspiracy were prosecuted in Scotland) from admitting the information in evidence at a trial."

And at p.447F :

" If a defendant's answers to interrogatories tend to show that he has been guilty of a serious offence I cannot think that there would be anything improper in his opponent reporting the matter to the criminal authorities with a view to prosecution, certainly if he had first obtained leave from the court which ordered the interrogatories, and probably without such leave."

11. The criteria for the exercise of the Court's discretion to release relevant documents from hub into satellite proceedings are set out in the judgment of Laddie J. in Cobra Golf Inc. and Anr. v. Rata & Ors., [1996] FSR 819 at p.830-831. It seems to me that, applying those criteria, it is proper for the Plaintiff to be released from its undertaking so that the criminal authorities may see the papers and make such use of them in the criminal proceedings as they may.

12. Paragraph 11 of Laddie J's criteria states :

" The existence of the implied undertaking means that an application to release the party from restraint must be made before there is collateral use."

13. Mr So for the 2nd Defendant argues that this order should not in any event be made because there has already been disclosure.

14. The answer to this must be that there is insufficient evidence of disclosure. If there had been, the Police and the Prosecuting Counsel in the District Court action would have these documents and I accept that they have not.

15. Paragraph 11(d)(1) of the criteria states :

" If they [the satellite proceedings] are criminal proceedings the court must take into account the possibility of the application being a method of by-passing the privilege against self-incrimination."

16. The 2nd Defendant did not seek to rely on this privilege in relation to the affirmations which he filed this action, as presumably he could have done, if he wished, in reliance on Rank Film Ltd. Nor indeed does it appear that there is any self-incrimination in his affirmations which are exculpatory. In any event, it will be for the District Judge to consider whether the use of any of the information contained in the documents is admissible, and if it is, whether or not it is prejudicial.

17. For these reasons, I allowed the application.

18. In High Court Action No.3041 of 1998, by a summons dated 7th December 1998, the Plaintiff made a similar application in respect of an undertaking given on 27th February 1998, for the purposes of an injunction made on the same date. The 2nd Defendant in this case, Mr Lo Jock-huen, is jointly charged in the District Court with Mr Lam Choi-lan. The Plaintiff seeks to be released from its undertakings so that it can disclose information obtained in this action to the Secretary for Justice, in order to assist the Prosecution in the District Court case.

19. There was no appearance by or on behalf of any of the Defendants in this action. For the same reasons as those given above, in their absence, I allowed the application.

	(G. P. Muttrie)
	Deputy Judge of the Court of First Instance, High Court

Representation:

Mr George Lamplough, inst'd by M/s Herbert Smith, for the Plaintiff

Mr Eric Chi Kit So of M/s Peter W.K. Lo & Co., for the 2nd, 3rd and 4th Defendant (for HCA4666/97)

HCA003041B/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS. 4666 OF 1997 AND 3041 OF 1998

-----------------

HCA4666/97

 

BETWEEN
	CAC BRAKE CO. LTD. ZHUHAI	Plaintiff
	AND
	LIANG JIN WEN (also known as LEUNG KAM MAN)	1st Defendant
	LAM CHOI LAN	2nd Defendant
	CHE LAP HONG COMPANY LTD	3rd Defendant
	POLY-WAYS (FAR EAST LTD)	4th Defendant
	LUI WAI HUNG	5th Defendant
	ERBAL INTERNATIONAL LTD	6th Defendant
	WONG TONG MING	7th Defendant
	SOLARWORLD INTERNATIONAL LTD	8th Defendant

 

AND

HCA304/98

BETWEEN
	CAC BRAKE CO. LTD. ZHUHAI	Plaintiff
	AND
	BENE MANUFACTURING COMPANY LTD.	1st Defendant
	LO JOCK HUEN	2nd Defendant
	LOBROS COMPANY LTD.	3rd Defendant

-----------------

(HEARD TOGETHER)

Coram: Deputy Judge Muttrie in Chambers

Date of Hearing: 15 December 1998

Date of Delivery of Reasons for Judgment:

 

---------------------------------------------------

REASONS FOR JUDGMENT

---------------------------------------------------

 

1. In High Court Action No.4666 of 1997, by summons dated 7^th December 1998, the plaintiff made the following application:

1.

The Plaintiff be granted leave to disclose to the Department of Justice all pleadings, affirmations and exhibits filed and served by the 2nd, 3rd and 4th Defendants in this action together with all orders of the Court made therein and for this purpose the Plaintiff be granted leave to disclose to the Department of Justice all pleadings, the Plaintiff be released from

	(a)	its implied undertaking not to disclose to any person not a party to these proceedings copies of the said documents, and
	(b)	its express undertaking given to the Court on 1st May 1997 not to make use (save in connection with this action) of any information obtained as a result of the operation of paragraphs 2 and 3 of the order of the Honourable Mr Justice Patrick Chan dated 1st May 1997.

2.

The costs of this application be to the Plaintiff in any event.

2. On 15^th December 1998, I made an order in terms of the application. I now give my reasons.

3. On 1^st May 1997, the Plaintiff obtained a world-wide Mareva injunction against the Defendants, with a disclosure order. The Plaintiff gave an undertaking which included the following:

"	H.	Not to make use (save in connection with this action) of any information obtained as a result of the operation of paragraph 2 of this Order or to commence any proceedings in other jurisdictions against the defendants without the leave of the Court;
	I.	Not to make use without the leave of the court of any information obtained as a result of the operation of paragraphs 3 or 4 of this Order other than in connection with

	(a)	following and tracing the proceeds of the frauds, and
	(b)	bringing proceedings against any person or persons in relation to the frauds."

4. In compliance with the disclosure order the 2^nd Defendant, by himself and on behalf of the 2^nd and 3^rd Defendants, filed certain affirmations. Mr Mak Shing, as director of the 3^rd and 4^th Defendants, also filed an affirmation, as did Mr Liu Wai-hung, the 5^th Defendant.

5. The 2^nd Defendant Mr Lam Choi-lan is presently on trial with one Mr Lo Jock-huen and the 6^th Defendant in this action before the District Court on various counts of false accounting and conspiracy to defraud arising out of the same matters as this action. The Plaintiff seeks to be released from its undertakings so that it can disclose the leave of the Court to disclose information obtained in this action to the Secretary for Justice, in order to assist the Prosecution in the District Court case.

6. The 2^nd Defendant complains that among the document bundle provided to him by the Prosecution, he found his affirmation dated 22^nd May 1997, the affirmation of Mr Mak Shing dated 14^th May 1997, and an affirmation by the 5^th Defendant. Mr Mak Shing and the 5^th Defendant appear on the list of witnesses which he says he received from the Prosecution. He infers that the Plaintiff or its solicitors must have disclosed this information to the Police and the Prosecuting Counsel, which he says is in breach of the undertaking shown above.

7. Mr Rattigan and Mr Lamplough of Herbert Smith, the Plaintiff's solicitors, have filed affirmations denying such disclosure. Correspondence with the Commercial Crime Bureau, also denying such disclosure, has been exhibited. Mr Lamplough affirms that the police officer in charge of the case and the Prosecuting Counsel, Mr McLanachan, have been shown the front pages of the affirmations and have confirmed to him that they are not in possession of copies of the affirmations.

8. There is no explanation as to how these affirmations got into the bundle of witness statements, if indeed they did. It is curious that the 2^nd Defendant himself appears as a witness on the list of witnesses which he has exhibited. He is not a witness for the Prosecution, obviously. One would not have expected his name to appear as a witness on the basis that he had given a cautioned statement; normally one would expect the statement taker's name to appear, and the statement itself to be shown as an exhibit. In any event there is no evidence as to how this list came into being, or who is its author.

9. In any event it seems to me that I have to take the present position to be as it appears from Mr Lamplough's affirmation, namely that however the documents may have come into the possession of the 2^nd Defendant, neither the Police nor the Prosecuting Counsel is now in possession of them.

10. I can see no reason why these documents should not be made available to the prosecuting authority for use in criminal proceedings. This is obviously what the House of Lords had in mind when it held in Rank Film Ltd. v. Video Information Centre [1982] 1 WLR 380 that the Defendants were entitled to rely on the privilege against self-incrimination by discovery or by answering interrogatories since if they complied with orders of that nature there was in the circumstances, a real and appreciable risk of criminal proceedings for conspiracy to defraud being taken against them. See the dicta of Lord Fraser of Tullybelton at p.446E:

"A restriction by the court making the order would, no doubt, be effective to bind the party who obtained the order, but it can hardly be suggested that it would be effective to prevent a prosecutor in the public interest from using, or an English criminal court (a fortiori a Scottish criminal court if a conspiracy were prosecuted in Scotland) from admitting the information in evidence at a trial."

And at p.447F:

"If a defendant's answers to interrogatories tend to show that he has been guilty of a serious offence I cannot think that there would be anything improper in his opponent reporting the matter to the criminal authorities with a view to prosecution, certainly if he had first obtained leave from the court which ordered the interrogatories, and probably without such leave."

11. The criteria for the exercise of the Court's discretion to release relevant documents from hub into satellite proceedings are set out in the judgment of Laddie J. in Cobra Golf Inc. and Anr. v. Rata & Ors., [1996] FSR 819 at p.830-831. It seems to me that, applying those criteria, it is proper for the Plaintiff to be released from its undertaking so that the criminal authorities may see the papers and make such use of them in the criminal proceedings as they may.

12. Paragraph 11 of Laddie J's criteria states:

"The existence of the implied undertaking means that an application to release the party from restraint must be made before there is collateral use."

13. Mr So for the 2^nd Defendant argues that this order should not in any event be made because there has already been disclosure.

14. The answer to this must be that there is insufficient evidence of disclosure. If there had been, the Police and the Prosecuting Counsel in the District Court action would have these documents and I accept that they have not.

15. Paragraph 11(d)(1) of the criteria states:

"If they [the satellite proceedings] are criminal proceedings the court must take into account the possibility of the application being a method of by-passing the privilege against self-incrimination."

16. The 2^nd Defendant did not seek to rely on this privilege in relation to the affirmations which he filed this action, as presumably he could have done, if he wished, in reliance on Rank Film Ltd. Nor indeed does it appear that there is any self-incrimination in his affirmations which are exculpatory. In any event, it will be for the District Judge to consider whether the use of any of the information contained in the documents is admissible, and if it is, whether or not it is prejudicial.

17. For these reasons, I allowed the application.

18. In High Court Action No.3041 of 1998, by a summons dated 7^th December 1998, the Plaintiff made a similar application in respect of an undertaking given on 27^th February 1998, for the purposes of an injunction made on the same date. The 2^nd Defendant in this case, Mr Lo Jock-huen, is jointly charged in the District Court with Mr Lam Choi-lan. The Plaintiff seeks to be released from its undertakings so that it can disclose information obtained in this action to the Secretary for Justice, in order to assist the Prosecution in the District Court case.

19. There was no appearance by or on behalf of any of the Defendants in this action. For the same reasons as those given above, in their absence, I allowed the application.

 

 

	(G.P. Muttrie)
	Deputy Judge of the Court of First Instance
	High Court

 

Representation:

Mr George Lamplough, inst'd by M/s Herbert Smith, for the Plaintiff

Mr Eric Chi Kit So of M/s Peter W.K. Lo & Co., for the 2^nd, 3^rd and 4^th Defendant (for HCA4666/97)

HCA003041/1998

1998 No. A3041

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

____________

BETWEEN
	CAC BRAKE CO. LTD. ZHUHAI	Plaintiff
	AND
	BENE MANUFACTURING CO. LTD.	1st Defendant
	LO JOCK HUEN	2nd Defendant
	LOBROS CO. LTD.	3rd Defendant

____________

Coram : Deputy Judge Jackson in Chambers

Date of Hearing : 3 April 1998

Date of Handing Down of Judgment : 7 April 1998

_______________

J U D G M E N T

_______________

1. This is an application by way of summons by the 1st, 2nd and 3rd Defendants for an order that the injunction granted herein by the order of the Honourable Mr. Justice Yeung dated 27th February 1998 and continued by the order of the Honourable Mr. Justice Barnett dated 6th March 1998 herein be discharged and that the costs be to the 1st, 2nd and 3rd Defendants.

2. By writ of summons issued on 27th February 1998 the Plaintiff claims inter alia against the 1st and 2nd Defendants damages for conspiracy and fraud. 24 overt acts pursuant to such conspiracy are alleged against the 2nd Defendants and are set out in paragraph 22 of the Plaintiffs statement of claim.

3. On 16th March 1998 the 2nd Defendant was apparently charged by the Commercial Crimes Bureau of the HKSAR Police Force with one count of conspiracy to defraud and with one count of fade accounting which charges I am told will be tried in the District Court. Those charges, I am also told relate specifically to those matters which have given rise to these proceedings. Whether or not those criminal proceedings will give rise to an application for a restraint order under Sections 14 and 15 of the Organised and Serious Crimes Ordinance, Cap. 455 is not a matter which need concern me.

4. I adjourned this application on Friday last until today to give me the opportunity, which I had not then had, of reading all the papers in this case particularly relative to the allegations of fraud and the participation of each of the Defendants in that fraud which allegations are neatly encapsulated in the affidavit of Patrick Ciaran Rattigan sworn on 27th February 1998. I considered it necessary to do this because the Plaintiff's opposition to the Defendants' application was clearly founded upon those applications from which I was invited to draw a singular inference.

5. On Friday I was presented with very helpful skeleton arguments in writing prepared by Mr. Grossman Senior Counsel leading Mr. Sham for the Defendants and by Mr. Lamplough Solicitor for the Plaintiffs.

6. What is plainly at issue is whether or not there is evidence of an appreciable risk that the Defendants will dissipate their assets.

7. Mr. Grossman's argument (having set out the background to the application and the law applicable to Mareva injunctions) is as follows:-

1. The Plaintiffs allegations of fraud are largely based upon a statement by an alleged co-conspirator which allegations are disputed by the Defendants - and that it is not for me in considering this application to seek to resolve that dispute and

2. There is no evidence of any risk of dissipation of assets by any of the Defendants and nor can such be inferred simply from the papers before me.

8. As to the 2nd of those submissions (having summarised the past and present positions of the 1st and 3rd Defendant companies in both of which the 2nd Defendant has a 50% shareholding) Mr. Grossman argues - and I quote from his skeleton argument.

"Apart from relying on an inference to be drawn from the nature of the alleged fraud, the Plaintiff has failed to adduce any evidence to show that there is any risk at all that the Defendants would, if not restrained, dissipate or remove their assets from the jurisdiction. The only purpose of the Plaintiffs' in junction is apparently to obtain security in advance of judgment for the sum it is now claiming ... there are no objective facts from which it may be inferred that the Defendants are likely to move assets abroad or dissipate them. The Plaintiffs unsupported statements and expressions of fear should be given little or no weight" - and in this regard Mr. Grossman refers me to O. Regan v. Iambic Productions Ltd. 1989 cited in the Supreme Court Practice 1997 Edition at page 516 and which is reported at page 1378 of the New Law Journal October 13th 1989.

9. Mr. Grossman also submits that Mareva jurisdiction does not extend to cover such an application and he quotes part of Lord Justice Kerr's judgment in Z Ltd v. A-Z [1982] 1 QB 558 at 586 where appears the following:

"The great value of this jurisdiction must not be debased by allowing it to become something which is invoked simply to obtain security for a judgment in advance and still less as a means of pressurising defendants into settlements."

10. Mr. Lamplough for the Plaintiff chose not to grasp that nettle directly but it is implicit in all that he has said to me that his submission is that because of the nature of the alleged fraud (or of the fraud as he puts it) and the 2nd Defendants part in it there is a real risk that he, with or without using the corporate vehicles provided by the 1st or 3rd Defendants will dissipate his assets.

11. Mr. Lamplough says that the Plaintiff has a strong arguable case against each of the Defendants and I do not doubt that for a moment based upon what I have read in the papers before me - in so far as it relates to the statement of claim; but it seems to me that I require to be satisfied as to more than that if a continuation of the injunction is to be justified. The question is - and here I refer to para. 11 of Mr. Lamplough's skeleton argument - whether I can draw a reasonable inference pointing to dissipation from the mere allegations of fraud, which fraud has yet to be proved.

12. I have given this application the most anxious consideration. I am very conscious of the requirement - (as stated by Kerrs L.J. in the 'Niedersachsen') that the Plaintiff must adduce 'solid evidence' to support his assertion that there is a real risk of the judgment or award going unsatisfied. In this context I am also aware, as it is stated at page 51 of Mareva Injunctions Law and Practice by Gee and Andrews (1st Edition) that since each case depends on its own facts it is impossible to lay down any general guidelines as to how and when this evidential burden will be satisfied. Nevertheless the 9 factors set out on pages 51 and 52 are of assistance - and none of those save perhaps No. 9 are directly relied on in the present case by the Plaintiff.

13. It seems to me that what Mr. Lamplough is seeking to persuade me to do is not to resolve disputed questions of fact - but to assume that the Plaintiff's view of those facts is correct and then proceed to draw from those facts - an inference of dissipation. That it seems to me is, with respect, to endeavour to put the cart before the horse and what I require to persuade me that there is a real risk of dissipation is something more than a detailed synopsis of an alleged fraud - something along the lines suggested by the 9 factors to which I have made reference.

14. Beyond that detailed allegation of fraud (or wrong doing on the part of the 2nd Defendant) I can find no evidence in the papers before me of an intention on the part of any of the Defendants (and in reality this means the 2nd Defendant) to dissipate such assets as may be available and that being so I am satisfied that the present application must succeed.

The injunction granted by the order of the Honourable Mr. Justice Yeung dated 27th February 1998 and continued by the order of the Honourable Mr. Justice Barnett dated 6th March 1998 is hereby discharged.

(C. G. Jackson)

Judge of the Court of First Instance

Representation:

Mr. C. Grossman, S.C. and Mr. Sham instructed by Messrs. Yolanda Fan & Co. for Defendants.

Mr. George Lamplough of Messrs. Herbert Smith for the Plaintiff.