DARYL MARK O\'SHAUGHNESSY v. DAVID WILLIAM GUNSON AND ANOTHER

HCA009218E/1999

HCA 9218/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9218 OF 1999

____________

BETWEEN
	DARYL MARK O'SHAUGHNESSY	Plaintiff
	AND
	DAVID WILLIAM GUNSON	1st Defendant
	PACIFIC SUPERANNUATION FUND LIMITED	2nd Defendant

____________

Coram: Hon Chung J in Chambers

Date of Hearing: 12 October 2000

Date of Handing Down Judgment: 20 October 2000

 

_______________

J U D G M E N T

_______________

 

1. The Plaintiff took out 2 summonses against the 1st Defendant. One is a summons under O. 14 r. 1 for final judgment to be entered against the 1st Defendant in the sum claimed in this action, that is, A$238,803.50. The other is a summons under O. 18 r. 19 for the striking out of the 1st Defendant's Defence filed on 23 September 1999. The 1st Defendant took out an application dated 9 October 2000 asking for leave to amend his Defence.

2. I shall deal with the O. 14 application first before turning to the O. 18 r. 19 application.

3. The Plaintiff brings this action against the 2 Defendants claiming for damages for breach of fiduciary duty and/or breach of trust in the sum of A$238,803.50, alternatively, for damages for conversion and/or theft by the 1st Defendant. The alleged wrongful act giving rise to such a claim is set out in para. 14 of the Statement of Claim. It reads:-

"... the 1st Defendant has wrongfully in breach of fiduciary duty paid away and/or converted the Plaintiff's cash deposit of A$238,803.50, and caused the same to be paid out of the 2nd Defendant's bank account .... together with unknown person's monies ... instead of paying the sum .... to the Plaintiff's account."

4. It is undisputed in evidence (at least for the purpose of the O. 14 application) that the 2nd Defendant is a company registered in New Zealand and operates a fund called "Pacific Superannuation Fund". It is also undisputed in evidence that a sum not less than A$238,803.50 has been deposited with the fund operated by the 2nd Defendant. The 1st Defendant disputes whether the Plaintiff has a valid claim against him personally for the return of this sum in accordance with the terms of the trust deed which are binding on the Plaintiff (and the 2nd Defendant). It is to be noted that the Plaintiff has not relied on any of the contractual documents signed by him, or indeed on any of the contemporaneous documents, as creating personal liability on the 1st Defendant's part to repay the sum claimed. This is obviously correct because all these documents bore the 2nd Defendant's letterhead. Whenever the 1st Defendant signed these documents, he did so as a director of the 2nd Defendant. The tenure of these documents shows that they might have been written on behalf of the 2nd Defendant. There is, therefore, at least a triable issue as to whether these documents could create personal liability on the 1st Defendant's part.

5. In inviting me to conclude in the Plaintiff's favour, Mr Pirie for the Plaintiff asks me to draw an inference that the 1st Defendant must have committed the wrongful act complained of in the Statement of Claim because:-

(1) it is undisputed that the said deposit was received as trust money;

(2) by a letter dated 22 September 1998 bearing the 1st Defendant's letterhead and signed by the 2nd Defendant as the 1st Defendant's director, it was confirmed that

"all current standing instructions to ... credit ANZ bank [the 2nd Defendant's banker] at the end of each month should cease as from October 1998 and that we shall in turn cancel existing standing instructions to ANZ bank to transfer ...

We will also pay out all relevant overfunded contributions by transfer to the respective members' own bankers; if you will kindly provide a schedule of their bank co-ordinates. ... We plan to carry out these transfers to members effective mid-October ...."

This letter is (so the Plaintiff says) evidence that the trust deposit would be terminated in October 1998 and the deposit would be returned to the Plaintiff by that time;

(3) despite (2) above, the deposit has not been repaid and no account has been given by the 1st Defendant (up to now) as to where the money went;

(4) the only inference is that the 1st Defendant committed (or was a party to the) theft of the Plaintiff's money: see paras 1 to 9 of the Plaintiff's skeleton submissions dated 10 October 2000.

6. The 1st Defendant has in his skeleton submissions argued that the letter dated 22 September 1998 was written under a mistake of law: see para. 3.9 of the 1st Defendant's skeleton submissions. Despite this argument, I am prepared to proceed to determine the O. 14 application on the basis that this document has the effect contended for by the Plaintiff, that is, the trust arrangement was terminated as from October 1998 pursuant to Cl. 34(g) of the Trust Deed and the deposit therefore became liable to be repaid to the Plaintiff since then. I am also prepared to proceed on the basis that the 1st Defendant was the director in control of the 2nd Defendant's business and/or affairs.

7. It has been stated in a number of Court of Appeal decisions that if leave to defend is given, it is usually undesirable for the court to go into the details as to why leave to defend is justified. With this in mind, I shall only say a few words as to why I consider leave to defend ought to be given to the 1st Defendant. Further, these comments are made purely for the purpose of the O. 14 application and are not intended to fetter the determination of this action at the time of trial.

8. The Plaintiff's case against the 1st Defendant is not premised on his lack of care and/or negligence. A case of alleged criminal acts on the 1st Defendant's part has been put forward. There is no direct evidence of the commission of the criminal acts and the court is asked to infer that these acts were committed.

9. It is not unknown that the business of trust companies sometimes failed and beneficiaries' claim became unsatisfied as a result. However, not every such business failure resulted from criminal acts on the part of the directors of the trust companies. The failure could have been the result of unwise investment decisions or other legitimate reasons related to business failures not involving any impropriety. In the present case, Cl. 15 of the Trust Deed (relating to the powers of the trustee, that is, the 2nd Defendant, to invest) shows that the parties intended the funds were to be invested.

10. The lack of an explanation by the 1st Defendant as to what exactly happened to the Plaintiff's deposit (or other sums in the fund) makes the situation suspicious (but not such as to make the 1st Defendant's case "practically moonshine"). Indeed, since I approach this matter on the basis the Plaintiff's deposit became repayable since mid-October 1998, its non-payment is strong evidence that the Defendants are unable to make repayment. The non-payment further shows that the 1st Defendant might not have entirely been truthful when he made various "promises" (for the 2nd Defendant) to repay since at least October 1998. However, people may lie, withhold or mis-state facts for other less "culpable" reasons, such as, the desire to keep a business afloat or for personal pride. I therefore do not accept the Plaintiff's contention that a lack of explanation or evidence of lies must give rise to an inference that the 1st Defendant must have committed the alleged wrongful acts. This is a matter more appropriate for trial. For the above reasons, I do not consider it appropriate to draw the inference contended for by the Plaintiff at this stage.

11. In view of the above, it is strictly unnecessary to consider the other arguments raised by the parties but I shall do so for completeness.

12. The 1st Defendant argues that parts of the Plaintiff's deposit were contributed by the Plaintiff's employer. The 1st Defendant contends that the Plaintiff has no valid claim to these sums. The validity of this argument depends (among other things) on whether the trust has been effectually terminated. If it has been, there is no reason why the Plaintiff cannot make a claim against the 1st Defendant for the whole amount (assuming that the Plaintiff can establish personal liability against the 1st Defendant): see Target Holdings Ltd v. Redferns [1996] 1 AC 421, 434G to 435A and 435B to C.

13. The 1st Defendant also raised the issue of New Zealand trust law. However, no evidence has been adduced in this regard. I therefore do not find that sufficient basis has been laid for this to be raised in this application.

14. The Plaintiff contends that the undertaking given by the 1st Defendant to court on 7 January 2000 amounts to an admission of his personal liability. I disagree and rather agree with the 1st Defendant's submission that his undertaking was in effect to pay over the amount to a new trustee and hence can be regarded as an act consistent with his defence that the Plaintiff is not entitled to the repayment of the sum in question.

15. The 1st Defendant argues that even if the 2nd Defendant has exercised its discretion under Cl. 34(g) of the Trust Deed to terminate the trust, it could subsequently retract from this stance. By reason of my earlier findings that leave to defend should be given, I do not consider it appropriate to comment on this argument.

16. There will be unconditional leave for the 1st Defendant to defend this action.

17. As regards the O. 18 r. 19 application, it is conceded by the 1st Defendant that the Defence has to be amended: see para. 4.2 to 4.3 of the 1st Defendant's skeleton submissions. The Plaintiff argues that particulars are lacking for some of the matters pleaded in the draft. I agree with the 1st Defendant's submissions that the draft pleading is sufficiently clear for leave to amend to be given. As to whether request(s) for further and better particulars should be made, this can be dealt with (if necessary) at a later stage. The Plaintiff also argues that if leave to amend is given, the 1st Defendant ought to be ordered to pay the wasted costs forthwith. Having considered the whole circumstance, including the matters set out above in relation to the O. 14 application, I do not consider it appropriate to make such a cost order. There will, therefore, be an order in terms of para. 1 of the 1st Defendant's summons dated 9 October 2000 "on the usual terms as to costs": see The Supreme Court Practice 1999, para. 20/8/52.

18. Further to the above, the parties agree that a costs order nisi should be included in this judgment.

19. In relation to the Plaintiff's O. 18 r. 19 application, since the 1st Defendant concedes that the Defence as it now stands is inadequate, the proper order is that costs of this application should be paid by the 1st Defendant to the Plaintiff in any event.

20. In addition to the 2 summonses referred to above, the 1st Defendant has taken out an application to strike out the Statement of Claim. No argument was advanced in support of this application and it is dismissed with costs to the Plaintiff in any event.

21. As it turned out at the hearing on 12 October 2000, there was no need to deal with paras 1 and 2 of the Plaintiff's application dated 4 October 2000 relating to further evidence. Para. 3(2) of this application is unnecessary. No order was made on paras 1, 2 or 3(2) of this application. There will be no order as to costs of these parts of this application. Para. 3(1) of this application was adjourned sine die with liberty to restore. Costs of that part of the application are reserved.

22. The costs of the O. 14 application should be in the cause of the action.

 

 

 

Representation:

Mr Nicholas Pirie, instructed by Messrs Haldanes, for the Plaintiff

Mr C P Erving, of Messrs Erving Brettell, for the 1st Defendant

HCA009218C/1999

HCA 9218/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9218 OF 1999

____________

BETWEEN
	DARYL MARK O'SHAUGHNESSY	Plaintiff
	AND
	DAVID WILLIAM GUNSON	1st Defendant
	PACIFIC SUPERANNUATION FUND LIMITED	2nd Defendant

____________

Coram: Hon Chung J in Court

Date of Hearing: 13 April 2000

Date of Decision: 13 April 2000

 

____________________________

DECISION ON COSTS

____________________________

 

Costs

1. At the end of the hearing of the Plaintiff's Notice of Motion for the contempt of the 1st Defendant, the Plaintiff asks me to exercise my discretion to fix a gross sum for the costs thereby incurred instead of taxation, pursuant to R.H.C. Ord. 62 r. 9(4)(b). For that purpose, the Plaintiff has earlier on asked for, and obtained, an order dated 30 March 2000 giving directions including the following:

"(5) The Plaintiff be at liberty to produce at the hearing a gross sum bill of costs for the court to consider pursuant to Ord. 62 r. 9(4)(b) of the Rules of the High Court."

I understand that the order has been served on the 1st Defendant. Further, a "Plaintiff's Gross Sum Bill of Costs" dated 10 April 2000 was prepared and served on the 1st Defendant. Further, an updated "Plaintiff's Gross Sum Bill of Costs" dated 13 April 2000 was also prepared and served. I understand that the updated bill contains a number of minor revisions as well as the additional costs incurred as a result of the hearing on 12 April 2000.

2. The 1st Defendant has indicated that he had no objection to the costs being fixed today instead of being taxed, nor did he have any objection to the items or amounts set out in the updated bill.

3. Having considered the whole circumstance of the proceedings, I consider that my discretion should be exercised to fix a gross sum pursuant to R.H.C. Ord. 62 r. 9(4)(b). Further, I find that it is appropriate to approach the matter adopting the standard applicable in a taxation of costs on an indemnity basis (see Ord. 62 r. 28(4A).

4. The Plaintiff's solicitors have fairly accepted that some of the items in the updated bill are related to the application for the extension of the Prohibition Order against the 1st Defendant. The Plaintiff argues however that the Prohibition Orders were necessary for the committal proceeding, that is, they were needed to ensure the 1st Defendant's presence in Hong Kong. At one stage I considered that these costs should not be allowed but having heard the Plaintiff's argument, I agree with it and find that such costs are necessary in the context of this case.

5. However, I still consider that part of counsel's brief for the ex parte hearing on 1 March 2000 should only be related to the application for leave to apply for committal. This is item (IX)(5)(ii) on page 10 of the updated bill in the sum of $50,000.00. I understand this sum was the brief of counsel for both the hearing on 1 March 2000 and that on 10 March 2000. Instead of splitting the sum into 2 halves, I consider it appropriate to attribute $35,000.00 for the hearing on 1 March 2000 and $15,000.00 for that on 10 March 2000 because:

(a) 2 applications were dealt with on 1 March 2000 whereas the hearing on 10 March 2000 was only related to the Prohibition Order against the 1st Defendant;

(b) in any event, the hearing on 10 March 2000 was in the nature of a continuation of the application for the Prohibition Order on 1 March 2000.

I further consider that $20,000.00 of the $35,000.00 attributable to the hearing on 1 March 2000 was related to the application for leave. Ord. 52 r. 2(4) indicates that an application for leave needs not be (1) attended by the applicant, or (2) determined in open court, and can be dealt with on an ex parte basis. I also understand that the usual practice is for a "paper" application to be made. There is no valid reason for that practice to be departed from in this case. For this reason, I will disallow $20,000.00 out of item (IX)(5)(ii) on page 10 of the updated bill. The updated bill of costs is otherwise allowed.

 

 

 

Representation:

Mr Nigel De Boinville, instructed by Messrs Hardanes, for the Plaintiff

1st Defendant in person, present

 

HCA009218D/1999

HCA 9218/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9218 OF 1999

____________

BETWEEN
	DARYL MARK O'SHAUGHNESSY	Plaintiff
	AND
	DAVID WILLIAM GUNSON	1st Defendant
	PACIFIC SUPERANNUATION FUND LIMITED	2nd Defendant

____________

Coram: Hon Chung J in Court

Date of Hearing: 13 April 2000

Date of Decision: 13 April 2000

 

_______________________

DECISION ON SENTENCE

_______________________

 

1. In a decision made on 12 April 2000, I found the 1st Defendant to have been in contempt of court. This is the decision on the penalty to be imposed on him.

2. I have invited the 1st Defendant to address me in mitigation and his background is briefly as follows. The 1st Defendant is 46 years old, married with 3 children aged between 11 and 19 years old. His family lives in the U.K. The 1st Defendant was born in New Zealand and received his education there. He is legally qualified to practise in New Zealand, Australia, and Hong Kong and has worked in a law firm in the U.K. Since 1986, the 1st Defendant has been working in Hong Kong, specialising in tax and fund management work.

3. In brief, his personal background shows a man of good character, with apparently a stable family life and gainful employment. This is a matter in his favour in mitigation.

4. On the other hand, as I indicated earlier today, I consider that the 1st Defendant has not shown by his conduct in these proceedings that he is genuinely repentant despite the verbal apologies offered by him in mitigation. Not only were the committal proceedings contested to the end, both yesterday and today the 1st Defendant has repeatedly represented to the court that the funds in question are likely to be available but these indications (like so many before them) never materialised. This is of course not an aggravating factor, but it certainly does not assist the 1st Defendant in his mitigation.

5. A number of options are open to the Court in relation to the form of punishment to be imposed, including a fine, a suspended sentence and immediate imprisonment (with or without a suspension under O.52 r.7(1)).

6. I consider that the contempt committed in this case is a serious one. The 1st Defendant is a qualified solicitor and should be fully aware of the consequence of the breach of an undertaking given to court (which has the force of a court order). Up to today, the undertaking is still not complied with.

7. Further, from the contemporaneous documents filed by the parties herein (especially those referred to by Mr Pirie in his cross-examination of the 1st Defendant), some of which dated back to 1998, there was no reasonable ground for the 1st Defendant to believe on 7 January 2000 that he was in a position to comply with his undertaking of 7 January 2000. This is therefore a case which:-

(a) (at best) the 1st Defendant deliberately took the risk of breaching his undertaking; or

(b) (at worst) the 1st Defendant well knew at the time that he would not be able to comply with his undertaking.

In either case, as I indicated earlier, the contempt should be regarded as a serious one.

8. I bear in mind (and agree with) the observations of Stone J in Abu Dhabi National Tanker Co. Ltd v. Lam Ming Chi [1998] 4 HKC 320 that a delicate balance has to be maintained in the imposition of the penalty for civil contempt between the strong public interest in ensuring that the orders of the Hong Kong Courts will not flouted and the evaluation of the individual circumstances of each case.

9. It certainly does not give me pleasure to have to deal with a person in the position of the 1st Defendant. However, taking everything into consideration, I do not consider that a fine is an appropriate form of punishment, nor is it appropriate to impose a suspended sentence. Mr Pirie has made certain observations regarding the question of punishment. With respect to him, I do not consider the approach he advocated for should be adopted and I therefore ignore them.

10. Having taken everything into account, I find that a sentence of 3 months' imprisonment is appropriate. In view of the numerous opportunities which were given to the 1st Defendant to make payment or transfer of funds since 7 January 2000, especially those given since yesterday. I do not consider it appropriate to suspend the execution of the order under O.52 r.7(1). The 1st Defendant will therefore have to serve this term of imprisonment forthwith.

11. I should mention for the 1st Defendant's benefit (in case it is not already known to him) that he can apply for a discharge under O.52 r.8 on good cause being shown.

 

 

 

Representation:

Mr Nigel De Boinville, instructed by Messrs Haldanes, for the Plaintiff

1st Defendant in person, present

 

HCA009218B/1999

HCA 9218/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9218 OF 1999

____________

BETWEEN
	DARYL MARK O'SHAUGHNESSY	Plaintiff
	AND
	DAVID WILLIAM GUNSON	1st Defendant
	PACIFIC SUPERANNUATION FUND LIMITED	2nd Defendant

____________

Coram: Hon Chung J in Court

Date of Hearing: 12 April 2000

Date of Decision: 12 April 2000

 

_______________

D E C I S I O N

_______________

 

1. This is the decision on the Plaintiff's Notice of Motion to commit the 1st Defendant for Contempt of Court. Leave to do so was given to the Plaintiff on 1 March 2000.

2. The history of the proceedings can be briefly stated as follows. The Plaintiff commenced this action against the 2 Defendants on 4 June 1999 claiming that his money which has been placed with the 2nd Defendant on trust for the Plaintiff in November 1997 was wrongfully converted by the 2 Defendants. This claim was denied by the 1st Defendant in his defence filed on 23 September 1999. A number of interlocutory applications were taken out by the parties, including the Plaintiff's application for summary judgment taken out pursuant to R.H.C. Order 14. That application came to be heard by Cheung J on 7 January 2000 and resulted in a consent order being made. The consent order contains an undertaking given by the 1st Defendant in the following terms.

"Upon the 1st Defendant's undertaking that he will within 14 days pay or cause to be paid unconditionally (save for the usual indemnity given between trustees) the sum of A$246,090.94 which stands to the credit of the Plaintiff's account with the 2nd Defendant to Byrne Corporate Services Ltd as agent for the Plaintiff's new pension fund trustees Byrne Trust (NZ) Ltd and/or Byrne Trust Co. Ltd" ("D1's undertaking")

3. It is in relation to an alleged breach of D1's undertaking (which is denied by the 1st Defendant) that the Plaintiff commenced this application for contempt.

4. It is trite law that an undertaking given to court has the same force as an order made by the court: see for example Borrie & Lowe: The Law of Contempt (1996) 3rd ed., pp 578 to 582.

5. Further, D1's undertaking was that "he will within 14 days pay or cause to be paid unconditionally ... A$246,090.94." This may be regarded as the 1st Defendant's personal undertaking to pay that amount. I understand from Mr Pirie, however, that the 1st Defendant gave this undertaking not in his personal capacity but in his capacity as a trustee and director of the 2nd Defendant. This point has not been disputed by the 1st Defendant at the hearing before me.

6. It is also trite law that in contempt proceedings, the applicant (the Plaintiff in this action) has the burden of proving that the respondent (the 1st Defendant in this action) is in contempt. The standard of proof is a criminal one, that is, the applicant must prove the respondent's contempt beyond all reasonable doubts.

7. The following matters are undisputed:-

(a) D1's undertaking was given to court on 7 January 2000;

(b) he was present when D1's undertaking was given and he understood its nature and effect;

(c) no payment or transfer of money has been made in accordance with D1's undertaking.

8. The evidence filed by the 1st Defendant (and the arguments advanced by him at the hearing) was to the effect that:-

(1) at the time when he gave D1's undertaking, the 1st Defendant has reasonable grounds to believe that he would be able to comply with it. Further, he honestly believed that it could be complied with timeously;

(2) matters which caused the non-compliance of D1's undertaking were matters beyond his control and included:-

(a) delay caused by clearance problems in Australia;

(b) delay caused by the internal procedure of the banks concerned;

(c) delay caused by the 1st Defendant's colleague in Australia who was in charge of the funds in question.

9. On 30 March 2000, directions were given for the hearing of the contempt proceedings. One of the directions was:-

"Subject to notice of cross-examination being given to the other party on or before Friday 7 April 2000, the parties be at liberty to cross-examine the deponent of affidavits intended to be used or relied upon at the hearing on 11 April 2000 and for that purpose unless the deponent of the said affidavits attend court to be cross-examined, their affidavits cannot be used or relied upon at the said hearing."

10. No notice to cross-examine was given by the 1st Defendant on the deponents of the affidavits filed by the Plaintiff. On the other hand, the Plaintiff has given a notice to cross-examine the 1st Defendant. At the hearing, Mr Pirie for the Plaintiff indicated that he wished to cross-examine the 1st Defendant and the 1st Defendant elected to offer himself for cross-examination.

11. Two main areas of criticism were launched by Mr Pirie in his cross-examination of the 1st Defendant:-

(a) previous representations made by the 1st Defendant dating as far back as 1998 to the effect that the Plaintiff's funds were available (or available shortly) but none of which materialised;

(b) the lack of any documentary verification of the whereabouts of the Plaintiff's funds.

In the course of doing so, Mr Pirie has referred the 1st Defendant to quite a number of documents which I do not propose to set out herein.

12. Having heard the testimony, the parties' submissions and considered the materials before me, I find the 1st Defendant's testimony to be unbelievable. No satisfactory explanation has been given by him as to why he made the previous representations and why they did not materialise. Similarly, no satisfactory explanation has been given by him as to the lack of documentary proof of the whereabouts of the Plaintiff's funds. For these reasons, I find the 1st Defendant's testimony as well as his affidavits to be untruthful evidence and therefore reject them.

13. In these circumstances, I also find that the Plaintiff has established that there was no reasonable excuse for not complying with D1's undertaking. Mr Pirie has invited me to infer that there was certain motive for the 1st Defendant to have given D1's undertaking. With respect to Mr Pirie, I do not find it necessary to make a positive finding as to the 1st Defendant's motive in relation to these matters at least insofar as this decision is concerned. What is relevant is that I consider I am entitled to (and should) infer from the admissible evidence before me that the 1st Defendant was wilfully in breach of D1's undertaking by not complying with it, that is, to pay or cause to be paid within 14 days from 7 January 2000 the sum of A$246,090.94 which stands to the credit of the Plaintiff's account with the 2nd Defendant to Byrne Corporate Services Ltd as agent for the Plaintiff's new pension fund trustees Byrne Trust (NZ) Ltd and/or Byrne Trust Co. Ltd.

14. For the above reasons, I find that the Plaintiff has established that the 1st Defendant has been in contempt.

 

 

 

Representation:

Mr Pirie Nicolas, instructed by Messrs Haldanes, for the Plaintiff

1st Defendant in person, present

 

HCA009218/1999

HCA 9218/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 9218 OF 1999

____________

BETWEEN
	DARYL MARK O'SHAUGHNESSY	Plaintiff
	AND
	DAVID WILLIAM GUNSON	1st Defendant
	PACIFIC SUPERANNUATION FUND LIMITED	2nd Defendant

____________

Coram: Deputy Judge Li in Chambers

Date of Hearing: 26 August 1999

Date of Handing Down Judgment: 2 September 1999

_______________

J U D G M E N T

_______________

 

This is an application by the First Defendant for a declaration by the court to decline jurisdiction or alternatively an order to stay the proceedings.

2. There is an unusual feature in this matter in that the First Defendant is a practising solicitor in Hong Kong. He was represented by a firm of solicitors and counsel. However, those solicitors came off the record and his counsel had to withdraw at the last minute. Despite conventional wisdom, the First Defendant chose to represent himself at the hearing before me. This created a number of problems including inconvenience to his opponent. And, I regret to say, I had considerable difficulties in getting the First Defendant to frame cogent grounds for his application. Anyway, as I understood it, the First Defendant's arguments boiled down to 3 grounds:-

(1) The Plaintiff has not shown that Hong Kong is the appropriate forum. New Zealand is the forum conveniens because (a) the parties herein are connected by a trust which specifies New Zealand law as the proper law and which gives New Zealand courts exclusive jurisdiction and (b) banking transactions for the trust were carried out in New Zealand.

(2) As already mentioned, the Plaintiff is bound by trust deed to resort to New Zealand courts only.

(3) There is on going police investigation of the First Defendant for allegation of theft of funds belonging to the Plaintiff. It is unfair to allow civil proceedings based on the same allegations to proceed at the same time.

3. Ground (1) can be decided by reference to fairly basic principles which are well known. Both parties agree that Re Spiliada [1986] 3 All ER 843 is a convenient authority to rely upon. One only needs to refer to the headnotes for guidance:-

Held - (1) the fundamental principle applicable to both the stay of English proceedings on the ground that some other forum was the appropriate forum and also the grant of leave to serve proceedings out of the jurisdiction was that the court would choose that forum in which the case could be tried more suitably for the interests of all the parties and for the ends of jutice (see p 846 c d, p 847 a to c, p 853 d e and p 854 j, post); dictum of Lord Kinnear in Sim v Robinow (1892) 19 R (Ct of Sess) 665 applied; Sociétédu Gaz de Paris v SA de Navigation 'Les Armateurs Francais' 1926 SC (HL) 13 considered.

(2) In the case of an application for a stay of English proceedings the burden of proof lay on the defendant to show that the court should exercise its discretion to grant a stay. Moreover, the defendant was required to show not merely that England was not the natural or appropriate forum for the trial but that there was another available forum which was clearly or distinctly more appropriate than the English forum. In considering whether there was another forum which was more appropriate the court would look for that forum with which the action had the most real and substantial connection, eg in terms of convenience or expense, availability of witnesses, the law governing the relevant transaction, and the places where the parties resided or carried on business. If the court concluded that there was no other available forum which was more appropriate than the English court it would normally refuse a stay. If, however, the court concluded that there was another forum which was prima facie more appropriate the court would normally grant a stay unless there were circumstances militating against a stay, eg if the plaintiff would not obtain justice in the foreign jurisdiction (see p 846 c d, p 847 a to c, p 854 j, p 855 h j and p 856 a to e, post); Sociétédu Gaz de Paris v SA de Navigation 'Les Armateurs Francais' 1926 SC (HL) 13, The Atlantic Star [1973] 2 All ER 175, MacShannon v Rockware Glass Ltd [1978] 1 All ER 625 and The Abidin Daver [1984] 1 All ER 470 considered.

4. In the present case the connection with New Zealand on account of contractual proper law is not a strong one. There has never been real problem for common law courts, like Hong Kong courts, to grapple with foreign law especially when the foreign law is also the law of a common law jurisdiction. The connection with New Zealand due to banking transactions there is rather tenuous because the evidence shows that the relevant banking transactions and documents are those with the Hong Kong and Shanghai Banking Corporation Limited in Hong Kong. The Plaintiff side has quite properly informed the court that the trust had a trustee resident in New Zealand but he has already resigned for some time and he is not connected with the theft alleged to have been committed by the First Defendant. Moreover, there is no evidence at all that judgment against the Defendants may be enforced in New Zealand. Neither Defendants has significant assets in New Zealand. If there are any real assets available for satisfaction of judgment, they are more likely to be in Hong Kong. There is little point in proceeding in New Zealand only to revert back to Hong Kong for enforcement.

5. On the other hand, the First Defendant is resident in Hong Kong. He works in Hong Kong. Apparently, he administered the trust that is the nexus in this case in Hong Kong. The Plaintiff is now resident in Australia but he is a pilot and comes to Hong Kong often. Another major source of evidence in this case, the Hong Kong and Shanghai Banking Corporation Limited is, of course, based in Hong Kong. The money which the Plaintiff seeks to recover is allegedly misappropriated in Hong Kong.

6. In the premises, I had no difficulty in coming to the conclusion that Hong Kong is the distinctly more appropriate forum than New Zealand.

7. On Ground (3), the applicable principles are also well settled. Mr. Pirie for the Plaintiff cited Prime Computer (Hong Kong) Ltd. v. Frank Sham Tak-keung and others [1992] 1 HKLR 115. Again, one only has to refer to the headnotes:-

Held:

1. The applicable principles governing the discretion to stay civil proceedings where there are concurrent criminal proceedings involving the same subject matter are laid down in Petroliam Nasional Berhad v. Tan Soon-gin [1990] 1 HKLR 4 and in Jefferson Ltd. v. Bhetcha [1979] 1 WLR 898. The burden is upon the defendant to the civil proceedings to show that it is just and convenient that the plaintiff's ordinary right of having his claim processed, heard and decided should be interfered with by reason of such a stay. (See p.117, lines 14-20.)

Whilst it is impossible to produce an exhaustive list of the factors to be taken into account in any given case in deciding whether there should be a stay, as adverted to in Petroliam Nasional Berhad v. Tan Soon-gin (supra) a strong factor in favour of a stay would arise if it were to appear that the civil proceedings, if not stayed, were likely to generate publicity which might reach and influence potential jurors in the criminal proceedings, or lead to the disclosure of the defence with a resultant risk that prosecution witnesses would on the strength of such disclosure fabricate evidence or trim their testimony or that interference with witnesses was something sensibly to be feared as a result of the disclosure of the defence in the course of the civil proceedings. (See p.117, lines 31-39). It was unnecessary to rely upon the Bill of Rights. Both the presumption of innocence and the right of silence are rooted in the common law. There is no statutory or other inroad attempted against either of those rights, which are fundamental to the first defendant. Neither of the decisions in Petroliam Nasional Berhad v. Tan Soon-gin and Jefferson Ltd. v. Bhetcha, (supra) make any inroads into anyone's fundamental rights. They recognise the rights on both sides and provide guidance as to how such rival rights are to be balanced to achieve a just result. Both decisions are consistent with the Bill of Rights. (See p.118, lines 19-30.)

The first defendant had not shown that it would be just or convenient to interfere with the ordinary right of the plaintiff in having his claim processed and heard and decided in the way in which the requested stay would interfere with that right. (See p.118, lines 34-36.)

8. Unfortunately, the First Defendant has not produced any evidence, nor did he make out by way of submission circumstances, to show that it is just and convenient to stay the Plaintiff's case. As Mr. Pirie for the Plaintiff pointed out, the failure on the part of the First Defendant to start to make a case is inexcusable because the First Defendant himself is a lawyer and he had adequate objective legal representation right up to just before the hearing before me.

9. Hence Ground (3) did not even get off the ground and was ruled out.

10. Ground (2) was of some substance. This turned on the interpretation of an exclusive jurisdiction clause in a trust deed. The Clause reads:-

7.(a) Laws of New Zealand apply

Subject to paragraph (b) below, this Deed and the trust, powers and provisions set forth herein shall be governed and construed and shall take effect in accordance with the laws of New Zealand. The Employer, the Trustee, Members, Beneficiaries and all persons claiming under them shall accept and submit to the jurisdiction of the Courts of New Zealand and Courts having appellate jurisdiction therefrom. All proceedings affecting any of the aforementioned persons inter se (whether interlocutory proceedings, proceedings for discovery and the obtaining of evidence or proceedings to enforce or declare any such rights, powers, liabilities and obligations) shall be commenced and issued in the Courts of New Zealand only and not otherwise.

11. Counsel for the Plaintiff suggested that on the plain reading of the clause in question, only "proceedings to enforce or declare any such rights, powers, liabilities and obligations" under the deed need to be taken in New Zealand courts. In this case, vis-a-vis the First Defendant, the Plaintiff is claiming that the First Defendant effectively intercepted payment from the Second Defendant to the Plaintiff and misappropriated the money. The claim is one of conversion based on tort. Moreover, even if it is held that the claim is based on trust, it is trite law that a party who has turned his back to a contractual document cannot claim protection from that document. Mr. Pirie also relied on the case of Grupo Torras v. Al Sabah & others [1996] 1 Lloyds L.R. 7. In that case the defendant stole money from a company registered in Spain and went to England. When sued in England for conversion of the money belonging to the company, the defendant prayed in aid an international convention whereby suits against an European company must be prosecuted in the country of registration of the company. The English Court of Appeal held that the theft had nothing to do with the administration of the company. Hence the Plaintiff could sue for conversion in England.

12. I accept these arguments advanced for the Plaintiff and hold that Ground (3) fails too.

13. In the premises, the First Defendant's summons is dismissed.

14. Mr. Pirie suggested that when I come to consider the question of costs in dismissing the summons, I should award costs to the Plaintiff on an indemnity basis to be paid forthwith because the summons is hopeless in the first place. Obviously, the First Defendant cannot resist order for costs against him. However, although Grounds (1) and (3) are rather weak, Ground (2) relied upon by the First Defendant is not untenable. For this reason, I make an order nisi that the First Defendant do pay the Plaintiff's costs for this application to be taxed if not agreed and to be paid forthwith. The order nisi becomes absolute unless either party applies for variation within 14 days from the date of handing down this judgment.

	(Z.E. Li)
	Deputy Judge of Court of First Instance

Representation:

Mr. Nicholas Pirie instructed by Messrs Haldones for the Plaintiff

The First Defendant in person