AKAI HOLDINGS LTD (IN COMPULSORY LIQUIDATION) AND OTHERS v. PHENOMENON AGENTS LTD

HCCL 37/2005 and
HCCL 40/05

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NOS. 37 AND 40 OF 2005

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(and consequential argument)

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J U D G M E N T

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The application

1.  This is an application by the plaintiff liquidators, pursuant to a summons dated 28 July 2007, for the appointment of a Receiver over the assets of the 1^st defendant herein, Mr Christopher Ho.

2.  This matter first was called on on 30 July 2009, but was adjourned by this court to a hearing on 26^th and 27^th August.  In the event, argument has taken not 2 but 4 full days, and I have reserved my decision overnight on this issue.

3.  I now give my decision, accompanied by necessarily brief reasons only.  Diary difficulties, and the inevitability of urgent applications to the Court of Appeal within the next few days, mean that there is no opportunity to write a lengthy judgment; in the prevailing circumstances the court simply does not have the luxury of time.

4.  Hence this document represents the product of overnight reflection, which at the least will provide their Lordships upon any urgent appeal with an idea of what has been taking place, and the basis of the decision to which I now have come.

The parties

5.  The parties to this application are the plaintiff liquidator, represented by Mr Kosmin QC, Mr Manzoni QC and Ms Linda Chan, and Mr Colin Wright for the 1^st defendant, Mr Ho; initially Mr Wright was led by Mr McCoy SC, but circumstances precluded Mr McCoy’s detailed involvement, and thus it was that Mr Wright has shouldered the not inconsiderable burden of the argument on behalf of his client.

6.  Since the issuance of the receivership summons, there has been an additional party before the Court. 

7.  Miss Audrey Eu SC, leading Ms Catrina Lam, has appeared on behalf of the Intervener, Accolade Inc., the trustee of the Ho Family Trust, and has sought leave to be joined as a party to this action.

8.  This application on behalf of the Intervener was by summons dated 25 August 2009. 

9.  This summons was in three parts: first, it sought liberty on the part of Accolade to intervene, second, the adjournment of the plaintiff’s receivership summons “pending final determination” of the applicant’s application for varying earlier Orders of this court, and third, it sought variation of the February 2009 Mareva Order to permit funds to be released to Accolade for the provision of legal fees.

10.  In the event, notwithstanding Mr Kosmin’s strenuous opposition, this court granted the intervention of Accolade to be joined as a party to these proceedings, and further authorized release of funds, from a specified bank account to be verified on affidavit, in order to fund the Intervener’s legal fees.

11.  However, paragraph 2 of the summons, namely that the receivership summons be adjourned pending the determination of the Intervener’s application to vary the Mareva Order of 17 February 2009, and the subsequent Order of 1 June 2009, to the effect that these Orders should cease to have any effect on the assets of the Ho Family Trust, was refused.

12.  Notwithstanding the personal difficulties of Ms Eu, who had just been instructed in this case, and who indicated to the court at the outset that she had been retained solely to apply to join her client in this case and thereafter to adjourn this receivership application, this court declined to permit that which Mr Kosmin characterized, in my view correctly, as an obvious attempted ‘filibuster’ on the part of the 1^st defendant, Mr Ho.

13.  Hence the hearing of the receivership summons was ordered to proceed, and hence the extended argument thereon which is the subject of this judgment.

The background

14.  At the outset it may be convenient to record that this application by the plaintiff for the appointment of a receiver is the latest instalment of a long-running procedural saga, which had as has its origin  that part of the February 2009 Mareva Order which stipulated that there should be disclosure of assets on the part of Mr Ho.

15.  This Order of 17 February 2009 speaks for itself; in the current context the operative paragraphs are paras 1, 2, 3 and the assets listed in the Schedules thereto, in particular Schedule 3.

16.  The court’s principal judgment of 9 February 2009 was followed in relatively short order by no less than 3 further judgments, all primarily stimulated by this vexed disclosure issue, which this court earlier has described as “a running sore” in this litigation; these judgments, which speak for themselves, are dated 16 April 2009 (giving reasons for decision dated 19 March), 1 June 2009, and 23 July 2009.

17.  Some idea of the flavour of these judgments can be gleaned from paras 66-75 of this latest judgment of 23 July 2009, wherein the court referred to the “calculated course of conduct” (para 67) adopted by Mr Ho to avoid asset disclosure as per the original disclosure order, and to “the sustained level of resistance…towards asset disclosure” (para 75).

18.  The court also stated (at para 66) the following:

“…once again for the avoidance of doubt, I continue to hold the firm belief, expressed by this court as long ago as February 2009 in the substantive Mareva judgment (and repeated, I believe, in subsequent judgments) that Mr Ho remains the person who stands at the apex of the opaque worldwide corporate pyramid which he has established in order to hold and to exercise his wealth, and through which he exercises an wholly dominant influence over all commercial activities as are undertaken by such companies/entities within that complex structure, which clearly he has been at great pains to set up…it is through this prism that I view the efforts to-date of Mr Ho, and indeed of Grande, to avoid making proper disclosure…”

19.  This, therefore, represents the 5^th judgment which has been written over the past 6 months, with the ‘disclosure dispute’ forming the central issue over and above the initial Mareva order as was granted in the sum of US$200 million.

The nature of the disclosure Order

20.  Notwithstanding Mr Wright’s firm and persistent attempts to construe the Mareva Order – and the disclosure provisions therein – otherwise, I remain of the view that the Order is clear and unambiguous, and that on its face it expressly includes “trust assets”.

21.  This is not a matter which, perhaps, is capable of elaboration.  Either this court’s view of the meaning and import of the disclosure provision is correct, or it is not.

22.  In fact, Mr Wright’s argument that “trust assets” are not ‘assets’ of Mr Ho in reality is no more than a rehash of the failed argument that Mr Snowden QC earlier mounted before this court when there was an attempt to ‘clarify’ the Mareva Order dated 17 February 2009: the judgment of 16 April 2009 refers.

23.  Of course, if Mr Wright is correct in his insistence as to the true construction of the Order this matter ends there; the problem, however, is that I do not think that he is.

Breaches of the Mareva Order

24.  I also take the view that on the evidence currently before this court that, as Mr Kosmin has put it during argument, there is “overwhelming evidence” that Mr Ho has, and continues, to breach the protective regime as established by the grant of the Mareva Order in early February 2009.

25.  There have been incidents, involving, for example, the sale of the Grande Headquarters building in Singapore – in my view a particularly egregious event, since it appears to have taken place the very night before an eleventh hour application by leading counsel on behalf of Mr Ho to extend time to make the requisite ‘disclosure’, an application made absent any reference to the alienation of the Grande building – the post-Mareva ‘migration’ of companies from the BVI to Malta (Kimbergold Capital Ltd) and Luxembourg (The Grande International Holdings Ltd), and most recently, the evidence contained in an affidavit dated 20 August 2009 of Mrs Crosthwaite, a long-time employee of Mr Ho.  This affidavit was placed before the court in the Beddoe application mounted but days ago before Reyes J, evidence which (minus the privileged legal advice therein) was ordered by this court to be produced both to the court and to the plaintiffs – a ruling which immediately was appealed, this appeal being rejected by Rogers VP and Le Pichon JA in their written decision dated 27 August 2009.

26.  In particular, this new evidence which has come to light by what effectively was a side-wind neatly demonstrated just how much money was being siphoned away via the so-called ‘Sino Bright transfers’; the bank statements of Sino Bright Enterprises Co Ltd, apparently an “administrative arm of the family trust”, indicated that there had been paid into, and removed from, this account during the period January to July 2009 the sum of HK$300 million, a matter characterized by Mr Kosmin as a “flagrant breach” of the Mareva Order.

27.  A full and detailed analysis of the post-Mareva events in so far as they affect the Ho Family Trust, company migrations and the transfers of very large tranches of money are outlined in detail in the Reply document handed to the court by Mr Kosmin upon the last day of argument.  Time constraints preclude condescension to greater detail in this judgment.

28.  Accordingly, I have little doubt, and so find, that there have been breaches of the Mareva Order at the behest of Mr Ho, who once again, I have no doubt, has deftly been pulling the strings of his corporate empire with the aim of safeguarding assets which otherwise would be available to satisfy any judgment against him.

29.  Much has been made in this case, both by Mr Wright and by Ms Eu, of the discretionary nature of the Ho Family Trust, and of the fact that there is a pre-existing trust deed dated 1993, but in this regard I accept the submission of Mr Kosmin that the present case is, as he puts it, “a paradigm case” of good reason to believe that Mr Ho controls the assets in that trust, and the dispersion of those assets. 

30.  In my judgment, on the available evidence, this is the “substantive reality”: see, for example, the trenchant comments of Robert Walker LJ in International Credit and Investment Co (Overseas) Ltd 7 anor v Adham & ors [1998] BCC 134, at 136:

“…it is becoming increasingly clear, as the English High Court regrettably has to deal more and more often with major international fraud, that the court will, on appropriate occasions, take drastic action and will not allow its orders to be evaded by the manipulation of shadowy offshore trusts and companies formed in jurisdictions where secrecy is highly prized and official regulation is at a low level…”

whilst in Dadourian Group v AzuriLtd [2005] EWHC 1768, Edward Bartley Jones QC referred to the problem of shadowy offshore trusts, and noted:

“What needs to be established is the substantive reality of control, not a strict trust law analysis as to whether the trustee is a bare trustee.  Thus, in my judgment, placing assets in a discretionary trust would not prevent the Chabra jurisdiction being exercised against that discretionary trust if the substantive reality were that the relevant defendant controlled the exercise of the discretionary trust.  Any other analysis would entirely defeat the ability of the English courts to take drastic action and would allow the court’s orders to be evaded by manipulations, entirely contrary to the court’s powers and duties as identified by Robert Walker J in International Credit and Investment Co (Overseas) Limited v Adham (above).  Whether this be described as identifying the discretionary trust as a “sham”, as piercing the corporate veil, or as seeking to identify a controlled discretionary trust as a bare trust does not, to my mind, particularly matter.  Certainly, at the interim stage, all that matters is to ascertain whether there is good reason to suppose that the relevant defendant controlled the assets in the discretionary trust.”

31.  At this stage I should also make reference to the fact that, apart from the clear exercise of control by Mr Ho over the assets of the Ho Family Trust and of the underlying corporate entities, Mr Ho is the settlor of this trust and that pursuant to his “Letter of Wishes” the entire income and capital is to be held for him absolutely.

32.  Much has been said in argument about the interests of a beneficiary under a trust having no more than a mere ‘spes’ or legitimate expectation of preferment, but this principle, which in general I accept, is relevant only in a situation in which there is a genuine arms’-length trust and wherein it can be shown that the trustees truly are independent of the beneficiaries.

33.  I do not consider that this has been demonstrated to be the situation in this case; to the contrary the overwhelming probability is quite the reverse.

34.  In Asic v Carey (2006) 153 FCR 509, French J (as he then was) recognized that in this regard control is the touchstone; he said, at para 36:

“The difficulty with applying the notion of contingent interests to beneficiaries of a discretionary trust lies party in the uncertain scope of the distribution be it income or capital, which may be made in favour of any given beneficiary.  I am inclined to think that a beneficiary in such a case, at arms length from the trustee, does not have a “contingent interest” but rather an expectancy or mere possibility of a distribution…   On the other hand, where a discretionary trust is controlled by a trustee who is in truth the alter ego of a beneficiary, then at the very least a contingent interest may be identified because, to use the words of Nourse J, “it is as good as certain” that the beneficiary will receive the benefits of distributions either of income or capital or both.”

35.  During argument Mr Wright took the view that this case actually supported his argument, although I then was, and indeed remain, at a loss to understand why; suffice it to say that I do not read it that way.

36.  It seems to me that in the case of Accolade, whose directors are said to be Mr Ho’s sister, Dr Sabrina Ho, his long-time employee, Ms Eleanor Crosthwaite, and his brother-in-law, Mr Alistair Asprey, manifestly there is no cogent evidence of independence, and that any suggestion of true independence, or of Accolade constituting an independent arm’s length trustee, in my judgment is risible. 

37.  Thus, the reliance by Mr Ho/Accolade, within the argument of Mr Wright and Ms Eu, on strict trust law analysis in opposition to the appointment of receivers cannot in my view be sustained on the particular facts of this case.

38.  I also note that whilst Ms Eu persuasively argued for an SCF v Masri [1985] 1 WLR 876 type of preliminary issue into ‘ownership’ of assets now regarded by this court to belong to Mr Ho – as my earlier judgments indicate, I have little doubt but that this is the case – but in this particular factual matrix I do not think that the ordering of such an issue would achieve anything save for massive further delay and yet more disputes as the adequacy of disclosure. 

39.  Simply put, this court has determined that there is good reason to justify the view – however much Mr Ho and/or his lawyers and/or Accolade may continue to protest to the contrary – that assets held in the name of third parties are the assets of the 1st defendant, and, rightly or wrongly, I decline to accept the proposition that the scope of the present Mareva Order, and the disclosure provisions therein, must depend on a ‘Masri type’ inquiry.

40.  Having thus come to the view that there have been clear breaches of the Mareva Order of February 2009, and having been unable to agree with the constant refrain that the Order in the terms in which it is drawn fails to ‘catch’ assets owned and controlled by Mr Ho, albeit nominally held qua ‘trust assets’, I now turn to the issue of whether the appointment of Receivers as now sought is “just and convenient” and ancillary to the Mareva Order, and whether it is a proportionate remedy in the current impasse created by Mr Ho’s persistent non-disclosure.

“Just and convenient”: section 21L, Cap 4

41. I accept the proposition that there is long and well-established authority that where a Mareva Order is breached, or there is a real risk of such breach, the appropriate remedy is the appointment of a receiver over assets which are subject to the Mareva order: see Derby v Weldon (No’s 3 & 4) [1990] Ch 65 and Derby vWeldon (No 6) [1990] 1 WLR 1139.

42. As Gee on Commercial Injunctions (5^th ed) expresses the position, at paragraph 16.08:

“If (1) assets are liable to be dissipated or are otherwise in jeopardy and (2) cannot satisfactorily be preserved by injunction, then it may be appropriate to appoint a receiver.  This arises where the defendant controls a network of overseas trusts or companies and it appears that he has arranged his affairs in such a complicated way that if the step were not to be taken he might be judgment proof.  The appointment of a receiver would be effective relief when an injunction, on its own, would not be…  Other examples of situation calling for the appointment of a receiver are where the defendants are likely to act in disregard of an injunction or have already done so…”

43. I respectfully agree with this view.  See also in this context the observation by Robert Walker LJ in ICIC v Adham, op cit, that where worldwide Mareva injunctions had been granted over property, it was right for the court to pierce the corporate veil and to appoint a receiver over property in circumstances where there appeared to the court to be a real risk that the Mareva orders might be breached; and further, the observations of Austin J in the Australian case of ASIC v Bourke [2000] NSWSC 694. 

44. It is also appropriate to record that Mr Wright has argued strongly that there is a fundamental difference between the principles applicable to the grant of Mareva relief and an application for the appointment of a receiver in a case such as this: “the American Cyanamid approach should not be taken”, and that there must be considerable emphasis upon an “umbrella principle” of justice and convenience, particularly in instances in which the court has not yet had the opportunity finally to determine factual matters.

45. With respect, I disagree, at least in terms of disavowing a primary AmericanCyanamid approach.  In this regard I respectfully agree with the views of Kwan J in Re Chime Corporation, HCMP 4146 of 2001, judgment dated 25 June 2003, wherein the learned judge was considering the power to appoint receivers upon interlocutory application; she observed as follows:

“39. The power to appoint receivers on an interlocutory application is a discretionary power to be exercised flexibly on a similar basis to that of an interlocutory injunction, and the principles in American Cyanamid Co v Ethicon Ltd [1975] AC 396 apply (Chinese United Establishments Ltd v Cheung Siu Ki [1997] 2 HKC 212 at 223; Re Niceline Co. Ltd, HCCW No. 423 of 2002, 22 January 2003, paras 50 to 53; Re Full Bullion Shipping Ltd, HCMP No. 2423 of 2002, 28 March 2003, paras 17 and 18.

 40. The approach I adopt here… is to assess and balance the following matters:

(a) If there is a serious question to be tried;

(b) the alleged risk of dissipation of assets of the estate;

(c) the current protective regime and its efficacy; and

(d) the risk of damage to the Chime Group and Mrs Wang’s interest if the appointment is made, and whether it can be adequately compensated by a cross-undertaking in damages.”

46. It is of course necessary at this stage additionally to consider whether any ‘lesser’ or less intrusive remedy is suitable in the particular circumstances: in this regard, for example, Ms Eu has mentioned pre-action disclosure orders against her client, Accolade, and the possibility of contempt proceedings against Mr Ho, and Mr Wright has talked of Norwich Pharmacal relief and ‘unless’ orders.

47. I do not consider that these so-called ‘alternative remedies’ are appropriate, nor that they should justify deviation from the principle, established over 20 years ago in Derby v Weldon, op cit., that the appropriate remedy is the appointment of receivers. 

48. I fail to see, for instance, how contempt proceedings – with the increased burden of proof commensurate therewith, and perhaps ultimately necessitating the appointment of sequestrators – can be appropriate when there is a need to prevent such continuing dissipation of assets as appears to be occurring in this case in breach of the initial Mareva Order.  To take such proceedings now, it seems to me, would serve only to produce further lengthy and costly delay, and certainly would not ensure Mr Ho’s compliance with his existing disclosure obligations under that Mareva relief.

49. As to the possibility of ordering disclosure by Accolade, it is difficult not to agree with the view of the plaintiffs’ leading counsel that this ‘remedy’ is little more than an alternative tactic on the part of Mr Ho and Accolade to delay the appointment of receivers.

50. In this connection, Mr Kosmin has pointed out that three directors of Accolade personally were served on 22 July 2009 with the Mareva Order itself, and that it also was served through its solicitors, M/s Chui & Lau, and that, far from offering to co-operate, the solicitors for Accolade returned the court order to the plaintiffs’ solicitors by letter dated 23 July 2009, refusing to accept such service.

51. So there is little comfort there.

52. Accordingly, in the particular circumstances of this case the court has little option but to accept Mr Kosmin’s submission that Mr Ho’s breaches of the existing Order are “continuing and flagrant”, and now appear to involve actual dissipation in addition to his continuing refusal to make proper disclosure. 

53. Mr Kosmin repeatedly has stressed that since the February Order, Mr Ho has appointed new directors to most of the companies he controls, and earlier I have referred to the nearly HK$300 million which has passed through Sino Bright bank accounts – of which at least 70 million appears to have been stripped out of Grande, in addition to the sale of the Grande Singapore headquarters building – and the re-domicile of two holding companies of the Sutton Place Hotels Group from BVI to Malta and Luxembourg respectively.

54. In short, it is difficult to avoid the conclusion, notwithstanding his vigorous protest to the effect that he has not failed to make appropriate disclosure under the Mareva Order – a submission which I have made clear that I reject – that in his activities to-date Mr Ho simply is ‘cocking a snook’ at the court, and indeed mocking its Order, the sole purpose of which was, and remains, to preserve assets pending trial of the main action.

Proportionate?

55. If the grant of a receivership order otherwise may be considered to be, in the language of section 21L, “just and convenient”, would the grant of such an order be proportionate?

56. Mr Ho conspicuously has declined to make any attempt to make other than nominal disclosure – on each occasion his tactic, which continues even now, has been to reaffirm his rejected view of the effect of the Order as drawn – but I confess that nevertheless I have been concerned as to the ‘proportionality’ of the relief as represented by the draft receivership Order which has been proffered to the court.

57. Whilst I have made it clear that I do not consider that a so-called ‘lesser’ remedy would be suitable, I should have been attracted to the concept of a ‘partial receivership’, so that instead of a receivership order over the entirety of the trust estate, such an order could lie over, for example, the Canadian hotel group, so that in such restricted form fairness and protection can be achieved from the plaintiff’s viewpoint, but at the same time the possibility (it is in my view but a possibility) of widespread disruption to Mr Ho’s corporate empire would be negated.

58. Mr Kosmin’s ready answer to this was that the receivership must extend to all of Mr Ho’s assets because, as matters currently stand, and in light of the wholly obstructive stance to-date adopted by Mr Ho, the court and the plaintiffs have no evidence either of the quantum or of identity of his total assets.

59. As Mr Kosmin expressed the position, if Mr Ho were to “see sense” and set aside US$200 million of his clearly vast corporate assets, then the receivership order could be discharged promptly.  This, suggested Mr Kosmin, would be the usual (and logical) response of someone in Mr Ho’s position, and thus that Mr Ho was the “master of his own destiny” in this respect.

60. Similarly, if the court had had reliable evidence from Mr Ho of relative values – if, for example, it could be sure that the hotel group in question was worth in excess of the Mareva figure of US$200 million, then such a ‘partial receivership’ would be tenable – but once again such information was not forthcoming; in any event, said Mr Kosmin, if Mr Ho were allowed to choose which US$200 million of his assets should be subject to any such partial receivership order, he would no doubt elect for the most inaccessible or questionable assets: in this connection see the observations of Potter LJ in MotorolaCredit Corp v Uzan (No 2) [2004] 1 WLR 113, at 145-147.

61. I think there is force in this argument.

62. Accordingly, whilst I would have welcomed the opportunity to order a specific ‘partial receivership’, in effect Mr Ho’s attitude toward the disclosure orders of this court has rendered this impossible fairly to effect.  It is still, of course, open to Mr Ho to act in this manner, and thus to avoid the consequence of the appointment of receivers, but either he has not received such advice or he has declined to listen.

63. But in any event, and whichever way one cuts it, in my judgment the authority of the Hong Kong High Court has been, and continues to be, flouted by Mr Ho, and ultimately it is this fact which in my view justifies and underpins the plaintiffs’ present application.

64. Finally, I mention the issue of time.  Ms Eu rightly has said that the chronology of this litigation demonstrates that it is going at a snail’s pace, and she is very concerned that any receivership order will simply last indefinitely and will do untold damage to her client, Accolade.

65. It seems to me that, once again, the remedy is in Mr Ho’s hands.  Since the order is framed ‘until trial or further order’, he can put a stop to this immediately, either by coming clean in terms of detailed discovery, or to elect for the availability of an asset or assets which, if put in place, will more than cover the US$200 million of the Mareva order – in which case, as Mr Kosmin says, the parties can forget this time-wasting (and hugely costly) satellite litigation and start making progress on the actual issues which have been pleaded out in this case.

66. It follows, therefore, that whilst considerations of ‘proportionality’ and time concerns inevitably are placed into the discretionary ‘mix’, for the reasons given they do not hold decisive sway.

Urgency?

67. In light of the additional information which now has come to light, there seems to me to be little room for argument but that the appointment of receivers is urgent; the plaintiffs have no idea of the true extent of asset dissipation and the ambit of the restructuring of asset-holding entities.

68. I accept that to ensure that there are no further breaches of the court’s order, and to attempt to ensure there is no further asset-dissipation, the receivers, as officers of the Court, need to secure and investigate the affairs of Mr Ho and Accolade.

69. I also accept that if the Receivers find evidence that companies specified in the receivership order are not assets of Mr Ho, then variation immediately can be sought.

Personal security/fortification of undertaking/remuneration

70. A good deal has been said about the issue of security to be put up by the receivers personally, the terms of the fortification of the undertaking, and as to the issue of the remuneration of the receivers.

71. As to the latter, I accept the submission that all costs are subject to taxation, and must be justified to the satisfaction of the taxing master; it they are not, such costs will be borne by the receivers.  See, for example: Mirror Group Newspapers v Maxwell [1998] 1 BCLC 638, at 655; Re Peregrine Investments [1998] 3 HKC 1, per Le Pichon JA, whose trenchant observations served to clarify the law in this jurisdiction.

72. With regard to the cross-undertaking, Mr Kosmin points out that the undertaking is in Schedule 4 to the Mareva Order and is fortified by HK$50 million already paid into court.  He says, and on balance I am minded to agree, that a receivership as ordered is ancillary to the Mareva order, and achieves the same result as full compliance by the defendant with the Order.  Moreover, he points out that the receivers will not be managers, and that they will not interfere with the Boards of various companies except by order of the court.  I also agree with the submission that given the “flagrant” non-compliance with the disclosure order, there is no basis for further fortification in this circumstance.

73. In terms of personal security, Mr Kosmin submits that this is a matter for a Master, and that the receivers should attend in order to satisfy the Master as to their professional indemnity insurance.  I see no reason to differ from this view.

Detailed terms of the Order

74. In all the circumstances, and in the exercise of my discretion, I have decided to grant a receivership order substantially in terms of the draft last handed to the court at 2.30 pm yesterday afternoon.

75. Mr Kosmin has suggested that this order, which has been vigorously criticized by Ms Eu on a clause by clause basis, is in basically standard form, and is similar to the Orders made for the appointment of receivers in Hong Kong (albeit generally in the Companies Court) and in foreign courts, including the BVI.

76. However, I make the following detailed amendments to the draft in its present form:

Paragraph 10: insert the figure of HK$300,000 and not HK$250,000;

Paragraph 12: insert the figure of HK$50,000 and not HK$10,000.

Funding

77. This is an issue which cannot be side-stepped.

78. I also require, and will hear counsel upon, protection to be written into the terms of the existing draft to cater for the fact that the plaintiffs are funded by professional funders.

79. I have already said something about this subject in earlier judgments, and whilst I will not here repeat those sentiments I cannot pretend that I am happy about the fact that such ‘funders’ are involved, and the implications which follow in terms of the conduct of this litigation.

80. In this connection Ms Eu has made the sage point – the only point in the entire debate, in fact, to which Mr Kosmin did not respond specifically – that the receivership order as proposed gave the receivers carte blanche to investigate the assets of Mr Ho/the Ho Family Trust, but did not provide for the fact that unknown third parties with unknown interests were funding this action – in return, doubtless, for a sizeable share of any recovery.

81. I consider this a fair point, and one to which, as I have said, no answer was proffered.

82. Accordingly, I wish amendment to be made to the draft Order, in a form suggested by leading counsel, to take account of this fact, and to ensure protection from such third party funders of the information uncovered by the two receivers to be appointed.

83. I appreciate, of course, that the Receivers are not the plaintiffs’ agents, that they will be independent officers of the court, who will report to the court and be subject to the court’s directions.

84. Nevertheless I require to be inserted in the Order to be made some form of preclusion to ensure that there is, in effect, a ‘Chinese wall’ erected between the receivers and the plaintiffs’ paymaster.

Summary

85. It follows from the foregoing therefore, that I am minded to accede to the receivership summons, in terms of an order as suitably amended.

86. I can see no reason why costs of the application should not follow the event.

87. I will, however, hear the parties on costs, and upon any subsequent applications that the 1^st defendant and the intervener now may wish to make in light of this judgment

Costs

88. Mr Kosmin asks for his costs of this application.  He says that in the circumstances, wherein Mr Ho effectively has created the environment wherein this receivership application has had to be mounted, that such costs should be on a higher than normal basis, that is, on a common fund or indemnity basis.

89. Mr Wright demurs.  He says that since this is an interlocutory application, the appropriate course is to reserve the costs of this application to the trial judge; alternatively, to make an order such as ‘plaintiff’s costs in the cause’; and in any event any costs’ order should be on no higher basis than on the normal ‘party and party’ level.

90. Miss Eu observes that in the circumstances it would be unfair to visit on her client, the trustee, Accolade, the alleged breaches of the Mareva order which have been laid at the door of Mr Ho – and in any event, since she just has joined this action (and has had to fight tooth and nail to do that) any breaches of the Mareva order cannot in any sense be attributed to her client, hitherto not a party, and which thus should not be responsible for costs incurred.

91. Whilst I have declined to attribute independence of action to the trustee of the Ho Family Trust, which clearly is the repository of Mr Ho’s massive wealth, nevertheless I see some technical force in Ms Eu’s comments. 

92. As a matter of practical politics it probably does not make a great deal of difference, given my firm conviction that nothing whatever is done within this extensive corporate empire absent Mr Ho’s say-so, but in all the circumstances I consider that the fairest costs’ order upon this receivership application is that the costs of and occasioned by the application are to be paid forthwith by the 1^st defendant, Mr Ho, to the plaintiffs, such costs, if not agreed, to be taxed on a common fund basis; as to the Intervener, I make no order as to costs.

93. I so order, and anticipate that the Receivership Order as engrossed will reflect this decision.

94. For the sake of completeness, I regret that I must, and now do, reject Miss Linda Chan’s application for a certificate for 3 counsel upon this receivership application.

Leave to appeal

95. Both Ms Eu and Mr Wright make application for leave to appeal, pursuant to the provisions within section 14AA of the new civil procedure rules, with which I confess I currently am less than familiar.

96. In any event, both say that they fall within the rubric that any appeal against the decision of this court on this receivership application falls within the term “reasonable prospect of success”, and Mr Wright even invokes, somewhat ambitiously in my view, the alternative rubric of “some other reason in the interests of justice why the appeal should be heard”.

97. It seems to me, with respect both to Ms Eu and to Mr Wright, that any issue of leave to appeal must fall to be considered in tandem with their further application, namely that there be a stay of the Order of this court pending appeal – to which application I now turn. 

Interim stay of the receivership order

98. Mr Wright has made it clear that his preferred option is that this court grant a stay of its Order pending the substantive appeal his client wishes to prosecute against the appointment of receivers.

99. As the court made clear in argument, such a stay is out of the question, and the most that can be considered is to provide some form of short ‘window’ to enable the 1^st defendant and the Intervener to arrange an urgent appearance before the Court of Appeal, thereby precluding an undignified dash to that court.

100. I also take the view that the issue of a stay of this court’s order on any basis other than a very short interim stay is irrevocably linked to the issue of leave to appeal.

101. Accordingly, on the twin issues of leave to appeal and of a stay of this court’s order on this application, I order as follows:

(a) the application by the Intervener and the 1^st defendant for leave to appeal to the Court of Appeal is refused;

(b)    there will be an interim stay of the Order of this court until 5pm on Friday 4 September 2009.

102. I appreciate that this does not assist Ms Eu, who has laboured valiantly in this application absent full papers/instructions, but the court has to hold the ring between the interests of the plaintiffs, who now are uncomfortably aware of Mr Ho’s proclivities in terms of rearranging his corporate empire, and the interests of both Mr Ho and Accolade, who will have a window 3 days in which to arrange an appellate hearing, and whom, if necessary, can mount an application for an extended stay.  As far as this court is concerned, however, the end of this week is the furthest that it is prepared to extend the interim stay envelope.

Other matters

103. Consequent upon delivery of this judgment in the form appearing above several matters of detail consequentially were canvassed.  I take them in order.

(1)  The ‘funding proviso’

104. Pursuant to my observations at paragraphs 77-84 above, there was discussion between counsel as to the appropriate form of wording to be inserted within the Schedule 4 Undertakings appended to the Order.

105. Mr Kosmin suggested, to no significant dissent, that a like form of wording could be inserted to that which appeared within paragraph 4 of the Order dated 23 July 2009 (curiously now the subject of a pending Notice of Appeal) which then had been agreed between Mr Kosmin and Mr McCoy.  Clearly modifications were necessary to take account of the presence of the Intervener, but as I understood the position Mr Kosmin and Mr Wright were ad idem in terms of this wording.

106. Accordingly, I confidently anticipate that this ‘funding proviso’, if I may so term it for shorthand purposes, will be included within the Order to be engrossed.

(2)  Clauses 8(b) and 13 of the draft Order

107. I am grateful to Miss Eu for bringing the court’s attention to the date of September 3 2009 appearing in these clauses: I confess that I had intended to pick up this point and to include it within the matters of detail as dealt with at paragraph 76 in the body of this Judgment.

108. Ms Eu says that the date of 3 September obviously is out of the question given the length of time it has taken to argue this case, and the likelihood of immediate appellate action.  She asks that this date be replaced by a date 21 days thereafter.

109. For his part Mr Wright echoes this view.

110. Mr Kosmin is indignant, particularly in terms of Mr Wright’s request on behalf of a client who is “months late” in making disclosure.

111. I confess that at this stage I find it hard to become excited over a few extra days; far too much water has flowed under this particular procedural bridge.

112. I grant both the 1^st defendant and the Intervener a further 21 days from 3 September, that is, until 24 September 2009 at 4pm, which will be the cut-off date, save that in terms of the information solely relating to bank statements (vide paragraph 2, Schedule 2) I grant a further 14 days only, that is, until 4pm on 17 September 2009, to supply this information.

Costs of the Intervener’s application to be joined as a party

113. Strictly this is nothing to do with the receivership application, but I heard argument on this element this morning, and it is convenient to give my ruling upon this aspect of the case in this judgment.

114. Mr Kosmin accepts, I think, that he lost this application as mounted by Miss Eu, and that he should pay the costs of the argument.  However, he points out that whilst he lost the argument on Wednesday 26 September 2009 – which took up the greater part of the first day of this hearing – nevertheless he succeeded, against very strong resistance, including an appeal, in obtaining the evidence used in the Beddoe application before Reyes J, which evidence acted as a “searchlight” illuminating just what had been going on in terms of asset dissipation.  He also points out that he succeeded in preventing an adjournment of this hearing consequent upon Accolade being admitted as a party, and that he succeeded on Miss Eu’s application for leave to appeal against this court’s ruling that he, and the court, should have sight of the evidence used on the Beddoe application.

115. It seems to me that the answer to this is as follows.

116. I estimate that the hearing day on Wednesday 26 September 2009 took some 6 hours; in fact, Miss Eu has reminded the court that we reconvened at 6pm on that day to hear further argument.

117. In my view the fairest attribution of costs thus is as follows:

(i)  the Intervener is to have its costs of and occasioned by its application to intervene (estimated time: 5 hours), such costs to be taxed if not agreed; and

(ii) the plaintiffs are to have the costs attributed to the remaining part of that hearing day (estimated time: 1 hour), such costs to be taxed if not agreed.

Finally

118. As counsel are aware, this court is shortly to embark upon a 6 month trial in another Akai matter.  Save for any clarification which may  be required as to the content of the Receivership Order as now made, with appropriate modifications/amendments, this court is unable further to deal with this case, the management of which therefore should be transferred to another judge.

119. I am grateful to all counsel for the assistance they have rendered on this application, which on occasion involved vigorous exchanges of view.

HCCL 37/2005 and
HCCL 40/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NOS. 37 AND 40 OF 2005

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

BETWEEN

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

DECISION ON COSTS

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

Reservation of Costs: Order dated 1 June 2009

1.  By paragraphs 9 and 11 of the Order of this court dated 1 June 2009, this court ordered that the costs of the plaintiffs’ summonses dated 17 March 2009 (‘the interrogation summons’) and 27 April 2009 (‘the specification summons’) be reserved to be determined upon the basis of written submissions made to the court following the determination of the then-pending appeal of the 1^st defendant in CACV 44 of 2009, which appeal sought to overturn the Order of this court (‘the Mareva Order’) dated 17 February 2009.

2.  On 6 July 2009 the 1^st defendant abandoned this appeal.

3.  Hence, the issue of costs of these summonses became available for decision, and pursuant to the direction made the court received written submissions on the issue: from the plaintiffs dated 20 July 2009, and a submission of like date on behalf of the 1^st defendant.

4.  The court has re-read its written judgment dated 1 June 2009, which deals at some length with the progression/treatment of these summonses, and further carefully has perused the submissions of the parties.

5.  After considering all the circumstances, and in the exercise of its discretion, the court now makes the following orders as to costs of these applications:

(i) As to the ‘interrogation summons’ dated 17 March 2009, the costs’ order is to be in the following terms:

‘There be no order as to costs of this summons’.

(ii) As to the ‘specification summons’ dated 27 April 2009 – which in substance superceded the ‘interrogation summons’ – the costs’ order is to be in the terms following:

‘The costs of and occasioned by the plaintiffs’ summons dated 27 April 2009 (otherwise referred to as ‘the specification summons’) are to be to the plaintiffs, such costs, if not agreed, to be taxed and paid forthwith by the 1^st and 2^nd defendants on a common fund basis’.

6.  Those acting for the plaintiffs will please ensure that these Orders as to costs are engrossed in the aforementioned terms.

HCCL 37/2005 and
HCCL 40/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NOS. 37 AND 40 OF 2005

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

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

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

J U D G M E N T

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

The application

1.  There is before the Court a summons issued by the plaintiff liquidators dated 6 July 2009.

2.  It is yet another discovery application in what is becoming a drawn-out saga between the liquidators of Akai and the 1^st and 2^nd defendants in this consolidated action, respectively Mr Christopher Ho and The Grande Holdings Ltd (‘Grande’), a publicly listed company on the Hong Kong Main Board.

3.  In fact, this judgment dealing with this summons represents the fourth judgment this court has had to write in the space of six months dealing with the dispute between the plaintiff liquidators of Akai, and the 1^st and 2^nd defendants herein, although I apprehend that this may be the last; diary commitments are likely to preclude further involvement in this case, which is unfortunate, because if any case requires continuity of judicial thought/knowledge of its history, and consequential case management, this is it.

4.  Be that as it may.  In material summary this summons of 6 July 2009 seeks:

(1) discovery on the part of the 2^nd defendant, Grande, acting by a proper officer and with the sanction of the Board of Directors, of:

(a) information and documentation (adumbrated in Schedule A of the summons) regarding the disposal of the Grande Building in Singapore, which transaction was announced on 25 June 2009 – which sale has stimulated the issuance of the present summons; and

(b) detailing with particularity details of the disposal of shares in Sansui Acoustics Research Corporation, including information as to what has become of the sum of US$59.2 million received by subsidiaries of the 2^nd defendant (as per the details set out in Schedule B of the summons);

(2) An order that the 2^nd defendant do give the plaintiffs at least 14 days’ advance written notice of the date of completion of the sale of the Grand Building, 8 Commonwealth Lane, Singapore;

(3) An order that the 1^st defendant, Mr Ho, do file and serve an urgent affidavit on the plaintiffs providing with full particularity details of all of the dealings by the 1^st defendant with his assets (as defined in paragraphs 2 and 3 of the Order of this court – ‘the Mareva Order’ – dated 17 February 2009, and in light of the further Order of this court dated 1 June 2009) since 19 November 2008;

(4) An order that the order of February 2009 be amended so that the undertaking in Schedule 2, para 7 thereof is varied in order that disclosure of the information to be provided pursuant to this application be made to certain specified persons only otherwise than with the written consent of the 1^st and/or 2^nd defendants or further order of this court;

(5) That the costs of this application be to the plaintiffs upon an indemnity basis. 

The background 

5.  The objective observer might suspect that the background to this summons is redolent with procedural history.  This suspicion would be correct.

6.  This application realistically cannot be regarded independently from the disputed matters which have gone before, and to which I must now briefly refer.

7.  In this connection the court has been supplied by Mr Kosmin QC, who together with Mr Manzoni QC appears on behalf of the plaintiffs, with that which is entitled “Timeline of Non-disclosure by the 1^st and 2^nd defendants”.

8.  The dates within this document speak for themselves, and I have no intention in this judgment of doing other than specifying certain ‘landmark’ features as they have involved hearings before, and decisions/judgments of, this court.

The 1st Judgment: Mareva relief: 9 February 2009

9.  On 9 February 2009 this court issued its Judgment upon the plaintiffs’ application for Mareva relief.

10.  This inter partes application took five days of argument, which initially commenced on 22 December 2008, and finally was completed (after an adjournment for Christmas) on 21 January 2008. 

11.  Originally Mr Manzoni had made an application for like relief ‘exparte on notice’ on 19 November 2008, an application this court then had declined to entertain having heard the submissions of Mr Yu SC, then acting for the 1^st and 2^nd defendants, who had come to court on an urgent basis.  Accordingly, directions then were made, and the matter ultimately came on for hearing inter partes on 22 December 2008.

12.  During this hearing the plaintiffs were represented by Mr Kosmin QC and Mr Manzoni, and the 1^st and 2^nd defendants were represented by Mr Snowden QC leading Mr Godfrey Lam SC and Mr Abraham Chan on the instructions of M/s Baker & McKenzie.

13.  This application was of some dimension; as I recall the position, Mr Kosmin was asking for Mareva relief against the 1^st and 2^nd defendants, Mr Ho and The Grande Holdings, in the sum of US$500 million, together with extensive disclosure.

14.  This judgment, issued on 9 February 2009, is relatively full, of some 73 pages.  In the event, Mr Kosmin did not get all that he had wanted – Mareva relief was granted against Mr Ho in the sum of US$200 million, together with an order against him for asset disclosure, whilst against Grande an order for asset disclosure only was made, the court taking the view that it was disinclined, on the evidence before it, to grant Mareva relief against a publicly listed company in Hong Kong.

15.  It is the asset disclosure orders as then made, and as subsequently amended, which have proved a running sore thus far in this litigation, and regrettably have provided fertile ground for continuing dispute and recrimination.

Settling the MarevaOrder: 17 February 2009

16.  It was clear on the face of the judgment of 9 February 2009 that certain matters of detail required to be sorted out, and thus it was that shortly after delivery of this judgment that a further hearing was held on 17 February 2009 specifically in order that these matters could be clarified.

17.  This hearing was attended by Mr Dobby of M/s Lovells for the plaintiffs and by Mr Abraham Chan, instructed by M/s Baker & McKenzie, on behalf of the 1^st and 2^nd defendants.

18.  Such matters of detail were canvassed, as was the general form of the draft Order, and at the end of the hearing the Order was settled with the express agreement of either side thereto: in particular, within the context of the present application, Schedule 3 of the Order – entitled ‘Particular Assets Subject To This Order – was agreed, this Schedule dealing with the assets of the 1^st and 2^nd defendants.

19.  Accordingly, the Mareva Order dated 17 February 2009 formally was engrossed.

20.  Pursuant to that Order, the 1^st and 2^nd defendants were to make the disclosure as thus ordered within 42 days of the date thereof, that is, by 31 March 2009.

The 2^nd Judgment: Stay of Execution/Clarification of the Order:

19 March 2009 [Date of Decisions], 16 April 2009 [Reasons for Decisions]

21.  By summons dated 17 March 2009 the 1^st and 2^nd defendants applied for ‘clarification’ of the Mareva Order dated 17 February 2009, and also by summons dated 6 March 2009 taken out by the 1^st defendant only, Mr Ho applied for a stay of execution of the disclosure order as made against him pending the hearing of his appeal in CACV 44 of 2009, under Notice of Appeal dated 5 March 2009, against the Mareva relief which this court had issued against him.

22.  In turn a summons dated 17 March 2009 taken out by the plaintiffs seeking an order for leave to cross-examine Mr Ho with regard to two recent transactions which had come to the attention of the liquidators and which were said to have raised serious concerns as to the veracity of Mr Ho, and as to his compliance with the terms of the Mareva Order, was adjourned to a date to be fixed.

23.  Accordingly, the hearing on 19 March 2009 was concerned solely with the defendants’ applications for ‘clarification’ of the existing Order and for a stay of execution thereof; at this hearing the defendants again were represented by Mr Snowden QC and Mr Abraham Chan, once more on the instructions of M/s Baker & McKenzie, and the plaintiffs by Mr Kosmin QC and by Mr Manzoni QC.

24.  At the conclusion of argument on 19 March 2009 the court dismissed both of the defendants’ applications, and by its Reasons For Decision, dated 16 April 2009, the factors underpinning such dismissal were explained. 

25.  This judgment speaks for itself; for present purposes, however, I note that paragraph 27 thereof recited the argument of Mr Kosmin – with which this court ultimately agreed – that the Mareva Order had incorporated Schedule 3 thereof, which had specified the assets of the 1^st and 2^nd defendants, and which at the hearing of 17 February 2009 had been the subject of particular consideration by the parties, and that there now was no basis for Mr Ho and/or Grande to seek to rewrite it: he described this as “a blatant attempt to avoid making full and proper disclosure”, and thus to avoid scrutiny in relation to the recent transactions as identified by the plaintiff liquidators which had aroused cause for concern.

26.  No appeal was launched against the dismissal of these applications, the Order consequent thereon being formally engrossed on 19 March 2009, albeit there remained extant and pending the substantive appeal by Mr Ho against the Mareva Order dated 17 February 2009, the existence of this forthcoming appeal – which had been set down for hearing on 22 July 2009 – having formed the basis of the stay of execution application.

Disclosure as made by the 1^st and 2^nd defendants

27.  On 31 March 2009 the 1^st and 2^nd defendants filed affirmations in purported compliance with the requirements within the Mareva Order.

28.  The plaintiff liquidators took the view that such disclosure manifestly was deficient, and by letter dated 6 April 2009 from M/s Lovells to M/s Baker & McKenzie, the plaintiffs detailed their concerns in this regard.  On 14and 15 April further letters were sent from the plaintiffs, and on 14 April 2009 a response came from Baker & McKenzie requesting a further 14 days, that is, to 28 April 2009, in which to respond to the content of the plaintiffs’ letters.

29.  On 27 April 2009 the plaintiffs issued a summons (‘the specification summons’) seeking that the 1^st and 2^nd defendants (i) do properly comply with the terms as to disclosure within the Mareva Order, and (ii) that they be cross-examined on oath as to their assets.

The 3^rd Judgment: ‘the specification summons’: 1 June 2009

30.  This court entertained argument upon this ‘specification summons’ on 8 May 2009; in fact, the content of this new summons had superceded the plaintiffs’ earlier summons (‘the interrogation summons’) issued on 17 March 2009, which in effect now fell by the wayside, and upon which this court made no order.

31.  At the hearing of this application the plaintiff liquidators once more were represented by Mr Kosmin QC and by Mr Manzoni QC; acting on behalf of the defendants on this occasion were Mr Godfrey Lam SC leading Ms Queenie Lau, again on the instructions of the defendants’ then solicitors, M/s Baker & McKenzie.

32.  At the hearing of this application, Mr Lam for the defendants made it clear that his instructions were that Mr Ho, the 1^st defendant, and a Mr Adrian Ma, a director of Grande, the 2^nd defendant, were prepared to appear before this court and to be cross-examined by Mr Kosmin.

33.  For his part Mr Kosmin submitted that should the ‘disclosure’ as had been made to-date by these defendants be permitted to remain in its currently “hopelessly inadequate” state, any such cross-examination as now apparently offered would prove wholly ineffective, because, absent proper disclosure being made prior thereto, in response to detailed questioning the deponents would be able to take refuge in responses which were bound to be uninformative without there being to hand relevant documentation; in effect, said Mr Kosmin, the exercise now being proposed by the defendants would amount to a re-run of the earlier section 221 examinations conducted by the Akai liquidator, wherein little of practical assistance was gained by reason of a lack of documentary evidence available in advance upon which to found any serious cross-examination.  It followed, Mr Kosmin opined, that there was a clear and pressing necessity for an appropriate level of asset disclosure in anticipation of any such cross-examination.

34.  In the event, the court acceded to the application made by the plaintiffs.  The Judgment consequent upon this application is self-explanatory, and the Order is set out in that Judgment (at para 71 thereof); this Order formally was engrossed on 1 June 2009.

35.  The Order of 1 June 2009 is of particular significance in the context of the present applications.

36.  In material part, it required Mr Ho, the 1^st defendant, within 21 days of the date of service of the Order upon him, to make a further affidavit in “full and proper compliance” with the Mareva Order, setting out on its face the categories of information of which disclosure was required, whilst a correlative section of the Order dealt with the disclosure required to be made by the 2^nd defendant, Grande.  In addition, cross-examination on oath was provided for with respect both for Mr Ho and for representatives of Grande.

37.  At this stage it reasonably might have been thought that matters relating to this apparently interminable disclosure dispute had been laid to rest, but this was not to be.

Application for an extension of time: 26 June 2009

38.  On 26 June 2009 the 1^st and 2^nd defendants made an application for an extension of time with which to comply with the order of 1 June 2009 for the filing of additional disclosure affidavits.

39.  This application was mounted by Mr McCoy SC, appearing for the1st and 2^nd defendants on the instructions of M/s Huen Wong & Co, who apparently now had taken over conduct of the case in place of Baker & McKenzie.

40.  Mr McCoy explained that his clients recently had seen the necessity to change their solicitors, from M/s Baker & McKenzie to M/s Huen Wong & Co, and in the few days in which the new solicitors had had available – without, said Mr McCoy, the ready availability of all of the relevant files – it just would not prove possible to meet the time limit as prescribed by the court by its existing Order of 1 June 2009.

41.  In fact, leading counsel said, what he was after in terms of a time extension was 28 days for the 1^st defendant, and 42 days for the 2^nd defendant, instead of the period of 21 days as then was in place.

42.  At the same time Mr McCoy also confirmed to the court that the 1^st defendant’s appeal against the Mareva Order of 9 February 2009 was to be withdrawn; in fact, I understand that such withdrawal of this appeal formally took place on 6 July 2009.

43.  For his part Mr Manzoni, appearing for the plaintiffs, vigorously opposed this application, castigating the change of solicitors as nothing more than a “transparent ploy” in which to gain more time and with which to force yet another delay in rendering proper asset disclosure.

44.  In the event, this court was persuaded to recognize the stark reality of new representation of the 1^st and 2^nd defendants – both of solicitors and, apparently now, of counsel also – and after, it must be said, some degree of hesitation, reluctantly agreed to order an extension of time, for each of the 1^st and 2^nd defendants, but of 21 days only.

45.  However, that which this court then most certainly did not know (and, as I am sure, as Mr McCoy also then was unaware) was that the evening before this application for extension of time was mounted the 2^nd defendant, Grande – which so far as this court was concerned was controlled by Mr Ho – publicly had announced entry into a contract to dispose of its headquarters building in Singapore, an event which subsequently had come to the notice of the plaintiff liquidators, and which in turn now has stimulated the application by the plaintiffs with which this court presently is dealing.

46.  Accordingly, after condescending to the detail of the somewhat labyrinthine procedural background, it is to this new application that I now revert.

The plaintiffs’ summons dated 6 July 2009

47.  I have earlier set out the substance of this application, which, as I have said, resulted from the belated discovery of the 2^nd defendant’s public announcement, at 9.39 pm on 25 June 2009, to the effect that it had entered into a contract for the sale of the Grande Building in Singapore for the sum of Sing$19.5 million (US$13.3 million approximately), and that this sale expressly had been approved by Mr Ho’s company, Barrican Investments Corporation. 

48.  This fact was not disclosed to the court or to the plaintiffs at the hearing on 26 June 2009 for the defendants’ extension of time in which to file further disclosure affidavits, and when viewed in the context of discovery pursuant to the Mareva order of fully some five months earlier, it is fair to observe that the imparting of this information would have made a significant difference to the manner in which this court then regarded the defendants’ position, the change of solicitors and counsel notwithstanding.

49.  I am told that the plaintiffs first had learned of the announcement of this sale shortly after the hearing on 26 June 2009 at which the extension of time had been granted; in the circumstances I am a little surprised that the plaintiffs did not immediately return to court with this information prior to the engrossment of the order dealing with the extension of time, but for some reason this did not occur.

50.  Instead, M/s Lovells took up the issue in correspondence with the defendants’ new solicitors, M/s Huen Wong & Co, by letter dated Monday 29 June 2009, in which they sought a comprehensive explanation from Mr Ho regarding the terms and circumstances of the sale of the property, and further sought an undertaking that Grande would not complete the sale of the property without providing 14 days written notice to the plaintiffs.

51.  On 30 June 2009 M/s Huen Wong & Co replied on behalf of Mr Ho and Grande. 

52.  I rarely have cause to read solicitors’ correspondence, but on this occasion I have been constrained to do so, and by any standards this was an peculiar response, not only in terms of its aggressive, aggrieved and faintly hysterical tone, but because this letter raised for the first time that which Mr Kosmin has characterized as the “bizarre and extraordinary proposition” that Mr Ho was not the beneficial owner and controller of Grande.

53.  The ineluctable fact is that this assertion was contrary to the basis of the submissions made to this court by English leading counsel, Mr Snowden QC, during argument upon the substantive Mareva application wherein such beneficial ownership never was disputed (indeed the now-unappealed Judgment of 9 February 2009 records that Mr Ho “is and was the majority shareholder, President, Group Chief Executive and a director of Grande”), and is wholly contrary to the manner in which the defendants’ case has been conducted to-date; moreover it flies in the face of the specific content of Schedule 3 forming part of the Mareva Order – which, it will be recalled, was settled at a hearing consequent upon submissions made by junior counsel upon the defendants’ behalf – and also is inconsistent with the disclosures in Grande’s Annual Reports and with representations made to the Stock Exchange of Hong Kong (and, it also now seems, to regulators in America).  Quite how the Hong Kong regulators react to the revelation that factual representations as originally made on behalf of Mr Ho, and as now recorded in public filings, do not represent the true position is something which is not the immediate concern of this court.

54.  This fundamental change of position as to Mr Ho’s status in relation to Grande also is reflected in the affidavit evidence filed by the 1^st and 2^nd defendants in opposition to this summons.

55.  In this connection there is affirmation evidence from Mr Adrian Ma Chi Chiu (affirmation dated 13 July 2009) on behalf of Grande and the 5^th and 6^th affirmations, respectively dated 13 July and 14 July 2009), from Mr Ho himself.

56.  So far as he is concerned Mr Ma, the CEO of Grande, asserts that “in actual fact, Mr Ho does not have any shareholding in Grande” (para 24), that “the plaintiffs have simply no basis at all to meddle with Grande’s business”, and – surprisingly in the circumstances – he goes so far as to say, in my view somewhat ambitiously, that he verily believes that “the present application made by the plaintiffs is vexatious and is wholly devoid of merits”.

57.  For his part Mr Ho, in his 5^th affirmation, seeks to uphold the sanctity (and legal effect) of the Ho Family Trust, in which, he says, his wife, daughter and himself “are all beneficiaries” (para 10), he informs the court that his brother in law and elder sister are directors of Grande (para 16) and are people of the utmost integrity who would not succumb to any outside influence, he suggests that the statement in the Mareva judgment of 9^th February 2009 to the effect that he is the beneficial owner of 69/70% of Grande, whilst perhaps not disputed by his legal representatives at that hearing, had caused him to be “very surprised” and that this did not represent his instructions (para 18), that the corporate structure chart placed before the court at the Mareva hearing (Annexure D) had never been drawn to his attention – “It has only been produced to me by my present solicitors when this affirmation was being prepared” – and that the representation thereon is “completely untrue”.  He continues that “I do not have any beneficial interest (direct or otherwise) in Grande’s shareholding” (para 22), that the allegation that he has such a shareholding “remains a mystery to me and is completely contrary to my understanding” (para 24), and that the apparently incorrect public filings in the Companies Registry represent inadvertent errors on the part of Baker & McKenzie, his former advisors and solicitors (para 29), and that he personally was not involved in the approval process for the sale of the Grande Building by Barrican Investments because he did not participate in the relevant Board Meeting of Grande, and also that he is not a director of Barrican Holdings (para 32).

58.  Mr Ho’s 6^th affirmation of the next day follows essentially the same theme: he has never been a director and shareholder of Accolade Inc, the trustee of the Ho Family Trust, which is not controlled by him, and that he is only a member of a class of potential beneficiaries (para 5), that public corporate circulars by Lafe Corporation Limited (as exhibited by Mr Borrelli) which on their face diametrically go against his current affirmation of the position “appear to have arisen as the result of inadvertence on the part of others and escaped my attention”, that he does not recall the circumstances in which these statements were actually made (para 5(4)), and that the statement in the Lafe Annual Report for 2007, which attributed to him a 100% beneficial interest in The Grande International Holdings Limited, which in turn owned a majority interest in the share capital of The Grande Holdings Limited through its wholly-owned subsidiary, Barrican Investments Corporation, are “incorrect”, and that he “does not recall the circumstances in which the above statements were actually made in the above annual report” (para 5(5).

59.  Accordingly, the position now taken by Mr Ho may, I hope not unfairly, broadly be summed up thus: that in this litigation to-date his legal representatives fundamentally had misunderstood his position, and in turn have misrepresented that position to the court, and that the documents of public record as filed by his legal representatives with market regulators, the content of which demonstrate a picture wholly contrary to that now sought to be portrayed, were and are attributable to filing errors/misunderstandings on the part of Baker & McKenzie, to an erroneous understanding of Stock Exchange Codes (Code 205 having been mixed up with Code 210) and perhaps, also, can be explained by a ‘deeming provision so that, as he now put it, “I am nevertheless deemed to have such interest [in Grande] given that I am a beneficiary under a discretionary trust and by virtue of the relevant statutory provisions of the SFO, but solely for satisfaction of the statutory disclosure obligations to the public investors only” (Ho 5^th, para 22).

60.  In response to this wholesale change of position, Mr Kosmin went to some length to remind the court of the detailed manner in which this case had developed in terms of the portrayal of Mr Ho’s position; he noted also the withdrawal of his appeal against the judgment of 9 February 2009, and he also drew attention to a number of corporate public disclosure forms, in which so far as Mr Ho is concerned an antithetical position is represented; thus, for example, the Hong Kong Exchanges and Clearing Disclosure of Shareholder Interests represents Mr Ho as a Director of Grande with a 69.18 percentage shareholding, whilst in an extract from Lafe Technology Annual Accounts the following appears:

“Mr Christopher Ho Wing-On had a 100% beneficial interest in The Grande International Holdings Limited, which owned a majority interest in the share capital of The Grande Holdings Limited through its wholly-owned subsidiary, Barrican Investments Corporation…”

and in a Lafe Technology Memorandum of Understanding For Acquisition of Assets dated 25 April 2007, under the heading ‘Directors’ Interest’, Mr Christopher Ho Wing-On is described as:

“a director and shareholder of the Company [and] is also a director and controlling shareholder of Grande and its subsidiaries…”

Further, in a US filing on behalf of, I believe, Emerson Corporation, the following passage appears:

 “As the owner of approximately 67% of the share capital of Grande Holdings, Barrican Investments Ltd has the indirect power to vote and dispose of the Shares held for the account of S&T.  As the sole parent of Barrican, The Grande International Holdings Ltd has the indirect power to vote and dispose of the shares held for the account of S&T.  As the sole owner of Grande International, the Ho Family Trust has the indirect power to vote and dispose of the Shares held for the account of S&T.  As the sole beneficiary of the Ho Family Trust, Mr Ho has the indirect power to vote and dispose of the Shares held for the account of S&T.  In such capacities, Grande Holdings, N.A.K.S. and Mr Ho may be deemed to be the beneficial owners of the Shares held for the account of S&T…”

and with regard to the place of the Ho Family Trust in the scheme of things, a public release on behalf of Lafe Corporation Ltd regarding a proposed acquisition of shares reads thus:

“The Ho Family Trust and Christopher Ho Wing-On

HFT is a corporation incorporated in the British Virgin Islands and has its registered office at P.O. Box 438, Tropic Isle Building, Road Town, Tortola, British Virgin Islands.  HFT’s sole shareholder is Accolade Inc., a corporation incorporated in the British Virgin Islands which holds all the shares of HFT on trust for CWH.  CWH is the beneficiary under a trust of all the shares of HFT, and is a Director and controlling shareholder of the Company”

In the same context I also have had sight of a ‘Memorandum of Wishes of the Ho Family Trust’, as signed by Mr Ho, paragraph 2 of which reads:

“During my lifetime, the Trustee should hold the whole of the capital and income of the Trust Fund for me absolutely and should in the exercise of all its powers and duties and also with regard to the management and administration of the Trust and the distribution of income and capital consult with me…”

61.  The foregoing represent examples of the documentary material pointed out by Mr Kosmin which run counter to the case as now posited on oath by Mr Ho, the apparent explanation being that such information is mistaken and in clear error and/or constitutes negligent oversight by professional advisers and/or arises as the result of certain statutory deeming provisions – and that with regard to all such matters it now transpired that hitherto Mr Ho had been wholly unaware of the misrepresentations made in his name.

62.  At this stage of the case, therefore, and given all that had occurred thus far in this ongoing discovery dispute, Mr Kosmin asked the court to “disregard” the evidence now recently filed by Mr Ho.  In my view he was justified in so doing.

63.  At this stage it is right to record that the court’s apparent disregard for the probity of Mr Ho, arising as it did from the evidential volte face as now adopted by this gentleman, excited discomfort in Mr McCoy, and – whilst formally he did not get to the stage of making an application – leading counsel nevertheless trailed the suggestion that this court should consider recusing itself from further entertaining this summons by reason of bias, this view stemming from observations made by the court during Mr Kosmin’s submission as to the credibility of Mr Ho’s evidence as now had been  filed in opposition to this latest summons.

64.  Whilst the steadfast barrister fearlessly standing up on behalf of his client to an oppressive and unfair tribunal is one of the most, if not the most, notable features of our adversarial system – and, if I may say so, long may this remain the situation in Hong Kong – in the circumstances as now had arisen I am bound to say that it struck me as a bit rich to characterize the court’s obvious (and in my judgment perfectly justified) scepticism as to the truth of Mr Ho’s recent evidence, which legitimately might be regarded by any hard-nosed commercial judge as a singularly unfortunate and self-serving attempt to rewrite history, and thereby to avoid the disclosure as now sought, as manifesting ‘unfairness’ or ‘bias’ on the part of the Bench.  Accordingly, whilst I make no criticism of leading counsel for acting as he thought fit, it seemed to me that in such extraordinary circumstances the premise for such submission was less than compelling.

65.  For the avoidance of doubt, however, and in the event that this matter goes further, let me state unequivocally that in all the circumstances of this case I have decided to accord to Mr Ho’s recent evidence in his 5^th and 6^th affirmations – and, indeed, to similar evidence as now put forward on the part of Mr Adrian Ma – no credence.  I am wholly disinclined to accept that black actually amounts to white, notwithstanding the ‘spin’ and convoluted explanation with which Mr Ho, and for that matter Mr Ma of Grande, wishes to invest the argument.

66.  Moreover, and once again for the avoidance of doubt, I continue to hold the firm belief, expressed by this court as long ago as February 2009 in the substantive Mareva judgment (and repeated, I believe, in subsequent judgments), that Mr Ho remains the person who stands at the apex of the opaque worldwide corporate pyramid which he has established in order to hold and to exercise his wealth, and through which he exercises an wholly dominant influence over all commercial activities as are undertaken by such companies/entities within that complex structure, which clearly he has been at great pains to set up.

67.  It is therefore through this prism that I view the efforts to-date of Mr Ho, and indeed Grande, to avoid making proper disclosure; indeed, a reasonable and fair-minded observer familiar with the course of events in this case might come to the view that in terms of asset disclosure the 1^st and 2^nd defendants have entered upon a calculated course of conduct which conveniently might be characterised as a combination of evasion, obfuscation, and disingenuous repudiation.

68.  It is also in this context that I am ruefully reminded of Mr Manzoni’s forceful assertion at the 21 June 2009 hearing that this latest change of legal representation on the part of Mr Ho and Grande – against the background of which this court felt constrained to grant further temporal indulgence – clearly was purely opportunistic and was calculated to achieve yet further delay.  This court takes particular and strong exception favourably to entertaining an eleventh hour plea for time by reason of a late change of solicitors when, as hindsight now so clearly illustrates, on the very evening preceding that application the 2^nd defendant, in which company Mr Ho now disavows both shareholding and influence, was in the process of alienating what presumably is a very significant asset, namely its headquarters building in Singapore.

69.  As to this sale of Grande’s headquarters, Mr Kosmin asserts in his skeleton argument filed on behalf of the plaintiffs that there is no doubt but that there has been a breach of the Mareva Order by the failure to disclose this transaction to the liquidators of Akai before the sale agreement was executed, and that given that the property in question is Grande’s Singapore headquarters, and that its sale was required publicly to be disclosed pursuant to the rules of the Stock Exchange of Hong Kong, the sale of the property clearly was and is not a transaction within the normal course of business for Grande.

70.  Therefore, he said, in order to comply with the Mareva Order, Mr Ho should have notified Akai’s liquidators of the proposed sale of the property by no later than 1 June 2009, the day 14 days before the ‘Option Agreement’ dated 15 June 2009 referred to in the Announcement.

71.  To the contrary, in his skeleton argument filed in opposition to this application, Mr McCoy sought to uphold that which he described as the “emphatic” and “unchallenged” evidence of Mr Ho, and maintained that “the plaintiffs also cannot establish that the sale of the Grande Building was not in the ordinary course of business”.  He also submitted that in the absence of evidence that Mr Ho personally had caused or procured the Grande Building transaction, and in the absence of proof that the disposal was not in the ordinary course of business, that the plaintiffs could not establish any breach of the terms of the Mareva Order – although it should not be forgotten that by this application the plaintiff liquidators simply were seeking further – and now, apparently, highly relevant – discovery.

72.  In any event, Mr McCoy also firmly submitted, at least in his written material, that there was no basis for the orders as sought by the plaintiffs, and that it was not a proper basis for the grant of a disclosure order that the court would assist the plaintiffs to “monitor compliance” or to “police” the Mareva Order, and that the terms of the orders sought clearly indicated that the plaintiffs were “fishing” and were seeking the orders for “purposes other than to make the Mareva Order effective.”

73.  As shortly will be indicated, I did not have to sound to the issue of breach of the existing Mareva – it may be that this task will occupy another day – but on two points in particular I am minded to observe: first, that it strikes me as tolerably clear, if indeed the plaintiff bears the burden, that the sale of the headquarters building of the 2^nd defendant most certainly does not fall within the rubric of “the ordinary course of business”; and second, as to the contention, based on the old Bekhor v Bilton [1981] 1 QB 923 rubric, to the effect that disclosure is not permissible to ‘monitor compliance’ with the constraints of a Mareva injunction, it should be emphasized that nowadays the Commercial Court is far more sympathetic to the evolving attitude relatively recently expressed by Arden LJ in Dadourian Group vSimms (No 2), [2007] 2 All ER 329, at 335E, which, whilst earlier quoted in the 3^rd Judgment of this Court, dated 1 June 2009, seems to me to bear repetition:

“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 those assets…”

74.  I note also that in that same 3^rd Judgment, this court had observed (at para 53) that the objective observer might think that the instant case in particular was one wherein the court should be “astute” lest a mockery be made of the disclosure process, and further (at para 54) that the fact that Mr Ho “appeared to care little about the opinion of and orders of the Hong Kong court” ultimately was nothing to the central issue, which was that the court took the view that wholly inadequate disclosure thus far had been made, and that upon appropriate application the court should take such reasonable steps as it had available within its judicial “armoury” to ensure that there was substantial practical compliance with its orders.  Finally, the court further noted (at para 55) that thus far the history of events supported this position, and that the defendants’ assertions that the discovery obligations were more limited than the court regarded as appropriate, taken together with the tenor and content of the inter-solicitor correspondence (at that stage emanating from M/s Baker & McKenzie on behalf of the 1^st and 2^nd defendants), served to buttress the view that “Mr Ho and Grande are strongly motivated not to reveal the extent of their assets.”

75.  Re-reading these observations at this later stage, and in light of subsequent events, this court is reinforced in the views it earlier had expressed, and is struck yet again by the sustained level of resistance demonstrated by these defendants towards the asset disclosure which the court considers warranted in the circumstances, and which, of course, remains appurtenant to the Mareva relief issued as far back as 17 February 2009.

Decision

76.  As matters transpired, the plaintiffs’ application for the discovery sought was compromised, at least in part, because when the court returned for the hearing’s afternoon session, it emerged that leading counsel for the parties helpfully had been conferring as to the terms of a draft Order which had been prepared by Mr Kosmin, consisting of 5 paragraphs and 2 Schedules, and to which, at least in substantial part, Mr McCoy felt able to agree.

77.  In terms of this draft, Mr McCoy indicated a restricted level of agreement to paragraph 1(a) of the proposed order, dealing with the disclosure by the 2^nd defendant of certain categories of information (as identified in Schedule A) relating to the disposal of the Grande Building in Singapore, and also as to paragraph 1(b), which was in relation to the disposal of shares in Sansui Acoustics Research Corporation (and which in turn was cross-referenced to the categories of information in Schedule B); Mr McCoy was able further to agree to paragraph 2, which was that the 2^nd defendant was to give the plaintiffs at least 14 days’ advance written notice of the date of completion of the sale of the Grande Building in Commonwealth Lane, Singapore.  If I may say so, in this regard Mr McCoy was entirely sensible to act as he did; even had such agreement not been forthcoming, this court would have had little hesitation in making an order very substantially in terms of these paragraphs.

78.  Paragraph 4 of the Order, dealing with the amendment of the plaintiffs’ undertaking as to the disclosure of information obtained on discovery also was agreed.

79.  This left specific non-agreement as to paragraph 3 and paragraph 5.

80.  The thrust of paragraph 3 of the proposed draft Order went to the disclosure by the 1^st defendant, Mr Ho, of affidavit evidence detailing his dealings with his assets (as defined within paragraphs 2 and 3 of the Mareva Order dated 17 February 2009, and in light of the decision of this court dated 1 June 2009) since 19 November 2008 “being the date on which the Plaintiffs’ application for a Mareva injunction was made”.

81.  As to this, Mr McCoy submitted that this was clearly premature, since the disclosure as originally ordered after the 21 day extension was shortly due on 21 July, and until the plaintiffs saw what was contained in that disclosure there was no justified basis in asking the 1^st defendant to catalogue any movement of his assets, if indeed there had been any such movement, from the starting point of any given date, and in this latter regard he certainly did not agree with the proposed commencement date of 19 November 2008, as now was proposed by the plaintiffs.

82.  On reflection, however, and in light of all that has transpired in this case, not least in terms of the recent agreement for the sale of Grande’s Singapore headquarters, I do not consider that such disclosure as was said imminently to be forthcoming – as this judgment is written the court has no idea of precisely what was forthcoming – provided a sufficient basis to refuse the relief in paragraph 3, and therefore I have decided to order the relief therein sought.  It seems to me that if there has been no, or no significant, asset movement, any such affidavit will be short; if, on the other hand, the contrary is the position, the necessity for such information is clear – in which context I am reminded of the sage words of David Steel J (earlier quoted with approval in this court’s 2^nd judgment of 16 April 2009, at para 48 thereof) in Motorola Credit Corporation v Cem Cegiz Uzan [2002] 2 All ER (Comm) 945 to the effect that in situations wherein there was the possibility of a transfer or hiding of funds “the sooner the matter is clear on paper the better.”

83.  Accordingly, I make an order in terms of paragraph 3, save that I order that the date for compliance (at line 1) therefor be varied to “by no later than 4 pm on 7 August”, and that the date from which any such asset movement had taken place (penultimate line of para 3) be varied to “since 9 February 2009”, which was the date of publication of the Mareva judgment.

84.  As to paragraph 5, this is the part of the summons in which the plaintiffs seek costs, and more particularly indemnity costs.

85.  I have reflected on the situation, and do not grant costs upon an indemnity basis; nevertheless, I do consider that in the circumstances of this case an enhanced order for costs is appropriate, and accordingly in the exercise of my discretion I make the following costs’ order:

“The costs of this application be to the Plaintiffs, to be payable forthwith and to be taxed (if not agreed) on a common fund basis”.

86.  I turn now to the detail in the two Schedules to this draft Order, Schedules A and B, to which, as earlier indicated, paragraphs 1(a) and 1(b) cross-refer.

87.  Schedule A contains 11 paragraphs, and Mr McCoy has confirmed to the court his agreement to providing the information within paragraphs 1, 2, 6 and 11; he objected to the remainder.

88.  After considering the categories of information contained within these remaining paragraphs, I order that there be disclosure of the information within paragraph 3, paragraph 4, paragraph 5, and paragraphs 8, 9 and 10.

89.  However, I decline to make an order in terms of paragraph 7 of Schedule A; I  cannot see particular significance or relevance in terms of the manner of the marketing of the property in Singapore.

90.  As to Schedule B, Mr McCoy has indicated that he is willing to agree to paragraphs 1-6 inclusive, and also to paragraph 7, save for the last three lines thereof beginning with the words “together with…”

91.  This latter exception deals with any Board Resolution of the 2^nd defendant at which the Sansui Electric transaction was considered, and the production of associated materials relevant to the passage of that Resolution.

92.  For present purposes, I consider that the information within paragraph 7 is to be given in toto, since I am unable to see the justification for, or the utility of, any ‘hiving off’ the Resolution from its underlying/associated Board materials; accordingly I also make an order in terms of this paragraph.

Order

93.  I should be grateful if as soon as possible after publication of this Judgment that counsel for the plaintiffs would prepare an Order for engrossment in the terms indicated above.

94.  There is to be liberty to apply as to the form (but not the substance) of the Order.

HCCL 37/2005 and
HCCL 40/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NOS. 37 and 40 of 2005

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J U D G M E N T

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The applications

1. This is an ongoing discovery dispute in this action between on the one hand the liquidator plaintiff(s), and on the other the 1^st defendant, Mr Christopher Ho, and the 2^nd defendant, The Grande Holdings Ltd; this dispute has its origin in an ancillary disclosure order made by this court against both defendants at the time of granting direct Mareva injunctive relief against the 1^st defendant.

2. There are two applications before the Court which are the subject of this Judgment:

(i)  The plaintiff’s summons dated 17 March 2009, which summons stood adjourned from a previous hearing on 19 March 2009, attended by Mr Kosmin QC on behalf of the liquidator plaintiff and by Mr Snowden QC for the 2^nd to 20^th defendants: see Reasons for Decisions handed down by this court on 16 April 2009.

At this hearing this summons has been referred to as ‘theinterrogation summons’, whereby the plaintiff requested an order that there be leave to interrogate the 1^st defendant in this action, Mr Christopher Ho, alternatively that Mr Ho be cross-examined on oath with regard to certain transactions which have come to the attention of the plaintiff liquidator, and which are said to have raised concerns as to the veracity of Mr Ho and as to the issue of his compliance with the terms of a Mareva order made against him; and

(ii)  The plaintiff’s summons dated 27 April 2009, as substantially amended and re-dated 5 May 2009; at this hearing this has been referred to as ‘the specification summons’.

  By this summons the plaintiff liquidator seeks from Mr Ho a further affidavit which can be said properly to comply with paragraph 6 of the Mareva injunction Order of this court dated 17 February 2009 [‘the Mareva Order’], whereby inter alia Mr Ho was to inform the plaintiff of all his assets of an individual value of US$100,000.

  As matters transpired, this second summons, which in its amended form condescends to considerable detail in terms of specific categories of material now sought from Mr Ho (at paragraphs 1-3 thereof) and also from the 2^nd defendant to this action, Grande Holdings Ltd (at paragraphs 4 and 5), was characterised by Mr Kosmin QC, who again appeared with Mr Manzoni for the plaintiff liquidator, as the principal substantive application now before the court; he suggested that the interrogation summons had to all intents and purposes been superceded by the subsequent application.

  This amended ‘specification summons’ further seeks an order that the 1^st defendant, Mr Ho, be cross-examined on oath as to his assets, and as to the content of his affirmation evidence purportedly filed in compliance with the disclosure order of this court contained in the Mareva Order, and that two directors of the 2^nd defendant, Grande Holdings Ltd, also be cross-examined on oath as to the assets of that company purportedly disclosed in the affirmation evidence of the 2^nd defendant filed pursuant to the Mareva Order.

The procedural background

3. At the outset I should say a little about the manner in which this particular debate has arisen.

4. These consolidated actions represent but two in a series of actions taken by the plaintiff liquidators of Akai Holdings Ltd, which has been in liquidation since 2001, in an attempt to recoup/recover assets of Akai which, it is alleged, had been misappropriated from that company in what by common consensus is thought to be one of the largest corporate failures in Hong Kong history; when the liquidators came onto the scene, there was, I am told, no more than US$167,000 left in the till, hence the fact that in the ‘Akai litigation’ the liquidators are ‘funded’ by professional litigation funders, which are thought to be Australian companies specializing in this form of activity, as to the existence and activity of which this court has expressed some concern (vide the court’s discussion of this situation at paragraphs 124-143 of its Mareva Judgment dated 9 February 2009).

5. These two actions commenced in 2005, and the pleadings therein are voluminous, running into several hundreds of pages.

6. By summons dated 19 November 2008, the liquidator, in the person of Mr Borrelli, mounted an application for a Mareva injunction against Mr Ho, the 1^st defendant, and against The Grande Holdings Ltd (‘Grande’) the Hong Kong publicly listed 2^nd defendant.

7. On 9 February 2009 this court handed down its decision by a Judgment of that date.  That Judgment speaks for itself.

8. In short, the court ordered Mareva relief against Mr Ho personally, but not directly against Grande, and also ordered disclosure of assets asagainst both Mr Ho and Grande.

9. The precise terms of the Mareva Order as engrossed were determined at a hearing on 17 February 2009 which was attended by Mr Dobby, the plaintiffs’ solicitor, and by Mr Abraham Chan of counsel for the 1^st and 2^nd defendants.

10. Paragraph 6 of that Order read thus:

“Each of the First and Second Defendants must inform the Plaintiffs’ solicitors in writing within 42 days from the date hereof of all their assets of an individual value of US$100,000 in the case of the First Defendant and US$150,000 in the case of the Second Defendant, whether within or outside Hong Kong, whether in their own names or not, and whether solely or jointly owned, giving the value, location and details of all such assets.   The First and Second Defendants may be entitled to refuse to provide some or all of this information on the grounds that it may incriminate them.”

11. Paragraph 7 of the Order recited that the information disclosed by each of the First and Second Defendants must be confirmed on affidavit to be served on the plaintiffs within 14 days of the disclosure given pursuant to paragraph 6 of the Order, and Schedule 3 of the Order provided details under the heading of “Particular Assets Subject to this Order” of both Mr Ho and Grande.

12. The Mareva Order of 17 February 2009 appears to have been just the beginning of associated applications to the court.

13. Thus, on 17 March 2009 the 1^st and 2^nd defendants took out a summons requesting ‘clarification’ of the Order, and further, by amended summons dated 6 March 2006, the 1^st defendant applied for a stay of execution of the ancillary disclosure order made against the 1^st defendant pending the hearing of his appeal in CACV 44 of 2009, under Notice of Appeal dated 5 March 2009, against the grant of  Mareva relief, which appeal I am told is due to be entertained by the Court of Appeal on 22 July 2009.

14. For its part the plaintiff liquidator took out ‘the interrogation summons’ dated 17 March 2009, to which reference has been made at the outset of this judgment.

15. At the end of the hearing of these three applications on 19 March 2009, this court adjourned ‘the interrogation summons’, which now is restored for adjudication, but dismissed the ‘clarification summons’ and the ‘stay of execution’ summons.

16. The next event of note was that on 31 March 2009 Mr Ho and Grande, in the person of a Ms Christine Asprey (whom, I am told, is Mr Ho’s sister) filed affidavits purporting to make disclosure pursuant to paragraph 6 of the Mareva Order.

17. It is fair to say that the quality of this disclosure left the plaintiff liquidator unimpressed, and on 6 and 14 April 2009 Messrs Lovells, solicitors for the plaintiffs in these actions, wrote to Messrs Baker & McKenzie, solicitors for the 1^st and 2^nd defendants, to complain as to the adequacy and quality of the ‘disclosure’ as thus made.

18. On 14 April Baker & McKenzie replied that it would not be possible to respond by that day in light of the work then required to complete Grande’s annual financial results, which were due to be announced on 22 April, and also the completion of the Points of Defence, which document was due to be filed on 15 April 2009; accordingly it was said that they would take instructions on Lovells’ complaints as to the allegedly inadequate disclosure within the two weeks following.

19. Two days later this court handed down its ‘Reasons for Decisions’ for the dismissal of the respective applications for a stay of execution and for ‘clarification’ of the Mareva Order, and on the following day, 17 April 2009 Baker & McKenzie wrote to Lovells in order to provide an explanation for the two commercial transactions (the ‘Lafe transaction’ and the ‘Sansui transaction’), the knowledge of which had stimulated the plaintiff to issue ‘the interrogation summons’ on the same day.

20. On 27 April 2009, the plaintiff issued the initial version of ‘the specification summons’, which was marked returnable on 30 April 2009, for an order requiring Mr Ho and Grande to “fully and properly” comply with paragraph 6 of the Mareva Order, and further to exhibit financial statements and tax returns, and to address issues raised by Lovells in their letters to Baker & McKenzie of 6 and 14 April 2009.

21. At the hearing on 30 April, the plaintiff submitted draft orders which now were sought in lieu of those orders originally sought in the summons of 27 April 2009, and further agreed, after discussion between Bench and counsel, to amend the summons to reflect the application as now was being advanced in terms of the specification and increased ambit of the additional material sought; this, it was said, represented the substance of that which the plaintiff liquidator considered “proper and appropriate” disclosure ancillary to the Mareva relief as earlier granted.

22. Accordingly, the court adjourned the so-called ‘interrogation summons’ and the ‘specification summons’ to a day’s hearing on 8 May 2009, and also made relevant consequential directions.

23. On 6 May 2009 Baker &  McKenzie wrote to Lovells setting out in detail Grande’s response to the matters set out in Lovells’ letters of 6 and 14 April, and on 7 May 2009, that is one day prior to the substantive hearing, Mr Ho filed his 4^th affirmation dealing with certain matters arising.

Ambit of the discovery argument

24. Each party has taken the time and trouble to produce detailed and informative skeleton arguments with regard to the summonses presently before the court, and I have found both documents to be of considerable assistance.

25. In light of the extent of the information and argument as has been committed to paper, I hope I will be forgiven if for immediate purposes I merely outline the main lines of argument adopted by each side.

26. For the 1st and 2nd defendants, Mr Ho and Grande, Mr Godfrey Lam SC, leading Ms Lau, made his initial focus the ‘interrogation summons’, and in reliance upon, inter alia, dicta in A J Bekhor & Co Ltd v Bilton [1981] 1 QB 923, at 949B-C, Mr Lam emphasized that disclosure orders are based upon what is necessary to make the Mareva injunction effective, and that any disclosure order must be approached in light of this purpose; in this context reference also was made to the observations of Ma J (as he then was) in Yau Chiu Wah v Gold Chief Investment Ltd & anr [2002] 2 HKLRD 832, at 840, wherein the learned judge had emphasized that the purpose of making an ancillary disclosure order was to identify and preserve the assets of the defendant falling within the scope of the injunction.

27. Mr Lam also laid considerable stress upon the principle that neither interrogation nor cross-examination should be granted for the purpose of uncovering whether the defendant in question has acted in breach of the Mareva injunction as granted – which, he suggested, appeared to have been the main focus of the correspondence which had emanated from Messrs Lovells in connection with this summons – and that it also was important to bear in mind that cross-examination for the purpose of uncovering whether or not the defendant had broken undertakings to the court should not be given: see, for example, Gee, Commercial Injunctions, 5th ed., at para 22.025, and Memory Corp plc v Sidhu [2000] Ch 645, at 647, 649.

28. Accordingly, he asked that the ‘interrogation summons’ be dismissed.

29. As to the ‘specification summons’ Mr Lam made a number of points.

30. He noted that in principle no objection was made to the attendance for cross-examination of Mr Ho and Ms Asprey (or of another director, Mr Adrian Ma, who would swear an affidavit confirmatory of that sworn by Ms Asprey, who had sworn her affidavit only by reason of Mr Ma’s temporary absence from Hong Kong) for the purpose of legitimate cross-examination; at the same time, however, Mr Lam submitted that extensive details of assets, such as were now sought by the plaintiff in the ‘specification summons’, are not necessary where it already is established what assets have been covered by the injunction, and that there was no reason why for present purposes the plaintiff should need to know further details, such as, for example, the basis of the valuations which had been given of the assets now disclosed.

31. Mr Lam emphasized that the court should be vigilant not to permit the Mareva jurisdiction to be used by the plaintiff obtaining that order to obtain security for the claim – which was yet to be sustained, proved and adjudged – nor to permit the defendants to be treated as judgment debtors.

32. Mr Lam stressed that there was no intention on the part of Mr Ho or of Grande to conceal any assets, that there had been effected “conscientious disclosure” thus far, and that in any event Mr Ho and Grande (through Mr Adrian Ma) openly had stated their willingness to attend examination on oath relating to the disclosure thus far made.

33. Moreover, light of the fact that the plaintiff liquidator was ‘funded’ in this litigation by third party litigation funders, Mr Lam also cast doubt upon the motives of the plaintiff in seeking such extensive further disclosure as was set out on the face of the amended ‘specification summons’, noting that the type of information as now sought doubtless would be useful for the plaintiff to have “for their own commercial purposes”, and that it was not necessary as part of the disclosure which had been ordered in aid of the Mareva relief as granted.

34. In his skeleton argument Mr Lam made specific comments upon each of the paragraphs of the ‘specification summons’, and left the court in no doubt but that in his submission this was unnecessary and inappropriate satellite litigation against a backdrop wherein, as the 1st and 2nd defendants maintained, already there had been “full compliance” with the disclosure order contained in paragraph 6 of the Order of 17 February 2009, and that the present amended ‘specification summons’ represented a step too far, and was “oppressive, unnecessary and egregious.”

35. Whilst both leading counsel agreed upon basic legal principle, it is perhaps unsurprising in the circumstances that Mr Kosmin QC took an entirely contrary view of the merits – and of the necessity – of the ‘specification summons’, although he made it clear at the outset that since Mr Ho and Mr Ma now were apparently offering themselves for cross-examination, he considered that the so-called ‘interrogation summons’ had been rendered little more than a preliminary sideshow, and that the substance thereof effectively had elided into the substance of the amended and far more detailed ‘specification summons’.

36. Accordingly, Mr Kosmin focused his efforts upon this latter application, in which regard his basis thesis was that Mr Ho and Grande had been “playing games” in terms of the quality and quantity of the disclosure as thus far made, and that in effect they were “cocking a snook” at the relevant court order in a manner which was little short of “disgraceful”.

37. Whilst Mr Kosmin acknowledged the apparent statement of intent to appear and to be cross-examined on the part of Mr Ho personally, and now also of Mr Ma for Grande (in lieu of Ms Asprey), he submitted that should the ‘disclosure’ made to-date to be permitted to be left in its current wholly inadequate state, the inevitable result would be that such cross-examination as now was being offered in reality would prove wholly ineffective, and that upon such cross-examination the deponents would be able to take refuge in responses which indicated that they were unable ’off the top of their heads’ to recall any degree of detail in terms of the primary categories of assets thus far disclosed.

38. Thus, leading counsel submitted, this exercise effectively would prove a re-run of the earlier section 221 examinations which the Akai liquidator had conducted, wherein little of use was obtained by the liquidator by reason of a lack of documentary evidence made available in advance upon which to found any serious cross-examination.  If this be correct, Mr Kosmin suggested, there was a clear and pressing necessity for an appropriate level of asset disclosure in anticipation of the now-promised cross-examination.

39. As to Mr Lam’s point that it was not the purpose of ancillary disclosure orders to function as vehicles for detecting breach of the disclosure order as made, Mr Kosmin made it clear that he understood the purport of that submission, but noted that the final sentence of paragraph 6 of the primary Order of 17 February 2009 had made due allowance for this eventuality, viz.: “The First and Second Defendants may be entitled to refuse to provide some or all of this information on the grounds that it may incriminate them.”

40. Mr Kosmin further submitted that this latest bout of opposition on the part both of Mr Ho and Grande to what he insisted were “wholly legitimate and sustainable requests” for the additional disclosure now requested was entirely consistent with the nature of the defendants’ earlier applications which had been rejected by the court, namely the attempt at ‘clarification’ of the disclosure order, and the application that there be a stay of execution of such order pending the appeal, now due to be heard on 22 July 2009, against the grant of direct Mareva relief against Mr Ho personally.

41. Accordingly, Mr Kosmin asked the court to take a view as to the motives behind the present stout opposition to what, he insisted, were entirely reasonable disclosure requests which clearly were necessary to make effective such Mareva relief as had been granted.

42. Mr Kosmin’s skeleton in this regard goes into some detail in terms of the categories of disclosure which now were sought by the liquidator, and he observed that Mr Ho’s 3^rd affidavit sworn on 31 March 2009 not only provided, as he put it, “woefully inadequate” information, but that on its face it was in breach of paragraph 6 of the Mareva order; in this regard he suggested that the most obvious example of such inadequacy is that Mr Ho purported only to identify the principal categories of assets held by the family trust, contrary to his express obligation to disclose all assets over the value-level specified.

43. He also provides a detailed commentary of the assets of which disclosure was sought under various generic heads, viz: Jewellery and Objets d’Art, Cash, Bank Accounts and other investments, the assets within the ‘Trust’ (itself inadequately defined), which appear principally to be shareholdings in 14 overseas companies absent any identification of what is held by those companies, and also a property at Mount Kellett, which evidently is used as Mr Ho’s home in Hong Kong, albeit of this property there had been no mention in his affidavit, and in fact its existence had come to the plaintiff’s attention only as the result of a newspaper report in the Standard of 7 April 2009 of a domestic dispute involving Mr Ho.

44. As to the disclosure purportedly effected by Grande, Mr Kosmin was equally critical, submitting that Ms Asprey’s affidavit sworn on behalf of Grande “contains little or none of the details that are required properly to comply with the disclosure order.”

45. This skeleton argument speaks for itself; suffice it to say that Mr Kosmin characterised the ‘disclosure’ to-date as “deliberate evasion”, a situation which the now-amended ‘specification summons’ was designed to remedy, and he asked for an order in terms of that application.

The ‘specification summons’: Decision

46. Notwithstanding Mr Lam’s admirable efforts upon his clients’ behalf, wherein at no time was there any attempt unfairly to ‘gloss’ or otherwise to obfuscate in his vigorous defence of the adequacy and appropriateness of the existing disclosure, I had considerable sympathy with Mr Kosmin’s complaint as to the transparent defects within the disclosure exercise as thus far effected; in fact, given the obvious approach to, and the limited content of, the disclosure as presently provided, it was difficult not to conclude that Mr Ho appears to have little interest in essaying appropriate compliance, and in lieu thereof that which has been proffered to-date amounts to little more than a gesture towards going through the disclosure motions.

47. I hope that this characterisation is not unfair, but I regret that I have been driven to this opinion.

48. Accordingly, I view the amended ‘specification summons’ essentially as a remedial exercise, wherein Mr Ho and Grande are offered a further chance to provide a fuller and more complete asset picture than hitherto has been the case.

49. Nor do I accept the beguiling notion that the asset disclosure defects of which vigorous complaint now is mounted – and which have been disputed – in themselves would best be rectified simply and solely by means of proffering Mr Ho and Mr Ma for cross-examination, which represents the defendants’ current position. 

50. It strikes me as tolerably clear that absent primary data upon which to cross-examine, the overwhelming probability is that any such exercise would be rendered nugatory in practical terms, given the lack of detailed recollection likely to be invoked by both examinees, with the result that the plaintiff, which has obtained Mareva injunctive relief against Mr Ho directly, and ancillary disclosure orders against both Mr Ho and Grande, now would be no further forward in any realistic identification of the assets the subject of this relief.  As Ma J observed in Yau Chiu Wahv Gold Chief Investment Ltd, op cit.,

“…the cross-examination of a deponent is not simply an examination on an appointed date.  It is possible if not probable that further discovery in preparation for the hearing may be required.  The production of accounts in the case of a company is perhaps the best example of this…”

51. I bear in mind the existence of the appeal now pending against the grant of the primary Mareva relief, and that if such appeal by Mr Ho – Grande is not, I understand, appealing the disclosure order made against it – were to be successful, then the jurisdictional basis for the disclosure as now sought by the liquidator necessarily would fall, but for present purposes the court must proceed on the basis that such inital Order was correctly made; as earlier observed, the court has rejected the application for a stay of execution of the disclosure order, emphasising in the judgment on that application (at paragraph 37 et seq) that the court agreed with the views of David Steel J in Motorola Credit Corporation v Cem Cegiz Uzan [2002] 2 All ER (Comm) 945 that in situations wherein there remained the possibility of a transfer or hiding of funds – which Mr Kosmin maintains precisely remains the risk in this case – that “the sooner the matter is clear on paper the better”, and further that, as Lord Woolf also put in on appeal in that case (at [2002] EWCA 98), a disclosure order is “intimately involved in the effectiveness of the freezing order.”

52. I accept also the proposition that in the commercial context there is now abroad a more robust judicial attitude towards ensuring the effectiveness of Mareva relief, and a to an extent a drawing back (or advancing from) arguably the more conservative ‘Bekhor v Bilton’ emphasis discernible in the Nineties; in this connection Mr Kosmin drew the attention of the court to the relatively recent observations of Arden LJ in Dadourian Group v Simms (No 2), [2007] 2 All ER 329 at 335E, wherein her Ladyship observed:

“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…”

53. It seems to me that in the present circumstances, that mythical (and allegedly reasonable) observer, the man on the Shawkiwan tram, might think that the instant case was and is particularly one where the court should be thus “astute”, lest a mockery be made of the disclosure process. 

54. The fact that Mr Ho appears to care little about the opinion and/or orders of the Hong Kong court ultimately is nothing to the central issue, which is that in my view inadequate disclosure thus far has been made, and upon application being made in an attempt to rectify this situation, the court should take such reasonable steps as it has available within its “armoury” to ensure that there is substantial practical compliance with its orders.

55. In my view the history of events to-date tends to supports this position: in this context I refer to the attempts to limit the scope of the Order as made, the assertion that the discovery obligations are more limited than the court clearly regards as appropriate, and the tenor and content of the inter-solicitor correspondence on the point, which all buttress the view that Mr Ho and Grande are strongly motivated not to reveal the extent of their assets.

56. The result is that I have been convinced to grant a substantial proportion of that which presently is sought in the body of the amended ‘specification summons’, to the detailed provisions of which I now briefly turn.

The discovery sought by the plaintiff liquidator

57. As against Mr Ho personally, the application for additional discovery essentially is in three parts:

Paragraph 1 deals with three different asset classes, namely collections of furniture, jewellery, crystal, watches, paintings and objets d’art, collections of wine, and savings accounts, investment portfolios, unit trusts and pension funds; paragraph 2 specifies 6 categories of ancillary details and, where relevant, associated documentation in connection with the asset categories specified in paragraph 1; and paragraph 3 goes to the provision of bank account details, details relating to the source of all funds which the 1^st defendant uses to pay his living expenses, a summary breakdown of those expenses, and lastly, the request to address particular issues identified in the plaintiffs’ solicitor’s letters dated 6^th and 14^th April 2009.

58. As against Grande, two paragraphs go to the specified discovery now sought: paragraph 4 seeks affidavit/affirmation evidence sworn by a director of that company of all its assets of an individual value of US$150,000, within or without Hong Kong, and howsoever held, giving value, location and details of such assets; whilst paragraph 5 itemises, as subparagraphs (a) to (h), eight categories of the detail required pursuant to the assets to be listed pursuant to paragraph 4.

59. In addition, paragraph 6 of the amended summons seeks a further or alternative order that the 1^st defendant be cross-examined on oath as to his assets, including those disclosed and to be disclosed in accordance with paragraph 1 of the summons, whilst paragraph 7 requests that Mr Ho, Mr Adrian Ma Chi Chiu and Ms Asprey Lai Shan, Christine, as directors of Grande be cross-examined on oath as to the 2^nd defendant’s assets, including those assets to be divulged in an affidavit to be sworn pursuant to paragraph 4 of this order.

60. Finally, paragraph 8 of the revised application seeks an order for costs of and occasioned by this application on an indemnity basis, whilst paragraph 9 provides for liberty for the plaintiffs to apply.

61. I have set out in outline the content of this amended summons because in making the Order which I have decided to grant on this application I cross-reference the terms of this Order to the internal numeration of the amended ‘specification summons’.

62. In addition to such further disclosure I now have decided is appropriate – the better, in Lord Woolf’s words in Motorola, op cit., at 955h, to give “the teeth which are critical to the freezing order” – I should make it clear that I recognize that this further disclosure goes further than the existing disclosure order, in that in certain instances it seeks delivery up of documentation evidencing disclosed assets, and documents which identify the Trust which stands at the apex of Mr Ho’s asset structure pyramid – vide ‘Schedule D’, to which reference is made (at paragraph 34 thereof) in the ‘clarification of Order’ judgment dated 16 April 2009.

63. This aspect of the matter has given me pause for reflection, not least given Mr Lam’s crisp observation that notwithstanding the dismissal of the 1^st and 2^nd defendant’s application to ‘clarify’ the Order of 17 February 2009, nevertheless in turn the plaintiff liquidator himself now is seeking to rewrite/extend the ambit of the original order.

64. At first blush this argument appears to have some resonance, but on reflection it seems to me that it does not succeed; this application as now mounted by the plaintiff was necessitated by the deficient approach towards the disclosure as originally ordered ancillary to the Mareva injunctive relief, and if as a direct consequence of such deficient disclosure, the plaintiff is required substantially to revisit the issue and to complain about what has been done in the course of such purported compliance, it does not seem to me to be impermissible subsequently to extend its detailed ambit consequent upon the perfunctory and clearly incomplete disclosure as in fact made.

65. As Mr Kosmin pointed out, it is evident that there is jurisdiction to grant this order if the interests of justice so require, and the patent deficiency of the asset disclosure as thus far purportedly made by the 1^st and 2^nd defendants serves reasonably to buttress the perceived necessity on the part of the plaintiff liquidator for the specified degree of asset disclosure as now sought. 

66. In this connection there has been cited to this court parts of the judgment of Openshaw J in Cinar Productions v Panju [2006] EWHC 2557, in particular at paragraphs 10-15 thereof, wherein the learned judge observed, inter alia, that whilst orders for the delivery up of documents is intrusive and overrides privacy and confidentiality, nonetheless this is justified in “the compelling interests of justice”.

67. Mr Justice Openshaw in that case also adverted to the argument placed before him by counsel for the defendant that production of further material enhances the potential risk of subsequent contempt proceedings being founded against the defendant, and he appears to have had little hesitation in rejecting this line of argument, noting (op cit., at paragraph 12) that “if such an argument was upheld it would effectively prevent orders for the delivery up of documents being made or being pursued against evasive defendants”; in the same vein (op cit., at paragraph 13) the judge also saw no difficulty in principle in “requiring the defendant to deliver up documents relating to his past financial conduct because it may identify the whereabouts of present and existing assets.”

68. I thus see no conceptual objection to granting an Order in the terms hereinafter set out which, in my judgment, is required in the interests of justice in this case; as I have observed, the apparent evasiveness to-date towards discovery serves to reinforce the merits of the present application.

The Order to be made

69. I have reflected upon the categories/subcategories as enumerated in the amended ‘specification summons’, and the parties’ helpful and detailed submissions with regard to each such individual category/subcategory, and after evaluating the competing arguments, and reflecting upon the necessity for such disclosure in the interests of justice, in the exercise of my discretion I have attempted to strike a balance between the interests of the plaintiff liquidator and the legitimate interests of the 1^st and 2^nd defendants; such balancing exercise attempts to informs the decisions thus reached.

70. I would further add that since cross-examination has been volunteered by the 1^st and 2^nd defendants, and since the avowed purpose of the plaintiff liquidator in pursuing such further discovery, now to be supplemented by cross-examination, solely is to enable the effective enforcement of the Mareva relief which has been granted, I see no necessity to become concerned as to the potential difficulties which Gee, op cit., at paragraph 22.025, suggests may arise when there is “blended together” a cross-examination for the purpose of enabling an effective enforcement of a court order with a cross-examination directed to uncovering whether the defendant has broken undertakings given to the court; in any event, if and in so far as there may arise some difficulty of this nature during such cross-examination, there remains in the 1^st and 2^nd defendants the opportunity and right to invoke the privilege against self-incrimination. 

71. Accordingly I now make the Order in the terms hereinbelow indicated; as earlier noted, the content of this Order is cross-referenced to the particular paragraphs/subparagraphs of the amended ‘specification summons’, and I should be grateful if junior counsel on each side would agree the cumulative form of Order to be engrossed in order to reflect the following:

(i)  There is to be an order in terms of paragraph 1 of the amended summons;

(ii) There is to be an order in terms of subparagraphs 2 (a),  (b),(c),(e),(g), and (h).  The application in terms of subparagraphs 2 (d) and (f) is refused;

(iii)    There is to be an order in terms of subparagraphs 3 (a), (b), (c).  The application in terms of subparagraph 3(d) is refused;

(iv)    There is to be an order in terms of paragraphs 4.

(v) There is to be an order in terms of subparagraphs 5 (a), (b), (c), (d), (e) and (g).  The application in terms of subparagraphs 5(f) and (h) is refused;

(vi)    As to the orders in (i) to (iv) above, such disclosure is to be made within 21 days of the date on which the engrossed  Order is served on the solicitors for the 1^st and 2^nd defendants;

(vii)   There is to be an order in terms of paragraphs 6 and 7 (relating to cross-examination), save that:

(a) if and in so far as Mr Adrian Ma deposes on oath to the truth of the content of the 1^st affidavit of Ms Christine Asprey, thereby adopting such evidence as his own, Ms Asprey need not attend for the purpose of cross-examination;

(b) absent such a confirmatory affidavit/affirmation from Mr Ma, Ms Asprey herself is to attend for the purpose of cross-examination;

(c) such cross-examination as aforesaid is to be conducted on a date to be fixed before the High Court Judge seized with the future conduct of this case, and in any event not earlier than 21 days subsequent to receipt of the disclosure particularized at paragraphs (i) to (v) above;

(viii)  There is to be liberty to all parties to apply.

Costs

72. Paragraph 8 of the amended ‘specification summons’ requests that the costs of and occasioned by the application be to the plaintiffs to be paid by the 1^st and 2^nd defendants on an indemnity basis.

73. In normal course I should be minded to essay a costs’ order nisi consequent upon the resolution of this amended summons; however, on this occasion I consider it prudent to reserve costs, and so order.

74. I say this in light of the forthcoming appeal to be mounted by the 1^st defendant against the ‘Mareva Order’ of 17 February 2009, which appeal, as earlier indicated, is to be entertained by the Court of Appeal on 22^nd July 2009.

75. As earlier noted, if and in so far as that appeal were to be successful in any part, the foundation of the disclosure orders as then made will be removed, and in such eventuality there may be a consequential ‘ripple effect’ in terms of the costs orders relating to subsequent applications, including this ‘specification summons’.

76. Accordingly, in this instance I see no downside to reserving costs to await the appellate event, and, in the absence of agreement on the issue, further to order that written submissions on costs be made to this court not later than 14 days after the determination of the forthcoming appeal.

The ‘interrogation summons’: Decision

77. The focus of the argument on and in the terms of the ‘specification summons’ effectively has rendered the earlier ‘interrogation summons’ something of a preliminary side-show, since for all practical purposes it was overtaken by the summons issued some five weeks later, and as thereafter amended.  In this regard, Mr Kosmin made it clear that in the circumstances as had evolved, his focus entirely was upon the subsequent amended application.

78. I accept the submission that in substantive terms there is no necessity for any order to be made on this earlier summons, although I suspect that there may be some residual argument as to costs; in this context, I repeat my earlier observation as to the appropriateness of reserving any such costs’ argument pending the 1^st defendant’s appeal.

79. Accordingly, the Order of this court upon the plaintiff’s summons dated 17 March 2009 is that there be no order on the substantive application, save that as to the costs thereof, absent agreement thereon, it is further ordered that the issue be reserved to this court, to be determined on the basis of written submissions submitted to this court no later than 14 days after the determination of the appeal on 22 July 2009.

80. Once again, I should be grateful if junior counsel would agree upon the precise form of this Order.

HCCL 37/2005 and
HCCL 40/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 37 OF 2005

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(Consolidated)

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REASONS   FOR   DECISIONS

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The applications

1.  At a hearing on 19 March 2009 three summonses were before this Court:

(i)  Summons dated 17 March 2009 taken out by the 1^st and 2^nd defendants for ‘clarification’ of the Mareva Order dated 17 February 2009;

(ii)  Amended summons dated 6 March 2009 taken out by the 1^st defendant for a stay of execution of a disclosure order pending the hearing of the appeal of the 1^st defendant in CACV 44 of 2009 under Notice of Appeal dated 5 March 2009;

(iii)  Summons dated 17 March 2009 taken out by the plaintiffs for an order for leave to interrogate the 1^st defendant, Mr Ho, alternatively that Mr Ho be cross-examined on oath with regard to two recent transactions which had come to the attention of the liquidators and which, it is said, have raised serious further concerns as to the veracity of Mr Ho and as to the issue of his compliance with the Mareva Order as made against him.

Decisions taken at the hearing on 19 March

2.  The summons at (iii) above was adjourned to a date to be fixed, with costs reserved.

3.  As to the summonses at (i) and (ii) above, at the end of a full day’s hearing each of these applications was dismissed with costs, with brief reasons to be given later.

4.  This I now do.

The procedural background

5.  Over a period of 5 days in late December 2008 and in late January 2009, this court heard an application for an inter partesMareva injunction and ancillary disclosure orders.

6.  On 9 February 2009, this court delivered its written judgment upon those applications.

7.  That judgment, of some 73 pages speaks for itself; paragraph 91 thereof purports to summarise the substance of the orders the court desired to make “subject to the drafting of the relevant Order”.

8.  In outline, the court granted Mareva relief against the 1^st defendant, Mr Ho, but specifically declined so to do against the 2^nd defendant, The Grande Holdings Limited.

9.  In addition, ‘asset disclosure orders’ were made against both defendants.

10.  Pending formal engrossment of the Order consequent upon this judgment, an existing Interim Order dated 23 December 2008 was declared to remain in force.

11.  Paragraph 193 of this judgment anticipated that as to certain detail (for example, as to acceptable expenditure levels and as to time limits for disclosure orders) and also regarding ‘final settlement’ of the wording of the Order, that counsel would appear at a short appointment which would “enable brief argument upon any point of difference which may arise in terms of collateral detail or in terms of drafting…”; at the same time it was anticipated that counsel would be heard upon the issue of the costs of the application.

12.  This short appointment took place on 17 February 2009: for the plaintiff Mr Dobby of Messrs Lovells, attended, and for the defendant, Mr Abraham Chan, junior counsel to Mr Snowden at the substantive hearing of the Mareva application.

13.  A number of matters of detail were canvassed at this hearing; in particular, the draft Order as proposed by the plaintiff was considered in detail, before being engrossed in the form of the draft, as further amended consequent upon the representations as then were made to the Court on behalf of the parties.

14.  On 5 March 2009 the 1^st defendant filed his Notice of Appeal against the judgment of this court granting Mareva relief against him, the hearing date of which, I now understand, is fixed for 22 July for 2 days; the corporate 2^nd defendant, which is publicly listed in Hong Kong, mounts no appeal against that judgment, wherein no direct injunctive relief was granted against the company, although asset disclosure was ordered.

The ‘clarification summons’ dated 17 March 2009

15.  This application was moved by Mr Snowden QC, who led for the defendants in the Mareva application, and was opposed by Mr Kosmin QC, leading counsel for the liquidator plaintiffs in that application.

16.  Each side furnished useful skeleton arguments, the content of which I shall not rehearse in detail.

17.  The broad thrust of Mr Snowden’s argument was that the Order as engrossed required clarification, and that this application was made pursuant to the express permission granted within the Order to apply to the court at any time for a variation; he said that there was a concern on the part of Mr Ho and Grande that the plaintiff liquidators were “attempting to interpret” parts of the Order in a manner inconsistent with the Judgment which had been given, and thus were “seeking to extend the scope of the Order so as to inhibit dealings by third parties with their own assets” which were not covered by the Order.

18.  Mr Snowden rehearsed the basic principles of the Mareva remedy, and emphasized that relief should not be granted in relation to assets which appeared on their face to belong to a third party unless there is a “good reason” for supposing that such assets “are in truth assets of the defendants”: see SCF v Masri [1985] 1 WLR 876, at 884.

19.  His basic thesis was that the Mareva injunction should respect the fundamental principles of company law that a company is a separate legal entity and that the assets of a company do not belong to the shareholders of the company: see Saloman v Saloman [1897] AC 22 (HL).

20.  Thus, he argued, the assets of a subsidiary company are not to be treated as assets of the parent company, and he noted that the judgment of the court upon the substantive application reflected the underlying intention that Mr Ho should be restrained from taking actions qua shareholder in respect of his beneficial interest in Grande.

21.  Mr Snowden suggested that it was apparent that the liquidators had misinterpreted the Judgment and Order, had “seized upon” the description of certain assets in the Schedules to the Order in order to contend that the Order applied to transactions far beyond its intended scope, and had expressed concern in respect of two specific matters:

(i)  the deposit by way of security in 2008 of share certificates in Sansui Acoustics Research Corporation by Sansui Electric Co Ltd with Sansui Japan; and

(ii)  the apparent agreement of Lafe Corporation Ltd to sell its own shares in Lafe Components Ltd and five other subsidiaries.

22.  Mr Snowden argued that these transactions did not, on their face, fall within the scope of the Order as engrossed, and that there was no proper basis either for the disclosure or for the cross-examination order as now was sought by the liquidators in their summons of 17 March 2009.

23.  He said that if and to the extent that the aim of the liquidators was to seek information concerning dealings by Mr Ho with that which the liquidators mistakenly asserted to be Mr Ho’s assets, then subject to any stay pending appeal, such intrusive orders should not be made until after the defendants had given disclosure of their assets in accordance with the Order as made.

24.  In the disclosure context, Mr Snowden made it plain that the thrust of the present objection and the need for clarification arose from paragraph 6 of the Order, wherein Grande and Mr Ho were required to make disclosure of “all their assets”, that is, assets beneficially owned by them, and not by the plethora of other subsidiary and related companies, and that the terms of the disclosure order as made did not extend to assets of Mr Ho or of Grande in which they had no legal or beneficial interest.

25.  Accordingly, he said, if there was any doubt about the true scope of the disclosure required under paragraph 6 of the Order, such doubt could and should be removed by the insertion of the words suggested in the draft amended Order appended to the summons, and he maintained that the Court now should vary its order in the manner suggested by Mr Ho “so as to put its meaning beyond doubt”.

26.  For the plaintiff liquidator, Mr Kosmin QC had little truck with this argument.

27.  He argued that the Mareva Order itself, which in particular incorporated Schedule 3, a schedule entitled ‘Particular Assets Subject to this Order’, and which delimited the assets of the 1^st and 2^nd defendants, had been the subject of full and detailed argument between the parties, and that there now was no basis for Mr Ho and Grande to seek to rewrite it in what was, he said, an “entirely misconceived application” and one which he characterised as “a blatant attempt to avoid making full and proper disclosure”, and thus to avoid scrutiny in relation to the recent transactions as identified by the plaintiffs.

28.  If this ‘clarification/Order amendment’ application were to be granted, leading counsel submitted – he also made it clear that he did not accept that there was any proper jurisdictional basis for now so doing – this would have the practical effect of materially amending/rewriting the Mareva Order as perfected in a manner inconsistent with the judgment as delivered, and in a way that would significantly and unreasonably limit the terms of the prohibition upon the disposal of assets and avoid making any proper disclosure of the defendants’ respective assets.

29.  It was clear, said Mr Kosmin, that what these defendants now were after was a substantial limitation of the scope of the current disclosure order such that it would apply only to assets directly held, but would not extend to assets held beneficially or by subsidiary companies.

30.  It was also evident, he said, that the Mareva Order as made was designed to prevent Mr Ho from using his legal (that is, direct) or beneficial (that is, indirect) ownership to cause the underlying companies to dispose of their assets, and that the amendments as now proposed to the Order would severely impact upon the scope and effectiveness of that Order.

Basis for decision

31.  I agreed with and accepted Mr Kosmin’s submissions, and accordingly dismissed with costs the application to ‘clarify’ the Order as engrossed.

32.  The Mareva Order, as drafted and thereafter perfected – it must be borne in mind after input and detailed submission from Mr Abraham Chan on behalf of the defendants at the appointment held to finalise the Order subsequent to the Judgment – had attempted to strike a balance between preventing Mr Ho from utilise his complex corporate empire in order to dissipate his assets, howsoever so held, and yet at the same time not to obstruct the conduct of ordinary business.  Nor did I consider that the Order was ambiguous or misleading in light of the Judgment as issued.

33.  In the Judgment (at paragraph 48, page 25) this court specifically had noted:

“It is known that Mr Ho holds his private assets through opaque structures in differing jurisdictions around the world, and during this hearing reference has been made to a corporate chart (at ‘Annexure D’ to the plaintiffs’ skeleton argument) which is thought to approximate the shareholding structure in various private companies and trusts as at February 2008”

and viewed from this perspective, it struck me that Mr Snowden’s invocation of Saloman as a means of precluding inquiry/disclosure was ambitious to say the least, and was not a submission with which I had a great deal of sympathy in the particular circumstances of this case.

34.  Indeed, having regard to the content of ‘Schedule D’, to which diagram/chart considerable attention had been paid by both sides during the hearing, the reductio of Mr Snowden’s argument would have resulted in a disclosure affidavit/affirmation by Mr Ho that contained reference to but one company only, namely, a BVI company at the apex of the corporate structure by the name of “The Ho Family Trust Limited”, which ‘Schedule D’ indicates is 100% held on trust for Mr Ho by Accolade Ltd, and from which all the other corporate entities emanate, whether they be held 100% by The Ho Family Trust Limited or which (save for Sansui Electric Company Ltd at 40%) are held in lesser, albeit majority, percentages in excess of 50%.

35.  At the end of the day, there may well have been some truth in Mr Kosmin’s barb to the effect that this so-called ‘clarification’ application, together with the accompanying application for a stay of execution of the disclosure order pending appeal, represented no more than an attempt by Mr Ho to avoid making the full and proper disclosure which was ordered, and which, I am told, under the timetable as laid down, is due to be made by the beginning of April.

36.  In the event, therefore, I was not minded to accede to the request to modify the terms of the Order as engrossed since I did not consider any amendment as was mooted to be necessary, and accordingly this application immediately was dismissed with costs.

The summons of 6 March 2009 for stay of execution of the disclosure order

37.  This application, as amended, was issued solely on behalf of Mr Ho, the 1^st defendant, paragraph 1 of which requested that execution on paragraph 6 of the Order dated 17 February 2009 be stayed pending the hearing of an appeal in CACV 44 of 2009, to which the 1^st defendant’s Notice of Appeal dated 5 March 2009 refers.

38.  The 2^nd defendant, Grande, makes no application for a stay of execution nor, as I earlier have observed, does it appeal against the disclosure order made against it in the substantive Order of 17 February.

39.  On behalf of the 1^st defendant Mr Snowden pitched his application on three bases:

(i)  First, absent the grant of a stay, the appeal against the disclosure order would be rendered nugatory;

(ii)  Second, the disclosure order severely infringes Mr Ho’s privacy, and that he will suffer loss incapable of damage quantification; and

(iii)  Third, there are good grounds of appeal.

40.  As to the issue of the appeal being rendered nugatory, Mr Snowden cited the observations of Ma J (as he then was) in Star Play Development Ltd v Bess FashionManagement Ltd [2007] 5 HKC 84, at para 9(1), and noted that in this case the nature of the disclosure order as made was such that Mr Ho’s appeal against it inevitably would be rendered nugatory: the disclosure order was a mandatory order requiring Mr Ho to disclose all of his assets over US$100,000, and, he said, there could be no question of “undoing” such disclosure once it had taken place.

41.  Mr Snowden noted, also, that these are essentially the like circumstances upon which a stay was granted by the court in RACP Pharmaceutical Holdings Ltd v Li Xiaobo, HCA 490 of 2007, unrep., judgment dated 27 June 2007.

42.  Mr Snowden emphasized that this was a meritorious appeal focusing upon the issues of ‘good arguable case’ and quantum’, the grounds of which are set out in some detail in the Notice of Appeal dated 5 March 2009.  In this connection I note that the substance of this appeal would appear to involve essentially the like arguments which are to be harnessed on behalf of Mr Ho and the Grande defendants at the forthcoming strike out application, the hearing of which currently stands adjourned for a date to be fixed.

43.  Mr Snowden further suggested that in any event there was no real urgency for the disclosure as had been ordered, given that the liquidators on their own case had been concerned about the type of conduct leading to the Mareva application since at least September 2008, and that the plaintiffs’ interests were adequately protected by the direct Mareva relief ordered against Mr Ho, which remains in force and against which no application for a stay of execution is mounted.

44.  Accordingly, said leading counsel, these considerations weighed strongly in favour of a stay as now sought.

45.  Mr Kosmin took a firm and wholly contrary view.

46.  In his detailed skeleton argument prepared for this application, he set out the general principles applicable on applications for a stay of execution, and emphasized that the most important consideration was whether there were strong grounds within and supporting the proposed appeal, citing in this context the Court of Appeal decision in World Trade Centre Group Limited v Resourceful River& anr, unrep., judgment dated 12 May 1993, and in particular the observations of Litton JA (as he then was).

47.  He noted that a “merely arguable” appeal would not be sufficient in itself to justify a stay, and that “something more” is required – see, for example, Star PlayDevelopment Limited, op cit., – and that to show that an appeal will be rendered nugatory it is at least necessary to demonstrate that the failure to grant a stay would have a serious deleterious effect.

48.  Ultimately, Mr Kosmin said, the court has to embark upon a balancing exercise fundamentally no different from that applied when a stay is sought of a substantive interlocutory injunction pending appeal, although he made the additional point that in the particular case where a disclosure order has been made in aid of a Mareva, prima facie it is inappropriate to stay or to suspend the disclosure order while a challenge to the full freezing order is being considered: see Motorola Credit Corporation v Cem Cegiz Uzan [2002] 2 All ER (Comm) 945, wherein David Steel J at first instance had refused to grant a stay of a disclosure order pending appeal of a substantive Mareva order, and inter alia had observed that it was prima facie inappropriate to ‘carve up’ the Order so as to permit the restraints to stand but for the mandatory requirement for disclosure to be put on hold, and that in his view in these situations, wherein there remained the possibility of a transfer or hiding of funds, “the sooner the matter is clear on paper the better.”

49.  The Court of Appeal in that case upheld the view of David Steel J (at [2002] EWCA Civ 989), Waller LJ noting that the learned judge was right in saying that once it was accepted that a freezing order should continue, “a disclosure provision would be the normal provision so that the freezing order can be properly policed and effective”, and Lord Woolf CJ had agreed, stating that the disclosure order is “intimately involved in the effectiveness of the freezing order”; his Lordship observed (op cit., at para 40) that:

“When dealing with interim applications for stays a broad-brush approach has to be taken, otherwise on the application for a stay the court will be determining the very issues which are to be determined later.  It seems to me that was the approach of David Steel J.  Adopting that approach, it seems to me that, although prejudice would be caused to the defendants in this case, the likelihood is that greater prejudice would be caused to the claimants if we were to interfere with the decision of David Steel J.  Accordingly I would dismiss the appeal.”

50.  Mr Kosmin submitted that the prospects for a successful appeal in this case were “remote”, not least because any such appeal would necessarily involve interference with judicial discretion, and he made the additional observation that it was notable that although Mr Ho now sought a stay of the disclosure order, none of the grounds of appeal advanced by Mr Ho in the Notice of Appeal raised any specific complaint about the discovery order, and nor, for that matter, did it raise any questions of principle in relation to the Mareva order as granted.

51.  In terms of the issue of potential prejudice to Mr Ho, Mr Kosmin argued that the particular terms of the Order, (and in particular paragraph 7 of Schedule 2) had made every effort to ensure that the appeal would not be rendered nugatory, and that it was unlikely that disclosure would be particularly onerous, given that the monetary benchmark had been set at the significant level of US$100,000.  Moreover, any infringement of privacy would be minimal, and in fact there was no evidence whatever before the court as to potential detriment.

Basis of decision

52.  Notwithstanding the skill with which Mr Snowden invested his argument, once again it seemed to me that Mr Kosmin had the better of this particular argument, and accordingly at the conclusion of the hearing this application also was dismissed with costs.

53.  As was indicated to leading counsel during the course of the hearing, originally it had been in my mind to deal with this application by means of an interim stay of but a few days only, thus to permit the 1^st defendant to obtain an urgent hearing before the Court of Appeal in an attempt to request a stay of execution pending resolution of the appeal.

54.  However, as a result of the argument I changed my view.

55.  It struck me that in terms of the balancing exercise required any stay of execution of the disclosure order pending the hearing of the substantive appeal on July 22 this year potentially might enure to the greater detriment of the plaintiff liquidators than would accrue to the detriment of the 1^st defendant.

56.  I bore in mind specifically the necessity for disclosure in order to “give the teeth which are critical to the freezing order” (per Lord Woolf CJ in Motorola CreditCorporation, op cit.), in light of the fact that the judgment under appeal had expressed little doubt but that indeed there was a real risk of dissipation by the 1^st defendant via his complex web of corporate holding structures.

57.  As to the contention that the appeal would be rendered nugatory absent a stay, which often is the best point in applications of this nature, I considered significant in weighing the balance the fact that the terms of this Order, and in particular the terms of paragraph 7 of Schedule 2 – wherein the recipients of the information to be disclosed is expressly limited to 8 specified persons – together with the fact that Mr Borelli of the plaintiffs has undertaken to return or destroy any information provided in the event of a successful appeal (see Borelli 11, para 16), made it unlikely in practical terms that any real prejudice would be suffered by Mr Ho which otherwise could not be compensated in costs.

58.  Accordingly, after considering all the relevant factors, in the exercise of my discretion I came to the view that this application also should not be granted, even on a purely interim basis.

HCCL 37/2005 and  HCCL 40/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NOS. 37 AND 40 OF 2005

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(Consolidated)

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J U D G M E N T

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INDEX TO JUDGMENT

	Pages
The application	4-6
The present case: an overview	7-10
Connected applications	10-15
The Mareva application: the evidence	15-16
The Worldwide Mareva application: the Orders sought	16-17
Worldwide Mareva: the constituent elements ‘Good arguable case' Assets within and without the jurisdiction Risk of dissipation	17-3518-2021-2222-35
Balance of convenience (i) As against Mr Ho (ii) As against Grande	35-4535-3737-45
The 'funding issue'	45-54
Mareva relief: Quantum	54-62
Disclosure Orders	62-69
Summary	69-70
Orders to be made	70-72
Drawing of the Order	72-73
Continuation of the present Order for Interim Relief	73

The application

1.    This is the judgment upon the plaintiffs’ application, commenced by summons dated 19 November 2008, for relief by way of Mareva injunction against the 1^st and 2^nd defendants in this consolidated action, and for asset disclosure orders against certain of the defendants ancillary to such injunctive relief.

2.    This is far from the run-of-the-mill type of Mareva application as regularly encountered in the Commercial Court.

3. It is mounted within the context of heavy commercial litigation – this is the third of the so-called major ‘Akai liquidation’ cases to arise out of the liquidation of Akai Holdings Ltd (‘Akai’) on 23 August 2000 – in which proceedings initially were commenced by writs issued in different actions on 7 November 2005, and wherein (consequent upon renewal of the writs and subsequent order for consolidation of these actions) a 282 page Consolidated Points of Claim (consisting of 833 paragraphs plus Glossary and Appendices) on behalf of 17 plaintiffs was first served on 31 March 2008 upon the 20 defendants named therein.

4. Unusually, this Mareva application did not commence life upon an ex parte basis.

5. This was an application which, by summons issued on 11 November 2008, initially was sought ex parte on notice with an estimated time of 2 hours – which application, then attended by Mr Manzoni for the plaintiffs and by Mr Yu SC for the defendants – was refused by this court at the hearing on 18 November 2008.

6. Paragraph 2 of the Order of 18 November 2008 required that the existing ex parte on notice summons be reconstituted as an inter partes application, which thus resulted in issuance on the following day of the instant summons with the determination of which this court now is seized.

7. Argument on this summons between the respective teams of counsel – Mr Leslie Kosmin QC leading Mr Charles Manzoni for the plaintiffs, and Mr Richard Snowden QC leading Mr Godfrey Lam SC and Mr Abraham Chan for the so-called ‘Grande defendants’ (namely D1, D2, D4, D6, D7, D9, D15, D16, D18, D19 and D20) thereafter has been entertained over a period of 5 hearing days, the 2 day hearing immediately prior to Christmas 2008 being adjourned to dates in mid-January 2009 for completion of argument.

8. By reason of this unanticipated adjournment (from 23 December 2008 to 19 January 2009), by Interim Order of 23 December 2008 this Court granted interim Mareva relief solely against the 1^st defendant, Mr Christopher Ho, but equally refused to make any like interim order against the 2^nd defendant, Grande Holdings Limited, a Hong Kong publicly-listed company which in substantial part is beneficially owned by Mr Ho. 

9. A verbatim transcript of the extemporary Ruling delivered by the court in acceding to the plaintiffs’ request for such interim relief has been transcribed and made available to the parties.

10. By paragraph 2 of that Interim Order, the injunctive relief as then granted against Mr Ho was to remain extant until the determination by this court of the substantive Mareva application.

The present case: an overview

11. The Mareva application as now mounted cannot properly be understood absent brief indication of the nature and scope of this litigation, which, as is usual, is girt about with significant volumes of paper.

12. Akai, the 1^st plaintiff, was the holding and controlling company of numerous subsidiaries and associated companies who were principally engaged in the manufacture and worldwide distribution and retailing of consumer electronics; each of the plaintiffs was a company within the so-called ‘Akai Group’ of companies, albeit controlled and ultimately held by Akai.

13. The Grande Holdings Ltd (‘Grande’), the 2^nd defendant, also was the holding and controlling company of a group principally engaged in the manufacture and sale of consumer electronic products; Mr Christopher Ho Wing On (‘Mr Ho’) is and was the majority shareholder, President, Group Chief Executive and a director of Grande.

14. The plaintiffs’ claim is that they suffered loss and damage in the hundreds of millions of dollars as a result of a covert agreement made in November 1999 between Mr James Ting, hitherto Chief Executive and de facto controller of the Akai Group, whereby Mr Ting and the then remaining directors of Akai abdicated their positions, and that Mr Ho, Grande and other Grande defendants (in particular the 7^th defendant, The Grande Group Ltd, the 18^th defendant, Samuel Yuen Kin, and the 19^th defendant, Ruby Lee Yen Kee) took control of Akai and its subsidiaries from Mr James Ting, and in so doing became de facto and/or shadow directors of the plaintiffs, and thereafter proceeded to act with blatant disregard for the interests of Akai and the Akai Group.

15. In particular, it is said that in breach of the fiduciary duties which these defendants thereby had assumed towards Akai and the other plaintiffs, and without any proper authority so to do, through a series of transactions these defendants caused Akai to enter into unauthorized transactions and thus to be divested of all of its remaining valuable assets, and further caused Akai’s corporate opportunities to be redirected to Grande.

16. These transactions are said to constitute void dispositions and fraudulent preferences pursuant to section 182 of the Companies Ordinance, Cap 32, given that, pursuant to section 184(2), Akai’s winding up is deemed to have commenced on 13 January 2000, the date of presentation of the petition (by four creditor banks) for Akai’s winding up, this petition finally having been presented, it is also alleged, only after strenuous efforts made by Mr Ho and Mr Ting to delay this event by means of various cosmetic restructuring proposals.

17. In addition to the loss and damage allegedly caused by the various breaches of fiduciary duty on the part of the 1^st, 2^nd, 7^th, 18^th and 19^th defendants, the other defendants variously are said to have received the property of Akai and the other plaintiffs pursuant to such void transactions, and at times when these defendants were controlled by Mr Ho and Grande; thus it is said that they took such property and assets with full knowledge that such was taken or diverted from the plaintiffs in breach of fiduciary duty, and therefore are liable to account therefor to the plaintiffs as ‘knowing recipients’.

18. It is also alleged that in permitting Mr Ho and Grande to take over Akai, Mr James Ting himself was acting in breach of his fiduciary duty to Akai, that Mr Ho and Grande necessarily were aware of this, and thus that their conduct in the ‘stripping’ of Akai’s assets and its corporate opportunities constituted assisting Mr Ting in his own breach of fiduciary duty, thus making them liable as ‘dishonest assistors’.

19. During argument Mr Kosmin QC expressed this situation rather more graphically: Akai and the other plaintiffs, he said, effectively had been subjected to a “double mugging”, first at the hands of Mr Ting, and thereafter, upon the latter’s departure from the scene, at the hands of Mr Ho and the Grande defendants, who had removed what assets remained after the pillaging that Akai already had received at the hands of Mr Ting.

20. Some idea of the scale of the ‘asset strip’ which Akai suffered in the course of the year 2000, said Mr Kosmin, could be gained from the fact that a document dated 10 December 1999 and entitled ‘Preliminary Information Memorandum’ prepared by the accountants, Ernst & Young, at the specific behest of Mr Ho and Grande, had indicated that it then had recorded assets of US$1,248 million, and yet, when the liquidators of Akai took control consequent upon the winding up order – curiously no Provisional Liquidator appears ever to have been appointed – the only assets remaining and located amounted to US$167,675.

21. On the basis of the foregoing facts the plaintiffs mount various claims for damages and to equitable compensation and/or an account of profits and/or restitution.

22. Equitable compensation is claimed both at a general level in terms of the difference between Akai’ assets prior to the intervention of Mr Ho and those assets remaining as at the date of the winding up order, and also at a specific level, in which each plaintiff which has suffered a loss claims for that loss from the defendants; the account of profits which alternatively is sought is an account of profits made by the defendants resulting from the diversion to them of business properly belonging to Akai; the restitutionary remedies which are pursued are in respect of transactions which are allegedly void pursuant to section 182 of the Companies Ordinance, transactions alleged to be unfair preferences under section 50 of the Bankruptcy Ordinance, and section 266 of the Companies Ordinance – no Validation Order ever having been sought from the court with regard to any of these transactions – and in respect of ‘knowing receipt’.

23. The foregoing is able to provide no more than the intrinsic flavour of this dispute, but suffices, I hope, to place the current Mareva application into broad perspective.

Connected applications

24. At this stage I should also refer briefly to various other applications which also were returnable before the court at these hearings, some of which have infused the present Mareva debate:

(i)  By summons dated 22 December 2008, the ‘Grande defendants’ sought orders for:

  first, security for costs against two tranches of defendants on the basis of certain of these defendants being ordinarily resident out of the jurisdiction and on the further basis of those defendants which were registered Hong Kong companies being unable to pay the defendants’ costs herein; and

  second, that the plaintiffs provide the defendants with copies of Agreements entered into “with regard to their respective funding arrangements to finance their legal costs and disbursements for pursuing this consolidated action up to and including the trial and any appeals” (hereafter ‘the funding application’).

  The security for costs application was dealt with by Consent Summons dated 21^st January 2009, the content of which duly was made an Order of this court.

  As to ‘the funding application’, in itself this was not pursued by Mr Snowden QC, albeit the existence of such funding arrangements (which were not denied by the liquidator plaintiff) was to remain a live issue within the context of the ‘good arguable case’ and the ‘balance of convenience’ elements of the Mareva application.

(ii)  By summons dated 9 December 2008, the ‘Grande defendants’ sought to strike out the Consolidated Points of Claim dated 31 March 2008, and sought dismissal of this action (‘the strike out application’). 

  This strike out application – on the face of the summons taken on all available grounds, but in reality focusing upon the primary stance of Mr Snowden that the pleading, even in amended form, clearly infringed the ‘proper plaintiff/reflective loss principle’ – was taken out but one week prior to the date stipulated by this Court, after the grant of various time extensions, for delivery of the Defence on the part of all 20 defendants to the action herein: aside from the 11 ‘Grande defendants’ which are represented in these proceedings by Baker & McKenzie, the 9 remaining defendants have elected for separate representation (the 3^rd defendant: Stephenson Harwood & Lo, the 5^th defendant: Jennifer Lee & Co, the 8^th and 17^th defendants: Yuen & Partners, the 10^th, 11^th, 12^th, 13^th and 14^th defendants: David Lo & Partners).

  This application to strike out has been adjourned for argument to an available date in June/July 2009, this court having made it clear to Mr Snowden that it was unwilling to entertain such application prior to having sight of the Defence of the Grande defendants, thereby precluding any further delay in the immediate progress of this action, and also enabling the court to gain a fuller appreciation of the wider picture.  With this course Mr Snowden did not disagree, albeit clearly this did not preclude him from referring to his complaints as to the Consolidated Points of Claim (“fundamental structural problems” which, he maintained, Mr Kosmin’s proposed amendments did nothing to ameliorate) during his submission that in terms of the Mareva application there was no ‘good arguable case’ for his clients to meet.

(iii) Plaintiff’s application to amend

  At the commencement of the Mareva application on 22 December 2008, Mr Kosmin had taken took the court at some length through the as then-unamended Consolidated Points of Claim, and, having been apprised of the forthcoming submission by Mr Snowden QC as to the allegedly deficient nature of the pleading due to infringement of the ‘proper plaintiff/no reflective loss’ principle – which he firmly rejected as revelatory of a fundamental misunderstanding of the plaintiffs’ claim in this action (“wholly irrelevant to the restitutionary claims and fraudulent preferences”) – at the same time he had foreshadowed to the court that he foresaw making certain amendments to the Consolidated Points of Claim in light of the recent Court of Final Appeal decision in Waddington Ltd v Playmates & Ors, FACV 15 of 2007, Determination dated 2 September 2008.

  Pursuant to this earlier indication, at the resumed hearing in January of the Mareva application Mr Kosmin produced a draft Amended Consolidated Points of Claim, and formally sought leave (if leave formally were to be required) to file and serve this pleading.  He submitted that the amendments as now sought were limited in scope and few in number, and addressed three distinct matters:

  (a) the introduction of a new cause of action based on equitable fraud, in light of the decision of Owen J of the Supreme Court of Western Australia delivered on 28 October 2008 in The Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9), [2008] WASC 239; the effect of this remedy based on equitable fraud, he submitted, was that all of the transactions and dealings imposed on Akai and the Akai Group from the time when they were controlled by Mr Ho and the Grande Group fell to be set aside against the plaintiffs to the extent that they are parties to the transactions or are in any way affected by them and which, in turn, would entitle the plaintiffs to an account of profits and/or equitable compensation from each of the defendants, and thus to provide the plaintiffs with an ‘umbrella remedy’ against the defendants and a complete answer to the technical ‘transaction by transaction, party by party’ approach to defending this action, which involved the defendants effectively urging the court to adopt an unsatisfactory ‘form over substance’ approach;

  (b)    certain amendments consequential on the decision of the CFA in Waddington, op cit., which held that the ‘disability’ exception (described in Giles v Rhind [2003] Ch 218) to the ‘no reflective loss’ principle was not part of the law of Hong Kong.  These ‘Waddington amendments’, said Mr Kosmin, thus would remove any proprietary claims in respect of ‘Sansui’ and ‘Akai’ trademarks and patents, and ‘Kawa’ trademarks, which pleas formerly were grounded on the disability of the companies concerned, which companies in any event no longer were controlled by Akai, and which instead now are controlled by Grande, and represented claims which under current Hong Kong law it is accepted no longer could be formulated in that fashion;

  (c) specific amendments to individual paragraphs to provide additional particulars, plus correction of typographical errors.

  As earlier indicated, Mr Snowden QC made it clear that these amendments did not address the fundamental concerns he had with this pleading, and I have no doubt that counsel will expand on this theme at the forthcoming hearing of the strike out application.

  In the meantime, however, the draft amendments formally were permitted to be made, without prejudice to the ‘Grande defendants’ right to attack the Consolidated Points of Claim in such amended form at the hearing of the strike out application. 

  I apprehend that this Amended Consolidated Points of Claim, as engrossed in terms of the draft, will be served on the ‘non-Grande defendants’, and that the Defences as filed by all defendants (the court having ordered that the time for so doing now is extended to 15 April 2009) will be directly responsive to this Amended Consolidated Points of Claim.

The Mareva application: the evidence

25. I turn now to consider the application with which this judgment primarily is concerned.

26. On behalf of the plaintiffs, the relevant evidence takes the form of affidavit evidence from Mr Cosimo Borrelli, the lead liquidator in the Hong Kong liquidation of Akai (there are, I understand, parallel liquidation proceedings in Bermuda), whose 7^th, 8^th, 9^th and 10^th affidavits in this litigation are dated respectively 12 November, 21 November, 21 December 2008, and 19 January 2009.

27. On behalf of the defendants, Mr Christopher Ho has sworn two affirmations: the 1^st dated 17 November 2008, and the 2^nd dated 9 December 2008.

28. In reaching my conclusion I have considered the totality of this evidence.

29. In this context I confess that I have been underwhelmed by the nature of the evidence filed by Mr Ho.  I do not wish to be unfair, nor unduly critical, and I bear firmly in mind that care must be exercised in evaluating affidavit evidence absent the opportunity for cross-examination, but nevertheless it strikes me that his two affirmations are ‘thin’ and unsubstantiated by relevant contemporary documentation; perhaps the fairest and most objective comment is that they do noting to inspire confidence.

The Worldwide Mareva application: the Orders sought

30. As indicated at the outset, in these proceedings the plaintiffs seek both worldwide Mareva relief and ancillary Disclosure Orders.

31. The specific injunctive relief as now sought differs substantially from that as originally set out in the ex parte on notice summons dated 11 November 2008 (whereby Mareva relief initially had been sought against the 1^st, 2^nd, 4^th, 6^th, 7^th, 9^th, 15^th, 16^th, 19^th and 20^th defendants) in that the plaintiffs now seek Mareva orders against the 1^st and 2^nd defendants only.

32. As against the 1^st defendant, Mr Ho, and the 2^nd defendant, Grande, the plaintiffs seek to restrain dealings in their worldwide assets up to a maximum (cumulative) value of US$500 million.

33. In this context, Mr Kosmin has made it clear during the December hearing that in this regard his ‘primary target’ was Mr Ho, and that his ‘secondary target’ was Grande, although he subsequently has said that he would have no objection if the court were to apportion the maximum sum of US$500 million between the 1^st and 2^nd defendants.

34. In addition, ancillary disclosure orders are sought by the plaintiffs not only against the ‘injuncted defendants’ (that is, the 1^st and 2^nd defendants), but also against the 4^th, 6th, 7^th, 9^th, 15^th, 16^th and 20^th defendants, which entities are companies said to be owned by Mr Ho, to the effect that they each make disclosure to the plaintiffs of their worldwide assets which have an individual value of US$100,000 or more.

Worldwide Mareva: the constituent elements

35. There is no dispute but that for the grant of Worldwide Mareva relief, there must be demonstrated that (i) there is a ‘good arguable case’ against the defendants in respect of the claim; (ii) that the defendants have no assets or insufficient assets within the jurisdiction to satisfy the claim; (iii) that refusal of the relief sought would involve a ‘real risk’ of dissipation of the defendants’ assets in such a way that a judgment in favour of the plaintiffs would go unsatisfied; and (iv) that it is ‘just and convenient’ so to grant the injunctive relief: section 21L(1) of the High Court Ordinance, Cap 4, otherwise subsumed within the general rubric of the ‘balance of convenience’.

36. Subject to the issue of the whereabouts of assets, the basic principles for the grant of a worldwide Mareva do not differ from those applicable to a purely ‘domestic’ Mareva: in Bank of India v Bhagwandas Kewelam Murjani & Ors [1989] 2 HKLR 318, at 320, Kempster JA put the matter thus:

“Thus, subject to provisos and undertakings apt to allow the defendant to carry on his business and private life in the ordinary way and to limit the effect of the order on third parties outside the jurisdiction, the principles applicable to the grant of an injunction inhibiting the disposal of assets are…equally applicable to the grant of such injunction directed to assets outside it.  We so conclude in the light of the several persuasive authorities decided between June and December 1988 during which the practice in the English Court of Appeal was developed and clarified and, in particular, of Derby & CoLtd v Weldon (No’s 3 &4) [1989] 2 WLR 412…”

37. Whilst the legal elements necessary to justify the grant of a Mareva excite no controversy, the parties wholly differ upon whether these elements have been shown to exist on the evidence before the court.

38. I deal with each of these issues in the foregoing order.

39. ‘Good arguable case’

39.   The test of ‘good arguable case’ was considered in detail in Ninemia Maritime, op cit.,(at 404) wherein the formulation of Mustill J – upheld on appeal at [1984] 1 All ER 398, at 413 et seq – was that the plaintiff need not go so far as to persuade the judge that he is likely to win, but that a good arguable case is one that is “more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success.”

40. Applying that test to the present case, I have little doubt but that this test is met, subject always to the issue of the quantum of the plaintiffs’ claim – which represented one of the principal arguments of Mr Snowden QC on this issue, who strongly submitted that no only did substantial parts of the Points of Claim infringe the ‘proper plaintiff/reflective loss’ principle (and thus should be struck out on that basis, as would be demonstrated when the application to strike out was heard), but that in any event there was no ‘good arguable case’ for the amount of US$500 million, that the quantum as sought by the plaintiffs in this case was absurdly high and logically indefensible, and at the very most the claim could be in the “low tens of millions”, albeit in his written submission had he managed to reduce it to very substantially less.

41. It seems to me that the ‘quantum aspect’ of the defence argument, which is relevant to several lines of argument, best can be dealt with later in this judgment when I come to consider the issue of the monetary level of any relief that this court may see fit to grant upon this application.

42. I note, also, that whilst I accept that on the face of all the material presently before the court that there is sufficient to underpin the grant of Mareva relief, I do not consider correct the plaintiffs’ submission that the fact that because on 21 December 2007 this court saw fit to grant, upon Mr Borrelli’s paper application, ex parte leave to serve out of the jurisdiction in respect of the 5^th, 8^th, 10^th – 14^th and 17^th defendants is in any way conclusive on this issue, or that it is anything to the immediate point.

43. Be that as it may.  At bottom, the plaintiffs’ case seems to me to satisfy the first criterion for the grant of worldwide Mareva relief and, as put, the broad outline of this case is tolerably clear.

44. To repeat: it is that in taking control of Akai and its subsidiaries, Mr Ho, Grande and others who had assumed the role of de facto or shadow directors of Akai and its subsidiaries – and thus owed fiduciary and statutory duties concomitant with ordinary de jure directors – knew that Akai and its subsidiaries were insolvent or near insolvent, and therefore there should have placed Akai and its subsidiaries into liquidation or provisional liquidation at that time; instead, say the plaintiffs, Mr Ho and the Grande defendants pointedly avoided this obvious course, representing themselves as ‘rescuers’ of Akai and its subsidiaries for the covert purpose of stripping the assets of Akai and its subsidiaries and integrating them into Grande for Grande’s benefit.  Thus, it is said, by procuring Akai’s continued existence outwith any independent governance regime, Mr Ho and the Grande defendants breached their fiduciary duties to Akai and its subsidiaries, and the ultimate effect of this conduct was that by the time that Akai formally was wound up in August 2000, there simply was nothing left in the till.

45. Accordingly, this plaintiffs contend that they are entitled to be restored to their position as at November 1999, that is, at the time that Grande and Mr Ho took over, and at the time that the fiduciary breaches commenced; it follows that the plaintiffs seek either equitable compensation or alternatively an account of profits from the benefits gained by Mr Ho and Grande from their manifold breaches of fiduciary duty, albeit whether this remedy is elected for can only subsequently be determined, and certainly not until after discovery.

46. From that which I have read and heard thus far – admittedly I have not yet entertained Mr Snowden’s strike out argument, which is scheduled for some weeks hence, and thus I have not yet had the advantage of full and detailed argument – I presently do not consider that the alleged ‘lack of proper plaintiff/reflective loss’ argument, which lies at the heart of the defendants’ objections to the ‘good arguable case’, is immediately and obviously fatal to the plaintiffs’ case, and subject always to the issue of quantum, in my judgment for present purposes the requirement of a ‘good arguable case’ is satisfied against both the 1^st and 2^nd defendants, Mr Ho and Grande, whom are the only entities against whom the plaintiffs now seek worldwide Mareva relief.

 Assets within and without the jurisdiction

47. I do not think that the existence of assets within and without the jurisdiction is an issue in this case; in fact, the known circumstances of Mr Ho and Grande appear to make this proposition an obvious one not capable of dissent, and I touch on it briefly only for the sake of completeness.

48. It is known that Mr Ho holds his private assets through opaque corporate structures in differing jurisdictions around the world, and during this hearing reference has been made to a corporate chart (at ‘Annexure D’ to the plaintiffs’ skeleton argument) which is thought to approximate the shareholding structure in various private companies and trusts as at February 2008.

49. The principal jurisdiction involved appears to be the British Virgin Islands – with which, as Mr Kosmin points out, Hong Kong has no reciprocal arrangement for the enforcement of judgments – and through such BVI companies Mr Ho holds significant assets in Canada and the United States.

50. The plaintiffs maintain, in my view not unfairly on the face of the presently available evidence, that there is a high probability that there are insufficient assets within Hong Kong to satisfy any judgment as may be awarded against him in due course.

51. As to the assets of Grande, which I am told by Mr Kosmin fundamentally is a ‘holding company’, once again the most valuable Grande assets are known by the liquidators of Akai to be held through opaque corporate structures incorporated in remote jurisdictions, and thus there equally is a risk that there are insufficient assets in Hong Kong to satisfy any judgment which in due course may be entered against the 2^nd defendant.  In a sense, the issue of ‘risk of dissipation’, to which I now turn, tends to underscore the point in terms of potentially insufficient Grande assets remaining within this jurisdiction, and thereby justifying grant of worldwide Mareva relief.

Risk of dissipation

52. As to applicable principle, the benchmark here is the concept of ‘risk’, and there is no requirement to prove nefarious intent per se: see Kerr LJ in Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft mbH & Co KG (‘The Niedersachsen’) [1984] 1 All ER 398, at 419f-j:

 “In our view the test is whether, on the assumption that the plaintiff has shown at least a ‘good arguable case’, the court concludes, on the whole of the evidence then before it, that the refusal of a Mareva injunction would involve a real risk that a judgment or award in favour of the plaintiff would remain unsatisfied…”

It is also established that evidence of behaviour on the part of defendant disclosing an “unacceptably low standard of commercial morality” (per Godfrey J in Honsaico Trading Co v Hong Yiah Seng Co Ltd [1990] 1 HKLR 235, at 240 or “questionable integrity” (see Standard Chartered Securities v Lai Arthur & ors [1993] HKC 375) will entitle the court to conclude that there is a sufficient risk to justify the grant of a Mareva injunction; see also Gee, Commercial Injunctions (5^th ed), at 12.040.

53. Moreover, where a good arguable case is established on a claim for fraud or dishonesty, a court more readily may infer a real risk of dissipation: see CAC Brake Co LtdZhuhai v Bene Manufacturing Co Ltd & Ors, unrep., 30 April 1998, CACV No 94 of 1998, citing Norwich UnionFire Insurance Society Ltd v Eden, unrep, 25 January 1996, English Court of Appeal), where Phillips LJ (as he then was) stated:

“It seems to me that when the court considers that there is a good arguable case it is at that stage that it considers whether the likelihood of a judgment in favour of the plaintiff is sufficient to justify the grant of Mareva relief.  If it is so satisfied, the question then arises:- if such a Judgment is given, what is the risk that there will be no assets there to satisfy it?  If the judgment in question being considered is a judgment in which allegations of fraud are made, then it seems to me that it is open to the court to conclude from that fact alone that there is a sufficient risk of dissipation of assets to justify the grant of relief…”

54. Once again, underlying legal principles are not in dispute; however, the factual matrix which is said to constitute evidence of such risk has been hotly debated. This element has taken up a good deal of the argument, and for immediate purposes I attempt to do no more than to summarise the opposing contentions.

55. Mr Kosmin says that, when taken as a whole, the evidence before the court abundantly demonstrates conduct on the part of Mr Ho and Grande which is devious and of an unacceptably low standard of commercial morality, and that there must be a real danger that if Mr Ho thought that it was in his best interests so to do that he would not shirk from attempting to defeat the interest of the plaintiffs under any judgment which may be obtained in this action.

56. He asserts that the primary factors demonstrating a risk of dissipation are (a) the underlying facts which give rise to this litigation, which facts have been extensively pleaded in the Amended Consolidated Points of Claim, which point to the covert taking of control of Akai and the clinical ‘asset stripping’ of Akai during the course of 2000; and (b) the actual disposal of assets of Grande during late 2007 and 2008.

57. In the latter regard the liquidators say that they first had learned of the type of conduct which formed the genesis of this application on 22 October 2008, when Mr Ho and the Grande defendants filed a skeleton argument in support of an application for disclosure of transcripts of section 221 examinations undertaken by the liquidators, which skeleton argument had disclosed to the liquidators for the first time the fact that Grande’s interest in the 9^th defendant, TWD Asia Limited and what are known as ‘the Zhongshan companies’, that is, the 10^th – 14^th defendants, had been sold.  This information then stimulated an urgent chain of inquiry, culminating in the discovery that since the commencement of this action there had been a slew of recent, and, so say the liquidators, commercially-unjustifiable disposals, of Grande’s assets amounting to some HK$880 million.

58. These dispositions vary both in size and in potential significance, but they are summarized by the plaintiffs as follows:

(i)    the sale in November 2007 of property owning companies by Grande to a Ho-controlled and partially owned subsidiary called ‘Lafe Corporation Limited’ (‘Lafe’), a company quoted on the Singapore Stock Exchange, at what the plaintiffs say was an undervalue of US$13.972 million;

(ii)  the January 2008 distribution by Grande of its entire shareholding in Lafe (valued by Grande at US$90.8 million) by way of a dividend in specie, the principal beneficiary of which was Mr Ho, who thus ended up holding 52% of Lafe;

(iii)    the sale by Grande in the first half of 2008 of its interest in Zhongshan Kawa Electronics (Group) Co Ltd (‘ZKEG’) for nominal consideration (HK$1,000), either directly or by way of sale of TWD Asia, the holding company for Grande’s interest in ZKEG;

(iv)    the forgiveness, write off or effective assumption by a third party, on unspecified terms, in the first half of 2008, of amounts owing to Grande by ZKEG totalling up to HK$349 million;

(v)  the forgiveness in 2007 of an amount of HK$189 million owed to Grande by Starcom Pacific Trading Ltd (‘Starcom’) for no apparent commercial purpose;

(vi)    the payment of cash dividends totalling HK$115 million since November 2007, the principal beneficiary of which has been Mr Ho, notwithstanding Grande’s “parlous financial position” and the obvious risk of future liability to the plaintiffs arising from these proceedings.

59. In his submissions as to risk of dissipation it is fair to say that Mr Kosmin placed greatest stress on the ‘Lafe distribution’, the sale to ZKEG and the apparent forgiveness of the debt owed to Grande, and the forgiveness of the Starcom debt of US$14.3 million.

60. For the Grande defendants, Mr Snowden had little truck with this approach.

61. He noted that the plaintiffs summarily had abandoned their application for Mareva freezing orders against the 4^th, 6^th, 7^th, 9^th, 15^th, 16^th, and 20^th defendants – which had been their initial stance – and he said that the proper focus of a Mareva injunction is, and can only be, upon the improper dissipation of assets, and that ordinary business dealings, even those which had the practical effect of a substantial depletion of the defendant’s assets, did not amount to a valid basis for the grant of Mareva relief: see Halifax v Chandler [2001] EWCA Civ 1750 at paras 18-20.

62. Real and cogent proof of risk of dissipation was all-important, he maintained, in this regard emphasising the dictum of Mortimer VP in Yau Kwok Chiu v Yau Kwong Ha, CACV 132 of 1999, judgment dated 9 July 1999, wherein the learned judge stated:

“A Mareva type injunction is a draconian order.  It is an order that is usually made in commercial actions but, of course, it is not only available in such actions.  It is, however, made only in very limited circumstances which are well-known.  It is only made in limited circumstances because it is such a drastic order and because it can have a devastating effect upon the person or company restrained.  The primary basis necessary for such an order is that there is evidence of a risk that the defendant will dissipate his or her assets so as to make any judgment a valueless one.  Proof of this risk of dissipation is vital…”

63. Mr Snowden referred also to the established factors relevant to the assessment of risk in any case as adumbrated in the well-known standard text, Gee, CommercialInjunctions (5^th ed), at para 12.039, which factors included the ease or difficulty with which the defendant’s assets could be disposed of or dissipated, the nature and financial standing of the defendant’s business, and the length of time it had been established.  In this connection he made the strong point that Grande is a publicly-listed company in Hong Kong, is internationally known and well-established, and its operations are overseen by a Board of Directors which presently includes a former President of the Law Society of Hong Kong.

64. Mr Snowden also took the opportunity to examine in some detail the 6 transactions which were contended by the plaintiffs to constitute cogent evidence of improper dissipation.

65. He noted, inter alia, that the property sale to Lafe had taken place before the service of the writ in these proceedings, and that there was a clear commercial rationale for this sale, namely that Grande should focus on its core business in consumer electronics, not on property management, whilst the allegation that Grande did not receive fair value for the site simply was bad, given that it had been underpinned by two independent valuations by reputable valuers as at June 2007, and that the Sale and Purchase Agreement of June 2007 was based on those valuations, the difference in value between that and the revaluation as at 31 December 2007 being a function of market movements in both Singapore and Hong Kong; moreover, these transactions had been publicly announced.

66. As to the Lafe dividend distribution in specie, he said that once again the commercial rationale was clear: there were distributable profits, and such distribution would permit Grande shareholders to hold a direct investment in Lafe, which would further Grande’s strategic objective of “re-configuring the operational structure” of the Grande group, which was the evidence on the point put forward by Mr Ho. 

67. Moreover, the distribution as made had been consistent with Grande’s previous dividend policy, the explanation of Mr Ho that this action had resulted in a “clear cut operational structure” clearly was not a lately constructed rationale, having been prominently disclosed in the Chairman’s statement in Grande’s 2007 Annual Report and in the Directors’ Report, and in any event a distribution inspecie was not an uncommon commercial practice – Grande had so distributed in respect of Sansui shares in 2001 and 2003.  Nor had this distribution been kept ‘under wraps’: in this regard there had been a Grande public announcement dated 9 January 208, a circular issued by Grande on 17 January 2008, a circular issued by Grande on 22 April 2008 on a management services agreement with Lafe – Grande now was renting its office building in Hong Kong, which hitherto it had owned and which now was owned and managed by Lafe, and it also had been mentioned in the Notes to the 2008 Grande Interim Report dated 17 September 2008.

68. Mr Snowden also put forward persuasive submissions in terms of the other matters prayed in aid by the plaintiffs in terms of risk of dissipation: there had, he said, also been a clear commercial rationale, namely the streamlining of Grande’s business, for the disposal of the TWD shares, whilst the Zhongshan companies were loss-making companies in which Grande had an indirect 50.1% interest, and these losses hitherto had been funded by Grande.  This transaction, he argued, had involved no forgiveness of debts owed to Grande, because, following the disposal, as a purely accounting issue the amount stated to be due from ‘associates’ had been re-classified under the accounting rubric ‘prepayments, deposits and other assets’ in the unaudited 2008 interim report, there had been disclosure to the public in the Grande Interim Report dated 17 September 2008, and indeed the Grande defendants had “directly and frankly informed the court and the liquidators” that TWD Asia no longer was part of the Grande group in the skeleton argument used before Kwan J in the argument seeking disclosure of the section 221 transcripts, thus once again patently demonstrating the lack of any reason or desire to conceal this legitimate transaction.

69. As to the ‘Starcom situation’, Mr Snowden argued that there had been no forgiveness of the HK$189 million debt, and that this ‘debt elimination’ had been the result of a negotiated reduction with Starcom, an independent third party, of HK$112 million from the sale price of a 15% stake in an entity known as Capetronic, which mainly was involved in the manufacture of price-competitive flat panel display products, and that this price reduction had been informed by a significant change in market conditions which had rendered it desirable for Grande to scale back its original business activities in that area of consumer electronics.  Once again, he said, this was entirely consistent with Grande’s position that this transaction “wholly legitimate and reasonable”, and was a transaction of which full disclosure had been made.

70. Similarly, the cash dividends of which complaint was made had been consistent over the years from 2001, all such dividends had been at prudent levels, Grande’s gearing ratio had not been affected by such dividend payments, and a regular dividend policy would strengthen the Grande share price and meet shareholder expectations.  It simply did not follow, leading counsel said, from the fact that Grande, like most substantial commercial enterprises, borrowed to finance its operations, including dividend payments, that such dividends had been paid illegitimately, and it was nonsense for the liquidators now to propose to “allow” Grande to pay cash dividends of up to HK$60 million per year, which was the position the plaintiffs were seeking to achieve, at least on the face of the proposed draft Order.

71. This debate was spirited, and I have not found it easy fairly to resolve.  I bear in mind, as Mr Snowden emphatically pointed out, that save for a clear case of unjustified dealing, it is not the place of the plaintiffs, nor indeed of this court in the exercise of its Mareva jurisdiction, to review or second-guess the merits of past operational commercial activity.

72. I dare say, absent the Lafe distribution in specie, that I should have been rather more ambivalent to the suggestion that the other matters of which complaint now is made (which admittedly arouse suspicion) in themselves necessarily were indicative of a risk of dissipation on the part either of Mr Ho or of Grande – although in this connection I remind myself it is not always easy to separate the interests of these defendants given that it is common ground that Mr Ho is the beneficial owner of 69/70% of Grande, and thus, if he so wishes, ultimately is able practically to ensure that Grande follows whatever course he may desire.

73. However, I have been impressed by the force of Mr Kosmin’s arguments in terms of the ‘Lafe distribution’.

74. There is no dispute but that this distribution, which was characterized merely as a Second Interim Dividend (and thus did not require shareholder approval) occurred, and involved a disposal of the assets of Grande with a book value of HK$708 million.  In principle I decline to ‘second guess’ apparently normal commercial transactions, but I am unable to convince myself that a distribution of this nature in fact can be regarded as a ‘normal’ dividend; whatever may vaguely be said in terms of such distribution having had the “strategic objective of re-configuring the operational structure of the Grande group”, at bottom this was an wholly extraordinary distribution by any standard, which in my view cannot be explained save as a clear indication of an intent to divest Grande, which is a defendant in this action, of a substantial part of its asset base in favour of Lafe, which is not.

75. No Board papers or other material justifying this extraordinary distribution by way of 2^nd interim dividend have been produced to explain how this can have been in the best interests of Grande, given that Lafe appears to have been a significant contributor to the turnover and profit of Grande, there is no obvious commercial rationale for this action, and certainly none has been disclosed by Grande or Mr Ho in the evidence filed herein on behalf of the defendants; in fact, Mr Borrelli has explained (in his 7^th affidavit) that Lafe contributed about 35% of the tangible assets of Grande in 2007, and was so profitable that it was responsible for reducing the loss that the Grande group suffered in 2007.

76. Mr Kosmin also has pointed out that the distribution of Lafe was not foreshadowed when Grande earlier had sold properties to Lafe, and, to the contrary, Grande’s public announcement of the property sale on 29 June 2007 gave precisely the opposite impression in stating therein that “Lafe will remain as a 64.31% owned subsidiary of the Company”.  He further characterized the rationale now put forward regarding the desirability of achieving a “clear cut operational structure” as an ex post facto attempt to justify the unjustifiable, and that had this represented the real explanation, it would have been easy for Mr Ho and other directors of Grande to have said so on affidavit and to have explained this in detail, together with an indication of the considerations which apparently led the Directors of Board of Grande to conclude that this action was commercially sensible and in the best interests of Grande; however such was not forthcoming.

77. Leading counsel further suggested that in any event there is no hint of any justification for the Lafe distribution having been placed before the Board of Grande: within the assembled papers there is evidence only of a circular resolution in writing apparently signed separately by each Board member, which in itself would indicate the absence of any formal Board meeting or explanatory Board paper, whilst the resolution itself fails to identify any reason underpinning its adoption.  Mr Kosmin goes so far as to suggest that on the state of the evidence before the court, it safely can be concluded that on the probabilities the Board of Grande did not consider whether the Lafe distribution was, or was not, in the best interests of Grande, as distinct from the best interests of Mr Ho.

78. Nor, said Mr Kosmin, was it of significance that this transaction was disclosed to the Stock Exchange of Hong Kong.  The short point was that this had to be so under the Listing Rules (Rule 13.45), and indeed it would not have been possible to have achieved this distribution without such disclosure after the event.

79. At the end of the day, therefore, I accept the strong submission made on behalf of the plaintiffs that, when taken at face value, there remains no normal commercial rationale for Grande to distribute Lafe in specie.  As Mr Kosmin has emphasized, a distribution of this type is different in nature, size and substance in comparison with the payment of ordinary periodic cash dividends in normal commercial course.

80. During his submissions Mr Kosmin went on to analyse in some detail the sale of ZKEG (for HK$1,000) and the forgiveness of the debt of HK$349 million – observing that if this sale indeed was a bona fide arm’s length commercial bargain to an independent third party, with a sound commercial rationale from Grande’s perspective, that it would have been easy for Mr Ho to have demonstrated this by means of objective evidence as opposed to mere bare assertion – and he also considered the forgiveness of the ‘Starcom debt’ owing to Grande in the sum of US$14.3 million, noting that this apparently had been agreed to in December 2007, a mere 12 months after a valid and binding contract had been entered into which had obliged Starcom, another hitherto unknown BVI company, to pay that amount over a period of 7 years, as was confirmed by the Notes to the 2006 Grande accounts. 

81. He suggested, once again, that the evidence on this issue as offered by Mr Ho was little more than bare assertion, and that the only document produced to underpin this was a letter from Starcom dated 21 December 2007, which was wholly inadequate to justify the forgiveness by Grande of such a sizeable debt; nor, he said, had there been any disclosure of the reasons underlying such forgiveness, in that no explanation is given in the Grande 2007 accounts for the fact that the amount hitherto due to Grande is shown to have gone from US$189 million to zero, nor had there been any public announcement from Grande in respect of the forgiveness of the Starcom debt, thus providing, he submitted, “another example of an actual asset disposal by Grande for which there is no identifiable commercial benefit and for which no disclosure was made either before or after the transaction”, and thus buttressing his contention as to the risk of dissipation.

82. As earlier intimated, notwithstanding the commercial curiosities inherent within these other transactions which have been prayed in aid by the plaintiffs, and which in themselves may or may not have been sufficient to get them home on ‘risk of dissipation’, in my judgment the Lafe distribution in specie – which was referred to by Mr Snowden, correctly in my view, as the “high watermark” of Mr Kosmin’s case as to risk of dissipation – has driven me to the conclusion that for the purposes of this application the plaintiffs indeed have established such a risk on the part both of Grande and Mr Ho.

83. As to the position of Grande itself, as Mr Kosmin has emphasized he was here not dealing with ‘risk’ but with ‘actualité’, given that the evidence before the court discloses the hard fact that Grande’s assets have been diminished by over HK$1.1 billion during the last twelve months, leaving Grande with, it is thought, net tangible assets of but some US$13 million (not counting intangibles such goodwill and the value of trademarks and so forth).

84. As to the position of Mr Ho, whilst the liquidators have no evidence of Mr Ho having actually disposed of his personal assets, I agree with and accept the submission that the circumstances point to the inevitable conclusion that there is a clear risk that this gentleman will do so; in fact, opined Mr Kosmin, it is not perhaps surprising that the plaintiffs are unaware of any actual dissipation of Mr Ho’s assets given that they appear to be held through opaque chains of private BVI companies, and that to-date Mr Ho has made no disclosure of such holdings.

85. Nevertheless the ineluctable fact remains that in terms of these private BVI companies Mr Ho, as controller and major shareholder, must be regarded effectively as the ‘puppet master’, and that he remains responsible for the conduct of Grande and its subsidiaries.

86. Moreover, the plaintiffs say that Mr Ho appears to have been restructuring his private holdings (the chart produced at ‘Annexure D’ of the plaintiffs’ skeleton argument purporting to demonstrate this assertion), and, as Mr Kosmin has explained, the fact remains that Mr Ho has been responsible for the extraordinary underlying factual matrix which forms the substance of this litigation – hence the contention, which I accept has been established, as to risk of dissipation.

87. Given that this thus represents satisfaction of the third ‘leg’ of the requirement for the imposition of a worldwide Mareva, what therefore is the situation in terms of the overall discretionary weighing exercise which the court must be perform prior to the grant of injunctive relief?

Balance of convenience

(i)  As against Mr Ho

88. The plaintiffs say that there are no circumstances identified on the evidence which would take the case outside the ordinary cases where Mareva relief would follow on a risk of dissipation being demonstrated.

89. Mr Kosmin relies in particular upon Mr Ho’s dominance and direction of the improper transactions which caused the demise of Akai and which form the subject-matter of this action, his lead role in the dissipations as actually have taken place in terms of Grande, his direct and substantial benefit from the misconduct alleged against him taken together with the commensurate detriment to Akai, and to his “continued obstruction” of the liquidators between 2001 and 2007.

90. It is thus said that the totality of the evidence indicates that Mr Ho has engaged in serious misconduct including self-dealing with, and self-benefit from, the Hong Kong assets of Akai and Grande, and that his commercial modus operandi includes the use of complex offshore corporate structures, the creation of documentation of limited and questionable provenance (wrongful backdating of security instruments is alleged), and a disregard of normal standards of corporate governance, including entry into the ‘Lafe transaction’ apparently without contemporaneous Board discussion or professional advice. 

91. In fact, Mr Kosmin says that whatever caution the court may exercise when examining the balance of convenience in respect of Grande, none of these same concerns apply to Mr Ho, and he puts it as high as submitting that there could be no party before the court whose conduct and approach warranted Mareva intervention more than Mr Ho, against whom orders freezing Mr Ho’s assets and ancillary disclosure should follow “as a matter of course”.

92. For his part Mr Snowden strongly resists any order against Mr Ho personally, emphasizing that, putting to one side argument based upon corporate interests (which he does not accept), the plaintiffs have been unable to cite any example of Mr Ho’s personal disposal of assets.  In this regard I think it fair to say that Mr Snowden’s arguments as to quantum, ‘good arguable case’ and the absence of any real identifiable risk of dissipation in turn infuses his argument as to the ‘balance of convenience’.

93. In face of the information placed before the court, and subject to quantum considerations, with which I shortly deal, I am in little doubt, and so hold, that when it comes to Mr Ho a good case has been shown for coming down on the side of the plaintiff liquidators in terms of the balance of convenience, and thus in principle warranting the grant of a Mareva injunction against Mr Ho.

(ii) As against Grande

94.  In terms of the interim Mareva relief granted by this court in December 2008, Grande specifically was excluded from such relief, and the ‘balance of convenience’ argument in the context of Grande continues to pose problems.

95. Mr Kosmin specifically recognizes that as Grande is a listed company, that in principle the court should approach this question with “justifiable caution”, and that such an order against a listed company is “somewhat unusual”.

96. Counsel seeks to overcome the instinctive judicial reluctance thus to interfere with the commercial operations of a public listed company by characterizing Grande as “not a normal” public company but “substantively a private company with a small minority interest and very thinly traded shares” – in fact, Mr Kosmin asserts that by far the greater part of the market in Grande shares is made by Mr Ho personally, given that he has been the buyer of 69% of all Grande shares sold on the HKSE since 1 October 2008, which means that the single event which would have the most dramatic impact on Grande shares would not be Mareva injunctive relief but if Mr Ho himself were to stop buying Grande shares.

97. Mr Kosmin says that Grande effectively is little more than Mr Ho’s private fief, given that he owns some 70% of the issued share capital, and that there is or appears to be only a small public float of some 19%, and even then it is not known what influence if any Mr Ho has over this element of the issued shareholding.

98. In any event, he submits, given that Mr Ho clearly is the sole dominant force and decision maker within Grande, the evidence now before the court tends to confirm an absence of standard modern corporate governance practices or consultative decision making within Grande, and that despite its formal listed status, effectively there is substantive parity of identity between Grande and Mr Ho in just the same manner as there had been between Mr Ting and Akai until November 1999.

99. Nor, it is argued, does the Hong Kong Stock Exchange listing of Grande provide much source of comfort to the plaintiffs, since under the Listing Rules, only transactions involving greater than 25% of the assets, revenue, equity or market capitalization of Grande must be subject to prior announcement and shareholder approval, whilst pursuant to Listing Rules 14.08 and 14.33, other dealings at most would be subject to post-event announcement.

100. Mr Kosmin also forcefully makes the point that the Grande transactions with regard to ZKEG and Starcom serves to demonstrate that Grande has substantial scope to divest itself of assets without disclosure – in the case of ZKEG the disposal was publicized only in the 2008 Interim Report well after the event, whilst in the case of Starcom the release of the debt apparently owing to Grande was not disclosed at all – whilst these transactions further demonstrated the disposal of assets to unknown and undisclosed third parties: for example, there is no evidence provided by Mr Ho of who it is also stands behind Richma, the purchaser of TWD Asia, and Starcom, such lack of disclosure leading to the reasonable inference that both companies are closely associated with Mr Ho.

101. In his submission Mr Kosmin went as far as to suggest that in fact there is parity of interest between Grande’s minority shareholders, Grande’s creditors and the plaintiffs, in that each group would benefit from a restraint on any future dissipation of Grande’s assets, and that the only constituent of Grande who is likely to be disappointed is Mr Ho himself; he further notes that from the time at which this action was disclosed to the HKSE on 21 November 2008, there has been no deterioration of the share price of Grande. 

102. In terms of Mr Ho’s bare assertion in his evidence that after this public announcement Grande had received inquiries from banks, investors and bond holders and a credit insurance company requesting detailed information on the status and effect of the injunction application on Grande’s and Grande’s subsidiaries operations, Mr Kosmin noted that no further evidence as to such inquiries has been adduced, and, perhaps more to the immediate point, no evidence has been adduced from any other director (executive or non-executive) of Grande in opposition to the plaintiffs’ application, which would have been expected from a public listed company faced with an application of this nature.

103. For his part Mr Snowden emphatically rejected the idea of Mareva relief against Grande.

104. He says that to the extent that the grant of a Mareva would inflict hardship on a defendant, this legitimate interest must prevail over that of the plaintiff: see Ninemia Maritime, op cit., at 1426D; Sanshin Trading Co Ltd v Kwok Kwok Yu, CACV 156 of 1990, judgment dated 26 February 1991.

105. He argues that the fact that Grande has a legitimate ongoing business which necessarily must be adversely affected by the injunction must always be an important consideration for the court, both in connection with the question of risk of dissipation and also whether it is ‘just and convenient’ to grant the injunction: see Peter Ho Pui Tsun v Chain Liaison Investment Ltd, HCA 7111 of 1995, judgment dated 2 November 1995.

106. Mr Snowden’s argument is that if and in so far as it became necessary even to consider the ‘balance of convenience’ – and now I have held that it is – such balance lay “overwhelmingly” against the grant of any Mareva relief for any duration. 

107. In this connection he relied on the fact of potential irreparable harm to public shareholders of Grande, who inevitably would suffer a concomitant drop in the value of their shareholding, damage to investor confidence generally, and an overall prejudice which would be extremely difficult, if not impossible, to quantify in terms of damages likely to be suffered by means of the injunction sought.

108. Mr Snowden also focused upon the regime as proposed by the plaintiff liquidators in terms of the draft order as placed before the court, which postulates injunctive relief against both Mr Ho and Grande, and in particular paragraph 8.2 thereof which, under the head of ‘Exceptions to this Order’ states:

“However, for the avoidance of doubt, this Order does prohibit the Injuncted Defendants [D1 and D2] from, and does prohibit the Injuncted Defendants from using their legal or beneficial shareholder equity to cause or procure the underlying companies to:

2.1  declare or distribute dividends, save to the extent already required by law to do so and save that the Second Defendant [Grande] may declare and distribute cash dividends in any one financial year of any amount up to a total of HK$60,000,000 in that financial year;

2.2  charge, mortgage or otherwise encumber any Assets;

2.3  compromise debts owed by existing debtors other than in the ordinary and proper course of business, whether such existing debtors are related parties or not.” (emphasis added)

109. Mr Snowden’s submission is that the italicized phrase posed intrinsic difficulties of interpretation, and that it would be difficult for third parties and financiers who have notice of the injunction readily to ascertain whether a particular Grande transaction would or would not fall within the exception; moreover, that it makes little commercial sense for a company to have to approach a liquidator (or the court) on a continuing basis for approval of major business decisions, particularly where timing may be critical.  He also says, I think, that this position is a fortiori when, as is the case here, the liquidators are funded by unidentified third parties – as to which situation I comment below.

110. In addition, Mr Snowden makes the point that any Mareva relief imposed directly upon Grande inevitably adversely would affect the business relations between Grande and corporate third parties, and “at a stroke” would undermine commercial confidence in the Grande group, at a time of the most adverse credit conditions within the global economy and when confidence of creditors and suppliers is perhaps the most important currency of all.

111. The access to good credit facilities could not be over-emphasised, he said; it was essential for the day-to-day business of Grande, and an injunction imposed against Grande well could trigger an event of default in credit facilities which would seriously prejudice the company; indeed Grande’s public announcement disclosing the existence of the Mareva application already had led to enquiries from numerous banks, and, according to Mr Ho’s evidence on the point, already had affected an intended capital injection and business development exercise of the Grande group.  In fact, a Mareva, if granted against Grande, would affect relationships with customers and suppliers alike, and such damage would be impossible to quantify in purely monetary terms when and if the necessity arose to quantify the harm caused to Grande by grant of such an injunction.

112. Nor, said Mr Snowden, could it realistically be said to be the case that there were insufficient safeguards already in place.  Grande was publicly-listed with substantial assets, and was required under Stock Exchange Rules to give notice of any major transaction; the dealings now complained of by the liquidators in fact had been publicly disclosed, and could have been acted on by the liquidators many months ago, and Grande would continue to make appropriate disclosure as required by its legal obligations.  In any event, the liquidators remained free to apply to this court in respect of any future matter causing concern, and at the end of the day there simply was insufficient justification for what, in truth, would be an extremely intrusive and disruptive regime as now was sought in terms of the liquidators’ application and proposed draft Order.

113. With regard to the position of Grande, I have not found this a straightforward decision in terms fairly of resolving the vital ‘balance of convenience’ issue.

114. I recognize that Mr Kosmin has emphasized that on the face of the proposed Order against Grande itself that no restriction is sought upon Grande trading in ‘the normal course of business’, and that the plaintiffs have a direct interest in the future success of Grande in the conduct of its consumer electronics business, and that it is only dissipation outwith the ordinary course of business with which the plaintiffs are concerned.

115. He says that if Grande approaches the plaintiffs with a proposal for such dealing, then the liquidators assure the court that they will take “a commercial and pragmatic approach to any such proposal” provided that there is a clear and direct benefit for Grande in the proposed transaction, and that if perchance there is dissension on the point, the court then could and should referee the debate.

116. I view this as an unappetizing prospect.  Although Mr Kosmin protests the sentiment, the realpolitic of the current situation is that there is no realistic prospect of the liquidator in this case, who is funded by an unidentified third party or parties, agreeing to any suggestion emanating from Mr Ho or Grande, and certainly it is not the general practice of this court, via the exercise of its Mareva jurisdiction, to involve itself in monitoring the daily commercial activity of a Hong Kong listed company which remains governed by its Board of Directors, and which remains accountable to at least a percentage of the shareholding public.  So I reject this suggestion, soothing though Mr Kosmin made it sound as a possible solution to the dilemma raised if a Mareva were to be granted in specific terms against Grande.

117. At the end of the day, therefore, after attempting to weigh all relevant considerations, in the exercise of my discretion I have concluded that no Mareva relief now is to be granted by this court directly against Grande – which according to Mr Kosmin always has represented his “secondary target” in this application and which apparently already has been divested of a very considerable portion of its assets, leaving it, says Mr Kosmin, only with assets of some US$13 million – and that any ‘solution’, if solution it be, should lie only in a form of restraint upon the activity of Mr Ho, qua majority shareholder, so that he is to be enjoined from utilizing his beneficial interest in Grande in order to force disposal of any of Grande’s assets outwith the normal course of Grande’s business, save where the course of action in question otherwise has been approved by Grande’s Board at a meeting of the Board of Directors formally convened for such purpose; for present purposes I naturally must assume that the Grande directors are attaching themselves diligently to their responsibilities qua directors to act in the best interests of the company, and I confidently anticipate that members of the Grande Board will be reading this judgment. 

118. As an additional safeguard, I would also order that any Board Resolution expressly sanctioning disposal or distribution of Grande assets other than in the ordinary course of Grande’s business must be notified by Mr Ho to the Akai liquidators 14 days in advance of such disposal.  Moreover, if subsequently I were to be told that consequent upon this judgment there have been significant changes made to the composition of the Board, I should make it clear that I would be prepared to revisit the terms of this particular ruling.

119. It follows therefore that I am prepared to order direct Mareva injunctive relief against Mr Ho only, which begs the all-important issue of the quantum of such restriction, the analysis of the figures put forward by the plaintiffs in this case representing the key plank in Mr Snowden’s vigorous opposition to the Mareva relief as now sought.

120. However before turning to quantum, it may be convenient briefly to comment upon an issue which in my mind has weighed heavy on the shoulders of this application, namely the funding of this litigation by an entirely unconnected third party or third parties; this is an issue which in my view infuses not only the exercise of judicial discretion inherent within the grant, or otherwise, of Mareva relief, but also has resonance when consideration is given to the level of monetary relief to be granted on this application.

121. In short, this is an issue which in this context cannot simply be overlooked and dismissed as being of no consequence, much as Mr Kosmin may wish the court to adopt this view.

The ‘funding issue’

122. First the facts, at least as they presently appear.

123. As earlier observed, this is heavy commercial litigation, with costs likely to run, at a conservative estimate, into the tens of millions of dollars at the very least.

124. Clearly, therefore, when Mr Borrelli and his liquidation team came onto the scene upon the formal liquidation of Akai, and found that Akai had been left with assets in the order of some US$167,000, there was no question of mounting this sort of highly expensive claim, either in the present case or, for that matter, in the other significant ‘Akai liquidation cases’.

125. As I understand the situation, the creditor banks of Akai – four of whom had petitioned to put Akai into liquidation, and had rebuffed the efforts of Mr Ting and/or Mr Ho to put off this event via restructuring proposals – were unwilling to fund the litigation necessary to attempt to recoup the huge sums of money which it is alleged were ‘stripped’ from Akai.

126. Thus, it arose – in circumstances I know not – that the liquidators were to be funded in their litigation endeavours by a third party or third parties (again, I know not), who regard this litigation as no more than a speculative commercial venture, with, no doubt, a significant proportion of such sums as and when ultimately recovered to be recouped qua dividend upon this large monetary investment.

127. At face value this course of action appears wholly and unashamedly champertous, save that in this instance I am told that Madam Justice Kwan, the learned Judge in charge of the Companies List of the High Court, in fact granted the liquidators’ application permitting such third party funding to take place, although despite requests I have been shown neither her Order in this regard nor the affidavit evidence which must have been used to back Mr Borrelli’s application; however in this connection it is fair to record that the plaintiffs have made it clear that they are particularly averse to the defendants having sight of any documentation which illuminates this subject, or for that matter which identifies the provider(s) of such funding, and I suspect that they have taken the view, with which in principle I do not demur, that it is wrong for the plaintiffs and the court to be in possession of information when such also is not made available to the defendants.

128. For all practical purposes, therefore, this situation amounts to one of ‘licensed champerty’, the consequence of which is that the liquidators of Akai have been given the ability, in this case and, presumably in the other pieces of the ‘Akai litigation’, to have access to justice which, had such outside third party funding not been available and permitted by the Companies Court so to be utilized, otherwise would have been denied.

129. Whilst I confess that I find this ‘third party venture capital approach’ to litigation wholly unappealing, since it strikes me as potentially giving rise to various significant difficulties, Mr Kosmin has been at pains to point out to the court that this phenomenon is both well-known and accepted within the world of company liquidations; in this connection he has cited no less an authority than Lord Hoffmann in NorglenLtd (in liquidation) v Reeds Rains Prudential Ltd [1999] 2 AC 1, at 11, wherein his Lordship observed:

“The law is traditionally hostile to the assignment of causes of action in return for a share of the proceeds.  Such transactions were described as champerty (division of the field) and regarded as illegal and unenforceable.  It is unnecessary to examine the reasons: judges said that it would encourage malicious suits, but treating such arrangements as criminal was also, before the introduction of legal aid, an effective way of preventing poor people from obtaining legal redress.  The position of liquidators and trustees in bankruptcy is however quite different.  The courts have recognized that they often have no assets with which to fund litigation and that in such case the only practical way in which they can turn a cause of action into money is to sell it, either for a fixed sum or a share of the proceeds, to someone who is willing to take proceedings in his own name.  In this respect they are of course no different from many other people.  But because trustees and liquidators act on behalf of creditors, the courts have for the past century construed their statutory powers as placing them in a privileged position…”

130. In this connection Mr Kosmin also referred the court to the Australian High Court case of  Campbells Cash and Carry Pty vFostif Pty Ltd (2006) 229 CLR 386, wherein the majority (Gummow, Hayne and Crennan JJ) surveyed the historical situation and noted (at 428) that “practices no different in substance from some of those condemned so roundly [that is, maintenance and champerty] became commonplace in the law of insolvency…” and thereafter continued, op cit., at 434:

“As Mason P pointed out in the Court of Appeal, many people seek profit from assisting in the processes of litigation.  That a person who hazards funds in litigation wishes to control the litigation is hardly surprising.  That someone seeks out those who may have a claim and excites litigation where otherwise there would be none could be condemned as contrary to public policy only if a general rule against the maintenance of actions were to be adopted.  But that approach has long since been abandoned and the qualification of that rule (by reference to criteria of common interest) proved unsuccessful.  And if the conduct is neither criminal nor tortious, what would be the ultimate foundation for a conclusion not only that maintaining an action (or maintaining an action in return for a share of the proceeds) should be considered as contrary to public policy, but also that the claim that is maintained should not be determined by the court whose jurisdiction otherwise is regularly invoked?”

131. Mr Kosmin noted that both Norglen and Campbells Cash andCarry, op cit., were referred to with apparent approval by the Court of Final Appeal in Unruh v Seeburger (20070 10 HKCFAR 31, albeit the factual context in the latter case was somewhat different.

132. Leading counsel for the plaintiffs strongly submitted that the special position of liquidators in litigation funding arrangements had been recognized for well over 100 years, and that fact that, as in this case, the plaintiffs are in liquidation and only are able to bring this action with the assistance of external third party funding is not a matter which ought to give rise to an “additional hurdle” which the plaintiffs must overcome in order to invoke the court’s Mareva jurisdiction – a factor which is particularly acute when it is alleged in this case that the plaintiffs’ total impecuniosity was the direct result of the allegedly gross misconduct of the defendants in respect of their direction and control of the plaintiffs between November 1999 and August 2000.

133. Mr Kosmin pointed out, also, that there was no evidence whatever to support the suggestion that the substantive proceedings in this action had been brought for a purpose other than to pursue genuine causes of action to recover losses suffered by the plaintiffs, and benefits received by the Grande defendants, as the result of the latters’ control over Akai during November 1999 to August 2000; moreover, he said, the court could not infer any collateral purpose merely because the source of the liquidators’ funds is undisclosed, particularly when the Companies Court expressly had sanctioned the funding arrangements, and where the court had evidence before it from Mr Borrelli that not only were such funding arrangements approved by Kwan J – and also by Akai’s major creditors through its Committee of Inspection – but also that these arrangements are strictly confidential and are subject to legal professional privilege, that it would be inappropriate to fetter the powers of the liquidators as officers of the court, and that through leading counsel Mr Borrelli had been at pains to assure this court that he alone instructed counsel and solicitors, and does not go to the funder for instructions, and that there was no representative of the funder on the Committee of Inspection.

134. That ‘litigation funding’ was, if not the norm, then at the least was not unusual in liquidation situations was accepted by Mr Snowden, who also made it clear to the court that he did not pursue that aspect of his security for costs’ summons dated 22 December 2008 (vide paragraph 24 above) that the defendants should have sight of the relevant Agreement(s) containing these funding arrangements.  Whilst for this reason I do not further consider the ‘funding issue’, including for example the claim of legal professional privilege therefor, I do not wish it to be thought that I necessarily accept all Mr Kosmin’s submissions on the ‘funding issue’: in the circumstances I am simply relieved from the task of sounding to them.

135. However, whilst he chose not to continue with this particular discovery application, Mr Snowden nevertheless insisted that the “champertous dimension” to this action resulting from such funding arrangements necessarily brought with it wholly legitimate concerns as to the risk of wildly inflated claims and unreliable evidence, and that this remained the situation even if (as he now accepted) the funding in question did not amount to champerty of a kind or degree which otherwise would justify a stay of these proceedings.

136. He submitted that the court’s immediate concern lay in assessing the extent to which the Mareva application was properly founded, and that the risk of even moderately “inflamed” claims for damages plainly was relevant here, as did the court’s assessment of the merits of the application depend in large part upon whether and to what extent the plaintiffs had a ‘good arguable claim’.

137. Mr Snowden made it very clear that he was not in the least placated by the statements made on instructions by Mr Kosmin from the Bar at the December 2008 hearing as to the relationship between the liquidators (in particular Mr Borrelli) and the funders, and noted that the precise terms of those statements nowhere are formally recorded, and that that nature of this relationship “remained obscure”, insisting that it would be contrary to common commercial sense if the funders – who appear to be putting out a very great deal of money in the pursuit of this action, including the sum of HK$50 million which presently stood in court as fortification for the undertaking as to damages referable to the interim relief granted by this court as the result of the adjourned hearing of this Mareva application – had not insisted upon a quid pro quo in terms of a critical degree of control and management over this litigation in return for their ongoing financial support.

138. In the course of this submission Mr Snowden made the point that the Australian state jurisdictions appear to be the most advanced in terms of the general practice of ‘litigation funding’, and referred to what is considered to be established practice of litigation funders, as exemplified in the notes of a ‘Funding Industry Presentation’ made by one Mr Patrick Coope, Managing Director of the Australian Litigation Fund at a conference held on 15-17 September 2006, in which Mr Coope acknowledged that in general the ‘funder’ was given influence over the strategic conduct of the litigation and decisions regarding settlement, reserving the right to cease funding at any time at its sole discretion, that the industry preference was to be involved from the start rather than to inherit (and pay for) decisions already made by others, that “the applicant for the funding needs to accept that working with a litigation funder will involve ceding some control over the conduct of the litigation”, absent which it was unlikely that funding would be forthcoming, that funders generally seek to have input into all decisions which need to be made which will have a material effect on either the costs of the litigation or the amount of time taken to get to trial, that monthly meetings often were required to assess progress against detailed time and costs budgets, that it would be “naïve to assume” that unmeritorious claims would not be made with a view to extracting quick settlements from well-resourced defendants, and that funding in the insolvency context was the largest market for this type of activity.

139. Mr Kosmin objected to the court having sight of this particular document on the basis that it had not been adduced on affidavit – which naturally Mr Snowden immediately offered to do – but this is the Commercial Court, and for my part I can see no reason whatever, in face of resolute silence from the plaintiff liquidators in this case as to any detail whatever of their third party funding arrangements, for the court not to have sight of what clearly was a genuine (and wholly informative) conference presentation apparently made by one of the industry leaders.  In this regard it seems to me that Mr Kosmin and his clients cannot have it both ways: they cannot refuse to divulge particular information on the one hand, and yet object to the court having knowledge of, and being educated upon, general ‘funding’ practice on the other.

140. Mr Snowden’s final point of relevance in the Mareva context was that there was on the part of his clients “a further dimension of concern” given the existence of a third party funder(s), in that given the operating imperatives of the funders, it remained highly likely that sensitive commercial information obtained by the plaintiffs as the result of such ancillary discovery orders as also might be made in this application would be required to be disclosed to the funders, who remain unascertained third parties over which the court has no effective control – albeit I note that as from 1 April 2009, and the introduction of the new Civil Procedure Rules, I apprehend that an order for disclosure of the identity of such funders will be possible in the event that a costs’ order is to be sought against them.

141. I have taken the trouble to set out the main parameters of this ‘funding sub-debate’ because I do not consider that this issue can be swept under the carpet and castigated as “fundamentally irrelevant in principle”, as Mr Kosmin has suggested is the case.  If I may be permitted to say so, this court is not known for easily acceding to Mareva applications, and I am bound to say that in this particular instance the ‘funding background’, if I may term it thus, has added a patina to this case and has engendered a significant degree of reflection.

142. Mr Snowden’s legitimate concerns as to confidentiality can, I should have thought, be assuaged by appropriate undertakings extracted from the plaintiffs, but the wider issues raised have provided food for thought, and I have no compunction in stating that the ‘funding issue’ has been in the forefront of my mind first, in the exercise of my discretion in terms of the ‘balance of convenience’ with regard to the relief sought as against Grande, and second, (and as will shortly become apparent), in deciding upon the monetary level at which to pitch the specific Mareva injunctive relief which I have decided to grant directly against the 1^st defendant herein, Mr Ho.

143. It is to this final piece of this jigsaw that I now turn.

Mareva relief: Quantum

144. In my view the issue of the quantum of Akai’s claim – and hence an appropriate figure for such Mareva relief as has been granted – is the most problematic question in this case.

145. Mr Kosmin clearly recognizes this.  He says that it is essential to appreciate that at this stage the plaintiffs’ claim is “substantially unquantified”, and will be capable of accurate quantification only following discovery and expert evidence, in particular as to the value of Akai’s assets in November 1999 when Mr Ho and Grande took control.  Additionally, the question of interest will be another quantum ‘wildcard’, and will very substantially increase (and perhaps even double) the amount which may be awarded to the plaintiffs, particularly if this were to be ordered on the basis, say, of compound interest with quarterly rests.

146. Nevertheless he maintains that for present purposes it is unnecessary to prove a precise quantum figure, and that in any event there is sufficient material before the court to satisfy the court that an order should now be made freezing assets up to US$500 million, notwithstanding that the best evidence currently available is that during the tenure of Mr Ho and the Grande defendants, the value of Akai’s assets as at October/November 1999 dramatically fell from US$1,248 million – as recorded in the December 1999 Preliminary Information Memorandum produced by Ernst & Young at the behest of Mr Ho, and as represented by him to Akai’s bank creditors as accurately stating the position at that time – to the figure discovered upon the liquidators taking control as at 23 August 2000, when all that was remained in the order of some US$167,000.

147. Mr Kosmin submits that the plaintiffs’ “global claim” for equitable compensation wholly is consistent with the principles of equitable compensation outlined by Street J in Re Dawson [1966] 2 NSWR 211, at 215, and that, despite the stringent criticism as to causation that has been aimed at that approach by Mr Snowden at this hearing, it nevertheless remains the plaintiffs’ case that all of the loss and detriment suffered by the plaintiffs from October/November 1999 was relevantly caused by Mr Ho and the misconduct of the Grande defendants.

148. However, Mr Kosmin is realistic enough to concede that for the purposes of any current Mareva relief, the restraint now sought of US$500 million recognizes “the prospect of some inevitable reduction of this amount” following more detailed analysis and expert evidence, although he makes the point that the defendants’ contention that trading losses contributed substantially to the loss suffered by Akai does not avail them, since the hard fact is that Akai and its subsidiaries ought not then to have continued to be in a trading position, and, but for the covert agenda of Mr Ho, Akai probably ought to have been placed in liquidation or provisional liquidation in or around November 1999.

149. As to the proposed figure of US$500 million, I note that at the very outset of this application, Mr Borrelli’s evidence (vide his 7^th Affidavit, at paras 57 and 58) the sum of “at least US$500 million” initially was attributed to the value of the lost patents and trademarks alone, including the ‘Akai’, ‘Sansui’ and ‘Kawa’ trademarks, and the Zhongshan factories, although it is right to record that this approach to quantum now has been substantially modified given the specific objections which then were raised (by Mr Yu SC at the initial ex parte on notice hearing) in terms of the irrecoverability of ‘reflective loss’.

150. Mr Kosmin goes on to submit, without prejudice to Akai’s ‘global claim’, from the full ambit of which he does not shrink, that the Amended Consolidated Points of Claim also identify a number of specific losses (pleaded at paragraph 832.3 onwards) which represent a ‘subset’ of Akai’s ‘global claim’, and that at least for present purposes, the court should be satisfied that US$500 million is a reasonable estimate of the quantum of this ‘global claim’ – although by the same token he accepts that if the Court is not satisfied a Mareva order in the amount claimed is justified, it was clearly open to the court, in the exercise of its discretion, to award such lower figure as it saw fit.

151. In any event, he says that for present purposes the plaintiffs further can point to 10 specific transactions – summarized at ‘Annexure E’ to his written skeleton – that total HK$3,683,985,587 (approximately US$473,009,357) which should assist for the purpose of quantification of “at least part” of the ‘global claim’ by reference to these individual transactions, and he has gone to some length in his written submissions to identify and to narrate these transactions, the most significant of which appear under the following general heads:

Liability to Alpha Capital and Prosperous Finance:	US$50m
Payments to Alpha Capital:	US$5m
Toyo Loan Facility:	US$630m
Lost benefits of Accounts Receivable:	US$178m
Lost cash:	US$1.2m
Proceeds of Sale of Akai Electric Shares:	US$5.2m
Loss of Shareholding in Akai Electric:	US$136m
Loss of Benefit of Property Sales:	US$0.6m

152. In the alternative, Mr Kosmin moots his quantum on the basis of an account of profits, and says that any criticism by the defendants that the plaintiffs have provided inadequate evidence of the value of an account of profits such as to support a Mareva is wholly disingenuous given that Grande has not yet made discovery on the issue, and that the relevant information is exclusively in its possession.

153. He notes that, like equitable compensation, the award of an account of profits is a remedy reflective of the strictness of equity in dealing with an errant fiduciary, and that the principles underpinning this remedy were summarized by the High Court of Australia in Warman International Ltd v Dwyer (1995) 182 CLR 544, at 547, wherein the Court opined (at paragraph 25):

“the assessment of the profit will often be extremely difficult in practice; accordingly it has been said that ‘what will be required on the inquiry…will not be mathematical exactness but only a reasonable approximation’.  What is necessary however is to determine as accurately as possible the true measure of the profit or benefit obtained by the fiduciary in breach of duty…”

154.  Mr Kosmin accepted that if the ‘account of profits’ route were to be elected for by the plaintiffs, the detailed quantification necessarily would be a complex exercise that would involve a detailed forensic analysis of Grande’s financial records that clearly is not possible prior to Grande’s discovery, although he also noted that in his 8^th Affidavit Mr Borrelli had provided and estimate of the profits generated by Grande in a range of between US$233 million to US$268 million, calculations which were based on information published by Grande itself, and which had not sought to be challenged with any contrary evidence.

155. It is this very significant element of quantum which provided Mr Snowden with substantial material for his stringent attack upon the content of the plaintiffs’ case upon this application; in his first skeleton argument filed before this application had commenced in December 2008 he submitted that “for the purposes of the Mareva injunction, the focus of the court should be on the monetary aspect of the plaintiffs’ claim”, and with this theme uppermost in mind Mr Snowden launched his attack on the basis of no ‘good arguable case’ and on the “highly dubious” quantum of losses claimed.

156. This theme is repeated in a further document handed up towards the end of this application, entitled “Summary Response to the Plaintiffs’ Arguments Re Mareva Relief”, which I now have had the opportunity to read in detail.

157. At the outset Mr Snowden makes the point that although his submissions in respect of the Mareva application are distinct from those in respect of his (now forthcoming) strike out application, that of necessity there is some overlap between the two, and further that it is important constantly to bear in mind that whilst in terms of the strike out he bears the burden of making good his contentions – for example, that a specific plea is plainly and obviously demurrable, and thus should be struck from the Claim – that to the contrary in a Mareva application the onus lies on the plaintiffs to establish not only a ‘good arguable case’ for injunctive relief, but a good arguable case for injunctive relief in the amount of US$500 million, which is the figure for which in this application Mr Kosmin now was pressing.

158. Mr Snowden then proceeded to castigate much of the plaintiff’s claims as infringing the ‘proper plaintiff/reflective loss’ principle, a principle, he says, which is “categorical and uncompromising”, and that, simply clothing the claim in different form – vide the recent amendment to plead equitable fraud – certainly does not suffice to circumvent the stringency of this principle.

159.He submitted that the plaintiffs’ evidence and arguments in support thereof sought to justify the “extraordinary quantum of their claim” in a variety of ways, viz., the so-called ‘global claim’, which encompasses the decrease in the Akai assets from US$1,248 million to under US$1 million, reference to the value of the ‘Akai’ and ‘Sansui’ trademarks, some general and “flawed” estimates of an account of profits, and finally, the supposed value of specific claims in relation to the transactions as set out in the plaintiffs’ ‘Annexure E’, and he says that none of these approaches “provides the remotest justification” for the amount of the Mareva relief as now sought in the sum of US%500 million.

160. Indeed, his own response to the plaintiffs’ ‘Annexure E’, which suggests a claim in excess of US$473 million – Mr Snowden’s own ‘Annotated Annexure E’ – succeeds, on his case at least, in reducing the quantum of the plaintiffs’ claim to just under US$7 million, although when pressed by the court on the point Mr Snowden responded that, putting the best blush possible on the plaintiffs’ claim, at its highest this could only be “in the low tens of millions of dollars”.

161. Following from his broad submission that in this case the plaintiffs’ claims were hopelessly inflated – and he made it clear that in this context he certainly did not consider the ‘funding issue’ irrelevant – Mr Snowden’s written and detailed response to each category of the plaintiffs’ claims covers some 26 pages and 107 paragraphs.

162. Given the subject matter and relative urgency of this judgment, the court does not have the luxury of time in which to attempt to evaluate with any degree of precision the argument and counter-argument as to the various heads of loss, which encompass matters as factually diverse, for example, as the loss of the shareholding in Akai Electric (Akai’s Japanese subsidiary) by Serlen [P15] and/or Turdiga [P16] and/or Canicula [P3] by reason of Civil Restructuring proceedings in Japan on 4 July 2001, a claim relating to the loss of ‘Akai’ and ‘Sansui’ and ‘Kawa’ trademarks, and the alleged lost benefits of accounts receivable in terms of an Accounts Receivable Assignment in favour of a company known as ‘Tremendous Springs’.  There is no particular magic in these three examples, save to give an indication of the undoubtedly complex array of quantum claims as now pursued by the plaintiffs.  And in any event, whilst the court has been assisted by receipt of these written submissions, absent specific oral argument upon each these various matters, and absent reference to such documents as exist, it is virtually impossible at this stage to come to a definitive view as to quantum – although, as I have observed, no doubt the court will be in a position better to evaluate the situation once it has heard the detailed strike out submissions, which Mr Snowden has stressed will be pursued not on an arid technical basis but on issues of irreducible principle.

163. Suffice to say that in attempting to adjudicate this Mareva application as fairly as I am able, I have read the submissions on the accumulated quantum material, both for and against, and in the circumstances I consider that for present purposes I have no option but to take a broad view in face of plaintiffs who insist that the elements of their claim are eminently justifiable, and defendants who maintain that by far the greater part of the quantum claimed in this action is simply misguided and wholly untenable, and (I suppose that this is the necessary implication, although it was not put expressly in these terms) that the level of quantum as now claimed may represent an attempt by third party funders to achieve a quick and favourable settlement in what clearly is a highly tendentious case.

164. Accordingly, for the purpose of assessing the level of quantum for the Mareva relief that in principle I have decided to grant, I decline at this stage to become embroiled in detailed analysis of the various claims, and the detailed arguments emanating from each side as to their viability at law – in fact, I find myself reflecting whether, in light of the highly complex facts of this case, that the close legal and factual analysis which will be required to make any such determination actually is achievable at this early interlocutory stage.  However, this exercise must await another day, and, as I have stated, I now simply have to do my best to alight upon an overall figure which I consider appropriate in light of all the evidence before me.

165. I have not found this an easy task, that doing the best that I can in the exercise of my discretion I have concluded that the appropriate sum for which to grant Mareva relief in the Order to be issued against Mr Ho is US$200 million.

166. I recognize, obviously, that this is no more than 40% of the sum for which the plaintiffs were contending on this application, but after a good deal of reflection this is a figure that in all the circumstances strikes me as right or, at the least, not obviously wrong; I confess that in matters such as these I have long ago come to the view that in the making of such decisions stomach remains a valuable adjunct to cerebrum. 

Disclosure Orders

167. Mr Kosmin asks for disclosure orders of all assets with an individual value of US$100,000 or more from Mr Ho, Grande and all the other ‘Grande defendants’.

168. He says that disclosure orders are sought to “render the restraint order effective, or more effective”, in the words of Nicholls LJ (as he then was) in Derby & Co Ltd & Ors v Weldon & Ors [1990] 1 Ch 48, at 60.  He also has referred the court to dicta regarding the rationale and purpose of disclosure orders in A v C [1980] 2 All ER 347, at 351, per Goff J, and Motorola CreditCorporation v Uzan & Ors (No 2) [2004] 1 WLR 113, per Potter LJ, who said, at 146:

“The purpose of disclosure is to make the freezing order effective.  In the ordinary way a defendant is required to disclose all his assets above a certain value.  This is because if he can choose which assets to disclose he is likely to choose those which are the least available or accessible to the claimant for the purposes of execution.  That is what the claimant says the defendants have done in this case.  If there are assets which are more readily available, a claimant is entitled to be told what they are.  In such circumstances a freezing order may be varied, so that particular assets are attached and others are released and, this way, the order may be made more effective…”

169. Mr Kosmin further submits that the orders are necessary in this case not only because the plaintiffs have limited information as to the identity, location and value of the Grande defendants’ assets, but also because the use of certain jurisdictions for the incorporation of subsidiaries, where little information is available, and a Hong Kong judgment would not be directly enforceable through reciprocal legislative arrangements.

170. In this regard in his original skeleton argument he also suggests that the scope and focus of the Order as made could “potentially be refined” following the identification of specific assets of specific defendants, which would reduce its impact on the Grande defendants and third parties, and that it is important that the plaintiffs be put in a position “voluntarily to refine the scope of the Order” so as to protect against future complaints about the impact of the Order on the Grande defendants.

171. To the contrary, Mr Snowden says that there should be no disclosure orders because the request for these should fall with the request for Mareva relief.  He points out that since – as originally was the case – no claim for injunctive relief ultimately was maintained against the 4^th, 6^th, 7^th, 9^th, 15^th, 16^th and 20^th defendants, it followed that no disclosure orders (which are necessarily ancillary to the injunctive relief itself) can be made, and he goes on to submit that any suggestion that these non-injuncted defendants should be required to disclose assets to enable the plaintiffsto make a further Mareva application is “absurd”.

172. He further comments, correctly in my view, that the court must be vigilant in not permitting the Mareva jurisdiction to be used by these ‘third party funded plaintiffs’to obtain security for their claim, and that, notwithstanding the odium currently heaped upon his clients, they should not be treated as de facto judgment debtors.

173. Mr Snowden further notes that the plaintiffs have sought disclosure orders in order to “monitor compliance” with such Mareva relief as may be granted, and asserts, again correctly in my view, that this is an inappropriate basis for applying for disclosure orders, citing the Hong Kong Court of Appeal in RACPPharmaceutical Holdings Ltd v Li Xiaobo, CACV 139 of 2007, judgment dated 19 September 2007, wherein Le Pichon JA observed that “‘policing’ is not a legitimate purpose for making a disclosure order”, citing in this regard Bekhor & Co Ltd v Bilton [1981] 1 QB 923, at 944G-945D.

174. In terms of developing jurisprudence regarding disclosure orders ancillary to the exercise (or anticipated exercise) of the Mareva jurisdiction, I think it appropriate at this point to add that after the formal conclusion of this hearing – but with reference to a general discussion as to applicable principle as had taken place between Bench and Bar towards the end of the January hearing – the court was sent by the solicitors for the plaintiffs a copy of the transcript of an unreported decision of the Full Court of South Australia in the case of Caboche v Southern Equities Corp Ltd, wherein on 8 March 2001 the Full Court had entertained an appeal from a single judge regarding a Mareva order and with respect to an order requiring three defendants to file affidavits listing their current assets.

175. In particular, the Full Court considered (at paragraph 45 et seq) the issue of the court’s authority to make an order for discovery of assets as an aid to the framing of the terms of an anticipatedMareva order, which apparently had been done in the New South Wales case of Bax Global (Australia) Pty Ltd v Evans (1999) 47 NSWLR 538, per Austin J.

176. In his judgment in Caboche, op cit.,Williams J (with whom Dugghan J agreed) observed as follows, at paras 48-53:

“In my opinion, the appellants are correct in their submission that the exercise of jurisdiction to order an affidavit as to assets at this stage must be linked to an existing Mareva order or one which is at least in contemplation.  Such an affidavit may be of use in providing a starting point for the supervision of the order to ascertain whether it has been breached (see Bekhor v Bilton, at 952).  It will also enable the terms of a proposed order to be more adequately framed in order to avoid embarrassment when in principle the court has reached the conclusion that such an order would be appropriate (see A v C [1981] QB 956, at 959-960).

In addition to these two situations, it would also seem that the court has jurisdiction to go a step further and require an affidavit of assets where the applicant anticipates that the defendant may dispose of assets and requires the affidavit in order better to assess the danger (and of course the consequences of the usual undertaking as to damages which an order would require).  The reasonableness of the applicant’s apprehension will then provide the jurisdictional basis for an affidavit by way of discovery as a first step in the process of seeking a Mareva order (see Australia Competition & Consumer Commission v Top Snack FoodsPty Ltd & Ors, unrep., 16 May 1997, per Tamberlin J).

The Court’s power before final judgment to order affidavits as to assets is not at large although the Court has a broad discretion.  The foundation of the jurisdiction is the need to prevent judgments of the Court from being rendered ineffective in such cases (Bekhor v Bilton, at 941 per Ackner LJ).  Debelle J [the 1^st instance judge from whose decision this appeal lay] asserted in his reasons that the Court will in the exercise of its discretion make such an order when it is just and convenient so to do.  The appellants take issue with the breadth of that statement but his Honour was clearly speaking in the context of promoting the purposes for which a Mareva order may be granted.

Although in his reasons…Debelle J dealt with the question of discovery of assets before resolving the application for a Mareva order it appears from subsequent reasons (concerning the working out of orders under his earlier reasons) that his Honour was then exercising the Court’s power as ancillary to a Mareva order…

In my opinion, the discovery order now under appeal appropriately accompanies the Mareva order in the light of the manipulation of assets and the unsatisfactory answers so far provided by the three personal defendants…”

177. I apprehend that this case subsequently was sent to this court to buttress the suggestion on the part of Mr Kosmin that in principle it was open to the court either to make disclosure orders against defendants to this action against whom no substantive Mareva relief had been sought at this application (ie the ‘Grande defendants’ generally) and/or to make orders against any of the Grande defendants on a purely ‘anticipatory’ basis.  I hope that in so characterizing the general discussion with leading counsel that I have not overstated the thrust of his views which, as I have noted, were expressions of principle made without reference to the decision in Caboche, op cit., which subsequently was located only after the end of this application.

178.  Be that as it may.  By letter dated 22 January 2009, the defendants replied to the reference to Caboche, and refer to the view of Mr Snowden that this decision provides no support for the plaintiffs’ proposition that the court has jurisdiction to, or should, as a matter of practice and discretion, make a disclosure order where either a Mareva is not granted or is granted for some nominal amount (in order, I apprehend, to meet a perceived requirement that an assets disclosure order necessarily must be ancillary to an existing Mareva injunction).

179. In this letter of response Mr Snowden further is reported as maintaining that Caboche is a case where the court had made a Mareva order against a company (CLC) restraining it and its directors from dealing with its assets, save to a limited extent, and that (at paragraphs 45 and 48) the judge had adhered to the “orthodox position” that the power exists to order disclosure in order to ensure that Mareva relief is effective and not oppressive, and that it is readily apparent from the references to Bekhor v Bilton and A v C (which were the cases cited by the Grande defendants on this point) that the real concern justifying the making of disclosure orders in some circumstances is to render a Mareva order workable and fair in order to protect the defendants from oppression and third parties, such as banks, who may be affected by a Mareva, from embarrassment.  He asserts that neither Caboche nor these other cases provide any support for the proposition that disclosure orders can be anticipatorily used to determine the appropriate level of a Mareva or to decide to increase it from a nominal amount.

180. Absent the benefit of oral argument, and further opportunity to consider the potential extension of disclosure orders (which arose only toward the end of this lengthy and detailed application) I am disinclined in this regard to go too far beyond the ‘traditional view’ of the ambit of disclosure orders, although it should not be assumed that in principle this court necessarily is resistant to extending the ‘traditional ambit’ of such orders where an appropriate case is made therefor.  The short point is that in this hearing the issue has not been subject to sufficient focus and consideration by either side and was developed, if ‘developed’ at all, essentially by a side-wind.

181. This begs the question as to such disclosure orders I consider are appropriate in this instance.

182. As to Mr Ho personally, he is to be the subject of direct injunctive relief, and in the circumstances I have little hesitation in ordering that Mr Ho be ordered to make disclosure of those of his assets which in value are in excess of, say, US$50,000, albeit I am prepared to hear argument upon this figure.  It seems to me that if the Mareva relief which I have seen fit to grant against this gentleman is to be effective, that this order necessarily must follow, and that a comprehensive disclosure order is thus required.

183. I so order.

184. As to the 2^nd defendant, Grande itself, no direct Mareva order has been made against it, although it is true that in a sense the form of Mareva relief as now to be granted against Mr Ho – whereby, inter alia, Mr Ho is precluded from exercising his power as majority shareholder to ‘push through’ extraordinary dispositions of Grande assets absent the consent of a duly convened meeting of his Board of Directors, and that Mr Ho is to give the Akai liquidators 14 days advance which of the Resolution to make such disposition – in effect indirectly impleads Grande, and places into stark relief the impact of any such distribution upon its overall asset position.

185. Accordingly, in such circumstances I consider it just and appropriate that Grande itself be ordered to make disclosure of each of its assets to a value in excess of, say, US$50,000, although once again I am prepared to listen to submissions as to the relevant amount.

186. I apprehend that it also will be necessary to include in the order giving effect to this judgment appropriate confidentiality undertakings to be given on behalf of the plaintiffs.

187. For the avoidance of doubt, I decline to accede to Mr Kosmin’s request that disclosure orders be made against the other ‘Grande defendants’, and presently make no order for disclosure of assets against any of these defendants.

188. The other defendants to this action, who rejoice under the title of the ‘non-Grande defendants’, are not of course represented before the court on this application, and naturally no order of any kind is made against any of these persons or entities.

Summary

189. I regret the excessive length of this judgment, but such has been the depth of the material with which the court has been confronted that, even with the considerable assistance of leading counsel and their respective teams, I have not found it easy to attempt comprehensible treatment of this data, and consequential argument, without becoming embroiled in at least some detail in the context of what is very obviously a complex case; indeed, I strongly suspect that this application has done no more than to scrape the surface of the factual matrix as in due course will emerge in evidence at trial.

190. It may assist at this stage, however, to essay a summary of the position consequent on this judgment. 

a.   For present purposes (I bear firmly in mind that I am yet to entertain detailed argument upon the defendants’ strike out) I do not accept the defendants’ contention that the plaintiffs’ Mareva application is “wholly without merit” and that it is founded upon a “profoundly deficient” claim and “an array of misconceived allegations” regarding the conduct of the Grande defendants;

b.   Nor do I accept the assertion that this application is in substance no more than a “tactical ploy” instigated by an unidentified third party funder (or funders) in a bid to exert commercial pressure and to “fish” for documents to which the plaintiffs plainly are not entitled; whilst I can appreciate the temptation to express the position thus in the circumstances, I consider that this is to pitch the case too high;

c.   I decline to accept the defendants’ assertion that the plaintiffs have failed to show a ‘good arguable case’ for any monetary claim, or that no risk of dissipation has been demonstrated;

d.   I decline to accept that it is “plain and obvious” that the ‘balance of convenience’ lies against any form of injunctive relief being granted on this application.

Orders to be made

191. In light of the foregoing (and subject to requisite drafting of the relevant Order), in the exercise of my discretion I therefore consider it appropriate in substance to make the following Orders upon the plaintiffs’ Mareva application commenced by Summons dated 19 November 2008:

i.    As against the 1^st defendant, Mr Ho, that he be enjoined on a worldwide Mareva basis from disposing or dealing with or diminishing the value of any of his assets, whether within or without Hong Kong, up to the value of US$200 million;

ii.   As against the 1^st defendant, Mr Ho, that he be enjoined from using his beneficial shareholder equity within the 2^nd defendant, The Grande Holdings Ltd, so as to cause a disposition of Grande assets other than in the ordinary course of Grande business, save where any such disposition outwith the ordinary course of business expressly is approved by the Board of Directors of Grande, at a Board Meeting formally convened for the purpose, as being in the best interests of Grande, and wherein the liquidator of Akai is given by Mr Ho 14 days’ advance notice of the Resolution to make any such intended disposition;

iii.  As against the 1^st defendant, Mr Ho, that [within 28 days] of the date of the Order as engrossed that he must inform the plaintiffs’ solicitors in writing of all his assets to an individual value of [US$50,000] or more, whether held within or without Hong Kong, whether or not in his own name, and whether solely or jointly held, giving the value, location and details of all such assets, and that the information thus disclosed must be confirmed on affidavit/affirmation [within 21 days] thereafter;

iv.  As against the 2^nd defendant, Grande, that [within 28 days] of the Order as engrossed that it must inform the plaintiffs’ solicitors in writing of all its assets to an individual value of [US$50,000] or more, whether held within or without Hong Kong, whether or not in its own name, and whether solely or jointly held, giving the value, location and details of all such assets, and that the information thus disclosed must be confirmed on affidavit/affirmation by a responsible officer of the company [within 21 days] thereafter;

v.   That in terms of the disclosure orders against the 1^st and 2^nd defendants, there be included within the Order to be engrossed appropriate confidentiality provisions to be agreed between counsel for the plaintiffs and counsel for the defendants, alternatively the terms of which to be decided by the court.

Drawing of the Order

192. The foregoing summary does not, of course, deal with matters of detail ancillary to the substance of the Orders made.

193. I currently have no particular views as to the exceptions to the Mareva relief granted against Mr Ho in terms of the level of expenditure on living expenses, and expenses on legal advice and representation, and I anticipate that counsel will be able to confer (and hopefully agree) on these incidental issues, and also as to the question of the time limits proposed for the disclosure orders (as presently indicated in square brackets), and thereafter that counsel will appear before this court on a short appointment to be fixed in order to secure approval and final settlement of an Order which gives effect to this judgment; such appointment also will enable brief argument upon any point of difference which may arise in terms of collateral detail or in terms of drafting (for example, as to the confidentiality provision to which I have referred in the context of the disclosure order), and also, I remind myself, as to the necessary amount of monetary fortification for the plaintiffs’ undertaking in damages.

194. At the same time I anticipate that I will hear counsel on the issue of costs, both upon the Mareva application and upon the other applications which were listed before the Court, and which have been summarized in the judgment herein (at paragraph 24). 

195. In this regard, it would be of assistance, absent agreement thereon, if counsel would render a short skeleton argument as to costs’ (and as to any other matter in dispute) for the consideration of this court several days prior to the date fixed to obtain the court’s confirmation of the terms of the Order to be engrossed.

Continuation of the present Order for Interim Relief

196. Pending such further hearing and settlement of the Order giving effect to the judgment herein, I order that the existing Interim Order dated 23 December 2008 is to remain in force until further Order.

HCCL 37/2005 and
HCCL 40/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 37 OF 2005

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