QUESTNET LTD v. KURT GEORG ROCCO RINCK AND ANOTHER

HCA 1475/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1475 OF 2006

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

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

HCA 1475/2006

IN THE HIGH COURT OF THE

HONG KONG ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1475 OF 2006

_________________

__________________

___________________________

SENTENCE FOR COMMITTAL

___________________________

1.  The matter now before the court is the sentence to be imposed on Mr Lane, the 2nd defendant in these proceedings, with regard to two convictions for contempt of civil court orders. 

2.  In terms of time, the first is an order to make disclosure in relation to the whereabouts of and his dealings with funds derived from or placed with him by the 1st defendant.  The order was made on 17 August 2006 and required compliance within 24 hours.  In convicting the 2nd defendant on 15 June 2007, I had found him to be aware of the order latest by 16 February 2007 when he conducted a search of the court file and, in any event, by 25 April 2007 when his then solicitors received the papers from the plaintiff's solicitors.  The 2nd defendant only filed his affidavit of compliance on 13 June 2007.  I had indicated in my Judgment that this affidavit might prove to be inadequate.  Nevertheless, this aspect has not been pressed by the plaintiff and, in sentencing, I will proceed on the basis that the affidavit filed on 13 June 2007 is a compliance of the disclosure order.

3. The second conviction relates to the Mareva injunction that was granted at the same time as the disclosure order.  The injunction restrains the 2nd defendant from dealing with, or disposing of, or diminishing the value of any funds derived from, or placed with him by the 1st defendant, up to the limit of EUR 582,806.44.  The 2nd defendant had, on his admission, received US$737,600.31 from the 1st defendant and when the Mareva injunction was in place, paid out to Alpha Omega Group of Austria and the 1st defendant's wife on 21 and 28 August 2006, the respective sums of US$100,000 and US$535,477.50.  In my Judgment delivered earlier today, I found the 2nd defendant was aware and had notice of the prohibition imposed by the injunction when he paid out the funds. 

4. As a matter of principle, I accept that the sentence for contempt of civil court orders may range from a fine to a term of imprisonment.  The starting-point, however, is to acknowledge that contempt of civil court orders is a serious matter and that court orders are made to be obeyed.  As Stone J pointed out in the case of Abu Dhabi National Tanker Company v Lam Ming Chi [1998] 4 HKC 320 at page 336E, a prime consideration of the court in sentencing contempt is the “signal importance of demonstrating to litigants that the orders of these courts are to be obeyed."  By "litigants", Stone J is clearly referring to litigants in general and not just the contemnor himself.  At the same time, the nature of the order and breach in question, as well as the extent of the breach, are also highly relevant considerations. 

5. In the present case, the Mareva injunction and the disclosure order against the 2nd defendant have to be viewed against the backdrop that the plaintiff was claiming against the 1st defendant for the recovery of funds held by him on trust and had been misappropriated and converted by him.  The 1st defendant was formerly a director and employee of the plaintiff.  The 2nd defendant was also previously the chief legal adviser of the plaintiff and worked for the plaintiff's group of companies.  The 2nd defendant was aware of the nature of the plaintiff's claim against the 1st defendant and that Mareva injunction and disclosure order had been made against the 1st defendant.

6.  Further, one of the clear effects of the 2nd defendant's breaches is that the plaintiff had been delayed, if not frustrated, in taking actions, whether timely or at all, to trace and recover the funds to which it belonged. This is not to mention the unnecessary costs involved because of the breaches.  Despite judgments had been entered against the 1st and 2nd defendants, the plaintiff has yet to recover the trust funds.  In addition, the 2nd defendant had, as I have found, acted to avoid the service of the process.  This has added to the delay and costs as well as inconvenience of the plaintiff. 

7.  Seen in these context, there can be no doubt that the breaches committed by the 2nd defendant are very serious and should, as a matter of principle, attract a term of imprisonment. 

8. In this connection, the authorities cited by Mr Leung in which fines were given, stand in very different category from the present.  For instance, the contemnor in Sino Wood Investment Limited v Wong Kam Yin HCA307 of 2002 (unreported) was not successful in her attempt to leave the jurisdiction in disregard of the prohibition order. Saunders J also found that the contempt “was not a contempt that related to the administration of justice in the sense that it was not the disregard of an order that was designed to the immediate benefit of the plaintiff in the proceedings, such as an order in the nature of discovery or the like.” (at para.13).  And in the case of Kao Lee & Yip v Donald Koo Hoi Yan & Others HCA8847 of 1993 (unreported), there was an episode of very bitter litigation between the plaintiff and the contemnor.  The 2nd defendant in our case was, as a matter of fact and law, a “stranger” to the trust held by the 1st defendant.  Yet, he had voluntarily undertaken to assist the 1st defendant in dissipating the trust funds, albeit under payment. 

9. I now deal with the length of the sentence to be imposed.  In this regard, I acknowledge the very thorough and eloquent submissions that Mr Leung had advanced on behalf of the 2nd defendant on the general mitigating factors and, in particular, his personal and family background. In a case like this, and given the findings of the court on the circumstances of the contempt, there is, in fact, very little that counsel could advance in relation to the circumstances surrounding the commission of the contempt. 

10. I accept that the 2nd defendant is a family man and has commitments to his family.  It has been an unpleasant experience both for him and his family in the period since August 2006 during which he cannot leave Hong Kong due to the existence of the prohibition orders.  I also accept that he has a good working and employment record and he was on good relationship with the plaintiff when he retired, as well as the fact that the 2nd defendant is a reputed sportsman.  No doubt, the convictions for contempt would have tarnished his hitherto good reputation. 

11. I note too that the 2nd defendant does not appear to enjoy a very sound health.  He has been certified by doctor to require regular and long-term medication for his asthma and chronic bronchitis problem. 

12. The 2nd defendant had filed two affidavits offering apologies to the court for the two contempt.  They were, however, brief and, in the case of the affidavit made this morning for the second contempt, it is cursory and bears little sign of great or sincere remorse. 

13. I do not accept that the first contempt is a technical breach.  It was a substantial breach, even on the basis of my finding in that set of contempt proceedings.  Further, in light of the findings in the second set of contempt proceedings when more evidence has come to light, the breach was much more serious and long.  It simply cannot be said that there was no real consequences flowing from the much-delayed disclosure. 

14. I consider that, in the circumstances, and having regard to the personal background and health of the 2nd defendant, a sentence of 1 month is warranted for the 1^st contempt. 

15.  In the case of the second contempt, it is a flagrant breach of the Mareva injunction.  The consequences to the plaintiff are far-reaching and damaging.  Effectively, the plaintiff has been deprived of the opportunity to trace and recover part of the trust money.  I consider that a sentence of 3 months is called for, notwithstanding the mitigating factors that have been advanced. 

16.  The sentences are to be served concurrently. 

17.  As to costs, it is not contested that they should be borne by the 2nd defendant.  There is also no dispute that the costs should be awarded on indemnity basis.  What is in issue is that a gross sum costs order should not be made because some of the items on the plaintiff's skeleton bills were being disputed.

18.  However, having heard Mr Leung, I am not persuaded that the disputes he had outlined could not be resolved or are unsuitable for resolution under a gross sum costs order.  I agree with Mr Maurellet’s submissions that much costs and time would be saved by a gross sum costs order.  This is particularly so for the costs of the sentence in the first set of contempt proceedings, since the costs of the hearing on liability had already been dealt with by a gross sum costs order in the amount of $133,161.00, which was on indemnity basis. I am of the view that the costs should be dealt with by way of gross sum assessments. 

19. In respect of the costs for the sentence in the first contempt proceeding, I note that the number of documents and work additional to those in connection with the liability hearing are not that many; they consist primarily of the Second Affidavit of the 2nd defendant and a couple of further attendances before the court.  I would award a gross sum costs in the amount of $200,000.00.

20. As to the costs of the second contempt proceedings, as it is awarded on indemnity basis, all costs should be allowed save those which the paying party can demonstrate are unreasonably or improperly incurred. I do not agree it is unreasonable for the plaintiff to be represented by both senior and junior counsel, having regard to the gravity of the matter and the number of issues raised by way of defence to the contempt proceedings.

21. I do, however, note that quite a number of the documentation in support of the second contempt proceedings would have featured in the other proceedings or applications in this action, for instance, the applications by the plaintiff for summary judgment against the 1^st defendant and for grant and/or continuations of prohibition orders against the 2^nd defendant, the applications by the 2^nd defendant to set aside the default judgment and for discharge of prohibition orders, and so on.  Further, as these various proceedings have been going on in parallel, there is bound to be overlapping in the work done and. Hence, even though the costs are on indemnity basis, there should be adjustments on the skeleton bill to reflect this. And the margin of reduction or adjustment would be wider than what may otherwise have been on indemnity basis assessments. 

22. On the second set of contempt proceedings, the costs are allowed at $600,000.00. 

23. The assessments that I have made are on a global basis and I have not dealt with the two skeleton bills on an item-by-item basis because I do not consider this to be justifiable or appropriate. It would not be in line with the spirit of gross sum costs assessment and the objectives of minimising the costs and time involved in a taxation exercise. 

HCA 1475/2006

IN THE HIGH COURT OF THE

HONG KONG ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1475 OF 2006

_________________

__________________

_________________

DECISION

_________________

1.  This is the decision on the amended summons filed by the 2nd defendant on 10 June 2008, applying for discharge of the prohibition order granted by Master against him on 5 June 2008. 

2.  Prior to the issue of this summons, the 2nd defendant had already made one application for discharge of prohibition order then in force against him.  That application was refused in February of this year.  This, therefore, is a renewed or another application to discharge prohibition order. 

3. I understand that the 2nd defendant is, at the moment, appealing against the previous refusal to discharge the prohibition order. Nevertheless, as matter now stands, it is for the 2nd defendant to demonstrate that there has been a change of circumstances since the refusal in February 2008 to justify the court reconsidering the matter and discharging the prohibition order.  It would not be proper for this court to revisit or reconsider matters that had already been argued and dealt with in the earlier application and the February decision. 

4. For the purpose of the present application, the 2nd defendant primarily relies on two matters.  The first is that the plaintiff has commenced enforcement proceedings against him in New Zealand. The second is that the prohibition order had an adverse effect on his income and livelihood. Specifically, it is said that there is a sponsorship agreement, which would be seriously affected or terminated if he were not able to present himself in person to the sponsors in Indonesia by a date that has now passed. 

5. On the first point, apart from registering the default judgment against the 2^nd defendant and bankruptcy proceedings in New Zealand, the plaintiff is also at the same time trying to enforce the judgment in Hong Kong.  Among others, there is the examination of debtor proceeding that has been adjourned part-heard and will be resumed in the very near future.  At the same time, the plaintiff is also seeking to enforce costs orders that are separate from the default judgment. 

6. That being the position, the fact that there are enforcement proceedings in New Zealand, does not mean that the presence of the 2^nd defendant in the jurisdiction is of no purpose at all.  It is per se not a material change of circumstances that warrants the court reconsidering whether to discharge the prohibition order.  It should also be noted that the 2nd defendant has resisted the enforcement proceedings in Hong Kong. He has, among others, applied to set aside the statutory demand. This, together with the fact that the examination of debtor proceeding is part-heard, are good and cogent reasons why his presence in Hong Kong would be desired in connection with the enforcement proceedings in this action.

7. As to the second point about the effect of the prohibition order on his income or livelihood, much of the relevance and force is lost in light of the sentence passed this morning in the contempt proceedings against the 2^nd defendant.  Mr Leung made the point that the issue would re-present itself when the terms of imprisonment have been served. That is, however, based on certain speculations, including that the plaintiff might move for continuation or reissue of prohibition orders or that the further development in this case would not warrant a different approach to the question of whether the 2^nd defendant's presence in Hong Kong would continue to be desired or required. 

8. That aside, the hardship to the 2^nd defendant if he is prevented from leaving the jurisdiction is a matter that had already been argued and considered in the earlier application for discharge. I do not consider the matters now raised provide grounds for reviewing the court’s earlier decision. 

9. I would also add that there is, in fact, an air of uncertainty as to what this sponsorship agreement is all about and what role the 2nd defendant has in it.  Whether this is a sponsorship agreement made with him as a party or not is really unclear on the evidence available to the court. There is also no proven explanation as to the apparent necessity or importance of his intended travel to Indonesia to meet with the sponsors.  For instance, we were not told why it was not possible for a meeting to be arranged within the jurisdiction, if indeed there has to be some discussions as to the continuation or further conduct of the sponsorship agreement. 

10. For the reasons that I have indicated, I am not persuaded that the court should exercise its power to discharge the prohibition order that is in existence.  Accordingly, the amended summons is dismissed. 

11. The 2^nd defendant does not dispute costs. I therefore make an order that the costs of the application are to be paid by the 2nd defendant to the plaintiff, assessed on a gross sum basis in the amount of $60,000. 

HCA 1475/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1475 OF 2006

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

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

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

R E A S O N S   F O R   D E C I S I O N

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

1.  On 18 February 2008, I dealt with an application by Mr Rinck to set aside a summary judgement.  The order made on that application was following terms:

“The application to set aside the summary judgment will be stayed for a period of three months, that is until Monday 9 May 2008, to enable Mr Rinck to purge his contempt and to return to Hong Kong for sentencing on the matter of contempt.  If he should fail so to do, the application to set aside the summary judgment will stand dismissed.”

2.  Mr Rinck now seeks to extend the time to appeal against that decision.  The order was perfected on 25 February 2008.  Pursuant to O 59 r 4(1)(a), the time to appeal expired on 10 March 2008.  The summons seeking to extend time was filed on that day, and is accordingly filed within the relevant time period.

3.  I heard argument on the matter on 7 April 2008, and dismissed the application, with reasons to follow.  These are my reasons.

4.  The principles for extension of time to appeal to the Court of Appeal require the court to consider four matters: (1) the length of the delay; (2) the reason for the delay; (3) the chances of the appeal succeeding if time is extended; and (4) prejudice to the respondent.

5.  The length of the delay is not long.  The extension has been sought within the required time, and if the notice of appeal was filed now the appeal would be about one month out of time.  Mr Maurellet does not rely upon the length of the delay.

6.  Mr Rinck has not personally filed an affidavit in support of the application to extend time.  Instead an affidavit has been made by Mr Rinck’s solicitor, Mr Healy, on 10 March 2008.  In that affidavit an assertion is made that Mr Rinck has found it difficult to pay legal costs, that he anticipated that funds would be available to cover the cost of preparing the appeal in early March, but that there was a delay in funds becoming available.  Mr Healy says further:

“I am informed by (Mr Rinck) that he anticipates that funds will be available to cover the costs of the preparation of the appeal papers within the next 14 days and I verily believe that there will be no prejudice caused to (QuestNet) by virtue of such an extension of time being granted.”

7.  Today Mr Healy frankly, and properly, acknowledges to me that he has received no funds and is unable to take the matter beyond the circumstances set out in the affidavit.

8.  There is no evidence at all of any lack of funds on the part of Mr Rinck.  Mr Maurellet points out that Mr Rinck has apparently been able to fund Swiss lawyers to take steps to prevent the enforcement of the judgment sought to be set aside, in Switzerland.  I reject the proposition that Mr Rinck is unable to provide funds to obtain legal advice.

9.  In the affidavit Mr Healy refers to the fact that counsel who appeared for Mr Rinck previously is presently on holiday.  That cannot be a proper reason for any delay.  The judgment sought to be appealed is only five pages long, and deals with one discrete point.  It simply does not matter that counsel who appeared on the original application is presently out of Hong Kong.  Advice as to the possible chances of success of an appeal could be obtained from any other counsel. 

10.  Nothing is said to me as to any prospect of success of an appeal.  The principles applied followed established English principles recently approved by the Hong Kong Court of Appeal in Ho Tung v H Yuen [2007] 4 HKLRD 384.  I accept Mr Maurellet’s submission that there can be no serious suggestion that there was an error of law in the judgment.

11.  The judgement involved the exercise of discretion.  Nothing is suggested to me as to any basis upon which it could be argued that wrong principles were applied in the exercise of discretion.

12.  The absence of prejudice to a would-be respondent is not a ground for extending time: see Secretary for Justice v Yaumati Ferry Company Ltd [2001] 1 HKC 125 at 133.  Nothing turns on the fact that QuestNet can point to no other prejudice than that they would be denied finality in litigation.

13.  Have regard to all of the circumstances are not satisfied any proper case at all has been made out to extend time.  The summons to extend time was accordingly dismissed with costs to QuestNet.

14.  Subsequent to the hearing I received a request from the solicitors for QuestNet that costs should be assessed on a gross sum basis.  It is eminently sensible in a small matter such as this that there should be gross sum costs, and the parties should not be put to the expense of taxation.

15.  Unfortunately the request for gross sum costs generated a considerable amount of correspondence between the parties as to the entitlement, subsequent to the hearing, to request gross sum costs, and the amount involved.

16.  I have reviewed the schedule provided by the solicitors for QuestNet as to the costs incurred.  I fix gross sum costs at $20,000.

HCA 1475/2006

IN THE HIGH COURT OF THE

HONG KONG ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1475 OF 2006

______________________

______________________

___________________________________

REASONS FOR DECISION

____________________________________

1.  By summons filed on 15 November 2007, the 2^nd defendant applied to discharge “the last issued Prohibition Order” against him. The summons was adjourned by the Master to be heard by me.  At the hearing on 18 February 2008, I dismissed the application with costs against the 2^nd defendant. My reasons appear below.

The action

2.  On 12 July 2006, the plaintiff issued the writ herein claiming against the 1^st defendant for sums of money held by him as the plaintiff’s trustee.   The factual circumstances leading to the claim have been detailed in Saunders J’s judgment of 30 November 2006, whereby he granted summary judgment against the 1^st defendant.  I will not repeat them here.

3.  On 21 July 2006, the plaintiff obtained a Mareva injunction against the 1^st defendant.  Under the Order, the 1^st defendant was required to make disclosure by affidavit of, inter alia, details of his dealings with the funds in various trust accounts, together with the identity of the recipient of each withdrawal or transfer of the trust funds.

4.    Subsequently, the 1^st defendant made a number of affirmations purporting to comply with the order for disclosure.  In his fourth affirmation filed on 17 August 2006, the 1^st defendant stated, for the first time, he had on 30 June 2006 transferred Euro 582,806.44 into one of his Swiss bank accounts and thereafter placed the funds on trust with the 2^nd defendant.  The 1^st defendant further stated in the affirmation that he had also given instruction to the 2^nd defendant to deal with the funds.

5.  Consequent upon this disclosure by the 1^st defendant, the plaintiff applied to join the 2^nd defendant. By the Order of Master de Souza dated 23 August 2006, the 2^nd defendant was joined as a defendant to this action. The Master also granted leave to the plaintiff to re-amend the Writ to make amendments consequential upon the joinder.

Default judgment dated 4 September 2007

6.  On 7 September 2006, the Statement of Claim was filed. With leave of the court granted on 26 October 2006, the plaintiff effected substituted service of the Re-Amended Writ and the Statement of Claim on the 2^nd defendant by advertising in the newspapers and by leaving the documents with Messrs John M Pickavant & Co., the 2^nd defendant’s former solicitors.  Copies of these documents were further served on Messrs Au Yeung, Cheng Ho & Tin on 26 April 2007 after they filed a notice to act for the 2^nd defendant.

7.  No notice of intention to defend was given by the 2^nd defendant. By summons filed on 6 August 2007, the plaintiff applied to enter judgment against the 2^nd defendant. With leave of the court granted on 17 August 2007, the plaintiff effected substituted service of the summons together with the supporting affidavit on the 2^nd defendant by advertising in the newspapers and by posting to the 2^nd defendant’s address in Auckland, New Zealand.

8.  Although the 2^nd defendant had on 3 September 2007 faxed a letter to the Master requesting to have time to deal with the matter, he did not attend the hearing on 4 September 2007.  Having considered the letter, Master de Souza entered judgment for the plaintiff against the 2^nd defendant for the amount of US$737,600.31 or its Hong Kong dollars equivalent, together with interest and costs.  

The Mareva injunction and prohibition order

9.  Previously on 17 August 2006, upon receipt of the 1^st defendant’s Fourth Affirmation, the plaintiff had moved for and obtained ex parte a Mareva injunction against the 2^nd defendant to restrain him from dealing with the Euro 582,806.44.  The ex parte order as re-amended on 19 August 2006 was continued by the Order of 1 September 2006.  A copy of the 1st Defendant’s fourth affirmation was attached to the injunction order.

10.  On the same day, the plaintiff also applied for and obtained a prohibition order against the 2^nd defendant prohibiting him from leaving the jurisdiction.  The prohibition order has since been extended and renewed. Following the default judgment obtained on 4 September 2007, the prohibition order was further extended. On 7 December 2007, the plaintiff obtained a fresh prohibition order against the 2^nd defendant, which was extended on 8 January and 4 February 2008 respectively. This is the subject matter of the 2^nd defendant’s discharge application, having regard to the wording of his summons. 

11.  By the order of Master Ho of 23 August 2006, the plaintiff was given leave to effect substituted service of the Mareva injunction order and the prohibition order on the 2^nd defendant.  This was duly done. Copies of these orders together with other court documents, including the Re-Amended Writ and Statement of Claim, were also served on Messrs Au Yeung, Cheng Ho & Tin on 26 April 2007 after they filed a notice to act for the 2^nd defendant.

Contempt proceedings

12.  On 10 May 2007, the plaintiff commenced committal proceedings against the 2^nd defendant for non-compliance with the disclosure order under the Mareva injunction order.  On 15 June 2007, the 2^nd defendant was found guilty of contempt with the sentencing being adjourned pending the execution of the warrant of arrest that was issued on the same day.

13.  On 27 June 2007, the plaintiff commenced a second set of contempt proceedings against the 2^nd defendant for breach of the Mareva injunction order. On 11 September 2007, the 2^nd defendant appeared before me and the warrant of arrest was discharged on terms. Sentencing in the first contempt proceedings and the hearing of the second Motion for contempt are scheduled to be heard on 23 to 25 April 2008.

Examination proceedings

14.  On 20 November 2007, the plaintiff obtained an order for examination of the 2^nd defendant to ascertain his assets within and outside Hong Kong for the purpose of enforcing the default judgment against him. By summons filed on 21 January 2008, the 2^nd defendant applied to set aside the order for examination. By the order of Master Levy of 4 February 2008, the 2^nd defendant’s application and the examination hearing were adjourned to 9 May 2008.

Applications to set aside and stay the default judgment

15.  By summons filed on 18 December 2007, the 2^nd defendant applied to set aside the default judgment. At the first hearing of the summons, the 2^nd defendant applied for an interim stay of execution of the judgment, but it was refused by Master Hui. The setting aside application was adjourned for argument and will be heard on 16 April 2008.

16.  The 2^nd defendant had appealed against the Master’s refusal for an interim stay of execution. On 18 January 2008, Sakhrani J adjourned the appeal for argument. The application for an interim stay of execution of the judgment pending the appeal was refused by the Judge. 

Relevant legal principles

17.  The court’s jurisdiction to make prohibition order is provided by section 21B(1) of the High Court Ordinance, cap. 4 (“the Ordinance”), which states:

“	(1)	The Court shall have jurisdiction to make an order prohibiting a person from leaving Hong Kong (a prohibition order) to facilitate the enforcement, securing or pursuance of-
		(a)	a judgment against that person for the payment of a specified sum of money;
		(b)	a judgment or order against that person-
			(i)	for the payment of an amount to be assessed; or
			(ii)	requiring him to deliver any property or perform any other act; or
		(c)	a civil claim (other than a judgment)-
			(i)	for the payment of money or damages; or
			(ii)	for the delivery of any property or the performance of any other act.”

18.  In addition, Order 44A, rule 3 of Rules of the High Court, cap. 4A (“RHC”) provides that: “Subject to the provisions of section 21B of the Ordinance, the Court may make an order prohibiting the debtor from leaving Hong Kong.”  Under rule 2, the application for prohibition order can be made ex parte.

19.  When the prohibition order was first granted on 17 August 2006, it was made pursuant to section 21B(1)(c) of the Ordinance as the plaintiff had yet to obtain judgment against the 2^nd defendant. In respect of the prohibition order that was granted on 7 December 2007, which is the subject matter of the present discharge application, it was an order made under section 21B(1)(a) in that the plaintiff had by then entered judgment against the 2^nd defendant. Accordingly, the requirements under section 21B(2) and (3) have no relevance.     

20.  As for discharge of prohibition order, section 21B(4)(a) provides that: “The Court may, on application, discharge a prohibition order, either absolutely or subject to such conditions as the Court thinks fit.”

21.  Order 44A, rule 4(1) of RHC further provides that the debtor may on 2 days clear notice and upon being present in person in court apply to discharge the prohibition order. Rule 4(2) provides that in an application by a judgment debtor, “the Court shall after assessing the amount due to the judgment creditor if appropriate - (a) discharge the order; and (b) proceed as if the judgment debtor appears under arrest for examination under Order 49B.”

22.  Plainly, the exercise of the power to discharge is a matter of discretion. In this regard, it should be pointed out that the provision in Rule 4(4) that the Court shall discharge the prohibition order if satisfied that the defendant has a substantial defence to the plaintiff's claim, has no application to the present discharge application since the sub-rule expressly states that it does not apply to a judgment debtor.

23.  In Yue Wah Chuk Richard & Anor v. Mckeon Bredan Hugh (unreported) DCCJ 7088/2003, 24 August 2004, at para.45, H H Judge To commented on the exercise of the discretion in the case of an application by a judgment debtor, with which I respectfully agree, as follows:

“

Where judgment for a sum certain has been obtained, the Court is not prohibited from making the order if the judgment debtor is not about to leave Hong Kong.  But the Court will not exercise that discretion arbitrarily or unnecessarily.  Thus before the discretion is exercised, the Court will consider three questions: (1) whether there is a real likelihood that the judgment debtor will leave Hong Kong; (2) whether there is a real risk that he will not return for a substantial period of time and (3) whether as a result of his absence enforcement of the judgment would be obstructed or delayed.”

24.  With these principles in mind, I now turn to deal with the application.

The 2^nd defendant’s grounds for discharge

25. In support of his application, the 2^nd defendant had filed the 4^th and 6^th affidavits. He had also put in a skeleton argument on the day of the hearing. Based on these documents and his oral submissions, it would appear that the discharge application is made on the following grounds:

(1)	The prohibition orders were obtained in breach of Order 44A, rule 1(2)(b) of RHC.
(2)	The plaintiff brought the action against the 2nd defendant out of spite. The plaintiff does not have a cause of action against him.
(3)	The 2nd defendant has a substantial defence to the claim and has applied to set aside the default judgment.
(4)	The plaintiff is well aware of his address in Auckland, New Zealand and should have applied under Order 11, RHC to serve the papers outside jurisdiction at that address, instead of effecting substituted service.
(5)	The prohibition order is a contravention of Article 8 of the Bill of Rights Ordinance. The 2nd defendant has been held up in Hong Kong for some 18 months, which has an adverse effect on his health and has jeopardized his prospect of representing his country as a billiard player.
(6)	The 2nd defendant is willing and prepared give an undertaking to return to Hong Kong to deal with the outstanding proceedings.

The plaintiff’s opposition

26. In opposing the discharge application, the plaintiff’s primary contention is that there is at the very least a real likelihood of the 2^nd defendant leaving Hong Kong with the consequence that the enforcement of the default judgment will be obstructed or delayed.  The plaintiff’s case is that the 2^nd defendant has throughout adopted an evasive attitude towards these proceedings and that, despite having full knowledge of the various proceedings against him, he has been avoiding service of the legal documents.    

Order 44A, rule 1(2)(b) of RHC

27.  The 2^nd defendant’s first argument is that the plaintiff had failed to issue a writ against him on the day following the grant of the first prohibition order dated 17 August 2006, as required by Order 44A, rule 1(2)(b), RHC.

28.  Order 44, rule 1(1) provides that the Court may grant the relief provided by Order 44 notwithstanding that the plaintiff has not commenced his action. Thus, a prohibition order may be made before the plaintiff has commenced an action. Rule 1(2) goes on to provide that:

“	An order shall not be made under paragraph (1) unless the plaintiff, at the hearing of his application for such order-
	(c)	produces at the hearing of the application, a draft writ; and
	(d)	undertakes to the Judge to issue the writ on the next day on which an office of the Court is open.”

29.  Order 44A, rule 1(1) has no application to the present case.  This is because when the plaintiff applied for the prohibition order against the 2^nd defendant on 17 August 2006, the Writ in this action had already been issued. Further, insofar as the prohibition order dated 7 December 2007, the subject matter of this discharge application, is concerned, there can be no doubt that the Re-amended Writ had been issued when it was applied for and granted. It follows that the requirement of an undertaking under rule 1(2)(b) does not arise whether at the time of the application of the prohibition order dated 17 August 2006 or that of the prohibition order dated 7 December 2007.

30.  The 2^nd defendant had in his submission made the point that the Writ was only sealed and issued on 26 April 2007. The 2^nd defendant had not explained the basis of this assertion.  In any case, this is clearly erroneous. The Writ in this action was issued on 12 July 2006. It was amended on 17 July 2006. The re-amendment to Writ, which was consequential upon the joining of the 2^nd defendant, was made on 23 August 2006.

31.  The 2^nd defendant’s argument that there has been a breach of Order 44A, rule 1(2)(b) of RHC and that consequentially the plaintiff is guilty of material non-disclosure cannot stand.

Merits of the claim and the defence

32.  It is common ground that the 2^nd defendant was formerly employed by the plaintiff as its chief legal adviser. In August 2006, he had already left the plaintiff’s employment. The 2^nd defendant suggests that because there was a dispute between the 1^st defendant and the CEO of the plaintiff and that because he was assisting the 1^st defendant to set up a rival operation, the plaintiff has a spite against him. The 2^nd defendant says that this is vendetta litigation.

33.  However, in his 1^st affidavit filed in connection with the first contempt proceedings against him, the 2^nd defendant had accepted that he had through his personal BVI company, Landbase Corporation, received US$737,600.31 from the 1^st defendant and had dealt with the funds, albeit on the 1^st defendant’s instruction. At the time the 2^nd defendant dealt with the funds, there was already in force a Mareva injunction against the 1^st defendant.  Further, an amount of US$535,477.50 was remitted to the account of the 1^st defendant’s wife on or about 28 August 2006, after the plaintiff had obtained the Mareva injunction against the 2^nd defendant.

34.  Against these admissions, the 2^nd defendant argues that he has been engaged by the 1^st defendant as a consultant; his relationship with the 1^st defendant is no different than that of a solicitor and client. He claims to have no knowledge of the funds being trust funds belonging to the plaintiff. He also says that he derives no gain from dealing with the funds as instructed by the 1^st defendant. He therefore argues that the plaintiff has no cause of action against him at all.

35.  Having regard to the Fourth Affirmation of the 1^st defendant and the 1^st Affidavit of the 2^nd defendant, it is, to say the least, not open to the 2^nd defendant to contend that the plaintiff has no cause of action against him in respect of his receipt and dealings with the funds the 1^st defendant held on trust for the plaintiff.  Further, the plaintiff has adduced evidence to show that the 2^nd defendant had been seen in the frequent company of the 1^st defendant in August 2006. In particular, they went together to the 1^st defendant’s former solicitors on 16 August 2006, the day on which the 1^st defendant affirmed his fourth affirmation. There must be a grave doubt on the 2^nd defendant’s assertions as to his relationship with the 1^st defendant, his knowledge of the source and nature of the funds that he had received from the 1^st defendant as well as his role when he dealt with the funds after the two Mareva injunctions were granted.

36.  That aside, the plaintiff had obtained judgment against the 2^nd defendant. Although there is a pending application to set it aside, the judgment remains valid and binding. The 2^nd defendant’s attempts to have the execution of it stayed have thus far not been successful. It is also to be noted that in an application to set aside a default judgment, what a defendant must show is that the defence has a real prospect of success. Insofar as the 2^nd defendant suggests he has a fair and reasonable or substantial defence, that is the relevant test.        

Service of legal process

37.  In connection with his application to set aside the judgment, the 2^nd defendant had criticized the service of documents on him by the plaintiff. The thrust of his complaint is that the plaintiff should have applied for leave to serve outside jurisdiction and sent all the legal documents to his address in Auckland, New Zealand instead of obtaining orders for substituted service. 

38.  In my view, this argument has no merits. First, there can be no dispute that the 2^nd defendant was present within the jurisdiction when he was joined in this action and he has since remained in Hong Kong. Accordingly, there is no proper basis for invoking Order 11 r.1, RHC or to effect service outside jurisdiction. Second, it is obvious from the history of this action, as summarized in the 46^th Affidavit of Li Adrienne May together with the 6^th affidavit of Seamus Donegan exhibited thereto as exhibit LAM-102, and also Mr Maurellet’s submissions, that the 2^nd defendant is a sophisticated litigant and has been taking careful steps to avoid being properly served with the legal process. The plaintiff cannot be criticized for resorting to substituted service. After all, in granting permission to effect substituted service, the Masters involved must have been satisfied that it was appropriate to make the orders.

39.  Third, inasmuch as the 2^nd defendant says that the plaintiff is well aware of his New Zealand address, he is also well aware of the identity and mode of contact of the plaintiff’s solicitors. On the evidence before the court, it can be readily seen that he has knowledge of the plaintiff’s action against him and also the various proceedings. He could have, right from the early stage of the action, arranged with the plaintiff’s solicitors on the manner of effecting service within jurisdiction. It is against reason and logic to put the plaintiff to the burden and delay of sending documents to New Zealand in order for them to be routed back to Hong Kong to the 2^nd defendant when the documents could have been served directly on the 2^nd defendant in Hong Kong.       

Freedom of movement and hardship to the 2^nd defendant

40.  The 2^nd defendant also complains that the prohibition order has infringed his freedom of movement and violates the Bill of Rights Ordinance. In Tam Hing-yee v. Wu Tai-wai [1992] 1 HKLR 185, the Court of Appeal held that the Bill of Rights Ordinance has no application to a dispute between private individuals. The Court of Appeal further observed that the provision in the District Court Ordinance for prohibition orders (which is equivalent to section 21B(1)(a) of the Ordinance) is not inconsistent with Article 8 of the Bills of Right Ordinance.

41.  As to the complaint that he has been detained in Hong Kong for some 18 months, two points have to be made. First, although the 2^nd defendant was informed by Master Kwan on 18 August 2006 of the making of the prohibition order, he had taken no step to challenge the prohibition order or to discharge it until 15 November 2007 when he filed the present summons.  Second, the 2^nd defendant has advanced no valid objection to the decisions to grant, extend or renew the prohibition orders.  In the circumstances, the mere fact that he has been prevented from leaving Hong Kong is not a ground for discharging the prohibition order.

42.  The 2^nd defendant says that he is a chronic asthmatic scheduled to be vaccinated annually in New Zealand. He also says that the medication available in Hong Kong is not suitable and his doctor in New Zealand would no longer permit his wife to renew prescriptions for him without seeing him.  However, the medical certificate produced by the 2^nd defendant (as exhibit D1 to the 2^nd defendant’s First Affidavit) was dated 19 February 2007, which was a year ago. While the doctor said in it that he would not give any further renewal of prescriptions, it is not known from the evidence before the court as to what the 2^nd defendant has been doing about his medication since then. There are, in addition, no details of the suggestion that the medication available in Hong Kong is unsuitable for his needs.

43.  As to the matter of his not being able to travel abroad to discharge his obligation under the sponsorship contract and to represent his country to play billiards, it is not something that weighs materially in favour of a discharge of the prohibition order, having regard to all the circumstances of the case.

Undertaking to return

44.  At the hearing, the 2^nd defendant had offered an undertaking to return to Hong Kong on terms to be imposed by the court. In this connection, it is necessary to take a broad and overall view of the matter.

45.  First, there is at present against the 2^nd defendant, a valid and binding judgement, on which execution has not been stayed. Second, from the materials before the court, it can be readily inferred that the 2^nd defendant has intention to leave Hong Kong and he will do so if the prohibition order were removed. In fact, the 2^nd defendant does not dispute this. His family ties are not in Hong Kong. According to him, he has no fixed abode in Hong Kong. Third, it is not known what assets the 2^nd defendant may have in Hong Kong. The bank account(s) he had disclosed are offshore. He has not been forthcoming in making disclosure. Fourth, there are a number of outstanding enforcement proceedings against him, ranging from examination of debtor proceeding to contempt proceeding. Fifth, the 2^nd defendant’s previous conduct has been less than cooperative. Among other matters, he had been convicted of contempt of court order and is awaiting sentence.

46.  In these circumstances, if the prohibition order is discharged, there is more than a real likelihood that the 2^nd defendant will leave Hong Kong. There are serious doubts whether he will thereafter return to Hong Kong willingly and/or timely to face the enforcement proceedings. The absence of the 2^nd defendant from the jurisdiction will surely obstruct or delay, if not frustrate, the enforcement of the judgment against him. I am therefore not prepared to act on the 2^nd defendant’s undertaking to return to Hong Kong. Although he says the court can impose terms, the 2^nd defendant has not put forward any condition for the consideration of the court or the plaintiff.

47.  For the above reasons, the application to discharge the prohibition order is dismissed.                   

Costs

48.  The plaintiff asks for costs of the application and that a gross sum costs order be made under Order 62 rule 9(4)(b), RHC.

49.  The 2^nd defendant opposes costs by referring to two provisions in the RHC.  The first is Order 62, rule 28A, dealing with taxation of costs awarded in favour of a litigant in person.  However, the rule has no relevance since there has yet to be a costs order in favour of the 2^nd defendant.  The 2^nd defendant also refers to Order 44A, rule 5, dealing with the court's power to award compensation where “the court is of the view that the prohibition order was applied for on insufficient grounds or was not caused to lapse by the plaintiff or judgment creditor as soon as reasonably possible after it was no longer required”.  I am unable to see how this provision applies here especially when the application to discharge has been dismissed. 

50.  There is no ground to depart from the usual order of costs follow event. Accordingly, the plaintiff should have the costs of this application assessed on party-and-party basis.

51.  Clearly, the court has power under Order 62, rule 9(4)(b) RHC to make a gross sum costs order in lieu of taxation.  The present discharge application is a short application. Only two hearings are involved. The papers are not voluminous, not in terms of the number of pages but in terms of the item of documents involved in the application.  I consider it is appropriate to make a gross sum costs order.

52.  The plaintiff’s solicitors have provided a skeleton bill of costs, on which the 2^nd defendant has queried the items claimed under Part C.

53.  In respect of item C(1), under which AL claimed 17.8 hours for preparation of documents.  Having regard to the documents filed by the plaintiff in this application, and on a party-and-party basis assessment, I will allow 15 hours instead, giving rise to a total figure of $36,000.00 for AL, hence a deduction of $6,720. 

54.  In item C3 relating to preparation for hearings, given that both hearings were attended by counsel, the time for AL is allowed at 3 hours, giving rise to a figure of $7,200.00 and, accordingly, a reduction of $3,600.00.  As for EH, who is the litigation executive, I assume his role in the preparation of the hearings would be dealing with the bundles. There is already under Part E, an item for photocopying charges.  The $3.00 per page is allowed on the basis that it covers ancillary clerical works such as arranging and pagination of bundles and not mere photocopying. For this reason, the $990.00 charged by EH under C(3) is taken off.

55.  Finally, on item C(4), whilst I appreciate the attendance of Mr Donegan at this hearing, the fact remains that on party-and-party costs, only in very exceptional circumstances will two fee earners be allowed. On that basis, I will only allow the fees of AL. There is hence a reduction of $8,000.00. 

56.  The total amount of costs after all the deductions should be $126,468.00.[1] There is an order that the 2^nd defendant pays the plaintiff the costs of this application assessed at $126,468.00.

Appeal dismissed: see CACV71/2008 dated 10 December 2008

HCA 1475/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1475 OF 2006

______________________

______________________

______________________

J U D G M E N T

______________________

1.  In a decision delivered by me on 30 November 2006, following prolonged interlocutory matters in which Mr Rinck filed a number of affidavits which were relevant not only to the interlocutory matters but also to the issue of summary judgement, summary judgement was entered against Mr Rinck.

2.  In the course of those interlocutory matters, on 17 November 2006, I found Mr Rinck to be in contempt of court in that he had failed, within a required time, to file an affidavit setting out the balance is remaining in certain bank accounts, together with an account of his dealing with those accounts and funds therein.

3.  On both occasions Mr Rinck, although having being represented previously, was unrepresented and did not appear.

4.  Sentencing on the matter of contempt was adjourned and a warrant was issued to arrest Mr Rinck to bring him before the court for sentence.  Mr Rinck now resides in Bali, and has not returned to Hong Kong.  He has not yet been sentenced on the matter of contempt and has taken no steps whatsoever to purge his contempt.

5.  On 14 September 2007, Mr Rinck filed a summons to set aside the summary judgement entered on 30 November 2006.  The application was not accompanied by an affidavit and on 12 October 2007, I dismissed the summons, without prejudice to Mr Rinck’s right to apply again, the application to be supported by an appropriate affidavit.

6.  On 10 December 2007, a further summons to set aside the summary judgement of 30 November 2006, was filed, this time accompanied by an affidavit.

7.  Mr Maurellet takes the preliminary point that Mr Rinck, being in contempt, ought not to be heard in the same cause until he has purged his contempt.

8.  The usual rule is the person in contempt will not be heard in the same cause until he has purged his contempt: see Hadkinson v Hadkinson [1952] All ER 567 CA.  The rule has recently been confirmed in Hong Kong by the Court of Appeal in Hotung v H Yuen Ki [2007] 4 HKLRD 384 at 396-398.  There the court permitted the contemnor to proceed as the order not complied with was the very order that was being appealed, that circumstance being an exception to the usual rule.

9.  The order in respect of which Mr Rinck is in contempt is not the summary judgement order.  It is an order requiring disclosure of information relevant to the case of QuestNet, which information was in the hands of Mr Rinck, and not QuestNet.

10.  Mr Maurellet does not contend that the purging of the contempt, that it is Mr Rinck’s compliance with the order for disclosure, is an essential step in dealing with the application to set aside the judgment.  There is no evidence that the course of justice is being impeded by the continuation of Mr Rinck’s contempt.  In so saying I do not in any way minimise the gravity of Mr Rinck’s contempt. 

11.  The primary point taken is that by allowing the proceedings to go on without the contempt being purged, and without proper affidavits of disclosure, would mean Mr Rinck can taunt and ignore the Hong Kong courts when it suits him, but at the same time use the court’s process, only when it is to his advantage.

12.  The situation where the order sought to be appealed is itself the order that is the subject of contempt proceedings is plainly in a quite different class.  To apply the rule in such a case would, in effect, prevent a person from attacking the very foundation of a contempt finding.  That could not be right.

13.  In the present application however that situation does not arise.  Mr Rinck was found to have not only made false and misleading affidavits in relation to the requirement for disclosure, but to have deliberately set about frustrating the purpose of the orders by giving as little information as possible.  Over a year has passed now since the decision in contempt proceedings, and Mr Rinck has taken no steps at all to appeal against the findings in that respect.

14.  Instead, when faced with the consequences of the enforcement of the summary judgement, Mr Rinck disregards his contempt and seeks to set aside the summary judgement.

15.  In the whole of the circumstances I accept Mr Maurellet’s submission that this is a proper case in which Mr Rinck should not be permitted to seek the assistance of the court in setting aside the summary judgement until such time as he has purged his contempt by filing proper affidavits of disclosure, and returned to Hong Kong for sentencing.

16.  The application to set aside the summary judgement will be stayed for a period of three months, that is until Monday 9 May 2008, to enable Mr Rinck to purge his contempt and to return to Hong Kong for sentencing on the matter of contempt.  If he should fail so to do, the application to set aside the summary judgement will stand dismissed.

17.  All questions of costs are reserved.

HCA 1475/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1475 OF 2006

____________

____________

HCA 1475/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1475 OF 2006

______________________

______________________

______________

J U D G M E N T

______________

1.  QuestNet seeks to have Mr Rinck committed for contempt.  Mr Lane, despite being a party to the proceedings, has not yet been served, and took no part in the proceedings.

Background circumstances:

2.  Mr Rinck is a shareholder in, and was formerly a director and employee of, QuestNet.  There is a dispute between Mr Rinck and QuestNet over monies allegedly due by QuestNet to Mr Rinck.  Mr Rinck contends that dividends are due to him by QuestNet, but they have not been paid.  Mr Rinck has not yet issued proceedings in respect of the dividends, either by separate proceedings, or by counterclaim in these proceedings.

3.  QuestNet, in these proceedings, sues Mr Rinck for monies they say he owes them, pursuant to certain declarations of trust.

4.  On 18 November 2003, Mr Rinck made a declaration of trust in favour of QuestNet in which he declared that he held all monies in certain accounts at Citibank in Hong Kong, including account number 82346968, (the Citibank Account), which was in Mr Rinck’s personal name, and that he held those monies in trust for QuestNet.

5.  QuestNet alleges that by a further declaration made on 13 December 2005, Mr Rinck made a declaration of trust in favour of QuestNet, in relation to the Citibank Account funds and in relation to further funds with a bank known as Dominick Bank in Zürich, Switzerland.  In these proceedings Mr Rinck does not admit to having executed the trust declaration of 13 December 2005.

The relevant orders:

6.  On 21 July 2006, Deputy Judge Poon issued a Mareva injunction, (the Poon Order).  against Mr Rinck, by which restrictions were imposed on various accounts including the Citibank Account, (the Trust Accounts).  The Poon Order contained the following provision:

“	2.	Disclosure of information
		(1)	[Mr Rinck] must, within 14 days of today, file an affidavit or affirmation setting up the balances remaining in [the Trust Accounts] together with an account of his dealings with the Trust Accounts and funds therein since 1 March 2006, including details of every amount withdrawn or transferred on the identity of the recipient of each withdrawal or transfer.”

Mr Rinck was represented by solicitors and counsel when the order was made at that hearing.

7.  On 27 July 2006, Waung J varied the Poon Order requiring that the necessary affidavit must be filed by the close of business on that day, (the Waung Order).

8.  On 27 July 2006, Mr Rinck made a short affidavit, (the first affidavit), setting out what was said to be the current balances listed in the various accounts which were the subject of the Poon Order, including the Citibank Account.   On 4 August 2006, Mr Rinck made a second affidavit.  That affidavit asserted to the fact that only two transactions had taken place in the various accounts.  First Mr Rinck said that on 30 June 2006, the sum of €582,806.44 was transferred from the Citibank Account 82346968, to another Citibank account in Mr Rinck’s personal name, account number 0083084339.  Next he said that on the same day a sum of US$7,385.95 was moved, but he said that he had no recollection as to the nature of that sum and was checking with his bankers.

9.  QuestNet was not satisfied that the two affidavits complied with the Poon Order.  The matter came before me on 15 August 2006, when I made an order that Mr Rinck must comply with the Poon Order, within 48 hours, that is no later than 1 p.m. on 17 August 2006, (the Saunders Order).  Mr Rinck was represented by solicitors and counsel at that hearing.

10.  Mr Rinck responded to the Saunders Order by a fourth affidavit made on 16 August 2006.  In that affidavit Mr Rinck stated, in reference to the transfer of €582,806.44, that he:

“should add that on the same day I transferred the said sum of €582,806.44 into one of my Swiss bank accounts of Dominick Bank (from my recollection the account No. is 800.782) and thereafter the funds were placed in trust with a person whom I have known to be my “lawyer” but not a solicitor or barrister since first consulting him for advice in a Canadian law firm with an office in Hong Kong from 1991 to now, Mr W. Royce Lane.  He has on my instructions debited by ledger with him to pay debts owed to my creditors.”

11.  QuestNet was still not satisfied that the affidavits filed by Mr Rinck in response to the three orders complied with those orders.  Consequently on 28 August 2006, QuestNet filed the appropriate Notice of Motion, together with the required Statement and Affidavits in support seeking leave to commit.  On 30 August 2006, I granted leave to proceed with the committal proceedings.

12.  Those proceedings came before me for argument on 13 November 2006.  By that time the solicitors acting for Mr Rinck had obtained leave to withdraw, and Mr Rinck neither appeared at, nor was represented before me at that hearing.  On 14 November 2006, my clerk received, by fax, from Mr Rinck, a three-page statement referring to the matters before the court.  Upon my instructions Mr Rinck was informed that a copy of the statement would be given to QuestNet’s solicitors, and that I would hear from QuestNet’s counsel in response to the statement at 10 a.m. on 15 November 2006.  It was plain from the statement sent to the court by Mr Rinck that he was fully aware of the nature of the proceedings before the court.

Do the affidavits filed comply with the orders:

13.  Neither the first, second nor the fourth affidavits filed by Mr Rinck properly complied with the Poon Order, as varied.

14.  The first affidavit exhibited a bank statement issued by Citibank showing the balances in Citibank Hong Kong, and the Dominick Bank in Zürich.  As at 11 April 2006, in Hong Kong dollars, US dollars, and Euros, the balances totalled some HK$3.5 million.  No reference was made to any transactions having taken place in any of the accounts during the relevant period.

15.  The second affidavit referred to certain transactions having taken place in the relevant period, by virtue of which a sum of €582,806.44 had been transferred from the Citibank account, to Mr Rinck’s personal account with Citibank on 30 June 2006.  This affidavit purported to indicate that the total sums held by Mr Rinck were HK$5.8 million.

16.  The fourth affidavit disclosed that the sum €582,806.44 had, on 30 June 2006, been transferred from Mr Rinck’s personal account at Citibank to the Dominick Bank in Zürich, and then to the account of Mr Lane from where an undisclosed portion had been applied in payment of Mr Rinck’s creditors.  No particulars were given as to the whereabouts of Mr Lane's account, nor the amounts that had been debited.

17.  I am satisfied beyond reasonable doubt that the first affidavit was false or misleading in that, at the time the affidavit was made the Citibank Account did not contain the sums it averred to.  That is plain from the subsequent affidavits.  Those affidavits disclose that withdrawals had been made from the Citibank Account prior to the making of the first affidavit.  Further, it was false and misleading in that it purported to state that the total sums contained in the accounts were HK$3.5 million, when, as disclosed by the second affirmation, the account held sums totalling HK$5.8 million as at 1 March 2006.

18.  I am satisfied beyond reasonable doubt that the second affidavit was false or misleading in that it failed to set out properly an account of the dealings of the relevant funds since 1 March 2006.  It gave a false impression that as at 4 August 2006, the date of the second affidavit, the sum of €582,806.44 remained in Mr Rinck’s personal account with Citibank.  That was false as demonstrated by the fourth affidavit, because on 30 June 2006, that sum had been transferred to Mr Rinck’s personal account at the Dominick Bank in Zürich.

19.  I am satisfied beyond reasonable doubt that the fourth affidavit was false or misleading in that it failed to give a proper account of the dealings in the sum of €582,806.44 which had been transferred from Mr Rinck’s personal Citibank account, to Mr Lane’s account.  The affidavit disclosed no details as to Mr Lane’s account, neither stating the name of the bank, nor the location of the bank, nor the account number in which the funds were held.  No details were given as to the debts purportedly paid, or the dates, the amounts, nor the identity of the creditors who received payment.  No particulars were given as to any instructions given by Mr Rinck to Mr Lane.  Neither the amount, nor the balance of any remaining sum, nor its whereabouts were stated.

The consequence of the failure to comply with the orders:

20.  Mr Rinck’s failure to comply properly with the Orders has had a material effect on the course of the proceedings.  In reliance upon the details in the first affidavit, QuestNet obtained an ex parte Mareva injunction against Mr Rinck from Sakhrani J. on 1 August 2006, in relation to the funds disclosed.  That injunction was limited to the amount disclosed in the first affidavit as purportedly being in the accounts, totalling some HK$3.55 million.  It was necessary for QuestNet to go back to Sakhrani J. on 5 August 2006, following the second affidavit, to increase the extent of the Mareva injunction, having regard to the new information disclosed in that affidavit.

21.  Mr Rinck’s failure to make proper disclosure has demonstrably prevented QuestNet from obtaining appropriate restraining orders in relation to funds prima facie held by Mr Rinck in trust for QuestNet.

The absence of Mr Rinck:

22.  It is clear that, provided service of all necessary documents has been properly effected or dispensed with, the court may proceed with the hearing despite the absence of the respondent, as the court’s process should not be frustrated by the recalcitrance of the respondent: see Hong Kong Civil Procedure 2006, para 52/6/4.  Further, as Mr Rinck is absent, QuestNet has a duty to bring all relevant matters to the court’s attention, including those in Mr Rinck’s favour.  Mr Maurellet, and those instructing him have properly discharged that duty.

Service of proceedings and orders:

23.  The service of the committal proceedings has been properly effected following an order made by Sakhrani J. on 26 September 2006.  That order dispensed with personal service, and permitted substituted service by leaving the Notice of Motion, the Statement under Order 52, and the affidavit in support, with the solicitors then on the record for Mr Rinck, Messers John Pickavant & Co.  That firm was given leave to cease to act on the morning of Friday 10 November 2006.  I am satisfied from having seen a series of e-mail exchanges between those solicitors and Mr Rinck, that Mr Rinck was fully aware of the impending committal proceedings.  That was confirmed by the subsequent statement received by my clerk from Mr Rinck.

24.  The Poon Order was made at a time when Mr Rinck was represented by solicitors and counsel, who appeared at the hearing on 21 July 2006, and argued matters on Mr Rinck’s behalf in relation to that Order.  The Order duly contained a Penal Notice.  Service of a sealed copy of the Order was effected by delivering the same to Mr Rinck’s solicitors.  That service has been duly proved.

25.  The Waung Order, made on 27 July 2006, varying the Poon order, was made by consent.  The sealed Order did not contain a Penal Notice.  The Saunders Order, made on 15 August 2006, was, like the Poon Order, made at a hearing when Mr Rinck was represented by solicitors and counsel.  The Saunders Order, when sealed, did not contain a Penal Notice.

26.  Order 45 R 7 requires there to be personal service of any order upon which an applicant relies for the purposes of contempt proceedings.  It is clear that the Court has power to dispense with the personal service of the orders: see AXA China Region Insurance Co Ltd v Li Yu Ping [2002] 3 HKC 339 (CA) and Excel Noble v Wah Nam [2001] 4 HKC 148 (CA).

27.  I am satisfied that this is a proper case to dispense with personal service of the Orders.  It is abundantly clear that Mr Rinck was fully aware of the requirements of all three Orders, and any service point would be one that would be utterly devoid of merit, and merely putting form over substance.

28.  Mr Rinck was represented by solicitors and counsel in relation to all three Orders.  By that fact alone he must be taken to be fully aware of the purpose of the Orders and their content.  The three relevant affidavits filed by Mr Rinck all refer to the Orders and are in purported compliance with them.  It would be idle to suggest that Mr Rinck did not know of his obligations pursuant to the various Orders.

29.  Having regard to all the circumstances I make an order pursuant to O 45 R 7(7), dispensing with the personal service of the three relevant Orders on Mr Rinck.

The requirement for a Penal Notice:

30.  It is correct that the Penal Notice was attached only to the Poon Order and not to the subsequent two Orders.  It is certainly arguable that there is no particular requirement for that course: see Hong Kong CivilProcedure 2006, para 52/2/8.  It would be appropriate, out of an abundance of caution, for solicitors acting in matters where an order with a Penal Notice attached is later varied, to ensure that the Penal Notice is attached to those subsequent orders. 

31.  I am satisfied that the court has power to dispense with the requirements of the Penal Notice on the subsequent orders: see Hong KongCivil Procedure 2006, para 52/2/9.  I accept Mr Maurellet’s submission that there could hardly be a more appropriate case for dispensation than this case.  Mr Rinck was plainly aware of what was required and the consequences of non-compliance.  The subsequent Orders served merely to vary the time for compliance with the Poon Order and did not in any way vary the substance of that Order.

32.  In any event, it is plain that having dispensed with personal service of the Waung Order and the Saunders Order, the requirement to endorse those Orders with a Penal Notice must fall away: see AXA China Region Insurance at 355H-356E.

A possible defence: material non-disclosure:

33.  To discharge the obligation on QuestNet to put to the court consideration, in the absence of Mr Rinck, any possible defences to the proceedings, Mr Maurellet drew my attention to the contention, continually made by Mr Rinck, that the Poon order, the basis upon which the subsequent orders were obtained, was an order obtained upon the basis of material nondisclosure, and hence ought not to be enforced.  Mr Rinck has contended that there has been a material nondisclosure, in that QuestNet, in obtaining orders against him, failed to properly inform the court that it was withholding dividends from him, and that consequently he was entitled to set-off the dividends due against any funds he might hold for QuestNet.

34.  The Poon Order was an order made inter partes.  It is clear from the transcript of the hearing that on 21 July 2006, when that order was made Mr Rinck was represented by solicitors who had instructed capable counsel.  Counsel was duly heard by the court.  The basis upon which Mr Rinck sought to contend that there had been a material nondisclosure was part of Mr Rinck’s counsel’s argument.

35.  It is right that, in the affidavits in support of the injunction sought, QuestNet did not specifically refer to the question of dividends.  But the issue of material non-disclosure arises when there are relevant facts which ought to be put before the court to enable it to make its decision, and, in ex parte proceedings, those facts have not been disclosed.  Here all the relevant facts were before the court.  It is irrelevant that QuestNet did not specifically raise the matter.  Mr Rinck himself ventilated the issue through his counsel.  Thus, the court was fully aware of the bases upon which Mr Rinck sought to resist the order.  Quite simply there was no non-disclosure.  The court was fully aware of Mr Rinck’s allegation that he was not being paid his dividends and that he claimed a set-off.

36.  The Poon Order was made as a result of an inter partes hearing where Mr Rinck was properly represented.  Those advising him had a full opportunity to draw to the attention of the court all matters considered relevant.  They did so.  There can be no complaint.

The requirements of contempt:

The required intent:

37.  It is now clear from the decision of the Court of Appeal in Kao Lee & Yip v Donald Koo & Ors, unreported, CACV 32/2006, 8 November 2006, that proof of an intention to disobey the order is not required.  The court said:

“	25.	….. That passage [from AG v General Times Newspaper Ltd [1992] AC 1919 at 217-18, per Lord Oliver] highlights the following matters: (1) that there is a distinction to be drawn between civil contempt and criminal contempt in relation to the mental element that is required; and (2) that in civil contempt, liability is strict in the sense that an intention to interfere with or impede the administration of justice is not required.
	26.	These were recognised by Ma J (as he then was) in Citybase Property Management Ltd v Kam Kyun Tak [2003] 2 HKC 98 at 103H which the judge below cited in paragraph 12 of his judgement.  He held that proof of an intention to disobey the order is not required.  All that has to be shown is that the alleged contemnor knew the facts which gave rise to the contempt and that the conduct was not accidental.”

38.  Mr Rinck has through a series of affidavits purported to comply with the Orders.  He has signally failed to do so.  It is plain on the face of the affidavits, that each gives a little further information, but none goes any real way to properly complying with the Poon Order.  I am satisfied that Mr Rinck has deliberately set about to frustrate the purpose of the Orders obtained by giving as little information as possible.

39.  Mr Rinck has been forced, ultimately, to the position in the fourth affidavit where he finally discloses, not only that the funds had been removed from the Citibank and Dominick Bank accounts under his control, but that the funds have been placed in an unknown, unnamed account, in an unknown location, and applied, in part at least, for Mr Rinck’s own personal purposes.

40.  It is abundantly clear that not only does Mr Rinck know the whole of the facts, but that he has deliberately chosen not to disclose the whole of the facts to the court, and that his conduct is not accidental.

41.  Even if Mr Rinck has filed these affidavits consequent upon bona fide legal advice, that fact will not provide him with a defence: see Re the Mileage Conference Group of the Tie Manufacturers’ Conference Ltd Agreement [1966] 1 WLR 1137 at 1162E-1163A. I am fully aware of the fact that steps taken upon legal advice may however be relevant to penalty.

The burden of proof:

42.  The burden of proof is on QuestNet and I am satisfied that it has discharged that burden.  I am satisfied beyond reasonable doubt that Mr Rinck has misled QuestNet and the Court in his first and second affidavits, and that in his fourth affidavit he has failed to properly comply with the Poon Order in that he has failed to give a proper account of his dealings with the relevant funds.

Mr Rinck’s statement:

43.  In reaching the conclusion that I have set out above I have had due regard to the statement sent by fax to the court by Mr Rinck on 14 November 2006, and the submissions made on that statement by counsel for QuestNet.

44.  The statement does not directly address the issues raised in relation to the contempt, save that Mr Rinck asserts that funds have been returned to him by Mr Lane and that Mr Rinck has now placed the funds with a well-known Indonesian politician, Abdurrahman Wahid, (Gus Dur).

45.  Attached to the statement submitted to the court by Mr Rinck is a document which purports to be a certificate signed by Mr Wahid, dated 22 October 2006, in which it is said that Mr Wahid holds US$740,000 in favour of Mr Rinck.  This document had previously been produced to the court in efforts by Mr Rinck to resolve matters.  Assurances had been given by those representing Mr Rinck that the sum would be paid into Court.  Nothing was paid in.

46.  The document asserts that:

“Upon completion of our week long Idul fitti national holiday [Mr Wahid] would cause the issuance of a bank draft payable to Mr Rinck’s Hong Kong solicitors, to effect the same being paid into Court.”

The Idul fitti is a public holiday in Indonesia spanning the two days of 6 and 7 December.  There is no explanation as to why the funds cannot now be paid into Court nor why matters must wait until December.

47.  In considering whether or not Mr Rinck has committed a contempt of court I have had due regard to the statement and the attached document.  Neither the statement nor the document attached assists Mr Rinck.

The Order:

48.  I am satisfied that the defendant, Kurt Georg Rocco Rinck, has been guilty of contempt of court in that he has failed, prior to 17 August 2006, to file an affidavit setting out the balances remaining in the accounts set out in the schedule below as at 21 July 2006, together with an account of his dealings with those accounts and funds therein since 1 March 2006, including details of every amount withdrawn or transferred and the identity of the recipient of each withdrawal or transfer:

Schedule
(1)	Accounts in the name of Kurt Georg Rocco Rinck at Citibank in Hong Kong:-
	12330345, 12330353, 82346968, 19356439, 39052036, & 29342899
(2)	Account number 800777 under Identification #800777 SWATSCHENKO at Dominick Bank in Zürich, Switzerland.

Sentence:

49.  As I have recorded Mr Rinck was not present at the hearing, neither was he represented by solicitors or counsel.  In all of the circumstances, while I am satisfied of Mr Rinck’s contempt, I consider that it would be inappropriate to pass sentence without first giving him an opportunity to be heard on the sentence.  A warrant to arrest Mr Rinck shall be issued, and upon arrest he shall be brought before me in order that I may hear him as to sentence.

Costs:

50.  Mr Maurellet made an application for gross sum costs, on an indemnity basis, and put before me a schedule of those costs totalling, with the additional appearance on 15 November 2006, $410,913.00.  I have examined the schedule.  The solicitors rates charged are reasonable, and are all within the rates usually allowed on a taxation.  Counsel’s fees are sensible and reasonable.  The account is one which may properly be described as conservative.

51.  This is a contempt which is neither technical, nor one which may be categorised as “not serious”. Over a period of time Mr Rinck has deliberately misled QuestNet as to the extent of the funds he held and the location of those funds.  By adopting this device Mr Rinck has successfully removed the funds from Hong Kong, has met his own creditors from the funds, and fails still to disclose the whereabouts of the balance.  As Mr Maurellet correctly points out, had there been proper compliance with the Orders, none of the costs involved in the contempt proceedings would have been incurred, and QuestNet would have been able, as they are entitled, to secure the funds.

52.  I am accordingly satisfied that this is a proper case for gross sum costs on an indemnity basis.  Mr Rinck must pay QuestNet’s costs of the proceedings in the sum of $410,913.00 forthwith.

HCA 1475/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1475 OF 2006

____________

____________