COSIMO BORRELLI as Trustee of the SFC LITIGATION TRUST v. ALLEN TAK YUEN CHAN

HCMP 2174/2014

[2019] HKCFI 2999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2174 OF 2014

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D E C I S I O N

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Introduction

1.  Pursuant to a court order, the 5^th Defendant (“Mr Danny Wu”) paid a sum of HK$16,275,000 representing the 1^st Defendant’s assets into court, as security for the Plaintiff’s action against the 1^st Defendant in Ontario, Canada.  Having obtained judgment in Ontario against the 1^st Defendant, the Plaintiff applies for payment out. This is resisted by Mr Danny Wu who claims that the condition for payment out has not been met.

Undisputed facts

2.  The background facts are not disputed and are taken from the skeleton submission of Ms Holden, solicitor for the Plaintiff.

3.  On 31 March 2014, the Plaintiff commenced proceedings against the 1^st Defendant in the Ontario Court of Canada (“Ontario Proceedings”), seeking damages for claims of wide-ranging fraud and breaches of fiduciary duty arising out of the 1^st Defendant’s role as the former chairman and CEO of Sino Forest Corporation (“SFC”).

4.  On 28 August 2014, the Ontario Court granted the Plaintiff a worldwide Mareva injunction prohibiting the 1^st Defendant from selling, dissipating or dealing with his assets, whether in his own name or otherwise. The Plaintiff also obtained disclosure orders against the 1^st Defendant (“the Ontario Mareva”).

5.  On 29 August 2014, Anthony Chan J granted the Plaintiff an ancillary Mareva injunction against the 1^st Defendant’s assets in Hong Kong up to the value of HK $2,250,000,000 pursuant to section 21M of the High Court Ordinance (“the Hong Kong Mareva”).

6.  As part of his disclosure pursuant to the Ontario Mareva, the 1^st Defendant disclosed that Win Fair Holdings Group Limited (“Win Fair”) was under his control, and its assets were subject to the Ontario Mareva and the Hong Kong Mareva.  Win Fair advanced US$1,300,000 to his female companion (D2) and US$2,600,000 to each of his daughters (D3 and D4) (collectively, “the Sums”).  Those advances were made very shortly after publication of a short-seller report in relation to SFC in June 2011, that ultimately led to SFC’s collapse.

7.  As a result of this disclosure, on 9 January 2015, Chow J made orders extending the Hong Kong Mareva to freeze the bank accounts of D2 to D4 that received the funds from Win Fair.  He also ordered D2-D4 to disclose how the Sums had been used and the current whereabouts.

8.  On 7 July 2016, D2 to D4 disclosed that substantial transfers totalling HK$34,525,000 originating from the Sums were paid to 3 BVI Companies (“the Substantial Transfers”).

9.  As a result of the Substantial Transfers, the Plaintiff commenced contempt proceedings against D1 to D4 in HCMP 1987 of 2016 for breach of the Ontario Mareva and Hong Kong Mareva.

10.  On 24 October 2014, Campbell-Moffat J granted orders allowing the Plaintiff to obtain from Fubon Bank and ICBC details of the account signatories of the 3 BVI Companies.  The account opening form subsequently produced confirmed that the bank accounts of the 3 BVI Companies were all controlled by Mr Danny Wu.

11.  In the light of that information, the Plaintiff filed a summons for Mr Danny Wu to disclose the whereabouts of the Substantial Transfers (“Disclosure Summons”).

12.  On 24 November 2016, the day before the return date of the Disclosure Summons, Mr Danny Wu filed an affirmation in opposition deposing to the following facts:

(1)     That he had made payments in the PRC at the 1^st Defendant’s direction, which accounted for approximately HK$18,250,000 of the Substantial Transfers;

(2)     That he had made payments of the balance of the Substantial Transfers totalling HK$16,275,000 in the PRC on behalf of the 1^st Defendant, with the 1^st Defendant paying Mr Danny Wu “in Hong Kong dollars equivalent in Hong Kong”; and

(3)     That having made such payments in the PRC, the balance of the Substantial Transfers in the 3 BVI Companies’ Accounts were his funds and the subsequent withdrawals were for his own purposes.

13.  Mr Danny Wu declined to provide any records to substantiate the purported payments he had made in the PRC on behalf of the 1^st Defendant. Instead, Mr Danny Wu indicated that he was willing to pay into court the balance of the Substantial Transfers totalling HK$16,275,000, in lieu of disclosure.

14.  On 7 December 2016, upon undertakings from Mr Danny Wu, Campbell-Moffat J made the subject order (“the Order”) with these terms:

“AND UPON the 5^th Defendant’s [ie Mr Danny Wu’s] undertaking to make “payment into court a sum of HK$16,275,000 (“Payment”) on or before 3 January 2017 upon the terms hereinunder set out …

AND UPON the Intended 5^th Defendant’s undertaking not to seek enforcement of any judgment obtained against [the 1^st Defendant] to indemnify [Mr Danny Wu] for the said Payment for so long as any judgment obtained by the Plaintiff (if any) in the Action (as defined below) remains unsatisfied …

AND UPON the Intended 5^th Defendant’s undertaking to consent to payment out to the Plaintiff from the Payment of such amounts as are necessary to satisfy the judgment debt (if any) in the Action as defined below and any order for costs against the 1^st Defendant in the Action and in these proceedings.

IT IS ORDERED THAT:

…

(3)     The Payment:

(a)     stands, as between the Plaintiff and the 5^th Defendant (and as between them only) as representing the assets of the 1^st Defendant; and

(b)     stands as security in response of (sic) the Plaintiff’s action in [the Ontario Proceedings] (the “Action”) to the extent that there are insufficient assets of the 1^st Defendant in Canada and/or in Hong Kong available to fully satisfy any judgment debt thereof.”

The words underlined in paragraph (3)(b) shall be referred to as “the Condition”.

15.  After a 48-day trial, on 14 March 2018, the Ontario court awarded damages to the Plaintiff that totalled CAD$2.9 billion and punitive damages of CAD$5 million (“the Ontario Judgment”).

16.  The Court of Appeal for Ontario dismissed the 1^st Defendant’s appeal on 24 June 2019. There is a pending application by the 1^st Defendant for leave to appeal to the Supreme Court of Canada but the 1^st Defendant’s application for stay of execution pending the leave application has been dismissed by the Court of Appeal for Ontario on 9 September 2019.

17.  Meanwhile, on 28 March 2018, the Plaintiff commenced proceedings in Hong Kong in HCA 709/2018 against the 1^st Defendant to enforce the Ontario Judgment (“HK Enforcement Proceedings”).

18.  On 18 October 2019, the Plaintiff took out this summons for payment out.

19.  On 28 October 2019, Master H Au-Yeung granted summary judgment to the Plaintiff in the HK Enforcement Proceedings, whereby the 1^st Defendant was adjudged to pay the sum awarded in the Ontario Judgment, together with interest and costs.

Undisputed legal principles

20.  The court has unfettered discretion to order payment out so as to achieve justice between the parties on a case by case basis: MGA Entertainment Inc v Toy and Trends (Hong Kong) Ltd & ors, HCA 2152/2002 (unrep, 15 July 2014), per Master H Au-Yeung at §§16‑17.

21.  In the normal course of events, money will be released for the purpose it was paid in, such as to satisfy a judgment sum where payment in was a condition for stay of execution: MGA Entertainment at §18.

22.  Where the applicant is prima facie entitled to the release of funds in the court, the onus is on the counterparty opposing the release to give some good reason justifying why the money should remain in court: Ng Chi Kwan, Danny Summer & anor v Yeung Yiu Kwai & anor [2015] 1 HKC 348 per DHCJ Marlene Ng (as she then was) at §§21, 22 & 25.

23.  The fact that an unsuccessful party who has paid money into court may seek to appeal is not a legitimate matter for the court’s consideration.  There is no reason to defer payment out where no stay of execution of the judgment has been sought: Wear Me Apparel LLC v Lam Na, HCA 149/2009 (unrep, 25 April 2013), per Au-Yeung J at §§6 & 15.

Application of the legal principles

24.  Determination of this summons turns on interpretation of the Condition. Mr Bernard Mak and Mr Ernest Ng for Mr Danny Wu submit that in order to apply for payment out, the Plaintiff must show:

(1)     That there is a judgment debt in the Action in Canada;

(2)     That enforcement proceedings against the 1^st Defendant’s assets have been commenced and concluded in Canada and Hong Kong, unless in exceptional circumstances where the commencement of such proceedings is otherwise impracticable; and

(3)     That the fruits of those enforcement proceedings are insufficient to fully satisfy the judgment debt in the Action and the judgment debt remains unsatisfied after those proceedings.

25.  In respect of proposition (1), Mr Bernard Mak conceded that it has been fulfilled by reason of the Ontario Judgment. 

26.  The application for leave to appeal to the Supreme Court of Canada is, in my view, irrelevant as there is no automatic stay of execution of judgment and this court has no power to order a stay: Wear Me Apparel.

27.  In respect of proposition (2), I do not agree that commencement or conclusion of proceedings is a necessary starting point.  The Order must be construed with common sense.  The primary obligor to pay the judgment debt is still the 1^st Defendant.  Assuming he has only CAD$1,000 in a bank account in Canada and a similar amount in a Hong Kong bank, it is simply impracticable to commence enforcement proceedings in either jurisdiction since the costs are likely to exceed the fruits of the enforcement proceedings.  The Plaintiff should be at liberty to apply for payment out upon disclosure of that situation (with credible proof) to the court.

28.  Similarly, if the 1^st Defendant only has CAD$100,000 in a bank account in Canada but no asset elsewhere, there is no need to wait till conclusion of garnishee proceedings before the Plaintiff can apply for payment out because the assets (after taking into account costs) are plainly insufficient.

29.  The intention of the Order was clear: that assets of the 1^st Defendant in Canada and/or Hong Kong must first be shown (with credible evidence) to be insufficient to cover the judgment debt before the frozen funds in court can be utilized.

30.  Strict adherence to the terms of the Order would not cause prejudice to either party as the money will remain in court until the Condition has been satisfied.  This approach is consistent with the principle in MGA Entertainment, especially since the Order was entered into by consent with the assistance of leading counsel on both sides.

31.  Mr Danny Wu should not be troubled to seek indemnity from the 1^st Defendant if the latter has the resources to meet the judgment debt in the first place.  Adherence to the terms of the Order will also protect other judgment creditors who may have priority over the funds in court.

32.  In respect of proposition (2), the only “enforcement action” taken by the Plaintiff was the HK Enforcement Proceedings.  The Plaintiff only obtained the summary judgment against the 1^st Defendant on 28 October 2019, 10 days after the payment out summons was issued. 

33.  There is no evidence of enforcement proceedings in Canada, nor evidence that the 1^st Defendant would not honour the Ontario Judgment. 

34.  Mr Borrelli’s 11^th affidavit in support of this summons wrongly relied on an order in draft form and simply failed to explain how the Condition was satisfied.

35.  It was only in his 12^th affidavit that Mr Borrelli averred that assets disclosed by the 1^st Defendant in Hong Kong and Singapore were worth only about HK$214,000,000.  Those assets comprised bank balances, Hong Kong real properties held for the benefit of the 1^st Defendant and the money in court.  Even if all his disclosed assets worldwide are taken into account, they are only worth about HK$304,000,000, way below the Ontario Judgment sum.  The Plaintiff has not been able to identify other available assets.

36.  In my view, the Plaintiff’s situation falls within the analogy in paragraph 28 above and meets the intention of the Order set out in paragraph 29 above.  It is not necessary to wait for conclusion of the Hong Kong Enforcement Proceedings nor commencement of enforcement proceedings in Canada. 

37.  Consequentially, proposition (3) has been fulfilled as the fruits of any enforcement proceedings in any of the 2 jurisdictions will be insufficient to fully satisfy the Ontario Judgment sum.

Conclusion

38.  Since the Condition imposed by the Order has been met, the Plaintiff is entitled to payment out and Mr Danny Wu has not rebutted the same.  I grant an order in terms of the summons.

39.  It is not appropriate to grant costs to the Plaintiff on indemnity basis because Mr Borrelli’s 11^th affidavit did not show that the Condition has been fulfilled.

40.  There is no complexity on law or facts.  The only “complexity” is to compile evidence showing that the value of the 1^st Defendant’s assets fell short of the Ontario Judgment sum.

41.  I make an order nisi that costs be to the Plaintiff, summarily assessed at $100,000, to be borne by Mr Danny Wu.

HCMP 2174/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2174 OF 2014

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______________

D E C I S I O N

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1.  This is an application made by the plaintiff, being the Trustee of the SFC Litigation Trust (“Trustee”), to compel the 2^nd defendant (“Hu”), 3^rd defendant (“Grace”) and 4^th defendant (“Joyce”) to comply with the disclosure orders made by Chow J on 9 January 2015 and 12 November 2015.

2.  These proceedings were brought by the Trustee, representing the creditors of Sino Forest Corporation (“Sino”), against the 1^st defendant (“Chan”), the former Chairman and Chief Executive Officer of Sino, which is a public company listed on the Toronto Stock Exchange, for breach of fiduciary duties.  The claim is that Sino had been defrauded by Chan, who had allegedly procured many fictitious transactions to be entered into by Sino or its subsidiaries, which had resulted in very substantial funds having been diverted to himself or his nominees.  Mareva injunctions have been granted in Ontario and Hong Kong against Chan.  In Hong Kong, the injunction order was granted on 29 August 2014 (“Order”), initially against Chan only as defendant, whereby he was restrained from removing or disposing of his assets up to the value of HK$2.25 billion. 

3.  On 9 January 2015, Chow J extended the Order (on the Chabra basis) to cover 3 specified bank accounts maintained by Grace, Joyce and Hu with the Standard Chartered Bank in Hong Kong (“SCBAccounts”).  In his Decision of 9 January 2015, Chow J pointed out that on the basis of the materials before him, he had little difficulty in coming to the view that there were good reasons to suppose that Chan had substantial control over the 3 sums of money (totaling US$6.5 million “Monies”) transferred to Hu, Grace and Joyce (paragraph 6 of his Decision), and further, that there was certainly a possible inference to be drawn on the existing evidence that the Monies were held by Hu, Grace and Joyce as nominees for Chan (paragraph 8 of the Decision).  Grace and Joyce are the daughters of Chan, and Hu has been described as Chan’s close companion.

4.  Under the order made by Chow J on 9 January 2015 (“Chow Order”), Grace, Joyce and Hu were to disclose by affidavit within 7 days how the Monies they had received from Chan “have been used and expended and the current whereabouts of the money (or any part thereof) with full particulars and documents in support”.  There is no further dispute as to the terms of the Chow Order.

5.  An unless order was made by Chow J on 12 November 2015 (“Unless Order”), compelling Hu, Grace and Joyce (who had by then been joined as 2^nd, 3^rd and 4^th defendants respectively on 6 November 2015) to comply with the Chow Order on or before 10 December 2015.  The parties had disputed the meaning and effect of the Chow Order, and whether the Chow Order required Grace, Joyce and Hu (collectively “3^rd Parties”) to provide a historical trail of fund flow of the Monies from the SCB Accounts. In granting the Unless Order, Chow J has clearly explained the Chow Order, and put its meaning and effect beyond any further dispute. 

6.  In paragraphs 14 and 15 of his Decision of 12 November 2015, Chow clarified the purpose of the Chow Order, as follows:

“In other words, the Disclosure Order was made with the view of achieving a proper balance between on the one hand avoiding the oppression that might be caused to the 3^rd Parties by a wide injunction covering all their “properties and assets” and on the other hand enabling the plaintiff to trace the Monies into assets (if any) currently held by the 3^rd Parties so that the plaintiff could apply for further injunctive relief (if so advised) in respect of such current assets.

Mr Chain (for the 3^rd Parties) accepts that the wording of the Disclosure Order is arguably wide enough to mean that a historical trail of fund flow of the Monies from the SCB Accounts should be provided by the 3^rd Parties.  For my part, I consider that to be the natural and ordinary meaning of the words used in the Disclosure Order.  Even if there should be any doubt about the matter (which I do not think there is), the context and background of the Disclosure Order would, in my view, strongly support the view that it does require the 3^rd Parties to provide a historical trail of fund-flow of the Monies from the SCB Accounts.” (Emphasis added)

7.  Following the making of the Unless Order, the 3^rd Parties made further affirmations in December 2015, in purported compliance with the Chow Order and the Unless Order.  The Trustee claims that notwithstanding these affirmations, the 3^rd Parties have still failed to comply with their obligation of disclosures.  In summary, the Trustee claims that although the 3^rd Parties have provided bank statements with their affirmations, these statements were provided in a piecemeal fashion after January 2016 and were still incomplete, that parts of the bank statements were redacted, and that the 3^rd Parties have not disclosed all the recipients of the proceeds paid out of the Monies.

8.  The 3^rd Parties on their part claim that they have disclosed the trail of the fund flow from the SCB Accounts, that the 3^rd Parties’ oath that they have done so should be conclusive, and that the heavy burden is on the Trustee to establish that the 3^rd Parties have not done so, or that the redacted information is not irrelevant (as the 3^rd Parties claim).  Counsel for the 3^rd Parties relies on Mimi Kar Kee Wong Hung v Severn Villa Ltd [2012] 1 HKLRD 887.

9.  I agree with Counsel for the Trustee, that at this stage, it is no longer open to the 3^rd Parties to further argue whether or not the Monies belonged to Chan, or to dispute that under the Chow Order, and as explained in the Unless Order, the 3^rd Parties are compelled to provide a historical trail of the fund-flow of the Monies from the SCB Accounts.  In the exercise of the Chabra jurisdiction of the Court, the Order was extended to the SCB Accounts, which were not in Chan’s name, but in the name of the 3^rd Parties to whom Chan had transferred the Monies.  In making the Chow Order, the Court was satisfied that Chan had substantive control over the 3^rd Parties.  Under the Chow Order, the 3^rd Parties are to provide a historical trail “of the Monies in the SCB Accounts”.  If it can be objectively seen that the Monies in the SCB Accounts were paid out, a historical trail has to be provided, and the recipients of the payments identified.

10.  The Court of Appeal’s decision in Mimi Kar Kee Wong Hung v Severn Villa Ltd, as relied upon by the 3^rd Parties, related to a party’s application for a further and better list of documents, to disclose further accounting records referred to in affirmations filed, and for unredacted copies of the documents already disclosed, when a party had gone on oath to confirm that the redacted parts were irrelevant to the issues to be tried.  In this context, the Court of Appeal referred (in paragraph 51 of the judgment of Kwan JA) to Jones v Andrews (1888) 58 LT 601, 604 and GE Capital Corporate Finance Group v Bankers Trust Co [1995] 1WLR 172, and stated:

“The oath of the party giving discovery is conclusive, ‘unless the court can be satisfied - not on a conflict of affidavits, but either from the documents produced or from anything in the affidavit made by [that party], or by any admission by him in the pleadings, or necessarily from the circumstances of the case - that the affidavit does not truly state that which it ought to state’. ... The test is whether it is not unreasonable to suppose that the parts redacted do contain information which may, either directly or indirectly, enable Ms Wong to advance their own case or to damage the defendants’ case. A heavy burden lies on the party who seeks to challenge the veracity of the other party’s oath regarding redaction.”

11.  For the Trustee, Miss Sit pointed out that the last remark made in relation to the heavy burden deals with redaction only, and not disclosure generally.  She also referred to the appropriate test set out in China Metal Recycling (Holdings) Ltd (in prov liq) v Chun Chi Wai, HCA 1412/2013, unreported, 17 November 2014.  There, in making an unless order for the defendants’ disclosure of assets, the learned judge considered whether the defendants’ explanation is on the face credible and consistent with contemporaneous documents and/or their previous statements.

12.  As Miss Sit has illustrated from the entirety of the 3^rd Parties’ own affirmations and the documents exhibited by them, I am satisfied that when the bank statements produced are objectively considered, it can be seen that the 3^rd Parties have failed to fully disclose and provide a historical trail of the fund-flow of the Monies, and how they were paid out from the SCB Accounts.  Miss Sit has taken me through the bank statements and related documents, and shown to my satisfaction how the Monies were paid into the SCB Accounts, and how it can be seen from the documents exhibited by the 3^rd Parties that after the Monies were received by the 3^rd Parties, the Monies were used to purchase 3 unit trusts, which were redeemed, and the proceeds used to purchase new unit trusts, which were then redeemed in mid-2014 when it became known that the Trustee had commenced proceedings against Chan in Ontario, and that immediately after the grant of the Mareva injunctions in Hong Kong and in Ontario, the proceeds were paid out by the 3^rd Parties to unidentified persons. 

13.  The 3^rd Parties sought to explain their failure to account for the flow of parts of the Monies, on the basis that they had mentally kept a ledger of what expenses and payments they made were attributable to the Monies received.  Grace’s statement in paragraph 6 of her 5^th affidavit summarizes the 3^rd Parties’ stance:

“To me, the receipt of the Sum meant that my net wealth increased by HK$20,224,100 which made me substantially more wealthy and financially secure. Since I received such a substantial gift money from my father, it had subsequently caused me to have spent a lot of money in purchasing items and making investments which I would not have otherwise done but for the receipt of the Sum. I have therefore considered that the spending and investments were made out of the Sum. When I wanted to spend money from the Sum, regardless of which bank account that money was drawn from, in my mind I would mentally treat that I was spending the money from the Sum. It was on this basis that I spent the Sum, and this was how I identified how I used and expended the Sum, and the current whereabouts of the Sum ... by reference to my intention at the time.”

14.  On that basis, although no causative link can be seen between the Monies in the SCB Accounts and some payments and expenditure claimed to have been made by Grace, these payments were asserted by her to have been made from the Monies. Grace also claims that certain withdrawals or transfers which can be seen, objectively, to have been made from the SCB Accounts did not come from the Monies.  Likewise, Joyce only accounts for payments withdrawn or transferred from the SCB Accounts on the basis of what she had mentally attributed to the Monies. 

15.  I regret that I do not find these assertions made by the 3^rd Parties (that they had mentally allocated expenditure to the Monies in the SCB Accounts, regardless of the actual bank account from which the expenditure was made) to be credible.  Nor do I believe the 3^rd Parties, when they claim that the source of various payments and transfers made from the SCB Accounts were in fact unrelated to the Monies.  These assertions and claims by the 3^rd Parties are self-contradictory, and are not supported by the contemporaneous documents themselves.  Bearing in mind the timing of the payments in and out of the SCB Account, the 3^rd Parties’ versions and explanations are most improbable and unbelievable.  Nor can I believe their bare assertions that transfers and payments made from the SCB Accounts to the unidentified recipients, and the redacted entries in their bank statements, were all unrelated to the Monies. 

16.  As Counsel for the Trustee pointed out, there are inconsistencies in the affirmations filed by the 3^rd Parties at different stages.  The use of the Monies to purchase unit trusts, the redemption of the unit trusts and the payment of the proceeds out of the SCB Accounts were not mentioned in any of the earlier affirmations filed by the 3^rd Parties, until their latest 5^th affidavits and affirmation filed in April 2016, when admissions were made by them that at least some of the Monies had been used to purchase those unit trusts.

17.  As explained in paragraph 12 above, I am satisfied from what I have seen that on the face of the documents provided by the 3^rd Parties, the purchase of the unit trusts and the proceeds of their redemption which from the bulk of the funds in the SCB Accounts all stem from the Monies.  A historical trail must therefore be provided by the 3^rd Parties of all the payments out from these funds.

18.  In the case of Joyce, she claimed that of the money redeemed from the unit trusts purchased with the Monies, HK$5 million was paid out of the relevant SCB Account in September 2014, as a loan to her friend Gloria.  It is alleged that the loan carries no interest, has no repayment date and that the only evidence of the loan is an ex post facto note  from Gloria, dated 9 December 2015 (“Note”), that the HK$5 million was a loan from Joyce. Joyce also claims that she had issued a cashier order to Gloria for HK$1.8 million from the Monies on 6 September 2014, which was “mainly for the purpose of funding the purchase of a motor vehicle to replace Joyce’s previous one”.  The Note from Gloria confirmed that of the HK$1.8 million, $500,000 was for buying a motor vehicle for Joyce.  However, these statements of Joyce and Gloria are inconsistent with the vehicle registration document exhibited, which shows that the owner of the vehicle is Gloria, and not Joyce.

19.  In Hu’s case, she admits in her 5^th affirmation that the Monies had been applied towards purchasing unit trusts.  Her claim that HK$10,525,000 of the Monies she had received had been paid out on 19 September 2014 is incredulous, when it has been shown that the monies she had received from the redemption of the unit trusts were only credited into her bank account on 20 September 2014, before the alleged payment out.  Instead, HK$10,525,000 from the redemption monies was only paid out by her on 22 September 2014, and she has failed to disclose the payee of the amount.

20.  In any event, the Chow Order and the Unless Order require the 3^rd Parties to give the fund flow of the Monies that can be seen to be maintained and kept in the SCB Accounts.  It is not sufficient for the 3^rd Parties to refuse disclosure under the orders on the ground that mentally, they had not intended the payment out or transfer from the SCB Accounts to be attributed to the Monies.

21.  It has to be borne in mind that the claims made against Chan are proprietary in nature. As Hoffman J (as he then was) highlighted in the case of Arab Monetary Fund v Hashim and others (No 5) [1992] 2 All ER 911, by reference to the oft-quoted passage of Templeman LJ’s judgment in Mediterranea Raffineria Siciliana Petroli SpA v Mabanaft GmbH [1978] CA Transcript 816 in the Court of Appeal:

“A court of equity has never hesitated to use the strongest powers to protect and preserve a trust fund in interlocutory proceedings on the basis that, if the trust fund disappears by the time the action comes to trial, equity will have been invoked in vain.”

22.  Where discovery is sought against a person who is not a party to an action, but who is “mixed up in the tortious acts of others so as to facilitate their wrongdoing” (Norwich Parmacal Co v Customs and Excise Comrs [1973] 2 All ER 943 at 948), such person has a duty to assist the party who has been wronged by giving him full information and disclosing the identity of the wrongdoers. The Norwich relief was extended to cases in which a plaintiff wanted to know, not the identity of the wrongdoer, but what he had done with misappropriated money (eg Bankers Trust Co v Shapira [1980] 3 All ER 353). The court made it clear in Arab Monetary Fund that the Bankers Trust order can extend to the disclosure of information:

“It rests upon the proposition that unless the assets in question can be located and secured, the ultimate determination of ownership of those assets may be frustrated by their removal or dissipation and there will be no point in calling on the third party at the trial to produce the required documents or give the requested information. In my judgment, therefore, the first principle of the Bankers Trust case is that the plaintiff must demonstrate a real prospect that the information may lead to the location or preservation of assets to which he is making a proprietary claim.”

23.  I do not agree that the Trustee is embarking on a fishing expedition, or acting on the basis of his speculation and guesses.  On the evidence presented, there is a real prospect that the information sought from the 3^rd Parties, including the information now redacted by them, might lead to the location and preservation of the Monies.

24.  Bearing in mind the objective of the Chow Order and the Unless Order, as stated in paragraphs 14 to 16 of Chow J’s Decision of 12 November 2015, it is clear that the 3^rd Parties have not complied in full with the Unless Order, and it is appropriate for the Court to give effect to the stated purpose of the Chow Order and the Unless Order by ordering the 3^rd Parties to provide further and specific information.  They should file corrective affidavits to give a full and accurate account of the historical trail and the current whereabouts of the Monies.  They should in particular disclose the recipients of the amounts which are seen to be paid out of the SCB Accounts and are, on the face of the documents disclosed, attributable to the redemption monies from the unit trusts purchased with the Monies.  These are, in Hu’s case, the HK$10,525,000 paid out on 22 September 2014; in Grace’s case, the amounts paid out on 17 March 2014, 1 September 2014, 5 September 2014, 22 September 2014 and 23 September 2014; and in Joyce’s case, the amounts paid out on 1 September 2014, 6 September 2014, 22 September 2014 and 19 January 2015.

25.  The 3^rd Parties have had more than sufficient and reasonable time to comply with the Chow Order which was made on 9 January 2015, and the Unless Order which was made on 12 November 2015.  I have indicated in the course of the hearing that it might be more appropriate for the Trustee simply to enforce the orders by contempt proceedings, but bearing in mind the objectives intended to be achieved by the orders, I agree that it would be appropriate for this Court to give a final opportunity to the 3^rd Parties, and to order them to comply with the Chow Order and the Unless Order by filing corrective affidavits within 21 days from the date of handing down this Decision. 

26.  An order is accordingly given in terms of the Trustee’s summons issued on 1 March 2016, which includes the provision of unredacted copies of all bank statements exhibited to the 3^rd Parties’ affirmations.

HCMP 2174/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2174 OF 2014

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_______________

___________________

D E C I S I O N

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INTRODUCTION

1. I have before me an application by the plaintiff by summons dated 16 April 2015 seeking an “unless order” against Hu Liang Mei, Chan Wing Yan Grace and Chan Wing See Joyce (hereinafter collectively referred to as the “Third Parties”) to compel them to comply with a disclosure order made by me on 9 January 2015 (“the Disclosure Order”).

2. The background facts giving rise to the Disclosure Order were set out in my earlier decision given on 9 January 2015 (“the 9 January Decision”) and my further decision given on 23 January 2015 (“the 23 January Decision”), and I shall not repeat them here.

3. By the Disclosure Order, the Third Parties are required to disclose:-

“ how the monies received by them … have been used and expended and the current whereabouts of the monies (or any part thereof) with full particulars and documents in support”.

4. The “monies” received by the Third Parties mentioned in the Disclosure Order refer to the sums of US$1.3 million, US$2.6 million and US$2.6 million (collectively referred to as “the Monies”) transferred from an account of the defendant’s company (Win Fair Holdings Group Limited”) to the bank accounts of Madam Hu, Grace Chan and Joyce Chan respectively at Standard Chartered Bank (“the SCB Accounts”).

5. In compliance, or purported compliance, with the Disclosure Order, Madam Hu, Grace Chan and Joyce Chan each filed an affidavit or affirmation on 22 January 2015, 22 January 2015 and 3 February 2015 respectively, identifying various assets said to have been acquired, as well as various expenditures paid for, through or by the use of the Monies.

6. The plaintiff considered the disclosure made by the Third Parties to be deficient and asked them to remedy the deficiencies by a letter dated 28 January 2015 from Lipman Karas (the plaintiff’s solicitors).  Initially, the Third Parties indicated through their solicitors (Kwok, Ng & Chan) that they needed time to collate information and documents (said to be voluminous) before they could address the plaintiff’s questions.

7. However, in a subsequent letter from Kwok, Ng & Chan dated 12 March 2015, the Third Parties took the position that they had duly complied with the Disclosure Order.

8. On 16 April 2015, the plaintiff issued the present summons to compel the Third Parties to fully comply with the Disclosure Order.

Interpretation of the Disclosure Order

9. The central dispute between the parties, as I understand it from the submissions of Ms Eva Sit (for the plaintiff) and Mr Christopher Chain (for the Third Parties), turns on the question of whether the Disclosure Order requires the Third Parties to provide a historical trail of fund-flow of the Monies from the SCB Accounts.

10. If the Disclosure Order, on its proper interpretation, requires such a historical trail to be provided, it is not in dispute that the Third Parties have failed to comply with it.

11. The principles on how a court order ought to be interpreted do not appear to be in dispute.  In Secretary of State for Business, Innovation and Skills v Feld [2014] 1 WLR 3396, at paragraph 23 per Deputy High Court Judge Edward-Murray, it is said that the starting point is the natural and ordinary meaning of the words used in light of the syntax, context and background in which those words are used.  What additional principles and factors come into play as part of the court’s exercise of interpretation will depend on the nature of the writing to be interpreted and will be highly dependent on the facts of the specific case.

12. In the present case, the context and background of the Disclosure Order can be gathered from the 23 January Decision, where I stated the following at paragraph 9:

“ As mentioned in my earlier decision given on 9 January 2015, I was not prepared to impose a blanket Mareva injunction to cover all the assets of the Third Parties because of the absence of evidence that the Monies or any part thereof were still held by the Third Parties, and what had become of the Monies. I considered that, in fairness to the Third Parties, a more limited form of Mareva injunction should be granted covering only the three specific bank accounts into which the Monies were paid, but I also required the Third Parties to make disclosure of how the Monies received by them had been used and expended and the current whereabouts of the Monies (or any part thereof) with full particulars and documents in support so that the plaintiff could carry out further investigation and, if necessary, apply for further injunctive relief from the court.”

13. The above passage should also be read together with the 9 January Decision, where I stated the following at paragraphs 9 to 12:-

“ 9. The plaintiff’s difficulty, as I see it, is that the transfers were made more than 3 years ago, on 9 June 2011. There is no evidence that any part of the Monies are still held by the Third Parties, or what has become of the Monies. On the other hand, the extended injunction sought by the plaintiff would cover all “properties and assets” of the Third Parties and not just the Monies or assets acquired by or derived from the use of the Monies. While I accept that the court does have jurisdiction to make a wide order in the terms sought, as Mr Justice Ng remarked at paragraph 30 of his judgment in Re Chau Cham Wong Patrick, a Bankrupt: ‘A Mareva injunction should not be granted lightly. The consequences of granting the injunction are such as to put the defendant at a very real disadvantage and in a position from which it may never adequately recover’.

  10.   In the absence of any evidence that the Monies are currently still held by the Third Parties or have been turned into some identifiable assets, it seems to me that the order sought would be far too draconian and cannot be justified.

  11.   I would be prepared, however, to grant a more limited form of Mareva injunction, limited to the 3 identified accounts at SCB into which the Monies were transferred.

  12.   I do not consider it appropriate to order any trial of preliminary issue, but I would hear the parties on the further directions to be given for the disposal of the plaintiff’s summons, and also on the question of whether any ancillary disclosure order should be made against the Third Parties regarding the current whereabouts of the Monies.”

14. In other words, the Disclosure Order was made with the view of achieving a proper balance between on the one hand avoiding the oppression that might be caused to the Third Parties by a wide injunction covering all their “properties and assets” and on the other hand enabling the plaintiff to trace the Monies into assets (if any) currently held by the Third Parties so that the plaintiff could apply for further injunctive relief (if so advised) in respect of such current assets.

15. Mr Chain accepts that the wording of the Disclosure Order is arguably wide enough to mean that a historical trail of fund-flow of the Monies from the SCB Accounts should be provided by the Third Parties.  For my part, I consider that to be the natural and ordinary meaning of the words used in the Disclosure Order.  Even if there should be any doubt about the matter (which I do not think there is), the context and background of the Disclosure Order would, in my view, strongly support the view that it does require the Third Parties to provide a historical trail of fund-flow of the Monies from the SCB Accounts.

16. I should also briefly explain why it is important that the Third Parties should provide such historical trail.  For the plaintiff to be able to apply for further injunctive relief in respect of current assets held by the Third Parties acquired through the use of the Monies, it is obviously necessary or essential that the plaintiff be able to show that the current assets were indeed purchased through the use of the Monies. For example, the defendant in his second affirmation dated 22 January 2015 stated that he had been informed by Madam Hu that out of the US$1.3 million received by her, part of it became two deposits in the total sum of RMB 5 million sitting in a bank account at Agricultural Bank of China Limited.  Madam Hu has now stated, in her 2^nd affirmation dated 2 February 2015, that what the defendant said is incorrect.  In fact, the RMB 5 million went towards the purchase of an insurance policy with ICBC.  Had the plaintiff taken what the defendant said at face value and applied for a further injunction to restrain Madam Hu from disposing of or dealing with the two bank deposits at Agricultural Bank of China Limited, any injunction granted by the court would be wrong (assuming that what Madam Hu says is the correct version, which the court obviously is in no position to determine at this stage).  This clearly demonstrates the importance of the Third Parties providing an accurate historical trail of fund-flow of the Monies from the SCB Accounts with full particulars and supporting documents.

Failure to comply with the Disclosure Order

17. As earlier mentioned, it is not disputed by the Third Parties that they have failed to comply with the Disclosure Order if, on its true interpretation, it requires them to provide a historical trail of fund-flow of the Monies from the SCB Accounts.

18. Ms Sit has highlighted various deficiencies in the disclosure so far made by the Third Parties at paragraphs 20 to 40 of her skeleton submissions dated 9 November 2015 which it is not necessary for me to repeat here.  They have not been answered by Mr Chain on behalf of the Third Parties, and I consider the complaints raised by Ms Sit to be justified on the evidence and materials before me.

19. As regards the court’s jurisdiction to grant an unless order to enforce compliance with a disclosure order made ancillary to a mareva injunction and the rationale behind such jurisdiction, I refer to an earlier decision of this court made in China Metal Recycling (Holdings) Limited (in Provisional Liquidation) and Another v Chun Chi Wai and Others, HCA 1412/2013 (17 November 2014), where the following was stated at paragraphs 51 and 52:-

“ 51. It is not in dispute that the court has jurisdiction to make an “unless” order to ensure compliance with disclosure orders in aid of Mareva injunctions: see JSC BTA Bank v Ablyazov [2013] 2 All ER 414 at paragraphs 146, 149, 165, 183‑188, per Rix LJ. In relation to the exercise of such jurisdiction, the following was said by Rix LJ at paragraph 188:

“ The authorities demonstrate that it is vital for the court, in the interests of justice, to have effective powers, and effective sanctions. Without these, it would be possible for a defendant (or, in a different situation, a claimant) to flout the orders of the court, which are the court’s considered means by which to keep the scales of justice for the parties even. If once it became known that the court was unable or unwilling to maintain the effectiveness of its orders, then it would lose all control over litigation of this kind, with terrible consequences for the administration of justice. Those wrongly accused of fraud would be relieved of a certain amount of inconvenience, but fraudsters would rejoice and hitch a free ride to interminable litigation on the back of ill-gotten gains.”

  52.   As submitted by Mr Coleman, freezing orders are critical weapons in the court’s armoury against fraud, securing the preservation of assets which might otherwise be wrongly dissipated pending judgment, and in appropriate cases, the preservation of evidence, including documentation, and the provision of information to trace the proceeds of fraud: CIBC Mellon Trust Company v Stolzenberg [2003] EWHC 13 at paragraph 103, per Etherton J.  Further, compliance with orders of the court goes to the essence of the rule of law that parties subject to the court’s jurisdiction should comply with court orders.  The gravity of the matter of non‑compliance will increase where the non‑compliance results from a conscious decision: see CIBC Mellon Trust Company v Stolzenberg [2004] EWCA Civ 827 at paragraph 167, per Arden LJ.”

20. In the present case, I consider it to be clear that:-

(1)  the Third Parties have failed to comply with the Disclosure Order;

(2)  their failure to comply with the Disclosure Order is intentional or deliberate; and

(3)  it is well within their powers to fully and properly comply with the Disclosure Order.

21. In these circumstances, it would plainly be correct to make an unless order to compel the Third Parties to comply with the Disclosure Order.

22. As regards the time for compliance, I take into account the fact that the Third Parties have already had 10 months to comply with the Disclosure Order.  Bearing in mind the serious consequence of a failure to comply with the unless order, I am prepared to grant them a further 28 days to comply with it.

Disposition

23. Accordingly, I make an order in terms of paragraphs (1) and (2) of the plaintiff’s summons dated 16 April 2015, save that the time specified in paragraph (2) shall be changed to “unless by 4:00 pm on 10 December 2015”.

24. I shall hear the parties on the question of costs.

HCMP 2174/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2174 OF 2014

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_______________

_____________________________

SUMMARY ASSESSMENT OF COSTS

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1. On 23 January 2015, at the conclusion of the hearing of an application by Hu Liang Mei, Chan Wing Yan Grace and Chan Wing See Joyce (hereinafter collectively referred to as the “Third Parties”) for an extension of time to comply with a disclosure order contained in paragraph 3 of an earlier order made by me on 9 January 2015 (“the Order”), I made an order that the Third Parties shall pay the costs of the application to the plaintiff to be assessed summarily and not on the fixed costs basis. I also gave directions for the plaintiff to lodge and serve his costs statements, and for the Third Parties to lodge their objections to the plaintiff’s costs statements.

2. I have received the plaintiff’s costs statements and the Third Parties’ objections, and this is my summary assessment of the plaintiff’s costs.  The plaintiff seeks costs in the total sum of HK$93,190, which sum is made up of four parts:

(1)   Manual work ($2,740).

(2)   Communications, including conferences, telephone calls and letters with client, counsel and the other side ($21,300).

(3)   Professional work, including preparation of documents, review of documents, preparation for hearing and attending hearing ($25,150).

(4)   Disbursements – brief to counsel ($44,000).

3. As mentioned in the decision, a disclosure order in aid of a Mareva injunction is part of the interim mandatory injunction carrying the contempt sanction for non‑compliance, and an application for an extension of time to comply with a disclosure order is not just any time summons.  I also expressed the view that I considered the plaintiff was entitled to raise the issue of “unless order” and to instruct counsel to attend the hearing.

4. I consider that there is force in the Third Parties’ objections that it was quite unnecessary for this application to involve both a partner and an assistant solicitor with 12 years and two years post‑qualification experience, having regard to the involvement of counsel and the fact that the basis and justification for an unless order was primarily a matter for legal submissions, and it was unnecessary for two solicitors to attend the hearing on behalf of the plaintiff.  The time spent by the plaintiff’s solicitors in attending on the Third Parties’ solicitors and in reviewing documents also seems to me to be on the high side. 

5. On the other hand, I consider counsel’s brief fee to be reasonable.

6. I bear in mind the principle of proportionality, and that taxation on a party‑to‑party basis is not intended to provide a complete indemnity of the costs to the winning side.  It is important that litigation costs be kept to a reasonable level and in proportion to the nature and significance of the application in question.

7. In all, I would summarily assess the plaintiff’s costs in the sum of $65,000.

HCMP 2174/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2174 OF 2014

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_______________

_______________

D E C I S I O N

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1.  I have before me an application by Hu Liang Mei, Chan Wing Yan Grace and Chan Wing See Joyce (hereinafter collectively referred to as the “Third Parties”) for an extension of time to comply with a disclosure order contained in paragraph 3 of an earlier order made by me on 9 January 2015 (“the Order”).

2.  The background facts of this matter are set out in my decision given on 9 January 2015 and I shall not repeat them here.

3.  On 9 January 2015, I varied a Mareva injunction order granted by Mr Justice Anthony Chan on 29 August 2014 (as subsequently continued and amended) by extending it to cover three specific bank accounts held in the names of the Third Parties respectively at Standard Chartered Bank (Hong Kong) Limited into which the defendant’s company, Win Fair Holdings Group Ltd, transferred the total sum of US$6.5 million (“the Monies”) on 9 June 2011.  The variation was an interim order made pending the substantive hearing of the plaintiff’s summons issued on 5 January 2015.  I also made an ancillary order (“the Disclosure Order”) requiring the Third Parties to disclose, by affidavit to be filed and served within seven days, on how the Monies received by them had been used and expended and the current whereabouts of the Monies (or any part thereof) with full particulars and documents in support.

4.  The time for the Third Parties to comply with the Disclosure Order expired on 16 January 2015.

5.  On 14 January 2015, the Third Parties, through their solicitors, wrote to the plaintiff’s solicitors seeking an extension of 14 days (ie up to 30 January 2015) to comply with the Disclosure Order on the ground that they “need time to locate bank records & related documents in order to make disclosure by affidavit”.  The Third Parties’ solicitors requested for a reply by the close of business on 14 January 2015.

6.  By a letter dated 15 January 2015 (which apparently was received by the Third Parties’ solicitors at around 10:18 am on that date), the plaintiff’s solicitors replied stating that the plaintiff would only agree to an extension of time up to 23 January 2015 on an “unless” basis, ie unless the requisite affidavits were filed and served by 23 January 2015 the Third Parties be barred from filing evidence in opposition to the plaintiff’s summons issued on 5 January 2015 as provided for in paragraph 4 of the Order.

7.  The Third Parties then took out the summons on 15 January 2015, returnable on 23 January 2015.  In that summons, the Third Parties sought an extension of 14 days from the date of the order to be made therein to file the requisite affidavits, in other words by 6 February 2015.

8.  Apart from the assertion in the Third Parties’ solicitors’ letter dated 14 January 2015, and repeated in their subsequent letter dated 19 January 2015, that the Third Parties needed time to locate bank records and related documents in order to make disclosure by affidavit, the Third Parties have not explained, whether by affidavit or in letter form, where the relevant bank records and documents are kept and why they could not be readily retrieved.

9.  As mentioned in my earlier decision given on 9 January 2015, I was not prepared to impose a blanket Mareva injunction to cover all the assets of the Third Parties because of the absence of evidence that the Monies or any part thereof were still held by the Third Parties, and what had become of the Monies.  I considered that, in fairness to the Third Parties, a more limited form of Mareva injunction should be granted covering only the three specific bank accounts into which the Monies were paid, but I also required the Third Parties to make disclosure of how the Monies received by them had been used and expended and the current whereabouts of the Monies (or any part thereof) with full particulars and documents in support so that the plaintiff could carry out further investigation and, if necessary, apply for further injunctive relief from the court.

10.  In those circumstances, I considered that a tight timeframe ought to be imposed for the Third Parties to make the requisite disclosure, and a time limit of seven days was set.

11.  In considering the present application by the Third Parties for extension of time, the following matters are also of relevance:

(1) The transfers concerned a single payment of a substantial sum to each of the Third Parties.  The receipt of the Monies by the Third Parties did not appear to be routine in nature, although I accept that it may be more difficult to ascertain or identify how the Monies were subsequently used or expended.

(2) The Third Parties have been put on notice since 22 October 2014 that the plaintiff was inquiring into the transfers and seeking information thereon.

(3) The information and documents which the Third Parties are required to disclose are peculiarly within their knowledge.  As earlier mentioned, the Third Parties have not explained where the relevant bank records and documents are kept and why they could not be readily retrieved.

12.  Late yesterday, Chan Wing Yan Grace and Chan Wing See Joyce each filed an affidavit, and the defendant filed an affirmation on behalf of Hu Liang Mei (apparently because she is currently in the PRC taking care of her sister), in compliance or purported compliance with the Disclosure Order.

13.  In view of the late filing of the aforesaid affidavits and affirmation, the plaintiff is still considering whether the Disclosure Order has been sufficiently complied with, and what (if any) further action to take as a result of the disclosure made by the Third Parties.  Also, it appears that Chan Wing See Joyce purchased a motor vehicle on 16 January 2015 but it is not clear as to the source of the funds which she used for this purpose.

14. Ms Sit for the plaintiff has informed the court that in light of the recent development, the plaintiff is not insisting on the court granting an “unless order”.  In all the circumstances, I grant a retrospective extension of time up to 22 January 2015 to Chan Wing Yan Grace and Chan Wing See Joyce to comply with the Disclosure Order.  I also grant an extension of time up to 3 February 2015 to Hu Liang Mei to file an affidavit to confirm the contents of the 2^nd affirmation of the defendant to comply with the Disclosure Order.

15.  Nothing that is said in this decision shall affect the further action which the plaintiff may take after due consideration of the recent disclosure made by the Third Parties.

16.  As for costs, as submitted by Ms Sit, a disclosure order in aid of a Mareva injunction is part of the interim mandatory injunction carrying the contempt sanction for non‑compliance, and an application for extension of time to comply with a disclosure order is not just any time summons.  Also, the Third Parties were seeking an extension of effectively up to 6 February 2015 and the plaintiff’s position was that an “unless order” should be granted.  While I had not made up my mind whether to grant an “unless order” had it been necessary for me to decide this issue, I consider that the plaintiff was fully entitled to raise the issue of “unless order” today.

17.  In all the circumstances, I consider that it is appropriate for the plaintiff to attend by counsel today, and I order the Third Parties to pay the costs of the application to the Plaintiff to be assessed summarily and not on the fixed costs basis.

18.  I direct the plaintiff to lodge and serve his costs statement within seven days, and the Third Parties to lodge their objections to the plaintiff’s costs statement within seven days thereafter.  I shall give my ruling on paper afterwards.

HCMP 2174/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2174 OF 2014

_____________________

_____________________

________________________

D E C I S I O N

________________________

1. I have before me an application by the plaintiff by summons dated 5 January 2015 to vary a Mareva injunction order granted by Mr Justice Anthony Chan on 29 August 2014 (as subsequently continued and amended) by extending it to cover all properties and assets belonging to three third parties, namely, the defendant’s two daughters and a person described as the defendant’s companion (“Ms Hu”), up to the monetary limit of US$2.6 million in the case of each of the two daughters and US$1.3 million in the case of Ms Hu. They will collectively be referred to as the “Third Parties” hereinafter, and the three sums, ie US$2.6 million, US$2.6 million and US$1.3 million, will hereinafter collectively be referred to as the “Monies”.

2. For the purpose of today, I am concerned only with the question of whether I ought to grant an interim injunction pending the substantive hearing of the plaintiff’s summons. 

3. The basis of the application is, and there is no dispute about this, that the defendant’s company, Win Fair Holdings Group Ltd (“Win Fair”), transferred from its account at Standard Chartered Bank (“SCB”) the sum of US$2.6 million to each of his two daughters and the sum of US$1.3 million to Ms Hu on 9 June 2011.  The transfers were made to their respective accounts at SCB, and took place shortly after the publication of what is referred to as the Muddy Waters Report on 2 June 2011 which apparently sparked off a series of investigations and ultimately led to the collapse of Sino Forest Corporation, a public company listed on the Toronto Stock Exchange formerly under the control of the defendant.  Those investigations also revealed large scale frauds relating to many transactions entered or purportedly entered into by Sino Forest Corporation’s BVI subsidiaries in which the defendant is implicated.  I understand that the defendant disputes the allegations against him.  Obviously those allegations cannot be resolved in the current interlocutory application. 

4. On 28 August 2014, the Canadian court granted a worldwide Mareva injunction against the defendant without any monetary limit and, as earlier mentioned, a parallel Mareva injunction was granted by the Hong Kong court on 29 August 2014 under s.21M of the High Court Ordinance against the defendant subject to the monetary cap of HK$2.25 billion. 

5. The current application is, I am told, based on information provided by the defendant pursuant to disclosure orders made against him in the Canadian proceedings.  The aforesaid transfers to the Third Parties came to light as a result of the disclosure made by the defendant in October 2014.  It is the plaintiff’s case that the payments were an attempt by the defendant to put his assets out of the reach of his creditors, when he realized that his fraudulent dealings were about to be revealed.  

6. On the other hand, it is the case of the defendant, as well as that of the Third Parties, that the payments were gifts.  In view of the fact that the present summons was only taken out on 5 January 2015, none of them has so far filed any affidavit or affirmation regarding the circumstances of the gifts.  On the basis of the existing materials, I have little difficulty in coming to the view, for the purpose of today’s hearing, that there are good reasons to suppose that the defendant had substantial control over the Monies transferred to the Third Parties on 9 June 2011.

7. Mr Chain (for the defendant) submits that no interim injunction should be granted because the plaintiff has failed to demonstrate any real risk of dissipation of assets by the defendant.  The basis of this submission is that the plaintiff had knowledge of the transfers in October 2014, and furthermore had given notice of his intention to seek injunctive relief to restrain the Third Parties from dealing with the Monies as far back as October 2014. Hence, it is argued, if there is any real risk of dissipation by the defendant of the Monies held by or in the names of the Third Parties, he would have taken steps to dissipate them a long time ago.  Mr Chain relies on the judgment of Mr Justice Ng in Re Chau Cham Wong Patrick, a Bankrupt, HCB 549/2012 (20 June 2014), in particular his Lordship’s observation at paragraph 34 of that judgment: “Equity does not act in vain – a court does not usually grant injunctions where significant time has elapsed and an injunction would in effect be locking the stable door after the horse has bolted”. 

8. It should be noted, however, that if the Monies were indeed held by the Third Parties as nominees for the defendant (which is certainly a possible inference to be drawn on the existing evidence) and assuming that the Monies are currently still held by them, the existing Mareva injunction order of Mr Justice Anthony Chan would be wide enough to restrain the defendant from dealing with or dissipating the Monies.  I do not think the court should proceed on the basis that the defendant has acted in breach of the Mareva injunction order. 

9. The plaintiff’s difficulty, as I see it, is that the transfers were made more than 3 years ago, on 9 June 2011. There is no evidence that any part of the Monies are still held by the Third Parties, or what has become of the Monies.  On the other hand, the extended injunction sought by the plaintiff would cover all “properties and assets” of the Third Parties and not just the Monies or assets acquired by or derived from the use of the Monies.  While I accept that the court does have jurisdiction to make a wide order in the terms sought, as Mr Justice Ng remarked at paragraph 30 of his judgment in Re Chau Cham Wong Patrick, a Bankrupt: “A Mareva injunction should not be granted lightly.  The consequences of granting the injunction are such as to put the defendant at a very real disadvantage and in a position from which it may never adequately recover”.

10. In the absence of any evidence that the Monies are currently still held by the Third Parties or have been turned into some identifiable assets, it seems to me that the order sought would be far too draconian and cannot be justified. 

11. I would be prepared, however, to grant a more limited form of Mareva injunction, limited to the 3 identified accounts at SCB into which the Monies were transferred. 

12. I do not consider it appropriate to order any trial of preliminary issue, but I would hear the parties on the further directions to be given for the disposal of the plaintiff’s summons, and also on the question of whether any ancillary disclosure order should be made against the Third Parties regarding the current whereabouts of the Monies.