HWANG JOON SANG AND ANOTHER v. GOLDEN ELECTRONICS INC. AND OTHERS

HCA 1529/2019

[2021] HKCFI 3296

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1529 OF 2019

________________________

________________________

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D E C I S I O N

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A.Introduction

1.  Although ex parte applications for leave to apply for an order of committal for contempt are usually dealt with on the papers, I fixed a short hearing of the plaintiffs’ application in this case, not least because of the effect of the combination of RHC Order 41A rule 9 and Order 52 rule 2 which are the two rules under which the application is made.

2.  At the end of the hearing, at which the plaintiffs were represented by Mr Moses Park of Counsel, I reserved my Decision to be handed down in writing the following morning.  Mr Park had of course filed prior written submissions for use at the hearing.  However, in the afternoon following the hearing, Mr Park also filed supplemental written submissions to address what he understood to be areas of concern raised by me at the hearing.  I have taken those further submissions into account.

3.  This is my Decision.

B.      The Application

4.  The plaintiffs seek leave to apply for an order of committal for contempt against the 6^th defendant (“Vivien”), because of the false statements made by her, on behalf of herself and the 1^st to 7^th defendants, in her 1^st and 2^nd affirmations made in support of the application to discharge the injunctions against them (“Discharge Summons”).

5.  The context for, and the decision on, the Discharge Summons can be found in my Judgment dated 19 August 2021, [2021] HKCFI 2425.  For present purposes, focus can be on that part of the Judgment beginning at §47, which dealt with Vivien’s case that the plaintiffs had made a material non-disclosure in the “misrepresentation” as to why Vivien went back to Taiwan.  More specifically, at §§54-61, I stated:

54.       But most importantly, (1) the chronology is against Vivien’s submissions, and (2) Vivien’s case has shifted to the extent that there is at least a strong argument that she deliberately lied in her earlier affirmations, and that her complaint of non-disclosure is based on that lie.

55.       As to the first point, on the evidence originally put forward, it seems that the threatening words were communicated only after Vivien absconded and became uncontactable.  Hence, I agree with Mr Lam that it is illogical to suggest that she absconded because of the use of those words.  Indeed, if Vivien had not apparently disappeared with the Plaintiffs’ money, Jason would not have reason to have sent the messages (inappropriate though they were), and it might be thought that he would not have become increasingly desperate as the messages reveal.

56.       Further, on the original evidence as filed, it did not seem to me that Vivien likely felt “threatened”.  She was apparently in Hong Kong on 4 July 2019, and had a meal at a restaurant in Causeway Bay using the credit card of one of Jason’s clients.  On that basis, either she did not “flee back” to Taiwan as she claimed, or if she had travelled to Taiwan she nevertheless felt able to return to Hong Kong.

57.       As to the second point, the evolution of Vivien’s case is stark.  In her 1^st affirmation she had a section headed ‘Reasons for my “Abscondment”’.  In it, having set out the content of certain messages, she expressly said, “That was why I had to flee back to Taiwan in a big hurry”.  There can be no doubt that Vivien was intending to leave the impression that it was the threatening emails which caused her to leave Hong Kong and to go to Taiwan, and to do so in a big hurry.  Indeed, later in the same affirmation she referred back to her explanation of “the true reason for my hurried departure from Hong Kong” and how she had “withdrawn to Taiwan where I thought I would be safe”.

58.       In her 2^nd affirmation, Vivien wrote about what she called Jason’s criminal intimidation in “sending the gangsters to kill me in Hong Kong”.  As she put it, “Rushing back to Taiwan where I am surrounded by my own folks is the safest course that I could have taken in the circumstances”.  Again, there can be no doubt that Vivien was intending to leave the impression that she had left Hong Kong in a rush, to go back to Taiwan to find the safety not available to her in Hong Kong.

59.       But since the last hearing and my Hadkinson decision, which raised questions about the chronology and the veracity or logic of her allegations, Vivien has filed further evidence in her 4^th affirmation.  In it, she has made a complete volte face.  Now she says that she was not in fact in Hong Kong on 4 July 2019, and in fact had been in Taiwan throughout the period from 6 June to 10 July 2019.  That evidence in effect gives the lie to her own previous evidence by showing that she did not “flee” or “rush back” from Hong Kong to Taiwan – because, on the new evidence, she was already in Taiwan and had been for some time.  It was simply not the threats which caused her to leave Hong Kong and rush to safety Taiwan, as she originally claimed.  Indeed, there is also a further significant change in the evidence, because she claims not to have received the messages as soon as they were sent, as she had left her mobile phone behind and only picked them up later.  Having read them, despite being in preparation to fly to Hong Kong, she now says she immediately cancelled the flight.

60.       There is no attempt to explain away the complete inconsistencies in her evidence, and her change of stance.  Further, the explanation as to why she had been non-communicative at the relevant time, resting on the assertion that her mother encountered a traffic accident on 17 May 2019, which required Vivien to attend to her whilst in hospital and afterwards, is also somewhat contradicted by the continuing business messages from Vivien to Jason in May and June 2019 (including when she was continuing to report to him the various bank balances – false reports though they now, at least at first blush, appear to be).

61.       Hence, the suggested material non-disclosure in failing to explain the “true” reasons for Vivien’s abscondment from Hong Kong does not seem to me to get off the ground.

6.  It is of no surprise that the plaintiffs now place significant reliance on what I have already said.

C.      Applicable Legal Principles

7.  Order 52, rule 2(1) provides that no application for an order of committal against any person may be made unless leave to make such an application has been granted in accordance with the rule.

8.  But the plaintiffs’ present application also invokes Order 41A rule 9, which provides that:

(1)  Proceedings for contempt of court may be brought against the person if he makes, or causes to be made, a false statement in a document verified by a statement of truth without an honest belief in its truth.

(2)  Proceedings under this rule may be brought only –

(a)  by the Secretary for Justice or a person aggrieved by the full statement; and

(b)  with the leave of the Court.

(3)  The Court shall not grant the leave under paragraph (2) unless it is satisfied that the punishment for contempt of court is proportionate and appropriate in relation to the full statement.

(4)  Proceedings under this rule are subject to the law relating to contempt of court and this rule is without prejudice to such law.

9.  Hence, a person who makes a statement in a document verified by a statement of truth is only guilty of contempt if the statement is false and the person knew it to be untrue or was reckless as to whether or not it was true when he/she made it.  This is against the starting point that statements of truth are, and must be regarded as, important. Persons who sign to verify the contents of documents which are in fact untrue must appreciate that they may face contempt proceedings and, possibly, independent criminal proceedings.

10.  How to approach applications under Order 41A rule 9 was considered by the Court of Appeal in Numeric City Ltd v Lau Chi Wing [2016] 4 HKLRD 812.  At §13, the Court of Appeal endorsed part of the content of what is now found in Hong Kong Civil Procedure 2022 Note 41A/9/1. At §§17-18, the Court of Appeal further emphasized the importance of Order 41A rule 9, including by reference to the explanation in KJM Superbikes Ltd v Hinton [2009] 1 WLR 2406 at §§16-17:

11.  Drawing the various strings together, I would offer my own summary of the approach as follows:

(1)  The Court will always approach with extreme caution any application for leave to cite a person for contempt for giving a false statement verified by statement of truth without an honest belief in its truth.

(2)  Hence, it is of paramount importance for the applicant to make explicit reference to the fact that he is seeking leave under Order 41A rule 9, so that the Court’s vigilance is aroused.

(3)  On the application, the Court should remind itself that contempt proceedings are public in nature, and that ultimately the only question is whether it is in the public interest for such proceedings to be brought.

(4)  The wider public interest would not be served if Courts were to exercise the discretion too freely in favour of allowing such proceedings to be pursued by private persons.

(5)  As examples:

(a)  the Court should be astute to guard against the risk of allowing vindictive litigants to use such proceedings to harass persons against whom they have a grievance, whether justified or not; and

(b)  a significant period of delay in bringing proceedings for contempt may make it oppressive to grant leave.

(6)  When answering the ultimate question as to whether it is in the public interest for the proceedings to be brought, there are many factors that the Court will need to consider.  Cases are bound to differ widely both as to their nature and as to the circumstances of the alleged contempt and so each case will have to be considered according to its own facts.

(7)  Some of the factors may indicate whether or not the alleged contempt, if proved, is of sufficient gravity for there to be a public interest in taking proceedings in relation to it.

(8)  Those factors include:

(a)  the strength of the evidence tending to show the falsity of the statement in question and that it was known at the time to be false;

(b)  the significance of the statement in the proceedings in which it was made; and

(c)  such evidence as there is as to the state of mind of the person who made the statement, including his understanding of its likely effect and the use to which it was actually put in the proceedings.

(9)  But, even if those factors tend to point to the public interest in the grant of leave, those are not the only factors to be taken into account.

(10)  Other important factors to be weighed in the balance will include the Court’s view as to:

(a)  the extent to which the applicant was or might be directly affected by the false statement;

(b)  whether the alleged contemnor was warned at the earliest opportunity that he/she may have committed a contempt;

(c)  whether the alleged contemnor has recanted from the relevant statement, and the timing of any recanting from the relevant statement;

(d)  the deterrent effect of the proposed contempt proceedings (i) on the alleged contemnor and (ii) on other litigants in general; and

(e)  whether the proposed contempt proceedings would be likely to justify the resources that would have to be devoted to them.

(11)  But only limited weight should be attached to the likely penalty.

(12)  Foreign individuals may be subject to contempt proceedings, or otherwise the integrity of the system as a whole would be undermined if it were thought that foreign parties or witnesses were not subject to the same discipline as parties or witnesses in Hong Kong.

12.  It might also be pointed out that, in general, the proper time for determining truth or falsity of statements which may give rise to contempt is at trial, when all the relevant issues of fact are before the court and the statements can be considered against the totality of evidence.  To give leave during the interlocutory stages will unlikely be appropriate if it would serve to distort the trial process.  In essence, the Court should be wary of entertaining applications for committal if this would risk impacting adversely upon the fairness of future proceedings, and in particular upon the ability of the alleged contemnor to give oral evidence at a future point in time.  However, this was not an immutable rule and a Court would have to weigh carefully all the relevant surrounding circumstances.  After trial, the Court may be better able to make an informed assessment as to whether or not the pursuit of contempt proceedings is in the public interest in the particular case, as well as to consider such alternatives as referring the papers to the Director of Public Prosecutions (as to which, see further below).

13.  If the Court grants leave, it should give reasons for doing so.  But care must be taken to avoid prejudicing the outcome of the substantive proceedings.

D.      Is Order 41A rule 9 Applicable to an Affidavit/Affirmation?

14.  However, the question arises as to whether Order 41A rule 9 has any application to a complaint about a false statement made in an affidavit or affirmation.

15.  Order 41A in general, and rule 9 in particular, refer to documents verified by a statement of truth.  Under Order 41A rule 2, the documents which must be so verified in accordance with Order 41A are stated to be: (a) a pleading; (b) a witness statement; (c) an expert report; and (d) any other document verification of which in accordance with Order 41A is required by any other provision of the RHC or by a Practice Direction.

16.  On the face of it, an affidavit or affirmation does not fall within the description of those documents required to be verified under Order 41A.  Within the RHC, it is Order 41 which comprises the rules relating to affidavits.  One further difference is that pleadings or witness statements or expert reports, though required to be verified by a statement of truth, are not in themselves evidence (at least not until actually adopted or deployed as evidence), whereas an affidavit or affirmation is sworn or affirmed evidence from the time it is sworn or affirmed.

17.  On one view, making a false affidavit or affirmation, in other words giving false evidence, might be thought to be more serious than merely verifying as true a document which has yet to become (and may never become) actual evidence.  But I wonder whether that seems anachronistic.  As pointed out by Green J in International Sports Stores Ltd v Thomas Shorey [2015] EWHC 2040 (QB) at §41, it assumes that the law attributes less weight and significance to a formal statement of truth than to a formal affidavit, and I share his view that this is not a reflection of modern litigation practice.

18.  Of course, there is a specific criminal offence created by section 40 of the Crimes Ordinance Cap 200, which is headed ‘Using false affidavits’, and states:

Any person who wilfully uses for any purpose any affidavit which he knows to be false or does not believe to be true, wherever such affidavit may have been sworn, shall be guilty of an offence and shall be liable on conviction upon indictment to imprisonment for 7 years and to a fine.

19.  Reference can also be made to ‘Arlidge, Eady and Smith on Contempt’ 5^th Ed at §11-61, and the cases there footnoted, which identify that the equivalent English procedural rule has no application to an allegation of contempt by knowingly swearing a false affidavit.  The point is also made that nowadays it is unusual for false evidence to be the subject of contempt proceedings rather than a prosecution for perjury, but in principle the sanctions for contempt remain available in an appropriate case.

20.  On the other hand, especially in modern litigation practice, it seems to me that the requirement for affidavits or affirmations to be sworn or affirmed as to their truth is closely similar to the requirement for other documents to be verified by a statement of truth. The mischief aimed at must be the prevention, or at least strong deterrence against, giving false evidence.  The direct analogy was drawn in Kinform Ltd v Tsui Loi [2011] 5 HKLRD 80 at §8, when it was put thus:

Like the commission of the offence of perjury, the giving of a false statement verified by a statement of truth would undermine the whole process of our system of justice and the Court will not tolerate such an act. A clear message has been sent to all litigants that they must not lie when they put forward their case in the form of pleadings or witness statements.

21.  Mr Park has also drawn my attention to La Dolce Vita Fine Dining Group Holdings Ltd v Zhang Lan[2018] HKCFI 548 at §98, where it was pointed out – referencing the Numeric case – that a deponent who knowingly swears a false affidavit or affirmation commits a contempt of court, since the affidavit includes a jurat and is therefore the equivalent of testimony on oath.

22.  Therefore, even if Order 41A rule 9 is not directly applicable to an application for leave to apply for committal against the person on the basis that the person has made a false affidavit or affirmation – and I think it is not – the general approach to be taken to such an application will be similar.  If Order 41A is not directly applicable, the applicant for leave to apply for committal will still need to satisfy the requirements of Order 52.

23.  At bottom, as the ultimate question identifies (see above), it is the Court to whom the oath or affirmation or verification statement is given, and it is the Court in its maintenance of the proper administration of justice that decides whether it is in the public interest in the overall circumstances of any individual case to permit committal proceedings in that case, and if so at what point in time.

E.      Is it in the Public Interest for Leave to be Granted?

24.  On the basis that Order 41A rule 9 is applicable, or on the basis that the relevant approach will by analogy be considered in the context of the assertion that a false statement has been made on affidavit or affirmation, the question arises as to whether it is in the public interest for leave to be granted to commence committal proceedings.

25.  As shown above, including by reference to my Judgment dismissing the Discharge Summons:

(1)  I have already found that there was at least a strong argument that Vivien deliberately lied in her earlier affirmations and that her complaint of non-disclosure was based on that lie.

(2)  Indeed, as I went on to hold, the falsity in the statements made by Vivien in her 1^st and 2^nd affirmations was revealed by the complete volte face made in her 4^th affirmation, which in effect gave the lie to her own previous evidence.

(3)  Therefore, I accept that the case against Vivien is strong.

(4)  In fact, though my finding was on the civil standard, because of the nature of the finding I needed to be satisfied that there was compelling evidence supporting that finding.  I was, because there was.

(5)  I also accept that the false statements were material to the Discharge Summons, essentially underpinning the complaint of material non-disclosure as one of the reasons to discharge.

(6)  The materiality must have been understood, not least in circumstances where Vivien has all along been legally represented and the Discharge Summons and supporting affirmations were prepared with the benefit of that representation.

(7)  There were other aspects of Vivien’s conduct strongly suggestive of wilful indifference to, or simply ignoring of, Court orders made against her: see my Hadkinson Order Decision [2020] HKCFI 1973.

26.  Those factors tend to point to the public interest in the grant of leave to apply for committal.  It might also be thought that, because the particular false statements were made in the context of an application which has now been dealt with, now would be an appropriate time for the grant of leave (rather than awaiting any trial).

27.  I also accept that sending a clear message to all litigants not to lie when putting forward their case is important in upholding the proper administration of justice and itself points to the public interest in the grant of leave.  This is in part because statements can, and are sometimes designed to, interfere with the course of justice.

28.  Of course, Vivien has by what she said in her 4^th affirmation recanted from the falsity in the statements originally made, though I have also noted a complete failure in that affirmation to explain away the inconsistencies in her evidence and her change of stance.

29.  I note that having been informed of the possibility of this application, Vivien has filed her 6^th affirmation dated 24 September 2021, in which she seeks to explain why (as she puts it) she “made the mistake in [her] 1^st and 2^nd Affirmations about [her] rushing back to Hong Kong in early July 2019”.  Her offered explanation is that the mistake was caused by a misrepresentation by Jason (the 1^st plaintiff), and that it was only after the exact date of her return to Taiwan became an issue in the hearing on 16 July 2021 that she then checked the official records to find out when she had left and arrived in Taiwan.  Without descending into unnecessary detail, I can say that I do not think much of that explanation, and that Vivien risks looking like someone already in a deep hole who would be better advised to stop digging.

30.  Nevertheless, the following factors must also be brought into the balance:

(1)  The immediate effect of the falsity in Vivien’s statements (as found by me to the appropriate standard in the relevant context) has already been felt in the dismissal of the Discharge Summons, in the maintenance of the injunctions, and in the costs orders made against her (though I accept she may not have honoured them).

(2)  As Mr Park fairly acknowledges, the false statements may not affect the outcome of the trial, not least where Vivien has already recanted.

(3)  Indeed, the Discharge Summons was itself an interlocutory element of the litigation, more or less separate from the main questions to be resolved at any trial.

(4)  Vivien also knows from my previous Judgment, as well as from this Decision, that the Court will bring some healthy scepticism to play and will carefully scrutinise any statement she chooses to make, when assessing its truthfulness in the context of the evidence overall.

(5)  Though the absence from Hong Kong of a party or witness should not be regarded as giving licence to that party or witness to lie without fear of consequence, there are other forms of consequence which can be brought to bear than merely those flowing from committal proceedings.

(6)  Any contempt proceedings would of course require the devotion of Court resources.

(7)  Because Vivien is in Taiwan not Hong Kong, the possibility obviously arises as to the means by which any contempt proceedings would be conducted, including any potential ‘remote hearing’ element, which points may themselves give rise to additional argument and further necessary use of Court resources.

31.  In his supplemental submissions, Mr Park has suggested that granting leave in this case would be in the interests of justice as the opportunity would arise for the Court to obtain undertaking(s) from Vivien including but not limited to her undertaking to attend the HCA Action failing which her Defence may be struck out.  But, first, I doubt that extracting (or seeking to extract) an undertaking of that nature is a form of penalty which might be exercised upon an order of committal. Further, secondly and in any event, in the consideration as to whether or not to grant leave to apply for committal, only limited weight should be attached to the likely penalty.

32.  On balance, and in the overall exercise of my discretion, it seems to me that the answer to the ultimate question is that it is not in the public interest for committal proceedings to be brought. Overall, again on balance, I do not think such proceedings leading to potential punishment for contempt would be proportionate or appropriate in this instance.

33.  Because this application is being decided on its own particular facts and circumstances, nothing in it should be taken to reduce the deterrence intended to other parties or witnesses.

F.      Result

34.  The ex parte application for leave to apply for an order of committal for contempt is refused.

35.  Because notice had been given of the intention to make the application, and solicitors for Vivien asked for her 6^th affirmation and their correspondence to be brought to the attention of the Court, I also direct that this Decision be served on those solicitors.

36.  I make no order as to costs.

HCA 1529/2019

[2021] HKCFI 2425

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1529 OF 2019

________________________

________________________

______________

J U D G M E N T

______________

A.  Introduction

1.  This hearing was, in effect, the resumption of the hearing of an application dated 26 April 2021 (“Discharge Summons”) made by (only) the 1^st to 7^th defendants (“D1”, “D2”, “D3”, “D4”, “D5”, “D6” or Vivien and “D7” respectively, and together, for present purposes, “Defendants”), seeking to discharge certain injunction orders made against them.  The Discharge Summons was originally fixed for hearing on 6 July 2021.

2.  At the hearing on that date, and by a Decision of the same date [2021] HKCFI 1973, I dealt with a Hadkinson application made by the 1^st plaintiff (“Jason”) and 2^nd plaintiff (“Future Cell”) (together, “Plaintiffs”).  I held that the Defendants had engaged in long-term deliberate non-compliance with court orders, and I granted the Hadkinson Order.  I gave a direction that the Defendants should fully comply with the various disclosure orders before the Court would entertain the Discharge Summons.

3.  As before, I can identify the broad nature of the dispute as follows.

4.  Jason and is the sole director and shareholder of Future Cell.  They bring their claim against D6 (“Vivien”) and various other defendants, essentially arising out of alleged breaches of fiduciary or other duties owed by Vivien and/or a conspiracy to injure by unlawful means and/or unjust enrichment, because significant funds have been transferred on Vivien’s instructions away from companies which the Plaintiffs allege are their nominees or bare trustees of the funds/assets held by those companies.

5.  The claim has given rise to various interlocutory applications leading to numerous orders for interim injunctive relief, in the form of proprietary injunctions, freezing injunctions and disclosure orders.  With the benefit of the orders granted, the Plaintiffs have sought to perform a tracing exercise, which has identified, they say, that Vivien caused the nominee companies to transfer their funds through multi-tier recipients so as to put them out of reach of the Plaintiffs.

6.  Vivien is the sole shareholder and director of each of D1 to D5 and D7 and she now asserts that they are not nominee or trustee companies belonging to the Plaintiffs, but that they are beneficially owned by herself.

7.  The original worldwide Mareva injunction was granted against D1 to D6 by order of Anthony Chan J dated 23 August 2019 (“August 2019 Order”), and the worldwide Mareva and proprietary injunction was granted against D7 by my order dated 27 February 2020 (“February 2020 Order”).

8.  There was significant delay following the grant and service of the August 2019 Order and the February 2020 Order before the Defendant even sought legal advice in October 2020, and before she eventually issued the Discharge Summons in April 2021.

9.  The Plaintiffs continue to be represented by Mr Douglas Lam SC, leading Mr Moses Park and Mr Billy Mok of Counsel; the Defendants continue to be represented by Mr Nelson Miu and Ms Jolie Kung.

10.  This is my Judgment.

B.   Whether Disclosure Given as Required

11.  As indicated above, I gave a direction that the Defendants should fully comply with the various disclosure orders before the Court would entertain the Discharge Summons.  Vivien has since made certain disclosure on behalf of herself and the other Defendants.  Originally, the Plaintiffs did not accept that appropriate disclosure has been made, and the submission was made that the Hadkinson Order should be continued.

12.  The criticism of the disclosure is made in the 20^th affirmation of the Plaintiffs’ solicitor, and Vivien has sought to respond to it in her 5^th affirmation.

13.  However, in light of that response, Mr Lam did not pursue any application for the continuation of the Hadkinson Order.

14.  In any event, I do not think it necessary to engage in a detailed examination of the disclosure, the criticisms and the response at this stage.  At least substantial disclosure has now been provided and, in the exercise of my discretion, I do not think it necessary to continue the Hadkinson Order any further.

15.  Rather, I think it preferable to address and determine the merits of the Discharge Summons, to which I now turn.

C.   Discharge Summons

16.  The Discharge Summons seeks the discharge of the August 2019 Order as continued by various orders, as well as the injunction orders against all other Defendants, including the February 2020 Order as against D7.

17.  The grounds put forward as founding the Discharge Summons are that:

(1)  there was material non-disclosure, as to:

(a)  Vivien’s alleged misrepresentation about currency law, and

(b)  the (lack of) reason for her “abscondment”;

(2)  the Plaintiffs have failed to satisfy a good arguable case; and

(3)  the Plaintiffs are not entitled to equitable relief because they have not come to court with ‘clean hands’.

18.  Though put and addressed in that order by Mr Miu, I agree with Mr Lam that it may be more helpful first to consider the merits of the claim, and whether it satisfies the good arguable case test, before considering whether there has been material non-disclosure and, if so, what should be the consequences of that.

D.   Good Arguable Case

D.1    Applicable Principles

19.  It is settled that an applicant for a Mareva injunction needs to show a good arguable case in the sense of a case which is more than barely capable of serious argument, and yet not necessarily one which the Judge believes to have a better than 50% chance of success.

20.  Therefore, if the court now considers the plaintiffs have failed to show a good arguable case, not only will the original order be discharged, no question of any re-grant could arise.

21.  On the other hand, there should be no attempt to persuade a court to resolve disputed questions of fact, whether relating to the merits of the underlying claim in respect of which a Mareva is sought or relating to the elements of the Mareva jurisdiction such as that of dissipation.  Similarly, there should be no detailed arguments on difficult points of law on which the claim of either party may ultimately depend. Further, the existence of a good arguable defence to a claim does not necessarily negate the existence of a good arguable case on the claim.

D.2    This Case

22.  The essence of each side’s cases are diametrically opposed.  Jason says that Vivien worked for him, because he trusted her, and that he is the beneficial owner of D1-5 and D7 (and indirectly their assets).  Vivien says the opposite, namely that Jason in effect worked for her, sometimes as an agent for commission and sometimes as a counterparty to the sale and purchase of product, and that she is the beneficial owner of D1-5 and D7.  Insofar as she suggests that Jason was a business partner, it is clear that she means he was but a counterparty to her business arrangements.

23.  There is, on these diametrically opposed cases, no room for any middle ground.  Importantly, neither party suggests that they were parties to a partnership, in the sense of a legal entity in which they both had ownership rights and liability obligations.

24.  Mr Miu submitted that the Plaintiffs’ case – which he sought to summarise in §19 of his skeleton argument – was and remains flimsy and nebulous.  He submitted that material aspects of the case had been shown to be false by evidence now produced, both by the Defendants and the Plaintiffs.

25.  However, despite Mr Miu’s meticulous approach to various aspects of the case, I do not think his analysis identifies that there is not even a good arguable case shown by the plaintiffs.  Mr Miu’s analysis may perhaps show that there is also a good arguable defence, but that is insufficient to satisfy the burden on the Discharge Summons.  He is able to show that mistakes have been made in Jason’s evidence, such that Jason has conceded that fact.  But, I am not convinced those mistakes are necessarily of the greatest materiality in the overall picture.  Nor do I think it appropriate at this stage to engage in a point by point consideration of what Jason and Vivien say respectively.  More importantly, essentially the arguments raise contentions or disputes of fact of a nature which can only be resolved at trial.

26.  Mr Miu’s main focus was on the relationship between Jason and Vivien, on which the Plaintiffs base their claim that Vivien owed them fiduciary duties.  He says that the Plaintiff’s case is one of the relationship of employer/employee, but that cannot be made out because there were none of the indicia of employment present.  He says there was no written contract of employment, no commencement date, no agreed terms and no particular monthly salary, no requirement that Vivien should work exclusively for the Plaintiffs, and no control by him as to how Vivien should carry out her work.

27.  On the other hand, as Mr Lam submits, the existence of a fiduciary duty would be as regards Vivien’s dealing with monies which did not belong to her, but to the Plaintiffs.  Indeed, it seems to me that it is probably the wrong point of focus as to whether there were the indicia of employment, which is the sort of exercise typically conducted when looking to see whether a relationship is one of a contract of service as opposed to a contract for services.  In this case, the core allegation rests on the point that Vivien was entrusted by Jason to handle his and Future Cell’s funds.  That is what gave rise to the alleged fiduciary duties.

28.  The allegations of trust also arise in the context that Jason says that he and Vivien were previously romantically involved.  Whilst Vivien denies that, there are references in the WeChat messages to them previously being lovers, to which there is no response by Vivien.  It might be said that the general tone of the messages sent in June 2019 are consistent with a man who feels suddenly betrayed by his long-term assistant and former lover, after she has apparently disappeared with his funds.

29.  Indeed, the WeChat messages make clear that Jason was seeking to recover his own funds from Vivien.  In the face of those contemporaneous demands, Vivien remained silent, and never disputed that Jason was the owner of the funds.  Her belated claim that she was always the true beneficial owner of the relevant defendant companies, and hence their funds, is not convincing. Indeed, a strong picture is painted by the evidence that Vivien assisted or worked for and reported to Jason.  She regularly reported bank balances and the financial position of the Defendants, and sought approval from him on various matters.  She occasionally addressed him as ‘boss’.  That she did so is some evidence that she was his secretary or assistant in his employ, or at least handling his funds at his direction.  Her explanation in evidence as to why she did so – namely to show suppliers the financial strength of the parties they were trading with – does not strike me at this stage as particularly compelling.  Indeed, on the format of the reporting, that explanation appears to make little sense.  It makes little sense why, for example, the reports were not simply in the form of balance sheets, and it is difficult to see why any supplier would be satisfied with the WeChat reporting, or be interested in the explanation that some monies had been used to pay for lunches etc.  Vivien’s explanation is something which she can put forward at trial, but it certainly does not remove the good arguable case.

30.  As it happens, as a result of the disclosure obtained so far in this case, there is also a strong argument that the represented bank balances in May and June 2019 were misrepresentations by Vivien to Jason.  The available bank statements for 2019 showed nothing like the figures that Vivien was representing.  It seems to make less sense that she was misrepresenting her own funds, than it does that she was misrepresenting Jason’s funds so as to prevent or suspend his discovery that they had been dissipated.  It might also be noted in passing that one of the messages reporting bank balances includes an explanation that some expenditure was for “salary”.

31.  Vivien was remunerated at times by payments from Future Cell.  I accept there is some question or confusion as to the basis of the payments, but that is not something that can be resolved at this stage.  Indeed, there is some force in some of the points made by or for Vivien.  On the other hand, there is no evidence of any negotiation or bargaining between Vivien and Jason as would follow from her case, and Jason’s evidence is that Vivien has none of the requisite skills, knowledge, or connections to source products. She did not know any of the suppliers and customers personally, with one exception, and Vivien has not produced any evidence that she had direct contact with suppliers and customers.  On the other hand, he majored in material engineering for electronics and had working experience in the electronics, semiconductors and display sectors.  The evidence from business associates also identifies that they knew Vivien only to be Jason’s administrative assistant or secretary.  Vivien challenges that evidence, but that gives rise to matters for trial.

32.  There is also the oddity that, if it was Vivien who was conducting the multi-million dollar business through companies which she owned, that activity appears to have ceased suddenly and entirely in June 2019. This is shown by the asset disclosure lately given by Vivien.  Indeed, the disclosure of assets also does not seem to evidence that the various Defendant companies were actively engaged in business – except now, as Mr Lam suggests, the business of lending and holding an unparticularised interest in a body of artwork, which rather smacks of money laundering.  Perhaps more relevantly, there was a complete lack of reaction to the commencement of these proceedings and the obtaining of various injunctions, which had the effect (on Vivien’s case) of significantly interfering with the business and/or companies of which she was owner, and funds in accounts to which she lays claim.  On her own evidence, she did not even consult lawyers until October 2020, more than a year after she knew of these proceedings.

33.  Further, the suggestion by the Defendants that the various transfers to the ‘second-tier’ defendants were for ordinary business transactions, investments, personal loans and/or other dealings with Vivien’s friends and acquaintances is something that would necessarily be investigated at trial.  At this stage, the inherent likelihood of that suggestion being correct seems relatively low, but in any event such evidence as Vivien has produced does not negate the existence of a good arguable case on the claim.

34.  As a general point, I do not accept Mr Miu’s submission that it has been Jason’s approach to evidence that “if his lie is exposed he will adopt the true position and hopefully people forget he has lied”.  Of course, where it is accepted that mistakes may have been made there is room for criticism of certain aspects of his evidence, and there may be plenty of room for testing that evidence at trial.  Again, however, that does not remove the existence of a good arguable case.  I reject Mr Miu’s submission that Jason has engaged in “bare assertions, with little or no documentary evidence in support”.

35.  I also take into account the matters relating to Vivien’s evolving case about her reaction to certain messages sent by Jason in late June 2019 (being part of the matters relied upon by her for one of the arguments on material non-disclosure: see below).  There is a strong suggestion from the totality of the evidence that Vivien has simply lied about this.  This is unhelpful to an applicant who asks the court to accept all her other evidence at the interlocutory stage.

D.3    Conclusion on Good Arguable Case

36.  I am entirely satisfied that the Plaintiffs demonstrated, and continue to demonstrate, at least a good arguable case on their claim.

E.   Material Non-Disclosure

E.1    Applicable Principles

37.  The guiding principles on material disclosure are well-established.  For present purposes they can be summarised as follows, without reference to previous authority:

(1)  An applicant making an ex parte application must act fairly in all material aspects when preparing and presenting the application.

(2)  This includes the duty to disclose to the Court all matters which are material, meaning those matters material to the court’s assessment and decision whether or not to grant the relief without notice, and if so on what terms.

(3)  The test as to materiality is an objective one, and ultimately a question for the court.  Hence, it is no excuse for an applicant subsequently to say that he was generally unaware, or did not believe, that the facts were relevant or important.

(4)  Non-disclosure may be material even if its effect is just to give a seriously different ‘flavour’ to the case.

(5)  The duty of full and frank disclosure is a stringent one, designed to protect the absent party.

(6)  Therefore, if material non-disclosure has occurred at the ex parte application, the order obtained at such an application would likely be set aside automatically without going into the merits.

(7)  Nevertheless, there is a discretion to re-grant the same order.  That jurisdiction should be only sparingly exercised, taking into account the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.

(8)  Hence, an assessment will be made as to the degree and extent of the culpability with regards to the non-disclosure.  The more serious or culpable the non-disclosure, the more likely the court is to set its order aside and not renew it, however prejudicial the consequences.

(9)  It is therefore relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge.  Nor is there a general rule that a deliberate breach will attract that sanction.

(10)  The application of principles which seek to uphold the integrity of the judicial process should not be carried to such lengths as will allow them to become the instrument of injustice.

(11)  Because of the penal nature of the jurisdiction, the court should have regard to the proportionality between the punishment and offence.

(12)  When exercising the discretion whether to re-grant the order, the court should take into account all relevant circumstances.

E.2    The 1^st Alleged Non-Disclosure

38.  As part of Jason’s 2^nd affirmation, used in support of the injunction applications, Jason asserted that he had asked Vivien about transferring large sums to Future Cell, but that Vivien refused citing currency control laws (which he has now been advised was false, as the transfer of funds would not be prohibited by Hong Kong law).

39.  In her 1^st affirmation, Vivien asserts that Jason well knew that remittances far exceeding US$30,000-US$40,000 could be made to Future Cell without any problem, since a remittance as large as US$681,206 had been made from D3 to Future Cell in May 2017 without problem.  All that was required was a proper invoice to evidence the underlying transaction.  Vivien says the true reason why she refused to remit larger sums was because Jason intended to create a fictitious marketing contract as the underlying document, which she would not go along with.

40.  In his 13^th affirmation, Jason did not deny the fictitious nature of the proposed marketing contracts, but maintained that as the beneficial owner of D1 and D2, he had the power to cause them to enter those contracts, which Vivien did not tell him would be illegal. In reply, Vivien explained in her 2^nd affirmation that the creation of fictitious documents to support a remittance would clearly be an attempt to circumvent anti-money laundering regulations, and that she would be the one facing trouble if it were subsequently discovered.

41.  Mr Miu submitted that the most likely true reason for Jason’s request to be paid part of his commissions in cash in Hong Kong was to avoid declaring them as income to the South Korean tax authorities. Therefore, the request for remittances of large sums was to avoid the risk of carrying large sums in cash from Hong Kong to South Korea.

42.  Mr Miu submits that, knowing full well that Vivien would not appear in court to contest the proceedings (because she had rushed back to Taiwan after receipt of life-threatening messages), Jason made up the story of misrepresentation by Vivien about currency control laws. Worse, he did so to cover up his own proposal of creating a fictitious contract to evade anti-money laundering regulations.

43.  However, I agree with Mr Lam that it is not clear on the evidence how these matters can properly be said to amount to an issue of material non-disclosure.  Despite the attempt to paint it in this way, there was no fraudulent scheme.  The Plaintiffs (on their case) were the beneficial owners of funds held by D1 to D5, and were intending to make intra-group transfers to allow finance for Future Cell.  That the contracts were to be made for a proper purpose – that is, not for an illegal, fraudulent or money-laundering purpose – seems to me to be consistent with the reading of the relevant email message relied upon by Vivien, and in particular the phrase “make a contract officially”.  Further, Vivien’s complaint about non-disclosure turns to a significant degree on accepting her case that she is the beneficial owner of the funds.  Without that, the money-laundering allegation seems to have some logical difficulties.

44.  On Jason’s case, he has no experience in finance or law and he took Vivien’s explanation of currency controls (if that is what she said) at face value.  Against her warning, and in light of his wish to have larger amounts transferred to Future Cell, Jason asked Vivien to check with her main point of contact at the Taipei Fubon bank as to whether there would be an issue.  However, Vivien cited currency control laws again at a subsequent meeting and refused to transfer large amounts.

45.  There is ultimately no dispute that Vivien did tell Jason that she would not transfer to him larger sums/funds.  The dispute is as to why, but that is really a merits point rather than a non-disclosure point.  Mr Lam has accepted that it might have been better to have referred to the previous larger transfer, in anticipation of a potential argument in answer to Jason’s case.  But, that seems to me to be almost immaterial in the context of the merits of the case as a whole, and probably not material to any assessment of the risk of dissipation.

46.  In conclusion, and it can be noted that I was one of the Judges who granted the original injunctions, I do not accept there was really any material non-disclosure in this respect.

E.3    The 2^nd Alleged Non-Disclosure

47.  The second alleged misrepresentation was as to why Vivien went back to Taiwan.  For that, Vivien relies upon the WeChat messages sent between 25 June and 11 July 2019, and her assertion that the messages exhibited by Jason were manufactured.  This was, not least, because of the excision of those threats made to her, such as to involve Japanese yakuza and Chinese gangsters to go after Vivien and her son, and to steal the money back.

48.  Again, in his 13^th affirmation, Jason did not deny the veracity of the fuller picture of the messages, nor did he explain how his own exhibit was compiled, save to acknowledge that the exhibit could have been better described.  Instead he asserted that it was unconvincing and unbelievable that Vivien was allegedly so afraid of the threats that she fled to Taiwan, when she failed to report the matter to the police in Hong Kong or Japan or South Korea or Taiwan.  He also pointed out that Vivien had herself not shown the true picture because he had sincerely apologised to her on 29 June 2019 by email and by WeChat.

49.  I traversed some of the relevant evidential ground relating to the messages in my previous Decision [2021] HKCFI 1793, at §§42-47 and 51, which can be read and which I shall adopt for present purposes without simple repetition of it.

50.  Mr Miu submitted that the original exhibit to Jason’s affirmation was a misrepresentation or blatant lie far worse than a mere non-disclosure.  He also submitted that it was material, and its materiality must have been appreciated by Jason, as he went to the trouble of excluding that material.  This was not, therefore, an innocent oversight, but rather was a deliberate attempt to deceive the Court.

51.  Though the threats were clearly wholly inappropriate and should never have been uttered, there was an immediate retraction from them and an apology for them.  I accept that there were a number of messages over a two- or three-day period before the retraction and apology came, and it might not have been immediately accepted as genuine.  But I remain of the view that Vivien must have known the power of that retraction and apology, because she herself deliberately failed to disclose it to the Court when complaining about the threats.  She must have known that, had she revealed the apology, it may well paint a very different picture.  This is particularly so against the evolving evidence: see below.

52.  Indeed, the remainder of the context is also relevant.  On many occasions, the messages contain Jason’s statements that he did not want anyone to be hurt, that he did not want to lose his ‘partner’ (Vivien), that he still loved her and wanted her to come back, and that he would pursue legal proceedings, though he preferred and hoped for a compromise and to reach an agreement.

53.  Further, as time has passed (approaching two years by the time of the Discharge Summons), it might be thought that it had become clearer still that the Plaintiffs were and are pursuing judicial remedies as opposed to any other form of redress.  Yet at no point until April 2021 was the Discharge Summons issued, in circumstances where I do not accept that it was the commencement of criminal proceedings in Taiwan in October 2020 that Vivien realised for the first time she had no option but to fight back.  As pointed out before, the terms of the August 2019 Order and the February 2020 Order specifically identified her right and the other Defendants’ right to apply at any time to vary or discharge the orders.

54.  But most importantly, (1) the chronology is against Vivien’s submissions, and (2) Vivien’s case has shifted to the extent that there is at least a strong argument that she deliberately lied in her earlier affirmations, and that her complaint of non-disclosure is based on that lie.

55.  As to the first point, on the evidence originally put forward, it seems that the threatening words were communicated only after Vivien absconded and became uncontactable.  Hence, I agree with Mr Lam that it is illogical to suggest that she absconded because of the use of those words.  Indeed, if Vivien had not apparently disappeared with the Plaintiffs’ money, Jason would not have reason to have sent the messages (inappropriate though they were), and it might be thought that he would not have become increasingly desperate as the messages reveal.

56.  Further, on the original evidence as filed, it did not seem to me that Vivien likely felt “threatened”.  She was apparently in Hong Kong on 4 July 2019, and had a meal at a restaurant in Causeway Bay using the credit card of one of Jason’s clients.  On that basis, either she did not “flee back” to Taiwan as she claimed, or if she had travelled to Taiwan she nevertheless felt able to return to Hong Kong.

57.  As to the second point, the evolution of Vivien’s case is stark.  In her first affirmation she had a section headed ‘Reasons for my “Abscondment”’.  In it, having set out the content of certain messages, she expressly said, “That was why I had to flee back to Taiwan in a big hurry”.  There can be no doubt that Vivien was intending to leave the impression that it was the threatening emails which caused her to leave Hong Kong and to go to Taiwan, and to do so in a big hurry.  Indeed, later in the same affirmation she referred back to her explanation of “the true reason for my hurried departure from Hong Kong” and how she had “withdrawn to Taiwan where I thought I would be safe”.

58.  In her 2^nd affirmation, Vivien wrote about what she called Jason’s criminal intimidation in “sending the gangsters to kill me in Hong Kong”.  As she put it, “Rushing back to Taiwan where I am surrounded by my own folks is the safest course that I could have taken in the circumstances”.  Again, there can be no doubt that Vivien was intending to leave the impression that she had left Hong Kong in a rush, to go back to Taiwan to find the safety not available to her in Hong Kong.

59.  But since the last hearing and my Hadkinson decision, which raised questions about the chronology and the veracity or logic of her allegations, Vivien has filed further evidence in her 4^th affirmation.  In it, she has made a complete volte face.  Now she says that she was not in fact in Hong Kong on 4 July 2019, and in fact had been in Taiwan throughout the period from 6 June to 10 July 2019.  That evidence in effect gives the lie to her own previous evidence by showing that she did not “flee” or “rush back” from Hong Kong to Taiwan – because, on the new evidence, she was already in Taiwan and had been for some time.  It was simply not the threats which caused her to leave Hong Kong and rush to safety Taiwan, as she originally claimed.  Indeed, there is also a further significant change in the evidence, because she claims not to have received the messages as soon as they were sent, as she had left her mobile phone behind and only picked them up later.  Having read them, despite being in preparation to fly to Hong Kong, she now says she immediately cancelled the flight.

60.  There is no attempt to explain away the complete inconsistencies in her evidence, and her change of stance.  Further, the explanation as to why she had been non-communicative at the relevant time, resting on the assertion that her mother encountered traffic accident on 17 May 2019, which required Vivien to attend to her whilst in hospital and afterwards, is also somewhat contradicted by the continuing business messages from Vivien to Jason in May and June 2019 (including when she was continuing to report to him the various bank balances – false reports though they now, at least at first blush, appear to be).

61.  Hence, the suggested material non-disclosure in failing to explain the “true” reasons for Vivien’s abscondment from Hong Kong does not seem to me to get off the ground.

62.  Perhaps recognising that possible view, Mr Miu added to his oral submissions that there was also non-disclosure from the non-disclosed messages, not just because they contain the threats but because they contain references to “partnership” and “50-50 sharing”.  His submission was that, whilst the idea of a partnership was neither the case of the Plaintiffs nor that of the Defendants, the Court might take a different view and so the references were material.

63.  I disagree.  First, I do not think it material that there were words which in another context might be capable of being consistent with something, if that something is plainly not the case of any party to this action.  Secondly, the context of the words seems to me at this stage to be relatively plain (though I do not suggest that it would not be open to some exploration at trial).  The words “partner” or “partnership” seem to me to be most likely used in a very loose sense, to denote counterparties or close colleagues, or to denote a close personal relationship (not least in the context of allied references to being lovers).  The references to “sharing” seem to me to identify sharing of Jason’s profit (for example, “my profit”) by an agreement that would need to be put in place, and not by a partnership or sharing agreement already in place.  So I do not accept the submission that these messages give a seriously different flavour to the case.

64.  Indeed, I tend to agree with Mr Lam’s description that these messages actually enhance the flavour of the case being put forward by the Plaintiffs.  I accept that that may mean that the messages were, at their most technical, material in the sense of being relevant to an assessment whether to grant or not grant the injunction.  However, to continue the analogy, they were probably simply extra seasoning to an already well-made dish.

65.  Again, Mr Lam has accepted that it would have been perhaps better to have produced the full set of messages, both those sent by WeChat and those sent by SMS, and perhaps those sent both to Vivien and to her son.  Of course, that the messages were edited out from a larger number must mean that they were, in that sense, intentionally not disclosed.  But I do not think that they were intentionally not disclosed for an ulterior or contumelious purpose.

66.  I therefore accept that the non-disclosure of the threats was innocent.  But in any event, for the reasons identified, it was not material.

E.4    Conclusion on Material Non-Disclosure

67.  I am not persuaded that there was any substantial or material non-disclosure.

68.  In any event, even on the assumption that there was material non-disclosure, such are the overall circumstances that – in light of the conclusion as to at least a good arguable case and against the totality of circumstances – I would in the exercise of my discretion certainly continue and/or re-grant the injunctions.

69.  I do not overlook the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.  But in my assessment as to the degree and extent of the culpability with regards to the alleged non-disclosure, and my view that any breach was an innocent breach, a discharge of the original injunction and/or a failure to re-grant would be wholly disproportionate.

70.  Indeed, in this case, there is a real sense that in recognition of significant difficulties as regards the merits the Defendants have cast about for allegations that they can make about non-disclosure.  One complaint seems to me to be almost obviously not a material non-disclosure but a dispute on the merits, and the other complaint is based on an apparent lie.  This is a case where the application of principles which seek to uphold the integrity of the judicial process should not be carried to such lengths as would allow them to become the instrument of injustice.

F.   Clean Hands

71.  The ‘clean hands’ argument stands or falls with the allegations of material non-disclosure.

72.  In this case, and in the exercise of my discretion, I see no basis for depriving the Plaintiffs – through some application of the clean hands principle – of the injunctive relief which they have obtained and wished to maintain, and to which I think they are plainly entitled.

G.   Result

73.  The Discharge Summons is dismissed.

74.  It also logically follows that any remaining part the Stay Summons referred to in my earlier Decision should be dismissed. Further, I have already allowed the Hadkinson application.

75.  At present, where the Plaintiffs have been comprehensively successful on the various summonses, I see no reason why the costs should not follow the event.  Therefore, I would order the Defendants to pay the Plaintiffs’ costs, to be payable forthwith following a gross or summary assessment, which can be performed on the papers.

76.  However, as I have not heard any costs argument, I shall make that costs order in the first instance on a nisi basis. Any variation application should be made within 14 days, and any response to that application should be filed 7 days thereafter.  If no variation application is made, the costs order will become absolute.

77.  In any event, the Plaintiffs should file a Statement of Costs for Summary Assessment by 27 August 2021.  The Defendant should file any Objections to that Statement by 3 September 2021. Should it be appropriate in light of either (a) no variation application or (b) the result of any variation application, I shall then summarily assess the costs on the papers.

HCA 1529/2019

[2021] HKCFI 1973

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1529 OF 2019

________________________

________________________

_____________

D E C I S I O N

_____________

A.   Introduction

1.  The 1^st plaintiff (“Jason”) is the sole director and shareholder of the 2^nd plaintiff (“Future Cell”).  Jason and Future Cell (together, “Plaintiffs”) bring their claim against the 6^th defendant (“Vivien”) and various other defendants, essentially arising out of alleged breaches of fiduciary or other duties owed by Vivien and/or a conspiracy to injure by unlawful means and/or unjust enrichment, because significant funds have been transferred on Vivien’s instructions away from companies which the Plaintiffs allege are their nominees or bare trustees of the funds/assets held by those companies.

2.  The claim has given rise to various interlocutory applications leading to numerous orders for interim injunctive relief, in the form of proprietary injunctions, freezing injunctions and disclosure orders. With the benefit of the orders granted, the Plaintiffs have sought to perform a tracing exercise, which has identified, they say, that Vivien caused the nominee companies to transfer their funds through multi-tier recipients so as to put them out of reach of the Plaintiffs.

3.  The present applications are concerned only the 1^st to 7^th defendants (“D1”, “D2”, “D3”, “D4”, “D5”, “D6” or Vivien and “D7” respectively, and together, for present purposes, “Defendants”).  Vivien is the sole shareholder and director of each of D1 to D5 and D7 and she asserts that they are not nominee or trustee companies belonging to the Plaintiffs, but that they are beneficially owned by herself.

4.  It is chronologically important to identify that the original worldwide Mareva injunction was granted against D1 to D6 as long ago as by order of Anthony Chan J dated 23 August 2019 (“August 2019 Order”), and that the worldwide Mareva and proprietary injunction was granted against D7 as long ago as by my order dated 27 February 2020 (“February 2020 Order”).

5.  It is also important that it is not in dispute that service of the August 2019 Order and the February 2020 Order was effected on the respective defendants, as follows:

(1)  D1: on 27 August 2019;

(2)  D2: on 28 August 2019;

(3)  D3: on 27 August 2019 (Hong Kong) and 21 October 2019 (Anguilla);

(4)  D4: on 27 August 2019 (Hong Kong) and 21 October 2019 (Anguilla);

(5)  D5: on 27 August 2019;

(6)  Vivien: on 9 September 2019 (personal service) and 4 November 2019 (email); and

(7)  D7: on 7 May 2020.

6.  As a result, the deadlines for complying with the various ancillary disclosure orders expired (as regards D1 to D6) on various dates between 30 August 2019 and 13 November 2019, and (as regards D7) on 18 May 2020.

7.  There are now three summonses before the Court:

(1)  the Defendants’ summons dated 26 April 2021 (“Discharge Summons”), which seeks the discharge of the August 2019 Order as continued by various orders, as well as the injunction orders against all other defendants including D7;

(2)  the Defendants’ summons dated 25 May 2021 (“Stay Summons”), which seeks (a) leave to amend the Discharge Summons by deleting paragraph 3 which sought an order for an assessment of damages and (b) a stay of paragraph 2 of the August 2019 Order requiring D1 to D7 to disclose details of all assets;

(3)  the Plaintiffs’ summons dated 23 June 2021 (“Hadkinson Summons”) opposing the Stay Summons and seeking a direction that the Defendants should fully comply with the various disclosure orders before the Court would entertain the Discharge Summons.

8.  The Application to amend is not controversial, and a formal order granting leave to the Defendants to withdraw paragraph 3 of the Discharge Summons can be made now.

9.  As to the Hadkinson Summons, I have previously directed that I would hear argument on it first, at the beginning of the hearing of the three summonses.  That is what happened at the hearing.

10.  However, the parties were of course prepared to argue the Discharge Summons and the Stay Summons, and had filed written argument on those two summonses.  That has given rise to the practical conundrum as to the appropriate way of dealing with the summonses.

11.  On one view, it would make practical sense just to deal with the argument on all three summonses and then to determine them, perhaps logically answering the Hadkinson question first.  But to do so would also potentially have the effect of denuding any Hadkinson order of its real value. As will be seen from my consideration of the principles, one of the purposes of granting a Hadkinson order is because of a concern that there is no other way of securing compliance with the original orders of which the person is in contempt.  Therefore, if after consideration I were to decide in favour of the Plaintiffs on the Hadkinson Summons, yet have already heard the argument on the Discharge Summons (and Stay Summons), a person in determined breach of court orders might simply remain in breach if the challenge to the original orders were to fail.

12.  For that reason, and in the light of the discussion which follows, it seems to me to be the right procedural approach in this case to decide the Hadkinson Summons first, and to announce my decision. What flows from that decision can be discussed with Counsel thereafter.

13.  At the hearing, the Plaintiffs have been represented by Mr Douglas Lam SC, leading Mr Moses Park and Mr Billy Mok of Counsel; the Defendants have been represented by Mr Nelson Miu and Ms Jolie Kung.

14.  This is my Decision.

B.   Necessary Background

B.1  Factual Background

15.  For present purposes, I do not propose to rehearse at any length what are said to be the matters of factual background, as put forward by either side.  The following short summary suffices.

16.  As indicated above, the Plaintiffs assert proprietary claims over the funds in bank accounts held by the Defendants (as well as other defendants not involved in the current summonses).  The particular relief claimed includes declarations as to the various defendants holding the funds on constructive trust, and as to liability to account and orders for payment of sums due on taking of the account.

17.  The Plaintiffs’ proprietary claims are alleged to arise in the following way.  The Plaintiffs say that Jason and Vivien are former lovers, and that Vivien was engaged by Jason as an assistant in the plaintiffs’ business in electronics trading from its commencement around 2008. Jason is a Korean national who does not speak Chinese, and Vivien’s role included liaison with Chinese language counterparties and managing the financial and administrative aspects of the business.

18.  D1-D5 and D7 were set up at the suggestion of Vivien, to whom Jason entrusted such matters.  Vivien does not have beneficial ownership in D1-D5 or D7, nor to any funds which are or were held by those companies.

19.  The Plaintiffs assert that in mid-2019, Vivien absconded whilst retaining control over the companies.  In support of that allegation, when applying for the various injunctions, Jason produced in evidence some WeChat messages which he said evidence his attempts to contact and locate and negotiate with Vivien, but to which she simply refused to respond.

20.  It is further alleged that from at least June 2016, there were unauthorised transfers between D1-D5 and D7-D27.  The plaintiffs have no knowledge of D7-D27, and no business with them.  The transfers were unauthorised, and D7-D27 must have known that those transfers were unauthorised as being outside any normal or proper business purpose, that they were not entitled to the transferred funds, and that it is unconscionable for them to retain the funds.

21.  For her part, Vivien denies that she was employed by Jason or Future Cell, or that she had a romantic relationship with Jason.  Rather, all of the relevant companies belong to her beneficially, and were operated by her in her own business.  At most, Jason was a middleman by which he or Future Cell would earn a commission.  Essentially, commission was earned because Jason introduced customers to her companies, and she was the one involved in trading, and was responsible for the quality of goods which she bought and on-sold to customers.  Part of the commissions would be remitted to Future Cell, while part of the commissions would be paid to him in cash, when he came to Hong Kong.  Therefore, Jason’s allegation that she was an employee is simply a lie.

22.  Further, Vivien says that Jason has been untruthful when he has suggested that she misrepresented to him that because of Hong Kong’s currency controls, transfers of large sums of money to South Korea would be illegal, and so instead of wiring funds to Future Cell, she should pay him in cash only around US$30,000-US$40,000 every two weeks.  She says Jason knew full well that there were never any currency control laws in Hong Kong. The occasion when she refused to transfer US$200,000 was because Jason was suggesting that Future Cell should enter into a fictitious marketing contract with one of her companies and use that contract as an excuse or justification to remit the funds.  But, Vivien says, she refused to go along with his fraudulent scheme.

23.  As to her alleged “abscondment”, Vivien has produced the correct and full version of the relevant WeChat messages, which she says demonstrate that Jason had performed a ‘cut-and-paste job’ when producing his own false exhibit, which she says was aimed at misleading or deceiving the court.  Indeed, Mr Lam does not shy away from the fact that when Jason produced what he described as “a true copy of the WeChat messages [he] sent to Vivien Chung demonstrating [his] attempts to contact Vivien Chung from 25 June 2019 to 11 July 2019”, that was not correct as (a) what was produced was some combination of WeChat and MMS messages, and (b) what was produced was not the totality of the messages, as some had been edited out by being not included in the exhibit.

24.  Vivien particularly relies on two of the messages as follows:

(1)   At 5:40am on 26 June 2019:

Vivien, i still trust you 100%.  Because we have a long partnership.  So, i always think of your life and weiwei’s future.  I don’t want you to destroy your son’s life and his bright future.  I am sure that you will keep your promise to your Buddha.  Otherwise your Buddha will not forgive you.  This is what i think for you and weiwei.  Let’s make a deal like this way.  Let’s share my profit portion 50:50 with you because we are a partner except for sharp boss 50% portion.  If you break our basis rule w sharp boss, i cannot guarantee you and weiwei’s life.  If you break the rule with sharp boss, you and your son may face japanese yakuza or chinese gangster soon.  That means you and your son’s life is in jeopardy.  And Your son’s life and future is totally destroyed.  I don’t want to see this kind of worst case.  Please accept my proposal as above.  I don’t want you and your son to be hurted.  If you accept my proposal, we still enjoy our life, biz and partnership as before.  No need to destroy you and weiwei’s life and his future.  Please make a right decision for your son.  let’s see our meeting schedule at your earliest convenience.  Please inform me of your next schedule.  Wait for your reply.  I still trust you 100%.  I don’t want to blame you this time because we are best partner.  Let’s make a deal!!  It’s cool and fair trade.  Also good for you and your son.  I can sign on this deal.  Also, sharp boss.  Please make a right decision for you and your son.  Thx for your kind understanding.

(2)   At 10:14am on 28 June 2019:

Don’t be regret after deadline.  I will do my best to destroy you and weiwei after deadline.  I bet all of your money 18mil.usd to all of gangsters to punish you.  Because you destroy me and my family completely.  I will be divorced soon and i am broken now.  All of gangsters are haunting you to steal the money from you and kill u and your son.  After you’re dead, I commit suicide at same day.  What’s the meaning of money after you and your son is dead.  We may see each other in the hell soon.  I hope it will not be happen.  Please make right decision and don’t regret to your life.  I already give up my life.  See u in the hell.

25.  Between those two messages were other messages which contained comments which might reasonably be understood to refer to those threats.  For example (although there are perhaps other references):

(1)  at 05:50 on 26 June 2019:

“… I wish you understand their style. They are very brutal to the betrayer. …”

(2)  at 00:10 on 27 June 2019:

“… You cannot hide away. Because Everybody is trying to find you and your son. Please do not destroy your son’s life and his future …”

(3)  At 05:56 on 27 June 2019:

“… Also, don’t forget japanese and chinese style. Do not destroy you and your son’s life …”

(4)  At 18:52 on 27 June 2019:

“If you want to take it all, you may lose everything in the future. We are not stupid. We’re chasing you and your son, fiancei to the end of the world. U cannot run away or hide away. … Don’t forget. Many of chinese japanese, taiwanese team is chasing all of your families. Please don’t be mistake. You may regret in the future if you don’t accept my last proposal. 50:50 equally share. Then, enjoy our life.”

(5)  At 08:21 on 28 June 2019:

“Let’s meet and settle down this issue with 50:50 sharing. We want to be happy and healthy life. Even though you’re rich, but if you and your son live in a fearful life every day, what’s the meaning of your life. I don’t think you want to destroy me and your son life.”

26.  However, not least in the context of Vivien’s allegations of material non-disclosure (see below), it is noteworthy that she has not disclosed a message sent by Jason the very next day, 29 June 2019, which reads as follows (sic):

I highly apologize what i said back things to u and your son before.  I was so upset that i said bad things.  I sincerely apologize that and i will never ever phisically threaten you and your son in the future.  I promise you.  So, please make an easy on your son.  I already send message to him to apologize my bad words.  I really want him to be success and happy life with his wife.  Also, support him as much as i can as i promised to u.  I only compromise this issue legally and follow jury order in the court.  I already finish legal filing to sue you to the court next week.  We may see in china/hk/twn court soon.  But still we have a chance to compromise this issue before we go to the court.  See u in the court.  If you don’t want to go to the court, please inform me in advance.  We can sign the contract with lawer.

27.  Vivien now says in her affirmation that she was genuinely fearful of the threats, and fled to Taiwan.  Nevertheless, there is evidence that she was in Causeway Bay in Hong Kong on 5 July 2019. There is no evidence as to when she arrived in Hong Kong for that trip, namely whether it was before or after the threats and the apology.  But, clearly she did not immediately flee.  There is evidence that Vivien was seen in Taipei on 9 July 2019.  Vivien has not provided details of the dates when she arrived in or left Hong Kong, or arrived in Taipei.

B.2    Procedural Background

28.  I have already identified the dates of making and service of the August 2019 Order and the February 2020 Order.

29.  Therefore, there can be little serious dispute that D1-D6 have been (and continue to be) in breach of the disclosure orders in the August 2019 Order for around 22 months, and D7 has been (and continues to be) in breach of the disclosure order in the February 2020 Order for around 14 months.

30.  No application for any extension of time for compliance has been made by any of the Defendants.  Indeed, it was only after prompting from the Plaintiffs’ solicitors by letter dated 20 May 2021 that the Defendants issued the Stay Summons on 25 May 2021.

31.  In the meantime, it was only on 26 April 2021 that the Defendants issued the Discharge Summons.  The only explanation for the delay is tucked at the end of Vivien’s affirmation in support of the Discharge Summons, at §63, which reads in its entirety:

Lastly, I would like to briefly explain why it is taken me so long to make this application to discharge the injunction orders.  I had been very worried by the threat on my life and that of my son, and had withdrawn to Taiwan where I thought I would be safe.  However, Jason had continued his hunt by drawing in more and more defendants, people who had traded with me in the past, in normal business dealings.  In October 2020 he even commenced criminal proceedings in Taiwan against me (Jason’s allegation here that I had stolen money that belong to him, if true/proven, would have criminal as well as civil consequences in Taiwan).  That is when I realised that I have no option but to fight back.  In addition to defending the criminal proceedings brought against me, I have also commenced legal proceedings against Jason in Taipei complaining of his threat on my life and that of my son.

32.  Even then, and leaving aside what can be said about that explanation (as to which see below), there is still no explanation of the delay between October 2020 and April 2021, a period of around six months.

C.   Shape of Arguments

33.  In light of those facts, the broad shape of the arguments arising on the various summonses is as follows:

(1)  Hadkinson Summons:

(a)   the Plaintiffs say that, because the Defendants have knowingly disobeyed and continued to disobey (at the very least) the disclosure orders contained in the August 2019 Order and the Court should refuse to hear the Discharge Summons until such orders have been duly complied with;

(b)   the Defendants say that the Discharge Summons falls squarely within an exception to the rule in Hadkinson v Hadkinson [1952] P 285 at 288, because it is an application to set aside the earlier orders upon which the Defendants’ alleged contempt is founded.

(2)  Stay Summons:

(a)   the Defendants say that there should be a stay of the disclosure requirements pending the determination of the Discharge Summons;

(b)   the Plaintiff say that there is no basis for the grant of any such stay, not least in the face of the deliberate refusal to provide disclosure in breach of court orders;

(3)  Discharge Summons:

(a)   the Defendants say that the August 2019 Order and the February 2020 Order should be discharged because of material non-disclosure, in two misrepresentations or lies about (i) Vivien’s alleged misrepresentation about currency law, and (ii) the reason for Vivien’s “abscondment”;

(b)   the Defendants also say that no good arguable case sufficient to ground the grant of a Mareva injunction exists;

(c)   the Plaintiffs say that there was no material non-disclosure, that they at least have a good arguable case on their claims, and there is no question of “unclean hands”.

34.  I think it is fair to say that some of these arguments to an extent overlap.  But, notwithstanding that I bear that point in mind, it is convenient to deal with them more or less separately.  As indicated, in any event, logically it falls to address the Hadkinson point first.

D.   Hadkinson Summons

D.1  Applicable Principles

35.  The applicable principles are well-known.  For example, I recently canvassed those principles in China Chanshui Cement Group Ltd v Zhang Caikui & Ors[2020] HKCFI 2560 at §§67-70.

36.  The starting point is the clear obligation of every person against whom an order is made by a court of competent jurisdiction to obey it, unless and until that order is discharged: see Hadkinson v Hadkinson [1952] P 285 at 288.  The other principle set in the case is that a person in contempt of court would not ordinarily be heard by the court whose order he had disobeyed.

37.  However, there are exceptions to the rule.  For example, one exception is that a person can apply to purge his contempt, another is that a person can appeal with a view to setting aside the order upon which his alleged contempt is founded.

38.  In any event, it is settled that the court retains a discretion whether to hear the person in contempt.  In other words, the fact that a party to a cause has disobeyed an order of the court is not of itself an absolute bar to his being heard.  To refuse to hear a party, even a contemnor, is a strong thing only to be justified by grave considerations of public policy.

39.  Previous cases do not provide any hard and fast rules for the exercise of discretion, though the cases give examples which may serve as guidelines.  For the sort of questions that the court might ask, see CWG v MH [2014] 4 HKLRD 141 at §12.  There, the Court of Appeal suggested that the questions to be asked, on the civil standard of proof, might include: (1) is the party against whom the order is sought in contempt? (2) is there an impediment to the course of justice?  (3) is there any other effective means of securing compliance with the court’s orders?  (4) should the court exercise its discretion to impose conditions having regard to that question?  (5) is the contempt will full, that is, is it contumacious and continuing?  (6) If so, what conditions would be proportionate?

40.  As I summarised those questions in the case, the court will take into account when exercising the relevant discretion matters such as the gravity of the effect of the contempt, whether it is wilful, and whether there are other means available for securing compliance with the order.  If the contemnor’s disobedience is such that, so long as it continues, it impedes the course of justice in that case, making it more difficult for the court to ascertain the truth or to enforce the orders which it may make, then the court may in its discretion refuse to hear that person until the impediment is removed or a good reason shown why it should not be removed.  The court considers the proportionality principle in deciding whether or not to bar the contemnor, and what conditions to impose.

41.  Mr Miu relies on what he says is the established exception to the general rule where the purpose of the application is to appeal against, or have set aside, on whatever ground or grounds, the very order disobedience of which has put the person concerned in contempt: see Motorola Credit Corp. v Uzan (No 2) [2004] 1 WLR 113 at §§47-51.  There, it was also held that the proposition that the court will hear a person in contempt when the purpose of his application is to appeal against the order disobedience to which has put him in contempt, has the merit not only of good sense but satisfies considerations of fairness, and that it would be neither logical nor appropriate to shut out argument directed to reversal of the original order.

42.  Nevertheless, as Mr Miu recognises from The Messiniaki Tolmi [1981] 2 Lloyd’s Rep 595 at 602 there are qualifications to that statement including that there may be cases where an appeal by a party in contempt against the very order disobedience of which has put him in contempt, can be shown to be for one reason or another an abuse of the process of the court.  In such a case the exception to the general rule as discussed would not apply.

43.  On the same point, Mr Lam relies on what was recently stated by Mimmie Chan J in La Dolce Vita Fine Dining Group Holdings Ltd v Zhang Lan[2020] HKCFI 622 at §14, where she stated that the court will not refuse to grant a Hadkinson order simply because there is a legitimate argument that the order that was breached is wrong or should be varied.  Further, at §19, she identified that it is not a denial of justice – against the maxim audi alteram partem – if a party has been given an opportunity to be heard upon terms with which he can reasonably comply, so there is not and there should not be any impediment in principle to the imposition by the court of proper conditions which require to be complied with before an appeal from (or, I would add, an application to discharge) the original order is heard.

44.  Essentially, the question boils down to whether, in the circumstances of the individual case, the interests of justice are best served by hearing a party in contempt or by refusing to do so.

D.2   Application to this Case

45.  Mr Miu’s submission is that it cannot be said that the Discharge Summons is an abuse of process, so to hear the Defendants in their application to discharge not only has the merits of good sense but is necessary is to satisfy conditions of fairness.  Mr Miu also points to the threat to engage Japanese yakuza and Chinese gangsters to “steal the money” from Vivien, where any information disclosed could be passed on to them and then what they could do with that information would be beyond the control of the court.  In short, he says that the interests of justice would be best served by hearing the Defendants’ application, rather than refusing to do so.

46.  Mr Lam has addressed his submissions to the questions posed in the CWG case.  First, he submits that there can be no serious dispute that the Defendants have been in breach for very substantial periods of time, and continue to be in breach, of their disclosure obligations.

47.  Secondly, he submits that there is no justifiable excuse.  This is because the only ground raised by the Defendants is that the damage done through disclosure may be irreparable, relying on the WeChat messages where Jason wrote that Vivien and her son “may face Japanese yakuza or Chinese gangster” and “all of gangsters are hunting [them] to steal the money from [them] and kill [them]”.  However, first and foremost, Mr Lam says Jason fully accepts that he should never have said those words and that it was wrong to do so, and has unreservedly apologised for any distress caused, and he points to his apology on the very next day (see above).  Further, when viewed in context, Mr Lam says that the threatening words were uttered when Jason discovered his trusted assistant and confidante (with whom he says he had a romantic relationship) suddenly disappeared with US$18 million belonging to him in his businesses.  But the content of the messages as a whole make clear that Jason was saddened and dismayed by Vivien’s conduct, and implored her to return and restore the funds taken, and that if she did so all would be forgiven.  Not only did he have no real intention to cause any harm, he has never made any attempt to carry out the threatening words (nor is it suggested that he has done so).  This is so, notwithstanding that the Plaintiffs have all along been aware of the addresses of Vivien and other defendants.  Further, there is no basis for thinking the disclosure ordered would somehow be passed on to “gangsters” to enable them to go after Vivien and her son to “steal” the money from them.

48.  Thirdly, the non-compliance and delayed compliance with the ancillary disclosure orders risks defeating the very nature of the Mareva injunction orders, which were made to prevent unjustified dissipation of assets by a defendant to frustrate potential judgment.  That is a clear impediment to the course of justice.  Striking a balance between depriving the Plaintiffs of the “teeth” of the injunctions, and any potential prejudice to the Defendants in making disclosure, Mr Lam says the balance points firmly in favour of requiring disclosure.  At present, the Plaintiffs and the Court remain completely in the dark as to the Defendants’ assets and whether the freezing orders have even been complied with by the Defendants since they were made.

49.  Fourthly, Mr Lam says there is no other means by which the plaintiffs could effectively secure compliance, nor have the Defendants suggested any such other means.  There is also no irremediable prejudice to the Defendants if they are to comply with the disclosure orders, and any such prejudice would be outweighed by the need for compliance.  The Defendants are also protected by the cross-undertaking in damages.

50.  Fifthly, there has been inexcusable delay.  In stark distinction from the Motorola case, there has not been an application to discharge made in due time.  Rather, the Discharge Summons and the Stay Summons were issued extremely late, with no proper justification, and little explanation.  Therefore, Mr Lam says, requiring compliance before hearing the Discharge Summons – rather than granting any stay – is a proportional condition to the hearing of the Discharge Summons.

51.  I agree.  Though I will necessarily revisit the question relating to the WeChat threats on any argument on the Discharge Summons, I do not think that they properly excuse or justify the long-term deliberate non-compliance with court orders:

(1)  First, though the threats were clearly wholly inappropriate and should never have been uttered, there was an immediate retraction from them and an apology for them.  I accept that there were a number of messages over a two or three day period before the retraction and apology came, and it might not have been immediately accepted as genuine.  But Vivien must have known the power of that retraction and apology, because she deliberately failed to disclose it to the Court when complaining about the threats.  She must have known that, had she revealed the apology, it may well paint a very different picture.

(2)  Secondly, read against the totality of the messages now produced by Vivien, a fair reading is that the Plaintiffs were ultimately much more likely going to pursue court proceedings to seek redress by way of lawful means; they were not actually going to pursue any extra-judicial means.

(3)  Thirdly, if there was a genuine belief and fear that the threats might actually have been intended and actioned, the obvious thing for Vivien to have done would have been to make an immediate complaint, to either or both of the criminal/police authorities (in Hong Kong and/or Taiwan) and this court.  Indeed, that this court is an obvious place in which to make a complaint is evidenced by the fact that Vivien has now, albeit extremely belatedly, made that complaint.

(4)  Fourthly, as time has passed (approaching two years by the time of the Discharge Summons), it might be thought that it has become clearer still that the Plaintiffs were and are pursuing judicial remedies as opposed to any other form of redress.  Yet at no point until April 2021 was the Discharge Summons issued, and it was only over a month later that the Stay Summons was issued (and that only after prompting by the Plaintiffs’ solicitors).  Oddly, I was told by Mr Miu that lawyers were first instructed by Vivien in December 2020, but there was still the delay until April 2021.  There was not even a letter to the Plaintiffs’ solicitors informing them that the Defendants had instructed solicitors, and perhaps seeking an extension of time within which to effect compliance with the outstanding orders, or to make some challenge to them.

(5)  Fifthly, I am not persuaded that it was the WeChat threats which caused Vivien, as she claims, “to flee back to Taiwan in a big hurry”.  But, even if she fled to safety in Taiwan, once there she was well placed either to have complied with the disclosure orders, or to have challenged them – and to have made a criminal complaint of the sort she has now much later chosen to make (which, incidentally, is inconsistent with her claim that there was no point in making a criminal complaint).  It would have been possible to contact lawyers, either in Taiwan or in Hong Kong or both, and physical presence in Hong Kong to challenge the original disclosure orders was clearly not necessary.  Even now, on the challenge she has made, she has not disclosed her Taiwan address on the affirmation made available to the Plaintiffs.  She could have adopted this approach much earlier.

(6)  Sixthly, it seems to me that the challenge now made is simply because Vivien faces criminal proceedings in Taiwan, commenced in October 2020.  I do not accept that was the first time when she realised she had no option but to fight back, when the terms of the August 2019 Order and the February 2020 Order specifically identified her right and the other Defendants’ right to apply at any time to vary or discharge the orders (at the same time as warning of the consequences of disobeying the orders).  As Mr Lam submits, on Vivien’s case that she is the true owner of the various defendant companies, and so at least indirectly their assets, and with the knowledge that worldwide freezing orders had been made against her and them, it makes little sense for her to have ignored the orders completely. In so saying, I have taken into account Mr Miu’s point that people react differently to different events, such as the threatening messages.

(7)  Seventh, as the continued delay beyond October 2020 identifies, the stance of the Defendants has plainly been either to ignore or to stonewall these proceedings and the various, incremental, orders by which the Plaintiffs were pursuing their claims and the necessary tracing exercise. I have, in a previous decision in this case, already identified the significant connections between the various defendants (including those not a party to the current summonses).  The flat refusal to engage in these proceedings – and the opposite desire instead to obstruct them – was deliberate and contumelious.

(8)  Eighth, the Defendants have chosen not to inform the court whether they have or have not complied with the other aspects of the August 2019 Order and the February 2020 Order (that is, the proprietary/freezing aspects).  Further, if the Defendants had a genuine intention to obey court orders in future, one might have expected it to be made clear by a straightforward apology for not having done so yet, and by a clear statement that compliance would follow if the challenge to the original orders were to fail.  That evidence is conspicuously missing.  Therefore, there is force in Mr Lam’s point that if the Discharge Summons is allowed to be argued but goes against the Defendants, they will simply “disappear” again.

(9)  Ninth, there might have been other ways to seek to comply with the disclosure orders yet retain protection against the stated concerns.  For example, the Defendants could have offered to make disclosure on a ‘sealed’ basis, to be seen only by the Court and not to be passed to the Plaintiffs without leave.  Neither that nor any other suggestion as a practical means of compliance has ever been canvassed.

(10)  Finally, the overall impression left is that the Defendants would have continued to seek to ignore these proceedings, and to disobey court orders, unless and until they were ultimately to feel (as apparently they were) ‘boxed in’ by the Plaintiffs’ continued and entirely lawful use of civil and criminal complaints.

52.  Further in the context of the proprietary claim put forward by the Plaintiffs, and the need for a tracing exercise, the current failure and refusal to comply with the disclosure orders – which seem to me to be necessary both for tracing and for the purposes of enforcing the freezing orders – is a real impediment to justice.  It is well-known that in the context of a claim such as the present, the greater the delay in any tracing exercise the more difficult that exercise will become.  In this case, the delay has already been very lengthy and significant.

53.  I have taken into consideration in the overall exercise of my discretion a preliminary view (that is one formed on the evidential materials and with the benefit of skeleton submissions, but without the benefit of full oral argument) of the merits in the Discharge Summons, and in particular on the aspects of non-disclosure arising from the WeChat messages I have canvassed earlier.

54.  I would, therefore, in the exercise of my discretion as to what seems to me to be in better service of the interests of justice, grant a Hadkinson order.

55.  Subject to hearing further argument on the point, I propose to grant a short period within which compliance must be given, and to address the form by which compliance should be given.

[Discussion with Counsel]

56.  In the circumstances, I shall give until 2 August 2021 for compliance.  I will allow time for the parties to seek to agree the form of compliance, for example by disclosure to the Court and creating a ‘confidentiality club’ permitting the materials disclosed to be seen not by Jason, but by (some of) his legal representatives.  I also allow time to the parties to consider and seek to agree the relevant date or dates as the relevant disclosure ‘snap-shot’ date(s).  If they cannot agree, I will deal with the mechanics of disclosure on paper submissions.

57.  Pending compliance or not, I adjourn the Discharge Summons and the Stay Summons for argument at 10am on 17 August 2021. All matters of costs are reserved.

HCA 1529/2019

[2021] HKCFI 544

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1529 OF 2019

________________________

________________________

_______________

J U D G M E N T

_______________

A.     Introduction

1.  In these proceedings, the plaintiffs assert proprietary claims over funds in the bank accounts held by the defendants. Essentially, the funds held in the various accounts are said to be the proceeds of the plaintiffs’ business activities, and to belong beneficially to the plaintiffs.  The particular relief claimed includes declarations as to the defendants holding the funds on constructive trust, and as to liability to account and orders for payment of sums due on taking of the account.

2.  Numerous previous Mareva and proprietary injunction orders have been made and continued against the various defendants, into whose hands the plaintiffs seek to trace the funds over which they make a proprietary claim.  Further, various disclosure orders have been granted in relation to the various tiers of recipient of the funds over which the plaintiffs assert the proprietary claim.

3.  The broad background to the proceedings, which provides sufficient context for today’s purposes, can be found in my previous Decision [2020] HKCFI 1084, to which reference can be made.

4.  By summons dated 26 February 2021, the plaintiffs now seek a ‘bankers’ books’ disclosure order pursuant to section 21 of the Evidence Ordinance Cap 8 (“EO”), alternatively Norwich Pharmacal relief against the Taipei Fubon Commercial Bank, Hong Kong branch (“Bank”).  The application seeks disclosure relating to the operation of the accounts held at the Bank by the 1^st and 2^nd defendants.

5.  The application follows the information obtained from previous ordered disclosure, from which it seems that the 6^th defendant, with the knowledge or assistance of others including the 20^th defendant, misappropriated money from a time earlier than June 2016, which previously was understood to be the commencement of the misappropriation.  Out of the 1^st to 5^th defendant’s’ accounts, only the accounts of the 1^st and 2^nd defendants were active in the period before 1 June 2016.  Their respective account opening dates were 15 March 2013 and 2 April 2015.

6.  In those circumstances, the plaintiffs seek a disclosure order against the bank accounts of the 1^st and 2^nd defendants, held with the Bank, for the periods from the respective account opening dates until 31 May 2016.

B.     Applicable Principles

B.1    Bankers’ Books Orders

7.  The principles concerning an application for ‘bankers’ books’ disclosure orders are well-established: see, for example, Golden Brothers, Inc v Medicare Asia Ltd (unreported, HCA 2590/2016, 14 October 2016).

8.  The primary purpose of a discovery order made under section 21 of the EO is to preserve the assets or property which might otherwise be dissipated notwithstanding an injunction not to do so. Though the court will not lightly use its powers to order disclosure of full information touching the confidential relationship of banker and customer, such an order may be justified where the plaintiff seeks to trace funds which, in equity, belong to it and of which there is strong evidence that it has been fraudulently deprived, where delay might result in the dissipation of the funds before trial.

9.  There are three limits to the exercise of the power, being: (1) 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; (2) where documents are required to be disclosed, the third party should be entitled to the same specificity in the documents he is asked to produce as he would be if served with a subpoena; and (3) even if the application prima facie falls within the principle for disclosure, the court needs to balance the potential advantage of disclosure against the detriment to the person against whom the order is sought, not merely in terms of costs (for which he is ordinarily compensated on an indemnity basis by the terms of the order) but by way of invasion of privacy and requiring breach of obligations of confidence owed to others.

10.  Further, the plaintiff is ordinarily required to give an undertaking that whatever information is obtained would be used only for the purposes of the action to trace the funds, and not for any other purpose.

11.  I shall return, in the ‘Postscript’ below, to the question of the terms of the order providing for the costs of providing disclosure being ordinarily compensated on an indemnity basis.

B.2    Norwich Pharmacal Orders

12.  As to the alternative Norwich Pharmacal basis for a disclosure order, the principles are also well-established: see A Co v B Co [2002] 3 HKLRD 111 at §13.  There are three essential requirements, being: (1) there must be cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place; (2) the order will, or will very likely, reap substantial and worthwhile benefits for the plaintiff; and (3) the discovery sought must not be unduly wide.

C.     This Application

13.  The application made by summons dated 26 February 2021 is primarily supported by the evidence found in the 2^nd and 10^th affirmations of the 1^st plaintiff.  (The final signed version of the 10^th affirmation has not yet been properly affirmed, but is exhibited to an affidavit of the plaintiffs’ solicitor, with an undertaking that the 1^st plaintiff will travel to Hong Kong and sign the affirmation before a Hong Kong solicitor within 28 days of the lifting of the travel restrictions which currently prohibit him from so doing.  In the exercise of my discretion, I proceed on the basis of the material contained in that affirmation notwithstanding.)

14.  On the evidence, I am satisfied that the circumstances are such as make it appropriate to grant the disclosure orders sought.  There seems to me to be real purpose in the application, in obtaining information of assistance in seeking to trace and preserve the assets, and the order can specify the documents to be produced.  The balancing of the potential advantage in ordering disclosure against the potential detriment to the Bank seems to me to point firmly in favour of ordering disclosure.  Further, the plaintiffs have given an undertaking that the information obtained would be used only for the purposes of investigating the whereabouts of the assets over which the proprietary claim is made, and the identities and/or wrongdoings of the persons or entities involved in the receipt, handling, transfers or disposal of such assets, including for commencing and pursuing legal proceedings in Hong Kong or elsewhere.

15.  If necessary, I am also satisfied that there is cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place, and that the order will very likely reap substantial and worthwhile benefits for the plaintiffs on a discovery order which is not unduly wide.

16.  The plaintiffs have also agreed to reimburse the Bank their reasonable costs of complying with any disclosure ordered.

17.  Further, I take into account that the plaintiffs’ solicitors have written to the Bank, and have received a reply indicating that the Bank has no objection to the making of the order.

D.     Postscript

18.  However, the non-objection of the Bank to the making of the order is conditional upon the plaintiffs’ agreement and undertaking to pay specific charges for handling the request for disclosure. It is the particular level of charges put forward which leads me to make the following comments.

19.  In this case, the Bank is seeking a handling fee of HK$3,000 per account and an additional fee of HK$200 per page of document to be provided.  The plaintiffs’ solicitors’ suggestion in correspondence that HK$200 per page is wholly excessive, not least when the previous agreed charge was HK$25 per page in April 2020 for another disclosure application involving the same Bank in this Action, has not had the courtesy of a reply.  Nor has the Bank provided the requested simple breakdown of the fee as was sought.

20.  In the circumstances, but only in the interest of saving time and the costs of any contested hearing, the plaintiffs have agreed to the proposed fee in this instance.  But, Mr Park, Counsel for the plaintiffs, points out that the charges raised by banks providing disclosure in compliance with orders of court vary significantly, and that it is a topic usually unaddressed by the court.

21.  Of course, I recognise that I do not have any information from the Bank, or indeed from any other bank, explaining the charge of HK$200 per page.  But, on its face, that charge does seem to be somewhat arbitrary, and at least on the high side, if not wholly excessive.  But the obvious problem arising from such level of fees is that it may deter victims of fraud from seeking to trace their assets.

22.  In another previous Decision in this Action, [2020] HKCFI 1233, I pointed out the problem broadly in the following way:

(1)  On the face of the plaintiffs’ claim – and in circumstances where no defendant has yet identified any defence to any part of the claim – the plaintiffs appear to have at least a strongly meritorious proprietary claim to the funds that have been the subject of various transfer between the defendants’ bank accounts.

(2)  Yet, despite the strong claim to being defrauded of significant sums, the plaintiffs are required to expend significant further sums in an attempt to trace and recover what they have lost.

(3)  Of course, even though the discovery sought must not be unduly wide, it is also correct that the plaintiffs are not in a position to make a narrowly focused application for documents, as they do not know precisely the number of documents (or pages) which will be made available by any particular bank.

(4)  No doubt, some of the documents produced will be of rather less assistance than those which identify the core elements of the transfers which may permit the intended tracing exercise.

(5)  Whilst the plaintiffs are willing to give undertakings to reimburse the banks for their reasonable costs of complying with any disclosure ordered by the Court, there is a good argument that the Court should actively approve and adopt a practice and procedure which may help reduce costs that can be otherwise saved, so long as it is possible and fair, just and reasonable to do so.

(6)  In light of the underlying objectives under RHC Order 1A rule 1, I agreed.

(7)  Those objectives include increasing the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court; promoting a sense of reasonable proportion and procedural economy in the conduct of proceedings; and ensuring fairness between the parties.

23.  Therefore, on that occasion, I specifically left it as a term of the order made to permit the individual bank to consider whether it would be more economical and environmentally friendly to adopt the provision of disclosure through use of the data room.

24.  I also pointed out that, in practical terms, the banks being required to provide disclosure probably hold the relevant materials in electronic or digital form.  It would seem to be an unnecessary expenditure of time and cost to print out hard copy documents so as to provide them to the plaintiffs.  That is particularly so where the plaintiffs will likely have to scan those documents, and thereby to create their own electronic or digital versions of them, to pass them to (for example) forensic accountants or others involved in the tracing exercise.  Turning paper documents back into electronic documents would also seem to be an unnecessary expenditure of time and costs. The use of paper, at least much more paper than is likely to be required for any focused exercise, would also seem to be environmentally unattractive.

25.  I expressed the view that most banks would probably prefer to avoid the unnecessary expenditure of both time and administrative resources, or would at least prefer to minimise such expenditure.

26.  Relevantly for today’s purposes, I also expressed the view – which I maintain – that I do not think it is part of the profit making of a bank to charge for compliance with orders for disclosure on a basis greater than the actual reasonable costs of compliance.  Indeed, the whole point of ordering the costs of providing disclosure to be paid on an indemnity basis, against the applicant’s undertaking to do so, is to ensure full (but no more than full) compensation for the costs of complying with the order.

27.  If banks were to engage in a practice of levying extravagant photocopying or administrative charges, rather than seeking genuinely to provide for full (but no more than full) compensation for the costs of complying with the order, victims of fraud may face a significant dilemma.  Either they are stuck with a “take it or leave it” situation and have no choice but to accede to the bank’s demanded charges, or they may have to chance the costs of an argument at a contested hearing, where the only contest is as to the proper or reasonable charge for compliance with the order for disclosure.  An even worse alternative would be for the victim not to pursue the disclosure at all, as in some cases it may appear commercially not worthwhile to do so.

28.  Such a situation would be at best unfortunate. It therefore seems to me that banks and financial institutions who are asked to provide disclosure should give careful thought as to the real and reasonable costs of compliance, which would justify the full indemnity extracted from the applicant as part of the consideration in granting or refusing the application.

29.  It is regrettable that applications for ‘bankers’ books’ orders and/or Norwich Pharmacal relief have become commonplace with the explosion of email and other similar financial frauds, where proceeds of fraud are passed through tiers of bank accounts, which may require complex investigation and tracing processes.

30.  Again, as in my previous Decision, I am conscious that I have not heard from any bank (or any association of banks) as might usefully add to the debate.  Without further detail, I do not say that the fees put forward on this occasion could not be justified; perhaps they could.  But, as the fees have been agreed, that question does not arise, and the plaintiffs have been careful to point out no actual complaint is being made today.

31.  But, it seems to me that failing a justified approach in future, it may be that the court will on some occasion be forced to consider identifying the reasonable indemnity costs for compliance with an order in any particular case, through a process of taxation or otherwise.  Perhaps the time has come for a suitable association of banks to consider in broad terms what would be fair and reasonable charges for complying with disclosure orders, as might justify the undertaking to meet those costs of compliance on an indemnity basis.

32.  The more consistent the charges, the more questions of proportion and procedural economy and fairness to all can be addressed, and all involved parties can properly assess those and related matters.

Mr Moses Park, instructed by ONC Lawyers, for the plaintiffs

HCA 1529/2019

[2020] HKCFI 1233

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1529 OF 2019

________________________

________________________

___________________________________

REASONS FOR DECISION

___________________________________

A.  Introduction

1.  This Decision is in relation to the practical means by which a bank, which has been made the subject of a ‘bankers’ books’ or Norwich Pharmacal disclosure order, might comply with the aspects of disclosure ordered.

2.  At the hearing on 15 June 2020, I made an order requiring various banks to supply documents by way of disclosure to the plaintiffs, and permitting (indeed, encouraging) the banks to do so by use of electronic or digital versions of those documents being uploaded to a data room.  These are my Reasons for so doing.

3.  In this Decision, I shall refer to the individual numbered plaintiffs and defendants as, for example, “P1” and “D10”. None of the defendants have ever actively participated in the proceedings.

4.  The plaintiffs were again represented by Counsel Mr Moses Park (with Mr Billy Mok).

B.  Brief Background

5.  I recently gave a brief description of the nature of the action and its procedural history in my Reasons for Decision dated 9 June 2020 [2020] HKCFI 1084, to which reference can be made.

6.  In short, the plaintiffs assert proprietary claims over the funds in bank accounts held by the defendants.  The particular relief claimed includes declarations as to the defendants holding the funds on constructive trust, and as to liability to account and orders for payment of sums due on taking of the account.

7.  Numerous previous Mareva and proprietary injunction orders have been made and continued against the various defendants, into whose hands the plaintiffs seek to trace the funds over which they make a proprietary claim.

8.  At the hearing on 15 June 2020, I granted leave to re-amend the writ to join D29 as a defendant, and I granted an interim injunction restraining the various funds over which the proprietary claim is made held in the hands of D18 and D29.  I also granted leave for service out of the jurisdiction on those defendants outside of the jurisdiction, in Taiwan.

9.  Recently, in my Reasons for Decision dated 9 June 2020 [2020] HKCFI 1084, I permitted a relatively novel mode of ordinary service under RHC Order 65 rule 5(1)(d), using a data room to which the person served is given access by being sent a previously Court-approved letter providing a link to the data room, and by separate communication an access code to the data room.

10.  The plaintiffs have also obtained multiple disclosure orders against various banks for information of the defendants’ bank accounts.  Indeed, it is by use of the information obtained from such disclosure that the original action against only D1-D6 has been expanded to include (up to this point) D7-D29.

C.  Means of Providing Disclosure

11.  It is not the purpose of these Reasons for Decision to engage in any analysis of the principles applicable on applications for “bankers’ book” or Norwich Pharmacal disclosure orders.  Those principles are well settled: see, for example, Golden Brothers Inc v Medicare Asia Limited (unreported, HCA 2590/2016, 14 October 2016, Zervos J) at §§23-24, 26 and A Co v B Co [2002] 3 HKLRD 111 at §13.

12.  At the hearing on 15 June 2020, I was satisfied on the evidence, and by the application of the appropriate principles, that the plaintiffs are entitled to further disclosure orders against the 12 banks identified in the Schedules to the summons.

13.  However, as to the precise terms of the order, in particular as to the method by which the banks might provide that disclosure ordered, Mr Park invited me to include a paragraph in each of the Schedules (except one) providing that:

Documents produced by [the bank] may be served by access to data room if considered by [the bank] to be the more economical and environmentally friendly option:

(1) the Plaintiffs shall create an online data room containing orders made in relation to [the bank] in this action; and

(2) the Plaintiffs shall send to [the bank] by post a link to the data room, and by separate post and access code to the data room and instructions to access the data room.

14.  Obviously, the idea would be that the plaintiffs would create an online data room for each of the banks, so that only the particular bank would have access to the materials in, or be able to upload materials to, that data room.

15.  This method of compliance using access to a data room was suggested in particular because of the heavy costs, including photocopying charges, levied by the various banks in producing documents as ordered.  As stated, the procedural history of this action identifies that the plaintiffs have already obtained multiple disclosure orders against various banks.  Those orders, necessary for the intended tracing exercises, have already imposed a significant financial burden on the plaintiffs.  For example, one bank quoted a sum of HK$157,100 for photocopying charges of 1571 pages of documents, that is at HK$100 per page.

16.  On the face of the plaintiffs’ claim – and in circumstances where no defendant has yet identified any defence to any part of the claim – the plaintiffs appear to have at least a strongly meritorious proprietary claim to the funds that have been the subject of various transfer between the defendants’ bank accounts.  Yet, despite the strong claim to being defrauded of significant sums, the plaintiffs are required to expend significant further sums in an attempt to trace and recover what they have lost.

17.  Of course, even though the discovery sought must not be unduly wide, it is also correct that the plaintiffs are not in a position to make a more narrowly focused application for documents, as they do not know precisely the number of documents (or pages) which will be made available by any particular bank.  No doubt, some of the documents produced will be of rather less assistance than those which identify the core elements of the transfers which may permit the intended tracing exercise.  The above example of the bank which produced over 1,500 pages would seem to demonstrate that point.

18.  Whilst the plaintiffs are willing to give an undertaking – and have given the undertaking – to reimburse the banks for their reasonable costs of complying with any disclosure ordered by the Court, Mr Park submits that the Court should actively approve and adopt a practice and procedure which may help reduce costs that can be otherwise saved, so long as it is possible and fair, just and reasonable to do so.

19.  In light of the underlying objectives under RHC Order 1A rule 1, I agree.  Those objectives include increasing the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court; promoting a sense of reasonable proportion and procedural economy in the conduct of proceedings; and ensuring fairness between the parties.

20.  In practical terms, the banks being required to provide disclosure probably hold the relevant materials in electronic or digital form.  It would seem to be an unnecessary expenditure of time and cost to print out hard copy documents so as to provide them to the plaintiffs.  That is particularly so where the plaintiffs will likely have to scan those documents, and thereby to create their own electronic or digital versions of them, to pass them to (for example) forensic accountants or others involved in the tracing exercise.  Turning paper documents back into electronic documents would also seem to be a further unnecessary expenditure of time and costs.  The use of paper, at least much more paper than is likely to be required for any focused exercise, would also seem to be environmentally unattractive.

21.  I am conscious that, when the plaintiffs sent blank draft orders to the banks seeking their stance in relation to the intended application, those drafts did not include the paragraph relating to the use of the data room.  I have, therefore, not heard from any individual bank (nor from any association that might reasonably be expected to represent the interests of banks in general).  But, it seems to me that many, if not most, banks would prefer to avoid the unnecessary expenditure of both time and administrative resources, or would at least prefer to minimise such expenditure.  After all, I do not think it is part of the profit-making of a bank to charge for compliance with orders for disclosure on a basis greater than the actual reasonable costs of compliance.

22.  In any event, the paragraph I have permitted to be added specifically leaves it to the individual bank to consider whether it would be more economical and environmentally friendly to adopt the provision of disclosure through use of the data room.

23.  As Mr Park submits, if this practice is approved and adopted, then banks’ photocopying charges can be lowered, if not eliminated altogether (presumably also lowering administration charges generally).  That means a saving in costs, time, and paper.  It may also permit the information to be provided faster, which is a significant benefit in cases such as the present case where earlier attempts to trace assets may lead to greater recovery, without further dissipation and greater difficulty in tracing and recovery.

24.  It will also go some way to ensure that disclosure orders obtained against banks in cases such as the present do not become impracticable to all but the most well-off victims.  Indeed, it is not difficult to think of victims who may be deprived of a significant proportion of their assets by an alleged fraud, and who would not be left with significant funds with which to pursue the recovery of the funds defrauded.  Where the purposes of ordering disclosure from the banks are (a) to facilitate the provision of information which may lead to the location and preservation of assets to which a party makes a proprietary claim, and (b) where the order is intended to reap substantial and worthwhile benefits for the plaintiff, then the form of the order should permit and encourage compliance using a method which actually furthers those purposes, rather than risks frustrating them.

25.  Therefore, I have no hesitation in deciding that in an appropriate case (such as the present case) the Court should indeed actively approve and adopt this procedure.  In this case, and balancing the interests of the parties, being the plaintiffs and defendants and the banks, it seems to me that the order including this method of compliance is possible and fair, just and reasonable.

26.  I was also shown, and I approved, a draft letter to be sent to the banks in accordance with that leave granted.  The draft letter gives clear, pictorial instructions as to how to operate the link with the use of the access code, so as to gain access to and upload the documents to the data room.

HCA 1529/2019

[2020] HKCFI 1084

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1529 OF 2019

________________________

________________

_________________________________

REASONS FOR DECISION

_________________________________

A. Introduction

1.  This Decision is principally in relation to a relatively novel mode of ordinary service under RHC Order 65 rule 5(1)(d), using a data room to which the person served is given access by being sent a previously Court-approved letter providing a link to the data room, and by separate communication an access code to the data room.

2.  At the hearing on 5 June 2020, I made an order giving leave to the plaintiffs to serve certain future court documents on various defendants in that way.  These are my Reasons for so doing.

3.  In this Decision, I shall refer to the individual numbered plaintiffs and defendants as, for example, “P1” and “D10”. None of the defendants have ever actively participated in the proceedings.

B.     Brief Background

4.  For present purposes, only a brief description of the nature of the action and its procedural history is necessary.

5.  The plaintiffs assert proprietary claims over the funds in bank accounts held by the defendants.  The particular relief claimed includes declarations as to the defendants holding the funds on constructive trust, and as to liability to account and orders for payment of sums due on taking of the account.

6.  The plaintiffs’ proprietary claims are alleged to arise in the following way.  P1 and D6 are former lovers.  D6 was engaged by P1 as an assistant in the plaintiffs’ business in electronics trading from its commencement around 2008.  P1 is a Korean national who does not speak Chinese, and D6’s role included liaison with Chinese language counterparties and managing the financial and administrative aspects of the business.

7.  D1-D5 were set up at the suggestion of D6, to whom P1 entrusted such matters.  D6 does not have beneficial ownership in D1-D5, nor to any funds which are or were held by those companies.  In mid-2019, D6 absconded whilst retaining control over D1-D5.  It is alleged that from at least June 2016, there were unauthorised transfers between D1-D5 and D7-D27.  The plaintiffs have no knowledge of D7-D27, and no business with them.  The transfers were unauthorised, and D7-D27 must have known that those transfers were unauthorised as being outside any normal or proper business purpose.

8.  D25 is the sole director and shareholder of D11, and there were unusual transactions between D25 and D11 of substantial amounts.  D19 is a shareholder of D17, and there were unusual transactions between D19 and D17.  D28 is the sole director and a shareholder of D17, and there were also unusual transactions between D28 and D17, the latter of which conducted transfers on some occasions only shortly after it received monies from D1 and D2.  D28 must know that those transactions were not bona fide.

9.  In the circumstances, the plaintiffs assert that D7-D28 must have known that they were not entitled to the transferred funds, and that it is unconscionable for them to retain the funds.

10.  The action was commenced by writ dated 21 August 2019, and originally against only D1-D6.  In earlier applications, beginning in August 2019, interim injunction orders were granted against D1-D6, which have been continued until trial or further order.  Bankers books disclosure was also obtained, which identified the transactions involving D7-D28.

11.  On 27 February 2020, I granted leave to amend the writ to join D7-D28 as defendants, and I granted an interim injunction restraining the various funds over which the proprietary claim is made held in the hands of D7-D28 (except D9 and D18).  I also granted leave for service out of the jurisdiction on those defendants outside of the jurisdiction, mostly in Taiwan.

12.  The action has been discontinued against D8, and no continuation of any order was sought against D8.  Therefore, on 5 June 2020, the plaintiffs sought the continuation of the interim injunction against D7, D10, D11, D13, D14, D15, D17, D19, D20, D21, D22, D23, D24, D25, D26, D27 and D28.

13.  On the materials provided, I was satisfied that it was appropriate to continue the interim injunction against those defendants, except D25 (where the plaintiffs accept that D25 has not yet been effectively served).

14.  D7 is a company incorporated in Anguilla, where it was served.  No further consideration need be given to D7 in this Decision.

C.     Service in Taiwan

15.  A firm of attorneys-at-law was engaged by the plaintiffs, through their Hong Kong solicitors, to effect service of documents on D10, D11, D13, D14, D15, D17, D19, D20, D21, D22, D23, D24, D25, D26, D27 and D28 in Taiwan.

16.  Affidavits of service have been filed identifying how service was effected, or attempted, on each defendant in Taiwan. As stated, the plaintiffs accept that service has not been effected on D25, and no further consideration need be given to D25 in this Decision.  D13 and D15 were served in a way where service was accepted and the documents were not returned, and no further consideration need be given to D13 and D15 in this Decision.

17.  However, the documents served on D10, D11, D14, D17, D19, D20, D21, D22, D23, D24, D26, D27 and D28 (“Thirteen Defendants”) were returned.  The circumstances of the return of those documents is unusual, but notwithstanding their return I was satisfied that service had been effected on the Thirteen Defendants.

18.  Each of the Thirteen Defendants was served with an individual package of documents, at various different addresses in Taiwan.

19.  Nevertheless, the documents which were returned to the plaintiffs’ solicitors were packed in five similarly wrapped boxes/parcels, which were all sent from Taiwan on 7 May 2020 and which were all delivered to the plaintiffs’ solicitors by courier/airmail together.  Photos of four of the five parcel’s airmail labels show they were numbered CC20788622, CC20788625, CC20788628, CC20788630.

20.  Upon inspection of the parcels, it was seen that all of the documents had been opened.  The documents in the parcels were apparently grouped together in an organised and orderly fashion, to affect what was in effect a “consolidated” return of 13 different packages.

21.  It would seem clear that the Thirteen Defendants must have had the documents in their possession at some point of time, and had a reasonable opportunity to read and inspect them, and I am satisfied that each of them is aware of the present proceedings against them in Hong Kong, and that their decision not to participate in the proceedings has been both voluntary and informed.

22.  But, it would also seem clear that the Thirteen Defendants are attempting to refuse or evade service of the documents.  They just did not do so very cleverly.

D.     Future Mode of Service

23.  RHC Order 65 rule 5(1)(d) provides that service of any document (not being a document which is originating process or is required to be served personally) may be effected “in such manner as the court may direct”.

24.  In this case, in light of the substantial (and growing) volume of papers and the particular behaviour of some of the defendants, and in order to save costs, time and resources, Mr Moses Park, Counsel for the plaintiffs, invited me to consider permitting service by access to a data room.

25.  In the modern era of communications, it has become relatively common for Courts to permit service to be affected by use of email.  I have also previously, in a small number other cases, permitted service using Facebook Messenger or WhatsApp Messenger, which are both private service channels which might be used either to send documents or to send a link to documents.  One of the virtues of using WhatsApp, for example, is that it usually shows the sender of the message when the message has been sent to the addressee, and when it has been read by the addressee.

26.  In this case, Mr Park submitted that I should go further.  He referred me to the English decision of HHJ Waksman QC (sitting as a Judge of the High Court) in CMOC Sales & Marketing Ltd v Persons Unknown and 30 others [2018] EWHC 2230 (Comm) at §191.  In that paragraph, the Judge identified that he had earlier approved a system of effecting service on the defendants which involved use of a data room.  He described it as “an innovative feature” of the litigation.

27.  The process comprised sending the relevant party by a previously approved Court method (for example, email or hardcopy) a link to a data room, and by separate email an access code to the data room.  If the code was used, it would enable the user to view all of the evidence adduced up to that point of time, together with all applications and court orders made.

28.  The process, however, required CMOC first to serve each defendant by another Court approved method, before it could serve by use of the data room.  However, for the ‘non-cause of action defendants’, such as the banks joined for the purposes of supplying information, CMOC was not required first to serve them by another Court approved method before it could serve by data room.

29.  I am satisfied that in an appropriate case a similar mode of service can clearly be justified in Hong Kong.

30.  RHC Order 1A rule 1 sets out the ‘underlying objectives’ of the rules.  They include: (a) to increase the cost-effectiveness of any practice and procedure to be followed in relation to proceedings before the Court; (c) to promote a sense of reasonable proportion and procedural economy in the conduct of the proceedings; and (d) to ensure fairness between the parties.  By virtue of Order 1A rule 2, the Court is mandated to give effect to the underlying objectives of the rules when it exercises any of its powers (whether under its inherent jurisdiction or given to it by the rules or otherwise), or when it interprets any of the rules.

31.  Further, by virtue of Order 1A rule 1(1), the Court is mandated to further the underlying objectives of the rules by actively managing cases.  By virtue of Order 1A rule 4(2)(k), active case management includes making use of technology.

32.  By virtue of Order 1B rule 1(1)(l), the Court may by order take any step or make any other order for the purpose of managing the case and furthering the underlying objectives set out in Order 1A.  That power is in addition to any powers given to the Court by any other rule or practice direction or by any other enactment or any powers it may otherwise have.

33.  The present case is one in some ways similar to the CMOC case.  There have already been numerous interlocutory applications, and a number of defendants have been added to those originally defendants to the proceedings.  Mr Park informed me that it was likely that an application would be made in the near future for joinder of further defendants, and for interim relief to be sought against those further defendants, as a result of information obtained from various banks with the benefit of previous orders.  Indeed, a number of orders have been obtained already requiring banks to supply information intended to permit tracing of the funds over which the plaintiffs claim their proprietary interest.

34.  Therefore, (a) there is already a substantial body of material in the form of affidavits, exhibits and previous court orders, and (b) there will likely be further documents to be added.  There is clearly significant expense, as well as the use of time and paper, in continued service of significant volumes of hardcopy materials, not least if that also involves employment of agents/lawyers overseas to effect that service.  The large number of defendants – and the potential addition of further defendants – exacerbates these points. In so far as orders are sought against banks, against whom there strictly lies no cause of action, it is unlikely that they would wish to be deluged with reams of paper only some of which might be relevant to their particular considerations.

35.  This seems to me to be precisely the sort of case, and precisely the sort of circumstances, in which the underlying objectives of case management which I have identified above point strongly towards the use of available technology, including by the effecting of service by data room.

36.  In some ways, the provision of the link to the data room might be regarded as akin to an envelope or package containing documents, and the access code or password to use on that link as akin to the method by which to open the envelope or package.  Clearly, the link and the access code together will provide ready access to the documentation in a form which many, if not most, would find more convenient than hardcopy.  It would do so in a way which is quick, efficient, and cost-effective – and also relatively secure.  On the matter which is the essence of effecting service, I am satisfied that this mode of service will bring the process and the relevant documents to the notice of the persons to be served.

37.  Nevertheless, of course it remains important and necessary to ensure that the proposed method of service on each occasion is or remains authorised by the Court.  It is also important that any first occasion of service on any defendant or third party should be affected by another Court approved method, before an alternative is mooted.

38.  As an aside, I recognise that this innovative mode of ordinary service might not be suitable in respect of some individuals. Though the point has not yet arisen and may not arise in this case, there may be occasion to consider whether, for some persons or classes of person, technology would be a bar or hurdle rather than an aid.  The fact that there may be no ‘one size fits all’ approach is fully catered for by the need for the parties and the court proactively to consider the appropriate mode of service in any particular case.

39.  In this case, there is also a distinction between those defendants for whom the plaintiffs have an email address and those for whom they do not have an email address.  The method of providing the link and the access code, so as to facilitate access to the data room, may therefore vary from party to party.

E.     Disposition

40.  As well as continuing the interim injunction against certain defendants, as regards service I made the following order:

Leave be given to the plaintiffs to serve future documents on D10, D11, D14, D17, D19, D20, D21, D22, D23, D24, D26, D27 and D28 by access to data room:

     (a)     the plaintiffs shall create an online data room containing all of the evidence thus far adduced, together with all applications and orders made in this action; and

     (b)     the plaintiff shall send to D10, D11, D14, D17, D19, D20, D21, D22, D23, D24, D26, D27 and D28 by post and/or by email (to those for whom the plaintiffs have an email address) a link to the data room, and by separate post and/or email an access code to the data room and instructions to access the data room.

41.  I was also shown, and I approved, a draft letter to be sent in accordance with that leave granted.  The draft letter gives clear, pictorial instructions as to how to operate the link with the use of the access code, so as to gain access to the documents in the data room.