Connaught West Ltd v. Global Fiduciary Solutions Ltd and Others

HCA 525/2017

[2019] HKCFI 1481

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 525 OF 2017

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Before: Deputy High Court Judge Leung in Chambers

Date of Hearing: 17 May 2019

Date of Decision: 17 June 2019

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D E C I S I O N

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1.The plaintiff took out an application for an order that the defendants be referred to the Department of Justice with regard to their alleged criminal conduct. There is also its application for costs of the last adjournment of the hearing of the plaintiff’s application for preservation order against the defendants.

Background

2.This action concerns the contest between the plaintiff and the 2^nd defendant for control over the trusteeship of an occupation retirement scheme.  The plaintiff applied for preservation order against the defendants in respect of the members’ money in the scheme.  After receiving further evidence and hearing substantive argument, DHCJ William Wong handed down his decision on 7 January 2019.  The background of the dispute was adequately set out in the learned DHCJ’s decision, which I would adopt.

3.For the present purpose, it is not necessary to go into the details or the merits of the case.  What gave rise to the referral application was partly what happened when the plaintiff’s application for preservation order first came before this court on 12 September 2018.  By then, the parties have filed their respective affidavits, including those of the director of the plaintiff in support and the director of the 1^st and the 3^rd defendants (“Manktelow”) in opposition.  In support of the plaintiff’s application, there was also an affidavit of a pension fund member (“the Member”) under the scheme.  Essentially, the Member joined the others in complaining about funds that should be, but had not been, released to him as a result of the withholding of the same by the defendants in neglect of their fiduciary duties.

4.However, by letter dated 17 August 2018 to this court (which was copied to the parties), the Member sought to clarify that he did not wish to be involved in the dispute between the parties in this action, and that he simply set out in his affidavit the difficulties that he faced in dealing with his pension in the light of the dispute.  He continued to say:

“I am now advised that the matters deposed to in the Affidavit are not relevant to the Application at all.

In the circumstances, I confirm that I have no further interest in this matter and would like to withdraw the Affidavit to the extent permitted by the Court.”

5.It is odd for a mere witness to personally seek to withdraw his affidavit evidence from the court in a matter pending hearing, and to do so for the purported reason so stated above. Not surprisingly, the plaintiff’s solicitors apparently investigated into what caused the Member to do that.  This led to the affidavit of the plaintiff’s solicitor sought to be filed just prior to the hearing before this court.

6.The investigation by the plaintiff’s solicitor revealed that the above letter from the Member was precipitated by the correspondence between Manktelow and the Member.  These correspondence are dated between 31 July and 10 August 2018, and are now disclosed by plaintiff’s solicitor disclosed by his affidavit mentioned above.

7.The email correspondence started with Manktelow offering to make payment to the Member subject to the latter withdrawing his affidavit.  The Member replied and questioned the legal appropriateness of the proposed course.  However, as he needed his money, the Member expressed his readiness to sign some form of release as Manktelow suggested.  Manktelow followed up by suggesting that there was no mechanism for withdrawing the affidavit from the court, but their lawyers were then drafting a document which, if signed by the Member and submitted to the court, would effectively neutralize the Member’s affidavit.  There came the draft letter, which was eventually the one signed and sent by the Member to this court.

8.The Member had apparently obtained advice from his own London solicitor, and reverted to Manktelow that the conditional approach suggested by Manktelow was highly inappropriate, and might be seen as a potential attempt to pervert the course of justice.  The Member proposed revision of the draft letter to the court, and leaving it to the parties in this action to make appropriate representations to the court in relation to his affidavit.

9.According to the Member in his subsequent email, Manktelow reacted strongly to his response mentioned above. Manktelow allegedly issued a verbal ultimatum so that the Member would not get paid unless he signed the letter proposed by Manktelow.  It was in these circumstances that the Member sent out his letter to this court seeking to withdraw his affidavit in terms as requested by Manktelow.

10.The plaintiff’s solicitor took the view that the conduct of Manktelow of the 1^st defendant was indeed tantamount to an attempt to pervert the course of justice.  It therefore sought leave to file his affidavit, setting out what happened behind the letter, in discharge of his duty to the court.  I gave leave for that at the hearing.

11.At that hearing, the parties’ legal representatives expressed their readiness to proceed with the substantive argument of the plaintiff’s application for preservation order. However, be it due to the plaintiff taking issue or from the court’s perspective, the defendants should be alerted of the possible ramification of any finding in relation to the episode mentioned above which would be open to the court to make upon the substantive determination of the plaintiff’s application.  Hence the opportunity to the defendants to respond specifically to such episode, if so advised, before the substantive hearing.  On such basis, the defendants’ solicitor asked for time for filing the affidavit, if so advised, which I also gave.  I also adjourned the plaintiff’s application for preservation order to another date for substantive argument, but indicated to the parties that they might want to fix the resumed hearing before this court. As mentioned, that eventually went to DHCJ William Wong SC.

12.Pursuant to my leave, Manktelow indeed filed his affidavit, which, amongst other things, confirmed that the letter from the Member to this court was drafted by the 1^st defendant’s solicitor.  He also exhibited the email from the Member replying to him that the Member, acting against his own legal advice as mentioned above, would sign the letter as requested by Manktelow in return for the payment promised.  However Manktelow explained that he had no intention of perverting the course of justice.

13.When the hearing of the plaintiff’s application for preservation order resumed, the attention of DHCJ William Wong SC was drawn to the above episode, presumably also the issue of costs of the adjournment of the hearing by this court on 12 September 2018, which has been reserved.  Whilst the learned DHCJ expressed his preliminary observation about Manktelow’s explanation in relation to the episode, he directed the plaintiff to take out a proper application, if so advised, before this court for determining: (i) whether referral to the Department of Justice should be made, and (ii) whether the costs of and occasioned by the last adjournment should be paid by the defendants (forthwith on an indemnity basis)[1].  The plaintiff did exactly that.  Hence the present application.

Referral

14.DHCJ William Wong SC directed the plaintiff to take out a proper application for the referral issue, if so advised.  I would not have advised to take out such an application.  The reason is that the question of referral simply does not form the subject matter of an application, in respect of which a party may claim to be entitled to relief or order from the court.  Further, an inter partes application for such purpose would entail argument by the parties, which also does not seem to be the norm for the purpose of the court’s consideration of whether or not to make the referral.

15.Though per se not providing the answer for the present purpose, what was said in the case of TCWF v LKKS (No 1) [2014] 1 HKLRD 896, I find, is helpful.  In that case, the court in his judgment after trial found the existence of criminal behaviour with regard to certain affidavits filed in the matrimonial proceedings.  Forgery and and perverting the course of justice were suggested.  The judge made it as part of the formal order in his judgment the direction that the Registrar would forward a copy of the judgment to the Director of Public Prosecution (DPP) for appropriate action.  The parties accused of such misconduct appealed that part of the order.

16.In stating that such part of the order of the judge was not appealable, the Court of Appeal in TCWF explained (at §119) that:

“The act of the judge in making the referral is in substance no different from the referral made by any ordinary citizen. That the DPP may be inclined to give greater weight to the referral of a judge is nothing to the point. Regardless of who made the referral, the DPP is required to exercise his independent professional judgment on what investigations should be carried out in a particular matter and whether any prosecution should be brought as a result. In referring the matter to the DPP, the Court is not ordering him to act or expecting him to act in any particular way.”

(at §122):

“The long-standing practice of the courts is that where an arguable case of serious misconduct is disclosed by evidence in a civil trial, the court will consider referring the matter to the prosecuting authority, as it is part of the court’s duty in upholding the rule of law…”

17.The Court of Appeal continued (at §125) to deal with the argument by the appellants that referral should not be made without hearing the parties’ argument.  The Court explained that whether any party or witness in a case should be given advance notice and the opportunity to make representations before a referral to the DPP is made must depend on the facts and circumstances of each case.

18.What the appellate court said, in my view, reflects that it is a matter for the court in discharge of its duty, if a case of serious misconduct is disclosed by the evidence in the proceedings before it, to consider whether the matter ought to be referred to the appropriate authority.  As much as any citizen having the right to make a complaint to the relevant authority, a party to such proceedings may do so.  Whilst there is nothing wrong in principle for the party to invite the court to consider making the referral, it is up to the court to consider if the referral should be made, which does not have to be backed by an order of the court, let alone one sought by any party by way of an inter partes application and after argument between the parties.

19.In setting out the background above, I mention that it was only partly because of the episode concerning the letter from the Member that the present application was taken out.  The other part of this actually had to do with matters not before this court but only arose during the substantive argument of the plaintiff’s application for preservation order before DHCJ William Wong SC.  As mentioned, the learned DHCJ in the course of the substantive hearing directed the parties to file further evidence and submissions.  Upon consideration of the further evidence before him, the learned DHCJ discovered that the defendants did not possess proper licence to manage the trust monies, contrary to the Anti-Money Laundry and Counter-Terrorist Financing Ordinance, Cap 615.  The DHCJ took the view that that was a serious matter[2]. In the present application, the plaintiff is also seeking an order of this court to make referral to the Department of Justice on account of such findings of the learned DHCJ.

20.The defendants had intended to ask for directions in respect of the filing of affidavit evidence and substantive argument of the present application.  In view of the above discussion, I consider that to be unnecessary.  As indicated during the present hearing, the plaintiff is as equipped as the court insofar as the factual basis for engaging the authorities to investigate into what transpired at the hearings before this court and DHCJ William Wong SC respectively.  As mentioned, this does not require an order of the court for such purpose.  I therefore simply make no order in respect of this part of the present application.

Costs of the adjournment

21.In his decision, DHCJ William Wong SC ordered that the costs of the plaintiff’s application for preservation order should be in the cause, but he specifically reserved the costs of the adjournment of the hearing on 12 September 2018 back to this court for determination.  As mentioned, the plaintiff was specifically directed to take out an application before this court for such purpose.

22.Now the plaintiff asks for the costs of the adjournment on the basis that such adjournment was occasioned by affording the defendants the opportunity to adduce affidavit evidence to respond to the newly filed affidavit of the plaintiff’s solicitor that arose out of Manktelow’s questionable conduct.  However, Manktelow’s further affidavit did not provide any meaningful answer, as DHCJ William Wong SC preliminarily observed.  The plaintiff says that the adjournment was wasted and so were the costs.

23.Again, the defendants had intended to seek direction for adjourning the substantive argument of this part of the present application[3]. I do not find that to be necessary either.  In court, it was submitted on behalf of the defendants that there was no fault on their part in occasioning the adjournment, and there should be no order as to costs of that.

24.Procedurally, it was due to the plaintiff’s application for leave to file its solicitor’s affidavit, which entailed the affording of an opportunity to the defendants to file theirs in response and thus the adjournment.  However, in the circumstances explained above, the propriety of such an affidavit from the plaintiff’s solicitor to give the court the full picture of the episode concerning the Member’s letter to the court should not be questioned.  It was unlike an ordinary late application for leave to file additional evidence.

25.As mentioned, the defendants should be alerted to the possible ramification of the kind of finding that the court hearing the substantive argument of the plaintiff’s application for preservation order would be entitled to make in relation to the episode concerning the Member.  It was upon this court’s taking such view then the defendants asked for time to file an affidavit in response, if so advised.  In my view, the defendants should be afforded such an opportunity.  The defendants did file their affidavit in response, but the plaintiff criticises that as lacking in substance.

26.All circumstances considered, I order that the costs of the adjournment shall be the plaintiff’s costs in the cause.  It follows that if the plaintiff succeeds, it shall get the costs of such adjournment as well, but in the event that it fails in this action, it remains protected insofar as such costs of the adjournment are concerned.

Costs of this application

27.As discussed, the referral part of the present application should not have been taken out, notwithstanding the direction of DHCJ William Wong SC (which did say it would be up to the plaintiff to do so only if so advised).  The plaintiff managed to obtain an order in respect of the costs part of the present application better than what the defendant suggested in court.  All circumstances considered, I think a fair order will be one of no order as to the costs of this application.  In the absence of an application to vary within 14 days, the order as to the costs of this application shall become absolute without further order of the court.

Mr Andrew Lynn, instructed by Chan & Ho, for the plaintiff

Mr David Chen, instructed by Robertsons, for the defendants