Anz Commodity Trading Pty Ltd v. Excellence Raise Overseas Ltd and Others
Read the full judgment text of HCCL 4/2017 on BabelCite. This HCCL judgment was delivered on 9 July 2019.
1. This is the hearing of the Plaintiff’s application for continuation of the proprietary injunction order made by Deputy High Court Judge Douglas Lam SC on 13 November 2018, against the 9 th and 10 th Defendants in these proceedings. At the conclusion of the hearing, I indicated that I would give a brief Decision after reserving judgment.
Cites 3 cases
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HCCL 4/2017 [2019] HKCFI 1704 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE COMMERCIAL ACTION NO 4 OF 2017 ____________
____________ Before: Hon Mimmie Chan J in Chambers Date of Hearing: 4 July 2019 Date of Decision: 9 July 2019 ______________ D E C I S I O N ______________ 1.This is the hearing of the Plaintiff’s application for continuation of the proprietary injunction order made by Deputy High Court Judge Douglas Lam SC on 13 November 2018, against the 9th and 10th Defendants in these proceedings. At the conclusion of the hearing, I indicated that I would give a brief Decision after reserving judgment. 2.This action was first commenced by the Plaintiff in May 2017 against the 1st Defendant (“ERO”) only. The claim is for unjust enrichment and proprietary tracing in respect of a sum of US$4,395,164.84 received by ERO from Mega Wealth International Trading Limited (“MW”) on 8 November 2016, which the Plaintiff contends represented the proceeds of a commodities trading fraud perpetrated against the Plaintiff by various entities including MW. MW has since been joined as 3rd Defendant in these proceedings, together with Come Harvest Holdings Limited as 2nd Defendant (“CH”), and the director, employees, and agents of MW and CH. As a result of disclosure orders obtained by the Plaintiff against the defendants and other third parties including banks, more defendants have been joined as a result of tracing of the funds paid by the Plaintiff to its counterparty, E D & F Man Capital Markets Limited (“MCM”), and then paid by MCM to CH and MW. In these proceedings, the plaintiff is seeking recovery of a total sum of approximately US$300 million from a total of 10 defendants. 3.It is alleged, by amendment to the Writ and Statement of Claim made in June 2019, that the 9th Defendant and 10th Defendant had in November 2016 received funds sourced from the money paid by the Plaintiff to MCM, and by MCM to CH and/or MW, and that part of such funds had been used to acquire shares in a company known as United Biopharma Inc (“Shares”) which are now registered in the name of the 9th and 10th Defendant. On 13 November 2018, the Plaintiff obtained ex parte on notice a proprietary injunction (“Injunction”), which restrained the 9th and 10th Defendants from disposing of or dealing with the sums remitted by MW into their designated bank accounts in Hong Kong, and the traceable fruits and proceeds thereof, including the Shares. 4.At the substantive hearing of the Plaintiff’s summons issued on 13 November 2018 to continue the Injunction (“Summons”), the Defendant opposed such continuation, on the grounds that there was no basis for the Injunction to be made in the first place, that there was delay in the ex parte application, and that there was material non-disclosure. Just before the hearing of the Summons, the 9th and 10th Defendants applied by summons to discharge the Injunction. That has been adjourned, for lack of 2 clear days’ notice before the hearing on 4 July 2019, despite the long lapse of time from 13 November 2018. Whether that application for discharge is to be pursued is for the 9th and 10th Defendants to decide. 5.After hearing the submissions made by Counsel, and on the evidence and pleadings filed, I am prepared to continue the Injunction. My brief reasons are as follows. 6.At this stage, the Court is only to consider whether there is a serious issue to be tried, whether the balance of convenience is in favor of the grant of the proprietary injunction sought and whether it is just and convenient to do so. These principles are not disputed by the Defendants. It is not for the Court, at this stage of the proceedings, to decide factual matters in dispute as to the merits of the Plaintiff’s claims in the action or as to whether there were facts giving rise to failure to make full and frank disclosure. 7.On the pleadings and the evidence, I am satisfied that there is a serious issue to be tried, that the ultimate source of the funds deposited into MW’s bank account, from which the 9th and 10th Defendants and ERO were paid, is traceable to the Plaintiff’s funds paid by it pursuant to the fraudulent scheme perpetrated. 8.In a case such as this, which involves massive fraud involving multiple parties and multiple transfers made between numerous bank accounts in different jurisdictions, there may not be exact proof of each transactional link between the Plaintiff/MCM and the 9th and 10th Defendants. There may be an evidential “black hole” in the chain of transfers and payments so far identified (as alluded to in para 30-061 of Snell’s Equity (33rd ed 2015)), but having reviewed the transfers in and out from the different bank accounts, I am satisfied that there is a serious question to be tried, that the funds paid to the 9th and 10th Defendants are sourced from the Plaintiff’s money which it paid to MCM, and was then paid by MCM to MW, and further dissipated from MW’s accounts to the different defendants. 9.I am also satisfied, on the evidence adduced and in view of the close proximity in time and amount between the sums paid to the 9th and 10th Defendants, and the amounts converted by the 9th and 10th Defendants to pay for the placement of the Shares, that there is a serious issue to be tried that the sums remitted by MW to the 9th and 10th Defendants are the same amounts utilized by the 9th and 10th Defendants to acquire the Shares, such that the Plaintiff can assert a proprietary tracing claim over the Shares. 10.I reject the contradicted evidence of the Defendants and their unsubstantiated allegation that the sums received by the 9th and 10th Defendants from MW were due to their private currency exchange arrangements. 11.Being satisfied that there is a serious question to be tried as to the Plaintiff’s proprietary claim, it is clear from the authorities that as compared to Mareva relief, a proprietary injunction is easier to obtain (Falcon Private Bank Ltd v Borry Bernard Edouard Charles Limited and Anor, unreported, HCA 1934/2011, 9 July 2012). There is no need to prove risk of dissipation. In Madoff Securities International Ltd and Anor v Raven and ors [2012] 2 All ER (Comm) 634, Faux J observed:
12.Falcon Private Bank and Madoff Securities were both cited in the decision of the Court in Zimmer Sweden AB v KPN Hong Kong Limited, HCA 2264/2013 2 May 2014 to which Counsel for the Plaintiff has referred. 13.Delay in the context of an ex parte application for an interlocutory injunction is generally relevant to the question of whether it can be shown that the plaintiff has suffered or will suffer irreparable harm, whether there is risk of prejudice to the plaintiff or the defendant, as in the case of a risk of dissipation if interlocutory relief is not immediately granted, and whether it is just to grant the relief to the plaintiff. In the context of a proprietary injunction in aid of a tracing claim, the fact that what is sought to be recovered is the plaintiff’s property, goes to alleviate any prejudice or injustice that may be caused to the defendant, such that delay and lack of evidence of dissipation may not be regarded by the Court to be as significant as in cases when Mareva or other form of interim injunctions are sought. 14.Considering the multiple parties involved in this massive fraud, the transfers made between the numerous accounts, and the tracing exercise this involved, which included many applications to the Court for disclosure orders and specific discovery by other defendants and third-party entities (including the discovery made on 30 October 2018 by ERO as to the documents evidencing the acquisition of the Shares), I do not consider that there is unexplained or unjustifiable delay, from the commencement of the proceedings in 2017, the discovery of the payments which had been made from the accounts of MW and the 9th and 10th Defendants in November 2016, to the application for the Injunction in November 2018, to extend to the funds ultimately identified to remain in the bank accounts of the 9th and 10th Defendants and to the Shares acquired in their name with the funds. There was conflict in the evidence from ERO as to when the Shares had been purchased by the 9th and 10th Defendants: whether it was before, or after, the receipt of funds in November 2016. The Plaintiff had been making investigations and seeking documents to verify the availability of the funds remaining after the transfer to the 9th and 10th Defendants, and whether the Shares had been purchased with the funds. As Counsel for the Plaintiff pointed out, the Plaintiff had to act responsibly whenever it applied to the Court for injunctive relief, and I tend to agree that any criticism against the Plaintiff for not having included a wide, blanket injunction against the 9th and 10th Defendants in the Plaintiff’s initial application in November 2016 when the action was first commenced, is only made with the benefit of hindsight, when clearer evidence has now appeared of the connection between the Shares acquired by the 9th and 10th Defendants, and the funds initially transferred from MCM to CH and MW, and then to the 9th and 10th Defendants. 15.Further, it was in August 2018 that UBP issued its press release, which referred to the options given to shareholders of UBP to sell their shares, and the resulting risk that the Shares registered in the name of the 9th and 10th Defendants may be subject to further conversion, sale or transfer to different entities. I do not consider that there was unreasonable delay in all the circumstances and complexities of the fraud and the tracing exercise that has taken place in this case. The application against the 9th and 10th Defendants was made, on notice to Mr Chui, who was in control and responsible for the operation of the 9th and 10th Defendants as well as ERO. 16.As for the Defendants’ reference and purported reliance on matters which they claim constitute material non-disclosure, I find no basis on the admitted evidence available that there were any relevant or material matters which had been withheld from the Court at the ex parte application. The details of the UK proceedings instituted by MCM (which is a separate entity and independent of the Plaintiff) against CH and MW are immaterial to the Court’s decision as to whether or not to grant the Injunction to the Plaintiff in these proceedings in respect of the property of the 9th and 10th Defendants, including the Shares. Whether or not the Plaintiff is entitled to be indemnified by MCM, its own counterparty, and whether or not it may have settled its own claims against MCM, are not material to the grant of the Injunction, when the Plaintiff is entitled in its own right to pursue its claims against the Defendants named in this action. 17.In all the circumstances, I am satisfied that on a balance of the risks of doing an injustice in case the grant or discharge of the Injunction should turn out to be wrong, I am satisfied that it is just and convenient to continue the Injunction until trial, or further order. 18.The usual order as to costs on the Summons is that they should be in the cause. I make such an order on nisi basis.
Mr Derek Chan, instructed by Holman Fenwick Willan, for the plaintiff Mr Kenny CP Lin and Mr Alex Fan, instructed by Wai & Co, Solicitors, for the 9th & 10th defendants | |||||||||||||||||||||||||||||||||||||||||||||
Cases cited in this judgment
Further hearings and rulings under HCCL 4/2017