Oldham, Li & Nie, Solicitors (A Firm) v. Melvin Waxman and Another

HCA 263/2023

[2024] HKCFI 181

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 263 OF 2023

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BETWEEN

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DECISION

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1.On 29 June 2023, the Plaintiff obtained default judgment against the 1^st and 2^nd Defendants for sums totalling over HK$8 million odd.

2.Steps for enforcement thereof have been taken, one of which came before me on 7 December 2023 at 9:30 a.m (“the Application”).  By the Application, the Plaintiff applied for a receiver to be appointed by way of equitable execution of the judgment debt, by receiving the 1^st Defendant’s 3,000 shares in WDI International (HK)  Limited (“the Company” and “the Shares” respectively), and all current and future debt, income, receipts and monies in respect of the 1^st Defendant’s interest in the Shares.

3.At the time of the hearing, the Plaintiff had also made an application for a charging order to be made absolute on the Shares which was due to be heard on 2 January 2024.  The application has since been heard and the charging order made absolute accordingly.

4.On the evidence laid before the Court, I am satisfied that:

(a)  The Company is an asset of the 1^st Defendant’s.

(b)  It holds or had held at least two subsidiaries.

(c)  There had previously been an arrangement whereby dividends from those said subsidiaries was received by the ultimate shareholders of the Company (according to their respective percentage of shareholding therein)  via an offshore bank account (“Agreed Distribution Arrangement”), and the 1^st Defendant as one of the ultimate shareholders had benefitted from such an arrangement. The logistics of such arrangement had been set out and confirmed in an affirmation by the 1^st Defendant in another High Court Action.

5.It is unclear if the Company presently has any other subsidiaries, and if so, whether the dividends from those subsidiaries is dealt with in similar manner.

6.The rationale underlying the Application was that:

(a)  Even if the charging order were to be made absolute (which it has now been), this would likely not be particularly effective as a means of enforcement as the Company, being a private company, will be difficult to value, and thus the Shares will be difficult to sell.

(b)  No financial information is available on the Company (thus further hindering attempts at valuation).

(c)  Future earnings or receipts flowing from the subsidiaries are not attachable to a garnishee order. Not only that, there is a risk that any such dividends or earnings from the subsidiaries would be paid over to the 1^st Defendant rather than the Plaintiff.

7.The Plaintiff thus seeks to have a receiver appointed such that current and future dividends to be declared by subsidiaries of the Company, which are payable to the 1^st Defendant by reason of the Agreed Distribution Arrangement, should be made the subject of equitable execution.

8.The Plaintiff places reliance on Karaha Bodas Co LLC v Perusahaan Pertambangan Minyak Dan Gas Bumi Negar [2005] 1 HKLRD 21 at §8:

“ (1)  A receiver may be appointed when recovery of the judgment debt by normal means of legal execution is "not practicable". In such case the courts grant equitable relief as a means of "taking out of the way a hindrance which prevents execution at common law". An applicant must normally show that circumstances are such as to render it practically difficult, if not impossible, to obtain the fruits of his judgment. See also Goldschmidt v Oberrheinische Metallwerke. [1906] 1 KB 373 and Bourne v Colodense Ltd [1985] ICR 291.

(2)  It is not necessary that a judgment debtor has a legal interest in the asset over which a receiver is sought to be appointed. Thus, it is possible to appoint a receiver to recover future debts from a third party, even though at the time of the garnishee order or appointment of a receiver such debts cannot be attached at common law.

(3)  Nonetheless, there must be some difficulty, arising from the nature of the property, which precludes execution at law but which can be overcome by the appointment of a receiver.”

(see also Tasarruf Mevduati Sigorta Fonu v Merrill Lynch Bank and Trust Co (Cayman)  Ltd [2012] 1 WLR 1721 at §56; Cruz City 1 Mauritius Holdings v Unitech Ltd [2014] EWHC 3131 (Comm)  at §47; Masri v Consolidated Contractors International (UK)  Ltd and others (No.2) [2008] EWCA Civ 303 at §§151-153)

9.When the Application came before me, I expressed some reservations regarding the breadth of the order sought, as it seemed to encapsulate more than just the dividends, whether current or future.  I reserved the decision in order to further consider this aspect of the Application.

10.Following the hearing, the Plaintiff helpfully wrote in on 18 December 2023 with a revised Draft Order, which set out the terms of the appointment in a more precise manner, and also explored further authorities which go towards the scope of a receiver’s powers and their involvement in the asset to be received.  The essential proposition is that there is nothing objectionable in the receiver having the relevant powers insofar as this will assist in him being able to ascertain what payments (in this case, dividends)  are or will become due (see Soinco v Novokuznetzk Aluminium Plant [1998] 1 QB 406 at 421C-F).

11.Upon considering the revised draft order and the supplemental submissions from the Plaintiff, I am satisfied that this is an appropriate case in which to appoint a receiver by way of equitable execution.  I thus make an order in terms of the revised Draft Order submitted to the Court on 18 December 2023.

Ms Lily Yeung, instructed by Oldham, Li & Nie, for the plaintiff

The 1^st defendant, acting in person, absent