Carmon Reestrutura-engenharia E Servicos Técnicos Especiais(Su) Limitada v. Carmon Restrutura Ltd and Another
Read the full judgment text of HCA 1812/2022 on BabelCite. This High Court CFI judgment was delivered on 29 January 2024.
1. This was the Plaintiff’s application by an inter partes summons dated 6 November 2023 (“the 2023 Summons”). The application arose out of proprietary injunctions P had obtained in respect of its funds in D1’s account held with DBS Bank (“D1 DBS account”).
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HCA 1812/2022 [2024] HKCFI 435 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 1812 OF 2022 ____________________
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______________________________ REASONS FOR DECISION ______________________________ 1.This was the Plaintiff’s application by an inter partes summons dated 6 November 2023 (“the 2023 Summons”). The application arose out of proprietary injunctions P had obtained in respect of its funds in D1’s account held with DBS Bank (“D1 DBS account”). 2.P’s application is for ancillary disclosure from D2 in respect of assets which represent or are derived from the proceeds of the assets held in the D2’s bank accounts held with Emirates NBD Bank PJSC (referred to as “the 401 account” and “the 402 account”, collectively, “the Emirates Accounts”). Funds in those accounts represent traceable proceeds of funds held in the D1 DBS account. P also sought documents described in the Schedule to the Summons relating the Emirates Accounts. 3.At the conclusion of the hearing, I made an order in terms of the Summons. My reasons appear below. Background facts 4.The Plaintiff is an Angolan company engaged in construction and civil engineering works in Angola. D1 is a Hong Kong company intended to be a branch/subsidiary of the Plaintiff to facilitate receipts and payments from a business partner. 5.D2 was a Director General and director of the P until August 2022. As a matter of convenience, when D1 was set up, D2 became its sole registered shareholder and director. Pursuant to the P’s instructions, D2 caused D1 to open the D1 DBS account for receipt of funds by D1 on behalf of D2. 6.Between June and August 2022, the relationship between P and D2 deteriorated, with D2 resigning as employee and director on 9 August 2022. However, D2 failed to transfer back to P its shareholding in D1. 7.On 7 December 2022, P was unable to access the D1 DBS account at all as a result of D2 having changed the online banking login details after which D2 caused transfers in excess of USD $22.5 million to be made from the D1 DBS account to various of his personal accounts including the Emirates accounts. 8.When the above came to P’s knowledge, on 28 December 2022, P filed a summons (“the 2022 Summons”) for a Mareva injunction as well as a summons for a bankers books disclosure order (“the 2nd 2022 Summons”). 9.On 30 December 2022, P obtained the following orders from Recorder William Wong SC:
10.The 2022 Injunction order and the Bankers books order are collectively referred to as “the December 2022 orders”. 11.On 19 January 2023, P obtained a further ex parte injunction order obtaining relief similar to that granted in the 2022 Injunction order but on a worldwide basis (“the January 2023 order”). 12.D2 filed his affidavit on 14 March 2023 (“Cuenda 1st”) purportedly complying with the 2022 Injunction order and the January 2023 order confirming that
13.On 16 March 2023, Au-Yeung J made 2 orders by consent effectively continuing the 2022 Injunction order and the January 2023 order (collectively “the March 2023 orders”). 14.The 2022 Injunction order, the January 2023 order and the March 2023 orders are collectively referred to as “the Mareva orders”. 15.On 20 July 2023, P applied ex parte to the Dubai International Financial Centre (“DIFC”) Court for a freezing order and obtained the same on 24 July 2023. After hearing the parties on the return date, on 7 September 2023, Justice Wayne Martin continued the freezing order until further order. Appended to that order were the Reasons. 16.In the Reasons at §37, Justice Martin noted that D2’s Dubai legal representatives had served an unsigned witness statement from D2 together with several bank statements including ones relating to the Emirates Accounts. Based on those matters, it was recorded (at §39 of the Reasons) that the statement for the 401 account as of 27 July 2023 showed a balance of AED 82,120,068, and the statement for the 402 account had a balance of approximately USD $848,000 as of late July 2023 (at §§40-41). 17.On the face of the Reasons describing the facts as found by Justice Martin, there appeared to be significant dissipations from the Emirates Accounts since Cuenda 1st was filed[1] as shown in the following table:
Legal principles 18.The principles on ancillary disclosure were considered in Liao Chen Toh v Loyal International Enterprises Co Ltd [2021] HKCFI 164. The following may be highlighted:
Need for ancillary disclosure 19.Ms Natalie So, counsel for P, submitted that even taking Cuenda 1st at face value, it is evident (if not also a necessary inference) from the table[2] that monies have been dissipated from the Emirates Accounts between 14 March 2023 and July 2023. Such dissipations included traceable proceeds of the Subject Funds. 20.If the March 2023 orders are to be effective, ancillary disclosure orders are indispensable. They would enable P to identify the whereabouts of further dissipations from the Emirates Accounts and to trace the Subject Funds misappropriated from the D1 DBS account. Without ancillary disclosure orders, the tracing exercise as regards dissipations from the Emirates accounts would be rendered nugatory. 21.For P to be able to trace those dissipations, it needs to know the exact location and value of those monies. Only D2 has that knowledge given that the Emirates Accounts are his personal accounts. Accordingly, the ancillary disclosure order the 2023 Summons seeks requires D2 to produce information/documents that shed light on dealings with the Emirates Accounts. This would enable P to take further action as may be necessary such as other preservation orders. 22.In addition to an order similar in terms to the orders for ancillary disclosure of 2022 Injunction order and January 2023 order, P seeks production of the documents set out in the Schedule to the 2023 Summons. They are (1) bank statements for the Emirates Accounts; (2) correspondence/communication between D2 and the Emirates Bank; and (3) further bank statements accounts holding traceable proceeds of the Subject Funds. 23.Documents sought under (2) and (3) above are designed to track the fund flow of dissipations from the Emirates Accounts. D2’s case (A) Breach of express undertakings 24.In opposing the application, Mr Alan CL To, counsel for D2, referred to the following 2 undertakings[3] in the December 2022 order:
25.D2 relied heavily on the Decision of DHCJ To in Agritrade Resources Ltd v Ashok Kumar Sahoo [2021] HKCFI 685 and the analysis of those undertakings, in particular, Undertaking 6 in the 2022 Injunction order. Agritrade concerned the plaintiff’s application to vary the undertakings in a worldwide Mareva injunction against the defendant to allow proceedings to be commenced in Singapore. At the hearing, the plaintiff contended that leave was not required so long as the plaintiff did not seek direct enforcement of the injunction in Singapore. 26.In the present case, D2 accepts that the Dubai proceedings did not constitute “enforcement” of the Hong Kong injunction. In other words, D2 accepted that P’s application in Dubai for a freezing order did not constitute a breach of Undertaking 7. 27.As regards Undertaking 6, D2 adopted the Agritrade analysis (at §124) that it imposes a blanket on two activities: (1) commencing proceedings against the defendant in any foreign jurisdictions; and (2) use of information obtained from the injunction order in Hong Kong. The words “begin proceedings” are to be restrictively construed to mean “proceedings in respect of the same subject matter” (§126). To do so against the same defendant in another jurisdiction is potentially oppressive (§127). 28.For the prohibition against use of information, Agritrade accepted that the word “information” must necessarily include all information contained in the affirmations and exhibits filed as well as information disclosed pursuant to any order made in the proceedings (§128). 29.Accordingly, D2 submitted that the fact that P had produced and exhibited Cuenda 1st and the disclosures made in support of its ex parte application in Dubai was in breach of the restriction on use imposed by Undertaking 6. It was further submitted that the fact that the Reasons referred to Cuenda 1st and commented on it was a collateral use of information contrary to Undertaking 6. 30.When considering the validity of the objections based on a breach of Undertaking 6, it is necessary to construe the December 2022 orders (and hence also the March 2023 orders) in their proper context. As earlier noted[4], on 30 December 2022, the Court made not one but two orders, namely the December 2022 orders (comprising the 2022 Injunction order and the Bankers books order). Undertakings 6 and 7 are set out in the Schedule to the 2022 Injunction order, there being before the Court the two summonses referred to in §8 above. 31.The Bankers books order (made by the same judge) recited (inter alia) P’s undertakings, inter alia, that:
32.The Court then ordered that
33.D2 invited the Court to look exclusively at the 2022 Injunction order that contains Undertaking 6. It was submitted that P should have obtained leave from the Hong Kong court before making its ex parte application in Dubai. 34.But that submission effectively ignores or overlooks the fact that the 2nd 2022 Summons was part and parcel of the application heard by the Court on 30 December 2022 culminating in the 2 orders made on that occasion. In other words, P did obtain the requisite leave to commence proceedings in other jurisdictions on that occasion. 35.The absurdity of D2’s submissions on breaches of Undertaking 6 is patent and requires no further elaboration. (B) Breach of implied undertaking 36.D2’s fallback position is that
37.D2 submitted that P’s application relies on the discovery of further transfers of the Subject Funds made by D2. Use of D2’s disclosures made pursuant to the DIFC Court’s orders in the Dubai proceedings without leave of that Court would breach P’s implied undertaking to not use the documents obtained from discovery in the Dubai proceedings in Hong Kong or other actions (“the implied undertaking”). 38.Based on there being an implied undertaking, D2 submitted that P’s application would be unsupported by any evidence and, hence, must be dismissed. 39.The short answer to this submission is that given the terms of paragraph (4) (iii) of the Bankers books order granting express leave to commence/pursue new or existing proceedings in Hong Kong and elsewhere, any implied undertaking (assuming its existence) would have been subsumed or overtaken by the provision granting express leave to commence/pursue proceedings outside Hong Kong. Conclusion 40.For the reasons set out above, I had no hesitation in granting the relief sought by P’s Summons with costs, and ordered that such costs be summarily assessed. Directions were given at the hearing that regard.
Ms Natalie So, instructed by Lau, Horton & Wise LLP, for the Plaintiff Mr Alan C L To, instructed by Cheung & Liu, for the 1st and 2nd Defendants [1] This is on the assumption that the information stated in Cuenda 1st is accurate. [2] See P's written submissions at §20, set out in §17 above. [3] P gave the same undertakings in the Mareva orders but in the January 2023 order those undertakings were numbered differently i.e. (5) and (6) instead of (6) and (7). [4] See §9 above. [5] D2’s written submissions at §7. | |||||||||||||||||||||||||||||||||||||||||
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