Sino Wood Investment Ltd. v. Wong Kam Yin

HCA000307/2002

HCA 307/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 307 OF 2002

____________

____________

Coram: Deputy High Court Judge A Cheung in Chambers

Date of Hearing: 16 December 2002

Date of Judgment: 23 December 2002

_______________

J U D G M E N T

_______________

Mareva injunction

1.I have before me an application by the Plaintiff to continue a Mareva injunction against the Defendant, and a cross-application by the Defendant to set aside the Mareva injunction for material non-disclosure as well as for want of a risk of dissipation of assets.

2.The Mareva injunction was granted back on 23 February 2002. The summons to continue the injunction was issued on 25 February 2002. The cross-summons to set aside the injunction was issued on 16 April 2002. The hearing only took place in December. In view of the long delay and the nature of the applications, I am anxious to give judgment as soon as possible. Further, in view of the conclusion that I have reached, and lest anything that I say here should affect the eventual adjudication of the substantive issues between the parties that can only be resolved by trial, I will be as brief as possible.

3.Stripped of all non-essential details, the issues before me may be briefly stated. The Plaintiff has made a substantial investment in a public toll road in the Mainland. It went into difficulties with its investment. According to the Plaintiff, the provincial government in the Mainland reversed its original decision to operate the road as a toll road. It wanted to operate the road as a toll-free road. The Plaintiff wanted to withdraw from the project, which was a joint venture one. The Defendant who was introduced to Mr Yaw, the man behind the Plaintiff, "as a consultant, an expert in Chinese business matters, and someone with very good connections with PRC high ranking officials", offered to Mr Yaw to assist the Plaintiff in withdrawing its investment from the project. According to Mr Yaw's first affirmation, which he made for use in applying for this ex parte Mareva injunction, he was impressed by the Defendant's claimed achievements and connections in the Mainland. By about mid 1997, he started to trust the Defendant more and more and believed that she could play an important role for the business of his group of companies, and that with her connections, she would be able to sort out the matters arising from the joint venture project in question.

4.The Plaintiff's case is that in those circumstances, Mr Yaw eventually decided to enlist the Defendant's help in seeking to withdraw from the joint venture project, and more importantly, to recoup the Plaintiff's investment in the project. In order to give the Defendant a title or status so that she could represent the Plaintiff in the requisite negotiations, and for no other purpose, on 1 November 1997, Mr Yaw caused the shares in the two BVI companies which owned the shares in the Plaintiff to be transferred to the Defendant, and the Defendant also became the sole director of the BVI companies, the director of the Plaintiff and the chief representative of the Plaintiff's Hangzhou office. To secure Mr Yaw's and the Plaintiff's position, relevant declarations of trust, blank sold notes and blank instruments of transfer were executed by the Defendant in favour of Mr Yaw's companies. It is the Plaintiff's case that the Defendant only held her shares in the two BVI companies as trustee in trust for Mr Yaw's other companies.

5.It is common ground that the Defendant managed to recover a total of RMB58.5 million from either the liquidation committee of the joint venture company or the joint venture partner. According to Mr Yaw, out of this total sum, a sum of RMB31.8 million was transferred by the Defendant to other bank accounts of the Plaintiff's related companies pursuant to the instructions of Mr Yaw. The remainder of RMB26.7 million, however, remains unaccounted for by the Defendant.

6.It is also the Plaintiff's case that in fact, unbeknown to the Plaintiff or Mr Yaw, the Defendant had also recovered a sum of RMB16 million from either the liquidation committee or (as the Defendant maintains) the joint venture partner, which the Defendant has also failed to account for.

7.In those circumstances, the Plaintiff went for and successfully obtained an ex parte Mareva injunction against the Defendant.

8.The Defendant says in her defence and counterclaim filed on 26 February 2002, which was her first substantive reply to the case of the Plaintiff after the commencement of action in January 2002 and the grant of the Mareva injunction on 23 February 2002, that she has kept a sum of RMB1 million in the Plaintiff's Hangzhou office for the purpose of defraying the expenses of the office, and has paid out the remaining RMB25.7 million as well as the RMB16 million "as the Plaintiff's re-investment in various items of business", on which no particulars were supplied in her pleading. However, in the pleading, the Defendant also claims that on 1 November 1997, the only shares in the two BVI companies were transferred to her in consideration of the sum of US$1 each and "the Defendant thereby became and has since been the sole beneficial owner" of the two BVI companies.

9.It is common ground between counsel that in applications of the present type, the Plaintiff has to show, amongst other things (which, subject to the matters mentioned in this judgment, are not in issue), a good arguable case on the evidence, and a real risk of dissipation of assets. For the general principles, see Hong Kong Civil Procedure 2002 Vol. 1 paras. 29/1/51-29/1/75 and in particular para. 29/1/56.

Good arguable case accepted

10.At the hearing before me, the Defendant does not dispute that the Plaintiff has a good arguable case on the evidence. Through counsel, the Defendant argues that there has been material non-disclosure. She also argues that there is no real risk of dissipation of assets.

Material non-disclosure

11.The Defendant's case on material non-disclosure, the relevant principles on which may be found in Hong Kong Civil Procedure 2002 (Vol. 1) paras 29/1/63 and 29/1/39, may be briefly summarised thus: According to the Defendant, she had a very complicated relationship with Mr Yaw. She was his lover and cohabitee, at one stage Mr Yaw had proposed to marry her, they were engaged, and she was once pregnant by him which ended in an abortion. They had a very close and romantic relationship. Secondly, not only were they lovers, they had complicated money dealings. So for instance, in the space of three months, Mr Yaw had given her a total sum of $43 million. I need not go into details here regarding the respective versions of these money transactions given by the Defendant and Mr Yaw. Thirdly, the Defendant says that the Plaintiff and Mr Yaw failed to disclose to the court the true circumstances under which the Plaintiff entered into the joint venture in the first place, the true reason why the Plaintiff went into difficulties with the joint venture project (namely, the Plaintiff's failure to make the requisite capital contribution as well as the dissipation of the joint venture company's assets by two former representatives of the Plaintiff for which Mr Yaw was held by the joint venture partner to be responsible - para 13A of the amended defence and counterclaim), and thus the true reason for the transfer of the shares in the BVI companies to the Defendant and her becoming involved in the negotiations regarding the Plaintiff's withdrawal from the joint venture project and the recoupment of money invested into the project. Fourthly, the Defendant points to the very confusing shareholding records regarding the two BVI companies which the Plaintiff failed to explain to the ex parte judge.

12.Facts are material, and should be disclosed, in the present context, if they "are relevant to the weighing operation which the court has to make in deciding whether or not to grant the order": Citibank NA v. Express Ship Management Services Ltd [1987] HKLR 1184 (CA); Thermax v. Schott Industrial Glass Ltd [1981] FSR 289, 298 (per Browne-Wilkinson J). The Defendant's argument basically is that all the above matters were relevant to the weighing operation, which the ex parte judge had to make in deciding whether or not the Plaintiff had shown a good arguable case, and therefore whether or not to grant the Mareva injunction.

13.But whether the Plaintiff has shown a good arguable case cannot be considered in vacuum. What is a good arguable case must be defined by the issues in dispute between the parties.

14.According to the defence and counterclaim, and the subsequent amended defence and counterclaim filed on 18 October 2002, the monies in question had been "re-invested" by the Plaintiff and used in its "ordinary course of business". Strictly speaking, this is the only pleaded defence of the Defendant even up to this stage (apart from a defence of set-off regarding monies - on which no particulars have been supplied - she has expended on behalf of the Plaintiff). Bearing in mind that this is an action by the Plaintiff company to recover its own missing monies, the personal relationships between Mr Yaw and the Defendant cannot be relevant to the issue between the parties, namely, whether the Defendant has really re-invested the monies in question for the purpose of the Plaintiff, or whether the Plaintiff has a good case for the recovery of the missing monies from its director (or former director) i.e. the Defendant. Similarly, the background leading to the Plaintiff's involvement in the joint venture project in the first place, the Plaintiff's difficulties faced in the joint venture project, and the reason why the Defendant became involved in the Plaintiff and the Plaintiff's BVI shareholders, as to which both sides have filed much evidence in dispute with each other, cannot be relevant. Likewise, the alleged confusing shareholding records of the BVI companies cannot be relevant.

15.If one takes such a strict approach to the issues between the parties, in order to examine the question of whether the Plaintiff has failed to disclose "material" matters to the ex parte judge, the answer must be in the negative.

16.However, it is perhaps tolerably clear from the original defence and counterclaim (particularly the last sentence in paragraph 30) as well as the third affirmation of the Defendant filed subsequently on 11 March 2002 (which was her first substantive affirmation in opposition in the continuation of the Mareva injunction), that the Defendant is saying that because she is and was the beneficial owner of the BVI companies, the only shareholders of the Plaintiff, she could do whatever she liked with the monies of the Plaintiff, although in neither her defence and counterclaim nor her subsequent amended defence and counterclaim has she pleaded her defence in such an explicit way. Taking this to its logical conclusion, the Defendant is indeed saying that Mr Yaw has no authority whatsoever to commence and continue the present action in the name of the Plaintiff company against her.

17.Assuming that this is the real issue between the parties, was the Plaintiff guilty of material non-disclosure? The Defendant's allegation is not something new to the Plaintiff. In fact, when the Plaintiff went ex parte before the learned judge, Mr Yaw in his supporting affirmation referred to this as the Defendant's "probable defence". He pointed out in his first affirmation that the Defendant had claimed to the liquidation committee and other related parties in the Mainland that she is the owner of the Plaintiff, and that "it is likely that her defence in this Action is that she is the owner of the Plaintiff and is therefore entitled to the monies repaid by the liquidation committee which are returnable upon the winding-up of the Joint Venture Company". In his first affirmation which was placed before the ex parte judge, apart from maintaining his story that in fact the Defendant was only holding her shares in the BVI companies in trust for his group of companies, Mr Yaw also exhibited the copy declarations of trust, blank instruments of transfer and blank sold notes.

18.Indeed, the Defendant had, prior to the commencement of the present action, written to the Plaintiff's solicitors, claiming to be the shareholder of the Plaintiff, which is strictly speaking, not correct even according to her own case. She had also written to the Registrar of Companies, which letter was copied to the Plaintiff and Mr Yaw, claiming to be the "sole owner" of the respective shareholdings in the two BVI companies. The correspondences were disclosed and referred to in Mr Yaw's first affirmation and another supporting affirmation filed by the Plaintiff's in-house counsel. All this, however, did not go beyond what had been mentioned by Mr Yaw in his first affirmation regarding the Defendant's "probable defence".

19.In my judgment, the Plaintiff should not be judged too harshly in relation to the present issue of material non-disclosure. Its case was that monies belonging to the company had gone missing and the Defendant had failed to account for the monies. When it went before the ex parte judge, it voluntarily disclosed the "probable defence" of the Defendant, namely, that she was the beneficial owner of the BVI companies owning the only shares in the Plaintiff, and thus she was entitled to use the monies of the Plaintiff in whatever way she liked. The Plaintiff (through Mr Yaw) then pointed to the exhibited copy declarations of trust, blank instruments of transfer and blank sold notes, all signed by the Defendant, as written, contemporaneous and decisive proof that the shares were merely held by the Defendant in trust for Mr Yaw's other companies.

20.The Defendant only belatedly said in her fourth affirmation filed on 8 May 2002, and pleaded in her rejoinder filed on 18 October 2002, that the declarations of trust and related documents were signed by her under a total mistake about their true nature, because of oral misrepresentations by Mr Yaw, because she does not know the English language, and because of her intimate relationship with Mr Yaw whom she relied on. None of all this was said in her original defence and counterclaim and third affirmation both filed after the grant of the injunction against her, even though the declarations of trust and the related documents were referred to specifically in and exhibited to the first affirmation of Mr Yaw which he made on 25 February 2002 in support of his application for a Mareva injunction.

21.I am not here concerned with whether what the Defendant now says about the declarations of trust and related documents is true or false. Rather the significance of all this lies here: Prior to the fourth affirmation of the Defendant and her rejoinder, there was no material to indicate that the Defendant was going to deny the validity of the declarations of trust and related documents, apart from her general assertion, which was known to the Plaintiff prior to the ex parte application and which was dealt with by Mr Yaw specifically in his first affirmation placed before the ex parte judge, that she was the sole owner of the shares in the BVI companies.

22.In those circumstances, viewed from the position of the Plaintiff, when it went ex parte before the learned judge, it did not know that the Defendant would dispute the validity of the declarations of trust and related documents or dispute them on the grounds now raised; all that it knew was a bare claim to beneficial ownership of the shares in the BVI companies, which it thought it could conclusively rebut by signed contemporaneous documents, copy of which were duly exhibited to the supporting affirmation.

23.At that ex parte application stage, given those signed documents and the ignorance of the Defendant's present defences about them, the possibility of the Defendant being the beneficial owner of the shares of the BVI companies was really a non-issue. In those circumstances, the matters now relied on by the Defendant in support of her case on material non-disclosure could not be relevant matters to the weighing operation which the ex pate judge had to make in deciding whether the Plaintiff had indeed shown a good arguable case on the evidence, and therefore whether the Plaintiff should be granted an ex parte Mareva injunction.

24.Of course, whether something is material is not to be decided by the parties, but by the court objectively. But the time element here is important: One must not be influenced by what has since been known subsequent to the ex parte application. Hindsight here is not necessarily a benefit. Looking at the matter objectively, at the ex parte application stage, given the existence of the signed documentary evidence relating to the true ownership of the shares in the BVI companies, and given that the Defendant's present defences about the signed documents was not known then, all the matters that are now relied on by the Defendant in the present context would be quite irrelevant to the ex parte judge's consideration. So for instance, suppose the ex parte judge were told that Mr Yaw and the Defendant were in love, had a very intimate relationship, and had many complicated money transactions between themselves, how would that have affected the judge's assessment of whether the Plaintiff had shown a good arguable case on the evidence? More specifically, how would that have affected the judge's assessment of whether the Defendant was not really the beneficial owner of the BVI companies' shares, despite her claim? In fact, I would have thought that the closer the relationship between Mr Yaw and the Defendant, the more likely that Mr Yaw would be willing to entrust the Plaintiff's business and affairs, particularly the very important question of recovery of the Plaintiff's investment in the joint venture project, to the Defendant.

25.To illustrate my point further, suppose the Defendant were in fact the wife and business helper/associate of Mr Yaw, how would the disclosure of that fact to the ex parte judge have affected his assessment of whether the Defendant was or was not really the beneficial owner of the shares in the BVI company, in the light of the signed declarations of trust and related documents, and when it was not known to the Plaintiff that the Defendant would dispute the validity of those declarations of trust and related documents by alleging mistake, misrepresentation, and ignorance of the English language, which allegations did not surface until months after the grant of the ex parte injunction?

26.After all, Mr Yaw did indeed mention in his first affirmation before the ex parte judge his trust in the Defendant (paras. 17 and 24), the loans he had made to her (para. 20) and his alleged indebtedness to her (which he denied) (para. 72). Whether the "trust" was based solely on the Defendant's claimed achievements in the PRC and/or other emotional/sexual ties as well - which is hotly in dispute - was quite irrelevant. Nor were the details of the personal money transactions between the two - who owed whom how much? - really relevant to the Plaintiff's claim for an account and recovery of the missing monies.

27.There are more difficulties facing the Defendant than that. The alleged subject matters of material non-disclosure are hotly disputed by the Plaintiff. I have four bundles of documents of over 1,200 pages from both sides disputing with each other over all matters, big or small. Mr Walter Lau, appearing for the Defendant, very wisely accepted that there is no way this Court can conduct a mini-trial in relation to the disputed subject matters of the alleged material non-disclosure. Indeed, the Plaintiff strenuously disputes the Defendant's version in relation to the subject matters of the alleged material non-disclosure. For instance, apart form admitting that he had "causal sex" with the Defendant on several occasions, Mr Yaw denies all allegations of an intimate and romantic relationship between him and the Defendant. Further, Mr Yaw has a very different story to tell regarding the complicated money transactions between the two.

28.Mr Lau has tried hard in seeking to persuade me that the Defendant's story is inherently more credible than that of Mr Yaw's, despite his submission that the Court should not and cannot conduct a mini-trial. Whilst I appreciate Mr Lau's good effort, it does not really assist his client's case in the present context. As is pointed out in Hong Kong Civil Procedure 2002 Vol. 1 para 29/1/39 (at pp. 484-485):

"A dispute, however, about whether or not a plaintiff has made full and frank disclosure in obtaining an ex parte Mareva injunction should be investigated at the trial of the action and not, save in exceptional circumstances, at the inter partes hearing of the application for the injunction; the purpose of the inter partes injunction hearing is to consider what should happen in the future, not what has happened in the past (Dormeuil Frer´es SA v. Nicolian International (Textiles) Ltd [1988] 1 WLR 1362; [1988] 3 All ER 197)."

29.In Dormeuil, Sir Nicolas Browne-Wilkinson V-C (as he then was) said thus (at pp. 1368C-1370D):

"I will deal first with the application to set aside the ex parte order. It is a basic principle, applicable to all ex parte applications, that a plaintiff seeking ex parte relief must make full disclosure to the court of all facts which are material to the exercise of the court's discretion whether or not to grant the relief. If such disclosure is not made by the plaintiff, the court may discharge the ex parte injunction on that ground alone. But if, in the circumstances existing when the matter comes before the court inter partes, justice requires an order either continuing the ex parte injunction or the grant of a fresh injunction, such an order can be made notwithstanding the earlier failure of the plaintiff to make such disclosure. Moreover, there is authority that, contrary to the law as it was originally laid down, there is no absolute right to have an ex parte order obtained without due disclosure set aside; there is a discretion in the court whether to do so or not.

These propositions, which are of very great everyday practical importance are established by three decisions in the Court of Appeal. The first is Yardley & Co. Ltd v. Higson [1984] F.S.R. 304; the second is Lloyds Bowmaker Ltd v. Britannia Arrow Holdings Plc., ante, p. 1337; the third is Brink's Mat Ltd v. Elcombe, ante, p. 1350. It is a surprise to me that decisions on a point of such great everyday importance in dealing with these matters have not found their way into the official reports. It has been my experience and that of other judges of this division that the application of those principles frequently gives rise to applications being made to discharge ex parte orders, such as that made by the defendant in this case. Those applications to discharge the ex parte order are frequently made at the same time as the plaintiff's motion to continue the ex parte injunction comes before the court inter partes. The result of the joining of an application to discharge the ex parte order with the hearing of the inter partes motion for an injunction is almost invariably to increase both the duration and the complexity of the interlocutory proceedings to a substantial extent.

To discover whether an ex parte order has been improperly obtained, the court first has to consider the evidence as it was at the time of the application for the ex parte order and then a mass of evidence designed to demonstrate that that evidence was misleading or failed to make full disclosure. The real question at the time of the inter partes hearing should not be what has happened in the past but what should happen in the future. On the hearing of the inter partes motion it is impossible to make any concluded finding of fact, yet the court is being asked to reach a conclusion on the issue of non-disclosure without full knowledge of the circumstances. This attempt involves a minute examination of detailed allegations and counter-allegations, the exact materiality of which may not be clear to the judge in the interlocutory hearing, in circumstances when that is not necessary for the future conduct of the case.

The cost in time and money to the parties in a complex case can become vast and the waste of court time quite unacceptable. I share the view expressed by Slade L.J. in the Brink's Mat case, ante, p. 1350. He said that the principle of full disclosure was an extremely important one, a statement with which I agree. He continued, at p. 1359B-E:

"Nevertheless, the nature of the principle, as I see it, is essentially penal and in its application the practical realities of any case before the court cannot be overlooked. By their very nature, ex parte applications usually necessitate the giving and taking of instructions and the preparation of the requisite drafts in some haste. Particularly, in heavy commercial cases, the borderline between material facts and non-material facts may be a somewhat uncertain one. While in no way discounting the heavy duty of candour and care which falls on persons making ex parte applications, I do not think the application of the principle should be carried to extreme lengths. In one or two other recent cases coming before this court, I have suspected signs of a growing tendency on the part of some litigants against whom ex parte injunctions have been granted, or of their legal advisers, to rush to the Rex v. Kensington Income Tax Commissioners, Ex parte Princess Edmond de Polignac [1917] 1 K.B. 486 principle as a tabula in naufragio, alleging material non-disclosure on sometimes rather slender grounds, as representing substantially the only hope of obtaining the discharge of injunctions in cases where there is little hope of doing so on the substantial merits of the case or on the balance of convenience."

That account of the experience in the Court of Appeal I echo as being my experience also.

...

In my judgment, save in exceptional cases, it is not the correct procedure to apply to discharge an ex parte injunction on the grounds of lack of full disclosure at the interlocutory stage of the proceedings. The purpose of interlocutory proceedings is to regulate the future of the case until trial. ...

Similar considerations apply in the case of an ex parte Mareva injunction. When the motion comes before the court inter partes, the court can then on the evidence before it from both sides decide what is the correct form of the Mareva relief to grant until trial. The question whether the earlier ex parte order should be set aside is not an urgent matter and is only relevant to the cross-undertaking in damages. Similar considerations apply in the case of ordinary ex parte injunctions.

In my judgment, therefore, in the ordinary case it is wrong on the hearing of an inter partes motion to go into the huge complexities involved in seeking to disentangle at that stage whether there was full disclosure when the ex parte order was obtained. The matter should normally be dealt with at trial in the way I have indicated. The right course, therefore, would normally be to adjourn an application to set aside the ex parte order to be dealt with at the trial. That is the course that I think is appropriate in this case ... "

30.Of course, what was said in Dormeuil should not be taken to the extreme, and must be read subject to the subsequent development of the case law as has been summarized in the relevant paragraphs in Hong Kong Civil Procedure 2002 (Vol. 1) referred to above, so as not to deny an aggrieved defendant a fair chance to persuade the court on clear evidence, if he could, that the ex parte order was obtained by material non-disclosure. But Dormeuil does highlight the undesirability of seeking to resolve serious disputes of fact regarding alleged material non-disclosure at the inter partes stage.

31.I cannot decide the substantial disputes between the parties in relation to the subject matters of the alleged material non-disclosure on paper. Not only must I resist the temptation of conducting a min-trial, I must not, on the incomplete evidence that has been placed by the parties before me, seek to evaluate the "inherent probabilities" of the respective competing versions of the parties. I need not repeat here the example given by Mr Warren Chan, SC, appearing for the Plaintiff, to illustrate how dangerous it would be to attempt to weigh the inherent probabilities of the competing versions at this stage.

32.Finally, in relation to material non-disclosure, I must not forget what has been said by the Court of Appeal in Citibank NA, supra, regarding the true scope of the principle of full and frank disclosure:

"Unless the courts use the sanctions which the practice gives them only when the non-disclosure is of facts which are relevant to the ex parte judge's "weighing operation", an impossible burden would be placed upon applicants and their advisers, and affidavits, ex abundanti, will tend to contain all sorts of facts and exhibits which are not really necessary for the proper exercise of the court's discretion when ex parte relief is sought." (per Fuad JA at p. 1190I)

"... it would be unfortunate if it were to be thought that in laying down the very sensible and necessary principles concerning disclosure of all material facts, the courts have intended to give active encouragement to undeserving defendants to search ingeniously for facts which a plaintiff might innocently have failed to disclose, in the hope that a judge may consider them to be material and so discharge the injunction. Commonsense must prevail. The heavy burden cast on a plaintiff must not be allowed to become so onerous as to be intolerable." (per Macdougall J at pp. 1191J-1192A)

33.Likewise, in Wo Fung Paper Making Factory Ltd v. Sappi Kraft (Pty.) Ltd [1988] 2 HKLR 346, Hunter JA said (at p. 357H-358G):

"I turn now to the two principles I conceive to be relevant, in relation to non-disclosure. First the court's power to discharge any order obtained ex parte for material non-disclosure is salutary and necessary. As one of the earlier cases shows, ex parte Polignac [1917] 1 KB 486, it is there for the court's own protection. It is necessary to prevent its processes being abused. Secondly, there is another equally significant principle in this jurisdiction. This is to make sure that the court does not get itself in a position of what might be called "counter-abuse": where this sort of point is regarded by litigants as "a very present help in trouble"; and where problems arise on the substance to resort to attack as the best method of defence. ...

[The learned judge then quoted with approval the passages from Thermax and Citibank that have been extracted above and continued:]

I fear that there has been a failure in this case, in the court below, to concentrate upon the material facts, and to appreciate that disputed issues of facts simply go to the need for trial, and are of very little value indeed in deciding whether a good arguable case has been made out. Furthermore, it seems to me that the point has to be tested by looking at the substance. That is why I am proposing to start with the question whether a good arguable case was shown at the inter partes stage. That is where I think you should start; not where [the] judge started, and with respect where the argument started here, on the question of non-disclosure."

34.As I said, Mr Lau for the Defendant did not dispute that on the evidence, the Plaintiff has a good arguable case.

35.For all these reasons, I am not with the Defendant on the material non-disclosure ground.

Real risk of dissipation of assets

36.Turning to the risk of dissipation of assets, the Plaintiff relies on a number of matters in support of its case that there is a real risk of dissipation of assets. They include the transfer of the Defendant's shareholding in a company known as Ma Jia Chai to two BVI companies, the de-registration of another company of the Defendant (All Mount Ltd), the Defendant's "evasive conduct" in the related litigation in Beijing, the Defendant's removal of furniture from her Beijing premises for shipment to an unspecified address in Toronto, the Defendant's putting up of her Red Hill Apartment in Hong Kong for sale just before the Chinese New Year, the Defendant's being allegedly placed under the "wanted list" in the Mainland for suspected misappropriation of monies, the inability to contact the Defendant by all her known phone numbers, the alleged evasion of service of the writ of summons, and the Defendant's continued absence from Hong Kong. In response, the Defendant has put in evidence to explain all these matters and tell her side of the story. Whilst on some of these matters, the Plaintiff may seem to have a stronger case, whereas on others, the Defendant may seem to have provided a credible explanation or reasonable clarification of the true position, again I must resist the temptation of conducting a mini-trial on paper here. I am concerned with whether there is a "real risk" of dissipation of assets.

37.Further, given the concession - no doubt made after careful consideration by the Defendant and her lawyers of the strength of the Plaintiff's case against her - that the Plaintiff has a good arguable case, I am entitled to take into account the nature of the Plaintiff's case. It is the Plaintiff's case that the Defendant as director of the Plaintiff has failed to account for very substantial missing monies belonging to the company. It is a case of misappropriation of company assets. It is a case of breach of fiduciary duty. As Mr Warren Chan, SC put it at the hearing, what the Defendant has done is "criminal" - she is allegedly on the "wanted list" of the police in the Mainland. As I said, according to the Defendant's latest pleading, she has "re-invested" the Plaintiff's monies on behalf of the Plaintiff. That still remains her pleaded defence. Yet no particulars have been pleaded, nor were any details given in the affirmations. Thus far she has shied away from pleading explicitly that as the sole beneficial owner of the shares of the BVI companies which own the only issued shares of the Plaintiff, she is and was at all material times entitled to do whatever she wants to do with the monies in question, and that she has indeed used the monies for her own purposes as she was fully entitled so to do.

38.As is pointed out in Hong Kong Civil Procedure 2002 Vol. 1 para 29/1/62,

"The nature of commercial dealings between the plaintiff and the defendant can be a relevant factor in showing risk of dissipation, for example, where the defendant has acted to very low commercial standards, even if not dishonestly (see Honsaico Trading Ltd v. Hong Eryaayiah Seng Co. Ltd [1990] 1 HKLR 235."

39.In Honsaico (affirmed an appeal: CACV 171/1989, 3 May 1990), Godfrey J (as he then was) said, in concluding that there was a real risk of dissipation of assets (at p. 240B-I):

"The question of "real risk" was vigorously debated before me. However, here too, thanks to the good sense of counsel, I have the advantage of an agreement between them as to what the question is that I have to decide. The question is: On the whole of the evidence, would the refusal of a Mareva injunction involve a real risk that the judgment in favour of the plaintiff would remain unsatisfied? (The framing of the question in that way is supported by a judgment of the Court of Appeal in England in Ninemia Maritime Corpn. v. Trave Schiffahrtsgesellschaft m.b.h. und Co. K.G. [1983] 1 WLR 1412.)

The defendant is a foreign company which is, on the evidence, in a big way of business, though not in Hong Kong. There is no evidence before me of its having a bad reputation in the market. There is, I think, no doubt that the grant of a Mareva injunction would tend to damage its interests and its reputation in Hong Kong and possibly elsewhere; that is often the effect of a Mareva injunction granted on the ground that the judge is satisfied that there is a real risk that the defendant might allow a judgment against it to remain unsatisfied. In the present case, the defendant claims (without giving anything that could remotely be considered as particulars) that it has a substantial banking relationship in Hong Kong with its bankers. For these reasons, which I quite understand, I am most hesitant to grant this relief against this defendant. But I do have to weigh against these considerations the fact that, as the evidence establishes; there is no reciprocity of enforcement of judgments between Hong Kong and Thailand, and also the most important consideration which, as it seems to me this case discloses; that is, the devious conduct of the defendant in its dealings with the plaintiff.

I am not here to punish the defendant because I disapprove of its conduct; that is not the purpose of a Mareva injunction. But, if I come to the view that its conduct, in relation to this transaction, leaves me so uneasy that I am driven to the conclusion that there is a real risk that a judgment in favour of the plaintiff might remain unsatisfied, then I conceive it to be my duty to grant the injunction. It may be that some cash will come to the hands of the defendant which would be easily removable out of the jurisdiction, but I attach no very considerable weight to that. It is the case as I have already pointed out that the defendant is a foreign corporation, but it is a substantial one, and I place no great weight on that either.

I have, however, come to the conclusion that the defendant has exhibited an unacceptably low standard of commercial morality in its dealings with the plaintiff; and this drives me to conclude that there is a danger that if the defendant thought it was in its best interests to do it, it would not shrink from attempting to defeat the interests of the plaintiff under any judgment the plaintiff might obtain here."

See also Commodore Electronics Ltd v. Tam Hon Wah HCA 2987/1992 Bewley J (8 October 1992); Tamco Electrical & Electronics (Hong Kong) Ltd v. Stephen Ng Chun Fai CACV 132/1993 (14 December 1993); Cartiman International Limited v. Polymer Resources International (USA) Inc HCCL 132/1995 Keith J (13 November 1996); Macy's Candies Ltd v. Chan Man Hong HCA 13060/1996 Le Pichon J (28 February 1997); Securities and Futures Commission v. Mandarin Resources Corporation Ltd HCCW 348/1996 Burrell J (26 January 2000); Foshan City Commercial Bank v. Chen Yong Yi HCA 15922/1998 Chung J (13 January 2000).

40.In Guinness Plc. v. Saunders, The Independent, 15 April 1987, Sir Nicolas Browne-Wilkinson V-C said:

"In my judgment dishonest behaviour is relevant to Mareva relief not by reference to what is pleaded but by reference to the possibility or likelihood of it existing. Whether or not pleaded, if there is dishonesty or suspicion of dishonesty, that will be an important ground on which Mareva relief can be obtained."

41.On the authorities, and on the facts of the present case, I am of the view that there is indeed a real risk of dissipation of assets.

Outcome

42.For all these reasons, I make an order continuing the Mareva injunction until trial or further order. The Defendant's application to discharge the Mareva injunction is dismissed.

43.For the sake of completeness, I should say this: If I were wrong with my conclusion on the material non-disclosure ground, given the concession of a good arguable case (which, in my judgment, was rightly made), and my conclusion that there is a real risk of dissipation of assets, I would be prepared to exercise my discretion against the discharge of the Mareva injunction (particularly when I am of the view that the non-disclosure, if material, was more an error of judgment than a deliberate omission or misrepresentation and there was thus no question of the court's "processes being abused": Wo Fung at p. 357I). Alternatively, if I were again wrong and the injunction should be discharged, I would be prepared to listen sympathetically to any application for a fresh injunction (subject of course to what the Defendant might like to say in opposition), given the presence of a good arguable case and a real risk of dissipation of assets.

44.As regards costs, I make the following costs order nisi:

(1) The costs of the Plaintiff's application to continue the Mareva injunction and the costs of the Defendant's application to discharge the same be the Plaintiff's costs in the cause, with a certificate for two counsel.

(2) The costs of the Defendant's summons dated 10 December 2002 to adduce further evidence be the Plaintiff's costs in the cause.

(3) There be no order as to costs in relation to the Plaintiff's summons dated 13 December 2002 to adduce further evidence (which summons was withdrawn with leave at the hearing).

45.The costs order nisi shall become absolute upon the expiry of 14 days after this judgment is handed down, unless either party applies to vary it within the 14-day period.

46.Lastly, I would like to thank counsel for their helpful assistance.

Representation:

Mr Warren Chan, SC and Mr Thomas Au, instructed by Messrs Allen & Overy, for the Plaintiff

Mr Walter Lau, instructed by Messrs T C Foo & Co., for the Defendant