Cac Brake Co. Ltd. Zhuhai v. Liang Jin Wen and Others

HCA004666B/1997

HCA 4666/97

HEADNOTE

Application by Plaintiff against some of the defendants for an order that they do by their solicitors' affirmation provide information giving full details of payments made to their solicitors in relation to legal fees. Allegation made that such payments were received by solicitors with knowledge of breach of Mareva injunction on the part of a defendant.

Held, This was not an application for discovery in aid of a Mareva injunction to discover the whereabouts of assets. The solicitors should not be compelled to make an affirmation to provide information to the Plaintiff for contempt proceedings. Application dismissed.

HCA 4666/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4666 OF 1997

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Coram: The Hon. Mr. Justice Sakhrani in Chambers

Date of Hearing: 4 March 1999

Date of Judgment: 4 March 1999

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J U D G M E N T

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1. This is an unusual application. It is an application by the Plaintiff for an order that pursuant to the order of Patrick Chan J. (as he then was) dated 1st May 1997, the 2nd, 3rd and 4th Defendants do within 7 days from the date hereof each by their solicitors Messrs. Peter W. K. Lo & Co. provide on affirmation the information set out in the schedule to the summons dated 15th February 1999. The information that is sought in the schedule relates to full details of all payments made in relation to legal fees and expenses of the 2nd, 3rd and 4th Defendants in this action and the legal fees and expenses of the 2nd Defendant in connection with the criminal proceedings in District Court Criminal Case 771 of 1998 where the 2nd Defendant was the Defendant with another person. The details that are sought are to include the date when each payment was made, the amount of each payment, the name of the persons making each payment and the details of the bank account or accounts from which each payment was made, and copies of all documents evidencing the matters referred to are also sought.

2. The Plaintiff obtained a Mareva injunction in this case on 1st May 1997 which was granted by Patrick Chan J. (as he then was). Para. 6 of his order provided, inter alia, as follows:

"(a) each of the defendants may withdraw from an account, the details of which have been notified in advance to the plaintiff's solicitors, reasonable sums for payment of reasonable legal fees incurred in connection with this action and;

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(d) each of the defendants may make such other payments or withdrawals of money as may first be consented to in writing by the Plaintiff's solicitors."

3. The 2nd, 3rd and 4th Defendants have deposed on affirmation that they have no assets. That was done in compliance with the order of Patrick Chan J. but I am told that that was not done immediately.

4. The 2nd Defendant is also a director of the 3rd and 4th Defendants. The 2nd Defendant was charged and convicted in the District Court on 22nd January 1999 in respect of four charges of furnishing false information under the Theft Ordinance. These relate to the subject-matter of the civil action brought by the Plaintiff against these and other Defendants and on 8th February 1999, the 2nd Defendant was sentenced to four years' imprisonment. He was represented by counsel and solicitors at his criminal trial, and indeed, has been represented by counsel and solicitors in these proceedings.

5. In June 1998, the Plaintiff's solicitors wrote to the solicitors for these Defendants requesting, inter alia, details of the account or accounts from which funds had been drawn to pay the reasonable legal fees incurred in this action and the amount of those payments. There did not appear to be any reply to that letter and the matter was taken up again on 17th December 1998 by a letter from the solicitors for the Plaintiff to the solicitors for these Defendants. Attention was drawn to the relevant parts of para. 6 of the order made by Patrick Chan J., which was wrongly described as para. 5 in the letter. By para. 4 of the letter, it was stated as follows:

"We do not have any objection to Mr. Lam paying your reasonable legal costs and the reasonable legal costs of counsel. We only require Mr. Lam to seek our client's consent and so comply with the terms of the injunction. He has failed to do so, he is in breach of the injunction and in contempt of court."

And in the para. numbered 5 of the letter it was stated as follows:

"You have received funds from or on behalf of Mr. Lam with express knowledge of the terms of paragraph 5(a) and (d) of the said order. Your client is in contempt of court for having failed to comply with the provisions of paragraph 5(a) and your firm has accepted those funds in the knowledge of Mr. Lam's contempt."

The reference to para. 5 should, of course, have been a reference of para. 6 of the order. The letter went on to ask for full particulars of all payments that had been received by the solicitors from Mr. Lam or on behalf of Mr. Lam, on account of legal costs, including details of when all such payments were made, the amount of each payment and the bank account(s) from which and/or persons from whom the payments were received.

6. It is clear from that letter that the solicitors for the Plaintiff was alleging that the 2nd Defendant was in breach of the Mareva injunction and in contempt of court. It is also clear that an allegation was made that the solicitors' firm, Messrs. Peter W. K. Lo & Co., had accepted funds in the knowledge of Mr. Lam's contempt; in effect, alleging that they were aiding and abetting a breach of the Mareva injunction on the part of Mr. Lam. Those are serious allegations especially made against a solicitor.

7. On 23rd December 1998, the solicitors for these Defendants wrote to the solicitors for the Plaintiff stating, inter alia:

"We write to confirm that our firm has not, as from the date of the said Order, received any costs and/or any money on account from Mr. Lam Choi Lan.

In all the circumstances, our firm and Mr. Lam Choi Lan has strictly adhered to the court Order.

Your fallacious allegation under paragraph 5 of your said letter that our firm has received funds from or on behalf of Mr. Lam are expressly denied."

8. This led to the response from the solicitors of the Plaintiff on 23rd December which stated, inter alia:

"Are we correct in understanding from your fax that none of the defendants, nor any person on their behalf has paid to your firm any money on account of their legal costs in the civil proceedings or Mr. Lam's legal costs in the criminal proceedings? We should be grateful if you would clarify the position for us.

Are we perhaps correct in thinking that a third party has loaned the money to the defendants for their legal costs and that paragraph 4 of your fax is mistaken?"

9. On 2nd January 1999, solicitors for these Defendants replied as follows stating, inter alia:

"We have made it crystal clear in paragraph 2 of our letter dated 23rd December 1998, our firm has not received any costs and/or any money on account from Mr. Lam Choi Lan nor from any person(s) whether acting on behalf of Mr. Lam or as lender to defray costs on his behalf to the best of our knowledge."

10. Understandably, as these Defendants had been represented by solicitors and counsel in these proceedings and the 2nd Defendant had been represented by counsel in his criminal proceedings, the solicitors for the Plaintiff were not happy with that response and wrote on 5th January 1999, pointing out in effect that in the skeleton bill of costs which had been used in the application for security for costs by these Defendants legal costs had been incurred and that counsel had already been paid certain sums of money. Furthermore, two counsel had been employed in the criminal proceedings with the same solicitors instructing them as the solicitors for these Defendants. So, not unreasonably, the solicitors asked for the solicitors to reconsider their position and to provide the full and complete detail of the matters for which they had requested.

11. No substantive reply was received on these matters until 15th February 1999 and by a letter from the solicitors for these Defendants to the solicitors for the Plaintiff, they stated, inter alia, as follows:

"Paragraph 5 of the Order of Mr. Justice Chan is well noted by us and Mr. Lam. Please be advised that Mr. Lam has not been in breach of paragraph 5 of the said Order at any time. Please provide us with the authority you are seeking to rely upon in compelling Mr. Lam and his Solicitors to disclose the source of legal funds which do not come from the asset of Mr. Lam or any of the co-Defendants. We trust there is none.

Any contempt proceedings to be instituted by you are groundless and will be strenuously opposed."

Again, the reference to para. 5 of the order should be to para. 6 of the order. This letter seems to suggest that the solicitors had been funded from funds which do not come from the assets of Mr. Lam or any of the other Defendants that the solicitors were acting for and at first blush, it seems to be contradictory to an earlier letter that they had written which I have set out above. The solicitors for the Plaintiff were not happy with that response and they issued the summons.

12. The Plaintiff relies on the authority of A and another v. C and another [1981] 2 WLR 629 in support of this application. That, in my view, was a very different situation. In that case, Goff J. (as he then was) was dealing with an application for discovery in aid of a Mareva injunction. The discovery that was being sought was an order that the defendants disclose sums at present standing in the accounts in the name of the defendants. It is one thing to ask for discovery in aid of a Mareva injunction to discover the whereabouts of assets. It is quite another thing to ask for discovery where allegations have been made that the Defendant is in breach of the Mareva injunction as well as the solicitors acting on his behalf. The discovery that is being sought is, in my view, being sought for the purpose of trying to bolster up a case for contempt proceedings against the Defendant. It is not to discover the whereabouts of assets.

13. In my judgment, the case of A and another v. C and another is no authority for the type of order that the Plaintiff wishes to seek. I do not consider that in the exercise of my discretion I ought to compel the Defendants' solicitors to make an affirmation to provide information to the Plaintiff so that they can bring contempt proceedings against the 2nd Defendant which I have said, an allegation that there has been a breach of the Mareva injunction has already been made against the 2nd, 3rd and 4th Defendants, and indeed, against the solicitors as well for assisting the alleged breach.

14. In the circumstances, the summons is dismissed. Costs to these Defendants in any event.

Representation:

Mr. George Lamplough of Messrs. Herbert Smith for Plaintiff.

Mr. Paul Wu instructed by Messrs. Peter W. K. Lo & Co. for 2nd, 3rd and 4th Defendant.