International Management Group (Uk) Ltd. v. Mohamed Kasam Millwala t/a Madina Exchange Co. and Others

HCA001954/2002

HCA1954/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.1954 OF 2002

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Coram : Hon Ma J in Chambers

Dates of Hearing : 31 May and 5 June 2002

Date of Decision : 5 June 2002

Date of Handing Down of Reasons for Decision : 22 August 2002

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R E A S O N S F O R D E C I S I O N

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THE APPLICATION

1.On 31 May 2002, the parties appeared before me on the plaintiff's application for a Mareva injunction. The plaintiff had originally applied ex parte before Stone J for relief but, for reasons that will be apparent later, the application was adjourned until 31 May 2002 to be dealt with inter partes.

2.On that day, after hearing submissions from Mr Jeremy Bartlett (for the plaintiff) and Mr Paul Harris (for the defendants), I indicated that I was in principle prepared to grant a Mareva injunction, but adjourned the matter to 5 June 2002 for the terms of the order to be finalized. At the resumed hearing, the parties were largely in agreement as to the form of the injunction and the only remaining argument was over the extent of the fortification of the plaintiff's undertaking as to damages. This was eventually determined by me in the sum of ￡30,000.

3.I indicated that I would hand down the Reasons for my Decision.

RELEVANT FACTS

4.I am conscious, of course, that the plaintiff's claims will eventually have to be resolved at a later stage, but it is necessary now to deal to some extent with the facts leading up to the plaintiff's claims against the defendants (contained in the affidavit evidence before me) in order to see at least how the plaintiff can establish a good arguable case.

5.The plaintiff is the United Kingdom arm of the IMG Group, well-known for its management and representation of sports personalities. Tiger Woods and Jack Nicklaus are but two of the personalities this group represents.

6.The plaintiff carries on business in leased office premises being McCormack House, Hogarth Roundabout, Chiswick, London (en route from Heathrow Airport to Central London). The landlord of the premises is Scottish Amicable Life Assurance Society. Prudential Property Investment Managers Limited ("PPIM") are the managers and it is to PPIM that the plaintiff pays the rent and other charges for the premises.

7.By a fax dated 18 March 2002, purportedly from PPIM (the sender was one Tracey Cummings) to the plaintiff's account department, details were provided of the bank account into which payment for the rental and other charges for the premises was to be made. The stated bank account was at a branch of the National Westminster Bank located in West Bromwich in the Midlands. The account number was stated to be 22319328 and the name of the account, PPIM ("the NatWest Account").

8.Following this fax, the plaintiff made payment of ￡314,000.75 into the account on 2 April 2002. This sum represented the quarterly rent and other charges that the plaintiff was obliged to pay to PPIM.

9.Investigations have now shown that the said fax dated 18 March 2002 was a forgery. PPIM has confirmed that it did not receive payment in the sum of ￡314,000.75 from the plaintiff on 2 April 2002, that the NatWest Account was not one of its accounts and that no person by the name of Tracey Cummings was in its employment.

10.It is clear from the above that a fraud was committed on the plaintiff. The police in England were brought in. Further investigations have revealed that the NatWest Account was in the name of one R Uppal trading as A Touch of Class ("Uppal").

11.In April 2002, monies from the NatWest Account were transferred to a bank account in Hong Kong and, within the same day, transferred to two more accounts and within two days withdrawn in cash. The passage of the monies has been pieced together by investigations carried out by and on behalf of the plaintiff and this has even involved the plaintiff obtaining Norwich Pharmacal relief from this court. The Commercial Crimes Bureau ("the CCB") are also involved in investigations.

12.In detail, the passage of the monies was as follows :

(1) From a NatWest form headed "Sending a Payment Abroad", instructions were given by Uppal (as an "URGENT TRANSFER") to remit ￡300,000 from the NatWest Account to account number 018-8-616775 at the Hongkong and Shanghai Banking Corporation (Kowloon Hotel Branch) ("the 1st Account"). The beneficiary named was "PARAMJIT". The details to be notified to the beneficiary were stated to be "ATTENTION OF PANDIT JI". Subsequent to the transfer, the NatWest Account was overdrawn by ￡0.23.

(2) The 1st Account is a savings account in the name of the 2nd defendant. ￡299,995.52 was received into this account on 13 April 2002 (being one can assume the said sum of ￡300,000 less bank charges).

(3) On the same day, there was a transfer of ￡299,995 out of the 1st Account (reducing the balance in the account to zero) into an account also at HSBC numbered 628046708888 ("the 2nd Account"). The 2nd Account is in the name of the 3rd defendant. The instruction to transfer the said sum from the 1st Account to the 2nd Account was given by the 5th defendant, who apparently had the right to operate the 1st Account under a power of attorney even though that account was in the name of the 2nd defendant. The 4th defendant also had this right, again apparently under a power of attorney.

(4) Still on the same day, by a TT Application Form, instructions were given to HSBC to transfer from the 2nd Account ￡300,000 to be deposited into an account at Wing Lung Bank numbered 612-8014770-3 ("the 3rd Account"). The beneficiary was the 4th defendant.

(5) On 15 April 2002 (the next banking day, 14 April being a Sunday), the 3rd defendant gave instructions for the withdrawal from the 3rd Account of the sums of ￡165,000 and ￡135,000 respectively, both in the Hong Kong dollar equivalent, both in cash. The monies were actually collected by one Ayoob Ansari Shaik Dawood Abdul N.

13.On 18 May 2002, the CCB entered the 1st defendant's premises at Chungking Mansions, Nathan Road, Kowloon and there seized HK$700,000 and US$60,000. The justification given by the CCB was that this was connected to the fraud involving the ￡300,000. In addition, the CCB invoked powers under sections 25(1) and (2) of the Organized and Serious Crimes Ordinance, Cap.455 ("ORCO"), effectively to freeze the 1st, 2nd and 3rd Accounts.

14.This led to the 1st defendant taking out an urgent inter partes summons that day against the Commissioner of Police for the release of the said funds and bank accounts. This was made in proceedings taken out by the 1st defendant against the Commissioner of Police being HCA 1938/2002 ("the CCB Proceedings"). The summons was made returnable before Stone J on 18 May 2002. I shall deal further with this hearing below.

15.The summons was supported by a draft statement of claim and a draft affirmation of the 3rd defendant. Solicitors were instructed by the 1st defendant (Messrs Jal Karbhari & Co.) and correspondence was exchanged between these solicitors and the CCB. From this material and the affirmation of the 3rd defendant served in the present proceedings, the following facts and matters emerge at this stage as being the defendants' case :

(1) The 1st defendant, a sole proprietorship in the name of Mr Millwala, carries on business as a remittance agent or money changer and has done so for 13 years.

(2) The 2nd defendant is said by the 3rd defendant in his affirmation to be a customer of the 1st defendant. However, the 1st Account which was in the 2nd defendant's name, also had, as I have already observed, as an authorized signatory the 5th defendant who was the 1st defendant's assistant manager. The other signatory, the 4th defendant, was said to be a member of the 1st defendant's staff as well.

(3) The 3rd defendant is the general manger of the 1st defendant.

(4) It would appear that the 1st, 2nd and 3rd Accounts were accounts used by the 1st defendant in the course of its business even though the 1st Account was in the name of a so-called customer.

(5) The way that the 1st defendant carries on its money remittance or money changing business is described in the following way by the 3rd defendant in his affirmation in these proceedings :

"I previously described the money remittance work of our firm in my first affirmation in HCA 1938/2002 which Mr Thomas has exhibited at 'GHT13' to his affidavit. For convenience and the avoidance of doubt I again set out here how Madina operates this business. We rely on a high turnover of transactions giving a small profit margin. The transaction usually involves money being deposited with a money changer in one country or territory (say Hong Kong) for the purpose of making a payment to a beneficiary in another country or territory (in the present case Dubai). Following the deposit of the money the Hong Kong money changer contacts a trusted fellow money changer in Dubai and notifies the Hong Kong money changer's receipt of the payment. The Dubai money changer then pays an equivalent sum of money to the intended beneficiary in Dubai, without any money physically moving between the two places. In this situation the money changer in Dubai, who has paid out the money to the designated beneficiary, will in due course re-coup that money in a quite separate and unrelated transaction or transactions by taking a deposit from another customer in his country for payment out to a designated payee in Hong Kong. By carrying out this business the Hong Kong money changer has incurred a debt to the Dubai money changer which will be redeemed in an unrelated future transaction or transactions. The profit on these transactions by both money changers is made from commissions charged to the depositing customer and/or and from small variations in the rates of exchange which the money changer negotiates when converting from one currency to another."

I shall say more about this method of remittance later in the context of what has been referred to as the Hawala or Hundi system of financing.

(6) As for the ￡300,000 which was remitted from the NatWest Account, the 3rd defendant says that he had been told several times by phone by a Mr Sanjeev Dhingra ("Mr Dhingra") from Dubai that he was expecting a remittance of the sum. Mr Dhingra's nickname is said to be "Panditji", the name that was on the NatWest "Sending a Payment Abroad" Form.

(7) In his affirmation in the CCB Proceedings, the 3rd defendant says that he "advised" Uppal to remit the funds to the 1st Account, which was in the name of the 2nd defendant. In his affirmation in the present proceedings, however, he says that this was a mistake as he nor anyone else at the 1st defendant, had ever had any contact with Uppal. The only explanation is that there was a misunderstanding by the defendants' solicitors. This mistake is nowhere further elaborated upon.

(8) As seen above, the ￡300,000 was subsequently transferred to the 2nd and 3rd Accounts and then ultimately withdrawn in cash. In the draft statement of claim in the CCB Proceedings, it is pleaded in paragraph 5, "The said sum of ￡300,000 was subsequently on the instructions of Mr Ranjit Uppal paid in cash on 14 April 2002 to a Mr Sanjeev Dhingra in Dubai". However, exhibited in the 3rd defendant's affirmation in the present action is a handwritten receipt by Mr Dhingra in the following terms, "I am Sanjeev Dhingra. My passport number B-030452. I received three hundred thousand pounds only. Date : 14/4/2002. By Hongkong Bank. Reference Ranjit UK" (I have added the punctuation). This is somewhat inconsistent with the draft statement of claim in that it suggests that Mr Dhingra was paid on 14 April 2002 by HSBC (which presumably is a reference to the remittance from the NatWest Account to the 1st Account on 13 April 2002) rather than in cash. There is, however, some support for this version in that it will be recalled that on the "Sending a Payment Abroad" Form, it was stated "ATTENTION OF PANDIT JI", a reference to Mr Dhingra by his nickname.

(9) However, in what appears to be another version, in the 3rd defendant's draft affirmation in the CCB Proceedings, it was said that after learning from HSBC of the receipt of ￡300,000 on 13 April 2002, the 3rd defendant gave instructions to one of the 1st defendant's correspondents in Dubai to make payment to Mr Dhingra. On 15 April 2002, the 3rd defendant received confirmation that this had been effected. In his affirmation in the present action, the 3rd defendant identifies the Dubai correspondent as Neamat Electronics ("Neamat") and it is clear that this entity (it is not apparent what the legal personality of Neamat is) is said by the defendants to be the Dubai money changer involved in the Hawala or Hundi system of financing, referred to in sub-paragraph 5 above.

(10) It is inherent in a Hawala or Hundi type transaction that a series of debits and credits (or net-offs) build up between the money changers or, as the plaintiff terms them, "Hawaladars" (who are usually located in different countries). In other words, a payment by one Hawaladar on behalf of another Hawaladar will at some stage be reciprocated. In this way, as described by the 3rd defendant, monies can be remitted to Hawaladar "A" in say Hong Kong by a customer in order to pay that customer's indebtedness to another person, say in Dubai. Hawaladar "A" then contacts Hawaladar "B" in Dubai who pays the amount owed to the creditor in Dubai. At some stage, Hawaladar "A" will do the same for Hawaladar "B" in some other wholly independent transaction. This, without the refinements that one must inevitably find in this system, is the essence of a Hawala or Hundi system of financing.

(11) In the present case, the 1st defendant is Hawaladar "A" in what I have described in the previous paragraph and Neamat, Hawaladar "B". In the 3rd defendant's affirmation, he alleges that the corresponding net-off for Neamat's payment of ￡300,000 to Mr Dhingra, took the form of instructions to remit various amounts on Neamat's behalf to various beneficiaries around the world. This was said to amount to US$403,936 (equivalent to ￡288,525). The balance ￡11,475 (to make up the ￡300,000) was used to pay various of Neamat's clients. This is to be contrasted with what he said in his affirmation in the CCB Proceedings. There, it was said that the cash withdrawal of ￡290,000 from the 3rd Account on 15 April 2002, was used to make a total of 18 remittances "on behalf of various clients" (emphasis added) and not just Neamat's. The remaining ￡10,000 was used by the 1st defendant for "over the counter transactions". It is clear that in both affirmations, the 3rd defendant was referring to the same transaction because the reference is to the same remittance forms exhibited in the 3rd defendant's affirmation in the CCB Proceedings.

(12) It will also be seen that these versions of how the 1st defendant purportedly dealt with the ￡300,000 remittance to the 1st Account from the NatWest Account, are in apparent conflict with Mr Dhingra's handwritten note (referred to in sub-paragraph 8 above) in which Mr Dhingra stated that he received ￡300,000 from HSBC.

(13) The matter is further complicated by the version contained in a letter dated 16 May 2002 from the defendants' solicitors to CCB in which the impression is given that the ￡300,000 was "further remitted to Dubai". This is consistent perhaps with Mr Dhingra's note but inconsistent with the defendants' version and other parts of the evidence. It seems to suggest that the plan all along may have been to the effect that payment was to be made to Mr Dhingra in Dubai by a payment emanating from the UK via Hong Kong.

16.I will later deal with the significance of the various inconsistencies in the defendants' versions of the relevant events when I come to analyse whether there exists a good arguable case.

17.I have previously made reference to the fact that the 1st defendant took out an inter partes summons in the CCB Proceedings returnable before Stone J on 18 May 2002. The CCB seizure was directly related to the ￡300,000 and the complaints that the plaintiff had made in that regard. On that day, Stone J ordered the release of all funds in excess of ￡300,000. At the hearing on 24 May 2002 in that action, the 1st defendant and the Department of Justice (which represented the Commissioner of Police) agreed terms. However, it was on that day as well that the plaintiff applied ex parte for a Mareva injunction in the present action. With all parties being present on the plaintiff's application (including counsel for the 1st defendant), an order was eventually made by Stone J effectively freezing the 2nd and 3rd Accounts and the said cash amounts of HK$700,000 and US$60,000 (which, it will be remembered, had been seized at the defendant's offices) until the resolution of the Mareva injunction application that was eventually heard by me.

18.It is interesting to note from the proceedings on 24 May 2002 that counsel for the Department of Justice informed the court that the 3rd defendant had, under caution, said that the said cash seized by the CCB from the 1st defendant's premises, was derived from the ￡300,000. The 3rd defendant also went on to say that the balance was remitted to various clients between 15 and 18 April 2002. If this is correct, this adds yet another inconsistency to the defendants' version of facts. However, the 3rd defendant, while admitting that he did say this to the CCB, has now made a retraction in his 2nd affirmation in the CCB Proceedings. His explanation was that he was in shock at the time he made the statement.

19.I now deal with the various components involved in an application for a Mareva injunction - good arguable case, risk of dissipation and balance of convenience.

Good arguable case

20.The setting is this. Property (say money as in the present case) belonging to the plaintiff is taken by A (in this case, Uppal) without the plaintiff's consent and then transferred to B, a third party (some or more of the defendants), who transfers some or all of the property away. What are the liabilities of B in such a situation? A is, of course, a fraudulent party and is without doubt a constructive trustee of the relevant property. In the present case, the plaintiff relies on a number of different causes of action. I need only deal with two of these : knowing receipt and dishonest assistance (formerly known as knowing assistance).

21.It is inappropriate for me at this stage to deal at length with these concepts. At this interlocutory stage when the Court is not concerned with making findings of fact and when not all the facts are necessarily before it, I should do no more than just superficially touch on the principles.

22.For knowing receipt :

(1) The plaintiff must show, first, a disposal of assets in breach of fiduciary duty; second, the beneficial receipt by B of property which is traceable to or represents the plaintiff's assets; thirdly, the requisite knowledge on B's part that the property he has received is traceable to a breach of fiduciary duty : see the judgment of Hoffman LJ in El Ajou v. Dollar Land Holdings [1994] 1 BCLC 464.

(2) In Twinsectra Ltd v. Yardley [2002] 2 WLR 802, a case involving dishonest assistance, Lord Millett in the course of his dissenting opinion, said this in relation to knowing receipt at 831, paragraph 105 :

" Liability for 'knowing receipt' is receipt-based. It does not depend on fault. The cause of action is restitutionary and is available only where the defendant received or applied the money in breach of trust for his own use and benefit : see Agip (Africa) Ltd v Jackson [1990] Ch 265, 291-292; Royal Brunei Airlines Sdn Bhd v Tan [1995] 2 AC 378, 386. There is no basis for requiring actual knowledge of the breach of trust, let alone dishonesty, as a condition of liability. Constructive notice is sufficient, and may not even be necessary. There is powerful academic support for the proposition that the liability of the recipient is the same as in other cases of restitution, that is to say strict but subject to a change of position defence."

(3) As I have said, I do not propose to (nor should I) deal at length with the ambit of the law here. Not only would it be inappropriate, it would also involve an examination of numerous important decisions in various jurisdictions including the UK, Australia and New Zealand (in which there has been significant jurisprudence on the subject) without knowledge of the exact state of the facts in the present case.

(4) It is sufficient to say that a person's liability in knowing receipt can take the form of an equitable proprietary claim (where the relevant property or a part of it is still in the possession of the defendant) or a personal claim (where liability is fixed on the defendant on the same basis as a constructive trustee wrongfully dealing with property belonging to another). I shall assume that, despite the misgivings articulated by Lord Millett in Twinsectra, knowledge is a requisite element. The requisite degree of knowledge was submitted by Mr Bartlett to be the five categories set out in the judgment of Peter Gibson J in Baden v. Societe Generale pour Favoriser le Developpement du Commerce et de l'Industrie en France SA [1993] 1 WLR 509, at 575-6 (paragraph 250). There is an argument in some circles that only the first three categories will suffice (see in particular Re Montagu's Settlement [1987] Ch. 264) and I will assume this limitation to be correct for the purposes (and only the purposes) of the present application.

23.As to dishonest assistance :

(1) The important decisions of the House of Lords in Royal Brunei Airlines Sdn Bhd v. Tan [1995] 2 AC 378 and Twinsectra have to a large extent clarified the law in this aspect of accessory liability in breaches of trust.

(2) Here, an accessory will be liable for dishonest assistance if he dishonestly assisted in a breach of trust (it is not necessary that such breach of trust should be fraudulent : see Twinsectra at 832G at paragraph 109). The requisite degree of dishonesty is a consciousness or knowledge on the part of the defendant that he is transgressing ordinary standards of honest behaviour; in other words he knew that what he was doing would be regarded as dishonest by ordinary people : see Twinsectra at 807G-H at paragraph 20 (per Lord Hoffman) and 812D-E (per Lord Hutton).

24.Applying the law to the facts presented before me, I reach the conclusion that the plaintiff has demonstrated a good arguable case on both knowing receipt and dishonest assistance :

(1) There is no doubt that Uppal was a constructive trustee and liable as such. The ￡300,000 initially transferred into the NatWest Account belonged to the plaintiff. Although Uppal claims in one of her affidavits that the ￡300,000 remitted to the 1st Account was "my legitimate money which is not the proceeds of theft or any other illegal transaction", the facts show otherwise. It will be recalled that after the money was remitted to the 1st Account on 13 April 2002, the NatWest Account became overdrawn by ￡0.23. There can therefore be no possibility that Uppal was referring to some other ￡300,000 which may have been legitimately obtained.

(2) The defendants are to be viewed together. The 1st defendant utilized the 1st, 2nd and 3rd Accounts in the course of its business. The 3rd, 4th and 5th defendants are employees of the 1st defendant. The 2nd defendant is said to be a customer of the 1st defendant but he is obviously closely connected to the operation of the 1st defendant's business. Indeed, the 3rd defendant says in his affirmation that the 2nd defendant "sometimes assists Madina [the 1st defendant] with its business".

(3) It is readily apparent that the 1st defendant has received the ￡300,000 belonging in equity to the plaintiff. Further, in the Hawala or Hundi system of finance described by both parties, it would appear that any monies received by one money changer (or Hawaladar) would be for its own benefit since the payment made by the Hawaladar in the place where the party to be paid is located, is made independently of the originally remitted funds. This is because in this system of finance, the respective money changers or Hawaladars function on the basis of net-offs. There is at no stage any transfer of money. Thus viewed, it is therefore apparent that when the 1st defendant received the ￡300,000, it was for its own use and benefit. This limb of the knowing receipt claims satisfied, was there the requisite degree of knowledge?

(4) In my view, there was, for the following reasons :

(a) The way in which the 1st defendant conducted itself once the ￡300,000 was received into the 1st Account was, in my view, suspicious. No satisfactory explanation has been given of the movement of the funds from the 1st Account into the 2nd Account and then to the 3rd Account, all in the space of one day (13 April 2002). On the following business day (15 April 2002), the money was withdrawn in cash. In the absence of an explanation, it is a reasonable inference that these manoeuvres were intended to help disguise the trail of the money.

(b) The various inconsistencies in the way that the defendants' version of events has been presented to the Court (as set out above) merely serve to increase this suspicion. There has been no satisfactory attempt to explain these inconsistencies. The attempt on the 3rd defendant's part to dissociate the 1st defendant from Uppal, resulting in a reversal of earlier evidence deposed to by him, is likewise unexplained and therefore again suspicious.

(c) It is also significant in my view that virtually no documentation exists to support the Hawaladar or Hundi transaction alleged by the defendants. The 1st defendant being a remittance agent or money changer, its activities are governed by ORCO. Its remittance and money changing business is in fact registered under section 24B of ORCO. In this capacity, the 1st defendant is obliged under section 24C of and schedule 6 to that Ordinance to keep records of its business activities. Included are records of instruction details, which would reveal the identity of the party giving the instructions as well as the instructions themselves. Most, if not all, of the various versions put forward by the defendants as to the transaction in question in the present case, would place the 1st defendant in the position of a remittance agent within the meaning of that term in section 24A of ORCO.

(d) Quite apart from the statutory requirements, it is surprising that no record seems to exist regarding this transaction. Certainly, if they do exist, the defendants have not produced them. I accept that inherent in the Hawala or Hundi system of finance is the element of trust between Hundis or Hawaladars. Even then and especially given the crucial set-off characteristics in such transactions, one would have expected detailed records to be kept. The singular absence of critical documentation is unexplained.

(e) Mr Harris submitted that the Court should treat the 1st defendant just as any other respectable financial institution and not be too ready to assume bad faith on its part. However, in my view at this stage, the unsatisfactory way which the 1st defendant has explained the nature of this transaction and bearing in mind the origins of ￡300,000 being the fraud perpetrated on the plaintiff, have led me to infer that the role of the 1st defendant in all this is highly suspect. I accept that the Hawala or Hundi system of finance is often used legitimately and honestly. However, I equally accept that, if abused, it is often utilized for money laundering and other illegal activities.

(f) I have already set out in paragraph 15(5) above that passage in the 3rd defendant's affirmation which describes the Hawala or Hundi system that the defendant operates. One of the characteristics of the system is that small profits are made (through commissions and exchange rates used) but turnover is high. The 3rd defendant says in his affirmation that a transaction involving US$100,000 would only bring profits of HK$300. I have assumed that the system therefore provides a cheaper alternative to using banks and/or other financial institutions and that because of the small profits generated from transactions, overheads must inevitably be kept to a minimum. It is therefore somewhat surprising why in the present transaction, the relevant parties chose to effect the payment from a person in the United Kingdom to a person in Dubai via Hong Kong, specially when it appears that two of the main centres where the Hawala or Hundi system functions are these two places. Furthermore, the inter-account transfers that took place on 13 April 2002 must inevitably have resulted in bank charges being levied for the three transactions. Yet I have been given no explanation for these anomalies.

(5) Finally, on knowing receipt, I should just mention that insofar as the 3rd defendant's statement to the CCB made under caution is true, namely that the said cash amounts of HK$700,000 and US$60,000 held by the 1st defendant are attributable to the ￡300,000, this would provide the plaintiff with an equitable proprietary remedy.

(6) So far, I have dealt with the cause of action based on knowing receipt principally with regard to the 1st defendant. As far as the other defendants are concerned, a viable cause of action based on knowing receipt also exists. This is because between them, they each were either the holders or signatories of the 1st, 2nd and 3rd Accounts, as outlined above. If at trial it is shown that they were in any way beneficially entitled to the monies in those accounts and given those facts I have already referred to above, a good arguable case on knowing receipt is made out against them.

(7) On dishonest assistance, the same facts and matters I have already set out above give rise in my judgment to a good arguable case that the defendants have dishonestly participated in a breach of trust. Inconsistencies in the evidence in crucial aspects, a lack of documentation when this seems to be required by statute (with criminal penalties) and the background to the whole matter being the fraud perpetrated on the plaintiff, all lead to this conclusion at this stage.

Risk of dissipation

25.This aspect, more accurately the need to demonstrate a real risk that a judgment may go unsatisfied because of the risk the defendant may dissipate his assets, can be dealt with quite briefly. The very nature of the 1st defendant's business (involving as it does, for example, the use of bank accounts in different names, rapid transfers of money within short spaces of time and little or no documents) not to mention the rather unsatisfactory way in which the defendants' case as a whole has been presented to the court, all give rise to genuine concerns as to the risk of dissipation. Further, I have not overlooked the fact that the relevant assets in question sought to be frozen, comprise money.

Balance of convenience

26.The same factors that have led me to conclude that there exists a risk of dissipation also in my view determine that the balance of convenience is in the plaintiff's favour by the grant of the present injunction.

27.Despite this, Mr Harris argued that the effect of the injunction in freezing ￡300,000 was effectively to freeze the 1st defendant's working capital for an indefinite time. This would be devastating to the 1st defendant's business and would result in the destruction of it, it is said. It might even be forced into bankruptcy. He relies on statements to this effect in the 3rd defendant's affirmation. The 3rd defendant in that affirmation refers to the 1st defendant's tax return for the year 2000/2001 in which its net profits amounted to HK$443,075, far less than the ￡300,000 which would be caught by the injunction.

28.In my judgment, an allegation that one's business will be ruined or put into serious jeopardy must be supported by relevant documents and details. I have not been provided by the defendants with details, for example, of the following facts and matters regarding the 1st defendant :

(1) The exact method of its operations, in particular its source of funds in carrying on its business. From the bank statements of the 1st Account and the computer print outs of the 1st defendant's daily receipts and disbursements for 13-17 April 2002, it can be seen the 1st defendant at this time dealt in quite large amounts.

(2) No financial statements or accounts have been provided so that its assets (and those of its sole proprietor) can be looked at.

(3) One aspect of the 1st defendant's source of funds must be its ability to borrow in order to finance its operations. No details have been provided of this and I have therefore assumed that the possibility must be there. Indeed, the fortification ordered to be provided by the plaintiff in the sum of ￡30,000 reflects this, being the costs of borrowing ￡300,000 at 5% per annum for two years (this being the estimated time from now to trial).

29.In short, I am unable to see at this stage how much impact, if any, there would be on the 1st defendant's business if an injunction were to be granted. While Mareva injunctions must not stifle the carrying on of a defendant's business (and often appropriate safeguards are put in place to ensure this), no satisfactory or indeed any evidence has been placed before the court to justify what really amounts to a bare assertion of financial ruin.

30.As to the other defendants, no separate submissions regarding the balance of convenience have been made regarding their position.

31.In my judgment, the balance of convenience is clearly in favour of the grant of the present injunction.

Representation:

Mr Jeremy Bartlett, instructed by Messrs Herbert Smith, for the Plaintiff

Mr Paul Harris, instructed by Messrs Jal. N. Karbhari & Co.,for the Defendants