Dallah Albaraka (Ireland) Ltd v. Symphony Gems Nv and Others

HCA 2555/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO.2555 OF 2003

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BETWEEN

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Before : Hon Stone J in Chambers

Dates of Hearing : 3 and 4 November 2004

Date of Judgment : 9 November 2004

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J U D G M E N T

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Introduction

1.This is a case about diamonds which had been pledged to the plaintiff as security for a debt.  These diamonds were stolen in the course of the plaintiff’s attempt to sell them, and in a bid to recover their value the plaintiff has instituted these proceedings against the fifteen defendants who have been joined as parties thereto.

2.Some of these fifteen defendants have not been served.  Others have had default judgment entered against them.  These particular interlocutory applications have as their focus two defendants, the 6^th and 7^th defendants, who were purportedly served with process out of the jurisdiction, and whom also have had default judgments entered against them.  In addition, charging orders nisi and stop orders were entered on the strength of the default judgment, and a worldwide Mareva injunction has been granted freezing their assets.

3.These two defendants, Mr Rajesh Mehta and his uncle Mr Vijay Mehta, are members of a diamond dealing family.  Each resides in Belgium.  They are unhappy by the treatment that has been accorded them by the plaintiff. Each objects strenuously to the assertion of jurisdiction over them by the Hong Kong court, and wishes the exercise of such jurisdiction to be set aside.  Coterminus with this relief, each seeks the setting aside of the default judgment together with the Mareva injunction and the charging and stop orders.

4.Pursuant to their desire to rectify the situation, and to seek to set aside the primary exercise of jurisdiction over them, together with the subsequent forms of procedural relief, the 6^th and 7^th defendants caused three summonses to be issued, respectively dated 3 June 2004, 27 August 2004, and 28 August 2004.  A fourth summons, dated 8 October 2004, was also issued, which has as its subject matter the striking out of parts of an amended pleading against them in conspiracy.  The latter I mention for completeness only; it has no relevance to the main jurisdictional fight, and for present purposes I do not intend to deal with it further in this judgment.

5.The date for the hearing of the first three summonses was fixed for 3 November 2004, with an additional day reserved.  The evidential ambit of the case appeared considerable.  A great deal of evidence had been assembled during the course of these proceedings; in fact, just shortly before the hearing was due to start Mr Lane, the plaintiff’s solicitor, had sworn his eleventh affidavit dated 29 October 2004.  For their part the defendants had put in their own evidence : Mr Rajesh Mehta, the 6^th defendant, had put in two affirmations of 3 June 2004 and 13 October 2004, and his uncle, Mr Vijay Mehta, had filed his own affirmation of 11 October 2004.  Neither, however, thus far had had the opportunity to respond to the latest affidavit of Mr Lane, and accordingly, by summons dated 2 November 2004, leave was sought, and granted, to introduce into evidence the 3^rd Affirmation of Mr Rajesh Mehta.

6.In addition, in anticipation of the application to discharge the existing orders against his clients, Mr John Scott SC, leading counsel for the 6^th and 7^th defendants, had compiled a lengthy and detailed skeleton argument.  In the introduction apologies were tendered for its length and detail, but in truth such reticence was unnecessary : absent this document, it would have been difficult indeed for the inter partes judge hearing applications to set aside ex parte orders to make sense of the almost labyrinthine course that this litigation had thus far followed, and the court found these written submissions to be of great assistance.

7.However, the procedural complexities of this case were to take a further and unexpected turn.  Confronted with Mr Scott’s skeleton argument, the plaintiff chose to throw in the towel and not to oppose discharge of the various orders that they had accumulated against the 6^th and 7^th defendants.  This stark fact, which no doubt resulted from counsels’ advice, was communicated to the court, and to those acting for the defendant, by letter from the plaintiff’s solicitors dated 2 November 2004, that is, the day preceding the commencement of this hearing.

8.Nevertheless, in this letter it was made clear that the plaintiff’s concession, and the decision not to oppose the defendants’ applications, was not to be taken as acceptance of the validity of the evidence and argument filed by the defendants in opposition to the plaintiff’s allegations of fraud, and that the intention was for the plaintiff to make an ex parte application to the court for leave to further amend its pleading, and to seek fresh Order 11 and Mareva relief against the 6^th and 7^th defendants based upon the allegation of conspiracy to defraud the plaintiff of US$7,154,575 worth of diamonds.

9.At the end of the day, therefore, the focus of this judgment became not the discharge of the existing orders — such discharge is conceded — but with the application for fresh orders permitting service upon the defendants out of the jurisdiction, for new Mareva relief, and for leave to file and serve a Re-re-Amended Statement of Claim, a draft of which was exhibited to a second affidavit of Mr George of the plaintiff’s solicitors.

10.Upon that which at the outset was characterised as a hearing ex parte on notice, it was initially suggested by Mr Bunting SC, who appeared for the plaintiff, that the role of Mr Scott should be limited to that of merely ‘assisting the court’ in accordance with the practice laid down in the Supreme Court Practice at 29/1/40.  This contention was rejected.  I saw no reason, in these most unusual circumstances, why Mr Scott should be in any way constrained in his submissions.  During preliminary argument Mr Scott made it clear that he did not seek to put in further evidence, nor, should he be unsuccessful in preventing such new relief, would he attempt to have a further bite of the cherry in terms of an application to discharge.  Hence, the hearing became, in effect, a hearing inter partes on short notice, and was treated by both counsel as such, albeit as Mr Scott made clear — and it was not suggested otherwise — in so participating his clients were in no sense submitting to the jurisdiction.

The pleaded case

11.At this juncture it may be useful to comment briefly upon the manner in which this case has evolved against the 6^th and 7^th defendants.

12.Whilst they are presently asserted to be part of a conspiracy to defraud the plaintiff, this was not always the position.  At the outset the plea mounted against them was solely in terms of their alleged liability as guarantors pursuant to a series of bank facilities — ‘Murabaha agreements’ — entered into between the plaintiff and the 1^st defendant, of which the 6^th and 7^th defendants were directors until 2003.

13.Thus was the plaintiff’s claim initially formulated in the Statement of Claim filed on 13 October 2003.  However, on 16 October 2003, by amended Writ and Statement of Claim, a cause of action in conspiracy was introduced against these defendants.  This latter plea did not stay in place for very long, however, because on 20 January 2004, upon an application seeking to enter default judgment, counsel then acting for the plaintiff gave an undertaking to the court to abandon the conspiracy claim against the 6^th and 7^th defendants in order, it seems, to facilitate the entry of default judgment.  In fact, judgment in default was entered on 5 February 2004, based solely upon the plea that the defendants had failed to honour their obligation under the personal guarantees : this judgment was in the sums of some US$15.46 million and GBP13,750.  This position was confirmed by a letter dated 5 May 2004 from the plaintiff’s solicitors to those acting for the defendants.

14.By order of Lugar-Mawson J dated 20 August 2004 leave was granted to the plaintiff to re-amend the Statement of Claim.  This re-amendment appears to have maintained allegations of conspiracy to defraud against the 6^th and 7^th defendants, although such was not reflected in the prayer, doubtless because by this stage default judgment in terms of the sums claimed under the guarantees already had been entered against them.

15.The pleading sequence was not yet over, however.  Consistent with the decision not to attempt to defend the earlier assertion of jurisdiction over the 6^th and 7^th defendants, and thereby not to object, inter alia, to the discharge of the default judgment, the 2^nd Affidavit of Mr George –— which supports the application for the fresh orders as now sought — exhibits thereto a draft Re-re-Amended Statement of Claim, wherein the particulars of the claim in conspiracy against, inter alia, the 6^th and 7^th defendants are reamended, and which now includes within the prayer a claim consequential upon such asserted conspiracy.

16.It is this new re-re-amended pleading which now forms the subject of one of the applications now before this court, namely, the application for leave to file and serve this document, and it is a draft pleading the content of which also has been referred to during argument regarding the desired fresh exercise both of Order 11 jurisdiction and of the Mareva jurisdiction.  It is to these applications that I now turn.

The fresh applications

Order 11 jurisdiction

17.The original order granting leave to serve the 1^st, 6^th and 7^th defendants out of the jurisdiction had been granted on ex parte application by Pang J on 9 July 2003.  That order, which it is now conceded is to be set aside, was granted on the basis of two affidavits, namely that of the 1^st affidavit of Mr Dinshaw, the plaintiff’s London solicitor, dated 1 July 2003, and the 1^st affidavit of Mr Lane, of the plaintiff’s Hong Kong solicitors, dated 9 July 2003.  The basis of the application was put on the basis of Order 11, rule 1(1)(c), namely that “the claim is brought against a person duly served within or out of the jurisdiction and a person out of the jurisdiction is a necessary or proper party thereto”.

18.On behalf of the plaintiff, the extraterritorial reach of the Hong Kong jurisdiction, in the form of service upon the 6^th and 7^th defendants of the re-re-amended pleading, is now asserted on the basis both of Order 11, rule 1(1)(c) and further on the basis of subparagraph (f), which provides that service out is permissible when “the claim is founded on a tort and the damage was sustained, or resulted from an act committed, within the jurisdiction”.

19.Mr Bunting SC submits that this case meets the requirements of both heads, and that in all the circumstances this is a proper case for service out of the jurisdiction.

20.As to (c), he says that the 2^nd to the 5^th defendants and the 9^th and 10^th defendants have already been properly served within the jurisdiction, and that implicit within the conspiracy claims there are real issues between the plaintiff and the other conspiracy defendants which the plaintiff may reasonably ask the court to try : Order 11, rule 4(1)(d).  Moreover the 6^th and the 7^th defendants are “proper” parties to the claim in that if both had been within the jurisdiction they would both have been proper parties to the claim : see Dicey & Morris, The Conflict of Laws, Vol.1 (30^th ed.), at para 11-148.  Mr Bunting further noted that there is now deposed to the assertion that there is a good cause of action against these defendants : see Order 11, rule 4(1)(b).

21.The submission that the 6^th and 7^th defendants fall within the rubric of (c) is an assertion which, in the circumstances of this case, I am unable to accept.  An analysis of the state of play within the proceedings against the other defendants joined in this case reveals that, at present, there is currently not one ‘lis’ between plaintiff and any of these defendants which is ‘live’.

22.In this connection it is perhaps worth summarizing the procedural position, which is thus : the 1^st defendant (the original debtor) has not been served, and in fact has been subject to summary judgment in England; default judgment has been entered against the 2^nd, 3^rd and 4^th defendants; the 5^th defendant is now deceased, and there are no personal representatives; the 8^th defendant, together with the 11^th, 12^th and 13^th defendants, were all joined to this action for the purpose of obtaining Norwich Pharmacal relief; default judgment has been entered against the 9^th and 10^th defendants; the 14^th defendant has not been served; and the 15^th defendant, a private Hong Kong company, has had no cause of action pleaded against it, and has been joined to this case because its shares have been subject to the erstwhile Mareva relief to which the 6^th and 7^th defendants earlier were subject.

23.The established jurisprudence as to the joinder of foreign parties on the “necessary or proper” basis makes it clear that this is a ground for service out of the jurisdiction with respect to which particular care must be taken; as this court noted in Inchcape JDH Ltd v. Baltrans Exhibition & Removal Ltd & anr. [1997] HKLRD 1278, at 1282, this ground has traditionally been set apart from other categories within Order 11, possibly because there was a tendency for its provisions to be creatively utilized in order to found jurisdiction when difficulty was encountered in fitting a particular case within the more ‘substantive’ subheads of this rule, and it is important that there should be no question of permitting an existing defendant to become, in effect, a sort of jurisdictional Trojan Horse.

24.The circumstances of this case provide an apt, if somewhat unusual, example.  Where there is no ‘live’ issue between the plaintiff and any of the other defendants, as is the case here, it seems to me to be hard to get home on the argument that in such circumstance the 6^th and 7^th defendants can be regarded as “proper parties” within the accepted meaning of that phrase : there are simply no “real issues between the plaintiff and the other [conspiracy] defendants which the plaintiff may reasonably ask the court to try”.  In this connection I recognize the plaintiff’s fall-back position to the effect that the 9^th and 10^th defendants, against whom default judgment has been entered, are said to be attempting to set aside such judgments, but Mr Bunting fairly accepts, I think, that this court must consider the situation as it prevails as at the date of this application for leave to serve out, and that is that these default judgments currently are in place.

25.For this reason alone in my view Mr Bunting fails on his argument under (c), and perhaps it is in recognition of this fact that he mounts his alternative argument under (f), submitting in this regard that the plaintiff’s claim against the 6^th and 7^th defendants is in the tort of conspiracy and that the damage was sustained, or resulted from, an act committed within the jurisdiction.  Taken together with the fact that the plaintiff, through the affidavit of Mr George, has deposed to the fact that there is a good cause of action, as required by Order 11, rule 4(1)(b), and also together with the matters raised in the affidavit evidence, it was submitted that a good case for service out thus had been established.

26.Mr Scott submits to the contrary.  He says that the requirements of (f) have not been met.  On the plaintiff’s case what overt act or acts on the part of his clients, he asks, took place in Hong Kong?  And how is it said that damage occurred in Hong Kong?

27.In this I think that Mr Scott is correct.  The ‘damage’ in this case undoubtedly was suffered in Tokyo, where there appears to have been delivery to an empty 4^th floor of a building (which was not the address of the Mehta family company, Gembel Tokyo), at which point the ‘trail’, on the plaintiff’s own case, has gone cold.  Whilst it is clear that the rule requires that there must be an act committed within the jurisdiction by the alleged tortfeasor, on the state of the evidence it is unclear what this is; in fact, this seems to be a similar problem which appears to have faced the applicant for leave to serve out in ABCI v. Banque Franco Tunisienne [2003] 2 Lloyd’s Rep 146, a case in which the cause of action was in conspiracy and in which the Court of Appeal set aside the leave granted below in reliance upon rule 1(1)(f).

28.In my view the analytical difficulty thus facing the plaintiff cannot simply be finessed under the head of a plea in conspiracy, and the position is a fortiori when there is factored into the equation that which I regard as the poor state of the evidence in conspiracy against the 6^th and 7^th defendants — as to which I have something further to say later in this judgment.

29.Accordingly in my judgment the case for service out of the jurisdiction under (f) fails also.  In neither the assertion under (c) or (f) does the plaintiff meet the requirement of a ‘good arguable case’, which is the degree of proof required by the court at this stage to show that the case falls within one of the subparagraphs of Order 11 rule 1(1).

30.This however is not quite the end of the point.  If I be wrong in my view of the merits of the application under grounds (c) and (f), the further consideration arises as to whether, pursuant to Order 11 rule 4(2), that it has been made “sufficiently to appear to the court that the case is a proper one for service out of the jurisdiction under this Order”.  This general provision permits the court to exercise its discretion in all the circumstances of the case, so that, for example, special considerations apply where proceedings are on foot in another jurisdiction, a fact which must be disclosed to the court since it is clearly highly germane to the decision as to whether this ‘long arm’ jurisdictional rule should be exercised.

31.Had this case come to this court de novo, then, other things being equal it is unlikely that the new application as now made would have been affected by the ambit of rule 4(2).  However this is not the position in this instance.  I agree with Mr Scott that in the exercise of its discretion in this application the court is entitled to take into account the history of events, and in particular that which occurred (or, more precisely, did not occur) in the first ex parte application before Pang J on 9 July 2003.  When the learned judge was dealing with that application — in the context of a case which at that time remained solely as a suit upon the guarantees — he was asked to grant leave to the plaintiff to serve the 6^th and the 7^th defendants in Belgium, but he was not told a number of significant matters, all of which were relevant to the forum conveniens considerations which are inherent in the exercise of discretion under Order 11.

32.The judge was not told of the fact that the proper law of the guarantees — which was the sole cause of action asserted at that stage — was English, and that none of the parties had any connection with Hong Kong.  More particularly, however, he was not told that proceedings under the guarantees had been brought, and were continuing, against the 6^th and 7^th defendants in Belgium for the same debt, although Mr Dinshaw refers to the fact that ‘demand’ on the guarantees has issued in Belgium, and at one stage Mr Lane makes passing reference to litigation in Belgium and the UK.

33.It is difficult to understand why such economy of reference should have been regarded as necessary.  There could have been little more material, in the context of an application to serve out, than the fact that there were existing foreign proceedings relating to precisely the same debt and involving precisely the like cause of action; as Burton J observed in the recent decision in Network Telecom (Europe) Ltd v. Telephone Systems International Inc [2004] 1 All ER 418 (wherein ‘mirror image’ proceedings had been served in the United States against the plaintiff) it is a serious matter for a foreigner to be put to the expense and inconvenience of being brought before the courts of England, and failure to make full and fair disclosure as to relevant foreign proceedings would, as in all without notice applications, justify the court in discharging the order.

34.Absent the analytical difficulty of bringing itself within grounds (c) and (f), on the basis such non-disclosure alone I should have declined to find that this case is a “proper one” for service out of the jurisdiction; a plaintiff is unable, in effect, to move to ‘sanitise’ the earlier non-disclosure by conceding, as here, that the earlier order be set aside, and then by mounting a new application untrammeled by that which has occurred in the earlier ex parte application.

35.At the end of the day, therefore, in my judgment the plaintiff has failed, and failed clearly, in its renewed application for leave to serve the 6^th and 7^th defendants out of the jurisdiction.  Accordingly the application is dismissed.

36.This conclusion effectively spells the end of this case, at least as far as the 6^th and 7^th defendants are concerned.  These parties are not subject to the jurisdiction of this court, and indeed, consequent upon the conceded discharge of the earlier ex parte order of Pang J, such jurisdiction has never been established.

37.The issue of primary jurisdiction is a fundamental consideration.  At the outset of argument Mr Bunting noted that it was entirely in the discretion of the court as to the stage at which the court formally should make the orders discharging the earlier ex parte orders regarding the exercise of jurisdiction and the imposition of Mareva relief.  As to the latter, he asked the court to retain the status quo pending decision upon his renewed application.  Analogous, he said, was the situation in which the court hears application to discharge such relief, during which the plaintiff seeks to renew the application if and in so far as the court should accede to the application to discharge the existing order; thus there can be no lacuna created between orders if in fact there is to be the grant of new relief, and thereby asset dissipation within such period can be avoided.

38.There was some debate on the point between bench and bar, but in the event the court acceded to this application.  On reflection, this course was inappropriate in these circumstances.  There is here a distinction with a real difference.  In the more usual instance in which a court, after argument, is minded to discharge, but thereafter to regrant Mareva relief, there is no primary jurisdictional problem; the issue is solely whether the earlier breach of ex parte principles, generally within a material non-disclosure context, is sufficiently serious to preclude grant of a fresh order wherein the circumstances of the case otherwise would justify such injunctive relief.

39.In this instance, however, it is conceded that the earlier order must be set aside, and thus there is, and was, no valid exercise of primary jurisdiction upon the basis of which injunctive relief may be granted : as Lord Mustill expressed the position in Mercedes-Benz AG v. Leiduck [1995] 3 HKC 1 (PC) — a case combining Order 11 and Mareva jurisdictions “both of which should be exercised with great circumspection” — Mercedes could not bring themselves within the terms of Order 11, and thus could not have improved their position by starting incompetent proceedings, with the result that the earlier proceedings were “procedurally meaningless”(op cit, page 9).

40.It follows, therefore, that as a matter of law, upon concession that the ex parte order of Pang J should be set aside, an order in those terms, together with an order setting aside the Mareva relief that was grafted thereon, should have been made immediately, without the delay incumbent in argument upon the fresh applications necessitated by such concession.

Mareva relief

41.In light of the conclusion that has been reached as to the absence of jurisdiction in this case, the issue of the fresh application for Mareva relief is thus effectively resolved.  Nevertheless, if and in so far as I may be held to be wrong upon the primary issue, I move now to consider the question of renewed injunctive relief.

42.Mr Bunting submits that a fresh Mareva is justified, but on a basis different to that upon which relief originally was granted ex parte by Lugar-Mawson J on 20 August 2004.  He notes that this earlier relief was premised upon a cause of action based upon the guarantees executed by the 6^th and 7^th defendants.  However, this is no longer the basis asserted.  Mareva relief is now sought in support of the intended conspiracy claim against these defendants, as set out in the draft re-re-amended Statement of Claim, and further in aid of the pending Belgian proceedings, wherein the defendants have mounted an appeal (which is to be by way of rehearing) against the judgment that there has been entered against them.

43.It is said that there is a real risk that if Mareva relief is not granted that the 6^th and 7^th defendants will dissipate their assets and thereby render nugatory any judgment in these proceedings (or in the Belgian action if the appeal is dismissed).  In particular it is asserted that there is a real risk that substantial sums accruing to the 15^th defendant herein, a Hong Kong company known as Valuable Resources Ltd, will be dissipated such as to render worthless any beneficial interest the 6^th and 7^th defendants have in this company; in fact, it is said that such beneficial interest in VRL already has been transferred to junior members of the Mehta family (vide the 2^nd affidavit of Mr George).  Mr Bunting further submits that the plaintiff is willing to provide a cross-undertaking as to damages, but says that fortification - which I note found no place in the earlier order - is unnecessary.

44.Mr Scott begs to differ.  On behalf of his clients he is indignant in his opposition to this application.  The main thrust of his substantial argument is that there no good arguable case in fraud has been made out against his clients, and he vigorously attacks the quality and style of the affidavit evidence that in this regard has been placed before the court by the plaintiff.  He asks that this application be dismissed, and invites the court to conclude that the substance of the fraud assertions is paper thin, and that in this regard there is no question of the plaintiff reaching the required threshold of a ‘good arguable case’.

45.The case as raised asserts the participation of the 6^th and 7^th defendants in a scheme to procure the plaintiff into selling diamonds worth about US$7 million, which were held by the plaintiff as security, to the 2^nd, 3^rd and 4^th defendants between April and November 2001.  The mechanics of the transaction leading to the loss are thus.  Four diamond shipments have gone missing.  The 2^nd defendant, Precious (HK) Ltd, was the purchaser of the first two shipments, and the 3^rd and the 4^th defendants, Keenhill Ltd and Goldwide Ltd, were the purchasers of the last two shipments.  This is undisputed.  The diamonds the subject of these shipments were routed through Hong Kong, and were subsequently consigned to Gembel Tokyo, which is said to be a ‘Mehta family company’, albeit the evidence from the 6^th and the 7^th defendants is that this company is controlled by a rival family faction with which the ‘Symphony Gems’ side is in a long-standing dispute.  Suffice to say that it appears that the diamonds were delivered to a Tokyo address, which on subsequent investigation appears to have been an empty floor of a Tokyo building, but which it is accepted by the plaintiff was not the address of Gembel Tokyo.  Thereafter the trail has gone cold.  There is no allegation that the 6^th and 7^th defendants have obtained either the missing diamonds or the proceeds thereof.

46.Mr Scott points out that the diamonds in question were in the custody of the plaintiff, through Regency Shipping, and that it was the plaintiff who took the decision to sell them, and who determined the manner in which this was to be done.  The 6^th defendant had agreed to assist the plaintiff, which had no contacts in the industry, and whom, against the background of the 1^st defendant, Symphony Gems NV, being the debtor under the loan arrangements, had been asked by the plaintiff to help in selling the diamonds.

47.In terms of the alleged conspiracy to defraud, said Mr Scott, little if anything was specifically alleged against the 7^th defendant.  As for the role of the 6^th defendant, it was accepted that his involvement was to facilitate the sale process, and that he had an already established business relationship with the 2^nd defendant, Precious, and with Mr Hameed, recently deceased, who ran the 3^rd and 4^th defendant companies, Keenhill and Goldwide.  However, he submitted that none of the matters which were relied upon to demonstrate a good arguable case against the 6^th defendant stood up to scrutiny.

48.It is probably fair to say that the case as now advanced by the plaintiff in terms of Mr Rajesh Mehta contains three, or possibly four, distinct strands.

49.First, it is the case that the 6^th defendant proffered to the plaintiff that which can be characterized as a ‘letter of comfort’ with regard to the creditworthiness of the 3^rd and 4^th defendants, ostensibly the purchasers of the third and fourth shipments.  The 6^th defendant’s evidence in this regard is that he was relying on Mr Hameed, a business associate, an explanation that has been proffered in the English litigation which has arisen as a result of this case.  In this regard it is difficult to see how this becomes evidence of fraud; bank references were taken up also, and in any event it is not demonstrated that this statement in itself was false to the knowledge of the 6^th defendant.

50.Second, given that it is undisputed that the plaintiff asked Mr Rajesh Mehta to find buyers for the remaining US$5.8 million of security diamonds, it is not easy to appreciate why the representation ascribed to Mr Mehta at a meeting on 31 August 2001 that he was “expecting buyers in Antwerp” can take the case much further; as Mr Scott has pointed out, this reference to such buyers plainly cannot have been to the 3^rd and 4^th defendants since they materialized as potential buyers some time later, so this does not appear materially to assist the plaintiff either.

51.Third, and it is here perhaps that Mr Bunting makes the most play, there is the hotly disputed topic of the alleged relationship between the 6^th and 7^th defendants and the other relevant defendants who figured in some fashion in the putative sale process, from which the court is asked to draw certain negative inferences.  In this respect the eleventh affidavit of Mr Lane looms large, because exhibited to this document, at ‘JHL-30’, is an affidavit of one Mr Rashid Suleman Oomer, who appears to be the managing director of a finance house associated with the plaintiff.

52.This affidavit is dated 28 October 2004, but relates to a conversation that Mr Oomer is said to have had with a Mr Ramesh Desai during a visit by Mr Desai to Mr Oomer’s office on 23 August 2004.  The thrust of Mr Oomer’s account of Mr Desai’s information is that the 2^nd and the 9^th defendants had been set up on the instructions of the 6^th and 7^th defendants, and that Mr Desai was employed as an ‘employee director’ by the Mehtas although, he, that is, Mr Desai, also says that he was not involved in the day to day operations of the two companies.  From this a link is drawn by the plaintiff between the 6^th and 7^th defendants and the 2^nd defendant (purchaser of the first two diamond tranches), of which company it is alleged that they are the “beneficial owners”, whilst it is yet further alleged that the 3^rd and 4^th defendants (purchaser of the latter two tranches) is further indirectly owned by the 6^th and 7^th defendants through the 2^nd defendant. Mr Bunting also draws attention to the fact that the 3^rd and 4^th defendants appear to have been set up, in part at least, from funds drawn on the 9^th defendant.  The point of all this, and the focus of the submission on the point, is thus that the 2^nd, 3^rd and 4^th defendants are, in effect, alleged to be under the de facto ownership of the 6^th and 7^th defendants, and that it is these entitities which have played a key role in the disappearance of the diamonds.

53.It is clear that Mr Oomer’s evidence is a most substantial factor within the present debate.  Mr Scott has submitted that the court should place little or no weight thereon.  He points out that so far as the 2^nd defendant is concerned, there is no company registry documentation linking the 6^th and 7^th defendants with Precious (HK) Ltd, or indeed any record or any other corporate document to suggest any connection whatever.  He further suggests that Mr Oomer’s account is not worth the paper that it is written on, maintaining that this is, in effect, an interested party recounting a hearsay conversation with Mr Desai, absent documentary evidence of any kind, about a conversation occurring over two months ago but which has just seen the light of day in this case as at the beginning of November; moreover, the “short note” which Mr Oomer recounts that he prepared following his discussion with Mr Desai is nowhere to be seen, nor is there any evidence that the 6^th and 7^th defendants had any knowledge of the 2^nd defendant’s actions, of which in any event Mr Desai says that he had no ‘day to day’ experience.

54.Moreover, said Mr Scott, as to the alleged connection with the 3^rd and 4^th defendants, which was denied by his clients, a private investigator’s report prepared for the plaintiff bespeaks the fact that “the responsible individual for both companies” is Mr Hameed, the 5^th defendant and regrettably now deceased.  Whilst as to the 9^th defendant, of which the 5^th defendant was a director, and its supposed role in the setting up of the 3^rd and 4^th defendant, the 6^th and 7^th defendants admittedly had been shareholders (but not directors) for a short period in order to facilitate business with de Beers, but that role had ceased by 9 May 2001, whereas the 9^th defendant’s cheque in payment of the acquisition of Keenhill and Goldwide had been dated 11 October 2001.

55.As to that which I will term, for shorthand, the ‘Oomer element’ of this case, in my judgment Mr Scott’s criticisms are well founded.  In the context of a serious allegation of conspiracy to defraud I regard this as flimsy and insubstantial evidence which has arrived late in the day, and it is not something to which, having regard to the circumstances of this case, I would ascribe any weight.

56.Thus far, therefore, there does not seem to be a great deal of substance upon which the plaintiff can hang its hat, even factoring into the equation the forensic difficulties inherent in establishing a fraud case.  The fourth matter upon which reliance appears to be placed relates to the assertion that Gembel Tokyo — to which the diamonds apparently were onshipped from Hong Kong, albeit they failed to arrive — is a Mehta family company “controlled by” the 6^th and 7^th defendants and their family members.  This allegation surfaces in Mr Lane’s second affidavit (at para.18) and is repeated in first affidavit of Mr George (at para.7).  The response of the 6^th defendant (at para.13b of his second affirmation) states that the Gembel Group is indeed associated with some members of the Mehta family, but not with himself or the 7^th defendant.  He states that it is controlled by two of his uncles, Rashmi and Prabodh, with whom the 6^th and 7^th defendants have since late 2000 been engaged in a “bitter dispute”, in fact a “family feud” which is referred to in Mr Lane’s ninth affidavit, so that the Gembel group is controlled by the “other side” to this dispute.

57.In the circumstances there seems little scope for much argument about this.  This dispute is documented, and recognized by the plaintiff, yet the assertion as to “control” by the 6^th and 7^th defendants appears to be maintained.  In fact, the assertion of this element of “control” within the second affidavit of Mr Lane strikes me as an object lesson in prejudicial drafting.  A close reading of paragraph 18, in which this allegation first surfaced, seeks to demonstrate that “representatives of the 6^th and 7^th defendants’ family are active in control of the [Gembel] group’s companies”, but in the later narrative within that paragraph this assertion seamlessly morphs into “The Gembel Group of companies, therefore, was and remains very much a family business, controlled by the 6^th and 7^th defendants and their family members.”

58.This sort of narrative elision, subsequently repeated in the evidence, by Mr George, as a “stated belief” that Gembel Tokyo is part of a group of companies “controlled by the 6^th and 7^th defendants” is regrettable, and I take this opportunity to state as firmly as I may that ‘glossing’ of this nature has no place in affidavit evidence of any kind, far less in evidence filed in support of draconian ex parte orders wherein a busy first instance judge is asked to act quickly in reliance of that which is placed before him.  Indeed, after making due allowance for forensic hyperbole, I consider that there is some justification for Mr Scott’s characterization of the plaintiff’s evidence in this case as “shot full of speculation, hearsay and unsubstantiated allegation”.  The immutable principle is that interests of accuracy and fairness are never to be sacrificed upon the altar of forensic expediency.

59.At the end of the day, therefore, with respect to the issue of fresh Mareva relief, I have concluded that notwithstanding Mr Bunting having said all that he properly could say on this issue, in my judgment the plaintiff has failed to demonstrate a ‘good arguable case’ in conspiracy against the 6^th and 7^th defendants.

60.In assessing the position I have come to this conclusion after reviewing the evidence on both sides, and I have borne in mind judicial dicta as to what comprises ‘a good arguable case’, some of which are set out at length in an earlier decision of this court dealing with an application for the discharge of a Mareva injunction : see Jau-Hwa Stewart v. E Excel Ltd, HCA 2493 of 2001, unrep., dated 30 August 2001.  I appreciate, of course, that the concept of a ‘good arguable case’ is sometimes likened to the smile on the face of the Cheshire Cat : difficult to describe, but you know it when you see it.  And in this case I am in little doubt that the plaintiff has failed to get home in a case wherein, at the outset, the 6^th and 7^th defendants were described, in the first affirmation of Mr Dinshaw, merely as “possibly” instigating the deception of the plaintiff.  In my view the accumulation of emphasis which has taken place has not been justified by the quality of the evidence as subsequently filed, and whatever suspicions the plaintiff may harbour, at the end of the day the discretion of the court is, and can only be, governed by the strength of the evidence : see here the observations of Gee, Mareva Injunctions, 4^th Ed. (1998), at 184 who sums up the position thus :

“In Mareva cases, the all-important question is whether, in the circumstances of the case, it is ‘just and convenient’ to grant the injunction… the court will take into account the apparent strength or weakness of the respective cases in order to decide whether the plaintiff’s case, on the merits, is sufficiently strong to reach the threshold, and this can include assessing the apparent plausibility of statements in affidavits … Although a good arguable case remains the minimum requirement, the judge’s view of the merits of the plaintiff’s case and his chances of ultimate success are obviously important factors in the exercise of his discretion.”

61.Finally under this head, there is no need in the present circumstances to consider in detail the interesting submission by Mr Pao to the effect that in instances in which a substantial claim is brought within the jurisdiction, it is open to the court to grant interim relief in such circumstances, regardless of whether final judgment is to be pronounced in this or another court.  In other words, the submission that in this case that there was a clear need for Mareva relief in aid of the Belgian proceedings.  As Mr Pao pointed out, in Jau-Hwa Stewart, op cit, this court therein took the view that there is jurisdiction in appropriate circumstances to grant such form of relief, citing in that instance the decision of Barnett J in Merrill Lynch International Bank Ltd v. Wallace [1997] 3 HKC 776 at 781, wherein reliance was placed on Channel Tunnel v. Balfour Beatty Construction [1993] AC 334.

62.In the instant case, however, and putting to one side this court’s conclusion as to the absence of jurisdiction, this court has been told little in detail about the state of these Belgian proceedings (the existence of which was not disclosed at the time of the first application to serve out), save that the Belgian judgment is not a ‘final’ judgment for enforcement purposes and that such proceedings are in any event based on a cause of action which the draft re-amended pleading makes clear is intended no longer to be pursued in Hong Kong against the 6^th and 7^th defendants.  Nor, for that matter, is there any pleaded claim for specific injunctive relief in support of the Belgian proceedings, which in my view is necessary is instances in which this form relief is sought on this particular basis.

63.Accordingly, even if the principle in Channel Tunnel, op cit, was to be applicable — this court in Jau Hwa-Stewart noting that the authorities establish that a court faced with a merely ancillary jurisdiction should adopt a “cautious approach” — and there were to be no primary jurisdictional hurdle, the view I have taken on what presently is no more than an academic point is that in any event I am signally unsatisfied on the state of the present evidence that this is, or would be, a proper case for grant of a Mareva injunction.

64.It follows from the foregoing that if and in so far as primary jurisdiction has been established over the 6^th and 7^th defendants (which I have held is not the position) for the reasons set out above I further dismiss the renewed application as now made by the plaintiff for Mareva relief.

The amendment issue

65.As indicated at the outset, the third application was for leave to file and serve a Re-re-amended Statement of Claim in term of the draft exhibited to the second affidavit of Mr George.

66.Since the plaintiff has lost the jurisdictional argument, and this court has held that the 6^th and 7^th defendants are not to be subject to the exercise of Order 11, and thus are not to be impleaded qua defendants before this court, this last application appears of little practical consequence, save that the application to file and serve the re-re-amended pleading in terms of the draft as presently proposed is denied. Whether in light of this judgment, and any appeal therefrom, the plaintiff wishes to reconsider its pleading position I know not.

67.Two further matters arise in this context.  First, it seems to me that if a plaintiff seriously is to pursue a claim in conspiracy to defraud, as a matter of good practice the evidence should be considered by counsel, and the consequent pleading, with all that such a plea imports, should be signed by counsel.  The present draft pleading bears the signature of the Hong Kong solicitors for the plaintiff, although it is as plain as a pikestaff that it was drawn by counsel, albeit such authorship is not acknowledged, which in my view should have been the case.

68.Second, a point has arisen about an undertaking which was given to the court by counsel on behalf of the plaintiff at the time that the plaintiff wished to enter default judgment against the 6^th and 7^th defendants.  This undertaking was to the effect that the plea in conspiracy then advanced against the 6^th and 7^th defendants would be abandoned.  That such undertaking was made appears not to be in dispute, although the plaintiff currently is represented by counsel who were not then involved.  In the context of this application to amend Mr Scott takes the point that such undertaking having been given to the court, it cannot now be retracted, and that in so far as this application remains relevant the leave to re-re-amend as now sought should be denied for this reason alone.

69.There is no need in the circumstances to decide the issue, and I do not do so, not least because in the circumstances there was a limited amount of argument on the point.  I am inclined to think, however, that in light of the fact that the undertaking as given was proffered for a specific purpose, namely the entry of a default judgment that now is not sought to be defended, that in these particular circumstances the absolute nature of the bar which it is suggested now has arisen consequent upon such ex parte undertaking is not a submission which, had it been of any practical relevance, would have found favour.

70.It is difficult to see how there could have been an irrevocable waiver or abandonment in the circumstances, not least because I am told that in support of its application to re-amend the then existing Statement of Claim in order to delete the plea in conspiracy, there was an express reservation of right to reinstate such conspiracy claim should such judgment in default be set aside.

Orders

71.Consequent upon this judgment, and the concessions made at the outset by the plaintiff, I make the following substantive orders :

(a)    that the Order of Pang J dated 9 July 2003 and the Order of Lugar-Mawson J dated 20 August 2004 be set aside in so far as such orders relate to the 6^th and 7^th defendants herein;

(b)    that the Default Judgment entered on 5 February 2004 and the Charging Order Nisi dated 1 April 2004 and the Stop Notice ancillary thereto be set aside;

(c)    that the plaintiff’s application for a fresh leave to file and serve the Re-re-amended Statement of Claim out of the jurisdiction upon the 6^th and 7^th defendants be dismissed;

(d)    that the plaintiff’s application for fresh Mareva relief against the 6^th and 7^th defendants be dismissed;

(e)    that the plaintiff’s application to file a Re-re-amended Statement of Claim in terms of the draft proposed be denied.

Costs

72.There can be no argument but that the costs of the applications as taken out on behalf of the 6^th and 7^th defendants to set aside those orders which were conceded at the outset should be set aside must be to the 6^th and 7^th defendants, such costs to be taxed if not agreed.  However, Mr Scott has made it clear that in this regard his instructions are to ask for costs orders on a higher scale than party and party, and in the circumstances the court will entertain submissions from counsel.

73.As to the costs of the renewed applications for fresh leave to serve the 6^th and 7^th defendants out of the jurisdiction, for renewed Mareva relief, and for leave to file the draft re-re-amended pleading, such costs similarly are to be to the 6^th and 7^th defendants, to be taxed if not agreed.  I await the submission of counsel as to whether it is intended to argue that these costs also should be taxed upon an enhanced basis.

Matters arising

74.I should be assisted if counsel would agree orders in appropriate form for the purpose of engrossment. Absent agreement, and in so far as may be necessary I will hear counsel as to the precise form of such orders.

75.I will also entertain any other submissions which may immediately arise as a consequence of this judgment.

76.I express my appreciation to counsel on both sides for the manner in which this hearing was conducted, and for the assistance rendered to the court in what was a case of some complexity, both factually and as a matter of law.

Mr Michael Bunting, SC leading Mr Jin Pao, instructed by Messrs Wilkinson & Grist, for the plaintiff

Mr John Scott, SC instructed by Messrs Clifford Chance, for the 6^th and 7^th defendants