Gravity Co Ltd v. The Hongkong and Shanghai Banking Corporation Ltd

HCMP 2756/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2756 OF 2005

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BETWEEN

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Before:  Hon. Lam J, in Chambers

Date of hearing:  16 & 20 December 2005

Date of Decision:  20 December 2005

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D E C I S I O N

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1.On the gagging order part of the application, what we have here is a situation where, firstly, Mr Kim has already been alerted to the fact that the Plaintiff is investigating into the matters.  To put it in Mr Chu’s words, he knows that thing is on his heels and he also knows that the Plaintiff is investigating into matters relating to the HSBC account. 

2.Secondly, Mr Kim had an interview with the Plaintiffs, together with lawyers in October 2005 and signed a statement in which he admitted diversion of funds to the tune of US$4.02 million and ¥200 million Japanese yen.  In the interview, he gave an explanation as to why this was done and then there was a repayment by him in the sum of US$7.3 million on 17 October 2005. 

3.On top of that, a court order was made by the Seoul Central District Court on 16 December 2005 by way of an ex parte charging order, securing for the Plaintiffs in respect of the assets of Mr Kim.  The assets, according to the evidence before me, add up to US$40 million or thereabout. 

4.The evidence before me suggests that as far as concrete evidence is concerned, there had been of diversion of funds of around US$6 million.  Of course, I appreciate that investigation is still under way and the precise extent of diversion of funds cannot, at this stage, be ascertained. 

5.So these are the relevant factual matters which I have to take into account in deciding whether a gagging order is warranted in the present case.  Although I have no problem with the granting of discovery orders against the bank in order to obtain the bank statements, it does not necessarily follow from that that I must or should make a gagging order.  As has been stressed by Ma J (as he then was) in the case of A v B  [2002] 2 HKCpage 497 at page 509, paragraphs 40 to 41, gagging orders are exceptional remedies and it is a serious intrusion into what otherwise would be a party’s basic right.  In a sense, it is condemning the person identified as a wrongdoer without a balanced picture being provided to the court at this stage and therefore a strong case has to be made out before the order could be made. 

6.More specifically, in assessing the pros and cons of making a gagging order one has to ask oneself this question:  “Were the wrongdoer or wrongdoers to be forewarned that action was about to be taken, or was being taken against them by the Plaintiff, might this cause them to embark on activity that may well prove to be prejudicial to the Plaintiff?”  By answering this question, I come to the conclusion that this is not an appropriate case to grant a gagging order.  To start with, Mr Kim has been forewarned about actions that would be taken by the Plaintiff.  Firstly, there was this interview in October; secondly, there were legal proceedings in Korea.  It would be naïve to suggest that he is not forewarned about the prospect of the Plaintiff taking action in Hong Kong with regard to this account maintained with the Defendant.   

7.As regards the risk that there would be prejudicial conduct on the part of Mr Kim upon notice of the present application in terms of getting discovery from the bank about the statements in that bank account, having regard to the state of the evidence and the security held by the Plaintiffs over the assets of Mr Kim and the fact that there has been a repayment of US$7.3 million, I do not consider there is a sufficiently strong case being made out about the likelihood of prejudicial conduct to the detriment of the Plaintiff if Mr Kim is informed about this order. 

8.Mr Chu has urged upon this court to take into account of the previous wrongdoing or the evidence showing the previous wrongdoing on the part of Mr Kim in terms of diversion of funds.  I think, in this regard, one may well have regard to the guidance which the court had laid down in the context of an Anton Piller order, in particular what was said by Lord Nicholl’s in the case of Universal Thermosensors v Hibben [1992] 1 WLR 840.  The fact that a defendant might have committed wrongdoing in the past does not by itself necessarily lead a court to the conclusion that there is a risk of destruction of evidence and suspicion alone is not enough to support a case for an Anton Piller order.  There is something to be said about applying the same wisdom in the context of an application for a gagging order. 

9.In the present context, for the reasons that I have given, I do not think it is appropriate to grant a gagging order.  So I will confine myself to grant relief in terms of the discovery part of the originating summons and that there would be an order in terms of paragraph 1, paragraph 2 (as revised) paragraph 3 and paragraph 5 of the originating summons.

10.This is the order I make. 

Mr David Chu, of Messrs Simmons & Simmons, for the Plaintiff

Defendant, The Hongkong and Shanghai Banking Corporation Limited, in person, absent