Questnet Ltd v. Kurt Georg Rocco Rinck and Another
Read the full judgment text of HCA 1475/2006 on BabelCite. This High Court CFI judgment was delivered on 18 February 2008.
1. By summons filed on 15 November 2007, the 2 nd defendant applied to discharge “the last issued Prohibition Order” against him. The summons was adjourned by the Master to be heard by me. At the hearing on 18 February 2008, I dismissed the application with costs against the 2 nd defendant. My reasons appear below.
Cites 2 cases
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HCA 1475/2006 IN THE HIGH COURT OF THE HONG KONG ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1475 OF 2006 ______________________ BETWEEN
______________________ Coram : Hon Chu J in Chambers Date of Hearing : 18 February 2008 Date of Decision : 18 February 2008 Date of Reasons for Decision : 22 February 2008 ___________________________________ REASONS FOR DECISION ____________________________________ 1.By summons filed on 15 November 2007, the 2nd defendant applied to discharge “the last issued Prohibition Order” against him. The summons was adjourned by the Master to be heard by me. At the hearing on 18 February 2008, I dismissed the application with costs against the 2nd defendant. My reasons appear below. The action 2.On 12 July 2006, the plaintiff issued the writ herein claiming against the 1st defendant for sums of money held by him as the plaintiff’s trustee. The factual circumstances leading to the claim have been detailed in Saunders J’s judgment of 30 November 2006, whereby he granted summary judgment against the 1st defendant. I will not repeat them here. 3.On 21 July 2006, the plaintiff obtained a Mareva injunction against the 1st defendant. Under the Order, the 1st defendant was required to make disclosure by affidavit of, inter alia, details of his dealings with the funds in various trust accounts, together with the identity of the recipient of each withdrawal or transfer of the trust funds. 4.Subsequently, the 1st defendant made a number of affirmations purporting to comply with the order for disclosure. In his fourth affirmation filed on 17 August 2006, the 1st defendant stated, for the first time, he had on 30 June 2006 transferred Euro 582,806.44 into one of his Swiss bank accounts and thereafter placed the funds on trust with the 2nd defendant. The 1st defendant further stated in the affirmation that he had also given instruction to the 2nd defendant to deal with the funds. 5.Consequent upon this disclosure by the 1st defendant, the plaintiff applied to join the 2nd defendant. By the Order of Master de Souza dated 23 August 2006, the 2nd defendant was joined as a defendant to this action. The Master also granted leave to the plaintiff to re-amend the Writ to make amendments consequential upon the joinder. Default judgment dated 4 September 2007 6.On 7 September 2006, the Statement of Claim was filed. With leave of the court granted on 26 October 2006, the plaintiff effected substituted service of the Re-Amended Writ and the Statement of Claim on the 2nd defendant by advertising in the newspapers and by leaving the documents with Messrs John M Pickavant & Co., the 2nd defendant’s former solicitors. Copies of these documents were further served on Messrs Au Yeung, Cheng Ho & Tin on 26 April 2007 after they filed a notice to act for the 2nd defendant. 7.No notice of intention to defend was given by the 2nd defendant. By summons filed on 6 August 2007, the plaintiff applied to enter judgment against the 2nd defendant. With leave of the court granted on 17 August 2007, the plaintiff effected substituted service of the summons together with the supporting affidavit on the 2nd defendant by advertising in the newspapers and by posting to the 2nd defendant’s address in Auckland, New Zealand. 8.Although the 2nd defendant had on 3 September 2007 faxed a letter to the Master requesting to have time to deal with the matter, he did not attend the hearing on 4 September 2007. Having considered the letter, Master de Souza entered judgment for the plaintiff against the 2nd defendant for the amount of US$737,600.31 or its Hong Kong dollars equivalent, together with interest and costs. The Mareva injunction and prohibition order 9.Previously on 17 August 2006, upon receipt of the 1st defendant’s Fourth Affirmation, the plaintiff had moved for and obtained ex parte a Mareva injunction against the 2nd defendant to restrain him from dealing with the Euro 582,806.44. The ex parte order as re-amended on 19 August 2006 was continued by the Order of 1 September 2006. A copy of the 1st Defendant’s fourth affirmation was attached to the injunction order. 10.On the same day, the plaintiff also applied for and obtained a prohibition order against the 2nd defendant prohibiting him from leaving the jurisdiction. The prohibition order has since been extended and renewed. Following the default judgment obtained on 4 September 2007, the prohibition order was further extended. On 7 December 2007, the plaintiff obtained a fresh prohibition order against the 2nd defendant, which was extended on 8 January and 4 February 2008 respectively. This is the subject matter of the 2nd defendant’s discharge application, having regard to the wording of his summons. 11.By the order of Master Ho of 23 August 2006, the plaintiff was given leave to effect substituted service of the Mareva injunction order and the prohibition order on the 2nd defendant. This was duly done. Copies of these orders together with other court documents, including the Re-Amended Writ and Statement of Claim, were also served on Messrs Au Yeung, Cheng Ho & Tin on 26 April 2007 after they filed a notice to act for the 2nd defendant. Contempt proceedings 12.On 10 May 2007, the plaintiff commenced committal proceedings against the 2nd defendant for non-compliance with the disclosure order under the Mareva injunction order. On 15 June 2007, the 2nd defendant was found guilty of contempt with the sentencing being adjourned pending the execution of the warrant of arrest that was issued on the same day. 13.On 27 June 2007, the plaintiff commenced a second set of contempt proceedings against the 2nd defendant for breach of the Mareva injunction order. On 11 September 2007, the 2nd defendant appeared before me and the warrant of arrest was discharged on terms. Sentencing in the first contempt proceedings and the hearing of the second Motion for contempt are scheduled to be heard on 23 to 25 April 2008. Examination proceedings 14.On 20 November 2007, the plaintiff obtained an order for examination of the 2nd defendant to ascertain his assets within and outside Hong Kong for the purpose of enforcing the default judgment against him. By summons filed on 21 January 2008, the 2nd defendant applied to set aside the order for examination. By the order of Master Levy of 4 February 2008, the 2nd defendant’s application and the examination hearing were adjourned to 9 May 2008. Applications to set aside and stay the default judgment 15.By summons filed on 18 December 2007, the 2nd defendant applied to set aside the default judgment. At the first hearing of the summons, the 2nd defendant applied for an interim stay of execution of the judgment, but it was refused by Master Hui. The setting aside application was adjourned for argument and will be heard on 16 April 2008. 16.The 2nd defendant had appealed against the Master’s refusal for an interim stay of execution. On 18 January 2008, Sakhrani J adjourned the appeal for argument. The application for an interim stay of execution of the judgment pending the appeal was refused by the Judge. Relevant legal principles 17.The court’s jurisdiction to make prohibition order is provided by section 21B(1) of the High Court Ordinance, cap. 4 (“the Ordinance”), which states:
18.In addition, Order 44A, rule 3 of Rules of the High Court, cap. 4A (“RHC”) provides that: “Subject to the provisions of section 21B of the Ordinance, the Court may make an order prohibiting the debtor from leaving Hong Kong.” Under rule 2, the application for prohibition order can be made ex parte. 19.When the prohibition order was first granted on 17 August 2006, it was made pursuant to section 21B(1)(c) of the Ordinance as the plaintiff had yet to obtain judgment against the 2nd defendant. In respect of the prohibition order that was granted on 7 December 2007, which is the subject matter of the present discharge application, it was an order made under section 21B(1)(a) in that the plaintiff had by then entered judgment against the 2nd defendant. Accordingly, the requirements under section 21B(2) and (3) have no relevance. 20.As for discharge of prohibition order, section 21B(4)(a) provides that: “The Court may, on application, discharge a prohibition order, either absolutely or subject to such conditions as the Court thinks fit.” 21.Order 44A, rule 4(1) of RHC further provides that the debtor may on 2 days clear notice and upon being present in person in court apply to discharge the prohibition order. Rule 4(2) provides that in an application by a judgment debtor, “the Court shall after assessing the amount due to the judgment creditor if appropriate - (a) discharge the order; and (b) proceed as if the judgment debtor appears under arrest for examination under Order 49B.” 22.Plainly, the exercise of the power to discharge is a matter of discretion. In this regard, it should be pointed out that the provision in Rule 4(4) that the Court shall discharge the prohibition order if satisfied that the defendant has a substantial defence to the plaintiff's claim, has no application to the present discharge application since the sub-rule expressly states that it does not apply to a judgment debtor. 23.In Yue Wah Chuk Richard & Anor v. Mckeon Bredan Hugh (unreported) DCCJ 7088/2003, 24 August 2004, at para.45, H H Judge To commented on the exercise of the discretion in the case of an application by a judgment debtor, with which I respectfully agree, as follows:
24.With these principles in mind, I now turn to deal with the application. The 2nd defendant’s grounds for discharge 25.In support of his application, the 2nd defendant had filed the 4th and 6th affidavits. He had also put in a skeleton argument on the day of the hearing. Based on these documents and his oral submissions, it would appear that the discharge application is made on the following grounds:
The plaintiff’s opposition 26.In opposing the discharge application, the plaintiff’s primary contention is that there is at the very least a real likelihood of the 2nd defendant leaving Hong Kong with the consequence that the enforcement of the default judgment will be obstructed or delayed. The plaintiff’s case is that the 2nd defendant has throughout adopted an evasive attitude towards these proceedings and that, despite having full knowledge of the various proceedings against him, he has been avoiding service of the legal documents. Order 44A, rule 1(2)(b) of RHC 27.The 2nd defendant’s first argument is that the plaintiff had failed to issue a writ against him on the day following the grant of the first prohibition order dated 17 August 2006, as required by Order 44A, rule 1(2)(b), RHC. 28.Order 44, rule 1(1) provides that the Court may grant the relief provided by Order 44 notwithstanding that the plaintiff has not commenced his action. Thus, a prohibition order may be made before the plaintiff has commenced an action. Rule 1(2) goes on to provide that:
29.Order 44A, rule 1(1) has no application to the present case. This is because when the plaintiff applied for the prohibition order against the 2nd defendant on 17 August 2006, the Writ in this action had already been issued. Further, insofar as the prohibition order dated 7 December 2007, the subject matter of this discharge application, is concerned, there can be no doubt that the Re-amended Writ had been issued when it was applied for and granted. It follows that the requirement of an undertaking under rule 1(2)(b) does not arise whether at the time of the application of the prohibition order dated 17 August 2006 or that of the prohibition order dated 7 December 2007. 30.The 2nd defendant had in his submission made the point that the Writ was only sealed and issued on 26 April 2007. The 2nd defendant had not explained the basis of this assertion. In any case, this is clearly erroneous. The Writ in this action was issued on 12 July 2006. It was amended on 17 July 2006. The re-amendment to Writ, which was consequential upon the joining of the 2nd defendant, was made on 23 August 2006. 31.The 2nd defendant’s argument that there has been a breach of Order 44A, rule 1(2)(b) of RHC and that consequentially the plaintiff is guilty of material non-disclosure cannot stand. Merits of the claim and the defence 32.It is common ground that the 2nd defendant was formerly employed by the plaintiff as its chief legal adviser. In August 2006, he had already left the plaintiff’s employment. The 2nd defendant suggests that because there was a dispute between the 1st defendant and the CEO of the plaintiff and that because he was assisting the 1st defendant to set up a rival operation, the plaintiff has a spite against him. The 2nd defendant says that this is vendetta litigation. 33.However, in his 1st affidavit filed in connection with the first contempt proceedings against him, the 2nd defendant had accepted that he had through his personal BVI company, Landbase Corporation, received US$737,600.31 from the 1st defendant and had dealt with the funds, albeit on the 1st defendant’s instruction. At the time the 2nd defendant dealt with the funds, there was already in force a Mareva injunction against the 1st defendant. Further, an amount of US$535,477.50 was remitted to the account of the 1st defendant’s wife on or about 28 August 2006, after the plaintiff had obtained the Mareva injunction against the 2nd defendant. 34.Against these admissions, the 2nd defendant argues that he has been engaged by the 1st defendant as a consultant; his relationship with the 1st defendant is no different than that of a solicitor and client. He claims to have no knowledge of the funds being trust funds belonging to the plaintiff. He also says that he derives no gain from dealing with the funds as instructed by the 1st defendant. He therefore argues that the plaintiff has no cause of action against him at all. 35.Having regard to the Fourth Affirmation of the 1st defendant and the 1st Affidavit of the 2nd defendant, it is, to say the least, not open to the 2nd defendant to contend that the plaintiff has no cause of action against him in respect of his receipt and dealings with the funds the 1st defendant held on trust for the plaintiff. Further, the plaintiff has adduced evidence to show that the 2nd defendant had been seen in the frequent company of the 1st defendant in August 2006. In particular, they went together to the 1st defendant’s former solicitors on 16 August 2006, the day on which the 1st defendant affirmed his fourth affirmation. There must be a grave doubt on the 2nd defendant’s assertions as to his relationship with the 1st defendant, his knowledge of the source and nature of the funds that he had received from the 1st defendant as well as his role when he dealt with the funds after the two Mareva injunctions were granted. 36.That aside, the plaintiff had obtained judgment against the 2nd defendant. Although there is a pending application to set it aside, the judgment remains valid and binding. The 2nd defendant’s attempts to have the execution of it stayed have thus far not been successful. It is also to be noted that in an application to set aside a default judgment, what a defendant must show is that the defence has a real prospect of success. Insofar as the 2nd defendant suggests he has a fair and reasonable or substantial defence, that is the relevant test. Service of legal process 37.In connection with his application to set aside the judgment, the 2nd defendant had criticized the service of documents on him by the plaintiff. The thrust of his complaint is that the plaintiff should have applied for leave to serve outside jurisdiction and sent all the legal documents to his address in Auckland, New Zealand instead of obtaining orders for substituted service. 38.In my view, this argument has no merits. First, there can be no dispute that the 2nd defendant was present within the jurisdiction when he was joined in this action and he has since remained in Hong Kong. Accordingly, there is no proper basis for invoking Order 11 r.1, RHC or to effect service outside jurisdiction. Second, it is obvious from the history of this action, as summarized in the 46th Affidavit of Li Adrienne May together with the 6th affidavit of Seamus Donegan exhibited thereto as exhibit LAM-102, and also Mr Maurellet’s submissions, that the 2nd defendant is a sophisticated litigant and has been taking careful steps to avoid being properly served with the legal process. The plaintiff cannot be criticized for resorting to substituted service. After all, in granting permission to effect substituted service, the Masters involved must have been satisfied that it was appropriate to make the orders. 39.Third, inasmuch as the 2nd defendant says that the plaintiff is well aware of his New Zealand address, he is also well aware of the identity and mode of contact of the plaintiff’s solicitors. On the evidence before the court, it can be readily seen that he has knowledge of the plaintiff’s action against him and also the various proceedings. He could have, right from the early stage of the action, arranged with the plaintiff’s solicitors on the manner of effecting service within jurisdiction. It is against reason and logic to put the plaintiff to the burden and delay of sending documents to New Zealand in order for them to be routed back to Hong Kong to the 2nd defendant when the documents could have been served directly on the 2nd defendant in Hong Kong. Freedom of movement and hardship to the 2nd defendant 40.The 2nd defendant also complains that the prohibition order has infringed his freedom of movement and violates the Bill of Rights Ordinance. In Tam Hing-yee v. Wu Tai-wai [1992] 1 HKLR 185, the Court of Appeal held that the Bill of Rights Ordinance has no application to a dispute between private individuals. The Court of Appeal further observed that the provision in the District Court Ordinance for prohibition orders (which is equivalent to section 21B(1)(a) of the Ordinance) is not inconsistent with Article 8 of the Bills of Right Ordinance. 41.As to the complaint that he has been detained in Hong Kong for some 18 months, two points have to be made. First, although the 2nd defendant was informed by Master Kwan on 18 August 2006 of the making of the prohibition order, he had taken no step to challenge the prohibition order or to discharge it until 15 November 2007 when he filed the present summons. Second, the 2nd defendant has advanced no valid objection to the decisions to grant, extend or renew the prohibition orders. In the circumstances, the mere fact that he has been prevented from leaving Hong Kong is not a ground for discharging the prohibition order. 42.The 2nd defendant says that he is a chronic asthmatic scheduled to be vaccinated annually in New Zealand. He also says that the medication available in Hong Kong is not suitable and his doctor in New Zealand would no longer permit his wife to renew prescriptions for him without seeing him. However, the medical certificate produced by the 2nd defendant (as exhibit D1 to the 2nd defendant’s First Affidavit) was dated 19 February 2007, which was a year ago. While the doctor said in it that he would not give any further renewal of prescriptions, it is not known from the evidence before the court as to what the 2nd defendant has been doing about his medication since then. There are, in addition, no details of the suggestion that the medication available in Hong Kong is unsuitable for his needs. 43.As to the matter of his not being able to travel abroad to discharge his obligation under the sponsorship contract and to represent his country to play billiards, it is not something that weighs materially in favour of a discharge of the prohibition order, having regard to all the circumstances of the case. Undertaking to return 44.At the hearing, the 2nd defendant had offered an undertaking to return to Hong Kong on terms to be imposed by the court. In this connection, it is necessary to take a broad and overall view of the matter. 45.First, there is at present against the 2nd defendant, a valid and binding judgement, on which execution has not been stayed. Second, from the materials before the court, it can be readily inferred that the 2nd defendant has intention to leave Hong Kong and he will do so if the prohibition order were removed. In fact, the 2nd defendant does not dispute this. His family ties are not in Hong Kong. According to him, he has no fixed abode in Hong Kong. Third, it is not known what assets the 2nd defendant may have in Hong Kong. The bank account(s) he had disclosed are offshore. He has not been forthcoming in making disclosure. Fourth, there are a number of outstanding enforcement proceedings against him, ranging from examination of debtor proceeding to contempt proceeding. Fifth, the 2nd defendant’s previous conduct has been less than cooperative. Among other matters, he had been convicted of contempt of court order and is awaiting sentence. 46.In these circumstances, if the prohibition order is discharged, there is more than a real likelihood that the 2nd defendant will leave Hong Kong. There are serious doubts whether he will thereafter return to Hong Kong willingly and/or timely to face the enforcement proceedings. The absence of the 2nd defendant from the jurisdiction will surely obstruct or delay, if not frustrate, the enforcement of the judgment against him. I am therefore not prepared to act on the 2nd defendant’s undertaking to return to Hong Kong. Although he says the court can impose terms, the 2nd defendant has not put forward any condition for the consideration of the court or the plaintiff. 47.For the above reasons, the application to discharge the prohibition order is dismissed. Costs 48.The plaintiff asks for costs of the application and that a gross sum costs order be made under Order 62 rule 9(4)(b), RHC. 49.The 2nd defendant opposes costs by referring to two provisions in the RHC. The first is Order 62, rule 28A, dealing with taxation of costs awarded in favour of a litigant in person. However, the rule has no relevance since there has yet to be a costs order in favour of the 2nd defendant. The 2nd defendant also refers to Order 44A, rule 5, dealing with the court's power to award compensation where “the court is of the view that the prohibition order was applied for on insufficient grounds or was not caused to lapse by the plaintiff or judgment creditor as soon as reasonably possible after it was no longer required”. I am unable to see how this provision applies here especially when the application to discharge has been dismissed. 50.There is no ground to depart from the usual order of costs follow event. Accordingly, the plaintiff should have the costs of this application assessed on party-and-party basis. 51.Clearly, the court has power under Order 62, rule 9(4)(b) RHC to make a gross sum costs order in lieu of taxation. The present discharge application is a short application. Only two hearings are involved. The papers are not voluminous, not in terms of the number of pages but in terms of the item of documents involved in the application. I consider it is appropriate to make a gross sum costs order. 52.The plaintiff’s solicitors have provided a skeleton bill of costs, on which the 2nd defendant has queried the items claimed under Part C. 53.In respect of item C(1), under which AL claimed 17.8 hours for preparation of documents. Having regard to the documents filed by the plaintiff in this application, and on a party-and-party basis assessment, I will allow 15 hours instead, giving rise to a total figure of $36,000.00 for AL, hence a deduction of $6,720. 54.In item C3 relating to preparation for hearings, given that both hearings were attended by counsel, the time for AL is allowed at 3 hours, giving rise to a figure of $7,200.00 and, accordingly, a reduction of $3,600.00. As for EH, who is the litigation executive, I assume his role in the preparation of the hearings would be dealing with the bundles. There is already under Part E, an item for photocopying charges. The $3.00 per page is allowed on the basis that it covers ancillary clerical works such as arranging and pagination of bundles and not mere photocopying. For this reason, the $990.00 charged by EH under C(3) is taken off. 55.Finally, on item C(4), whilst I appreciate the attendance of Mr Donegan at this hearing, the fact remains that on party-and-party costs, only in very exceptional circumstances will two fee earners be allowed. On that basis, I will only allow the fees of AL. There is hence a reduction of $8,000.00. 56.The total amount of costs after all the deductions should be $126,468.00.[1] There is an order that the 2nd defendant pays the plaintiff the costs of this application assessed at $126,468.00.
Mr Jose-Antonio Maurellet instructed by Messrs Barlow Lyde & Gilbert, for the plaintiff The 2nd defendant unrepresented appeared in person.
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Cases cited in this judgment
Further hearings and rulings under HCA 1475/2006