Grand Field Group Holdings Ltd v. Chu King Fai and Others

HCA 771/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 771 OF 2009

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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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Introduction

1.At the end of the hearing on 12 November 2014, I discharged the Mareva injunction continued by the court on 27 June 2014.  Below are the reasons for the decision.

Background

2.The said injunction has a rather unusual background.

3.The plaintiff commenced this action in 2009, pursuant to leave granted by the court in February 2009.  Further, the plaintiff sought, and was granted, a Mareva injunction in August 2012; it was continued in various subsequent orders in May 2013.  The last of the injunction orders before the trial of this action was dated 5 June 2014.  As is common for interlocutory injunctions, the last-mentioned order continued the Mareva injunction:

“… until trial or further order of the Court” (para 1 thereof).

(the more desirable format nowadays would be to continue the injunction “until the determination of (or “judgment in”) the action or further order (or “unless previously varied or discharged”)): Gee on Commercial Injunctions (2004) 5^th Ed, para 23.001.

4.After a 19-day trial which spanned over various days in August, September and October 2012, and in a judgment handed down on 17 June 2014 (which contains over 120 pages), the deputy judge dismissed the plaintiff’s claims (“the deputy judge’s judgment”).

5.By November 2012 (after the completion of the trial), one would have thought the said Mareva injunction should have lapsed by reason that the event prescribed therein for it to lapse having taken place (that is, the trial).  If that did not in fact happen, one would have thought the dismissal of the plaintiff’s claim in June 2014 should have brought about that result.

6.Strangely, however, two applicants which were affected by the Mareva injunction (collectively “the applicants”) considered it necessary to take out an application, subsequent to the deputy judge’s judgment, to have the said Mareva injunction discharged.  That application came to be heard by another judge a few days later, who ordered that:

“For the avoidance of doubt, [the said Mareva injunction is] to continue until determination of [the summons] or until further order of the Court” (para 4 thereof).

7.This is again unusual because, as observed in para 5 above, by the end of June 2014, the said Mareva injunction most certainly should have lapsed, and hence there was no injunction still in existence to be “continued”.

8.No matter, the state of affairs was as summarized above when the applicants’ said “discharge” application (which has the strange effect of “resurrecting” an already lapsed injunction) came before me.

This application

9.Having drawn the parties’ attention to the above history, and with their agreement, the said “discharge” application was treated as the plaintiff’s application for a fresh Mareva injunction, despite its claims in this action having been dismissed.

10.The plaintiff has helpfully drawn my attention to the decision of T v Shiu Wai Tuen HCA 2229/2007 (10 January 2011); [2011] HKEC 61 (para 14 to 15 thereof) in support of its argument that there is jurisdiction to grant such an injunction.  There, the trial judge, having earlier dismissed the plaintiff’s claim and entered judgment for the defendant’s counterclaim, granted a Mareva injunction which was to last until the determination of the plaintiff’s appeal (on condition the plaintiff paid into court part of the judgment sum).

11.The main plank of the plaintiff’s present application was that there is a real prospect of success in the pending appeal.  The following matters were specifically raised by the plaintiff in support of such a stance.

12.The first ground relied on by the plaintiff was that the trial deputy judge was biased against it (or at least gave an appearance of bias): para 1, notice of appeal. After hearing further from the plaintiff, the real complaint was in short that the trial deputy judge has erroneously disbelieved the plaintiff’s witness.

13.The first instance (or example) of such error was said to be set out at para 1(c) and (f), notice of appeal.  The former is about the part of the deputy judge’s judgment which gives a general overview of the reasons for the deputy judge’s assessment of credibility (that is, para 119 thereof). But there are in fact other paragraphs in the deputy judge’s judgment relevant to that exercise, including para 115 to 118 and 120.  Finally, at para 121, the deputy judge stated:

“In my consideration of the plaintiff’s claim below, I will also identify other areas of Mr Tsang’s evidence which I find to be incredible or unconvincing”.

14.Para 127 to 268, the deputy judge’s judgment, then elaborated on the different aspects of the dispute, and discussed the witnesses’ credibility under different headings (such as “Bribery of directors”, “Breach of fiduciary duties by the defendants in the setting up of Yuan Cheng and using it to provide rolling facilities”, and “Yuan Cheng Contentions”).

15.A fair reading of the above passages cannot in any way give rise to an impression of bias; rather, they show a detailed and reasoned approach to an exercise of credibility assessment and fact finding.

16.Para 1(f), notice of appeal, is a mere assertion to the effect that a fair-minded observer would have concluded the deputy judge pre-judged Mr Tsang’s credibility and was unfair and inappropriate.  In view of the conclusion in para 15 above, there is no substance in the assertion.

17.The second example of the deputy judge’s alleged error is set out at para 1(b) (and in effect repeated at para 3), notice of appeal.  The complaint is that the deputy judge failed or refused to draw adverse inference against the defence witnesses when one witness did not testify and another left the court during cross-examination (para 124, the deputy judge’s judgment).  On the other hand, the deputy judge drew adverse inference against the plaintiff when one witness did not testify (para 161 and 202, the deputy judge’s judgment).

18.In considering the importance of the “adverse inference”, it has to be borne in mind what the plaintiff’s case was at trial; in short, it was the plaintiff’s directors were bribed to pass board resolutions to enable the plaintiff’s assets (principally money) to be siphoned off as directed by the defendants (see para 2(a) to (h), the deputy judge’s judgment for details).

19.Such being the case, the deputy judge must have approached the dispute on the basis the plaintiff should bear the burden of proving the above allegation (the burden was fairly (and correctly) accepted by the plaintiff at the hearing before me).

20.Judged from that perspective, it is difficult to see what could be gained by drawing an adverse inference against the defence witnesses. The plaintiff has attempted to do so during the hearing before me; various parts of the trial transcript have been examined (see below).

21.The first part of the deputy judge’s judgment challenged by the plaintiff is para 251 thereof (concerning an alleged wrongful transfer of RMB17 million).  However, it can also be seen that that aspect was further discussed in para 252 to 258 thereof (where various reasons were given for the rejection of the plaintiff’s case of misuse of its assets as “rolling facilities”).  So the question of drawing “adverse inference” should have no proper place.

22.The plaintiff also tried to establish that the defence witness who left the court admitted that a Ms Chen Yu belonged to the defence camp (and hence the trial deputy judge should have drawn an adverse inference when she did not testify for the defence).  However, the parts of the transcript referred to actually show that the testimony during the cross-examination was:

“… because Madam Chen Yu was completely unrelated to me. She was employed from the market and also appointed by the chairman [that is, Mr Tsang, a principal witness for the plaintiff] … ”.

Those parts of the transcript simply failed to support the plaintiff’s above argument.

23.The notice of appeal (para 5 thereof) also complains that the deputy judge failed to consider an ex facie illegal contract (para 226 to 227 thereof).  But the evidence relied on falls short of establishing that complaint:

(a) the plaintiff pleaded that the terms of what were called “the Management Services Agreement” and “the Supplemental Agreement” were not normal commercial terms and were blatantly disadvantageous to the plaintiff (para 226, the deputy judge’s judgment);

(b) the cross-examination elicited a few answers which “seemed to suggest that the above agreements were a sham” (para 227, the deputy judge’s judgment).

24.That being the state of the evidence, the deputy judge cannot be faulted for concluding that the plaintiff should not be allowed to put forth illegality in the absence of proper pleading (para 228, the deputy judge’s judgment).

25.By virtue of the above matters, I do not consider there is a real prospect of success in the plaintiff’s appeal.

Conclusion

26.To conclude, the plaintiff was unable to establish a good arguable case that it has a real prospect of success in its appeal.  The application for a fresh Mareva injunction post-judgment should be refused on this ground alone.

Other matters

27.The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the reasons for decision and its comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.

Ms Lorinda Lau, instructed by Simon Ho & Co, for the plaintiff

Mr Raymond Fong & Mr Keith Lau, instructed by Kelvin Cheung & Co, for Hongkong Zhongxing Group Company Limited and Li Yi