Huang Li v. Hady Hartanto and Others
Read the full judgment text of HCA 2322/2014 on BabelCite. This High Court CFI judgment was delivered on 5 May 2015.
1. This is an application made by the 3 rd defendant, Next Generation Satellite Communications Limited (“Next Generation”), on 8 December 2014 for discharge of the ex parte worldwide Mareva injunction granted by DHCJ Seagroatt on 14 November 2014 and continued (with variations) by the orders dated 21 November 2014 and 12 December 2014.
Cites 4 cases
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HCA 2322/2014 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE HIGH COURT ACTION NO 2322 OF 2014 ________________
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________________ D E C I S I O N 1.This is an application made by the 3rd defendant, Next Generation Satellite Communications Limited (“Next Generation”), on 8 December 2014 for discharge of the ex parte worldwide Mareva injunction granted by DHCJ Seagroatt on 14 November 2014 and continued (with variations) by the orders dated 21 November 2014 and 12 December 2014. 2.The plaintiff, Ms Huang Li, came to know the 1st defendant, Mr Hady Hartanto, in around December 2010 to January 2011 through the introduction of Mr George Lam (“Lam”) and Mr Lu Rui Feng (“Lu”) in Beijing. The plaintiff and the 1st defendant are Hong Kong residents. The 2nd defendant, Telemedia Pacific Group Limited, is a company incorporated in the British Virgin Islands and is said to be “fully controlled” by the 1st defendant although its shares are held by the 1st defendant and Lu as to 50% each. Next Generation is a company incorporated in Singapore and its shares are listed on the Singapore Exchange Securities Limited (“SGX”). 3.According to the notice of change in the percentage level of a substantial shareholder’s interest dated 9 July 2010 submitted by the 1st defendant, the 2nd defendant was described as a substantial shareholder of Next Generation, holding 2,998,500,000 shares (equivalent to 50.01% of its issued shares). In the Annual Report 2012 of Next Generation, the 2nd defendant was described as a substantial shareholder, holding 2,269,500,000 shares (representing 35.54% of its issued shares). The plaintiff’s case 4.It is the plaintiff ’s case, as stated in her affirmation dated 14 November 2014 filed in support of her ex parte application, that at the dinner held before 25 January 2011, the 1st defendant made the following representations to her (collectively “1st Representations”):
5.In reliance on the 1st Representation, the plaintiff agreed to purchase the Shares from the 1st defendant at the Purchase Price (“Agreement”) and provided details of her share depository account with the Hong Kong branch of Bank of China (“Share Account”). On 25 January 2011, the plaintiff and her son met the 1st defendant in Shenzhen at which the 1st defendant directed her to make the cheque payable to “Ban Joo Company Limited” which was the former name of Next Generation. On the same day, the cheque was deposited into Next Generation’s bank account at HSBC in Hong Kong. 6.Despite payment of the Purchase Price, the 1st defendant failed to transfer the Shares to the plaintiff. Following the repeated demands made by the plaintiff, in or around March 2011, the 1st defendant provided a sale and purchase agreement in respect of the Shares (“SPA”) “to placate and/or appease her”. In the course of executing the SPA, the 1st defendant made the following representations to the plaintiff (collectively “2nd Representations”):
7.The plaintiff claims that by providing and executing the SPA the 1st defendant had by conduct further represented that he would abide by the 1st Representations, thereby inducing the plaintiff to sign the SPA and not to seek immediate refund of the Purchase Price (“Further Representations”). In reliance on the 1st Representations, 2nd Representations and Further Representations, the plaintiff executed the SPA and did not seek immediate refund of the Purchase Price. The 1st defendant executed the SPA on behalf of the 2nd defendant and back‑dated it to 28 January 2011. 8.In the SPA, it was stated, inter alia, that:
9.In October 2011, the 1st defendant resigned as executive deputy chairman and director of Next Generation as a result of the regulatory actions taken by SGX against him. The plaintiff was aware of the resignation, but claims that it was only until October 2014 that she knew the true reason of his resignation. 10.The plaintiff says that despite repeated requests made between March 2011 and January 2014, the 1st defendant did not transfer the Shares to her. By letter dated 19 May 2014 issued by Adrian Yeung and Cheng (“AYC”) on behalf of the plaintiff, it was asserted that (a) the 2nd defendant had acted in breach of the SPA by failing to transfer the Shares to the plaintiff, and such act constituted repudiation of the SPA which was accepted by the plaintiff; and (b) the 1st defendant had fraudulently represented to the plaintiff that the 1st and 2nd defendants intended to sell the Shares to the plaintiff, which constituted a fraud on the plaintiff. The letter concluded by stating that unless the 1st and 2nd defendants repay the sum of HK$10,000,000 to the plaintiff within 14 days, the plaintiff shall commence proceedings against the 1st and 2nd defendants and may lodge a complaint to the Hong Kong Police, the SGX and the other relevant authorities. 11.According to the plaintiff, at the meeting held on 4 June 2014 in Shenzhen, the 1st defendant “admitted” that (a) the Shares were “in fact warrants that were owned by Lam” and that the Purchase Price paid into Next Generation’s account was subsequently paid to Lam, and (b) he and the 2nd defendant could not transfer the Shares to the Share Account and, in any event, they could not sell the Shares to the plaintiff as such sale would require them (as substantial shareholders of Next Generation) to make the necessary announcements to SGX and the consent of Lu who holds 50% shares in the 2nd defendant. 12.Thereafter, on 5 June 2014 and 30 June 2014, the 1st defendant through text messages and the letter from his solicitors, Liu, Chan and Lam, requested the plaintiff to withhold legal proceedings. On 6 August 2014, the plaintiff lodged a complaint with SGX. This was followed by a complaint lodged with the Hong Kong Police on 15 August 2014. The 1st defendant was aware of the complaints as he sent a text message to the plaintiff on 11 September 2014, stating that it was not right for the plaintiff to report the matter to the police. 13.On 24 September 2014, the 1st defendant contacted the plaintiff and her solicitors stating that he had deposited HK$2 million with his solicitors which could be paid to the plaintiff the next day, whereupon the plaintiff agreed that if she received HK$2 million by 25 September 2014, she would allow the 1st defendant to repay the balance by 10 October 2014. Despite this promise, the 1st defendant did not pay any amount to the plaintiff by 10 October 2014. 14.In October 2014, the plaintiff became aware of the findings of Ernst & Young from Next Generation’s announcement, which stated that the 1st defendant had been heavily indebted to a finance company, Niaga Finance Company Limited (of which he was a shareholder and director) (“Niaga”), and that it was because of the various transactions between Next Generation and Niaga procured to be made by the 1st defendant in March 2011 which led to SGX’s regulatory actions against the 1st defendant. 15.When confronted by the plaintiff, Lam denied that he had received the Purchase Price while Lu said that the Purchase Price had been paid to Next Generation and that he would request the 1st defendant to repay the Purchase Price in full by 10 October 2014. 16.Since January 2011 the trading price of the shares in Next Generation has been falling, and by 12 November 2014, it fell to S$0.003 per share. 17.Based on the above allegations, the plaintiff pleaded the following claims in the statement of claim dated 14 November 2014 (“SOC”):
18.In her affirmation dated 14 November 2014, under “Real Risk of Dissipation/Dishonesty”, the plaintiff alleged that:
19.On the basis of the above evidence and claims, the plaintiff applied for and obtained an ex parte Mareva injunction against the 1st and 2nd defendants and Next Generation up to HK$10,000,000. Applicable principles 20.It is well established that ex parte application without notice should only be made where either the delay would cause injustice to the applicant or the defendant would take action which may nullify the effect of the injunction: Ho Tak Eng t/a Hung Man Interior Design Co v Fame Brilliant Ltd [2006] 1 HKLRD 34, §8 per Rogers VP. 21.In applying for a Mareva injunction, the plaintiff must show:
22.Where, as here, a worldwide Mareva injunction is sought, the plaintiff has to satisfy the court that (a) there are no assets or insufficient assets within the jurisdiction to satisfy his claim, (b) there are assets outside the jurisdiction, and (c) there is a real risk of dissipation or secretion of those assets so as to render any judgment which the plaintiff may obtain nugatory. In this regard, the plaintiff must make due inquiries regarding the defendant’s assets within and outside jurisdiction, and it is insufficient for the plaintiff to simply argue that any inquiries would have yielded no result as this is a matter that should be established by evidence (Hong Kong Civil Procedure 2015, §29/1/83). 23.As for the duty to make full and frank disclosure, the materiality of the fact is to be decided by the court and not by the assessment of the applicant or his legal advisers. The applicant must make proper inquiries before making the application, as the duty of disclosure applies not only to material facts known to the applicant but also to additional facts which he would have known if he had made such inquiries. If material non‑disclosure is established the court will be astute to ensure that a plaintiff who obtains an ex parte injunction without full disclosure is deprived of any advantage he may have derived by that breach of duty (Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350 at 1356G‑1357B‑C, per Ralph Gibson LJ). 24.The requirement of the plaintiff making due inquiries as to the assets held by the defendants in Hong Kong and overseas and to place such evidence before the court is crucial, as it enables the court to assess whether there is a need to restrain the defendant from disposing its assets pending determination of the action. This principle was stated by Recorder Anthony Chan SC (as he then was) in NCS Co Ltd v Bao Harvest Holdings Ltd [2012] 5 HKLRD 138, as summarized in the headnote:
Grounds for discharge 25.The skeleton used by the plaintiff at the ex parte hearing is not included in the hearing bundles. According to Mr Chan Chung, counsel for the plaintiff, the only basis relied on by the plaintiff for proceeding ex parte was urgency. It was not the plaintiff’s contention that the ex parte application was justified on the need for secrecy. 26.Mr Minju Kim, counsel for Next Generation, contends that the Mareva injunction should be discharged for the following reasons:
27.I shall deal with these points in turn. No risk of dissipation 28.As pointed out by Mr Kim, at the ex parte application, there was no evidence of any risk of dissipation of assets on the part of Next Generation. The plaintiff’s evidence on risk of dissipation of assets, as summarised in §18 above, were all directed to the 1st defendant and, to a certain extent, the 2nd defendant. Nothing was said about Next Generation. This is not surprising as the 1st defendant has since October 2011 ceased to hold any position in Next Generation. Thus, any alleged dishonesty or low commercial morality on the part of the 1st defendant was entirely irrelevant to the question whether at the time the injunction was applied for, there was a risk of dissipation on the part of Next Generation. 29.Mr Chan does not dispute that there was no evidence of risk of dissipation of assets against Next Generation at the ex parte hearing. For this reason alone, the ex parte Mareva injunction should be discharged. 30.Nevertheless, Mr Chan contends that even if the injunction is discharged, the court should re‑grant an injunction against Next Generation as the evidence subsequently filed by the plaintiff shows that there is a risk of dissipation of assets on its part because:
31.Leaving aside the fact that no application for a re‑grant has been made or even fore-shadowed by the plaintiff in the skeleton, the contention is wholly without merit. It is well established that where, as here, there is an effective board, the shareholders cannot in general meeting usurp the powers of the board (Breckland Group Holdings Ltd v London and Suffolk Properties and others [1989] BCLC 100; Miracle Chance Ltd v Ho Yuk Wah [1999] 3 HKC 811 (CA) at 815C‑F). There is nothing to suggest that the board of Next Generation is not effective or that the shareholders are able to usurp its power in the way suggested by Mr Chan. As for the position of the 1st defendant’s sister, I do not think the evidence justifies the plaintiff’s allegation, which is a serious allegation. In any event, as one out of the seven directors, it would not be possible for Ms Hartanto to dissipate the assets of Next Generation. This is particularly so when Ms Hartanto is no longer an authorised signatory of any bank account of Next Generation. Material non‑disclosure 32.Mr Kim submits that the plaintiff failed to make any inquiries as to the assets of Next Generation and to inform the court at the ex parte application the fact that according to the financial information published by Next Generation, it was a solvent company with substantial assets. Mr Kim submits that the omission must be deliberate as the plaintiff did depose to the fact that the 1st and 2nd defendants did not have any assets within or outside the jurisdiction other than the shares in Next Generation, but did not deal with Next Generation’s assets at all. I agree. 33.That the omission to disclose the extent of assets owned by Next Generation must be deliberate is reinforced by the following fact:
34.In light of the material non-disclosure as to the assets of Next Generation, the ex parte Mareva injunction must be discharged. I do not think it is appropriate to re‑grant an injunction against Next Generation even if the plaintiff has demonstrated that there is a risk of dissipation of assets on the part of Next Generation (which it has not). Delay 35.Mr Kim submits that there was considerable delay and inaction on the part of the plaintiff for over three years which shows that there is no risk of dissipation of assets. He relies on Re Chau Cham Wong Patrick, HCB 549/2012, 20 June 2014, where Ng J at §33 said:
36.In the present case, there was a delay of over three years on the part of the plaintiff in commencing proceedings and seeking injunctive relief against the defendants. On the plaintiff’s own case, the 1st defendant was in breach of the alleged Agreement on the same day it was made (25 January 2011) when he failed to transfer the Shares to her. Although the parties then entered into the SPA, which required the 2nd defendant to transfer the Shares to the plaintiff on 28 January 2011 (despite the fact that the SPA was made in March 2011), the 2nd defendant failed to transfer the Shares to her. This was followed by the regulatory action taken by SGX against the 1st defendant in October 2011. Thus, any alleged dishonesty or low commerciality on the part of the 1st and 2nd defendants relied on by the plaintiff at the ex parte application were matters known to her by at least October 2011. 37.Mr Chan submits that there was no delay on the part of the plaintiff as the action was commenced within the limitation period and the 1st defendant had been dealing with the plaintiff until September 2014 when he “disappeared” and could not be found. As regards Next Generation, the application for injunction was prompted by the findings of Ernst & Young announced by Next Generation in October 2014. 38.In my view, the fact that the plaintiff had been in contact with the 1st defendant shows that she was contented to negotiate with the 1st defendant and did not consider that there was any risk of dissipation of assets on his part. As for the findings of Ernst & Young, they only set out the details of the transactions between Next Generation and Niaga procured to be made by the 1st defendant back in March 2011. In any event, there was nothing in Ernst & Young’s findings which suggested that there was any concern about the conduct of Next Generation or its incumbent directors. 39.Having regard to the substantial delay and inaction on the part of the plaintiff, I do not think that it was open to her to justify the ex parte application as against Next Generation on the ground of urgency. The injunction should be discharged for this additional reason. No good arguable case 40.In view of my conclusion on risk of dissipation of assets, material non‑disclosure and delay, it is not necessary for me to consider whether the plaintiff has a good arguable case against Next Generation. Nevertheless, it seems to me that on the basis of the plaintiff’s evidence and the SOC, the plaintiff does not have a good arguable case against Next Generation. 41.So far as the claim for misrepresentation is concerned, there is no allegation that Next Generation was privy to any of the alleged 1st, 2nd or Further Representation or that such representations were made by the 1st defendant on behalf of Next Generation. 42.As for the “trust” claim pleaded in §25 of SOC, it is based solely on the fact that “the Purchase Price had been paid to [Next Generation] for the purpose of acquiring the Shares from the 1st Defendant on the directions of the 1st Defendant in the circumstances as pleaded hereinabove”. At the hearing, Mr Chan submits that since the 1st defendant was a director of Next Generation at that time, his knowledge could be attributed to Next Generation, relying on El Ajou v Dollar Land Holdings plc [1994] 2 All ER 685. On this basis, Mr Chan submits that Next Generation “who had obtained the HK$10M is a constructive trustee of the proceeds and the sum is traceable in equity”. 43.I am unable to see how the fact that the 1st defendant directed the Purchase Price to be paid to Next Generation would make Next Generation to become a trustee in respect of the Purchase Price. The contention is inconsistent with the plaintiff’s own evidence, as well as her pleaded case, that the Purchase Price was paid by her for the purpose of acquiring the Shares from the 1st and 2nd defendants, such that the 1st and 2nd defendants are liable to repay the same by reason of rescission of the SPA, and alternatively, repudiatory breach of the SPA. It is not the plaintiff’s case that as part of their Agreement, the 1st defendant or Next Generation was required to retain the Purchase Price or otherwise hold it on trust for the plaintiff until the Shares were transferred to her. Nor is it the plaintiff’s case that Next Generation was designated by the plaintiff to hold the Purchase Price on trust pending the transfer of the Shares. That being the position, once the Purchase Price was paid to the 1st defendant, he was free to use it in the way he saw fit. The fact that the 1st defendant decided to use the Purchase Price to pay Next Generation would not make Next Generation to become a trustee of the Purchase Price for the plaintiff. The same goes to the plaintiff’s claim against Next Generation for dishonest assistance (§27) and total failure of consideration (§28). Conclusion 44.For the above reasons, I order that the ex parte Mareva injunction granted by DHCJ Seagroatt on 14 November 2014 against Next Generation and continued by the order of DHCJ Seagroatt made on 21 November 2014 and the order of Ng J on 12 December 2014 (as varied) be discharged. I make a costs order nisi that the costs of and occasioned by the summons for discharge dated 8 December 2014 be paid by the plaintiff to Next Generation on an indemnity basis. Such costs to be taxed by way of gross sum assessment. I direct Next Generation to submit a statement of costs within three working days of this Decision and the plaintiff to provide her comments on the statement of costs within three working days thereafter.
Mr Chan Chung, instructed by Adrian Yeung & Cheng, for the plaintiff Mr Minju Kim, instructed by Lam & Co, for the 3rd defendant |
Cases cited in this judgment
Further hearings and rulings under HCA 2322/2014