David Paul Steicke v. Raymond Gatt and Others

HCA 1095/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1095 OF 2015

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DECISION

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1.This is a dispute between two very wealthy men who in the past, and according to Mr Steicke, still, were partners in a gambling syndicate which had its origins in Australia.  Mr Gatt now operates a gambling syndicate in Hong Kong, and Mr Steicke contends that syndicate had its origins in the syndicate of which they were both members.  Consequently, Mr Steicke says that both share equally in the assets of the business that operates the gambling syndicate.  Mr Gatt’s case, yet to be fully pleaded, is, as I understand it, that any partnership that there might have been between himself and Mr Steicke ended in about 2006, and he no longer has any obligations to Mr Steicke.

2.One of the assets in Hong Kong is the float of funds that are used to gamble both in Hong Kong and internationally.

3.On 3 July 2005, Mr Steicke, by counsel, went before DHCJ Seagroatt and obtained, pursuant to Order 29, rule 2 an Interim Preservation and Inspection Order, the terms of which included the following provisions:

“The 1^st, 2^nd and 3^rd Defendant shall detain and preserve the following below-described property which is in their position and/or under their ownership and/or control and which is part of the subject-matter of this Action and in respect of which questions arise herein, namely:-

1. …

(9) the property and subject matter of this action is defined in the Statement of Claim filed on 2^nd July 2015 as follows:-

(ii) Paragraph 35(4) Syndicate Property;

…

2. The Plaintiff’s Solicitors have authorisation, pursuant to Order 29 rule 2(1) and (2) of the Rules of the I Court, to enter the Offices during business hours on 16 July 2015 for the purpose of carrying out this Order by inspecting the property which is subject to the orders in paragraph 1 above and the 1^st, 2^nd and 3^rd Defendants are ordered to:-

(1) allow and/or render their co-operation to allow the Plaintiff and/or his representatives to inspect the said property; and

(2) provide passwords, other access keys and/or assistance to the Plaintiff and/or his representatives to allow the inspection of that property.”

4.The remainder of the order, not set out here, effectively preserves shares in the 2^nd 3^rd and 4^th defendants, real properties owned by the 3^rd defendant and computers, data, software and documentation that will all be relevant in the trial.  On Mr Steicke’s argument these are also all assets to which the betting syndicate is entitled.

5.The return day for the ex parte order was set at Friday, 17 July 2015.  Of course, by that time, pursuant to the order, the inspection would have taken place.

6.Mr Steicke seeks the continuation of the order and the appointment of receivers.  That will be a matter for the inter partes hearing. Mr Barlow sensibly accepted that the inspection, fixed for tomorrow, Thursday, 16 July 2015, could not proceed, and was to be a matter for argument in due course.

7.The question now arises as to whether I should set aside any part of the ex parte order.

8.At the hearing Mr Yu reserved his rights in respect of the remainder of the order, and concentrated on §1(9)(ii).  The effect of the remainder of the order will be to preserve all of the evidence that will be necessary for the trial.  Mr Barlow accepted that §1(9)(ii) was directed at the betting float held by Mr Gatt in Hong Kong.

9.For the following reasons I am satisfied that §1(9)(ii) cannot stand.

10.The order in this case, not only has the effect of preserving an asset, but also the effect of a Mareva order in that it prevents Mr Gatt from dealing in any way with the funds in the float.  That effectively prevents him from carrying on the business of the betting syndicate.  In that sense it is a highly intrusive and oppressive order.

11.Although I accept that the court has an inherent jurisdiction to make an ex parte order in the terms that were granted, that is not the basis upon which counsel went before the judge.  The judge was specifically told that the order was to be made pursuant to Order 29, rule 2.  The judge was not told that by rule 2(5), an order made under Order 29 is required to be by summons, that is on notice, or by notice at a Case Management Conference.

12.Mr Barlow quite properly accepts that the judge was not told that the jurisdiction he was actually exercising was the inherent jurisdiction to make an ex parte order, and that he was being asked to make the order in the face of a rule specifically prohibiting an order in the terms sought, and under the rule relied upon, being made other than on notice.

13.Mr Barlow is fortunate that insistence has not been made at the hearing on the whole order going.  In the face of the failure to draw of the judge’s attention to rule 2(5), I believe I would be quite entitled to set aside the whole order.

14.Second, I am not satisfied that the terms of the order sought are sufficiently clear and precise so that the order might be properly enforced. What is sought to be preserved is a sum of money.  If the order is to be taken at its face value, it prevents any dealing whatsoever with the cash fund in Mr Gatt’s possession being used for his usual business purposes, as he has apparently done without any real complaint since around 2006.  It is right that these are not contempt proceedings, and that the issue as to the clarity and precision of an order usually arises when steps are taken to enforce an order by contempt proceedings.  But that is no reason to say that the court should not strive at the beginning to ensure that an order made is capable of proper enforcement.

15.Third, what is sought to be preserved is simply money.  It cannot be said that the fund now in Mr Gatt’s possession can be identified as the precise sums of money that were in the float in 2006, and issues may well arise as to whether or not the whole of the fund is attributable to the 2006 float. I am satisfied that an adequate remedy will lie in damages if it is subsequently established that funds have been misappropriated or misapplied. In so holding I recognise that Mr Barlow argues that the funds are partnership funds and accordingly liable to be the subject of an order in specie.

Fourth, I am not satisfied that there is a sufficient risk of dissipation of the fund that would justify an intrusive and oppressive order at this stage.  The dispute has been simmering between the parties on the lowest possible boil between 2006 and 2014.  It came to a head again in 2014, with exchanges of e‑mails between the parties.  Mr Steicke consulted solicitors who, on 21 April 2015 issued a generally indorsed writ. Thereafter, correspondence began between the parties solicitors.

16.There is nothing to suggest that through the whole of that time, some nine years, Mr Gatt has done anything with the fund other than use it for the purpose that it was intended.  The issue between the parties is for whom that purpose was intended.  It is right, and I accept, that the fund may be moved offshore at the stroke of a computer key.  Mr Gatt has had ample warning of these proceedings, and there is no suggestion that he has taken any such step, or that he intends to take such a step. 

17.As I pointed out during the hearing, it would be a very foolish man who, facing this very expensive litigation, would not endeavour to maintain the high moral ground, and keep the fund in Hong Kong.  He would be facing a very difficult argument on his own credibility at the trial were he to take any step now to conceal the fund.

18.Mr Barlow argues that Mr Gatt has been endeavouring to evade service.  Both parties are wealthy men with international business interests.  It is entirely normal these days for such men to travel widely, and often.  That they are doing so does not raise an inference of evasion of service.  It might have been better if Mr Gatt had instructed his solicitor’s to accept service on his behalf, but that failure to do so is not such as to raise a prima facie case of risk of dissipation.

19.Finally, I have regarded to the delay on the part of Mr Steicke in commencing these proceedings.  For nine years he has apparently known of his entitlement to share in the betting float, but other than an occasional exchange of e‑mails he has been perfectly content to let Mr Gatt continue to operate the gambling business using the funds in the float.  If he was not concerned about the risk of dissipation of the fund by Mr Gatt for nine years, it is difficult to see why he should have an oppressive order now.  It is right that he moved immediately after the issue of the writ for the order, but that is not the period by which his delay must be judged.

20.For these reasons I set aside §1(9)(ii) of the order of 3 July 2015.  I should note that the fact that the order has been set aside is not a bar to Mr Steicke is seeking a re‑grant of the order in the course of the inter partes hearing that is yet to come.

21.I then heard the parties on ancillary matters arising and a timetable for the inter partes hearing, and made the following orders:

(1)   The 1^st to 3^rd defendants to file affirmations in reply within 28 days, by 12 August 2015.

(2)   The plaintiff to reply within 14 days, by 26 August 2015.

(3)   The inter partes hearing to be set down for two days, not before 9 September 2015, the parties being entitled to seek the hearing date immediately notwithstanding that affirmations have not yet been filed.  Leave is reserved to the defendants to pursue the summons to set aside the whole of the ex parte order, at the inter partes hearing.

(4)   The date for inspection be set aside, and the issue of inspection adjourned to the inter partes hearing.

(5)   Leave is reserved to apply.

22.Having heard counsel, I ordered that the costs of and incidental to the inter partes hearing on 17 July 2015 of the 1^st – 3^rd defendants’ application to set aside the ex parte order be the 1^st – 3^rd defendants’ costs in the cause, with a certificate for two counsel.

Mr Barrie Barlow SC, leading Mr Chan Pat Lun, instructed by Oldham Li & Nie, for the plaintiff

Mr Benjamin Yu SC, leading Ms Bianca Yu, instructed by Kwok, Ng & Chan, for the 1^st to 3^rd defendants

4^th defendant, represented by Kwok, Ng & Chan,  did not appear

5^th – 7^th defendants, absent