Komal Patel and Others v. Chris Au and Others

HCA 183/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 183 OF 2014

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DECISION
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1.This is an application by Retribution for leave to appeal against this Court’s decision dated 7 July 2015 refusing to vary the freezing injunction order dated 11 July 2014.

2.By my decision dated 7 July 2015, I refused Retribution’s application to vary the injunction.  The order sought under Order 29 of the Rules of the High Court was in the following terms which I highlight by bold type instead of red as stated therein.

“1. Paragraph 1(3)(i) of the injunction order granted by Zervos J on 11 July 2014 as against the 1^st, 2^nd and 3^rd Defendants (“the Injunction Order”) be varied in the following terms, with the amendments highlighted in red :-

‘The 3^rd Defendant (by Original Action) must not remove from Hong Kong any of its property or assets, or in any way dispose of or diminish the value of its property up to the amount of the Plaintiffs’ (by Original Action) claim against the 3^rd Defendant (namely two-thirds of SGD 11.984 million), or the Plaintiffs’ (by Original Action) property or assets in its hands, including but not limited to:-

(i) the funds it holds in its bank account held at DBS Bank numbered 786020573 (Bank Code: 016; Bank swift code: DHBKHKHH; Bank address: G/F, The Center, 99 Queen’s Road Central, Central) (the “DBS Bank Account”) up to the amount of the Plaintiffs’ claim against the 3^rd Defendant, namely two-thirds of SGD 11.984 million (ie SGD 7.99 million)

(ii) the funds it hold in its bank account held at Bank of China numbered 047-886-429

(iii) the shares it holds in Kudeta (BVI) Limited’

2. Exception (1) of the Injunction Order be varied to reflect paragraph (1) above.”

3.Retribution seeks leave to appeal against the interlocutory decisions, namely, the injunction order of 11 July 2014 and the refusal to vary the injunction order of 7 July 2015, pursuant to section 14AA(4) of the High Court Ordinance, Cap 4.  In deciding whether to grant leave to appeal, I have to be satisfied that the appeal has a reasonable prospect of success or that there is some other reason in the interests of justice why the appeal should be heard. 

4.The proposed grounds of appeal essentially complain of two matters.  First, the injunction order of 11 July 2014 was granted on an erroneous legal basis and froze more assets than the plaintiffs’ total claim.  Secondly, the injunction order was highly unusual as it effectively provided no allowance to Retribution in respect of legal fees and thus resulted in manifest unfairness to it. 

5.It is well settled that the purpose of an injunction is to preserve assets so that the claimant’s claim can be satisfied and should cover anything against which a judgment could be enforced. 

6.The funds frozen is the sum of SGD 11.98 4 million which were monies that were transferred to Retribution’s bank account and represent part payment of L Capital’s acquisition of a 51% stake in KDT BVI.

7.Mr Douglas Clark, who appears with Mr Martin Ho for Retribution, argues under the first ground that the injunction order cannot extend beyond the plaintiffs’ proprietary claim of two-thirds of the funds.  This is only part of the plaintiffs’ claim where it is alleged that the 1^st and 3^rd plaintiffs are the beneficial owners of one-third each of the shareholding of Retribution with the other third beneficial ownership to the 1^st defendant.  On this aspect of the dispute between the parties, both the 1^st and 2^nd defendants in their respective pleaded cases, say that the funds frozen belong to the 1^st defendant, as representing part payment of the purchase of his interest in KDT BVI held on his behalf by Retribution.  The significance of this is that on the cases pleaded by the parties it is not asserted that the funds frozen belong to Retribution.  

8.The issue as to the beneficial ownership of the shareholding of Retribution is only one aspect of the plaintiffs’ claim as summarised below in the Re-Amended Statement of Claim dated 18 June 2015:

“(A) Against the 1^st Defendant

(1) Damages to the 1^st, 2^nd and/or 4^th Plaintiffs for breach of the General Agreement pleaded in paragraph 19 and/or paragraph 44A above to be assessed by this Honourable Court.

(2) A Declaration that the 1^st Defendant:

hold all Distributable Profits referred to in paragraph 19 and/or paragraph 44A above on constructive or other trusts for the 1^st, 2^nd and/or 4^th Plaintiffs.

(3) Tracing into such Distributable Profits and all assets replacing or substituting the same.

(4) All necessary accounts and inquiries in respect of all Distributable Profits referred to in (2) above to the 1^st, 2^nd and/or 4^th Plaintiffs.

(5) Payment and delivery up of what is found due upon the taking of such accounts and the making of such inquiries.

(6) Damages to the 1^st and 3^rd Plaintiffs as pleaded in paragraph 65F above.

(B) Against the 1^st and 2^nd Defendants

(7) A Declaration that the 2^nd Defendant held and still holds 63.67% and 11.63% shareholdings in the 3^rd Defendant, and all Distributable Profits as pleaded in paragraph 39 above, on trust for the 1^st and 3^rd Plaintiffs (together with Cheong Yew Kuan on Teeka’s behalf) and the 2^nd Plaintiff respectively.

(8) Equitable compensation and/or damages as pleaded in paragraphs 39 and 57 above.

(9) Tracing into such Distributable Profits as referred to in (7) above and all assets replacing or substituting the same.

(10) All necessary accounts and inquiries in respect of all Distributable Profits referred to in (7) above to the 1^st to 3^rd Plaintiffs.

(C) Against the 3^rd Defendant

(11) A Declaration that it holds two-thirds of the purchase price installment of SGD 11.8 million received from L Capital on 29^th January 2014 on trust for the 1^st and 3^rd Plaintiffs.

(12) An order for the payment to the 1^st and 3^rd Plaintiffs of the amount referred to in (11) above.

(D) Against all Defendants

(13) Equitable compensation and/or damages for breach of fiduciary duties.

(14) An Order for all accounts and inquiries to be taken, and for payment of all sums found due.

(15) An injunction that the 1^st, 2^nd, and 3^rd Defendants, whether acting by themselves, their servants, agents, employees or otherwise howsoever (including but not limited to Casey Au), be restrained until the determination of these proceedings or further order, from doing any act which causes, procures or induces, or is intended to cause, procure or induce L Capital to act in breach of the ARSHA and/or ARCLA, or to interfere with the performance by L Capital or the Plaintiffs of the ARSHA and/or ARCLA relating to the 1^st and 3^rd Plaintiffs’ contractual rights as majority beneficial shareholders of the 3^rd Defendant to be appointed and to act as directors of Kudeta BVI.

(16) Equitable compensation and common law damages, including damages for conspiracy and interference with contractual relations.

(17) Interest as aforesaid pursuant to s.48 High Court Ordinance Cap 4, alternatively under the Court’s equitable jurisdiction.

(18) Further or other relief.

(19) Costs.”

9.Mr Clark seeks to quantify the plaintiffs’ claim which he submits is a total sum less than the funds frozen.  On his calculations, by converting the sum of money from Singaporean dollars into Hong Kong dollars, he submits that the total liquidated claims amount to about $96 million and the total amount frozen amount to about $112 million which therefore leaves an excess amount of about $16 million.  He submits that these calculations are made by taking the plaintiffs’ case at its highest.  As I explained in my decision, I accepted the plaintiffs’ submissions on this issue and the calculations will undoubtedly be subject to a more precise determination at trial. 

10.Mr Clark complains that there is no upper limit in respect of the funds frozen in the injunction order.  He refers to cases concerned with injunction orders where the amount is unlimited but this is not really on point in the present case as the funds frozen are a fixed amount.  Whilst unlimited orders are rarely justifiable in ordinary freezing injunction cases, there are instances where it may be appropriate for the courts to place no financial limits on the injunction, either because the full quantum of the claimant’s claim is unascertainable (or unascertainable to a reasonably accurate or reliable degree), or because it is just and equitable that all assets should be preserved until investigations have been carried out or the matter has been finally determined.  See Macy’s Candies Ltd v Chan Man Hong [1997] HKLRD 554 and Gee on Commercial Injunctions (5^th Edition, 2004) at 116-122. 

11.In any event the injunction order is for the fixed amount of SGD 11.984 million which as submitted by the plaintiffs is frozen to cover the plaintiffs’ overall claim against the defendants. 

12.The second ground questions whether it was legally permissible to provide no allowance to Retribution in respect of legal fees in the injunction order of 11 July 2014.  This issue was raised for the first time at the variation hearing on 25 June 2015.  The reason for the variation application is explained in the 2^nd defendant’s 6^th affirmation and seems to be motivated out of a desire to obtain access to the funds frozen in order to pay legal fees that have been substantially incurred by the 1^st and 2^nd defendants.  See paragraph 11 of my decision.  On the 1^st and 2^nd defendants’ pleaded cases, the funds in question belonged to the 1^st defendant and not to Retribution.  In my decision, I questioned why provision should be made for Retribution’s legal fees from monies that are claimed to belong to the 1^st defendant on the cases pleaded by the defendants and that are also at the very heart of this dispute. 

13.I am not satisfied that the intended appeal has any reasonable prospect of success and I see no reason why leave should be granted in the interests of justice.  The application for leave to appeal is therefore refused.

Mr Barry Hoy, Robertsons, Solicitors for the plaintiffs

Mr Douglas Clark and Mr Martin Ho, instructed by Au & Vrijmoed, for the 3^rd defendant