TIGER RESORT ASIA LITD v. KAZUO OKADA AND OTHERS

HCA 3017/2017

[2022] HKCFI 2289

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3017 OF 2017

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D E C I S I O N

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A. THE SUMMONSES

1.  There are four summonses before this court:

(a)  By the plaintiff (“P”), its Summons dated 5 August 2021 (“P’s Judgment Summons”) for an order that the 1^st defendant (“D1”) having failed to comply with an unless order dated 22 April 2021 made by this Court (the “Unless Order”)[1]and his Re-Amended Defence (the “Re-Amended Defence”) having consequently been struck out automatically on 20 May 2021, P be at liberty to enter judgment against D1 for HK$120 million and HK$16 million together with interest;

(b)  By D1:

(i)  his Summons dated 27 August 2021 (the “D1’s Relief Summons”)[2], seeking:

(1)  extension of time for applying for relief from sanction for non-compliance (if any) of the Unless Order (the “D1’s Extension Application”); and

(2)  relief from sanction for such non-compliance (the “D1’s Relief Application”);

(ii)  his Summons of 6 April 2021 (the “D1/Aff13 Summons”) seeking leave to file and serve his 13^th affirmation (“D1/Aff13”); and

(iii)  his Summons of 19 April 2021 (the “D1/Aff14 Summons”) seeking leave to file and serve his 14^th affirmation (“D1/Aff14”).

2.  Mr Robert Whitehead SC leading Mr Steven Kwan and Ms Charlotte Chan appear for P.  Mr MC Law SC leading Ms Natalie So appear for D1.

B.  THE D1/AFF13 AND D1/AFF14 FURTHER AFFIRMATION APPLICATION

3.  Mr Whitehead does not oppose the same.  I on 20 April 2022 made an order in terms of the two summonses, with costs to P.

C.  PREVIOUS DECISIONS OF THIS COURT

4.  Parties have previously come before this Court.  Arising from those appearances I have handed down a number of Decisions.  I refer to those Decisions, and unless otherwise specified, adopt the same terms and nomenclature which I used. 

5.  Amongst those various Decisions, of particular relevance to the present applications are:

(a)  My Decision of 31 May 2019[3] (the “Injunction Decision”), wherein I:

(i)  set out the nature of P’s claims against D1 and the basis of P’s application for a proprietary/Mareva injunction (with discovery in aid) against inter alios him[4];

(ii)  set out my reasons for making against D1:

(1)  a proprietary injunction restraining disposition of:

(a)  the sum of JPY¥ 1,002 million (referred to in the Injunction Decision as the “3^rd Sum”); and

(b)  the sum of HK$22,556,519.38 (referred to as the “4^th Sum (Part)”) out of the sum of US$18 million (which US$18 million was referred to as the “4^th Sum”);

(2)  a disclosure order (the “Disclosure Order”) requiring D1 to give disclosure on the whereabouts and what has become of the above two sums; and

(3)  an order that D1 be cross-examined on §§5.1 and 5.2 of his 2^nd affirmation of 8 May 2018[5];

(b)  My Decision of 22 April 2021[6] (the “Unless Order Decision”) wherein I:

(i)  summarized the contents of D1’s 5^th to 9^th affirmations (“D1/Aff5” to “D1/Aff9”) filed principally in purported compliance of the Disclosure Order[7];

(ii)  set out my reasons for concluding that D1 had failed to comply with the Disclosure Order; and

(iii)  explained why I made against D1 the Unless Order.

D.  THE DISCLOSURE ORDER AND THE UNLESS ORDER

6.  I set out here for ease of reference the terms of:

(a)  the Disclosure Order, that:

“[D1] shall disclose to [P] in writing within 14 days as to the whereabouts and what, if anything, has become the [3^rd Sum] and [4^th Sum (Part)]. The information to be disclosed to [P] shall be confirmed in an affidavit or affirmation with relevant documents identified and exhibited which must be served on [P’s] solicitors”;

(b)  the Unless Order, that:

“Unless by 4 pm on Thursday, 20^th May 2021 [D1] serve an affidavit or affirmation in full and proper compliance with [the Disclosure Order], the [Re-Amended Defence] be struck out and [P] be at liberty to enter judgment against [D1] with costs …”.

E.  THE 3^RD SUM AND THE 4^TH SUM (PART) – A RECAPITULATION

7.  The fund-flows of the 3^rd Sum and the 4^th Sum (Part) are important.  I have set them out in some details in the Injunction Decision and Unless Order Decision.  I refer to[8] and will not repeat them here.  In gist, and most relevantly:

(a)  In respect of the 3^rd Sum, it was transmitted via D2 to D1, then from D1 to D5, and then on around 15 June 2016 JPY¥1,000,000,000 out of it was remitted from D5 BComm Account to an account held by Teramoto Seiichiro (“Teramoto” or “Mr Teramoto”).  Teramoto was an art dealer residing in Tokyo; and

(b)  In respect of the 4^th Sum (Part)[9], the 4^th Sum was transmitted by D2 to D1, then by D1 to his BDO Peso Account with Unibank, out of which a number of sums were transferred out, as follows (the “5 Transfers-out”):

Date of Transaction	Payee	Sum in Peso (HKD at 1 to 6.5)
27.09.2016	Merlita R Montefalcon[10]	₱100,000 (HK$15,392)
30.09.2016	Laurence Hawke[11]	₱300,000 (HK$46,177)
11.10.2016	Ivarluski Aseron[12]	₱105,000 (HK$16,161)
25.10.2016	Transasia Construction Development Corporation[13]	₱450,000,000 (HK$69,265,553)
27.10.2016	Dindo A Espeleta[14]	₱300,000,000 (HK$46,177,035)

F.  SUBSEQUENT MATTERS LEADING TO THE PRESENT APPLICATIONS

8.  Subsequent to the Unless Order, and said to be for the purpose of complying the same, D filed his 10^th and 11^th affirmations dated respectively 20 May and 15 September 2021 (“D1/Aff10” and “D1/Aff11”).

9.  D1/Aff10 is intended to be the main affirmation.  On disclosure, and in gist:

(a)  In respect of the 3^rd Sum:

(i)  D1 describes the efforts he says he and his lawyer have made in tracking down Teramoto.  He says that after Teramoto left the Okada Museum of Art (the “Museum”), he (D1) had not reached out to him.  He therefore asked his solicitors to conduct a search of Teramoto on the internet.  He said that it was then discovered that Teramoto was the owner of a café in Saga, Japan.  A letter was sent to him.  That letter has been produced and is dated 8 May 2021.  D1 says that after the Unless Order Decision was handed down on 22 April 2021, he upon advice from his legal advisers also called Teramoto on his last known mobile number.  He managed to speak to him.  D1 says at §17 that:

“… I asked him to provide the information requested but he had not responded. He then came to visit me at my home respectively on around 7 and 10 May 2021 as I was very ill and had to rest at home. Despite the requests made during the meetings, Mr Teramoto did not provide me with any information. In view of this, on 19 May 2021, I further arranged to meet with Mr Teramoto as a follow up on this request.”

D1 then says that during that meeting, Teramoto “expressed strongly against me on this request and questioned why I instructed my lawyers to send him a legal letter”.  Despite further explanations, at the end of the meeting, Teramoto refused to provide any information on the artworks purchased or reasons for his refusal to disclose;

(ii)  D1 also says that the Museum possesses a list which contains information about the origin and provenance of the art pieces, with records such as the time when they were deposited into the Museum (the “Museum List”);

(b)  In respect of the 4^th Sum (Part) and the 5 Transfers-out, again in gist:

(i)     Despite efforts, he and his lawyers were not able to identify Montefalcon;

(ii)    After efforts, Hawke had been tracked down, who on 19 May 2021 talked to D1’s lawyers.  Hawke could not remember details of the payment, though he confirmed that he was an employee of Okada Manila, and so he might get regular payments;

(iii)   After efforts, Aseron was identified as a fashion designer in the Philippines.  Though D1 does not recall, his best conclusion is that the sum to Aseron was either designing fee or the price of some clothes Aseron made for him;

(iv)   Requests for information had been sent to Transasia, but no reply has been received.  But since Transasia was the construction company engaged for the building of the Okada Manila (resort and casino) project, D1 verily believes that the payment was made in connection with that project;

(v)    Despites efforts, Espeleta could neither be identified nor located;

(vi)   D1 has further asked his assistant to look for the records they had in the Philippines in relation to those 5 persons or entities.  There was no information of the payments to Montefalcon, Hawke and Aseron.  As regards Transasia and Espeleta, D1 says that “since there are ongoing disputes with these parties, my assistant cannot reach out to them”[15].

10.  In respect of D1/Aff11:

(a)  D1 provides therein some update to the information he has provided in D1/Aff10.  Notably, he says that Teramoto replied in writing in June 2021. Teramoto said that details of the artworks he has dealt with “must be kept as an extreme secret in our circle, which is also the professional duty of an art dealer”.  Further but unsuccessful efforts have been made to find Negishi.  He has given some further information on the Okada Manila Project;

(b)  D1/Aff11 was also filed in support of D1’s Relief Summons.  D1 states his belief that the Unless Order has been complied with, but that if this Court is of the view that he has not, he seeks relief from sanction.  He says that he had a busy schedule running a business corporation with worldwide presence.  He delegated his duties and work to assistants, one being Negishi, who handled all his financial transactions, of which there were numerous.  D1 trusted him, and did not keep records himself.  After he has been ousted from his business empire, he no longer has access to the information and records kept by the company, including those on the artworks.  He is of advanced age, and his health has been poor.  He says that the claim P makes against him involves very serious allegations of dishonesty and impropriety.  If his Re-Amended Defence were struck out, he would be deprived of the opportunity to defend the case.

11.  On 21^st December 2021, Mr Asano (“Asano”) filed his 7^th affirmation (“Asano/Aff7”) in support of P’s Judgment Summons.  Amongst other matters:

(a)  He produces a set of Private Investigation Reports (“PI Reports”), that:

“12.  [P] has obtained the [PI Reports] prepared by private investigators instructed by [Universal Entertainment Corporation (“UE”)].  The PI Reports concern [D1’s] daily activities for the period of surveillance from January 2021 to early November 2021.  I verily believe that the same to be true and accurate.

  …

16.  Further, I have been informed by UE that the private investigators have been following [D1] for an extensive period of time and are therefore familiar with Mr Teramoto and his vehicles.  For instance, as recorded in the PI Report dated 15 April 2021 …, the private investigators attended Mr Teramoto’s residence and was able to identify his Mercedes Benz there ...”[16]

(b)  The PI Reports come with photographs.  As summarized by Asano, the PI Reports show that between January and early November 2021, D1 and Teramoto had met at least 55 times.  Just between January and April 2021, there were some 22 meetings.  That is a stark contrast with D1’s version about him having had to instruct his lawyers to internet search Teramoto’s whereabouts, and that a letter had to be sent in May 2021 to him at the address of the café which D1 says they managed to discover;

(c)  Asano denies the existence of any Museum List which contains the sort of information and records claimed by D1;

(d)  Asano produces the printout of a softcopy of an invoice dated 6 June 2016 issued by Teramoto to D5 recording the sale of   9 sets of artwork (the “9 Sets of Artwork”) in the aggregate sum of JPY¥1,000,000,000 (the “Invoice”);

(e)  Asano says that as D1 has not made all genuine attempts to gather and provide information as required under the Unless Order, no relief from sanction should be granted.  P also seeks an order that D1’s Re-Amended Defence be struck out, and that P be at liberty to enter judgment against him.

12.  Subsequently, D1 further filed D1/Aff12 to D1/Aff14.

13.  D1/Aff12 was principally filed in reply to Asano/Aff7:

(a)  In respect of the PI Reports, he has the following to say:

“4. Regarding the purported PI Reports, whilst I confirmed that I had met with Mr Teramoto at my home on 7, 10 and 19 May 2021 respectively for the purpose of obtaining information concerning the art pieces purchased with the 3^rd Sum in or around June 2016 (the ‘Artwork’) …, I denied that I had kept in close contact and met Mr Teramoto prior to the said three meetings. It was my understanding that prior to May 2021, Mr Teramoto had been frequently hospitalised so it was simply impossible for Mr Teramoto and I to have met each other so frequently as alleged.”

He then in §5 says that “I consider it unnecessary and irrelevant to engage in a detailed investigative analysis of the contents of the PI Reports.”  He proceeds to criticize the accuracy and credibility of the PI Reports on the bases that:

“…most of the photos are not clear. This is not to mention that the persons therein all appeared to be wearing masks. It is simply impossible to identify who those persons were.”

“… there is also no explanation and/or indication whatsoever in the PI Reports as to how the investigator identify/conclude from the photos (a) the identifies of each of the person; (b) the vehicles and the ownership thereof; and (3) the locations at which the photos were alleged taken.”

(b)  D1 repeats that he has already “made the best effort to try to contact Mr Teramoto”[17]. He states his belief that with the records open to P, P has the capability of tracing the artworks purchased with the 3^rd Sum;

(c)  He says that he has exhausted all means to try to obtain information on the 5 Transfers-out.  He gives some further information on Transasia and Espeleta, the former he says being the principal contractor of the construction of the roof of the primary architecture of the Okada Manila Project, and the latter having been the chief executive advisor of Tiger Resort, Leisure and Entertainment, Inc. incorporated in the Philippines.  He says that the related payments to them must be related to payments of the construction of the Okada Manila Project.  He reiterates his belief that he has complied with the Unless Order.

14.  D1/Aff13 was filed to supplement D1/Aff11 and D1/Aff12, principally in relation to the Invoice, and the disputes with Espeleta which he has previously mentioned.

15.  D1/Aff14 was filed principally to explain why he did not in his earlier affirmations deal with the Invoice, which had been provided to his legal representatives prior to, and was further shown to D1 during, the Cross-examination.  

G.  PARTIES’ STANCES

16.  It is P’s case that D1 has failed to comply with the Disclosure Order despite D1/Aff10 to D1/Aff14.  Given the Unless Order, the Re-Amended Defence has automatically been struck out.  It therefore seeks judgment against D1. 

17.  D1 does not accept that he has been in breach, but to the extent that he has been, he seeks relief from sanction.  Mr Law stresses a number of times that D1 delegated his duties, could not be expected to remember the details of the financial transactions, that he has been ousted and no longer has access to the records, and that D1 has been of poor health.  He submits that in any event, given the draconian and disproportionate nature of the sanction being sought (entry of judgment for a very substantial sum), P’s application should be dismissed.   

H.  THE PI REPORTS, AND THEIR ADMISSIBILITY

18.  I have set out above the stark contrast between the PI Reports and D1’s evidence claiming that he had to instruct his lawyers to locate Teramoto, and that a letter had to be sent in May 2021 to him at the new-found address.

19.  I have studied the PI Reports.  Some of the photographs are not clear. But there are others which are more than clear enough for the subjects photographed to be identified.  That is so despite the masks that they were wearing because of the pandemic.  D1 would definitely be able to identify himself from those clear photographs if he is the subject (or to deny it if he is not).

20.  I have set out above D1’s reply at §§4 and 5 of D1/Aff12 in relation to the PI Reports.  Those replies are in my view verging on being games of words. He denies “that I had kept in close contact and met Mr Teramoto prior to the said three meetings”.  He does not however deny that he had been in contact with Teramoto between January and April 2021, close or not.  He claims that “it was simply impossible for Mr Teramoto and I to have met each other so frequently as alleged”.  He does not however deny that he has met Teramoto as photographed, frequently or not.  He has not denied that any of the photographs showing apparently he and Teramoto going out for meals together in fact depict him and Teramoto.  

21.  Up till the moment when Mr Whitehead had finished his opening submissions during the hearing and when Mr Law produced to this Court and Mr Whitehead his written speaking notes (the “Speaking Notes”), there had been no notice from D1’s side that they would seek to challenge in court the admissibility of the PI Reports.  It was only after Mr Whitehead had sat down when D1’s side indicated for the first time that the “investigation report is inadmissible.  The maker is not identified; and hence it is inadmissible hearsay.”[18] That sentence is not even in Mr Law’s written submissions filed only a couple of days earlier[19]. 

22.  That state of affairs was in my view highly unsatisfactory.  In the end, and before the conclusion of the hearing, I granted parties liberty to file further written submissions to deal with the point.  Mr Whitehead did so on 28 April 2022 (“P/Hearsay Sub#1”).  Mr Law filed his Further Submissions on 5 May 2022 (“D1/Hearsay Sub#1”).  Mr Whitehead then filed reply on 10 May 2022 (“P/Hearsay Sub#2”).  Mr Law filed his response on 16 May 2022 (“D1/Hearsay Sub#2”), which P objects as I have not given D1 liberty to do so.  I have nonetheless considered the same.

23.  For the following reasons, I rule the PI Reports admissible, and place weight upon their contents:

(a)  In D1/Hearsay Sub#1 at §6, Mr Law submits that the “starting point” is Order 41 rule 5.  He then cites 3 English authorities[20] and a number of Hong Kong authorities to illustrate what he submits are the effects of that rule;

(b)  I do not agree that Order 41 rule 5 is the starting point.  What Mr Law has unfortunately failed to point out in D1/Hearsay Sub#1, but are stressed by Mr Whitehead in P/Hearsay Sub#2, are that in England, section 1(1) of the Civil Evidence Act 1995 did away in 1997 (when it came into operation) with the exclusionary hearsay rule in civil proceedings as it used to operate, which reform was followed in Hong Kong by the implementation of Section 47 of the Evidence Ordinance, Cap 8 in 1999; 

(c)  In D1/Hearsay Sub#2 at §4, Mr Law submits that P’s reliance on the Evidence Ordinance is “completely misplaced”.  I do not agree.  The Rules of the High Court, being subsidiary legislation, have to be read subject to the Evidence Ordinance;

(d)  The 3 English authorities cited by Mr Law are all pre-1997, and should be understood in the above legislative context.  I agree with Mr Whitehead in this regard;

(e)  Mr Law at D1/Hearsay Sub#1 refers to Leung Kin Fook & Ors v Eastern Worldwide Co Ltd [1991] 1 HKC 55.  Similarly, he has not highlighted the fact that that case was decided before the amendment to the Evidence Ordinance.  Mr Law replies at §3 of D1/Hearsay Sub#2 that Leung Kin Fook has not been overruled.  Whilst that is so, its effects would still have to be understood in the light of the then legislative framework in Hong Kong;

(f)  But even in Leung Kin Fook, and prior to the amendment to the Evidence Ordinance, Power JA (as he then was) cited at 58H – 59B with approval the following passage from Wang King-fong v Chan Fook- hong [1961] HKLR 448, that:

“If it be the case that the parties do not choose to bring the attention of the Court to the defect of an affidavit made in [non-compliance with Order 41, rule 5(2)], and are content to take the judgment of the Court upon such an affidavit, that is one thing. It does not follow that the Court is always bound to take the objection, but where the objection is taken, and where it is an objection of substance, and not a mere technical and frivolous objection, it seems to me that the Court would be acting contrary to its plainest duty if it refused to observe the rule.” (Emphasis added)

(g)  So, the starting point is that as a matter of law, hearsay is no longer in civil proceedings inadmissible by virtue only of the previous common law exclusionary hearsay rule;

(h)  In respect of the legislative regime on the admissibility of hearsay evidence in civil proceedings, it should also be noted that whilst section 47A(2) of the Evidence Ordinance makes provisions for the filing of hearsay notice, section 47A(4) stipulates that a failure to comply with that subsection or any related rules of court shall not affect the admissibility of the evidence.  Weight may however be affected, the assessment of which is further regulated by section 49 of the Evidence Ordinance[21];

(i)  By analogy, and in my view, even non-compliance with Order 41 rule 5 shall not affect the admissibility of the evidence concerned;

(j)  I have also considered the effects of Order 41 rule 5 in Amadeaus Investment Ltd v Lin Kao Kun [2019] 2 HKLRD 647 at §§29 to 31, which discussions I repeat;

(k)  Further, and in any event, I agree with Mr Whitehead that Mr Law has not in §14 of his Speaking Notes identified the accurate requirements under Order 41 rule 5.  That rule does not in relation to any “statements of information or belief” require identification of the maker, but “the sources and grounds thereof;

(l)  There is a clear distinction between the identification of the maker and the provision of the source.  As explained by Ralph Gibson LJ in Zambia Steel v Clark & Eaton [1986] 2 Lloyd’s Rep 225 at page 233 observed:

“Circumstances may arise in which a deponent can sufficiently, for the purposes of [Order 41 rule 5], identify the source of the information without identifying a named person who gave it …”

(m)  I have set out above how Asano produces the PI Reports.  He has stated the source of the PI Reports to be private investigators instructed by UE;

(n)  I have set out above D1’s reply in D1/Aff12 to the PI Reports.  I have stated my view that there are some photographs which are more than clear enough for the subjects photographed to be identified, and that D1 would definitely be able to identify himself from those clear photographs if he is the subject (or to deny it if he is not);

(o)  Apart from criticizing the credibility and reliability of the PI Reports, and engaging in the games of words which I have described above, D1 had made no meaningful reply to the PI Reports;

(p)  In my view, the objection which Mr Law has belatedly taken on the admissibility of the PI Reports is at best technical in nature, and borrowing the words in Wang King-fong, I am not bound to take the objection;

(q)  On weight, I have taken into account the considerations set out at section 49 of the Evidence Ordinance, which Mr Whitehead deals with at §25 of P/Hearsay Sub #2.  I note and agree that the PI Reports are highly relevant, that it is reasonable for P not to disclose the exact identity of the private investigators concerned given the nature of their job, that the PI Reports were made contemporaneous to the events they record, that multiple hearsay is not involved, and that the professional private investigators have no motive to lie.  I place weight on their contents.

24.  For completeness sake I mention also this.  Mr Whitehead has in P/Hearsay Sub#1 dealt with the rules on the admissibility of photographs.  I note those submissions.  I note on the other hand Mr Law’s clarification that it is the admissibility of the entirety of the PI Reports which he is objecting to, and that the photographs without the illustrative contents and captions would mean very little.  I accept those submissions.  I have therefore not isolated the photographs for considerations, but have considered the admissibility and weight of the entire PI Reports as I have done above.

I.  WHETHER NON-COMPLIANCE OF THE UNLESS ORDER

I.1.    THE APPLICABLE LAW          

25.  Mr Law has cited Silver Universe Investments Limited v China Times Securities Ltd [2019] HKCFI 834 where I discussed a number of issues which are relevant to the present application.  Mr Whitehead does not dispute their application or accuracy.  I adopt them.

26.  Whether there is any non-compliance of an unless order is obviously dependent upon the wording of the order concerned, and the extent of the compliance (or non-compliance).

27.  When considering compliance, a distinction should be drawn between at least two types of unless orders.  The first type is one made to secure compliance of the Rules of the High Court by the undertaking of a particular procedural step, e.g. the filing of a witness statement by a specified time. In respect of such an order, the issue as to whether there has been non-compliance is straight-forward – whether the step has been undertaken within the specified time.  There is on the other hand another type, like the present Unless Order, the issue as to the compliance (or non-compliance) of which can involve a qualitative analysis of the adequacy of the purported compliance.  The issue is not as straightforward.

28.  In Silver Universe, at §§39 to 42, I have explained, with reference to Tarn Insurance Services Ltd v Kirby & Ors [2009] EWCA Civ 19 at §74 and The Republic of Angola v Perfectbit Ltd & Ors (unreported, CL-2017-000702, 5 March 2018, QBD (Comm)) at §8 and China Metal Recycling (Holdings) Ltd (in provisional liquidation) v Chun Chi Wai & Ors (HCA 1412/2013, 25 June 2014), why I applied the standard of “virtually complete compliance” when considering the issue of compliance in the context of an order for disclosure in aid of an injunction.  I have also explained, at §§43 to 48, with reference to the disclosure order in that case, why I observed that the defendant in that case was only compelled to disclose transactions and other specified matters which were within its knowledge (but not to the extent of information that could reasonably be expected to obtain or have knowledge of, and to take reasonable steps to investigate), but that any documents that were required to be disclosed would include documents that were within its possession, custody or power.

29.  When considering whether there has been non-compliance, whilst it is not appropriate to conduct a mini-trial on affirmations, the court is entitled to consider whether the disclosure or explanation given is on its face credible and consistent with contemporaneous documents or other previous statements[22].

I.2.    THE 3^RD SUM

30.  In respect of the 3^rd Sum, I have explained why I find the PI Reports admissible, and why I have decided to place weight on them.  I have also set out the stark contrast between D1’s version and the contents of the reports.  In my view, D1’s evidence and disclosure in respect his efforts in locating Teramoto, how he had to write to him in May 2021, and how Teramoto refused to assist, are incredible and unbelievable.  His explanations about him having delegated, not remembering details of all the financial transactions and him being of poor health also have little relevance to D1’s purported disclosure of the 3^rd Sum.  The 3^rd Sum concerns purchase of artworks, but not any intricate financial transactions. 

31.  There are more to what I have discussed above.  D1 has failed to deal with the Invoice in D1/Aff10 and D1/Aff11.  He failed to do so despite the invoiced sum being almost the same as the 3^rd Sum, that it was issued by Teramoto, and that the Invoice was issued less than 10 days before the transfer of the 3^rd Sum to Teramoto.  In D1/Aff13 at §8[23], D1 claims that the Invoice was “for the first time produced” in Asano/Aff7.  But that is not true.  D1 had been provided with the Invoice, both before (through his legal advisers) and during the Cross-examination.  He lays blame on his previous legal team[24]. He claims that despite having been shown the Invoice during the Cross-examination, he failed to “connect the dots” when he was preparing D1/Aff10[25]. But even with the Invoice, D1 in D1/Aff13 still fails to match up the 9 Sets of Artwork with any items on the Museum List.  His explanations are that “because the [9 Sets of Artwork] in the Invoice were written in shorthand/ abbreviation and the description of the antiques/artworks in the [Museum List] appears to be either incomplete or too generic for identification”.  But as pointed out by Mr Whitehead, during the Cross-examination when being asked with reference to the Invoice whether “the items of artwork that were purchased by you from Mr Teramoto are carefully listed in these invoices”, D1’s answer was “I think, yes, that is correct”.  Then D1 claims[26] that he had reached out to Teramoto for assistance, but that Teramoto had not reverted to him by the time he prepared D1/Aff13.  No particulars of such reaching out have been provided, and D1 has failed to update his efforts in D1/Aff14.  His explanations in relation to the Invoice and his alleged inability to match up the 9 Sets of Artwork with any on the Museum List are in my view also inherently improbable, inconsistent and incredible.  

32.  For the above reasons, I do not accept that D1 has disclosed what he knows as to the whereabouts of the 3^rd Sum, and what has become of the 3^rd Sum.  I am of the view that D1 has failed to comply with the Disclosure Order and the Unless Order in respect of the 3^rd Sum.

I.3.    THE 4^TH SUM (PART)

33.  I have set out the 5 Transfers-out above.

34.  D1 has provided further disclosure in relation to the payments to Hawke and Aseron.  In my view, the disclosure is now sufficient.

35.  D1 has said that he and his lawyers could not identify Montefalcon. Given the relevantly small amount involved, I do not find D1’s disclosure incredible. 

36.  In relation to the payments to Transaia and Espeleta, the manner of D1’s compliance has been dilatory.  The nature of the alleged disputes with Espeleta is also not at all clear.  Disclosure only dribbled in.  That has been highly unsatisfactory.  I disapprove such attitude.  But I am not here to pass sanction on D1’s manner of compliance.  The issue remains whether he has complied with the Unless Order according to the law discussed above.

37.  D1’s disclosure suggests that Transasia and Espeleta were involved with or in the Okada Manila Project and Tiger Resort, Leisure and Entertainment, Inc. The payments to them could have been so related.  D1 says that he had a busy schedule running a business corporation with worldwide presence, and that he delegated.  He could not, and cannot be expected to remember details of business-related payment.  He has been ousted from his empire.  He no long has access to business records.  I cannot dismiss such explanations as being incredible. 

38.  In the end, I conclude that P cannot establish any non-compliance of the Unless Order in relation to the 4^th Sum (Part).

J.  D1’S EXTENSION APPLICATION

39.  In the light of my conclusions above, D1’s Extension Application and D1’s Relief Application are both engaged.  I deal with the former first.

40.  I repeat my observations above about the nature of the Unless Order, and the fact that the issue as to whether it has been breached involves the undertaking of a qualitative analysis of the evidence and degree of compliance.  Despite Mr Whitehead’s objection, and irrespective of whether strictly and technically the non-compliance took place upon the expiry of the unless period, and despite Order 2 rule 4, I am of the view that there are understandable bases for D1 to take out D1’s Relief Summons and asked for time only after P had taken out P’s Judgment Summons.  I am prepared to grant D1 and extension to the extent of enabling him to seek relief. 

K.  D1’S RELIEF APPLICATION

41.  I have concluded that D1 has failed to comply with the Unless Order in relation to the 3^rd Sum.

42.  D1 seeks relief.  I have set out in gist his basis for his application.

43.  I have to consider all the circumstances of the case, including those set out in Order 2 rule 5.

44.  As observed by Fok JA (as he then was) in Daimler AG v Leiduck [2012] 3 HKLRD 119 at §57:

“… a weighty factor in the weighing exercise to be undertaken by the Court … is the question of proportionality of the sanction in the circumstances of this case.”

45.  The sanction which P is seeking may be described as the ultimate one, the most serious one that a plaintiff can seek against a defendant, namely to have the defence struck out, to deprive the defendant of the right to defend himself, and to have judgment entered against him.

46.  The nature of the allegations which P is making again D1 should also be noted.  They include breaches of trust and fiduciary duties said to be owed by D1 to P, and misappropriation of P’s funds by D1.  They are all serious allegations.  Such serious allegations, I borrow the words of Fok JA at §58 of Daimler AG v Leiduck, should be the subject of a trial.

47.  The amount of the claim is also very substantial.

48.  This weighty factor of proportionality favours the granting of relief.

49.  I proceed to consider the other specific matters set out in Order 2 rule 5.

50.  The interests of the administration of justice:

(a)  Mr Whitehead has in his written reply cited JSC BTA Bank v Ablyazov (No 8) [2013] 1 WLR 1331, wherein Rix LJ observed at §34 that:

“The authorities demonstrate that it is vital for the court, in the interests of justice, to have effective powers, and effective sanctions. Without these, it would be possible for a defendant (or, in a different situation, a claimant) to flout the orders of the court, which are the court’s considered means by which to keep the scales of justice for the parties even. If once it became known that the court was unable or unwilling to maintain the effectiveness of its orders, then it would lose all control over litigation of this kind, with terrible consequences for the administration of justice. Those wrongly accused of fraud would be relieved of a certain amount of inconvenience, but fraudsters would rejoice and hitch a free ride to interminable litigation on the back of ill-gotten gains.”

Mr Whitehead submits further that a court order should hence be honoured in the observance, and the court should not be astute to find excuses for non-compliance;

(b)  I have taken those factors into account.  On the other hand, the countervailing considerations are those observations of Fok JA in Daimler AG v Leiduck which I have cited above, and His Lordship’s further observations at §58, that:

“It is not in the interests of the administration of justice that serious findings go by way of default against a party, especially since, pursuant to O.1 r.2(2), the court is enjoined to recognise that the primary aim in exercising its powers is to secure the just resolution of disputes in accordance with the substantive rights of the parties.”

(c)  It is also pertinent to heed the observation of Green J in Gupta v Olgun Halil-Shah[2022] EWHC 318 (Ch) at §13, that:

“Surely, if they do not believe the defendants, they should either ask to cross-examine them or should pursue committal proceedings.”

(d)  This Court is not trivializing D1’s conduct and manner of purported compliance.  Far from it, this Court takes such acts very seriously.  But this court should still at the same time weigh in the balance the weighty factor of proportionality.  P also has other options open to it should it want to pursue D1’s conduct and manner of purported compliance further. 

51.  Whether the application for relief been made promptly:

(a)  I have highlighted the nature of the Unless Order.  D1’s Relief Summons was taken out shortly after P’s Judgment Summons;

(b)  In my view, there is no inexcusable and inordinate delay in the application. 

52.  Whether the failure to comply was intentional:

In my view, and on the evidence, the non-compliance of the Disclosure Order and the Unless Order in relation to the 3^rd Sum has been intentional.  Given the contents of the PI Reports, the way D1’s version is contradicted thereby, and the incredibility of his explanations as I have analyzed above, that is the only inference I can draw.

53.  Whether there is a good explanation for the failure to comply:

I can see none.

54.  The extent to which D1 has complied with other rules and court orders:

Apart from the Disclosure Order and the Unless Order, there is no allegation that D has failed to comply with other rules and court orders.

55.  Whether caused by D1 or his legal representative:

Whilst D1 has on a number of previous occasions blamed his legal advisers on a number of matters, I am of the view given the nature of the non-compliances that the non-compliance has been caused by D1.

56.  Whether the trial date can still be met:

There is no suggestion that the non-compliance may cause any trial date or likely trial date to be missed.

57.  The effect of the failure to comply on each party:

(a)  I note the contents of the Invoice.  According to Asano, and doing the best P could, save one of the 9 Sets of Artwork, “UE has married up the [Invoice] with what would appear to be the corresponding piece of artwork in the Museum”;

(b)  Hence, whilst P has not been able to secure D1’s confirmation in that regard by way of disclosure, at least, the possibility is that 8 of 9 Sets of Artwork could independently be identified by P with the aid of the Invoice, and they are with the Museum.

58.  Effect of granting of relief on each party:

Following up from the consideration immediately above, the granting of relief is not likely to seriously prejudice P, but would allow D1 the opportunity to defend the serious allegations against him.

59.  Having considered all circumstances, I reach the conclusion, albeit with some reluctance, that I ought to accede to D1’s Relief Application.  I make an order in terms of §2 of D1’s Relief Summons.

L.  COSTS

60.  What’s left is the question of costs.

61.  P has not been able to obtain leave to enter judgement against D1.  But it is vindicated partly by my conclusion that there has been non-compliance by D1 of the Unless Order in respect of the 3^rd Sum.  In my view, given the contents of the PI Reports, and the unsatisfactory manner in which the compliance of Unless Order has been approached by D1, I am of the view that P was justified in taking out P’s Judgment Summons.  I make a costs order nisi that there be no order as to costs in respect of P’s Judgment Summons.

62.  In respect of D1’s Relief Summons, although he is successful in seeking relief, it is D1 who has to seek the Court’s indulgence.  I have set out also by view that the non-compliance of the Unless Order in respect of the 3^rd Sum has been intentional.  I have also stated my view on the unsatisfactory manner in which the compliance of Unless Order has been approached by D1.  In my view, all the above justify this Court making a costs order nisi that the costs of D1’s Relief Summons should be paid by D1 to P on an indemnity basis, with certificate for 2 counsel, to be summarily assess and be paid forthwith.

63.  Any party who seeks any variation of the costs orders nisi above may write in directly to my clerk within 14 days hereof, upon receipt of which this court will give further directions on paper.