DIETER NIENABER AND OTHERS v. BRAVERY CO LTD

1989 No. A2942

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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D E C I S I O N

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1. These proceedings stem flow an Order granted ex-parte to the plaintiffs by Duffy J. in Chambers on the 4th August. It is a Mareva Injunction order with an order for disclosure in aid thereof in terns of its paragraph 2.

2. The defendant seeks to set aside the injunction order so granter. The parties have agreed that compliance with the disclosure order was to be stood over until the determination of the defendant's application.

3. The defendant takes various points before me. First, it is submitted that the plaintiffs have failed to establish a good arguable case in the sense that there existed no contractual relationship between the plaintiffs and the defendant. Counsel for the defendant argues that the defendant was the sole and exclusive Far East agent of a German corporation with which the plaintiffs, or some of them were associated. The contention of the defendant is therefore that only the corporation, the principal for which the defendant acted would have any right of recourse against the defendant. In essence, what is being complained by the defendant is that the plaintiffs are no proper parties on the alleged claims against the defendant.

4. Much water has flown, so to speak, under the bridge. There has been an 0.14 application; there has been an application for security for costs there has been an application for cross-examining the plaintiffs' solicitor. It has never been made known by or on behalf of the defendant until today that the point of the plaintiffs being not proper parties would be formally taken.

5. Counsel for the defendant explains that the primary objective is first to have the injunction granted set aside. When that is done, an application shall be made against the plaintiffs, taking the point that they are not proper parties in the instant action. But that seems to be putting the cart before the horse. On the other hand, the plaintiffs maintain that they are parties entitled to sue the defendant for some DM756,000. The issue is thus joiner. There is a serious question to he tried.

6. In my view despite the defendant's allegation and the proposed action later in time to strike out the plaintiffs as a party to this action, there is really no substance at this stage in the defendant's contention that the plaintiffs have not established a good arguable case by reason of their alleged lack of capacity to sue.

7. Secondly, it is submitted on behalf of the defendant that it has no substantial assets. Counsel maintains that his statement is being made on instructions. But as disclosed in the affidavit of May Wong, a director of the defendant fixtures, fittings and equipments of the defendant company have been sold. The other director, husband of May Wong, has been and is in the course of collecting the defendant's receivables from its debtors. The defendant succeeded in obtaining a release of up to $50,000 for legal costs. The bald assertion made on behalf of the defendant by counsel cannot be, to say the least, well founded. Moreover, the disclosure order in aid of the Mareva injunction was by consent postponed until the determination of the defendant's application. It would have been a futile step if the defendant had had and has now no substantial assets to disclose.

8. Thirdly, on behalf of the defendant, counsel argues that the plaintiffs have failed to establish any real risk of assets dissipation. The close down of the defendant is said to be in May, but in the fax of the 11th April, the defendant was then still enthusiastically discussing future activities. According to May Wong, she and her husband visited Germany or the German corporation described as "P-1" in April and due to the alleged financial difficulty of the company, the direct contact the company had wrongfully made with one of the defendant's suppliers in Formosa and the alleged anticipated decrease in orders solicited, promoted or placed by that company with the defendant, a decision was thereupon taken in April to have the defendant's business wound up. The fax of the 11th April thus, on the face of it, reflects badly on these explanations of May Wong

9. Furthermore, whilst it is conceded by the defendant that it was sole and exclusive agent of the company in Far East, there was no notification to the company nor to any of the plaintiffs of the decision to close down the defendant. The plaintiffs commenced this action against the defendant at its former address, not knowing that the defendant company had moved its address to the office of its accountant.

10. Counsel for the defendant concedes that it is unusual conduct on the part of the defendant as sole agent not to have notified the company or the plaintiffs of its intention to cease operation. Counsel invites this court to attribute the defendant's conduct to tolerable odd behaviour in general.

11. The plaintiff discovered chance of address and tile sale of the property owned by the defendant company after institution of these proceedings. The defendant has offered explanations as to the propriety of the sale. The Agreement of the Sale and Purchase is dated the 6th July, but completion fell strangely on the 5th, the day before. Again in this direction, the defendant offers circumstances explaining the unusual feature in the document for sale and purchase of the defendant's property. Particularly, the defendant maintains that negotiation for the sale of the property began sometime in June and that it was a sale to the bank with the reminder of the purchase price going to another bank with which the defendant had been involved in facilities. But the damning feature in this case is the steps or measures taken in haste by the defendant in closing down without the slightest warning to the German company or any of the plaintiffs. These are matters which may legitimately be taken as facts indicative of the defendant company through its directors, May Wong and her husband, as being likely to have assets dissipated to defeat whatever judgment obtained by the Plaintiffs. These matters are nova being reinforced by the very strange attitude adopted by the defendant seeking a deferment of its compliance with the disclosure order and vigorously contesting the Mareva injunction while maintaining its assertion of lacking in any substantial assets. I am left with a belief in the distinct probability of justice being likely defeated unless the Order be continued.

12. May Wong has made an allegation that three memos evidencing some DM275,000 indebtedness to the 1st, 2nd and 5th plaintiffs out of the plaintiffs' total claim of DM756,000 odd contain forged signatures. The originals have now been produced for inspection by counsel for the plaintiffs. The signatures on all these three memos form part and parcel of the chop of the defendant on these documents. Some explanations are also sought to be advanced by counsel of the defendant, but they are not so convincing as to lead this court into believing that May Wong through her, the defendant company, is very responsible in making allegations.

13. The stance taken by the defendant in these proceedings is that the plaintiffs are not proper parties. As against the corporation or company in Germany, the defendant raises a counterclaim on the force of proceeds from eight shipments.

14. Counsel for the defendant maintains that the Mareva Injunction, if sustained, ought to take into consideration the amounts of these proceeds of the eight shipments. As to four of them it is yet another illustration of an irresponsible allegation made on behalf of the defendant. The alleged proceeds under those four shipments have been, in fact, given credit for, in Schedule 2 to the Statement of Claim of the plaintiffs.

15. The proceeds alleged to come under the remaining four shipments cannot be, in my view, accepted as a good arguable counterclaim for the following reasons. May Wong has been proven wrong once in respect of half of the proceeds of these alleged shipments. In addition, there has been no demand for payment by the defendant from the company or any of the plaintiffs. Counsel for the defendant endeavours to excuse his client on account of the short duration of a month and the fact that it would be pointless to send any letter of demand after action, though allegedly commenced by the wrong parties. A month certainly would have been more than sufficient time for a simple letter of demand to be written, particularly involving a substantial amount of DM375,000.

16. Finally, as to the remaining four shipments, there is an allegation by the plaintiffs of forgeries in some of the documents in connection with those transactions. For all these reasons, I do not accept the defendant as having made out a good arguable counterclaim on these four alleged shipments to Germany. In any event, the circumstances are such that the amount claimed by the defendant warrants no serious consideration.

17. It remains for me to continue the injunction. Paragraph 2, the disclosure order is in wider terms than what Miss Eu would like this court to believe. It is not impossible for the defendant to run into difficulty in disclosing assets exclusively referable to the accounting process now in progress. If that should occur, the defendant should make an application to have itself properly excused. Therefore the whole injunction order be continued. Liberty to the defendant to apply if it should encounter difficulty exclusively as a result of or arising from the accounting process now in progress in complying with the disclosure order in paragraph 2 of the order. Lastly, subject to what counsel have to say, I propose to order costs of today to be costs in the cause.

(Submissions on costs)

18. I have listened to submissions made on behalf of the plaintiffs as regards costs of today and cost reserved. There are allegations of forgeries on both sides. Although I do not think there is much substance in the forgery allegations advanced on behalf of the defendant, they are nevertheless serious allegations for investigation. Costs of the entire proceedings and of today should, in my view, be costs in the cause. I order (1) injunction order be continued until trial or further order; (2) liberty to apply, should the defendant encounter difficulty exclusively arising from accounts now in hands of the Accountant of the defendant; and (3) costs of today and cost reserved be costs in the cause.

19. Naturally, the variation for the release of up to $50,000 for legal costs is to stand. The injunction order be continued as varied.