XCHRX YICK FUNG SHIPPING AND ENTERPRISES CO. LTD v. NEW CENTRAL INTERNATIONAL (HOLDINGS) CO. LTD.

HCCL211/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.211 OF 1999

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J U D G M E N T

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1. On 14 July 2000, this court delivered judgment in this action. This was the judgment on the plaintiff's application, by summons dated 24 January 2000, for final judgment under Order 14, Rules of the High Court. That judgment speaks for itself. The end result is that, after some considerable hesitation, New Central International (Holdings) Company Limited ("the defendant"), was given leave to defend, but that such leave should be conditional upon the defendant making a payment into court in such sum and in such manner as the court would in due course direct. It is fair to say that that judgment reflects the misgivings that this court felt about the defence proffered, but at the same time also reflected the court's lack of enthusiasm for giving judgment for an astronomical sum of money unless it was fully satisfied (which ultimately it was not) that the same indeed was due and owing.

2. Thereafter, there has been an inquiry into the means of the defendant and its many associated companies. There was an earlier hearing on 18 September, when the evidence then put in by the defendant as to its assets was soundly criticized by Mr Sussex. I will not attempt to encapsulate today the variety of criticisms he aimed at the state of that evidence. The diligence of those instructing him, via company searches, had uncovered a considerable amount of information. Part of that information was that hitherto subsidiary companies of the present defendant had, to use Mr Sussex's words, been "spirited away", Mr Sussex then suggesting that such spiriting away had been in anticipation of the forthcoming Order 14 application.

3. At that hearing on 18 September, the view the court ultimately took was that the matter should be further adjourned, and the defendant was to provide additional affidavit evidence as to means within 14 days. Such additional affidavit evidence has now come in, although Mr Sussex tells me, and Mr Mumford does not demur, that this further evidence was not served on the plaintiff's solicitors until 4 pm on the afternoon of Thursday, 5 October, that is, but four days ago.

4. A considerable amount of further data has been produced. Mr Sussex castigates it as not being full and frank and being restricted to information which is proffered, in his words, "on the basis of what they know that we know". He also points out that there is no information given at all about the personal circumstances of Mr Cheng Hui, nor about any of the BVI companies. Such accounts as had been produced were on the basis of unaudited balance sheets derived from information given by the directors, and Mr Sussex also observes that four subsidiary companies of the defendant he has been able to identify have now been placed under the umbrella of a company with a very similar sounding name. This apparently occurred on 23 May 2000. He notes in parenthesis that the shares for such transfer were - if the company records are to be believed - for a consideration representing the nominal value of each of the shares. So in case of one company, for example, that was almost a million dollars.

5. Mr Mumford, for his part, properly invites the court not to ignore the evidence. He says this reveals a dismal picture indeed across the spectrum. When pressed by the court to identify a sum that could be raised to be paid into court in satisfaction of the requirement for leave to defend, he suggested the figure of four to five hundred thousand dollars, albeit I have the impression, even if it was perhaps an aside, that possibly the figure could be raised to $1 million.

6. On the other side of the coin, Mr Sussex robustly maintained that the defendant was 'cocking a snook' at the court in terms of disclosure and that, in those circumstances, the court would be perfectly entitled to order a sum of $100 million pursuant to the condition to be imposed. Rarely, perhaps, in any debate on conditional leave has there been such a disparity between figures, namely $0.5 million on the one hand and $100 million on the other. In this connection Mr Sussex has also prayed in aid the observations of Saville J (as he then was) in Flender Werft v. Aegean Maritime [1990] 2 Ll. LR 27 at 29.

7. I am very conscious of the difficulties outlined by Mr Mumford, and in particular Mr Mumford's suggestion that the defence of this case and, more particularly, his client's prospective counterclaim, should not be stillborn by reason of the imposition of an unreasonable amount to be paid into court in compliance with the requirement of conditional leave.

8. Equally, I bear in mind that this defendant company, and in particular, Mr Cheng Hui, played with sums of money which can only be described, to adopt Mr Sussex's words during the original Order 14 hearing, as "telephone numbers". The original claim is in the region of some $300 million odd although for Order 14 purposes (page 5 of the Order 14 judgment refers), Mr Sussex was prepared to accept a bottomline figure of $120 million. Mr Mumford for his part protests that this is all very well, but that the defendant's case substantially is that the defendant has been oppressed by the plaintiff, and that the plaintiff, as Mr Mumford put it, now controls 90% of their erstwhile joint venture. Mr Mumford goes on to say that 10% of the figure of $116 million, which appears (on the basis of one of the reports exhibited) to be the figure carried forward by that joint venture, actually belongs to his clients.

9. What then is the court to do? This is a murky case. Very large sums of money indeed have been in play, and to quote from the earlier judgment, there seems to have been, in the relations between these particular parties, "a distinctly free-form propensity in terms of inter-corporate accounting".

10. I have tried to look at the matter in the round. I have weighed up Mr Mumford's stout defence of the position on behalf of his clients, together with Mr Sussex's scathing criticisms. This is the Commercial Court. It generally takes a broad view in matters like this, hopefully correctly. But in any event, it must be a matter for the discretion of the court, in light of all the available evidence and in light of the persuasive arguments put forward by counsel. I find it difficult to accept, on the face of this evidence, that the defendant is as impecunious as it says, at least in terms of its access to funds, and I am particularly concerned of the absence of any revelation by Mr Cheng Hui as to his personal circumstances.

11. Taking all the circumstances into account, I do not accept that it is impossible for the defendant to comply with an order, which I hereby make, that leave to defend be conditional upon payment into court within 28 days from the date hereof of the sum of HK$10 million, the same to be held in an interest-bearing account.

12. I will now hear the parties on the costs of this application, and on the adjourned matter of costs of the main Order 14 application.

[Submissions from counsel]

13. I have now had the opportunity of hearing both senior counsel on the issue of costs. This falls into two sub-issues - the costs of the main Order 14 application and the costs of what Mr Mumford has aptly described as the "ancillary" hearings. Both counsel have referred me to Marginal Note 14/7/13 in the White Book. It seems to me that the present approach of the court should be expressed in terms of there being compliance with the condition now ordered. Accordingly, my order is as follows :

In the event of the condition now ordered as to the payment into court of $10 million within 28 days from today being complied with, the costs of the Order 14 application together with the costs of the hearing today are to be costs in the cause.

I further order that the costs of the intermediate hearing, if I may so term it, on 18 September 2000, be to the plaintiff in any event, to be taxed if not agreed.

14. Naturally, if there is non-compliance with the order as now made in terms of conditional leave, judgment must be entered in favour of the plaintiff, and no doubt costs will follow in that event, but I would prefer to deal with that eventuality if and when it occurs. I am also by no means sure at the moment, without hearing further from counsel, as to the correct sum for which any judgment should be entered. Accordingly, I will cross these particular bridges when I come to them.