CLARE HOLLINGWORTH v.THOMAS EDWARD JUSON

HCA249/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 249 OF 2006

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REASONS FOR DECISION

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1.  The plaintiff’s applied by summons for an Unless Order to compel the defendant to file and serve an account and a verifying affidavit in compliance with the order dated 12 July 2006.  The defendant opposed the application.  After hearing submissions, I ordered the defendant to file and serve the account and verifying affidavit within 30 days with costs to the plaintiff. My reasons appear below. 

The facts leading to the application

2.  The background and facts surrounding this action had been set out in my Decision handed down on 12 July 2006. I will not repeat them.

3.  On 15 March 2006, the plaintiff applied by summons for a summary order for account under Order 43 Rule 1 of Rules of the High Court.  After a contested hearing on 3 July 2006, I ordered in my Decision of 12 July 2006 that the defendant should within 21 days (or such longer period as the plaintiff may by writing agree): (a) file and serve an account in respect of the sums set out in Schedules 1 and 2 of the Amended Statement of Claim and the defendant’s dealings with them and the profits or interests made as a result of the receipt of the said sums by the defendant with all necessary vouchers and supporting documentation, and (b) verify the account by affidavit.  

4.  On 31 August 2006, the defendant filed his 4^th affidavit for the purpose of complying with the Order of 12 July 2006

5.  On 8 September 2006, the defendant filed a Notice to Act in Person.

The plaintiff’s arguments

6.  It is the plaintiff’s case that the 4^th affidavit of the defendant fails to comply with the Order of 12 July 2006, both in form and in substance.  The arguments advanced can be summarized as follows:

(1)	The defendant’s 4th affidavit is not an account.  Further, it is not comprehensive and contains various cross-references.  The affidavit only confirms the truthfulness and accuracy of the figures in the exhibits, but not the veracity of the documents exhibited and their contents.
(2)	The defendant’s 4th affidavit does not add anything useful to what was provided by the defendant prior to the plaintiff’s Order 43 application and the Order of 12 July 2006.  The underlying supporting vouchers and documents were not provided.  The figures and descriptions in the exhibits are inconsistent and also contradict with what were previously provided.

The defendant’s arguments

7.  In opposing the application, the defendant made the following points:

(1)	He came to be stuck with the plaintiff and became involved with the plaintiff’s funds by default. It was at a time when the plaintiff was abandoned and everyone was taking advantage of her at the Foreign Correspondents Club through free meals and free drinks. When the plaintiff was in hospital, she pleaded with him not to leave her alone.  The money paid by the defendant on her behalf had to be seen against this background.
(2)	The plaintiff has failing eyesight and is very hard of hearing. There was somebody emailing the defendant from Russia claiming to be the great nephew of the plaintiff.  Then the plaintiff made a new will and executed a power of attorney in favour of these people who claimed to be her relatives and their next-of-kin.  The defendant is in the circumstances entitled to know who is behind this litigation.
(3)	A lot of the plaintiff’s money has been spent on this litigation, which will only benefit the people behind the litigation and their lawyers.
(4)	The defendant had already on three occasions provided an account.  He had repeatedly asked what were wrong with the accounts given and what in fact did the plaintiff want.  All the money said to be owed by him had been returned or paid into court.
(5)	The manner in which the plaintiff’s solicitors served the papers of the present application, by scattering them outside his residence, was objectionable.
(6)	The plaintiff’s had secretly corresponded with the Director of Legal Aid and lied about his financial means, causing the defendant’s legal aid application to be refused.
(7)	The plaintiff’s solicitors had belittled his medical problem that caused his absence at the returnable date of the plaintiff’s present summons, when it was a life-threatening matter discovered more than one year ago.
(8)	The Atkin’s Encyclopaedia of Court Forms in Civil Proceedings, second edition (1992 issue), vol. 1, cited by Mr Stock to show the proper form and contents of an account and verifying account, is not applicable to Hong Kong.

8.  In addition, the defendant requested the court to order the Director of Legal Aid and the plaintiff’s solicitors to disclose to him the correspondence exchanged between them.  He further requested an order be made directing the plaintiff to pay into court the costs that would be involved in this litigation.

Non-compliance with the Order

9.  Though stated to be made in pursuance of the Order of 12 July 2006, the defendant’s 4^th affidavit does not amount to compliance with the Order.

10.  In terms of the practice and proper format for account and verifying affidavit, Mr Stock had helpfully referred to Atkin’s Encyclopaedia of Court Forms in Civil Proceedings, second edition (1992 issue), vol. 1 at pp.605-617 and 646-655. At para.14 on p.612 is a reference to the requirement that the items on each side of the account must be numbered.  This is the requirement under Order 43 rule 4(2) of Rules of the High Court. Para.14 goes on to state that in cases where it is impracticable to number the account, for instance where it is a long, complex partnership account, it is customary to lodge summarised account in ordinary accountants’ form.  In such cases, the accounting party may be ordered to allow the other party to have access to all the books, vouchers and other documents in their possession and power relating to the account.  In simpler cases, the accounting party may be directed to exhibit the supporting vouchers and documents to his affidavit.  At pp.647-648 are the precedent forms of an account (Form 30) and a verifying affidavit (Form 31).

11.  I do not agree that the practice and precedent forms relating to account as contained in Atkin’s Forms have no application to Hong Kong.  On the contrary, the practice set out in Atkin’s Forms is the same as that described in Hong Kong Civil Procedure 2006 vol.1 para.43/3/1.             

12.  Schedules 1 and 2 to the Amended Statement of Claim are not long schedules.  They relate to ATM withdrawals made and cheques paid between 11 July 2003 and 11 June 2005, which is not a long period.  In respect of the cheques in Schedule 2, the details of their numbers, dates, payees and endorsements at the back had been set out in the Schedule.  I do not believe it is impracticable or that it will be a complex or cumbersome task for the defendant to give an itemized and numbered account similar to the precedent form in Atkin’s Forms.  I note in this connection that it is the defendant’s case that an accountant, Mr Barry Lau, was engaged to manage and oversee the plaintiff’s finances.  The defendant also indicated at the hearing of the present application that he was relying on Mr Lau and would be enlisting his help to prepare the account.

13.  It appears to me that despite the Order of 12 July 2006, no attempt was made to give a complete and consolidated account, whether in numbered or summarized form, of all the items in Schedules 1 and 2 to the Amended Statement of Claim.  As Mr Stock rightly pointed out, the defendant only filed and served his 4^th affidavit, but did not file and serve an account.  Neither did the defendant’s 4^th affidavit exhibit or verify any single document called an account.  Purely on this point, there has been no compliance of the Order.

14.  Secondly, an important consideration underlying my Decision and the Order of 12 July 2006 is that the defendant should provide not only a full, but also consolidated account of the withdrawals and payments from the plaintiff’s account as contained in Schedules 1 and 2 of the Amended Statement of Claim and his dealings with the money withdrawn and any profits and interests derived from such dealings.  In my Decision, I had also referred to some of the more prominent problems in the account and explanations previously given by the defendant. 

15.  The defendant’s 4^th affidavit is however not a self-contained document.  It made various cross-references to the accounts previously supplied and the letters from the defendant’s former solicitors. This does not serve the purpose of rendering an account, which ought to be comprehensive and self-contained and have all supporting documentation attached.  It also does not meet the ultimate objective of the Decision and the Order of 12 July 2006 of consolidating the defendant’s position on the transactions contained in Schedules 1 and 2 of the Amended Statement of Claim and in turn defining the disputes between the parties on them.  Notwithstanding the service of the defendant’s 4^th affidavit, it remains difficult to identify with clarity and precision the defendant’s case on the purposes of and the actual use put to the various withdrawals and payments and what have become of the money involved.  Without a proper consolidated account, the plaintiff will not be able to file a meaningful list of objections.  It is also not possible to define precisely the issues between the parties. 

16.  Thirdly, in the concluding paragraph of the 4^th affidavit, the defendant confirmed to the best of his knowledge information and belief that “the figures stated in the exhibits to this affidavit are true and correct”.  These are carefully chosen words.  They do not amount to a proper verification of an account.  The exhibits to the 4^th affidavit are primarily analyses of (i) the income and expenditure, (ii) the account of the book “Captain if Captured” and (iii) spending on sums withdrawn from and cheques drawn on the plaintiff’s account.  Other than (ii), no underlying invoices, receipts and vouchers or primary documentation were provided. Plainly, verification of the veracity of the exhibits and their contents is called for. There ought also to be a verification that a full account had already been given and that all the necessary vouchers and supporting documentation had been attached, which is specifically required by the Order.

Problems in the defendant’s 4^th affidavit

17.  Turning to the contents and substance of the defendant’s 4^th affidavit and the exhibits, they have created more problems than addressing the problems in the accounts and explanations previously supplied by the defendant.  

18.  Firstly, the management accounts in exhibit “TEJ-8” cannot be reconciled with the analyses and schedules in exhibit “TEJ-10”.  Just to state a few examples:

(1)	All the monthly management accounts (covering the period from February 2003 to May 2005) recorded a monthly accounting fee of $1,000. In the document called “Analysis of Clare’s expenses for period covering July 2003 to August 2005 (26 months)” (page 2 of exhibit TEJ-10), the total accounting fees was stated to be $28,000. This is more than a monthly fee of $1,000.
(2)	In the same Analysis, it was recorded that a total of $123,200 had been withdrawn from the plaintiff’s account either by way of ATM cash withdrawal ($67,200 as per the attached schedule I) or by cheques ($56,000 as per the attached schedule II) to cover the defendant’s management fees (page 3 of exhibit TEJ-10).  The attached schedules I and II indicated that the management fees covered the period from July 2003 to May 2005.  The total amount of the defendant’s management fee for the period of July 2003 to May 2005 as stated in the monthly management accounts, however, was only $96,200.
(3)	Indeed, a comparison of the schedules I and II attached to this Analysis with the monthly management accounts for the months covered by the Analysis reveals very different figures for some of the months, such as August and December 2003.

19.  Secondly, the items and figures in the management accounts in exhibit TEJ-8 differ from those given in the management accounts previously supplied by the defendant (which only covered November 2004 to March 2005). Again, just to give some examples:

(1)	For the management account for November 2004, the total expenses in the previous and latest account are $39,655 and $34,755 respectively. The cash expenditure for miscellaneous items has reduced by $5,000. Not only that, $2,000 previously described as wine is now described as the defendant’s management fee.
(2)	For the management account for December 2004, there is also a $5,000 reduction of the total expenses from $39,046 to $34,646.  The descriptions of the items are also very different while the figures for the same items also differ.

20.  The important point is not so much that there are revisions or differences between the previous and latest set of management accounts, which may perhaps be understandable if these were the result of a more serious and vigilant approach to the duty to account. What concern me are the seemingly large discrepancies in the figures and descriptions in the monthly accounts together with the lack of explanations.

21.  Thirdly, the underlying primary documents based upon which the management accounts and analyses were compiled have not been attached to these accounts and analyses.  Only in exhibit TEJ-9, were there invoices or receipts attached to the analysis of the account for the book “Captain if Captured”.  However, the relevance of, for instance, the medical bills, attached to the analysis of the account for the book publication has not been explained.

22.  Mr Stock in his submissions pointed out that the defendant has yet to supply the full sets of account-opening documents and statements of accounts of: (a) what has been referred in these proceedings as “the Juson account” (the account maintained in the defendant’s name with Standard Chartered Bank bearing no. 447-0-062240-6), and (b) the margin trading account maintained in the defendant’s name with China Merchants Securities (HK) Co Ltd bearing account no. MB01681.  On the defendant’s case, the plaintiff’s money had been transferred into these accounts. Prima facie, the funds in the two accounts are held on trust for the plaintiff and ought to be specifically accounted for.  The plaintiff should also be allowed access to the documents relating to the two accounts. I am in agreement with this submission.    

23.  In short, the defendant’s 4^th affidavit, whether taken on its own or together with the account previously provided, fall short of what is required to make a proper and full account.

The defendant’s objections

24.  Turning to the objections raised by the defendant to the present application, most of them are not relevant.  Firstly, the argument that the defendant was driven by circumstance to become involved with the plaintiff’s funds has no bearing on the duty to properly comply with the Order to render a full account. Secondly, the defendant had issued summons under Order 80 rule 2 to challenge the plaintiff’s capacity to bring these proceedings and also sought the intervention of the Official Solicitors. The hearing is scheduled for November 2006.  The defendant’s queries as to whether there are and if so who are the people behind the litigation will be dealt with on that occasion.

25.  Thirdly, the propriety or otherwise of the conduct of the plaintiff’s solicitors in their communications with the Director of Legal Aid and in their dealings with the defendant is not a matter that would afford the defendant a defence to the present application to compel a compliance with an Order.  There is no proper legal basis for this court to order disclosure of the letters exchanged between the plaintiff’s solicitors and the Director of Legal Aid.  In any event, the defendant is appealing against the refusal of legal aid to the Registrar. 

26.  Fourthly, the amount of legal costs that the plaintiff has incurred and will incur for this litigation may well be substantial.  There is presently no finding that they are improperly incurred.  Even if the summons under Order 80 was determined in the defendant’s favour, it is by itself not a ground for ordering the plaintiff to pay into the court the costs already or will be incurred.

27.  Finally, on the argument that the defendant had on three occasions provided an account, it is clear from the Decision of 12 July 2006 and the above analysis that these attempts are inadequate and do not discharge the defendant from the duty to comply with the Order of 12 July 2006 to make a full and proper account with all necessary supporting documentation and to verify it on oath.  It is not for the plaintiff and her legal advisers to advise the defendant on what he should do to comply with the duty to account and the Order.  It is not to be forgotten that the defendant was until early September 2006 legally represented and his 4^th affidavit was prepared before he became unrepresented.         

Should an Unless Order be made?

28.  The plaintiff’s summons asked that the defendant be given 21 days to comply with the 12 July 2006 Order and also for an Unless Order striking out the Defence and for judgment to be entered in the event of non-compliance.

29.  At the hearing, the defendant indicated he would require 20 to 30 days to prepare the full and consolidated account and to put together the supporting documentation.  Mr Stock did not take objection to the period of time requested for.

30.  As to the making of an Unless Order, Mr Stock submitted that it was called for because there had been repeated requests for an account since February 2005 and the defendant had failed to comply notwithstanding the plaintiff’s summons and the supporting affidavits setting out the grounds as well as the Decision and Order of 12 July 2006.  It was also pointed out that the plaintiff is about to turn 95 years old and there should not be any further delay in the matter.

31.  No doubt, the defendant has since early 2005 been requested to account for the withdrawals made from the plaintiff’s account and his dealings with the money withdrawn.  There is also no doubt that it is in the plaintiff’s interest to have an account and the defendant’s explanations about the withdrawals and expenditure expeditiously. I would say that expeditious resolution of the action is also important having regard to the defendant’s pleaded case that the expenditure and his dealings with the money were with the agreement of the plaintiff.  It is in both side’s interest to resolve the dispute during the lifetime of the plaintiff.

32.  That said, however, the court does not make an Unless Order lightly.  Generally speaking, Unless Order is an order of last resort and should not be made unless there is a history of failure to comply.  It is the last chance for the party in default to put his case in order: Hytech Information Systems Ltd v. Coventry City Council [1977] 1WLR 1666 cited with approval in Lessy SARL v. Pacific Star Development Ltd [1997] 3HKC 306 at 311-2.

33.  In the present case, I am not prepared to conclude at this stage that the defendant is deliberately ignoring the Order of 12 July 2006, such that he ought to be visited by an Unless Order.  The matter may be viewed differently if, notwithstanding the opportunity offered by the order to be made, the defendant continues not to fully and properly comply with the Order of 12 July 2006.

Costs

34.  Both the plaintiff and the defendant asked for costs of the application be awarded to them.  The plaintiff further asked for costs to be awarded on a higher scale, namely, either on an indemnity or a common fund basis.

35.   There is no reason for departing from the normal rule of costs follow event. The fact that Deputy Judge Gill had intimated in his Decision that this may be a case fit for mediation is not a ground for awarding costs to the defendant. The plaintiff should have the costs of the application. 

36.  As to the basis of the costs, I take cognizance of the plaintiff’s concerns that the defendant has failed to comply with the Order of 12 July 2006 at a time when he was legally represented.  I also accept that the defendant had the opportunity to receive advice on what a full and proper account should comprise and what he was required to do to  comply with the Order.  However, as noted above, I am not prepared at this stage to conclude that it was a deliberate decision to ignore the Order and its effect, though a different view may be taken if the non-compliance were to continue. I will not therefore exercise the discretion to award the costs on a higher scale on the plaintiff’s present summons.  

Conclusion

37.  For the above reasons, I make the following orders:

(1)	The defendant shall within 30 days file and serve an account and a verifying affidavit in compliance with the Order dated 12 July 2006. The documentation in support of the said account shall include, but not limited to full sets of account opening documents and statements of accounts of: (a) the account maintained in the defendant’s name with the Standard Chartered Bank bearing account no. 447-0-062240-6, and (b) the margin trading account maintained in the defendant’s name with China Merchants Securities (HK) Co Ltd bearing account no. MB01681.
(2)	The defendant’s requests that the Director of Legal Aid and the plaintiff be compelled to disclose correspondence exchanged between them, and that the plaintiff be ordered to make payment into court in respect of the costs of these proceedings are refused.
(3)	The defendant pays the plaintiff the costs of this application in any event on a party-and-party basis, to be taxed if not agreed.