NATURAL DAIRY (NZ) HOLDINGS LTD (In Provisional Liquidation) v. CHEN KEEN (alias JACK CHEN) AND OTHERS

HCA 2218/2017

[2022] HKCFI 2185

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2218 OF 2017

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DECISION

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THE APPLICATION

1.  By a Decision dated 7 October 2020 (“the Decision”), Deputy High Court Judge Sit, SC made a Mareva injunction order against the 2^nd defendant, prohibiting her from removing, disposing or dealing with her assets up to the value of $776,070,000 (“the Mareva Injunction”).

2.  By summons filed on 10 May 2022 (“the Summons”), the 2^nd defendant applied:

(1)  to vary the Mareva Injunction such that a sum of $26,835,450 (“the CFA Costs”) be excepted either:

(i)  for the purpose of paying partially her legal costs incurred in the 1^st retrial in HCCC 309/2019 (“the 1^st Retrial”);

(ii)  alternatively, for the purpose of paying partially her future legal costs to be incurred in the 2^nd retrial in HCCC 309/2019 (“the 2^nd Retrial”);

(2)  for leave to withdraw another summons filed on 24 November 2020 with no further order as to costs.

THE PROCEDURAL HISTORY

3.  To understand the 2^nd defendant’s application herein properly, it is necessary to set out the procedural history not only of this civil action but also of the related criminal case.

4.  The 2^nd defendant was arrested back in December 2010 on charges of conspiracy to defraud the Stock Exchange Hong Kong (“SEHK”) for false representations or non-disclosure. Upon the Department of Justice’s application, a Restraint Order was granted on 26 October 2011 with respect to all of the properties of the 2^nd defendant in and outside Hong Kong (“the Restraint Order”).

5.  The 2^nd defendant was subsequently charged, together with others, with conspiracy to defraud the SEHK, the plaintiff and the plaintiff’s existing shareholders by dishonestly making false representations and concealing or failing to disclose certain matters.

6.  The 2^nd defendant was convicted after trial (HCCC 83/2014), and such conviction was upheld by the Court of Appeal. On further appeal, the Court of Final Appeal allowed the 2^nd defendant’s appeal on 30 August 2019, quashed her conviction and ordered a retrial.

7.  On 8 January 2020, the CFA awarded the 2^nd defendant with her costs in the original trial in HCCC 83/2014 and of the appeals. Such costs were subsequently agreed between the Department of Justice and the 2^nd defendant’s then solicitors at $26,835,450, i.e. the CFA Costs as defined above, which is the subject matter of the present application.

8.  In the meantime, the plaintiff took out an application for the Mareva Injunction, which, as aforesaid, was granted by Deputy High Court Judge Sit, SC against the 2^nd defendant on 7 October 2020.

9.  As the draft injunction order lodged by the plaintiff contained an exception for legal fees without stating any amount thereof, her Ladyship directed the parties to lodge and serve written submissions (together with any evidence which they might wish to rely on) as to the amount of legal fees to be excepted, which the parties duly did so. Having considered such submissions, the learned Deputy Judge ordered on 9 November 2020 that there be no exception to the Mareva Injunction for the payment of the 2^nd defendant’s legal fees.

10.  The 2^nd defendant then filed a summons on 23 November 2020 for leave to appeal against the learned Deputy Judge’s order dated 9 November 2020. However, the 2^nd defendant had not proceeded with this summons so far.

11.  On 24 November 2020, the 2^nd defendant took out a summons to apply for variation of the Mareva Injunction such that the CFA Costs may be excepted from the Mareva Injunction (“the Nov 2020 Variation Summons”).

12.  While the Nov 2020 Variation Summons was initially fixed to be heard on 25 January 2021, the 2^nd defendant eventually decided not to proceed with the application. Pursuant to the order of Au-Yeung J, the application was adjourned sine die with liberty to restore, and the 2^nd defendant was ordered to bear the plaintiff’s costs of and occasioned by the adjournment.

13.  The 1^st Retrial commenced on 8 February 2021. Unfortunately, because the trial Judge, Deputy High Court Judge Andrew Bruce, SC, took the view that the jury had received information which his Lordship considered prejudicial to the 2^nd defendant, the learned Deputy Judge decided on 15 June 2021 to discharge the jury.

14.  The 2^nd defendant’s legal representative then made submissions on 25 June 2021 that the prosecution should not be permitted to pursue a further trial before a fresh jury. However, by a ruling dated 30 November 2021, the learned Deputy Judge refused to order a stay of the criminal proceedings.

15.  The 2^nd Retrial was since then fixed to commence on 2 May 2023 (with an estimated length of 90 days), with a Case Management Hearing to be held on 19 October 2022.

THE GROUNDS OF OBJECTION

16.  The plaintiff asked this Court to dismiss the Summons on the following two grounds:

(1)  The applications made by virtue of the Nov 2020 Variation Summons and the Summons are an abuse of process because the 2^nd defendant’s first application for “legal fees exception” had already been dismissed on 9 November 2020 and she had filed an application for leave to appeal in respect thereof. There is no material change of circumstances since then;

(2)  The 2^nd defendant has not demonstrated by sufficient evidence that:

(i)  she does not have other assets to meet the payment of legal costs;

(ii)  the purpose of the application is not an attempt to dissipate her assets.

DISCUSSION

Abuse of process

17.  The plaintiff suggested that this is the third time that the 2^nd defendant had applied for “legal fees exception”, and it is an abuse of the process of the court for the 2^nd defendant to do so.

18.  In Lau Sin v Wong Mary & Others [2018] HKLRD 202, Deputy High Court Judge Paul Lam, SC, having considered various authorities, summarised the following general principles applicable to the situation where the same interlocutory application was made again[1]:

“(a) The doctrine of res judicata, properly-so-called, does not apply to interlocutory orders.

(b) If a party seeks to re-litigate a matter which has been determined in a previous interlocutory decision by taking out a second application, the second application is liable to be dismissed by the court, either of its own motion or on application, pursuant (sic) its inherent jurisdiction or Order 18, rule 19, on the ground that it constitutes an abuse of process.

(c) It will not be an abuse of process if there are express statutory provisions permitting the re-litigation of the matter. There are many express provisions allowing the respondent to an application to apply to set aside an order made in its absence or as a result of its failure to comply with certain procedural steps (eg Order 13, rule 9; Order 14, rule 11; Order 19, rule 9; Order 24, rule 17; Order 26, rule 8). Another useful example is that directions on evidence (including expert evidence) may also be revoked and varied by a subsequent direction (Order 38, rule 44).

(d) In the absence of any such express statutory provision, whether the second application constitutes an abuse of process must depend on the particular circumstances of each case. Generally speaking, the court should consider what is just and reasonable.

(e) It is inappropriate and impossible to set out exhaustively what the relevant considerations will be. Naturally, the court will need to consider the nature of the interlocutory application; whether the applicant had, or could and should have, challenged the first interlocutory decision by other means; and why a second application on the same matter has been made. Examples of situation where the court may conclude that there is no abuse of process include: the ruling on the first application was not based on merits but on a technical objection, the applicant failed to prove essential facts from mistake or inadvertence at the first application, there is new evidence that seriously justifies reconsideration of the issue; or there is a material change of circumstances.

(f) Nevertheless, the court should adopt a holistic, rather than a dogmatic or mechanistic, approach. At the end of the day, the court shall whether it is in the interests of justice to allow the second application to proceed having regard to all relevant circumstances of the particular case. And in considering how its discretion should be exercised, Order 1A, rule 2 requires the court to give effect to the underlying objectives of the RHC as set out in Order 1A, rule 1.”

19.  In the circumstances of the present case, I do not consider that the 2^nd defendant has abused the process of the Court by taking out the Summons. My reasons are as follows.

20.  Firstly, I do not think it was fair for the 2^nd defendant to be described by the plaintiff as having made her “1^st Costs Exception Application” back in October 2020 when she lodged her written submissions pursuant to the learned Deputy Judge’s directions contained in the Decision. In paragraph 129(4) of the Decision, it was stated that:

“The draft order to the Summons contains an exception for legal fees but no amount has been suggested by either side. Both Mr Wong and Mr Cao drew my attention to the imminent re-trial in the 1^st Criminal Proceedings for which legal costs will have to be incurred, and the prospect of receiving taxed costs from the Department of Justice pursuant to the costs order made by the Court of Final Appeal. In these circumstances I will direct that:-

(a) D1 to D4 to file and serve written submissions of no more than 5 pages (together with any evidence they may wish to rely on) as to the amount of legal fees to be excepted under the Mareva injunction within 14 days hereof;

(b) […]

(c) […]”

21.  It can be seen that when the application for Mareva Injunction was made, it was the plaintiff which proposed (by inserting a “legal cost exception” in the draft order) that there be a costs exception. The only issue at that time seems to be the quantum to be allowed. I therefore accept the 2^nd defendant’s explanation that her focus at that time was on the amount of costs to be incurred for the 1^st Retrial and that as a result she did not file any additional evidence pursuant to the learned Deputy Judge’s directions.

22.  Secondly, in any event, it is evident that since then there have been material changes of the circumstances:

(1)  The 1^st Retrial had been aborted and the 2^nd defendant is now facing the 2^nd Retrial in 2023;

(2)  The 2^nd defendant is now indebted to her solicitors and counsel legal fees incurred for the 1^st Retrial in the total sum of $37,271,583.65;

(3)  It is evident (in the form of Mr Andrew Powner’s 2^nd Affirmation which this Court has no hesitation to accept) that the 2^nd defendant had indeed not paid any legal fees in respect of the 1^st Retrial (apart from $150,000 which only covered leading counsel’s travelling expenses from England);

(4)  The Case Management hearing for the 2^nd Retrial is going to be heard on 19 October 2022, and the whole legal team of the 2^nd defendant would only agree to continue acting for her provided the CFA Costs could be released to pay off part of either the outstanding legal costs or the costs for the 2^nd Retrial.

23.  Thirdly, in relation to the 2^nd defendant’s application for leave to appeal against Deputy High Court Judge Sit SC’s order dated 9 November 2020, it is the evidence of the 2^nd defendant that she had no funds to engage solicitors or counsel for the purpose of conducting the appeal. She also affirmed that she thought at the material time that it would be quicker if she took out a summons and made an application for variation of the Mareva Injunction. As a matter of fact, the 2^nd defendant did take out a summons (the Nov 2020 Variation Summons). Furthermore, given the change of circumstances since November 2020 and the availability of more evidence (as explained in the preceding paragraph), I do not think the 2^nd defendant should be prohibited from making a fresh application for variation by relying on the most up-to-date circumstances in 2022.

24.  Fourthly, in relation to the Nov 2020 Variation Summons, it is the evidence of the 2^nd defendant that, shortly before the scheduled hearing date, she thought she had successfully found a benefactor. She therefore decided not to proceed further with the application in order to save costs. This part of her evidence is corroborated by Mr Powner in his 2^nd Affirmation.

25.  The plaintiff’s solicitors had reminded this Court that when the Nov 2020 Variation Summons was filed, there was also a threat made by the 2^nd defendant’s trial counsel that they might return their briefs, yet they did not do so at the end of the day despite the fact that they were not paid. In this regard, Mr Powner explained in his 2^nd Affirmation that counsel and solicitors decided to act for the 2^nd defendant in the 1^st Retrial because they had significant concern that the 2^nd defendant would be left without any legal representation shortly before the complex criminal trial and the grave injustice that would be brought about. I have no reason not to accept Mr Powner’s evidence. However, it must not be assumed that counsel and solicitors would be prepared to be so generous for the 2^nd time.

26.  In these circumstances, taking into account the fact that the merits of the Nov 2020 Variation Summons had not been ruled upon, and the change of circumstances since then, I do not think the 2^nd defendant had abused the process of the Court by taking out the Summons.

27.  Hence, in my view, it is in the interest of justice to allow the 2^nd defendant to make the present application.

The legal principles applicable to this application

28.  Before I proceed to consider whether this Court should accede to the 2^nd defendant’s application to vary the Mareva Injunction, it may be useful to refer to the relevant legal principles.

29.  In XY, LLC v Jesse Zhu (a.k.a. Jia-Bei Zhu and Jesse Jia-Bei Zhu) [2018] HKCFI 1485, Wilson Chan J had summarised the principles as follows:

“18. As laid down in Derby & Co Ltd v Weldon (Nos 3 and 4) [1990] Ch 65 (at 76-77) and quoted in Atlas Maritime SA v Avalon Ltd (No 3) [1991] 1 WLR 917 (CA) (at 920H to 921A):

(1) The ‘fundamental principle underlying this [Mareva] jurisdiction is that, within the limits of its powers, no court should permit a defendant to take action designed to ensure that subsequent orders of the court are rendered less effective than would otherwise be the case’, as would occur here if the application under GNT’s Summons were to succeed because the funds available to satisfy judgment in the Hong Kong Enforcement Action would be yet further diminished.

(2) That principle is, however, subject to the proviso that ‘it is not its [the Mareva jurisdiction’s] purpose to prevent a defendant carrying on business in the ordinary way … nor to impede him in defending himself against the claim.’ (the ‘Proviso’).

19. […]

20. The second limb of the Proviso is further explained by Lord Donaldson MR in Atlas Maritime SA v Avalon Ltd (No 3), ibid, thus:

(1) (at 926C-D):

‘… the fact that the variation of the injunction to enable legal costs to be paid would be likely to render any award in favour of [the plaintiff] less effective is not of itself a fatal objection because of the proviso built into what I have described as the fundamental principle. But this proviso only applies in cases in which the operation of the injunction would impede the person enjoined from defending himself against the claim.’

(2) (at 927B):

‘In exercising the equitable Mareva jurisdiction, the court should …not limit its consideration to funds to which the party concerned has a legal right, if there are reasonable grounds for believing that it can obtain money otherwise.’ [emphasis supplied]

21. In Wharf Ltd v Lau Yuen How [2010] 1 HKLRD 783, Au J at paragraph 14 stated this:

‘14. In the case of an ‘ordinary’ Mareva injunction, where there is no proprietary claim asserted against the enjoined assets, in the exercise of the court’s discretion faced with an application to release the funds, the court should consider whether the defendant has shown by sufficient evidence that (a) he does not have other assets to meet the payment; and (b) the purpose of the application is not an attempt to dissipate the assets (which prima facie are the defendant’s) to frustrate the enforcement of judgment by the plaintiff.’ [emphasis supplied]

22. Drawing the threads together, two points thus emerge. First, in an application of this nature, the burden is on the defendant to show ‘by sufficient evidence’. Secondly, that the defendant ‘does not have other assets to meet the payment’ should be read together with the analysis postulated by Lord Donaldson MR, so that the court should not ‘limit its consideration to funds to which the party concerned has a legal right, if there are reasonable grounds for believing that it can obtain money otherwise’.”

30.  In my view, when considering whether the 2^nd defendant has shown by sufficient evidence that she does not have other assets to meet the payment, this Court should also follow the approach explained in Bank St Peterburg & Another v Vitaly Arkhangelsky & Another [2014] EWHC 574 (Ch) as follows:

“21. In this case, however, (a) the Defendants’ assets worldwide (with some presently immaterial exceptions) have been frozen and (b) substantial evidence as to the Defendants’ means has been filed. In such circumstances, in my view, the burden shifts to the Claimants to show that the evidence of the Defendants is incredible, and that there are sufficiently strong grounds for supposing that in breach of the worldwide order the Defendants have not disclosed other assets from which they could meet their living and legal expenses to outweigh the natural concern of the court not by its own orders to cause real and irremediable prejudice.

22. Otherwise, if the burden were on the Defendants (as the Claimants submitted), the Defendants would be faced with the difficulty of proving a negative, a difficulty all the greater at an interlocutory stage, and exposed to a total freeze if they cannot do so; that would be unjust, and give no sufficient weight to the fact that at this interlocutory stage the facts cannot be found, and the Court must do its best to avoid irremediable unfairness or injustice.

23. Is the evidence filed by the Defendants incredible? Are there real grounds for supposing that they have available to them undisclosed assets which they have kept away from the purview of the Freezing Order? Are those grounds sufficient to outweigh the risk of the irremediable and serious injustice which would necessarily be occasioned if in truth the Defendants have no other substantial assets out of which to pay the living expenses of themselves and their young family and their legal costs?” (emphasis added)

Other source of funds

31.  The first question which this Court has to consider is whether the 2^nd defendant has shown by sufficient evidence that she has no other source of funds to pay for her legal costs.

32.  To answer this question, I would give much weight to the evidence of Mr Andrew Powner, solicitors acting for the 2^nd defendant, who has made two affirmations in the present case. In view of the importance of his evidence, I will quote these affirmations extensively below.

33.  In his 1^st Affirmation filed on 24 November 2020, he stated, among other things, that:

“50. […] the 2^nd Defendant wishes to ensure equality of arms at the [1^st Retrial] by engaging the services of her former Queens (sic) Counsel who represented her both in the Court of Appeal and in the Court of Final Appeal.

51. It was therefore agreed between local Counsel and Haldanes that we would each reduce our previously agreed brief fees and preparation costs to allocate an agreed, fixed sum of HK$1 million of the CFA Costs towards the brief fee of Ian Winter QC, to enable him to conduct the pre-trial applications.

52. The 2^nd Defendant informed me that she had no funds available from any other source (ie, other than the CFA Costs) in order to brief Ian Winter QC to conduct those pre-trial applications which (until receipt of the Directions) were previously anticipated to be heard in late November or early December 2020. […]

53. In addition to briefing Ian Winter QC to conduct her pre-trial applications, because of the high regard in which the 2^nd Defendant holds him, I was informed that she embarked upon an exercise in early 2020 to try to brief Ian Winter QC for her 1^st Retrial]. As explained in the 3^rd affirmation of the 2^nd Defendant, I am informed that her attempts to raise third-party funds to fund Mr Winter QC’s brief fee to conduct her [1^st Retrial] have not met with any success. […]

[…]

60. Since the CFA Costs are now included within the ambit of the Mareva injunction, all Counsel have informed me that they will return their briefs on 12 December 2020 since there is no prospect of payment of their brief fees before the deadline on 12 December 2020, being the 30 day before trial period specified in the briefs […]

[…]

64. Thus, as from 12 December 2020, the 2^nd Defendant will be unrepresented at a complex 105-day retrial, which is currently scheduled to commence on 11 January 2021. Haldanes are also entitled to cease to act on the same day, 12 December 2020 due to lack of funds, although we wish to assist the Court as much as possible in the likely task of vacating the [1^st Retrial] before coming off the Record in all criminal and civil actions.”

34.  He further explained what happened in 2021 in his 2^nd Affirmation filed on 10 May 2022 as follows:

“6. In late December 2020, after discussions with the 2^nd Defendant and Counsel, despite the 2^nd Defendant having no funds to pay the legal costs, Haldanes and Counsel agreed to continue to act for the 2^nd Defendant in order to prevent the sudden adjournment of a lengthy commercial crime trial. This was done in circumstances where our client had been awaiting trial since her arrest in 2010 and had spent over 2½ years in prison before [the 1^st Retrial] was ordered. Furthermore, the resources of the Court would have been wasted if we withdrew, since the trial had been listed for many months. If the trial judge ordered the trial to continue without the 2^nd Defendant having legal representation, then we were also very concerned about the fairness of the retrial. In addition, one of the two overseas senior counsel admitted for the retrial had already arrived in Hong Kong to conduct the 105-day trial.

7. Furthermore, we had confidence that the 2^nd Defendant would either succeed in appealing the order of DHCJ Sit, or in obtaining a variation of the Mareva Injunction in January 2021 in circumstances where the CFA Costs had been awarded specifically for the purpose of funding her retrial; or further alternatively, that the 2^nd Defendant would be able to locate a new benefactor who would be prepared to fund her first retrial.

8. In January 2021, the 2^nd Defendant did in fact find a friend who agreed to contribute HK$150,000 towards leading counsel’s disbursements; i.e., his travelling expenses from England (two business class return flights from November 2020 to January 2021), and thereafter to remain for the trial in hotel accommodation for over 120 days in total, which disbursements were paid by Mr Ian Winter QC personally.

9. Shortly before the [1^st Retrial] was to begin in February 2021, the 2^nd Defendant was confident that she had secured a new benefactor for her legal fees, and for this reason her [Nov 2020 Variation Summons] to be heard on 25 January 2021 was adjourned sine die (see paragraph 28 of the 2^nd Defendant’s 6^th Affirmation). Unfortunately, very shortly thereafter, she informed us that she had failed.

10. Under normal circumstances, Haldanes would have ceased to act in the criminal trial. However, it was a significant concern for us that our client would be left without legal representation so shortly before a complex trial and the grave injustice that would take place. After further discussions, Haldanes and Counsel took the exceptional decision to continue to act for her.

11. The 2^nd Defendant assured us that she would continue to look for a new benefactor whilst [the 1^st Retrial] continued. She did not have any funds to brief civil Counsel to argue for a variation of the Mareva injunction (the 2^nd Defendant was acting in person in this civil matter) or to pursue her appeal. She was also rather concerned about having to argue in person against an experienced counsel for the Plaintiff in circumstances where she was fully occupied in preparing for her criminal retrial, which was shortly about to begin after some pre-trial arguments.

12. After the [1^st Retrial] concluded without a verdict, the 2^nd Defendant continued in her efforts to obtain a new benefactor. However, in October 2021, she informed us that she had exhausted all possibilities. Haldanes came off the record in December 2021 due to the outstanding legal fees and are no longer representing the 2^nd Defendant for her second retrial in 2023.

[…]

15. With reference to my affirmation dated 24 November 2020, I confirm that Haldanes and Counsel are still unpaid for our past legal services […]”

35.  Mr Powner’s evidence is important because it shows that:

(1)  The 2^nd defendant knew that she would be left unrepresented in the 1^st Retrial if she was unable to pay her counsel’s brief fees by 12 December 2020;

(2)  There is no evidence to show that she knew beforehand that her counsel and solicitors would stay on as her legal representatives even if she could not raise any funds for counsel’s brief fees and the solicitors’ costs on account;

(3)  Despite the threat of the grave consequence of being left unrepresented in the 1^st Retrial, the 2^nd defendant as a matter of fact did not pay towards her counsel’s brief fees at all;

(4)  The 2^nd defendant could not even raise any funds to proceed with her appeal against DHCJ Sit SC’s order nor to make an application for variation of the Mareva Injunction.

36.  In my view, the above amounts to strong evidence in support of the 2^nd defendant’s assertion that she really could not find any other source of fund to pay her legal fees. If she somehow had hid some monies somewhere, or if she knew that there were any benefactors who were ready to give her further financial assistance, I would have thought she would have approached them and come up with the necessary funds. Yet, what happened was that she had never come up with such funds. That speaks volume of the actual situation.

37.  The plaintiff has made a number of points in opposition.

38.  Firstly, it was alleged that the disclosure provided by the 2^nd defendant remained grossly inadequate. It was pointed out that:

(1)  despite the previous benefactors’ allegations that they had no direct or indirect relationship with this case and/or the criminal case, the evidence which the joint and several liquidators found show that many of them in fact were related to the plaintiff company or other parties herein;

(2)  the 2^nd defendant has never disclosed any loan agreement between her and any of the alleged benefactors;

(3)  it is incredible that Mr William Chan would agree to contribute over $1 million when, on his own evidence, he did not know the 2^nd defendant well at the time;

(4)  it is difficult to fathom how Tong Ho Yin, a company secretary, would be in a position to provide $4.3 million financial assistance to the 2^nd defendant, and it is also strange that he would agree to do so when he and the 2^nd defendant had only known each other for 3 years;

(5)  the alleged benefactors had failed to disclose their source of funds.

39.  While the plaintiff’s solicitors did not make it clear in their written submission, it appears that it was hinted that those alleged benefactors were in fact not benefactors as such, but were in fact using the 2^nd defendant’s own money and pretending that they had given financial assistance to the 2^nd defendant. Putting aside the fact that this is pure speculation, even if it were true, as I analysed above, the 2^nd defendant’s conduct shows that she was unable to provide any more fund to pay her legal fees for the 1^st Retrial and/or the 2^nd Retrial.

40.  Secondly, the plaintiff’s solicitors argued that 5 of the purported benefactors had failed to give affirmation evidence to confirm that no further funding would be provided to the 2^nd defendant, despite the fact that the 2^nd defendant had previously confirmed that the same would be filed. With greatest respect, this is neither here nor there. The fact that they did not make any affirmation to confirm this point does not mean that they were willing to give further assistance to the 2^nd defendant. I would have thought, if any of them were really able to do so, the 2^nd defendant would have approached them when she urgently needed money to pay her counsel’s brief fees for her 1^st Retrial, or at least to secure legal representation for her application to vary the Mareva Injunction.

41.  Thirdly, the plaintiff’s solicitors argued that there was not enough disclosure on the part of the 2^nd defendant because she did not name the alleged potential benefactor who indicated that he would unconditionally fund 75% of the costs of the 1^st Retrial. With greatest respect, this is totally irrelevant, because it cannot be denied that, at the end of the day, the potential benefactor did not actually assist the 2^nd defendant at all.

42.  It was further complained by the plaintiff’s solicitors that the 2^nd defendant did not disclose her relationship with a Mr Liu who allegedly provided $150,000 towards Mr Ian Winter QC’s travel expenses to Hong Kong. It was further said that no particulars had been provided as to the circumstances of the financial assistance. With greatest respect, these matters are totally beside the point.

43.  Fourthly, the plaintiff’s solicitors stated that the 2^nd defendant had failed to disclose a number of variations to the Restraint Order.

44.  All those variations (the last one was made on 28 April 2016) were in fact made at least 4 years before the Mareva Injunction. I do not understand, and the plaintiff’s solicitors did not explain at all, why they were relevant to the present application.

45.  To conclude, the plaintiff has not put forward sufficiently strong grounds for supposing that in breach of the Injunction Order the 2^nd defendant has not disclosed other assets from which she could meet her legal expenses. On the other hand, I am satisfied that the 2^nd defendant has adduced sufficient evidence that that she has no other source of funds to pay for her legal costs.

Dissipation of assets

46.  The next question is whether the 2^nd defendant has provided sufficient evidence that the purpose of the present application is not an attempt to dissipate her assets to frustrate the enforcement of judgment by the plaintiff.

47.  In this regard, I only need to refer to Haldanes’ retainer letter dated 25 April 2022 in which the costs agreements in relation to the 2^nd Retrial were set out. It is provided, among other things, that:

“1. We refer to our costs agreement dated 30 September 2020 in respect of your first re-trial in February 2021, which concluded in June 2021. Haldanes are no longer representing you or appear on the Court’s record in respect of your first or second re-trials. This new costs agreement relates to your second re-trial which has been listed in 2023.

2. We note your intention to plead not guilty to all charges. After careful consideration and discussions with your former Senior Counsel Ian Winter, Haldanes and Mr Winter QC would agree to represent you in your second retrial in May 2023, provided that a sum of HK$26,835,450 is provided as costs on account by 1 August 2022; ie, in sufficient time to allow for detailed pre-trial preparation and for Senior Counsel to mark his diary for a High Court trial in 2023.

3. In this regard, Haldanes and Counsel do not waive entitlement to any of your outstanding legal costs including those for your Appeal, Final Appeal and first re-trial, as set out in our previous bills. You shall remain liable for those outstanding legal costs which amount to a total of HK$41,000,000 in total, which still remain unpaid […]

4. However, in the interest of a fair trial in a complex commercial crime case before the High Court in which we recognise that proper legal representation is essential, and taking into account your difficult circumstances, Haldanes and Counsel would agree to represent you at your second re-trial provided that costs on account in the sum of HK$26,835,450 are paid in advance by 1 August 2022.

5. In order for Counsel and Haldanes to represent you at your second re-trial in 2023, the said sum of HK$26,835,450 can be paid either: (a) in part-satisfaction of your outstanding unpaid bills of HK$41,000,000 (as per paragraph 3 above); or (b) as costs on account for your second re-trial in 2023, in accordance with the terms of this costs agreement.

[…]”

48.  The retainer letter then went on to provide that the agreed costs for the 2^nd Retrial would be in the total amount of $41 million (assuming that it will not overrun).

49.  Given the provisions in the retainer letter, I am of the view that the 2^nd defendant has adduced sufficient evidence that the purpose of this application is not an attempt to dissipate the 2^nd defendant’s assets to frustrate the enforcement of judgment by the plaintiff.

50.  As a matter of fact, it must also be borne in mind that the CFA Costs were actually costs awarded to the 2^nd defendant. In my view, it would only be fair if the 2^nd defendant would be allowed to make use of this fund to secure legal representation in the 2^nd Retrial.

The plaintiff’s other miscellaneous arguments

51.  The plaintiff’s solicitors had made a number of other miscellaneous points which I will deal with below.

52.  It was said that the legal cost of $41,000,000 for the 2^nd Retrial is “not a reasonable nor a credible figure” and that it is incredible that solicitors and counsel would agree to accept instructions and undertake the work in the circumstances where the 2^nd defendant would still owe an outstanding amount of more than $14 million. The plaintiff’s solicitors went as far as to submit that:

“Accordingly, it appears that, in reality, the variation that D2 seeks in her [current application] simply has the effect of allowing Haldanes and the Counsel to be partially repaid their debt owed to D2, thus preferred as unsecured creditors over D2’s many other creditors, which includes P.”

53.  I am surprised to see that the plaintiff’s legal representative would make such a point. It is clear from the retainer letter that solicitors and counsel were willing to act for the 2^nd defendant in the 2^nd Retrial provided the CFA Costs would be paid to Haldanes by 1 August 2022, even though no one could tell when the balance of the legal costs could be paid. To say that it is “incredible” that solicitors and counsel will agree to accept instructions and undertake the work in relation to the 2^nd Retrial on this basis is tantamount to alleging that the retainer letter did not mean what it said. This is a very serious allegation made against their fellow legal practitioners which should not have been made without basis.

54.  As to the reasonableness of the figure of $41 million being the quoted total fees for the 2^nd Retrial, with greatest respect, since we are not taxing such fees herein, it is simply irrelevant to consider “reasonableness” of such fees. While I agree that $41 million is a high level of costs, after all, it is a matter between the 2^nd defendant’s legal team and the 2^nd defendant. So long as there is no evidence showing that the 2^nd defendant and the lawyers are conspiring together to misrepresent what they have agreed on costs (I must emphasize that I have absolutely no reason to suspect so in the present case), the level of costs to be charged by the 2^nd defendant’s lawyers, to put it bluntly, is really none of the plaintiff’s business. In any event, what the 2^nd defendant is asking for is the release of the CFA Costs which is in the sum of $26,835,450 only.

55.  The plaintiff’s solicitors then pointed out that, even if the 2^nd defendant were to succeed in the present application, she would still owe her lawyers more than $14 million in relation to the 2^nd Retrial. I do not understand the solicitors’ purpose of mentioning this. Again, this is a matter which should not be a matter of concern on the part of the plaintiff, at least not before an application is made by the 2^nd defendant for further freezed assets to be released for payment towards such balance.

56.  On the allegation that the costs of $41 million is incredible, I am of the view that there is no basis for the plaintiff’s solicitors to make such a serious allegation.

Conclusion

57.  To conclude, having taken all the relevant circumstances into account, I am of the view that it is just and convenient for the Court to accede to the application of the 2^nd defendant, so that she will be able to have legal representation in the 2^nd Retrial, in which she will face very serious criminal charges. It is not in the interest of justice if the 2^nd defendant’s ability to defend herself properly in the 2^nd Retrial is impeded.

ORDER

58.  By reasons of the aforesaid, I make the following order:

(1)  The Mareva Injunction granted against the 2^nd defendant by the Decision made by Deputy High Court Judge Eva Sit, SC dated 7 October 2020 be varied and excepted in the sum of $26,835,450 for the purpose of paying partial future legal costs to be incurred in the 2^nd retrial in HCCC 309/2019.

(2)  Leave be granted to the 2^nd defendant to withdraw the Summons filed herein on 24 November 2020.

(3)  By consent, the 2^nd defendant shall bear the plaintiff’s costs of the Summons filed on 24 November 2020 (except the costs of and occasioned by the preparation of affidavit evidence in relation to the said Summons), with certificate for counsel for the hearing before Wilson Chan J on 27 November 2020, to be taxed if not agreed.

COSTS

59.  I make a costs order nisi that the plaintiff shall bear the costs of the 2^nd defendant (including the costs of and occasioned by the preparation of affidavit evidence in relation to the Summons filed herein on 24 November 2020 and all costs reserved (if any)), to be taxed if not agreed.

60.  The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof.