SECRETARY FOR JUSTICE on behalf of the GOVERNMENT OF THE UNITED MEXICAN STATES v. ZHENLY YE GON AND ANOTHER

CACV 174/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 174 OF 2011

(ON APPEAL FROM HCMP NO. 2649 OF 2009)

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BETWEEN

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R U L I N G

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Hon Hartmann JA (giving the ruling of the Court):

Introduction

1.  In 2007, the federal authorities in Mexico instituted criminal proceedings against the first defendant for various offences of trafficking in dangerous drugs.  At the time, it appears that the first defendant was in the United States and accordingly extradition proceedings were instituted against him for his return to Mexico.  In December 2009, acting upon the request of the Government of Mexico, the Secretary for Justice made a successful ex parte application to the Court of First Instance for an order restraining both the first and second defendants (the second defendant being a local company controlled by the first defendant) from dealing with any of the funds held by them in Hong Kong in the Bank of China pending a resolution of the criminal proceedings against the first defendant in Mexico.

2.  In the latter part of 2010, the defendants filed proceedings in the Court of First Instance seeking a discharge of the restraining order or, in the alternative, an order of variation.  Pursuant to the request for variation, permission was sought to withdraw funds to meet the first defendant’s costs of maintaining himself and his family and, in addition, to meet the first defendant’s on-going legal costs.  In respect of legal costs, funds were sought to help pay the applicant’s legal costs in the United States, in Mexico and in Hong Kong.  Indeed, in respect of the Hong Kong proceedings what was sought was “a reasonable sum for legal advice and representation not exceeding HK$500,000.”

3.  In a judgment dated 10 August 2011, Wright J dismissed the application for discharge and the alternative application for variation, directing that the restraining order remain in full force and effect until further order.

4.  The defendants appealed.  In the notice of appeal, in the event that the restraining order was not discharged, the first defendant sought by way of variation an increased amount of HK$810,000 to meet his costs of legal advice and representation in this jurisdiction.

5.  In our judgment dated 9 March 2012, we noted that the first defendant was seeking by way of variation a sum not exceeding $810,000 to meet his Hong Kong legal expenses.  As it was, we dismissed the appeal, refusing to release any funds by way of variation.

6.  We reserved costs on the basis that it would not be appropriate to make any final order in that regard until the conclusion of the criminal proceedings in Mexico and, in the event of the first defendant being convicted, any subsequent confiscation proceedings.

The present application

7.  In a letter to the Court dated 7 May 2012, the solicitors for the defendants appeared to seek an early resolution of the costs issue both at first instance and on appeal.  Their letter commenced in the following terms:

“We refer to the judgment of their Lordships in the above case handed down on 9 March 2012. It is not intended to take any further step in this litigation. For this, among other reasons, the issue of the costs reserved now falls for consideration …”

8.  However, after correspondence with counsel representing the Department of Justice, the solicitors for the defendants confirmed in a letter of 17 May 2012 that they were not seeking a determination of the costs order but were seeking a variation of the restraining order.  In this regard, the letter said:

“We confirm that we are seeking a variation of the restraint order for the release of funds to pay the defendant’s costs for both solicitors and counsel for the appeal as well as the proceedings before Justice Wright.”

Resolution

9.  It will be seen that, in seeking a variation of the restraining order to meet legal fees incurred in respect of the Hong Kong proceedings, as opposed to an early resolution of the costs orders, the defendants have sought exactly what was originally sought at first instance and what was sought thereafter before ourselves on appeal.  That issue has been determined. Both at first instance and before us, the request for variation to meet the Hong Kong legal costs was refused.  It is not for this Court to re-determine the same issue.

10.  In our judgment of 9 March 2012, we affirmed the fundamental principle that, when an application is made to vary a restraining order to meet legal costs and living expenses, the burden is on the applicant to show that he has no other assets available to him to meet those expenses.  At first instance, Wright J found that there had been a singular failure by the applicant to disclose his worldwide financial resources in affidavits.  The judge was of the view that full and frank disclosure was of particular importance in the present case given the first defendant’s ability to move very substantial sums of money internationally and to do so over an extended period of time.  We agreed with that finding.

11.  It was only on 29 May 2012, nearly three months after our judgment was handed down, that the first defendant signed a somewhat terse affidavit stating that all he had available to assist in his legal proceedings was a sum held by his United States lawyer in the amount of US$160,956.  If the affidavit had been filed with this Court prior to the appeal it may have been of some assistance.  It is of none whatsoever when it is filed nearly three months after our judgment has been handed down and, for all effective purposes, we have been rendered functus.

12.  Should there be a material change in the first defendant’s circumstances then it is of course open to him to make a further application for variation but that application must be addressed to the Court of First Instance.

13.  The application to re-open the appeal proceedings – for that effectively is what it is – is misconceived and is refused.

14.  Costs relevant to this application are to the Plaintiff.