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HCA686/2007
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 686 OF 2007
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BETWEEN
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RONALD EDWARD TICKNER |
Plaintiff |
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and |
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TRANSGLOBAL CONSULTANTS LIMITED |
1st Defendant |
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PETER MARKOVITCH (alias Paul Jenson) |
2nd Defendant |
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Before : Hon Poon J in Chambers
Date of Hearing : 7 January 2009
Date of Reasons for Decision : 2 February 2009
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REASONS FOR DECISION
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1. On 7 January 2009, I dismissed the 2nd defendant’s application to set aside the default judgment dated 22 October 2007 and two garnishee orders nisi both dated 29 January 2008 obtained by the plaintiff against him with costs.
2. These are my reasons.
Background
3. The 1st defendant, Transglobal Consultants Limited (“Transglobal”), is a company incorporated in the Commonwealth of Dominica. It had since January 2001 been put on the alert lists of various regulatory bodies worldwide including the Securities and Futures Commission in Hong Kong, who categorised Transglobal as a company practising the type of investment fraud known as “bolier room”.
4. The 2nd defendant was at all material times the managing director and the sole director of Transglobal. He used his alias “Paul Jenson” in the promotional literatures of Transglobal. Other senior officers of Transglobal included Nigel Meissner, senior consultant, and Michael Stewart, vice-chairman of international trading.
5. The 2nd defendant was prior to February 2001 the sole signatory of Transglobal’s bank accounts in Hong Kong. In February 2001, he appointed a business acquaintance of his, Sammy Winick, to be an additional signatory.
6. In mid to late 2000, Transglobal promoted the share of Fortune Gaming.com (“Fortune”), a company apparently established in 1999 and registered in the USA which engaged in the business of online casinos. Transglobal offered to sell shares in Fortune at US$4.87 per share while the same were trading in the US market at US$5.37 per share, thereby offering the purchaser an immediate gain of US$0.50 per share.
7. It is the plaintiff’s case that Meissner and Stewart made various fraudulent misrepresentations to him and relying on the same, he paid a total of AUD375,650.71 to Transglobal (into one of its bank accounts in Hong Kong) for purported purchase from Transglobal the shares in Fortune in 2000. Stewart made further fraudulent misrepresentations to the plaintiff which caused him to pay AUD$271,723.10 to Transglobal in 2001.
8. The plaintiff sued the 2nd defendant for damages for fraud and deceit, equitable compensation for dishonest assistance of Transglobal’s breaches of trust and fiduciary duties and damages for conspiracy.
9. On 22 October 2007, A. Cheung J entered default judgment against the 2nd defendant for equitable compensation in the sum of AUD$337,666.14 with interest and costs.
Discussion
10. The default judgment is a regular judgment. The burden rests on the 2nd defendant to raise a defence with a real prospect of success supported by credible evidence. But the 2nd defendant did not file any affidavit. What he relied on is an affirmation filed on his behalf by Mr Wong Ghi Sing of his former solicitors, who had recently ceased to act. Mr Wong clearly did not have any personal knowledge of the matters raised by the 2nd defendant as defence. The draft defence exhibited to his affirmation is not verified. So the court is in effect left with the hearsay evidence of Mr Wong, which is most unsatisfactory. For the court normally expects a defendant to condescend to particulars of his defence on the merits in his own words : see Tong Yi Sang & Another v. Fung, Law & Ng, Solicitors & Others [1993] 2 HKC 665, per Kaplan J at p. 672. Mr Wong referred to a number of reasons why the 2nd defendant was unable to take steps to defend the plaintiff’s claim, including his health, his ignorance of the law and the fact that he, a Canadian citizen and resident, is debarred from leaving Canada because of a pending criminal trial against him. But none of them is an excuse for the 2nd defendant not to file the requisite affidavit himself. Indeed, I can see no reason why the 2nd defendant did not do so. In the circumstances, I will attach no weight to the Mr Wong’s affirmation. On this ground alone, the 2nd defendant’s application must be dismissed.
11. For completeness, I will nevertheless deal with the 2nd defendant’s defence as follows.
12. As a general observation, I note that all the matters raised in the draft defence are bare allegations. For some of the allegations, one would reasonably expect the 2nd defendant to produce documentary evidence in support. But there is simply none. In any event, all the allegations have already been comprehensively dealt with by Mr Ronald Tickner of the plaintiff in his 4th affirmation. The 2nd defendant has adduced no evidence to contradict Mr Tickner. For these reasons, I will take the 2nd defendant’s allegations raised in the draft defence with a pinch of salt.
13. I will now look more closely at his allegations.
14. First, the 2nd defendant denied that he had any knowledge of the fraud committed by Transglobal, Meissner and Stewart. He alleged that he had been unable to leave Canada since January 2001; that he sold his interest in Transglobal pursuant to an oral agreement with one Colt Currey, a senior sales executive of Transglobal based in Bangkok and Winnick in or about January/February 2001; that he resigned from his position as the sole director of Transglobal in or about March 2001; and that he had lost control of Transglobal’s bank accounts in Hong Kong since April 2001.
15. I am unable to accept these allegations for the following reasons.
16. These alleged events all took place in 2001 after the fraud pertaining to the Fortune shares and the payments totalling AUD375,650.71 made in 2000 had already been perpetrated. As such, they cannot be an answer to the plaintiff’s claims based on those matters.
17. The alleged oral agreement is devoid of particulars and not supported by any documentary evidence, such as proof of the transfer by the 2nd defendant of his controlling interest in Transglobal to Currey and Winnick.
18. His allegations that he had lost control of Transglobal and its bank accounts in Hong Kong are contradicted by his own conduct. He issued a letter on behalf of Transglobal in March 2001 in his capacity as its managing director. In an application by the Department of Justice for a restraint order against Transglobal in March 2002, the 2nd defendant and Winnick were named as joint signatories of Transglobal’s bank accounts in Hong Kong. The 2nd defendant did not deny that but sought to apply to discharge the restraint order.
19. Second, the 2nd defendant alleged that Transglobal did transfer the Fortune shares to the plaintiff’s account and the plaintiff was still the registered owner of those shares as at April 2008. He had adduced no documentary evidence in support. Worse still, this allegation is contradicted by Transglobal’s own invoice/confirmation dated 5 February 2001 that all the Fortune shares were sold on 1 February 2001.
20. Third, the 2nd defendant relied on the exemption clause under the Client Trading Agreement dated 28 July 2000 between Transglobal and the plaintiff. The exemption clause read :
“THIS AGREEMENT … LIMITS YOUR RECOURSE AGAINST TRANSGLOBAL CONSULTANTS LIMITED UNDER CERTAIN CIRCUMSTANCES
1. The services to be provided to [P] by [Transglobal] are limited to the opening and maintaining of a securities trading account, the execution of orders to buy or sell securities & commodities as given by [P] and such other specific services as may be requested by [P] in writing. [P] forever releases [Transglobal] from breach of fiduciary duty, arising out of actions or commissions of [Transglobal], [Transglobal’s officers], directors, employees or representatives acting within the scope of the services agree to be provided in this clause.
2. Notwithstanding any other provision of this Agreement, in no event will [Transglobal] or [Transglobal’s] officers, directors, employees or [Transglobals] representatives be liable to the undersigned for damages from lost profits, or incidental, consequential or special damages.”
21. I agree with the submission of Mr Liu, counsel for the plaintiff, that however wide the terms of the exemption clause, it cannot exonerate Transglobal from actual fraud, whether at law or in equity : HIH Casualty & General Insurance (Asia) Ltd v. Chase Manhatten Bank [2003] 2 Lloyd’s Rep. 261. In any event, the 2nd defendant himself is not a party to the agreement. He can derive no protection from the exemption clause.
22. Fourth, the 2nd defendant alleged that Transglobal was not the plaintiff’s investment adviser. This allegation does not sit well with Transglobal’s own promotional materials which depicted itself as portfolio manager and investment advisor of its clients and the 2nd defendant’s own admission in the draft defence that the promotional materials were issued with his approval.
23. Fifth, the 2nd defendant relied on a settlement agreement entered into by Transglobal and the plaintiff dated 22 August 2001 purporting to settle the plaintiff’s claims against Transglobal.
24. Pursuant to the settlement agreement, Transglobal had to pay the plaintiff a total of US$212,003 by four monthly installments between September and December 2001. It is the plaintiff’s case that Transglobal had only paid part of the said sum of US$212,003 leaving an outstanding balance of US$108,001.5, which it had persistently failed to pay. Transglobal had thereby repudiated the settlement agreement. Hence the present action.
25. The 2nd defendant alleged that under the settlement agreement, the plaintiff had waived all his claims against Transglobal and its directors subject to Transglobal paying the four installments and that the total amount paid by Transglobal before 15 December 2001 exceeded the settlement sum of US$212,003. However, this allegation conveniently ignored the fact that payments by Transglobal before 15 September 2001 were not to be taken as part of the settlement sums. When those payments are excluded, Transglobal had clearly failed to pay the settlement sums in full.
26. Finally, the 2nd defendant alleged that the plaintiff’s claims for AUD$375,650.71 made in 2000 are time-barred.
27. Mr Liu relied on section 26 of the Limitation Ordinance, Cap. 347. Section 26 provides :
“Postponement of limitation period in case of fraud, concealment or mistake
(1) Subject to subsection (4), where in the case of any action for which a period of limitation is prescribed by this Ordinance, either―
(a) the action is based upon the fraud of the defendant;
(b) any fact relevant to the plaintiff’s right of action has been deliberately concealed from him by the defendant; or
(c) the action is for relief from the consequences of a mistake,
the period of limitation shall not begin to run until the plaintiff has discovered the fraud, concealment or mistake (as the case may be) or could with reasonable diligence have discovered it.”
28. Mr Liu submitted that on the evidence before the court, the plaintiff did not discover or could with reasonable diligence have discovered the fraud pertaining to the payments made in 2000 or 2001. So the limitation period should be postponed so as not to bar the plaintiff from commencing the present proceedings. I entirely agree.
29. None of the matters raised as defence is meritorious.
Conclusion
30. For the above reasons, I dismissed the 2nd defendant’s application with costs.
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(J. Poon)
Judge of the Court of First Instance
High Court |
Mr Harry Liu, instructed by Messrs Deacons, for the Plaintiff
The 2nd Defendant, in person, absent
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