TIGER RESORT ASIA LTD v. KAZUO OKADA AND OTHERS

HCA 3017/2017

[2021] HKCFI 1117

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3017 OF 2017

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DECISION

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1.  By summons dated 22 September 2020 (the “Summons”), the plaintiff (“P”) seeks an order (the “Unless Order”) that unless the 1^st defendant (“D1”) fully and properly complies with §2 of the order made by this Court on 31 May 2019 (“the 2^nd Injunction Order”), the Re‑Amended Defence of D1 be struck out and P be at liberty to enter judgment against him.

2.  The application was originally set down for substantive hearing on 30 November 2020.  Shortly before then, this Court was informed that a member of one of the parties’ legal teams had been diagnosed positive for COVID‑19.  I directed that the Summons be disposed of on the papers, and gave consequential directions on the filing of submissions. 

3.  On behalf of P, Mr Robert Whitehead SC leading Mr Steven Kwan and Ms Charlotte O T Chan filed their submissions dated 25 November 2020, 2 December 2020 and 2 February 2021 (“P’s Submissions”, “P’s Reply” and “P’s Sup Reply” respectively).  On behalf of D1, Mr William Wong SC leading Mr Brian Fan filed their submissions dated 26 November 2020 and 26 January 2021 (“D1’s Submissions” and “D1’s Sup Submissions” respectively).

The 2^nd Injunction Order and the Disclosure Order

4.  This Summons is taken out to enforce the 2^nd Injunction Order.  For background of this case and the reasons I gave for granting the 2^nd Injunction Order, I refer to the Decision I handed down on 31 May 2019[1] (the “31/5/2019 Decision”).  I adopt also the same terms I used in the Decision.

5.  In respect of the 2^nd Injunction Order:

 (a)    by §1(a) thereof, D1 is ordered to preserve and not to deal with until trial or further order the sum of JPY¥1,002 million (ie the 3^rd Sum) or its fruits or proceeds, whether the same is within or outside Hong Kong;

 (b)    by §1(b) thereof, D1 is ordered to preserve and not to deal with until trial or further order the sum of HK$22,556,519.38 out of the 4^th Sum or its fruits or proceeds (“4^th Sum (Part)”) whether the same is within or outside Hong Kong;

 (c)    by §2 thereof (the “Disclosure Order”), D1 is ordered to:

“ … disclose to [P] in writing within 14 days as to the whereabouts and what, if anything, has become the sums referred to in paragraph 1 above. The information to be disclosed to [P] shall be confirmed in affidavit or affirmation with relevant documents identified and exhibited which must be served on [Ps’] solicitors.”

The relevant affirmations

6.  Some 13 months after the 2^nd Injunction Order, D1 filed his 5^th affirmation on 15 July 2020 (“D1/Aff5”) in purported compliance of the same.  That was followed later by his 6^th, 7^th and 8^th affirmations of 2 October 2020, 26 October 2020 and 8 December 2020 respectively (“D1/Aff6”, “D1/Aff7” and “D1/Aff8”). 

7.  On 20 January 2021, Mr Kensui Asano on behalf of P filed his 6^th affirmation in reply of D1/Aff8 (“Asano” and “Asano/Aff6”).

8.  On 21 January 2021, I further granted D1 leave to file his 9^th affirmation (“D1/Aff9”), which draft was attached to the 2^nd affirmation of Karen Lam of 31 December 2020[2].

The issues

9.  The main issues raised by the present application are:

 (a)    whether D1 has, by making and filing D’s Disclosure Affirmations, complied with the Disclosure Order; and

 (b)    if not, whether the Unless Order should in the exercise of this Court’s discretion be granted.

Events leading to the Summons

10.  I summarize below the events that have taken place since the grant of the 2^nd Injunction Order.

11.  In the hearing which led to the 2^nd Injunction Order, D1 was represented by leading counsel.  The instructing firm was Messrs SSW & Associates (“SSW”).  P was, and has been, represented by Haldanes (“Haldanes”).

12.  The time for D1 to comply with the Disclosure Order expired on 14 June 2019.

13.  On that same day, D1, still represented then by SSW, filed an application for leave to appeal against the 2^nd Injunction Order.

14.  On 16 July 2019, SSW ceased to act for D1.  On 18 July 2019 Messrs Tse Yuen Ting Wong (“TYTW”) came on record to act for him.

15.  On 28 July 2019, the 2^nd Injunction Order with penal notice was served on TYTW.

16.  On 9 August 2019, TYTW sought an extension for time from this Court for D1 to lodge his skeleton arguments in support of his application for leave to appeal.

17.  On 26 August 2019, D1, represented by counsel and TYTW, filed his submissions in support of his application for leave to appeal.

18.  On 31 October 2019, I handed down my decision refusing D1’s application for leave to appeal.

19.  No application for leave has been made to the Court of Appeal.

20.  On 6 May 2020, D1 changed his legal representatives to Wong Wan & Partners (“WW&P”).

21.  On 8 May 2020, Haldanes wrote to WW&P demanding again compliance of the Disclosure Order.

22.  On 15 May 2020, WW&P wrote to Haldanes and sought a 28‑day time extension to comply with the Disclosure Order.  No explanation for the non‑compliance was offered.

23.  After correspondence, P consented to an extension till 10 July 2020.

24.  On 15 July 2020, D1 filed D1/Aff5.

D1’s affirmations

25.  In D1/Aff5:

 (a)    in relation to the 3^rd Sum, D1 says that:

 (i)   he cannot remember the exact details and had to refer to bank statements to assist;

 (ii)   on 13 June 2016, a sum of JPY¥1,002,003,589 was withdrawn from D1’s account in Deutsche Bank AG, Hong Kong Branch (“DB A/C”) and paid to an account of D5;

 (iii)   he cannot remember the whereabouts of the funds, and whether they were still in D5’s account;

 (iv)   he on 8 July 2020 made an application to the Bank of Communications Co Ltd (“BComm”) where D5’s account (“D5 BComm Account”) was held and asked for reprint of document / account history of D5;

 (v)   the documents were not yet available by the time he made D1/Aff5, but that:

“ I do not want to further delay the disclosure and have therefore decided to first disclose the documents which I possess and hereby undertake to this Court that I shall inform this Court and disclose the whereabouts of the funds by way of affirmation when I retrieve the said information.”[3]

 (b)    in relation to the 4^th Sum (Part), he says that:

 (i)   he likewise cannot remember the exact details and had to refer to bank statements to assist;

 (ii)   on 31 August 2016, a sum of US$17,999,995 was transferred to another account with the description of “$PURCH$17999995@46.51/OKADA KAZUO”;

 (iii)   the statement of his Philippine Peso account with BDO Unibank (“BDO Peso Account”) shows that a sum of ₱837,179,767.45 (equivalent to US$17,999,995 at the exchange rate of 46.51) was on 31 August 2016 credited into that account;

 (iv)   there were multiple transactions under the BDO Peso Account subsequent to that deposit;

 (v)   he:

“ cannot recall what were the transactions and the whereabouts of the said sum without referring to the documents. In view of my disclosure duties, I have also made an application on 10 July 2020 to BDO Unibank Philippines seeking the relevant information for those transactions. Once I hear from BDO Unibank Philippines, I shall inform this Court and disclose the whereabouts of the funds further by way of affirmation.”[4]

26.  In D1/Aff6:

 (a)    D1 seeks to give an update;

 (b)    in relation to the 3^rd Sum[5]:

 (i)   he produces certain bank statements of D5 BComm Account;

 (ii)   he says that a sum of JPY¥1,002,000,000 was deposited into that account on 15 June 2016;

 (iii)   he says that subsequently on that same day, a sum of JPY¥1,000,006,861 was withdrawn from D5 BComm Account;

 (iv)   he does not recall the details of that withdrawal and who the payee was;

 (v)   he will file further affirmation to update;

 (c)    in relation to the 4^th Sum (Part)[6]:

 (i)   he discloses certain documents and statements in respect of the BDO Peso Account;

 (ii)   he says that in the months of September and October 2016, multiple transactions took place and a total sum of ₱750,505,000 was wired out;

 (iii)   he gives a summary of 5 withdrawals.  He gives the dates, the name of the 5 recipients, and the amounts of those 5 withdrawals;

 (iv)   he said[7] that out of those 5 recipients:

 (1)    he “cannot recall exactly who” 2 of them were[8];

 (2)    In respect of the other 3, he said that:

“ … Laurence Hawke, Transasia Construction Development Corporation and Dindo Espeleta[9] were all parties related to either Okada Manila or Tiger Resort Asia. Laurence Hawke was the CFO of Okada Manila during 2016. Dindo Espeleta was Tiger Resort’s Chief Executive Advisor. Transasia was the main constructor / development company involved in the Okada Manila project.”

 (d)    D1 claims that he has fulfilled his disclosure duties[10].

27.  D1/Aff7 is filed in opposition of the present application.  Therein:

 (a)    In respect of the 3^rd Sum, D1 claims that BComm was unable to process the relevant information request due to the loss of D5’s company chop;

 (b)    In respect of the 4^th Sum (Part):

“ 21. As to what these third parties had done with the monies, this is beyond my knowledge. I confirm that these various third parties are not acting as my nominees. As I set out in paragraph 8 of [D1/Aff6], some of these payments were made to employees, contractors and personnel under the casino project carried out by [P] (i.e. the construction and operation of Okada Manila in the Philippines).

   22.    While I do not have concrete documentary proof (as the documents in relation to the casino project are no longer in my possession ever since the ouster in 2017 and the relevant records were previously maintained by Negishi), I believe that the payments were made on behalf of UEC and/or its subsidiaries for the purpose of the casino project.  My belief is fortified by the fact that the said sums were paid out from the BDO Peso Account, which was held with a bank in the Philippines (i.e. where the Okada Manila — the casino project — is located).”

 (c)    He seeks to explain the delay in his compliance of the Disclosure Order;

 (d)    He claims that he would suffer severe prejudice if the present application is to be granted. 

28.  On 24 November 2020, Seyfarth, D1’s current solicitors, wrote to Haldanes (the “Seyfarth 24/11/20 Letter”).  It was said that D1 had received the reprints of some documents from BComm on the transfer of the 3^rd Sum to D5 BComm Account, and that on or around 15 June 2016, remittance of JPY¥1 billion was effected from the D5 BComm Account to an individual named “Teramoto Seiichiro”.  It was further said that:

“ We are currently in the course of taking instructions from our client as to the identity of this Teramoto Seiichiro on an urgent basis …

Further details in relation to the transferee and the transaction will be deposed to by our client by way of affirmation as soon as practicable.”

29.  In D1/Aff8:

 (a)    D1 says, with reference to certain documents received from BComm, that in relation to the 3^rd Sum:

 (i)   JPY¥1,000,000,000 out of the sum of JPY¥1,000,006,861 withdrawn from D5 BComm Account was remitted to an account held by Teramoto Seiichiro with the Bank of Tokyo‑Mitubishi UFJ, Ltd;

 (ii)   Teramoto Seiichiro is an art dealer residing in Tokyo;

 (iii)   that:

“…I can only deduce that I must have purchased some artwork from Mr Teramoto in around mid‑June 2016, and such purchase must have been deposited with the Okada Museum of Art”[11];

  …

  I cannot recall which specific piece(s) of artwork were purchased by the specific JPY 1,000,000,000’[12];

  …

  Since I was ousted from control of UEC’s board in May 2017, I no longer have access to the information of Okada Museum of Art.  However UEC (who at all material times controls the Plaintiff) has unfettered access to the records kept by Okada Museum of Art, which I understand include a catalogue setting out the date of acquisitions of art pieces and their acquisition prices”[13];

 (b)    D1 says in respect of the 4^th Sum (Part) that the underlying documents in relation to the Okada Manila Project are kept with P and the operating vehicle of the Casino Project (“Tiger PH”), which he no longer has access to.

30.  In Asano/Aff6, Asano says:

 (a)    in respect of the 3^rd Sum, that with the scarcity of information provided by D1, there is no feasible way whereby P can check the alleged artworks indeed exist and stored at Okada Museum of Art, or, if they exist, which pieces were purchased with the 3^rd Sum;

 (b)    in respect of the 4^th Sum (Part), that as the relevant payments were made by D1’s personal account maintained with the BDO Peso Account, neither P nor Tiger PH has records of the same.

31.  In D1/Aff9, D1 tries to explain the difficulties he has in disclosing documents in relation to the purchase of the artworks.  In particular, at §7 thereof, he claims that:

“ …I wish to inform this Court, by way of affirmation, the difficulty I have in providing the documentation required, in particular those under paragraph 5.2 as either (1) they do not exist or (2) they are not in my possession or (3) it is not within my powers to retrieve such documents.”

Jurisdiction to make an unless order

32.  This Court has the power to grant the Unless Order to ensure compliance with the Disclosure Order — see China Metal Recycling (Holdings) Ltd (in provisional liquidation) v Chun Chi Wai & Ors HCA 1412/2013 (17 November 2014), per Chow J at §§51‑52, JSC BTA Bank v Ablyazov (No 8) [2013] 1 WLR 1331 at §§146, 149, 165, 183‑188 (cited with approval by Chow J in China Metal Recyling), and my Decision in Silver Universe Investments Ltd v China Times Securities Ltd & Others [2019] HKCFI 834 at §78.

33.  The need for such powers is obvious.  As explained by Rix LJ at §188 of Ablyazov (No 8):

“ The authorities demonstrate that it is vital for the court, in the interests of justice, to have effective powers, and effective sanctions. Without these, it would be possible for a defendant (or, in a different situation, a claimant) to flout the orders of the court, which are the court’s considered means by which to keep the scales of justice for the parties even. If once it became known that the court was unable or unwilling to maintain the effectiveness of its orders, then it would lose all control over litigation of this kind, with terrible consequences for the administration of justice. Those wrongly accused of fraud would be relieved of a certain amount of inconvenience, but fraudsters would rejoice and hitch a free ride to interminable litigation on the back of ill‑gotten gains.”

34.  Ablyazov (No 8) was followed in ORB a.r.l. v Ruhan [2016] EWHC 850 (Comm).  Therein, Popplewell J observed at §178 that:

“ … In the context of freezing orders, the emphasis is on an effective trial, so as to enable the applicant’s rights to be vindicated by enforcement, not merely judgment. The interest of a party in seeking an effective and realistic outcome to his litigation, if he succeeds, may be as important in the balance of things as the interest of the other party in preserving his right of access to trial despite his refusal to abide by orders of the court: see JSC BTA Bank v Ablyazov (No 8) [2013] 1 WLR 1331 per Rix LJ at paragraphs [182]-[185]. Moreover, the Court’s orders are to be obeyed. The administration of justice depends on it. Maintaining public confidence in the Court’s ability and willingness to secure compliance with its orders is an important and legitimate objective of an unless order in itself: ibid at paragraph [188]. The Court regularly makes debarring orders where the failure does not directly impact on the substantive issues which fall to be decided at trial. It does so, for example when it stays proceedings for failure to provide security for costs. It is well established that such an unless or debarring order may be justified by failure to comply with a freezing order and ancillary disclosure order …”

35.  The above are not in dispute, and I apply the same.

Whether non‑compliance

36.  In my view, D1’s non‑compliance of the Disclosure Order has been clear and flagrant.

37.  The first obvious aspect of D1’s breach is his delay in taking steps to comply with the Disclosure Order:

 (a)    The Disclosure Order was made on 31 May 2019.  Even according to D1’s own evidence, he did not approach BComm and BDO Unibank Philippines for documents until July 2020, and did not file D1/Aff5 until 15 July 2020;

 (b)    In D1/Aff5, D1 claims that:

 (i)   the delay “was purely inadvertent”[14];

 (ii)   he is 77 year‑old Japanese who does not speak English, that he had “great difficulty in communicating with [SSW] in light of the language barriers”[15], and that it was only in May 2020 after WW&P had been instructed that “I was brought to the attention of the [Disclosure] Order and was advised by them of my duty to comply with the [Disclosure] Order”[16]; and

 (iii)   his health had been poor[17];

 (c)    In D1/Aff7[18], he similarly blamed the delay on the alleged language barrier.  He claimed that difficulties in taking instructions, giving advice and communication persisted despite the engagement of TYTW;

 (d)    Those explanations are in my view plainly incredible;

 (e)    D1 has previously on affirmation claimed that he is immensely rich, in the sense that “[P’s] claim is in respect of money …  It cannot be validly suggested that I would be unable to meet any claim for damages”[19].  Leading counsel has previously described to this Court that the quantum of P’s claim is “pocket change” for D1[20];

 (f)    A man of D1’s worth could have engaged interpretation services, and the very best should he so choose.  For him to suggest that he was hampered by “language barriers” to communicate with his lawyers is entirely unbelievable;

 (g)    I do not accept D1’s bare assertion that his duties under the Disclosure Order had not prior to May 2020 been explained to him;

 (h)    Alleged poor health is in my view nothing but an excuse.  Either D1 knew, or did not know about his duties under the Disclosure Order.  He is not saying that he knew about his duties but poor health had prevented him from compliance.  Poor health is irrelevant given his assertion that he in fact did not know;

 (i)    In any event:

 (i)   I observe that the medical certificate produced[21] discloses principally cardiac disease.  There is no cognitive impairment.  The medical advice was simply that D1 “is required to rest in bed because he is feeling unwell, and should avoid the business trip in abroad and night time work and the fatigue”;

 (ii)   even if D1 had been of poor health, and assuming that poor health had prevented prompt compliance, what he should have done was to apply for time to comply, but not simply to ignore his duties.

38.  In respect of the 3^rd Sum, and at least to the extent of the terms of the underlying transaction between D5 and Teramoto Seiichiro, even D1 accepts that he had before D1/Aff8 failed to fully comply with the Disclosure Order[22].

39.  In D1/Aff8, apart from revealing that Teramoto Seiichiro is an art dealer, and his deduction that he must have purchased artworks from him with the 3^rd Sum, D1 has disclosed little that enables P to trace what has become of the 3^rd Sum.

40.  In respect of the 4^th Sum (Part):

 (a)    I accept Mr Whitehead’s submissions[23] that D1 has so far failed to comply with the Disclosure Order;

 (b)    In respect of Merlita R. Montefalcon and Ivarluski Aseron, what D1 meant by saying that he “cannot recall exactly” who they were is, to say the least, vague;

 (c)    In respect of Transasia Construction Development Corporation and Dindo A Espeleta, the sums involved were very significant.  Other than a bare assertion of belief, D1 has given no explanation as to why he transferred out those sums.  More importantly, no documents have been produced, and no evidence has been adduced on any attempts on his part to obtain them[24];

 (d)    I accept Mr Whitehead’s submissions[25] that absent any responsible explanation as to what those substantial transfers were for, and absent any documents evidencing the same, it is unacceptable to suggest that D1 has complied with the Disclosure Order in relation to the 4^th Sum (Part);

 (e)    As stated in Asano Aff/6, the relevant payments were made from D1’s personal account, and neither P nor Tiger PH has record of the same.

41.  In D1/Aff9, he asserted that it was difficult for him to provide the documentation required because they (1) do not exist, or (2) are not in his possession or (3) are not within his powers to retrieve those documents.

42.  In this regard, I accept Mr Whitehead’s submissions[26] that when tested under cross‑examination, it became clear that D1 had made no effort to contact Teramoto Seiichiro to try to obtain the information.   

D1’s submissions and my consideration thereof

43.  I deal with a number of submissions made on behalf of D1 that the Unless Order should not be granted.

44.  Relying principally on Bruce James Stinson v Gu Ming Gao [2018] HKCA 10, per Kwan JA (as the V‑P then was), Mr Wong submits that:

 (a)    the immediate purpose of an unless order is “forward‑looking” and to bring pressure on a non‑complying party to comply;

 (b)    the draconian sanction of striking out a litigant’s claim should not be the default consequence of an unless order but as a last resort;

 (c)    a relevant consideration is whether the non‑compliance is excusable; and

 (d)    necessity and proportionality should be considered.

45.  In so far as Mr Wong seeking to argue that D1’s non‑compliance has been excusable[27], or that the Unless Order sought is unnecessary at this stage given D1’s “persistent efforts to comply”[28], I do not accept the same.  I have explained why I do not accept D1’s explanation for his delay in complying.  They are in my view plainly incredible. I do not find what D1 has done constitutes “persistent efforts to comply”. I found the steps taken by D1 dilatory and inadequate.

46.  I accept that the immediate purpose of an unless order is in general forward‑looking. That in my view does not assist D1 in the present case.  Mr Wong’s submissions in this regard (that as a result the Unless Order should not be granted) is made on the premise that the only pending disclosure relates to the 3^rd Sum[29], and even that is now under urgent investigation.  I do not accept that premise. I have found that D1 also has not complied with his duties in relation to the 4^th Sum (Part).  I have explained why.

47.  Further, on the facts of this case, D1’s conduct has given rise to risk of injustice by reason of the difficulty of enforcing a judgment.  Dealing with that risk is forward‑looking.  As observed by Teare J in JSC BTA Bank v Mukhtar Ablyazov [2012] EWHC 455 (Comm) at §§53-55, that:

“ 53. The authorities … do not, in my judgment, suggest that it is illegitimate to make an unless order for such purposes. The principle which they establish is that a defence may be struck out if there is a substantial risk of injustice.

54. Whilst the cases essentially deal with a risk of an injustice by reason of the difficulty of there being a fair trial of the issues in dispute, a risk of injustice can also arise by reason of the difficulty of enforcing a judgment caused by a defendant hiding his assets or dealing with his assets prior to trial. If a judgment cannot be enforced for such a reason, any claimant would consider the proceedings, ‘unsatisfactory’ … The court is entitled to have regard to, ‘the overall fairness of the proceedings’ … That includes taking into account the risk that if an unless order is not made, the Bank may be restricted in the recovery it might otherwise make ….

55.   That approach reflects what I said when sentencing Mr Ablyazov for contempt.  I observed that the purpose of freezing orders is to enable the court to do justice between the parties.”

48.  Mr Wong further submits[30] that an unless order with a 7‑day period will stand to operate with undue and disproportionate prejudice.  He concludes, for that and other reasons, that the Summons should be dismissed and a further 21‑day extension be granted to D1 (without prejudice to P’s right to further apply for an unless order if disclosure remains insufficient without cogent explanation).

49.  I am prepared to accept that given the pandemic, D1 might need slightly more time.  I am therefore prepared to give D1 more time to comply, but that indulgence will be backed up by an unless order.

Conclusion

50.  For the reasons set out above, I grant an order in terms of §1 of the Summons, save that I will give D1 until “4 p.m. on the 28^th day following the date hereof” to comply.

51.  I see no reason why costs should not follow the event.  I make a costs order nisi in terms of §2 of the Summons.  Any party seeking summary assessment or otherwise any variation should do so by written submissions within 7 days from the date hereof, response within 7 days upon receipt, and reply within 7 days thereafter.