INTERCONTINENTAL HOUSING DEVELOPMENT LIMITED v. QUEK TECK HUAT AND OTHERS

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JUDGMENT

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1. On the 7th of January of this year, Mr. Martin Lee appeared on behalf of the Plaintiff before me asking ex parte for Mareva Injunctions and Prohibition Orders against the first four Defendants in this action and on the affidavits being considered those orders were made.

2. On the 13th of January the 2nd Defendant together with the Plaintiff asked for a Consent Order on the 2nd Defendant's application to set orders aside. The Consent Order was to set aside the Prohibition Order against the 2nd Defendant, the Mareva being left substantially intact. That Order was made without prejudice to the 2nd Defendant's right to appear at a later date to apply to set aside the injunction.

3. The 4th Defendant now appears and applies to set both these Orders aside. The Plaintiff's Counsel, now Mr. Bokhary, did not seek to support the Prohibition Order at this hearing and I accordingly made an Order setting aside that Prohibition Order against the 4th Defendant last evening.

4. The history of this matter is somewhat complicated. The salient facts are these. I set them out, not overlooking that some of them are in dispute or at least some of the facts associated with them are in dispute.

5. The salient facts are these: Mr. Ch'ng Poh was, probably still is, a Director and Shareholder in Join Park Limited and other associated companies. In May of last year Join Park through him was interested in purchasing control in a Malaysian public company called Paper Products. In negotiations for that purchase he met the 4th Defendant. The 4th Defendant's actual position in the 5th Defendant, the Ka Wah Bank, is subject to some dispute but it seems that at relevant times he was an Executive Vice-President. In any event he was closely associated with the 5th Defendant. Through the 4th Defendant he met the President of the Ka Wah Bank and another Executive Director but Mr. Ch'ng's dealings were with the 4th Defendant. In the course of these dealings it is said by Mr. Ch'ng that the 4th Defendant steered him away from purchase in Paper Products towards a purchase of a controlling interest in the Plaintiff. The purchase was to be from Territorial Development Limited & Company which was headed by the 1st Defendant. In the course of those negotiations it became clear to Mr. Ch'ng that the 4th Defendant had full power to give undertakings and assurances, to disclose accounts and to make agreements. The result was that an agreement was made by Mr. Ch'ng on behalf of Join Park to buy 77,000,000 shares at a cost of something in the order of $232.5 million Hong Kong. The 1st Defendant in that agreement was a guarantor and the terms included among others: 1) that Join Park should retain $123 million Hong Kong against any depreciation in the Plaintiff's assets and; 2) that the 1st Defendant would procure Territorial Development Limited, the vendor, to deliver a banker's draft to the Plaintiff in discharge of certain obligations. By a further complication Accordance Limited, a subsidiary of the Plaintiff, owed the 5th Defendant, the bank, a sum in the order of $124 M although that was apparently in dispute and the Plaintiff intended to use some of the money in discharge of that debt, that is the money which Territorial Development was going to pay over in discharge of some other obligations which I need not go into.

6. On the 17th of August three cashier orders were issued by the vendor on the 5th Defendant bank to the Plaintiff totalling $127,617,747.88¢HK the precise sum is of some importance. On the same day the 1st Defendant left the Plaintiff as Chairman and was replaced; Mr. Ch'ng Poh became Deputy Chairman and Chief Executive; group Directors resigned and were replaced. The 2nd Defendant who was also a Director resigned some time in September. The 3rd Defendant was an employee and she left on the 17th of August also.

7. The three cashier orders were paid in to the 5th Defendant and then eight cheques were made out to cash. They were withdrawn on the 1st and 2nd Defendants' signature and they were paid into Dixon Limited, the 7th Defendant, a subsidiary of the Plaintiff. Those cheques came to exactly the sum of the three cashiers orders that I have mentioned. Exactly the same sum was immediately paid out to cash against Dixon's cheques, again from the 5th Defendant. Those cheques were signed by the 3rd Defendant and amounted to be exactly the same sum. The cheques stubs (or some of them) are marked 'investment' and the whereabouts of that money is not known to date.

8. After the change of staff in the Plaintiff Mr. Ch'ng Poh had to replace staff, some from Malaya. It was on the 21st of September that one of the new staff, Mr. Eddy Choo, drew the withdrawals from the Plaintiff's account of HK$127 M odd to Mr. Ching's notice. He ordered enquiries to be made. They were made both by himself and Mr. Eddy Choo. To say the least of it those enquiries made of the 2nd and 3rd Defendants initially received either no answers or unhelpful ones. There was a reply by the 3rd Defendant at the beginning of December. That reply speaks for itself - its of the most unhelpful nature. Enquiries were pursued and in December the 1st Defendant was asked about the matter but again he made no reply.

9. On the 19th December there was a meeting between Mr. Ch'ng Poh and the lst and 2nd Defendant. They promised to settle the matter but nothing happened. Mr. Ch'ng Poh then asked for a meeting with the 4th Defendant and, either during the conversation arranging the meeting or some other time, the 4th Defendant suggested (according to Mr. Ch'ng) that the $123 million which had been retained should be set-off against the $127 million.

10. On the 20th December there was a meeting between Mr. Ch'ng Poh and the 3rd and 4th Defendants. According to Mr. Ch'ng Poh the 4th Defendant said that if Mr. Ch'ng Poh made trouble a Director of the Vendor and formerly of the Plaintiff (whom I shall not name) would cause him to be attacked and caused bodily harm.

11. On the 4th of January there was a further meeting between Mr. Ch'ng Poh and 4th Defendant and that at that meeting (according to Mr. Ch'ng Poh although denied by the 4th Defendant) a number of matters took place. I will deal with them in due course but the main matter was this: Mr. Ch'ng Poh says that the 4th Defendant was suggesting to him that he, Mr. Ch'ng Poh, could help the 4th Defendant write-off the $127 million and that the 4th Defendant could help him write it off in some way or improve his personal loan. Also, according to Mr. Ch'ng Poh, the 4th Defendant was trying to "implicate him" whatever that may mean. There were other matters took place at that meeting. I will deal with them in due course.

12. The further evidence is this:- there seems to be a very close association on both the business and the personal level, first, between the 1st Defendant and the 4th Defendant, they may share the same office in Singapore; and between the 3rd and 4th Defendants, who seem to use the same office here in Hong Kong, have the same use of the same car, sometimes lunch together, and appear to be on good terms.

13. Now I set those matters out in the knowledge that many of them are disputed. I set them out as the background to this matter. I may say at this stage that I am greatly indebted to Counsel on both sides for their very careful and helpful arguments.

14. What is my approach - so far as the evidence is concerned? The evidence before me inevitably is affidavit evidence. It is necessary for me to consider all that affidavit evidence but there are issues and serious of issues between the parties about important matters. It is not possible for me to resolve those issues on affidavit evidence. Usually that is quite impossible and it is impossible in this case. I must look at the whole of that evidence in the round and consider all the evidence. Sometimes the answer made by a Defendant may weaken considerably the case for the Plaintiff by the obvious inherent force of what he says. In other circumstances the Defendants' affidavit, far from providing an answer to the Plaintiff's affidavit, may indeed fill in certain gaps in the evidence which are useful to the Plaintiff. So, I consider the whole of the evidence in the round, particularly do I have proper regard to those parts of the evidence which are disputed.

15. Mr. Ching, on behalf of the 4th Defendant, submits that the Mareva Injunction should be discharged on a number of different and independent grounds. I will deal with them separately. First, he says that by its nature a Mareva Injunction is one which is made as a matter of urgency and without delay. He says, rightly, that in this type of injunction speed is essential and it should be made before there is an opportunity for assets to be removed and he says here that Mr. Ch'ng Poh (acting on behalf of the Plaintiff) has delayed and that as the Court should be vigilant to see that the process is not abused, because of that delay I should refuse to allow the order to continue and discharge it. Of course, it is also the duty of a plaintiff to make reasonable enquiries before resorting to this procedure. I have to balance these considerations. There has been some delay, that is certain, and I raised the matter with Counsel for the Plaintiff at the ex parte hearing. I deal with the matter afresh now and take into account that delay and consider its importance. So far as the delay is concerned some of it is entirely justified. For example, the removal of this money, which was said to be unauthorised and was done secretly, was not discovered for some time because of the change of staff. That delay is entirely justified. Some delay was caused by the Defendants' (I am not speaking now the 4th Defendant but the other Defendants, the 1st, 2nd and 3rd Defendants') evasiveness and lack of co-operation, the refusal to co-operate to indicate where this money had gone and what was the nature of the transactions which were being made. Some of the delay may inevitably have come about because of the season of the year but that is not a matter which I take into account. I am quite satisfied that inspite of some delay Mr. Ch'ng Poh was entitled to make many reasonable investigations to discover what had happened to this money before rushing to Court. That is what he did. I am quite satisfied that I ought, in all the circumstances of this case, to exercise my discretion to allow the order to continue on this ground. If this were the only ground of challenge I am satisfied that I should not discharge the order on the basis of any delay. This Order if made, is still likely to be effective and it is not an abuse of the procedure.

16. I now take Mr. Ching's next point out of order for reasons which will become clear. He next submits that the injunction should be discharged because of two matters which are related. First, that there must be evidence that the 4th Defendant has assets within the jurisdiction and that there is no evidence, and indeed no assertion, in the affirmation before me that the 4th Defendant has assets within the jurisdiction. Secondly, he says that the evidence before me does not enable me to find that there is a real risk that any judgment might be frustrated by any assets being removed out of the jurisdiction. If they have no assets none can be removed.

17. Let me deal with one submission Mr. Ching made in order to get it out of the way. Among other things he submitted that so far as assets are concerned if a judgment is made then that will be effective against the 5th Defendant, the bank, because they have assets here obviously sufficient even to satisfy this judgment. I reject this as an argument on behalf of the 4th Defendant. For the test is not whether any other Defendant may or may not be able to satisfy the judgment. The testis, first, has the 4th Defendant's assets within the jurisdiction, and second, is there a risk that those assets will be placed beyond the arm of the law unless the order is made?

18. I do, however, agree with Mr. Ching's submissions that mere assertions of belief or mere assertions in affidavits without evidence and particulars setting out the foundation of that belief or assertion are valueless. Examples can be found in Mr. Ch'ng Poh's affidavit. One is his assertion that the real vendor was the 4th Defendant and that is an assertion which he has made without any foundation, it is proof of his belief. I am inclined to accept that was his belief but it was a belief without secure foundation. There are other examples.

19. In order to determine whether it is established on the evidence that the 4th Defendant has assets within the jurisdiction it is necessary to look at the whole of the evidence before me in the round and to see whether it is a proper inference from that evidence that he has assets within the jurisdiction. Well, the evidence shows this, and it is in his own affidavit (the 4th Defendant's) and in other places.

20. First, he has a residence here in Hong Kong. Second, he holds or has recently held very high position in the 5th Defendant bank, a very substantial bank in Hong Kong. Third, apart from his position in the bank, he uses an office here in Hong Kong, he has the use of a car here in Hong Kong and he obviously has business interests here in Hong Kong. It is a proper inference from these matters that he has assets here.

21. Is it shown that there is a risk that he will remove those assets? For it is necessary on well known principles in applications for a Mareva Injunctions to show that there is some risk. In Third Chandris Shipping Corporation v. Unimarine [1979] 1 Q.B. 645. The Former Master of the Rolls said at p. 669A:-

"The Plaintiff should give some grounds for believing that there is a risk with the assets being removed before the Judgement or award is satisfied. The mere fact that the Defendant is aboard is not by itself sufficient. "

He then goes on to deal with the Company situation which of course it is not directly relevant to the facts of this case and continues at D:-

"Other grounds may be shown for believing there is a risk but some such should be shown. "

22. All the circumstances must be examined. In Hong Kong with the cosmopolitan nature of its community, the international nature of its financial institutions, its international connections, its ease of travel and the ease with which liquid assets can be moved both in and out of the jurisdiction are matters which necessarily have to be considered. In Hong Kong it may be easier to infer from the evidence that there is a risk that assets may be removed from the jurisdiction than in places lacking some of these facilities which in every other respect are admirable.

23. Here the 4th Defendant is only temporarily resident for the purposes of his business. He is a visitor with family in Singapore. His real livelihood is in Kuala Lumpur. He seems to travel freely. He has obvious access to financial institutions, holding or having recently held, a position in this bank, the 5th Defendant. It is an inference from all this that he has assets, also assets aboard and there is little doubt that in the course of his business he will transfer assets between here and Singapore. The temptation to remove assets from the jurisdiction facing the claim of this size must indeed be great. On the whole of the evidence that is before me, in the words used by Lord Denning, I am satisfied that some such risk is shown.

24. Let me turn now to the most important part of this case. In order to persuade me to continue this injunction the Plaintiff has to establish a good arguable case. Put in other way, he must establish that a strong prima facie case is made out against the 4th Defendant. If such is not made out then it is my duty to discharge the Mareva.

25. Mr. Ching first makes a point which goes to the very foundation of the Plaintiff's case. He says that it is their duty to make all reasonable enquiries and they simply have not done so. He says, for example, it is incumbent upon the Plaintiff to make proper enquiry as to what happened to the money that came out of Dixon's account on the 17th August in cash, because if these enquiries are not made the Plaintiff cannot show even that it has lost the money. I regret to say that I reject this submission. On all the evidence that is before the Court, including the refusal of the 1st, 2nd and 3rd Defendants, (the signatories to the cheques), to make any or any adequate explanation, it is quite clear to me that there is the strongest prima facie case that the Plaintiff has lost the money.

26. Of course, that is not to say there is the strongest prima facie case against the 4th Defendant. I go on to consider this. The first matter upon which the Plaintiff relies is that strong case against the 1st, 2nd and 3rd Defendants. In my judgment it is properly put as an extremely strong prima facie case against those three Defendants. They are signatories to cheques upon which a large amount of money was drawn and the withdrawals remain unexplained, and are probably inexplicable in any proper way. The case against these Defendants, on the present state of the evidence (I emphasise) looks unanswerable.

27. But is the evidence against the 4th Defendant, sufficient to make out of strong prima facie or arguable case that he was involved with those other Defendants in the removal of that enormous sum of money? The Plaintiff further relies upon these matters and I do not forget that much of it is challenged; first, he says that throughout the negotiations the 4th Defendant was purporting to act on behalf of the 5th Defendant, or at least he was acting as if he was an officer of the bank, because he was able to speak for what the bank could do; then he took a leading part in all the negotiations with the full authority of the 1st Defendant as agent to the vendor, to act, to make agreements to disclose accounts, and to give undertakings where they were necessary; then he was closely associated personally, and in business, with the 1st Defendant in Singapore and the 3rd Defendant here in Hong Kong, against whom there is such a powerful case. Further, he attended the meeting on the 20th December with the 3rd Defendant.

28. Next, the Plaintiff says that when the money went missing he appeared to be aware of the problem. Indeed, there could have been no doubt that he was aware of the problem because a copy letter was sent to him when the 1st Defendant was being asked for an explanation.

29. The next matter put against him is that when he was contacted he suggested that the $123 million which had been retained by the purchaser should be set-off against the missing money and during a meeting on the 20th December the 4th Defendant suggested that if Mr. Ch'ng Poh did not drop his allegation someone would do him harm. Finally, on the 4th of January in the course of a fairly lengthy discussion the 4th Defendant was suggesting that the bank could help both Mr. Ch'ng Poh and the Plaintiff; they could indulge in business deals together and make money; that Mr Ch'ng Poh could help the 4th Defendant to write-off the $127M concerned, and that the 4th Defendant could help Mr. Ch'ng Poh also with his personal loan, also that the 4th Defendant was trying to 'implicate' Mr. Ch'ng Poh in some way. Finally; the 4th Defendant offered to buy back the shares if he was so concerned about the matter.

30. That is all circumstantial evidence. It is said by Mr. Ching that the vital links are missing. He says, you have the first stage where there were negotiations until they were completed and you have the final stage when there were enquiries being made about where this money had gone but the vital link in the middle of implication and being concerned in the removal of the money is missing. Of course, circumstantial evidence varies greatly in its power. Sometimes circumstantial evidence is so powerful that it becomes more probative and more persuasive even than direct evidence. This I bear in mind.

31. One matter with which I was concerned at the ex parte hearing (whether I expressed it in open Court I am not sure) - I was concerned having read the affidavit that if the 5th Defendant honoured these cheques in these circumstances the 4th Defendant's co-operation with the other conspirators in removing the money was necessary. Of that there is now no suggestion and on further examination of all the evidence such an inference would not stand up. There are many other possible explanations of the 1st, 2nd and 3rd Defendants being able to remove the money on their signatures.

32. The real question for me therefore is this: Do any of those later conversations with Mr. Ch'ng Poh amount either to an admission that the 4th Defendant was implicated in the removal of the money or do they lead the clear inference that he was a party to the removal of the money? I say clear inference because I think that is the proper test where the allegation is one of conspiracy to defraud. A clear inference must be shown, not of course, an overwhelming or conclusive inference but at least a clear one.

33. The allegations against him must therefore be clearly shown and they must be particularised. In considering the evidence; first, I do not see how this fraud with the payment of cheques to cash could have been planned in any meaningful way during the negotiation stage of the purchase of this company. I do not see how the allegation that the 4th Defendant persuaded Mr. Ch'ng Poh on behalf of his company to buy shares in the Plaintiff as opposed to any one else could have been part of an overall plan. So the negotiation part is neutral.

34. There being no direct evidence of involvement in the removal of the money or the disposal of it. What about the later conversations?

35. First, the suggestion (if made)that the retention money should be set-off against the loss. Certainly, by itself, this would not lead to a proper inference of guilt. It seems to me that anyone talking or considering this matter, (however illogically it may be on close examination) would be saying to Mr. Ch'ng Poh 'well at least you have retained $123M and you can set that off.'

36. I have considered the points made by Mr. Bokhary about paragraph 19 of the 4th Defendant's affidavit and the alterations that were made between the draft and the time when that affidavit was sworn. The points he makes and the changes which were made at some stage may be of importance, I cannot regard them of any importance at this hearing considering as I do simply the affidavit itself. If ever there comes a time in the course of this trial when the 4th Defendant gives evidence then those will be matters about which the 4th Defendant will be cross-examined. I am not making any forecast as to what his answers may or may not be.

37. The suggestion that the shares should be purchased back. If made, again that does not seem to me to be a matter which necessarily involves an adverse inference against the 4th Defendant. Of course, it could be that he was trying to avoid guilt but it is also capable of innocent explanation. Particularly if one takes the stance that he was a person who had made a negotiation which had gone sour and his associates were involved in some alleged serious conduct. It may be that an innocent man would be making that kind of suggestion.

38. Similarly, talk of making money and making deals and the bank helping in certain circumstances seem to me to be properly regarded as neutral.

39. The suggestion that the 4th Defendant was trying to "implicate" Mr. Ch'ng Poh is one I do not understand. Mr. Ching said, 'Implicate" him in what? It is unparticularised and being unparticularised if I cannot understand what the evidence means then it seems to me that I should not act upon it and I do not.

40. Similarly, statements that the 4th Defendant was desperate to get in touch with Mr. Ch'ng Poh I regard as assertions without foundation in the sense that no particulars are given. There is no foundation upon which I could find myself able to act upon the statement that the 4th Defendant was desperate to get in touch with Mr. Ch'ng Poh.

41. There is however one statement, it seems to me, which would lead to a proper inference that the 4th Defendant was involved in the removal of this money. It is in paragraph 28 of Mr. Ch'ng Poh's affidavit and it is vigorously denied by the 4th Defendant. Mr. Ch'ng Poh speaking of the 4th Defendant and of the meeting that was held on the 4th of January at the Mandarin Hotel says:

"He suggested that we could make money together and that I could help him to write-off the $127M and he could help me to set-off my personal loan in some way. "

When the 4th Defendant speaks of the $127M he must be speaking of the money that had gone missing. If he needed to write-off that sum it would lead to a strong prima facie admission but he had something to do with the removal of that money in the first place.

42. However, the problem is this: That part of the evidence is quite unparticularised. It is vague. I do not understand what the suggestion was nor really what the evidence is upon which Mr. Ch'ng Poh relies. He does not set out at any stage the conversation in detail and there must have been some further conversation if that statement means anything. It is a matter about which I confess I have had some difficulty but it seems to me that I should approach that part of the evidence (because if it is so important) in a fairly analytical way. If one approaches it in an analytical way I am driven to the conclusion that this part of the evidence is too vague and too unparticularised to found a strong prima facie case even with the rest of the evidence.

43. Now having come to that position one conclusion only can result. There are here circumstances against the 4th Defendant of enormous suspicion. The case may in the end prove to be a good one against him. I do not know. So far as these proceedings are concerned having taken this view about the evidence and whether a good arguable case or a good prima facie case is made out - on the balance of probabilities the burden to do that is upon the Plaintiff - and by very narrow margin I have come to the conclusion that it is not made out.

44. On that ground therefore it is necessary for me to discharge the order against the 4th Defendant. I discharge it on that ground and that ground only. In every other respect I would have continued the order.