NICEKIND HOLDINGS LTD. v. YIM WAI NING AND ANOTHER

CACV435/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 435 OF 2000

(ON APPEAL FROM HCA 3950 OF 2000)

_________________________

_______________

J U D G M E N T

_______________

Hon Leong CJHC :

1. In September 1997 the plaintiff Nicekind Holdings Ltd ("Nicekind") through its director Ma Nam ("Ma") asked the lst defendant Yim Wai Ning ("Yim") to find someone who could subscribe shares in China Telecom that would be allotted to Nicekind. It was agreed that if Yim succeeded in finding such a party, Nicekind would share with Yim the profits in the transaction. Subsequently, Yim found DH International Ltd ("DH") to subscribe to the shares.

2. On 8 October 1997 Nicekind and DH signed an agreement. Nicekind agreed to arrange for the placement of 5 million China Telecom shares. As regards payment for the shares, if the price of the shares was below $10, DH was to pay a sum obtained by multiplying the price of the shares with the number of shares placed and if the price of the shares exceeds $10, Nicekind was to pay a sum obtained by multiplying the amount which is in excess of $10 in the price of the shares with the number of shares placed.

3. On 9 October 1997, DH signed an agreement with the 2nd defendant Chung Fai Holdings Ltd ("Chung Fai"). This agreement was expressed to be in relation to the introduction fee or referral fee arising from the agreement entered into between Nicekind and DH on 8 October 1997 on placement of China Telecom shares. In this agreement, Chung Fai warranted to DH to obtain the placement of not less than 5 million China Telecom shares. DH agreed to tender a banker's draft of $15 million to solicitors Baker and Mckenzie for safe keeping. In return, Chung Fai agreed to tender a cheque of $1.5 million payable to DH to the same solicitors for safe keeping. If Nicekind obtained the shares, DH would pay to Chung Fai $3 for each share obtained by Nicekind and if by the time the shares were listed on the Hong Kong Exchange, the solicitors received no objection from DH, the sum of $15 million tendered by DH would be released to Chung Fai. If less than 5 million shares were allotted, proportionate deductions would be made from the sum of $15 millions. The effect of this agreement is that Chung Fai would have $15 million as introduction fee or referral fee if 5 millions shares were obtained by Nicekind.

4. On the same day, 9 October 1997, Nicekind signed an agreement with Wan Yu Industries Ltd ("Wan Yu"). In this agreement, Nicekind and Wan Yu agreed on sharing the profits in the shares jointly purchased by Nicekind and DH in 6:4 proportion after deducting 3rd party profits and handling fees and expenses.

5. On 24 October 1997, Nicekind and DH signed a new agreement replacing their 8 October 1997 agreement. In this new agreement, DH agreed to deliver to Nicekind a banker's draft of $9 million in full and final settlement of the 5 million China Telecom shares held by Goldman Sachs on account of Nicekind. DH and Nicekind further agreed to open a joint share account to hold the shares for 60 days. During this period, Nicekind was entitled to request DH to sell the shares and if sold, DH was to pay Nicekind $23.5 million out of the proceeds of sale. If DH did not sell them and retained them instead, Nicekind was entitled to a sum of $23.5 million to be paid by DH.

6. On the same day, pursuant to this agreement, DH delivered to Nicekind a banker's draft of $9 million.

7. On 11 December 1997, DH and Nicekind entered into a further agreement which is expressed to be in relation to the appointment of Nicekind by DH to purchase the shares in China Telecom. In this agreement, DH agreed to make an advance payment of $5 million and to issue two cheques to Nicekind, one of $12 million and the other $6.5 million and Nicekind agreed to transfer the 5 million China Telecom shares to DH on receipt of the cash and cheques.

8. On 12 December 1997, after the cash and cheques were received, Nicekind transferred 5 million China Telecom shares to DH and subsequently presented the cheques for payment. The $12 million cheque was honoured whereas the $6.5 million cheque was dishonoured.

9. On 4 February 1998, Nicekind commenced proceedings against DH in respect of the dishonoured $6.5 million cheque. (HCA1678/98) (the "NK-DH proceedings"). This action was settled on 29 March 1998 after it had gone to trial and appeal to the Court of Appeal. DH paid Nicekind $2.5 million pursuant to the settlement.

10. In the meantime, DH failed to pay Chung Fai the $15 million DH agreed to pay under their agreement of 9 October 1997 and Chung Fai commenced proceedings against DH to recover this sum (HCA3351/98) ("the CF-DH proceedings"). This action was eventually settled on 29 March 2000. DH paid Chung Fai $13.6 million pursuant to the settlement.

11. On 13 April 2000, Nicekind in an ex parte application, applied for a Mareva Injunction against Yim. In the affirmation filed by Ma in support of the application, Ma stated Yim was Nicekind's agent and had acted in breach of his fiduciary duty by asking for a secret commission from DH and Yim used Chung Fai as a facade to receive the secret commission and there was a risk of dissipation of Yim's assets.

12. The application came before Chung J who expressed concern about the lapse between the time Ma realising the true identity of Chung Fai and the time the application was made and the absence of information about Yim's business in Hong Kong. The matter was adjourned.

13. When the matter came back before Recorder Kwok SC on 14 April 2000 no additional information about the matters previously raised by Chung J were put before the Recorder although a 2nd affirmation of Ma was referred to. Recorder Kwok granted the ex parte injunction.

14. On 15 April 2000, Nicekind issued a writ against Yim. This was subsequently amended joining Chung Fai as the 2nd defendant. In the amended statement of claim, Nicekind's case stated against Yim was this: Yim was Nicekind's agent in finding DH to subscribe the China Telecom shares. In breach of his fiduciary duty as an agent, Yim obtained a secret profit by arranging the agreement between Chung Fai and DH whereby Chung Fai was paid $15 million by DH for the introduction of DH to Nicekind and Chung Fai was Yim's facade. The claim was for Yim and Chung Fai to account to Nicekind the sum of $15 million.

15. On 20 April 2000 Deputy Judge Chu continued the ex parte injunction and extended it to cover Chung Fai.

16. On 28 August 2000, Chung J heard Nicekind's inter partes summons for the ex parte injunction to continue. The judge found that Nicekind had not made out a good arguable case that Yim acted as agent for Nicekind when DH was found to subscribe the China Telecom shares. The judge also found no arguable case had been made out that Chung Fai was Yim's facade. He concluded that these findings would have been sufficient grounds for him to discharge the injunction. Nevertheless, he continued to find there was substantial delay in bringing the ex parte application, but he did not rely on that to discharge the injunction. He made no finding as to whether there was a risk of dissipation of asset, but he regarded the fact that Chung Fai was a B.V.I. company with no known asset in Hong Kong and that there was no evidence that an injunction would cause Chung Fai prejudice, were factors weighing against discharging the injunction. He accepted there had been material non-disclosure by Nicekind and that Nicekind had filed misleading evidence as to whether Yim could be located since the end of February 2000. The judge considered that in all the circumstances the ex parte injunction should be discharged and so ordered. He refused to grant a new injunction.

17. The present appeal is against the order of Chung J on 28 February 2000.

18. The essence of the first 5 grounds of appeal taken together is that on the evidence before him, the judge erred in finding there was no good arguable case or serious question to be tried or a good arguable case has not been made out that Yim was Nicekind's agent and Chung Fai was facade for Yim in receiving secret commission from DH.

19. Mr Bunting SC for Nicekind submits that Nicekind had asked Yim to find a purchaser for the China Telecom shares and agreed to share the profits from the transaction with Yim. That relationship was not limited to Yim just acting as go between in finding the purchaser DH. It is submitted that on the evidence of Ma, Yim conducted and assisted in the initial negotiations between Nicekind and DH which resulted in the agreement between them on 8 October 1997. Together with Tai King Wai ("Tai")'s evidence in the NK-DH proceedings (HCA1678/98), it clearly shows that Yim was an internal agent of Nicekind. Tai was representing DH in the negotiations with Nicekind. Mr Bunting also submits that the judge was wrong to find inconsistency between Ma's evidence in the NK-DH proceedings denying Yim was agent of Nicekind and Ma's evidence in the present case that Yim was Nicekind's agent. Ma in the earlier case, so Mr. Bunting submits, only denied Yim was authorised by Nicekind to settle their claim against DH and no more and there could not have been any inconsistency.

20. Ma's evidence in this regard as he deposed in his lst affirmation dated 13 April 2000 in support of the application for injunction, part of which has been set out in the judgment of Chung J, is this:

"2. The claims against the intended Defendant ("D") are in the main, for the secret profits gained by D in the sum of about HK$13,600,000.00, the details whereof will be referred to hereinbelow. I am advised that P's right of action is founded upon D's relationship with P and what I have to state at this early stage is that it is only until recently (because of the Court of Appeal decision in Chung Fai Holdings Limited v D.H. International Limited, HCA 3351/98 wherein D is the plaintiff) that I began to comprehend that at all material times, D was an agent of P in finding someone to inject capital for the subscription of 5,000,000 or more shares in China Telecom (Hong Kong) Limited ("China Telecom") which was to be listed on the Hong Kong Stock Exchange. ...

3...

4...

5. In mid September 1997, ... I learnt that Goldman Sachs was the only authorised agent of China Telecom which would soon be listed on the Hong Kong Stock Exchange. At that time, I expected that the price of the shares in China Telecom would skyrocket after the company was listed on the Hong Kong Stock Exchange for trading. Around late September 1997 when D was in St. Paul's Hospital receiving medical treatment, I visited D. During my visit, we talked about shares speculation and I informed D my request for subscription of the shares in China Telecom and asked him to find me a party who could inject capital to subscribe the shares in China Telecom which were to be allotted to me. Several days after my visit, D telephoned me and asked me about the unit price of the shares. I told D that I would agree to fix the unit price of the shares at HK $17.00 and I agreed to share some of the profits with D if D could successfully find me someone who could inject the necessary capital and pay the unit price of the shares at HK$17.00. Over the same phone call, D told me that he had some candidates who could inject capital to subscribe for the shares in China Telecom which were to be allotted to P. At that time, I had not put my thought to the type of relationship between P and D and this has not been further discussed between me and D.

6. In late September or early October 1997, D introduced one Mr. Tai King Wai ("Mr. Tai") of D.H. International ("D.H.") to me and D.H. negotiated with P via D for the acquisition of the shares in China Telecom to be subscribed by P. At the beginning of the negotiation, D assisted P in communicating with D.H. ....."

21. It would appear that what was intended by Ma was a mere introduction of some financier and he had never contemplated the relationship of agency with Yim and that was never contemplated by Yim either. What Yim did afterwards was no more than introducing Tai to Ma and assisting in the negotiations between Nicekind and DH.

22. In his affirmation dated 18 March 1998 filed in the NK-DH proceedings, part of which had been relied on by the judge, Ma categorically denied that Yim had been Nicekind's agent in the transaction. He said this:

" 2(f) As to paragraphs 4 to 9 inclusive of Tai's affirmation, I know nothing about how Mr. Yim was introduced to Tai and their conversations. However, what is within my personal knowledge and I am definitely sure is that the Plaintiff has never appointed Mr. Yim as its agent in the instant sale and purchase of the shares although the Plaintiff did have an agreement with one of the companies of Mr. Yim, i.e. Wan Yu Industries (Groups) Limited ("Wan Yu") to share the profits arising out of the 8.10.1997 agreement. The share of the profits given to Wan Yu was regarded by the Plaintiff as a consideration for Mr. Yim referring the Defendant to the Plaintiff in the sale and purchase of the shares. Nowhere in the said agreement with Wan Yu says that Mr. Yim was the agent of the Plaintiff. I also asked Mr. Yim whether he had told Tai that he was the agent of the Plaintiff. Mr. Yim informed me that he had never told Tai that he was the Plaintiff's agent."

23. In the same affirmation, Ma said at paragraph 2 (q):

"..... I have to reiterate that Mr. Yim has never been the agent of the Plaintiff. Mr. Yim has never had any authority from the Plaintiff to act on behalf of the Plaintiff in whatever way. I have to make it absolutely clear that the Plaintiff has never ever given any authority to Mr. Yim to negotiate and to waive the Plaintiff's claim for HK$6,500,000.00. I take grave exception to the suggestion that I told Mr. Yim that I agreed to waive the Plaintiff's claim. I have never agreed to waive the claim. ..."

24. Again, in his 2nd affirmation dated 14 April 2000 and filed on 17 April 2000 in support of the ex parte injunction application, Ma denied the second time the existence of agency. He said:

"3. In or about the middle of 1999, the Defendant (D) telephoned me and asked me to grant him a loan to fund his litigation with D.H. International Limited ("D.H.") i.e. the litigation between D (Chung Fai) and D.H. referred to in my 1st affirmation filed herein. I asked him what the litigation was about and he informed me that he was suing for referral fees from D.H..

4. At that time, I did not perceive D as my agent. To my mind, I did not perceived as my agent since D at all times confirmed to me that he had never informed D.H. that he was acting as my agent. I stress that at that time, I misapprehended the type relationship between D and P and it was only when the Court of Appeal's decision came out in February 2000 that I began to realize that indeed the relationship between D and P was not one that I had all along perceived. That is the reason why I had not sought advice from my solicitor as to the recoverability of HK$15,000,000.00 referral fees and in any event, there was then a heated on-going litigation between D (Chung Fai) and D.H. and D's entitlement to the referral fees at that time still remained to be seen."

25. Thus Nicekind's position in the NK-DH proceedings was firmly that Yim was not their agent in whatever capacity and their denial of Yim's agency was not limited to settlement of the proceedings with DH. Even in the present case, as may be seen, the contention that Yim was Nicekind's agent is far from being supported by Ma's evidence.

26. Mr Fung SC for Yim and Chung Fai refers us to the Reply and Defence to Counterclaim filed by Nicekind in the NK-DH proceedings. DH in their defence alleged that Yim was Nicekind's agent. Nicekind in paragraph 7 of its Reply and Defence and Counterclaim contended that Yim was a director of Wan Yu and Chung Fai and the profit sharing agreement between Nicekind and Wan Yu did not suggest that Yim or Wan Yu was Nicekind's agent.

27. Tai's evidence in the Chung Fai-DH proceedings, part of which that is relevant has been reproduced in the judgment of Chung J, was Yim had told him that he (Yim) was agent of Nicekind and Tai discussed with Yim on the terms of the Nicekind DH agreement on acquiring the shares. Tai gave the same evidence in the NK-DH proceedings. But it does not appear that the judge had been affected by Tai's evidence.

28. Mr Fung submits that the evidence does not support Nicekind's contention that they had a good arguable case. This is demonstrated by the following evidence:

1. In the meeting of Ma and Yim in St. Paul's Hospital, Ma asked Yim to introduce people to subscribe shares. Yim said Ma had asked him to invest but he preferred to introducing possible financiers for the project and they discussed about the share price.

2. The Nicekind-Wan Yu agreement of 9 October 1997 expressly provided for sharing of profit in the transaction and not about commission. The Nicekind-Wan Yu agreement was linked to the Nicekind-DH agreement and they were all about profit sharing and no mention was made of agency.

3. In the DH-Nicekind proceedings, Nicekind denied Yim was its agent, general nor specific, for the purpose negotiation and pleaded that Yim was DH's agent.

4. Ma's request for a loan from Yim to pay Goldman Sachs was inconsistent with Yim being agent of Nicekind because one would not expect Ma as Yim's principal, would ask for a loan from his own agent to settle his debt with Goldman Sachs.

29. Thus, it appears that Nicekind had changed to alleging that Yim was their agent to suit their purpose to claim for an account.

30. The judge in his judgment agreed that Nicekind was not legally barred in the present case from changing its position regarding the capacity of Yim in the transaction in question. But he said this in his judgment:

" ...I consider that Nicekind's position in the NK proceedings a weighty piece of evidence in the determination of whether there is a good arguable case over this point in this action. I find that when the evidence filed herein is considered together with the evidence filed by Nicekind in the NK proceedings, such a good arguable case has not been made out. Instead, I find that the true position was that Yim was only asked by Nicekind to find someone to inject capital for the subscription of the Shares, which Yim did by locating DH for Nicekind."

31. In view of all the evidence which have been reviewed above, can it be said the judge was wrong in his assessment of the evidence and the conclusion he reached? I do not think so.

32. The judge had in addition considered the effect of the judgment of the Court of Appeal in the Chung Fai-DH proceedings. In those proceedings, Chung Fai claimed against DH and DH raised the defence of double agency alleging that Chung Fai was at the material time acting both for Nicekind and for DH. The Recorder who dealt with the proceedings, entered summary judgment against DH and concluded that even if Chung Fai were Nicekind's agent, Chung Fai could not be agent of DH. The Court of Appeal agreed and considered it not even arguable that Yim was acting in the capacity of DH's agent. But the Court of Appeal considered Yim was Nicekind's agent in this one off transaction.

33. The judge however found this conclusion of the Court of Appeal did not affect his conclusion because in those proceedings whether Yim was an agent of Nicekind was not an issue for decision. The Court of Appeal's ruling was but an observation with no binding effect.

34. The central issue in the Chung Fai-DH proceedings was whether Chung Fai was agent of DH, and if so, Chung Fai would not be entitled to claim the sum of $15 million from DH. The Recorder found there was nothing to link Chung Fai to Wan Yu who was sharing profits with Nicekind. Whether Chung Fai was agent of Nicekind would not affect Chung Fai's claim against DH.

35. In my opinion, what the Court of Appeal observed in the Chung Fai-DH proceedings was, on the unilateral evidence of Tai filed in support of the application for summary judgment, Yim was apparently the agent of Nicekind. But that was not a finding of this fact and Mr Bunting agrees. This could not have any effect on the judge's findings of fact. The judge was entitled to conclude that Nicekind had not made out a good arguable case that Yim was Nicekind's agent.

36. Attack is also made on the judge's conclusion that even if an agency existed, it was limited to Yim finding some one on behalf of Nicekind to subscribe shares. Mr Bunting argues that such relationship also gave rise to a fiduciary duty to account for secret profits. Further, Mr Bunting submits that Yim had admitted to Ma he had a substantive interest in Chung Fai and that Chung Fai was his own company. In addition, Yim personally conducted most of the introduction of DH to Nicekind and there was no evidence he was acting for Chung Fai.

37. Yim on the other hand denied this and his evidence was that there were 5 directors in Chung Fai and he was only one of them and was appointed solely for the purpose of handling the introduction in the deal between Nicekind and DH. He had no management control over the company. He said Ma knew there were other persons involved in the transaction and that Chung Fai was not Yim's company.

38. The evidence before the judge was therefore conflicting. Faced with such conflicting evidence, the judge was entitled to draw his own conclusion and it cannot be said to be wrong for him to conclude that he was far from being satisfied that a good arguable case that Chung Fai was Yim facade had been made out.

39. There are a number of matters which Nicekind was said to have failed to disclose on making the ex parte application. Among these are Nicekind never authorised Yim to negotiate with DH, the Nicekind-Wan Yu agreement was about introduction or referral fees, Ma only realised the legal position of Yim after taking legal advice, Yim had denied in the NK-DH proceedings that he was Nicekind's agent and in the NK-DH proceedings, Ma differentiated between Yim and Chung Fai.

40. The judge considered these complaints of non-disclosure were made out. Mr Bunting however submits that the judge was wrong in that conclusion because these matters were not material to the issues and even if they were, a distinction has to be drawn between innocent non-disclosures and deliberate non-disclosures. Relying on Brink's Mat Ltd v. Elcombe [1988] 1 WLR 1350 (CA) Mr Bunting submits that not every omission that the injunction will be discharged and the court has a discretion notwithstanding proof of material non-disclosure which justifies or requires the immediate discharge of the ex parte order, nevertheless to continue the order to make a new order on term. He submits that the case of Nicekind never suggested that Yim was authorised to negotiate the terms with the party that could finance the shares subscription and once it is recognised that Yim was authorised by Ma to find the financier, he would be regarded as an agent for Nicekind and whether he was authorised to negotiate the terms is immaterial. The fact is that Yim did participate in the negotiation with DH. The non-disclosure was therefore insufficient to discharge the injunction. Nicekind's case, it is also submitted, was that the Nicekind-Wan Yu agreement was to provide for a referral fee for Yim through Yim's nominee Wan Yu and this is clear from the agreement itself. As regards Ma's denial of Yim's agency in other proceedings, it is submitted that it was limited Yim's authority to settle the proceedings. The denial is immaterial to the present proceedings.

41. Be that as it may, the non-disclosures complained of were not limited to those referred to in the judgment. Mr Fung submits that information about Yim's business in Hong Kong was not fully disclosed to Recorder Kwok despite the indication of Chung J the previous day that he was concerned that no such information had been disclosed.

42. Yim's business in Hong Kong is a material fact when there was the allegation of dissipation. Yim was a director of Macmilton Development Limited in Hong Kong in which Ma was also a director. This was never disclosed by Ma until the inter partes stage of the application despite the enquiry by Chung J. No explanation had been forthcoming for the non-disclosure which could not be anything other than deliberate.

43. There was also the non-disclosure of the telephone conversations between Yim and Ma since the end of January 2000. The non-disclosure gave a misleading picture that Nicekind was unable to contact Yim despite various attempts. This was material to the allegation of dissipation.

44. Despite what Mr Bunting has said about innocent and deliberate non-disclosure and the materiality of some of the matters which had not been disclosed, these two non-disclosures would have weighed heavily against Nicekind on the balance of convenience.

45. On the issue of delay, the evidence is clear, as Ma himself admitted, that he was aware of the Chung Fai-DH agreement in 1997 and was aware that Chung Fai would be paid a referral fee of $15 million which he claimed in the present proceedings was secret profit. As he admitted in his evidence, he became aware of the Chung Fai-DH proceedings in June 1999 when Yim came to asked for a loan to fund the Chung Fai-DH litigation. However, Nicekind's ex parte application for Mareva injunction was only taken out in April 2000. There was a delay of 9 months. His explanation was that he had to wait until the outcome of the Chung Fai-DH proceedings which finally settled in March 2000, to find out if Chung Fai had to account to Nicekind anything by reason of having received secret commission. Before that he could not decide if proceedings should be taken out.

46. Mr Bunting submits that the delay was not a bar to Nicekind's application for Mareva relief and the delay did not prejudice Yim or Chung Fai.

47. Mr Fung on the other hand submits that Nicekind had a cause of action for more than two years counting from the time of the Chung Fai-DH agreement and for 9 months counting from the proceedings by Chung Fai against DH. If it is right that Yim was Nicekind's agent, Nicekind would be entitled to the money claimed by Chung Fai from DH. Nicekind had the right to take over from the agent if Chung Fai was truly its agent but Nicekind did not do so. Mr Fung further submits that delay in applying for a Mareva when all the relevant facts which are necessary to enable the judge to exercise his discretion properly are known, would prejudice the plaintiff as well as the defendant. Marevas are often employed as a tactical move to submit the defendant into a compromise.

48. The judge had refused to accept Nicekind's explanation for the delay and found there was substantial delay prior to bringing the ex parte application. That conclusion cannot be faulted. There is no authority that delay alone would bar a Mareva but certainly delay is a factor that should be thrown into the balance of convenience which the judge will consider at the end in exercising his discretion.

49. Having regard to all the issues and evidence which have been analysed above, what is clear is that the judge in exercising his discretion has reached a decision which he was entitled to reach. His exercise of discretion should not be interfered with. The appeal must be dismissed.

Hon Mayo VP :

50. It is evident from a perusal of Chung J's judgment that his main reason for discharging this injunction was not being satisfied that the plaintiff had an arguable case. This was principally on account of Mr Ma's protestations in collateral litigation that Mr Yim had not been an agent for the plaintiff.

51. In particular it is relevant to refer to two passages from his affirmation of 18 March 1998 in HCA 1678 of 1998 at pages 5 and 14:

"...

f. As to paragraphs 4 to 9 inclusive of Tai's affirmation, I know nothing about how Mr. Yim was introduced to Tai and their conversations. However, what is within my personal knowledge and I am definitely sure is that the Plaintiff has never appointed Mr. Yim as its agent in the instant sale and purchase of the Shares although the Plaintiff did have an agreement with one of the companies of Mr. Yim, i.e. Wan Yu Industries (Groups) Limited ('Wan Yu') to share the profits arising out of the 8th October 1997 Agreement. The share of the profits given to Wan Yu was regarded by the Plaintiff as a consideration for Mr. Yim referring the Defendant to the Plaintiff in the sale and purchase of the Shares. Nowhere in the said agreement with Wan Yu says that Mr. Yim was the agent of the Plaintiff. I also asked Mr. Yim whether he had told Tai that he was the agent of the Plaintiff. Mr. Yim informed me that he had never told Tai that he was the Plaintiff's agent.

...

q. As regards paragraphs 28 to 31 inclusive of Tai's affirmation, I would say that I have only limited knowledge about the claim by Chung Fai Holdings Ltd. against the Defendant for referral fees. I do not know much about any negotiations between Tai and Mr. Yim arising from that claim. I have to reiterate that Mr. Yim has never been the agent of the Plaintiff. Mr. Yim has never had any authority from the Plaintiff to act on behalf of the Plaintiff in whatever way. I have to make it absolutely clear that the Plaintiff has never ever given any authority to Mr. Yim to negotiate and to waive the Plaintiff's claim for HK$6,500,000.00. I take grave exception to the suggestion that I told Mr. Yim that I agreed to waive the Plaintiff's claim. I have never agreed to waive the claim. If there had been such an agreement of waiver, the Defendant would have insisted on putting such an agreement in writing."

52. Mr Bunting SC for the plaintiff attempted to explain how it came about that Mr Ma had expressed himself in such forthright terms.

53. The litigation in question had related to a claim the plaintiff had been making against D.H. International Ltd in relation to a commission payment.

54. One of the issues which had arisen in the litigation was the question whether Mr Yim had in fact been representing the plaintiff as its agent.

55. Mr Bunting argued that the denials that Mr Yim had been Nicekind's agent had related to a suggestion that Mr Yim had been authorised to represent the company in connection with negotiations which had taken place.

56. In my view the Judge would have been fully justified in not being convinced with this explanation particularly having regard to the manner in which Mr Ma had expressed himself.

57. In this connection it needs to be added that the whole tenor of the case pleaded in the litigation between the plaintiff and D.H. International Ltd was a profit sharing agreement between all the interested parties.

58. However in my opinion what was even more important than all of this were the overall surrounding circumstances of the matter.

59. What is clear is that Mr Ma and Mr Yim had a close working relationship over a protracted period of time.

60. No convincing explanation was ever forthcoming for the very considerable period of time which elapsed from the time when Mr Ma learnt that Mr Yim was associated with Chung Fai Holdings Limited ("Chung Fai") in the middle of 1999 and his commencing the present action in April 2000.

61. While at first sight this might not appear to be an inordinate delay it does become a significant matter having regard to all the surrounding circumstances.

62. If it had indeed been the case that Mr Ma had learnt for the first time that Mr Yim had taken a substantial commission behind his back and without his knowledge one would expect that he would have done something about it.

63. At the relevant time (June 1999) Mr Yim through Chung Fai was engaged in litigation with D.H. International Ltd. It would in all probability have been possible for the plaintiff to have made an application to the court to be joined as a party as there would appear to have been a sufficient nexus to enable the court to make such an order. Had this been done Mr Ma could in all probability have exercised a measure of control over the litigation to protect his interests.

64. I do however accept that it may be the case that there are in fact reasons why this course may not have been feasible.

65. What is though also of significance is the way in which Mr Ma has approached the present case.

66. It is undoubtedly the case on reading the affirmation he made in support of the mareva injunction that he was alleging that Mr Yim had "gone missing".

67. This was a travesty of the true position. Although Mr Ma had been fully aware of the fact that Mr Yim had moved from the 22nd floor to the 19th floor of Fortress Tower neither he nor his solicitors made inquiries at the 19th floor to check whether he had left forwarding instructions. Over and above this it is clear that Mr Ma and Mr Yim had an ongoing close business relationship. Mr Yim refers to this from paragraphs 4-11 of his first affirmation made on 19 June 2000. He and Mr Ma were both directors of a company called Macmilton Development Ltd. It would appear in all the circumstances to have been very unlikely that Mr Ma could not have communicated with Mr Yim had he wished to do so.

68. The judge was exercising a discretion which was reposed in him. In my view he was fully justified in reaching the conclusion that this was not a situation where it was appropriate for the plaintiff to have mareva relief. Accordingly this appeal should be dismissed.

Hon Stock JA :

69. I agree that this appeal should be dismissed.

70. The duty to make full disclosure of all matters material for the court's consideration is a duty which applies to all ex parte applications, but it is a duty "which applies with special force to applications for Mareva and Anton Pillar relief, which by their nature are particularly liable to cause substantial prejudice to a defendant ...." (See Steven Gee, QC, 'Mareva Injunctions and Anton Pillar Relief' 4th ed. p.127), and it is no accident or question of style that speaks of that duty as a duty of utmost, or of the highest good faith; and "if access to such a ["nuclear"] weapon is obtained without the fullest and frankest disclosure, I have no doubt at all that it should be revoked" (per Donaldson LJ in Bank Mellat v Nikpour 1985 FSR 87, 92). This principle derives from recognition that the relief is sought in the absence of representations from the affected party, the potential consequences of the relief, and the need to discourage unmeritorious applications. The requirement is not to be applied artificially by ignoring the real and rushed circumstances in which applications are made and determined, or by being overly nice in the choice of phrase, or by tucking the truth away in a buried exhibit. The obligation is to be entirely open, especially about those factors known to influence the court in its decision, and about such matters as are expressly raised by a court in the course of a hearing and which are causing it concern. If an affirmation on its face creates a false picture, it is no answer to say that, taken literally, this assertion or that was, strictly speaking, accurate, or that the misleading picture would have been corrected if only the judge, even though uninvited, had uncovered one amongst a host of exhibits. As we all know, the truth is not necessarily the whole truth.

71. One of the matters that will always catch the eye of the judge hearing an ex parte application is that part of the affirmation, and of counsel's skeleton argument, which deals with the risk of dissipation of assets. The nature of the assertions tend to be much the same in many a case, along the lines for example, that a company is a foreign company; that a defendant has scant assets; that a defendant has "shut shop" and is not contactable. Such assertions are powerful tools in influencing the grant or, in their absence, the refusal of relief.

72. In this case, the court was dealing with a defendant - in the case of D1 - who was indigenous to this territory; and an assertion, actual or implicit, that he was no longer connected with Hong Kong and was not contactable, was a very important assertion. If it transpired that assertions along those lines were knowingly misleading then other matters, in my view, in the context of this appeal, pale into insignificance. And I think that that is what the judge found. That being so, I fail to see how his decision is one that can be said to be plainly wrong. The obligation to be frank and open was, in this case, all the more emphasized because the judge who was first presented with the application for the injunction expressed concern about the question of the defendants' connection with Hong Kong and, because there was insufficient evidence about it, the case was adjourned. It may be odd to talk of degrees of an obligation of frankness. Yet, given the judge's concern, the obligation was acute.

73. Whatever protestations are made about the exact wording, or the technical accuracy, of what was stated, the truth is that the impression which the applicant sought to convey, and which must have been conveyed, was of a defendant who had entered upon a secret deal, had cut all ties with Hong Kong, had no longer any connection with Hong Kong, had no assets here save those recently gained in the Chung Fai v DH litigation, who was only staying in Hong Kong in order to see that litigation to finality, and who had sold his property here (recently, so it was implied), and who had permanently settled abroad with his family. The skeleton argument refers to a secret agreement, as do the pleadings. The skeleton argument states broadly that Mr Yim (and his family) "has already emigrated to Canada and has no strong attachment with Hong Kong". Mr Ma's first affirmation says the same, that Mr Yim is a Canadian immigrant, and has emigrated to reside there. It adds that he has no strong attachment in Hong Kong. The wording must have been carefully chosen, for it leaves open the possibility that he has some attachment to Hong Kong, but without saying what that was. No doubt that is what led the judge to ask the questions he asked. Mr Ma had said that Yim told him that Chung Fai was not his company and that he was not related to it which, he says, was a lie, discovered by him in about June 1999. The judge having expressed concern about the absence of information about Yim's business in Hong Kong, the plaintiff replied that "in respect of what D is now doing, from end of February 2000 to the beginning of March 2000 I had difficulty in finding D." He talks about attending his offices at Room 2203, 22nd floor, Fortress Tower in King's Road, but that the office was locked and unoccupied. In an affirmation filed by solicitors on the plaintiff's behalf, the court's attention is drawn to the fact that "the defendant used to own property in Hong Kong at Flat F, 22/fl Evelyn Towers, 38 Cloudview Rd. which was his residential property. However, as part of his severing his ties with Hong Kong and making an emigration move to Canada, this piece of property has already been sold and there is now produced and shown a true copy of the land search record evidencing such sale."

74. The true picture - and I rely for this analysis upon matters which are not in dispute - was as follows:

(1) Mr Yim has business interests in Hong Kong other than his connection with Chung Fai. He was, as Mr Ma well knew, a significant shareholder, and the director of an active company in Hong Kong, called Macmilton Development Limited. Mr Ma knew that to be the case because he, too, was a director and shareholder of the same company. The annual return of the company for 1999 shows Mr Ma as the company secretary. Ma also knew, as is evident from his subsequent testimony, that Macmilton Ltd. has a sizable interest in a company called BaoDing Macmilton of which company Yim is a director. (In fact, it transpires that Yim has never emigrated to Canada, though he had made an application to do so; and he spends almost all his time in this part of the world, although I cannot say on the information before me whether Ma knew about the absence of formal immigration or not. Nevertheless, the statement in the affirmation of Ma, and in the skeleton argument, asserts emigration and no strong ties with Hong Kong without making clear what is truly meant.).

(2) There is no doubt in my mind but that the impression which Ma was seeking deliberately to create by paragraph 7 of his affirmation in response to the judge's specific concerns raised on 14 April was that he had lost contact with the 1st Defendant. He chose to say that between the end of February and the beginning of March 2000 he had had difficulty in finding the 1st Defendant. That is an example of the truth, but not the whole truth. The evidence of Mr Yim, which is not disputed, is that there had been telephonic communication between the two of them both before and after that date, and as recently as 15 March. It is not good enough to say that the statement of Ma was accurate as far as it went. It was part of the theme, the tenor, being presented to the court, of a man who had cut his ties and whom it was not possible to contact; part of the atmosphere, which the evidence created, of a real risk of dissipation of assets.

(3) It was said that the 1st Defendant's flat had been sold. In the context of this application, and as phrased, I think that the clear implication was that it had recently been sold. But it had not recently been sold. It was sold as long ago as early 1997 and Mr Yim's evidence is that other property was bought with the proceeds. I do not think it good enough in the circumstances to say that the date of sale, a sale three years ago, could readily be ascertained from the exhibit. Judges hearing urgent application read the affirmation, and if there is no need to go to an exhibit then, in an urgent application, it is unlikely that they will do so. It would have been easy enough to say in the body of the affirmation that the sale was not a recent one.

(4) On the question of the 1st Defendant's whereabouts, Ma said that he had attended the offices, in late January or early February, of the Defendant's company Wan Yu on the 22nd floor of Fortress Tower. But he saw that it was unoccupied and locked. In fact, the office was then located in the same building, at Room 1905, and Mr Yim says, and it is not disputed, that Ma had visited both offices in the past. This brought the response that Ma's staff had gone to Room 1905 on 15 April to take pictures of the entrance and reception area, which begs the question why the court was not told of the other address, at room 1905, and why, despite the fact that Wan Yu signs were not displayed at the 19th floor, no enquiry was made within, nor at either premises as to the date when the previous occupants had moved, and whether there was any forwarding address.

75. It cannot be gainsaid that there has been significant delay between the time Ma, on his own account, learnt that Yim was connected with, or had an interest, in Chung Fai, and the making of the application. Indeed, there was substantial delay between that time and the time any complaint was made at all. Ma knew as long ago as October 1997 that Chung Fai had entered upon the September 1997 agreement with DH. I assume, for present purposes only, that he did not know of the 1st defendant's connection with the company by then and that he did not know full well what the 1st defendant's position was in relation to that agreement. He says that in October 1997, D1 told him that CF "was not his company and not related to him." He says that he only discovered in June 1999 that D1 had a beneficial interest in Chung Fai. I note, however, that in the Reply and Defence to Counterclaim filed by the plaintiff in the proceedings between Nicekind and DH and dated May 1998, it is asserted that "at all material times Mr Yim was the director and represented Wan Yu and Chung Fai". This assertion was not drawn to the court's attention either, and it is difficult in the light of that pleading to credit that Mr Ma only woke up to the fact in June 1999 that Yim was to benefit from the Chung Fai/DH agreement. But still, be even that as it may, why the delay between June 1999 and April 2000 when eventually the application was made for a Mareva injunction? The explanation put forward is difficult to accept, namely, that Mr Ma did not appreciate until the Court of Appeal judgment that Yim had been his agent. But whatever his appreciation of the position in law, he knew what the factual situation was. He knew, by June 1999, on his own account, that Yim had benefitted, or was benefitting, from a deal when that fact had been kept secret from him. Indeed, according to him, Yim had lied to him about his interest in the matter. Yet, putting aside any question of legal proceedings, there is not a whisper of a protest or a question raised about it.

76. Mr Bunting argues that there is no good reason to debar a plaintiff from Mareva relief just because he delayed making the application. That may be so, if one emphasizes the words "just because". But in this case, the delay does not stand by itself. It is part of a picture. It goes, in my judgment, to the question of the bona fides of the claim, and the bona fides of the plaintiff's purported belief that the 1st Defendant is intent on dissipating, as soon as he can, such assets as he might obtain as a result of the action which he instituted against DH.

77. For these reasons alone, I am satisfied, that this is not, nor was, a case for a Mareva injunction and it matters not therefore whether there was an arguable case of agency.

Hon Leong CJHC :

78. The appeal is accordingly dismissed with an order nisi that the costs of the appeal be to the Defendants.