SOCIÉTÉ GÉNÉRALE, SINGAPORE BRANCH v. INTER PACIFIC GROUP PTE LTD AND OTHERS

HCA 1617/2019

[2020] HKCFI 1160

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1617 OF 2019

________________________

________________________

______________

D E C I S I O N

______________

Introduction

1.  On 5 December 2019, I handed down a decision[1] dismissing the Summons of the 8^th and the 9^th defendants seeking to discharge the 2^nd Injunction or alternatively to allow payment to them their business and legal expenses.  I shall not repeat my reasons stated in the Decision.

2.  By Summons dated 18 December 2019, the 8^th and the 9^th defendants seek leave to appeal against the Decision on grounds contained in a draft notice of appeal (“the DNA”) annexed thereto.

3.  The threshold for the grant of leave to appeal from an interlocutory order or judgment is not in dispute: the intended appeal must have a reasonable prospect of success or that there is some other reason in the interests of justice that the appeal should be heard.[2]  Reasonable prospect involves the notion that the prospect must be more than fanciful without having to be probable.[3]

4.  In the DNA, seven grounds are proposed.  I shall deal with each one in turn.

Grounds 1-3

5.  Ground 1 suggests that I failed to consider the “true case” of the 8^th and the 9^th defendants in support of their application for discharge.  In so far as the 2^nd Injunction is a Mareva injunction, it is said that with the new evidence filed (after the 2^nd Injunction was continued by K Yeung J), in the form of the 8^th and the 9^th affirmations of Mr Lee, and in particular the allegation that the 8^th and the 9^th defendants were paid the monies concerned, and paid some of them out, under bona fide and genuine transactions, and the proposed payment in, the alleged risk of dissipation is no longer present.

6.  In so far as the 2^nd Injunction is a proprietary injunction, it is also said that I erred in saying that the 8^th and the 9^th defendants did not address me on the merits of the plaintiff’s proprietary claim.  They refer to [18]-[19] of their skeleton before me, as well as their case that the relevant transactions were bona fide and genuine transactions.

7.  Grounds 2 and 3 also refer to and rely on the new evidence and the suggestion that the relevant transactions were bona fide and genuine.

8.  I have dealt with the case of the 8^th and the 9^th defendants on the new evidence at [15] of the Decision, as well as the effect of the proposed payment in at [18] of the Decision.  Even if those transactions were bona fide and genuine, the allegation remains that the 8^th and the 9^th defendants were knowing participants in the alleged fraudulent scheme, and there is a good arguable case for the plaintiff’s allegations which if established would support its proprietary claim against the 8^th and the 9^th defendants.  The fact that the 8^th and the 9^th defendants might have transferred out most of the relevant sums does not mean that the plaintiff, if it otherwise has made out a case for the 2^nd Injunction, should not be protected in respect of what remain with them, or the traceable substitutes of the relevant sums.  The proposed payment in does not provide protection as far as traceable substitutes are concerned, in the form of future receipts which fall under that description.

9.  [18] of the skeleton referred to the judgment of Chow J in 任俊國 v Chin Choi Ming[4]that no proprietary injunction should be granted without some reasonable evidence of the existence of specific assets or its traceable proceeds[5], whereas [19] stated that no proprietary claim could now be made for any amount in excess of the sums currently held by the 8^th and the 9^th defendants.

10.  任俊國 is in fact authority that a proprietary claim can be made of traceable proceeds or traceable substitutes of the original asset in question.  With respect, I do not think that [18]-[19] of the skeleton were addressing the merits of the plaintiff’s proprietary claim to the sums now held by the 8^th and the 9^th defendants, or “the traceable substitutes” thereof, which are the subject of the 2^nd Injunction, with just a bold statement at [19].  In so far as the 2^nd Injunction applies to any amounts in excess of the sums now held by the 8^th and the 9^th defendants, that would only be so if such amounts constitute “traceable substitutes” of the sums originally received, which can be the subject of a proprietary claim, and [18] and [19] did not address why a proprietary claim, or a proprietary injunction, cannot be made against them.

11.  I do not think that these grounds have reasonable prospect of success and I decline to grant leave to appeal thereon.

Ground 4

12.  This ground states that I erred in holding that the risk of dissipation did not cease because the 4^th defendant, the alleged mastermind of the alleged fraudulent scheme, had ceased to be one of the three directors of the 8^th and the 9^th defendants (the other two being the younger sister of the 4^th defendant, and Mr Lee): see [16] of the Decision.  It is emphasised that Mr Lee is now responsible for the governance of the 8^th and the 9^th defendants.

13.  However, as I said at [16] of the Decision, there is evidence that the 4^th defendant was still “pulling the strings” after ceasing to be a director.  Further, Mr Lee had been, together with the 4^th defendant (and her sister), a co-director before, and the mere fact that the 8^th and the 9^th defendants are now allegedly in the governance of Mr Lee does not in my judgment mean that the risk of dissipation is gone.

14.  I do not find this ground to have a reasonable prospect of success.

Ground 5

15.  This ground states that I erred in not giving sufficient regard to the fact that the maintenance of the 2^nd Injunction means that the businesses of the 8^th and the 9^th defendants have come to a complete standstill.  It is said that I failed to give regard to Deiulemar Shipping SpA v Transfield ER Futures Ltd[6], Hsin Chong Construction (Asia) Ltd v Henble Ltd[7], and Gee on Commercial Injunctions[8].

16.  These authorities were not cited to me.  In so far as those authorities suggest that I should have in mind the effect a Mareva injunction has on a defendant and I should carefully and critically scrutinise the evidence, that is a given but the 8^th and the 9^th defendants still have to pinpoint actual errors committed by me which have a reasonable prospect of success in the Court of Appeal.  It is difficult to make out what are the errors I have committed from the DNA.

17.  From their skeleton, it seems that the complaint is that on the one hand I was concerned about freezing future income (in so far as they are traceable substitutes) of the 8^th and the 9^th defendants, while the effect of the 2^nd Injunction is that they could not conduct businesses to earn the income in the first place.  But then the other side of the coin is that if I discharged the 2^nd Injunction any such future income, in so far as they are traceable substitutes, would not be subject to an injunction and thus would be at risk of being dispersed.  It is difficult for me to understand how this argument relates to the issues in this case: it seems to be a point on balance of convenience and if so it is a discretionary point and the 8^th and the 9^th defendants have not shown why there is a reasonable prospect of success on this point.

Ground 6

18.  This relates to the application for legal and business expenses.

19.  It should be noted that the 2^nd Injunction does allow for legal and business expenses already: see [6] of the Decision.  It is not the case that I (or the other learned Judges) did not allow such expenses at all.  If the 8^th and the 9^th defendants are suggesting that the amounts are inadequate (which they are so suggesting) the burden is on them to show why with proper evidence the necessity of allowing more.  However, while of course their parent did not and does not have a legal obligation to fund the 8^th and the 9^th defendants, their ability and willingness is, on well-established authorities, highly material but there is no evidence thereon.  In so far as the 2^nd Injunction is a proprietary injunction and the objection of the 8^th and the 9^th defendants is on the merits of the plaintiff’s proprietary claim, I do not find such objection to have a reasonable prospect of success (see [9]-[10] above).

Ground 7

20.  Finally, the 8^th and the 9^th defendants argue that I at least should have varied the 2^nd Injunction to freeze only “sums they had received from the 6^th defendant” which are “traceable substitutes of the sum they had received from the 6^th defendant”. With respect, I fail to see the difference between this formulation (which they did not ask for before me) and the 2^nd Injunction, which only relates to the actual, specific sums each of the 8^th and the 9^th defendants received from the 6^th defendant during 1 June to 31 August 2019, or the traceable substitutes thereof.

Disposition

21.  None of the proposed grounds in the DNA has a reasonable prospect of success and there is no other reason for the proposed appeal to proceed.  I dismiss this application by the 8^th and the 9^th defendants for leave to appeal against the Decision, with costs to the plaintiff.