CHINA MINSHENG BANKING CORP. LTD (SHENZHEN BRANCH) v. DICHAIN HOLDINGS LTD AND ANOTHER

HCCT 58/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION LIST

ACTION NO. 58 OF 2006

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REASONS  FOR  DECISION

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The application:

1.  By an amended summons dated 25 October 2006, the plaintiff, China Minsheng, seeks, at its own cost, to inspect and take copies of certain records relating to bank accounts of both defendants at two named banks, and other un-named banks, and documents in relation to the sale and purchase of shares held by both or either defendant or Farsight Holdings Ltd, in China Merchants DiChain (Asia) Ltd, (CMDA).  Those latter documents are said potentially to be in the possession of the Stock Exchange of Hong Kong Ltd, (SEHK), or Tengis Ltd, the registrar in relation to the shares in CMDA.

The reason for the application:

2.  The summons is essentially an ancillary order in aid of a Mareva injunction granted by Yam J. on 10 August 2006, and continued by A Cheung J. on 18 August 2006.  That injunction prevents the defendants from removing their assets, or in any way disposing or diminishing their assets in Hong Kong up to a value of $16.5 million each, to disclose to China Minsheng Bank all assets worth $5,000 or more in Hong Kong, and the whereabouts of the sale proceeds of certain shares received by them between 20 February 2006 and 28 July 2006.

3.  The orders sought will enable China Minsheng to identify the location of assets up to the value of $16.5 million, and the precise circumstances of the CMDA shares, which are specifically relevant to the issues at the heart of the proceedings.

Discussion:

4.  I am satisfied, from the chronology put before me by Mr D’souza, that he was entirely justified in his submission that the defendants have consistently avoided and delayed these proceedings against them, both before and after the injunction, and that they have failed to comply with the orders under the injunction.

5.  The defendants’ circumstances are such as to plainly give rise to suspicion that they will avoid compliance with any judgement made against them.  Shortly after guaranteeing a loan agreement made with China Minsheng, which guarantee depended largely upon their holding in shares in CMDA, they sold most of those shares.  DiChain Holdings, (the 1^st defendant), operates under a shelf address.  Fan Di, (the 2^nd defendant), has reported to the Companies Registry a residential address in which he has long ceased to live.

6.  The banks concerned in the first part of the orders sought have expressly confirmed that they have no objections to the order sought under the summons.  Other banks have not yet replied, but I accept Mr D’souza’s submission that any order will be for the benefit of such banks, as, having been put on notice by the Mareva injunction, they may be liable in contempt if they assist or permit either defendant to breach the injunction.  The orders sought will allow China Minsheng to co-ordinate efficiently with all banks, enabling them to identify appropriate assets to be secured, so as to alleviate them from the risk of any contingent liability.

7.  The whereabouts of the shares in CMDA are directly relevant to the disclosure requirements under the injunction.  Both the SEHK and Tengis have expressly stated that they have no objection to the orders sought.  It subsequently transpires that share brokers DBS Vickers (Hong Kong) Limited have also been involved with dealings in the CMDA shares.

8.  The primary purpose of a Mareva injunction is to preserve the assets or property which might otherwise be dissipated notwithstanding the Mareva injunction.  It is important to both plaintiffs and defendants that no more assets than might be required to meet a judgement are secured.  A defendant is entitled to freely deal with any assets he has which exceed the value required to meet the judgement.  Mr D’souza correctly and sensibly points out that once China Minsheng knows the full extent of the defendants’ assets, said to exceed $16.5 million, all those assets in excess of that sum can be released from the terms of the injunction.  That is plainly in the interests of the defendants.

9.  Mr Yau has, with his customary thoroughness and enthusiasm, sought to persuade me that the orders sought are unnecessary.  He says first that the assets exceed the sum of $16.5 million.  But, as demonstrated in the previous paragraph, that is no answer to the orders sought, but rather a reason why, in the absence of proper affidavits, the orders should be made.

10.  Next Mr Yau says that all the information required in respect of the CMDA shares can be supplied by the share brokers involved in the matter for the defendants.  That may well be right, and in circumstances where there had been better earlier compliance with the requirements of the Mareva injunction that might have been enough to enable the court to exercise a discretion in favour of the defendants at this stage.  But having regard to the facts set out in the chronology I am firmly of the view that China Minsheng is entitled to the protection of an order now.

11.  Mr Yau says that orders involving the SEHK and Tengis are unnecessary, for the share brokers can supply all the necessary information.  At the end of the day that may well prove to be right, and if appropriate information is supplied by the brokers, it will not be necessary to China Minsheng to take any steps in relation to the orders insofar as they affect the SEHK and Tengis.  No harm will have been done by making the orders, and China Minsheng has the protection of the orders in the event that the information is not supplied by the brokers.

12.  I listened carefully to everything that Mr Yau has said but at the end of the day I came to the conclusion that the orders ought to be made in terms of the amended summons dated 25 October 2006, adding to paragraph 1 (b) the words: “ and the DBS Vickers (Hong Kong) Limited.

Costs:

13.  There will be an order nisi that the defendants must pay the plaintiffs costs on the summons, to be taxed on a party and party basis, in any event.