FALCON PRIVATE BANK LTD v. BORRY BERNARD EDOUARD CHARLES LTD AND ANOTHER

HCA 1934/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1934 OF 2011

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BETWEEN

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D E C I S I O N

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Background

1.  This is the plaintiff’s application by summons to enforce the proper compliance by the defendants with a series of orders made by this court to trace a sum of US$10 million received by the 1^st defendant.      On 27 January 2012, I made an order that unless the defendants make disclosure in compliance with paragraphs 1 and 2 of the order of Deputy High Court Judge Lok dated 6 January 2012 by 4:00 pm on 31 January 2012, they shall be precluded from calling evidence in any application for summary judgment or at the trial of this action; and refused the defendants’ application for leave to appeal against that unless order.       On 9 February 2012, the defendants lodged an application to the Court of Appeal for leave to appeal against the unless order.  But no application for stay pending appeal has been made to this court or the Court of Appeal.  The background of this case is summarised in paragraphs 2 to 15 of my decision dated 27 January 2012. 

2.  On 31 January 2012, the 2^nd defendant filed his 7^th affidavit in purported compliance with the unless order.  The plaintiff’s solicitors wrote to the defendants’ solicitors on 2 February 2012 complaining of inadequacies of the 2^nd defendant’s affidavit.  The defendants’ solicitors did not respond.  On 10 February 2012, the plaintiff took out the present summons seeking: (1) to enforce the unless order made on 27 January 2012; and (2) further and specific disclosure in respect of inconsistencies arising from the 2^nd defendant’s affidavits.

Enforcement of the unless order

3.  Basically, the inadequacies alleged fall under two categories: (1) failure to disclose banking documents which are patently within the power of the 1^st and/or 2^nd defendants; and (2) failure to answer queries arising from the affidavits.  There is no need for me to go into details of those inadequacies because in the course of submission, it is accepted by Mr Wright, counsel for the defendants, that the 7^th affidavit of the          2^nd defendant was inadequate.  What counsel says is that there is no obligation to disclose the banking documents which were not in the physical possession of the defendants at the time of the making of the unless order and that the time allowed for the disclosure was inadequate.

4.  Mr Wright argues that the summons was set down for         15 minutes for the purpose of directions and should be adjourned for argument.  I disagree.  This is a simple matter of non-compliance of an unless order made after a series of breaches of the court’s orders.            Mr Wright says it would take hours for the defendants’ case to be fully argued.  And I listened patiently for two and half hours.  Mr Wright spends most of that time in regurgitating his earlier arguments presented at the hearing on 27 January 2012, ie the plaintiff will be unable to prove the defendants’ knowledge that the sum of US$10 million credited to the 1^st defendant’s account was transferred in breach of trust and his argument that money deposited in a bank account is a chose in action.      I heard those arguments at the hearing on 27 January 2012 and rejected them as being irrelevant for the purpose of the present application.       The real issues are whether the defendants are under any obligation to disclose the banking documents which were not in their physical possession at the time of the making of the unless order and whether the time allowed for the disclosure was inadequate.  Mr Wright’s insistence on an adjournment is just a delaying tactic.

5.  Under paragraph 1.1 of the order of Deputy High Court Judge Lok, the defendants were ordered to produce bank transfer instructions and bank statements in relation to a sum of US$2.5 million allegedly transferred to Mr Jager from the 2^nd defendant’s account with ANZ Bank in New Zealand.  It is incumbent upon the defendants to make the disclosure or otherwise satisfy the court why they were unable to do so.  The 2^nd defendant disclosed that he received US$5 million from Standard Chartered Bank Singapore (“SCB Singapore”) which was transferred to his US dollar account with ANZ Bank, converted into   New Zealand dollars and transferred to his New Zealand dollar account with ANZ Bank through the internet on 19 October 2011.  Then, the     2^nd defendant said on or about 18 November 2011 he was informed by ANZ Bank that all services provided to him by the bank were to be unilaterally withdrawn with effect from 1 December 2011.  By the time the further disclosure order was made, the ANZ Bank accounts were all closed and the internet banking services discontinued.  Then, he said in paragraphs 13 and 14 of his 7^th affidavit:

“13. The fact that ANZ Bank was not prepared to deal with me has repeatedly been shown to me during the month of December 2011 when I repeated telephoned the bank’s officers. I was never told the reason why the bank closed my accounts. I was not given any courtesy from ANZ Bank or co-operation from their personnel or copies of documents relating to the account.

  14.  Further to paragraph 13 above, despite my contact with ANZ Bank’s personnel, my attempts to obtain copies of my ANZ Bank accounts’ bank statements has not been granted.  ANZ Bank has refused to deal with me and won’t give me any support. I have been informed by my solicitors that I am not required to provide information which is not in my knowledge or my possession, custody or control. For the reasons stated above, the bank statements are not in my possession (no copies were taken), custody or control (ANZ Bank won’t now provide them).  In so far as I am required to explain and provide the whereabouts of ANZ Bank account statements which the Plaintiff requires, these are in the possession of ANZ Bank at the moment and for some reason, undoubtedly caused by the Plaintiff, out of my control.”

6.  In gist, the 2^nd defendant said that he kept no computer printout of the internet transfer he made, that ANZ Bank closed his accounts, withdrew all services from him with effect from 1 December 2011 and refused to deal with him.  He made a bald allegation that     ANZ Bank refused to provide him with bank statements.  The allegation was lacking in particulars as to when the requests for bank statements were made and not supported by any written correspondence issued by him or by the bank.  It is incredible that well established international banks such as SCB Singapore and ANZ Bank would refuse to supply their clients, albeit former clients, banking documents relating to their accounts upon a request properly made.

7.  Mr Wright submits that the 2^nd defendant is not required to disclose anything which he does not actually have.  This is blatantly in contradiction to what the 2^nd defendant said in his 7^th affidavit of what   he was advised by his solicitors, ie he was obliged to disclose the information in his knowledge, possession, custody or control.  Mr Wright argues without quoting any authority that that phrase means documents which a person actually has in his possession at the time of the making of the order.  That is a wholly layman’s approach to the interpretation of a seasoned phrase used in the courts everyday.  Law students from the universities are born with the concept that the phrase “documents in the possession, custody or control” includes documents which a person does not have in his possession or custody, but has a right to obtain from the person who has them: see Hong Kong Civil Procedure 2012, paragraph 24/2/7.  This is trite law.  Such submission is as much an insult to the intelligence of the court as it is a disgrace to the counsel of such seniority who utters it.  This comment is made not without regard to counsel’s duty to fearlessly uphold the interest of his client; but such duty does not excuse counsel from misleading the court. 

8.  Another ludicrous argument of Mr Wright is that I did not allow adequate time for the defendants to obtain the documents.  The disclosure was ordered by Deputy High Court Judge Lok on 6 January 2012.  The defendants’ solicitors understood the order to include documents in the control of the defendants.  There was no appeal against the order of Deputy High Court Judge Lok.  The defendants’ solicitors should have set in motion the steps to obtain the documents, including writing to the banks if necessary.  No such correspondence had been produced in the 7^th affidavit of the 2^nd defendant.  The 2^nd defendant did not even say his solicitors had written to the banks or he had instructed his solicitors to do so.  The only mention was the bald and vague allegation of oral requests I referred to above.  Then at the hearing before me on 27 January 2012, there was no argument by Mr Wright that the documents were not in the defendants’ possession, custody or control.  There was no argument that more time was needed to write to the banks to obtain the documents.  The argument was focussed on deferment pending the outcome of a review of the order of Sakhrani J, the application for which was yet to be made.  It was therefore assumed that the documents were in the possession of the defendants or otherwise readily available.  The time for compliance was set on that basis.  When the order was made, no objection was raised by Mr Wright that compliance would be impossible because some documents were not available.  The way this matter was conducted by the defendants was to engender to delay.  It appears that very experienced counsel and reputable solicitors are part of it.  They should not have slept on the order of Deputy High Court Judge Lok for over six weeks and then advance a self induced excuse of inadequate time to comply.

9.  It is unnecessary to refer to the other inadequacies mentioned in the summons.  They all relate to bank cheques and bank documents.   In view of the history of delay and breaches, the plaintiff is entitled to judgment in the terms of the unless order.  I offer the plaintiff the option of a judgment forthwith or another disclosure order on unless terms.  After taking instructions, Mr Lam opts for the latter, which in my view is the preferred choice.  I therefore grant a further unless order in terms as agreed by counsel.

Further and specific disclosure 

10.  The plaintiff also asks for further and specific disclosure in respect of inconsistencies and queries arising from the 2^nd defendant’s   7^th affidavit.  The court’s power to order further and specific disclosure in case where the disclosure given is unsatisfactory or inadequate is well established.  The plaintiff’s case for specific disclosure arose out of inconsistencies in the 2^nd defendant’s affidavit.

11.  Under paragraph 1.2 of the order of Deputy High Court Judge Lok, the 2^nd defendant was required to produce copies of cheques and relevant bank statements relating to the sum of US$2.5 million allegedly paid to Sunesko LLC’s clients.  In paragraph 12(ii) of his fourth affidavit, the 2^nd defendant said specifically that “cheque payments” were made to Sunesko LLC’s “clients”, suggesting there were multiple payments made. However, in paragraph 16 of his 7^th affidavit, the        2^nd defendant said that there was only one payment which was by a cheque to him, which was collected by Mr Malik.  Then in paragraph 18, he said “as stated in paragraph 12(ii) of my fourth affidavit, I understand that the cheque was paid by way of an endorsement to it by Mr Malik     to a client of Sunesko LLC’s”.  No such allegation was made in paragraph 12(ii) of his fourth affidavit.  Such inconsistent disclosure       was unsatisfactory and inadequate.  The plaintiff is entitled to further and specific disclosure.  In view of the history of delays and breaches, it is only appropriate that this disclosure order should be fortified with the terms of an unless order.  

Costs

12.  This application would not have been necessary had the defendants not been guilty of unsatisfactory and inadequate disclosure.  Against a background of contumelious delays and breaches, I order the defendants to pay the plaintiff’s costs with certificate for counsel on an indemnity basis.

Leave to appeal

13.  At the conclusion of the hearing, Mr Wright applies for leave to appeal against my decision.  No further reasons having been advanced, leave to appeal is forthwith refused.