UNITED OVERSEAS BANK (CHINA) LTD v. GUANGZHOU DEXING LTD AND OTHERS

HCCL 10/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO. 10 OF 2009

----------------------

BETWEEN

----------------------

-------------------------

J U D G M E N T

-------------------------

The application

1.  By summons dated 13 May 2009, the 3^rd and 4^th defendants seek the discharge of a worldwide Mareva injunction granted ex parte by this court on 28 April 2009, together with costs on an indemnity basis.

2.  Reduced to its fundamentals, the thrust of the argument of Mr Barlow SC, for the applicants, was that this injunction should be discharged on either or both of two principal bases: that of material non‑disclosure and/or absence of risk of dissipation.

3.  Such discharge was opposed by Mr Sussex SC, acting on behalf of the plaintiff.

4.  I deal, in outline at least, with the respective arguments later in this judgment; before so doing, however, I should provide some indication of the background which led to the ex parte grant of this injunctive relief.

The factual background

5.  This case is about a letter of credit fraud.

6.  The plaintiff, UOB China is a bank; it is constituted under the laws of the PRC, and is an wholly-owned subsidiary of UOB, Singapore.

7.  The 1^st and 2^nd defendants, which respectively I shall refer to as ‘Dexing’ and ‘Guo’, were customers of UOB, China; for present purposes I do not think that there is any doubt on the present evidence but that they can be characterized as fraudsters.

8.  The 3^rd defendant, ICT Company Limited (‘ICT’) is a Hong Kong company, owned and managed by the 4^th defendant, one Mr Peter Pohl.

9.  On his own case, as revealed in his affidavit evidence, through the medium of ICT Mr Pohl runs, inter alia, that which he characterizes as a L/C documents processing business:

“Since 2003, the 3^rd defendant has been engaged in the business of processing L/C documents and monies on the instructions of its clients…

The 3^rd defendant [ICT] carries on business as a Commission Agent for various companies providing a fast service for the transfer of monies obtained from letters of credit. One of the 3^rd defendant’s clients is the 1^st defendant [Dexing] and through it, the 2^nd defendant [Guo]…” (Pohl 1^st affirmation, dd 5 May 2009)

10.  The way this operation worked was as follows: indeed, there appears no dispute whatever as to its essential features, which are exemplified by the events of the present case.

11.  In outline, ICT was the beneficiary under 2 letters of credit, which can be referred to as ‘LC 204’ and ‘LC 264’: in fact, the modus operandi in each instance was identical.

12.  These LC’s were opened by the plaintiff bank, UOB China, upon the application of its customer, the 1^st defendant, Dexing, acting through the 2^nd defendant, Mr Guo.

13.  As is apparent on their face, these LC’s represented the payment mechanism for 2 cargoes of Malaysian round logs to be shipped at a Malaysian port for carriage to, and discharge at, Nansha, China.

14.  These LC’s were acceptance credits, because by their terms the plaintiff bank engaged, upon due presentation of the requisite documentation, to accept a draft drawn upon itself at 90 days’ sight.

15.  In each case the LC’s stipulated that the documents requiring to be presented in order to ‘trigger’ the plaintiff bank’s obligation to accept a tenor draft were: (1) signed commercial invoice in 3 copies; (2) packing list in two copies; and (3) full set of clean on board bills of lading.

16.  It is admitted and accepted by Mr Pohl that ICT never had sold a cargo of Malaysian round logs to Dexing – a factual element of this case which is extraordinary, because the natural implication from the fact of ICT being named beneficiary under the credit was that ICT indeed was the seller, and that the credit proceeds were to reimburse the sale price for the cargo of Malaysian round logs.

17.  Be that as it may. It is Mr Pohl’s position that for each of the two letters of credit in this case, Mr Pohl actually created a commercial invoice and a packing list and had ensured that these documents conformed with the requirements of the letters of credit.

18.  He also apparently received from Dexing and Guo bills of lading in respect of each purported shipment of Malaysian round logs, albeit – as Mr Sussex observed during argument – it does not appear to have occurred to him how it was that Dexing, ostensibly the buyer of the rounds logs shipments, then should have been in possession of bills of lading, which, as documents of title, are held by the seller and are not handed over to the buyer, thereby permitting the buyer to take delivery, until the particular payment mechanism is satisfied: in this instance, of course, such payment mechanism was by LC as issued by the plaintiff bank.

19.  In addition to creating the compliant invoice and packing list, Mr Pohl also drew a bill of exchange upon the plaintiff bank, and then gave the three documents he thus had created to the Bank of China (‘BOC’) in Hong Kong, with a request that the documents be forwarded and presented to the plaintiff.

20.  It is worth emphasizing at this stage that BOC, which appears to be a bank with which Mr Pohl frequently has dealt in similar manner, itself assumed neither obligation nor engagement under the LC, and acted merely as presenting bank.

21.  Upon the documents, as thus prepared, being remitted to the plaintiff through the banking system, and upon the plaintiff ensuring documentary compliance with the terms of the LC, the plaintiff then indicated to BOC its acceptance of the bills of exchange in each case in accordance with its engagement on the face of the LC’s issued to its customer, Dexing; thereupon UOB China became obliged, as a matter of contract, to pay the face value of the bill of exchange on maturity.

22.  In other words, upon receipt of the compliant documentation, the payment obligations of UOB China, qua issuing bank, thereupon crystallized, and in due course payment was made.

23.  During argument much has been made of the position of BOC in this chain of events, and it has been asserted that BOC “knew full well” precisely what was happening, and that which Mr Pohl/ICT were doing in terms of such ‘LC document processing’.

24.  Similarly, a good deal has been made of the fact that, upon the plaintiff bank determining that there had been compliant presentation, and thereafter notifying BOC that it had accepted the bill of exchange drawn upon it by Mr Pohl, monies thereafter immediately were remitted from BOC to ICT/Mr Pohl, albeit in the form of a lesser sum than the face value of the bill of exchange; this was because BOC – which now knew (because UOB, China had confirmed it) that it was going to be placed in funds by the plaintiff – had discounted the bill, the sum thus discounted reflecting the fact of payment earlier than the tenor of the bill (initially of 90 days, although this period subsequently was extended with the agreement of the plaintiff bank.)

25.  However, I wholly fail to see why the factual interposition of BOC, as ICT/Mr Pohl’s bank, makes a difference to the analytical case advanced by Mr Sussex on behalf of the plaintiff in terms of the tort of deceit, or that which often is referred to as ‘Derry v Peak’ fraud.

26.  Nor do I understand why Mr Pohl’s frequent assertion that BOC allegedly well knew and appreciated his modus operandi should make any difference to the primary analysis in terms of the legal relationship between ICT/Mr Pohl on the one hand and UOB, China on the other.

27.  I have no idea whether BOC in fact did know precisely what was happening – this is a factual assertion which Mr Pohl presumably wishes to establish at trial – but the ineluctable fact is that there is no evidence whatever that the plaintiff bank, UOB China, was aware of the situation which was taking place by reason of the creative activities of ICT/Mr Pohl.

28.  The short (and irrefutable) point is that ICT/Mr Pohl never have been customers of the plaintiff bank; accordingly, when documents, such as those admittedly created by Mr Pohl – whose ‘service/agency fee’ doubtless covered the dual tasks of creation of the appropriate documentation and, in accordance with his principal’s instructions, the subsequent disbursement of the monies thus forthcoming, upon a discounted basis, from BOC – had named ICT as beneficiary, the task of the plaintiff’s bills department solely was to check to ensure that there had been compliant documentary presentation.

29.  For present purposes, on the probabilities I also accept that the plaintiff does and did not keep records of ICT’s chop or authorized signatures; so far as the plaintiff issuing bank is concerned, which deals only in documents, ICT is no more or less than one of the many counterparties to transactions entered into by customers, such as Dexing/Guo, of the plaintiff bank.

30.  Accordingly, if the foregoing analysis be accurate, as I believe it to be – indeed it follows directly upon the factual matrix as admitted to/sworn by Mr Pohl in his affirmations filed upon this application – then it must follow that whatever be the relationship/understanding between ICT/Mr Pohl on the one hand, and Dexing and Guo on the other, the business Mr Pohl describes on oath necessarily involved the creation of documents containing representations which Mr Pohl knew to be untrue – ICT had purchased no consignments of Malaysian round logs from Dexing – and thereafter presenting them under the relevant letters of credit with the intention that such representations be relied upon by the issuing bank, UOB China, in deciding whether to comply with its contractual payment obligations under the terms of the credits.

31.  Lest it be suggested – and at bottom I do not think realistically that it can be – that the plaintiff bank was aware of what was going on, for present purposes I reject any such suggestion.

32.  The reason for this conclusion is clear: if – as occurred in this case – Dexing/Guo did not place UOB China in funds to cover the LC amount, the issuing bank effecting payment under the LC effectively is left high and dry, given that the Trust Receipt purportedly given to the bank by the fraudsters (and which otherwise would have constituted a form of security for the bank over the cargo itself) obviously was nugatory, since in these instances there was no cargo; nevertheless the plaintiff bank had paid out on the very documents created, upon the instructions of Dexing/Guo, by Mr Pohl, and thereafter the funds thus received had been disbursed by Mr Pohl upon the instructions of the fraudsters.

33.  I have taken some time to rehearse the undisputed facts, and the analysis which I believe necessarily follows consequent upon these facts, because these matters impact upon the argument for discharge of the Mareva injunction granted by this court in April 2009.

34.  I turn, therefore, to the main planks of this argument as mounted by Mr Barlow SC on behalf of ICT/Mr Pohl.

(1) Material non-disclosure

35.  Mr Barlow’s main thrust on this application was that the deponent, Mr Lamplough, of the plaintiff’s solicitors, had been guilty of material non-disclosure, and that on this basis alone the injunction as now in place should be discharged.

36.  The court has been reminded of the relevant principles, which are tolerably well-known: see, for example, Citibank NA v Express Ship Management Services Ltd [1987] HKLR 1184 (CA); Wah Nam Holdings Co Ltd v Excel Nobel Development Ltd [2000] 3 HKC 118 (CA).

37.  Mr Barlow fiercely criticized Mr Lamplough for the manner in which the plaintiff’s fraud case had been developed in the affidavit leading the ex parte application; indeed, Mr Barlow suggested that the application should not even have been made ex parte, and that it would have been open to the plaintiff to have come to the court ex parte on notice, after the banks had closed.

38.  For my own part, I considered this latter argument somewhat ambitious; the plaintiff bank undoubtedly had suffered a major fraud at the hands of the 1^st and 2^nd defendants, Dexing and Guo, and clearly ICT/Mr Pohl had been players/participants in the events that had unfolded, whereby the bank had been caused significant loss, and thus it does not, and indeed did not, strike me as unusual or unwarranted that an application for Mareva relief, in the case of an obvious LC fraud, should have been mounted precisely as occurred.

39.  Mr Barlow lambasted Mr Lamplough for the manner in which the generally endorsed writ had been pleaded: a ‘blunderbuss approach’ was his colourful description, and true it is that one way or another Mr Lamplough had included in his draft writ just about every conceivable cause of action.

40.  However, I do not criticize him for that. At this early stage it is impossible to know all the details, and for the pleader not to cast his net wide would be irresponsible from a practitioner’s viewpoint. And in any event, this is the Commercial Court, wherein niceties of pleading generally are subsumed within considerations of robust and practical action, particularly when it comes to the plaintiff’s solicitor attempting to mitigate the effect on his client of an obvious LC fraud.

41.  So I do not think there is anything in this point. The fact that causes of action which assumed greater profile at the ex parte stage assume less profile later in the case, and that other causes of action, such as the tort of deceit, begin to swim more compellingly into the frame at a time when the factual matrix more precisely is known – Mr Pohl to-date has filed no less than 3 explanatory/justificatory affirmations – does not seem to me greatly to matter, and certainly does not justify discharging an injunction on the basis of material non-disclosure.

42.  Leading counsel for the 3^rd and 4^th defendants also laid emphasis upon the ‘speculative’ nature of Mr Lamlough’s affidavit leading the application, pointing out that certain important assertions were unsourced, at least in terms of strict compliance with Order 41, rule 5, RHC, and that no-one from the plaintiff bank, UOB China, then had seen fit to depose to any of the matters upon which Mr Lamplough deposed on the basis of his information and belief, but self-evidently absent direct personal knowledge of any of these unfortunate events.

43.  These points are reasonably made, but in my view they do not get his client home in terms of material non-disclosure/discharge. In addition criticisms were mounted of the lack of particulars of fraud – in particular, here, the use of the words “ presumably unwittingly” in the affidavit narrative to characterize the presumed position of BOC in passing on to UOB, China the LC documents created for presentation under the relevant credit by Mr Pohl, but in my view this criticism has no particular resonance in the ‘non-disclosure’ scheme of things; the state of mind of BOC officers is nothing to the analytical point vis-à-vis the 3^rd and 4^th defendants on the one hand and UOB China on the other.

44.  I repeat that at this early stage the defrauded plaintiff’s solicitor frequently possesses the bare minimum of hard information to go on, and whilst he must be sure that allegations of fraud are not made irresponsibly absent reasonable (and objectively justifiable) evidential foundation, the fact that not unreasonable speculative assertion ultimately turns out to be unfounded in fact, or indeed different in emphasis, does not strike me as fatal.

45.  Mr Barlow also made much of the oversight, subsequently expressly acknowledged by Mr Lamplough, to include within the documents placed before the court at the ex parte stage a letter dated 7 April 2009 from Singapore solicitors Rajah & Tan, who earlier on that same date had sent Mr Pohl a first letter inquiring as to his role in this fraud, as the result of which Mr Pohl had picked up the telephone and had purported to explain to the Singaporean solicitor what had happened from his viewpoint. Thus, this ‘missing’ 2^nd letter had recounted the solicitor’s version of that which Mr Pohl had told him over the telephone; the opening paragraphs of this letter read:

“Dear Mr Pohl,

LETTER OF CREDIT: SCMLC 00264 (“THE LETTER OF CREDIT”)

BILL OF LADING NO HS-053B

We refer to our telephone conversation at around 1.00 pm this afternoon.

We understand from your explanation that ICT Company Limited (‘ICT’) is in fact a commission agent for Guangzhou Dexing Ltd (‘Dexing’). ICT’s arrangement with Dexing is to process documents (including letters of credit and bills of lading) received from Dexing in Guangzhou or Golden Sun/Golden Oriental in Singapore, including issuing invoices and packing lists for shipments, and to present the documents to the negotiating banks for payment. As you have explained, the payment received from ICT from the negotiating banks is paid according to Dexing’s instructions. You have also confirmed that ICT did not ever enter into any contract for the sale of timber to Dexing in respect of the captioned Letter of Credit or any other letters of credit.

In relation to the captioned Letter of Credit, you have indicated that ICT has been paid by Bank of China (Hong Kong) pursuant to the negotiation and that the proceeds of the negotiation have been paid over to Dexing. You have further informed us that BOC (HK) was likely to be aware of the arrangement between ICT and Dexing. In any event, there was no back to back letter of credit issued by BOC (HK) on your application.

As you may well appreciate, this is developing into a serious matter…”

46.  At first blush, failure to exhibit this letter is a fair point, in that it shows that Mr Pohl then was responsive to queries about his role in the fraud, although it also should be noted that he appeared even then not to appreciate just what it was that he had been doing vis-à-vis the plaintiff bank, and the manner in which his own actions on behalf of Dexing and Guo had engendered loss.

47.  Be that as it may. Prima facie this at least was a runner in the non-disclosure stakes, but the force of the point substantially is dissipated when it is realized that, whilst Mr Lamplough admittedly had forgotten to include this 2^nd letter of 7 April 2009 in the exhibits to his 1^st affidavit, nevertheless the narrative of that affidavit deposes (at paragraph 55 thereof) to precisely the content of this 2^nd Rajah & Tan letter: the carriage to his paragraph commences “Pohl telephoned Rajah & Tan within an hour of the fax [Rajah & Tan’s first letter of demand dated 7 April 2009 sent by fax] having been sent. In that telephone conversation, ICT confirmed that:….and thereafter is set out a précis of the 2^nd letter; this paragraph 55 further records that Mr Pohl and ICT “have not cooperated with Rajah & Tan any further”.

48.  This latter statement now is corroborated by the affirmation of Maureen Poh, dated 31 July 2009. Ms Poh, who is an associate of Rajah & Tan, the Singapore solicitors for the plaintiff bank, UOB, China, deposes to the fact that she was present during the telephone conversation (held on speakerphone) between Mr Pohl and her colleague Mr Toh, of Rajah & Tan, and corroborates Mr Lamplough’s version of the substance of that conversation as contained in the 2^nd letter, and goes on to recount how urgent requests were made of Mr Pohl for all relevant documents and correspondence pertinent to the fraud, and that neither Mr Pohl nor any other representative of ICT responded to this request: “in the days following 7 April, the possibility of obtaining Mr Pohl’s co-operation diminished”.

49.  Ms Poh also says that thereafter Mr Toh and herself repeatedly had telephoned Mr Pohl (once more on the speakerphone) at the number he had given them, that in the afternoon of 8 April a woman had answered, and that when a request was made to speak with Mr Pohl “this woman denied having any knowledge of Mr Pohl”; having now read Mr Pohl’s 1^st affirmation, Ms Poh believes that this woman was Mr Pohl’s wife. In the event, they did not hear from Mr Pohl after that, “the repeated telephone calls to ICT’s offices were unanswered”, it “soon became clear that Mr Pohl was avoiding us”, and that none of the requested documents were sent by Mr Pohl to their firm: “neither Mr Pohl nor ICT have co‑operated with Rajah & Tan any further.”

50.  Accordingly, as matters stand, I do not see why the omission of the Rajah & Tan 2^nd letter is of material import, although from a non‑disclosure viewpoint I accept that the position might very well have been different if Mr Lamplough had not recounted in his affidavit the substance of this Pohl/Rajah & Tan telephone conversation.

51.  Additionally in the non-disclosure context, Mr Barlow mounted a strong attack upon the alleged failure of Mr Lamplough to draw the court’s attention to the obvious discrepancy in the appearance of the alleged chops and signatures of ICT and Mr Pohl as respectively appeared, in diverse forms it must be said, upon the face of the Purchase Contract (which Mr Pohl did not prepare) and on the face of the Commercial Invoice (which he did).

52.  The point once again is fairly made, but I do not consider it bears the level of ‘non disclosure’ significance now attributed to it by counsel. It seems to me that when faced with an obvious LC fraud of which the full details then remain unclear, save that the plaintiff bank has lost a good deal of money consequent upon presentation of false documents which refer to non-existent cargoes, it might reasonably be anticipated that chops or signatures on the associated documents are frauds, but given the plaintiff’s state of knowledge at this preliminary investigatory stage, I do not consider that the clear discrepancy – to which the court’s attention was not, I think, drawn by Mr Lamplough – would add much, if at all, to the discretionary evaluation the court is required to make when faced on an ex parte application relating to an LC fraud: one or the other probably was false (or perhaps even both), but attempted identification of such falsity at that early stage would not have assisted, and in itself would have been a speculative exercise.

53.  At the end of the day, therefore, hard though Mr Barlow pressed the point, I decline to set aside this injunction on the grounds of material non-disclosure. Certainly there were inadequacies in Mr Lamplough’s affidavit leading the application, but none have been revealed as sufficiently compelling to warrant a discharge on the grounds of material non-disclosure, and accordingly I do not do so.

54.  As a matter of fundamental approach, where there has been an obvious fraud perpetrated upon an issuing bank – as undoubtedly was the situation here – and when the plaintiff comes to the Commercial Court on an ex parte basis to request Mareva relief, evidential perfection clearly is unattainable, albeit the court nevertheless must be satisfied as to the essential case, even if subsequently it may transpire, after further investigation and the filing of appropriate evidence, that the manner of the fraud was not precisely as earlier had been surmised.

55.  In fact, is one of the peculiar ironies of this case that no solicitor seized with obtaining Mareva relief for his client reasonably could have anticipated that these two LC frauds took place in quite the manner that they undoubtedly did, and in my judgment the issue of non‑disclosure should be viewed through the prism of the presentation of the misleading documents as were created by Mr Pohl precisely to achieve the result which was achieved, namely the dissemination of the LC monies from UOB China through BOC to Mr Pohl/ICT, with, thereafter, remission to the fraudsters.

56.  It remains an extraordinary aspect of this case that in mounting this application, and in his sworn evidence, Mr Pohl even now does not appear to appreciate that his ‘commission agent’ business involved creation of LC documents which on their face misrepresented the position to the issuing bank, and which, upon the basis of the representations made therein, thereafter acted to its detriment by paying out under the credit absent being placed in funds and absent viable trust receipt security.

57.  I agree with and acceptthe submission of Mr Sussex that these are the classic ingredients of Derry v Peak fraud, whether or not the 3^rd and 4^th defendants realized the position, and that it is likely that the only reason that ICT/Mr Pohl appear thus far successfully to have operated this business, in its present form at least, is that on every other occasion the issuing bank must have been put in funds by the applicant for the credit, although on this particular occasion, consequent upon the nefarious activities of Dexing/Guo, the plaintiff bank indeed has been defrauded and has been left holding the financial baby.

58.  To this I would add the observation that I am unable to agree with Mr Barlow’s repeated contention, in argument, that for these purposes the representee is and was at all times BOC; with respect, it is not.

59.  It seems to me that the correct analysis is that the representee is the plaintiff bank, UOB China, to whom the documents as created by Mr Pohl were passed via BOC, and which, upon determining documentary compliance with the terms of the credit, confirmed its engagement to pay, and that it was only upon notice of such confirmation that BOC had advanced the discounted sum to ICT/Mr Pohl – the reason being, of course, because BOC knew that it had a right of recourse to the plaintiff bank.

60.  It follows from the foregoing that in my view any argument predicated upon BOC, the bank with which Mr Pohl/ICT frequently dealt – and which it now is alleged had specific knowledge of his modus operandi – being the representee is misplaced; nor, for that matter, do I think that the position of BOC is of particular relevance, whether on these two occasions regarding LC’s 240 and 264, or indeed on any of the 150 odd other occasions on which Mr Pohl now says that he has conducted similar operations through that bank.

61.  As earlier emphasised, there is absolutely no evidence that the plaintiff, UOB China, was aware of what was happening, and as matters presently stand I am unable to see that there can be an issue of, for example, a ‘waiver’ of the plaintiff’s rights. The short point is that the plaintiff undoubtedly is the financial victim, and that this status has arisen, in part at least, as a direct consequence of Mr Pohl’s activities.

(2) Risk of dissipation

62.  Mr Barlow’s second main point was that in all the circumstances, and as now revealed on the evidence as filed by ICT/Mr Pohl, self-evidently there was no real risk of dissipation of the 3^rd and 4^th defendant’s assets such that there was a real risk that any judgment in favour of the plaintiff would be unsatisfied.

63.  In this connection leading counsel emphasized that since the letters from Rajah & Tan of 7 April 2009 and the date of the ex parte application on 28 April 2009, the plaintiff’s solicitor had had no less than 3 weeks in which to make appropriate inquiries as to the status/credit standing of the 3^rd and 4^th defendants, and that had this exercise been done, it would have revealed that ICT/Mr Pohl had been carrying on business in Hong Kong for over 21 years, that “they are not going anywhere”, and that indeed they will be “resolutely” defending this action and the false allegations of dishonesty as now levelled against them. Indeed, said Mr Barlow, to-date ICT/Mr Pohl had not dissipated any of their assets, which was hardly surprising given that Hong Kong was home to Mr Pohl and his wife, and is the place where they have all their business connections.

64.  The attention of the court was drawn to the principle that in this situation the plaintiff was under an obligation to make all due inquiries – see, for example, dicta in Bank Mellat v Nikpour [1985] FSR 87, at 89-90 – and viewed in this context the 3 week lacuna was, said Mr Barlow, an important consideration which served to highlight the relative paucity of hard data sworn to by Mr Lamplough merely on the basis of information and belief. Counsel also referred to the passage in Peter Oswald Scales v William HH Wong & anr [1983] HKLR 110, at 114, wherein Sir Alan Huggins VP had observed that “evidence which might tend to support a claim by the defendants that they honestly believed that they were entitled to do what they had done would reduce the likelihood of fraud and, consequently, tend to destroy the basis for an inference that there was a real risk of disposal of property…”

65.  At one point I confess that I was attracted to this argument, which potentially struck me as a stronger point that the material non‑disclosure argument which the court now has rejected.

66.  On reflection, however, I do not consider that this line suffices to get ICT/Mr Pohl home either, and to achieve the discharge as now is sought.

67.  Absent Mr Pohl’s own evidence as filed on this application, I should, perhaps, have been minded to discharge on this basis. However, in terms of the risk of non-disclosure I cannot properly overlook this element of the case.

68.  On behalf of his client Mr Sussex SC has referred the court to passages commenting on risk of dissipation in cases as far apart as Third Chandris Corpn v Unimarine SA [1979] 1 QB 645, per Lawton J at 671-672, together with a judgment of this court in its very recent Mareva judgment in Akai Holdings Ltd v Ho Wing On & ors, HCCL 37 & 40 of 2005, unrep., Judgment dated 9 February 2009, at paras 52 and 53.

69.  The gravamen of these passages is that where a good arguable case is established on the ground of fraud, dishonesty or an “unacceptably low standard of commercial morality”, the court is the more likely to infer a real risk of dissipation; as Phillips LJ (as he then was) crisply put it in Norwich Union Fire Insurance Society Ltd v Eden, unrep., 25 January 1996:

“It seems to me that when the court considers that there is a good arguable case it is at that stage that it considers whether the likelihood of a judgment in favour of the plaintiff is sufficient to justify the grant of Mareva relief. If it is so satisfied, the question then arises:- if such a Judgment is given, what is the risk that there will be no assets there to satisfy it? If the judgment in question being considered is a judgment in which allegations of fraud are made, then it seems to me that it is open to the court to conclude from that fact alone that there is a sufficient risk of dissipation of assets to justify the grant of relief…”

70.  I appreciate, of course, that on behalf of his client Mr Barlow firmly disavows any suggestion of dishonesty per se or of “low commercial standards of morality”, to adopt the well-known rubric from Honsaico Trading v Hong Yiah Seng Co Ltd [1990] 1 HKLR 235, at 240, or of “questionable integrity”: Standard Chartered Securities v Arther Lai [1993] HKC 375, and seeks to make the point that this was fully intended to be an ‘above-board’ business run by Mr Pohl through ICT.

71.  However, as Mr Sussex stressed during argument, the business as now described in Mr Pohl’s evidence cannot by any stretch of the imagination be described as “legitimate business” (whatever he may believe, or has been led to believe to be the case) since such business necessarily involves creating documents containing representations which Mr Pohl must have known to be untrue, and thereafter causing such documents to be presented under LC’s with the clear and obvious intention that they be relied upon by the issuing banks – in the present case in context of LC’s 240 and 264, and the consequent triggering of the obligation of the present plaintiff, UOB China, to make payment under those credits. I also accept the correlative proposition that it can only be by reason of fortuity that hitherto Dexing appears to have reimbursed the issuing bank, and thus that this fraudulent state of affairs had not earlier come to light.

72.  The fact that Mr Pohl thus far had “got away with it” and apparently has run this type of business for some time without coming to commercial grief ultimately is nothing to the analytical point. This court has no reason to believe, and indeed does not believe, that Mr Pohl set out to act dishonestly, but putting it at its lowest he is misguided in doing what he has been doing – his modus operandi means that he is effectively an hostage to the intentions of his clients – and it is ironic that he does not seem to appreciate the illegitimate nature of this commercial conduct, an aspect of this case which Mr Sussex has suggested serves to exacerbate the current situation when considering ‘risk of dissipation’.

73.  When it comes to “dishonesty” in creating and presenting documents known by the creator to contain misleading and wrong representations, in my view it is not open to Mr Pohl now to attempt to claim the moral high ground by saying, in effect, that he was only following his principal’s instructions (both in creating the documents and in disbursing the resultant funds) and that accordingly no ‘dishonesty’ of any shade can be laid at his door.

74.  As Lord Nicholls observed in his celebrated speech in Royal Brunei Airlines Sdn Bhd v Philip Tan Kok Ming [1995] 2 AC 378, at 389:

“…for the most part dishonesty is to be equated with conscious impropriety. However, these subjective characteristics of honesty do not mean that individuals are free to set their own standards of honesty in particular circumstances. The standard of what constitutes honest conduct is not subjective. Honesty is not an optional scale, with higher or lower values according to the moral standards of each individual. If a person knowingly appropriates another’s property, he will not escape a finding of dishonesty simply because he sees nothing wrong in such behaviour…” (emphasis added)

75.  Moreover, Mr Sussex reiterated that in any event his client presently did not accept the story of, and the ‘defence’ of Mr Pohl/ICT, which he characterized as “irrational, intemperate and inherently incredible”; nor, for that matter, was he minded to accept the submission of Mr Barlow that factually there had been no dissipation of assets from ICT subsequent the receipt by ICT/Mr Pohl of the Rajah & Tan correspondence on 7 April 2009. As far as his client was concerned, said Mr Sussex, given the serious nature of the conduct now admitted to by Mr Pohl, it was clear that ICT and/or Mr Pohl already had put the proceeds of these fraudulent activities beyond the reach of the plaintiff, and that having regard to the facts upon which this claim was based, and the manner in which the claim unapologetically and aggressively now was being defended, he submitted that there remained “every reason to fear” that, absent the injunction remaining in place, assets would be removed from the reach of the plaintiff.

76.  In this connection counsel further noted that, unlike the situation with 5^th and 6^th defendants, Shine Well International Group Ltd and Edward Anwar (in the context of a 3^rd fraud unconnected to LC’s 204 and 264) there had been no offer to pay back any of the monies thus abstracted from UOB China consequent upon the frauds as had taken place.

77.  At the end of the day, therefore, and after carefully reflecting upon all the circumstances of this case, not least in this context the current stance of Mr Pohl/ICT, I have decided also to refuse the discharge application on the alternative basis of absence of risk of dissipation.

78.  I have come to this conclusion after some hesitation, but in the event in the exercise of my discretion, and after weighing all the factors in the balance, I do not consider that it would be appropriate for the injunction currently in place now to be discharged.

79.  To an extent I am fortified in this view because I have been told from the bar table that ICT in fact has not been prevented from operating at all – albeit it seems to have been doing so on a much reduced basis – given that one of its bank accounts, that with Bank of Communications, has by consent of the plaintiff’s solicitors not been frozen consequent upon this injunction; indeed, Mr Sussex observed that from his client’s viewpoint, the plaintiff was keen for ICT to continue to trade, at least legitimately, in order to accrue assets for what was regarded as a ‘sure winner’ in terms of the tort of deceit.

80.  As to this characterization of the plaintiff’s prospects of success, at present I naturally venture no concluded view, save to observe that on the basis of the currently available materials the plaintiff appears to have a strong case, and in coming to my conclusion to leave the injunction in place I naturally also place this opinion into the discretionary ‘mix’.

81.  I should add, for the sake of completeness, that on reflection I do not consider the Norwich Pharmacal order, granted by Reyes J on the plaintiff’s application against BOC on 23 April 2009, is of particular significance in the context of the present application, although it is true that the documentation surrounding this application was produced at the request of the court towards the conclusion of argument.

82.  It may also be useful to state that had I not come to the view to which I have come as to the discharge application as mounted by the 3^rd and 4^th defendants, and had I decided to discharge the Mareva injunction obtained from this court ex parte on 28 April 2009, in light of the totality of the evidence before the court I should have entertained, and indeed would have accepted, an application to regrant, although such regrant would not have been in the terms of the existing injunction.

83.  Which in turn naturally leads to Mr Barlow’s belated application to vary.

Variation of terms

84.  At the conclusion of his argument, Mr Barlow asked the court alternatively to consider a variation of the terms of the injunction as granted.

85.  He had in mind the principal sum for which Mareva injunctive relief was granted against the 3^rd and 4^th defendants, namely in the sum of US$1.8 million, and wondered rhetorically how this amount could have been so magnified by the elements of interest and costs when the principal sum of the 2 LC’s as had been honoured by the plaintiff bank came to no more than US$1.28 million (vide the Endorsement of Claim).

86.  I am assured by Mr Sussex that Mr Lamplough’s clear recollection of the ex parte hearing of 28 April 2009 – of which now I have but a very limited memory – is that Mr Lamplough did make a specific point of drawing the attention of the court to the sum of US$1.8 million, and the constituent elements thereof.

87.  I am happy to accept this assurance, and can only conclude that in this regard my concentration must have wavered, and that this figure went through absent appropriate evaluation – certainly it is the case, as Mr Barlow was keen to point out, that there can be little justification for the principal sum as claimed to be inflated by almost 30% solely on the basis of interest and costs, not least since the current rates of interest paid on US deposits as the result of the recent financial contagion are now risibly low, and reflect the huge amount of liquidit injected by governments around the world into the financial system.

88.  In my view the figure more properly should have been US$1.5 million, and accordingly I now vary the order to this extent, with the substitution of this latter figure for that as originally granted.

Other matters

89.  An oddity of this case is the strategy adopted by the 3^rd and 4^th defendants in this litigation.

90.  The ex parte Mareva relief was granted on 28 April 2009, and the application to discharge, which in the event has been unsuccessful, has come on for hearing some 13 weeks later.

91.  It strikes me that instead of lavishing time and money upon an application to discharge, a better use resources would have been to seek an order from the Commercial Court for an early trial; indeed, with co-operation from both sides – which I see no reason not to be forthcoming in the circumstances – the case could have been prepared and heard within, or at the least reasonably near to, the time taken for this interlocutory application.

92.  The court made this observation during argument, and Mr Sussex indicated that his client would be amenable to such an order for an expedited hearing, which surely is in the interest of the parties.

93.  Accordingly, I make an order for an early trial of this action. In my view this is precisely the sort of case which should attract an order of this type.

Order

94.  It follows from the foregoing that the Order of this court on this application is as follows:

(i) The 3^rd and 4^th defendants’ application by summons dated 13 May 2009 is dismissed;

(ii) The Mareva injunction order dated 28 April 2009, as amended on 27 May 2009, and as re-amended on 11 June 2009, is henceforth varied, at paragraph 1(1)(b) hereof, by the substitution of the figure of US$1.5 million for the figure of US$1.8 million;

(iii) There be an order for an early trial of this action;

(iv) As to costs, there be an order nisi that 90% of the costs of and occasioned by the 3^rd and 4^th defendants summons dated 13 May 2009 be to the plaintiff in any event, such costs to be taxed if not agreed.