SILVER ART LTD v. HO CHING WAH IDY

HCA 243/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 243 OF 2005

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RULING

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1.  There are three summonses before me in this matter, which comes before me on an adjourned return date.  The 1^st summons is the Plaintiff’s summons to continue the Mareva injunction granted by Deputy Judge Gill on 7 February 2005.  The 2^nd summons is a summons taken out by the Defendant for the discharge of the Mareva injunction, and the 3^rd summons is a summons by the Plaintiff, for variation of the Mareva injunction up to an amount of $8.3 million.

2.  The essence of the Plaintiff’s claim against the Defendant is that the Defendant has misappropriated funds from the Plaintiff’s company.  The evidence was, and I am satisfied that it was appropriate, sufficient, on 7 February 2005, to satisfy Deputy Judge Gill that a Mareva injunction ought to be issued, and Deputy Judge Carlson on 18 February 2005, that it ought to remain pending today’s hearing.

3.  Mr Cheng, for the Defendant, makes two primary points on the issue of discharge.

4.  First, he said that there has been material non-disclosure.  He said that the Plaintiff did not disclose to the Court at the time the injunction was sought, documents called “payment authorities” which supported the cheques upon which the Plaintiff relies for the misappropriation.  It is right that the payment authorities were not produced, but I am satisfied on the evidence that it was not necessary to produce them at that time.

5.  They have been now been produced, and they served only to underline the strength of the Plaintiff’s argument against the Defendant.  The payment authorities are supported by photocopy of the cheques to which they relate.  Those photocopies show that the payment authorities and the cheque attached to it are in the name of a particular payee.  In some cases, it is a man called Leung Shing Kit, in other place exists, it is Mr Wang, in reality the majority shareholder in the Plaintiff’s company.  In other cases, they are to a bank and purported to be for payments to Mr Wan himself.  But the cheques that were actually presented to the bank, in almost every circumstance are made payable to the Defendant herself. If not payable to the Defendant they are payable to some other person or entity, other than that shown on the payment authority, or the cheque attached to it.  In those cases they are virtually all for the benefit of the Defendant.

6.  The Defendant said that Mr Wang owed her money and that these sums were repayments to her authorised by Mr Wang.  If they were sums authorised by Mr Wan for repayment to her, I would have no doubt at all that the cheque would be shown payable to her.  The payment authority would be payable to her, and the details of the payment authority would indicate that they are a repayment of the loan.  In fact, they do not, and so  the payment authority and the cheque attached to remain in the Plaintiff’s record is completely misleading.  Mr Cheng said that if this is misleading, Mr Wan ought to have notice it earlier.  That might well be the case but that is a matter for the trial at the end of the day.  On the face of the documents, there is a very strong case to say that there was a misappropriation by the Defendant.  Mr Wan would not be the first employer who was relied simply on the document presented to him by an employee over a long period of time, and not made further checks, only to subsequently find that his employee has been deceiving him.

7.  Mr Cheng also makes a point that there should have been greater disclosure of the loan that is alleged by the Defendant to exist between the Plaintiff and the Defendant.  When seeking the ex-parte injunction, Mr Wang produced, as part of the evidence, a document apparently given to him by the Defendant which tends to support the proposition that there was a loan.

8.  Mr Cheng said that it was a running account which went on and fairly to disclose what happened after mid 2004, the date of the document is a material non-disclosure.  I do not accept that.  The potential existence of a debt has been disclosed, as it ought to have been, but the existence of a debt owed by Mr Wang, or even the Plaintiff’s company to the Defendant is not an answer to the very strong case of misappropriation that exists on the papers.  As I have said, if the payments were in reality authorised repayments of the loan the payment authorities would have said so.  They would not have been in the company papers in a deceiving manner.

9.  Mr Chan has raised a number of other matters, all of which are factual matters and which are matters of credibility, and all of which are matters which go to be argued at the end of the day, at the trial, and are not matters upon which the Mareva injunction ought to be set aside.

10.  I am satisfied that there has been no material disclosure upon which the Mareva injunction might otherwise be set aside.

11.  Mr Cheng next said that there is no evidence of any risk of dissipation of assets, and on that basis the Mareva injunction should be set aside.

12.  Where dishonesty is alleged, it is not necessary to establish risk of dissipation.  I adopt as a correct statement of the law the following passage from paragraph 12.040 in Commercial Injunctions, 5^th Ed, by Mr Stephen Gee:-

“But if there was a good arguable case and support of an allegation that the Defendant has acted fraudulently or dishonestly (e.g. being implicated in an ingenious scheme for the misappropriation of funds belonging to the claimant), or with an unacceptably low standard of commercial morality giving rise to a feeling of uneasiness about the defendant, then it is often unnecessary for there to be any further specific evidence on risk of dissipation for the court to be entitled to take the view that there is a sufficient risk to justify granting Mareva relief.

The very extensive prima facie case of misappropriation here falls precisely within that principle.

13.  I am satisfied that in the circumstances of this case, there need not be any evidence of any risk of dissipation of assets.  I am satisfied that there is a good arguable case established of dishonesty on the part of the Defendant.  That is sufficient in the circumstances, to entitle the Plaintiff to a Mareva injunction.

14.  The Defendant’s application to set aside or discharge the Mareva injunction is dismissed.

15.  It follows that the injunction must be continued until trial or further order of the court.  Mr Cheng, sensibly in the face of the conclusion that the Mareva injunction will not be set aside, does not oppose the Plaintiff’s summons to vary the sum of the Mareva injunction to $8,340,000.  There will be an order in those terms.

16.  I am satisfied after hearing from counsel that the proper order for costs is Plaintiff’s cost in the cause.  The Defendant has failed in her application to discharge the injunction.  The matters raised were matters of credibility which were matters for trial.  The strong case on dishonesty is such that although there is an ultimate issue of credibility, at this stage the order ought to be Plaintiff’s costs in the cause, which I accordingly make.