RHONDA JEANINE POHN v. MAC RICHARD POHN AND OTHERS

HCA 1381/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1381 OF 2010

____________

_____________

D E C I S I O N
_____________

1. This is an application by the 1st defendant to vary or revoke an interlocutory proprietary injunction granted by DHCJ Mayo on 5 October 2012. The injunction enjoins the defendants from dealing with or withdrawing any money or assets of the 2nd defendant. This application is made by the 1st defendant only as the 2nd and 3rd defendants are unrepresented companies.

Background

2. This action is brought by the plaintiff in her own rights and as special administrator of the estate of Maxwell Pohn, deceased.  The plaintiff was the deceased’s wife and the 1st defendant their son.

3. The 2nd defendant is a BVI company.  It has only one issued share.  This share used to be held by one Chatham Limited on trust for the deceased.

4. The 3rd defendant is a Hong Kong company controlled by the 1st defendant. 

5. The deceased procured the transfer of the share of the 2nd defendant by Chatham Limited to the 3rd defendant in November 2007 without consideration.  The plaintiff claims in this action that the transfer of the share of the 2nd defendant to the 3rd defendant did not result in any change to the deceased’s beneficial ownership of and in the 2nd defendant and the 3rd defendant merely held the share on trust for the deceased.  

6. The plaintiff relies on among other things, some e-mails exchanged between the deceased and the 1st defendant after the said transfer to show that the 1st defendant had to seek approval of the deceased before dealing with the 2nd defendant’s assets and the deceased was still in full control of the 2nd defendant and its assets.  There is also a letter signed by the 1st defendant to 2nd defendant’s banker in Switzerland dated 22 April 2008 (page 95) confirming that there was no change in the beneficial ownership of the 2nd defendant.  The plaintiff relied on these documents to show that the deceased was still the beneficial owner of the 2nd defendant after the transfer.

7. The plaintiff is also making an alternative claim for half of the beneficial interest in the share of the 2nd defendant on the ground that this share was community property belonging to her and the deceased under Californian law.

8. The 1st defendant disputes the plaintiff’s claim and contends that the transfer of the share of the 2nd defendant to the 3rd defendant was an absolute transfer of both the legal and beneficial interests of the same.

9. The deceased died on 2 April 2010.  Shortly after that, the 1st defendant withdrew US$800,000 from the bank account of the 2nd defendant in Switzerland making his total withdrawal from the account at about US$1.3 million. The plaintiff claimed that the 1st defendant had refused to account for the whereabouts of the money to her.  But the 1st defendant maintained that he had no obligation to give any account of the money to the plaintiff as his company the 3rd defendant was the legal and beneficial owner of the 2nd defendant.

10. The plaintiff was also advised by the 2nd defendant’s banker in Switzerland in about September 2012 that the bank account of the 2nd defendant there had to be closed because the beneficial owner of the 2nd defendant was an American national.  The banker also made it plain that he would only accept instructions of the 1st defendant on the disposal of some US$2.58 million upon closer of the account. 

11. The 1st defendant did not undertake to the plaintiff not to make any further withdrawal of the money on top of the US$1.3 million he had withdrawn. 

12. Faced with this situation, the plaintiff applied for and was granted by DHCJ Mayo the interim proprietary injunction on 5 October 2012. 

13. The 1st to 3rd defendants were then legally represented. They through their lawyers gave consent for the interim injunction to continue until after the trial of this action.  An order in these terms was made by DHCJ Mayo on 6 November 2012.

14. The pre-trial review of the action was held on 12 February 2015.  The trial is scheduled to commence on 27 May 2015.

This application

15. The 1st defendant issued a summons on 14 January 2015 for the revocation or modification of the injunction order of 5 October 2012. It was first heard on 27 January 2015 before DHCJ Cooney, SC.  

16. The 1st defendant clarified on that occasion that he actually wanted to vary the injunction order continued on 6 November 2012 so that the payment from the 2nd defendant’s account in Switzerland of US$30,000 per month maintenance to him, which was stopped in August 2012, would be resumed; a lump sum of HK$2.25 million would be released from the bank account of the 2nd defendant for the use by him and the 3rd defendant to engage lawyers for the trial; and a lump sum would be released to him for payment of his healthcare and maintenance.

17. The hearing on 27 January 2015 was adjourned for the specific purpose of allowing the 1st defendant to file a further affidavit to set out his financial circumstances and how they have changed since 2012 (transcript p 22H to J).

Analyses

18. It is regrettable that the 1st defendant had not made good use of the opportunity.  He in his affidavit filed on 16 February 2015 exhibited some witness statements filed by both sides; a few documents showing his withdrawal of money from the 2nd defendant’s bank account in Switzerland; some bank statements showing total deposits of less than US$10,000 in a few bank accounts but with little or no movement of funds since the end of 2012; some correspondence with his lawyers showing the exhaustion of legal costs on account; some correspondence with his health insurer showing payment by him of premium in instalments; and some documents about his mining investment in Mongolia. 

19. There is not a shred of evidence on how he had applied the US$1.3 million or where that money has gone.  His answer to this is that he had no obligation to give an account of this money to the plaintiff. 

20. There is also no evidence on how the financial circumstances of the 1st and 3rd defendants had changed since 2012.  The evidence filed is only to purportedly show that the 1st defendant has no money now.  But it seems clear that he has not made a full and frank disclosure of all his assets and bank accounts. The reason being that the few bank statements he exhibited had almost no movement of funds since the end of 2012.  If these bank statements should represent his current financial status, then he was in this dire status since the end of 2012 with no change in the meantime.  That is unlikely to be true.  He also did not say that these were all his bank statements or statements of all his bank accounts.

21. In the hearing on 9 March 2015, he repeatedly referred to issues of facts which could weigh on the respective merits of the parties in this action.  He also emphasised that he had withdrawn US$200,000 in August 2008 and nobody including the deceased had raised any query. 

22. He also said that he had since the transfer of the 2nd defendant’s share to the 3rd defendant been operating the bank account of the 2nd defendant all by himself. 

23. If he made these arguments to show that the plaintiff did not have a serious question to be tried, then the time for arguing this issue was in November 2012.  Since then, there has been no change in any circumstances that is relevant to this issue.  He cannot therefore raise this issue now having consented in November 2012 to the continuation of the injunction until trial (see Chanel Ltd v F W Woolworth & Co Ltd [1981] 1 WLR 485 at 492H to 493B).

24. He also argued that there was no evidence of dissipation of assets by the defendants.  However, the same principle above applied.  He could have argued this issue in November 2012.  Since there has not been any material change in circumstances relating to this issue, he cannot raise it now.

25. He also asserted that there has been a lapse of over 1,800 days since the commencement of the action, but the matter is still pending. Nevertheless, he did not pin-point any period of inactivity or delay for which the plaintiff should be responsible.

26. He also said that when he consented to the continuation of the injunction in November 2012, he was under the belief that the action would be concluded in three months.  However, even if he should have laboured under such erroneous belief, there is nothing to suggest that the plaintiff or her lawyers should in any way be responsible for it.  He was then legally advised and represented.  I also do not believe that his legal representatives would have given him any such advice as the witness statements had not been exchanged then.

27. He then reiterated that he had no money to engage lawyers to contest the trial.  He also relied on para 29/1/35 of Hong Kong Civil Procedure 2015 which provides:

“Variation of injunction involving proprietary claims to pay defendant’s legal expenses—Where the plaintiff has obtained an injunction in respect of a proprietary claim over certain assets, the court has a discretion to enable the defendant to use assets subject to the injunction to pay legal expenses. In deciding whether to exercise that discretion, the court will adopt a two-stage process. First, the defendant applying for the release of assets has to demonstrate with full and frank evidence that there are no other available assets that can be used to pay his legal expenses. If the defendant fails in this first hurdle, the court need not consider the second stage and the application should be dismissed. Secondly, the court must balance the potential injustice to the plaintiff of releasing the assets against the potential injustice to the defendant of depriving him of legal assistance to advance what may ultimately be a successful defence. This process is a ‘careful and anxious judgment’, and the court is entitled to look at all relevant circumstances, and in particular, to weigh the relative strengths of the plaintiff’s proprietary claim to the assets and the defendant’s defence to that claim (Ostrich Farming Corp Ltd v. Ketchell (unrep., 10 Dec 1997); Liu Xian Feng v. Liu Bo [2006] 4 H.K.L.R.D. 33; Wharf Ltd v. Lau Yuen How [2010] 1 H.K.L.R.D. 783).”

28. I have already said above that the 1st defendant has not made a full and frank disclosure of his assets.  I also doubt if he has disclosed all the statements of his bank accounts.  He has therefore failed to get over the first hurdle.

29. He has also failed to account for the US$1.3 million which he took from the 2nd defendant’s bank account in Switzerland.  His excuse for non-disclosure is that he has no obligation to account this money to the plaintiff as this money belonged to the 2nd defendant which is owned by the 3rd defendant and not by the deceased or the plaintiff.  But he knew that this is an issue for the trial.  He merely made use of this as an excuse not to give an account of the whereabouts of that sum of money.

Order

30. In the light of the 1st defendant’s failure to provide full and frank evidence that he has no other asset available for payment of legal expenses, I dismiss his application.  I also make a costs order nisi that the 1st defendant do pay the costs of this application including the costs for the hearing on 27 January 2015 to the plaintiff in any event.