QUESTNET LTD v. KURT GEORG ROCCO RINCK AND ANOTHER

HCA 1475/2006

IN THE HIGH COURT OF THE

HONG KONG ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1475 OF 2006

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J U D G M E N T

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1. On 12 July 2006, the plaintiff issued the writ herein claiming against the 1^st defendant for sums of money held by him as the plaintiff’s trustee.   The factual circumstances leading to the claim have been set out in Saunders J’s judgment of 30 November 2006, whereby he granted summary judgment against the 1^st defendant.  I will not repeat them here.

2. On 21 July 2006, the plaintiff obtained a Mareva injunction against the 1^st defendant.  Under the Order, the 1^st defendant was required to disclose by affidavit the balances in the various trust accounts, together with an account of his dealings with the trust accounts and the funds in them since 1 March 2006, including details of every amount withdrawn or transferred and the identity of the recipient of each withdrawal or transfer. 

Subsequently, the 1^st defendant made a number of affirmations purporting to comply with the order for disclosure. 

3. On 17 August 2006, the 1^st defendant filed his fourth affirmation, in which he stated, for the first time, he had on 30 June 2006 transferred Euro 582,806.44 into one of his Swiss bank accounts and thereafter placed the funds on trust with the 2^nd defendant.  The 1^st defendant further stated in the affirmation that the 2^nd defendant had on his instruction paid debts owed to his creditors.

4.  Consequent upon this disclosure by the 1^st defendant, the 2^nd defendant was joined as a defendant to this action on 23 August 2006.  Prior to that, on 17 August 2006, the plaintiff’s solicitor had moved for and obtained ex parte a Mareva injunction against the 2^nd defendant to restrain the 2^nd defendant from dealing with the Euro 582,806.44.  The ex parte order as re-amended on 19 August 2006 was continued by the Order of 1 September 2006. 

5.  Paragraph 2 of the order required the 2^nd defendant to make disclosure in relation to the Euro 582,806.44 (“the Disclosure Order”) as follows:

“The intended 2^nd defendant must inform the plaintiff by affidavit to be served on the plaintiff’s solicitors within 24 hours of the date of this Order the precise whereabouts of, and all his dealings with, all the funds derived from, or placed with him by, [the 1^st defendant] or anyone on behalf of [the 1^st defendant] as referred to in paragraph 2 of the 4^th Affirmation of [the 1^st defendant] attached hereto.”

A copy of the 1st Defendant’s fourth affirmation was attached to that order.

6. On the same day a prohibition order was also issued against the 2^nd defendant prohibiting him from leaving the jurisdiction.  The prohibition order has been continued and remains effective until now.

7. By the order of Master Ho of 23 August 2006, the Mareva injunction order and the prohibition order were permitted to be served on the 2^nd defendant by substituted service.  This was duly done.

8. On 25 April 2007, Messrs Au Yeung, Cheng Ho & Tin (“ACHT”) filed a notice to act for the 2^nd defendant. The plaintiff’s solicitors immediately on 26 April 2007 served a copy of the Mareva injunction order on ACHT together with the other court documents including the Writ, Statement of Claim and the Order of 1 September 2006.  In the covering letter, the plaintiff’s solicitor drew to ACHT’s attention that the 2^nd defendant had not complied with the Disclosure Order and warned that committal proceedings would be commenced against the 2^nd defendant.

9. By letter dated 30 April 2007, ACHT asked to be provided with all the court papers and requested the plaintiff to withhold committal proceedings for 28 days so as to take instructions from the 2^nd defendant.  I pause here to observe that it would appear from the affidavit filed by the 2^nd defendant, which I shall deal with in greater details later on, that by this date ACHT had already conducted a search of the court file and this tallies with the court record.

10. Be that as it is, the plaintiff’s solicitors replied by letter on the same day, i.e. 30 April 2007, pointing out that all the court papers had been served on 26 April 2007 and that the Disclosure Order was a straightforward one.  The plaintiff’s solicitors further intimated that if the disclosure affidavit was not received by 2 May 2007, committal proceedings would be instituted against the 2^nd defendant.  On 3 May 2007, ACHT wrote again to the plaintiff’s solicitors requesting further time on the basis that counsel was abroad until 15 May 2007.  Nothing further was then heard from ACHT.

11. On 10 May 2007, the plaintiff commenced committal proceedings against the 2^nd defendant and leave was granted on 15 May 2007.  On 16 May 2007, the plaintiff filed the Notice of Motion, which was returnable on 14 June 2007.

12. By my Order dated 5 June 2007, personal service of the committal papers on the 2^nd defendant was dispensed with.  Leave was further given to effect substituted service of the committal papers and the Notice of Motion by leaving the documents with ACHT.  On 6 June 2007, substituted service of the committal papers and the Notice of Motion was effected in accordance with the Order.

13. By summons filed on 8 June 2007, ACHT applied for an order to cease to act for the 2^nd defendant.  Master Yu granted the application on 13 June 2007, the day before the Notice of Motion was due to be heard.  Notwithstanding the Order, as at 14 June 2007, or even today, ACHT remains on court record as solicitors for the 2^nd defendant because the necessary steps under Order 67, Rule 6(7) of Rules of the High Court have not yet been complied with.

14. That aside, at 4.40 p.m. on 13 June 2007, there was filed with the Court Registry an affidavit of the 2^nd defendant.  Paragraph 3 of the 2^nd defendant’s affidavit stated that on 25 April 2007, the 2^nd defendant was handed by ACHT a copy of the Mareva injunction order which, although was made on 17 August 2006, was re-amended and filed on 19 August 2006.  Accordingly, when the 2^nd defendant referred to the Order of 19 August 2006, he must be referring to the Mareva injunction order containing the Disclosure Order.

15. The 2^nd defendant also alleged in his affidavit that ACHT did not take any action or furnish him with any process or letters between the plaintiff’s solicitors and him.  In paragraphs 7 to 9 of the affidavit, the 2^nd defendant stated that US$737,600.31 had arrived from Switzerland at the bank account of his personal BVI company, Landbase Corporation.  This bank account, according to him, had already been closed in February 2007.  The 2^nd defendant went on to say that two sums of US$105,000 and US$100,000 had been sent to a company called Alpha Omega Group of Austria, on 27 July and 21 August 2006 respectively.  He deposed further that another sum of US$535,477.50, being the remainder of the funds with interest, was sent to an account with Bank International Indonesia, which was said to be an account of the 1^st defendant’s wife.

16. The 2^nd defendant’s affidavit was preceded by a SMS message sent to the plaintiff’s solicitors, indicating that he would be “filing and serving compliance with the [Disclosure Order] within 24 hours from this time, 8.30 am, 13 June 2007.”  He also asked the plaintiff’s solicitors to bring this message to the court’s attention, which the plaintiff’s solicitor duly did at the hearing on 14 June 2007.  It would appear that this message was copied to Mr Tsui, his solicitor at ACHT.  The plaintiff’s solicitor replied by return message pointing out that if the 2^nd defendant did not attend the hearing, they would move for a warrant for his arrest.  The 2^nd defendant was further requested to provide a draft of his intended affidavit within the day.  The 2^nd defendant did not respond to the message.

17.  At the hearing on 14 June 2007, neither the 2^nd defendant nor any representative from ACHT appeared.  The hearing was adjourned to today, 15 June 2007, partly to enable the plaintiff’s solicitors to look more closely at the affidavit put in by the 2^nd defendant at the very last hour and also to enable ACHT to appear to explain the absence. 

18.  Mr Tsui has appeared today on behalf of ACHT.  He handed up a fax memo received from the 2^nd defendant on 9 June 2007.  In it, the 2^nd defendant suggested that ACHT had not proceeded with the matter diligently and, as a result, he did not wish to retain the firm. He indicated he would file a notice to act in person with an address for service. The address that he intended to be used for service, as appeared in the fax memo, was an address in New Zealand. Given that it was an address outside the jurisdiction, if the 2^nd defendant did proceed to file a notice to act in person, it would not have been sufficient under the Rules: see the combined effect of Order 12 rule 3(2)(a) and Order 67 rule 4 of Rules of the High Court.  Be that as it may, the reality is the 2^nd defendant has filed no notice whatsoever with the consequence that ACHT remains as of this moment his solicitor on record.  Accordingly, I declined to excuse Mr Tsui from the hearing, having particular regard to the fact that the application for committal carries grave consequences. Since ACHT remains as the 2^nd defendant’ solicitors on record, even though Mr Tsui said his firm had received no instruction on the applicant, he should remain attend the hearing so as to safeguard the interests of the 2^nd defendant and to render assistance to the Court, if so required.

19. I turn now to the application before this court, which is to commit the 2^nd defendant for contempt of the Disclosure Order.  It is abundantly clear from the materials before the Court that the 2^nd defendant has had notice and knowledge of the injunction order and the Disclosure Order, latest by 16 February 2007.  This is because the court record shows that on 16 February 2007, he conducted a search of the court file in person.  In the normal course of events, he would have seen and read the order of 17 August 2006 as re-amended and filed on 19 August 2006 as well as other court documents filed up to that date.  In any case, he had in his affidavit admitted to have received from ACHT the relevant orders on 25 April 2007. 

20. Despite having notice and knowledge of the Disclosure Order, which was endorsed with penal notice, the 2^nd defendant had taken no steps to comply with it until the day before the hearing of the Notice of Motion.  From reading his affidavit and the exhibits to it, it would appear that the account he gave as to his dealings and the whereabouts of the money transferred from the 1^st defendant to him might prove to be inadequate.  For the present purpose, I need not go into this aspect as the affidavit was in any event late. It is only relevant to the question of sentence.   

21. As far as liability is concerned, I am satisfied beyond reasonable doubt that the 2^nd defendant is guilty of contempt of court, in that he had, at least, until 13 June 2007, failed to comply with the Disclosure Order as contained in the Order of 17 August 2006.  As of this moment, the 2^nd defendant has offered no or no satisfactory explanation for his non-compliance.  Contempt of court order is a serious matter because court orders are intended to be complied with.  The consequence of contempt is serious; the sentence ranges from a fine to a term of imprisonment.  In the circumstances, I consider it would be more appropriate to adjourn the sentence to await any explanation or mitigation that the 2^nd defendant would wish to offer.

22. In the meantime, a warrant for the 2^nd defendant’s arrest, as asked for by the plaintiff, is to be issued so that he may be brought to court and to offer any explanation that he wishes to.

23. On the costs of the committal proceedings, I can see no justification for departing from the normal rule of costs follow event.  The plaintiff should have the costs of the application.  The plaintiff asks that costs be awarded on an indemnity basis.  Considering that this is an application occasioned by the 2^nd defendant’s failure to comply with the Court’s order, for which no explanation has been offered, I agree that an indemnity costs order is justified.  Since this is a short matter, I accept it would be appropriate to make a gross sum costs order in lieu of taxation.

24. The plaintiff’s solicitors have provided a skeleton bill of costs.  Purely dealing with the part concerning the application for committal, the total amount (after adjustment to take into account that the hearing today lasted one-and-a-quarter hours) comes up to $133,161.  I am of the view that this represents a reasonable amount bearing in mind that costs were awarded on indemnity basis. There will accordingly be an order that the 2^nd defendant pays the plaintiff the costs of the committal application up to today on an indemnity basis and assessed in the amount of $133,161, to be payable forthwith.