KOMAL PATEL AND OTHERS v. CHRIS AU AND OTHERS

HCA 183/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 183 OF 2014

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J U D G M E N T

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Index

I. Introduction

II. The background to the case

III. The plaintiffs’ case

IV. The defendants’ case

V. Procedural history

VI. The issues in these proceedings

VII. The discharge application

(a) General principles on material non-disclosure

(b) The conduct of the plaintiffs and their solicitors

(c) Form of the injunction order

(d) Submissions on material non-disclosure

(e) Conclusion

VIII.  The summary judgment application

(a) The plaintiffs’ argument

(b) The defendants’ response

(c) Conclusion

IX. The application for further injunction orders

(a) The relevant legal principles

(b) The plaintiffs’ argument

(c) The defendants’ response

(d) Conclusion

X. Conclusion

XI. Costs

XII. Other matters

XIII. Directions for trial

Dramatis Personae

Komal Patel (Patel) – The 1^st plaintiff and the original investor.

Jason Mark Cohen (Cohen) – The 2^nd plaintiff and an investor.

Harilaos Apostolides (Apostolides) – The 3^rd plaintiff and an investor.

Rocky Cape International Limited (Rocky Cape) – The 4^th plaintiff and the corporate vehicle of Patel.

Chris Au (Au) – The 1^st defendant and the original investor.

Ho Ching Yi Elsa (Ho) – The 2^nd defendant and nominee shareholder and director of Retribution.

Retribution Limited (Retribution) – The 3^rd defendant and the corporate vehicle of Au which held 72.5% in Kudeta BVI on behalf of certain investors.

Kudeta Ltd (Kudeta BVI) – A British Virgin Islands company and the investment holding company for the Ku De Ta business.

Ku De Ta SG Pte Ltd (Kudeta SG) – A Singapore company and a subsidiary of  Kudeta BVI.

Yew Kuan Cheong (YKC) – An investor.

Essence Investments Limited (Essence) – The corporate vehicle of YKC which held 27.5% in Kudeta BVI.

Knut Unger (Unger) – An investor or an associate of the investors.

Balaji Singh Teeka (Teeka) – An investor who acquired a 10% interest from Au.

Able Vision Ltd (Able Vision) – The corporate vehicle of Teeka.

Arthur Chondros (Chondros) – An investor.

Justin Todd (Todd) – An investor.

Lifestyle Investments Ltd (Lifestyle) – The corporate vehicle of Chondros and Todd.

L Capital KUDETA Ltd (L Capital) – A 51% shareholder of Kudeta BVI and an offshoot of the Louis Vuitton Moet Hennessy Group.

Prime Mark Group Ltd (Prime Mark) – A company operated by Au.

Bay Ridge Ltd (Bay Ridge) – A company operated by Au.

I. Introduction

1.  This judgment concerns various applications arising from a dispute between the operators of Ku De Ta restaurant and bar at Marina Bay Sands Hotel and Casino, Singapore.  It should be read in conjunction with my judgment in this case handed down on 1 April 2014. 

2.  In the hearing of this case, I dealt with the following contested applications[1]:

(1) The defendants’ application to discharge the injunction order dated 29 January 2014 under the summons dated 13 March 2014 (the discharge application)[2];

(2) The plaintiffs’ application for summary judgment against the 2^nd defendant for part judgment under the summons dated 12 March 2014 (the summary judgment application)[3];

(3) The plaintiffs’ application for further injunction orders under the summonses dated 14 and 25 March 2014 (the further injunction orders).[4]

II. The background to the case

3.  This is a dispute between investors and operators of a very successful bar and restaurant known as Ku De Ta located in Singapore. On the one side are Patel, Cohen and Apostolides together with other investors, and on the other side are Au and Ho.

4.  Patel through the corporate vehicle of Rocky Cape and Au through the corporate vehicle of Retribution entered into a Joint Venture Agreement dated 20 July 2009 in respect of the establishment of a restaurant, bar and club at the Marina Bay Sands Hotel and Casino Development in Singapore.[5]  For this purpose the two companies agreed to incorporate Kudeta BVI as their joint venture vehicle and to establish Kudeta SG, a wholly owned subsidiary of Kudeta BVI, as the operating company for the joint venture.  The agreement confirmed that Retribution under a licence agreement dated 29 June 2009 with Nine Squares Pty Ltd had an exclusive licence to use the brand “Ku De Ta” in Singapore.  This was later the subject of litigation in Singapore.

5.  It was agreed that Kudeta BVI would have an authorised share capital of US$10,000 divided into 10,000 shares of par value of US$1 each and that 5,100 shares would be issued and allotted to Retribution and Rocky Cape on the proportions of 2,550 shares each.  In the agreement, Retribution and Rocky Cape were referred to as the A-shareholder and B-shareholder respectively.  It was intended that the remaining 4,900 shares would be allotted to an investor, but this did not eventuate.  It was provided in the event of any disagreement or dispute between the parties, arising from the agreement that the law of Hong Kong would apply. This agreement was signed by Ho for Retribution and Kudeta BVI and Patel for Rocky Cape.  Even though Ho did not have an interest in this venture, she was a nominee shareholder and director of Retribution and director of Kudeta BVI.

6.  Clause 15 of the Joint Venture Agreement provided that if the company made profits that could lawfully be distributed by way of dividend, the shareholders would resolve to declare and distribute dividends/interim dividends for each financial year on a quarterly basis which were to be made to the shareholders in proportion to their shareholding subject to the company’s normal working capital requirements.[6] The transfer of shares in Kudeta BVI was governed by clause 12 which provided that a shareholder had to notify another shareholder of any sale of shares.

7.  It seems from the outset that Patel was holding a portion of his interest in this business through Rocky Cape on trust for Cohen.[7]

8.  Au was to operate the bar and restaurant and he entered into an employment contract with Kudeta SG which he signed on 28 December 2009.[8] It was re-executed nearly a year later on 12 November 2010.[9]  

9.  There was a proposed agreement with SUTL Corporation Pte Ltd to come in as an owner of 51% equity in Kudeta BVI but it was formally terminated on 1 March 2010.[10]

10.  At about the time Ku De Ta opened in September 2010, a Draft Replacement Joint Venture Agreement had been prepared.  It was in the same terms as the original Joint Venture Agreement, but it provided for two additional shareholders in Kudeta BVI which were unnamed and referred to as C-shareholder and D-shareholder respectively.[11] The agreement was not executed.

11.  Sometime in 2010, Essence acquired a 27.5% of the Kudeta business.  The remaining 72.5% was held by Retribution. It appears that Patel, instead of holding his interest through Rocky Cape, held it through Retribution.  At some point, Patel was holding a portion of his interest on trust not only for Cohen but also for Apostolides.

12.  On 26 January 2011, Kudeta BVI by a written resolution signed by Ho, as the sole director of the company, transferred 3,698 shares to Retribution and 1,402 shares to Essence.[12]  Share transfer forms were executed by Ho from Kudeta BVI to Retribution and Essence in the amount of shares as agreed.[13] It is curious that Ho held the shares in Kudeta BVI all this time and was the transferor of the 5,100 shares to Retribution and Essence.  There was to be a further transfer of the shares held by Retribution to Rocky Cape but it never took place.[14]  It would appear at this stage that the interests in Kudeta BVI were for Essence to hold 27.5%, Retribution to hold 47.5% and Rocky Cape to hold 25%.[15]

13.  I should point out at this juncture that there appeared to be very little adherence to formal documentation and requirements relating to the corporate entities and the business.  Payments were made as dividends and stated as such by Au.[16] But it would appear that the internal company requirements had not been complied with in order to make these payments properly.  Au and Ho, who had responsibility for the conduct and affairs of the business, did so without proper regard to or compliance with the legal and administrative requirements that had to be fulfilled.  It seems they were not alone in this respect as the other parties involved did not insist on getting things done properly. 

14.  I note however that the transfer of shares to Rocky Cape appears to have been held up because Patel had not signed a shareholder’s agreement.[17] A query about this was raised by Cohen in an email to Au in July 2011, but nothing seems to have been done about it and the investors held their beneficial interests in Kudeta BVI through Retribution. 

15.  During this time, there was litigation in Singapore over the use of the trademark “Ku De Ta”.  Au gave evidence before the Singapore High Court on 14 and 15 August 2012, where he denied he held any interest in Retribution or the Kudeta business.[18]

16.  There was discussion between the parties in about June 2012 to bring into the company Chondros and Todd by giving them a small shareholding as they operated the original Ku De Ta in Bali and had a strong claim to the brand name. This was considered to be of assistance to them if there was any claim against them for using the name.[19] It appears for this purpose a Shareholders’ Agreement with the date 1 September 2012 was drafted but not executed.[20] It was sent by email dated 31 December 2012 from Apostolides to Au.

17.  During this time there were a series of emails between the parties, where Patel stated that Au held 47.5% in Kudeta BVI.  This continued and it was reaffirmed in about June 2013 that the shareholding in Kudeta BVI was 47.5% to Retribution, 27.5% to Essence and 25% to Rocky Cape although the actual shareholding was 27.5% to Essence and 72.5% to Retribution which included Rocky Cape’s 25%.  It was agreed between them to transfer 5% to Chondros and Todd and this was to be done by reducing Essence’s stake from 27.5% to 25.5%, Rocky Cape’s from 25% to 24% and Retribution’s from 47.5% to 45.5%.[21]

18.  From around late 2011 until around January 2013, Apostolides on behalf of Kudeta BVI negotiated with L Capital to acquire a major interest in the business.  The partners were keen to bring L Capital into the business for its expertise and capital and to further their overall strategy to expand and set up similar establishments in various locations throughout the world.  Au seemed to be reluctant about the L Capital deal and this was evident by the exchange of emails he had with the partners, and it was evident that this was the cause of friction between them.  On 22 January 2013, Au tendered his resignation and arrangements were made for him to leave the business.[22] On 30 January 2013, a Convertible Loan Agreement (CLA) was entered into with L Capital and Au was one of the signatories to the agreement.[23]

19.  On 30 January 2013, a declaration of bare trust was executed by Ho as trustee for Patel, Apostolides and Au in relation to the shares in her name in Retribution.  There is a serious issue between the parties in relation to the bare trust document and their respective cases turn on the legal effect of it.  The plaintiffs claim that under this document each of Patel, Apostolides and Au held one third of the shares in Retribution and in turn each held 24.17% interest in Kudeta BVI, being one third of Retribution’s 72.5% interest in Kudeta BVI. 

20.  The trust deed states that Ho is the Nominee and Patel, Apostolides and Au are the Beneficial Owners of Retribution.  It records that the Nominee is the registered owner of 1000 shares in Retribution.  It states that:

“The Nominee is entering into the deed at the request of the Beneficial Owners to confirm the terms on which the Nominee holds and has always since 30 January 2013 held the shares and on which she agreed to act as Nominee.”

21.  The operative provisions 1 and 2 read:

“1. The Nominee hereby declares that:

1.1 the Nominee holds the Shares and all dividends and interest accrued or to accrue on the Shares or any of them on trust in equal shares for the Beneficial Owners;

1.2 the Nominee agrees to transfer, pay and deal with the Shares and the dividends and interest payable in respect of the Shares in whatever manner the Beneficial Owners may from time to time direct; and

1.3 the Nominee has no beneficial interest in, or any claim, right or lien in respect of, the Shares other than as arising pursuant to this Deed.

2. The Nominee:

2.1 will vote at all meetings of shareholders or otherwise which as registered owner of the Shares the Nominee may attend in whatever manner the Beneficial Owners shall have previously requested in writing and in default of and subject to that direction (if any) at the discretion of the Nominee; and

2.2 will, if so required by the Beneficial Owners, execute all proxies or other documents that shall be necessary or proper to enable the Beneficial Owners to vote at any of those meetings in place of the Nominee.”

22.  However, the initial L Capital acquisition in January 2013 was not completed.  There were renegotiations and new agreements were drawn up.  It was agreed that L Capital would acquire a 51% stake in Kudeta BVI which included purchasing all of Essence’s 27.5% stake in Kudeta BVI and 12.6% of Retribution’s stake in Kudeta BVI.  Various agreements were executed for the L Capital acquisition.  There was an agreement entitled Amended and Restated Convertible Loan Agreement (ARCLA).[24]  It is dated 31 December 2013 and includes Patel and Apostolides, Au and Retribution, Kudeta BVI and L Capital.  It is signed by the various parties including Au.  Schedule 5 to the agreement sets out the form for the Confirmation of Interest in Kudeta BVI.  In the Schedule 5 document, the following is recorded:

“[Note: the stated percentage in the Confirmation of Interest for Justin Todd and Chris must be in the range of 10% to 12.5%; the stated percentage in the Confirmation of Interest for Harry, Karl and Yew Kuan Cheong must be equal to or greater than 25%, it being understood by the Parties as of the date of this Agreement that the indicative percentages contemplated are as follows: Arthur Chondros – 2.5%; Justin Todd and Chris Au – no more than 12.5%; Jason Cohen – 5 to 6 %; and Harry/Karl/Yew Kuan Cheong – 29%]”

23.  The Confirmation of Interest to L Capital from Kudeta BVI, signed by Ho as a director and dated 29 January 2014, sets out the interests to be held by the named individuals in Kudeta BVI through the 49% holding of Retribution. [25]  It stated that:

“We hereby represent and warrant to you that the following individuals will hold interests in the KDTL Shares through Retribution immediately upon Conversion and the performance by all Parties of their obligations in Clause 5 of the Agreement.”

24.  It was acknowledged that the representation and warranty were true and accurate as of the date of the Conversion. 

25.  It set out the interests to be held by the individuals as follows: Arthur Chondros as to 2%, Justin Todd and Chris (Au) as to 10.1%, Jason Cohen (Cohen) as to 5.7%, and Harry (Apostolides), Karl (Patel) and Yew Kuan Cheong (YKC) as to 31.2%.  As Retribution held a 49% stake in Kudeta BVI this corresponded to the individuals holding an interest in Kudeta as follows: Arthur Chondros as to 4.09%, Justin Todd and Chris (Au) as to 20.68%, Jason Cohen (Cohen) as to 11.63%, and Harry (Apostolides), Karl (Patel) and Yew Kuan Cheong (YKC) as to 63.6%.

26.  There is also an agreement entitled Amended and Restated Shareholders’ Agreement (ARSA) dated 31 December 2013 entered into by L Capital, Retribution, Kudeta BVI and persons listed in Schedule 1.  It provides that:

“The Parties have entered into an amended and restated convertible loan agreement (the “CLA”) dated 31 December 2013 in relation to a loan for the sum of $10 million advanced from LCap by way of interest-bearing convertible loans (the “Loans”) to Ku De Ta SG Pte Ltd. Under the terms and conditions of the CLA, LCap has the right to convent the Primary Tranche (as defined below) into Shares. Pursuant to the terms and conditions of the CLA, LCap will become a Shareholder upon the conversion of the Loans.”

27.  It is claimed by the plaintiffs that as at 30 January 2014 and in accordance with the agreements with L Capital, Ho held the shares in Retribution on trust for Patel, Cohen, Apostolides, Au and others in the proportions as stated and that Ho has, in breach of the trust, not acted in the best interests of the beneficiaries, including Patel, Cohen and Apostolides.

28.  On the other hand, it is claimed by the defendants that the declaration of bare trust was executed in anticipation of the acquisition by L Capital in January 2013 and the resultant change in shareholding in Kudeta BVI that this would create.  The deal was not completed, and therefore the bare trust did not reflect the shareholding held by Au in Kudeta BVI.  The defendants claim that Au held a 35.5% interest in Kudeta BVI and an agreement had been struck with the other parties for him to be bought out of his interest with the proceeds of the renewed L Capital acquisition in January 2014.

III.     The plaintiffs’ case

29.  The dispute between the parties centres on Au’s alleged misappropriation of company funds and failure to account or distribute to the other investors their entitlement to the profits of the business in the form of dividends, and the percentage interest that the parties hold prior to and after the L Capital acquisition in Kudeta BVI through Retribution and the alleged sale of Au’s interest as part of the L Capital acquisition which was to be paid for by the L Capital acquisition funds.

30.  Mr John Scott, SC, Mr Chua Guan-hock, SC, and Ms Ebony Ling, for the plaintiffs, submit that the bare trust agreement dated 30 January 2013 reflects the interest the parties had in Kudeta BVI.  The trust deed essentially provides that Ho held the 1,000 shares in Retribution as a nominee and in equal shares for Patel, Apostolides and Au.  As at this date, Retribution held 72.5% in Kudeta BVI.

31.  It is the plaintiffs’ case that each of the defendants is accountable to them as constructive trustee for (a) all misappropriated or misapplied monies or property of the plaintiffs; (b) all secret profits directly or indirectly received by each of the defendants; and (c) all other property of the plaintiffs, which has been misappropriated by Au or persons acting under his influence and/or control.  In essence the plaintiffs are alleging against Au, that he has by or through Ho and Retribution, dishonestly misappropriated monies or property which they have an interest in and entitlement to by way of their beneficial shareholding in Retribution.

IV. The defendants’ case

32.  Mr Charles Sussex, SC, and Ms Queenie Lau, for the defendants, argue that the bare trust agreement was entered into in anticipation of the then proposed acquisition by L Capital in Kudeta BVI, which did not go ahead and the agreement does not reflect the interest held by Au at the relevant time.  It is submitted that Au had a 47.5% interest in Kudeta BVI and this was evidenced by e-mail communications between the parties.  It is noted that Au’s interest was reduced by a sell-off of 10% to another investor, Teeka, and the provision of 2% to the original owners of Ku De Ta in Bali, Chondros and Todd.  It is submitted that Au as at the time of the L Capital acquisition had a 35.5% interest in Kudeta BVI and an e-mail from Apostolides dated 26 December 2013 evidenced an agreement to buy out Au’s interest with the funds from the L Capital acquisition. 

33.  The case for the defendants is advanced on two bases.  First, it is argued that the plaintiffs by these proceedings are wrongfully seeking to claim an interest in Retribution without paying anything for the shares in that company which was the subject of an agreement concluded between the plaintiffs, YKC and Essence on or about 26 December 2013.  Secondly, it is argued that the plaintiffs are seeking to use these proceedings and the court as the vehicle by which to perpetrate this fraud.[26] The defendants’ case is stated as follows:

“ D’s case is that Ps, YKC and Essence are in serious breach of the agreement that they concluded with D1 on or about 26 December 2013 made party orally and partly in writing, or alternatively by an agreement of that date concluded orally and partly evidenced in writing, by which they agreed that:

(1) Upon payment by L Capital for 40.1% of the shares in Kudeta BVI, D1 would receive payment of SGD 33,732,539.50 for shares in D3 representing a 35.5% beneficial interest in Kudeta BVI. Payment would be effected in the following manner:-

(a) The full amount of SGD 11,984,933.50 paid to D3 by L Capital for the purchase of 643 shares in Kudeta BVI would be paid to D1; and

(b) SGD 21,747,606 out of the SGD 26,115,755 paid by L Capital for the purchase of shares in the name of Essence would be paid to D1.

(2) Upon payment to D1 for the beneficial interest of 35.5% in Kudeta BVI as aforesaid, there would be an adjustment of the interest in D3 held by D1 to enable D1 to realize case for shares in D3 representing a beneficial interest in Kudeta BVI of 35.5%.

(3) Once D1 received payment for 35.5% of Kudeta BVI, he would hand over, alternatively procure the handover of, control of D3 to Ps and Essence who would become majority owners of D3.

(4) Further, D1 would resign as the Chief Executive Officer of Kudeta SG and would effect an orderly transfer of control of Kudeta BVI to L Capital.

(the ‘26.12.13 Agreement’)”

V. Procedural history

34.  In the brief but intense history of this case, the parties have engaged in a series of challenges and confrontations both in and out of court that not only may have had deleterious consequences to the parties’ commercial interests but also to the business that has been very successful and profitable up until this dispute arose.  In essence, it is a dispute between partners, with the plaintiffs on one side and the defendants on the other. 

35.  This case commenced on 29 January 2014 when I granted to the plaintiffs an ex parte injunction order together with disclosure orders against the defendants.  The hearing of the application was lengthy, and I was provided with a detailed written submission and affirmation together with numerous exhibits in support.  A draft of the order was submitted to me and in the course of submissions I was taken to the disclosure order.  There is now criticism from the defendants that the plaintiffs did not comply with Practice Direction 11.2 in not bringing to my attention the terms of the disclosure order and other variations in the injunction order.  I was fully aware of the terms of the injunction order and the disclosure that was sought from the defendants.  I was satisfied that the terms and conditions of the injunction order were appropriate to meet the circumstances of the case on the information and material presented to me at the hearing.

36.  The plaintiffs made an application for a worldwide freezing injunction order together with ancillary relief against the defendants to freeze the assets of the defendants of a value up to SGD 16,075,880 which was claimed to be the sum of unpaid dividends and/or the plaintiffs’ entitlements to the sale proceeds of an interest in the Kudeta business.    The injunction order sought to freeze monies that were expected to be transferred into a bank account in Hong Kong of Retribution which were part of the proceeds of the acquisition of 51% of the Kudeta business by L Capital.  The writ of summons issued on the same day alleged that the defendants, in particular Au, had misappropriated and misapplied funds of the Kudeta business in which the plaintiffs have a beneficial interest.

37.  On the return date of 14 February 2014, the freezing injunction order was continued until further order. 

38.  On 13 March 2014, the defendants made an application to discharge the injunction order.  On 14 March 2014, the plaintiffs applied for an interlocutory injunction to restrain Ho from acting contrary to the instructions of and/or in a manner adverse to the interests of Patel, Cohen and Apostolides relating to their shareholdings in Retribution held on trust for them by the Ho and for leave under paragraph 5 of Schedule 2 of the injunction order to enforce the order outside Hong Kong. 

39.  At a hearing of the application on 18 March 2014, Ho gave an undertaking to the court which together with other matters dispensed with the need to grant the application. 

40.  On 25 March 2014, the plaintiffs amended the writ dated 29 January 2014 to add the cause of action of contractual interference by reason of the defendants’ conduct of interfering with the plaintiffs; contractual rights under the ARCLA and ARSHA.[27]  Under this claim, the plaintiffs alleged that the defendants’ conduct has caused serious damage to the plaintiffs’ contractual rights under ARCLA and ARSHA and amounted to the tort of inducing breach of contract and non-contractual interference.  It is claimed that the dispute has caused disruption within the corporate structure of Kudeta BVI and its business operation and has acted to the detriment of Kudeta business’ association with L Capital.  It was submitted by the plaintiffs that the injunction against contractual rights interference is therefore just and appropriate and necessary to protect the plaintiffs’ interests under the agreements and to prevent the defendants from interfering further by inappropriate conduct with the performance by the plaintiffs and L Capital in accordance with the terms and conditions in the agreements.

41.  As a result of further matters coming to light, the plaintiffs on 26 March 2014 applied for an interlocutory injunction against the defendants in similar terms to the undertaking by Ho and restraining them from doing any act which causes, procures or induces L Capital to act in breach of the ARCLA and/or the ARSHA, or to interfere with the performance by L Capital and the plaintiffs in relation to these agreements.  The application was granted.  The plaintiffs put off their application until the return date for the inclusion in the injunction order of a further order against the defendants to procure and reinstate Patel and Apostolides to the Kudeta BVI board; procure the appointment of Patel and Apostolides as Retribution’s majority beneficial shareholders to its board, along with a representative of Au who shall replace Ho; and withdraw any request by Retribution and its written resolution dated 14 February 2014 to Kudeta BVI, to appoint Au and Teeka as directors of Kudeta BVI in place of Patel, Cohen and Apostolides. 

42.  On 31 March 2014, the defendants filed a defence and counterclaim.  It is claimed that Patel, Cohen and Apostolides are not beneficial shareholders of Retribution and are seeking an interest in Retribution without paying for the shares in the company as agreed on 26 December 2013 and that the plaintiffs, YKC and Essence have wrongfully failed to pay Au a total of SGD 33,732,539.50 for shares in Retribution pursuant to an agreement which the defendants’ claim was on the following basis:

“ (a) Upon payment by L Capital for 40.1% of the shares in Kudeta BVI, the 1^st defendant would receive payment of SGD 33,732,539.50 for shares in the 3^rd defendant representing a 35.5% beneficial interest in Kudeta BVI. Payment would be effected in the following manner:

(i) The full amount of SGD 11,984,933.50 paid to the 3^rd defendant by L Capital for the purchase of 643 shares in Kudeta BVI would be paid to the 1^st defendant; and

(ii) SGD 21,747,606 out of the SGD 26,115,755 paid by the L Capital for the purchase of shares in the name of Essence would be paid to the 1^st defendant.

(b) Upon payment to the 1^st defendant for the beneficial interest of 35.5% in Kudeta BVI as aforesaid, there would be an adjustment of the interest in the 3^rd defendant held by the 1^st defendant to enable the 1^st defendant to realise cash for shares in the 3^rd defendant representing a beneficial interest in Kudeta BVI of 35.5%

(c) Once the 1^st defendant received payment for 35.5% of Kudeta BVI, he would hand over, alternatively procure the handover of, control of the 3^rd defendant to the plaintiffs and Essence who would become majority owners of the 3^rd defendant.

(d) Further, the 1^st defendant would resign as the Chief Executive Officer of Kudeta SG and would effect an orderly transfer of control of Kudeta BVI to L Capital.”[28]

43.  It is also claimed that upon conclusion of the agreement Au was to hold 1 share in Retribution or Kudeta BVI and Retribution was to continue to hold a 10% beneficial interest in Kudeta BVI on trust for Teeka.

44.  It is further claimed that the plaintiffs, Essence and YKC failed to pay SGD 21,747,606 to Au out of monies received by Essence, and the plaintiffs have secured an injunction order over SGD 11,984,782.89 received by Retribution, the entirety of which is due to Au. 

VI. The issues in these proceedings

45.  The issues between the parties boil down to whether Au has misappropriated and misused funds of the business and failed to account or distribute the profits or entitlements to the relevant persons or entities as claimed by the plaintiffs and whether the plaintiffs have breached an agreement to buy out Au’s interest and have used these proceedings to cheat him out of his actual interest in Kudeta BVI as claimed by the defendants.  This acrimonious dispute could have serious consequences to the interests of the parties in this very successful business and to the business itself and the controlling interest of L Capital.  This is a feature of the case I have kept firmly in mind when deciding the appropriateness of invoking protective measures and the nature of them during the course of this litigation. 

46.  When this matter first came before me for the injunction order, the concern of the plaintiffs, in particular Patel were the revelations from a report prepared by Price Waterhouse Coopers (PwC), which had only been received by him on 20 January 2014 of unpaid dividends and of the entitlements of the plaintiffs in accordance with their beneficial interests in the Kudeta business.  A sum of SGD 16,075,880 was claimed to be involved.  The plaintiffs were concerned about the payment of SGD 11,800,000 which was due to be paid by L Capital to Retribution in a bank account held in Hong Kong. 

47.  The freezing order was sought in relation to each of the defendants in the sum of SGD 16,075,880 and with particular reference to the funds to be transferred into Retribution’s Hong Kong bank account.  Patel in his affirmation describes the difficulty that he and other shareholders and investors had in getting Au to account as to the financial affairs and situation of the business and the PwC report confirmed their concerns.  The writ of summons claimed that the defendants, in particular Au, had misappropriated or misapplied monies or property of the plaintiffs and had received secret profits while acting as an agent and/or constructive trustee of the plaintiffs.  The plaintiffs sought, amongst other things, a declaration to enable them to trace their property with the defendants and that the defendants restore to them the value of the property they had received.  The plaintiffs in their written and oral submissions sought ancillary disclosure orders together with the freezing order. 

48.  Mr Sussex for the defendants argues that the plaintiffs did not fulfil their duty of full and frank disclosure in various respects and that is the subject, which I will address later, of the defendants’ application to discharge the injunction order.  I should point out that from the material before me, it was evident that the plaintiffs were concerned about Au’s lack of accountability to them about the affairs and financial situation of the business.  There were frequent emails between the partners and Au that reflected tension between them and concern over Au’s running of the business.  It seems Au was not enthusiastic about the L Capital acquisition, and he had indicated as early as the first proposed transaction that he would resign his position as the CEO of the Kudeta SG.  It was argued by Mr Chua, for the plaintiffs, that Au was on his way out and the interest to be held by the parties in the business was reflected by the L Capital acquisition agreements and related documents.  The partners had a 49% stake in Kudeta BVI held by Retribution to be apportioned on the basis of 2% to Chondros, 10.1% to Au and Todd, 5.7% to Cohen and 31.2% to Patel, Apostolides and YKC.  The issue from Au’s point of view is that his interest had been reduced and that he was to be paid for his interest from the proceeds of the L Capital acquisition.  I note that there is an inconsistency with the defendants’ case in that it is claimed that the e-mail of 26 December 2013 evidenced an agreement to buy out Au’s 35.5% share, but the L Capital agreements have him retain a 10.1% interest with Todd.  The plaintiffs argue that this reflected Au’s actual interest in Kudeta BVI and this was confirmed by him in the execution of the L Capital agreements and related documents.

49.  I am of the view that the plaintiffs were concerned about the financial situation with their investment in Kudeta BVI and the conduct of Au who seems to have unhindered control of the corporate structure and business.  Even though Ho was the director and shareholder of Retribution and a nominee for the beneficial interests of Patel, Apostolides and Au, she was as far as I can ascertain the alter ego of Au and did whatever she was instructed to do by him.  The plaintiffs have a legitimate complaint in this regard.

50.  I can understand the degree of frustration the plaintiffs were experiencing in their dealings with Au who was controlling the affairs of the business through his manipulation of Ho. I also note that Au is claimed to be a qualified lawyer and yet in proceedings before the Singapore High Court on 14 and 15 August 2012, he gave evidence on oath that was false by claiming he had no interest in Retribution and the Kudeta business.  I will address this matter later in my judgment.  It was a matter that was highlighted before me when the injunction order was sought.  It was also a matter that I specifically addressed in my judgment of 1 April 2014 but I have received no response to it.  As far as I am concerned, it is a very serious matter and on the material before me he gave false evidence to a court and on the very issue that is the subject of these proceedings.

51.  A matter I have borne in mind when considering the applications is that the plaintiffs by these proceedings were responding to a report that had just been brought to their attention which confirmed their concerns about the financial affairs of the business.  This was later further addressed in more detail in a report from Deloitte in which questionable transactions and transfers were identified.  It seems to me that the plaintiffs were responding to issues as they were unfolding and this was taking place during the course of the proceedings.  Where appropriately, I have taken this into account when considering the criticisms levelled against them by the defendants for their conduct of these proceedings.

52.  Mr Sussex points out that there has been material non-disclosure and misrepresentation of matters by the plaintiffs in the application for the injunction order.  He points to the incorrect quantification of the unpaid dividends, which he says were exaggerated, the lack of entitlement by the plaintiffs of dividends as a matter of law and the interests held by parties in Kudeta BVI and the cashing out agreement with Au.  I should note that the defendants’ arguments as to the legal status of the dividends are extraordinary, given that the failure to adhere to the legal requirements was entirely due to Au and Ho.  In any event, the plaintiffs understood that the payments were dividends because that is how Au referred to them.  The plaintiffs are also claiming their entitlements from the profits of the business.  I should also note that the plaintiffs claim was mounted on allegations of misappropriation and misapplication of the funds of the business and the unfettered control Au had, through the compliance of Ho, over those funds.  The injunction order froze the funds that had been transferred into Retribution’s bank account in Hong Kong.  On the one hand, Au claims that these funds were payment to him for cashing out his interest in the business, and on the other hand, the plaintiffs claim there was no such agreement and the funds remain the property of the business.  That in essence is the impasse between the parties which will be ultimately resolved after full trial.  This in my view is a strong reason why the funds received by Retribution should remain frozen.

53.  After the grant of the injunction order there were a series of inter partes hearings where on 18 March 2014 the plaintiffs sought an additional injunctive order which I refused as Ho had given an undertaking to the court not to do anything to deal with or diminish the value of the shares in Kudeta BVI held by Retribution, and on 26 March 2014 where I granted the additional injunctive order for the reasons I set out in my judgment of 1 April 2014. 

54.  Mr Sussex took issue with the court on granting the injunction as he argued that it was a mandatory injunction which required the defendants to do specified acts and therefore the court had to be satisfied that there was a high degree of assurance of the plaintiffs’ chances of establishing their claim.  The authorities in addition provide that the court should take a practical and realistic view of the situation to which the injunction will apply and ensure that the protective measures it contains are both necessary and appropriate to meet the ends of justice.  The concern I have is that this litigation has inflamed an acrimonious dispute between the parties which could have a damaging effect on the interests of the current investors and the business.  I find on the material before me that there is a good arguable case for the claim by the plaintiffs against the defendants in relation to the misappropriation and misapplication of funds of the business and Ho’s breach of fiduciary duties as trustee.  I note that Au has ceased his operational involvement in the business. I also find, from my assessment of the material before me, that Au is a person of low commercial morality as evidenced by his false evidence on oath before the Singapore High Court and the use he made of others for his own ends, as evidenced by his control over Ho, in his commercial dealings and conduct.

55.  It is acknowledged by the defendants that the court plainly cannot resolve the issues between the parties at this stage on the basis of affidavits but that is not the only limitation.  The court has been inundated with numerous applications and voluminous material coupled with allegations and counter-allegations between the parties at pre-trial stage in order to deal with interlocutory relief.  I should add that the submissions before me were inordinately lengthy dealing with a range of matters and issues most of which did not appropriately focus on the main issues and some of which were irrelevant or unnecessary.

VII. The discharge application

56.  The defendants make application for an order to discharge the injunction order made on 29 January 2014 which prohibits them from dealing with their assets up to the stated amount of SGD 16,075,880 and to award damages caused by the injunction order to them.  They do so on the grounds that it departs materially from the standard form order set out in Practice Direction 11.2, that there are fundamental errors in the way in which the plaintiffs have structured their claim for the purposes of obtaining the order, and that there has been material and deliberate non-disclosure. 

(a) General principles on material non-disclosure

57.  In an ex parte application, an applicant has a duty to make full and fair disclosure of the facts that are material to the exercise of the discretion.  The duty of disclosure not only applies to material facts known to the applicant but also to any additional material facts that depending on all the circumstances could be reasonably obtained by proper inquiry.  A summary of the applicable principles in relation to a freezing order have been stated by Ralph Gibson LJ in Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350 at 1358:

“ (1) The duty of the applicant is to make ‘a full and fair disclosure of all the material facts’: see Rex v Kensington Income Tax Commissioners, ex p Princess Edmond de Polignac [1917] 1 KB 486,514, per Scrutton LJ.

(2) The material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers: see Rex v Kensington Income Tax Commissioners, per Lord Cozens-Hardy MR, at p 504, citing Dalglish v Jarvie (1850) 2 Mac & G 231,238, and Browne-Wilkinson J in Thermax Ltd v Schott Industrial Glass Ltd [1981] FSR 289,295.

(3) The applicant must make proper inquiries before making the application: see Bank Mellat v Nikpour [1985] FSR 87. The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such enquiries.

(4) The extent of the inquiries which will be held to be proper, and therefore necessary, must depend on all the circumstances of the case including (a) the nature of the case which the applicant is making when he makes the application; and (b) the order for which application is made and the probable effect of the order on the defendant: see, for example, the examination by Scott J of the possible effect of an Anton Piller order in Columbia Picture Industries Inc v Robinson [1987] Ch 38; and (c) the degree of legitimate urgency and the time available for the making of inquiries: see per Slade LJ in Bank Mellat v Nikpour [1985] FSR 87,92-93.

(5) If material non-disclosure is established the court will be ‘astute to ensure that a plaintiff who obtains [an ex parte injunction] without full disclosure… is deprived of any advantage he may have derived by the breach of duty’: see per Donaldson LJ in Bank Mellat v Nikpour, at p91, citing Warrington LJ in the Kensington Income Tax Commissioners’ case [1917] 1 KB 486,509.

(6) Whether the fact not disclosed is of sufficient materiality to justify or require immediate discharge of the order without examination of the merits depends on the importance of the fact to the issues which were to be decided by the judge on the application. The answer to the question whether the non-disclosure was innocent, in the sense that the fact was not known to the applicant or that its relevance was not perceived, is an important consideration but not decisive by reason of the duty on the applicant to make all proper inquires and to give careful consideration to the case being presented.

(7) Finally, it ‘is not for every omission that the injunction will be automatically discharged. A locus penitentiae may sometimes be afforded’, per Lord Denning MR in Bank Mellat v Nikpour [1985] FSR 87,90. The court has a discretion, notwithstanding proof of material non-disclosure which justifies or requires the immediate discharge of the ex parte order, nevertheless to continue the order, or to make a new order on terms.

‘     when the whole of the facts, including that of the original non-disclosure, are before [the court, it] may well grant… a second injunction if the original non-disclosure was innocent and if an injunction could properly be granted even had the facts been disclosed’: per Glidewell LJ in Lloyd’s Bowmaker Ltd v Britannia Arrow Holdings Plc [1988] 1 WLR 1337 at pp 1343H-1344A.”

58.  It is therefore important that an applicant presents fairly to the court the material facts and issues.

59.  The materiality of matters undisclosed or misstated will depend on the importance of them in deciding to grant the ex parte application.  The test of materiality is objective.  Where there has been material non-disclosure or misrepresentation, and it is proportionate to do so, the court may set aside the ex parte relief and refuse to renew it.  See Velatel Global Communications Inc & Anr v Chinacomm Ltd & Ors, HCA 1978/2011, 26 October 2012, unreported, paras 25-31.  There is a continuing obligation on an applicant to bring to the attention of the court any material nondisclosure of which it becomes aware and seek an appropriate direction from the court in relation to the order made.

60.  The court has a discretion whether to re-grant an interlocutory injunction where the injunction is discharged for material non-disclosure.  The relevant principles in the exercise in this discretion were recently discussed by the Court of Appeal in Excel Courage Holding Ltd and Anor v Wong Siu Lai and Ors, CACV 28/2014, 30 May 2014, unreported, where Kwan JA giving the judgment of the Court adopted the following summary of the main principles from the unreported decision of The Arena Corporation Ltd v Schroeder [2003] EWHC 1089 (Ch), as a guide to the court in the exercise of its discretion.

“ (1) If the court finds that there have been breaches of the duty of full and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial.

(2) Notwithstanding that general rule, the court has jurisdiction to continue or re-grant the order.

(3) That jurisdiction should be exercised sparingly, and should take account of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.

(4) The court should assess the degree and extent of the culpability with regard to non-disclosure. It is relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge of the order. Equally, there is no general rule that a deliberate breach will attract that sanction.

(5) The court should assess the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the court. In making this assessment, the fact that the judge might have made the order anyway is of little if any importance.

(6) The court can weigh the merits of the plaintiff’s claim, but should not conduct a simple balancing exercise in which the strength of the plaintiff’s case is allowed to undermine the policy objective of the principle.

(7) The application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice.

(8) The jurisdiction is penal in nature and the court should therefore have regard to the proportionality between the punishment and the offence.

(9) There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the court should take into account all relevant circumstances.”

61.  The general rule is that where there has been a material breach of the duty of full and fair disclosure on an ex parte application, the order obtained in breach should be discharged and refused to be renewed.   However, the court has jurisdiction to continue or regrant the order by striking a balance between two competing public interests.  On the one hand, the need to protect the administration of justice and uphold the public interest of requiring fair and full disclosure, and on the other, the need to ensure that the sanction imposed is not an instrument of injustice and disproportionate to the breach.  It requires the court to take into account all relevant circumstances and consider the justice of the situation in determining what is appropriate.

62.  It is argued by the defendants that the plaintiffs did not fulfil their duty to the court by bringing to its attention material misinformation or a material change in circumstances.  I do not see there has been any failure on the part of the plaintiffs to do so given the frequency and intensity of the proceedings between the parties and the constant flow of additional information in the course of these proceedings.

63.  It is also argued by the defendants that the plaintiffs have further failed in their duty to the court by not identifying any defences or issues likely to be taken by the opposing party.

64.  I turn now to deal with the various grounds of complaint from the defendants in support of the discharge application.

(b) The conduct of the plaintiffs and their solicitors

65.  The defendants listed various complaints against the plaintiffs’ solicitors.  I regret that I have to deal with these matters because I consider them to be minor and inconsequential, but they have been put in submissions and accordingly I will address them.  They display an unattractive and inappropriate manner in the conduct of litigation, and legal practitioners should be very careful before they make allegations and complaints against fellow legal practitioners in the combative atmosphere of a civil dispute.  It distracts attention away from the real issues and unnecessarily focuses on matters of minor or little consequence to the subject and issues in dispute.                                                                            

66.  It is complained that the plaintiffs have failed to serve promptly the injunction order dated 29 January 2014.  It is suggested that this was deliberately done to not risk jeopardising the L Capital deal and letting Au find out about these proceedings and the freezing of the transferred funds.  There is no substance to this complaint.  The injunction order was made just prior to the Chinese New Year public holidays and the first of the three defendants to be served was Ho on 4 February 2014.

67.  It is also complained that the plaintiffs’ solicitors refused to provide to the defendants’ solicitors a note of the ex parte hearing.  There is also no substance to this complaint.  The plaintiffs’ solicitors sought and obtained a transcript of the ex parte hearing.  The plaintiffs’ solicitors’ request for a note of the hearing was made on 7 February 2014 and the transcript was supplied on 12 February 2014.

68.  It is finally complained that a solicitor for the plaintiffs filed a false affirmation in support of an application for an extension of time to file further evidence.  There is absolutely no substance to this complaint.  The solicitor in the affirmation claimed that the defendants had failed to file their evidence by 31 March 2014 when the date for filing was 2 April 2014 by which date the defendants had filed their evidence.  It was nothing more than an inadvertent mistake of no consequence, and did not warrant the harsh criticism it invoked in submissions from the defendants.

69.  It is unfortunate that these matters found their way in submissions before me and I trust in future that legal representatives in civil proceedings, even when such proceedings are vigorously contested, focus on the substantive issues before the court where their efforts and attention should be directed.

(c)      Form of the injunction order

70.  The defendants complain that the form of the freezing order did not comply with the standard form in Practice Direction 11.2.  It is argued by the defendants that the plaintiffs departed materially from the standard form order in numerous respects.  They list a number of items which concern the form and wording of the disclosure order.  Their main complaint is that the disclosure order as drafted was not in the usual form and was not appropriately addressed in written or oral submissions, nor was it brought to my attention for my approval.  The draft order was before me and it met with my approval given the nature of the claim and allegations made in support of the application for the injunction order. 

71.  Overall, the plaintiffs complied with the form and substance of the standard form in drafting the injunction order which was framed to meet the circumstances of the case.  It followed the form as required, and it is when the order sought deviates in a “material” respect from the standard form, that the Practice Direction provides that such material changes should be drawn to the attention of the judge hearing the application.  It was clear at the hearing that the injunction order would include a disclosure order to meet the circumstances of the case.  As rightly pointed out by the plaintiffs the deviations relied on by the defendants are not material.

(d)     Submissions on material non-disclosure

72.  Mr Sussex submits that the defendants’ application is based on an allegation that a fraud has been practiced on the court.  He argues that there was a material non-disclosure and misrepresentation that was perpetrated through dishonest means.  He argues that material was either put forward or omitted from being put forward that gave a false and misleading case on behalf of the plaintiffs and this was done to their knowledge.  In essence, he is arguing that there has been material non-disclosure of such seriousness as to constitute a fraud on the court.  He complains that the plaintiffs have not only failed to put relevant material before the court at the time of the application but also failed to put alternative or likely defence arguments to the plaintiffs’ case which were apparent from their knowledge and material in their possession. 

73.  The plaintiffs argue that fraud has not been pleaded by the defendants and that it is a fundamental requirement in civil litigation that if a party relies on an allegation of fraud it must be specifically pleaded and with the utmost particularity.[29]  In the absence of such a plea and particulars, allegations of fraud on affidavit alone are inappropriate and irrelevant and should be disregarded.  The allegation of fraud was the central theme of the defendants’ submission for a discharge of the injunction orders and Mr Scott for the plaintiffs, asks the rhetorical question: On what basis at this stage of the proceedings can a court make a finding of fraud?  It seems to me that the court can make such a finding if the material is cogent and compelling but otherwise, I have to agree with Mr Scott, that this is a matter that can only be appropriately dealt with by full particulars and the full trial process.

74.  The plaintiffs argue that this litigation arises out of their concern for the conduct of Au and Ho in relation to the Kudeta business.  The plaintiffs state in submissions that as a result of the defendants’ conduct, “it is more than likely they will continue to exploit and misuse their position, power and authority by taking further action to the plaintiffs’ prejudice, to suit the 1^st defendant’s personal agenda and not in the best interests of the Kudeta business and the majority beneficial shareholders of the 3^rd defendant.”

75.  The plaintiffs’ case is essentially that under the agreement on profit-sharing, it was orally agreed between the parties that the profits and/or dividends payable in the issued shares of Kudeta BVI would be distributed amongst Essence and Retribution in the agreed proportions.  The plaintiffs allege that in breach of that agreement, Au caused and procured Ho to underpay dividends which were payable to Rocky Cape and later on, stop payment of dividends payable to Rocky Cape altogether.  This resulted in Rocky Cape suffering a loss of dividends payable to it.  The plaintiffs also allege that in breach of trust and the terms of the declaration of bare trust, Ho failed or refused to transfer the shareholding in Retribution to Patel and Apostolides as beneficial owners, and declare or arrange for the payment of dividends payable in respect of the shareholdings in Retribution and/or Kudeta BVI beneficially owned by them for the period from January 2013 to 2014.

76.  As already noted, it is a fundamental principle in an ex parte application that an applicant has a duty to make full and frank disclosure of all material facts.  As to what constitutes a material fact is highly dependent upon the context and is a question of whether the fact not disclosed was relevant and should have been placed on the scales when the court was weighing whether or not to grant the order.  What will be foremost in the mind of the court is whether the plaintiffs had shown that the requirements for a freezing injunction order had been met, and even in the face of material non-disclosure resulting in the discharge of the order, it is open to the court to grant a fresh freezing injunction order in order to meet the overriding objective to do justice while addressing the need for proportionality.  This will of course depend upon all the circumstances of the case but it is important to ensure that the punishment fits the wrongdoing and does not exceed the bounds of what is just and proportionate.

77.  In considering a discharge application, the court starts with the question of whether a good arguable case has been shown by the plaintiffs.  It must be remembered that an application of this type is made without the benefit of full discovery and the exchange of evidence and a full trial. 

78.  Mr Sussex is particularly critical of the plaintiffs’ failure to produce and bring to the court’s attention an email dated 26 December 2013 that he claims evidences an agreement between the parties to pay out Au for his 35.5% shareholding in Kudeta BVI.  He further argues that Patel falsely relied on the shareholding contained in the declaration of bare trust which had been subsequently varied and changed between the parties.  He referred to the 1^st affirmation of Patel where in paragraph 29 he identified five individuals that beneficially and economically owned Retribution and he then compared this to an email from Apostolides where he identified a different set of individuals.  It could be that this was a result of each of them talking about the individuals behind Retribution at different times or according to their understanding.

79.  However, the basis of the defendants’ allegations is that the email dated 26 December 2013 was a concluded and binding agreement which defined Au’s interest in Kudeta BVI at 35.5%.  Based on this allegation, the defendants argue that the plaintiffs have no cause of action, that there was material non-disclosure, and that the injunction order should be discharged.   Mr Scott for plaintiffs argues that the defendants’ allegation is not supported by the evidence.  He submits that Apostolides in his email is summarising a conversation with Au and the contents of the email do not evidence a concluded and binding agreement between the parties.  This is really a matter for trial upon a full presentation and examination of the respective cases of the parties.  It does not support an allegation of fraud.

80.  I was also taken through a series of emails and related documents by Mr Sussex in order to make good his point that the plaintiffs deliberately and falsely relied on the percentage of the shareholding of Retribution as stated in the bare trust which was relevant at the time it was executed on 30 January 2013 but in expectation of the second tranche under the Convertible Loan Agreement also dated 30 January 2013.  He argues that second tranche did not go ahead and the parties reverted back to dealing with one another in accordance with the percentage of the shareholding they had agreed between themselves.  He refers to various emails which mention that Au had a 47.5% shareholding in Kudeta BVI which was reduced to 45.5% for the provision of additional parties.  Au as at 1 August 2013 sold off 10% of his 45.5% shareholding to Teeka.  This resulted in Au having a 35.5% stake in Kudeta BVI.  He argues that the plaintiffs, in particular Patel, misrepresented the shareholdings in Retribution and Kudeta BVI.  It was not reflected as stated under the trust deed which provided that Patel, Apostolides and Au each held a third of the shares in Retribution.  As already noted, Mr Sussex stressed that the trust deed had been created in anticipation of Au selling a portion of his shareholding to L Capital under the CLA.  He submits that this was later replaced by ARCLA and ARSHA and the deal between the parties was that Au would sell out his 35.5% interest which would be paid on a pro rata basis from the contribution by L Capital for the 51% stake it had agreed to purchase. 

81.  Mr Sussex also makes the point that only a shareholder of a company is entitled to a dividend, and only when that dividend has been declared.  He argues that no dividends were declared by Retribution and the plaintiffs were not entitled in law to any dividend payments.  The monies that were advanced, he argues, were booked as loans.  He argues this point of law was a serious omission by the plaintiffs in submissions before the court at the time of the application for the freezing injunction order.  A point I have already made is that this was due to the failure of Au and Ho to adhere to the requirements for the making of a dividend and in any event, Au referred to the payments as dividends. 

82.  As I have already stated, Mr Sussex has made out an arguable case for the defendants that Au held a 35.5% stake in Kudeta BVI but it still raises the issue whether there was a concluded and binding agreement between the parties for the buy out of Au’s interest as claimed by the defendants.  However, Mr Sussex makes a valid point that there were supporting materials that evidenced that Au had 35.5% stake in Kudeta BVI which should have been highlighted in the ex parte application.  Although I note that there were documents included in the material before me at the ex parte application hearing which made reference to Au’s stake in Kudeta BVI, they were not specifically drawn to my attention.

(e) Conclusion

83.  From my evaluation of the material before me, even though I find that Au has an arguable case as to the percentage interest he held in Kudeta BVI and despite Mr Sussex’s very able submissions, there is an issue as to whether there was a buy out agreement for there is little evidential support for the elaborate terms and conditions that are being claimed existed under the agreement. 

84.  Accepting that Au had a 35.5% in Kudeta BVI, there is an issue as to whether there was an agreement to buy him out, and if so, on what terms and conditions.  I accept that Mr Sussex, assuming that the declaration of bare trust dated 30 January 2013 is void and of no effect, has advanced a case that Au had an interest in Kudeta BVI of 35.5%.

85.  I therefore conclude that there was material non-disclosure by the misrepresentation of the amount of unpaid dividends being claimed and the omission of bringing to the court’s attention the interest of Au in Kudeta BVI and his likely defence or claim.  These matters need to be considered in the context of the overall circumstances of the application and the case.  Even though I have come to the conclusion that there has been non-disclosure, I do not find that it was deliberate, nor do I find that it was significant enough to invoke the opprobrium of the court by refusing to regrant the injunction.

86.  As for the amount of unpaid dividends this appears to have been due to a misreading of the PwC report.  The plaintiffs were mounting a claim of misappropriation and misapplication of funds by the defendants (in the case of Ho it involved a breach of her fiduciary duties as trustee for the plaintiffs) in which they had a beneficial interest.  In making their application they supported their claim by submitting material which was made in response to the recent discovery of the alleged wrongdoing by Au from the PwC report and concern of dissipation of assets by the imminent transfer of L Capital funds to the Retribution bank account in Hong Kong.

87.  As for the Au’s interest in Kudeta BVI, this is a matter of dispute between the parties but it should have been brought to my attention.

88.  Notwithstanding the case advanced by the defendants that Au had a 35.5% interest in Kudeta BVI, I am of the view that the plaintiffs have a good arguable case on the misappropriation and misapplication of funds of Kudeta BVI by the defendants, and that there is a risk of dissipation of the property and assets of Retribution, in particular in relation to the shares it holds in Kudeta BVI and the L Capital funds that it received in its bank account in Hong Kong.  I am also of the view that the property and assets of Retribution need to be protected for the benefit of the parties while awaiting the outcome of this litigation.

VIII. The summary judgment application

(a) The plaintiffs’ argument

89.  The plaintiffs’ application under this summons seeks the following order:

“ Final judgment in this Action be entered for the 1^st, 2^nd and 3^rd plaintiffs against the 2^nd defendant as follows:

A declaration that the 2^nd defendant held and still holds 63.67% and 11.63% shareholdings in the 3^rd defendant, and all dividends and interest accrued, on trust for the 1^st and 3^rd plaintiffs (together with Cheong Yew Kuan or Mr Balaji Singh Teeka’s behalf) and the 2^nd plaintiff respectively in the percentages stated below pursuant to:

A Declaration of Bare Trust dated 30 January 2013;

An Amended and restated Convertible Loan Agreement dated 31 December 2013 (at Schedule 5 thereof) concluded between inter alia, the 1^st and 3^rd plaintiffs, the 1^st and 3^rd defendants, Kudeta Limited, and L Capital Kudeta Ltd; and

Kudeta Limited’s letter to L Capital Kudeta Ltd dated 29 January 2014 signed by the 2^nd defendant as a then director of Kudeta Limited, setting out the beneficial shareholders of the 3^rd defendant’s 49% stake in Kudeta BVI, as follows:

(1) 1st and 3rd plaintiffs: (and Cheong Yew Kuan on behalf of Teeka)	63.67% total shareholding in 3rd defendant
(2) 2nd plaintiff	11.63% shareholding in 3rd defendant
(3) 1st defendant: (with Justin Todd)	20.61% shareholding in 3rd defendant
(4) Arthur Chondros	4.09% shareholding in 3rd defendant

An order for the delivery up, transfer, and payment to the 1^st to 3^rd plaintiffs of the assets referred to in paragraph (a) above.

Costs of this part of the Action including the costs of and occasioned by this application be paid by the 2^nd defendant to the 1^st to 4^th plaintiffs forthwith.”

90.  The plaintiffs’ argued that their claim was supported by contemporaneous documents and facts which cannot be seriously disputed.  It is argued that Ho has failed to discharge her onus under O 14 r 3 of the Rules of the High Court to show that there are triable issues, that is, that she has a real or bona fide defence to this action. 

91.  The principles in relation to the summary judgment are well-known.  A plaintiff may apply for summary judgment under O14 r 1(1) on the ground that the defendant has no defence to a claim in the writ.  The onus is on the defendant to show there are triable issues on the balance of probabilities.  The test at the summary stage is whether the defendant’s assertions are believable, in the context of so much of the background as is undisputed or beyond reasonable dispute, and having regard to contemporaneous documents, and the defendant’s own conduct.  The mere fact that a defendant has a counterclaim does not necessarily entitle him or her to have leave to defend.

92.  The defendants argue that Pacific Electric Wire and Cable Co Ltd [2009] 3 HKLRD 94 applies and O 14 r 1(2)(b) excludes a summary judgment application where the claim is based on an allegation of fraud.  The plaintiffs submit that this application is for part judgment which is not based on an allegation of fraud.  It is argued that in construing the fraud exclusion on a proper purposive construction,  it is important to bear in mind that its overall purpose is to ensure that the conclusion by the court in summary proceedings of an allegation of fraud must be done in the clearest possible case and where the evidence is overwhelming.  The exclusion of an allegation of fraud on the application for O14 was abolished in England and Wales.  It was anticipated that judgment under the order would only be granted where it was necessary to rely on fraud as a basis of an action.  It is argued that the fraud exclusion should be construed narrowly in accordance with English authorities which are confined to actions based on deceit.  The plaintiffs in submission question the correctness of the judgment in Pacific Electric Wire and Cable Co Ltd and distinguish it on the basis that the allegation of fraud in that case was for the alternative basis of liability. 

93.  The plaintiffs submit that the summary judgment application is based on the contemporaneous contractual documents to which the defendants were a party and evidence the beneficial shareholding in Retribution. It is submitted that it is separate and distinct from the rest of the claim against the defendants and does not depend on an allegation of fraud against Ho. The plaintiffs take issue with the contentions by the defendants that the declaration of bare trust concerned a transaction that did not take effect and that Ho’s representation letter was created only to affect the intended shareholding post completion of the L Capital transaction.  It was noted by the plaintiffs that Ho in a failed legal action in Singapore asserted the converse to what is asserted in the defence and counterclaim in this action.  In the Singapore action, she asserted on oath that she was the beneficial owner of the shares in Retribution.  She claimed she was a part owner of the shares in Retribution together with Au and that Au acted on her behalf, in making agreements with and dealing with the plaintiffs concerning the shares in Retribution.[30] 

94.  The plaintiffs submit that they have a strong case against the defendants.  They rely on the following:

(1) The agreements struck between the parties representing the existing interests of the Kudeta business and L Capital, the acquiring entity of 51% of the business.[31]

(2) The declaration of bare trust dated 30 January 2013 and the representation letter of the interests in Kudeta BVI.

(3) The acquisition by L Capital proceeded in accordance with the agreements as evidenced by the payment of fund and the resignation of Au and the representation letter of Ho. 

(4) The corporate vehicles of Au and Ho, Prime Mark and Bay Ridge respectively, were in receipt of various substantial funds from the Kudeta business after October 2012 when it is claimed by the defendants that no dividends were declared by Kudeta BVI.

(5) The large number of highly questionable transactions by the defendants and their corporate vehicles as identified in the supplemental report of Deloitte. 

(6) The conduct of the Au and Ho has been carried out with the clear knowledge and intention of interfering with the ARSHA and ARCLA to which they are both a party and warrantor. 

(b) The defendants’ response

95.  The defendants argued that in breach of the agreement of 26 December 2013, the plaintiffs, YKC and Essence have not paid Au any of the SGD 33,732,539.50 due and owing to him.  I should say at this stage that on the material before me I have doubt as to whether any clear agreement had been struck between the parties.  The defendant seemed to be relying on the email from Apostolides on 26 December 2013 and an historical analysis of the interests held by the parties in the Kudeta business which was constantly changing between them and to some extent is even now somewhat unclear, except for the L Capital documents.  I note that the Apostolides’ email is in general terms, and incomplete as an agreement.  Clearly, there is an issue as to whether it constitutes an agreement, and if it is whether the terms and conditions of the agreement were as claimed by the defendants.  Au himself did not respond to this email until sometime later on 30 January 2014, the day after the injunction was granted.[32] He said:

“ If there is still any doubt to what was agreed kindly view below.

Once funds are release then same day all shares and directorial control will be transfer to your stakes. Shareholder accounts was provided. I have no issue doing proper handover to you.

I propose have essence funds release to roydk trust account then can be distributed from there.”

96.  It is argued by the defendant that the plaintiffs have instituted these proceedings to deprive Au of the sum for the sale of his shares and to seek to take control of Retribution and Au’s shareholding in the company without payment for it.  Whatever Au’s shareholding and whatever the sum to be paid for some or all of his shareholding, if anything at all, it seems to me to be true that if there was a valid agreement between the parties for the purchase of some or all of Au’s shares, that has been put on hold upon the discovery that Au has misused and misappropriated funds of the company.  As far as I can determine, this is what ignited the current dispute and caused the plaintiffs to institute proceedings against the defendants.  What is clearly apparent to me from the material that I have before me is that despite the interests of other investors, Au has controlled the business through his nominee, Ho, who is the alter ego of Au and that is apparent by her conduct in the operation of the business and more recently during the course of the litigation currently before the courts.

97.  It is argued by Au that he is entitled to retain the full beneficial entitlement in restitution until the agreement of 26 December 2013 is complete.  But that is what this dispute is all about.  Does the email of 26 December 2013 constitute a valid agreement between the parties?  Is Au entitled to all the interest in Retribution? What is Au’s interest in Ku De Ta?  Has Au misused and misappropriated funds of Ku De Ta? Has Au failed to properly account or distribute the funds of Ku De Ta to other persons or entities with an interest in the business?

(c) Conclusion

98.  As compelling as the plaintiffs’ arguments may be, especially in light of what Ho has claimed in the Singapore proceedings which seriously reflect on her credibility and the defence claim, it still remains that the defendants have established that there are triable issues in relation to the legal effect of the bare trust, the percentage interest that Au held in Kudeta BVI and a buy out agreement for Au’s interest in Kudeta BVI.  For these reasons I refuse the application, but the points made in submission by the plaintiffs do provide strong grounds for the continuation of the injunction order of 26 March 2014.

IX. Application for further injunction orders

(a) The relevant legal principles

99.  The legal principles are clear as to the requirements for a grant of a freezing injunction.  A plaintiff must show (1) a good arguable case on a substantive claim; (2) there are assets within the jurisdiction; (3) the balance of convenience is in favour of granting the injunction; and (4) there is a real risk of dissipation of assets.

100.  A “good arguable case” means a case which is more than barely capable of serious argument, and yet not necessarily one which the court believes to have a better than 50% chance of success.  I also refer to my statement of the applicable legal principles in my judgment in this case of 1 April 2014.[33]

(b) The plaintiffs’ argument

101.  It is argued by the plaintiffs that the present injunction order is insufficient to protect them from the risk of dissipation of assets by the defendants outside Hong Kong.  In support of this contention, the plaintiffs make the following points:

(1) On 20 February 2014, Au and Ho filed their affirmations in purported compliance with their disclosure obligations under the injunction order.  They were obliged to provide details of all bank accounts in the name of all Hong Kong and foreign companies and/or other vehicles over which they had an interest or control.  It is submitted by the plaintiffs that the defendants have clearly breached this obligation by failing to disclose any detail of the bank account held with HSBC in Hong Kong in the name of a BVI company which is the corporate vehicle of Au, Prime Mark.  It is also complained by the plaintiffs that in providing an explanation for this omission, Au avoided identifying that Ho is the person who operates the account and that he is the beneficial owner of it.

(2) Ho on the instruction of Au caused substantial sums of money over US$300,000 to be transferred from Kudeta BVI’s bank account to Prime Mark’s HSBC bank account.

(3) There are many depositions from Prime Mark’s 3^rd parties including to an account in Australia which shows that there is a real risk of dissipation of assets by the defendants outside Hong Kong.  As the matter currently stands, the disclosure obligations under the injunction order are restricted to assets within Hong Kong and therefore the plaintiffs should be entitled to seek and obtain information on the defendants’ assets outside Hong Kong.  It is argued by the plaintiffs that given the conduct of the defendants over the last few years in the mishandling of funds and the misdescription of them in the books of accounts and the funds have taken a circulatory route with no plausible explanation.

(4) Retribution is a BVI company and any changes purported to be effected in its shareholding at the BVI Company’s registry are not restrained by the injunction order.

(5) The stop notice issue would not serve to protect the interests of Patel and Apostolides.

102.  It is submitted by the plaintiffs that there is a real risk that the defendants will act outside Hong Kong in a way that will further prejudice the plaintiffs’ interests.  They argue that this is evident by non-compliance with the disclosure obligations under the injunction order by Au and Ho.  The plaintiffs in order to protect themselves against the real risk of dissipation of assets by the defendants outside Hong Kong, which may render any judgment obtained by the plaintiffs in this action unsatisfied, the plaintiffs intend to apply to the Eastern Caribbean Supreme Court in the British Virgin Islands for a freezing injunction order in support of this action and a stop notice to be placed over the shares. 

103.  The plaintiffs’ original application under the summons dated 14 March 2014 sought the following order:

“(1) Ho, whether acting by herself, her servants, agents, employees, or otherwise howsoever, be restrained from acting contrary to the instructions of and/or in a manner adverse to the interests of Patel, Cohen and Apostolides relating to their rightful shareholdings in Retribution as stated in the letter dated 29 January 2014 signed by Ho and addressed to L Capital.

(2) The plaintiffs do have leave to enforce the injunction order made by the Honourable Mr Justice Zervos dated 29 January 2014 outside Hong Kong and/or seek an Order of a similar nature including Orders conferring a charge or other security against the defendants and/or the defendants’ assets.

(3) Further or alternatively, the plaintiffs do have leave to seek to apply for a stop notice outside Hong Kong over their rightful shareholdings in Retribution.”

104.  This was superseded by the summons dated 25 March 2014 where the plaintiffs’ application was for an order set out below:

“(1) The 1^st, 2^nd and 3^rd defendants, whether acting by themselves, their servants, agents, employees, (including but not limited to Casey Au) or otherwise howsoever, be restrained until the determination of these proceedings or further order, from:

(a) Doing, or causing anything to be done by the 3^rd defendant that would dispose of, deal with, or diminish, the value of the shares in the 3^rd defendant, or the shares in Kudeta Limited (a company incorporated in the British Virgin Islands) with Company Registration Number 1540692) (Kudeta BVI), held in the names of the 2^nd and 3^rd defendant respectively, without the written consent of the plaintiffs or an Order of this Honourable Court;

(b) Without 7 days’ written notice to the plaintiffs’ solicitors, causing the 3^rd defendant to issue any notices or exercise any rights under the Amended and Restated Shareholders’ Agreement (the Shareholders’ Agreement) and/or the Amended and Restated Convertible Loan Agreement (the ARCLA) both dated 31 December 2013, between inter alia Kudeta BVI, the 3^rd defendant and L Capital KUDETA Limited (L Capital) including calling for a board or shareholders’ meeting of Kudeta BVI, or the 3^rd defendant, other than for the purpose of complying with paragraph 2 below;

(c) Acting in a manner which is unfair and not in accordance with the written intentions and instructions of all the beneficial shareholders of the 3^rd defendant, including the 1^st to 3^rd plaintiffs, such shareholders being identified in the representation letter signed by the 2^nd defendant as the then sole director of Kudeta BVI to L Capital dated 29 January 2014 pursuant to the ARCLA (at Schedule 5), having regard to:

(i) The 2^nd defendant’s responsibilities as bare trustee, nominee shareholder, and director of and for, all the beneficial shareholders in the 3^rd defendant; and

(ii) The 1^st defendant’s responsibilities as a current director of Kudeta BVI in his capacity as a representative of and for, all beneficial shareholders of the 3^rd defendant and as shadow and/or de facto director of the 3^rd defendant;

(2) The 1^st, 2^nd and 3^rd defendants whether acting by themselves, their servants, agents, employees, or otherwise howsoever do forthwith:

(a) Procure the reinstatement of the 1^st and 3^rd plaintiffs to the Board of Directors of Kudeta BVI;

(b) Procure the appointment of the 1^st and 3^rd plaintiffs as the majority beneficial shareholders of the 3^rd defendant to the Board of Directors of the 3^rd defendant along with a representative of the 1^st defendant who shall replace the 2^nd defendant; and

(c) Withdraw any request by the 3^rd defendant and its written resolution dated 14 February 2014 to Kudeta BVI, to appoint the 1^st defendant and Balaji Singh Teeka as directors of Kudeta BVI in place of the 1^st and 3^rd plaintiffs.”

105.  It is submitted by the plaintiffs that they have a strong case against the defendants, there being no arguable defence, in view of the contemporaneous documents which show that substantial funds belonging to the Kudeta business were received and utilised by Au.  The plaintiffs argue that the balance of convenience clearly lies in the plaintiffs’ side.  This is made good on the following bases:

(1) Patel and Apostolides are indisputably majority beneficial owners of the shares in Retribution and this is evidenced by contemporaneous documents signed or executed by the defendants.  Patel and Apostolides are entitled in equity, to deal with the shares and exercise their rights as beneficial owners in any way they wish, including removing Ho as the appointed trustee and Retribution’s sole director.

(2) If the defendants are not restrained there is a real risk that they would continue to exploit and misuse their position, power and authority by taking further action to the prejudice of the plaintiffs and contrary to the interests of the Kudeta business and Retribution’s majority beneficial shareholders.

(3) There is no apparent detriment to the defendants if they were restrained as requested.  Bearing in mind that Patel and Apostolides are the majority beneficial owners of the shares and entitled to remove Ho as Retribution’s sole director and Retribution’s nominated representative of Kudeta BVI.  Any potential damage that may be suffered by the defendants is well protected by the plaintiffs’ undertaking of damages and the payment into court of US$1 million pursuant to paragraph 7, Schedule 2 of the freezing injunction order.  In addition, the defendants are also protected by the plaintiffs’ claim to share in the proceeds of sale of shares of Retribution currently held in Retribution’s DBS bank account. 

106.  The prohibitory and mandatory injunctive reliefs are sought against the defendants on the basis that Au and Ho will continue to exploit and misuse their power and authority.  It is clear to me that Ho is the alter ego of Au and acts entirely on his instructions or in furtherance of his interests, possibly contrary to, and to the detriment of the interests of the other beneficial owners.  Ho as trustee of the beneficiaries could be in serious breach of her fiduciary duties and obligations to them.

107.  The plaintiffs argue that the prohibitory and mandatory injunctive reliefs are necessary to properly protect the plaintiffs’ interests and are just and convenient in order to (1) preserve the status quo pending trial concerning Patel and Apostolides as Retribution’s initially nominated representatives and majority beneficial shareholders on the board of Kudeta BVI; and (2) enforce the contractual rights of Patel and Apostolides, as majority beneficial shareholders in Retribution as acknowledged in the representation letter signed by Ho in accordance with relevant agreements to be appointed to the board of Kudeta BVI; and (3) protect the plaintiffs from the defendants’ wholly inappropriate conduct and their lack of commercial morality.

(c) The defendants’ response

108.  The defendants’ argument against the granting of the further injunctions is primarily mounted on the basis that the court cannot be satisfied that there is a high degree of assurance that at trial it will appear that the mandatory injunction sought by the plaintiffs was rightly granted.  The defendants in their submissions in response list the arguments they have advanced in support of their defence and counterclaim.

109.  Bearing in mind the relevant legal principles, I am of the view that the plaintiffs have a good arguable case on the substantive claim of misappropriation and misapplication of funds of Kudeta BVI in which the plaintiffs have a beneficial interest and the misconduct of Ho as trustee of their beneficial interest, that there is a risk of the dissipation of the assets of Retribution and that the balance of convenience lies in favour of granting the injunction in the terms I granted by my decision of 1 April 2014, in order to provide just and protective measures to ensure that the commercial interests in dispute are not deleteriously affected by the conduct of the parties.

110.  I am not prepared to go as far as requested by the plaintiffs by ordering the further mandatory relief sought and will only continue with the current injunction as that in my view meets the apparent concerns of the circumstances of this case.  As I stated in my decision of 1 April 2014 when granting the current injunction, it is likely to cause the least irremediable prejudice to the parties and given the practical realities of the situation that the parties are in, it will do justice to the case once it is decided on its merits.[34]

(d) Conclusion

111.  Accordingly, for the reasons I have given, I order the continuance of the injunction order of 26 March 2014 until further order or trial but refuse the plaintiffs’ application for the further injunctive relief sought.

X. Conclusion 

112.  I have dealt with the applications as follows.  I find that there was material non-disclosure by the plaintiffs at the application for the injunction order of 29 January 2014 on the following basis. The amount of unpaid dividends was incorrectly interpreted and misrepresented to me which may have been due to a misreading of the PwC report and the defendants’ case was not presented to me when it was apparent that Au would claim that he had a 35.5% interest in Kudeta BVI and that part of the proceeds of the L Capital acquisition were to be paid to him for a percentage of his interest in Kudeta BVI.  The other points raised by the defendants such as whether the plaintiffs were entitled to any dividends and the percentage interests of the parties are issues raised by the defendants as part of their case or an answer to the plaintiffs’ case which will need to be resolved at trial. 

113.  In relation to the injunction order of 26 March 2014, I had the benefit of full argument from the parties when I made my decision.  The issue with respect to this injunction is whether the matters raised and the material submitted by the defendants warrant reconsideration and discharge of the order.  After having heard submissions and considered the material presented to me, I am fortified in my view that the injunction of 26 March 2014 was properly granted and should remain in force.  I am of the view that it provides adequate protection of the assets in dispute under the plaintiffs’ claim. 

114.  For the reasons I have given and taking into account the circumstances of this case,

(1) I discharge the injunction order of 29 January 2014 but regrant it on the limited basis of freezing the funds and property of Retribution by amending the injunction so that the restriction on disposal of assets only apply to Retribution and in relation to all of its property and assets, including the shares it holds in Kudeta BVI and the funds it holds in its bank accounts, and that the restrictions on Au and Ho in relation to the shares of Retribution remain;

(2) I order that the injunction order of 26 March 2014 remain in force and continue until any further order or trial; and

(3) I refuse the plaintiffs’ application for summary judgment.

115.  For the avoidance of any doubt, the injunction order of 29 January 2014 will continue until a new injunction order replacing it is issued on the terms I have proposed.

XI. Costs

116.  On the question of costs, I direct that the parties file and serve a written argument which should be no more than 5 pages in length within 14 days of the date of the judgment and reply, if any, to be filed and served within 7 days thereafter which should be no more than 2 pages in length.

XII. Other matters  

117.  There are two matters that I need to mention arising from these proceedings.  The first is the serious matter of Au’s evidence before the Singapore High Court on 10 and 12 August 2013.  I am minded to refer the papers to the Attorney General of Singapore.  I will allow Au to make any written submission on this matter within 7 days from the date of this judgment.  The second is the position of Ho who as far as I can see, is acting on the instructions of Au and consideration should be given to her obtaining separate legal representation and to avoid any potential conflict of interest. 

XIII. Directions for trial

118.  It is clear this case needs to be fixed for trial and as expeditiously as possible.  I had called for written submissions to address the directions for trial but the parties have been unable to agree to appropriate directions and to a timetable.  I will hear the parties on the directions for trial.