CHOW WAI LAN v. CHEUNG SIU FONG AND OTHERS

1989, No. A5218

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. The plaintiff's cause of action has the merit of simplicity. The same may be said of the defence.

2. Through the introduction of a personal friend, the plaintiff came to know her mother-in-law, the 1st defendant. According to the plaintiff, she parted with vast sums of money to the 1st defendant for investing in tradings of Gold Bullion and Bank Promisory Notes. The 2nd defendant is the son of the 1st defendant. The 1st defendant and her son are the shareholders/directors of the 3rd and 4th companies. In February 1988, the plaintiff drew a cheque for $300,000 at the request of the 1st defendant in the name of her son. The 2nd defendant had allegedly confirmed to the plaintiff that he assisted his mother in these tradings. The 1st defendant has admittedly used accounts of the other defendants.

3. For Gold Bullion trading, the plaintiff's case is that after several repayments the 1st defendant is still indebted to the plaintiff over $1.44m. For Bank Promisory Notes transactions, the outstanding amount due from the 1st defendant is $8m. In all, the plaintiff claims against the 1st defendant for over $9.44m.

4. The assertions of the plaintiff are wholly denied. The 1st defendant maintains that the sums from the plaintiff were all loans at, occasionally, illegal rate of interest. It is the defendants' case that all these loans together with interest, lawful or otherwise, had all been repaid prior to the institution of these proceedings. But it is worthy of note that the 1st deference was silent on any such lendings in her statement to the police.

5. The parties are poles apart on as well the nature of their past association as the outstanding liability : the plaintiff seeks a return of the balance of her investment, funds, and to the defence it is a false claim fabricated after full payment by the 1st defendant of all private loans.

6. On the 16th September, the plaintiff applied ex parte for a Mareva injunction against the 1st and the other defendants. The plaintiff sought and obtained an order for disclosure and a tracing order in aid of the Mareva injunction granted. The 1st and 2nd Defendants were further made subject to a Prohibitory Order for one month. Usual leave was reserved to the defendants to apply on a two clear days' notice to stay, vary or discharge the Order of the 16th September.

7. The 1st, 3rd and 4th defendants now apply to discharge the entire Order made on the 16th September. The 2nd defendant represented by Mr Wong is not concerned with these other defendants' application. The 2nd defendant has unsuccessfully sought an adjournment for considering whether he should join force with these other defendants. Except for the length of further time, he has not through his solicitor associated himself with these other defendants' application. That application also asks for, in the alternative, further time to comply with paragraph 3(A) & 3(B) (tracing and discovery) of the order granted on 16th September. The additional time requested is a fortnight and four weeks respectively.

8. It is submitted by Mr Chan that a different standard of proof applies to the tracing order. Whilst it is agreed on all hands that the plaintiff must establish allegations on the basis of a good arguable case, for the tracing order, so Mr Chan argues, the plaintiff should go on to show a strong prima facie case. It is contended that since a tracing order is analogous to an Anton Pillar order and entails a degree of finality, there is a need for a much higher standard of proof. Mr Chan urges this Court to hold that the plaintiff has not discharged the heavy burden for her tracing order. In addition, so it is submitted on behalf of the 1st, 3rd and 4th defendants, there are no or no sufficient exceptional circumstances to warrant the worldwide effect given to the Mareva injunction in this case.

9. Mr Chan for the defendant applicants has even sought, at one time, to argue that standing on their own the plaintiff's allegations are not sufficient to justify the Mareva injunction or the Prohibitory Order. But this area seems to have been passed over without elaboration.

10. It would be more convenient for me to deal with the submissions advanced on behalf of the plaintiff by Miss Eu. Hopefully this would avoid or at least minimise unnecessary repetition of contra-arguments.

11. On explanations offered, the criticism of the plaintiff deliberately withholding in her ex paste application the 1st defendant's known new local address has virtually been abandoned. The point of material non-disclosure was not pursued.

12. It is common ground that the tracing order in paragraph 3(A) aside, the plaintiff is to establish a good arguable case and a real risk of dissipation of assets and that exceptional circumstances must be shown to justify the worldwide coverage.

13. No cases have been cited for the proposition that a different standard of proof should be superimposed on a tracing order in aid of a Mareva. For an Anton Piller order, it is well settled that a strong or extremely strong prima facie case must be shown. An Anton Piller calls for a higher standard of proof on matters such as serious damage, possession of incriminating evidence and real possibility of its destruction or concealment on or before the making of an application inter partes.

14. The tracing order in aid of a Mareva under consideration is not in my view, a final order as submitted by Mr Chan, counsel for the defendant applicants. It seeks information and disclosure for tracing assets. It would bring about no consequences of a final adjudication of rights or on the merits. The order does not invade privacy in the form of a forced entry and search. It does not have the drastic nature or element of surprise of an Anton Piller. The defendants are allowed a reasonable period for preparation in consultation with their legal advisers. They are not being subjected to any intense pressure although they have a time limit to keep. The plaintiff and her legal advisers are not entitled to freely inspect or select for retention from material kept in the defendants' premises. Indeed, should any defendant or third party feel aggreived or otherwise prejudiced, such representation as may be advised can be made to question the tracing order. Tracing orders are frequently made and if a higher standard of proof in interlocutory proceedings is required, one would expect that to find its way somehow into one of the many decided cases. A.V.C. (Note) [1981] Q.B. 956 is the first case in which a tracing order made its debut in a Mareva. In London and county Securities Ltd. v. Caplan, (26th May 1978, unreported but referred to by Ackner L.J. in A.J. Bekhor & Co. Ltd. v. Bilton [1981]2 AER 565 at p.573 letter j) Templeman L.J. was emphatic that it is the concern of any court of equity to see the stable door locked before the horse has bolted. I have taken the opportunity of referring to the 1988 White Book Supplement. No new cases have been added. From first to last, no heavier burden has been suggested. For all these reasons, I cannot accept the contention of Mr Chan. Miss Eu must be correct that the same criterion would apply to a tracing order in aid of a Mareva.

15. Has the plaintiff established a good arguable case? She has reasonably particularized her claim and made a full disclosure. From the 1st defendant, we have a blunt denial based on a completely different case of her own. The factual conflict has cast no such suspicion as would lead me to doubt the bona fide of the plaintiff's case. Naturally, it is not the time for factual determination, but the diagonally opposite versions of facts without written record would make it doubly difficult for these defendants to attempt to attack or expose the weaknesses, if any, in the plaintiff's allegations. The 1st defendant has not even suggested any real incentive for the plaintiff who has allegedly been paid exceedingly high illegal loan interests to come back ungratefully for more on what are said to be utterly groundless and false accusations. In the absence of suspcious circumstances, the plaintiff's allegations as made support, in my view, a good arguable case.

16. The plaintiff must also give circumstances for a real risk of dissipation of assets. Mr Cheng, a friend of the plaintiff, from whom she had taken a loan of about $1m, describes his own bad experience with the 1st defendant in a loan transaction of approximately $30,000. Much effort was said to have been made and much time wasted before its ultimate repayment. Mr Garry Chan who accompanied the plaintiff on her visit to the 1st defendant's flat on the 3rd November 1988 refutes what is being alleged by the 1st defendant, namely that on that visit, the plaintiff sought assistance as she was being pressed for payment by the man in her company. The 1st defendant evaded service for a considerably long time. When service of my Order was attempted to be effected on her some time on the 19th September, her friend, Mr Chu, claimed that the plaintiff was unavailable. Both the solicitor's clerk and Mr To, the solicitor having the conduct of the plaintiff's proceedings, described the manner in which the 1st defendant and Mr Chu, on leaving the police station, were making a detour with a view to frustrating attempted service.

17. Further, the 1st defendant is said to have, for quite some time, avoided personal contact with the plaintiff and failed to respond to enquiries by telephone. Lies about her whereabouts had allegedly been told by the 1st defendant, Mr Chu and the 2nd defendant, her son.

18. According to the plaintiff, the 1st defendant had confided to her that she was a woman of means and had secretively kept her wealth and money outside Hong Kong for evasion of levy of profit tax and on account of her preference to keep a low profile.

19. The 1st defendant has now confirmed that she has no assets outside of the Hong Kong. I am told that continuation of order for disclosure of foreign assets is being resisted as a matter of principle.

20. The 1st defendant has admitted that she traded in gold bullion and bank promisory notes transactions. They are known to be deals often transcending territorial boundaries. It cannot be denied, looking at the overall picture with what experience I have, that the evidence disclosed by the plaintiff has indeed shown a real risk of disposal of assets within and without jurisdiction by the 1st defendant through hereself and her son and companies to shun her creditors.

21. Counsel for the defendant applicants referred to Derby & Co. Ltd. v. Weldon, [1989] 2 W.L.R. 276 where it was held that exceptional circumstances might be found in the substantial amount involved, the lack of sufficient local assets, the existance of forign assets and the absence of undue oppression on the defendant concerned. The $9.44m in these proceedings cannot be said to be trivial. It is a vast sum allegedly lost within a fairly short span of time, between January to May 1988. The 1st defendant has a residential flat in Hong Kong subject to bank mortgage, possibly more than one. Other disclosed assets are insignificant. It is hardly necessary to analyse in any great detail possessions of the 1st and the other defendants. It is evident that there are no sufficient disclosed assets within jurisdiction to meet this plaintiff's claim of some $9.44m.

22. In the light of the previous alleged conversation with the plaintiff and her past activities, it is not unreasonable for the plaintiff to reject the 1st defendant's reaffirmed assertion that she and her companies have litte local and no outside assets. After all, on her admission of absence of foreign asset, the 1st defendant cannot complain of hardship or oppression. It is understandable that on her allegations, the plaintiff entertains serious doubts as to the disclosure presently made.

23. A good arguable case of exceptional circumstances has been shown to support a world-wide Mareva injunction or what is sometimes described as an extra-territorial Mareva injunction.

24. Counsel for the 1st, 3rd and 4th defendants, intimated that if the court should continue the Mareva injunction, further time would be needed to comply with the disclosure and tracing orders. Counsel explains on instructions what would appear to be practical difficulties faced by the these defendants. Miss Eu resists the periods sought in these defendants' summons. Miss Eu is prepared to accede to a period of 14 days. There is little to suggest that the further time is wantonly or arbitrarily requested despite the fact that the 1st defendant's son was served almost immediately after the Order and the 1st defendant managed to affirm her affirmation in purported compliance with my Order one day after she had herself been personally served, and filed two days thereafter. Delay in making full disclosure does not necessarily rule out practical difficulties. I would grant indulgence of 14 days for paragraph 3(A) and 28 days of paragraph 2(B). Mr Wong for the 2nd defendant, not a party to the other defendants' summons, voiced his approval of the periods of time so requested. The defendants should now make every effort to fully comply with my Order made on the 16th September.

25. I turn to the plaintiffs application to extend the Prohibitory Order against the 1st and 2nd defendants. Mr Wong submits that the correct yardstick for an extension, if justified, must be one no longer than it is necessary to enable the plaintiff to obtain all the permissible information sought.

26. Counsel cites Bayer A.G. v. Winter, [1986]1 W.L.R. 497. The principle so enunciated is not, in my view, questionable. Orders involving personal liberty should be granted and continued with great care and circumspection.

27. Mr Wong for the 2nd defendant, I believe, supports Mr Chan, though little has been said.

28. The defendants are now granted 28 days for compliance with paragraph 3(B) of my Order made on the 16th September. Some additional time after the filing of further evidence should be provided to the plaint for considering what further steps, if any, should be taken, such as an application for cross-examination. I would extend the Prohibitory Order against both the 1st and 2nd defendants for a period of 6 weeks from its expiry.

29. Miss Eu applies for directions. It may be more appropriate to entertain an application of this nature after full disclosure. In any case, Mr Chan and, I believe, Mr Wong are unprepared, and it is now well into the afternoon. A formal application is decidedly more acceptable.

30. I order :

(1) Summons of 1st, 3rd & 4th defendants be dismissed with costs;

(2) Further time as prayed for in summons of 1st, 3rd & 4th be granted;

(3) Plaintiff's summons be acceded to with time for Prohibitory Order extended but limited to 6 weeks after expiration;

(4) Costs of Plaintiff's summons be against all defendants.