DEXIA SA/NV v. EPIC INVESTMENTS SA AND OTHERS

HCMP 1859/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1859 OF 2013

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J U D G M E N T

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A.   INTRODUCTION

1. Pursuant to an ex parte summons issued on 30 July 2013, Tong J made an order granting the plaintiff a Mareva injunction (“Mareva”) which, inter alia, restrained all four defendants from removing, disposing of or dealing with or diminishing the value of any assets they may have within Hong Kong to the extent of EUR62,626,175.21 or its Hong Kong dollar equivalent.  The prohibition under the order also covered any account(s) that the defendants (or any of them) held in the China Construction Bank (Asia) Limited (“CCB”), and in particular in two identified accounts with that bank.  The Mareva was sought by the plaintiff in aid of proceedings that they were at that point in time intending to commence in Belgium against the defendant.  There was also an order seeking disclosure by affidavit by the defendants of any assets that they had in Hong Kong to the value of $50,000 or more (A/4-11).

2. By a summons issued on the same day, presumably after obtaining the Mareva the plaintiff sought on the return day on 9 August 2013 for a continuation of the injunction order until trial or further order (A/12). 

3. By a summons dated 7 August 2013 returnable on 9 August 2013, the defendants sought a discharge of the Mareva (the discharge application) as well as seeking for the disclosure order to be discharged or stayed pending the determination of the discharge application or further order (A/14-1).

4. Both summonses came before Mimmie Chan J on 9 August 2013.  She ordered that both summonses be adjourned for argument.  In the interim she continued Tong J’s Mareva order and stayed his disclosure orders pending the final determination of the two summonses or further order of the court.  She gave directions as to the filing of further evidence by the parties reserving the costs of the hearing on 9 August 2013 to be costs in the cause of the two summonses (A/14-8).

5. The matter came before me for full argument on 29 and overran to 30 October 2013.  The parties came back before me on 12 March 2014 pursuant to an inter partes summons issued by the plaintiff for variation of the amount of the Mareva order from EUR62,626,175.41 to a sum of EUR2,626,175.41 until the final determination of the proceedings in the Belgian Commercial Court for reasons which I will expand further on in my judgment.  I reserved my judgment in respect of both sets of hearings. I now set out the reasons for my decision in respect of three summonses that I heard. 

B.   BACKGROUND

6. The plaintiff is a company limited by shares incorporated in Belgium and listed on the Belgium, French and Luxembourg stock exchanges.  It is a relatively substantial banking and financial holding company principally owned by the Belgium and French governments.  Due to the financial tsunami that struck the world markets in 2008 the plaintiff and associated companies within the Dexia Group suffered substantial losses.  In the light of the turmoil from the adverse market conditions the plaintiff was further subjected to credit difficulties and experienced a severe credit crunch as a result of the closure of the inter-bank market liquidity. 

7. In order to avoid being further impacted by the turmoil in the European financial markets, the Belgian and French governments stepped in to restore some stability and confidence in the plaintiff with an injection of a further capital of EUR5.5 billion. It transpires that with the support of the two states together with Luxembourg, a restructuring plan was conceived to facilitate an orderly resolution of the Group to reduce the risk profiles of some of its businesses and to enhance its balance sheet structure (Bohet 1^st A/17: para 7 ).

8. In 2011, due to the fall‑out from the sovereign debt crisis pervading in Europe the plaintiff was further buffeted with pressures on it liquidity position in consequence of the downgrading of its credit rating status.  This in return precipitated the Group having to carry out an orderly resolution plan whereby it was required to dispose of its commercial franchises and to run‑off its residual assets with the viability of the plaintiff in the interim being buttressed by a funding guarantee of EUR85 billion by the three countries, namely, Belgium, France and Luxembourg.  As part of that orderly resolution plan, the plaintiff was required to arrange to dispose off its investment management arm, Dexia Asset Management Group (DAML), which was and had been a major international player in the asset management industry.  This sale was required to be completed by 31 December 2013 (Bohet 2^nd A/17: paras 8‑11).

9. Some of the defendants, said to be the 1^st and 3^rd defendant, are by and large Special Purpose Vehicles (“SPVs”) incorporated for the purpose of effecting the underlying transaction and/or incorporated for that specific purpose.  This is the subject matter of the intended Belgian proceedings, namely, the purchase of DAML ultimately by the 1^st defendant.  It would appear that all these entities are part of what has been described as the GCS Capital Group, at the head of the corporate structure bring an entity called GCS Capital Ltd. 

10. The 1^st defendant was incorporated in Luxembourg, the 2^nd and 4^th defendants in the Cayman Islands, whilst the 3^rd defendant was incorporated in Hong Kong.  The two key persons behind the GCS Group involved with this matter would appear to be Mr Guocang Huan (Huan) and Mr Mike Powell, both of whom are said to be the co‑founders of GCS Capital (“GCSC”), which is said to be an established private equity investment fund apparently supported by large institutional investors from Greater China and the Middle East.  GCSC is based in Hong Kong with offices in London and Beijing (Huan 1^st A/76-7: paras 4- 6).

11. From the third quarter of 2011 and during the course of 2012, the plaintiff arranged for a competitive auction process to be undertaken to solicit offers internationally from interested purchasers of DAM in order to find a suitable buyer at the best possible price.  The various bidders went through a selection process which involved those selected to sign a non‑disclosure agreement; this was followed by a second phase with a shortlist of just five potential purchasers being subject to management presentations and interviews.  The field was eventually narrowed down to three potential buyers.  In November 2012 the plaintiff was selected and proceeded to enter into exclusive negotiations with the GCSC Group.

12. By a sale and purchase agreement dated 12 December 2012 (the SPA), the plaintiff agreed to sell to the 1^st defendant the total issued and outstanding capital of DAML for an initial purchase price of EUR380,000,000 with a provision for a later adjustment of the price to reflect inflow and outflow of assets under the management of DAML between 30 September 2012 and the date of completion.  The completion date was defined by reference to a number of condition precedents that were set out in clause 3 of the agreement (Bohet 1^st B/1: Tab 5).  The SPA expressly provided that it was governed by Belgian law and that the Belgian courts had exclusive jurisdiction to hear all disputes arising under the SPA without prejudice to any party seeking interim relief from any other court of competent jurisdiction (clauses 25 and 26).

13. In order to carry out the SPA, the GCSC Group employed the SPVs.  They were expected to finance the transaction with equity and debt commitments from third parties such China Life (Overseas) Company Ltd (“China Life”), Industrial and Commercial Bank of China (“ICBC”) and AWAB Enterprises (“AWAB”), a Qatari company.  Linked with the ruling royal family in Qatar

14. This arrangement was buttressed by a letter dated 12 December 2012 (“the Equity Commitment Letter”) signed by the plaintiff and the defendants whereby the 2^nd and 3^rd defendants undertook to the plaintiff and 1^st defendant that they would ensure there would be sufficient and immediately available funds to the 1^st defendant to the extent of EUR230 million to enable it to pay the initial purchase price.  The 2^nd and 3^rd defendants also undertook to ensure that the necessary financing would be in place before the completion date.  The 4^th defendant was obligated to drawdown the full amount of US$200 million which had been committed by China Life into the account of the 2^nd defendant. 

15. All the conditions were apparently completed and satisfied by 29 May 2013.  Accordingly on 18 June 2013, the plaintiff sent a letter to the 1^st defendant informing it that completion was to take place on 28 June 2013 at the offices of their solicitors, Allen & Overy, in Brussels (B2/285).

16. By 21 June 2013, it became apparent that the AWAB equity commitment of EUR200 million to the 3^rd defendant was not going to be forthcoming, and representatives of the defendants informed the plaintiff of the same.  There was an exchange of correspondence between the parties relating to this failure of AWAB to meet its commitment (B2/287-297). 

17. By a letter dated 28 June 2013, the plaintiff notified the 1^st defendant that it was in breach of the SPA in failing to complete the transaction on the stipulated completion date and holding the defendants fully liable for all loss and damages occasioned by their breaches which were identified.  The plaintiff, as it was entitled to under clause 7.5(b)(ii) of the agreement, fixed 12 July as the new date for completion (Bohet 1^st : A/23-4; paras 35-6). The defendants were reminded to take all necessary steps to ensure compliance by AWAB of its equity commitment obligations. 

18. Between 1to 9 July 2013 there was an exchange of correspondence between the plaintiff and the defendants whereby the plaintiff exhorted the defendants to ensure that AWAB would carry out its obligations; on the other hand the defendants apparently sought to explain their position that they were pressing AWAB to fulfil their obligations but were desisting from instituting legal proceedings against AWAB.  The completion again did not take place on 12 July 2013.

19. On 15 July 2013, the plaintiff sent another letter to the defendants whereby it exercised its option to extend the completion date to 29 July 2013.  It asked the defendants to remedy all the breaches so that completion could take place on the scheduled new stipulated date (B2/348-9).  However, the completion did not take place on this date either, and in fact not at all.

20. Consequently, by letter dated 30 July 2013, the plaintiff notified the defendants that the SPA was terminated due to their repeated breaches in failing to complete the transaction on the stipulated completion dates and reserving all their rights and interests against them (B2/509-10).  On the same day, ie 30 July 2013, the plaintiff sought an ex parte Mareva injunction in Hong Kong and obtained the same from Tong J in the terms as set out in para 1 above. 

C.   EVENTS SUBSEQUENT TO TONG J’S MAREVA ORDER

21. On the return day before Mimmie Chan J on 9 August 2013, she made an order in consequence of which the following further evidence was filed by the parties:

(a)  Huan’s 1^st affirmation dated 23 August 2013 in opposition to the plaintiff’s application to continue with the Mareva injunction order and in support of the defendants’ application to discharge the same;

(b)  affirmation of Joost Everaert (“Everaert”) dated 2 October 2013 responding to Huan’s affirmation;

(c)   Bohet’s 2^nd affirmation dated 2 October 2013 also in response to Huan’s affirmation;

(d)  Huan’s 2^nd affirmation dated 17 October 2013 in support of the discharge application and in response to Bohet’s 2^nd affirmation; and

(e)   affirmation of Karel de Boeck (“Boeck”) dated 28 October 2013.[1]

22. Furthermore, since the ex parte application, the following events had transpired:

(i)   The plaintiff apparently received an offer from one of the original bidders, New York Life (“NYL”), on 1 August which led to a press release about the exclusive negotiations on 19 September for the sale of DAML (B3/635).  This eventually culminated in the signing of a sale and purchase agreement between the plaintiff and NYL on 25 September 2013 and made the subject matter of a press release of the same date (B3/637). The purchase price was stated to be EUR380 million, which was higher than the purchase price in the SPA with the defendants as it did not have a price adjustment clause.  The finalisation of the transaction was still subject to regulatory clearance and approvals as well as various conditions precedent (Bohets 2^nd: A/62-3; paras 36-41).

(ii)  On 17 September 2013 the plaintiff apparently received an offer from Finex (BVI) Limited (“Finex”), a company which it is said was previously unknown to the plaintiff, offering to step into the shoes of and complete the transaction on behalf of the defendants on the same terms and price but with a requirement that the plaintiff waive any claims it may have against any of the defendants.  This was followed up by a letter of 18 September 2013 along similar lines to the previous letter, but this time offering to show proof of funds to the extent of the purchase price of EUR380 million by the 27 September, failing which they would pay the plaintiff a penalty of US$10 million. The plaintiff was also required to confirm that they would only be conducting negotiations exclusively with Finex (B3/630-3).

(iii)  By a letter dated 19 September 2013, the plaintiff responded to the Finex offer by indicating that the plaintiff was not able to give the confirmation of exclusivity in negotiations at the present time and would therefore decline the offer (Bohets 2^nd: A/64-5; paras 47-54).

23. Mr Ashley Burns SC, leading counsel for the plaintiff who appeared together with Mr Roger Beresford, informed the court that since the ex parte hearing the plaintiff had commenced proceedings in the Belgian Commercial Court on 14 August 2013.  I was informed that the draft writ exhibited to the 2^nd affirmation of Bohets (B2/350) is the same as the writ eventually filed in the Belgian court. 

24. The plaintiff’s principal argument was that there cannot be any dispute on the issue of liability for the breaches of the SPA by the defendants.  It was their contention that the defendants had clearly failed to complete the transaction within the stipulated completion dates despite the fact that they had been extended twice.  According to Mr Burns SC, the 1^st defendant failed in respect of its purchase obligation whereas the 2^nd to 4^th defendants failed in respect of their financing obligations.  As he put it, the only live issue was the quantum of damages claimed by the plaintiff.  This, it was argued comprised of two limbs (i) the diminution in value of DAML in consequence of the defendants’ breaches of the SPA which was estimated to be about EUR60 million; and (ii) the wasted costs incurred by the plaintiff in respect of the failed transaction with the defendants which was claimed to be EUR2,626,175.41. 

25. It was contended by the plaintiff that the quantum of damages was essentially a matter for the Belgian courts. It was argued that the Hong Kong courts should be slow to interfere by speculating as to what damages would be eventually awarded in the absence of any evidence to the contrary of the applicable Belgian law referred to in the 1^st affirmation of Bohets (A/25-28; paras 44-49). 

26. Underlying the damages claim for the diminution in value of DAML due to the failed transaction was the assertion that in consequence of the failure, there had been a decrease in respect of the assets under management by DAML.  According to Bohets this decrease was at least EUR60 million less than the price agreed under the SPA with the defendants.  It was asserted that this estimated diminution of assets under management would be at the same rate as the diminution between the announcement of the SPA until at the very least mid‑2013 and which would not have been exacerbated by the announcement of the failed transaction. 

27. Mr Burns SC argued that the plaintiff had established a good arguable case which justified the grant of the Mareva order by Tong J.  Similarly, he argued that on the evidence filed before thecourt there was no dispute that the court had jurisdiction to grant the Mareva injunction.  It was further argued on behalf of the plaintiff that it would only be right and proper for the Mareva injunction to be continued until the conclusion of the Belgian proceedings or further order.

28. It was the plaintiff’s case that it had demonstrated that there were assets belonging to one or more of the defendants within the jurisdiction.  In this regard my attention was drawn to the account number specified in CCB and the credit advice dated 21 April 2011 involving a remittance receipt in the sum of US$86,246,152.07 to that account in the name of Great China Strategic Capital LP sent by China Life (B2/297). It would appear that this was the name of the 2^nd defendant before it was changed to its present name on 31 January 2012 (Huan 1^st: A/86 para 33; B3/743).  My attention was also drawn to an account in the name of the 3^rd defendant indicating a balance of US$31,263,753.47 as on 24 May 2013 (B2/296).

29. By a letter dated 31 July 2013, CCB confirmed to the plaintiff’s solicitors that the bank accounts of the 2^nd to 4^th defendants maintained with the bank had been frozen, presumably in the light of Tong J’s Mareva injunction order.

30. The next platform of the plaintiff’s argument in support of the continuation of the Mareva injunction was that there was a real risk of dissipation of any of the defendants’ assets within the jurisdiction.  The thrust of this argument was that having regard to the nature of the assets, which was essentially cash, they were easily moved around particularly given that they involved companies incorporated in the Cayman Islands, and thereby would become difficult to trace.  It was contended that given the structure of the transactions which involved funds being channelled through a variety of entities such that they could be transferred through unidentified ‘affiliated and associated entities.’

31. Mr Burns SC argued that there were question marks about the nature of the businesses of the various defendants and that Huan does not condescend to fully explain this in his affirmations.  He argued that Huan claims to be associated with GCS Capital Limited as its CEO and managing partner, which is not party to the SPA, but would appear to nevertheless control the defendant companies.  At the same time Huan claims the company and the defendants are part of “GCS Capital” which is said to be a ‘group of affiliated and associated entities running a private investment fund (Huan 1^st: A/75 para 1].

32. Mr Burns SC points out that although Huan asserts that GCS Capital “is an established equity investment fund which is supported by large institutional investors from greater China and the Middle East with significant financial and strategic resources” (A/76 para 4), it is not clear what sort of an entity this animal really is—whether it is a legal entity or a partnership.  All this he submits heightens the plaintiff’s concerns that GCS Capital is ‘shadowy to say the least’ and raises a high index and suspicious spectre as the nature, financial standing and apparent lack of substance of the defendant companies.

33. These concerns, he argues, are exacerbated further by the offer letter from Finex dated 17 September 2013 (B3/630) whereby it offered to ‘step into and close the transaction negotiated by GCSC.’ He submits that the very fact that it is suggested that the SPV structure that had been specifically designed for the transaction was freely transferable to a third party further highlights the risk of dissipation of the assets of the defendants to unknown parties outside the jurisdiction of Hong Kong.

34. He further submits that the court is entitled to look at the domicile of the defendant companies in considering the question of whether there is any risk of dissipation of assets within the jurisdiction.  However it is to be noted that in the present case that although the 1^st defendant was incorporated in Luxembourg, Huan explains that this was required by the regulators, and no challenge appears to be taken about that explanation on the evidence before me. 

35. However Mr Burns SC argues that the 2^nd to 4^th defendants were all incorporated in the Cayman Islands and it is suggested that the court should be more inclined in respect of offshore companies to draw the inference of a real risk that the judgment may go unsatisfied.  In this regard reliance was placed on the following remarks by Lord Denning MR in Third Chandris Shipping Corporation v Ultramarine (1979) QB 645 when giving guidelines as to the matters that should be borne in mind when parties apply for a Mareva:

“The mere fact that the defendant is abroad is not by itself sufficient... But there are some foreign companies whose structure invites comment. We often see in this court a corporation which is registered in a country where the company law is so loose that nothing is known about it – where it does no work and has no officers and has no assets. Nothing charges on them. Judgment cannot be enforced against them. There is no reciprocal enforcement of judgments. It is nothing more than a name grasped from the air, as elusive as the Cheshire Cat. In such cases the very fact of incorporation there gives some ground for believing there is a risk that, if judgment or an award is obtained, it may go unsatisfied. Such registration of such companies may carry many advantages to the individuals who control them, but they may suffer the disadvantage of having a Mareva injunction granted against them. The giving of security for a debt is a small price to pay for the convenience of such a registration.” (at p 669)

36. It was contended that the Cayman Islands registered defendants came under this category.  I was also referred to McGhee on Commercial Injunctions,5^th Edn, para 12.039 to reinforce this aspect of the submission.

37. Mr Burns SC then went on to address the defendants’ application and arguments to discharge the Mareva injunction granted by Tong J.  He pointed out that although no grounds as such are identified in the defendants summons to discharge the Mareva, the application appeared to be based on the alleged failure by the plaintiff to disclose to the court three matters under its duty to make full and frank disclosure:

(a)  the existence of a Quistclose trust in respect of the funds lying in the defendants’ bank accounts;

(b)  the perilous financial position of the plaintiff; and

(c)   the unsustainability of the plaintiff’s claim for damages. 

38. It was the plaintiff’s submission that if all the surrounding facts are analysed properly and in their context, the defendants argument in respect of the Quistclose trust was wholly misconceived and wrong.  It was argued that just because money is paid for a particular purpose does not necessarily mean a Quistclose automatically trust arises in each case.  Whether there is such a trust or not would depend on whether the parties intended for the money to be at the free disposal of the recipient or whether the intention was to exclude such freedom of disposal but instead mandate that it be used exclusively for the stated purpose.  It is only in the latter event that a Quistclose trust can be said to arise. Reliance was placed on the speech of Lord Millett in Twinsectra Ltd v Yardley (2002) 2 AC 164:

“A lender will often inquire into the purpose for which a loan is sought in order to decide whether he would be justified in making it. He may be said to lend the money for the purpose in question, but this is not enough to create a trust; once lent the money is at the free disposal of the borrower. Similarly payments in advance for goods and services are paid for a particular purpose, but such payments do not ordinarily create a trust. The money is intended to be at the free disposal of the supplier and may be used as part of his cashflow. Commercial life would be impossible if this were not the case.” (at p185, para 74)

39. It was the plaintiff’s contention that the documentation produced by the defendants simply does not show an intention to create any trust.  It was said that it is unclear how the moneys in the two relevant accounts came to be there or pursuant to what arrangements or agreements the moneys were paid or received.  In the light of this uncertainty, it was argued that it would be difficult to make any assumptions about the intentions of the parties or assume/infer that a Quistclose trust arose in respect of the funds lying in the two relevant bank accounts and that the plaintiff was under an obligation to raise this issue before Tong J when applying for the Mareva injunction.

40. It was pointed out that the defendants’ letter of 26 June 2013 (B2/292) to the plaintiff referred to a sum of EUR30 million that was claimed to have already been made available from China Life into the account of the 2^nd defendant. The documents relied upon by the defendants in that letter relate to a savings deposit slip of US$31,283,753.47 into the account of presumably the 3^rd defendant; whilst the other document relied upon, is a credit advice dated 21 April 2011 in the sum of US$86.246,152.07, after deduction of bank charges into the account of the 2^nd defendant. 

41. Mr Burns SC argues that there is simply no evidence that the 2011 and 2013 ICBC records relate to the transaction in issue in this case.  He argues that if one looks at the Equity Commitment Letter and Schedule 2 and the various documentation attached to it (B1/86), the structural arrangement was for an equity commitment of EUR200 million from AWAB, a loan of EUR150 million from ICBC, an equity commitment of EUR50 million from Orient International Resources Group (Orient) and a capital commitment of US$200 million by China Life. 

42. It was argued that the entity Great China Strategic Capital (GP) LP, which was a party to the subscription agreement (B1/141-7) was not the same entity as the 4^th defendant, Great China Strategic Capital LP, who is the account holder of the ICBC account.  It was further contended that the subscription agreement reflects a purchase of limited partnership interests in the 3^rd defendant with the capital commitment, suggesting a purchase of shares and therefore was not a loan or trust. 

43. The plaintiff’s argument runs that the defendant has not adduced any evidence to suggest that that the purchase of the shares in the 3^rd defendant had failed, or any evidence that the capital commitment was advanced on the condition that if the purchase failed the money was to be returned or that the 3^rd defendant was only entitled to use the money exclusively for the transaction in question and nothing else.  It is argued that as the defendants raise this argument now, the onus is on them to present the compelling evidence in support of their assertions. 

44. It is said that neither the SPA nor the documents attached to it support any Quistclose trust.  The ICBC facility letter (B1/95) provided a “non‑amortizing five year multiple draw term facility to make loans to GCS Capital’s SPV of EUR150 million acquisition finance”.  This it was argued is the type of quintessential loan that Lord Millet was referring to in the Twinsectra case which did not create a Quistclose trust.

45. It was argued that the neither the AWAB commitment letter (B1/121) nor the Orient equity commitment letter required any funds they committed to be strictly kept separately from the other moneys in the 3^rd defendant’s accounts.  In such circumstances, it was said that there was no reason for the plaintiff to believe the funds in the bank accounts of the defendants had a Quistclose trust element imposed on them that required the plaintiff to draw this to the attention of Tong J when applying for the Mareva injunction.

46. It was argued by Mr Burns SC that even assuming the funds were paid or transmitted for the particular purpose of the SPA, the obligations of the 1^st and/or 3^rd defendant had yet to be fulfilled.  Accordingly, it was argued, that the purpose for which the commitments were made had not failed.  Reliance was placed on the following passage in the speech of Lord Diplock in Photo Production v Securicor Ltd (1980) AC 827:

“Every failure to perform a primary obligation is a breach of contract. The secondary obligation on the part of the contact breaker to which it gives rise by implication of the common law is to pay monetary compensation to the other party for the loss sustained by him in consequence of the breach.” (at p 850C)

47. The plaintiff contends that the defendants still have the secondary obligation to pay damages for breach of contract, and have therefore not discharged their obligations.

48. As regards the question of whether the plaintiff failed to fully and frankly disclose its financial position to Tong J when applying for the Mareva, it was argued that the plaintiff was backed by the French and Belgian governments and it was unlikely that the plaintiff would cease to exist by the time the Belgian proceedings would have concluded. 

49. It was argued that Bohet in his affirmation had clearly spelt out the fact that the plaintiff was in ‘orderly resolution’ and that there was also a funding guarantee by Belgium, Luxembourg and France governments of EUR85 billion vouching for the plaintiff’s financial viability (A/17: paras 7-10).  Reliance was also placed on the report from the plaintiff’s auditors (which was unqualified) and as to why it was said that it was justified to treat the plaintiff’s accounts on a ‘going concern’ basis.  Accordingly, it was contended that there was simply no basis for the defendants to argue that the plaintiff had failed to make full and frank disclosure of its financial position before Tong J.

50. An associated but separate complaint about failure of the plaintiff’s duty of full and frank disclosure was a point raised in the defendants’ skeleton submissions (paras 44-46) filed in support of their discharge summons.  This was to the effect that the plaintiff had failed to disclose to Tong J an offer letter attached to an email from Oddo & Cie to the plaintiff to purchase DAML on 29 July 2013 (B3/629-1 to 629-9), one day before the hearing of the Mareva application on 30 July 2013 as well as an earlier offer letter dated 12 July 2013 (B3/787) from an entity known as Ramphastos Investments Management B V offering (“Ramphastos offer”) to inject EUR230 million in order for the transaction between the plaintiff and the defendants to proceed and be completed.

51. The gravamen of the complaint here was that Bohets had failed to draw the attention of Tong J about the Oddo & Cie offer which purported to purchase DAML at almost the same price as that which the defendants had agreed to pay under the SPA.  It was the defendants’ contention that these offers should have been placed before the court at the ex parte stage, and the fact that the plaintiff did not do so is said to be “a significant failure by the plaintiff in its duty of full and frank disclosure”.  It was the defendants’ case that each of these failures was sufficient on their own for the injunction to be discharged, but cumulatively presented an overwhelming case for such a discharge.

52. Mr Burns SC’s response to this was to emphasise the importance and the need to keep in mind the time‑line when the offer came to the notice of the plaintiff and the time when the Mareva was granted the next morning.  In this regard he points out that the email with the offer letter attached was only sent out at 1433 hours of the afternoon of 29 July, which according to the affirmation of Boeck only came to his notice at sometime around 2200 hours that evening due to his other commitments.  Upon reading it, he then forwarded it, amongst others, to Bohets at 2213 hours that evening. 

53. Boeck claimed that he was only able to discuss this with Bohets on the morning of 30 July, by which time the Mareva had already been granted by Tong J.  It was further argued that by the time Bohets had made his affirmation on 29 July, he would not, and did not, have notice of this offer so it was not something the plaintiff could have drawn to the court’s attention at the time of the Mareva hearing.  The SPA under the Ramphastos offer letter was only sent to Boeck the following morning. 

54. Given the time difference between Hong Kong and Europe and the fact that when the offer came to the attention of Boeck it would be in the middle of the morning in Hong Kong, I am inclined to agree with Mr Burns SC that it would be unreasonable and impractical to suggest that the failure to mention the Oddo & Cie offer to Tong J was tantamount to failure to make full and frank disclosure by the plaintiff when obtaining the Mareva from Tong J. I therefore reject the defendants’ arguments that the Mareva should be discharged by reason of the failure by the plaintiff to draw to the attention of the court the Oddo & Cie offer on 30^th July. 

55. As regards the Ramphastos offer letter, the plaintiff’s argument was that the fact Huan made various proposals was not a matter that was required to be drawn to the attention of the court as none of the proposals of Huan ever materialised into anything. I note that the Ramphastos offer letter dated 12 July was addressed to the 3^rd defendant only.  However, it appears to be common ground that this offer was discussed between Huan (A/100: para 12((a)(i)) and Boeck (Boeck, para 8) in Paris on 23 July 2013, but nothing concrete seems to have resulted.  I note that there is no explanation from Huan as to why the Ramphastos offer did not go any further.

56. The defendants argue that the Ramphastos offer also has a further significance in that it shows that despite the failed deal between the plaintiff and the defendants, the market still perceived the purchase of DAML purchase as a “good deal”.  Accordingly, it is argued, that this impacts on the quantum of damages the plaintiff would allegedly suffer, if any, and therefore on the quantum of moneys to be subjected to and injuncted under the Mareva.  A similar point was made about an offer by Finex dated 17 September 2013.  I will address this aspect of the argument and its implications later in this judgment.

57. Between the grant of the Mareva by Tong J and the hearing before me on 29 October 2013, the plaintiff had entered into a SPA with NYL.  The plaintiff’s contention is that as the transaction has not been completed, it would be premature to take this into account in evaluating the damages claim of the plaintiff.  It is argued that it would be premature to take the NYL sale into account at this stage, as there were a number of uncertainties surrounding whether the transaction would eventually complete as well as the ultimate price that would be paid, in the light of the onerous indemnification conditions that the plaintiff was required to undertake in securing NYL to enter into an agreement.  The court was invited to continue the Mareva freezing the moneys on the same terms until the sale was completed.

58. Although the full terms of the NYL SPA were not disclosed or provided to the court, Bohets did confirm that the price payable under that agreement was higher than the price payable under the SPA with the defendants, which he claims was due to the exceptional efforts by the plaintiff in committing a significant amount of time, resources and effort in order to expedite the transaction (Bohets 2^nd: A/62-3; paras 36, 37 and 40).

59. It is further the plaintiff’s case that even if the transaction with NYL proceeds to completion at a higher price, this does not necessarily affect the plaintiff’s claim for damages against the defendants for the additional costs that it has incurred by reason of the additional costs the plaintiff has incurred as a result of the aborted transaction with the defendants.  In this regard, reliance is placed on what is asserted by Everaert, a Belgian qualified lawyer, as to the entitlement under Belgian law for a party who has taken actions far in excess of what a normally prudent and diligent party who is the victim of a contractual breach would be expected to undertake in the circumstances.  He asserts that by reason of this, it was arguable that the plaintiff would be entitled to persevere with their claim against the defendants for those wasted additional costs and expenses incurred by them due to the defendants breach even if the NYL transaction proceeds to completion (A/72; paras 17-20).

60. In essence the plaintiff’s submission was that these are all matters of Belgian law and that the Hong Kong courts should not be engaging in a quantum assessment at this stage.  Instead it was argued that the court should simply maintain the status quo until at the very least the completion of the NYL sale.

61. Mr Peter Clayton SC appearing with Mr John Hui for the defendants drew the court’s attention to the fact that a Mareva injunction was one of two nuclear weapons in the legal armoury which was both highly intrusive in nature and draconian in its impact.  Accordingly, it was contended that a Mareva should only be granted or continued if there was a real risk of dissipation of assets before judgment so that the plaintiff is not left with a barren judgment at the end of the day.

62. It is well established that the Mareva is not intended to provide the plaintiff with security in advance of judgment, but only to ensure that there is no risk of dissipation of assets in the interim.  Reliance was placed on the following dicta of Lord Donaldson MR in Polly Peck International plc v Nadir (No 2) (1992) 4 All ER 769:

“(2) It is not the purpose of a Mareva injunction to prevent a defendant acting as he would have acted in the absence of claim against him… Equally no defendant, whether a natural or juridical person can be enjoined in terms which will prevent him from carrying on his business in the ordinary way or from meeting his debts as they come due prior to judgment being given in the action. (4) It is not the purpose of a Mareva injunction to render the plaintiff a secured creditor.” (at p 685)

63. It is trite law that a concomitant obligation upon a plaintiff in obtaining a Mareva injunction is the requirement that the party acts in the highest good faith.  The plaintiff is under a strict duty to make full and frank disclosure and draw the attention of the court to all relevant matters that would be material in arriving at its decision as to whether or not to grant the Mareva. 

64. Mr Clayton SC’s criticisms of the plaintiff’s failure to make full and frank disclosure were directed at three specific areas:

(a)  a failure to disclose to the court that there was a Quistclose trust which arose in respect of the funds in the defendants’ bank accounts and therefore should not and cannot be the subject matter of an injunction;

(b)  failing to draw the court’s attention to the precarious financial position of the plaintiff which would, inter alia, impact on their cross‑undertakings as to damages; and

(c)   failing to draw the attention of the court to the fact that the basis of the plaintiff’s damages claim was unsustainable and failing to place matters before the court that compounded that unsustainablity.

Quistclose trust

65. Mr Clayton SC’s primary submission was that the Mareva could only be on the defendants’ assets.  He argued that on the evidence adduced by the plaintiff in the form of Bohets 1^st affirmation, it was clear that the funds in the accounts of the 3^rd and 4^th defendants were moneys belonging to others which was passing through the SPV structure which had been specifically designed for the SPA transaction.  This was a structure that had been accepted and approved by the plaintiff and the regulators in France, Belgium and Luxembourg and therefore should evoke no suspicion. 

66. It was argued that the funds from Orient, ICBC in the accounts of the 2^nd and 3^rd defendants were all for and held for the specific purpose of the SPA transaction.  Once the purpose failed, it is said, the obligation on the part of the defendants was to return the money, as it is not their money.  He seeks to distinguish the Photo Production case relied upon by the plaintiff on the basis that involved obligations for contractual breaches, whereas in the present set of circumstances the obligations arising are in the nature of a trust.  This was something that it is said the plaintiff was duty bound to draw to the attention of Tong J when applying for the Mareva, but which they had failed to do so. 

67. In my view, the defendants argument on the Quistclose trust is misconceived.  The evidence of Huan clearly states that 2^nd and 4^th defendants “participate and invest in many projects at the same time.  They process and manage substantial amount of funds, and the 4^th defendant makes business and investment decisions, as part of its daily operations.”  (Huan 1^st: A/85-6; para 32)

68. This clearly suggests that the funds which were deposited into the accounts of the defendants were in the nature of general funds which were at the discretion, control and direction of the defendants and not controlled by the various parties who were providing and depositing the various funds.  Clearly, these were sums of money at the complete disposal of the defendants and there was obviously intermingling of funds that were placed with them from time to time.  As Huan himself puts it, the fund investment from China Life is not limited to the SPA Transaction.  He furthermore categorically states that the funds put into the 2^nd defendant by China Life were in 2011, which was long before the SPA Transaction.  He speaks of a long term strategic relationship with between GCS Capital and China Life, which would suggest that the SPA Transaction was not the only business dealing between them over the years (Huan 1^st A/86; paras 33-4).

69. I disagree that there were any of the hallmarks of a Quistclose trust in respect of the funds lying in the accounts of the 2^nd and 3^rd defendants. I am also not satisfied that this was something that the plaintiff should have been aware of and/or drawn to the attention of Tong J when applying for the Mareva.  I find it difficult to envisage why the plaintiff or for that matter any independent observer faced with these same set of facts would have considered that the funds lying in the accounts of the 2^nd and 3^rd defendants were not their money at their free disposal but instead sums of money which were imprinted with the imprimatur of a Quistclose trust.

70. I accordingly reject the defendants arguments that there was a failure of full and frank disclosure by the plaintiff on the Quistclose trust ground.

Financial Position of Dexia

71. Mr Clayton SC argues that the plaintiff was leaking like a sieve and that its financial situation was critical.  He argues that although the plaintiff may have been a substantial financial institution in the past, by 2013 it was a company in ‘orderly resolution.  He argues that this may be an euphemistic way of saying that it was winding down its operations, but complains no proper and clear explanation was forthcoming from Bohets as to what exactly this phrase means. He argues that for Bohets to assert that the plaintiff was financially sound was both misleading and incorrect.

72. In his 2^nd affirmation Bohets explains that when he stated that the plaintiff was financially sound he was addressing the question of whether the plaintiff would be able to meet its obligations arising from its cross-undertakings as to damages in the event it is found that the Mareva should not have been granted.  He goes on to explain that as of 30 June 2013, the ‘Core Shareholders Equity’ was at EUR10,146 million and that the ‘Total Shareholders Equity Group Share’ amounted to EUR3,106 million (A/57: paras 7-9).

73. I have carefully considered the arguments of Mr Clayton SC on this issue and examined the various accounting documentation reflecting on the financial status of the plaintiff. It is undisputed that the plaintiff was reeling first from the 2008 crisis which resulted in the closure of the interbank market’s liquidity.  It was then further affected by the European sovereign debt crisis in 2011 and clearly was an institution that was attempting to avoid a meltdown which would have posed systemic risks to the European banking system.

74. What is of significance in this regard is that the financial stability of the plaintiff was considerably improved by the injection of EUR5 billion by the French and Belgium states in December 2012.  Furthermore, its financial viability was further assured by the funding guarantee of a maximum of up to EUR85 billion by France, Belgium and Luxembourg.  In my view this financial lifeline by the three states addresses whatever concerns and complaints that the defendants have about the financial viability of the plaintiff if called upon to honour their damages undertaking.

75. Looking at the matter in the round, I am satisfied that there was no failure by the plaintiff to present to Tong J a full, frank and accurate picture of the plaintiff’s financial status.  On the contrary, I am satisfied that the plaintiff has taken all proper and necessary steps to present to the court a candid and realistic picture of the plaintiff’s financial position. 

76. I therefore reject the defendants complaint of failure by the plaintiff to make full and frank disclosure of its financial status and as to its capability or otherwise to honour its cross-undertakings as to damages.

Unsustainable Damages Claim

77. Mr Clayton SC launched a blistering attack on the purported damages claim of the plaintiff complaining that the claim was grossly exaggerated, entirely speculative and clearly unsustainable. 

78. The basis of computation of the plaintiff’s potential damages claim is premised on Bohets assertion that that any sale of DAML in the future would most likely be at a ‘substantially lower’ price than that agreed under the SPA with the defendants.  Bohets states that since the announcement of the sale to the defendants in December 2012, the ‘assets under management’ of DAML had apparently decreased by EUR32.33 million which would have warranted a reduction in the sale price to the defendants of that amount, if the SPA had been proceeded with.

79. He asserts that the announcement by the plaintiff on 24 July 2013 that the sale to the defendants would not take place would have had a negative impact on the DAML franchise and in particular the assets that would come under its management. This in effect would affect the price at which the franchise could be sold in the future to any third party.  He suggests that it may take an estimated lead time of a year to complete any new sale.  He then estimates that by the time any successful sale is completed a year ahead, the ‘assets under management’ would decrease by a similar magnitude and postulates that the sale price under the new agreement would be at least EUR60 million.  He suggests that this was a conservative estimate as it assumes that the decrease would continue at the current rate and not be aggravated by the announcement of the failed sale to the defendants (A/28: para 47(b)). 

80. Bohets then produced some calculations reflecting the position of the plaintiff between December 2012 and June 2103 and claims that this supports the underlying basis of the plaintiff’s damages claim (B2/363-374).  The additional damages claimed sum of EUR2,220,175.11 is said to represent the costs that the plaintiff had expended in respect of the aborted SPA with the defendants (A/27: para 47(a)).

81. The defendants also rely on the fact that there were other offers from Oddo & Cie and from Ramphastos that show that any potential loss could not be as much as the plaintiff alleges it may be.  The Oddo & Cie offer was to complete the transaction at almost the same price as the SPA with the defendants but at the very maximum EUR40 million less.  On the other hand the Ramphastos offer was to purchase at the same price as the SPA with the defendants.

82. I have already earlier explained why I did not consider the failure by the plaintiff to refer to the Oddo & Cie offer to Tong J on the morning of 30 July 2013 as understandable and not a breach of the plaintiff’s obligations of making full and frank disclosure.  In relation to the Ramphastos offer of 12 July 2013 Huan says he discussed this offer with Boeck on 23 July 2013 in Paris.  I note that Boeck confirms these discussions with Huan but claims nothing materialised from them and which is why he lost faith in what whatever Huan said (paras 8-11).

83. In my view the significance of the Ramphastos offer lies not in whether it was proceeded with or otherwise.  The real significance lies in the fact that despite the fact that the SPA with the defendants was not being proceeded with, the market sentiment and perception appeared to be that the purchase price payable for DAML was considered to be an acceptable one, as the Ramphastos offer was to complete the purchase at the same price as the SPA with the defendants. 

84. This clearly has implications on the level of potential damages that the plaintiff was likely to sustain.  It also impacts on the projection by Bohets of a spiralling downward pressure on the purchase price that would be attainable by the plaintiff in any subsequent sale.  The fact that an offer at the same price had been made is arguably something that should have been drawn to the attention of the court when the Mareva was being applied for as it could possibly have a bearing as to whether the potential loss of damages as projected by Bohets was a realistic one.  It is arguably a matter that the judge hearing the Mareva application would weigh in the balance when considering whether and the extent of the amount of funds that should be frozen. 

85. There is no explanation forthcoming by the plaintiff as to why this was not drawn to the attention of Tong J. In his 2^nd affirmations Bohets does allude to the Ramphastos offer, and the only observation he makes is that the offer letter is addressed to the 3^rd defendant and that nothing resulted from the offer. No explanation is given as to why the fact there was an offer at the same price made after the aborted sale to the defendants was not mentioned to Tong J.

86. Given that apart from the fact of offer by Ramphastos on 12 July 2013 nothing further developed from it by the time the matter came before Tong J on 30 July 2013, it is difficult to say what, if any effect, the revelation of that offer would have had in Tong J’s assessment of whether to grant the Mareva and the amount that should be the subject matter of the injunction. 

87. Looking at the matter in the round, I am not prepared to say that the failure to mention the Ramphastos offer to Tong J is tantamount to a serious and deliberate breach of the plaintiff’s obligations to make full and frank disclosure of all relevant and material facts.  Further, that as a result of such failure the Mareva should be discharged on that ground.  I would rather adopt the approach of taking account of the Ramphastos offer together with the offers from Oddo & Cie, Finex and NYL in the context of considering whether the Mareva should be continued and/or as to the amount that should be the subject matter of the freezing order. 

88. As stated earlier, by the time the matter came for hearing before me the plaintiff had received an offer from NYL which was effectively EUR40 million more than the SPA with the defendants.  Since the aborted transaction with the defendants, the picture that emerges clearly is that the failure of that transaction does not appear to have had a negative impact on the sale price of DAML and that there would appear to be bidders who were prepared to purchase it at either the same (Ramphastos) or higher price (NYL).

89. This contrasts with the rather gloomy and depressing picture that Bohets had projected in respect of any future sale in the light of the aborted transaction with the defendants. I have carefully examined the various documents relied upon by Bohets for the projected potential damages claim of the plaintiff (B2: 363-374).  I agree with Mr Clayton SC when he complains that these documents are rather difficult to read being almost microscopic in print and are certainly incomprehensible without the benefit of any explanation.  Bohets just exhibits them in his 1^st affirmation without any explanation as to how these documents help support the assertion that the loss would be as much as EUR60 million.

90. There is equally no explanation as to why Bohets projects a loss over a period of a year, when on his own evidence he categorically states that as part of the orderly resolution the transaction for the sale of DAM by the plaintiff “must take place before 31^st December 2013” (my emphasis) (A/17: para 11).  Mr Clayton SC argues that on the plaintiff’s own evidence, if the DAML transaction has to be completed by 31 December 2013, the potential loss, if any, would be only half of that alleged by the plaintiff, namely EUR30 million. He makes it clear that the defendants are not conceding this figure but rather are highlighting the inherent weakness and flawed logic of the plaintiff’s case on damages.  This is why he submits that the plaintiff’s claim on damages is simply unsustainable. 

91. It is trite law that the onus is on the party seeking to freeze the funds of another party to provide clear, compelling and credible evidence that the amount it seeks to freeze is a reasonable and appropriate one in all the circumstances.  It seems to me that even if allowance is given to the plaintiff for believing that the loss may be as much as it asserted before Tong J, it is difficult to see how they can persist in claiming for a continuation of the Mareva in the same amount in the light of the NYL agreement when they appeared before me. 

92. On the totality of the evidence before me, which, I must say, was very different from that which was placed before Tong J, there is considerable uncertainty as to whether the plaintiff would suffer any damages at all in the light of the NYL agreement.  In any event, there was simply no credible or compelling evidence that impresses me that the loss would be as much as EUR60 million as alleged by the plaintiff. On the contrary, the evidence suggests that the plaintiff is unlikely to sustain any damages at all in the event the NYL transaction is completed.

DISSIPATION OF ASSETS—SHOULD THE MAREVA BE CONTINUED?

93. I turn to address the question of whether there is a risk of dissipation of the assets of the defendants so that the Mareva should be continued.  The plaintiff’s case is that the defendants (apart from the 3^rd defendant) are companies incorporated in Luxembourg or the Cayman Islands.  It is said that they are shadowy in nature and being largely SPVs are therefore entities with little financial or business history behind them.  This it is argued raises the strong spectre of suspicion that unless the funds in the defendants’ bank accounts are frozen they would be dissipated leaving the plaintiff with an empty judgment.

94. I have carefully considered this argument of the plaintiff but am not impressed with it in the light of all the evidence.  The defendants were subject to close scrutiny and approvals by the regulatory authorities in Luxembourg, Belgium, France, Australia and the EU Commission.  As I understand it, the use of SPVs was something which was very common in large transactions such as the SPA in the present case.  Huan explains in his 1^st affirmation that as DAML was a Luxembourg company the regulator there required DAML to be acquired by a Luxembourg incorporated SPV so that after the completion of the transaction, both DAML and the purchasing SPV would remain under their jurisdiction and supervision.  It was in such circumstances that the 1^st defendant was incorporated (A/82-3: para 24).  It was also pointed out the structure of the SPVs was approved by the regulators in the various jurisdictions (B3/702-710).

95. Against this backdrop, which must be known to the plaintiff, it is a little difficult to understand the plaintiff’s complaint that these defendants are shadowy companies or companies that lack any financial muscle.  Huan’s explanation as to why SPVs were used in this case is clearly set out in his 1^st affirmation (A/80-84: paras 16-29; 87-8: paras 38-30).  This explanation has not been challenged by the plaintiff.

96. The evidence before me shows that the 2^nd and 4^th defendants have been in operation for some time and are not SPVs.  They appear to be the operating entities of the private equity fund managed by GCS Capital.  They deal with substantial sums of moneys from relatively large institutional investors.  On the face of it, these appear to be companies of substance and controlled by Huan and Powell, who appear to be persons well connected in the investment world with substantial institutional investors. 

97. This fuller picture of the background of the defendants and the manner and circumstances in which they came to be incorporated and become involved with the SPA in question was not before Tong J.  This may explain why he felt that it would be appropriate to grant the Mareva at that preliminary stage.

98. With the benefit of the further evidence by the time of the hearing before me, I am not satisfied that the plaintiff has established to my satisfaction that there is a real risk of dissipation of assets.  Evidence that the defendants intend or may dispose of certain assets in the ordinary course of business without more would be insufficient to show a risk of dissipation (see Eastman Chemical Ltd v Heyro Chemical Co Ltd (2012) 3 HKLRD 307). 

99. In my view, the onus is on the plaintiff to at least show that the defendants intend to use the assets otherwise than for normal and proper commercial purposes (see Mobil Cerro Negro v Petroleos de Venezuala (2008) Lloyds Rep 684).  The evidence before me suggests that at most, the defendants intend in the light of the aborted SPA to return the moneys to the parties who had remitted the funds into their accounts in the expectation the transaction would go through.  This seems to me a normal and proper commercial purpose and does not suggest any improper motive to keeps moneys out of the reach of the plaintiff. 

100. In my view, the onus is on the plaintiff to satisfy me that I should continue the Mareva on the same terms until the completion of the NYL sale transaction.  On the evidence before me I am not so satisfied. 

101. I would therefore have discharged the Mareva injunction granted by Tong J and as continued by Mimmie Chan J on 9 August 2013.

Hearing on 12 March 2014

102. The plaintiff took out a summons returnable before me on 12 March 2014 seeking a variation of the order made by Mimmie Chan J in the light of the completion of the sale of DAML to NYL.  In effect the plaintiff was asking for the substitution of the sum of EUR62,626,175.41 with the sum of EUR2,626,175.41. This substituted sum represented what the plaintiff claimed were the wasted costs it had incurred as a result of the aborted SPA transaction with the defendants.  The application was not surprisingly strenuously opposed by the defendants.

103. I was informed that the NYL sale was completed on 3 February 2014 and that the purchase price “exceeds the aggregate of the final price payable by the 1^st defendant under the SPA and the amount of the costs and expenses claimed by Dexia incurred as a result of the failed Transaction”.  I was not told the price at which DAML was ultimately sold. 

104. Having heard arguments of the parties, and even if I had not arrived at the decision to discharge the Mareva, I would not have acceded to the application of the plaintiff.  In my view there is no justification or necessity to freeze over EUR2.6 million of the defendants’ money in respect of this alleged wasted costs claim.  I express no view as to viability or otherwise of such a claim under Belgian law.  In the event the plaintiff wishes to pursue such a claim against the defendants, they can do so in the Belgian courts.  I do not see why they need to injunct funds in Hong Kong for that purpose in the absence of compelling evidence that the defendants would seek to dissipate their assets otherwise in the interim. 

105. I therefore make the following orders:

(a)  discharge the orders made by Tong J and Mimmie Chan J with costs in favour of the defendants in respect of the hearing before Mimmie Chan J;

(b)  an enquiry as to damages, if any, sustained by the defendants pursuant to the plaintiff’s undertaking on damages; and

(c)   costs of the discharge hearing before me on 29and 30^t October 2013 and 12 March 2014 be paid to the defendants, to be taxed if not agreed with certificate for two counsel.

106. The costs orders are orders nisi and will become absolute after 14 days unless any party wishing to vary the orders makes a written application.

107. I would like to emphasise that the fact that I have not set out all the submissions of the parties or the cases relied upon by them do not mean that I have ignored them.  I have carefully taken into account all that has been placed before me, and the act that I have not mentioned them all is simply to strike a balance between the length of the judgment and its comprehension.

108. It last remains for me to thank all counsel for their comprehensive submissions and their able assistance.