WHARF LTD AND OTHERS v. LAU YUEN HOW AND OTHERS

HCA1535/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1535 OF 2008

----------------------

----------------------

------------------------------------------

REASONS FOR DECISION

------------------------------------------

1. On 25 August 2008, I dismissed the defendants’ applications to (a) stay the proceedings; (b) impose an undertaking on the plaintiffs and their solicitors; and (c) vary the Mareva injunction obtained by the plaintiffs from Deputy Judge Geiser on 17 August 2008, with costs.

2. These are my reasons.

A.  Background

3. The plaintiffs all belong to the Wheelock group of companies, providing various services to the group.  The 1^st plaintiff provides management services; the 2^nd plaintiff, management, accounting and taxation services; and the 3^rd plaintiff, hotel management services to the hotel business of the group.

4. Prior to 23 July 2008, the 1^st plaintiff employed the 1^st defendant as its assistant payroll manager.  He alone handled the payroll of the senior staff (assistant general manager grade or above) in the Wheelock group.

5. The 2^nd defendant is the 1^st defendant’s wife.  The 3^rd defendant is his sister.

6. The plaintiffs’ complaint is this.  In July 2008, the plaintiffs discovered that the 1^st defendant had between 13 May 2004 and 30 January 2008 falsified documents in 14 bank transactions involving a total of HK$8.5 million and diverted the same to the defendant’s bank accounts.  Further, on 30 June 2008, the 1^st defendant fraudulently drew a cheque in the sum of HK$659,540 from the 1^st plaintiff’s HSBC bank account and made it payable to himself.

7. On 20 July 2008, the plaintiffs reported the matter to the police.  The police arrested the 3^rd defendant on 24 July 1008 and 1^st and 2^nd defendants on the following day.  Holding charges were then laid against them.  The 1^st defendant was charged with one count of attempted theft.  The 2^nd defendant and the 3^rd defendant were respectively charged with two counts and one count of dealing with property known or believed to represent proceeds of indictable offence.  They were all brought before the magistrate on 26 July 2008.  The 1^st defendant was refused bail and has since been remanded in custody.  The 2^nd and 3^rd defendants were granted bail.  The case was adjourned to 22 September 2008 for mention.  In the meantime, the Commercial Crime Bureau is still continuing with the investigation.

8. On 1 August 2008, the 2^nd defendant entered into a sale and purchase agreement in respect of a property in Tseung Kwan O that she bought in 2005.  What she did alarmed the plaintiffs.  On 17 August 2008, they successfully obtained the Mareva injunction against the defendants.  Among other things, the defendants were ordered to disclose the their assets of an individual value of HK$50,000 by affidavit within 14 days from the service of the order.

B.  Applications

9. The defendants did not seek to discharge or set aside the Mareva injunction.

10. Instead, they applied to stay the action pending until the determination of the criminal proceedings and for an order imposing an undertaking on the plaintiffs and their solicitors not to disclose any information disclosed under this action to the police or to the Department of Justice or any relevant parties.  They further applied for a variation of the injunction by :

(1) filing the affidavits on assets within 42 days after the determination of the criminal proceedings against them; and

(2) excluding the 3^rd defendant’s account with Bank of China from the injunction (“the Account”).

11. The 1^st defendant did not file any evidence in support of the applications.  Absent such evidence, Mr Mok, who appeared for all the defendants, did not pursue the applications for him.

12. I will first consider the stay application.

C.  The stay application

C.1.   The law

13. When a defendant in a civil action faces parallel criminal proceedings arising out of the same subject matter, the court has the discretion to stay the action pending the determination of the criminal proceedings.  The burden rests on the defendant to show that it is just and convenient that the plaintiff’s ordinary rights of having his claim processed and heard and decided should be interfered with : Jefferson Ltd v. Bhetcha [1979] 1 WLR 898, per Megaw LJ at p.905C-D; followed in Petroliam Nasional Berhad & Others v. Tan Soon-gin & Others [1990] 1 HKLRD 4, per Cons Acting CJ at p.8A-B.

14. Each case has to be judged on its own facts.  In deciding how to exercise the discretion, the court needs to take into account all the relevant factors.

15. Perhaps the most often cited factor in favour of a stay is the infringement made to the defendant’s right to remain silent in the criminal proceedings — in the absence of a stay, the defendant’s defence disclosed in the civil action would result in a premature disclosure of his defence in the parallel criminal proceedings.  But that is not a conclusive factor.  In Petroliam, the Court of Appeal rejected the argument that the need to reveal the defence to a criminal charge should be given no or at least no appreciable, weight unless at the same time it gave rise to a real danger of causing injustice in the criminal proceedings.  Cons Acting CJ went on to say at p.9F-G :

“   ... The right to reserve one’s defence up to the last minute, that is until the prosecution has completed its evidence, except perhaps so far as it may be necessary to put matters in cross-examination, is such a basic fundamental of the criminal process that we think it cannot be so lightly dismissed.  We accept that breach of the right does not necessarily amount to an injustice.  It may at times be no more than a disadvantage: see Charles of the Ritz v. Jory [1986] FSR 14, and at others there may be factors by which it is completely outweighed.  But in our opinion it is always a matter for some consideration, the precise weight to be determined by the individual judge in all the circumstances as he sees them. ….”

16. In Jefferson, Megaw LJ suggested some examples of relevant factors in favour of stay at pp.905D-G :

“   Of course, one factor to be taken into account, and it may well be a very important factor, is whether there is a real danger of the causing of injustice in the criminal proceedings.  There may be cases—no doubt there are—where that discretion should be exercised.  In my view it would be wrong and undesirable to attempt to define in the abstract what are the relevant factors.  By way of example, a relevant factor telling in favour of a defendant might well be the fact that the civil action, or some step in it, would be likely to obtain such publicity as might sensibly be expected to reach, and to influence, persons who would or might be jurors in criminal proceedings.  It may be that, if the criminal proceedings were likely to be heard in a very short time (such as was the fact in the Wonder Heat case in the Victoria Supreme Court) it would be fair and sensible to postpone the hearing of the civil action.  It might be that it could be shown, or inferred, that there was some real—not merely notional—danger that the disclosure of the defence in the civil action would, or might, lead to a potential miscarriage of justice in the criminal proceedings, by, for example, enabling prosecution witnesses to prepare a fabrication of evidence or by leading to interference with witnesses or in some other way.”

17. Ultimately, the court, having considered all the relevant factors, performs an exercise balancing between the justice of the parties and determines where the discretion lies.

C.2.   Discussion

18. In their affirmations, both the 2^nd and 3^rd defendants asked the court to stay the present action until the determination of the criminal proceedings.  They have not cited the right to remain silent or privilege against self-incrimination as a reason.  In fact, they have not given any single reason at all why it is just and convenient to stay the action.

19. Mr Mok tried to fill the evidential lacuna by relying on 15 special features which, he said, justified a stay.  Those special features boiled down to six contentions, which I will consider in turn below.

20. First, the defendants need to face two sets of parallel proceedings arising from the same subject matters.  The criminal charges are very serious.  The claims in the civil action well exceed their means and wealth.  An additional hardship is that the 1^st defendant is now in custody.

21. I note that neither the 2^nd or 3^rd defendant has said in their affirmation that the plaintiffs’ claims well exceed their means and wealth.  The defendants may well have to face parallel proceedings.  But it hardly justifies a stay of the civil action.  The fact that the 1^st defendant is in custody may cause inconvenience to the 2^nd and 3^rd defendants in defending the present action.  But I do not think it amounts to any hardship as such.  They should have no particular difficulty to continue with the present action.

22. Second, the defendants’ right to remain silent in the criminal proceedings, which they have exercised so far, would be infringed should they make any disclosure of their defence in the civil action.  In particular, the 1^st and 2^nd defendants are husband and wife with privilege extending to each other.

23. I fully recognize the possibility that if the 2^nd and 3^rd defendants are to meaningfully continue with the present action, they may need to disclose their defence which may have the effect of, partly or wholly, disclosing their defence in the criminal proceedings.  But I am not convinced that on the materials before me, it would amount to any injustice.  And it is outweighed by other factors, which I shall return in a moment.

24. Third, the case is likely to attract publicity.  This in itself is not a factor in favour of stay.  Publicity counts only if it might sensibly be expected to reach and to influence persons who would or might be jurors in the criminal proceedings : see Jefferson, at p.905.  Here, the defendants have not adduced any evidence to show that the publicity of the case, if any, would have such effect.

25. Fourth, there is ample opportunity for the prosecution witnesses, who are likely to be the plaintiffs’ witnesses, to tailor their evidence if they know what the defendants’ defence is.  This very serious allegation is wholly unsubstantiated by any evidence.  It must be rejected.

26. Fifth, the civil action was started at the police’s invitation.  The purpose was to preserve the defendants’ assets, which has been achieved by the Mareva injunction.  The plaintiffs will not suffer much prejudice by the limited delay in the civil action.

27. It is factually incorrect to assert that the police invited the plaintiffs to start the present action.  At all material times, the plaintiffs were legally represented.  Surely, they must have taken legal advice before commencing the present action.  Further, it is wrong to say that the plaintiffs commenced the present action simply with a view to preserving the defendants’ assets.  Like any claimant, they plainly want to recover their loss by prosecuting the action as expeditiously as possible.  They will certainly suffer prejudice if they are debarred from doing so by a stay of the present action.  It is also wrong to suggest that the stay will only result in a limited delay in the present action.  Both the criminal proceedings and the present action are at the very early stage.  Nobody knows when the criminal proceedings will come to a final resolution.

28. Sixth, the law enforcement agencies are able to aid and incite victims to take civil action to break a defendant’s silence.  It makes a mockery of the constitutional right to remain silent and privilege against self-incrimination.  I can see nothing wrong for the police, upon request, to provide relevant information to a complaint to assist him to pursue his civil remedies.  On the other hand, if the police did it with the ulterior motive to infringe the defendant’s right to remain silent by a side wind, that is, by making him to disclose his defence to the criminal charge in the civil action, it is a strong factor in favour of stay.  But the defendant who takes this point must come up with cogent evidence in support.  Here, there is simply none at all.  This complaint must be rejected.

29. To recap, of all the 15 special features that Mr Mok sought to rely on, only the possibility that the defendants’ right to remain silent may be infringed is relevant.  But as I have indicated, it is outweighed by other factors against a stay.

30. Those factors are as follows.  First, on the materials before me, the plaintiffs’ claims against the defendants are overwhelming.  They should be entitled to prosecute their claims and seek recovery of their loss as expeditiously as possible.  Second, there is a real risk of the defendants’ dissipating their assets.  It is best demonstrated by the fact that once released on police bail, the 2^nd defendant immediately entered into a sale and purchase agreement dated 1 August 2008, selling her property in Tseung Kwan O.  The Mareva injunction may offer some protection to the plaintiffs in the meantime.  But facing with such risk of dissipation, the plaintiffs should be entitled to proceed to judgment, if successful, without delay.  Third, it is also in the interest of the defendants to have the civil action determined without delay, especially with the Mareva injunction, which they did not seek to set aside or discharge, hanging over their heads.

31. To conclude the discussion, I need to deal with Mr Mok’s reliance on Article 10 of the Hong Kong Bill of Rights Ordinance, Cap. 383, which he said, encapsulated all his submissions.  As I understand him, what he meant is that the defendants will be deprived of a fair trial in the criminal proceedings if the civil action is not stayed.  For the reasons above, I do not agree that the defendants will be so deprived even if the present action is to continue in its usual manner.  So I do not Article 10 takes the matter any further.

32. For the above reasons, the stay application is dismissed.

D.  The application for imposing the undertaking

33. The application for imposing the undertaking not to disclose anything to the police of the Department of Justice or any relevant party rests on the defendants’ right to remain silent and privilege against self-incrimination.  As I have observed above, even if the defendants may need to disclose their defence which may have the effect of, partly or wholly, disclosing their defence in the criminal proceedings, it would not on the materials before me amount to any injustice.  Further, the ambit of the undertaking is simply too wide.  It may well cover matters that are outside the privilege of self-incrimination.  The application must fail.

E.  Variations

34. I now come to the variations sought.

E.1.   Extending the time for filing the affidavits on assets

35. The 2^nd and 3^rd defendants wanted to extend the time for making the disclosure of their assets “…for the reasons of preparing my defence case in [the criminal proceedings] and safeguarding my right of silence and right against self-incrimination”.  The aim was to avoid “any possible risk of anybody making use of this injunction proceedings to collect information from the affidavit of assets, whether it be existence or non-existence of any assets, to prove or disprove issues in the criminal cases.”

36. What the affidavit of assets requires the defendants to do is no more than disclosing their assets of an individual value of HK$50,000 or more.  I fail to see how such disclosure, without more, would infringe their right to remain silent or privilege against self-incrimination in the criminal proceedings.

37. Mr Mok submitted that the disclosure would lead to a train of enquiry in the criminal proceedings, which is prejudicial to the 2^nd and 3^rd defendants.  I disagree.  It is simply too early to tell if the disclosure would result in any further inquiry which impacts the criminal proceedings in the way as contended by the 2^nd and 3^rd defendants.

38. It should be borne in mind that the defendants’ assets are subject to a real risk of dissipation.  To make the Mareva injunction effective, the information sought must be disclosed.

39. This variation must fail.

E.2.   Excluding the Account

40. The 3^rd defendant’s case is that all the deposits in New Zealand currency in the Account belonged to her parents beneficially.  So it should be excluded from the Mareva injunction.  To support her case, the 3^rd defendant exhibited certain bank documents to show that the deposits were transferred from her parents’ account to the Account in August 2002 and have since remained there.

41. In my view, the documentary evidence is not conclusive.  As rightly pointed out by Ms Wu, counsel for the plaintiffs, there is a possibility that the deposits were a gift.  Plainly further investigation is necessary before the question of beneficial owner can be determined.

42. The 3^rd defendant also said that her mother, who is 84, needs to have ready access to the deposits in light of her failing health and need for constant medical treatment.  I have some doubt about this allegation because the deposits have in fact been sitting in the Account since 2002.  To preserve the status quo, I think it is right not to exclude the Account from the injunction.

F.   Conclusion

43. For the above reasons, I dismissed all the defendants’ applications.  I also took the view that costs should follow the event.  So the defendants were ordered to pay the costs, to be taxed if not agreed.