PETROCRAFT S.A. v. CHAN CHUN FUNG VINCENT AND OTHERS

HCA 69/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 69 OF 2012

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D E C I S I O N

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1.  The plaintiff sues the defendants in fraud. It is said that goods under a third invoice had been paid for by the plaintiff but were not delivered. Those goods had been ordered by the 1^st defendant’s company called MLL which acted as the plaintiff’s agent in Hong Kong. The 2^nd defendant is the 1^st defendant’s wife and the 3^rd defendant is his mother.

2.  As a result of the plaintiff’s report to the police, the defendants were arrested on 3 December 2011 on a charge of conspiracy to defraud the plaintiff.

3.  The plaintiff did not know what has happened to the third lot of goods save that the 1^st and 2^nd defendants were the authorised signatories to the account into which the price for the third lot had been deposited.  The plaintiff says that at least part of the price had been transferred to 6 accounts controlled by or belonging to the 1^st defendant, 3 accounts controlled by or belonging to the 2^nd defendant and 10 accounts by the 3^rd defendant.  Some of the money for the third lot of goods had also allegedly been used to buy properties or put on time deposits.

4.  The plaintiff claims that it has suffered loss and damage in the sum of US$6,605,722.63 (“the Sum”) being the price of the third lot of goods.  The plaintiff claims that the defendants are accountable as constructive trustees or are otherwise unjustly enriched and so the plaintiff is entitled to tracing.  It seeks recovery of the Sum and account or inquiry.

5.  The plaintiff has reported what was said by the prosecution and the defendants during the hearing of the criminal proceedings against the defendants in the plaintiff’s affirmation in support of the injunction.  The defendants have not yet filed a defence or affirmation in answer.

6.  On 13 January 2012, Deputy Judge Lok imposed an injunction on the assets of the defendants to the effect that if the total unencumbered value of the defendants’ assets in Hong Kong exceeded the Sum, the defendants might remove or dispose of those assets so long as the unencumbered value remained above the Sum.  Deputy Judge Lok also made a disclosure order requiring the defendants to disclose assets to the value of $10,000 or above and the flow of the monies in respect of the third lot of goods.

7.  Directions for filing of defence out of time and filing of evidence in answer to the summons for injunction have been made, but the defence and the affirmations have not yet been filed by the defendants.

8.  In the meantime, on 22 March 2012, by consent, Chung J ordered that on a without admission of liability basis, the 3^rd defendant do pay to the plaintiff’s solicitors the sum of HK$9.36 million to hold the same as trustee for the plaintiff – being monies to be withdrawn from specified stakeholder’s or bank accounts. Within 7 days after such payment, the plaintiff shall apply to withdraw the claim against the mother.  This order has not yet been complied with by the 3^rd defendant.

9.  By summons filed on 30 March 2012, the defendants applied to vary paragraphs 1 and 2 of the injunction order of Deputy Judge Lok as extended by the order of Chung J.  In substance, the 1^st defendant is asking that instead of freezing “all assets” of the defendants up to the value of the Sum, all those “assets listed in a schedule attached to the summons” be frozen up to the value of the Sum.  The schedule of assets represents those disclosed by the defendants pursuant to Deputy Judge Lok’s disclosure order.

10.  I have considered the evidence and the submission of the parties.  Even on the defendants’ own evidence filed in support of the variation summons, the sum total of the money in the accounts disclosed in the schedule fell below the Sum.  The disclosed value works out at just above HK$50 million, which was below the Sum (equivalent to HK$51,524,636 at an exchange rate of US$1 to HK$7.8).  Of the total amount of just over HK$50 million, the amount said to be held under Pickford Escrow Company Inc was evidenced just by a set of cancellation instructions from the 1^st and 2^nd defendants to that company.  It is not clear whether the amount apparently held in escrow for the 1^st and 2^nd defendants is now in any of the defendants’ bank accounts listed in the schedule.

11.  It is true that the schedule contains other assets like wine, cars and shares in a company.  However, the values of these items are not clear, nor are they agreed.

12.  The court cannot be satisfied at this stage that the value of assets already disclosed as evidence in the schedule exceeds the Sum.

13.  In any case, the present wording of Deputy Judge Lok’s injunction order sufficiently protects the defendants in the sense that if the unencumbered value of the assets exceeds the Sum, they are at liberty to dispose of the rest of the assets.  It is for the defendants who want particularity and clarity in an injunction order to set out the evidence clearly, and to produce sufficient evidence to satisfy the court that the injunction ought to be varied, so that not more than enough assets will be frozen.  I am not satisfied on the state of the evidence that this has been achieved. 

14.  Accordingly, I shall not vary the injunction in the form proposed by the defendants.  Costs of the defendants’ summons shall be to the plaintiff, summarily assessed and allowed at $20,000.