ASHITA IMPEX PVT LTD. v. LEGANZA INTERNATIONAL PTE LTD AND ANOTHER

HCMP 1430/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1430 OF 2005

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J U D G M E N T

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I. INTRODUCTION

1.  This is an appeal against the decision of Master Au-yeung refusing summarily to discharge a Garnishee Order Nisi in Ashita’s favour against Mayar HK.  Master Au-yeung instead ordered that there be further discovery in aid of a trial of an issue.

2.  Ashita claims that Mayar HK owes US$358,000 to Leganza and Ashita should be entitled to garnishee that debt. 

3.  Mayar HK denies owing Leganza anything and contends that there is no cogent evidence of a continuing debt owed to Leganza.  Mayar HK asks that I accordingly discharge Ashita’s garnishee proceedings.

II. BACKGROUND

4.  In November 2001 Ashita obtained judgment in Singapore against Leganza for US$358,000.  The judgment remains unsatisfied.

5.  Until January 2004 Leganza (then known as Mayar Resources Singapore) was a subsidiary of Mayar HK.  Ashita alleges that Leganza transferred US$358,000 by way of a loan to Mayar HK in July 2000.  Ashita says that this loan remains outstanding from Mayar HK to Leganza. 

6.  Having registered the Singaporean judgment here in August 2005, Ashita obtained a Garnishee Order Nisi in October 2005.

7.  Mayar HK accepts that it received US$358,000 from Leganza.  But Mayar HK denies that it presently owes any money to Leganza.  This is because, according to Mayar HK, there was a running account between it and Leganza.  As a result of monies having been advanced by Mayar HK to Leganza before and after July 2000, the current position (Mayar HK says) is that Leganza owes Mayar HK a significant amount of money.

8.  In October 2006 Master Au-yeung directed that an issue be tried as to whether any debt is due from Mayar HK to Ashita and (if so) how much.  There has been discovery between the parties on that issue.  Affidavit evidence has also been filed.  Among the documents disclosed by Mayar HK have been its audited accounts prepared by Ernst & Young.  These accounts state that Leganza presently owes Mayar HK over S$1 million.

9.  Mayar HK says that, with the exception of a fax of dubious probative value, no evidence has come to light contradicting what is stated in the audited reports.  Mayar HK consequently asks the High Court to strike out Ashita’s garnishee proceedings. 

10.  The fax just mentioned is the single piece of positive evidence upon which Ashita’s case of an outstanding loan rests.  The fax is dated 31 July 2000.  Written by Michael Finucan to Mayar HK, it reads:-

“	ATTN: AMIT JAIN
	With reference to my telephone conversation with you and Subsequent e-mail to Ms. Padma.
	This is to confirm that sum of USD 358,000 has been received from [Ashita] ... as their subscription towards application of shares in Mayar Resources (Singapore) Pte Ltd on 28 July 2000.
	As per your instruction this amount has been transferred to Mayar (HK) Ltd. as a short term loan of USD 358,000 to be prepaid at a later date.”

11.  Mr. Finucan was a nominee director of Ashita’s Managing Director, Mr. Narotam Sayal.  Mr. Jain no longer works for Mayar HK, which has had no real contact with him since his resignation in 2000.  Ms. Padma has deposed to the fact that, not surprisingly after so many years, she no longer has the e-mail referred to in the fax.

III. DISCUSSION

12.  In support of Ashita’s contention that this matter should go to trial rather than be dealt with summarily, Mr. Maurellet relies on the fax and Mayar HK’s acceptance that US$358,000 was actually transferred to it by Leganza.  In contrast, Mr. Maurellet observes that there has been no evidence of actual transfers from Mayar HK in Leganza’s favour extinguishing the debt of US$358,000.

13.  Mr. Maurellet submits that it is not good enough for Mayar HK to rely on its audited accounts showing that, as of today, over S$1 million is owed to it by Leganza.  Mr. Maurellet suggests that the veracity of the audited accounts must be in doubt given “the cosy state of affairs” between Leganza and Mayar HK.  This “cosy state of affairs” is said to arise because Leganza was once Mayar HK’s subsidiary and many of Leganza’s records were removed and transferred to Mayar HK’s offices.

14.  Mr. Maurellet further contends that Mayar HK may not have made loans to Leganza extinguishing the alleged US$358,000 debt, but “rather [Mayar HK] paid for expenses on [Leganza’s] behalf”.  If this had been the case, it would have been hard (Mr. Maurellet reasons) for Ernst & Young as auditors to verify the true state of accounts.  Additionally, all this (Mr. Maurellet suggests) would not be surprising given that Leganza had no employees by March 2001 and was by then fully controlled by Mayar HK.

15.  I am not persuaded by Mr. Maurellet’s submission.

16.  Even taking the fax at face value, all it states is that (as far as Mr. Finucan was concerned) US$358,000 was transferred to Mayar HK by way of a “loan”.  The fax says nothing about what Leganza may have owed Mayar HK before the transfer.  Nor does the fax say anything about the position today, years after the transfer was made. 

17.  It seems to me that the best evidence of what has since happened to the “loan” of US$358,000 must be Mayar HK’s audited accounts.  These show that the alleged loan has been more than extinguished by transfers from Mayar HK to Leganza. 

18.  I do not see how it assists Ashita’s case to query whether such transfers to Leganza where actually by loans to the latter or payments made by Mayar HK as agent for and on behalf of Leganza.  On either basis, the outlay of funds by Mayar HK would go towards extinguishing the “loan” referred to in the fax.

19.  Given that (the fax apart) Ashita has no other evidence of a currently existing loan, I think Mr. Sussex SC (appearing for Mayar HK) is right.  There is no use in wasting time and money in proceeding to a full blown trial of an issue.  As far as I can see, the trial will not throw up anything further.  The Court is in as good a position to deal with the matter at this time as it will ever be.

20.  Mr. Maurellet has sought to bolster his argument by querying the absence of affidavit evidence on Mayar HK’s behalf from Mr. Finucan or Mr. Jain.  But it is hard to see how any such evidence will help. 

21.  Mr. Finucan (as Mr. Sayal’s nominee) might conceivably be hostile to Mayar HK’s interests so that Mayar HK may be reluctant to have recourse to him.  But even if Mr. Finucan were called, how will he be able to assist the Court?  There is nothing to suggest that, having ceased to work for Leganza in October 2000, Mr. Finucan will be able to say anything comprehensive about transfers or advances made by Mayar HK to or on behalf of Leganza.

22.  The same can be said of Mr. Jain.  Mayar HK has lost touch with him.  But even if he were called, it is highly doubtful that (having left Mayar HK in 2000) he can say anything that will take the matter further.

23.  Mr. Maurellet has sought to cast doubt on points of detail in Mayar HK’s audited accounts.  But the relevance of these details to the issue to be tried is unclear.

24.  As Mr. Sussex observes, echoing a dictum of Megarry VC usually cited in connection with Order 14 applications, the Court is not here to “investigate alleged obscurities [in] the hope that something will turn up on the investigation”.  See Lady Anne Tennant v. AssociatedNewspapers Group Ltd. [1979] FSR 298.  Alleged obscurities (characterised by Mr. Sussex as “surmise and Micawberism”) in the audited accounts which are only tangentially connected with the issue at stake cannot be sufficient reason to refuse Mayar HK’s application.

25.  Mr. Maurellet stresses that no evidence has been adduced by Mayar HK of actual transfers of money to Leganza.  The further discovery ordered by Master Au-yeung relates to this.  She directed, for example, that disclosure be made of all documents (contracts, invoices, vouchers, transfer forms, bank records) supporting the alleged fund transfers extinguishing the US$358,000.

26.  But the further discovery sought by Ashita which Master Au-yeung ordered strikes me as little more than a fishing exercise.  Ashita has no particularised case as to why, despite confirmation in the form of audited accounts prepared by a reputable firm, transfers from Mayar HK to Leganza have not been made.  Ashita is simply hoping that something may turn up in the process of discovery.  That is not the function of discovery.

27.  Essentially, Mr. Maurellet contends that, because there may possibly be inconsequential inaccuracies in parts of the audited accounts, I should completely disregard the accounts at this stage as potentially unreliable.  I should also in consequence allow substantial further discovery of the documents underlying the audited accounts.  For the reasons given, I do not accept this contention.

28.  Finally, Mr. Maurellet suggests that the matter of a summary discharge of the Garnishee Order Nisi is res judicata.  This is the result (Mr. Maurellet submits) of Master Au-yeung having directed that there be an issue on the existence of a debt and the parties having proceeded on such basis.  Mr. Maurellet notes that Mayar HK even obtained security for its costs against Ashita on the footing that there would be a trial of an issue.

29.  I am unable to accept that there is res judicata.

30.  Nothing has been decided substantively on the validity of the Garnishee Order Nisi.  Having early on been invited to determine the matter summarily, Master Au-yeung instead directed that the case proceed by way of a trial of an issue. 

31.  Such direction does not mean that if (following the filing of affidavit evidence and relevant discovery) a party does not appear to have a reasonable case, the other side is precluded from applying to strike out the proceedings altogether. 

32.  It must remain open to a party to apply in a later hearing for the summary disposition of a case on the basis that to proceed to trial would plainly be a waste of time and money.

33.  Mayar HK is saying that, on the evidence adduced and the pertinent discovery made, Ashita has no viable case.  I agree.  That being the situation, trial would be otiose.

IV. CONCLUSION

34.  Mayar HK’s appeal succeeds.  The Garnishee Order Nisi should be set aside.  Master Au-yeung’s Order for further discovery is discharged.  I shall now hear the parties on costs and consequential matters.