HCA626/2008
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO. 626 OF 2008
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BETWEEN
REM ASSETS LIMITED
Plaintiff
and
MIR INVESTMENTS LIMITED
1st Defendant
CORRADO RICCIO
2nd Defendant
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Before : Hon Poon J in Chambers
Date of Hearing : 19 June 2008
Date of Decision : 19 June 2008
Date of Reasons for Decision : 16 July 2008
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REASONS FOR DECISION
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Orders
1. On 19 June 2008, after hearing the parties, I made various orders :
(1) allowing the plaintiff’s application to re-amend the writ of summons (summons dated 12 June 2008);
(2) dismissing the 2nd defendant’s application for stay of proceedings (summons dated 28 April 2008);
(3) dismissing the 2nd defendant’s application to discharge the prohibition order that the plaintiff obtained ex parte on 11 April 2008 (“the Prohibition Order”) (summonses dated 16 April and 16 June 2008);
(4) making no order on the plaintiff summons dated 23 April 2008 save and except that the plaintiff shall have the costs in any event; and
(5) allowing the plaintiff’s application to extend the Prohibition Order until 11 July 2008 (summons dated 9 May 2008[1] ).
2. These are my reasons.
The claims
3. The plaintiff is a BVI company. Mr Claudio Rondinelli is a shareholder and sole director of the plaintiff. The 1st defendant is also a BVI company. The 2nd defendant is its shareholder and director.
4. On 15 April 2008, the plaintiff commenced the present action. The pleaded case in its amended statement of claim is in brief this.
5. The 2nd defendant made various fraudulent misrepresentations to Mr Rondinelli in 2003 :
(a) the 2nd defendant set up the 1st defendant for the purpose of, inter alia , investing in Bund Futures Contracts;
(b) by the use of a computer programme known as “Technical Analysis”, the 1st defendant was able to generate profits in the buying and selling of Bund Futures Contracts of over 30% per annum; and
(c) the purported business of the 1st defendant of investing funds in Bund Futures Contracts had been funded by monies provide by the 2nd defendant personally (amounting to about EUR$7 million); monies provided by the 2nd defendant’s father and additional monies provided by other investors.
6. In 2005, the 2nd defendant repeated the same misrepresentations to Mr Rondinelli and further misrepresented :
(a) if the plaintiff advanced monies by way of loan to the 1st defendant, such monies would be used by the 1st defendant for investment in Bund Futures Contracts;
(b) the principal amount of such loan would be repaid on the 1st anniversary of the making of the same; and
(c) interest would accrue on the principal amount of such loan at the rate of 20% per annum.
7. The misrepresentations were false because the 2nd defendant had never personally invested in the 1st defendant; the monies which had been advanced to the 1st defendant or the greater part thereof had not been invested in the Bund Futures Contracts or any other investments; and the 1st and 2nd defendants did not intent to invest in the 1st defendant’s monies in Bund Futures Contracts.
8. By reason of the misrepresentations, the plaintiff advanced to the 1st defendant EUR$1 million on 4 November 2005. By subsequent agreements, the interest accrued on that sum was rolled over as principal. On 20 November 2006, the plaintiff advanced to the 1st defendant a further sum of EUR$1,770,626, thereby increasing the principal to EUR$3 million.
9. On 1 November 2007, Mr Rondinelli requested the 1st defendant to repay the plaintiff EUR$2.13 million by the end of January 2008. As consideration for accepting late payment, it was agreed that the 1st defendant would pay EUR$2.13 million on 1 March 2008 with additional interest of 5% for the period between 1 December 2007 and 1 March 2008.
10. The 1st defendant did not make any repayment.
11. By letter dated 1 March 2008, the defendants informed the plaintiff that the 1st defendant could no fulfill any of its financial obligations and that the 1st defendant was not in a position to repay capital or interest to the plaintiff. The plaintiff regarded this as an anticipatory breach on the part of the 1st defendant, which the plaintiff accepted. The plaintiff claimed against the 1st defendant the sum of EUR$3 million or alternatively the sum of EUR$2.13 million and interest; and against the 2nd defendant damages for fraudulent misrepresentation and interest.
Acknowledgment of service
12. The amended writ was served on the 2nd defendant who filed the acknowledgment of service on 16 April 2008.
The Prohibition Order
13. On 11 April 2008 (before the writ was issued), the plaintiff obtained from Burrell J on an ex parte application the Prohibition Order, restraining the 2nd defendant from leaving jurisdiction for one month.
The applications
14. The 2nd defendant’s summons dated 16 April 2008 (for discharging the Prohibition Order), the plaintiff’s summons dated 23 April 2008 (for extending the Prohibition Order for one month) and the 2nd defendant’s summons dated 28 April 2008 (for stay) first came before me on 7 May 2008. I gave directions for filing of evidence and adjourned all the applications to 19 June 2008. I also extended the Prohibition Order up to 19 June 2008 pending the determination of the applications. The parties subsequently took out the other summonses, all returnable on the same date.
15. I would deal with the applications in turn.
The application to re-amend
16. The application was necessary in order to bring the endorsement in line with the prayers in the amended statement of claim. This was a perfectly legitimate amendment. The application was therefore allowed.
The stay application
17. The 2nd defendant contended that the Loan Note Instrument, the only binding contract between the plaintiff and the 1st defendant, contained an exclusive jurisdiction clause in favour of the BVI courts. He submitted that the court should stay the action instituted in breach of the clause unless the plaintiff proves that it is just and proper to allow the action to continue : Dicey & Morris on the Conflict of Laws , 14th Edn, Rule 32(2) at p.514.
18. However, as rightly pointed out by Mr Burns, SC, counsel for the plaintiff, the plaintiff’s claim against the 2nd defendant is based on fraudulent misrepresentations. So even if assuming that the Loan Note Instrument is the contract between the plaintiff and the 1st defendant, it is irrelevant for present purposes. The reliance on the exclusive jurisdiction clause is simply misplaced.
19. The 2nd defendant having acknowledged service, the burden rests on him to show that the court should exercise its discretion to grant a stay and, in doing so, must show not merely that Hong Kong is not the natural or appropriate forum for the trial but that there is another forum which is clearly and distinctly more appropriate than the Hong Kong forum. In considering whether there is another forum which is more appropriate, the court will look for that forum with which the action has the most real and substantial connection, e.g. in terms of convenience or expense, availability of witnesses, the law governing the relevant transaction and the places where the parties resided or carry on business. If the court concludes that there is no other available forum which is more appropriate than the Hong Kong court, it will normally refuse a stay. If, however, the court concludes that there is another forum which is prima facie more appropriate, the court will normally grant a stay unless there are circumstances militating against a stay, e.g. if the plaintiff will not obtain justice in the foreign jurisdiction. See Hong Kong Civil Procedure 2008 , Vol. 1 para.11/1/10 at p.106.
20. The 2nd defendant argued that BVI court is a more appropriate forum. The plaintiff and the 1st defendant are BVI companies. None of the parties are based in or conducted any activities relating to the transactions which are the subject matter of this action in Hong Kong. Most of the relevant events took place outside Hong Kong. The Loan Note Instrument is expressed to be governed by the laws of the BVI and contained an exclusive jurisdiction in favour of the BVI courts.
21. None of the points taken by the 2nd defendant demonstrated that BVI is clearly and distinctly a more appropriate forum.
22. First, the mere fact that the plaintiff and the 1st defendant are BVI companies is not a determinative factor or should carry a particularly heavy weight. The court needs to look at the substance of the transaction and other relevant factors as well.
23. Second, contrary to the 2nd defendant’s contention, the evidence clearly shows that the fraudulent misrepresentations were all made in Hong Kong. See Mr Rondinelli’s evidence in paragraphs 8 to 12 of his affidavit dated 2 May 2008. The 2nd defendant did not seriously dispute this point. The misrepresentations were also acted upon in Hong Kong — the monies involved were sent by telegraphic transfer by HSBC.
24. Third, it should be borne in mind that the plaintiff’s claim against the 2nd defendant is fraudulent misrepresentation. The Loan Note Instrument its governing law and exclusive jurisdiction clauses are simply irrelevant. In any event, the applicable law to the plaintiff’s claim of fraudulent misrepresentations is plainly the law of Hong Kong.
25. The 2nd defendant tried to minimize his own personal connection with Hong Kong. This is however untenable when it is clear from the evidence that he has been living in Hong Kong since 1998 and his confirmation that he does not have any strong links with anywhere in the world other than Hong Kong.
26. The 2nd defendant has also failed to show that he would be inconvenienced or in any way prejudiced by the action being continued in Hong Kong, e.g., potential unavailability of witnesses.
27. In my view, the 2nd defendant has failed to show that BVI is a clearly and distinctly more appropriate forum than Hong Kong. The stay application was therefore refused.
The applications pertaining to the Prohibition Order
28. The plaintiff’s summons dated 23 April 2008 was overtaken by event because on 7 May 2008, I extended the Prohibition Order up to 19 June 2008 pending the determination of the adjourned applications. I therefore made no order on it except awarding costs to the plaintiff who won on its substantive application for extension.
29. Section 21B(1) of the High Court Ordinance, Cap. 4 provides :
“(1) The Court shall have jurisdiction to make an order prohibiting a person from leaving Hong Kong (a prohibition order) to facilitate the enforcement, securing or pursuance of—
…
(c) a civil claim (other than a judgment)—
(i) for the payment of money or damages …”
Further, Order 44A rule 3, Rules of the High Court provides that subject to the provisions of section 21B, the court may make an order prohibiting the debtor from leaving Hong Kong.
30. The requirements which must be satisfied before a prohibition order is granted are :
(1) There is a good cause of action.
(2) The person against whom the order is sought—
(a) incurred the alleged liability, which is the subject of the claim, in Hong Kong while he was present in Hong Kong; or
(b) carries on business in Hong Kong; or
(c) is ordinarily resident in Hong Kong.
(3) That person is about to leave Hong Kong; and
(4) By reason of paragraph (3), any judgment that may be given against that person is likely to be obstructed or delayed.
See Hong Kong Civil Procedure 2008, Vol.1, para.44A/2/4 at p.712.
31. I would look at these requirements in turn.
32. First, on the evidence before me, the plaintiff clearly has a good cause of action against the 2nd defendant. Other than the bare assertion that “[he] and the plaintiff should have a 50/50 chance of winning/losing their case”, and that he has never made any misrepresentation, the 2nd defendant has not come up with any evidence which would amount to a substantial defence to the plaintiff’s claim. In fact, the 2nd defendant has made numerous admissions of wrongdoing in an email dated 18 March 2008 and at meetings held on 20 and 27 March 2008.
33. Second, the representations made by the 2nd defendant which are relied on as constituting the causes of action against him were all made in Hong Kong.
34. Third, in order to satisfy the requirement that the defendant is “about to leave Hong Kong”, there need only be evidence to show that the defendant’s departure is imminent, albeit not necessarily permanent. See Hong Kong Civil Procedure 2008 ,Vol. 1, para.44A/2/5, at p.713. In his 1st affidavit dated 16 April 2008, the 2nd defendant confirmed that he was then intending to move to Beijing and to relocate his domicile there. In his 4th affidavit dated 30 May 2008, the 2nd defendant said if a stay is granted he would probably leave Hong Kong.
35. I agree with Mr Burns’s submission that in view of (a) the very existence of these proceedings (b) the size of the plaintiff’s claim and the apparent lack of defence (c) the ongoing police investigations against the 2nd defendant (d) the admitted lack of family connections with Hong Kong, if not prohibited, the 2nd defendant would leave and not return to Hong Kong.
36. Finally, the enforcement of any judgment is likely to be obstructed or delayed by the 2nd defendant’s absence from Hong Kong. In Murjani v. Bank of India [1989] 2 HKLR 285, the plaintiff had a large claim against the defendant and there were no known available assets of discharge the defendant’s liability, the examination of the debtor under Order 49B (for which purpose the debtor’s presence in Hong Kong is required) was said to be crucial : per Hunter JA at 286D-E. The same applies here.
37. All the requirements are thus satisfied. The grant of the Prohibition Order was well justified.
38. Applying to discharge the Prohibition Order, the 2nd defendant first complained that the prohibition order has infringed his freedom of movement. This is however misconceived : see Tam Hing-yee v. Wu Tai-wai [1992] 1 HKLR 185, where the Court of Appeal held that the Bill of Rights Ordinance has no application to a dispute between private individuals.
39. The 2nd defendant next complained that there was material non-disclosure when the plaintiff went before Burrell J. But he has failed to make good this allegation.
40. The 2nd defendant has been unable to satisfy me that he has a substantial defence to the plaintiff’s claim.
41. For the above reasons, the 2nd defendant’s application to discharge the Prohibition Order must fail, which was dismissed.
42. On the evidence before me, it was plainly right to extend the Prohibition Order. I therefore ordered it to be continued up to 11 July 2008.
(J. Poon)
Mr Ashley Burns, SC instructed by Messrs Clyde & Co., for the Plaintiff
The 2nd defendant, in person, present
[1] The summons originally asked for an extension up to 19 July 2008. At the hearing, Mr Burns, SC, counsel for the plaintiff, conceded that the extension sought on this occasion could only be made up to 11 July 2008.