YEUNG SIU YUNG v. FAN PUI WAN, MARGARET AND OTHERS

HCA 1211/2018

[2019] HKCFI 1598

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1211 OF 2018

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DECISION

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1.  This is the appeal of the 1^st and 4^th Defendants against the Order of Master Phoebe Man dated 5 March 2019 refusing their application for a stay of the proceedings herein on the ground of the potential adverse effects on them in the parallel criminal proceedings arising from the same set of facts.

Background

2.  The Plaintiff was born in mainland China and was educated up to secondary level.  She came to settle in Hong Kong in 1978 and emigrated to the United Kingdom in 1999.  She returned to stay in Hong Kong in about 2010.  She was 70 years old at the material time in 2014, divorced and lived alone.  She did not know much English.

3.  The Plaintiff’s case is that she came to know the 1^stDefendant through a friend in about May 2014.  The 1^stDefendant befriended the Plaintiff and portrayed herself as a child brought up by her father in a single-parent family.  The Plaintiff took pity on her and treated her as a “god daughter”. 

4.  The 1^stDefendant held herself out as an investment advisor.  She also claimed to have previously held a senior position at The Hong Kong and Shanghai BankingCorporation (“HSBC”) and by virtue whereof she was well connected with people there. 

5.  The 1^st Defendant is the sole director and controlling shareholder of the 4^thDefendant, a company incorporated in Hong Kong. The 2^ndDefendant was introduced to the Plaintiff by the 1^st Defendant as her husband, whereas the 3^rdDefendant, as her secretary.  

6.  The 8^thDefendant, the sole director and shareholder of the 5^thDefendant, was introduced to the Plaintiff as a lawyer of the 1^stDefendant.

7.  Since about May 2014, the 1^stDefendant started to introduce various investment programs, vehicles or opportunities to the Plaintiff, including those briefly described hereinafter. 

8.  The first one was known as a “Private Placement Program” purportedly offered by HSBC to selected investors, which simply involveddepositing US$11 million into an account with HSBC under the Plaintiff’sname. The Plaintiff was led to believe that the returns on such investment would be distributed in due course.  She decided to participate and made the deposit accordingly.

9.  Thereafter, in or about July 2014, the Plaintiff also participated in a second Private Placement Program as introduced by the 1^stDefendant. 

10.  In July/August 2014, the Plaintiff visited London with the 1^stDefendant and was convinced to participate in certain “European Projects Investments.   

11.  In September 2014, the Plaintiff visited London again and was convinced by the 1^stDefendant to participate in certain Joint Venture Investment with one General Master Investment Limited, which involved the opening of a joint account at HSBC held by the Plaintiff and the 1^stDefendant, utilizing the US$11 million standing to the credit of the Plaintiff’s own HSBC account as aforesaid and transferring various sums to the 6^thDefendant, a BVI company, held out to be a “trader” by the 1^stDefendant.

12.  During the trip in September 2014, the Plaintiff was also introduced to certain Hotel Development Investment in Munich and Paris in respect whereof a confidential agreement was signed.

13.  On or about 26 January 2015, the Plaintiff was convinced to participate in some further investment involving advance payment of US$1.5 million in exchange for two post-dated cheques presentable only upon notification, which was never forthcoming.

14.  For the purpose of her participation in the various purported investment programs or vehicles as introduced by the 1^stDefendant, acting in concert with the 2^nd, 3^rd and 8^th Defendants using companies, such as the 4^th, 5^th, 6^th and 7^th Defendants, as conduits, the Plaintiff made various transfers of money equivalent to a total of HK$71,969,689.35 (as particularized in paragraphs 85 and 86 of the Statement of Claim).

15.  Between 7 May 2015 and 7 June 2016, the 1^stDefendant caused three transfers totalling the equivalent of HK$5,853,780 to be madeby the 4^thDefendant to the Plaintiff for various purposes (as particularized in paragraph 87 of the Statement of Claim).

16.  In about early November 2017, the 1^stDefendant was out of contact and claimed that she was stranded in United Kingdom as a result of a surgical operation.  However, the Plaintiff has since discovered that in fact the 1^stDefendant was in jail custody in Hong Kong serving a sentence in respect of certain offence involving dishonesty. 

17.  Further, the Plaintiff discovered that all the representations made by the 1^stDefendant, with the participation of the 2^nd, 3^rd and 8^th Defendants, concerning the various investment programs, vehicles and opportunities were false since these various investment programs, vehicles and opportunities never existed.

18.  The Plaintiff therefore made a report to the Police on or about 5 November 2017 which culminated in a charge of “Obtaining Property by Deception” involving a sum of HK$68,582,543, being preferred against the 1^stDefendant (KTCC 1156/2018).  It would appear that the case has since been transferred to the Eastern Magistrates’ Court (ESCC 1210/2018) in preparation of either transfer to the District Court or committal to the High Court, pending the decision of the Director of Public Prosecution as to the venue of trial.   

19.  By a summons dated 28 September 2018, the 1^st and 4^thDefendants applied for a stay of the proceedings herein pending conclusion of the criminal prosecution.  In the 1^stDefendant’s affirmation in support it was claimed that the pleading of a defence herein would involve “substantial argument and explanation as to the facts of the case”which “will cause injustice and unfairness in the Criminal case”.

The Law

20.  It is trite that where there is a civil action proceeding in parallel with a criminal prosecution arising from the same factual matrix, there is no entitlement to a stay of proceeding of the civil action.  It is all amatter of discretion of the court in light of the circumstances of each case.   

21.  This principle enunciated by the English Court of Appeal in Jefferson Ltd v Bhetcha [1979] 1 WLR 898 has been adopted and applied in a number of cases including Petroliam Nasional Berhad & Others v Tan Soon-gin, also known as George Tan & Others [1990] 1 HKLR 4, wherein Cons, Acting CJ said (at 7I – 8A):

“ The crux of the decision in Jefferson Ltd. v. Bhetcha is to be found in a passage at p. 905C:

‘ while each case must be judged on its own facts, the burden is on the defendant in the civil action 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.’” (emphasis added)

22.  More recently, in Asia Energy Logistics Group Limited v Chat Tat CheeHCA 870/2009 (unreported, 5 August 2010), Reyes J said:

“ 24. Where there is an overlap between a civil action and pending criminal proceedings, there is no general rule that the former should be stayed pending the outcome of the latter. The Court has a discretion to stay the civil proceedings:-

‘ if it appeared to the court that justice—the balancing of justice between the parties—so required, having regard to the concurrent criminal proceedings, and taking into account the principle, which applies in the criminal proceeding itself, of what is sometimes referred to as the ‘right of silence’ and the reason why that right, under the law as it stands, is a right of a defendant in criminal proceedings.’ [Megaw LJ in Jefferson Ltd. v. Bhetcha [1979] 1 WLR 898, at 904H].

25. The authorities are adamant that there is:-

‘ no principle of law that a plaintiff in a civil action is to be debarred from pursuing that action in accordance with the normal rules for the conduct of civil actions merely because so to do would, or might, result in the defendant,if he wished to defend the action, having to disclose, by an affidavit under Order 14, or in the pleading of his defence, or by way of discovery or otherwise, what his defence is or may be, in whole or in part, with the result that he might be giving an indication of what his defence was likely to be in the contemporaneous criminal proceedings.  The protection which is at present given to one facing a criminal charge—the so-called ‘right of silence’—does not extend to give the defendant as a matter of right the same protection in contemporaneous civil proceedings.’  [Megaw LJ in First Jefferson, at 904H – 905B.]

26.   The burden is on a 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’.  See Petroliam Nasional Berhad v.Tan Soon Gin [1990] 1 HKLR 4 (CA), at 8, citing First Jefferson with approval.

27.   Helpful examples (marked as Examples A, B and C in the passage below) of when a Court might grant a stay were provided by Megaw LJ in First Jefferson (at 905):-

‘ 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 relevant factors. By way of example,a relevant factor telling in favour of a defendant might well be the fact [Example A] that the civil action, or somestep 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 [Example B] that, if the criminal proceedings were likely to be heard in a very short time … it would be fair and sensible to postpone the hearing of the civil action. It might be [Example C] 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.’” (emphasis added)

Analysis

23.  Mr Yeung for the Plaintiff puts emphasis on the strength of the Plaintiff’s case which has been fully pleaded in the Statement of Claim. Firstly, he points to the fact that the 1^stDefendant is a person of doubtful integrity in light of her various convictions for offences involving dishonesty for which she was given custodial sentence.  As indeed, she was charged by the police for the current offence of “Obtaining Property by Deception” on 19 May 2018, the day after she had been released from prison in respect of a previous conviction.

24.  Secondly, Mr Yeung relies on the fact that the 1^stDefendant has demonstrably lied about her personal background claiming that her mother had passed away whereas in fact her mother, who previously accompanied her in court, is alive and well. The 1^stDefendant lied to earn the sympathy and affection of the Plaintiff in order to entice her to invest in the various programs or vehicles as pleaded in the Statement of Claim.

25.  Thirdly, Mr Yeung argues that the falsity of the 1^stDefendant’s representations, for instance, the non-existence of the various investment programs, vehicles or opportunities held out by the 1^stDefendant, can be proven by documentary and other evidence (as opposed to oral evidence whether from the Plaintiff or the 1^stDefendant).

26.  Mr Yeung also emphasizes that the criminal investigation is ongoing and there is a possibility that further charge(s) may be preferred against the 1^stDefendant.  Hence, it is unknown when the prosecution will be concluded.  Further, there is no indication from the Director of Public Prosecution as to whether the trial will take place in the District Court or the High Court (with a jury).

27.  In the premises, Mr Yeung argues that a stay of the proceedings will have the effect of “warehousing” the civil claim herein to the detriment of the Plaintiff, particularly, in light of the fact that the Mareva Injunction granted in favour of the Plaintiff against the defendants (including the 1^st and 4^th Defendants) have not been effective in the identification and preservation of any substantial assets to answer any judgment that may be obtained against them.  

28.  In light of the foregoing, Mr Yeung submits that the balance of convenience clearly militates against the stay application of the 1^st and 4^th Defendants.

29.  On behalf of the 1^st and 4^th Defendants, Mr Chu relies on a fewparagraphs in the 1^stAffirmation of the 1^stDefendant (dated 28 September 2018) to mount the submission that:

(a)   the Plaintiff has clearly confirmed by declaration that she signed the various documents in question;

(b)   the fact that the Plaintiff now alleges that the Private Placement Program and the Joint Venture Investment did not exist constitutes a discrepancy between the Plaintiff’s pleaded case and the documentary evidence in respect whereof the 1^stDefendant would need to mount a defence by making “substantial arguments and explanation”;

(c)   there is a possibility that upon seeing the defence of the 1^stDefendant, the Plaintiff may fabricate her evidence in orderto influence the police investigation since she has an immense personal interest in the outcome of the criminal prosecution; and

(d)   In the premises, it will cause injustice and unfairness in the criminal case if the 1^st and 4^th Defendants are compelled to reveal their defence in the civil action at this stage.      

30.  In advancing his argument, Mr Chu seeks to rely on the case of Commissioner of the Australian Federal Police v Zhao (2015) 255 CLR 46 wherein the High Court of Australia upheld the decision of the Supreme Court of Victoria ordering a stay of a forfeiture proceedings under the Proceeds of Crime Act 2002 in respect of a landed property owned by the respondents, which was believed to have been acquired with proceeds of crime, namely, earnings from sex workers contrary to section 10 of the Sex Work Act 1994. 

31.  In Zhao (supra), there was a related criminal prosecution and in support of an application to stay the forfeiture proceedings, the second respondent only deposed to the fact that in order to defend the forfeiture order he would have to disclose the ownership of the property, the source of money and the relevant bank account which he did not wish to do.  He was also apprehensive that if the civil proceeding was not stayed, he might be cross-examined about other matters such as the origin of particular funds and assets outside of the period in question and there was a real risk that this would prejudice his rights and that it might open up further investigation against him and others (at para 9).

32.  In upholding the stay of proceedings, the High Court of Australia said (at para 42) that:

“ It is not necessary for the second respondent to say any more than he did on the application for a stay in order to identify that risk, given that the offences and the circumstances relevant to both proceedings are substantially identical.”

33.  Further, it was held (at para 50) that:

“ The interests of justice are not served by requiring the second respondent to defend the forfeiture proceedings or pursue the exclusion [from forfeiture] proceedings before his criminal proceedings are finalised, especially since the Commissioner will suffer no relevant prejudice from a delay in the continuation of the forfeiture proceedings [since the property was already subject to a restraining order].”

34.  Despite the valiant attempt made by Mr Chu, I am not convinced that the High Court of Australia was seeking to lay down any principle of law, or else there will be no situation where a stay of the civil proceedings would not be granted where there is a parallel criminal prosecution arising from the same transaction.

35.  Each case must be decided on its own facts and I am of the view that the Zhao case is distinguishable in that the forfeiture proceedingshad the effect of forcing the second respondent to make the stark choice ofbeing visited upon by a forfeiture order or giving up his right to remain silent.

36.  Given the detailed pleadings, the extensive affirmations already made by the Plaintiff herein and the fact that she had given three witness statements to the police on 5 November 2017, 8 January 2018 and 13 April 2018 respectively, I am of the view that the risk of the Plaintiff tailoring her evidence in the criminal trial in light of evidence revealed in the civil action is minimal since the Plaintiff should be taken to know that any change in her evidence would inevitably tax on her credibility.

37.  In this connection, Mr Chu points to the fact that initially the Plaintiff did not reveal to the police three sums of money returned or caused to be returned to her by the 1^stDefendant (see para 15 above and para 123 of the Plaintiff’s 1^stAffirmation dated 28 September 2018).  There is no substance in this allegation since such sums were duly disclosed to the police during a subsequent interview on 13 April 2018 and/or pleaded in paragraph 87 of the Statement of Claim.

38.  In order to succeed in an application for stay of proceedings, it is incumbent upon the 1^st and 4^th Defendants to “sketched out any details of alleged prejudice” (see Reyes J in Asia Energy Logistics Group Limited (at para 34)). I am of the view that the bare assertions made in the 1^stAffirmation of the 1^stDefendant (see paragraph 29 above) is hardly sufficient. 

39.  By way of example, it is the Plaintiff’s allegation that the various investment programs, vehicles or opportunities never existed and it was just a fraudulent scheme perpetrated by the 1^stDefendant and others in a conspiracy with intent to injure her.

40.  In so far as it is the defence of the 1^st and 4^th Defendants that in fact the investment programs, vehicles or opportunities did exist although it somehow did not work out, one would have thought that there must have been credible contemporaneous documents or other evidence in support of the defence.  It does not necessarily involve any “argument or explanation” from the 1^stDefendant so as to infringe her right of silence. Further, such concern does not apply to the 4^thDefendant in any case since no charge has been preferred against it.

41.  At the very least, it is incumbent upon the 1^stDefendant to identify and sketch out details of the potential prejudice, which she has singularly failed to do in her affirmations.

42.  Further, Mr Chu argues that the disclosure of the defence at this stage may give rise to the risk of the Plaintiff tailoring her evidence.  In this respect, I accept the submission of Mr Yeung that given the details of her pleaded case and her comprehensive affirmation dated 28 September 2018 in support of her application for the Mareva Injunction, the risk of the Plaintiff lying around the defence evidence is not material or else the Plaintiff stands to have her own credibility tarnished.

43.  Mr Chu also alludes to the risk of adverse publicity arising from the civil action which may influence the assessment of the jurors if the 1^stDefendant is committed to the High Court for trial.  This argument is premature since the venue of trial is hitherto unknown.  In any event, there is no reason to doubt that jurors trying the 1^stDefendant’s case would abide by the usual direction of the judge to ignore any knowledge of the 1^st Defendant or her case that they may have acquired through the media.

44.  In all circumstances, I am of the view that the balance of convenience militates against the stay of the civil action herein.  The appeal of the 1^st and 4^th Defendants against the Order of Master Phoebe Man is dismissed accordingly.

45.  Further, I order that the 1^st and 4^th Defendants do pay the Plaintiff’s costs of the appeal herein, which is summarily assessed at HK$95,000.