XCHRX MANUFACTURER'S LIFE INSURANCE CO. OF CANADA v. HARVEST HERO INTERNATIONAL LTD. AND OTHERS

HCCL96/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMMERCIAL ACTION NO.96 OF 2000

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REASONS FOR JUDGMENT

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THE APPLICATION

1. By inter partes summons dated 20 November 2000, the plaintiff herein, Manufacturer's Life Insurance Company of Canada ("Manufacturer's Life"), sought certain categories of documents and information pursuant to that which is popularly known as Norwich Pharmacal relief.

2. The terms of this summons mirrored the terms of the Indorsement of Claim contained in the Writ in this action, issued on 14 November 2000.

3. An ex parte application for like relief, based upon the Writ as drawn, had earlier been made to this court on 20 November 2000, and was dismissed.

4. At the conclusion of the hearing of the inter partes summons, the court also dismissed this application, with costs, on the basis of reasons to be given later. The following represents an outline of the case and a brief summary of those reasons.

THE FACTUAL BACKGROUND

5. The focus of this case is an Indonesian share dispute. What is in issue is the ownership of a 40% stake, namely 1,800 shares, in Manulife Indonesia. These shares were previously owned by an entity called PT Dharmala Sakti Sejahtera Tok, invariably referred to as 'DSS'. DSS was declared bankrupt on 6 June 2000, and the plaintiff purported to buy these shares at a public auction arranged by a Curator, appointed by the Indonesian Commercial Court, to realise the assets of DSS. The shares in question were DSS's principal asset, and were so acquired by the plaintiff at the aforesaid auction on 26 October 2000 for the sum of 170 billion Indonesian Rupiahs, which equates to approximately US$20 million.

6. The problem with which this (and related litigation) is concerned, in essence, is this. The validity of the sale and purchase of these shares at the auction is being publicly disputed by a company known as Roman Gold Assets Limited ("Roman Gold"), a BVI company, which contends that the Curator had no legal power to sell the DSS shares, and that the auction should not have taken place, because DSS had previously sold the shares to Roman Gold, pursuant to a series of transactions involving Powers of Attorney dated 1 February 1996 and 1 March 1996.

7. DSS is and was at all material times said to be controlled by a gentleman named Mr Suyanto Gondokusumo ("Mr Gondokusumo"). The plaintiff's allegation is that through a series of unlawful, and possibly forged, transactions undertaken by Mr Gondokusumo together with the 1st defendant herein, Harvest Hero International Limited ("Harvest Hero") (a shelf company purchased in Hong Kong, of which the 4th defendant is company secretary and the 2nd and 3rd defendants directors), and a Samoan company, one Highmead Limited, Roman Gold has been provided with a specious claim for the very shares apparently validly purchased by the plaintiff. The plaintiff further says that this specious claim has been publicly advanced in the media by Roman Gold, thereby falsely slandering the plaintiff's lawful title to the shares, with false allegations of criminality being levelled by both Roman Gold and Mr Gondokusumo against the plaintiff and its staff, and also against the Curator.

8. In the event, says the plaintiff, it has suffered great harm as the result of these events. Senior staff members have been detained by Indonesian police as the result of Roman Gold's false claims, and its ownership of 40% of Indonesia's largest foreign insurer, a US$20 million asset, is being publicly impugned, thereby harming its reputation and business.

9. The plaintiff's allegations are primarily contained in an affidavit dated 17 November 2000 sworn by Mr Mitchell New ("Mr New"), who identifies himself as Manulife's General Counsel for Asian businesses.

10. For its part the defendants dispute the plaintiff's case. Mr Robin Ilmuwan, a director of Harvest Hero, has sworn evidence in reply to that of Mr New, variously asserting that the sale of the shares to Roman Gold is valid under Indonesian law, and going on to state that the plaintiff has been responsible for material non-disclosures, alleging in this context that Roman Gold is in possession of the original share certificates for the DSS shares, and that the plaintiff, and Mr New, is wrongly in possession of a duplicate set of share certificates, and was so in possession of such duplicate certificates even prior to the auction. It is further asserted that the Indonesian police have detained and questioned senior officers of the plaintiff as to alleged forgery, and that there had been an admission made by the plaintiff's officers as to the signing of such duplicate share certificates.

11. In short, in this case accusation and counter-accusation abound, and this court has no intention whatever of being drawn into the merits of this dispute. Nor am I prepared, as Mr Jamison clearly would have me do, to proceed on the basis of established fraud, or to assume that the sale to Roman Gold is indeed a sham - these evidential waters are far too murky.

CONSEQUENTIAL LEGAL PROCEEDINGS

12. As the result of these events, the plaintiff issued the present action, that is, HCCL96 of 2000 on 14 November 2000. This action is purely concerned with obtaining information and discovery pursuant to the principles laid down in Norwich Pharmacal v. Customs and Excise Commissioners, [1974] AC 133 (HL).

13. As earlier indicated, the interlocutory summons presently before the court mirrors the Indorsement of Claim. Inspection of three categories of documents is pursued, viz. :-

"(i) the power of attorney to sell with substitution rights granted in Jakarta, Indonesia on 1 February 1996 by PT Dharmala Sakti Sejahtera to the 1st Defendant and represented by the 3rd Defendant;

(ii) the power of attorney to sell with substitution rights granted in Jakarta, Indonesia on 1 March 1996 by the 1st Defendant to Highmead Limited;

(iii) all documents which are or have at any time been in their possession, custody or power relating to the 1,800 shares in PT Asuransi Jiwa Dharmala Manulife previously owned by of PT Dharmala Sakti Sejahtera."

14. Whilst in terms of information, the following items are sought :-

"The Defendants do disclose to the Plaintiff within 7 days:

(i) the identity of the person, persons, company, companies, firm, firms, body or bodies from whom the Defendants received the documents referred to in paragraphs 1(i) and 2(iii) above;

(ii) full details of the circumstances in which the 1st Defendant received the documents referred to in paragraphs 1(i) and 2(iii) above;

(iii) the identity of the person, persons, company, companies, firm, firms, body or bodies from whom the 1st Defendant and 3rd Defendant received instructions to enter into the document referred to in paragraph 1(ii) above;

(iv) full details of the circumstances in which the 1st Defendant and 3rd Defendant received the instructions to enter into the document referred to in paragraph 1(ii) above;

(v) full details of the Defendants' knowledge of the sale of the 1,800 shares in PT Asuransi Jiwa Dharmala Manulife by PT Dharmala Sakti Sejahtera and/or their lawful attorneys;

(vi) the identity of any other person, persons, company, companies, firm, firms, body or bodies involved in the wrongdoing of Highmead Limited and/or Roman Gold Assets Limited."

15. This, however, is not the end of the story in terms of Hong Kong proceedings. One month after the present Norwich Pharmacal action was issued, on 15 December 2000 the plaintiff issued further proceedings in HCCL105 of 2000. This is a substantive action against the like four defendants in the Norwich Pharmacal proceedings, together with the addition of a 5th defendant, one Maggie Ho Yuk Lin, who is joined as the owner of the 4th defendant, AMS Management Services Limited ("AMS Management Services"), which is in the business of the provision of corporate services. An additional plaintiff, Manulife Indonesia, is also added.

16. The Statement of Claim, indorsed on the Writ, rehearses the factual background, including the sale of Harvest Hero to Mr Gondokusumo and the transaction complained of involving Harvest Hero and Highmead, via Powers of Attorney, culminating in the sale of the shares by Highmead to Roman Gold. Paragraph 8 of the pleading recites :-

"The Transaction was fraudulent, and the documents evidencing it were forgeries. There was no genuine sale of the Shares and no proceeds of sale. Highmead and Roman Gold were at all material times companies beneficially owned and/or controlled by Mr Gondokusumo and/or his nominees and operated in accordance with his directions. The purpose of the purchase of Harvest Hero by or on behalf of Mr Gondokusumo, and of the Transaction, was to remove the Shares, which were DSS's most significant and valuable asset, out of DSS's estate in liquidation where they would be sold for the benefit of DSS's creditors, and to keep them instead within the control of Mr Gondokusumo. The purchase and the Transaction had the further or alternative purpose of establishing and documenting a fictitious claim to the Shares in competition with DSS's legitimate claim, which could be used to prevent or delay any sale of the Shares by the Curator."

17. Thereafter it is asserted, at paragraphs 9 and 10 of the pleading, that :-

"9. The Defendants must have been aware of the illegitimate purpose for which Harvest Hero had been purchased, and must have known that the Transaction was fraudulent, and the documents evidencing it forgeries"

"10. In the premises the Defendants have unlawfully interfered with the economic interests of, and have conspired to injure, DSS and its successors in title."

18. The history of Roman Gold's claim to the shares is then recited, culminating in the plea, at paragraph 13, that :-

"13. By reason of these assertions of title by Roman Gold, and the consequent inpuning (sic) of Manulife's title to the Shares, Manulife and Manulife Indonesia have suffered substantial harm in their respective reputations and businesses.

Particulars

By reason of the matters pleaded above, the whole business of Manulife Indonesia has been and continues to be threatened and harmed. The best estimate which the Plaintiffs can presently put upon the value of their loss is US$50 million and continuing."

The prayer for relief claims damages against all five defendants for unlawful interference with economic interests and damages for conspiracy to injure.

19. I have set out the contents of this substantive claim in some detail because it seems to me fundamentally inappropriate to consider the present discovery application with which this court is seized in isolation from a parallel substantive action, the existence of which action (as then issued but as yet unserved) was disclosed to the court by Mr Jamison shortly before the conclusion of the morning session on the first day of the inter partes application. In the event, service of these proceedings was effected the following day.

20. Aside from these two sets of proceedings in Hong Kong, no proceedings arising from this matter are in existence anywhere else.

PURPOSE OF THE DISCOVERY SOUGHT

21. At the outset of this application the court formed the strong impression that Norwich Pharmacal relief was being pursued in this case for use in foreign proceedings, and in particular in Indonesia which, upon the present state of the evidence at least, appears to represent the centre of gravity of this share dispute between Manufacturer's Life on the one hand and Roman Gold / Mr Gondokusumo on the other. However, on behalf of the applicant, Mr Jamison made it clear that this Norwich Pharmacal relief was wanted both for anticipated proceedings in Indonesia - "we want evidence of the real person behind these transactions and want to use that evidence in Indonesia" - and also, possibly, for potential proceedings in Singapore, but at the same time the discovery sought was wanted for the substantive Hong Kong proceedings which had now been served; indeed, as he put it, it had "always been the case that we wanted it for all three jurisdictions", albeit it was clearly recognised that "clearly Indonesia is central to the main fraud" and, if not granted for use in Indonesia or Singapore, his clients "will take what the court will grant us".

REASONS FOR DISMISSAL

22. In my judgment this application failed, and failed clearly, for the following principal reasons.

(1) Jurisdiction at common law

23. I do not accept that there is a common law jurisdiction, as Mr Jamison asserts - he has confirmed that his argument is solely common law based - to order Norwich Pharmacal relief in aid of potential foreign proceedings. To the contrary. In my view the only jurisdiction is by statute, Part VIII, Cap.8 and RHC Order 70 collectively comprising, as Mr Chua for the defendants submits, a comprehensive self-contained code governing the court's power to order discovery in aid of foreign proceedings. In my opinion this is an exclusive statutory regime, the Norwich Pharmacal case itself making no change to the common law position. Nor do I understand that the cases of Smith Kline Limited v. Global Pharmaceutics Limited, [1986] RPC 394 (CA) or Jade Engineering (Coventry) Limited v. Antiference Window Systems Limited & Others, (1996) Ch.D. (unreported) to support the jurisdictional proposition put forward by Mr Jamison, these particular cases going primarily to the proposition that if the proceedings are to be taken within the jurisdiction, it does not matter if the alleged wrongdoer is outside it.

24. The conclusion that there is no such common law jurisdiction is a view shared by the authors of Matthews and Malek on Discovery, (1992) at paragraph 2.09, page 22, who opine that "the discovery must be sought in aid of legal proceedings contemplated to be taken in England", an opinion reiterated in the latest edition of the work, retitled Disclosure (2000 ed.), at paragraph 2.13.

25. Accordingly, in so far as the present relief in fact is sought for use in potential foreign proceedings, whether such be in Indonesia or Singapore, in my judgment such application fails on the basis of want of primary jurisdiction.

26. Having reached this conclusion, therefore, that which follows is concerned solely with the request for the exercise of Norwich Pharmacal jurisdiction for use in Hong Kong proceedings.

(ii) Requirements of Norwich Pharmacal jurisdiction

27. Mr Chua submitted, matters of discretion apart, that certain basic conditions required to be met before the court could exercise Norwich Pharmacal jurisdiction, quoting in this instance the speech of Millett J (as he then was) in Lonrho PLC v. Fayed (No.2), [1992] 1 WLR 1 at pages 13-14 :-

"It is, however, a prerequisite for the exercise of the jurisdiction that the applicant can demonstrate a prima facie cause of action against a party or parties whose identity cannot be ascertained without the information sought. The jurisdiction is founded on judicial necessity: its justification lies in the fact that the information will not otherwise become available, so that to withhold relief would amount to a denial of justice.

In my judgment, neither of the two essential conditions for the making of an order has been satisfied in the present case. Lonrho has not shown that it has no other means of ascertaining the identity of the persons who supplied those funds. To take them in reverse order: Lonrho has been shouting the name of the person in question from the roof tops; it has even pleaded it in paragraph 22(f) of the present statement of claim. It now acknowledges that it may be wrong; but 'it remains the fact that it seeks inspection, not to ascertain the identity of the source of finance, but to confirm its belief that it already knows it. That is not a proper ground for invoking the jurisdiction.

.....

It knows, or thinks it knows, whom to sue: it seeks inspection in order to find out whether it has cause of action against him which it can properly plead. In my judgment, it is a fishing exercise and ought not to be allowed."

28. Likewise, says Mr Chua, in this case : there is clearly no "judicial necessity", in the sense in which this term is used in this context, nor could it be said that the identity of the defendants could not be ascertained without the information sought.

29. I agree with this submission. I cannot imagine that the refusal of this court to grant the relief presently sought can possibly be elevated, for example, to the level of a "denial of justice" if not so granted. To the contrary. Not only have the names of Mr Gondokusumo and Roman Gold been bruited abroad both in Indonesia and the international financial press, but in any event the present writ which has been issued in Hong Kong specifically names the identity of the alleged wrongdoers, both those actually impleaded in this litigation together with Mr Gondokusumo, Highmead and Roman Gold. Moreover, these proceedings now extant in Hong Kong appropriately provide the medium for discovery applications, if justified in the context of that litigation, a point made by Sir Alan Huggins V.P. in Yew Seng Computer v. Computerland Corp., [1986] HKLR 283 (CA) at 285 :-

"Norwich Pharmacal may not be limited to obtaining the identity of a possible defendant and I would accept that Radio Corporation of America v. Reddington's Rare Records [1975] RPC 95 shows that in a proper case additional information may be sought which can be used as evidence, but the information must be necessary for justice to be done. In the present case I do not think it is necessary: the plaintiff will in due course be entitled to apply for discovery in the ordinary course and everything which could now be obtained on the order which has been granted will become available, and I see no reason why the present form of proceedings should be used to obtain discovery at an earlier stage than otherwise would be available."

30. I respectfully agree with and apply these observations, which seem to me more than usually apposite in the present case.

(iii) Discretion

31. It may be that this last point fits equally well in terms of general discretion. In any event, if and in so far as I be wrong under the heads above, I should also have dismissed this application in the exercise of my discretion. In this context two particular considerations are material.

32. First, I bear firmly in mind the existence and nature of the substantive proceedings now also brought against the defendants in addition to the current Norwich Pharmacal action. Not only is the court disinclined to make a discovery order in this action which equally can be applied for in the usual course in the substantive litigation, but it seems to me, also, that the nature of this further litigation is a powerful factor in the decision to deny the relief sought. Mr Chua canvasses the point in terms of oppression. He says it is oppressive in a situation in which fraud is alleged against persons (as here) to seek to compel such persons to provide disclosure of this nature in this manner, citing in this instance the judgment of Sir Richard Scott V.C. in First American Corp. v. Zayed, [1999] 1 WLR 1154 (CA) at 1168 to 1169 :-

"It is, it seems to me, inherently oppressive to hold over the head of two witnesses serious allegations of complicity in fraud and the real possibility of being joined as defendants in a civil action based on that alleged complicity, while at the same time requesting an opportunity for a wide examination of the two witnesses on the very topics that would be relevant in an action against them.

.....

But allegations of fraud raise special considerations and so long as First American hold themselves free to use any information they may obtain from these two witnesses in a civil action for fraud in which the witnesses, or their firm, are defendants, the requests are in my judgment, oppressive."

33. This is a submission to which I accede. There is no doubt whatever that the pleading in the substantive action places the named defendants squarely within a course of allegedly fraudulent conduct, notwithstanding that which Mr Jamison has described as the "careful framing" of the cause of action, and it is for this reason, no doubt, that Mr Chua has also invoked the privilege against self-incrimination (available pursuant to sections 10, 65 and 77 of the Evidence Ordinance) in the sense used by Lord Wilberforce in Rank Film Ltd v. Video Information Centre, [1982] AC 380 at 443 :-

"... whatever direct use may or may not be made of information given, or material disclosed, under the compulsory process of the court, it must not be overlooked that, quite apart from that, its provision or disclosure may set in train a process which may lead to incrimination or may lead to the discovery of real evidence of an incriminating character. In the present case, this cannot be discounted as unlikely: it is not only a possible but probably the intended result. The party from whom disclosure is asked is entitled, on established law, to be protected from these consequences."

34. Second, the court is very aware, were the relief presently sought to be granted, that the plaintiff in effect would be obtaining the totality of the relief sought in the action at the very outset of the proceedings, and in the face of strongly divergent affidavit evidence redolent with disputed allegations of fact as to the true position, the respective merits of which, as I have observed, I have no intention of attempting to fathom. In this connection I remind myself of the authorities that lay down that securing full relief at the interlocutory stage ought not to occur save in clearly appropriate circumstances, which I do not consider these to be, not least because the plaintiff has felt able to issue substantive proceedings naming the same defendants as in the present action, and it is those proceedings which in my judgment now must be permitted to take their course.

35. I bear in mind also Mr Chua's observations about unjustified "fishing" in terms of the information sought, seeking general and not specific discovery : viz. "all documents which are or have been in their possession custody or power relating to the 1,800 shares in [Manulife Indonesia] previously owned by [DSS] ...", and the additional fact that the plaintiff already has copies of the two powers of attorney sought, respectively dated 1 February 1996 (granted by DSS to the 1st defendant) and 1 March 1996 (granted by the 1st defendant to Highmead) which, of course, are dated well before the occurrence of events of which complaint is now made. Nor do I intend to become enmeshed in the allegations of material non-disclosure made by the defendants - in particular that the plaintiff had duplicate share certificates in its possession prior to the auction and that the plaintiff's Mr Purnomo had signed a duplicate share certificate, contrary to Indonesian law, thereby creating the duplication which had given rise to the dispute between the plaintiff and Roman Gold - save to observe that this type of evidential complication renders it all the more inappropriate for the court to accord the full relief prayed for in the action at a very early stage and but a short period after the issuance of the writ.

36. Accordingly, if and in so far as it be relevant, I would, as I have indicated, have rejected this application in the exercise of my discretion upon these bases alone.

COSTS

37. The dismissal of the plaintiff's application for Norwich Pharmacal relief must be attended by a costs order. There can be no question but that the costs must follow the event, the only outstanding issue being the scale of such costs. Mr Chua has asked for costs upon an indemnity basis, whilst Mr Jamison reserved his position pending sight of the court's reasons for dismissal of his application.

38. I have reflected upon the situation and on the circumstances surrounding this application, and I now make an order nisi that the costs of and occasioned by this application are to be paid by the plaintiff to the 1st, 2nd and 4th defendants upon a common fund basis, such costs to be taxed if not agreed.

THE DEFENDANTS' SUMMONS DATED 15 DECEMBER 2000

39. This summons was taken out on behalf of the 1st, 2nd and 4th defendants and requests, inter alia, stay or dismissal of these Norwich Pharmacal proceedings. This application was not in fact disposed of at the conclusion of the hearing on 7 February at the time the order was made dismissing the plaintiff's application.

40. As I believe Mr Jamison accepted during argument, without the grant of Norwich Pharmacal relief this present action has no further purpose, albeit the relief sought in the defendants' summons was not specifically addressed, both parties concentrating upon the subject-matter of the plaintiff's application.

41. In the circumstances, and absent agreement thereon, I make an order nisi that the defendants' action herein be dismissed with costs, to be taxed if not agreed. For the avoidance of doubt, this costs order is intended to deal with such costs which do not fall within the umbrella of the costs order nisi which I have made upon the plaintiff's summons dated 20 November 2000.