KASEM NARONGDEJ v. GOLDEN MUSIC LTD AND OTHERS

HCA 1525/2018

[2019] HKCFI 1813

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1525 OF 2018

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D E C I S I O N

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Introduction

1.  This is the plaintiff’s application (taken out on 22 November 2018) in effect for:

(a)   the ex parte injunction order dated 29 June 2018 (and continued by the order dated 6 July 2018) to be discharged;

(b)   this action to be discontinued.

2.  The defendants do not oppose this application, but seek:

(1)   the costs to be paid to them by the plaintiff on indemnity basis;

(2)   to impose a condition that the plaintiff should not commence the same or a similar action in Hong Kong except with the court’s leave.

There is no dispute the usual costs order is for an applicant seeking withdrawal or discontinuance to pay the costs.  The main dispute herein being whether there are exceptions which would justify a departure from the usual costs consequence.

Background

3.  The relevant background facts can be summarized as follows.

4.  The plaintiff (“Kasem”) and the 2^nd defendant (“Nop”) are father and son respectively.  The 3^rd defendant (“KKB”) is Nop’s mother-in-law.  The 1^st defendant (“GML”) is the subject-matter of this action because the parties’ dispute revolves around whether Kasem (and his “family” (which term will be elaborated further below)) should be the owner of 99.9% of its shares (“GML shares”).

5.  According to Kasem’s case put forth at the ex parte application for interlocutory injunction, GML owns “a substantial interest” in a Thailand renewable energy (especially wind energy), Wind Energy Holding Co Ltd (“WEH”) (see, for example, Kasem’s skeleton submissions for the ex parte hearing on 29 June 2018 (“the ex parte application”), para 3; statement of claim, para 10 to 18, 21 to 23).

6.  Nop agreed in mid-2015 to acquire a Renewable Energy Corporation Co Ltd (“REC”), which owned about 60% of WEH.

7.  According to Kasem:

(a)   he was the founder of the KPN Group (and other family businesses), which (together) was the business ventures of his family (namely, Kasem and his sons, Kris, Nop and Korn) (“the KPN family” or “KPN group”);

(b)   between late 2016 and early 2017, Nop proposed to Kasem, Kris and Korn for the KPN family to invest in wind energy business in Thailand;

(c)   at the request of Nop, the KPN family provided financial assistance (by way of loans) to Nop for acquiring what turned out to be WEH.

8.  Dispute erupted between Nop and the vendor of the WEH shares (“WEH sellers”) since early 2016.  By January 2018, the WEH sellers commenced criminal proceedings in Thailand against (among others) Kasem and Nop allegedly for non-payment.

9.  Further, several companies which claim to be the vendors of the WEH shares commenced an action in mid-2018 in Hong Kong (HCCT 31/2018), and obtained an injunction order restraining GML from dealing in any way with the WEH shares (that injunction was later discharged in February 2019).

The ex parte injunction

10.  The writ herein was issued on 3 July 2018. Slightly earlier, on 29 June 2018, the ex parte application was heard, at the end of which an injunction order was granted principally to restrain Nop and KKB from dealing in any way with the GML shares (which by then were (purportedly, according to Kasem, registered in KKB’s name)) (“the ex parte injunction”).

11.  The basis for which the ex parte application was brought (and very probably why the ex parte injunction was granted) can be gathered from Kasem’s affirmation in support of the ex parte application:

(1)   the matters summarized in para 5 to 7 above;

(2)   Nop and/or KKB have forged the documents relating to a bogus transfer of GML shares from him to KKB.  The share transfer is in effect a sham;

(3)   any dealings in the GML shares and/or WEH shares by Nop would bring disrepute to the KPN family;

(4)   any dealings in the GML shares would put the KPN family at serious risk of substantial loss (namely, the KPN family losing its interest in REC entirely) because the REC shares were the only substantial asset of GML.

(for sub-para (2) to (4) above, see, for example, Kasem’s affirmation, para 64 (under the heading “Balance of Convenience”))

12.  It has to be noted (which may or may not be obvious to the court at the time of the ex parte application), in Kasem’s skeleton submissions for the ex parte application, he submitted that damages might not be an adequate remedy because:

(a)   GML being a private company, its shares are not readily available in the market;

(b)   loss of control of a company is not something which can be quantified in damages.

The skeleton submissions have not expressly adopted the part of Kasem’s affirmation summarized in para 11 above, but merely stated:

“… there should be no doubt as to the inadequacy of damages for [Kasem] even if he were to succeed at trial … ” (para 50 thereof)

13.  Further, Kasem’s skeleton submissions for the ex parte application seemed to have mentioned a sale and purchase agreement between REC (as vendor) and Kasem (as purchaser) (“the REC SPA”) (para 14 thereof).  But its significance to Kasem’s case has not been elaborated (such as under the heading “Serious issue to be tried”, “Adequacy of damages” or “Balance of Convenience”).

This application

14.  The nature of this application has been stated in para 1 above.  The evidence in support is Kasem’s 4^th affirmation.  The relevant parts are:

“… I have already discovered a number of documents … which signatures have been forged and/or are not my genuine and authentic signatures. … [My] recent knowledge of a further forged signature purportedly to be mine … The WEH Shares were transferred to me from [KPN Energy (Thailand) Company Limited] (“KPN Energy”) [formerly called REC] pursuant to this SPA [that is, sale and purchase agreement] (“WEH SPA”) … I understand that the forged SPA will be treated as if it had never been entered into under Thai law. Accordingly, as a result of the forgery, the ownership of the WEH Shares should never have been transferred to GML” (emphasis supplied);

“As a result of the forgery … there has been a fundamental change in the bases for my pursuing [the ex parte injunction (and this action)] … ” (emphasis supplied)

(para 3 and 4 thereof) (“WEH SPA” above is, for present purpose, the same as REC SPA herein).  The first mentioned group of forged documents must refer to the allegedly forged documents relating to the bogus transfer of the GML shares (para 11(2) above).

15.  Probably because Kasem is trying to wriggle out of the need for him to pay the costs, he has not been entirely clear (or consistent) in what the “change of bases” is (in other words, what the original bases were, and what the current bases are).  One sentence in his skeleton submissions for this application may shed some light on what Kasem’s current stance in this application (and this action) may be:

“Had [Kasem] known his lack of proper locus (due to the forged signature on the purported [WEH SPA]) in the beginning, it is obvious that [Kasem] would not have taken the trouble to commence this action.” (para 61 thereof)

16.  What has not been made explicit, even at the end of the hearing of this application, is whether:

(1)   at the time of the ex parte application;

(2)   between the ex parte application and 12 November 2018 (Kasem’s discovery of the forged REC SPA),

Kasem’s claim was premised on:

(a)   the wind energy business (that is, the Kasem’s ownership of the WEH shares);

(b)   merely his ownership of the GML shares simpliciter.

17.  Kasem’s affirmation (summarized in para 11 above) seems to show that para 16(1)(a) above was the basis, whereas his skeleton submissions for the ex parte application (summarized in para 12 above) can be read as relying merely on para 16(1)(b) above as the basis, of Kasem’s claim.

18.  Because Kasem’s current stance in this application (summarized in para 15 above) is that without the REC SPA, there will be no property substantial enough for him to bring this action (hence, the application summarized in para 1 above), or indeed to continue this action, it would seem logical to conclude that the basis of Kasem’s claim remained the same prior to 12 November 2018 (when, according to Kasem, he was first shown the REC SPA); that is, the basis of his claim was all along as summarized in para 16(1)(a) and 16(2)(a) above.

19.  In view of the matters set out above (especially para 5 to7, 11, 14, 17 and 18 above), I find that Kasem has, at best, failed to discharge his duty to make full and frank disclosure, and at worst, intentionally misinformed the court, about the true basis of his case.

20.  There are materials which may aggravate Kasem’s fault:

(a)   the manner in which certain statements were drafted and set out in Kasem’s affirmation and his skeleton submissions for the ex parte hearing;

(b)   Kasem earlier filed a criminal complaint with the Thai court against Nop and others for forging the documents relating to a bogus transfer of GML shares from him to KKB (similar to, if not the same as, his complaint herein).  In a decision pronounced on 30 November 2018 (about 5 months after the ex parte hearing), the Thai court dismissed the complaint.

21.  In relation to para 20(a) above:

(1)   as stated above, Kasem’s affirmation seemed to “predict” there was an authenticity problem regarding the WEH SPA by stating in effect that he was unsure if he actually signed the document (para 31 thereof);

(2)   similarly, Kasem’s skeleton submissions for the ex parte hearing seemed to have mentioned the same matter (para 14 thereof; see also para 13 above).

However, in neither of the above documents has the significance of the REC SPA been mentioned.  In Kasem’s affirmation, the matter was placed under the heading “Investigations into Nop’s wrongdoing and the fraudulent scheme”.  It is unclear if by doing so the court hearing the ex parte application was left with the impression the REC SPA was but one of the alleged wrongful acts of Nop.  What is clear is Kasem has not disclosed fully and frankly that absent the REC SPA, he would have no title over the WEH shares.

22.  In relation to para 20(b) above, the Thai court observed (among other things) after a preliminary examination:

“[Kasem] argued in his Complaint that he was never aware that he held shares in GML [before the injunction made in the HCCT action] …. [Kasem] then delegated his legal counsel’s company and lawyer to verify such facts ……” (hearing bundle B5, tab 74, pp 1049 to 1050);

“… if [Kasem] never delegated any person to purchase [the GML shares] for him, and [Kasem] truly believed that he did not own any shares in GML, then [Kasem] should not have declared his intention to accept [the GML shares].”

(“the Thai court prelim exam decision”)

23.  While the Thai court prelim exam decision was only pronounced after the ex parte application, it should be noted Kasem seemed to have (at the very least) doubts over his ownership of the GML shares even before then. According to Kasem’s “Chronology of Key Events”, he filed the criminal complaint against Nop and KKB (and another individual) on 15 August 2018 (less than 2 months after the ex parte hearing) (the preliminary hearing itself took place in October and November 2018).  There is no clear evidence about when Kasem first began to have such doubt, but it can be inferred he had such doubt at least at the time of the ex parte application (because there is no suggestion Kasem’s case against the defendants herein has ever changed between June and November 2018).  Again, it is does not appear the court’s attention has been drawn to this during the ex parte application.

24.  In view of the matters set out in para 20 to 23 above, it seems Kasem’s lack of full and frank disclosure is unlikely to be innocent.

25.  Consequently, if this application had been the “return day” of the ex parte injunction, I would have exercised my discretion:

(a)   to discharge the ex parte injunction;

(b)   to refuse any application for a regrant of the ex parte injunction.

26.  In relation to the costs the subject-matter of this application, having come to the conclusion set out in para 24 to 25 above, there is no exceptional circumstance to justify a departure from the usual rule that the applicant (to withdraw or discontinue) should pay the costs.  Kasem having (at the very least) failed to make full and frank disclosure (otherwise than innocently).  For this reason, the costs should be taxed and paid forthwith on indemnity basis.

The parties’ other arguments

27.  For completeness, the other arguments raised by the parties will be discussed briefly.

28.  The first main dispute is whether Kasem has a meritorious case regarding his allegation of Nop and KKB forging the documents relating to a bogus transfer of GML shares from him to KKB:

(1)   on the part of Kasem, reliance is placed on the handwriting expert report prepared by the Thai police (which concluded that the documents were not signed by Kasem);

(2)   on the part of the defence, reliance is placed on the Thai criminal court’s dismissal of Kasem’s complaint of forgery (para 20(b) and 22 above).

29.  Because of the seriousness of a forgery charge in civil proceedings, this dispute cannot properly be resolved in an application of the present kind.  Upon an application for withdrawal or discontinuance, the burden to establish that there should be a departure from the usual costs consequence is placed upon the applicant.  In this regard, Kasem has failed to discharge that burden.

30.  Secondly, the defence contends that Kasem ought reasonably to have access to the REC SPA if he, or his Thai legal representatives, had exercised due diligence to inspect the document. Reference here is made to the document having been made available for inspection since 4 April 2018 in the criminal complaint made by the WEH sellers (referred to in para 8 above).  Kasem has not been able to explain satisfactorily his failure to inspect.

31.  Thirdly, the defence argues that leave to serve the concurrent writ herein outside jurisdiction ought to be aside in any event, because Hong Kong is not clearly and distinctly the most appropriate forum. The only nexus with Hong Kong put forth by Kasem in support of his contention Hong Kong is the more appropriate forum is that GML is a company incorporated in Hong Kong.  However, as the defence correctly points out:

(a)   the parties (except GML) are residents in Thailand and their background have a strong connection there;

(b)   Kasem has commenced both civil and criminal proceedings in Thailand based essentially on the same facts and allegations;

(c)   the alleged wrongful acts all took place in Thailand;

(d)   the factual (and probably also any expert) witnesses are highly likely to be residents of Thailand, and speak the Thai language;

(e)   most if not all of the important documents are written in the Thai language;

(f)   Thai court has jurisdiction to grant an order similar to the ex parte injunction (albeit such orders may not be readily made).

Further, Thai law is very likely the applicable law.

32.  By reason of the matters aforesaid, if my discretion had to be based on the matters set out under this heading, I find that they are factors which weigh in favour of the defence and against Kasem.

Condition for granting leave to withdraw/discontinue

33.  In view of the stance now taken by Kasem (that is, he does not have any interest in WEH), there is no valid reason why he should be left with the liberty to commence a fresh action based on his allegation in essence that WEH has been wrongfully taken away from him.

Conclusion

34.  To conclude, I agree in principle with the proposed order set out in the skeleton submissions of KKB; namely, leave be granted to the plaintiff to discontinue the action on condition that:

(1)   Kasem pays to the defendants the costs of and occasioned by:

(a)   this action;

(b)   Kasem’s summonses dated 3 July 2018, 16 July 2018 and 22 November 2018;

(c)   Nop’s summons dated 29 November 2018 and KKB’s summons dated 1 November 2018,

to be taxed if not agreed,

(2)   Kasem is not to commence another action against the defendants based on the same, or substantially the same, grounds as the present action without paying all the costs awarded herein and without leave of the court.

(similar to para 61 thereof)

The costs of sub-para (1)(b) and (1)(c) are taxable and payable on indemnity basis (para 26 above).  There will also be a cost order nisi certifying the suitability for two counsel to attend the hearing on 11 July 2019.

Other matters

35.  Because leave has been given to Kasem to discontinue this action (para 2 and 34 above) there is no practical need to make any order concerning (i) para 2, Nop’s summons dated 29 November 2018, and (ii) para 2, KKB’s summons dated 1 November 2018 (the concurrent writ herein be discharged or set aside).

36.  The parties’ written submissions also mentioned various other points.  These have not been expressly set out or dealt with above.  This is so only because of the need to balance between the length of the decision and its easier comprehension.  It does not mean those other points are thought to be irrelevant (or have been overlooked).  To avoid doubt, those other points have also been considered.