NICO CONSTANTIJN ANTONIUS SAMARA v. STIVE JEAN PAUL DAN also known as STEVE JEAN PAUL DAN, STIVE JEAN PAUL DAN and STEVE JEAN PAUL DAN

HCA 902/2018 & HCA 2332/2018

[2021] HKCFI 1078

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 902 AND 2332 OF 2018

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REASONS FOR DECISION

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1.  There were two applications before the court. The plaintiff applied by summons dated 24 September 2020 for a proprietary injunction over certain assets (“the proprietary injunction summons”) while the other summons was taken out on behalf of the defendant seeking leave to withdraw monies from a bank account allegedly to meet living and legal expenses (“the withdrawal summons”).

2.  After hearing the parties, I indicated that an order in terms of the proprietary injunction summons, but not one in terms of the withdrawal summons, would be made.  The summary of my reasons is now given.

3.  The background to the dispute between the parties has been set out in paragraph 6 of the decision of Deputy High Court Judge Le Pichon dated 1 November 2019, and I do not think it necessary to repeat that background in any detail.  The essential elements of the dispute are that plaintiff is a Dutch citizen living in Curaçao, who came to Hong Kong in June 2017 for the purpose of engaging the defendant to sell bitcoins for him.  The plaintiff says that the defendant was to be paid a commission for doing so.  He says further that it was agreed between the plaintiff and the defendant that the sale proceeds would be deposited in the first instance into a nominated bank account of the defendant in Hong Kong from which they would be paid onwards to the plaintiff.  The plaintiff was given access to the bank account login details and security token.

4.  The defendant contends that the nature of the agreement, and therefore of the subsequent transactions was different to that alleged by the plaintiff, being a sale by the plaintiff to the defendant of the bitcoins.  The defendant denies that he acted as agent in making the sale of the bitcoins and says that he was acting as principal, having bought the bitcoins from the plaintiff for consideration paid in cash. The payments alleged to have been made by him are summarised in tables in his pleaded defence.

5.  In any event transfers of bitcoins were made by the plaintiff to the defendant’s account with one Gatecoin Ltd., (a company now in liquidation), following which sales were made of bitcoins to third parties, and proceeds received which, according to the plaintiff amounted to approximately US$3.1 million.  A portion of that money was transferred to the plaintiff’s bank account in Germany, but after mid-September 2017 no further transfers were made.  It appears that the money held in the (relevant) defendant’s account was placed on time deposit, and was therefore “locked in”.

6.  The plaintiff seeks to assert a proprietary interest over the remaining bitcoins (held by Gatecoin) and the sale proceeds, and seeks a declaration that the sale proceeds were and are held on trust for the plaintiff.

7.  A Mareva injunction was granted by the court on 1 November 2019, and documentary disclosure subsequent to that injunction order has been given by, inter alia, the bank of the defendant.  It is the plaintiff’s contention that, based on those documents, it has been able to trace the sale proceeds and the result of that tracing exercise is the proprietary injunction application.  In addition, the plaintiff had filed an amended consolidated statement of claim including details of the fund flows alleged.

8.  On 15 May 2020 Solicitors then acting for the defendant requested the consent of the plaintiff to a variation of the Mareva injunction so as to provide funds to pay an existing legal bill.  The letter included the suggestion that the defendant had no other source of funds to settle that legal bill.  The plaintiff did not agree to the proposal.  No application was made to court by the defendant however until 18 September 2020.

The Proprietary Injunction

9.  There is no significant dispute between the parties as to the nature of this, nor as to the essential requirements.  Such a proprietary injunction will be granted where necessary to preserve assets which are the subject of a proprietary claim and an applicant is expected to show that there is a serious issue to be tried on the merits; that the balance of convenience favours the grant of the injunction and, that it will be just and convenient to do so.

10.  Those matters were considered by the judge in deciding to grant the Mareva injunction, and the plaintiff relies, it appears, on largely the same points in making the application for the proprietary injunction.  Perhaps understandably, the defendant offered little by way of submissions as to why no such injunction should be granted.  There can be no argument that there is not a serious issue to be tried between the parties as to the nature of their business relationship, and no real argument that the discretionary considerations favour maintaining all the status quo so far as possible in regard to the assets of the defendant which have been identified in Hong Kong.

11.  The judge, in granting the Mareva injunction was critical of the explanations and evidence which had been provided by the defendant in relation to these transactions, and the disposition of the funds received in respect of the sale of the bitcoins.  In submissions, the plaintiff is further critical of the evidence which has been supplied on behalf of the defendant to explain his available assets.  The defendant’s contention is that he requires access to the Citibank account in order to be able to pay for his living and legal expenses.  On the other hand, a further affirmation of the defendant’s solicitor dated 18 November 2019 describes his assets (and as summarised by his counsel in submissions) as amounting to some HK$31 million, albeit that much of this is the subject of the injunction, and certain assets are of restricted access (including bitcoin held by Gatecoin Ltd).

12.  It is also the defendant’s case that he has bank accounts in Colombia, and has been the owner of properties in Colombia which he has used as collateral for an alleged loan, seemingly from a company that may be associated with the defendant himself.  There is undoubtedly a lack of clarity as to the defendant’s position, putting matters at the very lowest.

13.  Furthermore, in support of the withdrawal summons the defendant filed only an affirmation made by his solicitor which gave no further particulars of the defendants financial means or assets.  The defendant himself made (but did not affirm) a draft affirmation containing what is described by the plaintiff (understandably, in my view) as “piecemeal, incorrect, and potentially misleading evidence as to his assets”.  That affirmation contained various assertions as to what had happened to the substantial sums which were withdrawn by the defendant from the Citibank account, and which funds seem to have been transferred to the defendant’s own accounts in Colombia.

14.  It is clear on a perusal of the evidence that the defendant has given limited and selective disclosure of his assets, and has apparently, (at least without the benefit of further explanation from him) been engaged in attempts to remove assets out of the reach of the plaintiff.  There is no clear evidence available as to his assets overall, or as to the business expenses on which he says some of the funds have been spent.

15.  Overall it is clear on the present evidence that the defendant’s evidence is highly unsatisfactory and raises far more questions as to his assets and resources than are answered.  For those reasons it appeared to me entirely appropriate both to allow the extension of the injunction as sought by the plaintiff, and to refuse the application of the defendant to be allowed to use his Hong Kong bank account for the payment of living expenses and legal fees.  Orders were made in terms of the plaintiff’s summons.  The defendant’s summons was dismissed.

Costs

16.  The plaintiff asked for the costs of both its summons, and of the defendant’s summons, and further that there be a summary assessment of those costs.  The defendant’s primary position was that the costs of the plaintiff’s summons should be costs in the cause; that taxation of costs should be ordered rather than a summary assessment made; but nevertheless submissions were made as to the reasonableness of the plaintiff’s Statement of Costs in the event that a summary assessment was to be made.

17.  Having considered those submissions, I make orders that the costs of each summons be to the plaintiff.  Having considered the submissions of the parties as to the amount of costs, I consider that a summary assessment of the relevant costs is appropriate, and having considered the submissions made, make a summary assessment of the plaintiff’s costs at $520,000.00.