BEYONICS TECHNOLOGY LTD AND ANOTHER v. GOH CHAN PENG AND OTHERS

CACV 244/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 244 OF 2014

(ON APPEAL FROM HCMP NO 1840 OF 2013)

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JUDGMENT

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Hon Chu JA:

1.This is the 1^st, 3^rd and 4^th defendants’ appeal against two orders of Chung J (“the Judge”) given on 12 November 2014 dismissing their application to discharge the Mareva injunction order dated 27 July 2013 as continued by the order dated 2 August 2013 (collectively “the Hong Kong Mareva injunction”), and granting the plaintiffs’ application for inspection of bankers’ records of the 1^st, 3^rd and 4^th defendants’ bank accounts in Hong Kong.

A. The plaintiffs’ claims

2.The plaintiffs are companies incorporated in Singapore. The 2^nd plaintiff is a wholly owned subsidiary of the 1^st plaintiff. The 1^st plaintiff and its subsidiaries (“Beyonics Group”) are engaged in the business of manufacturing baseplates and parts for the hard disk drive industry. Seagate Technology International (“Seagate”) is a key customer of the 1^st plaintiff.

3.The 1^st defendant was a director and CEO of the 1^st plaintiff and the CEO of the Beyonics Group until his resignation on 9 January 2013. The 2^nd defendant is his wife. The 3^rd and 4^th defendants are BVI companies under the control of the 1^st defendant.

4.It is the plaintiffs’ case that when the 1^st defendant was working for the 1^st plaintiff and the Beyonics Group, he had, in breach of his duties and fiduciary obligations to the plaintiffs, (1) diverted away from the Beyonics Group part of the baseplate manufacturing work for Seagate to a Korean group (“Nedec/Kodec Group”); (2) procured a loan from Seagate for the Nedec/Kodec Group to facilitate the Nedec/Kodec Group to secure business from Seagate in competition with the 1^st plaintiff and/or with a view to the Nedec/Kodec Group supplanting the 1^st plaintiff and its subsidiaries; and (3) received, through the 3^rd defendant, payments (in the form of commission and a sum of US$200,000) as inducement or reward for procuring the diversion of business from the Beyonics Group to Nedec/Kodec Group and for procuring the loan from Seagate to the Nedec/Kodec Group. The plaintiffs say that these payments are bribes.

5.It is also the plaintiffs’ case that the 1^st defendant had made unjustified claims for expenses, and that he had received bonus and salary payments that he would not be entitled to had his misdeeds been discovered.

B. Proceedings in Singapore

6.On 25 July 2013, the plaintiffs commenced proceedings in Singapore against the defendants. The plaintiffs’ primary claim is against the 1^st and 3^rd defendants. The 2^nd and 4^th defendants are joined under the Chabra jurisdiction (TSB Private Bank International SA v Chabra [1992] 1 WLR 231), on the basis that there are good reasons to believe they hold assets and money for the 1^st defendant.

7.The 1^st plaintiff claims:

(1) As against the 1^st defendant, damages for breach of fiduciary duties and duties of loyalty and fidelity, an order for account and inquiry and a tracing order in respect of the payments he had received from the Nedec/Kodec Group;

(2) As against the 3^rd defendant, a declaration that it is liable to account as constructive trustee for dishonest assistance in the 1^st defendant’s breach of duties and knowing receipt of the bribes made to the 1^st defendant, a tracing order in respect of the bribes and damages for dishonestly assisting the breaches of the 1^st defendant’s duties; and

(3) As against the 1^st and 3^rd defendants, damages for conspiracy to injure the 1^st plaintiff and/or its subsidiaries by unlawful means.

8.The 2^nd plaintiff also claims against the 1^st defendant the refund of unjustified expenses and salaries paid.

9.On 26 July 2013, the plaintiffs obtained in the High Court of Singapore a worldwide Mareva injunction order against all the defendants up to the value of S$12 million (“Singapore Mareva injunction”) and an ancillary disclosure order.

C. Proceedings in Hong Kong

10.On 27 July 2013, the plaintiffs applied ex parte to the Hong Kong court for a Mareva injunction against the defendants in aid of the proceedings in Singapore. Toh J granted the application and made the Hong Kong Mareva injunction against the 1^st, 3^rd and 4^th defendants (but not the 2^nd defendant) restraining them from disposing of their assets in Hong Kong up to the value of HK$73.5 million (equivalent to S$12 million). On 2 August 2013, the injunction was continued until further order.

11.On 9 September 2013, the plaintiffs issued the summons seeking discovery of bankers’ records of the 1^st, 3^rd and 4^th defendants’ bank accounts in Hong Kong pursuant to section 21 of the Evidence Ordinance, Cap. 8 and Order 38 rule 13 of The Rules of the High Court, Cap. 4A.

D. Development in the Singapore proceedings

12.On 2 April 2014, after a contested hearing, the Singapore Court discharged the Singapore Mareva injunction and gave liberty to the plaintiffs to enter caveats on five landed properties owned by the 1^st and/or the 2^nd defendants (“the defendants’ Properties”), to continue until after trial of the Singapore action or further order. According to the defendants, the equity of the five properties is about S$6.6 million.

13.Meanwhile the plaintiffs had also applied to the Singapore Court for discovery against the defendants, the scope of which included bank statements of their bank accounts in Hong Kong. The application was refused on 25 March 2014. The plaintiffs’ appeal was dismissed on 30 June 2014.

E. The 1^st, 3^rd and 4^th defendants’ applications

14.On 10 June 2014, the 1^st, 3^rd and 4^th defendants applied by summons to discharge the Hong Kong Mareva injunction. The application was heard together with the plaintiffs’ discovery application. On 12 November 2014, the Judge dismissed the discharge application and granted the discovery application.

15.The 1^st, 3^rd and 4^th defendants’ application for leave to appeal was refused by the Judge on 14 November 2014. Their renewed application to the Court of Appeal[1] was granted by the Court of Appeal (Lam VP and Barma JA) on 26 November 2014.

16.On 4 December 2014, the Court of Appeal ordered, inter alia, that the execution of the Judge’s discovery order be varied to the extent that the bankers’ records provided by the banks shall be placed in sealed envelopes and kept with the court pending the outcome of the appeal.

F. Legal principles governing the appeal

17.The Judge’s decision on the discharge application and discovery application is an exercise of discretion. An appellate court will not interfere unless it is demonstrated that the Judge acted under a mistake of law, or in disregard to principle, or under a misapprehension of facts, or that he took into account irrelevant matters or the conclusion which he reached was outside the generous ambit within which a reasonable disagreement is possible: see Excel Courage Holdings Ltd & Anor v. Wong Sin Lai & Ors [2014] 3 HKLRD 642, 655.

G. Appeal against the discharge application

G1. The Judge’s decision

18.Before the Judge, the defendants’ primary arguments on the discharge application are, firstly, as the Singapore court has discharged the Singapore Mareva injunction and since section 21M is in the nature of ancillary relief in aid of foreign proceedings, the Hong Kong Court should not take a view contrary to that of the Singapore Court; and, secondly, in light of the caveats entered on the 1^st and 2^nd defendants’ properties and the discharge of the injunction in Singapore, the Hong Kong Mareva injunction is neither necessary nor maintainable.

19.In his Decision, the Judge noted that the Singapore Court had not given reasons for discharging the Singapore Mareva injunction and giving liberty to the plaintiffs to enter caveats against the defendants’ Properties, and considered it was inappropriate to attach any weight to the defendants’ suggestion that the Singapore Court must have been satisfied that the value of the defendants’ Properties could adequately guard against any risk of a judgment in the plaintiffs’ favour being unsatisfied because “the outcome of that hearing could well have been the result of the parties’ out-of-court discussion, instead of a considered determination after full argument.”[2]

20.The Judge’s reasons for concluding that the discharge application should be refused are encapsulated in §§14-17 of his Decision:

“14. Looked at in such light, I rather consider it more appropriate to determine this application, not by drawing any inference about the Singapore judge’s alleged intention when making the Singapore order, but instead to bear in mind the plaintiffs have been afforded at least some “protection” by way of the Singapore order.

15. As regards whether the plaintiffs have established a good arguable case, both as regards the validity of the whole of its claim in the Singapore action, and as regards whether the Singapore action is capable of giving rise to a judgment which may be enforced in Hong Kong, the defendants have not put forth grounds other than those summarized in para8 and 11 above. Having considered the evidence adduced so far, I am satisfied that the plaintiffs have established such a good arguable case.

16. As regards “balance of convenience”, as the plaintiffs correctly point out, the Hong Kong ex parte injunction has been in place since July 2013 (about a year before this application, and more than a year before its hearing). The defendants have not contended (whether by submissions or evidence) that irreparable damage had been (or would likely be) caused. In fact, the Singapore order will likely result in the release of some of the defendants’ assets, which will likely enable them to pay for their legal and other expenses.

17. Such being the case, the “balance of convenience” is in favour of preserving the status quo since the Hong Kong ex parte injunction.”

G2. Grounds of appeal

21.The crux of the 1^st, 3^rd and 4^th defendants’ appeal on the refusal of the discharge application is that the Judge failed to give due regard to the order of the Singaporean Court discharging the Singapore Mareva injunction upon giving the plaintiffs liberty to enter caveats on the defendant’s Properties.

G3. Discussions

22.Under section 21M(1) of the High Court Ordinance, the Court of First Instance may grant interim relief in relation to foreign proceedings if those proceedings are capable of giving rise to a judgment which may be enforced in Hong Kong. Section 21M(4) further provides that the Court of First Instance may refuse to grant interim relief if the court is of the opinion that the fact that the court has no jurisdiction makes it unjust or inconvenient to grant the relief.

23.The Hong Kong Court’s jurisdiction under section 21M is ancillary in nature and the purpose is to facilitate the foreign court that has primary jurisdiction over the matter. The approach to a section 21M application is to consider first whether the facts warrant the relief sought if the substantive proceedings were brought in Hong Kong; and second whether it is unjust or inconvenient to grant the interim relief sought: see Refco Inc & Anor v. Eastern Trading Co & Ors [1999] 1 Lloyd’s Law Report 159, at 170-171.

24.On the first question, the court will have to be satisfied that the basic requirements for granting the relief were satisfied if the substantive proceedings were brought in Hong Kong. In the case of a Mareva injunction application, this involves demonstrating a good arguable case and a real risk of dissipation of assets so that any judgment obtained will go unsatisfied: Refco Inc v. Eastern Trading Co at pp.164 & 171.

25. On the second question, Potter LJ said in Motorola Credit Corp v. Uzan & Ors (No. 2) [2004] 1 WLR 113 at §115 that:

“As the authorities show, there are five particular considerations which the court should bear in mind, when considering the question whether it is inexpedient to make an order. First, whether the making of the order will interfere with the management of the case in the primary court e g where the order is inconsistent with an order in the primary court or overlaps with it. That consideration does not arise in the present case. Second, whether it is the policy of the primary jurisdiction not itself to make worldwide freezing/ disclosure orders. Third, whether there is a danger that the orders made will give rise to disharmony or confusion and/or risk of conflicting inconsistent or overlapping orders in other jurisdictions, in particular the courts of the state were the person enjoined resides or where the assets affected are located. If so, then respect for the territorial jurisdiction of that state should discourage the English court from using its unusually wide powers against a foreign defendant. Fourth, whether at the time the order is sought there is likely to be a potential conflict as to jurisdiction rendering it inappropriate and inexpedient to make a worldwide order. Fifth, whether, in a case where jurisdiction is resisted and disobedience to be expected, the court will be making an order which it cannot enforce.”

26.Although section 25 of the Civil Jurisdiction and Judgments Act 1982 uses the term “inexpedient” whereas our section 21M refers to “unjust or inconvenient”, what was said by Potter LJ and also the discussions and observations in other English cases on section 25 are applicable when considering the exercise of the section 21M jurisdiction.

27.I agree with Miss Lau, who appeared for the 1^st, 3^rd and 4^th defendants, that the Judge had not afforded due and sufficient regard for the Singapore Court’s decision to discharge the Singapore Mareva injunction upon giving the plaintiffs liberty to enter caveats on the defendant’s Properties. As explained below, this has an impact on the Judge’s assessment of the first question of whether the Mareva injunction should be maintained if the substantive proceedings had been brought in Hong Kong, and the second question of whether it is unjust or inconvenient to maintain the injunction.

28.In the first place, although the Singapore Court did not give reasons for its decision, the circumstances leading to its decision can be gleaned from the notes of the hearing. While the Hong Kong Court should not second guess the intention of Mr Justice Tay in discharging the Singapore Mareva injunction, it does not mean that his order and its practical implication and effect should not be taken into consideration.

29.Secondly, the Judge’s view that the Singapore Court’s order “could well have been the result of the parties’ out-of-court discussion, instead of a considered determination after full argument” is not borne out by the evidence before the Hong Kong Court, including the notes of hearing kept by the Singapore Court. The notes show that the substitution of the Singapore Mareva injunction by the caveats on the defendants’ Properties was raised by Mr. Justice Tay. The case was stood down to enable instructions be taken from the parties. When the hearing resumed, the plaintiffs insisted on maintaining the injunction, albeit for a lower amount taking into account the caveats on the defendants’ Properties. This was opposed by the defendants. After hearing counsel, Mr Justice Tay ordered the Singapore Mareva injunction to be discharged. The order was not made consensually. There is also the affidavit evidence from the defendants to the effect that the discharge was made after a contested hearing.

30.Thirdly, the practical effect of the discharge of the Singapore Mareva injunction is that, other than the five properties subject to caveats, the defendants are free to deal with all their assets worldwide, including their Hong Kong assets. It is not disputed that it is within the power of the Singapore Court to maintain the Mareva injunction over the defendants’ Hong Kong assets. It is also open to the Singapore Court to accede to the plaintiffs’ request to reduce the amount covered by the Singapore Mareva injunction instead of discharging it, given that the defendants do have other assets in Singapore. For instance, the 1^st defendant holds 6.47% shares in Channelview Investments Ltd, which owns the 1^st plaintiff. Mr Whitehead SC, who appeared for the plaintiffs with Mr Chang, argued emphatically that the Singapore Court was aware of the existence of the Hong Kong Mareva injunction order. However, the existence of the Hong Kong Mareva injunction was not a matter canvassed at the hearing in the Singapore Court, and there is no evidence that this was a matter relied on by Mr Justice Tay. Looking at the matter in the round, the discharge of the Singapore Mareva injunction is reflective of the Singapore Court’s assessment of the extent to which the plaintiffs’ claim should be protected against the risk that judgment will go unsatisfied. It is therefore a relevant consideration and ought to be afforded due weight and importance when assessing whether there remains a real risk that judgment obtained by the plaintiffs will go unsatisfied and, in turn, whether it is necessary to maintain the Hong Kong Mareva injunction. It is not sufficient for the Hong Kong Court merely to bear in mind that under the Singapore court order, the plaintiffs have been afforded some protection.

31.Fourthly, as Hong Kong Court only has an ancillary jurisdiction, it should be especially cautious and sensitive to the informed view of the foreign court concerned with the substantive merits. In Credit Suisse Fides Trust SA v. Cuoghi [1998] QB 818 at 831H-832B, Lord Bingham CJ said,

“It may weigh against the grant of relief by this court that the primary court could have granted such relief and has not done so, particularly if the primary court has been asked to grant such relief and declined. On the other hand, it may be thought to weigh in favour of granting such relief that a defendant is present in this country and so liable to effective enforcement of an order made in personam, always provided that by granting such relief this court does not tread on the toes of the primary court or any other court involved in the case. On any application under section 25 this court must recognize that its role is subordinate to and must be supportive of that of the primary court.”

It was also said by Millett LJ (as he then was) that (at 829E),

“Where a similar order has been applied for and has been refused by that court, it would generally be wrong for us to interfere.”

32. In Refco Inc v. Eastern Trading Co, Millett LJ, after noting that the case was one in which the English Court was being asked to exercise its long-arm jurisdiction against foreign residents who were the subject of foreign proceedings, highlighted the importance of judicial comity, saying that (at p.175):

“The jurisdiction of national Courts is primarily territorial, being ordinarily dependent on the presence of persons or assets within their jurisdiction. Commercial necessity resulting from the increasing globalization of trade has encouraged the adoption of measures to enable national Courts to provide assistance to one another, thereby overcoming difficulties occasioned by the territorial limits of their respective jurisdictions. But judicial comity requires restraint, based on mutual respect not only for the integrity of one another’s process, but also for one another’s procedural and substantive laws. The test is an objective one. It does not depend upon the personal attitude of the Judge of the foreign Court or on whether the individual Judge would find our assistance objectionable. Comity involves respect for the foreign Judge’s feelings. A Court which is invited to exercise its ancillary jurisdiction to provide assistance to the Court seized of the substantive proceedings need feel no reluctance in supplying a want of territorial jurisdiction but for which the other Court would have acted. But it should be very slow to grant relief which the primary Court would not have granted even against persons present within its own jurisdiction and having assets there.”

33. In his reasoning for refusing to discharge the Hong Kong Mareva injunction[3], the Judge had not addressed the issue of real risk of dissipation of assets. There was no discussion on whether, in the light of the Singapore Court’s decision to discharge the Singapore Mareva injunction upon caveats being entered on the defendants’ Properties, there are still real risks that any judgment obtained by the plaintiffs will go unsatisfied. If this requirement of a real risk could not be made out, the Mareva relief would not be maintained even if the substantive proceedings had been brought in Hong Kong.

34. In addition and also critically, the Judge’s Decision has not dealt with the second question of whether the fact that the Hong Kong Court has no jurisdiction makes it unjust or inconvenient to maintain the Hong Kong Mareva injunction. In this connection, the Singapore Court’s decision to discharge the Singapore Mareva injunction is a pertinent consideration and gives rise to two questions. The first is why the Mareva injunction order was not maintained in Singapore, and the second is whether this should affect the Hong Kong Court in its exercise of discretion.

35. On the question of why the Singapore Mareva injunction was not maintained, it is important to bear in mind that the injunction was discharged not because the Singapore Court lacks jurisdiction or because the defendants have no assets in Singapore. Quite the contrary, it is within the power of the Singapore Court, who has primary jurisdiction over the defendants and the subject matter of the claim, to maintain the Mareva injunction over the defendants’ Hong Kong assets or to merely reduce the amount covered by the Singapore Mareva injunction. The Hong Kong Court should give due weight to the fact that the Singapore Court did not see fit to exercise its power to continue the Singapore Mareva injunction, despite having the jurisdiction to do so. Without speculating on the intention of the Singapore Court, the Hong Kong Court should also have regard to the practical effect of the Singapore Court’s order as mentioned above.

36. It is further incumbent upon the Hong Kong Court, in exercising its discretion, to consider whether with the discharge of the Singapore Mareva injunction, it is still just and convenient that the Hong Kong Mareva injunction be maintained, having regard to the ancillary nature of the section 21M jurisdiction, the subordinate and supportive role of the Hong Kong Court and the importance of judicial comity. The Hong Kong Court should also not lose sight of the fact that when Mareva relief was first sought in Hong Kong, it was made on a “back-to-back” basis with the Singapore Mareva injunction, which has since been discharged.

37. In my view, the Judge’s omission to address the important question of whether the fact that the Hong Kong Court has no jurisdiction makes it unjust or inconvenient to maintain the Hong Kong Mareva injunction as well as the issue of real risk of dissipation of assets so that judgment will go unsatisfied, and the impact of the Singapore Court’s order, renders his exercise of discretion open to review upon appeal.

38. As the authorities have emphasized, the Hong Kong Court in exercising its ancillary jurisdiction to provide assistance to the Singapore Court which is seized of the substantive proceedings, must respect the view and the approach of the Singapore Court. Given that the Singapore Court did not consider it necessary to continue the Mareva injunction upon caveats being entered on the defendants’ Properties, notwithstanding it has jurisdiction over the defendants in personam, the Hong Kong Court should be cautious and should be very slow to take a different view on the necessity of maintaining a worldwide Mareva injunction.

39. The plaintiffs pointed to the fact that defendants’ Properties subject to caveats only had a value of about 50% of the amount of the claim and argued that it is necessary as well as just and convenient that the Hong Kong Mareva injunction be continued so as to ring-fence the defendants’ assets in Hong Kong. From the notes of the hearing before the Singapore Court, there is no doubt that the Singapore Court was informed and was well aware of the disparity between the value of the properties subject to caveats and the amount of the plaintiffs’ claim. The plaintiffs’ had insisted on maintaining the Singapore Mareva injunction in addition to having the caveats on the properties. The Singapore Court nevertheless discharged the Singapore Mareva injunction.

40. As said above, the order is reflective of the Singapore Court’s view of the extent to which the plaintiffs’ claim should be protected against the risk that judgment will go unsatisfied, which the Hong Kong Court should respect. On the materials before the Court, I do not see any circumstance warranting the Hong Kong Court to take a different view.

41. Having regard to the principles that govern a foreign court in the exercise of the section 21M jurisdiction and for the reasons set out above, I am of the view that the Judge’s exercise of discretion should be vitiated, and that the 1^st, 3^rd and 4^th defendants’ application to discharge the Mareva injunction should be granted.

42. The plaintiffs had filed a Respondents’ Notice contending that there should be a re-grant of a Mareva injunction in terms of the Hong Kong Mareva injunction on the basis that (1) there is a good arguable case that the Singapore proceedings are capable of giving rise to a judgment which may be enforced in Hong Kong; (2) further or alternatively, the Court is entitled to grant an injunction to ring-fence the assets of the 2^nd and 4^th defendants believed to be held for the 1^st defendant, based on the Chabra jurisdiction; (3) there are assets of the defendants in Hong Kong; (4) there is a real risk of dissipation or removal of assets from Hong Kong rendering the plaintiff’s judgment of no effect; and (5) the balance of convenience is in favour of granting an injunction.

43. For the reasons and analysis articulated above, I do not consider that the matters set out in the Respondents’ Notice justify the Hong Kong Court granting a fresh worldwide Mareva injunction in the same terms, or to cover a lower amount as contended for by Mr Whitehead in his oral submissions.

H. Appeal against the discovery order

H1. The judge’s decision

44. I turn next to consider the plaintiff’s discovery application, which was made pursuant to section 21 of Evidence Ordinance and Order 38 rule 13 RHC. In the submissions before the Judge, the application was also put on the basis of an interim relief under section 21M of the High Court Ordinance. Mr Whitehead adopted the same position before us.

45. The 1^st, 3^rd and 4^th defendants opposed the application on the bases that with the discharge of the Hong Kong Mareva injunction, there would be no pending Hong Kong proceedings to sustain a discovery order; that the Hong Kong Mareva injunction was merely in aid of the Singapore proceedings; and that the Singapore Court had refused the plaintiffs’ discovery applications.

46 The Judge granted the discovery application on the basis of section 21 of the Evidence Ordinance and Order 38 rule 13 of The Rule of the High Court.[4] The Judge rejected the defendants’ first objection as a result of his refusal of the discharge application. The Judge also did not regard the fact that a discovery application was made merely to aid foreign proceedings a valid objection especially when there was in place a Hong Kong Mareva injunction, to which a discovery order can attach. The Judge further considered there was a difference between the discovery applications made to the Singapore Court and the application made to the Hong Kong Court in that:

“(1) the defendants affirmed in the Singapore action that there were no further document to discover (the Singapore application was for specific discovery), and that those documents which had not been discovered were irrelevant;

(2) the documents sought herein are bank records, which can reveal the particulars of fund movements (such as the identity of the recipients); they can also reveal the extent of the alleged bribe and its disposal.”

H2. Discussions

47. The 1^st, 3^rd and 4^th defendants’ arguments on appeal are substantially the same as those advanced before the Judge.

48. Order 38 rule 13(1) RHC provides:

“At any stage in a cause or matter the Court may order any person to attend any proceeding in the cause or matter and produce any document to be specified or described in the order, the production of which appears to the Court to be necessary for the purpose of that proceedings.”

49. Section 21(1) of the Evidence Ordinance provides:

“On the application of any party to any proceedings, the court or a judge may order that such party be at liberty to inspect and take copies of any entries in a banker’s record for any of the purposes of such proceedings.”

50. The “proceedings” referred to in both provisions mean proceedings in Hong Kong, as “court” and “judge” have been defined to mean courts of Hong Kong and judges of Hong Kong: Order 1 rule 4 RHC; and section 3 of Interpretation and General Clauses Ordinance, Cap. 1.

51. The only proceedings in Hong Kong between the parties are the proceedings brought by the plaintiffs in the Court of First Instance (i.e. HCMP 1840/2013). With the discharge of the Hong Kong Mareva injunction, these proceedings will come to an end. Consequently, there is no jurisdiction to make a discovery order against the bankers whether under Order 38 rule 13 or section 21 of the Evidence Ordinance. Mr Whitehead has not argued against this.

52. Further, Miss Lau argued, and I agree, that Order 38 rule 13 is not intended to create a general right to discovery against a third party in the absence of a pending proceeding in a cause of matter and that an application for discovery against a non-party bank should be made under section 21 of the Evidence: see Chan Wai Sun v. Law Shiu Kai Andrew [2003] 3 HKLRD 954 at §8.

53. Mr Whitehead, however, argued that the Hong Kong Court has jurisdiction under section 21M of the High Court Ordinance to make a discovery order against non-party bankers by way of interim relief. Reliance is placed on the first instance judgment in Pacific King Shipping Holdings Pte Ltd v. Huang Ziqiang [2014] 6 HKC 31. In that case, Zervos J dismissed the defendant’s application to discharge a Mareva injunction order in aid of proceedings in Singapore and granted an order for further disclosure under section 21 of the Evidence Ordinance, observing that (at §54):

“The disclosure order sought under s 21, in my view, can be made and granted by virtue of s 21M in its own right or as a power ancillary to or in support of the freezing injunctive order granted under s 21M.”

54. On the defendant’s appeal (CACV 94/2014, unreported, 15 January 2015), the Court of Appeal set aside the disclosure order on the basis that Zervos J was mistaken that the plaintiff’s claim was proprietary in nature since whether it was a proprietary claim would make a difference in terms of ordering disclosure against a third party ancillary to a Mareva injunction. Poon J (giving the judgment of the Court) explained that (at §29):

“If the case involves a proprietary claim where the plaintiff seeks to trace property which in equity belongs to him, the court not only has jurisdiction to grant an injunction retraining the disposal that property, it may in addition make orders designed to ascertain the whereabouts of that property. In particular, it may order a third party bank to give discovery of documents in relation to the bank account of a defendant who is alleged to have defrauded the plaintiff of his assets.”

55. Mr Whitehead submitted that the present case is such a case in that part of the plaintiffs’ claim against the 1^st defendant is that he had received bribes and secret commissions, in which the plaintiffs have a proprietary interest and they were held by the 1^st defendant on trust for them: A-G of Hong Kong v. Reid [1994] 1 AC 324.

56. I accept that the jurisdiction to grant interim relief under section 21M can include the making of a disclosure or discovery order against third party. In general, such an order is in aid of, thus ancillary to, an injunction. Its primary purpose is to preserve assets and to prevent their dissipation notwithstanding the injunction. Where it is a proprietary claim, a discovery order against third party, including bankers, may be made for the purpose of tracing the properties or funds or preservation of assets to which the plaintiff is making a proprietary claim. In the present case, the plaintiffs are in effect seeking to have a free-standing discovery order against non-party bankers not in aid of an injunction, which they cannot obtain under section 21 of the Evidence Ordinance. For my part, I have doubts whether this is within the contemplation of section 21M.

57. That aside, the section 21M jurisdiction is an exercise of discretion. Even assuming that the discovery order sought by the plaintiffs will be granted if the substantive proceedings had been brought in Hong Kong, the Hong Kong Court must still consider whether it is just and convenient to order discovery against non-party bankers. In this connection, the fact that the plaintiffs’ discovery application had twice been dismissed by the Singapore Court is a material factor to be taken into account by the Hong Kong Court. As discussed above, the Hong Kong Court should be cautious and sensitive to the informed view of the Singapore Court, which is the founding court and has a better feel for the case: see also Deiulemar Shipping Spa v. Transfield ER Futures Ltd [2011] 1 HKLRD 75, at §§48-50, and should be very slow to depart from the view of the Singapore Court.

58 The plaintiffs argued, and the Judge accepted, that there are differences between the discovery applications made to the Singapore Court and the application for inspection of bankers’ records made to the Hong Kong Court.[5] It is said that the Singapore application is for specific discovery of documents that include bank statements of the defendants’ bank accounts in Hong Kong. The plaintiffs said the application was refused because the defendants stated on oath that there was no further document to disclose and further took the position that the bank statements not disclosed were irrelevant for the Singapore proceedings. It is also said that the Hong Kong application is broader in scope in that it extends to banker records, which will reveal information such as fund movements and identities of parties involved in the banking transactions.

59. Miss Lau, however, submitted that the plaintiffs should not bypass the Singapore Court and should have made an application to the Singapore Court for it to request the Hong Kong Court’s assistance in procuring the production of the bankers’ records pursuant to sections 75 and 76 of the Evidence Ordinance and Order 70 RHC. This is particularly the case when there are a number of underlying disputes and objections to the plaintiffs’ present application. It was, for instance, pointed out that whether the money received by the 1^st defendant are bribes and secret commissions or legitimate consultancy fees is hotly contested. Hence, the plaintiffs’ case that they have a proprietary claim that justifies a discovery order to ascertain the whereabouts of the fund is not without controversy. There are also challenges to the scope of the inspection sought by the plaintiffs, which the defendants contend is unjustifiably wide.

60 There is considerable force in these arguments. Given the discharge of both the Singapore and Hong Kong Mareva injunctions, the plaintiff’s application to inspect bankers’ records will be for the purpose of assisting the Singapore proceedings, instead of as an aid to injunction. This being the case, the Singapore Court, which has the primary jurisdiction, is clearly in a better position than the Hong Kong Court to assess the disputes underlying the discovery application and also to decide on the appropriate scope of the discovery. It is also to be noted that while the present application may be wider in scope than a specific discovery application, there is some overlapping between the banking documents sought in the Singapore proceedings and those sought here. In the premises, it is of significance that the Singapore Court had twice refused to order discovery of these banking documents. The appropriate course is, as Miss Lau suggested, for the plaintiffs to apply to the Singapore Court for the issue of a Letter of Request to Hong Kong so that the Singapore Court shall have an opportunity to scrutinize the plaintiffs’ application.

61. For the above reasons, the Judge’s order for discovery should be set aside.

I. Disposition

62. For the reasons stated above, I would allow the appeal, discharge the Mareva injunction and set aside the order for discovery. I would also make an order that the bankers’ records lodged by the banks and put in sealed envelopes shall be returned to the respective banks.

63. Costs should follow the event. There will be an order nisi that:

(1) The costs order made by the Judge is set aside;

(2) The plaintiffs shall pay the 1^st, 3^rd and 4^th defendants the costs below, to be taxed if not agreed; and

(3) The plaintiff shall pay the defendant the costs of this appeal and the costs in HCMP 3006/2014, to be taxed if not agreed.

 

Hon Barma JA:

64. I agree.

Hon Chu JA:

65. Accordingly, we make the following orders:

(1) The appeal is allowed;

(2) The Judge’s order of 12 November 2014 is set aside;

(3) The Mareva injunction order dated 27 July 2013 as continued by the order dated 2 August 2013 is discharged;

(4) The documents that the banks had lodged with the Court in compliance with the order of 12 November 2014 and placed in sealed envelopes pursuant to the order dated 4 December 2014 shall be returned to the respective banks;

(5) There is an order nisi that:

(a) The costs order made by the Judge is set aside;

(b) The plaintiffs shall pay the 1^st, 3^rd and 4^th defendants the costs of the applications in the Court of First Instance, to be taxed if not agreed; and

(c) The plaintiffs shall pay the 1^st, 3^rd and 4^th defendants the costs of this appeal and the costs in HCMP 3006/2014, to be taxed if not agreed.