AGRITRADE RESOURCES LTD THROUGH THE JOINT PROVISIONAL LIQUIDATORS NG KIAN KIAT, OON SU SUN AND E. ALEXANDER WHITTAKER AND ANOTHER v. ASHOK KUMAR SAHOO

HCA 1660/2020

[2021] HKCFI 685

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1660 OF 2020

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D E C I S I O N

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INTRODUCTION

The applications

1.  On 25 September 2020, the Plaintiffs made an urgent application by way of letter before Lam J for an ex parte worldwide Mareva injunction against the Defendant.  After a number of enquiries by Godfrey Lam J and the filing of a supplemental affirmation, Lam J granted an injunction at the second ex parte hearing on 28 September 2020 (the “Injunction”) with a remark that “on balance, it probably just passes the threshold”.  Lam J left the issue of disclosure for resolution inter partes on the return date.

2.  On 29 September 2020, the Plaintiff applied by way of an inter parte summons to continue the Injunction (the “Plaintiffs’ Summons”).  On the return date the Defendant opposed the Plaintiffs’ Summons.  Deputy High Court Judge Patrick Fung SC ordered the Injunction to continue until the substantive hearing of the Plaintiffs’ Summons including the issue of disclosure.

3.  By summons dated 19 October 2020, the Plaintiffs applied to be released from Undertaking 8 of the Injunction, as they wished to take legal action in Singapore to prevent the dissipation of the Defendant’s assets located there.  The application was adjourned for hearing before Yeung J on 8 January 2021. 

4.  On 27 October 2020, the Plaintiff took out another summons seeking to vary Undertaking 7 and Undertaking 8.  On 30 October 2020, Lam J granted leave to the Plaintiff to withdraw the summons dated 27 October 2020 and leave to amend the summons dated 19 October 2020 by carving out Singapore from any restriction on overseas proceedings or enforcement in Undertaking 7 and Undertaking 8; vacated the hearing before Yeung J on 8 January 2021; and adjourned the application to this hearing.

5.  In addition, on 21 December 2020, the Plaintiffs sought leave to file and serve the 2^nd Affirmation of Manish Sangani (in draft form) for the purpose of this hearing.

6.  At this hearing, Mr Brown, counsel for the Plaintiffs, confirmed that the amount sought to be restrained is reduced from US$12,675,000 to US$5,252,000 and that the 2^nd Plaintiff shall not proceed with this claim in Hong Kong.  This is therefore the substantive hearing of the following applications of the 1^st Plaintiff in relation to a worldwide Mareva injunction against the Defendant:

(1)  the Plaintiffs’ Leave Application to file and serve the draft 2^nd Affirmation of Manish Sangani (the “Leave Application”);

(2)  paragraph 1 of the Plaintiffs’ Summons for the continuation of the Injunction until trial or further order (the “Continuation Application”);

(3)  paragraphs 2 and 3 of the Plaintiffs’ Summons and paragraph 2 of the Order of DHCJ Patrick Fung SC dated 9 October 2020 for ancillary disclosure (the “Disclosure Application”); and

(4)  the Plaintiffs’ summons dated 19 October 2020 for variation of the Injunction with leave to amend granted by Lam J on 30 October 2020 (the “Variation Application”).

The parties and dramatis personae

7.  Agritrade International Pte Limited is the indirect controlling shareholder of Agritrade Resources Limited.

8.  Agritrade Resources Limited (“ARL”) is a company incorporated in Bermuda with shares listed on the Main Board of The Stock Exchange of Hong Kong (stock code: 1131).  It is the 1^st Plaintiff herein, which is now in liquidation.

9.  Fair Thermal Power Limited (“Fair Thermal”) is a company incorporated in the British Virgin Islands.  It is a wholly-owned subsidiary of ARL and the 2^nd Plaintiff herein.

10.  Agritrade Power Venture Pvt Ltd (“Agritrade India”) is a company incorporated in India.  According to the Plaintiffs, it is a wholly-owned subsidiary of ARL.  According to the Defendant, its shareholders are ARL, Fair Thermal, Agritrade Power Holding Mauritius Limited (“Agritrade Mauritius”) and Agritrade Power Holding Pte. Ltd (“Agritrade Singapore”).  Effectively, it is a wholly-owned subsidiary of ARL.

11.  Newtone Management Limited (“Newtone”) is a company incorporated in Hong Kong and wholly-owned by ARL.  The Defendant was employed by Newtone as chief strategy and investment officer under a written employment contract subject to Hong Kong law with a non-exclusive Hong Kong jurisdiction clause. His employment was intended to cover his role as chief financial officer of ARL.  That was in fact regularized as reflected in ARL’s announcement to The Stock Exchange dated 1 August 2013.

12.  Agritrade Resources Asia Pte Ltd (“Agritrade Asia”) is a company incorporated in Singapore.  The Defendant was also employed by Agritrade Asia as chief financial officer of ARL under a written employment contract subject to Singaporean law with a Singapore jurisdiction clause.  No claim is made under this contract.

13.  Agritrade Singapore is a company incorporated in Singapore.  It is a wholly-owned subsidiary of Fair Thermal.

14.  Agritrade Mauritius is a company incorporated in Mauritius.  It is a wholly-owned subsidiary of Fair Thermal.

15.  Entwickeln India Energy Private Limited (“Entwickeln”) is a company incorporated in India.  It is jointly-owned by Agritrade Singapore as to 99.8% and Agritrade Mauritius as to the remaining 0.2%.  Effectively, it is an indirect wholly-owned subsidiary of Fair Thermal and of ARL.

16.  SKS Power Generation (Chhattisgarh) Limited (“SKS”) is a company incorporated in India holding a coal-based thermal power plant in India.  It was indebted to a number of lenders.  Entwickeln settled SKS’s debts with the lenders and took an assignment of the debts owed to the lenders by SKS.  It was wholly-owned by Entwickeln until 31 January 2020 when it was amalgamated with Entwickeln pursuant to an order of an Indian court.  The amalgamated entity continues to be known as Entwickeln and remains owned by Agritrade Singapore and Agritrade Mauritius.

17.  Berrio Global Limited (“Berrio Global”) is a company incorporated in the British Virgin Islands and wholly-owned by the Defendant and his wife.

18.  Berrio Mauritius Global Limited (“Berrio Mauritius”) is a company incorporated in Mauritius, wholly-owned by Berrio Global and beneficially owned by the Defendant and his wife.

19.  Ng Xinwei (“Ng”), Ng Say Pek and Ong Jia Sheng Jeffrey were former directors of ARL group of companies.

20.  Manish Sangani (“Sangani”) is the former company secretary of SKS from 22 March 2020 to 13 July 2013 and again from 6 February 2014 to 2 November 2020, according to the Plaintiffs.

21.  Ashok Kumar Sahoo (“Sahoo”) is the Defendant herein.  He was formerly an Indian national and is now a citizen and resident of Singapore.  At the material time, he was the chief financial officer of ARL and an executive director of part of ARL’s Executive Board Committee, a director of more than 25 companies within the ARL group, including Fair Thermal, Entwickeln, SKS and Agritrade India; and a trusted member of the ARL group’s senior management.

22.  Nisha Sahu (“Nisha”) is the wife of the Defendant.

23.  Abhaya Kumar Sahoo (“Abhaya”) is the Defendant’s brother.  At the material time Abhaya and the Defendant were the two directors of Agritrade India.  Ng was the only other director.

24.  Abhijeet Kar (“Abhijeet”) was a director of Entwickeln and director and chief financial officer of SKS.  He was a childhood friend of the Defendant and Abhaya.

Vikrant Anand’s Affirmation

25.  One of the affirmations filed by the Plaintiffs was made by Vikrant Anand (“Anand”), a senior associate at Clasis Law, the solicitors representing the Plaintiffs in India.  In his affirmation, he set out the position under Indian law in relation to issuance of sweat equity in a non-listed public company in India.  He does not purport to be giving expert evidence.  While not objecting to the filing of his affirmation as such, the Defendant argued that Anand cannot be an independent legal expert on Indian law as he is representing the Plaintiffs in India.  He invited the court to disregard Anand’s evidence on the ground that it is inadmissible opinion evidence.

26.  In interlocutory matters, evidence of foreign law is most properly given by way of an affidavit of the expert.  In practice, the Hong Kong courts are more relaxed because of the interlocutory nature and urgency. The courts often rely for interlocutory purposes upon unsworn letter or opinion exhibited to an affidavit of the adducing party’s solicitor.  However, evidence in that form may, in the court’s discretion, be given somewhat lesser weight in cases of doubt: The Conflict of Laws in Hong Kong[1].

27.  Sweat equity under Indian law was raised by the Defendant.  There was no direction for filing expert evidence.  In any event, it is a narrow issue.  If the Defendant is of the view that the opinion of Anand is incorrect, he could have sought leave to file evidence in reply, but he did not.  There is no dispute that Anand is a lawyer qualified to practice in India.  He is in a position to advise the court about the law in India where he is qualified to practice.  The fact that his firm is representing the Plaintiffs in the Indian proceedings against the Defendant may have an impact on the question of weight for the court.  In the absence of contrary evidence from the Defendant, I accept Anand’s evidence, subject to the court’s assessment of weight after hearing the totality of the evidence.

THE LEAVE APPLICATION

Sangani’s 2^nd Affirmation

28.  Sangani was SKS’s company secretary from 22 March 2010 to 15 July 2013 and again from 6 February 2014 to 2 November 2020.  Sangani’s 1^st Affirmation was filed on 16 December 2020 in reply to the Defendant’s 3^rd Affirmation.  The main point in his affirmation is to contradict the Defendant’s allegation that Ng was present at certain meetings of SKS’s board approving the sale of the compulsory convertible debentures (“CCDs”) and to explain why Ng was recorded in the minutes as being present at the meetings. 

29.  Sangani’s 2^nd Affirmation in draft form was served at 17:20 hours on Friday 18 December 2020, just two working days before the hearing on 23 December 2020.  The gist of his evidence is about the unusual circumstances in which the CCDs were bought by the Defendant, including that their sale was not an item on the meeting agenda, that the sale was not discussed at the board meeting, and that he was directed by the Defendant to add this item into the minutes.

30.  The Plaintiffs explained the late filing on the ground that Sangani was from the Defendant’s camp who turned over to the Plaintiffs only recently.  He gave one affirmation but was unable to collate all the necessary facts and documents by then.  He needed further time to put together supporting documents.

31.  The Defendant objected to the late filing as an ambush at the eleventh hour.  Directions for filing of evidence was given on 9 October 2020 with an order that no further affirmations may be filed without the leave of the court.  Ms Cheung, counsel for the Defendant complained that there was no explanation for the late filing other than that Sangani was unable to collate all the facts and documents with no further elaboration and that Sangani had not even foreshadowed the need for a second affirmation in his 1^st Affirmation.  Ms Cheung said that the focus in Sangani’s 1^st Affirmation is on Ng’s presence at the meeting, but the focus is shifted in the 2^nd Affirmation to a total absence of discussion about the sale of CCDs, which is something entirely new.  She submitted that the evidence is very prejudicial to the Defendant and in the absence of genuine extenuating circumstances, leave for such late filing should not be granted.

32.  The witness and documents were all outside Hong Kong.  I accept the Plaintiffs’ explanation that Sangani only turned himself over to the Plaintiffs recently.  The Plaintiffs had, with due diligence, filed Sangani’s 1^st Affirmation on 16 December 2020 within time.  The distinction between the two foci in the two affirmations relied on by Ms Cheung is more apparent than real.  The essence in dispute is about the propriety of the sale of the CCDs allegedly approved at the meeting. The use of two affirmations was obviously to minimize any prejudice which might be caused by the late filing of the 2^nd Affirmation.  Though the 2^nd Affirmation was not foreshadowed in Sangani’s 1^st Affirmation, it was served on 18 December 2020 within two days thereafter indicating real difficulties in collating documents and facts and a serious attempt to meet the deadline.  But for the late filing, the Plaintiffs are entitled to the last words.  I accept that there is extenuating circumstance which justifies granting leave for the late filing. 

THE FACTUAL BACKGROUND

Incorporation of Entwickeln, Agritrade India

33.  In around 2016, ARL was exploring investment opportunities in India.  At the Defendant’s suggestion, Agritrade India was incorporated for the purpose of initiating businesses in India.  It is common ground that Agritrade India is a wholly-owned subsidiary of ARL. 

34.  Later, the Defendant recommended acquiring SKS, including its power plant, which was in financial difficulties.  ARL accepted his recommendation. It decided to incorporate Entwickeln as the group’s investment vehicle to acquire SKS by paying off its creditors.  Hence, Entwickeln was incorporated with Agritrade Singapore as the majority shareholder holding 99.8% with Agritrade Mauritius holding the remaining 0.2% issued shares.  It should be noted that Entwickeln is neither a subsidiary nor a sister company of Agritrade India.

35.  ARL accepted the Defendant’s recommendation to appoint his brother Abhaya and their childhood friend Abhijeet as director of SKS in March 2019.  Ng was the only other director of SKS.  ARL also accepted the Defendant’s recommendation to appoint himself, Abhijeet and Abhaya as directors of Entwickeln.  Thus, the boards of SKS and Entwickeln were under the effective control of the Defendant.  Accordingly, ARL has two investment vehicles in India: Entwickeln to specifically acquire SKS and its power plant; and Agritrade India for other Indian businesses.

Discovery of the Defendant’s fraud

36.  By April 2020, ARL and its subsidiaries had invested US$123.1 million in the power plant.  The board of ARL came to learn from some of the ground staff working at the power plant that the power plant had been shut down on 26 March 2020 apparently due to a lack of funds.  This provoked a series of enquiries which led the Plaintiffs to believe that the Defendant had (i) misappropriated SKS’s CCDs in a self-dealing at gross undervalue; and (ii) misappropriated substantial funds destined for operation of the power plant by SKS, including as later discovered a sum of about US$1,800,000 for buying a property for himself from Gupta Steel Corporation Pvt Ltd (“Gupta Steel”) (the “Gupta Steel Transaction”).

Defendant’s self-dealing in the CCDs

37.  The Defendant’s self-dealing in the CCDs is being litigated separately in India by the Plaintiffs seeking to annul their transfer.  They do not form part of the Plaintiffs’ claim in this action.  It is mentioned as part of the background and as evidence of the Defendant’s low commercial morality and risk of dissipation.  It is therefore only dealt with briefly here. 

38.  Prior to the acquisition, SKS had issued CCDs as security for the debts it owed.  The CCDs were assigned to Entwickeln as part of the acquisition process and were to be extinguished on amalgamation of Entwickeln and SKS.  If converted into shares, the CCDs would constitute approximately 14.355% of SKS’s shareholding with a value of just under US$75 million based on valuation as at 31 August 2018.  However, the amalgamation of Entwickeln into SKS was never implemented due to the Defendant’s failure to implement the issue of shares in the amalgamated entity.

39.  On or around 10 May 2020, the Plaintiffs discovered that the CCDs had been sold by Entwickeln to Berrio Mauritius for US$100,000. under a securities purchase agreement dated 22 August 2019.  The sale and purchase began on or around 16 August 2019 when Ng as the other co-signatory of Agritrade Mauritius bank account was induced by the Defendant to sign a blank transfer form under the pretext of transferring US$100,000 to SKS for the operation of the power plant.  It later transpired that the form was used to transfer the funds to Berrio Mauritius instead.  On 22 August 2019, the Defendant, Abhaya and Abhijeet executed the security purchase agreement.  As it transpired, Berrio Mauritius is wholly-owned by Berrio Global, which in turn is wholly-owned by the Defendant and his wife.  Furthermore, it appears that the consideration for the CCDs was paid by the funds transferred to Berrio Mauritius from Agritrade Mauritius as aforesaid.  When the transfer was questioned, the Defendant repaid on 29 May 2020 claiming it was a repayment of a loan, but no such loan was documented.  The inescapable and irresistible inference is that the sale was at a gross undervalue and orchestrated by the Defendant. 

40.  That was the state of the evidence at the ex parte stage. In the Defendant’s 3^rd Affirmation filed for this hearing, he claimed he received the CCDs as “sweat equity” for his hard work and contribution for ARL’s expansion into India.  He relied on approval of the sale given at SKS’s board meeting in June 2019 attended by Ng.

41.  Ng denied having attended the board meeting.  His evidence is corroborated by the company secretary, Sangani.  According to Sangani, Ng did not attend the board meeting, not even via video link; there was no discussion at the meeting about the sale of CCDs which was not even an agenda item for the meeting; and that the Defendant coerced him to falsify the meeting minute to the effect that Ng had attended the meeting and approved the sale.

42.  What is missing from the Defendant’s “sweat equity claim” is paper trial showing agreement between him and ARL to give him this sweat equity.  At the highest, he could only produce the disputed minutes of meeting approving the sale all out of the blue and without any mention of “sweat equity”.  

43.  It is incredible that the Defendant would receive such a significant reward representing 330 years of his highest Hong Kong salary, particularly as SKS was only acquired in March 2019 and the ARL group was on its way to financial collapse.

44.  According to Anand, section 54 of the Indian Companies Act 2013 (the “Act”) permit an unlisted public company to issue sweat equity to its directors or employees at a discount or for consideration other than cash, for their providing know-how or making available rights in the nature of intellectual property rights or value additions, but there are onerous procedural requirements.  These requirements include authorization by a special resolution passed by the company at general meeting specifying the number of shares, the current market price, consideration, if any, and the class or classes of directors or employees to whom such equity shares are to be issued.  There are other onerous disclosure requirements to shareholders and in boards’ report. However, this section only envisage issuance of fresh equity shares as sweat equity shares to the employees or directors, but not transfer of securities such as the CCDs in question.  The transfer of securities of an Indian company is a separate process prescribed under the Act and the CCDs cannot be transferred as a part of sweat equity to employees or directors of the company.  Despite all these requirements, all that the Defendant could rely on is the disputed minutes of the board meeting in June 2019.

45.  Anand also referred to section 173 of the Act which makes it mandatory for board meetings to be recorded and stored if a director joins the meeting through a video conference rather than physical attendance.  Despite this being raised, the Defendant did not produce the recording to support his evidence of Ng’s attendance of the meeting via video conferencing. 

46.  This court is entitled to treat the Defendant’s self-dealing in CCDs as evidence of his low commercial morality and risk of dissipation.

The Gupta Steel Transaction

47.  As a result of the Defendant’s 3^rd Affirmation, the Plaintiffs discovered some hitherto unexplained payments effected by the Defendant relating to the Gupta Steel Transaction.  As asserted in Xinwei Ng’s Affirmation, in a letter dated 10 August 2020 issued by Abhaya (the Defendant’s brother) on behalf of Agritrade India to Gupta Steel, it is stated that the funds were paid for the purchase of a property in Juhu, Mumbai, India as a guest house for SKS.  It is also stated that the funds were transferred to Gupta Steel on the basis of a “mutual understanding in good faith”, without “any written agreement as it was verbally agreed by both parties and as [Agritrade India] trusted [Gupta Steel]”.  It is also alleged in the letter that Gupta Steel failed to complete the transaction and Agritrade India demanded a full refund of the money paid amounting to Rs 13,62,04,000 or approximately US$1,847,815. 

48.  In response, Gupta Steel replied in its letter dated 18 August 2020 that it had no property in Juhu and the only residential property it owned was Ahuja Towers in Prabhadevi, Mumbai.  It asserted that the transaction referred to by Abhaya was “the complete transaction done by [the Defendant]”.  It further alleged that after multiple visits and inspection of documents and the property, the Defendant personally finalized the purchase with Gupta Steel for a total consideration of Rs 38,00,00,000 (38 crores), equivalent to US$5,100,000.  On 14 May 2019, Gupta Steel confirmed receipt of a deposit of Rs 5,00,00,000 (5 crores), equivalent to US$673,326 and part of the balance in the amount of Rs 13,62,04,000 or approximately US$1,847,815 as alleged by Abhaya up to March 2020.  The total amount acknowledged by Gupta Steel is US$2,521,141.

49.  The Gupta Steel Transaction is highly suspicious.  First, the payments are supported at least to the extent of US$2,450,000 as is confirmed from an analysis of the Defendant’s 3^rd Affirmation (see paragraph 94).  The receipt by Gupta Steel is not disputed.  Second, there is absolutely no board minutes or documentary evidence whatever within SKS in support of the purchase of the guest house for SKS, whether in Juhu or Mumbai, from Gupta Steel.  Third, as was asserted by Abhaya, the purchase was made orally on the basis of good faith without any written document.  This is remarkable for a property transaction of that magnitude in India.  Fourth, Gupta Steel asserted that the purchase was made by the Defendant in his personal capacity and not for and on behalf of Agritrade India or the ARL group.  Fifth, there is no response from the Defendant in the face of Xinwei Ng’s Affirmation dated 15 December 2020 about the account of the Gupta Steel Transaction as asserted by Gupta Steel.

The unexplained misappropriation by the Defendant

50.  Despite having transferred about US$140 million by ARL and its subsidiaries to fund SKS’s operation at the request of the Defendant, in April 2020 the board of ARL came to learn from some of the ground staff working at the power plant that the power plant had been shut down in around 26 March 2020.

51.  Upon investigation, the Plaintiffs discovered that between 19 March and 4 October 2019, ARL and Fair Thermal respectively provided US$9,375,000 and US$3,300,000, totaling US$12,675,000 via Agritrade Mauritius and Agritrade Singapore for the purpose of funding the power plant.  Rather than transferring the funds directly to Entwickeln, the Defendant arranged for the funds to be paid to Agritrade India.  As explained above, Entwickeln is a subsidiary of Agritrade Singapore and Agritrade Mauritius incorporated for the specific purpose of acquiring SKS and the power plant.  It is not a subsidiary of Agritrade India which was incorporated for other businesses and had no role in the operation of the power plant.  The routing of the funds via Agritrade India over which the Defendant had control arouses suspicion.  Even though the majority of the funds had been applied to the purpose of the power plant, a substantial amount had not been accounted for and the Defendant responsible for the funds did not respond despite serious allegations of misappropriation had been made against him. 

52.  On 11 May 2020, the Plaintiffs’ solicitors in India, Clasis Law, wrote to the Defendant at his address in India and in Singapore making serious allegations of gross dishonesty and misconducts, including misappropriating US$100,000 from Agritrade Mauritius relating to the sale of the CCDs; the Defendant’s self-dealing in the CCDs; and misappropriating disbursed funds of US$19,400,025.  Clasis Law demanded a reply within seven days, but the Defendant did not respond.

53.  On 5 July 2020, Clasis Law wrote to the Defendant repeating the same and additional complaints and demanding a full account of the disbursed funds and supporting documents including bank statements.  Again, the Defendant did not respond.  In his 3^rd Affirmation, the Defendant explained that he did not respond because he considered the Plaintiffs had no locus standi to demand explanation from him.  As I shall explain later when dealing with the Defendant’s defences, this is a lame excuse.

54.  In the meantime, ARL had filed a moratorium.  On 21 May 2020, it called for its subsidiaries, including Agritrade India to submit their bank balances and management account.  Abhijeet provided the bank balances on the same day, but explained that there were difficulties in providing the management account due to COVID-19 lock-down.  At 15:42, ARL requested “statements of the respective bank accounts with accompanying bank books in Excel format for the financial year end.”

55.  At 19:49, Abhijeet replied explaining that he was denied access to the office due to COVID-19 lock-down and could not obtain bank statements. He said that he had “requested the bankers to print and give statements for the whole year for our Statutory Audit purpose” and after that he “will be able to convert it to Excel sheet.”  This email suggested that Abhijeet would be sending bank statements in Excel format converted from hard copies to be obtained from the bank.

56.  On 22 May 2020, Abhijeet sent the bank statements which he called “Cash/Bank Ledgers” in Excel format to ARL in an attachment identified as “Bank_Statement_April_March_2020.zip”.  At that stage, the Plaintiffs seemingly did not consider the bank statements as they were of the opinion that the bank statements were unauthentic and could be subject to manipulation.  It is now accepted by the Plaintiffs that the bank statements in Excel format had been downloaded from the bank and are authentic.  Obviously, the misunderstanding was caused by a combination of negligence on the part of the Plaintiffs in not properly examining the attachment and by Abhijeet’s email at 19:49 on 21 May 2020 which indicated that what he would be sending over would be statements converted by him to Excel format and not downloaded from the bank.

57.  More correspondence followed in June 2020 in which, inter alia, draft unaudited financial statements of SKS, Entwickeln and Agritrade India were provided.  However, from the end of June to 9 July 2020, ARL chased Abhijeet for bank statements.  Abhijeet replied reiterating that the requested bank statements had been provided on 22 May 2020, and attached his email dated 22 May 2020 expressly referring to them as bank statements.

58.  Then, on 5 July 2020, Clasis Law wrote to SKS requesting, inter alia, all bank statements and accounting records evidencing the fund flows.  On the same day, Clasis Law also wrote to Defendant demanding his account for the funds misappropriated etc as mentioned above.

59.  It should be noted that the bank statements were sent over by Abhijeet in response to ARL’s request in connection with the moratorium and were not sent over by the Defendant in response to the demands by Clasis Law.  However, Ms Cheung’s arguments were premised on the bank statements were the Defendant’s response to the Plaintiffs’ demand for explanation.  This is not the case.  In fact, the Defendant said in his 3^rd Affirmation that he considered the Plaintiffs had no locus standi to demand explanations from him and therefore he did not respond.

60.  That was the position at the ex partes hearing on 28 September 2020.  At that stage, the Plaintiffs claimed that the Defendant had misappropriated US$12,675,000. 

MATERIAL NON-DISCLOSURE

The law

61.  The legal principles applicable to material non-disclosure are well settled.  They have recently been set out in detail by Recorder Manzoni SC in Aleksandr Narimanovich Kushaev v Greenly Holdings Ltd (in liquidation) and Others[2]. These are as follows:-

(1)  The duty of the applicant in an ex parte application is to make a full and frank disclosure of all the material facts: Brink’s Mat Ltd v Elcombe[3].

(2)  Material facts mean all facts that are relevant to the weighing operation which the Court has to make in deciding whether or not to grant the order.  The correct test is not simply whether, if the non-disclosure had not occurred, the ex parte judge would nevertheless have made the order, but whether the facts not disclosed, being relevant, should have been in the scales: Citibank NA v Express Ship Management Services Ltd & Anor[4].

(3)  The test as to materiality is an objective one, and it is not for the applicant or his advisers to decide the question; hence it is no excuse for the applicant subsequently to say that he was genuinely unaware, or did not believe, that the facts were relevant or important.  All matters which are relevant to the “weighing operation” that the court has to make in deciding whether or not to grant the order must be disclosed: New Asia Energy Ltd v Concord Oil (Hong Kong) Ltd[5].

(4)  In addition, the plaintiff must identify any defences, which, although not yet taken, would have been available to be taken by the defendant had he been present at the ex parte application, provided that: (1) the defence is one which can reasonably be expected to be raised in due course by the defendant; and (2) the defence is not one which can be dismissed as without substance or importance: New Asia Energy Ltd[6].

(5)  An applicant has a duty to make proper enquiries before making the application.  The duty of disclosure covers not only facts known to the applicant but also facts which he would have known had he made such proper enquiries: Tsui Yun Bun Barry v Law Wan Tung (formerly known as Law Siu Yi Biby)[7].

(6)  The duty of making full and frank disclosure is not discharged by making partial disclosure on oath or deposing to half-truths.  The court is entitled to assume that the applicant acts with utmost good faith, failing which the position of the ex parte judge would be extremely difficult, if not impossible: Guangdong Yuehe Investment Holdings Co Ltd & Another v Hongfan International Ltd[8].

(7)  The disclosure should be made in the affidavit (and/or the skeleton submissions) and not in the exhibits.  This is to ensure that the ex parte judge will not overlook the matters which require disclosure, ex parte applications being usually urgent (so the judge usually has little reading time) and ex parte hearings are often short: Tiong King Sing v Sam Boon Peng Yee[9].

(8)  An applicant has a duty to inform the court as soon as he becomes aware that the court has been misinformed or given incomplete information at the time of the ex parte application: Cargill International Trading Pty Ltd v Loyal Base Development Ltd[10].

(9)  A plaintiff cannot use completely new allegations to justify the continuation of an injunction.  Where a plaintiff fails to present a proper case at the ex parte stage, it should not be allowed to try to patch it up by coming up with an essentially new case only in reply: China National Machine Tool Sales and Technical Service Corporation v Nationsync Electrical and Machinery Equip Corp Ltd[11].

(10)  Where the non-disclosures are not only material, but also could not have been anything but deliberate, the court should not exercise its discretion to re-grant the injunction: Excel Courage Holdings Ltd v Wong Sin Lai[12].

62.  The Defendant raised three complaints on material non-disclosure:

(1)  the Plaintiffs’ failure to produce to the court the bank statements in the form of spreadsheets in Excel format which show there was no misappropriation;

(2)  the Plaintiffs’ failure to inform the court the availability of the defence of no reflective loss; and

(3)  the Plaintiffs’ failure to inform the court that the Plaintiffs have no arguable case on quantum.

The state of the evidence at the ex parte hearings

63.  The parties’ case on material non-discovery must be considered against the state of the evidence at the ex parte hearings.  It is the Plaintiffs’ case that the Defendant orchestrated the sale of the CCDs to Berrio Mauritius on 22 August 2019.  In January 2020, the Singapore Commercial Affairs Department raided the office of Agritrade International Pte Limited, the indirect controlling shareholder of ARL[13]. By and around that time, the Defendant had caused Agritrade India to pay Gupta Steel Rs13.62 crores, equivalent to about US$1.85 million for purchase of a property in Mumbai in his name.  Following the raid, a number of significant events occurred.  In early February 2020, the Defendant sent emails stating his decision to resign as the chief financial officer of ARL and director of 23 companies related to the ARL group, but insisted to remain as a director of Agritrade India, Entwickeln and SKS.  He effectively resigned on 24 February 2020.  In mid-February 2020, the Defendant demanded US$50 million for the operation of the power plant.  This was followed by the shutdown of the power plant, since 26 March 2020.  According to the Plaintiffs this was due to lack of operation funds.  According to the Defendant, it was due to COVID-19 lockdown, reduced demand for power and drop in power price.  This was the setting which prompted the Plaintiffs’ investigation which revealed the Defendant’s misappropriation and self-dealing in the CCDs.

No good arguable case on quantum

64.  The Defendant argued that the “good arguable case” threshold extends to the quantum sought in the Mareva injunction; but even on the Plaintiffs’ own case, there was no evidence of how much had been misappropriated. Hence, the Plaintiffs had not even passed this threshold. 

65.  I have outlined the state of the Plaintiffs’ evidence at the ex parte stage in the above subsections.  On the Plaintiffs’ case, the majority of the funds were funds of ARL routed to Agritrade India by the Defendant but intended for the operation of the power plant.  The Plaintiffs’ case on quantum was based on inference to be drawn from the fact that despite substantial funds had been transferred to the power plant for its operation, it was closed down; the discovery of missing funds; and the absence of explanation from the Defendant despite repeated requests.  Given the total silence of the Defendant, adverse inference may reasonably be drawn.  The Plaintiffs were unable to show the precise amount of funds misappropriated because of the Defendant’s failure to provide the very information he was under a duty to provide.  The Plaintiffs made it abundantly clear that they suspected they had been defrauded of substantial funds but did not know how much and what happened to the funds.  They suggested a figure of US$12,675,000.  There was no attempt to conceal the state of the evidence on quantum.

66.  On the assumption that the spreadsheets were not authentic, the Plaintiffs did not regard the spreadsheets as bank statements.  Perhaps because of the need to somehow extract a figure to justify a limit on the Mareva injunction, the Plaintiffs had to shift the focus to the sum injected by the Plaintiffs rather than the sum misappropriated from Agritrade India.  The Plaintiffs had unequivocally informed the court that they do not know the fate of the missing funds.  I shall not overlook the Plaintiffs’ negligence in failing to notice that the bank statements had in fact been provided by Abhijeet.  I have explained that the Plaintiffs’ misunderstanding was at least in part caused by Abhijeet’s email of 21 May 2020 and in part by the Defendant’s silence.  The bank statements were not provided by the Defendant pursuant to the Plaintiffs’ request via their solicitors, but by Abhijeet in response to a separate exercise requested by ARL.  The Plaintiffs are not wholly to blame.

67.  I accept that the proof of quantum is not satisfactory. However, the Defendant, being a director of ARL, Fair Thermal, Agritrade Singapore, and Agritrade Mauritius at the material time, had a duty in respect of the Plaintiffs’ funds generally and under his employment contract as executive director of ARL.  Yet, despite substantial funds had been provided, the power plant was closed down being underfunded[14]. And despite repeated demands for information relating to the suspected missing funds, the Defendant chose not to respond but to remain in control of the relevant companies.  The Defendant should not be permitted to take advantage of his own wrong to prevent the Plaintiffs from seeking an injunction against him to remedy the wrong he had committed against the Plaintiffs. Despite some failing on the part of the Plaintiffs, having regard to the state of the evidence, in particular strong evidence of misappropriation of the Plaintiffs’ funds, strong evidence of self-dealing in SKS’s CCDs (albeit a different matter involving a different plaintiff), the suspicious circumstances, and the Defendant’s silence; I accept that the Plaintiffs had done what they could in the circumstances in assessing and proving their loss and that they had not failed their duties in informing the court the nature and limitation of their case on quantum.  Viewed as a whole, On the peculiar factual circumstances of this case, I consider the Plaintiffs have shown a sufficient proof of a good arguable case that the allegedly missing fund had been misappropriated by the Defendant.

Failure to produce spreadsheets

68.  The Defendant argued that many of the points now raised by the Defendant are based on documents, namely the bank statements in Excel format in the form of spreadsheets, which were available to the Plaintiffs at the time of the ex parte hearings, but had not been sufficiently disclosed to Lam J.  Not only are the non-disclosures material, they are deliberate and positively misleading. 

69.  The Defendant adduced the transcript of the two ex parte hearings on 25 and 28 September 2020.  The transcript shows that at the first hearing, Lam J raised questions about the spreadsheets which were not attached to Ong’s 1^st Affirmation.  Mr Brown informed the court that the spreadsheets had been provided earlier and after a brief standing down produced two pages of the spreadsheets.  Following a “toing and froing session” in the words of Lam J at the first ex parte hearing, the Plaintiffs were given another chance to correct and clarify matters raised by the court at the second ex parte hearing when they filed a supplemental affirmation and confirmed that the Plaintiffs had received the spreadsheets.  At the second ex parte hearing, a chain of correspondence, including seven out of over 400 pages of spreadsheets contained therein were produced.  After viewing the exhibits and hearing counsel’s submission, Lam J granted the ex parte injunction.  He said, “This is not an entirely straightforward case” and that “on balance, it probably just passes the threshold.” 

70.  The trouble taken by the learned judge to call for a second hearing made it plainly clear that he placed much importance on the spreadsheets.  It can hardly be disputed that they are material.  Ms Cheung submitted that from the above matters, it is difficult to escape the conclusion that this was a deliberate attempt to mislead at the ex parte stage.  She emphasized that the Plaintiffs having received, downloaded and “unzipped” the attachment “Bank_Statement_April_March_2020.zip”, deliberately extracted only seven out of over 400 pages to provide to the court and did not even inform the court that there had been other financial documents provided despite Lam J’s express concerns as to the same.  She submitted that for these reasons alone, the Injunction ought to be discharged on the ground of material non-disclosure.

71.  The failure to produce the spreadsheets together with the reactions of Lam J did reflected adversely on the Plaintiffs.  However, despite the inadequacy, there was no concealment of Abhijeet’s email of 22 May 2020 and the attachment, “Bank_Statement_April_March_2020.zip” containing the bank statements of SKS, Entwickeln and Agritrade India.  Though only seven out of over 400 pages of spreadsheets were produced, there was no attempt to mislead the court.  Even during the first ex parte hearing, counsel made it plain that the spreadsheets had been received earlier and actually produced two pages to confirm the prior receipt.  It was only when the learned judge considered necessary that a second hearing was arranged when seven pages were produced.  Lam J, having viewed the seven pages, did not find it necessary to look at all 400 pages.  Counsel had submitted that the Plaintiffs did not know what happened to the funds and the Defendant did not respond to the Plaintiffs’ demand for explanation.  Viewing the spreadsheets in the absence of the Defendant’s explanation could not untangle what had been done by the Defendant in relation to the funds transferred.  Obviously, Lam J understood that.  He had taken the exceptional and admirable care when considering the application. He observed that this is a complicated case, but nevertheless was satisfied that it probably passed the test without having to call for the other 400 pages of spreadsheets.

72.  I do not wish to second guess what was in the mind of Lam J when he granted the Injunction.  I would have agreed with his decision.  It is important to understand what the Plaintiffs’ case was before the ex parte judge.  The Plaintiffs’ case was that the Defendant diverted enormous amount of funds to Agritrade India instead of to Entwickeln or SKS where the funds were destined for SKS’s operation; despite the funding, the operation of SKS was suspended; and despite repeated requests for explanation in relation to those funds and other serious irregularities, including self-dealing in CCDs, the Defendant never responded.  The Defendant only responded after commencement of these proceedings by his un-affirmed affirmation dated 8 October 2020. 

73.  Ms Cheung argued that the Defendant had responded with the bank statements.  That is incorrect.  It is never the Defendant’s case that the spreadsheets were produced by him in response to the Plaintiffs’ demand for explanation via Clasis Law’s letters of 11 May and 5 July 2020.  The spreadsheets among other financial documents were produced as a result of a separate exercise related to ARL’s filing of moratorium in May 2020.  It commenced with a series of email all dated 21 May 2020 from Mingqing Sim written on behalf of ARL to Abhijeet requiring him to provide bank balances, management accounts, bank statements etc of all subsidiaries of “Agritrade Singapore not excluding Agritrade India”.  The request was made directly to Abhijeet (presumably as the chief financial officer of SKS and/or director responsible for accounting and financial matters), not to the Defendant, although the Defendant as a director of Entwickeln, SKS and Agritrade India had been copied the emails.  The spreadsheets were not provided by the Defendant and were not a reply to the Plaintiffs’ demand.

74.  All along, the Plaintiffs acted on the basis that the spreadsheets were converted from hard copies of bank statements by Abhijeet and doubted their authenticity.  This impression was created by Abhijeet’s email dated 21 May 2020 in which he said he could not access the office to obtain the bank statements and would request the bank to provide the statements for the full year and then convert them to Excel format.  Then, on the following day, Abhijeet provided the bank statements in Excel format downloaded from the bank and attached them to his email dated 22 May 2020, without mentioning that the statements were attached and that they were downloaded from the bank. That was why ARL subsequently chased Abhijeet for the bank statements.  The Plaintiffs thought the spreadsheets are unauthentic and could have been manipulated.  That was the position taken by the Plaintiffs at the ex parte hearings.  The misunderstanding was created by Abhijeet.  It is a reasonable misunderstanding and not reflective of any intention to mislead.  

75.  The Plaintiffs now accept that the spreadsheets are authentic. Even if it were known that they are authentic, given the absence of explanation from the Defendant, it is difficult to see how the spreadsheets by themselves could afford a plausible defence and hence ought to have be exhibited.  Even now, with the explanation provided by the Defendant via his 3^rd Affirmation, there is still an unexplained shortage of US$5.252 million.  The Plaintiffs had never concealed the existence of the spreadsheets.  In fact, in answer to questions from Lam J, counsel said that they “seem to have been provided earlier”.  Having seen the seven pages produced, Lam J did not find it necessary to call for all the over 400 pages and found it sufficient for him to grant the Injunction.  Thus, the disclosure was adequate.  The Defendant’s argument about the Plaintiffs’ failure to produce all 400 pages as deliberate material non-disclosure with intent to mislead is, with respect, overblown and mis-focused.

Reflective loss 

76.  It is trite that a loss claimed by a shareholder which is merely reflective of a loss suffered by the company, ie a loss which would be made good if the company had enforced its rights in full against the defendant wrongdoer, is not recoverable by the shareholder: Landune International Ltd v Cheung Chung Leung Richard[15]. The Defendant argued that what the Plaintiffs’ complaint is essentially alleged misappropriation by the Defendant from Agritrade India and the loss (which is denied) is suffered by Agritrade India, which is not a plaintiff in these proceedings.  The Defendant argued that the present case is similar Landune International.  Hence, the Plaintiffs’ claims are barred by the “no reflective loss” rule.  The availability of this possible defence which should have been disclosed to the ex parte judge was not so disclosed. 

77.  In Landune International, a director of the holding company and subsidiary company caused the subsidiary to buy shares in a company for $120 million.  The holding company paid directly for the shares as a shareholder’s loan from the holding company to the subsidiary.  The shares bought turned out to be worthless.  The director petitioned to wind up the holding company on the basis of outstanding payments.  The holding company acknowledged the outstanding payments, but applied to strike-out the petition on the basis of the un-litigated cross-claim.  The application was dismissed at first instance on the ground, inter alia, that the cross-claim would be defeated by the rule against recovery of reflective loss in that any loss suffered by the holding company would merely be reflective of loss suffered by the subsidiary.  The holding company appealed but its appeal was dismissed by the Court of Appeal.

78.  In Landune International, the funds for purchasing the shares were the subsidiary’s funds, being shareholder’s loan advanced by the holding company.  The loss was clearly suffered by the subsidiary.  Here, the Plaintiffs’ case is that Entwickeln was incorporated specifically for the purpose of acquiring SKS and its power plant, while Agritrade India which was incorporated earlier was for the purpose of businesses other than the power plant.  Unlike in Landune International, Entwickeln is not a subsidiary of Agritrade India.  Here, the Defendant channeled the Plaintiffs’ funds (not Agritrade India’s funds) destined to Entwickeln and SKS for the operation of the power plant to Agritrade India without the Plaintiffs’ authority; and took advantage of the fact that while the funds were under his control when it was with Agritrade India to misapply some of the funds, though the majority were properly channeled to Entwickeln and SKS.  Even if the Agritrade India had been authorized as the conduit for the transfer of funds, the funds remained the Plaintiffs’ and not Agritrade India’s.  This distinguishes the present case from Landune International in which the funds for purchasing the shares were the subsidiary’s.  It is all the more so if, on the Plaintiffs’ case, Agritrade India was not authorized by the Plaintiffs to receive the funds, but being a company under his control, was made use of by the Defendant for his unlawful design. 

79.  The Defendant’s stance is that as the funds were diverted to Agritrade India, they were properties of Agritrade India.  Agritrade India should be the proper plaintiff and the party to suffer loss.  Hence, the Plaintiffs have no locus standi to institute action and any loss if suffered by the Plaintiffs is reflective loss.  This is a novel argument which is only to be rejected.  Agritrade India was just part of the conduit used by the Defendant to misappropriate funds belonging to the Plaintiffs while flowing through the conduit.  It cannot be right to argue that the loss was suffered by the conduit and not the Plaintiffs which were the source of the funds.  This novel but unarguable defence may not be readily apparent to the Plaintiffs.  The Plaintiffs should be excused for failing to advise the court of the availability of such a possible defence.  This defence is one which is doomed to fail.  Even if this possible defence had been drawn to the attention of the ex parte judge, the injunction would still have been granted.

Conclusion

80.  For the above reasons, I reject the Defendant’s plea on material non-disclosure.

GOOD ARGUABLE CASE

The law

81.  To obtain a world-wide Mareva injunction, a plaintiff has to show[16]:

(1)  the plaintiff has a good arguable case;

(2)  there are no or insufficient assets within the jurisdiction to satisfy the claim;

(3)  there is a real risk of dissipation of assets which would render the plaintiff’s judgment of no effect; and

(4)  the balance of convenience is in favour of granting the injunction.

82.  At the ex parte stage, a plaintiff has to show a good arguable case.  To establish a “good arguable case”, the plaintiff is not required to show that he is likely to win.  Rather, he must show that his case is one that is more than barely capable of serious argument and yet not necessarily one which the judge believes to have a better than 50% chance of success: see Hong Kong Civil Procedures 2021[17].

83.  At the inter parte stage, a defendant may be able to put up a defence and evidence of sufficient cogency as to water down the merits of the claim to such an extent that it no longer stands as a good arguable case or even a serious issue to be tried.  If the continuation of the ex parte injunction is being challenged, merit must be assessed on the evidence now before the court: see Pacific Rainbow International Inc v Shenzhen Wolverine Tech Ltd & Ors[18] and Arrow ECS Norway AS v Xin Cheng Holdings (International) Company Limited[19].  The opposite is equally true.  A defendant’s failure to sufficiently answer the claims against him may elevate the plaintiff’s case.

84.  It is possible to have, at the inter parte stage, both the claim and the defence being more than barely capable of serious argument and not necessarily with one having a better than 50% chance of success.  There is no requirement that the plaintiff must show he has a much better case or argument than the defendant.  However, as the burden remains on the plaintiff to show a good arguable case, under such a situation, the test is therefore whether in the light of the defendant’s arguments and evidence, the plaintiff has shown a good arguable case without the defendant having to rely on disputed facts or complicated issues of law.

Good arguable case

85.  At the ex parte stage, the Plaintiffs have proved a good arguable case in the sum of US$12,675,000 under the then circumstances.  The Defendant argued that the Plaintiffs are not proper plaintiffs and that their loss is reflective loss.  These arguments have been advanced by the Defendant as part of his attack on the Plaintiffs’ material non-disclosure.  I adopt the reason I have given for rejecting those arguments.  In this section, it is only necessary to consider if the Plaintiffs has an arguable case on quantum in the light of the evidence filed by the Defendant.

86.  With the benefit of the Defendant’s 3^rd Affirmation filed in opposition to the continuation of the Injunction for the purpose of the inter partes hearing, the Plaintiffs are able to prove a much stronger arguable case albeit in the lesser amount.  The Plaintiffs have reduced the amount to be restrained to US$5,252,000.

87.  In his 3^rd Affirmation, the Defendant exhibited a table showing various transfers from Agritrade Mauritius, Agritrade Singapore and Fair Thermal in the total amount of US$12,650,000 to Agritrade India. These transfers were recorded as “investment in equity shares” in the ledger accounts of these companies with Agritrade India and reflected in the balance sheet of Agritrade India.  According to Ms Cheung, the amount was actually US$13,088,740 which was higher than the amount allegedly unexplained.  Ms Cheung submitted that these entries show there was no misappropriation. Whatever the amount, there is no dispute about receipt of the funds by Agritrade India.  In fact, it is also the Plaintiffs’ case that the funds were diverted to Agritrade India instead of to Entwickeln or SKS where they were destined.  The dispute is what happened to these funds.  The Plaintiffs’ complaint is the Defendant’s failure to account for the funds thereafter.  The table serves no purpose but to mislead.

88.  The Defendant asserted that “all of the Funds were applied for proper business purposes (including for funding the operation, for loan servicing and to Gupta Steel for the purchase of a guest house for SKS, and most of them has been transferred to SKS as demonstrated by the documents (including the bank statements) which have already been provided to the Plaintiffs.  Most importantly, none of the Funds has been used for my own benefits”.  On a proper analysis of the evidence, these are just bald assertions unsupported by evidence.

89.  The evidence relating to the Gupta Steel Transaction has been summarized in paragraphs 47 to 49.  It shows that some US$1.8 million had been paid out to Gupta Steel on what Gupta Steel alleged was a private sale of property to the Defendant, not to SKS.  Even on the evidence of Abhaya, which the Defendant did not dispute, it was an oral sale and purchase on the basis of good faith. There was no written contract of sale.  This is incredible for a sale and purchase of real property of that magnitude.  Not only that, there was no board resolution or other documentary evidence from within SKS in support of the purchase of guest house.  The Defendant did not seek to contradict Gupta Steel’s evidence that the funds allegedly used to purchase a guest house for SKS were in fact used to purchase a property for his personal benefit.  Adverse inference may reasonably be drawn from his silence.  The Defendant’s allegations that “the funds were applied for proper business purposes of SKS” and that “none of the funds has been used for [his] own benefits” are all unsupported bald assertions. 

90.  With exchange of affidavit evidence, the Plaintiffs now accept that only US$5,252,000 is unaccounted for during the period between 1 April 2019 and 31 March 2020.  The Defendant offered no explanation for these unaccounted funds.  These consist of the following:

Description	Amount in Rs Lakhs	Amount in US$
Cash withdrawals	1570	2,100,000
Cheque transfer	1000	1,300,000
Gupta Steel	1100	1,500,000
SKS Minerals	120	160,000
CSIDC	92	125,000
Pragya Dhameja	50	67,000

91.  With respect to the cash withdrawals, the bank statements exhibited in the Defendant’s 3^rd Affirmation contain a handwritten marking of “STDR” against two entries totaling Rs 870 lakhs or US$1,100,000 and a handwritten marking of “Gupta Steel” against two other entries totaling Rs 700 lakhs or approximately US$950,000; indicating these respective amounts had been withdrawn in relation to business connected with STDR and Gupta Steel.  These withdrawals totaled US$2,050,000; the other sum of US$50,000 is untraceable.

92.  With respect to the cheque transfer of US$1,300,000, there is a handwritten marking of “STDR” against this entry, suggesting the transfer was related to business connected with STDR. There is nothing to suggest what the letters “STDR” stand for.  Ms Cheung submitted that those letters stand for “Special Term Deposit Receipt” and referred to an entry marked “Interest on Term Deposits” in the unaudited profit and loss statement of Agritrade India in support of the funds being deposited into the bank account of Agritrade India instead of being misappropriated.  This is obviously evidence given from the bar table.  She could not identify the two deposits from the bank statements to give credibility to her submission.  The Defendant who did not produce the bank statements now sought to rely on the bank statements.  Other than asserting that “the funds were applied for proper business purpose of SKS”, he did not care to explain these payments.  I can only accept the Plaintiffs’ argument that these expenses are unexplained.

93.  The table shows a transfer of US$1,500,000 to Gupta Steel. Together with the cash withdrawals marked with “Gupta Steel”, the total amount of funds transferred to Gupta Steel was US$2,450,000.  This payment is supported at least to the extent of US$1,847,815 as stated in Abhaya’s letter to Gupta Steel dated 10 August 2020 and to the extent of US$2,521,141 as stated in Gupta Steel’s letter dated 18 August 2020 acknowledging receipt of that total amount from Agritrade India in connection with the Defendant’s purchase of Ahuja Towers.

94.  With respect to the transfer described as “CSIDC”, a sum of Rs 92 lakhs or US$125,000 was transferred to Chhattisgarth State Industrial Development Corporation.  The Plaintiffs accept that the corporation is a government department in India which leased out the land for the power plant project to SKS.  The Plaintiffs queried why such payment should be paid by SKS and not Agritrade India and that no explanation had been given for the arrangement.  But there is no suggestion from the Plaintiffs that the payment was otherwise than for the purpose of SKS and its power plant.  For the present purpose and adopting a very relaxed approach, I accept the payment has been accounted for.

95.  With respect to the transfer of Rs 50 lakhs or US$67,000 to “Pragya Dhameja”, to the Plaintiffs’ knowledge Pragya Dhameja is an Indian lawyer and an associate partner at the firm DSK Legal instructed by SKS.  The Plaintiffs raised a similar query why the payment should be made by Agritrade India and not SKS.  Again, for the same reasons as above, I accept that this amount has been accounted for.

96.  Discounting these two amounts, there remains an amount of US$5,060,000 unaccounted for.  I am satisfied that the Plaintiffs have proved an arguable case on quantum to the extent of US$5,060,000.

RISK OF DISSIPATION AND SECRECY

The law

97.  The principles governing the approach in assessing the risk of dissipation of assets was recently considered by the Court of Appeal in Convoy Collateral Limited v Cho Kwai Chee[20]. These are:

(1)  The ultimate question is whether the plaintiff can show objectively that there is a solid basis for concluding that there is a real risk of unjustified dissipation of assets by a defendant.  That question is to be answered by examining the evidence holistically.

(2)  Evidence of dishonest and/or fraudulent conduct or other serious wrongdoings which form the basis of the claim, and which reflect adversely on the integrity of the defendant, could point powerfully towards an inference of such a risk.

(3)  Each case is fact specific and relevant factors must be looked at cumulatively.

(4)  Examples of where a risk of dissipation has been inferred include where the defendant has:

(i)  disposed of or concealed assets otherwise than in the normal course of business;

(ii)  dishonestly and deliberately concealed its breach of contract from the plaintiff;

(iii)  dishonestly attempted to conceal inventory or proceeds;

(iv)  engaged in wrongdoing against the applicant relevant to the issue of dissipation;

(v)  committed dishonest or wrongful acts which were not themselves acts of dissipation;

(vi)  been implicated in a scheme of fraud; and

(vii)  where conduct is at or very close to the fraud or dishonesty end of the spectrum.

98.  The last example above is a reference to Crete Maritime Corporation v Emirates Shipping Line Dmcest[21], in which Anthony Chan J held that evidence of behaviour disclosing an unacceptably low standard of commercial morality approaching dishonesty or fraud (as opposed to mere sharp practice) may entitle the court to infer a sufficient risk of dissipation.

Risk of dissipation

99.  The Plaintiffs have proved a good arguable case of unexplained misappropriation of funds in the amount of US$5,060,000.  In particular, there is clear evidence of the Defendant misapplying funds in the amount of US$2,450,000 for purchasing a property for himself in the Gupta Steel Transaction.  This evidence is uncontested.  It is evidence of dishonesty which gives rise to a strong inference of risk of dissipation of misappropriated assets in his hands.  This conduct falls within most of the examples given in the preceding paragraphs.  This evidence is sufficient for the Plaintiffs to discharge their burden of proving risk of dissipation.

100.  In addition, there is also clear evidence of self-dealing in SKS’s CCDs and misappropriating US$100,000 from Agritrade Mauritius for paying the CCDs.  This conduct involves double dishonesty in that the Defendant used funds of his employer to pay for the CCDs sold to a company beneficially owned by him and his wife.  This conduct also falls within all of the examples given in the preceding paragraphs. Although the Defendant raised the defence of “sweat equity” and claimed he had repaid, the evidence is doubtful and disputed.  For reasons as already explained, his defences are incredible.  These are subject matters of separate proceedings between the Defendant and SKS, however, the parties are related and the incident arose out of the same factual matrix.  This is evidence of general propensity which supports the risk of dissipation.

101.  The Defendant argued that the Plaintiffs had known about the misappropriation since April 2020 but it was not until late September 2020 that they applied for the Injunction. This militates against any conclusion of a real risk of dissipation.  There is some force in this argument.  However, the evidence of risk of dissipation is so strong that the argument of delay deserves little weight.

Delay

102.  The Defendant mentioned about the Plaintiffs’ delay in applying for injunction in the context that it militates against any conclusion of a real risk of dissipation but not as a bar against the grant of injunction.  I shall only deal with this briefly.

103.  Delay reflects the lack of irreparable damage and lack of urgent need to grant relief ex parte.  As was held by the Court of Appeal in Harbour Front Limited v Money Facts Limited & Ors[22], delay is not an absolute bar to the grant of an injunction.  The ultimate question is after taking into account all the circumstances, including the nature and length of the delay, whether it is just to grant the injunction.  The conclusion is fact sensitive.

104.  In the present case, the Defendant was a trusted senior employee.  He resigned towards the end of February 2020, prior to the Plaintiffs becoming aware of any impropriety.  At the time, there was a raid by the Singapore Commercial Affairs Department of the office of Agritrade International Pte Limited, following which a new board of ARL was put in place.  Amidst all these disruptive events, it took time for the new board to come to terms with the position of ARL and its many subsidiaries. Investigations into payments destined for SKS routed to Agritrade India were carried out in mid-April 2020.  The self-dealing in CCDs was discovered on 10 May 2020.  Immediately, Clasis Law wrote to the Defendant demanding an explanation on 11 May 2020.  The Plaintiffs waited for response.  The Defendant did not reply.  Clasis Law wrote again on 5 July 2020.  Again the Defendant did not respond.  It took three months from then on until the Plaintiffs sought Injunction.

105.  The Plaintiffs explained that due to the complexity of the underlying facts and absence of direct evidence of the loss, the Plaintiffs need time to take advice on the claim generally and how best to go about a recovery.  Three months was a little too long.  However, having regard to the complexity of the case and I should add the impecuniosity of the Plaintiffs, the delay could well be understood.  There is no submission that the Defendant suffered any prejudice as a result of the delay.  Having regard to all the circumstances, in particular, the lack of a proper defence, I consider it just to grant the injunction notwithstanding the delay.

Secrecy

106.  The Defendant argued that there could be no element of secrecy justifying an ex parte Mareva injunction application because the Plaintiffs had commenced proceedings in India in relation to the CCDs and Clasis Law’s letter in July 2020 had already threatened seeking a worldwide Mareva injunction. 

107.  The fact that a defendant is already subjected to on-going legal proceedings or has been tipped of about imminent proceedings against him is a factor to be taken into account in considering the need to apply ex parte injunction.  To the Plaintiffs’ knowledge, the Defendant has a bank account in Hong Kong.  Though there are on-going proceedings in India in relation to the narrower issue of the CCDs and threatened further proceedings, the Defendant might believe his assets are safe in Hong Kong.

108.  Where the assets could be easily moved, it is unrealistic for the Plaintiffs to give notice of application of the injunction, particularly if there are real risks of dissipation.  In the present case, the existence of the Indian proceedings and the possibility that the Defendant was already tipped off to the fact that the Plaintiffs were seeking recourse against him had been brought to the attention of the ex parte judge.  Lam J did not consider it inappropriate to grant the injunction at the ex parte stage.  Neither do I at this inter parte stage.

THE CONTINUATION APPLICATION

109.  At the interlocutory injunction stage, the principal concern of the court is that it might make a wrong decision, in the sense that after trial, the party to whom an interlocutory injunction has been granted may lose or the party who has been refused one may win.  The court is concerned to take whatever course appears to carry the lower risk of injustice, if the court should turn out to be wrong: Music Advance Ltd & Anor v The Incorporated Owners of Argyle Centre Phase I[23].

110.  The Defendant is restrained from dealing with his assets.  He is an individual.  It is not likely that he will suffer material loss due to his assets being frozen.  He has not advanced any particular damage he is likely to suffer.  In the event that the injunction is continued when it should not have been continued, the damage and inconvenience he is likely to suffer is unlikely to be substantial.  His only recourse is the Plaintiffs’ undertaking. 

111.  The Plaintiffs have not shied away from their impecuniosity.  ARL is in “soft touch” liquidation for the purpose of restructuring and Fair Thermal is under receivership and is without funds.  ARL’s debts are near US$1 billion.  It has assets, such as the power plant and two coal mines, but is nevertheless, insolvent.  The further assets as ARL does have are infrastructure and are highly illiquid.  It is difficult for the Defendant to enforce the undertaking as to damages against those assets.  This is an important factor which the court has to take into consideration in continuing the injunction and deciding its terms.

112.  On the other hand, if the Injunction is not continued when it should have been continued, the Plaintiffs would most likely be left with an empty judgment.  This is an equally important factor which the court has to take into consideration in discharging the injunction.

113.  In circumstances such as these where the balance is even, it is appropriate for the court to consider merits of the parties’ case.  The Plaintiffs have presented a strong case of misappropriation based on credible evidence. The defence is basically one of denial and bald assertions.  The relevant exculpatory evidence, if there is any, was within the Defendant’s reach.  He could have easily provided the supporting documentation for the various transactions paid out from Agritrade India’s account.  He knew this is the key issue since the end of September 2020.  He chose not to provide such documents to support his argument.  In the circumstances, the balance tilts in favour of continuing the injunction on the same terms.

THE DISCLOSURE APPLICATION

114.  The Plaintiffs seek the standard disclosure order.  Disclosure order are usually granted together with an injunction order so as to give effect to the injunction.  As noted in Gee on Commercial Injunctions[24], a disclosure order serves two purposes.  First, it allows third parties to be served with the order, thereby preventing dissipation by the defendant. Second, it prevents the defendant from being treated oppressively by double or multiple freezing of assets by different bankers such that too much is frozen. In that connection, it also protects the plaintiff from being exposed to a claim in damages where too much is frozen.  A disclosure order will usually follow, having regard to the exceptional nature of the worldwide Mareva relief. 

115.  In the present case, the Plaintiffs have not frozen sufficient funds through the Defendant’s known assets.  Without a disclosure order, the Plaintiffs will not know on whom to serve the Injunction to make the Injunction effective.  Having continued the injunction, I grant the disclosure order.

THE VARIATION APPLICATION

The procedural background

116.  Having obtained the Injunction from Lam J and continued by DHCJ Patrick Fung SC, the Plaintiffs sought a variation of the injunction on 19 October 2020 by removing Undertaking 8 of Schedule 2.  That application was adjourned for substantive argument on 8 January 2021. 

117.  Yet, on 27 October 2020, the Plaintiffs filed another summons seeking to vary Undertaking 7 and Undertaking 8 instead by carving out Singapore.  At the hearing on 30 October 2020, following exchange between Lam J and the Plaintiffs’ counsel, the summons dated 27 October 2020 was withdrawn and leave was granted to amend the 19 October 2020 summons to effectively seek the variations sought under the 27 October 2020 summons.  Essentially, the Plaintiffs seek to commence proceedings and/or enforce the Injunction in Singapore.  This is the Variation Application now before this court.  In the event that the Injunction is continued, the Defendant opposes the Variation Application.

118.  By a sudden twist at this hearing, Mr Brown now argued, quoting Sang Cheol Woo v Yoon Shin Choi & Ors[25] that leave is in fact not required in respect of Undertaking 8, if the Plaintiffs do not seek the direct enforcement of the Injunction in Singapore, which they do not.  He submitted that the Plaintiffs can commence fresh proceedings and obtain injunctive relief of a similar nature in Singapore, so long as that relief can be obtained independently of the injunction.  However, as the Defendant’s case is that leave is required, he invited this court to resolve the question of whether leave is in fact required. 

119.  There is a distinction between varying the terms of the undertakings (or its geographical scope as in this case) and seeking leave to carry out proceedings pursuant to the terms of the undertaking.  If, as Mr Brown argued, leave is not required under the current terms of the undertaking, there is no need to seek variation at all.  But that proposition is based on some undisclosed pre-suppositions of “if” and “so long as”.  Even assuming that the Plaintiffs wish to commence proceedings in Singapore to restrain the Defendant from disposing of his assets located in Singapore, it is not known what proceedings the Plaintiffs had in mind and what those pre-suppositions are. With respect, the Plaintiffs’ argument is rather convoluted and difficult to understand.  It is probably based on a misunderstanding of Sang Cheol Woo. Besides, that argument only applies to Undertaking 8 but not Undertaking 7 which is of wider import.  It appeared as if the Plaintiffs have not quite made up their mind the way ahead. 

120.  In the following discussion, I shall first consider

(1)  what are the Plaintiffs’ obligation according to the true construction of the undertakings;

(2)  whether, under the terms of the undertakings as they stand, leave is required for the Plaintiffs to commence proceedings in Singapore to restrain the Defendant from disposing of his assets;

(3)  if leave is required, whether to grant leave; and

(4)  regardless whether leave is required, whether to vary the undertakings by carving out the geographical area of Singapore.

The Undertakings

121.  The meaning and effect of the undertaking is a matter of construction.  The usual rules of statutory construction apply. An undertaking has to be construed against the origin of the Mareva relief and the purpose for which the undertaking was given.

122.  Worldwide Mareva injunction is an exceptional and extreme remedy.  It is usually given with a disclosure order for the purpose of giving effect to or policing the injunction.  Hence, the court will always guard the information obtained under the disclosure order with jealousy.  The court has two concerns that underpinned the origin of the undertaking.  These are: (1) avoiding the oppression of the defendant by the institution of multiple proceedings for enforcement of the domestic freezing order in several foreign countries at the expense of the ability of the defendant to defend the domestic proceedings; and (2) preventing the enforcement of the freezing order in a foreign jurisdiction having a more far-reaching effect in that jurisdiction than in the home jurisdiction: see Ackine Bendrove Bankas Snoras v Vladimir Antonov & Ors[26]. The theme is to prevent abuse of this exceptional and extreme relief from being used as a means of oppression on the defendant.  To address these concerns, the undertakings are imposed to ensure the court’s jurisdiction is not being abused or invoked on a temporary basis for tactical reasons or ulterior purposes; to ensure that a defendant will not be harassed more than necessary; and to enable the court to police the circumstances in which the applicant sought to use the relief obtained, in particular the disclosures, as a means to obtain further or greater or oppressive relief against the defendant abroad.  It is these concerns which gave rise to the undertaking.  Hence, an undertaking has to be construed against the origin and purpose of the Mareva jurisdiction.

123.  The Plaintiffs gave the following standard undertakings in Schedule 2 of the Injunction:

“Undertaking 7

The Plaintiffs will not without the leave of the Court begin proceedings against the Defendant in any other jurisdiction or use information obtained as a result of an order of the Court in this jurisdiction for the purpose of civil or criminal proceedings in any other jurisdiction.

Undertaking 8

The Plaintiffs will not without the leave of the Court seek to enforce this Order outside Hong Kong or seek an order of a similar nature including orders conferring a charge or other security against the Defendant or the Defendant’s assets.”

124.  Undertaking 7 appears to be a blanket restriction on two activities: (1) commencing proceedings against the defendant in any foreign jurisdictions; and (2) use of information obtained from the Injunction order in Hong Kong.

125.  The standard undertaking provided under Schedule B of the United Kingdom Practice Direction 25A (ie Undertaking (9)) only prohibits the use of information.  There is no general prohibition on commencing proceedings against the defendant without leave of the court.  This is probably because prohibition against commencing proceedings is probably adequately covered by Undertaking (10) which is similar to Undertaking 8 in the present case.  In other words, there is a measure of overlapping between Undertaking 7 and Undertaking 8. 

126.  In respect of prohibition against commencing proceedings, the words “begin proceedings” are vague.  They could not possibly be construed to cover all or any proceedings to which the Plaintiffs and Defendant may be parties.  All the undertakings in Schedule 2 have to be construed as a whole.  There are some other proceedings restrained under Undertaking 8.  As the purpose of the undertakings is to ensure that the Defendant will not be harassed more than necessary, when read in the context of Undertaking 7 and Undertaking 8, these words must be restrictively construed to mean proceedings in respect of the same subject matter. 

127.  In Re Bank of Credit and Commerce International SA (In Liquidation) (No.9)[27], the English Court of Appeal considered a stand-alone undertaking not to commence proceedings against the defendant in foreign jurisdictions.  This undertaking is similar to the undertaking under the first limb of Undertaking 7.  The Court of Appeal noted that commencing proceedings on the same subject matter against the defendant in another jurisdiction is potentially oppressive to the defendant.  This is precisely the oppression which the first limb of Undertaking 7 as thus construed is designed to prevent.

128.  In respect of prohibition against use of information, Gee on Commercial Injunctions[28]wrote:

“Undertaking (9) enables the court to retain control over information obtained under the disclosure order by not permitting the use of the information in civil or criminal proceedings other than the proceedings in which the disclosure order has been made. The purpose of this undertaking is to avoid the use of the information for an improper or collateral purpose. The undertaking applies to information disclosed under the disclosure order including the contents of any affidavits made pursuant to the order.”

I agree and respectfully adopt that submission.  The word “information” must necessarily include all information contained in affirmations and exhibits filed as well as information disclosed pursuant to any order made in these proceedings.  In my view, under Undertaking 7 leave is required for commencing proceedings and using information obtained under the Hong Kong Injunction in proceedings in a foreign jurisdiction in relation to the same subject matter.

129.  Undertaking 8 is similar to the standard Undertaking (10) provided under Schedule B of the United Kingdom Practice Direction 25A.  It prohibits the Plaintiffs from enforcing this Injunction outside Hong Kong or seek “an order of a similar nature”.  The words “an order of a similar nature” were construed by the United Kingdom court in Bankas Snoras[29].  The judge reviewed the judgment in Re an LMAA Arbitration E, F, G v M (F v M)[30]. He identified the twin concerns that underpinned the origin of the undertaking as: (1) preventing the enforcement of the freezing order in a foreign jurisdiction having a more far-reaching effect in that jurisdiction than in England; and (2) avoiding the oppression of the defendant by the institution of multiple proceedings for enforcement of the English freezing order in several countries at the expense of the ability of the defendant to defend the English proceedings.  He noted the intention of the English court to police the circumstances in which the applicant sought to use the English Freezing Order as a means to obtain further or greater or oppressive relief abroad.  After having regard to the above, he construed those words narrowly as meaning any order that seeks to enforce the local order, ie the Hong Kong order in the context of the present case.  The judge expressly excluded the following situations from the undertaking:

“The Undertaking is not concerned with the situation where the order sought abroad does not amount to the direct or effective enforcement of the Freezing Order. The Undertaking is not concerned with the situation where the foreign court in making the relevant order is exercising its own independent jurisdiction, irrespective of the English Freezing Order, even if the existence of the Freezing Order granted in England is referred to in support of the application abroad for that order and even if the order of the foreign court is of a similar nature or effect as the English Freezing Order. Therefore, if the jurisdiction of the foreign court to grant the order does not depend upon or derive from the making by the English court of the Freezing Order for the purpose of the direct or effective enforcement of the Freezing Order, but arises from a different and independent right or jurisdiction, the Undertaking is not engaged.”

130.  This narrow construction was adopted by DHCJ Le Pichon in Sang Cheol Woo.  I am of the same opinion and I respectfully adopt the narrow construction in Bankas Snoras.  Thus, under Undertaking 8, leave is required for enforcing the Hong Kong Injunction or an order that seeks to enforce the Hong Kong Injunction in a foreign jurisdiction.

Background leading to the Variation Application

131.  The Injunction was granted on 28 September 2020.  At the hearing on 9 October 2020, the Defendant sought a variation on payment of living expenses including mortgage payments in respect of an unidentified property held in his wife’s name, supported by his un-affirmed and undated affirmation.

132.  The residential address given by the Defendant in his affirmation is a property at Pari Dedap Walk in Singapore (the “Property”).  At the time, the Plaintiffs had conducted a property search of the Property which showed it was owned by the Defendant without a mortgage.

133.  On 21 October 2020, the Defendant’s solicitors sought the Plaintiffs’ consent to the sale of certain unspecified shares held in an unspecified bank or bank in Singapore for financing his unspecified fees and expenses.  That was rejected by the Plaintiffs.

134.  On 26 October 2020, the Plaintiffs’ solicitors in Singapore conducted a property search and found that the Defendant had on 13 October 2020 lodged with the Singapore Land Authority a transfer of the Property to his wife by way of gift on trust for his son.  The transfer was registered on 23 October 2020. 

135.  It should be noted that at the time of the transfer, the Defendant had been served the worldwide Mareva Injunction order and he had made an affirmation, albeit unsigned and un-affirmed, that it was not his intention to dissipate his assets.  Notwithstanding his knowledge of the worldwide Mareva Injunction and his expressed intention not to dissipate his assets, he processed and registered the transfer.  At no time since he was notified of the worldwide Mareva Injunction did he mention to the Plaintiffs or this court any plan or intention to effect the transfer.  Instead, he proceeded secretively to divest himself of the Property. 

136.  The Defendant’s son is only an infant of 1 year and 9 months old.  The Defendant has offered no reason why there was a need to transfer and register the transfer of the property now only to be held on trust for his son who could not possibly hold the Property himself for another 16 years until he reaches the age of majority.  This speaks volume of his intention to put his assets out of reach of the Plaintiffs in the event that judgment is obtained against him.

137.  The Defendant’s solicitors filed a signed but un-affirmed 2^nd Affirmation of the Defendant to contest the Variation Application.  The complaints of the Plaintiffs were unanswered.  This incident is clear evidence of dishonesty, wanton disregard of this court’s order and dissipation of assets.

The guidelines

138.  Ms Cheung did not seek to contest the above factual background leading to the application.  She referred to the guidelines for granting permission to enforce a worldwide Mareva order abroad as set out in Dadourian Group International Inc v Simms and Others[31] as applied in Hong Kong in RACP Pharmaceutical Holdings Ltd v Li Xiaobo[32] and submitted that on the basis of these guidelines leave should not be granted.  These guidelines are as follows:

(1)  The grant of permission should be just and convenient for the purpose of ensuring the effectiveness of the worldwide freezing order and the addition that it is not oppressive to the parties to the local proceedings or to third parties who may be joined to the foreign proceedings;

(2)  All relevant circumstances and options need to be considered.  In particular, consideration should be given to granting relief on terms, for example, terms as to the extension to third parties with the undertaking to compensate for costs incurred as a result of the worldwide freezing order and as to the type of proceedings that may be commenced abroad, proportionality of the steps proposed to be taken abroad and in addition to the form of any order;

(3)  The interests of the applicant should be balanced against the interests of the other parties to the proceedings and any new party likely to be joined to the foreign proceedings;

(4)  Permission should not normally be given in terms that would enable the applicant to obtain relief in the foreign proceedings which is superior to the relief given by the worldwide freezing order;

(5)  The evidence in support of the application for permission should contain all the information so far as it can reasonably be obtained in the time available necessary to enable the judge to reach an informed decision including evidence as to the applicable law and practice in the foreign court, evidence as to the nature of the proposed proceedings to be commenced and evidence as to the assets believed to be located in the jurisdiction of the foreign court and the names of the parties by whom such assets are held;

(6)  The standard of proof as to the existence of assets that are both within the worldwide freezing order and within the jurisdiction of the foreign court is a real prospect, that is, the applicant must show that there is a real prospect that such assets are located within the jurisdiction of the foreign court in question;

(7)  There must be evidence of a risk of dissipation of the assets in question; and

(8)  Normally, the application should be made on notice to the respondent.

139.  These guidelines are not intended to be strict jackets.  They revolve around the general principles discussed earlier, namely, abuse of this form of exceptional and extreme relief, multiplicity of proceedings and oppression to the defendant.  Ms Cheung’s argument is that despite these guidelines have been drawn to the Plaintiffs’ attention in the Defendant’s skeleton submissions for the hearing on 30 October 2020, no information has been provided in the Plaintiffs’ evidence as to the nature of the relief intended to be sought in Singapore, in particular whether it is by nature superior to relief given by the Injunction.  She also complained that there is no evidence on the applicable law and practice in the Singapore court as suggested in Guideline (5).

Whether leave is required

140.  The Plaintiffs provided incontrovertible evidence of dissipation and argued that the variation is necessary to prevent the Defendant from divesting himself of the Property and from dissipating any additional assets he owns in Singapore.  They failed to provide information as to the nature of relief intended to be sought in Singapore for which variations to the terms of the undertakings are required. 

141.  Mr Brown submitted, quoting Sang Cheol Woo that leave is in fact not required in respect of Undertaking 8, if the Plaintiffs do not seek direct enforcement of the Injunction in Singapore and if that relief can be obtained independently of the Injunction.  He did not say how the Plaintiffs could do so.  In the following discussion, I shall demonstrate that they could not.  In my view, his argument is based on a misunderstanding of Sang Cheol Woo. 

142.  The plaintiff in that case obtained judgment against the defendant and nine others in Korea.  Then, he commenced enforcement action against the Korean judgment in jurisdiction where the defendant’s assets were suspected to be present, including in Hong Kong and Singapore. 

143.  On 23 April 2019, the plaintiff obtained a worldwide Mareva injunction in Singapore against the defendant and another and a domestic Mareva injunction against each of the related British Virgin Islands entities.  The plaintiff gave an undertaking in similar terms as Undertaking 8. 

144.  On 31 May 2020, the plaintiff obtained an ex parte injunction in Hong Kong against the defendant and two others restraining them from disposing of certain shares in a Hong Kong company.  At the time of the application for the ex parte injunction, the court’s attention had not been drawn to the Singapore undertaking.

145.  Then, the defendant sought to have the ex parte injunction discharged on the ground of material non-disclosure concerning an alleged breach of the Singapore undertaking by the plaintiff.  It was in that context that DHCJ Le Pichon held that the Hong Kong injunction was not an enforcement of the Singapore injunctions but an exercise by the Hong Kong Court of its own independent jurisdiction based on the circumstances then prevailing on the evidence before it.  Since that jurisdiction did not depend on the Singapore injunction, there was no breach of the Singapore undertaking.

146.  In Sang Cheol Woo, the plaintiff was enforcing a final judgment against the defendant in various jurisdictions where the defendant was suspected to have assets, including Hong Kong and Singapore.  He was entitled to do so as of right.  Here, the Plaintiffs have not obtained any judgment.  They have no judgment to enforce in Hong Kong.  They are merely invoking the Mareva jurisdiction of the Hong Kong court to freeze the Defendant’s assets worldwide by relying on the alleged misappropriation by the Defendant of their funds in Agritrade India.  Likewise, they have no judgment to enforce in Singapore.  If they wish to invoke the Mareva jurisdiction of the Singapore court, they would have to commence action by relying on that very misappropriation before they could seek an independent domestic Mareva injunction in Singapore.  That would be a clear breach of the first limb of Undertaking 7 for beginning proceedings in any other jurisdiction on the same subject matter.  If they should do so by relying on the Hong Kong Injunction, they would be seeking to enforce the Hong Kong Injunction and would be in clear breach of Undertaking 8.  In either event, leave is required under the terms of the undertakings as they stand.

Whether leave should be granted

147.  There is incontrovertible evidence that the Defendant with full knowledge of the Hong Kong Injunction disposed of the Property.  Such disposal is clear evidence of dishonesty, wanton disregard of this court’s order and dissipation of assets. 

148.  A court’s order is meant to be obeyed.  If a litigant obeys a court order, he is entitled to all the protection which the law affords him for his obedience to the order, such as protection from harassment or multiple actions as in a worldwide Mareva injunction.  If he disobeys the court order and abuses the legal process, the law will be vigilant to ensure that the court’s order is obeyed.  Thus, when the purpose of the foreign proceedings is to safeguard assets which should be preserved so as to be available to satisfy a possible future local judgment, the undertakings should be released to enable this to be done if the defendant knowingly breached the court’s order: Bayer v Winter (No. 3)[33]. If the claim is for a substantial amount based on substantial allegations of dishonesty which are supported by evidence, and if the defendant’s main assets are abroad, these are strong factors in favour of permission in appropriate terms being granted so as to enable the foreign assets to be preserved.  There is evidence of dishonest misappropriation of the Plaintiffs’ assets.  There is incontrovertible evidence of knowing and dishonest breach of the court’s order.  This is a case which is appropriate for the Plaintiffs to be released of their undertakings to enable them to enforce the Injunction.

149.  Other than adducing evidence of knowing and dishonest breach of the Injunction, the Plaintiffs have not adduced any evidence to justify commencing action in Singapore in respect of the same subject matter.  To allow the Plaintiffs to do so would result in double harassment of the Defendant. Assuming that it is possible for the Plaintiffs to commence action in Singapore, however, they have made a choice to institute action in Hong Kong. In circumstances when it is apparent that there are other possible jurisdictions where the matter could be litigated, a court which is being asked to grant an extreme remedy such as a Mareva injunction, is entitled to demand of the plaintiff that the litigation will indeed be conducted in Hong Kong.  The imposition of such a condition would be with a view to insuring, that a defendant will not be harassed more than necessary and the court’s jurisdiction is not being invoked on a temporary basis for tactical reasons:  Eastgate Partners Limited and Suthi Tejavibulya & Ors[34]. The Plaintiffs have not adduced any reasons why they should be released from the first limb of Undertaking 7.

150.  However, at the minimum, given the Defendant’s knowing and dishonest breach of the Injunction, it is just that the Plaintiffs should be given leave under Undertaking 8 to enable them to enforce the Injunction in Singapore and for that purpose leave to use the information obtained in these proceedings under Undertaking 7. 

151.  The Plaintiffs have not provided evidence as to the nature of the relief intended to be sought in Singapore, in particular whether it is by nature superior to relief given by the Injunction.  They have not provided information on the applicable law and practice in the Singapore court as suggested in guidelines.  This is unsatisfactory, but this could not prevent the court from granting leave to commence proceedings in a foreign jurisdiction if it is appropriate to do so.  By giving the Plaintiffs leave to enforce the Injunction in Singapore, the relief they could obtain in Singapore will be limited by the Injunction and will not be superior to the relief available under the Injunction.  As the enforcement proceedings will be conducted in Singapore and the Defendant is a Singaporean, information on the applicable law and practice in Singapore may be dispensed with. 

Whether variations should be allowed

152.  As leave to commence proceedings on the same subject matter in Singapore would not be granted, a fortiori, there is no reason to vary the prohibition under the first limb of Undertaking 7 by excluding Singapore.

153.  As for variation of the second limb under Undertaking 7 and Undertaking 8 by excluding Singapore, I think such geographical exclusion is alien and offending to the origin and development of the worldwide Mareva jurisdiction.  It would render this exceptional and extreme relief open to abuse and subject a defendant to unnecessary double or multiple harassment and deprive the court of its control over use of information obtained under the disclosure order by not permitting its use in civil or criminal proceedings other than in the proceedings in which the disclosure order has been made.

154.  As was held by the Court of Appeal in Eastgate Partners Limited and Suthi Tejavibulya & Ors, if it is apparent that there are other possible jurisdictions where the matter could be litigated, a plaintiff should make a careful option where to commence action and not to invoke this exceptional and extreme jurisdiction casually or on temporary basis for tactical reasons.  By asking the court to grant such an extreme remedy, the court is entitled to demand the plaintiff that the litigation will indeed be conducted in Hong Kong unless there are very good grounds for switching to another jurisdiction.  

155.  The Plaintiffs have not offered any reason why they should be given a blanket release from these undertakings in respect of Singapore.  The interests of the Plaintiffs would be adequately protected by granting leave to enforce the Injunction in Singapore.  The application for variation must be refused.

CONCLUSION

156.  The Plaintiffs’ Leave Application is allowed with costs to the Defendant fixed in the sum of HK$1,040.

157.  The Plaintiffs’ Continuation Application is allowed.  The Injunction shall be continued until trial or further order in the reduced amount of US$5,060,000.

158.  The Plaintiffs’ Disclosure Application is allowed.

159.  The Plaintiffs’ Variation Application is refused, but leave is granted to the Plaintiffs to enforce the Injunction in Singapore and for that purpose only to use the information obtained in these proceedings. 

160.  I make a costs order nisi that the Plaintiffs shall have costs of the Continuation Application, Disclosure Application and Variation Application to be taxed, if not agreed.