SUTRISNO WINATA v. WIDARTO AND OTHERS

1986 No. 6700

IN THE HIGH COURT OF JUSTICE

HONG KONG

__________

___________

JUDGMENT

___________

1. This is an unfortunate family dispute in which the scenario might almost have been a work of fiction, because the issue to be resolved at the trial is going to involve questions like whether the mother is behaving sensibly to protect the position of her son or somewhat hysterically; and whether the 1st defendant occupies the role of the good or the wicked uncle. So it is not entirely out of place, if I say once upon a time three brothers ran the Sungai Budi group in Indonesia. A substantial and highly successful group it appears to have been. The brothers were Ngadiman, Widarto and Handoko. The brother Ngadiman died sadly in an aircrash in March 1982. The plaintiff is his son, and so is the 2nd defendant. Widarto is the lst defendant. Handoko is the man whose desire to leave the group in the earlier part of this year gave rise to the background to this dispute. The group had substantial interests in Hong Kong, and the underlying issues is whether those interests were acquired out of profit or out of capital.

2. Hardoko's desire to leave the group meant that those interests had to be severed. There had to be a severance between him and the three other persons who were remaining in the group, that is to say the two sons of Nagdiman and Widarto, the plaintiff, the 1st and 2nd defendants. By this agreement, terms of severance were agreed, and the proportions in which the proceeds of sale of two properties owned by two Hong Kong Companies, in which the four were the principal shareholders were defined and set out. That agreement describes those shares as being beneficiary owned by the parties to it.

3. The result of that agreement and the two sales was that total proceeds computed in accordance with that agreement of HK$205m. were realised, being the shares of the plaintiff, the 1st defendant and the 2nd defendant. The plaintiff's proportion of that was about $88 m. The plaintiff founds upon the agreement of 5th July and says: "I am beneficially entitled to that sum; I want that money in Hong Kong. "

4. The issue which is raised by the defendant is that this money was not profit of the group distributed to Hong Kong but was capital of the group. Part of that was borrowed in Indonesia and there are underlying liabilities like guarantees in Indonesia. Those have to be dealt with first before the true profit can be identified and distributed amongst the three. That is an issue which will have to be resolved at this trial. It will no doubt, I am minded to think, be quite simply resolved by documentation which must exist in Indonesia. But in the time available, neither party has produced any documentation of that sort on these applications.

5. The agreement having been made on 5th July, the next thing that happened is that the three continuing participants in the group opened a bank account at the Bank of China. This was a bank account numbered 4331/4. There has been a good deal of argument on the documents as to the reasons for the opening of that account. It seems to me apparent on the face of the documents, that the defendants are right about that, not the plaintiff. The account that was opened was the account under the number I have given. That became the parent account. Out of that account there were spawned a whole series of subsidiary accounts to which this original bank mandate was applied. One of those subsidiary accounts was 812/8 into which, in early August, the $205 m. was paid. But the parent account 4331/4 was from the outset used for group purposes, for the receipt and investment of group money. Throughout the accounts were all joint accounts. There was never any attempt at severance. Indeed the HK$205 m. itself included a proportion of the admittedly group money because included in that sum were sums said to constitute the recipients' proportion of group loans as opposed to shareholders' loan. So there was a mixture of monies in these accounts from the outset and which subsists today.

6. The monies in Hong Kong were managed by the 3rd and 4th defendants. The 3rd defendant is the husband of the plaintiff's aunt. He married one of the deceased's sisters. He came here earlier this year to try and help out, I think, on the unscrambling of the group arising from Handoko's decision to leave. The 4th defendant is a local Chinese, resident.

7. They were given signing rights under the original bank mandate for account 4331 and they have been managing the funds in Hong Kong. But in a short space of time it was realised by them that those signing rights were inadequate, and in succession, the three parties, plaintiff, 1st defendant and 2nd defendant signed two powers of attorney authorising the 3rd and 4th defendants to make investments. There is no question that the plaintiff signed the powers. His complaint now is that he did so, without realising what he was doing, and without any explanation of the documents at all. Also arising out of the power of attorney given to the 3rd and 4th defendants, there was further documentation in the making a deposit of US$2.5 m. with the Bank of America out of the monies in the Bank of China account in order to secure banking facilities to one of the companies in the group. That documentation was likewise signed both by the plaintiff and by his mother. The plaintiff says that he did not understand, and has no recollection of any of these things at all.

8. That was the position through to about 11th November when the story on the documents opens, with the mother's visit to the Hong Kong office of the group where the 3rd and 4th defendants work in Worldwide House. She is said to have complained that the 1st defendant was threatening in substance to deprive the plaintiff of his birthright by putting his share of the fund out of the plaintiff's reach. She was making these complaints to the 3rd and 4th defendants, who likewise assert that she was threatening herself to freeze the accounts.

9. A few days later, on 13th or 14th November, the 1st defendant passed through Hong Kong on his way back to Indonesia and a meeting took place between him, the plaintiff and his mother. This was an important meeting because it set the stage for every thing that followed. As I have said up till that time, there had been no question of severance of any of these funds and on the evidence, there had been no request for severance. This is the first occasion on which it can be said that the plaintiff made any sort of demand for payment out of what he asserts to be his own.

10. The meeting on the 3rd defendant's account, lasted an hour. The evidence in relation to it is still exceedingly unsatisfactory. Initially, the plaintiff said nothing at all about this meeting in his evidence. It was first raised by the 3rd defendant who gave an account at first hand and second hand. The first hand account was that the meeting took place and lasted for an hour; and that he heard some of the remarks which the 1st defendant made as he, the plaintiff and his mother left the meeting, these were to the effect: "you understand these things, why can't you explain them to your mother?" The second hand account is that given then, so the 3rd defendant tells me, by the 1st defendant to him, of the explanation and what he said to the plaintiff and his mother at the meeting which was to the effect that I have already given that these were monies which had to be returned to Indonesia first to discharge existing liabilities there and could not be distributed as beneficial funds now in Hong Kong.

11. In the light of that evidence from the 3rd defendant, affirmations in reply were made by both the mother and the plaintiff. Mother said, yes, there was a meeting at which complaint had been made to the 1st defendant and she denies making any threat. She did not give any account at all of what the 1st defendant said at that meeting; whether he gave an explanation, whether he refused to distribute the monies or anything at all.

12. The plaintiff likewise dealt with the matter in a highly ambiguous way in his affirmation. He says that the meeting took place to ask for an account for the delay and the sentence then go straight on "the explanation given for the failure to make such payment is quite false". I am bound to say when I first read that I thought he was acknowledging that this had been the 1st defendant's explanation and that he was asserting that this explanation was quite false. Indeed the falsity of the explanation was gone into at some length. As a result of comment, I think, from me and from the defendants in the course of argument, I was first told that that reading of the words was wrong, that I should read it "but no account was in fact given, and the assertion now made by the 3rd defendant is denied". And then at a very late stage indeed, when the plaintiff had returned to Indonesia, I admitted an affidavit from the plaintiff's solicitor, sworn to on instructions, to the effect that, no explanation was offered by the 1st defendant and the 1st defendant did not dispute that any of the monies were owned beneficially at all.

13. An affirmation which reaches the Court in those sort of circumstances, on instruction from a gentleman who was apparently in Court on the first two days, is not one to which I am disposed to give very much in the way of weight. But in any event, I still do not know what the plaintiff and his mother assert, that the 1st defendant did say. There has been a series of denials, and assertions of what he did not say. I still do not know what they say he said on this occasion. I only know what he said he told the 3rd defendant, that he said. On a crucial piece of evidence on a dispute of this nature, I find that profoundly unsatisfactory.

14. Going on with the story, on 15th November, the plaintiff makes his first visit to the Bank of China, and there learns that in the account which originally contained the whole proceeds of these sales, only $35 m. still stands. There are a number of other accounts which stand in the names of the three parties, largely in Deutsche Marks and Japanese Yen containing something like $160 m. That does not seem to have surprised him at all which surprises me in the light of his present complaint. Because he did not go back to the office and say to the 3rd and 4th defendants: "what on earth is going on; what are you doing with these monies. "

15. The next stage in the story starts on the 15th and was concluded on the 16th. That on the evidence was the masterminded by and originated with the 3rd and 4th defendants. They took seriously the plaintiff's mother's threats to freeze these accounts. Nothing worries fund managers more than finding themselves with accounts frozen in their hands when they are in a market which is as volatile as foreign currency. They were in Deutsche Marks and Yen in a very big way. They were concerned as to the impact of that upon the investment. Having consulted the bank and the 1st and 2nd defendants, they then got another power of attorney from the 1st and 2nd defendants and arranged for the Deutsche Marks and the Yen accounts to be switched into the names of the 1st and 2nd defendants alone. That, they say was concluded on 16th November.

16. On 22nd November, which was a Saturday, the plaintiff returned to the Bank of China. Again there was no intervening enquiry from the group office, as far as I can see. He there presents the bank with documents, which the defendants assert (I think with considerable force) were intended to freeze all these accounts. The documents are instructions withdrawing the original mandate in respect of the parent account which was opened, and included a deed of revocation revoking the power of attorney. This is slightly surprising because the plaintiff has said he knew nothing, until that day, of this power of attorney, never having been able to read it or understand it. He first got a copy of the power of attorney that Saturday morning from the Bank.

17. Those steps, as far as I can see, would have meant that nothing could have been done with any of those funds in Hong Kong by any of the present defendants without the concurrence of the plaintiff. That was the freezing exercise the prospect of which concerned the 3rd and 4th defendants. Having discovered the switch from the bank on the Saturday, and apparently that evening, mother rings the 4th defendant and asks what is going on. Some explanation is given to her. He says he had great difficulty in getting through, but he tried to explain the whole thing. The ore thing which apparently did get through was that the monies were still in the Bank of China, and that they had been moved to other accounts by him on the instructions of the lst and 2nd defendants. But all the funds were still there in the Bank.

18. On Monday, 24th November, the plaintiff goes back to Bank of China again and gets confirmation that the funds are now in other accounts. But the bank, when asked to confirm that the money was still with them, plainly could not do so because they were accounts in which the inquirer had no interest. The only persons who could be asked for that information with any hope of getting a sensible answer were the 3rd and the 4th defendants. But unfortunately, as it seems to me, the party did not walk from the Bank of China to Worldwide House, where the 3rd and 4th defendants had their office, to find out what was going on. There was never any demand on the 1st and 2nd defendants. There was no letter before action.

19. What happened later that day was that application was made in great panic as a matter of extreme urgency to Macdougall J. without any affidavit upon the basis that these funds were at great risk. It is easy to say now, because it is perfectly obvious, that there was no risk at all. It is difficult to see any reasonable grounds for thinking that there was risk on that day. Because both the plaintiff and his mother knew from the conversation on the Saturday night that the funds were still with the. Bank of China, and the fact that the bank could not confirm that did not detract from that assurance in any way at all.

20. Application was duly made to Macdougall, J. and he has been kind enough to provide us with a typed up and corrected copy of the notes that he then took. He was told about the visit on 22nd November to the Bank, but not as far as I can see, of the first visit on 15th November. He was told of the discovery on the Saturday that the funds had been moved out of the account by the 3rd and 4th defendants. The note then goes on: "The bank indicated the monies were being changed into other currencies. Reason client's enquiry to the bank was that one of the other parties had (threatened) to transfer funds out of Hong Kong. On Saturday evening the 4th defendant told mother of the intended plaintiff, monies had been withdrawn and were being used to purchase currencies with funds still with the Bank of China. "

21. The reference to threats to transfer funds out of Hong Kong was apparently the reference to the threat alleged to have been made much earlier by the 1st defendant to put the funds "out of the plaintiff's reach." The references there to "being changed into currencies", were I think calculated to induce the judge to think that this was a recent event and was associated with the threatened removal from the jurisdiction; whereas in fact this has been a state of affairs which had existed for some weeks if not months.

22. As a result the judge granted a Mareva Injunction. He made wide orders, ex parte, for discovery, and made a Prohibition Order against the 3rd defendant. The order was made upon an undertaking by the plaintiff to file evidence in support of what counsel had told the judge. That affirmation was then filed and goes beyond, as far as I can see, what the judge recorded as having been told, because it deals with the first visit to the Bank on 15th November.

23. The first question which arises on this application is whether proper disclosure was made by the plaintiff to the judge on that application. The law here is not in issue. Various tests have been suggested which, I think, are all substantially different ways of saying the same thing. The first is that which is cited by Kerr, L.J. in Booker McConnell plc V. Plascow and others⁽¹⁾, citing from Sir James Wigram, V.C. in Castelli v. Cook⁽²⁾ where he says that the applicant ex parte must "state the whole case fully and fairly to the court". Then there is Lord Dennings' succinct statement in the Third Chandris Shipping Corporation case⁽³⁾: “the plaintiff should make full and frank disclosure of all matters in his knowledge which are material for the judge to know. " The other convenient statement of principle is by Browne Wilkinson, J. (as he then was) in Thermax v. Schott⁽⁴⁾: "The Court must be fully informed of all the facts which are relevant to the weighing operation which the court has to make in deciding whether or not to grant the order. " Likewise it is common ground that if the court concludes that there has not been full and frank disclosure, it has a discretion. It can set aside the order without inquiry on the merits or it can go on and consider the merits. One of the problems the plaintiff created for himself, I think, here is going blindly in before Macdougall, J. without an affirmation upon the basis that there was vast urgency when in reality, there was none at all.

24. There were three points which particularly are relied upon by the defendants in support of their application that there has not been proper disclosure. The first, they say, is that there was no proper disclosure to the judge of the real family relationship here. It is true that he had put before him the agreement of 5th July and he can see from the names on that and from the names on the pleadings themselves that there appears to be two members of the Winata family who are involved and likewise there was a lot of money. But that, the defendant asserts, was only a fraction of the story. It was very material for the judge to know, the real extent of the family relationship here; namely that the plaintiff was suing one of his own brothers, his uncle and an uncle by marriage. These were the people against whom he was suggesting dishonesty which justify the making of the urgent application that he were making. That was a matter which the judge might well have regarded as relevant to know. Likewise the fact that they were all closely associated together in this substantial wealthy group in Indonesia, and the monies in Hong Kong were in fact an extension of those Indonesian investments. I think, there is a good deal of force in those criticisms.

25. Secondly, it said that there was no reference to the powers of attorney in this case. Although the plaintiff may not have realised that he had signed both these powers of attorney at the time he did so, the full position must have become apparent to him on the preceding Saturday when he got a copy of the power of attorney from the bank. A curious thing seems to have happened. The endorsement of the writ refers to the power of attorney. The judge's notes refer to a power of attorney. But both documents plainly, when they use that expression, are referring to the original bank mandate to the signing rights given to the 3rd and 4th defendants on that bank mandate. This does not seem to me to have constituted a power of attorney in any sense at all. So that the judge was being told of a power of attorney, and reference was being made to a document described as a power of attorney which was not one; and no reference was made to the real power of attorney or two powers of attorney which existed. Those documents it is suggested, were relevant to a number of things. First of all to the 3rd and 4th defendants' ability to make the transfer of which complaint was made; and likewise to the length of time that these powers had been exercised by the 3rd and 4th defendants in relation to the management of these funds and their investment in foreign currencies. It is said and I think, with considerable force, that if that document had been put before the judge (if necessary with an explanation I have only just got it, I cannot think how came to sign this. ") He would have seen the date on the document, the powers of the document, and might then have realised that the tense in which he records the purchase of currencies was somewhat misleading, and that this was a state of affairs had been going on for a long time.

26. Thirdly, complaint is made of a matter which I have already referred to at some length. That is the evidence relating to the meeting with the lst defendant on 13th - 14th November and the fact that nothing whatever was said in the original affirmation about that meeting at all. Indeed the affirmation talks about the threats made at some uncertain date by the 1st defendant; the expectation that the money would be transferred into his name personally; and goes straight on to deal with the visit to the bank. There was nothing about any visits to the office in Worldwide House and not a word about the meeting with the lst defendant.

27. For the reasons that I have already given, I cannot regard that as remotely satisfactory. This was the only occasion when anything like a demand was made; the only occasion on which entitlement to this was discussed. I do not think that it was right to make no reference to it at all, anymore than is satisfactory to leave the references now in the present very unsatisfactory situation. There is all the difference in the world, between an uncle who is giving an explanation and who is not; and even a greater difference between an uncle who in refusing and one who is saying "you cannot do this now, you have another duty to the underlying companies in Indonesia" which is what, at least, the 3rd defendant is saying that his understanding is it is what the 3rd defendant said.

28. All those facts, in my judgment, should have been before the judge. I think that the plaintiff brought this on himself by not making the enquiries which it now seems to me, he could so readily have made, and would have saved a great deal of trouble. He made a panic stations application to Macdougall, J. in circumstances where no justification for panic existed and I cannot see any reasonable grounds of justification for panic. If you rush in in that state of affairs, then you are giving hostages to fortune, in slipping up and not dealing with matters which you might well have dealt, with if you have given yourself more time to think. That seems to me here to have been the plaintiff's fundamental mistake.

29. Having taken that view, I do not think it is necessarily right here simply to say that I am going to discharge the order without more. I think it is right to consider the matter further and see what the strength or weakness of the application really is. Therefore I go on to consider the second question which is whether or not intervention by the court is now necessary.

30. Looking at the matter first of all as a pure Mareva Application, there are now two questions to be asked and I take them both from the Ninemia Maritime Corp. v. Trave⁽⁵⁾. The first question is "good arguable case"; and the second question, "would the refusal of a Mareva involve a real risk that a judgment or award in favour of the plaintiff would remain unsatisfied:" per Kerr, L. J. at p.419. I assume for the purposes of this, that a good arguable case is shown. I therefore concentrate entirely upon real risk.

31. The first real risk, and I believe looking at his notes that it was the only risk in the mind of the judge, was removal from the jurisdiction. That was not in fact even alluded to in the plaintiff's first affirmation. It is not surprising really because it simply does not exist here at all and never has. The funds have been intact here all along and there has been no attempt, in fact, even to remit them to Indonesia from whence they came; let alone the sort of remittance to Indonesia which would attract relief in the form of a Mareva type injunction.

32. The only basis on which this Mareva can be put, is that there has been dissipation or the threat of dissipation within the jurisdiction. It said that the conduct of the defendants in taking these monies out of the three-named accounts and putting them in a two-named accounts equals dissipation. Dissipation is a convenient term to use in this context, to deal with the expenditure or use or assets, in ways other than for the bona fide payment of debts, the effect of which might make the defendant judgment proof. It may cover all sorts of pieces of human behaviour which can have that result, and usually are intended to have that result, although intent is not strictly necessary. The assets may be squandered; they may be secreted; they may be spent; they may be handed to someone else by way of threatened fraudulent preference. There are all sorts of aspects of this behaviour. But putting the widest possible expression upon that term, for the purposes of this case, there is no way in which I can describe what happened here as dissipation. The funds are there. They have simply been put in a different form with the intent, not of depriving anybody of anything, but to protect them from the very thing that happened four days after they were so transferred.

33. The matter does not stop there. I have now got S.K.K.L.16 in front of me which shows details of assets worth in round figures HK$90 m. in varying accounts and in varying forms, all restored to the three names of these parties, the plaintiff, the 1st defendant and the 2nd defendant. Those assets are all unencumbered with one exception. That is the deposit with the Bank of America. This was encumbered by the parties at the time it was made, and to which both the plaintiff and his mother were party. In addition to that, there are other very large sums in funds in the names only of the two defendants which remain here in Hong Kong. Therefore I asked myself simply this question: "Is there a real risk on the present facts of an unsatisfied judgment?" The answer is there is no conceivable risk at all.

34. I then ask myself the second question which arises on the proprietary claim which was not originally advanced by the plaintiff at all, but which was developed at some length by Mr Mills-Owens in his reply. At this juncture I in fact, despite the defendant's protestations, granted the plaintiff leave to amend the writ which was necessary to maintain this part of the claim at all.

35. I accept that there is a difference between these two forms of claim. In particular, I accept the description of the difference given by Lloyd, J. in the case of POW (underwriting Agencies) Ltd. v. Dixon and another⁽⁶⁾ where at p.164 he says this:-

"The distinction between the ordinary Mareva plaintiff (to use Ackner L.J.'s phrase) and the case where the plaintiff is laying claim to a trust fund on the so-called wider ground, is thus clear. In the latter case the whole object is to secure the trust fund itself so that it should be available if the plaintiff should prove his claim. In the former case by contrast the plaintiff is not entitled to any security. The purpose of the jurisdiction, as is now clearly established, is not to provide the plaintiffs with any form of pretrial attachment it is simply to prevent the injustice of a defendant removing or dissipating his assets so as to cheat the plaintiff of the fruits of his claim. "

Again, I accept that the beneficiary under a trust may be able to trace those trust funds and that this is a valuable right if the fund has been distributed, or if the trustees and others amenable to a direct claim are of a doubtful financial standing. The peculiarity of this case is that the issue is not so much whether there is a trust fund but who is the beneficiary. Plaintiff says that he is the only beneficiary; the defendants assert it is the companies who are the underlying beneficiaries.

36. Likewise for this purpose, I shall assume that there is a serious question to be tried and concentrate upon the question of discretion which really comes down to this : is the funds in danger; are steps necessary "to secure the trust fund itself?" The first point arising there is that it became plain in the argument that no special tracing order or order on a proprietary basis could be made in this case. There is no possible way on the material before the court of identifying what has happened to the share of the original $205 m. claimed by the plaintiff, because the funds have all been mixed up ever since they were paid into these various accounts. The only way now would be to make an order by way of protection, which would take the ordinary Mareva-type terms covering funds in the names of the parties up to a certain maximum. The order could in no way, be more specific in this case.

37. The second question, perhaps a more fundamental one, is: is the fund in danger? As I have already pointed out, there is a fund of $90 m. which is intact subject only to the charge on the Bank of America deposit to which the plaintiff was party. In addition, there is a much larger fund likewise intact in the Bank of China. Has there been any dissipation of the trust fund in the trust sense? Again this begs the whole question which the court will have to try, because the motivation for the alteration had nothing to do with depriving the plaintiff of anything but to protect the fund against conduct which, if the defendants are right, could have constituted a breach of trust or breach of contract on the plaintiffs part. So that where the Court is faced with very substantial assets being preserved outside the fund in that way, and an apparent fund of $90 m, it seems to me that there is no conceivable justification for the Court doing anything more. In those circumstances I can see no reason for maintaining the order now, and no reason for not discharging the order in the light of the non-disclosure which in my judgment took place when it was obtained.

(1) [1985] R. P.C.  425 at 436

(2) [1849] 7 Have's Rep 89, 94

(3) [1979] 1 Q.B. 645 at 668

(4) [1981] F.S.R. 289, 298

(5) [1984] 1 All E. R. 398

(6) [1983] 2 All E.R. at 158