D.P.I. (HK) Ltd. and Another v. Wong Ze Kei Maimei and Others

CACV 13/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 13 OF 1999

(ON APPEAL FROM HCA 11191/97)

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J U D G M E N T

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Leave to amend Notice of Appeal

Mortimer, V-P :

1. Mr John Bleach SC, who appears for the plaintiffs on this appeal, seeks leave to amend his notice of appeal. We deal first with that amendment insofar as it concerns the party known as the applicant who were solicitors in criminal proceedings appearing for the 1st defendant against whom a so-called Mareva injunction had been obtained.

2. The appeal concerns a variation of the Mareva injunction granted by Nguyen J on 6 January 1999 in which he allowed the release of money including money to the applicant, a firm of solicitors.

3. Mr Bleach seeks to amend his notice of appeal because the original notice is admittedly flawed and does not comply with the rules of court. There is nowhere in the notice a statement of the order which is sought from this Court. The grounds of the appeal are, to say the least of it, brief and he concedes are defective. This, however, is clear: the plaintiffs are seeking to set aside the order of Nguyen J varying the original Mareva injunction.

4. Insofar as the notice concerns the applicant, no relief was sought which affected them. The applicant was not named as a party in the heading. However, the notice of appeal was served on the applicant and the applicant knew that it was served upon them. They had been concerned in the proceedings below. However, it is said by Mr Tang who appears for them that the applicant was misled by the correspondence into thinking that there was to be no application to set aside the relevant part of the order. In particular, Mr Ronald Tang refers to a letter written by the plaintiffs' solicitors on 23 January. That letter sets out the proceedings and contains this sentence:

"We enclose herewith copy letter from the High Court dated 20th January 1999 for your information. As the appeal also concerns you, though not formally being a party to these proceedings, please take note of the date on which parties will attend the Registry to fix a date for the Appeal."

5. The applicants' position was later set out in a letter of 3 May - only three days ago. This paragraph appears:

"Our client was not named as a party in your client's Notice of Appeal filed on 15th January 1999. In other court documents, your client also did not indicate that our client was a party. Your client's Notice of appeal also did not indicate what order your client would like to seek from the Court of Appeal against our client."

6. Mr Tang tells the court that as a result of the letter of 23 January, the applicant considered that no relief was being sought concerning them, therefore, for the first time they took steps to recover the money from the bank accounts which had been released and also to tax their bill of costs.

7. The question arises therefore whether the plaintiffs are estopped from amending the notice of appeal and pursuing the orders they seek against the applicant because they have misled the applicant by what they have done. Mr Tang concedes readily that there was no real prejudice in what was done save for those two matters. I have just mentioned.

8. In our view, the applicant was not prejudiced by what was done. However, they were misled. The notice of appeal was obviously defective. That remained the situation until shortly before this appeal.

9. In our discretion, we refuse Mr Bleach's application to pursue his amended notice of appeal so far as it concerns the applicant. The consequence no doubt will be that Mr Tang and his client will not seek to take any further part in the appeal but that will be resolved in a moment.

10. So far as the application to amend the notice of appeal and serving it out of time against the other parties is concerned, they could not have been misled nor could they have been prejudiced by what has happened. We allow the application to amend the relief sought against them. That will be our order.

11. The result will be that the order prayed under paragraph 2 in the amended notice of appeal will not be allowed.

Rogers, J.A. :

12. I appreciate that the judgment which has been given is the decision to which the Court has come but I would like, for my own part, to say a few words because I regret to say that I would have exercised my own discretion in a different way.

13. Whilst I agree with what has been said in respect of the original Notice of Appeal and the correspondence and Mr. Bleach has manfully admitted that the original Notice of Appeal was indefensible, I would have looked upon this as an application to appeal out of time. I would have granted leave to appeal out of time.

14. The reasons for the delay in the original appeal, so far as it was, was clearly the fault of the Appellants' legal advisers. But the consequences of that fault of the legal advisers should, in my view, not be visited upon the Appellants unless there has been irremediable prejudice to the party involved, namely in this case the party who is termed the Applicant.

15. Mr. Tang on behalf of the Applicant refers to the payment out to his solicitor clients of the money released after the order of the Court below. That, on its own, does not seem to me to be reason for denying the order for leave to appeal out of time.

16. Mr. Tang on behalf of his clients refused to give an undertaking to return the money should the Plaintiffs claim against the 1st and 3rd Defendants succeed. Insofar as the Plaintiffs' claim is a proprietorial claim, he may be right and Mr. Tang's clients might have defences to any claim by the Plaintiffs for reimbursement of money that has been paid to them. That is because his clients are solicitors and if the money has been dissipated in legal fees before the proprietorial claim is proved, they may in law not be required to reimburse the money. Insofar as the Plaintiffs simply have a monetary claim, again, it seems on the facts of this case that the money may be irrecoverable from the solicitors.

17. It seems to me that as a result of the order in the Court below, there may well at the end of the day be prejudice to the Plaintiffs. I, for my part, would have given the Plaintiffs an opportunity to try and redress that now because afterwards it may be too late. I have to say as a practical matter, even in this appeal, it might not have been possible to redress it but I would still give the Plaintiffs an opportunity to do so.

Godfrey, J.A. :

18. I am content to associate myself with the exercise of discretion indicated by Mortimer, V-P. I would only add that, as it seems to me, this application to bring in as a respondent to this appeal, at this very late stage, the applicant below after giving the applicant reason to believe that it would not be the subject of an appeal against the order below so far as the applicant was concerned, was made so late that the exercise of discretion could sensibly be exercised only in favour of refusing the application (or adjourning it, in my opinion, an unsatisfactory alternative).

Appeal proper

Rogers, J.A. :

19. This is an appeal from a decision of Nguyen, J. given on 6th January this year. The Action concerns a claim by the Plaintiffs who were the former employers of the 1st Defendant. The 1st Defendant is alleged to have misappropriated very substantial funds of the Plaintiffs totalling some $24m.

20. When the Action first started in November 1997, a Mareva injunction was applied for and granted on 6th November. Slightly earlier, a Restraint Order had been made under the provisions of the Organised and Serious Crimes Ordinance. To that, I shall refer later.

21. The order of Findlay, J. had been based upon the proprietorial claim of the plaintiffs to the money and it encompassed, in effect, all the assets of the 1st Defendant, at any rate, all the assets which have been identified even up until now.

22. On 6th January of this year, the 1st Defendant and 2nd Defendant, together with a firm of solicitors, who have been referred to as the Applicants, applied for variation of the Mareva injunction in order to pay solicitors fees. The application by the Defendants was for variation so that provision could be made for the legal expenses in the defence of the corresponding criminal case. The solicitors firm made application to provide for payment of the legal costs incurred by them during the period they were acting as solicitors for the 1st and 2nd Defendants. Those legal costs apparently had been taxed and allowed at the sum of $338,158. The Judge allowed the application.

23. There was insufficient money in the bank accounts in the name of the 1st Defendant to allow for the payment of the various sums of money. In order to cater for that, one of the properties over which the Plaintiffs made a proprietorial claim would have had to have been sold. However, this appeal was launched straightaway after the variation order granted by Nguyen, J. As a result, no sale has taken place.

24. It is important at the outset to bear this factor in mind that there has been no denial on affidavit by the Defendants of the Plaintiffs' proprietorial claim. There has been no substantiation of any allegation that the Plaintiffs were not entitled to the amounts claimed. There has been a defence filed and I would content myself at this stage in saying that it is difficult to glean from that document precisely what the defence is to the proprietorial claim. Indeed, I asked counsel in the course of hearing and he was unable to assist very much in that regard.

25. In his decision, the Judge said that the Mareva injunction which had been granted should be treated on the same basis as a Restraint Order under the Organised and Serious Crimes Ordinance. He said :-

"I would have been sympathetic to that submission (referring to the fact that the Plaintiffs' claim was a proprietorial claim) had it not been for the fact that in this particular case the matter was complicated by the fact that before the Defendants were arrested, the Department of Justice applied for, and subsequently obtained, a Restraint Order, restraining or freezing all the assets of the 1st and 2nd Defendants under the Organised and Serious Crimes Ordinance. Mr Tang for the Applicant, has relied upon O.117, r.5(1) which provides for reasonable living and legal expenses of a defendant under an Organised and Serious Crimes Ordinance Restraint Order. In addition, when Counsel then appearing for the Plaintiffs before Findlay J (who I would hasten to add was not Counsel in this case or in the Court below), in applying for the Mareva injunction, submitted to Findlay J that the Mareva order should mirror but not duplicate the order made in the Restraining Order for living expenses of the Defendants, and insofar as the provision for legal fees was concerned, Counsel said :

'Provision for legal fees has also been made in the [Restraint] Order. It is accepted these are intended to cover the criminal proceedings and not these proceedings [the civil proceedings]. Consequently, further provision should be made.'

It is not clear whether when Findlay J made the Mareva injunction he had in mind provision for legal expenses to defend in the criminal case, but in view of what Counsel had said to him, in my view, Findlay J must have had in mind provision for legal expenses to defend in the criminal case. In any case, it is my view that these Defendants should not be permitted to appear as Defendants in a criminal case without legal representation." (Part in italics added)

26. In my view, this passage demonstrates a wrong approach by the Judge to the matter. First of all, a concession by Counsel cannot bind the Court or the parties as to the basis upon which a Mareva injunction is granted. The parties cannot be bound to deal with a Mareva injunction on the same basis as an order made in some other proceedings simply because of a stray phrase used by Counsel in the course of submissions.

27. In any event, the passage which I have quoted does not give rise to any estoppel or other consideration. What Counsel was addressing was whether the $100,000 should be allowed for fees in this litigation, not the correctness or otherwise of allowing the legal fees for representation in the criminal proceedings. The $100,000 would have barely covered the advice and preparation in relation to the injunction proceedings and, I hesitate to say, not even representation at a fully fought out contest in that regard.

28. The question as to the desirability of the Defendants appearing unrepresented cannot make it right to deprive a party of a proprietorial right if he has one. In any event, it seems to me that the Judge failed to take into consideration that there was a manifest shortfall of something over $10m between the amounts accountants' investigations had shown had been taken and the amounts that the Defendants had admitted to be in their possession.

29. In my view, the Judge should not have granted the order, first and foremost, because of the Plaintiffs' proprietorial claim, and should not have permitted assets to be dissipated in legal fees on behalf of the Defendants when there are, at the moment, uncontested allegations by the Plaintiffs that they have a proprietorial claim over these sums.

30. I would allow this appeal accordingly.

Godfrey, J.A. :

31. I agree, for the reasons given by Rogers, J.A., that the judge's approach here was wrong. Although we are differing from the judge, there is nothing I can usefully add.

Mortimer, V-P :

32. I also agree that the appeal must be allowed.