GERALD METALS SA v. SANSON METAL (INTERNATIONAL) LTD AND OTHERS

HCMP 591/2019

[2019] HKCFI 1103

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 591 OF 2019

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DECISION

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1.  On 17 April 2019, the plaintiff (“P”) on an ex parte basis came before me as the Duty Judge for (1) against the 1^st and 4^th defendants (“D1” and “D4” respectively) a domestic Mareva Injunction, and (2) against the 2^nd, 3^rd and 5^th defendants (“D2”, “D3” and “D5” respectively) a worldwide Mareva Injunction. Having heard Mr Phang, counsel for P, I granted the Injunctions sought (the “Injunctions”), save the discovery in aid, which in my view might better be dealt with during the inter partes stage. This is the return day hearing of the inter partes summons (the “Summons”) for the continuation of the Injunctions.

2.  P’s applications are supported principally by the draft first affirmation of Gianlorenzo Capitelli (“GC 1^st”), which I have read.  In gist, P is a company incorporated in Switzerland.  It engages in the business of trading in various commodities including copper, aluminium, iron ore, steel and precious metals.  It is a company of significant financial standing with total current assets of more than US$1.4 billion and net assets in excess of US$57.4 million as at 31 December 2018.

3.  D1, D2 and D3 (collectively “Buyers”) are corporate entities said to be owned or controlled by D4 and D5.  They have been in business with P for some years.  Among others, the Buyers have been purchasing from P aluminium and alumina.

4.  The Buyers have entered with P into a number of sale and purchase contracts for aluminium ingots or sows.  Those contracts are governed by English Law and contain London Metal Exchange (“LME”) arbitration clauses.  As a result of those contracts, Ds have become liable to P for unpaid invoices in the total amount of US$9,721,559.80.  Out of that total sum of US$9,721,559.80:

 (a) the Buyers are jointly and severally liable for US$6,777,157.66;

 (b) on top of D1’s liability jointly and severally with D2 and D3 for US$6,777,157.66, D1 is solely liable for the balance of US$2,944,402.14 (in other words D1 is liable for the entire sum of US$9,721,559.80).

5.  I record that according to the evidence, there have been other sale and purchase contracts between the Buyers and P.  Out of those other contracts, another batch of invoices in the total amount of US$4,995,276.00 will, according to P’s case, become due on 22 May 2019.  For the purpose of these applications for the Injunctions, those invoices which are not yet due have been ignored.

6.  D4 and D5 have separately signed two Deeds of Guarantee in favour of P (the “Personal Guarantees”).  Both were dated 24 November 2017.  They are governed by Hong Kong law and contain HKIAC arbitration clauses providing for arbitration in Hong Kong.  D4 and D5 thereby guaranteed the due performance by the Buyers of certain “contracts for the sale of aluminium” entered into by them with P.  The liabilities of D1 to D3 under those sale and purchase agreements mentioned above (in the total sum of US$9,721,559.8) are according to the evidence within the scope of the Personal Guarantees.

7.  Separately, D1 and P have entered into other agreements:

 (a) Pursuant to another agreement (also with a LME arbitration clause), D1 sold to P 2,000 metric tonnes of aluminium bus bars for US$4,000,000 to off-set some of the amounts owed by D1 to P.  Those bus bars were supposed to have been safely stored by D1 in a segregated manner for the disposal of P.  However,those bus bars have since gone missing;

 (b) D1 has failed to perform two forward sales contracts (with LME arbitration clauses) it had entered into with P, resulting in loss and unpaid rent in the total amount of US$1,944,062.

8.  P now intends to commence LME arbitration against the Buyers. It separately intends to commence HKIAC arbitration against D4 and D5 for their alleged liabilities under the Personal Guarantees.

9.  The present Originating Summons, issued on 18 April 2019, were taken out by P pursuant to section 45 of the Arbitration Ordinance for interim measures in aid of the intended arbitration proceedings.

10.  On the strength of the contracts and agreements summarized above, I am satisfied that P has established a good arguable case that:

 (a) D1 is liable to P for the total sum of US$15,665,621.80 (US$9,721,559.80 + US$4,000,000 + US$1,944,062);

 (b) D2 and D3 are liable to P for the total sum of US$6,777,157.66;and

 (c) D4 and D5 are liable to P under the Personal Guarantee for the total sum of US$9,721,559.80.

The above sums are the respective ceilings specified in the Injunctions against Ds.

11.  On the evidence, I am satisfied that there have been acts on the part of Ds which can be regarded as acts of actual dissipation of assets.  D4 has entered into an agreement (dated 15 February 2019, due to be completed on 31 May 2019) to sell a residential property jointly owned by him and a Lai Kit for HK$28,880,000.  D5 has recently (on 4 April 2019) caused a company (Guangdong Jinlan Holding Company Limited) wholly owned by him and his son to dispose of its entire shareholding in another company (called Chongqing Jinlan Aluminium Products Co., Ltd).  The smelter (the “Smelter”) which D3 owns and has been operating in Zunyi has or in the process of being closed down, with its machines, inventories and other items of value being dismantled or moved to unknown places.  Contrary to D4’s representation that the Buyers will continue to do business with P through the downstream processing plant also located at the Smelter, even thedownstream process plant appears to have ceased operation with its machines, inventories and other items of value being dismantled and moved away.

12.  There is further evidence before me that D4 had during a meeting on 3 April 2019 with representatives of P admitted that he and D5 had been hiding losses and manipulating the financial records and accounts of D1 and D3.

13.  I am satisfied that D2, D3 and D5 have insufficient assets within the jurisdiction to satisfy P’s claim, and that they have assets without the jurisdiction.

14.  On the evidence, the balance of convenience tilts clearly in favour of the continuation of the Injunctions.

15.  I have read the affirmation of service of Wong Kin Wai.  I am satisfied that the Summons for the present hearing and all other necessary documents have been validly served upon all the Ds.  Despite the service, none of them has entered appearance.  No evidence has been placed before me to contradict the matters which I have set out above.

16.  In all the circumstances, I continue the Injunctions and grant the application for discovery in aid.  In short, I grant the Order in terms of the draft order as amended[1].