XCHRX JAU-HWA STEWART v. E. EXCEL LTD. AND OTHERS

HCA2493/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2493 OF 2001

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J U D G M E N T

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THE PRESENT PROCEEDINGS

1. On 3 June 2001 the Hon. Waung J granted, against all defendants in these proceedings, a Worldwide Mareva injunction upon the plaintiff's ex parte application. Paragraph (G) of that Order further granted leave to the plaintiff to serve the writ and the injunction order out of the jurisdiction upon the 2nd to 5th defendants, the 1st defendant herein being a Hong Kong company.

2. The events of that distant afternoon, some 11 weeks ago, now have produced a slew of consequential applications. For present purposes, however, the major application, and that which has taken up the bulk of the argument, is the summons taken out by the defendants dated 7 July 2001, which seeks tripartite relief : first, the discharge of the Mareva injunction, second, the stay of this action in favour of the Fourth Judicial District Court in Utah County, Utah, USA, and third, the setting aside of the jurisdiction assumed by this court over the 2nd to 5th defendants. Accordingly, this judgment focuses primarily upon these issues.

3. This is a case which is larded with detail. It has attracted a very considerable amount of paper, there being well over 30 affidavits and some 15 box files placed before the court at this inter partes stage, together with skeleton arguments from each camp each in excess of 100 pages. I am reminded of Lord Templeman's celebrated observation that disputed interlocutory applications should be measured in hours, not days. And although it has not proved possible to attain that benchmark, the considerable efforts of both teams of counsel, to whom I am grateful, have rendered the more easily accessible the broad points of distinction in the respective cases.

4. There can, however, be no proper grasp of the arguments absent introductory reference to the convoluted factual backdrop which has spawned the present action.

THE FACTUAL BACKGROUND

5. It is fair to say, at bottom, that this case is a family dispute, and is primarily a dispute between two sisters. The plaintiff, who for ease of reference I shall call 'Jau Hwa', is the sister of the 5th defendant, whom I shall refer to as 'Dr Chen'. All other players in this drama are, it seems to me, essentially subsidiary.

6. If this be a family dispute, however, it is also a dispute which arises in the context of what hitherto has been an highly successful family commercial enterprise which, on the evidence, in the past has generated very significant amounts of money. The operation of this enterprise now, sadly, has generated a wealth of accusation and counter-accusation.

7. Dr Chen, the 5th defendant, is the founder of E. Excel International Inc. ("Excel US"), a Utah corporation engaged in the business of manufacturing and distributing nutritional and health products. Until her dismissal by the plaintiff in late 2000, she was its CEO/President. The 2nd defendant is Dr Chen's husband and was, prior to his own dismissal at the same time as that of his wife, a director of Excel US.

8. Also a director and Vice-President of Excel US, at least until her own subsequent removal at the behest of the Utah court, was the plaintiff whom, as I have noted, is the sister of Dr Chen - in fact, she is the elder by some five years.

9. The 3rd and 4th defendants are sisters of the 2nd defendant, and are resident in the PRC. They were, and remain, the sole directors and shareholders of the 1st defendant, E. Excel Limited ("Excel HK"), which entity - at least until the impact of the Mareva injunction granted by Waung J - is said to have functioned as the Asian marketing and sourcing hub for Excel US. Excel HK also, it appears, constituted a receptacle/clearing house for the very large amount of US dollars arising from the Asian sale of Excel US health and nutritional products, the disbursement of which monies, not all of which were remitted to Utah, providing the asserted basis for the plaintiff's litigation in Utah and Hong Kong.

10. Before the events which have given rise to this unfortunate case, Excel US clearly had been extremely prosperous. The evidence from Dr Chen is that by 1999 annual sales of the group were in the order of US$100 million, and the group had some 200,000 individual distributors in Asia. There appears to be no dispute that such success largely was due to the efforts of Dr Chen, assisted by her husband and by her elder sister Jau Hwa, and that Dr Chen and her husband, the 2nd defendant, made frequent trips outside the US in order to liaise with distributors and to promote the products and the image of the Excel group. Evidence has been given in the Utah court that Dr Chen was out of Utah, and the US, for some 80% of her time, but in any event she was obviously away from home base far more than she was present, and during those periods she left the running of Excel US to her sister, who until the break up of their relationship was her trusted aide.

11. The major sales of Excel US product were conducted through primary distributors, called 'Territorial Owners', in various Asian countries, namely Hong Kong, Taiwan, Malaysia, Korea and the Philippines. Such owners appear to be companies incorporated in those countries bearing in some form the Excel name. This Asian market is and was of fundamental import to the economic welfare of the Excel group. I note that it is Dr Chen's evidence that, at least prior to the present dispute, over 95% of the group's sales volume came from Asia. The manner in which the system would function was thus : the primary distributors, the Territorial Owners, enlisted individuals as independent distributors to promote and sell the products, who in turn placed orders and on-sold to their customers through the medium of what was a multi-level selling organization. So that in each particular territory there was a large network of independent distributors, at the head of which was the Territorial Owner. These Territorial Owners in turn accounted to the 1st defendant for the product sales, albeit on the basis of the higher of the two invoices issued by Excel US for the particular tranche of products in question - the so-called 'double-invoicing' system - and the 1st defendant in turn accounted, on the basis of the lower invoice value, to Excel US, which situation forms the substance of the plaintiff's complaint in these proceedings.

THE SHAREHOLDING IN EXCEL US

12. It is undisputed that in the period 1987-1995 that Dr Chen held 100% (6,000 shares) of the common stock in Excel US.

13. This equity position underwent significant alteration in late 1995. Because on 30 December 1995, Dr Chen conveyed 25% of the shares in Excel US to her sister, Jau Hwa, by way of gift, and at the same time conveyed the balance of 75% to her three children. Why she chose to do this does not particularly matter, save that the issue of 'the children's shares', if I can put it thus, provides a significant point of dispute. In Utah proceedings, Jau Hwa says that Dr Chen in fact intended to convey 75% of the shares in Excel US to Jau Hwa to hold on trust for Dr Chen's three children. Whilst for her part Dr Chen says that she caused to be issued share certificates in respect of the 75% shareholding directly in the names of her three children, and that there was no intention to convey to Jau Hwa as trustee.

14. This issue is one of the disputes currently before the Utah courts, and for present purposes I make no comment thereon. Suffice to say that it appears established that in or about December 2000 Jau Hwa took delivery of the children's share certificates in respect of the 75% shares and applied for them to be re-issued to her as owner, at that time swearing an affidavit stating that she had lost or misplaced the share certificates evidencing her legal ownership.

15. Whatever be the precise position it seems clear that Jau Hwa, whether qua sole registered shareholder consequent upon such re-issue, or whether as shareholder in her own right of 25% of the common stock and as alleged trustee of the remaining 75%, was in position in September 2000 to exercise her power to dismiss Dr Chen and her husband as directors and officers of Excel US. The basis of such dismissal is said to be the alleged embezzlement by the 2nd defendant from Excel US in favour of his mistress, but absent this bare assertion I have seen no evidence in this regard. I further note that, upon refusing Jau Hwa's request to dismiss her husband from the company, Dr Chen is alleged herself to have attempted to remove Jau Hwa, albeit again there is no evidence of any such attempt.

16. Be that as it may. These are not matters which can be resolved upon affidavit. What at least is objectively verifiable is that, consequent upon the dismissal from Excel US of her sister and her brother-in-law in September 2000, Jau Hwa appointed her own husband and her mother to the board of directors in lieu of her sister and brother-in-law, and that soon after Dr Chen and her husband left Utah for Singapore, where they now reside.

17. This, however, did not signal the end of the corporate restructuring. In December 2000 and January 2001, company documents indicate that Jau Hwa caused to be issued a further 3,200 shares in Excel US, initially in her name and thereafter in her mother's name. The mathematical result of this new issue was that Jau Hwa controlled 4,700 out of a total of 9,200 issued shares, that is, approximately 51% of the common stock. Such share issue effectively reduced the children's shareholding from a 75% majority to a 49% minority interest.

CONSEQUENTIAL LITIGATION

18. For good cause or bad, therefore, at the end of 2000 Jau Hwa indubitably controlled Excel US with, as I have said, her husband and mother on the board of the company. Her mother's position in this set-up is noteworthy, as will become apparent.

19. As the result of the complete breakdown in the sisters' relationship, litigation commenced both in Utah and in Hong Kong. And the onset of the Utah litigation presaged the removal of Jau Hwa herself from her now dominant position at Excel US.

(i) Dr Chen's Utah proceedings

20. On 8 January 2001 Dr Chen, in her personal capacity and on behalf of the children, issued proceedings in the Fourth Judicial District Court in Utah County under Complaint No. 01040098, wherein she sought the removal of Jau Hwa as President of Excel US, and complained of Jau Hwa's conduct in the operation of the Utah corporation, it being alleged that irreparable harm was being caused to Excel US by its refusal to ship products to existing Territorial Owners, and in supplying goods to new companies which had been formed by erstwhile Territorial Owners - in particular, one Sam Tzu in Hong Kong and one Richard Hu in the Philippines - who had, it seems, aligned themselves with the new regime under Jau Hwa.

21. These proceedings, as taken out by Dr Chen, remain ongoing. Two days after their commencement, Judge Howard of the Utah District Court issued a Temporary Restraining Order ("TRO") against Jau Hwa, wherein he restrained her from acting as President of Excel US and enjoined and directed her immediately to fulfill and ship all pending product orders received by Excel US from its established Territorial Owners. In granting the TRO Judge Howard did not mince his words. He observed, inter alia :

" Defendant Stewart's conduct herein has caused serious irreparable damage and, if not enjoined, will continue to cause serious irreparable damage. Stewart appears to have no authority to vote three quarters of the Company's shares-a clear majority over which she has no rights or control whatsoever. Despite such apparent lack of authority, she has purported to remove Dr. Chen as the president and as a director of the Company. She appears to have done so without following corporate formalities or Utah Law. Her conduct in failing and refusing to ship ordered and confirmed product and in establishing competing territorial entities through threats of loss of business to the existing entities (extortion) and in causing such companies to violate their exclusive contracts with the Company, appears to constitute a serious violation and breach of her fiduciary duties as a Company director and, to the extent, if any, the Trusts have beneficial ownership of any stock, her conduct appears to constitute a serious violation and breach of her fiduciary duties as a trustee.

Her conduct appears to have seriously damaged and diminished the value of the Company to the owners. Reputational and good will damages alone are not subject to specific calculation or liquidation. She has diminished the value of the Company and the Territorial Ownerships by failing and refusing to ship ordered and confirmed product pursuant to the Company's exclusive contractual obligations, course of dealing and custom and practice. Her ultra virus conduct appears to have caused and is causing serious irreparable damage that should be halted immediately."

22. Oral evidence already has been given in these Utah proceedings from a number of witnesses. On 21 February 2001 the Utah court entered a Consent Order to the extent that stock of Excel US "will be deemed to be held by Jau Hwa (25%) and by the minor children (of Dr Chen) (75%)", and that throughout these proceedings the children would be represented by what is, in effect, a guardian ad litem.

23. Perhaps more important, for present purposes, is that under the Order of 21 February 2001, the Utah court was to appoint an "independent neutral Third Party" to act as interim CEO/President of Excel US. Accordingly, on 13 March 2001 Mr Larry Holman was appointed as a Special Master of the Utah court and as interim CEO/President of Excel US.

24. As might be anticipated, given the circumstances of his appointment, Mr Holman's duty was to report his findings to the Utah court. On 25 May 2001 Mr Holman filed his 'Report No. 3', a document which has featured in argument in this application, and which has been adopted by the Utah court in its entirety. This Report is an important feature of this case, and given its contents it is perhaps unsurprising that Jau Hwa, the plaintiff in these current proceedings in her personal capacity, has moved to suppress it. There is no need to go into great detail. Suffice to say that in this document Mr Holman critically considered the conduct of Jua Hwa after she had gained control of Excel US and recommended, inter alia, that in his commercial judgment there should be a compromise of all existing litigation against Excel US, in particular in this context the Hong Kong proceedings which preceded the present Hong Kong action, namely HCA No.558 of 2001, an action which had been instigated by Jau Hwa in the name of Excel US. This action was settled pursuant to a Compromise Agreement of 1 June 2001, entered into by Mr Holman and sanctioned by the Utah court, whereby this first Hong Kong action was dismissed with no order as to costs.

(ii) Jau Hwa's Utah proceedings

25. Four days after the commencement of Dr Chen's action in Utah, on 12 January 201 Jau Hwa responded by filing a Complaint in the name of Excel US against the 1st, 2nd and 5th defendants in the present Hong Kong proceedings. This Complaint has subsequently been amended to add both herself as complainant and further defendants, including corporate defendants in Taiwan and Malaysia. The Complaint was re-amended in June 2001, wherein, inter alia, the original claim for ancillary injunctive relief was deleted, and a claim (the 11th Claim) for declaratory judgment of the Utah court was made in terms that "Mrs Stewart may engage in a productive means to sustain her livelihood which would include, but is not limited to, creating a business that fairly competes with E. Excel USA".

26. In these widely drawn Utah proceedings, relief is claimed under a number of separate heads (breach of contract, breach of fiduciary duty, conspiracy), but for present purposes the signal point is that Jau Hwa is complaining against Excel HK, Dr Chen and her husband (i.e. the 1st, 2nd and 5th defendants herein) on the like grounds as are and were relied upon in the current Hong Kong action and in its immediate predecessor in this jurisdiction, HCA No.558 of 2001.

27. In the context of this Utah action, Dr Chen failed with a motion to dismiss on the basis that the action was brought without competent authority and that the requirement to mount derivative claims was not satisfied. I am told from the Bar that this Motion to Dismiss was based upon facts as they then stood before the settlements entered into on behalf of Excel US by Mr Holman, and that a further application is to be launched.

(iii) Territorial Owners' Utah proceedings

28. This is the 3rd Utah action involving Excel US. In the context of this application the details of litigation commenced by Territorial Owners do not much matter, albeit I record that Malaysian, Taiwanese and Korean Territorial Owners have commenced their own litigation in Utah against Jau Hwa and Excel US for specific performance and damages for breach of contract in failing or refusing to ship Excel US product to them from America.

29. Thus far I have dealt briefly with the litigation currently extant in Utah. I turn now to the litigation as it has affected the Hong Kong courts.

(a) HCA No.558 of 2001

30. On 3 February 2001 a writ was issued in the name of Excel US against the same five defendants for the identical relief sought in the current proceedings. Two days later, on 5 February 2001, Jua Hwa, through the then plaintiff, Excel US, obtained from Yeung J an ex parte Worldwide Mareva injunction in very similar terms to the present. The anticipated hearing fixed for the defendants' application to discharge that injunction, namely 11 June 2001, did not materialize, however, because on 1 June 2001 this action was compromised by the Special Master, Mr Holman, pursuant to the Compromise Agreement to which I have earlier referred.

(b) The current proceedings : HCA No.2493 of 2001

31. The date of Sunday, 3 June 2001, on which day Waung J granted the current ex parte Worldwide Mareva relief on application at his residence, is not mere happenstance, in that this application was urgently made on that day precisely in order to obtain the grant of further injunctive relief before the Utah court gave effect to the Compromise Agreement settling the existing Hong Kong litigation, HCA No.558 of 2001 - and with it, of course, the discharge of the Worldwide Mareva initially granted by Yeung J in early February. The effect of this, therefore, is that a Worldwide Mareva against these defendants now has been in place for a period of some seven months before the defendants have been able to challenge both the assertion of jurisdiction over them and the imposition of injunctive relief, which it is said has had the effect of crippling the activities of the 1st defendant.

32. Perhaps the defendants could and should have moved more quickly. In any event, what is crucial to note at the outset is that the case as presented in HCA No.558 and that as presented now differ in one highly material respect. It is this. Whereas the plaintiff in HCA No.558 was Excel US, which had of course instituted proceedings at the behest of Jau Hwa, who was at that time in control, the current plaintiff is Jau Hwa herself, who is bringing suit as a minority shareholder in Excel US in respect of wrongs allegedly done to the corporation, but in circumstances wherein that corporation, via the action of an independent interim CEO appointed by the Utah court, itself has compromised any cause of action it may have in the identical subject matter of this action, and has done so with the express sanction of the Utah court.

33. In her role as the current plaintiff, Jau Hwa claims against the defendants for, inter alia, breach of fiduciary duties allegedly owed under Utah law directly to the plaintiff, as shareholder, by Dr Chen and her husband, together with a claim for knowing assistance against the remaining defendants, reliance being placed upon the same facts as those previously alleged in HCA No.558 of 2001. Precise details of the claim appear in the Statement of Claim filed herein on 13 July 2001, the generally endorsed writ having been filed on 4 June 2001, the day following the grant of injunctive relief by Waung J.

34. The gravamen of the plaintiff's case is the wrongful diversion of the assets of Excel US by Dr Chen and her husband to (and from) the 1st defendant, Excel HK, knowingly assisted by the directors thereof, the 3rd and 4th defendants. It is said that such wrongful diversion was achieved in two ways, via the so-called system of "double-invoicing", and also a system whereby the Taiwanese Territorial Owner paid a 'consulting fee' to the 1st defendant.

35. Against this broad background - which I have felt it necessary to set out in some detail - I turn now to consider the particular applications immediately to hand. It seems to me that they most usefully can be classified in terms of forum issues and injunction issues.

Forum issues

(1) The defendants' application for a stay of proceedings

36. This application is made in paragraph 2 of the defendants' summons dated 7 July 2001. I take it first because, at the least, its resolution must impact upon the issue of the discharge of the Mareva injunction.

37. In seeking a stay of these proceedings, the defendants pray in aid the doctrine of forum non conveniens, together with the existence of the concurrent Utah proceedings instituted by the present plaintiff against the 1st, 2nd and 5th defendants in Complaint No. 010400201 in the Fourth Judicial District Court of Utah County in the State of Utah, USA. To this extent, therefore, these defendants also invoke the doctrine of lis alibi pendens.

38. The principles underlying these applications are well known. They are the subject of exhaustive annotation in the various texts, and are often invoked in the Commercial Court. For the defendants, Mr Yu SC says that the Spiliada test is amply satisfied in this case, submitting that the Utah court is clearly or distinctly the more appropriate forum for the action, in the sense that the case may be tried more suitably in Utah than Hong Kong in the interest of all parties and the ends of justice. To the contrary, Mr Kotewall SC gamely argues that at least part of the plaintiff's claims are governed by Hong Kong law, that the Hong Kong courts are well experienced in trying questions of foreign law, that a substantial number of Chinese speaking witnesses are in Asia or Hong Kong, and, further, that there may be enforcement difficulties in terms of a Utah judgment.

39. Notwithstanding Mr Kotewall's persuasive efforts in this regard, I do not think that this resistance gets off the ground. In my judgment the answer to this question is clear. In all the circumstances of this case Utah is clearly and distinctly the more appropriate forum; indeed, it seems to me to represent the natural and obvious centre of gravity of this case. Like proceedings against like parties are already under way in Utah, together with associated litigation, all of which focuses upon the factual matrix surrounding the operation and control of Excel US, a "closely held" Utah corporation. Many relevant witnesses and a substantial bulk of relevant documents are in Utah (Mr Yu makes the point that there can be no subpoena upon the mother of Jau Hwa and Dr Chen other than in Utah), and last but certainly not least, the correct interpretation of Utah law is of fundamental import, inter alia, in the evaluation of the viability of Jau Hwa's locus and presently asserted cause of action. As Mr Yu points out, her entire case collapses unless she can establish that under Utah law a minority shareholder is able to maintain a cause of action in terms of breach of fiduciary duty in respect of alleged wrongs done to the company by its directors in circumstances wherein the company, through its properly constituted CEO (in this instance Mr Holman, the court appointed independent officer) has compromised any cause of action the company itself may have.

40. Accordingly, after taking all the evidence into account, and after accepting Mr Yu's statement on behalf of his clients that there will be no contest to the jurisdiction in Utah, in the exercise of my discretion I order that this case be stayed to the Fourth Judicial District Court of Utah County, State of Utah, USA.

(2) Setting aside the writ and service thereon upon the 2nd to 5th defendants

41. The grant of a stay of proceedings, whether on the basis of forum non conveniens or lis alibi pendens, assumes the undoubted existence of a jurisdiction which, in the exercise of its discretion, the Hong Kong court chooses not to exercise.

42. On behalf of the 2nd to 5th defendants, against whom jurisdiction purportedly was exercised pursuant to the provisions of Order 11, rule 1(1)(c), and with regard to whom Waung J granted ex parte relief, Mr Yu further seeks to challenge the primary exercise of such jurisdiction.

43. In my view he is right to do so. Putting to one side the defects in the affidavit leading the application - only Order 11, rule 1(1)(p) is therein prayed in aid, and no reference is made to the concurrent Utah proceedings taken out by Jau Hwa, although I of course accept Mr Kotewall's assurance from the Bar that the existence of these Utah proceedings was canvassed before the learned judge and that reliance specifically was placed upon subhead 1(c) - it seems inexorably to follow that if (as is the case) this court now has decided to stay these proceedings in favour of Utah on the basis of forum non conveniens, the plaintiff thus cannot and does not satisfy the other side of the jurisdictional coin, namely the Order 11 requirement to demonstrate that, for the purpose of the assumption of jurisdiction, Hong Kong is the forum conveniens. As an adjunct, I note also that the leave to serve out as so granted is subject also to the requirement of the establishment of a good arguable case, an aspect of this matter discussed later in this judgment in the context of the grant of injunctive relief.

44. The consequence of this, therefore, is that I accede to the relief sought in paragraph 3 of the defendants' summons dated 7 July 2001, and formally set aside the writ and the service of these proceedings upon the 2nd to 5th defendants.

(3) Preliminary issues

45. On the same day as the defendants applied, inter alia, to stay these proceedings, the plaintiff took out her own summons, wherein the trial of the following preliminary issues were sought, namely, "whether, under Utah law, the plaintiff as minority shareholder can bring an action in the circumstances of this case against the directors of the company for breach of a duty which is alleged to be owed by such directors to the plaintiff as shareholder personally", and second, "if so, whether Utah is a more appropriate forum to try the merits of the present action".

46. The primary decision made herein as to the appropriate forum implicitly provides its own negative response to this request, which Mr Yu SC castigates as little more than "an attempt to sidestep the plaintiff's stay application".

47. Clearly nothing is to be gained by permitting ventilation of these preliminary issues in this court, Mr Kotewall's faith in the ability of Hong Kong judges to unravel complex and difficult issues of foreign law notwithstanding. The short answer is that there are already proceedings in Utah wherein the identical issue will be tried by a Utah judge conversant with Utah law, and indeed it may well be that the issue of the plaintiff's locus will be determined sooner rather than later, given the information that there is a pending application in the Utah court to strike out the plaintiff's claim which is pursued not in the name of Excel US but in her personal capacity.

48. At the end of the day the difficulties involved in the Hong Kong court permitting itself to become entangled with preliminary issues (which have their own attendant and well known difficulties) concerning matters of Utah law, with the obvious risk of inconsistent decisions should this court accede to this application, serve in my view to underpin the conclusion earlier reached as to the most appropriate forum in which finally to resolve these parties' disputes. Accordingly, the plaintiff's application for leave to try the preliminary issues so specified is dismissed.

Injunction issues

49. Having determined what I have called the 'forum issues', I now consider the question of injunctive relief. Or, more appositely, whether in light of the conclusion now reached as to forum/jurisdiction, whether any form of restraint - whether it be in terms of a modified Mareva injunction, or of the appointment of an interim receiver of the 1st defendant, or possibly of a payment into court of the monies presently frozen in the 1st defendant's accounts consequent upon the Order of Waung J - should survive the decision that these proceedings are no longer to continue in this jurisdiction.

50. These issues are variously raised in the defendants' application dated 7 July 2001 to discharge the Mareva injunction, and in the plaintiff's summons of like date wherein the court is asked to consider (at paragraph 1(3)) whether if the present action be stayed in favour of the Utah court, this court nevertheless should grant ancillary relief in aid of the Utah proceedings, and further (at paragraph 2), the appointment of an interim receiver pursuant to section 21L, Cap. 4 and Order 30, rule 1(1), in order to preserve the assets of the 1st defendant pending resolution of the plaintiff's claim.

51. The issue of the continued preservation of the 1st defendant's assets was clearly uppermost in Mr Kotewall's submissions to this court. No doubt sensing the direction the judicial wind was blowing, in terms of choice of forum at least, whilst not conceding a stay he took care to emphasise his client's concern that, in the event of a stay, some pertinent form of ancillary relief be put in place so that, as he put it, something would remain "in the pot" to which the plaintiff could have recourse should her claim ultimately be adjudged successful. In light of his client's allegations as to unwarranted disbursement of the monies of Excel US from the accounts of Excel HK, the 1st defendant herein, there was, he said, a considerable risk of dissipation.

52. The submission as made was attractive, appealing as it did to the court's instinctive embrace of the maintenance of the status quo pending the opportunity to resolve at trial the rights and obligations of the parties, and indeed, the entitlement to this particular "pot". This particular "pot" (I am tempted to say "honeypot") would appear to be more than usually appealing in the circumstances of this case. Mr Kotewall told the court that he had been shown a letter from the First Pacific Bank indicating that a sum of approximately US$10.5 million presently reposed in the 1st defendant's accounts, and it is abundantly clear on the available evidence that at least one of the functions of the 1st defendant - in addition to the sourcing of product raw material in China, and liaison and product development with the Territorial Owners in the various Asian territories - was to receive, hold and disburse very large sums of money, only a proportion of which would be remitted to homebase, namely Excel US.

53. As earlier observed, this represents the plaintiff's primary complaint, obvious difficulties of locus notwithstanding. She says that she has now discovered that primarily as a result of the so-called 'double-invoicing system' - whereby a like parcel of goods is invoiced to the 1st defendant at a substantially lower price then is invoiced to the Territorial Owner, who pays the 1st defendant at the higher price, the 1st defendant in turn accounting to Excel US at the lower price - very large sums of money have been diverted from Excel US to her detriment as a 25% minority shareholder. And this as a result, inter alia, of the breach of fiduciary duty of the erstwhile directors, Dr Chen and her husband, together with the knowing assistance of the 3rd and 4th defendants, the directors of the 1st defendant.

54. The argument as to continuation of some form of restraint upon the 1st defendant's assets conveniently breaks down into distinct elements. The first major point of distinction between the parties is thus : Mr Yu SC asserts that, if and in so far as a stay of proceedings were to be granted, this court has no jurisdiction to grant ancillary relief in aid of a stay of proceedings in favour of the courts of a foreign state, in this instance Utah.

55. The jurisdictional point is an interesting one, and in circumstances wherein urgency is less of a factor might well merit detailed treatment. For present purposes, however, I take the view that this court does have jurisdiction to grant such relief, so that there is no question of knocking out the Mareva currently in place against the 1st defendant upon a primary jurisdictional basis. In this regard I am minded to adopt the approach of Barnett J in Merrill Lynch International Bank Ltd v. Wallace [1997] 3 HKC 776 at 781, wherein the learned judge placed reliance upon Channel Tunnel v. Balfour Beatty Construction [1993] AC 334, the line of argument being that in instances of a substantial claim brought within the jurisdiction (as is the case here, at least against the 1st defendant), it was open to the court to grant interim relief in such circumstances, regardless of whether final judgment is to be pronounced in this or another court. In so holding, I recognize that the grant of ancillary relief in these circumstances is something not granted lightly, and that the authorities establish that the court should adopt a "cautious approach" to avoid conflict with orders of the court seized with these substantive proceedings : see for example observations in Credit Suisse Fides Trust SA v. Cuoghi [1998] QB 818 (CA) and in Refco Inc. and Another v. Eastern Trading Co. and Another [1999] 1 Lloyds 159, at 171, wherein Morritt LJ (as he then was) noted that a court faced with a merely ancillary jurisdiction "should be especially cautious and sensitive to the informed view of the foreign court seized with the substantive merits".

56. At the end of the day, therefore, as in so many other cases this matter essentially redounds to the exercise of judicial discretion, and that which is referred to in the texts and authorities as the 'weighing process'. Let me say at the outset that I have neither intention nor inclination to become enmeshed in the myriad of allegation and counter-allegation which is to be found in the evidence presently before this court, at the last count there being, I believe, some 37 affidavits by and on behalf of plaintiff and defendants.

57. Both counsel clearly recognize the inherent difficulties posed at the interlocutory stage, and have couched their submissions accordingly. For the plaintiff, Mr Kotewall SC puts his position attractively and succinctly. He says that there may well be fault on both sides which cannot be apportioned at this stage, and that the court should not be sidetracked by the extensive parade of prejudicial material put into evidence by the defendants, all of which is disputed and contradicted. It is clear (as indeed Waung J obviously considered when granting the injunctive relief) that the plaintiff has a good arguable case against the defendants for breach of fiduciary duty and for knowing assistance with regard to such breach, and, said Mr Kotewall, the proper course is for the court to do what it can to maintain an appropriate balance, consonant with the fair disposition of the various hotly-disputed issues in a just and convenient manner. Whatever be the rights and wrongs, he maintained, such assets as there are remaining in Hong Kong ought to be preserved or safeguarded, either by injunction or by the appointment of a receiver. Unless interim protection be maintained, he submitted, the chances are that the plaintiff will be left with an empty judgment, which would be most unfortunate. If the plaintiff ultimately is adjudged to have been wrong in her allegations, the defendants have remedies against her, and the situation should not prevail whereby they are permitted to profit from their activities in breach of their fiduciary duties, and in permitting them to divert to themselves vast amounts of money properly belonging to the Utah corporation.

58. For his part, Mr Yu SC asked the court to set aside injunctive relief with immediate effect. The parlous situation in terms of the unjustified constraint upon the affairs of the 1st defendant, which hitherto functioned as important cog within the Asian Excel US operation, could not possibly be justified, he said, and this was a situation which had, in effect, now gone on for more than seven months, given the injunctive relief granted in the two Hong Kong actions. Apart from very serious questions of material non-disclosure to Waung J at the ex parte stage, the injunctive relief should be discharged, he submitted, because the defendant does not have a good arguable case and, looking at the history and circumstances of this case, her bona fides must be cast into serious doubt, so that in any event it could not be "just and convenient", in the statutory language of the High Court Ordinance, for the grant of an injunction or its continuation.

59. It seemed to me then, as now, that the latter approach provides a more constructive way of dealing with this case than subjecting the evidence to detailed analysis in terms of the establishment of particular categories of material non-disclosure. In this context Mr Kotewall has emphasized the great urgency in which the application was made before Waung J, given the imminence of the Compromise by the Utah Special Master of the first Hong Kong proceedings, and he correctly notes that in any event, in instances of inadvertent non-disclosure, it is always possible for the court to discharge and immediately to re-grant. So that I intend to consider this element of the case on the "good arguable case/just and convenient" basis, not least because the cogent points made by Mr Yu in the material non-disclosure context as easily fit within this broader based consideration.

60. It is perhaps not often that the precise import of the term "good arguable case" comes under the spotlight. In many instances it seems to be assumed pending trial, and the consequent balancing exercise then occupies centre stage. Nevertheless there are some extremely useful dicta on the point.

61. In one of the early Mareva cases, Bank Mellat v. Nikpour [1985] FSR 87, at 90 (CA) Lord Denning MR noted :

"I would go further. It seems to me that although there might be an arguable case for the plaintiff bank on the merits, equally, on the material which has been put before us, there might be a good arguable defence. So much so that it is not a case in which a Mareva injunction should be granted."

62. In an unreported case in the English Court of Appeal, Silvera v. Faleh Al-Rashidi, 17 August 1993, CA (Lexis Report), Dillon LJ observed :

" So far as the satisfaction of the standard of prospects of success is concerned, be it 'good arguable case' or 'good reason', the real issue in the present case is as to how far, if at all, on an application for a Mareva injunction, or for leave to serve out of the jurisdiction under Ord 11, it is permissible for the Court to look critically at the 'evidence' adduced by the plaintiff in support of his case.

My Brodie refers us to the well-established rule that the Court must not, on an interlocutory application conduct a trial on affidavits of disputed questions of fact. He refers us also to the observations of Lord Justice Parker in Derby and Co. Ltd. v Weldon [1990] 1 Ch 48, [1989] 1 All ER 469 at 58 of the former report that the Court should not spend many days attempting to consider whether, on voluminous and conflicting evidence, there is a good arguable case for the grant of Mareva relief. Moreover, Mr Brodie says that there is 'direct evidence' on behalf of the plaintiff from a Mr Haydir Ibrahim that the moneys paid into the account in the name of the third defendant with the National Bank of Kuwait on 26 January 1993 were indeed the first defendant's moneys. That, he says, is for present purposes as far as it is permissible to look.

But on Mr Brodie's reasoning, if Mr Ibrahim had asserted in an affidavit that 'the earth is flat' that would be 'direct evidence' that the earth is flat and conclusive to establish a good arguable case that it is indeed flat. Consequently, so far as this point is concerned of the standard of prospects of success, the Court would be bound to grant Mareva relief and leave to serve out against anyone who dared to dispute the flatness of the earth. While fully accepting that the Court cannot conduct a trial on affidavit, I do not believe that the Court is as bound as Mr Brodie would have it to accept uncritically the ipse dixit of a deponent in considering whether a good arguable case has been made out.

It is well-established that a Mareva injunction is a draconian and potentially oppressive form of Order and that to compel a person to submit under Ord 11 to the jurisdiction of a country where that person is not resident and owes no allegiance is a strong step. The Court must always, therefore, be cautious before making any such Order."

63. Whilst in the same case, in evaluating the argument of counsel that credibility cannot be judged on paper, and that the court should not attempt to resolve basic conflicts at this stage, Nolan LJ stated :

" Despite these powerful submissions of Mr Brodie, I have come to the same conclusion as the learned Deputy Judge, although I would not express it in quite the same way. The position as I see it is this. Whatever the difficulties in applying the phrase 'good arguable case' or 'good reason' to what is essentially a question of credibility, there can be no doubt that the Court is required, even at the interlocutory stage, to take a preliminary view of the merits of the plaintiff's claim, including its factual basis. The phrases in question have for some years now been used to describe the criterion which should be applied for this purpose. (See in this connection Seaconsar Far East Ltd. v Bank Markazi Jomhouri [1993] 1 Lloyds Rep. 236 per Lord Justice Lloyd at page 242.)

I do not accept that the test is impossible to apply in a case where the issue is one of credibility. If that were so, then any cock and bull story put forward in affidavit on the plaintiff's behalf would justify the grant of leave to serve abroad or the grant of an injunction, or would call at least for the full trial of the issue. The truth is that in this as in other fields, the law in my judgment permits and indeed requires the Court in an appropriate case to dismiss affidavit evidence out of hand. (Compare in this connection Banque de Paris et des PaysBas (Suisse) SA v Costa de Naray [1984] 1 Lloyds Rep. 21 especially per Lord Justice Ackner, as he then was, at page 23.)

Secondly, I do not accept that the phrases 'good arguable case' and 'good reason' present a real difficulty in this connection. They are not terms of art. The key to their meaning is to be found in the purpose which they are designed to serve, which is that the Ord 11 jurisdiction and the Mareva jurisdiction should be exercised with caution. Of the former, Lord Justice Lloyd said in Seaconsar at page 242:

' To require a foreigner to answer a claim in our Courts it is not enough that the claim, if sound, can conveniently, or most conveniently be tried in England. Nor is it enough that the conditions of Order 11, r.1 are satisfied. The claim itself must be of a certain strength.'"

64. In addition, the established texts accept that in the exercise of the discretion whether to grant or re-grant relief, that the court will have regard to the relative strength of the parties' cases : See Gee, Mareva Injunctions, 4th Ed. (1998) at 184 :

"In Mareva cases, the all-important question is whether, in the circumstances of the case, it is 'just and convenient' to grant the injunction..... the court will take into account the apparent strength or weakness of the respective cases in order to decide whether the plaintiff's case, on the merits, is sufficiently strong to reach the threshold, and this can include assessing the apparent plausibility of statements in affidavits.... Although a good arguable case remains the minimum requirement, the judge's view of the merits of the plaintiff's case and his chances of ultimate success are obviously important factors in the exercise of his discretion."

65. The principles, therefore, are clear, and clearly established. Without becoming enmeshed in the welter of accusation and counter-accusation, the judge at the interlocutory stage is required to take a broad preliminary view of the plaintiff's merits, doing the best that he can, notwithstanding the obvious difficulties that interlocutory applications present.

66. I have taken such a broad preliminary view of the plaintiff's case. I have had regard to the indisputable history of the matter, the background and circumstances of the litigation between the parties, both in Utah and in Hong Kong, and I have had regard to indisputable documentary evidence existing within specific contexts, in particular surrounding movement of tranches of money from the 1st defendant. I have also read with interest emails to (and from) the plaintiff. The conclusion reluctantly arrived at is that this claim, as postulated by this plaintiff is, at best, disingenuous and fraught with flaws.

67. In all the circumstances disclosed in these papers, I am strongly disinclined to accept at face value the plaintiff's contention that she was, in effect, an administrative na?f who had led a highly compartmentalized life within Excel US, that she had had no real grasp of what was going on, and that she had not discovered the financial double-dealing arranged by her sister and brother-in-law, via the double-invoicing system and wrongful disbursements from the 1st defendant, until she gained control of Excel US and was able to examine corporate documents and, with the assistance of an expert forensic accountant, to discover what really had been happening all these years.

68. I bear firmly in mind that the plaintiff was the person in charge of the corporation during the very frequent and extensive absences from Utah of Dr Chen and her husband, that she had access to all documents, and that it was she who kept the relevant chops, that the double-invoicing system (which required the use of those chops) had, on any basis, been established and well-known to all persons of authority within Excel US since 1994, and that, even on her own case, the 1st defendant had remitted a very considerable sum of money to Excel US - in or about US$26 million - notwithstanding the alleged diversion, said to be in excess of US$32 million, of which complaint now is made.

69. As to the alleged wrongful diversions from the 1st defendant's account, Mr Yu carefully has demonstrated, with reference to available documents and account numbers, that the plaintiff not only was privy to the diversion of US$7.6 million from the 1st defendant to accounts of her aunt and uncle (for which accounts she was the contact person), but further that she was instrumental in the utilization of at least part of these monies to pay certain of her US attorney fees, and also to provide seed capital for the establishment of companies to compete with existing Territorial Owners in Hong Kong and Taiwan. I pause to note that these were companies run by Messrs Sam Tzu and Richard Hu, the particular gentlemen who feature with her upon an embarrassing tape recording, the certified transcript of which is in evidence.

70. In addition, the diversion of a sum of US$32,681,011, which was taken from the 1st defendant's accounts to buy cashier orders in the name of Credit Suisse, the proceeds then being deposited in the account of her mother with regard to which the plaintiff holds a power of attorney - albeit she declines to reveal the balance therein, citing the wishes of her mother (whom, it will be recalled, was one of the directors appointed in the stead of Dr Chen and her husband, and who also was a subscriber to the new share issue) - does not strike me as representing the action of someone who is bona fide and genuinely attempting to recoup allegedly wrongfully diverted assets of Excel US. In fact, it seems to follow that if and in so far as other monies diverted from the 1st defendant are held on constructive trust for the US corporation, then these two specific sums also must be so held.

71. Regarded dispassionately, and notwithstanding the limitations imposed at the interlocutory stage, there is a preponderance of objective evidence that the plaintiff was well aware of the purpose of the double-invoicing system - Mr Yu SC emphatically referred to the "mountains of material" demonstrating the plaintiff's knowledge thereof, and the fact that Asian sales proceeds went to the 1st defendant - and in my view it is highly improbable, if not inconceivable, that Jau Hwa was unaware of the operation of the 1st defendant and the role that it played in terms of its financial activities. To the contrary, the overwhelming probabilities are that she knew precisely what was happening, and in fact did have recourse to these monies via the completion of blank transfer forms left in the Utah office, as the transfer of the sum of US$7.6 million to the accounts of her uncle and aunt, and the outgoings therefrom, tend to illustrate. In this connection Mr Yu makes the forensic point that it is peculiar that Jau Hwa felt it necessary to employ Mr Miller, the expert forensic accountant, to track flows of money, since she clearly already had considerable detailed information to hand, as Schedule 3 to the ex parte injunction amply demonstrates. Mr Yu further noted that the plaintiff was in a position immediately to launch detailed cross-proceedings in Utah four days after her sister's action, and but days after Mr Miller's own retention, and that, as the documentation indicates in terms of the transfer of the US$7.6 million, she had prior knowledge of the existence of the 1st defendant's account no. 803-3156-902, an account which Mr Miller gives the impression of having uncovered in the course of his investigations. It seems fair to reflect that experts are, of course, only as good as their instructions.

72. I bear in mind also the further undisputed fact that the plaintiff, having been divested by court order of control of the Utah corporation, now apparently is engaged in setting up, via former Territorial Owners loyal to her, a competing business, and that she has been successful in restricting the operation of Excel HK, via the means of the consecutive Worldwide Marevas granted in Hong Kong. As coincidence would have it there was, I think, an echo in this court of such competition earlier this year when the original Territorial Owner, Extra Excel International Limited, obtained an order on 16 January 2001 in HCA No.264 of 2001, upon ex parte application, against one Tsz Shih Shih and Excel International (HK) Limited for passing off and breach of confidence, although no application was made to discharge or vary this injunction, and indeed, it appears that there was a consent order to continue it.

73. The plaintiff's current application for declaratory relief in the Utah court tends also to underscore the point. Her real agenda, not least in light of some of the observations in the taped conversation of the meeting with Messrs Tzu and Hu, can only be open to severe doubt. I also bear in mind within the competition context, the observations of the Special Master, Mr Holman, in his Report No. 3 to the Utah court, to the effect that the plaintiff had caused Excel US to supply these new distributors with products but without payment or record, thus to enable them to duplicate products at discounted prices and to destroy the markets of existing Territorial Owners. In his Report, Mr Holman reflects upon the substantial damage caused to Excel US by the plaintiff, who, since she had been in control "was able to generate no recorded sales for the company in Asia .... notwithstanding the fact that substantial amounts of product left the company for Asia" and further refers to the termination of historical distributorships. He comments in the following terms :

" Moreover, the Company cannot afford and does not desire to litigate the termination of historical distributorships where there has been a profitable course of dealing, and sees no business reason to incur the substantial risk of substantial damages. On the contrary, the Company has every business interest in re-establishing the relationships that generated over $15 million in wholesale revenues to the Company in 1999 and had generated over $18 million of sales in just over 8 months in 2000.

It is also difficult to understand the reason or strategy involved in terminating good profitable business relationships. We are told that this past Fall a meeting was held in Provo, Utah, among Mrs. Stewart, her mother and various representatives of the Territorial Owners, wherein the Territorial Owners were told to disassociate from Dr. Chen or they would no longer have relationships with the Company. The Territorial Owners refused. The current business model of Mrs. Stewart is the result: new distributors with no sales or payments to the Company during the last 9 months and litigation around the world."

74. Viewed from this perspective, the defendants' case that Jau Hwa had full knowledge and control, and indeed was the historical architect of these legitimate diversion arrangements as set up many years ago - "entirely [the plaintiff's] idea" - gain in resonance This is not to say, of course, that Mr Kotewall's stringent criticisms of the defendants, which he has been kind enough to commit to paper, and which focus on the proposition that the defendants' case lacks intrinsic commercial sense - why, he asks rhetorically, would the plaintiff design a scheme that is unnecessarily complicated, difficult to control, and easily open to abuse by the 2nd defendant and his family members, whom the defendants admit the plaintiff never trusted? - are simply to be ignored, and I have reflected at length upon them. The fact remains that there are unanswered questions on both sides - "gaps" and "posturing" is how Mr Kotwall puts it - and whilst I note that there is no evidence that any part of the 1st defendant's money went to Dr Chen or her husband, it seems to me to be as plain as a pikestaff why monies from product sales were collected by and disbursed from the 1st defendant other than to Excel US.

75. However, if and in so far as the task of this court is to weigh what is said in the balance, and that "everything must depend upon the strength which the assertions command in the circumstances of the particular case" - which is the way Mustill LJ put it in Societe Commerciale de Reassurance v. Evas International Limited [1992] 1 Lloyds 570 - then in my view the prospects for this dispute, when viewed through the prism of a "good arguable case", clearly appear to favour the defendants. It seems to me that this is a case wherein the court may legitimately conclude, as it now does, that in all the circumstances not only does this plaintiff fail on the reef of "good arguable case", but also upon the shoal of the "just and appropriate" benchmark. Damon Runyan once famously observed that the race does not always go to the fleet, nor the fight to the strong, but that is the way to bet. In my judgment, on the basis of this evidence, and in particular the indisputable factors outlined by Mr Yu in his extensive argument, it is the defendants who seem to me to have considerably the greater cause for optimism.

76. Accordingly, for the reasons given, in the exercise of my discretion and without, I may say, a great deal of hesitation, I discharge in its entirety the existing Worldwide Mareva granted by Waung J on 3 June 2001. Against the 2nd to 5th defendants, of course, such would have been discharged in any event by reason of want of primary jurisdiction, given that this court now has set aside the writ and the service of the writ upon them.

77. It follows from this conclusion that I am against Mr Kotewall in his application for other forms of interlocutory relief, and accordingly, I also dismiss the plaintiff's application, by summons dated 7 July 2001, for the appointment of an interim receiver over the affairs of the 1st defendant.

OTHER APPLICATIONS

78. In addition to the defendants' summons of 7 July 2001 and that of the plaintiff of like date, both of which now have been disposed of in the course of this judgment, other applications were extant. Let me deal briefly with them.

(a) The 1st defendant's application to discharge dated 12 June 2001

79. I remain unclear as to why this summons anticipated the defendants' tripartite summons of 7 July, which itself superseded the application by the 1st defendant alone. I make no order in respect of this summons.

(b) The defendants' application for security for costs dated 27 July 2001

80. This application was not formally moved, pending resolution of the major issues. In light of the stay of these proceedings as now granted, and subject to anything counsel may wish to say, this application also stands stayed.

(c) The plaintiff's application dated 4 July 2001 to strike out references to "Report No. 3"

81. I dismiss this application. If and in so far as the use of this Report in these proceedings has been impliedly proscribed by the Utah court - and it does not seem to me that it has, albeit I am in no position finally to decide the point - then this must be a matter for a Utah judge to pass on.

82. For my own part, I cannot see why the views of Mr Holman, the independent court-appointed CEO, should be denied to this court, any more than should the views of Judge Howard, who granted the TRO against the plaintiff and who installed Mr Holman within Excel US. In my view the observations of these two gentlemen legitimately may be considered part of the factual matrix as it relates to the present dispute, and should be permitted to be placed into the discretionary "mix" along with the other evidence. I can fully understand why the plaintiff wishes to exclude the observations of Mr Holman, but that is nothing to the point. I perceive no unfairness in this court reading and taking into account the content of "Report No. 3".

(d) The plaintiff's discovery summons dated 24 July 2001

83. This is the plaintiff's application, pursuant to the grant of the Mareva, for information as to assets of the 1st defendant, both from Directors of the 1st defendant and also from its bankers.

84. Co-terminus with the discharge of the Mareva injunction, this application must be dismissed. I note in passing that the 1st defendant appears to have notified the plaintiff as to the balance of some US$10.5 million in its account(s), and also that the bulk of the banking documents (save perhaps the most recent) are said by Mr Yu SC already to be in the possession of Excel US in Utah. Doubtless they will emerge on discovery in the usual fashion.

(e) The plaintiff's summons dated 22 August 2001 for leave to file and serve additional evidence

85. With the consent of counsel I read this additional evidence de bene esse. Four affidavits were involved in this application, and the only one to which Mr Yu maintained strong objection at this late stage was the 2nd Affirmation of Mr Mark Larsen, submitting that its admission was unfair and prejudicial in that it dealt with new matters of Utah law, and that the defendants had not had the opportunity to respond thereto. In my view this objection is well founded. I make an order in terms of the summons, save and except for the 2nd Affirmation of Mark Larsen served on the 17 August 2001, which I exclude. I have of course read this affidavit, and I would merely comment that even had it been formally admitted, it would have made no difference to the result of the applications before this court.

86. I will now hear counsel on costs, and upon any consequential matters arising.

[Submissions from counsel]

87. I now have had the opportunity to hear from leading counsel. Several matters have been raised. I deal with them as follows.

(1) Costs

88. The debate has focused not the prima facie entitlement to costs on summonses won and lost - Mr Kotewall rightly does not resist in principle - but upon the scale of those costs, and also as to the costs of what I might term the peripheral summonses, detailed above at paragraphs 78 to 85.

89. As to the scale of costs, Mr Yu asks for his costs to be taxed and paid forthwith on an indemnity basis, praying in aid certain of the observations of the court in this judgment. To the contrary, Mr Kotewall says that in the circumstances the court should not depart from the usual order, namely taxation on a party and party basis.

90. On occasion costs arguments are as difficult, if not more so, than substantive decisions. All matters have to be weighed, or re-weighed, which is why this court declined to give its decision on costs immediately after the oral delivery of judgment, instead adding its conclusions on the issue to the judgment as now engrossed.

91. In terms of the primary decision to be made, namely that of the scale of costs, I have borne particularly in mind that this court has been seized with this dispute at the interlocutory stage only, and I have concluded that in all the circumstances indemnity costs are not appropriate. After some reflection, and after revisiting the circumstances of the case, in the exercise of my discretion I make the following costs orders :

(i) Upon the defendants' summons dated 7 July 2001, the plaintiff's summons dated 7 July 2001, and the plaintiff's summons dated 4 July 2001

The costs of and occasioned by these summonses (including the costs of the hearing on 23, 24 and 30 August 2001) be to the defendants, such costs, if not agreed, to be taxed and paid by the plaintiff on a common fund basis;

(ii) Upon the plaintiff's summons dated 24 July 2001

The costs of and occasioned by this summons (which was not called on for argument) be to the defendants, to be taxed if not agreed;

(iii) Upon the defendants' summons dated 27 July 2001

Save for the costs of the issuance of the summons, there be no order as to costs of this application (which stands stayed and which was not called on for argument);

(iv) Upon the plaintiff's summons dated 22 August 2001

Order in terms of paragraph 3 thereof, such costs to be taxed if not agreed;

(v) Upon the 1st defendant's summons dated 12 June 2001

There be no order as to costs;

(vi) I grant a Certificate for Two Counsel.

(2) Inquiry as to damages

92. Mr Yu, who has been successful in discharging the Mareva injunction, asks for an immediate order directing an inquiry as to damages pursuant to the plaintiff's undertaking. Mr Kotewall suggests that in the circumstances this issue is not as straightforward as it may seem. There is some law, he says, and he has asked to be given time to argue the point. To this end an appointment in the court's diary provisionally has been fixed for 17 September 2001. I further order that the sum of HK$2 million, which was ordered to be paid into court as fortification of the plaintiff's undertaking as to damages, is to remain in court until further order.

(3) Suspension of the court's orders

93. Mr Kotewall, appropriately in my view, does not go so far as to ask for a stay pending appeal. Instead he asks for the interim suspension of the operation of the orders herein for a brief period to enable him to take the matter further, if so instructed. Mr Yu does not demur in principle, save naturally he is anxious to ensure that this further period be as short as possible.

94. As counsel are aware, this court already has ordered that there be an interim suspension of the operation of its orders herein until 5p.m. on Wednesday, 5 September 2001. It follows, absent further order from a higher court, that after that time the orders of this court will have immediate effect.

95. I thank both teams of counsel for their very considerable assistance.