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HCA 2610/2017
[2018] HKCFI 2302
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
ACTION NO 2610 OF 2017
________________________
| BETWEEN |
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YARON BROWN |
1st Plaintiff |
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DROR CEDER |
2nd Plaintiff |
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DANIEL TAL MOR |
3rd Plaintiff |
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NOAM KLEINFELD |
4th Plaintiff |
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EHUD GROBER |
5th Plaintiff |
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ZINN INVESTMENTS LLC |
6th Plaintiff |
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AVI SMILA |
7th Plaintiff |
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EDY TAL |
8th Plaintiff |
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EYAL HALIMI |
9th Plaintiff |
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SIMON GELFAND |
10th Plaintiff |
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MOSHE MOR |
11th Plaintiff |
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AVISHAI ABRAHAMI |
12th Plaintiff |
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LIOR MENASHE SHEMESH |
13th Plaintiff |
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NIR ZOHAR |
14th Plaintiff |
and |
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LEXINTA LIMITED |
1st Defendant |
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LEXINTA MANAGEMENT LIMITED |
2nd Defendant |
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LEXINTA INC |
3rd Defendant |
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LEXINTA GROUP LIMITED |
4th Defendant |
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LEXINTA AG |
5th Defendant |
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BISMARK ANTONIO BADILLA RIVERA |
6th Defendant |
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| Before: Deputy High Court Judge William Wong SC in Chambers |
| Dates of Hearing: 2 and 5 October 2018 |
| Dates of Decision: 2 and 5 October 2018 |
| Date of Reasons for Decision: 11 October 2018 |
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REASONS FOR DECISION
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1. There are a total of five summonses before this court. The first two summonses relate to the Plaintiffs’ applications pursuant to section 21 of the Evidence Ordinance, Cap 8, for orders that the banks identified in Schedule 2 of the Summons and all other “banks” in Hong Kong (as defined in the Banking Ordinance, Cap 155) (together the “Banks”) do disclose to the Plaintiffs details of each and every bank account maintained by the Defendants. The first summons was dated 16 July 2018 (“the First Summons”). On 13 September 2018, the Plaintiffs took out a summons to amend the First Summons principally to seek leave that “the information and documents contained in all the affirmations of Yu Kwai Manand exhibits thereto filed in this action by providing them (or copies thereof) to the Zurich Public Prosecutor’s Office, Switzerland (Staatsanwaltschaft IIIdes Kantons Zurich) for the purposes of assisting them in their investigationsinto the misappropriation of the Plaintiffs’ and other investors’ monies andin any subsequent proceedings against the 1st to 6th Defendants”. (Together “the Section 21 Summonses”.)
2. The second set of summonses relate to the Plaintiffs’ application pursuant to section 25A of the High Court Ordinance, Cap 4 (“the Ordinance”) and the court’s inherent jurisdiction for orders that the Defendants do sign, or procure a signature for, the letters annexed to the summons dated 29 August 2018 as Schedule 2 (“the Authorisation Letters”) authorising DBS Vickers (Hong Kong) Limited to disclose to the Plaintiffs, details of each and every account maintained by any of the Defendants with them, if any Defendants (or any one of them) fail to comply, the court do execute the Authorisation Letters on behalf of the Defendants. On 26 September 2018, the Plaintiff took out a summons to amend the summons dated 29 August 2018 so as to enlarge the scope of their application under section 25A of the Ordinance to include all securities accounts which the Defendants hold or maintain as legal or beneficial owners, or of which they are signatories (“the Section 25A Summonses”).
3. On 3 October 2018, the Plaintiffs also took out a further summons under section 21L of the High Court Ordinance, Cap 4 and the inherent jurisdiction of the court for an order that DBS Vickers (Hong Kong) Limited do disclose the list of documents set out therein and leave for the Plaintiffs to be released from the implied undertaking to deploy such documents for the purpose of proceedings (actual or contemplated) against the Defendants to these proceedings in Hong Kong or elsewhere, including without limitation, providing them (or copies thereof) to the Zurich Public Prosecutor’s Office, Switzerland (Staatsanwaltschaft III des Kantons Zurich) for the purposes of assisting them in their investigations into the misappropriation of the Plaintiffs’ and other investors’ monies and in any subsequent proceedings against the Defendants (“the Section 21L Summons”).
4. The Defendants were originally represented by Messrs Wai & Co and all the summonses were served on Messrs Wai & Co, Solicitors. However, before the hearing on 2 October 2018, this Court was informed that Messrs Wai & Co, Solicitors is applying to cease to act for the Defendants and therefore could not attend court for the hearing as scheduled. Mr Dobby, for the Plaintiffs, submitted that the Defendants were duly informed of this hearing and the court should proceed on the basis that the Defendants chose to be absent. I agree.
5. I shall deal with the Section 21 Summonses, the Section 25A Summonses and the Section 21L Summons sequentially in that order.
SECTION 21 SUMMONSES AND BANKERS’ TRUST ORDER
Material facts
6. The Plaintiffs obtained an ex parte world-wide freezing injunction against the Defendants on 10 November 2017 (the “Injunction Order”).
7. On 19 January 2018, in light of the Defendants’ continued failure to comply with their disclosure obligations under the Injunction Order, Madam Justice Lisa Wong made a further disclosure order (the “Disclosure Order”) that the Defendants do give full and proper disclosure within 14 days.
8. On 9 February 2018, the Defendants having, again, failed to discharge their disclosure obligations, Madam Justice B Chu made an orderthat unless the Defendants do give full and proper disclosure, the Defendants be debarred from defending the action, any defences filed on behalf of the Defendants be struck out and the Plaintiffs be at liberty to enter judgment against the Defendants with costs (the “Unless Order”).
9. On 13 March 2018, the Defendants having failed to comply with the Unless Order and having failed to file defences within the time prescribed under the Rules of the High Court, Madam Justice B Chu made an order (i) debarring the Defendants from defending the action, (ii) that judgment be entered against the Defendants and (iii) continuing the Injunction Order post-judgment, until further order of the court (the “Judgment”).
10. By the Judgment, the Defendants, inter alia, were adjudicatedto pay the judgment debt in the sum of US$24,239,747 to the Plaintiffs (the“Judgment Debt”) and it was further declared that the Defendants hold the misappropriated funds on trust for the Plaintiffs as constructive trustees.
11. The Judgment Debt remains unpaid and, in the light of the repeated and continuing failure on the part of the Defendants to discharge their disclosure obligations, I agree that there is no realistic prospect that the Defendants will provide disclosure of their assets, including details of the whereabouts of the sums paid to them by the Plaintiffs.
12. The Plaintiffs have previously obtained two rounds of disclosure of bank documents from HSBC, Hang Seng Bank Limited and DBS pursuant to the orders of Madam Justice Lisa Wong dated 24 November 2017 and 26 January 2018.
13. The Plaintiffs’ concern is that they cannot determine from disclosures so far made by the three banks whether there are other undisclosed bank accounts held in the name of the Defendants in Hong Kong. It is submitted that in the absence of proper disclosure from the Defendants, the Plaintiffs cannot ascertain whether their monies have been remitted into different accounts in Hong Kong.
14. It is against the above background that the Plaintiffs took out the Section 21 Summonses and the Bankers’ Trust applications so as to (a) police the Injunction Order; (b) identify the whereabouts of their assets; and (c) identify any assets of the Defendants for the purpose of execution of the Judgment.
Applicable legal principles
15. Section 21 of Evidence Ordinance provides:
“ (1) On the application of any party to any proceedings, the court or a judge may order that such party be at liberty to inspect and take copies of any entries in a banker’s record for any of the purposes of such proceedings.”
16. In CTO (HK) Ltd v Li Man Chiu & Ors [2002] 2 HKLRD 875, Deputy High Court Judge Poon (as he then was) helpfully set out the following legal principles:
(1) It is not uncommon for a plaintiff to seek a section 21 order to inspect and take entries in a banker’s record in order to make a Mareva injunction effective. This is consistent with the common discovery that would be ordered to facilitate a Mareva injunction: §§10 – 11.
(2) A section 21 order is justified where the plaintiff seeks to trace funds which, in equity, belong to him and of which there was strong evidence that he had been fraudulently deprived: §12.
(3) A section 21 order is also justified where delay might result in the dissipation of the funds before trial; §12 citing Bankers Trust Co v Shapira [1980] 1 WLR 1274 with approval.
(4) The jurisdiction of the court rests on the proposition that unlessthe assets in question can be located and secured, the ultimate determination of ownership of those assets may be frustrated by their dissipation and there will be no point in requiring the production of documents or information at trial: §13.
(5) There are three limits on the Bankers Trust jurisdiction which equally apply to the section 21 jurisdiction (§13):
(a) First, the plaintiff must demonstrate a real prospect thatthe information may lead to the location or preservation of assets to which he is making a proprietary claim.
(b) Secondly, the documents sought to be disclosed must be identified with some specificityas would be expected of a subpoena.
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