An Ying International Financial Limited v Li HC Auckland CIV 2004 404 6952
[2005] NZHC 1642
•6 April 2005
IN THE HIGH COURT OF NEW ZEALAND AUCKLAND REGISTRY
CIV 2004 404 6952
BETWEEN AN YING INTERNATIONAL FINANCIAL LIMITED AND AN YING
(WELLINGTON) LIMITED
Plaintiff AND
QIU YUN LI AND HONG LAI ZHAO
First Defendant
AND
YIN DI JIANG AND GUANG YAO LI
Second Defendant
Hearing:
4 March 2005
Appearances: D J Chisholm for plaintiffs
L H M Lim and K F Quinn for defendants Judgment: 6 April 2005
JUDGMENT OF ALLAN J
In accordance with r 540(4) I direct that the Registrar endorse this judgment with the delivery time of on Wednesday 6 April 2005.
Solicitors
Simpsons, PO Box 105984, Auckland Kensington Swan, PO Box 92101, Auckland
AN YING INTERNATIONAL FINANCIAL LIMITED AND AN YING (WELLINGTON) LIMITED V QIU YUN LI AND HONG LAI ZHAO And Anor HC AK CIV 2004 404 6952 [6 April 2005]
Procedural history
[1] In this proceeding An Ying International Financial Limited claims that a former director and employee, Qiu Yun Li (the first named first defendant), has stolen from it a very substantial sum, the precise quantum of which is in issue, but which is of the order of about $6 million.
[2] It is further claimed that the remaining defendants (respectively the husband and parents of Ms Li), acted in concert with Ms Li. Judgment is sought for the amount proven to have been stolen, together with any profits which the defendants may have made thereon, and interest.
[3] There is a second cause of action seeking an order transferring to the plaintiff certain listed assets claimed to have been purchased with sums stolen from the plaintiffs.
[4] The statement of claim appears to have been prepared in haste, as is understandable in the light of the fact it was accompanied by an application for a Mareva injunction. Whether or not that is so, it is appropriate to note that the statement of claim is filed in the names of two plaintiffs, namely An Ying International Financial Limited and An Ying (Wellington) Limited. No relief is sought by the latter company, and indeed the statement of claim does not refer to it at any point. Throughout this judgment my references to the plaintiff are to be taken as references to An Ying International Financial Limited.
[5] On 9 December 2004, Winkelmann J granted to the plaintiff a Mareva injunction in the following terms:
1. That until trial of this proceeding or further order of this Court, the first defendants and the first named second defendant, by themselves, their agents or otherwise are restrained from dealing with, selling, disposing, encumbering including by the opening of any bank accounts or otherwise dealing with any of their assets in New Zealand or elsewhere including the following:
a.Any interest they have in Unit 904, Citylife Apartment, 171 Queen Street, Auckland City being described as estate in freehold Unit 9L and 1/12 share of AU9 and 1/306 share AU27 and 1/306 share of AU41 DP 181394, Certificate of Title NZ 112C/195 (North Auckland Registry).
b.Any interest they have in 2 Essex Street, Kelburn, Wellington being described as an estate comprising 434 m² Section 1 Survey Office Plan 36888, Certificate of Title WN 44A/444.
c.Mercedes Benz motor vehicle registered number BNJ180.
d.BMW motor vehicle registered number BMC888
e.Any account including foreign currency trading account held with Man Financial Australia Pty Limited and/or in KVB Kunlun New Zealand limited or Saxo Bank of Denmark in any one or more of the defendant’s names either jointly or individually directly or indirectly through a third party including any account in the name of Gui Yun Li (also called Guiyun Li) which may include an account numbered 1668.
2. Freezing any bank account in the name of the defendants as follows subject to paragraph 3 hereof:
a.ASB account 12-3089-0265227-00 in name of first defendants including any other bank account in their names with that bank whether by themselves or jointly with any other persons including a joint account of the defendant Hong Lai Zhao and Miss W Qiu in account 12-3141- 0205433-00.
b.National bank of New Zealand account 060-287-0737818-18 in name of first defendant Qiuyun Li including any other bank account in her name with that bank whether by herself or jointly with any other persons.
c.National bank of New Zealand account 060-229-0011437-23 in name of second defendant Yin Di Jiang and any other accounts in the defendant’s name with the said bank whether by herself or jointly with any other persons.
d.ANZ Bank account 01-0186-0168812-00 in the name of the first named first defendant Qiuyun Li and any other accounts in the defendant’s name with the said bank whether by herself or jointly with any other person.
e.The first defendant’s family trust (known as Heng Ji Trust) bank account at ASB Bank Limited account number 12- 3057-0884680-00.
3. The bank shall be authorised to allow the account holder to withdrawal (sic) only amount of $500 from the named account after receipt of the order by the bank.
4. Directing Man Financial Australia Pty Limited, KVB Kunlun New Zealand Limited and Saxon Bank of Denmark within five working days of service of this order to provide to the plaintiff details of what accounts it has in the names of any of the defendants or Gui Yun Li (the sister of the defendant Qiuyun Li) and confirm that those accounts have been frozen pending further direction of the Court.
5. Directing each of the defendants within five working days of the service of this order to file in Court and serve on the plaintiff an affidavit (I) listing all his or her or their assets in New Zealand and overseas in the defendant’s names or to which the defendants are beneficially entitled including any bank or financial accounts together with the balances of those accounts as at the date of this order and (ii) detailing all bank accounts or foreign currency accounts held by any of them within the last year but now closed in New Zealand or overseas.
6. Leave is reserved to any of the defendants to apply for directions or variation or discharge of any of these orders on three days notice.
7. Costs are reserved.
[6] On 17 December 2004 the plaintiff made a further ex parte application for variation of the orders made on 9 December. That application also came before Winkelmann J. It sought to exclude from the ambit of the orders already made a property at Essex Street, Kelburn, Wellington and certain funds of the defendants, for the purpose of facilitating the transfer of those assets by the defendants to the plaintiff. Winkelmann J was sufficiently concerned about the terms of that application to hear from counsel for the plaintiff in chambers, following which she issued a minute recording her concern at the fact that, while the plaintiff was taking the benefit of the Mareva injunction, it had neglected, some eight days after that order was made, to serve the proceedings upon any of the defendants. This despite the fact it had by then served certain banks and other financial institutions affected by the order. The decision not to serve the proceedings forthwith appeared to have arisen from the fact that the defendants had offered a measure of co-operation to the plaintiff, including the making of what appeared to be an acknowledgement of wrongdoing and an offer of amends.
[7] Understandably, Winkelmann J was extremely troubled at what she regarded as a most unsatisfactory state of affairs and declined to vary the orders when the defendants had no opportunity to be heard. She listed the proceeding for mention before her on 21 December 2004. The plaintiff was directed to take all possible steps to serve the proceedings upon the first and second defendants, and to advise them of the mentions hearing on 21 December.
[8] On 21 December Ms Lim appeared for the defendants, having only recently been instructed. She advised Winkelmann J that she had instructions to apply to set aside the Mareva injunction and in the meantime she sought a variation to enable adequate funds to be released from a frozen bank account in order that the defendants might fund living expenses and legal and accounting costs. At that time Ms Lim advised the Court that legal and accounting costs would be more expensive than usual because the defendants had a limited command of English and required the assistance of interpreters throughout.
[9]Ms Lim sought to exclude from the ambit of the Mareva orders the sum of
$100,000 on account of the defendants’ ability to meet these expense. Mr Connell for the plaintiff argued that such a sum was too high, but was prepared to agree to the payment of a total of $40,000 from a bank account maintained by Ms Li’s family trust (known as the Heng Ji Trust) at the ASB Bank. Of that sum, $30,000 was allowed for legal, accounting and interpreting costs and $10,000 for living expenses.
[10] Accordingly, Winkelmann J made an order permitting the sum of $40,000 to be withdrawn from that account. She also made timetable orders in respect of the foreshadowed defendants’ application to set aside the Mareva injunction. That timetable was subsequently varied on 25 January by Harrison J, without opposition.
[11] On 2 February 2005 the defendants filed two separate applications. In the first they sought an order setting aside the Mareva injunction granted on 9 December 2004. The second application was in the following terms:
1. That the Mareva and Preservation orders of the Honourable Justice Winkelmann dated 23 December 2004 be varied as follows:
a.That the defendants be entitled to $9,600 per month from their accounts to be paid into the Kensington Swan trust account to meet living expenses of the defendants;
b.That the defendants be entitled to moneys to enable them to conduct a proper defence of the substantive proceeding including all interlocutory proceedings and third party costs associated with the proceeding, and the Serious Fraud Office investigation;
c.That the second defendants, who are not New Zealand residents, are not required to disclose their assets in China.
d.Directing the plaintiff’s shareholder, Mr Wang Chang Wu and/or his legal representative, Nancy or Hui Ling Xin, to transfer the sums of HK$2.95 million and RMB956,700 held by Mr Wang on trust for the defendants into the trust account of Kensington Swan to be held until further order of the Court.
2. That An Ying (Wellington) limited also provide an undertaking as to damages.
3. That, as a condition of the continuation of the Mareva orders, the plaintiffs are required to pay into Court the sum of NZ$100,000 to be held as security for damages which may result from the Mareva orders, until such time as the defendants’ application to set aside the Mareva orders has been determined.
4. That Zhang Ming Dao is not to contact any of the defendants, or any members of their family, directly until further order of the Court.
[12] On 17 February 2005, the defendants moved ex parte for the following orders:
1. That the plaintiffs have failed to comply with the terms of the interim mareva and preservation orders granted by Winkelmann J against the defendants on 9 December 2004.
2. That the interim mareva and preservation orders against the defendants be discharged and the proceedings against them dismissed.
3. That the following sums, currently held by the plaintiffs, or under their control, be paid into Court immediately upon the making of these orders, or to be held by the solicitors for the defendants until further order of the Court:
a.HK$2,950,000 (or NZ$ equivalent);
b.RMB956,700 (or $NZ equivalent);
c. $85,126.53.
d. $450,000.
4. The plaintiffs are restrained from dealing in any of the defendants’ assets which are subject to the interim mareva and preservation orders made on 9 December 2004 by Winkelmann J until further order of the Court.
5. That the plaintiffs pay the solicitor/client costs of this application.
[13] This last application came before Priestley J who directed that the matter was not appropriate for disposal ex parte, and that it should be heard along with the other pending applications.
[14] Against that background, the following applications were argued before me on 4 March 2005:
a)The defendants’ application of 2 February 2005 to set aside the mareva orders in their entirety. This application necessarily required reconsideration of the plaintiff’s ex parte application of 9 December 2004.
b)The defendants’ application of 2 February 2005 for variation of the mareva orders in such fashion as to permit the payment of living expenses and the meeting of legal and accounting expenses.
c)The defendants’ ex parte application of 17 February 2005 in which the defendants sought to discharge the mareva orders on grounds associated with the conduct of the plaintiff since the orders were first granted.
d)The plaintiff’s ex parte application of 17 December 2004, which sought to exclude from the ambit of the original mareva injunction assets which the defendants had agreed to transfer to the plaintiff.
Grounds for discharge application
[15] The defendants advance three grounds upon which it is claimed that the existing Mareva injunction ought to be discharged:
a)That the plaintiff has no basis for maintaining the injunction – that is, the plaintiff has not made out a case on the merits for the continuation of the injunction;
b)That the plaintiff has failed to disclose all material facts and to act in absolute good faith;
c)That the conduct of the plaintiff following the initial granting of the Mareva injunction justifies discharge.
Discharge on the merits
[16] It was common ground between counsel that upon an application for discharge, the onus falls upon the plaintiff to establish de novo its entitlement an injunction. To that end the plaintiff must first show it has a good arguable case. That is a more onerous requirement than is the need to establish a serious question to be tried in the case of interlocutory injunctions: Barclay-Johnson v Yuill [1980] 1 WLR 1259; Property Marine (Australia) Pty Limited v Condor Yacht (Bermuda) Limited (1987) 1 PRNZ 251, 253; Bank of New Zealand v Hawkins (1989) 1 PRNZ 451, 452. The expression “good arguable case” was distinguished from that of merely “arguable” in the following way by Mustill J (as he then was), in The Niedersachsen [1984] 1 All ER 398, 404:
…the plaintiff has to do substantially more than show that the case is merely ‘arguable’: a word which to my mind at least connotes that, although their claim will not be laughed out of court, the plaintiff will not be justified in feeling any optimism. On the other hand … the plaintiff will not need to go so far as to persuade the Judge that he is likely to win.
…a case which is more than barely capable of serious argument, and yet not necessarily one which the judge believes to have a better than 50% chance of success.
[17] The plaintiff, must also establish that the defendant has assets within the jurisdiction which can be made subject to a Mareva injunction, although in certain circumstances an order may cover assets outside the jurisdiction. The focus in the present case is on assets which are within the jurisdiction.
[18] The plaintiff must establish that there is a real risk of dissipation of assets. A mere assertion of belief that the defendant will dissipate assets is insufficient. There must exist proper grounds which justify that belief: Bank of New Zealand v Hawkins (p.454). But a plaintiff is not required to adduce affirmative proof to that effect: Third Chandris Shipping Corp v Unimarine SA [1979] 2 All ER 972, 977 (Mustill LJ). It is sufficient if a plaintiff can show that a danger of dissipation exists.
[19] Finally, the Court must consider the overall justice of the case in all the circumstances, balancing the need to protect the plaintiff so as to ensure any judgment is not rendered barren against any prejudice or hardship to the defendant, or to third parties: Bank of New Zealand v Hawkins (p.456).
[20] Ms Lim submits that the plaintiff does not have a good arguable case because:
a)No moneys are owed by the defendants to the plaintiff;
b)There is no evidence that the defendants will dissipate or dispose of assets to evade judgment.
[21] Because this threshold issue is vigorously contested, it is necessary to consider the factual background in a little detail.
[22] Ms Li became involved with An Ying International Financial Limited (An Ying) in August 2001. According to her evidence she came to New Zealand from China as part of a family group who brought to this country funds of the order of NZ$4 million which represented the greater part of their Chinese assets. Those assets were transferred to New Zealand in 2002 and 2003. She says in evidence that she and her family made significant investments in the plaintiff by way of loans,
bonds, savings and investments, commencing about the time of her initial involvement with the plaintiff. She says that her loans to the plaintiff amount to about $880,000. There are investments amounting to approximately $1.1 million. She also holds about 14% of the capital of the plaintiff.
[23]Additionally she says there are savings of about $250,000, and a bond of
$100,000 also in the hands of the plaintiff.
[24] Ms Li became a director of the plaintiff in April 2002. She worked in the plaintiff’s foreign exchange department and became its manager before being transferred from that department in January or February 2004, to work on a Chinese newspaper published by the organisation. There was evidence on the part of the plaintiff to the effect that the transfer occurred by reason of developing concern over cash flow problems and the possibility that Ms Li may have some responsibility for those problems.
[25] In mid-2004 it was discovered that an employee of the plaintiff, unconnected with the defendants, had stolen something over $700,000 from the plaintiff, and the plaintiff’s principals commenced investigations into the overall financial position of the plaintiff, with special reference to the extent and causes of the apparent short-fall in funds. That investigation included the role played by Ms Li in the plaintiff.
[26] Inquiries centred on the activities of An Ying (Wellington) Limited, a company owned as to 51% by An Ying Group Limited (the parent company of the plaintiff), and as to 49% by Ms Li. An Ying (Wellington) Limited operated in effect as a branch office of the plaintiff. Its day to day operations were in the hands of Ms Li, her husband and a son.
[27]The plaintiff’s investigations were primarily conducted by
· Yun Chen (Andrew Chen), who holds just under 20% of the shareholding in An Ying Group Limited, and is also its managing director,
· Ming Dao Zhang (Mr Zhang), a director of the plaintiff, who is a senior employee of An Ying Group Limited and a beneficial shareholder in that company. He is also a director and 49% shareholder of An Ying (Christchurch) Ltd, a sister company of An Ying (Wellington) Ltd, but operating in Christchurch,
· Hui Ling Xin (Nancy), who is an employee of the An Ying Group. She was appointed a director of that company on 29 December 2004.
[28] These investigators concluded that there were defalcations for which Ms Li was responsible.
[29] On 8 December 2004, Mr Zhang confronted Ms Li with an allegation of theft. Between 8 and 16 December 2004 a number of meetings took place between representatives of the plaintiff on the one hand and Ms Li and her husband on the other. Ms Li’s parents were also involved on one or two occasions. The subject matter of those meetings was the financial position of the plaintiff and of An Ying (Wellington) Ltd, and the degree of responsibility which Ms Li and the other defendants bore for an apparent shortfall in the funds of those companies.
[30] A great deal of affidavit material has been filed with respect to the events of that period. The various meetings have been described in copious detail on both sides.
[31] The plaintiff’s case is that during the course of those meetings, Ms Li and her husband frankly admitted that Ms Li had appropriated funds to which she was not entitled, and she promised to make good her defalcation. The plaintiff points to certain documents which are said to be written admissions to that effect. I will return to those documents shortly.
[32] On the other hand, the defendants say the documents so signed were not admissions of wrong-doing but simply related to matters of accounting between the parties, and that further, the meetings to which I have referred took place mostly at night, continued for many hours, were undertaken at the direction of officers of the
plaintiff who adopted an intimidatory stance towards the defendants, and that the documents signed by Ms Li and her husband were executed under physical and mental duress. The duress allegations are stoutly denied by each of the plaintiff’s witnesses.
[33] I return now to the documents signed by Ms Li and her husband. On 9 December 2004, Ms Li signed an acknowledgement in Chinese in the following terms:
(Translation ‘O’) An Ying Company:
I, Li Qiuyun agree to use all funds in my and LI Guiyun’s M/(Australia Joint Name), M/account 1668 return as first instalment of that I took from An Ying. The unpaid balance will be repaid somehow within two weeks. As for the exact figure, after I have checked, I will report to Chen Yun and Yang Hongzhang about the money I took from An Ying.
Person making promise: Li Qiuyun 09/12/04
[34] On 10 December 2004, both Ms Li and her husband signed a further acknowledgement in these terms:
(Translation ‘P’)
I and Li Qiuyun promise to return back to An Ying five million nine hundred and fifty six thousands dollars we have taken within two weeks. (We hope the board of directors will take further steps to confirm exact figures and their accuracy). (More than three hundred thousand dollars will be returned daily.
(Signature) Zhao Honglai Li Qiuyun
10.12.04
[35] The English translations reproduced above are those of a translator instructed by the defendants.
[36] On 13 December 2004 both Ms Li and her husband executed a document headed “Statement of debts repayment” in English, an agreement to transfer the title
to a property situated at 2 Essex Street, Kelburn, Wellington, held by the Heng Ji family trust together with a memorandum of transfer in respect of that property, and an authority to close all current margin trading positions in certain accounts operated by or on behalf of the defendants through the plaintiff.
[37] There is a fundamental conflict between the evidence of the three witnesses for the plaintiff and Ms Li. In addition to the duress allegations referred to earlier, Ms Li also claims that the documents referred to above were executed by her and her husband, simply as security for such sums as might be found to be owing by the defendants to the plaintiff, once an accounting was completed. From her evidence I infer that she believed the documents were simply to be held in escrow pending the outcome of that accounting exercise.
[38] There are some difficulties with that explanation. In Ms Li’s first affidavit there is no reference to the execution of documents in Chinese. It is said there that the documents were executed only in English, which she claims not to understand. The existence of executed documents in Chinese was acknowledged only in Ms Li’s third affidavit. Neither is there any reference in the executed acknowledgement to the funds being held on trust, or simply as security. The agreement to repay is unconditional.
[39] The plaintiff argues that the word “took” in the acknowledgements signed by Ms Li may be taken to mean “stole”. For the defendants it is argued that the word “took” is essentially neutral and read in context it refers to funds uplifted or withdrawn from the plaintiff by the defendants.
[40] The plaintiff offers services which include the undertaking of funds transfers between China and New Zealand, and vice versa. Clients are also enabled through the plaintiff to engage in margin trading. The case for the defendants is that Ms Li and her family simply used the plaintiff’s facilities for those purposes, and in the course of those activities they both deposited large sums with, and withdrew large sums from, the plaintiff. Ms Li says any balance owed by the defendants to the plaintiff arises in the course of normal business activities, and indeed it may well be,
according to her, that it is found on completion of a proper accounting, that the plaintiff owes a sum of money to her, rather than the other way around.
[41]The Mareva injunction was granted on 9 December 2004.
[42] In furtherance of the “Statement of debts repayment” made between the parties on 13 December 2004, the defendants organised further payments to the plaintiff. Two separate sums were involved. Both transactions occurred on 15-16 December 2004. Both involved the transfer of funds from Ms Li’s sister in China to a Mrs Wang, who is associated with the plaintiff. First a sum of HK$2,950,000 was paid into Mrs Wang’s account at the National Bank of New Zealand. Second a sum of RMB956,700 was paid into a Chinese bank account also controlled by Mrs Wang. I was advised from the bar that the exchange rate for the Chinese unit of currency (RMB) is similar to that of the Hong Kong dollar.
[43] Subsequently, on or about 21-22 December 2004, Mrs Wang transferred these funds to the order of the plaintiff. The Hong Kong dollar fund was paid to the plaintiff and the funds held in Chinese currency was transferred on 21 December 2004 at the direction of the plaintiff to a third party in China.
[44] There is significant affidavit material on each side, going to the state of the plaintiff’s accounts, and directed to the question of whether there is in fact any liability to the plaintiff on the part of the defendants.
[45] During the course of argument I was invited to draw a number of inferences in favour of various competing contentions on that topic, but the financial material at this stage is incomplete, and of course no witnesses were cross-examined for the purposes of this interlocutory hearing. It is quite impossible to reach any conclusions, however tentative, as to the likely final outcome of accounting matters as between the plaintiff and the defendants.
[46] Neither am I able, as I was invited to do, to reach any conclusions with respect to the duress allegations made by the defendants and denied on behalf of the plaintiff. That must await trial.
[47] But there is undisputed material which leads to the conclusion that the plaintiff has made out an arguable case sufficient to found a Mareva injunction. The acknowledgements signed by the defendants, the transfers of property referred to above, and the payments effected through Ms Li’s sister and Mrs Wang, are all consistent with the plaintiff’s claim that these events took place in the context of an acceptance by Ms Li on her part of unauthorised withdrawals of funds from the plaintiff. Of course I make no finding whatever of wrongdoing on Ms Li’s part. That is a matter which must be left to trial, but these matters are sufficient to establish a good arguable case for the purpose of founding a Mareva injunction.
[48] The plaintiff must next establish a risk of dissipation. Mere suspicion that such a risk exists is not sufficient: Euro-National Corporation v Petricevic (1989) 2 PRNZ 351, 357. The plaintiff must demonstrate that there is a real risk that the defendant will dissipate or dispose of assets so as to render himself or herself judgment proof: Bank of New Zealand v Hawkins (p 454). In appropriate cases, the existence of a sufficient risk of dissipation may properly be inferred from evidence of the material facts upon which the plaintiff’s cause of action is based: Ontario Inc v Bauman (2000) 190 DLR (4th) 491, 507, Patterson v BTR Engineering (Aust) Ltd (1989) 18 NSWLR 319, 325. It is not necessary for the plaintiff to demonstrate that there is a risk of removal of assets beyond the jurisdiction. Dissipation within the jurisdiction is a risk falling within the scope of the mareva remedy: Bank of New Zealand v Hawkins (p 454); Third Chandris Shipping Corp v Unimarine SA.
[49] Here, given the nature of the plaintiff’s claim, and the evidence consistent with that claim to which I have already referred, there would appear prima facie, to exist sufficient risk to justify the making of an order.
[50]Against that, Ms Lim points to the following matters:
a)The transfers of funds to the accounts of the defendants has been completely open. There has been no attempt to create false accounts as might be expected where theft on a large scale exists. But I note an allegation by the plaintiff that Ms Li has been involved in the
improper alteration of certain transactional documents held by the plaintiff.
b)The first defendants, although Chinese born, are New Zealand residents and they have been transferring their Chinese assets into the New Zealand jurisdiction and not out of it.
c)The defendants have been extremely co-operative with both the plaintiff and the Serious Fraud Office, which has been asked to investigate the matter. For example, the defendants have put up their assets as security (on the case advanced by them).
d)The defendants were on notice as from 8 December 2004 that the plaintiff considered the defendants had stolen the plaintiff’s funds. Although the mareva order was obtained on 9 December 2004 it was not served on the defendants until 17 and 18 December respectively. During that time the defendants made no attempt to transfer or dissipate their assets.
[51] I accept that these are matters properly to be considered in the balancing exercise. But I conclude there is a sufficient risk of dissipation. The nature of this claim and the steps subsequently taken by the defendants by way of acknowledgement of responsibility to the plaintiff, despite the defendants’ disavowal of legal liability, are such as to raise a sufficient degree of concern about asset dissipation. I note all of the co-operation offered by the defendants to the plaintiff took place before these proceedings were served on the defendants. It cannot safely be inferred that the defendants will continue to preserve their assets in order to meet any claim which the plaintiff may succeed in establishing.
[52] Finally, I consider the overall justice of the case favours the grant of a Mareva injunction. The impact upon the defendants will be reduced by the taking of all proper steps to ensure an early trial, and by the making of appropriate orders in respect of living expenses and legal and accounting costs with which I deal later in this judgment.
Alleged failure by plaintiff to make proper disclosure
[53] The defendants allege material non-disclosure by the plaintiff of facts and circumstances which ought to have been placed before the Court, and argue that by reason of such failure to disclose the Mareva injunction ought to be discharged. The relevant principle is not in doubt. It is summarised in Lloyds Bowmaker Ltd v Britannia Arrow Holdings PLC (Lavens, 3rd party), [1988] 3 All ER 178, where the Court of Appeal put the principle in this way:
An applicant who applies ex parte for a Mareva injunction is under a duty to the Court to make the fullest disclosure of all material facts, including any defence he has reason to anticipate may be advanced. If he does not comply with that duty he will normally be deprived of the benefits of the order without consideration of the merits, and irrespective of whether the non- disclosure was innocent or deliberate, or whether he would have obtained the order if he had made full disclosure.
[54] The first ground relied upon by the defendants and the most concerning, is the failure of the plaintiff in the course of its application to the Court to disclose the substantial scale of the investment made by the defendants, and in particular Ms Li, in the plaintiff company. I have alluded earlier to the detail of that investment. On Ms Li’s evidence something over $2 million was applied by her and her family in the plaintiff.
[55] For its part, the plaintiff’s evidence incorporated in an affidavit by Mr Zhang, in support of its application of 9 December 2004, disclosed the fact of Ms Li’s shareholding in the plaintiff, but not the overall level of investment made by her in the plaintiff. The affidavit did however, emphasise the relative modesty of the salaries of Ms Li and her husband (in each case less than $30,000 per annum gross) and those limited salaries were also referred to in counsel’s memorandum in support of the ex parte application. The plaintiff was bound to disclose anything which might be relevant to the Court’s consideration of the application, and in particular anything which might relate to any defence which the plaintiff ought to have anticipated that the defendants might raise.
[56] The plaintiff’s position is that it believed it had uncovered a substantial fraud and that Ms Li, on being taxed with that, prior to the swearing of Mr Zhang’s
affidavit, had not contended that payments received by her and/or by her family were not stolen from the plaintiff, or that they simply represented a repayment of moneys invested by the family. Indeed, Mr Zhang, with some justification, points to the signing of a cheque by Ms Li for $300,000 prior to the making of the application to the Court, as evidence that Ms Li accepted that there had been wrongdoing on her part and she had a liability to the plaintiff accordingly.
[57] When the application was made to the Court therefore, the plaintiff was justified in believing that the defendants had no defence to the plaintiff’s claim, and against that background the failure of the plaintiff to disclose to the Court the detail of the defendants’ financial interests in the plaintiff and the nature and scale of the family’s investments with the plaintiff, does not in my view, call for the imposition of the sanction which a Court may impose in cases of material non-disclosure.
[58] Of course, since the making of the application to the Court and the granting of the Mareva injunction there have been two significant developments. First, the defendants have executed the acknowledgements of liability to repay substantial sums to which I have earlier referred. Those acknowledgements tend to support Mr Zhang’s understanding as at 9 December 2004, that Ms Li did not deny her responsibility to repay moneys to the plaintiff. Second, as it transpires, the defendants contend that there is no shortfall in the funds of the plaintiff for which they are responsible, but that is a matter which has arisen subsequent to the grant of the Mareva injunction and represents a stance which was unknown to the plaintiff, as at the time of the application to the Court.
[59] Having said that, there is no doubt that it would have been desirable for the plaintiff to disclose in greater detail than occurred, the precise nature and extent of the defendants’ financial involvement with the plaintiff. The plaintiff’s focus on the modesty of the first defendants’ earnings with the plaintiff tended to suggest that the scale of the transactions between the plaintiff and the defendants could not possibly have been the subject of lawful dealings, having regard to the defendants’ limited means, when in truth the defendants have access to very substantial funds, a good proportion of which were already invested with the plaintiff.
[60] However, Mr Zhang was entitled to believe when he swore his affidavit on 9 December 2004, that Ms Li did not contend that the withdrawals of large sums of money from the plaintiff was justified. For that reason the plaintiff was entitled to regard the detail of the defendants’ investments with the plaintiff as something which was not material to the application for the Mareva injunction, and I therefore conclude that the defendants are not entitled to a discharge of the injunction on that ground.
[61] The next two grounds can conveniently be considered together. It is argued that the plaintiff ought to have disclosed:
a)The extent of the investigations conducted to date in respect of the financial records of the plaintiff in greater detail than was in fact disclosed;
b)The detail of payments made by the defendants to the plaintiff, which are said to have matched at least to some degree the withdrawals made by the defendants and of which the plaintiff complains.
[62] These linked claims amount in reality to a contention that the plaintiff ought, prior to making application to the Court, to have completed a thorough investigation of its financial records in the course of which it should have matched deposits and withdrawals relating to the defendants, and so reached a final conclusion as to the state of the account as between the plaintiff and the defendants. Linked with that contention is a claim that the plaintiff has, through Mr Zhang’s first affidavit, selectively disclosed evidence to the Court which tends to suggest that Ms Li has been involved in the alteration of transaction slips for improper purposes.
[63] I think that the defendants are putting the plaintiff’s obligation too high. The evidence is that it had for some time been undertaking an investigation of its records which had reached the stage at which suspicion fell upon the defendants and upon Ms Li in particular. It felt justified, by 9 December 2004, in making an application for a Mareva injunction. As I have indicated, Ms Li’s initial reaction to being taxed with claims of impropriety was not inconsistent with the plaintiff’s suspicions. It
was not incumbent upon the plaintiff to wait until its investigations had been concluded and every avenue of inquiry exhausted before it approached the Court for ex parte relief. I do not think there is any substance in this ground of complaint.
[64] The next ground relied upon is the failure of the plaintiff to make full disclosure to the Court of the circumstances in which the acknowledgements of financial responsibility to the plaintiff were signed by the first defendants. The defendants complain that the plaintiff failed to include among the exhibits to Mr Zhang’s affidavit, Chinese versions of the documents executed by the defendants. They say that neither did the plaintiff disclose as it ought to have, that the defendants did not speak or write English, and that accordingly the English translations of the Chinese acknowledgements should be regarded with circumspection.
[65] On behalf of the defendants it is said that had the Court been aware of the their difficulties with the English language then it might have ordered an independent translator to translate the Chinese documents. There may also have been a doubt raised in the Court’s mind as to whether the defendants were fully aware of the contents of the English documents they signed.
[66] There is nothing in this point. The defendants accept that they signed a Chinese version of the acknowledgement. There is a dispute as to its proper interpretation but the provision to the Court of the Chinese version would not have assisted to the slightest degree a non-Chinese speaking Judge. Moreover, the complaint here relates not to the December 9 injunction application but to the subsequent ex parte application of 17 December 2004, in which it will be recalled the plaintiff sought to exempt from the ambit of the earlier injunction assets which the defendants had agreed to transfer to the plaintiff, subsequent to the initial grant of the injunction.
[67] The defendants say that the 17 December application being made on an ex parte basis, the usual rules requiring complete disclosure applied, and that the failure to produce the Chinese versions of the acknowledgement signed after the grant of the initial injunction justifies the discharge of the injunction.
[68] I have already ruled that this point lacks merit, but even had I concluded that there had been a relevant failure to disclose, that would not have justified the discharge of the 9 December injunction. It might however, have justified the discharge of an ex parte order had it been made on the 17 December application.
[69] Finally, the defendants claim that the plaintiff has inadequately disclosed to the Court in the course of the 17 December application, the detail of what passed between the parties between 9 and 17 December, and in particular, it is said the plaintiff has made inadequate disclosure of circumstances which go to the defendants’ duress defence.
[70] There are two answers to that contention. First, the claim relates to the 17 December application. It would not in my view, even if made out, result in the discharge of the 9 December order. In the event, the 17 December application was not dealt with on an ex parte basis. It is among the matters to be dealt with now.
[71] Second, there is no merit in the defendants’ complaint. The plaintiff sees the acknowledgements signed by the first defendants as having been the product of properly conducted negotiations which took place in Chinese, and during the course of which the defendants were at no material disadvantage. The complaints of duress now made by the defendants had not arisen as at 17 December, and there was no basis upon which it could properly be contended that the plaintiff ought to have disclosed a defence of which it was then unaware.
[72] Although the defendants argue that there has been a wholesale failure on the part of the plaintiff to make proper disclosure to the Court, and that the plaintiff has acted in bad faith in failing to make such disclosure, I have concluded that overall the defendants’ complaints are not of sufficient weight to justify the discharge of the 9 December injunction.
Events subsequent to 9 December 2004
[73] In their application of 17 February 2005 (initially filed ex parte), the defendants complain of the manner in which the plaintiff has dealt with certain of
their assets since 9 December 2004, and contends by reason of the plaintiff’s alleged misconduct the interim mareva order ought to be discharged, and indeed, claims that the proceeding itself ought to be dismissed. I have set out the terms of this application earlier in this judgment.
[74] There are two groups of impugned transactions; the first relates to the payment of funds by Ms Li’s sister in China to Mrs Wang, and thence to the plaintiff. It will be recalled that the sums involved were respectively HK$2,950,000 and RMB956,700. The defendants contend that the acceptance by the plaintiff of these sums on the admitted basis that the funds have subsequently been used by the plaintiff for its ordinary purposes, constitutes a breach of the 9 December Mareva injunction.
[75] I accept Mr Chisholm’s submission that these assets were simply not within the reach of the Mareva injunction. The payments were made not by a defendant but by Ms Li’s sister. There is no evidence that in making the payments she was deploying funds of the defendants which fell within the scope of the Mareva injunction, and so there is no evidence that the utilisation of the funds by the plaintiff might amount to a breach of the 9 December order.
[76] The defendants also complain that the plaintiff has failed to honour Ms Li’s understanding that the sums so paid were to be held on trust by the plaintiff, pending the outcome of the proceeding. That understanding is denied by Ms Xin, who was involved for the plaintiff in organising the payments. Although the defendants’ solicitors wrote to Mrs Wang to record the defendants’ understanding of the basis upon which the moneys had been paid to Mrs Wang, there has been no acknowledgement by her or by anyone on behalf of the plaintiff that the funds are so held. As I observed earlier, there is nothing in the acknowledgements of 9 and 10 December 2004 to suggest that the repayments contemplated in those documents were to be held as security by or on behalf of the plaintiff. In those circumstances the defendants cannot be regarded as having made out their claim of breach on the plaintiff’s part of the terms of the 9 December order.
[77] The second ground of complaint is that sums of $85,826.53 and $450,000 respectively, held in the defendants’ margin trading accounts maintained at third party institutions have been improperly applied by the plaintiff in breach of the terms of the 9 December injunction.
[78] Mr Chisholm contends that the plaintiff has not beneficially appropriated the sums concerned. It has however, debited the accounts of the defendants in its own books with the sums involved, and closed the margin trading accounts with Saxo bank pursuant to an authority given to the plaintiff by the defendants. But the funds concerned remained in the hands of the plaintiff, which accepts they are frozen in terms of the 9 December order. The authority to which the plaintiff refers is the document signed by the first defendants on 13 December 2004, and headed ‘Statement of debts repayment’ which for convenience I reproduce below.
We, Qui Yun Li and Hong Lai Zhao, hereby confirm that would like to use the following assets to repay the money we have taken from An Ying International Financial Limited by using false transaction sheets to exchange the Hong Kong Dollars transferred from Hong Kong to An Ying International Financial Limited A/C in New Zealand into New Zealand Dollars (total New Zealand $5.76 millions, as so far been discovered by 13 December 2004) and then transferred into the bank accounts of Qiu Yun Li, Hong Lai Zhao and Yin Di Jiang in New Zealand.
1. All shares Qiu Yun Li held in An Ying Group Ltd, being valued at
$560,000.00 New Zealand Dollars.
2. All shares Qiu Yun Li held in An Ying International Ltd, being valued at
$90,000 New Zealand Dollars;
3. The fund of $600,000 lent to An Ying International Financial Ltd through An Ying Investment Fund;
4. The fund of $250,000 lent to An Ying International Financial Ltd, as cash deposit;
5. All balance from Man Financial Australia Pty Ltd. margin trading A/C No.1668 and 1818 being valued at New Zealand $1,100,000.00;
6. All balance from Saxo Bank margin trading A/C No. 334879 and 334026 being valued at New Zealand $470,000.00;
7. Property at 2 Essex St, Kelburn, Wellington (CT No. WN44A/444) being valued at New Zealand $230,000.00;
8. Property at unit 904, 171 Queen St, Auckland Central (CT No. NA112C/195) being valued at New Zealand $200,000.00;
9. Cash payment of New Zealand $980,000.00 or equivalent amount in other currency to be transferred to An Ying International Financial Ltd from overseas by 17 December, 2004.
There are further New Zealand $1,280,000 which claimed have been paid back to An Ying International Financial Ltd, but need further evidence provided by Qiu Yun Li and Hong Lai Zhao and to be confirmed by An Ying International Financial Ltd (This undertaking covers the previous undertaking dated on 10 December, 2004, written in Chinese).
Signed by: Signed by:
‘Qiu Yun Li’ ‘Hong Lai Zhao’
Date 13.12.04 Date 2004 12.13
[79] The relationship between the plaintiff and the defendants in respect of the margin trading accounts is simply that of debtor and creditor. The plaintiff accepts that its debt to the defendants remains unaffected by the internal bookkeeping arising from the closure of the margin trading accounts. That is, the sums concerned remain subject to the terms of the Mareva injunction. The margin trading accounts have been closed and the funds are within the plaintiff’s control, but the debt owed by the plaintiff to the defendants in respect of the funds so derived remains subject to the injunction. While it would have been desirable to leave the balances unadjusted in the books of the plaintiff, Mr Chisholm’s acknowledgement on behalf of the plaintiff that the relevant debt owed by the plaintiff to the defendants remains subject to the injunction, is a sufficient answer to the point raised by the defendants.
Variation application: living expenses, legal and accounting fees
[80] The defendants seek variation of the 9 December order to enable them to meet their own living expenses and to pay legal, accounting and translation expenses pending the hearing of the substantive proceeding.
[81] The legal principles relevant to such an application are not in dispute. The purpose behind the Mareva injunction remedy must be borne in mind. It is to prevent a plaintiff from being deprived of the proceeds of an action, should it be successful, by a defendant transferring assets abroad, or dissipating assets within the jurisdiction. The remedy is not intended to give the plaintiff priority over those
assets or to punish a defendant for his misdeeds, or to enable a plaintiff to exert pressure on a defendant to settle an action: PCW (Underwriting Agencies) Ltd v Dixon [1983] 2 All ER 158. It is normal to permit a defendant an exemption from the order in respect of legal costs incurred in defending the relevant proceeding and to permit him to meet day to day living expenses: Mansour v Mansour (1990) FCR 17; CBS v Lambert [1982] 3 All ER 237, 242.
[82] Moreover, the level of allowances permitted a defendant must be realistic and not parsimonious. A defendant ought not to be required to reduce his or her living standards at the behest of a plaintiff: PCW (Underwriting Agencies) Ltd v Dixon at p 162. The level of the allowance made for legal costs ought to be reasonable in all the circumstances and sufficient to permit the defendants to take competent legal advice: Halifax plc v Chandler [2001] EWCA Civ 1750.
[83] Existing creditors of a defendant who is subject to a Mareva injunction are entitled to have their contractual commitments nevertheless honoured. The Mareva injunction jurisdiction is not intended to give a plaintiff security or priority in respect of the amount claimed: Iraqi Defence Ministry v Arcepey Shipping Co [1980] 1 All ER 480.
[84] Mr Chisholm refers to the fact that the plaintiff’s claim is of a proprietary nature in that it claims the right to trace funds allegedly misappropriated from it by one or more of the defendants. In those circumstances, Mr Chisholm argues the principle outlined in Fitzgerald v Williams [1996] QB 657, 669 is relevant. There, Sir Thomas Bingham MR distinguished between funds of the defendants which arguably constitute the trust fund to which the plaintiff laid claim, and the defendants’ own funds. The Court accepted the proposition that a defendant who seeks variation of a Mareva injunction in order to meet living expenses and legal costs, in the first instance should resort to his own funds. Only when they are exhausted should he be entitled to look to the fund in which the plaintiff claims an interest.
[85] The real difficulty arises however in a case such as this, where the plaintiff is not, at least at this stage, able to point to any particular fund or funds claimed to
represent the misappropriated amounts, but nevertheless the plaintiff’s claim is of such magnitude as to suggest that if it the claim is made out, that the plaintiff will seek to trace across a wide range of the defendants’ assets.
[86] Counsel did not analyse the various statements of assets filed by the defendants, for the purpose of endeavouring to identify those which might be regarded as free from consideration for a proprietary claim. The difficulties of balancing on the one hand the basic entitlement of a litigant to instruct solicitors and counsel, and on the other the desirability of preserving, so far as is possible, a fund to which a plaintiff makes a proprietary claim, were illustrated in an unreported English case: Sundt Wrigley & Co Ltd v Wrigley Court of Appeal (Civil Division) 23 June 1993. That decision was carefully considered in United Mizrahi Bank Ltd v Doherty [1998] 1 WLR 435, 439, where the following passage appears:
… there is the important decision of Sundt Wrigley & Co Ltd v Wrigley (unreported), 23 June 1993, Court of Appeal (Civil Division) Transcript No 685 of 1993, in which Sir Thomas Bingham MR gave a detailed judgment, with which Mann and Peter Gibson LJJ agreed, considering a first instance decision in which very careful consideration had been given to a number of questions, including the question of whether a litigant should be driven from the judgment seat by not having legal representation on the one hand, or whether the fund should be expended on the other. He concluded that it was only in an exceptional case, where the merits could be gone into for the purpose of satisfying a court that the proprietary claim was so strong that it could be demonstrated that such proprietary claim was well founded at an interlocutory stage, that a defendant should not be free to draw on enjoined funds to finance his defence. Absent the intervention of such considerations, the ordinary balancing act would apply, albeit that the question was formulated by Sir Thomas Bingham MR in this way:
‘is there so great a risk of injustice to the defendant if he is not represented as to justify recourse to enjoined funds which may be shown to be the plaintiff’s funds held by the defendant as trustee or constructive trustee?’
He further said:
‘a careful and anxious judgment has to be made in a case where a proprietary claim is advanced by the plaintiff as to whether the injustice of permitting the use of the funds by the defendant is outweighed by the possible injustice to the defendant is he is denied the opportunity of advancing what may of course turn out to be a successful defence.’
[87] There can be no question in this case but that the defendants must have appropriate legal representation. There are difficult factual, accounting and legal
questions to be determined and given that the defendants have, on the evidence, a poor command of English, it would be simply impossible for them to mount, unrepresented, any defence to a claim brought by a well resourced plaintiff.
[88] Accordingly, I think the necessary balancing exercise must result in a proper allowance to the defendants for their legal costs.
[89] The defendants have filed an affidavit which exhibits on a confidential basis (solicitors and counsel only), details of legal, translation and accounting expenses incurred by them in respect of this proceeding. I refrain from setting out in this judgment details of the amounts involved, but the total sum is very large – well into six figures.
[90] I am disposed to vary the order by providing for payment of that part of those costs which relates to this proceeding, but I have no information as to the source of the funds intended to be utilised for that purpose, and ask that counsel for the defendants file a memorandum or affidavit setting out those details. If possible, the material furnished to the Court should include such detail as is available to demonstrate that the plaintiff, even if successful overall at trial, is unlikely to be able to trace its funds to the source from which it is proposed to pay the outstanding accounts.
[91] The plaintiff may file a memorandum in response to the material provided by the defendants once it is received. The defendants’ material is to be filed and served within 14 days of the date of this judgment, and any memorandum from the plaintiff is to be filed and served within seven days thereafter.
[92] Ms Li has deposed to ordinary family living expenses amounting to $9,200 per month. It has not been suggested by Mr Chisholm that this sum is unreasonable. Ms Li had provided a certain amount of detail. In all the circumstances I am satisfied that the defendants ought to have a variation of the injunction to permit access to their assets for the purpose of withdrawing $9,200 per calendar month, so that they may meet their ordinary living expenses.
[93] Although I was not addressed upon the topic, I infer that the defendants propose to utilise the same bank account as was referred to in paragraph 1(a) of the Variation Order of Winkelmann J dated 21 December 2004, namely, the ASB account 12-3057-0884680-00, in the name of Heng Ji Trust. I make an order accordingly. If my assumption is wrong, then counsel for the defendants may file a memorandum setting out alternative proposals. Counsel for the plaintiff may respond by memorandum. The defendants are to have 14 days following the delivery of this judgment, and the plaintiff seven days thereafter, within which to file any such documents.
[94] In the circumstances of this case, involving a claim by the plaintiff to proprietary remedies, and where there are indications that the plaintiff has a substantial case, I believe that the appropriate course is to direct that a fresh application should be made, if it is desired by the defendants to resort to assets subject to the injunction in order to pay future defence costs.
Adequacy of plaintiff’s undertaking as to damages
[95] Undertakings as to damages have been filed, both by An Ying International Financial Limited and An Ying Group Ltd. The defendants have filed an affidavit by Mr N J Patterson, a chartered accountant which analyses the available financial statements of these companies for the purpose of determining their adequacy. Mr Patterson points out that he does not have access to everything he needs in order to reach a firm conclusion as to the solvency and liquidity of the two companies. However, his preliminary view is neither of them satisfies the solvency test provided for in s 4 of the Companies Act 1993.
[96] Mr Chisholm takes issue with certain of the assumptions made by Mr Patterson and argues he has insufficient information to enable him to reach that conclusion. In particular Mr Chisholm points to the fact that trade creditors for An Ying Group Ltd total only $16,310, and that its current account liabilities include a debt of approximately $2.9 million to its wholly owned subsidiary, An Ying International Financial Limited.
[97] Having said that, Mr Chisholm accepts that the financial position of the two companies is questionable.
[98] Ms Lim argues that the Court should require the plaintiff to pay into Court the sum of $150,000 as security to support the undertakings already lodged.
[99] As always it is necessary to balance the interests of the parties and to weigh competing considerations. In the end, I have concluded that it is not appropriate to direct the giving of further security. In reaching that conclusion I have had regard to the following matters:
a)This is a proprietary claim in which the plaintiff appears to have some realistic prospect of success;
b)It is arguable for the plaintiff that the currently modest financial position in which the two companies giving undertakings find themselves arises from a shortfall in funds for which the defendants are at least partly responsible;
c)This being a case of the grant of a Mareva injunction, the damage which the defendants are liable to incur, will result from an inability to access their own funds which remain frozen for the time being. The likelihood of that damage will be significantly ameliorated by the orders which I have made in respect of the defendants’ living expenses and their entitlement to access funds for the purpose of meeting legal, translation and accounting costs.
[100] Further commitments, including commitments to third parties, can be the subject of further application to the Court if necessary.
Identity of the plaintiff
[101] Ms Lim, quite properly, draws the Court’s attention to the fact that, while the notice of proceeding and undertaking as to damages refer to only one plaintiff, An
Ying International Financial Limited, other documents include An Ying (Wellington) Ltd as a plaintiff. I have alluded to this issue at the outset of the judgment.
[102] The plaintiff must regularise the position. Either An Ying (Wellington) Ltd should appear in the body of the statement of claim as a party having a proper interest and entitled to appropriate relief, or it should be deleted from the statement of claim entirely. An amended statement of claim is to be filed and served within 14 days of the date of this judgment.
The plaintiff’s application of 17 December 2004.
[103] In this ex parte application the plaintiff sought to exempt from the ambit of the Mareva injunction certain assets which it was claimed, the defendants had agreed to transfer to the plaintiff. The Court earlier declined to deal with that application otherwise than on notice. It was formally before the Court, along with the other applications dealt with in this judgment, but no argument was addressed to the Court on the matters raised in the application, which at present appears inapposite.
[104] The application is formally adjourned. Any party may bring it on for hearing if the circumstances warrant.
Disclosure of Chinese assets by second defendants
[105] In a written synopsis of submissions, Ms Lim referred to an issue regarding the extent of disclosure by the defendants of their assets situated in China. The matter received little attention in oral argument and appears unrelated to any of the main issues arising in the various applications with which I have dealt.
[106] In her synopsis Ms Lim refers to evidence of certain deponents which indicates that Chinese banks, at which various of the defendants maintain accounts, will not provide details of transactions and account balances unless the defendants personally attend at the Chinese branches of the banks concerned.
[107] The second defendants, the parents of Ms Li, are not New Zealand residents. Indeed, I understand they have now returned to China, having been in New Zealand during the relevant period only for the purpose of visiting their family. Ms Li is however, a New Zealand resident. Ms Lim submits that the Court does not have the power to make an order requiring a non-New Zealand resident to disclose foreign assets, but accepts the position is different in the case of Ms Li. She points also to the purposes of the mareva jurisdiction which do not include a requirement that the defendants make disclosure to the plaintiff, to enable the plaintiff to execute a future judgment.
[108] The passage in the synopsis was not directed by Ms Lim to any issue which arises on an application currently before the Court. It appears to address in advance possible claims of inadequate disclosure which might be forthcoming from the plaintiff. The better course is, I think, to permit the plaintiff to raise the adequacy of disclosure in respect of Chinese assets, as and when it thinks fit. The Court can then deal with the issue at that stage.
Summary
[109]In summary, the effect of this judgment is that:
a)The defendants’ application for discharge of the Mareva injunction of 9 December 2004 on the merits is dismissed. The terms of that injunction are confirmed.
b)I decline to discharge the injunction either on the grounds of alleged material non-disclosure, or post-injunction conduct of the plaintiff;
c)The defendants are entitled to living expenses of $9,200 per month from the Heng Ji trust account maintained at the ASB. They are also entitled to withdraw from assets frozen by the injunction a sufficient sum to meet legal, translation and accounting expenses upon the terms set out in the judgment;
d)I decline to require the plaintiff to furnish further security to support the undertakings as to damages already lodged;
e)The plaintiff must regularise the pleadings with respect to the identity of the plaintiff or plaintiffs in the proceeding. An amended statement of claim is to be filed and served for that purpose within 14 days of the date of this judgment;
f)The plaintiff’s application of 17 December 2004 (initially filed ex parte), is adjourned for future argument if necessary.
g)The issue of the extent to which the second defendants are bound to disclose Chinese assets is deferred for later consideration if counsel require that.
Costs
[110]Costs are reserved. Counsel may file memoranda if they cannot agree.
Future conduct of this proceeding
[111] It is clearly in the interests of all parties that this case proceed to final resolution as soon as possible. The plaintiff claims a proprietary interest in a very substantial sum, said to be in the hands of the defendants. If that claim is valid, then drawn out interlocutory proceedings will simply increase the amount which the defendants will need to expend on legal, translation and accounting advice, with the result that funds otherwise available to the plaintiff, will be depleted.
[112] For the defendants, there are obvious and immediate benefits in resolving this dispute as soon as possible, so that the Mareva injunction can be discharged and the defendants are left free to get on with their lives.
[113] While this proceeding will of course take its place in the case management regime, which the rules prescribe, the parties are urged to take the initiative by
endeavouring to truncate interlocutory matters (consistent with the proper requirements of the parties), with a view to an early determination of the substantive dispute between them. The question of a priority fixture is a matter for the Civil List Judge, but I record my view for what it is worth, that there are some features of this case which qualify it for serious consideration for an early fixture.
C J Allan J
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