Seng Mi Commercial Company v John Y. Singh & Company Ltd [1997] FJLawRp 8; [1997] 43 FLR 66 (6 March 1997)

[1997] 43 FLR 66

HIGH COURT OF FIJI ISLANDS

SENG MI COMMERCIAL COMPANY

v

1. JOHN Y. SINGH & COMPANY LIMITED
2. JOHN YOGENDRA SINGH

[HIGH COURT, 1997 (Fatiaki J) 6 March]

Civil Jurisdiction

Practice: Civil- mareva injunction- writ ne exeat regno- principles governing their grant.

The Defendants sought to set aside a mareva injunction and a writ ne exeat regno which had been granted against them ex parte. Dismissing the application the High Court emphasised the relevance of prima facie evidence of fraud, and explained the purpose of the orders made and the principles governing their grant.

Cases cited:
;

A v. C [1981] 1 QB 956

Al Nahkel for Contracting and Trading Ltd v. Lowe&#16href="http://www.paclii.orgi.org.vu/cgi-bin/LawCite?cit=%5b1986%5d%201%20All%20ER%20729" title="View LawCiteRecord">[1986] 1 All ER 729

Bayer A.C. v. Winter & Ors [1986] 1 All ER 733

Bekhor Ltd v. Bilton [1981] EWCA Civ 8; [1981] 1 QB 923

Chartered Bank klouche [1980] 1 All ER 205

Felton v. Callis [1968]l ER 673

GiGirdhar Lal Raniga v. Merchant Bank of Fiji 39 FLR 181

i>Jackson v. Sterling IndusIndustries Ltd [1987] HCA 23; (1987) 987) [1987] HCA 23; 162 CLR 612

Leslie Redvers Martin v. BNZ and FDB (Cppeal No. 73/84)

[1969] 1 WLR 1241

Nini>Ninemia Corp. v. Trave Schiffahrts [1984] 1 All ER 398

Patterson v. . Engineering (Aust.) Ltd. ( 18 NSWLR 319

9

9

Robert Rogers v. Pacific Hotels & Development Ltd Civ.on 1132/85

ThThird Chandris Shipping Corp v. Unimarine [1979] 2 All ER 972

>TSTSB Private Bank Inteonal S.A. v. Chabra [1992] 1 WLR 231

WBC v. Satish Chandra&ndra Cction No. 356/91

D. Sh/i> fo60;for the Plaintiff
H. Lateef&#1r thendants
&#16>
Fatiaki J&#1r> #160;
On the 17th Janu99y 1997 this Court granted ex-parte against the dantsreva injunction aion and also issued a Writ Ne Exeat Regno egno against the second defendant preventing him from leaving the Court’ssdiction. The facts of the the case may be briefly outlined for present purposes.

The piff company is a Ks a Korean company which entered into an agreement with the 1st defendant company to purchase trochus shell blank buttons for the Korean markean agreed price of $US97,825.70. It is common ground that that the plaintiff company paid the purchase price to the 1st defendant company through a Letter of Credit redeemed at the 1st defendant company’s account at the A.N.Z. Bank, Marks Street Branch in Suva. It is also common ground that the container which was sent by the 1st defendant company in fulfilment of the plaintiff company’s order arrived in Pusan, South Korea and when opened was found to be empty.

In its Statement of Claim the plaintiff company amongst other things :

‘ed that the the defendants acted fraudulently in strippingplaintiffs container and sending an empty container to the plaintiff.’ [para : 12(h)]2(h)]

and further that :
&

‘Without the the second defendant the plaintiff’s claim against the first defendant would be futile as the compa only a shell company.’ (para.16)

and the plaintifpany seny seeks to reco recover the full purchase price paid, a Mareva injunction and an order restraining the second defendant from leaving Fiji.

In itidavit dated 16th 16th Janu997 in support of the injuninjunctive relief, the plaintiff company’s local authorised agent deposed inter alia :

#8216second defendant iant is the principal shareholder of r of the first defendant and was the person who was engaged in all materialings with the plaintiff.’ (para.4)

&#8216t) The defendefendantsdants had tried to blame the shipping agents. However the Shipping Agents records confirms the deliberate fraud that was perpetrated by the Defendants in this matter.&#82para.16)

and fand further> #160;

‘That the second defendant and his family are planning to migrate to United States and that they are likely to go at any moment.’ (para.17)

The factual backd of thof the case is that laintiff company claims to s to be the victim of a fraud which it infers was master-minded by the second defendant. It has placed befhe Court affidavit evidence which constitutes ‘a good good arguable case’ that a fraud has been committed, though, whether such a fraud may hereafter be proved depends upon the effect of the evidence given at the trial of the action.

Ban the above circumstaumstances this Court granted the plaintiff company a Mareva injunction limited to the sum of $US98,000 and d a Writ Ne Exeat Regno conditional upon the 2nd defendant surrendering his passport and annd any other travel documents and air tickets that he might have to the High Court.

In this l regard it is t is common ground that pursuant to the Court’s order the second defendant was stopped by immigration officials from leaving the country on the 18th of January 1997 i.e. th following the issue of thef the Writ ne exeat Regno.

On January 1997 the defe defendants issued an inter partes motion seeking the dissolution of the Mareva injunction and the discharge of the Writ Ne Exeat Regno.

The affidavit of thend defendant in support of t of the motion if I may say so, lacked simple commercial transaction details, was evasive and sought to dny responsibility or any knowledge of, or indeed, any inclination to find out how a full coll container that was despatched by the defendant company to local shippers in fulfilment of the plaintiff company’s order arrived empty in Pusan, South Korea. He does not deny however that payment has been received by the 1st defendant company or that he was the person engaged in all material dealings with the plaintiff. [See : paras 4 and 8
Inbr>In this regard in the Ninemia Corp. v. Trave Schiffahrts Mustill J. relevantlerobserobserved at p.409 :

̶“The judge whge who hears the proceedings inter partes must decide on all the evidence laid before him. The evidence adduced by the defendant will normally be looked at for the pus of deciding whether it isit is enough to displace any inferences (of danger of dissipation) which might otherwise be drawn from the plaintiff’s evidence. But I see no reason in principle why, if the defendant’s evidence raises more questions than it answers, and does so in a manner which tends to enhance rather than allay any justifiable apprehension concerning dissipation of assets, the Court should be obliged to leave this out of account.”

Mr. Lafor the defendantndants in moving the motion prefaced his submissions by stating that he did not propose to address the merits of the plaintiff company’s , in particular, the very serious allegations of fraudulentulent dealings made against the defendants. He made 5 submissions which may be summarised as follows :

(1) ـ Cl doubtdoubted the authoruthority of Mr. Cheong Chang Han to act for the plaintiff company or give an undertaking in damages on its behalf ;

(2); ـ T00; Thas noence thce that that the defe defendants’ assets were being dissipated or transferred out of the courts jurisdiction or being otse deith so as to render them ‘judgment-freeRe’ ;

(3) &160; ـ Thsre is no evidencidence that the first defendant company is being wound up or will cease operations in the absence of the second defendant ;

&#/p> <ـ The effect of the court&ourt’#8217;s Ma;s Mareva order was improperly to provide security for any money judgment the plaintiff company might obtain or recover against the defendants ;

(5) ـ Taintiffntiff company has has no cause of action or claim against the second defendant and accordingly the writ ne exeat regno was improperly issued at him&#160In essence defence counsel questions thns the core correctnrectness on principle of the Court granting the Mareva injunction and the writ ne exeat in the absence of sufficient supporting evidence or proper grounds for the same.

I can deal briefly woun counsel’s fifth submission concerning the issuance of the writ ne exeat regno in the absence of a cause of action. In regard Megarry J. laid down in [190;[1968] 3 .R. 673, bas, bas, basing himself on Section 6 of the Debtors Act 1869 (U.K.), four conditions or requirements which had to be first satisfied before the writ could be issued. These are :
&

‘(i)The actioaction is one in which the defendant would formerly have been liable to arrest at law, (ii) A good cause of action for at least £50 is established, (iii) There is probable cause for believing that the defendant is about to quit England unless he is arrested, (iv) The absence of the defendant from England will materially prejudice the plaintiff in the prosecution of his action.’

Section 6 of our Debtcts Act (Cap.32) however, is far less stringent in its requirements than its U.K. counterpart. It merely requires the Court to be satisfied that the defendant in any action for the recovery ofm exceeding $10 is ‘a216;about to abscond’, which, according to the Shorter Oxfortionaryy, means ‘to hide oneself ; to go away hurriedly and secretly’.
see : Lioods OrderOrder Storestores v. I.R.C. [1969] 1 W.L.R. 1241 per Lord Denning M.R. at p.1254]

aation, I was sati that thatplaintiff company had an arguable claim against tnst the second defendant, and further, tha, that the presence of the second defendanthe country was necessary for the service of the plaintiff&tiff’s claim upon him, and further, to prevent him from absconding.

If I should be wroneverwever in the issuance of the writ ne exeat regno then there is no doubt in my mind that this Court has the necessary power and jurisdiction to issue an injunction restraining the second defendant from leaving the country and requiring him to deliver up his passport on the ground that they are necessary and reasonable orders which are ancillary to the due performance of the Court’s function of protecting the plaintiff’s rights to a Mareva injunction pending the hearing of the action. [see : Bayer A.C. v. Winter ane Others [1986] 1 All E.R. 733]
seeW.B.C. v. Satish Chandra Civil Action tion No. 356 of 1991; Robert Rogers v. Pacifte Hotels & Development Ltd. Civil Action No. 1132 of 1985; Leslie Redvers Martin v. B.N.Z. and F.D.B. Civil Appeal No. 73 of 1984 ;ar Laiga v. Merchant Bant Bank of Fiji 39 FLR 181 #160;and [1986] 1 All E.R. 729) in which it was

“ : The: The court had jurisoiction to i to issue a writ ne exeat regno in support of a Mareva injunction in orderrevenefendant from leaving the jurisdiction with assets in order to frustrate a lawfulawful clai claim before the Court.”

Ho it is not so much thch the Court’s jurisdiction which is in doubt, rather counsel raises the established parameters withich the particular jurisdiction is exercised and in particular, counsel drew the Court’#8217;s attention to the decision of the High Court of Australia in . [1987] HCA 23; (1987)1987) [1987] HCA 23; 162 C.L.R. 612 where the Court :#160;

“ : When an order for the preservation of assets gots goes beyond simply restraining the defendant from disposing of specificts until after judgment it must be framed so as to come wite within the limits set by the purpose for which it can properly be intended to serve. That purpose is not to create security for the plaintiff or to require a defendant to provide security as a condition of being allowed to defend the action against him, but to prevent a defendant from disposing of his actual assets (including claims and expectancies) so as to frustrate the process of the Court by depriving a plaintiff of the fruits of any judgment obtained in the action.”

“per inc ... as a general propon, itn, it should now be accepted ... that a Mareva injunction can be granted if the circumstances are such that there is aer ofdefendant absconding, or a danger of his assets bets being removed out of the jurisdiction tion or disposed of within the jurisdiction, or otherwise dealt with so that there is a danger that a successful plaintiff will not be able to have his judgment satisfied.”

The order was set asideaside in that case however, differed fundamentally from that which this Court granted ex-parte in so far as it actually required the defendant : ‘to provide security in the sum of $3,000,000 ...’. No such requirement is imposed in this instance.

Needless y I cannot acct accept that the Court’s orders offended any of the parameters set out in the above case. The traditional or accepted form of a Mareva order was described by Robert Goff J#160;A. v. C. [1981]1981] 1 Q.B. 956 at p.959 as being :

“... in a widy wide form ; it restrains the defendant from removing from the jurisdiction or otherwise disposing of or dealing with any of his assets within the jurisdict.. save as in so far as such assets do not exceed in value alue the sum of the plaintiff’s claim.”

Nor in my, and contrarytrary to defence counsel’s submissions, does the Court’s order have the improper effect of granting orring to the plaintiff company, a fund against which it may enforce any judgment it may even eventually obtain. Quite plainly it does not.

Nevertheless iof assistssistance to recall the observations of Ackner L.J. in Bekhor Ltd. v. Bilton [19 Q.B. 923 when he said oaid of a Mareva injunction at p.941 :

‘It provides a limited exception to theral that the court will not normally grant an injunction to restrain a defendant from from part parting with his assets so that they may eserved in case the plaintiff’s claim succeeds.’#8217;

and later at p.942 :

‘... The Mareva plaintiff, who has satisfied the guidelines ... and in particular who has provided adequate grounds for believing that the a ri the defendant’s assets being removed beforbefore the judgment or award is satisfied,fied, is in a privileged position ...’

In ChartBank v. Daklouche [1980] 1 All E.R. 205 where fraud had been pleaded as a cause of action againstdefendant husband alleging ging inter alia that he was part of a conspiracy to defraud his creditors, Lord Denning M.R. in extending areva injunction in that case against both husband and wife wife said at p.208 :

&#8t is very easy tasy to transfer money from one bank to another at a moment’s notice.”

and later at p.210 thenlearned Master of Rolls sabr>

“The law should beld be that there is jurs jurisdiction to grant a Mareva injunction, even though the defendant mayerved. If he makes a fleeting visit, or if there is a is a danger that he may abscond or that that the assets or moneys may disappear ... a Mareva injunction can be granted.”

Eveleigh for his part iart in supporting the course of action endorsed a passage in Kerr on Fraud andake (760;(7th edn.) where thrneearned author wrote :

(See also : Tiv Pr Bank Internationational S.A. v. Chabra [1992] 1 W.L.R. 231)#160;There is no merit in defence counsels submissions (4) and (5) which are accordingly dismissed.

As for submns (2) && (3), Lording M.R. said in Third Chandris Shg Corp.Corp. v. U v. Unimarine [1979] 2 All E.R. 972 at 985 :

&#8he plaintiff shguld give some grounds for believing that that there is a risk of the assets being removed before the judgment or award is fied o one should wish any reputable foreign company tany to be plagued with a Mareva injunctionction ... But there are some foreign companies whose structure invites comment ...”

In ame case at p.987 La87 Lawton L.J. said :

“...ffidavit avit in support of a Mareva injunction should give enough particulars of the plaintiff’s case to enable the to a its strength andh and should set out what enquiries have been made about the defendantRt’s business and what information has been revealed including that relating to its size, origins, business domicile, the location of its known assets and the circumstances in which the dispute has arisen.”

In latter regard counseounsel for the plaintiff company forcefully submitted that upon the second defendant’s own admission the first defendant company ‘has always run the business ondraft facilities and has noas no funds to transfer out’. Counsel then highlighted the apparent speed with which, within a fortnight of the plaintiff company’s payment of almost $US98,000 cash into the defendant company’s bank account, the money appears to have vanished into thin air.

A search e Companies Ofes Office also reveals that the first defendant company is a private family company with two paid up dollar shares held by the second defendant and his wife and in which the secofendant’s three sons sons and a daughter are employees and directors.

In light of oregoing cong counsel for the plaintiff company submits with some force that the second defendant is not a mere shareholder of the 1st defendant company, he is fect its managing director and the father and husband of thof the family members that comprise the employees of the 1st defendant company and therefore the defendant company may be described as an ‘alter-ego’ of the second defendant.

Thond defendant for hisr his part produced a Financial Statement of the 1st defendant company for the year ending 30 June 1996 andpinion from his bankers, but, as counsel for plaintiff company points out, the accounts ares are unaudited and cannot be said to present a true and fair view of the company’s financial position, and the bank’s opinion is expressly couched in terms denying responsibility on the part of the bank or its officers.

Furthermore and desphe the seemingly sound trading position that the 1st defendant company’s accounts appears to present, plaintiff’s counsel submits there is no denyie second defendant’s sworn admission that the companympany ‘has always run the business on overdraft facilities’ and ‘all (of the defendants assets) are secured by various securities to the Bank’.

In considering this a oect of the Mareva equation, I have also been much assisted by the observations of the Court of Appeal (N.S.W.) in Patt v. B Engineering (Ang (Aust.) Ltd. (1989) 18 N.S.W.L.R. 319 where the Court HeHeld&#16r>&#160

“#160;ـ&160; It would be undese tblende endeavour to formulate a precise dise definition of the standard of proof red to lish the existence of (a danger that by reason ofon of the defendant absconding, the plaintlaintiff, if he succeeds, will not be able to have his judgment satisfied) ; however it is not appropriate to use the test that the Court only intervenes if there is more than a usual likelihood of such a danger.

(3) & ټ < Ev0; Evidence which ievantevant to establish a prima facie case may be considered in determining whether there is a danger of the type required.

In palar, Gleeson C.J. C.J. said in his judgment at p.325 :

8220;The present is nois not a case in which a plaintiff who claims simply to be an unsecureditor seeks to prevent a dissipation of assets which have have no connection with the claim in question. This is a case in which the plaintiff claims that the defendant, making use of a corporation controlled by him, fraudulently misappropriated a large sum of money which, if it is still under the control of the appellant, would be quite likely to constitute, directly or indirectly, the bulk of his assets.”

I am more than satisfied that similar observations may be made in this case against the defendants including the second defendant and accordingly the applications to dissolve the injunction and set aside the writ ne exegno are refused with costs osts to the plaintiff.

(Applications dismissed.)