Lee Chu v Kin Ming Je & Anor

A claim should be struck out only where it discloses no legally recognisable claim, is bound to fail, or involves misconduct so serious that continuing it would affront the court. Pleadings alleging fraud or conspiracy must give sufficient particulars, but a measured generosity may be appropriate before disclosure where the alleged fraud was concealed. At the freezing-order stage, the claimant must show a good arguable case, a real risk of unjustified dissipation established by solid evidence, and that relief is just and convenient. The risk must be assessed separately against each respondent. A Chabra order does not dispense with that requirement. A case-management stay to await foreign proceedings is exceptional and depends on whether the stay is in the interests of justice.

The claimant alleged that the defendants were involved in fraud connected with several investment schemes and sought equitable compensation and proprietary relief. She applied for worldwide freezing and asset-disclosure orders. The defendants applied to strike out the claims and challenged the court’s jurisdiction; one defendant alternatively sought a stay pending criminal proceedings in the United States.

The court considered whether the pleadings disclosed viable claims, whether there was a good arguable case and a real risk of dissipation against either defendant, whether the Chabra jurisdiction applied, and whether the proceedings should be stayed or declined on jurisdictional grounds.

1. Strike out against Mr Je. The pleadings were imperfect but disclosed a proper unlawful-means conspiracy claim. It was unnecessary to plead that Mr Je personally made the representations; it was sufficient to allege that he joined a joint enterprise using deceit to cause loss, knew the representations were false, and played a central role in the schemes. The claim was not bound to fail and its continuation was not an abuse. The application under CPR 3.4(2)(a) and (b) was dismissed.
2. Strike out against Ms Rong. The proprietary claim was parasitic on the claim against Mr Je and survived because that underlying claim survived. The claim might be overstated, since only a proportion of the claimant’s investment could probably be traced into mixed funds, but that was not a reason to strike it out entirely.
3. Freezing order against Mr Je. The indictment and SEC complaint were admissible hearsay evidence under section 1 of the Civil Evidence Act 1995. They were allegations and required careful assessment, but their detail, underlying investigative material, corroboration in Mr Je’s evidence, and evidence of the claimant’s investments supplied a plausible evidential basis and a good arguable case. The alleged large-scale and sophisticated fraud, movement of funds through numerous entities and accounts, attempted transfer of approximately $46 million, and Mr Je’s continued absence from the jurisdiction established a real risk of dissipation by solid evidence. Delay did not defeat relief. A worldwide freezing and asset-disclosure order was therefore just and convenient, subject to credit for recoveries and permission to apply concerning interest and costs.
4. Freezing order against Ms Rong. The claimant showed only a good arguable proprietary claim in a modest proportion of the funds and no separate real risk of dissipation against Ms Rong. The risk had to be established separately against her. The Chabra jurisdiction did not remove that requirement. The application was dismissed. The court nevertheless rejected the submission that a Chabra order could never be made against an existing party.
5. Jurisdiction and stay. No stay was granted pending the United States criminal proceedings. Such a stay is exceptional and requires a powerful reason in the interests of justice. The criminal trial did not concern Mr Je and would not resolve the issues in the claim. Ms Rong’s alleged election in Mr Kwok’s bankruptcy did not deprive the court of jurisdiction; any recoveries would be credited.
6. Amendment. The proposed amendments did not alter the conclusions on the applications. They could be contested separately. The proceedings were to continue.