ZHEJIANG PROVINCIAL RAILWAY INVESTMENT INTERNATIONAL TRADE CO., LTD v. HK ZEXIN RESOURCES CO., LTD

HCA 3243/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3243 of 2016

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D E C I S I O N

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Relevant background

1.  On 9 December 2016, the plaintiff issued the Writ in this action against the defendant for damages in the sum of RMB120,519,063.55.

2.  On 9 December 2016, the plaintiff applied ex parte and obtained a domestic Mareva injunction granted by L Chan J.

3.  On 16 December 2016, L Chan J continued the domestic Mareva injunction.

4.  On 4 January 2017, L Chan J granted a worldwide Mareva injunction.

5.  On 6 January 2017, the plaintiff issued a summons (the “Bankers Book Summons”) for a Bankers Book Order against HSBC.

6.  On 13 January 2017, A Chan J continued the worldwide Mareva injunction.

7.  On 13 January 2017, A Chan J gave directions on the filing and service of evidence and on the hearing of the Bankers Book Summons.

8.  On 27 April 2017, the plaintiff issued a summons for summary judgment.

9.  On 10 May 2017, the plaintiff issued a summons for leave to amend the Bankers Book Summons to:

(1)   cover the period from 28 September 2016 to the date of service of the Bankers Book order in respect of the defendant’s HSBC accounts; and

(2)   cover the period from 9 December 2016 to the date of service of the Bankers Book order in respect of the defendant’s accounts with Shanghai Pudong Development Bank Co Ltd (“Shanghai Pudong”).

Consent directions on the Order 14 summons

10.  By consent, I gave the following directions on the Order 14 summons:

1.   The defendant do have leave to file affirmation in opposition within 28 days.

2.   The plaintiff do have leave to file affirmation(s) in reply within 14 days thereafter.

3.   No further affidavit evidence without leave.

4.   Leave be given to the plaintiff to set down the hearing of the application forthwith, the hearing to be fixed not before 18 July 2017, with 1 day reserved before a Judge in consultation [with] counsel’s diary.

5.   Costs be in the cause.

Defendant’s stand

11.  The defendant:

(1)   does not in principle oppose the plaintiff’s application to amend the Bankers Book Summons;

(2)   does not object to the recent filing of supplemental evidence by the plaintiff;

(3)   does not oppose the Bankers Book order sought in respect of the period from 9 December 2016 in respect of HSBC, but oppose it in respect of the period from 28 September 2016 to 9 December 2016; and

(4)   does not oppose the Bankers Book order in principle in respect of the period from 9 December 2016 in respect of Shanghai Pudong.

12.  The defendant asked to be provided with copies of documents to be supplied to the plaintiff under any Bankers Book order to be made.

28 September 2016 and 9 December 2016

13.  The plaintiff alleged that it had been shown by the defendant 2 documents purporting to be:

(1)   a statement of the defendant’s account issued by HSBC showing a balance of US$12,367,277.46 as of 28 September 2016; and

(2)   a statement of the defendant’s account issued by HSBC showing a balance of US$37,367,186.34 as of 29 September 2016.

14.  9 December 2016 was the date when the domestic Mareva injunction was granted.

The issue

15.  In view of the defendant’s stand, the only live issue before me is whether the Banker’s Book order in respect of HSBC should commence on 9 December 2016 or 28 September 2016.

No proprietary claim

16.  The plaintiff acknowledged at the outset that:

“… at this stage and for the present purpose, it has no proprietary claim against [the defendant] and has no in rem entitlement to trace and claim the US$37 million in [the defendant’s] HSBC Account.”

The plaintiff’s contention

17.  The plaintiff contended that:

“ … there is a need to find out the present whereabouts of [the defendant’s] known assets, namely the US$37 million previously in [the defendant’s] HSBC Account. This information is highly relevant to the present action and to make the Mareva injunction effective: –

(a) Given that [the defendant’s] unsatisfactory disclosure shows that it has insufficient assets in Hong Kong despite having some US$37 million in [the defendant’s] HSBC account earlier, there is a pressing need to locate the whereabouts of [the defendant’s] assets, so as to give effect to the mareva injunction.

(b) In particular, such disclosure would enable [the plaintiff] to locate the whereabouts of these assets and in regard to [Shanghai Pudong] the balances of those accounts and whereabouts of any monies paid out. It would also allow [the plaintiff] to identify and possibly serve the injunction on the intermediaries holding the assets for [the defendant] so as to give effect to the Worldwide Mareva Injunction. Without the disclosure, it would be: –

– Impossible to identify the recipients of these funds (which serves a different purpose to the ancillary disclosure order made pursuant to the Worldwide Mareva Injunction); and

– Difficult for [the plaintiff] to serve the injunction in a targeted and specific manner.

This is in line with the approach indicated by Goff J in A v C, at 960C–F.

(c) The disclosure would potentially allow [the plaintiff] to extend the Mareva injunction to cover third parties holding assets for [the defendant] pursuant to the court’s Chabra jurisdiction.”

Mareva injunction has no retrospective effect

18.  A Mareva injunction, whether domestic or worldwide, has no retrospective effect.  It bites from the making or service of the order.  A Mareva injunction does not restrain dissipation of assets or removal of assets out of jurisdiction before the making of the injunction order.  The defendant was not restrained from dealing with the bank balance of US$37 million before 9 December 2016.  If the defendant had “dissipated” US$37 million or transferred it out of jurisdiction before 9 December 2016, the defendant was not in breach of the domestic Mareva injunction or worldwide Mareva injunction, neither of which had been granted.  Knowledge about the defendant’s dealings with US$37 million before 9 December 2016 does not enhance the efficacy of the domestic or worldwide Mareva injunctions.  The plaintiff’s contention fails.  It is a clever fishing expedition aimed at mounting a tracing claim in respect of US$37 million, despite having acknowledged at the outset that:

“… at this stage and for the present purpose, it has no proprietary claim against [the defendant] and has no in rem entitlement to trace and claim the US$37 million in [the defendant’s] HSBC Account.”

Authorities

19.  Apart from BHP Billiton Marketing AG, Baar Switzerland v Transfield Shipping Inc, Panama, HCA 2124/2011, 29 April 2013, none of the cases cited was on discovery before the date of the Mareva injunction in a non‑proprietary claim.  §38 of the judgment dealt with the scope of the discovery in these terms:

“ I also do not accept that the scope of the Discovery Order is too wide. The disclosure sought relates to the period between 16 May 2011 (the date of the transfer of the fund into the Account by RTI) and 15 December 2011 (the date when the HK Injunction order was made), which is a period of 7 months prior to the making of the HK Injunction order. As such injunction order is intended to restrain the defendant from disposing its assets in Hong Kong, the information requested would be necessary to know what has become of the identified asset, including any remission of the asset prior to the date of the HK Injunction order.”

20.  HCA 2124/2011 can be distinguished because the plaintiff was a judgment creditor.

21.  Further and in any event, “identifying” an asset does not turn the claim into a tracing claim.

22.  With respect, I decline to follow HCA 2124/2011.

23.  The plaintiff also cited §32 of Pacific King Shipping Holdings Pte Ltd v Huang Ziqiang[2015] 1 HKLRD 830 where Jeremy Poon J (as he then was), giving the judgment of the Court of Appeal, stated that:

“ 32. The main underlying consideration for ordering disclosure is to prevent abuse by the defendant to frustrate or defeat the very purpose of the Mareva injunction: see A v C (No 1) [1980] 1 QB 956, per Goff J (as he then was) at p.959E–F. Absent any evidence of abuse such as non-compliance of the Mareva injunction, the court will normally refuse to order further disclosure in addition to the standard disclosure. Thus in RACP Pharmaceutical Holdings Ltd v Li Xiaobo (unrep., CACV 139/2007, [2007] HKEC 1713) (19 September 2007), at [15], citing AJ Bekhor & Co Ltd v Bilton [1981] 1 QB 923, Le Pichon JA said:

… Discovery directed at finding out whether the defendant had ‘dissipated’ or ‘concealed’ [the monies which the plaintiff paid the defendant].  In other words, ‘policing’, is not a legitimate purpose for making a disclosure order.”

24.  While non-compliance with an earlier discovery order may justify a Bankers Book order from the date of the injunction, it does not justify ordering discovery before the date of the injunction and does not justify turning a non-proprietary claim into a tracing claim of what is not alleged to be the plaintiff’s asset.

25.  To sum up, the plaintiff is seeking what Le Pichon JA said is not a legitimate purpose of making a disclosure order.

Orders

26.  I make an order in terms §§1 – 6 of the draft order at pp 79 – 81 of Bundle A of the Hearing Bundles subject to the following amendments:

(1)   In §1, “on or before 6 June 2017” be replaced by
“within 14 days from the date of service of this Order”;

(2)   In §1, “28 September 2016” be replaced by
“9 December 2016”;and

(3)   In §1(9), “September 2016 to December 2016” be replaced by
“December 2016 to April 2017”;and

(4)   In §6, insert “to a judge or a master (as may be appropriate)”
after“apply”.

27.  I further order that, upon the defendant paying the Banks the reasonable costs and reasonable expenses incurred by them in complying with this paragraph and undertaking to indemnify the Banks against any liability arising from such compliance, the defendant be provided with copies of documents to be supplied to the plaintiff by the Banks under this Order.

28.  The defendant has not contested most of the plaintiff’s applications.  It has succeeded on the only contentious issue before me.  I make an order nisi under Order 42, rule 5B(6) of the Rules of the High Court, Cap 4A, that ½ the costs of the defendant be taxed (if not agreed) and paid by the plaintiff to the defendant, with certificate for 2 counsel.