XCHRX SILVER GAIN DEVELOPMENT LIMITED & OTHERS v. PACIFIC BASE SERVICES LIMITED & OTHER

1995, No. A5407

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. The Background

2. The second and third plaintiffs are directors of the first plaintiff. The second defendant is a director of the first defendant.

3. On 1 June 1995, the plaintiffs obtained an ex parte injunction against the defendants in terms of which, in short, the defendants, "their agents, servants or representatives or any of them or otherwise howsoever" were restrained from visiting certain premises, and "communicating with, or threatening" the second and third plaintiffs and their families.

4. The Plaintiffs' Case

5. This injunction was obtained on the basis of affirmations filed by the plaintiffs deposing to the following -

i. On 4 October 1992 (meaning 1993), the first plaintiff entered into a service agreement with the first defendant under which certain money would be due to the first defendant when, amongst other things, all title deeds relating to certain land in China were issued. They have not been issued.

ii. In September 1994, the second defendant and others visited the offices of the second and third plaintiffs several times demanding payment of money.

iii. On 27 September 1994, the second defendant, with others numbering 7 to 8 people, went to the offices of the third plaintiff. They forced themselves into the third plaintiff's room, "demanded immediate payment and refused to leave. Foul languages, verbal assaults and threats were made against [the third plaintiff] and his family. the events resulted in a scuffle and [the third plaintiff] was pushed to the floor by one of [the second defendant's] associates."

iv. Following this, the first plaintiff negotiated with the first defendant. This led to 2 payments of $20 million and $6 million and a variation of the agreement. The variation was that the balance would not be payable until after the issue of a "valid planning permission and a permit to commence construction work" by the Guangzhou authorities. These documents have not, to date, been issued and "it is clear that payment cannot be due".

v. On 30 May 1995, a Mr Cheung and a Madam Chan went to the office of the third plaintiff and demanded payment of the remaining sum. They produced a letter of authorisation from the first defendant. They were unsuccessful in their endeavour, and they left.

vi. During the afternoon of the same day, the second defendant telephoned the third defendant, making the same demands. The second defendant told the third plaintiff in a threatening manner that if his demand was not met, he would send his associates again, and he would not be responsible for any actions his associates might take.

vii. Later the same day, Mr Cheung and Madam Chan, and several associates, came to the second plaintiff's office. They said they were acting for the first defendant and on the instructions of the second defendant. This was confirmed by a call to the office of the first defendant. The second plaintiff demanded that they leave. They refused to do so. They "continued to cause disturbance by attempting to force themselves into the premises as well as shouting abusive words at those who tried to stop them." The police attended.

viii. On 31 May 1995, Madam Chan telephoned the second plaintiff at home. She demanded payment, without success. The second plaintiff made it clear that she and her associates had no right to enter his office, and any attempts by them to do so would be refused.

ix. Later the same day, Mr Cheung and Madam Chan returned to the second plaintiff's office, with a Mr Leung, demanding payment, while a large group of their associates gathered in the lobby "randomly shouting abusive words and posing as a threat to other guests in the building. Apart from behaving in a generally abusive and intimidating manner, specific threats were made by Cheung and Chan against" the second plaintiff and his family. They said his family would be harassed at his home. Chan said she would continue to harass his office, and if no satisfactory response was received by noon the next day, "further more severe actions will be taken" against the second plaintiff and his family. The police attended again.

6. The Defendants' Response

7. Mr Chong suggests that this is an incomplete and misleading story.

8. He says that the information given in paragraph i. above fails to disclose the joint venture agreement between Tung Kin Enterprise Limited (Tung Kin) and the first plaintiff on 30 April 1992 as a result of which a joint venture company called Tung Ngan Realty Company Limited (Tung Ngan) was formed. The purposes of this joint venture was to develop Tung Hiu Gardens in Guangzhou. On 29 September 1992, the Guangzhou authorities granted to Tung Kin a "State Land-use Right" for the purpose of developing Tung Hiu Gardens.

9. He says the plaintiffs also failed to disclose that on 27 September 1993 the second defendant's firm, Wong Pun & Partners Limited (Wong Pun) entered into a service agreement with the first plaintiff under which Wong Pun would provide project co-ordination services in respect of Tung Hiu Gardens and the first payment would pay $7.235 million. Mr Chong submits, and I agree, that this agreement clearly requires communication and co-operation between the second defendant and the first plaintiff.

10. Mr Chong says that, as mentioned in paragraph iv. above, the plaintiffs misrepresented that this $20 million was paid after 27 September 1994, and, by implication, as a result of the intimidation by the second defendant on that day.

11. On 4 October 1993, Wong Pun entered into a consultation service agreement with Tung Ngan in connection with the Tung Hiu Gardens project. The second plaintiff signed on behalf of Tung Ngan and the second defendant on behalf of Wong Pun. The amount payable to Wong Pun under this agreement was $6.235 million. On the same day, the agreement disclosed by the plaintiffs under paragraph i. above was entered into, but the plaintiffs misrepresented that the payments was conditional on title deeds being issued, whereas the agreement talks of a State Land-use Certificate not title deeds. The amount payable under this agreement was $47.056 million.

12. On 14 October 1993, the first plaintiff paid the sum of $9 million due under the agreement last mentioned.

13. As one might expect, the parties differ as to what happened on 27 September 1994. But, on 30 September 1994, the third plaintiff wrote to the second defendant. This is a normal business letter, and makes no mention of the fracas a few days earlier.

14. On 12 October 1994, the first plaintiff paid $6 million to the first defendant. The plaintiffs imply that this money was paid following the intimidation by the second defendant. The receipt signed by the second defendant on behalf of the first defendant incorporates an agreement changing the terms on which further payment is due from the issue of the State Land-use Certificate (or title deeds) to the issue of Planning Permit and Construction Works Permit.

15. On 31 December 1994, the Guangzhou authorities issued an "Approval for application for construction works". The first plaintiff refused to pay because the permit for planning works had not been issued.

16. The second defendant authorised Mr Cheung and Madam Chan to demand payment of the balance alleged to be due. Mr Cheung and Madam Chan deny the events of 30 and 31 May 1995 as disposed to by the plaintiffs.

17. Assessment

18. There are allegations by the defendants concerning just what documents were to be issued by the Guangzhou authorities before the first defendant and Wong Pun were entitled to payment. There are allegations as to the nature of these documents as we might understand them in Hong Kong. This is all very confusing, and cannot be resolved in the proceedings before me.

19. The central allegation in this matter, and the one that would have concerned the ex parte judge, is that concerning the events on 30 and 31 May 1995. Whatever the rights and wrongs of the dispute between the parties, this conduct, if established, is not justifiable. It is true, of course, that a party may not seek to confine its case narrowly, and thereby say that facts it did not disclose are not material that narrow case. The question is: If the facts not disclosed to the ex parte judge had been before him, would he have placed them in the scales when deciding whether or not to grant the injunction? Most of the facts not disclosed go to the background of the dealings between the parties and whether or not the defendants and Wong Pun were justified in believing that money was owed to them. This could have, in no way, justified the conduct as alleged by the plaintiffs. The judge already knew, from the plaintiffs case, that the defendants claimed that money was due to them, and felt strongly about this, and he also knew that there was a business relationship between the first plaintiff and the first defendant.

20. In my view, the only substantial allegation of non-disclosure or misstatement is that, the plaintiffs misrepresented that the sum of $20 million was paid after 27 September 1994, and, by implication, as a result of the intimidation by the second defendant on that day. The $20 million was not paid after 27 September 1994, and, therefore, clearly not a result of anything said or done on that date. The date of payment is not important, and would not have ended up on the scales, but, if indeed the plaintiffs said that it was paid as a result of the intimidation, this would have been taken into consideration. It is possible that it was the intention to imply that the amount was paid as a consequence of what happened on 27 September 1994, but I doubt if this would have been the impression left with the judge. The plaintiffs say that negotiations led to the payments, and it is said that there was also a variation of the agreement; a variation in favour of the first plaintiff. I do not think that this implies that the first plaintiff was intimidated into doing this, especially when there was a variation against the interests of the intimidator.

21. On balance, I do not believe that there has been any material non-disclosure in this case.

22. Balance of Convenience

23. There can be no doubt that the plaintiffs have established a good arguable case. This case is, of course, denied by the defendants, but this issue cannot be tried on the papers. On the balance of convenience, accepting the plaintiffs case at this stage, they are clearly entitled to an injunction. There is no prejudice to the defendants in being restrained from committing intimidatory acts against the plaintiffs, even if it so that they did not commit these acts in the past. But an injunction should not, of course, go further than is necessary, and the balance of convenience is relevant here also. The injunction granted does, in my view, go further than is necessary, and does not reflect the proper balance of convenience, especially in the light of the further detail before me of the relationship between the various parties involved. The injunction, in my view, goes too far in restraining the defendants from communicating with the second and third plaintiffs at all. I do not see how the defendants can do what has to be done in the context of their relationship with the plaintiffs without communicating with them. I can understand that the plaintiffs do not want the defendants near them, if what they say regarding their conduct is true. But there is nothing to fear from communications by post, fax, telephone or any other means of communication from a distance. If this is permitted, it will enable the defendants to continue their business relationship with the first plaintiff, and discharge the obligations of the first defendant and Wong Pun. The balance of convenience will be restored.

24. Conclusion

25. Accordingly, I order that the injunction be continued, with the variation I have mentioned. I leave it to the parties to agree a draft order for approval. The defendants application to discharge the injunction is refused.

26. Costs

27. The truth of this matter will not come out, and the merits properly judged, until the trial. Accordingly, it seems to me that the proper order as to costs is that the costs be in the cause, and I make an order nisi to that effect.

28. Comment

29. I ask the plaintiffs' solicitors to be good enough, in future, to comply with the practice directions regarding these matters, and that counsel ensure that this is done.