HOPTAI SHARKFINS CO LTD v. PRODUCTOS PESQUEROS GALLEGOS, S.L.

HCA 1283/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1283 OF 2012

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BETWEEN

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D E C I S I O N

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1.  There are 2 applications before me: one for the continuation of the ex parte Mareva injunction granted by Sakhrani DHCJ on 23 July 2012 and the other one for the discharge of the same injunction.

Background

2.  The present dispute arises out of a sale of goods contract.  The defendant is a company incorporated in Spain specialising in fresh and frozen fish marketing.

3.  By a contract made between the plaintiff and the defendant dated 10 April 2012, the defendant agreed to sell 164,000 kg of sharkfins (“the Goods”) to the plaintiff, which is a company incorporated in Hong Kong, at a price of €164,000.

4.  It is the plaintiff’s case that it had paid the full purchase price of the Goods to the defendant.  The Goods arrived in Hong Kong on or about 8 July 2012.  After the arrival of the Goods in Hong Kong, the defendant made an attempt to sell the Goods to a third party.  By reason of the alleged wrongful conduct on the part of the defendant, the plaintiff made an application for a Mareva injunction against the defendant to deal with assets up to the value of HK$1,979,835, in particular to deal with the Goods which are now stored in the Kwai Chung Container Terminal.

The discharge of the ex parte injunction

5.  In the ex parte application, the plaintiff informed the court that:

(i) it had paid the full purchase price to the defendant;

(ii) the defendant had told the plaintiff that it was in financial difficulty; and

(iii) the defendant attempted to sell the Goods to other buyer behind the plaintiff’s back. 

Based on these allegations, the court granted the ex parte injunction.

6.  However, the plaintiff has failed to inform the court of one material fact.  After the Goods arrived in Hong Kong on 8 July 2012, there was some contact between the plaintiff and the defendant and the defendant demanded the plaintiff for the payment of the balance of the purchase price of the Goods.  By that time, the plaintiff confirmed to the defendant that it had made full payment pursuant to the instruction given by the defendant in the email correspondence.  After carrying out some investigation and on 11 July 2012, one Ms Carolina Ramiro of the defendant informed one Mr Au Yeung Nim Ching of the plaintiff that the defendant had never used the email address in the email correspondence, ie Carolina.propegal@hotmail.com. In such case, the defendant suspected that the parties’ email accounts might have been hacked and the plaintiff had been making payment upon the instruction of the hackers and not the defendant.  On 12 July 2012, the plaintiff sent an email to the defendant acknowledging that the parties might be victims of a computer fraud.  On the same day, the defendant informed the plaintiff that it had reported the matter to the Spanish police.

7.  In my judgment, the plaintiff should have disclosed to the court in the ex parte application about such possible defence available to the defendant.  According to the submission of Mr Luk, counsel for the plaintiff, the defendant’s allegation about the computer crime is unbelievable and he has advanced a number of arguments with a view to discredit such allegation.  However, it is not for the plaintiff to decide whether the defendant’s allegation is believable or not.  In an ex parte application, the court will have to consider whether to grant an order without hearing the respondent.  In such circumstances, it is certainly an important duty of the applicant to draw the attention of the court to any possible defences available to the defendant.  After informing the court of such possible defences, the applicant can then persuade the court to accept that these defences are ones without merit.  Without telling the court of the possible defences available to the defendant, it is clear that the plaintiff has failed to make material disclosure, and as a result the ex parte injunction would have to be discharged.

8.  In fact, Mr Luk very fairly agrees that such material fact should have been disclosed to the court in the ex parte hearing. By that time, he was not aware of such fact and so the same had not been disclosed to the court.  In such circumstances, Mr Luk is not seriously opposing the defendant’s application for the discharge of the Mareva injunction.  I therefore order the discharge of the Mareva injunction.

Re-grant of the injunction

9.  Mr Luk, however, asks the court to re-grant the injunction.  Since the defendant has no asset in Hong Kong, the plaintiff is not seeking for a general Mareva injunction against the defendant.  Instead, the plaintiff asks the court to restrain the defendant from dealing with the Goods now stored in the container terminal.

10.  In deciding whether to grant the interlocutory injunction, the court has to apply the well-known American Cyanamid principles.

11.  In this regard, I am satisfied that there is a serious question to be tried in present case.  According to the evidence at this stage, the plaintiff had made full payment to the defendant for the Goods pursuant to the purported instruction given by the defendant in the emails.  Mr Wong, counsel for the defendant, has advanced to the court a number of arguments as why the defendant could not have been a party to the suspected computer crime.  On the other hand, Mr Luk refers me to a number of factors as why he says that there was no computer fraud involved and it was simply a case of the defendant in failing to deliver the Goods to the plaintiff despite the payment of the purchase price.  In particular, the defendant admitted to the plaintiff that it was experiencing financial difficulty, and the defendant, without carrying out any further investigation about the allegation of the possible computer fraud, just proceeded to sell the Goods without notifying or informing the plaintiff.

12.  At this stage, it is not possible for the court to make a final determination on these matters.  However, based on the existing available facts, there is certainly circumstantial evidence to support the plaintiff’s allegation that there was no computer fraud involved, or that the defendant or the defendant’s staff or agent was involved in such computer crime.  If the plaintiff is able to persuade the trial judge to accept such inference, the property of the Goods has already passed to the plaintiff upon the payment of the full purchase price.  In such circumstances, I accept that there is a serious question to be tried.

13.  Secondly, I am of the view that the balance of convenience lies in favour of the granting of the injunction.  If the plaintiff succeeds at the trial, the property of the Goods has already passed to the plaintiff and it should be regarded as the owner of the Goods.  If the defendant is free to dispose of the Goods now, it would be very difficult for the plaintiff to recover the proceeds of the sale of the Goods from the defendant, which is a Spanish company with no asset in Hong Kong.  On the other hand, the defendant is not able to adduce any evidence as to why the preservation of the Goods would cause it any inconvenience or financial hardship.  Hence, the balance of convenience lies in favour of the plaintiff.

14.  Mr Wong has also referred me to the decision of Tyece Ltd v Max Concept Technology Ltd [2003] 3 HKC 116 and submits that the court would generally refuse to re-grant an injunction if the applicant has failed to make material disclosure to the court in the making of an ex parte order.  However, in deciding whether to re-grant an injunction, the court has to look at the merits of each individual case.  Here, it is clear that the plaintiff had made full payment for the purchase of the Goods pursuant to the instruction purportedly given by the defendant.  Whether the defendant did give such instruction, or whether the defendant’s staff or agent was in any way involved in the making of such fraudulent instruction, are matters which have to be properly investigated at the trial.  In such circumstances, it is only fair to grant an injunction to preserve the subject matter of the action.  I therefore so order.

15.  I understand that there would be substantial storage costs involved in preserving the Goods at the container terminal.  In such circumstances, it would only be sensible for the parties to sell the Goods and for the proceeds of sale be paid into court pending the determination of this case.  In such case, I leave it to the parties to explore such option and provide for liberty to the parties to apply to vary the terms of the injunction.

16.  I now listen to the parties’ submissions on the terms of the order and on the issue of costs.