MEI YU LAU v. INTERTEX TRADING CO. LTD. and Others

IN THE COURT OF APPEAL

1995, No. 261
(Civil)

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J U D G M E N T

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Mortimer, J.A.:

1. This is an appeal by the 2nd defendant asking this Court to vary an order of Findlay J whereby he allowed an increase of the amount that the 2nd defendant could spend on these legal proceedings after a Mareva injunction.

The background

2. On 30 November 1994 the Superior Court of New Jersey in the United States of America ordered the dissolution of the plaintiff's marriage to the 1st defendant and ordered the 1st defendant to pay to her a considerable sum - US$4,168,751. On 3 February 1995 the plaintiff wife issued a writ to enforce the United States judgment in Hong Kong. It was followed by a Statement of Claim and in that the 2nd defendant was joined on the basis that the 2nd defendant was the alter ego of the 1st defendant - a company beneficially owned by him and part of his assets. So on 9 February an application was granted by Ryan J for a Mareva injunction. It was granted and the 2nd defendant's assets were frozen. That order permitted the expenditure by the 2nd defendant on legal expenses of $100,000.

3. In due course the wife obtained summary judgment against the 1st defendant. The Court of Appeal refused to set that aside, and apparently he has now petitioned to Privy Council for special leave.

4. The 2nd defendant appeared on the return day of the Mareva injunction on 15 February 1995. The injunction was continued but - it is said - it has always been the intention of the 2nd defendant to apply to discharge the Mareva, the merits of which are no concern of this Court. It is clear, however, that that intention has not been pursued with expedition. It is now 14 months later and no application has yet been made.

5. On 15 August 1995, the 2nd defendant issued a summons to vary the amount which it is entitled to spend on legal proceedings, asking initially for $300,000. Later they proposed to amend to $500,000 but when they appeared before Findlay J on 8 September 1995 he preferred not to allow the amendment to increase the sum unless it became necessary.

The judge's order

6. The judge heard the parties and made his order which was that the amount should be increased - not to the $300,000 in the summons before him - but to $250,000 in all. The basis upon which he made that order was that he was not satisfied that the $100,000 originally allowed had been properly accounted for. There was before him an affidavit from the 2nd defendant's solicitors confirming that the $100,000 had been almost exhausted saying that an interim bill up to the end of June 1995 covering the costs and fees payable had been issued in the total sum of $80,750. But no details of that bill were annexed to the affidavit and no details were provided.

7. The judge was not impressed by that. He said:

"In these circumstances, I cannot be satisfied that the second defendant needs the sum requested. I have been given no details of how the original sum of $100,000 has been spent, if that is so. I am not satisfied, in any event, that I should increase the amount, at this stage, to cover three further applications in the future. I am prepared to go only so far as increasing the amount to the sum offered by the plaintiff ..."

So $250,000 was allowed.

The appeal

8. The appellant submits, through Mr Mok, that the judge did not understand the nature of the application which was being made. It submits that an extensive skeleton bill which was to be used in an application for security was put before the court and the judge did not fully understand:

(i) that the only application which was really to be made was to discharge the injunction; and

(ii) did not fully understand the nature of the bill itself.

We are asked by Mr Mok to consider whether it was apparent to the judge that the only application to be made was for the discharge.

9. It seems - but perhaps does not matter - that this was not made very clear to the judge. He said, wrongly so far as defending the plaintiff's action was concerned (but he is to be forgiven having regard to the content of the affidavits):

"As well as defending the plaintiff's action, the second defendant wishes to apply for security for costs against the plaintiff, for a stay of proceedings and to discharge the injunction."

We are asked to say that he should he have taken into account and allowed the amount in the bill which was required to cover the whole of the proceedings to discharge the injunction. It is suggested that he made an error in not understanding that; that he was therefore plainly wrong, and that we ought to interfere.

The approach of this Court

10. Of that, I would say several things. First, in an application of this nature, the parties should never come to the Court of Appeal unless it is essential to do so. If the matter is still in the hands of the judge, the matter should go back to him. Next, where the judge is exercising a wide discretion in circumstances such as this, it should be understood that unless the judge has refused to exercise his discretion, this Court will be very reluctant to interfere with his assessment of such sum as is required for the conduct of legal proceedings at the time when he makes the order because it is well understood that further applications can be made for further sums to be released.

Was the judge plainly wrong?

11. Where there is a Mareva injunction the judge has the duty to ensure that the sums which are released from the Mareva during its continuance are reasonably necessary for the conduct of the proceedings. He must ensure that the sums are not spent in a profligate manner. In these circumstances he will often release sums as they are required on the understanding that further applications will be made to him if the parties cannot agree for such sums to be released.

12. In this case, it seems to me, the 2nd defendant did not get past first base in making the application. By the original Mareva, it could spend $100,000. It was fundamental that it should satisfy the judge that the $100,000 had been properly spent and accounted for, or was about to be spent and was required, before he allowed a further amount. The judge was not so satisfied. It was open to him not to be satisfied because the detailed bill was not put before him. In these circumstances the judge thought that he would exercise his discretion to allow a further sum in spite of that but inevitably he was going to allow a smaller rather than a larger one. He chose the amount which had been agreed by the plaintiff's solicitors. For my part, I think the judge's approach was absolutely right. I would dismiss this appeal.

13. It should be understood that in making his order, the judge clearly contemplated that the parties would go back to him if further sums are required for these proceedings.

Godfrey JA: The judge was satisfied, on the material before him, that the 2nd defendant had made out a case for a variation of the Mareva injunction so as to enable the 2nd defendant to spend up to $250,000 on legal advice and representation. He was not satisfied, on that material, that the 2nd defendant had made out a case for a variation so as to enable it to spend more than this for those purposes.

14. The 2nd defendant has not persuaded me that the judge failed properly to exercise his discretion in reaching this conclusion. It is to be observed that the judge did not shut out the 2nd defendant from putting before the court, at a later stage, other evidence to justify a further variation of the order. Like Mortimer, J.A., I do not think the judge's exercise of his discretion on the material before him can properly be faulted. Accordingly, I, too, would dismiss this appeal.

Mayo, J.A.:

I agree entirely with the views expressed by Mortimer and Godfrey JJA and would also dismiss this appeal.