ACME TEL FZC v. ALFA ENTERPRISES (HK) LTD AND ANOTHER

HCMP 3313/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3313 OF 2014

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D E C I S I O N

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The application:

1. Acme was granted a Mareva injunction on 22 December 2014, to restrain Alfa from disposing of certain of their assets in Hong Kong.  The dispute between the parties arises from a contract in respect of the supply of telecom services.  In the event of a dispute between the parties arising from the contract, the dispute was to go to arbitration before the ICC in the United Arab Emirates (UAE).  The arbitration began in the UAE on 20 October 2014.

2. The Mareva injunction was granted on 22 December 2014, pursuant to s.21M High Court Ordinance, in support of the foreign proceedings.

3. On the first return day, 2 January 2015, counsel and solicitors for Alfa sought, and were given, further time to deal with the matter on the basis that they had only recently been instructed.  At Alfa’s request the unrestrained amount in the frozen bank account was increased to HK$100,000 to enable provision for legal expenses.

4. Acme now seeks to continue the injunction, Alfa opposes the continuation, and says that the injunction should be discharged. The grounds relied upon are failure to make full and frank disclosure at the ex parte hearing, no good arguable case, and no risk of dissipation of assets.

Leave to adduce further evidence:

5. The day before the next return day, 5 February 2015, Alfa filed and served the affidavit of Mr Oberoi in opposition to the continuation of the injunction.  Alfa wished to file further evidence, and on 6 February 2015, Alfa was given until 26 February 2015, to file an affidavit. Acme was given a further 21 days thereafter to file any affidavit in reply. The court directed that no further evidence may be filed without the leave of the court.

6. Alfa did not file the further evidence within the required time and on 5 March 2015, and an “Unless” order was made requiring the affidavit to be filed by 19 March 2015.

7. The affidavit was filed on 19 March 2015, and accordingly any reply was to be filed by 16 April 2015.  Mr Lane acknowledges that Acme’s affidavit in reply is late.  For that reason he seeks leave. 

8. Acme’s affidavit was filed on 22 June 2015, 10 days prior to this hearing.  The affidavit simply responds to Mr Oberoi’s affidavit and identifies documentation already before the court which answers, according to Mr Lane, Mr Oberoi’s assertions.  With one exception, no new information is put before the court.  The one exception relates to the production of a telecom licence in the United Arab Emirates.  Mr Oberoi had asserted that Acme did not hold such a licence.  The licence is produced.  So that too simply constitutes a response to Alfa’s supplemental affidavit.

9. It hardly lies in the mouth of Alfa to object to the filing of this evidence.  It was necessary for Alfa to seek indulgence for filing its own evidence, it was unable to comply with its own time estimate for filing its supplemental evidence, and required a further time extension an “Unless Order” before the supplemental affidavit was filed.

10. In any event, there is a continuing obligation on an applicant for a Mareva injunction to keep the court informed in respect of matters.  The affidavit from Acme simply responds to Alfa’s evidence, and brings the court up-to-date in respect of the progress of the arbitration between the parties in UAE.  That is entirely appropriate.

11. Mr Lane offered to agree to an adjournment in order that Alfa may give instructions and their solicitors and counsel consider whether a substantive reply needed to be filed, but that offer was declined. 

12. The declination of that offer, and at the same time the opposition by Alfa to the filing of Acme’s affidavit, all points to a party that is trying to manipulate the evidence before the court to its advantage.  It is proper that there should be a reasonable exchange of evidence if the court is to determine whether or not the Mareva injunction is to continue or be set aside.  With Acme’s affidavit in reply, the court is now in that position. 

13. There is no need to delay this matter further. It must proceed to finality today.  I am satisfied that this is a proper case to grant leave to admit further evidence.  There is no possible prejudice to Alfa. Nothing new is raised in the affidavit from Acme which requires a reply from Alfa. Leave is granted accordingly.

Material nondisclosure:

14. The substantive proceedings in respect of which the Mareva injunction is sought are ICC arbitration proceedings in the UAE.  Mr Yip contends that failing to inform the ex parte Judge that the ICC Court had granted an extension of time to Alfa to file a defence in the arbitration was a matter of material nondisclosure.

15. The first affidavit in support of the ex parte Mareva injunction (filed on 23 December 2014) disclosed the fact of the ICC arbitration.  That arbitration had been commenced on 20 October 2014.  The second affidavit in support (also filed on 23 December 2014) exhibited an e-mail, dated 27 November 2014, in which Alfa sought from the Secretariat of the ICC three weeks to appoint legal representation in the arbitration.  On 5 December 2014, Alfa had rejected Acme’s nomination for arbitrator in the arbitration, without suggesting who might act as arbitrator.

16. It is correct that the ex parte Judge was not informed of the time extension that was granted by the ICC for the filing of a defence by Alfa.  But the evidence establishes that the extension of time was only notified to the parties by e-mail from the Secretariat of the ICC at 12:30 PM Hong Kong time, on 22 December 2014.  Prior to that, the extension of time was unknown to all of the parties.  The ex parte injunction had been granted by the summons Judge after hearing Acme’s solicitor at 10 AM Hong Kong time that morning.

17. It is not without significance that it is only since Acme’s affidavit in reply in these proceedings was filed on 22 June 2015, that Alfa has finally filed its defence in the arbitration.  Significant delays appear to be occurring in the arbitration process which on the face of the evidence are arguably attributable to delays on the part of Alfa.

18. The ex parte Judge was fully aware of the existence of the ICC arbitration.  The submissions made in respect of the arbitration to the ex parte Judge were perfectly justifiable on the basis of the information in the hands of Acme at that time.  That the ICC subsequently granted an extension of time does not detract in any way from those submissions, but serves to underline the delay in the arbitration that was taking place that appeared to be attributable to Alfa.  That delay was the foundation of the submissions were made to the ex parte Judge.

19. I am satisfied that there is no material nondisclosure in this respect.

Evidence of Alfa’s complaints about the telecom service:

20. The assertion was made on the part of Acme at the ex parte hearing that Alfa had failed to disclose basic particulars, including the identity of alleged complaints and details of calls upon which complaints were said to have been raised.  The affidavit from Alfa attaches a bundle of correspondence and asserts that in that correspondence Alfa gave the information to Acme, and that correspondence was not disclosed to the ex parte Judge.

21. In the affidavit in reply by Acme, a table is set out identifying where each of the items of correspondence, exhibited by Mr Oberoi, was put before the court at the ex parte hearing.  All of the correspondence about which Mr Oberoi now complains was before the ex parte Judge. 

22. The ex parte Judge was aware that the dispute between the parties was the subject of ICC arbitration proceedings in the UAE. It was not necessary in my view that he be taken to these documents in order that he might be aware of the precise nature of the details of the dispute.  It was enough that he was aware of the existence of the dispute.

23. I am satisfied that there is no material nondisclosure in this respect.

Acme’s telecom licence in the UAE:

24. Alfa argues that Acme does not have a telecom licence in the UAE.  There is nothing in the complaint.  The license is now exhibited.  It might have been better if it was included in the original application, but it does not constitute a matter of material nondisclosure.

Acme’s alleged non-use of Alfa’s line:

25. It is asserted by Alfa that Acme had intentionally not used Alfa’s phone lines.  That is a matter of fine detail in the dispute.  Whether true or not, it would not in any way have impacted upon the decision the judge had to make and does not constitute a matter of material nondisclosure. 

26. In any event, on the face of the evidence before the court, Acme has been using Alfa’s line, and has been duly giving credit for that use in the statements of monies due between the parties.

Had Acme admitted causing the loss to Alfa:

27. It is right that there has been an exchange of e-mails in which the issue of compensation between the parties is discussed.  I have read the e-mails.  Nowhere does Acme admit causing a loss to Alfa.  The e-mails do not amount to an admission of liability on the part of Acme. 

28. I accept Mr Lane’s submission that the e-mails constitute a genuine commercial attempt to resolve the dispute by a party without making an admission of liability.  It is right that the e-mails are not marked “without prejudice” but that does not impact upon the position that they do not contain an admission.

29. I am satisfied that it was not a material nondisclosure not to put those e-mails before the ex parte Judge.

No good arguable case:

30. Mr Yip argues that because Alfa contends that Acme was providing substandard services which resulted in a dispute, it did not have a telecom licence, and the lifting of a credit limit during a holiday in the UAE, all meant that Acme did not have a good arguable case.

31. I have read the agreement between the parties, and on the face of it Acme was entitled to take steps it did.  There is no doubt that Alfa has not been paying in accordance with the usage, and Alfa does not appear to dispute the usage.  The issue of substandard services did not arise until after the arbitration commenced.  That fact alone makes doubtful the assertion of substandard usage.  The telecom licence has been duly proved.

32. It is not my role in these proceedings to make a determination of any of the issues between the parties.  I am satisfied that there is a genuine dispute and that Acme has a good arguable case in respect of that dispute.  None of the matters raised by Mr Yip constitute a complete answer to the case.

Risk of dissipation:

33. The principal matter relied upon by Acme in this respect is an alleged forgery of a bank notification document in relation to payments, said to have been made by Alfa.  Alfa, in its affidavit, alleges that the “confirmation documents” are merely documents asking Acme to double check and confirm whether the details of the wire transfer were correct. 

34. I accept Mr Lane’s submission that that assertion contradicts the contemporaneous evidence available.  It is plain on the face of those documents that they purport to assert that a payment of US$50,000 was made by Alfa to Acme on 8 May 2013, and a second payment of $180,000 was made on 8 June 2013.

35. When providing the first confirmation document it was described by Alfa as a “letter from the bank”.  The confirmation document was provided specifically in reply to a request for “Swift Confirmation” or “bank confirmation”.  It is clear from the context of the delivery that the documents were intended by Alfa to be perceived by Acme as information from the bank.  The first payment of US$50,000 was duly made.

36. Alfa later asserted that a further payment of US$180,000 had been made.  When pressed for bank confirmation, Alfa supplied a second confirmation document which purported to confirm the telegraph transfer had been made.  The receipt of that document persuaded Acme to continue its service to Alfa through a public holiday, during which the document could not be checked.  The continuation of the service created part of the loss upon which the arbitration is based. 

37. The second confirmation document has precisely the same “Transaction Reference Number” as the confirmation document in respect of the first payment.  I accept Mr Lane’s submission that it is highly unlikely that two separate transactions, a month apart, would carry the same “Transaction Reference Number”. 

38. As the payment of US$180,000 has not been made, the inference necessarily strongly arises that Alfa has forged the second confirmation document, to lead Acme to think that the payment had been made.  Alfa has had ample time since this issue was first raised by Acme in which to get evidence from the bank of the payment that it says has been made, and the document is genuine.  Other than an assertion in the affidavit that the document is not a bank confirmation of payment, but a request to check the details are correct, nothing is before the court.

39. There is a good arguable case that the second document has been forged.  It is not necessary for me to resolve the issue in these proceedings.  I recognise that there are arguments to the contrary, but that does not detract from the fact that the good arguable case exists.

40. Apart from any other evidence as to dissipation there may be, where there is a strong arguable case that a party has forged a document, it necessarily follows that there is a risk that that party will dissipate or try to hide assets.

The balance of convenience:

41. There is no suggestion of that if the injunction is continued,  Alfa cannot be properly compensated in damages.  On the other hand, if the injunction is not continued, and the funds disappear from the account, Acme may not be able to make recovery, and may not be able to be compensated by damages.

42. Where there is a risk that a party will dissipate or try to hide assets, and that party can be compensated in damages, the balance of convenience plainly lies with granting or continuing the injunction.

43. For the foregoing reasons I decline to set aside the Mareva injunction, which will continue.

Costs:

44. I heard the parties in respect of costs.  The plaintiffs have succeeded in all respects.  There will be an order that Acme are entitled to the costs of the proceedings, on a party and party basis.