HCMP 1490 /2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1490 OF 2010

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BETWEEN

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D E C I S I O N

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1.  This is an application for leave to appeal. I have no doubt that leave should be refused. It must be remembered first and foremost that the grant or refusal of an interlocutory injunction is the exercise of a discretion.

2.  The injunction was sought on the basis that it was in aid of foreign proceedings, namely, the action in the Commercial Court in London, claim number 2010, folio 312, see paragraph 2A of Mr Shaw’s first affidavit.  The background to this case can be gathered from two decisions which I have already given.

3.  At the conclusion of the first decision a request was made that the decision not be published, pending an application to the Commercial Court in London, in accordance with the suggestion that had been made that that court should be requested to grant a Mareva injunction, on the basis that a corresponding application will then be made in Hong Kong either immediately or very soon thereafter.  I acceded to that request on the basis that such an application was to be made.  However, no such application was made to the Commercial Court.

4.  The suggestion that I made was ignored and Mr Hughes, the London solicitor acting for the plaintiffs, has sought to divert attention from that suggestion by asserting that any injunction granted in England would not affect the bank in Hong Kong.

5.  The renewed application was originally made to another judge and the proprietary of that matter has already been dealt with. I ordered that my refusal of the renewed application should be made known to the defendant.  That order has been stayed pending this application.

6.  The application for leave to appeal the order to disclose the decisions was initially not pursued today but has been revived just prior to giving this decision.  Initially, it was thought that since a further stay will be granted pending any application to the Court of Appeal for leave to appeal and any order made thereafter, it was unnecessary to appeal the disclosure order.  The further stay, pending any application for leave to appeal will, of course, be conditional upon the plaintiff undertaking to file any necessary application within the time provided in the rules.

7.  In brief, I did not consider that the plaintiff had made out a case for a Mareva injunction.  On this application the plaintiffs have been disposed to stress that they have an arguable case on the merits of their claims against the defendant.  As far as I am concerned that has never been a matter of dispute.  They have claims in the Commercial Court in London, the claims are before that court and the defence has been filed. There is, therefore, no suggestion that the plaintiffs do not have an arguable case on the merits of their claim.  But that, of itself, does not give them a right to a Mareva injunction.

8.  As has been said time and again, a Mareva injunction is a very serious form of order.  I am not fond of the use of emotive adjectives but Mareva injunctions have been described as one of the law’s nuclear weapons.  In the case of a Mareva injunction it does describe some of the effects that the injunction is likely to have.  It is a) indiscriminate; and b) can do considerable damage.

9.  In this case, the grant of a Mareva injunction would not only affect the conduct of the proceedings in the Commercial Court and payment by the defendant of its legal fees, but as already pointed out, the defendant would be hampered in its ability to make payments in the ordinary course of its business.  That is quite apart from any damage to its financial reputation which the grant of a Mareva injunction would inevitably endanger.

10.  Given the nature of the defendant’s business, there is a real and substantial danger that the grant of a Mareva injunction would precipitate the collapse of the defendant’s business and possibly force the defendant into liquidation.  As was explained when the applications were made, large sums of money have to change hands every month as contracts of the nature which the defendant deals mature and have to be squared off.  One can assume that the defendant has dealings with a number of other of other parties other than the plaintiffs.  Mr Hughes gave, as a reason for delaying the application for an injunction in Hong Kong, the fact that the defendant would have counter-parties.  He estimated that payments would be made to the defendant’s account.  But equally, it seems to me, that depends very much on whether the defendant was astute and successful and would gain from the contracts or would have to pay money out.

11.  The grant of a Mareva injunction would thus prevent the defendant from making payments in the ordinary course of itsbusiness. These were not payments simply of utility bills, nor were they limited to its payments of rent or otherwise, or staff wages.  If the defendant could not make a payment in respect of one of the FFA contracts - and on the case that has been presented, one approaches the matter on the basis that there are other contracts - then that, in itself, would trigger an event of default and then it would be entirely within the realms of possibility, if not likelihood, that the whole of the defendant’s business would come to an immediate halt, with, quite probably, permanent consequences.

12.  In saying this, I note that Mr Hughes gave as one of reasons for delaying the application to the court in Hong Kong until 5 August, the fact that the plaintiff considered it likely that it would gain maximum advantage from the likely timing of payments.  No doubt, also, the reverse is true.  The grant of the injunction on the day before payments are due is quite likely to cause the maximum disruption and damage to the defendant.

13.  What clearly has to be considered is the nature of the defendant’s business, as has been presented.  In paragraph 12 of my Decision of 5 August, I said that I was not satisfied that the plaintiffs’ cases were necessarily that strong that it behoved the grant of an injunction on that basis alone.  I went on to say that the parties seem to me to be in an equal position and I was not satisfied that the circumstances made it necessary for the court to grant a Mareva injunction, which despite the arguments which have been put forward, were still regarded as a very serious type of injunction to be granted in any circumstances.

14.  The court must, and does, take into account the effect of a Mareva injunction which, as I have indicated, is very serious.  The grant or the refusal of an injunction is a matter of a weighing exercise.  It is a matter of discretion.  In this case the court has to take into account not only the fact that there are proceedings extant in England.  The plaintiff clearly has an arguable case but, as Mr Shaw has conceded, the plaintiff has not been in a position to obtain summary judgment or otherwise in London.

15.  On each occasion that the matter has come before me, I have indicated that I consider that in the circumstances of this case, and taking into account all relevant matters, this court may be more disposed to grant a Mareva injunction in aid of the proceedings in the Commercial Court, if the Commercial Court considered that that was an appropriate course, given all the other circumstances that are likely to happen.

16.  I was not purporting to lay down a matter of principle, nor a matter of procedure that should be followed in every case.  I just indicated that that seemed the appropriate course in this case and that if that were followed then the result might well be different.  It may be observed that the first reason given for delaying the application in Hong Kong until 5 August, was in Mr Hughes own words:

“The first is that the plaintiffs agreed to wait to see if the defendant intended to defend the English proceedings and if so on what basis: hence it was agreed we would wait for receipt of the defence in the English Proceedings.”

17.  It is certainly not clear with whom that agreement was made, nor is it clear as to why it took another two and a half weeks to apply in Hong Kong other than what has already been said.  Mr Hughes chose to ignore that suggestion of a founding application in the court of litigation and, whilst he filed an affidavit, he sought to divert attention from my suggestion of simultaneous or complimentary applications and simply argue that an injunction would not bind the HSBC in Hong Kong.

18.  Whilst I indicated that I was not satisfied that he was right about that, it is also manifest that a full research as to the structure of the Hong Kong and Shanghai Banking Corporation had not been made and the company search that was produced was perfunctory to say the least. What I said was in the context of an aside as I considered that the real point was the complimentary injunctions that could have been sought.  If, given the existence of the proceedings in the Commercial Court in London, this court were to impose a Mareva injunction that would very likely interfere with the London proceedings.  If it was right, as Mr Hughes said it was, that the primary reason for the delay was to wait and see the nature of the defence in the Commercial Court, it seems to me that the attitude of the Commercial Court to that defence is particularly relevant.

19.  I turn now to the question of the disclosure of the decisions which had previously been thought to be resolved.  The first point raised is that no reasons were given as to why such an order should be made.  In my view, it cannot be suggested that a plaintiff would be entitled to commence an application for a Mareva injunction in Hong Kong and, if unsuccessful, simply abandon the proceedings and keep the matter of the application confidential.  If the court were to sanction that, that would be to sanction conduct which is equivalent to a plaintiff being willing to wound but afraid to fight or afraid to stand by its conduct.

20.  In my view, that approach to litigation would be clearly wrong.  It is a fundamental rule that justice in Hong Kong is administered openly.  Ex-parte orders are an acknowledged infringement of one of the cardinal rules of natural justice, namely, that one should hear the other party.   That has been referred to in a number of case, see TRP v Thorley, 13 July 1993, a decision of Hoffman LJ, Steyn LJ and Sir Thomas Bingham MR, as they respectively then were, and Jademan Holdings Limited v Francis Leung Pak To & Ors, 16 February 1989 in High Court Action 805/1989.

21.  There can only be very limited exceptions to that but those exceptions are even more limited when it comes to questions of court decisions.  It is, perhaps, instructive to consider the terms of Article 10 of the Hong Kong Bill of Rights:

“

Equality before courts and right to fair and public hearing

All persons shall be equal before the courts and tribunals. In the determination of any criminal charge against him, or of his rights and obligations in a suit at law, everyone shall be entitled to a fair and public hearing by a competent, independent and impartial tribunal established by law. The press and the public may be excluded from all or part of a trial for reasons of morals, public order (ordre public) or national security in a democratic society, or when the interest of the private lives of the parties so requires, or to the extent strictly necessary in the opinion of the court in special circumstances where publicity would prejudice the interests of justice; but any judgment rendered in a criminal case or in a suit at law shall be made public except where the interest of juvenile persons otherwise requires or the proceedings concern matrimonial disputes or the guardianship of children.”

22.  That is very salutary.  If the provisions are not carefully observed, it will lead to the administration of justice in secret.  Any erosion of the principle of open administration of justice and that administration being less than open would, in my view, undermine the rule of law.  The courts in Hong Kong, have themselves, had to review the practice of deciding even minor points in a case in private.  Chambers hearings which deal with minor and often insignificant points of procedure are heard in public whereas previously they were heard with the public excluded.  A decision following an application is just as much a judgment as the reasons for a judgment.

23.  If the provisions of the Bill of Rights were not enough and, in my view, they clearly are, it has always been the case that a party that goes before the judge on an ex parte application has to issue proceedings immediately thereafter, if they have not already been issued.  In Dragon Capital Partners LP v Merrill Lynch Capital Services Inc, HCA 10161 of 1994, 14 November 1996 Keith J said:

“Where an application for urgent interlocutory relief is made prior to the filing of originating process, the applicant should undertake to file the appropriate originating process as soon as reasonably practicable. That applies even if no order is made on the application and even if it is decided not to continue with the proceedings. Once the originating process has been issued it can then be assigned an action or miscellaneous proceedings number. In that way, the pre-action proceedings will have acquired the appropriate action or miscellaneous number. The proceedings can then be discontinued, either without leave under Order 21, rule 2 or if the originating process was a writ or with leave under Order 21, rule 3, whatever form of originating process was used.”

24.  In so saying, Keith J was not laying down any new principle.  He was simply stating what has always been the case.  A court can defer publication of its judgment in appropriate cases.

25.  I have no doubt that if an application were made to the Commercial Court in London, the fact that that application had been made would come to the attention of the defendant whether or not that application were successful.  The papers would go on the court file.  I do not see that the plaintiff should be in any different position if they choose to make their application in Hong Kong in aid of those proceedings in the Commercial Court.

26.  Prior to the days when section 21M of the High Court Ordinance were in existence, the fact that an action had been commenced would inevitably come to the attention of the defendant and he would be entitled to make all inquiries and investigation of the court file.  The notion that one can seek to obtain an order, supposedly in aid of foreign proceedings which are in full progress and commence the proceedings in Hong Kong, without the defendant ever being able to have knowledge of it, appears to me to be repugnant.

27.  In my view there has been nothing which has shown that the exercise of the discretion which I have made, which I consider is clearly competent for this court to make, has been wrongly exercised and I would therefore refuse leave to appeal.