PACIFIC ANDES ENTERPRISES (BVI) LTD (IN LIQUIDATION) AND ANOTHER v. HONGKONG AND SHANGHAI BANKING CORPORATION LTD

CAMP 71/2019

[2019] HKCA 1039

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

MISCELLANEOUS PROCEEDINGS NO 71 OF 2019

(ON AN INTENDED APPEAL FROM HCMP 320 OF 2019)

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REASONS FOR DECISION AND
DECISION ON COSTS

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Hon Barma JA (giving the Reasons for Decision of the Court):

1.  This is a renewed application for leave to appeal out of time against the order of DHCJ M K Liu dated 25 March 2019, by which he granted an interim stay of the order made by Au-Yeung J on 15 March 2019, pending the hearing of an application by the intended 2^nd defendant, The Hong Eng Investments Holding Limited (“THE”), to be joined as 2^nd defendant to these proceedings. These proceedings (HCMP 320/2019) involve an application by the plaintiffs for Norwich Pharmacal relief against the Hongkong & Shanghai Banking Corporation Ltd (together with a gagging order preventing the bank from disclosing the proceedings to any third party). The documents sought consist of account documentation of THE with HSBC.

2.  The joinder application is to be heard on 12 September 2019.  DHCJ Liu refused leave to appeal against his order on 9 April 2019, and the renewed application before this court was made by summons dated 24 April 2019 (one day out of time).  Having considered the material placed before us, including the written submissions of both parties, we considered that the matter can and should be disposed of on paper.

Background

3.  The plaintiffs are BVI companies in liquidation, liquidators having been appointed in 2016.  Annie is a director of THE and a former director of the 1^st plaintiff.  The liquidators have alleged, among other things, that THE was involved in trade finance fraud.

4.  On 18 December 2018, the liquidators brought proceedings (HCMP 2219/2018) by way of Originating Summons against HSBC, seeking production of bank account documentation for a number of companies including THE.  THE learnt of those proceedings through public search of the Court Registry, and applied, by summons dated 25 February 2019, to be joined as a party to them.  At a hearing on 5 March 2019, the liquidators and THE agreed that this application, and the Originating Summons so far as it related to the account of THE, should be adjourned sine die with liberty to restore. THE say that they were given assurances that the liquidators would not seek to restore those proceedings without first giving notice to THE.

5.  On 8 March 2019, the plaintiffs took out an ex parte application against HSBC in these proceedings, on the basis of Norwich Pharmacal, seeking disclosure of bank statements and other account documents relating to bank accounts held by THE with HSBC.  THE was not informed of these proceedings. Mimmie Chan J made an ex parte order substantially in the terms sought “until further order” on the same day.  The order made also included an order that HSBC should not inform THE or anyone associated with them of the fact that the order had been made.

6.  On 15 March 2019, there was an inter partes hearing in these proceedings, at which HSBC was absent, in which Au-Yeung J made an order continuing (with a minor variation as to the date range of the documents to be produced) Mimmie Chan J’s ex parte order of 8 March 2019 “until further order”.

7.  Also on 15 March 2019, the plaintiffs’ solicitors (who were also the solicitors for the liquidators in the earlier proceedings) sent a copy of Harris J’s sealed order dated 5 March 2019 to THE’s solicitors.  They also enclosed (apparently by mistake) a further draft order for comment – that further draft order related to these proceedings rather than the earlier one, and demonstrated that an application had been made, and perhaps granted, for disclosure by HSBC of THE’s bank account documents.  THE’s solicitors sought clarification as to whether these proceedings concerned THE’s bank accounts, but no such confirmation was forthcoming, citing the confidentiality order that had been made.

8.  On 18 March 2019, Au-Yeung J’s order of 15 March 2019 was sealed.

9.  On 20 March 2019, believing that the plaintiffs had obtained some form of disclosure order against HSBC relating to its bank accounts, notwithstanding the adjournment of the earlier proceedings before Harris J and the assurance that those proceedings would not be restored without notice to THE, THE filed its summons in these proceedings seeking (among other things) to be joined as a party to these proceedings, leave to search and inspect the documents filed in these proceedings, a stay of the production order dated 15 March 2019, and an order that any documents provided to the plaintiffs pursuant to it be sealed and not inspected pending the determination of the joinder application.

10.  The joinder summons was heard by DHCJ Liu on 25 March 2019.  At the hearing, THE sought interim orders for a stay of the production order and sealing of documents produced pursuant to it pending the full hearing of its application (which, as noted, has now been fixed to be heard on 12 September 2019).  THE contended that the making of the Norwich Pharmacal application in these proceedings was an abuse of process, having regard to the way in which the earlier proceedings had been dealt with, and that the plaintiffs had been guilty of material non-disclosure in failing to disclose the position that had been reached in respect of the earlier proceedings before Harris J.

11.  For its part, the plaintiffs denied that there had been any material non-disclosure.  However, the principal argument advanced by the plaintiffs was that the court had no jurisdiction to further vary the order made by Au-Yeung J, as it was functus officio, since that order was a final order, which had been sealed.  DHCJ Liu rejected this submission, taking the view that as Au-Yeung J’s order was expressed to be “until further order”, it was not a final order and the court was thus not functus.  Having regard to the balance of convenience, DHCJ Liu granted an interim stay of Au‑Yeung J’s order, and made an interim order for the sealing of any documents produced pursuant to it, pending the determination of the joinder application, which was adjourned (and subsequently fixed to be heard on 12 September 2019).

12.  In his decision refusing leave to appeal (set out in a letter from the court to the parties dated 9 April 2019), DHCJ Liu reiterated his view that the court was not functus, stating:

“It is expressly provided in the Order [of 15 March 2019] that the Order is subject to further order made by the court – ‘until further order’. That being the case, the court retains jurisdiction to vary the Order if and when necessary.”

This application

13.  The plaintiffs renewed their application for leave to appeal to this court on 24 April 2019.  The application was late by one day, and accordingly an extension of time for making this application is also sought.  The plaintiffs’ explanation for the delay is that this was due to the unavailability of counsel and the fact that there were three public holidays in the period between the decision of DHCJ Liu and the filing of their present application.  Although THE have submitted that these are not good reasons, bearing in mind the very slight delay, we are prepared to regard the delay as excusable in the circumstances, and will go on to consider whether leave to appeal should be granted.

14.  As to this, the plaintiffs submitted that the proposed appeal is reasonably arguable, in that the judge erred in holding that the court still had jurisdiction to consider the joinder application and was not functus simply because of the inclusion of the words “until further order” in Au-Yeung J’s order of 15 March 2019.  It was submitted that these words could only relate to ancillary matters (such as the confidentiality provisions), as the plaintiff had, on 15 March 2019, already obtained the substantive relief sought by the Originating Summons, when the order for production of documents was made on an inter partes basis.  Thereafter, there was no need for any further order to be made, and the order was therefore a final order, so that the court became functus once it had been sealed.

15.  For its part, THE submitted that it had informed the plaintiffs, prior to 18 March 2019 when Au-Yeung J’s order was sealed, of its intention to take out the joinder application.  THE also submitted that all that DHCJ Liu needed to consider on 25 March 2019 was whether or not the application for joinder was arguable.  If it was, it was open to him to grant an interim stay and sealing order to hold the ring pending full argument of the joinder application, and it was clearly within the reasonable exercise of his discretion to do so.

16.  The plaintiffs’ response to the latter argument was that DHCJ Liu was invited to rule on the question of jurisdiction and did so, so that this matter would no longer be open for argument at the hearing of the joinder summons on 12 September 2019.

Discussion

17.  In our view, it is tolerably clear from DCHJ Liu’s decision in relation to the application for leave to appeal in the court below that he dealt with the plaintiffs’ jurisdiction challenge on the basis that the court was functus on its merits and determined it against the plaintiffs.  He regarded the words “until further order” as being indicative of the fact that the court retained jurisdiction to deal further with the matter.

18.  The plaintiffs rely on the observations of Rogers VP in Kensington International Ltd v ICS Secretaries Ltd [2008] 4 HKLRD 589, at [19], where he said:

“The order of 16 November was a Norwich Pharmacal order pure and simple. Although the order of 2 November had been granted ex parte, the order made on 16 November was made inter partes. As already pointed out, that was the final order made in that case and there was never going to be any further proceedings in that action because the whole of the relief sought in the originating summons had been granted. ...”

19.  We do not think that those observations are of assistance to the plaintiffs in the present case.  They were made in the context of an explanation by Rogers VP of the nature of the Norwich Pharmacal jurisdiction, with a view to explaining why (in his view) the implied undertakings applicable to documents disclosed on discovery might not be directly transposable to documents disclosed under the Norwich Pharmacal jurisdiction.  This was not in fact an argument made in that case (see, eg per Barma J as he then was at [36]).  The main argument in Kensington was actually as to whether any implied undertaking as to the use to which the documents disclosed could be put continued to apply to documents that had been read out in open court.  The question of whether or not the court was functus did not arise for consideration.

20.  Moreover, the precise terms of the 16 November order to which Rogers VP referred are not set out in the judgment in the Kensington case.  In particular, it is not clear whether or not it contained the words “until further order”.  If it were a final order, made inter partes, one would not ordinarily expect those words to have appeared, although of course the proper construction of an order will depend on its particular terms consider in the context of the circumstances of the case at hand.

21.  In the present case, the words “until further order” clearly do appear in the order of 15 March 2019.  We also note that the order is stated to be a “continuation” of the ex parte order made by Mimmie Chan J on 8 March 2019.  There is nothing in the terms of the order of 15 March to indicate that it is a final order, and the words to which we have just referred suggest that it was not.  We are not attracted to the suggestion that those words must have been intended to refer only to ancillary matters and not to the substantive order itself – there is nothing to suggest that they were.

22.  On the contrary, having regard to the fact that, prior to the sealing of the order, THE had already through its solicitors given notice of its intention to seek to intervene in the proceedings, we would be reluctant to have to conclude that the plaintiffs or their legal advisers were engaged in what might very reasonably be regarded as at least sharp practice in seeking to render the court functus at a time when it was known to them that a party affected by the order wished to intervene in the proceedings so as to be heard.

23.  We are therefore of the view that the judge was right to conclude that the court was not functus, and do not consider the contrary to be reasonably arguable.

24.  While it might not have been strictly necessary for the judge to have come to a final view on the functus point, as it would have been enough for him to conclude that it was sufficiently arguable to justify the granting of interim relief pending the hearing of the joinder application, so as to not render that application nugatory, it is clear from his reasons for decision in relation to the leave application that he in fact determined the point substantively.  The plaintiffs cannot (and does not) complain about this, as it was they who invited the judge to determine the point.

25.  Further, even if it might (contrary to our view) be thought that the court was (or might arguably be) functus, this would not be the end of the matter.  The application to intervene could, we think, properly be made for a number of purposes.  One of these would be to enable THE to take part in the proceedings to argue against the making of a final order.  Other reasons might be to seek to set aside the original ex parte order for material non-disclosure (which has been denied, but so far as we can see, without elaboration), or, even if the Norwich Pharmacal order is not varied or set aside, for the purpose of appealing to this court against the making of the order, on whatever grounds may be available.  The seeking of interim orders to hold the position pending the hearing of the joinder application and the taking of one or more of the steps just outlined was clearly a course that was open to THE.  In the circumstances of this case, it seems to us that not only was the judge not clearly wrong to make the interim orders he did, he was clearly right to do so.  There can be no real prejudice to the plaintiffs from a delay in the provision of the documents sought (assuming they are entitled to such production), whereas the prejudice to THE if the documents are disclosed to the plaintiffs, before they have taken such steps as they may be advised to take, is manifest.

Disposition

26.  We therefore dismiss the plaintiffs’ renewed application for leave to appeal.  We are also of the view that the application is totally without merit, and make an order pursuant to Order 59 rule 2A(8) that no party may request that this determination be reconsidered at an oral hearing inter partes.

27.  So far as costs are concerned, these must be paid by the plaintiffs to THE.  We assess THE’s costs on a gross sum basis at HK$36,338.