GAINLUXE INVESTMENT LTD. v. SUPERSTAND DEVELOPMENT LTD. AND ANOTHER

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HEADNOTE

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CONVEYANCING - MAREVA INJUNCTION - THE PURCHASER SHOULD NOT, IN GENERAL, BE ALLOWED, TO MAKE "POISONED PILL" COMPLETION IN THAT THE PURCHASER TENDERED THE WHOLE OF BALANCE PURCHASE PRICE AND AT THE SAME TIME SERVED A MAREVA INJUNCTION (WHICH WAS OBTAINED EARLIER EX PARTE ON NOTICE) RESTRAINING THE VENDOR TO USE PART OF THE BALANCE OF THE PRICE SO TENDERED - ZUCKER V. TYNDALL HOLDINGS P/C [1992]1 WLR 1127 FOLLOWED.

1994, No. A7476

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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D E C I S I O N

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I deliver this Decision in Open Court as this case involves a novel point of principle of law and fact in Hong Kong.

The Facts

2. The 1st Defendant and the 2nd Defendant were the owners of the Property made up as follows :-

Property I (1st Defendant)

Property II (The 2nd Defendant)

3. The Plaintiff entered into a Provisional Agreement of Sale and Purchase of the Property dated 15th February 1994 with the Defendants . Thereafter the Plaintiff obtained from a surveyor Sam Mak and Associates Surveyors Ltd, a preliminary report dated 26th February 1994 which stated the area of the Property at 6,141.94 square feet with a possible further area of 33.15 square feet ("the February Report").

4. The parties entered into a Formal Sale and Purchase Agreement dated 28th February 1994 whereby the Defendants agreed to sell the Property to the Plaintiff for a total price of $430,000,000. Time was stipulated to be the essence of the contract and completion date was agreed on 30th July 1994.

5. Clause 36 of the Agreement provided for an adjustment of the purchase price downwards only as follows :-

"36. The Vendor hereby declares that the area of the Property is 6,265 square feet. Notwithstanding anything herein contained, if on or before the date of completion, the area of the Property is determined in the manner as hereinafter mentioned to be smaller than 6,265 square feet then the Purchase Price shall be reduced in proportion to the reduction in the area of the Property. The parties hereto agree to appoint and procure Sam Mak & Associates Surveyors Limited ('the Surveyor') to calculate the area of the Property subject to the basis of calculation hereunder and to submit a report thereof on or before 30th April 1994. The basis for calculation of the area of the Property is hereby expressly agreed as follows :-

(a) ` If any of the title deeds of the Property stipulates the area of any part of the Property the area stipulated therein shall be conclusive and taken as the area of such part of the Property.

(b) If any of the title deeds of the Property stipulates the measurements of any part of the Property. the area of such part of the Property shall be calculated by the Surveyor basing on such measurements, if such measurements will enable the Surveyor to calculate the area of such part of the Property.

(c) If the relevant title deeds do not contain any information on the area and/or the measurement of such part of the Property and/or the area of such part of the Property is unable to be determined by the Surveyor based on such measurements, then the area of such part of the Property which such title deeds relate shall be determined by the Surveyor by making a site survey on such part of the Property.

If the parties hereto shall disagree with the report by the Surveyor on the area of the Property, then the parties hereto shall refer the area of the Property to be determined by a Chartered Surveyor to be appointed by the President for the time being of the Royal Institute of Chartered Surveyors (HK) Branch ('Second Surveyor'). The Second Surveyor shall act as expert and shall determine the area of the Property in accordance with his own judgment and opinion having taken the above agreed principle No. (a), (b) & (c) as the basis to determine the area of the property. The fees of the Second Surveyor shall be borne by both parties in equal shares. The decision of the Second Surveyor as to the area of the Property shall be final and conclusive and binding on the parties. If the area of the Property as determined by the Second Surveyor shall be smaller than 6,265 square feet then the Purchase Price shall be adjusted as aforesaid accordingly."

6. Sam Mak produced a report dated 14th April 1994 ("the April Report") at the instructions of the Plaintiff as follows :-

"The basis for calculation of the 'site area' of the property is hereby expressed as follows :-

(a) The title deeds of 75 Jervois Street and 14 Burd Street (M.L. 35A) stipulates the area of such part of the Property. The area of such part of the Property is 113.2 square metres. [i.e. 1218.48 s.f.]

(b) The title deeds of 69-73 Jervois Street and 10-12A Burd Street (I.L.36) stipulates the area of such part of the Property. The area of such part of the Property is 345.0 square metres. [i.e. 3713.58 s.f.]

(c) The relevant title deeds of 67 Jervois Street and 8 Burd Street (M.L.19 s.A. ss.1) do not contain any information on the area and/or the measurement of such part of the Property. The area of such part of the Property which such title deeds relate shall be determined by us by making a site survey on such of the Property.

7. The area of such part of the Property is 112.4 square metres.

8. It was not clear in the April Report itself from what title deeds Sam Mak deduced or obtained the aforesaid data. However the Plaintiff's solicitors by a letter dated 23rd February 1994 enclosed only seven Assignments to Sam Mak on the instruction of the Plaintiff and presumably they were for Sam Mak's reference and calculation according to Clause 36 and Sam Mak only had those Assignments to work with in accordance with Clause 36.

9. Consequently by a letter dated 26th April 1994, the Plaintiff's solicitors wrote to the Defendants' solicitors enclosing the aforesaid report and contended that the purchase price should be reduced by about $8.4 million odd.

10. The Defendants' solicitors by a letter dated 29th April 1994 addressed to the Plaintiff's solicitors and requested the following clarification, namely :-

"1. The Dimensioned Plan supplied differs from the one previously supplied vide your letter dated 26th February 1994 in that the area marked 'surrendered or to be surrendered for road widening' is excluded. Please supply us with evidence showing that this strip of land is not within the realms of the subject property.

2. The subject property consists of Section B and the Remaining Portion of Inland Lot No.36 and Section A and the Remaining Portion of Marine Lot No.35A, Subsection 1 of Section A of Marine Lot No.19, Section C of Marine Lot No.19 and Section A of Inland Lot No.36. However the dimensioned plan supplied only shows Marine Lot No.35A, Inland Lot No.36 and Subsection 1 of Section A of Marine Lot No.19. We require clarification on the plan the dimension and area of each and every piece of land which together form the subject property in particular Section C of Marine Lot No.19 which does not seem to exist at all either in the site report or on the dimensioned plan.

We will let you have our comments after verification against the relevant title deeds."

11. It should be noted here that Clause 36 provided that the parties agreed to appoint and procure Sam Mak to calculate the area of the Property subject to the basis of calculation thereunder provided and to submit a report thereof on or before 30th April 1994.

12. By a letter dated 2nd May 1994, the Plaintiff's solicitors wrote to Sam Mak and sought clarification of the queries raised by the Defendants' solicitors as aforesaid. Thereupon Sam Mak produced another report on the same day, i.e. 2nd May 1994 ("the May Report") which was a revised survey report and was meant to supersede their report and plan made earlier in April 1994. In this May Report Sam Mak stated as follows :-

"1. Referring to Government Setting Out Plan No.H2786 dated July 1968, the surveyed 'Site Area' of No.75 Jervois Street - M.L. No.35A s.A & R.P. - is 113.4 square metres. [i.e. 1220.64 s.f.]

2. Referring to Government Setting Out Plan No.H3673 dated April 1970, the total surveyed 'Site Area' of Nos.71 & 73 Jervois Street - IL. No.36 s.B & R.P. - and No.69 Jervois Street - I.L. No.36 s.A - is 346.3 square metres. [i.e. 3727.57 s.f.]

3. There is no Government survey plan showing the 'Site Area' of No.67 Jervois Street. The survey 'Site Area' by Sam Mak & Associates Surveyors Ltd of No.67 Jervois Street - M.L. No.19 s.A ss.1 & s.C is 113.9 square metres. [i.e. 1,226.02 s.f.]"

[i.e. total area of about 6,174.23 s.f. as opposed to 6,141.94 s.f. in the earlier April Report]

It should be noted here that Sam Mak enclosed two Setting Out Plans of the Hong Kong Government Crown Lands and Survey Office dated 19th February 1968 and April 1970. Both plans stated that Inland Lot No.36 had an area of 3,728 square feet.

13. By a letter dated 5th May 1994, the Plaintiff wrote to Sam Mak with copies to the Defendants and the two firms of solicitors saying that the revised report (i.e. the May Report) was not prepared according to the specifications laid down in their letter dated 23rd March 1994 in paragraphs (a), (b) and (c) (i.e. Clause 36(a), (b) and (c)). They suggested a meeting for all the parties in the following week.

14. Both parties before me agreed that there were two meetings on 24th May and 3rd June 1994 ("the May and June Meeting"). The Plaintiff's director, one Mr Yip Ho Daniel, said in his affirmation filed on 29th July 1994 that the Plaintiff's solicitors in the meantime discovered, inter alia, that the Crown Lease relating to Inland Lot No.36 dated 14th November 1866 expressly stated the total area of the said lot to be 2,720 square feet. Similarly Crown Lease relating to Marine Lot No.35A dated 10th September 1845 expressly stated the total area of the said lot to be 1,140 square feet. The plan annexed to Assignment Memorial No.42447 dated 6th February 1908 relating to section C of Marine Lot No. 19 stated the area thereof to be 376.12 square feet The only part of the Property for which site survey may be necessary is sub-section 1 of section A of Marine Lot No.19. In other words, the most controversial figure is the Crown Lease for Inland Lot No.36 which stated 2,720 square feet as against the aforesaid two government plans in 1968 and 1970 which both stated to be 3,728 square feet, a difference of nearly 1,000 square feet.

15. After the June meeting the Defendants' solicitors wrote on 10th June 1994 and enclosed a draft Second Supplemental Agreement for the approval of the Plaintiff's solicitors. The Defendants alleged that there was an oral agreement reached at the meeting on 3rd June 1994 as contained in the aforesaid draft. Basically the draft agreement provided that Clause 36 should be deleted and superseded by a new arrangement. The parties should apply to the District Land Surveyor to set out on the ground of the said Property failing which, or in the event that the District Land Surveyor should decline to set out the said lots, the Defendants should instruct one Land Marker (1980) HK Company Limited to set out those lots. The area as stated in the setting out plan supplied by the District Land Surveyor and/or land marker should be conclusive of the area of the Property. The purchase price likewise should be reduced downwards if the total area should be less than 6,265 square feet. These provisions should survive completion and the Defendants' solicitors should withhold $10 million from the balance of the purchase price payable by the Plaintiff as stakeholder for such purpose.

16. There was no reply to this letter by the Plaintiff's solicitors until 13th July 1994. Mr Yip Ho Daniel explained that their draft proposal was referred to the senior management of the Plaintiff's company for consideration and for legal advice. By a letter dated 13th July 1994 the Plaintiff's solicitors wrote to the Defendants' solicitors with substantial amendment to the draft Second Supplemental Agreement. Apart from the Defendant's obligation to apply to the District Survey Office for setting out on the ground and determine the area of each of the lot which made up the Property, failing which they should instruct Land Marker to do the same, the Defendants were also under an obligation to apply and procure the Hong Kong Government to confirm and to rectify the Crown Leases in respect of M.L. No.35A and I.L. No.36. Should the setting out plans be not available before the day of completion, i.e. 30th July 1994, a sum of $10 million together with a further sum of $75 million should be deducted from the balance of the purchase price and placed in an interest bearing account jointly held by the Plaintiff's and Defendants' solicitors as stakeholders and they should be applied by the stakeholders in those manners as provided in the Second Supplemental Agreement as amended. This supplemental clause, of course, would survive completion.

17. On 15th July 1994 the Plaintiff wrote to Sam Mak again and said, inter alia, that they were advised by their solicitors that the Crown Leases for M.L. Lot No.35A and I.L. Lot No.36 were stated to be of 1,140 square feet and 2,720 square feet respectively. Three Crown Leases and other assignments were enclosed for their reference and attention. They were asked to prepare in accordance with the basis set out in their original letter dated 23rd March 1994 a further survey report. By a letter dated 18th July 1994 Sam Mak replied as follows :-

"The Government's Setting Out Plans for ML35A & IL 36 were issued after the old Lease/Assignment Plans, and are usually considered to be the title deeds to supersede the old Lease/Assignment Plans. The data in the Government's Setting Out Plans are normally accepted by BDD for the approval of Plans."

18. By a letter dated.20th July 1994 the Plaintiff wrote to Sam Mak again and stated that they were not satisfied with their reply.

19. The Plaintiff wrote again on 21st July 1994 to Sam Mak and I think it is important to reduce the substance of that letter in full as follows :-

"Further to the telephone conversations between your Mr Sam Mak and the undersigned on 20/7/94 and between your Mr Jacky Tull and the undersigned today, your report should clearly contain the following main points :

'(1) The crown lease of Marine Lot 35A (75 Jervois Street) stipulates that the area of the lot is 1,140 sq.ft. (105.9 m2).

(2) The crown lease of Inland Lot 36 (69-73 Jervois Street) stipulates that the area of the lot is 2,720 sq.ft. (252.7 m2).

(3) The carving out plan in the title deeds of Section C of Marine Lot 19 stipulates that the area of the lot is 376.12 sq.ft. (34.9 m2).

(4) The area of Sub-section 1 of Section A of Marine Lot 19 has to be arrived at by site survey and the area is (... m2).

(5) In accordance with the specifications laid down in Gainluxe Investment Ltd.'s instruction letter dated 23/3/94, the total area of Marine Lot 35A, Inland Lot 36, Section C and Sub-section 1 of Section A of Marine Lot 19 is 105.9 m2 + 252.7 m2 + 34.9 m2 + ...m2 = ...m2.'

We don't object that you mention somewhere in your report about the government's setting out plans if you feel obliged that you have to disclose the findings. You are reminded to check the accuracy of the figures given above.

Please treat the production of the report to us as top priority and we shall be grateful if we can receive it by tomorrow."

It is noted here that the Plaintiff stipulated to Sam Mak that they must produce a report which contain the area as stipulated by the Crown Leases. They even dictated the format and the content of the report. This letter, I was told, was not copied to the Defendants' side; instead there was some handwriting note on the right hand top corner saying :-

"Daniel, please advise if we need to circulate this letter & Sam Mak's draft report to the Vendor"

20. Eventually Sam Mak produced a report dated 23rd July 1994.and was given to the Plaintiff by a covering letter dated 25th July 1994 ("the July Report"). The conclusion of this report has two sets of findings as follows :-

"4.2 The total area of the subject site based on the information from crown lease and actual site survey according to the basis for calculation in item 4.1 is
1226 square feet (113.9 m2) (Item 1.1 from Site Survey) +

2720 square feet (252.7 m2) (Item 2.1 from Crown Lease) +

1140 square feet (105.9 m2) (Item 3.1 from Crown Lease)
= 5086 square feet (472.5 m2)

4.3. However the surveyed 'Site Area' based on the information from the Government Survey Office and the actual site survey is 1226 square feet (113.9 m2) (Item 1.1 from Site Survey) + 3728 square feet (346.3 m2) (Item 2.2 from Government Setting Out Plan) +

1221 square feet (113.4 m2) (Item 3.2 from Government Setting Out Plan)

= 6175 square feet (573.6 m2).

4.4 This final report supersedes all the previous reports."

21. In the mean time the Defendants' solicitors wrote on 22nd July 1994 to the Plaintiffs' solicitors and alleged that they were most perturbed by the Plaintiff's gross inconsistency in the calculation of the area of the Property. They also contended that the parties had mutually agreed to resolve the dispute over the area of the Property in line with their original draft Second Supplemental Agreement. They disagreed to the Plaintiff's proposal that the Defendants should seek confirmation and rectification of the Crown Leases.

22. By a letter dated 26th July 1994 the Plaintiff's solicitors denied the allegation of the alleged agreement of the Defendants. They enclosed the Final (i.e. July) Report of Sam Mak dated 23rd July 1994 which stated in paragraph 4.2 that the area of the Property was 5,086 square feet. The Defendants were requested to reply by 5 p.m. the next day as to whether the Defendants agreed with Item 4.2 of the Final Report and if not, they would have to refer the area of the Property to be determined by a chartered surveyor in accordance with Clause 36. Again in the meantime they also proposed to proceed the completion by the Defendants' solicitors withholding $80.9 million odd as stakeholder. This letter was received by the Defendants' solicitors at 3:33 p.m. on the 27th July 1994. By a letter dated 27th July 1994 faxed to the Plaintiff's solicitor at 17:25 to the Plaintiff's solicitors, the Defendants' solicitors maintained the oral agreement reached at the meeting on 3rd June 1994. They further said, inter alia, that they "do not agree to the so called 'Final Report' or to any extension of time for completion." However, they were "prepared to place HK$10 million from the balance of the purchase price on completion on 30th July 1994 as stakeholders pending the outcome of the setting out exercise or any order of the court."

23. There were further correspondences between the two parties. On the 29th July 1994 the Plaintiff obtained by way of an ex parte application on notice to the Defendants, a Mareva Injunction Order restraining the Defendants from obtaining and the Defendants' solicitors from releasing the sum of $80.9 million odd upon the completion of the said Property the next day, i.e. 30th July 1994. In other words on the date of completion, on one hand the Plaintiff completed the sale and purchase by tendering the full balance of the purchase price but at the same time on the other hand served the Mareva Injunction on the Defendants and their solicitors. This is what has been called "poisoned pill" completion by Staughton L.J. in the case of Zucker v. Tyndall Holding Plc (CA) [1992]1 WLR 1127.

The Defendants' application to discharge the injunction

24. The Defendants now apply to discharge this Mareva Injunction before me.

25. Mr Chang, Q.C. for the Defendants, mounted his attack on the Mareva Injunction granted on four grounds, namely :-

(1) No good arguable case has been shown by the Plaintiff,

(2) The court has no jurisdiction in the sense that there is no actual or threatened invasion of any presently enforceable right, legal or equitable, of the Plaintiff;

(3) It is an abuse of the process of the court;

(4) There is no risk of dissipation of assets by the Defendants.

The Authorities

26. There are 2 decided cases of Mareva injunction in a "poisoned pill" completion of sale by the Court of Appeal in England. I shall start with The Niedersachsen, Ninemia Maritime Corp. v. Schiffahrtsqesellschaft [1983]2 LI.L.R. 600. The headnote of this case reads as follows :-

" By a memorandum of agreement dated Jan. 24, 1983, the sellers sold their vessel Niedersachsen to the buyers. The contract was in the Norwegian Sale form and provided inter alia:

18. Delivery of the vessel ... off Dubai, without drydocking safely afloat, charter free with steam raised in both boilers and ready to sail ...

19. Sellers also to arrange for confirmation from class that there is no leaking to stern simplex gland.

On Mar. 7, 1983, the buyers applied ex parte for an injunction but the application was refused on the grounds that the vessel had not been tendered for delivery, the price had not been paid and the buyers had no cause of action in respect of alleged defects. The buyers had alleged that the vessel was out of conformity with the contract at the time of delivery in two distinct respects, i.e. there were leaks and other deficiencies in the tubing of the starboard boiler and there were defects in the stern tube and tailshaft. There was at that time no asset to be attached and no claim for which to attach it.

On Mar. 8, 1993, the vessel was delivered and the price paid and the buyers applied for an injunction. Such injunction was granted with the sum attached limited to $787,000.

The sellers applied to discharge the Mareva injunction. --------Held, by Q.B. (Com. Ct.) (MUSTILL, J.), that (1) on the evidence the buyers had demonstrated a sufficient case to satisfy the first requirement for the grant of a Mareva injunction, i.e., the buyers had a good arguable case in the sense of a case which was more than barely capable of serious argument and yet not necessarily one which the Judge believed to have a better than 50 per cent chance of success;

(2) the buyers had however, in all the circumstances of the case, failed to prove a degree of risk sufficient to justify the maintenance of the injunction;

(3) the application to discharge the injunction would be allowed. On appeal by the plaintiffs:

----------Held, by C.A. (EVELEIGH, KERR and DILLON, L.JJ.), that (1) the evidence had to be looked at as a whole and although a good arguable case was no doubt the minimum which the plaintiffs had to show in order to cross the threshold for the exercise of the jurisdiction, the Court had to consider the evidence as a whole in deciding whether or not to exercise this statutory jurisdiction (see p.614, col. 1);

(2) the machinery of the Mareva injunction could not be invoked for the purpose of providing plaintiffs with security for claims even when these appeared likely to succeed, and even when there was no reason to suppose that an order for an injunction or the provision of some substitute security by the defendants would cause any real hardship to the defendants (see p.617, col.1);

(3) the test was whether on the assumption that the plaintiffs had shown at least a good arguable case, the Court concluded on the whole of the evidence before it, that the refusal of a Mareva injunction would involve a real risk that a judgment or award in favour of the plaintiffs would remain unsatisfied (see p.617, col.2);

(4) while it was obviously up to the defendants what evidence they put before the Court, the plaintiffs were equally clearly entitled to comment adversely upon any evidence which the defendants might adduce; whether the inter partes hearing took the form of an application by the defendants to discharge the injunction, or whether the injunction was only granted for a limited time and then there was then an inter partes hearing as to whether or not it should be continued, the Judge had to consider the whole of the evidence as it then stood in deciding whether to maintain or continue or to discharge or vary the order previously made (see p.619, col.2);

(5) the ultimate test for the exercise of the jurisdiction was whether in all the circumstances, the case was one in which it appeared to the Court to be just and convenient to grant the injunction (see p.619, col. 2; p.620, col. 1);

(6) here the learned Judge correctly applied the two tests which fell to be considered on the facts and there was no basis for criticising the conclusion which he reached in exercising his discretion; the appeal would be dismissed (see p.620, col. 1)."

27. Mustill, J. considered the principles involved in the granting and discharging of a Mareva Injunction at p.603 to p.605 :-

" On the issue of principle the following cases were cited in argument : Rasu Maritime S.A. v. Pertamina, [1977]2 Lloyd's Rep.397; Z Ltd v. A-Z and AA-LL, [1982]2 Lloyd's Rep.240; [1982] Q.B.558; American Cyanamid v. Ethicon, [1975] A.C.396, Vitkovice Hornia Hutri Tegirstvo v. Korner, [1951] A.C.869; Fary- Jones v. I.F.M., (1979, unreported); Bakarim v. Victoria P. Shipping Co. (The Tatiangela), [1980] 2 Lloyd's Rep. 193. These cases are not easily reconciled, but to my mind they establish that the strength of the plaintiff's case is relevant in two distinct respects - (1) The plaintiff must have a case of a certain strength, before the question of granting Mareva relief can arise at all. I will call this the 'threshold'. (2) Even where the plaintiff shows that he has a case which reaches the threshold, the strength of his case is to be weighed in the balance with other factors is to be weighed in the balance with other factors relevant to the exercise of the discretion.

It seems to me plain that the second proposition is justified by commonsense and by the authorities. It is the first which raises problems. There are only two direct authorities on the location of the threshold. The first is the judgment of Lord Denning, M.R., in the Pertamina case, and that of Lord Justice Kerr in Z Ltd. v. A-Z and AA-LL. In the former, Lord Denning said -

So I would hold that an order restraining assets can be made whenever the plaintiff can show that he has a 'good arguable case'. That is a test applied for service on a defendant out of the jurisdiction: see Vitkovice v. Korner, and it is a good test in this procedure which is appropriate when the defendants are out of the jurisdiction. It is also in conformity with the test as to granting of injunctions whenever it is just and convenient as laid down by the House of Lords in the American Cyanamid case.

The passage calls up two lines of authority. One relates to the general principles governing the grant of interlocutory injunctions. With great respect, I see real difficulties here. In the ordinary way, a plaintiff seeks an interlocutory injunction for the purpose of holding until trial the substantive relief which he hopes to obtain on final judgment. the interlocutory injunction is a direct reflection of his cause of action. The relief granted on a Mareva application is of a quite different character. It bears no relation to the relief granted at the trial. The plaintiff, however successful at the trial, will not obtain a perpetual injunction in terms of the inter-locutory Mareva injunction. The latter bears on assets which in the great majority of cases have no connection at all with the cause of action on which the injunction is founded.

Moreover, even if the analogy with ordinary interlocutory injunctions were accepted, it would not lead to 'a good arguable case' as the test. The Cyanamid case teaches that the Court should not attempt to weigh the merits except to ascertain at the outset that the plaintiff's case is not derisory, and then to employ it as a factor of last resort if all other considerations are equal. The standard of 'a good arguable case' seems to have no place here.

The analogy with proceedings under R.S.C., O.11 also seems rather distant. It is true that the service of a writ out of the jurisdiction commands a foreigner to appear, against his will. But he need not comply, if he does not choose. The Mareva injunction, by contrast, bites directly on the defendant's assets; he must come in and defend, or lose them. Moreover, it is now the law - which was not so when the Rasu Maritime case was decided - that the Mareva injunction applies to persons resident in the United Kingdom, so the relationship with O.11 of the Rules of the Supreme Court seems even more remote.

Nevertheless, the Pertamina case is the foundation authority, and the test of a 'good arguable case' was adopted by the Court of Appeal in Fary-Jones v. I.F.M., sup., so it seems appropriate to adopt it here. But what exactly does the expression mean? The issue before the House of Lords in Vitkovice Hornia Hutri Tegirstvo v. Korner, [1951] A.C.869, was whether, on the affidavit evidence, it was ----

... made sufficiently to appear to the court or judge that the case is a proper one for service out of the jurisdiction [see O.11, r.4]

The case is not easy to analyse, but it appears that the following propositions are justified - (1) The plaintiff must do more than make a bare assertion of facts which would give the Court jurisdiction. (2) The question whether the plaintiff has shown a prima facie case is not an appropriate test, at least where the respondent has adduced evidence in opposition. (3) The Court cannot, and should not attempt to, try the issues at the interlocutory stage. (4) Nor does the expression 'made sufficiently to appear' mean that the Court should apply the same standard of proof as will be appropriate at the trial. For reasons which must have been special to the situation in Vitkovice v. Korner but which do not appear from the report, two of the speeches refer to proof beyond reasonable doubt. Presumably, in an ordinary case, the proposition implies that the plaintiff need not establish his case on balance of probability. (5) Leaving aside the speech of Lord Oaksey, who appears on this particular issue to have been in a minority, the speeches use a variety of terms to express the same concept: 'satisfied'; 'A proper one to be heard in our Courts'; 'a good arguable case'; 'a strong argument'; 'a strong case for argument'. These expressions suggest that the plaintiff has to do substantially more than show that the case is merely 'arguable' : a word which to my mind at least connotes that, although the claim will not be laughed out of Court, the plaintiff will not be laughed out of Court, the plaintiff will not be justified in feeling any optimism. On the other hand, if I am right on proposition (4), the plaintiff need not go so far as to persuade the Judge that he is likely to win.

There is, however, another authority to be taken into account. In Z Ltd. v. A-Z and AA-LL, [1982] 2 Lloyd's Rep.240; [1982] Q.B.558, Lord Justice Kerr laid down a series of guidelines, in which Lord Justice Eveleigh concurred, for the exercise of the Mareva jurisdiction which have been widely acted upon in practice. In section 1 of his judgment, Lord Justice Kerr refers on three occasions to the grant of an injunction where the plaintiff is 'likely' to recover judgment. Does this entail that, whatever Vitkovice v. Korner may appear to say, the jurisdiction should not be invoked unless the available evidence points to the conclusion that the plaintiff has a better than even chance of success? I believe not. Lord Justice Kerr was not addressing himself specifically to the present issue. In my judgment, he was doing no more than reiterating that the plaintiff must always demonstrate a likelihood of success, and was not prescribing the degree of likelihood.

In these circumstances, I consider that the right course is to adopt the test of a good arguable case, in the sense of a case which is more than barely capable of serious argument, and yet not necessarily one which the Judge believes to have a better than 50 per cent chance of success.

In conclusion, I should add that it is particularly important in the present instance that the Court should not be drawn into a premature trial of the action, rather than a preliminary appraisal of the plaintiff's case, for the parties have contracted for a determination by arbitrators, not by the Court, and nothing must be done to pre-empt the decision of the agreed tribunal."

28. Later at p.611 to p.612 Mustill J. considered whether it was an abuse of the Mareva procedure by the buyer - which was later on described by Staughton L.J. as an "poisoned pill" case as aforesaid :-

" Second, it is contended for the sellers that the present case is an abuse of the Mareva procedure. The matter arose in this way. As I have said, the first ex parte application was made before the sale was completed. The affidavit of Mr Nott-Bower disclosed the intent to apply the injunction to the purchase price. After completion, the application was renewed. At this time, reference was made to Negocios del Mar S.A. v. Doric Shipping Corporation S.A. (The Assios), [1979]1 Lloyd's Rep.331. This was a case in which the vendors of a ship had obtained a Mareva injunction in advance of completion without disclosing their intention to employ it for the retention of the purchase price. The Court of Appeal upheld the decision of Mr Justice Mocatta, who discharged the injunction on the ground that the Court should have been informed of the vendor's intention. This decision was plainly distinguishable in the present instance. since full disclosure was made in Mr Nott-Bower's affidavit. There was, however, another authority on the question, which was not before the Court when the ex parte injunction in the present case was granted: namely, Z Ltd. v. A-Z and AA-LL sup. In the course of the judgement, to which I have already referred, Lord Justice Kerr said :

... The second, and fortunately much rarer, illustration of what I would regard as an abuse of this procedure, is where it is used as a means of enabling a person to make a payment under a contract or intended contract to someone in circumstances where he regards the demand for the payment as unjustifiable; or where he actually believes, or even knows, that the demands is unlawful; and where he obtains a Mareva injunction ex parte in advance of the payment, which is then immediately served and has the effect of 'freezing' the sum paid over. Thus, we were told by Mr Slowe that payments are sometimes made for premiums which are required illegally on the assignment of leases, and which are then 'frozen' immediately as soon as the payment has been made. In effect, this amounts to using the injunction as a means of setting a trap for the payee. A reported instance of such a case (though not in a context of alleged illegality) was Negocios del Mar S.A. v. Doric Shipping Corporation S.A., [1979] 1 Lloyd's Rep. 331, where the injunction was set aside because the plaintiff had not disclosed to the Court that he intended to use the order for this purpose. However, in my view even the disclosure of the intention should not suffice to obtain the injunction in such cases. If a person is willing to make such a payment, appreciating the implications, the Courts should not assist him to safeguard the payment in advance by means of a Mareva injunction.

I do not know what effect a citation of this judgment - that is, the judgment of Lord Justice Kerr - would have had, if made at the stage of the ex parte application. Quite possibly, I would have acceded to the argument now advanced for the buyers, that Lord Justice Kerr was dealing only with applications made in advance of payment; and I would no doubt have been impressed by the information, furnished on the present hearing, that the plaintiffs in The Assios had, notwithstanding the decision of the Court of Appeal, obtained an injunction once the price had been paid.

The matter has now been argued out in full, at the inter partes hearing. I have found it difficult. Mr Boyd points out - rightly, as it seems to me - that there is no logic in a rule which would prevent a plaintiff from enjoining the disposal of an asset, simply because the asset took the shape of moneys paid to the defendant by the plaintiff himself. Nor would a rule be workable, if it precluded an application for Mareva relief within a reasonable time of the asset having been paid by the plaintiff to the defendant. The only solution, Mr Boyd contends, is to treat sums paid by the plaintiff on the same footing as any other asset.

While I see the logic of this, it is not compelling. There is something unattractive about the idea of a buyer, who is ostensibly paying the full price of a chattel, preparing himself behind the seller's back to deprive him of part of the price. This gives the buyer the best of both worlds. He is spared the awkward decision whether to reject the res vendita, with the possible commercial loss to himself from not having the chattel, coupled with the risk of an action by the seller for non-acceptance. Instead, he gets the res vendita, avoids an action, and can secure himself for a cross-claim in damages, pursued in his own good time. I am very doubtful whether this is a proper use of the Mareva jurisdiction. On the other hand, how is the Judge to identify the cases where relief should be refused? I believe that the answer may - and I emphasize 'may' - be that it will normally be an abuse of the procedure for a seller [sic. buyer] to restrain the dispersal of the purchase price where - (a) the claim upon which the injunction is founded is itself based on the contract of sale, and (b) the Court can infer that the seller [sic. buyer] knows of the facts upon which his claim is based before the sale is completed. In the event, however, it is not necessary to express a concluded view on this point, since I propose to set aside the injunction on other grounds."

This point was considered by Kerr L.J. again in the Court of Appeal together with his comment on his own judgment in Z Ltd v. A-Z & AA-LL as follows :-

" Thirdly, there was the fact that the plaintiffs were proposing to use the machinery of a Mareva injunction in order to 'freeze' the price of the vessel as soon as it was paid over, unbeknown to the sellers. In this connection the Judge referred to a passage in the judgment of Lord Justice Kerr in Z Ltd. v. A-Z and AA-LL, [1982] 1 Lloyd's Rep.240; [1982] Q.B. 558 at pp. 251 and 585, with which Lord Justice Eveleigh agreed at pp.250 and 584 and expressed reservations about this conduct on the part of the plaintiffs even though their intentions in this regard had of course been fully disclosed in Mr Nott-Bower's affidavit. However, given the fact that a plaintiff's intention in this regard is fully disclosed to the Court, as it must be, we do not think that it would be desirable to express any views about this aspect. We agree with the Judge when he said :

... There is something unattractive about the idea of a buyer, who is ostensibly paying the full price of a chattel, preparing himself behind the seller's back to deprive him of part of the price. This gives the buyer the best of both worlds.

This factor should certainly be borne in mind by the Court when it arises, and it may well militate against the exercise of the discretion to grant the injunction in such cases. However, in other cases the circumstances might well be such as to justify a Mareva injunction even in the face of this factor. In our view it would not be appropriate to seek to lay down any guidelines about it."

In other words whilst Kerr L.J. agreed with Mustill J. that it would be unattractive about the idea of a buyer who is ostensibly paying the full price of a chattel preparing himself behind the seller's back to deprive him of part of the price, he considered that it is only one of the factor to be borne in mind by the court which may militate against the exercise of the discretion to grant the injunction in such cases.

29. The same point was considered by a differently constituted Court of Appeal in England in a more recent case of Zucker v. Tyndall Holdings Plc [1992]1 WLR 1127. The headnote of Zucker reads as follows :-

" An agreement expressed to be governed by Swiss law provided for the allotment to the plaintiffs of 25 per cent of the shares in a Swiss company, T., the remaining 75 per cent of shares to be allotted to a company, H., which was a wholly owned subsidiary of the defendant company. Under the agreement the plaintiffs were given a 'put option' to sell to H. their shares in T. if the control of T. should ever pass out of the hands of H., the consideration for such sale to be the issue to the plaintiffs of new shares in the defendant within three months of the receipt by H. of notification by the plaintiffs of the exercise of their option and the receipt by H. of the plaintiffs' T. share certificates.

The defendant was taken over by another company and the plaintiffs, having been advised by a Swiss lawyer that in consequence they were entitled to exercise the put option, on 23 March 1992 sent to H. notification of their exercise of the option and the share certificates. On 25th March the plaintiffs started proceedings in Switzerland claiming a declaration that they had validly exercised the put option and an order for the payment to them of a sum of money in lieu of new shares in the defendant. On 30 March they issued a writ in England claiming, inter alia, specific performance of the agreement for the sale of the shares with the consideration therefor being a sum of money. On the same date they were granted an ex parte order restraining the defendant from removing from the jurisdiction, or dealing with, its assets within the jurisdiction. On 6 April Morland J. discharged that order on the ground that in the circumstances there was no jurisdiction grant a Mareva injunction.

On appeal by the plaintiffs :-

Held, dismissing the appeal, that in the light of the principle that a Mareva injunction could only be granted in support of a cause of action which the English court had jurisdiction to entertain arising out of an actual or threatened invasion of a legal or equitable right of the plaintiff, that (per Dillon and Neill L.JJ.) since the question whether the plaintiffs were entitled to a money payment in lieu of the issue to them of shares in the defendant had not yet been determined by the Swiss courts, there was no present right of the plaintiffs to a sum of money to which a Mareva injunction could be attached; that (per Neill and Staughton L.JJ.) the plaintiffs had no presently existing cause of action which was amenable to Mareva relief since there had been no actual invasion of or interference with the plaintiff's rights under the put option, and there had been no threatened breach; and that, accordingly, there was no jurisdiction to grant a Mareva injunction to the plaintiffs (post, pp.1132F-H, 1134H, 1135A-C, E-1136A, E-H, 1137D-E).

Dictum of Lord Diplock in Siskina (Owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C. 210, 256, H.L.(E.) and Ninemia Maritime Corporation v. Trave Schiffahrtsgesellschaft m.b.H. und Co. K.G. [1983] 1 W.L.R. 1412, C.A. applied.

Order of Morland J. affirmed."

Neill L.J. considered the power of the court to grant an interlocutory injunction at p.1132 as follows :-

"In particular the power to grant an interlocutory injunction can, in the words of Lord Diplock in Siskina (Owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C.210, 256F, only be exercised 'in protection or assertion of some legal or equitable right which it has jurisdiction to enforce by final judgment.' A little earlier in his speech Lord Diplock said, at p.256:

'A right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent upon there being a pre-existing cause of action against the defendant arising out of an invasion, actual or threatened by him, of a legal or equitable right of the plaintiff for the enforcement of which the defendant is amenable to the jurisdiction of the court. The right to obtain an interlocutory injunction is merely ancillary and incidental the pre-existing cause of action. It is granted to preserve the status quo pending the ascertainment by the court of the rights of the parties and the grant to the plaintiff of the relief to which his cause of action entitles him, which may or may not include a final injunction.'"

30. Neill L.J. considered that the plaintiff had not demonstrated an interference or an invasion or threat to a legal or equitable right at p.1135 as follows :-

" It seems to me that, as the law stands at present, for the purpose of a Mareva injunction it is necessary to demonstrate that a legal or equitable right has been interfered with or invaded or such an invasion or interference is threatened, though it is certainly true, as Mr Mann has demonstrated in the course of his argument, that interlocutory relief can be obtained in certain circumstances to protect an equitable interest even before the time for performance under a contract has arisen.

For my part, I see great force in the submissions Mr Mann has put forward, and it is to be noted that in some of the Australian cases courts exercising a jurisdiction similar to the Mareva jurisdiction have regarded the matter as a matter of discretion and have held that in certain circumstances exceptions can be made to the general principle that a cause of action must exist which is independent of the right to a Mareva injunction. But, in my judgment, on the facts of the present case, it is not open to this court to grant an injunction. It has no jurisdiction to do so.

There is. in fact, a further reason why I have come to that conclusion. Under the terms of the shareholders' agreement, the right of the plaintiff's was to obtain the issue of a determinable number of shares. They are bringing proceedings in Switzerland for an order that in lieu of such shares a payment of a sum of money amounting approximately to Sw. Fr. 6m. should be made. But that is a matter which has not yet been determined by the Swiss court, and unless and until the Swiss court makes a declaration, it seems to me that there is on any view no present right in the plaintiffs to claim a sum of money to which a Mareva injunction would be attached.

31. For these reasons I, for may part, would dismiss this appeal." Staughton L.J. delivered his short judgment and considered the "poisoned pill" situation :-

"Staughton L.J. I agree that this appeal should be dismissed. I also agree that, as Neill L.J. has said, the apparently unlimited discretion in section 37(1) of the Supreme Court Act 1981 to grant an injunction, whether interlocutory or final, is subject to the exceptions which the law imposes. Those are, as it seems to me, conveniently and accurately set out in the speech of Lord Diplock in the Siskina case [1979] A.C.210, 256 :

'A right to obtain an interlocutory injunction is not a cause of action. It cannot stand on its own. It is dependent upon there being a pre-existing cause of action against the defendant arising out of an invasion, actual or threatened by him, of a legal or equitable right of the plaintiff ...'

The question for us is not, I think, whether the plaintiffs have a cause of action. The question is whether they have a cause of action arising out of the invasion, actual or threatened, of a legal or equitable right of theirs. So we do not need to consider whether a right to sue for specific performance before the completion date arrives is or is not by itself a cause of action. I happily leave that for others to determine. What we have to decide is whether there is here a cause of action arising out of the invasion, actual or threatened, of a legal or equitable right.

Actual invasion of such a right is plain enough. In a contract case the plaintiff must not only show that there is a relevant term of the contract, he must also show that the defendant has broken it. The plaintiff can then obtain an interlocutory injunction in support of his claim in the action. In an appropriate case, that can be a prior restraint injunction, preventing the defendant from removing or dissipating his assets.

But what of threatened invasion? That must cover a threat to break a contractual obligation which is presently performable. But does it cover a threatened breach of some term of a contract which is not presently performable? It appears from Veracruz Transportation Inc. v. V.C. Shipping Co. Inc. [1992] 1 Lloyd's Rep. 353; Steamship Mutual Underwriting Association (Bermuda) Ltd. v. Thakur Shipping Co. Ltd. (Note) [1986] 2 Lloyd's Rep.439; Ninemia Maritime Corporation v. Trave Schiffahrtsgesellschaft m.b. H. und Co. K.G. [1983] 1 W.L.R. 1412 and Siporex Trade S.A. v. Comdel Commodities Ltd. [1986] 2 Lloyd's Rep. 428 that it does not cover such a threat. One example that has occurred is what I call the poisoned pill case, where the plaintiff is bound by his contract to pay money to the defendant against delivery of a chattel, and accompanies his cheque with a Mareva injunction granted a day or two earlier, anticipating that the chattel, when delivered, will be defective in breach of contract. That is not permitted.

If there was no actual breach at the date when the injunction was granted, and no threatened breach of an obligation which was then presently performable, there should be no injunction. In this case, there has been no actual breach and no threat to break a term which is presently performable. If there has been any threat at all, which is challenged, it is a threat to break a term which is not yet presently performable.

In my judgment Morland J. was right to discharge the injunction, and I would dismiss this appeal."

32. On the point of "poisoned pill" situation, while Mustill J. and Kerr L.J. both considered that it was unattractive for a purchaser to do so, it was only one of the factor to be taken into consideration to militate the grant of the injunction, Staughton L.J. said categorically that that is not permitted. I shall start with applying the aforesaid principles in the present case by considering whether the Plaintiff has shown a good arguable case before me.

Any good arguable case for the Plaintiff?

33. Sam Mak had made in total four reports in the months of February, April, May, and finally in July, (in order to avoid confusion I have been using the month to distinguish these various report since there are different descriptions by different parties in the evidence as to whether the February report was the first one or the April report was the first one).

34. Both parties agreed that the April report was made pursuant to Clause 36 on the instructions of the Plaintiff. Those queries raised by the Defendants' solicitors on 29th April 1994 did not amount to any disagreement with the report or at least not yet. In seeking clarification within the time, i.e. the time whereby Sam Mak had to submit a report by 30th April 1994, it would not, in my view amount to a waiver or estoppel that the deadline of 30th April 1994 which should be extended. Even if the Defendants had, by so doing, waived this deadline, it would only amount to an extension for a reasonable period for Sam Mak's clarification. In any event if the Defendants had indicated any disagreement with the April report or the Plaintiff with the May report, the result would, according to Clause 36, only entitle the parties to refer the matter to the President of the Royal Institute of Chartered Surveyors, Hong Kong Branch, to call upon a chartered surveyor ("the Second Surveyor") to determine the area, a move which neither parties had made.

35. In the event Defendants' solicitors were proved to be right and Sam Mak had corrected himself by his May Report dated 2nd May 1994. The Defendants had not all along expressed that they would then rely on this May Report which was more favourable to them. It was the Plaintiff who took the matter to Sam Mak and said they did not follow the instructions (a) (b) and (c) in accordance with the provisions in Clause 36 resulting in the area being a little bit larger in the May Report than the April Report. They however had not expressed to the Defendants that they (the Plaintiff) disagreed with the May Report and the Second Surveyor would have to be appointed in accordance Clause 36.

36. What the Defendants did (i.e. in seeking clarification from the Plaintiff before the deadline on 30th April 1994), from the evidence before me, would not entitle the Plaintiff, upon discovery of the description of area in the Crown Leases by then, to "twist the arms of Sam Mak" by dictating to them what the report should contain as in their letter dated 21st July 1994 which was not copied to the other side.

37. Further Sam Mak in their July report produced two sets of conclusions at paragraphs 4.2 and 4.3. The Plaintiff obviously took only paragraph 4.2 as the proper conclusion reached in accordance with Clause 36. If the Defendants' conduct in general and in particular their seeking clarification and negotiation with the Plaintiff for another arrangement, would amount to a waiver or estoppel as to the deadline of 30th April 1994 and would have, as contended by the Plaintiff, extended the deadline of 30th April 1994 and Clause 36 was still effective by then, the Defendants' solicitors had by their letter dated 27th July 1994 categorically said that they disagreed with the so called "final report". Thus in accordance with Clause 36, the parties should in any event appoint the Second Surveyors as aforesaid. Such right has never been exercised by the Plaintiff up to this stage. In other words if the Plaintiff contended that that Clause 36 have survived the completion date by the Defendants' conduct, they should perform the contract in accordance with Clause 36. I was not told of any steps taken by either the Plaintiff or the Defendants in accordance with the proviso in Clause 36.

38. Whilst Clause 36(a) provided that the Crown Lease area should be conclusive, the proviso clearly stipulated that the parties could disagree to the Report of Sam Mak and a Second Surveyor should be appointed to determine the area. The parties agreed that the decision of this second surveyor should be final and conclusive and binding on the parties.

39. In conclusion, if either the April and/or May reports of Sam Mak was taken as the report made pursuant to Clause 36, there was no or no sufficient disagreement shown by the parties. It is true that the Plaintiff apparently had shown a disagreement to the May report after discovery of the Crown Lease. According to Clause 36 it should convey its disagreement and appoint the second surveyor in accordance with Clause 36. Instead it pressed upon Sam Mak to produce a report in a way that favoured the Plaintiff, or in the way that Clause 36(a) should be strictly adhered to. But then the Defendants still have a right to disagree with such a report which they did and thus the Second Surveyor have to be appointed according to the said proviso.

40. In other words from the aforesaid analysis of the case, according to the Plaintiff, there is still no final and conclusive finding as to the area of the Property in accordance with Clause 36.

41. The Plaintiff now prays for a declaration that Clause 36 is valid, subsisting and binding and at the same time a declaration that the total area of the Property is 5,086 square feet and consequently the purchase price should be $349 million odd, i.e. $80.9 million odd less, and an order that the Defendants should return this amount of $80.9 million odd to the Plaintiff.

42. In my view the plaintiff has not demonstrated a good arguable case for those relief sought in the Statement of Claim. I reached this conclusion not by weighing the merits of the Plaintiff's case but simply by analysing its case in light of the evidence and contention put before me from the Plaintiff's side alone.

43. Further Mr Mok, junior counsel for the Defendants, has taken me meticulously through the evidence to demonstrate that the description in the Crown Lease of the east and west boundary of Lot 36 of 64 ft. must be a mistake for 84 ft. From all the evidence before me (I would not go into detail of them), it is quite plain and obvious and therefore compelling to infer that 64 is a mistake for 84. In fact, as Mr Chang in his reply pointed out that all the grounds setting out in the survey in accordance with Government's Setting Out Plans of Crown Lands and Survey Office, Sam Mak and a recent report by Chynchen on 17th August 1994 for the site area of Lot 36 was in the region of 3,700 odd sq.ft. and not 2,700 odd sq.ft. I am conscious that this is not the trial of the action. But the evidence before me is so compelling for me to draw that inference. Thus on the fact of the area of the Property, there is also not a good arguable case for the Plaintiff.

Any Jurisdiction

44. In my view, if there is no actual or threatened invasion of a plaintiff's legal or equitable right presently enforceable by him, it is an instant of no good arguable case of the plaintiff in a Mareva injunction application.

45. From my aforesaid analysis there is no invasion, actual or threatened, into the rights of the Plaintiff, legal or equitable presently enforceable by them. The Plaintiff could not say there was one report in July, part of which was done in accordance with paragraph (a) of Clause 36 and thus that was conclusive and they are entitled to the declarations as sought. If they wanted to enforce Clause 36 and contended that it had survived completion, they should appoint the Second Surveyor in accordance with Clause 36. They have no right to seek those declarations as aforesaid. From all the evidence before me, it cannot be said their right to reduction of the balance of the purchase price has been invaded or threatened - a right which the Defendants have all along acknowledged in accordance with Clause 36.

Any abuse?

46. The authorities in the Court of Appeal in England conflicted with each other as to whether "poisoned pill" should not be permitted or should only be one of the considerations taken against the granting of the injunction. I, for my part, would consider that it is not appropriate to lay down a general rule to disallow all kinds of so called "poisoned pill" completion. There are myriad numbers of possibilities in life which cannot be foreseen or predicted from our mortal and limited wisdom. I would only say it is an important consideration to be borne in mind in a Mareva injunction application.

47. However I have no doubt that the "poisoned pill" completion in this very case should not be allowed. The Plaintiff, as I have said, has not demonstrated a good arguable case and there is no actual or threatened invasion of a presently enforceable right, legal or equitable of the Plaintiff. The Defendants' offer and undertaking to withhold $10 million for such possible reduction is, in my view, very reasonable in the circumstances. It is therefore, an abuse of the process of the Court.

Dissipation of assets

48. The consideration of the risk of dissipation of assets should not be necessary as I have decided that the injunction should be discharged on the aforesaid grounds. However, in deference to the careful submissions made by counsel for both parties on this point, and also to the fact that I have admitted one affidavit of the Plaintiff of 15th September 1994 (given to me at the commencement of the hearing) attacking the integrity of the Defendants' Director, Mr Lai and Mr Lai's affidavit in reply, I think I should comment a little bit on this point.

49. The Plaintiff's aforesaid affidavit quoted an article in the Next Magazine of 22nd April 1994. It was reported by the writer in one of the paragraphs at page 137 as follows:-

"'Besides, every user has to pay management deposits to management company. This sum is not small sum. I collect them to open a fixed term deposit account. I use it as security to apply for loans or overdraft from banks. And then I use the money for investment.' Plotio's office in Central Cheung Kee Building was purchased by such means. The then purchase price was 6.5m.. After 6 years, which is the end of last year, it was sold at $17.28m., gaining a profit of more than $10m.."

The single quotation was purportedly an admission made by the Mr Lai. It is not clear when the writer said Plotio's office in Central Cheung Kee Building was purchased by such means, whether this was an contention or admission made by Mr Lai or was a piece of information obtained by the writer elsewhere or otherwise an inference or conjecture of the writer. On this passage of the article Mr Yip, for the Plaintiff, in his 3rd affirmation of 15th September 1994, made the following comments in his paragraph 5 as follows:-

"I verily believe that Lai's aforesaid conduct was unscrupulous to say the least, and was probably also dishonest and in breach of the fiduciary duties owed by him and/or his company to the property owners as management agent. If that was the way in which the affairs of the Defendants and of the 'Group' are going to be conducted, the said affirmation reinforces, rather than alleviates, the Plaintiff's concern stated in paragraph 28 of my 1st affirmation."

50. It is clear that the Plaintiff did not see fit to ask the writer, a Mr Wong of the Article, to put in an affidavit to depose to the alleged admissions of Mr Lai. Further, it is not clear from the Article how the deposits were paid and what contractual arrangement the management company had made with the depositors. As pointed out by Mr Chang for the Defendants, there are many different kinds of contractual arrangements and some deposits in tenancy matters could be used by the landlord who only has a liability to repay at the end of the tenancy. In other words, I accept the Defendants' submission that the Article, even taking at its highest, could not attract the severe attack of Mr Yip as in his affirmation, and I shall pay no attention, therefore, to this latest evidence put in by the Plaintiff trying to show that the Director of the Defendants is of low commercial morality.

51. The Plaintiff's case on dissipation of assets could be summarised as follows:-

"(i) Defendants are limited corporations with minimal capital and little or no assets other than Property I and Property II.

(ii) Defendants renunciation of Clause 36.

(iii) Defendants invited to propose and Defendants stood on what they perceived to be their right and offered only $10 million stakehold.

(iv) The Plaintiff is likely to face serious risks of either (i) having the deposits, or part to them, forfeited by the Defendants if the Plaintiff does not complete or does not make an unconditional tender of the full balance of the said purchase price, or (ii) being unable to recover any over payment made to the Defendants because the same is disposed of or dissipated in the meantime'."

In Niedersachsen, in dealing with the topic of dissipation, Mustill J. stated at p.609 as follows :-

"The judge who hears the proceedings inter partes must decide on all the evidence laid before him. The evidence adduced for the Defendant will normally be looked at for the purposes of deciding whether it is enough to displace any inferences which might otherwise be drawn from the Plaintiff's evidence ... The Defendant is entitled to choose for himself what evidence, if any, he adduces. The less impressive, the less ineffective it will be to displace any adverse inferences. But there must be an inference to be displaced ..." (emphasis added)

Mustill J. summarised the evidence before him in this way at p.609 as follows :-

"So one must start with the evidence for the buyer. The contents amount to this - a West German company has incurred a large indebtedness. It has recently sold its only 2 ships. It has no asset in this country apart from the price of the vessel which (the buyer surmise) will immediately be removed from the jurisdiction. The deponent is 'pessimistic' about the buyers honouring an award unless the money is retained within the jurisdiction. Furthermore, the sellers have refused to give an indemnity in respect of further leakages." (emphasis added)

Further Mustill, J. said :-

"I will deal with the last point first. It amounts to a complaint that the sellers have failed to admit liability in advance, in respect of defects not yet known to exist. I see no reason why they should do any such thing, or why their refusal to do so should justify the inference that if they are held liable they will no longer be in funds to pay." (at p.609)

He accepted comments made on the evidence of the Defendant and said at p.610 :-

"It (i.e. the Defendant's evidence) confirms their (i.e. the Plaintiff's) assertion that the moneys will be removed from the jurisdiction, unless the injunction is maintained. It goes on to admit that once removed from the U.K., the funds will not stay with the company, but will be redeployed within the group - and the affidavit does not say that they will necessarily stay in West Germany. The affidavit also show what is indeed obvious, that the sellers have suffered a grievous financial blow from the fall in the market, which must impair or totally preclude their ability to meet from their own funds any damages which may be awarded."

In all the circumstances, Mustill J., concluded at p.610 and p.611 :-

"The Defendant have no obligation to disclose their financial affairs, simply to answer a challenged from the buyers which is unsupported by solid evidence ... In all the circumstance, I consider that the buyers have failed to prove a degree of risk sufficient to justify the maintenance of the injunction." (emphasis added)

The C.A. affirmed Mustill, J's decision and, inter alia, dealt with certain submissions of the Plaintiff at p.617 as follows :-

"We mention this because some of Mr Griffiths' submissions on this appeal appeared to go much further. Thus, he submitted at one stage of his argument that the fact that the Defendants did not assert that they required the frozen sum of $787,000 for the purpose of their trade or to pay their creditors, but merely to invest as they thought best, was in itself a ground for granting the injunction, coupled with the Plaintiffs' 'good arguable case', because this would do little harm to the Defendants, in particular if the Plaintiffs' cross-undertaking in damages was supported by security, as was offered on this appeal (though not below). He also submitted that if the Defendants wished to have the use of these funds, they could easily provide a bank guarantee instead, in order to secure the Plaintiffs. Finally, he submitted, in effect, that the grant of Mareva injunctions should be greatly extended generally, so as to align the practice in this country with what he claimed to be the position in other jurisdictions, of requiring Defendants to provide security for claims which appear to the Court to be well-founded, unless the Defendants show some sufficient reason why this should not be done. In our view all these submissions go much too far in the light of the authorities and are indeed wholly inconsistent with the origin and development of this jurisdiction. The machinery of the Mareva injunction is extremely useful in appropriate cases. But, as the law stands, this jurisdiction cannot be invoked for the purpose of providing Plaintiffs with security for claims, even when these appear likely to succeed (we are speaking generally and not with reference to this case), and even when there is no reason to suppose that an order for an injunction, or the provision of some substitute security by the Defendants, would cause any real hardship to the Defendants." (emphasis added).

52. From the evidence put before me by the Plaintiff, I could not see any case to suggest that the Defendants are trying to dissipate assets in order to defeat the Plaintiff's possible judgment in the recovery of the over-payment in the purchase price over $10 million. The Defendants' undertaking given by their solicitors had always been that they would reserve $10m. for the purpose of such repayment. From the analysis as I have made herein before, I am of the view that such amount is more than sufficient and therefore very reasonable in the circumstances. It is true that the Defendants are actively participating in other substantial projects in Pau Cheung Street and Shanghai Street. It actually shows that the Defendants or their group of companies are actively trading as land developer and there is no evidence to show that they are trying to dissipate any assets in order to defeat the Plaintiff's possible judgment in the eventuality.

53. The Plaintiff's contented that the Defendants were trying to renounce Clause 36 on one hand and the Defendants intended to dissipate their assets on the other hand. There is no evidence to suggest that they are trying to renounce Clause 36. The Defendants only contended that there was an oral agreement reached at the June Meeting, which would superseded Clause 36. If they are wrong in their allegation of an oral agreement (and assuming they are wrong) they have shown their disagreement with the so-called "final report" of Sam Mak, and as I have said, it is the Plaintiff who has not done anything pursuant to the proviso in Clause 36. The jurisdiction of the court in granting a Mareva injunction cannot be invoked for the purpose of providing the Plaintiff with security for claims even when they appear likely to succeed.

Conclusion

54. I find that the Plaintiff does not have a good arguable case and there is no cause of action in this case in the sense that there is no actual or threatened invasion of a presently enforceable right of the Plaintiff. It is also an abuse of the process of the court to apply for an injunction restraining the Defendants to the extent of $80 million odd in the circumstances of this case when the undertaking of the Defendants to the extent of $10 million is more than sufficient for the purpose of any over-payment by way of diminishing in the site area. Further, there is no evidence to suggest any intended dissipation of assets by the Defendants in order to defeat the Plaintiff's claim. Accordingly, the Mareva injunction granted is discharged. I shall now hear the parties on the question of costs.