XCHRX YAU CHIU WAH v. GOLD CHIEF INVESTMENT LTD. AND ANOTHER

HCA807/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 807 OF 2001

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J U D G M E N T

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1. On 15 May 2001 following a hearing that had taken place on 20 April on two summonses, one taken out by the plaintiff for the continuation of a Mareva injunction granted by Mr Justice Waung on 19 February 2001, the other taken out by the 1st defendant for the discharge of that injunction, I set aside the original ex parte Mareva injunction (which had been modified by order of Mr Justice Yeung on 23 February 2001), but held that a fresh injunction should be granted. The reason I set aside the original injunction was that there had been material non-disclosure.

2. The matter comes back before me because there has been no agreement as to the appropriate form of the order I should make and as to costs. I deal first with the form of the order. There is a large measure of agreement between the parties. On the contentious issues, I decide the following :

(a) The reference to the 1st defendant's current account at The Hongkong and Shanghai Banking Corporation should remain. It has not been suggested that such an account does not exist. Parties seeking Mareva relief should identify specific assets as much as possible and it is therefore right for this account to be named. As to the 1st defendant's argument that a specific reference to this account will or may adversely affect the 1st defendant's financial standing (if indeed this is a real fear as to which I have some doubts), it is nevertheless a natural consequence of a Mareva injunction being granted.

(b) In relation to the amount that the 1st defendant should be permitted to spend on legal costs for the action, the figure which I allow for legal costs is $1 million. The 1st defendant must be allowed to defend the action properly. A Mareva injunction is not made to cause disruption. Its function is to freeze a party's assets in the face of a risk of dissipation. Expenditure on matters such as daily living expenses and legal costs will always be allowed where the amounts sought are reasonable. Mr Chan, for the plaintiff, submits that it is necessary to ascertain the totality of the 1st defendant's assets before such an allowance can be made. I disagree. Only where the amount sought is unreasonable or excessive, then perhaps it may be relevant to look at the totality of the plaintiff's assets. However, I am of the view that a figure of $1 million is neither excessive nor unreasonable.

3. I now deal with the costs of the two summonses. Both sides basically seek an order for costs in their favour. In circumstances where a court sets aside an ex parte order on the basis of material non-disclosure but makes a fresh order, the applicant for the order has obtained an indulgence from the court and has been given what the authorities call a locus poenitentiae. I have already, in my earlier judgment, referred to the vigilance needed to ensure that material facts and matters are placed before the court.

4. The case of Pacific Base Services Limited v. Silver Gain Development Limited [1996] 2 HKLR 26 referred to by Mr Chan reinforces this. In my judgment, the proper order for costs is that the plaintiff, having obtained an indulgence from the court despite the material non-disclosure (albeit innocent), must pay the costs of and occasioned by the two summonses, such costs to include the hearings on 23 February and 20 April 2001. There will be no costs order for the hearing on 19 February 2001 before Mr Justice Waung.

5. It is sometimes the case that the court will order costs payable on a more generous scale where there has been material non-disclosure. In the present case, I do not do so for the following reasons :

(a) the material non-disclosure was, as I have said, innocent;

(b) justice demanded that a Mareva injunction be granted; and

(c) the 1st defendant has not asked for such an order.

6. Although Mr Chan has argued that either the plaintiff should have her costs or that the costs should be the plaintiff's costs in the cause, I am of the view that where there has been a material non-disclosure, the plaintiff should not be permitted to derive any advantage from an order obtained in such circumstances. Although the plaintiff has succeeded in obtaining Mareva relief, this was as a result of an indulgence and is therefore right that she should bear the costs. It should be noted that while the material non-disclosure was as I have held innocent, it was nevertheless a serious omission. The omission was one that gave a misleading impression of the strength of the plaintiff's case at the ex parte stage.

7. I will therefore hear the parties now as to the costs of today before finalizing the form of the order.