BUNKER HOLDINGS LTD v. ASIA PACIFIC SEAFOOD MANAGEMENT LTD AND OTHERS

HCA 2371/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2371 of 2003

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Dates of Hearing: 13, 16 August 2004

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JUDGMENT

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1.  On 30 July 2004, on the application of the plaintiff, I granted a Prohibition Order, (the Order), pursuant to s 21B High Court Ordinance, Cap 4 (the Ordinance), restraining Mr Alexander Meerovitsch, (Mr Meerovitsch), from leaving Hong Kong.  Mr Meerovitsch now seeks an order  under s 21B (4) of the Ordinance discharging the Order.

2.  The Order was made in the following circumstances.  In June 2003 the plaintiff issued its writ of summons seeking payment of money due from the defendants for goods supplied.  On 31 July 2003 judgment was entered by default against the 1^st defendant for the sum of US$1,006,494.70.  On 19 August 2003 judgment was entered by default against the 2^nd defendant for the sum of US$625,469.70 together with interest in the sum of US$119,975.11.  On 6 November 2003 judgment was entered by default against the 3^rd defendant for the same sum as judgment was entered against the 1^st defendant.  The total amounts for which judgment had been entered is US$1,751,939.51.  The claims arise from the supply of bunker oil by the plaintiff to vessels operated by the defendant companies.  The evidence establishes that although Mr Meerovitsch is neither a director nor secretary of the defendant companies, he and his father are the directing power behind the three companies.

3.  On 26 June 2003, the plaintiff obtained a Mareva injunction against the 1^st and 2^nd defendants, and on 26 August 2003, a similar injunction was obtained against the 3^rd defendant.  With those injunctions were the usual orders requiring disclosure of the assets of the three defendant companies.  The requirements for disclosure in the Mareva injunctions not having been met, on 29 August 2003, the plaintiff issued Writs of Sequestration under which the Sequestrators were authorised and directed to enter into and take possession of all of the real and personal estate of the 1^st and 2^nd defendants.

4.  Pursuant to their duties, the Sequestrators requested information concerning the assets of the 1st and 2nd defendants from Mr Meerovitsch.  They did so by letters dated 9 September 2003 and 17 September 2003.  By letter dated 25 September 2003 Mr Meerovitsch responded to the Sequestrators in the following terms:

“I understand you have been trying to contact me.  I have been away and regret any delay in responding to you.  I do not hold any property or assets in the companies.  Nor do I have any information, documentary or otherwise which might assist in responding to any enquiries you have.”

Having regard to the terms of e-mails and correspondence, to and from Mr Meerovitsch, which demonstrate his involvement in, and apparent knowledge of, the business of the defendant companies, the Sequestrators were quite justified in not accepting that response at face value.

5.  On 19 July 2004 the Sequestrators lodged a Statement for the Committal of Mr Meerovitsch pursuant to the provisions of O. 52 r. 2(2).  Leave was given to commence committal proceedings by Tang J.  On 27 July 2004, the Sequestrators notice of motion for committal of Mr Meerovitsch was filed.  That notice of motion is due to be heard on 25 August 2004.

6.  On 30 July 2004, on an ex parte basis, the Sequestrators sought and obtained from me the Order.  The Order was duly served on the Immigration Department.  It now transpires that Mr Meerovitsch was out of Hong Kong at that time.  He returned to Hong Kong on 7 August 2004.  On 12 August 2004 Mr Meerovitsch attempted to leave Hong Kong to go to China.  He then learned of the Order, when informed of the Order by the Immigration Department at the border.  On Friday 13 August 2004, late in the day, and ex parte, he came before me seeking the discharge of the Order.  I was told that the application was made “ex parte on notice”, but the Sequestrators were not represented.  The provisions of O. 44A r. 4 are clear.  Where the debtor is prohibited from leaving Hong Kong, he may on 2 clear days notice to the plaintiff, and upon being present in person in Court, apply for the order to be discharged.  The application was defective, having been made ex parte and not on proper notice.  Sensibly, when she appeared on Monday 16 August 2004, Miss Tong did not take the point, and the matter was argued before me.

7.  The provisions of s.21B (6) of the Ordinance require that a copy of a Prohibition Order shall be served on:

“the Director of Immigration, the Commissioner of Police, and, if he can be found, the judgment debtor or person against whom the claim is made”.

The evidence establishes that on 2 August 2004, a process server visited Mr Meerovitsch’s address in Tuen Mun to serve both the Order and the Notice of Motion for Committal.  The process server was informed by a maid that both Mr Meerovitsch and his wife were out of Hong Kong, and that she did not know when they would return.  Subsequently the Sequestrators learned from the Immigration Department that Mr Meerovitsch had left Hong Kong for Australia on 9 July 2004, and that there had been no further movement through an immigration checkpoint by him since then.

8.  On 12 August 2004, the Sequestrators solicitors were informed by the Immigration Department that Mr Meerovitsch had attempted to depart from Hong Kong via the China Ferry Terminal.  The process server again visited his residence but was informed by the maid that he had gone to China and would return on the following Monday.  The Sequestrators then gave instructions to prepare an application for substituted service of the Order and the Notice of Motion for Committal.

9.  Mr Chua, for Mr Meerovitsch, seeks to have the Order discharged on two grounds.  First, he says that in the particular circumstances of this case, there was no jurisdiction to grant a prohibition order.  Second, he says that the failure of the Sequestrators to serve the order immediately means that in the exercise of its discretion the court should discharge the order.

10.  Miss Tong accepts that she must rely on s 21B (1)(c)(ii) as the basis for jurisdiction to grant the Order.  That provision permits the court:

“…..to make an order prohibiting a person from leaving Hong Kong to facilitate the enforcement, securing or pursuance of-

“(c)  a civil claim (other than a judgment)-

(ii)        for the delivery of any property or the performance of any other act.”

The provisions of s 21B (3) of the Ordinance provide that the court shall not make a Prohibition order:

“unless it is satisfied that there is probable cause for believing that-

(a)    there is a good cause of action;

(b)    the person against whom the order is sought-

(iii)                is ordinarily resident in Hong Kong;

(c)     that person is about to leave Hong Kong;

(d)    and by reason of paragraph (c) any judgment that may be given against that person is likely to be obstructed or delayed.

11.  Mr Chua first mounted his attack by contending that an application for committal does not constitute a “cause of action”.  Mr Chua relied primarily on Re Oriental Credit [1988] 1 All ER 892, where Harman J held that in circumstances where a company’s liquidators had obtained an order for the private examination of a director of the company, there was no “cause of action” before the court which would give rise to a legal right upon which an application for an injunction restraining the director from leaving the country could be obtained.  That decision is undoubtedly correct.  But in the present case the Sequestrators do not rely simply upon any right they may have to examine Mr Meerovitsch by virtue of the provisions of the Mareva injunction or the Sequestration order.

12.  Here, as a consequence of Mr Meerovitsch’s failure to discharge his duty to the Sequestrators, either under the provisions of the Mareva injunction, or the sequestration order, an application has been made for the committal of Mr Meerovitsch for contempt of court.  I am satisfied that the expression “civil claim”, as that expression is used in s 21B (1)(c), should be given the widest possible meaning.  I adopt the words of Seagroatt J in Standard London (Asia) Ltd v Ho Wai-kin Robert [1998] 4 HKC 595 at 598C where he said:

“The order and rule cannot, in my view, cut down on the ambit of the section and limit ‘a civil claim’ to proceedings begun by writ of summons.  Accordingly, ‘writ’ should be given its widest meaning, or at least treated as being no more than an example by which proceedings are commenced.  To do otherwise, and to confine the construction of the rule to its strict wording would be to ignore the broader concepts of claims and proceedings envisaged in s 21B(1)(c). ”

13.  I am satisfied that an application for committal for contempt of court falls within the expression in s 21B (1)(c):

“a civil claim…. for… the performance of any other act”

and is sufficient to found jurisdiction for the grant of a prohibition order.

14.  Mr Chua next argued that as Mr Meerovitsch was not a party to the proceedings, in the sense that he was not a defendant in the writ commenced by the plaintiff, he could not be considered a party to the cause of action relied on by the Sequestrators.  It is right that an interlocutory injunction cannot be obtained against an entity which is not a party to the action: see Xinyuin Trading Co Ltd v Bank of China [1999] 4 HKC 686 CA.  With the greatest respect to Mr Chua, the submission misses the point.  The cause of action relied upon by the Sequestrators is not the original writ of summons in which a civil claim was made against the three defendants for a money sum due, but the application for the committal of Mr Meerovitsch for contempt of court.  He is plainly a party to that application.

15.  Leave has been granted by Tang J to issue the notice of motion for committal.  It is accordingly unarguable that there is probable cause for believing that there is a good cause of action.  If there were not goods grounds, the judge would not have granted leave to issue the notice of motion for committal.  The criteria in s 21B (3)(a) is accordingly met.  Mr Meerovitsch is ordinarily resident in Hong Kong, and accordingly the criteria in s 21B (3)(b) is met.

16.  On his own affidavit Mr Meerovitsch regularly leaves Hong Kong.  Exhibited to his second affidavit was an itinerary showing that he intended to leave Hong Kong on 16 August 2004 to go to Japan, returning on the morning of 21 August 2004.  He admits that he tends to travel fairly extensively between August and October as that is usually the busiest period when he seeks orders and negotiates with trading customers.  He was in the process of leaving Hong Kong of 12 August 2004.  I am satisfied that he is about to leave Hong Kong and the criteria in s 21B (3)(c) is met.

17.  It follows that if Mr Meerovitsch were to leave Hong Kong any judgment that may be given against him in the committal proceedings would be likely to be obstructed or delayed.  His stated intention to travel frequently would probably result in the serious disruption of the steps being taken by the Sequestrators in the discharge by Mr Meerovitsch of his duties of cooperation and the supply of information under both the Mareva injunction and the sequestration order.  Such disruption would very probably result in considerable increase in costs and would be added to an already substantial judgment.  Accordingly the criteria in s 21B (3)(d) is met.

18.  It is right that Mr Meerovitsch is a permanent resident of Hong Kong and that his family is here.  However, given his attitude towards service of the proceedings, set out later in this judgment, his failure to date to cooperate with the Sequestrators, and the fact that he is now facing imprisonment for contempt, I am satisfied that there are good reasons to fear his failure to return to Hong Kong, should he now leave.  Like Seagroatt J, I am of the view that family and other connections with Hong Kong are no guarantee of return.  That is particularly so of a person who does not have the roots in Hong Kong of one who was born here, and who holds a foreign passport and who is facing potential imprisonment in Hong Kong.  It is a simple matter for such a person not to return to Hong Kong, and to relocate their immediate family.

19.  The second basis on which discharge of the Order was sought was the non-service of the order.  The Ordinance does not require personal service of the order and it would have been open to the Sequestrators to have served the order by post.  Miss Tong makes the point that if Mr Meerovitsch were absent from Hong Kong, and postal service was effected  on his home, he may be informed of its existence and avoid returning to Hong Kong.  There is merit in the argument, and the fact that the Ordinance requires service of the order only if the subject of the order can be found leads me to the view that if the subject cannot be found in Hong Kong there is no need to adopt some other form of service which might thereby warn him of the order and defeat its purpose.

20.  Mr Chua argued that where a prohibition order is obtained Mr Meerovitsch was under a duty to take steps to serve it immediately.  In support of the submission he relied upon dicta from Kaplan J in Auto-Treasure Ltd t/a Albert Jewellery Creation v Pyramid International (a firm) & Ors CA Civ App 24/1992, unreported in the following terms:

“A plaintiff who obtains a prohibition order is in my judgment under a duty to take reasonable steps to serve it immediately.  If he decides for whatever reason, that he does not wish to serve it immediately, then he is under obligation to return to the ex parte judge and inform him and explain why service is not to be effected immediately.  This will entail giving the judge further information as to what has happened since he made the order and will assist him in deciding whether he is of the opinion that the order should stand or be discharged.  The notion of a plaintiff keeping such a drastic order of this nature up his sleeve for some four days is quite unacceptable.”

That is undoubtedly right, but it is a statement made in circumstances far removed from the present case.  In Auto-Treasure, Kaplan J was dealing with a situation where, after the order had been made, the applicant for the order held negotiations with the subject of the order.  The applicant did not immediately effect service of the order, “keeping it up his sleeve” while he attempted to negotiate a resolution of the dispute.  There was no suggestion that the subject could not be found.  On failing to resolve the matter, he served the order.  In an application by the subject to discharge the order, both the judge hearing the application and the Court of Appeal were concerned at this course of action.  In the present case however a proper attempt to personally serve the order had been made immediately, and the Sequestrators process server was told that it was not known when Mr Meerovitsch would return to Hong Kong. As soon as the Sequestrators learned that Mr. Meerovitsch had returned to Hong Kong and instructed solicitors they sought, through those solicitors, arrangements to effect service.  Mr. Meerovitsch did not disclose his whereabouts and refused to cooperate in service.  In those circumstances, the Sequestrators were not, as in Auto-Treasure, “keeping the order up their sleeve”, but had done all they could to effect personal service.

21.  When Mr Meerovitsch came before me late on Friday 13 August 2004, he asserted in his affidavit that he had not been served with a copy of the order.  The primary basis upon which the order was then sought to be discharged was failure of service.  Mr Meerovitsch did not disclose in his affidavit that he had instructed solicitors to act for him in the matter, but that he had specifically declined to instruct them to accept service of the Order on his behalf.  That was a serious breach of the duty of disclosure on an ex parte application.  I learned only of that situation when I drew the attention of the solicitor appearing for Mr Meerovitsch before me to a fax from the Sequestrators solicitors containing that information.  I now understand that fax had been sent to the court during the hearing by Mr Meerovitsch’s solicitors.  But the fact that Mr Meerovitsch had declined to instruct his solicitors to accept service should have been contained in his affidavit, or at least been told to me at the commencement of the hearing.

22.  It can hardly lie in the mouth of Mr Meerovitsch to seek to discharge an order for want of service in these circumstances.  It is not acceptable to argue that service has not been effected when a person travels widely out of Hong Kong and then declines to instruct solicitors to accept service on his behalf, and conceals that fact from the court.  I accept now, that after I raised this matter in the course of the hearing on 13 August 2004, Mr Meerovitsch, no doubt following sensible advice from counsel, has given instructions to his solicitors, and service of both the Order and the Notice of Motion for Committal have now been effected by service on the solicitors.

23.  Four factors lead me to conclude that the fact that the order was not served personally immediately following it being made, is not a basis upon which I should discharge the Order.  They are, first the absence of Mr Meerovitsch from Hong Kong, second, the lack of knowledge on the part of the Sequestrators as to when he might return, third, Mr Meerovitsch’s refusal to instruct solicitors to accept service on his behalf, and fourth, that as soon as they knew he was in Hong Kong, the Sequestrators took immediate steps to effect service.

24.  In the exercise of my discretion I bear in mind also that the application for committal is due to be heard in only ten days, on 25 August 2004.  While Mr Meerovitsch shows that he had a trip to Japan planned, he does not give any reasons for that trip nor does he assert that his presence in Japan was vital.  He does not assert in his affidavit that he has any other specific need to travel during those ten days.  I weigh in the balance the provisions of Article 31 of the Basic Law preserving freedom of movement of Hong Kong residents, and their freedom to travel and enter and leave the Hong Kong Special Administrative Region.  The restriction that is imposed is for a period of ten days only.  In the whole of the circumstances I am satisfied that the restriction is necessary and proportionate.  It will be for the judge in the committal proceedings to say whether the Order should continue beyond 25 August 2004. 

25.  For the foregoing reasons the application to discharge the Prohibition Order is refused.  There will be an order nisi that Mr Meerovitsch must pay the Sequestrators costs of the application to be taxed on a party and party basis, that order to be absolute in 7 days.

26.  In Re Oriental Credit, Harman J, although satisfied that there was no cause of action still declined to set aside the injunction order that he had made.  He said:

“None the less, it seems to me, when the court has, in 561(4) of the 1985 Act, the extraordinarily powerful remedy of immediate arrest and bringing the person before the court by summary procedure and with out his having been heard, it would be astonishing, in contrast with the position when the order is defied after the time for its performance has been made, if the court on being told, before the time for performance has arrived, ‘Oh, I have no intention of complying and I shall absent myself the day before your order is due to come into effect’, were to have two hold its hands and say, ‘Oh dear, oh dear, how very awkward, there is nothing we can do.’”

For precisely the same reasons I am satisfied that if, in the circumstances of this case, there was no jurisdiction to issue a prohibition order, I would issue an interim injunction restraining Mr Meerovitsch from leaving Hong Kong until after the hearing of the notice of motion for his committal on 25 August 2004.  It would be a remarkable proposition were the court to have to say that it would consider imprisoning a man for default of a duty to Sequestrators, and breach of a Mareva injunction, but allow him to leave the jurisdiction to avoid that consequence, while the application was pending before the court.

Representation: