JIANGMEN CHAO CHENG THREAD CO., LTD v. NG SIU LUN AND ANOTHER

CACV 47/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 47 OF 2000

(ON APPEAL FROM HCA 219/2000)

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J U D G M E N T

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Hon Godfrey VP :

Introduction

1. This is an appeal from an interlocutory order of Yeung J, made on 21 January 2000, by which the judge continued an injunction in Mareva form which the plaintiff in the action had obtained against Ng Siu Lun ("the husband") and Lau Fook Hing ("the wife"), the defendants in the action before him. The husband now appeals, on the ground that the judge was wrong to find (as he did find) that this was a case in which there was a risk that the husband would dissipate his assets if an injunction were not granted against him to restrain him from doing so and thus deprive the plaintiff of the fruits of any judgment it might obtain in the action. The plaintiff contends that the judge was right to continue the injunction and invites us to dismiss the appeal.

The background

2. The husband carried on business in Hong Kong under the name of Hip Hing Thread Factory. He was in ill-health. He decided to emigrate to Canada and did so in July 1997. He left the business in the hands of the wife and his son for the purpose of its beneficial winding-up. He says that, instead of doing that, the wife and son proceeded to utilise the assets of the business for their own purposes and in the course of doing so incorporated for their own benefit a limited company called Hip Hing Thread Factory Co. Ltd. The plaintiff, having supplied threads for the purposes of the business, claims that it has not been paid all that is due to it for the goods so supplied. On 7 January 2000, it issued a writ against the defendants endorsed with a statement of claim seeking payment of what it claimed was due to it. It described the defendants in the following manner :-

"Ng Siu Lun and Lau Fook Hing trading as or holding out to trade as HIP HING THREAD FACTORY (a firm)."

This is hardly a satisfactory description of the defendants but it appears from the statement of claim that it is the case of the plaintiff that the two named defendants (the husband and the wife) had held themselves out to be partners and the sole owners of Hip Hing Thread Factory.

3. In the statement of claim, the plaintiff claims to have supplied threads to "the defendants" or to their order. It asserts that, on 27 September 1999, "the defendants" in writing confirmed as follows :-

"(a) as at the end of August, 1999, the Defendants were indebted to the Plaintiff to the extent of HK$2,050,141.14 for unsettled invoices of goods supplied in good order.

(b) up to 16th September, 1999, the Plaintiff has further supplied goods of value HK$515,560.66 to the Defendants."

It further asserts that, after 16 September 1999, the plaintiff supplied more goods of the value of HK$681,414.54, but "the defendants" have only further paid HK$193,000.00. Hence, "the defendants" still owe the plaintiff HK$3,054,116.34.

The plaintiff's case

4. The plaintiff says that the husband is liable for this sum; that that he is a Canadian; the circumstances are suspicious; and that there is a risk that he will dissipate his assets in order to avoid any judgment obtained against him.

The husband's case

5. The husband has deposed that he is not a Canadian. He says that he did go to live in Canada but that in October 1999 he returned to Hong Kong and now he has no intention of returning to Canada. He says that after he went to Canada he delegated the management of the business to his son in order to gradually wind-up the business. He was not well and had decided to live in Canada to recuperate while that was done. The wife did not come with the husband to Canada and has never visited him there. The husband says that he thought the son had complied with his request and had laid off all the staff and removed the machines from the factory and vacated the offices, but subsequent developments showed that that was not so, for, when he returned to live in Hong Kong, he discovered that the business had not been wound up. He found that the financial situation of the business had deteriorated drastically since his departure from Hong Kong. He was told by the bank manager that the business was indebted to the bank in a sum in excess of $4 million. He discovered the incorporation of the company, Hip Hing Thread Trading Co. Ltd (to which I have already referred) by the wife and son. He says he has taken no part in the incorporation, or the running, of the company.

6. In these circumstances, he denies liability to the plaintiff for the goods ordered for the use of the business. He says that he has no knowledge of any such orders and never himself authorised the wife or the son to place any such orders. He says (although it is disputed) that he personally has never dealt with the plaintiff. Finally, he says that, in view of his decision to re-settle in Hong Kong, he has decided to resume the operation of the business himself to the extent that his health will permit. There is a risk of a collapse of the business altogether if the Mareva injunction is not discharged.

Conclusion

7. As is well-known, the purpose of the Mareva injunction is to prevent an unscrupulous and dishonest defendant from dealing with his assets so as to deny the plaintiff the fruits of any judgment he may obtain against the defendant. The case for the plaintiff is that this is such a case. It points to the fact that the husband has been resident in Canada. It says he may well go back there. It points to the confusion about the liability for the goods; whether the liability is that of the limited company; or of the husband; or of the wife and son. It contends that the means of conducting the business suggests at least the possibility that the recipients of the goods were anxious to get them without paying for them, which would, of course, be a dishonest thing to do. It refers to a confusing facsimile message, under the letterhead of the company and over the company's name, denying liability on the part of the company and asserting that that must be the liability of the business before its incorporation. It refers to the disputes between the family members, which, it says, lead to an inference that the husband will indeed go back to Canada. It suggests that the husband has been evasive in his evidence, and that his denial of liability itself suggests an unwillingness to abide by the decision of the court if the case were to go against him.

8. As to all this, the judge said as follows :-

"In the light of the manner in which the business dealings were concluded with the Plaintiff in particular, the use of a limited company and the attempt to shift the responsibility onto one another and bearing in mind also, the background of the 1st named Defendant, namely his ability to reside out of Hong Kong and his only known asset is the three factory premises which are the subject matter for a resumption order, there are valid reasons for the Plaintiff to be concerned as to whether the debt can be recovered.

Bearing in mind the suspicious way in which the business dealings were concluded with the Plaintiff by the factory and/or the limited company and the relationship of the 1st and the 2nd named Defendants as well as their son Mr Ng Yun Ming, in my view, there is also a real risk of dissipation of property. Therefore, prima facie an Mareva injunction against the assets of the two named Defendants is right and proper."

9. I have given anxious consideration to this passage of the judge's judgment, but I have to say that, in my opinion, there is no evidence here to justify the grant of this injunction against the husband. There is nothing in any of the matters relied on to justify the inference or to lead to the conclusion that the husband has acted or will act in such a way as to deprive the plaintiff of the fruits of any judgment it may obtain against him unless he is restrained by injunction from doing so. On the contrary, all the evidence suggests that the husband has been placed in a difficult position; he is anxious to rescue the business as best as he can, despite the serious state of his health, and to stay in Hong Kong to try and do it.

10. In my judgment, this is not a case in which the judge ought to have continued the injunction granted ex parte.

11. Accordingly, I would, for my part, allow this appeal.

Hon Rogers JA :

12. I agree.

13. I have very little to add save that it can only be emphasised, yet again, that a Mareva injunction is a very serious matter and the implications of a Mareva injunction are far wider than ordinary injunctions. In this case, I entirely agree that there was no evidence upon which the court could act in relation to the dissipation of assets.

14. In my view, the matter was most succinctly summed up by Miss Fung's final statement in her submissions : "There was no clear case of dishonesty but suspicion." Even that suspicion, in my view, when properly analysed, did not materialise.

15. I would therefore agree that this appeal must be allowed and the injunction discharged.

Hon Godfrey VP :

16. The appeal will therefore be allowed and the injunctions granted against the husband by the judge's order will be discharged. The husband's costs of the application for that order and of this appeal must be taxed (if not agreed) and paid by the plaintiff to the husband.