M CORP v. B INC AND ANOTHER

This application was heard in chambers. As there may be some points of general interest I had it now in open Court but order that the names of the parties in any report of the matter should not be disclosed.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. In this matter the plaintiff M. Corp., by a charter party dated the 13th February 1985 chartered a vessel to B. Inc. the 1st defendant. The plaintiff alleges that the 2nd defendant, A. Ltd., guaranteed the performance of the 1st defendant under that charter party. The lst defendant is said to have defaulted in its performance and the plaintiff now claims against the 2nd defendant under the alleged guarantee. A Mareva injunction was granted against the 2nd defendant on the 15th of July 1985 forbidding it both to remove any assets from the jurisdiction and to charge its assets so as to reduce their value to below US$115,000. This amount was reduced, on the 20th July, by an amendment to the order to an amount of US$66,183. The order goes on to forbid the 2nd defendant from, in particular, disposing of or dealing with any money standing to its credit in its account with the Bank of Credit and Commerce Branch in Mody Road. The 2nd defendant now asked that the order be amended to allow it to deal with its assets so as to be able to satisfy its normal trading and operating debts.

2. Mr. K, the Managing Director of the 2nd defendant, said in an affidavit filed on 24th of July 1985, that the 2nd defendant is currently defaulting on 11 payments of hire which total U.S.$753,000 and that the Bank of Credit and Commerce is refusing to allow payments to be made from the 2nd defendant's account with it. None of the hire payments which Mr. K says are owing, is in excess of U.S.$100,000 and the smallest is U.S.$53,112.50. I am satisfy that I must proceed upon the basis, there having been no suggestion to the contrary, that the bark is acting properly in accordance with the terms of injunction. This being so it must follow that if any one of the payments was made the account would be reduced to a figure below U.S.$66,183 i.e. that the amount presently in the account is less than $53,112.50 more than that figure.

3. Mr. Sussex, who appears for the 2nd defendant, submits relying upon the Angel Bell (1981) 1 QB 65 that a defendant against whom a Mareva injunction has been granted should not be prevented from paying its trade debts as they fall due. Mr. Stone, who appears for the plaintiff, does not seek to argue otherwise. He submits however, that the 2nd defendant has not placed facts before the Court sufficient to justify the Court making the order sought. The position facing this Court is exactly that which faced Robert Goff, J. in A. & Anor. v. C. & Anor. (1981) 1 QB 961 where the learned Judge stated the position, at 693, as follows -

"In the present case, I have had to consider the position where the defendant has, or may have, other assets from which the relevant payment may be made. I have still to apply the basic principle, i.e. that I can only permit a qualification to the injunction if the defendant satisfies the Court that the money is required for a purpose which does not conflict with the policy underlying the Mareva injunction."

the learned Judge went on to say that what had to be proved by a defendant would depend upon the circumstances in each particular case.

4. The policy indulging the Mareva injunction was succintly stated by Lloyd J. in PCW Ltd. v. Dixon (1983) 2 All E.R. 158 where he said, at p. 162, that -  

"The sole purpose or justification for the Mareva order is to prevent the plaintiffs being cheated our of the proceeds of their action should it be successful, by the defendant either transferring his assets abroad or dissipating his assets within the jurisdiction."

5. I now turn to the facts which were disclosed in paragraph 2 of the affidavits of Mr. K, the managing director of D2 and Mr. C the deputy managing director. These facts Mr. Sussex submits show clearly that there is no intention to defeat the policy underlying the Mareva injunction and demonstrate that the only intention of D2 is to obtain an order that will allow it to continue to trade.

Mr. K said :

Mr. K went on to say in paragraph 3 and 4 that -

and that -

6. Mr. Stone is critical of the matters disclosed in Mr. K's affidavit arguing that there is no mention as to whether or not the defendant company has any other bank accounts in Hong Kong and that all the Managing Director has said is that he -

"wishes to make payments from its account at Bank of Credit and Commerce International".

The matter does not, however, rest there as Mr. C in his affidavit said, in paragraph 21, that : "The 2nd defendant conducts its financial affairs through its account at Bank of Credit and Commerce in Hong Kong. A Nil balance is maintained in the US Dollars Account at Liu Chong Hing Bank in California. None of its agents hold any funds which could meet the above hire payments. Apart from payments through Bank of Credit and Commerce, the 2nd defendant has no means of making the above hire payments." Mr. Stone also criticizes this statement on the grounds that it also fails to state specifically that the 2nd defendant has no other bank accounts in Hong Kong. Mr. Stone submits that the 2nd defendant has not been frank with the Court and has deliberately withheld facts which would place the Court in a position to know the true situation. He says that the only statement that really deals with assets is the one that says that D2 has a nil balance in its US dollar bank account in California. Mr. Stone referred to A. & Anor. v. C. & Anor. at p. 962 where Robert Goff, J. stated -

"but no evidence whatsoever was placed before the Court concerning any other assets of the defendant's making the application; it was not therefore possible for the Court to assess whether any other assets of these defendants were available to pay the costs or if they were so available, why the defendants were seeking to make use of the assets which were subject to the mareva injunction for this purpose".

Mr. Stone suggested that it lay upon D2 to do as the defendant had done in PCW Ltd. v. Dixon (1983) 2 All ER 158 to set "out his financial obligations in considerable detail".

7. Mr. Sussex submits that the defendant is required only to satisfy the Court that the money is required for a purpose which does not conflict with the policy underlying the mareva jurisdiction which is as I have noted, to prevent the plaintiff being cheated out of the proceed of his action ... by the defendant either transferring his assets or disappointing them. The correctness of Mr. Sussex's submission cannot be doubled but what must be borne in mind is that it is for the defendant to satisfy the Court that the money is required for such a purpose. Mr. Sussex says that the defendant has said that he has no overseas account. He submits that paragraph 21 of Mr. C's affidavit makes it clear that the only operative bank account which the 2nd defendant has in Hong Kong is its account at the Bank of Credit and Commerce and that Mr. C has said that D2 has "no means of making the above hire payments" except through that account. I must say that I find that Mr. C's final statement somewhat lacking in particularity but even if it be so that the only means of making payments is through the Bank of Credit and Commerce I am still left asking myself where is the evidence as to assets. What the Court is really concerned with are the assets of the defendant and is for the defendant to place before the Court evidence as to those assets. He must place the Court in a position where it can to paraphase the words of Robert Goff J. in A v. C, "assess whether any other assets of the (defendant) were available to pay the (amounts owing) or, if they were so available, why the defendants were seeking to make use of the assets which were subject to the Mareva injunction for this purpose." As I have not been placed in a position where I can make any such assessment because there has been no real statement as to the 2nd defendant's assets.

8. All the defendant has really said is that it has a bank account and that it operates through that account and that it has no means of making any payments except through that account. I find the affidavits wholly lacking in the sort of detail which I consider should be furnished by a defendant seeking to vary a Mareva injunction so to allow him to pay his trade debts. On the evidence before me the 2nd defendant has not discharged the burden of proof which rested upon it and the application must therefore be dismissed.

Mr. Stone : I ask for costs.

Mr. Sussex : I oppose this application costs should be reserved.