SNE ENGINEERING CO LTD v. CHIM KEE MACHINERY CO LTD

HCA 1313/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1313 OF 2012

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DECISION ON COSTS

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Introduction

1.  This decision on costs concerns the costs of and occasioned by:

(a)  an ex parte injunction order dated 24 July 2012 (a Tuesday);

(b)  an inter partes injunction order dated 30 July 2012 which continued the said ex parte order (but with amendments).

2.  The main issues raised by the defendant during the hearing on 10 August were:

(1)  there was material non-disclosure by the plaintiff at the ex parte hearing;

(2)  there was no urgency to justify the ex parte hearing.

Background

3.  It is common ground the dispute in this action was concerned with an MTR Corporation Ltd. (“MTR”) construction site known as “Nam Cheong Property Foundation Removal and Reprovisioning site — the Express Rail Link 802” (“the Site”).

4.  MTR was the Site’s employer and Hsin Chong Construction Co Ltd (“Hsin Chong”) was its main contractor.  The plaintiff was one of Hsin Chong’s sub-contractors.  The plaintiff entered into a machinery hire agreement with the defendant for the supply of some of the equipment and machinery needed by the plaintiff (“the hiring agreement”).

5.  The injunction order (as amended) in short compelled the defendant to remove certain construction equipment and machinery (“the deft’s machines”) from the plaintiff’s part of the Site.

Material non-disclosure

6.  At the ex parte hearing, the plaintiff lodged with court a 4-page skeleton argument.  There was also a supporting affirmation of about 12 pages; attached to this were over 370 pages of documentary exhibits.

7.  The ex parte skeleton argument has the following headings:

(a)  documents before the court;

(b)  ex parte application for mandatory injunction;

(c)   background;

(d)  principles to be applied;

(e)   application of the principles.

8.  The plaintiff’s case set out in the part of the skeleton argument at para 7(e) above can be summarized as follows.  The defendant has no right to be present at the Site since 3 July 2012, the date of termination of the hiring agreement.  Any continued presence of the defendant would (at worst) cost the plaintiff its contract with Hsin Chong, and (at best) cause delays to the works at the Site.

9.  The history leading to the ex parte application was more complicated than that set out in the plaintiff’s skeleton argument.  Parts of the history can be found in the plaintiff’s supporting affirmation:

(1)  exhibit “WK-3” (defendant’s letter dated 30 March 2012) shows a complaint of the plaintiff’s non-payment of the defendant’s contract sums;

(2)  exhibit “WK-4” (statutory demand) shows the amount allegedly due to the defendant to be over $10.399 million;

(3)  exhibit “WK-5” (rental arrangement dated 23 May 2012) shows a tripartite agreement whereby the plaintiff, the defendant and Hsin Chong agreed that Hsin Chong would pay to the defendant (for the plaintiff) the hiring charges;

(4)  Hsin Chong complained on 26 June 2012 the plaintiff was in breach of the sub-contract by failing to make payment to the sub-sub-contractors, that some essential equipment would be withdrawn from the Site as a result and the withdrawal might affect work progress.  The complaint was denied by the plaintiff (para 12 and 13);

(5)  the defendant’s said letter of termination of 3 July 2012 (exhibit “WK-8”) (see also para 8 above);

(6)  Hsin Chong stating on 3 July 2012 the plaintiff was in breach of the sub-contract and Hsin Chong had to take control of the plaintiff’s sub-contract works immediately (para 15);

(7)  Hsin Chong in essence repeated the said allegation on 9 July 2012 (para 16);

(8)  the plaintiff informed Hsin Chong on 11 July 2012 it accepted the defendant’s termination of the agreement (para 18);

(9)  by then, the amount due to the plaintiff appeared to be about $3.5 million odd (para 19 and 20);

(10)   exhibit “WK-18” (plaintiff’s letter dated 19 July 2012) shows that the plaintiff denied its breach of the sub-contract, stated that it was ready to introduce its own machinery and asked Hsin Chong if the defendant had been permitted to remain at the Site by Hsin Chong.  The plaintiff also informed Hsin Chong that an application for an injunction order would be made within 14 days against the defendant if the deft’s machines should continue to wrongfully remain at the Site;

(11)   the plaintiff also demanded on 19 July 2012 that unless the defendant commenced to remove the deft’s machines the following day, an application for an injunction order would be made (para 30).

10.  In relation to para 9(10) above, at the 10 August hearing the plaintiff fairly accepted it asked Hsin Chong if permission to remain had been given because it suspected a secret agreement might have been reached between Hsin Chong and the defendant.

11.  The latter parts of the supporting affirmation then narrated the subsequent correspondence between the plaintiff, the defendant, the Hsin Chong’s project manager concerning the steps to be taken for the removal of the deft’s machines, such as the provision of a demobilization schedule, obtaining MTR’s consent for demobilization, and the plaintiff’s repeated requests for Hsin Chong to withdraw its earlier threat to terminate the sub-contract between itself and the plaintiff.

12.  The court records show that the ex parte hearing on 24 July lasted for about 8 to 10 minutes.

13.  The principles relating to the applicant’s duty to make full and frank disclosure at ex parte applications are trite.  Hong Kong Civil Procedure 2012, Vol 1 says:

“On any ex parte application, the applicant must proceed ‘with the highest good faith’ ” (para 29/1/39).

“Good faith” in such context is shown by the applicant making full and frank disclosure of all material facts.

14.  Hong Kong Civil Procedure 2012 also says:

“Materiality is to be decided by the court and not by the assessment of applicants or their advisers”;

“The disclosure of material facts is not to be confused with discovery and should be made in the affidavit, not in the exhibits … ”

(para 29/1/39).

15.  The decision of the English court of appeal in National Bank of Sharjah v Dellborg (1992) The Times (24 December 1992) was cited as the authority for the last-mentioned legal proposition.  The court also said in that decision:

“The material facts at the ex parte stage were those which were necessary to enable the judge to exercise his discretion properly and fairly between the parties ...

But the place to disclose the facts, both favourable and adverse, was in the affidavit and not in the exhibits. No doubt it would usually be convenient to exhibit a few key documents where it was necessary to do so to explain the case.

...

If the facts were not fairly stated in the affidavit it would not assist the plaintiff to be able to point to some exhibit from which the fact might be extracted.

If they were fairly stated, then it should not avail the defendant to show that some document, relevant on discovery, had been omitted” (emphasis supplied).

16.  As stated above, the supporting affirmation disclosed a history which was much more complicated than that stated in the plaintiff’s ex parte skeleton argument.  In addition, three matters have not been disclosed at the ex parte hearing (at the very least, they were not properly and/or sufficiently brought to the court’s attention):

(a)  the deft’s machines were “sizeable items of substantial weight”;

(b)  probably because of (a) above, any dismantling and removal of the deft’s machines would require (i) assistance from the management of the Site; (ii) the exit permit/consent from the management of the Site; (iii) a demobilization schedule; (iv) several days’ time and a dedicated team of removal workers (see also MTR’s letter dated 27 July 2012 referred to in para 20 below);

(c)   it was not entirely clear who Hsin Chong would regard as the party in breach of the sub-contract, and/or who to further engage for the supply of machinery covered by the hiring agreement

(the defendant’s affirmation dated 30 July 2012, especially at para 8, 11 to 16, 17 to 18, 22 to 26, 28 to 31 and 34 to 35 (and the related exhibits), and at para 10 above).

17.  Finally, the need for the plaintiff to make the application ex parte was the imminence of Hsin Chong’s threat to terminate its sub-contract with the plaintiff (Hsin Chong’s letter of 18 July giving the plaintiff 7 days’ notice to rectify its defaults):

(1)  para 25 to 27 and 38 to 40, supporting affirmation;

(2)  para 3 and 5 to 6, plaintiff’s skeleton argument.

However, a similar threat has in fact been made by Hsin Chong in early July (para 9(6) and (7) above).

18.  Further to the need in the plaintiff’s skeleton argument to draw the court’s attention at the ex parte application to the more complicated history summarized in para 9 above, the plaintiff should also have made proper disclosure of the matters set out in para 16 above.

19.  By reason of the above matters, I am satisfied that there has been material non-disclosure on the plaintiff’s part.

20.  It ought to be mentioned (though this did not affect the determination of this aspect) in a letter dated 27 July 2012, MTR expressed certain surprise about the plaintiff’s action:

“[The plaintiff has] somehow gained a High Court injunction to remove cranes from [the Site]. This is MTR’s work site and under the Contract no equipment, plant or materials or any part thereof shall be removed from [the Site] without the written consent of the Engineer. Did Hsin Chong advised the High Court that this is not [the plaintiff’s] site?”

Probably unknown to MTR, Hsin Chong was not a party to this action and naturally never enjoyed a right to be heard.

Need for ex parte application

21.  The ex parte application was not made on the basis that there was a need to keep the legal proceedings confidential and without warning to the defendant.  Thus, the only basis for so applying must be urgency which justified a departure from the normal mode of application (by way of inter partes hearing).

22.  I also agree with the defendant the plaintiff has failed to establish a proper/sufficient case of urgency.

23.  The matter put forth by the plaintiff as constituting urgency was Hsin Chong’s threat to terminate the sub-contract with the plaintiff (para 8 and 17 above).  But any urgency so arising was at least partly caused by the plaintiff:

(1)  the defendant served the notice of termination as early as on 3 July;

(2)  the plaintiff could have treated the hiring agreement as having been brought to an end since then (the termination was in fact “accepted” by the plaintiff on 11 July (para 9(8) above)).

Thus, any application for an injunction order could have been made much earlier than Hsin Chong’s threat/notice of 18 July (para 16 above).

24.  This is particularly so taking into account Hsin Chong’s threat made in early July (para 9(6) and (7) above).

25.  Moreover, in a letter dated 19 July 2012, the defendant’s solicitors expressly informed the plaintiff the defendant intended to vigorously defend any application for injunction which the plaintiff might make.  Regrettably, this has apparently been ignored by the plaintiff.

26.  Finally, as must have been well known to legal practitioners, a “summons day” is available practically every Friday to deal with interlocutory injunction applications (the Friday following 3 July (para 8, 9(5) and 23(1) above) was 6 July, that following 11 July (para 9(8) and 23(2) above) was 13 July and that following 24 July was 27 July).

Conclusion

27.  By reason of the matters above, both the ex parte injunction order and the inter partes injunction order should have been discharged.

28.  Accordingly, this is an appropriate case for the costs of and occasioned by those orders to be paid by the plaintiff to the defendant to be taxed if not agreed.

Other matters

29.  Events subsequent to the grant of the injunction orders (whether in the original or the amended version) have overtaken the need for the injunction orders.  The parties have thus sensibly consented to their discharge at the 10 August hearing.

30.  The relief sought in the action (which was substantially the same as that sought in the ex parte and inter partes hearings) is likewise rendered academic by now.  The plaintiff has again sensibly sought leave to withdraw this action with costs to the defendant to be taxed if not agreed.