THE DISCOVERY PUBLICATION COMPANY LIMITED v. WAI KIN BONG AND OTHERS

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

-------------------

-----------------

JUDGMENT

-----------------

1. I have before me a summons issued on behalf of King's Reef Investment Company Limited, (the intervener) to vary a Mareva injunction that I granted in favour of the plaintiff against the defendants on the 11th February 1988 restraining them from, inter alia, disposing of their assets and in particular, properties in Tai Koo Shing and Tin Hau Temple Road.

2. The intervener, by a sale and purchase agreement dated the 9th February 1988, agreed to purchase from the 3rd defendant, the property in Tin Hau Temple Road for $2,450,000 which agreement was registered in the Land Office on the 16th February 1988. A deposit of $240,000 has been paid of which sum $195,000 is held by the intervener's solicitor as stake-holder. The property is subject to a legal charge in favour of the Far East Bank Limited (the bank) dated the 24th April 1987 in respect of general banking facilities and all advances. It appears that the bank is prepared to release the title deeds upon payment to it of the sum of $2,400,000.

3. By the present summons, the intervener seeks a variation of the order so that the 3rd defendant is allowed to redeem the property from the bank and thereby to complete the sale and purchase agreement. In the normal course of events such an application should cause no problems for it is conceded by the plaintiff that the bank has priority over any claims that it has against the 3rd defendant. The plaintiff, of course, does not have any charge over the assets of the 3rd defendant. However, the legal charge in favour of the bank was not only executed by the 3rd defendant but by two other parties, viz. Dragon Newspaper and Nagazine Distributors Limited and the Morning News Limited.

4. Whilst Miss Eu, who appeared for the plaintiff, is agreeable to completion of the sale and purchase agreement taking place, she submits that there is an obligation upon the 3rd defendant to reveal the state of its actual indebtedness to the bank and that of the other two parties.

5. The plaintiff's stance is set out in their solicitors' letter to the 3rd defendant's solicitors dated the 28th March 1988 which refers to the summons of the 3rd defendant's summons to vary the Mareva injunction which came before me on the 26th February 1988 and which was on that date adjourned sine die with liberty to restore. That letter where relevant reads as follows:-

6. A reply from the 3rd defendant's solicitors was written on the 29th March 1988, which reads:-

"         We refer to your letter by fax dated the 28th March 1988. We cannot agree with the contents of your said letter. Our counsel has made it clear that in the present case, the sale of the property concerned has entered prior to the injunction and moreover, in any event, the bank should have first priority over the property. As we understand, the application is now issued by the purchaser. It seems more unreasonable for you to demand information from our clients as the issue is whether the purchaser should have priority over the injunction. If they should have priority, it has nothing to do with the questions raised in your said letter."

7. The law with regard to Mareva injunctions has been settled by a long line of authorities, the object being to protect the plaintiff from being unjustly deprived of the fruits of a judgment that he can reasonably expect to obtain by the defendant dissipating his assets or transferring them beyond the reach of the plaintiff.

8. Where an application is made to vary such an order, the burden lies upon the defendant to satisfy the Court that payments can properly be made. I then refer to the case of A. and Another v. C. and Others (No. 2)⁽¹⁾ as applied by Power, J., as he then was, in M. Corp. v. B. Incorp and Another ⁽²⁾.

9. The 3rd defendant in this case has not provided any evidence to show whether it has any other assets available to satisfy its indebtedness to the bank or provided any evidence as to the liabilities of the other two parties and the extent of their indebtedness, if any, for reasons which have not been explained. Despite, comments that I made to the 3rd defendant's counsel at the earlier hearing on the 26th February, the 3rd defendant has still not provided the information requested nor does it appear to be willing to do so. I am placed in the same position that Power, J. found himself in M. Corp. v. B. Incorp. ⁽²⁾ where at P.660 of his judgment, he had this to say:-

"What the Court is really concerned with are the assets of the defendant and it 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."

Power, J. refused the defendants' application to vary the Mareva injunction.

10. The 3rd defendant here although adopting a neutral stance, in effect supports the intervener's application. The intervener is, of course, an innocent party and there is no reason to doubt that the application made today is not bona fide. However, I am unable to depart from the accepted principles relating to a variation of the Mareva injunction to which I have referred. In the absence of evidence forthcoming from the 3rd defendant, the application for the variation sought by the intervener must be refused. The summons is therefore dismissed.

(1)    [1981] 1 Q.B. 961

(2)    [1986] H.K.L.R. 657