DA FONG CONSTRUCTION ENGINEERING CO. LTD. v. CHUEN HING CONSTRUCTION CO. LTD.

HCA 4734/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4734 OF 2001

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J U D G M E N T

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1. Originally this was an ex parte application for a Mareva injunction up to a limit of $574,598.40 made by the Plaintiff against the Defendant.

2. It was heard yesterday by Stone J and his Lordship adjourned the application to this morning in order to enable notice to be given to the Defendant, and the matter eventually came before me for hearing. Having read the papers and heard submissions from both parties, I am not minded to grant a Mareva injunction in favour of the Plaintiff. The Plaintiff has in this action obtained O. 14 judgment against the Defendant for the sum of $574,598.40 under three dishonoured cheques, which remains wholly unsatisfied. There are still outstanding disputes between the parties in the present action but I am not concerned with them.

3. I do not accede to the application for a Mareva injunction because I am not satisfied by the evidence presented by the Plaintiff before me that there is a real risk of dissipation of assets by the Defendant, so as to render itself "execution proof" in respect of the judgment already obtained by the Plaintiff against the Defendant. But this is not the end of the matter. Pursuant to the O. 14 judgment obtained by the Plaintiff against the Defendant, the Plaintiff took out an inter partes summons under O. 77 r. 16(2) of the Rules of the High Court as well as section 23 of the Crown Proceedings Ordinance (Cap. 300) for an order restraining the Defendant from receiving interim payments under a Government project from the Government, out of which the present dispute between the Plaintiff, a sub-contractor of the Defendant, and the Defendant, arose.

4. The Plaintiff also applied under the summons for the direct payment of the interim payments payable to the Defendant by the Government to the Plaintiff instead in satisfaction of the O. 14 judgment. As I said, that summons was taken out on 2 April 2002 and it is still pending before the Court for determination. The matter which prompted the Plaintiff to apply for the Mareva injunction is this: According to information obtained by the Plaintiff, the Government has recently issued a cheque for the sum of $565,193.80 in favour of the Defendant; that was done on 13 May 2002 by ordinary mail. At today's hearing, the Defendant does not deny the issue of the cheque in favour of the Defendant by the Government.

5. In my judgment, given the judgment debt that is outstanding, and given the outstanding application under O. 77 for, in effect, a garnishee order against the Government and an order restraining the Defendant from receiving payment from the Government direct, fairness and justice require that the cheque from the Government in question and the money represented by the cheque be preserved pending the final determination of the O. 77 summons.

6. In this regard, I have listened carefully to what Miss Chow, counsel for the Defendant, had to say by way of submission, but I do not see any real prejudice to the Defendant, or indeed any third party like those former employees of the Plaintiff who are suing the Defendant as main contractor in the Labour Tribunal for outstanding wages, if I make an order preserving the cheque or the money represented by the cheque pending the outcome of the O. 77 summons.

7. In my judgment, given the judgment debt in question, the Plaintiff is quite entitled to take out its summons under O. 77 against the Defendant, and of course, the Rules provide the Defendant with an opportunity to contest the application. Pending the outcome of the application, the best course to take is to preserve the status quo, i.e. to preserve the cheque which was issued well after the taking out of the O. 77 summons by the Plaintiff, pending the outcome of the summons.

8. If no injunction is granted in the meantime, that could well defeat in whole or in part the application of the Plaintiff under O. 77 quite prematurely. I do not think that would be either fair or just. Further, the Plaintiff is prepared to offer the usual undertaking as to damages as well as an undertaking to prosecute its O. 77 summons expeditiously.

9. For all these reasons, I am prepared to grant an injunction preserving the cheque or rather the money represented by the cheque pending the determination of the summons. I am fully satisfied that I do have the jurisdiction to grant the injunction whether under the provisions in the High Court Ordinance or under O. 29 or alternatively under the inherent jurisdiction of the Court.

10. As for the form of the injunction, there is no point in restraining the cashing of the Government cheque; that would only cause a loss of interest. In my judgment, the best course to take is to preserve the money represented by the cheque. I would order that the money represented by the cheque, i.e. the sum of $565,193.80 be paid by the Defendant into Court and be placed in an interest bearing account immediately if the cheque has already been cashed, or, on the same day when the cheque is cashed if the cheque has not been cashed yet, pending the outcome of the O. 77 summons or further order of the Court, upon the Plaintiff's undertaking as to damages as well as its undertaking to prosecute the O. 77 summons expeditiously. I would also give the Defendant liberty to apply to vary or discharge the order that I made just now upon showing good ground.

11. On the question of costs, as I say, the Plaintiff originally went for a Mareva, but by a twist, it eventually got an injunction preserving the money in question. Understandably much effort was expended by the Defendant on preparing for its opposition to the application for a Mareva. The effort has been wasted and the Plaintiff must pay for the costs.

12. On the other hand, the Plaintiff did eventually ask for an injunction preserving the money in question. That was opposed by the Defendant unsuccessfully, although to be fair to the Defendant, it came here to defend an application for a Mareva. So, looking at the matter in the round, I would make the following order as to costs in the exercise of my discretion:

(1) Costs of appearance before Stone J on 14 May 2002 be borne by the Plaintiff;

(2) subject to the above, 70% of the costs of this application be paid by the Plaintiff to the Defendant forthwith, to be taxed if not agreed;

(3) the remaining 30% of the costs of this application be costs in the cause of the Plaintiff's summons under O. 77.