RE MOHAN BHAGWANDAS MURJANI

IN THE HIGH COURT OF HONG KONG

IN BANKRUPTCY

NOS B525 OF 1989 & B808 OF 1990

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DECISION

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1. On 27th April 1989, I gave leave for entry of judgment against Mohan Bhagwandas Murjani (Mr. Murjani) in Action 1045/89, and against Bhagwandas Kewalram Murjani (BKM) in Action 1404/89, for US$10,798,955.91. In each action, the Bank of India (BOI) was plaintiff, while Mr. Murjani and BKM were each guarantors of Murjani industries (HK) Ltd. for facilities granted to that company by BOI. Appeals against my decision were dismissed on 11th December 1989. Meanwhile, in September and October 1989, Mr. Murjani had been examined in accordance with the provisions of Order 49B. It having become apparent to BOI that there were no assets against which execution could  be levied, BOI caused to be issued bankruptcy notices against Mr. Murjani on 19th October, and against BKM on 29th October, each notice based on the judgment debts.

2. Within the time specified in the notice, i.e. 7 days, BKM applied for the notice to be set aside upon the ground that he has a counter-claim set off or cross-demand equal to or in excess of the judgment debt as provided in Section 3(1)(g) of the Bankruptcy Ordinance (the ordinance) which reads:

"3 (1)     A debtor commits an act of bankruptcy in each of the following cases --

.....

(g)

if a creditor has obtained a final judgment or final order against him for any amount, and Execution thereon not having been stayed, has served on him in Hong Kong or, by leave of the court, elsewhere, a bankruptcy notice under this ordinance, and he does not, within 7 days after service of the notice, in case the Service is effected in Hong Kong, and in case the service is effected elsewhere, then within the time limited in that behalf by the order giving leave to effect the service, either comply with the requirements of the notice or satisfy the court that he has a counter-claim set off or cross demand which equals or exceeds the amount of the judgment debt or sum ordered to be paid, and which he could not set up in the action in which the judgment was obtained or the proceedings in which the order was obtained: ..."

3. Mr. Murjani failed to make his application to set aside in time. Time was not extended by the Court. Accordingly, BOI's petition against him was set down for hearing on 1st July 1991. By re-amended notice of motion dated 4th April 1991, Mr. Murjani gave notice that he would show cause against the petition on two grounds:

(i)    He is not a debtor within the meaning of Suction 3(2) of the Ordinance, so that the court lacks jurisdiction and;

(ii)    He has a counterclaim and cross demand equal to or greater than the debt.

4. By motion dated 25th June 1991, as amended (the June motion), Mr. Murjani sought a variety of reliefs. It is necessary to set out in full the terms of the June motion:

"l.    That the court should hear and determine the application to set aside the Bankruptcy Notice in Bankruptcy No. B808 of 1990 and/or the application to strike out the Statement of Claim in HCA No. A8752 of 1990 before hearing and/or dealing with the Petition herein.

 

2.    That the petition herein be dismissed on the following grounds/preliminary objections:

(1)    That on the basis of the Debtor's claim as set out in the Statement of Claim in HCA No. A4481 of 1991, the Court cannot be satisfied with proof of the debt of the above-mentioned petitioner ("the petitioner");

 

(2)    Further or in the alternative, that there is otherwise sufficient cause such that no receiving order ought to be made;

 

3.    Alternatively that all proceedings on this petition be dismissed or stayed or adjourned for such period and on such terms as this Court deems fit on the following grounds.

 

(1)    That the Debtor denies his alleged indebtedness petitioner by reason of his claim against the petitioner in HCA No. A4481 of 1991 and that the proceedings herein should be stayed for such time as may be required for the trial of HCA No. A4481 of 1991;

 

(2)    Further or in the alternative, that the petitioner is estopped and/or prevented from proceeding with its petition herein in that:

 

(a)    The Petitioner has issued a Statutory Demand against the Debtor in England in Bankruptcy Proceedings No. SD295 of 1990 based on the same alleged debt on which it relies herein; and

 

(b)    The said Statutory Demand was set aside by Mr. Registrar Scott on 26th October 1990 on the ground that the Debtor had an arguable/triable cross demand, set off or counterclaim based on the same facts as those upon which HCA No. A4481 of 1991 was founded;

 

(3)    Further or in the alternative, that the issuing of and/or the proceedings under the petition herein constitutes an abuse of process and/or wrongful acts in furtherance of the conspiracy alleged against the petitioner in HCA No. A4481 of 1991.

 

(4)    Further or in the alternative, that the Petition herein is based on inadmissible evidence purportedly adduced herein without leave of the Court, such evidence having been obtained by the Petitioner in other proceedings and subject to the usual implied undertaking not to use them for any collateral or ulterior purpose."

 

5. HCA A8752/90 is an action for damages by BKM against State Bank of India (SBI), BOI and other Indian banks. It is the counterclaim upon which he bases his application to set aside the bankruptcy notice.

6. HCA A4481/91 is a similar action by Mr. Murjani, and a company called Fizzazz Inc. (formerly Tommy Hilfiger Company Inc. which I shall call TH Co.). It is upon the same grounds as BKM's action and consitutes the primary basis for the relief which he seeks. For that relief, Mr. Murjani relies upon the Court's power to dismiss a petition under s.s. 9(2) and (3) of the Ordinance which read:

"(2)   At the hearing the court shall require proof of the debt of the petitioning creditor of the service of the petition and of the act of bankruptcy, or if more than one act of  bankruptcy is alleged in the petition, of some one of the alleged acts of bankruptcy, and if satisfied with the proof, may make a receiving order in pursuance of the petition.

 

(3)    If the court is not satisfied with the proof of the petitioning creditor's debt or of the act of bankruptcy or of the service of the petition, or is satisfied by the debtor that he is able to pay his debts, or considers that for other sufficient cause no order ought to be made, the court may dismiss the petition."

 

Thus the Court may dismiss a petition:

(a)    if the Court is not satisfied with proof of debt or the act of bankruptcy;

(b)    if the Court is satisfied that the debtor is able to pay his debts or;

(c)    for other sufficient reason.

7. Mr. Murjani also relies upon the Court's power to stay a petition under Suction 9(5) of the Ordinance which reads:

"(5)    Where the debtor appears on the petition and denies that he is indebted to the petitioner, or that he is indebted to such an amount as would justify the petitioner in presenting a petition against him, the court, on such  security (if any) being given as the court may require for payment to the petitioner of any debt which may be established against him in due course of law, and of the costs of establishing the debt, may, instead of dismissing the petition, stay all proceedings on the petition for such time as may be required for trial of the question relating to the debt."

 

and under Section 104 of the Ordinance which reads:

"     The court may at any time, for sufficient reason, make an order staying the proceedings under a bankruptcy petition, either altogether or for a limited time, on such terms and subject to such conditions as the court may think just."

 

8. Mr. Murjani further relies upon the Court's inherent jurisdiction to stay for abuse of its process, and its general power to adjourn the hearing of a petition from time to time.

9. It was agreed that BKM's application and Mr. Murjani's June motion should be heard together. The principal thrust of the June motion is that Mr. Murjani has a genuine counterclaim which relies on the same facts as BKM's counterclaim. The two effectively stand or fall together. Like Mr. Ronny Tong Q.C., who appeared for Mr. Murjani and BKM, I will deal with the June motion first, and add anything necessary in relation to BKM thereafter.

10. Pare. 3(2) - estoppel

11. After Mr. Tong had addressed me in opening, this ground was stopped in its tracks. An appeal against the decision of Mr. Registrar Scott was allowed on 6th July by Scott, J. I need say no more about it, other than that the Judge based his decision upon the wholly speculative quantum of damages, and that while I find his decision of interest, I place no reliance upon it.

12. Para. 3 (4) - inadmissible evidence

13. On the reamended petition itself, two issues arise

(i)    whether this Court has jurisdiction. This arises from para. (1) of the petition which reads:

 

"(1)    That the said Mohan Bhagwandas Murjani is domiciled in Hong Kong and/or within a year before the presentation of this petition has ordinarily resided at 3 Henderson Road, Hong Kong and/or within such period has had a dwelling house at Flat B14, 7th Floor, Carolina Gardens, 24 Coombe Road, Hong Kong and/or within such period has had a place of business at 52 Wing Kwong Street, Hunghom, Kowloon, Hong Kong and/or has carried on business in Hong Kong within such period;"

 

(ii)    - the acts of bankruptcy which under para (4) are:

 

"(4)    That the said Mohan Bhagwandas Murjani within three months before the date of the presentation of this petition has committed the following acts of bankruptcy, namely:-

(a)

That on 22nd September 1989, during his examination under Order 498 in High Court Action No. A1045 of 1989, the said Mohan Bhagwandas Murjani gave notice to your petitioner and to the Court that he had suspended payment of his debts by stating, when asked for his proposals for payment of the said judgment debt due to your petitioner, that he did not have any funds to settle the same and that he was destitute and did not have any money at all;

(b)

That on 18th October 1989, during his examination under Order 49B in High Court Action No. A1045 of 1989, the said Mohan Bhagwandas Murjani gave notice to your petitioner and to the Court that he had suspended payment of his debts by stating, when asked whether he had any proposals to repay the said judgment debt, that he did not have any assets at that stage from which he could discharge the said judgment debt;"

   

14. I am told that BOI relies or hopes to rely on four sources of material to establish these issues to the satisfaction of the Court;

15. It is Mr. Tong's contention that discovery in bankruptcy proceedings is not available before a receiving order is made. It is his further contention that the material comprised in items (ii) and (iv) is not admissible. He said that such documents and evidence are subject to an implied undertaking that they will not be used for an ulterior purpose, i.e. a purpose not connected with the action in which they were disclosed or given. If they are used or misused to found another action, for example ,bankruptcy proceedings, BOI is in breach of its implied undertaking, which amounts to an abuse of process for which the subsequent action or proceedings should be dismissed.

16. Mr. Tong relied primarily on two authorities. Crest Homes Plc v. Marks & others (1987) 1 A.C. 829 concerned an Anton Piller order. In his speech at page 853, Lord Oliver said:

"         The purpose of an Anton Piller order is, primarily, the preservation of evidence which might otherwise be removed, destroyed or concealed but it operates, of course, also as an order for discovery in advance of pleadings. It is clearly established and has recently been affirmed in this House that a solicitor who, in the course of discovery in an action, obtains possession of copies of documents belonging to his client's adversary gives an implied undertaking to the court not to use that material nor to allow it to be used for any purpose other than the proper conduct of that action on behalf of his client: see Home Office v. Harman [1983] 1 A.C. 280. It must not be used for any "collateral or ulterior" purpose, to use the words of Jenkins J. in Alterskye v. Scott [1948] 1 All E.R. 469, approved and adopted by Lord Diplock in Harman's case, at p.302. Thus, for instance, to use a document obtained on discovery in one action as the foundation for a claim in a different and wholly unrelated proceedings would be a clear breach of the implied undertaking: see Riddick v. Thames Board Mills Ltd. [1977] Q.B. 881.  It has recently been held by Scott J. in Sybron Corporation v. BarclaysBank Plc. [1985] Ch. 299 -- and this must, in my judgment, clearly be right - that the implied undertaking applies not merely to the documents discovered themselves but also to information derived from those documents whether it be embodied in a copy or stored in the mind. But the implied undertaking is one which is given to the court ordering discovery and it is clear and is not disputed by the appellants that it can, in appropriate circumstances, be released or modified by the court."

17. Mr. Tong argued that, on the authority of Lord Oliver's speech, there is no distinction to be drawn between documents and any other information, for example, information obtained in answer to interrogatories. He said the policy is to encourage full and frank discovery, the discoverer being safe in the knowledge that what he discloses will not be used against him in different proceedings.

18. In the same case at page 858, Lord Oliver said:

 

"It is true that in A.J. Bekhor & Co. Ltd. v. Bilton the Court of Appeal held that an order for discovery in aid of a Mareva injunction (Mareva Compania Naviera S.A. v. International Bulkcarriers S.A. [1975] 2 Lloyd's Rep. 509) ought not to be made for the purpose, not of discovering the whereabouts of assets, but of ascertaining whether there had been past breaches of the injunction.''

19. That, said Mr. Tong, emphasises that discovery must not be for an ulterior purpose.

20. The material parts of order 49B Rule 1A read:

 

"      (1)   Upon appearance of the judgment debtor for examination, he shall give evidence and he may be examined on oath by the judgment creditor and the Court; and the Court may receive such other evidence as it thinks fit.

 

        (2)  The judgment debtor shall, at his examination, make a full disclosure of all his assets, liabilities, income and expenditure and of the disposal of any assets or income and shall, subject to the directions of the Court, answer all questions put to him."

 

21. Mr. Tong said that as a debtor is compelled to give evidence it would be wrong for a judgment creditor to be able to use any material obtained in the course of such an examination in subsequent bankruptcy proceedings. He reinforced his argument by asserting that, as there is no right to discovery in bankruptcy proceedings before a receiving order is made, a creditor should not be allowed to circumvent this by obtaining discovery in other proceedings.

22. Rule 24 of the Bankruptcy Rules reads:

 

"         24.    Any party to any proceeding in court may with the leave of the court administer interrogatories to or obtain discovery of documents from any other party to such proceeding. Proceedings under this rule shall be regulated as nearly as may be by the provisions in the Rules of the Supreme Court for the time being in force in relation to discovery and inspection. An application for leave under this rule may be made ex parte."

 

Section 29(1) of the Ordinance reads:

 

"         29.(1)    The court may, on the application of the Official Receiver or trustee, at anytime after a receiving order has been made against a debtor summon before it the debtor or his wife, or any person known or suspected to have in his possession any of the estate or effects belonging to the debtor or supposed to be indebted to the debtor, or any person whom the court may deem capable of giving information respecting the debtor, his dealings or property, and the court may require any such person to produce any documents in his custody or power relating to the debtor, his dealings or property."

(My emphasis)

 

23. There are no other provisions in the Ordinance or the Bankruptcy Rules as to discovery. Section 29 relates to discovery after a receiving order has been made, therefore, it was argued, there is no right to discovery before the receiving order. Creditors should not, said Mr. Tong, be allowed to avoid this difficulty by seeking an examination under order 49B, not for the purpose at which the order is aimed, but for the ulterior purpose of gaining information or material for prosecuting a bankruptcy petition.

24. Mr. Tong placed great reliance for this proposition on In re A Debtor (No. 7 of 1910) (1910) 2 K.B. 59 where the headnote reads:

"         The petitioning creditor in a bankruptcy petition cannot, before the hearing of the petition, obtain an order for interrogatories or discovery to prove the allegations in the petition."

 

25. The Court of Appeal in that case consisted of six Lord Justices. (It produces the agreeably entertaining situation of Kennedy, L.J. who delivered the final judgment saying "I agree. I have nothing to add" without it being entirely clear with what he was agreeing). The case concerned Rule 72 of the then English Bankruptcy Rules, the wording of which is identical with our Rule 24. The Registrar had refused interrogatories and discovery. The Court of Appeal dismissed an appeal by the petitioner. The dismissal was hardly surprising because it was clear that, without interrogatories or discovery, the petitioner had no other information or material to prove the petition, despite what he had sworn to in his affidavit in support. The petitioner was effectively on a fishing expedition.

26. I accept that the court delivered some fairly trenchant judgments against discovery before a receiving order. Vaughan Williams, L.J. said at page 64:

"It is of the utmost importance to consider that in the sections of the Bankruptcy Act and in the Bankruptcy Rules it is always recognized that anything in the nature of discovery and anything in the nature of examination of the bankrupt is something which must take place not before the receiving order is made, as in this case, but after the receiving order has been made. So far as my experience goes I have not only never known of an order for discovery or interrogatories to assist the petitioner in proving the allegations in his bankruptcy petition, but in addition to that the provisions of s.27 and the other provisions of the Act whether for discovery or for the examination of the debtor relate to proceedings which have to be taken after a receiving order has been made and not before. It is really, speaking of the common law proceeding, as if a plaintiff who had got no judgment but hoped he might get a judgment applied for an order for the examination of the defendant touching his or her property before he brought in his judgment. In my opinion no such order as this asked for has ever been made in bankruptcy; nor, taking the analogous stage in common law proceedings, would it have been made at common law."

 

Fletcher Moulton L.J. agreed but added at page 65:

 

"In my opinion the principles on which discovery and interrogatories have been allowed in actions in the High Court shew that when the real issue is of a penal nature neither discovery nor interrogatories will be allowed. Now proceedings in bankruptcy are of course not actions, but in my opinion what the petitioner seeks by his petition is in the highest degree penal in its consequences. It amounts to loss of civil status carrying with it grave disqualifications, and the principles which in actions have guided the Court in giving or refusing discovery in the High Court appear to me to apply with special force to proceedings in bankruptcy, and shew that we ought not here to allow either discovery or interrogatories."

27. Mr. Tong submitted that Vaughan Williams L.J. at least made a clear statement that, under the bankruptcy legislation, discovery is not available before a receiving order is made. I disagree. What emerges clearly is not that there is no power or jurisdiction to give discovery before a receiving order, but that there is a discretion to do so. Vaughan Williams L.J. said at page 62 "it is not disputed but what the registrar had a discretion, whether he would make the order or not" and at page 65 "here, what is asked for is that the Court should exercise discretion". Fletcher Moulton L.J. used the words "ought not" which implied discretionary relief. Farwell L.J. said at page 66 "I think it plain that the registrar is justified in taking all those consequences into consideration before he exercises his discretion".

28. In the same case, Vaughan Williams L.J. referred to an earlier decision of the Court of Appeal In re X.Y. ex parte Haes (1902). 1 K.B. 98, in which he delivered the leading judgment. His Lordship expressly said that he was not detracting or departing from the judgments in that earlier case. In X.Y., the Court examined the practice in the bankruptcy court which prevented a petitioning creditor from calling the debtor in support of his petition, because bankruptcy proceedings were regarded as, in some sense, criminal. The examination was necessary because the creditor's application to produce in evidence certain books of the debtor had been refused. At page 104, Vaughan Williams L.J. said:

 

"         It is suggested that there is now no ground for supporting this practice. Speaking for myself. I must say very reluctantly, because I consider the practice was a very wholesome one, I cannot find any principle which now justifies it, whether as regards the examination of the debtor himself, or the production of his books. In saying this I am bearing in mind, amongst other things, that since 1869 the nature of bankruptcy proceedings has been considerably altered. It is difficult to say that bankruptcy proceedings are in any sense criminal now that a debtor may petition against himself. Under these circumstances I suppose that this practice will have to be altered.

 

          I should add that if the books are produced, and they are proved to be the books of the debtor, it is plain that prima facie they are evidence against the debtor as admissions by him. I think, therefore, that an order ought to be made for their production."

 

Romer and Cozens-Hardy L.J.J agreed.

29. It would follow, as Mr. Robert Tang, Q.C. who appeared for BOI said, that if a debtor can be called on the hearing of a petition by the creditor there is no reason why he cannot be required to discover documents or answer interrogatories. Indeed, it seems to me that that is the thrust of the decision in Debtor No. 7.

30. Further, it seems to me that it is Rule 24 which governs discovery generally in bankruptcy proceedings. It contains no restriction upon the timing of an application for discovery. Section 29(1), however, deals with discovery by third parties for which specific provision is plainly desirable and which would be inappropriate before a receiving order is made.

31. I am satisfied, therefore, that the court does have a discretion to allow discovery in aid of a creditor in proving a petition in bankruptcy. I agree with Fletcher Moulton L.J., however, that the principles guiding discovery "apply with special force to proceedings in bankruptcy", so that the Court will give extra scrutiny to any application for discovery before a receiving order is made.

32. An Order 49B examination is not, therefore, necessary to circumvent a prohibition upon discovery in bankruptcy proceedings. The question then is whether a creditor should be allowed to use material obtained as a result of such an examination in support of a bankruptcy petition. The answer must, as a general rule, be "yes". I see no reason in law, logic or perhaps most importantly commonsense for answering otherwise.

33. Both Mr. Tong and Mr. Tang referred to Riddick v. Thames Board Mills Ltd. (1977) 1 Q.B. 881. In an earlier action concerning the manner of his dismissal, there was discovered to the plaintiff a memorandum upon which he sought to found an action for libel. Again, not surprisingly, the Court of Appeal held that the plaintiff was not entitled to rely on it. In delivering the leading judgment, Lord Denning M.R. said at page 895:

"         The reason for compelling discovery of documents in this way lies in the public interest in discovering the truth so that justice may be done between the parties. That public interest is to be put into the scales against the public, interest in preserving privacy and protecting confidential information. The balance comes down in the ordinary way in favour of the public interest of discovering the truth, i.e., in making full disclosure."

 

At page 896 he continued:

 

"         Compulsion is an invasion of a private right to keep one's documents to oneself. The public interest in privacy and confidence demands that this compulsion should not be pressed further than the course of justice requires. The courts should, therefore, not allow the other party -- or anyone else -- to use the documents for any ulterior or alien purpose. Otherwise the courts themselves would be doing injustice ... In order to encourage openness and fairness, the public interest requires that documents disclosed on discovery are not to be made use of except for the purposes of the action in which they are disclosed. They are not to be made a ground for comments in the newspapers, nor for bringing a libel action or for any other alien purpose. The principle was stated in a work of the highest authority 93 years ago by Bray J. Bray on Discovery 1st ed. (1885), p.238.

 

"A party who has obtained access to his adversary's documents under an order for production has no right to make their contents public or communicate them to any stranger to the suit: ... nor to use them or copies of them for any collateral object ... If necessary an undertaking to that effect will be made a condition of granting an order ..."

 

Since that time such an undertaking his always been implied, as Jenkins J. said in Alterskye v. Scott [1948] 1 All E.R. 469 471. A party who seeks discovery of documents gets it on condition that he will make use of them only for the purposes of that action, and no other purposes."

Stevenson L.J. said at page 902:

 

"         But in my judgment the court has and should generally use the power to protect parties who make full and frank disclosure of documents, and the public interest in such disclosure; by discouraging the use by a plaintiff in a later action of a document obtained on discovery in an earlier action. If the court can require an undertaking from a plaintiff not to misuse a document before it is produced to him, it should have the power to restrain him from misusing it after it has been produced. And if he misuses it before the court restrains him why should the court allow itself to be used to countenance his misuse of it? I think it is entitled and indeed bound to refuse him help and to regard his attempt to get it as an abuse of its process.

 

        I would therefore allow the appeal on this ground. There may be cases in which a plaintiff would be justified in bringing an action on a document disclosed in an earlier action. I do not say that it could never be done without abusing the process of the court. But generally speaking it would be an abuse of its process and in the circumstances of this case the plaintiff's use of this memorandum is an improper use which the court should not countenance."

34. It is clear, as Mr. Tang accepts, that material discovered in an action must not be used for any ulterior or alien purpose. If it is, it amounts to an abuse. I am at a loss to understand, however, how it can be said that the use to which BOI wishes to put material obtained in the Order 49B examination is ulterior or alien or amounts to an abuse. I accept that technically bankruptcy proceedings are different and separate from an action in which a judgment debt has been obtained. The essence of Order 49B and bankruptcy proceedings is, however, the enforcement and recovery of that debt. Bankruptcy proceedings are, of course, for the ultimate benefit of all creditors but they flow naturally and inevitably from the judgment debt, and are no less enforcement than garnishee proceedings or a charging order. The notes at 45/1/3 of the Supreme Court practice 1991 recognise bankruptcy as a mode of enforcing a judgment.

35. Further, as Mr. Tang pointed out, proceedings can be taken under S.60 of the Conveyancing and property ordinance to set aside a disposition made with intent to defraud creditors. 1t must be, he said, that material obtained in an Order 49B examination could be used as it could hardly be said to be for an alien purpose. Equally, such material must be capable of use under Section 47 of the Ordinance to avoid a settlement made at a time when a debtor was otherwise solvent. Otherwise, the donee would be entitled to keep the gift.

36. I am satisfied, therefore, that the Court has a discretion to admit in the hearing of a bankruptcy petition material obtained by a creditor in an earlier 49B examination whether that material relates to assets, jurisdiction or any other matter which has to be proved before a receiving order can be made. I see no reason not to exercise my discretion in favour of BOI. It is not necessary for an application to be made in those earlier proceedings for BOI to be released from an implied undertaking. I will hear further submissions, if necessary, as to what documents and other evidence should be used, and as to discovery in these bankruptcy proceedings.

37. I was informed that an application by BOI in these proceedings for leave to use the order 49B material is part-heard before a master. I have no doubt that the Master will forgive me if I relieve him, as I do, of the burden of further considering that application. The issue having been raised and fully argued before me, I resolve it.

38. Paras. 2 and 3(1) - No debt due

39. By Action 4481/91 Fizzazz and Mr. Murjani seek damages including general, aggravated, exemplary and, in accordance with New York Law, punitive damages against BOI and SBI. Four causes of action are pleaded against the two banks.

 

(1)    Conspiracy to injure;

(2)    Malicious detention and false imprisonment;

(3)    Abuse of process;

(4)    Unlawful interference in economic interests.

40. It is also pleaded that the two banks are jointly and severally liable for the three individual torts.

41. Put shortly, Mr. Tong's argument is thus. Mr. Murjani has a substantial and genuine claim. This gives rise to an equitable set off which has the effect of extinguishing the judgment debt. The Court cannot be satisfied that the debt.  upon which the petition is based is or can be proved. Tharefore, the petition should be dismissed or, at least pending resolution of the issues in action 4481, stayed. Alternatively, if the Court is satisfied that there is a genuine claim, but not satisfied as to the amount, that constitutes sufficient cause for dismissal under S.9(3) or for a stay under S.9(5) or S.104 of the Ordinance. Alternatively, the cause of action having accrued in action 4481, and the two banks having become liable to pay damages upon issue of the writ.  Mr. Murjani is able to pay his debts as provided by S.9(3).

42. I say immediately that I reject the final alternative. It is one thing to establish a genuine claim. It is quite another to say that this enables a plaintiff to settle his debts. The outcome on liability is still uncertain, and it may be some years before it is established; quantum, even if liability is established, may be assessed at an amount considerably less than that hoped for. In the absence of authority, I have no hesitation in holding that simply establishing the existence of a genuine claim does not enable a debtor to say he is able to pay his debts within the meaning of S.9(3).

43. It is not in dispute that Mr. Murjani has to prove he has a genuine claim with a reasonable probability of success. The law is neatly laid out in In re A Debtor (No. 75 of 1982) (1984) 1 W.L.R 353. Section 1(1)(g) of the Bankruptcy Act 1914, the equivalent of our Section 3(l)(g) was under consideration. After reviewing the authorities, Warner J. said at page 362:

"         So far as relevant for present purposes, what emerges from those authorities may be summarized as follows. It behoves a debtor who wishes to avail himself of the third option in a bankruptcy notice to file an affidavit, or affidavits under rules 137 and 138 showing three things on the face of it or of them, with adequate particularity, the burden of proof being on the debtor. First, the affidavit or affidavits must show that he has a cross-demand against the creditor which is genuine. To satisfy that requirement, the cross-demand must be put forward in good faith and must have a reasonable probability of success, or as it has also been expressed, must give rise to a triable issue. In the latter respect, there is no hard and fast rule as to the degree of proof required. It depends in each case on the particular facts and circumstances of that case. Secondly, the affidavit or affidavits must show that the cross-demand could not have been set up in the action in which the judgment relied on by the creditor was obtained. Thirdly, the affidavit or affidavits must show that the cross-demand equals or exceeds the amount of the judgment debt. For that purpose the cross-demand need not be for a liquidated sum or even for a sum of money at all. But it must be capable of being quantified in terms of money and the affidavit or affidavits must quantify it."

44. While accepting that he has a burden, Mr. Tong suggested that Warner J. perhaps went too far. For my part, I am content to accept that judge's test. Mr. Tang contended that the burden is no lighter than the burden on a defendant seeking judgment under order 14. He pointed out that a judgment under order 14 is final. In bankruptcy, however, the making of a receiving order upon a petition does not necessarily dispose of a debtor's claim, because it can be pursued by his trustee in bankruptcy if the trustee thinks fit.

45. Pursuant to Bhagwandas Kewalram Murjani & others v. Bank of India (1990) 1 H.K.L.R 586, the appeals against my decision giving judgment to BOI, Mr. Tang said he relied upon the inherent implausibility of Mr. Murjani's case, and its inconsistency with the documents. I do not, however, find that approach to be apposite. The position here is very different from the situation I faced in BOI's application for summary judgment against Mr. Murjani. and BKM where the defence which I characterized as "transparently a concoction", relied upon Mr. Murjani's unsupported word and defied the other evidence. Mr. Murjani's evidence now is far from unsupported, while there is considerable documentary evidence from the banks themselves which is capable of lending substance to Mr. Murjani's claims. The more usual weighing of the material is, therefore, required.

46. The Murjani family controlled and operated companies world-wide. They were known as the Murjani Group. Since 1985, the Group has had a negative net worth. In 1987, the Group began to crumble having incurred massive debts which by 1988 were in the region of US$150 million. By debt rescheduling and asset realization, it managed to pay off the majority of its creditors, principally its secured creditors, so that its debt was reduced to US$35 million by January 1989, of which $34 million was guaranteed by Mr. Murjani. Over US$20 million was owed to the Indian Banks in Hong Kong of which over $12 million was then due to BOI. Much of the funds to bring about such a.reduction came from the sale or proposed sale of certain trade marks, or the licenses to use those marks, in relation to Coca-Cola, Gloria Vanderbilt, Tommy Hilfiger and Jeep.

47. By the beginning of 1989 the Gloria Vanderbilt and Coca Cold rights had been disposed of and an action by Coca Cola settled. Unfortunately, after paying off creditors and settling the Coca-Cola action no surplus cash was left to start paying unsecured creditors, such as BOI, as had clearly been promised. Negotiations for the sale of TH Co. were taking Place about which the Indian Banks in Hong Kong were kept informed. In November 1988, the Group wrote to SBI with a proposed schedule of repayments between April 1989 and 1993, based on cash flow from its four trade marks or licenses. In relation to the Tommy Hilfiger licence, a note made it clear that this depended upon the, sale of TH Co. equity to outside interests.

48. The Tommy Hilfiger trade mark was owned by Tommy Hilfiger himself. A licence to use the mark was held by TH Co. which was part of the Group. In 1988, it is said the TH Co. business was worth US$31 million.

49. It is fair to say, I think, that SBI was less than impressed by the situation.

50. On 21st January 1989, Mr. Murjani came to Hong Kong to discuss the sale of TH Co., and on 1st February settled Heads of Agreement with representatives of credit Agricole for the sale of TH Co. to a consortium of Mr. Murjani, who would take 49%, Credit Agricole which would take 17%, and Tommy Hilfiger and partners who would take 34%. The total price was US$23 million, of which paid up capital was to be US$15 million corresponding to good will. Mr. Murjani's or the Group's contribution was to be US$7.5 million. The affect was that 51% of TH Co. was being sold for US$15.5 million. It still remained for Tommy Hilfiger himself to agree. For this purpose Mr. Murjani was to fly to New York on or about 4th February to complete the sale. Copies of the Heads of Agreement were sent to lawyers for Mr. Murjani and Tommy Hilfiger. Meanwhile, Mr. Murjani attempted to negotiate with the Indian Banks in Hong Kong and to reschedule the Group's debts with them. He informed them of the sale of TH Co. He produced an undated memorandum, undoubtedly on the 2nd February; which has been described as "a document calculated to chill the blood of any banker". That memorandum confirmed that the Coca-Cola and Gloria Vanderbilt rights had been disposed of without any cash surplus. It said discussions for the sale of TH Co. were taking place but, as there was a condition that all of TH Co.'s creditors be paid in full, an immediate surplus would be unlikely. It continued:

                "6.        Repayment of Bank Debt

            With a continuing negative net worth position, the termination of the Coca-Cola business and the sale of the Gloria Vanderbilt rights (including the rights to future royalties) the Group finds itself unable to formulate proposals for cash repayments at this point of time. An analysis of the break-up value also shows that attempted realisation of all assets will not be of benefit and will only result in the inability to generate future revenue.

 

            The following is suggested as a basis for discussions with the nationalised Indian banking sector, whose outstanding total approximate by US$22 Million (sic)

 

a)    All the constituent institutions in this group to form one consortium.

b)    The consortium to receive a security interest in the Group's continuing shareholding in the Tommy Hilfiger Company, with a specific pledge of shares with all future benefits from these shares (dividends/future sale proceeds etc.) assigned to the consortium. c) Alternatively, the consortium itself acquires from the Group the remaining Murjani portion of the Tommy Hilfiger shareholdings, at the same valuation as the consideration from 3rd parties, with these proceeds being applied in reduction of the debt due, with an option for Murjani to re-purchase the shares. d) A moratorium on interest payments, which should be waived on an on-going basis.

 

          We will be pleased to formulate more detailed proposals based on the reaction of the lenders."

51. The reaction of the Indian Banks was not unexpected. The Indian Banks did not like what they saw. They saw their chances as unsecured creditors (personal guarantees of Mr. Murjani and BKM apart) of recovering their debt diminishing, as secured creditors and other unsecured creditors were being paid first. The Indian Banks, it is now alleged, conspired to keep Mr. Murjani in Hong Kong and wreck the TH Co. sale, partly in the hope of exerting pressure and obtaining some benefit, and partly by way of revenge.

52. On 3rd February 1989, SBI telexed its Head Office in India. The telex recited the position and concluded:

"         We have carefully considered the whole matter and feel strongly that Murjanis have not played a fair game with Indian Banks who unfortunately have no security to fail back upon. In any case, we ware assured by Mr. B.K. Murjani from time to time and as late as about 10 days back that the amount received from Gloria Vanderbilt licence sale will be apportioned among various creditor banks equitably. They have now gone ahead and' made payments among others to trade creditors. Further, Credit Agricole is reportedly going to pay approximately US$11 million to creditors of Tommy Hilfiger. What this deal implies and who these creditors are we are not aware. However, the fact remains that Murjanis are paying to unsecured creditors in preference to Indian Banks and we feel that this should be stopped. We would like the deal with Credit Agricole also to be stopped pending detailed discussions and examination.

 

In view of the above, we propose to:-

 

        A.     Restrain Mr. Mohan Murjani from leaving Hong Kong for London/New York to sign the agreement.

 

        B.     Serve notices on all the concerned parties not to go ahead with the proposed agreement which may prejudice our interest.

 

        C.     File bankruptcy proceedings against Murjani Industries Hong Kong, Murjani Marketing Group Ltd., New Jersey (The Drawees), The Murjani Trading Ltd. (The Drawees in Macau) and Mr. B.K. Murjani and Mr. Mohan Murjani (The Guarantors). We will ask our solicitors to raise the issue of fraudulent preference during the proceedings.

 

          In this connection, we have had discussions with Bank of India officials in Hong Kong who arc the largest lender among Indian Banks (Approximately US$ll million) and they concur with this proposal. We suggest that the matter may be discussed with their head office in Bombay, to whom a report is bring sent by their Hong Kong offices. In case they agree, a joint move would help cut down the cost and also put more pressure on Murjanis.

 

          As we would like to move the Court tomorrow, we request your sanction/advices today by lunch time if possible."

53. This telex is the foundation of Mr. Murjani's claim.

54. On the same day, BOI telexed its Head Office. After outlining the position, the telex concluded.

 

"         Our overall impression gathered from aforesaid discussion as well as subsequent discussion today is that Murjanis will not pay any amount immediately towards the over dues STP instead they are coming up with proposals which to our mind are not workable STP moreover it appears that with funds received out of sale proceeds of Gloria Vanderbilt rights they have settled unsecured trade creditors and out of proposed arrangement with Credit Agricole they want to settle unsecured creditor with the excess amount of US$10 million STP.

 

        This shows that they do not want to settle dues with us and other Indian Banks excepting offering pledge of 49 pct of Tommy Hilfiger share which is of little or no value to us presently.

 

        We have discussed with SBI and w are given to understand that they are already proceeding with serving a restraint order on Mr. Mohan Murjani from leaving colony (Mr. Murjani is slated to leave colony on 5th February 1989) and follow up with a winding up petition on the company proper STP we also share their view and recommend adopting coercive measures including filing of suits in consultation with solicitors to protect our interest position of account as on 31.1.1989 is as under."

55. Here, it is submitted, is evidence of an immediate combination or common design.

56. On 4th February, SBI obtained a prohibition order with quite appalling ineptitude. The guarantee, under which SBI intended claiming, provided for payment on demand and contained the following clause:

 

"4.    Any demand under this Guarantee shall be considered as having been duly made if signed by anyone of your managers or other authorised officials and sent by registered post addressed to the Undersigned at the address above given or at the last known place of abode or business within Hong Kong of the Undersigned."

 

57. Mr. V. Gupta, Chief Manager of SBI, made an affirmation in support of the application. After briefly but reasonably accurately, reciting the background, he said:

 

"10.    It is intended that formal notice be served forthwith on the intended defendant pursuant to the guarantee giving 7 days notice of demand for payment. It appears that the company itself does not have the resources to repay the indebtedness to the intending plaintiff."

58. That demand was, in fact, made on 10th February. Mr. Tang, however, argued that Clause 4 is simply a deeming provision and does not preclude an oral demand. He said SBI had, in fact, mad an oral demand. While accepting that Mr. Tang's interpretation of Clause 4 is tenable, I do not think that the point has relevance to the issues which I have to determine. The position is that, prima facie, SBI had no cause of action on 4th February, and it is difficult to see how Gupta could have affirmed that it did.

59. Pelion, hwoever, was piled an Ossa. Order 44A Rule 1, under which SBI's application was made, provides:

"    1.    (1)     Subject to paragraph (2), on the hearing of an application by a plaintiff, the Judge may, if he thinks fit, order that the relief provided by this Order shall be available to the plaintiff notwithstanding that the plaintiff has not commenced his action.

 

        (2)     An order shall not be made under paragraph (1) unless the plaintiff, at the hearing of his application for such order --

(a)    produces at the hearing of the application, a draft writ; and

(b)    undertakes to the Judge to issue the writ on the next day on which an office of the Court is open.''

60. No draft writ was produced. No undertaking was given. Proceedings were not, in fact; commenced until 17th February. It is hardly surprising that the prohibition order was discharged on 24th February. BOI, however, obtained a prohibition order on the same day issuing its writ on 25th February. Mr. Murjani was then detained in Hong Kong until 19th October, some 8 months, the only apparent benefit to BOI being the opportunity to examine him, as I have already mentioned.

61. Before issuing its writ however, BOI had remained in touch with its Head Office. On 4th February, it telexed as follows:

"ROT 3rd Feb 89 RE: A/C Murjani Industries (HK) Ltd. and subsequent teletalk our Mr. B. Chakravarty had with your Mr. P.R. Yagnick who conveyed HO decision to go in for legal action  jointly with SBI Hongkong STP accordingly we have today handed over all papers to our solicitors M/s. Wilkinson & Grist STP in the meantime we understand that SBI has obtained today court order restraining Mr. Mohan B. Murjani from leaving Colony till 1.3.1989 STP.

 

Having obtained restraint order on Mr. Mohan B. Murjani on behalf of SBI the solicitors (who are common with us) advised us to follow up legal action proper after the holidays i.e. after 8.2.1989 STP we shall keep HO posted with developments."

 

62. Between 4th and 9th February, both Mr. Murjani and BKM met or spoke to representatives of the Indian Banks. They made clear that keeping Mr. Murjani in Hong Kong prejudiced the sale of TH Co., which could lead to substantial damage to that company. But ultimately, they also agreed to provide payment of cash US$4 million from the proceeds of sale and security of US$5 million by a charge over a London property, which would be released by Credit Agricole from a charge in its favour on completion of the sale.

63. On 7th February, BOI again telexed its Head Office. The telex, after setting out the Murjani's proposals in great detail, concluded:

"       Mr. Murjani pleaded that his presence in New York is urgently required to close the deal with Credit Agricole and Tommy and if for his delay ultimately the deal is not clinched it might be difficult for him to pay and/or securitise exposure of Indian Banks with cash against sale of 51 percent equity and pledging of balance 49 percent of Tommy Hilfiger.

        Our exposures on Murjanis are presently fully unsecured. In course of our negotiation he tried to reduce outstanding and to securitise balance with their assets reported to be available at present. If the above propositions materialise our exposure will be reduced by around US$2.0 million and balance exposure of US$8.7 million would be partially secritiesed with present value of assets on which charges are proposed to be created and fully secured against reported expected value of the same. In view of the above we recommend acceptance of proposal given by Mr. Murjani as narrated above and defer legal action for the present. However we may insist on increasing value of stand by letter of credit mentioned in para (TWO) - 2 above to US$2.0 million as he mentioned in course of discussions and also creation of mortgage on their residential property in Jardines Lookout since released by us and transferred to their family trust.

        We understand SBI Hongkong has referred same proposal to their Central Office Bombay with a request to give decision urgently in coordination with our Head office."

64. BOI's Head Office replied on 6th February saying the proposal was unacceptable unless substantially increased. On 9th February, Mr. Murjani wrote to SBI and BOI with his $9 million proposal but emphasised that, because he had been detained in Hong Kong, the price of TH Co. was substantially reduced, that his business generally had suffered, and that accordingly there was even less available for creditors.

65. On 10th February, BOI advised Head office of his proposal and offered its views as follows:

 

"         With regard to our recommendation on above we may state that Murjanis have chosen to satisfy all non Indian Banks and propose to pay even unsecured trade creditors while Indian Banks who have financed their genuine trade transactions have been chosen for raw deal STP besides we do not accept the contention of Murjanis that Jardines Lookout property cannot be charged to us nor do we accept that all known and chargeable assets have been already charged/ajusted and they have no chargeable assets/fund to be offered to Indian Banks STP further if Murjanis could continue their high living including buying two race horses in Hong Kong and have other privates large means with suitable legal pressure on them such as the present one restraining Mr. Mohan Murjani to leave Hong Kong and effective handling by both corporate offices and branches of Indian Banks who should compel them to increase the security and give a firm repayment programme preferably guaranteed by Insurance company as to the repayment it should be possible for Murjanis to improve their offer of securities and firm repayment schedule STP should Murjani see stiffness of attitude by Indian Banks and volunteer to offer further Securities/guarantees and cash deposit Indian Bank may consider giving a longer repayment period and if necessary concessional rate of interest STP in the light of the foregoing we feel that the pressure should be continued on them and they should be asked to improve their offer to Indian Banks."

 

66. It cannot be denied that, by now, the acid was eating into BOI. Equally, it is clear that the TH Co. sale was mot exactly prominent in its thoughts.

67. Head Office replied on l4th February that the cash payment should be substantially increased to merit consideration. On 15th February, BOI advised its Head Office that the Indian Banks had approached both Murjanis without success, and said:

 

"        Mr. B.K. Murjani totally concurred to his son's offer and said that it could mot be improved upon as there is no asset left with the company or with the guarantors and that each day Mr. Mohan's detention in Hong Kong results in the recovery of money from sale of rights becoming bleaker STP in the circumstances we report a failure on the compromise front and a decision will have to be taken in consultation with corporate offices of other Indian Banks financing this group about future course of action STP it may be pertinent at this stage to restate that one component of the security namely the House in London is roportedly a part of a trust which by normal process of laws cannot be reached at STP besides our common solicitors have advised both us and SBI that whereas they are prepared to initiate legal action it is going to be a long drawn affair with uncertain results owing to laws of various countries operating/affecting their transactions and complexity in their organization as they have been dissolving some companies and incorporating mew ones in their place as well as the legal position of rights, trade marks etc. all unknown to us and therefore the solicitors suggest that

 

(I)    A commercial view of the whole matter should be taken as legal position is uncertain to banks and

(II) At any rate they felt that a compromise could be entered into now and those assets taken over by the banks and for the balance amount banks can go to court of law SIP for this purpose, the text of the compromise could be suitably worded to enable banks to do that STP we now request that a joint meeting of the corporate offices be held and a decision conveyed to us for compliance."

 

68. The following day BOI, with the concurrence of SBI and other banks, asked Mr. Murjani to obtain a letter from Credit Agricole undertaking to pay US$4 million to the Indian Banks and to release the London property. Credit Agricole on the same day provided this letter in the following terms:

                "Subject to:

 

(a)    appropriate instructions from our client;

(b)    other terms and conditions to be specified by Credit Agricole including, but not limited to - receipt of funds which may be derived from the sale of the Tommy Hilfiger business;

 

We will make a payment of US$4 million and, we will release our charge over the property known as 43A Acacia Road London.

 

The letter does not represent a commitment on the part of the Bank or its officers or representatives."

69. It appears that this letter was unacceptable. At all events, no further negotiation took place. The sale of TH Co. fell through and the Murjani Group lost the Tommy Hilfiger licence, because Tommy Hilfiger in an undated letter to Mr. Murjani explained:

"It was, therefore, directly as a consequence of the prohibition order that the proposed joint-venture collapsed. Once that had happened, I obviously had to protect the interests of the mark and it was for that reason that the licence to use the mark was terminated on 19th March 1989."

70. From these facts the four causes of action I referred to earlier have been pleaded. They are contained in a Statement of Claim running to 168 paragraphs. 10 schedules and 77 pages. But ultimately they depend upon the prohibition order, what it was intended to achieve and whether that intention is within the scope of Section 21B of the Supreme Court Ordinance, which provides the jurisdiction to make a prohibition order. The crucial paragraphs seem to me to be as follows:

"56.        On or before 4th February 1989 and as pleaded in paragraphs 136 to 141 below, the Indian Banks conspired and/or combined together:

56.1        with:

 

1.	the intention and/or the object and/or for the purpose of preventing and/or knowingly and deliberately intending to prevent; and/or
2.	the real and/or predominant intention of preventing and/or in order to prevent; and/or
3.	a purpose that was not legitimate and/or wrongfully without just cause or excuse, intending to prevent;

 

the proposed sale to Credit Agricole from going ahead and of thereby injuring; inter alia, Mr. Murjani and/or Tommy Hilfiger Co. Inc. (and Mr. B.K. Murjani) by the use of means which were unlawful and/or tortious and/or which constituted actionable wrongs; and/or

 

56.2             with:-

 

1. the real and/or predominant intention of preventing and/or in order to prevent; and/or

2. a purpose that was not legitimate and/or wrongfully, without just cause or excuse, intenting to prevent;

the proposed sale to Credit Agricole from going ahead and of thereby injuring, inter alia. Mr. Murjani and/or Tommy Hilfiger Co. Inc. (and Mr. B.K. Murjani).

 

67.   The application was made by SBI with the intention and/or the predominant intention of preventing the proposed sale of the Tommy Hilfiger business to Credit Agricole from going ahead and/or of injuring, inter alia. Tommy Hilfiger Co. Inc. and/or Mr. Murjani, as set out in paragraph 56 above.

 

103. As a result of the Prohibition Order and Mr. Murjani's detention in Hong Kong:

 

103.1 the proposed sale of part of the Tommy Hilfiger business to Credit Agricole was not completed; and/or

103.2 the Licence was terminated."

71. Mr. Tong took me through the law in relation to each cause of action with great care. As Mr. Tang did not disagree with any of the propositions, and because the heart of the matter is the propriety of the prohibition order.  I can deal with the law shortly.

72. Conspiracy.

73. It is now settled that there are two classes; to do lawful acts with the predominant purpose of injuring another; to do unlawful acts with an intention but not the predominant intention of causing injury to another: Lonrho Plc v. Fayed & others House of Lords 27th June 1991 unreported. Provided an alleged conspirator knows the facts on which the combination is unlawful he is guilty, even if he did not know that the effect was unlawful: R. v. Churchill (1967) 2 A.C. 224. Even if a person is not a conspirator, he is a joint tortfeasor if he is party to a common design: The Koursk (1924) P.140, Brooke v. Bool (1928) 2 K.B. 579.

74. Abuse of process.

(i)    where a defendant institutes and maintains an action without reasonable or probable cause with malice i.e. intentionally doing a wrongful act: Mitchell v. Jenkins (1833) 110 E.R. 908.

(ii)    where a defendant maintains an action for an improper purpose i.e. to achieve a purpose which is not within the scope of the process: Grainger v. Hill (1838) 132 E.R. 769.

75. Mr. Tong maintained that SBI falls within both forms of abuse and BOI certainly within the second.

76. Malicious detention or false imprisonment.

77. A defendant is guilty if he obtains detention or imprisonment of a person as a result of abuse: Grainger v. Hill. Bird v. Jones (1845) 115 E.R. 668.

78. Unlawful interference in economic affairs.

79. This tort, although relatively new and developing, is recognised: Lonrho Plc v. Fayed & others (1990) 2 Q.B. 479. Such an intention need not be predominant. Provided the defendant appreciated the probable consequences to the plaintiff when he embarked on a course of conduct, the plaintiff should be compensated: per Woolf. L.J. at p.494.

80. Returning to the prohibition order, I start by saying that I attach no sinister significance to the way in which the order was obtained. It was so comically inapt, reflecting badly upon both the judiciary and the profession, that it is laughable to suppose that SBI set out deliberately to deceive the Court and to obtain relief by that deceit. Nor can it be arguable that BOI in any way could have countenanced this, assuming it knew which I think is also unarguable.

81. It is also clear that while the banks were clearly acting in concert BOI at least had no predominant intention of injuring Mr. Murjani, TH Co.or BKM. The telexes emphasise that they were at least equally anxious to achieve some sort of compromise or settlement, not least to avoid protracted litigation (I doubt whether BOI ever anticipated that the litigation would be quite so extensive and protracted as it has become). Further, given that the banks had common solicitors and were acting together, in which I see nothing wrong, I do not see it as arguable that SBI could have had a predominant purpose to injure Mr. Murjani and the others.

82. The crux then is whether SBI's purpose in obtaining the prohibition order was improper, i.e. to stop or wreck the proposed sale of TH Co. to Credit Agricole.

83. Section 21B of the Supreme Court Ordinance, so far as it is relevant, provides:

"21B.    (1)  The Court shall have jurisdiction to make an order prohibiting a person from leaving Hong Kong to facilitate the enforcement, securing or pursuance of --

(a)    ...

(b)    ...

(c)    A civil claim (other than a judgment):

(i)    for payment of money or damages; or

(ii)    ...

        (2)     ...

        (3)     The Court shall not make an order under subsection (1)(c) unless it is satisfied that there is probable cause for believing that

(a)    there is a good cause of action:

(b)    the person against whom an order is sought --

(i)    incurred the alleged liability, which is the subject of the claim, in Hong Kong while he was present in Hong Kong; or

(ii)    ...

(iii)    ...

(c)    that person is about to leave Hong Kong; and

(d) by reason of paragraph (c), any judgment that may be given against that person is likely to be obstructed or delayed."

84. In Bank of India v. Murjani Industries (HK) Ltd. & another (1989) 2 HKLR 276, the Court of Appeal (of which I was a member) held that subsection (3)(d) refers to the period both before and after judgment, i.e. both the obtaining of judgment and its enforcement. Mr. Tong said that the issue is the securing or pursuance of a civil claim. He said in general terms that stopping a sale is not within the purpose of a prohibition order. He said specifically that preventing the sale of TH Co. could not be said to facilitate the securing or pursuance of a claim on a guarantee and that, in any event the effect of a prohibition order would not necessarily be to stop the sale. He argued that a consequence, but not effect of Mr. Murjani being restrained was to abort that sale, but the order would not necessarily prevent another sale as TH Co. or the Murjani Group generally could continue their activities. He said the use to which S 21B has been put usurps the function of a Mareva injunction, which is the appropriate method of securing an alleged debtor's assets if there is a risk of dissipation, or the function of the Companies Court wherein winding up of the companies guaranteed by Mr. Murjani more properly should have been sought.

85. The real purpose of s.21B Mr. Tong submitted, is to secure the person of a defendant to answer a judgment debt, not now by way of imprisonment, but at least by way of examination as to his assets. I reject this submission. If that had been the purpose of the legislature, it could easily, have said' so instead of using the much wider wording which clearly encompasses purposes other than simply ensuring that a debtor will be available for examination after judgment obtained. I am satisfied that the wording is wide enough to allow the restraint of an alleged debtor in order to prevent him taking part in activities which would in all probability affect at least the enforcement of any judgment obtained. If there is an overlap with Mareva relief I see no difficulty. Both are forms of injunctive relief subject to scrutiny by the Court which will ensure (I hope in all future cases) that they are regularly applied for and obtained.

86. In deciding this issue it is important to rehearse whet took place during the hearing. In his reply, Mr. Tong attempted to argue that restraining one person to prevent a sale by another cannot facilitate anything to do with securing or enforcement of a judgment against the person restrained. Mr. Tang objected. I upheld the objection. I had not understood that to be Mr. Tong's argument in opening, although I would have been happy to hear argument to prevent injustice to Mr. Murjani because of. any misapprehension on my part. In my view; however, the point was not open on the Statement of Claim. In spite of the care with which the pleader had distinguished between the various persons, the thrust of the claim as I read it was that Mr. Murjani was restrained to prevent the sale of TH Co., it being implicit that he had such right of disposal.

87. The position, therefore, was that the Indian Banks were faced with the imminent departure of a man who was guarantor to them for sums in excess of US$20 million; who clearly had direction of the Murjani Group including TH Co. and its funds; who was responsible for negotiating with the banks for a possible allocation to them of such funds none of which had to date reached them; who had said nothing would be forthcoming from the proposed sale of TH Co.; and whose presence was indispensible if that or any other sale was to be effected. Mr. Murjani being thus so closely identified with TH Co. it is difficult to see how it can be said it was wrong to seek to prevent him disposing of a business on terms which would confer no immediate benefit to the banks, when it might otherwise be made, through Mr. Murjani to produce something more tangible for them. A Mareva injunction which would perhaps have been appropriate would not have had the same immediate impact, involving as it would have done taking steps in New York to have it recognized before it could become effective.

88. In my judgment, SBI's purpose in obtaining the prohibition order was not improper, it being a purpose contemplated by S.21B. I find, therefore, that Mr. Murjani has no genuine claim against SBI or BOI. It follows there is no substance in any of the remaining paragraphs of the June Motion. Accordingly, that motion is dismissed.

89. BKM's application stands or falls with that of Mr. Murjani. In the circumstances, that application is also dismissed.

90. In case I am wrong in my conclusion I shall deal briefly with the other two matters it would have been necessary for me to consider, namely quantum and whether to dismiss or stay the petition. As to quantum, it seems to me that two elements are of particular importance. First the consequences of the aborting of the sale of TH Co. I am satisfied that what was being sold (and it is arguable to say the very least) was the business of that company in spite of the debate as to whether shares or business the subject of sale. I recognise the inconsistency on the part of Mr. Murjani who said initially that it was the sale of shares. If that was so, of course, Fizzazz would have no claim. Other witnesses, however, deposed that it was the business to be sold. Analysis of the Heads of Agreement suggests to me that that is the correct interpretation, otherwise there would have been no necessity to set up a new company to acquire what was being sold.

91. Quite what would have been the result if the sale had taken place is far from clear. Both Counsel had difficulty in interpreting the figures in the Heads of Agreement, and demonstrating what benefits would have flowed to TH Co. and, by reason of a reduction of the Groups's debt, to Mr. Murjani as its guarantor. It could be as low as US$3 million. Further, in spite of Mr. Tong's submission to the contrary, it seems to me at least debatable whether the sale would have gone through, an earlier completed sale having fallen through and being a sale in which Tommy Hilfiger was again involved. There is every reason to think that there would have to be a reduction in the amount of damages to take into account what Mr. Murjani described as loss of a "significant opportunity".

92. The other element is punitive damages. It is arguable that The Adhiguna Meranti (1987) HKLR 904 was wrongly decided, and that while the lex fori generally applies, a particular issue between parties may be governed by the lex loci delicti. Even assuming, however, that Mr. Tong is correct and that the lex loci delicti, i.e. of New York, applies so as to bring not only the head of punitive damages within the Hong Kong's purview but also its quantification. I think it highly unlikely that a Hong Kong Court would award the sort of sum that might be obtained in New York.

93. The position as to damages, therefore, I find highly unsatisfactory and speculative. I would have been quite unable to say that there had been demonstrated not only a genuine claim, but one equal to or in excess of the judgment debt. That would have effectively disposed of BKM's application because under S.3(l)(g) of the Ordinance, it does not appear that the Court has any discretion. The Court must allow the application to set aside a bankruptcy notice or dismiss it. I did not understand Mr. Tong to argue to the contrary.

94. I would not, in the circumstances, have considered dismissing the petition against Mr. Murjani. My initial reaction was that if a genuine claim was made out, the petition must necessarily be stayed or adjourned. It seemed to me that a genuine claim would demonstrate thoroughly reprehensible conduct on the part of the banks. Such conduct does not, however, necessarily emerge. On the other hand, Mr. Murjani does not come to this Court with entirely clean hands. He did not disclose to the banks that between lst and 8th February, the critical period of these proceedings, the TH Co. business was frozen by an injunction in New York obtained by one of the parties to the earlier sale. In BOI's action against him, he attempted to rely on a defence of moratorium which is now demonstrated as plainly deceitful. At the same time as he was asserting this defence before the Court of Appeal on 20th July 1989, there was poised in New York an action by Mr. Murjani and Fizzazz similar to that which they are now prosecuting in Hong Kong. That New York action was launched the following day. Even if Mr. Murjani's Hong Kong lawyers were not aware of the significance of SBI's telex of 3rd February, which forms the basis of. Mr. Murjani's action against SBI and BOI, Mr. Murjani clearly was. I would add that the New York proceedings have now been dismissed on the basis that the New York Courts lack jurisdiction.

95. In exercising my discretion, therefore, I would have looked at other grounds. I would have accepted, I think, that Mr. Murjani's action is inextricably involved with BOI'S claim. This together with the fact that Mr. Murjani admittedly has no assets are powerful factors: In Re L.H.F. Wools Ltd. (1970) 1 Chancery 27. I would take into account that if a receiving order is made, Mr. Murjani would have difficulties, although not insurmountable ones, in prosecuting his action since it would have to be done by his trustee. I say not insurmountable because Fizzazz. would still be able to carry on, and success on its. part must necessarily redound to the benefit of Mr. Murjani. Mr. Murjani anyway is being subsidized by someone to conduct litigation, at no little expense, both in Hong Kong, London and New York. If that person feels so strongly about Mr. Murjani's innocence, he will , no doubt, put the trustee in funds. The Court will be able to ensure that the trustee is not improperly blocked by the creditors if he decides to pursue the action.

96. There would no doubt be delay in prosecuting the action which, apart from the usual consequences, means that Mr. Mrujani's reputation will remain tarnished for longer than necessary, and BOI will have profited from its wrong-doing, if Mr. Murjani' is ultimately successful. There is also a possibility that BKM who is old and whose health is not good, might die before he is vindicated.

97. On the other hand. BOI has an unassailable judgment for some US$10 million. Whilst it is true that Mr. Murjani now has no apparent assets upon which to fasten, he did have assets of which he divested himself during a period of some ten years before 1989. The trial of Mr. Murjani's action is unlikely to be concluded for two years. While that is not a long time in terms of litigation, it seems to me desirable that, sooner rather than later; BOI or the trustee should have the opportunity of examining the transactions by which such divestment took place and, if appropriate, having them set aside.

98. I would not, in the circumstances, have exercised my discretion in favour of Mr. Murjani, and stayed or adjourned the petition.