FABIANO HOTELS LTD v. PROFITMAX HOLDINGS INC.AND OTHERS

HCA 3428/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 3428 OF 2016

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AND

HCMP 2825/2016

MISCELLANEOUS PROCEEDINGS NO 2825 OF 2016

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(Heard Together)

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DECISION

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INTRODUCTION

Introduction

1.  This is the hearing of the Plaintiff’s summonses seeking:

1)   summary judgment against the Defendants in HCA 3428/2016, pursuant to Order 14 of the Rules of the High Court (the “summary judgment application”);

2)   leave to adduce the affirmation of Lakhani out of time in HCMP 2825/2016 (the “leave application”); and

3)   continuation of the injunction order made on 18 October 2016 in HCMP 2825/2016 as varied and continued on 28 October 2016 prohibiting the Defendants from disposing of their assets in Hong Kong (the “continuation application”).

2.  In addition, there are two unscheduled applications by the Defendants raised by their counsel in the course of his submission:

1)   to discharge the injunction order (the “discharge application”); and alternatively,

2)   to vary the terms of the injunction order (the “variation application”).

The background

3.  The Plaintiff is the owner of the business of a hotel located at Altura Tower in London.

4.  The 2^nd to 4^th Defendants are companies incorporated in Hong Kong.  They carry on the business of, amongst other things, hotel management and the provision of advice and expertise as regards the operation and strategic management of hotels.

5.  The 1^st Defendant is a company incorporated in the British Virgin Islands (“BVI”).  It wholly owns the 4^th Defendant, which in turn holds 49% of the issued shares of the 3^rd Defendant.  The remaining 51% of the issued shares of the 3^rd Defendant were until around late 2016 owned by Peterson Holdings Co Ltd (“Peterson Holdings”).  Currently, those 51% shareholding are owned by Janton Global Limited (“Janton Global”).  The 2^nd Defendant is wholly owned by Golden Pegasus Enterprises Limited (“Golden Pegasus”).  Janton Global and Golden Pegasus are not parties to the present proceedings.

6.  The Plaintiff and the 1^st Defendant had entered into a hotel management agreement under which the 1^st Defendant provided hotel management services to the Plaintiff’s hotel.  The management agreement was terminated on 31 March 2014.

The English Proceedings

7.  On 14 August 2015, the Plaintiff commenced legal proceedings against the Defendants in England and Wales for breaches of the management agreement (the “English Proceedings”).

8.  On 30 October 2015, the Defendants filed a defence and counterclaim through its solicitors, Messrs Stephenson Harwood LLP (“Stephenson Harwood”).  On 11 November 2015, the Plaintiff filed its reply and defence to counterclaim.

9.  On 18 July 2016, Stephenson Harwood obtained an order to cease to act for the Defendants.  At a hearing held on 26 July 2016, in which the Defendants did not appear, an order was made that unless the Defendants provide certain documents and their address for service by 4 pm on 16 August 2016, their defence be struck out without further order and the Plaintiff be at liberty to apply for judgment.  The Defendants did not comply with that order.  On 19 August 2016, interlocutory judgment was entered with damages and interest to be assessed.  An assessment was made and final judgment in the sum of £4,240,142.75 was entered against the Defendants on 2 December 2016 (the “English judgment”).

The Hong Kong Proceedings

10.  On 18 October 2016, the Plaintiff obtained an ex parte injunction order against the Defendants under HCMP 2825/2016.  On 19 October 2016, it made the continuation application by way of an inter parte summons.

11.  At an inter parte hearing on 28 October 2016, Lok J continued the injunction order subject to some variations.  Paragraphs 3 and 4 of Lok J’s order provided that “the injunction order as varied be continued until further order of the court” and the continuation application be adjourned for argument.

12.  On 29 December 2016, the Plaintiff commenced proceedings under HCA 3428/2016 to enforce the English judgment.  The Defendants filed acknowledgement of service on 13 January 2017.  Three days later, on 16 January 2017, the Plaintiff took out a summons to enforce the English judgment by seeking summary judgment against the Defendants.

13.  On 20 March 2017, the Plaintiff took out another summons in HCMP 2825/2016 seeking leave to file and serve the affirmation of Lakhani out of time.

14.  Obviously, once the court enters summary judgment against the Defendants, the Plaintiff’s leave application and the Defendants’ purported objections to the continuation application would become redundant and academic. 

SUMMARY JUDGMENT APPLICATION IN HCA 3428/2016

Introduction

15.  In HCA 3428/2016, the Plaintiff claims the sum of £4,240,142.75 awarded under the English judgment.  In effect, this is a case of enforcement of a foreign judgment.  The Plaintiff’s case is that the judgment sum is now res judicata and beyond dispute.

16.  The Defendants resist the application on the ground that this is not a clear and suitable case for summary judgment.  The thrust of their argument is that the English judgment is a default judgment which by its very nature is not final and conclusive and on the merits.  They also rely on the various defences put forward in the English proceedings. 

17.  There is no dispute that the principle of res judicata is extended to foreign judgments.  Recognition and enforcement of a foreign judgment is founded on the doctrine of obligation, as was held by Parke B in Russell v Smyth[1] and Williams v Jones[2].  This doctrine was approved and restated by Blackburn J a generation later in Godard v Gray[3] and Schibsby v Westenholz[4] as follows[5]:

“ We think that … the true principle on which the judgments of foreign tribunals are enforced in England is … that the judgment of a court of competent jurisdiction over the defendant imposes a duty or obligation on the defendant to pay the sum for which judgment is given, which the courts in this country are bound to enforce; and consequently that anything which negatives that duty, or forms a legal excuse for not performing it, is a defence to the action.”

18.  At common law, a foreign judgment which is a res judicata, will be recognised or enforced in England if the judgment is final and conclusive, subject to narrow defences such as lack of jurisdiction on the part of the foreign court, lack of identity between the parties in the foreign judgment and the party against whom enforcement is sought; fraud in obtaining the judgment; absence of natural justice in the mode by which the judgment was reached and public policy.  None of the limited defences mentioned above has been raised in the present case. 

Final and conclusive

19.  In Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 2)[6], Lord Reid approved the following test of finality as formulated by Lord Herschell in Nouvion v Freeman[7]:

“ My Lords, I think that in order to establish that such a [foreign] judgment has been pronounced it must be shewn that in the Court by which it was pronounced it conclusively, finally, and for ever established the existence of the debt of which it is sought to be made conclusive evidence in this country, so as to make it res judicata between the parties. If it is not conclusive in the same Court which pronounced it, so that notwithstanding such a judgment the existence of the debt may between the same parties be afterwards contested in that Court, and upon proper proceedings being taken and such contest being adjudicated upon, it may be declared that there existed no obligation to pay the debt at all, then I do not think that a judgment which is of that character can be regarded as finally and conclusively evidencing the debt, and so entitling the person who has obtained the judgment to claim a decree from our Courts for the payment of that debt.”

The phrase “final and conclusive” is therefore understood to mean “final and conclusive on the merits” of the cause. If a judgment is provisional or nisi in that the judicial system provides for a procedure to enable the parties to re-argue their case before the same court pronouncing the judgment which would enable the same court to set aside the judgment or alter it, such a judgment is not final.  But the possibility of appeal to a higher court and the fact that the judgment is currently under appeal do not alter its finality.  The test of finality is therefore the treatment of the judgment by the tribunal pronouncing it as res judicata between the parties and putting it beyond its power to abrogate or alter its decision.

20.  Mr Ko, counsel for the Defendants, relies on Lord Herschell’s test of finality.  The thrust of his argument is that as a judgment by default is liable to be set aside it is not final and conclusive.  He relies on two Privy Council decisions in Daniel Thomas Keymer v P Viswanatham Reddi (Madras)[8] and L Oppenheim and Company v Mahomed Haneef[9] in which the Privy Council held that an English default judgment is not final and conclusive and could not be enforced in India.  He argues that these are clear authorities that as a matter of common law applicable in Hong Kong, a default judgment is not final and conclusive.  I shall turn to these decisions after reviewing a line of authorities in England and other common law jurisdictions dating back to the 18^th century to the contrary.  These authorities show that for the purpose of enforcement of a foreign judgment in a local jurisdiction, a foreign default judgment may be final and conclusive so long as it stands, even though it is liable to be set aside in the very court which rendered it.

21.  English courts regard a judgment by default as a judicial decision, whether the default was in filing an appearance; in pleading; in appearance at the hearing; or in prosecution of, or resistance to, an appeal.  See: Aslin v Parkin[10]; Wilkinson v Kirby[11]; Huffer v Allen[12] and Harris v Mulkern[13].  The courts draw no distinction between a judgment after trial and a judgment by default.  Though a default judgment may be set aside by the very court rendering it, until that happens, it remains in full force and effect and capable of being sued upon.

22.  In Vanquelin v Bouard[14], a default judgment was entered against the defendant and the plaintiff’s late husband for their failure to appear in the court of the Tribunal of Commerce in the Department of the Seine in France.  After the husband’s death, the plaintiff paid the judgment debt and commenced recovery proceedings against the defendant in the Tribunal Civil of the First Instance of the Department of the Seine.  The Seine court granted an injunction requiring the defendant to pay back the plaintiff.  The plaintiff then sought to enforce the Seine judgment in the Court of Common Pleas.  The defendant resisted the claim on the basis that the judgment of the Seine court was a judgment by default for non-appearance and that under French law would become void and of no effect as soon as the defendant entered an opposition to the judgment.  Erle CJ rejected the defendant’s argument and held[15]:

“ The twelfth plea, to the first count, alleges that the judgment in the first count mentioned was a judgment by default for want of anappearance by the defendant in the court of Tribunal of Commerce, and by the law of France would become void as of course on an appearance being entered. I apprehend that every judgment of a foreign court of competent jurisdiction is valid, and may be the foundation of an action in our courts, though subject to the contingency, that, by adopting a certain course, the party against whom the judgment is obtained might cause it to be vacated or set aside. But, until that course has been pursued, the judgment remains in full force and capable of being sued upon.”

On this authority, even though a default judgment may be set aside by the very court which rendered it and at the instance of the person against whom it was made as of right, until that course has been pursued, it remains in full force and effect.  Thus a foreign default judgment may be final and conclusive.

23.  Then in 1889, Lord Herschell gave his seminal judgment in Nouvion v Freeman.  There, he said[16]:

“ The principle upon which I think our enforcement of foreign judgments must proceed is this: that in a Court of competent jurisdiction, where according to its established procedure the whole merits of the case were open, at all events, to the parties, however much they may have failed to take advantage of them, or may have waived any of their rights,a final adjudication has been given that a debt or obligation exists which cannot thereafterin that Court be disputed, and can only be questioned in an appeal to a higher tribunal.” (My emphasis underlined)

From the above dicta, there could not be any doubt that in Lord Herschell’s mind a default judgment, at least insofar as English law was concerned, was liable to be set aside by the very court which rendered it and at the instance of the person against whom the judgment was made.  Yet, it was with this concept in his mind that his Lordship said that a default judgment was a final adjudication on the merits.  Thus, in the context of enforcement of a foreign judgment, a default judgment may be final and conclusive and on the merits, until it was set aside.

24.  In Kok Hoong v Leong Cheong Kweng Mines Ltd[17] which was a case of issue estoppel and not enforcement of foreign judgment, the Privy Council proceeded on the basis that a default judgment was final and conclusive.  Viscount Radcliffe said that a default judgment is capable of giving rise to an estoppel per rem judicatam.  That dictum must also have been made on the basis that a default judgment was final and conclusive until it was set aside.  It is significant to note that this was a decision of the Privy Council made after the two authorities quoted by Mr Ko.

25.  More recently, in Starlight International Inc v Bruce & Ors[18], the claimant obtained default judgment against the defendants in the United States and applied for summary judgment against the first defendant in the United Kingdom to enforce the default judgment.  Collins J, as he then was and now NPJ of the Hong Kong Court of Final Appeal, set out the requirements for enforcement of a foreign judgment at common law as follows[19]:

“ The other potentially relevant matters in connection with the enforcement of a judgment at common law are these: first, the foreign judgment must be for a definite sum of money, …; second, the judgment must be final and conclusive, and for that purpose a default judgment may be final and conclusive provided that it is res judicata in the foreign legal system; third, a judgment will not be enforceable if the foreign proceedings were contrary to natural justice, ….”

This is the clearest judicial statement that a foreign default statement may be final and conclusive for the purpose of its enforcement in the local jurisdiction, provided it is res judicata in the foreign legal system.  That proviso means that the judgment must be one given by a court of competent jurisdiction and on the merits.  Of course, underlying these dicta is the assumption that a default judgment may be set aside by the very court rendering it and as of right at the instance of the person against whom it was made.  Against the backdrop of these authorities dating back to the 19^th century which I have quoted, such as Nouvion v Freeman and Vanquelin v Bouard, it is obvious that the statement of law advanced by Collins J, as he then was, was such well settled law in the United Kingdom that he did not even find it necessary to quote any authorities.

26.  Foreign default judgments are treated similarly in other common law jurisdictions, such as Canada and Australia.  In Boyle v Victoria Yukon Trading Co[20], the plaintiff commenced an action for damages against the defendant in Yukon. A defence was filed by the defendant.  But no one appeared for the defendant at trial.  The plaintiff obtained judgment by default which it sought to enforce in British Columbia.  At the hearing, the defendant relying on Lord Herschell’s dicta in Nouvion v Freeman quoted above, contended that the judgment being by default was not final and conclusive.  That argument was rejected by Hunter CJ of the British Columbia Supreme Court.  He distinguished Nouvion v Freeman on the basis that it was a case brought on a Spanish “remate” judgment, which, by the law of Spain, concluded nothing between the parties, as the same and in fact all questions could be re-argued in another action, called a plenary action in which the remate judgment may for all purposes be annulled.  However, he accepted Lord Herschell’s test of finality in Nouvion v Freeman and Erle CJ’s statement of the law in Vanguelin v Bouardthat a default judgment so long as it stands may be final and conclusive, even though it is liable to be set aside in the very court which rendered it.  He said[21]:

“ It is true that under the system which prevails in the Yukon, as well as in our Courts, as also in England, a default judgment may be set aside either absolutely or on terms, but so long as it stands it is a final and conclusive adjudication that a debt is due by the defendant if the claim is for debt. It is also true that other expressions occur in the judgments which at first sight would seem to imply that a default judgment has not the finality necessary to make it an enforceable foreign judgment, but I think such expressions must be taken secundum subjectam materiam, as remarked by Lord Bramwell in Sewell v. Burdick (1884), 10 App. Cas. 74 at p. 104. For example, Lord Watson, p. 13, says: ‘It must be final and unalterable in the Court which pronounced it.’ Now, of course, this judgment is not unalterable in the wide sense,because it can be set aside by a Judge of the Yukon Court, but it is unalterable in the sense that it is conclusive while it stands, being for a fixed ascertained amount, and as Lord Bramwell says, at p. 14, ‘The judgment is of such a nature as would found an action of debt.’ Again Lord Herschell says, p. 10, that ‘The judgment must be such as cannot thereafter be disputed, and can only be questioned in an appeal to a higher tribunal.’ This also must be taken to mean so long as the judgment stands, as both the Lord Chancellor, at p. 14, and Lindley, L.J., in the case below, 37 Ch. D. 25–6, evidently considered that default judgments may possess the necessary degree of finality and conclusiveness, and if default judgment taken as here by reason of the defendant not appearing at the trial (being equivalent to a judgment on the merits, accordingto Armour v. Bate (1891), 2 Q.B. 233) has not this quality, then it is difficult to see what kind of default judgment would have the quality required. In fact, if we were to say merely because a default judgment may be set aside by the Court in which it is taken that therefore it is of not final legal validity for the purpose of international suit, we would, in effect, be saying that the clearer the plaintiff’s case the more useless his judgment would be. Take, for instance, the case of a defendant having no defence to a promissory note. Is it to be said that a plaintiff on getting a default judgment takes nothing by his judgment in the foreign jurisdiction? It seems to me that the law is, as stated by Erle, C.J., in Vanquelin v. Boward (1863), 15 C.B.N.S. 341, cited by Mr. Peters, subject to the limitations as above explained laid down in Nouvion v. Freeman about the quality of the judgment, and subject to the qualification that it is not void for manifest error or for want of jurisdiction or fraud, or as being contrary to natural justice, or the like. He says at p. 367–8, ‘I apprehend that every judgment of a foreign Court of competent jurisdiction is valid, and may be the foundation of an action in our Courts, though subject to the contingency, that, by adopting a certain course, the party against whom the judgment is obtained might cause it to be vacated or set aside. But, until that course has been pursued, the judgment remains in full force and capable of being sued upon.’” (My emphasis underlined)

27.  I agree with the gloss added on by Hunter CJ in respect of default judgments.  It is full of realism and common sense.  As was said by Blackburn J in Godard v Gray and Schibsby v Westenholz, the courts in the enforcing jurisdiction are bound to enforce the judgment of a foreign court of competent jurisdiction.  If a defendant, who has no defence to a claim and has no assets in the foreign jurisdiction to satisfy any judgment obtained, chooses to allow judgment to be obtained against him by default there, he cannot complaint if the courts in another jurisdiction enforce the judgment against him from his assets within that jurisdiction.  If the courts in that other jurisdiction do not enforce the judgement, they would be assisting the defendant to evade justice and in serious breach of their duty under Godard v Gray and Schibsby v Westenholz.

28.  In Bank of Bermuda Ltd v Stutz[22], like the instant case, the defendant filed a defence but failed to comply with an order to deliver a listof documents.  As result, the plaintiff obtained default judgment against thedefendant in Bermuda, which it sought to enforce in Ontario.  In dismissing the defendant’s application to dismiss the plaintiff’s action, Jessup J adopted Hughes J’s reasons for judgment in an earlier motion for like relief, which are as follows:

“ Application dismissed with costs for the reasons given by Hunter, CJBC, in Boyle v Victoria Yukon Trading Co (1902), 9 BCR 213, and see Nouvion v Freeman (1889), 15 AC 1 at pp 9–10:

‘ The principle upon which I think our enforcement of foreign judgments must proceed is this: that in a Court of competent jurisdiction, where according to its established procedure the whole merits of the case were open, at all events, to the parties, however much they may have failed to take advantage of them, or may have waived any of their rights, a final adjudication has been given that a debt or obligation exists which cannot thereafter be disputed, and can only be questioned in an appeal to a higher tribunal.’

The italics are mine: and in my view the whole merits of this case were open to this applicant in the Bermuda Court.  The existence of the debt is res judicata between the parties until appealed or set aside upon proper grounds, this being no ‘remate’ (remate) judgment as in the Nouvion case: cf Boyle v Victoria, supra.  Moreover, there is no question of the applicant not having been able to defend upon the merits in Bermuda as to impair the quality of res judicata as in ‘The Challenge’ and Duc d’Aumale, [1904] p. 41.”

On appeal, Wilson J approved the above dicta and dismissed the appeal.  Basically, he followed Hunter CJ in Boyle v Victoria Yukon and distinguished Nouvion v Freeman on the basis that it concerned a remate judgment which was not final under the law of Spain.  He quoted a number of Canadian decisions in which default judgments obtained in different provinces of Canada and the State of New York were held to be final and conclusive, including McLean v Shields and Leacock[23]; Wood v Wood[24]; and Maguire v Maguire[25]. It is important to note the court’s reliance on Lord Herschell’s dicta that a default judgment is a final adjudication.

29.  In Four Embarcadero Center Venture et al v Mr Greenjeans Corp et al[26], the plaintiffs obtained a judgment by default in California. The defendant appealed.  The appeal did not have the effect of staying the execution of the judgment and the plaintiffs sought to enforce the judgment debt in Ontario.  Henry J followed Nouvion v Freeman, Bank of Bermuda Ltd v Stutz and Boyle v Victoria Yukon.  He summarized the proper principles applicable in Ontario as follows:

“ First. The proper criteria for determining whether an action will lie on a foreign money judgment are whether or not the judgment may be abrogated or varied, or the issues reheard, by the court that pronounced it; whether the judgment represents an adjudication on the rights of the parties, and whether it is conclusive as to the amounts payable. It is not necessary for the plaintiff to show that the judgment cannot be varied or retired by any other means — including on appeal.

Second. A foreign judgment that has gone by default is no less final or enforceable than a judgment rendered after a full trial on the merits; indeed according to the law introduced into Ontario in Bank of Bermuda Ltd v Stutz even though the judgment can be varied, it is enforceable by action until it is set aside.

Third. An action may be commenced in Ontario to enforce a foreign money judgment that is final in the above sense, notwithstanding that it is under appeal where there is no stay of enforcement so that under the foreign law it may be enforced notwithstanding pendency of an appeal, ….

Fourth.  The safeguard of the rights of a judgment debtor in such circumstances is to stay execution of the judgment obtained in the Ontario action until the outcome of the appellate proceedings is finally determined.”

The first of these principles is just a re-statement of the test of finality in Nouvion v Freeman.  The second principle is a re-statement of the principle in Boyle v Victoria Yukon that a default judgment may be final and conclusive so long as it stands until it is set aside.  

30.  In Skaggs Companies Inc v Mega Technical Holdings Ltd[27], the plaintiff obtained a default judgment against the defendant in Utah, as the defendant decided “not to engage in costly and time consuming U.S.A. litigation”.  The same excuse is relied on by the Defendants in the present case.  Master Funduk entered summary judgment against the defendant in Alberta and said:

“ It is a tribute to Canadian internationalism that our courts have seen no reason why Canadian defendants should be any less liable under a default judgment from the United States or the United Kingdom than under a default judgment from elsewhere in Canada.”[28]

On the issue of finality of a foreign default judgment in respect of a debt, after referring to some of the authorities I mentioned above, he said[29]:

“ If a default judgment is not a final judgment local defendants who have contractually attorned to the foreign court’s jurisdiction can evade that agreement merely by not entering an appearance in the foreign lawsuit. The plaintiff would then be forced to sue in the local court on the original cause of action. Local defendants cannot subvert what they contractually agreed to by the simple ploy of not entering an appearance in the foreign lawsuit.”

The above dicta echo my sentiments expressed in paragraph 27 above.

31.  There are other authorities to the like effect.  I do not think it necessary to refer to any more of them.  It appears to be very well settled law in Canada that a foreign default judgment may be final and conclusive so long as it stands, even though it is liable to be set aside by the court rendering it.

32.  The law in Australia is similar.  In Schnabel v Lui[30], the plaintiff obtained a default judgment against the defendants in the United States.  The 1^st defendant resisted enforcement of the default judgment against him in New South Wales on the ground that it was not final and conclusive.  Bergin J held that a default judgment may be enforceable as a final and conclusive judgment even though it is liable to be set aside in the very court that rendered it.  He relied on the same authorities mentioned above, including Nouvion v Freeman, Boyle v Victoria Yukon, Bank of Bermuda Ltd v Stutz, Four Embarcadero Center Venture et al v Mr Greenjeans Corp et al, Skaggs v Mega.

33.  In Linprint Pty Ltd v Hexham Textiles Pty Ltd[31], the respondent withdrew from a trial in the county court and its counterclaim against the appellant was dismissed.  Many years later, he sued the appellant. The appellant pleaded res judicata.  Kirby P held[32]:

“ The mere fact that a judgment entered for default of appearance of a party may be set aside if that party moves the court giving judgment to do so, is not a reason, in the meantime, for regarding the judgment so entered as anything but final for the purpose of the law of res judicata.”

He further held[33]:

“ …these authorities establish that if a plaintiff withdraws from the trial and an order is made in its absence dismissing its claim then that order will, unless set aside or successfully appealed from, ground a later plea of res judicata in the event that a later attempt is made to litigate the same case. The position is no different than that which arises under a default judgment: Spencer-Bower (at 158).”

Though this case was about estoppel raised by withdrawal from trial and not about enforcement of a foreign default judgment, it states the principle that an order to withdraw as well as a default judgment have full force and effect unless and until they are set aside or successfully appealed from.

34.  However, against the weight of these authorities from English and common law jurisdictions, Mr Ko argues that a default judgment is not final and conclusive by relying on the two Privy Council decisions.

35.  In Daniel Thomas Keymer v P Viswanatham Reddi (Madras), the plaintiff obtained a default judgment in England against the defendant for his failing to answer interrogatories.  He then sought to enforce the judgment in Madras.  The defence was that the default judgment obtained in England was not a judgment given upon the merits of the action and by virtue of section 13(b) of the Indian Code of Civil Procedure 1908 the action could not be maintained on the judgment alone in the Indian courts and that the merits would have to be investigated.  The Madras court found in favour of the defendant. 

36.  On appeal to the Privy Council, the Board considered that the question raised by this appeal was the construction of section 13(b) of the Indian Code of Civil Procedure.  The Board held:

“ The question as to whether that defence is well established depends upon considering what are the terms of Section 13 of the Code of Civil Procedure, and what is the meaning of the phrase there contained as to a judgment given ‘on the merits of the case.’ Section 13 begins by a general provision that foreign judgments shall be conclusive as between parties to the litigation. It is in these terms: ‘A foreign judgment shall be conclusive as to any matter thereby directly adjudicated upon between the same parties or between parties under whom they or any of them claim litigating under the same title.’ But to that general provision there are certain definite exceptions, and one of them is as follows: ‘Except where such judgment has not been given on the merits of the case.’

   The whole question in the present appeal is whether, in the circumstances narrated, judgment was given on the 5th May, 1913, between the parties on the merits of the case. …”

Then having regard to the defence in which the plaintiff’s allegations in the statement of claim were all denied and having regard to the fact that the judgment was obtained by default, the Board held that the merits of the case were never the subject of adjudication and advised His Majesty to dismiss the appeal.  

37.  As was noted by the Board, this appeal turned on the true construction of section 13 of the Indian Code of Civil Procedure.  Unlike the position at common law under which the test of finality is the treatment of the judgment by the tribunal pronouncing it as a res judicata between theparties, the Indian Code of Civil Procedure laid down a statutory requirement that to be conclusive a foreign judgment must be one made on the merits.  There is no such requirement under Hong Kong law.  This case is obviously distinguishable from the present case.

38.  The facts of L Oppenheim and Company v Mahomed Haneefwere similar to Keymer v Viswanatham Reddi.  It concerned the construction of the same section 13 of the Indian Code of Civil Procedure and applied Keymer v Viswanatham Reddi.  It could not support Mr Ko’s argument.  

39.  Furthermore, these decisions were not followed thereafter in New Brunswick Railway Co v British and French Trust Corp Ltd[34] and Kok Hoongv Leong Cheong Kweng Mines Ltd.  The House of Lords and Privy Council respectively proceeded on the basis that a default judgment was capable of giving rise to an estoppel and is therefore final, conclusive and on the merits.  In New Brunswick Lord Wright said, in particular:

“ All necessary effect is given to the default judgment by treating it as conclusive of what it directly decides.”

These decisions confirm that the two Privy Council decisions relied on by Mr Ko should be restricted to their own facts.  With respect, Mr Ko’s argument is based on his misreading and misapplying these two decisions.  As a matter of law, at least in the context of enforcement of foreign judgment is concerned, a foreign default judgment may be final and conclusive.

40.  English law and Hong Kong law are similar.  The nature of a default judgment under English law is no different from that under Hong Kong law.  The treatment of an English default judgment by the English court is also no different from the treatment of a Hong Kong default judgment by the local court.  On the fact, there is nothing to suggest that the English judgment was not final and conclusive or in any way irregular.  In conclusion, on the basis of well-established authorities, I am satisfied that as a matter of law and fact the English judgment sued upon by the Plaintiff is final and conclusive.

On the merits

41.  I now turn to Mr Ko’s argument that a default judgment is not a judgment on the merits and as such cannot be a res judicata.  He quotes the following dicta of Lord Brandon in The Sennar (No 2)[35], and submits that a decision on the merits is a decision which establishes certain facts as proved or not in dispute; states what are the relevant principles of law applicable to such facts; and expresses a conclusion with regard to the effect of applying those principles to the factual situation concerned:

“ Looking at the matter negatively a decision on procedure alone is not a decision on the merits. Looking at the matter positively a decision on the merits is a decision which establishes certain factsas proved or not in dispute; states what are the relevant principles of law applicable to such facts; and expresses a conclusion with regard to the effect of applying those principles to the factual situation concerned.”

He also quotes extensively Lord Collins NPJ’s approval of the above dicta in the Court of Final Appeal’s decision in First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd[36] as lending authority to Lord Brandon’s test of merits.  Mr Ko submits that on this test, a default judgment is a decision on procedure alone and not a decision on the merits. 

42.  Mr Suen, counsel for the Plaintiff, argues that that there is a world of difference between (a) relying on a default judgment for what it directly decides; and (b) relying on a default judgment to raise issue estoppel in respect of a particular issue in another proceeding.  I agree.  In my view, in the case of enforcement of foreign judgment, the question for the court is not whether there can be estoppel in respect of a certain issue or issues, but rather what the judgment prayed in aid should be treated as concluding and for what conclusion it is to stand.  The question is what is the subject matter which is alleged to be the issue of res judicata.  When suing on a foreign judgment, the judgment debt is the subject matter of the issue of res judicata.  There may be many issues raised in a cause of action resulting in the judgment debt and many issues raised in the defence to that cause of action.  The judgmentis the end product of the resolution of these issues, some of which may be resolved in favour of the claimant and some in favour of his opponent.  The subject matter of res judicata in the context of enforcement of foreign judgment is the judgment debt.  The Plaintiff is relying on the English judgment for what it directly decides and not any particular issue or point raised in the English proceedings.

43.  The Sennar (No 2) and First Laser are cases of issue estoppel.  Indeed, when formulating his test, Lord Brandon was addressing counsel’s misconception with regard to the meaning of the expression “on the merits”as used in the context of the doctrine of issue estoppel.  Immediately before setting out his test as quoted by Mr Ko, Lord Brandon said:

“ In my opinion, this argument is based on a misconception with regard to the meaning of the expression ‘on the merits’ as used in the context of the doctrine of issue estoppel.”

Clearly, Lord Brandon intended the test to be applied to a judgment on the merits in the context of issue estoppel only and not to a judgment in the enforcement context when the subject matter of res judicata is the end product of resolution of multiple issues in dispute and not a specific issue.

44.  In the same case, Lord Diplock explained what was the meaning of “on the merits” in the context of a foreign default judgment which is sought to be enforced locally.  He said[37]:

“ It is often said that the final judgment of the foreign court must be ‘on the merits’. The moral overtones which this expression tends to conjure up may make it misleading. What it means in the context of judgments delivered by courts of justice is that the court has held that it has jurisdiction to adjudicate upon an issue raised in the cause of action to which the particular set of facts give rise; and that its judgment on that cause of action is one that cannot be varied, re-opened or set aside by the court that delivered it or any other court of co-ordinate jurisdiction although it may be subject to appeal to a court of higher jurisdiction.”

That is what “on the merits” means in the context of enforcement of foreign default judgment.  As Lord Herschell said in Nouvion v Freeman[38],the principle upon which our enforcement of foreign judgments must proceed is that the judgment pronounced by a foreign court of competent jurisdiction according to its established procedure in which the whole merits of the case were open to the parties, however much they may have failed to take advantage of them, or may have waived any of their rights, is final and cannot thereafter be disputed.  If a foreign court of competent jurisdiction held that it had jurisdiction to adjudicate upon an issue raised in the cause of action to which the particular set of facts gave rise, and the whole merits of the case were open to the parties in accordance with the established procedure of that court, then the judgment pronounced by that court on that cause of action is a judgment on the merits. The phrase does not mean proof of each and every element of the cause of action and rebutting each and every element of the defence.  It is a judgment on the merits even though the party against whom the judgment was made has failed to appear before the court at any or all of the proceedings and for whatever reason, except those which are recognised as valid reasons for setting aside the judgment such as that the judgment was entered as result of breaches of natural justice, fraud and contrary to public policy.  The same approach is adopted by local courts when enforcing a local judgment passed by another court.  The courts do not go behind the judgment except where the judgment is alleged to have been obtained under those vitiating circumstances I mentioned above.  A judgment on the merits in the context of enforcement of foreign judgment must be understood in the above sense.  It is convenient to point out at this stage that there is no argument or evidence that the English judgment is bad in this context for any reason.

45.  Mr Ko refers to the three cautions which Lord Reid mentioned in Carl Zeiss about applying estoppel based on a foreign judgment.  Lord Reid said[39]:

“ … but there appear to me to be at least three reasons for being cautious in any particular case. In the first place, we are not familiar with modes of procedure in many foreign countries, and itmay not be easy to be sure that a particular issue has been decided or that its decision was a basis of the foreign judgment and not merely collateral or obiter. Secondly, I have already alluded to the practical difficulties of a defendant in deciding whether, even in this country, he should incur the trouble and expense of deploying his full case in a trivial case: it might be most unjust to hold that a litigant here should be estopped from putting forward his case because it was impracticable for him to do so in an earlier case of a trivial character abroad, with the result that the decision in that case went against him.”

The third of the reason advanced by Lord Reid was finality of the earlier judgment giving rise to estoppel, which I have dealt with separately in the above sub-section.  Mr Ko submits that in the light of these cautions, the Defendants should not be estopped from re-litigating their case in this court.‌

46.  Lord Reid’s first two caveats apply to issue estoppels and not to res judicata in the context of enforcement of foreign judgment.  In any event, there is no merit in Mr Ko’s argument for the following reasons.  In respect of the first caveat, English law and procedures are essentially similar to those in Hong Kong.  Mr Ko has not advanced any argument pointing out any material differences between law and procedure of these two jurisdictions which may have a bearing on the present case.  Furthermore, as the subject matter of res judicata is the judgment debt, which was the very subject matter of the English judgment, the decision was clearly not collateral or obiter.

47.  As for the second caveat, it seems that the allegations contained in the Defendants’ affirmation was tailor-made to fit Lord Reid’s second caveat.  The Defendants asserted that they deemed it unworthy to contest the English proceedings because the Plaintiff was merely a shell company which could not pay the Defendants’ costs even if they win.  They further asserted that it was conceivably more difficult for them to seek security for costs in England as that was the jurisdiction in which the Plaintiff was based than in Hong Kong where the Plaintiff’s status is a foreign plaintiff.  Such argument is plainly moonshine.  Similar arguments had been deployed in some of the Canadian authorities such as Skaggs v Mega Technical but were rejected.  I am not suggesting that the practical difficulties suggested by Lord Reid could never constitute good reasons for not defending an action.  I am saying that those suggested by the Defendants are unreal.  Lord Reid’s caveat was directed at attempts to rely on an issue which could well be collateral or obiter which may or may not arise in a trivial case abroad to raise issue estoppel in proceedings of different dimension or scope in the United Kingdom.  It was not directed at a substantive claim of £4 million.  The Plaintiff’s claim cannot be described as a trivial case.  It simply does not stand up to reason that in the face of a £4 million claim and having instructed solicitors to file a defence and a substantive counterclaim that theDefendants should simply choose to let their defence to a very substantive liability and a very substantive counterclaim fall by default, which means accepting liability of £4 million and forgoing their chance of a substantive counterclaim.  Apart from an empty assertion that it was not worthwhile to contest the Plaintiff’s trivial claim, they have not advanced any reason why providing documents which they prima facie had possession, custody and power and to provide their address for service which they must have was so onerous and costly that they should allow the Plaintiff’s claim to succeed by default, not at least at that stage.  It was also inexplicable why they should refuse to disclose their address for service.  The only reasonable inference is that they had no bona fide defence and that they have much to hide, including assets within the jurisdiction. 

48.  On the fact, it is not disputed that the English court is a court of competent jurisdiction which has jurisdiction over the subject matter which formed the subject matter of the English judgment and that under its established practice all merits of the dispute were open to the parties.Though the judgment was entered because of the Defendants’ failure to comply with the unless order, all the merits had been placed before the court.  The Plaintiffhad filed its statement of claim.  The Defendants accepted jurisdiction and filed a defence and counterclaim.  The Plaintiff’s filed its reply and defence to counterclaim.  Then, the court made an unless order requiring the Defendants to file certain documents and to provide their address for service.  In making the unless order, the court must have had regard to all the pleadings, must have considered that the documents ordered to be produced were material and went to the merit of the parties’ case, and that the sanction to enforce compliance appropriate.  As result of the Defendants’ failure to comply with the order, interlocutory judgment was entered.  Despite the Defendants had notice of the hearing of assessment of damages, they chose not to attend.  Upon considering Lakhani’s evidence, damages were assessed and final judgment entered.  In my view, the court has sufficiently considered the merits of the case which the circumstances allowed.  Mr Ko argues that the court only considered Lakhani’s evidence after interlocutory judgment had been entered and therefore had not considered merits.  This argument is misconceived.  Firstly, as a matter of law, “on the merits” in the context of enforcement of foreign judgment does not mean proof of each and every issue constituting the cause of action.  Secondly, merit was considered when the court made the unless order.  Such order would not have been made had the court not considered there was no merit in the defence without the documents.  Thirdly, for the reasons as stated by Lord Herschell, the Defendants only had themselves to blame for not complying with the unless order.  I am satisfied on the law and on the fact that the English judgment was one on the merits. 

49.  For the above reasons, the English judgment is final and conclusive and on the merits.  The judgment debt is now res judicata.

Other defences

50.  The Defendants raised numerous other defences, including those pleaded in their defence and counterclaim in the English proceedings.  These are spurious and not worth detailed consideration.  As the English judgment is res judicata, the Defendants are precluded from re-litigating on the defences raised under the English proceedings.  Hereunder, I shall deal a few of the less insignificant defences.

51.  First, the Defendants argue that Hong Kong court is not a proper forum to determine the dispute between the Plaintiff and the 1^st Defendant. This is hopeless as the Plaintiff is seeking to enforce the English judgment in Hong Kong and not re-litigating the whole matter here and, furthermore, the English judgment is now res judicata.

52.  The Defendants explained that it was not commercially worthwhile defending the English proceedings as the Plaintiff has no meansto satisfy any order of costs which may be made against it.  I have already disposed of that argument. It is not a valid defence.  Furthermore, there is now credible evidence from Lakhani to contradict the Defendants’ assertion of the Plaintiff’s dire financial condition.

53.  The Defendants asserted that the damages assessed were excessive.  Quite apart from the fact that the final judgment is now final and conclusive and that the Defendants only had themselves to blame by making a deliberate decision not to attend and contest the assessment, they failed to condescend upon particulars.

54.  There are other bizarre, frivolous and unfounded assertions which could not constitute valid defence.  I do not find it necessary to deal with them except to say that I have considered them but dismissed them primarily for the reasons as submitted by Mr Suen.

Conclusion

55.  In conclusion, the Defendants have utterly failed to show any triable issue not to mention that their assertions are not believable.  I shall enter summary judgment against the Defendants.

THE LEAVE APPLICATION

56.  Once this court decides to enter summary judgment against the Defendants, any purported objections by the Defendants to the leave application and continuation application become wholly redundant and academic.  Mr Ko objects to the leave application on the ground that there was no explanation for the delay in making the application.  Mr Suen does not shy away from the absence of explanation or excuse, but asserts there is no prejudice caused to the Defendants and that justice requires all issues in controversy should be fairly placed before the court.

57.  The deadline for filing this affirmation in HCMP 2825/2016 was 29 December 2016.  It was not until almost three months after that was the application for leave to file the affirmation made.  The delay was unexplained.  It was an obvious neglect.  However, I agree with Mr Suen that the Defendants would suffer no prejudice if the application is allowed so that all the facts could be placed fairly before the court.

58.  An identical affirmation had been served and filed in HCA 3824/2016.  The Defendants chose not to respond.  I assume that the facts in that affirmation are not in dispute.  Much of the evidence contained therein are derived from company search documents.  The other assertions are actually matters for counsel’s submission.  The Plaintiff now seeks to rely on the affirmation in its continuing application in HCMP 2825/2016 also.  Summary judgment having been entered, an identical copy of the affirmation having been served in the other proceedings, having regard to the total lack of prejudice, I think there is no valid objection for this affirmation to be filed out of time.  In fact, justice would require it to be filed, so that all the facts could be fairly placed before the court.  I allow the application.

THE CONTINUATION APPLICATION

59.  Obviously, upon entering summary judgment against the Defendants, the continuation application becomes wholly academic.  What the court should do is to give effect to the injunction to enable execution to be effected on the Defendants’ assets.  Except for the argument based on jurisdiction, Mr Ko’s arguments are directed at discharging the injunction rather than objecting to its continuation.  I shall consider those arguments in the context of the continuation application.

60.  The injunction order was made pursuant to section 21M of the High Court Ordinance.  Mr Ko correctly refers to the two stage approach in considering such an application as set out by the Court of Final Appeal in Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd[40], which is as follows:

First Stage:

“ … the court has first to consider whether, if the plaintiff succeeds in the primary jurisdiction the resultant judgment is one that the Hong Kong court will enforce. If the answer to that is yes, the court has to form a view, on all the available material, including any findings of the foreign court itself,”

  (i)   “ whether the plaintiff has a good arguable case before the foreign court and”

  (ii)   “ whether there is a real risk that the defendant will dissipate his assets if the Mareva is not granted.”

Second stage:

“ … whether the fact that the court has no jurisdiction apart from this section in relation to the subject matter of the proceedings concerned makes it ‘unjust’ or ‘inconvenient’ for the court to grant the application [interim relief].”

Having obtained summary judgment against the defendants, there are now no questions of triable issue, balance of convenience or prejudice.  However, Mr Ko seeks to argue afresh that the injunction order should not have been granted as there was no assets within the jurisdiction and there was no risk of dissipation of assets.  As for the second stage, Mr Ko argues that it is unjust and inconvenient to grant the injunction order or to allow it to continue.

Jurisdiction

61.  Mr Ko submits that the injunction order was made pursuant to section 21M. The power to grant injunction is to be exercised with regard to the fact that it is ancillary to, and for the purpose of facilitating the process of the relevant court outside Hong Kong.  He argues that once HCA 3428/2016 was commenced to enforce the English judgment, the case ceases to be within section 21M, as the injunction would be in aid of local proceedings, rather than foreign proceedings and hence the section ceases to be applicable.  He submits that the proper course is to seek a fresh injunction order under HCA 3428/2016, and the court should make no order under HCMP 2825/2016 other than ordering costs in those proceedings be in the cause of HCA 3428/2016.

62.  With respect, Mr Ko’s submission is entirely misconceived.  The jurisdiction under section 21M was created to address the previous common law position that a Mareva injunction cannot be sought in the absence of a valid cause of action in Hong Kong.  The purpose of the section is to enable interim relief to be made in relation to foreign proceedings even without such cause of action in Hong Kong.  The section is couched in wide terms.  It can be invoked even before the foreign proceedings have been commenced.  It confers jurisdiction on the court to grant interim relief in relation to proceedings which have been or are to be commenced in a place outside Hong Kong; and are capable of giving rise to a judgment which may be enforced in Hong Kong under any Ordinance or at common law.  There is no dispute that these requirements are satisfied in the present case. 

63.  The section does not require such jurisdiction to cease immediately when the plaintiff obtains judgment abroad and hence has a cause of action in Hong Kong, irrespective of whether enforcement proceedings are commenced immediately or not.  There is also no reason why upon commencement of enforcement proceedings in Hong Kong the section shouldcease to have force and effect.  Even after obtaining the foreign judgment, the foreign proceedings remain extant.  There can be, for instance, appeal, enforcement and taxation.  There is no reason why the court should cease to have power to grant or continue any relief in the interim.

64.  Mr Ko’s submission is arbitrary and contrived.  The effect of his submission is that section 21M may only be invoked if there are no enforcement proceedings in Hong Kong or that it ceases to have effect once judgment is obtained abroad.  If so, what is the purpose of the injunction?  On the other hand, to require fresh application to be made would serve no intelligible purpose.  It is not conducive to justice, and only escalates costs and causes delay.  The Plaintiff would have to file a fresh application and the parties would have to repeat the same evidence.  The result would, of course, be the same, except that extra costs will have to be incurred and a lacuna will be created for the Defendants to remove their assets out of Hong Kong.  That cannot be right.  I reject Mr Ko’s submission.

No assets within the jurisdiction

65.  Mr Ko argues that there is no assets within jurisdiction which is a basic requirement for granting the injunction in the first place.  But there is no dispute that there are some assets within the jurisdiction.  On the affirmation of the Defendants’ financial controller Chan Cho Fai (“Chan”) dated 8 December 2016 filed on behalf of the Defendants, there are at least account receivables due to the 1^st and 4^th Defendants, cash in the 3^rd Defendant’s bank account and intangible assets of the 3^rd Defendant.  In his 2^nd affirmation, Chan made a bare assertion of third party interest in these assets.  The alleged interest, even if it exits does not amount to a relationship of trust.  The Defendants have not put forward any evidence in support of any agreement or arrangement which supports the creation of a trust.  Despite this issue has been raised by the Plaintiff, the Defendants tendered no evidence of any alleged third parties making any claims against any of the Defendants.  No application has been made by any third parties seeking to vary or discharge the injunction order.  Chan’s assertion of no assets within the jurisdiction is just a bare one.

Risk of dissipation

66.  Mr Ko argues that the Plaintiff has failed to adduce any evidence to support its allegation of risk of dissipation or removal of their assets in Hong Kong.  The Plaintiff relies on the transfer of the Defendants’ hotel management contracts, the changes in the Defendants’ corporate structure since commencement of the English proceedings, the Defendants’ low commercial morality and the evasive manner in which they conducted the English proceedings as evidence of risk of dissipation of assets.

67.  After commencement of the English proceedings on 14 August 2015, the Defendants’ group, ie the Rhombus Group, incorporated two new companies in Hong Kong, namely Rhombus Consultant Ltd and Rhombus Management Ltd on 17 March 2016.  While there is no direct evidence yet of any transfer of the Defendants’ assets or business to these new companies, the Plaintiff believe on the basis of the surrounding circumstances which I shall set out below, there is a distinct possibility that the incorporation of these new companies was to pave the way for future transfer.

68.  While the Defendants’ principal business is hotel management, four management contracts with Hotel LKF, Hotel Panorama, Hotel Pennington and Rhombus Park Aura Chengdu Hotel, were terminated at about the same time.  The Defendants explained that the terminations were purely upon the expiry of contracts, change of new owner and with mutual consent of the contracting parties.  These are bare assertions without any documentary support.  The Defendants further argue that there is no reason why the hotel owners concerned should assist them in the dissipation of assets.  As submitted by Mr Suen, this only begs the question whether the hotel owners had knowledge of the Defendants’ scheme of dissipation.  Further, while expiry of contract (assuming it is genuine) may be an innocuous event, the unexplained non-renewal by the hotel owners and the defendants whose business it was to manage the hotels does raise suspicion.  One is entitled to ask rhetorically, why do these business people not renew these contracts and why should they terminate the contracts by mutual consent?  The non-renewal and the unexplained and timely termination of these contracts by mutual consent are indicative of a transfer of assets for the purpose of putting them out of reach of the Plaintiff in the event that judgment is obtained.

69.  Then, despite there was surplus in the Defendants’ bank accounts, the Defendants pressed for injection of funds.  They explained that funds were required for renovation of the restaurant of Hotel Verta which was carried out in good faith and in accordance with the Plaintiff’s instruction.  However, when asked for particulars, they just shied away.

70.  There had been serious accounting irregularities detailed in the Plaintiff’s accounting and expert evidence, including discrepancies between bank balances and bank account in the accounts provided by the Defendants to the Plaintiff.  The Defendants suggested that the inaccuracies were due to the Plaintiff insisting to use a new accounting system without providing proper training to the staff.  Again, the allegation of lack of proper training is a bare one, unsupported by documentary evidence or evidence from the staff concerned.  The irregularities are not disputed, but the explanation is unsupported and debatable.

71.  Then, amidst all these are the changes in the Defendants’ corporate structure.  The Defendants are evasive about their background and beneficial ownership.  The 1^st Defendant is a company incorporated in the British Virgin Island, the ownership of which is totally unknown to the Plaintiff and the Defendants have not made any disclosure.  The ownership in the 3^rd Defendant changed.  Prior to the commencement of the English proceedings, its shareholders were the 4^th Defendant as to 49% and Peterson Holdings as to the remaining 51%.  Some time between 9 May 2016 and the filing of Chan’s 2^nd Affirmation on 9 December 2016, Peterson Holdings divested its stake in the 3^rd Defendant to Janton Global.  Despite specific queries raised by the Plaintiff on 20 March 2017, the Defendants have to date refused to disclose any information relating to the background or ownership of Janton Global.

72.  Most suspicious of all is that within a week after the service of the injunction order on the Defendants, the entire boards of directors of the 2^nd, 3^rd and 4^th Defendants resigned.  On 26 October 2016, both existing directors of the 2^nd and 4^th Defendants, Wayne Mak and Calvin Mak who were founders and chief executive officers of the Rhombus Group, resigned and were conveniently replaced by their financialcontroller, Chan.  On 25 and 26 October 2016, all the four existing directors of the 3^rd Defendant, including Calvin Mak resigned and were replaced by Chan and Janton Global.

73.  While these resignations and corporate changes by themselves in isolation may be innocuous, the fact that they occurred together and shortlyafter service of the injunction order suggest that these were not coincidences. The secrecy of the beneficial ownership in the Defendants, the termination of the hotel management contracts, the irregularities in the accounts and the timing when all these changes occur suggest that the Defendants are of low commercial morality.  This enables the inference that the above acts were preparatory acts to transferring their assets to be drawn.  I have no difficulties to find that there was risk of dissipation of assets before the grant of the injunction order and the risk increased all the more upon commencement of HCA 3428/2016. 

Unjust and inconvenient

74.  Having made lengthy submissions the law, the only point made by the Defendants on the “unjust and inconvenient” ground is that the injunction order would have the effect of prejudicing the Defendants in defending HCA 3428/2016.  The Defendants had full opportunity to file evidence.  Yet, they cannot point to any material prejudice suffered or likely to be suffered by them by reason of the continuation of the injunction order.  As the debt under the English judgment is res judicata and summaryjudgment has now been obtained in HCA 3428/2016, there can be no prejudice in continuing the injunction order.

Conclusion

75.  As I have said, having entered summary judgment what remains is for the court to continue the injunction order to enable its execution.  Accordingly, I shall continue the injunction order until further order.  The Plaintiff will have to apply to discharge the injunction order for the purpose of enforcing the summary judgment now obtained.

DISCHARGE APPLICATION

76.  Mr Suen objects strongly to the Defendants’ application seeking to discharge the injunction order.  He reiterates the fact that no application has been taken out by the Defendants to discharge the injunction order for material non-disclosure.  At the inter parte hearing before Lok J, the Defendants were represented.  No complaint about non-disclosure was raised.  Three months later, the Defendants took out an application for variation of the injunction.  Again, no application to discharge the injunction order was made.  This application was only raised by Mr Ko in his skeleton argument dated 25 May 2017 for hearing on 29 May 2017.  The application has not been properly made.  The Plaintiff has no opportunity of filing evidence in opposition.  It would be unfair and prejudicial to the Plaintiff if I should allow this application to be heard.  I refused to allow this court to be hi-jacked into hearing this un-scheduled application.

VARIATION APPLICATION

77.  As mentioned above, back on 23 January 2017, the Defendants took out a summons seeking to vary the terms of the injunction order on account of legal costs to be incurred by them.  The application was heard before Deputy High Court Judge Hunsworth on 27 January 2017 and was adjourned sine die with liberty to restore and with costs to the Plaintiff.  Yet, to date, the Defendants have not sought to restore the application for hearing.  Now, through counsel’s skeleton submission, the Defendants seek to vary the terms of the injunction order to the extent that it does not prohibit each of the Defendants from spending $10,000 per week towards its ordinary and proper business expenses and does not prohibit them collectively spending a total of $200,000 per month on legal advice and representation subject to a maximum of $1,600,000.  As the application has not been restored, no evidence has been filed and, more importantly, summary judgment having been entered against the Defendants, I see no reason or purpose in granting the variation.  The application is dismissed.

CONCLUSION

78.  For all these reasons, summary judgment is entered against all the Defendants; the Plaintiff’s summons seeking leave to file the affirmationof Lakhani is allowed; and the injunction order is continued until furtherorder.  The Defendants’ application to discharge the injunction order or to vary its terms by way of counsel’s skeleton submission is refused.  I also make a costs order nisi that the Defendants shall pay the Plaintiff’s costs.