INDIAN CORRIDOR SDN BHD AND ANOTHER v. CHINA IDEA DEVELOPMENT LTD AND OTHERS

HCA 1/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1 OF 2008

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R U L I N G

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Introduction

1.  The two summonses now before me are consequent upon my Ruling of 4 February this year [Bundle pages 69-80] to which reference should be made for the background to this matter, the order coming from that Ruling being at pages 81-84.  The only contested summons is that taken out by the 2^nd Defendant [121-123] which requires me to rule on a number of sharply contested matters.  The 1^st Defendant’s summons at pages 118-120 is uncontroversial and I will come to that shortly.

2.  I will need to have regard to the terms of the 2^nd Defendant’s present summons and my Order of 4 February so as to explain what it is that the 2^nd Defendant is inviting me to do.

3.  Under paragraph 5 of the Order [page 82], I made a Mareva injunction restraining the Plaintiffs and their solicitors, Messrs Robertsons, from removing from Hong Kong or in any way dealing with any monies up to a limit of $20 million, including a sum of $2 million already paid by the Plaintiffs to Robertsons, their solicitors, for the purpose of fortification of their undertakings as to the Defendants’ damages in respect of the ex parte Mareva injunction obtained by the Plaintiffs from Deputy High Court Judge To on 31 December 2007.  The amount of $20 million was as reasonable a pre-estimate, as could then be given, of the 1^st and 2^nd Defendants’ damages as a result of the Plaintiffs having obtained the Mareva injunction in the now discontinued action.  Paragraph 1 of the 2^nd Defendant’s summons seeks to raise this amount to $87.5 million, this figure being the amount of the losses which the 2^nd Defendant says that it has suffered as a result of the Mareva injunction against it which is calculated on the basis of the sixth affirmation of Mr Teh Soon Seng [136-142].  What is sought therefore is security pending the outcome of the inquiry as to damages in respect of the Plaintiffs’ undertaking as to damages.

4.  One aspect of this paragraph of the summons which has been resolved by agreement is that Robertsons will now pay into court, rather than retain to the court’s order, the sum of $2 million.  Once they have done so the existing paragraph 5 of my Order can be amended so as to delete on the first line the words “and/or the Plaintiffs’ solicitors Robertsons” and to delete on the fifth line the words “to Robertsons” and these words will be replaced by the words “into court”.

5.  Paragraph 6 of my Order [82] is an anti-suit injunction which restrains the Plaintiffs:

“from bringing or continuing, in any other jurisdiction, any new legal proceedings raising the same disputes or issues as they have raised in their Statement of Claim herein against the Defendants herein until the Plaintiffs have discharged or provided security for all their liabilities to the Defendants in these proceedings.”

That order excepted proceedings currently afoot in the High Court of Malaysia sitting at Shah Alarm.  The basis of that order appears in paragraphs 11 to 17 of my Ruling of 4 February [73-77].  The 1^st and 2^nd Defendants have now identified an action brought by a company called Pan Stone Development Sdn Bhd in the commercial division of the High Court at Kuala Lumpur, in which the two Plaintiffs in this action are 6^th and 7^th Defendants respectively.  By paragraph 2 of its summons [122], the 2^nd Defendant seeks an amendment of paragraph 6 of my Order to extend the anti-suit injunction by requiring the two Plaintiffs, as 6^th and 7^thDefendants in the Kuala Lumpur action, for whose benefit Pan Stone has brought the action, to obtain a stay of that action.

6.  The basis for seeking such an amendment to the existing Order appears in the Affirmation of Mr Peter So, the 2^nd Defendant’s solicitor dated 13 May 2008 [161-167].  Paragraphs 16 to 17 of his affidavit [164-167] are the relevant paragraphs.  A brief explanation will suffice for present purposes.  It is said on behalf of the 2^nd Defendant that Pan Stone (a private company from Penang like the Plaintiffs in this action) is related to the Plaintiffs with overlapping shareholders.  In the Pan Stone action, it sues the first three Defendants in this action for the benefit of the Plaintiffs in this action and seeks no relief against them, they being, as I have already mentioned, 6^th and 7^th Defendants in it.  In substance, submits Mr Barlow SC for the 2^nd Defendant, this amounts to a vicarious breach of the existing anti-suit injunction by means of a company related to the Plaintiffs which, given my reasons for having made the anti-suit injunction in the first place, should be stopped.

Chronology

7.  Having set out and explained what is asked for, it will be helpful briefly, to provide a timetable for these events.

8.  The summons and Mr So’s affidavit supporting the orders sought are dated 13 May.  Mr Teh’s sixth affirmation quantifying the 2^nd Defendant’s damages is dated 29 April.  Mr Barlow’s skeleton in support is dated 21May.  It is brief, and perhaps advisedly so, because even as late as then it appeared that the summons might be unopposed because there was extant a summons by Robertsons to cease acting on behalf of the Plaintiffs.  That summons has not in fact been pursued and Robertsons have been able to continue representing the Plaintiffs.  As a result, they have been able to instruct Mr Sussex SC (Mr Smith SC having previously appeared on 1 and 4 February) and Miss Lok, his junior, to appear for the Plaintiffs today.  Mr Sussex has prepared a skeleton argument, dated and served on 22 May, in response to the summons, to which I will need to give detailed consideration.  Robertsons have also been able to serve and file the 3^rd Affidavit of Mr Hoy, one of its partners, who has the conduct of the case for the Plaintiffs, which is dated 21 May but not served until the afternoon of 22 May, in other words on the eve of the hearing of the summons.

9.  Mr Barlow has characterised the service of this evidence as deliberately late with a view to causing the 2^nd Defendant maximum difficulty in advancing its summons.

10.  For my part, I am not prepared to ascribe any malign intent on the part of Mr Hoy as to the undoubtedly very late service of his substantial and important affidavit which exhibits to it, three affirmations dated 20 May from important players, if I can so describe them, in this action and in the Pan Stone action at Kuala Lumpur.  Mr Hoy’s affidavit and its exhibits run to 261 pages, served on the afternoon before the hearing, the date of which had been known since 13 May.  I am prepared to accept from Mr Sussex that this delay has been caused by the very late resolution of the on-going difficulties between Robertsons and the Plaintiffs as to whether it was possible for Robertons to continue acting for them having regard to the terms of paragraph 5 of my Order of 4 February which involved, in a limited way, Robertsons in the Mareva injunction that I made on that occasion and in my having adjourned, rather than dismissed or secured the withdrawal of, the 2^nd Defendant’s application for a wasted costs order against Roberstons in respect of the bringing of the Plaintiffs’ discontinued action and the obtaining of the ex parte Mareva on 31 December 2007.

11.  Against the background of this lateness, Mr Sussex without any summons of his own, has rather decided that on this occasion attack is the best form of defence.  Quite apart from questioning the necessity of increasing the amount of the order from $20 million to $87.5 million in circumstances where he says that beyond the $2 million which Robertsons will be paying into court, there are no other assets of the Plaintiffs’ in this jurisdiction, and seeking to refute by the affidavits exhibited to Mr Hoy’s 3^rd affidavit, the suggestion that Pan Stone’s action in Kuala Lumpur amounts to a vicariously brought suit on behalf of the Plaintiffs’ in breach of the anti-suit injunction in paragraph 6 of my Order to which no possible criticism, save for extreme lateness, can be made, has also sought to have re-litigated, on two bases, the matters which resulted in my making the orders of 4 February.  It is this attempt to which Mr Barlow has characterised as, amongst other descriptions, scandalous and abusive and which I should not entertain.

12.  Mr Barlow’s primary position is that I should not have regard to Mr Hoy’s 3^rd affidavit because it is so late and that, untroubled by it, I should go on to consider whether, on their merits, I should make the orders that are asked for by the 2^nd Defendant in its summons.  Nevertheless, if I am inclined to allow Mr Sussex to use Mr Hoy’s affidavit, then Mr Barlow wishes for an adjournment of his summons with a direction for the cross-examination of the makers of the affidavits exhibited to Mr Hoy’s affidavit but on terms that the Plaintiffs should pay the costs of the adjournment on an indemnity basis and should bring into court $200,000 on account of costs.

Should I Allow the Order of 4 February to be Re-opened

13.  I need to deal with this first, because if I were persuaded to adopt that course, this would of necessity have to precede any consideration of Mr Barlow’s summons.

14.  The starting point for Mr Sussex is that the hearings of 1 and 4 February were ex parte on notice.  They came about in this way.  The Plaintiffs having obtained the Mareva ex parte from Deputy High Court Judge To on 31 December 2007 were provided with a return date on 18 January 2008 before Reyes J, who continued the injunction but varied it by, inter alia, requiring the Plaintiffs to fortify their undertaking to the 2^nd Defendant by paying $8 million into court.  On 25 January 2008, I made a similar order in favour of the 1^st Defendant by requiring fortification of $9 million from the Plaintiffs [48-50 and 55-58].

15.  The 1^st February was the date fixed for the hearing of  the 1^st and 2^nd Defendants’ application to strike out the statement of claim as disclosing no cause of action and to discharge the ex parte Mareva injunction.  On the day before, that is to say 31 January, the Plaintiffs served a Notice of Discontinuance of the action [63].

16.  On the same day as the Notice of Discontinuance the 2^nd Defendant issued its summons at pages 66-67 upon which I made the orders that I did on 1 and 4 February, largely consequent upon my Ruling of 4 February [69-80].

17.  In applying to re-open the matters of 1 and 4 February, Mr Sussex has taken two points.  Firstly, he seeks clarification from me of whether I had, when giving my Ruling and the orders that came from it on 4 February, considered the reasons for the discontinuance by the Plaintiffs before going on to make the draconian orders, as he describes them, that resulted from my Ruling.  He refers to the substantial fortification that had been ordered, totalling $17 million.  He submits that a Plaintiff in such circumstances is entitled to say that it will decline or is unable to assume such an obligation as the price of obtaining its injunction and, in such circumstances, it is fully entitled to forgo the injunction that the court has granted to it and, if it wishes, it is fully entitled to discontinue the action under which it had applied for the injunction.

18.  It seems to me that this is a correct analysis of the situation, but, it will also follow from a discontinuance that a Plaintiff will have to assume the consequences of having started an action and then calling a halt to it.  In the usual, and more straightforward case, this will only result in paying the Defendant its costs.  In this matter, I had been invited by the Defendants to look beyond the inevitable costs consequences and I was persuaded to make the other orders as well.

19.  My Ruling will need to stand on its own terms and merits or, otherwise.  I do not propose to say whether I considered or did not consider a particular issue or matter.  I have provided reasons for taking the course that I did and, if need be my reasons can be analysed elsewhere.  The simple fact of the matter was that the Plaintiffs had obtained ex parte orders restraining the movement of up to $647.5 million of the 1^st and 2^nd Defendants’ assets in Hong Kong.  Having then been put on terms by orders of fortification, some weeks after they obtained their injunction, the Plaintiffs took the decision not to pay those amounts into court and subsequently called a halt to the action.  My orders of 1 and 4 February reflected, as best as I could provide, the appropriate relief to the Defendants who had been put to expense, in terms of legal representation and, who had suffered, as yet unquantified contractual losses as a result of the granting of the ex parte Mareva injunction that had been granted to the Plaintiffs.

20.  That is as far as I am prepared to go in relation to Mr Sussex’s invitation to “clarify” whether I had considered the Plaintiffs’ reasons for their discontinuance.

21.  I now turn to his second point which is that the order of 4 February will need to be re-considered because the hearings of 1 and 4 February were only ex parte on notice and therefore the Plaintiffs have been deprived of an inter partes hearing to which they are entitled as of right.

22.  I had referred to the hearing as ex parte on notice at paragraph 8 of my Ruling when referring to the order that I made in terms of paragraph 5 of the summons [66-67] reflected as paragraph 5 of the order [82], being a domestic and not world-wide Mareva injunction to preserve up to $20 million to abide the outcome of the enquiry as to damages as a result of the Plaintiffs having obtained their Mareva injunction against the 1^st and 2^nd Defendants on 31 December 2007.  In paragraph 8 of my Ruling, I gave the Plaintiffs and their solicitors the opportunity to say whether they were, for some reason, unable to comply with that part of the order and indeed to go further and seek to discharge it.  Nobody has sought to avail themselves of that right.

23.  Mr Barlow submits that it is quite wrong of the Plaintiffs to attempt to re-open matters in this way.  The Plaintiffs were represented by leading and junior counsel on 1 and 4 February when the issues raised in the 2^nd Defendant’s summons [66/67] were fully argued.  Once the order was made nothing further was heard from the Plaintiffs to say that they required an inter partes hearing nor have they sought to appeal the orders made.  They have allowed the time for appealing to long expire — over three and the half months of now elapsed since I made the orders — and now, at the very last moment, with no summons and a skeleton served on the afternoon before this hearing, complaint is made that this should all be gone through again inter partes.

24.  Mr Barlow has referred to the note at 29/1/40 of Order 29 — (see page 546 of the current practice) which, he says, properly describes the nature of the hearings of 1 and 4 February.  The note says the following:

       “‘Opposed’ ex parte motions — A practice has developed of hearing what may be called ‘opposed ex parte motions,’ i.e. where the defendant is present at the hearing of the ex parte application and takes part in it in order to assist the court and if the defendant should be present at the express or tacit invitation of the plaintiff, the court has jurisdiction to award him costs if his opposition to the application is successful (see Pickwick International Inc. (G.B.) Ltd v Multiple Sound Distributors Ltd [1972] 1 W.L.R.1213; [1972] 3 All E.R.384).  The court of its own motion may adjourn an ex parte motion to permit the defendant to appear, either for a full inter partes hearing or for an ‘opposed ex parte’ hearing.

       When a plaintiff moves ex parte and the defendant is present and addresses the court, the hearing is effectively inter partes, and any appeal therefrom is an appeal against an inter partes order.  It is unsatisfactory, however, for the Court of Appeal to be asked to adjudicate on such appeals when only one side’s evidence has been heard.  It is preferable that the motion should stand over to a subsequent inter parties hearing when all the evidence can be put before the court.  The aggrieved party may then appeal without leave (Hunter and Partners v. Wellings and Partners [1987] F.S.R.83, CA)”

25.  I am bound to say that my sense of it was that Mr Smith had come to argue the matter on its merits as a full blown inter partes hearing.  I was alive to the fact that given the shortage of time I should allow the Plaintiffs the opportunity to come back if they wished on the Mareva element of my order if, on further consideration, they were going to have difficulty in complying.  Save for that, it seemed to me that this was being heard as an opposed inter partes argument.

26.  From that order the Plaintiffs, as I have already observed, have not returned for any variation or discharge.  Today, without summons, they have adopted this position.  It strikes me that to now ask for an inter partes hearing is, if I may say so, misconceived.  The ex parte hearing on notice was, in my judgment, the substantive hearing during which no suggestion had been made that these orders would require further ventilation and confirmation at a further inter partes contest.  No formal application has been made for such a hearing and there has been no appeal from my order.  I decline to go into these matters again.  I consider my order to have been a final one on the Defendant’s summons.

The Defendant’s Summonses

27.  The matters that are now left over are the application to vary the amount of $20 million to $87.5 million in paragraph 5 of my Order and to vary the anti-suit injunction.  I propose to stand both over for argument to a date to be fixed.  Mr Barlow has asked me to take the less frequently adopted course of ordering cross-examination on their affidavits of the Plaintiffs’ witnesses, who I am told would be willing to come to Hong Kong for that purpose but if they do not, this will entail use of the Technology Court, this relating to the variation of the anti-suit injunction.  Whilst I am not against taking that course, I would prefer it if further consideration were given to this by the Defendants.  Their counsel and solicitors have only just had a sight of Mr Hoy’s 3^rd affidavit and its exhibited affidavits from Malaysia and they may wish to reply to those affidavits.  I propose to give them leave to do so within 21 days, if so advised. Thereafter, there will be no further affidavits without leave of the court.  I will adjourn both of these outstanding applications to a date to be fixed in consultation with counsel’s diaries for a three-hour hearing on the basis that there will be no cross-examination.  In the event that the Defendants, on further consideration, still require to cross-examine the witnesses from Malaysia, I will hear an application at a short [30 minutes] directions appointment and decide whether to allow cross-examination on the affidavits.  If I were to allow cross-examination then I would have thought that the parties will need somewhat more than the three hours, which would be sufficient to hear the argument on the affidavits alone. 

28.  I see no real urgency at present in respect of the application to increase the amount of $20 million to one of $87.5 million.  Mr Sussex says there is no money beyond the present amount of just over $2 million held by Robertsons.  The parties will have an opportunity to say anything more that they wish to on this matter on the next occasion and I will then give my Ruling on it.

Costs

29.  Mr Barlow has asked for indemnity costs and further payments into court on account of costs.  Today, I propose to reserve costs to the substantive hearing.