YAU KWONG CHIU AND ANOTHER v. YAU KWONG HA

CACV 132/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 132 OF 1999

(ON APPEAL FROM HCA 2607 OF 1997)

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J U D G M E N T

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Mortimer V-P:

1. This is an appeal against the order of Deputy Judge Li on 7 May 1999 by which he restrained the defendant from selling, charging or dissipating to others her interest in a flat until the trial of the action or further order. By a second order the injunction would be discharged upon the defendant paying into court the sum of $500,000 or providing some other guarantee for the same amount as security.

Background

2. The background of this matter is a dispute between the plaintiff and the defendant concerning their mother's will. The plaintiff is the brother and the defendant, the sister. Their mother died in 1990, leaving a will dated 17 December 1986 by which she appointed them her executors. She left all her real and personal estate to two of them in equal shares. In the dispute, the 1st plaintiff and his son claimed a share in money withdrawn by the defendant from a joint account which she held in the names of herself and her mother, and secondly, a share in the contents of a deposit box but these are not relevant to this case.

3. The defendant disputes the claim - no doubt relying in part upon the presumption of advancement - but going further and saying that in any event the joint account was a gift to provide for her. In the defence she alleges that provision was made for the brother in some other way.

The application below

4. The application for this Mareva type injunction was made by the plaintiffs on specific grounds. Mr Hung who represented the plaintiff before the Deputy Judge made it quite clear. He said this in the course of his application:

"What the plaintiffs are trying to preserve is the property which now the defendant and her family is using as a residence. Now we are not claiming that the purchase was purchased with the money from the bank account of the mother, we are not claiming that. We are seeking an injunction order on the basis. There was a recent development, namely, that the husband of the defendant suddenly called the 1st plaintiff while he was working at the police station and threatened that even if the 1st defendant was to succeed in this litigation, the defendant, that is the sister of the 1st plaintiff would sell her property under her name and would make sure the plaintiffs could not get a single cent."

So it was on the basis of this threat that the two plaintiffs say that there is a risk of dissipation of the assets. Later, in exchange with the judge, this was said by Mr Hung:

"MR HUNG: My Lord, the 1st plaintiff became concerned that, because of the course of the threat from the husband of the defendant, that at the end of the day, even if he succeeds in this litigation, he and the 2nd plaintiff will not get any fruit of the judgment.

COURT: So, is that the only evidence of risk of dissipation?

MR HUNG: Yes, my Lord."

5. However, when he came to consider the risk of dissipation in his judgment, the judge concluded on the evidence that there was a risk of dissipation but not only in relation to the allegation set out by Mr Hung in that passage, which is disposed to, but also that there was other more important evidence. The judge said:

"RISKS OF DISSIPATION

Let me point out at once that, with respect, Mr. Yuen's arguments about bare allegations by the First Plaintiff are misleading and untenable. Of course bare assertion or bare allegation is not good enough. If a plaintiff comes to court saying 'I fear that the defendant will dissipate its assets', it would attract hardly the slightest attention from the court. Here the First Plaintiff has stated on oath that the Defendant's husband indicated by word of mouth intention to deprive the Plaintiffs the fruits of judgment if the Plaintiff do succeed. There is clearly evidence tending to show risks of dissipation of assets. If there is independence evidence in support, that is all the better but independence evidence is not an absolute necessity. How many cases have been decided on oral evidence without a tint of extrinsic documentary support? If what [the] First Plaintiff has stated in his affirmation as quoted above is believed, a court may well accept that there is solid evidence of risks of dissipation. And there is more.

On the face of the Defence filed, I was under the impression that the monies in the Joint Account were still in that account. However, when I enquired, it transpired that the roughly $1.3 to $1.4 million had been withdrawn by the Defendant from the Joint Account. Now, since the Joint Account is in the name of the Deceased and the Defendant, prima facie at least part of the monies in that account would form part of the estate of the Deceased. Indeed there is evidence that the Defendant had agreed in writing to share the balance in the Joint Account with the Plaintiff. By withdrawing monies from the Joint Account, and no justification or explanation for doing so has been given, the Court may very well conclude that there had been efforts to dissipate assets belonging to the estate."

So in reaching his conclusion that there was a risk of dissipation the judge relied upon those two matters even though it was clear that the plaintiff's counsel did not rely at all upon the removal of money from the joint account.

Risk of dissipation

6. A Mareva type injunction is a draconian order. It is an order that is usually made in commercial actions but, of course, it is not only available in such actions. It is, however, made only in very limited circumstances which are well known. It is only made in limited circumstances because it is such a drastic order and because it can have a devastating effect upon the person or company restrained. The primary basis necessary for such an order is that there is evidence of a risk that the defendant will dissipate his or her assets so as to make any judgment a valueless one. Proof of this risk of dissipation is vital.

The evidence

7. I turn to the judge's assessment of this evidence. The evidence from the defendant's husband stood completely alone. There was no independent support for that evidence which was specifically challenged. It was not evidence from one of the parties. So it was not evidence by way of any kind of admission. As Mr Rimsky Yuen submitted below, the threat alleged by the plaintiff was inherently improbable. As is well known in these courts, if there is a risk of dissipation, one of the last things that a party will do is to inform the other party. If there is a real intent to dissipate, then it is likely to be frustrated. So, had the matter stood alone and the judge had acted simply upon that statement by a non-party about the state of mind of a party which was denied, although the judge said the contrary, that would not be sufficiently probative to have justified the making of such a draconian order as this.

8. As it was, the judge found support in the fact that monies had been withdrawn from the joint account. He expressed the view was prima facie part of the estate.

9. A number of matters arise. Although the judge is not limited in his assessment of the case to the way in which the plaintiff puts it, if the plaintiff advances his case on one basis and there is a finding on another, it is necessary for the judge to ensure that the plaintiff has a proper opportunity to deal with the matter. There was never any dispute that monies had been removed from the joint account, but it being a joint account, prima facie after the death of the mother the monies belonged to the sister defendant in the absence of some other evidence of intention. So the matter remains at large. Without more, then for my part, I am bound to say that in taking it as a pointer to a risk of dissipation, the judge was wrong. Indeed, there is no evidence of any kind other than the removal of money from the account to indicate that there had been any dissipation of that money.

The plaintiff's submission

10. It is attractively argued by Miss Cissy Lam for the plaintiff that this money is the subject matter of the action. Of course, if this has been an application to trace and preserve the subject matter of the action, the judge would have to approach the matter in an entirely different way. It is not possible on the evidence filed in the application for a Mareva injunction to know whether such an application would have succeeded. As it is, for my part, I am quite satisfied that the reasoning of the judge in concluding that there was a risk of dissipation sufficient to justify the granting of a Mareva injunction in a family dispute over the will of the mother between brother and sister was flawed. It was not sufficient.

The balancing exercise

11. Mr Yuen takes another point. He says that the judge also went wrong in the balancing exercise. It is to be found in his judgment at paragraph 21 where he says:

"In this case, the Defendant has gone on oath to say she has no intention to sell the Property which is her residence, I really cannot see how an undertaking not to dispose of the Property or an injunction order to similar effect can cause any prejudice or inconvenience to her. I was told by Mr. Yuen that the Defendant refused to give an undertaking and opposed the application for injunction as a matter of principle. Well, for that matter, the test is balance of convenience. It is sad that the Defendant is fighting for fighting's sake only without regard to the consequences of costs and judicial resources which may be better utilized."

From the words the judge used, it seems that he had in mind that the defendant was being difficult in not giving an undertaking and in opposing the application when it was of no disadvantage to her. But with the greatest respect, if that was part of his reasons, then I am bound to say he was wrong.

The discretion

12. Mr Yuen has helpfully cited a passage of Kerr LJ in Ninemia Maritime Corp v Travel GmbH [1983]1 WLR 1412 at 1421 which deals with the general discretion:

"(1) Although the discretion ultimately rests upon the words of section 37 of the Supreme Court Act 1981 to grant an interlocutory injunction 'in all cases in which it appears to the court to be just and convenient to do so,' certain material criteria have already been laid down in a number of well known authorities to which regard must be had in the application of these wide words in relation to Mareva injunctions. We mention this because some of Mr. Griffiths's submissions on this appeal appeared to go much further. Thus, he submitted at one stage of his argument that the fact that the defendants did not assert that they required the frozen sum of $787,000 for the purpose of their trade or to pay their creditors, but merely to invest as they thought best, was in itself a ground for granting the injunction, coupled with the plaintiffs' 'good arguable case,' because this would do little harm to the defendants, in particular if the plaintiffs' cross - undertaking in damages was supported by security, as was offered on this appeal (though not below). He also submitted that if the defendants wished to have the use of these funds, they could easily provide a bank guarantee instead, in order to secure the plaintiffs. Finally, he submitted, in effect, that the grant of Mareva injunctions should be greatly extended generally, so as to align the practice in this country with what he claimed to be the position in other jurisdictions, of requiring defendants to provide security for claims which appear to the court to be well-founded, unless the defendants show some sufficient reason why this should not be done.

In our view all these submissions go much too far in the light of the authorities and are indeed wholly inconsistent with the origin and development of this jurisdiction. The machinery of the Mareva injunction is extremely useful in appropriate cases. But, as the law stands, this jurisdiction cannot be invoked for the purpose of providing plaintiffs with security for claims, even when these appear likely to succeed - we are speaking generally and not with reference to this case - and even when there is no reason to suppose that an order for an injunction, or the provision of some substitute security by the defendants, would cause any real hardship to the defendants. Mr. Griffiths even went so far as to suggest that unless this jurisdiction were extended along these lines, Mareva injunctions might fall into desuetude. But the tendency is notoriously the other way.

Those last words of Kerr LJ have indeed been borne out by authorities and the practice of the court which followed so as to firmly establish that such injunctions will not be made because there is no particular disadvantage to the defendant. Of course, such injunction should never be made if the reason for such is to provide security for a judgment which has not been obtained over property which is the property of the defendant.

Conclusion

13. For those reasons, I would hold that the judge should not have granted the injunction. He was, in my judgment, plainly wrong to do so.

14. Miss Lam in her course of submissions mentioned that this jurisdiction of granting or refusing Mareva injunctions is often a question of feel for the judge. In that she was absolutely correct. It is a matter of feel but, as she added, a feel which has to be made upon a consideration of all the facts in the case.

15. For those reasons I would allow this appeal and discharge the injunction.

Mayo JA:

16. I agree and have nothing to add.

Rogers JA:

17. I agree. I wish to add a few words not only because we are differing from the Judge below on a matter of discretion but out of deference to the argument of Miss Lam which loses nothing of the attractiveness of its presentation through its lack of success.

18. A Mareva Injunction, at least as much as any other type of injunction, and perhaps more than most, can have very serious consequences. It has been described in graphic terms and likened to a nuclear weapon. Those passages in judgments are often quoted. Their impact can sometimes, however, be lost through use of such metaphoric language. The fact is that the grant of a Mareva Injunction can, and almost certainly will, have an effect beyond the confines of the subject matter of the proceedings.

19. The judgment below was based on the Judge's conclusion that there was sufficient evidence of dissipation of assets. For the reasons which have been given I consider that there was insufficient risk of dissipation of assets for the grant of a Mareva Injunction.

20. I would also in particular echo the words of the Vice-President in respect of the considerations which appear to have been in the Judges' mind and are reflected in paragraph 21 of the judgment.

21. Finally, I would note that the injunction granted was to prevent the Defendant from selling or further charging or otherwise disposing of her interest in a flat which is her residence. That is not a Mareva Injunction in the normal terms. It might perhaps be an appropriate form of injunction if there were a propriety claim over that flat but for a Mareva Injunction, the injunction granted should in almost all circumstances be an injunction to keep a relevant value of assets within the jurisdiction and it should not be directed to particular assets over which no claim is made.

22. I too would allow this appeal.

Mortimer V-P:

23. The appeal is allowed with costs both here and below. The injunction is discharged. There will be an order for the plaintiff's costs to be taxed in accordance with the Legal Aid Regulations. We are greatly obliged for the assistance we received from counsel.