BUILDERS FEDERAL (HK) LTD. v. ELEMETA HOLDINGS LTD.

1986, No. A709

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. On 15th February of this year, on an ex-parte application, I granted a Mareva injunction, restraining the defendant until further order "from removing from the jurisdiction of this court any money due and owing to the defendant from the John Lok Wimpey Joint Venture, or otherwise disposing of or dealing with the same or any part thereof. " I have before me today, an application by the defendant to discharge that injunction.

2. A word first about the proper approach. I do not think for a moment that this put me in the bizarre position of appealing from myself. I think the correct approach is that any exparte order which a judge makes should be regarded as provisional in the sense that when full or further facts are placed before him, he should have no hesitation in reconsidering the matter as a whole in the light of all the evidence that is put before him. I have in mind, but cannot identify, some observations of Sir John Donaldson in a very recent case to that effect. It also emerges from a decision of the Court of Appeal in England, in Ninemia Maritime Corp. v. Trave Schiffahrtgesellschaft⁽¹⁾. In that case the trial judge said:

"The judge who hears the proceedings inter-partes must decide on all the evidence laid before him. "

He was referring there to himself as the judge who heard the proceedings inter-partes as well as having granted the ex-parte injunction. That this was the right approach, and was so regarded by the Court of Appeal, is to be seen from the observations of Kerr, L.J. at the foot of p. 1425 and the top of p. 1426.

3. So I should now be looking at the whole of the evidence, not for the purposes of deciding whether I was right or wrong in granting the ex-parte order, but whether in the light of the whole of that evidence, an injunction should now continue in favour of this plaintiff in the terms that I originally ordered or in any terms.

4. There is no issue as to the proper principles. They are conveniently set out in the case I have just cited and also in the Third Chandris Shipping Corporation case⁽²⁾. It really comes down to two matters which have to be shown. First, as a minimum, the applicant for the injunction, the plaintiff in this case, must show "a good arguable case". This is drawn from the judgment of Kerr, L.J. at p.1417. Secondly on that assumption, an injunction should only be granted if the court concludes "on the whole of the evidence then before it, that the refusal of a Mareva injunction would involve a real risk that a judgment or award in favour of the plaintiff would remain unsatisfied". The operative words there are 'real risk'. I propose to consider those two points in turn.

5. What happened in this case was this. The defendants were sub-contractors or sub-sub-contractors retained by the John Lok Wimpey Joint Venture, on a particular aspect of the work involved in the construction of the new Hong Kong Bank Building. They retained the services of the plaintiffs as their sub-contractors, and it would appear as their labour only sub-contractors. A good deal of work was done by the plaintiff. But there came a time when disputes were arising between the parties. The plaintiff's director, and the gentleman who has dealt with this contract, went on record, before this dispute surfaced, as saying in a telex: -

"There is not now nor has there ever been a meeting of minds between' defendant and plaintiff 'as to the terms of any agreement relative to the above' which is this work. "

As a result of that, the parties tried to create a meeting of minds and did so in an agreement in writing dated 24th August 1985. It was consequent upon that agreement that further work was done by the plaintiff for the defendant at this site, and the invoices upon which this claim is now based by the plaintiff, relate principally to work done subsequent to the August agreement, although if one looks at them carefully they may in fact extend back in time before that date.

6. What happened before that agreement was made, as recited in two clauses to the agreement was this: Having spoken about the work having been done; D "Elemeta, (the defendant), has heretofore paid to Builders, (the plaintiff), H. K. $2.8 million for work done previously. To' cover payment for work previously invoiced but not paid, and the future work contemplated by this agreement, the defendant is paying to the plaintiff an additional H. K. $2 million, making a total paid todate of $4.8 million" odd. It then goes E: "On completion of the works, the gross value of the plaintiff's work shall be valued in accordance with the Exhibit A hereto and this Agreement. Within 7 days after agreeing the final account, and not later than 30 days after practical completion of the works, both parties agreed to abide by the following. " It then goes on to say that if the value was more than $4.8 m, then the defendant should pay and if it was the less, the plaintiff should repay.

7. So that there was a payment on account made by the defendants before this Agreement was made, which was going to be reconsidered at the expiration of the work. The document at least does not rile out the possibility, having regard to its terms, that no further money would be due. This is what the defendants are in substance now saying. They are saying under the terms of this contract that we have the right to value the whole of the plaintiff's work. We, the defendants, have conducted such valuation. It has taken a long time and it has been a rather involved process. Our valuation shows that the total sum of 4.8 m is in fact too much, and that it is the plaintiff who owes us.

8. It is in those circumstances that I have to consider the question as to whether a good arguable case has been established by the plaintiff within the meaning of that phrase in this context. I have not been taken by counsel quite deliberately and I believe, sensibly, through the elaborate pleadings which have now been put on the file by both parties; by the defendants in support of its defence and counterclaim, and by the plaintiff by way of a reply to the defendant's document. Basically the essential argument seems to me to come down to this: Whether the plaintiff can say, as they said in the affirmations originally filed and which were before me at the time of the ex-parte injunction; we can look separately to what happened after August. Some of the complaints that were then being raised by the defendants, was said on such affirmations to relate to the period prior to August, and therefore could be disregarded. We are entitled to start again and be paid for the work that we did since August. That is, in its essence, their basis claim; whereas the defendants are asserting a right to reopen the whole job.

9. All I can say at the moment on that is this. It seems to me that upon a simple reading of the words that I have just read out from the Agreement of August, that there must be an arguable case for the defendants that the valuation exercise extended to the whole of the work of this contract because it related to the whole of the money being paid. I do not see how a valuation could be done in relation to that unless the whole work was being brought into account. It therefore seems to me exceeding difficult for this court today to say what the outcome of such revaluation is going to be with any degree of assurance at all. Therefore this point, which I am bound to say, was not present to my mind at all last February, leaves the plaintiff, I believe, in a position of being unable to show a good arguable case for any particular sum for Mareva injunction purposes. What the plaintiff can show here is scope for a great deal of argument in relation to a building contract, and can point to an uncertain outcome which may be favourable or it may not. I do not believe that a plaintiff in that position can be said to satisfy the first "minimum requirement", the phrase used by Kerr L.J. to qualify him for a Mareva.

10. The second point is whether there is a real risk of a judgment or award remaining unsatisfied. The case that was argued before me last February, and repeated by the plaintiff today, is really this. The defendants have given rise to suspicion by a combination of prevarication and avoidance, in not dealing with the invoices which the plaintiffs submitted at the proper time; allowing what was said to be a 30 day payment period to be long overdue; to have been avoiding the plaintiff's representatives when their Mr. Edwards was visiting Hong Kong, and being very difficult to track down at that time; and to have abandoned the office which they then had here in Hong Kong. As a matter of recollection, I think, those were the matters which I took account of on the previous occasion; coupled with the fact that this appeared to be a case of a defendant who had no connection with Hong Kong at all, receiving money in Hong Kong from the John Lok Wimpey Partnership and remitting it all to England, so that there was going to be nothing here out of which any possible Hong Kong judgment could be satisfied.

11. On the evidence that has been placed before me today, a rather different total picture emerges. The first thing that emerges is that throughout the job, the method of payment was this: First the John Lok Wimpey Partnership was paying the defendant in England into an English bank account, and the possibility cannot be excluded that they were paying in sterling. Secondly the defendants were paying the plaintiff, no doubt in Hong Kong dollars by moneys remitted from England to Hong Kong. So this was certainly not the sort of case where in anticipation of proceedings or under threat of proceedings, a potential defendant has started so to adjust his affairs so as to denude himself of assets in Hong Kong. It is in that particular context, that the Mareva injunction originally was invented. This is a case of a defendant who was doing no more than continuing to receive money in England and to pay money from England, if and when anything became payable in the same way as before.

12. So that I have had nagging doubts in the back of my mind in this case as to whether it constitutes a case within the Mareva principles at all, namely (in the word that is constantly used) of "removal" of assets from the jurisdiction. But sensibly no doubt, the defendants have not founded upon that possible nicety or technicality so that apart from recording my reservations about it, I need say no more. But what I do say is that in the context of discretion, the fact that moneys have been paid in this way and have come back from England to this defendant, has a good deal of bearing upon the element of risk.

13. Secondly, in the light again of the evidence before me, the suggestion of avoidance and prevarication has I think, been very largely dissipated by the explanation which Mr. Edwards has put before me of his particular position when he was in Hong Kong, which was supervising work at night for the whole time he was here, getting work corrected at the bank building outside banking hours, and spending much of the daylight hours ordering the next night's work. It is not an idle schedule, very far from it. It may well have been that he had comparatively little time or patience at that time for interviews with this plaintiff until a later date. Secondly, he has explained that the revaluation work which he, on his construction of the contract is necessary, was a very difficult and protracted task which he (I think reading between the lines) only finished subsequent to that visit.

14. The general effect of this evidence is not to support the inference of avoidance which was being put before me on the previous occasion. Rather it seems to me to show, and to be explained by bona fide disputes and bona fide differences of construction and impact of the agreement of August of last year. So that there is really, if one takes that inference out, very little left in support of the assertion that there is in fact a real risk of this English Corporation not meeting any future Hong Kong judgment. It is a private company, but I have been given figures of its turnover and its work in hand which run into a very large sum of money indeed. It has been asserted on behalf of the company that it has never defaulted in the past on any judgment, in any jurisdiction, or on any arbitration award. The sum involved is not very great. A Hong Kong judgment can very readily be enforced in the United Kingdom. It seems to me highly unlikely that a company with £250 million worth of work in hand, would default on a judgment for something less than £100,000 which is rather more than the sum at stake on this claim.

15. Looking at the matter again, the plaintiffs have failed to satisfy me, that there is a real risk of any judgment which they may hereafter obtain in Hong Kong, not being honoured by this defendant. In those circumstances and in the light of the new information before me, I do not think that this injunction should continue, and that the order I make is that it be discharged.

(1)    [1983] 1 W.L.R. 1412

(2)    [1979] 1 Q.B. 645