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.  I am required to rule on a number of interlocutory matters as this case proceeds to its final goal which is the 1^st and 2^nd Defendants’ application to have awarded to them damages consequent upon the Plaintiffs’ undertaking in damages upon its having obtained an ex parte Mareva injunction against them on 31 January 2007.  Subsequently, on 18 January 2008 and also on 25 January 2008, on which dates they were required to fortify their undertakings, the Plaintiffs decided that they would not to do so and applied to discontinue the action, which they were given leave to do by me by a Ruling dated 4 February this year [Bundle 1/69], the resulting Order being at Bundle 1/83.  The main features of the Order were that upon the discontinuance the injunction was discharged and an enquiry as to damages was ordered, together with standard directions as to the conduct of the enquiry leading to its ultimate hearing.  I also granted the 1^st and 2^nd Defendants, an injunction preventing the Plaintiffs from removing from Hong Kong any assets up to $20 million, to safeguard the Defendants’ position pending the outcome of the enquiry as to damages.  Finally, I also granted the Defendants an anti-suit injunction preventing the Plaintiffs from bringing, in any other jurisdiction, any new proceedings raising the same disputes or issues as they had raised in their Statement of Claim against the Defendants, until such time as they had discharged or provided security for all their liabilities to the Defendants in these proceedings.  It seemed to me that this was a proper order to make in view of the fact that the Plaintiffs, having sued the Defendants here and obtained a very substantial Mareva injunction freezing some $647 million only to discontinue the action a month later, should be required to put their house in order in this jurisdiction before being allowed to litigate against the Defendants on the same subject matter elsewhere.  So much for the background.  I now need to recount what has happened since then.

2.  On 29 April, both Defendants filed their Particulars of Claim of Loss in the enquiry as to damages [Bundle 1/pages 85 and 102 respectively].  The 1^st Defendant’s claim exceeds $70 million and the 2^nd Defendant’s is quantified at $87.5 million.  On 9 May, the 1^st Defendant took out a summons.  That is at Bundle 1/118.  Its solicitors had learnt that Messrs Robertsons, the Plaintiffs’ solicitors, who held over $2 million belonging to the Plaintiffs which they held to the court’s order as part of the injunction that I had made on 4 February requiring the Plaintiffs not to remove up to $20 million from Hong Kong, had applied to cease acting.  The 1^st Defendant’s solicitors were therefore anxious to obtain an order from the court, as the summons recites, requiring Messrs Robertsons to pay the amount they held into court and also for an order for costs on the summons.  In the event, in circumstances that I will explain presently, Messrs Robertsons have continued to act for the Plaintiffs and the amount held by them has now been paid into court.  Nevertheless, there remains outstanding the issue of the costs of that summons which the 1^st Defendant wishes me to award to it.  This therefore is one of the matters which I will need to rule on.

3.  The next matter is that the 2^nd Defendant’s solicitors were informed by their counterparts in Malaysia that, amongst other parties, the 2^nd Defendant had been made a Defendant to an Originating Summons in the High Court of Malaya by a company called Pan Stone Development Sdn Bhd (“Pan Stone”) in which Pan Stone is, inter alia, seeking a declaration setting aside the same Management Agreement which was the subject of the Statement of Claim in this action and also declarations on behalf of the 6^th and 7^th Defendants to the Originating Summons, who are the two Plaintiffs before me.  This will need more detailed consideration in due course but by way of introduction all I need to say is that the 2^nd Defendant has taken the view that Pan Stone is no more or less than an emanation of the Plaintiffs in this action and that some of the matters raised by it in the Originating Summons in the High Court of Malaya amount to the same issues that had been raised in the Statement of Claim in this action, in consequence of which parts of this Originating Summons are in breach of the anti-suit injunction that I had granted on 4 February.  As a result the 2^nd Defendant has taken out a summons dated 13 May [Bundle 1/121].  In this summons, it seeks two orders.  Firstly, now that it has been able to quantify its claim for damages against the Plaintiffs in the enquiry, that the amount that the Plaintiffs have been ordered to retain in Hong Kong by virtue of the injunction that I granted on 4 February should be raised from $20 million (which was the best estimate of the 2^nd Defendant’s losses caused by the grant of the Mareva on 31 December 2007) to $87.5 million which is the amount now claimed by it in the enquiry.  Secondly, in relation to the anti-suit injunction, also granted by me on 4 February, that the Plaintiffs should see to it that Pan Stone stays the Originating Summons proceedings in the High Court of Malaya against the Plaintiffs in this action for whose benefit Pan Stone is said to have started those proceedings.  In other words, the 2^nd Defendant is asking for an extension of the anti-suit injunction to encompass that matter.

4.  Pausing there, those two summonses of 9 and 13 May, were initially heard by me on 23 May which resulted in a Ruling dated 26 May [B1/135.14].  The Ruling provides a description of the course of the hearing on 23 May which I propose to briefly summarise.  The Plaintiffs, by then represented by Mr Sussex SC, sought to have me re-open the hearings of 1and 4 February on the basis that what had then taken place was an ex parte on notice hearing and that his clients were entitled to a proper inter partes hearing.  He also wanted me to indicate whether, in making the orders that I had in February, I had taken into account matters about which my Ruling of 4 February was silent.  The effect of all of this was that this argument on the day occupied all of the allotted time and I was not able to hear, in particular, the 2^nd Defendant’s summons of 13 May.  As to the 1^st Defendant’s summons concerning the payment into court by Messrs Robertsons of the $2 million, agreement was reached and the amount has now been paid in, leaving over the question of the costs of that summons which is now before me.  As to the 2^nd Defendant’s summons, the matter had been compounded by the service of a very late affidavit on behalf of the Plaintiffs and so inevitably, the 2^nd Defendant’s summons had to go over.  I have already referred to its terms and the orders that it seeks.

5.  Following that adjournment, the Plaintiffs had sought to appeal parts of my orders of 4 February to the Court of Appeal which involved an application to extend their time for appealing.  That application was dismissed by a single justice of appeal in the latter part of July.

6.  Finally, by way of introduction, I turn to two other matters which I need to determine.  On 24 July, the 2^nd Defendant issued a summons to strike out parts of the Plaintiffs’ defence to the 2^nd Defendant’s particulars of claim of loss, on the basis that those parts of the pleading raise matters that are simply not open to the Plaintiffs to advance in the enquiry as to damages, the background to this being the reference in the defence to the Management Agreement.  I will come to the argument presently.  Mr Barlow SC, for the 2^nd Defendant, submits that these parts of the pleading are bound to fail.  They do not disclose a reasonable cause of defence and that given their subject matter these amount to an abuse of process — more of which shortly.

7.  The last matter of substance concerns the timetable and further directions to be given before the hearing of the enquiry.  On 4 February, I had already provided fairly standard directions as to the service of pleadings and discovery which substantially have now been complied with.  Nevertheless, further directions will need to be given and complied with to ensure readiness.  The matter that concerns both Defendants which Mr Strachan, who appears for the 1^st Defendant, has addressed is that there should be no further delay in setting down the enquiry which is estimated to last between five and seven days.  I will therefore have to deal with this as well.

8.  There are other incidental summonses, if I can so describe them, concerning the filing of late affirmation evidence which I propose to accede to.  I will leave it to the parties’ solicitors to draw up appropriate orders based on those summonses.  From that somewhat lengthy introduction, I now turn to each of the contentious issues which I have referred to. 

The 1^st Defendant’s Summons of 9 May

9.  This relates to the application for costs on the summons because, as Mr Strachan puts it, the Plaintiffs, through their solicitors Messrs Robertsons declined to pay the $2 million plus into court when invited to and only did so after the 1^st Defendant had brought the matter to court on 23 May.  Mr Strachan has traced the short history of this issue.  It having come to the notice of the 1^st Defendant’s solicitors that Robertsons were applying to cease to act, this summons was made returnable on the same day as Robertsons’ summons to be removed from the record.  The Master, not having the jurisdiction to grant an injunction, this aspect forming part of the injunction that I granted on 4 February, remitted the summons to me as the judge seised of the matter.

10.  This issue of costs falls to be determined on the exchange of correspondence.  Upon being invited to pay the money into court, Mr Strachan submits that his instructing solicitors were met with a refusal.  Agreement was only forthcoming at court on 23 May.  It seems to me that when one considers the terms of Robertsons’ letter of 6 May upon which Mr Strachan places reliance, it is rather harsh to characterise it merely as a refusal.  I will set out its material parts which come at the top of the page 193 in Bundle 1:

“The monies (which, we wish to clarify, are not ‘trust’ monies as you state) will remain in the designated account until such time as any further directions or Orders are given by the Court (which granted the Injunction) for the monies to be transferred into Court and/or otherwise dealt with.

We will certainly not be dealing with the monies or applying to the Court unnecessarily but we agree that we will on the hearing of the application to cease to act on our part, bring a copy of Lovells’ letter dated 5^th May 2008 and this issue i.e. as to the Injunction which remains in place over the monies in the Designated Account, to the attention of the Court.”

It strikes me that this is a perfectly sensible response by Robertsons.  The money was perfectly safe and it was going nowhere until the court otherwise directed, it having gone into the designated account pursuant to the court’s previous order on 4 February.  Having come before me on 23 May, Robertsons agreed to pay the amount into court.  To now order the Plaintiffs to pay the costs of the 1^st Defendant’s summons inviting a payment in would not be a just reflection of the parties respective conduct.  Whilst the issuing of the summons was perfectly understandable given that Robertsons appeared to be on the verge of ceasing to act their letter of 6 May should have satisfied the 1^st Plaintiff’s solicitors.  In the event, the matter was resolved by agreement on the next court appearance on 23 May.  The appropriate order for costs is one of no order for costs on the summons including the costs previously reserved under it.

11.  The other two matters which have concerned Mr Strachan relate to the filing of further evidence in the enquiry and the fixing of a date for the hearing of the assessment.  As this is of general relevance to all the parties I propose to leave this aspect to last.

The 2^nd Defendant’s Summons of 13 May

12.  This comprises two aspects.  Firstly, the application to raise the amount of the existing embargo on removal of assets from Hong Kong from $20 million to $87.5 million, which is the amount claimed on the assessment of damages by the 2^nd Defendant.  Mr Barlow, on its behalf, submits that this is perfectly justified and fits into the scheme of the orders that I made on 4 February, the whole purpose of which was to protect and compensate these wronged Defendants from the extravagance of the Plaintiffs’ conduct in bringing this derivative action against them, obtaining a substantial Mareva injunction, now said to have caused them very considerable loss, only to withdraw the action within a few weeks of its initiation.

13.  Mr Sussex replies by saying that there is simply no reason for such an order.  It would be meaningless.  The injunction is a domestic one, its reach is not world-wide.  The Plaintiffs have no assets in Hong Kong save for the just over $2 million now paid into court, and that the court should not make an order that would serve no purpose.  Equity does not act in vain he says and, although he does not specifically say so, the fact is that the Plaintiffs would almost certainly see to it that no assets of theirs would come to Hong Kong whilst there is in place the current regime of orders and the enquiry as to damages remains to be heard.

14.  Mr Barlow’s response is to say that if this is the Plaintiffs’ approach then if they are to be consistent with it, they should be applying for a reduction of the order from $20 million down to the figure currently paid into court.

15.  Whilst one has sympathy for the 2^nd Defendant’s position and the court would wish to afford it all proper interlocutory protection, I also need to approach this with a degree of realism.  It strikes me that Mr Sussex is right.  The truth of the matter is that there is nothing within this jurisdiction beyond what is now in court and it is very unlikely indeed that there ever will be.  I propose to leave matters as they are.  To order the amount to be increased would be acting in an entirely academic way.  No practical purpose would be served now nor, as best as one can predict such matters, in the future.  This part of the summons must therefore fail and will stand dismissed.

16.  The next aspect concerns the extension of the anti-trust injunction to cover Pan Stone’s Originating Summons in the High Court of Malaysia.  It seems to me that Mr Barlow’s analysis as to whether Pan Stone is in effect controlled by Mr Ooi Kee Liang is entirely correct.  Mr Goh Teng Whoo, who is on paper, the person in control of the affairs of Pan Stone is very much a subordinate of Mr Ooi.  The researches of Mr Peter So of Lovell’s, the 2^nd Defendant’s solicitors, as set out in his second affidavit [B1/168.5] clearly shows that Mr Goh is an employee, albeit a senior one, of Mr Ooi within Mr Ooi’s property development businesses Concept Intelligence Sdn Bhd and Ideal Homes.  Given the nature of that relationship, which Mr Ooi has attempted to diminish, I have no doubt that it is within Mr Ooi’s power to see to it that Pan Stone, through Mr Goh, can take steps to stay such parts of the Originating Summons as this court considers it should.  In order to make any headway on this aspect, Mr Barlow needs to have demonstrated that Mr Ooi, as the controlling mind behind the Plaintiffs, is also in that position so far as the affairs of Pan Stone are concerned, which on my finding he has.  Without that Mr Barlow would have failed in limine.

17.  I now need to consider, given the nature of the proceedings instituted by Pan Stone, whether these proceedings are of such a nature as to be caught by the terms of the anti-suit injunction of 4 February.  If they are not, or any part of them is not, then the application to extend the order to cover these proceedings must fail either entirely or in respect of such part as is outside the purview of the order of 4 February.

18.  The starting point to this is the Originating Summons itself which appears as Exhibit STMP4 of Mr So’s first affidavit sworn on 13 May [see B1/196].  The relevant parts of the pleading are at pages 198 and 199.  There are two sets of declarations that are asked for.  I take those at paragraph 2 of the prayer first because it strikes me that these cannot be said to raise the same issues or disputes as those appearing in the Statement of Claim in this action.  These declarations relate to Malaysian securities and company law, and I would have thought, raising as they do rights of representation on the Board of Directors of 6^th and 7^th defendants (the Plaintiffs in this action), are matters which fall outside the issues raised in the Statement of Claim.  Mr Barlow has not really suggested a way in which these declarations could be caught by the terms of 4 February anti-suit injunction.  I do not believe they are and accordingly, certainly as to these declarations, the application to have the anti-suit injunction extended to them must fail.  The same fate must befall the injunction asked for at paragraph 3 of the Originating Summons insofar as that is said to support any declaration that is made by the court in Malaysia in respect of those paragraph 2 declarations.

19.  As to the declarations asked for under paragraph 1, Mr Barlow refers to the fact that these declarations are the same as the declaration asked for in the Statement of Claim in this action.  This refers to the Management Agreement and when one considers the terms of paragraph 1 of the prayer to the Statement of Claim [B1/44] which seeks a declaration that the Management Agreement is “null and void and of no legal effect”, it seems to me that Mr Barlow must be right in submitting that this part of the prayer of the Originating Summons in Malaysia covers the same issue as that raised in this action.  The Originating Summons seeks to achieve the same result as the Statement of Claim in this court had before the action was discontinued.  This being so I am of the view that an order should go in terms of paragraph 2 of the 2^nd Defendant’s summons [B1/122] which will have the effect of requiring Pan Stone to stay paragraph 1 of the prayer to the Originating Summons and paragraph 3 insofar as any injunction that might have gone to give effect to a declaration under paragraph 1.  This therefore concludes what I need to say about the 2^nd Defendant’s summons of 13 May.  As to the costs of this summons, I take of view that broadly speaking honours have been shared and accordingly I propose to make an order nisi that there should be no order as to costs on this summons.

The 2^nd Defendant’s Summons of 24 July [B1/135.57-59]

20.  By this summons, the 2^nd Defendant seeks to strike out any reference to the Management Agreement by the Plaintiffs in their defence to the 2^nd Defendant’s Particulars of Claim of Loss.  I have already referred to the basis of the application.  Mr Barlow says that this is an attempt to re-litigate the effect of the Management Agreement after the action has been discontinued.  The Plaintiffs’ pleading is at B1/135.30-135.38.  It is very clear from paragraphs 6(2)(3) and 13(2)(3) that if allowed to the Plaintiffs intend to attack the validity of this Agreement and further refer to it on the basis that the obtaining of the injunction was not causative of any loss or damage as the 2^nd Defendant may be able to prove.

21.  Mr Sussex analyses the matter in this way.  He says that just because the action has been discontinued the Management Agreement has not gone away.  The court in assessing damages retains a discretion as to what damages the Plaintiffs ought to pay.  In this regard, causation of losses claimed by the 2^nd Defendant (and indeed the 1^st Defendant as well) is up for dispute.  If the Management Agreement is shown to be invalid and should therefore go then any losses that are said to flow from that Agreement cannot be recoverable. 

22.  It seems to me that such an argument must at least be fairly arguable, in which circumstances those parts of the Plaintiffs’ defence ought to be allowed to stand and contested over at the hearing of the assessment.  The assessment must inevitably take in all aspects of the grant of the Plaintiffs’ injunction which are said to have caused the Defendants’ losses.  The Defendants rely on the Management Agreement in their Particulars of Claim of Loss and it must be at least fairly arguable that the Plaintiffs should be able to submit that this Agreement is invalid and therefore cannot be relied on as having been a source of the Defendants’ losses.  Accordingly, I propose to dismiss this summons with an order nisi that the costs of the summons should be to the Plaintiffs in any event.  The way that Mr Sussex has put the matter on behalf of the Plaintiffs must therefore be left to the hearing of the assessment itself, as the 1^st Defendant has I think correctly accepted by at this stage only challenging the Plaintiffs’ contentions in its pleadings and therefore reserving the position for argument to the hearing of the assessment.  This is all I need to say on this summons.

Directions and Setting Down

23.  The Defendants are anxious to have the assessment set down for hearing now.  Estimates for the length of the hearing range from five to seven days.  Whichever of these estimates is taken will mean that a fixture will not be obtained much before January next year leaving sufficient time for any outstanding interlocutory matters to be argued over and dealt with in time.  Mr Sussex for the Plaintiffs complains that his clients should not be bounced into court before they are ready.  This is a very substantial claim that is being made against them and it should not be dealt with summarily.  I agree with those sentiments, nevertheless Mr Strachan, who has dealt with this aspect, is also right.  I will direct that the hearing of the assessment should now be set down for hearing with a 7-day estimate.  There are three parties and the canvassed issues are likely to take some time to work through.  The listing should be in consultation with counsel’s dairies.  Such witnesses as the parties intend the call will make themselves available for cross-examination at the option of any of the opposing parties.  Affidavits and, witness statements if any, will stand as part of the witnesses’ evidence in chief unless otherwise ordered at the hearing.  I have already provided for pleadings and discovery.  I will leave it to the parties themselves to draw up any further pre-hearing directions.  Failing agreement, the disputed directions will need to be listed before me for decision.  I do not think it is necessary to list a formal Check List Review hearing but I direct a Pre-trial Review before me 56 days before the start of the hearing.  Any outstanding directions which the parties are able to agree should be sent to me for approval within 21 days of this Ruling.  The costs of this part of the hearing will be costs in the assessment.  This will be an order nisi.

24.  Hopefully, this Ruling has dealt with the contentious matters and that the parties can now devote their energies to getting the matter listed and disposed of.  There should not be much to argue about that I can see in terms of outstanding directions.  I am grateful to counsel for their assistance so far.  Where I have made orders for costs all these orders will come with a certificate for two counsel.