XCHRX CHAN CHUNG WA t/a WAH SING INDUSTRIAL CO. v. NG SIU KAM AND OTHERS t/a KA SHING PCB CO.

HCA 11184/1996

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL ACTION NO. 11184 OF 1996

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R U L I N G

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1. I have before me an application for a Mareva Injunction and also a Prohibition Order. I have advised counsel for the Applicants, Mr James Li of Messrs James W L Li & Co. that I am prepared to grant the Prohibition Order but I have difficulties with the application for the Mareva Injunction and I will, in respect of that injunction, adjourn the matter sine die giving leave to the Applicant to restore the matter.

2. A brief history explains the position:

(a) I am told that the Applicant, a trading company, obtain default judgment against the three Defendants in or about the late 1996. It did so for a trading debt of $632,390.00 plus interest and costs. The interest and costs by now will have increased the amount due to somewhere close to a million dollars.

(b) A charging order was obtained against one of the Defendants' properties. However, the property was already heavily mortgaged to a Hong Kong bank, leaving little, if anything, by way of free equity should the property be sold.

(c) In the result, the Applicant has been unable to obtain satisfaction for its judgment debt. Recently, however, it discovered that the three Defendants are apparently running a successful business on the Mainland which deals in money exchange and audio electric equipment. The Defendants have apparently attempted to avoid Hong Kong creditors by calling their Mainland business by a name which does not reveal their ownership.

(d) I am told that the Defendants, however, still reside in Hong Kong and journey back and forth. Their residential addresses are unknown.

(e) I am also told that the Applicant has no knowledge of any assets that the Defendants - either individually or jointly - may have in Hong Kong. But it is presumed that there must be something here, probably in some bank account.

3. Mr Li, for the Applicant, has said that he wishes to obtain a Mareva Injunction against the three Defendants so that copies of that injunction may be sent to various Hong Kong banks - he lists them as being somewhere in the region of 200 to 300 - and that this will invariably "flush out" any necessary information concerning accounts held by the Defendants. Put simply, if the bank does not hold an account, it will reply to that effect. If, however, a bank which receives a copy of the injunction does hold an account it will then be obliged to confirm that fact and to divulge the amounts of money held. As I understand it, he seeks to use the injunction as some sort of search engine.

4. I am happy to grant a Prohibition Order because, in terms of section 21B of the High Court Ordinance, this Court has jurisdiction to make an order prohibiting a person from leaving Hong Kong in order to facilitate the enforcement of a judgment for a specified sum of money. We have a judgment and it is for a specified sum. I am also satisfied that, in terms of Section 21B(3), the persons against whom the Prohibition Order is sought incurred the liabilities when they were in Hong Kong. They were at the time carrying on business in Hong Kong and were residents here. There is also evidence that they leave Hong Kong regularly and it may be inferred that, if they are in Hong Kong now, they will be leaving again in order to look after their business affairs on the Mainland.

5. However, in respect of the Mareva Injunction, it has always been my understanding - which is open to correction - that it is essentially an interlocutory injunction in the sense that it is issued in order to restrain a Defendant from dissipating assets, either before or after judgment, for the purpose of defeating a judgment. Unless assets are identified and are in danger of dissipation, there is no need for a mareva.

6. In my judgment, it would be wrong to extend the use to which a mareva may be used so that it effectively becomes a means of 'sniffing out' assets.

7. In addition, I am concerned - even if I am wrong on that first matter - that before a mareva can be issued, it is necessary to show that a Defendant does have assets within the jurisdiction. This means that there must be some evidence that there are assets available to be 'frozen'. In the present case, Mr Li accepts that there is no evidence to show the assets are held here. It may be that the debtors are keeping all their assets on the Mainland or off-shore. There being no identifiable assets in Hong Kong. I do not see that it is proper in such circumstances for me to order the issue of a mareva.

8. In case I am wrong in my understanding of the law, I have given leave for Mr Li to return to this Court in respect of his application for the Mareva Injuction. The Application in that regard therefore is adjourned sine die with liberty to restore.