XCHRX CANDY E. FONG FONG v. TSUI CHE YIU

1998 No. A16855

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 16855 OF 1998

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J U D G M E N T

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1. This is an application by the Defendant to discharge a Mareva injunction.

2. The Plaintiff is a practising barrister. The Defendant was her former boyfriend. They had been living for a number of years at 7A, 26-28 College Road, Serene Court, Kowloon, Hong Kong ("Flat 7A"). Flat 7A was a property solely owned by the Defendant which was sold in August 1998 with a completion date of 5th October 1998. His solicitors in respect of such sale were Messrs. Wong and Poon.

3. The Plaintiff's claim against the Defendant by the Writ of Summons and Statement of Claim issued on 5th October 1998 is a claim in respect of two dishonoured cheques totalling $2,470,000.00. On the basis that there was a risk of dissipation of assets as set out in her affirmation in support of 5th October 1998, the Plaintiff applied in person ex-parte before Seagroatt J. on 6th October 1998 for a Mareva injunction in respect of the proceeds of sale and obtained such an order against the Defendant and Messrs. Wong, Poon & Co. ("the first order")

4. On 8th October 1998, she applied again before Seagroatt J. on an ex-parte basis. The Statement of Claim was amended to include an additional claim on an oral agreement by the Defendant to pay her compensation in respect of assaults allegedly committed by the Defendant on her. There was an additional claim for:

(1) $32,000.00 being rental payment for two years totalling $768,000.00 in respect of the Regalia flat to which the Plaintiff and Defendant moved;

(2) $800,000.00 for repayment of loan to Vickers Ballas; and

(3) $1,000,000.00 to be paid to the Plaintiff

The Plaintiff went back before Seagroatt J. ex-parte on 8th October 1998. Relying on her second affirmation and the amended Statement of Claim, she obtained a Mareva injunction on that date restraining the Defendant from removing $4,000.000.00 in the name of the Defendant at the Liu Chong Hing Bank. ("the second order")

5. The Plaintiff has told me that the second order was applied for to replace the first order. She has no problem in the discharge of the first order and concedes that the first order should be discharged. She, however, opposes the discharge of the second order.

6. The Defendant complains that there has been material non-disclosure and misrepresentation in the obtaining of the first and second orders. The Defendant also complains that there has been a disregard by the Plaintiff of the Practice Direction in respect of Mareva injunctions.

7. It must be remembered that a Mareva injunction is an exceptional order devised for use in rare and extreme cases. This was emphasised by the Court of Appeal in Ng Chung Fai, Stephen v. Tamco Electrical and Electronics (Hong Kong) Ltd. (formerly t/a Newey & Eyre (HK) Ltd.) [1993] 1 HKC 160 where many of the important principles were restated.

8. A matter of fundamental importance is the rule requiring full and frank disclosure of all material facts. In Bank Mellat v. Nikpour [1985] FSR 87, Donaldson J. (as he then was) said at 92:

"The rule requiring full disclosure seems to me to be one of the most fundamental importance, particularly in the context of the draconian remedy of the Mareva injunction. It is in effect, together with the Anton Piller order, one of the laws two "nuclear" weapons. If access to such a weapon is obtained without the fullest and frankest disclosure, I have no doubt at all that it should be revoked."

9. The applicant must make full disclosure to the court of all matters within his knowledge. If he fails to do so, even where that failure was an error of judgment only and not deliberate, the order must be discharged without investigating its merits. Thermax Limited v. Schott Industrial Glass Limited [1981] FSR 289.

10. The court must be informed of all facts that are relevant to the weighing operation which the court has to make in deciding whether or not to grant the order (per Browne-Wilkinson J. (as he then was) in Thermax Limited v. Schott Industrial Glass Limited [1981] FSR 289 at 298; and Wardle Fabrics Ltd. v. G. Mystristis Ltd. [1984] FSR 263).

11. The material facts are those which it is material for the judge to know in dealing with the application as made. Materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers (per Ralph Gibson L.J. in Brink's Mat Ltd. v. Elcombe [1988] 1WLR 1350 at 1356).

Non-disclosure

12. The evidence before me shows that Vickers Ballas Hong Kong Ltd. had in fact brought proceedings against the Plaintiff on 30th October 1997 for $987,811.96 plus interest and judgment had already been obtained against her in 1997. Further, First Yuanta Finance Ltd. had also brought proceedings against the Plaintiff for $606,329.36 plus interest. There is, however, a dispute whether judgment has already been obtained against the Plaintiff on this claim.

13. These actions and the judgment by Vickers Ballas Hong Kong Ltd. were not disclosed to the judge hearing the ex-parte applications. In my view, this was an important matter. The judge may well have considered whether or not to order fortification of her undertaking in damages. Although neither the first order nor the second order expressly incorporates the Plaintiff's undertaking in damages, she did give an undertaking in damages in her first affirmation and her undertaking in damages is, in my view, implied in the first and second orders. As I have said, the judge may well have considered whether or not to order fortification of her undertaking in damages. The non-disclosure by her of the two actions and the judgment by Vickers Ballas Hong Kong Ltd. are serious enough, in my view, to warrant a discharge of the Mareva injunction.

14. There are a number of other matters on the question of non-disclosure. The evidence before me shows that it is the Defendant's case that over the years from 1995 to 1998, there have been mutual transfer of funds between the Plaintiff and the Defendant. The Plaintiff's evidence shows that a total of $9,630,546.00 was paid by the Plaintiff to the Defendant over the years and a total of $7,113,966.40 was paid by the Defendant to her. The Defendant says in addition to that sum a total of $1,575,996.40 was also paid by him as gifts and expenses and a total of $3,970,000.00 was paid to the Plaintiff's mother on the Plaintiff's behalf. The Defendant says that this was paid either directly to the Plaintiff's mother or through Sanlite Development Ltd. This was a company in which the Defendant is the major shareholder and the Plaintiff's mother was an authorised signatory in the bank account of the company. The Defendant's case is that he has made an overpayment to her over the years and will be counterclaiming against her.

15. The Defendant has a good arguable defence on the evidence. The matter, of course, cannot be determined on affidavit evidence alone. But it is clear that the case presented to the ex-parte judge on 6th October 1998 was that the Plaintiff had transferred money to the Defendant to hold in trust for her. This is contained in para. 2 of her first affirmation. This was, on that evidence, a one-sided transfer of money by the Plaintiff to the Defendant during 1997 and 1998. Even on the Plaintiff's own case on the evidence before me, the Defendant had transferred at least $7,113,966.40 over the years to the Plaintiff. There was a failure to disclose the fact that the transfer of money was not just one-sided from the Plaintiff to the Defendant but in fact mutual transfers of money between the Plaintiff and the Defendant over the years. The case as presented to the ex-parte judge was, in my view, misleading. This was another serious error on the part of the Plaintiff justifying a discharge of the orders.

16. Another matter relates to para. 8 of her first affirmation where she says that the Defendant sold his last and remaining property in August. Had the Plaintiff made sufficient and proper enquiries before launching her application, she would have discovered that 7C, 26-28 College Road, Serene Court, Kowloon, Hong Kong ("Flat 7C") was another property which was owned by the Defendant as tenant-in-common with his mother and brothers and which was not sold. Flat 7C is the address given by the Plaintiff in the Writ of Summons as being the address of the Defendant. Flat 7C was also the flat where the Defendant's mother used to live when both the Plaintiff and Defendant lived at Flat 7A. The Plaintiff should have made proper enquiries as regards Flat 7C before making the bold assertion that the Defendant had sold his last remaining property.

Service of the orders

17. According to the affirmation of service of Chan Tin Chi, the Writ of Summons and the first and second orders together with the affirmations of the Plaintiff were served on the Defendant through his solicitors only on 18th November 1998. The Defendant's solicitors had been complaining before that time about the non-service of the orders. By a letter dated 16th October 1998, the Defendant's solicitors asked the Plaintiff for all relevant documents as service had been not effected.

18. The Plaintiff says that she was unable to contact the Defendant. However, there is no evidence before me that any attempt was made to serve the documents on the Defendant at Flat 7C, the very address of the Defendant that she gave in the Writ of Summons. The Defendant says that he was and is living there although this is disputed by David Lok. Notwithstanding the solicitor's letter of 16th October 1998, service was still not effected and this resulted in another letter from the solicitors on 10th November 1998. Finally, on 18th November 1998 service was effected.

19. It cannot be right that service on the Defendant of an extreme order as a Mareva injunction can be delayed until the Plaintiff is pressed by the Defendant or his solicitors to serve the same. There is no evidence of attempts made by the Plaintiff to serve the documents on the Defendant either at Flat 7C or elsewhere. I observe that on the evidence the Plaintiff was able to effect a settlement with the Defendant over part of her claim through a friend, David Lok, after the second order was obtained and also received the amounts of $96,000.00 and $40,000.00 from the Defendant through David Lok on 13th October 1998. Yet she failed to serve the orders and other relevant documents on him until 18th November 1998. I find this disturbing.

The Practice Direction

20. The Plaintiff failed to comply with the Practice Direction in respect of Mareva injunctions dated 27th January 1998 which was effective as from 1st March 1998 when applying for the first and second orders. A lay person may be excused for not following a Practice Direction but the Plaintiff is not an ordinary lay person. She is a practising barrister and should have known better. She, however, says that she is not well-versed in these matters.

21. The said Practice Direction makes it plain that a Mareva injunction should, in the absence of good reasons, follow the standard form of order. Also, where the order sought deviates in a material respect from the standard form, this should be drawn to the attention of the judge hearing the application.

22. The Practice Direction was not complied with in this case when the application was made for the first and second orders. The first order did not have a ceiling imposed on the amount frozen. There are no undertakings incorporated in the first and second orders as set out in the standard form. Although the undertaking as to damages is implied in any event in the first and second orders, there is no undertaking as to service of the Writ and the orders. There is no return date specified in the orders. This is important as the absence of a return date unnecessarily puts the burden on the Defendant to apply to discharge the orders instead of the Plaintiff being required to justify the continuation of the orders on the return date. Although the first order was made "until further order of this court", the second order did not even contain these words. Surprisingly, the ex-parte judge made the first and second orders in the form asked for.

23. There was also non-compliance with the Practice Direction in other respects. Although there was a non-compliance with the Practice Direction on the part of the Plaintiff, I do not discharge the first and second orders on this ground as the Plaintiff was acting in person and she says she is not well-versed in these matters.

24. I am satisfied, however, that the first and second orders should be discharged on the ground of material non-disclosure. I exercise my discretion by discharging the first and second orders and refuse to continue the second order. The court's power to discharge where the duty of full and frank disclosure has not been observed is salutary and necessary for the court's protection. The Plaintiff should, in my view, be deprived of the advantage she has gained by the obtaining of the orders. The first and second orders are discharged.

25. The costs of the application should be borne by the Plaintiff and to be paid to the Defendant. Such costs to be taxed and paid forthwith.