XCHRX ASIA-PAC INFRASTRUCTURE DEVELOPMENT LTD. v. ING YIM LEUNG, ALEXANDER AND OTHERS

HCA 16778/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 16778 OF 1999

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J U D G M E N T

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BACKGROUND:

1. The plaintiff obtained Mareva Injunction Order against all the defendants on 24 October 1999, which was then continued by consent as against the 1st and 2nd defendants until trial or further order, subject to some minor variations, and with liberty to the 1st and 2nd defendants to apply generally. The plaintiff's application to continue the order against the 7th defendant and the 7th defendant's application to discharge that order were heard together before me. I delivered judgment on 15 March 2000 allowing the plaintiff's application to continue the Mareva injunction order and dismissing the 7th defendant's application to discharge that order with costs reserved.

2. Subsequently, the plaintiff's solicitors filed two summonses making various applications for hearing on 29 March 2000. The hearing of these applications were adjourned for argument.

COSTS PREVIOUSLY RESERVED:

Background:

3. The plaintiff now seeks a review of my order reserving costs in relation to the application to continue or to discharge the Mareva injunction order against the 7th defendant. So long as the costs order has not been perfected, I consider I do have jurisdiction to review my order reserving costs to be determined at a later stage and to determine it forthwith, without relying on Order 20 rule 11.

4. Mr Bleach SC sought to persuade me not only to order costs against the 7th defendant, but also against the 1st and 2nd defendants who were not a party to the two applications, and to order costs on an indemnity basis and to be paid forthwith.

Whether costs to follow event:

5. The general rule in relation to costs is that costs shall follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs: Order 62, rule 3(2). When I ordered costs to be reserved, I did not have the benefit of counsel's argument and thought it convenient and fair that the question of costs be determined at the conclusion of the proceedings after the merits have been fully investigated into. I am now convinced that I should have ordered otherwise.

6. In Kickers International SA v. Paul Kettle Agencies Limited and Another, [1990] SFR 436, the plaintiff sought interlocutory injunction against the defendants. After being served with the defendants' evidence, the plaintiff offered not to proceed with the motion for interlocutory relief and to submit to an order that the defendants' costs be costs in the cause. Hoffman J held at page 438:

"An order for a party's costs to be "in the cause" is made because the court has not investigated the merits and considers that it would not be fair for him to recover those costs unless he succeeded at the trial. But the fact that the merits have not been investigated, or not fully investigated, does not necessarily mean that the court cannot dispose finally of interlocutory costs. The question cannot be settled simply by reference to practice: it must be answered on the facts of the individual case. Would it be unfair in this case for the defendants to have the costs of the motion even if they lost at trial? On balance I do not think that it would. Although I cannot decide the merits, I can form a view on whether the plaintiff, on the material it has produced and what it must have known about the defendants, was justified in launching the motion. I do not think it was. Therefore whatever the outcome of the trial, the motion which has now been abandoned has put the defendants to a great deal of unnecessary expense.

One solution sometimes adopted is to reserve the costs of the motion to the trial judge. There is a superficial attraction about this course because the trial judge will have all the facts and be in the best position to decide whether a party should have interlocutory costs despite the fact that he has lost at the trial... But in practice it has serious disadvantages. One is the difficulty of reconstructing for the trial judge how things looked at the time of the interlocutory application, particularly when it involved questions of balance of convenience which were irrelevant at the trial. But the more important reason is that very often there is no trial. In such a case, an order that costs be in the cause or reserved to the trial judge is in practice a decision that there should be no order as to costs. Not many defendants, even with the encouragement of success at the interlocutory stage, are willing to insist on a trial for the purpose of recovering their interlocutory costs. ... Furthermore, the existence of an order for substantial costs contingent upon the outcome of the trial, or reserved to the trial judge, may push the parties into a trial of an action which would otherwise have settled.

Thus it seems to me that in making a costs order at the interlocutory stage, there are two risks of injustice which have to be balanced against each other. On the one hand, a final order might award a party costs which, upon fuller consideration at the trial, he would not have been given. On the other hand, failure to make a final order might have the practical effect of depriving a party of some or all of the costs which he should in fairness have recovered. I think it is possible that in the past the courts may have been more impressed by the first risk than by the second."

Hoffman J then ordered the plaintiff to pay the defendants' costs in any event.

7. Mr Chain argued that Kickers international S A v. Paul Kettle Agencies Limited is distinguishable from the present case. In that case the plaintiff launched the motion and then abandoned it. The possibility of no trial may operate unfairly against the successful defendant. In the present case the plaintiff was successful at the interlocutory stage. It is up to the plaintiff to decide whether to proceed to trial. Hence the no trial consideration is inapplicable. That, however, is just one of the factors to be considered in the exercise of my discretion.

8. Next, Mr Chain submitted with some force that the plaintiff was seeking a favour to interfere with the defendant's liberty even before it has established its right, and therefore the plaintiff should not have its costs until it has shown it is right in the end. He further submitted that the usual order for interlocutory costs is cost in the cause and that for Mareva injunction, it is all the more appropriate that such order be made as the test here is based on risk of dissipation of asset and balance of convenience.

9. I agree with the reasoning of Hoffman J. Whether it is the defendant seeking costs upon the plaintiff's abandoning or losing the interlocutory proceeding or that it is the successful plaintiff seeking cost in the interlocutory proceeding, the considerations are similar. To determine the question of costs, one should start with Order 62, rule 3(2) which provides that costs shall follow the event, except when it appears to the Court that in the circumstances of the case some other order should be made as to the whole or any part of the costs. Thus in the context of interlocutory costs, the general rule should be that costs follow event, unless in all the circumstances it would be unfair for the successful party to have the costs even if he lost at the trial. The burden of proof is on the unsuccessful defendant, if he wishes to avoid the usual consequence of costs.

10. While the trial judge may be in the best position to decide whether it was fair for a party to have interlocutory costs, he would have to place himself in my position and reconstruct how things looked at the time of the interlocutory application. Thus unless I cannot form any view on the evidence now before me, whether it would be unfair for the plaintiff to have the costs even if he lost at the trial, then the question of costs should not be reserved.

11. Mr Chain submitted that my finding on credibility is only provisional in an interlocutory proceeding and that I did not have the benefit of seeing the witnesses under cross examination. My finding on credibility as with any other of my findings of facts are provisional. However, in considering the applications, I have read the affirmations of the plaintiff's witness and the 1st and 2nd defendants and Mr Yao who are directors of the 7th defendant. I have read no less than ten box files of documents produced by the parties. I have formed an adverse view of the credibility of the 1st and 2nd defendants and Mr Yao based on documents prepared or written by themselves. In particular, I have formed the following view:

(1) The 1st and 2nd defendants and Mr Yao of the 7th defendant are not to be believed; the 1st and 2nd defendants are not mere paper directors of the 7th defendant as alleged and through Mr Yao, the 7th defendant has not been honest with its affirmation;

(2) The 1st and 2nd defendants were in breach of their fiduciary duty owed to the plaintiff;

(3) The 1st and 2nd defendants are the controlling mind of the 7th defendant; and

(4) The 7th defendant has knowledge of the 1st and 2nd defendant's breach of fiduciary duty and knowingly assisted in their breach.

It was based on these views and for the reasons as stated in my judgment, which I shall not repeat in here, that I continued the injunction order against the 7th defendant.

12. I should add that the 1st and 2nd defendants are the controlling mind of the 7th defendant, their knowledge of the circumstances is imputed to the 7th defendant. With that knowledge in mind, had the 7th defendant reasonably considered the matter, it ought to know that it had no chance of success and ought not have resisted the application. Furthermore, the terms of the injunction, so far as they affect the 7th defendant, are not unreasonable or unduly restrictive.

13. For all these reasons, I think I can form a fair view that it was unreasonable for the 7th defendant to resist the application. In the circumstances, it would not be unfair for the plaintiff to have the interlocutory costs, even if they were to lose at the trial.

Indemnity costs:

14. Next, Mr Bleach SC, asked for costs on an indemnity basis. In his affirmation filed in support of the 7th defendant's case, Mr Yao, another director of the 7th defendant, sought to dissociate the 7th defendant from the 1st and 2nd defendants by saying that he and the Chinese party are in control of the 7th defendant. An important aspect of the 7th defendant's case is that the 1st and 2nd defendants are merely paper directors of the 7th defendant. This is obviously untrue for reasons as stated in my earlier judgment. Mr Bleach SC submitted that Mr Yao could not have been honestly mistaken about the involvement of the 1st and 2nd defendants. Yet he put forward a positive case that the 1st and 2nd defendants were just paper directors, in an attempt to deliberately mislead the court. The 7th defendant failed not because it honestly presented a bad case. This is the case where the defendant in bad faith and with intent to mislead the Court, presented an apparently good but concocted case which collapsed in the light of other compelling evidence. The contention of facts in the 7th defendant's affirmations are absurd and made it necessary for the plaintiff to incur tremendous amount of costs and expenses in rebutting them. The conduct of the 7th defendant is nothing short of dishonesty, bad faith, disgraceful and outrageous conduct. In the circumstances, to show the court's disapproval, costs should be ordered to be taxed on an indemnity basis with certificate for two counsel.

15. In coming to the above conclusion, I have rejected Mr Chain's submission that I had not made any finding of disgraceful or outrageous conduct in my earlier judgment. For the purpose of that judgement, I do not need to. The breach of fiduciary duty by the 1st and 2nd defendants and the way they perpetrated their dishonest design through the 7th defendant must be outrageous. In that setting, the 7th defendant filed affirmations containing false allegations to resist the plaintiff's application. To conduct the proceedings in this manner is disgraceful.

Whether the costs are to be paid forthwith:

16. Costs are usually taxed and paid after the conclusion of the trial. The obvious reasons are that the costs in interlocutory proceedings are too small to make taxation worthwhile. In addition, there is also the possibility of set off in other interlocutory proceedings. Other considerations are whether it is unfair to keep the successful party out of pocket for his costs, especially if he is not a person of means and the costs are substantial and also the possibility that there may be no trial for one reason or another. Of course, where a litigant has conducted his case in bad faith and dishonestly, the court should show disapproval by ordering costs to be paid forthwith.

17. In the present case, the hearing took four days and no less than 12 box files of documents were involved. Costs must be substantial and should be taxed and paid at once. As the 7th defendant has conducted the proceedings in bad faith and dishonestly, it is appropriate that the Court should show its disapproval by ordering immediate taxation and by doing so to discourage repetition of such conduct. Furthermore, as its directors who are in the driving seat of the 7th defendant have acted dishonestly and in breach of fiduciary duty, there is every risk that the plaintiff may be deprived of its costs if not ordered to be paid forthwith.

18. For all these reasons, I order that the plaintiff shall have costs against the 7th defendant on an indemnity basis and to be paid forthwith.

Cost against the 1st and 2nd defendant:

19. Mr Bleach SC further asked that the costs should be borne not just by the 7th defendant but by the 1st and 2nd defendants jointly with the 7th defendant. His grounds are as follows. The cause of action against the 7th defendant is essentially one jointly against the 1st, 2nd and 7th defendants. The 7th defendant is the corporate vehicle through which the 1st and 2nd defendant conducted business in breach of their fiduciary duty owed to the plaintiff. The 1st and 2nd defendants made lengthy affirmations on behalf of all relevant defendants, including the 7th defendant in support of their opposition to the plaintiff's application to continue the Mareva injunction. These affirmations contained false allegations and untrue statements and were made dishonestly and in bad faith. The 1st and 2nd defendants were and are in the driving seat of the 7th defendant which could not have resisted the proceedings without the consent, assistance and direction of the 1st and 2nd defendants.

20. On the other hand, Mr Chong for the 1st and 2nd defendants, submitted that before the hearing, the plaintiff and the 1st and 2nd defendants reached an agreement to dispose of their respective applications, including the question of costs. Their agreement has been made the subject matter of a consent order which has been sealed. He submitted that the terms of that consent order including the terms as to costs are binding and constituted an estoppel by record. He also advanced argument based on res judicata.

21. I do not consider Mr Chong's submission relevant. The issue of costs agreed under the terms of the Consent Order relates to the costs as between the 1st and 2nd defendant on the one part and the plaintiff on the other part, regarding the continuation of the Mareva injunction against the 1st and 2nd defendants. The present issue is whether, in relation to the application to continue or to discharge the Mareva injunction against the 7th defendant, the 1st and 2nd defendants should bear the plaintiff's costs, because of the false allegations contained in their affirmations filed and used for the purpose of disposing of those applications and because they as the controlling mind of the 7th defendant were parties to the decision to resist the plaintiff's application to continue the Mareva injunction order and to pursue the 7th defendant's application to discharge that order.

22. Section 52A of the High Court Ordinance provides:

(1) Subject to the provisions of rules of court, the costs of and incidental to all proceedings in the Court of Appeal in its civil jurisdiction and in the Court of First Instance, including the administration of estates and trusts, shall be in the discretion of Court, and the Court shall have full power to determine by whom and to what extent the costs are to be paid;

(2) Subject to specific provision made in this or any other Ordinance (other than subsidiary legislation) nothing in subsection (1) shall authorize an award of costs against a person who is not a party to the relevant proceedings.

Thus while the Court has wide discretion and full power to determine by whom and to what extent the costs are to be paid, this power may not be exercised against a person who is not a party to the relevant proceedings.

23. Mr Chong submitted that the 1st and 2nd defendants were not parties to the application as between the plaintiff and the 7th defendant. Mr Bleach SC disagreed. He submitted that they were parties to the inter partes summons dated 26 October 1999 and they did not cease to be parties to the relevant proceedings merely because their dispute had been disposed of. I do not think it right to treat all persons named in a summons as parties to any of the matters for determination. The word "parties" must be limited to the parties who are interested in the subject matter for determination, which is the relevant proceedings. As between the 1st and 2nd defendant and the plaintiff, the matter for determination has been disposed of by consent. The outstanding matter, or the relevant proceeding, is one as between the plaintiff and the 7th defendant. I do not think the 1st and 2nd defendants are parties to the relevant proceedings, i.e. the dispute between the plaintiff and the 7th defendant. They were neither present nor represented at the hearing.

24. The next question is whether being non parties, the 1st and 2nd defendants are personally liable for costs as directors of the 7th defendant and/or as makers of affirmations relied on by the 7th defendant which contained false allegations which were made deliberately and dishonestly. On that logic, such liability should equally be extended to Mr Yao as well. I am not aware of any provision under the High Court Ordinance, the Companies Ordinance or any other Ordinance which empowers me to order costs against a director of a party to the relevant proceedings or against a maker of an affirmation containing false allegations. In the circumstances, I do not think it is open to me to order the 1st and 2nd defendants to pay the plaintiff's costs.

25. As there is no legal basis for the plaintiff's application for costs against the 1st and 2nd defendants, the application must be dismissed with costs.

7TH DEFENDANT'S APPLICATION TO STRIKE OUT PLAINTIFF'S STATEMENT OF CLAIM:

26. This application had been adjourned on 11 February 2000 with liberty to restore when the 7th defendant's application to discharge the Mareva injunction order was heard. As I have refused to discharge the Mareva injunction order against the 7th defendant, the plaintiff now seeks to restore the 7th defendant's application to strike out for the purpose of formally dismissing that application.

27. The 7th defendant's grounds for striking out the plaintiff's Statement of Claim are:

(1) that it discloses no reasonable cause of action, it is frivolous and vexatious and is an abuse of the process of the Court;

(2) that the plaintiff has not pleaded any viable case against the 7th defendant;

(3) that the Statement of Claim does not show a good arguable case for the purpose of Mareva relief; and

(4) that the Statement of Claim lacked particularity.

28. In my judgment of 15 March 2000, I have found that the 1st and 2nd defendants were in breach of their fiduciary duty owed to the plaintiff in diverting business opportunities to others, including the 7th defendant. I have also found that as the 1st and 2nd defendants were and are the controlling mind of the 7th defendant, the 7th defendant was fixed with knowledge of the 1st and 2nd defendant's breach of fiduciary duty and had knowingly assisted in that breach. As the 1st and 2nd defendants are the controlling mind of the 7th defendant, there is a real risk of dissipation of assets.

29. Mr Chain rightly conceded that in view of my judgment, he cannot succeed with his application to strike out. He submitted that as the 7th defendant is appealing against that judgment, the summons should be stood over pending the outcome of the appeal rather than to have it disposed of today. He also undertook to file a defence so as to remove any prejudice the delay may cause.

30. In view of my judgment of 15 March 2000, the 7th defendant's application to strike out has no merit. If I am right in continuing the Mareva injunction, the 7th defendant's application must be dismissed; and for expediency, the earlier the better. If I were wrong, it does not automatically mean the 7th defendant's application to strike out must succeed. The result then will be, it will have to be heard afresh anyway. I believe, my decision will be appealed against, whatever the outcome. There is nothing to be achieved by leaving the striking out application hanging over the plaintiff. To do so would only cause inordinate delay. Now that I have considered all the affirmations and read all these box files of documents, I am in the position to decide on the merits of the application. There is no reason why I should shy away and defer making a decision. And if I should also be wrong about this decision, it is in the best interest of all parties that it should be reviewed together with my other decision during the impending appeal.

31. Accordingly, I dismiss the 7th defendant's application to strike out the plaintiff's Statement of Claim with costs and with certificate for one counsel, in view of the complexity originally envisaged. As the application was essentially based on a pleading point, I consider the 7th defendant's disgraceful and outrageous conduct in resisting the application to continue the Mareva injunction irrelevant for the purpose of considering the costs of this application. In respect of this application, I do not think the 7th defendant should be penalised with indemnity costs.

LEAVE FOR PLAINTIFF TO BE RELEASED OF UNDERTAKING NOT TO DISCLOSE CERTAIN DOCUMENTS OR INFORMATION OBTAINED AS A RESULT OF THE EXECUTION OF ANTON PILLER ORDER:

32. This application relates to certain documents belonging to the 2nd and 8th defendants seized by the plaintiff during the execution of the Anton Piller Order. The plaintiff wishes to release the documents or information to its director, Mr Ho, and an associated company for their use in defending an action against them by Nissho Iwai Hong Kong Corporation Limited (hereinafter called "Nissho Iwai"). According to the plaintiff, Nissho Iwai was the plaintiff's exclusive financier, but it financed the business opportunities diverted from the plaintiff by and to the 1st and 2nd defendants.

33. The plaintiff's application was originally listed for hearing on 29 March 2000. At that stage, the plaintiff's application covered all documents and information seized. The defendant's objected. The hearing was adjourned to today. The plaintiff's solicitor then identified in a schedule the documents and information in respect of which the plaintiff wished to be released from its undertaking. This afternoon, Mr Chong confirmed that the defendants do not wish to object to the application anymore.

34. Both parties asked for costs. Mr Bleach SC submitted that as the documents belonged to the 8th defendant, there was no reason why the 1st and 2nd defendants should resist the application. No affirmation had been filed and no reason had been advanced in opposing the application. Mr Bleach SC asked for indemnity costs and to be taxed forthwith.

35. Mr Chong said that the documents belonged either to the 2nd or 8th defendants and the plaintiff is seeking to use his clients' documents in some other proceedings. He submitted the defendants were not obliged to consent to the application and as the plaintiff was seeking indulgence to be released from its undertaking, the plaintiff should pay costs or at least the costs up to 29 March 2000 when the application was adjourned.

36. As the plaintiff had given an undertaking to the Court, it has to apply for leave to be released from the undertaking before Mr Ho and its associated company may use the documents or information. Normally the application will be made first to the other party with a view to have it disposed of by consent. Only after refusal will the application be contested in court. However, that has not been attempted. But that does not mean the defendants must object. Up to now, no reason has been advanced for opposing the application. I assume there was none. I do not think the defendants should come to court doing nothing but to ask for cost. I strongly disapprove of such conduct, which unnecessarily escalated the cost of litigation. If they would consent, or would adopt a non-contentious attitude, they should have informed the plaintiff earlier to save their costs. Yet, yesterday, the defendants filed their skeleton argument resisting the application and asking for costs, intimating that the application will be contested to the end. That could not be right. They had no ground to object and to prevent the court from knowing the truth. Not only that the defendants should not have costs of today's hearing, they should pay the plaintiff's costs.

37. As Mr Chong purported to object to the plaintiff's application on behalf of the 1st, 2nd, 4th, 6th, 8th and 9th defendants, all these defendants should be liable to pay the plaintiff's costs. However, Mr Bleach SC only requested costs against the 1st and 2nd defendants, but on an indemnity basis. According to Mr Ho's affirmation Nissho Iwai was the exclusive financier and financial adviser of the plaintiff's group of company but it financed the business opportunities diverted from the plaintiff by the 1st and 2nd defendants. The plaintiff instituted action against Nissho Iwai which then retaliated by instituting action against Mr Ho and the plaintiff's associated company, Saint Joy International Company Limited. The documents, the subject matter of the present application, are required to show the relation between Nissho Iwai and the 1st and 2nd defendants.

38. Mr Bleach SC said that none of these documents belong to the two defendants and that they resisted the application for a self serving purpose. He therefore submitted this was an abuse of proceedings. Mr Chong argued that the documents belonged either to the 2nd or the 8th defendants. As Mr Bleach SC did not challenge this, I assume that Mr Chong was correct. While I am satisfied that the objection raised by the 1st defendant is an abuse of proceedings, I cannot so satisfied in respect of the 2nd defendant, as he was the owner of some of the documents and might have some reason to object to the application.

39. As for the adjournment on 29 March 2000 in relation to this application, it was necessitated because the terms of the application was unduly wide. The defendants should therefore have costs against the plaintiff, but on a party and party basis. I shall deal with that separately.

40. Accordingly, in relation to this application I grant leave to the plaintiff to use the documents listed in the schedule to its summons dated 22 March 2000. The plaintiff shall have costs of the hearing on 16 May 2000 against the 1st defendant on an indemnity basis with certificate for two counsel and against the 2nd defendant on a party and party basis. I make no order as to costs as between the plaintiff and the 7th defendant.

DISCLOSURE ORDER AGAINST THE 1ST, 2ND AND 7TH DEFENDANTS:

41. The plaintiff now seeks additional relief ancillary to the Mareva injunction order which is continued against the 1st, 2nd and 7th defendants. It has now become standard practice to order disclosure of information about assets as an ancillary order in aid of a Mareva injunction. This is reflected in the standard form orders. In A and Another v. C and Others, [1981] QB 956 at 959, Goff J held:

"Now the exercise of this jurisdiction may lead to many problems. The defendant may have more than one asset within the jurisdiction - for example, he may have a number of bank accounts. The plaintiff does not know how much, if anything, is in any of them; nor does each of the defendant's bankers know what is in the other accounts. Without information about the state of each account it is difficult, if not impossible, to operate the Mareva jurisdiction properly; for example, if each banker prevents any drawing from his account to the limit of the sum claimed, the defendant will be treated oppressively; and the plaintiff may be held liable on his undertaking in damages. Again, there may be a single claim against a number of defendants; in that event the same difficulties may arise. Furthermore, the very generality of the order creates difficulty for the defendant's bankers, who may for example be unaware of the existence of other assets of the defendant within the jurisdiction; indeed, if a more specific order is possible, it may give much needed protection for the defendant's bankers, who are after all simply the innocent holders of one form of the defendant's assets.

Considerations such as these point, in my judgment, to the conclusion that the court should, where necessary, exercise its powers to order discovery or interrogatories in order to ensure that the Mareva jurisdiction is properly exercised and thereby to secure its objective which is, as I have described, the prevention of abuse. That the court has power to order discovery of particular documents and interrogatories at any early stage of proceedings is, I think, not in doubt.

42. The Mareva injunction against the 1st and 2nd defendants is continued by consent. Impliedly, the risk of dissipation of asset is conceded by the 1st and 2nd defendants. In ordering the Mareva injunction to continue against the 7th defendant, I have also made a finding that as the 1st and 2nd defendants are in the driving seat of the 7th defendant and as they have been shown to be dishonest, there is a real risk that the 7th defendant will dissipate its assets to the frustration of the plaintiff. In view of these risks, the disclosure orders are necessary to enable the plaintiff to make the Mareva injunction effective.

43. Mr Chong sought to resist the application by arguing that as the Mareva injunction was continued by consent against the 1st and 2nd defendants, this consent constituted a new and independent agreement between the parties for good consideration. He submitted the effects of the Consent Order are to put an end to the proceedings which were thereby spent and exhausted; to preclude the parties from taking any further steps in the action except to enforce the terms of the agreement and to supersede the original cause of action altogether.

44. With respect to Mr Chong, I do not think the principles he submitted are applicable to interlocutory proceedings. The application for disclosure order is made separately from the summons for the continuation of the Mareva injunction. As Mr Bleach SC submitted, even assuming that the Consent Order constituted an agreement, there is no basis for contending that it either expressly or impliedly disposed of the application for disclosure which was not a subject matter of that summons. Nor can it be contended that there was any express or implied undertaking by the plaintiff not to seek disclosure orders.

45. That paragraph 5 of the Consent Order provided that there shall be no further order cannot assist the 1st and 2nd defendants either. This is because that paragraph is related to the summonses dated 26 October and 1 December 1999 only. Disclosure order is not a subject matter in either of those summonses. For similar reason, that the plaintiff was not given liberty to apply does not preclude the plaintiff from making the present application.

46. Mr Chong submitted that the Consent Order constituted an estoppel by record. It is well settled that estoppel by record, also known as estoppel per rem judicatum, does not arise in the absence of a judicial determination by judgment which is final as opposed to interlocutory: Halsbury's Laws of England, 4th edition, Re-issue, Volume 16, para. 953, 965 and 966.

47. Mr Chong also relied on the doctrine of res judicata in the wider sense and Yat Tung Co v. Dao Heng Bank, [1975] AC 581. He argued that the plaintiff was precluded from raising other issues which could have been raised in the earlier proceedings. He cited the following dicta from Yat Tung Co. v. Dao Heng Bank at page 581:

"..... where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of the matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case. The plea of res judicata applies, except in special cases, not only to points upon which the court was actually required by the parties to form an opinion and pronounce a judgment, but to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time."

48. In Greenhalgh v. Mallard [1949] 2 All ER 225 at 257, Somervell LJ cited with approval the judgment of the Privy Council in Yat Tung and expanded on the phrase "every point which properly belonged to the subject of litigation" as follows:

"..... res judicata for this purpose is not confined to the issues which the court is actually asked to decide, but ... it covers issues or facts which are so clearly part of the subject matter of the litigation and so clearly could have been raised that it would be an abuse of the process of the court to allow a new proceeding to be started in respect of them."

49. Relying on the above dicta, Mr Chong submitted that an application for disclosure could have been made by the plaintiff in its application to continue the Mareva injunction or when defendants applied for discharge of the Mareva injunction and there were no special circumstances that render the doctrine res judicata in its wider sense inapplicable.

50. Mr Bleach SC also relied on the same dicta, but to which he put on a different interpretation. He submitted that from the above passages the doctrine of res judicata is confined to issues which are the subject matter of the litigation in question. In Yat Tung, the subject matter was cause of action estoppel. In the present case, none of the matters which are the subject matter of the litigation have been litigated in the sense of there having been any final or concluded determination in respect of them. The subject matter being litigated are those matters pleaded in the Statement of Claim. The parties are still a long way before final determination. The Consent Order of 9 March 2000 only dealt with an interlocutory matter, i.e. protection of assets, pending final determination. In the course of further conduct of the case, whether arising out of further investigation, or discovery, or disclosure of new facts, the need for further interlocutory relief may arise. Indeed, in A v. C, Goff J held that the court has power to order discovery at any early stage of proceedings is not in doubt. In my view, the doctrine of res judicata does not extend to interlocutory relief. For the same reason, it is impossible to require the parties to seek all possible relief ancillary to a Mareva injunction at the same time as the Mareva itself. The "whole case" argument does not apply to interlocutory proceedings or application for ancillary relief.

51. Mr Chong submitted that had the plaintiff made an application for disclosure of assets at the same time as the application to continue the Mareva injunction, the defendants would have approached the terms of the Consent Order differently or might not have compromised at all. He submitted now that the defendants had consented, none of them may retract from their agreement and they have therefore acted to their detriment.

52. I am quite unable to agree with Mr Chong's submission. There was no agreement not to seek relief ancillary to the Mareva injunction being continued. It is illogical to suggest that the defendants' consent to continue the Mareva injunction was affected by the existence or otherwise of an application for disclosure. If they had any reason or ground to resist the continuation of the Mareva injunction, they would have done so, irrespective whether the plaintiff would ask for further ancillary relief.

53. As Mr Bleach SC submitted, the only "compromise" consisted of a relaxation of the terms of the Mareva injunction by increasing the amounts which the 1st and 2nd defendants were permitted to spend on ordinary living expenses and on legal advice and representation. There is no reason why the terms of the Consent Order would have been any different had the application for ancillary relief been in the contemplation of the parties then.

54. Mr Chong's argument based on detriment is totally devoid of merit. There was no reason advanced by counsel or by the defendants in the form of affirmation as to why they might wish to retract from the Consent Order or what detriment they have suffered or might suffer. It is an express term of the Consent Order that its duration is until trial or further order and the 1st and 2nd defendants have been given liberty to apply. I am unable to see what possible detriment there might be or how the 1st and 2nd defendants have changed their position. I therefore order disclosure against the 1st and 2nd defendants in terms of paragraph 1 of the plaintiff's summons dated 24 March 2000, with costs to the plaintiff.

55. As for the application against the 7th defendant, Mr Bleach SC referred to the various correspondence from the 7th defendant's solicitors requesting for well over $1 million to be released from the 7th defendant's bank account with Hong Kong Bank. According to Mr Yao's affirmation, the 7th defendant only had $955,634.91 in that account. Mr Bleach SC therefore submitted that while on 29 August 1999, it was true, as the bank statement showed, that the 7th defendant only had $955,634.91 in its account, there must have been funds coming into the account between then and now. As the 1st and 2nd defendants are in the driving seat of the 7th defendant, whose honesty is in doubt, it is appropriate in the circumstances for the disclosure order to be issued. Mr Chain's only objection was that there was no basis for the application as the 7th defendant had already filed evidence to the effect that it had no asset other than that deposit with Hong Kong Bank and that the requests for release of funds for an amount in excess of that deposit did not necessarily mean there were that amount of funds in the account. However, he consented to the order on condition that it be stayed until the outcome of his appeal on the Mareva injunction. That was acceptable to Mr Bleach SC. Accordingly, I order disclosure against the 7th defendant in terms of paragraph 1 of the plaintiff's summons dated 24 March 2000, with costs to the plaintiff; but execution shall be stayed until the conclusion of the 7th defendant's appeal against the continuation of the Mareva injunction.

7TH DEFENDANT'S APPLICATION FOR FORTIFICATION OF PLAINTIFF'S UNDERTAKING:

56. Mr Chain submitted that the plaintiff's undertaking in the amount of $5 million in respect of the ten defendants is grossly inadequate. He therefore asked for fortification. No summons or affirmation has been filed on behalf of the 7th defendant. Mr Chain submitted that the evidence I heard in relation to the Mareva injunction is sufficient to enable me to reach the conclusion that the undertaking is inadequate.

57. Mr Bleach SC submitted that the proper course is for the 7th defendant to issue a summons requesting for fortification and supported by affirmation. He said that the Mareva injunction does not affect the ordinary course of business of the 7th defendant and that plaintiff has acceded to every request for release of funds made by the 7th defendant.

58. On the evidence before me, I am unable to see what damages would be suffered by the 7th defendant. It is appropriate for the 7th defendant to formally issue a summons supported by affirmation as to how the continuation of the Mareva injunction has affected or would likely affect the 7th defendant and as to why the undertaking is inadequate. In the circumstances, the application must be dismissed with costs.

COST OF ADJOURNMENT ON 29 MARCH 2000:

59. The circumstances leading to the adjournment on 29 March 2000 are as follows. On 22 March 2000, the plaintiff filed a summons seeking to be released of its undertaking, with a time estimate of 30 minutes. The application was set down for hearing before me at 9:30 a.m. on 29 March 2000.

60. Two days later, on 24 March, the plaintiff filed another summons seeking disclosure order with a time estimate of 15 minutes. From the fact that my name, the hearing date and time were all pre-typed on the summons, it is obvious that the hearing of this summons together with the one filed on 22 March was thrust onto the listing officer, with no regard as to whether the time reserved was realistic.

61. Then on the day immediately before the hearing, the plaintiff's solicitor wrote to my clerk intimating that they would seek to review my earlier cost order and to have the 7th defendant's application to strike out disposed of on 29 March as well. Thus there were altogether four applications to be heard within the 30 minutes available for the 9:30 a.m. session. I do strongly reproach such conduct. It is inappropriate for a party to dictate and take over the court's diary. It is only too obvious that there would not be sufficient time to dispose of all the four applications within the time available. Subsequently all four applications had to be adjourned as a result. The Court's time was wasted, when it could have been usefully spent hearing some other litigants.

62. At that hearing, Mr Roger on behalf of the plaintiff explained that the defendants did not respond to his request to have the applications disposed of by consent and it was intended that the parties were to seek direction at that hearing. I cannot accept that. In their letter to my clerk on 28 March, copied to the defendant's solicitors, they did not express that they only intended to seek direction for the further conduct of the proceedings. Instead, they intimated that they would be sending in their skeleton arguments and list of authorities. It is clear that they intended to proceed with the full hearing, despite the limitation of time. They have led the defendants' solicitors into so believing and hence they instructed counsel for the hearing. Such costs were unnecessarily wasted. I consider the plaintiff's solicitors were wholly to blame for the adjournment on 29 March 2000. Accordingly, I order that the defendants shall have costs against the plaintiff in respect of the adjournment.

SUMMARY OF ORDERS:

63. Accordingly, I make the following orders:

(1) The 1st, 2nd, 4th to 9th defendants shall have the costs of and occasioned by the adjournment on 29 March 2000 against the plaintiff;

(2) I set aside my earlier order reserving costs in respect of the application to continue and application to discharge the Mareva injunction order; and order that the plaintiff shall have costs against the 7th defendant on an indemnity basis, with certificate for two counsel;

(3) The plaintiff's cost application on 16 May 2000 in respect of the application mentioned in sub-paragraph (2) above against the 1st and 2nd defendants is dismissed with costs against the plaintiff;

(4) The 7th defendant's application to strike out plaintiff's claim is dismissed with costs to the plaintiff against the 7th defendant, and with certificate for one counsel;

(5) Leave is given to the plaintiff to use the documents listed in the schedule to its summons dated 22 March 2000 and be released from its undertaken in accordance with paragraph 1 of that summons. The plaintiff shall have costs of the application against the 1st defendant on an indemnity basis, with certificate for two counsel and against the 2nd defendant on a party and party basis;

(6) The 1st, 2nd and 7th defendant shall file and serve an affidavit or affirmation setting out all their assets in accordance with paragraph 1 of the plaintiff's summons dated 24 March 2000. There be stay of execution against the 7th defendant pending its appeal against my judgment dated of 15 March 2000. The plaintiff shall have costs of the application for disclosure against the 1st, 2nd and 7th defendants;

(7) The 7th defendant's application for fortification is dismissed with costs to the plaintiff against the 7th defendant;

(8) Unless otherwise ordered, all costs are to be assessed on party and party basis with certificate for one counsel;

(9) All costs are to be taxed immediately if not agreed, and to be paid forthwith.