A.O.SMITH HOLDINGS (BARBADOS) SRL v. ZHANG DACHENG

HCCT 22/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDING

NO. 22 OF 2011

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BETWEEN

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REASONS FOR DECISION

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Introduction

1.  This reasons for decision concerns the discharge of a prohibition order made on 14 June 2011 against the defendant, a Mainland resident.  It was dealt with on the summons day.  The brief reasons for the discharge appear below.

2.  The plaintiff commenced this action in April 2011.  Further, on 26 April, the plaintiff applied for, and was granted ex parte, a worldwide Mareva injunction order against the defendant.

Issues in The Discharge Application

3.  It was alleged by the plaintiff that, despite the said injunction order, the defendant transferred all of his shares in a company to someone else. Based on that allegation, the plaintiff applied, and on 16 June 2011 was given leave, to commit the defendant for contempt of court.  As can be seen from para. 1 above, the prohibition order was granted before such leave was applied for or given.  It was accepted the prohibition order was obtained to facilitate the bringing of such committal proceedings (and not other proceedings).

4.  One of the reasons put forth in support of this application for the discharge was that there was no jurisdiction to grant the prohibition order. On the other hand, the plaintiff contended that s. 21B(1)(b), High Court Ordinance (Cap. 4) empowers the court to grant such an order before judgment is given or order is made.

5.  The plaintiff accepted that it could not satisfy some of the conditions prescribed by s. 21B(3), Cap. 4 for the making of an order under s. 21B(1)(c) (jurisdiction to make a prohibition order in relation to a civil claim) and so could not properly rely on that provision.

6.  The relevant parts of s. 21B(1)(b), Cap. 4 provide:-

“The Court shall have jurisdiction to make an order prohibiting a person from leaving Hong Kong (a prohibition order) to facilitate the enforcement, securing or pursuance of ... a judgment or order against that person ... requiring him to ... perform any other act … ”.

The parties’ respective case focused on whether the phrase

“… the enforcement, securing or pursuance of … a judgment or order … ”

in that sub-section can cover pre-judgment situations.

7.  The plaintiff’s case that it can was premised on a remark made in the court of appeal’s judgment in Bank of India v. Murjani Industries (HK) Ltd. and Another [1989] 2 HKLR 276:-

“So one has the same phrase used both in the context of a civil claim and in the context of a judgment [in s. 21A(1)]. When you come to s. 21B you start with the opening words in sub-s. (1) where the same formula is repeated … Those three words seem to me to cover three situations. ‘Pursuance’ must, in the context of a claim, be the obtaining of a judgment. ‘Securing’ could be events which either happen pre-judgment or post. ‘Enforcement’ suggests post-judgment” (emphasis supplied) (p. 284A).

The plaintiff relied on the presence of the words “securing” and “pursuance” in s. 21B(1)(b), Cap. 4.

8.  The court of appeal’s above remark was made in the following factual context.  The bank plaintiff sued the defendant as a guarantor.  After the discharge of an earlier prohibition order against the defendant, the bank plaintiff applied to another judge for a new order. The plaintiff produced a draft writ and gave an appropriate undertaking when doing so. The court of appeal dismissed the appeal against the making of the new order.

Reasons for Deciding This Application

9.  In short, the decision to discharge was based on a lack of jurisdiction.

10.  Despite the apparent width of the court of appeal’s said remark, its true meaning is shown by a proper understanding of the entire judgment.  Having read the judgment, I conclude that it was directed against s. 21B(1)(c) (and not s. 21B(1)(b), as in this application).

11.  I so conclude because:-

(a) the court of appeal expressly said so (p. 280D);

(b) of the reference to “… the context of a claim” in the above quote in the court of appeal’s judgment;

(c) of the court of appeal’s later remark that

“I think that what defeats [the defendant guarantor’s] argument is the grammar in sub-s. (d) [that is, s. 21B(3)(d)]. … in (d) the governing word is not ‘giving’ the judgment. The governing phrase is ‘the judgment’” (p. 285B).

S. 21B(3)(d) is clearly related to s. 21B(1)(c) (which confers the jurisdiction to make prohibition orders in relation to civil claims).

12.  Further, to construe s. 21B(1)(b), Cap. 4 in the manner contended for by the plaintiff would render some of the provisions in s. 21B superfluous and/or inconsistent with each other:-

(1) if s. 21B(1)(b) were to cover pre-judgment cases as well, there would have been no need for s. 21B(1)(c) (and the related s. 21B(3)) to be enacted;

(2) the conditions prescribed by s. 21B(2) (required for the making of an order under s. 21B(1)(b)) are different from those prescribed by s. 21B(3) (required for the making of an order under s. 21B(1)(c)).  Additional conditions are required under s. 21B(3) (see s. 21B(3)(a) and (b)).

On the other hand, to construe it in the manner contended for by the defence would make the whole scheme consistent and sensible.