XCHRX D.P.I. (HK) LIMITED AND ANOTHER v. WONG ZE KEI MAIMEI AND OTHERS

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

1999, No. 79
(Misc. Proceedings)

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J U D G M E N T

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Mortimer V-P (giving the judgment of the Court) :

This is an application for a stay pending appeal against an order of Nguyen J granting a variation to a Mareva injunction in which he allowed a variation to enable funds to be released in two respects, first, payment of legal costs incurred and taxed and allowed at $338,158 to a firm of solicitors; and secondly, that there should be release of a sum amounting to over $2m in respect of estimated fees for criminal proceedings.

The background

1. The plaintiffs' claim against the defendants is a proprietary one. It is said that the 1st defendant has taken the plaintiffs' funds which were held by herself or the 2nd defendant. The 2nd defendant offered the 3rd defendant control by both. The sum involved is over $20m. The matter came to light in about October 1997 and developed quickly because the matter was reported to the police on 18 October 1997. On 21 October 1997 the Department of Justice obtained a restraining order under the Organized and Serious Crimes Ordinance (Cap 455). By 22 October a writ was issued. On 27 October the 1st and 2nd defendants appeared in front of the Magistrates Court. On 6 November the Mareva injunction concerned in these proceedings was made by Findlay J. At that time, therefore, there was not only the restraining order under the Organized and Serious Crimes Ordinance but in effect also the Mareva injunction. It seems that the order so far as legal costs were concerned, the intention was that the two orders should have separate effect because the Mareva injunction under clause 3 "exceptions to the order" provided that the order would not prohibit $100,000 being spent on legal advice and representation "in respect of these proceedings". As Mr Ronald Tang, for the firm of solicitors involved, has pointed out, the intention must have been that that was to deal with the civil proceedings because the legal expenses in relation to criminal proceedings were provided for under the restraining order.

2. So the matter remained until about six months later. By agreement the restraining order was discharged so that there should not be a duplication of restraint of the same sums of money. The question what was to happen so far as the criminal proceedings were concerned was raised - no doubt because of the terms of the Mareva injunction. According to Nguyen J's judgment, Mr Bell, counsel appearing for the plaintiff, accepted that fees to cover the criminal proceedings would be made available. Obviously, what he meant was that any application in that respect would not be resisted.

The application before Nguyen J

3. That was the background to the matter until the application was made in front of Nguyen J for the variation of the order which he made. Following it, an application was made by Mr Neal Clough on behalf of the plaintiffs for a 24-hour stay of the order, pending appeal to the Court of Appeal so that an application for a stay could be renewed in front of me. It is pointed out by Mr Tang that an application for a stay, not just a 24-hour stay, ought to be made in front of the judge who makes the order. That is clearly right but it is of no moment, now that this application is being heard at short notice today.

The plaintiff's point

4. Mr Clough takes this point and it is a powerful one. He says that in spite of the sums of money claimed, the assets which have been frozen amount to only $7-8m. The costs already incurred by the plaintiffs in pursuing these matters have already amounted to something approaching $4m. If the moneys concerned in the appeal, in Nguyen J's variation, are released, that will release another sum approaching $2.5m and there will be only $2m left, out of the claim for over $20m. The claim is a proprietary claim. The whole proceedings will become in effect nugatory.

5. It is worth noting that where the plaintiffs have a proprietary claim, and there is a so-called Mareva injunction, freezing those assets. It may well be an injustice to grant the variations that are normally granted in a Mareva injunction because it may mean that the defendants are financing legal proceedings other than the ones concerned with proprietary claim out of the plaintiffs' assets. That would be, of course, an injustice but these matters require careful balancing. No doubt those points could well be clarified by the Court of Appeal in the future.

The applicant

6. But what of this application for a stay? So far as Mr Tang's clients are concerned, he says that in any event there could not be any good reason for granting a stay in the case of his clients because if the money is paid out to them, the appeal succeeds, then they will be in a position to repay. It is a powerful point. It would be sufficient for him to succeed were it not for what I am about to say about both variations.

Conclusion

7. This matter was very carefully considered by the judge below. He also was concerned about the effect of the proprietary claim and possible injustice to the plaintiffs by allowing these moneys to be released. But in the end the concession, even if partial by counsel on behalf of the plaintiffs when the restraining order was discharged, was a matter that influenced him considerably. I am not able to say that this was wrong. It would, of course, be very difficult in those circumstances to say that the judge's reliance upon that in the exercise of his discretion will be shown by the plaintiffs to be plainly wrong in the balancing exercise that the judge undertook.

8. In those circumstances should I grant a stay of the order? What must also be put into the balance is that the criminal proceedings are due to start on Wednesday. It would not be possible for this matter to be heard by the Court of Appeal before then. In the end, I am not prepared to stay this matter. I think the chances of the appeal succeeding are not sufficiently high and I am conscious that a person who succeeds below is normally entitled to the fruits of his success although in a interlocutory matter that is not usually quite so important.

9. In those circumstances I refuse a stay.