XCHRX GODFREY CHRISTOHER ROOKE AND MELODY ANN ROOKE v. HV CONSTRUCTION SERVICES LIMITED AND ANOTHER

1997, CL. No.74

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

COMMERCIAL LIST

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J U D G M E N T

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Background

1. This is an appeal against the decision of a master by which he made absolute a Garnishee Order nisi.

2. The judgment creditors are husband and wife, Mr and Mrs Rooke. The judgment debtor is a company incorporated in Hong Kong. It, or its sister company in the U.K., was engaged upon the development of a significant number of properties in the U.K. and marketed those properties in Hong Kong and perhaps elsewhere. It is evident that quite a number of people in Hong Kong entered upon agreements with the company by which they agreed to buy properties which the company was developing, and the purchase prices or substantial proportions of those prices have been paid. The company has run into difficulties and cannot complete the projects. The result is that the purchasers have little or no prospect of realising their investments and wish to recoup them or as much of them as possible.

3. In 1995, Mr and Mrs Rooke agreed with the judgment debtor to buy two properties in the United Kingdom and they made downpayments in the total sum of 120,000. In 1996 it became evident that things were going awry, and in the course of correspondence between the judgment creditors and the judgment debtor, it was agreed that the Rookes would not proceed with the purchases, and that the sum of 120,000 would be returned to them, plus interest. But the company has repaid some although not all of the money due, so that on 17^th April 1997 the judgment creditors through their solicitors demanded the sum then due, and threatened legal proceedings; and by a further letter dated 24^th April 1997 made a threat that the Rookes might present a petition for the winding up of the company on the basis of its inability to pay its debts.

4. Proceedings were issued on 6th May 1997, and the garnishee proceedings followed a judgment in favour of the judgment creditors. As at 22^nd May 1997, the date of judgment, the amount due was 90,000 plus 3,134.53 interest and HK$1,500 fixed costs. The Garnishee Order absolute, dated 17^th July 1997, is for payment of the total sum of HK$1,178,065.27 plus interest at the judgment rate.

The Grounds of Opposition

5. The appeal is lodged by the company but with the active support of investor creditors of the company other than the judgment creditors. One of the affidavits filed is that of Mr Thoms who asserts that he is authorised to make it on behalf of 55 other creditors of the company. None of the creditors, apart from the judgment creditors, has instituted proceedings against the company, whether to seek judgment in respect of individual sums due, or by a winding-up petition.

6. The essence of the company's case, and that of these investor creditors, is that by April 1997 it had become clear that the company had incurred losses so serious that it was insolvent. There was then a meeting on 28^th April 1997, attended by 47 creditors as well as by a representative of the company, and that at that meeting, attended also by Mr and Mrs Rooke, there was an agreement by the investor creditors present. The precise terms of that agreement, which is said by the company and by the other creditors to have been unanimous, is, upon the evidence before me, not clear and is the subject of a potentially important dispute. According to one version (the first affidavit of Mr Thoms, and an affidavit of Mr Hayworth, a director and shareholder of the company), it was unanimously agreed that there should be a moratorium, whereby a committee of creditors chaired by Mr Thoms would :

"... endeavour to effect an orderly disposal of the defendant company's assets with the co-operation of the directors with a view to avoiding the considerable expense of putting the company into liquidation and thereby maximising the return to the creditors."

It is said that in light of that fact, and since the company is insolvent, it would be inequitable to make the Garnishee Order absolute, as its effect would be to prefer the judgment creditors over the other creditors of the company. It is further suggested that the evidence filed by Mrs Rooke is misleading, and that the court should decline therefore to grant this form of discretionary order. Finally, it is said that the evidence that sums owing to the judgment debtor lay in the hands of the garnishee was obtained by the judgment creditors in circumstances of confidentiality, such that they should be precluded from using it for the purpose of the Garnishee Order, and that the use of that information for a purpose extraneous to that for which it was disclosed should persuade this court to exercise its discretion against the making of the order absolute.

7. This is not a case in which the appropriate course evidences itself, as often transpires in these cases, from a mere examination of dates of proceedings, the Garnishee Order, and the fact a regular feature of other cases, but not of this one that there has been presented a petition or scheme of arrangement or that a resolution has been passed. In this case, there has been no petition for a winding-up, no order that the company be wound up, no resolution to that effect, and no scheme of arrangement whether proposed or agreed.

8. I must add that there is an understandable stance on the part of all parties to this appeal against the prospect of a trial of the disputed facts. If the matter can justly and properly be resolved without recourse to oral evidence, that must be desirable. In the circumstances a rehearsal of the facts those in issue, as well as those agreed somewhat more detailed than is normal in such cases is, I think, necessary.

Demands; letters before action; and proceedings

9. There was an exchange of correspondence between the parties between June and September 1996 in consequence of which it was agreed that the judgment creditors would withdraw from the sale and purchase agreements with the company, and that the principal amounts be repaid by the company plus a contribution towards the interest paid by the judgment creditors in respect of loans raised by them. The sums due were to be repaid by 31^st December 1996. From late December 1996 there followed repeated demands by the judgment creditors for payment. Some sums were paid, but not all. On 18^th February 1997, Mr Rooke wrote to Mr Hayworth, his frustration at non-payment evident from the demand that :

"I want from you, this week, in writing, details of when you will be discharging this debt. If a sale fails to provide the funds, then you will have to take out a loan to pay us."

Later, he stressed that he and his wife had to demonstrate some progress on repayments to their bank.

10. On 14^th April 1997, the judgment creditors wrote to the company pointing out that the time had passed for the completion of the sale of one of the properties in consequence of which sale it had, allegedly, been said that the entire sums due would be paid, adding that "... we can no longer allow this debt to remain outstanding."

11. Three days later, namely, on 17^th April 1997, solicitors for the judgment creditors wrote a letter to the judgment debtors, by which they threatened proceedings if by 25^th April the outstanding sum had not been received.

12. A letter dated 24^th April 1997 from the same solicitors contained a demand under s.178(1)(a) of the Companies Ordinance that unless the monies were paid within three weeks, the defendant company would be deemed unable to pay its debts, and that that would entitle Mr and Mrs Rooke to present a petition to the court for a compulsory winding-up order.

13. So, well before any meetings of creditors, the judgment creditors were pressing hard for the monies due to them, and shortly before the first creditors' meeting, there were two letters before action written on behalf of the judgment creditors.

14. The writ claiming the amount due was issued on 6^th May 1997. It bears repeating that no petition has been presented either by the judgment creditors or by anyone else for the compulsory winding-up of the company, nor has any resolution for the voluntary winding-up of the company been proposed or passed.

The Meeting of 28th April

15. After the delivery of the two letters, but before the institution of proceedings by the judgment creditors, there took place this meeting of investor creditors on 28^th April 1997. It was a meeting addressed by Mr Hayworth, one of the two directors of the judgment debtor company. He made a statement in which he outlined the progress, or lack of it, in relation to each site which it had been hoped to develop, stating in almost each instance that the company would suffer substantial loss if the project did not proceed; and he added that he had been hard pressed by participants in the schemes, in other words by the investor creditors. It is clear from correspondence which he placed before that meeting that the other director of the company, resident in the U.K., was advising that the company was insolvent and that "the company has no effective alternative but to go for a formal insolvency to deal with non-charged assets." Mr Hayworth had been asked on behalf of his co-director to sign a form to agree to the appointment of a receiver. Mr Hayworth however thought that something could be done to salvage the situation. He told the meeting that if the company were liquidated, there would be proceeds of about 2.7 million to 3 million "as compared with outstanding positions of approximately 4.3 million." He thought however that the position could be improved if the company continued trading.

16. I have earlier referred to the version put forward by Mr Thoms. It is that at that meeting, attended by 47 investor creditors (of a total of about 66), it was agreed unanimously that there should be a moratorium whereby a committee of creditors chaired by him "would endeavour to effect an orderly disposal of the defendant company's assets with the co-operation of its directors, with a view to avoiding the considerable expense of putting the company into liquidation and thereby maximizing the return to the creditors." He annexes to his affidavit a letter from the company's auditors stating that the company is insolvent.

17. Mrs Rooke, in response, says that there was no moratorium agreed. She contends that she was first informed on 25^th April that a meeting was proposed for 28^th April. She says that what was agreed was that a steering committee of investors be formed and that a letter be written to the judgment debtor's bankers requesting them not to commence liquidation proceedings :

"One of the main concerns of the meeting was to allow the judgment debtor to continue the construction projects in order to recover more money to give to the investors."

She was telephoned after the meeting by Mr Thoms and others asking that she not pursue winding-up proceedings, and this she agreed. What she did not agree, she says, was not to institute legal proceedings.

18. This affidavit by Mrs Rooke was followed by one sworn by Mr Hayworth. He says that there was a moratorium, "i.e. that each creditor should refrain from enforcing his or her individual claim in consideration for the others doing the same, and that a committee of creditors should be appointed to effect an orderly disposal of the defendant company's assets with the co-operation of its directors." Mr Hayworth says that he saw both the judgment creditors raise their hands in support of the resolution.

19. Mr Thoms returned to the fray with a further affidavit, and it is noticeable that his version of the resolution proposed to the meeting is a variant of that which had earlier, in his and Mr Hayworth's evidence, been suggested. He describes the motive behind the resolution or its proposal, namely, that the creditors present at an earlier meeting on 24^th April, not attended by the judgment creditors, felt that it was far preferable to avoid placing the company into liquidation and that -

"... it was realised that if any creditors took action against the assets of the company, liquidation was inevitable ... I agreed to propose to a meeting of creditors, later confirmed to be arranged for 28^th April 1997 resolutions that the creditors would not take action which would result in the liquidation of the company, and also that a committee of creditors be appointed to monitor the activities of the company ... I addressed the meeting [of 28^th April] and after discussion proposed the resolutions, namely, that the creditors agree not to take action against the company which would result in liquidation and that a committee be appointed. It must," he continues, "have been obvious to Mrs Rooke ... that what the creditors were being asked to agree to in [that] resolution was not to proceed with any actions against the company or its assets. I did not read from any prepared note of each resolution, but its meaning was clear."

20. Mrs Rooke in further reply takes issue even with the suggestion that this narrow resolution was passed. She voted in favour of a resolution, she says, by which it was decided to "form a steering committee to over-view the management of the judgment debtor and to write a letter of comfort to the debtor's banks to convince them not to commence liquidation proceedings." She emphasises the distinction between the institution of proceedings to recover a debt, on the one hand, and on the other, the institution of winding-up proceedings. There was no intention, she implies, after that meeting on the part of the judgment creditors to institute such proceedings, but instead to obtain judgment and to execute that judgment against the judgment debtor's assets.

21. Mrs Rooke says that her position and that of her husband is quite different from that of the other creditors in that she and her husband no longer have the benefit of the sale and purchase agreements with the company, and that none of the other creditors has instituted proceedings. She says that the result of the meeting of 28^th April was inconclusive, and the financial position of the company unclear. No audit of the company has been carried out and although a figure for the company's indebtedness has been stated, that figure has not been subjected to independent verification. She says that there is no or no sufficient evidence that the company is insolvent.

22. As for the meeting of 28^th April, she says that "One of the main concerns of the meeting was to allow the judgment debtor to continue the construction projects in order to recover more money to give to the investors."

23. So much for the opposing contentions about the resolution passed at the meeting of 28^th April 1997.

The Garnishees : how the judgment creditors knew

24. There is a second significant factual issue in this case, namely, that which concerns the source of the information that funds owing to the debtor were in the hands of M.K. Lam and Co. solicitors, the Garnishees.

25. There was a further meeting of creditors on 14^th May 1997, not attended by either of the judgment creditors. That meeting was told by Mr Hayworth that another, or a former co-director had attempted to withdraw funds from the company's bank account presumably judgment debtor funds in consequence of which Mr Hayworth himself withdrew the funds and gave them to M.K. Lam & Co. for safekeeping. "Mrs Rooke was not present at the meeting," says Mr Thoms, "but she was briefed on the proceedings afterwards by one of the creditors present who told her about the action taken by Mr Hayworth, which enabled her to obtain the Garnishee Order against the funds held by M.K. Lam & Co."

26. This is not denied by Mrs Rooke. She accepts that in May she was told by a creditor that at the meeting on 14th May, which she did not attend, it was revealed that one of the company directors had moved a large amount of money from the Bank of America to a client account with a firm of solicitors, namely, the garnishee in these proceedings. That is how she came to know about the place where these assets were. She simply argues in reply that :-

"... if the judgment creditors had not found out about the monies in the account held by M.K. Lam & Company I am advised that there were other ways in which the judgment could have been executed."

27. It is evident that Mrs Rooke was aware that the threatened issue of proceedings by herself and her husband, and then the proceedings themselves, were a matter of concern to Mr Hayworth and to those judgment creditors who were aware of it. According to her, the fact of the threat of proceedings by her was not revealed at the meeting on 28^th April, and there was a request on 12^th May on behalf of several creditors for a meeting with her to talk about the writ, but she replied that she was not available to meet them and was not willing to be questioned about the action which she had commenced. She was notified about the meeting of 14^th May and she was asked to meet them before the meeting but she said she would not attend.

The company's insolvency

28. The investor creditors have placed before the court a draft statement of accounts prepared by certified public accountants for the year ending March 1997 which, on their face, show the company to be insolvent. Mr Hayworth says that the company is insolvent, and that it is the company's intention to distribute assets pari passu to the creditors.

The Law

29. Counsel have taken me to a number of authorities which canvass the conflicting interests at play between, on the one hand, that of the creditor who has been sufficiently swift to seek to secure his position as against a company in default of its liability to him; and, on the other, those of the creditors at large who would wish the assets of a company in clear and irretrievable financial trouble to be preserved for distribution between themselves pari passu. That conflict evidences itself in cases where courts are asked to make absolute a charging order or a garnishee order. The principles to be applied are the same in either situation.

30. The conflicting interests have been summarised thus :

"A person who has the misfortune to have given credit to a company which runs into financial difficulties has every right to seek to secure himself. Any such company or its other creditors has every right to hasten liquidation in order to thwart such a purpose." (per Lord Brightman in Roberts Petroleum Limited v. Bernard Kenny Limited [1983]1 ALL ER 564, page 571.)

31. In that case, there had been passed a resolution at an extraordinary meeting that the company be wound up and a liquidator appointed. That resolution was passed after the making of a charging order nisi, but two days before it was sought to make that order absolute. It was held that if at the time the court considered whether to make the order absolute a statutory scheme for dealing with its assets was irrevocably imposed on the company by resolution or a winding-up order, the court should exercise its discretion by refusing to make the order absolute.

"The basic question ... which confronts the court when it is faced with an application by an execution creditor to convert an order nisi into an order absolute in a case such as the present is whether the asset in question should fall outside the statutory scheme which, by virtue of the liquidation, is then in existence or should be subject to that scheme. In the absence of persuasive authority to the contrary ... I would myself have thought that the court should exercise its discretion so that the assets fall within the statutory scheme.

...

I think that this ... conclusion accords with the general sense of those sections of the Companies Act 1948 which preclude inroads into the assets of a company once liquidation has begun." (per Lord Brightman in Roberts Petroleum Ltd, supra, at pages 572, 573).

It was further held that, contrary to the decision in Burston Finance Limited v. Godfrey [1976]2 All ER 976, it was not necessary that, in addition to the insolvency of the company and the fact of a liquidation or an inevitable liquidation, there should be a scheme of arrangement which has been set on foot by the main body of creditors or which has a reasonable prospect of succeeding.

32. In Rainbow and another v. Moorgate Properties Limited [1975]2 All ER 821, the plaintiffs applied for and were granted charging orders nisi against the defendant company which was one of a group of property developer companies that had been experiencing financial difficulties and the parent company had gone into liquidation some months before a creditors' voluntary liquidation. At a creditors' meeting some months before the charging orders, it was decided to observe a moratorium for six months on the enforcement of debts against companies in the group. In the meantime, no subsidiary companies would go into liquidation, and a scheme of arrangement would be prepared for submission for approval of the court. The plaintiffs were not parties to these decisions. After the making of the charging orders but before the hearing of the application to have the orders made absolute, the defendant company presented its own petition for a winding-up order. It was held that before the court could exercise its jurisdiction to enforce a judgment debt by imposing a charging order on the debtor's land, it had to be satisfied that it would be proper to place the judgment creditor at an advantage over other creditors. Where the court was aware that the debtor was or was likely to turn out to be insolvent, it was wrong that it should give one creditor an advantage over other unsecured creditors by granting him a charging order which effectively converted him into a secured creditor. For those reasons and in view of the moratorium and the proposed scheme of arrangement, it would be wrong to permit the plaintiffs to have the benefit of the charging orders. The orders were accordingly discharged. Nonetheless, it must be noted that in that case the parent company had gone into liquidation at the time of the moratorium and that the defendant company had itself presented a petition before the court was called upon to the determine whether the charging order should be made absolute.

33. Finally, there is Wardley Ltd. and Others v. Aik San Realty Limited and E. Wah Realty Limited, High Court Action No.379 of 1984. No winding-up proceedings nor any scheme of arrangement had been instituted or were imminent. Hunter J. (as he then was) had this to say :

" Next Mr. Yu submits that the Master ought to have refused to make the Orders absolute in the exercise of his discretion. The defendants have been for some two years in what he described as a position of near insolvency. Notwithstanding the failure to agree upon a scheme of arrangement because of the difficulties, the directors, he submitted, have been attempting to hold the scales equally and should be allowed to continue. These plaintiff creditors should not be allowed to obtain any preference. He relies upon a line of authority culminating in Roberts Petroleum Limited v. Bernard Kenny Limited (1933) 2 A.C.192.

This line of authority shows that if the Court has a choice between allowing a particular creditor to obtain a preference or ensuring a pari passu distribution of a debtor's total assets amongst his creditors, it will opt for the latter and equality. But in the case of a corporate debtor no choice arises unless a pari passu distribution will follow from a refusal to make a Charging Order absolute i.e. because winding-up proceedings have already been commenced or perhaps because their equivalent in the form of some scheme of arrangement is imminent. Unless these circumstances exist the above choice is not available to the Court.

That is the position here. No one, including the directors of the defendants, has chosen to put either of these companies in liquidation. What has happened over the past two years cannot be described as an equal distribution. There have simply been individual settlements on terms unknown with individual creditors. There is at present no prospect of a true pari passu distribution taking place. So in my judgment these authorities have no application and the Master was right."

Analysis

34. Mr Smith, for the company, argues that these cases are but examples of the inclination of the courts towards taking such course as will lead to an equal distribution of assets amongst creditors. In other words, he says, it is not a condition precedent to the defeat of the judgment creditors in these circumstances, that there should be a resolution passed or on the table, or that there should be in existence a winding-up order or a petition. It is implicit in his argument that it suffices that an equal distribution is the subject of active progress, even of an informal kind.

35. Yet, although not conclusive of the matter, there is no case shown to me where an order has been refused other than when the company is in liquidation or where, at least, that liquidation is imminent. It seems to me that what is required is a significant degree of certainty in the matter, so that the rights of a judgment creditor are not in uncertain abeyance and that judgment creditors generally may operate within the framework, as was evidently thought desirable in Roberts Petroleum Ltd (see page 576), of clear working rules.

36. There is, in this case, in existence no winding-up petition, nor any resolution for the presentation of a petition, nor any resolution for the voluntary winding-up of the company, nor is there in existence an approved company voluntary arrangement. Two assurances, or assurances of a kind, were held out at the beginning of this hearing by Mr Smith on behalf of the company, but he was not, upon reflection, in a position to give undertakings in relation to them. The first was that if necessary the company would undertake to present a petition, or to propose the necessary resolution, resulting in the placing of the company in liquidation. Then there is an affidavit from a solicitor, Mr Brown, who is one of the company's creditors who annexes to the affidavit a copy of a scheme of arrangement which he says the company is prepared to propose to the creditors (if so required by the court). That is a proposal, the implementation of which, let alone its acceptance by the creditors, cannot be assured.

37. In the event, I am satisfied that the affairs of the company have not reached that stage at which a statutory scheme is in place or imminent, such as would warrant this court's interference with the right of the judgment creditors to execution of the judgment debt in the way now sought. There is in sight no clear or ascertainable resolution to the matter; no dates by which it could be said that the affairs of the company would be resolved. I do not think the fact that other creditors have opted to take the route they have, by which they seek to avoid liquidation, and have to that end formed a committee and have agreed to hold their hands and see whether the company can extricate itself from its financial difficulties or at any rate improve its position to the benefit of the creditors by continuing to operate, suffices to warrant engaging this court's power to refuse the grant of an order absolute.

Confidentiality

38. But that is not the end of the matter, for Mr Smith prays in aid an alleged breach of confidentiality such as should preclude the making of the order absolute. He argues that it would be inequitable to permit the judgment creditors to utilise, as they seek to do, information released at the meeting on 14th May that monies had been placed in the hands of the company's solicitors for safekeeping. In support of this leg of his case, he relies upon the breach of confidentiality cases Saltman Engineering Co. Ltd. v. Campbell Engineering Co. Ltd. [1948] LXV RPC 203; and Fraser and Others v. Thames Television Ltd [1948]1 QB 44.

39. If there is a contract, an implied term of which is that information imparted for the purpose of the contract will not be used for a particular purpose, then an obligation will be enforced by the courts to treat that information as confidential. If it be suggested that the judgment creditors are party to an agreement amongst all the creditors at the 28^th April meeting not to institute proceedings of any kind and there is that suggestion in this case and that it was part of that agreement or an implied term of it that information imparted to those creditors by the company or its directors would not be used by any of them for any purpose other than agreed purposes then that is, although relevant to the issue I have to decide, not an issue which I can decide upon the affidavits; and is an issue which would have to travel the path which all parties wish to avoid, namely, a trial of the factual dispute which is evidenced by the affidavits : whether the judgment creditors were party to an agreement on 28^th April, and if so what were the terms of that agreement.

40. But breach of confidentiality as a ground for remedial action by the courts is not confined to contract. It has been said that the law on the subject -

"... depends on the broad principle of equity that he who has received information in confidence shall not take unfair advantage of it. He must not make use of it to the prejudice of him who gave it without obtaining his consent." per Lord Denning M.R. in Seager v. Copydex Ltd [1967]1 WLR 923, at page 931.

And in Moorgate Tobacco Co. Ltd v. Philip Morris Ltd. (1984)156 CLR 414 the jurisdiction to grant relief against abuse of confidential information did not, according to Deane J. in the High Court of Australia, find its rational basis in proprietary right. Rather, he said (at page 437), its rational basis -

"... lies in the notion of an obligation of conscience arising from the circumstances in which the information was communicated or obtained."

41. The factors that will determine whether an obligation of confidence arises and is one which a court will preserve or enforce are manifold :

"Three elements are normally required if, apart from contract, a case of breach of confidence is to succeed. First the information itself ... must have the necessary quality of confidence about it. Secondly that information must have been imparted in circumstances importing an obligation of confidence. Thirdly, there must be an unauthorised use of that information to the detriment of the party communicating it." (See Megarry J. in Coco v. A.N. Clark (Engineers) Ltd. [1969] RPC 41, 47.)

42. In deciding those questions, the court will look, of course, at all the circumstances of the case, and will want to assess whether the information is useful or useless, and the manner in which the defendant has come into possession of the information, and whether that information was available to the defendant other than from the party which claims some exclusivity in its possession of the information.

43. Lord Goff put the matter thus :

"I start with the broad general principle (which I do not intend in any way to be definitive) that a duty of confidence arises when confidential information comes to the knowledge of a person (the confidant) in circumstances where he has notice, or is held to have agreed, that the information is confidential, with the effect that it would be just in all the circumstances that he should be precluded from disclosing the information to others." AG v. Guardian Newspapers (No.2) [1990]1 AC 109, 281.

44. I think it useful, finally, to return to Megarry J. in Coco v. A.N. Clark Engineers Ltd. (at page 48) :

"From the authorities cited to me, I have not been able to derive any very precise idea what test is to be applied in determining whether the circumstances import an obligation of confidence ... It may be that that hard-worked creature, the reasonable man, may be pressed into service once more; for I do not see why he should not labour in equity as well as at law. It seems to me that if the circumstances are such that any reasonable man standing in the shoes of the recipient of the information would have realised that upon reasonable grounds the information was given to him in confidence, then that should suffice to impose upon him the equitable obligation of confidence."

45. Those citations provide, I think, an adequate flavour for present purposes of the obligation and the criteria to which, generally, a court will look.

46. One further principle requires to be stated in this case :

"The duty of confidence is, as a general rule, also imposed on a third party who is in possession of information which he knows is subject to an obligation of confidence." (per Lord Griffiths in AG v. Guardian Newspaper (No.2) supra, at page 268)

47. Mr Hart, for the judgment creditors, argues that the cases of Saltman and Fraser (and he would presumably embrace those additional authorities to which I have referred) do not apply to the present case, and that for two reasons. First, he says, it is not established that the information was provided upon a confidential basis and, secondly, that it has not been shown that the information was the property of the committee.

48. Mr Smith's argument is that whether or not it can be shown that the committee had property in the information matters not at the end of the day, for the judgment creditor has to make a case in equity, and where it can be shown that the information has been used for a purpose for which, to the knowledge of the recipient, its disclosure was clearly never intended, and that where that enures to the disadvantage of the other creditors, the judgment creditor should not be permitted to reap the advantage.

49. Whether or not the committee can show property in the information does not seem to me to go to the crux of the matter. As for the suggested confidential quality of the information, the evidence thus far does not show that there was some clear embargo placed against onward transmission of the information disclosed to those who attended the meeting of 14th May, in that there is no evidence that the information was released to them on some understanding that it should be kept from any particular judgment creditor or from Mr and Mrs Rooke. Nor is there express evidence that the director who did release the information would not have done so had he contemplated that it would be passed to the judgment creditors, or utilised by them. It may be, therefore, that this is not a breach of confidence case, properly or traditionally so described.

The Equitable Approach

50. But that is not, so it seems to me, the end of the case. The heart of the issue which I must tackle is whether it would be inequitable for me to grant the order, that is, to make the order absolute. Whilst the matter is not free of difficulty, I have concluded that it would be inequitable to do so. I am of the view that the nature of the information and the circumstances in which it came into the hands of the judgment creditors, in the context of the case as a whole, are such as should bite on the conscience of the judgment creditors. Whatever may have been the details of the agreement on 28^th April, it was at least agreed that the company was to be permitted to continue construction projects in order to improve its position with the investor creditors, and it must have been clear to the judgment creditors that, whatever independent course they had determined to pursue, it was the aim of Mr Hayworth and of the committee and of most of the investor creditors to preserve as best they could the assets of the company for the benefit of the investor creditors as a whole, in the hope of an optimum pari passu distribution of assets in due course. It is apparent, also, from the evidence filed by Mrs Rooke that she and her husband were, immediately before the meeting of 14^th May, well aware that the company and the committee were anxious to persuade the judgment creditors to delay or withhold proceedings and viewed the action which had been commenced as detrimental to the interests of the creditor body as a whole. In addition, Mrs Rooke accepts that she had agreed to take no steps which might lead to the company's liquidation.

51. Against that background, whilst one might say that the company and those investor creditors who knew of the pending action had, whether they liked it or not, to swallow the fact that the judgment creditors had, by instituting proceedings, secured for themselves a position of actual or potential preference in relation to the assets of the company, nonetheless it must or would have been obvious to anyone who gave the matter some thought that neither the company nor those investor creditors were likely, willingly, to do anything to aid the judgment creditors in cementing that preference; and that in telling the meeting of 14^th May that company funds had been placed in safe hands for safekeeping Mr Hayworth was providing information of comfort to the investor creditors. He would hardly have contemplated that in disclosing the safe repose of the funds, he was thereby rendering that repose open to immediate disturbance by the judgment creditors. And the judgment creditors must, or ought to have, appreciated that those were the circumstances in which, and the purpose for which, the information in question was disclosed by Mr Hayworth on 14^th May.

52. Put another way, it is my judgment that in such circumstances the reasonable man standing in the shoes of the judgment creditors would have well appreciated that, whatever may have been the motive of the individual who imparted the information to Mrs Rooke and there is no evidence about that he who disclosed to the meeting on 14^th May the information that funds had been placed for safekeeping in the hands of M.K. Lam & Co. would clearly have done so on an assumption that that information would not then be used in the way in which the judgment creditors then used it. It is difficult to believe that either judgment creditor could have thought otherwise upon receipt of that information. It strikes me as inequitable that the information which came into the hands of creditors in these circumstances, after a creditors' committee had been formed, and came into their hands by the good grace of the company director who had been privy, and solely privy, to that information should then be utilized by the judgment creditors to the disadvantage of the investor creditors as a whole.

53. This is not to say that the judgment creditors are precluded from moving against other assets of the company in order to enforce the judgment which they have obtained, but merely that, in the exercise of my discretion, I shall preclude them from moving against these particular assets.

54. It is not in the circumstances necessary for me to deal seriatim with the allegations that Mrs Rooke's affidavits are untrue in material aspects, and evasive. It suffices to say however that they are not contentions with which on the material before me, I am able to agree.

Result

55. Accordingly this appeal is allowed and I shall set aside the order absolute and discharge the Garnishee Order nisi.

56. I make an order nisi that the judgment creditors shall pay the judgment debtor's costs of this appeal and of the application herein dated 22^nd July 1997 for a stay of execution pending this appeal of the master's order dated 17^th July 1997.