XCHRX CAC BRAKE CO. LTD. ZHUHAI v. BENE MANUFACTURING CO. LTD. and Others

1998 No. A3041

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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J U D G M E N T

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1. This is an application by way of summons by the 1st, 2nd and 3rd Defendants for an order that the injunction granted herein by the order of the Honourable Mr. Justice Yeung dated 27th February 1998 and continued by the order of the Honourable Mr. Justice Barnett dated 6th March 1998 herein be discharged and that the costs be to the 1st, 2nd and 3rd Defendants.

2. By writ of summons issued on 27th February 1998 the Plaintiff claims inter alia against the 1st and 2nd Defendants damages for conspiracy and fraud. 24 overt acts pursuant to such conspiracy are alleged against the 2nd Defendants and are set out in paragraph 22 of the Plaintiffs statement of claim.

3. On 16th March 1998 the 2nd Defendant was apparently charged by the Commercial Crimes Bureau of the HKSAR Police Force with one count of conspiracy to defraud and with one count of fade accounting which charges I am told will be tried in the District Court. Those charges, I am also told relate specifically to those matters which have given rise to these proceedings. Whether or not those criminal proceedings will give rise to an application for a restraint order under Sections 14 and 15 of the Organised and Serious Crimes Ordinance, Cap. 455 is not a matter which need concern me.

4. I adjourned this application on Friday last until today to give me the opportunity, which I had not then had, of reading all the papers in this case particularly relative to the allegations of fraud and the participation of each of the Defendants in that fraud which allegations are neatly encapsulated in the affidavit of Patrick Ciaran Rattigan sworn on 27th February 1998. I considered it necessary to do this because the Plaintiff's opposition to the Defendants' application was clearly founded upon those applications from which I was invited to draw a singular inference.

5. On Friday I was presented with very helpful skeleton arguments in writing prepared by Mr. Grossman Senior Counsel leading Mr. Sham for the Defendants and by Mr. Lamplough Solicitor for the Plaintiffs.

6. What is plainly at issue is whether or not there is evidence of an appreciable risk that the Defendants will dissipate their assets.

7. Mr. Grossman's argument (having set out the background to the application and the law applicable to Mareva injunctions) is as follows:-

1. The Plaintiffs allegations of fraud are largely based upon a statement by an alleged co-conspirator which allegations are disputed by the Defendants - and that it is not for me in considering this application to seek to resolve that dispute and

2. There is no evidence of any risk of dissipation of assets by any of the Defendants and nor can such be inferred simply from the papers before me.

8. As to the 2nd of those submissions (having summarised the past and present positions of the 1st and 3rd Defendant companies in both of which the 2nd Defendant has a 50% shareholding) Mr. Grossman argues - and I quote from his skeleton argument.

"Apart from relying on an inference to be drawn from the nature of the alleged fraud, the Plaintiff has failed to adduce any evidence to show that there is any risk at all that the Defendants would, if not restrained, dissipate or remove their assets from the jurisdiction. The only purpose of the Plaintiffs' in junction is apparently to obtain security in advance of judgment for the sum it is now claiming ... there are no objective facts from which it may be inferred that the Defendants are likely to move assets abroad or dissipate them. The Plaintiffs unsupported statements and expressions of fear should be given little or no weight" - and in this regard Mr. Grossman refers me to O. Regan v. Iambic Productions Ltd. 1989 cited in the Supreme Court Practice 1997 Edition at page 516 and which is reported at page 1378 of the New Law Journal October 13th 1989.

9. Mr. Grossman also submits that Mareva jurisdiction does not extend to cover such an application and he quotes part of Lord Justice Kerr's judgment in Z Ltd v. A-Z [1982] 1 QB 558 at 586 where appears the following:

"The great value of this jurisdiction must not be debased by allowing it to become something which is invoked simply to obtain security for a judgment in advance and still less as a means of pressurising defendants into settlements."

10. Mr. Lamplough for the Plaintiff chose not to grasp that nettle directly but it is implicit in all that he has said to me that his submission is that because of the nature of the alleged fraud (or of the fraud as he puts it) and the 2nd Defendants part in it there is a real risk that he, with or without using the corporate vehicles provided by the 1st or 3rd Defendants will dissipate his assets.

11. Mr. Lamplough says that the Plaintiff has a strong arguable case against each of the Defendants and I do not doubt that for a moment based upon what I have read in the papers before me - in so far as it relates to the statement of claim; but it seems to me that I require to be satisfied as to more than that if a continuation of the injunction is to be justified. The question is - and here I refer to para. 11 of Mr. Lamplough's skeleton argument - whether I can draw a reasonable inference pointing to dissipation from the mere allegations of fraud, which fraud has yet to be proved.

12. I have given this application the most anxious consideration. I am very conscious of the requirement - (as stated by Kerrs L.J. in the 'Niedersachsen') that the Plaintiff must adduce 'solid evidence' to support his assertion that there is a real risk of the judgment or award going unsatisfied. In this context I am also aware, as it is stated at page 51 of Mareva Injunctions Law and Practice by Gee and Andrews (1st Edition) that since each case depends on its own facts it is impossible to lay down any general guidelines as to how and when this evidential burden will be satisfied. Nevertheless the 9 factors set out on pages 51 and 52 are of assistance - and none of those save perhaps No. 9 are directly relied on in the present case by the Plaintiff.

13. It seems to me that what Mr. Lamplough is seeking to persuade me to do is not to resolve disputed questions of fact - but to assume that the Plaintiff's view of those facts is correct and then proceed to draw from those facts - an inference of dissipation. That it seems to me is, with respect, to endeavour to put the cart before the horse and what I require to persuade me that there is a real risk of dissipation is something more than a detailed synopsis of an alleged fraud - something along the lines suggested by the 9 factors to which I have made reference.

14. Beyond that detailed allegation of fraud (or wrong doing on the part of the 2nd Defendant) I can find no evidence in the papers before me of an intention on the part of any of the Defendants (and in reality this means the 2nd Defendant) to dissipate such assets as may be available and that being so I am satisfied that the present application must succeed.

The injunction granted by the order of the Honourable Mr. Justice Yeung dated 27th February 1998 and continued by the order of the Honourable Mr. Justice Barnett dated 6th March 1998 is hereby discharged.

(C. G. Jackson)

Judge of the Court of First Instance