CHEUNG SAI LUN v. LAU TAI CHIN FRANCIS AND ANOTHER

HCCW 677/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 677 OF 2004

______________________

____________________

_______________________________________________

REASONS FOR DECISION

_______________________________________________

1.  This is an application by Mr Lau seeking a variation of the Mareva injunction that has been granted against him.  For present purposes, the key question relates to the application for an order that Mr Lau is to be at liberty to obtain payment out of court from the moneys that are presently standing in court, having been paid in pursuant to the order of Madam Justice Kwan of 6 July 2007, as continued by my order of 13 July 2007, for the purposes provided under paragraph 1 of the exceptions to the order, and further, that he be at liberty to obtain payment out of court from such moneys in respect of legal costs that, I said, have been incurred or are to be incurred in various amounts:

(i)	$164,750 in relation to costs relating to the injunction proceedings themselves;
(ii)	$76,500 in relation to legal costs in relation to the present application for payment out or liberty to obtain payment out;
(iii)	$235,833.70 on legal costs in relation to an application for leave to appeal out of time against my judgment of 18 May 2007 in the winding up proceedings; and
(iv)	a sum of $371,000 on legal costs in relation to the actual appeal hearing itself.

2.  The total amount involved in relation to the legal costs alone comes to just under HK$800,000.  And, in addition, under the first part of the application payment out is sought of sums at the rate of HK$15,000 per week to enable Mr Lau to meet his ordinary living expenses. 

3.  I think it necessary to point out at the outset that the current amount standing in court that remains from the proceeds of sale of Mr Lau’s property amount to no more than some HK$238,000- odd.  The reason for this is that the net sale proceeds amounted to slightly over HK$310,000.  But there has already been payment out from those sale proceeds of a total sum of $80,000:  $30,000 representing two weeks of living expenses up to 19 July 2007, and $50,000 on account of legal costs, which it was anticipated would be incurred in connection with the various matters which I have just mentioned. 

4.  The application is resisted by Mr Cheung.  For Mr Cheung, Mr Pun has submitted that to allow the application, whether in whole or in part, would be to defeat the purpose of the Mareva injunction that was granted by Madam Justice Kwan and continued by me.

5.  Mr Pun suggested that the purpose of the Mareva injunction was to ensure that there was a fund available to satisfy the amounts to which Mr Cheung would be entitled after taxation of his bill of costs in the winding up proceedings in which judgment was given in May this year.  With respect, I do not agree that that is the purpose of a Mareva injunction.  The purpose of a Mareva injunction has been stated in a number of authorities which have considered the question of variations to the injunction so as to permit payments to be made by a defendant subject to a Mareva injunction to meet either his living expenses, other ordinary or business expenses, or his legal expenses in connection with the litigation with which he is concerned. 

6.  In all of those cases, which include Iraqi Ministry of Defence v Arcepey Shipping Company SA [1981] 1 QB 65, A v C, noted at [1981] 1 QB 961, certain other unreported decisions of the English Court of Appeal, such as Anglo Eastern Trust v Kermanshahchi (10 December 2002), Southern Cross Commodities Pty Ltd v Martin & Ors (11 February 1986), and Kea Corporation v Parrott Corporation Limited (24 September 1986), and the Hong Kong authority of Yau Chin Wah v Gold Chief Investment Limited & Anor [2003] 3 HKLRD 553, a decision of Mr Justice Ma JA, as he then was, the courts have made it clear that the purpose of a Mareva injunction is not to secure an intending plaintiff, or for that matter a successful plaintiff, in respect of the judgment which he may obtain or may have already obtained.

7.  The purpose is to prevent the injustice that would be caused to the plaintiff or claimant by the defendant being permitted to so deal with his assets as to put them out of the Plaintiff’s reach so that they are no longer available for execution to be levied against.  It seems to me that it is important to draw a distinction between the use by a defendant of his assets for his personal expenditure of a normal and everyday nature, such as living expenses, or for other proper expenses such as everyday business expenses in the case of a company, or legal costs in the case of an individual who is subject to legal proceedings being taken against him.

8.  In the case of expenditure on matters of that nature, the nature of the expenditure is to meet proper expenses which the individual or company concerned can justifiably claim to be part of his or its normal expenses.  In those situations there is no dissipation of assets or injustice to the plaintiff or intending plaintiff as the assets are being used in the ordinary course for the normal expenses of the defendant concerned.  They are not being used or transferred or expended with the objective of defeating the potential claim or actual judgment of the plaintiff.  That, I think, is an important distinction that has to be borne in mind.

9.  In this case, so far certainly as the request for payment out in relation to living expenses is concerned, there can, I think, be no doubt that living expenses and expenditure of a Defendant’s assets, which are otherwise the subject of a Mareva injunction, cannot be said to be in any way contradictory of the purpose for which a Mareva injunction was granted.  The same I think is true, as is shown by the various cases to which I have referred, of legal costs, particularly where those legal costs are reasonable in amount. 

10.  I should point out that I have borne in mind the observations of Mr Justice Robert Goff, as he then was, in A v C, in which he declined to permit the expenditure of assets subject to a Mareva injunction by the defendant in that case on the grounds that there was no evidence put before him as to other sources of funds out of which the Defendant could meet the expenditures that it was sought to make. 

11.  That, however, is a rather different situation from that which pertains in the present case in that Mr Lau has, pursuant to the terms of the Mareva injunction made against him, made disclosure of his assets in Hong Kong.  He has disclosed that, apart from the proceeds of sale of his property, which are presently sitting in court, he has no other assets of substance out of which he can meet daily living expenses or his legal expenses.  It seems from his evidence that he has so far been managing on the basis of loans or assistance afforded to him by friends and family. 

12.  However, it seems to me that given that expenditure on ordinary living expenses or proper legal expenses is in no way an infringement of the underlying purpose of the Mareva injunction, there is no justification for the court to, in effect, force a defendant to have to rely on the charity or indulgence of relatives and friends to meet such expenses where he has funds which, if they were made available to him, he could use to meet such expenses.  Although it has been suggested that there are reasons to doubt whether or not Mr Lau has been entirely frank as to the extent of the assets that he has, I am bound to say that on the material before me I do not think that it is possible to say that there is good ground for suspecting that Mr Lau has other assets readily available to him which he has chosen not to disclose. 

13.  The Petitioner has raised a number of areas which he says are of concern to him.  The first relates to a company called Meta Ink Limited, which was formed by Mr Lau to in effect take over the business formerly run by the company which was the subject of the winding up petition.  Mr Lau’s evidence is that Meta Ink Limited’s business has proven to be unsuccessful and, in effect, ceased a few months after it was commenced in 2004.  This appears consistent with the position that has been taken by Mr Cheung and his legal advisers, because in their application for the ex parte injunction seeking the Mareva injunction that they have obtained, it was suggested in their skeleton argument that Meta Ink was no longer in operation. 

14.  Similarly, although it is suggested that Mr Lau’s wife, Ms Chair, has apparently assets of her own, and questions have been asked as to the source of the funds with which she was able to acquire those assets, it does seem to me that, on the evidence presently available, those assets are not assets of Mr Lau’s.  Mr Pun did indicate that he wished to cross-examine Mr Lau in relation to the state of his actual financial position.  However, this is not an invitation that I was prepared to accede to since it seems to me that in matters such as this it is not appropriate to indulge in cross-examination and a lengthy hearing to determine what should be a relatively short and straightforward matter.

15.  At the end of the day, therefore, it seems to me that on the evidence available the position is that Mr Lau does not have available to him any source to meet the daily expenses other than the moneys in court.  In those circumstances it seems to me that, applying the principles established in the cases to which I have referred, there can be no objection from the point of view of the policy of the Mareva injunction to his being permitted to utilise those funds for his daily living expenses.  I therefore would be prepared to make an order permitting Mr Lau to withdraw from court the sum of $15,000 a week for the purpose of meeting his daily living expenses.

16.  So far as the legal expenses that it is proposed should be paid are concerned, however, I do at this stage have some reservations as to permitting funds to be paid out of court for those purposes.  The difficulty that I have is that whereas in other cases in which payment of moneys otherwise subject to Mareva injunction have been allowed for the purpose of paying legal expenses, there have generally been bills presented by the solicitors concerned for legal services already rendered. 

17.  In the present case, all that I have is a statement of account which effectively seeks payment on account of fees which had not at the time of the statement of account apparently been incurred, or at any rate not incurred in any substantial part.  I simply do not know at this stage what costs Mr Lau has in fact incurred, whether in relation to this application or his application concerning the injunction.  In those circumstances, I am not prepared at this stage to authorise any particular payment out of the moneys in court for those purposes.

18.  So far as the intended appeal against my judgment is concerned, while I would accept that payment of those costs may well be an ordinary expense in the sense that it is one for which funds otherwise subject to a Mareva injunction can be used, it does seem to me that since the application for leave to appeal has not yet been heard and there is no certainty as to whether or not an appeal will actually eventuate, it would not be appropriate at this stage to permit withdrawal of the funds in court for the purpose of paying those parts of the statement of account that have been rendered that relate to these matters.