A.M.D. PACK RACK LTD AND OTHERS v. THE BARRONS LEASING CO LTD AND OTHERS

1991, No. CL-195

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H E A D N O T E

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There is a discretion to decline to intervene to discharge injunctive relief on the ground of inadequate ex parte disclosure where : dishonesty does not appear to be involved; it is by no means obvious that there has been any failure to make material disclosure; it would be necessary to comb through a large body of disputed evidence to discern whether adequate disclosure had or had not been made; and the nature of the alleged failure is not so serious as to demand immediate investigation.

1991, No. CL-195

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

COMMERCIAL LIST

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BETWEEN

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J U D G M E N T

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1. By an order made ex parte on December 10, 1991, my brother Wong granted Anton Piller and Mareva relief against, among others, the 3rd defendant. This is the 3rd defendant's application for the discharge of such relief against it.

2. The application is made on the ground that full and frank disclosure had not been made to my brother Wong and, further or alternatively, that he had been positively misled as to the material facts.

3. I say at once that I see no basis on which the allegation that my brother Wong had been positively misled can be made out. I cannot lie quite so brief on the question of want of full and frank disclosure. But I will, nevertheless, be as brief as I can for this reason. One of the matters - perhaps the principal one - in respect of which it is said that full and frank disclosure had not been made is the authority of the plaintiffs' solicitors to commence and pursue these proceedings. And whether this application succeeds or fails, an application to strike out for want of authority may well be made in the future. So I should avoid saying anything which might prejudice any such future application.

4. There are other grounds as well. These are summarised in paragraph 3 of Mrs Oxenburgh's third affidavit, the contents of which I will not rehearse here. And even those grounds could arise in future applications. So they too have to be dealt with carefully so as to avoid prejudicing any such application. If such enforced brevity appears to do less than justice to counsel's arguments, then that is particularly unfortunate. For I have nothing but gratitude and admiration for their assistance, especially as their task was made more onerous by reason of the fact that, my having taking ill on the afternoon before this application began, my ability to read the papers beforehand was greatly limited.

5. The background to this matter - insofar as it appears necessary to state it - is as follows.

6. The plaintiffs - and there are hundreds of them - are all resident abroad, mainly in Canada. Most of them are individuals, although there are a few companies dotted about amongst them. Each of them - wisely or unwisely - purchased marine cargo containers. These were then leased to the 1st defendant, a Hong Kong company, which, it would seem, subsequently sold its business to the 2nd defendant, a British Virgin Islands company. That was in July of 1990; and in the following month, August 1990, the 6th defendant, another British Virgin Islands company, was brought into the picture as someone offering to purchase the plaintiffs' containers. It was said that the 2nd. defendant did not intend to continue with an "individual owned container rental programme". I will not attempt to summarize what happened upon such introduction of the 6th defendant as a purchaser. There remains a great deal of controversy over what happened and what was or was not done to undo what happened.

7. It is the plaintiffs' case that the 1st, 2nd and 6th defendants, all companies, were controlled by the 4th defendant, an individual. The 3rd defendant, the applicant before me, is a Bermuda Company. The plaintiffs say that it too was controlled by the 4th defendant. The case against the 3rd defendant is that it has assisted the 1st, 2nd and 6th defendants to convert the plaintiffs' containers by leasing them to third parties and collecting the rental for the same. These containers are now well and truly spread across the world; and the accumulated and accumulating rental - in the belief of the plaintiffs and in the phrase of their leading counsel, Mr Thomas - constitute a "pot of gold" here in Hong Kong.

8. The Mareva relief is in respect of the containers themselves and the assets in Hong Kong up to US$1.5 million. The containers are the plaintiffs' property subject to certain arguments which I need not go into here. And as far as the assets are concerned, one remembers that the claim is in regard to rental actually collected.

9. The Mareva relief - if this discharge application on behalf of the 3rd defendant succeeds - will simply go as far as the 3rd defendant is concerned. As far as the Anton Piller relief is concerned, Mr Faulkner for the 3rd defendant has been unable to explain precisely how one would unscramble what has happened under the Anton Piller order if this application succeeds. But he has pointed out that certain documents might be returned.

10. Now, the most important thing seems to me to be the question of authority, followed by the position of the plaintiffs and the value of any undertaking in damages given on their behalf authority apart. There is some irony here because if the action is not authorized, then, on the basis of a breach of warranty of authority, the undertakings may be worth quite a lot against the solicitors for the plaintiffs. But if the action is authorized, then of course the undertakings are only worth as much as the plaintiffs are worth; and to that must be superadded the difficulty of enforcement overseas. I say nothing about fortification at this stage because an application for the same may come in the future.

11. A number of things have been said including this: that the learned judge was not even told that these were foreign plaintiffs. Frankly, on all the material before him, I cannot imagine for one moment that the learned judge would be unaware that the majority of these plaintiffs, if not all of them, were resident abroad. Quite apart from anything else, it was said that Mr Kadler was resident in Canada and that he was ``co-ordinating`` the litigation on behalf of all the plaintiffs. Why anyone would think that a Canadian resident would co-ordinate litigation in Hong Kong on behalf of Hong Kong residents is more than I am able to understand. And I am sure that the learned judge would not have imagined that to be the position either. I might add that the Hong Kong solicitors were approached, it was made clear, by Canadian solicitors.

12. As far as authority is concerned, it is quite impossible to say that the possible difficulties in regard to instructions from the various plaintiffs was not something which the learned judge would have gathered. There was a large group of persons spread over no doubt a large area overseas. Of course a judge of this court would place considerable reliance on solicitors who are officers of the same court. No solicitor - whether he is thinking of his duty to the court or whether he is thinking of his own position, and I suppose that any sensible solicitor thinks of both - is at all likely to commence proceedings if he was not confident that he was authorized to do so.

13. It seems to me that such difficulties as existed generally and in regard to the value of the undertakings in particular were fairly before the learned judge.

14. The duty of a plaintiff seeking ex parte relief to make full and frank disclosure was described by Vice-Chancellor Browne Wilkinson in Tate Access Inc. v. Boswell [1991] 2 WLR 304 at P. 319H as the ``golden rule``; and so it is.

15. But it is a reality of life and of litigation that some of the most cherished principles of the law can be turned into impediments to justice if one simply puts them on a pedestal without realising that they are working tools and not decorations. That seems to be what the learned Vice-Chancellor had in mind when he referred (at p.320 E-F in the same case) to ``a growing practice of combing through large volumes of, often disputed, evidence with a view to showing that there had been some failure to make a material disclosure``. How was the golden rule to be preserved while discouraging that growing and obviously unsatisfactory practice (which I have noticed here even as the learned Vice-Chancellor noticed in England)? A tentative answer was suggested by the learned Vice-Chancellor (at p.321 B-C of the same case) where he said this:

"It may be that the reconciliation between the public interest in upholding the golden rule and the public interest in ensuring that the courts are not clogged with long interlocutory hearings is that the investigation of the circumstances in which the ex parte order was obtained should take place at an interlocutory stage only where it is clear that there has been a failure to make a material disclosure or where the nature of the alleged failure is so serious as to demand immediate investigation."

I would not be so bold as to convert into a rule what the learned Vice-Chancellor put forward as a suggestion. Nevertheless, leaving aside any general rule, I am sure of this. There is a discretion to decline to intervene to discharge injunctive relief on the ground of inadequate ex parte disclosure where: dishonesty does not appear to be involved; it is by no means obvious that there has been any failure to make material disclosure; it would be necessary to comb through a large body of disputed evidence to discern whether adequate disclosure had or had not been made; and the nature of the alleged failure is not so serious as to demand immediate investigation. Even at worst for the defendants, this case is such a case.

16. In fact, I am on the whole left of the view that the plaintiffs' legal advisers have on their behalf acted not only honestly - the contrary is not suggested and I would not have been disposed to accept any suggestion on the contrary anyway - but also reasonably by reference to what is to be expected in all the circumstances. In saying that, I am in no way seeking to lessen the heavy burden of making full and frank disclosure when a judge is being asked to act in the absence of the party against whom he is asked to order relief, especially draconian relief. But one has to look at the realities of litigation as they apply in each case.

17. It is my view, on the whole of the material before me, that the picture which was placed before my brother Wong was objectively a fair one.

18. But even if I was not of that view and felt that there had been some inadvertent failure to place before him all that should have been placed before him, I would not have been inclined, in all the circumstances of this somewhat complicated matter, to discharge any part of the relief granted. I do not forget these matters. If the plaintiffs have really got a case on want of authority, it is much better that the point be taken fairly and squarely in an application to strike out. It seems to me unreal to say that there is a point of want of authority but that a massive action should be allowed to continue without challenge to authority, although some interlocutory relief should be discharged on the basis that the plaintiffs did not, before the judge dealing with the matter ex party, deal adequately with the very thing which the defendants themselves are not interested in taking fairly and squarely. If the defendants are interested in taking the point or want of authority fairly and squarely in an application to strike out, then all of this would be subsumed anyway. Nor do I forget that insofar as there may be other difficulties with the plaintiffs' case, other applications for variation or discharge can be made. And I think they should be made like that so that everybody can focus on what really matters without the artificiality of trying to squeeze everything under the umbrella of failure to make full and frank disclousre. I am sure that better justice would be achieved that way if for no other reason than because better attention and focus would then exist.

19. Finally, I do not forget that if the undertaking in damages is thought to be insufficient protection in the absence of fortification, then an application for fortification can be made. Of course, in an application for fortification, the court has to take a broad view of what amount to an order by way of fortification to say that the party seeking fortification some material before the court to assist it figure.

20. For all those reasons - unhappily expressed perhaps - I come to the conclusion that this application must be dismissed. That is of course without prejudice to other applications which this defendant or other defendants may wish to make in the future. I have identified some of those possible applications. There may be others.

[Submissions on costs]

21. The summons seeking discharge will be dismissed with costs. Costs are not resisted; but the application that those costs be taxed and paid forthwith is resisted. Nevertheless, I do propose to order that the plaintiffs be at liberty to tax their costs forthwith and recover them immediately upon their being taxed. It is not in every interlocutory application that one would allow such an order even in a case of this complexity. But this seems to be quite a fundamental application that I have now resolved. In all the circumstances, I think that the order for taxation and payment forthwith is justified. So I make it.

22. A certificate for two counsel is sought; and Mr Faulkner has, in a very reasonable manner, pointed out that it may well be that the defendants' case could have been adequately dealt with by junior counsel. There are very few cases which a junior counsel cannot deal with and deal with adequately. Nevertheless, in all the circumstances, I think that the briefing of two counsel, one of them leading counsel, for the defendants.was reasonable. So I propose to allow a certificate for two counsel. It is a fact that junior counsel for the defendants was not present in court for the second day, apparently because there was some other aspect of the case which had to be dealt with outside the court. Nevertheless, the fact that he was not present in court is something which I note for the benefit of the taxing master to deal with as he sees fit after hearing argument on the significance of that absence. Mr Thomas is perfectly happy that I should note that; and I do note it.