XCHRX SEVERIN ASIA LTD. v. GREAT UNIVERSE (HONG KONG) LTD.

HCA2322/99 and 5063/99

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NOS.2322 AND 5063 OF 1999

-------------

-------------

-----------------------

J U D G M E N T

-----------------------

1. The Plaintiff obtained an injunction before Findlay J on 14th July 1999 restraining the Defendant from removing any of its assets out of the jurisdiction, or disposing of, or charging, or otherwise dealing with any of its assets in the jurisdiction save and in so far as the unincumbent value of such assets exceeds HK$4 million, in particular, properties then identified in paragraph 2 of the Order with the usual provisos as to legal and other expenses.

2. This morning, the Defendant, on the Plaintiff's application to continue the Mareva, opposed the continuation. Mr Burney, for the Plaintiff, has submitted that the circumstances justify the continuation of the Order. He reminds me that the subject matter of these two sets of proceedings in the High Court are in respect of dishonoured cheques which total just under HK$3.5 million, and that the Defendant admits that it has countermanded payments on these cheques and that the Plaintiff has delivered the goods it was supposed to deliver.

3. The Defendant, however, alleges that the Plaintiff was in breach of an exclusive agency agreement and that the goods delivered were defective. The Defendant has a sizeable counterclaim which, in fact, overtops the Plaintiff's claim.

4. Mr Burney submitted that the Court's approach should be as follows and that I should consider the following matters :

5. On the basis of the causes of action pleaded-

1) whether the Plaintiff has a good arguable case against the Defendant;

2) whether there are grounds for believing that the Defendant has assets in the jurisdiction;

3) whether there are grounds for believing that there is a risk that the Defendant may deal with those assets so that they may not be available to satisfy any judgment against it; and

4) whether it is just and convenient to grant the injunction.

6. The injunction order initially specified two properties. The Plaintiff now accepts that they were sold to discharge part of the Defendant's indebtedness to the Agricultural Bank ("the Bank"), which it was perfectly entitled to do. The evidence suggests that the Defendant is indebted in the sum of over HK$24.5 million to the Bank. The two properties already sold - which were intended to be covered by the original injunction - netted a sum of under HK$12 million. The Plaintiff now seeks to restrain the Defendant from disposing of a third property - a property in Redhill Peninsular - which was apparently purchased for about HK$40 million odd, but which is now worth about half of that sum.

7. The Defendant's case is that it is entitled, if it wants to, to sell the Redhill Peninsular property to pay off the Bank; and that on the material before the Court, the Bank is still owed in excess of HK$12 million.

8. Assuming, as I am prepared to do, that the Plaintiff has a good arguable case on the merits of the action - and obviously the Defendant has assets in the jurisdiction - the question then becomes whether there are grounds for believing that there is a risk that the Defendant may deal with that asset so that it would not be available to satisfy any judgment against it.

9. The Defendant submits that it is perfectly entitled to repay the Bank, and it relies on its substantial counterclaim against the Plaintiff which, Mr Chong tells me, is a company in Hong Kong with an issued capital of HK$10,000.

10. Mr Burney submits that there are grounds for believing that there is such a risk and he refers to a number of authorities to demonstrate that it is not necessary for the Plaintiff to show a nefarious intent on the part of the Defendant. I accept that it is not necessary to show such an intent, and the question is whether, on the whole of the evidence, the refusal of a Mareva injunction involves a real risk that the judgment in favour of the Plaintiff would remain unsatisfied.

11. I have to, bear in mind, however, that a Mareva injunction, or the Mareva approach, does not give the Plaintiff any security to assets of the Defendant, nor does it allow a plaintiff who has not obtained a judgment any priority in terms of enforcement against the Defendant. A defendant against whom a claim is made is entitled to use its assets as part of its ordinary business and to pay off just and legitimate debts. A plaintiff is not entitled to direct how the defendant should carry on its business, or the order in which the defendant must pay off its debts.

12. Although I have found that the Plaintiff has an arguable case on the merits on the dishonoured cheque, I note that there is a substantial counterclaim, I note also that the Defendant is a fairly substantial company with monthly sales of over HK$10 million; and I note that the proceeds of sale from the two earlier properties went straight to the Bank, so that the fact that two earlier properties had been sold is no indication that the Defendant is going to deal with its assets so as to delay, or defeat, or obstruct the Plaintiff.

13. In all the circumstances, I do not believe that the Plaintiff has made out an adequate case on the standard indicated in Ninemia Maritime Corpn v. Trave Schiffahrtsgesellschaft m.b.h. und Co. K.G. [1983] 1 WLR 1413. In my judgment, it would be wrong to grant the injunction now in respect of the Defendant's dealings with the third property - the Redhill Peninsular property - and the Plaintiff's summons for continuation of the injunction order made by Findlay J on 14th July is dismissed.

[Submission on Costs]

14. I have heard the parties on the costs aspect of this application. I think it is fair to say that in these matters, quite often if the defendant succeeds, the usual order is for the defendant's costs to be paid in any event. Mr Chong seeks to persuade me that in the circumstances of this case, the Defendant ought to have its costs in any event. I have given this matter some thought. I believe that this is a slightly different case. I have weighed it during the course of the hearing and it was not entirely clear-cut. I think the fair order would be that the Defendant should get its "costs in the cause" and not "in any event".