UES INTERNATIONAL (HK) LTD v. MARITIMA MARUBA SA

HCA 632/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 632 OF 2011

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D E C I S I O N

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1. There are 2 Summonses before the court. One taken out by the plaintiff for leave to file an Amended Reply (“AR”) and a supplemental witness statement from its only witness, Ms Gao Shanjuan (“SWS”). The other Summons concerns the defendant’s application to discharge an ex parte Mareva injunction granted against it on 7 April 2011 (“Injunction”). In addition, the pre-trial review of this action has been adjourned to be heard with these Summonses.

2. At the end of the hearing, I allowed the plaintiff’s application but awarded costs against it on indemnity basis. Further, in light of the imminence of the trial (to take place in about 6 weeks on 18 December 2013 with 3 days reserved), I gave a number of directions for the further conduct of these proceedings with a view to preserving the trial date.  The reasons for granting the plaintiff’s application and the decision on the discharge application are as follows.

3. The background to this action had been set out in a decision of this court dated 7 May 2013 (“Decision”).  I do not propose to repeat the same here.

New discovery

4. The 2 Summonses are very much related to the same matter, namely, the recent discovery of 14 documents by the plaintiff by way of its 1^st Supplemental List of Documents dated 28 August 2013 (“1^st List”).  In response to certain complaints of the defendant, a 2^nd Supplemental List of Documents dated 25 October 2013 was filed by the plaintiff (“2^nd List”) disclosing a further 19 documents. 

5. The documents contain in the Lists relate to a key issue in this action, namely, whether the rights under the 12 leasing agreements (“Agreements”), which underpin the plaintiff’s cause of action, have been assigned (see paras 2 and 4 of the Decision).  The defendant contends that if the plaintiff has no right under the Agreements, it has no locus to sue in this action.  It is common ground that this is one of the main issues to be tried in this action. 

6. The existing pleading of the plaintiff is that only 7 of the 12 Agreements involved an assignment, ie, there were 7 assignments.  Six of the assignments did not name any assignee and 1 named Cosmos Palace Investments Ltd as assignee. 

7. Paras 6 and 7 of the Reply pleaded as follows:

“…there was no absolute assignment in respect of the 7 of the Leasing Agreements concerning South Atlantic (“said 7 Leasing Agreements”).

   PARTICULATRS

1)  In 6 out of the said 7 Leasing Agreements, the 6 corresponding Notices of Assignment did not name any assignee.  In fact, there had not been any assignment of rights and benefits by the Plaintiff in those 6 Lessing (sic) Agreements at the material time.  South Atlantic signed 6 the (sic) corresponding Acknowledgments to acknowledge that there was no assignee in the aforesaid 6 Notices of Assignment.

2)  In respect of the GVC/MRB-07-016-LA, it was an assignment by way of charge only from the Plaintiff to [Cosmos].  South Atlantic acknowledged the existence of aforesaid security interest and denied any absolute assignment in respect of GVC/MRB-07-016- LA by signing the corresponding Acknowledgement which provided that ‘we further acknowledge that apart from the security interest granted in favour of the Assignee, no encumbrance or other security interest may be created or permitted to subsist with respect to the Agreement and all monies from time to time payable by us under or pursuant to the Agreement.’

7.  Further or in the alternative, the each of the Notices of Assignment provided that South Atlantic ‘shall continue to pay all Monies and other amounts assigned to the Assignee pursuant to the Assignment to the Lessor until either the Lessor or the Assignee notify you of the occurrence of an Event of Default (as defined in the Assignment).’  South Atlantic agreed ‘to pay all Monies (as defined in the Notice of Assignment) in accordance with the instructions in the Notice of Assignment.’ The Plaintiff or Cosmos Palace has not notified South Atlantic of any Event of Default.  In the premises, the assignments (if any) have not been crystallized and payment by South Atlantic to the Plaintiff is good discharge for any sums owed under the said 7 Leasing Agreements.”   

8. In short, under para 6 of the Reply, the plaintiff’s case was that there was no assignment in respect of the 6 “blank” assignments.  The 7^th assignment was only a charge.  I have been informed by Mr Houghton SC, who appeared for the plaintiff with Mr Nip, that the 6 “blank” assignments were never used. 

9. Further, according to para 7 of the Reply, South Atlantic had to continue to honour its payment obligation under the relevant Agreements in the absence of any event of default and there was no such event.

10. Before I deal with the change of the plaintiff’s case to reflect the new documents, I shall deal with a number of irregularities in the practice and procedure adopted in this case.

Irregularities of practice and procedure 

11. The Reply was verified by a statement of truth made by the plaintiff’s solicitor.  It is extraordinary for a professional advisor to be performing such a task for his client.  Rubric 18/20A/4 of the Hong Kong Civil Procedure 2014, vol 1 (“HKCP”) states as follows:

“Identity of verifiers - … Parties must be careful to identify and select the appropriate person(s) who are truly able to speak to the truth of the pleadings or particulars of a pleading which he is (or they are) thereby verifying.

  For example, care should be taken to identify and select verifiers who should ideally also be available and willing to become that party’s eventual witness (or one of them), in order to establish and make good the truths verified by him, stand by his oral testimony, as well as being competent to defend the truths he has verified through cross-examination.”

12. Solicitors are plainly not the appropriate person to verify the pleading of their client.  I note that Ms Gao has provided a Shanghai address.  However, with modern technology, distance or location of witness is no longer an excuse for not having things done by the right person. 

13. I regret to say that this is not the only inappropriate action taken by the plaintiff’s solicitor.  On the material before the court, the plaintiff’s solicitor has made a total of 7 affidavits on behalf of the plaintiff, including the one which grounded the Injunction (“Tsui 1^st”) and those in relation to the present Summonses.  Some of the contents of the affidavits are highly controversial and some of which are submissions made to advance the case of the plaintiff.  It cannot be the role of a professional advisor to give evidence on contentious matters in respect of which he may be subject to cross-examination. 

14. Rubric 41/5/4 of HKCP states as follows:

“Solicitors, duty of – A solicitor who has innocently put on the file an affidavit which he discovers to be false, owes a duty to the court, if he continues to act as solicitor, to put the matter right at the earliest moment (Myers v Elman [1940] AC 282). He may be ordered to pay costs of proceedings where his managing clerk is guilty of misconduct in preparing affidavits (ibid.).

  An affidavit should where possible be sworn by the person with the most direct knowledge of the matters deposed to.  This will usually be the party rather than his solicitor.”

15. In my view, solicitors should only give evidence on behalf of their client as a matter of exception which can be justified.  As an example, where documents were served by a solicitor, it would be proper for him to make an affidavit to verify that matter.  However, even where the client is abroad and his affidavit cannot be perfected in time, a draft of the same can be exhibited to that of his solicitor.  As will be seen below (para 56), a failure to adhere to the proper practice and procedure can be detrimental to the administration of justice.

16. This same fault has been committed by the defendant’s solicitor.  She has made no less than 8 affirmations on behalf of the defendant.  Again, some of the contents are highly controversial and the affirmations contain much submissions.  This is a matter which is so widespread that this court has found it necessary to advise solicitors to adhere to the rule on a regular basis. However, such advice has simply fallen upon deaf ears. 

17. From now on, solicitors may be required to explain to the court why it is proper for them to make an affidavit on behalf of their client.  In the absence of a satisfactory explanation, the costs of the evidence may be disallowed by the court. 

18. Furthermore, the plaintiff’s solicitors have not complied with the Practice Directions concerning the maximum amount of papers which should be contained in a lever-arch file.  Para 4(4) of PD5.4 on Preparation of Interlocutory Summonses and Appeals to Judge in Chambers for Hearing (I erroneously referred to PD5.6 at the hearing) states as follows:

“(4) All the documents (with the exception of transcripts) must be bound together in lever-arch files or ring-binders. Lever-arch files and ring-binders must not be over-filled (and should never include more than 250 pages) and care must be taken to ensure that the rings close and fit properly so that the pages can be turned over easily. ...”

19. There are good reasons for such directions.  An over-filled lever-arch file is very difficult to use.  The excessive amount of papers tends to damage the file.  More importantly, an excessively heavy file can cause injury to the user.  However, the non-compliance of para 4(4) is so widespread that this court has found it necessary to raise the matter every week, but to no avail. 

20. The situation is simply unacceptable.  It is the court’s duty to uphold the proper practice and procedure.  When constant advice produces no improvement, there is little choice but to impose costs sanction. To be effective, such sanction has to be significant.  In the premises, I order that half of the costs of the hearing bundles should be borne by the plaintiff’s solicitors.  Their client is not responsible for the preparation of the bundles and therefore the sanction must fall on them.

Change of plaintiff’s case 

21. Returning to the plaintiff’s case, paras 6 and 7 of the Reply are reflected in Ms Gao’s witness statement.  In addition, Ms Gao’s evidence is that the 6 “blank” assignments were “sent out by the relevant colleague in the Marketing Department of the Plaintiff just following a set of precedent documents”. 

22. I should add that the plaintiff’s case and its evidence in respect of the 7 assignments was an important part of the decision of this court in rejecting the defendant’s O14A application – see para 14 of the Decision.

23. It appears from the documents disclosed in the Lists that the plaintiff’s case on the assignment of the Agreements is at best highly misleading.  Save for 2 of the 12 Agreements, each one of them had in fact been subject to an assignment. 

24. As a general picture, the assignments were made as part of a number of complex financial arrangements where loans were taken out by plaintiff or companies related to it.  The assignments were made as security for the loans.  At the same time, there were management agreements put in place under which the plaintiff would continue to manage the Agreements, including the collection of charges thereunder.  In some cases, the interest in the Agreements was re-assigned to the plaintiff.  The details concerning the assignments can now be found in the draft AR.  However, there is no disagreement with the foregoing summary as a general picture.

25. To underscore the complexity of the financial arrangements, Mr Brown, who appeared for the defendant, has summarised the new evidence in relation to 4 of the Agreements which have been referred to as the “Four Bayer Leases” as follows:

“(1)  P entered into a loan with Bayerische Hypo-Bank Vereinsbank AG (“Bayer”) to refinance the purchase of certain containers.

(2)   On 18 September 2008, P gave Bayer an assignment of rights relating to the Four Bayer Leases by the Assignment of Lease Agreement.

(3)   On 27 March 2012, UES Holdings took over P’s obligations in relation to the loan from Bayer pursuant to the Transfer Agreement.

(4)   On 8 May 2012, (ie after the proceedings were commenced), the containers that were the subject of the Four Bayer Leases were then transferred from P to UES Holdings through operation of the Deed of Transfer.

(5)   The Deed of Transfer gave P the right to enforce UES Holding’s rights.

(6)   On 10 December 2012, pursuant to the Security Agreement, the Four Bayer Leases were reassigned to UES Holdings.

(7)   Pursuant to the Security Agreement UES Holdings acknowledged that Bayer was the legal owner of the containers while UES Holdings was the “economical owner” of the containers.”

Plaintiff’s Summons

26. In light of the facts as revealed by the new documents, it is hardly surprising that the plaintiff would like to amend its case and to adduce a supplemental statement from Ms Gao.  Without these material, the real dispute over the assignment will not be before the court at the trial. 

27. Mr Houghton endeavoured to downplay this very late application by submitting that some of the documents only came into existence recently and that the plaintiff’s case remains unchanged.  With respect, there is no merit in the submissions.  Only 8 documents came into existence after this action was instituted on 8 April 2011.  They do not begin to excuse the plaintiff for advancing a false case in the first place.

28. As regards the alleged consistency of the plaintiff’s case, it was said that in respect of 10 out of the 12 Agreements, P had and has the right to lease out the containers by virtue of its position as manager.  In respect of the remaining 2 Agreements, the plaintiff leased out the containers as owner thereof.  With skill and attraction, Mr Houghton argued that the new documents are of little relevance in respect of the plaintiff’s claim against the defendant which is based on guarantee contracts.  However, such argument ignores the technical defences which may be marshalled by the defendant based on the new documents. 

29. Mr Brown has helpfully set out in his submissions a number of issues which have arisen from the new documents on the Four Bayer Leases, which are set out below with modifications:

“(1) The assignment in the Assignment of Lease Agreement is described as being both ‘absolute’ and ‘as security’. Whether a particular instrument creates an absolute assignment (whether legal or in equity) or an assignment by way of charge only, is a question of construction of the relevant instrument taken as a whole (Court Line Ltd v Aktiebolaget Gotaverken (The ‘Halcyon the Great’) 1984 1 Lloyd’s Rep 283 at 288 per Staughton J). The fact that an assignment is expressed to be by way of security is not itself sufficient to make it by way of charge only.

(2) If the Assignment of Lease Agreement creates an assignment in equity then Bayer must be a party to the proceedings (Three Rivers DC v Governor and Company of the Bank of England [1996] QB 292 at pp 307-308).

(3) P maintains that it is enforcing UES Holding’s rights as its agent and is entitled to do so under the terms of the Deed of Transfer. However, UES Holdings had already assigned ‘any and all its claims under the lease agreements’ to Bayer pursuant to the terms of the Transfer Agreement. It is therefore not clear what rights remained with UES Holdings, that it could direct P to enforce on its behalf.

(4) For rental accrued before 8 May 2012 (ie before the containers were transferred to UES Holdings), P is presumably suing in its capacity as lessor. For rental incurred after 8 May 2012, P is presumably suing in its capacity as agent for UES Holdings. P is not entitled to unilaterally change the capacity in which it sues (Bexhill UK Limited v Abdul Razzaq [2012] EWCA Civ 1376 at §66).

(5) While it is clear that the Court is required to consider a number of documents in conjunction to come to a view on their proper construction, it cannot do so because:

(a) The Assignment of Lease Agreement is governed by German law.

(b) The Security Agreement is governed by German Law.

(c) The Transfer Agreement is governed by German law.

(d)  Although the actual assignment between UES and Bayer is not discovered, it is likely that it is governed by German law, as the obligation to execute the assignment was created under the Transfer Agreement which is governed by German law.”

30. Mr Houghton has fairly accepted that these are, prima facie, arguable points. 

31. The only explanation advanced for this late application has been set out in para 3 of the 6^th affidavit of Mr Tsui as follows:

“In the course of preparing for the pre-trial review on 2 September 2013 and the trial generally, the Plaintiff through its solicitors sought advice from Counsel as to whether certain documents in its possession are discoverable. Pursuant to Counsel’s advice, the Plaintiff has filed a supplemental list of documents disclosing these further documents. These documents concern the issue of assignments of certain of the Leasing Agreements, which is a matter of contention at trial.”

32. The explanation is wholly unconvincing.  There is no attempt to provide the court with a full picture.  The relevance of the issue of assignment has been identified from day one.  It was addressed in Tsui 1^st purportedly in compliance with the plaintiff’s duty to make full and frank disclosure to the court.  I should return to this issue below on the defendant’s discharge application.  There is no evidence adduced by the plaintiff as to when it realised that the discovery which had been made was inadequate.  I do not accept that it was necessary to wait for counsel’s advice for such inadequacy to be appreciated.  In any case, there is no explanation as to why the advice was not sought well before the PTR when most of the documents in question have been in existence for a considerable period of time. 

33. Normally, failure by an applicant to provide a proper explanation for his default may well justify a refusal by the court to grant relief to him.  However, the interest of justice will not be served if this application is declined.  The defendant has not been able to demonstrate any real prejudice that it will suffer if this application is granted.  I bear in mind the principle stated in VCS Building Products Co Ltd v Kono Insurance Ltd, unerp, HCA 947/2005, 9 September 2009 at para 22:

“Absent any real prejudice, the case must be decided upon the general principle that a court of law seeks to adjudicate on the real issues and disputes between the parties and, if possible, technical and procedural rules should not stand in the way of allowing the parties to raise their real claims or defences before the court for adjudication.”

34. In these circumstances, and not without a good deal of reluctance, I allowed the application.  Before turning to the impact of the AR and SWS on the trial, I should deal with yet another matter of procedure, which has been raised by Mr Brown.  It has been submitted that the filing of the Lists require the leave of the court by reason of their lateness.  I have been referred to a recent authority – Kinetics Medical Health Group Co Ltd & Ors v Dr Tse Ivan Cheong Yau, unrep, HCA 1115/2010, 8 May 2013.  It was a case where substantial supplemental discovery was made shortly before trial.  After reciting the procedural history, Deputy High Court Judge M Ng said at paras 31-33:

“31. …it appears that the plaintiffs simply treated the recent discovery of documents as if it were part of a continuing discovery exercise that would not require leave of the court.

32. However, as I have explained in Liu Chen v Chan Poon Wing & anor HCPI 1779/2006 (unreported, 7 October 2009) at para 24, where discovery is given at the eleventh hour just before trial, it is quite impermissible for the litigant giving such discovery to do so under the guise of voluntary discovery without seeking leave of the court to give further discovery out of time. Mr Tang acknowledged that the plaintiffs’ new discovery was late, but he disagreed it was made at the eleventh hour. In my view, although the plaintiffs’ new discovery was not made on the first day or in the course of trial, there can be no doubt that making discovery of a substantial volume of documents after the 1^st PTR and a month before trial (irrespective of whether it should be described as having been made at the eleventh hour or not) is patently and obviously late.

33. Given the lateness of such further discovery, it should be anticipated (especially after the Civil Justice Reform (“CJR”)) that the opposing party would complain of such lateness. It is therefore incumbent on a litigant giving such late discovery to make proper inter partes application to seek leave of the court for such new discovery. Here, the plaintiffs did not even have to anticipate the defendant’s objection for the defendant had already vigorously complained against the lateness of the new discovery. Not only did the defendant’s solicitors raise objection in their correspondence, they also criticised the shifting of the plaintiffs’ evidential goalposts without any identification of the relevance of the newly discovered documents. But notwithstanding such complaints, the plaintiffs still did not issue any proper application for leave.”

35. I respectfully agree with Deputy Judge M Ng.  It should be remembered that the PTR of this case was originally scheduled to take place on 2 September 2013 (it was adjourned by reason of the plaintiff’s Summons) for a trial starting on 18 December 2013.  Late application of this kind can unravel the case management works done by the court.  It is highly controversial.  It stands to reason that a proper application should be taken out so that the objection can be ventilated and that the court can continue to discharge its case management function. 

36. Accordingly, I granted leave for the filing of the Lists.

37. As regards the costs of the Summons, this is a late application which can derail the trial.  I have been referred by Mr Brown to an unreported decision of Deputy High Court Judge Lok, Waddington Ltd v Chan Chun Hoo & Ors, HCA 3291/2003, 7 May 2013 at para 53:

“Express warning about late applications has already been given in §34 of Practice Direction 5.2, and practitioners should be reminded that late applications may be dismissed on the basis of delay alone. Unless there are exceptional circumstances and there are good reasons for the delay, one should not expect the courts to grant any late applications taken out shortly before the PTR. This is the case even if the applications have satisfied all the other threshold requirements for the granting of the relevant orders. Practitioners should therefore give serious thought about the question relating to outstanding interlocutory applications when they fill in the listing questionnaires before the case is set down for trial, otherwise they only have themselves to blame if their late applications are rejected on the ground of delay alone. Further, as pointed out by Lam JA in Li Xiao Yun & Anr v China Gas Holdings Ltd, surpa, at §18, applicant for late application should normally be expected to face an adverse costs order on indemnity basis.”

38. In this case, the plaintiff had filed a listing questionnaire dated 30 November 2012 in which it was stated that the plaintiff’s pleadings were in order and required no amendment; its discovery had been completed; and that all steps that ought to be taken to prepare its case for trial had been duly taken and complied with. 

39. What is most unfortunate is the failure by the plaintiff to explain its defaults.  In the premises, an order that the costs be paid on indemnity basis is justified.

Consequential directions 

40. The decision on whether to adjourn the trial as a consequence of allowing the plaintiff’s application has proved to be a difficult decision.  Eventually, with fairness on Mr Brown’s part and the persuasion of Mr Houghton, I have decided that the trial date can be preserved subject to the potential need for expert evidence on foreign law.  In particular, I am persuaded that although the new documents would result in additional legal submissions, they are unlikely to add significantly to the factual dispute, which has been narrowed down considerably in respect of quantum of damages.  Hence, the estimate of 3 days is tight but remains feasible.

41. Accordingly, I have given directions on the filing of a Rejoinder and a supplemental witness statement (if so advised) by the defendant within 14 days; and the making of any specific discovery application by the defendant within 7 days. 

42. Given the involvement of foreign law (German and Californian) in respect of the financial arrangements (see para 24 above), I directed that any application by the defendant to adduce expert evidence on foreign law is to be made not later than 26 November 2013 (just over 3 weeks from trial).

PTR

43. With the agreement of the parties, I have made some directions for the conduct of the trial with the view to mitigating the impact of the new documents.  On further reflection, the direction on filing of written submissions should be modified as follows:

“Written opening submissions containing, inter alia, full submissions on legal issues together with a list of authorities are to be filed and served by the parties not later than 7 working days before trial.”

44. I make a further direction that the plaintiff is to file and serve together with its opening submissions a table setting out chronologically the financial documents which were created in respect of each of the 10 Agreements which have been subject to an assignment with bundle references. 

Discharge of the Injunction

45. The defendant applies to have the Injunction discharged on, primarily, the grounds of material non-disclosure and change of circumstances. 

46. The law on material non-disclosure is trite, a good summary of which can be found in Velatel Global Communications Inc & Anr v Chinacomm Ltd & Ors, unrep, HCA 1978/2011, 26 October 2012 at paras 25-31. 

47. In my view, the case of material non-disclosure here is open and shut.  Valiantly, Mr Houghton has tried to defend his case by submitting that the assignment issue is in truth irrelevant.  I cannot agree.  If the plaintiff has/had no right to make a claim under any of the Agreements because such right has been assigned, then correspondingly there can be no claim under the Guarantees in question.  It was clearly a relevant matter for the court to consider in the ex parte application. Hence, in Tsui 1^st, disclosure was made in respect of certain assignments.

48. In light of the new documents, the information given to the ex parte Judge (on 7 April 2011) was clearly inaccurate because, eg, in respect of the Four Bayer Leases, an assignment was made in favour of Bayer on 18 September 2008 (see para 6A of AR). 

49. It must be right that at some stage the error has come to the attention of the plaintiff.  There has been no attempt made by the plaintiff to go back to the court to explain the erroneous information.  Such irresponsible behaviour must be met with the court’s discountenance. 

50. The seriousness of the non-disclosure is such that I have no hesitation in discharging the Injunction immediately.

51. Once again (see NCS Co Ltd v Bao Harvest Holding Ltd [2012] 5 HKLRD 138 at para 30), I would like to cite with wholehearted agreement the dicta of Chung J in Tiong King Sing v Sam Boon Peng Yee & Anr, unrep, HCMP 1289/2011 at p 4N to 6S:

“Duty of Full and Frank Disclosure

11. The grant of an ex parte injunction order implies the grant of legal relief without the party against whom the relief is sought having the opportunity to be heard: Hong Kong Civil Procedure 2011, Vol 1, para 29/1/39.

12. The first short-coming of such a course is that, to certain extent, it is an inroad into a litigant’s entitlement to a right to be heard, such entitlement being set out, for example, in Art 10, Hong Kong Bill of Rights Ordinance (Cap 383). The other short-coming is the temptation for an applicant to try to get a ‘head-start’ in the litigation by obtaining an ex parte order.

13. One of the tools employed by the courts to eliminate (or mitigate against) any abuse of this ‘unconventional’ remedy is the requirement that the applicant must proceed ‘with the highest good faith’ (Schmitten v Faulkes [1983] WN 64).

14. The requirement has many facets:-

(a) the applicant must make proper inquiries before making the ex parte application;

(b) ‘material’ means all matters which are material for the ex parte judge to know and which are necessary to enable him to exercise his discretion properly;

(c) an applicant has a continuing duty to inform the court as soon as he becomes aware that the court has been misinformed or given incomplete information earlier;

(d) there is also a duty to disclose any material change of circumstances while the proceeding remains ex parte; and

(e) the disclosure should be made in the affidavit (and/or the skeleton submissions) and not in the exhibits (this is to ensure the ex parte judge will not overlook the matters which require disclosure, ex parte applications being usually urgent (so the judge usually has little reading time) and ex parte hearings are often short).

15. Where there is material non-disclosure by the applicant, the court will ensure that he is deprived of any advantage derived from his breach of duty: Hong Kong Civil Procedure 2011, Vol 1, para 29/1/39; Commercial Litigation: Pre-emptive Remedies (2005) para A1-458, p 175, citing Bank Mellat v Nikpour (Mohammad Ebrahim) [1985] FSR 87, 91.

16. There are two purposes for the court to do so:-

(1) to deprive the wrongdoer of an advantage improperly obtained; and

(2) to serve as a deterrent to ensure that applicants realize that they have a duty of disclosure and the consequences if they fail in that duty.

17. Chu Hung Ching v Chan Kam Ming and Others, CACA 46/2001 (9 February 2001) was an instance where a Mareva injunction order was discharged where the plaintiff had failed to make full disclosure of changed circumstances, despite strong evidence of likely dissipation of assets.

18. Nonetheless, the court retains a discretion not to discharge the ex parte order, or to make a new order on terms. A typical example where the discretion will be so exercised is:-

(i) the non-disclosure is innocent; and

(ii)  an injunction would still have been granted even had the facts been properly disclosed.”

52. I have been asked by the plaintiff to exercise the court’s residual discretion to grant a fresh injunction.  Again, the law in this area is trite and I have been referred to Cheung Kam Wah v Cheung Hon Wah & Ors, CA, [2005] 1 HKC 136 at 155, para 63. 

53. I also remind myself of the principle that if material non-disclosure is established the court will be astute to ensure that a plaintiff who obtained an ex parte injunction without full disclosure is deprived of any advantage he may have obtained by that breach of duty. 

54. I reject the application for a re-grant.  The non-disclosure has not been properly explained at all.  Hence, there is no evidential basis to suggest that it was innocent.  Where an injunction has been discharged by reason of material non-disclosure and the non-disclosure has neither been shown to be innocent nor properly explained, it would be rare indeed for the court to exercise its residual discretion to re-grant an injunction. 

55. In the premises, there is no need to deal with the arguments on change of circumstances.

56. On the issue of costs, Mr Brown submitted that costs should be awarded on indemnity basis if the court is of the view that the non-disclosure was deliberate.  I may be erring in favour of the plaintiff but I am not convinced that there is sufficient material on which to draw the inference that the non-disclosure was deliberate.  I bear in mind in particular that the grounding affidavit was made by the plaintiff’s solicitor and it is possible that the non-disclosure was caused by misunderstanding between the deponent and his client.  This is a good illustration that evidence should be given by the client and not via his advisor (see paras 13 to 15 above).

Conclusions 

57. I have allowed the plaintiff’s Summons with costs against it as indicated above.  Various directions have already been given for the further conduct of these proceedings, subject to a modification as per para 43 above.  I make a further direction as set out in para 44 above.

58. I order that the plaintiff’s solicitors should bear one half of the costs of the hearing bundles.

59. The Injunction is discharged with costs to the defendant to be taxed if not agreed.

60. Last but not least, I am grateful to counsel for their assistance in these matters.