PACIFIC BULK SUPRAMAX CO LTD v. BINTAN MINING CORPORATION

HCMP 1190/2020

[2021] HKCFI 680

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1190 OF 2020

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BETWEEN

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D E C I S I O N

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1.  This was the substantive hearing of the Amended Originating Summons (“Amended OS” and pre-amendment “OS”) of Pacific Bulk Supramax Company Limited, the plaintiff (“PB”) for Mareva relief in aid of 16 ongoing Hong Kong arbitrations between PB and the defendant Bintan Mining Corp (“BMC”) pursuant to section 45 of the Arbitration Ordinance, Cap 609.

2.  The hearing did not conclude on 23 February 2021 and was adjourned for PB’s reply to be made in writing by 25 February 2021, with the court’s decision to be handed down in due course which I now do.

BMC’s application for an adjournment

3.  At the outset of the hearing, BMC applied for an adjournment on the basis that PB’s reply evidence being the 5^th affirmation of Sun Min dated 21 January 2021 (“Sun 5^th”) exhibiting a Solomon Islands Legal Opinion from L & L Lawyers dated 12 November 2020 (“the November Opinion”) and their Supplementary Legal Opinion dated 18 January 2021, (collectively “the PB Opinion”) introduced new matters that have not been addressed in BMC’s evidence and sought leave to adduce evidence from Mr Jonathan Ivanisevic, BMC’s expert on mining law in the Solomon Islands.

4.  Mr Toby Brown, counsel for BMC, requested that BMC be allowed 14 days to file further affirmations with time for PB to reply thereafter and, in the interim, BMC was willing to submit to a worldwide Mareva save for minor amendments to the disclosure order which request was opposed by Mr Joffe, counsel for the PB.

5.  After hearing counsel, the Court considered that no adjournment was warranted and dismissed the adjournment application for the reasons set out below.

6.  The nub of the November Opinion was conveyed by letter dated 1 December 2020 from PB’s solicitors to BMC’s solicitors.  It is also obvious that the letter of 1 December 2020 would not have been written had PB not intended to adduce evidence from its expert in its reply affirmation.

7.  There was no response to the 1 December letter until 7 weeks later.

8.  On 20 January 2021, BMC’s solicitors attached what was said to be “Legal Opinions” issued by their expert confirming Bintan Mining SI Limited (“BMSI”)’s mining rights in the form of a letter to BMC’s solicitors that addressed each of the allegations raised in the letter of 1 December 2020.

9.  Notwithstanding receipt on 21 January 2021 of the PB Opinion exhibited to Sun 5^th, no request or application was made for leave to put in a point by point answer until Mr Brown’s skeleton submissions of 19 February 2021 for this hearing. 

10.  BMC had every opportunity since receipt of the 1 December letter and/or the PB Opinion on 21 January 2021 to make its intentions known: after all, BMC’s legal expert had been instructed to advise and had rendered advice to BMC’s solicitors concerning the consequences of revocation of the land registration on BMSI’s mining business.

11.  In my view, it is now far too late to derail this hearing.  It would not advance the objectives set out in RHC Order 1A r 1.

Background

12.  PB and BMC have a long-standing business relationship, with BMC chartering PB’s vessels for shipment of bauxite cargo from the Solomon Islands to the PRC.

13.  Between September 2018 and June 2020, the parties entered into 16 charterparties governed by English law. PB’s claim against BMC is for outstanding fees for freight and demurrage.

Procedural history

14.  On 10 August 2020, DHCJ Dawes SC granted an ex parte domestic Mareva injunction in the sum of approximately US$5.6 million (“Mareva ceiling”) which he continued on 14 August 2020, pending the substantive inter partes hearing (being this hearing).

15.  On 20 August 2020, BMC disclosed that its assets within Hong Kong were approximately US$40,000 which, in the context of the Mareva ceiling, is a minimal amount.

16.  On 1 September 2020, PB applied to convert the domestic Mareva into an interim worldwide Mareva injunction (“worldwide Mareva”) and obtained leave to amend the OS on 4 September 2020 from DHCJ Jin Pao SC (“the judge”).

17.  At that hearing, BMC disclosed that it had a wholly-owned subsidiary incorporated in the Solomon Islands, i.e. BMSI and that its shares in BMSI were valuable based on a November 2018 valuation of US$91 million made on a discounted cash-flow basis.

18.  Upon BMC’s undertaking not to dispose of or deal with its shareholding in BMSI, BMC was ordered to provide a valuation of BMSI within 21 days on a net tangible asset basis and to confirm whether its shareholding was encumbered (“the 4 September order”).

19.  However, the valuation BMC provided on 25 September 2020 was in breach of the 4 September order in 2 respects: (a) it was a valuation of BMC and not of BMSI; and (b) it was done on a cash-flow basis and not on a net asset value basis.

20.  On 14 October 2020, one day before the hearing of PB’s renewed application to vary the interim domestic Mareva into a worldwide Mareva, BMC exhibited a certificate of gross tangible asset value of BMSI as of 9 October 2020 of approximately US$23 million (“BMSI gross value certificate”) prepared by Ting & Co, BMSI’s accountants, who opined that there was insignificant debt and all funding was by internal sources. However, as a full audit had not been conducted there was no statement of its exact liabilities.

21.  When the matter came before him on 15 October 2020, while accepting that there had been non-compliance with the 4 September order, the judge considered the risk of dissipation to be the key issue and came to the view that the evidence negated that risk.

22.  He attached significance to the BMSI gross value certificate showing that the bulk of its value lies in fixed assets of some US$16.7 million, to the fact that mining rights in relation to BMSI to be matters of considerable value and that the valuer opined that BMSI could operate as a going concern with insignificant external debt. In his view, it would be difficult for the assets to be dissipated with BMC’s undertakings (including that mentioned in §18 above) continuing in place.

Applicable legal principles

23.  The applicable legal principles are well established and are not controversial. The burden is on PB show (a) a good arguable case on the merits; (b) that there is a risk of dissipation; and (c) the balance of convenience is in favour of granting Mareva relief.

24.  BMC has assets in Hong Kong as well as outside the jurisdiction. The Hong Kong assets are insufficient to satisfy PB’s claim.

The present application

25.  The relief PB now seeks from this court consists of :

(i) an expansion of the domestic Mareva to a worldwide Mareva until further order;

(ii) further ancillary disclosure orders should a worldwide Mareva be granted; and

(iii) a variation of the Mareva ceiling to approximately US$8.1 million.

26.  PB’s claim for unpaid freight and demurrage under the charterparties is supported by an opinion on English law.  That PB has shown a good arguable case on the merits is not seriously challenged: the fact that BMC has not adduced evidence to counter that opinion speaks for itself.

27.  It is the risk of dissipation that is highly controversial and, in particular, the effect of rectification of the land registration in respect of Western Rennell where the mining operations are carried out.

28.  BMC also raised material nondisclosure as a reason for this Court to refuse to grant the injunctive relief sought.

RISK OF DISSIPATION

29.  In its recent decision in Convoy Collateral Limited v Cho Kwai Chee [2020] HKCA 537, the Court of Appeal had occasion to examine the proper approach when assessing whether there is a risk of dissipation (at §35). It adopted (at §36) the principles[1] set out by Popplewell J in Fundo Soberano de Angola v dos Santos [2018] EWHC 2199 (Comm) at [86] which were held to be applicable in Hong Kong, and elaborated on their application in §§37-54 of its judgment.

30.  The ultimate question, whether a plaintiff succeeds in showing objectively there is a solid basis for concluding that there is a real risk of unjustified dissipation of assets, is to be answered by examining the evidence holistically, involving an evaluative and predictive judgment. Evidence of dishonest and fraudulent conduct or other serious wrongdoing which form the basis of the claims and which reflect adversely on the integrity of the defendant could point powerfully towards the inference of such a risk: at §§40 and 53.

31.  Mr Joffe, counsel for PB, relied on 4 factors that support the inference of a risk of dissipation on the part of BMC which he submitted the evidence establishes.

I. BMC’s fraudulent and dishonest conduct towards PB

32.  It is PB’s case that BMC, for its own benefit, lied to PB on 2 occasions to induce PB to give up its security rights to the detriment of PB’s financial position.

33.  The first attempt was made in the following circumstances:

(i) In view the fees then outstanding, in June/July 2020, PB exercised its security rights and obtained security over 8 BMC cargoes by withholding 3 cargoes (“the withheld cargoes”) and, upon obtaining an order from the Qingdao Maritime Court, arrested 5 cargoes (“the arrested cargoes”)).

(ii) After PB’s multiple requests for confirmation of BMC’s ownership[2] of those cargoes, on 23 July 2020, BMC did confirm BMC’s ownership by suggesting that PB was “over secured”, and demanded the release of one of the withheld cargoes to which request PB did not accede.

(iii) In fact, 4 of the 8 cargoes (“the disputed cargoes”) had been sold to a third party[3] who, on 27 July 2020, applied to the Qingdao Maritime Court for their release and it was only on that date that BMC disclosed their sale.

34.  Prior to 27 July, BMC had given inconsistent explanations.  It is clear from contemporaneous documents that they are shown to be false. For example, BMC asserted that it had clarified[4] at the meeting on 24 June 2020 that the cargoes had been sold. A perusal of the transcript of that meeting[5] reveals no such ‘clarification’.

35.  The second attempt was successful. PB was deceived into releasing certain cargo by BMC’s representation that once sold, proceeds of US$2 million would be used to pay PB.

36.  The evidence shows that on 5 June 2020, when PB was about to issue a notice of lien over certain cargo, BMC represented to PB that it had been sold to Chalco Trading HK Co Ltd (“Chalco”) (producing a sale/purchase agreement[6] and a provisional commercial invoice in support) and that the first instalment proceeds of about US$2 million would be applied to pay PB on 12 June 2020.

37.  In reliance on that representation, PB released the cargo on 10 June 2020.  However, upon receipt of the proceeds, BMC did not pay PB (as BMC has now accepted[7]) but immediately applied the proceeds for other purposes, thus diminishing the amount of security available to PB.

38.  BMC relied on an extract from the transcript of the 24 June meeting (set out in §57 of its written submissions) to question the very existence of the Chalco representation:

“Sun: … when we sat here on 5 June, you told us you would pay us … 3 million by that week … You would pay 1.8 M USD from the Chalco contract, and another 900k from the fund you obtained elsewhere.

Wong: I think you got that wrong. I said I will try to transfer that to you. I paid you over 900 K. If I do not use that money to pay for bunkers, employees, I could not deal with the later shipments.

Sun: So you did not pay all the money from Chalco to us. Yes?

Wong: how could I? I need to buy bunkers etc.

Sun: So Manson, do you remember what Mr Wong said that day, did I misunderstand him?

[No response from Manson]

Wong: Maybe I really did not speak clearly.  Maybe my Mandarin was not good …”

39.  BMC submitted that the conversation does not support a clear and binding promise to pay the Chalco proceeds to PB: when Sun sought Manson[8]’s support, Manson did not confirm that agreement and there was no further discussion on that topic after Wong suggested that there may have been a misunderstanding.

40.  However, as PB in its reply submissions highlighted, the extract set out in BMC’s submissions is not an accurate presentation of the evidence: the words “[no response from Manson]” (which suggest a pause or silence on Manson’s part) do not appear in the original transcript exhibited to Sun 5^th and were inserted by BMC. According to the recording[9] from which the transcript is derived, Wong spoke immediately after Sun posed her question, interrupting before Manson could speak.

41.  The unwarranted interpolation into PB’s office transcript, seemingly made even before BMC had been provided with the recording from which the transcript is derived and, in any event, without previously challenging the accuracy of the transcript, speaks to BMC’s total lack of integrity and willingness to deceive.

II. BMC’s breach of the Court’s disclosure order

42.  As earlier noted (see §§18-20 above), BMC failed to comply with the 4 September order in 2 material respects.

43.  It is evident from the judgment dated 15 October 2020 that the reasons for requiring an asset valuation of BMSI were made known to BMC: it was to enable the Court to obtain a clearer picture of BMSI’s financial position and to evaluate its worth in terms of assets.

44.  What BMC provided (being a valuation of BMC done on a cash flow basis as at June 2020) could not possibly have advanced the court’s understanding of BMSI’s financial position which was the whole point of the 4 September order.  The underlying financial statements of BMC or its subsidiary did not feature at all and remained unknown.

45.  It is clear from the judgment dated 15 October 2020 that the judge rejected BMC’s explanation/excuse for non-compliance. That BMC breached the Court’s disclosure order is an undeniable fact.

III. BMC’s acts of dissipation

46.  The local assets disclosed by BMC included sums held in an USD account at Industrial and Commercial Bank of China (Asia) Ltd (“the ICBC USD account”) and one at Agricultural Bank of China (“the ABC USD account”).

47.  Funds of approximately US$11.8 million (including the Chalco proceeds of US$2.2 million) had been paid into those business bank accounts between March and June 2020.  However, by 10 August 2020, such funds had dwindled to less than 1% of what had been paid in during the relevant period.

48.  PB highlighted the fact that no explanation has been given for BMC’s use of those funds other than the Chalco proceeds[10]. 

49.  At the hearing, BMC submitted that as its cash flow had been restricted because of the Covid pandemic delaying the discharge of cargoes and also from their being withheld/arrested, the monies were spent in the ordinary course of business.  It was further submitted that there being no suggestion that money has been squirreled away, the decrease in funds in those accounts cannot reasonably be construed as equivalent to active dissipation of assets and BMC is not required to provide any explanation in the absence of any actual evidence of dissipation.

50.  In my view, it was incumbent on BMC to make good that response by adducing evidence of its operating expenses for that period in support. It failed to do so and, in the circumstances, the inference of dissipation is warranted. 

IV. BMC’s undertakings dishonestly given to the Court

51.  On 15 October 2020, upon BMC giving two undertakings to the Court, PB’s application for an interim worldwide Mareva was dismissed.

52.  The undertakings given are:

(i) an undertaking not to dispose of the shares in BMSI (“the BMSI undertaking”); and

(ii) undertakings to pay receivables of approximately US $2 million from C & D Logistics (Tianjin) Co Ltd (“C & D”) into BMC’s Hong Kong bank accounts and to provide monthly updates PB (“the C & D undertaking”).

(A) The BMSI undertaking

53.  This undertaking was premised on BMSI having financial value based on the BMSI gross value certificate[11].

54.  On 17 November 2020, BMC produced a certificate dated 12 November 2020 of the BMSI’s net tangible asset value which adopted a valuation date of 15 October 2020 showing a value of approximately US$21 million (the “BMSI net value certificate”). The only difference with its gross value certificate[12] is the item of liabilities of approximately US $2.1 million.

55.  BMSI’s mining operations are conducted on customary land (parcel number 298-005-1 known and hereafter referred to as “Western Rennell”) pursuant to rights granted under Heads of Agreement dated 21 March 2014 entered into by Asia Pacific Investment Development Limited (“APID”) with BMC and BMSI, (“the heads of agreement”) granting them the sole and exclusive right for 25 years to mine, market and sell the bauxite in return for a royalty fee.

56.  APID holds a mining lease which was granted by the Solomon Islands Government (“SIG”) (acting by the Minister of Mines, Energy and Rural Electrification) dated 14 September 2014 (“the mining lease”) and is party to the mining agreement dated 11 March 2016 and made between SIG and APID (“the mining agreement”). 

57.  BMC was incorporated in the BVI in 2006 and registered in Hong Kong in 2019. Its principal business is in the production, marketing and sales of bauxite. Its wholly-owned subsidiary, BMSI, registered in the Solomon Islands is the sole supplier of bauxite to BMC[13].

58.  BMC and BMSI share the same directors, being Wong Man Kam Patrick (“Mr Wong”) and Leung Chi Kin (“Mr Leung”).  BMSI’s general manager stationed in the Solomon Islands is Fred Tang (“Mr Tang”). Mr Tang and BMSI were under investigation by NCID[14] in relation to allegations of manipulation of the registration process concerning the registration of Western Rennell. 

59.  The relationship between APID and BMC/BMSI is far from clear.  In his 1^st affirmation, Mr Wong stated that BMC’s parent company also owns APID[15]. But in his 3^rd affirmation made only 3 weeks later, under the guise of “clarifying”[16] his earlier evidence, Mr Wong, after naming the shareholders of APID (being the persons stated as shareholders of APID in the mining lease), asserted that APID “is independent” from BMC.

60.  Mr Wong’s “clarification” contradicted his earlier evidence but no explanation was given as to how the mistake could have come about.

61.  PB’s case is that the BMSI undertaking is of no value because SIG has stripped BMSI of its mining rights and fixed assets and that BMC must have been aware of this on 15 October 2020 when the undertaking was given.

62.  PB has produced a Minute dated 19 October 2020 issued by the Registrar of Titles of the Registrar General’s Office of the Solomon Islands rectifying the registration Western Rennell through revocation of the registration (“the revocation letter”).  That letter was issued in response to a letter dated 9 October 2020 from the Director of the National Criminal Investigation Department (“NCID”) requesting such rectification.

63.  The Perpetual Estate Register (“PER”) records a first registration of Western Rennell made under Part V, Division 1 of the Land and Titles Act of the Solomon Islands, Cap 133 (“LTA”), naming 4 individuals as “owners”.  It also records 2 incumbrances registered in the estate, a lease dated 4 May 2015[17] and a grant of profit to APID dated 18 June 2015[18] for a period of 10 years.

64.  The revocation letter stated that it is not permissible to register customary land pursuant to Part V unless the Solomon Islands government (“SIG”) or a Provincial Government wants to buy or lease the land; the process for a sale/lease (“the acquisition process”) to SIG is governed by Part V; Western Rennell was first registered to 4 individuals (“the trustees”) on 29 May 2015 under Part V; but there is no evidence that SIG ever purchased or leased Western Rennell.

65.  For those reasons the Registrar considered the registration unlawful since customary land can only be acquired under Part V by SIG and/or Provincial Governments by private treaty or compulsory acquisition for public purposes. Accordingly, the registration was revoked, returning Western Rennell to customary ownership as customary land pursuant to his powers under section 228 (1) of the LTA.

66.  As earlier noted, underpinning PB’s submission that BMSI is of little value (if any) is the revocation letter and its effect on BMSI.  In respect of the latter, it relied on the PB Opinion. §78 of the PB Opinion is in the following terms:

“The rectification of [Western Rennell] also had a domino effect on the Grant of Profit to APID dated 18 June 2015, Lease registered to the Commissioner of Lands COL] dated 19 June 2015 and the Sub-Lease to APID dated 19 June 2015.”

67.  It concluded that the rectification would impact the mining agreement, the heads of agreement as well as on the mining operations of BMC and BMSI but that the mining operations undertaken by BMSI will continue unless (i) restrained by SIG; or (ii) restrained by disgruntled landowners who had initially raised complaints with the Registrar of Titles resulting in the revocation letter or (iii) the mining lease is cancelled by the Minister[19], with the caveat[20] that any dealings whatsoever with APID, BMC and BMSI regarding their mining operations is “perilous and uncertain”.

68.  The PB Opinion concluded that while cancellation of the mining lease has not yet occurred and so remains in effect, APID and its contractor are liable to be sued by the customary owners for damages in respect of mining operations undertaken as from 19 October 2020.

69.  Mr Brown submitted that BMSI remains valuable, relying on the fact that the mining lease has not been suspended or cancelled and remains on foot.  Moreover, BMC’s expert has opined that the PB Opinion conflates the mining lease with registration when the mining lease is different and separate from registration of the land such that the cancellation of the registration does not affect the mining lease.

70.  Mr Brown was also critical of the views expressed in §§108-110 of the Supplemental Opinion to the effect that revocation of the existing registration meant that the land reverted back to its initial status as customary land and that its owners would have full authority and control over such land and fixtures.

71.  It was said that §110 failed to comment on the actual assets and the application of the Latin maxim[21] was useless because what was entirely missing was any suggestion that any of the assets set out in the valuation are assets that, as a matter of Solomon Islands law, constitutes fixed assets.   

72.  BMC emphasised that the position remains as it was before the judge: as a significant part of the US$20 million worth of assets could not be easily moved, the risk of dissipation was negated. 

73.  As regards the mining lease, PB maintained its stance. APID applied for the mining lease on the basis of a “Surface Rental and Compensation for Damages Agreement” dated 10 April 2014 (“the Surface Rental Agreement”) between APID and customary landowners but on 30 June 2014, the Mines and Minerals Board determined that APID’s mining lease application would only be approved on the basis of SARs obtained through “land acquisition”[22] from the customary landowners pursuant to section 32(1) of the Mines and Minerals Act.

74.  In the present case, a “lease” and “grant of profit” were put into place for APID (amidst allegations of the acquisition officer having been bribed) when the proper compulsory purchase procedure under Part V of the LTA (pursuant to which only SIG can acquire land on a compulsory acquisition basis from customary landowners) had not been complied with.

75.  It is clear that, at a minimum, the PB Opinion raises serious doubts as to the value of BMC/BMSI’s mining operations.

76.  In so far as the BMSI net value certificate is concerned, it should be noted that:

(i) it has been overtaken by events in that it can only speak to the net value of the assets as at 15 October 2020; it is not and cannot be taken as evidence of what the assets are worth post-19 October 2020;

(ii) the judge made his order on 15 October without requiring the provision of such a certificate. To ‘volunteer’ such a document 5 weeks later is highly unusual when, seemingly, there was no specific purpose/event precipitating it; and

(iii) the certificate, not being a detailed valuation report does not provide source material/evidence that the assets identified belong[23] to BMSI.

77.  For those reasons, the BMSI net value certificate is of little assistance. BMC’s submissions do not satisfactorily answer, much less displace, the serious doubts that have been raised as to the nature and value of BMSI’s assets.

78.  While APID commenced judicial review proceedings against the Registrar of Titles on 28 October 2020 to set aside the revocation on the basis that the Registrar had exceeded his powers, though listed for mention on 2 December 2020, they have been adjourned.

79.  At this hearing, a different point was taken: BMC pointed to the tight timeframe of only 10 calendar days between the request made on 9 October 2020 and the Registrar’s decision. Given the section 228 requirements[24] it was said that compliance was unlikely.

80.  However, as matters stand, the revocation remains on foot and valid until it is set aside by the Solomon Islands Court. Moreover, there is no stay of the revocation of registration pending the judicial review proceedings.

81.  PB submitted (and I accept) that the land revocation adversely affects the value of BMC’s shares in BMSI:

(i) BMSI’s ability to continue its mining operations as a going concern is a major component of its value.  That is now in question given the land registration revocation and potential cancellation of the mining lease.

(ii) Ownership of the building and infrastructure (which as fixtures would vest with ownership of land[25]), the stockpile (the rights to which are dependent on the mining lease), and potentially parts of the machinery and equipment (which may have become fixtures upon installation) is in serious doubt.

(B) The C&D undertaking

82.  Since the date of the undertaking, PB has never been notified that BMC has received any part of the C&D proceeds. On 2 November 2020 and 1 December 2020 BMC informed PB that C & D’s payment was delayed but further discussions, payment to BMC was anticipated to be made in January 2021.

83.  Thereafter, in breach of the undertaking, BMC failed to give any further updates.

84.  It then transpired from PB’s own investigations that the underlying contracts prove to have no substance, not being true sales contracts but part of a much wider arrangement, and further, C&D denies any liability to pay such receivables.

85.  PB’s allegations were put directly to BMC in the letter of 24 November 2020 which in summary are the following:  

(i) the subject of the C & D undertaking comprised 30% of the balance due under 3 contracts made in February to April 2020 between BMSI and C & D which became payable some 5 to 6 months later but before the 15 October hearing;

(ii) C & D does not consider it is liable to pay the balance of 30% to BMC because the contracts were part of a larger transaction with C & D acting as agent of BMC whilst also providing an upfront financing to BMC (equivalent to 70% of the contract price) to be repaid from the price payable within a 90-day period by downstream purchasers;

(iii) as there were no such purchases within a 90-day period, BMC would be liable to pay C & D immediately the 70% from its own funds and the latter likewise would not be liable for the 30% balance and is entitled to seek a refund of the 70% paid by C & D to BMC;

(iv) BMC deliberately refrained from disclosing (a) the relationship with C & D in Leung 1^st and/or at the 15 October hearing and (b) BMC’s failure to procure downstream purchasers within the 90-day period.

86.  BMC made no submissions in response to those allegations.  In those circumstances, it is irrefutable that BMC knew that the C&D undertaking was worthless when it was given.

Conclusion on risk of dissipation

87.  Bearing in mind the applicable principles set out in Convoy, looking at the evidence holistically, PB has demonstrated dishonest and fraudulent conduct on BMC’s part in relation to matters that form the basis of the claims. BMC’s lack of integrity is amply borne out by the evidence.

88.  The more egregious instances are the following:

(i) The Chalco representation.

(ii) BMC’s failure to apprise the Court of the revocation letter once it came to BMC’s notice[26].

(iii) On 17 November 2020, BMC proferred the BMSI net value certificate to the Court when it must have known that the basis for that valuation was no longer valid.

(iv) BMC gave the C & D undertaking (see §§82-86 above) when it must have known that the undertaking was worthless.

89.  Those events cannot be explained away as innocent errors or misjudgements. They were deliberate and dishonest acts undertaken to deceive and mislead.

90.  Accordingly, I have no hesitation in concluding that the risk of dissipation has been made out.

MATERIAL NONDISCLOSURE

91.  BMC’s allegations are that at the ex parte stage, PB did not disclose past dealings between PB’s associated companies[27] with Indo Bauxite Mining Corporation[28] (“IBMC”).

92.  PB’s associated companies are separate legal entities.  The same applies to IBMC and BMC. None of these companies is involved in the present proceedings or the 16 arbitrations mentioned earlier.

93.  Mr Lau is a director of PB as well as its associated companies. PBE advanced US$3 million to BMC under a facility agreement dated 17 November 2014 in return for PBE being appointed as the exclusive provider of marine transportation services to carry bauxite exported from Western Rennell and paid US$1 per ton, later reduced to US$0.5 per ton.

94.  The facility agreement recited that under a licence agreement with the holder of the mining licence (APID), BMC and its associated company BMSI have exclusive rights to excavate and export bauxite from Western Rennell.

95.  BMC’s allegation is that Mr Lau was therefore “fully on top of BMC’s mining rights” in Western Rennell but failed to disclose this to the ex parte judge.  It was submitted that Mr Lau’s knowledge (gained through his directorship of the associated companies) is to be attributed to PB.

96.  Pausing there, as regards Mr Lau’s knowledge of BMC’s mining rights, the evidence in Wong 4^th at §§8-25 is nowhere close to supporting the submission if it is meant to be to the effect that Mr Lau was “on top of” the value of BMC’s shares in BMSI or the latter’s exclusive mining rights in Western Rennell. The evidence does not show that Mr Lau was privy to the value of BMSI or BMC’s shareholding of BMSI or the value of the mining operations.

97.  The ex parte application concerned the grant of a domestic Mareva.  Dissipation in that context includes dissipation within the jurisdiction or removal from the jurisdiction: HKCP 2021 at §29/1/70.  PB submitted that at the ex parte stage, BMSI mines or fixed assets in the Solomon Islands bear no relevance to whether BMC would remove assets from Hong Kong.

98.  At the inter partes hearing, BMC relied on the fact that it had a wholly-owned subsidiary (namely BMSI) carrying on a substantial business in the Solomon Islands rendering its shareholding in BMSI valuable to negate the suggestion that there was a risk of dissipation of assets.   At §46 of its written submissions, it was suggested that the judge, once apprised of those matters, “came to the opposite conclusion to the ex parte judge on this issue”.  Therefore, it was said that those matters must have been relevant.

99.  If what is meant is that had those matters been before the ex parte judge the domestic Mareva would not have been granted, it is clearly wrong because the judge continued the domestic Mareva.  In concluding that as matters then stood there was no risk of dissipation on a worldwide basis, the judge took into account the existence of the domestic Mareva remaining in place, coupled with BMC’s undertakings including the C & D undertaking to bring funds into Hong Kong which would then be subject to the domestic Mareva.

100.  BMC’s criticism[29] that there had been “no mention before the ex parte judge of the scope of [BMC]’s operations, [PB]’s long and profitable relationship with [BMC] or [BMC]’s assets[30]” is unwarranted given §§9-10 and 13 of Sun 1^st.  In so far as it is directed to the fact that there had been no reference to the facility agreement which BMC dubbed “an investment”, it was an associated company (and not PB) that was the contracting party.

101.  In my view, BMC’s submission that there was material nondisclosure at the ex parte stage has not been made out.

102.  If I am wrong, the principles set out by the Court of Appeal in Excel Courage Holdings Limited v Wong Sin Lai [2014] 3 HKLRD 642 at §§56-58 pertaining to the discretion to re-grant injunctions become relevant.

103.  Once the Court finds that there have been breaches of the duty of and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial. This is sometimes referred to as the “golden rule”. Nevertheless, the Court has jurisdiction to continue or re-grant the order to ensure that justice is done and not to allow the application of the golden rule to become the instrument of injustice in a particular case.  

104.  The Court would have regard to the principle of proportionality in the exercise of its penal jurisdiction to impose sanctions for non-disclosure.  The overriding question for the Court is what is in the interests of justice in the particular circumstances of the case.

105.  Applying those principles, if necessary, I would re-grant the domestic Mareva.

DISPOSITION

106.  Having regard to the evidence before the court, I have no hesitation in converting the domestic Mareva into a worldwide Mareva.

107.  In addition to the usual ancillary disclosure order, PB now seeks disclosure of the details of any disposition or transfer of assets on or after 1 March 2020[31] up to the date of the order to be made herein.  The evidence shows that of funds of approximately US$11.8 million paid into BMC’s Hong Kong bank accounts between March and June 2020. By 10 August 2020, only US$40,000 remained.

108.  Given the amount transferred out of BMC’s Hong Kong bank accounts within such a short time span, it is not unlikely that those funds have been transferred to other entities under circumstances that would fall within the Court’s Chabra jurisdiction. 

109.  I agree that such an order would be appropriate in the circumstances of the present case. 

New Mareva ceiling

110.  The outstanding fees due under the charterparties are US$15,062,391.14.  PB calculates the value of valid security it holds at US$6,948,338.70 using methodology explained in detail in Sun 1^st §§39-48 and adopting a market selling price of bauxite at US $41/DMT on the basis of the Chalco contract[32]. The new Mareva ceiling it seeks is US$8,114,052.44.

111.  BMC takes issue with the market price PB adopted and referred the court to the Appraisal Report dated 21 September 2020 where the appraiser considered that the selling price of US $47/DMT estimated by BMC to be reasonable and could be supported by the historical price and the market price.

112.  Except for Chalco contract, all the other contracts for the sale of bauxite that is in evidence formed part of a larger arrangement similar to the C & D contracts.  I accept that the price in the Chalco contract better reflects the true selling price.  Accordingly, there should be a new Mareva ceiling as sought in the draft order.

Order

113.  For the reasons set out above, there is to be an order in terms of the draft order attached to PB’s written submissions with the amendment to the ancillary disclosure order mentioned in §107 above.

114.  Costs should follow the event.  There is to be an order of costs nisi in favour of the plaintiff with certificate for 2 counsel, such costs to be summarily assessed and payable forthwith.  Directions will be given separately for summary assessment.