AIG (ASIA) DIRECT INVESTMENT FUND LTD. AND OTHERS v. NGAI WAI LUN, WILLIAM AND ANOTHER

CACV 272/1998

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H E A D N O T E

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An application to vary or discharge an order made ex parte (e.g. a Mareva or Anton Pillar injunction) will not be entertained by the Court of Appeal unless such an application has first been made to a judge of first instance and has been refused.

A party who is given notice of an application to be made against him ex parte has no right to be heard on that application. But if the judge indicates that he is minded to make the order applied for, the party aggrieved may (either immediately or subsequently) apply for the discharge of the order. If that application for variation or discharge is refused, then the party aggrieved may appeal to the Court of Appeal for variation or discharge of the order; but it is only in most exceptional cases that the Court of Appeal will entertain such an appeal. Appeals to the Court of Appeal to vary or discharge interlocutory orders made ex parte should not normally be made until after the substantive hearing inter partes at first instance, at which both sides will have had an opportunity to put in the evidence on which they wish to rely.

CACV 272/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 272 OF 1998

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J U D G M E N T

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Godfrey, J.A. :

Judgment of the court

1. The judgment now handed down is the judgment of the court, to which both of its members have contributed.

Introduction

2. This is an appeal by the defendants from an order of Yeung, J., made, at the instance of the plaintiffs, on 10 November 1998, in the form of a world-wide Mareva injunction, expressed to "remain in force up to the hearing of the Plaintiffs' inter partes summons which is to be fixed to be heard on an early date with an estimated time for hearing of one day, unless before then it is varied or discharged by a further order of the High Court."

The background

3. This may, for present purposes, be very briefly outlined. The plaintiffs' action is one in which they seek to assert the validity of a notice, allegedly served by them on the defendants, requiring the defendants to purchase from the plaintiffs shares in a company called Joyce Link Holdings Ltd, pursuant to the provisions of an agreement in writing made between the parties on 6 December 1996. The dispute between the parties concerns the exercise of the option; the plaintiffs claim that it has been validly exercised, a claim which the defendants deny. On the footing that the option was validly exercised, the plaintiffs claim specific performance or damages.

The proceedings

4. The writ was issued on 31 January 1998. The Statement of Claim was served on 23 February 1998. On 6 March 1998, the plaintiffs applied to a judge for summary judgment. On 5 June 1998, the judge (Stone, J.) refused that application and gave the defendants unconditional leave to defend the action. On 18 June 1998, the defendants served their Defence, and on 14 September 1998 the plaintiffs served their Reply.

5. On 10 November 1998, the plaintiffs, asserting that they now had evidence, not earlier available to them, that the defendants might take steps to frustrate any judgment obtained against the defendants in Hong Kong, applied ex parte to Yeung, J. for a world-wide Mareva injunction against the defendants. The plaintiffs notified the defendants of their intention to make that ex parte application. The defendants instructed solicitors and counsel to attend the hearing of the plaintiffs' ex parte application and to resist the making of the order for which the plaintiffs had said they would ask. Despite representations by counsel for the defendants, the judge made the order above-mentioned.

The procedural issue

6. What happened here was, in one respect at least, unusual. A plaintiff who fears that the defendant will dissipate his assets so as to frustrate any judgment obtained against him should proceed, ex parte, at the same time as he commences his proceedings, for an injunction in the Mareva form. It would, usually, make no sense for the plaintiff to do so long after commencing his proceedings, and no sense for him to do so on notice to the defendant. The reason is obvious; a plaintiff who signals his intentions in any way to a defendant who is likely to dissipate assets in order to frustrate a judgment risks bringing about the very thing which he is seeking to prevent. But there is no reason in principle to bar a plaintiff from seeking such relief in a case where it is only after, even only long after, the commencement of the proceedings that the plaintiff first comes into possession of evidence which demonstrates a risk that the defendant, unless restrained from doing so, is likely to dissipate his assets so as to frustrate any judgment against him. Nor is there any reason in principle why he should not give notice to the defendant of his intention to apply for such relief; indeed in those circumstances that is an appropriate course to take. What, then, if the defendant turns up to object, is the status of such an "opposed ex parte application"?

"Opposed ex parte applications"

7. The description of the procedure whereby a plaintiff applies for relief ex parte, but gives the defendant notice of his intention to make such an application (with the result that the defendant attends to resist the making of the order) as an "opposed ex parte application", was criticised by May, L.J. giving the judgment of the court in Hunter & Partners v. Wellings & Partners [1987] FSR 83 as "both an anomalous and incorrect description of the actual procedure" (see at p. 86) and "inherently erroneous" (see at p. 87). As he went on (at pp. 87-88) :

"..... on a strict analysis we think that what took place before the learned judge below in this case was, first, an ex parte motion by counsel for the plaintiffs for interim interlocutory injunctions. The judge having indicated directly or indirectly that he was minded to grant such injunctions, counsel for the defendants must be taken then to have moved inter partes to have those injunctions discharged. In this he failed. Accordingly if he were to seek to challenge the learned judge's decision in this court, the proper procedure was by way of an appeal against the judge's dismissal of his inter partes motion to set aside the interim interlocutory injunctions. This in the end is what we heard. However, that we did so should not be relied on as any precedent that on another similar occasion this court will be prepared to hear such an appeal on its merits as we did. Having made what we think is the correct procedural analysis of what occurred at first instance, we wish to make it clear that we deprecate appeals to this court at this stage in matters of this nature. It is in general most unsatisfactory for this court to be asked to adjudicate upon such appeals when only one side's evidence has been filed. The usual procedure in future should be to let the plaintiffs' original motion stand over to the subsequent inter partes hearing when the evidence on both sides will be before the court of first instance. After that court has reached its decision on that evidence, then the party aggrieved, by either the grant or refusal of an injunction, may appeal without leave to the Court of Appeal - see section 18(1)(h) of the Supreme Court Act 1981. Even so, it should be kept well in mind that the decision of the judge at first instance will have been one which was made by him in the exercise of his judicial discretion. As is well known an appeal against such an exercise of discretion can only succeed in limited circumstances."

8. We respectfully adopt this analysis of the status of the "opposed ex parte" motion and its consequences.

9. So, although we know it did not in fact happen quite like this, we think that counsel for the defendants must be taken to have asked Yeung, J. to discharge the injunction the judge was minded to grant. Before us, counsel for the plaintiffs, and counsel for the defendants, were content to accept this. (It would have been open to counsel for the plaintiffs to submit that this was incorrect, and that all that had happened before Yeung, J. was the hearing of an ex parte application and the making by the judge of his order granting that application; had he done so, we could have dismissed the appeal on the ground that a defendant whose only complaint is that a judge has wrongly made an order against him ex parte must, before coming to this court, apply to the Court of First Instance for the discharge of the order. Since that did not happen here, the appeal to this court by the defendants would have had to be treated as an abuse of process and summarily dismissed. But on the hypothesis we have adopted, the defendants' appeal to this court, being an appeal against an order of a judge refusing to discharge his ex parte order, was perfectly legitimate.)

10. We will, accordingly, treat this appeal in favour of the defendants, as (or as if it were) their appeal to this court to discharge an order of Yeung, J. refusing to discharge the order he made on 10 November 1998, and we now deal with that appeal on its merits.

The merits of the appeal

11. Counsel for the defendants contended that the order of 10 November 1998 should be discharged since (1) there was no evidence to support the plaintiffs' assertion of a risk of dissipation of assets; (2) there was nothing to justify the grant of the injunction in world-wide form; and (3) the application for the injunction was not made timeously but was made only long after the commencement of the proceedings.

12. As to (1), however, there was some evidence, inevitably one-sided, in the form of the disposal of certain properties by the defendants in advance of the plaintiffs' application for summary judgment, which, in our opinion, would justify a judge in coming to the conclusion adverse to the defendants to which Yeung, J. came here. We do not know whether we would ourselves have formed the same view on this evidence, which at first blush seems to us exiguous; but that is not the point. Unless there was no evidence of any risk of dissipation of assets, this court, in accordance with its usual practice, will not at this stage, while the evidence remains incomplete, interfere with the assessment of the matter by the judge.

13. As to (2), the evidence demonstrates ownership of substantial assets by the defendants in Canada, the Philippines, Thailand and Macau. Again, we cannot at this stage interfere with the judge's assessment that a world-wide order was appropriate. The defendants will be able to contend that it was not appropriate at the inter partes hearing directed by the judge.

14. As to (3), it took a long time for the plaintiffs to assemble the evidence which, they assert, justified the grant (and will in due course justify the continuance) of the injunction. We cannot, at this stage, interfere with the judge's decision to grant rather than refuse the injunction. What was the just and convenient course to take on the material before him was a matter entirely for his discretion, with which we will not interfere.

The future

15. The right course now is for the parties to proceed to the inter partes hearing directed by the judge, at which the evidence on both sides will be available. The judge rightly said that this hearing should be fixed "for an early date". We were astonished to be told that the date in fact fixed is a date in March 1999; and further astonished to be told that a date so far distant had been fixed to suit the convenience of the defendants' counsel. That is quite unacceptable. Even if the defendants themselves are aware (as we must assume) that the only reason this injunction will remain in force for so long without their being heard is because that suits their counsels' convenience, the interests of the proper administration of justice demand that an early date, not a date in March, be given for the inter partes hearing. The parties should now go back to the listing clerk and ask him to fix such an "early date" for the inter partes hearing, instead of the date in March previously fixed.

Conclusion

16. At the conclusion of the hearing of this appeal on 26 November 1998, we said that we would dismiss this appeal and would reduce into writing our reasons for doing so, as we have now done (see above). In summary, we have treated the appeal as an appeal by the defendants against the refusal of Yeung, J. to discharge his order of 10 November 1998. Having considered the appeal on its merits, we reject it.

17. The judge's order of 10 November 1998 will accordingly stand. The order we shall make dismissing the appeal (subject to Order 42 rule 5B(6) of the Rules of the High Court) will provide for the costs of the plaintiffs of this appeal to be taxed forthwith and paid by the defendants to the plaintiffs.