JADEMAN (HOLDINGS) LTD AND OTHERS v. TONY WONG CHUN LOONG AND OTHERS

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JUDGMENT

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Sir Derek Cons, V.P., delivered the judgment of the Court:

1. This appeal is from the decision of Jones, J., given on the 10th April this year whereby he continued a Mareva injunction and other orders originally granted by Barnes, J., on the 28th February, as subsequently amended.

2. The orders were made in an action by Jademan (Holdings) Ltd. and various other companies within the Jademan group against Tony WONG Chun Loong, his sister, his mother and several companies said to be exclusively in his control. Until the 14th June last year, when they resigned their respective positions, Tony Wong had been director and chairman of Jademan, and his sister and mother had been directors of various companies within the group. His sister had also been personal assistant to him and appears to have played a significant part in the day to day running of the companies.

3. The claims made are for considerable sums, based in particular upon misappropriation, breaches of fiduciary duty and what are, for the moment, termed "negligent loan transactions".

4. Jademan was incorporated by Tony Wong as a private company in 1979. He was then the managing director and held a 100% interest in its shares. In 1986 he caused the company to go public, retaining a 75% interest, later reduced to 40%.

5. It is not necessary now to set out in detail what has happened subsequently. It is sufficient to say that Tony Wong lost a great deal of money through the stock market crash of October, 1987; that the accounts in March, 1989 showed considerable losses; and that in June of the same year Tony Wong and his sister were charged with criminal offences arising from their management of the group. Tony Wong, as we have already indicated, resigned from his position in management, but was retained as chief artist.

6. Tony Wong was also in financial difficulties, having mortgaged almost his entire shareholding in Jademan to three financial institutions - James Capel (Far Fast) Ltd., the Liu Chong Hing Bank and the Standard Chartered Bank Ltd. in a total sum of about $116 million. On the 10th August, being apparently pressed for repayment, he entered into an agreement with a company incorporated in Liberia, Tabor International Incorporated, owned by a Mr. LAM Kin Ming and Mr. Tony Zie, presently directors of Jademan, whereby, inter alia, he gave Tabor a charge over his shares against a loan of $117 million to pay off the institutions. The loan was to some extent repayable over a period of time, with a provision, in fact exercised on the 18th November, to demand repayment in full upon seven days' notice in writing. To complete this brief outline we should add that the service of Tony Wong as the company's chief artist was terminated by the company on the 19th December.

7. The present action, one of many arising from these affairs, was initiated on the 28th February this year. The first move was an ex parte application to Barnes, J. He granted a worldwide Mareva, with provision for payments in the ordinary course of business, living expenses and legal fees; he made as well orders for extensive discovery, a preservation order, and an Anton Piller order in respect of one apparently commercial and three domestic premises. His orders were effective until the hearing of an inter partes summons to continue the same returnable in seven days, subject to an application to vary or discharge upon 24 hours' notice.

8. The summons to continue came before Jones, J., on the 6th March and was adjourned, some further orders being made, to the 22nd March. He dealt with it on that and the following day, and again on the 30th March, by which time a summons seeking varied relief by both sides had been added to the proceedings. So far as the Defendants were concerned, the variations sought had regard to the amount of living expenses and legal fees and further:

By that time the charge to the Standard Chartered Bank had been redeemed. But to James Capel (Far East) Ltd. had not, a fact which has given rise to urgent applications in this Court and elsewhere. For our part we ultimately gave leave two days ago for Tony Wong to borrow from Arbus Incorporated, a company incorporated in the British Virgin Islands, and owned by Miss Sally Aw Sian and Sing Tao Ltd., as much money as might be necessary in order to redeem the shares mortgaged to Tabor International Incorporated, a move which could in no way prejudice the interests of the Plaintiffs. Thus the only question with regard to the redemption aspect is whether Tony Wong should be permitted to charge his shares to secure that loan.

9. It was conceded before Jones, J., that the Plaintiffs has a good arguable case, at least to some financial extent. "Accordingly" said the judge "the only issue that I have to determine is whether there is a real risk of dissipation of the plaintiffs' assets that would result in a judgment obtained by the plaintiffs being rendered nugatory".

10. The judge was satisfied that there was such a risk, for reasons which, we think, can be fairly summarised as

11. The judge therefore ordered the injunction to continue, adding to it, by his order, the further reliefs sought by the Plaintiffs, one of which, to be fair, restricted the ambit of the discovery originally ordered by Barnes, J. The judge declined to deal with the reliefs sought by the Defendants on the grounds that

12. The grant of a Mareva injunction is invariably a matter for a judge's discretion. It will not inevitably follow even where a good arguable case and the risk of dissipation have been clearly shown. There may, for example, be cases where the Plaintiff is abusing the process and acting mala fide.

13. Mr. Tang, for the Defendants, has suggested, more strongly in his reply than in opening, that such is the present case. We do not think that contention has been sufficiently made out. The action by the company may perhaps also serve what are suggested to be the private interests of some members of the board, but if there is in fact a risk of dissipation the interests of the company would require such action to be taken. The board would be rendering a disservice to the company if it failed to do so.

14. Mr. Tang has advanced several factors to indicate that there is no risk of dissipation and that Tony Wong is no "debt dodger". He instances Tony Wong's guaranteeing the staff loans, his acceptance of only 30% of his salary, his indemnification of the Jademan loss on the Allied property shares, his repayment to a large extent of the James Capel loan, and in particular, his desire to retain his controlling interest in the company.

15. We accept that these are factors to be considered. We also consider that, apart from the partial repayment to James Capel Ltd., none of them has as yet involved actual payment out by Tony Wong; that our attention has not been drawn to any income that he may be receiving at the moment; and that circumstances may preclude the fulfillment of his desires. There is, on the other hand, force in the considerations relied upon by the judge. We see no reason to interfere with the exercise of his discretion to continue the injunction as such. However the variations requested by the Defendants raise different considerations.

16. Mr. Thomas has taken us through the submission he made in this respect in the court below, to illustrate that the judge's decision was not based on the law of contempt, as one might be tempted to think from his reference to the Times Newspaper Report of National Bank of Greece v. Constantinos Dimitriou and Another, but was truly the exercise of a discretion upon principles pertinent to Mareva injunctions and discovery in aid of tracing or proprietary claims.

17. The submission referred to such cases as A v. C (No. 2) [1981] 1 Q.B. 961, Campbell Mussels and Others v. Thompson and Others (1984) Law Society Gazette 2457, Avant Petroleum v. Gatoil [1986] 2 Lloyds' Rep. 236, National Bank of Greece v. Constantinos Dimitriou and Another, Beknor v. Bilton [1981] Q.B. 923 and House of Spring Gardens v. Waite [1984] FSR 277. Before us Mr. Thomas has added Bankers Trust Co. v. Shapira and Others [1980] 1 W.L.R. 1274. The object was to establish the importance of full disclosure when there is an application to vary a Mareva injunction, so that the policy of the injunction may not be undermined by the depletion of injuncted assets while others are left untouched, through being, before the law was fully developed, outside the jurisdiction, or perhaps in the present case, undisclosed. In tracing cases the importance lies in preventing the payment away of a plaintiff's own assets.

18. We note, however, that apart from the National Bank of Greece v. Constantinos Dimitriou and Another case, which appears to place stronger emphasis on contempt than defeating the object of the Mareva, none of the cases referred to in the submission was mentioned by the judge. Having regard to that, and to the passage of his judgment already set out, and to comments made by him seven days later in the course of a further application upon similar lines (to which Appeal No. 79 of 1990 relates), we find ourselves forced to the conclusion that the judge took the view that once satisfied that full disclosure had not been made in accordance with the order of Barnes, J., he was precluded as a matter of law from consideration of any application to vary. We are confirmed in this view by the fact that in the course of his judgment he made no reference whatsoever to the Defendants' request for sufficient funds to meet the condition imposed by Saied, J., or to redeem the mortgaged shares, either of which may not have depleted the assets subject to the injunction, depending upon the manner by which it was to be financed.

19. With respect to the judge he was mistaken. There is always room for consideration of the particular circumstances of an application. Authority is to be found in the judgment of Romer, L.J., with which Somervell, L.J. agreed, in Hadkinson v. Hadkinson [1952] Probate Division 285, where, after referring to one of the consequences of a person's being in contempt of court as that

he added as one of the exceptions to the rule :

Again in Campbell Mussels and Others v. Thompson and Others, after suggesting that A v. C had been interpreted too widely, Sir John Donaldson, M.R., emphasized that:

20. The judge having failed to exercise his discretion in this respect, this Court is free to do so in his stead. In our view consideration should be given to the Defendants' applications. We accept that, having regard to the disclosure that was in fact made, it may be thought that with more effort the result could have been more satisfactory. That was accepted by counsel who appeared on the subsequent application. But, on the other hand, we bear in mind that in the event the judge allowed a further three months to comply with the discovery orders, which is some indication of the difficulties involved, that reasonable explanations have been offered with regard to the failure to disclose the Australian properties, the sale of the Ton Weight property, and the three safe deposit boxes; and that the redemption of the mortgaged shares may not involve any diminution of the assets. Meeting the condition imposed by Saied, J., is no longer of any importance.

21. Whether all, or any, of the variations requested should be granted, or what other course this Court might take in the circumstances, are questions on which we said we would prefer to hear counsel later and will do so now. For the moment we allow the appeal only to the extent we have indicated.