WONG HO YIN v. FONG MEI YING

DCCJ 3418/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3418 OF 2008

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BETWEEN

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DECISION ON COSTS

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1.  By two inter partes summonses dated 15^th September 2011, the Plaintiffs in both actions (“the Plaintiffs”) sought to continue the Mareva Injunctionsgranted by Deputy District Judge A. Kwok ex parte on 14^th September 2011 (“the ex parte Orders”). The Defendant sought to discharge the injunctions at the hearing.

2.  At the hearing, before Defence Counsel gave his submissions, the parties came to a settlement in respect of the disposal of the ex parte Order, subject to argument on costs.  In short, the proposed consent order is that:  Upon Defendant’s undertaking to pay $150,000 (for each case) to her solicitors to stakehold until further Court order, the ex parte Orders be discharged.

3.  Upon hearing Counsel’s submissions on costs, I now set out my decision and the reasons thereof.

Background

4.  This is a water seepage case.  The Plaintiffs are the owners of properties (“the Plaintiffs’ Properties”), which were situated immediately beneath a property owned by the Defendant (“the Defendant’s Property”).  It is the Plaintiffs’ case that water has seeped from the Defendant’s Property into the Plaintiffs’ Property since 2006.

5.  The Defendant’s case is simple.  She alleged that the said seepage originated from the external wall of the same building and another property situated next to the Defendant’s Property.

6.  Pursuant to an Order dated 8th June 2011, the parties appointed their surveyors for the purpose of preparing a joint report on liability and quantum.  A joint expert report was compiled and filed on 9th September 2011.  In short, both experts opined that the water seepage originated from the Defendant’s Property.

7.  In early August 2011, it came to the Plaintiffs’ knowledge that the Defendant entered into a Sale and Purchase Agreement, dated 30th June 2011, to sell the Defendant’s Property.  According to the Sale and Purchase Agreement, the completion would take place on or before 16^th September 2011.  It is thus on that basis the Plaintiffs took out their applications for the ex parte Orders.

8.  The Defendant sought to discharge the ex parteOrders on the following grounds:-

(a) There was serious material non-disclosure on the part of the Plaintiffs, in respect of a draft agreement (草簽) signed by the parties during mediation (“the Draft Agreement”).

(b) The Plaintiffs did not have a good arguable case.

(c) There was undue/inexcusable delay on the Plaintiffs’ part in taking out the application for the ex parte Orders.

(d) There was no evidence from the Plaintiffs to show any risks of dissipation of assets by the Defendant.

(e) The manner in which the Plaintiffs have taken out their applications of the ex parte Orders amounts to an abuse of process.

Court’s Approach to determine costs in a settlement

9.  I understand the difficulties when courts are asked to determine on costs after parties having settled their disputes.  Mr Recorder Jat SC in Graham M. Morley v Kwan Wo San & Others (Unreported, HCA 4366 of 2003, 30 December 2009)have summarized the relevant principles:-

(a) In Butcher v Wolfe [1999] 1 FLR 334, Mummery LJ observed at 338G–339C that:

“A point of general concern arises on the judicial determination of costs when everything else has been agreed. It is unfortunate that, in compromising these proceedings, the parties were unable to reach an agreement on liability for costs. That led to a situation which settlements are intended to prevent—further litigation between the parties, with the result that substantial additional costs have been incurred in deciding who should pay the substantial costs already incurred.

All lawyers learn from experience that costs are often a stumbling block in negotiating a settlement of proceedings. A judge who is informed by the parties that they have agreed everything except costs may be placed in a difficult position. On the one hand, he may take the view that, if the parties have not agreed everything, including costs, then they have not settled their case: they must either reach an agreement on costs or, failing that, go on with the case. This is a matter for the discretion of the judge. He may be entitled in some circumstances to adopt that position in the hope that the case will not go on and that a settlement on costs will be achieved. On the other hand, a judge may not wish to risk jeopardising the settlement, and may agree to do what Rattee J did in this case—decide the costs issue for the parties. There can be problems; as the case has not run its full course, the judge has not heard all the evidence and all the argument. He may face difficulty in knowing what materials he should take into account in the exercise of his judicial discretion.”

(b) In BCT Software Solutions Ltd v C Brewers & Sons Ltd [2003] EWCA Civ 939, Mummery LJ said:

“4. The arguments advanced on this appeal have demonstrated the real difficulties inherent in asking a judge to exercise his discretion in respect of the costs of an action, which he has not tried. There are, no doubt, straightforward cases in which it is reasonably clear from the terms of the settlement that there is a winner and a loser in the litigation. In most cases of that description the parties themselves will realistically recognise the result and the costs will be agreed. There will be no need to involve the judge in any decision on costs. If he becomes involved, because the parties cannot agree and ask him to resolve the costs dispute, the decision is not usually a difficult one for him to make.

5. There are, however, more complex cases (and this is such a case) in which it will be difficult for the judge to decide who is the winner and who is the loser without embarking on a course, which comes close to conducting a trial of the action that the parties intended to avoid by their compromise. The truth often is that neither side has won or lost. It is also true that a considerable number of cases are settled by the parties in the belief that the terms of settlement represent a victory, or at least a vindication of their position, in the litigation, or in the belief that they have not lost; or, at the very least, in the belief that the other side has not won.

6. In my judgment, in all but straightforward compromises, which are, in general, unlikely to involve him, a judge is entitled to say to the parties ‘If you have not reached an agreement on costs, you have not settled your dispute. The action must go on, unless your compromise covers costs as well.’

7. The disposition of a judge to help parties in negotiations for a settlement is understood and applauded. Good intentions are not, however, risk free. If acted upon too readily, commendable judicial intentions can make things far worse than they would have been if the judge had adopted the unpopular stance of requiring the parties to confront the realities of their litigation situation. The judge has a discretion to decline to do what the parties ask him to do. If, on the one hand, the action is for damages, it will be relatively easy for the judge to tell from the size of the settlement sum and from the litigation history (offers, payments in and so on) how the costs should be borne. As I have already said, it would be relatively unusual for the parties themselves not to agree on the costs of such cases. In more complex cases, however, involving a number of issues and claims for discretionary equitable relief, the costs position is much more difficult for the judge to resolve without actually trying the case.

8. …If there is a point of principle in this case, which I very much doubt, it does not arise from the way in which the judge exercised his discretion, but from whether he should ever have embarked on this particular exercise at all. As both parties agreed that he should undertake the task, it is reasonable to expect them to accept his decision, unless it can be shown that the result is, in all the circumstances, manifestly unjust. I would certainly not be inclined to interfere with the judge’s decision simply because it is possible to detect imperfections in his approach or in his reasoning.”

(c) Chadwick LJ, in the same judgment said:

“21. I agree that this appeal should be dismissed. I add some observations of my own only in order to emphasise that—as has already been said by Lord Justice Mummery in his judgment—a trial judge should be cautious before making an order as to costs in litigation in which all other issues have been compromised without a full trial.

22. The power to make an order as to the costs of civil proceedings is conferred by section 51(1) of the Supreme Court Act 1981 [equivalent to High Court Ordinance section 52A(1)]. It is in the discretion of the court whether, in any particular case, that power should be exercised. That is made clear by CPR 44.3(1)(a). It finds expression in the opening words of CPR 44.3(2)—‘If the court decides to make an order about costs—’. The first question for the court—in every case—is whether it is satisfied that it is in a position to make an order about costs at all.

23. In addressing that question the court must have regard to the need (if an order about costs is to be made) to have a proper basis of agreed or determined facts upon which to decide, in the light of the principles set out under the other provisions in CPR 44, what order should be made. The general rule, if the court decides to make an order about costs, is that the unsuccessful party will be ordered to pay the costs of the successful party—CPR 44.3(2)(a). But the court may make a different order—CPR 44.3(2)(b). Unless the court is satisfied that it has a proper basis of agreed or determined facts upon which to decide whether the case is one in which it should give effect to ‘the general rule’—or should make ‘a different order’ (and, if so, what order)—it must accept that it is not in a position to make an order about costs at all. That is not an abdication of the court’s function in relation to costs. It is a proper recognition that the course which the parties have adopted in the litigation has led to the position in which the right way in which to discharge that function is to decide not to make an order about costs.

24. In a case where there has been a judgment after trial, the judge may be expected to be in a position to decide whether one party or the other has been successful overall; whether one party or the other has been successful on discrete issues; whether the fact that the party who has been successful overall but unsuccessful on some issues calls for an order which reflects his lack of success on those issues; and whether—having regard to all the circumstances (including conduct) as CPR 44.3(4) requires—the order for costs should be limited in one or more of the respects set out in CPR 44.3(6). But where there has been no trial—or no judgment—the judge may well not be in a position to reach a decision on those matters. He will not be in a position to decide those matters if they turn on facts which have not been agreed or determined. In such a case he should accept that the right course is to decide that he should not make an order about costs. As the arguments on the present appeal demonstrate, it does the parties no service if the judge—in a laudable attempt to assist them to resolve their dispute—makes an order about costs which he is not really in a position to make.

25. It does not, of course, follow that there will be no cases in which (absent a judgment after trial) the judge will be in a position to make an order about costs. There will be cases (perhaps many cases) in which it will be clear that there was only one issue, that one party has been successful on that issue, and that conduct is not a factor which could displace the general rule. But, in such cases, the answer to the question which party should bear the costs of the litigation is likely to be so obvious that, as Lord Justice Mummery has pointed out, the judge will not be asked to decide that question. It will be agreed as one of the terms of compromise.

26. The cases in which the judge will be asked to decide questions of costs—following a compromise of the substantive issues—are likely to be those in which the answer is not obvious. And it may well be that, in many such cases, the answer is not obvious because it turns on facts which are not agreed between the parties and which have not been determined. The judge should be slow to embark on the determination of disputed facts solely in order to put himself in a position to make a decision about costs. As Lord Justice Mummery has put it, the better course may be to require the parties to confront the realities of their litigation situation; to point out to them that, if they have not reached an agreement on costs, they have not settled their dispute and the action must proceed to judgment.

27. I share Lord Justice Mummery’s view that this is a case in which the judge could not have been criticised if he had taken that course. For my part, I think he would have been wise to do so. But it is not open to the appellant to complain that the judge set out to do what both parties had asked him to do—that is to say, to make an order about costs and to decide what order to make on the material before him and without determining disputed facts. Nor is it open to the appellant to complain that, in seeking to perform that task, the judge adopted an approach which he, himself, described as ‘broad brush’. It is difficult to see what other approach the judge could have adopted in the circumstances.”

(d) In Chinese United Establishment Ltd, (Unreported, HCCW 391 of 1994, 5 October 1995), Rogers J (as he then was) stated as follows:-

“[6] … [the Petitioners’] point is simple: they came to court to get an order that was an order in the alternative, that either [the company] be wound up or the Petitioners’ shares be purchased. They say that was an alternative order and they got the order which they came to court to seek, if they did not get the exact order, they obtained substantially the relief that they came for.

[7] The Respondents resist the order for costs sought by the Petitioner. First of all they point out that there was no admission of any allegation being well-founded and this was a Consent Order which provided expressly for that, nor have the merits been decided. They say in effect that there has been no determination upon which the Court could order costs. They say that although costs normally follow the event, the event would be a finding that the Petitioner would be entitled to his relief and that has not happened because what the Petitioner has done is to accept an offer which has been made.

[8] In my view, I consider that the Petitioners are entitled to their costs on the very simple footing that they have, in effect, gained by these proceedings that which they had to come to court to get. If this open offer had been made earlier, perhaps when the petition were presented, or in lieu of evidence being filed by the Respondents, or at any other time, then of course the Petitioners would not have had to proceed with their petition, or if they had done so, would have done so at their own peril as to costs.

[9] I am mindful in so saying that once the matter comes to court the Respondents are in a difficult position; they may well have reached a situation where, with a three to five week case looming as this one was, their irrecoverable costs, even were they to defeat the petition, would be so high that the chances of recovering them from the Petitioner would not be great, I know not.

[10] The only suggestion I can make is that any offer which is to be made in such circumstances, whether for protection of costs or otherwise, would have to be made specifically with the order as to costs included, otherwise it seems to me that the normal course should follow and the Petitioners, having obtained their buy out order, should receive their costs.”

(e) The case was appealed to the Court of Appeal (Unreported, CACV 214 of 1995, 24 April 1996). Mayo JA said:

“[13.] The way that the judge approached the problem was to consider what had been achieved by the petitioners. It had been as a consequence of the filing of the petition that the respondents had made the offer they had. It could be said that the action taken by the petitioners had achieved this.

[14.] The main contention advanced by the appellants is that it is wrong to conclude that the respondents have in fact been successful. There had been no admission as to liability and the whole issue between the parties remained at large. In considering whether it was a case where costs should follow the event it was necessary to consider what is meant by ‘event’. Mr [Robert Tang QC, as he then was] called in aid the case of Howell v. Dering and Others [1915] 1 KB 54 and in particular a passage at p63 of the judgment of Buckley LJ:

‘In the next place, was the answer of the jury to that question an ‘event’? In my opinion it was not. An ‘event’ within the meaning of the rule is an outcome of the presentation to the tribunal of some claim made by the plaintiff against the defendant which results in a finding that the plaintiff is or is not entitled to relief against the defendant.’

[15.] Mr Tang submitted that there had been no determination of the issues between the parties. This is not really germane to the present case. The fact of the matter here is that the petitioner did substantially obtain the relief sought.

[16.] When the judge made the order he did he was exercising his judicial discretion. We can only interfere with the exercise of this discretion if we are satisfied that the exercise of this discretion was either wrong in principle or manifestly in error.

[17.] This cannot be said in the present case. Clearly the parties left open the question of costs when they agreed the terms of the consent order. The reasons given by the judge for making the order he did are valid reasons. We are not justified in interfering with this order and accordingly this appeal is dismissed with costs on a common fund basis.”

(f) In Re Super Deluxe International Ltd (Unreported, HCCW 186 of 2001, 3 June 2003), Kwan J. (as she then was) stated:-

“6. As for the costs of the petition generally, it was recognised by both parties that even though the other prayers for relief have become unnecessary for adjudication, it is still necessary for the petitioner to bring the proceedings for hearing for the purpose of obtaining costs (Ta Tung China & Arts Ltd. v. Fontana Restaurant Ltd. [1999] 1 HKLRD 404). The Court of Appeal held in that case that it was impossible to have the costs liability issue resolved without having the action disposed of in one of two ways, namely, by seeking leave to discontinue the action and asking for the costs to be determined, or by going to trial and having the costs dealt with after the trial. Godfrey JA has this to say at 407F to G:

‘Where a plaintiff seeks to recover costs against a defendant in an action in which the substantive issues have been determined in one way or another before the trial, the only way which the plaintiff can recover his costs (if the defendant refuses to pay them) is to bring the action to trial for the purpose of doing so. The issues at the trial will be limited and no additional expense should be incurred by adopting that course...’

7. Mortimer VP also observed at 407A that the issues on such a trial would be ‘extremely limited’, and like Godfrey JA, he did not elaborate as to the extent to which the issues might be limited or whether it would be necessary in all cases for the court to make a determination of the issues in the proceedings on the merits. The third member of the Court of Appeal, Rogers JA, gave a concurring judgment, and stated at 409C that ‘there is no alternative but to resolve the action’.

8. It was contended by Mr Godfrey Lam, who appeared for the petitioner, that I do not need to resolve the factual disputes arising in the petition and I could simply have regard to the fact that the petitioner had issued letters before action which were completely ignored by the respondents and that she had to bring these proceedings to seek, inter alia, buy-out relief under section 168A. As the respondents did subsequently agree to buy out the petitioner’s shares, the respondents ought prima facie be held responsible for the petitioner’s costs unless it could be shown that the petition is demurrable or it does not disclose a prima facie case, citing Burgess v. Hill (1858) 26 Beav 244 in his written submission. I do not think Burgess v. Hill is authority for the proposition advanced by Mr Lam. It was held by Sir John Romilly, MR at 249 that the plaintiff could not have the question of costs decided without moving for judgment as the court had ‘no power to do anything but to adjudicate on the rights of the parties’.

9. Mr Lam also sought to rely on the unreported decision of Re Chinese United Establishments Ltd., CWU No. 391 of 1994, 5 October 1995, a case referred to by Mr Rimsky Yuen, SC, who appeared for the respondents. That was a decision on costs by Rogers J (as he then was). The court was concerned with a petition to wind up the company on just and equitable ground and alternatively for buy-out relief of the petitioners’ shares. At the second day of the hearing of the petition, the respondents made an open offer to purchase the petitioners’ shares and that resulted in a consent order for the purchase of the petitioners’ shares. The order provided that it was made without admission that either party was entitled to costs and without prejudice to either party seeking costs against the other. Immediately after the order was made, the petitioners applied for costs on the simple footing that they had substantially obtained the relief for which they had to come to court to get. The respondents resisted costs on the basis that there was no determination upon which the court could order costs as there was no admission of any allegation being well-founded in the consent order, nor was there any finding that the petitioners would be entitled to relief. The respondents’ submission was rejected by the court.

10. This decision was upheld by the Court of Appeal in CACV No. 214 of 1995, 24 April 1996.  The Court of Appeal did not think it germane to the case there had been no determination on the merits of the issues ventilated in the petition, or that the judge had erred in principle or was manifestly in error in the exercise of his discretion by considering what the petitioners had achieved.

11. I do not think the above decision is necessarily in conflict with the subsequent case of Ta Tung.  Costs are a matter of judicial discretion.  What materials are to be taken into consideration in the exercise of that discretion would depend on the circumstances of a particular case.  It is not apparent from the decision in Chinese United Establishment whether the court was asked to receive evidence and make a determination of the petitioners’ entitlement to relief before it was to rule on costs, or whether the court was asked to adjudicate on costs simply on the basis of what was put forward by the petitioners as the parties were anxious to avoid the costs of a three to five week trial of the petition on the merits.  I do not think anything was said in the judgments of the Court of Appeal in Chinese United Establishment or in Ta Tung that would tie the hands of the court as to what evidence it should or should not receive and what findings it should or should not make in a particular case for the purpose of adjudicating on costs.

12. In the present case, I was asked by the respondents to receive evidence and make a finding on the petitioners’ entitlement to the relief sought for the purpose of ruling on the costs liability of the petition generally.  It is up to the parties to put forward such evidence as is helpful to their case for the purpose of seeking adjudication on any matter.  And if the evidence put forward were such that the court would need to resolve factual disputes with the benefit of cross-examination, then that exercise would have to be undertaken.

13. In view of the evidence filed for the purpose of this hearing, I accept Mr Yuen’s submission that I should rule on the petitioner’s entitlement to the relief sought.  To do so, it would be necessary to resolve the factual disputes arising in the petition and the evidence filed in opposition.  For that purpose, the parties have served notice to cross-examine the other side’s deponents on their affirmations, pursuant to directions given by the court on 11 November 2002, and I have to assess the evidence given on affirmation in the light of the cross-examination of these witnesses.”

10.   I consider the background in the current case is similar to that in Graham M. Morley v Kwan Wo San. In that case, the parties managed to reach settlement of their dispute, save for the costs of the action. In the instant case, the applications for continuance/discharge of the ex parte Orders have been disposed of by the agreement of the parties, leaving only the issue of costs outstanding. The present situation is akin to that in Re Chinese United Establishment Ltd, but distinguishable from that in Ta Tung.

11.   Further, the completion of the Defendant’s property was extended to 30 September 2011, i.e. 3 days after the substantial hearing of this application. The parties came to a settlement at about 5 p.m.. At that time, Defence Counsel was yet to make his submission. Both Counsel indicated to me as to difficulties with their diaries before 30 September 2011 if the matter goes part heard. Under those circumstances, I consider sanctioning the settlement between the parties, leaving only the issue of costs outstanding for me to determine, is consistent with the underlying objectives under RDC Order 1A. Thus, save as to some minor mark-ups, I made an order in terms of the proposed consent order.

Plaintiffs’ Application for costs

12.  The Plaintiffs sought for an order that the Plaintiff’s costs be in the cause. Mrs Chan submitted that because they were able to obtain the Defendant’s undertaking through the settlement, they should have their costs.

Defendant’s Application for costs

Analysis

A. Material Non-Disclosure

14.  In support of the contention that the Defendant has an overwhelming case, Mr. Kwong first sought to rely on Standard Chartered Securities Ltd v Lai Arthur & Others [1993] 1 HKC 375. At p.389E, it stated:-

“I think that insofar as a serious material non-disclosure, albeit not deliberate one, has been exposed, the court should have no hesitation to discharge the ex parte order and refuse to grant any fresh injunctive relief in favour of the applicant.”

It is on this basis, that Mr Kwong submitted that whenever there is material non-disclosure, the court will normally discharge the injunction without a regrant.

15.  The approach which the court shall take regarding material non-disclosure has been further explained by Mr. Recorder G. Ma SC (as the Chief Justice then was) in Yau Chiu Wah v Gold Chief Investment Limited & Another (Unreported, HCA 807/2001, 15 May 2001).  It clearly sets out that:  “If there was material non-disclosure, should the court nevertheless exercise its discretion not to discharge the injunction or grant a new one?”  It is stated in the judgment that:-

“32. I approach the question of material non-disclosure by dealing with the following questions:-

1. Were the facts alleged not to be disclosure, material?

2. Was there non-disclosure?

3. If there was non-disclosure, was it innocent?

4. If there was material non-disclosure, should the court nevertheless exercise its discretion not to discharge the injunction or grant a new one?”

16.  In answering question No. 4, the Chief Justice said:-

“43. Material non-disclosure is rightly regarded as a serious matter and in certain cases would not only justify the setting aside of an existing order but may also constitute the determining factor in the refusal of a fresh grant. However, it is important for a court, when considering whether or not to set aside an existing order or to grant a new injunction, to consider all the circumstances of the case to arrive at what is the justice of the situation. There is of course no doubt that the court does have the residual discretion not to set aside or to grant a fresh order even in circumstances where material non-disclosure has been shown.

44. Of the relevant factors that a court would consider in the exercise of its discretion, they would include the following :-

1. Whether the non-disclosure was innocent or deliberate.

2. The excuse or reason for such material non-disclosure.

3. Whether the non-disclosure would in fact have resulted in the original order not having been made in the first place or whether, conversely, even if the material fact or facts have been disclosed, this would have made no difference. Here, the court is required to look at the merits and justice of the grant of a Mareva injunction.

4. Whether the party guilty of the non-disclosure is deserving of a locus poenitentiae.”

17.  The Court of Appeal in Cheung Kam Wah v Cheung Hon Wah & Others (Unreported, CACV 53/2004, 11January 2005) after considering Yau Chiu Wah and various authorities (including Standard Chartered Securities Ltd. v Lai Arthur), concluded at Paragraph 66 that:-

“It is therefore clear, according to both English and Hong Kong authorities, that upon the discharge of an ex-parte order for material non-disclosure, the court does have discretion to grant the order inter partes. Whether it should do so depends on the circumstances of each case, and the factors for consideration include those set out in Yau [Chiu] Wah as well as other relevant factors, depending on where the justice of the case lies.”

18.  Thus, in the instant case, even if the non-disclosure of the Draft Agreement is material, I shall still proceed to exercise my discretion to consider whether there should be a re-grant. Whether the non-disclosure was committed innocently or deliberately is one of the paramount issues I have to determine if the hearing proceeds without a settlement.

19.  For reasons set out in her 2nd Affirmation, the Plaintiff alleged that she was misled into signing the Draft Agreement. She therefore refused to sign on the formal agreement, and believed that by doing so, the Draft Agreement would be put to an end. The Plaintiff also said that when she refused to sign the final agreement, the Defendant was present and therefore knew the reason of the Plaintiff’s refusal to sign on the formal agreement.

20.  Her belief was reinforced when the Defendant since then remained silent in respect of the Draft Agreement for a certain period of time. In particular, the Defendant did not draw the attention of the Masterswhen appearing before them afterwards, to the existence of the Draft Agreement. That was neither mentioned when the Master ordered for expert reports. It is under such circumstances the Plaintiff did not disclose the Draft Agreement at the ex parte hearing.

21.  It was eventually found out at the hearing before me, that the Defendant did in June 2011 wrote to the Master by referring to the Draft Agreement (after expert reports have been ordered for), but those correspondences/documents were never copied to the Plaintiff. As such the Plaintiff was entirely ignorant as to the existence of those correspondences, and continued with her belief that the Draft Agreement was put to an end.

22.  Under those circumstances, it is in my view that it is at least arguable for the Plaintiff to say that the non-disclosure of the Draft Agreement was not deliberate, even if the non-disclosure is to be considered material.

B. Good Arguable Case

23.  As said in the above, though the Defendant wrote to the Master, referring to the signing of the Draft Agreement, the correspondences were never copied to the Plaintiff. The Defendant also failed to inform the court at the hearings before the Masters. Hence, in the Plaintiffs’ eyes, the Defendant was absolutely silent and/or inactive in pursing the Draft Agreement. What the Defendant did or omitted to do to the knowledge of the Plaintiff is paramount in this issue. As set out by Lord Brightman in Paal Wilson & Co. v Partenreederei [1983] 1 A.C. 854, at 924:

“To entitle the sellers to rely on abandonment, they must show that the buyers so conducted themselves as to entitle the sellers to assume, and that the sellers did assume, that the contract was agreed to be abandoned sub silentio. The evidence which is relevant to that inquiry will consist of or include: (1) What the buyers did or omitted to do to the knowledge of the sellers. Excluded from considerations will be the acts of the buyers of which the sellers were ignorant, because those acts will have signaled nothing to the sellers and cannot have founded or fortified any assumption on the part of the sellers. (2) What the sellers did or omitted to do, whether or not to the knowledge of the buyers. These facts evidence the state of mind if the sellers, and therefore the validity of the assertion by the sellers that they assumed that the contract was agreed to be abandoned. The state of mind of the buyers is relevant to a consideration of what the sellers were entitled to assume. The state of mind of the sellers is vital to a consideration of what the sellers in fact assumed.”

24.  It is thus open for the Plaintiffs to argue that by virtue of the Defendant’s conduct, they are entitled to assume, and did assume that the Draft Agreement was agreed to be abandoned, sub silentio.

25.  I consider that such argument to be at least more than barely capable of serious argument, as enunciated in the principles set out in Mustill J. judgment in Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft mbH & Co. KG (the Niedersachsen) [1983] 2 Lloyds Rep 600, at 604 -605.

26.  Thus, for the reasons given in the above, I am of the view that this is not a case which the ex parte Orders will definitely not be re-granted, even if the non-disclosure of the Draft Agreement is found to be material.

C. Delay

27.  Mr Kwong also submitted that there was inexcusable delay on the part of the Plaintiffs in taking out applications for the ex parte Orders, until 2 days before completion.

28.  It has been explained in the Plaintiffs’ affirmation that they have to wait for the result of the expert’s report, which will confirm the source of the leakage. This would serve the purpose of satisfying the limb of “good arguable case” in the application of Mareva Injunction. That is why the ex parte applications were taken out on 14 September 2011, despite the Plaintiffs came to know about the conveyance of the Defendant’s property in early August 2011. The practical approach of the Plaintiffs in my view is reasonable and I do not consider such delay to be undue or inexcusable.

D. Dissipation of Assets

29.  Mr Kwong also contends that there is no solid evidence to show any risk of dissipation of assets on the part of the Defendant.

30.  There are a number of features which I will need to look into if the hearing continues:

(a) The Defendant has held the subject property since 1989. She did not sell the property until after an order for joint experts report of the subject property was made on 8th June 2011.

(b) The subject property is the Defendant’s only substantial asset.

(c) She is a housewife, and her husband is only able to earn limited income.

(d) She will be unable to pay her legal fees if she is not allowed to proceed with the sale of the subject property.

(e) Once the Defendant receives the proceeds of sale, it would be relatively easy for him to dissipate them.

31.  In view of the features set out in the above, whether the sale of the subject property is one clearly distinct from the Defendant’s usual or ordinary course of business or living is still open for argument. Therefore, I do not agree with Mr Kwong’s submissions that there is no solid evidence to show any risk of dissipation.

32.  As such I do not consider the merits of the Defendant’s case under this head to be overwhelming.

E. Abuse of Process

33.  Under this limb, Mr Kwong relied again on the late application of the ex parte Orders. I have dealt with his argument under the head of “Delay” and found accordingly the delay was not undue nor inexcusable. I do not think it necessary to repeat my judgment in the above.

34.  Mr Kwong’s another complaint is that the application for the ex parte Orders was taken out without notice to the Defendant. I cannot see any merits in this argument. Paragraph 29/1/50 of Hong Kong Civil Procedure 2012, Vol 1 is self-explanatory on the point, which reads:-

“The starting-point is that applications for interlocutory injunctions should be made inter partes after the commencement of proceedings. It is contrary to the principles of natural justice that any judicial order adversely affecting a party’s interest should be made with the party being given a reasonable opportunity of being heard. Derogations are only permitted in certain limited and exceptional circumstances, the most obvious of which is a situation which concerns matters of such extreme urgency that there is no time warn the defendant of what is proposed, or where the purpose of the injunction will or may well be frustrated if the defendant is informed of what is proposed, or where the defendant simply cannot be found …The application may be made ex parte either by reason of urgency, or by reason of the need for confidentiality. This applies particularly in Anton Pillar or Mareva applications, where the purpose of injunction may well be frustrated by the prospective defendant being given notice of an inter partes hearing … ”

Conclusion on Defendant’s“Overwhelming Case”

35.  For the reasons set out in the above, I do not consider the Defendant’s case in seeking to discharge the ex parte Orders to be “overwhelming”.

Costs between the Plaintiffs and the Defendant

36.  I have considered the circumstances of the case, and I consider that adopting the broad brush approach in Re Chinese United Establishments Ltdand Graham M Morley v Kwan Wo San in this case is appropriate.

37.  In exercising my discretion, I bear in mind that:

(a) Through the settlement, the Plaintiffs were able to obtain undertakings from the Defendant; and

(b) The Defendant was able to reduce the frozen amount from $370,370 (in 3418/08) and $587,500 (in 3419/08) to HK$150,000 in each case. The reductions in the amounts frozen (by approximately 60% and 75%) are substantial.

38.  By looking at all the circumstances objectively, I am of the view that both the Plaintiffs and the Defendant were able to achieve something out of the settlement. In the circumstances, I consider an order that no order as to costs is an appropriate order to make and I order so. This order will also include the Plaintiff’s costs for the application of the ex parte Orders on 14 September 2011.