LIBERTY MEDIA HOLDINGS, LLC v. FF MAGNAT LTD

HCMP 1275/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1275 OF 2012

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REASONS FOR DECISION

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Introduction

1.  At the end of the hearing on 16 October 2012, I dismissed the defendant’s two summonses.  Chronologically, they were:

(a)  the summons dated 5 July 2012 seeking to discharge the injunction order dated 22 June 2012 (“the Jun 2012 injunction”). Alternatively, it sought the immediate release of its money deposited with the bank to the defendant (“the discharge application”);

(b)  the summons dated 1 August 2012 seeking to amend the above summons by further seeking (1) an inquiry as to the damages sustained by the defendant, and (2) the payment of further sums for the defendant’s legal expenses (“the amendment application”).

2.  In doing so, I said extemporarily that I agreed with the plaintiff’s arguments and disagreed with the defendant’s, indicating also that fuller reasons would be handed down later.  They are below.

Background

3.  The plaintiff commenced this action in June 2012 seeking essentially two types of relief:

(1)  an injunction restraining the defendant from disposing of his assets to the value of up to US$3 million;

(2)  a bank disclosure order relating to the defendant’s bank account’s transactions and records.

4.  Further, the plaintiff applied for, and obtained, an ex parte Mareva injunction order; this resulted in the Jun 2012 injunction (which was ordered on 6 July to continue until further order).  The subject-matter of the Jun 2012 injunction is the defendant’s money deposited in a bank account in Hong Kong.

5.  The defendant’s two summonses were heard on 8 August 2012 and adjourned part-heard to 16 October 2012.

Full and frank disclosure

6.  The gist of the plaintiff’s skeleton submissions for use at the 8 August hearing was:

(a)  the Jun 2012 injunction was in aid of an US legal proceeding between the parties (in which the plaintiff claimed that the defendant, a web hosting company, infringed its copyrights by enabling the unauthorized use of the plaintiff’s works);

(b)  a settlement agreement was entered into on 1 July 2012 concerning the resolution of both the US legal proceeding and this action (“the settlement agreement”).  In brief, upon the defendant performing the settlement agreement, both the US legal proceeding and this action are to be dismissed;

(c)  by virtue of the defendant’s refusal to perform the settlement agreement, the plaintiff sought the US court to have it enforced;

(d)  in the meantime, the Jun 2012 injunction should remain to preserve the status quo between the parties.

7.  On the other hand, the defendant contended that:

(1)  there was no evidence to show a real risk of dissipation of its assets, and any fund transfers relied upon by the plaintiff as such evidence were part of the ordinary course of the defendant’s business;

(2)  as the plaintiff ought to be aware of sub-para (1) above, the plaintiff failed to make full and frank disclosure of the same.

8.  The above contentions were denied by the plaintiff.  Further, the plaintiff drew attention to the unusual transfers of the defendant’s share, and the unusual location of the individuals behind the defendant (with addresses in various countries), in support of its allegation of risk of asset dissipation.  With these matters in mind, the plaintiff cannot be faulted for viewing the fund transfers with suspect.

9.  In any event, the earlier fund transfers, relied upon by the defendant as showing that such transfers were part of its ordinary course of business, have been:

(a)  shown in the bank statements exhibited to one of the plaintiff’s affidavits (and referred to in the body of the affidavit);

(b)  referred to by the ex parte judge.

10.  By reason of the above matters, I do not consider the plaintiff to have failed to make full and frank disclosure when it applied for the Jun 2012 injunction.

Status quo

11.  The amount of damages contended for by the plaintiff in the US legal proceeding was about US$30 million.

12.  At the 16 October hearing, the plaintiff did not dispute that the defendant had performed the settlement agreement by paying the stipulated sum (US$550,000) at the end of August 2012.  Having done so, however, the defendant’s legal representatives in the US have been instructed to appeal against the US court’s order to enforce the settlement agreement, contending that the settlement agreement was not valid or enforceable.

13.  A notice of appeal has been issued in September 2012.  However, the appeal itself was still pending.  Naturally, both parties would claim in that appeal that the merits were in their respective favour.

14.  In such circumstances, I agreed with the plaintiff that the discretion ought to be exercised to preserve the status quo by leaving the Jun 2012 injunction in place.

Other matters

15.  Other matters usually relevant to the exercise of the court’s discretion in deciding whether to grant (or continue) a Mareva injunction order have not been emphasized by the defendant.  They have nonetheless been taken into account when I determined the defendant’s summonses.

Indemnity costs

16.  I awarded indemnity costs in the plaintiff’s favour.  In doing so, I agreed with the plaintiff that the defendant has been “blowing hot and cold”: having performed the settlement agreement, the defendant instructed its legal representatives in the US to persist in its argument that the settlement agreement was legally invalid and unenforceable.  Further, the defendant then instructed its legal representatives in Hong Kong to pursue the summonses without even attempting to resolve this apparently inconsistent stance.  The defendant’s conduct has thus been unreasonable and an affront to the court.