Jewrim Ltd and Another v. S&C Ltd and Another

HCMP 2724/2017

[2020] HKCFI 1983

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2724 OF 2017

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BETWEEN

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REASONS FOR DECISION

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A.  INTRODUCTION

1.This was the substantive hearing of:

(1)  The Plaintiffs’ Summons dated 21 December 2017 for the continuation of a Mareva injunction (originally obtained ex parte on 20 December 2017) in aid of foreign proceedings (“the Injunction Order”) (“the Continuation Application”); and

(2)  The 1^st Defendant’s Summons dated 12 February 2018 seeking the discharge of the Injunction Order (“the Discharge Summons”).

2.This matter has had a long and chequered history. The Injunction Order was originally obtained in December 2017 pursuant to S.21M of the High Court Ordinance in aid of proceedings in Russia.  By the time the matter came before me on 23 July 2020:

(1)  The Plaintiffs’ various claims in Russia had been decided at trial court level, and then appealed via the available channels and had all been ultimately dismissed, with no further appeals pending. 

(2)  Despite the dismissal of their claims in Russia, the Plaintiffs had not sought to progress or otherwise address the Injunction Order in Hong Kong.  On 14 July 2020, the Plaintiffs’ solicitors on record, Messrs. Tanner De Witt (“TDW”), had filed an application to cease acting, which was yet to be heard as at the date of the present hearing.  Whilst TDW did appear at the hearing it was solely on their own volition in order to assist the Court; they did not have any instructions from the Plaintiffs and thus did not make any substantive submissions.

3.It was therefore obvious that the Injunction Order stood to be discharged.  The only issue remaining was that of costs, which is the subject matter of this decision. 

4.At the hearing, the 1^st Defendant was represented by Counsel Ms Joyce Leung.  Mr Jeff Lane of TDW appeared in the limited capacity as indicated at paragraph 2(2) above.

B.  BACKGROUND

5.I set out below the relevant background insofar as the costs issue is concerned.

B1.  The Russian Proceedings

6.The 2^nd Plaintiff (“Drozdov”) was and is a Russian national and businessman.  One of Drozdov’s businesses was an interest in the gambling industry.  Through a wholly-owned BVI company, Elegant City Group Limited (“Elegant City”), Drozdov held a stake in Oriental Regent Limited, which was a shareholder in The First Gambling Company of the East LLC, a company that was developing a casino and entertainment resort in Vladivostok in or around 2013.

7.In October 2013 Drozdov was detained and imprisoned pending criminal investigation.  There are conflicting stories as to the reason for his imprisonment.  Drozdov’s claim was that one Simanchuk Aleksey Sergeevich (“Simanchuk”) orchestrated his incarceration as part of a scheme for the hostile takeover of Drozdov’s share in the casino project.  The Defendants suggest that in fact, Drozdov had been imprisoned because of the commission of “business malpractices” by one of his companies.

8.Shortly before his release from prison Drozdov concluded a settlement agreement dated 7 August 2014 (the “Settlement Agreement”) between himself and his two former business partners, Simanchuk and the 2^nd Defendant (“Grushina”), in which he agreed to advance US$16,875,000 to Grushina within 3 months from the signing of the agreement.  The circumstances surrounding its conclusion are similarly disputed.  Drozdov claimed that he was coerced into signing the Settlement Agreement by Simanchuk in order to secure his release.  This is disputed by the Defendants.

9.Upon his release Drozdov borrowed the sum of US$17,000,000 from Elegant City under a loan agreement dated 15 October 2014.  Firich Investment Limited, on behalf of Elegant City, then remitted the Euro equivalent of US$16,875,000 to the 1^st Defendant’s (“S&C”) bank account in Hong Kong on instruction from Grushina (who was the sole shareholder of S&C at that time).

10.Three months later, Elegant City then assigned its right to recover its loan from Drozdov to the 1^st Plaintiff (“Jewrim”) for US$1,838,000 by way of an agreement dated 26 January 2015.  Jewrim’s director, sole shareholder and ultimate beneficiary is and was the son of Drozdov’s wife, one Alexsei Lomakin.

11.In or around October 2015, Sberbank of Russia (“Sberbank”) initiated bankruptcy proceedings against Drozdov, whose claim was upheld and Drozdov was declared bankrupt.

12.The Plaintiffs commenced proceedings in Russia in 2017 (Civil Action Case A51-21631/2015 and 115182/2017) (“the Russian Proceedings”).  They are divided into three claims:

(1)  Jewrim’s claim for its debt to be included in the register of creditors’ claims, which was opposed by other creditors including Sberbank, on grounds that Jewrim had no right to do so under Articles 10, 168 and 170 of the Civil Code of the Russian Federation (the “Creditor Status Claim”).

(2)  The Plaintiffs’ joint claim against Grushina and Simanchuk declaring the Settlement Agreement null and void by reason of disproportionate compensation and non-performance of the terms therein as well as the return of US$16,875,000 advanced to S&C/Grushina (the “Null and Void Claim”). 

(3)  Provisional measures obtained by Jewrim against Grushina and Simanchuk restraining them from disposing of funds/property owned by them (being in their possession or possession of other parties) up to the value of US$16,875,000 and disposing of shares of legal entities owned by them (the “1^st Provisional Measures”).

13.For each of the above claims, the Plaintiffs were initially successful at the Russian first instance trial stage.  However, each of these were appealed to various levels of Court, as is further discussed in Section B3 below.

14.Of particular note for the purposes of this decision is the following issue (“the Locus Issue”):

(1)  The Null and Void Claim was only commenced after Jewrim was initiailly successful in the Creditor Status Claim.  This was because in order for the Null and Void Claim to be properly commenced, Jewrim needed to establish its locus to do so. 

(2)  Jewrim’s locus to challenge the Settlement Agreement in the Null and Void Claim arose as a result of its creditor status.  It was not a party to the Settlement Agreement, but would be entitled to independently challenge its validity on two grounds.  First, Jewrim was assigned the right by Elegant City, a company which Drozdov previously owned and controlled, to recover its loan of US$17,000,000 from Drozdov and could thus claim to be a creditor of Drozdov’s estate.  Second, with a purported claim amount of RUB 1,337,568,500 (roughly equivalent to US$17,000,000), the debt would be 10% or more of the total amount of debts included in the register of creditors such that, under Russian bankruptcy law, Jewrim would automatically be entitled to challenge Drozdov’s transactions.  On either route, its status as a creditor was crucial to it being able to advance the Null and Void Claim (and in consequence thereof, to obtain the 1^st Provisional Measures).

The upshot of the above is that if there were any change in the status of the Creditor Status Claim, this would fundamentally affect the viability and legitimacy of the Null and Void Claim and the 1^st Provisional Measures.

B2.  The Hong Kong Procedural History

15.It was in this context (all three claims being initially successful) that on 20 December 2017, the Plaintiffs sought and obtained the ex parte Injunction Order against the Defendants in aid of the Russian Proceedings.  By that order, the Defendants were and have been restrained from disposing of their assets within Hong Kong up to the value of US$16,875,000 (“the Sum”).  A small amount of fortification in the sum of HK$150,000 was ordered to be paid into Court.

16.There were two return date hearings – on 29 December 2017 and 12 January 2018 respectively – which proceeded in the absence of the Defendants.  The Injunction Order was continued at each of those hearings.

17.On 1 February 2018, Messrs.  Haldanes filed a notice to act for the 1^st Defendant.  The 2^nd Defendant has never entered an appearance in these proceedings.

18.On 12 February 2018, the Discharge Summons was taken out.

19.On 14 February 2018, the parties filed a consent order for the Discharge Summons to be adjourned for argument and the Injunction Order to be continued pending determination of the same.

20.The Discharge Summons was heard on 12 December 2018 before Hon P Ng J.  However, the learned Judge adjourned the hearing thereof pending further developments in the Russian Proceedings.

21.The matter was then originally due to be heard in March 2020, but this was adjourned by reason of the General Adjournment Period (“GAP”) due to Covid-19.  The matter was then re-fixed for hearing on 23 July 2020.

B3.  Developments in Russia

22.Whilst the above was occurring in Hong Kong, the following developments took place in Russia.

2018: Creditor Status Claim

23.By reasons handed down on 17 January 2018, the Court of Appeal in Russia (Court of Appeal: Fifth Arbitration Court of Appeal, “FACA”) overturned the trial court’s finding in favour of Jewrim (thus removing its creditor status).  From the relevant judgment document (as translated), the following is noted:

(1)  It states that “The operative part of the resolution was announced on January 10, 2018”.

(2)  Insofar as the full reasons for the decision, it stated that “The resolution in full was made on January 17, 2018.”

The 1^st Defendant seeks to make the point that the decision itself had already been pronounced on 10 January 2018, with the full reasons being given on 17 January 2018.  The implications to be drawn therefrom are discussed below.

24.Jewrim further appealed in respect of the Creditor Status Claim.  This was heard by the next level of appellate court, Court of Cassation Appeal: the Far Eastern District Arbitration Court (“FEDAC”). On 23 April 2018, FEDAC handed down its decision, overturning the FACA decision of 17 January 2018.  In short, Jewrim’s Creditor Status was restored at this juncture.

2018: Null and Void Claim & Provisional Measures

25.Grushina and Simanchuk appealed the trial court’s decision in respect of the Null and Void Claim.  The reasons for the decision were published on 10 May 2018, with the appeal being successful.  As a result, the 1^st Provisional Measures were also cancelled by FACA on 1 June 2018.

26.On 22 June 2018, FEDAC granted fresh provisional measures (“2^nd Provisional Measures”) in favour of Jewrim in terms similar to the 1^st Provisional Measures.

27.On 2 July 2018, the 2^nd Provisional Measures were cancelled in part in relation to Grushina’s disposal of shares in S&C on the basis that Grushina was no longer a shareholder of S&C.

28.On 13 August 2018, FEDAC handed down a decision in relation to the Null and Void Claim.  In essence, the FACA decision on of 10 May 2018 was “cancelled” by FEDAC and the matter sent back to FACA for reconsideration.  There is a dispute in the evidence as to what the effect of that decision was:

(1)  The Plaintiffs’ evidence suggested that the Null and Void Claim and the Provisional Measures “continues to be in effect” and that the challenges thereto “remain subject of the appeal and judicial reconsideration”. 

(2)  The 1^st Defendant’s evidence was that the original decision in favour of the Plaintiffs at trial level was “not subject to affirmance, because, … at its adoption the court did not investigate a number of circumstances important for consideration of this dispute.”

29.On 14 November 2018, the FACA reconsideration of the Null and Void Claim was adjourned.  There is again a dispute in the evidence as to why this was:

(1)  The Plaintiffs’ evidence was that the adjournment was occasioned by Grushina’s application to file additional documents.

(2)  The Defendants evidence is that this was because the next and final level of appellate court, the Supreme Court of the Russian Federation (“the Supreme Court”), accepted the appeal of inter alia Sberbank against Jewrim in relation to the Creditor Status Claim.

Supreme Court Decision on the Creditor Status Claim and Developments Thereafter

30.On 26 November 2018, the Supreme Court cancelled the original trial court and FEDAC decisions on the Creditor Status Claim, and sent the matter back to the trial court level for reconsideration.

31.There then followed a series of decisions which variously overturned prior decisions:

(1)  On 4 July 2019, the trial court reconsidered the Creditor Status Claim and held that Jewrim was successful – ie its creditor status was maintained.

(2)  On 3 September 2019, FACA overturned the 4 July 2019 decision and held that Jewrim’s creditor status was not maintained.

(3)  On 12 December 2019, FEDAC upheld the FACA decision.

(4)  Jewrim filed an appeal to the Supreme Court.  On 26 March 2020, the Supreme Court refused to accept consideration of the appeal.

32.The upshot of the above is that ultimately, Jewrim has not established its creditor status.

2020 Developments on the Null and Void Claim and the Provisional Measures

33.On 31 January 2020, FACA handed down a decision not to invalidate the Settlement Agreement.  The Plaintiffs appealed against the decision, which appeal was dismissed by FEDAC on 10 June 2020.

34.On 4 February 2020, a decision was handed down by FACA in Grushina’s favour cancelling the 2^nd Provisional Measures. No appeal has been filed by the Plaintiffs in relation thereto.

B4.  Conclusion on the Procedural History

35.As can be seen from the above, all three sets of claims had been the subject of multiple considerations by the various levels of court, with numerous appeals and reconsiderations, and with both sides respectively scoring wins and suffering losses throughout.  However, by 10 June 2020 at the very latest, it would have been abundantly apparent to the Plaintiffs that all of the claims were unsuccessful in the Russian Proceedings. There were no appeals thereafter.

C.  DISCUSSION

36.The question then arises as to what implication the above history has on costs.

C1.  The 1^st Defendant’s Submissions

37.The 1^st Defendant invites the Court to award costs to it for the entirety of the proceedings on the following grounds.

38.First, the Court is invited to consider the merits of the Continuation Application.  In particular, the points are made that:

(1)  There was and is no argument addressed by the Plaintiffs as to the enforcement of Russian judgments in Hong Kong.  As Russia is not one of the countries which is subject of the Foreign Judgments (Reciprocal Enforcement) Ordinance (Cap 319), the Plaintiffs would have had to proceed by way of the common law criteria, which they had not addressed the Court on.  In support of this argument, the 1^st Defendant referred to the decision of the Court of Final Appeal in Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd (2016) 19 HKCFAR 586 at §§47-48.

(2)  It was suggested, based upon the developments in Russia, and in particular the ultimate failure in respect of all three claims, that there was no (or at least no longer) a good arguable case.

(3)  On similar grounds, it was suggested that there was no (or no longer) a real risk of dissipation of assets.  In this regard, attention was drawn inter alia to the fact that the story relied upon in Hong Kong as to why Drozdov signed the Settlement Agreement (ie that he had been coerced to do so by Grushina and Simanchuk as a condition for his release from jail) was never brought to the Russian Courts’ attention.  This having been relied upon in Hong Kong to establish the “unacceptably low standard of commercial morality”, the 1^st Defendant says that it is inherently suspect.

39.Second, it is said that there has been material non-disclosure by the Plaintiffs in the following areas:

(1)  The Locus Issue was not drawn to the Court’s attention, whether at the ex parte stage or thereafter – in particular, at the ex parte hearing on 20 December 2017, and the two return date hearings on 29 December 2017 and 12 January 2018.  

(2)  It is complained that it was only after the Discharge Summons was filed on 12 February 2018 that the Plaintiffs filed evidence on 13 February 2018 from their Russian lawyers explaining that the Creditor Status Claim had been the subject of the FACA decision against the Plaintiffs, as referenced at paragraph 23 above (which had in effect removed Jewrim’s creditor status).  (I note the complaint, but also note that the evidence was affirmed on 12 February 2018).

(3)  It is also complained that no proper explanation was given as to why, as at the 12 January 2018 return date, the Plaintiffs had not drawn to the attention of the Court the fact that there had been the ruling by FACA, referenced at paragraph 23 above, against them.  This was addressed (belatedly, it is said by the Defendants) in the evidence of the Plaintiffs dated 14 February 2019.  There, it was explained that the notification for the decision was only obtained on 12 January 2018 Russian time, and it was not practicable to inform the Hong Kong Court of the same as at the date of the 12 January 2018 return date hearing in Hong Kong.

On the above basis (ie there had been material non-disclosures), the 1^st Defendant seeks costs in its favour on an indemnity basis.

40.In relation to the issue of costs, attention was also drawn to the following:

(1)  On 19 February 2020, Haldanes wrote to TDW suggesting the discharge of the Injunction Order as the Plaintiffs had lost their appeal in the FEDAC in terms of the Creditor Status Claim, and the Null and Void Claim was also dismissed by the FEDAC.

(2)  On 23 June 2020, Haldanes again wrote to TDW (with a chaser on 3 July 2020) inviting the Plaintiffs to consent to filing of evidence to update the Court as to the developments in the Russian Proceedings.

(3)  There was no reply to either of the above. 

41.At the substantive hearing before me, Mr Lane confirmed that:

(1)  He did not have instructions to respond to the June and July 2020 correspondence; and

(2)  The only assets of the Plaintiffs available in Hong Kong were the fortification funds of HK$150,000 paid into Court pursuant to the original Injunction Order.

C2.  Relevant Legal Principles

S.21M Relief

42.The principles on S.21M relief have been settled by way of the CFA’s decision in Hin-Pro (supra)

43.For present purposes, it suffices to note the following criteria which must be satisfied:

(1)  The Court will first consider whether, if the plaintiff succeeds in the primary jurisdiction, the resultant judgment is one that the Hong Kong court will enforce.

(2)  The Court will then look at whether the plaintiff has a good arguable case in the foreign court, and whether there is a real risk of dissipation.  The foreign court’s conclusions as to these factors will carry weight with the Hong Kong Court.

(3)  There is then an overall assessment of whether it would be just and convenient to grant the injunction sought.

Costs

44.It is trite that the Court has a broad discretion insofar as costs in relation to an application for interlocutory relief is concerned.  Whilst the normal practice was that the successful plaintiff is granted his costs in the cause, whereas the successful defendant would be granted his costs in the cause, the rationale underlying this is not entirely clear.  Ultimately the court will look at the facts of the individual case, and may, where the facts justify, and a party has acted improperly or is in some way to be penalised, award costs immediately (Hong Kong Civil Procedure 2020, §29/1/55). 

45.Where there has been material non-disclosure and discharge as a result thereof, the usual costs order is for costs to the defendant.  This may be on an indemnity basis where the non-disclosure was deliberate or seriously culpable (HKCP 2020, §29/1/55; Velatel Global Communications Inc., Ltd v Chinacomm Ltd, HCA 1978/2011, unreported decision dated 8 March 2013; Gee on Commercial Injunctions, 6^th ed., §24.044).

46.Related to the above, the Defendant also draws attention to:

(1)  The continuing duty and obligation on an applicant for interlocutory injunctive relief to make full and frank disclosure of all material matters (HKCP 2020, §29/1/51);

(2)  The need for the applicant to return to the court if the basis on which the injunction was granted no longer applies (Todaysure Matthews Limited, Matthews International Corp v Marketing Ways Services Ltd [2015] EWHC 64 (Comm) at §18); and

(3)  Where injunctive relief is granted pursuant to S.21M, once the foreign injunction has lapsed, the mirroring injunction in Hong Kong ought also to be discharged (Great River Corporation Limited and others v China NTG Gansu Gas Limited, HCMP 1967/2012 (unrep., 29 October 2014)).

C3.  Application to the Facts of the Present Case

47.There can be little dispute that there is no longer any basis upon which the Injunction Order can be maintained.  By reason of the Chronology of events as summarized in Section B above, and in particular, the developments in Russia (Section B3), by 10 June 2020 at the very latest, all of the claims and appeals had been heard and dismissed, and the Plaintiffs did not pursue any further follow up steps in relation thereto. By that date (ie 10 June 2020), therefore, it would have been abundantly obvious that the Hong Kong Injunction Order ought to be discharged. 

48.On such basis, the failure by the Plaintiff to take positive steps after 10 June 2020 caused the Defendants to incur costs unnecessarily, particularly in relation to the 24 July 2020 hearing, and I would award the Defendants their costs after 10 June 2020.

49.Consideration of the matter does not end there, however.  In particular, insofar as the costs from the initiation of the S.21M proceedings in December 2017 up to 10 June 2020, one needs to consider:

(1)  Whether there had been any material non-disclosure, as the Defendants allege.  (If there was, then this is likely to be largely determinative of the costs issue); and/or

(2)  If there was no material non-disclosure, whether, as at the date of the original application (ie 20 December 2017), the Plaintiffs were justified in making the application to begin with, and whether their conduct throughout was reasonable, bearing in mind the principles set out in Section C2 above.

50.The above two issues would weigh heavily on how the Court is to deal with the costs incurred prior to 10 June 2020.

51.As to the first issue, I have the following observations:

(1)  I have considered the evidence filed by the Plaintiffs for the purposes of the ex parte hearing (having regard, in particular, to the evidence on the progress of the Russian Proceedings, and the sections on Full and Frank disclosure), as well as the subsequent explanations as to the Locus Issue in the evidence filed by the Russian lawyers for the Plaintiffs.

(2)  I would agree with Ms Leung that the Locus Issue was not sufficiently flagged for the Court’s consideration as at the date of the ex parte hearing on 20 December 2017. 

(3)  The original evidence filed for the ex parte hearing did not make sufficiently clear that:

(a)   The Null and Void Claim and the Provisional Measures were ultimately dependent on the Creditor Status Claim being maintained in favour of the Plaintiff; and

(b)  There was a pending appeal regarding the Creditor Status Claim as at the date of the ex parte hearing.  The appeal was in fact heard shortly thereafter on 10 January 2018, and the Plaintiffs were unsuccessful – see paragraph 23 above (although I note this outcome would not, of course, have been known as at the date of the December 2017 hearing).

(4)  In the Plaintiffs’ evidence filed on 13 February 2018 seeking to update the Court on the status of the Russian Proceedings (dated 12 February 2018), the Plaintiffs’ Russian lawyer, a Mr Konstantin Bykovskiy, discussed the FACA decision of 10 January 2018.  No mention was made of the Locus Issue.  Instead, the only point made was that the FACA decision “does not directly affect, and does not automatically set aside” the trial court decisions on the Null and Void Claim and the 1^st Provisional Measures.

(5)  On the basis of the above, I consider that there had been material non-disclosure on the Locus Issue, in that the point was not sufficiently drawn to the Court’s attention, whether as a matter going to the substance of the Plaintiffs’ claim and/or also as a point that the Plaintiffs ought to have raised as being a substantive counter argument that the 1^st Defendant was very likely to pursue.  I consider that this issue, if raised, would have weighed upon the Court’s consideration of whether to grant the interlocutory relief at all.

(6)  However, I am less persuaded that there was a standalone instance of material non-disclosure as at the 12 January 2018 return date with regards to the FACA decision referenced at paragraph 23 above.  It is not entirely clear from the underlying document of the FACA decision what precisely was announced on 10 January 2018, nor when this result became available to the Plaintiffs’ Russian lawyers.  Ms Leung referred me to the evidence of a Mr Shevchenko (the Plaintiffs’ Russian lawyer) filed on 14 February 2019, which discussed the timing of the 10 January 2018 decision and when it became available.  His evidence was that he obtained the ruling online on 12 January 2018 and that it was impossible to inform the Hong Kong lawyers of this result in time for the return date hearing on 12 January 2018.  Ms Leung’s point was that the affidavit was silent as to whether Mr Shevchenko was already aware of the decision as at 10 January 2018, since the reasons subsequently published seemed to indicate that he had been personally present in court on 10 January 2018, and that the decision against the Plaintiffs had already been pronounced as at that earlier date.  Given there is a lack of clarity in the available documents, I have given the Plaintiffs the benefit of the doubt on this narrower point and would decline to find that there had been a material non-disclosure regarding the 10 January 2018 ruling as at the time of the 12 January 2018 return date. 

(7)  The above does not detract, however, from the wider point above that the Locus Issue was not sufficiently drawn to the Court’s attention at the point of the ex parte hearing, as well as the return dates thereafter. 

(8)  Further, I consider the non-disclosure to be deliberate, in that the Plaintiffs’ Russian lawyers plainly must have known that there was an impending appeal hearing on the Creditor Status Claim which would affect the Plaintiffs’ locus for the other claims, and yet, this was not drawn to the Hong Kong Court’s attention.

52.For completeness, I note that I am not persuaded that there had been material non-disclosure as regards the argument on risk of dissipation.  In short, the point made was that the story about Drozdov’s imprisonment and release relied upon by the Plaintiffs in asserting a case of low commercial morality were never argued in Russia.  And that the reality was that he was released because the bail funds had been put up.  I do not consider the evidence sufficiently clear in this regard to make any determination as to whose version of events is, in fact, the truth.  On such basis, I do not consider it appropriate to make any finding of material non-disclosure on this ground.

53.In respect to all of the above points made on material non-disclosure, I wish to make clear that I do not make any criticism of TDW or Mr Lane and his team.  It is readily apparent that the relevant evidence on the progress, status and effect of the Russian Proceedings came from the Russian lawyers, namely Mr Shevchenko and Mr Bykovskiy.  It was incumbent upon the Plaintiffs and their Russian lawyers to inform their Hong Kong lawyers of what was happening in Russia, and to place all relevant materials before the Hong Kong Court.

54.In the circumstances, I find that there had been deliberate, material non-disclosure as to the Locus Issue as at the date of the original ex parte hearing, which is further reinforced by the failure to explain the issue in the evidence of Mr Bykovskiy dated 12 February 2018. This being the case, I would order that the costs be awarded to the 1^st Defendant on an indemnity basis. 

55.As to the second issue, this becomes largely academic in light of the above finding.  However, for completeness, I will address it briefly below.  Had it been necessary to do so (ie if I had not found that there had been material non-disclosure), I would have taken into account the following points, and weighing these in the round, would have ordered that there be no order as to costs instead.

56.As to the point taken regarding the failure to address enforcement of Russian judgments in Hong Kong: The conditions for enforcement of a judgment at common law are set out in First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd (2012) 15 HKCFAR 569 at §§43-49.  In short: “At common law a judgment of a foreign court of competent jurisdiction which is final and conclusive and on the merits will be conclusive in Hong Kong proceedings if the parties are the same and the issue is identical.” (at §44).  I do not consider that the complaint regarding the failure to address the potential for common law enforcement is made out.  It is tolerably clear on the face of the papers that the parties and issues in the Russian Proceedings and the present proceedings overlap.  Further, the question posed by the CFA in Hin-Pro (supra) at §§47-48 was more concerned with general objections to enforceability such as “the exercise of the foreign jurisdiction is exorbitant or for some other reason of public policy…”. 

57.As to the other criteria of good arguable case and risk of dissipation: At the very least, as at the date of the granting of the ex parte relief, there would appear to have been sufficient basis to demonstrate good arguable case, a risk of dissipation of assets and that it was just and convenient to grant the Injunction Order.  This was presumably the position taken by the learned Judge who granted the original ex parte Injunction Order.  It would also presumably be the position of the learned Judges who continued the same by way of the subsequent return date orders.  Putting aside for the moment the argument on material non-disclosure, based on what is before me, I would not seek to differ from their assessments at those material times.  In short, it cannot be said to be unreasonable or inappropriate for the original Injunction Order to have been granted at the outset and continued thereafter.

58.The real question seems to me to be whether, after 12 January 2018 (ie the second return date), the Plaintiff ought to have proactively come back to the Hong Kong Court to update the Hong Kong Court on the developments in Russia as summarized above at Section B3.  In this regard:

(1)  There were various junctures at which the Creditor Status Claim and the Null and Void Claim were overturned on appeal (against the Plaintiffs) and yet, the position in Hong Kong remained as the status quo (ie with the injunctive relief in place) with no immediate updates being given by the Plaintiffs. 

(2)  The 1^st Defendant’s complaint is that the Plaintiffs ought to have come back proactively to update the Court when they lost at the various appellate stages.

(3)  Having said that, in the circumstances of this particular case, I note that the position in Russia was clearly very fluid, and developing constantly every few months. 

(4)  Furthermore, after 1 February 2018, the 1^st Defendant was legally represented and had already filed the Discharge Summons which was due to be heard.  And in response to this, the Plaintiffs had given their version of events as to what had occurred in relation to the various appeals and decisions at various levels of Court, with the Defendants also being afforded the opportunity to challenge the same (see eg paragraphs 28 and 29 above). 

(5)  As I have already indicated at paragraph 47 above, it was abundantly clear by the time the appellate avenues had been exhausted in June 2020 that the Plaintiffs ought to have come back to discharge the Injunction Order.  However, I am less persuaded on the circumstances of this particular case that they were necessarily obliged to come back prior to that, bearing in mind (i) the fluid and complex developments in Russia every few months and (ii) the fact that the 1^st Defendant was legally represented after 1 February 2018 and had already brought the relevant matters to the Court’s attention.  In this regard, I note that Hon P Ng J had made the decision in December 2018 to adjourn the matter pending developments in Russia, and no application was brought by the 1^st Defendant to challenge or otherwise alter that outcome (for example, on the basis that there had been a material change of circumstances).

59.In view of the above, had the above been the entirety of the 1^st Defendant’s submissions, and had I not found that there was material non-disclosure, I would have considered matters in the round and made no order as to costs as between the parties. 

D.  CONCLUSION

60.For the above reasons, I have made the following orders:

(1)  The Injunction Order is discharged forthwith; and

(2)  I made a costs order nisi that the costs of and occasioned by both the Continuation Summons and the Discharge Summons to be paid forthwith by the Plaintiffs to the 1^st Defendant on an indemnity basis.  Upon consideration of the Statement of Costs, and bearing in mind the approach as set out in Practice Direction 14.3 and Hong Kong Civil Procedure 2020, §62/9/10, I summarily assess the total costs at $900,000.

61.I thank Counsel and Mr Lane for their assistance.

Mr Jeffrey Hayde Lane, of Tanner De Witt, for the 1^st and 2^nd Plaintiff

Ms Joyce Leung, instructed by Haldanes, for the 1^st Defendant

The 2^nd Defendant was not represented and did not appear