Bank of India v. Bhagwandas Kewalram Murjani and Others

CACV000048A/1989

Nos 48 & 49 of 1989
(Civil)

Headnote

Injunction - Mareva Injunction - Jurisdiction - Defendants with insufficient assets in Hong Kong to satisfy judgment if entered in plaintiffs' favour but having assets outside the jurisdiction - Plaintiffs seeking to prevent dissipation of assets outside the jurisdiction before judgment - Whether jurisdiction to grant injunction and if so what factors to be considered before jurisdiction exercised.

In actions by the plaintiffs, being bankers, against debtors and guarantors the plaintiffs obtained Mareva injunctions against the defendants restraining, subject to undertakings and provisos, the disposition of their assets worldwide until judgment or further order together with orders for discovery in aid. The defendants successfully applied to discharge the injunctions.

On appeal by the plaintiffs :-

Held, dismissing the appeal,

(1) that in suitable cases a Mareva injunction affecting the assets of a defendant worldwide could be granted to prevent action designed to frustrate subsequent orders of the court.

(2) that the principles governing the grant of a Mareva injunction relating to assets within the jurisdiction are applicable.

(3) that the plaintiffs had not shown by their evidence that there was a real risk that the defendants might take action designed to frustrate subsequent orders of the court.

The Court declined to suggest uniform terms for the duration of a Mareva injunction granted ex parte.

BETWEEN

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No 49 of 1989
(Civil)

BETWEEN

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Coram: Hon. Cons, V.-P., Kempster & Penlington, JJ.A.

Dates of hearing: 20 - 21, 25 - 26 April 1989

Date of judgment: 17 May 1989

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J U D G M E N T

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Kempster, J.A. :

1. This is the judgment of the Court on an appeal from the judgment of Barnett J given on 4 April last discharging orders made ex parte By Duffy J on 14 March pursuant to section 21L of the Supreme Court Ordinance (cap 4) and amended by him on 17 of that month, after a hearing inter partes, which in general terms and subject to exceptions and undertakings restrained the defendants from disposing of their assets worldwide until judgment in actions Nos 1045 and 1404 of 1989 or further order. While, by order of this Court, the Mareva injuctions have remained in force pending the outcome of the appeal, on 27 April summary judgment was entered in the plaintiffs' favour in both actions against all defendants save Murjani Limited for US$10798955=19 together with interest. Subject to further appeals the proper resolution of the matters canvassed before us between 20 and 26 April have, accordingly, become relevant only to costs, and possibly, to the cross undertakings as to damages. The plaintiffs, the Bank of India, have on 16 May obtained an injunction from Sears J ex parte in similar form on evidence presently available and including material not considered by us whereby, presumably, they demonstrated grounds for apprehension as to the continued availability for the purposes of execution of the defendants' assets.

2. We have been told that this is the first occasion upon which it has fallen to any division of this Court, which hitherto has followed the earlier approach of the English Court of Appeal illustrated in Ashtiani v Kashi [1987] QB 888, to consider the circumstances in which a Mareva injunction restrainning the disposition of assets outside the jurisdiction, as opposed to the appointment of a receiver for such assets, should be granted and, if thought appropriate, to offer guidance to judges in the exercise of their discretion in this field. It has not been suggested in argument that the Hong Kong courts should decline to exercise this wider jurisdiction in suitable cases.

3. That the relief operates in personam as regards a defendant but, in effect ad rem as against third parties and does not amount to a pre-trial attachment of assets was common ground. In our opinion a Mareva injunction affecting assets outside the jurisdiction may be granted when there is a good arguable case that the plaintiff will recover judgment, reason to think both that the defendant, properly before the court, has such assets available to satisfy it but insufficient assets within the jurisdiction for the purpose and the Court is satisfied that there is a real risk that the defendant may take steps designed so to dispose of or conceal such foreign assets as to render the judgment nugatory by the time that it is given. Further the defendant may be ordered to make discovery as to his assets in a proper case and the jurisdiction in that regard is not limited to tracing actions. Thus, subject to provisos and undertakings apt to allow the defendant to carry on his business and private life in the ordinary way and to limit the effect of the order on third parties outside the jurisdiction, the principles applicable to the grant of an injunction inhibiting the disposition of assets within the jurisdiction are, as Barnett J held, equally applicable to the grant of such an injunction directed to assets outside it. We so conclude an the light of the several persuasive authorities decided between June and December 1988 during which the practice in the English Court of Appeal was developed and clarified and, in particular, of Derby & Co Ltd v Weldon (Nos 3 & 4) [1989] 2 WLR 412.

4. The existence of "a good arguable case" is conceded. The judge's finding that at least some of the defendants, who either trade in concert as a group, providing group accounts, control its activities or legally or beneficially enjoy the fruits of such activities, have assets overseas is unchallenged. Accordingly the substantial matter at issue upon the hearing of this appeal was whether in the light of full argument and further evidence a real risk that the defendants might dispose of or conceal these assets prior to judgment had existed on 14 March; Barnett J having found, quite firmly, that it had not. Some matters material to this issue were, it was submitted on behalf of the plaintiffs, ignored; allowing us, if we agree, to exercise our own discretion to affirm or discharge the Mareva injunctions.

5. The ramifications of the Murjani family Group are reflected in a diagram which, in its final form, shows the B K Murjani 1981 Trust, through its trustee company Lawful (Holdings) Limited, as the ultimate owner of a group of corporations. Some are incorporated in Hong Kong and some overseas; one in the British Virgin Islands where legitimate access to information as to assets and directors is not possible. There exists, therefore, a structure which might have been used artificially to frustrate the legitimate expectations of the plaintiffs as to the availability of assets for the satisfaction of a judgment.

6. On or about 17 March Murjani Industries (HK) Ltd went into liquidation on grounds of insolvency following a resolution for voluntary winding-up pursuant to section 228A of the Companies Ordinance (Cap 32). That company was removed as trustee of the Murjani Industries Unit Trust on 20th of the same month. Also on or about 17 March Lawful (Holdings) Limited were removed as trustees of the B K Murjani 1981 Trust.

7. Without this background Mr Chakravaty, on behalf of the plaintiffs, made affirmations upon which Duffy J must have relied in granting injunctions on 14 March 1989.

8. Seeking to demonstrate a lively risk of dissipation or concealment of assets Mr Chakravaty first referred to the sale by Mr B K Murjani of his property in Henderson Road, Hong Kong, during November 1988 to himself as trustee of Sheela Trust, his wife being the beneficiary, for HK$16m. That property had professionally been valued on 21 July 1988 at HK$21m and mortgaged to the plaintiffs to secure the debts of Murjani Industries (HK) Ltd. On payment of US$3.8m by Mr M B Murjani the plaintiffs had released their mortgages on this and another Hong Kong property situated at Coombe Road and owned by Mr M B Murjani. Having regard to the volatility of house prices in the Territory we are not prepared to infer that the valuation made in July, which from its nature must be less than precise, remained a sure guide to the worth of the Henderson Road property four months later.

9. Reliance was next placed on payments of HK$46m made by Lucky Pierre Limited during August 1988 to creditors of Murjani Industries (HK) Ltd. This was calculated to prejudice the plaintiffs' prospects of recovering as against Lucky Pierre Limited. But there is no evidence from which it can properly be inferred that the payments were made with this end in view while reference to "cash injections" of some US$14m by members of the Murjani family for the benefit of companies in the group suggests a contrary intention.

10. Mr Chakravaty goes on complain that Murjani World-Wide BV, not parties to these proceedings, had sold its interests in the Gloria Vanderbilt trade mark for US$15m all of which had been paid to creditors other than the plaintiffs; some secured and some not. It is not clear whether they were creditors of Murjani World-Wide BV or, as in the case of Lucky Pierre Ltd, of some other company in the group but if so the same considerations would apply. The plaintiffs failed to obtain or retain security for their huge advances to Murjani Industries (HK) Ltd or, it would seem, to exert the same pressure for repayment as other creditors. As a result they believed the cupboard to be depleted, if not bare, and have sought to secure for themselves anything that remained.

11. In argument other matters, deriving from the extensive documentation assembled, were advanced as suggestive of an intent to dissipate or conceal assets. We were shown sanguine forecasts based on Coca-Cola and other licenses made by Murjani Industries (HK) Ltd and submitted to the plaintiffs on November 15 1988 at a time when negotiations were in train for the sale of the Gloria Vanderbilt mark and a dispute had arisen with Coca-Cola. Insofar as it was suggested, however, that these forecasts, were calculated to deceive the contents of a telex sent from the plaintiffs' Hong Kong Office to their office in Bombay on the 12th of that month, which we allowed the defendants to adduce as additional evidence, suggested that Mr Kaiser Ahmed and Mr Dilip Murjani had orally disclosed the bad news to the plaintiffs on the previous day. The affidavit deposing to that telex also disposed of the complaint that textile quota belonging to Murjani Industries (HK) Ltd had been lost by reason of the winding-up. The deponent stated that such quota had just been sold as a result of the efforts of Joint receivers appointed by the Court. Today we allowed the plaintiffs to adduce in evidence a further affirmation from Mr Chakravaty which confirms the contents of the telex of 12 November 1988 and that they had every reason for disquiet about the defendants' solvency but complains that the defendants' plight was even worse than was disclosed. We cannot believe that the plaintiffs were under any illusions or that intent to dissipate or conceal asset a is to be inferred from the matters deposed to.

12. This really leaves the plaintiffs with the complaints that the defendants were tardy in telling them about the winding-up of Murjani Industries (HK) Ltd and of the change of trustees for the Murjani Industries Unit Trust and had failed altogether to reveal the decision not to wind-up Murjant Holdings Ltd, as represented, but instead to change its name. Taking together all the background and circumstances outlined we are not persuaded that there was a real risk that the defendants would contrive the disposal or concealment of their assets pending judgment.

13. A final point arose relating to the procedure to be adopted when granting Mareva injunctions ex parte namely whether they should run only until the hearing of an inter partes summons on a date then fixed or until trial or further order with liberty to the defendant to apply to discharge on short notice. We do not think it appropriate to suggest a uniform procedure which might inhibit the discretion to he exercised by the judges who grant such orders.

14. In view of our conclusions, based on all the material put before us, there is no reason to comment either on the failure of Barnett J, for good reason or bad, to allude to each and every factor advanced by the plaintiffs or on whether he should have taken or we should take into account material not specifically relied upon by the plaintiffs in their supporting affirmations. No more need we make any observation in relation to the orders for discovery made by Duffy J in aid of injunctions which were properly discharged as having been granted when, as is now apparent on all the materials considered by us, there was no real risk of deliberate dissipation or concealment of assets before judgment.

15. The appeal must be dismissd.

Representation:

Neil Kaplan QC & Mrs Kaplan (Wilkinson & Grist) for Appellant/Plaintiff

Michael Thomas QC & Raymond Faulkner (JSM) for Defendants/Respondents apart from D3 and D5