Northchart Investments Ltd and Another v. Charles Hu t/a Kung Ming Commercial Co

HCA004508/1979

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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Coram: Mr. Commissioner Mayo in Chambers.

Date of Judgment: 30 October 1979

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MAREVA INJUNCTION

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1. This application is made pursuant to an Ex Parte injunction I granted on the 13th October 1979 restraining the Defendant from dealing with or disposing of the Plaintiffs' assets or destroying any documents or accounts relating to transactions between the parties.

2. The background of the matter is as follows. The Plaintiff Companies are subsidiaries of Lonrho Ltd. an English Company. In 1968 Northchart Investments Ltd. obtained a 30% and Coronation Syndicate Ltd. a 25% interest in a company Northern Minerals (Zambia) Ltd. and a substantial shareholding was also acquired by Crystals S.A. which is a Company owned and controlled by a Mr. Dan Mayers who together with his wife and Crystals S.A. was the Defendant in legal proceedings in London which I will refer to in due course.

3. The arrangements made in 1968 were that amethysts mined and produced by Lonrho were marketed by Crystals S.A. There was an alteration in the arrangements in 1974 but this did not affect the overall object of the exercise which was that Crystals S.A. in effect undertook the marketing of the amethysts.

4. Low grade amethysts were shipped to Hong Kong for "hammering" which is a process whereby waste minerals are "hammered" from the amethysts so as to enable them to become saleable. The Defendant undertook this work for Crystals S.A. and it was the contention of the Plaintiffs that the Defendant was the Agent or Sub Agent of Crystals S.A. for the purpose of storing, treating and selling amethysts.

5. Much of the Plaintiffs' evidence was contained in an affidavit sworn by Mr. A.R. Taylor who is a Partner in Messrs. Johnson, Stokes & Master. In his affidavit Mr. Taylor made reference to legal proceedings which are presently being conducted in London and in particular to an Injunction which was granted by Mr. Justice Michael Davies on the 5th October 1979 whereby Crystals S.A. and Mr. & Mrs. D. Mayers were restrained from dealing with or disposing of the assets of Northern Minerals (Zambia) Ltd. or destroying accounts or records of the said Company.

6. The English litigation was based upon Lonrho's contention that either Crystals S.A. or Mr. Mayers or both of them had failed to satisfactorily account for amethysts they had dealt with.

7. It was argued by Mr. Ronald Wong, who represented the Plaintiffs that unless a similar type of injunction was granted in Hong Kong the English Injunction would be largely rendered nugatory. In support of this he referred to the uncontested evidence in Mr. Taylor's affidavit that the Defendant had for about 14 years until he resigned earlier this year been a Director of Crystals S.A. and had for many years been a very close personal friend of Mr. Mayers. He ought therefore to be aware of the arrangements between the parties.

8. The injunction granted by Mr. Justice Davies was a mareva injunction the purpose of which is to preserve assets or the subject matter of litigation. Mr. Wong submitted that the situation in the present case falls within the ambit of the normal Mareva principles. In support of this contention he cited the case of Third Chandris Corporation v. Unimarine S.A.⁽¹⁾. In particular he referred to the guidelines laid down by Lord Denning M.R. at p.137. Five matters had to be satisfied. The first was that there had been full disclosure. The second was that the assets in question should be sufficiently identified. Mr. Wong argued that his clients had done everything within their power to identify such assets as may be available. The third was that assets should be within the jurisdiction. Mr. Wong said that evidence to this effect in Mr. Taylor's affidavit had not been contested. The fourth guideline was that there should be some risk that the assets might be removed. Mr. Wong argued that the relationship between the Defendant and Mr. Mayers was sufficiently close to render this more than just a possibility. The fifth and final requirement related to the necessity of the Plaintiff to undertake to indemnify a Defendant from any losses which might arise as a result of the litigation being unsuccessful. Mr. Wong submitted that as all the assets belonged to the Plaintiffs there could be no question of substantial damages being incurred by the Defendant.

9. Mr. Wong contended that as all these requirements had been complied with the ex parte injunction which had been granted should not be discharged.

10. Mr. Martin Lee, for the Defendant argued most forcibly that the whole application had been misconceived. He pointed first to the most basic defect that no cause of action had been established by the Plaintiffs against the Defendant in Hong Kong. While there might be a cause of action against Mr. Mayers in Hong Kong, there was nothing to suggest that there was against the Defendant. He said that there was no satisfactory evidence to establish that the Defendant ever had knowledge of dealings between the Plaintiffs and Defendants in the English litigation and it appeared from the documents annexed to Mr. Taylor's affidavit that the accounts and documents referred to were presently in England and not in Hong Kong. He argued that there was nothing to indicate that the Defendant might be minded to destroy the accounts and documents, likewise there was nothing to indicate that the Defendant may attempt to dispose of any assets of the Plaintiffs.

11. Mr. Lee also argued that there was no legal doctrine he was aware of which in any way obligated Courts in one part of the world to fall into line and make similar orders to other Courts.

12. Mr. Lee also referred to the question of delay. He argued that an element of urgency must be established. It was evident from the papers supporting the English application that the Plaintiffs had been dilatory in taking action and that they had been aware of the alleged failure by Crystals S.A. to satisfactorily account over a period of many months. This was only a further factor which underlined the unsatisfactory position of attempting to simply follow the action which was taken by the English Courts.

13. I am satisfied that Mr. Wong has not made out a case that the English Mareva injunction should be extended to Hong Kong. Conceptually this is unjustified and any attempt to make such an order would be bound to lead to the gravest difficulties and in the present case injustice and possible hardship to the Defendant. I agree with Mr. Lee that there are fundamental defects in this application and accordingly I order that the ex parte injunction I granted must be discharged. At the conclusion of the hearing I indicated to the parties what my decision would be and Mr. Wong applied for a stay of my order discharging the injunction pending an appeal. I refused this. The reason for my refusal was that I considered the whole application to be misconceived and thus it would be wrong for me to allow the injunction to remain in effect.

14. I order that costs shall be to the Defendant and that there shall be a certificate for two Counsel.

Representation:

Mr. R. Wong (Johnson, Stokes & Master) for Plaintiffs.

Mr. Martin Lee, Q.C. and Mr. Hin Lee Wong (Victor Ng & Co.) for Defendant.

(1) 1979 3 W.L.R. p.122.