Chen Lee Hong Man v. William Chen and Another

HCA004939/1979

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Coram: Mr. Commissioner Hooper in Chambers

Date of Judgment: 17th February, 1981

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RULING

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This is an application for what has come to be known in England as a Mareva injunction. The writ of summons in this action was issued on the 8th November 1979. The indorsement of claim indicates in some detail that it is a claim for -

1. The plaintiff is the wife of the 1st defendant and the 2nd defendant is the mother of the 1st defendant.

2. There are proceedings afoot for the dissolution of the Marriage.

3. On the same date that the writ was issued, the interparties summons with which I am now concerned was filed making application for -

4. The summons also sought-

save in so far as may be necessary to affect the payment into Court of the same. It also seeks such further or other relief as may be just and costs.

5. This matter came on for hearing before Mr. Justice Silke on the 12th November 1979 and it was adjourned to a date to be fixed upon undertakings given by the 1st and 2nd defendants in the following terms-

6. So protection was afforded to the plaintiff's alleged rights until the hearing of this application. The learned judge was asked at that time, if he reserved the costs, to reserve the matter to himself. This he did with the unfortunate consequences, resulting from the state of his diary and the fact that he went on leave, that it was not until the 29th October 1980 that the matter came before him again. By then a summons had been issued under the provisions of Order 38 Rule 2(3) of the Rules of the Supreme Court for an order that the plaintiff, her mother and her father, do attend for cross-examination on their affidavits.

7. This application was resisted and after substantial argument Mr. Justice Silke dismissed the summons on the 30th October 1980.

8. I am informed that there was not sufficient time for the present application to be heard and on the 31st October an order was made by Mr. Justice Silke that the matter be released from his list and a date to be fixed in consultation with counsel.

9. On the 7th November 1980 this matter was fixed for hearing on the 21st to the 23rd January 1981, when it finally came before me.

10. The plaintiff's main contentions are set out in an affirmation affirmed on the 8th November 1979 and filed on the 9th November 1979. In paragraph 1 she refers to her application in the Victoria District Court for leave to present a petition for dissolution of her marriage to the 1st defendant before the expiration of the period of 3 years from the date of such marriage. She also exhibits to the affirmation the papers filed in those proceedings including the proposed petition. In paragraph 2 she confirms the contents of her proposed petition to be true and in paragraph 3 she affirms that the aforesaid flat was the matrimonial home. In paragraph 7 she claims to be a beneficial owner of a half share in the flat in question for the reasons that follow in paragraphs 8 to 17 of her affirmation. These paragraphs require careful consideration and I therefore have set them out in full.

11. In paragraph 4 of her affirmation the plaintiff has affirmed that the 1st defendant pretended to give the said property to his mother, the 2nd defendant by a purported deed of gift dated February 2, 1979. In paragraph 5 she has affirmed that the 2nd defendant assigned the said property to 3rd parties for the sum of HK$866,000.00. In paragraph 6 she has set out her case in similar terms to paragraph 2 of the Indorsement of Claim.

12. At the time when the matter first came on for hearing before Mr. Justice Silke there was only one affidavit filed by Mr. Stephenson, the then solicitor for the 1st and 2nd defendants, in which he deposed to the fact that he had been informed by both defendants and verily believed that notwithstanding the fact that the premises in question were registered in the name of the 1st defendant, the purchase price thereof was furnished solely by the 2nd defendant out of her own moneys.

13. Subsequently on the 24th March 1980 Mr. William Chen, the 1st defendant, swore an affidavit which was filed in this Court on the 25th March on behalf of the 1st and 2nd defendants. This affidavit reveals that there are material differences between the contentions of both parties. In paragraph 5 he claimed that the 2nd defendant first mentioned the matter to him a few days before she signed the agreement to purchase the said property when she informed him that she was buying the said property in his name but on condition that, in the event of her death, he would see to it that the said property or the value thereof would be held by him for himself, his two brothers and his sister in equal shares. It is his evidence that he accepted this condition and further the condition that he would be personally responsible for paying the rates and other out-goings thereon. He denied that there was any question in his mind that the property was purchased for him as a gift to him and his prospective bride. He positively denied the plaintiff's allegation that the property was assigned by way of a gift to him and to her or that the plaintiff was to have any beneficial interest therein. He maintained in reply to paragraphs 9, 10 and 11 of the plaintiff's affirmation that to the best of his recollection he first told the plaintiff about the said property sometime at the end of May 1977 at his parents' home. He told her that his mother had an apartment in which he and the plaintiff could live rent free after their marriage. He maintained that he did not tell the plaintiff that the said property was in his name. It was on that occasion that he handed the key to the plaintiff, and he maintained that it was that same evening that he and the plaintiff went to visit the property. In reply to paragraph 12 of the plaintiff's affirmation he denied that there was any such conversation as alleged by the plaintiff, but as he merely said that his mother was kind to let he and the plaintiff live in her apartment and that he agreed that he did suggest to the plaintiff that she should thank his mother for her kindness in this respect. In reply to paragraph 15 of the plaintiff's affirmation, he denied that any such discussion took place as alleged by the plaintiff and in particular that the plaintiff had ever asked him whether the property was in his name. He further contended in reply to paragraph 17 of the plaintiff's affirmation that there was no truth whatsoever in her allegations concerning his borther David and his intended marriage and maintained that there was no such conversation between he and the plaintiff as alleged by the plaintiff. He maintained that the deed of gift dated the 2nd February was a genuine transaction of giving the property back to his mother and not a 'purported gift'. He maintained that he found that the flat was too big for him alone and it was a sad place for him to live in on his own and therefore he had no further interest in the property and handed it back to his mother to do what she wanted with it. He claimed that it would be more convenient if its return to his mother were to be affected by means of a legal document so that she could sell it in her own name.

14. The 1st defendant is supported in his affidavit by an affirmation by his brother David affirmed on the 12th December 1979 but only filed in Court on the 25th March 1980. This of course relates to paragraph 17 of the plaintiff's affirmation.

15. There is also on file an affirmation by the 2nd defendant which was affirmed on the 26th March 1980 and filed on the 28th of the same month. Her affirmation corroborates the affidavit of the 1st defendant. In particular in paragraph 9 of her affirmation she stated that one of the reasons why she decided to have the property registered in the name of the 1st defendant was -

"To save myself all the trouble of visits to solicitors' offices for the purpose of signing documents and of having the same interpreted and explained to me as I speak no English. Another reason was that neither my said husband nor I have made wills and I decided it would save trouble when I died if the 1st defendant could deal with the said property as indicated in paragraph 7 hereof."

In reply to paragraph 16 of the plaintiff's affirmation she affirmed that she does remember an occasion on which the plaintiff telephoned her to say how much she liked the property but she claimed to have no recollection to any reference being made to a higher flat nor to the No.6 and that she has no knowledge as to whether the plaintiff is superstitious or not. In this connection she adds that she speaks the Shanghai dialect and very little Cantonese while the plaintiff does not speak the Shanghai dialect at all. As a result the plaintiff and she have always had considerable difficulty in communicating with each other. Furthermore in reply to paragraph 17 of the plaintiff's affirmation she said that there was no truth whatsoever in the plaintiff's allegation concerning the son David and his intended marriage.

16. A further affirmation was filed by the plaintiff on 29th July 1980 in which she affirmed that it seemed to her upon reflection that it was right after the 1st defendant had handed her the key to the flat that she asked the 1st defendant if there was a view from the flat. As to when exactly she was first told of the property by the 1st defendant she agreed that the 1st defendant's recollection that it was at the end of May 1977 could be correct. It was, she now recalled, sometimes towards the end of May or the beginning of June 1977 when she was first told. She further corrected paragraph 12 of her earlier affirmation by saying that it seemed to her that it was a few nights after she and the 1st defendant had viewed property (and not on the same evening) that the 1st defendant came to her parents' home for dinner.

17. A further affirmation by the mother of the plaintiff was filed on the 18th August 1980. In it she confirmed the alleged conversations between the plaintiff and her to which the plaintiff had referred in her affirmation and she also mentioned a conversation which she had with the 2nd defendant to thank her on her daughter's behalf. She affirmed that they spoke in SHANGHAINESS and that -

"After thanking her, she asked me if my daughter liked the flat. She also said that she knew my daughter liked a view from the flat and that she would have purchased a flat on higher floors but because those flats which were available on higher floors did not have a number which we like, she had therefore chosen one on the 6th floor which still had a view and had the number '6' and that she hoped that my daughter liked it."

She maintained that the 2nd defendant had learned of her family's superstitious belief that the numbers 3, 6 and 9 are their lucky numbers during the preparation and arrangements for the wedding.

The Nature of These Proceedings

18. The view which was taken by Mr. Justice Silke when he gave his ruling on the 30th October 1980 dismissing the application for leave to cross-examine on the affidavits was that these were not matrimonial proceedings. Both Mr. Litton, leading counsel, who appears with Mrs. Bokhary for the plaintiff and Mr. Jackson-Lipkin leading counsel, who appears with Mr. Gilbert Rodway, for both defendants are of the same opinion. Mr. Litton pursues this application on the basis of the alleged proprietary rights of his client and not on any alleged matrimonial rights.

19. That being the case I do not consider that my decision should be influenced in any way by the relief sought in paragraph 2(iii) and (iv) or paragraph 3(i) of the Indorsement of Claim, which should be sought in matrimonial proceedings, but only the relief sought in the remaining paragraphs.

What is the Substantive Relief Sought?

20. It seeks the various declarations in paragraph 1 and what is left of paragraphs 2 and 3. It seeks the injunctions in paragraphs 4 and 5. It seeks damages for conspiracy and interest. Neither of the injunctions sought in paragraphs 4 and 5 have the appearance of permanent injunctions but are merely concerned with getting the proceeds or so much thereof as are under the control of the defendants etc. paid into Court. The substantive relief sought is really the award of damages based on a tortious conspiracy between the defendants to violate the plaintiff's rightssin the property. There is no substantive claim for payment of half the proceeds of sale to the plaintiff. The injunctions sought are more appropriate for interlocutory proceedings than final relief in the form of a perpetual injunction.

The present interlocutory application

21. It would seem that the present application is made with a view to giving the plaintiff security so that any judgment for damages and interest which may be given to her at the end of the day will not amount to an empty judgment.

The Mareva Injunction

22. This is described in the 1979 white book at page 474 in the following terms -

"Where an action for a debt due and owing is brought against a defendant who is not within the jurisdiction but who has assets in this country, the Court has jurisdiction under section 45 of the Judicature Act of 1925 to grant an ex parte or interim injunction to restrain the defendant from removing assets from the jurisdiction pending the trial of the action, and the discretionary remedy may be applied both to money and to goods and is to be exercised when it is just and convenient so to do. (Rasu Ma-ritima S.A. v. Perusahaan Pertam-bangan Minyakdangas Bumi Negara [1977] 3 W.L.R. 518, C.A.) applying Nippon Yusen Kaisha v. Karagelrgia [1975] 1 W.L.R. 1093 and Mareva Compania Naviera S.A. v. International Bulk Carriers Ltd. [1975] 2 Lloyd's Rep. 509 ............."

23. This type of injunction derives its name from this last mentioned case.

24. The Rasu Maritima Case, which has also been called "The Pertamina" was an English Court of Appeal Decision decided in March 1977. The other two cases were cases where the relief was sought and granted ex parte to hold the position until the parties were heard. In fact they never came to be heard because no doubt there was no defence. In the Rasu Maritima Case the parties were heard and, the application was refused on the balance of convenience. The Court of Appeal held that the jurisdiction to grant an interim injunction of this nature should not be limited to cases where the plaintiff could obtain judgment under RSC 0.14 and (Per Lord Denning M.R.) could be exercised when the plaintiff showed that he had a "good arguable case".

25. In Siskina v. Distos Compania Naviera S.A. [1979] A.C. 210. The House of Lords had this procedure under their close examination but did not cast any doubt on it. They did however indicate that it could only be applied in the case of an "Interlocutory Order".

26. In Chartered Bank v. Daklouche (Unreported), decided on 1st March 1979, the Court of Appeal extended this relief further by applying a mareva injunction to an English based defendant. This was referred to in Third Chandris Corp. v. Unimarine S.A. [1979] 1 Q.B. 645 where the English Court of Appeal held that there must be evidence that the defendant had assets within the jurisdiction. In that case they were satisfied that the existence of a London bank account was evidence of this. They further held that since the affidavit evidence showed that the plaintiff had a genuine cause of action against the defendant and reasonably feared difficulty in being paid if they succeeded in their claims, and the defendants, who were a foreign corporation had disclosed no evidence of the existence or location of any specific assets, the injunctions should be maintained.

27. In this case Lord Denning laid down guidelines for the exercise of the Courts discretion. At page 668 he has this to say -

"The guidelines

Much as I am in favour of the Mareva injunction, it must not be stretched too far lest it be endangered. In endeavouring to set out some guidelines, I have had recourse to the practice of many other countries which have been put before us. They have been most helpful. These are the points which those who apply for it should bear in mind:

In setting out those guidelines, I hope we shall do nothing to reduce the efficacy of the present practice. In it speed is of the essence. Ex parte is of the essence. If there is delay, or if advance warning is given, the assets may well be removed before the injunction can bite. It is rather like the new injunction in Chancery, the Anton Piller injunction (Anton Piller KG v. Manufacturing Processes Ltd. [1976] Ch. 55), which has proved equally beneficial. That must be done speedily ex parte before the incriminating material is removed. So here in Mareva injunctions before the assets are removed. The solicitors of the City of London can, I believe, continue their present practice so long as they do it with due regard to their responsibilities: and so long as the judges exercise a wise discretion so as to see that the procedure is not abused."

28. In July 1979 the English Court of Appeal extended the principles further by holding that a Mareva injunction could be granted in a personal injury action for damages as it had been in commercial actions.

Allen v. Jambo Ltd. [1980] 1 W.L.R. 1252

29. In April 1980 Sir Robert Megarry V.C. in Barclay-Johnson v. Yuill [1980] 1 W.L.R. 1259 summarised the effect of the English cases and came to the conclusion that the place of residence of a defendant was immaterial. He said:

"It seems to me that the heart and core of the Mareva injunction is the risk of the defendant removing his assets from the jurisdiction and so stultifying any judgment given by the courts in the action. If there is no real risk of this, such an injunction should be refused; if there is a real risk, then if the other requirements are satisfied, the injunction ought to be granted. If the assets are likely to remain in the jurisdiction, then the plaintiff, like all others with claims against the defendant, must run the risk, common to all, that the defendant may dissipate his assets, or consume them in discharging other liabilities, and so leave nothing with which to satisfy any judgment. On the other hand, if there is a real risk of the assets being removed from the jurisdiction, a Mareva injunction will prevent their removal. It is not enough for such an injunction merely to forbid the defendant to remove them from the jurisdiction, for otherwise he might transfer them to some collaborator who would then remove them; accordingly, the injunction will restrain the defendant from disposing of them even within the jurisdiction. But that does not mean that the assets will remain sterilised for the benefit of the plaintiff, for the court will permit the defendant to use them for paying debts as they fall due: see Iraqi Ministry of Defence v. Arcepey Shipping Co. S.A. [1980] 2 W.L.R. 488, especially at p. 494, per Robert Goff J."

30. The latest case to which I have been referred is the case of Rahman v. Abu-Taha and anothers [1980] 1 W.L.R. 1268 where the Court of Appeal held on 12th June 1980 that a Mareva injunction should be applied to two defendants who were not British subjects and who although they both claimed to have a residence in England had not disclosed their respective places of residence or the location of their assets, and who had given a cheque which had not been met on presentation. The Court was of the view that there was a real risk that the defendants would remove their assets from the jurisdiction or otherwise dispose of them, if an injunction were not granted. The Barclay-Johnson v. Yuill case was approved.

31. Lord Denning echoed the words of the report of the Committee on the Enforcement of Judgment Debts (1969 (CMND 3909) that under modern conditions of travel, particularly as the cost of air travel is now within the means of many a debtor, the risk of goods and chattels, or substantial sums of money being taken out the country is greatly increased. He echoed the words of Sir Robert Mcgarry V.C. in the Barclay-Johnson case that the abolition of exchange control had made it easier for everybody to transfer assets abroad. Having reviewed the effect of the above mentioned cases he said the time had come to grasp the nettle and later concluded by saying:

"So I would hold that a Mareva injunction can be granted against a man even though he is based in this country if the circumstances are such that there is a danger of his absconding, or a danger of the assets being removed out of the jurisdiction or disposed of within the jurisdiction, or otherwise dealt with so that there is a danger that the plaintiff, if he gets judgment, will not be able to get it satisfied."

32. Of course all these considerations apply to Hong Kong. It would appear that the old principle that the Court would not grant an injunction to restrain a defendant from disposing of assets merely in order to improve the prospects of the plaintiff, if successful, in recovering on his judgment has finally been laid to rest. Such an injunction may be granted if there are grounds for believing that assets will be disposed of before the judgment or award is satisfied and that the defendant will not therefore satisfy such judgment or award.

33. These pronouncements on the scope of section 45 of the Supreme Court of Judicature (Consolidation) Act of 1925, which is in precisely the same terms as section 19 of our Supreme Court Ordinance, are of the highest persuasive value in Hong Kong. I hold that the same principles apply here, and that this form of relief exists in Hong Kong side by side with that provided in O.44A R.S.C.

34. It will no doubt be rare that the plaintiff will find that he will need to obtain a Mareva injunction in Hong Kong because of the protection afforded him by R.S.C. O.44A which can be obtained at any stage from the institution of his action until final judgment.

The Present Considerations

35. It is of course Mr. Litton's contention that there is an arguable case and that there is good reason to think that the defendants will dispose of the proceeds of sale of the flat if the injunction is not granted. He contends that the evidence shows that the defendants have attempted to remove the proceeds of the flat out of her reach to defeat her claim.

36. Mr. Jackson-Lipkin has marshalled a considerable number of points as to why the injunction should not be granted. These appear to fall into the following categories:

37. In the circumstances I make an order, subject to the usual undertakings, granting an injunction restraining the 1st and 2nd defendants from dealing with half of the proceeds of sale of the flat in question or so much thereof up to one half as are under their control or the control of either of them, save in so far as may be necessary to affect payment into a bank account.

Representation:

Mr. Henry LItton, Q.C. & Mrs. Bohkary instructed by Messrs Helen A. Lo & Co. for the plaintiff

Mr. Jackson-Lipkin, Q.C. & Mr. Gilbert Rodway instructed by Messrs Victoria Y. Chan & Co. for both defendants