Read the full judgment text of CACV 000053/2004 on BabelCite. This Court of Appeal judgment was delivered on 11 January 2005 before Woo VP, Yeung JA.
Civil procedure – interlocutory injunction – ex parte application – discharge for material non-disclosure and misrepresentation – fresh inter partes injunction – duty of full and frank disclosure – cross-undertaking as to damages – appellate review of discretion – derivative action for breach of fiduciary duty. The plaintiff and the 1st defendant (D1) were brothers and the only two directors and 50/50 shareholders of Kammy Town Limited. The 2nd to 6th defendants were former employees of Kammy Town, and the 7th and 8th defendants were Hong Kong companies alleged to be vehicles of D1 and D2. The plaintiff commenced a derivative action alleging D1 breached his fiduciary duties by diverting Kammy Town's business to D7 and D8 and soliciting its employees, and obtained an ex parte injunction from Deputy Judge Gill restraining the defendants from dealing with ten named customers of Kammy Town. The ex parte judge questioned the plaintiff about the financial position of Guangzhou Caming Real Estate Development Ltd, in which the plaintiff indirectly held a 70% interest via Caming Development Ltd, and the plaintiff represented the project as being worth about RMB 100 million and his share as worth about RMB 62 million. The defendants gave undertakings in lieu on 11 April 2003, but on the inter partes application Deputy Judge Poon discharged the ex parte injunction on grounds of material non-disclosure and misrepresentation, and refused to grant a fresh inter partes injunction. The plaintiff appealed. Held, dismissing the appeal: (1) The judge was correct in discharging the ex parte injunction. The duty of full and frank disclosure required the plaintiff to disclose all matters relevant to the exercise of the court's discretion, particularly his financial position where there were realistic doubts about his ability to honour the cross-undertaking as to damages (Wah Nam Holdings, American Cyanamid). The plaintiff knowingly relied on his interest in Guangzhou Caming to demonstrate his financial worth, but failed to disclose that about RMB 7.8 million of the project premium remained unpaid, that Guangzhou Caming was liable to a penalty of 1% per day (365% per annum) on the overdue premium potentially amounting to about RMB 300 million, that RMB 4.1 million was still owed to contractors under a judgment debt, and that Guangzhou Caming had recorded an accumulated loss of over RMB 25 million in its 2001 accounts. The plaintiff was also guilty of misrepresentation by asserting the project was worth about RMB 100 million when he knew the figure was unsustainable. (2) The judge did not err in refusing to grant a fresh inter partes injunction. Although the court has a discretion to grant fresh relief inter partes (Pacific Base Services; Shenzhen Universal; Brink's Mat), the discretion is to be exercised sparingly, and where the non-disclosure is not innocent, the public interest in upholding the golden rule of disclosure weighs heavily against the grant of fresh relief (Tate Access Floors; Behbehani; Lloyds Bowmaker; Standard Chartered). Three factors militated against the grant of a fresh injunction: the seriousness and culpability of the non-disclosure including the penalty matter; the plaintiff's inaction over nine months since discharge, during which he took no step to apply for a stay, an interim injunction pending appeal, or an order for speedy trial, allowing the status quo to shift; and the existence of D1's continuing undertaking to the court in the same terms, which reduced the risk of harm to the plaintiff. Re-granting the injunction would disturb rather than preserve the status quo (Garden Cottage Foods; Shepherd Homes). Order: appeal dismissed; plaintiff to pay costs of appeal to the 2nd to 8th defendants to be taxed if not agreed; costs order of Deputy Judge Poon confirmed; order for speedy trial made.
Legal issues: Whether material non-disclosure and misrepresentation justified discharge of ex parte injunction · Whether fresh inter partes injunction should be granted after discharge of ex parte order
Outcome: Appeal dismissed; the Court of Appeal upheld Deputy Judge Poon's discharge of the ex parte injunction and refusal to grant a fresh inter partes injunction.
Cited by 13 cases · Cites 3 cases