Indian Corridor Sdn Bhd and Another v. China Idea Development Ltd and Others
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HCMP 1168/2008 in the high court of the hong kong special administrative region court of appeal MISCELLANEOUS PROCEEDINGS no. 1168 of 2008 (on AN INTENDED appeal from HCA NO. 1 of 2008) ________________________ BETWEEN
Before: Hon Rogers VP in Chambers Date of Hearing: 21 July 2008 Date of Decision: 21 July 2008 Date of Further Submissions: 31 July 2008 Date of Handing Down Reasons for Decision: 11 August 2008 ________________________ REASONS FOR DECISION ________________________ 1.This was an application for leave to appeal out of time in respect of a number of parts of the order made by Deputy High Court Judge Carlson on 4 February 2008. At the conclusion of the hearing of this application leave to appeal out of time was refused with reasons to be given in writing. Background 2.On 31 December 2007 the plaintiffs obtained ex parte an injunction order in the Mareva form against the first and second defendants limited to the sum of HK$647,449,536. Although that order was in the standard form it is pertinent to draw attention to three aspects. The first is that the order was made before the issue of the writ and by its terms was to remain in force up to and including 1 February 2008. The second point to note is that the plaintiffs gave an undertaking to the court that the original summons should be served on the first and second defendants. Implicit in that, of course, was the requirement that the writ should be issued. The third point is that paragraph 9 of the order provided that:
3.On 2 January 2008 the plaintiffs issued the writ in this action. The action was a derivative action on behalf of the third defendant. The claims against the first and second defendant were directed to a management agreement dated 25 July 2007 which was alleged to be void and of no legal effect. Various declarations and other relief were sought in the action. The statement of claim followed on 15 January 2008 and the same relief was claimed. 4.The matter next came before Reyes J on 18 January 2008. The judge stayed parts of the order of 31 December relating to discovery and made an order that the second defendant could spend $8 million on business expenses and $1 million on legal advice and representation. The judge also ordered that the plaintiff should provide security in the sum of $8 million on or before 31 January 2008. Reyes J also ordered that the summons issued by the second defendant to have the action struck out and additionally or in the alternative that the ex parte order be discharged and there be an enquiry for damages be adjourned to 1 February 2008, which was the return date given when the ex parte order was made. 5.On 25 January 2008 the matter came back before Deputy High Court Judge Carlson on an application by the first defendant. The judge permitted the first defendant to spend up to $28 million towards business expenses and $1 million on legal advice and representation. He made a similar order that there should be fortification, this time in the sum of $9 million again on or before 31 January. The judge made a similar order in respect of the summons issued on behalf of the first defendant to have the injunction order discharged. A few days later a second summons was issued also seeking the striking out of the action. 6.Apparently without any warning or explanation, on 31 January the plaintiffs served notice of discontinuance of the action. The defendants were clearly not prepared to accept this last minute change of stance by the plaintiffs for which no explanation had been given. If matters had been allowed to remain there the defendants would have been entitled to party and party costs and no more. The defendants, however, were not content to leave matters in that state of affairs. They immediately took steps to have the hearing on 1 February maintained so that they could seek orders for costs on an indemnity basis, discharge of the orders made on 31 December 2007 with costs on an indemnity basis, an enquiry as to damages on the basis that the plaintiffs shall be jointly and severally liable to pay the defendants pursuant to the plaintiffs’ undertakings as to damages contained in the ex parte order. They also sought orders that the plaintiffs and/or their solicitors should be restrained from disposing or removing from Hong Kong or in any way dealing with monies up to a limit of $20 million belonging to the plaintiffs which included $2 million paid by the plaintiffs to their solicitors as well as orders preventing the plaintiffs from commencing any action whether in Hong Kong or elsewhere raising the same issues as had been raised in the statement of claim until the plaintiffs had discharged or provided security for all their liabilities to the defendants in these proceedings. The judge made orders in those terms and also ordered that the second defendant’s application that the solicitors should be responsible for any shortfall in the recovery of the second defendant’s costs should be adjourned. 7.It is clear from the transcript of the proceedings before Deputy High Court Judge Carlson of 4 February that the plaintiffs’ leading counsel conceded and agreed that the defendants were entitled to an order for an enquiry as to damages. The judge had before him evidence upon which the defendants had relied as showing that there had been material nondisclosure in particular as to what was alleged to be the first plaintiffs’ insolvency and upon which the defendants alleged that they were entitled to have the action against them struck out. 8.The plaintiffs’ conduct in obtaining an ex parte order in the Mareva form, keeping it in force and then filing the notice of discontinuance the day before the scheduled hearing of the return date of the ex parte injunction was not simply discourteous but, in my view, constituted an abuse of the process of the court. At the hearing of this application, grave exception was expressed as to the plaintiffs’ conduct. As a result of further consideration of the matter during the course of preparation of these reasons, it became apparent that the filing of the notice of discontinuance might well have lead to a breach of the order of 31 December 2007. As a result, the plaintiffs’ solicitors were notified and an opportunity was given for submissions to be made on the matter. Further submissions were made on behalf of the plaintiffs dated 31 July 2008. 9.The order of 31 December specified that the injunctions would remain in force until 1 February 2008 and required the application to be brought before the court on that day. The undertaking by the plaintiffs to serve the writ on the first and second defendants and to issue a summons to be heard on the return date coupled with paragraph 9 of the order made it quite clear that the court had ordered that the matter should come before it on 1 February 2008. 10.In so far as the plaintiffs attempted to vacate the date of 1 February 2008 by service of the notice of discontinuance they risked being in breach of the order. Although it is not entirely clear, it would appear that breach of the order was avoided only because the defendants insisted on there being a hearing that day. In my view, however, it was still an abuse of the process of the court for an ex parte injunction in the Mareva form to be obtained and enforced by service thereof and for the action to be discontinued without the consent of all parties affected by the order or leave of the court. 11.Moreover, it is highly questionable as to whether the obligation to serve the writ could be satisfied by serving the writ and discontinuing the action before the return date. In that context the act of discontinuance raises cause for grave concern in respect of the plaintiffs’ undertaking given to the court. This is quite apart from the fact that the lack of any explanation to the court or to the defendants was, in my view, in the circumstances a gross discourtesy. 12.At the hearing Mr Sussex SC, who appeared on this application on behalf of the plaintiffs, argued that a party was entitled to obtain an injunction and if required to provide security for the cross-undertaking, that party could then abandon the injunction. Naturally, any party may at any time seek to have an injunction that it has obtained discharged. It is quite a different thing, however, when a plaintiff obtains a Mareva injunction and when challenged discontinues the action. A party obtains a Mareva injunction on the basis that it has a strong and sound cause of action and that the matter is so serious and urgent that it requires the court to issue an order which is in breach of the opposing party’s basic rights namely to have its case heard and, it might be added, potentially highly damaging to the party injuncted. To then abandon that action without any explanation to the court, let alone the defendant who had been subjected to the injunction, raises cause for inquiry. 13.Not surprisingly the judge made the orders that the defendants should have their costs on an indemnity basis and that there should be an enquiry as to damages. The greater part of his ruling on 4 February 2008 was concerned with the grant of what was termed an “anti-suit” injunction to restrain the plaintiffs from bringing similar proceedings until after they had discharged their obligations. From the scope of that injunction the judge excluded the current action that was on foot against the second and third defendants in Malaysia as well as an action in respect of the calling of an EGM. The plaintiffs had objected to the wasted costs order against the solicitors and argued that it created a potential conflict of interest between the plaintiffs and their solicitors. As the judge rightly pointed out, that conflict would remain whether or not the summons was ordered to be adjourned or refused on the basis that it had not been heard. On that basis the judge considered that the application that the plaintiffs’ solicitors should bear any shortfall of the costs should be adjourned sine die with liberty to restore not before the conclusion of the enquiry as to damages. 14.The second defendant issued a summons on 13 May 2008 which was heard on 23 May 2008 seeking an increase in the amount of the limit of the amount restrained under the order of 4 February from HK$20,000,000 to RMB 78.9 million. When the matter was heard before Deputy High Court Judge Carlson he declined to make such an order and but at the same hearing, the plaintiffs, without any application, sought some clarification which was dealt with in paragraph 11 of the judge’s ruling of 26 May in the following terms:
15.The judge declined to go into the matter, in my view quite correctly. 16.Turning to the matters sought to be raised should leave to appeal be granted, the first was that the order that there be an enquiry into damages should be set aside. After Mr Scott SC, appearing for the first defendant, and Mr Barlow SC appearing for the second and third defendants, respectively had demonstrated conclusively that the leading counsel then representing the plaintiffs had on 1 February conceded in explicit terms that the defendants were entitled to an enquiry as to damages, Mr Sussex produced during his reply speech a new draft notice of appeal, in which in lieu of paragraph 4 of the order being discharged sought a variation in terms that:
17.Whilst it had been the plaintiffs’ case that the so termed Issue (1) should be determined before any enquiry as to damages was ordered this draft notice of the appeal, which had not previously been shown to the court or to the opposing counsel, could be considered as no more than an attempt at salvaging something from this application. 18.It should be noted that the undertaking to the court given by the plaintiffs as part of the ex parte order was that:
19.Similarly, the order made by the judge below was that the enquiry was as to the amount of damages which the Plaintiffs shall be jointly and severally liable to pay the defendants pursuant to the undertakings. It was thus not simply an order to ascertain the amount of damages which the defendants had suffered but it was an assessment of the quantum that should be paid to the defendants. In so far as Mr Sussex sought to go further and argue that it was now open to the plaintiffs to challenge whether the undertakings as to damages ought to be enforced at all, that was a matter which was conceded on 1 February and, I would add, in the circumstances of this case it was extraordinarily adventurous of Mr Sussex to suggest that there could be the slightest doubt about the matter. 20.Turning to the next part of the order which the plaintiffs seek to challenge, namely paragraph 5, which restrained the plaintiffs from disposing or removing from Hong Kong or in any other way dealing with monies up to the limit of HK$20 million, I consider that the judge was amply justified in ordering that. Given the plaintiffs’ conduct in obtaining the order of 31 December and then, in the afternoon prior to the return date which had been ordered, seeking to discontinue the action, the plaintiffs have demonstrated that not only are they prepared to risk being in breach of a court order which they themselves had sought but they were willing to inflict damage but were not prepared to pursue their allegations. On the evidence the judge was amply justified in coming to the conclusion that there was the gravest doubt as to the plaintiffs’ solvency and was justified in coming to the conclusion that the plaintiffs would be likely to remove every possible asset from the jurisdiction to avoid the consequences of a holding under an enquiry as to damages. 21.In relation to what was termed the “anti-suit” order, paragraph 6 of the order, again, I consider that this was an entirely proper order for the judge to have made. The plaintiffs had brought action against the first defendant only in Hong Kong and had abandoned it. Before they made any further attempt to bring suit against the defendants they should clearly discharge any liability that they had incurred in respect of the present action. 22.Finally in relation to paragraph 7 of the order, wherein the judge adjourned the second defendant’s summons whereby an order was sought that the plaintiffs’ solicitors should pay any shortfall to the second defendants in respect of costs, Mr Sussex sought to argue that the adjournment of the matter put the plaintiffs in difficulties with their solicitors because of the potential conflict of interest. As already indicated, and as the judge pointed out, that conflict would exist whether the summons was adjourned or dismissed without a hearing on the basis that it could be revived later. As has been pointed out above, at the very least, the plaintiffs had risked being in breach of their own order of 31 December. It is unnecessary to go further than to point out that in doing so their solicitors can hardly be said not to be blameworthy. The solicitors were acting for an overseas corporate client. It was the solicitors’ task to advise the client and ensure so far as possible that the client complied with orders of the court. If and in so far as the solicitors received instructions that would entail breaching such an undertaking, as in this case discontinuing the action where an undertaking had been given to serve the writ and have an application heard on a future date, the solicitors’ proper course was, in all probability, to decline to act further and seek to take themselves off the record. 23.I have set out above my reasons for considering that there would in fact be no merit in any appeal which is sought by the plaintiffs. There is, of course, the important matter to be considered namely the delay between 4 February when the relevant order was made and 23 June whether the application was made for leave to appeal out of time. The first excuse proffered by Mr Ooi Kee Liang in his affirmation filed on 24 June 2008 was contained in paragraph 13 of his affirmation which were read:
24.As the chronology produced by Mr Sussex demonstrated, apart from a few letters written in February and March the plaintiffs did nothing. In my view the delay which the plaintiffs themselves were content with must, in the absence of exceptional merits in any factors in any appeal, debar them from any extension of time. 25.For all the reasons I consider that it would be quite wrong to grant any extension of time to appeal the order of 1 February.
Mr Charles Sussex SC & Ms Frances Lok, instructed by Messrs Robertsons, for the 1st & 2nd Plaintiffs/Applicants Mr John Scott SC & Ms Janine Cheung, instructed by Messrs Richards Butler, for the 1st Defendant/1st Respondent Mr Barrie Barlow SC, instructed by Messrs Lovells, for the 2nd Defendant/ 2nd Respondent |