Securities and Futures Commission v. Descartes Investment Management Ltd and Others
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HCMP 796/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 796 OF 2009 ----------------------
---------------------- Before: Deputy High Court Judge Carlson in Chambers Date of Hearing: 6 July 2009 Date of Ruling (Handed Down): 7 July 2009 ---------------------- R U L I N G ---------------------- Introduction 1.This Ruling needs to be read in conjunction with one that I handed down on 30 June last. It is regrettable that the parties have been unable to agree on the terms of the bank guarantee. Fortunately, the dispute has narrowed itself down to just two, albeit very important, aspects which I must now impose on unwilling parties depending on how I decide these issues. Should the guarantee be by Deed 2.This element has been introduced by the Plaintiff and is supported by the Joint Administrators of the first 4 defendants. The reasoning is that there may be some doubt as to whether consideration has moved from the Plaintiff and from the Joint Administrators for the provision of the guarantee. Mr Barlow SC, on behalf of the 5th Defendant and the Intervener, submits that the consideration is obvious, which must be the lifting of the Mareva injunction under which the sum of $160.89 million is currently frozen. Some doubt is expressed on behalf of the Joint Administrators because the first 4 defendants are not a party for whose benefit the injunction has been granted – in their cases they are the subject of the injunction. 3.Mr Barlow submits that where they are now under administration the guarantee will be in exchange for the injunction, the assets of the first 4 defendants now being under the control of the Joint Administrators who would be able to look to the amount now held by the injunction in the event of proven wrongdoing by the 5th Defendant. 4.Both Mr Wong for the Plaintiff and Mr Dobby for the Joint Administrators stress that their clients should not be placed in the position of having to exchange a perfectly good injunction for what may be a fallible bank guarantee in circumstances where at some future point, issue may be taken on the consideration that has been provided to support it. If the guarantee were under Deed no such issue could arise. 5.Mr Barlow says that a Deed is wholly unnecessary where the consideration for the guarantee is obvious. Whilst bank guarantees under Deed are commonplace, he submits I should not order one simply because of the great urgency for his clients to have the injunction lifted and the guarantee put in place instead. He tells me, there is no evidence of this, that if a Deed is insisted on that this could delay the matter for weeks because of this particular bank’s internal procedures on issuing documents by Deed. Such matters need to pass a number of bank officials and committees which causes delay. 6.In the absence of evidence about this Mr Wong says I should go on and order a Deed and take no chances with the Plaintiff’s and Joint Administrators’ interests. 7.I have decided to dispense with a Deed. I have done so because I am entirely satisfied, and for no other reason, that a guarantee which is not under Deed in circumstances such as these would be perfectly valid. There is simply no question that good and sufficient consideration would have been given for the guarantee which is the exchange of the injunction for the guarantee itself which will, therefore, bind all the parties to it. That therefore disposes of the first issue. Should the guarantee cover other proceedings that may be brought by the Plaintiff and the Joint Administrators? 8.Paragraph 16 of my Ruling of 30 June indicated that one of the matters that would need to be addressed was the insertion into the then draft guarantee of a provision that it cover any “other proceedings” that might in the future be brought by the Plaintiff and/or the Joint Administrators against the 5th Defendant and the Intervener. 9.Mr Barlow raises what he describes as a jurisdictional issue. He submits that I can only approve and insist upon a guarantee which is limited to “other proceedings” within the boundaries of this present action and not, as Mr Wong and Mr Dobby contend, any other new action or actions that may be brought by the parties that they represent. 10.For my part, when I said what I did at paragraph 16 of my Ruling, I had contemplated any proceedings additional to this current action. It seems to me that to insist on this provision in the guarantee would not offend against the current jurisdictional parametres imposed by this action. As Mr Wong, correctly in my view, points out the guarantee as a contractual document stands apart from the action itself. It is part of the bargain struck for the lifting of the present injunction. Mr Wong describes it as the court establishing terms under which the injunction will be lifted. 11.I do not believe that issues of jurisdiction come into this matter. The only issue really is whether to insist on this provision would be unreasonable where the current injunction only affects this action and no prospective or theoretical future action or actions. 12.If this provision is not in the guarantee the Plaintiff and the Joint Administrators would have to seek a fresh injunction in support each future action and Mr Barlow’s clients would then need to either get a fresh guarantee on each occasion or have this guarantee amended on each subsequent occasion to have any future injunction lifted. That is something to be avoided. 13.Where I am satisfied that there is no jurisdictional impediment, I direct that a clause shall be inserted to provide for “other proceedings” in the terms drafted by Lovells on behalf of the Joint Administrators. I observe from the correspondence that this provision had been agreeable to Mr Barlow’s instructing solicitors but, he says that they were wrong to have agreed to it. They had not referred the matter to him before agreeing. Where Mr Barlow’s objection is jurisdictional and I am against him on that, I am content to direct the insertion of this provision as drafted by Lovells. 14.Mr Barlow has also raised the prospect of the bank not agreeing to this. For my part I can see no difficulty. The bank’s primary concern is that it is properly covered up to the limit of the guarantee which it must be otherwise it would not have gone as far as it has. This provision merely widens the scope of the guarantee being called in for which, as I say, the bank will have ensured that it is commercially protected. 15.I daresay that these “other proceedings” may never eventuate and if this appears to be so, then after this action is over one way or another, it will be open to the 5th Defendant and the Intervener to come to court and obtain their release from the guarantee. It would not be right to continue to hold the guarantors to some indefinite obligation that by then shows no likelihood of coming about. This it seems to me would address Mr Barlow’s proper concerns about an open-ended obligation only restricted by the Limitation Ordinance. 16.The Order which will provide for the substitution of the bank guarantee for the injunction will therefore contain a provision giving the 5th Defendant and the Intervener liberty to apply to discharge the guarantee, which would be unlikely to succeed certainly during the lifetime of this action. The Orders 17.Given the terms of my ruling the draft guarantee prepared by the 5th Defendant and the Intervener will therefore need to be amended to incorporate Lovells draft on “other proceedings”. Save as to that, the guarantee as now proffered is acceptable. Once it is executed the injunction will be discharged. 18.Other than that I will also make the agreed directions for the future conduct of this matter as they appear at page 924 of the Bundle. 19.I will now hear the parties as to costs which, where everybody appears to have raised perfectly proper concerns, I would have thought can be costs in the cause. Nevertheless, I will hear argument on this if necessary, as I will on any other consequential directions that may be needed. (Having heard argument the court made an order of Plaintiff’s costs in the cause for the hearing of 25 June 2009 and costs in the cause for 6 and 7 July 2009).
William Wong instructed by Securities and Futures Commission for the Plaintiff Christopher Dobby of Messrs Lovells, for the 1st to 4th Defendants Barrie Barlow SC instructed by Messrs Shum & Co., for the 5th Defendant and Intervener |
Further hearings and rulings under HCMP 796/2009