Win Profit Corporation Ltd v. World Orient Investment Ltd
Read the full judgment text of HCA 1487/2009 on BabelCite. This High Court CFI judgment was delivered on 8 January 2010.
1. This was the hearing of the plaintiff’s inter partes summons for the continuation of a Mareva Injunction granted by me ex parte on 24 December 2009.
Cites 2 cases
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HCA1487/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1487 OF 2009 --------------------- BETWEEN
--------------------- Before : Hon Suffiad J in Chambers Date of Hearing : 8 January 2010 Date of Decision : 8 January 2010 Date of Reasons for Decision : 20 January 2010 ----------------------------------------------------- REASONS FOR DECISION ----------------------------------------------------- 1.This was the hearing of the plaintiff’s inter partes summons for the continuation of a Mareva Injunction granted by me ex parte on 24 December 2009. 2.At the same hearing, the defendant sought to discharge the injunction, alternatively to have certain terms varied. 3.After hearing submissions from both parties, I ordered that the injunction be discharged in its entirety and indicated that I would give my reasons in due course in written form which I now do. Background 4.The defendant carries on business as a property investor. 5.The plaintiff and the defendant entered into a written Sale and Purchase Agreement dated 23 October 2007 (“the Agreement”) in respect of a property situated at 8th Floor, Tower A, Mandarin Plaza, No.14 Science Museum Road, Kowloon, Hong Kong (“the Property”) at the price of HK$107,200,000 with the plaintiff being the seller and the defendant being the buyer. Completion was scheduled for 17 September 2008. 6.The defendant had paid deposits totaling $10,720,000 to the plaintiff pursuant to the Agreement. 7.The defendant entered into a sub-sale agreement with 823 Investment Limited (“823”) on 5 November 2007 for sub-sale of the Property to 823 at a sub-sale price of $123,467,130 with the same completion date as the Agreement. 8.When the time for completion came, due to the inability of 823 to complete the sub-sale, it resulted in the defendant failing also to complete the Agreement. 9.The total deposit paid by the defendant were forfeited by the plaintiff. In like manner the deposit paid by 823 to the defendant was also forfeited by the defendant. 10.On 9 June 2009, the plaintiff re-sold the Property at $80,019,900, the agreement for such resale being executed in April 2009. 11.By its solicitor’s letter dated 18 June 2009, the plaintiff demanded from the defendant the amount of $17,253,849.61 to be paid within seven days, being damages arising from the re-sale of the Property. 12.The defendant not having met such demand, the Writ was issued by the plaintiff on 25 June 2009. The Writ, which was amended on 13 July 2009, claimed against the defendant the sum of $17,253,849.61 as being liquidated damages in purported reliance on Clause 15 of the Agreement, alternatively, damages to be assessed. 13.The plaintiff issued Order 14 application for summary judgment on 16 July 2009. 14.On 24 August, upon the hearing of the Order 14 application, the master granted judgment to the plaintiff on liability with damages to be assessed. 15.No appeal was lodged by the defendant in respect of the granting of judgment on liability by the master. However, the defendant did appeal against two other directional orders of the master, the first imposing conditions upon the defendant for the filing of affidavit evidence, and the second relating to direction for the hearing for assessment of damages. That appeal was heard and allowed by deputy judge Carlson on 29 December 2009. I shall come back to the appeal in more detail later in this Reasons for Decision. 16.On Christmas eve, five days before that appeal was due to be heard by Deputy Judge Carlson, the plaintiff made an ex parte application for and obtained a Mareva injunction before me against the defendant seeking to freeze such assets of the defendant up to the amount of the plaintiff’s claim. Arguable case 17.At the ex parte application, the plaintiff showed that there was an arguable case on the basis that while the plaintiff’s claim was, as indicated above, a claim for $17,253,849.61 as being the difference between the contract price and the re-sale price of the Property (as well as taking into account the forfeited deposit), the defence raised by the defendant, at least in respect of damages, was that the plaintiff had failed to mitigate its loss by reason of the fact that the plaintiff had been given offers (which were declined by the plaintiff) which had exceeded the re-sale price of the Property almost immediately after the breach by the defendant in September 2008. 18.On the other hand, the plaintiff’s case was that it relied on the provisions of Clause 15 of the Agreement and claimed the difference between the contract price and the resale price as liquidated damages. 19.This issue was further argued before me at the inter partes hearing. 20.It was submitted by the defendant, relying on the decisions in Teng Fuh Co. Ltd v Keen Lloyd (Holdings) Ltd (CACV193/1999) and Alucase Co. Ltd and anr. v Keen Lloyd (Holdings) Ltd (HCMP3577/1998), that even where a provision such as Clause 15 can be relied upon, it was subject to an implied term that the resale must be carried out within a reasonable time and that the plaintiff could not simply resale at their convenience, especially in a falling market. In the former case, it was further held that any resale within six months after the determination of the agreement should be considered as reasonable. 21.In the present case, the resale was agreed only in April 2009 and completed in June 2009. 22.In response to that submission of the defendant, the plaintiff submitted that of the several offers which may have been communicated to the plaintiff through estate agents in respect of the Property after the breach by the defendant on 17 September 2008, there was only one which came with a signed provisional agreement and a cheque for the initial deposit. That was an offer by Three Gardens Ltd made through an estate agent named Lam Nam. The offer there was for $89,910,000. 23.The plaintiff further explained that with the other offers made only by estate agents, although termed by them as offers, the plaintiff was clearly skeptical of same since it was not uncommon for estate agents to be testing the temperature of the water to see the plaintiff’s reaction. 24.Therefore the plaintiff insisted on a firmer basis for such offers being a signed provisional sale and purchase agreement and accompanied by a cheque for the initial deposit. 25.As for the offer from Three Gardens Ltd, the plaintiff further explained that the offer was made on 18 September 2008 (which was a Thursday) and was expressed to be valid for only four days up to 22 September, being the following Monday. 26.It was contended by the plaintiff that since at the time, the plaintiff was seeking legal advice regarding the aborted sale by the defendant, in the short space of four days, it was not possible for the plaintiff to properly and seriously consider that offer. 27.Furthermore, at the time of the breach by the defendant, the valuation of the Property was at $110 million such that the plaintiff felt that the offer by Three Gardens Ltd was well below the market value. 28.In those circumstances, it was not unreasonable for the plaintiff not to have considered or accepted that offer by Three Gardens Ltd. 29.There was also evidence from the plaintiff that even in February and March 2009, the offers received by the plaintiff in respect of the Property only ranged from between $68 million to $70 million. 30.As for the six months period, the plaintiff submitted that although the decision in the Teng Fuh case said that a resale within six months would be considered reasonable, it does not follow that a resale just outside of the six months would not be reasonable. It all depended on the circumstances, and here the property market was suffering the effects and aftermaths of the financial tsunami of mid-2008. 31.A further point made by the plaintiff was to the effect that even if the plaintiff had accepted the offer from Three Gardens Ltd. in the amount of $89,910,000, and taking into account the amount of the forfeited deposit of the defendant, the plaintiff will still have a claim of $6,570,000 against the defendant pursuant to Clause 15 of the Agreement. 32.Having heard the argument of the parties, I was of the view that there are valid arguments for both sides on damages and the matter will have to be determined at the assessment hearing. 33.As such therefore there is here an arguable case. Risk of dissipation of assets 34.The main dispute between the parties at the inter partes hearing was whether there was a real risk that the assets of the defendant would be dissipated by the defendant to render any judgment obtained by the plaintiff of no effect. 35.At the ex parte hearing, the plaintiff’s case on dissipation of assets by the defendant was put on the following basis :
36.It should be noted at once that none of the above four factors per se could be said to be direct evidence of dissipation of assets so as to render any judgment obtained to be of no effect. However, the plaintiff’s case was that when the above four factors are looked at together there is a very strong inference that this was what the defendant was doing, and therefore a real risk of the dissipation of assets by the defendant. 37.The details of each one of those four factors referred to above will need some elaborating. 38.Firstly, it was pointed out at the ex parte hearing that the defendant was only one of the corporate vehicles used by Tung for property investment and that land searches carried out relating to the defendant has shown that since the aborted sale of the Property in September 2008, the defendant has not purchased any more properties. 39.Reference was also made to two units in Lippo Sun Plaza purchased by the defendant but was put into the name of Apex Link Ltd at the nomination of the defendant. 40.Upon query by the court as to the timing, it was conceded by counsel for the plaintiff at the ex parte hearing that the nomination for Apex Link Ltd to hold the two units in Lippo Sun Plaza was made in early 2008, before the breach complained of in the present case. With that concession counsel explained that the plaintiff was not relying on that evidence to suggest that the defendant did so with the intention of defeating any judgment obtained, but only to show that potentially it was possible for the defendant to do something similar. 41.In respect of the second factor, it was pointed out by counsel for the plaintiff at the ex parte hearing that at the commencement of these proceedings in June 2009, the defendant still owned two carparks in East Ocean Centre, units 14 and 15 in Mandarin Plaza, and 807 of Harbour Crystal Centre. 42.A provisional sale and purchase agreement was entered into on 22 September 2009 to sell off 807 Harbour Crystal Centre with completion scheduled for 10 November 2009. Not only was it pointed out that this property was sold by the defendant for $14,360,000 which was a loss to the defendant, the property having been acquired by it at $15,639,890 in May of 2008, but that it was also emphasized that the sale of this property at a loss was “unlike the defendant’s previous investments.” Therefore the price and the timing of this sale was suggestive of the defendant’s dissipation of its assets to render any judgment which may be obtained by the plaintiff to be of no effect. 43.It was also pointed out that from enquiries with estate agents, it came to be known that the defendant has already put on the market both the units it held in Mandarin Plaza which are estimated to be worth around $12.5 million, leaving only the two carparks in East Ocean Centre estimated to be worth about $600,000. 44.As for the third factor, it was brought to the notice of the court that the defendant has entered into a new all monies legal charge on 21 July 2009 using all its assets as securities and again emphasis was placed on the timing thereof being shortly after the commencement of the present proceedings. 45.Lastly, in relation to the fourth factor, it was pointed out by the plaintiff at the ex parte hearing (which was just five days before the defendant’s appeal was due to be heard by Deputy Judge Carlson on 29 December 2009) that the appeal brought by the defendant against, firstly, the master’s order imposing upon the defendant the payment of $50,000 as security for the plaintiff’s costs and secondly, a further order of the master to set down the assessment of damages hearing estimated to last for three hours, was an appeal which was devoid of merits but only brought by the defendant to delay the proceedings so as to allow the defendant to buy time in order to dissipate its assets. 46.At the ex parte hearing, which quite obviously was not attended by the defendant, only the plaintiff’s evidence and submission was before the court. 47.The Mareva injunction was therefore granted ex parte on the basis as put forward by the plaintiff, in particular as to the risk of dissipation of its assets by the defendant which the court was asked to infer from the four factors relied on by the plaintiff. 48.At the inter partes hearing, I heard evidence and submissions from the defendant relating to the issue of dissipation of assets. 49.Mr Yee for the defendant submitted firstly, the defendant having stopped buying properties after September 2008 that itself is not and cannot be evidence of dissipation of assets in order to render any judgment obtained to be of no effect. 50.It was also submitted that there can be no inference of anything sinister in the fact that Apex Link Ltd was nominated to hold the two units of the defendant in Lippo Sun Plaza since that was something done in January 2008, before the breach sued upon was even committed in the present case. 51.In relation to the second factor, namely the defendant started to sell its properties, in particular the unit in Harbour Crystal Centre which was sold in September 2009 at a slight loss, it was pointed out to the court that was not the only occasion on which the defendant had sold off its properties at a loss. 52.Documentary evidence was adduced by the defendant to show that it had also previously sold off the following properties at a loss :
53.The point was made by Mr Yee that the plaintiff was wrong to have submitted at the ex parte hearing that the Harbour Crystal Centre property was “unlike it’s previous investment, the defendant sold it at a loss this time”. The gloss and the implication of that submission by the defendant to infer dissipation of its assets is now shown to be completely wrong and unjustified. 54.A further pointed made by Mr Yee was that since the defendant’s business was in property investment, there is nothing wrong or sinister for the defendant to have sold off the unit in Harbour Crystal Centre at a slight loss in September 2009, particularly when that sale transaction was done openly with nothing to hide. 55.Furthermore, having sold off the unit in Harbour Crystal Centre, there is now evidence that the proceeds of that sale was used to partially pay off a bank loan from the Shanghai Commercial Bank. However, in the absence of any evidence or suggestion that that was not done in the usual course of the defendant’s business, it is not evidence of dissipation of asset. 56.It was also submitted by the defendant that units 14 and 15 in Mandarin Plaza had all along, ever since its acquisition by the defendant in February 2008, been put on the market for sale. This was at a time well before any breach by the defendant. 57.As regards the third factor, that of charging all of its assets after commencement of the present proceedings, evidence was adduced by the defendant which was backed up by documentary exhibits that this was not a newly created charge, but that the defendant was merely switching from one bank, namely the DBS Bank, to another bank, the Bank of East Asia, by reason of the fact that the Bank of East Asia was offering a better rate of interests. Therefore the creation of the all monies legal charge with the Bank of East Asia in July 2009 was merely taking over from the mortgage (also an all monies charge) which had been created in February 2008 with DBS Bank. This was therefore not something done by the defendant only after commencement of the present proceedings which was the suggestion at the ex parte hearing. 58.Finally, as to the fourth factor, the simple point made by the defendant was that the appeal having been heard by Deputy Judge Carlson on 29 December 2009, that appeal was allowed by the deputy judge with an order for costs made against the plaintiff. 59.It was therefore submitted that the result of that appeal speaks for itself in so far as the merit of it goes. Given that result, it cannot be said that the appeal was launched with the purpose of stalling for time as suggested by the plaintiff at the ex parte stage, at a time before the appeal was heard. 60.Ultimately, and given the above circumstances and evidence put forward by the defendant, it was submitted by Mr Yee that there is not a shred of evidence which could show that the defendant was dissipating its assets so as to put beyond reach any judgment which the plaintiff may obtain in these proceedings and accordingly the Mareva injunction ought to be discharged on that basis alone. Material non-disclosure 61.A number of points as to material non-disclosure was made by the defendant, however, it would not be necessary to go into each and every one of the points submitted. 62.Two significant matters stand out amongst all the points made. 63.Firstly, as to the defendant having sold off the unit in Harbour Crystal Centre at a loss, the court’s attention was not drawn to the fact that there were previous or other occasions that the defendant had sold off properties at a loss. Instead the picture that was attempted to be painted at the ex parte application was that this was done “unlike the defendant’s previous investment” suggesting that the defendant never did sell of its investments previously at a loss. 64.The evidence relating to the sale of the unit in Padek Palace at a loss by the defendant was not before the court, albeit that the explanation of the plaintiff was that they had no knowledge of that transaction. 65.Furthermore, although the material relating to the sale of the property in East Ocean Centre and Mega International Commercial Building was there, the court’s attention was not drawn to those transactions where the defendant had sold off those properties at a loss. 66.Secondly, in submitting that the defendant had entered into a new all monies legal charge on 21 July 2009, again it was not pointed out to the court that this was a mortgage replacing an earlier mortgage created with the DBS Bank. Decision 67.In coming to a decision in this matter, the main focus was on the inability of the plaintiff to show a real risk of dissipation of assets by the defendant in order to defeat any judgment which may be obtained by the plaintiff. 68.Given the result in the appeal heard on 29 December 2009 by Deputy Judge Carlson and given the documentary evidence now produced by the defendant showing that the all monies charge created in favour of the Bank of East Asia in July 2009 was no more than a re-financing of the mortgage originally created with DBS Bank in February 2008 because lower interests rates were offered by the Bank of East Asia, it follows therefrom that the third and fourth factors initially relied on by the plaintiff at the ex parte hearing have been totally eliminated. 69.That leaves only the first two factors, namely that the defendant has stopped purchasing properties, and that it has commenced selling some of its properties and have put others on the market. 70.I take the point already made that stopping to purchase further property is not dissipation. 71.As for the second factor, a substantial portion of that has been discredited by the defendant showing that there were previous occasions when the defendant had sold off properties at a loss since the gloss which the plaintiff sought to put on by making that point is no longer applicable. 72.What remains cannot, in my view, substantiate any suggestion made that the defendant have been dissipating its assets with a view to defeating any judgment that may be obtained against it. 73.Once the position is reached whereby the plaintiff cannot show that the defendant has been dissipating its assets, or that such an inference cannot properly be drawn from the evidence, the Mareva injunction must be discharged and that it is unnecessary for me to consider further any other matter which points in the same direction, such as non-disclosure of material facts. 74.However, for the sake of completeness, having heard the submissions of counsel and having considered all the evidence in this matter, I shall deal briefly with the other matters argued before me. 75.In so far as material non-disclosure goes, the law does not require that to be done deliberately or with intention to mislead. If material matter is omitted even by an error of judgment, that could amount to material non-disclosure. 76.That is particularly so where, as here, the plaintiff is, at the ex parte stage, asking the court to draw an inference (being dissipation of assets in the present case) which inference is to be drawn based on a number of factors collectively put before the court, and all the more so where the gloss which the plaintiff seeks to ascribe to each of the individual factors can have a significant bearing as to the ultimate inference which will or will not be drawn. 77.The inability of the plaintiff to bring to the attention of the court the matters referred to above had an important and significant effect in the present case for if those matters had been put fairly before the court, it was unlikely that the court would have made the inference which the plaintiff submitted was the correct inference to be made. 78.Apart from material non-disclosure, there were two further matters which caused me considerable uneasiness. 79.The first matter related to the fact that at the ex parte stage, the plaintiff merely stated that “recently” they had discovered by a land search from the Lands Registry of the sale of the Harbour Crystal Centre property by the defendant. It was never spelled out the exact timing when the plaintiff or its solicitors came to know of that sale. 80.My attention has now been drawn by Mr Yee for the defendant that the date shown on the relevant land search carried out by the plaintiff’s solicitors was 13 November 2009. 81.Had the timing of that land search, which seemingly on the plaintiff’s case, was the lynch pin for launching the application for Mareva injunction, the plaintiff would have been hard pressed to explain to the court why it took them some forty days to come to court for the ex parte Mareva application. 82.Secondly, the fact that after obtaining the order for a Mareva injunction ex parte from the court on the morning of 24 December, being Christmas eve, the solicitors for the plaintiff was able to serve copies of the sealed order on a number of banks on the afternoon of that same day, but that the defendant was only served through the defendant’s solicitors some time after 3 p.m. on 28 December when the return date given by the court at the time the order for Mareva injunction was made was 31 December. This effectively gave the defendant four days less to prepare for the return date. 83.I am unable to accept the plaintiff’s explanation that they were short handed when it came to service, particularly when there is an express undertaking given and contained in the order for Mareva injunction that the plaintiff was to serve that order upon the defendant “as soon as practicable”. 84.If the plaintiff’s solicitors could serve the order on a number of banks on the afternoon on Christmas eve, there can be no valid reason for not serving the defendant with the order that same afternoon, which must have priority given the undertaking. 85.Even though it is not necessary for me to make a decision as to whether or not there was a breach of the undertaking given, in this respect, the blame must be attributed to the plaintiff’s solicitors. 86.For the above reasons, the Mareva injunction was discharged. Costs 87.After having indicated to the parties at the hearing after the conclusion of their submissions that the Mareva injunction will be discharged but that I will give my reasons in due course in writing, I heard submissions from counsel regarding costs. 88.Mr Yee for the defendant asks for costs of the application and hearing including the costs reserved by Sakhrani J on the return day on 31 December to be taxed and paid forthwith. 89.On the other hand, Mr Wu for the plaintiff submitted that costs should be in the course of the assessment. 90.For my part, I am unable to see why the costs of the discharged Mareva injunction, for the reasons given above, should be in the course of the assessment hearing. 91.In my view, the Mareva injunction should not have been applied for in the present case at all. There is simply no evidence of dissipation of assets by the defendant but for the gloss which was quite wrongly put on to the four factors used by the plaintiff as the basis to show dissipation of assets. 92.Accordingly, there will be an order that the plaintiff is to bear all the costs of the application for Mareva injunction which includes paying the defendant’s costs for discharging same both at the hearing before Sakhrani J and the inter partes hearing before me on 8 January 2010, such costs to be taxed and paid forthwith by the plaintiff.
Mr Paul K.N. Wu, instructed by Messrs V. Hau & Chow, for the Plaintiff Mr Kent Yee, instructed by Messrs Alfred Lam, Keung & Ko, for the Defendant |
Cases cited in this judgment
Further hearings and rulings under HCA 1487/2009