Hui Chi Ming v. Koon Wing Yee and Others
Read the full judgment text of HCA 1479/2009 on BabelCite. This Court of First Instance judgment was delivered on 10 March 2011 before Deputy High Court Judge Burrell.
Civil procedure – Mareva injunction – fortification of cross-undertaking as to damages – appropriate quantum – speculative loss of investment opportunities – form of order – bank guarantee versus payment into court – costs – plaintiff encashed shareholding said to be worth HK$3 billion and resigned as Chairman in July 2010 – 2nd defendant forced to sell securities to meet margin call caused by Mareva order, shares now worth about HK$5 million more – 3rd defendant made HK$5 million profit on sale of Easyknit shares and claimed HK$15 million in lost investment opportunities – whether straightforward loss-of-value approach justifies HK$5–6 million for 2nd defendant – whether speculative loss of investment opportunities justifies HK$15 million for 3rd defendant – whether bank guarantee or payment into court is the appropriate form – whether costs should follow the event or be in the cause – held: HK$6 million for 2nd defendant adopting straightforward approach based on actual loss of share value – held: HK$6 million for 3rd defendant, his HK$15 million claim being wholly speculative and rose-tinted, but court taking broad view of unquantifiable risk – held: bank guarantee preferred over payment into court for consistency with the earlier order of Coleman DHCJ, both forms being equally secure – held: costs in the cause – orders: plaintiff to provide HK$6 million by bank guarantee within 28 days for each of the 2nd and 3rd defendants, failing which the Mareva injunction shall lapse; costs of the application in the cause.
Legal issues: Appropriate quantum of fortification for the 2nd defendant's cross-undertaking · Appropriate quantum of fortification for the 3rd defendant's cross-undertaking · Form of fortification order – bank guarantee versus payment into court · Costs of the fortification application
Outcome: Fortification granted: plaintiff ordered to provide HK$6 million by way of bank guarantee in respect of each of the 2nd and 3rd defendants within 28 days, failing which the Mareva injunction shall lapse; costs of the application in the cause.
|
HCA1479/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1479 OF 2009 -------------------------- BETWEEN
-------------------------- Before : Deputy High Court Judge Burrell in Chambers Dates of Hearing : 3 March 2011 Date of Judgment : 10 March 2011 ----------------------- J U D G M E N T ----------------------- 1.This is an application by the 2nd and 3rd defendants for fortification of the plaintiff’s undertaking as to damages on a Mareva injunction which had been granted by order of Tong J on 25 June 2009. 2.On 25 November 2010 the 1st defendant made an identical application which was granted by Deputy High Court Judge Coleman SC. He ordered the plaintiff to provide $5 million as security by way of a bank guarantee. 3.For the purposes of this application the plaintiff has conceded that an order can be made. The only issues have therefore been the amount of the order and the form of the order. The circumstances which enable the court to make an order are, briefly stated, that the plaintiff has since June 2009, encashed his entire shareholding in “the Company” (said to be worth $3 billion) and, in July 2010, resigned as Chairman and Executive Director. Thus as he is no longer Chairman and as nothing is known of the proceeds of the sale of his shares he should provide security to fortify his undertaking as to damages. QUANTUM (a) The 2nd defendant 4.The 2nd defendant, represented by Mr Jin Pao of counsel, seeks an order of $5-$6 million. Mr Raymond Ho, counsel for the plaintiff submits that $2.5 million would be more appropriate. 5.The simple basis of the claim, as far as quantum is concerned, is that as a result of the Mareva injunction the 2nd defendant was forced to sell certain securities in order to meet a margin account call. There is no dispute about this. Had those shares not been sold and were they still owned by the 2nd defendant they would now be worth about $5 million more than they were worth at the time of sale. The stock market in Hong Kong having made significant gains since 2009. 6.It seems reasonable to me to accept this straightforward approach. Simply stated, it is likely that at the time of this application the 2nd defendant would have been about $5-$6 million better off but for the consequences of the Mareva Order. 7.I make an order of $6 million on the 2nd defendant’s application. (b) The 3rd defendant 8.The 3rd defendant, represented by Mr Gerard McCoy SC and Mr Paul Wong, is in a different situation. 9.According to his own affirmation evidence the 3rd defendant had assets of approximately $11 million at the time of the Mareva injunction. Since then, and by consent, he has spent about $6 million on legal fees and living expenses. 10.His assets at the time of the Mareva included about $9 million worth of securities. The value of those securities would now be $12 million more than in 2009. However, in July 2010 (by consent and in order to pay legal fees) he sold shares in a company called Easyknit, which in 2009 had been worth about $7 million, for about $12 million. He therefore made a $5 million profit and still holds the balance of his shareholding after the Easyknit sale. After paying his legal fees his net worth is now $7 million plus the value of his remaining shareholding. Mr McCoy estimates this to be around $11 million. This figure would seem to be about right. 11.The question is — what has he lost? In money terms it could well be argued that he has lost nothing. In fact, thanks to the Hong Kong stock market he has done very well. 12.Mr McCoy’s real submission is that the 3rd defendant, who is an experienced, successful investor in securities, has lost “many investment opportunities” as a consequence of the Mareva injunction. He estimates that had he been able to take those opportunities he would have been $15 million better off net of the profit already realized on the Easyknit shares. 13.Mr McCoy correctly submits that the court should take a “broad view” of the matter and try to “assess the risk” of what profitable opportunities have been denied him as a consequence of the injunction? 14.In the 3rd defendant’s case it is a wholly speculative exercise. He has done well already. Mr McCoy submits he would have done even better and there is a real risk that he will lose the fruits of even better lucrative investments. 15.In my judgment $6 million adequately meets that highly speculative, unquantifiable risk. Apart from anything else the 3rd defendant’s estimate depends on a continuing favourable market and virtually all decisions to buy or sell resulting in gains. There is no basis for the $15 million estimate other than rose-tinted optimism. 16.In the 3rd defendant’s case I make an order in the sum of $6 million. FORM OF ORDER 17.Coleman DHCJ ordered the fortification to be by way of bank guarantee. The alternative form of a payment into court was not argued. In this application however the defendants seek a payment in whereas the plaintiff favours a bank guarantee. 18.The defendants submit that they are entitled to know that the money exists in a real form in the hands of the court. A guarantee is subject to bank regulations, and administration and annual renewal. 19.The granting of a bank guarantee in the 1st defendant’s application has proved to be unproblematic and uncontentious. In my judgment both options are equally secure and for the sake of consistency I prefer the bank guarantee. I so order. COSTS 20.I invited submissions on costs at the conclusion of the hearing. Points were made both ways. Looking at the whole matter I think the appropriate order in this particular case is that costs be in the cause. ORDER
Mr Raymond Ho, instructed by Messrs Peter Cheung & Co., for the Plaintiff Mr Jin Pao, instructed by Messrs Tung, Ng, Tse & Heung, for the 2nd Defendant Mr Gerard McCoy SC and Mr Paul Wong, instructed by Messrs Hau, Lau, Li & Yeung, for the 3rd Defendant | |||||||||||||||||||||||||||||
Further hearings and rulings under HCA 1479/2009