Astro Nusantara International B.V. and Others v. Pt Ayunda Prima Mitra and Others

HCCT 45/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PROCEEDINGS

NO. 45 OF 2010

____________

BETWEEN

____________

Before:  Deputy High Court Judge Lok in Chambers

Date of Hearing: 1, 4 & 6 February 2013

Dates of Decisions: 1, 4 & 6 February 2013

Date of Reasons for Decisions:7 March 2013

__________________________________

REASONS FOR DECISIONS

__________________________________

1.In the hearings on 1, 4 and 6 February 2013, I made a number of decisions in this case including:

(i)   the continuance of the ex parte on notice injunction order granted by me on 24 January 2013 subject to a qualified undertaking as to damages;

(ii)   the setting of the timetable for the garnishee to make the payment into court within 14 days as directed by the Court of Appeal in the judgment dated 10 August 2012.

2.I now give my reasons for these decisions. Before I do so, one needs to understand the rather unusual history of the present proceedings.

Background

3.The judgment creditors (collectively “Astro”) are related companies within a group of companies with the headquarter in Malaysia and the 2^nd judgment debtor, PT First Media TBK (“First Media”), is an Indonesian company listed in the Indonesian Stock Exchange.

4.The dispute between the relevant parties originated from a Subscription and Shareholders’ Agreement dated 11 March 2005.   Astro initiated arbitration proceedings in the Singapore International Arbitration Centre against the judgment debtors and obtained a number of awards in their favour (collectively “the SIAC Awards”).  The sums allegedly due from First Media under the SIAC Awards are over US$130 million.

5.Astro subsequently sought to enforce the SIAC Awards in Hong Kong, and leave to enforce was obtained pursuant to the orders of Saunders J dated 3 August and 20 September 2010 (“the Hong Kong Orders”). Judgment was entered in terms of the SIAC Awards on 9 December 2010 (“the Hong Kong Judgment”).

6.On 14 July 2011, Astro applied ex parte for a garnishee order against AcrossAsia Limited (“AAL”), which is a company incorporated in the Cayman Islands and listed in the GEM Market of the Hong Kong Stock Exchange.  First Media is an indirect 55.1% subsidiary of AAL.  There is no dispute that AAL owes a debt to First Media in the amount of US$44 million with the due date on 30 June 2012 (“the Debt”).  A garnishee order to show cause was granted on 22 July 2011.

7.On 18 January 2012, First Media made an application in this court to, inter alia:

(i)   set aside the Hong Kong Orders and Judgment and discharge the garnishee order (“the Hong Kong Setting Aside Application”); and

(ii)   adjourn the garnishee order absolute hearing pending the determination of the Hong Kong Setting Aside Application.

8.On the other hand, there are parallel proceedings in Singapore.   On about 5 August and 3 September 2010, Astro obtained orders for the enforcement of the SIAC Awards in Singapore (“the Singapore Orders”).  On 24 March 2011, judgment was entered in Singapore against the judgment debtors (“the Singapore Judgment”).

9.After obtaining leave, First Media made an application in the Singapore court on 12 September 2011 to set aside the Singapore Orders and Judgment (“the Singapore Setting Aside Application”).

10.I first dealt with this case in the hearing on 15 March 2012, in which I made 2 particular decisions.  Firstly, I made an order to stay the Hong Kong Setting Aside Application pending the result of the Singapore Setting Aside Application.  There has been no appeal against such order.  Secondly, I allowed Astro’s application and ordered AAL to pay the amount due under the Debt into the Hong Kong court pending the determination of the garnishee order absolute application (“the Subject Order”).

11.The second decision was not the focus of the hearing on 15 March 2012, and yet it was this decision that led to all the controversies that are now before the court.

12.In that hearing, Mr Barber, solicitor for AAL, filed a very simple written submission and relied on the “double jeopardy” argument to oppose the making of the Subject Order.  After hearing the submissions of the parties, I decided to exercise the discretion in ordering AAL to pay the amount of the Debt into court.

13.AAL lodged an appeal against the Subject Order. In the application for leave to appeal, Mr Sussex SC, who appeared for AAL for the first time, put forward completely new arguments and contended that this court had no jurisdiction to make the Subject Order on the ground that the situs of the Debt was in Indonesia.  I granted AAL leave to appeal against the Subject Order.

14.The appeal was heard by the Court of Appeal on 3 August 2012 (CACV 71/2012).  In the judgment handed down on 10 August 2012, the Court of Appeal affirmed the Subject Order requiring AAL to make the payment into court.

15.In rejecting AAL’s arguments about the risk of double jeopardy and that the Subject Order had the effect of circumventing, prejudicing or pre-judging the Singapore and Hong Kong Setting Aside Applications or the garnishee order absolute application, Kwan JA said the following about the nature of the Subject Order :

“The effect of the order for payment into court is merely to require the garnishee to bring into court a sum which is indisputably due, where the court is satisfied that the judgment creditor has legitimate concerns as to the ability of the garnishee to pay if and when the garnishee order is made absolute, pending the determination of the three applications aforesaid.” (at §42)

16.The Court of Appeal also recognised that this is an exceptional case which justifies ordering AAL to pay the amount due under the Debt into the Hong Kong court.  In §44 of the judgment, Kwan JA identified the exceptional circumstances as follows:

“The circumstances of the present case are exceptional, having regard to the relevant background matters set out in the earlier part of this judgment, the history of the proceedings taken out by Astro in Singapore and Hong Kong to enforce the awards, the delay of First Media in taking action in Singapore and Hong Kong to resist enforcement, the apparent connection between First Media and AAL, the very substantial credit facility extended to AAL by First Media not long after First Media applied to set aside the Singapore Judgment, the allegation of Astro that the facility agreement was an attempt to thwart the enforcement of the awards, and the legitimate concern of Astro of AAL’s ability to pay the debt in the event the garnishee order is made absolute.”

17.After affirming my decision about the Subject Order, Kwan JA observed, at §50 of the judgment, that the timetable laid down earlier had been superseded by events.  The Court of Appeal then ordered that if the parties could not agree on a new timetable, the matter be referred to me for determination.

Events after the Court of Appeal’s decision

18.Correspondence was exchanged in August 2012 between the parties in an attempt to agree the new timetable.  As the parties failed to reach agreement, the matter came back before me for an oral hearing on 17 September 2012.

19.On 14 September 2012 (just 1 working day before the hearing), AAL notified Astro, for the first time, that First Media had obtained an arbitration award against AAL in Indonesia in respect of the Debt (“the BANI Award”).  In fact, First Media made the request for arbitration on 30 August 2012, but neither First Media nor AAL informed the Hong Kong court or Astro about the arbitration proceedings (“the Arbitration Proceedings”) until the BANI Award had been made.

20.Pausing here, Astro make the following observations about the conduct of the Arbitration Proceedings in Indonesia.  The chronology of events shows that AAL and First Media were attempting to delay the setting of the timetable in the Hong Kong proceedings, whilst proceeding with extraordinary haste in Indonesia to procure the BANI Award.  The entire Arbitration Proceedings were concluded within 8 days.  As observed by the foreign law expert of Astro, such unbelievably quick time frame would not have been possible without close collaboration between AAL and First Media in order to procure an award on what was essentially an agreed position.  Further, the Arbitration Tribunal in Indonesia (“the Tribunal”) had exceeded its power by making an order, as part of the BANI Award, that AAL must make payment of the Debt in Indonesia and only to First Media.

21.There are certainly some justifications in these observations.  Up to now, neither AAL nor First Media has provided any creditable explanation as to why the Arbitration Proceedings could have been concluded in 8 days.  Further, the function of the Tribunal should have been to determine the rights and liabilities of the parties under the loan agreement giving rise to the Debt.  It was quite unnecessary for the Tribunal to make an order specifically requiring AAL to repay the Debt to First Media in Indonesia and to no one else.   In such circumstances, I have reasons to believe that the Tribunal was making the said order targeting the garnishee proceedings in the Hong Kong court.

22.On the basis of the BANI Award, AAL and First Media argued, in the hearing before me on 17 September 2012, that there was a material change of circumstances in that, among other things, the risk of double jeopardy had crystallised or was about to crystallise.  AAL also sought time to take out an application to set aside the Subject Order for payment into court on the ground of material change of circumstances.

23.In that hearing, very little information was provided to the court about what happened in Indonesia, and no evidence had been filed about the details of the Arbitration Proceedings.  In the absence of the full picture, I took the view that it was dangerous for the court to set the timetable in the hearing on 17 September 2012.  Further, AAL should be given an opportunity to adduce proper evidence before the court to make an application to set aside the Subject Order.  I therefore deferred the setting of the timetable and gave directions for the intended application to set aside the Subject Order, which I expected to hear within a short time frame.  AAL also intended to lodge an appeal against the decision of the Court of Appeal, but the parties agreed to adjourn the appeal proceedings in the meantime.

24.With the benefit of hindsight, in particular the subsequent actions taken by First Media in Indonesia, I now regret the decision for not setting the timetable on 17 September 2012.  I was under the wrong assumption that all the parties were prepared to maintain the status quo pending the final determination of the Hong Kong garnishee proceedings, which was not case as shown by the subsequent conduct of First Media in Indonesia.

25.On 24 September 2012, AAL took out 2 summonses to, inter alia, set aside the Subject Order and discharge the garnishee order nisi (“the AAL’s Applications”).

26.On 27 September 2012, I gave further directions for the filing of evidence in respect of the AAL’s Applications.  After ascertaining the estimated length of the hearing by the parties, I adjourned the garnishee order absolute hearing and the AAL’s Applications to an early date to be fixed for argument with 5 days reserved, which was subsequently fixed to be 9 September 2013 (“the September Hearing”).  I also directed that there be a further direction hearing with 3 hours reserved, with the hearing date subsequently fixed to be 11 March 2013.

27.Astro filed their evidence on 22 November 2012. The deadline for First Media and AAL to file evidence was originally 28 days after the filing of Astro’s evidence.  By consent, it was extended for 3 weeks to 10 January 2013.  AAL and First Media then wanted more time.  On 4 January 2013, I further extended the time limit to 24 January 2013.  AAL and First Media made another application for extension of time which came before me on 24 January 2013.

28.After the Court of Appeal’s decision, the Singapore court had dismissed the judgment debtors’ application to set aside the SIAC Awards.  The judgment debtors have lodged an appeal which will be heard in April 2013.  This should be the final challenge to the SIAC Awards.

29.In the meantime, something extraordinary happened in Indonesia.  First Media initiated bankruptcy proceedings (“the SOP Proceedings”) against its parent company, AAL, for failing to repay the sum due under the BANI Award.  On 15 January 2013, the Indonesian Bankruptcy Court made a Suspension for Payment order (“the SOP Order”) for, inter alia, the following:

(i)   there be a suspension of payment period (“the SOP Period”) of 45 days from 15 January 2013 which would expire on 1 March 2013;

(ii)   a supervisory judge be appointed for the SOP Proceedings; and

(iii)   administrators (“the Administrators”) be appointed for AAL.

30.The SOP application was registered with the Jakarta Commercial Court on 26 December 2012, but neither AAL nor First Media informed me about the SOP Proceedings in the hearing on 4 January 2013.

31.In order to protect their interest in view of the latest development in Indonesia, Astro, in the hearing on 24 January 2013 (which was supposed to deal with the applications for extension of time to file evidence by AAL and First Media), took out an application for the following order:

(i)   AAL do pay the amount due under the Debt into court within 7 days pursuant to the Subject Order; and

(ii)   an injunction, pending the September Hearing, to retrain AAL and First Media, whether individually or by way of any joint action, from doing any act in Indonesia or otherwise which has the purported effect of discharging the garnisheed Debt or any act to dispose or diminish the value of the garnisheed Debt, and from taking further steps in the Indonesian proceedings save with the leave of the court (“the Injunction”).

32.Astro put forward the following arguments to support the application.  The recent events in Indonesia show that First Media and AAL had acted together to frustrate or jeopardise the proceedings in the Hong Kong court by delaying the setting of the new timetable under the Subject Order and rushing through the Arbitration Proceedings in extreme haste. Further, First Media and AAL did not inform the Hong Kong court and the stock exchange regulatory authorities in Indonesia and Hong Kong about the SOP Proceedings until a very late stage.  The effect of the SOP Proceedings is that the Administrators are now appointed for AAL.  AAL is now given time to come up with a restructuring proposal, which will then be subject to the approval of the Administrators, the supervisory judge and the creditors (First Media is in substance the only creditor in the SOP Proceedings).  Should the proposal be rejected, AAL will then enter into bankruptcy.  Given the past conduct of AAL and First Media, there is a real risk that within a short time, the process will be complete and the Debt will be discharged.  Hence, in order to protect the Hong Kong process (ie the garnishee proceedings), the Hong Kong court should act swiftly by setting the new timetable and granting the Injunction to restrain AAL and First Media from taking any steps, whether in the SOP Proceedings or otherwise, which would jeopardise the Hong Kong process and the Subject Order.

33.Since there was no 2 clear days for the service of the summons, I treated Astro’s application as an ex parte on notice application.  After hearing the submissions of the legal representatives of AAL and First Media, I granted the Injunction and adjourned the application for the setting of the new timetable to the return day on 1 February 2013.

34.On the return day on 1 February 2013, Mr Chan SC appeared on behalf of AAL.  According to Mr Chan, AAL has been caught in the crossfire between Astro and First Media, and it should not be right to ask AAL to pay the Debt twice.  Further, AAL is bound by the Injunction.  If First Media does not agree to extend further the SOP Period, AAL will be declared bankrupt on 1 March 2013 which will be a death penalty for AAL.

35.I appreciate the difficulty facing AAL, but it was actually First Media, its subsidiary company, which had put its parent company in such a difficult position.  On the return day on 1 February 2013, I made a suggestion that we could perhaps leave AAL out of the picture.  AAL might be requested to pay the Debt to an overseas bank account in escrow pending the outcome of the final challenge to the SIAC Awards which would be heard in the Singapore court very shortly in April 2013.  Mr Dawes, the then counsel for First Media, saw the sense of the court’s suggestion, and he was prepared to take instructions from his client on such proposal.  The hearing was therefore adjourned to 4 February 2013 for the parties to explore such option. The Injunction was ordered to continue in the meantime.

36.In the hearing on 4 February 2013, Mr Dawes informed the court that the proposal was not acceptable to First Media.  First Media took the view that the situs of the Debt was in Indonesia and the court’s proposal would require First Media to bring assets that are otherwise outside the jurisdiction into Hong Kong or a different jurisdiction.  This would put Astro in a significantly better position than it would otherwise be in.  In my judgment, no criticism should be made against First Media for adopting such position.

37.The court therefore had to deal with a few difficult issues in the hearing on 4 February 2013.  Firstly, Mr Chan applied to bring forward the September Hearing so that the same could be heard before the deadline on 1 March 2013.  In the case that AAL is managed to discharge the garnishee order, AAL would be free to pay the Debt to First Media in Indonesia which would mean an end to the SOP Proceedings.

38.I declined such request.  Firstly, it was not possible to find any hearing dates on such an urgent basis.  The court has to deal with a number of issues in the garnishee proceedings, including ascertaining the true relationship between AAL and First Media and whether they had taken concerted action in frustrating the Hong Kong process.  The court also has to deal with various issues relating to Indonesian law.  The hearing will probably last for a few days.  In view of the intervening Chinese New Year holidays, the court diary simply could not accommodate such request.  Secondly, AAL and First Media had kept on asking extension of time to file their evidence.  In fact, the deadline for them to file evidence had been extended to 8 February 2013. If the hearing were to be heard in February 2013, Astro, through no fault of their own, simply had insufficient time to file their evidence in reply and to prepare for the hearing.  This would not be fair to Astro.  Despite such refusal, depending on what would happen in the Indonesian court, I would decide in the direction hearing on 11 March 2013 as to whether I would bring forward the September Hearing to be heard earlier, perhaps, some time in May 2013.

39.The second issue I had to deal with was whether the court should proceed to set the new timetable for payment into court.  I decided such issue in favour of Astro and ordered AAL to make the payment within 14 days.  I will explain my reasons in the latter part of this Reasons for Decisions.

40.The third issue was whether the Injunction Order should be continued and on what terms.  So far as First Media was concerned, it did not make any submission relating to the continuance of the Injunction Order.  Neither did it request Astro to provide any undertaking as to damages. Hence, I ordered the Injunction to continue against First Media until the final determination of the garnishee order absolute application.

41.Relating to the Injunction against AAL, Mr Chan’s position was that, provided that AAL would not be declared bankrupt by the Indonesian court and that AAL would not be asked to pay the Debt twice, he had no particular objection for the continuance of the Injunction.  In this regard, I have ascertained from Mr Smith SC, counsel for Astro, that Astro would entertain any reasonable request from AAL in respect of any actions to be taken by AAL in the SOP Proceedings to avoid being declared bankrupt.  Hence, there was no serious issue about the continuance of the Injunction against AAL.  The only remaining question was whether the Injunction should be continued subject to Astro’s undertaking as to damages.

42.Since there was not enough time to deal with such remaining issue on 4 February 2013, I adjourned the hearing to 6 February 2013.  Further, fully knowing that his client’s uncooperative attitude was causing all the inconvenience, concerns and anxieties to the court and the parties involved, Mr Dawes informed the court that he would go back to his client to see whether it would agree to extend the SOP Period in the Indonesian proceedings.  Such sensible action can avoid AAL from being declared bankrupt on 1 March 2013.

43.In the resumed hearing on 6 February 2013, Mr Dawes no longer represented First Media and instead it was represented by Mr Allen who was the solicitor acting for First Media.  Regrettably, Mr Allen informed the court that he had no instruction whether First Media would agree to a further extension of the SOP Period.  This was disappointing.  By that time, the only inference I could draw was that First Media wanted the money as soon as possible with the effect that the actions by it in the Indonesian proceedings would frustrate the Hong Kong process.  Although First Media, represented by a new legal team, agreed in the subsequent hearing on 21 February 2013 that it had no objection if AAL were to make an application in the Indonesian court to extend the SOP Period for 270 days, that does not disturb the view I had taken about First Media in the hearing on 6 February 2013.

44.On 6 February 2013, I ordered the Injunction be continued against AAL upon a qualified undertaking as to damages.  I will similarly explain my reasons in the latter part of this Reasons for Decisions.

The setting of the new timetable

45.I first give my reasons for setting the new timetable.  Despite all the events taken place after the Court of Appeal’s decision, I am of the view that this is a special case that I should follow strictly the direction of the Court of Appeal in ordering AAL to make the payment into court within a short period of time.

46.As I have been directed by the Court of Appeal to set the new timetable, the starting point is that I should follow the direction unless there is any good reason to contrary resulting from subsequent change of circumstances.

47.In opposing the setting of the new timetable, Mr Chan is basically relying on two lines of arguments.  Firstly, this court should not proceed to order AAL to make the payment into court in view of the new developments in the case, ie the granting of the BANI Award and the commencement of the SOP Proceedings against AAL in the Indonesian court.

48.According to Mr Chan, AAL is bound by the BANI Award to repay the Debt to First Media in Indonesia.  If the court were to order AAL to make the payment into court, AAL would have to pay the Debt twice. Further, as a result of the SOP Order, AAL’s Board of Directors, under Indonesian law, can no longer control the assets of AAL but have to manage the same jointly with the Administrators.  If the Board of Directors were to make the payment into court without the approval of the Administrators, they would be committing a criminal offence under Indonesian law.

49.These are powerful arguments.  In the normal course of events, these arguments would have been sufficient for the court not to order the garnishee to pay the garnisheed debt into court.  However, I must stress that this is an exceptional case.  The events after the Court of Appeal’s decision raise a legitimate concern that First Media and AAL had taken concerted action in Indonesia with a view to frustrate the garnishee proceedings in Hong Kong.

50.In particular, I must point out the unusual features of the Arbitration Proceedings and the SOP Proceedings in Indonesia. Firstly, the Arbitration Proceedings were concluded within a period of only 8 days.  Secondly, AAL had a very legitimate reason at least to delay the repayment of the Debt because of the garnishee order nisi issued by the Hong Kong court, and yet the Tribunal proceeded to make the BANI Award against AAL and the Indonesian court proceeded with the bankruptcy proceedings against the same.  Thirdly, it was extremely odd that the Tribunal made a specific order requiring AAL to repay the Debt to First Media in Indonesia and to no one else. Fourthly, as observed by the foreign law expert of Astro, I have serious doubt as to whether the Indonesian court has the jurisdiction to make a bankruptcy order against AAL, since it is a company incorporated in the Cayman Islands and listed in the GEM Market of the Hong Kong Stock Exchange.

51.Further, there is one special feature which distinguishes the present case from the other authorities relied on by Mr Chan, which is the peculiar relationship between the judgment debtor (First Media) and the garnishee (AAL).  Obviously, AAL is the parent company and the majority shareholder of First Media.  Although AAL has filed affidavit evidence outlining the steps that it had taken to contest the SOP Proceedings and to request First Media to conduct an EGM, AAL still failed to provide any creditable reason, at least at the stage of the hearing, as to why it could not exert control over First Media in not commencing or continuing the Arbitration Proceedings or the SOP Proceedings against AAL.  It is also most unusual that First Media has instituted bankruptcy proceedings against its own parent company, knowing full well that AAL is bound by the garnishee order nisi and that it has a legitimate reason at least to delay the repayment of the Debt.  The logical inference to be drawn from these facts is that either First Media wants to obtain the money due under the Debt as soon as possible for whatever reason, or that it has taken these actions with a view to frustrate the Hong Kong process.

52.Under these unusual circumstances, should the Hong Kong court just give up the enforcement of the Subject Order and let the SOP Proceedings to take their course?  In my judgment, the answer is clearly no, otherwise the Hong Kong court is just allowing First Media to frustrate its process.  In fact, the Court of Appeal had acknowledged the unusual circumstances of this case in affirming the Subject Order made by me earlier (see: §44 of the judgment), and the learned judges there confirmed that the effect of such order is not to discharge the Debt owed by AAL to First Media, but rather to require AAL to bring into court a sum which is indisputably due, where the court is satisfied that Astro has legitimate concerns as to the ability of the garnishee to pay if and when the garnishee order is made absolute.  There is nothing more to such order.  Further, there is more justification to support Astro’s concerns in view of the recent events in Indonesia, which reinforces that the court should act swiftly in protecting its process.

53.AAL has along protested its innocence.  I agree that whether AAL has taken part in the action in frustrating the Hong Kong process is a matter which should be properly investigated in the September Hearing. Despite that, if AAL had complied with the Subject Order I made earlier without any delay, it would not have to face the difficulty today.

54.AAL claims that the Board of Directors cannot just make the payment into court without first obtaining the approval of the Administrators.  Whilst the court may not expect the directors to commit a criminal offence in Indonesia, in the case of any non-compliance with the Subject Order, the Board of Directors and the Administrators owe a duty to the Hong Kong court to give an explanation as to why they do not comply with the timetable in making the payment into court.  Without setting the new timetable, AAL can just simply ignore the Subject Order thereby frustrating the object as to why such order should have been made in the first place.

55.The second line of argument is that there has been no material change of circumstances since I made the decision not to set the timetable on 17 September 2012.  According to Mr Chan, even based on Astro’s own case, the garnishee order nisi dated 22 July 2011 has created an equitable charge over the Debt in favour of Astro.  If Astro succeed at the end of the garnishee proceedings, they would be regarded as secured creditors of AAL as from 22 July onwards.  Further, based on Astro’s own evidence, a composition plan agreed by First Media and AAL (if any) in the SOP Proceedings would not bind any secured creditors who do not approve the composition plan. In such circumstances, either in the case that First Media and AAL reach a composition plan thereby avoiding AAL being declared bankrupt or that AAL is declared bankrupt without a composition plan, the interest of Astro would not be affected.  Since there has been no material change of circumstances regarding Astro’s interest in the garnisheed Debt, Mr Chan submits that the court should not proceed to set the timetable now.

56.In my judgment, such challenge is misconceived because AAL misunderstands the nature of the order I made on 17 September 2012.  In that hearing, I did not refuse to set the timetable.  If I had done so, I would have been acting contrary to the direction of the Court of Appeal. What I had done was only to defer the setting of the timetable so that the court could find out more about what happened in Indonesia.  Now that the court has the full picture, there is nothing to prevent the court from fixing the timetable pursuant to the direction of the Court of Appeal.

57.In the case that material change of circumstances is a prerequisite to the court’s re-exercise of the power to set the timetable, which I do not accept it to be the case, I also find that there was indeed such material change of circumstances.

58.As mentioned above, the rationale for the Subject Order is that the court is ordering AAL, as custodian of the funds attached, to pay the funds into court pending the resolution of the garnishee order absolute application.  The exceptional circumstances justifying the making of the Subject Order are also listed out in §44 of the judgment of the Court of Appeal.  The concerns already engendered by these exceptional circumstances can only have been increased by the subsequent conduct of First Media and AAL in Indonesia.  In the earlier part of this Reasons for Decisions, I have already set out the unusual features of the Arbitration Proceedings and the SOP Proceedings in Indonesia.  Further, whilst stalling attempts to agree on a new timetable for payment into court and requesting extension of time to file evidence, First Media pursued the SOP Proceedings in the Indonesian court in extreme haste.  In the meantime, First Media and AAL had not been frank in their explanations to the court in Hong Kong as to their conduct and what happened in Indonesia.  Equally, AAL had not given full, frank and prompt disclosure to the Hong Kong Stock Exchange about the SOP Proceedings.  In my judgment, these recent events only amplify the legitimate concerns already identified in the judgment of the Court of Appeal, and they obviously amount to material change of circumstances justifying the setting of the new timetable.

59.It is also extremely unlikely that Astro’s interest is adequately protected by the garnishee order nisi as alleged by Mr Chan.  If that is the case, there is simply no point for First Media to proceed with the Arbitration Proceedings and the SOP Proceedings in Indonesia with such urgency, since such actions should not be able to disturb Astro’s interest in the garnisheed Debt as alleged by Mr Chan.  There is also no credible explanation as to why First Media had to take the drastic action in bankrupting its own parent company.  As I see it, the whole purpose of these actions is to frustrate the Hong Kong process.  Although the court cannot make a final determination as to whether AAL was involved in the scheme, that was certainly the intention of First Media.  Hence, these events amount to material change of circumstances.

60.Based on the aforesaid analysis, no matter how one approaches the issue, the court should now proceed to set the new timetable without any delay.  This was what I did in the hearing on 4 February 2013.

The qualified undertaking as to damages

61.I also ordered the Injunction be continued against AAL upon Astro’s qualified undertaking as to damages, which exempts Astro from paying any damages to AAL if the court is of the view that there has been concerted action between AAL and First Media and/or AAL was in a position to influence First media, or vice versa, in relation to the Arbitration Proceedings and/or the SOP Proceedings in the Indonesian court.

62.Mr Smith submits that no undertaking should be required for the Injunction.  Firstly, the Injunction is not granted on American Cyanamid principles, and its nature is only to protect its own judicial process in Hong Kong.  Secondly, the Subject Order requiring the payment into court does not carry with it any undertaking as to damages.  The Injunction is merely an additional measure designed to protect the Hong Kong judicial process and similarly no undertaking should be required.  Thirdly, relying on dicta of Kekewich J in Fenner v Wilson [1893] 2 Ch 656, no undertaking should be required because the effect of the Injunction is final in nature.  The Injunction Order would not leave anything for the court to consider in the future and the object of the Injunction is only to protect the integrity of the judicial process pending the determination of the garnishee order absolute application.  Fourthly, the court should not exercise such discretion in favour of AAL.  Relying on the case of Kanesmatsu-Gosho (HK) Ltd v Lee Boon-chean [1986] HKLR 59, the court should not require Astro to give undertaking because AAL and First Media had colluded to bring this on themselves by their underhand conduct, and given such unconscionable conduct, there is a real risk that artificial damage may be invented so as to mount a false claim under the undertaking.

63.Despite the able submission of Mr Smith, I am of the view that a qualified undertaking should still be required.  AAL is only a garnishee in the proceedings, and it has to face the risk of being declared bankrupt simply because of the enforcement action taken by Astro against the judgment debtors.  The effect of the Injunction would prevent AAL from taking any steps in the SOP Proceedings to defend itself.  If AAL is “innocent” as claimed by Mr Chan, there is no reason why it should not be indemnified in respect of the losses suffered by it as a result of the Injunction and the enforcement action.

64.The main complaint of Astro is that AAL and First Media had taken concerted action to frustrate the Hong Kong garnishee proceedings.  Further, AAL, being the parent company and the majority shareholder of First Media, should have been able to direct First Media not to proceed with the Arbitration Proceedings and the SOP Proceedings against AAL. In fact, AAL is bound by the garnishee order nisi and it should therefore have a very legitimate reason for not repaying the Debt immediately. If the court requires Astro to provide the undertaking, there is a real risk that AAL and First Media may conspire together to fabricate a false claim for damages against Astro.

65.Although there are some justifications to support Mr Smith’s concerns, the court is not able to make a final determination on the validity of these complaints.  On the day of the hearing (ie 6 February 2013), AAL had yet filed all the evidence in answer to Astro’s complaints, and so the court needs to resolve these issues in the garnishee order absolute hearing. That is why the Injunction is not final in nature, and the court will still have to investigate Astro’s complaints at a later stage of the proceedings.

66.However, I agree with Mr Smith that, in the case of the discharge of the Injunction, it would be unconscionable to ask Astro to pay damages to AAL if the evidence shows that AAL and First Media had taken concerted action in the Arbitration Proceedings and the SOP Proceedings with a view to frustrate the Hong Kong process, or that AAL was in position to influence First Media in these proceedings and yet AAL just sat there without doing anything.  That is the reason for the qualification in the undertaking.  If AAL later seeks to enforce the undertaking, the court can refuse to do so if Astro can establish any of the unconscionable conduct on the part of AAL as stated in the qualified undertaking.  In my judgment, this would offer adequate protection to Astro and the risk of Astro in facing an inflated and fabricated claim for damages against it can be reduced to a minimum.  Hence, I ordered the Injunction be continued subject to the qualified undertaking as to damages.

67.These are the reasons for the decisions I made in the hearings on 1, 4 and 6 February 2013.

Mr Clifford Smith SC, instructed by Clifford Chance, for the judgment creditors

Mr Victor Dawes, instructed by Sidley Austin, for the 2^nd judgment debtor (in the hearings on 1 & 4 February 2013)

Mr Charles Allen, of Sidley Austin, for the 2^nd judgment debtor (in the hearing on 6 February 2013)

Mr Warren Chan SC and Mr Liu Man Kin, instructed by Reed Smith Richards Butler, for the garnishee