Lam Ping Wan and Another v. Ip Lam on
Read the full judgment text of CACV 158/2000 on BabelCite. This Court of Appeal judgment was delivered on 13 July 2000.
1. This is an appeal from an order of Sakhrani J made on 31 March 2000. The application before Sakhrani J arose in this way. The action was commenced in August of last year. The plaintiffs claimed that the defendant was in possession of a parcel of some 30 million shares in a publicly quoted company. The plaintiffs complained that the defendant had come into possession of those shares by reason of an agreement which they had with the defendant. That agreement provided that by that time the defen
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CACV000158/2000 CACV 158/2000 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 158 OF 2000 (ON APPEAL FROM HCA 12791/1999)
---------------------- Coram: Hon Rogers JA and Ribeiro JA in Court Date of Hearing: 13 July 2000 Date of Judgment: 13 July 2000 ---------------------- J U D G M E N T ---------------------- Hon Rogers JA : 1. This is an appeal from an order of Sakhrani J made on 31 March 2000. The application before Sakhrani J arose in this way. The action was commenced in August of last year. The plaintiffs claimed that the defendant was in possession of a parcel of some 30 million shares in a publicly quoted company. The plaintiffs complained that the defendant had come into possession of those shares by reason of an agreement which they had with the defendant. That agreement provided that by that time the defendant held their shares for the plaintiffs. 2. The defendant's case, however, is that he came by the shares in some completely different way from some third party. There is no need for this court to go into the rights and wrongs of that. There was an Order 14 application and the defendant was given unconditional leave to defend. 3. In August last year, however, when the action commenced, the plaintiffs obtained a Mareva injunction to prevent the further sale of the parcel of 30 million shares, some of which had already been sold. On the return date of the inter-partes injunction application, the defendant offered an undertaking not to dispose of any more of those shares which he still retained and to keep the proceeds of sale of those shares which he had sold safe until trial. In the order as drawn up, there was no explicit cross-undertaking as to damages. There is no dispute between the parties, however, that when one party gives an undertaking of an interlocutory nature to the court, it is implied that there will be a cross-undertaking as to damages unless the matter is specifically raised. 4. I would say further, however, that it would be very rare, and I can think of no circumstances at the moment where it would happen, that an interlocutory undertaking would be given and there would be no cross-undertaking as to damages. 5. However, be that as it may, when the action first started, the shares were valued at about $1.20. There was an occasion when the value increased substantially but that appears to have been for a short period. On the strength of that, the defendant wished to be discharged from his undertaking. He made an application which came before Sakhrani J in March. It was an application at short notice, as can be imagined, because the price of this share appears to be extremely volatile. 6. The plaintiffs objected to the defendant being released from his undertaking and they filed an affirmation by Mr Lam Ping Wan. At paragraph 11, Mr Lam says, amongst other things, in relation to the financial standing of the plaintiffs that the 2nd plaintiff has a paid up capital of $12 million. He then goes on :-
7. The offer to provide security was repeated by counsel in court. There was some discussion and counsel said in specific terms "We are prepared to give it". Indeed, further on in the transcript which we have been shown, counsel said :-
8. This matter obviously must have influenced the court because not only was it contained in the evidence but it was part of the submissions and in the interchange between the court and counsel. 9. Sakhrani J came to the view that the change in the value of the shares was not a material change which brought about circumstances justifying the release of the undertaking but, in my view, he did so in the light of the offer for fortification because he went on to say :-
10. In my view, the judge had before him an application by the defendant to discharge his undertaking to retain the shares. The matter was at large before him. As part of his decision not to permit the defendant to be released from his undertaking, he took into account the offer of fortification of the plaintiffs' cross-undertaking and, in my view, he was perfectly entitled to do so and he did so for valid reasons. I see no reason to disturb that. 11. Sir John Swaine SC, on behalf of the plaintiffs, takes a further point. In the order that was drawn up not only is there the order for fortification but paragraph 3 of the order reads :-
12. The point under consideration is the question as to how the cross-undertaking should be valued. Sir John Swaine has argued that the cross-undertaking should only be effective insofar as the shares were to drop in value from the price at which the defendant was prepared to sell them last August. He may well be right about that, but that is not a matter for this court. The cross-undertaking as to damages is a cross-undertaking to indemnify the defendant and any other party, against any loss which has been caused as a result of the injunction or in this case, the undertaking, being wrongly granted or given. 13. If there is an inquiry as to damages under the cross-undertaking, it is for the court considering that to determine what the proper figure should be. It would be impossible for this court even to attempt to do so now. Sir John Swaine has argued that paragraph 3 of the order was made in circumstances where the shares were considerably higher in value than they are at present. He says that the plaintiffs would be put into severe difficulties if the value of the shares were to drop considerably and, as a result of that, they had to provide fortification for the loss in value of the 5,954,000 shares between the value as at 31 March and the value possibly at any date in the future. 14. In my view, again, this is a matter which this court cannot determine at this stage. What further, if any, fortification needs to be given would have to be decided by a judge before whom such application is made. I would, however, say that the fortification which has been ordered appears to me to be the best form of, without implying any pejorative connotation, rough and ready justice. What, in effect, has been done is that the plaintiffs have secured these 5,954,000 shares against 30 million shares which were the subject of the action and have added in a financial element of some $5 million. Whether or not that would need to be disturbed in the future is something which this court cannot judge at this time because the court has no idea as to whether the shares will rise or fall in value. I would, however, say that the judge, quite rightly ordered a speedy trial and gave directions which should have led to an early trial and it seems to me that the sooner this case comes to trial, the better. 15. For those reasons, this appeal should be dismissed. Hon Ribeiro JA : 16. I agree. I would only wish to add a few words as to the effect of paragraph 3 of the Order of Sakhrani J containing a liberty to apply, as this was a matter as to which Sir John Swaine SC, appearing for the plaintiff, expressed anxiety in the course of his submissions. 17. The concern is that this liberty to apply may be construed as attributing to the shares forming part of the security fortifying the cross-undertaking a specific price, thereby enabling the defendant to seek further fortification to ensure that the value of the fortification be maintained at such specific price. 18. I would comment in general that it is undesirable to word a liberty to apply in such terms. I note, for example, that on its face this liberty only arises if the security should substantially diminish in value because of the fall in the price of shares before trial. 19. In my view, the proper approach is governed by well-known principles on applications to vary injunctive relief which give ample discretion to the court hearing any such application. Those ought to be the principles governing. It is, in my view, undesirable that the court should appear to limit the liberty to apply or in some manner to foreshadow what might happen on a future application to vary. 20. All I would say at this stage is that these concerns are matters to be left entirely to the discretion of the court if and when an application to vary should be made.
Representation: Sir John Swaine, SC and Mr Jimmy Kwong, instructed by Messrs William Sin & So, for the 1st Plaintiff Mr Adrian Bell, instructed by Messrs Anthony Hann & Co., for the Defendant |
Cases cited in this judgment
Further hearings and rulings under CACV 158/2000