Read the full judgment text of CACV 28/2014 on BabelCite. This Court of Appeal judgment was delivered on 20 May 2014 before Hon Lam VP and Kwan JA.
Civil procedure – Mareva injunction – interlocutory appeal – material non-disclosure on ex parte application – discharge of injunction – re-grant of fresh injunction in favour of different plaintiff – exercise of discretion – principles governing re-grant – duty of full and fair disclosure extending to law – constructive trust claim over shares and sale proceeds – bare trustee – penny stocks – share transfer at significant undervalue – risk of dissipation – appellate review of discretionary decisions – Hadmor Productions Ltd v Hamilton test – penal nature of non-disclosure sanction – proportionality – costs as penalty for non-disclosure. The plaintiffs, Excel Courage Holdings Limited (Excel) and Hung Ka Leung, appealed against orders of Deputy High Court Judge Mayo discharging an ex parte Mareva injunction obtained by Hung against the 1st defendant and refusing to re-grant a fresh injunction in favour of Excel, after Hung had been joined as the second plaintiff in the action. Excel was a BVI shelf company used as an investment vehicle for substantial shareholdings in two Hong Kong penny stocks, Luxey International (Holdings) Limited and China Railsmedia Corporation Limited, with the 1st defendant (an accountant) holding the sole issued share as bare trustee. The shares were transferred at a 60% discount through newly opened accounts to the 2nd to 5th defendants and rapidly sold. The Court of Appeal held that, on an appeal against the exercise of discretion, the appellate court's role is one of review and it will not disturb the judge's decision unless he misdirected himself as to the principles, took into account irrelevant matters or failed to take into account relevant matters, or his decision was plainly wrong (Hadmor Productions Ltd v Hamilton; The Abidin Daver). The principles on re-grant of injunctions discharged for material non-disclosure (The Arena Corporation Ltd v Schroeder; Re OJSC Ank Yugraneft; Sita UK Group Holdings Ltd v Serruys) require the court to weigh the culpability of non-disclosure, the significance of the matters not disclosed, the proportionality of the sanction, and the overarching interests of justice. The non-disclosure of law, in particular the proper plaintiff point, is a relevant consideration (Memory Corporation Plc v Sidhu (No 2); East Asia Satellite Television (Holdings) Ltd v New Cotai LLC), but the effect of such non-disclosure was spent once Excel was joined as a proper plaintiff. The non-disclosure of fact by Hung (including that his name was not on the declaration of trust when executed) was serious but not so egregious as to warrant penalising Excel, a separate corporate entity that was the proper plaintiff and the registered owner of the shares. The interest of justice was served by granting a fresh Mareva injunction in favour of Excel on the same terms, with the penal sanction falling on Hung through costs. As to the 2nd to 5th defendants, the court declined to re-grant or amend the injunction in favour of Excel, leaving the original injunction in Hung's favour extant pending the discharge/continuation applications in the court below. Outcome: appeal allowed in part; fresh Mareva injunction granted to Excel against the 1st defendant on the same terms as the discharged injunction; Hung to pay the 1st defendant's costs of the 4 and 10 October 2013 hearings forthwith with two-counsel certificate as the sanction for non-disclosure; costs of the 21 October hearing to be plaintiffs' costs in the action; plaintiffs to have costs of the appeal against the 1st defendant with two-counsel certificate; 2nd to 5th defendants to have their costs of the appeal in the action.
Legal issues: Refusal to re-grant fresh Mareva injunction in favour of Excel against 1st defendant after discharge for non-disclosure · Refusal to re-grant or amend Mareva injunction against 2nd to 5th defendants in favour of Excel · Costs of hearings below and appeal
Outcome: Appeal allowed in part. The judge's order refusing to re-grant a fresh Mareva injunction in favour of Excel against the 1st defendant was set aside and a fresh Mareva injunction granted. The order refusing to re-grant or amend the injunction against the 2nd to 5th defendants was not set aside, but no order was made as to that injunction pending determination of the discharge/continuation applications below.
Cited by 3 cases