COMPANIA SUD AMERICANA DE VAPORES S.A. v. HIN PRO INTERNATIONAL LOGISTICS LTD

HCMP 1449/2014

MISCELLANEOUS PROCEEDINGS NO1449 OF 2014

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D E C I S I O N
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1.  On 12 January 2016, I commented on the way in which the plaintiff’s application for leave to file a further affirmation was dealt with on both sides. In particular, I was not satisfied that it was necessary to prepare a draft affirmation (“draft affirmation”) in anticipation of the grant of leave to the plaintiff. I ordered, amongst others, solicitors for the plaintiff (“SH”) to show cause as to why they should not bear costs of that draft affirmation.

2.  SH had appeared on 18 January 2016 and had lodged written submission with supporting documents to show costs.  They explained:

(a) why they prepared the draft affirmation;

(b) why they briefed counsel to appear on 12 January 2016; and

(c) that the costs statement in fact overstated counsel’s fees by $60,000.

3.  With regard to (a), from the correspondence submitted by SH, it could be seen that SH acted on the advice of leading and junior counsel who in turn relied on some past experience in a similar situation before deciding to prepare the draft affirmation.  SH apparently has informed their clients of counsel’s advice.  The draft affirmation went into some length, one of the reasons being that this case had gone through the hands of six judges just at the interlocutory stage. 

4.  Taking all circumstances into account, SH has satisfied me that it has not acted in an improper or unreasonable manner or had other misconduct or default within the meaning of section 52A (6) of the High Court Ordinance, Cap 4.

5.  With regard to (b), Hin-Pro/Soar had indicated in correspondence that they would be represented by counsel.  Although that did not in itself justify the engagement of counsel on a party and party basis in view of the nature of the application, however, this case had been handled by counsel all along.  It was not an entirely unreasonable decision for a junior counsel to be engaged to handle the hearing especially since she had settled the affirmation.

6.  Further, Hin‑Pro or Soars’s position had been obscure in purporting to open up new issues in their affirmation in reply and in purporting to rely on unidentified affirmations previously filed. 

7.  There was justification in engaging counsel from the client’s angle.  The privileged correspondence between SH and counsel show that SH took cautious and not unreasonable steps in consulting counsel and keeping the client informed with reasons before taking the steps as they did under the summons.  SH has satisfied me that it had not acted in an improper or unreasonable manner, or had other misconduct or default within the meaning of section 52A(6) of the High Court Ordinance.

8.  I am more concerned with item (c).  It was a serious matter to overstate the fees of counsel (and in fact of solicitors as well) as a matter of principle in a costs statement, because it might be seen as an attempt to mislead the court and the paying party.  It was a matter that prima facie would have justified disciplinary sanction. 

9.  What happened was that counsel agreed to a brief fee for appearing on 12 January inclusive of drafting the supporting affirmation (“Part 1 Fees”).  Fees for settling the draft affirmation (“Part 2 Fees”) were negotiated separately, and counsel quoted a fee range.  SH agreed and so did the plaintiff client.  The Part 1 brief was delivered to counsel.  The handling solicitor’s experience was that counsel would issue a fee note after the hearing for Part 1 and Part 2 fees, a notion which I would not regard as unreasonable.

10.  When preparing the costs statement, SH chose a median figure from the range of fees quoted by counsel for Part 2 fees.  The costs statement was approved by the plaintiff client.  SH now accept that they should not have assumed that counsel would have charged her full Part 2 fees.  They claimed that it was not their intention to mislead the court and apologised for their mistake.

11.  It was a serious matter, in my view.  This was particularly so when counsel was present when the costs statement was handed up.  There was nothing to stop SH from confirming the fees with counsel.  If there had not been an issue of wasted costs, the overstatement of counsel’s fees in the costs statement would not have been discovered. 

12.  However, SH had properly brought the matter to this court’s attention on their volition despite the court having already made an order for party and party costs. 

13.  Having regard to the correspondence between SH and counsel, I am satisfied that SH had no intention of misleading the court.  I am not minded to refer this matter for disciplinary action.  The overstatement of counsel’s fees in fact had no impact on the order of party and party costs as I have disallowed the bulk of the costs for the reasons given extempore on 12 January 2016, save for a sum of $4,000.

14.  In summary, I do not see the need to impose a wasted costs order on SH, but I take this opportunity to remind practitioners to be vigilant in preparing costs statements.  Overstating the amount in a costs statement undermines the integrity of the summary assessment system.  It has to be noted that the indemnity principle, ie, that a receiving party cannot recover a sum in excess of their liability to their own solicitors apply equally to summary assessment as for taxation.

15.  But for the fact that I am satisfied with the explanation of SH, which was supported by contemporaneous documents, the matter would have been referred to the Law Society for investigation.

HCMP 1449/2014

MISCELLANEOUS PROCEEDINGS NO1449 OF 2014

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D E C I S I O N
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1.  The defendant applied to strike out the originating summons of the plaintiff on the grounds that it was an abuse of the court process and otherwise unarguable in the light of judgment dated 18 December 2014 and 11 March 2015 in CACV 243/2014.

2.  The defendant indicated through its counsel that the defendant would not rely on affidavit evidence except for the two judgments referred to. Today’s summons is taken out by the plaintiff for leave to file and serve a further round of affidavit in reply to the affidavit of Ho Hoi-fai filed on behalf of the defendant.

3.  It is said that the defendant is changing its stance in seeking to adduce new evidence when its original stance was that no evidence will be filed.  Today through counsel Mr Chu, the defendant has sought to withdraw this affirmation of Mr Ho.

The Plaintiff seeks costs

4.  The defendant’s solicitors in correspondence did not take the correct stance and hence the plaintiff had to take out the present summons. The defendant’s solicitors were not aware that the affidavit of Mr Ho in fact sought through paragraph 3 to rely on various affirmations including affirmations that have not been identified. 

5.  As a matter of principle, the plaintiff should be entitled to their costs.  However, the plaintiff produced a bill of $196,000 which, in this court’s view, was totally ridiculous. 

6.  The affidavit evidence filed in support of today’s summons really made a mountain out of a molehill.  The 6^th affidavit of Quek, filed on behalf of the plaintiff, spent paragraphs repeating background information that had been set out in various court judgments.  There was nothing of substance except to say that the defendant was going to purportedly change their stance and that there was no evidence in support of the abuse of process ground.  What probably was new was a reference to an English Court of Appeal judgment and the plaintiff reserved the right to adduce further evidence.

7.  The defendant’s affidavit of Mr Ho, as I said, suggested relying on various affidavit evidence.  The rest is all legal submission.  Paragraphs 6 to 8 of that affirmation purported to put in new evidence.  The affidavit evidence of Mr Green in support of the present summons once again set out the background of the case which can be found in various court judgments.  The purpose of this affidavit is simply to point out that the defendant purports to change their stance in seeking to rely on new evidence.  The 8^th affirmation of Mr Shea of the defendant in reply recited the Court of Appeal’s judgment, made arguments and some comments on the Affidavit of Quek.

8.  I set out in some detail the information of these affidavit evidence just to show the ridiculous manner in which litigation is conducted on both sides.  The plaintiff then seeks this huge cost of $196,000.  In my view, the present application is worth only a 3-minute hearing, although it has to be before a judge. 

9.  To reflect the court’s disapproval, I am not going to award the level of costs anything near to the level of costs now sought by the plaintiff.  There is no reason for either side to prepare such lengthy affirmation for this application.  There was also no reason for the plaintiff to prepare that draft affidavit evidence in anticipation of an order under the summons.

10.  For today’s purpose, I order the defendant to pay the plaintiff’s costs in the sum of $4,000.  The affidavit of Mr Ho is expunged from the court file.

HCMP 1449/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO1449 OF 2014

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D E C I S I O N

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1.  This is the application of the defendant and Soar to strike out the originating summons on the ground it is an abuse of court process and/or otherwise unarguable in view of 2 Court of Appeal’s decisions (“the CA decisions”).

Background

2.  The originating summons seeks only one head of relief – Mareva injunction in aid of the plaintiff’s English proceedings, wherein the plaintiff seeks to enforce an alleged exclusive jurisdiction clause by anti-suit injunction and ancillary orders.

3.  The plaintiff obtained interlocutory injunction and receivership orders but they were discharged by DHCJ Wilson Chan. 

4.  The first CA decision dated 18 December 2014 refused to grant a stay to the plaintiff of the order of discharge. 

5.  The second CA decision dated 11 March 2015 dismissed the appeal against the order of discharge primarily on the ground of judicial conflict. It was held, amongst others, that an English anti-suit injunction in respect of legal proceedings in another jurisdiction cannot be enforced in Hong Kong.  The plaintiff sought a Mareva injunction (and receivership order based on it) to protect its claim for reflective damages based upon the exclusive jurisdiction clause in the bills of lading in favour of English court.  Damages were sought to reverse the effect of whatever judgments which might be issued by the courts in the PRC instead of an investigation of the underlying claims on the bills of lading (which the English proceedings were not concerned with).  Given the rationale behind the principle of international comity, there was no justification for the court to proceed on the basis that, as between PRC law and English law, whichever regime yielding a result closer to one prescribed by the application of Hong Kong law should prevail.  (§§49-51, 57, 61 of the second CA decision)

6.  Effectively, the defendant and Soar are now suggesting that since the originating summons asks for the same relief as the interlocutory injunction/receivership orders, upon dismissal of the interlocutory orders, the originating summons should also be dismissed. 

7.  The plaintiff opposes the application. It brings to this court's attention the fact that there is a pending application for leave to appeal against the second CA decision (“the leave application”).  As directed by the Court of Appeal, the last day for filing written submission for the leave application shall expire today.  The plaintiff suggested adjourning the present summons until after disposal of the leave application, otherwise this court will be pre-empting the Court of Appeal’s determination in the leave application.

8.  Mr Barlow SC, counsel for the defendant and Soar, objects.  He submits that this court has no power to grant what was in effect a stay of proceedings in favour of the plaintiff when the stay had been refused.

Decision

9.  I remind myself that this is not an application to dispose of the originating summons substantively or the plaintiff’s application for a stay. It is a summons for striking it out.  It is a serious application.

10.  Although the Court of Appeal set aside the interlocutory injunction and receivership order, it did not deal with the merits of the originating summons. 

11.  The defendant suggested that this court should make the strike-out order now, sealing the order only after determination of the plaintiff’s leave application.  This is unorthodox.  An order takes effect on the date of its pronouncement unless there is good reason to postpone its sealing.  No good reason has been shown.

12.  Nor has it been shown what urgency there is in making an order for striking out now, if that be appropriate.  It will cause unnecessary procedural complications, as it may bar the leave application from being further considered in the next few days.  If an appeal goes to the Court of Final Appeal, there may be consequential reversal of decisions. 

13.  I see no reason why the plaintiff should be shut out from that opportunity of defending its claim when facing the potentially serious consequence of a strike-out and dismissal of the action.  In my view, there is no prejudice to anyone if this summons were to wait till after disposal of the leave application of the Court of Appeal in the near future.

14.  I therefore adjourn the summons for argument and direct the filing of affidavits in opposition within 7 days after the CA shall hand down its reasons for the leave application.  The defendant will have 7 days thereafter to respond by affidavit.  Costs are reserved.

15.  I thank counsel for their assistance.

HCMP 1449/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1449 OF 2014

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D E C I S I O N

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Introduction

1. This is the plaintiff’s summons for an order that:

(1)  The receivers be allowed remuneration, costs and expenses (collectively “the receivers’ remuneration”) from the assets of the defendant (“Hin-Pro”) and/or Soar International Logistics Limited (“Soar”); and

(2)  That there be a declaration that the receivers are entitled to a lien over the assets of Hin-Pro/Soar.

Background

2. From 16 June to 30 July 2014, Deputy High Court Judge Saunders made a series of orders on the application of the plaintiff against each of Hin-Pro and Soar (referred to below as “the HK Mareva Orders” and “the HK Receivership Orders” respectively).  Those orders were granted in support of foreign proceedings and a world-wide freezing order in England, pursuant to section 21M of the High Court Ordinance, Cap 4.

3. Those foreign proceedings related to Hin-Pro’s alleged breach of an exclusive jurisdiction clause in the bills of lading issued by the plaintiff which required the contractual dispute between them to be litigated in England.  The plaintiff has obtained an interim anti-suit injunction from the English court.

4. Notwithstanding the exclusive jurisdiction clause, Hin-Pro issued 75 actions in the PRC against the plaintiff.  The plaintiff had contested the jurisdiction of the PRC courts by reference to the exclusive jurisdiction clause.  The PRC courts applied PRC law in rejecting the challenge and some actions proceeded to trial.  The plaintiff is taking steps to appeal against those judgments.

5. On 15 October 2014, Deputy High Court Judge Wilson Chan (“DHCJ Chan”) discharged the HK Mareva Orders and HK Receivership Orders, primarily on the ground of judicial conflict.  His decision was upheld by the Court of Appeal by its judgment dated 11 March 2015.

6. On 8 April 2015, the plaintiff applied for leave to appeal to the Court of Final Appeal.

7. The English Court of Appeal has recently upheld the validity of the exclusive jurisdiction clause by its judgment dated 23 April 2015, which the plaintiff says will increase its prospects of success in the Court of Final Appeal.

8. The HK Receivership Orders did not expressly provide for the receivers’ remuneration.  However, the plaintiff has provided indemnities to the receivers for their work after their appointment.

9. There is no dispute that the receivers are entitled to remuneration.  The only question is who should pay.

10. The plaintiff (applicant for the now defunct Receivership Orders) asks that the receivers’ remuneration be borne out of the assets of Hin-Pro/Soar.

11. Hin-Pro/Soar rely on the matters in paragraph 8 above.  They contend that there is no jurisdiction for the court to require a party to pay the costs of receivers at an interlocutory stage.  The plaintiff, having failed in securing the HK Receivership Orders, cannot ask the defendant to foot the bill of the now defunct receivers.  The plaintiff is engaging in satellite litigation, causing as much damage as possible to Hin-Pro/Soar, commencing proceedings after the receivership order is discharged.

12. The receivers have, on their own volition, appeared to make representation and support the plaintiff’s summons.  As they ought to maintain a neutral stance and in any case, will receive remuneration one way or the other, I have declined to hear them.

B.  Legal principles

13. A receiver appointed by the court is entitled, in respect of his remuneration, to an indemnity out of and a lien over the assets that are subject to the receivership: Mellor v Mellor & ors [1992] 1 WLR 517, at 526B-E; Kerr & Hunter on Receivers and Administrators (19^th ed) at §10-8.

14. The indemnity exists regardless of whether the order for the receivers’ appointment was rightly made or the receivership proved beneficial. Absent any evidence that the receiver was in some way complicit in the non-disclosure or other impropriety on behalf of the applicant in obtaining the order, the receiver is entitled to act and be remunerated for acting on the footing that his appointment is valid: Mellor, at 525C-D, F-G.

15. A receiver takes on heavy responsibilities when he accepts appointment, and he is entitled to the security of knowing that the terms of his appointment will not be changed retrospectively – even if an appellate court later decides that the receivership should have been terminated at an earlier date: Capewell v Revenue and Customs Commissioner and anor [2007] 1 WLR 386, at 396B-C.

16. Where the order appointing the receiver was silent on his remuneration, this does not amount to a decision that he is to have no remuneration, even though he be a trustee, who as a general rule receives no remuneration: Kerr and Hunter on Receivers and Administrators (19 ed) at §10-4.

17. The receiver may insist, as a condition of accepting appointment, that the person seeking his appointment or someone else be personally responsible for his remuneration and indemnify him. In default of some such agreement, the receiver can only look to the assets the subject of the receivership.  Lightman & Moss, The Law of Administrators and Receiver of Companies (2011 ed) paragraph 29-017; Mellor, at 526F.

18. As for the receiver’s lien, it covers not only assets in his actual possession but all assets bound by the receivership.  His right does not terminate on discharge of the receivership, nor on the return or delivery of assets to the parties entitled to them: Kerr & Hunter on Receivers and Administrators(19^th ed) at §10-8; Mellor, at 527D-G.

19. The court has power under Order 30, rule 3 to determine the receivers’ remuneration:

“A person appointed receiver shall be allowed such proper remuneration, if any, as may be authorized by the Court and the Court may direct that such remuneration shall be fixed by reference to such scales or rates of professional charges as it thinks fit.”

20. This rule makes it clear that the receiver appointed by the court is entitled to remuneration but the court retains control over the quantum or remuneration.  That control extends to disallowing claims to remuneration where they have arisen from the improper or misguided actions by the receiver in the purported discharge of the duties of his office and to moderating such claims where they are judged to be excessive in amount.  Mellor, at 524F-G.

21. The court has no jurisdiction by interlocutory order to order any of the parties to the relevant litigation personally to provide the receivers’ remuneration.  This is because a receiver is not the agent or trustee of the parties. They cannot control him. He may incur expenses or liabilities without their having a say in the matter. It would be extreme hardship in most cases to parties to an action if they were to be held personally liable for expenses incurred by receivers over which they have no control.  See Mellor, at 526C-E, following Evans v Clayhope Properties Ltd[1998] 1 WLR 358 at 362B-F (CA).

22. Mr Chu, counsel for Hin-Pro/Soar, submits that the court has power to order which party to bear the costs.  He refers to CPR r.69.7 which provides, amongst others:

“(1) A receiver may only charge for his services if the court – (a) so directs; and (b) specifies the basis on which the receiver is to be remunerated.

(2)  The court may specify – (a) who is to be responsible for paying the receiver; and (b) the fund or property from which the receivers is to recover his remuneration.”

23. In Glatt v Sinclair [2013] 1 WLR 3602 (CA) it was held that:

“47. It is to be repeated that the person against whose assets the original receivership order was made is not without remedy. He has proper protection. A receiver who has been discharged can only recover remuneration, expenses and disbursements if the court approves them. (Directions in advance can also be sought from the court where appropriate.) If they are unnecessarily or unreasonably incurred, are disproportionate or unreasonable in amount, or do not properly relate to the receivership or the concluding of the administration of the receivership affairs, the court has ample powers to disallow them. …

50.  I add, for the avoidance of doubt, that so far as litigation costs incurred in connection with the receivership, before or after discharge, are concerned, these will normally be subject to the order of the courts made at the relevant times in the litigation itself, and the appropriate order is a matter for the court’s discretion.”

24. Lord Walker held that it was wrong to suppose that CPR r.69.7 had made (or could have made) a fundamental change in the general law of receivership: Capewell v Revenue and Customs Commissioners, at §27.

25. It is not necessary to decide if CPR r.69.7 can apply to Hong Kong by analogy if it has not changed the law of receivership.  Even if it can, I do not consider that the court’s power to order a party to bear the costs of the receivership should be exercised at an interlocutory stage.

Application of the legal principles

26. The court has power after discharge of a receivership order to give directions on payment of the receivers’ remuneration, eg as in Mellor.

27. However, Mr Ah-Weng, counsel for the plaintiff, is unable to point to any authority whereby the plaintiff, as opposed to the receivers, can apply for the types of order now sought.  In Mellor, it was the receiver who obtained leave to intervene and applied on his own motion for his remuneration to be determined by the court. 

28. The HK Receivership Orders were made in an interlocutory stage on inter parte basis.  The court has no jurisdiction, before the issues in this action have been determined, to make an interim order requiring the defendant (a party) to pay the remuneration of the receivers. See paragraph 21 above. Soar is not even a party in this case against whom an order can be made; it has only been served with the summons.

29. The receivers have indemnities from the plaintiff to which they can resort: paragraph 17 above.  Clause 2.1 of the indemnities provides, “No claim may be made under the indemnity contained in clause 1 above unless [the receivers] first seek to satisfy any claim hereunder out of the assets of the company.”  If the receivers need to, they can apply to the court for directions.  It is not for the plaintiff to apply on their behalf, especially since the HK Receivership Orders have been discharged.

30. If the court does have jurisdiction to make the orders sought, this court will decline making them.  The plaintiff was the party applying for the HK Receivership Orders in the first place but those Orders have been discharged.  The scope of those Orders was criticized as much wider than the plaintiff could have sought under section 21M of the High Court Ordinance (paragraph 70 of Court of Appeal’s judgment in CACV 243/2014).  There is no reason why Hin-Pro/Soar should pay for the receivers’ remuneration.

31. Mr Ah-Weng submits that if this court were to make the orders sought now, Hin-Pro/Soar could, in turn, sue the plaintiff pursuant to the cross-undertaking as to damages (“the cross-undertaking”) under the HK Mareva Orders or HK Receivership Orders.

32. I doubt it.  The present summons is one between the plaintiff and Hin-Pro/Soar.  Once the court decides, eg that Hin-Pro/Soar is to bear the receivers’ remuneration, there is a risk that it may operate as res judicata when Hin-Pro/Soar come to exercise their rights under the cross-undertaking.

33. In summary, this court has no jurisdiction at this interlocutory stage to order a party to personally provide the receivers’ remuneration.  It is not for the plaintiff to apply on behalf of the receivers.  An order against Hin-Pro/Soar now may operate as res judicata when they exercise their rights under the cross-undertaking in future.  I therefore dismiss the plaintiff’s summons.

Costs

34. The receivers should not be entitled to recover costs under this summons from the assets subject to the receivership as their attendance was not required.  They could not recover costs from Hin-Pro/Soar who had not sent their skeleton submission to the receivers.  The plaintiff had served the summons and a copy of the defendant’s skeleton submission on the receivers, but it remained the receivers’ own decision whether to respond to the summons.

35. I do accept, however, that the receivers’ submission was not much different to the plaintiff’s.  There would have been little difference to the submission made by Hin-Pro/Soar if the receivers’ had not attended.  I therefore make no order as to costs as between the receivers and Hin-Pro/Soar.

36. On a nisi basis, costs should follow the event and be paid by the plaintiff to Hin-Pro/Soar, summarily assessed at $120,000.

HCMP 1449/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1449 OF 2014

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D E C I S I O N

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1.  I am satisfied that the plaintiff’s proposed grounds of appeal (i) set out in the draft Notice of Appeal annexed to the summons dated 20 October 2014 and (ii) in terms of paragraph 12 of Counsel for the plaintiff’s skeleton dated 21 November 2014 are reasonably arguable and not fanciful, and that the Court of Appeal should have the opportunity to review my decision dated 15 October 2014 (“my Decision”).

2.  In this regard, I take into account in particular:-

(1) the decision of the Court of Appeal in Compania Sud Americana de Vapores S.A. v Hin‑Pro International Logistics Limited, HCMP 1932/2014 (Judgment dated 16 October 2014), in particular paragraph 11 thereof, referred to at paragraph 18 of the draft Notice of Appeal; and

(2) the material change of circumstances referred to in paragraphs 21 to 23 of the draft Notice of Appeal. In particular, the fact that there is currently an English final monetary judgment immediately enforceable against the defendant and its assets frozen in Hong Kong.

3.  Accordingly, I make an order in terms of the plaintiff’s summons dated 20 October 2014.

4.  However, I am not satisfied that the implementation of my order dated 15 October 2014 should be further stayed until the determination of the plaintiff’s appeal.

5.  The plaintiff’s stay application is made on the basis that the appeal will be rendered nugatory if no stay is granted.  This brings into focus the relative prejudice that may be caused to the plaintiff and to the defendant by a stay of execution [see: Star Play Development Limited v Bess Fashion Management Co. Ltd., HCA 4726/2001 (Decision dated 28 May 2002)].

6.  In this case, I think the plaintiff’s position can be sufficiently protected (and the appeal not rendered nugatory) if (i) the defendant undertakes to pay into court the sum of HK$2,916,522.80 presently standing to the credit of its bank account, to abide with further order of the court; and (ii) upon the undertaking of the defendant recited in paragraph 45 of my Decision.  For the reasons stated in paragraphs 41 to 44 of my Decision, I think that is the course which seems likely to cause the least irremediable prejudice to one party or the other.

7.  Therefore, on the undertakings stated above, my interim stay granted on 24 October 2014 is discharged.

8.  Finally, on the defendant’s application, I clarify that the order of Deputy High Court Judge Saunders dated 21 July 2014 fixing the costs ordered within the 17 July 2014 Hin‑Pro Receivership Order is also discharged by my order of 15 October 2014.

9.  I shall now hear from Mr Scott SC as to his application for a short interim stay so as to “hold the fort” until a renewed application is made to the Court of Appeal for a stay of execution. 

[Discussion between Court and Counsel]

10.  Upon the plaintiff’s undertaking, if so advised, to apply to the Court of Appeal for a stay of the implementation of my order of 15 October 2014 and of this order, it is ordered that the implementation of the order referred to in paragraph 7 above be stayed for 21 days to permit the plaintiff to make the said application to the Court of Appeal.

11.  I am not prepared to give any further direction to the receivers at this stage.

12.  There be liberty to the parties to apply. 

[Discussion between Court and Counsel]

13.  Costs of the plaintiff’s Amended Summons dated 17 October 2014 and paragraph 2 of the defendant’s Summons dated 29 October 2014 be paid by the plaintiff to the defendant in any event.  Such costs to be taxed if not agreed (with Certificate for two counsel for today’s hearing). 

14.  Paragraphs 1, 3 and 4 of the defendant’s Summons dated 29 October 2014 and the plaintiff’s Summons dated 27 August 2014 be adjourned sine die, with liberty to restore (if necessary) after determination of the plaintiff’s appeal against my decision dated 15 October 2014.

Mr John Scott, SC, leading Mr John Hui, instructed by Stephenson Harwood, for the plaintiff

Mr Barrie Barlow, SC, leading Mr George Chu, instructed by Damien Shea & Co, for the defendant

Gall, for the Receivers, attendance excused

HCMP 1449/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO1449 OF 2014

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D E C I S I O N

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1.  I am going to dismiss the summons before me today. These are my short reasons. For the background of the case, I have read the judgment of the Deputy Judge Saunders dated 17 July 2014 concerning appointment of receivers for the defendant and the decision of 18 July 2014 concerning the freezing of assets of Soar. I have also considered the submissions for both sides and read the materials produced before me in bundle A. I am grateful to Mr Scott SC and Mr Hui, counsel for the plaintiff, in setting out in a succinct manner the background of this case.

2.  I dismiss the summons today on 3 broad grounds.  Firstly, I query, whether or not, with the appointment of the receivers, the defendant, now acting through its director, still has the locus to take out the summons and seek the reliefs stated therein on behalf of the defendant. 

3.  Secondly, paragraph 1 of the summons, asks for an order that the receivers be ordered “in not to interfere the defendant’s all proceedings against the plaintiff in China”.  The receivers have been appointed by the court and the order has been made on inter parte basis although the defendant has chosen not to appear at that hearing.  The appointment order is now under appeal. 

4.  In a previous application for stay of execution before Deputy Judge Chu, her ladyship has questioned the jurisdiction of the court to entertain the application.  The appeal is still pending.  Similar to Deputy Judge Chu’s query, I likewise question the existence of jurisdiction of this court to deal with paragraph 1 of the summons.  That aside, the order sought would have the effect of defeating the anti-suit injunctions that are now in place. 

5.  Furthermore, under the receivership order, the receivers have been empowered to intervene and take any necessary steps on behalf of the defendant in the PRC legal actions referred to in schedule 1 of the order and, if thought fit, to withdraw and discontinue the said legal actions.  The receivers have been given the discretion to consider how best to deal with the proceedings in the Mainland, of course, in the light of those anti-suit injunctions.  This court has been informed by the affidavit of the receivers, that the receivers have not yet decided on what to do, let alone to “interfere” with the proceedings in the Mainland. 

6.  I am not satisfied that this court has the jurisdiction or should deal with paragraph 1 of the summons.

7.  In relation to the paragraph 2 of the summons, the defendant and Soar asked for an order that the monthly and litigation expenses of the defendant and Soar International Logistics Limited be increased as per the annex. 

8.  This is the 3^rd application by the defendant by summons for variation of the monthly and litigation expenses.  The 1^st one has been summarily dismissed by Deputy Judge Chu on the ground that the defendant had produced no meaningful evidence in support of the application.  The 2^nd summons went before Deputy Judge Ng who made an order for amendment so as to include Soar.  That amendment has not been pursued by the defendant to date.  Deputy Judge Ng gave directions for the variation application to be adjourned for arguments.  I have been told that the substantive hearing will take place on 11 September 2014, ie two weeks away.  There is no reason given by the defendant or Soar as to why another application of the same kind should be taken out before me before that substantive hearing. 

9.  Overall I consider it an abuse of process for the defendant to repeat its applications and for the reasons I have given, I dismiss the summons.

HCMP 1449/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1449 OF 2014

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D E C I S I O N

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The factual background

1.  This is an inter partes application for the appointment of receivers and managers over the defendant (Hin-Pro), and all its assets, until further order of the court.  I am satisfied from the affidavit of service of Mr Brian You that has been put before me this morning that the application has been brought to the attention of Hin‑Pro, but that Hin‑Pro has elected, deliberately, to ignore the proceedings and in particular to ignore this application.

2.  The plaintiff (CSAV) is a substantial Chilean shipping company which has provided shipping services to Hin-Pro, a Hong Kong registered company which provides freight forwarding services to companies in China.

3.  A number of disputes have arisen between CSAV and Hin-Pro.  These disputes are, CSAV argues, covered by an exclusive jurisdiction clause contained in the bills of lading upon which Hin-Pro has sought to sue CSAV.  The exclusive jurisdiction clause provides:

“LAW AND JURISDICTION This Bill of Lading and any claim or dispute arising hereunder shall be subject to English law and the jurisdiction of the English High Court of Justice in London. If, notwithstanding the foregoing, any proceedings are commenced in another jurisdiction, such proceedings shall be referred to ordinary courts of law. In the case of Chile, arbitrators shall not be competent to deal with any such disputes and proceedings shall be referred to the Chilean Ordinary Courts.”

4.  In breach of the exclusive jurisdiction clause, Hin-Pro commenced proceedings against CSAV in Wuhan PRC.  In response CSAV sued Hin-Pro in England for breach of the exclusive jurisdiction clause, and obtained an interim anti-suit injunction against Hin-Pro.  Hin-Pro ignored the anti-suit injunction, and CSAV took enforcement proceedings in England, which have resulted in Ms Su Wei, Hin-Pro’s director, being held in contempt by the English courts, and being sentenced to imprisonment for three months in absentia.

5.  In those proceedings, Hin-Pro was ordered to pay £57,000 in respect of costs.  No payment was made and CSAV was obliged to commence enforcement proceedings in Hong Kong, which it did in the District Court in May 2013.  Hin-Pro resisted these proceedings, but four days before the hearing on 29 April 2014, paid the costs order in full and agreed to pay the costs of the District Court proceedings.  CSAV had spent in excess of £70,000 in respect of the enforcement proceedings.

6.  Notwithstanding the orders made against it, Hin-Pro commenced numerous other proceedings against CSAV in a number of PRC courts, including Ningbo.  All of those proceedings are in breach of the anti-suit injunction and the exclusive jurisdiction clause in the bills of lading.  CSAV countered these PRC proceedings with a further anti-suit injunction in England against Hin-Pro. This injunction was also ignored by Hin-Pro.

7.  On 13 June 2014, CSAV obtained a worldwide freezing order against Hin-Pro in England, in order to preserve Hin-Pro’s assets.  The note made of the oral judgment of Walker J in granting the worldwide freezing order contains the following passage:

“I have read and considered the 2nd and 3rd affidavits of Mr Kaiser in the affidavit which has been signed (but not yet sworn) by Mr Jose Alfredo Sabatino Pizzolante. For the reasons given by Ms Melwani QC in her written skeleton arguments, I am satisfied that there is good reason for concern that Hin-Pro’s activities in China involve a fraudulent bringing of proceedings and there are good grounds to fear that they may result in execution in China so as to force CSAV to pay a sum which when combined with costs in this country, would total something in the region of US$27,845,000. Similarly I am satisfied that there are strong grounds for thinking that a cause of action has accrued now, even though a substantial part of the damage may not be suffered until sometime in the future. Ms Melwani QC’s skeleton arguments drew attention to four matters which indicate that there is a real risk of dissipation of assets. Taken together, I have no doubt that they make it appropriate to grant a worldwide freezing order.”

8.  On 16 June 2014, on CSAV’s application ex parte, in aid of the worldwide freezing order, I made a Mareva injunction, including a disclosure order requiring Hin-Pro to disclose assets of US$10,000/HK$78,000 or more.  The order required disclosure within seven days of service.  Service was effected by post on Hin-Pro of both the Mareva injunction and the worldwide freezing order, on 17 June 2014.  Hin-Pro has not responded to either the worldwide freezing order or the Mareva injunction with any disclosure at all.

9.  On 26 May 2014, the Ningbo Court awarded damages to Hin-Pro in one of the PRC actions.  There being a judgment and an award of damages in favour of Hin-Pro, Hin-Pro is prima facie entitled to enforce that judgment against CSAV. 

10.  The failure of Hin-Pro to respond to either the anti-suit injunction, and the fact that on the face of those orders Hin-Pro proceeded to judgment in Ningbo is clear evidence that Hin-Pro has no intention to discontinue the PRC actions. 

11.  Notwithstanding its continuance of the PRC actions, Hin-Pro has remained completely silent in respect of the English and Hong Kong proceedings save in respect of the action for the English costs in Hong Kong.  The plain inference is that Hin-Pro has no intention of appearing in or contesting the English or Hong Kong proceedings. 

12.  No inference can be drawn from the payment of costs in the Hong Kong District Court, because in those proceedings Hin-Pro had been forced by the progress of the proceedings to face a judgment.  In neither the English nor the other Hong Kong proceedings, is Hin-Pro yet facing a judgment.

Jurisdiction

13.  The court has power to appoint receivers: see s 21L High Court Ordinance.  There is long and well established authority that when a Mareva order is breached or there is a real risk of such breach the appropriate remedy is the appointment of a receiver over assets which are subject to the Mareva order: see Akai Holdings Ltd v Ho Wing On, Christopher (HCCL 37/2005, unreported, 1 September 2009). 

14.  The American Cyanamid principles apply.  CSAV must show:

(i) that there is a serious question to be tried,

(ii) that there is a real risk of dissipation of assets,

(iii) that there is no current effective protection regime whereby some form of interim protection could be granted to preserve the status quo, and

(iv) that the appointment of interim receivers is appropriate because the other less invasive remedies would not be adequate,

and that any risk of damage to the subject company can be adequately compensated by an undertaking as to damages: see Hong Kong Civil Procedure (2014) at §30/1/0; Re Zealot & Co [2008] 1 HKLRD 386 at §34, Beach Petroleum NL v Johnson (1992) 9 ACSR 404 at 406.

15.  The power to appoint receivers on an interlocutory application is discretionary and is to be exercised flexibly: Guo Jing Jing v Art Master Investment Ltd (HCA 1008/2009, unreported, 11 December 2009) at §36.

Discussion

16.  In my view this is a clear case for the appointment of receivers.  There is plainly a serious question to be tried. That requirement was a pre‑requisite for the granting of the anti‑suit injunctions, the worldwide freezing order, and the Mareva injunctions.

17.  I am satisfied that there is a real risk of dissipation.  Hin-Pro’s willingness to act fraudulently in the PRC courts in support of its claims against CSAV is a plain demonstration that if given the opportunity it will dissipate assets.  Hin-Pro has demonstrated itself to be a habitual flouter of serious court orders, and ignores the court proceedings in both England and Hong Kong, unless brought right to the wire.  It ignores orders made in England and in Hong Kong, but proceeds freely in the PRC, and at the same time is likely to move assets out of CSAV’s reach.

18.  To permit Hin-Pro to continue to act in this way is likely to render any judgment obtained either in England or in Hong Kong to be an empty judgment, unenforceable in the light of the absence of assets. There is the real risk that having obtained judgments in the PRC, Hin-Pro will attempt to arrest CSAV’s ships thereby seriously disrupting CSAV’s major business operations.

19.  The current interim remedies, those of anti-suit injunctions and asset freezing orders have been demonstrated to be ineffective against Hin-Pro.  In those circumstances, where the status quo cannot be maintained by the existing remedies it is proper for the court to look to appoint receivers notwithstanding the invasive nature of such an order.

Conclusion

20.  I am satisfied that the necessary prerequisites for the appointment of receivers have been established on the evidence.  I am further satisfied that the balance of convenience is strongly in favour of the appointment of receivers. Receivers will be in a position to effectively locate and preserve Hin-Pro’s assets for the purpose of complying with the Mareva injunction and the world wide freezing order, and to ensure that Hin-Pro properly complies with the disclosure orders made in the English and Hong Kong courts. 

21.  The receivers will be under the supervision of the court, and will be able to apply to the Hong Kong court should they require guidance in the course of their duties.  CSAV is willing to give the cross-undertaking as to damages.  It is a major listed company in Chile, and I am satisfied that there is no cause for concern regarding its ability to honour that undertaking.

22.  There will accordingly be an order for the abridgment of time in terms of CSAV’s summons of 15 July 2014, and an order for the appointment of receivers in terms of CSAV’s summons dated 14 July 2014.

23.  CSAV is entitled to its costs on the application.  There will be an order that Hin‑Pro must pay CSAV’s costs, with a certificate for two counsel, those costs to be paid forthwith.  I will make a summary assessment of those costs upon receipt of the appropriate schedules.