HCCT 31/2018
[2019] HKCFI 367
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
CONSTRUCTION AND ARBITRATION PROCEEDINGS
NO 31 OF 2018
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| | IN THE MATTER of section 45(2) of the Arbitration Ordinance (Cap 609) |
| | and |
| | IN THE MATTER of Order 29 of the Rules of the High Court (Cap 4A) and Inherent Jurisdiction |
_____________
| BETWEEN |
| | COMPANY A | 1st Plaintiff |
| | COMPANY B | 2nd Plaintiff |
| | COMPANY C | 3rd Plaintiff |
| and |
| | COMPANY D | 1st Defendant |
| | COMPANY E | 2nd Defendant |
| | COMPANY F | 3rd Defendant |
_____________
| Before: | Mr Recorder Eugene Fung SC in Chambers (Not Open to the Public) |
| Dates of Hearing: | 27 and 28 December 2018 |
| Date of Decision: | 15 February 2019 |
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DECISION
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A. INTRODUCTION
1. On 11 May 2018, G Lam J granted an ex parte injunction (“theInjunction”) in favour of the plaintiffs (“Ps”) to restrain the 3rd defendant (“D3”) from disposing of, or dealing with, or diminishing the value of, its 41,216,398 shares (“the Thai Co Shares”) in Company G (“Thai Co”), a company incorporated in Thailand. The Injunction was granted in aid of arbitral proceedings between Ps and the 1st and 2nd defendants (“D1 – D2”) in Singapore under section 45 of the Arbitration Ordinance (Cap 609) and as an extension of the usual Mareva injunction on the Chabra basis, and was continued by L Chan J on 18 May 2018.
2. D1 – D2 and D3 have separately applied to discharge the Injunction and this is the substantive hearing to determine the defendants’discharge applications.
B. THE RELEVANT FACTUAL BACKGROUND
3. In paragraphs 5 – 20 of her Ladyship’s Reasons for Decision dated 3 October 2018 (“the Receivership Decision”) for dismissing Ps’ application for the appointment of receivers in these proceedings (“the Receivership Application”), M Chan J set out most of the relevant background facts. I understand that they are not disputed by the parties. The facts set out below are largely taken from the Receivership Decision (which I gratefully adopt) and from the undisputed affidavit evidence.
4. Ps and D1 – D2 were parties to two separate sale and purchaseagreements (“the Agreements”), whereby D1 – D2 together acquired 97.94% of the shares in a Thai company known as Company H (“R Co”). Each of D1 – D2 executed deeds of guarantee to cross-guarantee each other’s obligations under the Agreements.
5. Ps claim that D1 – D2 are special purpose vehicles created (and ultimately owned) by Mr X (“X”) to hold the shares in R Co which were purchased under the Agreements (“the R Co Shares”). They further claim that the only material asset which R Co held at the time of the Agreements was 59.4% of the shares in Thai Co, which is a leading renewable energy company in Thailand. The total price agreed to be paidby D1 – D2 to Ps was US$700 million (“the Price”), by staggered payments tied to various milestone dates for completion of Thai Co’s key projects. The Agreements are governed by Thai law and are subject to an arbitration clause in favour of arbitration in Singapore pursuant to the ICC Rules.
6. According to Ps, D1 failed to pay the 1st instalment payment and D2 paid only part of the 1st instalment of the Price payable by them under the Agreements. Ps commenced two separate sets of arbitration proceedings in Singapore (referred to collectively as the “Arbitration”), the first against D1 in January 2016, and the second against D2 in March 2016.
7. P1 discovered that the D1 and/or D2 were attempting to dispose of the R Co Shares to a third party. On 29 January 2016, P1 therefore obtained from the BVI court an interim injunction prohibiting D1 (a BVI company) from (inter alia) “selling, pledging, dealing with, charging or otherwise disposing of” its shares in R Co. On 17 February 2016, P1 also applied for and obtained from the ICC Emergency Arbitrator an order (“the EA Order”) prohibiting D1 from disposing of, transferring or taking “any other action having an economic effect similar to the disposaland/or transfer and/or encumbrance of” the R Co Shares it held. D2 was further ordered to cause D1 to comply with the EA Order, and not to pledge,encumber or dispose of D2’s R Co Shares.
8. On 22 September 2017, after the hearing of the 1st phase of the Arbitration, the tribunal made its Partial Awards against D1 – D2 (“thePartial Awards”), whereby D1 was ordered to pay the 1stinstalment of thePrice with interest, and D2 was ordered to pay interest on the 1stinstalment of the Price. The tribunal also extended the EA Order by restraining D1 – D2 in terms that they were “not to dispose of Thai Co Shares in any manner until the Global Purchase Price is paid to the Plaintiffs”, and subject to the tribunal’s findings in the 2nd phase of the Arbitration.
9. By this time, as Ps later discovered in October 2017, R Co had in April 2016 already entered into a sale and purchase agreement (“the April16 Transaction”) to sell and transfer its shares in Thai Co to a third party.
10. According to Ps, they discovered from documents obtained incriminal proceedings they initiated in Thailand that under a share purchase agreement in the April 16 Transaction (“the R Co–Y SPA”), the Thai Co Shares were allegedly sold by R Co to X’s father, Mr Y (“Y”), for approximately US$68 million, which is less than 10% of the Price under the Agreements. Ps allege that this purchase price was payable in multiple instalments, that the funds were likely “recycled”, and further, that the majority of the funds R Co received under the April 16 Transaction were then lent to D2. Ps further discovered that D3 was the recipient of 37.9% of the Thai Co Shares in about July and August 2017 (“the Y–D3 Transfer”).
11. On the basis that D1 – D2 had acted in breach of the orders of the tribunal, by disposing of the Thai Co Shares, and by causing R Co to dispose of the Thai Co Shares, Ps applied to the Hong Kong court on 11 May 2018, and was granted an injunction in aid of the Arbitration (namely the Injunction), to restrain D3 from dealing with 37.9% of the Thai Co Shares transferred to it under the April 16 Transaction. The orderagainst D3 was sought on the basis that there were clear acts of dissipationby D1 – D2 in breach of the order of the tribunal, which acts were intended to frustrate the enforcement of the Partial Awards. Ps also claimed that the Thai Co Shares held by D3 were amenable to execution by which the Thai Co Shares would be available to satisfy the Partial Awards against D1 – D2.
12. On 27 June 2018, Ps applied to court to seek a receivership order in respect of the Thai Co Shares held in the name of D3. The application was made on the basis that such a receivership order was necessary to reinforce the Injunction against D3 in aid of the Arbitration. Ps claimed that there was evidence of fraudulent conduct on the part of those in control of D3, which took place after the grant of the Injunction,and which resulted in the unauthorised transfer of all the shares in D3 from Y to Mrs Z (“Z”) (X’s mother-in-law), with forged documents involved. The past conduct of D1 – D2, in dissipating the Thai Co Shares in breach of orders of the tribunal, was also relied upon as evidence of the commercial immorality of those in control of D3.
13. On 25 June 2018, D3 effected a transfer of its shares from Y to Z. D3’s evidence is that this was upon presentation to D3 of the relevant instruments of transfer, bought and sold notes, the original share certificate, all signed by Y, together with a declaration of trust and an agency agreement whereby Y declared D3’s shares to be held by him as agent and on trust for Z.
14. In short, on Ps’ case, the transfers of shares in D3 from R Co to Y, and from Y to Z, were not only breach of the injunction orders of the tribunal, but were all intended to evade the Injunction of the Court.
15. The ex parte application, made on notice to D3, was opposed and M Chan J ordered the matter to proceed on inter partes basis, with full arguments.
16. During the interim, between the ex parte application on 27 June 2018 and the inter partes hearing of the application on 2 August 2018, Y applied to the Court (in separate proceedings) and obtained an injunction,to restrain X and Z from disposing of or otherwise dealing with the shares in D3 (“the D3 Injunction”). This was on the basis of Y’s claim that his signatures on the documents relied upon to effect the alleged transfer of D3’s shares from himself to Z were forged. Y claims that the acquisition of Thai Co was supposed to be a family investment and was funded or secured by family assets, but that X had acted contrary to the agreement with Y and the family. Y denies that D3’s shares were held by him on trust for Z, disputes the purported transfers of D3’s shares in his name to Z,and asserts that he only found out about Ps’ claims made against D1 – D2 for the outstanding price of the acquisition of the R Co Shares, his shareholding in D3, and the Injunction against D3, in May or June 2018. He was concerned about the management of D3, and anxious that the Injunction should be observed, thus leading to his application for the D3 Injunction against X and Z, to prevent X from taking control of D3. At the hearing of Y’s application for the D3 Injunction, D3 also undertook to the Court not to effect any further transfers of its shares.
17. The claims made by Y are, in turn, disputed by D1 – D2. This dispute as to the ownership of D3’s shares are now the subject matter of HCA xx/2018 between Y, D3, X and Z.
18. On 22 November 2018, Y applied for leave to wholly discontinue his action in HCA xx/2018.
C. DEFENDANTS’ GROUNDS FOR DISCHARGE OF INJUNCTION
19. Ms Linda Chan SC (leading Mr Thomas Wong), on behalf of D1 – D2, advanced the following grounds to discharge the Injunction, namely:
(1) Ps have made deliberate material non-disclosures at the exparte stage; and
(2) there is no risk of dissipation of assets and it is not just or convenient to grant the Injunction.
20. Mr Victor Dawes SC (leading Mr Gary C C Lam), on behalf of D3, made similar submissions and adopted D1 – D2’s submissions, andfurther contended that:
(1) the Court has no jurisdiction under section 45 of the Arbitration Ordinance (Cap 609) against any non-party to the arbitration agreement, and therefore has no jurisdiction to grant the Injunction against D3; and
(2) Ps have failed to discharge their burden for the Court to exercise its discretion to grant the Injunction.
21. In this Decision, my discussions on the above grounds will be made in three sections: (1) Section D deals with D3’s jurisdiction point; (2) Section E deals with Ds’ submissions on material non-disclosure; and (3) Section F deals with the question of whether or not there is sufficient basis for the Court to grant a Mareva injunction against D3 in aid of foreign arbitral proceedings between Ps and D1 – D2 on the Chabra basis.
D. GROUND FOR DISCHARGE 1 — NO JURISDICTION
22. D3 contended that the Court has no jurisdiction under section 45 of the Arbitration Ordinance against any non-party to the arbitration agreement. The same submission was made by D3 in the Receivership Application, and was comprehensively dealt with and rejected by M Chan J in §§22 – 40 of the Receivership Decision.
23. D3 submitted that (1) it was not possible for D3 to appeal against M Chan J’s ruling on the jurisdiction point because Ps’ Receivership Application was dismissed, (2) her Ladyship’s decision on the jurisdiction point is not binding on this Court, and (3) this Court should form a view on the jurisdiction point.
24. Ps submitted that (1) there is an issue estoppel between Ps and D3 on the jurisdiction point and D3 is debarred from re-arguing the point in this application and (2) in any event, D3 has not demonstrated why M Chan J’s decision on the jurisdiction point in the Receivership Decision is plainly wrong.
D1. Issue estoppel
25. For an issue estoppel to arise, three conditions need to be satisfied:
(1) the same question must previously have been decided;
(2) the judicial decision which is said to create the estoppel must have been a final decision of a court of competent jurisdiction;and
(3) the parties to the prior judicial decision (or their privies) must have been the same persons as the parties to the subsequent proceedings in which the estoppel is raised (or their privies).
See Carl Zeiss Stiftung v Rayner & Keeler Ltd (No2) [1967] 1 AC 853 at 935 (Lord Guest); Littlewoods Retail Ltd v Revenue and Customs Commissioners [2014] STC 1761 at §152 (Henderson J); Re China Solar Energy Holdings Ltd (No2) [2018] 2 HKLRD 338 at §48 (Harris J).
26. Further, it has been held that only determinations which are essential or necessary to the decision, or which are so fundamental that thedecision cannot stand without them, will found an issue estoppel: In re Stateof Norway’s Application (No 2) [1990] 1 AC 723 at 743F–H (May LJ); P&O Nedlloyd BV v Arab Metals Co (No 2) [2007] 1 WLR 2288 at §§23 – 24 (Moore-Bick LJ).
27. Therefore, a decision of fact or law against the party who succeeded will not found an estoppel because it cannot be fundamental to the decision. It would be unjust for such a decision to create an estoppel because the person who failed on that issue cannot effectively appeal against it. See Spencer Bower and Handley: Res Judicata (4thed, 2009) §8.25.
28. In Carl Zeiss Stiftung (above), Lord Upjohn at 947 said:
“ All estoppels are not odious but must be applied so as to work justice and not injustice and I think the principle of issue estoppel must be applied to the circumstances of the subsequent case with this overriding consideration in mind.”
29. In the Receivership Application, D3 failed on the jurisdiction point but succeeded in resisting Ps’ application for the appointment of receivers. It seems to me that M Chan J’s determination on the jurisdiction point was neither essential nor fundamental to her Ladyship’s ultimate conclusion to dismiss the Receivership Application. I do not think it would be just to debar D3 from taking the jurisdiction point in this application in circumstances where it was unable to appeal against her Ladyship’s determination on the same point in the Receivership Application.
30. For these reasons, I do not consider that D3 is debarred or estopped from re-arguing the jurisdiction point in this application.
31. For the sake of completeness, I should record my disagreementwith Mr Clifford Smith SC’s submission, in reliance of Ko Hon Yue v ChiuPik Yuk (2012) 15 HKCFAR 72, that Ps are being vexed by the re-arguing of the jurisdiction point. In that case, Ma CJ at §83 was addressing the facets of the doctrine of the Henderson v Henderson abuse, namely that a party ought generally not to be permitted to raise in subsequent proceedingsmatters which that party could and should have raised in earlier proceedings. I do not consider that such a doctrine has any application in the present case.
D2. Whether previous decision was plainly wrong
32. Decisions of the Court of First Instance are not binding on other judges of the Court of First Instance.However, it has been held that a first instance judge should dissent from another Court of First Instance decision only if he or she is satisfied that it was clearly wrong: Building Authority v Business Rights Ltd [1999] 3 HKC 247 at 251 (Burrell J); Building Authority v Appeal Tribunal (Buildings) (unreported, HCAL 147/2002, 25 July 2003) §§22 – 23 (Hartmann J).
33. Mr Dawes accepted that D3 must show that M Chan J was plainly wrong on the jurisdiction point before he can succeed. With respect, I note that her Ladyship gave detailed and comprehensive reasonsin the Receivership Decision to explain why she was unable to accept D3’s submissions that the Court lacks jurisdiction. However, no submissions were advanced by D3 to identify the purported error(s) in her Ladyship’s analyses in the Receivership Decision, and this Court was simply referred to the same submissions as set out in D3’s skeleton submissions in the Receivership Application. Mr Dawes fairly acknowledged that it was not his intention to dwell on the point.
34. Having read the parties’ submissions before M Chan J, as well the Receivership Decision, I am simply unable to say that her Ladyship’s determination on the jurisdiction point is plainly wrong. In these circumstances, I am not satisfied that the Court has no jurisdiction to grant the Injunction against D3.
E. GROUND FOR DISCHARGE 2—MATERIAL NON-DISCLOSURES
E1. The relevant principles
35. In considering whether there has been relevant non-disclosure,the following principles are applicable:
(1) The duty of the applicant is to make a full and fair disclosure of all the material facts.
(2) The material facts are those which it is material for the judge to know in dealing with the application as made: materiality is to be decided by the court and not by the assessment of the applicant or his legal advisers.
(3) The applicant must make proper inquiries before making the application. The duty of disclosure therefore applies not only to material facts known to the applicant but also to any additional facts which he would have known if he had made such inquiries.
(4) The extent of the inquiries which will be held to be proper, andtherefore necessary, must depend on all the circumstances of the case including (a) the nature of the case which the applicantis making when he makes the application; and (b) the order forwhich application is made and the probable effect of the orderon the defendant; and (c) the degree of legitimate urgency and the time available for the making of inquiries.
See Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350 at 1356F – 1357B (Ralph Gibson LJ).
36. In exercising the court’s discretion as to whether an interlocutory injunction should be re-granted, the following principles are applicable:
(1) If the court finds that there have been breaches of the duty of full and fair disclosure on the ex parte application, the general rule is that it should discharge the order obtained in breach and refuse to renew the order until trial.
(2) Notwithstanding that general rule, the court has jurisdiction to continue or re-grant the order.
(3) That jurisdiction should be exercised sparingly, and should takeaccount of the need to protect the administration of justice and uphold the public interest in requiring full and fair disclosure.
(4) The court should assess the degree and extent of the culpabilitywith regard to non-disclosure. It is relevant that the breach was innocent, but there is no general rule that an innocent breach will not attract the sanction of discharge of the order. Equally, there is no general rule that a deliberate breach will attract that sanction.
(5) The court should assess the importance and significance to the outcome of the application for an injunction of the matters which were not disclosed to the court. In making this assessment, the fact that the judge might have made the order anyway is of little if any importance.
(6) The court can weigh the merits of the plaintiff’s claim, but should not conduct a simple balancing exercise in which the strength of the plaintiff’s case is allowed to undermine the policy objective of the principle.
(7) The application of the principle should not be carried to extreme lengths or be allowed to become the instrument of injustice.
(8) The jurisdiction is penal in nature and the court should therefore have regard to the proportionality between the punishment and the offence.
(9) There are no hard and fast rules as to whether the discretion to continue or re-grant the order should be exercised, and the court should take into account all relevant circumstances.
See Excel Courage Holdings Ltd v Wong Sin Lai [2014] 3 HKLRD 642 at §56 (Kwan JA).
E2. Discussion
37. D1 – D2 submitted that Ps were guilty of the following deliberate and intentional material non-disclosures when the Injunction was obtained ex parte:
(1) The proper scope of the order of the Emergency Arbitrator on 17 February 2016 (“the 1st Non-Disclosure”).
(2) The fact that the Injunction would not be recognised and enforced in Thailand (“the 2nd Non-Disclosure”).
(3) The fact that Ps do not have assets within the jurisdiction (“the 3rd Non-Disclosure”).
E2a. The 1st Non-Disclosure — Proper scope of the EA Order
38. By an order of the Emergency Arbitrator on 17 February 2016, D1 was “prohibited from disposing of the shares, representing 49% of theshare capital, it holds in [R Co]…(including through sale) and/or transferring such shares and/or creating any charge (whether fixed or floating), debenture, pledge, lien, title retention, deferred purchase option,right of pre-emption, right to acquire, right of set-off, any other security interest or third party right (whether legal or equitable) or another type of preferential arrangement having similar effect in relation to the shares,and any other action having an economic effect similar to the disposaland/or transfer and/or encumbrances of the shares, pending the resolution of the present dispute between the Parties by way of the final award in the arbitration between the Parties” (ie, the EA Order).
39. On 27 April 2016, P1 applied to the Emergency Arbitrator to “interpret” the EA Order (“the Interpretation Application”). In the application letter, P1’s legal representative stated that as R Co has no other asset than the Thai Co Shares, the disposal and/or transfer and/or pledge and/or other form of dealing with the Thai Co Shares by R Co would havean economic effect similar to the disposal and/or transfer of the R Co Shares by D1. P1 therefore asked the Emergency Arbitrator to confirm that the disposal and/or transfer and/or pledge and/or other form of dealing with the Thai Co Shares by R Co would also be covered by the EA Order. The Emergency Arbitrator was requested to “interpret” and/or “amend” the EA Order as follows:
“ [D1] and [D2], as guarantor of [D1’s] obligation under the D1 SPA, shall cause R Co to refrain from disposing of theThai Co shares and/or transferring such shares and/or creatingany charge (whether fixed or floating), debenture, pledge, lien,title retention, deferred purchase option, right of pre-emption,right to acquire, right of set-off, any other security interest or third party right (whether legal or equitable) or another type of preferential arrangement having similar effect in relation to theThai Co Shares, pending the resolution of the present dispute between the Parties by way of the final award …”
40. On 17 May 2016, the Emergency Arbitrator, amongst other things, rejected the Interpretation Application. In doing so, he noted that “[P1] did not…seek any order corresponding to the interpretation nowsought, i.e.that [D1 – D2] shall cause R Co to refrain from disposing of the Thai Co Shares”, and found that “therequested interpretation [went]beyond the scope of interpretation of an order or award within the meaning of the ICC Rules”.
41. It seems tolerably clear to me that the EA Order only enjoinedD1’s 49% shares in R Co, and not in respect of any of the shares in Thai Co.
42. This matter is reinforced by the request made by Ps and the consequential order made by the arbitral tribunal in its Partial Awards dated 22 September 2017, which ordered D1 – D2 not to dispose of the Thai Co Shares in any way until the total purchase price is paid to Ps, subject to thetribunal’s findings in the 2nd phase of the Arbitration (“the Further Order”). It seems to me that it would only have been necessary for Ps to request the arbitral tribunal to make the Further Order if they regarded the shares in Thai Co as not being the subject matters of the EA Order.
43. However, when Ps sought the Injunction at the ex parte stage,they did so on the basis that the transfer of the Thai Co Shares to Y under the April 16 Transaction constituted a breach of the EA Order. This is clear from Ps’ affidavit evidence and their ex parte skeleton submissions.[1]
44. Significantly, before the ex parte judge, Ps relied on the alleged breach of the EA Order to contend there was “not just a risk of dissipation,but [a clear act] of dissipation”.[2]
45. In view of the dismissal of the Interpretation Application, I am unable to see how the transfer of the Thai Co Shares by D1 – D2 to a third party can be said to be a breach of the EA Order. The Emergency Arbitrator refused to confirm that any form of dealing with the shares in Thai Co would also be covered by the EA Order.
46. Ps submitted that a disposal of the Thai Co Shares by R Co (1) amounts to an action “having an economic effect similar to the disposaland/or transfer and/or encumbrance” of the R Co Shares, in circumstances where the only material asset of R Co is the Thai Co Shares, and (2) is therefore a breach of the EA Order. They further submitted that the dismissal of the Interpretation Application was made purely on procedural grounds.
47. I reject these submissions. In dismissing the Interpretation Application, the Emergency Arbitrator made express reference to P1’s failure to seek any order to refrain D1 – D2 from causing R Co to dispose of the Thai Co Shares. Such a reference suggests that the Emergency Arbitrator considered that the EA Order would not cover the Thai Co Shares. Given that the Emergency Arbitrator had already determined the proper ambit of the EA Order, I do not consider it appropriate for this Court to re-construe that order so as to arrive at a view which is opposite to the determination made by the Emergency Arbitrator.
48. In my view, the proper scope of the EA Order is clearly a material matter which Ps should have drawn to the attention of the exparte judge.
49. Ps have not put forward any reason for the non-disclosure of the circumstances leading to the making of the Interpretation Application and the Emergency Arbitrator’s dismissal thereof. Indeed, in the light of their submissions made to this Court, it seems to me that the non-disclosures must have been deliberate.
E2b. The 2nd Non-Disclosure — Recognition and enforceability of Injunction in Thailand
50. A court will not make any order in vain: New Brunswick and Canada Railway and Land Co v Muggeridge (1859) 4 Drew 686 at 699 (Kindersley VC). Therefore, for example, a court may decline to grant an injunction on the basis that it is impossible to comply with the injunction: see eg Evans v Manchester, Sheffield, and Lincolnshire Railway Co (1887) 36 Ch D 626 at 639 (Kekewich J).
51. Further, when making an order, the court should ordinarily be willing to enforce it if necessary (South Bucks DC v Porter [2003] 2 AC 558 at §32 (Lord Bingham)). If an injunction order cannot be enforced,a court may exercise its discretion not to grant such an order. In Pride of Derby and Derbyshire Angling Association Ltd v British Celanese Ltd [1953] Ch 149, Evershed MR at 181 said “of course, the court will not impose on a local authority, or on anyone else, an obligation to do something whichis impossible, or which cannot be enforced, or which is unlawful”.
52. In their Receivership Application, Ps relied on expert evidence on Thai law to establish the following matters:[3]
(1) Thai law does not specifically provide for the direct enforcement or recognition of foreign court judgments in Thailand. Moreover, Thailand is not a party to any treaty or agreement by which a foreign court judgment may be entitled to recognition and enforcement in Thailand. Consequently, a new trial based on the merits must be initiated in Thailand for recognising and enforcing a foreign court judgment.
(2) The Injunction cannot be promptly (if at all) enforced or “mirrored” in Thailand. The Injunction would therefore be inapposite and without effect upon Thai Co, its directors and/or D3, and interim measures sought.
53. Ps’ Thai law expert concluded his affirmation by stating that D3 “can, notwithstanding the [Injunction], which is essentially not enforceable in Thailand or has any legal effect, transfer its Thai Co shares to a third person”.[4]
54. Further, Ps submitted to M Chan J in the Receivership Application that there is no way to ensure compliance with the Injunction and nearly impossible to police it.[5]
55. In this application, Ps have not withdrawn or supplemented the expert evidence on Thai law previously adduced, or their submissions in relation to their ability to ensure compliance with the Injunction. Instead,they submitted that D3 is a company incorporated in Hong Kong and can be subject to enforcement action by way of contempt proceedings and sequestration of property, and therefore the Injunction is not futile or pointless.
56. I do not consider that the Injunction is futile in the sense that it is impossible for D3 to comply with it, or that the order does not serve any practical purpose. However, it seems to me that whether an order can be effectively enforced is a question that is highly relevant in the court’s exercise of discretion in deciding whether or not an injunction should be granted. I do not believe that this question was adequately brought to the attention of the ex parte judge when the Injunction was granted:
(1) Although D3 is a Hong Kong company, the Injunction is concerned with shares in a Thai company and D3’s directors were at the material times, according to the information filed at the Companies Registry, an individual having an address in the United Arab Emirates and a company in Belize. On Ps’ own expert evidence, the Injunction cannot be effectively enforced in Thailand.
(2) There is no dispute that Ps did not inform the court the difficulties concerning enforcement or recognition of the Injunction in Thailand at the ex parte stage, or proffer any explanation for their failure to do so.
(3) I am not satisfied that Ps can take meaningful enforcement actions against D3:
(a) As far as sequestration of property is concerned, there is no evidence to suggest that D1 – D2 have any assets in Hong Kong. Further, Ps’ position is that D3’s only known asset is the Thai Co Shares,[6]which are situated in Thailand.It is difficult to see how the Injunction canbe said to be effectively enforced through sequestration of property.
(b) Further, on Ps’ own case, contempt proceedings would be wholly ineffective to ensure compliance with the Injunction. Ps advanced the following submissions to M Chan J in the Receivership Application:[7]
“ … it is not disputed that all of the relevant individuals in controlof [D3] (i.e. X, T and Z) are resident in Thailand. The sole connection between this dispute and Hong Kong is the fact that [D3] is a Hong Kong company, which so happened to havereceived the Thai Co shares as a nominal vehicle. As soon asthe Thai Co shares are transferred out of [D3] and out of Hong Kong in breach of the [Injunction], Ds can abandon the Hong Kong jurisdiction at no cost. There is no way to ensure that Ds will be punished for contempt and the contempt regime is wholly ineffective to ensure compliance with the [Injunction].”
57. For these reasons, I consider that the 2ndNon-Disclosure to be material and that Ps’ failure to make the disclosure to the ex parte judge was deliberate. I note that M Chan J in §55 of the Receivership Decision also came to the view that the ex parte judge should have been informed about Ps’ difficulties in policing any injunction restraining dealings in the Thai Co Shares and the lack of recognition by the Thai court of an injunction order.
E2c. The 3rd Non-Disclosure — Ps’ lack of assets within the jurisdiction
58. Ds submitted that Ps have no assets in Hong Kong and that they should have disclosed such a fact to the ex parte judge so that the issue of fortification of their undertakings as to damages could be considered.
59. In response, Ps relied on the reasoning in Top Gains MineralsMacao Commercial Offshore Ltd v TL Resources Pte Ltd [2016] 3 HKC 44 and submitted that there was no material non-disclosure by Ps in failing to disclose their assets within the jurisdiction.
60. In Top Gains, the defendant complained that the plaintiff failedto incorporate in the form of the injunction the standard undertakings set outin Practice Direction 11.2 in relation to the provision of a written guarantee and an affidavit confirming the substance of what was said to the court by the plaintiff’s counsel. In relation to the alleged failure to include an undertaking to provide a written guarantee, M Chan J said at §73:
“ The footnote to Standard Undertaking 2 states that the undertaking is to be included ‘in those cases where the judge considers that a guarantee should be provided prior to the return date’. The ex parte judge did not order any guarantee to be provided by way of fortification of the plaintiff’s undertaking as to damages. The plaintiff already disclosed in the affidavit in support of the Injunction that it is a company incorporated in Macau. I do not regard the Injunction to be irregular in form. Nor do I regard the failure to disclose the absence of Standard Undertaking 2 in the draft order submitted to Barnes J to be material non-disclosure.”
61. In my view, I consider that the footnote to §2 of the standard undertaking suggests that the ex parte judge should be put in a position to consider whether a guarantee should be provided prior to the return date. As pointed out by Ms Chan, D3 is a Hong Kong company and the ex parte judge was not apprised of the fact that it does not have any assets within the jurisdiction. In these circumstances, I find it difficult to see how the ex parte judge would be in a position to consider the necessity for Ps to provide a guarantee unless some evidence of their means was included in the supporting affidavit for the Injunction. Given that it appears to be common ground that no such evidence was put before the ex parte judge, I consider that the 3rdNon-Disclosure to be material. However, I do not regard such a non-disclosure to be deliberate or serious.
E3. Conclusion on material non-disclosures
62. For the reasons given above, I consider that the 1st, 2nd and 3rd Non-Disclosures to be material. Accordingly, and particularly given the seriousness and deliberateness of the 1st and 2nd Non-Disclosures, I would discharge the Injunction on the ground of material non-disclosure alone.
F. GROUND FOR DISCHARGE 3 — REQUIREMENTS FORSECTION 45 MAREVA INJUNCTION ON CHABRA BASIS NOT SATISFIED
63. As mentioned above, the Injunction was granted in aid of foreign arbitral proceedings between Ps and D1 – D2 under section 45 of the Arbitration Ordinance (Cap 609) and as an extension of the usual Mareva injunction on the Chabra basis.
F1. The relevant statutory provisions and legal principles on granting of interim measures in aid of arbitral proceedings
64. Section 45 of the Arbitration Ordinance (Cap 609) relevantly provides:
“ (2) On the application of any party, the Court may, in relation to any arbitral proceedings which have been or are to be commenced in or outside Hong Kong, grant an interim measure.
(3) The powers conferred by this section may be exercised by the Court irrespective of whether or not similar powers may be exercised by an arbitral tribunal under section 35 in relation to the same dispute.
(4) The Court may decline to grant an interim measure under subsection (2) on the ground that—
(a) the interim measure sought is currently the subject of arbitral proceedings; and
(b) the Court considers it more appropriate for the interim measure sought to be dealt with by the arbitral tribunal.
(5) In relation to arbitral proceedings which have been or areto be commenced outside Hong Kong, the Court may grant an interim measure under subsection (2) only if—
(a) the arbitral proceedings are capable of giving rise toan arbitral award (whether interim or final) that may be enforced in Hong Kong under this Ordinance or any other Ordinance; and
(b) the interim measure sought belongs to a type or description of interim measure that may be granted in Hong Kong in relation to arbitral proceedings by the Court.
(6) Subsection (5) applies even if—
(a) the subject matter of the arbitral proceedings wouldnot, apart from that subsection, give rise to a cause ofaction over which the Court would have jurisdiction;or
(b) the order sought is not ancillary or incidental to any arbitral proceedings in Hong Kong.
(7) In exercising the power under subsection (2) in relation to arbitral proceedings outside Hong Kong, the Court must have regard to the fact that the power is—
(a) ancillary to the arbitral proceedings outside Hong Kong; and
(b) for the purposes of facilitating the process of a court or arbitral tribunal outside Hong Kong that has primary jurisdiction over the arbitral proceedings.
(8) The Court has the same power to make any incidental orderor direction for the purposes of ensuring the effectiveness of an interim measure granted in relation to arbitral proceedings outside Hong Kong as if the interim measure were granted in relation to arbitral proceedings in Hong Kong.
(9) An interim measure referred to in subsection (2) means an interim measure referred to in article 17(2) of the UNCITRAL Model Law, given effect to by section 35(1), as if—
(a) a reference to the arbitral tribunal in that article were the court; and
(b) a reference to arbitral proceedings in that article were court proceedings,
and is to be construed as including an injunction but not including an order under section 60.”
65. As provided in section 45(9), interim measure is defined by reference to article 17(2) of the UNCITRAL Model Law, which is set out in section 35(1) of the Arbitration Ordinance:
“ Article 17 of the UNCITRAL Model Law, the text of which is set out below, has effect—
‘Article 17. Power of arbitral tribunal to order interim measures
(1) Unless otherwise agreed by the parties, the arbitral tribunal may, at the request of a party, grant interim measures.
(2) An interim measure is any temporary measure,whether in the form of an award or in another form, by which,at any time prior to the issuance of the award by which the dispute is finally decided, the arbitral tribunal orders a party to:
(a) Maintain or restore the status quo pending determination of the dispute;
(b) Take action that would prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself;
(c) Provide a means of preserving assets out of which a subsequent award may be satisfied; or
(d) Preserve evidence that may be relevant and material to the resolution of the dispute.’.”
66. When deciding whether to grant an interim measure sought in aid of an arbitration under section 45, the Court applies the same general principles governing the grant of the interim measure in question. For example, in the context of a Mareva injunction, the plaintiff has to show a good arguable case, that there is a real risk of dissipation of assets, and that the balance of convenience is in favour of the grant of the injunction. See Top Gains Minerals Macao Commercial Offshore Ltd v TL Resources Pte Ltd [2016] 3 HKC 44 at §30 (M Chan J); Chen Hongqing v Mi Jingtian& ors (unreported, HCMP 962/2017, 27 June 2017) at §23 (M Chan J).
F2. The relevant legal principles on granting of Mareva injunction on Chabra basis
67. A Mareva injunction may be made over assets that are held in the name of a third party against whom no claim for substantive relief is made, if the Court is satisfied that there is an arguable case that the assets are in fact those of the substantive defendant to the claim. This has been called the Chabra jurisdiction.[8]
68. In XY, LLC v Jesse Zhu [2017] 5 HKC 479, Kwan JA adopted the following principles of the Chabra jurisdiction from Popplewell J in PJSC Vseukrainskyi Aktsionernyl Bank v Maksimov [2013] EWHC 422 (Comm) at §7:
(1) The Chabra jurisdiction may be exercised where there is good reason to suppose that assets held in the name of a defendant against whom the claimant asserts no cause of action (“the NCAD”) would be amenable to some process, ultimately enforceable by the courts, by which the assets would be available to satisfy a judgment against a defendant whom the claimant asserts to be liable upon his substantive claim (“the CAD”).
(2) The test of “good reason to suppose” is to be equated with a good arguable case, that is to say one which is more than barely capable of serious argument, but yet not necessarily one which the judge believes to have a better than 50% chance of success.
(3) In such cases the jurisdiction will be exercised where it is just and convenient to do so. The jurisdiction is exceptional and should be exercised with caution, taking care that it should not operate oppressively to innocent third parties who are not substantive defendants and have not acted to frustrate the administration of justice.
(4) A common example of assets falling within the Chabra jurisdiction is where there is good reason to suppose that the assets in the name of the NCAD are in truth the assets of the CAD. Such assets will be treated as in truth the assets of the CAD if they are held as nominee or trustee for the CAD as the ultimate beneficial owner.
(5) Substantial control by the CAD over the assets in the name of the NCAD is often a relevant consideration, but substantial control is not the test for the existence and exercise of the Chabra jurisdiction. Establishing such substantial control will not necessarily justify the freezing of the assets in the hands of the NCAD. Substantial control may be relevant in two ways. First, evidence that the CAD exercises substantial control over the assets may be evidence from which the court will infer that the assets are held as nominee or trustee for the NCAD as the ultimate beneficial owner. Secondly, such evidence may establish that there is a real risk of dissipation of the assets in the absence of a freezing order, which the claimant will have to establish in order for it to be just and convenient to make the order. But the establishment of substantial control over the assets by the CAD will not necessarily be sufficient:a parent company may exercise substantial control over a wholly owned subsidiary, but the principles of separate corporate personality require the assets to be treated as those of the subsidiary not the parent. The ultimate test is always whether there is good reason to suppose that the assets would be amenable to execution of a judgment obtained against the CAD.
69. In XY, LLC (above), Kwan JA at §25 also approved the following passages from the High Court of Australia’s judgment in Cardilev LED Builders Pty Ltd (1999) 198 CLR 380 at §§57 and 58:
“ What then is the principle to guide the courts in determining whether to grant Mareva relief in a case such as the present where the activities of third parties are the object sought to be restrained? In our opinion such an order may, and we emphasisethe word ‘may’, be appropriate, assuming the existence of other relevant criteria and discretionary factors, in circumstances in which:
(i) the third party holds, is using, or has exercised or is exercising a power of disposition over, or is otherwise in possession of, assets, including ‘claims and expectancies’, of the judgment debtor or potential judgment debtor; or
(ii) some process, ultimately enforceable by the courts, is or may be available to the judgment creditor as a consequence of a judgment against that actual or potential judgment debtor, pursuant to which, whether by appointment of a liquidator, trustee in bankruptcy, receiver or otherwise,the third party may be obliged to disgorge property or otherwise contribute to the funds or property of the judgment debtor to help satisfy the judgment against the judgment debtor.
It is that principle which we would apply to this case. Its application is a matter of law, although discretionary elements are involved.”
F3. Approach on granting a Mareva injunction in aid of arbitral proceedings under section 45 and invoking the Chabra jurisdiction
70. As mentioned earlier, when deciding whether to grant an interim measure sought in aid of an arbitration under section 45, the Court applies the same general principles governing the grant of the interim measure in question.
71. Therefore, where a plaintiff seeks a Mareva injunction in aid of arbitral proceedings under section 45 and against a third party invoking the Chabra jurisdiction, it seems to me that the following requirements must be satisfied:
(1) There is good reason to suppose that:
(a) a defendant against whom the plaintiff asserts no cause of action (the NCAD) holds, is using, or has exercised,or is exercising a power of disposition over, or is otherwise in possession of, assets of the defendant whom the plaintiff asserts to be liable on his substantiveclaim in arbitration (the CAD) (“the 1st Limb”): XY, LLC (above) at §§25, 27 and 39; or alternatively
(b) the assets held in the name of the NCAD would be amenable to execution of some process, ultimately enforceable by the courts, by which the assets would be available to satisfy an award against the CAD (“the 2nd Limb”): XY, LLC (above) at §24(1).
(2) There is a real risk of dissipation of the assets: XY, LLC (above) at §§24(5) and 26.
(3) It is just and convenient to grant the injunction: XY, LLC (above) at §24(3) and (5).
72. Further, in exercising its discretion to grant such an injunction,the Court:
(1) must have regard to the fact that the power to grant an interim measure under section 45 is (a) ancillary to the arbitral proceedings outside Hong Kong and (b) for the purposes of facilitating the process of a court or arbitral tribunal outside Hong Kong that has primary jurisdiction over the arbitral proceedings: section 45(7) of Arbitration Ordinance; and
(2) should bear in mind that the Chabra jurisdiction is exceptional and should be exercised with caution: XY, LLC (above) at §24(3).
F4. Good reason to suppose D3’s assets would be amenable to execution of arbitral award against D1 – D2
73. In their skeleton submissions, Ps submitted that there is at leastgood reason to suppose (or a good arguable case) that D3 may be obliged to disgorge the Thai Co Shares or otherwise contribute to the funds or property of D1 – D2 to help satisfy the arbitral award against D1 – D2 under some court process.[9] In other words, in seeking to continue the Injunction in this application, Ps relied on the 2nd Limb (and not the 1stLimb) of the above-quoted principles in Cardile.
74. To determine whether there is good reason to suppose that theThai Co Shares held by D3 would be amenable to some process, ultimatelyenforceable by the courts, by which such shares would be available to satisfyan award against D1 – D2 in the Arbitration, I note that Ps’ remaining claimsagainst D1 – D2 in the Arbitration are personal and monetary in nature, andnot in respect of the Thai Co Shares. Specifically, Ps’ claims for rescissionof the Agreements were dismissed by the arbitral tribunal in its Partial Awards of 22 September 2017. Therefore, even if Ps succeed in the Arbitration against D1 – D2, they will not obtain an award in respect of the Thai Co Shares.
75. However, Ps submitted the Thai Co Shares held by D3 may be amenable to execution of the award in the Arbitration against D1 – D2:
(1) Ps submitted that the relevant assets subject to the Injunction are the Thai Co Shares and issues of title, ownership and priority of shares are governed by the lex situs (ie the place where the shares are situated), citing中國山水投資有限公司 v 張才奎 (unreported, HCA 1661, 1766, 2191/2014, 13 May 2015) at §§89 – 94 (G Lam J).
(2) Further, Ps relied on expert evidence on Thai law to contend that the R Co–Y SPA and the Y–D3 Transfer would be deemed “fictitious” transactions and void, and cancelled as a fraudulent act.
(3) The result, as Ps contended, would be that the Thai Co Shares would be liable to be returned to R Co and available for distribution ultimately to the creditors of D1 – D2 (being R Co’s parent companies) in liquidation.
76. D3 adduced extensive expert evidence on Thai law to counterthe effect of Ps’ submissions and submitted that the Thai Co Shares held by D3 are not, under Thai law, amenable to execution of any award against D1 – D2:
(1) D3’s expert on Thai law considers that the Thai Co Shares are not amenable to execution of the arbitral awards in Thailand.
(2) In particular, D3’s expert opines that:
(a) in the event Ps obtain favourable awards against D1 – D2, Ps would seek to liquidate D1 – D2 and appoint a receiver to take control of D1 – D2’s assets, who wouldnot be able to manage the assets of R Co to recover the Thai Co Shares and unwind the R Co–Y SPA and the Y–D3 Transfer as a matter of Thai law;
(b) Ps are not in a position to petition against the validity of the R Co–Y SPA and the Y–D3 Transfer under Thai law; and
(c) the R Co–Y SPA and the Y–D3 Transfer are not deemed null and void, or cancelled as a fraudulent act,by the Thai court.
77. Equally, Ps adduced extensive expert evidence on Thai law to rebut D3’s expert evidence.
78. It appears to be common ground between Ps and D3 that Thai law is relevant to determine whether or not Ps may have recourse against the Thai Co Shares in the event that Ps succeed in the Arbitration.
79. There are clearly disputes on the expert evidence on Thai law and it is neither possible nor desirable for me to resolve the differences at this stage.
80. On the evidence before the Court, I am satisfied that there is good reason to suppose that the Thai Co Shares held by D3 would be amenable to some process, ultimately enforceable by the courts, by which such shares would be available to satisfy an award against D1 – D2 in the Arbitration:
(1) I bear in mind that the test of “good reason to suppose” is to be equated with a good arguable case, which means that Ps’ case is one that is more than barely capable of serious argument,and yet not necessarily one which the judge believes to have abetter than 50% chance of success: XY, LLC (above) at §24(2).
(2) Ps’ expert sets out the possibility under Thai law for a receiver to look to the Thai Co Shares to contribute to the funds of D1 – D2 to satisfy an award in Ps’ favour in the Arbitration in the event that bankruptcy proceedings are initiated against D1 – D2. This may arguably be described as the “process” in the 2ndLimb of Cardile and Ps’ case on the 2nd Limb seems to me to be more than barely capable of serious argument.
(3) I have not lost sight of the fact that M Chan J in the Receivership Decision did not consider the 2nd Limb of Cardile to be satisfied. At §48, her Ladyship said:
“ By reason of the Defendants, R Co and Thai Co being separate legal entities, I am not satisfied from the evidence at this stage that [D3] may be obliged to disgorge its Thai Co Shares, or to contribute to the funds or property of [D1 – D2], to satisfy any judgment or award against [D1 – D2] (Paul Cardile v LED Build[ers] Proprietary Ltd (1999) 198 CLR 380), to justify any Chabra type relief to be granted. Under Hong Kong law, there cannot be execution of any judgment against [D1 – D2], by resorting to the assets of a separate legal entity, [D3]. The assets of [D1 – D2] cannot be equated in this case with the assets of R Co.”
It appears that her Ladyship came to the view on the basis of the evidence then available before her and the fact that the expert evidence on Thai law then available before her was inadmissible.[10] However, extensive additional and admissible expert evidence on Thai law has since been filed by both Ps and D3 on the issue and I should consider all the evidence available before this Court.
(4) D3 submitted that given the 2ndLimb of Cardile is “potentially of extremely wide application”,[11] this Court should adopt a “sufficient connection” requirement to narrow the very wide scope of the 2ndLimb. I am not satisfied that I should adopt the “sufficient connection” requirement in applying the 2ndLimb of Cardile:
(a) The “sufficient connection” requirement seems to haveits origin from Kirby J’s judgment in Cardile, where he said (at §121) that one of the conditions the applicant for a Chabra-type injunction must satisfy was that “theaffairs of the actual or potential judgment debtor and the non-party are closely intermingled”.
(b) In Revenue and Customs Commissioners v Egleton [2007] 1 All ER 606, whilst recognising (at §29) that the 2ndLimb of Cardile is “potentially of extremely wideapplication”, Briggs J (at §39) was not persuaded that the “sufficient connection” test should be adopted. At §42, he further observed that such a test is “by its natureso subjective and unfocused as to make it quite unsuitable as the boundary for the existence of jurisdiction”. I respectfully agree with these observations.
F5. Real risk of dissipation of assets
81. It appears to be common ground between the parties that one of the requirements Ps must satisfy for the grant of the Injunction is to demonstrate a real risk of dissipation of assets.
82. Where a plaintiff applies for a Mareva injunction without seeking to invoke the Chabra jurisdiction, the following principles on risk of dissipation are well-established:
(1) the expression “dissipation of assets” focuses on the conduct of the defendant as regards the defendant’s assets, and the question is whether a particular course of conduct in relation to assets by the defendant, actual or feared, is conduct which should or may lead the court to conclude that the grant of a freezing order is just and convenient: Mobil Cerro Negro Ltd v Petroleos de Venezuela SA [2008] 1 Lloyd’s Rep 684 at §35 (Walker J); and
(2) the risk of dissipation must involve a risk of impairing the plaintiff’s ability to enforce a judgment or award: Mobil CerroNegro Ltd (above) at §37.
83. Where a plaintiff seeks a Mareva injunction on the Chabra basis, it seems to me that the risk of dissipation factor should principally focus on the NCAD’s conduct as regards the NCAD’s assets:
(1) The underlying premise of a Mareva injunction on the Chabrabasis is that there is good reason to suppose that assets held in the NCAD’s name would be amenable to some process,ultimately enforceable by the courts, by which the assets would be available to satisfy a judgment or award against the CAD. The plaintiff’s ability to enforce the judgment or award against the CAD would necessarily be impaired if the effect of NCAD’s conduct would be to frustrate the enforcement of any judgment or award, or the NCAD’s assets are no longer available to be enforced against. In considering the risk of dissipation of assets, the principal focus should therefore be on NCAD’s conduct and his assets.
(2) In cases where there is substantial control by the CAD over the assets in the name of the NCAD, it may become relevant to examine the conduct of the CAD to determine whether there is a risk of dissipation of NCAD’s assets. “[Evidence that the CAD exercises substantial control over the assets] may establish that there is a real risk of dissipation of the assets in the absence of a freezing order, which the claimant will have to establish in order for it to be just and convenient to make the order”: XY, LLC (above) at §24(5).
84. At the ex parte stage, Ps relied on the April 16 Transaction to contend that there is a risk of dissipation of assets. Specifically, Ps submitted that this is “one of the rare cases where there is actual evidence of dissipation and there is no need for Ps to rely on any inferences to establish the matter”.[12] The same submission was repeated by Ps in this application.
85. Ps further submitted that after the grant of the Injunction, Z and/or X have already successfully taken control over D3 from Y and thereis objectively a real risk that Z and/or X can easily arrange for the Thai Co Shares to be transferred out of D3 to another entity in another jurisdiction.
86. The standard of proving a real risk of dissipation is relatively high, and the plaintiff must establish that risk by reference to solid or cogent evidence: Re Chau Cham Wong Patrick [2016] 2 HKLRD 278 at §32 (P Ng J).
87. In my view, I am not satisfied that Ps have established a real risk of dissipation of assets:
(1) First, for reasons given in Section E2a above, I do not consider that the April 16 Transaction amounted to a breach of the EA Order.
(2) Further, the fact that the Thai Co Shares may be easily transferred out of D3 to another entity does not ipso facto amount to a real risk of dissipation of assets by D3. Ps have not referred me to any unjustifiable conduct on the part of D3 the objective effect of which is to frustrate the enforcement of any award they may obtain against D1 – D2.
(3) Even if one considers the conduct of D1 – D2, other than the assertion that the April 16 Transaction amounted to a breach of the EA Order (which I reject), I am not satisfied that there is any unjustifiable conduct on the part of D1 – D2 designed to frustrate the enforcement of any award Ps may obtain against D1 – D2.
(4) In any event, as mentioned above, there are already orders in place made by the arbitral tribunal in the Partial Awards to restrain the disposal of the Thai Co Shares. On 1 June 2018, the arbitral tribunal extended its order to D3 and directed D3 not to dispose or diminish the value of the Thai Co Shares. Therefore, it seems to me that Ps are sufficiently protected insofar as they consider that there is a risk that their ability to enforce any arbitral award they may obtain against D1 – D2 is impaired.
F6. Balance of convenience
88. As pointed out above, in exercising my discretion in this application, I must have regard to the fact that (1) the Chabra jurisdiction is exceptional and should be exercised with caution and (2) the power to grant an interim measure under section 45 of the Arbitration Ordinance is (a) ancillary to the arbitral proceedings outside Hong Kong and (b) for the purposes of facilitating the process of a court or arbitral tribunal outside Hong Kong that has primary jurisdiction over the arbitral proceedings.
89. Given that I am not satisfied that Ps have established a real risk of dissipation of assets, it can neither be just nor convenient to continue the Injunction, particularly in view of the fact that Ps are asking this Court to invoke the exceptional jurisdiction. I also have difficulty seeing how the Injunction can be said to be for the purposes of facilitating the process of the arbitral tribunal when the arbitral tribunal on 1 June 2018(some four weeks after the granting of the Injunction) extended its order to D3 “not to dispose, pledge or otherwise encumber or diminish the value of the Thai Co Shares, and or cause third parties to do the same, until the resolution of all claims and counterclaims in these arbitrations or the lifting of this Order by the Tribunal”, which has very similar effect to that of the Injunction.
G. WHETHER THE INJUNCTION SHOULD BE RE-GRANTED?
90. First, because of the seriousness and deliberateness of the material non-disclosures, I would decline to re-grant the Injunction.
91. Further, and in any event, given that I am not satisfied that (1) there is a real risk of dissipation of assets and (2) the granting of the Injunction is just or convenient, I do not believe that the Injunction should be re-granted.
H. DISPOSITION
92. The orders that I make are as follows:
(1) That the Injunction be discharged.
(2) An order nisi that the costs of and occasioned by D1 – D2’s Summons dated 6 August 2018 (including all reserved costs) be paid by Ps to D1 – D2 to be taxed if not agreed, with a certificate for two counsel.
(3) An order nisi that the costs of and occasioned by D3’s Summons dated 30 July 2018 (including all reserved costs) be paid by Ps to D3 to be taxed if not agreed, with a certificate for two counsel.
| | (Eugene Fung SC) |
| | Recorder of the High Court
|
Mr Clifford Smith SC and Mr Justin Lam, instructed by Deacons, for the 1st to 3rd plaintiffs
Ms Linda Chan SC and Mr Thomas Wong, instructed by King & Wood Mallesons, for the 1st and 2nd defendants
Mr Victor Dawes SC and Mr Gary C C Lam, instructed by DLA Piper Hong Kong, for the 3rd defendant
[1] §33 of the 1st Affidavit of W and §§2, 18 and 24 of Ps’ ex parte skeleton submissions.
[2] §24 of Ps’ ex parte skeleton submissions.
[3] §§25 – 26 of the 2nd Affirmation of Q.
[4] §30 of the 2nd Affirmation of Q.
[5] §62 of Ps’ skeleton submissions in the Receivership Application.
[6] §60(2) of Ps’ skeleton submissions in the Receivership Application.
[7] §61 of Ps’ skeleton submissions in the Receivership Application.
[8] Named after TSB Private Bank International SA v Chabra [1992] 1 WLR 231.
[9] §§62(3) and 67 of Ps’ skeleton submissions.
[10] §56 of Receivership Decision.
[11]XY, LLC (above) at §26.
[12] §34 of Ps’ ex parte skeleton submissions.