The Court of Appeal (“CA”) handed down a judgment in Beyonics Technology Limited & Another v Goh Chan Peng & Others CACV 244/2014 recently which provides guidance on the discharge of a worldwide Mareva injunction issued by the Hong Kong courts and discovery orders in aid of foreign proceedings under section 21M of the High Court Ordinance (“Section 21M”).

The CA judgment clarifies the position of the Hong Kong courts as an ancillary court to assist foreign proceedings.  Hong Kong courts will be cautious and very slow to take a different view on the necessity of maintaining a Section 21M injunction if the foreign court which has primary jurisdiction over the matter has discharged an injunction order.  In addition, the Court of Appeal has doubted whether Section 21M allows the grant of a free-standing discovery order which is not in aid of an injunction.

Background

After obtaining a worldwide Mareva injunction order against the Defendants from the High Court of Singapore on 27 July 2013, the Plaintiffs obtained a Mareva injunction against the Defendants from the Hong Kong court in aid of the Singapore proceedings the next day.  On 9 September 2013, the Plaintiffs sought a discovery order in relation to bankers’ records of the 1st, 3rd and 4thDefendants’ bank accounts in Hong Kong pursuant to section 21 of the Evidence Ordinance, Cap. 8 and Order 38 rule 13 of the Rules of the High Court. Cap. 4A.

On 2 April 2014, the Singapore court discharged the Singapore Mareva injunction and gave liberty to the Plaintiffs to enter caveats on five landed properties owned by the 1st and/or 2ndDefendants, to continue until after the trial of the Singapore action or further order.  Meanwhile, the Plaintiffs applied to the Singapore court for discovery against the Defendants, the scope of which included bank statements of their bank accounts in Hong Kong.  The application was refused and the Plaintiffs’ appeal was later dismissed by the Singapore court.

On 10 June 2014, the 1st, 3rd and 4th Defendants applied to the Hong Kong court to discharge the Hong Kong Mareva injunction.  The application was heard together with the Plaintiffs’ discovery application.  The discharge application was dismissed but the discovery application was allowed.  The Plaintiffs appealed.

The CA’s Decision

The Defendants’ primary argument in the appeal was that the lower court judge failed to give due regard to the order of the Singapore court to discharge the Singapore Mareva injunction upon giving the Plaintiffs liberty to enter caveats on the 1st and 2nd Defendants’ properties. 

The Discharge Application

The CA said that generally, the Hong Kong court’s jurisdiction under Section 21M is ancillary in nature. Its purpose is to facilitate the foreign court which has primary jurisdiction over the matter.  The court should consider two questions: (1) whether the facts warrant the relief sought if the substantive proceedings were brought in Hong Kong, and (2) whether it is unjust and inconvenient to grant the interim relief sought.

In this case, the Hong Kong court, in exercising its ancillary jurisdiction to provide assistance to the foreign court which is seized of the substantive proceedings, must respect the view and approach of the foreign court.  The Hong Kong court should be cautious and very slow to take a different view on the necessity of maintaining a worldwide Mareva injunction. 

The CA found that the lower court had not afforded due and sufficient regard for the Singapore court’s decision to discharge the Singapore Mareva injunction upon giving the Plaintiffs liberty to enter caveats on the Defendants’ properties.  It should give due weight to the fact that the Singapore court did not see fit to exercise its power to continue the Singapore Mareva injunction, despite having the jurisdiction to do so.  It should also have regard to the practical effect of the Singapore court order, i.e. the Defendants were free to deal with all their assets worldwide, including their Hong Kong assets. 

The appeal was allowed.

The Discovery Application

The CA noted that the Plaintiffs were in effect seeking to have a free-standing discovery order against non-party bankers not in aid of an injunction.  The CA cast doubt on the scope of Section 21M to grant a free-standing discovery order against non-party bankers in the case where an injunction granted by the foreign court has been discharged. 

The CA held that the Hong Kong court must consider whether it is just and convenient to grant such order, and should be cautious and sensitive to the informed view of the foreign court.  The Singapore court which has primary jurisdiction is clearly in a better position than the Hong Kong court to assess the disputes underlying the discovery application and to decide on the scope of discovery.  As the Singapore court had refused to order discovery of documents (some of which overlapped with the banking documents sought in Hong Kong), the appropriate course would be for the Plaintiffs to apply to the Singapore court for the issue of a Letter of Request to Hong Kong so that the Singapore court have an opportunity to scrutinize the Plaintiffs’ application.

The application was dismissed.

Comments

The CA’s judgment is welcomed as it provides certainty in relation to the position of Hong Kong courts in considering the discharge of Section 21M injunctions in aid of foreign proceedings, and clarifies the scope of Section 21M in relation to inspection of bankers’ books applications. 

Hong Kong courts will be cautious and very slow to take a different view on the necessity of maintaining a Section 21M injunction if the foreign court which has primary jurisdiction over the matter has discharged an injunction ordered by it.  In addition, the Court of Appeal has doubted whether Section 21M allows the grant of a free-standing discovery order which is not in aid of an injunction.