In an important recent judgment, the Court of Final Appeal clarified the general principles that underpin the exercise of the courts' discretion to grant Mareva injunction relief (freezing of assets) in aid of overseas court proceedings, pursuant to Section 21M of the High Court Ordinance (Cap 4).(1) Following the outcome in the final appeal (and the overturning of the lower court judgment), the plaintiff has obtained a Mareva injunction over some of the defendant's assets in Hong Kong. The plaintiff sought the injunction to assist with the enforcement in Hong Kong of a judgment that it had obtained before the English courts for damages against the defendant.
The plaintiff is a Chilean ship-owning company and the defendant a Hong Kong freight forwarder.(2) The plaintiff had issued numerous bills of lading for the carriage of goods shipped by the defendant from various ports in China and destined for Venezuela.
The bills of lading contained an exclusive English jurisdiction clause. Despite this, the defendant commenced numerous legal actions in various provincial courts in China, claiming that (among other things) some of the cargo shipped had been wrongly delivered without production of bills of lading. Initially, the defendant appears to have achieved some success in these provincial courts, despite the plaintiff's objections and assertions that the defendant's claims were based on forged documents. Given the difficulty often experienced in China with enforcing jurisdiction clauses contained in bills of lading, the defendant's initial success may not be entirely unexpected.
Not to be outdone, the plaintiff commenced its own legal actions in the Commercial Court in England. In London, the plaintiff obtained anti-suit injunctions and an interlocutory worldwide freezing order against the defendant, prior to obtaining a judgment for substantial damages – the amount of that judgment essentially represented what the defendant had been awarded in some of the earlier court proceedings in China.
The defendant appears to have chosen to ignore much of the litigation against it in London, which culminated in a finding of contempt against its director. The defendant did deign to appeal the English judgment, but failed in that endeavour before the English Court of Appeal.
The English courts appear to have had serious doubts about the veracity of many of the defendant's claims before the Chinese courts. As events unfolded, the defendant's initial success in the Chinese courts was short lived.
Given that the defendant was a company incorporated in Hong Kong, it is unsurprising that the plaintiff commenced court proceedings there to obtain a Mareva injunction in order to assist with the English proceedings and, eventually, the enforcement of the English judgment.
The plaintiff initially obtained an ex parte (without notice) Mareva injunction in Hong Kong, pursuant to Section 21M of the High Court Ordinance. However, that interim relief was discharged on the defendant's contested application before a judge, whose decision was upheld by the Court of Appeal.(3)
The lower courts in Hong Kong did not consider that they were justified in exercising a discretion to grant interim relief to assist the plaintiff's English proceedings because of (among other things) principles of judicial comity. In particular, there was (so the argument went) a clear conflict over jurisdiction between the English and Chinese courts; therefore, a Hong Kong court should be careful not to prefer the one over the other where it lacked primary jurisdiction and was asked to exercise an ancillary jurisdiction pursuant to Section 21M of the ordinance.
By the time of the plaintiff's appeal to the Court of Final Appeal, events had moved on significantly. For example, many of the Chinese court decisions in the defendant's favour had been overturned on the plaintiff's appeal (following consolidation of many of the different actions commenced by the defendant). There was also a realisation that matters appeared to have gone somewhat awry in the Court of Appeal.(4) The plaintiff was not seeking interim relief in the Hong Kong courts on the back of an anti-suit injunction in England to enforce a jurisdiction clause – rather, it was seeking a Mareva injunction in Hong Kong (pursuant to Section 21M of the ordinance) in order to enforce its claim and, eventually, a judgment for damages awarded by the English court.
The main issue before the Court of Final Appeal was the proper approach to the exercise of the Hong Kong courts' discretion to grant interim relief in aid of overseas proceedings (pursuant to Section 21M of the ordinance) and the relevance of English appellate court cases as regards the equivalent provision in Section 25 of the English Civil Jurisdiction and Judgments Act 1982.
The Court of Final Appeal unanimously allowed the plaintiff's appeal and reinstated the Mareva relief in aid of the English proceedings.
Interestingly, the judgment was given by one of the English non-permanent judges (a former Commercial Court judge in London and the first president of the UK Supreme Court) – as such, one might expect him to be well placed to opine on the matter.(5)
As a starting point, the judgment makes clear that, in deciding whether to exercise the ancillary jurisdiction to grant interim relief pursuant to Section 21M of the ordinance, a Hong Kong court should consider whether the overseas court proceedings can give rise to a judgment that is enforceable in Hong Kong.(6) If the answer to that question is in the negative, the court's ancillary jurisdiction is not triggered. In this regard, the English judgment in favour of the plaintiff was for a claim for damages based on the defendant's breach of a jurisdiction clause held to be valid under English law and enforceable as a matter of contract against the defendant. The Court of Final Appeal considered that there was no objection in principle in giving effect to such a judgment by the grant of a Mareva injunction in Hong Kong, even though the plaintiff's claim could not have been made in Hong Kong (because of the jurisdiction clause).
Having surmounted this jurisdictional hurdle, within Section 21M(1) of the ordinance, the appeal then focused on the exercise of the court's discretion to do what is just or convenient, given that the court was exercising an ancillary jurisdiction (not a primary jurisdiction) to grant interim relief.(7)
At this point the Court of Final Appeal's judgment departs significantly from the lower courts' reasoning. The Court of Final Appeal did not accept that, on the facts, the enforcement of the English judgment in Hong Kong gave rise to a breach of comity, such that the Hong Kong courts were being asked to prefer the English courts over the Chinese courts. It considered that there was no good reason not to grant the plaintiff's application for interim relief to assist with the enforcement of a judgment which was otherwise unobjectionable – for example, the English judgment had been obtained as a result of the defendant's breach of a valid jurisdiction clause (for the purposes of English law) and, importantly, after due process (the defendant having chosen not to attend the trial in England and also having failed in its appeal there).
As a result, the Court of Final Appeal reinstated the Mareva relief for an amount to be determined by the lower court.
Since its introduction in April 2009, Section 21M of the ordinance has been put to good use in Hong Kong and has given rise to a fair amount of case law.(8) The Court of Final Appeal's judgment will be welcomed by many practitioners in Hong Kong (not to mention England) for a number of reasons, particularly in cross-border disputes.
First, it brings some welcome clarification to the general principles that underpin Section 21M of the ordinance, insofar as the grant of Mareva relief is concerned. Second, the outcome in the case reins in concerns about judicial comity in the context of the grant of interim relief in aid of overseas proceedings where a foreign plaintiff has obtained an unimpeachable judgment in another common law jurisdiction – particularly, in connection with two jurisdictions that share a common law heritage. Third, on a fair analysis, the Chilean plaintiff should be allowed to come to Hong Kong in order to protect its English judgment as against the defendant in Hong Kong.
That said, the issues raised are not as straightforward as writing about them may suggest.(9) Three respected and experienced Court of Appeal judges and a judge at first instance denied the plaintiff interim relief in Hong Kong.(10) However, as the Court of Final Appeal judgment notes, where the Court of Appeal appears to have gone wrong is in failing to give proper emphasis to the fact that the plaintiff was seeking Mareva relief in Hong Kong on the back of an unimpeachable English judgment (rather than an order to enforce an exclusive jurisdiction clause).(11)
There is also the reality that while the grant of a contested Mareva injunction is a serious business and the result of an exercise of a judicial discretion (on the facts), sometimes an element of judicial 'reverse engineering' can come into play. A defendant that (for example) plays the 'jurisdiction game', disregards a contractual jurisdiction clause, ignores (for the most part) overseas courts proceedings and appears to have difficulty in responding to some serious doubts about the veracity of its own claims is eventually likely to test the patience of the courts (whether in Hong Kong, mainland China or England and Wales).(12) It so happens that, in this case, the defendant's fortunes appear to have changed by the time of the final appeal in Hong Kong.
For further information on this topic please contact Warren Ganesh or Simon Baker at Smyth & Co in association with RPC by telephone (+852 2216 7000) or email (email@example.com or firstname.lastname@example.org). The RPC website can be accessed at www.rpc.co.uk.
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(3) HCMP 1449/2014, October 15 2014 and  2 HKLRD 458, March 11 2015. Also see the Court of Appeal judgment in Ming Hsieh v Xu Zhe  HKCU 2326, CACV Nos 189/189A of 2015 (in particular, paragraph 18).
(5) Lord Phillips (sitting with the chief justice and the three permanent judges). A contrarian view, perhaps, is that one of the Australian non-permanent judges might have been asked to preside over the final appeal.
(7) Section 21M(4) of the ordinance. To be more precise, the court may refuse an application for interim relief if (given the fact that it is not exercising a primary jurisdiction) to grant it would be "unjust or inconvenient".
(8) For further details please see "Injunctions in aid of overseas court proceedings – following the money".
(9) The Court of Final Appeal's judgment (at paragraphs 39-59) adopts a "two-stage approach" and raises three principal questions arising out of the issue(s) identified in this update. Also see "Press Summary" prepared by the Court of Final Appeal's judicial assistants.
(10) Not to be forgotten, the plaintiff's original ex parte application for interim relief was granted by a deputy judge in June-July 2014, although a receivership order granted pursuant to Section 21M was not pursued on appeal.
(12) Paragraph 61 of the Court of Final Appeal judgment questions whether the defendant's undertaking (not to enforce any judgment obtained in the Chinese courts) provided the plaintiff with adequate security such that interim relief pursuant to Section 21M of the ordinance was not justified. The outcome in the case (to date) also suggests some good lawyering on behalf of a determined foreign plaintiff.