Prior to the Civil Justice Reforms, the Hong Kong courts could not grant interim relief, such as a mareva injunction, where there were no substantive proceedings commenced (or to be commenced) in Hong Kong. This was considered unsatisfactory because it meant that a plaintiff, suing a defendant in a foreign court (and who had no jurisdictional basis for bringing proceedings for substantive relief in Hong Kong), could not obtain a mareva injunction against any assets that the defendant had in Hong Kong, to prevent him from disposing of them. This meant that a defendant could easily defeat the judicial process by moving his assets from country to country and thereby defeating any judgments obtained against him.
As part of the Civil Justice Reforms (which came into effect on 2 April 2009), a new section 21M was added to the High Court Ordinance, which provides that the Court of First Instance may appoint a receiver or grant other interim relief (such as a mareva injunction) in relation to proceedings which (i) have been or are to be commenced in a place outside Hong Kong; and (ii) are capable of giving rise to a judgment that may be enforced in Hong Kong under any Ordinance or at common law. This means that under section 21M, a receiver can be appointed or other interim relief granted (such as a mareva injunction) as an independent form of relief and without being ancillary or incidental to substantive proceedings in Hong Kong. Accordingly, section 21M can be used where a dispute has no connection with Hong Kong or where another jurisdiction is a more appropriate forum for resolution of the dispute, but where the defendant has assets in Hong Kong. After obtaining a judgment in another jurisdiction, the plaintiff can then apply to enforce the judgment over the defendant's assets in Hong Kong, having obtained an interim injunction to prevent their disposal in the meantime.
In respect of arbitration proceedings, section 45 of the Arbitration Ordinance (Cap 609), provides that the court can grant an interim measure (such as an injunction) in relation to any arbitral proceedings which have been or are to be commenced in or outside Hong Kong. In respect of arbitral proceedings outside Hong Kong, such interim measure can only be granted if the arbitral proceedings are capable of giving rise to an arbitral award that may be enforced in Hong Kong. The court may decline to grant interim measures where they are currently the subject of arbitration proceedings and the court considers it more appropriate for the interim measure to be dealt with by the arbitral tribunal.
The following are examples of cases where the court has granted interim relief under section 21M of the High Court Ordinance and section 45 of the Arbitration Ordinance.
In Muginoho Co Ltd V Vimiu HK Co Ltd, HCMP 107/2012, in which Deacons acted for the Plaintiff, the court granted the Plaintiff an interim injunction under section 45 of the Arbitration Ordinance. In that case, the parties had commenced arbitration proceedings in Japan. Japan being a party to the New York Convention, arbitral awards made in Japan, can be enforced in Hong Kong. The Defendants argued that as the parties had chosen to arbitrate in Japan, they should pursue the matter there. They said that it was inappropriate for the Hong Kong court to grant an injunction, which would pre-empt the decision ultimately to be made by the arbitral tribunal and that the court should not usurp the arbitral tribunal's functions. However, the court held that the amendments brought in by section 21M of the High Court Ordinance and the corresponding amendments to the Arbitration Ordinance were made for the purpose of facilitating foreign proceedings, taking comity into account. It said that the interim measures contemplated by section 45 of the Arbitration Ordinance were temporary measures to maintain or restore the status quo, pending determination of the dispute, or orders aimed at preventing imminent harm or prejudice to the arbitral process.
The court said that notwithstanding that Japanese law was the governing law of the agreement in dispute between the parties, it could not see that an interim injunction to preserve the status quo of the parties would pre-empt the ultimate award which the Japanese arbitral tribunal may grant or usurp its functions. The order of the court, it said, could be made subject to the arbitral award, orders or directions of the arbitral tribunal in Japan.
When exercising its jurisdiction to grant interim relief under section 21M of the High Court Ordinance or s.45 of the Arbitration Ordinance, the general principles governing the grant of an interim injunction still apply, namely whether there is a serious question to be tried, whether damages would be an adequate remedy and whether, on a balance of convenience, it would cause less harm to grant the relief sought. In the Muginoho case, the court held that it had no doubt that if the Plaintiff succeeded in the arbitral proceedings, it would not be adequately compensated in damages. The court saw no reason to refuse the injunction sought and said that clearly the status quo should be preserved, particularly with regard to the fact that the injunction sought was an interim measure in aid of the Japanese proceedings.
In Her Majesty's Revenue & Customs v Shahdadpuri & Anor, HCMP 938/2010, Her Majesty's Revenue and Customs (HMRC) had been granted an ex parte mareva injunction up to ₤40 million, in aid of foreign proceedings in the United Kingdom, under section 21M of the High Court Ordinance against the Defendant (“the Injunction”). HMRC had earlier obtained a worldwide mareva injunction to the extent of ₤40 million against the Defendant (“the English Action”). The Defendant applied to discharge the Injunction, arguing that the English Action was not capable of giving rise to a judgment which could be enforced in Hong Kong because Hong Kong courts had no jurisdiction to enforce the revenue laws of a foreign state, and the Injunction, the Defendant argued, amounted to enforcement directly or indirectly of UK revenue law. The court dismissed the Defendant's application, holding that the requirements of section 21M of the High Court Ordinance had been satisfied and that the action was one in fraud rather than the enforcement of UK revenue law.
Deacons are currently acting in further ongoing proceedings under section 21M. It is noticeable that clients are showing interest in applications under this section and section 45 of the Arbitration Ordinance. We welcome enquiries regarding interim relief in aid of foreign proceedings from overseas!
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