News

SNEAK OUT FROM THE BACK DOOR… (Litigation FAQs Part 4)

SNEAK OUT FROM THE BACK DOOR… (Litigation FAQs Part 4)

SNEAK OUT FROM THE BACK DOOR… (Litigation FAQs Part 4)

Tuesday, 16 July 2013 13:50

(Litigation in Hong Kong FAQs Part 4- The Final Chapter)

by Olivia Kung, associate

Very often plaintiffs are concerned that the defendant may abscond or dissipate assets which in effect render them “empty handed” even if they win the case. In legal terms, this is called Empty Judgment. In this article, we will discuss various actions plaintiffs can take to stop or prevent this from happening…

IT’S NOT AU REVOIR

Generally speaking, once a judgment is obtained, the winning party can conduct an asset search on the defendant and can apply to court to request judgment to be attached to the defendant’s assets.
The fear that the other side may “do a runner” with the assets probes lots of plaintiffs to ask whether they can request judgment to be attached to the defendant’s assets.
Unfortunately, there is no pre-judgment attachment over the defendant’s assets before commencement of litigation in Hong Kong. Having said that, there is a similar mechanism known as Mareva injunction which can serve this purpose.

A Mareva injunction is a form of interlocutory injunction (i.e. an order from the court directing a party to do /not to do certain acts pending trial) the Court of First Instance can grant to restrain any party from dealing with and removing assets out of the jurisdiction, so as to ensure that any judgment given after trial will not be rendered empty.
A Mareva injunction can be made against both residents and non-residents of Hong Kong to prevent assets from being removed out of the jurisdiction or dissipated within the jurisdiction.
Further, in addition to assets in Hong Kong, the court can also grant a Mareva injunction covering assets outside Hong Kong. This is known as “worldwide” Mareva injunction.
Please note that a Mareva injunction only freezes the defendant’s assets up to the amount of the plaintiff’s claim in the main action. Further, a Mareva injunction cannot be granted to a non-party to the proceedings.

MAKES ME WONDER

Unfortunately, just having a feeling that the other party may run is not enough to persuade the court to grant a Mareva injunction. As Mareva injunction is usually obtained without notice to the defendant, it is considered to be a draconian measure. Therefore to succeed in an application for such an order, the applicant must be able to demonstrate ALL of the following:-

1. Good arguable case on the merits;
2. A real risk that the defendant will dissipate assets;
3. Just or convenient to grant the injunction; and
4. Defendant has assets in or outside Hong Kong.

TODAY NOT TOMORROW

Delay in applying for a Mareva injunction may render the application refused as such delay makes it difficult for the applicant to prove to the court that such an injunction is necessary.

PRE-EMPTIVE STRIKE

In addition to the granting of Mareva injunction after the commencement of proceedings, the Court has also got the power to grant a Mareva injuntion before the commencement of proceedings. However, such power would only be granted where there is an undertaking by the applicant to commence proceedings, particularly where the application is made ex parte.

IF THAT’S STILL NOT ENOUGH

Another way to prevent a defendant from absconding with assets is to apply for a ‘gagging’ order. A gagging order can provide anonymity to the Defendant’s details in writ and/or court registry. The purpose is to conceal the court proceedings from interested parties and to permit confidential investigations to continue.

A gagging order will only be granted in exceptional circumstances.

The court has jurisdiction to grant a gagging order under s21L of the High Court Ordinance where there are grounds to believe that once the Defendant is aware that he is being pursued, he/she will take steps to prevent any claim that may be made against him/her or investigations being carried out.

This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances