HONG KONG Law and Practice Contributed by: George Lamplough, Edward Beeley, Vanessa Cheng and Curtis Pak, Holman Fenwick Willan
1.6 Rules of Pre-Action Conduct Damage Control: Preservation of Assets
An applicant can apply for a Mareva injunction at any time before or during the litigation process, so long as the court is satisfied that: • there is a good arguable case on a substantive claim against the defendant; • the defendant has assets within Hong Kong; • the balance of convenience is in favour of granting the injunction; and • there is a real risk of dissipation or secretion of assets. Defendants who refuse or fail to comply with the terms of a Mareva injunction may be liable for contempt of court and ordered to pay a fine or sent to prison. Court fees are inexpensive in Hong Kong. For High Court proceedings, the cost of issuing a writ or origi - A plaintiff who seeks injunctive relief must give an undertaking to pay the defendant any damages the defendant might suffer if it later transpires that the injunction should not have been granted. This is known as a cross-undertaking in damages. As a condition of granting an injunction, the courts may ask that the plaintiff “fortify” the cross-undertak - ing (ie, provide a bank guarantee or make a payment into court). nating summons is only HKD1,045. Cross-Undertakings in Damages Where there is a strong prima facie case of fraud, the courts do not always order the plaintiff to fortify its undertaking as to damages until after the defendant appears before the court and requests fortification. The Effect on Third Parties It is a contempt of court for any person notified of an injunction knowingly to assist in or permit a breach of the order. Any person doing so may be imprisoned, fined or have their assets seized. Prohibition Against Debtors Leaving Hong Kong RHC Order 44A enables a plaintiff or a judgment creditor to apply to courts, ex parte, seeking an order prohibiting a debtor from leaving Hong Kong for a “judgment-proof” jurisdiction.
As soon as fraud is discovered, victims should act quickly to stop the funds from being dissipated. Vic - tims should follow these general guidelines: • tell the bank – immediately inform the bank and ask the bank to reverse the transfer(s); • tell the police – file a report with the Hong Kong Police and a Suspicious Transaction Report with the Joint Financial Intelligence Unit (JFIU); • consider obtaining interim injunctive relief; and/or • consider obtaining disclosure orders, particularly Norwich Pharmacal orders (NPOs). Victims can apply for injunctive relief to freeze prop - erty over which the victim has a proprietary claim and restrict alleged wrongdoers from dealing with their assets. Injunctions can be granted in respect of assets within Hong Kong or worldwide and can restrain wrongdoers from removing or disposing of assets. Pre-Action Disclosure Pre-action disclosure against third parties (such as NPOs) can be sought to obtain information about potential defendants. Pre-action disclosure is also available against potential defendants. Such orders can assist an applicant who is aware of the identity of potential suspects but does not have sufficient details to advance a claim. 1.7 Prevention of Defendants Dissipating or Secreting Assets Mareva Injunctions (Sometimes Known as Freezing Orders) Mareva injunctions restrain defendants from dispos - ing of their assets with the intention of frustrating a judgment already or later made against them. Mareva injunctions operate in personam. Mareva injunction applications are usually made ex parte – that is, without notice to the defendant. When an application for a Mareva injunction is made ex parte, the plaintiff is obliged to make full and frank disclosure to the court. Shortly after the court grants a Mareva injunction, the defendant will have an oppor - tunity to challenge and set aside the order.
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