In Mainland China it is common to apply to the court for preservation of property for enforcement of judgment debt. Against a disappeared debtor, if his identifiable assets are deemed enforceable, the Court will normally approve such applications, regardless of whether the matter is pre-trial or post-trial.

How about Hong Kong? What could be done if the debtor has no enforceable asset in Mainland China but has some assets in Hong Kong, such as real properties, bank deposits or shares? Could a similar enforcement order be applied against such assets in Hong Kong? 

1. High threshold for application of property seizure order in Hong Kong
Before the commencement of litigation or enforcement in Hong Kong, there are possible measures similar to those in Mainland China for property preservation. Mareva Injunction, for example, is a form of interlocutory injunction where the court orders to restrain the defendant from dissipation of his assets before judgment. Given the strict requirements of Mareva Injunction, it is regard as “the most draconian measure” or “nuclear weapon” under the common law. Only in very exceptional case may the court grant such order. Thus, it is generally used as the very last resort.

Upon the commencement of an ex-parte Mareva injunction application, the court will examine the matter from the perspective of the defendant (respondent). Plaintiff (applicant) must then make a full and frank disclosure of the case details, especially those facts that may be unfavourable to the application. How such information has been obtained is also relevant and disclosable for ascertaining whether it is obtained in “clean hands”. The court will only grant such injunction if the plaintiff can prove: -
1.  A real risk of dissipation of assets on the part of the defendant; and
2.  Urgency in relation to the subject matter in dispute

2. Proving there exists a real risk of dissipation of assets?
Although there is no single universal rule for ascertaining the same, case laws have provided some guiding principles on assessing the risk of dissipation for various types of assets. For example, shares and bank deposits enjoy a lower threshold for proving the risk compared to real estate, whereas assets held by offshore companies also enjoy such lower threshold compared to assets held by local companies.

Another factor for consideration is the possibility of the defendant(respondent) being out of jurisdiction in the foreseeable future. Relevant indicators, which could possibly be evidenced by employees of the defendant(respondent), include but not limited to transfer or disposal of assets, preparations for overseas migration, conclusion of contracts for the sale of properties, or reduction in shareholding in Hong Kong listed companies. Such indicators may persuade the Court to grant a Mareva Injunction.

The Court will also take into account the jurisdiction of the respondent and whether there is any mutual recognition arrangement for judgments and enforcement, as well as the time required for such process. It may be easier to obtain an injunction if there is no similar mechanism or a long time is required for the process. Past and current credit records of the respondent are also relevant. The Court is more prepared to grant the order where the respondent has a poor credit record with relatively short business operation period.

On the other hand, where the respondent is on the verge of bankruptcy or winding-up, the court is unlikely to grant Mareva Injunction. An emphasis of “fairness” in common law results in the Court’s tendency in giving indulgence to the relatively weak party.

3. How will the court proceed after the application is filed?
The application is usually first made by way of a telephone call to the judge on duty in the morning. It will normally take 2-3 hours for the judge to review the relevant materials and the hearing is then commenced in the afternoon. Some judges may require the handling solicitor to brief the Court the case facts during the hearing, which highlights how the Court approaches such application with urgency. This also differs from the approach in Mainland China.

It is also worth noting that even if the applicant gives an undertaking of a full guarantee against the entire value of the injuncted asset, the Court will still reject such application if the Court is not satisfied that there exist a real risk of dissipation of assets and an urgency of the matter. Unlike Mainland China, Hong Kong Courts attach a high degree of priority towards private property rights. Thus, Mareva Injunction is seen as the most draconian measure or a nuclear weapon against the respondent. The Court will handle such application with great caution and tends to show reluctance in granting such order.

4. Other methods
There are other possible measures prior to litigation or enforcement with similar effects. Examples include registering the Originating Summons / Writ of Summons against the title of the defendant’s registered address in the Land Registry, or registering the Court Order against the same. Intended purchasers will have express notice upon reviewing the details of the property and will normally be deterred from proceeding with the intended purchase. The Plaintiff could then apply for Order of Sale to sell the defendant’s properties. Where there is clear evidence of any intended transfer or disposal of the asset in progress, the Court will be much more ready to grant a Mareva Injunction to freeze the assets.

For judgment debts that remain outstanding, the Court may order the judgment debtor to disclose his/ her financial information (assets, debts, income, expenditure and other relevant information) upon application. The Court may also order the defendant to provide documentary evidence in support of the full disclosure. Nevertheless, as personal service is required, service may become an issue where the judgment debtor is out of the jurisdiction.

Where the Court is satisfied that the judgment debtor is intending to evade attendance of the hearing, it may order that the judgment debtor be arrested and be brought before the Court before expiry of the next day of arrest.

Procedures afterwards
a.  If the Court is satisfied that the debtor is able to satisfy the judgment debt in whole or in part, but fails to do so; or has disposed of assets to avoid the full or partial performance of the judgment, or to avoid legal liability under the judgment in full or in part; or deliberately fails to make full disclosure, or deliberately refuses to answer requisitions as required, the court has the discretion to order the judgment debtor to be imprisoned for a period not exceeding 3 months.
b.  If the Court is satisfied that the debtor can or will be able to satisfy the judgment debt in full or in part by instalments or other means, it may also order the judgment debtor to perform the judgment in any manner as the Court deems appropriate.

If the judgment debtor fails to comply with the order, the plaintiff could apply to the Court for imprisonment of the debtor after giving a 2-day notice to the judgment debtor. The Court could then order the judgment debtor to be imprisoned for no less than 3 months unless there is legitimate reason provided by the judgment debtor for his default in compliance.

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