By: Nigel Binnersley, Yuqi Shi & Byron Chow
The court has jurisdiction to grant interlocutory injunctions before and after judgment has been handed down. A more recent trend has been towards the granting of “interim-interim” injunctions. Such a power is discretionary and may be exercised by the court, so long as it appears to be just and convenient to do so. This jurisdiction is derived from sections 21L and 21M of the High Court Ordinance, Cap. 4.
Generally, applications for interlocutory injunctions will only be considered if the injunctive relief sought is in support of a substantive cause of action in Hong Kong. Interlocutory injunctions can be (1) mandatory, which requires the respondent to perform positive action(s); or (2) prohibitory, which forbids the respondent from performing or continuing certain action(s).
Interim-Interim Injunction
As explained by the court in NPYJ v SMRC [2018] 1 HKLRD 573, an interim-interim injunction is “meant to be a very-short-term-basis kind of arrangement” and would only be made “as a temporary measure and in circumstances where the court feels that there are other issues which have to be explored, and the time given to the court to deal with the matter and in preparation of the matter were not sufficient for that purposes”. For the time being, the court will put in place “some kind of arrangement to regulate the affairs in light of the high conflict between the parties”. The court does so by “tak[ing] whichever course appeals to carry the lower risk of injustice if it should turn out that [the decision] is wrong”. It is a makeshift measure that is predicated on fairness. Sometimes, the court could also make directions for a full hearing to be heard quicker, so that there can be a full and proper determination of the matters and arguments raised by both parties.
This was endorsed by the court in China Shanshui Cement Group Ltd and Others v Zhang Caikui and Others [2018] HKCA 409, whereby interim-interim relief was described to be “an urgent temporary stop-gap measure and the circumstances were such that the court has to do practical justice on the balance of fairness even though it may not have sufficient time to consider the matter fully”. The highly urgent and short-term nature of such relief therefore earns the relief the name “interim-interim”, as opposed to the usual “interim” relief that is more well-known.
There is no definitive rule of whether an interlocutory injunction should be made ex parte or inter partes, but an ex parte injunction application is often made when the matter is of extreme secrecy or urgency where notifying the defendant of the injunction would defeat the application itself, or there is no time to notify the defendant. Given the nature of interim-interim relief, most applications are usually made ex parte. This means that the plaintiff is strictly required to give full and frank disclosure by, for example, disclosing facts that might result in the court not granting the relief sought.
When granting an interim-interim relief, the court has very limited time and an insufficient opportunity to fully consider an application for interlocutory relief. While the court is entitled to form a preliminary view on the merit of the applicant’s case, any provisional decisions are to be revisited in the near future, and by then, parties will have a proper chance to submit further arguments and evidence to substantiate their respective position.
In Shin Rick Ju-Feng (施如峰) and Others v Lo Yuen-Li (羅月麗) and Others [2021] HKCU 4770, the court explained that as the parties have not filed all evidence and the court has not had sufficient opportunity to fully consider the parties’ submissions, it is “impracticable and inappropriate to ask the Court to apply the American Cyanamid guidelines in full force” at such a stage. This also means that the court is not obliged to consider the merit of an application, and should be “extremely cautious” to form such views, except in clear and obvious cases. That being said, it would still be appropriate to not grant an interim-interim injunction if the court finds that it is reasonable to consider the merits and conclude that the plaintiff cannot even establish a serious question to be tried. In making its determination, as each case turns on its own context, the judge can accord different weight to the merit of an issue, the subject matter at stake and effect of the grant or refusal of the relief.
Recent Experience
In a recent case, our firm represented a defendant lender in a case arising from a loan facility arrangement with the plaintiff borrower. The arrangement involved a series of security documents being executed, including a debenture. The debenture provided our client, as the lender, with the power to appoint receivers over charged property (defined in the debenture) should the plaintiff default on its repayment obligations. The plaintiff defaulted, which resulted in our client appointing receivers and managers over the charged property.
The plaintiff sought an interim-interim injunction to be made until the determination at trial, to the effect that:
- The receivers would be restrained from exercising any powers conferred on them by the debenture, and holding themselves as receivers of the charged property; and
- Our client was restrained from enforcing or exercising any powers in the facility agreement and debenture.
The Plaintiff opponent objected to the appointment of receivers by alleging that the appointment was bringing significant disruption to its operations since the plaintiff no longer had access to bank accounts, which affected its receipt of funds, as well as regular and prompt payment of ordinary expenses, such as staff payroll. The plaintiff borrowers also alleged that should the receivership be disclosed to the public or potential business partners, the plaintiff’s bid for future business projects would beprejudiced . As the plaintiff’s business was a high cash-flow model, the plaintiff would allegedly have to shut down within a very short time frame, thereby causing irreversible prejudice. On top of this, the plaintiff claimed that it had secured a new loan agreement, with the injection of funds aimed at discharging its’ payments obligations to our client within the next two weeks.
The court at first instance found in favour of the plaintiff and granted an interim-interim injunction on terms the plaintiff sought. The relief was ordered to be only effective until the conclusion of the hearing of the summons, to be argued within two weeks.
In the subsequent hearing, upon given more time to consider the case and see additional evidence filed with the court, the plaintiff’s application for an interim-interim injunction was refused. The receivers could accordingly continue with their work. In arriving at this decision, the court focused on why the initial interim-interim relief was first granted, when the plaintiff had indicated that it would be able to get sufficient funding by the time of the subsequent hearing and that repayment would therefore have been made by that time. However, as it turned out, the deal did not materialise and repayment was never made, as promised. Having considered the nature of the urgent stop-gap relief, as well as from a practical standpoint and on a balance of convenience, the plaintiff’s application for interim-interim relief was unsubstantiated and would be dismissed.
In arriving at its decision, the court made the following practical observations:
- There is a difference between “not being able to do something” and “finding it difficult to do something”;
- By not being able to repay the loan amount, the plaintiff was by definition insolvent, and it would not be able to defend itself, in any event, if a statutory demand was served on them;
- The court did not allow the plaintiff to go into substantive details about their case because it was not a substantive hearing for determining of the summons.
Should you have any inquiries or require our assistance on such issues, please contact us.