On 1 December 2023, The Honourable Mr Justice Doyle dismissed an application by Mr Hao Liang (Mr Liang) for an inquiry into the loss and damage suffered by him personally, as a result of the appointment of joint provisional liquidators (JPLs) over Seahawk China Dynamic Fund (the Company or Fund).  The judgment is available here.

Katie Pearson and Alexia Adda of Claritas acted for Mr Lau Chun Shun (Mr Lau) on the application, instructing Clare Stanley KC of Wilberforce Chambers.  

Mr Lau had issued a winding up petition (Petition) and summons in February 2022, seeking the appointment of JPLs over the Fund (Summons). The Summons, heard ex parte on short notice to Mr Liang, the Fund’s manager, was successful and JPLs were appointed. The Order appointing the JPLs (JPLs Order) recorded Mr Lau’s cross-undertaking to the Court, as follows:

“Mr Lau Chun Shun by his counsel undertaking for and on behalf of [Mr Lau] to compensate for any loss or damage suffered by the Company as a result of this order if the Court considers it just in the event that the winding up petition is ultimately withdrawn or dismissed.” (Undertaking)

A consent order confirmed that “the proceedings shall be treated as inter partes proceeding between the Petitioner and [Mr Liang] as the holder of the management shares.”

The Petition was unsuccessful and the JPL order was discharged. Mr Liang sought an inquiry into the loss and damage suffered by the Company, as well as an inquiry into the loss and damage suffered by him personally. Mr Lau agreed to the former, so the application was solely concerned with whether the Undertaking extended to cover Mr Liang.

The application was heard on 22 November 2023 and the Court found as follows:

  • The Undertaking, which had been accepted by the Court, was in the standard form provided in the Companies Winding Up Rules. The Judge confirmed, “It is crystal clear in my mind, that the express wording of the Undertaking does not include Mr Liang.”
  • Mr Liang had pointed to no authority where the undertaking had been extended to cover shareholders or other third parties.
  • Mr Liang’s application for the cross-undertaking to be extended to him was belated. Mr Liang had not been joined as a party to the proceedings and his counsel’s submissions to the contrary were “misplaced.” He found that “The Undertaking does not cover Mr Liang and would not have covered him even if he had been joined as a party” as it was expressly limited to the Company and not expressed to cover “parties”.
  • Tucker v New Brunswick Trading Company of London (1809) 44 Ch D 249 was analogous to this case. In Tucker, the applicant had not asked for the undertaking to cover him, so the English Court of Appeal found that he was not beneficially entitled to it.
  • An undertaking is given by the plaintiff as the ‘price’ for the Court granting the injunction. The Court has no power to compel a plaintiff to give an undertaking, nor could it compel a plaintiff to retrospectively extend or amend the scope of an undertaking (Tucker, p.252). The likely cost of a plaintiff refusing to give an undertaking would be the refusal of the injunction application.
  • Ms Stanley cautioned the Court against using hindsight, noting that it is not certain what would have happened if Mr Liang had previously applied to the Court for the Undertaking to cover him. That application may not have succeeded. If it had, Mr Lau could have decided not to proceed with the JPLs Order.
  • As the Undertaking was express, limited and offered in the standard terms, there was no room to extend it by ‘implication’, as he confirmed that “an express offer [of an undertaking] must displace any implied offer.” (SmithKline, paragraph 58).

A party who considers they may be damaged as a result of the grant of injunctive relief must be alert to the scope of any undertaking given by the applicant and consider if they are sufficiently covered by it. If not, time is of the essence for any steps they need to take to bring themselves within its protection.