Standard Chartered Bank (Hong Kong) Ltd v Lau Lai Wendy and another  HKCU 3268
Clarification of the duty to make full and frank disclosure on ex parte applications
In the recent case of Standard Chartered Bank (Hong Kong) Ltd v Lau Lai Wendy and another  HKCU 3268, the Court of First Instance ("CFI") reviewed the issue of material non-disclosure in an ex parte application to the Court, and its implications for the applicant if material non-disclosure is established. The present case concerned the substantive hearing of the application for an injunction. The 2nd Defendant applied to discharge the injunction on the ground that there had been material non-disclosure of material facts by the plaintiff at the ex parte stage, such that the Court was deprived of the opportunity to consider matters raised by the 2nd Defendant. Although the Court acknowledged that it would have been better if additional evidence had been exhibited to the affidavit evidence filed in support of the original ex parte application for the injunction so as to avoid allegations of non-disclosure of material facts, the failure to do so in this case did not amount to a material non-disclosure. In doing so, the Court confirmed that the test for materiality is an objective one to consider whether all matters relevant to the Court's "weighing operation" have been disclosed.
After receiving customer complaints, the Plaintiff bank investigated the conduct of the 1st Defendant, an employee of the Plaintiff. The 1st Defendant admitted during the investigation that she had misappropriated funds from the 2nd Defendant's accounts and had subsequently transferred about US$24m from the Plaintiff's suspense accounts or other customer accounts into the 2nd Defendant's accounts held with the Plaintiff, and had retained some of those funds for her own benefit.
The Plaintiff bank then made an ex parte application for an injunction against the Defendants, which was granted. The 2nd Defendant alleged that there had been material non-disclosure by the Plaintiff bank during the ex parte application as it had not disclosed either the interview statements which were made during the Plaintiff's investigation, or WeChat text messages between the 1st and 2nd Defendants. The 2nd Defendant argued that these details were relevant because they contained the agreement with the 1st Defendant that he was entitled to additional interest payments and accordingly, entitled to the misappropriated funds, meaning that the Court had been deprived of the opportunity of considering a number of matters which were raised in the 2nd Defendant's skeleton submissions. After reviewing all of the matters before it, the Court found that there had been no material non-disclosure, though it did acknowledge that had these matters been disclosed, it would have prevented allegations of material non-disclosure being made in the first place.
The Court should make an objective assessment as to materiality of the undisclosed matter
In considering the 2nd Defendant's case, the Court confirmed that it is the applicant's duty to disclose all matters which are relevant to the "weighing operation which the Court has to make in deciding whether or not to grant the order". The test as to whether a matter is material is an objective one, to be decided by the Court. Any failure by the applicant to disclose relevant matters cannot be justified by the applicant being unaware or not believing the facts to be material to the application.
Further, the Court affirmed the principle that an injunction will not be automatically discharged once it is held that there has been material non-disclosure. If material non-disclosure is established, the Court retains the discretion to continue the order, or to make a new order on terms. In the present case, the Court decided that even if it was incorrect in finding that there was no material non-disclosure, it would have, in any event, granted a fresh injunction. The injunction initially obtained by the Plaintiff was ordered to be continued pending the trial of this action, or until further order of the Court.
This case is a reminder of the well-established principle that full and frank disclosure must be made by an applicant in respect of any ex parte application. Litigants should be mindful that this duty is not discharged simply by exhibiting bundles of documents mentioned in supporting affidavit evidence. Specific reference to relevant issues referred to in exhibits to the affidavit evidence must be highlighted in the body of the supporting affidavit, or in oral submissions to the Court at the ex parte hearing.
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