The background to the proceedings involved a substantial loan made by LR Capital to a Cayman company, Strategic Global (Energy) Investment Limited (Strategic Global), whose registered office is the Defendant, ICS. LR Capital claims Strategic Global defaulted on its repayments under the loan, with the amount outstanding for over US$49 million.

LR Capital commenced proceedings against Strategic Global in 2023 in the High Court of Hong Kong for repayment of the outstanding loan facility. Strategic Global did not participate in those proceedings and the terms of the proposed default judgment are in the process of being finalised.

Anticipating the potential enforcement of the default judgment in the Cayman courts, LR Capital’s attorneys conducted a Companies Registry search which, to the surprise of the Second Plaintiff, Mr Cong, who is a director of LR Capital, also listed him as a director of Strategic Global. Mr Cong asserted he never agreed to such appointment and has already commenced defamation proceedings in Hong Kong against Strategic Global and its director, Mr Bo Zhou. The false appointment, Mr Cong argued, was orchestrated to damage his professional reputation.

Against that backdrop, the Plaintiffs brought an ex parte application in the Grand Court seeking:

1. a document preservation order;
2. a sealing order; and
3. a gagging order, all against Strategic Global’s registered office, ICS.

Justice Asif carefully examined the evidential basis for the relief sought and expressed clear reservations about the necessity and proportionality of the orders sought.

Document preservation order

The Court found that there was no compelling evidence that ICS posed a real risk to the integrity of the relevant documents. The Court noted that ICS is a CIMA-regulated entity and would be expected, under the Cayman regulatory regime, to preserve corporate records regardless of any client instruction to the contrary.

Justice Asif also found that the Plaintiffs’ concerns - namely, that Mr Zhou might instruct ICS to destroy or transfer documents - were speculative and unsupported by material evidence.

Gagging and sealing orders

The Court was even less persuaded on the necessity for gagging and sealing orders. Justice Asif agreed with Justice Doyle’s reasoning in Cathay Capital  that gagging and sealing orders are exceptional, and found that the Plaintiffs failed to demonstrate a sufficient risk of prejudice to the intended Norwich Pharmacal application or other proceedings.

Moreover, Mr Cong had already initiated litigation in Hong Kong which significantly undermined the urgency or confidentiality usually required to justify a sealing and gagging order.

The Court further acknowledged that the merits of the underlying Norwich Pharmacal application were a relevant factor in deciding whether to grant interim relief such as sealing, gagging or preservation orders. A strong underlying claim might justify such protective measures, whereas a weak or speculative claim would weigh against them.

This case provides helpful guidance for parties seeking or defending interim relief before an intended Norwich Pharmacal application. There is a high threshold to overcome before preservation, sealing or gagging orders will be granted, particularly where the defendant is a registered office provider, ie a regulated service provider with statutory obligations and no axe to grind against the plaintiff.

The decision will also be welcomed by practitioners for the confirmation it provides that the Court will consider whether there is a prima facie  strong case for the underlying Norwich Pharmacal application as a factor in deciding whether such interim relief is justified in the interests of justice.