Chau Yuet Ching Brenda v. Chan Bo Man William and Others

HCA 652/2017

[2019] HKCFI 2778

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 652 OF 2017

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BETWEEN

Before: Deputy High Court Judge Le Pichon in Chambers

Date of Hearing: 9 October 2019

Date of Further Written Submissions: 11 and 15 October 2019

Date of Decision: 11 November 2019

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DECISION

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1.There are three summonses before the court:

(a) the summons dated 6 July 2018 of Chan Bo Man William (“D1”), BMC Decoration Limited (“D2”) and BMC Holdings (International) Ltd (“D3”) (“the discharge summons”) for an order to discharge (i) the injunction against D1 and D2 (“the injunction order”) granted ex parte on 29 March 2017 and continued on 6 April 2017 restraining D1 and D2 from dealing with the shares in three companies described below belonging to the plaintiff and (ii) the order of undertaking given by D3 on 4 May 2017 not to deal with the shares in Manyrich Investment Limited (“Manyrich”);

(b) the summons of D1 – D3 and BMC Construction Centre Limited (“D4”) dated 12 December 2018 (“the amendment summons”) for leave to amend a set of Further and Better Particulars (“2^nd FBP”) of the Amended Defence and Counterclaim (“ADCC”); and

(c) the summons dated 20 June 2019 of Chau Yuet Ching Brenda (“the plaintiff”) to vary the injunction order against D1 and D2 (“the variation summons”).

2.At the conclusion of the hearing, my Decision was reserved which I now give.

INTRODUCTION

3.The plaintiff is an elderly widow over 80 years of age with a son Chau Brandon Clairborne Kwok Fung (“Brandon”) who is married to Jenny Wong (“Jenny”).  The plaintiff is a well-known socialite and for a short time prior to her marriage, practised as a barrister.

4.She was the owner of shares in Manyrich, More Harvest Investment Limited (“More Harvest”) and Lucky Top Enterprises Limited (“Lucky Top”) (collectively “the plaintiff’s companies”) which were investment companies holding residential properties with substantial market value until the events that led to the injunction order. Those shares form the subject matter of the injunction order. The plaintiff and Brandon were the directors of Manyrich and Brandon was the sole director of More Harvest and Lucky Top.

5.The injunction order prohibited D1, D2 and (by undertaking) D3 from dealing with the plaintiff’s 9,999 shares in Manyrich, D1 and D2 from dealing with the sole share in More Harvest and the sole share in Lucky Top pending trial of the plaintiff’s claim or further order. The Manyrich matter has been settled: D3’s claim under a charge over those shares was released and discharged by a consent order dated 16 January 2019 (“the January 2019 order”) through a payment into court of $24 million by the plaintiff who has since held those shares free from D3’s charge. It is common ground that the injunction order over Manyrich is no longer required although it is the defendants’ position that it should not have been granted in the first place and falls under its discharge summons.

6.The plaintiff seeks to vary the injunction order to restrain D1 and D2 from dealing with the sole share in Lucky Top and the sole share in More Harvest pending judgment or further order of the court which if granted would leave Manyrich outside the scope of the injunction order.

7.In addition to the plaintiff’s companies, the plaintiff was also the owner of four other companies known as “the Pink Diamond Companies” and in each case, Brandon was the sole director.

BACKGROUND

8.The plaintiff has known D1 since 1996 in relation to renovation work for her properties. In mid-2016 the plaintiff let it be known to D1 that the mortgage repayments for her many properties were high and she wanted to sell them to obtain cash flow. D1 offered to help her with potential purchasers and estate agents to handle the sale as well as obtaining mortgages from the Bank of China (“BOC”) which offered more favourable terms.

9.Sometime in November 2016, D1 visited the plaintiff accompanied by a lawyer and an accountant and brought along a bundle of documents (“the November 2016 documents”) for the purpose of instructing agents to sell the plaintiff’s properties and for transferring mortgages to BOC. Believing in D1, she signed the documents without reading them. She was not given a copy.

10.In January 2017, she and Brandon were alerted by the auditor of her companies that certain records had been registered at the Companies Registry removing Brandon as director and also replacing the incumbent company secretaries with other entities. The plaintiff did not know why that was the case and instructed the auditor to rectify the records.

11.On 21 January 2017, the plaintiff’s solicitors wrote (“the solicitors’ letter”) to Three A Advisory Limited (“Advisory”) which had been appointed company secretary as a result of the November 2016 documents to the effect that those documents (appointing Advisory as company secretary, changing the auditor and the registered office of the plaintiff’s companies) were procured by “wrongful representation, pressure and influence” asserted by Advisory’s representative on the plaintiff. The solicitors demanded that Advisory immediately cease representing to third parties that it is the company secretary failing which the plaintiff would apply for an injunction.

12.D1 made several visits to the plaintiff in the early part of February 2017. On 15 February 2017, D1 arranged for the plaintiff to sign a bundle of documents (“the February 2017 documents”) at the office of a firm of accountants, DC Associates, which she believed had to do with appointing estate agents and the transfer of mortgages to BOC. They turned out to include instruments of transfer, bought and sold notes indicating that the plaintiff transferred at nominal consideration the shares of her companies; company records of the plaintiff’s companies removing Brandon as director, replacement of the incumbent company secretaries and registered office address of the companies.

13.On 17 February 2017, one of the staff queried whether she had borrowed money from financial institutions. That eventually led to reporting the matter to the police.

14.She learned that on about 17 March 2017 that there was a purported transfer of shares in Manyrich in favour of D1 and/or D2. On 24 March 2017 Hong Kong Hoi Shun Limited (“Hoi Shun”) acting on behalf of D1 asserted that D1 was the shareholder of Lucky Top. That led to the injunction order and the commencement of the current proceedings.

I. THE DISCHARGE SUMMONS

15.D1 – D3 put forward two grounds for discharging the injunction order: (a) material non-disclosure at the time the plaintiff made her ex parte application, and (b) futility of the injunction order as Lucky Top and More Harvest are no longer in the hands of D1 and D2.

(A) Material non-disclosure

16.The ex parte injunction was obtained on the basis that the plaintiff had been fraudulently induced by D1 whether by himself or acting in concert with D2 his company and/or their agents and servants into signing the November 2016 documents and the February 2017 documents in that they included instruments of transfer of shares in the plaintiff’s companies in favour of D1 or D2.

17.Mr Chong, counsel for D1 to D4 submitted that the plaintiff’s case of fraud against his clients is critically dependent upon her professed lack of knowledge of the true intent and effect of the November 2016 documents and the February 2017 documents, he submitted that such a claim is unsustainable but for a proper understanding, the context against which the documents were signed is required.

18.At the forefront of Mr Chong’s submissions was the fact that the solicitors’ letter (that did not allege fraud) was never brought to the attention of the judge. Had that been done, it would have raised questions as to why the plaintiff was nevertheless willing to sign a bundle of documents again having, as it were, already had her fingers burnt the previous November.

19.The defendants also criticised the plaintiff’s description of dealings with D1 (in her 1^st affirmation at §§19 – 20) as being wholly inadequate.

20.D1 and D2 relied on the following matters, namely, (i) the outstanding debt; (ii) the August agreement; (iii) the plaintiff’s knowledge as regards the effect of the November 2016 documents; and (iv) the plaintiff’s knowledge as regards the effect of the February 2017 documents.

21.So far as the relevant context is concerned, in broad outline, the defendants’ case is as follows:

(a) D1 and D2 submitted that the outstanding debt is indisputable given:

(i) the document dated 22 September 2016 (“the 2016 acknowledgement”) signed by the plaintiff acknowledging that she owed D2 $13,359,241 for services rendered between February 2006 and July 2016; and

(ii) the document dated 18 May 2012 (“the 2012 acknowledgement”) signed by the plaintiff acknowledging that she owed Talent Express a sum of $6 million for management services in relation to her land in Wong Chuk Yeung (“the WCY property”) as well as the legal costs of $352,611.48 Talent Express/Lam[1] had incurred on her behalf for a judicial review application in respect of the WCY property.

(b) It was then said that against that indisputable existence of the outstanding debt, in July 2016, the plaintiff approached D1 regarding the development of her lands in Sheung Yeung Village and Mang Kung Uk (“the new projects”) as she was experiencing financial difficulties.

(c) The plaintiff and D1 reached an agreement in August 2016 whereby D1 would procure the relevant companies to complete the new projects for her and in return D1 and the relevant companies would have the right to sell the plaintiff’s shares in the plaintiff’s companies and the proceeds would be applied to repay the outstanding debt and to complete the new projects (“the August agreement”).

(d) To facilitate its performance, the plaintiff requested D1 for assistance in removing Brandon as director of the plaintiff’s companies and appointing the plaintiff in his place and it was against that background that the November 2016 documents were signed.

(e) On 7 February 2017, upon realising that Brandon was reinstated as director the plaintiff again requested D1’s assistance to (i) again remove Brandon as director and (ii) effect the transfer of the shares of the plaintiff’s companies to the relevant companies which could on-sell the same to raise funds for the new projects.

22.Mr Chong submitted that it was for that purpose that the plaintiff signed the February 2017 documents and that the plaintiff knew exactly what she was doing when she signed the November 2016 documents and the February 2017 documents. There was simply no fraud which was the basis upon which the plaintiff had obtained the ex parte injunction. 

23.That, it was said, is supported by “direct evidence” showing that the plaintiff signed the documents of her own free will, namely voice recordings. D1 had secretly recorded a conversation between himself, the plaintiff and other unidentified persons on 26 September 2016 and at another meeting that took place at the plaintiff’s home on 7 February 2017, eight days before the February 2017 documents were signed on the 15 February 2017.  Transcripts of those recordings (said to be incomplete) were exhibited to D1’s 2^nd affirmation.

24.The court did not consider it a useful exercise to have selected passages read out in court. Mr Chong then agreed to submit a list of the relevant passages and the conclusions to be drawn from them after the hearing with leave to the plaintiff to submit a written response. That has duly taken place.

25.Since the hearing, the defendants have filed a list stating three conclusions referencing relevant pages of the transcripts. Those conclusions are that (i) the plaintiff knew full well that the effect of the November 2016 documents was to, among [other] things, remove Brandon as a director of the plaintiff’s companies; (ii) there was an internal struggle between the plaintiff and Brandon as to the control of the plaintiff’s companies as well as other monies and properties; and (iii) the plaintiff instructed D1 again to remove Brandon as a director of the plaintiff’s companies to get back control of those companies in performance of the August agreement.

26.The plaintiff does not admit the authenticity of the voice recordings. Both recordings are said to be incomplete and have been disclosed by D1 on a selective basis. Further, the plaintiff submitted that the selected pages do not support the conclusions sought to be drawn. None of the pages relied on for conclusion (i) specifically referred to the November 2016 documents. They therefore cannot show that the plaintiff knew the nature and effect of the documents signed in November 2016. Nor was there specific reference to the August agreement and the new projects and thus do not support conclusion (iii) that the plaintiff wanted to get back control of the companies for the purpose of performing the August agreement.

27.It was also noted that some pages[2] show that the plaintiff did not know that Brandon had been removed and it was D1 who suggested that Brandon be removed again and that he would assist the plaintiff to prepare the documents. On that basis, it could not be shown that the plaintiff knew she had to remove Brandon again.

28.It should be noted that secret recordings of conversations have been held to be contrary to the right to freedom and privacy of communication under Article 30 of the Basic Law and carried with it significant elements of inherent unfairness. The weight to be placed on such evidence depended on how it came to exist, in particular the unfairness to the plaintiff that he had no opportunity to examine the footage to determine if any other passages should be put before court at all: see Chan Sung Lai v Chan Sung Lim Paul [2015] 4 HKLRD 268 at §§20, 22 – 23, 28 – 33.

29.The observations of DHCJ To made in Cheer Sky Ltd v Chan Yuet Sheung [2019] HKCFI 606 (HCA 939/2014, 7 March 2019) at §§48 – 49 are particularly apposite:

“ 48. … I am always sceptical about the probative value of such evidence. Such recording is certainly reliable evidence of what was said during the conversations, but not necessarily of its truth. The party taping the conversation must have certain purposes to achieve, including to induce the other party to say things which are advantageous to him or prejudicial to the other side. The other party who does not know that the conversation was being taped, may have unwarily adopted what was put to him without much thought. In assessing the reliability of the conversation, I would adopt the following approach. Anything said by the party taping the conversation which is against his interest would be given more weight. Anything that he said which is to his interest is self-serving and will be given no weight. Anything prejudicial said by the party being recorded would have to be tested against the totality of the evidence before weight is given to that piece of evidence.

49.  In assessing weight to be given to a piece of conversation, it is always desirable to listen to the recording than to read the transcript. The intonation and tone of the speaker may give an impression which is very much different from that given by reading a transcript.”

30.Those observations were made in the context of the trial. We are here concerned with interlocutory proceedings which make it even less satisfactory for the court to attempt to evaluate selected passages without the complete picture to come to some conclusion on material non-disclosure based on secret recordings.

31.Pausing here, it is to be noted that despite the presence of professionals (a solicitor and an accountant) at the 15 February 2017 meeting, neither of them has provided an affidavit/affirmation of what transpired at the meeting. That is surprising.

32.Those matters aside, the relevant context which the defendants acknowledge is required for a proper understanding of the fraud claim is one that is fraught with highly controversial events and matters. Mr Chong then sought to downplay the relevance of the underlying transactions as not being the focus of the discharge summons. The question for the court was whether the plaintiff had lied to the court when obtaining the ex parte injunction.

33.That is all very well but it is clear from his oral submissions that the outstanding debt is the central or core feature underpinning the present application for discharge.

34.Far from the outstanding debt being “indisputable”, the opposite is true. Even the authenticity of the acknowledgement of debt itself is challenged. If the outstanding debt cannot be established with sufficient certainty at this stage, it necessarily undermines the rest of the defendants’ case regarding the August agreement and the share transfers and the raison d’être of the February 2017 documents.

35.The outstanding debt, the August agreement, the new projects and the share transfers are all disputed as to which matters voluminous evidence has been filed. 

36.Reverting to the point made at the outset concerning the significance of solicitors’ letter that had not been drawn to the attention of the judge, Ms Po, junior counsel for the plaintiff, submitted that the solicitors’ letter was written between the signing of the November 2016 documents and the signing of the February 2017 documents. When in January 2017, the plaintiff realised from her auditor of the changes in the company records, she immediately had those rectified and caused the solicitors’ letter to be written.

37.Thereafter, prior to her signing the February 2017 documents on 15 February 2017, D1 had come to her house on several occasions: on 7 February when the 2^nd secret recording was made, on 10 February when D1, his accountant, lawyer and other persons visited her, but Jenny had turned up which interrupted D1’s purpose for making that visit. Later, but before 15 February 2017, D1 visited her house again and told her that he had some other documents for her to sign to appoint estate agents and to effect changes on mortgages.

38.Ms Po submitted that the fact that the plaintiff told D1 that she would prefer signing documents in the presence of others and not alone with D1 in her house was her way of taking appropriate precautionary measures to protect herself. It was only after her refusal to sign on that occasion that D1 arranged for the February 2017 documents to be signed in Kwun Tong in the presence, inter alia, of his solicitor and accountant: see the plaintiff’s affirmation in support of the ex parte application at §§19 – 22.

39.It was submitted that contrary to the defendants’ submissions, that the plaintiff should have signed the February 2017 documents is not inexplicable at all.

40.Mr Chang SC leading counsel for the plaintiff submitted that the issue of material non-disclosure should be adjourned to trial given the serious factual disputes, citing Dormeuil Frères SA & Anor v Nicolian International (Textiles) Ltd [1988] 1 WLR 1362 where the Vice Chancellor stated (at 1368H – 1369A) as follows:

“ To discover whether an ex parte order has been improperly obtained, the court first has to consider the evidence as it was at the time of the application for the ex parte order and then a mass of evidence designed to demonstrate that that evidence was misleading or failed to make full disclosure. The real question at the time of the inter partes hearing should not be what has happened in the past but what should happen in the future. On the hearing of the inter partes motion it is impossible to make any concluded finding of fact, yet the court is being asked to reach a conclusion on the issue of non-disclosure without full knowledge of the circumstances. This attempt involves a minute examination of detailed allegations and counter-allegations, the exact materiality of which may not be clear to the judge in the interlocutory hearing, in circumstances when that is not necessary for the future conduct of the case.

The cost in time and money to the parties in a complex case can become vast and the waste of court time quite unacceptable.”

41.The Vice Chancellor (in the Dormeuil Frères case) went on to state that he shared the view expressed by Slade LJ in Brink’s Mat Ltd v Elcombe [1988] 1 WLR 1350 at 1359B–E:

“ Nevertheless, the nature of the principle, as I see it, is essentially penal and in its application the practical realities of any case before the court cannot be overlooked. By their very nature, ex parte applications usually necessitate the giving and taking of instructions and the preparation of the requisite drafts in some haste. Particularly, in heavy commercial cases, the borderline between material facts and non-material facts may be a somewhat uncertain one. While in no way discounting the heavy duty of candour and care which falls on persons making ex parte applications, I do not think the application of the principle should be carried to extreme lengths. … I have suspected signs of a growing tendency on the part of some litigants against whom ex parte injunctions have been granted, or of their legal advisers, to rush to the Rex v. Kensington Income Tax Commissioners [1917] 1 K.B. 486 principle as a tabula in naufragio, alleging material non-disclosure on sometimes rather slender grounds, as representing substantially the only hope of obtaining the discharge of injunctions in cases where there is little hope of doing so on the substantial merits of the case or on the balance of convenience.”

42.Those principles have been applied in recent cases in Hong Kong: see Top Gains Minerals Macao Commercial Offshore Ltd v TL Recourses PTE Ltd HCMP 1622/2015 (18 November 2015) at §§59 – 61; Lau Wing Yan & Ors v Chu Kong & Ors HCA 2562/2014 (30 May 2016), at §§47 – 48; and Pandora A/S & Anor v Glamulet International Ltd & Ors HCA 2941/2015 (26 July 2016) at §§15 and 20.

43.Mr Chong made no oral submissions as to why those principles are not relevant in the present case. In his written submissions, reference was made to the decision of Chu J (as she then was) in Minton Optic Industry Co Ltd v Multispark Ltd HCA 9619/2000, 7 July 2001 which was said to refer to an important distinguishing feature in Dormeuil Frères in that it concerned an Anton Piller order.

44.As DHCJ Sakhrani summarised in the Pandora case at §20, the Vice Chancellor (at p 1370) remarked that similar considerations apply when dealing with an Anton Piller order, a Mareva order and also in the case of an ordinary ex parte injunction, emphasising that the question whether the earlier ex parte order should be set aside is not an urgent matter and is only relevant to the cross-undertaking in damages.

45.The Vice Chancellor concluded (at p 1370D) that:

“ in the ordinary case, it is wrong on the hearing of an inter partes motion to go into the huge complexities involved in seeking to disentangle at that stage whether there was full disclosure when the ex parte order was obtained. The matter should normally be dealt with at trial …. The right course, therefore, would normally be to adjourn an application to set aside the ex parte order to be dealt with at the trial.”

46.Given the defendants’ acknowledgement of the importance of the context for the November 2016 documents and the February 2017 documents, the fact that the context involves matters that are highly controversial and disputed, I do not see how the court can be in any position to decide the issue of material non-disclosure if it is to do justice to the parties.

47.In my view, the Dormeuil Frères principles are applicable in this case.

(B) The futility issue

48.This will be considered in conjunction with the plaintiff’s variation summons.

II. THE VARIATION SUMMONS AND THE FUTILITY ISSUE

(1) Transfers of Lucky Top and More Harvest after 15 February 2017

49.The February 2017 documents included a transfer dated 16 February 2017 of the sole share of Lucky Top from the plaintiff to D2 in consideration of $1. That led to a series of transfers summarised in the table below:  

Lucky Top Transfers
Date	Transferor	Transferee	Documents signed	Consideration	Director
16 February 2017	Plaintiff	D2	Instrument of Transfer; Bought and Sold Notes	$1	Plaintiff
28 February 2017	D2	D6	Sale and purchase agreement (“1st SPA”)	$10,557,000
3 March 2017	D6	D7	2nd SPA	$5,800,000
8 March 2017	D2	D6	Instrument of Transfer; Bought and Sold Notes	$10,557,000	D1
8 March 2017	D6	D7	Instrument of Transfer; Bought and Sold Notes	$5,800,000
9 March 2017					D6

50.The February 2017 documents also included a transfer on 16 February 2017 from the plaintiff to D4 of her sole share in More Harvest for $1. That also led to a series of transfers summarised in table below:

More Harvest Transfers
Date	Transferor	Transferee	Documents signed	Consideration	Director
16 February 2017	Plaintiff	D4	Instrument of Transfer; Bought and Sold Notes	$1	Plaintiff
28 February 2017	D4	D5	Sale and purchase agreement (“1st SPA”)	$10,300,000
8 March 2017					D1
9 March 2017	D4	D5	Instrument of Transfer; Bought and Sold Notes	$10,300,000	D5
9 March 2017	D6	D8	2nd SPA	$5,800,000
10 March 2017	D5	D6	3rd SPA	$5,800,000
17 March 2017	D5	D6	Instrument of Transfer; Bought and Sold Notes	$10,300,000
	D6	D8	Instrument of Transfer; Bought and Sold Notes	$5,800,000

51.D2 claimed that the injunction order had the effect of interrupting D2’s sale of Lucky Top to D6 on 8 March 2017 and the transfer of the share in More Harvest by D4 [3] to D5 on 9 March 2017. When the solicitors for D1 and D2 revealed those transfers, they failed to reveal details of the sale as well as the subsequent transfer of Lucky Top to D7 and of More Harvest to D8.

52.As a result, the plaintiff obtained an ex parte injunction on 18 April 2017 (“the 2^nd injunction”) against D5 and D6 which was continued by an order dated 21 April 2017.

53.The letter from the Inland Revenue Department dated 27 July 2017 revealed that Lucky Top as well as More Harvest had been transferred. The plaintiff subsequently obtained an injunction against D7 in respect of Lucky Top and against D8 in respect of More Harvest on 19 January 2018 (“the 3^rd injunction”).

54.D1 and D2 submitted that the injunction order is redundant and so serves no useful purpose in that D1 never had any interest in Lucky Top and D2 had sold the sole share in Lucky Top on 8 March 2017 to D6 against whom there is the 2^nd injunction.

55.However, as noted in §14 above, Hoi Shun on behalf D1 had asserted on 24 March 2017 that D1 was the shareholder of Lucky Top.

56.It will be seen from the Lucky Top table that on 8 March 2017 D2 sold the share to D6 for $10.557 million and on the same day D6 sold the shares to D7 at a huge discount of approximately 45%.  Those transactions are not explicable unless D2, D6 and D7 were D1’s nominees.

57.When Hoi Shun sent its letter of 24 March 2017 asserting D1’s ownership, as at that date, D7 should have been the owner with D6 as director. On that analysis, it was submitted that D6 and D7 could only have been D1’s nominee. In any event, D1 and D2 were well aware of the 8 March transfer from D2 to D6 and as a result of Hoi Shun’s letter, D1 must have been D6’s principal.

58.So far as D2 is concerned, although there are share transfer documents signed to transfer the share in Lucky Top to D6, the registered member is unknown. The ultimate transferee, D7, pleaded that he has not been registered as a member. In those circumstances, it is clearly necessary to restrain D2 from dealing with the share in Lucky Top.

59.The More Harvest transfers also contain inexplicable features. When D6 entered into the 2^nd SPA with D8 on 9 March 2017, it had not yet acquired any interest or title to More Harvest. It can be seen from the More Harvest table above that D5 did not sell the share to D6 until the following day ie 10 March 2017 (the 3^rd SPA).  As had happened in Lucky Top[4], D5 having just acquired the property from D4 for $10.3 million disposed of it under the 3^rd SPA at a similar huge discount.

60.In his affirmation dated 6 July 2018, D1 asserted (at §§67 – 68) that performance of the sale and purchase agreements signed with D6 in respect of Lucky Top and with D5 in respect of More Harvest had been interrupted by the injunction order and that D1 had only received partial payment of $0.5 million each from D5 and D6. In that regard, D7 and D8 (the ultimate transferees of Lucky Top and More Harvest) alleged in their defence and counterclaim of 9 January 2018 that their respective acquisitions were not completed.

61.The plaintiff’s solicitors sought clarification by letter dated 14 March 2019 regarding (a) the current status of each of the sales in respect of Lucky Top and More Harvest; (b) the outstanding steps towards completion if the sales had been “interrupted” as alleged.

62.In the same letter, the plaintiff’s solicitors asked in respect of (a) Lucky Top, if D2 would be willing to pay the sale proceeds of $10.557 million into court, and (b) More Harvest, if D4 would be willing to pay the sale proceeds of $10.3 million into court, pending resolution of the action.  

63.Notwithstanding an indication given on 10 May 2019 that they would revert by 31 May 2019, and despite a follow-up letter from the plaintiff’s solicitors on 28 May 2019 intimating that a variation summons might be necessary failing any response, the defendants’ solicitors never replied.

64.In the circumstances, the inference is compelling that subsequent transfers in Lucky Top and More Harvest bear the hallmarks of sham transactions.

65.It was submitted that if D1 and D2 are not restrained, the injunction restraining them from representing themselves as directors would go. It should also not be overlooked that they are in possession of a set of green boxes. All this points to the need to continue the injunction order.

66.In addition to the above matters, the plaintiff also relied on what Mr Chang referred to as the Chanel principle, a reference to the English Court of Appeal’s decision in Chanel Ltd v F W Woolworth & Co Ltd [1981] 1 WLR 485 which was set out in §5 of the plaintiff’s skeleton submission dated 5 December 2018 for 13 December 2018 hearing before Peter Ng J.

67.The Chanel principle addresses three different situations:

(i) the court would only generally consider varying or discharging an interim injunction or any undertaking on good grounds or change of circumstances being shown (at 492D–E);

(ii) in an interim order where it is made effectively by consent, or following an inter partes hearing when both parties were legally represented and had full opportunities to bring to the court’s attention matters relevant to the making of the order, the person seeking to vary interim order is not entitled to do so as of right or to re-argue it as if it were a re-hearing. The burden is on the party seeking to vary the order to show either there has been some significant change of circumstances or it has become aware of facts that it could not have reasonably found out at the time of the interim order: see Chanel (492H – 493A); Keep Bright Ltd v Super Auto Investments Ltd HCCT 16/2010 (12 January 2012) at §45(2); and

(iii) the parties may re-open the arguments of afresh if they had contemplated at the time of the interim order that the issues there under would be revisited or where the injunction by its terms show that it was not substantively disposed but adjourned sine die generally with liberty to apply: Butt v Butt [1987] 1 WLR 1351 at 1354F–G per Nourse LJ, cited in Keep Bright at §45(3).

68.In the present case, the ex parte injunction was continued by an order dated 6 April 2017 by consent “without prejudice to the 1^st and 2^nd Defendant’s rights to apply for variation discharge …”.  The discharge summons was not taken out until 6 July 2018, exactly 15 months later. 

69.No complaint was made at the time about material non-disclosure nor was there any indication of any intention to make an application. Rather, on 12 April 2017, D4 gave a voluntary undertaking not to deal with More Harvest. Then on 4 May 2017, D3 provided its undertaking by consent without any reservation whatsoever. It was submitted, and I agree, that D3 cannot seek to revisit the matter now.

70.The matters upon which D1 and D2 rely for the discharge application were all in their possession at the time of the inter partes hearing.  They did not see fit to ask for an adjournment to put in evidence in answer to the plaintiff’s evidence then. No explanation has been given for this long delay.

71.It was suggested by Mr Chong that it was because nothing was happening in the action. That would not appear to be the case given the various transfers made in Lucky Top and More Harvest that required the plaintiff to apply for the 2^nd and 3^rd injunctions and to make further amendments to its statement of claim as a result. In any event, by February 2018, the defendants had filed their ADCC.

72.D1 and D2 are not relying on a change of circumstances. Rather, had they contemplated to revisit the matter, that should have been done promptly and, in any case, within a reasonable time. For my part, I do not consider that a general reservation of rights enables a party to sit on his hands for as long as he wishes and do nothing. In any event, as the plaintiff submitted, there was and is no urgency to revisit the matter.

CONCLUSION ON THE DISCHARGE AND VARIATION SUMMONSES

(I) The discharge summons

73.For the reasons set out above, I have no hesitation in rejecting the futility argument.

74.The present case is clearly one where it would be appropriate to adopt the Dormeuil Frères’ approach given the plethora of disputed facts and the voluminous evidence involved

75.Accordingly, it is ordered that the argument of material non-disclosure be adjourned to be dealt with at trial. There is to be an order nisi that the costs of the discharge summons be the plaintiff’s costs in the cause.

(II) The variation summons

76.I am also satisfied that there is sufficient evidence to justify the variations to the injunction order that the plaintiff seeks.

77.Accordingly, there is to be an order in terms of paragraph 1 of the variation summons.

78.There is also to be an order nisi that the costs of the variation summons be the plaintiff’s costs in the cause.

(III) The amendment summons

79.This summons was taken out by the defendants for leave to amend the Answer to the Supplemental Request for Further and Better Particulars of the ADCC of D1 to D4. They had earlier given particulars of loss suffered by D3 in relation to the Sheung Yeung project comprising loss of profits and disbursements and the loss suffered by BMC Strategic Partners (International) Limited, the 5^th plaintiff by counterclaim, in relation to the Mang Kung Uk project comprising loss of profits and disbursements. The proposed amendment seeks to swap the company name and the monetary figure given in those particulars.

80.Meanwhile the plaintiff had been asking for particulars of the figures claimed since loss of profits and disbursements are “special damages” that must be explicitly claimed with all necessary particulars: see Lam Sik Ying v Lam Sik Shi & Anor HCA 4713/2001 (21 September 2015) at §§25 – 29. Those particulars have not been provided. In §31 of their written submissions the plaintiff put forward two alternative solutions to resolve those matters.

81.At the hearing, when pressed by the court, the defendants intimated that they are willing to provide the particulars sought. Accordingly, the amendment was allowed on the basis that the particulars would be provided as soon as possible.

82.There is to be an order nisi that there be no order as to costs for the amendment summons.

Mr Denis Chang SC, leading Ms Po Wing Kay and Ms Kang Yanan, instructed by Peter K S Chan & Co, for the plaintiff (by original action) and the 1^st and 2^nd defendants (by counterclaim)

Mr Patrick Chong and Mr Lai Chun Ho, instructed by Au & Associates, for the 1^st to 4^th defendants (by original action) and the 1^st to 6^th plaintiffs (by counterclaim)