Shi Hong and Others v. Chan Man Kit and Others

HCA 2313/2019

[2020] HKCFI 191

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2313 OF 2019

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BETWEEN

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Before: Hon Linda Chan J in Chambers

Date of Hearing: 3 January 2020

Date of Decision: 3 January 2020

Date of Handing Down Reasons for Decision: 15 January 2020

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R E A S O N S    F O R    D E C I S I O N

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A. INTRODUCTION

1.This is an application by the plaintiffs, Ms Shi Hong (“Shi”), Wellgo International LLC (“Wellgo”) and Ms Xu Qing Yang (“Xu”), for an order to continue the worldwide Mareva injunction granted by Wilson Chan J upon the ex parte application made on 16 December 2019 (“ex p Injunction”) as continued by me at the first return date on 27 December 2019 until the 2^nd return date on 3 January 2020.  Upon hearing the submissions of the plaintiffs, I declined to continue the ex parte Injunction primarily on the grounds that the plaintiffs had failed (a) to discharge their duty of making full and frank disclosure both at the ex parte hearing and at the first return date; (b) to satisfy the requirements of s 21M of the High Court Ordinance (Cap 4) (“HCO”), and (c) to show that there was a real risk of dissipation of assets on the part of the defendants.  I said I will give detailed reasons for my decision which I now do. 

B. BACKGROUND FACTS

2.Shi is the mother of Xu.  She holds an indirect 42%[1] equity interest in Wellgo, a company incorporated in California, the U.S.A. 

3.The 1^st defendant, Mr Chan Man Kit (“Chan”), is the father of the 4^th defendant, Mr Nicholas Ling-hang Chan (“Nicholas”).  According to the plaintiffs, Chan controls the 2^nd defendant, Keywell International Holdings Ltd, a BVI company (“Keywell”), as well as the 3^rd defendant, Bowell Inc, a company incorporated in California (“Bowell”). 

4.Until 2 August 2019, the shares in Keywell were held by Chan and Xu as to 75% and 25% respectively.   

5.Until September 2019, Chan was a director and Chief Executive Officer of Wellgo, and an authorised signatory of 2 bank accounts (each with credit lines available to be drawn) maintained by Wellgo at East West Bank (“EWB”). 

6.According to the plaintiffs, Shi met Chan in 1990 and they had a romantic relationship from 2008 to 2012 or 2013.  Thereafter, Shi and Chan remained as business partners.  In March 2013, Shi funded the purchase of a property in Lowell Avenue, Palo Alto (“Lowell Property”) which was held in the name of Hiwell, Inc.  In 2016, the Lowell Property was sold and generated net proceeds of US$2.9 million, which were paid into Keywell’s bank account at HSBC with the consent of Shi. 

7.On 19 September 2016, Chan caused Keywell to transfer US$0.9 million to Xu.  This was done with the consent of Shi.  On 22 September 2016, Chan transferred the remaining US$2 million from Keywell’s bank account to his personal bank account at HSBC.  Shi claims that this transfer was done without her consent.  Nevertheless, it appears that Shi allowed Chan to retain and use this US$2 million including making investment in bonds, as she was able to produce the relevant bank statements showing the transfers and the investment. 

8.In 2018, Chan intended to purchase a property in San Jose (“SJ Property”) to be held in the name of Bowell.  According to Shi, Chan represented to her that he would use his own money to purchase the SJ Property and that Bowell would be under “separate management and accounting from Wellgo”.  Shi exhibited some documents which she said that Chan had made the representation.  However, if one reads the schedule relied on by Shi[2], it stated that the “Lowell investment” was US$2.5 million and Chan’s share was 66.7%.  Taking into account Chan’s share of the profit made, his “asset after Lowell” was US$1,950,667.  Under the schedule, Chan wrote words to the effect the schedule set out all his assets, and he agreed that following his separation with Shi, she had the full rights to deal with such assets.  He put the date of 8 June 2018.

9.Instead of setting out the contents of the schedule and the words written by Chan, in her affirmation dated 13 December 2019 filed in support of the ex parte application (“Shi 1^st”), Shi said that Chan had “unilaterally asserted that he had US$1,950,667 by himself” and, contrary to his representation that he would buy the SJ Property with his own money, Chan had “misappropriated US$2 million” from her and used such money to purchase the SJ Property.   

10.On 31 July 2018, Chan purchased the SJ Property in the name of Bowell for US$1.85 million.  Shi claims that of the amount used by Bowell to purchase the SJ Property, US$1.7 million came from Chan’s bank account at HSBC which, she believed, must had emanated from the remaining sale proceeds of the Lowell Property (i.e. the US$2 million retained by Chan). 

11.Nevertheless, it appears that no complaint was made by Shi about the purchase of SJ Property even though on her own case, Bowell was a company controlled by Chan.   

12.More than a year later, on 9 September 2019, Chan on behalf of Wellgo signed 2 cheques of US$960,000 each payable to Bowell. The amount withdrawn was met out of the credit lines available to Wellgo.  On the next day, Chan caused Bowell to transfer US$2 million to his personal bank account at HSBC. 

13.On 15 September 2019, Chan sent a WeChat message to Shi, informing her of the withdrawal of US$1.92 million from Wellgo and the subsequent transfer of the same to his personal bank account at HSBC. 

14.On 16 September 2019, Shi called the BVI agent of Keywell to enquire about its status and discovered that Xu’s 25% shares had been transferred to Chan.  According to Shi, the transfer was effected pursuant to the instrument of transfer and bought and sold notes both dated 2 August 2019 which contained forged signatures of Xu, as Xu never agreed to nor signed any documents to transfer her 25% shares in Keywell to Chan. 

15.Upon discovering the alleged forgeries, on 19 September 2019, Shi took steps to remove Chan from all his positions in Wellgo.

16.On 2 October 2019, Shi, Wellgo and Xu brought legal proceedings against Chan, Keywell, Bowell, Nicholas and other defendants before the Superior Court of the State of California, under Case No 19CV356047 (“California proceedings”).  In the California proceedings, Xu claims the return of her 25% shares in Keywell while Wellgo claims the return of the US$1.92 million withdrawn by Chan.  The claim was subsequently amended to remove Shi as a plaintiff.

17.On 11 October 2019, Chan sent a WeChat message to Shi which shows that he had knowledge of the California proceedings and the fact that he had been removed from all his positions in Wellgo.

18.On 16 October 2019, Shi and Xu reported the forgeries to the Hong Kong Police.  On 22 October 2019, Shi and Xu attended the Western Police station to make a statement.  On 7 November 2019, they instructed their solicitors to write to the same Police station in respect of their complaint of forgeries (and other miscellaneous claims, which do not form the subject matters of this action or the California proceedings).  On 18 October 2019, Shi made a report to the FBI in respect of the alleged forgeries and the withdrawal of the US$1.92 million from Wellgo.  A further report was made to the San Francisco Police department on 25 October 2019. 

19.Shi claims that a few days before she finalised her affirmation filed in support of the ex parte application, she discovered, apparently through a search against the SJ Property, that on 25 October 2019 Bowell had transferred the SJ Property to Nicholas. 

20.On 16 December 2019, the plaintiffs issued the Writ in this action in which:

(1) Shi claims (a) “damages for liability as trustees de son tort” in the amount of US$2 million, (b) a declaration that the defendants are liable to account to Shi for US$2 million and (c) a declaration that Nicholas holds the SJ Property on constructive trust for Shi. 

(2) Wellgo and Xu claim “[a] worldwide Mareva injunction in aid of and pending the [California] proceedings”. 

21.Neither the Writ nor the Endorsement of Claim referred to s 21M of the HCO. 

22.On the same day the Writ was issued, the plaintiffs filed an “Ex parte Summons” (which was endorsed with, inter alia, s 21M of HCO) seeking:

(1) a worldwide Mareva injunction against Chan, Keywell and Bowell up to US$4,382,500 which covers in particular, (a) Chan’s various bank accounts at HSBC and EWB, (b) the 75% and 25% shares held by Chan in Keywell, (c) Keywell’s 100% shareholding in Bowell, and (d) Bowell’s bank account at EWB;

(2) a worldwide Mareva injunction against Nicholas up to US$2 million which covers his bank account at Standard Chartered Bank (Hong Kong) Ltd and the SJ Property;

(3) a proprietary injunction enjoining Nicholas from disposing of or dealing with the SJ Property;

(4) an ancillary disclosure order requiring the defendants to disclose all their assets of individual value of HK$10,000 or more;

(5) an ancillary disclosure order requiring Chan and Nicholas to disclose the whereabouts of the proceeds of the SJ Property and all documents in relation to its disposal, if the SJ Property has been disposed of;

(6) discovery by Chan and Nicholas of the bank statements, account opening and records of their bank accounts at HSBC and SCB from 1 January 2016 to the date of the order;

(7) an order under s 21 of the Evidence Ordinance (Cap 8) (“EO”) requiring HSBC, SCB and another 73 banks listed in the Summons to provide “discovery” of all records of the bank accounts in which any of the defendants was a signatory for the period from 1 January 2016 to the date of the order; and

(8) an order releasing the plaintiffs from their implied undertaking so that they can use the information and documents obtained pursuant to this order in aid of the California proceedings.   

23.The ex parte Injunction was granted in substantially the same terms sought by the plaintiff save that (1) the limit of the worldwide Mareva injunction was reduced to US$3,920,000, (2) the application under s 21 of the EO was adjourned to the return date, and (3) leave for issue and service of a concurrent writ of summons out of jurisdiction was granted to the plaintiffs.

24.On 20 December 2019, Xu and Wellgo made an ex parte application to the California court and obtained a temporary protective order freezing all the assets of Chan, Bowell and Nicholas including the SJ Property for 40 days “unless a court dissolves it earlier or no undertaking[3] is filed by 1/3/2020” (“TPO”).  The TPO was served on each of the defendants on the same day.

C.                DISCUSSION

25.In my view, the ex parte Injunction should not be continued for the following reasons:

(1) No good arguable case: Shi does not have a good arguable case in respect of her claim for US$2 million against Nicholas.  As for Xu and Wellgo, they have not asserted any cause of action against the defendants in this action. 

(2) Requirements of s 21M not satisfied: The court should not exercise its discretion under s 21M in favour of Xu and Wellgo as they failed to satisfy with the requirements of s 21M and Order 29 rule 8A.

(3) No real risk of dissipation: The plaintiffs failed to show that there was a real risk of dissipation of assets on the part of the defendants.

(4) No proper basis to make ex parte application: The plaintiffs failed to draw to the attention of the court that there was neither great urgency nor need for secrecy which justified their ex parte application.  In any event, there was no basis to ask the court to grant an extensive order which required Chan and Nicholas to provide all the records of their bank accounts from 1 January 2016 to the date of the order. 

(5) No full and frank disclosure and deliberate misstatements: The plaintiffs failed to discharge their duty of making full and frank disclosure both at the ex parte application and at the first return date.  The plaintiffs also made deliberate statement to mislead the court into believing that they had not taken any steps to obtain an interim freezing order in the California proceedings. 

26.I deal with these points in turn.

C1.    No good arguable case

27.In Shi 1^st, the plaintiffs relied on the facts and matters summarised in §§2 – 19 above and claimed that they have the following claims against the defendants:

(1) In respect of the sale proceeds of the Lowell Property retained by Chan (US$2 million), Shi claims that Chan holds it on constructive trust for her.  Alternatively, if Chan has used any part of the US$2 million to purchase the SJ Property, Chan is liable as “a constructive trustee / trustee de son tort” and Bowell is liable as a “knowing recipient”.  These are the only substantive claims made by Shi in this action.

(2) In respect of the US$1.92 million withdrawn from Wellgo’s bank account at EWB, Wellgo claims that it has been misappropriated by Chan and claims its return.  This is the subject matter of the California proceedings.

(3) In respect of the 25% shares in Keywell transferred from Xu to Chan, Xu claims that the transfer was made pursuant to forged documents and claims its return.  This is the subject matter of the California proceedings.

28.It is clear that on Shi’s own case, the claim for return of US$2 million can only be made against Chan and Bowell who, to her knowledge, had received and used the US$2 million derived from the sale proceeds of the Lowell Property.  There is no assertion, let alone evidence, that Nicholas has ever received or used any part of the US$2 million. The only allegation is that Chan might have used part of the US$2 million to purchase the SJ Property.  Even assuming she can prove this allegation, it only provides a basis for Shi to claim that she has a proprietary interest in the SJ Property to the extent that her money has been used to fund the purchase.  As matter now stands, there is simply no basis to make Nicholas liable to account for the US$2 million to Shi.   

29.As for Xu and Wellgo, they have not asserted any cause of action against the defendants in this action and only seek a worldwide Mareva injunction in aid of the California proceedings.  That being the position, the court does not have any jurisdiction (other than under s 21M of HCO) to grant an injunction sought by Xu and Wellgo in respect of their claims for the return of the 25% shares in Keywell and the US$1.92 million (Mercedes-Benz AG v Leiduck [1996] AC 284, 299-300).  

C2.    Requirements of s 21M not satisfied

30.In the skeleton used at the ex parte application, the plaintiffs contended that the court can grant a Mareva injunction in aid of the California proceedings under s 21M of HCO and the test is:

(1) Whether the judgment given in the primary jurisdiction is one that the Hong Kong court would enforce;

(2) If so, whether the plaintiff had a good arguable case before the foreign court and whether there was a real risk that the defendants would dissipate their assets if the injunction is not granted; and

(3) Whether it is just and convenient for the injunction to be granted.

31.It was not drawn to the attention of the court at the ex parte application the following principles governing a s 21M application.

32.First, the requirement of s 21N(1)(b) of HCO, which states that the object of the exercise is to facilitate the process of the foreign court that has the primary jurisdiction. 

33.Second, the first 2 matters (set out in §30(1) – (3) above) are the considerations in the first stage of a s 21M application.  The court is required to consider, in the second stage, whether “the fact that the court has no jurisdiction apart from this section in relation to the subject matter of the proceedings concerned makes it ‘unjust’ or ‘inconvenient’ for the court to grant the application” (s 21M(4)).  The effect of s 21M(4) was described by the Court of Final Appeal in Compania Sud Americana de Vapores SA v Hin-Pro International Logistics Ltd (2016) 19 HKCFAR 586 at §54 in this way:

“… this provision in section 21M(4) underlines the fact that the court has a wide discretion to refuse to make the order sought if the fact that the substantive claim is being litigated in a foreign court has consequences that make the grant of a Mareva ‘unjust’ or ‘inconvenient’.”

34.In Compania (at §54) the CFA referred to the court’s approach in dealing with the equivalent provision of our s 21M expounded in Credit Suisse Fides Trust SA v Cuoghi [1998] QB 818 and Motorola Credit Corpn v Uzan and others (No 2) [2004] 1 WLR 113.  In Motorola, the English court held that the 5 factors which the court ought to bear in mind when determining whether an order should be made included:

(1) Whether the making of the order would interfere with the management of the case in the primary court;

(2) Whether it was the policy of the primary court not to make worldwide freezing orders;

(3) Whether there was a danger that the orders made would give rise to disharmony and/or “the risk of conflicting, inconsistent or overlapping orders in other jurisdictions” (citing Credit Suisse Fides Trust SA v Cuoghi [1988] QB 818 at 831);

(4) Whether, at the time the order was sought, there was likely to be a potential conflict as to jurisdiction, making it inappropriate and inexpedient to make a worldwide order; and

(5) Whether, in a case where jurisdiction was resisted and disobedience was to be expected, the court would be making an order which it could not enforce. 

35.As the CFA observed in Compania (at §54), the circumstances where it will be “unjust” or “expedient” for the court to make an order under s 21M are not exhaustive and fall to be decided in the context of the case under consideration. 

36.Third, the duty on the applicant who has on-going proceedings abroad to provide reasons why the application for injunctive relief was not submitted to the court that is seized with the substantive dispute.  This principle was described in Hong Kong Civil Procedure 2020, para 29/8A/3, where the learned editor referred to Deiulemar Shipping SpA v Transfield ER Futures Ltd [2011] 1 HKLRD 75 as authority in support.   

37.In Deiulemar, the plaintiffs made an ex parte application to the Hong Kong court for (a) a worldwide Mareva injunction in aid of English proceedings under s 21M in relation to HKD150.50 million held at a bank account at HSBC Hong Kong and (b) discovery of assets.  No such application was made in the English proceedings where the substantive action was brought.  The Court of Appeal upheld the Judge’s refusal to grant the Mareva injunction and concluded that s 21M application was “no more than a plaintiff trying to steal a march on the defendant” (§47) for the following reasons:

(1) The plaintiffs had failed to explain why no prior application was made to the English court which “is likely to have an excellent ‘feel’ for the case, given that it has been pleaded out in that Court” (§48).

(2) It is not enough for the plaintiffs to say that “the case brought against the defendant obviously was strong” (§52).  This did not constitute an adequate factual matrix to found a Mareva application in the foreign court without making any such application in the primary jurisdiction (§53).

(3) It is not sufficient to say that even if an English court had seen fit to grant a worldwide Mareva, the plaintiffs would still need to apply to the Hong Kong court for an order to freeze the Hong Kong bank account (§49). 

(4) In any event, there was no reason why an application in the English Court could not be made prior to making an application in Hong Kong (§50). 

38.The above considerations in Deiulemar apply equally to the present case. 

39.In Shi 1^st (at §78), she said: 

“… I have been advised and verily believe that, since the injunction order operates against [Nicholas] in personam, the order would still be operative notwithstanding the situs of the SJ Property is in California. I wish to inform the Court that, subject to advice from California lawyers, I may instruct them to make a freezing order application (or its equivalent) before the California Court to make sure that the SJ Property can be preserved even more safely. Hence, I will also specifically ask for leave from this Court to use documents to be obtained in the discovery orders in the California proceedings.” (underlined supplied)

40.There was no explanation, whether in Shi 1^st or in the skeleton as to why, despite having commenced the California proceedings against the defendants 2½ months ago (on 2 October 2019), the plaintiffs had not taken any steps to seek an ex parte or urgent injunction against the defendants to enjoin them from dissipating the 25% shares in Keywell or their assets up to the value of Wellgo’s claim (US$1.92 million).

41.The impression given in §78 of Shi 1^st was that the plaintiffs had not given any instructions to their lawyers to apply for a freezing order against the defendants.  However, upon this court’s enquiry made during the hearing, it transpired that the plaintiffs had on 9 or 10 December 2019 already given instructions to their lawyers, Squire Patton Boggs (US) LLP (“SPB LLP”), to seek a freezing order against the defendants.  It was a deliberate misstatement for Shi to say that she “may” instruct her lawyer to seek a freezing order from the California court when in fact, by the time she made Shi 1^st (on 13 December 2019), she had already given instructions to SPB LLP to apply for a freezing order in the California proceedings.  Having given such instructions to SPB LLP, Shi must have known that the California court has the power to grant a freezing order against the defendants’ assets on an ex parte basis.  Yet, no attempt was made by the plaintiffs to disclose this fact to the court at the ex parte application.     

42.The above deliberate misstatement and omission were material to the ex parte application.  Had the judge been told that the plaintiffs could have applied for and obtained the TPO from the California court on an ex parte basis, he would have required the plaintiffs to explain why no prior application was made to the California court and whether, in the absence of a good reason for not making such an application, it would be “unjust” or “inconvenient” for the Hong Kong court to grant a worldwide Mareva injunction against the defendants in aid of the claims made by Xu and Wellgo. 

43.Fourth, it was not drawn to the court’s attention the requirement of Order 29 rule 8A(1), which states:

“An application for interim relief under section 21M(1) of the High Court Ordinance (Cap. 4) must be made by originating summons in Form No. 10 in Appendix A.”

44.Not only did the plaintiffs fail to issue an originating summons as required by Order 29 rule 8A(1), they did not even identify s 21M as the juridical basis for seeking an worldwide Mareva injunction in aid of the claims made by Xu and Wellgo in the California proceedings.   

45.Mr Felix Ng[4] accepts that the plaintiffs failed to comply with the requirement of Order 29 rule 8A(1) but argues that the court should make an order under Order 2 rule 1(1) to cure the irregularity, contending that “This curative approach under Order 2 rule 1(1) is plainly justified and is most neat-and-tidy.  If, conversely, the ‘composite injunction’ proceedings were ex hypothesi started with the issuance of an OS concerning the [Lowell Property] (i.e. the part of the claim which underpins the s 21L HCO injunction), will have to be converted into a Writ action in any event, with directions given for the filing of pleadings.”

46.I do not see any basis for the court to exercise its discretion under Order 2 rule 1(1) to cure the irregularity for the following reasons:

(1) The plaintiffs have not issued any summons to seek an order to cure the irregularity.  This is despite the fact that at the first return date, this court already raised the queries as to why no originating summons had been issued and the Writ did not make any reference to s 21M.

(2) More importantly, the failure to comply with the requirement stipulated in Order 29 rule 8A(1) is compounded by the failure to draw to the court’s attention of the relevant principles governing a s 21M application, in particular the principles discussed in §§32 – 37 above.   

(3) The reason suggested by Mr Ng is a non-point, as it was open to Xu and Wellgo to issue an originating summons under s 21M, leaving Shi to issue a writ on her own, even if there was any basis to think that her claim could only be brought in the form of a writ.   

C3.    No real risk of dissipation

47.At the ex parte application, the plaintiffs relied on the following matters in support of their assertion that there was a real risk of dissipation of assets on the part of the defendants:

(1) The alleged acts of forgery on the part of Chan in transferring the 25% shares in Keywell to himself;

(2) The alleged misappropriation of assets from the plaintiffs through the dishonest acts of Chan and Nicholas, using Keywell and Bowell as their “corporate conduits”; and

(3) Chan’s act in procuring Bowell to transfer the SJ Property to Nicholas shortly after the California proceedings had been commenced against him.

48.I do not think any of these matters are sufficient to constitute a real risk of dissipation of assets on the part of the defendants:

(1) The 3 transactions complained of took place over a period of 3 years from September 2016 and 25 October 2019, more than 7 weeks before the ex parte application.  In the meantime, the defendants were aware that the plaintiffs had already commenced the California proceedings and reported the matters to the Police in Hong Kong and California.  If the defendants wanted to dissipate their assets to avoid any judgment which the plaintiffs might obtained against them, they would have done so long before the ex parte application.  Yet, the plaintiffs have not been able to adduce any evidence to show that the defendants had dissipated any of their assets during the period.   

(2) Although Shi claims that the transfer of the US$2 million to Chan was made without her consent, the evidence suggests that after she became aware that the US$2 million had been retained by Chan and used for his own purposes, Shi did not make any complaint or take any step to seek its return.  Instead, she was contented with Chan using the US$2 million to invest in bonds and, subsequently in the SJ Property.  The allegation also does not sit well with the fact that Shi continued to allow Chan to remain as a director and CEO of Wellgo and an authorised signatory of its bank account at EWB until he was removed from such position in September 2019.  As matter now stands, I do think there is a proper basis for Shi to castigate Chan’s acts in retaining and using the US$2 million as dishonest or that they constituted misappropriations of Shi’s assets.

(3) As for the withdrawal of US$1.92 million and the transfer of the same to Bowell, they were made known to Shi shortly after they had been made (on 15 September 2019).  Yet, Shi claims (at §§51, 59 of Shi 1^st) that Chan “admitted” to having withdrawn the sums, which she described as “Misappropriated Loan Drafts” “discovered” by her and Xu.  However, if one reads the message relied on by Shi[5], it can be seen that Chan said in light of their deteriorating relationship, he had decided to take back what he considered to be his assets and, for that purpose, he had withdrawn US$1.92 million from Wellgo and, together with the value of Bowell (which he put at US$2 million), he had taken assets worth HK$30 million.  This message, when viewed against the long history of financial dealings between Chan and Shi (and their respective corporate vehicles), shows that Chan believed that he was entitled to take a share of some of the assets hitherto managed by him.  As matter now stands, I do not accept that this message constituted an “admission” by Chan that he had misappropriated assets from Shi and Wellgo, as the plaintiffs claim.   

(4) As for the transfer of the SJ Property to Nicholas, it was done openly as the transfer was duly registered in the relevant registry.  Given that the SJ Property is a real property, if the plaintiffs had any real concern that it would be disposed of by Nicholas pending determination of the California proceedings, the obvious thing to do would be to request Nicholas to give an undertaking to preserve the SJ Property pending determination of the California proceedings.  This was particularly so when the plaintiffs did not have any prior dealing with Nicholas, such that they had no basis to think that he would take steps to dispose of the SJ Property so as to frustrate Shi’s claim.

49.At this hearing, Mr Ng places heavy reliance on the so-called “admission” by Chan in the recent WeChat messages exchanged between Shi and Chan on 20 December 2019 in which Chan referred to the “without prejudice” correspondence from his solicitors to the plaintiffs’ solicitors and expressed his wish to resolve the dispute with Shi without dragging his son (Nicholas) into the proceedings.  It is clear that the contents of the messages were part of the “without prejudice” discussions between the parties and, therefore, cannot be referred to or relied upon by the plaintiffs. 

C4.    No proper basis to make ex parte application

50.In my view, the plaintiffs have failed to draw to the attention of the court that the requirement for asking the court to take the exceptional course of dealing with the application on an ex parte basis was not met.   

51.It is well established that ex parte application without notice should only be made where either the delay would cause injustice to the applicant or the defendant would take action which may nullify the effect of the injunction (Ho Tak Eng t/a Hung Man Interior Design Co v Fame Brilliant Ltd [2006] 1 HKLRD 34, §8 per Rogers VP).

52.Further, Hong Kong Civil Procedure 2020 §29/1/50 summarised the principles as follows:

“The starting point is that applications for interlocutory injunctions should be made inter partes after the commencement of proceedings. It is contrary to the principles of natural justice that any judicial order adversely affecting a party’s interest should be made without the party being given a reasonable opportunity of being heard. Derogations are only permitted in certain limited and exceptional circumstances, the most obvious of which concerns matters of such extreme secrecy or urgency where there is no time to warn the defendant of what is proposed, or where the purpose of the injunction will or may well be frustrated if the defendant is informed of what is proposed, or where the defendant simply cannot be found…The exceptional nature of the circumstances for an ex parte application must be stressed. (TRP Ltd v Thorley, (unrep., July 13, 1993, CA); SNE Engineering Co Ltd v Chim Kee Machinery Co Ltd [2013] 1 HKLRD 410)…Order 29 rr.1(2) and (3) make it clear that, however, in case of urgency, the plaintiff may make the application ex parte on affidavit, even before the issue of proceedings. Such an ex parte injunction was set aside for failing to demonstrate the need for urgency in Luck Continent Ltd v Leonara Yung (unrep., CACV 42/2010, [2010] HKEC 1660). (See also Yifung Developments Ltd v Liu Chi Keung Ricky [2014] 3 HKLRD 483 …”

53.In the present case, the plaintiffs had made known her complaints to the Police and had commenced the California proceedings more than 2 months before the ex parte application.  There was thus neither a need for secrecy nor great urgency for the plaintiffs to ask the court to deal with the application on an ex parte basis.  Indeed, at the hearing, Mr Ng seems to acknowledge that neither the principle nor the lack of justification for taking the exceptional course of making the application on an ex parte basis was drawn to the attention of the court.    

C5.    No full and frank disclosure and deliberate misstatements

54.As stated in §§31 to 43 and 50 to 53 above, I consider that the plaintiffs have failed to discharge their duty of making full and frank disclosure and have made deliberate misstatement at the ex parte application. 

55.The duty to make full and frank disclosure is a continuing one.  At the first return date on 27 December 2019, the plaintiffs failed to disclose to the court that the California court had on 20 December 2019 granted the TPO against the defendants.  Instead, at the hearing on 27 December 2019, Mr Ng still asked for continuation of the ex parte Injunction on the basis that the plaintiffs required such Injunction to “support” the California proceedings.  Mr Ng says that neither him nor the plaintiffs’ solicitors were aware of the TPO until after the hearing.  Upon further enquiry, it transpired that SPB LLP had on 21 December 2019 already sent an email to the plaintiffs’ solicitors about the plaintiffs’ instructions to apply for a TPO, although the handling solicitors said that they did not review the email until after the hearing on 27 December 2019.  Even accepting the explanation given by the plaintiffs’ solicitors, it does not provide an excuse for the plaintiffs to withhold this material fact from their legal advisers and the court at the return date. 

56.On this ground alone, I would not exercise my discretion to continue the ex parte Injunction.   

D.      DISPOSITION

57.For the above reasons, I refuse to exercise the discretion to continue the ex parte Injunction.  It follows that the Summons dated 17 December 2019 issued by the plaintiffs for continuation of the ex parte Injunction must be dismissed. I make an order that the costs of and occasioned by the ex parte application, including the hearings on the first and second return date, be paid by the plaintiffs to the defendants forthwith and be assessed by way of gross sum assessment in accordance with the directions given at the hearing. 

Mr Felix Ng and Mr Peter Chung, instructed by Squire Patton Boggs, for the 1^st to 3^rd plaintiffs

Ms Becky BY Wong, instructed by Cheung & Yeung, for the 1^st to 4^th defendants