Ngai Chun Ngor Irene and Others v. Ling Fat Co Ltd and Others
Read the full judgment text of HCA 161/2020 on BabelCite. This High Court CFI judgment was delivered on 26 May 2022.
1. There are 2 applications before the court both issued by the 6 th defendant (“ D6 ”). The first is an application by summons dated 18 January 2022 ( “Summons” ) for variation of the “Injunction” (as defined in §17 below) and partial release from the “Undertakings” (as defined in §23 below) both for the purpose of allowing him to have the shares beneficially owned by the late Madam Cheng Yiu Chun ( “Mother” ) be registered in his name qua administrator of her estate (“ Estate ”). The other sum
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HCA 161/2020 [2022] HKCFI 1557 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 161 OF 2020 _______________
_______________ Before: Hon Linda Chan J in Chambers Date of Hearing: 5 May 2022 Date of Decision: 26 May 2022 _______________ D E C I S I O N _______________ 1.There are 2 applications before the court both issued by the 6th defendant (“D6”). The first is an application by summons dated 18 January 2022 (“Summons”) for variation of the “Injunction” (as defined in §17 below) and partial release from the “Undertakings” (as defined in §23 below) both for the purpose of allowing him to have the shares beneficially owned by the late Madam Cheng Yiu Chun (“Mother”) be registered in his name qua administrator of her estate (“Estate”). The other summons dated 21 April 2022 is for leave to amend the Summons to make clear that the application is made by D6 qua administrator of the Estate. 2.The plaintiffs (“Ps”) oppose the Summons but not the application for leave to amend the Summons. There is no prejudice to Ps as they had been told in January 2022 that the application would be made by D6 qua administrator of the Estate. It is appropriate to give leave to D6 to amend the Summons to make clear that the application is made by him qua administrator. Background 3.The parties to this action are members of the same family. The 9th defendant (“Father”) and Mother[1] begotten 5 children, who are the 1st plaintiff (“P1”), the 2nd plaintiff (“P2”), the 3rd plaintiff (“P3”), D6 and Mr Ngai Chun Ming Tommy (“Tommy”) who resides in Canada. D6, P2, P3 and Tommy are respectively the eldest, the 2nd, the 3rd and the youngest son. P1 is the daughter. The 7th defendant (“D7”) is the son of D6 while the 8th defendant (“D8”) is D7’s wife. 4.The 1st to 5th defendants are companies founded by Father and the parties regarded them as “family companies” (collectively “Companies”). 5.Amongst the Companies:
6.Until the impugned resolutions passed on 10 and 11 February 2020, the shareholders and directors of the Companies were as follows:
7.It is Ps’ case that the 5 siblings hold their shares in the Companies as trustees for Father and Mother[4], while D6 says that he holds some of the shares in D2-D5 as trustee for Mother. Ps produced various declarations of trust executed by the 5 siblings (as trustees) and duly stamped (collectively “DoTs”). The DoTs show that the 5 siblings held the shares described in the last column in the table on trust for Mother (collectively “Shares”):
8.The terms of the DoTs are identical and provide that:
9.There is no dispute that before his demise, Father made all the decisions for the Companies with the assistance of D6, P2 and P3.[5] Mother did not have involvement in the Companies. 10.On 1 December 2015, D7 was appointed as an alternate director of Father in Ling Fat. According to Ps, the appointment was made in light of Father’s poor health and immobility at the time. 11.It is Ps’ case that in December 2019, they discovered that various sums totalling HK$16.7 million had been transferred away from Father’s bank accounts between October 2018 and November 2019, of which at least HK$15 million was received by D7. This led to Ps to commencing HCMH 4/2020 on 15 January 2020 under s.7 of the Mental Health Ordinance (Cap. 136) for an inquiry on Father’s mental capacity (“MIP Proceedings”). 12.On 20 January 2020, P1 and P3 gave notice to hold annual general meetings of D2-D5 to be held on 11 February 2020.[6] 13.On 7 February 2020 (Friday), D6 issued a notice of board meeting of Ling Fat to be held on 10 February 2020 (Monday) for the purpose of passing a resolution to appoint D8 as additional director. The notice was sent to Ps’ solicitors and to P3 by WhatsApp on 8 February 2020. 14.On 10 February 2020:
15.At the board meetings of D2-D5 held on 11 February 2020, resolutions were passed to (1) approve the transfer of shares from Ps and Tommy to Father pursuant to the ITs; and (2) appoint D7 as an additional director of D2-D5.[8] 16.Ps say that all the resolutions passed on 10 and 11 February 2020 (collectively “Impugned Resolutions”) are invalid as they were passed in breach of the articles of associations (“Articles”) of D2-D5 which provide that an alternate director could only be appointed and be entitled to attend a board meeting in place of a director when he is or about to go abroad, but Father was present in Hong Kong at the relevant times[9]. 17.On 21 February 2020, Ps applied for and obtained an ex parte injunction from Lok J (“Injunction”) to restrain:
18.In the writ filed on 24 February 2020[10], Ps seek the following relief against the Companies, D6-D8 and Father:
19.The bases for invalidating the Impugned Resolutions and the ITs, as pleaded in the SOC filed on 12 March 2020, are as follows:
20.On 20 March 2020, Lisa Wong J continued the Injunction pending determination of Ps’ summons for continuation of the Injunction (“Continuation Summons”). In his affirmation filed on 10 July 2020 in opposition to the Continuation Summons, D6 said that he would vote using inter alia the shares held by him on trust for Mother.[11] 21.On 15 July 2020, D6 filed an affirmation in support of his application for letters of administration in respect of Mother’s estate. Amongst the assets listed in the schedule are the Shares held by the 5 siblings (as described in §7 above). The application was made without the knowledge of Ps. 22.Shortly before the substantive hearing of the Continuation Summons, on 24 August 2020, Ps, D6-D8 and Father filed a consent summons for continuation of the Injunction.[12] On 27 August 2020, Au Yeung J ordered by consent (“Consent Order”) that:
23.The Consent Order was made upon the undertakings from:
24.On 5 October 2020, letters of administration of the Estate were granted to D6 (“LoA”). 25.In the meantime, D6-D7 joined and opposed the MIP Proceedings. Father instructed his own team of counsel to oppose the application for appointment of a committee to manage his finances. Lok J varied the Injunction to allow HK$2.1 million and HK$6.4 million to be withdrawn from Father’s bank accounts to pay for his living and legal expenses. 26.After a contested hearing which lasted for 8 days, on 27 July 2021, Lok J handed down judgment in the MIP Proceedings (“MIP Judgment”),[13] declaring Father[14] to be a mentally incapacitated person in that he cannot remember the money he gifted in the past few years, how his monthly expenses were spent and the amount of legal expenses incurred in the MIP Proceedings[15]; and is incapable of appreciating the situation he faced in the MIP Proceedings[16] and making decisions relating to his finances[17]. 27.By notices of appeal dated 20 August 2021 and 21 September 2021, Father and D6-D7 appealed against the MIP Judgment. 28.By letter dated 5 January 2022, D6 through his solicitors informed Ps that the LoA had been granted to him and requested Ps to consent to a variation of the Injunction so as to permit:
29.In reply, Ps through Messrs. Hart Giles’ letter dated 13 January 2022, requested D6 to inter alia explain why Ps had not been notified of D6’s application for the LoA, provide the documents filed at the Registry and confirm that he agrees to appoint P1 and P3 as additional administrators of the Estate. D6 then issued the Summons. Discussion 30.The application for variation of the Injunction is made by D6 qua administrator of the Estate so as to allow him to take steps to have the Shares be registered in his name. 31.Mr Ronny Tong SC (leading Mr Herbert Leung and Mr Anson Tso) submits that the application should be allowed for the following reasons:
32.Ps oppose the application. In his skeleton argument, Mr Benjamin Yu SC (leading Mr Anthony Chan) opposes the Summons on the following grounds:
33.The Liberty to Apply point may be disposed of briefly. I do not think that the statement in Next Media assists Ps as the order in that case was a final order. By contrast, the Consent Order is an interlocutory order and the reference to “until … or further Order” makes it clear that the court does have jurisdiction to vary the Order. Mr Yu confirms that it is not Ps’ stance that the Consent Order should be treated as a contract or that the court does not have jurisdiction to vary the same. Abuse of Process point 34.Mr Yu submits that the Court will not entertain an application to vary an injunction or undertaking unless there has been a material change of circumstances or some other good reason such as where the judge in the original application had been misled in a material respect, or that there has been a manifest mistake, or the applicant has become aware of facts which he did not know and could not reasonably have discovered at the time of the hearing. The principle applies whether or not the court determined the original application (Gee, Commercial Injunctions 7th ed., §21-059; Chanel Ltd v Woolworth & Co Ltd[1981] 1 WLR 485, 492E-493B, per Buckley LJ; Orb a.r.l. v Ruhan[2016] EWHC 850 (Comm), §82, per Popplewell J (as he then was);Compania Sud Americana Da Vapores SA v Hin-Pro International Logistics Ltd [2015] 2 HKLRD 458 (CA), §§16-17). 35.The Chanel principle is founded on the basis that an applicant has a responsibility to take a point when it is first reasonably available to him before the court such that it would be an abuse to delay taking it until a subsequent application. The principle only applies, at any rate with full force, where no specific reservation is made before the court by the applicant (Gee, Commercial Injunctions §21-059). The position would be different if the parties had contemplated at the time of the interim order that the issues thereunder would be revisited such as where the terms of the injunction show that it was not substantively disposed of but was adjourned sine die with liberty to apply. In such circumstances, the parties may be able to re-open the arguments afresh (Keep Bright Ltd v Super Auto Investments Ltd,HCCT 16/2010, 12 January 2012, at §45(3), per Au J (as he then was), citing Butt v Butt [1987] 1 WLR 1351 at 1353H-1354D, per Nourse LJ, 1355, per Mustill LJ; Gantenbrink v BBC [1995] FSR 162, 164-165, per Sir Donald Nicholls VC). 36.In the present case, the Consent Order stated that the Continuation Summons was adjourned sine die with liberty to restore after final determination of the MIP Proceedings. Mr Yu contends that as “final determination” of proceedings includes determination of any appeals therefrom[21], it is not open to D6 to ask the court to revisit the terms of the Injunction until the appeals against the MIP Judgment are finally determined. The argument is right insofar as it concerns §2 of the Consent Order. However, §3 of the Consent Order expressly provides that there is liberty to apply. This indicates that although the parties agreed that the Continuation Summons should only be heard after the final determination of the MIP Proceedings, they contemplated the possibility of, and reserved the right to, apply for variation of the Injunction and of the Undertakings if the need arises. In light of this specific reservation, I do not think that the Chanel principle applies to D6’s application. 37.In any event, it seems to me that the Chanel principle only applies to the parties who participated at the earlier hearing leading to the interlocutory order. It has no application to a third party who has not taken part in the earlier hearing or the proceedings leading to the Consent Order. As Mr Tong submits, neither Mother nor the administrator of the Estate was a party to the action. Nor had they taken any step in the action which resulted in the Consent Order. As a matter of law, there is a distinction between a person being sued in his personal capacity and his representative capacity (Lemas v Williams [2013] EWCA Civ 1433, §§43, 62-63). It is wrong to equate D6’s earlier involvement in his personal capacity with his present role as administrator of the Estate. 38.Mr Yu submits that Lemas is a case which concerns with issue estoppel and has nothing to do with the present application. He emphasises that at the time the Consent Order was made, D6 must knew that he had applied for letters of administration in respect of the Estate. However, no matter how Mr Yu puts it, the fact remains that until the Summons was issued, D6 qua administrator of the Estate has no involvement in the action and has not participated in the proceedings leading to the Consent Order. Indeed, it would not be possible for D6 qua administrator to do so as the LoA were only granted to him on 5 October 2020. 39.Even if there is any proper basis to suggest that the Chanel principle applies to D6 qua administrator of the Estate (none has been identified), in my view, the grant of the LoA to D6 on 5 October 2020 constituted a material change of circumstances which entitles D6 qua administrator to apply for a variation of the Injunction. It also provides a good reason for D6 qua administrator to seek a variation of the Injunction. This is because the terms of the Injunction, as they now stand, have the effect of enjoining the administrator and the directors of D2-D5 from registering the Shares in the name of D6 qua administrator of the Estate. 40.I do not think that it is just and convenient for the Injunction to have the effect of prohibiting D6 qua administrator from taking steps to have the Shares be registered in his name in circumstances where:
41.For these reasons alone, I consider that there are good reasons for the court to vary the Injunction and to release D6 and Ps from the Undertakings so as to allow the Shares to be registered in D6’s name qua administrator of the Estate. No Good Reasons point 42.In light of my conclusion on the Abuse of Process point, it is strictly speaking not necessary to consider the No Good Reasons point. Nevertheless, as both counsel have advanced full arguments on the point, I will deal with the arguments and explain why I do not agree with Ps’ contentions. Before I deal with counsel’s respective arguments, I shall set out the principles which are not in dispute. 43.The court has jurisdiction to vary an injunction and release a party from the undertaking given to the court where it is just to do so (Hong Kong Civil Procedure 2022, §§29/1/34, 29/1/36). A personal representative is under a duty to take steps to get in the estate (Williams, Mortimer & Sunnucks on Executors, Administrators and Probate, 21st ed., §42-20). A personal representative is entitled to full ownership of the property of the deceased’s estate, without any distinction between legal and equitable interest (Karupayee Ammal (Administratrix of the Estate of Karupaya Selvaraj, Deceased) v G-Toys Manufacturing Ltd [2020] 6 HKC 59 at 63B;Probate and The Administration of Estate: A Practical Guide, 2nd ed.,§20-32). 44.As far as company law is concerned, the position of a personal representative and his entitlement to have the shares or interest held by the deceased in a company has been summarised in G-Toys Manufacturing Ltd [2020] 6 HKC 59, §§25-29:
44. Where the articles of association of a company give the power to the directors to refuse registration, such power must be exercised bona fide in the interests of the company and not for any collateral purpose (Re Wai Hing Enterprises Ltd, HCMP 2915/2014, 2 December 2015, §18, per Au-Yeung J; Re Hansby Company Limited, HCMP 4610/2003, 12 May 2004, §§10-13, per Barma J (as he then was)). However, unlike a transfer of shares to a third party where the directors have the power to refuse the transfer without giving any reason, the right of a personal representative to require the company to register the shares transmitted to him by operation of law is enshrined in s.158 of the Companies Ordinance (Cap. 622) and the directors are expected not to refuse registration in the absence of any valid ground to do so (Re Yuen Kiu Kwan, §§36-37; G-Toys, §44). 45.In the case of D2-D5, it is not in dispute that the relevant versions of Table A in the First Schedule to the former Companies Ordinance (Cap. 32), as adopted by article 1 of the Articles of D2-D5, contain regulations which entitle a personal representative of a deceased member to be registered as shareholder. For example, in the case of D2, regulation 30 of Table A provides as follows:
46.Mr Yu submits that for the following reasons the court should refuse the variation sought by D6:
47.In view of the “serious conflict” between D6’s personal interest and the interest the Estate, D6 is liable to be removed as a personal representative is not permitted to put himself in a position of conflict (Chan Yeuk Nam v Chan Yeuk Shan Isabella[2021] HKCFI 3649 at §27, per Wilson Chan J; Kong Colin Chung Ping v Kong Wing On, HCMP 2045/2012, 24 February 2015, §§19-20, per DHCJ Le Pichon). That there may be legal redress against any misconduct by an administrator[26] is not to the point. The question is whether the court should grant the variation sought in the circumstances of this case, which it plainly should not for the reasons identified above. 48.I am unable to agree with Mr Yu’s submissions.
49.For the reasons set out above, I consider that it is just and convenient for the court to vary the Injunction so as to allow D6 qua administrator of the Estate to take steps to have the Shares be registered in his name. I accept the Proposed Undertaking given by D6 and make an order in terms of §§1-2 of the Summons. 50.As for costs, I make a costs order nisi that:
Mr Benjamin Yu SC leading Mr Anthony Chan, instructed by Hart Giles, for the 1st – 3rd Plaintiffs Mr Ronny Tong SC leading Mr Herbert Leung and Mr Anson Tso, instructed by Kelvin Cheung & Co, for the 6th Defendant [1] Who passed away on 9 April 2010 [2] P2 Aff §19. [3] P2 Aff §20. [4] Statement of Claim (“SOC”) §6 [5] D7 Aff §7.5. [6] P2 Aff §64. [7] P3 Aff §§4-7. [8] P2 Aff §§53-63. [9] P2 Aff §§44-52. [10] With leave granted by Lok J during the General Adjournment Period [11] D6 Aff §33. [12] D6 Aff §4. [13] Reported in [2021] 3 HKLRD 814. [14] Who was then 97 years old although his actual age should be about 92 or 93: MIP Judgment §4 [15] MIP Judgment §§100-103 [16] MIP Judgment §§115-117 [17] MIP Judgment §§118-121 [18] Ps’ skeleton §§35, 37 [19] Ps’ skeleton §36 [20] Ps’ skeleton §§42-53 [21] See Inntrepreneur Pub Company (CPC) v Langton, 22 October 1999, p.11, per Arden J (as she then was) [22] P3 Aff §§31-35. [23] §3 of Father’s Defence dated 1 June 2020 admitting to §6 of SOC. [24] §5 of D6-D7’s Defence dated 9 July 2020; D6’s Aff §§28-32; D7’s Aff §6.3. [25] P3 2nd Aff §§38-43. Cf P2 Aff §18. [26] D6 Skeleton §22.4. [27] P2 2nd Aff §42(b). [28] P3 2nd Aff §37. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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