Lee Chi Keung and Others v. Wong Chi Chin and Others

HCA 1878/2020

[2022] HKCFI 3315

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1878 OF 2020

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HCA 1879/2020

ACTION NO. 1879 OF 2020

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HCA 1880/2020

ACTION NO. 1880 OF 2020

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HCA 1881/2020

ACTION NO. 1881 OF 2020

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DECISION

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THE APPLICATIONS

1.Before this Court are four summonses (“the Summonses”) which were filed in HCA 1878/2020 (“the 1878 Action”), HCA 1879/2020 (“the 1879 Action”), HCA 1880/2020 (“the 1880 Action”) and HCA 1881/2020 (“the 1881 Action”) (collectively, “the 4 Actions”) respectively on 18 November 2021. In each of the Summonses, the respective plaintiffs ask for:

(1)  a preservation order;

(2)  an order of account;

(3)  a proprietary injunction order and an ancillary disclosure order;

(4)  an injunction order;

(5)  an interim order; and

(6)  a discovery order.

THE UNDISPUTED FACTUAL BACKGROUND

2.Mr Lee Chi Keung (“Lee”) (the 1^st plaintiff in the 1878 Action, the 1879 Action and the 1880 Action) and Madam Lit Hei King (“Lit”) (the 1^st plaintiff in the 1881 Action) are husband and wife.

3.Mr Wong Chi Chin (“Wong”) (the 1^st defendant in the 1878 Action, the 1879 Action and the 1880 Action) and Madam Tse Shuk Fong (“Tse”) (the 2^nd defendant in the 1878 Action, the 1879 Action and the 1880 Action and the 1^st defendant in the 1881 Action) are a married couple.

4.Tse is the lawful and natural elder sister of Lit.

5.Mr Chan Shing (“Chan”) (the 2^nd plaintiff in the 1878 Action, the 1879 Action and the 1880 Action) has become acquainted with Lee and Wong since 2000 and 2003 respectively.

6.In 2005/2006, the parties and a Mr Tong Chi Leung (“Tong”) reached a consensus that they should invest in:

(1)  A property known as Ground Floor, Ka Ming Building, No.56 Belcher’s Street, Hong Kong (“the G/F Ka Ming Building Property”), and for the purpose of purchasing the said property, Max Dragon International Investment Limited (“Max Dragon”) was incorporated. These are the subject matters of the 1878 Action;

(2)  A property known as Portion B on Ground Floor and its Yard, Fook On Mansion, No.25 North Street, Hong Kong (“the Fook On Mansion Property”), and for the purpose of purchasing the said property, Lucky Honest International Limited (“Lucky Honest”) was incorporated. These are the subject matters of the 1879 Action;

(3)  The properties known as First Floor, Second Floor and Third Floor, Ka Ming Building, No.56 Belcher’s Street, Hong Kong (“the 1–3/F Ka Ming Building Properties”), and for the purpose of purchasing the said properties, Mega Dragon International Investment Limited (“Mega Dragon”) was incorporated. These are the subject matters of the 1880 Action;

(4)  A property known as Store Room on G/F, Hong Kong Industrial Building, Nos.444-452 Des Voeux Road West, Hong Kong (“the Hong Kong Industrial Building Property”), and for the purpose of purchasing the said property, Wisdom Well Investment Limited (“Wisdom Well”) was incorporated. These are the subject matters of the 1881 Action.

7.The relevant Companies Registry records show that:

Re: Max Dragon

(1)  The shareholdings thereof are held by Lee (38%), Chan (3%), Wong (54%) and Tse (5%);

(2)  Its Board of Directors has the following members: Lee, Wong and Tse.

Re: Lucky Honest

(1)  The shareholdings thereof are held by Lee (25%), Chan (1%), Wong (71%) and Tse (3%);

(2)  Its Board of Directors has the following members: Lee, Wong and Tse.

Re: Mega Dragon

(1)  The shareholdings thereof are held by Lee (38%), Chan (3%), Wong (54%) and Tse (5%);

(2)  Its Board of Directors has the following members: Lee, Wong and Tse.

Re: Wisdom Well

(1)  The shareholdings thereof are held by Lit (48%) and Tse (52%);

(2)  Its Board of Directors has the following members: Lit and Tse.

(collectively, “the 4 Companies”)

8.Upon the acquisition of the G/F Ka Ming Building Property, the Fook On Mansion Property, the 1–3/F Ka Ming Building Properties and the Hong Kong Industrial Building Property (collectively, “the 4 Land Properties”) by the 4 Companies, those properties were rented out in return for rental income.

THE PLAINTIFFS’ CASE IN THE 4 ACTIONS

9.The Statements of Claim filed in the 4 Actions are similar. The only difference among them is that they deal with different properties and companies. Other than that, the allegations made against Wong and Tse are more or less the same.

10.Generally speaking, it is alleged by the respective plaintiffs that:

(1)  Wong and Tse have failed and/or refused to pay or to account to Lee/Chan/Lit their respective interests and entitlements out of the 4 Land Properties (including the rental income, etc.);

(2)  Wong and Tse have refused to acknowledge the respective interests of Lee, Chan and/or Lit in the 4 Land Properties (as the case may be) as reflected in the relevant Companies Registry records referred to above;

(3)  Over the years, Wong and Tse have misappropriated and/or pocketed the surpluses of the rental income without consent, and without telling the other parties the whereabouts of the net income;

(4)  Wong and Tse had and have kept Lee/Chan/Lit in the dark, and failed and/or refused to inform, consult, update or involve any of them about (or in) the 4 Companies’ affairs or matters relating to the 4 Land Properties, including the rental income, the outgoings, the matters relating to the relevant facilities loans, etc.

WONG AND TSE’S CASE IN THE 4 ACTIONS

11.Wong and Tse’s case in the 4 Actions may be summarised as follows:

(1)  The 4 Companies (which hold the 4 Land Properties) are the respective true owners of the 4 Land Properties;

(2)  The parties had agreed that the 4 Companies should maintain a sizeable cash reserve, such that the 4 Companies would not be in default in the repayment of the respective mortgage loans and would be in the position to defray all relevant expenses;

(3)  Wong/Tse have been handling matters relating to the tenancy matters, mortgage repayment, etc. because Lee/Chan/Lit were not keen at all, such that Wong/Tse have to handle those matters themselves. In fact, Lee/Chan/Lit were welcome to participate in the affairs of the respective companies;

(4)  Wong/Tse had in fact made more contributions than as initially agreed when the G/F Ka Ming Building Property, the Fook On Mansion Property and the 1–3/F Ka Ming Building Properties were bought (because Lee/Lit/Tong refused to put in more capital and make up the shortfalls upon the parties’ failure to obtain the full amount of mortgage loans as initially planned), such that Wong/Tse should be entitled to a larger percentage of shareholdings in Max Dragon, Lucky Honest and Mega Dragon;

(5)  There were times when the G/F Ka Ming Building Property and the Hong Kong Industrial Building Property could not be rented out. There were also times when the rental income produced could not cover the expenses fully. As a result, the financial positions of the 4 Companies were not as strong as the plaintiffs mistakenly thought.

THE SUMMONSES

12.The plaintiffs in the 1878 Action filed a summons on 18 November 2021 and asked for a number of orders which have been summarised by the plaintiffs’ counsel as follows:

“(a) Preservation Order that D1-D3 do make payment into Court all the monthly rental income(s) by letting out the ‘Ka Ming Building Property’ since the date of the assignment on 25/7/2006 (of which D3 is the registered owner) after deducting the monthly repayment of the bank’s facility loan and/or other outgoing expenses in connection to the said property; and that D1/D2 do serve an account setting out the monthly income(s) and the deduction(s);

(b) Proprietary Injunction Order to restrain D1-D3 from disposing of the said monthly rental income(s); and the ancillary Disclosure Order;

(c) Interim Order that D3 do preserve the company’s assets (save and except to meet the ordinary running expenses);

(d) Discovery Order for the Items of Documents set out in the Schedule annexed to the said summons.”[1]

13.Identical applications have been made in the 1879 Action, 1880 Action and 1881 Action.

14.Counsel for the respective parties agreed that:

(1)  As far as the orders summarised by the plaintiffs’ counsel under paragraph 12(a), (b) and (c) above are concerned, this Court may focus on and make rulings in respect thereof in the 1878 Action only, and the parties agreed that they shall be bound by such rulings which shall be applicable to the 1879 Action, the 1880 Action and the 1881 Action;

(2)  In relation to the discovery applications (under paragraph 12(d) above), since the requests largely overlap, all this Court has to rule on is the requests made in the 1878 Action and the first request made in the 1879 Action. The Court’s rulings on those requests shall then be applicable to the corresponding requests made in the 1879 Action, the 1880 Action and the 1881 Action.

15.I will follow the above agreed approach in the discussions below.

16.However, before I turn to the substantive applications made under the Summonses, for the sake of completeness, I will set out my reasons which had been orally delivered at the beginning of the hearing on the applications made by the parties to adduce further evidence for the purposes of the 4 Summonses.

APPLICATIONS TO ADDUCE FURTHER EVIDENCE

The plaintiffs’ applications

17.By summonses filed on 12 August 2022, the plaintiffs sought to adduce the 3^rd Affirmations of Lee and Lit for the purpose of producing 4 sets of expert reports (one report per action) on fund tracing prepared by Ernst & Young (“the Expert Reports”).

18.It was submitted by the plaintiffs’ counsel that:

(1)  the contents of these reports were highly relevant to the issues in dispute, because they sought to compile and summarise all the relevant data relating to the inflow and outflow of funds;

(2)  they should be admitted for the purpose of this hearing so as to ensure fairness between the parties and for the Court to secure the just resolution of disputes in accordance with the substantive rights of the parties.

19.It cannot be disputed that this was a very late application. In this regard, Lee in his 3^rd Affirmations explained that, having sought legal advice from counsel upon reading the Affirmations in opposition of Wong and Tse, the plaintiffs decided to obtain independent expert reports on fund tracing of the income received by the companies over the years. He stated that some time had been taken for him to locate and contact experts and for the expert who was eventually engaged to prepare the reports.

20.Wong’s Affirmations in opposition were filed on 20 January 2022. However, as shown by the Expert Reports, the relevant engagement agreement was only entered into on 12 July 2022. It can therefore be seen that the plaintiffs had taken around 5 months or even more to engage the expert. In my view, such delay was inexcusable in the circumstances, despite Lee’s explanation. If this Court acceded to the plaintiffs’ request in allowing these reports to be admitted as evidence for the purpose of the hearing, justice would require that adequate time be given to the defendants to at least consider these reports, not to mention instructing their own experts to comment on these reports. The hearing would unavoidably have to be adjourned. Bearing in mind the underlying objectives to ensure that a case is dealt with as expeditiously as is reasonably practicable (Order 1A rule 1(b) of the Rules of the High Court (“RHC”)) and to ensure that the resources of the Court are distributed fairly (Order 1A rule 1(f) of the RHC), I was not persuaded that this was the right course to follow, even if that meant the plaintiffs would be deprived of the chance to rely on these reports which they said were very useful to their case. They only had themselves to blame for making these applications so late.

21.I should also add that it was no answer for the plaintiffs to allege that the documents which were analysed were all coming from the defendants, because, as Mr Chan for the plaintiffs very fairly accepted, the defendants would in any event be entitled to have adequate time to consider the expert opinion expressed in any event.

22.The plaintiffs’ applications to adduce the Expert Reports for the purpose of the hearing were therefore dismissed.

The defendants’ applications

23.The defendants filed summonses on 10 August 2022, pursuant to which they sought leave to file and serve the 2^nd Affirmations of Wong in each of the 4 Actions.

24.It was submitted on behalf of the defendants that it was necessary to file these Affirmations so as to answer the new allegations raised in the 2^nd Affirmations of Lee.

25.While the 2^nd Affirmations of Lee were filed on 11 April 2022, it had been confirmed by Mr Kwong for the defendants that they had in fact been served on the defendants’ solicitors on 15 March 2022. Therefore, the defendants only made the present applications for leave to adduce further evidence more than 4 months after they had been served with the 2^nd Affirmations of Lee.

26.In Wong’s 2^nd Affirmations, he stated that he discovered that there were new accusations raised in the plaintiffs’ Affirmations in reply when his legal representatives went through those Affirmations with him recently. He did not give any other explanation as to why these applications could not have been made earlier.

27.Hence, it seemed to me the reason why these applications were not made earlier was because the defendants did not consider the plaintiffs’ Affirmations in reply early enough.

28.If leave were granted to the defendants, the plaintiffs would be entitled to have the last word since they were the applicants of the substantive applications before this Court. That meant the hearing would have to be adjourned. I did not agree that that was right.

29.Mr Kwong submitted that it would only be fair if the defendants were given the chance to respond to the plaintiffs’ new allegations. With respect, I do not think “fairness” should only be assessed from the defendants’ perspective. They had themselves to blame for making these applications so late.

30.For the above ground alone, the defendants’ applications for leave should be dismissed.

31.In any event, even if there were no delay in the defendants’ applications, I would not have agreed with Mr Kwong that the defendants should be given leave to adduce further evidence. Mr Kwong had helpfully prepared a table setting out the alleged new accusations made by the plaintiffs in their Affirmations in reply. I would deal with them one by one below:

(1)  Lee alleged in his 2^nd Affirmations that the unsigned receipt of Tong would support the plaintiffs’ case. This plainly was a point made in reply to the defendants’ Affirmations in opposition;

(2)  Lee alleged in his 2^nd Affirmations that the defendants had still failed and/or refused to provide books and records for his inspection. This apparently was not a new accusation;

(3)  Lee accused the defendants for not providing him with the updated bank statements. This plainly was not a new accusation;

(4)  Lee accused the defendants of depositing $1,874,501 back into Max Dragon’s bank account. This was a point of reply made on the bank statements which the defendants produced by virtue of the Wong’s Affirmations in opposition;

(5)  Lee stated that Max Dragon’s audited financial statements were prepared without his involvement. This was not a new point;

(6)  Lee alleged that Wong had offended the self-dealing rule by causing Max Dragon to engage and pay Wong’s own company (Well Luck International Investment Company (“Well Luck”)). This was a point in reply to the defendants’ Affirmations in opposition which the plaintiffs were entitled to make;

(7)  Lee commented that it was bizarre and self-serving for Wong’s own company to charge Max Dragon substantial fee. This, again, was a point in reply to the defendants’ Affirmations in opposition which the plaintiffs were entitled to make.

32.I had therefore dismissed the defendants’ summonses.

33.At the hearing, I had made no order as to the costs of the plaintiffs’ summonses filed on 12 August 2022 and the defendants’ summonses filed on 10 August 2022.

THE SUBSTANTIVE APPLICATIONS

Preservation Order

The Law

34.Order 29 rule 2 of the RHC provides that:

“(1) On the application of any party to a cause or matter the Court may make an order for the detention, custody or preservation of any property which is the subject-matter of the cause or matter, or as to which any question may arise therein […]

(2) […]

(3) Where the right of any party to a specific fund is in dispute in a cause or matter, the Court may, on the application of a party to the cause or matter, order the fund to be paid into court or otherwise secured.

(4) An order under this rule may be made on such terms, if any, as the Court thinks just.

(5) […]

(6) […]”

35.The applicable principles for the grant of a preservation order can be found in Hong Kong Civil Procedure 2022, vol. 1, at paragraph 29/8/7:

“The applicable principles for the grant of a preservation order are: (i) There is property which is bona fide the subject matter of the cause or matter. (ii) Something ought to be done for the security of the property. Part of this inquiry will involve showing that damages may not be an adequate remedy. (iii) Unlike an application for a Mareva injunction, no risk of dissipation needs to be demonstrated. Further, even if there has been delay in making an application which may lead to refusal of a freezing injunction, a proprietary injunction may nonetheless be granted. (iv) An enquiry into the relative merits of rival claims is not necessary. (v) In respect of the merits of the claim, the party seeking the preservation order only needs to show that there is a serious issue to be tried on the merits on the normal American Cyanamid principles. […]”[2] (emphasis added)

36.In Feng Loy Chuen v Lim Yiong Lin [1977] HKLR 471, Zimmern J refused an application for a preservation order under Order 29 rule 2, on the basis that the plaintiff could be fully compensated by payment if he were successful, and there being no allegation that the defendant would not be good for his money.

37.The same approach had been adopted by DHCJ Au-Yeung (as she then was) in Samtani v Samtani [2012] 4 HKLRD 872.

Serious question to be tried

38.In their Amended Statement of Claim, the plaintiffs pleaded, inter alia, that:

(1)  The parties agreed (and it was their common intention) at the outset that Max Dragon would be used to acquire and hold the G/F Ka Ming Building Property for the parties beneficially;

(2)  Hence, the parties would be the beneficial owner of the said property, in accordance with their respective contributions to the purchase price (excluding the mortgage loan which was obtained from the bank) and expenses relating to the purchase;

(3)  Max Dragon therefore held the said property on constructive or resulting trust for the parties who had contributed to the purchase price;

(4)  Wong and Tse had been entrusted to deal with and handle all the tenancy matters of the G/F Ka Ming Building Property;

(5)  By failing to account to the plaintiffs the rental income generated by the tenancy of the G/F Ka Ming Building Property and by misappropriating such income, Wong and Tse were in breach of the said agreement and the said trust.

39.Mr Kwong for the defendants argued that the plaintiffs’ trust claim is misconceived both in law and on the facts.

40.As a matter of law, Mr Kwong relied on:

(1)  Good Profit Development Limited v Leung Hoi [1993] 2 HKLRD 176 (at 181) and submitted that a company is not a trustee or agent of its shareholders, and a shareholder does not have any interest in the assets held by the company; and

(2)  Luo Xing Juan Angela v The Estate of Hui Shui See, Willy, Deceased & Others (2009) 12 HKCFAR 1, in which Ribeiro PJ held that “the fact that [2 shareholders] might form a common intention that they should have shared beneficial interests in [the company]’s property cannot in principle be sufficient to impose a constructive trust on [the company] to hold [the company]’s property on trust for the [shareholders]. [The company] is not party to and does not unconscionably depart from any common intention, so there is nothing to constitute [the company] a trustee for [the shareholders]”,

and submitted that there is no room for the plaintiffs to argue that a trust had arisen from any alleged express or inferred common intention or agreement amongst Max Dragon’s shareholders, and that the plaintiffs simply do not have any beneficial interest over the G/F Ka Ming Building Property (and the rental deriving therefrom) at all.

41.In Good Profit Development Limited (supra), the plaintiff sought to add the company which was holding the subject property therein as an additional defendant to the action. It was alleged by the plaintiff therein, inter alia, that the company had been holding the property on a bare trust for the shareholder defendants, that the company was merely the alter ego of its shareholders and/or a vehicle holding the property in trust for them. Woo J held that the normal rule is that a company does not hold property as an agent or trustee for its members and a fortiori it does not hold property as agent or trustee for its directors. In that case, while the funds of the company were provided by the shareholder defendants, those funds appeared in the company’s accounts as shareholders’ advance. Therefore, on the particular facts of that case, there could not be a resulting trust in the property in favour of the shareholders because the money paid by them had been treated as a loan to the company.

42.What Ribeiro PJ stated in Luo Xing Juan Angela (supra) should also be understood in the proper context. In that case, Miss Luo and Mr Hui (the deceased) had been a cohabiting couple for some four years. They moved into the subject property which was held under the name of the deceased’s company, Glory Rise. That property was acquired in the course of the business being carried on by the deceased with his sister, in which Miss Luo was not involved. Initial payments were made by the deceased and his sister in the proportions of 80:20. Those payments were treated as shareholders’ loans. Be that as it may, the deceased and Ms Hui also held the shareholdings in Glory Rise in that proportion. The balance of the purchase price was financed by a term loan from a bank. Meanwhile, the deceased proposed marriage to Miss Luo and she accepted. The deceased then decided that Miss Luo should have 35% of the shares in Glory Rise, and therefore transferred 3,500 out of his 8,000 shares to her without receiving any payment in return. Simultaneously, he arranged his sister to transfer her 2,000 shares in Glory Rise to himself, in respect of which he had paid his sister subsequently. Unfortunately, before the deceased and Miss Luo got married, the deceased suddenly fell ill and passed away.

43.Against the background which was briefly summarised above, Ribeiro PJ held that:

“34. Prior to the deceased deciding that the Property should serve as their family home, it had clearly been beneficially owned as a marketable investment by Glory Rise. The company borrowed money from its shareholders and from a bank to purchase the Property and executed a mortgage on it by way of security. Glory Rise’s interest in the Property is said to have been transformed into the interest of a trustee solely on the basis of a constructive trust resting on the couple’s common intention. There is certainly no reason – and none is alleged – to lift the corporate veil or for treating Glory Rise as anything other than a legal person distinct from its shareholders. The basic proposition that a shareholder has no legal or equitable interest in the company’s property (as opposed to a right to share in the profits of its business and to a distribution of any surplus on liquidation) therefore applies.

35. It is against this background that the alleged common intention constructive trust must be considered. As the line of cases commencing with Pettitt v Pettitt and Gissing v Gissing show, where beneficial interests arise in a domestic cohabitation context, equity converts the person in whom the property is vested into a trustee of that property for both parties. As Lord Diplock puts it in Gissing v Gissing:

‘Any claim to a beneficial interest in land by a person, whether spouse or stranger, in whom the legal estate in the land is not vested must be based upon the proposition that the person in whom the legal estate is vested holds it as trustee upon trust to give effect to the beneficial interest of the claimant as cestui que trust.’

36. This is so in cases where a resulting trust arises by virtue of the claimant’s contribution in money or in some other way towards the property’s acquisition. Equity holds the legal owner to be a trustee of that property for the claimant in an appropriate share, giving effect to the parties’ presumed intention.

37. It is also the case where a constructive trust is imposed. Equity attaches the conscience of the legal owner and attributes to the claimant an appropriate beneficial interest in the property. As Millett LJ pointed out in Paragon Finance plc v D B Thakerar:

‘A constructive trust arises by operation of law whenever the circumstances are such that it would be unconscionable for the owner of property (usually but not necessarily the legal estate) to assert his own beneficial interest in the property and deny the beneficial interest of another.’

38. Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the claimant regarding their shared beneficial interests in the property that matters. The trust is constituted by the claimant’s detrimental reliance on their common intention and the unconscionability of the property owner departing therefrom.

39. It follows that Glory Rise’s ownership of the Property is crucial. The fact that A and B might form a common intention that they should have shared beneficial interests in C’s property cannot in principle be sufficient to impose a constructive trust on C to hold C’s property on trust for A and B. C is not party to and does not unconscionably depart from any common intention, so there is nothing to constitute C a trustee for A and B. If B does not make good his promise, he might attract personal liability to A, but it does not mean that an equitable interest in C’s property is created in favour of A.

40. The approach adopted by Kwan J runs counter to these principles in postulating that the doctrine of constructive trust applies if the court finds ‘that at the time of the acquisition of the property, or at some subsequent relevant period in exceptional circumstances, the intention is that the company is not to own the property beneficially but to hold it as a trustee or nominee for the beneficial owner’.

41. The ‘intention’ referred to must be the common intention of Miss Luo and the deceased on the evidence canvassed. But the existence of that common intention cannot transform Glory Rise into a constructive trustee and does not result in Miss Luo acquiring any proprietary interest in the Property. Moreover, Miss Luo did not know at any stage before the deceased’s death that the Property was held by a company so that there could not, on the evidence, ever have been the posited common intention that Glory Rise should hold the Property as trustee.

42. The same difficulties beset the approach adopted by Le Pichon JA insofar as she held that the common intention of the deceased and Miss Luo that the latter should have a 35% interest in the Property converted Glory Rise into a trustee of its sole asset in favour of its shareholders.

43. It is also, with respect, difficult to see any foundation for Le Pichon JA’s suggestion that a constructive trust attached to the deceased’s shares in Glory Rise. The Judge’s findings as to common intention relate only to beneficial interests in the Property and also to the shareholders’ loans to Glory Rise (discussed below). There was never any discussion of anyone acquiring an interest in the deceased’s 6,500 shares. On the contrary, the Judge found (as the evidence clearly warranted) that the deceased’s intention was that ‘they were to hold shares in the Company in the proportion of 35% and 65%’, although she found that this was a ‘legal nicety’ which the deceased had not communicated to Miss Luo. The deceased plainly meant to keep the 6,500 shares and to remain the majority shareholder. If the deceased had come under some equitable obligation preventing him from dealing with his own shares in a manner inconsistent with that obligation, this might take effect as a personal equity – as discussed below in relation to promissory estoppel – but that could not have resulted in the creation of any beneficial interest in favour of Miss Luo in the Property.” (emphasis added)

44.There are two important factual matters in Luo Xing Juan Angela (supra) which must be borne in mind:

(1)  The monetary contributions of the deceased and his sister were treated as shareholders’ loan to Glory Rise;

(2)  Miss Luo did not even know before the deceased passed away that the subject property was held under the name of Glory Rise.

45.In my view, the defendants before this Court have gone too far in suggesting that there is no room for the plaintiffs to argue that a trust could arise from the alleged express or inferred common intention amongst the shareholders of Max Dragon. I do not think the plaintiffs’ argument is bound to fail as a matter of law. It all depends on the factual circumstances. This may be illustrated by referring to the authority of Lo Man Yau v Chiu Sung Fai & Another [2018] 6 HKC 221, [2018] HKCA 387, in which Poon JA (as his Lordship then was) had the following to say:

“12. The present case concerned a property held by and in the name of a limited company but the purchase price partly came from the funds provided by its shareholder. In such a context, the legal principles governing how a resulting trust may arise can be briefly stated as follows. The summary below is largely taken from the judgment of Madam Recorder Linda Chan, SC in Re Fortune King Trading Limited, HCCW 432/2012, unreported, 19 May 2017, at [24] – [26] and [31].

(1) It is axiomatic that a company is in its own right a legal person having a separate and distinct identity from its shareholders. Therefore, as a general rule, a company does not hold property as an agent or trustee for its shareholder. Put differently, as a general rule, a shareholder has no legal or equitable interest in the company’s property, as opposed to a right to share in the profits of its business and to a distribution of any surplus on liquidation. See Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1, per Ribeiro PJ at [34].

(2) It follows that when the purchase of a property is made in the name of a company, the starting point is that the purchase was intended to vest both the legal and beneficial interest in the company. This is true even if the funds for the purchase are provided by a shareholder.

(3) Both (1) and (2) are general propositions. Combined together, they give rise to a normal, but rebuttable, inference that the beneficial interest of the property acquired in the name of the company with funds provided by its shareholder was intended to pass to the company. When the shareholder claims that by providing the funds, the equitable interest in the property was intended to be vested in him personally by way of a resulting trust, he bears the burden to rebut the inference by proving that the legal interest and the equitable interest of the property were so vested in the company and him separately.

(4) The time to take stock of the respective interest taken by the company and the shareholder in the property is the time of its acquisition. The focus is on the parties’ intention at the time of purchase : whether the parties intended to vest the beneficial interest of the property in the shareholder as the provider of the funds, having regard to all the circumstances.” (emphasis added)

46.This is the convenient point to turn to consider the factual circumstances of the case before this Court.

47.To recap, it is the plaintiffs’ case that it was the parties’ agreement and common intention that they should own the G/F Ka Ming Building Property beneficially despite the fact that it was held under the name of Max Dragon, and it was said that the parties’ respective shareholdings in Max Dragon were allocated in accordance with their respective financial contributions to the purchase price and expenses towards the purchase of the said property.

48.Mr Kwong submitted that the plaintiffs’ case is wholly incredible and contradicted by all the objective circumstances.

49.With respect, I do not agree with this submission. Indeed, even Mr Kwong accepted that “it was all along the parties’ agreement and understanding that they should own the shareholding in the Companies in proportion to their contributions towards the acquisition costs and expenses”[3]. That plainly supports the plaintiffs’ case.

50.It is trite that the threshold of “serious issues to be tried” is “not a very steep hurdle”. On the other hand, the threshold is high if the opposing party is minded to persuade the Court that there is no serious to be tried, and it would be necessary for such a party to show that the claim should be struck out.

51.In my view, the plaintiffs have no doubt passed the low hurdle. I hold that there is serious issue to be tried in the plaintiffs’ trust claim.

Adequacy of damages

52.The plaintiffs’ counsel submitted that one important question which the Court should ask is “where the money has gone”.

53.For this purpose, they have placed before this Court two tables, by which it was shown that a total sum of $10,110,000 had been transferred from Max Dragon’s bank account to Wong’s personal bank account or Well Luck’s bank account in the period between 2012 and 2020. On such a basis, it was said that protection is amply justified.

54.Assuming for the sake of argument that Wong has indeed misappropriated the money of Max Dragon, does it necessarily mean that the Court should, as a matter of justice, grant the preservation order sought?

55.In my view, it depends on whether the monetary judgment which the plaintiffs obtain at the end of the day would be meaningful to them practically, in the sense that it will be capable of being successfully enforced.

56.In this regard, this Court’s attention has been drawn to the fact that the net equity value of the G/F Ka Ming Building Property as at October 2020 was around $48.8 million. Even adopting the plaintiffs’ case that Wong and Tse are entitled to no more than 59%[4] beneficial interest thereof, the value of Wong and Tse’s interest in Max Dragon/the G/F Ka Ming Building Property should still amount to around $28.8 million. That is way more than the alleged amount of misappropriation.[5]

57.In other words, even if this Court does not take into account the value of Wong’s residential property in Pokfulam which allegedly has a value of no less than $30 million, the plaintiffs would be adequately protected even without the preservation order. Hence, I am not satisfied that something ought to be done for the security of the properties involved.

58.The plaintiffs’ application for preservation order is therefore dismissed.

59.The plaintiffs’ application for an account should also be dismissed as a consequence because the plaintiffs’ counsel accepted that the application for an account is ancillary to the application for a preservation order. The intended purpose was to verify the payments to be made into Court.[6]

Proprietary injunction

60.The plaintiffs asked for a proprietary injunction order that Wong and Tse must not remove or in any way dispose of or deal with the net monthly rental income in connection to and/or as a result of the letting out of the G/F Ka Ming Building Property since the date of the assignment in 2006.

The legal principles

61.The applicable legal principles are well established. The plaintiffs’ counsel have referred this Court to K Yeung J’s Decision in Gentle Soar Limited v CMBC Capital Finance Limited & Others [2021] HKCFI 3450 in which his Lordship summarised the relevant principles as follows:

“36. The legal principles and considerations applicable to an application for a proprietary injunction is not in dispute. As summarized at Sections C1 and C2 of Mr Ho’s written submissions (citing inter alia Pacific Bulk Investment Ltd v Chu Kong [2020] HKCFI 2825, Samtani v Samtani [2012] 4 HKLRD 872, Liao Chen Toh v Loyal International Enterprises Co Ltd & Ors, HCA 2302/2014 (30 March 2016) and Music Advance Ltd v Incorporated Owners of Argyle Centre Phase I [2010] 2 HKLRD 1041):

(a) For the grant of an interlocutory injunction, the broad requirements are that (a) there is a serious issue to be tried, and (b) the balance of convenience lies in favour of granting or continuing the injunction;

(b) Specifically in relation to the grant of a proprietary injunction or a preservation order:

(i) There is property which is bona fide the subject matter of the cause or matter, or as to which any question may arise;

(ii) Something ought to be done for the security of that property, because for example damages may not be an adequate remedy;

(iii) Unlike application for a Mareva injunction, no risk of dissipation needs to be demonstrated;

(iv) Even if there has been delay in making an application which may lead to refusal of a freezing injunction, a proprietary injunction may nonetheless be granted;

(v) An enquiry into the relative merits of rival claims is not necessary. In respect of the merits of the claim, the party seeking the preservation order only needs to show that there is a serious issue to be tried on the merits on the normal American Cyanamid principles;

(vi) If the opposing party seeks to show that there is no serious issue to be tried, the threshold is high, as it would be necessary to demonstrate that the claim should be struck out;

(vii) There is no strict requirement for an undertaking as to damages where the Court grants a proprietary injunction or a preservation order, albeit that the Court may require such an undertaking ‘where the circumstances warrant’;

(viii) There is no need for P to show that damages would not be an adequate remedy;

(c) As a fundamental principle, the Court at the interlocutory stage would take whichever course that appears to carry the lower risk of injustice if it should turn out that it is wrong;

(d) I have also considered the number of authorities cited by Mr Ho on the threshold of ‘serious issues to be tried’. I bear in mind that it is ‘not a very steep hurdle’, but that, as has been summarized above, if the opposing party seeks to show that there is no serious issue to be tried, the threshold is high.” (emphasis added)

62.As far as the legal principles are concerned, the only differences between the parties herein is whether there is any need on the part of the plaintiffs to show that damages would not be an adequate remedy.

63.Apart from relying on what K Yeung J stated in Gentle Soar Limited (supra) as quoted above, the plaintiffs’ counsel had also referred this Court to Pacific Telecom & Navigation Limited v Ye Lei [2020] HKCFI 586, in which DHCJ MK Liu also held at [28] that:

“[…] As said in the above, for interlocutory proprietary injunctions […] there is no need for P to show that damages would not be an adequate remedy […]”

64.While I agree that “inadequacy of damages” is not a necessary element (hence, the absence of which would not necessarily lead to the dismissal of an application for a proprietary injunction order), this is one of the factors that the Court may take into account. In Wason Holdings Limited & Others v BHP International Markets Limited & Another [2018] HKCA 113, it was held by Barma JA that:

“38. […] Although their claim may be characterised as proprietary, in the particular circumstances of this case, it is nonetheless a claim to money. Unless there is reason to think that the 1^st defendant will be unable to meet such a claim, there is no particularly pressing need for money to be kept aside to meet it […]”

Serious question to be tried

65.I have found when I considered the plaintiffs’ application for preservation order that there is serious question to be tried in the present case, and I do not intend to repeat what I have said above.

Balance of convenience

66.The question here is which course appears to carry the lower risk of injustice if it should turn out that this Court is wrong.

67.If the injunction application is refused, then the plaintiffs would be deprived of the “protection” which they sought. However, in the circumstances of the present case, at the end of the day, the plaintiffs are mainly (if not solely) concerned with monetary payment. As I have explained above, taking into account the net equity value of the G/F Ka Ming Building Property, the plaintiffs would be amply protected even without the injunction order, and they have no ground to allege that Wong and Tse may not be able to meet any judgment which the plaintiffs may obtain in the 1878 Action.

68.On the other hand, if the injunction application is allowed, there may be serious consequences. It must be borne in mind that the plaintiffs are now asking to prohibit Wong and Tse from, inter alia, dealing with the rental income since 25 July 2006 (i.e. 16 years ago) after deducting (i) the monthly repayment of the facility loan granted by the bank (ii) other outgoing expenses in connection with the G/F Ka Ming Building Property and (iii) other outgoing expenses of Max Dragon. In my view, there is a risk that there will be further disputes between the parties in the enforcement and operation of this order. This may lead to further legal costs and time having to be spent on the matter.

69.The question is: is this risk worth taking?

70.I take the view that it is not, because the plaintiffs can no doubt be adequately compensated anyway and there is no question that any order of the Court on damages can be enforced against Wong and Tse.

71.Therefore, I hold that this Court should not exercise its discretion in favour of granting the proprietary injunction order sought.

72.That being so, there is no need for the Court to consider the application for an ancillary disclosure order.

The injunction order on passing resolution in AGM

73.The plaintiffs also asked for an injunction order against Wong, Tse and/or Max Dragon, so that they shall not pass any resolution to adopt the Financial Report of Max Dragon as at 30 June 2019 at the AGM of Max Dragon.

74.As pointed out by Mr Kwong, at the AGM of Max Dragon held on 26 November 2021, the audited financial statements for the financial year ended 30 June 2019 had been approved by the majority shareholders (i.e. Wong and Tse) already. Hence, the injunction would no longer serve any useful purpose.

75.The plaintiffs have offered no answer to this submission.

76.The application is therefore dismissed.

Interim order

77.At the beginning of their skeleton submissions, the plaintiffs’ counsel mentioned that the plaintiffs’ summons in the 1878 Action asked for, inter alia:

“Interim Order that [Max Dragon] do preserve the company’s assets (save and except to meet the ordinary running expenses)”[7]

78.The relevant paragraph in the Summons filed in the 1878 Action reads:

“Insofar as appropriate, pending the Court’s determination of these HCA 1878/2020 proceedings, the 3^rd Defendant (‘Company’) shall take all steps to preserve the assets of the Company and shall not dilute or dissipate the capital or assets of the Company save to meet the ordinary running expenses of the Company.”[8]

79.However, in the body of the skeleton submissions, the plaintiffs’ counsel did not seek to justify this application at all. Neither did Mr Chan say anything on this part of the application at the hearing. In any event, by reason of the net equity value of the G/F Ka Ming Building Property, I do not think this application should be granted anyway.

80.On the other hand, the plaintiffs have in their skeleton submissions asked the Court to make an order of interim payment against Wong and Tse.

81.While the plaintiffs have indeed cited Order 29 rules 8, 10 and 11 of the RHC at the marginal note of the Summons filed in the 1878 Action, they have not included any order which they proposed the Court to make in the said Summons. In these circumstances, it is simply not right for the Court to consider this “application”.

Discovery

The documents sought

82.The plaintiffs sought discovery of a number of documents in the 4 Actions pursuant to Order 24 rule 10 of the RHC. As confirmed by counsel for the respective parties, it is adequate for the Court to make a ruling on the items sought in the 1878 Action as well as on the first item sought in the 1879 Action.

83.For the sake of clarity, the aforesaid items are set out as follows[9]:

(1)  “The tenancy as referred to at Paragraph 12(8) of the Amended Defence and Counterclaim (except those supplied under Messrs. Lau Wong & Chan’s letter dated 7^th September 2021)”;

(2)  “The tenancy and ‘rental income’ document(s) as referred to at Paragraph 12(10) of the Amended Defence and Counterclaim (except those supplied under Messrs. Lau Wong & Chan’ letter dated 7^th September 2021)”;

(3)  “The document(s) relating to ‘the Company’s expenses’ as referred to at Paragraph 12(10) of the Amended Defence and Counterclaim”;

(4)  “The Bank Statements of the Company’s Bank account No.[…] held with the Shanghai Commercial Bank for the period from the account opening up to the current updated bank statement as of the date of the order) (except for the period from June 2010 to October 2020)”;

(5)  “The ‘Company’s accounts and/or documents’ as referred to at Paragraph 17(4)(c) of the Amended Defence and Counterclaim”;

(6)  “The ‘books, account and records of the Company’ as referred to at Amended Paragraph 21(4) of the Defence and Counterclaim (if such are different from the [preceding item]”;

(7)  “The document(s) relating to the ‘incidental expenses in the sum of HK$1,004,528’ as referred to at Paragraph 11(5)(b) of the Amended Defence and Counterclaim”.

The legal principles

84.Order 24 rule 10 of the RHC provides that:

“(1) Any party to a cause or matter shall be entitled at any time to serve a notice on any other party in whose pleadings, affidavits or witness statements served under Order 38, rule 2A, or experts’ reports, reference is made to any document requiring him to produce that document for the inspection of the party giving the notice and to permit him to take copies thereof.

(2) The party on whom a notice is served under paragraph (1) must, within 4 days after service of the notice, serve on the party giving the notice a notice stating a time within 7 days after the service thereof at which the documents, or such of them as he does not object to produce, may be inspected at a place specified in the notice, and stating which (if any) of the documents he objects to produce and on what grounds.”

85.Order 24 rule 11 of the RHC provides that:

“(1) If a party […] who is served with a notice under rule 10(1)-

(a) fails to serve a notice under […] rule 10(2), or

(b) objects to produce any document for inspection, or

(c) offers inspection at a time or place such that, in the opinion of the Court, it is unreasonable to offer inspection then or, as the case may be, there,

then, subject to rule 13(1), the Court may, on the application of the party entitled to inspection, make an order for production of the documents in question for inspection at such time and place, and in such manner, as it thinks fit.

(2) Without prejudice to paragraph (1), but subject to rule 13(1), the Court may, on the application of any party to a cause or matter, order any other party to permit the party applying to inspect any documents in the possession, custody or power of that other party relating to any matter in question in the cause or matter.

(3) […]”

86.Order 24 rule 13(1) of the RHC provides as follows:

“No order for the production of any documents for inspection or to the Court or for the supply of a copy of any document shall be made under any of the foregoing rules unless the Court is of opinion that the order is necessary either for disposing fairly of the cause or matter or for saving costs.”

87.Counsel from both sides have referred this Court to the case of Lee Sai Nam v. Li Shu Chung and Another (HCA1711/2009, unreported, 10 January 2014), in which DHCJ M Ng (as she then was) had the following to say at [61]:

“The court has jurisdiction to order discovery of a document referred to in a pleading or affidavit or witness statement, whether or not the document is in the possession, custody or power of the party in whose pleading or affidavit or witness statement the reference is made. An order will not be made if good cause to the contrary is shown. The absence of possession, custody or power may amount to good cause, but will not invariably be so; the decision depends on the facts of each particular case. The party requesting inspection must satisfy the court that inspection is necessary either to dispose fairly of the matter or to save costs.”

88.Reference should also be made to Moulin Global Eyecare Holdings Ltd v Olivia Lee Sin Mei [2013] 3 HKLRD 72, in which Fok JA (as he then was) summarized the applicable principles as follows:

“31. I have set out above the rules of Court relevant to the present appeal. It is clear from those rules and from the authorities that have considered them (or the precursors to those rules) that there is a distinction between discovery of documents in an action in general and an application for production of documents referred to in pleadings or affidavits: see, in this respect, Quilter v Heatly per Lindley LJ at p. 49 and Shun Kai Finance Co Ltd v Japan Leasing (HK) Ltd per Rogers VP at pp. 523J-525B.

32. In the latter situation, where a party has referred to a document in his pleading or affidavit, the opposite party has a prima facie entitlement to see it, ‘unless good cause to the contrary is shewn’ (per Jessel MR in Quilter v Heady at p. 48), or ‘unless there is some sufficient ground for refusing production’ (ibid per Lindley LJ at p. 50), or “unless he can shew good cause why he should not” produce it (ibid per Bowen LJ at p. 51).

33. Nevertheless, it is clear from the rules that any order for production for inspection under 0.24 r.11 is expressly ‘subject to rule 13(1)’ and that latter rule plainly places, on an applicant for an order for production, a burden to demonstrate to the court that ‘the order is necessary either for disposing fairly of the cause or matter or for saving costs’.

34. In Dynamic Way, Godfrey VP expressed the position thus (at p. 142B-D):

‘We are concerned here with a document referred to in an affirmation, that is to say, the list of purchase orders mentioned in para 36. Although, prima facie, the party against whom it was sought to be used had a right to inspect this document and take copies of it, the court will not order production of the document for inspection unless the court is of the opinion that such an order is necessary either ‘for disposing fairly of the cause or matter or for saving costs ’; see 0 24 r 13 of the Rules of the High Court.’

35. There are thus two separate stages to be considered, although in practice these will usually be examined together. First, the party who has referred to the document in a pleading or affidavit bears the burden of showing good cause why an order for production should not be made. As a matter of practicality, at that stage, the fact of reference to a document in a pleading or affidavit will make it difficult for the referring party to contend that the document does not exist and it may also make it difficult for him to contend that it is not relevant. However, that is not the end of the inquiry as there is not then a presumptive rule in favour of an order for production and the referring party may be able to show, for example, that the document is privileged from production. In any event, under O.24 r.13 there remains, secondly, and independent of the first stage, a burden on the applicant for an order for production to show the court that the order is necessary either for disposing fairly of the cause or matter or for saving costs.”

89.Under Order 24 rule 10(1), the document referred to in the pleadings, affidavits or witness statements need not be individually listed or specified but must be alluded to instead of being left to be inferred. In Zida Technologies Ltd v Tiga Technologies Ltd [2001] 3 HKLRD 698[10], it was held at [36] that:

“Documents need not be identified or individually described – a general reference will suffice, as this is a compendious way of referring to a number of documents: Smith v. Harris (1883) 48 LT 869, 870 per Chitty J approved in Dubai Bank Ltd v. Galadari (No.2) [1990] 1 WLR 731, at 738C (CA) per Slade LJ. But a direct allusion to the document is required; where a document is not specifically mentioned its existence is prohibited from being inferred.” (emphasis added)

90.In Dubai Bank Ltd v Galadari & Others (No 2) [1990] WLR 731 (which was referred to in the paragraph quoted above), Slade L.J. also held that the “reference” as anticipated under Order 24 rule 10 must be to a document, as opposed to a deal/transaction. In his Lordship’s own words:

“[…] The problem arises in applying them in a case where, though the assertion made in the affidavit or pleading does not specifically mention a document or class of documents, it gives the reader strong grounds, perhaps even sure grounds, for supposing that a document must exist. A simple example was canvassed in the course of argument. Let it be g supposed that a deponent to an affidavit asserts that on a specified date ‘the property Blackacre was conveyed by A to B.’ If the assertion is true, one can be more or less certain that a document effecting the conveyance exists. But would the affidavit contain a ‘reference to’ a document within the meaning of the rule?

Mr. Purle submitted that it would. He accepted that the mere fact that a particular transaction, referred to in an affidavit or pleading, F would be likely to be evidenced by a document would not ipso facto involve a ‘reference’ to such a document. However, he made the broad submission that, if an affidavit refers to a transaction which on the balance of probabilities will have been effected by a document, that must involve a reference to such document for the purpose of the rule. […]

[…] We cannot accept the broad submission of Mr. Purle summarised above. It seems to us to involve reading the phrase ‘reference is made to any document’ as including reference by inference. This we do not regard as the natural and ordinary meaning of the phrase. To our minds, the phrase imports the making of a direct allusion to a document or documents. If the plaintiff were correct in its broad submission, this would oblige the court to enter into a process of inference and conjecture in order to determine whether the document or class of documents in question even existed; and indeed, the judge did so in the present case. We cannot think that this was what the makers of the rule had in mind. […]

[…] In our judgment, a mere opinion that on the balance of probabilities, a transaction referred to in a pleading or affidavit must have been effected by a document, does not give the court jurisdiction to make an order under R.S.C., Ord. 24, r. 10, unless the pleading or affidavit makes direct allusion to the document or class of documents in question.” (at 738D – 739H) (original emphasis)

91.Lastly, it is also trite that, generally speaking, discovery affidavits are invariably taken at face value. Subject to limited exceptions, they are conclusive as to relevance and existence or otherwise of the documents concerned, so that the party applying for discovery cannot seek to contravene the statements or assertions in such affidavits either by way of a further contentious affidavit or by applying to cross-examine the deponent.[11]

Discussions

“The tenancy”

92.The plaintiffs asked for the production of the “tenancy” which (they alleged) had been referred to in paragraph 12(8) of the Amended Defence and Counterclaim. It was pleaded therein that:

“Paragraph 9(i)[12] is admitted to the extent that the Shop has been let out for rental incomes, but it is denied that it has been let out ever since the Assignment. For the reasons pleaded hereinbelow, it took about six months after the Assignment before the renovation works could be completed and a tenant could be found. Further, there were periods of time for a few months when [Max Dragon] was unable to rent out the Shop, after a tenant had left.”

93.For Order 24 rule 10 of the RHC to apply, there is a requirement that, in the pleading/affidavit/witness statement concerned, “reference is made to any document”.

94.I do not think there can be any room for the plaintiffs to argue against the proposition that no “tenancy agreement” had been referred to in the aforesaid paragraph of the Amended Defence and Counterclaim at all. As aforesaid, it is inadequate for the pleading to refer to the deal/transaction concerned.

95.Hence, in my view, Order 24 rule 10 of the RHC is simply not engaged here.

96.The plaintiffs’ counsel relied heavily on the fact that the defendants’ solicitors had at one stage promised that they would supply the documents requested, and it was submitted that they should not be allowed to retreat/refuse to provide the requested documents. By their letter dated 31 May 2021, the defendants’ solicitors had indeed stated, inter alia, that:

“Meanwhile, we are in the course of collating the remaining requested documents. With a view to saving costs and avoiding unnecessary disputes, please withhold from taking further action at this stage. We shall let you have the same as soon as practicable.”

97.First of all, I do not think the defendants’ solicitors should be treated as if they had unequivocally accepted that their lay clients had the obligation to produce the documents requested pursuant to Order 24 rule 10 of the RHC as such.

98.Further, the defendants’ solicitors did subsequently send the plaintiffs’ solicitors a number of tenancy agreements under their covering letter dated 7 September 2021.

99.However, the plaintiffs contend that the tenancy agreements sent were incomplete.

100.In this regard, the defendants explained by Wong’s Affirmation that:

“53. […] The Company is only required to keep its accounting records for 7 years. Indeed, the Company’s auditors have already checked and verified the tenancy agreements and other receipts, and the Company’s turnover and expenditures are recorded in its audited accounts. There is hence no point for us to keep every single piece of paper since the Company came into existence. In any event, even though the Plaintiffs’ request is redundant and unwarranted, as shown in Exhibit ‘LCK-4’, the Plaintiffs have been supplied with tenancy agreements dated from 1^st April 2013 up to 1^st January 2021 […]

[…]

66. I repeat paragraph 53 above. We have already provided the tenancy agreements dated from 1^st April 2013 up to 1^st January 2021 […] Bearing in mind that we are only required to keep documents in the past 7 years, these are all the tenancy agreements in our power, control, possession and/or custody.”

101.As aforesaid, the confirmation made in the discovery affidavit is, generally speaking, conclusive. The plaintiffs’ counsel have not explained why Wong’s Affirmation should not be so treated.

102.For the above reasons, the application for production of “tenancy” is rejected.

“The tenancy and ‘rental income’ document(s)”

103.The plaintiffs asked for the production of “the tenancy and ‘rental income’ document(s)” as referred to in paragraph 12(10) of the Amended Defence and Counterclaim. It was pleaded therein that:

“As to Paragraph 9(k)[13]:-

(a) Whilst it is admitted that the Company had received rental income arising from the Shop (which was used to repay the mortgage loan and the Company’s expenses), it is averred that there were periods of time when the Company was unable to rent out the Shop.

(b) It is further averred that the Company still has not fully repaid the mortgage loan.

(c) Save as expressly admitted hereinabove, no admission is made as to Paragraph 9(k).”

104.This application must be rejected because there is no doubt that no reference has been made to any “tenancy and ‘rental income’ document(s)” at all in the said paragraph of the Amended Defence and Counterclaim. Order 24 rule 10 of the RHC is simply not engaged.

“The document(s) relating to ‘the Company’s expenses’ ”

105.The plaintiffs asked for the production of “the document(s) relating to ‘the Company’s expenses’ ” as referred to in paragraph 12(10) of the Amended Defence and Counterclaim.

106.I refer to paragraph 12(10) of the Amended Defence and Counterclaim quoted above. No reference to any document can be found therein.

107.The plaintiffs’ application should therefore be dismissed.

Bank statements

108.The plaintiffs asked for the production of:

“The Bank Statements of the Company’s Bank account No.[…] held with the Shanghai Commercial Bank for the period from the account opening up to the current updated bank statement as of the date of the order) (except for the period from June 2010 to October 2020)”

109.While the present application was made under Order 24 rule 10 of the RHC, the plaintiffs did not even state where in the pleading/affidavit/witness statement were the said bank statements referred to.

110.In fact, this item was not even included in the Notice for Request of Documents dated 4 May 2021.

111.Furthermore, in any event, Wong had in his Affirmation confirmed that the defendants no longer had the bank statements for the period prior to June 2010. This assertion was not challenged by the plaintiffs at all.

112.This application is therefore dismissed.

The Company’s accounts and/or documents

113.The plaintiffs asked for the production of “the Company’s accounts and/or documents” as referred to in paragraph 17(4)(c) of the Amended Defence and Counterclaim. It was pleaded in paragraph 17(4) thereof that:

“Paragraph 16(d) is denied.

(a) As pleaded hereinabove, the 1^st and 2^nd Defendants at all material times recognised the 1^st and 2^nd Plaintiffs’ status as the Company’s shareholders and their rights in respect thereof.

(b) As such, the 1^st and 2^nd Defendants at all material times welcomed the 1^st and 2^nd Plaintiffs to inspect the audited accounts of the Company. However, they have never requested inspection throughout the years.

(c) In the premises, it is strenuously denied that the Defendants had refused to disclose the Company’s accounts and/or documents.”

114.The aforesaid paragraph 17(4)(c) was pleaded in reply to paragraph 16(d) of the Amended Statement of Claim which in turn pleaded that:

“Despite that, the 1^st and 2^nd Defendants had totally ignored and paid no regard to the expert valuation report, and had continued to fail and/or refuse to recognise the 1^st and 2^nd Plaintiffs’ interest (by inter alia failing / refusing to account any income(s) to them, and failing / refusing to disclose any Company’s account documents or any relevant documents relating to the Company’s incomes, etc. to the Plaintiffs).”

115.It can thus be seen that it was the plaintiffs who referred to the documents in the first place. The defendants were only pleading to the matter in response. By doing so, I do not think the defendants should be taken as if they had referred to the documents themselves. Put it in another way, it makes no difference for the defendants to plead “In the premises, paragraph 16(d) is strenuously denied” in paragraph 17(4)(c) of the Amended Defence and Counterclaim. It would be most unreasonable to say that Order 24 rule 10 would be rendered applicable by the mere fact that the full allegation of the plaintiffs was set out therein.

116.Furthermore, the purpose of Order 24 rule 10 must be borne in mind. This was referred to in Zida Technologies Limited v Tiga Technologies Limited & Others[14], in which DHCJ McCoy SC had this to say:

“[…] the rationale for the jurisdiction is relevant to the formulation of a principled approach to the exercise of the underlying discretion. The thrust of the rule was emphasised by Lindley LJ in Quilter v Heatly (1883) LR 23 Ch D 42 at p.50, namely that the intention was to provide the other party with the same advantage, just as if the document had been fully set out. In short, one party could not use or rely upon the probative value of the document, yet simultaneously deny the other party the same forensic advantage […]”[15]

117.It is plain that the defendants were not relying upon the probative value of the accounts and/or documents at all in paragraph 17(4)(c) of the Amended Defence and Counterclaim at all.

118.The plaintiffs’ application should therefore be rejected.

The books, account and records of the Company

119.The plaintiffs asked for the production of the books, account and records of the Company as referred to in paragraph 21(4) of the Amended Defence and Counterclaim. It was pleaded therein that:

“The Defendants also repeat paragraphs 10A(4) and 10A(5) of this Amended Defence. As already pleaded hereinabove, the Defendants at all material times welcomed the Plaintiffs to inspect the books, accounts and records of the Company. However, the Plaintiffs were never keen on participating in the affairs of the Company, and they had never requested to inspect the books, accounts and records of the Company. In the premises, the Defendants strenuously deny the belated and ex post facto accusations raised by the Plaintiffs under the amendments in Paragraphs 20(d) to (f).”

120.It was pleaded in paragraphs 20(d) to (f) of the Amended Statement of Claim that:

“(d) The 1^st and 2^nd Defendants at all material times had and have kept the 1^st Plaintiff / 2^nd Plaintiff in the dark, and failed and/or refused to inform, consult, update or involve any of them about (or in) the Company’s affairs, including the rental incomes, the outgoings, and the matters relating to the relevant loans (made from the Shanghai Commercial Bank), etc.;

(e) The 1^st and 2^nd Defendants at all material times had failed and/or refused to provide with them with the Company’s audited accounts (if any, which the Defendants are put to strict proof), and the supporting accounting documents, financial statements, ledgers, etc. (if any, which the Defendants are put to strict proof);

(f) At all material times, no invitation, or notice was given to the Plaintiffs in respect of any AGM, EGM and/or directors’ meetings in relation to the accounting affairs of the Company or the preparation and/or approval of the Company’s alleged ‘audited accounts’ (if any, which the Defendants are put to strict proof), and the Plaintiffs had been excluded and/or not informed about the same at all.”

121.I agree with Mr Kwong that Order 24 rule 10 of the RHC is not engaged here. The defendants are not relying on the probative value of the documents mentioned at all. They were only replying to the plaintiffs’ allegations that the latter had been kept in the dark and were not provided with any audited accounts, the supporting accounting documents, financial statements, ledgers, etc.

122.This application should therefore be rejected.

The document(s) relating to the incidental expenses

123.This was the first item of request of documents made in the 1879 Action (and the last item which this Court has to deal with pursuant to counsel’s consensus).

124.This request was made on the basis of paragraph 11(5)(b) of the Amended Defence and Counterclaim which reads:

“11(5) As regards the total acquisition costs and/or expenses:

(a) […]

(b) In addition, the Company incurred incidental expenses in the sum of HK$1,004,528.”

125.There is simply no reference to any document at all in this paragraph of the Amended Defence and Counterclaim.

126.This application made pursuant to Order 24 rule 10 of the RHC is therefore hopeless and is bound to be dismissed.

ORDER

127.By reasons of the aforesaid, the Summonses are dismissed.

COSTS

128.Costs should follow the event.

129.I make a costs order nisi that the plaintiffs shall bear the defendants’ costs of the Summonses. Because of the volume of the documents involved in the 4 Actions, I take the preliminary view that such costs shall be taxed if not agreed.

130.The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof.

Mr Kenneth C. L. Chan, Mr Billy N. P. Ma and Mr Lawrence Luk, instructed by Yeung & Chan, for the plaintiffs in HCMP1878/2020, HCMP1879/2020, HCMP1880/2020 and HCMP1881/2020

Mr Alan Kwong, instructed by Lau, Wong Chan, for the defendants in HCMP1878/2020, HCMP1879/2020, HCMP1880/2020 and HCMP1881/2020