Pmcl also known as Lmc also known as Klmc v. Akk also known as Kak and Another

FCMC 11521 / 2015

[2023] HKFC 154

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MATRIMONIAL CAUSES

NO. 11521 OF 2015

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REASONS FOR DECISION
(W’s Application for Joinder)

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A.  THE APPLICATIONS

1.This is the Petitioner wife’s (“W”) application to join a third party (“ZL”) as the 2^nd Respondent (“Joinder Application”) for the determination of, inter alia, beneficial ownership of all the shares in SSEL (“SSEL Shares”) as preliminary issue[1]; and for interim injunctions restraining ZL and the Respondent husband (“H”) from disposing of, charging or dealing with the SSEL Shares, or causing any change to, or creating any encumbrance upon SSEL’s shareholding in NEPL or NEPL’s ownership in M Property (“Interim Injunction Applications”)[2].

2.W, H and ZL were represented by counsel at the hearing.

3.At the end of the hearing, I allowed the Joinder Application and the Interim Injunction Applications. In view of the long procedural history of this case and the need for active case management, I set a time table for further conduct of the case after considering the views of all parties through their legal representatives.

4.This is the reason of my decision.

B.  RELEVANT BACKGROUND AND PROCEDURAL HISTORY

5.SSEL was set up in around 2003. H and W were the initial shareholders. SSEL is the majority shareholder of NEPL and SEL. NEPL holds M Property which was purchased during the marriage of H and W.

6.W’s case is that in around 2012, the parties heard that their business might encounter problem with the Chinese customs. They therefore transferred the SSEL Shares to W’s father for him to hold on trust for H and W. W was arrested in the Mainland for tax related charges in 2013. Her father became scared and did not wish to get involved in the parties’ business. He then transferred the SSEL Shares to H. Before W was released from prison and without notice to W, H transferred the SSEL Shares to a former employee, HHS, who held the same as nominee. W’s stance is that the SSEL Shares are part of the matrimonial assets and are beneficially owned by H and W.

7.Prior to the present application, H’s position was that HHS held the SSEL Shares on trust for him alone, and he was the sole beneficial owner of the SSEL Shares. Thus, the SSEL Shares should also be part of the matrimonial assets.

8.In H’s 13^th Affirmation filed on 18 November 2022 in opposition to the present application, he deposed that the beneficial ownership of the SSEL Shares has been transferred to ZL on 8 July 2021. ZL became the sole beneficial owner of SSEL. He no longer has any beneficial interest in the SSEL Shares. ZL and H were appointed as SSEL’s directors in place of HHS. H remained as a director to assist and take care of the company matters. H contended that the transfer of SSEL Shares to ZL is a bona fide transaction made in good faith to partially offset HK$8.4 million debt owed by H to ZL[3].

9.W said (and not denied by H) that the share transfer to ZL was made without notice to her. She only came to know this when she had sight of the Statement of Claim dated 12 May 2022 filed in a High Court Action commenced, inter alios, by SSEL against her and her family members (“HC Action”). The plea in the Statement of Claim was verified by a Statement of Truth signed by H. H was in breach of his continuing duty of full and frank disclosure in these proceedings.

10.W said that ZL is the long-term girlfriend of H[4]. H and ZL described ZL as a long-term friend of the family[5].

11.Shortly before the hearing of a separate application in early August 2022 (“August Hearing”)[6], W applied for leave to issue an intended Summons (“Intended Summons”) for the following reliefs:

(1)  Paragraph 1: leave to issue the Intended Summons notwithstanding paragraph 2 of the Order dated 18 May 2021 made by DDJ M. Lam (“2021 Order”).

(2)  Paragraph 2: Joinder Application.

(3)  Paragraph 3: if ZL is joined, a determination that ZL holds (a) 50% of the SSEL Shares on trust for H and 50% for W; or (b) 100% of the SSEL Shares on trust for H and W as beneficial joint tenants or as beneficial tenants in common in equal shares; or (c) 100% of the SSEL Shares on trust for H.

(4)  Paragraph 4: an order to set aside the disposition of H’s beneficial interest in the SSEL Shares to ZL.

(5)  Paragraph 5: an order that ZL makes such transfer of the legal and beneficial title of the SSEL Shares, as may be necessary, to ensure the holding of beneficial ownership referred to in paragraph 3(a), (b) or (c).

(6)  Paragraph 6: an interim injunction against ZL.

(7)  Paragraph 7: an interim injunction against H.

12.The background for paragraph 1 of the Intended Summons (“Leave Application”) was that pursuant to paragraph 2 of the 2021 Order, the time for the parties to take out interlocutory applications was extended to 31 May 2021. The above order was made upon the parties’ undertaking that the parties would not seek further time extension in relation to the taking out of interlocutory applications before the Case Management Directions hearing returnable on 25 June 2021.

13.At the August Hearing, leading counsel for H asked for time to lodge further written submission on H’s opposition to the Leave Application and proposed directions if Leave Application was granted. He submitted that 2 days were needed.

14.At the end of the August Hearing, I granted leave to H to lodge and serve submissions on issues concerning the Leave Application within 7 days, and leave to W to lodge and serve submissions in reply within 7 days thereafter. The matter would be determined by way of paper disposal.

15.On 5 September 2022, I granted leave to W to issue the Intended Summons within 7 days notwithstanding paragraph 2 of the 2021 Order, and gave further case management directions as follows (“September Order”):

(1)  Paragraphs 2, 6 and 7 of the Intended Summons (being the Joinder Application and Interim Injunction Applications) be adjourned for substantive argument on a date to be fixed. Parties may provide their available dates for the hearing within a specified period.

(2)  Leave was granted to file evidence and submission on proposed directions in relation to the hearing for substantive argument within stipulated time.

(3)  Subject to the determination on the Joinder Application, paragraphs 3 to 5 and 8 to 9 of the Intended Summons (viz. application for declaration and set aside relief in connection with the SSEL Shares) be adjourned for substantive arguments.

(4)  Service of the Intended Summons on H be dispensed with.

(5)  H was directed to inform ZL forthwith the terms of the September Order.

16.W formally took out the Summons (in terms of the Intended Summons) on 6 September 2022 (“the Summons”).

17.This is the hearing on the substantive argument of paragraphs 2, 6 and 7 of the Summons, viz. the Joinder Application and the Interim Injunction Applications.

C.  SERVICE OF THE SUMMONS ON ZL

18.H and ZL argued that the Summons were not validly served on ZL.

C1.  Relevant facts on Service

19.The events relevant to the service of the Summons on ZL are as follows:

(1)  Pursuant to the September Order, H, through his then solicitors, Withers, sent the September Order to ZL by an email dated 17 September 2022 (“Withers’ Email”). According to Withers, the aforesaid email was not returned.

(2)  By various letters dated 7, 13 September 2022 and 31 January 2023 (“CCBH Letters”), CCBH (W’s solicitors) mailed the Summons, the September Order and other documents relating to the Summons (collectively the “Documents”) to ZL at the address of the parties’ former matrimonial home (“FMH Address”), which according to W, was the usual and last known address of ZL. CCBH said that none of the CCBH Letters were returned[7].

(3)  On 8 February 2023, CCBH received an email from ZL, in which ZL referred to Withers’ Email and stated that she appeared to have been dragged into a set of proceedings in Hong Kong. She claimed that (a) she always resides in the Mainland, (b) she had not been properly served with the documents in these proceedings and (c) she was not able to verify the authenticity of the “court letter” sent over by Withers.

(4)  On 21 February 2023, a process server served a sealed envelope containing the Documents on ZL (“Personal Service”).

(5)  On 1 March 2023, CCBH received a letter from Kwong & Lee requesting for service of the Summons, and stating that they have instructions to seek an adjournment for time to prepare ZL’s affirmation in opposition.

(6)  On 2 March 2023, Kwong & Lee filed a Notice to Act for ZL dated 1 March 2023.

20.At the hearing, counsel for ZL, Mr Eric Leung, accepted that the Summons was served on ZL on 1 March 2023 (the date of Kwong & Lee’s letter to CCBH) but not earlier.

C2.  Relevant legal principles

21.Under Rule 111(1)(b)(ii) of the Matrimonial Causes Rules (“MCR”), documents required to be served in any matrimonial proceedings on a person acting in person can be effected by delivering the document to him, or by leaving it at or sending it by post to his last known address if he has not given an address for service.

22.Order 65 rule 5(1) provides that ordinary service of any document may be effected, inter alia, by leaving the document at the proper address of the person to be served, or by post. Order 65 rule 5(2) further provides that if at the time when service is effected, that person has no address for service, his proper address for service under Order 65 rule 5(1) shall be his usual or last known address.

C3.  Issues on Service

23.The main issues in disputes were:

(1)  whether the FMH Address is ZL’s last known address for the purpose of service, and if so, whether the Documents were validly served by the CCBH Letters; and

(2)  whether the Personal Service was a valid service.

C3.  Last Known Address

24.I am satisfied that the FMH Address was ZL’s last known address for the purposes of service for the following reasons:

(1)  In the ND2A Form signed by H on behalf of NEPL dated 11 September 2021 about the appointment of ZL as a director of NEPL, the FMH Address was stated to be ZL’s address. In the Consent to Act form signed by ZL, she stated the FMH Address as her address.

(2)  The same address was reported in subsequent Annual Returns of NEPL dated 23 February 2022 and Annual Returns of SEL dated 6 December 2022.

(3)  Notices on change of ZL’s address to an address in Shenzhen were filed with the Companies Registry in respect of NEPL and SEL on 8 August 2022. These notices were filed 4 days after the August Hearing during which W made her Leave Application.

(4)  W said that she did not know the above changes until H disclosed the same in November 2022.

(5)  Subsequently, in SEL’s Annual Returns filed in December 2022, the FMH Address was again reported to be ZL’s address.

(6)  I do not accept H’s assertion that ZL’s address reported in the above public documents are “clerical negligence”[8]. The clerical staff would not know the address of ZL. The address must be provided and/or confirmed by ZL or H who signed the above annual returns.

(7)  Despite the notices on change of address filed on 8 August 2022, ZL or H continued to state the FMH Address as ZL’s address in the annual returns filed subsequently in December 2022.

(8)  H contended that ZL’s residence shall be in Shenzhen.[9]

(9)  The requirement under Rule 111 (1)(b)(ii) and Order 65 rule 5(1) is to serve the documents at the party’s last known address. A person’s last known address is not confined to his residence.

(10)  In Guangdong International Trust & Investment Corporation Hong Kong (Holdings) Ltd v Yuet Wah (Hong Kong) Wah Fat Ltd[10], it was held that the reference to a defendant’s “last known address” in Order 10 rule 1(2)(b) on service of a writ was a reference to the defendant’s last address known to the plaintiff. A defendant’s last known address must have been intended to be an alternative to a defendant’s usual address in case the plaintiff was unaware of a recent change in the defendant’s usual address. A defendant may have more than one last known address. The above applies to service of a Summons under Order 65 rule 5(1) and Rule 111 of MCR.

(11)  ZL’s last known address for service essentially means the address last known to W from whatever source where ZL may be reached or where contact or communication in written form could be established. It is not necessarily the address where she may in most probabilities be reached. ZL can have more than one last known address. See: The Hong Kong Mortgage Corporation Ltd. v Ching Kit Yu and Another[11], Hong Kong Civil Procedure 2023 [65/5/5].

C4.  Ordinary Service by post

25.I am satisfied that the CCBH Letters (with the Documents enclosed) were sent to ZL’s last known address by ordinary post on prepaid envelopes addressed to ZL. According to the evidence filed for W[12], the CCBH Letters were not returned. This is only prima facie evidence of ordinary service.

26.H deposed in his 14^th Affirmation filed on 8 March 2023 (the day before the hearing) that:

(1)  In or around mid-September 2022, he received a letter addressed to the FMH Address and ZL as the recipient (“Brown Envelope”). He did not open it, marked “WRONG POST” on it and dropped it in one of those pillar post boxes in the neighbourhood around the same day.

(2)  On or about 10 February 2023, he received a sealed envelope addressed to the FMH Address and ZL as the recipient (“White Envelope”). It was marked “Strictly Private and Confidential”. He did not open it, marked “WRONG POST” with a blue marker on the front of the envelope, kept the rest intact and dropped the same in one of those pillar post boxes in the neighbourhood on the same day.

(3)  The same envelope was found in his letterbox again on 21 February 2023. The previous “WRONG POST” mark became “POST” with the word “WRONG” being scrapped off. He also noticed a new postmark on the back of the envelope affixed by the Central Mail Centre when they processed the return mail on 10 February 2023. H believed that the above envelope had been inserted into his letterbox again after the same had been returned.

27.H exhibited photographs of the Brown Envelope and the White Envelope. The name and address of CCBH were printed on these two envelopes. It is more likely than not that H knew these are documents in relation to the present proceedings.

28.The above evidence from H suggested that ZL did not receive the CCBH Letters. In the circumstances, I cannot conclude that the Documents were validly served on ZL by the CCBH Letters.

C5.  Personal Service

29.According to the affirmation of the process server, he was provided by CCBH with (a) a sealed envelope containing the Documents (“Sealed Envelope”), (b) photographs of H, ZL, and a vehicle often used by H (the “Vehicle”). In the late morning of 21 February 2023, he arrived at the main entrance of the FMH, and noticed that the Vehicle was parked in the car park.

30.In the evening of the same day, the Vehicle was seen driven away from the FMH. A male and a female were seen in the Vehicle. The process server followed. A while later, the Vehicle was found parked near a public pier. No one was seen in the car. The process server checked the vicinity and found a female resembling ZL (by comparing with the photo given to him) along with a male. He took photos of the female and the male and forwarded them via text messages to W and her younger brother. W’s younger brother confirmed that the female was ZL and the male was H.

31.The process server approached ZL, addressed her by her name, passed her the Sealed Envelope and said to her in Cantonese and Mandarin that these were court documents for her. ZL refused to accept them. As a result, the Sealed Envelope dropped on the floor in ZL’s presence. ZL then left and walked towards the direction of the Vehicle with H.

32.I am satisfied that the above was a valid personal service of the Documents on ZL. See: Cheung Ping v Cheung Wai Kit[13]; Hong Kong Civil Procedure 2023 [65/2/3]

C6.  ZL has notice of the proceedings in September 2022, long before the Personal Service

33.ZL has notice of these proceedings, the intended joinder application and the directions in the September Order long before the Personal Service in February 2023. The following conducts of ZL and H were calculated to delay and/or evade service of the Documents and/or the hearing of the Summons:

(1)  ZL received Withers’ Email and the September Order in September 2022. Withers was the legal representative of H at that time. There was no apparent reason for her to doubt the email and its contents. If she was in doubt, she could easily write back and ask. However, she waited for about 5 months and only wrote to CCBH in February 2023 asserting that she was unsure of the authenticity of the court documents in Withers’ Email. I found that such assertion was not credible.

(2)  It was H’s own evidence[14] that he had been relying on ZL and communicating with her for collation of documents to prove the debts he owed to her, which was offset by the SSEL Shares for the purpose of these proceedings. ZL ought to have known the existence of these proceedings and that the debts and the transfer of SSEL Shares to her were in dispute.

(3)  ZL’s name was written in the September Order. The September Order contained directions with specific dates and timeline for filing of evidence, proposed directions and available dates for hearing.

(4)  If she was truly in doubt about Withers’ Email or its attachment, she would have enquired much earlier. However, she only wrote to CCBH about 5 months later. Her delay was, in my view, tactical.

(5)  The September Order was made on 5 September, a sealed copy of which was filed on 9 September.

(6)  H (not his solicitors) was directed to forthwith inform ZL of the September Order. There is no explanation as to why H had to wait until 17 September (12 days after the September Order) emailed the same to ZL through his solicitors.

(7)  Despite H and ZL had represented to the public by the annual returns that the FMH Address was the address of ZL, H deliberately returned the CCBH Letters with knowledge that they were from W’s solicitors.

D.  ADJOURNMENT APPLICATION NOT PROCEEDED

34.Despite Kwong & Lee’s indication in its letter to CCBH that ZL would seek an adjournment of the hearing for time to file evidence, ZL has not taken out any Summons for adjournment.

35.Mr Leung (counsel for ZL) stated in [5] of his written submissions that ZL was not given an opportunity to properly file an affirmation in opposition to the Joinder Application.

36.I do not accept the above submission of Mr Leung. By reason of the findings in section C6 above, ZL’s predicament, if any, was of her own making.

37.In [7] of the written submission, Mr Leung stated that ZL could have filed evidence on the following matters if she had been given the time to do so:

“7. … had [ZL] been given the sufficient time to file an Affirmation, she could have replied to many of the factually incorrect statements made in [W’s] 9^th and 10^th Affirmation, including, inter alia:

(1) That [ZL] is and was the “long-term” girlfriend of [H];

(2) That [H] could not have owed tens of millions to [ZL] because she was previously employed by him as a “shop manager” and that she would not have tens of millions to lend to him.

(3) [ZL] could also have dealt with the following areas, amongst others, in her intended Affirmation which may have assisted the Court’s determination on joinder:

(a) [ZL]’s personal friendship with [H] and [W];

(b) [ZL]’s financial circumstances and her ability to provide loans to [H];

(c) The accumulation of loans provided by [ZL] to [H] over the years

(d) The consolidation of [H]’s debt by [ZL].

(e) The “share swap” arrangement agreed by [ZL] and [H];

(f) Whether there are alternative arrangements that can be made that could avoid her being joined in the parties’ divorce proceedings.”

38.At the joinder stage, the Court considers whether there is a bona fide claim. The Court shall not engage itself in adjudicating the disputed facts on the substantive issue.

39.The evidence that ZL intended to file (“Further Evidence”) is relevant to the substantive dispute on beneficial ownership of the SSEL Shares, for which all parties (including ZL) will have an opportunity to file evidence if ZL was joined as a party.

40.At the hearing, while we were on the topic of case management directions, I indicated that if an adjournment was to be granted, I inclined it to be a short adjournment of say 7 days for ZL to file evidence relevant to the Joinder Application and the Interim Injunction Applications, and a further 7 days for W to reply. Notwithstanding the very tight court schedule, an adjourned hearing could be fixed on a date in April. The parties are also reminded of the costs implication. I asked the parties to take instructions and make submission if they wish to do so.

41.The reasons that only a short adjournment, if any, should be allowed are as follows:

(1)  This is a case with a long procedural history. The Petition was presented in 2015. There was a lack of proportionality in the conduct of this case. The parties ought to diligently proceed with the resolution of the dispute on ancillary relief. Active case management is necessary.

(2)  ZL had notice of the timetable for the filing of evidence, proposed directions and available days set out in September Order as early as on 17 September 2022 when she received Withers’ Email.

(3)  I do not accept that she was truly in doubt of the authenticity of Withers’ Email or its attachment.

(4)  I found that ZL, together with H, were playing delaying tactics, and had taken steps to delay or evade service of the Documents or the hearing of the Summons.

(5)  There is no prejudice against ZL if she could not adduce the Further Evidence at this stage as they are evidence relevant to the substantive dispute on beneficial ownership. ZL, if joined as a party, would have an opportunity to adduce them at a later stage.

(6)  ZL suggested that she could deal with the question of whether an alternative arrangement can be made that could avoid her being joined in these proceedings. She has not proposed any alternative arrangement. The Court will not entertain rhetorical question.

(7)  As service of the Documents was effected on 21 February 2023 by way of Personal Service, if ZL intended to file evidence that are truly relevant to the Joinder Application and Interim Injunction Applications, the Court may consider giving her an indulgence by granting a short adjournment, which in my view, ought to be sufficient in light of her prior notice of the proceedings and the confined scope of the issues involved.

42.In the afternoon, Mr Leung informed the Court that having taken instructions, an adjournment was no longer necessary.

43.Mr Leung then indicated that he would like to lodge a 4-page affirmation of ZL written in Chinese signed on 8 March 2023 (the day before the hearing) to deal with matters about her residence being in Shenzhen and the wrongly posted letters from CCBH. Mr Leung said it was his instruction that ZL wished to adduce this Chinese affirmation. Mr Leung accepted that most of the evidence in this Chinese affirmation could also be found in H’s affirmation.

44.Mr Nagpal objected to the last minutes filing of this Chinese affirmation for lack of relevance and delay.

45.Having heard the submission, I did not allow ZL’s last minute oral application for filing the Chinese affirmation for the following reasons:

(1)  This was introduced extremely late.

(2)  There was no mention of this affirmation at all until after lunch when Mr Nagpal (for W) and Ms Leung (for H) had finished their oral submissions, Mr Leung (for ZL) had made most of his oral submissions.

(3)  Most of the matters raised in the Chinese affirmation were also raised in H’s affirmations. It was not suggested that the contents of the Chinese affirmation were different from H’s evidence. There would be no real prejudice against ZL if the Chinese affirmation was not admitted because similar evidence was before the Court.

(4)  ZL accepted that service was effected by 1 March (although she disputed the service by post and the Personal Service). Mr Leung, after taken instructions, confirmed that no adjournment was sought (although Mr Leung had made some arguments for an adjournment in the early part of the hearing). In the circumstances, evidence about the service of the Documents is not relevant to the Joinder Application.

E.  JOINDER APPLICATION

46.The legal principles on joinder application are not in dispute. I refer to [35] to [45] of the decision handed down by this Court on 13 February 2023[15].

47.It is undisputable that prior to the present application, H contended that SSEL Shares were beneficially owned by him. The SSEL Shares were included as part of the matrimonial assets for consideration at the ancillary relief dispute. After the transfer to ZL, H and ZL said that ZL became the sole beneficial owner of the SSEL Shares. This raises a proper issue to be tried in W’s proprietary claim on 50% of SSEL Shares and the ancillary relief dispute.

48.H and ZL contended that the transfer was a bona fide transaction made with a third party in good faith to partially offset the debts owed by H to ZL by HK$8.4 million.

49.Mr Nagpal submitted that H and ZL’s contention on the nature of the transaction are not credible given:

(1)  the lack of particulars of the transaction, the underlying debts and the valuation of the SSEL Shares;

(2)  H remains a director and in control of SSEL and NEPL;

(3)  H’s relationship with ZL; and

(4)  ZL is more likely than not H’s nominee only.

50.Mr Nagpal further submitted that if H has truly disposed of his beneficial interest in SSEL, W has a case to set aside the transaction pursuant to section 17 of the Matrimonial Proceedings and Property Ordinance (“MPPO”).

51.W suggested that there is a practical need to seek a transfer of the SSEL Shares to her which will enable her to discontinue the HC Action, which she said, is vexatious and abusive. These are matters to be determined in the HC Action. This Court will not exercise discretion to allow the Joinder Application because W wants to gain control in SSEL to put a stop on the HC Action. Mr Nagpal confirmed at his oral submission that this is not his contention either.

52.Mr Leung submitted that ZL did not want to be involved in this matrimonial dispute between H and W. Be that as it may, she had already got herself involved in the dispute when she accepted the transfer of the SSEL Shares, which is part of the subject property in the ancillary relief dispute.

53.Ms Leung (for H) submitted that the proposed joinder is not necessary because there are sufficient assets to deal with W’s claim by way of addback. According to the previous schedule of assets of the parties, W would be the paying party, and the value of the SSEL Shares could be accounted for. Ms Leung submitted that the only substantial asset of SSEL is M Property which is a commercial property with no sentimental value. There is no need for a claim in species.

54.I do not agree that the present dispute can be dealt with by a possible addback provision at the ancillary relief trial. This is not a matter that can be resolved by a simple balance sheet calculation as suggested by Ms Leung. There are certain thresholds to be met for an addback. The Court has to take into account all circumstances of the case. In this case, W beneficially owned 50% of SSEL when it was found. W was making a proprietary claim on the SSEL Shares. The SSEL Shares were transferred at a value (HK$8.4 million) much lower than the value previously agreed by the parties (HK$17 million). W has an alternative claim under section 17 of MPPO.

55.Ms Leung also argued that there is a possible irregularity in the Summons because HHS is not a party to the proceedings and has not been notified or served with the Summons. Ms Leung submitted that HHS was the legal owner from whom the SSEL Shares were transferred to ZL. If W were to succeed in the setting aside application under section 17 of MPPO, the SSEL Shares would revert to HHS as the original legal owner and she ought to be joined. Ms Leung further submitted that the disposition that could be set aside under section 17 of MPPO must be against a party to the ancillary relief proceedings, but not between the disponee and a further party. Ms Leung relied on C v T [16] and HKCB Finance Ltd v Yuen Yu Wan Sandy[17]. Ms Leung later clarified in her oral submissions that she was not suggesting that the non-joinder of HHS was a defect in the Summons. She suggested that this might be an issue for considering whether an adjournment should be granted.

56.In response, Mr Nagpal pointed out that the disposition being challenged by W is the disposition of beneficial ownership by H to ZL, but not the transfer of legal ownership by HHS. HHS had declared that she only held the SSEL Shares as a trustee, she never had any beneficial interest in them. This was not disputed by any of the parties. If W successfully sets aside the disposition, ZL may continue to be the legal owner of the SSEL Shares on trust for the beneficial owner to be determined by the Court. There is no need to join HHS to be a party in these proceedings.

57.I tend to agree with Mr Nagpal. In any event, this matter was raised by Ms Leung with respect to the consideration for an adjournment. As there was no adjournment sought, this is not an issue for the present purpose.

58.I am satisfied that there is a bona fide claim on beneficial ownership of the SSEL Shares and it is a proper question to be tried among W, H and ZL. ZL, who claims to be the beneficial owner, is a necessary party to this proprietary claim. It is necessary to join ZL as a party in these proceedings for the effective adjudication of the dispute on beneficial ownership of the SSEL Shares.

F.  INTERIM INJUNCTION

59.This Court has power to grant injunction via two routes. One of them is under section 52B of the District Court Ordinance which provides that the Court may grant an interlocutory or final injunction in all cases in which it appears to the Court to be just and convenience to do so. The second route is pursuant to section 17(1)(a) of MPPO. The procedure or the test applicable under both routes do not differ: CCL aka L, CC v JRC aka C, JR[18].

60.Mr Nagpal submitted that the first route (section 52B of District Court Ordinance) applies to the interim injunction application against H and ZL, and the second route (section 17 of MPPO) applies to the interim injunction against H. He invited this Court to grant an injunction against H and ZL under section 52B of the District Court Ordinance.

61.Mr Nagpal informed the Court that on the day before the hearing, W discovered that M Property was marketed for sale. This reinforced the need and urgency for the granting of the interim injunction.

62.Ms Leung submitted that the issue of injunction rises and falls with the joinder of ZL. In regard to the marketing of M Property for sale, Ms Leung said her instruction was that H, as director of NEPL, was putting M Property on market solely to test the price, there was no intention to sell.

63.H was prepared to give an undertaking not to sell or create any encumbrances on M Property pending the determination on the remaining relief sought in the Summons.

64.Mr Leung also informed the Court that ZL was prepared to give a similar undertaking.

65.The legal principles on the granting of interlocutory injunction are not in dispute.

66.I have decided that there is a serious issue to be tried on the beneficial ownership of SSEL Shares, and allowed the Joinder Application.

67.By reason of the following facts, I am satisfied that there is a risk that the SSEL Shares or its underlying assets would be dissipated if H and ZL were not restrained from doing so:

(1)  H procured the transfer to ZL without notice to W or to the Court, whether before or after the transaction. This was in breach of his ongoing duty of full and frank disclosure.

(2)  When H made the transfer to ZL for partial settlement of his debts, H knew that these debts were in dispute.

(3)  H had not produced any evidence proving that a consideration was passed from ZL to him for the SSEL Shares.

(4)  In 2018, the market value of M Property assessed by an independent valuer was HK$17 million. In H’s Form E filed in July 2020, he estimated that the value of M Property was HK$14 million. In July 2021, H claimed to have transferred SSEL Shares to ZL to offset a debt of HK$8.4 million. There is no independent valuation to justify the figure of HK$8.4 million.

(5)  After the transfer to ZL, H remains to be a director and is in control of SSEL and NEPL. H continued to sign and verify the annual returns of SSEL, NEPL and SEL, caused these companies to commence the HC Action, and marketed the M Property for rent and for sale.

(6)  On the day before this hearing, W discovered that M Property was being marketed for rent and for sale.

68.As the claim before the Court is of a proprietary nature, there is more need for the preservation of the asset.

69.The undertakings offered by H and ZL are not adequate as it only covers M Property, but not the SSEL Shares or the NEPL Shares.

70.Ms Leung submitted that if an injunction is to be granted, it suffices to restrain ZL only as H is not the shareholder of the SSEL Shares. I do not accept her submission as this ignored the fact that H is the director and he has been actively conducting the affairs of these companies, including putting M Property for sale and for rent.

71.On a balance of convenience, it is just and convenient that the Interim Injunction Applications against H and ZL should be granted.

G.  CONCLUSION

72.By reason of the above, I allowed the Joinder Application and the Interim Injunction Applications. Case management directions for the conduct of the case were given at the end of the hearing after considering the views of all parties through their legal representatives. A case management hearing was fixed in December 2023. Directions were made for the filing of pleadings and evidence within a duration confirmed to be acceptable by the parties and were on an unless basis so as to prevent further delay or derailment from the resolution of the parties’ dispute.

73.I thank counsel for all parties for assistance.

Mr. Deepak Nagpal instructed by Chaine Chow & Barbara Hung for the Petitioner.

Ms. Vivien Leung instructed by Withers for the Respondent.

Mr. Eric Leung instructed by Kwong & Lee, Solicitors for the Intended 2^nd Respondent.