Tan Man Kou and Another v. Chime Corporation Ltd and Others
Read the full judgment text of HCMP 4146/2001 on BabelCite. This High Court CFI judgment was delivered on 25 June 2003.
1. On 21 November 2002, Yam J handed down judgment in High Court Probate Action No. 8 of 1999 ("the Probate Action"), after a trial which had lasted 171 days. He gave judgment for the plaintiff, Mr Wang Din Shin ("Mr Wang Senior"), and granted probate to him of a will of his son Mr Wang Teh Huei ("Mr Wang") executed in 1968, under which Mr Wang Senior is the sole beneficiary. The counterclaim of the defendant, Mrs Nina Wang ("Mrs Wang"), was dismissed. Mrs Wang had propounded another will of her
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HCMP004146A/2001 HCMP 4146/2001 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO. 4146 OF 2001 ____________
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____________ Coram: Hon Kwan J in Court Dates of Hearing: 10 to 13 June 2003 Date of Handing Down of Decision: 25 June 2003 ______________ D E C I S I O N ______________ The application 1.On 21 November 2002, Yam J handed down judgment in High Court Probate Action No. 8 of 1999 ("the Probate Action"), after a trial which had lasted 171 days. He gave judgment for the plaintiff, Mr Wang Din Shin ("Mr Wang Senior"), and granted probate to him of a will of his son Mr Wang Teh Huei ("Mr Wang") executed in 1968, under which Mr Wang Senior is the sole beneficiary. The counterclaim of the defendant, Mrs Nina Wang ("Mrs Wang"), was dismissed. Mrs Wang had propounded another will of her husband Mr Wang made in 1990, under which she is the sole beneficiary. The judge held that the 1990 will was a forgery, and found that the first page of this will was probably written by Mrs Wang herself. 2.On 12 December 2002, news broke in the press that Mrs Wang had been arrested by the Commercial Crime Bureau and released on police bail on her own recognisance of HK$5 million. She gave a statement to the police under caution. The police had obtained and executed search warrants on the headquarters of the Chinachem Group, a substantial enterprise established by Mr Wang, on the basis that they had reasonable grounds to suspect that the offences of forgery, using a false instrument and perverting the course of public justice had been committed. 3.On 18 December 2002, the joint administrators pendente lite of the estate of Mr Wang, who are the petitioners herein ("the joint administrators" or "the administrators"), made an ex parte application to this court seeking the appointment of receivers and managers of Chime Corporation Limited ("Chime"), a company in which the estate of Mr Wang is entitled to certain shares and is part of the Chinachem Group, pending the final determination of this petition. I declined to entertain the application on an ex parte basis, and directed the petitioners to issue an inter partes summons for this purpose, returnable before me for directions on 6 January 2003. There was no urgency to justify an application of this nature without notice to any of the respondents, and should not have been made in the absence of the most pressing need (Bond Brewing Holdings Ltd & Ors v National Australia Bank Ltd & Ors (1990) 1 ASCR 445 at 457-8). 4.On 2 January 2003, the administrators issued an inter partes summons under section 21L of the High Court Ordinance, Cap. 4, seeking an order that Mr Joseph K C Lo and Mr John J Toohey be appointed as receivers and managers of Chime jointly and severally pending the final determination of this petition. Directions were given on 6 January 2003 for the filing of evidence and the substantive hearing came before me on 10 June 2003. 5.In the draft order attached to the summons, the administrators seek very extensive powers for the receivers and managers, including the power to carry on and manage the business of Chime; to take possession of its assets; to investigate the affairs of Chime, its subsidiaries, associated companies, joint ventures or other entities in which Chime holds an interest; and to deal with, sell, or dispose of its assets. Paragraph 2.8 of the draft order is to be noted as this relates to the exercise of all rights which Chime may have in relation to any of its subsidiaries, associated companies, joint ventures or other entities in which Chime holds an interest so as to obtain control or management of any such entities, including "the power to appoint or remove all or any directors and other officers and agents of any such subsidiaries". Clause 6 of the draft order provides that while the order remains in force, the powers of the directors of Chime "shall be wholly suspended", save that the receivers may in their discretion engage any of the directors to assist them in the exercise of their powers. 6.In view of the powers as to the appointment and removal of directors of subsidiaries, it is necessary for the administrators to seek a variation of the order of Deputy Judge Gill made on 14 December 2001 to accommodate the order sought in the present application and this is provided for in paragraph 5 of the draft order. The orders made by the Deputy Judge and by the Court of Appeal on 31 July 2002 on the administrators' application for interim protective relief by summons dated 2 August 2001, as well as the earlier undertakings given by various parties to the Court of Appeal on 22 August 2001, are of relevance to the present application and they will be considered in the latter part of this decision. 7.I should also mention that in paragraph 4 of the draft order, it is provided that notwithstanding anything in the order sought, the current directors of Chime shall continue to be entitled to conduct the defence of Chime in the petition herein. Background to the application 8.The relevant background matters that led to this application may be stated as follows. 9.Mr Wang was kidnapped and disappeared on 10 April 1990. On 6 May 1999, Mr Wang Senior applied for leave to swear to the death of his son and Yam J granted leave on 22 September 1999. Mr Wang Senior swore to the death of Mr Wang on 23 September 1999. The Probate Action was commenced the following day. 10.On 15 March 2000, after considering the representations of the parties in the Probate Action, Chu J made an order appointing Mr Christopher John Barlow of Messrs PricewaterhouseCoopers (he was replaced by Mr Cheung Yat Ming of the same firm by an order dated 26 March 2001) and Mr Tan Man Kou of Deloitte Touche Tohmatsu to act as joint administrators pendente lite of the estate of Mr Wang. That order, as varied by Chu J on 11 April 2000, further provided for the powers and duties of the administrators, and was made by the court essentially in an administrative capacity. By the order, Mrs Wang was required to "provide to the Administrators as soon as reasonably practicable and in any event before 26 April 2000 a list of all properties in the Estate, and do, upon the grant of Letters of Administration to the Administrators, and upon the request of the Administrators do deliver or transfer to the Administrators all properties in the Estate ...". Subject to the grant of letters of administration pending suit, the administrators were authorised inter alia "to take steps as they are entitled in law to take as Administrators pendente lite for the purpose of getting in and preserving the Estate" and "with the leave of the Court and upon 3 days' prior notice to both parties (such notice may be dispensed with or abridged by Order of the Court) to take proceedings in the name of Wang Teh Huei or in their own names for the purpose of getting in and preserving the Estate". 11.On 17 July 2000, letters of administration pending suit were issued to the joint administrators. Of the known assets of the estate, Mr Wang's interest in the Chime Group of companies accounts for the bulk of such assets, on the basis that the estate should have a 56.7% shareholding of Chime, which was the percentage of Mr Wang's shareholding at the time of his disappearance, before the shareholding of Mrs Wang was increased in August and September 1990. 12.The share capital of Chime is divided into A and B shares, with differing par values of HK$100.00 and HK$1.00 respectively but ranking equally. Within four months of Mr Wang's disappearance, 15 million B shares were allotted to Mrs Wang and eight months after Mr Wang's disappearance, Chime's annual return for December 1990 recorded a change of ownership in 19,998 of his A shares, which were listed in the register of Chime as belonging to Mrs Wang. As a result of these changes, Mr Wang's direct holding in Chime had been reduced from 56.7% to 0.09% and Mrs Wang's holding had increased from 23.3% to 99.83%. 13.By an ex parte order made in the Probate Action by Chu J in an administrative capacity on 19 December 2000, the administrators were directed to require Mrs Wang "forthwith to transfer to the Administrators 19,998 of the 'A' shares in Chime Corporation Limited standing in her name and in default the Administrators have leave to apply to the Court for an order requiring her to effect such transfer". Further, the administrators were directed to question Mrs Wang and demand disclosure of all relevant documents relating to, inter alia, the allotment of the B shares to her, and in the event of Mrs Wang failing to produce a satisfactory response, the administrators were given leave to issue a summons requiring her to provide such information and documents. 14.On 16 January 2001, Mrs Wang issued a summons to set aside the ex parte order of Chu J, which had merely directed and authorised the administrators to take certain steps and did not dispense with the need to litigate if the administrators' requests to Mrs Wang were not met. The Judge dismissed the application on 19 April 2001. 15.On 18 January 2001, the administrators issued a summons in the Probate Action seeking an order for the transfer of the 19,998 Chime A shares. On 21 May 2001, Deputy Judge Muttrie made an order that on or before 12 June 2001 Mrs Wang was required to deliver to the administrators the original share certificate of these shares with all necessary instruments executed by her to transfer the legal interest alone in these shares to the administrators. These shares were duly transferred to the administrators on 12 June 2001 and registered in their names on 12 September 2001. 16.In respect of the B shares, the administrators sent a detailed questionnaire to Mrs Wang on 11 January 2001 seeking information and documents relating to the allotment of these shares, the dilution of Mr Wang's shareholdings in 29 other companies, and various bank accounts and issued a summons in the Probate Action on 23 January 2001 requiring her to answer the questionnaire on oath. Of the 29 questions, Mrs Wang agreed to answer nine of the questions, without prejudice to her objection to the order being made. The administrators did not pursue a further ten questions and amended a further three questions in the course of the hearing before Deputy Judge Muttrie on 21 and 22 May 2001. In the order made on 30 May 2001 as amended on 15 June 2001, Mrs Wang was required to answer the remaining seven questions and the three questions as amended. Mrs Wang lodged an appeal against the order and this was dismissed by the Court of Appeal on 4 September 2001 in CACV No. 1643 of 2001. 17.On 31 July 2001, the administrators presented the petition herein under section 168A of the Companies Ordinance, Cap. 32. The petition was amended on 20 May 2003 pursuant to an order I made on 6 May 2003, which is the subject of an appeal lodged by the administrators in respect of the amendments disallowed. Chime, Mrs Wang, Mr Kung Yan Sum ("Mr Kung") and six others are made respondents to these proceedings. The compass of the unfairly prejudicial acts in respect of Chime, as pleaded in paragraph 26 of the Amended Petition, reads as follows:
18.The primary relief sought in the Amended Petition is to set aside the allotments of the 15 million B shares to Mrs Wang. The administrators also seek an account of the benefits that have accrued to Mrs Wang, being dividends or otherwise, in respect of these shares and an order that she is to pay to Chime such sums as are found due pursuant to the inquiry. According to the audited financial statements of Chime, in the period between the allotment of the B shares and 30 June 2000, total dividends of HK$1,492,500,000.00 were paid on account of these B shares. 19.No relief was sought in the Amended Petition in respect of the alleged appropriation of 19,998 A shares. That is the subject of a separate writ action in High Court Action No. 2415 of 2002 brought by the administrators against Mrs Wang and another on 21 June 2002, in which they seek a declaration that the estate of Mr Wang is beneficially entitled to these shares. On 30 July 2002, Mrs Wang applied for a stay of this action on the ground of an alleged agreement she had with the administrators that the issues in this action would not be litigated until after the final judgment of the Probate Action. A stay was granted on 25 February 2003 but was set aside by the Court of Appeal on 3 June 2003 in CACV No. 65 of 2003. 20.Shortly after the petition herein was presented and on 2 August 2001, the administrators issued the summons I mentioned earlier seeking various forms of interim protective relief pending the determination of the petition. In respect of the B shares, an order was sought that Mrs Wang was to refrain from exercising any voting or other rights relating to these shares. For the dividends declared in respect of the B shares, Mrs Wang was to pay an equivalent amount into an escrow account held by the administrators. The respondents were to refrain from procuring, permitting or participating in any transaction relating to Chime and some 170 odd subsidiary, associated and investee companies not in the ordinary course of business and/or on ordinary commercial terms. Disclosure orders were sought from all these companies of audited and management accounts, minutes of general and board meetings, details of the nature and whereabouts of any asset presently owned by any of these companies with a value of HK$10 million or more, and details of all and any liabilities which individually exceed 10% of the relevant company's net asset value. Each of the companies was required to give as much notice as was reasonably practicable in advance of any disposition of property with a value of HK$10 million or more and to preserve all documents that relate to transactions which affect the nature or value of property in the estate with a value of HK$1 million or more. Further, an order was sought to procure the appointment of the administrators or their representatives "as directors of [Chime] in place of Wang Teh Huei" and as directors of such of the other 170 odd companies as the administrators might request. 21.At a hearing on 10 August 2001, Deputy Judge Gill directed that this summons should be heard on a date not before 3 October 2001. The administrators appealed against this order but no order was made by the Court of Appeal on undertakings given to the Court of Appeal on 22 August 2001 by Chime, Mrs Wang and Mr Kung with cross-undertakings by the administrators. The undertakings provided were along the lines of some of the reliefs sought so as to give protection to the administrators pending the hearing of the summons which would be delayed. The respondents have continued to provide these undertakings after the substantive hearing of the summons, save to the extent as varied and recorded in the order mentioned below, and they are still bound by these undertakings. 22.On the substantive hearing of the summons for interim relief, Deputy Judge Gill made an order on 14 December 2001 as amended on 4 January 2002, in which he ordered Mrs Wang to pay an amount equivalent to the dividends received by her in respect of the B shares into an escrow account of the administrators or otherwise be secured to the satisfaction of the court. Other reliefs sought in the summons were covered by further undertakings provided by Chime and Mrs Wang. Of the reliefs that were contested, the Judge made an order as sought with the exception of the appointment of the administrators as directors, and disclosure of the following items: management accounts; minutes of board meetings; details of the nature and whereabouts of any asset presently owned by any of the 170 odd companies with a value of HK$10 million or more; details of liabilities of any of these companies which individually exceed 10% of the relevant company's net asset value; and such further or other documents as the administrators may consider reasonably necessary. 23.On appeal to the Court of Appeal, the administrators' cross appeal was allowed to the extent that the items disallowed by the Judge were ordered to be disclosed, except for the last mentioned item, which was not the subject of the cross appeal. The Court of Appeal upheld the decision of the Judge to refuse an order appointing the administrators or their representatives to the board of Chime or any of the 170 odd companies. This is the decision in CACV No. 106 of 2002 handed down on 31 July 2002. Genesis of the application 24.Following upon the delivery of the judgment in the Probate Action and the reports in the press of Mrs Wang's arrest, the administrators, who have always been concerned about the risk of dissipation of the assets of the estate, felt their concerns "heightened". As a result of the judgment, Mr Wang Senior is the putative beneficiary of the estate. Most of the value in the estate remains in the control of Mrs Wang, and its safekeeping depends on her honesty. Mr Lunn, SC, who appeared for the administrators, submitted that the adverse determination against Mrs Wang in the Probate Action and her arrest should be "superimposed" or "overlaid" upon the matters that gave rise to the existing concerns of the administrators, so that the existing known matters would now assume an increased significance or relevance. Hence, notwithstanding that the Court of Appeal has held that the administrators have not shown a need to interfere with the management of Chime in dismissing their cross appeal in July 2002 to be appointed as directors, the administrators have applied for interim receivers and managers to be appointed for Chime, on the basis that it would now be inappropriate to continue leaving the assets of the estate in the unsupervised care of Mrs Wang in view of the enhanced risk of dissipation of assets. Mr Lunn submitted that the risk of dissipation of assets would be enhanced in the light of the findings against Mrs Wang in the Probate Action, even if one does not place too weight on the arrest of Mrs Wang. 25.Thus, it will be appreciated that much of the material placed before this court has been used in the summons for interim relief issued in August 2001 and considered by Deputy Judge Gill and the Court of Appeal. Most of the material put in evidence by the administrators in this application was available to them prior to the hearing of the appeal in July 2002, even if the material was not put in evidence in the earlier hearings. 26.The other side of the coin is this. Having sought the appointment of directors and failed, what is the justification for the administrators to make a fresh application seeking an even more intrusive form of intervention with the management of Chime? This is one of the main arguments advanced by Mr Mann, QC on behalf of Mrs Wang, and this argument was adopted by Mr Hamilton, QC, who appeared for Chime, and Miss Hui, who appeared for Mr Kung. I propose to address this argument first. Discretion to entertain a second application 27.As mentioned earlier, one of the reliefs sought by the administrators in their summons issued in August 2001 was to appoint them directors to Chime and to nominated companies associated with Chime. The purpose for this application was to "assist the Administrators in monitoring the affairs of those companies to ensure that the Estate's interests in them are protected" and to "obtain financial and operating information which may impact on the value of the companies ... [to] enable the Administrators to preserve the value of the Estate's interest in the companies" (1st affirmation of Cheung Yat Ming, paragraphs 67(4) and 71(7)). The relief now sought is the appointment of receivers and managers to Chime with extensive powers to monitor and manage the affairs of the Chime Group of companies, including a power to appoint directors into subsidiaries, which was the same relief sought in the summons in August 2001 and refused by the court. Mr Lunn has not disagreed with this analysis. It was submitted by Mr Mann that the present application would require even greater justification than merely applying for the same relief, as the administrators are seeking much more draconian relief in this instance. 28.Mr Mann relied on the following legal principle. Although strictly questions of issue estoppel do not apply to interlocutory applications, where interlocutory relief has been refused, a fresh application for the same relief should usually be supported by additional evidence and a change of circumstances (Spencer Bower on Issue Estoppel, 3rd ed., para. 172; WT Lamb & Sons v Rider [1948] 2 KB 331; Pierre Fabre SA v Ronco Teleproducts Inc. [1983] FSR 148; Chu Hung Ching v Chan Kam Ming [2001] 1 HKC 396 at 401D to 402D and 403C). In the last mentioned case, one of the questions posed by the court was this: is there new evidence that seriously justifies reconsideration of the issue? 29.Mr Mann further submitted that the new evidence must be genuinely new in the sense that it either has occurred after the previous application, or for reasons for which the party concerned cannot be blamed, was not available to that party before the last application. This is consistent with the principle in Henderson v Henderson (1843) 3 Hare 100 that there has to be an end to litigation and a party is expected to advance his whole case based on the materials available with none held back, whether deliberately or otherwise. He submitted there is no reason why the principle should not apply to interlocutory decisions. 30.Is there new evidence in the present application that seriously justifies consideration by the court if a more draconian form of relief should be granted? This involves a consideration of what the factual basis of the previous application was and, if relevant, what it might have been, even if it was not advanced at the time, and a comparison between that and what the factual basis of the present application is. As I understand Mr Mann's submission, for the purpose of ruling on this argument if the administrators should be allowed to make a second application for wider relief, I am basically concerned with the procedural aspect and the jurisdiction to prevent an abuse of the process of the court, I am not so concerned with the merits of this application. 31.Mr Mann's team has helpfully put together a schedule summarising the evidence and arguments relied on by the administrators to support the previous application for the appointment of directors and the present application for the appointment of receivers and managers. As the merits of this application are not meant to be gone into for the purpose of this argument, Mrs Wang's riposte to the evidence and assertions relied on by the administrators was not set out in that schedule. Mr Hamilton's team has done a similar exercise and has produced a schedule giving a comparison of the allegations raised in support of the previous application and the present application with all relevant references. 32.I have considered the evidence referred to in these schedules carefully. I do not propose to set out the evidence in detail. I am satisfied that insofar as the following matters or allegations are concerned, no new evidence or no material new evidence has been raised by the administrators in support of the present application:
33.The new matters adduced by the administrators in support of the present application are as follows:
34.The matters in (1) and (2) are obviously new. The payment of substantial directors' emoluments came to the knowledge of the administrators when the relevant accounts were delivered by Chime to the administrators after December 2001 in compliance with the order made by Deputy Judge Gill in the previous application, so this was known to the administrators when the appeal from the order of the Judge was heard in July 2002. The advances made by Chime to the seven companies of HK$6.117 billion only came to the knowledge of the administrators as a result of the order made by the Court of Appeal in July 2002, when Chime was required to provide details of the nature and whereabouts of any assets owned by any of the companies in the schedule to the administrators' summons in August 2001 which has a value of over HK$10 million or more. This information was provided on 16 October 2002. As for the last matter, being loans made by other companies in the Chinachem Group to CAL, it is not entirely clear from the evidence when the information was available to the administrators. 35.Are the above matters, individually or cumulatively, new evidence that justifies serious consideration by the court whether wider relief should be granted on a second application? Mr Mann submitted that whereas the actual findings in the Probate Action are new, the underlying thesis of the administrators is not in that they had relied on adverse findings against her credibility in the judgment in September 1999. So what that means is that the findings in the Probate Action are not new, they are just "more of the same". Mr Mann may well have a point here, but the findings against Mrs Wang's credibility are not the only new matters relied on by the administrators. 36.Of greater relevance is the on-lending by CAL of very substantial sums to companies in most of which the estate has no interest and the lending of lesser, but still substantial, sums by other companies in the Chinachem Group to CAL. Although the administrators would have known from the consolidated accounts of Chime that of the HK$4.3 billion lent to CAL as at 30 June 2001, only HK$1.1 billion had been lent back by CAL to Chime subsidiaries so the remaining balance must have left the Chime Group, the administrators did not know the extent of the on-lending by CAL until October 2002. Also, I do not think I can ignore the payment of very substantial directors' emoluments to Mrs Wang, notwithstanding the administrators had not sought leave from the Court of Appeal to adduce such evidence on appeal in July 2002. I appreciate these new matters may also be said to be "more of the same" in that only greater details have come to light, but whether that is so is a matter of fact and degree. If the new matters are such that even on a cursory review, they do not demonstrate an increase in the risk of dissipation of the assets of the estate, the new materials would be, as Mr Mann has said, nothing more than a dressed up second bite of the cherry, and the court should not entertain this application. 37.I do not think I can rule these new matters out of contention so cursorily. In my view, it would be necessary to go into the merits of the application in greater detail (and I think Mr Mann has also gone into the merits to some extent in advancing his arguments here notwithstanding his submission that for present purpose the court should be looking at procedure not merits). I rule that the administrators should be allowed to pursue the present application. In considering the matter de novo, so to speak, I would be looking not merely at the new matters, as the existing materials previously placed before the court would also have to be taken into consideration, as well as the protective regime presently in place as a result of undertakings and court orders. Application of the American Cyanamid principles 38.I now deal with the jurisdiction in which the appointment of receivers is made and the approach of the court in this application. The jurisdiction is founded on section 21L(1) of the High Court Ordinance, Cap. 4, which provides as follows:
39.The power to appoint receivers on an interlocutory application is a discretionary power to be exercised flexibly on a similar basis to that of an interlocutory injunction, and the principles in American Cyanamid Co. v Ethicon Ltd [1975] AC 396 apply (Chinese United Establishments Ltd v Cheung Siu Ki [1997] 2 HKC 212 at 223; Re Niceline Co. Ltd, HCCW No. 423 of 2002, 22 January 2003, paras. 50 to 53; Re Full Billion Shipping Ltd, HCMP No. 2423 of 2002, 28 March 2003, paras. 17 and 18). 40.The approach I adopt here, as submitted by Mr Mann, is to assess and balance the following matters:
41.The appointment of receivers and managers is an extremely serious matter for a company and the courts have always recognised the need for great circumspection in granting such relief. It is not to be granted without a proper consideration of the position of the company and unless the court is "convinced of its necessity" (Bond Brewing Holdings Ltd, supra. at 456-7, 471). Such an order is particularly drastic where the company concerned is the holding company of a trading group, as is the case of Chime. Chime has about 120 subsidiaries and over 25 associated companies; of these companies, about 100 are actively trading. The net assets of Chime, as at 30 June 2001, were almost HK$20 billion with a turnover of HK$1.25 billion for that financial year. Chime is part of the Chinachem Group which consists of some 600 companies with more than 2,000 employees, with a further 3,000 employed by sub-contractors and another 2,000 indirectly employed in building maintenance work. The interests of the Chime Group, although principally based in the property sector, are wide ranging, including interests in diverse sectors as aluminium smelting, supermarkets and food processing in Hong Kong and the Mainland. In refusing the lesser relief of the appointment of directors to Chime and its associated companies, the Court of Appeal acknowledged "a court should only interfere in the current management of a company if it is absolutely essential to do so" (para. 26, per Rogers, VP). It is important that the need for circumspection should be borne in mind firmly throughout. Serious question to be tried 42.I first consider if there is a serious question to be tried. 43.The administrators have contended that they have a strong prima facie case against Mrs Wang in respect of the allotment of the B shares and the appropriation of the A shares. But I do not think Mr Lunn has put his case so high that there is no serious question to be tried or that there is no defence to the main allegations in the petition. 44.Mrs Wang has now put in much more evidence to counter the allegations in the petition. I do not propose to go into the additional materials here. She accepts that the administrators have a prima facie case against her, but not a strong prima facie case. The findings in the Probate Action have not, in my view, significantly altered the position. Even if one takes into account the adverse findings against Mrs Wang's credibility in that action, her case in the petition does not turn on her evidence alone. The allegations in the petition cannot be resolved solely on the documentary evidence. The credibility of Mrs Wang and a number of witnesses who support her case, would have to be assessed with the benefit of cross-examination. As matters now stand, I do not think the court can come to a clear view on the merits of the petition. For the purpose of the present application, it will suffice for me to say that I am satisfied there is a serious question to be tried. Risk of dissipation 45.What I need to consider here is whether there is a sufficiently grave risk of dissipation of assets to justify the appointment of receivers and managers. 46.It would be convenient to deal with a point raised by Mr Mann first. He pointed out that the complaints pleaded in the Amended Petition are the improper allotments of B shares, the expropriation of A shares and the payment of dividends in respect of these shares. The principal relief claimed in the Amended Petition is the setting aside of the B share allotments and the repayment of dividends. There is no claim that the affairs of Chime have been unfairly conducted in any other respect. That latter type of claim in a petition may in some cases justify an order taking the management out of the hands of the directors by appointing a receiver in the interim. In such a situation, the interlocutory order would be ancillary to the claims made in the petition about the management of the day to day affairs of the company. The administrators' application here is based on the overall assertion that the management of the day to day affairs of Chime cannot be safely left in the hands of the existing management. As this is not part of the existing pleaded allegations in the Amended Petition, the administrators should not be allowed to rely on such matters in their application. 47.The apprehended risk of dissipation of assets lies at the heart of the administrators' application. I do not think they should be disallowed from relying on materials which would support their case of a risk of dissipation, even if such allegations do not feature in their existing pleaded case. 48.The evidence on the risk of dissipation may be conveniently grouped under the following heads. (1) The findings in the Probate Action 49.The adverse findings against Mrs Wang in that action are not made in the context of her commercial probity in running the affairs of a substantial group of companies. It is also pertinent to bear in mind that dissipation of the assets of the Chime Group would require the connivance of other directors of Chime. Apart from Mrs Wang, her brother Mr Kung and her sister-in-law Madam Liu Yuan Chun, there are two other directors, Mr Leung and Mr Chan Kam Por (who is responsible for supervising the accounting department of the Chinachem Group). These other directors would be in contempt of court if they were to act in contravention of the orders and protective undertakings given by Chime to the court. It must also be noted that the administrators or their representatives have been appointed to the board of directors of some 81 companies in the Chinachem Group and have been involved in many meetings with the management of such companies. I do not think a risk of dissipation of assets is demonstrated on the findings in the Probate Action. (2) Lack of co-operation in probate matters 50.A lot of evidence has been put in regarding the alleged lack of co-operation or the obstructive attitude of Mrs Wang towards the administration in providing information and delivering up assets of the estate. Again, I do not propose to set out the examples of non-cooperation alleged by the administrators and Mrs Wang's very detailed answer to each of these instances. I think the broad picture as summarised by Mr Mann is a fair one. The impression one gets, from going through the voluminous evidence, is that Mrs Wang has put up a vigorous opposition in her litigation with the administrators, as one might well expect she would do. In a number of instances, there was some give and take between the administrators' solicitors and Mrs Wang's solicitors. It is not as if Mrs Wang had from the outset turned down the administrators' requests or simply ignored court orders. She has not accepted without question what the administrators have asked her to do, and she has, not infrequently, exercised her right to challenge the administrators by applying to court. But the fact that she is slow to co-operate, or is prepared to do so only after she has exhausted all possible avenues of applying to court, or is doing the minimum to comply with the administrators' requests or court orders, is not a sufficient indication of a risk of dissipation of assets. It must also be noted that a lot of the complaints of non-cooperation are matters of history now, a notable example is the refusal to supply further information on the notices of disposition served by Chime, its subsidiaries and CAL. The administrators did not see fit to apply to court when there was no sufficient or timely compliance with court orders, these matters do not in my view show any present or increased risk of dissipation of assets. (3) The CAL loans 51.Mrs Wang's case here is that the unsecured interest-free loans to CAL (whether made by Chime or other companies within the Chinachem Group) were intra-group lending and CAL has taken on the role of a "treasury company" within the Chinachem Group since 1987, when Mr Wang was still involved in the business. There is evidence it is a common practice among real estate developers in Hong Kong to use a company within its group as a "banker". Acting in that role, CAL has provided administrative services for the Chinachem Group, received funds from various companies and made funds available to other companies in the Group. There is a dispute as to the beneficial ownership of CAL. Mrs Wang claims that she has been the sole beneficial owner since 1982, which the administrators do not accept. Nor do the administrators accept this was genuine intra-group lending. In one instance, they have brought proceedings for recovery against CAL. They have always expressed concern about the recoverability of these loans and ventilated their concern when they unsuccessfully sought the appointment of directors to Chime and its associated companies in 2001 and 2002. 52.Since October 2002, the administrators have acquired further information of the extent of on-lending by Chime, in particular to seven companies in most of which the estate has no interest. Of these companies, six were incorporated in Hong Kong and two were incorporated before Mr Wang's disappearance. Mrs Wang has described the business of each of the seven companies. The advances made by CAL to these companies were for the purchase of assets and investments acquired by these companies. Three of the companies each hold a building in Hong Kong. 53.The CAL loans have been known to the administrators for two years. Mrs Wang has stated that since the administrators' first complaint about these loans in August 2001, the amounts of the inter-company balances between CAL and the Chime Group have remained more or less the same. This is not disputed by the administrators. 54.It must be noted that amongst the undertakings given to the Court of Appeal in August 2001, Chime, Mrs Wang and Mr Kung have undertaken to refrain from any transaction involving Chime or its subsidiaries and CAL which are not in the ordinary course of business, which term shall include all present business practices not inconsistent with the interests of Chime and its subsidiaries; to provide advance notice of new disposition of any individual item of property with a value of HK$10 million or more (varied to HK$7.5 million in December 2001 with Mrs Wang's consent); and to preserve all documents that relate to transactions which affect or may have affected the nature or value of any individual item of property in the estate, including all transactions relating to Chime, its subsidiaries and CAL, with a value of HK$1 million or more. 55.In view of the present protective regime, I am not satisfied that the propensity to dissipate assets (even if one accepts there might be a plausible case that the loans were not intra-group lending) is likely to continue or that sufficient justification is shown that the appointment of receivers is absolutely essential to prevent further dissipation of assets. (4) The payment of dividends 56.I do not think much can be made of the payment of substantial dividends to Mrs Wang now. The court has ordered in December 2001 that Mrs Wang should provide security of HK$1,492,500,000.00, being the equivalent amount of dividends received by her, and that order has been fully complied with on 15 November 2002. Further, an undertaking was given to the court in December 2001 that Chime is to disclose to the administrators full details of all dividends declared (whether paid or unpaid) in respect of the B shares and to procure that all dividends payable in future with respect to the B shares be withheld by Chime. No dividends have in fact been paid since 1998. (5) Directors' remuneration 57.Of the payment of directors' emoluments of HK$1.4 billion between 1992 and 1998, more than half of the amount (HK$801,285,158.00) remains unpaid to Mrs Wang. Further, with the exception of the payment of a monthly salary of HK$50,000.00 from one of the subsidiaries of Chime until March 2000, no emoluments have been paid to her since 1998 by any of the five subsidiaries that had done so in the past or by other companies in the Chime Group. The payment of directors' remuneration was done openly and declared in the relevant accounts, which were made available to the administrators pursuant to the order of Deputy Judge Gill in December 2001. They were made in the years when the companies were generating substantial profits. Given the undertakings and orders made, it does not appear to me a sufficient case has been made out there is a greater risk or risk of a further dissipation of assets. 58.To summarise the position on risk of dissipation, many of the matters relied on are matters which have been known to the administrators for quite some time and were ventilated in the hearings before Deputy Judge Gill and the Court of Appeal. I am not persuaded the position in respect of that has changed significantly since then. I must also not lose sight that the litigation between Mrs Wang and the administrators has its roots in the attempts of Mr Wang Senior to gain control of the estate of Mr Wang, which had started before 1999 and on 14 June 1999, Mr Wang had issued an originating summons in HCMP No. 3454 of 1999 seeking the appointment of receivers over his son's estate (these proceedings were adjourned sine die at the request of Mr Wang Senior). Yet no evidence has been adduced to establish that Mrs Wang has dissipated assets in the face of these claims of Mr Wang Senior and the administrators. The above assessment of the risk of dissipation would have been sufficient to refuse the application for the appointment of receivers and managers. The current protective regime 59.In making orders, the court assumes that they will be obeyed (Castanho v Root & Brown [1981] AC 557 at 574C). That was the assumption of the court when it made orders on the last application of the administrators and accepted undertakings from Chime, Mrs Wang and Mr Kung. It is pertinent to ask if anything has happened to falsify that assumption so as to justify the administrators coming back to court seeking more drastic relief. On the materials adduced by the administrators, I am not satisfied that that is the case. 60.Mr Mann's team has prepared a comprehensive schedule setting out all the undertakings given and orders made by the court, which form the current protective regime. I annex a copy of it to this decision. It could be seen from the schedule the current protection that the administrators have from possible dissipation of assets. This is a regime of Mareva injunctions with a policing mechanism in place, and breach of the orders and undertakings would lead to serious consequences for Mrs Wang and other directors of Chime. Due to the large number of companies involved (there are some 170 companies in the Chime Group), and the voluminous documents to be supplied under the orders and undertakings, there was some delay on the part of Chime in locating and delivering some of the documents. Further documents have since been supplied by Chime to the administrators under cover of a letter of its solicitors dated 3 June 2003. There is no evidence before me that the current regime has not worked or is deficient in a material respect. In my judgment, the efficacy of the current protective regime is a material factor that militates against the granting of greater relief. The consequences of the appointment 61.The Chinachem Group is one of the leading property developers in Hong Kong and has diversified its business over the years. It has been extremely successful and profitable. Mrs Wang is the driving force behind the Chinachem Group and Chime, which is an integral part of the Chinachem Group. The success of the Group in the past 13 years, after the disappearance of Mr Wang, is attributable in no small part to her business skills and efforts. Her litigation with Mr Wang Senior and the administrators over the estate of Mr Wang is the subject of intense media attention and public interest. If she were in some way ousted from her critical role in the Chime Group by the appointment of receivers and managers, this would affect the standing and credit of the Chime Group and could have drastic consequences for the Chime Group and the Chinachem Group as a whole. 62.Evidence is adduced on behalf of Chime of very serious problems that would be caused by a receivership. There are placed before me affirmations from Mr Heng Kim Thiam (the project director of the Chinachem Group), Mr Kuok Hoi Sang (the managing director of Chevalier International Holdings Ltd, which has been a contractor of the Chinachem Group for over 30 years), Mr Leung, Mr James Ng Chi Ming (a former banker), and Mr Ng Shung Mo. They speak of the potentially damaging effect a receivership would have on the banks providing facilities to the Chime Group, the joint venture partners, the suppliers and sub-contractors, potential purchasers and tenants, and employees. 63.An appointment of receivers would amount to an event of default under the facility arrangements with banks, enabling the banks to call in the indebtedness prematurely. Further, there may be difficulties with the renewal of existing facilities and the obtaining of new facilities. 64.In relation to two substantial property development joint ventures in which Chime and its subsidiaries are currently involved, an appointment of receivers could lead to the joint venture partners enforcing their contractual rights to call on Chime to transfer its interest at a substantial discount, leading to losses of at least HK$60 million. 65.As for suppliers and sub-contractors, they would be concerned by the perception of insolvency and review their terms of working with the Chime Group. It is not correct to say that Chime does not trade directly with the public, as the Chime Group holds substantial property developments for sale or letting to the public. Potential purchasers and tenants might be put off from buying or leasing properties marketed under the brand name of Chinachem, or they might delay purchasing or leasing. I am not persuaded that the stigma of a receivership in this case would be any less merely because Chime is not a publicly listed company. 66.It is accepted by Mr Tan of the administrators in his 6th affirmation that "there is, of course, some stigma attached in the commercial world to the word receivership". For those in the outside world, it is often difficult to distinguish between receivers appointed on grounds of insolvency and receivers appointed on other grounds as one cannot expect the public to have a precise appreciation of every aspect of the institution of receivership (Jaber v Science & Information Technology Ltd [1992] BCLC 764 at 789h; Floydd v Cheney [1970] 1 Ch 602 at 610G). I agree with Mr Hamilton that the public perception would be exacerbated in the present case by the appointment of the proposed receivers, who are known as insolvency practitioners and liquidators in Hong Kong, and whose expertise lies in the realisation of the assets of failed or failing companies rather than in the management of successful companies. 67.The administrators have sought to address the adverse consequences of a receivership over the Chime Group in these ways. 68.Firstly, it is said that the receivers' perceived role would be "predominantly supervisory and prudential", they would permit Chime's business to continue largely as normal with the help of the current management. 69.I do not think I should approach the matter in that way, in view of the very extensive powers sought on the summons, in particular the provision that the powers of the directors are to be wholly suspended save that the receivers may in their discretion engage any of the directors to assist. The extensive powers are sought with the view that they will be exercised, if and when the need arises. The proposed receivers do perceive that in the event of lack of co-operation from the existing management, there will be intervention with the management of the business operations of the Chime Group. They have also stated as one of their proposed strategy that they would consider a revision of the terms on which loans have been granted to CAL. 70.The success of the Chinachem Group depends to a large extent on Mrs Wang's business acumen, commercial judgment and experience. There are on-going development projects in the Chime Group. In the event of her suspension from the participation of the management, this would inevitably give rise to practical problems, leading to a slow down in the taking of decisions, which could result in the loss of business opportunities, not to mention the loss of confidence on the part of those who have business dealings with the Group. 71.The examples of previous involvement of the proposed receivers in the management of companies do not demonstrate that they would be able to manage the substantial business of the Chime Group effectively. They would have to seek outside professional assistance and employ a substantial number of their own staff to carry out their duties. Given the size and complexity of the business of the Chime Group, it would be an extremely expensive exercise to appoint receivers and managers. This would be a substantial drain on the resources of Chime, as it is envisaged in the draft order that the costs of the receivership would be paid out of its assets. So far, the appointment of the administrators (and they are not running a large business) has cost the estate HK$58,469,968.52 for the period from 15 March 2000 to 30 July 2002, according to the 12th report of the administrators dated 30 August 2002. This has consumed virtually all the liquid assets of the estate. 72.Secondly, it is said that the financial creditors of Chime would not react to the appointment of receivers with a sudden withdrawal of facilities. The administrators have adduced evidence from Mr Andrew Holliday, a retired international banker with over 30 years of experience of corporate lending. He pointed out that Chime's liability to the banks arose out of guarantees given in support of the borrowing by one of its subsidiaries or related companies. With the exception of the facility granted to CAL by the Bank of East Asia Ltd which has an outstanding amount of HK$16.46 million as of 25 March 2003, security had been provided to the banks by the borrowers in the form of mortgaged properties, and the assignment of sale proceeds or rentals. In the assessment of Mr Holliday, the collaterals would provide the banks with a margin comfortably exceeding their exposure. In some instances, further security was provided in the subordination of all existing and future loans to the borrowers by any other lender. So it would appear unlikely that the guarantees of Chime would need to be called upon. 73.Mr Holliday may be right in his assessment of the situation, but this is not to say that the risk of the banks calling in the indebtedness is to be disregarded. He has not addressed the position of creditors other than the banks. Besides, the administrators have provided no effective answer to the situation of compulsory acquisition of Chime's interest in two substantial developments by the joint venture partners at a discounted value. 74.In my view, the appointment of receivers over Chime could lead to very substantial damages and such damages could prove irrecoverable, which brings me to the question of a cross undertaking in damages from the administrators in the event that the appointment of receivers is wrongly made. Cross-undertaking in damages 75.Mr Lunn's primary position is that no cross-undertaking should be required from the administrators. I would have no hesitation in rejecting that. It is an "essential condition" to the making or continuation of an order for appointment of receivers and managers that such an undertaking be given (National Australia Bank Ltd v Bond Brewing Holdings Ltd (1990) 1 ASCR 722 at 724-5; Re Niceline Co. Ltd, supra., paras. 77 to 85; Snell's Equity, 30th ed., para. 45-45 to 45-48). The administrators do not come within the extremely rare circumstances in which the court would dispense with a cross-undertaking (Snell's Equity, para. 45-46). 76.In the event I am not with Mr Lunn on his primary position, he has offered a cross- undertaking as to damages in respect of the appointment of receivers and managers to Chime in these terms: "such undertaking being limited to the amount of monies and net realizable value of the unpledged assets of the estate taken into custody or under the control of the administrators in the course of the administration less the costs, expenses, tax liabilities, statutory charges or other disbursements of the administration (including their legal advisors)." This form of undertaking is modelled on that accepted by Laddie J in RBG (Resources) plc v Rastogi [2002] BPIR 1028. In the special circumstances of that case, the court had accepted such a form of undertaking from the provisional liquidators notwithstanding it was recognised that the provisional liquidators would run out of funds well before the trial of the action so there would be no assets out of which the cross-undertaking could be honoured if the interlocutory injunction was wrongly granted. 77.In accepting a cross-undertaking in damages notwithstanding that it was not adequately supported by funds, Laddie J had taken into consideration certain dicta in Re DPR Futures Ltd [1989] 1 WLR 778. In DPR Futures, Millett J (as he then was) imposed a cap on the funds to be made available on the cross-undertaking offered by the liquidators, although the limit imposed would still have provided more than sufficient protection to the defendant, unlike the latter case of RBG Resources. In so doing, he laid emphasis on the fact that the liquidators were in a different position to normal litigants in hostile litigation and had this to say at 785G to H and 786D to F:
78.Laddie J regarded the last part of the above extract to be of particular importance, as that referred to a situation where there is no financial back-up to the cross-undertaking and that affects the balance of convenience between granting and refusing the injunction. He took it that whereas fortification may be a major consideration in deciding whether to grant or refuse the injunction, it is not by itself determinative. 79.Laddie J also referred to Allen v Jambo Holdings Ltd [1980] 1 WLR 1252, which involved a Mareva injunction obtained at the behest of a legally aided litigant making a claim for personal injuries whose cross-undertaking in damages was effectively valueless. The court in that case had approached the matter on the balance of convenience and took the course which would involve the least risk of ultimate injustice. 80.In view of these authorities, Laddie J came to the conclusion that it is within the scope of the discretion of the court to accept an undertaking not adequately supported by funds. In exercising his discretion in favour of the provisional liquidators, he was much influenced by the fact that there was made out an extremely strong case of serious and extensive wrongdoing on the part of the defendants, who were at the top level of management of the company. Other than one of the defendants who was not a director, none of them had suggested that had there been the massive frauds which the liquidators alleged (and there would appear to be little doubt that the alleged frauds had been perpetrated, as there was a vast hole in the finances of the company), the frauds were perpetrated by someone else. 81.Mr Mann referred me to an Australian decision not cited in RBG Resources. In Southern Tableland Insurance Brokers Pty. Ltd (in liq) v Schomberg 11 ACLR 337, Young J refused to grant a Mareva injunction where an undertaking was proffered to the extent of the assets of the company in liquidation but with no security and was not acceptable as the company was impecunious. The judge expressed the view that there is no reason why a company in liquidation should not be required to give the normal undertaking as to damages when obtaining a Mareva injunction. Even though it may be commercially inconvenient for the liquidator to get an indemnity from the creditors, he did not think commercial inconvenience should outweigh the prejudice to those affected by the injunction. He regarded the circumstances in which the normal undertaking would not be required as extremely rare and gave an example at 341:
82.That the court does have power to accept a cross-undertaking in damages notwithstanding that it is not adequately supported by funds cannot be disputed. It would appear from the authorities this discretion should be exercised only in an exceptional case. I do not think the allegations against Mrs Wang in the petition are so strong that one can say there is no serious question to be tried, unlike the position in RBG Resources. Unlike the situation in DPR Futures, where it would be impractical for the liquidators to obtain an indemnity from a large number of small creditors, no such impracticality would arise if the administrators should seek an indemnity from Mr Wang Senior, the principal beneficiary under the will, whether he would be good on the cross-undertaking is another matter. I would not be prepared to accept a cross-undertaking of insufficient value in this instance. 83.As mentioned earlier, the cross-undertaking offered by the administrators is limited to the net realizable value of the unpledged assets of the estate. The net value of the undisputed known assets of the estate under the control of the administrators is in the region of HK$690 million odd, subject to diminution on a monthly basis of HK$4.6 million being the costs and expenses of the administration. Whether this cross-undertaking is sufficient would depend on the estimate of the potential losses. Mrs Wang and Chime are unable to put a figure on the potential damage, except in relation to the compulsory acquisition of the interest of Chime by its joint venture partners, which would be at least HK$60 million. Loss in the value of companies may be capable of valuation but loss of ongoing trading opportunities would not be possible to quantify. Mr Mann submitted that although HK$600 million is a lot of money in any layman's terms, there is a significant risk that the potential losses would exceed that figure, bearing in mind the net assets of the Chime Group, which stood at HK$20 billion in June 2001. 84.The court cannot avoid the need to make an intelligent estimate of the likely amount of potential losses, nor can it abdicate responsibility for deciding where the balance of convenience lies, as stated in DPR Futures. In the present case, there is no indication that the administrators would be able to improve their offer of the cross-undertaking with, say, a substantial indemnity from Mr Wang Senior. Further, the net value of the estate is ever diminishing and the expenses of the administration are likely to rise as there is intimation there would be yet further litigation on a large scale between the administrators and Mrs Wang on another front. So this is not the situation, as envisaged in DPR Futures at 787, that if the cross-undertaking should prove inadequate due to unforeseen circumstances, the respondents can apply, with proper evidence to support their claim, for an increase in the amount of the undertaking and the court will then consider whether to require fortification in an appropriate amount. On the available evidence, I have doubts about the adequacy of the cross-undertaking offered by the administrators. The balancing exercise 85.I should weigh the various factors that I have considered to decide on a course that is the least likely to involve ultimate injustice. 86.This is not a case where the court can form a clear view on the merits of the petition. It has not been shown that the risk of dissipation of assets or erosion of value has changed significantly since the matter was considered by Deputy Judge Gill and the Court of Appeal. There is already in place a comprehensive protective regime which would appear to have worked well for some time. The appointment of receivers would be a very costly exercise. The adverse impact of the appointment of receivers is great and potential losses that may be suffered by the Chime Group would be substantial. There is doubt as to the adequacy of the undertaking offered by the administrators. 87.In my view, the balance of convenience is tilted against the appointment of receivers and managers for Chime. I would refuse the application. The identity of the receivers 88.It would be necessary to consider if the receivers should come from the same firms of accountants as the administrators have proposed only if the application is successful. As the application fails, I will deal with this briefly. 89.I accept the submissions of Mr Hamilton and Mr Mann that it would not be appropriate for the proposed receivers to be appointed. There would be obvious conflicts of interest between them as receivers and managers of Chime and their partners representing the estate of Mr Wang (In re Lloyd, Allen v Lloyd (1879) 12 Ch D 477; Snell's Equity, para. 46-11). Even if they scrupulously attempted to avoid such conflicts, there would be an inevitable perception of a lack of impartiality and independence. 90.Further, in the present case, Mrs Wang and the administrators are in hostile positions. The administrators have made it part of their case that Mrs Wang has been acting in an obstructive manner towards the administration. They have apparently adopted positions which Mrs Wang regards as detrimental to her interests and to the interests of the Chime Group, such as in the case of the CAL loans. It was submitted by Mr Mann that there is a justifiable apprehension on the part of Mrs Wang that the proposed receivers, if they should come from the same firms, would be influenced by the administrators in the taking of important decisions. 91.I was also referred by Mr Mann to Re L (Minors)(Care Proceedings: Solicitors) [2001] 1WLR 100 in which the court required the solicitor of a local authority to cease acting in care proceedings where there was a situation giving rise to an apprehension of bias. Emphasis was laid on the importance that the local authority in care proceedings should be seen to act impartially, as the way in which the authority should choose to present their case could have a profound effect on the outcome of the proceedings (at 109 to 110). 92.In my view, it is important that the proposed receivers should be perceived to be acting impartially in this situation. Orders 93.For the above reasons, I dismiss the application for the appointment of receivers and managers for Chime. 94.I make these orders nisi as to costs. I order that the administrators should pay the costs of Chime, Mrs Wang and Mr Kung in any event, with a certificate for two counsel in the case of Chime and a certificate for three counsel in the case of Mrs Wang. I consider it justifiable that Chime and Mrs Wang should engage more than one counsel for this application. I have had considerable assistance in the manner the evidence was presented and analysed, notwithstanding the voluminous evidence filed. I also recognise the importance of this application to the opposing parties. I decline to make an order that the administrators should pay costs forthwith, had I ruled in favour of the opposing parties that the application could not get off ground on the basis that the administrators were re-running points previously litigated, I might have been disposed to make that order. 95.I was asked by Mr Lunn to order that the administrators' own costs should be taxed on a trustee basis and paid out of the estate. Mr Mann submitted that it would be best to leave it to the administrators to seek this order from the Judge acting in an administrative capacity in the Probate Action. I see no reason why I should not deal with this. I make an order nisi that the administrators' own costs are to be taxed on a trustee basis and paid out of the assets of the estate.
Representation: Mr Michael Lunn, SC, instructed by Messrs Clifford Chance, for the Petitioners Mr Eben Hamilton, QC and Mr Peter Ng, instructed by Messrs White & Case, for the 1st Respondent Mr Anthony Mann, QC, Winston Poon, SC and Mr Godfrey Lam, instructed by Messrs Baker & Mckenzie, for the 2nd Respondent Miss Catherine Hui, instructed by Messrs Ford Kwan & Co., for the 3rd Respondent SCHEDULE OF UNDERTAKINGS AND ORDERS UNDERTAKINGS 1. The 2nd Respondent [i.e. Mrs Wang] undertakes to refrain from exercising any voting or other rights relating to the 15 million B shares ("the Shares") in the 1st Respondent [i.e. Chime] which were allotted to the 2nd Respondent pursuant to an ordinary resolution of the 1st Respondent dated 22 August 1990 save with the written consent of the Petitioners ... or the leave of the Court.1 2. The 1st Respondent undertakes to refrain from any transaction relating to the 1st Respondent, and to refrain from procuring, permitting or otherwise participating in any transaction relating to the subsidiary companies referred to in the Third Schedule [to the Order of the Court of Appeal dated 22/8/01] ("the Subsidiaries") and Chinachem Agencies Limited, which is not in the ordinary course of business, which term shall include all present business practices not inconsistent with the interests of the 1st Respondent and the Subsidiaries.2 3. The 2nd and 3rd Respondents [i.e. Mr Kung] respectively undertake to refrain from procuring, permitting or otherwise participating in any transaction relating to the 1st Respondent, the Subsidiaries and Chinachem Agencies Limited which is not in the ordinary course of business, which term shall include all present business practices not inconsistent with the interests of the 1st Respondent and the Subsidiaries.3 4. The 1st Respondent undertakes to provide, and to procure that the Subsidiaries and Chinachem Agencies Limited provide, to the Joint Administrators as much notice as reasonably practicable in advance, of any new disposition of any individual item of property (whether by sale, charge, other encumbrance, loans or otherwise) with a value of HK$7.5 million or more and, in any event, within 3 working days of such disposition being occurred [sic].4 5. The 2nd and 3rd Respondents respectively undertake to take such steps as are necessary to procure that the 1st Respondent, the Subsidiaries and Chinachem Agencies Limited provide to the Administrators as much notice as is reasonably practicable in advance of any new disposition of any individual item of property (whether by sale, charge, other encumbrance, loans or otherwise) with a value of HK$7.5 million or more and, in any event, within 3 working days of such disposition having occurred.5 6. The 1st Respondent, 2nd Respondent and 3rd Respondent respectively undertake to take such steps as are necessary to preserve (and to procure that others preserve) all documents (including, for the avoidance of doubt, documents maintained in electronic or magnetic form) that relate to transactions which affect or may have affected the nature or value of any individual item of property in the Estate, including all transactions relating to the 1st Respondent, the Subsidiaries and Chinachem Agencies Limited, with a value of HK$1 million or more.6 7. The 2nd Respondent undertakes to refrain from disposing of or otherwise encumbering the 15 million B shares in the 1st Respondent which were allotted to the 2nd Respondent in 1990 ("the B Shares") save with the written consent of the Petitioners or the leave of the Court.7 8. The 1st Respondent undertakes within 14 days to disclose to the Administrators full details of all dividends declared (whether paid or unpaid) by the 1st Respondent in respect of the B shares including the dates (insofar as this information remains available to the 1st Respondent) and amounts of such dividends.8 9. The 1st Respondent undertakes to refrain from issuing any new shares in the 1st Respondent save with the written consent of the Petitioners or the leave of the Court.9 10. The 1st Respondent undertakes to procure that all dividends payable in future with respect to the B shares be withheld by the 1st Respondent.10 11. The 1st to 3rd Respondents undertake to take such steps as are necessary, including without limitation providing any necessary instructions or approvals, to procure within 14 days the delivery to the Petitioners of the following to the extent that they have not already been provided:
ORDERS 12. The 2nd Respondent do procure that an amount equivalent to the dividends received by her in respect of the [15 million] B shares be paid into an escrow account opened by and in the names of the Petitioners within 42 days from [14/12/01] or such extension to that deadline as the Petitioners shall give or this Court orders or otherwise be secured to the satisfaction of the Court.12 13. Within 21 days from [14/12/01] or such extension to that deadline as the Petitioners shall give or this Court orders, the 1st and 2nd Respondents do take such steps as are necessary, including without limitation providing any necessary instructions or approvals, to procure the delivery to the Petitioners of the following:
14. The 1st and 2nd Respondents do take such steps as are necessary, including without limitation providing any necessary instructions or approvals, to procure the delivery to the Administrators of the following:
Order under Probate Action 15. The Defendant, so far as it lies within her power: ... do not [sic] until further Order of the Court dispose of or encumber any of the properties of the Estate without the leave of the Court other than by delivering or transferring it [sic] to the Administrators or by way of paying the costs of the administration pending settlement of estate duty.15 1 First offered by JSM [i.e. Mrs Wang's solicitors] by letter 28/7/01; incorporated into CA's Order 22/8/01 (1st Schedule, para. 1); continued under Deputy Judge Gill's Order 14/12/01; unchanged by Deputy Judge Gill's Order 4/1/02. 2 Undertaking incorporated into CA's Order 22/8/01 (1st Schedule, para. 2.1); continued under Deputy Judge Gill's Order 14/12/01; unchanged by Deputy Judge Gill's Order 4/1/02. 3 Undertaking incorporated into CA's Order 22/8/01 (1st Schedule, para. 2.2); continued under Deputy Judge Gill's Order 14/12/02; unchanged by Deputy Judge Gill's Order 4/1/02. 4 Undertaking incorporated into CA's Order 22/8/01 (1st Schedule, para. 3.1); continued as varied ($10 million reduced to $7.5 million) under Deputy Judge Gill's Order 14/12/01; unchanged by Deputy Judge Gill's Order 4/1/02. 5 First offered by JSM by letter 28/7/01; incorporated into CA's Order 22/8/01 (1st Schedule, para. 3.2); continued as varied ($10 million reduced to $7.5 million) under Deputy Judge Gill's Order 14/12/01; unchanged by Deputy Judge Gill's Order 4/1/02. 6 First offered by JSM by letter 28/7/01; incorporated into CA's Order 22/8/01 (1st Schedule, para. 4); continued under Deputy Judge Gill's Order 14/12/01; unchanged by Deputy Judge Gill's Order 4/1/02. 7 Undertaking incorporated into Deputy Judge Gill's Order 14/12/01; unchanged by Deputy Judge Gill's Order 4/1/02. 8 Undertaking incorporated into Deputy Judge Gill's Order 14/12/01; omitted in Deputy Judge Gill's Order 4/1/02 because it had already been complied with and was therefore spent. 9 Undertaking incorporated into Deputy Judge Gill's Order 14/12/01; unchanged by Deputy Judge Gill's Order 4/1/02. 10 First offered by JSM by letter 28/7/01; Undertaking incorporated into Deputy Judge Gill's Order 14/12/01; unchanged by Deputy Judge Gill's Order 4/1/02. 11 Undertaking incorporated into Deputy Judge Gill's Order 14/12/01; deleted from the Amended Order of Deputy Judge Gill dated 18/2/02 because it had already been complied with and was therefore spent. 12 Deputy Judge Gill's Order 14/12/01 (para. 1); amended by Deputy Judge Gill's Order 4/1/02 to allow for security to be given to the satisfaction of the Court; the deadline was extended by Orders dated 29/1/02, 22/2/02, 7/3/02, 26/4/02, 8/5/02, 13/6/02 and 15/11/02; the security offered by the 2nd Respondent was declared to be satisfactory by Order dated 15/11/02. 13 First offered by JSM by letter 28/7/01; Deputy Judge Gill's Order 14/12/01 (para. 2); the deadline was extended by Deputy Judge Gill's Order 4/1/02. 14 CA Order 31/7/02. 15 This is not an order made in HCMP No. 4146 of 2001 but is contained in paragraph 3(2) of Deputy Judge Chu's order made on 11 April 2000 in the Probate Action. |
Cases cited in this judgment
Other judgments that cite this case
Further hearings and rulings under HCMP 4146/2001