Hui Chi Ming v. Koon Wing Yee and Others
Read the full judgment text of HCA 1479/2009 on BabelCite. This High Court CFI judgment was delivered on 1 April 2010.
1. This is an application by the plaintiff by summons dated 13 January 2010 to extend the ambit of a Mareva injunction to cover the assets held under a trust called “The Magical 2000 Trust” (“the Trust”).
Cites 2 cases
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HCA 1479/2009 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO. 1479 OF 2009 ____________ BETWEEN
______________ Before: The Hon Fok J in Chambers Dates of Hearing: 16 March 2010 Date of Judgment: 1 April 2010 _______________ J U D G M E N T _______________ Introduction 1.This is an application by the plaintiff by summons dated 13 January 2010 to extend the ambit of a Mareva injunction to cover the assets held under a trust called “The Magical 2000 Trust” (“the Trust”). 2.The extension is opposed by the 1st Defendant. 3.It is also opposed by Madam Lui Yuk Chu, the 1st Defendant’s wife, who is a beneficiary under the Trust. Madam Lui is named in and was served with a copy of the plaintiff’s summons seeking the extension of the Mareva injunction. 4.The summons was also served on Hang Seng Bank Trustee International Limited (“HSBTIL”), the present trustee of the Trust, but it did not attend the hearing or file any evidence in respect of the application. Background facts 5.The background circumstances of the action are set out in the judgment of Poon J dated 25 September 2009 extending the Mareva injunction after a contested inter partes hearing. It is unnecessary to repeat that background at length in this judgment. 6.In essence, the plaintiff’s claim in this action is for relief arising from a Share Purchase Agreement made on 26 March 2009 which the plaintiff says was procured by duress and/or illegitimate coercion and/or unlawful intimidation exercised on him by each of the defendants and/or at their direction. 7.The action was commenced shortly after the four defendants were arrested and charged with conspiracy to blackmail in respect of the matters giving rise to the plaintiff’s claims. 8.On 25 June 2009, Tong J granted the Mareva injunction now in place to restrain the defendants from removing, disposing or otherwise dealing with “any of their assets which are within Hong Kong, whether in their own names or not, and whether solely or jointly owned, up to the value of HK$135,000,000” and also ordered disclosure by the defendants of all assets “of an individual value of HK$50,000 or more, whether in or outside Hong Kong, whether in his own name or not and whether solely or jointly owned, giving the value location and details of all such assets”. 9.The 1st Defendant’s solicitors wrote to the plaintiff’s solicitors on 2 July 2009 in response to the order of Tong J enclosing a list of assets of the 1st Defendant. In that letter, the 1st Defendant’s solicitors also stated:-
10.Shortly thereafter, on 16 July 2009, in his first affirmation in these proceedings, the 1st Defendant said of the Trust:-
11.The Trust Deed has been disclosed by the 1st Defendant. This shows that (1) the Trust was established on 14 July 2000, (2) the 1st Defendant’s mother is the settlor of the Trust, (3) Centre Trustees Limited was the trustee of the Trust on its being established, (4) the Trust is a discretionary trust, (5) the Eligible Beneficiaries include the 1st Defendant’s wife and her four children, (6) the 1st Defendant’s mother can nominate by deed a person to the office of appointor, and (6) the appointor has the power to remove and appoint the trustee. 12.In his fourth affirmation, made in opposition to this application, the 1st Defendant states that, in about the middle of 1999, his family, including his parents, decided that a trust should be set up “to avoid risk of Hong Kong and/or Global financial crisis and also to avoid estate tax”. He states that instructions were given to Messrs Deloitte Touche Tohmatsu to set up a trust with his mother as settlor in 1999. This led to the execution of the trust deed on 14 July 2000. After the Trust was set up, the 1st Defendant injected his “family wealth”, including shares of Easyknit International Holdings Limited (“Easyknit”), into the Trust. 13.By virtue of the 1st Defendant’s injection of assets into the Trust, he was a Notional Settlor under the Trust Deed. A Notional Settlor is not within the Excluded Class of persons and can therefore be added by the trustee (exercising its powers under clause 26) to the list of Eligible Beneficiaries under the Trust Deed. 14.The trustee under the Trust Deed (“the Trustee”) was originally Centre Trustees Limited. In 2002, apparently because the individual at Centre Trustees Limited changed employment, the Trustee was changed to Newcourt Trustee Limited. In 2004, because the same individual again changed employment, the Trustee was changed to Trustcorp Limited. In 2007, the Trustee was again changed, this time to HSBTIL, the present trustee. 15.In 2000, the 1st Defendant and others were subject to an investigation by the SFC into suspected insider dealing in the shares of Easyknit and Easy Concepts International Holdings Ltd in relation to an announcement on 18 February 2000 concerning the acquisition by the Pollon Group of a 75% interest in Easy Concepts International Holdings Ltd. 16.On 19 January 2006, the Insider Dealing Tribunal found the 1st Defendant to have been an insider dealer in respect of that transaction and made a number of orders against him including the disgorgement of profits, a fine and a disqualification order. The next day, 20 January 2006, the 1st Defendant resigned from all his corporate positions in Easyknit and his wife, Madam Lui Yuk Chu (“Madam Lui”), was appointed Vice President of that company and a member of the Remuneration Committee of the Board. 17.On 23 January 2006, Easyknit published an announcement stating that Madam Lui was deemed to have an interest in 36.74% of the issued share capital of the company within the meaning of Part XV of the Securities and Futures Ordinance and that the shares were:-
18.On 25 September 2009, as noted above, Poon J continued the Mareva injunction against the defendants after a contested inter partes hearing. 19.On 16 October 2009, Easyknit issued a public announcement that a very substantial acquisition and connected transaction had been undertaken, involving the acquisition by Easyknit from Madam Lui as vendor of the entire share capital of two companies, namely Grow Well Profits Ltd (“Grow Well”) and Supertop Investment Ltd (“Supertop”). 20.On 4 December 2009, Easyknit issued a further public announcement regarding the Grow Well and Supertop transactions. 21.The plaintiff contends that the Grow Well and Supertop transactions are highly unusual. It will be necessary to return to them in due course. 22.The summons now before me seeks the extension of the Mareva injunction to include a new paragraph 2(5) in the following terms:-
The summons also seeks disclosure by the Trustee of the assets of the Trust. 23.Evidence has now been filed, on behalf of Madam Lui, to the effect that the shares of Easyknit Enterprises Holdings Limited are owned by Landmark Profits Limited, which is wholly-owned by Easyknit, and therefore not owned by the Trust. The plaintiff accepts this means the addition of paragraph 2(5)(b) to the Mareva injunction cannot be pursued. The applicable principles 24.It is trite that the purpose of a Mareva injunction is to prevent injustice to a successful plaintiff by preserving the assets of a defendant and guarding against the risk of the disposal or dissipation of those assets by the defendant with a view to defeating the plaintiff’s attempts to execute a judgment in his favour. 25.In the context of a Mareva injunction, the assets of a defendant refers to assets belonging to that person and not to assets belonging to another person: Federal Bank of the Middle East Ltd v. Hadkinson [2000] 1 WLR 1695 at 1709F. Assets and funds which belong, or are assumed to belong, beneficially to someone else will not be available to satisfy the claim against the defendant: ibid. at 1709H. 26.However, it is established that the Mareva jurisdiction may be exercised against non-parties. 27.In S.C.F. Finance Co v. Masri [1985] 1 WLR 876 Lloyd LJ (as he then was) summarised the principles in relation to third party interests sought to be included within a Mareva injunction as follows (at 884B-E):-
28.The test of “good reason” in principle (i) above is a higher standard of proof or threshold than the test of a serious issue to be tried as to the ownership of the assets. The purpose of requiring the higher standard of proof or threshold is to protect the rights of innocent third parties: Allied Arab Bank v. Taj El Arefin Hajjar and others, unrep., The Times, 11 January 1988. 29.The above principles were not controversial between the parties. Where there was some disagreement, however, was in respect of whether it was necessary for the party seeking injunctive relief to show that the assets held by the third party were the defendant’s assets and that they were assets available to satisfy a judgment by way of execution. This was the submission of Mr John Yan SC, leading counsel for the 1st Defendant, which submission was adopted by Mr Horace Wong SC, leading counsel for Madam Lui. 30.However, I agree with the submission of Mr Johnny Mok SC, leading counsel for the plaintiff, that it is not necessary for the applicant to demonstrate, at the injunction stage, that the assets sought to be frozen belong to the defendant. In this regard, Mr Mok SC relied on Dadourian Group International Inc v. Azuri Ltd [2005] EWHC 1768 (Ch) (Westlaw Transcript 2005 WL 1686886), where Deputy Judge Edward Bartley Jones QC, held (at p.6 of the transcript):-
31.So, a Mareva injunction may be granted over assets where it is shown that there is good reason to suppose as against a non-party that the assets of or held by the non-party would be susceptible to a procedure which would lead to satisfaction of a judgment. Whether that ultimately proves to be the case, for example on the basis that a trust is to be disregarded as a sham, or by reason of a lifting of the corporate veil, or as a bare trust for the benefit of the defendant, is a separate issue to be determined at a later stage, either on a preliminary issue or at trial or in the process of execution. 32.For present purposes, therefore, I approach the plaintiff’s application by asking whether he has shown that there is good reason to suppose the assets of the Trust are assets which would be susceptible to a procedure which would lead to satisfaction of a judgment in his favour. 33.In this regard, however, where the grant of a Mareva injunction is sought to restrain the disposal or removal of assets held by third parties it must be shown that the person against whom judgment may be obtained has some right in respect of, or control over, or other access, direct or indirect, to the relevant assets so that they or the proceeds of their sale or other disposition could be required to be applied in discharge of the judgment debt. It is not sufficient to show that the person sought to be enjoined might be persuaded to make the assets available: Winter v. Marac Australia Ltd (1986) 6 NSWLR 11 at 12G-13B. The basis for the plaintiff’s application 34.In support of the application to extend the Mareva injunction to include assets which appear on their face to be held by the Trust, Mr Mok SC stressed a number of factors which, he submitted, demonstrate there is a good arguable case that the assets of the Trust are in fact controlled by persons other than the Trustee. He submitted that the only candidates are the 1st Defendant and Madam Lui. 35.I propose to consider each of these factors in turn. Factor 1: the timing of the setting up of the Trust 36.The first matter Mr Mok SC relied upon was the timing of the setting up of the Trust. The Trust was established by the Trust Deed dated 14 July 2000. This was shortly after the 1st Defendant was interviewed on 31 May 2000 by the SFC in relation to the acquisition by the Pollon Group of a 75% interest in Easy Concepts International Holdings Ltd. 37.I do not think the timing of the setting up of the Trust demonstrates that the Trust is not a genuine trust or that the Trustee is not independent. 38.The evidence of the 1st Defendant and Madam Lui is that instructions were given to Messrs Deloitte, Touche, Tohmatsu in 1999 to set up the Trust. If so, this pre-dated the transaction giving rise to the SFC investigation and therefore demonstrates that the establishment of the Trust was not a reaction to that investigation. Mr Mok SC submitted that the 1st Defendant’s and Madam Lui’s evidence should be disregarded since there was no evidence from Messrs Deloitte, Touche, Tohmatsu or any correspondence to support the 1999 date as the date when instructions were given for the setting up of the Trust. 39.But, even if the 1st Defendant’s and Madam Lui’s evidence is to be discounted, I am not persuaded that the timing of the establishment of the Trust gives rise to an inference that it was a step taken by the 1st Defendant to make himself judgment-proof. All that had happened by 14 July 2000 was that the SFC had commenced an investigation into insider dealing. There is no logical nexus between the setting up of the Trust and the SFC investigation and there is no obvious reason to suppose that the Trust was established to defeat any orders that might be made against him by an Insider Dealing Tribunal. Indeed, after the Insider Dealing Tribunal found against the 1st Defendant in January 2006, the 1st Defendant satisfied the various monetary awards against him. 40.It is also relevant to bear in mind that the Trust was set up long before the events giving rise to this action. So there is certainly no reason to infer that the setting up of the Trust was designed to dissipate assets to prevent a judgment in this action being satisfied. The Trust does not have the appearance of being part of a “network of trusts and companies” apparently done to make the 1st Defendant judgment-proof. 41.Whilst Poon J found (at §32 of his judgment dated 25 September 2009) that the evidence of the defendants’ behaviour disclosed an unacceptably low standard of commercial morality or questionable integrity entitling the court to conclude there was a sufficient risk of dissipation to justify the continuation of the Mareva injunction, there is no good reason to transfer the suspicions arising from that evidence, which relates to the events giving rise to this action which occurred in March and April 2009, to the setting up of the Trust in 2000. 42.Mr Mok SC also referred to the inconsistent statements in the 1st Defendant’s solicitors’ letter of 2 July 2009, that he set up the Trust, and in his affirmation dated 16 July 2009, that his mother set up the Trust. Whilst the statements are inconsistent, I do not consider that this requires an adverse inference to be drawn as regards the genuineness of the Trust. It is a fact that the 1st Defendant’s mother is the settlor under the Trust Deed. But it is also a fact that the 1st Defendant injected assets, which included the 36.74% interest in Easyknit, into the Trust at the time it was set up in July 2000 and this most probably explains why his solicitors wrote as they did. Factor 2: the 1st Defendant’s continued role in Easyknit after the establishment of the Trust and his wife’s appointments after his removal 43.Next, Mr Mok SC submitted that, even after the setting up of the Trust, the 1st Defendant remained in full control of Easyknit, occupying the positions of President, Chief Executive Officer, executive director, authorised representative, and member and Chairman of the Executive Committee and the Remuneration Committee of the Board. 44.It was only after disqualification orders were made against him by the Insider Dealing Tribunal on 19 January 2006, that the 1st Defendant resigned from his various positions on the following day. On the same day, Madam Lui was appointed as Vice President of Easyknit and a member of the Remuneration Committee of the Board. 45.Mr Mok SC submitted that this showed that, even after the Trust was set up and the Easyknit shares were injected into it, the 1st Defendant continued to exercise the rights attaching to those shares and it therefore followed that he was in control of the assets of the Trust. There was no evidence, he submitted, of any authorisation or direction from the Trustee to the 1st Defendant in respect of the shares. 46.In my judgment, it does not follow that the 1st Defendant’s continued occupation of various corporate positions in Easyknit after the injection of the shares into the Trust demonstrates that the 1st Defendant was in control of the Trust’s assets. Easyknit is a public company and it therefore does not follow that the 1st Defendant’s occupation of the various positions he held equates to full control of that company as contended for. The fact is that the 1st Defendant was the founder of Easyknit and occupied senior corporate positions even before the Trust was established. The continuity of his occupation of those positions after the establishment of the Trust is consistent with the Trustee reasonably taking the view that the 1st Defendant was the best person to occupy those positions. Factor 3: the recently disclosed documents relating to the Trust 47.By an affirmation dated 12 March 2010, shortly before the hearing, Madam Lui disclosed various documents relating to the Trust. These included a letter of wishes dated 12 November 2002 addressed to the then Trustee, Newcourt Trustees Limited, (“the Letter of Wishes”), a deed of variation between the settlor and HSBTIL dated 29 June 2007 (“the Deed of Variation”) and a deed of appointment dated 14 July 2000 (“the Deed of Appointment”). 48.Mr Mok SC relied on these documents to support his submission that the substantial reality was that the 1st Defendant controlled the assets of the Trust. It is necessary to consider each of these documents in turn. 49.The Deed of Appointment was executed by the 1st Defendant’s mother, as settlor of the Trust, and appointed Mr Kun Wing Ning, the 1st Defendant’s brother, as the Appointor under the Trust. Under the Trust Deed, the Appointor has the power to appoint a new trustee in place of the existing trustee and the various changes of Trustee of the Trust were accordingly effected by Mr Kun pursuant to several deeds. As Appointor, depending on whether sufficient prior notice of the intention to distribute the Grow Well shares to Madam Lui was given by the Trustee, he may have exercised a discretion in relation to the Trustee’s exercise of its powers in respect of the Grow Well transaction (as to which, see further below). 50.The Letter of Wishes is from the 1st Defendant to the Trustee of the Trust and consists of recommendations from the 1st Defendant as to how the Trustee should exercise its discretionary powers and duties under the Trust. This included a recommendation that, in the exercise of those powers and duties, the Trustee should consult with the 1st Defendant and take account of his recommendations during his lifetime. It also set out his wishes in the event of his death. However, as is usual, the Letter of Wishes is expressed not to impose any binding trust or obligation on the Trustee. 51.Mr Mok SC pointed to the fact that the Letter of Wishes referred to the existence of “former letters of wishes”, which have not been disclosed. He also pointed to the fact that the 1st Defendant made no mention of the Letter of Wishes when addressing the Trust in his 4th affirmation, in which he claimed he had no right, control of, or benefit, under the Trust and stated that the Grow Well transaction was a decision of the Trustee and beneficiary and had nothing to do with him. 52.Mr Mok SC submitted that these statements were blatantly untrue in the light of the Letter of Wishes. There was no reason to suppose the Trustee, as a professional trustee, would not have consulted with the 1st Defendant, as requested under paragraph 1 of the Letter of Wishes, before exercising its powers in respect of the Grow Well transaction. 53.As for the Deed of Variation, this provided for the creation of a new position of Protector under the Trust and for the appointment of Madam Lui to that position. Mr Mok SC submitted that the provisions of the Deed of Variation, including the exemption from liability, showed that the Protector must be involved in the administration of the Trust. The Deed of Variation provided that if no Protector was named, any natural person who settled property into the Trust, and this would therefore include the 1st Defendant, would be the Protector. 54.I do not consider that the terms and effect of these documents are sufficient to demonstrate good reason to suppose the assets of the Trust are, in substantial reality, controlled by the 1st Defendant. 55.The appointment of the 1st Defendant’s brother as Appointor under the Trust does not, it seems to me, give rise to any adverse inference against the 1st Defendant. The Trust was set up as a family trust for the benefit of the 1st Defendant’s wife and children and it is therefore not surprising to find a member of the family appointed to the role of Appointor. The Appointor is in the Excluded Class and so cannot be one of the Eligible Beneficiaries under the Trust. The fact that the Appointor might have exercised a discretion in respect of the Grow Well transaction (as to which see paragraph 67 below) does not, in my view, assist the plaintiff to show that the 1st Defendant was in control of the Trust or its assets. 56.As for the Letter of Wishes, although this is expressed to be non-binding on the Trustee, Mr Mok SC referred to a passage in Lewin on Trusts (18th Ed.) at §29-150 which states that it is “well-established that the trustees are entitled to take serious account of the settlor’s wishes and it is the better view that they are bound to do so”. Thus, Mr Mok SC submits that it must be assumed that the Trustee would consult with the 1st Defendant in relation to any exercise of power on its part and this demonstrates that the 1st Defendant exercised control over the Trust. On this assumption, he submitted, the statement in the 1st Defendant’s 4th affirmation that he played no part in the Grow Well transaction is untrue. 57.I do not think the conclusion that the 1st Defendant was in control of the Trust follows, even if one assumes the premise on which it is based, namely that the Trustee consulted him before exercising its powers. That trustees may be bound to take serious account of the views expressed in a letter of wishes may be so, but this does not make the views so expressed binding on them. The next paragraph of the text (§29-151) makes it clear that trustees must form their own view when exercising their dispositive powers and must not unthinkingly act as ciphers for the settlor and that to do so is to act in breach of trust. The text also notes that, where a letter of wishes is expressed not to be binding, it would not be a ground for challenging the exercise of a discretion that the trustees had thereby departed from the settlor’s wishes. 58.Whilst the fact of consultation by the Trustee with him would render the 1st Defendant’s statement that he played no part in the transaction untrue, I do not think that conclusion, which is based on assumption, is sufficient to lead to the inference that the 1st Defendant is in control of the Trust and its assets. 59.Therefore, the existence of the Letter of Wishes and the recommendations of the 1st Defendant to the Trustee do not, in my view, demonstrate as a matter of substantive reality that the 1st Defendant controls the Trust or its assets. 60.Finally, the Deed of Variation does not, in my opinion, add any material substance to the plaintiff’s contentions. The amendments to the Trust Deed introduced by the Deed of Variation appear to show that the purpose of introducing the Protector was to provide the Protector with a power to direct the Trustee to the extent that the Trustee might be involved in the management, conduct of business or administration of any Special Company in the Trust. This power of direction on the part of the Protector does not detract from the fact that the primary responsibility for the trust assets rests with the Trustee, who must act in accordance with the terms of the Trust Deed. 61.It is noteworthy that the Deed of Variation was entered into on the same date HSBTIL was appointed Trustee in place of Trustcorp Limited. A natural inference that arises from the timing of the Deed of Variation is that the various provisions it added to the Trust Deed were provisions which the new Trustee considered appropriate. This conclusion seems likely when, for example, the provisions of the new Clause 14AA of the Trust Deed are read: in substance, the provisions in that clause are for the protection of the Trustee. 62.Mr Mok SC’s submission that the creation of the position of Protector and the appointment of Madam Lui to that position demonstrates that she must have played a part in the administration of the Trust does not, in my view, take the matter any further. Even assuming the correctness of the contention that the Protector had a role to play in the administration of the Trust, that person is not the 1st Defendant. Although Madam Lui is the 1st Defendant’s wife, it is necessary to exercise caution in treating husband and wife as one and the same person, as the plaintiff’s submission in effect invites me to do. The mere fact that the 1st Defendant, as husband of the Protector, might be able to exert influence to persuade her to cause decisions to be made by the Trustee is not, in my view, sufficient, on its own, to lead to the inference that the Trust or its assets are controlled by the 1st Defendant. Put simply, directions of the Protector to the Trustee, being those of a separate person, are not directions of the 1st Defendant. Factor 4: the Grow Well and Supertop transactions 63.By these transactions, the shares in Grow Well and Supertop were sold to Easyknit by Madam Lui in the capacity of vendor. Grow Well owned various properties in Singapore and Supertop owned various properties in Hong Kong. The sale and purchase agreements were dated 14 October 2009. In the Grow Well transaction, the consideration was HK$123,120,000 and in the Supertop transaction, the consideration was HK$104,350,000. 64.Whereas the shares of Supertop were owned by Madam Lui personally, the shares of Grow Well were owned by Accumulate More Profits Limited, which was in turn owned by HSBTIL as Trustee for the Trust. 65.Mr Mok SC submitted that the transactions were highly unusual because they were substantial acquisitions entered into with a connected party, the deposit paid to Madam Lui under each agreement was unusually substantial, amounting to 40% of the total consideration in each case, and the deposits were paid even before the transactions were approved by the independent shareholders of Easyknit. He also relied on the fact that the transactions took place shortly after the judgment of Poon J on 25 September 2009 continuing the Mareva injunction in this action. 66.Of even more significance, submitted Mr Mok SC, it transpires (as announced by Easyknit on 4 December 2009) that as at the date of the sale and purchase agreement for the Grow Well transaction and the payment of the initial deposit thereunder, Madam Lui did not have title to the Grow Well shares. These were only transferred to her from Accumulate More Profits Limited on 23 October 2009. Yet the sale and purchase agreement was not conditional on the Trustee transferring the Grow Well shares to Madam Lui. 67.Mr Mok SC submitted that, in order for the Trustee to have approved the disposal of the Grow Well shares to Madam Lui under the Trust, further steps would have been, or may have needed to be, taken by the Trustee. It would have been necessary for the Trustee to consult the 1st Defendant under the Letter of Wishes. Depending on when the Trustee decided to exercise its power and when it gave notice to distribute the Grow Well shares to Madam Lui, it may have been necessary for the Trustee to obtain the consent of the Appointor in writing (under clause 29(b) of the Trust Deed). 68.All this showed, submitted Mr Mok SC, that the 1st Defendant had a very large degree of control over the assets of the Trust and that the substantial reality was that he controlled those assets. 69.There are certainly unusual features of the Grow Well and Supertop transactions. But I am not persuaded that those unusual features necessarily point to control over the assets of the Trust by the 1st Defendant. The suggestion that the transactions were entered into in the immediate aftermath of the continuation of the Mareva injunction by Poon J with a view to rendering the 1st Defendant judgment-proof seems somewhat strained, in my opinion. The Grow Well shares were already assets of the Trust. There was no suggestion at the time of the transaction that those assets were already covered by the Mareva injunction, since the plaintiff’s present application to extend the injunction was not issued until 13 January 2010. 70.If the 1st Defendant’s intention was to dissipate the assets of the Trust with a view to avoiding a judgment against him, the Grow Well transaction seems a rather inefficient and clumsy way in which to do so. The most obvious way to dissipate the assets of the Trust would be to transfer the Grow Well shares to Madam Lui and for her to seek to sell them clandestinely. Yet the sale of the Grow Well shares to Easyknit would inevitably require a public announcement to be made and this would necessarily run the risk of alerting the plaintiff to it. 71.Furthermore, the effect of the Grow Well transaction was, in substance, to transfer the Singapore properties into Easyknit. Since the Trust owned 36.74% of Easyknit, the exercise to dissipate assets from the Trust would have failed to that extent since part of the underlying assets would remain with the Trust. 72.The simultaneous Supertop transaction, by which Madam Lui in effect transferred the Hong Kong properties into Easyknit and therefore indirectly into the Trust, can be regarded as lending credence to the genuineness of both the transactions and refuting the fact that they were steps taken to dissipate the assets of the Trust. 73.As against the unusual features of the transactions, it is also the case that the transactions were approved by the independent shareholders of Easyknit, at a meeting in which Madam Lui was precluded from voting, and was supported by independent valuations and independent advice. 74.In short, I do not consider the Grow Well or Supertop transactions support the plaintiff’s contention that the substantive reality is that the 1st Defendant is in control of the Trust and its assets. Conclusion as to whether plaintiff has shown good reason to suppose assets of Trust controlled by 1st Defendant 75.I have not lost sight of the fact that most of the documentation in respect of the Trust was disclosed only lately in Madam Lui’s affirmation, nor that the Trustee has not filed any evidence to corroborate the 1st Defendant’s denial of control. Also, the 1st Defendant’s evidence in his 4th affirmation does give rise to questions as to whether he was entirely forthcoming about the Trust in that affirmation. 76.However, against these matters, there is no question that HSBTIL is a genuine third-party trustee company and no reason to assume that it does not and will not comply with its obligations to act as an independent trustee of the Trust. The situation in the present case is far removed, in my view, from that in Akai Holdings Limited (in compulsory liquidation) v. Ho Wing On Christopher and others, unrep., HCCL 37/2005 and HCCL 40/2005, 1.9.09. There, the court found the defendant, Mr Ho, was the settlor of the trust and that, pursuant to his letter of wishes, the entire income and capital of the trust was to be held for him absolutely. Also, the directors of the trustee company, Accolade Inc., were Mr Ho’s sister, his long-time employee and his brother-in-law so that the court found there was manifestly no cogent evidence of independence. 77.Ultimately, the burden is on the plaintiff to persuade the court that there is good reason to suppose the assets of the Trust are, in substantive reality, controlled by the 1st Defendant. 78.For the reasons set out above, I do not think the evidence and various factors presently relied upon by the plaintiff, even when considered cumulatively, demonstrate good reason to suppose that to be the case. Disposition and costs 79.I therefore dismiss the plaintiff’s summons dated 13 January 2010. 80.I make an order nisi that the plaintiff pay the 1st Defendant’s costs of the summons and also those of Madam Lui, to be taxed, if not agreed, with a certificate for two counsel.
Mr Johnny Mok, SC and Mr Raymond Ho, instructed by Peter Cheung & Co., for the Plaintiff Mr John M Y, SC and Mr Dominic W H Pun, instructed by Philip K H Wong, Kennedy Y H Wong & Co., for the 1st Defendant The 2nd Defendant (Absent) The 3rd Defendant (Absent) The 4th Defendant (Absent) Mr Horace Wong SC, and Mr Paul W P Mak, instructed by Ho & Co., for Lui Yuk Chu |
Cases cited in this judgment
Further hearings and rulings under HCA 1479/2009