Kong Chun Ming and Others v. Kong Chun Kit

HCA 2389/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2389 OF 2014

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JUDGMENT

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1.I have before me an application by way of inter-partes summons dated 17 February 2015 for an injunction seeking to prevent the defendant from selling or disposing of a taxi licence, registration number EB 4284, and the vehicle that goes with that licence; further, not to dispose of or deal with or diminish the value of any of his assets up to the value of HK$2,700,000; and finally, that the defendant shall, within five days of this order, sign the application form for renewing the taxi licence of the taxi vehicle.

2.The writ in this action names three persons as the plaintiff, that is Kong Chun-ming, Kong Chun-wah and Kong Chun-kit, trading as Kong Chun Ming.  The defendant is Kong Chun-kit.  It will therefore immediately be apparent that Kong Chun-kit sits as both the plaintiff and the defendant which is, to say the least, an unusual situation.  I say nothing more about whether that is correct or not.  It is clear that the plaintiff is, in fact, suing as a partnership and this is therefore, apparently, a partnership dispute.

3.In the statement of claim, it is said that the taxi, registration EB 4284, has at all material times since purchase, belonged beneficially to the plaintiff (by which I think is meant the partnership) and in the statement of claim, it is claimed that there should be a declaration that the plaintiff was and is the sole beneficial owner of the taxi and the taxi licence.

4.The defence and counterclaim sets out a slightly different picture.  The defence and counterclaim identifies that this is, in fact, part of an overall family dispute between the various siblings of the Kong family.  The defendant identifies that there are at least two partnerships within the Kong family.  The first is that which consists of the three plaintiffs in this action, namely (and I use their given names) Ming, Wah and Kit, holding as to 50 per cent, 25 per cent and 25 per cent respectively. That partnership, it is said, owned various vehicles but not in fact the particular taxi which is the subject of these proceedings.

5.There was then formed a second partnership between different siblings of the Kong family, namely the father (Chi) although the father was subsequently replaced by the mother (Yin), Wah, Kit and Fung as to 25 per cent each.  That second partnership owned a different series of vehicles, again which did not include the particular taxi the subject of these proceedings.

6.It is said by the defendant that Ming effectively became the manager of both partnerships even though he was not in fact a partner within the second partnership.  Because of his experience in running the nature of the business which they each undertook, he was tasked with running the business of both partnerships.  It is also said that there was a third business which was in fact 100 per cent owned by Ming himself and that third business owned a different group of vehicles, comprising both public light buses and taxis.

7.The defendant contends that Ming has mismanaged the various different partnerships in different ways which are set out in the defence and counterclaim.  As a result, he contends that one of the vehicles owned by the second partnership, namely public light bus 8022, was agreed by all the partners of all the partnerships to be sold and the money that would be raised would then be used to buy or, alternatively, finance the purchase of taxi EB 4284 which would then be placed in the name of the defendant on account of his pro rata share of the profits of the second partnership. 

8.In a manner which I do not entirely understand, the defendant says that there would, in some sense, thereafter be a rebalancing of all the accounts of the various partnerships so as to correct the mismanagement which is alleged as against Ming.  In this respect, it is also said that another public light bus, number 9298, was also purchased with part of the sale proceeds of 8022 and was given to Fung who, it will be recalled, is also a 25 per cent partner of the second alleged partnership.  It is said that that was also in respect of his pro rata share of the overall profits of the partnership.

9.In the reply and defence to counterclaim, the plaintiff denies that there was any second partnership but, again in a manner which I am not entirely clear about, suggests that there were three groups (to use the plaintiff’s words) each of which had different profit sharing ratios and liability sharing ratios.  The three groups are completely consistent with the three sets of businesses, namely the first partnership, the second partnership and the 100 per cent business of Ming, that the defendant contends for in the defence and counterclaim.  It is accepted in the reply and defence to counterclaim that the taxi the subject of this action in fact “belongs” to the second group which the plaintiff now says consists of Yin, Wah, Kit and Fung as to 25 per cent each.  It is also accepted that Ming managed the business of all groups, although it appears to be suggested that he did so through the first partnership rather than individually.

10.It seems to me that the position adopted by the plaintiff in the reply and defence to counterclaim and, in particular, paragraphs 9 and 15(b) thereof in which it is averred that the taxi EB 4284 does not belong to the plaintiff but instead belongs to the second group, is entirely inconsistent with the claim which is maintained within the statement of claim that the plaintiff is entitled to have the ownership of the taxi transferred to it.  I cannot see how Ming, who is entitled to 50 per cent of the assets and liabilities of the partnership which is suing as plaintiff, can possibly be entitled to a 50 per cent ownership of an asset which is admittedly owned as to 25 per cent by each of four different people, none of whom are Ming himself.

11.Mr Poon makes the case that the plaintiff group then holds the taxi on trust for the other group, but that seems to me to give rise to certain difficulties, to say the least.  In the light of that, I am not satisfied that the plaintiff has demonstrated that there is a good arguable case for a Mareva injunction of the nature sought. Consequently, for that reason, I dismiss it.

12.In case I am wrong as to that, I go on to address both the risk of dissipation and the balance of convenience, although I do so more briefly. 

13.In relation to the risk of dissipation, it is accepted that the taxi itself is currently under the control of Ming who has been managing it throughout.  Given that it remains under his control, it is difficult to see how there is any risk of dissipation of the type which is sought to be prevented by way of paragraph 1 of the inter-partes summons.  Although I accept that it is possible that the defendant may seek to sell the taxi without the purported purchaser seeing or inspecting it, however, in my view, that risk is small and unlikely to materialise.  Therefore I do not see any real risk of dissipation of the taxi.

14.The other risk of dissipation which is alleged is in relation to HK$2.7 million which arises in this way.  In October 2014, the defendant refinanced the taxi by obtaining a loan from DBS Bank in the sum of $5 million. $2.3 million of that loan was used to repay the existing hire purchase on the taxi and the remaining $2.7 million of the loan was, to use the plaintiff’s words, “pocketed” by the defendant.

15.As I am presently advised, I cannot see what claim the plaintiffs may have over that $2.7 million.  It was not the plaintiffs’ money and it appears to be a loan which the defendant himself has taken out and for which he is liable.  If he has chosen to dissipate the $2.7 million (as to which I make no finding) that is a matter for him and for which he must be liable and account to the bank from whom he borrowed it.  I do not see, on the basis of the pleadings, any claim that the plaintiffs may have over that $2.7 million loan.  Therefore, I can see no arguable case in relation to that $2.7 million and I can see no relevant risk of dissipation.

16.As to the balance of convenience, again, I can find nothing in any of the papers which would make it just that the taxi or the money should be the subject of an injunction and, as a result of the balance of convenience, therefore, there is nothing in addition to the matters which have been set out above which would, in any sense, cause me to change my mind.

17.The only possible other factor is the point raised by Mr Poon that because the taxi is unlicensed, it is losing the sum of $19,200 per month.  If the taxi is in fact owned by the defendant (again, as to which I make no findings) then that loss is a loss which will fall on the defendant and that is a matter for him and not for the plaintiffs.  If, however, the taxi is owned by the plaintiffs (on one view of the case), or alternatively, by the second partnership or group (on another view of the case), then clearly the $19,200 per month will fall upon them as the owner of the taxi. 

18.It is not clear to me entirely whether the $19,200 is a loss of income or an actual expenditure, although I suspect it is a loss of income.  Damages would clearly be an adequate remedy in that respect.  The purpose of a Mareva injunction is not so as to prevent a loss of profits; the purpose of a Mareva injunction is to secure existing assets from dissipation and I do not see that the $19,200 falls into the scope of intended protection that is to be provided by a Mareva injunction.

19.I turn then to the final application which is for an order that the defendant shall, within five days, sign the application form for renewing the taxi licence of this particular taxi.  In order to obtain a mandatory injunction, which is what this would be, it is necessary to demonstrate a much clearer case than would otherwise be necessary for a negative injunction. 

20.For all of the reasons above, I am not satisfied that a clear case has been established and I therefore reject the application for the fourth order sought by the inter-partes summons. 

21.I am conscious of Mr Poon’s submission that it is in everybody’s interest that the taxi be licensed and that everybody is losing money for each day which it is not licensed.  That may well be right but the court is not the guardian of the commercial interests of the parties.  The court can only act in accordance with the legal rights and obligations and the usual principles for granting mandatory injunctions.  If the parties choose to operate their business in such a way that it is loss-making, that ultimately is a matter for them.  Therefore, notwithstanding what appears to be the inevitable commercial commonsense of Mr Poon’s submissions, I am afraid it does not justify the granting of an injunction by this court.

22.Accordingly, the inter-partes summons is dismissed and I shall hear from the parties now as to costs.

(Submissions on costs)

23.In relation to costs, I make an order that the plaintiffs pay the defendant’s costs of the application, to be taxed if not agreed.  I decline to make an order that it is payable forthwith. However, given that Kit is named as both a plaintiff and as the defendant, and given that the plaintiff is suing as a partnership and Kit is a 25 per cent partner in that partnership, I make a further order that the costs payable by the plaintiff are to be borne by Ming and Wah and not by Kit.

Mr Jackson Poon, instructed by S H Chan & Co, for the plaintiff

Mr David W K Tang, instructed by Hastings & Co, for the defendant