Cheung Hing v. Wong Chor Cheung and Another
Read the full judgment text of HCA 336/2008 on BabelCite. This High Court CFI judgment was delivered on 13 August 2015.
1. Before the court were 2 summonses issued by the plaintiff (“ P ”), the first one for various directions for the sale of the subject property and for updated accounts of the 2 nd defendant (“ D2 ”), and the second one for various restraining orders against both the 1 st defendant (“ D1 ”) and D2.
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HCA 336/2008 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 336 OF 2008 ________________________
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______________ D E C I S I O N ______________ Introduction 1.Before the court were 2 summonses issued by the plaintiff (“P”), the first one for various directions for the sale of the subject property and for updated accounts of the 2nd defendant (“D2”), and the second one for various restraining orders against both the 1st defendant (“D1”) and D2. Background 2.The dispute between P and D1 arose out of their joint investment in 1991 to purchase a property on the 3rd floor and a garage space B1 on the ground floor of 23 Plantation Road, the Peak, Hong Kong (“Property”) through a corporate vehicle , namely D2. P and D1 were registered as equal shareholders in D2. 3.P commenced the present action in 2008, claiming against Ds, among other things, a declaration that D2 was holding the Property on trust or as constructive trustee for P and a declaration that P was the beneficial owner in respect of 50% share in the Property. P’s claim was registered as a lis pendens against the Property on 5 March 2008. 4.Since the commencement of the present action, the parties had been involved in no less than 6 other actions. 5.Trial of the present action was fixed before Yam J over five years ago, on 24 March 2010. Both P and D1 were unrepresented at the trial and a consent order was made on that day under which P and D1 agreed to D2 selling the Property forthwith and after deducting sale expenses, the proceeds of sale be paid into court and further D2 was to prepare an account of all income and expenses of the D2 within 60 days (“Consent Order”)[1]. 6.Notwithstanding the Consent Order, there was no co-operation between the parties in relation to the proposed sale, and on 10 May 2010 P issued a summons for sale. Prior to the return day of this summons, it transpired that D2 had, without P’s knowledge or consent, entered into a provisional sale and purchase agreement in May 2010 (“SPA”) with a company called Best Century Holdings Limited (“Best Century”), and the SPA had been registered in the Land Registry against the title of the Property. 7.When P found out, he issued HCA 925/2010 against D1, D2 (collectively “Ds”) and Best Century. It was P’s case that the purported sale by D2 to Best Century was a fraudulent sham orchestrated by D1. 8.Yam J made an order on 11 February 2011 giving directions to effect the sale of the Property (“1st Order”). 9.After the 1st Order, Best Century stepped into the picture by applying to intervene in the present action. This application was dismissed by Yam J on 18 March 2011. This led to an appeal by Best Century against the 1st Order under CACV 97/2011. On 18 March 2011, Yam J made a further order that, among other things, authorized P and D1 to proceed and complete with the sale of the Property pursuant to the 1st Order notwithstanding the SPA, and further directed that the registration of the SPA be vacated forthwith from the Land Registry (“2nd Order”). Ds then appealed against both the 1st Order and the 2nd Order under CACV 141/2011. 10.CACV 97/2011 and CACV 141/2011 were heard at the same time, and both were allowed by the Court of Appeal on 22 November 2011. As a result, Best Century was granted leave to intervene and be joined in the present action as 3rd defendant, and the 1st Order and the 2nd Order were set aside. 11.However, after the above decision by the Court of Appeal, Best Century had taken no further steps in the present action. P did not take any further steps either, until May 2014 as mentioned hereinafter. 12.In the meantime, P had proceeded with HCA 925/2010, and DHCJ Burrell handed down a judgment on 7 April 2014 in that action, after a trial of 3 days (“Burrell Judgment”) during which Ds and Best Century gave no evidence. 13.The effect of the Burrell Judgment was that the SPA was declared to be void and of no effect and the registration of the SPA at the Land Registry against the Property was ordered to be vacated. D1 was also restrained, among other things, to enter into any agreement for the sale of the Property, whether in the name of himself or D2 or otherwise without the prior written consent of P. D2 was likewise restrained. Damages to P were to be assessed and costs were ordered against D1 and Best Century on indemnity basis with certificate for two counsel. 14.Ds and Best Century appealed against the Burrell Judgment under CACV 100/2014 and CACV 101/2014 (collectively referred to as “Appeals”). The Appeals were fixed for hearing in the Court of Appeal on 14 April 2015. 15.It was after the Burrell Judgment that on 16 May 2014 P issued a notice of intention to proceed with the present action. According to P, thereafter he discovered a further encumbrance created by D2 against the Property, namely a Second Legal Charge dated 16 July 2014 registered on 25 July 2014 entered in favour of Hong Kong Finance Company Limited (“HK Finance Charge”). As a result thereof, P issued a summons for an interlocutory injunction against Ds on 26 August 2014 (“Injunction Summons”) to restrain them from further dealing with the Property in any way or using the Property as security for obtaining further loans, including extending, enlarging or increasing the loan amounts under the 22 August 2000 3rd mortgage to Dah Sing Bank (“Dah Sing Mortgage”) and also the HK Finance Charge. 16.On 5 September 2014, DHCJ Pang SC granted interim restraining orders against Ds as sought in the Injunction Summons, and eventually, with agreement of Ds, the interim injunction was continued until further order by this court on 10 November 2014 (“Injunction Order”). 17.P had also issued a summons on 24 September 2014 (“1st Summons”) seeking:
18.This was followed by Ds issuing a summons on 24 October 2014 seeking an order that, among other things, P’s 1st Summons to be heard after the Appeals fixed for hearing on 14 April 2015 (“Ds’ Summons”). 19.It was also discovered by P after the issue of the Injunction Summons, that the day before the issue, a further encumbrance was created by D2 against the Property dated 25 August 2014 and submitted for registration in the Land Registry on 19 September 2014[2] in favour of Good Brothers Finance Limited (“Good Brothers Mortgage”), and another encumbrance dated 4 September 2014 and registered in the Land Registry on 19 September 2014 in favour of Marcellotino Limited (“Marcellotino Mortgage”). 20.This then led P to issue a further summons on 12 November 2014 seeking, among other things, various restraining orders against Ds, including restraining them from extending/increasing the loan amount/s under the Good Brothers Mortgage and the Marcellotino Mortgage (“2nd Summons”). 21.P’s 1st and 2nd Summons and Ds’ Summons were all fixed before this court on 1 December 2014. 22.At the hearing, P agreed to his application for orders in relation to the sale of the Property be postponed until after the Appeals were heard. As a result, this court ordered that paragraphs 1-7, & 12 of P’s 1st Summons be fixed for a substantive hearing on 30 April 2015 (“Hearing”), after the scheduled hearing of the Appeals. D’s application for adjournment of other orders sought in P’s 1st Summons was refused. The rest of the applications in P’s 1st Summons, namely paragraphs 8, 9-11 were directed to be fixed for substantive argument at the hearing on 6 January 2015. 23.So far as P’s 2nd Summons was concerned, interim orders were made by this court on 1 December 2014, and the 2nd Summons was also adjourned to be argued at the hearing on 6 January 2015. 24.At the hearing on 6 January 2015, this court further made an order to the following effect[3]:
25.In the meantime, in relation to the Appeals, P had applied for security for costs against Ds and Best Century. On 4 December 2014, the Court of Appeal ordered Best Century to provide within 28 days security for P’s costs of the appeal in CACV 100/2014 in the sum of $416,570, and D1 and D2 to provide within 28 days security for P’s costs of the appeal in CACV 101/2014 in the sum of HK$442,420, in default of which the relevant appeal/s would be dismissed. 26.Best Century had subsequently applied for extension to provide the security. This was refused by the Court of Appeal on 2 January 2015, and Best Century’s appeal was then dismissed. 27.Ds had applied for and obtained an extension to provide the security by 25 February 2015, subject to certain terms. I understand that that Ds eventually failed to pay the security, and their appeal was also dismissed. 28.At the Hearing, P became legally represented and Counsel Mr Adrian But appeared for him. Counsel Mr David Chen appeared for Ds. 29.Ds had sought further time at the Hearing to comply with the Accounts Order. In the end, this court only allowed a further 14 days. P’s 1st Summons 30.One of the actions commenced by P was on 29 October 2012 in which P applied for leave to bring certain statutory derivative actions in the name of D2 and to defend an existing action on behalf of D2 in which D2 was a defendant, namely HCMP 2433 of 2012. Eventually, the matter was fixed for hearing on 14 January 2015 before G Lam J. 31.The derivative actions which P sought leave to issue in name of D2 against D1 included following intended actions :
32.G Lam J was satisfied that there were clearly serious issues to be tried and that it appeared to be prima facie in the interest of D2 to grant leave, and he did so grant on the same day of the hearing, 14 January 2015[4]. 33.Pursuant to leave granted by G Lam J, D2 had on 15 April 2015 issued the derivative action (through P) against D1, namely HCA 804/2015 (“Derivative Action”)[5]. 34.As a result of the above, at the Hearing, Mr But proposed that the directions for sale of the Property in P’s 1st Summons pursuant to the Consent Order, namely paragraphs 1-7, & 12, and other orders/directions sought in paragraphs 9-11 be adjourned sine die with liberty restore pending the full and final determination of the Derivative Action. 35.There was no objection thereto by Mr Chen, and I so ordered, with costs reserved. P’s 2nd Summons Reliefs sought 36.The reliefs sought in the 2nd Summons included:
Jurisdiction of the court 37.The main objection taken by Ds to P’s 2nd Summons was whether this court still had jurisdiction to make the Injunction Orders, in light of the present action having been concluded by the Consent Order. 38.As I understand it, Mr Chen was submitting that there was no longer any outstanding cause of matter to be tried after full and final settlement by way of the Consent Order. It was Mr Chen’s further contention that P had failed to satisfy the American Cyanamid test by having “no serious issue to be tried” for an interlocutory injunction to be granted in the absence of a substantive trial. 39.Mr Chen had referred this court to Leung Yee & Anor v Ng Yiu Ming & Anor [2001] 1HKLRD 309, in that the court’s power under a “liberty to apply” clause in a consent order was to “work out the order and to give effect to the terms of the order”[6]. 40.Mr But, however, based his submissions on the court’s jurisdiction to grant “post-judgment” interlocutory injunctions. 41.As a starting point, Mr But referred to section 21L (1) of the High Court Ordinance, which states that the Court of First Instance may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the Court of First Instance to be just or convenient to do so. 42.Further, as pointed out by Mr But, Order 29 rule 1 of the RHC specifically provided for the grant of injunctions after trial of the main cause of a writ, or even outside the scope of an original claim. 43.Mr But had also referred to a number of English cases where the UK equivalent of the above Hong Kong provisions were confirmed, namely Orwell Steel (Erection and Fabrication) Ltd v Asphalt and Tarmac (UK) Ltd [1984] 1 WLR 1997 and Stewart Chartering Ltd v C&O Managements SA and anor [1980] WLR 460, and UK Court of Appeal case Jet West Ltd and Another v Haddican and Others [1992] 1 WLR 487. 44.In Tang Chi Tai & Others v Tang On Kwai, HCA 331/2002, 13 December 2007, DHCJ To, as he then was, had held, among other things, that the court had unfettered discretion to make all kinds of post-judgment injunctions or other relief as “reasonably necessary and ancillary to the due performance of the court’s functions in the administration of justice”[7], following Orwell, and also another earlier English case Smith v Peters (1875) LR Eq 511. 45.DHCJ To had also said that the court’s jurisdiction was not limited to the purpose of enforcing judgment or to granting Mareva injunctions[8]. 46.In Chow Fu Hisen v K Vision International Investment Ltd, HCA 2884/2004, unreported, 20 June 2011, the plaintiff claimed for, among other things, taking of account of her beneficial interests in shares and the sales profit from the assets of the defendant company which was managed and controlled by a rival majority shareholder. The plaintiff succeeded in the action and obtained directions for taking account and consequential directions for payment, but the defendant became highly obstructive in relation to the compliance of the order. The court upheld the decision for the appointment of a receiver for the assets of the defendant for the preservation of the plaintiff’s interest and to prevent wrongful dissipation of assets. 47.Mr Chen had argued that the cases cited by Mr But did not concern a consent order, and that Woo JA had made it clear in Leung Yee that where there was a consent order, the court’s jurisdiction was limited. 48.The general principles summarized by Woo J in Leung Yee were as follows[9]:
49.The above general principles in relation to a variation or a setting aside of a consent order were not really disputed by Mr But. However, in the present case, what was sought in P’s 2nd Summons was not a setting aside nor a variation of the Consent Order, but for injunctive reliefs in aid of carrying out the effect of the Consent Order, which injunctive reliefs were necessary to procure due administration of justice. I am of the view that Mr Chen’s argument was misconceived. 50.In any event, Ds seemed to be taking an inconsistent stance. As pointed out by Mr But, at the hearing before this court on 10 November 2014, Mr Chen did not object to the Injunction Order being made, which was post Consent Order, nor did he object to substituted service in relation to the Injunction Order. 51.Having considered s 21L of the High Court Ordinance and Order 29 rule 1 of RHC, and the cases cited by Mr But, I am in no doubt that I have jurisdiction to grant the Injunction Reliefs as sought in P’s 2nd Summons. 52.As for the Disclosure Orders, Mr Chen had also argued that there was no legal basis for seeking these orders, as what P was seeking was not an application for Mareva relief where ancillary disclosure orders were often made to render the injunction effective, and that the proper way was for P to seek disclosure of the information/documents was to seek inspection of D2’s books and records under the Companies Ordinance, or P could make an application on behalf of D2 in the Derivative Action against D1 for specific discovery. 53.As I have concluded that I have jurisdiction to grant the Injunction Reliefs, the Disclosure Orders are in my view ancillary orders to the Injunction Reliefs, and that I also have the power to make the same. Whether this court should grant the reliefs/orders sought 54.P’s 2nd Summons was issued prior to P obtaining leave to issue the Derivative Action. 55.In the statement of claim filed in the Derivative Action, P had stated that he was a registered director of D2 since 29 January 1991, until, without his knowledge and consent, a Form D2A Notice was filed on behalf of D2 indicating that P had ceased to be a director as from 27 December 2013. P had challenged the validity of the Form D2A Notice. 56.According to P, D1 was a registered director of D2 until 18 April 2000. Since 17 August 2001, 5 other directors besides P were appointed, including D1’s wife Rita Wong. Again, it was P’s case that the appointment of these purported directors (“Purported Directors”) was without his knowledge and consent, and they were improperly or invalidly appointed. It was also P’s case that the Purported Directors were D1’s alter-ego, agents and/or representatives for the purpose of taking over the control and management of D2. 57.The Dah Sing Mortgage was executed by D1 and his wife as persons authorized by the board of directors of D2. D1, his wife and their son Jacky Wong were guarantors to the mortgage. The HK Finance Charge was executed by D1 on behalf of a corporate director, another corporate director, and D1’s wife, all as directors on behalf of D2. The Marcellotino Mortgage was executed by a corporate director, which was also a director of Best Century. As the registration of the Good Brothers Mortgage was withheld, it was not clear who executed the said mortgage. 58.Mr Chen had argued that P had no locus to apply for the Injunctive Reliefs, and that only D2 could apply. I accept Mr But’s submission that both P and D2 could apply for Injunctive Reliefs against D1, as P had a personal right to protect any sale proceeds of the Property. Further, as Mr But had submitted, it was important that P made the application against both D1 and D2. 59.The Derivative Action was only against D1. Mr But had submitted that seeking injunctive reliefs in the Derivative Action against D1 might not be sufficient, and it was more appropriate for P to apply in the present action against both D1 and D2, since some of the encumbrances were contracted by Purported Directors on behalf of D2. 60.Mr But had further informed the court that P would apply for consolidation of the present action and the Derivative Action, so that they could both dealt with by one judge, and that after consolidation, whether the orders sought were made in the present action or in the Derivative Action would make no difference. 61.As said in the Tang Che Tai case, the question is really whether the Injunctive Reliefs sought were reasonably necessary and ancillary to the administration of justice. 62.Neither Good Brothers nor Marcellotino were moneylenders. There did not seem to be any proper board minutes for the creation of those mortgages. As pointed out by Mr But, the timing of those mortgages was at about the same time as the Injunction Summons or its hearing. G Lam J had said that there were clearly serious issues to be tried. Mr But submitted that any further depreciation in the price of the Property would result in irreparable damage to P and that the balance of convenience must lie in favour of granting the Injunctive Reliefs. I agree. 63.Ds had complained of delay and that P should have expedited their application for leave to issue the Derivative Action. The fact was that the Good Brothers Mortgage and the Marcellotino Mortgage were only registered or submitted for registration at the Land Registry on 19 September 2014, and P could only have discovered the same thereafter. There was also no evidence of any prejudice to Ds if the Injunctive Reliefs or the Disclosure Order were to be granted. 64.Having considered all the circumstances of this case, I am of the view that Injunctive Reliefs and the Disclosure Order would be necessary and ancillary to the administration of justice, and I am prepared to grant the Injunctive Reliefs and the Disclosure Order sought in P’s 2nd Summons. As Ds did not object to the endorsement of the penal notice or the substituted service orders of the Injunction Order, I see no grounds for objecting to similar orders sought in P’s 2nd Summons. Conclusion 65.I thus grant an order in terms of paragraphs 1-6, and 8 of P’s 2nd Summons. 66.I see no reason as to why costs should not follow the event, and I order Ds to pay P’s costs of and incidental to P’s 2nd Summons, such costs to be taxed and paid forthwith. This is an order nisi, which shall be made final after 21 days.
Mr Adrian But, instructed by Cheung Wong & Associates, for the plaintiff Mr David Chen, instructed by W K To & Co, for the 1st to 2nd defendants [1] B:78-80 [2] Subsequently the registration of the Good Brothers Mortgage was withheld, see Land Search at A:191 [3] 2nd SB:208-211 [4] Judgment , 2nd SB:166-173; Order, 2nd SB:174-179 [5] Writ of summons : 2nd SB:180-207; statement of claim: 2nd SB: 182-202 [6] At 322E-G, per Woo JA [7] See paras 16-22, per DHCJ To [8] At para 22 [9] At H-J, pg 321 and A-B, pg 322 |
Cases cited in this judgment
Further hearings and rulings under HCA 336/2008