Case Detail

HCA 336/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 336 OF 2008

________________________

BETWEEN
	CHEUNG HING	Plaintiff
	and
	WONG CHOR CHEUNG	1^st Defendant
	WAH FUNG FOREST RESOURCES LIMITED	2^nd Defendant

_______________________

Before: Hon B Chu J in Chambers

Dates of Hearing: 6 April, 5 May 2017

Date of Decision: 12 June 2017

______________

D E C I S I O N

______________

Introduction

1. This is a long running litigation between the plaintiff (“P”) and the 1^st defendant (“D1”) arising out of their joint investment in 1991 to purchase a property on the Peak (“Property”) through the corporate vehicle, 2^nd defendant (“D2”).

2. The present summons issued by P concerned the service of two orders made by this court.

Background

3. The background in relating to the dispute has been set out in this court’s decision of 13 August 2015 (“13.08.15 Decision”) and also the Burrell Judgment referred therein, which will not be repeated here.

4. In particular, on 6 January 2015, under paragraph 6 of this court’s order made on that day (“06.01.15 Order”), D1 was to file and serve on P within 60 days an account of D2, updated to the date of the order (namely 6 January 2015), to be audited and verified by a chartered public accountant, and such account to show all rental income, in and out of mortgage loan monies and expenses commencing from the purchase of the Property up to the date of the order, and that thereafter D1 to file such accounts on a quarterly basis until the date of completion of the sale of the Property (“Accounts Order”).

5. Further, pursuant to paragraph 3 of this court’s order of 13 August 2015 (“13.08.15 Order”), D1 and D2 were to file and serve on P within 7 days of the order a list of information/documents in relation to the two mortgages, which I shall simply call Marcellotino Mortgage and the Good Brothers Mortgage (“Disclosure Order”).

6. As D1 failed to comply with the Accounts Order and the Disclosure Order, on 22 December 2016, this court granted a further order that D1 was to comply with the Accounts Order, and D1 and D2 were to comply with the Disclosure Order, within 42 days of that order (“22.12.16 Order”).

7. On 23 March 2017, P then issued the present summons for extension of time for D1 and/or D2 to comply with the Accounts Order and the Disclosure Order, and sought substituted service orders in relation to the two orders, and also that there be a penal notice be endorsed on the order to be made by this court.

8. The substituted service orders sought by P was as follows:

(i) Personal service on D1 be substituted by leaving a copy of a sealed copy of the order at the usual best and last known address of D1 (“Lai Chi Kok Address”) and at the address of D1’s present solicitors;
(ii) Personal service on D2 and its registered directors be substituted by leaving a copy of a sealed copy order of the registered address of D2 at the Lai Chi Kok Address, and also at the address of D2’s present solicitors.

9. At the 1^st hearing of P’s summons, 6 April 2017 (“1^st Hearing”), Counsel Mr Thomas Wong, appeared for Ds. With no opposition from Ds, this court ordered the extension of time for D1 and D2 to comply with the 22.12.16 Order, the order be endorsed with a penal notice, and that substituted service of D1 and D2 be effected at the Lai Chi Kok Address and at the address of their solicitors.

10. The only disputed matter was whether personal service on the directors of D2 should also be substituted, as there was no sufficient evidence to support this application, this court then ordered this matter be adjourned to a further hearing on 5 May 2017 (“2^nd Hearing”) and gave leave for P to file a further affirmation, D1 and D2 to file an affirmation in opposition and P had leave to reply.

11. P filed his supplemental affirmation on 11 April 2017. D1 then filed his 7^th affirmation in opposition on 4 May 2017. P complained at the 2^nd Hearing that D1’s affirmation was filed late and he did not have a chance to file a reply. The matter was then adjourned again for P to file his reply affirmation, and the parties to file supplemental written submissions. The parties agreed to this court dealing with the matter on paper, with no further oral hearing, unless otherwise directed.

The Law

12. Order 65 rule 4 of the Rules of the High Court (“RHC”) provides, among other things, that in the case of any document which is required to be served personally, if it appears to the court that it is impracticable for any reason to serve that document in the manner prescribed on that person, the court may make an order for substituted service of that document.

13. It is stated in paragraph 65/4/3 of the Hong Kong Civil Procedure 2017, Volume 1, the court will not make an order for substituted service on the mere statement that the defendant is evading service. The grounds for the statement must be given in the affidavit in support, which must state the efforts which have been made to find the defendant, and the reason for believing that he is keeping out of the way to evade service.

14. As further set out in paragraph 65/4/4 of Hong Kong Civil Court Practice 2016, in order to obtain an order for substituted service, it is necessary to demonstrate to the court that it is “impracticable for any reason” to effect service by the usual method, and that this is a threshold requirement which, when satisfied, gives the court a discretion whether to make the order: Chan Yuek Mui v Ng Shu Chi [1999] 2 HKC 702 (CA).

Whether impracticable

15. The 5 registered directors of D2 were :

(i) D1’s wife Ms Wong Yuen Wai Rita Maria (“Ms Wong”);
(ii) Chan Siu Fung (“Chan”);
(iii) Chen Shulong (“Chen”), said to be a New Zealander holding a New Zealand passport with no HKIC details;
(iv) Success Consultants Limited (“Success”); and
(v) Hopewell Investments Inc (“Hopewell”).

16. P had filed a total of 3 affirmations in support of his application. In his 1^st affirmation, he had said the directors and/or officers of D2 could not be located.

17. In P’s 2^nd affirmation, he explained that D1 and his wife Ms Wong were the founding shareholders and directors of D2, and he had set out the historical changes in D2’s directors since 29 January 1991 and that since 31 December 1993 until 19 February 1997, P and D1 were the only 2 directors of D2.

18. Thereafter, according to P, without his knowledge, and without valid shareholders’/directors’ resolution, Ms Wong, Chan and Chen were appointed as directors on 8 August 1997, whereas Success and Hopewell were appointed on 9 March 2000.

19. Further, according to P, D1 and Ms Wong resigned as directors on 9 March 2000, but Ms Wong was re-appointed again on 11 August 2000.

20. Then on 27 December 2013, without his knowledge and consent, P was said to cease to be a director.

21. Ms Wong then resigned as a director on 31 December 2013.

22. P said he had been told by his solicitors in the statutory derivative action HCMP 2433/2012 issued in October 2012 (“Derivative Action”) that before commencement of the intended Derivative Action, he had to give notice on behalf of D2 to each of the registered directors, and his solicitors were instructed to send notices to each of them. He was told by his solicitors that notices sent to Chan and Chen, both at their address given in the 2012 Annual Return of D2, to be at A-3, 24/F, Hong Keung Building, 32-34, Hong Keung Street, San Po Kong (“San Po Kong Address”) were returned through dead letter service with “no such person” marked thereon. Further when his solicitor’s staff Kan Sin Ying (“Kan”) attended the premises for personal service of the notices, it was found that the San Po Kong Address was an apartment with 6 partitioned rooms and a man there told Kan that no one was living there by the names of Chan or Chen.

23. As for notices given to Ms Wong, they were sent to the address she gave in various annual returns of D2, namely at the Hing Tai Building, No 139 Connaught Road West (“12A Hing Tai Building”), but later P’s solicitors received a letter dated 12 September 2012 from a KS Yu informing them that he was the owner of 12A Hing Tai Building which was purchased by him about 6-7 years ago, and no one by name of Ms Wong was at that address and he did not know any person by the name of Ms Wong and requested P’s solicitors not to send any further letters for Ms Wong to 12A Hing Tai Building.

24. As for Success and Hopewell, Success is a BVI company and Hopewell is a Mauritius company. P’s evidence was that the notices sent by his solicitors to the addresses of those companies respectively in BVI and in Mauritious were returned through the dead letter service.

25. P had relied on an affirmation of service filed by Kan in the Derivative Action. D had also produced a copy of last annual return D2 filed with the Companies Registry on 15 November 2013, which was made up to 19 February 2013 (“19.02.13 AR”) and the addresses of all the registered directors were given same as before. There has been no Notice of Change of Director’s address filed since.

26. Further, P pointed out that D1 and/or D2 did not object to the substituted service order previously sought by P against Ds and the 13.08.15 Order had already stated that personal service of the order on D2 and its registered directors be substituted by leaving a sealed copy of the order at the registered office of D2 and at the address of D2’s solicitors.

27. P also said he did on 22 January 2017 personally attended the Lai Chi Kok Address to effect personal service on D1 and D2 individually of copies of the 06.01.15 Order, the 13.08.15 Order, and the 22.12.16 Order, but the door of the Lai Chi Kok Address was closed and locked and no one answered when he rang the doorbell. He then served the 3 orders on Ds and the registered directors of D2 by leaving the same at the door of Ds’ address. He also attended the office of Ds’ present solicitors to try and effect personal service of the 3 orders by leaving the same at the address of Ds’ solicitors.

28. D1 had filed his 7^th affirmation to confirm Ms Wong is his wife, and that he said he “verily believed” that in or about 2013 when the 2013 AR was filed, his wife was residing at 12A Hing Tai Building, and that he had personally visited his wife at that address, and thus the address was genuine. Ms Wong’s address changed from the San Po Kong Address in the 19.02.00 AR to 12A Hing Tai Building in the 19.02.01 AR and since then until, according to D1, 2013. Yet, D1’s evidence was contrary to Kan’s evidence that the owner of that address claimed he had no knowledge of Ms Wong. There was no explanation offered by D1 in relation to Kan’s evidence.

29. D1 claimed that P had developed a personal and working relationship with Ms Wong and believed that P has her contact information, and that Ms Wong personally knows and has the contact information of Chan and Chen, and that P could have called up Ms Wong to arrange for personal service on her, Chan and Chen. As for service on Success and Hopewell the service indicated in Kan Sin Ying’s affirmation was in fact successful.

30. P denied what was alleged by D1, and said he had not developed a personal or working relationship with Ms Wong and there had been no communication between Ms Wong and P at all, and she had not provided any other contact details to him.

31. The San Po Kong Address was in fact also the address of D1 in the 1992 Return of Allotment of D2, and also the registered address of D2, and in fact also the address of Ms Wong up until the 19.02.00 AR, as above mentioned. Thus, D1, Ms Wong, Chan, and Chen had all used the San Po Kong address for various periods of time.

32. I find what D1 said in his 7^th affirmation was evasive, in that he has confirmed that Ms Wong is still his wife, and yet he offered no explanation why the owner of 12A Hing Tai Building would say he did not know any person by name of Ms Wong, notwithstanding the owner bought that property 6 or 7 years prior to 2012, and that there was no person by name of Ms Wong living at that address. If D1 verily believes that P has his wife’s contact information, then all D1 needs to do is to simply confirm or state the contact details of Ms Wong in his affirmation.

33. Attempts at service at the 12A Hing Tai Building and at the San Po Kong Address have failed so far. There have been no offers or no proposals by D1’s or D2’s solicitors to arrange for personal service on Ms Wong, Chan and/or Chen.

34. So far as the service on the two corporate directors were concerned, it appeared from Kan’s affirmation that the notices sent to Success and Hopewell were not returned through dead letter service, as alleged by P. Mr Wong thus submitted that P was lying and that his evidence should be rejected.

35. P then explained he was told by his solicitors that the notices were returned, and in any event, he had said personal service on unknown principal, unknown directors or officers of overseas companies is impracticable, unduly difficult and expensive.

36. P’s evidence on past service on the 5 directors was based on Kan’s affirmation filed in the Derivative Action. There was no reason to doubt Kan’s evidence.

Conclusion

37. Having considered the evidence, and the history of this matter, and further there was no objection by Ds’ then Counsel to the substituted service of the 13.08.15 Order on the 5 directors, I have come to the view that P has satisfied this court that it is impracticable, or unduly difficult or expensive, to effect personal service of the order made by this court on 6 April 2017 on the 5 directors.

38. The mode of substituted service proposed by P was at the registered office of D2, and at D2’s solicitors. This was the same mode previously ordered of the service of the 13.08.15 Order. I am satisfied that the mode of substituted service proposed is most suitable and will have the high probability to bring the order to the notice of the 5 directors of D2.

39. I therefore grant the orders sought by P in paragraph 5 (which should in fact read paragraph 4) of P’s summons issued on 23 March 2017, regarding substituted service on the 5 directors of D2.

40. As for costs, I accept that the adjournment of 1^st Hearing was occasioned by P seeking leave to file a further supplemental affirmation. I therefore order P to pay the costs of that adjournment. Save for those costs, as P is the successful party and has obtained all the orders sought, I order Ds to jointly and severally pay P the costs of the summons issued on 23 March 2017, to be taxed if not agreed. This is an order nisi, which will be made final after 14 days.

(Bebe Pui Ying Chu)
Judge of the Court of First Instance
High Court

The plaintiff appeared in person

Mr Thomas Wong, instructed by W K To & Co, for the 1^st to 2^nd defendants

HCA 336/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 336 OF 2008

________________________

BETWEEN
	CHEUNG HING	Plaintiff
	and
	WONG CHOR CHEUNG	1^st Defendant
	WAH FUNG FOREST RESOURCES LIMITED	2^nd Defendant

_______________________

Before: Hon B Chu J in Chambers

Date of Hearing: 30 April 2015

Date of Decision: 13 August 2015

______________

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 2^nd defendant (“D2”), and the second one for various restraining orders against both the 1^st 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 3^rd 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 (“1^st Order”).

9. After the 1^st 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 1^st 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 1^st Order notwithstanding the SPA, and further directed that the registration of the SPA be vacated forthwith from the Land Registry (“2^nd Order”). Ds then appealed against both the 1^st Order and the 2^nd 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 3^rd defendant, and the 1^st Order and the 2^nd 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 3^rd 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 (“1^stSummons”) seeking:

(i)     a number of directions for the sale of the Property pursuant to the Consent Order ( paragraphs 1-7, &12);
(ii)     an order pursuant to the Consent Order that D1 to file and serve on P within 28 days updated audited account of D2 which was to be verified by a chartered public account, such account to show all rental income, in and out of mortgage loan monies and expenses from purchase of the Property up to date of the order, and further up to date of completion of sale of the Property (paragraph 8);
(iii)     other orders not pursuant to the Consent Order (paragraphs 9-11).

18. This was followed by Ds issuing a summons on 24 October 2014 seeking an order that, among other things, P’s 1^st 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 (“2^ndSummons”).

21. P’s 1^st and 2^nd 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 1^st 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 1^st Summons was refused. The rest of the applications in P’s 1^st 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 2^nd Summons was concerned, interim orders were made by this court on 1 December 2014, and the 2^nd 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]:

(i) For paragraph 8, D1 to file and serve on P within 60 days an account of D2, updated to the date of the order, to be audited and verified by a chartered public accountant, and such account to show all rental income, in and out of mortgage loan monies and expenses commencing from the purchase of the Property up to the date of the order, and that thereafter D1 to file such accounts on a quarterly basis until the date of completion of the sale of the Property (“Accounts Order”);
(ii) Paragraphs 9-11 of P’s 1^st Summons be adjourned to be dealt with at the Hearing;
(iii) P’s 2^nd Summons also adjourned to be dealt with at the Hearing, and for avoidance of doubt, the interim order made on 1 December 2014 to continue until further order.

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 1^st 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 :

(i) For recovery of rental income allegedly misappropriated by D1 and damages as a result of D1’s actions;
(ii) For D1 to account for the use of the loans and all monies advanced or otherwise obtained over the Property, including the Dah Sing Mortgage, the HK Finance Charge, the Good Brothers Mortgage, and the Marcellotino Mortgage, and for damages, and for an order that D1 do repay all sums due under the 4 encumbrances and for discharge of these encumbrances.

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 1^st 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 2^nd Summons

Reliefs sought

36. The reliefs sought in the 2^nd Summons included:

(i) Injunctive reliefs against D1 and D2 in relation to any extension, enlarging, or increasing the loan amount under the Marcellotino Mortgage and the Good Brothers Mortgage (“Injunctive Reliefs”);
(ii) Disclosure orders against D1 and D2 for information/documents in relation to the Marcellotino Mortgage and the Good Brothers Mortgage (“Disclosure Order”);
(iii) Personal service of the order to be made on D1 and D2 be substituted.

Jurisdiction of the court

37. The main objection taken by Ds to P’s 2^nd 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 SAand anor [1980] WLR 460, and UK Court of Appeal case Jet West Ltd and Another v Haddicanand 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 ChowFu 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]:

(i) A consent order may evidence a contract;
(ii) On the other hand, a consent order may only mean the parties to it not objecting to the order being made, and the court can alter its terms;
(iii) Where there is a true contract contained in a consent order, the court has no power to set it aside or to vary its terms;
(iv) In matrimonial financial relief cases, the court will not alter the terms of an agreement in a consent order unless there are changed circumstances;
(v) However, where the consent order founded on a true contract is not sought to be set aside or altered, unless it is plain that time was intended to be of essence or that the jurisdiction of the court Order 3 rule 5 of RHC is ousted by the agreement, the court can grant extension of the time.

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 2^nd 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 2^nd 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 2^nd 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 2^nd 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 2^nd Summons.

Conclusion

65. I thus grant an order in terms of paragraphs 1-6, and 8 of P’s 2^nd 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 2^nd Summons, such costs to be taxed and paid forthwith. This is an order nisi, which shall be made final after 21 days.

	(Bebe Pui Ying Chu)
	Judge of the Court of First Instance
	High Court

Mr Adrian But, instructed by Cheung Wong & Associates, for the plaintiff

Mr David Chen, instructed by W K To & Co, for the 1^st to 2^nd defendants

[1] B:78-80

[2] Subsequently the registration of the Good Brothers Mortgage was withheld, see Land Search at A:191

[3] 2^nd SB:208-211

[4] Judgment , 2^nd SB:166-173; Order, 2^nd SB:174-179

[5] Writ of summons : 2^nd SB:180-207; statement of claim: 2^nd 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

HCA336/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 336 OF 2008

-------------------------

BETWEEN

	CHEUNG HING	Plaintiff
and
	WONG CHOR CHEUNG	1^st Defendant
	WAH FUNG FOREST RESOURCES LTD	2^nd Defendant

-------------------------

Before : Hon Yam J in Chambers

Date of Hearing : 18 March 2011

Date of Decision : 18 March 2011

----------------------

DECISION

----------------------

1. There are several applications from each of the three parties appearing before me today. The most important application is the one by the defendant in this action, seeking leave to appeal against my decision on 11 February 2011. The defendants are represented by Mr K.W. Ng, a solicitor. There is another application for further direction and order made by the plaintiff herein which I shall deal with later.

2. My decision of 11 February was a result of an overall CMC of all the cases involving basically between Mr “Wong” Chor Cheung, the 1^st defendant, and Mr “Cheung” Hing, the plaintiff, and other parties in respect of the same subject matter, and that is a Property in the Peak owned in the name of the 2^nd defendant, Wah Fung Forest Resources Ltd (“the Company”). It is common ground between Cheung and Wong that they were and still are 50% shareholders.

3. The recent annual return, dated 19 February 2010, submitted to the Company Registry shows that Wong is not a director any more, whereas his wife is. Cheung is still a director but there are other directors :

(1) Hopewell Investments Inc., a company resident in the Republic of Mauritius;
(2) Success Consultants Limited, in BVI;
(3) one individual called Chan Siu Fung; and
(4) another individual, also in Hong Kong, by the name of Chen Shulong.

Cheung Hing’s case

4. Cheung alleged that these directors were not appointed with his knowledge and there was no board resolution to that effect. Mr Ng said that in the past, the Company acted informally and even Cheung’s brother had been the company secretary at one stage and he was also appointed informally. But one thing is certain and that is, from Wong’s instructions, there were no board resolution to appoint these directors. Cheung’s case is that he has no knowledge of, and ex hypothesis, no consent to appointing these directors at all (though he had consented to appointing his brother as the company secretary). His case is that the Property and the Company was all the time handled by Wong. He has no knowledge as to its income, expenditure or anything. That is why he asked for an income and expenditure account of the Property. I have made an Order to the effect that Wong should furnish such an account to Cheung sometime ago, but for a long time thereafter, Wong has not complied with such an Order.

5. The present dispute stems from a Consent Order at the trial which is in Chinese, because at that time both of them were unrepresented and they told me at the trial that both of them would agree to have the Property sold. The first paragraph reads :

「經有關訴訟方同意，現頒令如下：
一．原告人與第一被告人同意第二被告人需即時出售該些物業，所得收益在扣除出售該些物業所涉及的所有開支後，需即時繳存於法院，為使上述物業得以出售，本訴訟的待決案件如已撤銷。
二．第二被告人所持有的該些物業需如製備賬目，另外原告人和第一被告人需於本命令日期起計六十天之內向法庭提交及向有關訴訟方送交賬目，列舉截止賬目註明日期或截止這些物業出售當日的所有收入和開支。訴訟各方均可向法庭提出申請及訴訟費事宜。
……
四．訟費事宜不作命令。」

6. In the first place the 1^st defendant has not complied with paragraph 2 of this Order. But more importantly it is quite clear, from paragraph 1, that both Cheung and Wong agreed that the Company should sell the said Property, in that, the Company, in selling the Property, would not be at the sole idea, initiation and/or intention of Wong. In other words, the Order did not say that Wong could, on his own, sell the Property without relating the matter to Cheung, the other 50% shareholder. Cheung and Wong together should sell the Property in the name of the Company.

7. Now, what happened thereafter was, from the horse’s mouth in Wong’s 2^nd supplemental affirmation, filed under HCA336/2008 and HCA925/2010, in paragraph 27 thereof, he said :

“(b) I used my best endeavour to find some potential purchasers with a view to selling the property at a higher price to the best interests of myself, the Plaintiff and W F Forest. As I know the investors of Mainland China are used to invest into the property market with the luxury property in Hong Kong, I believe that it would be the main source of looking for potential purchasers. Hence, I have contacted Midland Realty Limited, Shenzhen, in or around late April 2010. Apart from it [there is no explanation why he has to contact Midland Realty Limited, in Shenzhen instead of the same company’s headquarters in Hong Kong but be that as it may he went on to say] I had also conducted searches of the current market price of the property at the Internet through the websites of Centaline Property Agency Limited and Midland Realty Limited. It was my impression that the property was worth about HK$30 million at that time.
…
(e) W F Forest has successfully secured Best Century Holdings Limited as a purchaser and the parties reach an agreement on the terms of the sale for the property and the second purported PSP was signed eventually.”

8. Best Century is actually owned, I think implicitly wholly owned by a Mr “Ko” Cheong Hung Gary. Best Century is one of the defendants in HCA925/2010. Ko is represented by Miss Charmaine Lo of counsel today. Ko applied to intervene in these proceedings. In fact, Best Century was represented by Mr Wilson Hui, of counsel, at the last CMC when I made the orders and directions.

9. Ko put in an affirmation and described how he came to buy this Property at HK$15 million. He, because of his network in the Mainland, knew a lawyer in Shenzhen, Futian District, called Mr Yang Guangze. Mr Yang mentioned to him about this Property with an existing tenancy agreement and the owner was asking for a price around HK$20 million. This is located at the Peak with a size of around 2,000 sq.ft. There was no mention of the garage. But I take judicial notice that that price in May 2010 is too good to be true. A flat of the same size even in mid-levels must be worth more than $20 million. Be that as it may, I am fully conscious that now is not the trial of these actions. However I must assess the strength of each party’s case in this application for urgent interim measure, as the bank is threatening to foreclose the mortgage, in which event it will not benefit anyone of the three parties.

10. Yang then introduced Wong to him and Wong said he was trying to sell the Property quickly as the Company was behind its mortgage payments. Wong also mentioned that there was a possibility of a redevelopment project on the Property and the value thereof would be much higher than the current value. They then signed a provisional sale and purchase agreement (“the PSP”) on 28 May 2010 for $15 million with an option given to the Company to buy back 30% of the equity interest of the Property at the original price within six months from the expiry of the existing tenancy agreement. This was actually signed in Shenzhen.

11. This provisional sale and purchase agreement was registered in the Land Registry on 3 June 2010, which will of course date back to the date of the agreement on 28 May 2010 as it was registered within one month thereafter.

12. This will bring me to Mr C.Y. Li’s (for Cheung) first point, which he described as an open-and-shut point. The Best Century PSP was registered after the lis pendens of this action had been registered. In fact, the registration of the PSP was also after the registration of the Consent Order of 24 March 2010 in the Land Office. So Best Century’s interest, if any, will take after Cheung’s interest.

13. The same point was made when parties last time appeared before me on 11 February 2011 and that is : Best Century knew about the Consent Order when it made the PSP and thus the validity of the purported sale to Best Century is subject to the sale order in the 24 March Consent Order. Best Century knew or should have known that Cheung did not know or consent to the sale and hence the purported sale to it was not authorised. Indeed, nothing from Mr Ko, for Best Century, nor from Wong that at the time of the PSP, they have made inquiry as to the following matters :

(1) whether the Company has passed a proper board resolution approving the sale to Best Century; and
(2) whether the one who signed the PSP, which was described as Success Consultants Limited, being a BVI Company was a properly constituted director, with the knowledge and/or consent of Cheung or whether there was any board resolution, appointing Success Consultants Limited to sign the PSP.

14. Of course, Wong’s case, as submitted through Mr Ng, is that all directors, including Success Consultants Limited, were informally appointed with the knowledge of Cheung. Be that as it may, assuming that was the case, it still begs the question why Wong could effect a sale and cause the PSP to be signed by Success Consultants Limited without reference to Cheung and he said that was, in his solicitors’ language, by the Consent Order and eventually pursuant to the Consent Order. In my view, it is anything but pursuant to the Consent Order. For the aforesaid reason, the defendants have no reasonable chance of success in the appeal. The order for sale has been made long time ago, but it did not empower Wong to sell the Property himself without obtaining Cheung’s approval. It only empowered the Company to sell the Property. Thus it must have been painfully clear to Wong that he was not to go behind Cheung’s back and sell the Property himself.

15. This is tell-tale of the behaviour of Wong, as alleged by Cheung, all along since the purchase of the Property. “Mr Wong never referred to me. He just acted on his own without giving account of the profits he made, without repaying the money he owed me, without telling me what happened to the property at all until I sue him in this action”, so said Cheung.

16. In applying for leave to appeal and also in resisting Mr Li’s application for further direction and order, Mr Ng submitted that there is no urgency in selling the Property. Cheung’s position is safely secured. Best Century is under an injunction restraining it to resell the Property. I am afraid that is beside the point. The fact that Best Century cannot sell on the Property is no comfort to Cheung. The property market is very volatile. It fluctuates every minute. Nobody knows what will happen in the world in the next minute. No one in the past would know that, say, Japan would be facing a big disaster which would affect the world economy one way or the other.

17. In fact, on the other hand, Best Century’s position is well secured, if it proves to be right. The proceeds of any sale in future are directed to be paid into court. It is, at least, opened to Best Century to claim damages against Wong for breach of warranty of authority if Ko and Cheung both proved to be right.

18. That leads me to the last question to be decided and that is the submission of Miss Lo. According to Ko, Best Century is going to make a huge profit on re-development and, if there is a sale, then they will have lost the chance of redeveloping the Property for much more profit. Mr Li pointed to the evidence and said there is not one single piece of evidence that there will be a redevelopment project coming. The suggestion of the last one did not bear fruit at all.

19. Further, according to Cheung, because of the mortgage created with advancement in favour of Wong, the Company is now heavily indebted to the bank under the mortgage. The bank has all along, and more pressingly recently, threatened for a forced sale if no money is coming to repay the mortgage. That is the urgency of the sale under my Order of 24 March 2010.

20. In balancing the interest of the Company and Cheung on one side, and Ko and Best Century on the other side, and as an interim measure, the only solution to it is the sale of the Property, taking the opportunity of the recent market condition and repaying the bank. Hopefully, there will be a substantial balance to be shared between the two parties.

21. There is no action so far by Best Century or Mr Ko against Wong for breach of warranty of authority and no one has explained why that is so. Even if there is such an action, Best Century can look to the balance of the proceeds in court against Wong’s share in the proceeds.

22. Taking all these matters into consideration, the best way forward is to maintain the sale of the Property with a direction, as I have made in the past, that the proceeds shall be paid into court.

23. For the aforesaid reasons :

(1) D1 and D2’s application for leave to appeal against my decision on 11 February 2011 is refused; and
(2) the application for a stay of execution of the said Order is also refused.

24. I now come to Mr Li’s application by way of liberty to apply in respect of the time table of the Order for sale of the Property. Mr Ng objected to the application of Mr Li today for further direction by taking a technical point that it is not made by way of a summons. I agree with Mr Li that the application was made under liberty to apply and the other side has ample notice of what they are applying for. When the defendants’ application for leave to appeal and stay of execution is dismissed, there should be certain consequential directions from that since the timetable would have to be readjusted.

25. So I order in terms of the first application, and that is in paragraph 3.1(a)(i) of Mr Li’s skeleton argument. My order at page 165 of the bundle, paragraph 1, the last part will change to : “Within 28 days from the date of this court has appointed the surveyor.” Sub-paragraph (ii) in the last part shall be changed to “Within 42 days from the date this court has appointed the estate agent and the sale be completed within four months from the date of aforesaid appointment.”

26. In this respect, a further order is made that, since the parties cannot agree on the surveyor and the estate agents, and I accept the plaintiff’s submissions, as follows :

(1) that the plaintiff be authorised to nominate Centaline Surveyors Limited to determine the current market value of the Property;
(2) the plaintiff be authorised to nominate Centaline Property Agency Limited and Midland Realty Limited as the estate agents for the sale of the Property by private treaty and at the market value to be determined by Centaline Surveyors Limited; and
(3) should other estate agents, having potential buyers for the Property, the plaintiff be authorised to retain such estate agent or agents for the sale of the Property at the aforesaid market value.

27. As suggested by the solicitors for the defendants, with no objection from the plaintiff, Messrs P.C. Woo, Solicitors, shall undertake all legal works pertaining to the sale of the Property including redemption of the existing mortgage of the Property.

28. There is a further direction sought by Mr Li for the plaintiff, for the avoidance of doubt, since the intended sale will have to overcome the registration of Best Century PSP, namely :

“The purported sale of the property to Best Century Holdings Limited by the purported provisional agreement for sale and purchase of the Property (‘PSP’), dated 28 May 2010 was not made pursuant to the Consent Order dated 24 March 2010 and as such, the sale pursuant to the Consent Order shall take free of any interest of Best Century Holdings Limited which may subsist in the Property by reason of the PSP, but the aforesaid Order is made without prejudice to Best Century’s claim in the proceeds of the aforesaid sale in High Court Action 925 of 2010.”

29. Of course, before the Order is sealed, Mr Li may come up with a better draft for my approval to represent the intention of this Order. The intention is clearly that I am not declaring, as suggesting by Miss Lo, that Best Century has no interest but Best Century’s registration should not affect the proposed sale. For that reason, if there is a sale in the future, Best Century’s registration should be vacated. That is the intention.

30. Lastly, I entirely agree also with Mr Li that we have a case that Wong is trying to avoid service. Even Mr Ng cannot tell me why Wong did not instruct his own solicitors to accept service. To suggest Wong will now arrange a time to receive service, personal service, is too late. So pursuant to Order 65, rule 4, I make an order that Cheung shall be entitled to effect service of orders made on 11 February 2011 and 18 March 2011 and other documents in this case, on Wong with penal notices endorsed thereon, by serving the same on Messrs W.K. To & Co., by post or by hand and the same shall be deemed to be good and effective and sufficient service as personal service on Wong, and can be relied on in any contempt proceedings which may be instituted against Wong.

[Submissions oncosts]

31. It is Wong’s application which has failed and it is also Wong’s opposition to the plaintiff’s application which has failed. Thus, costs of the aforesaid applications of the plaintiff and the 1^st defendant, be paid by the 1^st defendant, Wong, to the plaintiff, Cheung, in any event to be taxed by summary assessment on papers.

32. Lastly, Best Century applied as an intervener, for leave to intervene and be heard in these proceedings.

[Submissions re Best Century’s application]

33. There is no need to include Best Century as an intervener in this Action HCA336/2008. The more convenient way is to consider consolidating the two Actions, HCA336/2008 and HCA925/2010, in which Best Century is the 2^nd defendant, upon its application. Accordingly the application by summons of Best Century Holdings Limited, dated 16 March 2011, is dismissed with costs to be paid by it to the plaintiff in any event to be taxed by summary assessment on papers. It is further directed that any application from any party herein, which may affect Best Century Holdings Limited, the applicant shall duly notify the solicitors for Best Century.

(D Yam)
Judge of the Court of First Instance
High Court

Mr C. Y. Li, instructed by Messrs Cheung Wong & Associates, for the Plaintiff

Mr K. W. Ng, Solicitor of Messrs W. K. To & Co., for the 1^st and 2^nd Defendants

Miss Charmaine Lo, instructed by Messrs Michael Li & Co., for the Intended Intervener, Best Century Holdings Ltd.

(I) Application for leave to appeal by the 1st and 2nd Defendants to Court of Appeal granted. Please refer to HCMP588/2011 dated 27 July 2011 (II) Please refer to CACV97/2011 & CACV141/2011 for the relevant appeal(s) to the Court of Appeal.

CHEUNG HING v. WONG CHOR CHEUNG AND ANOTHER

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