ONTONE FINANCE CO LTD v. LEUNG SIU KEE AND OTHERS
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HCA 408/2011 & HCA 433/2011
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
HIGH COURT ACTION NO 408 OF 2011
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| BETWEEN | ||
| ONTONE FINANCE COMPANY LIMITED | Plaintiff (Judgment Creditor) | |
| and | ||
| MR LEUNG SIU KEE (梁兆基), MR CHAN FONG KONG, FRANCIS (陳方剛), MR CHAN SIU LUN (陳肇倫) and MR LAM TING FUNG FREEMAN (林霆峰) | 1st Defendants (1st Judgment Debtors) | |
| SINOPHIL FOREST SOURCE MINING HOLDINGS CO, LIMITED formerly known as SINOPHIL INTERNATIONAL MINING LIMITED | 2nd Defendant (2nd Judgment Debtor) |
_________________________
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF FIRST INSTANCE
HIGH COURT ACTION NO 433 OF 2011
_________________________
| BETWEEN | ||
| ONTONE FINANCE COMPANY LIMITED | Plaintiff (Judgment Creditor) | |
| and | ||
| MR LEUNG SIU KEE (梁兆基), MR CHAN FONG KONG, FRANCIS (陳方剛), MR CHAN SIU LUN (陳肇倫) and MR LAM TING FUNG FREEMAN (林霆峰) | 1st Defendants (1st Judgment Debtors) | |
| LEUNG WING KEI, MR LAM TING FUNG FREEMAN (林霆峰) and TOBO INVESTMENTS LIMITED | 2nd Defendants (2nd Judgment Debtors) |
_________________________
| Before : Master M Wong in Court |
| Dates of Hearing: | 29 & 30 July 2013, 19 to 21 February 2014, 22 & 23 September 2014 and 2 March 2015 |
| Date of Handing Down of Decision : 30 April 2015 | |
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D E C I S I O N
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BACKGROUND
1. There are 2 cases heard before me together, namely HCA 408/2011 and HCA 433/2011. The plaintiff in both cases is Ontone Finance Company Limited (“Ontone”). The 1st defendants in both cases consist of 4 persons and they are Mr Leung Siu Kee (“S K Leung”), Mr Chan Fong Kong Francis (“Francis Chan”), Mr Chan Siu Lun (“S L Chan”) and Mr Lam Ting Fung Freeman (“Freeman Lam”). Freeman Lam is also the second named 2nd defendants in HCA 433/2011, and Francis Chan is a former director of the third named 2nd defendants in HCA 433/2011, namely Tobo Investments Limited (“Tobo”). The first named 2nd defendants in HCA 433/2011 is Leung Wing Kei (“W K Leung”). The 2nd defendant in HCA 408/2011 is not concerned with the hearing before me.
2. Ontone is a licensed money lender. By various loan agreements, the 1st defendants borrowed various sums of money from Ontone. The 2nd defendant in HCA 408/2011 and the 2nd defendants in HCA 433/2011 were the guarantors of some of these loans for the 1st defendants. In both cases, Ontone claimed against the 1st defendants for repayment of the outstanding loan amounts together with interest and costs as well as against the other defendants as guarantors of some of these loans.
3. In HCA 408/2011, Ontone obtained summary judgment against the 1st defendants (as well as the 2nd defendant) on 28 February 2012, whereby the 1st defendants were ordered to pay Ontone $4,000,000.00 with interests in the total sum of $2,404,040.78 for the period up to and including 28 February 2011 and thereafter at the rate of 48% per annum on the principal sum of $3,000,000.00 and 42% per annum on the principal sum of $1,000,000.00 until the date of judgment and thereafter at judgment rate.
4. In HCA 433/2011, Ontone also obtained summary judgment against the 1st defendants (as well as the 2nd defendants) on 28 February 2012, whereby the 1st defendants were ordered to pay Ontone $2,000,000.00 with interest in the total sum of $1,050,000.00 for the period up to and including 28 February 2011 and thereafter at the rate of 42% per annum until the date of judgment and thereafter at judgment rate.
5. Thus, pursuant to the said judgments, the 1st defendants owe the plaintiff a total sum of $9,454,040.78 as well as further interest from 28 February 2011 and costs. It is not disputed that the 1st defendants have not paid any part of the judgment sums to the plaintiff.
6. Upon the plaintiff’s application, on 30 May 2012, Master Ng ordered the 1st defendants in both cases to be orally examined before Master Levy on 18 June 2012 pursuant to Order 48, rule 1 of the Rules of the High Court as to what debts are owing to them and whether they have any and what other property or means of satisfying the said judgments. Master Ng also ordered W K Leung and Francis Chan as a former director of Tobo to be similarly examined.
7. On 18 June 2012, Master Levy adjourned the examination of the 1st defendants, Francis Chan as a former director of Tobo and W K Leung to a date to be fixed, and the 2 cases were ordered to be heard together. Master Levy also ordered the 1st defendants, Francis Chan as a former director of Tobo and W K Leung to produce various documents as listed out in the order to the plaintiff’s solicitors before the adjourned hearing.
8. The examination was then conducted before me on 29 & 30 July 2013, 19 to 21 February 2014 and 22 & 23 September 2014. Only S K Leung, Francis Chan, S L Chan and Freeman Lam were examined at the hearings. W K Leung was absent throughout the hearings. After the conclusion of the examination on 23 September 2014, the plaintiff applied for an order for imprisonment against S K Leung, Francis Chan, S L Chan and Freeman Lam pursuant to Order 49B, rule 1B(1) of the Rules of the High Court, as well as for costs of the examination. I adjourned the matter to a date to be fixed for hearing final submissions. The parties fixed the cases before me again on 2 March 2015 and made their final submissions.
9. However, before the hearing on 2 March 2015 and by way of letter dated 18 February 2015, the 1st defendants’ solicitors have disclosed some additional documents, and served a number of short affirmations, which relate to the complaints made in the plaintiff’s Skeleton Submissions.
10. This is my decision on the plaintiff’s application for imprisonment and costs orders.
THE LAW
11. It is clear that the Court has jurisdiction to order the imprisonment of a judgment debtor following an examination conducted under Order 48 of the Rules of the High Court. Order 49B, rule 1B(1) of the Rules of the High Court provides that: -
“Where the Court is satisfied, following the examination conducted under rule 1A or following an examination conducted under Order 48, that the judgment debtor-
(a) is able to satisfy the judgment, wholly or partly; or
(b) has disposed of assets with a view to avoiding satisfaction of the judgment or the liability which is the subject of the judgment, wholly or partly; or
(c) has wilfully failed to make a full disclosure as required under rule 1A(2) or at the examination under Order 48, or to answer any question as provided under that rule or Order,
it may, in its discretion, order the imprisonment of the judgment debtor for a period not exceeding 3 months.”
12. However, the jurisdiction to imprison a judgment debtor should be exercised with care and circumspection. An imprisonment order can only be made if the judgment creditor (who bears the burden of proof) proves beyond reasonable doubt that one or more of the grounds in Order 49B, rule 1B(1) is established. The jurisdiction is analogous to proceedings for contempt, which have been recognised as criminal in nature and must be proved to the criminal standard of proof (see Bank of India v Murjani& Others, CACV 12/1991, 1 May 1991; Honour Finance Co Ltd v Chan Mang, CACV 63/1989, 5 January 1990; Timekeeping Systems Inc v Stephen John Oberlander & Another, HCA 612/2007, 7 August 2009; and Citibank v Chow Tat Sang, HCA 9175/1983, 1 February 1984).
13. It has been emphasised by the courts that even good grounds for suspicion are insufficient to justify an imprisonment order (see Ferryhill International Ltd v Mahmoud Aziz [1997] HKLRD 482; Citibank v Chow Tat Sang, supra).
14. As the criminal standard is applicable, the Court may only draw an inference if: (i) it is grounded on clear findings of primary fact; (ii) it is a logical consequence of those facts; and (iii) it is the only inference that can reasonably be drawn on the basis of those facts (see Winnie Lo v HKSAR (2012) 15 HKCFAR 16).
15. In order to invoke the ground under Order 49B, rule 1B(1)(b), the judgment creditor must prove that the judgment debtor has disposed of his own assets (as opposed to the assets of others) and that the disposal of assets was made with a view to avoiding satisfaction of the judgment debt (see Timekeeper Systems, supra; and Trading Consultants Limited v John Stewart Sloan, DCCJ 2548 & 13438/2000, 7 November 2001).
16. In order to invoke the ground under Order 49B, rule 1B(1)(c), non-disclosure must be judged as a whole following the examination rather than on disobedience of any specific order, and the failure to make a full disclosure must be deliberate and intentional, as opposed to accidental or negligent (see Timekeeper Systems, supra; Ferryhill, supra; and Luen Hing Fat Textile Ltd v Lam Shing-chint/a New Cotton Trading Company [1990] 1 HKLRD 737).
17. The Court must be extremely careful not to imprison a debtor simply because he has no means to satisfy the judgment debt (see Ferryhill, supra; and Trading Consultants Limited, supra).
THE PLAINTIFF’S CASE
18. The plaintiff alleges that the 1st defendants have ability to repay the judgment sums, but refused to do so; and that they even did everything they could to obstruct the plaintiff from locating their assets to satisfy the judgment debts.
19. Apart from the reasons discussed below in respect of each of the 1st defendants, the plaintiff asks the court to consider the matter against the following background:-
(1) After leave was granted to examine the 1st defendants by Master Ng on 30 May 2012, the court has made the following orders directing the 1st defendants to disclose their books and documents: -
(a) Master Levy’s order dated 18 June 2012.
(b) After the hearing in July 2013, my order dated 30 July 2013.
(c) Orders dated 18 September 2013, 23 October 2013, 1 November 2013 and 5 December 2013 extending the time for the 1st defendants to comply with my order dated 30 July 2013.
(d) After the hearing in February 2014, my order dated 11 March 2014.
(2) The plaintiff’s solicitors, Messrs Robertsons (“RBS”), have written to the 1st defendants’ solicitors, Messrs Danny Lau & Lam (“DLL”) repeatedly to chase for the outstanding documents including but not limited to the following letters: -
(a) Letter dated 30 October 2013: RBS informed DLL that there were many missing pages from the documents enclosed in DLL’s letters dated 21 October 2013 and 29 October 2013. RBS listed out the missing documents and asked DLL to provide the same by return. Also, up to 30 October 2013, less than 10% of the documents covered by the court order dated 30 July 2013 have been provided.
(b) Letter dated 20 November 2013: RBS wrote to put on record that the defendants failed to supply the documents on or before 19 November 2013 as per the order. The 1st defendants’ failure to produce the documents amounted to an act in contempt of court.
(c) Letter dated 27 November 2013: RBS pointed out the discrepancies in description between the documents as provided in the letters of DLL and the actual documents rendered. RBS also chased for the missing pages from the documents enclosed in DLL’s letters dated 21 October 2013 and 29 October 2013.
(d) Letter dated 3 December 2013: RBS informed DLL that the provided Payment Slips for the Citibank Account no 4028-5640-0101-3841 did not cover the period ‘for September 2010, November 2010 and from January 2011 to August 2011’. DLL only provided Payment Slips for the Account no 402-5640-0002-0615 for the said period but not for the Account no 4028-5640-0101-3841. RBS also pointed out that Francis Chan was required to provide all credit card statements, while he only provided part of them.
(e) Letter dated 11 December 2013: RBS listed out all the missing documents and asked the 1st defendants to provide the documents. RBS also stated that the 1st defendants repeatedly ignored the court order and did not provide the documents as ordered. Finally, RBS chased for the costs of HK$4,200.
(f) Letter dated 13 December 2013: RBS stated that it was indisputable that the 1st defendants did not provide documents listed in RBS’s letter dated 11 December 2013. The 1st defendants’ affirmations provided nothing in substance. RBS wrote to put on record that the court order dated 5 December 2013 only extended the deadline to provide the documents to 25 November 2013.
(g) Letter dated 24 December 2013: RBS stated that the Completion Statement was not sufficient and asked the defendants to provide substantive documents to show where the proceeds have gone, such as bank statements. Once again, RBS chased for the missing documents.
(h) Letter dated 31 December 2013: In response to DLL’s letter dated 24 December 2013, RBS requested for the missing documents again.
(i) Letter dated 6 January 2014: RBS provided an updated list of missing documents to DLL and chased for the documents again.
(j) Letter dated 10 January 2014: RBS wrote to put on record that the 1st defendants still failed to provide the documents listed in RBS’s letter dated 6 January 2014, which was a clear breach of Court Orders.
(k) Letter dated 20 January 2014: RBS wrote to chase for the missing documents again.
(l) Letter dated 7 February 2014: RBS asked for the missing bank statements in relation to the six credit cards and chased for the provision of the remaining documents.
(m) Letter dated 3 June 2014: RBS provided a list of missing documents and asked the 1st defendants to provide the same without further delay.
(n) Letter dated 13 June 2014: RBS wrote to DLL and stated that the documents supplied by the 1st defendants were not sufficient to prove when the two bank accounts were closed.
(o) Letter dated 2 July 2014: RBS wrote to DLL asking Francis Chan to contact the agent in Prudential and request for the statements. RBS also asked Francis Chan to provide statements from Manulife.
(p) Letter dated 20 August 2014: RBS agreed to provide copies of the bank documents to DLL on the condition that DLL pays for the copying charges. RBS also listed out the outstanding documents and asked DLL to provide the documents on or before 12 September 2014.
(q) Letter dated 10 September 2014: RBS wrote to DLL to put on record that Freeman Lam’s mother, Ms Wong See Ching Jenny (“Ms Wong”) instructed BOC to supply all the bank statements to her instead of RBS.
20. I shall discuss the plaintiff’s case against each of the 1st defendants below taking into account of the above background.
FREEMAN LAM
Ability to partly satisfy judgment and Dissipation of Assets
21. The plaintiff contends that Freeman Lam is able to partially satisfy the judgment debts and/or has disposed of his assets with a view to avoiding satisfaction of part of the judgments or his liability.
22. The evidence shows that Freeman Lam had earned substantial income as an insurance agent. In particular, Freeman Lam earned the following commissions in the following periods: -
(a) Between 6 May 2010 and 31 March 2011: $5,647,982.00.
(b) Between 1 April 2011 and 31 March 2012: $4,416,182.00.
(c) Between 1 April 2012 and 31 March 2013: $3,519,516.00.
23. The default in repayment of the loans began in February 2010 and summary judgments were entered in February 2012. During these periods (and up to March 2013), Freeman Lam received income of over $13.5 million. Thus, the plaintiff submits that Freeman Lam has more than sufficient to fully pay, let alone partially pay, the judgment sums, but has chosen not to repay a single cent to the plaintiff. The plaintiff further submits that Freeman Lam has dissipated his incomes by channeling them to his wealthy mother, Ms Wong.
24. The plaintiff relies on the following evidence to support its contention that Freeman Lam did not have any intention of repaying any money to the plaintiff and that he has dissipated his income by channeling the same to Ms Wong: -
(a) All along, Freeman Lam’s income was paid into his personal account with HSBC.
(b) In 2012, after summary judgments were granted, his income was paid into his Bank of China joint accounts with Ms Wong. As soon as the income had been paid into these accounts, it was immediately dissipated.
(c) Freeman Lam explained that his income was controlled by Ms Wong, and that he never questioned how Ms Wong used the money in the joint accounts.
(d) For the period between June 2012 and April 2013 alone, the total income deposited into the joint accounts was over $3.6 million (about $786,501.00 for A/C No012-699-1-018222-2 and about $2.83 million for A/C No012-699-0-005557-8). This is a substantial sum of money which (or at least part of which) could be used to repay part of the judgment sums.
25. The plaintiff contends that Freeman Lam’s story that he had let Ms Wong use all the money is a pack of lies and must be rejected; and that Freeman Lam has clearly dissipated all his money by transferring it to her.
26. I accept that the evidence relied on by the plaintiff supports the suspicion that Freeman Lam was dissipating his money by transferring it to Ms Wong. However, from the authorities cited above, it is clear that suspicion is not enough to justify an imprisonment order, and if the plaintiff wants to draw any inference from these facts, it must be the only inference that can reasonably be drawn.
27. Based on the evidence before me, I do not find that the plaintiff is able to rebut Freeman Lam’s explanation that Ms Wong was in control of his income or that such an explanation is incapable of belief at all. If his explanation is true, then he is not dissipating his income with a view to avoiding satisfaction of the judgment debts. In any event, proving that Freeman Lam earned substantial income as an insurance agent between 2010 and 2013 is obviously not the same as proving that Freeman is presently able to satisfy the Judgment (which is something that the plaintiff has entirely failed to establish).
28. In fact, the plaintiff has initiated separate proceedings against Ms Wong (HCA 2557/2013). In its Statement of Claim dated 30 December 2013, the plaintiff alleges that: -
(a) Freeman Lam earned substantial income from his employer (AXA China Region Insurance Co Ltd, hereinafter “AXA”), amounting to over HK$2.7 million, between July 2012 and March 2013.
(b) As Freeman Lam stated during his examination hearing on 30 July 2013, all his income was deposited into the Bank of China joint accounts and then transferred out to Ms Wong.
(c) By doing so, Freeman Lam deliberately depleted his earnings and transferred them to Ms Wong in order to defraud the plaintiff as judgment creditor. As a result, Ms Wong became a constructive trustee of the money and is liable to make repayment to the plaintiff.
29. In her Defence dated 11 March 2014, Ms Wong pleads that:
(a) The income and commission which Freeman Lam deposited into the Bank of China joint accounts (amounting to approximately $2.7 million) was withdrawn by her to pay for Freeman Lam’s personal and business expenses.
(b) Further or alternatively, there was an agreement between Freeman Lam and her (who is also an insurance agent for AXA) that he would pay 50% of his commission to her. Therefore, 50% of the $2.7 million in fact belonged to her.
30. Those proceedings are now ongoing. On 17 June 2014, Ms Wong filed an answer to the plaintiff’s interrogatories. On 10 July 2014, Ms Wong filed her answers to the plaintiff’s request for further & better particulars. The plaintiff served its List of Documents on 20 October 2014. On 11 November 2014, case management directions were given by Registrar Lung (eg for exchange of witness statement). Ms Wong served her List of Documents on 23 December 2014.
31. Thus, the issue as to whether it was legitimate for Freeman Lam’s commission from AXA to be transferred to Ms Wong is a live dispute, which is being litigated in HCA 2557/2013. The plaintiff has not applied in that action for summary judgment. The plaintiff has clearly not proven at this stage beyond reasonable doubt that Freeman Lam’s explanation is fictitious.
32. The plaintiff refers to the fact that, starting from 2012, Freeman Lam’s income was paid into the Bank of China joint accounts instead of his personal account at HSBC and suggests that it is mysterious. However, the plaintiff’s counsel did not cross-examine Freeman Lam on this point. Under the ‘Browne v Dunn’ principle, it is unfair for the plaintiff to raise this point against him, as Freeman Lam may have a perfectly reasonable explanation for this change of accounts. In any event, this is part of the live dispute that is being litigated in HCA 2557/2013.
33. In the circumstances, the plaintiff has not properly established sufficient primary facts to say that the only logical and reasonable inference for Freeman Lam’s disposition of his income is that it was done with a view to avoiding satisfaction of part of the judgment or his liability.
Failure to fully disclose all his assets
Income
34. The plaintiff contends that Freeman Lam has failed to make a full disclosure of the disposal of his income from working as an insurance agent. I do not agree with this contention as Freeman Lam has already disclosed the relevant documents for the disposal of his income and answered all the questions put to him during his examination. It is just that the plaintiff is not satisfied with his answers, not that he did not disclose.
Rockingham and Fordstead
35. The plaintiff then contends that Freeman Lam has wilfully failed to make a full disclosure of his assets in Rockingham Development Limited (“Rockingham”), Fordstead Holdings Limited (“Fordstead”), Freeman Lam & Co and Kossilon Group Limited (“Kossilon”).
36. The plaintiff alleges that Freeman Lam is the beneficial owner of Rockingham. Rockingham in turn wholly owns Fordstead. In short, Freeman Lam owns Rockingham and Fordstead. Despite he is the beneficial owner of these 2 companies, Freeman Lam said on oath that he does not have any interest in Rockingham. He further refused to disclose Rockingham and Forstead’s assets and failed to provide the relevant documents relating to these 2 companies as required by Master Levy’s order dated 18 June 2012.
37. In the circumstances, the plaintiff contends that Freeman Lam has wilfully failed to make a full disclosure of his assets in Rockingham and Fordstead.
38. However, Freeman Lam has already explained during his cross-examination that he does not know anything about the assets of Rockingham and Fordstead, and that during the relevant period he was requested to sign many documents by Ms Margaret Leung. The plaintiff has adduced no evidence to contradict Freeman Lam’s explanation; nor has the plaintiff demonstrated why Freeman Lam’s account must be disbelieved.
39. In fact, Margaret Leung was also mentioned by Francis Chan and S K Leung in their examination as their boss whose instructions they would follow. Thus, Freeman Lam’s evidence is supported by their evidence.
40. Further, the 1st defendants have initiated a separate action against Margaret Leung (HCA 1942/2014). The 1st defendants filed their Statement of Claim on 30 September 2014 and pleaded, among other things, that: -
(a) Freeman Lam had a close personal relationship with, and indeed was the godson of, Margaret Leung. In 2007, Freeman Lam began to assist Margaret Leung with her business.
(b) In 2008, Freeman Lam introduced Francis Chan, S K Leung, and S L Chan to Margaret Leung. They also began to assist Margaret Leung with her business and came to develop a close personal relationship with her.
(c) In August 2008, the 1st defendants agreed to act as Margaret Leung’s agents in borrowing money from the plaintiff (ie the 1st defendants would be named as the “borrowers” in the loan agreement even though in reality Margaret Leung was borrowing the money).
41. In her Defence dated 8 January 2015, Margaret Leung admitted that there was a close personal relationship between her and the 1st defendants.
42. In view of the above, there is no solid ground to say that Freeman Lam’s explanation is incapable of belief and the plaintiff has clearly failed to prove beyond reasonable doubt that Freeman Lam lied about his knowledge of Rockingham and Fordstead’s assets. Instead, Freeman has given a plausible explanation that, during the material time, he signed many documents upon request by Margaret Leung and knew nothing about the assets of Rockingham and Fordstead.
Freeman Lam & Co
43. As to Freeman Lam & Co, the plaintiff alleges that Freeman Lam never disclosed that he is the sole proprietor of Freeman Lam & Co. In his examination, he refused to disclose whether Freeman Lam & Co holds any assets or has any bank accounts. Further, he has also failed to provide the relevant documents relating to this firm as required by Master Levy’s order dated 18 June 2012.
44. However, as Freeman Lam has already explained during his examination: -
(a) Freeman Lam & Co was used by him for his insurance business (in particular, for tax purposes). This was common practice in the insurance industry.
(b) Freeman Lam & Co was, in effect, the same as Freeman Lam himself.
(c) There was no further information or documents to be provided in relation to Freeman Lam & Co.
45. The plaintiff has provided no evidence to contradict Freeman Lam’s explanation, and has done nothing to show that he is to be disbelieved. In fact, Freeman Lam & Co, as a sole proprietorship, has no separate legal existence from Freeman Lam himself (see Mayson French & Ryan: Company Law, 32st ed, p 11). Thus, the assets of Freeman Lam & Co are the same as the assets of Freeman Lam. There is no evidence that there are separate documents relating to Freeman Lam & Co which Freeman Lam has failed to disclose.
Kossilon
46. Kossilon is a BVI company. It wholly owns Kossilon Business Consultants Limited and Kossilon Corporate Services Limited. It also holds 51% of the shares in another company called Kossilon Immigration Consultants Limited. The plaintiff contends that Kossilon and its 3 other subsidiaries clearly have substantial business operation.
47. Freeman Lam admitted that he was a shareholder of Kossilon, and that he had transferred his shares to his mother. He also said that he had the relevant transfer documents and that he would provide the relevant documents pertaining to the transfer. An order was therefore made requiring him to disclose the documents relevant to the transfer.
48. In his affirmation, however, Freeman Lam stated that he cannot produce those documents because they are not in his possession and cannot be obtained by him as Kossilon is not under his control.
49. The plaintiff therefore contends that as Freeman Lam cannot produce the relevant transfer documents, it shows that Kossilon is still his. He is simply refusing to fully and frankly disclose his assets.
50. The plaintiff further contends that Freeman Lam’s purported excuse proffered in his affirmation is a bad lie. The fact that he does not have possession of the documents does not mean that he or his mother cannot ask Kossilon for the relevant documents. His explanation that he cannot obtain those documents as Kossilon is not under his control is therefore a bad excuse. Freeman Lam did not even make the effort to ask for the relevant documents. Moreover, Kossilon is owned by the other 3 1st defendants or their family members. They are obviously very close. It is simply another pack of lies for him to say on oath that he could not obtain those documents from Kossilon.
51. Thus, as Freeman Lam cannot produce the relevant transfer documents, it clearly supports that he still partly owns Kossilon. He has therefore failed to disclose this part of his asset. Even assuming that he has actually sold the shares to his mother, he has nonetheless failed to comply with the court’s order and has failed to make a full disclosure of the disposal of his asset.
52. However, the document which shows the transfer of shareholding from Freeman Lam to Ms Wong has now been located and disclosed by him. This Instrument of Transfer records that, on 2 September 2011, Freeman Lam transferred 204 shares in Kossilon to Ms Wong. Furthermore, the 1st defendants have now located and disclosed a “Certificate of Incumbency” from Kossilon dated 9 January 2015 which certifies that, as of that date, the shareholders did not include any of the 1st defendants.
53. Freeman Lam also further confirms in his affirmation that:-
(a) Ms Wong was the beneficial owner of the shares in Kossilon since the start of the company in 2004.
(b) Because Ms Wong was then (in 2004) busy with her business, she asked Freeman Lam to hold the shares on trust for her.
(c) In around September 2011, Ms Wong asked Freeman Lam to transfer the shares to her, which he did.
54. Thus, what the plaintiff has submitted is no longer significant. In fact, contrary to what the plaintiff has submitted, Freeman Lam did not say during the hearing in July 2013 that he did have the relevant transfer documents and would provide them to the plaintiff. Instead, from the transcript, Freeman Lam simply said that Kossilon might have the relevant record.
55. In the circumstances, the available evidence supports Freeman Lam’s explanation regarding Kossilon, ie he transferred all his shareholdings to his mother because she had been the one who provided the funding for that shareholdings in the first place.
56. I therefore do not accept the plaintiff’s contention that Freeman Lam has failed to fully disclose all his assets.
Failure to provide all the documents as ordered
57. The plaintiff submits that despite so many warnings given by this court, the court has granted numerous extensions of time for Freeman Lam to comply with the court order, numerous demands and reminders issued by the plaintiff’s solicitors, and Freeman Lam has always been legally represented, he still has not disclosed the following items as ordered by this court on 30 July 2013: -
| Item 1: | except that Freeman Lam has provided the bank statement of the joint account for August 2012 and from May 2013 to July 2013. In short, the bank statements for the period between June 2010 and June 2012 are still outstanding. |
| Item 2: | copies of the passbook for the joint account for the period between 16 May 2013 and July 2013. |
| Item 7: | the documents relevant to the transfer of Freeman’s shares to his mother in Kossilon as mentioned above. |
58. However, from the authorities cited above, non-disclosure must be judged as a whole rather than on disobedience of any specific order, and that imprisonment can only be ordered if the non-disclosure was deliberate and intentional. Freeman Lam has in fact disclosed a significant number of documents, including bank statements, bank passbooks, credit card statements, salary statements, and credit reports. Even if a small percentage of the documents listed in the schedules of the court’s orders have not been disclosed to date, this falls far short of justifying an imprisonment order.
59. In any event, as for “Item 1” (bank statements of the joint account between June 2010 and June 2012, the 1st defendants’ solicitors have already explained in correspondence that the account was only opened in July 2012 and therefore there are no bank statements prior to that date. This has also been confirmed in Freeman Lam’s affirmation, namely Bank of China Account No 012-699-0-005557-8 was opened in July 2012, while Bank of China Account No 012-699-1-018222-2 was opened in June 2012. That answers the plaintiff’s complaint for “Item 1”.
60. As for “Item 2” (passbook for the joint account between 16 May 2013 and July 2013), this has now been updated and provided.
61. As for “Item 7” (documents relating to the transfer of Freeman Lam’s shares in Kossilon to his mother), this has now been provided as mentioned above.
62. Thus, looking at the matter as a whole, I do not accept that Freeman Lam’s failure to disclose some of the documents was deliberate or intentional or that he should be imprisoned for failing to comply with some specific orders.
Conduct
63. The plaintiff complains that Freeman Lam’s conduct during the examination was appalling. He was rude, arrogant and uncooperative and he had been warned by the court of his recalcitrant attitude. He did not turn up for the February 2014 Hearing citing some dubious medical reasons. Even taking his case to the highest and assuming he was not lying, he was only suffering from neck pain and was not unconscious on that occasion. He did not even try to give prior notice to inform the court that he could not attend the examination. He just did not show up at all. No full explanation was forthcoming until he was ordered by the court to do so. He, like the other 3 1st defendants, were adopting “catch me if you can” tactics, refusing to fully and frankly disclose his assets and expenditure.
64. The plaintiff submits that there are no other judgment debtors who can be worse than the 1st defendants, and Freeman Lam is the worst of all. Against the background which is so appalling, if the court does not order imprisonment against Freeman Lam, it is hard to see how any judgment debtor can ever be subject to imprisonment notwithstanding his dissipation of assets, failure to disclose his assets, and failure to comply with court order. Freeman Lam has no respect at all to this court. A term of imprisonment is clearly justifiable in the circumstances. Otherwise, this would render the entire section of Order 49B, rule 1B otiose and meaningless, and would encourage other judgment debtors adopting similar “catch me if you can” and “hide and seek” tactics.
65. However, I cannot see how Freeman Lam’s conduct or attitude during examination affects my decision above. The plaintiff has the burden to establish at least one of the grounds under Order 49B, rule 1B before an imprisonment order can be granted. A judgment creditor’s conduct or attitude during examination is not one of such grounds. In any event, although there may have one or two moments where Freeman Lam came into conflict with the plaintiff’s counsel, I do not agree that Freeman Lam’s conduct was “appalling”. In fact he did promptly offer his apologies to the court. His attitude also improved after the 1st defendants’ solicitor had advised him on the proper manner of conducting himself when giving evidence.
66. Although Freeman Lam did not attend the hearing in February 2014, it is not clear how the plaintiff can relate this to the grounds under Order 49B, rule 1B. In any event, Freeman Lam has adduced evidence to show that he was hospitalised during that time. The plaintiff points out that Freeman Lam “was not unconscious” at that time, but I think it is not justified to have such a high standard for absence on medical ground.
67. I therefore find no justification to imprison a judgment debtor just because his conduct or attitude during examination was not satisfactory.
S K LEUNG
68. The plaintiff contends that S K Leung is guilty of: -
(a) failing to fully disclose his assets, namely his interest in Kossilon’s group of companies; and
(b) failing to provide some of the documents as ordered by the court.
Disclosure of assets in Kossilon
69. The plaintiff submits that at the hearing in February 2014, S K Leung said on oath in no uncertain terms that he did not have any direct or indirect interest in any of Kossilon’s group of companies, which consists of 4 companies as aforesaid. S K Leung claimed that he has no beneficial interest in any of the 4 companies as it was his father who has invested in Kossilon’s group of companies.
70. However, the plaintiff contends that it is simply unbelievable that his father who was only a security guard without any professional qualification in accounting or any finance related qualification would have invested in such specialised professional business. On the other hand, S K Leung, a qualified accountant, used to work in Kossilon for a long time, should have beneficial interest in these companies. Yet when asked to identify the other shareholders, S K Leung claimed that he did not know them. The plaintiff submits that he is clearly lying, and it is a clear case of concocting evidence among the 4 1st defendants in relation to their interests in Kossilon. They concoct the same evidence claiming that their respective family members are holding the shares in Kossilon.
71. The plaintiff relies on the following evidence to say S K Leung is clearly lying: -
(a) S K Leung has not been able to produce any documentary evidence, for instance, the share certificates, to prove that his father is a shareholder.
(b) More importantly, his evidence is contradicted by the Audited Financial Statements of Latitude CPA Limited for (a) the year ended 31 December 2010 and (b) for the year ended 31 December 2011. In those audited financial statements, it is stated that S K Leung has beneficial interest in Kossilon Corporate Services Limited. He is a director and shareholder of Latitude CPA Limited and this was the reason why he had to disclose his interest therein. He has also admitted that he signed the audited financial statements for the year ended 2010.
(c) Further, S K Leung’s evidence is contradicted by the evidence of Francis Chan, who at least has admitted that the 4 1st defendants were once the shareholders of these companies. In other words, S K Leung was a shareholder.
72. In other words, contrary to his oral evidence given in February 2014, S K Leung is in fact beneficially interested in Kossilon’s group of companies. He is concealing his assets. Therefore, the plaintiff submits that S K Leung has wilfully failed to make a full disclosure of his assets.
73. Nevertheless, during his examination, S K Leung explained that it was his father who provided the funding for his participation in Kossilon’s group of companies and the amount was around $1 million. His father was therefore one of the investors and held the beneficial interest. He himself did not have any beneficial interest in Kossilon’s group of companies.
74. Although based on the evidence referred to by the plaintiff there is a suspicion that S K Leung might still have some interest in Kossilon’s group of companies, it is still not beyond doubt that it is in fact the case. I think the plaintiff has not established that S K Leung’s account is totally incapable of belief for the following reasons: -
(a) S K Leung has now located and disclosed an Instrument of Transfer dated 1 March 2011 which shows that his 204 shares in Kossilon were transferred to his father. This demonstrates that S K Leung is not presently a shareholder of Kossilon. It is also, at the very least, consistent with S K Leung’s evidence that his father was the true investor in the company.
(b) The Certificate of Incumbency dated 9 January 2015 in respect of Kossilon Group Ltd also confirms that S K Leung is not presently a shareholder.
(c) When S K Leung was asked during his testimony who were the other shareholders of Kossilon, his exact answer was that: (i) for ‘his’ portion, his father was the investor; and (ii) in respect of Francis Chan and S L Chan’s portions, he did not know the owner of the beneficial interest. It is possible that he did not know the identity of the person or persons who provided the funding for Francis Chan and SL Chan and who held the beneficial interests.
(d) Although the audited financial statements of Latitude CPA Ltd contain a note that S K Leung had beneficial interest in Kossilon Corporate Services Ltd, he has already explained that: (i) that particular note was a mistake; and (ii) when he signed as a director to confirm the accounts, he was confirming the figures in the income statement and the balance sheet (as opposed to all of the notes attached thereto).
(e) Contrary to what the plaintiff has submitted, S K Leung’s explanation is not contradicted by the evidence of Francis Chan. What Francis Chan said was that: (i) the 1st defendants are not presently the shareholders of Kossilon; (ii) Kossilon is now owned by the family members of the 1st defendants; (iii) it was the family members who had contributed the capital for the business; and (iv) as regards Francis Chan’s own portion, it is presently owned by his wife. This is fully consistent with S K Leung’s explanation (and also the Instrument of Transfer and Certificate of Incumbency which have recently been disclosed).
(f) The plaintiff argues that it is unbelievable that S K Leung’s father, who was “only a security guard” would have invested in a professional business such as the Kossilon group. However, S K Leung’s evidence was that his father was a security guard at the time of the father’s retirement and had done many other jobs before. The plaintiff’s counsel did not follow up with any questions on these other jobs. Consequently, there is no evidence on whether S K Leung’s father had the relevant experience and knowledge to invest in Kossilon. The plaintiff’s counsel also did not follow up on where S K Leung’s father obtained the money to invest in Kossilon. In any event, the fact that one is a ‘mere’ security guard does not mean that one cannot invest in a professional services firm which is to be operated by one’s trusted son. Thus, the plaintiff is only guessing but has not established beyond doubt that S K Leung’s father was incapable to be the real owner.
75. S K Leung also clarifies in his affirmation that:-
(a) When Kossilon was incorporated in 2004, his father asked S K Leung to hold the shares on trust for him.
(b) In about February 2011, his father requested S K Leung to transfer the shares to him. S K Leung complied with that request and duly transferred the shareholding.
76. This explanation is fully consistent with the documents disclosed by the 1st defendants, ie (i) Instrument of Transfer dated 1 March 2011; and (ii) Certificate of Incumbency. The plaintiff is unable to disprove such an explanation and can only rely on suspicion.
77. I am therefore not satisfied beyond doubt that S K Leung has failed to disclose his assets in Kossilon’s group of companies.
Failure to provide all the documents as ordered
78. The plaintiff contends that despite so many warnings given by this court, numerous demands and reminders issued by the plaintiff’s solicitors, and S K Leung has always been legally represented, he still has not disclosed the following items as ordered by this court on 11 March 2014:-
| Item 9: | Insurance policies and statements issued by Prudential and AIA |
| Item 17: | Full set of the Tax Demand Notes issued by the Inland Revenue Department for 2012/2013. |
79. Moreover, the plaintiff also contends that in breach of Master Levy’s order dated 18 June 2012, S K Leung has failed to produce his credit card statements.
80. However, as aforesaid, failure to comply with certain specific orders will not necessarily be enough to justify the granting of imprisonment order. The matter has to be looked at as a whole after the examination. In relation to “Item 9” (insurance policies and statement issued by Prudential and AIA): -
(a) S K Leung has previously disclosed various statements from Prudential from 2010 to 2013 and a letter from AIA confirming that his policies were surrendered as of 12 July 2011 and 3 January 2012.
(b) As explained during his testimony at the hearing in September 2014, S K Leung was informed by AIA that they were not able to reprint his insurance statements.
(c) S K Leung has now located and disclosed some further statements from Prudential for 2013-2014 and a letter confirming that one of his insurance policy was surrendered as of 23 May 2014.
81. As for “Item 17” (tax demand notes for 2012/2013), these have now been located and disclosed by S K Leung, which are his tax returns for 2012-2013 showing how his tax was calculated. These disclosed notes contain pages 1 and 2 (out of 3 pages in total). S K Leung confirms in his affirmation that the remaining page 3 was detached and sent by him to the Inland Revenue Department.
82. As to S K Leung’s credit card statements, these have now been located and disclosed as well.
83. Thus, I do not find that S K Leung is deliberately or intentionally hiding documents which are in his possession.
S L CHAN
84. Similarly, the plaintiff contends that S L Chan is guilty of: -
(a) failing to fully disclose his assets, namely his interest in Kossilon’s group of companies.
(b) failing to provide some of the documents as ordered by the court.
Disclosure of assets in Kossilon
85. The plaintiff submits that, despite his denial, S L Chan has an interest in Kossilon’s group of companies. It is the common line of defence of the 4 1st defendants that their respective family members hold shares in Kossilon’s group of companies, despite their family members have no accounting or relevant professional qualifications.
86. According to S L Chan’s evidence, he (also a qualified accountant) has worked for Kossilon’s group of companies for a very long time. He does not know who the other shareholders of the companies are. He also claimed that his mother is a shareholder. No documents have been provided in support of his evidence. According to him, his mother was formerly a teacher and has worked as a secretary. She simply has no relevant accounting qualifications. S L Chan however explained that his mother had gained company secretarial experience while she was working as a secretary. According to him, being a qualified accountant, he would seek directions from his mother.
87. The plaintiff submits that S L Chan’s evidence is simply not believable. Despite having worked for Kossilon’s group of companies since 2003, he cannot even tell who the other shareholders of the companies are. Further, as stated above, Francis Chan has admitted that he and the other 3 1st defendants were shareholders. Clearly, S L Chan has beneficial interest in the companies and he is trying to conceal his assets. Therefore, S L Chan has failed to fully disclose his assets.
88. However, as with Freeman Lam and S K Leung, the plaintiff has simply failed to prove beyond reasonable doubt that this is the case. During his examination, S L Chan explained that: (i) he had no ownership interest in Kossilon; (ii) from the start of the company, it was his mother who provided the capital; and (iii) for that reason, it was his mother who was in fact the shareholder. The plaintiff has completely failed to show that S L Chan’s account is incapable of belief for the following reasons:-
(a) S L Chan has now located and disclosed an Instrument of Transfer dated 1 March 2011 which shows that his 204 shares in Kossilon were transferred to “Kwok Pik Kin” (who is presumably his mother). This demonstrates that S L Chan is not presently a shareholder of Kossilon. It is also, at the very least, consistent with S L Chan’s story that his mother was the true investor in the company.
(b) The Certificate of Incumbency dated 9 January 2015 in respect of Kossilon also confirms that S L Chan is not presently a shareholder.
(c) There is nothing unusual about the fact that S L Chan did not know the identity of the other (true) shareholders of Kossilon. The plaintiff is unable to point to any obvious reason why S L Chan should have known who provided the funding for the other 1st defendants’ respective shares of the company.
(d) Contrary to the plaintiff’s submission, S L Chan’s explanation is not contradicted by the evidence of Francis Chan as discussed above.
(e) The plaintiff argues that it is unbelievable that S L Chan’s mother, who was formerly a teacher and has worked as a secretary has simply no relevant accounting qualifications and would not have invested in Kossilon’s group of companies. Again, the fact that S L Chan’s mother was a secretary does not mean that she could not invest in a professional services business to be operated by her trusted son. In any event, as S L Chan pointed out during his testimony, Kossilon Corporate Services Ltd is more of a small-scale secretarial services company than an accounting firm, and as such, there is no reason to suggest that his mother would not have invested in such a company.
89. S L Chan further clarifies in his affirmation that:-
(a) When Kossilon was incorporated in 2004, his mother was residing in New Zealand, and hence she was unable to sign corporate documentation (such as bank opening forms). Consequently, his mother arranged for S L Chan to hold the shareholding on trust for her.
(b) In about February 2011, his mother requested S L Chan to transfer the shareholding to her, which he did.
90. Again, this is consistent with: (i) Instrument of Transfer dated 1 March 2011; and (ii) Certificate of Incumbency.
91. Thus, the plaintiff is again unable to rebut such explanations and his case against S L Chan cannot be proven beyond doubt.
Failure to provide all the documents as ordered
92. The plaintiff contends that despite so many warnings given by the court, numerous demands and reminders issued by the plaintiff’s solicitors, and S L Chan has always been legally represented, he still has not disclosed the following items as ordered by the court on 11 March 2014: -
| Item 4: | Bank statements of the Instalment Loan account No71002802767310 maintained with Citibank from December 2011 to February 2014. Despite repeated demands, SL Chan has only provided a record of the repayment plan. |
| Item 5: | Bank statements of the Instalment Loan account No327-69388-184 maintained with Hang Seng Bank from December 2010 to 13 December 2011 are still outstanding (he has only provided the statements after 13 December 2011. |
| Item 6: | Bank statements of the Revolving Credit Account No396-055121-023 maintained with Hang Seng Bank from December 2010 to 20 November 2011. |
| Item 13: | Salary statements/bank records showing the remuneration from Kossilon Corporate Services Limited to him from 1 April 2013 to 28 February 2014. |
93. However, for “Item 4” (bank statements of Instalment Loan Account No. 71002802767310 maintained with Citibank), S L Chan has already explained during the hearing in September 2014 that the ‘record of repayment plan’ was the only document that he was able to obtain and reprint from Citibank. After S L Chan made this statement, the plaintiff’s counsel simply said “Okay” and did not ask further any follow-up questions.
94. As for “Item 5” (bank statements of Instalment Loan Account No 327-69388-184), S L Chan has already provided the statements from December 2011 to February 2014. He explained during the hearing in September 2014 that the aforesaid statements were what he was given by Hang Seng Bank when he made a request using the wording of the court order. The plaintiff’s counsel did not raise any follow-up questions upon hearing his explanation.S L Chan has recently made another request to Hang Seng Bank for the statements (see letter dated 9 January 2015), but is yet to receive the reply.
95. As for “item 6” (Revolving Credit Account No 396-055121-023 maintained with Hang Seng Bank), S L Chan has already provided the statements from November 2011 to February 2014. He explained during the hearing in September 2014 that he has been trying to find the pre-November 2011 statements, but so far without success. Again, the plaintiff’s counsel did not raise any follow-up questions upon hearing his explanation. S L Chan has recently made a request to Hang Seng Bank for the statements (see letter dated 9 January 2015). He has now received the bank statements from Hang Seng Bank (from December 2009 to 31 December 2011) and the same is disclosed.
96. As for “Item 13” (salary statements/bank records showing remuneration from Kossilon Corporate Services Ltd), S L Chan has stated in this affirmation that he does not have these documents. He explains that:-
(a) Kossilon Corporate Services Ltd was a small company and did not have any salary statements.
(b) The shareholders of Kossilon Corporate Services Ltd have objected to the disclosure of that company’s bank records.
(c) In any event, his salary from Kossilon Corporate Services Ltd from April 2013 to February 2014 was paid into his Hang Seng Bank savings account no 294-1-207967. For that account, he has already disclosed the bank statements, online transaction history, and passbook.
97. Thus, I am not satisfied that S L Chan has deliberately or intentionally failed to disclose all these documents.
FRANCIS CHAN
Disclosure of assets in Kossilon
98. The plaintiff also contends that Francis Chan, like the other 3 1st defendants, has lied about his interest in Kossilon’s group of companies. He explained that he has sold his shares in those companies to his wife and said that he has the relevant transfer documents including the bought and sold note. However, despite numerous requests, Francis Chan is unable to produce the relevant transfer documents. He said he would provide those transfer documents after the hearing in July 2103. An order was made requiring him to produce those documents. Notwithstanding the court order, he did not provide them before or at the hearing in February 2014. In his affirmation, Francis Chan explained the reason why he cannot produce these documents. His explanation is the same as that of Freeman Lam.
99. The plaintiff submits that the reasons given by Francis Chan and Freeman Lam are bad lies and do not amount to any reasonable excuses at all. The plaintiff also submits that Francis Chan can simply ask his wife for those documents, if they ever existed. The reason why he cannot produce the documents is simple. There was in fact never any transfer of shares to his wife because he is still a shareholder. He lied in court about the alleged transfer to his wife. He is trying to conceal his assets. Therefore, he has failed to fully disclose his assets.
100. However, I am not satisfied that the plaintiff has proved beyond doubt that Francis Chan is lying. His explanation during examination were that (i) the 1st defendants are not presently the shareholders of Kossilon; (ii) the shares of Kossilon were transferred to and are now owned by the family members of the 1st defendants; (iii) it was the family members who had contributed the capital for the business; and (iv) as regards Francis Chan’s own portion, it is presently owned by his wife.
101. Francis Chan has now located and disclosed an Instrument of Transfer dated 1 March 2011 which shows that his 204 shares in Kossilon were transferred to “Tong Pui Han”. This document (together with the Certificate of Incumbency mentioned above) supports Francis Chan’s account that he has already transferred his shareholding in Kossilon to his wife.
102. Just like the cases against the other 1st defendant, the plaintiff has not adduced any further evidence to prove that Francis Chan’s explanation is incapable of belief. Thus, I do not find that there is sufficient evidence to establish that Francis Chan has disposed of his interest in Kossilon with a view to avoiding satisfaction of the judgment debts.
Failure to disclose the whereabouts of the sale proceeds
103. The plaintiff contends that Francis Chan has failed to disclose the whereabouts of the sale proceeds of 2 properties which belonged to Tobo, namely Flat H on 36th Floor and Portion H of the Roof of Valiant Park, No. 52 Conduit Road, Hong Kong (“Valiant Park”) and Flat A on 12th Floor, Kam Ho Court, 144-148 Belcher’s Street, Hong Kong (“Kam Ho Court”).
Valiant Park
104. The plaintiff submits that Francis Chan is the beneficial owner of Tobo. Tobo owned a number of properties. After the 1st defendants defaulted in repayment in February 2010, Tobo sold a number of properties including Valiant Park and Kam Ho Court. Valiant Park was sold in December 2010 for $15.7 million.
105. The following sums of deposits and balance of the purchase price were paid to Tobo: -
(a) $800,000 being the initial deposit was paid on 2 October 2010.
(b) $770,000 being the further deposit was paid on 3 November 2010.
(c) after discharging the mortgage, $5,555,091 being the balance of the purchase price was paid to Tobo on 3 December 2010.
106. The above sums were paid into Tobo’s bank account. It is clear from the relevant bank statements that after those moneys were banked in, they have been immediately withdrawn from the account. It can be seen from the November 2010 bank statement that $1,570,000.00 was withdrawn and from the December 2010 statement that $5,555,100 was withdrawn from the account. The plaintiff contends that about $7.12 million was received by Francis Chan through Tobo in relation to the sale of Valiant Park, but there is no explanation on the whereabouts of the money.
107. Francis Chan at the hearing in July 2013 promised that he would look for the relevant information to locate the whereabouts of the money. At the hearing in September 2014, he explained that he has repaid $4 million to his father. As to the balance sum of $3.12 million, he did not provide any relevant information for tracing it.
108. Thus, the plaintiff submits that Francis Chan has failed to fully disclose the whereabouts of the sale proceeds received by Tobo in relation to the sale of Valiant Park. As this property was sold after the 1st defendants had defaulted in repayment, the irresistible inference to be drawn is that Francis Chan was selling the property to avoid payment of the judgment sums owed to the plaintiff. The plaintiff submits that Francis Chan is in a position to partially repay the judgment sums.
109. However, there is no evidence at all to contradict Francis Chan’s explanation that $4 million from the sale proceeds was transferred to his father because his father had provided funding for the purchase of the property in the first place.
110. In fact Francis Chan has explained that: -
(a) The sale proceeds (amounting to $7,125,100.00) were transferred from Tobo’s account at HSBC to the account of Francis Chan’s wife at HSBC, in two tranches on 5 November 2010 and 7 December 2010. This can be seen from the transaction advices and also the relevant entries in his wife’s bank statements.
(b) Out of that amount, $4,000,000.00 was transferred from his wife’s account to his father’s account. This is also consistent with the debit entry in his wife’s bank statement.
111. As for the remaining $3.12 million, Francis Chan stated during the hearing in September 2014 that he was unsure where the money was transferred. Francis Chan further explained in his affirmation that: (i) there had been no court orders which required him to produce documents showing the whereabouts of the sale proceeds of Valiant Park and Kam Ho Court received by Tobo; (ii) despite the court’s suggestion at the hearing in February 2014 that the plaintiff should serve a questionnaire on the 1st defendants, the plaintiff did not do so in advance of the September 2014 hearing; and (iii) when the plaintiff’s counsel examined Francis Chan about Valiant Park and Kam Ho Court at the hearing in September 2014, Francis Chan had to answer off-the-cuff and without the benefit of supporting documents.
112. This means that there is no evidence one way or another for the plaintiff to establish beyond reasonable doubt that Francis Chan has retained the money or is deliberately hiding information about the money. It is in fact unfair for the plaintiff to ask questions in this regard without letting Francis Chan to have the opportunity to prepare for the same.
Kam Ho Court
113. Tobo has also sold Kam Ho Court. Tobo bought it for $1.31 million and sold it for $1.85 million. As admitted by Francis Chan, the sale proceeds should have been deposited into Tobo’s bank account. Francis Chan explained that Tobo only has one bank account maintained with HSBC. The following deposits and balance of the sale proceeds should have been received from the sale of Kam Ho Court: -
(a) $90,000.00 being the initial deposit was paid to Tobo upon signing the provisional agreement on 3 May 2010.
(b) $95,000.00 being the further deposit was paid to Tobo upon signing the provisional agreement on 14 May 2010.
(c) $1,665,000.00 being the balance of the purchase price was paid to Tobo upon completion on 6 July 2010.
114. These sums should have been deposited into Tobo’s only bank account with HSBC on 3 May, 14 May and 6 July 2010. However, they were not paid into Tobo’s bank account at all. Francis Chan agreed that these sums cannot be found in the bank statements. The plaintiff therefore submits that Francis Chan has failed and refused to disclose the whereabouts of these sums and he is concealing his assets. Further, it is clear that Tobo must have more than one bank account, which he has failed to disclose.
115. As this property was also sold after the 1st defendants have defaulted in repayment the plaintiff submits that the irresistible inference to be drawn is that Francis Chan was selling Kam Ho Court to avoid payment of the judgment sums owed to the plaintiff, and Francis Chan is in a position to partially repay the judgments sums.
116. However, Francis Chan has now located a bank statement for Tobo dated 31 May 2010 which shows that the deposit payments of $90,000.00 and $95,000.00 for Kam Ho Court were deposited in Tobo’s HSBC account. As explained by Francis Chan in his affirmation, the total deposit of $185,000.00 was transferred from Tobo’s account to the account of Francis Chan’s wife on 19 May 2010. This can be seen from Tobo’s bank statement for May 2010 and Francis Chan’s wife’s bank statement for May 2010.
117. As to the balance of the purchase price amounting to $1,665,000.00, it can be shown in the ‘completion statement’ from Tobo’s solicitors dated 14 July 2010 as follows: -
(a) $822,666.64.00 was paid to the mortgagee as redemption money.
(b) $7,160.00 was paid for various fees and disbursements.
(c) The remaining $835,173.36 was paid to Tobo.
118. The payment of $835,173.36 into Tobo’s account can be seen from its bank statement for July 2010. As explained by Francis Chan in his affirmation, on 15 July 2010, $837,496.21 (ie the balance payment plus a bit of excess) was paid from Tobo’s account to the account of Francis Chan’s wife. This can be seen from Tobo’s bank statement for July 2010 and Francis’ wife’s bank statement for July 2010. In other words, the documents show that all of the sale proceeds for Kam Ho Court was transferred from Tobo to Francis Chan’s wife (without even passing through Francis Chan’s accounts).
119. Thus, Francis Chan has explained the whereabouts of the proceeds of sale. As mentioned above, when he was first examined on this, he was not given the opportunity to prepare beforehand, but now with all the supporting documents, he can provide the answers.
120. It shows that Francis Chan does not have the money. It is wrong for the plaintiff to assume that he has the money to repay the judgment debts. It is also not proved beyond doubt that he has disposed of the proceeds of sale to avoid satisfaction of the judgment debts, as the plaintiff cannot rebut the possibility that Francis Chan’s wife is the real beneficial owner.
Failure to provide all the documents as ordered
121. The plaintiff contends that despite so many warnings given by this court, numerous demands and reminders issued by the plaintiff’s solicitors, and Francis Chan has always been legally represented, he has not disclosed the following items as ordered by this court on 30 July 2013: -
122. However, as for “Item 11” (Citibank credit statements), these documents have now been provided.
123. As for “Item 12” (trading licence owned by the PRC Company), Francis Chan has already explained at the hearing in September 2014 that what he meant by “trading licence” was the permission granted by the government authorities to the PRC Company to trade in metals, which permission was stated in the PRC Company’s Certificate of Approval for Establishment. In other words, there does not exist any separate document entitled “Trading Licence”.
124. Contrary to the plaintiff’s argument, I do not accept that Francis Chan has changed his evidence. In his affirmation dated 22 November 2013, Francis Chan said that “they are not in my possession and cannot be obtained by me as [the PRC Company] is not under my control”, but that was directed to para 12 of Schedule I of my order dated 30 July 2013, which stated: “All relevant documents in relation to all licences (including the acquisition documents) held by [the PRC Company], in particular the licence to trade precious metals which cost RMB 10 million.” Thus, it is possible that Francis Chan was saying that he did not have all of those documents in his possession (rather than saying that he did not have the trading licence per se in hand).
125. As for “Item 14” (document relating to transfer of his shareholding in Kossilon), this has now been located and disclosed.
126. In the circumstances, I do not find that Francis Chan has deliberately or intentionally failed to disclose the documents requested from him.
CONCLUSION
127. In sum, despite its best efforts, the plaintiff has failed to prove to the requisite criminal standard that one or more of the grounds in Order 49B, rule 1B(1) is established, and by reasons aforesaid, I am not satisfied beyond all reasonable doubts that:-
(a) Freeman Lam is able to satisfy part of the judgments; has disposed of assets with a view to avoiding satisfaction of judgment debts; or has wilfully failed to make disclosure as required.
(b) S K Leung has disposed of assets with a view to avoiding satisfaction of judgment debts; or has wilfully failed to make disclosure as required.
(c) S L Chan has disposed of assets with a view to avoiding satisfaction of judgment debts; or has wilfully failed to make disclosure as required.
(d) Francis Chan is able to satisfy part of the judgment debts; has disposed of assets with a view to avoiding satisfaction of judgment debts; or has wilfully failed to make disclosure as required.
128. The plaintiff’s application for imprisonment order against the 4 1st defendants is therefore dismissed.
COSTS
129. As to costs, I think it is justified for the plaintiff to take out the proceedings for the examination of the 1st defendants in both cases and also the 2nd defendants in HCA 433/2011, but not for the application for imprisonment order. Although the plaintiff has failed to obtain the imprisonment order, the examination has been fruitful for the plaintiff to obtain many more documents and information from the defendants. Thus, the plaintiff is entitled to costs for the examination, but not the application for imprisonment order. In fact, the plaintiff should bear the 1st defendants’ costs in relation to the application for imprisonment order.
ORDERS
130. I therefore order that:-
(1) In HCA 408/2011:
(a) The plaintiff’s application for imprisonment order against the 1st defendants be dismissed;
(b) Costs order nisi: The plaintiff do pay the 1st defendants costs of the application for imprisonment order with certificate for counsel to be taxed if not agreed; and
(c) The 1st defendants do pay the plaintiff costs of the examination proceedings under Order 48, rule 1 of the Rules of the High Court (not including the costs of the application for imprisonment order) with certificate for counsel to be taxed if not agreed, and such costs be added to the judgment.
(2) In HCA 433/2011:
(a) The plaintiff’s application for imprisonment order against the 1st defendants be dismissed;
(b) Costs order nisi: The plaintiff do pay the 1st defendants costs of the application for imprisonment order with certificate for counsel to be taxed if not agreed; and
(c) The 1st defendants and the 2nd defendants do pay the plaintiff costs of the examination proceedings under Order 48, rule 1 of the Rules of the High Court (not including the costs of the application for imprisonment order) with certificate for counsel to be taxed if not agreed, and such costs be added to the judgment.
| (Michael Wong) | |
| Master of the High Court |
Mr Patrick Chong, instructed by Robertsons, for the plaintiff in both cases
Mr Wilson Leung, instructed by Danny Lau & Lam, for the 1st defendants in both cases and the 2nd defendants in HCA 433/2011