KISHIN SAMTANI, THE ADMINISTRATOR OF THE ESTATE OF NARIAN SAMTANI, DECEASED v. CHANDERSEN TIKAMDAS SAMTANI

HCA 496/2011

[2025] HKCFI 4526

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 496 OF 2011

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(by the Carry On Order of Master M Wong dated 31 August 2018)

________________________

________________________

DECISION

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A.  INTRODUCTION

1.  By a Judgment handed down on 18 March 2025 (“the Judgment”)[1], this Court:

(1)  dismissed the plaintiff’s claims (including his misappropriation claim);

(2)  ordered the plaintiff to give an account of profits which Narian had made in Regal Top;

(3)  ordered the plaintiff to pay the defendant the sum found due following such account;

(4)  ordered the plaintiff to pay the defendant nominal damages in the sum of $1,000 for Narian’s occupation of the Evelyn Towers Flat.

2.  In the Judgment, this Court also made an order nisi that the plaintiff shall bear the costs of the defendant, with certificate for two counsel, to be taxed if not agreed (“the Costs Order Nisi”).

3.  On 28 April 2025, the plaintiff applied to vary the Costs Order Nisi[2]. By a letter issued by his solicitors dated 11 July 2025 (“the plaintiff’s Variation Application”), he clarified that the variations that he sought are as follows:

(1)  Subject to sub-paragraph (a)  or (b)  below, the plaintiff do pay the defendant’s costs of the action, to be taxed if not agreed:-

(a)  The defendant do pay the plaintiff all costs (including all costs previously reserved)  in relation to the plaintiff’s claim of misappropriation, up to and including the date of the defendant’s Re-Re-Amended Defence and Counterclaim, to be taxed if not agreed; or alternatively,

(b)  The defendant be disallowed costs of this action (including all costs previously reserved)  in relation to the plaintiff’s claim of misappropriation, up to and including the date of the defendant’s Re-Re-Amended Defence and Counterclaim, to be taxed if not agreed.

(2)  The plaintiff’s costs of the defendant’s dismissed New Witness Statement Summons filed on 16 November 2023 be taxed on indemnity basis; and

(3)  Certificate for two counsel for the hearing of the trial.

4.  By a summons filed on 30 April 2025 (“the defendant’s Variation Summons”), the defendant also applied to vary the Costs Order Nisi.  The proposed terms are as follows:

(1)  The Estate of Narian Samtani, Deceased and Kishin Samtani personally do jointly and severally pay the defendant the costs of this action (including the costs of the trial and all the reserved costs (if any))  to be taxed if not agreed on indemnity basis with certificate for two counsel;

(2)  Alternatively, Kishin Samtani (in his personal capacity)  be joined as a party to this action for the purposes of costs only;

(3)  There be an Order that Kishin Samtani (in his personal capacity)  do pay (jointly and severally with the Estate of Narian Samtani, Deceased)  the defendant the costs of this action (including the costs of the trial and all the reserved costs (if any))  to be taxed if not agreed on indemnity basis with certificate for two counsel.

B.  THE PLAINTIFF’S VARIATION APPLICATION

5.  In gist, the plaintiff’s application consists of 2 limbs:

(1)  The defendant shall bear the plaintiff’s costs of the claim of misappropriation up to the time of the defendant’s filing of his Re-Re-Amended Defence and Counterclaim, or alternatively, there shall be no order as to such costs;

(2)  The plaintiff’s costs of the New Witness Statement Summons be taxed on indemnity basis.

B1.  The plaintiff’s costs of the claim of misappropriation

6.  The plaintiff’s submissions on the costs of the claim of misappropriation may be summarised as follows:

(1)  This Court has found that the credit notes served as compelling evidence of the existence of the CESCO Arrangement.  It is implied in such a finding that the Court accepted that those credit notes must have existed before this action was commenced;

(2)  However, despite the defendant’s undertakings given to this Court on 20 May 2011 and 16 September 2011, he failed to disclose the credit notes;

(3)  The defendant even gave the impression by virtue of his 7^th Affirmation filed on 12 June 2012 that the credit notes were no longer in existence;

(4)  Although the credit notes would have provided the defendant with a complete defence to the plaintiff’s claim of misappropriation, the defendant only produced them by annexing the same to his Re-Re-Amended Defence and Counterclaim filed on 28 October 2019;

(5)  If the defendant had disclosed those credit notes earlier, considerable time and costs would have been saved in the pursuit of such documents let alone the pursuit of such a cause of action.

(6)  Hence, the Court should vary the Costs Order Nisi by taking into account the defendant’s conduct aforementioned pursuant to Order 62 rule 5(2)(d)  of the RHC.

7.  When considering the plaintiff’s application in this regard, it is important to bear in mind this Court’s finding at [164] of the Judgment that:

“[…] it is more likely than not that Narian knew about the CESCO Arrangement. Indeed, it is the evidence of Michelle (which I accept)  that Narian knew about it at all material times […]”

8.  I accept the defendant’s argument that it follows from the above finding that the plaintiff’s misappropriation claim should not have been brought in the first place.  I do not accept the argument of the plaintiff’s counsel that even if Narian knew the existence of the CESCO Arrangement, it does not mean that the funds had been handled accordingly. This is because this was not the plaintiff’s case.  It has all along been the plaintiff’s case that the CESCO Arrangement had never existed[3].

9.  In an attempt to justify the carrying-on with the making of this claim by Kishin, the plaintiff further argues that even if Narian had had knowledge of the CESCO Arrangement, it does not mean that Kishin would have the same knowledge, as the latter had left Kay Tee in 2006. 

10.  This argument is futile, because it is contrary to Kishin’s own evidence – in his supplemental witness statement, he categorically denied that the CESCO had ever existed[4].

11.  In such circumstances, the proposed order that the defendant shall bear the plaintiff’s costs on his claim of misappropriation cannot be a fair one and I have no hesitation in rejecting it.

12.  In relation to the plaintiff’s submission that his time and costs could have been saved if the defendant had disclosed the credit notes earlier pursuant to his repeated requests, the defendant argued that:

“P’s contention is wholly unreal and artificial in that even after the Kay Tee Credit Notes were produced (which were in fact produced in 2011 or 2012), P continued to pursue the misappropriation claim until the end of the trial and contended without evidence that they were fabricated documents, which was rightly rejected by the Court. The contention that P would not have pursued the misappropriation claim if he had sight of the Kay Tee Credit Notes earlier flies in the face of P’s conduct of the action after the production of the Kay Tee Credit Notes and cannot be more unconvincing.”

13.  I agree with the defendant.

14.  Be that as it may, if the defendant has indeed failed in his disclosure obligation despite his undertakings given to the Court as alleged by the plaintiff, then this is something that the Court should take into account when considering whether to grant the entirety of the costs of the misappropriation claim to the defendant (for example, whether the Court should disallow the defendant’s costs incurred before he filed his Re-Re-Amended Defence and Counterclaim (with which a large number of credit notes were annexed)).

15.  However, as demonstrated by the defendant’s counsel, while the plaintiff had indeed asked the defendant for disclosure of “credit notes” since the early stage of these proceedings, such credit notes were in fact different in nature from those which the defendant annexed to the Re-Re-Amended Defence and Counterclaim:  The credit notes which the plaintiff had always asked for were issued by the bank(s), whereas the credit notes annexed to the defendant’s pleadings were Kay Tee’s internal documents.  The fact that the credits notes which had been asked for by the plaintiff were issued by the bank(s)  can be seen from the following references[5]:

(1)  The first request for credit notes was made by Narian on 30 March 2011, by which he asked the defendant for “Commission Accounts – each credit note with attached invoice”.  In answer to the enquiries made by the defendant’s solicitors by letter dated 14 April 2011 as to the meaning of “credit note”, the plaintiff’s solicitors clarified by letter dated 19 April 2011 that:

“ ‘Bank credit notes’ refer to funds received from customers in the form of Telegraphic Transfers (TT’s)  or export documents discounted from banks; whereas ‘bank debit notes’ refer to bank charges or outgoing TT’s.”

(2)  By letter dated 11 July 2011, the plaintiff’s solicitors wrote:

“We refer to […] your clients’ Undertaking dated 20^th May 2011 and your clients’ 2^nd Affirmation dated 24^th June 2011.

Notwithstanding all the above, we are instructed by our client that your client has still failed to produce vitally important accounting documentation.  We refer to credit advices and inward remittance advices from the partnerships’ banks […]”

(emphasis added)

(3)  By another letter dated 15 August 2011, the plaintiff’s solicitors further stated:

“Paragraph 2 of your letter states that ‘our client has never represented to your client that the documents referred in paragraph 2 of your said letter do not exist. What our client said is that he has already provided to your client all the documents in his possession.’ Paragraph 2 of our letter refers to ‘credit advices and inward remittance advices from the partnerships’ banks and collection orders and letters of instructions to said Bank ......’ (collectively referred to as ‘the Requested Outstanding Documents’).

Given you above answer, it is still unclear the whereabouts of the Requested Outstanding Documents. On the one hand, you state that your client never said the Requested Outstanding Documents do not exist. On the other hand, our client still could not find the Requested Outstanding Documents during the inspection carried out on various dates. So where are the Requested Outstanding Documents? The absence of a satisfactory answer necessitates the injunction proceedings to continue as the record of accounts provided by your client is still incomplete.

We recall that the Undertaking given by your client during the hearing before Suffiad J. on 20^th May 2011 expressly refers to the following :-

‘....... to allow access to, inspection and copying of the partnership books and accounts of Kay Tee Corporation and Kishoo Brothers from 2004 to 2010 within 7 days from the date hereof, such books and accounts to include bank statements, credit/debit notes, ledgeres, cheque books, purchase orders, invoices, receipts, commission statements, remittance advices/instructions, full sets of export documents, including collection orders, bills of exchange, bills of lading, packing lists, insurance policies on goods and all other business records.’ (underlined and bold, emphasis added)  Your client no doubt had in mind the ability to produce the same, otherwise he simply would not have agreed to adopt the above underlined wordings when giving the Undertaking.

To facilitate your instruction taking with your client, we enclose samples of inward and outward remittance advices for the two banks (HSBC and Standard Chartered)  where the partnership business Kay Tee Corporation had accounts. You will note that all the enclosed documents were addressed to Kay Tee Corporation. Your client being the one in financial control of the business should have received these documents.

[…]”

The samples attached to the said letter were all issued by Kay Tee’s banks;

(4)  While the plaintiff took out a summons on 11 May 2011 (“the Inspection Summons”)  and asked for, inter alia, an order that the defendant do deliver up to the plaintiff or allow the plaintiff access to certain documents including “credit/debit notes”, in paragraph 40 of Narian’s 3^rd Affirmation which was filed in support thereof on 5 August 2011, it was stated that:

“There are a number of categories of documents which I expected to see but which are missing from the current record of accounts provided by the Defendant which include:-

a)  credit advices from the partnership’s banks;

b)  inward remittance advices from the partnership’s banks;

c)  collection orders to the partnership’s banks; and

d)  letters of instructions to the partnership’s banks

These are documents that are issued by or to banks in the normal course of banking business which the Defendant has no reason not to have available for my inspection.”

(5)  In the 4^th Affirmation of Narian filed on 7 October 2011 in further support of the Inspection Summons, he stated at paragraph 27 that:

“[…] I have collected most of the documents for 7 years, except from the year January / February and March 2011. These documents are still in the office premises. I have not collected them as the document sets are not complete for each of the following documents:

a)  credit advices from the partnership’s banks;

b)  inward remittance advices from the partnership’s banks;

c)  collection orders to the partnership’s banks; and

d)  letters of instructions to the partnership’s banks.

I have told them repeatedly asked the Defendant to produce the complete set but to no avail.

(6)  In the 5^th Affirmation of Narian filed on 3 January 2012 in further support of the Inspection Summons, he stated that:

“4. At the hearing before the Honourable Mr Justice Suffiad on 20^th May 2011, the Defendant agreed to give an undertaking as per the draft approved by himself whereby he agreed to allow the Plaintiff’s access to, inspection and copying of the partnership books and accounts of Kay Tee Corporation and Kishoo Brothers from 2004 to 2010 and the phrase ‘books and accounts’ includes ‘credit/debit notes…commission statements, remittance advices / instructions...’ (hereinafter referred to as ‘the Outstanding Documents’). The Outstanding Documents were not found during my various inspections arranged by the Defendant.

5.   At the hearing before the Honourable Deputy Judge L.Chan on 16^th September 2011, the Defendant repeated the same undertaking covering the Outstanding Documents. In particular, the Defendant was specifically ordered to produce to the Plaintiff copies of the Outstanding Documents or alternatively, file and serve an affidavit explaining the reason for his inability to produce them.[…]

[…]

10. While waiting for the Defendant’s provision of the Outstanding Documents, I in parallel made enquiry with the Standard Chartered Bank (‘SCB’)  with which Kay Tee Corporation had maintained an account for the partnership business. I was able to obtain from SCB various bank statements, ‘credit/debit notes’for my double-checking on various transfers of partnership monies for the past years (i.e. 2004 to 2010).

[…]

15. As far as the documentary record is concerned, the bank statements, ‘credit/debit notes’, ‘remittance advices / instructions’ and even the Defendant’s personal bank account which he had used to receive the partnership funds are all relevant to this action and should be disclosed. The aforesaid exhibit obtained from the SCB demonstrates that these relevant documents did exist and there was no reason why the Defendant could not produce the same for my inspection. The only possible inference to be drawn for the Defendant’s failure to do so is that he has either hidden the record somewhere or destroyed the same or deliberately failed to produce them. In any of these cases, he has to explain the reason for his failure to produce the Outstanding Documents. The Defendant’s current responses (as summarized in para. 7.1 to 7.3 above)  in his 4^th affirmation with regard to the Outstanding Documents simply cannot stand. The Defendant can never be considered as being cooperative in any sense in respecting my rights of inspection as he has up to today’s date still failed to give adequate response with regard to the Outstanding Documents, necessitating the maintenance of my injunction application.

[…]

18.   […] I was unable to prepare this affirmation much earlier as I just received the relevant aforesaid documents from SCB earlier this month. Had the Defendant been cooperative in allowing my access to the Outstanding Documents, this affirmation could have been avoided.”

It can be seen that the credit notes were part of the “Outstanding Documents” which could be obtained from the Standard Chartered Bank, and they are not the same as those credit notes which were attached to the Re-Re-Amended Defence and Counterclaim.  I have also highlighted the references to the undertakings given by the defendant to show that these bank documents were the subject matters in the undertakings which the plaintiff had been complaining about;

(7)  In the letter dated 10 January 2012 issued by the plaintiff’s solicitors to the defendant’s solicitors, it was stated that:

“In light of the parties’ previous exchange of affidavit evidence such as your client’s 4^th Affirmation and our client’s 5^th and 6^th Affirmations in which the reference to the following items (ii)  and (iii)  were made and the fact that equivalent items were missing from your client’s List of Documents, we write to ask for specific discovery under 0.24 r.7, RHC of the following items to be disclosed forthwith :-

[…]

(iii)  credit/debit notes with Standard Chartered Bank

[…]”

Again, the reference to “credit/debit notes” is made in relation to a bank;

(8)  In the 7^th Affirmation of Narian filed on 7 February 2012, he sought to clarify the meaning of what documents he wanted.  He stated:

“36. […] The Defendant in paragraph 36 of the Defendant’s 5^th Affirmation intentionally confused the Court as to the meaning of ‘Commission Credit Notes’ and ‘Commission Statements’. ‘Commission Credit Notes’ refer to the bank credit notes for export documents and inward remittances advices / transfers […]”

(emphasis added)

(9)  In their letter dated 22 March 2012, the plaintiff’s solicitors maintained that:

“[…] the following documents are of utmost relevance to the captioned proceedings (especially after the exchange of the last round of affidavit evidence in support of our client’s application by way of Summons dated 11^th May 2011)  and should be in your client’s possession, custody or power. As such, we write to reiterate our client’s request for specific discovery under 0.24 r.7, RHC of the following items:-

[…]

(iii)  credit/debit notes with Standard Chartered Bank to the customers mentioned in (ii)  above; and

[…]”

(emphasis added)

(10)  In the plaintiff’s summons for specific discovery filed on 23 April 2012 (“the Specific Discovery Summons”), the plaintiff sought specific discovery for, inter alia:

“[…]

(iii)  credit/debit notes in relation to the Samtani Family Businesses issued by Standard Chartered Bank to [CESCO], [E&M] and [Woodies];

(iv)  […] credit notes and debit notes in relation to the Samtani Family Businesses issued by Standard Chartered Bank and/or Hong Kong Bank to the customers and the Samtani Family Businesses; and

[…]”

16.  The 1^st and 2^nd undertakings were given by the defendant on 20 May 2011 and 16 September 2011 respectively.  They include a promise to allow the plaintiff’s inspection of “credit notes”.  However, from items (1)  – (4)  above, it is apparent that the “credit notes” were not the “Kay Tee credit notes” which were disclosed by the defendant in 2019.

17.  In reply to the defendant’s argument that what the plaintiff had always asked for was a different category of documents, the plaintiff submitted that:

“22. D seeks to confine the Plaintiff’s request for ‘credit notes and debit notes in relation to the Samtani Family Businesses issued by Standard Chartered Bank and/or Hong Kong Bank to the customers and the Samtani Family Businesses’ to documents issued solely by the banks. With respect, this interpretation is unduly narrow and conveniently overlooks the commercial realities of how businesses operate.

23. The phrase ‘in relation to the Samtani Family Businesses’ is broad and plainly encompasses all credit and debit notes generated in the course of business. This includes those issued by the Samtani Family Businesses themselves to their customers, suppliers, or internal accounts.

24. The grammatical structure of the request does not exclude the possibility that the Samtani Family Businesses were themselves issuers of such documents. On the contrary, it is entirely routine for businesses to issue credit notes to reflect adjustments, rebates, or commissions, and debit notes to record charges or corrections. To exclude these from the scope of discovery is to ignore both the language of the request and the practicalities of business accounting.

[…]

26.  In light of the above, it is submitted that P’s request must be interpreted purposively and commercially, to include credit and debit notes issued by the Samtani Family Businesses themselves.  Any narrower reading would be artificial, illogical, and contrary to the principles of fair and transparent disclosure.”

18.  Such arguments, with greatest respect, are hopeless.  First of all, it only focused on the request made pursuant to the Specific Discovery Summons and did not answer the unequivocal expressions made in various solicitors’ letters and affirmations.  Secondly, in my view, the plaintiff’s request cannot be clearer if one takes a look at the plaintiff’s Specific Discovery Summons.  It is trite that, as the applicant, the plaintiff has to identify the category of documents with precision.  When the documents requested were described as “issued by Standard Chartered Bank” and issued by Standard Chartered Bank and/or Hong Kong Bank, there is simply no room for the plaintiff to say that the interpretation of the request should be wider.

19.  The plaintiff’s reliance on the defendant’s 7^th Affirmation (filed on 12 June 2012)  to allege that the defendant had misled the Court is also misconceived.  In the plaintiff’s written submissions lodged on 28 April 2025, it was argued that:

“Parts of D’s 7^th Affirmation are cited for their importance:

(1)  Having gone through some his historical events, D says ‘All the above suggest that the Plaintiff is concerned with ‘credit / debit notes’ and ‘remittance advices / instructions’ in the Injunction Application… If that is the case, the Plaintiff should not be allowed to take advantage of the procedures and seek specific discovery of those documents which the Plaintiff has already conceded not to obtain in the Injunction Application.’

(2)  ‘For Category (iii)  (i.e. Credit / Debit notes), the usual practice of the partnership was as follows:-

When there was a deposit / withdrawal from the partnership account, there would be a deposit / withdrawal (credit/debit)  slips.

Once such deposit / withdrawal (credit / debit)  slips had been checked against the entry in the bank statement, this deposit / withdrawal (credit / debit)  slips would usually be discarded …’.

(3)  The implication was that the very credit/debit slips sought in the Specific Discovery application had been discarded.

(4)  The above called into question the bona fides of the 2 Undertakings and various Affirmations under oath.”

20.  The 7^th Affirmation of the defendant quoted above was dealing with “category (iii)” document in the Specific Discovery Summons, that is, “credit/debit notes with Standard Chartered Bank to the customers”[6]. They are not referring to the credit notes which were subsequently disclosed together with the Re-Re-Amended Defence and Counterclaim.  Further, the content of the said 7^th Affirmation is also very clear – the defendant was referring to the “credit/debit slips” which would be issued “when there was a deposit / withdrawal from the partnership account”.

21.  Insofar as the plaintiff relies on the defendant’s late discovery of credit notes to say that those evidence should have been disclosed earlier, I am of the view that it is an opportunist’s argument because:

(1)  While it is true that Kay Tee’s credit notes were only first disclosed when the Re-Re-Amended Defence and Counterclaim was filed in October 2019, it should be borne in mind that the CESCO Arrangement had already been set out in the defendant’s 5^th Affirmation filed on 19 January 2012.  With Narian’s knowledge of such an arrangement at all material times (as found by this Court), he should have re-considered the merits of his misappropriation claim once the defendant had expressly referred to it even though he had yet to amend his pleadings;

(2)  It should also be remembered that this action had been left dormant between 5 April 2013 (the date of death of Narian)  and 31 August 2018 (when a carry-on order was made by Master M Wong).  Hence, the prima facie long delay should be viewed in such light.

22.  In relation to the Specific Discovery Summons which was eventually dismissed by Master Hui on 7 September 2022 with “costs reserved”, the plaintiff submitted that he should be entitled to the costs thereof because:

“Had the above documents been disclosed by D, as was his duty, there would have been no need for P to go through the lengthy exercise of analysing other documents in order to ascertain the shortfalls in amounts received that ought to have been received by the Business.”[7]

23.  This argument collapsed upon the above finding that the “credit notes” which the plaintiff had been seeking for were of a different category to those which were attached to the defendant’s Re-Re-Amended Defence and Counterclaim.

24.  Since the purpose of the Specific Discovery Summons was to substantiate the plaintiff’s claim for misappropriation, now that this claim has been dismissed, there is no reason why the plaintiff should not bear the costs of that application, particularly when that discovery summons had been dismissed too.

B2.  Costs of the New Witness Statement Summons

25.  To recap, the plaintiff is now asking the Court to order that his costs of the New Witness Statement Summons be taxed on indemnity basis.

26.  The New Witness Statement Summons was taken out by the defendant on 16 November 2023, and returnable on the first day of the trial (27 November 2023), on which day this Court, having heard submissions from both sides, dismissed the application.  This Court also made an order at the hearing that the costs of the summons be borne by the defendant.

27.  In light of the aforesaid, the defendant made a preliminary point that it is now not open to the plaintiff to “vary” the costs order of the New Witness Statement Summons since such a costs order was not made on a nisi basis.

28.  On the other hand, it was submitted by Mr Lo for the plaintiff that:

“The costs order for the New Witness Statement Summons was neither made on a nisi nor absolute basis and should therefore, not be precluded from P’s Costs Application.”[8]

29.  With greatest respect, Mr Lo’s argument that the costs order was made neither on a nisi nor absolute basis is totally incomprehensible.

30.  I agree that, if the plaintiff would like to ask for indemnity costs in respect of the said summons, he should have done so there and then.  However, he did not do so, and as a result, a final order in that regard had been made.  The plaintiff’s application to “vary” the said costs order should therefore be dismissed on this ground alone.

31.  In any event, the plaintiff’s application is totally unmeritorious.

32.  This Court held in [51] of the Judgment that New Witness Statement Summons should be dismissed for the following reasons:

“(1)  Jason explained that the Original Advices were discovered in the cabinets in the 4/F Conwell Office. There was no evidence which showed that those documents were only placed thereat recently, and it might be inferred that they had always been put in those cabinets. In these circumstances, the first question must be why they were not discovered earlier, particularly when those documents had been specifically requested for by the plaintiff long time ago, and indeed, they were documents which the defendant was obliged to produce pursuant to a court order dated 16 September 2011. However, no such explanation had been given. In my view, there had been inexcusable delay on the part of the defendant, and the application could be dismissed on this ground alone.

(2)  In the event leave was granted for the defendant to rely on the Supplemental Witness Statement of Michelle, as a matter of fairness, time must be given for the plaintiff’s legal team to go through the new documents carefully, consider the interrelationship of the Original Advices with the many documents already included in the trial bundle and take further instructions from the plaintiff. Mr Hingorani informed this Court that he would need at least 3 days but preferably 4 days to complete the process, which must be reasonable in the circumstances. Although a total of 14 days had been reserved for this trial, it must be borne in mind that the long period of trial was fixed having taken into account the defendant’s need to take long breaks from time to time while he was giving evidence in Court. Hence, the loss of 4 days might therefore lead to the case being part-heard, which was highly undesirable, particularly when this case had been pending for 12 years.

(3)    It could not be disputed that the defendant’s very late application had disrupted the plaintiff’s preparation of the trial as attention, time and effort had been diverted to the opposition of the late application.  This in itself was a form of prejudice.  Even if this Court only granted a short adjournment (say, for a few days, so that the plaintiff could take further instructions on the Original Advices), that would mean that further prejudice would be caused to the plaintiff, which was very unfair to the plaintiff.”

33.  The plaintiff submitted that the costs of the New Witness Statement Summons should be taxed on indemnity basis for all the above reasons, together with the fact that it was a last-minute application with which was taken out less than 2 weeks before the trial, and which sought to adduce new documents.

34.  In Holinail H.K. Limited v Matthias Pou & Others[2025] HKCFI 1157, this Court referred to a number of authorities which set out the trite general principles on when it would be appropriate to make an indemnity costs order as follows:

“43. In Overseas Trust Bank Ltd v Coopers & Lybrand (a firm)  and Others [1991] 1 HKLR 177, Godfrey J (as his Lordship then was)  explained that:

‘[…] In order to justify a taxation on the indemnity basis, the successful party has to show, either that the case is one of a type already recognised in the practice of the court as warranting a taxation on that basis (such as, for example, the contempt cases to which I have already referred)  or that there is some feature in the case even more special or unusual than one which would justify a taxation on the common fund basis. A case in which the successful party has demonstrated that the proceedings were initiated or prosecuted by the unsuccessful party in a manner which constitutes that party’s proceedings an abuse of the process of the court might well be a candidate for an award of taxation of costs on an indemnity basis. A taxation of the successful party’s costs on an indemnity basis could properly be ordered, in my opinion, where the proceedings were scandalous or vexatious, or had been initiated or prosecuted maliciously, or for an ulterior motive, or in an oppressive manner. Any proceedings instituted or prosecuted in such circumstances as to constitute an affront to the court could properly be the subject of a direction for taxation of the successful party’s costs on an indemnity basis.’ (at 182G – 183C)

44.  In Choy Yee Chun (The representative of the estate of Chan Pui Yiu)  v Bond Star Development Ltd[1997] HKLRD 1327, Stock J (as his Lordship then was), having referred to the Judgment quoted above, stated:

‘It has since been held that, though there must still be shown special and unusual features, even the circumstances particularised by Godfrey J. are not to be taken as exhaustive of the conditions in which it might be appropriate to make such an award, and that the power to award taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose. (See Macmillan Inc. v. Bishopsgate Investment Trust Ltd., 10 December 1993 (unreported)  cited in Sung Foo Kee Ltd. v. Pak Lik Co. [1996]3 HKC 570).

In Sung Foo Kee Ltd a litigant had been repeatedly in contempt of court orders and the trial judge had found that the defendant had deployed defences which he termed “hocus pocus” and had used the legal process to prevent the plaintiff obtaining its just payment.  The Court of Appeal said that it would have awarded costs on an indemnity basis.  It remarked (at page 575)  that the circumstances in which an indemnity award might properly be made were not restricted to circumstances such as those described by Godfrey J. in Overseas Trust Bank (supra).  At p.575B - E of Sung Foo Kee Ltd. (supra), Godfrey J.A. said –

‘Here, as in England and Wales, the judge has a discretion, in a case which does fall outside the general rule, to direct the taxation of the receiving party’s costs on the basis which he considers to be appropriate to that case. This is not a discretion limited by indications in previous cases, such as, eg the observations of Godfrey J in Overseas Trust Bank Ltd v Coopers & Lybrand [1991] 1 HKLR 177 (in which he declined to order the successful party’s costs to be taxed on the indemnity basis), as to the sort of special or unusual feature (there does have to be some special or unusual feature)  which could justify an award of indemnity costs. Although the examples given in the judgment of Godfrey J at 182J-183C may be of assistance in other cases in which indemnity costs are claimed, his judgment does not purport to be and is not to be taken as determinative of the sort of case in which indemnity costs may be ordered.’

The Court of Appeal endorsed the view of the English courts that :

‘The power to order taxation on an indemnity basis is not confined to cases which have been brought with an ulterior motive or for an improper purpose. Litigants who conduct their cases in bad faith, or as a personal vendetta, or in an improper or oppressive manner, or who cause costs to be incurred irrationally or out of all proportion as to what is at stake, may also expect to be ordered to pay costs on an indemnity basis if they lose, and have part of their costs disallowed if they win.  Nor are these necessarily the only situations where the jurisdiction may be exercised; the discretion is not to be fettered or circumscribed beyond the requirement that taxation on an indemnity basis must be ‘appropriate’.’ (see Macmillan Inc. v. Bishopsgate Investment Trust Ltd. supra)

Further at p.576 -

‘… it is a pity that various courts have attempted to define in exactly what circumstances indemnity costs may be ordered.’ (see Munkenbeck & Marshall v. McAlpine (1995)  44 Con LR 30 per Hollis J, at page 33)

The Court of Appeal in Sung Foo Kee Ltd at page 576F added :

‘… Our rules do now expressly provide for the taxation of costs on an indemnity basis and when they consider it appropriate judges should not be slow to make orders for the receiving party’s costs to be taxed on that basis.’ ’

(at 1334G – 1335G)

45.  In Cheung Wei Man Vivien and Chan Kim Thiam v Centaline Property Agency Ltd & Others (HCA 286/2000, unreported, 15 December 2006), Lam J (as Lam PJ then was)  also had the following to say:

‘6. It is also useful to remind ourselves what Simon Brown LJ said in Liam v MGN Ltd (No.2) [2002] 1 WLR 2810 at Paras.11 and 12 in considering whether the conduct of a losing party is so unreasonable so as to warrant an award of indemnity costs. In particular, at Para.12, His Lordship observed,

‘I for my part understand the court there to have been deciding no more than that conduct, albeit falling short of misconduct deserving of moral condemnation, can be so unreasonable as to justify an order for indemnity costs. With that I respectfully agree. To my mind, however, such conduct would need to be unreasonable to a high degree; unreasonable in this context certainly does not mean merely wrong or misguided in hindsight.’ ’

46.  It can therefore be seen that, while the Court would take into account the litigation conduct of a party when deciding whether to make an indemnity costs order, such conduct has to be ‘unreasonable to a high degree’, and unreasonable in this context ‘certainly does not mean merely wrong or misguided in hindsight’.”

35.  In gist, the Court’s discretion on making indemnity costs orders is unfettered.  The question is whether the circumstances of a particular case render it appropriate to do so.  While case authorities may provide examples on when the courts had made such an order, it should not be taken as if those courts were trying to define in exactly what circumstances indemnity costs should be ordered.  The categories of cases in which such a costs order may be considered appropriate are not closed. However, when considering the question of appropriateness, the Court should bear in mind that in order to justify the making of such an order, there must be some special features in the case. 

36.  Bearing the above in mind, with respect to the plaintiff’s counsel, although the New Witness Statement Summons was dismissed for the reasons set out in the Judgment, I am of the view that the taking out of the said summons cannot be said to be “unreasonable to a high degree”.  This is so even though it was a last-minute application.

37.  The plaintiff’s application for an indemnity costs order would therefore have been dismissed anyway even if he did not have the procedural difficulty in making the application at this stage.

B3.  The defendant’s medical condition

38.  At the end of the plaintiff’s written submissions lodged on 28 April 2025, the plaintiff further argued that:

“58. […] time and costs were also suffered, to P’s detriment, by reason of D’s medical condition which, it was announced by D’s Counsel after 5 days into the trial, would disable D from being cross-examined for more than 3 hours per day. D’s family must have known this and the effects of D’s medication for some time. Had they informed P earlier, consequential applications could have been made on his behalf in the context of the time estimate for cross-examination based on a 5-hour day. As it was, the cross-examination overran by 4.5 days. P respectfully submits that he should not be required to shoulder this additional financial burden. Your Lordship is invited to consider exercising Your discretion in P’s favour in this regard.”

39.  With greatest respect, this is a very bad point which should not have been made:

(1)  In the circumstances where the plaintiff is not challenging the genuineness of the defendant’s medical condition, asking the Court to make a costs order on the basis of the defendant’s medical condition is in effect inviting the Court to penalise the defendant for his sickness. This is plainly not right;

(2)  The plaintiff’s logic is not understood.  It seems that he is suggesting that if he had known about the defendant’s medical condition beforehand, the trial would not have over-run, because he would have asked for a longer trial length in the first place.  How is that related to the “additional legal costs” which the plaintiff now asks the defendant to bear?

(3)  In any event, this is not part of the plaintiff’s application for variation of the Costs Order Nisi in accordance with the letter issued by his solicitors dated 11 July 2025. Indeed, he has not, for example, asked for any order in the said letter that the defendant should be liable for the costs of 4.5 days of the trial. The plaintiff should not be allowed to amend his application as such.

40.  I would therefore reject this submission.

C.  THE DEFENDANT’S VARIATION SUMMONS

41.  The defendant’s application for variation is in 2 parts:

(1)  He asks that Kishin be ordered to bear the defendant’s costs of the action personally; and

(2)  He further asks for an indemnity costs order against the plaintiff.

42.  I will deal with these 2 parts of the defendant’s application in turn below.

C1.  Personal liability of Kishin to pay costs

43.  In relation to the first part of the defendant’s application, the defendant submitted that the Court should order Kishin to be personally liable for the defendant’s costs:

(1)  primarily on the bases that he is the administrator of Narian’s estate, and that he has adopted the present action;

(2)  alternatively, on the basis of the court’s jurisdiction under section 52A(2)  of the High Court Ordinance (Cap.4, Laws of Hong Kong)  and Order 62 rule 6A of the RHC to make a costs order against non-party.

44.  Mr Lo, in his written submissions dated 18 July 2025, does not dispute that Kishin should be liable personally for the defendant’s costs at all.  However, he submitted that the defendant’s summons for variation of the costs order nisi should nonetheless be dismissed for the reason that Kishin has represented repeatedly that he would be so liable.  It was therefore said that the defendant’s Variation Summons is “wholly academic and effectively beating a dead horse on an issue that was abundantly clear to all parties involved and is wholly unnecessary”[9].

45.  With respect, I disagree with the plaintiff’s submissions.

46.  First, as Mr Lo accepted, in the present case, Kishin, as the personal representative of Narian’s estate, is only “prima facie personally liable”[10] for the defendant’s costs. 

47.  Hence, there is no fixed rule that Kishin is as a matter of course personally liable for such costs. 

48.  As Mr Lo has expressly confirmed that he raises no dispute on the relevant legal principles cited by the defendant’s counsel in their written submissions dated 11 July 2025, I would gratefully set out the same below for the sake of clarity:

“4. In Williams, Mortimer & Sunnuck on Executors, Administrators and Probate (22^nd Ed, 2023), it is explained at §59-01:-

‘[59-01] In hostile litigation with outsiders, whether brought by representative as claimants or brought against them as defendants, the representatives will be in the position of any other litigants. The costs will be in the discretion of the court, but the general rule is that the unsuccessful party will be ordered to pay the costs of the successful party. The representative will be personally liable to the other party for any costs order made against them, and their liability will not be limited to the assets of the estate even if their liability on the rest of the judgment debt is limited to the assets. The judge making such a costs order will not be concerned as to whether the representative will be entitled to be indemnified against that order out of the estate, and will have no jurisdiction to decide that question, because the persons interested in the estate are not party to the proceedings…’ (emphasis added)

5. In Lewin on Trusts (20^th Ed, 2020)  at §48-113, the learned authors explained a trustee’s personal liability to bear the costs of unsuccessful claim:-

‘Trustees are not in general in a privileged position as to costs in third-party proceedings, as between themselves and the other party to the dispute, merely because they are trustees. The general position is that the trustee is on no better footing than any ordinary plaintiff or defendant, for the circumstances of the trust cannot be allowed to affect the interest of a third party.Accordingly, if a trustee makes a claim against a third party and loses, the trustee will normally be ordered to pay the costs…’ (emphasis added)

6. In Dagnell v J.L. Freedman & Co [1993] 1 WLR 388 at 392B-D, Lord Browne-Wilkinson held that:-

‘… In an action between trustees as plaintiffs and strangers to the trust as defendants, the costs of the action will be dealt with by the trial judge on the normal basis and without regard to the fact that the plaintiffs are trustees. If, in such an action, trustee plaintiffs are ordered to pay the defendants’ costs, the trustee plaintiffs will be personally liable so to do…’ (emphasis added)

7. In Wong Chong Kwai Yin v Tsang Hau Ling, the executrix of Tang Lan Fong[2022] HKCFI 1367 at §§7-10, DHCJ Douglas Lam SC applied the above principles stated in Williams, Mortimer & Sunnuck[D#1] and Lewin on Trusts and ordered that the executrix defendant should be made personally liable for the costs of the action commenced against the deceased during her lifetime.

8.  The starting point is that the personal representative shall be liable for all the costs from the start in the same manner as if they had commenced the action. The burden would be on the party seeking to depart from it to justify such a departure: see Wong Chong Kwai Yin at §§15-22, per DHCJ Douglas Lam SC; see also Williams, Mortimer & Sunnuck at §55-10.”

(original emphasis)

49.  It can therefore be seen that a cost order against the administrator of the deceased’s estate is only described as “normal”, “a general rule” and “a starting point”, and that the Court retains a discretion as to whether such an order should be made or not.  In other words, an expressed court order is necessary so as to make Kishin personally liable, as well as for the purpose of enforcement.

50.  Second, while Kishin had acknowledged before that he might be personally liable for the defendant’s costs, I do not agree with his counsel’s submissions that “it was clear as day to all parties”[11] that Kishin would be personally liable for the defendant’s costs if the action was unsuccessful.

51.  In this regard, I only have to refer to Kishin’s 3^rd Affirmation filed on 20 June 2025, which reads:

“1. I am the Plaintiff in this Action and I make this Affirmation in opposition to the Summons taken out by the Defendant on 30 April 2025 seeking to vary the cost order nisi made by the Honourable Mr. Justice H. Au-Yeung in the Judgment dated 18 March 2025.

[…]

27.  I also acknowledge that I may potentially be personally liable for the costs of this Action but I oppose the Defendant’s Summons seeking to vary the cost order nisi.”

52.  Kishin’s position cannot be clearer: even up to the time when he made his 3^rd Affirmation, he was still opposing the defendant’s variation application.  It should be reiterated that, according to the said Affirmation, such a stance was made not on the ground that he had allegedly given any consent to a court order to that effect.  Indeed, if that was his stance, he could have informed the Court and the defendant’s solicitors once he had been served with the defendant’s Variation Summons, so that costs could have been saved on at least the first part of the defendant’s application.

53.  In any event, given the plaintiff’s latest stance, the defendant’s application should be allowed. 

54.  For the avoidance of doubt, I am of the view that in the circumstances of this case, Kishin’s personal liability should cover the defendant’s costs of the whole action rather than from the time when he obtained the carry-on order. The plaintiff has not contended otherwise.

55.  Given the above conclusion, there is no need for the Court to consider the defendant’s alternative application made pursuant to section 52A(2)  of the High Court Ordinance and Order 62 rule 6A of the RHC.

C2.  Indemnity costs

56.  I have already set out the applicable general principles in the earlier part of this Decision, and I will not repeat the same here.

57.  In the present application, the grounds relied on by the defendant are as follows:

(1)  The plaintiff’s claims were clearly devoid of merits and were brought without sufficient evidential foundation;

(2)  It can be inferred that Kishin continued with this unmeritorious action because he wanted to take advantage of the defendant’s poor health condition;

(3)  Kishin had given false or untruthful evidence (including the advancement of the factual case of the Understanding and the alleged Indian family tradition)  which have been rejected by this Court;

(4)  Kishin has no intention to reach an amicable settlement with the defendant by asking for an unreasonable amount of $116 million for settlement.

58.  Having considered carefully the defendant’s elaboration on the aforesaid matters, I am of the view that this is not a case which warrants the making of an indemnity costs order against the plaintiff. My reasons are as follows.

59.  First, although this Court has found against the plaintiff on all his claims, in my view, this is just another case in which a plaintiff has not been able to establish his claims on the balance of probabilities.  Such a failure does not necessarily mean that the plaintiff should be further penalised by the Court’s adoption of a higher scale of taxation of costs.  As emphasized by To J in KJ v KMLM (HCMC 4/2010, unreported, 21 May 2014)  at [22]:

“If unreasonable conduct is relied on, the losing party’s conduct would need to be unreasonable to a high degree. In this context, ‘unreasonableness’ does not mean merely wrong or misguided in hindsight: see Kiam v MGN Ltd (No 2)[12]. Advancing a case which is difficult, unlikely to succeed or which in fact fails, or without any foundation in law or fact, or devoid of merits, is not necessarily in itself a sufficient reason for an award of indemnity costs: see Overseas Trust Bank[13]; Shaina Investment Corporation v Standard Bank London Ltd[14]; Golden Sand Marble Ltd v Hsin Chong Construction Co Ltd[15]; Kao, Lee & Yip (a firm)  v Midland Realty International Limited[16]. The court’s finding that the claim or the ground of defence is plainly and obviously incredible on the fact, or that the evidence has been deliberately untruthful will not necessarily in itself warrant an order for indemnity costs. The conduct of the losing party must be of a more venal kind and the conduct of the litigation has in some sense been wicked: see Choy Yee Chun v Bond Star Development Ltd[17]; and Kao, Lee & Yip[18].”

60.  Second, although I have found that Kishin was an incredible witness, that, again, does not necessarily mean that an indemnity costs order should be made.  As Deputy High Court Judge Lisa Wong SC (as she then was)  pointed out in Kao, Lee & Yip (a firm)  v Midland Realty International Limited (HCA 2153/2007, unreported, 31 March 2010)  at [18]:

“To my mind, it must at the end of the day be a question of extent and degree. […] Indeed, in every case where there is a material dispute of fact, the Court is bound to prefer one party’s account. Such a finding, without more, is not a special or unusual feature making indemnity costs appropriate.”

61.  Third, while it is true that this Court has at the end of the day accepted the existence of the CESCO Arrangement, it should be borne in mind that it has also been commented in the Judgment that it was indeed suspicious for the defendant not to plead such an arrangement in his first version of the Defence.  Hence, the plaintiff’s allegation of fabrication, though not accepted, cannot be said to be so unreasonable that should lead to a more serious costs consequence.

62.  Fourth, there is not enough material to infer that Kishin’s decision to continue with the present action was reached out of his desire to take advantage of the defendant’s poor health condition.

63.  Fifth, the offer of $116 million was made in the form of a sanctioned offer.  As accepted by the defendant, this was just a part of the plaintiff’s claims, for the defendant stated in his 9^th Affirmation that:

“6. […] Even just taking Kishin’s settlement offer of HK$116,000,000 (exhibit ‘CTS-86)  as an illustration, Kishin’s share to that would have been HK$16,571,428.60 (i.e. one seventh thereof)  which would be a substantial sum. This is not to mention that if Narian’s claim were wholly successful, Kishin’s share would be much greater.”

(emphasis added)

64.  Hence, it cannot be said that the offer was “plainly unreasonable” as alleged.   

65.  Looking at the matter in the round, I am not satisfied that the threshold of making an indemnity costs order is met.

66.  I therefore conclude that the defendant’s costs should only be taxed on the usual party-and-party basis.

D.  ORDER

67.  I therefore make the following orders:

(1)  The Estate of Narian Samtani, Deceased and Kishin Samtani personally do jointly and severally pay the defendant the costs of this action (including the costs of the trial and all the reserved costs (including the costs of the Specific Discovery Summons filed on 23 April 2012)), to be taxed on party-and-party basis if not agreed, with certificate for two counsel.

(2)  The plaintiff’s Variation Application be dismissed.

E.  COSTS

68.  I make a costs order nisi that the Estate of Narian Samtani, Deceased and Kishin Samtani personally do jointly and severally pay the defendant his costs on the plaintiff’s Variation Application and 50% of his costs of the defendant’s Variation Summons, with certificate for two counsel, to be taxed if not agreed.

69.  The above order nisi shall become absolute in the absence of application to vary (which, if any, will be disposed of on paper)  within 14 days hereof.

Mr Tony Lo, instructed by Fairbairn Catley Low & Kong, for the plaintiff

Mr Kenny Lin and Mr Jason Kung, instructed by Alvan Liu & Partners, for the defendant

HCA 496/2011

[2025] HKCFI 1076

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 496 OF 2011

_________________

BETWEEN

(by the Carry On Order of Master M Wong dated 31 August 2018)

_________________

_________________

JUDGMENT

_________________

A. INTRODUCTION

1.  This trial concerns a dispute within the Samtani family. The parties herein are siblings, and are the children of the late Mr Tikamdas Parsram Samtani (“Father”) and his late wife Tikamdas Bhagwanti Samtani (“Mother”).

2.  Father and Mother had 8 children, namely (in order of seniority):

(1) Lilawati Tikamdas Samtani (“Lily”), a daughter;

(2) Drupti Samtani (“Rose”), a daughter;

(3) Chandersen Tikamdas Samtani (i.e. the defendant), a son;

(4) Ruka Samtani, a daughter;

(5) Vidya Samtani (“Vidya”), a daughter;

(6) Narian Samtani (“Narian”), a son;

(7) Kishin Samtani (“Kishin”), a son; and

(8) Rita Samtani, a daughter.

(collectively, “the Children”)

3.  Father founded and carried on import and export businesses under the trade names of Kay Tee Corporation (“Kay Tee”) and Kishoo Brothers (“Kishoo”) (collectively, “the Businesses”) since mid-1950s as a sole proprietor.

4.  Narian, the defendant and Kishin were all, at one point or another, employees of the Businesses and received salary therefrom.

5.  With effect from 26 May 1983, Father and the defendant were partners of the Businesses (“the 1983 Partnership”). Father was a 60% partner and the defendant was a 40% partner.

6.  Father passed away on around 29 October 1989[1].

7.  After Father passed away, Narian and the defendant became the only partners of the Businesses (“the 1989 Partnership”). Narian was a 60% partner and the defendant was a 40% partner.

8.  The following properties are currently registered under the defendant’s name:

(1) A flat at Evelyn Towers, 38 Cloud View Road (“the Evelyn Towers Flat”);

(2) A flat at Maiden Court, 46 Cloud View Road (“the Maiden Court Flat”);

(3) A House at Manderly Garden, 48 Deep Water Bay Road (“the Manderly Garden House”);

(4) Some office units on 4/F of Conwell House, 34-38 Stanley Street (“the 4/F Conwell Office”)

(5) An office unit on 3/F of Conwell House, 34-38 Stanley Street (“the 3/F Conwell Office”) ((4) and (5) collectively, “the Conwell Offices”); and

(6) A flat at Tower 28, South Horizons, Yi Nam Road (“the South Horizons Flat”).

9.  The above-mentioned properties were purchased at the respective prices and dates as follow:

Property	Consideration	Date of purchase
The Evelyn Towers Flat	$400,000	30 April 1977
The Maiden Court Flat	$1,049,900	29 April 1981
The Manderly Garden House	$4,850,000	11 February 1987
The 4/F Conwell Office	$1,625,000	30 April 1987
The 3/F Conwell Office	$640,000	30 April 1987
The South Horizons Flat	$4,377,000	20 September 1995

B. THE PLAINTIFF’S CLAIMS

10.  This action was started in 2011 by Narian against the defendant. Unfortunately, Narian passed away in 2013. As a result, the action remained dormant for 5 years. Upon obtaining Letters of Administration of Narian’s estate, Kishin successfully applied for a “carry on” order in 2018 and substituted Narian as the plaintiff herein. In the light of these circumstances, the term “plaintiff” to be used hereinbelow in this Judgment shall be taken to mean either Narian or Kishin, as the case may be.

B1. The plaintiff’s claims as pleaded in theRe-Re-AmendedStatement of Claim

11.  The plaintiff’s case as pleaded in the Re-Re-Amended Statement of Claim may be summarised as follows.

12.  The Children (except Vidya) had at one time or another worked in the Businesses on the understanding with Father and one another that the sons (i.e. the defendant, Kishin and Narian) should be entitled to and share equally in the profits of such businesses and in the family wealth accumulated therefrom, and the daughters would be supported and provided for financially until they got married (“the Understanding”).

13.  The Understanding continued despite the conversion of the sole-proprietorship into partnership and the subsequent re-constitution of the partnership.

14.  There was also an Indian family tradition that Father tended to entrust the defendant as the eldest son of the family more with the family wealth generated by the Businesses and the assets acquired therewith, but only on the basis of the Understanding.

15.  The Businesses had generated profit sufficient for the acquisition of various properties (including those set out in [8] above, a flat at Kong Wing Court, Aberdeen Centre (“the Aberdeen Centre Flat”), and another flat located in Tower 27 of the South Horizons which is registered under Rose’s name and currently occupied by her (“Rose’s SH Flat”)) pursuant to the Understanding. Such properties (except Rose’s SH Flat) were, according to Indian family tradition, held under the name of the defendant for the benefit of all the sons and the unmarried daughters of the family.

16.  The individual situations of some of the landed properties purchased by the Samtani family were as follow:

(1) The Evelyn Towers Flat – It was used as the home of the Samtani family and was purchased pursuant to the Understanding, even though it was registered under the defendant’s name.

(2) The Maiden Court Flat and the Aberdeen Centre Flat – Both flats were partly paid out of family investments and partly financed by mortgage loans. While they were registered under the name of the defendant, they were purchased pursuant to the Understanding.

(3) The Manderly Garden House – It was the intention of the entire Samtani family to use the profit of the Businesses and/or the family wealth kept in the name of the defendant to pay for the down payment, etc. for the purchase, and raise the other 90% of the purchase price by a mortgage loan. It was further agreed:

(a) orally among Rose, the defendant, Kishin and Narian that the House should be rented out so as to generate rental for covering mortgage instalments and expenses (“the Manderly Rental Agreement”);

(b) among Father, Mother, Rose, Lily, the defendant, Kishin and Narian that the House should be vested in Kishin, the defendant, Rose and Narian as to 30%, 30%, 20% and 20% respectively, and they shall assume personal liability for the repayment of the entire mortgage loan.

The House was used in April/May 1989 as security against a further loan of about $2 million (which Rose, the defendant, Kishin and Narian were personally liable), with the intention of getting capital for investments in stocks and shares pursuant to the Understanding. However, in breach of the Manderly Rental Agreement, the defendant refused to let out the Manderly Garden House, and occupied it as his family residence.

(4) The Conwell Offices – It was agreed among Rose, the defendant, Kishin and Narian in 1986/1987 to purchase the Conwell Offices as a family investment pursuant to the Understanding by using the monies from the Businesses, with a view to occupying the 4/F Conwell Office and letting out the 3/F Conwell Office. The defendant became the registered owner thereof pursuant to the Understanding, and the down payment, etc. were paid by the Businesses, with the balance funded by mortgage, and the repayment of which was also paid by monies from the Businesses.

17.  It was agreed in around late 2004 between Narian and the defendant that Narian would transfer his 20% interest in the Manderly Garden House to the defendant who in return would transfer the defendant’s legal title and beneficial interest in the Evelyn Towers Flat together with $10 million (by instalments over 2 years) to Narian (“the Evelyn Towers Agreement”).

18.  It was further agreed among the defendant, Kishin and Narian to acquire a flat in Braemar Hill Mansions (“the Braemar Hill Mansions Flat”) as tenants-in-common in equal shares (1/3 each), with an agreement, inter alia, that they would contribute equally to the mortgage repayments and outgoings thereof with funds from the Businesses, and the said flat would be used by Kishin and his family rent-free (“the Braemar Hill Mansions Agreement”).

19.  The defendant breached the Understanding in that he, inter alia, had unlawfully and/or wrongfully claimed that the assets acquired with funds from the Businesses belong to him beneficially and exclusively.

20.  So far as relief which relates to the landed properties are concerned, the plaintiff seeks the following against the defendant “being a 40% partner of the Businesses”:-[2]

(1) a declaration that the defendant unlawfully and/or wrongfully acquired and/or purported to retain landed properties in his own name and to his own exclusive use and benefit by monies belonging to and/or misappropriated from the Businesses from 26 May 1983 to date;[3]

(2) a declaration that the defendant unlawfully and/or wrongfully made and/or acquired and/or purported to retain other investments in his own name and to his own exclusive use and benefit by monies belonging to and/or misappropriated from the Businesses from 26 May 1983 to date;[4]

(3) a declaration that the defendant is liable to account and an order that he do account for, inter alias, the matters aforesaid and for Narian’s share of and in such monies, payments, profits, properties, investments, and net rental income of which Narian pursuant to the Understanding and/or as 60% partner in the Businesses has been unlawfully and/or wrongfully deprived of by reason of the defendant’s conduct;[5]

(4) an order that the defendant do pay the plaintiff 60% of the monies, payments, profits, properties, investments, net rental income found due on the taking of account;[6]

(5) a declaration that the Maiden Court Flat is held by the defendant on resulting trust;[7]

(6) an order that the defendant is liable to account for the proceeds of sale of the Aberdeen Centre Flat;[8] and

(7) an order that the defendant do pay to the plaintiff the sum found due to him from the proceeds of sale of the Aberdeen Centre Flat and profits made from any sums invested from such proceeds of sale in accordance with an equitable apportionment thereto or such sum as is due to him therefrom as a partner of the Businesses.[9]

21.  Further, the plaintiff alleges that the defendant misappropriated monies belonging to the Businesses, in that at least between 2004 and 2010, the defendant had instructed customers of Kay Tee (i.e. Cassidy Electrical Supply Co Ltd (“CESCO”), E&M Lighting (“E&M”) and Woodies DIY Ltd (“Woodies”)) to remit monies in respect of goods ordered by them and as covered by invoices issued by Kay Tee and/or Kishoo, to his two personal accounts maintained with Standard Chartered Bank.[10]

22.  It is alleged that the defendant would thereafter retain part of the monies received from the customers for his personal use, after which he would remit/transfer the balances to the bank account of Kay Tee and/or Kishoo.[11] It is thus suggested that the defendant thereby misappropriated the shortfall.[12]

23.  In this regard, the plaintiff seeks the following relief:-

(1) a declaration that the defendant unlawfully and/or wrongfully misappropriated and/or converted monies belonging to Kay Tee and Kishoo from 26 May 1983 to date;[13]

(2) a declaration that the defendant unlawfully and/or wrongfully received and/or acquired and misappropriated monies, payments and/or profits directly or indirectly to his own personal use and advantage by conduct of business in competition with Kay Tee and Kishoo from 26 May 1983 to date;[14]

(3) a declaration that the defendant is liable to give account, and an order for account;[15]

(4) an order that the defendant to pay the plaintiff 60% of the monies, payments and/or profits due on taking of such accounts.[16]

24.  The plaintiff also seeks an injunction for the delivery up or access to all books, accounts and business records of Kay Tee and Kishoo.[17]

25.  There are 3 other standalone allegations for breaches of agreements.

26.  Firstly, the plaintiff pleaded that the defendant was in breach of the Manderly Rental Agreement by refusing to let it out since 1996.[18] However, no relief is sought in this respect.

27.  Secondly, the plaintiff alleges that the defendant was in breach of the Evelyn Towers Agreement in that he had failed to transfer the Evelyn Towers Flat to Narian and to pay him $10 million.[19] The plaintiff seeks specific performance or alternatively damages for this alleged breach.[20]

28.  Thirdly, the defendant was in breach of the Braemar Hill Mansions Agreement in that he had refused and/or failed to apply the funds of the Businesses to discharge the monthly mortgage instalments since 2005.[21] However, no relief has been sought in this respect.

B2. The plaintiff’s claims at the Opening Submissions

29.  At his Opening Submissions, Mr Hingorani submitted that, as far as the landed properties are concerned, the plaintiff would rely on common intention constructive trust. It was said, inter alia, that although this legal concept was not expressly stated in the Re-Re-Amended Statement of Claim, the defendant could not have been taken by surprise at all because the Understanding had been pleaded, and the Understanding was all about the family members’ common intention.

30.  I am afraid I cannot accept that the plaintiff is entitled to rely on common intention constructive trust at the trial.

31.  Firstly, I do not accept that this was, to say the least, adequately pleaded in the Re-Re-Amended Statement of Claim as alleged.

32.  As summarized by G Lam J (as he then was) in Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 at [46], the elements which a plaintiff must prove in order to establish a common intention constructive trust in his favour are that:-

(1) there was a common intention between him and the defendant that the plaintiff was to be the beneficial owner of the property despite that it was acquired in the defendant’s name;

(2) the plaintiff altered his position in detrimental reliance upon such common intention; and

(3) it is unconscionable for the defendant to assert ownership in reliance on his legal title to the property.

33.  While there is no doubt that the facts which constitute “detriment reliance” need to be pleaded[22], it is clear that the plaintiff has not done so. In this regard, Mr Hingorani and Mr Lo suggested in their Opening Submissions that:

“176. [Narian] also stated that he went into the Business when he did because he wanted to finish matriculation and to gain some outside work experience first.

177. In so doing, he became eligible to avail himself of other employment opportunities which he lost when he joined the Business. In other words, he lost a prospect of benefit even if such prospect were contingent and uncertain. Such loss of opportunity is sufficient to amount to a detriment.”

34.  The above submissions cannot assist the plaintiff because:

(1) The content under paragraph 176 above was only found in Narian’s witness statement rather than in the Re-Re-Amended Statement of Claim. In any event, working in the Businesses per se cannot be a detriment. Hence, it cannot salvage the plaintiff’s defective pleaded case;

(2) More importantly, the loss of alternative opportunities and loss of “prospect of benefit” were not even in Narian’s witness statement.

35.  Secondly, a more fundamental problem faced by the plaintiff is that the cause of action of common intention constructive trust is apparently not mentioned in the Writ, and as a result he cannot be permitted to run such a case.

36.  The starting point is Order 18 rule 15(2) of the Rules of the High Court (“RHC”) which reads:

“A statement of claim must not contain any allegation or claim in respect of a cause of action unless that cause of action is mentioned in the writ or arises from facts which are the same as, or include or form part of, facts giving rise to a cause of action so mentioned; but subject to that, a plaintiff may in his statement of claim alter, modify or extend any claim made by him in the endorsement of the writ without amending the endorsement.”

37.  In Moulin Global Eyecare Holdings Ltd v Olivia Lee Sin Mei (2014) 17 HKCFAR 466, Mr Justice Gummow NPJ accepted that the indorsement in the writ marks out the perimeter or range of the area within which the plaintiff may express its claim in a formal fashion in the statement of claim whether as originally filed or as sought to be amended.

38.  In Hong Kong Civil Procedure 2025, Vol.1, Commentary 18/15/8, the learned editors also summarised the legal position as follows:

“It has been said that para.(2) is, in general, meant to relate to cases in which some part of the facts necessary to establish the claim made in the writ would suffice to establish some other, perhaps narrower, cause of action (per Sachs L.J. in Brickfield Properties Ltd v. Newton [1971] 1 W.L.R. 862, CA). A plaintiff therefore cannot, without amending the writ, add in his statement of claim a new cause of action based on facts not disclosed in the writ (Wong Chun Loong, Tony v. Jademan (Holdings) Ltd[1991] 2 HKLR 580) or one in respect of which one of the facts in support is not relevant to and inconsistent with the cause of action mentioned in the writ without amending the writ (Kala Sakhrani Mohan v. Ontrade International Ltd [1983] 1 HKC 81) or completely change the cause of action indorsed on the writ (Cave v. Crew (1893) 62 L.J. Ch. 530; Ker v. Williams (1886) 30 S.J. 238) or introduce an entirely new and additional cause of action which cannot be conveniently tried with the original claim (United Telephone Co. v. Tasker (1888) 59 L.T. 852) or to introduce a claim which the court has no jurisdiction to entertain, eg a claim which, if indorsed upon a writ, would not have been allowed to be served out of the jurisdiction (Waterhouse v. Reid [1938] 1 KB 743, CA).”

39.  In the Writ of Summons herein, the plaintiff stated that his claims were for:

(1) A declaration that the defendant, being a 40% partner in the Businesses:

1. unlawfully and/or wrongfully conducted business dealings and transactions on his own account in competition with that of the Businesses from 26 May 1983 to date;

2. unlawfully and/or wrongfully diverted business away from the Businesses to himself from 26 May 1983 to date;

3. unlawfully and/or wrongfully misappropriated monies belonging to the Businesses from 26 May 1983 to date;

4. unlawfully and/or wrongfully received and/or acquired monies, payments and/or profits directly or indirectly to his own personal use and advantage by conduct of business in competition with and/or diverted away from the Businesses from 26 May 1983 to date;

5. unlawfully and/or wrongfully acquired and/or purported to retain real properties in his own name and to his own exclusive use and benefit by monies belonging to and/or misappropriated from the Businesses from 26 May 1983 to date;

6. unlawfully and/or wrongfully made and/or acquired and/or purported to retain other investments in his own name and to his own exclusive use and benefit by monies belonging to and/or misappropriated from the Businesses from 26 May 1983 to date;

7. is liable to account

(a) in respect of the matters pleaded under paragraph 1(1) – (5) aforesaid;

(b) for all his dealings and transactions in the Businesses from 26 May 1983 to date;

(c) for all investments of any kind whatsoever and their present equivalent or derived from the same (including interest, dividends or other earnings upon the same or accretions in value of the same) by reason of the matters pleaded under paragraph 1(6) aforesaid;

(d) for all rental income received and outgoings and expenses discharged by the defendant in respect of the properties;

(e) for all his dealings with the net rental income of the properties and their present equivalent or derived from the same (including all interest, dividends or other earnings upon the same or accretions in value of the same); and

(f) for the plaintiff’s share of and in such monies, payments, profits, properties, investments, net rental income of which the plaintiff as 60% partner in the Businesses has been unlawfully and/or wrongfully deprived by reason of the defendant’s conduct as pleaded aforesaid.

(2) An order that the defendant do account as pleaded under paragraph 1(7) above.

(3) An order that the defendant do pay the plaintiff 60%, or in the alternative what sum is due to him, of the monies, payments, and/or profits, properties, investments, net rental income as pleaded aforesaid and found due on the taking of such accounts.

(4) Specific performance of the Evelyn Towers Agreement.

(5) In the alternative to (4) above, damages for breach of the Evelyn Towers Agreement.

(6) Damages for unlawful interference in the Businesses.

(7) Mandatory injunction that the defendant, whether by himself, his servants or agents, do deliver up or allow the plaintiff access to, inspection and copying of all books, accounts, etc. of the Businesses.

(8) All future proper accounts, inquiries and directions.

(9) Interest.

40.  It can be seen that the writ only included 2 causes of action, namely, a partnership claim and a contractual claim (regarding the Evelyn Towers Agreement). There is no trace of any common intention constructive trust claim. That is fatal to the plaintiff’s case of common intention constructive trust.

41.  Apart from attempting to rely on common intention constructive trust, Mr Hingorani also informed this Court during his Opening Submissions that, as far as the landed properties are concerned, the plaintiff’s updated position on his claims would be as follows:

(1) He would not assert any proprietary claim any further;

(2) In respect of the Evelyn Towers Flat, he would only claim damages for the defendant’s breach of the Evelyn Towers Agreement, and would abandon his claim for specific performance thereof;

(3) In respect of the Maiden Court Flat, he would claim for (a) damages for the increment in its capital value; and (b) an account for rental income since 1981, on the basis that it was purchased with funds from the Businesses;

(4) In respect of the Aberdeen Centre Flat which had been sold by the defendant already, he would claim for an account for the sale proceeds and interest thereon, on the basis that it was purchased with funds from the Businesses;

(5) In respect of the Manderly Garden House, he would not seek any relief in relation to it even though it was purchased with funds from the Businesses;

(6) In respect of the Conwell Offices, the plaintiff would claim for an account as to their capital value, on the basis that they were purchased with funds from the Businesses;

(7) In respect of Rose’s SH Flat, the plaintiff would not make any claim even though it was purchased with funds from the Businesses;

(8) In respect of the South Horizons Flat, the plaintiff would claim for an account of the rental income.

B3. The plaintiff’s claims at the Closing Submissions

42.  At the stage of Closing Submissions, the plaintiff’s counsel further confirmed that the plaintiff would not rely on resulting trust in his case.

43.  Hence, the followings are the remaining causes of action pursued by the plaintiff:

(1) a partnership claim by which it is alleged that the defendant had used funds from the Businesses to purchase various landed properties;

(2) breach of the Evelyn Towers Agreement;

(3) misappropriation by asking CESCO to pay funds directly into the defendant’s personal bank account.

C. THE DEFENDANT’S CASE

44.  The defendant’s case is relatively simple and may be summarised as follows:

(1) There was no Understanding nor “Indian family tradition” (to entrust the eldest son with family assets) as such;

(2) The subject landed properties were purchased with his own money and therefore they belong to him legally and beneficially;

(3) There was no Evelyn Towers Agreement as alleged, and in any event it is unenforceable for being an oral agreement;

(4) The alleged misappropriation of monies was actually a payment arrangement between CESCO and the Businesses (“the CESCO Arrangement”) which was known to Narian at all material times:

(a) CESCO was a customer of the Businesses, and E&M was the same company as CESCO. Woodies was a customer of CESCO, and the latter would place order with the Businesses directly on behalf of Woodies;

(b) The money stated on the invoices issued by the Businesses include two parts, namely, actual amount payable by the customer and to be received by the Businesses; and credit payable to CESCO. The latter, which the plaintiff alleges to have been misappropriated by the defendant, was not an amount due to the Businesses, and there would be a corresponding commission credit note issued by the Businesses against a specific invoice setting out the amount of credit payable by the Businesses to CESCO;

(c) Since in general the Businesses would not receive payment from CESCO, E&M and Woodies within a short period of time, in order to keep the Businesses running, the defendant would arrange funds from his bank accounts to pay the Businesses what was due by CESCO, E&M and Woodies first according to the invoices pending payments to be made by them;

(d) As the defendant had already advanced the actual amount to the Businesses, he would keep the actual amount out from the invoiced amount as reimbursement, leaving the credit which were then paid to CESCO as directed;

(e) In the premises, all funds which have been due to the Businesses from CESCO and Woodies have been received by them.[23]

45.  The defendant also counterclaims against the plaintiff in relation to two matters:

(1) Firstly, it is alleged that Narian, in breach of his duties owed as a partner to the Businesses:

(a) engaged in and/or dealt with the business of Regal Top Trading Ltd (“Regal Top”), a business operated by Kishin, and was in competition with the Businesses;

(b) diverted business / customers of the Businesses to Regal Top.

The defendant therefore claims against the plaintiff for an account of benefits he received or to pay damages for loss and damage suffered by the defendant.

(2) Secondly, while the defendant as legal and beneficial owner of the Evelyn Towers Flat had requested Narian on 12 May 2011 to leave the said property, the latter had refused to do so wrongfully on 16 May 2011. In the premises, he is liable to pay mesne profits in respect of his occupation thereof since 1 June 2011.

D. THE PLAINTIFF’S DEFENCE TO COUNTERCLAIM

46.  In relation to the defendant’s counterclaim, the plaintiff’s defence is that:

(1) Regal Top was a business operated by Kishin, and Narian had not been involved therewith. Neither did Narian receive any benefits from any business or other dealings with Kishin. There was also no diversion of business. The defendant’s allegation concerns a common customer of the Businesses and Regal Top;

(2) In respect of the mesne profits counterclaim, the plaintiff denies that the defendant was or is the exclusive legal and beneficial owner of the Evelyn Towers Flat or that he has a right to make such a claim, even though it is admitted that Narian had remained in occupation despite the defendant’s demand and did not pay the defendant for such occupation.

E. THE DEFENDANT’S APPLICATION TO ADDUCE WITNESS STATEMENT

47.  Before I go on to deal with the substantive issues, I should put on record the reasoning for dismissing the defendant’s summons filed on 16 November 2023 (“the New Witness Statement Summons”) which was returnable on the first day of the trial, under which the defendant applied for leave to adduce the Supplemental Witness Statement of Michelle Samtani (“Michelle”) who is the defendant’s daughter. The main purpose of this witness statement was to produce various original copies of inward remittance advices (“the Original Advices”) and to explain certain handwritten notes thereon.

48.  The New Witness Statement Summons was supported by the Affirmation of Jason John Samtani (“Jason”), who is the son of the defendant. Jason explained that:

(1) On around 28 October 2023, he found the Original Advices among some old documents which in turn were discovered when he was trying to clean some cabinets in the office of the Businesses (4/F Conwell Office);

(2) As he noticed that the remarks (“Markings”) which were handwritten on the Original Advices appeared to be the handwriting of his sister Michelle, he asked Michelle about the Original Advices and whether the Markings were made by her;

(3) Having got the answers from Michelle, he thought what he was told by Michelle were very relevant to the defendant’s case in this action;

(4) Before his discovery of the Original Advices, he did not know or appreciate that those documents had been kept in the cabinets of the 4/F Conwell Office. Neither did the defendant, Michelle, nor their family members know about that, and they could not remember who placed the Original Advices there.

49.  Mr Lin for the defendant fairly accepted that this was a very late application. He drew this Court’s attention to the case of Parsad v Great Wealthy Engineering Co Ltd [2012] 3 HKLRD 705, in which Bharwaney J had the following to say:

“5. Whilst parties are generally free to call factual witnesses of their choice and leave is invariably given at the checklist review hearing to the parties to serve or exchange witness statements, the court’s discretion, whether or not to accede to a party’s late application to rely on a witness statement deposing to relevant and admissible facts, must be exercised within the ambit of the court’s management powers and in the light of the objectives of the civil justice reform, including the need to ensure the cost effectiveness of the proceedings; to ensure that the case is dealt with expeditiously; to ensure reasonable proportionality having regard to the amount of money involved, the importance of the case, the complexity of the issues, and the financial position of each party; to ensure procedural economy in the conduct of the proceedings; and to ensure fairness between the parties.

6. Whilst the primary aim is to secure the just resolution of the dispute in accordance with the substantive rights of the parties, and which must include the right of a party to rely on admissible, relevant and probative factual evidence, the court must also have regard to other relevant circumstances, such as the potential disruption to the trial, the prejudice to the other parties, and the explanation offered by the applicant for the late application. These matters have to be considered and weighed in the light of and against the underlying objectives of the civil justice reform to ensure cost effectiveness and economy, expedition, proportionality, and fairness between the parties.

7. It is not possible to lay down guidelines to cover and cater for every possible situation that may give rise to a late application for leave to rely on a witness statement; however, the court would have to carefully weigh, in each case, the relevance and probative value of such a witness statement against the potential disruption to trial, prejudice to other parties, and the objectives of civil justice reform […].”

50.  The above general principles were not in dispute. For completeness, it may also be helpful to refer to the case of Chu Hsiao-Chiu alias Chu Tony Chu Hsiao Chiu alias Chu Hsiao Chiu, deceased v Ma Jinrui & Another[2020] HKCFI 942, in which the plaintiff therein sought leave to file two affidavits in opposition to various applications taken out by the defendants less than 3 weeks before the substantive hearing. In his Decision, Coleman J. took the view that:

“18. It is well-established in the ‘post-CJR era’ that the underlying objectives emphasise not only substantive but also procedural fairness. Therefore, late or last-minute applications trigger the Court’s expectation that the applicant will provide a full account of the lateness of the application, and full justification as to why the application should be entertained at all at such a late stage.

19. There is no longer room for the notion that delay, even though inordinate and unexplained, will be forgiven as long as there is no prejudice and costs are paid. Courts should take into account that there may be an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Further, the vacation or adjournment of the hearing occasioned by last-minute applications may mean the loss of the hearing day which could have benefited other litigants, and inefficiencies in the use of Court time, which is a public resource. Hence, late applications can be dismissed on the basis of lateness alone.”

51.  Having heard counsel’s submissions, I held the view that the New Witness Statement Summons should be dismissed for the following reasons:

(1) Jason explained that the Original Advices were discovered in the cabinets in the 4/F Conwell Office. There was no evidence which showed that those documents were only placed thereat recently, and it might be inferred that they had always been put in those cabinets. In these circumstances, the first question must be why they were not discovered earlier, particularly when those documents had been specifically requested for by the plaintiff long time ago, and indeed, they were documents which the defendant was obliged to produce pursuant to a court order dated 16 September 2011. However, no such explanation had been given. In my view, there had been inexcusable delay on the part of the defendant, and the application could be dismissed on this ground alone.

(2) In the event leave was granted for the defendant to rely on the Supplemental Witness Statement of Michelle, as a matter of fairness, time must be given for the plaintiff’s legal team to go through the new documents carefully, consider the interrelationship of the Original Advices with the many documents already included in the trial bundle and take further instructions from the plaintiff. Mr Hingorani informed this Court that he would need at least 3 days but preferably 4 days to complete the process, which must be reasonable in the circumstances. Although a total of 14 days had been reserved for this trial, it must be borne in mind that the long period of trial was fixed having taken into account the defendant’s need to take long breaks from time to time while he was giving evidence in Court. Hence, the loss of 4 days might therefore lead to the case being part-heard, which was highly undesirable, particularly when this case had been pending for 12 years.

(3) It could not be disputed that the defendant’s very late application had disrupted the plaintiff’s preparation of the trial as attention, time and effort had been diverted to the opposition of the late application. This in itself was a form of prejudice. Even if this Court only granted a short adjournment (say, for a few days, so that the plaintiff could take further instructions on the Original Advices), that would mean that further prejudice would be caused to the plaintiff, which was very unfair to the plaintiff.

52.  The New Witness Statement Summons had therefore been dismissed with costs.

F. CREDIBILITY OF WITNESSES

53.  In Hu Lan v David Golden[2023] HKCFI 873, this Court held that:

“36. When I consider the credibility of various witnesses who had given evidence in court, I shall take the following matters into account:

(1) Generally speaking, contemporaneous written documents and documents which came into existence before the problems in question emerged are of the greatest importance in assessing credibility;

(2) Importance should be attached to the inherent likelihood or unlikelihood of an event having happened, or the apparent logic of events;

(3) The court will also attach importance to the consistency of the witness’ evidence with undisputed or indisputable evidence, and the internal consistency of the witness’ evidence. The latter type of consistency is often tested by a comparison between the witness’ oral testimony and his or her witness statement;

(4) The court should consider a witness’ motive for deliberately not giving truthful testimony. For example, telling the truth may prejudice his interest, or a just determination of the litigation may affect his interest;

(5) It is essential to have regard to the entirety of a witness’ evidence. A witness can make mistakes, but the mistakes do not necessarily affect other parts of his evidence. Likewise, a witness may lie. However, lies themselves do not mean necessarily that the entirety of that witness’ evidence is to be rejected. A witness may lie in a stupid attempt to bolster his case, but the actual case nevertheless remains good irrespective of the lie;

(6) On the other hand, where it is shown that a witness has been discredited over one or more matters to which he has testified, this fact is relevant to the assessment of his overall credibility;

(7) While the court is entitled to take demeanour into account when assessing testimony, it should be borne in mind that demeanour can be deceptive and is therefore to be approached with care.”

54.  I will bear the above in mind when I consider the credibility of the witnesses in the present case.

55.  In support of the plaintiff’s claims, statements of the following witnesses have been served:

(1) Kishin;

(2) Narian; and

(3) Lily.

56.  Unfortunately, both Narian and Lily had passed away before the trial. In such circumstances, their witness statements were adduced as hearsay evidence.

57.  On the other hand, apart from the defendant who had given evidence in Court, he had also called Rose and Michelle as his witnesses.

F1. Kishin

58.  I am of the view that Kishin is neither a credible nor a reliable witness for, inter alia, the following reasons.

59.  Even though he did not have personal knowledge on quite a number of matters, he tended to give evidence on those matters anyway based on his own speculation without any basis. For example:

(1) When he was challenged that Father did give Lily a Power of Attorney in 1962 authorising her (rather than the defendant) to deal with all Father’s affairs including the Businesses, Kishin stated he was sure that Father did give another power of attorney to the defendant subsequently. However, it is apparent that it was only his wild guess and he had absolutely no basis for saying so;

(2) When it was put to him that Father was very ill as at 1 October 1989 (the effective date of Narian becoming a partner of the Businesses) and therefore he could not have transferred his 60% interest in the Businesses to Narian, Kishin alleged that Father must have signed documents to that effect. However, again, Kishin had no basis for saying that;

(3) He stated in Court that when the Evelyn Towers Flat was bought, the purchase monies were firstly transferred from Father’s saving account to the defendant’s personal bank account, and then the defendant issued cheques for payment. However, he subsequently admitted that it was only his guess. On the following day of the trial, when he was asked on this matter further, he changed his evidence, and stated that the purchase money was paid out of a joint back account held by Father and Mother;

(4) He suggested in Court that Father put landed properties under the defendant’s name probably because he wanted to avoid estate duty liability. He had never said that in any of his witness statements, and admitted that this matter only came to his mind while giving oral evidence. In my view, this illustrates that Kishin would speak whatever which came to his mind, not caring whether those matters were true or not. Indeed, after further cross-examination, he admitted that he in fact did not know what Father was thinking at the time;

(5) He further stated in his oral evidence that Father put the Evelyn Towers Flat under the defendant’s name because of Father’s health condition. However, he had never mentioned this in his witness statement;

(6) While he stated in his witness statement that the down payments for the Maiden Court Flat and the Aberdeen Centre Flat were paid out of the Businesses’ funds, he admitted in Court that he in fact did not know the source of funds for such down payments.

60.  Some of Kishin’s evidence is very difficult to comprehend because they do not make sense. For example:

(1) He alleged that in view of Father’s old age and deteriorating health, Rose, the defendant, Narian and himself became increasingly concerned about the future of the Businesses, and proposed to Father that the sole proprietorship should be converted into a partnership. However, when he was cross-examined on the matter, and was asked why Father should still be holding 60% of the Businesses if the alleged purpose of the conversion into a partnership was to prepare for Father’s demise one day, he stated that that was because Father was still alive at the time. That answer is indeed puzzling because it contradicted his own evidence.

(2) He said Narian and he knew that the defendant had been misappropriating the Businesses’ monies for a long time, before 2006, but they did not do anything about it because they wanted to keep harmony, despite the fact that the defendant had refused to repay the Businesses’ monies which he had misappropriated. He also said that they were worried that they would be “in the street” if they did anything about it. These answers do not make sense:

(a) It is against logic that they would not take action despite the misappropriation;

(b) It should be borne in mind that Narian was a 60% partner of the Businesses since October 1989. There was simply no need for them to worry about losing their jobs;

(c) The alleged intention of keeping harmony cannot be the truth, because according to Narian, Kishin had commenced a court case against the defendant in 2006 (HCA 1936/2006), in which Narian had also made witness statements in support of the claim.

61.  Kishin would refuse to give any direct answer which would be favourable to the defendant’s case even though such an answer was obviously the truth. A usual means for him to evade answering this kind of questions was to say “I can’t reply”. Even if he finally (and exceptionally) gave a direct answer to this sort of questions, it would take a very long time for him to do so. For example, he had taken a very long pause when he was confronted with Lily’s evidence that it was the defendant who added Narian as a partner of the Businesses.

62.  Kishin has also given inconsistent evidence on a number of matters. It is obvious that he had no hesitation to change his evidence as long as it would suit his purpose. For example:

(1) He initially admitted that he had made a will. Further cross-examination on this will exposed the fact that the content thereof was inconsistent with the so-called Indian family tradition. When he realised the damage done to his case, he changed his evidence, and alleged that he in fact had not made any will yet, and he was only thinking what to include in his will. However, he reluctantly admitted subsequently that he had indeed executed his will already. That shows that it was a blatant lie when he alleged that he had not made his will yet;

(2) He had given different answers when he was asked whether he had followed the so-called Indian family tradition himself;

(3) When he was asked why he did not verify with CESCO the genuineness of a few confirmations allegedly issued by CESCO which confirmed receipt from the defendant and/or the Businesses certain payments which are the subject matters of the misappropriation claim herein, Kishin initially said it was because he thought CESCO would ignore his request anyway, but he changed his evidence subsequently, and said it had never occurred to him that he should approach CESCO. When he was further cross-examined on this, he changed his evidence for 2 more times.

63.  Further, there were many occasions when Kishin did not answer even straight forward questions directly, but only stated what he wanted to say. Such evasiveness, in my view, is an indication that he could not answer many of the questions asked by Mr Lin.

64.  There were also many occasions when his evidence in Court was plainly contradictory to the evidence contained in his own witness statements. For example:

(1) Although he stated in his witness statement that, when Father was still around, he retained general control of the income and expenses and accounts of the Businesses, he changed his evidence in Court and alleged that the defendant was in control of the Businesses’ bank accounts, and Father was not even in control of his own bank account at the time when the Evelyn Towers Flat was bought in 1977;

(2) According to Kishin’s witness statements, the deposit payments for the 2 flats in South Horizons came from family funds, and the mortgage instalments and other expenses were also paid out of the Businesses’ funds. However, he alleged in his oral evidence in Court that while Rose’s SH Flat should belong to her, the South Horizons Flat should belong to the family rather than the defendant even though it was registered under the defendant’s sole name. When Kishin was cross-examined on this, he initially could not give any answer as to why the treatment of the 2 flats should be different, but then changed his evidence and stated that it was because Rose had paid for the purchase price herself, which is contradictory to what he stated in his witness statement;

(3) In his witness statement, Kishin stated that the defendant had arranged overdraft facilities from Dao Heng Bank for the sum of approximately $1.7 million for a long time so as to provide sufficient fund for the Businesses to run. However, when Kishin was cross-examined, he confessed that actually he was not sure whether such a facility had been cancelled before he left the Businesses in 2006. When he was cross-examined further on this, he said the facility granted by Dao Heng Bank was actually of a small amount, and the Businesses mainly used the facilities granted by HSBC and Standard Chartered Bank. In my view, he was clearly making up his answers along the way.

65.  It is also surprising to note that sometimes Kishin could not answer Mr Lin’s question without reading his own witness statement again. Of course I have not lost sight of the fact that the focus of the questions was mainly about matters which took place many years ago, but that does not necessarily mean that it must be reasonable for Kishin to have the need to refer to his witness statement before answering, especially when those questions concerned matters which are so special that he would not lightly forget. For example, he made a request to read his own witness statement again when he was asked by Mr Lin to confirm that Narian and he were not made partners in 1983 because they were travelling all the time. He said he was confused because there were a lot of data for him to absorb. In my view, if he were always telling the truth, it should not be difficult for him to confirm the said matter which must be something special and within his personal knowledge. That shows how unreliable Kishin is as a witness.

F2. Narian

66.  It has been agreed between the parties that Narian’s witness statement may be admitted as hearsay evidence at the trial. The question for this Court is the weight to be attached to such evidence.

67.  Section 49 of the Evidence Ordinance (Cap.8, Laws of Hong Kong) provides that:

“(1) In estimating the weight, if any, to be given to hearsay evidence in civil proceedings the court shall have regard to any circumstances from which any inference can reasonably be drawn as to the reliability or otherwise of the evidence.

(2) For the purposes of subsection (1), regard may be had, in particular, to the following—

(a) whether it would have been reasonable and practicable for the party by whom the evidence was adduced to have produced the maker of the original statement as a witness;

(b) whether the original statement was made contemporaneously with the occurrence or existence of the matters stated;

(c) whether the evidence involves multiple hearsay;

(d) whether any person involved had any motive to conceal or misrepresent matters;

(e) whether the original statement was an edited account, or was made in collaboration with another or for a particular purpose;

(f) whether the circumstances in which the evidence is adduced as hearsay are such as to suggest an attempt to prevent proper evaluation of its weight;

(g) whether or not the evidence adduced by the party is consistent with any evidence previously adduced by the party.”

68.  I will now go through the factors set out in section 49(2) of the Evidence Ordinance:

(1) Narian’s witness statement was not made contemporaneously with the occurrence or existence of the matters stated;

(2) He was the plaintiff of this action and therefore he had the motive to conceal or misrepresent matters;

(3) His witness statement was an edited account and must have been prepared in collaboration with Kishin for the purpose of this action.

69.  Another important factor which this Court has to take into account is that Narian’s evidence cannot be tested by cross-examination.

70.  With all the above matters in mind, I am of the view that the Court should only attach minimal weight to Narian’s evidence.

F3. Lily

71.  Apart from the fact that Lily is not a party herein, the other factors under section 49(2) of the Evidence Ordinance discussed above are equally applicable to Lily’s witness statement. I therefore come to the same conclusion that only minimal weight should be given to Lily’s evidence.

F4. The defendant

72.  According to Dr Edmund Woo’s report dated 27 July 2023, the defendant:

(1) has been suffering from Parkinson’s disease for 20 years.;

(2) has evolved motor complications mainly in the form of on-off dyskinesia;

(3) has involuntary twisting of the trunk and the limbs from time to time (which is also apparent while he was giving evidence in Court);

(4) has muffled speech (which is also obvious to the Court);

(5) is likely to have difficulty in understanding complicated questions and in expressing himself in an articulate fashion, particularly when he is under stress;

(6) can cope with questions that require a “yes” or “no” answer;

(7) exhibits signs of early dementia with impaired memory, calculation and executive function.

73.  Dr Woo therefore advised the Court that the defendant should be given:

(1) ample time to express himself;

(2) assistance in fetching and turning trial bundles;

(3) adequate rest so as to minimise his motor fluctuations.

74.  Given the defendant’s health condition, the Court’s sitting hours while the defendant was giving evidence had been adjusted accordingly. Hearings were also stood down from time to time (with the consent of Mr Hingorani who had always dealt with the defendant’s applications in this regard very fairly) whenever the defendant’s family members considered that the physical state of the defendant appeared to show that he needed a rest. These adjustments are important because, as a matter of fairness, the Court does not want to see that the quality of a witness’ evidence would be affected by his physical condition which might fluctuate from time to time.

75.  With the above measures, I had an impression during the trial that the defendant could handle the cross-examination quite well. The most difficult part remained understanding what exactly the defendant was saying because of his slurred speech. While this had from time to time caused delay to the progress of the cross-examination because it might take time for the legal teams and this Court to figure out the exact meaning of the defendant, at the end of the day, I do not think there was any dispute as to what the defendant’s evidence was.

76.  Having considered all relevant matters in the round, I am of the view that the Court should approach the defendant’s evidence cautiously, because there were quite a few occasions when his evidence in Court was plainly contradictory to what he had stated in his own witness statements. For example:

(1) While he stated in his witness statement that he was persuaded to allow Narian, Kishin and Rose to join in in his investment in the Manderly Garden House, he changed his evidence in Court and said that in fact no one persuaded him;

(2) While he stated in his witness statement that he allowed Narian, Kishin and Rose to join in in his investment in the Manderly Garden House provided they would each contribute proportionately to the down-payment, the monthly mortgage instalments and other expenses of the said property, he said in Court that this part of the evidence was not true;

(3) The defendant also denied that he had orally agreed with Narian, Kishin and Rose that they shall hold the Manderly Garden House at the ratio of 30%, 20%, 30% and 20% even though that was what he confirmed in his witness statement;

(4) The defendant went as far as to say that he had never had discussion with Narian, Kishin and Rose regarding the Manderly Garden House which is plainly contradictory to what he said in his witness statement.

F5. Rose

77.  Generally speaking, I am of the view that Rose’s evidence is unshaken in cross-examination. I accept her evidence.

F6. Michelle

78.  I bear in mind that Michelle is the defendant’s daughter. However, I find that her evidence was unshaken despite the cross-examination. I accept her evidence.

G. DISCUSSION

79.  There are 2 concepts which basically run through the plaintiff’s case, namely, the Understanding and the Indian family tradition. I will therefore consider these 2 matters first.

G1. The alleged Understanding

80.  To recap, according to the plaintiff’s case, the Understanding was that the sons of the Samtani family should be entitled to and share equally in the profits of the Businesses and in the family wealth accumulated therefrom, and the daughters would be supported and provided for financially until they got married.

81.  There are many features in the present case which show, and therefore I find, that there was no such Understanding. I will just refer to a few below.

82.  First, the allegation of such an Understanding is in direct contradiction against Narian’s case of partnership under which only he and the defendant (but not Kishin) should be entitled to the profit generated by the Businesses. This was indeed his stance from the very beginning: In the pre-action letter sent by Narian’s solicitors, Narian demanded the defendant to, inter alia, account to him 60% share in the Businesses rather than 1/3, which even Kishin accepted in Court that this is inconsistent with the alleged Understanding.

83.  Second, Kishin said in his oral evidence that he considered that the Understanding existed because Father did mention that “everything in the Businesses belong to everyone”. This on the face of it is inconsistent with the alleged Understanding (because “everyone”, without qualification, must include even the married daughters), not to mention that in fact, as accepted by Kishin, Father had never said that the defendant should be responsible to look after the unmarried daughters after Father had passed away.

84.  Third, Kishin said the Manderly Garden House was owned by the 4 of them (Kishin, Narian, the defendant and Rose) and they were the true owners, not holding the said property for anyone. This is in direct contradiction against the plaintiff’s case on the Understanding. So is the fact that Narian only held 20% of the said property while the defendant and Kishin held 30% each thereof – in other words, they were not having equal shares in the property.

85.  Further, according to the plaintiff’s pleaded case, Kishin, Narian, the defendant and Rose would be personally liable for the repayment of the mortgage loan taken out for the purchase of the Manderly Garden House. This is puzzling as to why that would be so if the House was purchased pursuant to the Understanding.

86.  Pausing here, it is noted that Lily explained in her witness statement that the percentage of ownership was in fact finalised upon discussion among Father, Mother, the defendant and herself, and that the defendant and Kishin were given a larger share of the property because they had already got married by then. This contradicts Kishin’s evidence that he and Narian had been involved in the discussion.

87.  Fourth, if the Understanding existed, then the Conwell Offices would be belonging to the Businesses as well, and the defendant would be holding them only for and on behalf of the Businesses. In such a case, there is no way that Kay Tee would have entered into tenancy agreements with the defendant and pay the defendant monthly rent, still less for Narian to agree to such an arrangement and sign a number of tenancy agreements for that purpose. Further, it cannot be explained why the Businesses had never booked any rental income in respect of the 3/F Conwell Office which had all along been rented out to outside tenants.

G2. The alleged Indian family tradition

88.  Pursuant to the alleged Indian family tradition, Father tended to entrust the defendant as the eldest son of the family more with the family wealth generated by the Businesses and the assets acquired therewith but only on the basis of the Understanding.

89.  However, it has been exposed at the trial that the alleged tradition simply did not exist, and I would so find. It may be demonstrated by the following matters.

90.  First, it is evident that Father executed a power of attorney in 1962 by which he entrusted Lily to handle all his affairs including conducting the Businesses. On the face of it, this is inconsistent with the alleged Indian family tradition. Kishin tried to explain that Father elected to entrust Lily rather than the defendant at the time because the latter was still studying in the school. However, there is no evidence that this power of attorney has been revoked subsequently when the defendant grew older and started working at the Businesses.

91.  Second, Father made his last will in 1963 under which he bequeathed everything to Mother. At the time, the defendant was already 17 years old. This action on the part of Father clearly shows that there was no Indian family tradition as such. When Kishin was cross-examined on this, he had paused for a long time and could not give any answer.

92.  Third, if there was such an Indian family tradition for the eldest son to hold everything for the benefit of other family members, Kishin would not have (as he stated himself in his evidence) requested the defendant (shortly after Father’s passing) to make him a partner of the Businesses. In fact, Lily also stated in her witness statement that, in her view, every member of the family working in the Businesses should be made a partner thereof. This plainly contradicts the alleged Indian family tradition.

93.  Fourth, if there was such an Indian family tradition, then the defendant should have been made sole proprietor rather than just a partner in 1989 (if not 1983), not to mention that, as a matter of fact, Narian was made a partner who had a larger share (60%) than the defendant (40%). When these factual scenarios were pointed out to Kishin for his explanation, he could not offer any.

94.  Fifth, when Kishin was asked to articulate the alleged Indian family tradition in his own words while he was in the witness box, he started off by referring to the time when the parents had passed away. This apparently is quite different from the plaintiff’s pleaded case, which described the tradition to be applicable to the time when Father was still alive.

G3. The plaintiff’s partnership claims on the landed properties

95.  The plaintiff now claims 60% interest in the following properties on the basis that they are partnership properties:

(1) The Maiden Court Flat

(2) The Aberdeen Centre Flat (for account of sale proceeds, etc.)

(3) The Conwell Offices

(4) The South Horizons Flat

96.  It may be recalled that the respective years of purchase of these properties are as follow:

(1) The Maiden Court Flat – 1981

(2) The Aberdeen Centre Flat – 1982

(3) The Conwell Offices – 1987

(4) The South Horizons Flat – 1995

97.  It should also be borne in mind that:

(1) Father initially ran the Businesses as a sole proprietor since mid-1950s;

(2) Then the 1983 Partnership was formed, under which Father was a 60% partner and the defendant was a 40% partner;

(3) Narian became a partner with effect from 1 October 1989. At the time, Father was still alive, and therefore the partnership had 3 partners[24] (“the Interim Partnership”). However, it is unclear as to the percentage of ownership held by each of them;

(4) Father passed away on 29 October 1989, upon which the partnership only had 2 partners (i.e. the 1989 Partnership) – Narian was a 60% partner and the defendant was a 40% partner.

98.  It can therefore be seen that:

(1) Both the Maiden Court Flat and the Aberdeen Centre Flat were purchased while Father was the sole proprietor of the Businesses;

(2) The Conwell Offices were purchased while the 1983 Partnership was in existence;

(3) Only the South Horizons Flat was purchased during the existence of the 1989 Partnership.

99.  The difficulty in the plaintiff’s case is, in the above circumstances, even if the Maiden Court Flat, the Aberdeen Centre Flat and the Conwell Offices were purchased with the monies of the Businesses, how can it be said that they were partnership properties of the 1989 Partnership? I will address this question below.

G3.1 Partnership properties – the legal principles

100.  It is well established that upon the admission of a new partner, the original partnership dissolves and a new partnership forms: Hadlee v Commissioner of Inland Revenue [1989] 2 NZLR 447 at 455.

101.  In 勞慧聲經營之恆利公司v安聯保險香港有限公司 (HCA 4084/2001, unreported, 4 February 2005), Lam J (as Lam PJ then was) also had the following to say at [16]:

“It is necessary to specify the time for determining who were partners and who were not because the composition of a firm may change over time. Even the same firm name is used after a change in its composition, e.g. by admitting new partners, as a matter of fact they are a different group of people and regarded as such as a matter of law. Hence the firm prior to the change is not the same as the firm after the change. Upon every admission of new partner, the law views it as an implied dissolution of the old partnership and the formation of a new partnership.”

102.  In Lindley & Banks on Partnership (21^st Ed, 2022), the learned author wrote the followings:

§19-24

“It has long been recognized that partnership is not a species of joint tenancy and that, in the absence of some contrary agreement, there is no survivorship as between partners, at least so far as concerns their beneficial interests in the partnership assets […]”

§24-01

“What is meant by the ‘dissolution’ of a partnership is often misunderstood […]. In the case of a partnership, it invariably refers to the moment of time when the ongoing nature of the partnership relation terminates, even though the partners may continue to be associated together in a new partnership or merely for the purposes of winding up the old firm’s affairs. Indeed, the outward appearance of a partnership immediately prior to and immediately following a dissolution will frequently be unchanged. […]”

§24-03

“It does not necessarily follow from the fact that a partnership has been dissolved that its affairs will fall to be wound up in the manner prescribed by the Partnership Act 1890. It has already been seen that, as a matter of law, a change in the composition of a partnership results in a dissolution of the existing firm and the creation of a new firm; in such a case, the new firm will usually take on the assets and liabilities of the old, without any break in the continuity of the business. This is often referred to as a ‘technical’ dissolution and is usually, but not always, the result of agreement. Such a dissolution will almost inevitably require the taking of accounts to ascertain the entitlement of the outgoing or deceased partner.”

G3.2 Application of the legal principles

103.  As aforesaid, both the Maiden Court Flat and the Aberdeen Centre Flat were purchased while Father was the sole proprietor of the Businesses. Even if they were purchased with monies from the Businesses, it is difficult to see how they could be said to have been brought into the partnership, because even if the plaintiff’s case is accepted, they were purchased as family investments. Such a purpose had nothing to do with the Businesses. Hence, the plaintiff’s claim on these properties are bound to fail.

104.  The Conwell Offices were purchased in 1987, that is, during the 1983 Partnership.

105.  According to the legal principles referred to above, they could not form part of the partnership properties of the 1989 Partnership, unless it can be shown that there was no dissolution of the 1983 Partnership and the Interim Partnership as such.

106.  The plaintiff argued the matter in the following way:

“On 1 October 1989, Narian was admitted as an incoming partner of the Business with the transfer of 60% of Samtani Sr’s interest in the existing partnership to Narian. There was, at that point in time, no dissolution of the partnership. This is evidenced by a form entitled ‘change of partners’ filed at the registry which shows only the addition of Narian to the partnership. While the Defendant admitted to Narian’s 60% share, he also claimed Narian’s admission as a partner formed a second partnership in 1989.”[25]

107.  The emphasis of the plaintiff’s argument was the transfer of Father’s interest in the 1983 Partnership to Narian.

108.  Before I consider this argument further by reference to the facts, I should point out that the plaintiff should not even be allowed to put forward this argument because it is plainly contradictory to his pleaded case. In paragraph 4 of the Re-Re-Amended Statement of Claim, it was pleaded that:

“The Understanding continued

(1) after the Samtani Family Businesses were, in view of the old age and deteriorating health of [Father], converted from sole-proprietorships to partnerships by the registration of the Defendant, who had worked in the Samtani Family Businesses since about 1968, as a partner with effect from 26 May 1983 by consensus between [Father], [Rose], the Defendant, [Kishin] and [Narian]; and

(2) after such partnerships were reconstituted following the death of [Father] on 29 October 1989 and by the registration of [Narian], who had worked in the Samtani Family Businesses since about 1980, as a 60% partner with effect from 1 October 1989.” (emphasis added)

109.  It can be seen that it was the plaintiff’s pleaded case that the partnership was “reconstituted” in 1989. From any view, this must be different from the case where the partnership remained the same despite the change of partners.

110.  That being the case, the partnership properties, according to the plaintiff’s pleaded case, cannot be treated as being taken up by the 1989 Partnership as such.

111.  Moreover, even if the plaintiff had not pleaded positively that the partnership had been reconstituted, he had never pleaded any material facts in support of his assertion that the 1989 Partnership had taken over the assets of the 1983 Partnership and the Interim Partnership.

112.  Even if the plaintiff should be allowed to run such a case, it must be borne in mind that as at the effective date when Narian was added as a partner (1 October 1989), Father was still alive. Therefore, as at 1 October 1989, Father and Narian were partners at the same time. There is no evidence as to the respective percentage of interest held by them. But what is certain is that there could not be a transfer of 60% interest from Father to Narian as alleged.

113.  Mr Hingorani tried to tackle this difficulty in the plaintiff’s case by suggesting that after Narian was made a partner on 1 October 1989, the partnership entered into a transitional period, during which Father was a partner without holding any equity interest in the partnership. With respect, this is totally unsupported by evidence and must be rejected.

114.  In this regard, I note that the defendant’s evidence (which Kishin also accepted) was that in fact Narian was added by the defendant after the demise of Father. Indeed, it can be seen that the “Change of Partners” Form was dated 1 December 1989. Hence, it seems to me what happened was that the defendant somehow had inserted “1 October 1989” as the “Date of [Narian] joining the partnership”, that means the effective date was fixed retrospectively. If that is the case, that provides another reason why Narian’s share in the 1989 Partnership could not have been “transferred” by Father, because Father had already passed away when the defendant submitted the form to change the composition of the partnership.

115.  This would be so even if it was Father’s intention that Narian and the defendant should be 60% : 40% partners, as the existence of the Interim Partnership means there could not have been any “transfer” of Father’s 60% interest to Narian.

116.  The plaintiff further suggested that the defendant’s allegation that the 1989 Partnership is a new partnership has no evidential support. I do not accept this suggestion. It should be noted that it is the plaintiff’s case that the properties had been passed from one partnership to another. Therefore it should be the plaintiff who has the burden of proof. Furthermore, the formation of a new partnership is the legal effect caused by the admission of the new partner (and the retirement of the old partner). If the plaintiff contends otherwise, of course it should be the plaintiff who should satisfy the Court what he suggests to be the actual position.

117.  For the sake of completeness and at the risk of stating the obvious, section 35(1) of the Partnership Ordinance (Cap.38, Laws of Hong Kong) should also be referred to. This provision stipulates that:

“Subject to any agreement between the partners, every partnership is dissolved as regards all the partners by the death or bankruptcy of any partner.”

118.  The plaintiff has not pleaded, nor has he adduced any evidence to prove, any agreement which negates the effect of Father’s death on the continuation of the partnership.

119.  The conclusion that the landed properties are not partnership properties is further reinforced by the fact that there is no evidence that they had ever been recorded as such in the accounts of the 1989 Partnership.

120.  As far as the 4/F Conwell Office is concerned, if it had all along been treated as a property owned by the 1989 Partnership, the Businesses would not have paid the defendant any rental as they did.

121.  Most of the above analysis is not applicable to the South Horizons Flat, because it was purchased after the formation of the 1989 Partnership. In other words, the plaintiff does not have to establish the transfer of this property from one partnership to another.

122.  However, the point on the accounts of the 1989 Partnership is still applicable – there is no evidence that the South Horizons Flat has ever been included as a partnership property in the account of the 1989 Partnership. Moreover, it is apparent that it was not purchased for the purpose of the Businesses.

123.  I therefore hold that none of the landed properties belong to the 1989 Partnership and the plaintiff’s claims in this regard must fail.

124.  Having said that, for the sake of completeness, I will deal with the plaintiff’s arguments that the aforesaid properties were all purchased from the Businesses’ funds below briefly.

G3.3 Source of funds – the Maiden Court Flat and theAberdeen Centre Flat

125.  First and foremost, it should be pointed out that, since it is the plaintiff’s claims that the purchases of the landed properties were funded by the Businesses, the plaintiff has the burden of proving this allegation on the balance of probabilities.

126.  In this regard, the plaintiff’s case theory is that:

(1) While the purchases of the Maiden Court Flat and the Aberdeen Centre Flat were partly financed by mortgage loans, the defendant was still required to pay around $531,500 as part payments in the space of 9 months;

(2) Even assuming that the defendant was earning around $1,000 per month, in the 5 years since the purchase of the Evelyn Towers Flat in 1977, he could only have saved around $60,000 at most;

(3) Therefore, the defendant could not have afforded to pay the said total of around $531,500;

(4) The defendant has been silent as to how much he has made out of his allegedly very successful investments;

(5) The only inference that can be drawn is that the Businesses funded the purchase of each of the properties.

127.  Pausing here, it seems to me there is a fundamental problem with this case theory, in that the plaintiff has reversed the burden of proof. It must be borne in mind that the properties were held under the name of the defendant. If the plaintiff is alleging that the defendant was not the beneficial owner, it must be the plaintiff who should prove positively that the purchase funds came from the Businesses, rather than the other way round.

128.  In this regard, in fact the plaintiff could not come up to prove, because Kishin admitted under cross-examination that he did not know where the funds came from – whether they came from the Businesses or from Father’s personal bank account.

129.  Narian’s evidence is unhelpful in this respect also, for he could only make a bare assertion that the purchases were funded by the Businesses.

130.  On the other hand, there is the evidence of the defendant that, apart from other investments, he had made a profit of around $700,000 – $800,000 within 3 months out of his purchase of an uncompleted property at Hill Grove in 1979. His evidence on what happened in this transaction is supported by the land search record.

131.  I therefore hold that the plaintiff has failed to prove that the funds used to purchase the Maiden Court Flat and the Aberdeen Court Flat came from the Businesses.

132.  This finding is also supported by the following objective fact: If the defendant had the habit of claiming family assets as his own, then why did he agree to add Narian as a partner after Father’s demise in 1989? What the defendant could have done at that time was to simply turn the Businesses into sole proprietorship so that he himself would have the sole power to control everything belonging to the family. However, not only did he not do so, he made Narian a partner – not only a partner, but a partner with a larger equity interest in the Businesses. In this regard, I have not forgotten the defendant’s letter dated 21 February 2011 to the plaintiff’s solicitors in which he stated that it was Father’s decision to give Narian his 60% ownership in the partnership. However, by the time the defendant submitted the “Change of Partner” form, Father had already passed away. Hence, the defendant could have ignored Father’s decision.

133.  Another important matter which should be considered is this Court’s finding that the alleged Understanding and Indian family tradition did not exist. In such circumstances, there is no reason why the properties bought by Father or the Businesses should be registered under the sole name of the defendant.

G3.4 Source of funds – theConwell Offices

134.  Apart from arguing that the defendant has not proved his source of funds, the plaintiff’s counsel has not made submissions on the plaintiff’s case that the Conwell Offices were purchased with the Businesses’ funds.

135.  The plaintiff’s case in this regard is therefore bound to fail, as it is my view that the plaintiff should have the burden of proving his case.

136.  In fact, it is not surprising that the plaintiff’s counsel could not say much about the Conwell Offices, because Kishin’s evidence on this matter is totally unhelpful:

(1) In his witness statement, Kishin could only make a bare assertion that the purchase funds came from the Businesses;

(2) However, he admitted in Court during cross-examination that that was only his guess and he did not know this as a fact;

(3) He alleged that he and other siblings did request that the Conwell Offices should be registered under their names rather than under the defendant’s sole name, but the defendant refused. This is incredible.

137.  Indeed, it is evident that the defendant used his personal cheques to pay for the legal costs of acquisition of the 3/F Conwell Office. If it was the Businesses which funded the purchase, there is no reason why the defendant’s personal cheque (rather than the Businesses’ cheque) was used.

138.  Moreover, if the purchase funds were really coming from the Businesses, Narian as 60% partner of the Businesses would not have agreed to enter into tenancy agreements with the defendant in respect of the 4/F Conwell Office and pay rent to the defendant.

139.  Furthermore, if the Businesses were the real owner of the 3/F Conwell Office, it is difficult to understand why the rental received from the tenant thereof had never been booked in the Businesses’ account.

140.  The analysis in [132] and [133] above is also applicable.

141.  I therefore find that the purchase funds for the Conwell Offices did not come from the Businesses as alleged by the plaintiff.

G3.5 Source of funds – the South Horizons Flat

142.  In Kishin’s witness statement, he alleged that the deposit for this property (and Rose’s SH Flat) came from family funds that had been deposited with Standard Chartered Bank, and the mortgage repayments and other expenses were covered by Businesses’ funds.

143.  However, when he was cross-examined in Court, he stated that:

(1) he believed Rose’s SH Flat was purchased by Rose’s own money rather than by the Businesses’ money;

(2) the defendant used the monies which he misappropriated from CESCO to purchase the South Horizons Flat.

144.  When Kishin was cross-examined further, he admitted that he did not know where exactly the defendant got the purchase money for the South Horizons Flat from.

145.  When it was pointed out to Kishin that his evidenced in Court was different from what he said in his witness statement, he changed his evidence again and stated that he would stick to his witness statement.

146.  In my view, the inconsistency in Kishin’s evidence shows that his evidence in this respect incredible and unreliable. He was only speculating in his evidence, and had no basis at all to support his allegation against the defendant.

147.  The analysis in [133] above is also applicable.

148.  I therefore find that the plaintiff has failed to prove that the source of funds for the purchase of the South Horizons Flat came from the Businesses.

G4. The Evelyn Towers Agreement

149.  To recap, it is alleged by the plaintiff that the Evelyn Towers Agreement was reached in around late 2004 between Narian and the defendant, under which Narian would transfer his 20% interest in the Manderly Garden House to the defendant who in return would transfer his legal title and beneficial interest in the Evelyn Towers Flat together with $10 million to Narian.

150.  It is now alleged by the plaintiff that, while Narian had assigned his 20% interest in the Manderly Garden House to the defendant by virtue of a Vesting Assignment dated 1 February 2005, the defendant has refused and failed to transfer the Evelyn Towers Flat to Narian and pay him $10 million.

151.  The defendant denied the existence of the Evelyn Towers Agreement. His case is that Narian agreed to transfer his 20% interest in the Manderly Garden House back to him because Narian was unable to make his 20% contribution towards the purchase price and the expenses in relation thereto.

152.  The defendant’s case is supported by a Vesting Assignment dated 1 February 2005 executed by Narian by which he assigned his 20% interest in the Manderly Garden House to the defendant, in which the Evelyn Towers Agreement was not mentioned at all, and the payment of $10 million and/or the transfer of the Evelyn Towers Flat was not stated to be the consideration of the assignment of the said 20% interest.

153.  Narian explained in his witness statement that he did not have any proper opportunity to read the aforesaid document before he signed it. However, it should be borne in mind that according to Narian’s own evidence, at the material time, he had already seen enough to realise that the defendant would not keep his words[26]. If what Narian said was true, it is difficult to understand why he would agree to execute the aforesaid document, still less not to insist in putting the Evelyn Towers Agreement into writing.

154.  The defendant’s case is also supported by Rose, whose evidence is accepted by this Court.

155.  I have therefore come to the conclusion that the plaintiff has failed to prove the existence of the Evelyn Towers Agreement.

G5. Misappropriation of funds and the CESCO Arrangement

156.  I have already summarised the respective cases of the parties in Sections B and C above and I would not repeat the same.

157.  In support of his argument that the alleged CESCO Arrangement was a fabrication, the plaintiff relied heavily on the following features of the present case:

(1) the CESCO Arrangement was not pleaded right away in the Defence but only in subsequent amendments;

(2) the supporting documents were not disclosed by the defendant earlier;

(3) the defendant only came up with his purported explanations in his 5^th Affirmation (filed on 19 January 2012) when he was confronted with documentary evidence obtained by the plaintiff from the Standard Chartered Bank;

(4) the defendant did not fully explain the CESCO Arrangement in his affirmations but only responded to specific allegation of misappropriation raised against him;

(5) no representative from CESCO had given any sworn confirmation on the CESCO Arrangement; neither was there any evidence of written communication by the defendant seeking the confirmation from CESCO; and

(6) while the defendant had produced a document from CESCO in which CESCO seemed to have confirmed the CESCO Arrangement, it was dated immediately after Narian’s 5^th and 6^th Affirmations and followed exactly as those particularized in Narian’s 5^th and 6^th Affirmations.

158.  I agree that the fact that the defendant did not plead his case on the CESCO Arrangement right away when he filed his first version of the Defence is indeed suspicious and that is something that the Court has to take into account. However, it should be remembered that the CESCO Arrangement is supported by documents including credit notes issued by Kay Tee. If it is the plaintiff’s case that the alleged CESCO Arrangement did not exist at all, then it follows that it is also the plaintiff’s case that the credit notes must be fabricated documents, which were created in support of the defendant’s defence. In my view, this is a very serious allegation, and the Court should not come to this finding lightly without compelling evidence.

159.  Having considered all the circumstances of the case, I am of the view that it is more likely than not that the CESCO Arrangement existed, and that the defendant did not misappropriate any money as alleged.

160.  First, CESCO has issued a total of 3 confirmations (“the CESCO Confirmations”) which confirmed that CESCO had indeed received all commission from the defendant. That means the defendant did not misappropriate any short-fall as alleged.

161.  In relation to the CESCO Confirmations, it is noted that the plaintiff has only challenged the authenticity of one of them by pleading, but did not file Notice of Non-Admission under Order 27 rule 4 of the RHC in respect of the other 2 confirmations.

162.  The plaintiff asked the question why the defendant did not call the owners of CESCO to give evidence in Court. However, the reverse is true too. Given Kishin’s admission that he also had the contact information of CESCO, he could have approached CESCO and verified the genuineness of the content of the CESCO Confirmations. However, Kishin said he had dropped this idea because he thought CESCO would not reply anyway[27]. With all these in mind, I am of the view that due weight should be given to the confirmations in respect of which authenticity were not challenged. After all, there is no evidence as to why CESCO and its owners had to bend backwards to the extent of creating false documents to assist the defendant in his defence herein.

163.  Second, the entries appearing in the CESCO Confirmations can be matched with contemporaneous documents such as the defendant’s bank statements which show that there were indeed corresponding remittances. There were also contemporaneous emails which show that CESCO had directed the defendant to pay the credit to CESCO’s designated parties. In other words, the defendant did not keep any short-fall for his own use as alleged.

164.  Third, it should also be borne in mind that, as admitted by Kishin, at the material time the Businesses only had one computer and one email account the use of which were shared by the defendant and Narian. In other words, Narian could have accessed to the correspondence between the defendant and CESCO. This shows that it is more likely than not that Narian knew about the CESCO Arrangement. Indeed, it is the evidence of Michelle (which I accept) that Narian knew about it at all material times. Hence, the defendant could not be doing something behind Narian’s back.

165.  Fourth, there is nothing suspicious for one of the CESCO Confirmations to be dated immediately after Narian’s 5^th and 6^th Affirmations and followed exactly as those particularized in Narian’s 5^th and 6^th Affirmations, because apparently the said confirmation was prepared specifically for the purpose of dealing with Narian’s allegations.

166.  Fifth, if the defendant did misappropriate monies from the Businesses, one wonders why the plaintiff could only discover problems in relation to one customer (i.e. CESCO). In my view, this tends to support the defendant’s evidence that this was a special arrangement which was created at the request of one customer (CESCO) only.

167.  Sixth, I reject Kishin’s evidence that the Businesses did not require the defendant to advance his own funds for the running of the business:

(1) He had left the Businesses in 2006 and therefore could not have any knowledge on the Businesses’ usage of banking facilities afterwards;

(2) Even in relation to the time when he was still working at the Businesses, it is incredible for him to allege that he had always had good knowledge on the extent of the banking facilities used by the Businesses at any moment, as this is extremely improbable, as he was not the only one who would cause the facilities to be used.

168.  Seventh, insofar as it is the plaintiff’s case that there was no reason why the defendant would have to use his personal bank account to conduct business, this argument is made to be rejected, for Kishin also admitted in Court that he had opened a joint bank account with a client for the purpose of receiving payments owed to the Businesses.

169.  To conclude, the plaintiff’s claim of misappropriation must be rejected.

G6. The defendant’s counterclaim – Regal Top

170.  The defendant alleged that Narian, in breach of his duties owed as a partner to the Businesses, had:

(1) engaged in and/or dealt with the business of Regal Top, which was a business operated by Kishin, and was in competition with the Businesses;

(2) diverted business / customers of the Businesses to Regal Top.

171.  The defendant’s counsel have referred this Court to the case of Aas v Benham [1891] 2 Ch 244, in which Lindley LJ held at 255 that:

“It is clear law that every partner must account to the firm for every benefit derived by him without the consent of his co-partners from any transaction concerning the partnership or from any use by him of the partnership property, name or business connection […] It is equally clear law that if a partner without the consent of his co-partners carries on business of the same nature as, and competing with that of the firm, he must account for and pay over to the firm all profits made by him in that business […] Dean v. MacDowell shews that a partner is not bound to account to his co-partners for profits made by him in carrying on a separate business of his own, unless the case can be brought within one or other of the two principles to which I have alluded, even if he carries on such separate business contrary to one of the partnership articles.”

172.  It is also trite that a fiduciary may not put himself in a position where his interest and duty conflict or there is a real risk that they might conflict. Thus, no actual conflict is required for a fiduciary to breach his duties, provided that there be a real sensible possibility of conflict: Poon Ka Man Jason v Cheng Wai Tao (2016) 19 HKCFAR 144 at [74].

173.  Section 32 of the Partnership Ordinance also provides that:

“If a partner, without the consent of the other partners, carries on any business of the same nature as and competing with that of the firm, he must account for and pay over to the firm all profits made by him in that business.”

174.  In the present case, it is undisputed that, after Kishin had left the Businesses, he set up Regal Top which engaged in import and export business. It is therefore apparent that Regal Top was carrying on a business of the same nature as the Businesses. Indeed, as admitted by Kishin, most customers of the Businesses and Regal Top were the same.

175.  However, it was Narian’s evidence that he was not and had not been involved in Regal Top’s business.

176.  In my view, Narian’s evidence in this regard must be rejected:

(1) It is evident that Narian had a name card of Regal Top, in which he was described as a director thereof. His explanation that he had no knowledge about this name card is totally incredible;

(2) Narian’s further explanation that the format of the aforesaid name card did not follow the printing style of the business card used by Kishin is also incredible. If that is true, given the admittedly close relationship between Kishin and Narian, he could have caused Kishin to produce his own Regal Top name card for the purpose of making good this point, which he (as well as Kishin) had failed to do so. Kishin’s explanation that this thought did not occur to him is totally unbelievable.

(3) It is evident that Mr Nikos Garifalakis (“Mr Nikos”) sent an email on 19 November 2008 to Narian which reads:

“[…] I have paid the container of cutlery to kishin before 10 days and I don’t receive […]”

As admitted by Kishin, this was a transaction Regal Top had concluded with Mr Nikos. I agree with the defendant’s argument that there was no reason why Mr Nikos would have contacted Narian in respect of an order with Regal Top, unless Narian was carrying on Regal Top’s business together with Kishin. It should also be noted that, by the time of the email, Kishin had already left the Businesses for over 2 years. It is therefore extremely unlikely that Mr Nikos would have mixed up the 2 companies. Kishin’s explanation that Mr Nikos had sent this email to Narian because Mr Nikos knew they were brothers is totally incredible.

(4) Another document which proves that Narian was working for Regal Top in December 2007 is an email sent by Athanassios to Narian on 27 December 2007. By this email, Athanassios discussed with Narian as to the way to settle a sum which he owed Narian with the commission payable in respect of a transaction with Kishin’s Regal Top.

(5) It is also evident that Kishin had paid Narian a sum of HK$75,766.27 by a cheque issued by Regal Top on 23 December 2009. Kishin explained in Court that it was for the repayment of a personal loan of US$10,000 to Narian. I do not accept his evidence in this regard, because according to what he told the Court about how the defendant treated Narian, Kishin’s financial strength must be much stronger than Narian. The evidence that he had to borrow money from Narian is therefore unbelievable.

177.  Given the nature of Regal Top’s business and the admitted common clientele, there must be a conflict of interest on the part of Narian.

178.  Narian’s estate should therefore be ordered to give an account of profits which Narian had made in Regal Top.

G7. The defendant’s counterclaim – Narian’s occupation of the Evelyn Towers Flat

179.  It is undisputed that the defendant as legal and beneficial owner of the Evelyn Towers Flat had requested Narian on 12 May 2011 to leave the said property, which Narian had refused to do so.

180.  In his submissions, the plaintiff opposed this claim by relying on (1) the Understanding; (2) resulting trust in favour of Father; and the Evelyn Towers Flat being a partnership asset. These defences have either been abandoned or rejected in the earlier part of this Judgment.

181.  Hence, the plaintiff has no defence to this claim.

182.  However, the defendant has not adduced any evidence in support of his claim of mesne profit.

183.  In such circumstances, as accepted by Mr Lin, the defendant is only entitled to nominal damages.

184.  I therefore access such damages at $1,000.

H. ORDER

185.  By reasons of the aforesaid:

(1) The plaintiff’s claims are hereby dismissed;

(2) The plaintiff be ordered to give an account of profits which Narian had made in Regal Top;

(3) The plaintiff be ordered to pay the defendant the sum found due following such account;

(4) The plaintiff be ordered to pay the defendant nominal damages in the sum of $1,000.

I. COSTS

186.  I make a costs order nisi that the plaintiff shall bear the costs of the defendant, with certificate for two counsel, to be taxed if not agreed.

187.  The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof.

Mr Jeevan Hingorani and Mr Tony Lo, instructed by Fairbairn Catley Low & Kong, for the plaintiff

Mr Kenny Lin and Mr Jason Kung, instructed by Stevenson Wong & Co, for the defendant

HCA 496/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 496 OF 2011

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BETWEEN

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D E C I S I O N

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1.  This is an application by the plaintiff for an interim injunction restraining the defendant from disposing of assets and/or an order to preserve the assets alleged to be belonging to 2 partnerships.

UNDISPUTED FACTS

2.  The late Mr Samtani senior (“the father”) and the late Mrs Samtani (“the mother”) had 8 children of whom the plaintiff, the defendant (eldest) and Kishin are sons and Drupti (or Rose) is a daughter.

3.  Since the mid-1950s, the father had carried on import and export businesses under the names of Kay Tee Corporation (“Kay Tee”) and Kishoo Brothers.  These 2 entities are referred to collectively as “the Businesses”. 

4.  All of the children, with the exception of one daughter, have/had at some time worked in the Businesses.  The defendant started in the 1960s and the plaintiff in the 1980s.

5.  The father initially operated as a sole proprietorship, but entered into partnership with the defendant with effect from 26 May 1983 (“the 1^st partnership”).  The ratio between the father and the defendant was 60:40.

6.  With effect from 1 October 1989, the plaintiff and the defendant became partners (“the 2^nd partnership”) in the ratio of 60:40.  The father died on 29 October 1989. 

7.  The 2^nd partnership was dissolved on 6 May 2011 after commencement of this action on 24 March 2011.

THE PLAINTIFF’S CASE

8.  The plaintiff’s case is premised on a so-called “understanding”, Indian family tradition and partnership rights.  From time to time, the father had saved and invested the profits of the Businesses and the family wealth accumulated therefrom in bank accounts opened and landed properties acquired in the names of his children.  The understanding was one among the father and the children that the 3 sons would be entitled to share equally the profits of the Businesses and in the family wealth accumulated therefrom, and the daughters would be supported financially until they got married (“the understanding”).  In accordance with Indian family tradition, the father tended to trust the defendant as the eldest son more with the family wealth only on the same understanding.

9.  The defendant has/had the following properties (“the properties”) registered in his name:

Address		Year of assignment (relevant business entity)	Registered owner	Mode of payment according to plaintiff and defendant	Current occupation
1.	Flat at Evelyn Towers	1977  (sole proprietorship)	defendant	plaintiff: cash from Businesses	Residence of plaintiff & Drupti
2.	Flat at Maiden court	1981  (sole proprietorship)	defendant	plaintiff: money & mortgage from Businesses defendant: own money & mortgage	Rented out by defendant

Address		Year of assignment (relevant business entity)	Registered owner	Mode of payment according to plaintiff and defendant	Current occupation
3.	Flat at Aberdeen Centre	1992 (sole proprietorship)	defendant	plaintiff : money & mortgage from Businesses defendant: own money & mortgage	Sold by defendant
4.	House at Manderly Garden	1987  (1st partnership)	Past: defendant 30% Kishin 30% Drupti 20% plaintiff 20% Present: Kishin 30% defendant 70%	Agreement with siblings and cancellation afterwards defendant: own money & mortgage	Residence of defendant
5.	Offices nos. 1-3 on 4/F & flat roof, Conwell House	1987  (1st partnership)	defendant	plaintiff : money from Businesses defendant: own money & mortgage	Used by the Businesses
6.	Office no 3, 3rd floor, Conwell House	1987  (1st partnership)	defendant	plaintiff: money from Businesses defendant: own money & mortgage	Rented out by defendant
7.	Flat at Tower 27, South Horizons	1995 (2nd partnership)	Drupti (or Rose)		Rented out by Drupti
8.	Flat at Tower 28, South Horizons	1995 (2nd partnership)	defendant	defendant: own money & mortgage	Rented out by defendant

10.  It is the plaintiff’s case that the purchase monies for the properties had come from the father’s profits of the Businesses and/or the wealth accumulated therefrom.  The small drawings from the Businesses to cover personal expenses for each son could not have enabled the defendant to acquire the very substantial property portfolio in his own name, estimated at about $200 million, which was in stark contrast with assets that other family members have been able to accumulate. 

11.  Specifically, Evelyn Towers was purchased in cash from the Businesses whilst under the sole proprietorship of the father. It was owned beneficially by the father by way of resulting trust,subject to the understanding.  Upon death of the father, Evelyn Towers belonged beneficially to his estate and distributable by virtue of his intestacy to the mother and children, subject to the understanding.  Upon the death of the mother intestate, her 50% beneficial interest in Evelyn Towers vested in and was distributable to her children, subject to the understanding. 

12.  Maiden Court and Aberdeen Centre were also allegedly family investments made pursuant to the understanding:

(i) To the extent the deposits and mortgage repayments were financed by monies of the Businesses and rental during the currency of the sole proprietorship of the father, the 2 properties belonged beneficially to the father by way of resulting trust, subject to the understanding.  Upon death of the father, these 2 properties, to the extent of such financing, belonged beneficially to the estate of the father.  They were distributable as in the preceding paragraph.

(ii) To the extent repayment of the mortgages was financed by monies from the Businesses whilst under the 1^st partnership, they constituted partnership assets.  They were held on resulting trust by the defendant in favour of the 1^st partnership.

13.  Manderly Garden was purchased allegedly using the wealth from the Businesses, with Drupti and the 3 sons as tenants in common.  In breach of a “Manderly Rental Agreement”, beginning some time in 1996, the defendant had refused to let out Manderly Garden.  Instead he used it as his family residence without consent of Kishin and the plaintiff.

14.  Sometime towards the end of 2004, an “Evelyn Towers Agreement” was entered into whereby the plaintiff and the defendant would exchange each other’s interest in Manderly Garden and Evelyn Towers respectively.  The defendant was to pay to the plaintiff a sum of HK$10 million by instalments over 2 years as part of the consideration.  The plaintiff assigned his 20% interest in Manderly Garden to the defendant.  (Drupti did likewise.  The net result was that with effect from 16 February 2005, Kishin and the defendant held Manderly Garden as tenants-in-common as to 30% and 70% respectively.)  The defendant has since denied his obligation to pay the $10 million to the plaintiff.

15.  The Conwell House Offices were financed, as to downpayments and mortgages by monies from the Businesses.  The Businesses occupied the 4^th floor whereas the 3^rd floor was leased out.

16.  It is the plaintiff’s case that the 1^st partnership was “reconstituted following the death of the father”.  “Upon transfer by [the father] to the plaintiff of his 60% in the 1^st partnership, the plaintiff acquired all of [the father’s] proprietary rights as a partner at the time of assignment, including [the father’s] beneficial interest in such properties held on resulting trust by the defendant in favour of the [1^st partnership].”

17.  The plaintiff’s case on the understanding and family tradition was supported by his sister Lily. 

18.  The plaintiff’s case on partnership rights is also premised on the defendant trading in competition with and misappropriating monies belonging to the Businesses.  There was diversion of funds from Kay Tee to the defendant’s personal account.  The customers of Kay Tee involved were Cassidy Electrical Supply Co Ltd (“Cassidy” / “CESCO”) and Woodies.  The defendant had also used his personal account to make payments to a supplier Roden Trading Co Ltd in 2002 and to a UK supplier MGC Lamps Ltd. 

19.  The plaintiff’s claims can be broadly categorized as:

(A) partnership claims, ie

(i) account of the Businesses’ assets from 1983 to date pursuant to the understanding and/or as 60% partner in the Businesses;

(ii) damages for misappropriation of partnership funds;

(iii) account of profits for breach of duty as a partner in trading in competition with the Businesses; and

(iv) mandatory injunction for the defendant to deliver the books and records of the Businesses;

(B) tort claims, ie

(v) damages for unlawful interference in the Businesses; and

(vi) damages for conversion;

 (C) property claims, ie

(vii) account for proceeds of sale of the Aberdeen Centre flat;

(viii) declaration that Maiden Court was held on resulting trust; and

(ix) specific performance of the Evelyn Towers Agreement or damages for its breach.

THE DEFENCE

20.  The defendant denied the existence of the understanding and Indian tradition or that they had any legal force.  He was supported by Drupti.

21.  The defendant produced the father’s will dated 6 May 1963 whereby all the father’s worldly possessions were given to the mother without reference to any trust arrangement or the understanding.  The mother died intestate.  No administration has ever been taken out for either estate.

22.  The defendant asserts that Kay Tee and Kishoo were owned only by the principal or partners alone.  Those members of the Samtani family who had no partner status but had worked in the businesses were paid a salary.    

23.  The defendant denies any transfer of the father’s share in the first partnership to the plaintiff.  He avers that the 2^nd partnership was newly constituted between him and the plaintiff.  Kishin left the employ of the Businesses on his own accord in 2006.

24.  The plaintiff has all along rights and access to books and records of the businesses as any partner.  It was he who has never shown any significant interest in the management or operation of the businesses until January 2011.

25.  The Businesses were not profitable under the father’s management to be able to form any significant family wealth.  They only gradually developed after the father’s retirement.  At the time when both the plaintiff and the defendant were partners of the Businesses, they were each entitled to the same amount taken as drawings every month.  The defendant denies receiving any additional drawings over those of the plaintiff.

26.  The defendant avers that, except for Drupti’s property, the other 7 properties were acquired by him as legal and beneficial owner.  The funding came from his own savings and investments. 

27.  Re Manderly Garden, the defendant agreed that there was an arrangement whereby the 3 sons and Drupti would make contributions to the purchase price in the ratio set out in the table above.  However, after completion, the plaintiff, Kishin and Drupti disregarded their obligations to contribute towards the deposit, mortgage repayments and expenses.  The arrangement was cancelled by agreement such that the two brothers and Drupti would not have to pay back contributions towards the deposit to the defendant and the defendant would be solely responsible for the mortgage.  The three of them would transfer their legal title back to the defendant as and when called upon by the defendant to do so.  In 1996, the plaintiff and Kishin each executed a power of attorney authorizing the defendant to act for them in respect of the affairs of Manderly Garden.  In 2005, the plaintiff and Drupti have respectively executed declarations of trust and vesting assignments of their shares in favour of the defendant in respect of the Manderly Garden.  The defendant thus has full beneficial ownership of Manderly Garden.

28.  All funds due to the Businesses from CESCO or Woodies have been duly received.  The defendant claims having used personal funds for the Businesses.

29.  The defendant counterclaims against the plaintiff for damages for breach of duties for having engaged in Kishin’s business in the name of Regal Top Trading Limited (“Regal Top”), which was in competition with the Businesses; and the plaintiff had diverted business to Regal Top since 2006/7.  The defendant also counterclaims for mesne profits for the plaintiff’s occupation of Evelyn Towers.

THE APPLICATIONS

30.  The plaintiff seeks a Mareva injunction and a preservation order under Order 29 rules 1 and 2 of the Rules of the High Court and inherent jurisdiction of the court.  Towards the end of the submission, Mr Hingorani, counsel for the Plaintiff, proposes in writing that the defendant be restrained from disposing of 7 properties save for the purpose of renting them out.  If the defendant wants to sell any of them, he shall upon completion pay 60% of the net proceeds of sale into a designated account pending trial.  Mr Hingorani suggests, but eventually abandons, the idea of requiring the defendant to give not less than one month’s written notice of intention to sell with particulars of sale.

MAREVA INJUNCTION

The applicable legal principles

31.  The principles of American Cyanamid Co v Ethicon Ltd [1975] All ER 504 are well known.  It has to be shown:

(i) That there is a serious issue to be tried;

(ii) That there is a real risk of dissipation of assets; and

(iii) The balance of convenience lies in favour of granting an injunction.

Serious questions to be tried

(A)  Partnership claims

32.  Although the court does not need to resolve rival contentions at this stage, it should be borne in mind that the plaintiff should not be allowed to embark on a fishing expedition, suing the defendant without sufficient bases.  On the other hand, one should not lose sight of the fact that the plaintiff has not, even on his own case, taken interest in the partnership accounts for years.  The course taken by him to get access to those accounts and his subsequent request for bank documents from Standard Chartered Bank (“SCB”) demonstrated his difficulties in getting relevant documents from the defendant to support his claim.  One cannot therefore expect documentary evidence or parties’ evidence to be complete at this stage. 

33.  The plaintiff’s causes of action are primarily based on partnership and this is not a probate/administration action.  As confirmed by Mr Hingorani during the oral submission, the plaintiff is not suing the defendant as a partner for the father’s estate but only for that part of the properties paid for by the partnership.

34.  It is well established that upon admission of a new partner, the original partnership dissolves and a new partnership forms: Hadlee v Commissioner of Inland Revenue [1989] NZLR 447:

“In law the retirement of a partner, or the admission of a new partner, constitutes the dissolution of the old partnership and the formation of a new one. Here, upon the happening of such events there were no overt signs of dissolution; the partnership’s financial structure and arrangements were such that none was required but that does not alter the underlying legal significance of any retirement or new admission: Inland Revenue Commissioners v Gibbs [1942] AC 402, particularly per Viscount Simon LC at p 414, Lord Wright at pp 429 and 430 and Lord Porter at p 432; Brace v Calder [1895] 2 QB 253, per Lord Esher MR at p 258, Lopes LJ at p 261, and Rigby LJ at 263; Lindley on Partnership (15th ed, 1984) pp 543, 983. Nor, in my opinion, is it possible to avoid those legal propositions by the terms of the partnership agreement: no doubt it is competent for partners to agree in advance that in the event of a retirement the remaining partners will continue to practise in partnership but that does not overcome the consequence that the partnership practising the day after the retirement is a different one from that in business the previous day.” (per Eichelbaum CJ, at page 455)

35.  A claim by one partner against another in relation to the first partnership is unlikely to be regarded as having become an asset of the second and, as a matter of law, cannot be so regarded if both partners are members of the second partnership: Lindley & Banks on Partnership, 19^th ed, para 18-12. 

36.  It is particularly important to bear in mind the different partnerships constituted in the present case because the properties that form the subject matter of this summons fall into 3 categories:

(i) those purchased whilst the father was running a sole proprietorship (eg Evelyn Towers, Maiden Court and Aberdeen Centre);

(ii) those purchased before the 2^nd partnership was formed (eg Manderly Garden and the offices); and

(iii) one property purchased after the 2^nd partnership was formed (Tower 28 in South Horizons).

Strictly speaking, only item (iii) may constitute the 2^nd partnership’s property.  The other South Horizons property is in Drupti’s name and was purchased after the plaintiff became a partner.  It is not clear why the plaintiff included this property in his claim and, if any claim is made on it, why Drupti is not a party to these proceedings.

37.  That aside, the plaintiff’s case rests on concepts that may not have legal force.  For example, did the understanding purport to create some kind of unwritten trust?  If it applied to landed properties, it may be void for lack of writing: section 5 of the Conveyancing and Property Ordinance, Cap 219.  Was it purportedly based on agreement?  Absent specific provision, the default basis is that all of the father’s proprietary rights over any partnership assets would crystallize and become part of the father’s personal assets (and eventually his estate) at the time of dissolution of the 1^st partnership.  This is the inevitable consequence of the doctrine of non-survivability between partners: Lindley & Banks on Partnership, 19^th ed, para 19-13.

38.  Further, how should one reconcile the partnership rights with the understanding, the resulting trust (pleaded only after it was pointed out by the court that the plaintiff’s previously formulated claim was defective[1]) and intestacy or testacy law?  Whether testacy or intestacy law applied, the personal representative of the father is not a party to the present proceedings.  As submitted by Mr Chan, it cannot be said that the plaintiff somehow has an “indirect” claim as a beneficiary of the father’s (or even mother’s) estate.  There is no prayer for such in the re-amended statement of claim. What then is the pool of assets for each partnership?

39.  The Indian tradition adds another puzzle.  If it applied, why would the father give his majority share in the 1^st partnership to the plaintiff instead of the defendant (the eldest son)?  With the understanding and Indian tradition, did it mean that the plaintiff’s rights in the 2^nd partnership were not 60% but only 33.3%?

40.  The court expects more precision from a plaintiff who seeks an injunction of the draconian kind now sought.  That said, there is no dispute that the plaintiff was the 60% partner of the 2^nd partnership.  The plaintiff asserted from the outset, through his letter before action, that his share included a 60% proprietary interest in all the named properties, including those acquired before he became a partner.  He pleaded that the father “transferred his interest in the [1^st] partnership to him”.  This “transfer” appeared to have been acknowledged by the defendant in a letter in reply dated 21 February 2011 before action that “my late father gave me 40% share of Kay Tee Corporation and he decided to give Narian his 60% ownership in Kay Tee Corporation”.  That acknowledgement appeared in the first version of the defence (paragraph 5(4)), although it was retracted on 11 November 2011 upon amendment. 

41.  Where one partnership succeeds another, it will obviously be a question of fact whether the assets of the 1^st partnership have become assets of the 2^nd: Lindley & Banks on Partnership, 19^th ed, para 18-12.

42.  There is at least a serious question to be tried as to whether properties acquired during the 1^st partnership were “transferred” by the father to the plaintiff and formed part of the properties of the 2^nd partnership. 

43.  Further, even on the defendant’s own case, each party withdrew the same amount of money from the Businesses.  Those monthly amounts were not enormous.  The plaintiff queries how the defendant could afford to purchase the properties.  The defendant has not yet provided evidence of his savings and investments which funded the purchase.  There is a serious question to be tried as to the source of funding for purchase of the properties which might constitute partnership assets.

44.  As a partner, the plaintiff was entitled to inspection of partnership books and accounts, which the defendant did not dispute.  He was provided with limited documents before the action was commenced.   When this summons went before Suffiad J on 20 May 2011 and was adjourned for the first time the plaintiff’s request for documents was reduced from 15 to 7 years.  Even those 7 years’ records were incomplete.  The defendant undertook to produce (“the undertaking to produce”), among others, (i) credit/debit notes; (ii) remittance advices; (iii) collection orders; and (iv) remittance instructions (collectively “the missing documents”).  The undertaking to produce was repeated (with amendments that are immaterial) before Deputy Judge L Chan on 16 September 2011.

45.  The defendant claimed in his 3^rd affirmation that he had already, pursuant to his undertaking to produce, produced to the plaintiff all the documents he requested.”  In his 4^th affirmation (filed 5 months after this summons was issued), the defendant stated that the missing documents were irrelevant; that he had disclosed all available partnership documents and he had not concealed any record; and that there were no more partnership accounts or documents for the plaintiff to inspect.  In any case, the missing documents could be found in the bank statements and general legers already produced to the plaintiff.

46.  The missing documents were not disclosed even upon exchange of lists of documents. 

47.  The plaintiff had to obtain Kay Tee’s bank statements and credit/debit notes from SCB himself. Having correlated those documents to the invoices to customers, remittance instructions and the defendant’s bank account statements, there appeared to be a pattern of misappropriation of partnership funds.  Kay Tee would issue invoices to customers in US dollars.  Customers were instructed to pay into the personal account of the defendant in settlement of the invoices.  The defendant withdrew a lesser amount in HK dollars and deposited that into the SCB account of Kay Tee.  The total shortfall in the amount receivable by Kay Tee in 21 transactions was US$147,274.55.  There were 6 other transactions involving a shortfall of US$40,063.70.  (See the 5^th & 6^th affirmations of the plaintiff affirmed on 16 and 20 December 2011 respectively.)

48.  The defendant did not challenge the correlation among those documents. Instead, he alleged that there was a “CESCO payment arrangement” and “revised payment arrangement” which the defendant was made aware of.  According to the former arrangement, the invoiced amount would include the actual amount payable by the customer to the Businesses and the credit payable to CESCO for arranging a transaction (“credit”).  The credits represented the shortfalls alleged by the plaintiff.  They were not amounts due to the Businesses and hence not partnership funds.  As there had been insufficient funds to operate the Businesses, therefore, pending payment from customers (CESCO, E&M Lighting and Woodies), the defendant paid in his own funds representing the invoiced amounts less the credits.  Those customers would later pay the invoiced amounts to the defendant’s personal account and the defendant would keep it, releasing the credits to CESCO upon its instructions.  That CESCO payment arrangement had, allegedly to the plaintiff’s knowledge, been in existence since 2003.

49.  As for the revised payment arrangement, the defendant would not be holding the credits anymore but the customers would pay the invoiced amounts to the partnership and the partnership would pay the credits to CESCO when it so instructed.  However, Woodies made a mistake in making payment of the invoices directly into the defendant’s personal account. The defendant claimed that pursuant to the revised payment arrangement, he had remitted sums to the partnership account.  The only record of the existence of the 2 arrangements was CESCO’s unsworn confirmation dated 9 January 2012 produced by the defendant.

50.  Mr Hingorani challenges the assertion that Kay Tee did not have sufficient funds. There were banking facilities secured against Evelyn Towers, currently worth about $20.4 million and free from mortgage.

51.  Furthermore, as rightly pointed out by Mr Hingorani, under the defendant’s explanation, customers paid invoice amounts into the defendant’s personal account after the defendant had transferred funds into Kay Tee’s account.  Such explanation was wholly undermined by the missing documents, which showed the reverse.

52.  Further, if “credits” were paid to Cassidy for arranging transactions, they would be in the nature of agency commission.  One should not see them in relation to direct orders from Cassidy.  The fact is that the defendant paid credits even in respect of orders from Cassidy.  And the “credits” did not disclose a consistent percentage of commission.

53.  I agree with Mr Chan’s submission that I should not take the defendant’s wrong notion of giving access to the accounts to infer dishonesty.  However, the plaintiff has pleaded misappropriation even in the first version of the statement of claim on the basis of 3 remittance instructions.  At no time has the defendant ever pleaded that the shortfalls represented credits to CESCO.  He only came up with purported explanations in his 5^th affirmation when confronted with documentary evidence obtained from SCB.  

54.  The examples of misappropriation of partnership funds referred to by Mr Hingorani in his submission showed not isolated events but what might be recurrent misappropriation at least between 2004 and 2010 in relation to 27 transactions.

55.  It is not necessary to go into detailed analyses of each of the 27 transactions, nor the instances where the defendant said he had applied his own funds to pay suppliers such as Roden Trading and MGC Lamps Ltd.  Suffice to say there is a serious question to be tried on whether the defendant had misappropriated partnership funds.

56.  The defendant relied on time bar.  The plaintiff contended that section 20(1)(b) of the Limitation Ordinance, Cap 347 provides that:

“No period of limitation prescribed by this Ordinance shall apply to an action by a beneficiary under a trust, being an action to recover from the trustee trust property or the proceeds thereof in the possession of the trustee.”

57.  The question of limitation remains a triable issue.

 (B)  Tort claims

58.  The essence of the wrong of conversion is the unauthorized dealing with the claimant’s chattel so as to question or deny his title to it: Clerk & Lindsell on Torts, 12^th ed, 2010, para 17-06.  The plaintiff’s only allegation is the conversion of money belonging to the partnership.  The particulars given show that they refer to receivables, not chattels.  This cause of action is hardly unarguable.

59.  As for the cause of action on unlawful interference with the Businesses, Mr Chan points out the elements of the tort as follows:

“Unlawful means therefore consists of acts intended to cause loss to the claimant by interfering with the freedom of a third party in a way which is unlawful as against that third party and which is intended to cause loss to the claimant. It does not in my opinion include acts which may be unlawful against a third party but which do not affect his freedom to deal with the claimant.” OBG Ltd v. Allan [2008] 1 AC 1,para 51, per Lord Hoffmann; para with whom Baroness Hale of Richmond and Lord Brown agreed at paras 302 and 319 respectively.

60.  The pleaded case and the evidence adduced the by plaintiff are far from sustaining such a cause of action.

61.  There is no serious question to be tried on the tort claims.

(C)  Property claims

62.  There is doubt as to whether the claim in respect of Maiden Court and Aberdeen Centre based on resulting trust is sustainable, given that the relevant personal representative of the father is not a party.

63.  There is a serious question to be tried on whether there has been breach of the Evelyn Towers Agreement.  However, even on the plaintiff’s case, it will only sound in damages but not a right against the property itself.

64.  In summary, there are serious issues to be tried at least on the partnership claims and breach of the Evelyn Towers Agreement.

Risk of dissipation of assets

65.  Mr Hingorani submits that, absent any evidence of actual dissipation or threat of dissipation, the court has inferred a risk of dissipation where a defendant has acted dishonestly: CAC Brake Co Ltd Zhuhai v Bene Manufacturing Co Ltd,CACV 94/1998, 30 April 1998.  In Honsaico Trading Ltd v Hong Yiah Seng Co Ltd [1990] 1 HKLR 235, the court was satisfied of the real risk of dissipation from the fact that the defendant had acted to very low commercial standards.  Godfrey J (as he then was) held that [if the defendant’s] conduct, in relation to the transaction, leaves the court so uneasy that it is driven to conclude that there is a real risk that a judgment in favour of the plaintiff might remain unsatisfied, then it is the court’s duty to grant the injunction. (at page 240 F-G)

66.  Even accepting that the defendant may have displayed low moral standards in misappropriating partnership funds, there was no risk of dissipation of the properties.  Evelyn Towers has been held in full view of the siblings for over 30 years and the other properties for 17 to 25 years.  The state of occupation and leasing out were no secret to the plaintiff.

67.  At the hearings before Suffiad J and Deputy Judge L Chan, the defendant undertook (without prejudice to his rights in this action) to notify the plaintiff or his solicitors in writing in advance should the defendant wish to sell any or all of the properties (not including Manderly Garden and Evelyn Towers at that stage), to preserve the proceeds of sale thereof and not to make any disposition by any other means in respect of the properties (‘the undertaking re properties’).

68.  At the adjourned hearing before me on 22 December 2011, the defendant refused to continue that undertaking and I declined to order an interim injunction.

69.  The present hearing is the 3^rd adjourned hearing one year since the taking out of this summons dated 11 May 2011.  With or without the undertaking, the defendant has not done anything to deplete the properties.  There appears to be no risk of dissipation that will render judgment to the plaintiff being empty on the ground of lack of evidence of risk of dissipation.

Balance of convenience

70.  The court should consider whether, if the plaintiff succeeds at the trial, he will be adequately compensated for by damages.

71.  The 2^nd partnership has been dissolved and the plaintiff will be entitled to an account and payment of what is due to him. Save for the prayer for inspection of books and accounts, the rest of the reliefs sought will end up in a money judgment.  This was confirmed by Mr Hingorani in his first set of skeleton submission (paragraph 37) lodged on 18 May 2011.

72.  Mr Hingorani submits that the defendant stands to face an award against him of over $100 million. He queries whether the defendant will have such funds available to meet such an award.  Satisfaction of an award of damages out of funds which were themselves misappropriated will not be an adequate remedy.

73.  I have no idea how Mr Hingorani came up with the $100 million figure.  In any case, the properties are estimated to be about $200 million in value.  I find that damages will form an adequate remedy and the properties have sufficient value to meet the estimated award. 

Summary on the application for a Mareva injunction

74.  Since there is no evidence of the defendant dissipating his assets and loss of the plaintiff can be compensated for by damages, there is no reason why such a draconian order as to prohibit the defendant from selling the properties (whether as a beneficial owner or a partner with a duty to account) should be imposed.  In any case, it has not been demonstrated that freezing properties worth about $200 million is a protection proportionate to the $100 million claim of the defendant.  I decline to impose an interim injunction.

PRESERVATION ORDER

The applicable principles

75.  In respect of preservation orders under Order 29, rule 2, the source of the court’s powers is the inherent jurisdiction to secure by orders, a just and proper trial of the issues: Hong Kong Civil Procedure 2012, Vol 1, para 29/8/1.  It has to be shown that:

(i)  There is property which is the subject matter of the cause or matter, or as to which any question may arise.  The property must be bona fide the subject matter of the action: Scott v Mercantile Accident Insurance Co (1892) 8 TLR 320, Hong Kong Civil Procedure 2012, Vol 1, para 29/8/6;

(ii)  Something ought to be done for the security of that property. The court will not be deterred from making an order for preservation of property because a party against whom the order is sought has a proprietary interest in it.  An order should not be refused merely because the defendant claims that he has a discretionary power to determine whether or not the property should be preserved and how it should be preserved, when one of the issues in the case is whether or not the power is untrammeled by a duty to the plaintiff to preserve the property: Johnson v Tobacco Leaf Marketing Board [1967] VR 427, Hong Kong Civil Procedure 2012, Vol 1, para 29/8/8.

76.  The essential distinction between a preservation order and a Mareva injunction is that:

“In an action in which the plaintiff seeks to recover his property, the court has jurisdiction to grant an interlocutory injunction restraining the disposal of property over which the plaintiff has a proprietary claim. The single most significant feature of the Mareva injunction is that it goes well beyond this and enables the court to grant the plaintiff an interlocutory injunction restraining the defendant from disposing of or even dealing with his assets, being assets over which the plaintiff asserts no proprietary claim but which after judgment may be attached to satisfy a money judgment.” Hong Kong Civil Procedure 2012, Vol 1, para 29/1/51.

77.  For a preservation order, an enquiry into the relative merits of rival claims is not necessary: Johnson v. Tobacco Leaf Marketing Board [1967] VR 427, at 430. 

“What is involved is an exercise in salvage, pending, and for the purpose of, the ultimate determination. It is, therefore, relevant to consider what will be involved in that determination, and how it relates to the property sought to be preserved, and what justice demands in the way of making an order for the preservation of the property so as to prevent a determination one way or the other proving abortive.”

78.  Neither the rule itself nor the authorities require the applicant  to show risk of dissipation of assets. 

79.  However, the court will refuse to grant a preservation order if damages will be an adequate remedy for the plaintiff: Feng Loy Chuen v Lim Yiong Lin [1977] HKLR 471.

Grounds for the application

80.  In his 3^rd affirmation, the plaintiff justified this part of the application as the necessity to preserve “evidence” until the court’s determination.  He also believed that the defendant was already taking steps to transfer certain of his assets to his immediate family which might be an attempt to frustrate any order which may be made in this action.

81.  It was misconceived to regard the properties as “evidence” which needed to be preserved.  Mr Hingorani, rightly, does not insist on this point and corrects his client’s case as preservation of the subject matter of the partnership.

82.  There was also no evidence that the defendant had attempted to dispose of the properties in question, let alone to his immediate family members.

83.  However, Mr Hingorani submits that as between the plaintiff and defendant there is something which ought to be done for the security of the properties.  He relies on:

(i) Long-term misappropriation of partnership funds;

(ii) Concealment of the missing documents;

(iii) The fact that the father had, apart from Evelyn Towers, invested in stocks and had savings accounts even before 1975, demonstrating that the Businesses were in fact profitable; and

(iv) The defendant’s current challenge to specific discovery of  bank statements of his personal accounts, remittance advices/instructions, credit/debit notes and full set of export documents.

84.  I consider that those grounds are sufficient to support the application.  My analyses under paragraphs 40 to 57 on serious questions to be tried on the partnership claims are applicable.  Something ought to be done for the security of those properties. 

85.  The 2^nd partnership has indisputably been dissolved after commencement of this action.  The offices on 4^th Floor Conwell House will not be used for the Businesses and may be applied to other uses.  There is a duty to account on the part of the defendant.  The plaintiff may also have a right to trace the partnership funds that have found their way into any property held by the defendant.  Some of the properties (which I will identify below) are capable of forming bona fide the subject matter of the action, being acquired from funds of the Businesses, if the plaintiff’s case is accepted after trial.  The defendant has been leasing out or occupying the properties in the past.  Sale was not a normal activity.  If the defendant sells any of the properties, the plaintiff’s rights may be affected.

86.  There is no point preserving the properties in kind since the defendant does not object to the sale of any of them, given that his claim is in money.  Nor does he object to their leasing out.  Cash is always easier to dissipate than properties.  The misappropriation of partnership funds and less than full and frank discovery do not instill confidence in the defendant’s conduct.  It is best to avoid the trouble of rounds of tracing and discovery to see where funds have gone pending trial.

87.  I am satisfied that something ought to be done for the security of what might be partnership properties.  The question is only the form and extent.

Terms of the preservation order

88.  Mr Hingorani does not oppose sale at open market value or renting out of the properties.  All he requires is that 60% of the proceeds be put into a designated account pending trial of this action.  He does not require the defendant to seek the plaintiff’s consent before sale.

89.  The next question is what assets form the “subject matter” of this action.  Mr Hingorani identifies 7 properties.  My views are as follows:

(i) Evelyn Towers has been rightly omitted as, even on the plaintiff’s case, the resulting trust is in favour of the father’s estate and not any partnership.

(ii) Manderly Garden forms the subject matter of this action under the distinct cause of action in breach of the Evelyn Towers Agreement and Manderly Rental Agreement and does not form the asset of any partnership. It is newly added to the list of properties identified in the summons.  It forms 1/3 of the total value of the properties.  Mr Hingorani says that the plaintiff has “proprietary” interest.  I find that to be misconceived.  Any breach will only sound in damages of $10 million and lost of rental plus profits arising thereunder.  Freezing 60% of the net proceeds of sale of this property is clearly excessive and should not be allowed.

(iii) Maiden Court forms part of the father’s estate and cannot form the subject matter of a preservation order in this action.

(iv) The offices and Tower 28 of South Horizons may form the subject matter of the partnership claim. 

90.  A preservation order can be made notwithstanding that the defendant also has interest (at least 40% as a partner even on the plaintiff’s case) in those properties.  The requirement to preserve the proceeds of sale should apply whether or not the defendant sells at open market value.  (Of course if he sells at undervalue, he faces a risk in having to account the deficiency.)  Since there is distrust between the parties, the proceeds should be paid into an account held by the defendant’s solicitors instead of the defendant.

Undertaking as to damages

91.  The defendant has raised his concern that the plaintiff has not provided any undertaking as to damages.

92.  There is nothing in the rule itself or the authorities on the requirement for undertaking as to damages where the court makes a preservation order.  Since the power invoked by the court may restrain a party from disposing of assets in which he asserts beneficial ownership, the court may require an undertaking as to damages where the circumstances warrant.

93.  The plaintiff has expressed his willingness to provide the undertaking as to damages in his 3^rd affirmation.

94.  Given the difficulties alluded to in the plaintiff’s case, that the extent of the plaintiff’s entitlement remains unknown and that it may turn out to be much less than the 60% of the value of the defendant’s properties,  I am of the view that it is just to require the plaintiff to fortify his undertaking.

95.  It would, however, be oppressive to ask the plaintiff to pay into court an amount equivalent to the market value of the properties.  After all, he is not opposing the sale.  Preserving the proceeds will only affect the defendant’s opportunity to invest them.  In my view, any fortification should only be for an amount that represents loss of the ability to use the preserved funds pending trial.  The defendant has not specified what investments he has in mind and the potential gains.  I therefore adopt a rate of 5%, being the current best lending rate for borrowing funds to invest.

96.  The plaintiff says that he has been able to accumulate some $3.8 million in the form of cash and listed company shares. Since termination of the 2^nd partnership, the plaintiff is in the process of establishing an import/export business and he anticipates his income to be $800,000 per annum.  Prior to dissolution of the partnership, he had had no drawings since about July 2010.  The amount that I fix for him to fortify his undertaking should be within his means, having regard to the fact that the few properties are worth $23m in total.

97.  I order that before each payment in by the defendant of the net proceeds of sale of any of the offices or the flat at Tower 28 South Horizons into a designated account, the plaintiff shall fortify his undertaking by paying an amount equivalent to 5% of those net proceeds into court.

Costs of the application for injunction and preservation order

98.  The plaintiff is successful in obtaining a preservation order.  Cost should, prima facie, follow the event and be to him.  The question is whether other factors apply so as to make the usual order inappropriate: Order 62, rules 3(2A) and 5.

99.  The fact that one party relies on some arguments which failed does not mean he should be deprived of costs.  After all, some arguments are common to both applications in this case.

100.  The summons initially asked to restrain the defendant from dealing with all investments, stocks and shares acquired and retained by him in his own name by monies belonging to Kay Tee and Kishoo from 26 May 1983 to date.  The plaintiff has not in his supporting affirmations identified what those assets might be or condescended into particulars as to why he held such belief. The order as sought in the summons effectively requires the defendant to admit that the investment came from funds of Kay Tee and Kishoo.  The application in this regard, in my view, was doomed to failure.  It was rightly abandoned.

101.  The plaintiff pursued the Mareva injunction despite being alerted to the difficulties by Mr Chan in the skeleton submission lodged for the 2^nd adjourned hearing on 22 December 2011 before me.

102.  Further, the preservation order now given is in much narrower scope and less stringent terms than that applied for in the first place. 

103.  The defendant made no concession at all to the application.  Mr Chan describes in his skeleton submission dated 20 December 2011 that the preservation order sought by the plaintiff:

“presumably means that plaintiff only seeks a continuation of defendant’s undertaking to notify plaintiff or his solicitors of any intention to see the properties and to preserve the proceeds of sale (as well as to not make a gift or disposition of such properties). While such a concession if made would be sensible (though far belated having regard to costs), it does not go far enough. … the fundamental remains that the entirety of the plaintiff’s case for any kind of restraint in respect of the properties is without basis. There is simply no proper reason for restricting defendant’s right to deal with the properties in any way.”

This, in my view, is clear indication that the plaintiff still needs to come to court to obtain the preservation order.

104.  I do not agree with Mr Chan that “the appalling delay in pursuing the plaintiff’s application is the result of the plaintiff’s continuous failure to conduct his case properly and fairly, and in particular his regular launching of last-minute applications either to try to rectify patent deficiencies in his case or to add a yet further layer of wild allegations against defendant.” That fact is that the plaintiff had relied on the defendant’s undertaking to produce documents.  Those provided by the defendant were incomplete.  Documents from the bank came months after the summons was issued.  Spending one month’s time to collate the documents and preparing the 5^th and 6^th affirmations could not be said to be unreasonable.   The missing documents proved to be relevant material in showing a serious question to be tried on misappropriation of partnership funds.  The delay was contributed to by the defendant’s failure to provide the missing documents. 

105.  I have also taken into account the fact that numerous affirmations have been filed.  Each party has been repetitive in his case. There was detailed but unnecessary setting out of contents of correspondence (as opposed to the gist in narrative form) in the affirmations, eg the 2^nd affirmation of the defendant.  The court could have been referred to the correspondence during submissions and in fact that was what the parties did in the course of the oral submission.  Some costs should be disallowed on each side for such repetition.  To save the taxing master’s trouble in deciding which part was repetitive, I have taken into account the repetition when apportioning the percentage of costs.

106.  I have already alluded to the difficulties of the plaintiff’s case as regards the understanding, Indian tradition and resulting trust.  One cannot overlook the possibility that, after trial, even the restraint of 60% of the proceeds of sale might have been excessive.

107.  Taking all circumstances into account, I order that 30% of the costs of the summons (including all costs reserved in relation to it) should be the plaintiff’s costs in the cause.  80% of the costs of the hearing on 7 June 2012 should be apportioned as time spent on the application for of injunction and preservation order.

Costs of the application for inspection of books and accounts

108.  At the hearing on 22 December 2011, paragraph 1 of the summons on inspection of accounts (“the application for inspection”) was not proceeded with.  Each party asks for costs.

109.  I have read through the correspondence and considered each party’s submission on costs of the issue of inspection.  There was a lot of distrust and acrimony in the correspondence for which both sides were responsible.   One can only say that the issue of inspection was mixed, as rightly described by Mr Chan, with a “jumble of issues”.

110.  According to the plaintiff, before action, the defendant denied access to the accounts and asked for explanation as to why the plaintiff needed them.  The plaintiff had to go to solicitors to make the request.  The defendant provided 3 schedules of documents to the plaintiff before the summons was issued.  It took this summons to get the defendant’s response that the documents were at the partnership office, and another 2 months post-writ to allow the plaintiff to inspect the accounts.

111.  It was after 20 years of disinterest that the plaintiff suddenly sought access to partnership records.  There was then no apparent urgency.  The plaintiff obviously failed to consider the plaintiff’s need for time to prepare copies of partnership documents for the plaintiff on the one hand and the need for taking care of the Businesses and preparing the trade shows on the other. Given the years of partnership documents involved, it was not unreasonable for some of them to have been stored elsewhere and time was needed for retrieval. The plaintiff has also failed to take into account the defendant’s Parkinson’s disease which prevented the defendant from responding as quickly as the plaintiff might have expected.  I shall not infer that the defendant was denying access.

112.  The plaintiff has also unreasonably insisted on inspection of accounts at the partnership office even though the matter has gone into the hands of lawyers.

113.  Mr Chan describes the plaintiff’s requests for inspection to be “erratic, inconsistent and confusing”.  The defendant challenged the request for inspection of books and accounts relating to the Businesses and asserted that books and accounts did not normally include bank statements and receipts.  Whilst I consider that the plaintiff (or his lawyers) could have been more precise in framing the requests, there was no objective difficulty in understanding that the plaintiff was entitled to obtain only books and accounts of the 2^nd partnership.

114.  The defendant all along expressed willingness to allow access to the accounts. Apparently, he and his lawyers were keen to avoid litigation.  However, the defendant had made unhelpful assertions that the plaintiff’s inspection was no longer necessary.  He also said that he plaintiff left the office on his own accord without inspecting the documents, knowing they were available.

115.  The defendant harboured suspicions as to the plaintiff’s association with Kishin (who was not a partner or auditor but a competitor) and hence motive for obtaining the partnership records.  His concerns might have been justified as the surveillance reports commissioned by him showed that the partnership accounts obtained at the office had been passed to Kishin.  The plaintiff admitted keeping those accounts at Kishin’s place, though he explained that it was not for Kishin to scrutinize them but for passing on to the plaintiff’s solicitors.

116.  The plaintiff asked for an undertaking from the plaintiff not to disclose the partnership records to Kishin and third parties.  That was understandable though not legitimate, because it would restrict the plaintiff’s right to consult eg an auditor.  However, the defendant had soon retracted his demand for the undertaking after some tug-of-war with the plaintiff.

117.  The defendant also questioned whether Kishin had disclosed to the plaintiff the settlement terms in the proceedings involving Kishin and the defendant (“the Kishin actions”).  He queried the plaintiff’s request for waiver of confidentiality in respect of witness statements filed in the Kishin actions.  He alleged a conspiracy between the plaintiff and Kishin.  He alleged that the plaintiff was involved in Kishin’s business.  Those were entirely irrelevant to the issue of inspection.

118.  Similarly, alleging that the plaintiff had neglected his duties as a partner, asking the plaintiff (as a partner) to confirm whether he could advise on the whereabouts of the stored accounts, asserting that the plaintiff had access to partnership documents dating back to at least 1997 and hence there was no basis to seek injunction relief, asking for the plaintiff’s production of partnership documents in the latter’s possession, and expressing concern over the plaintiff’s involvement in another trading company and Regal Top, were all irrelevant to the issue of inspection.

119.  It is true that production of documents was pursuant to the defendant’s voluntary undertaking but the production was not complete.   The defendant had not produced the missing documents despite a request on 31 March 2011 before action and his undertaking to produce.  He could not have been mistaken as to what the plaintiff wanted as, on 15 August 2011, the latter has given him samples of the inward and outward remittance advices for HSBC and SCB.  The missing documents which the defendant considered as irrelevant turned out to be most relevant to the issue of misappropriation of partnership funds.  I find these matters to be weighty in terms of deciding that the defendant should bear more blame for this application.

120.  Whether the defendant has complied fully with his undertaking to produce did not rest on whether the plaintiff had made the right complaint as regards the missing documents.  It was of no use for the defendant to express surprise that despite the plaintiff’s own inspection and copying of documents the defendant still alleged that the missing documents could not be found.  It was of no use for the defendant to keep repeating that he had never denied access and the plaintiff had never asked for access over the past 21 years until recently. It was for the defendant to comply with the letter and spirit of his own undertaking.

121.  The defendant’s accusation that the plaintiff took out the writ one day before expiry of the ultimatum for production of all documents in a letter from the plaintiff dated 22 March 2011 had no significance in the context of this case.  That one day could not have led the parties to a peaceful resolution through pre-action correspondence or without issue of this summons.

122.  Having regard to all the circumstances, I am of the view that costs of the application for inspection of books and accounts should be borne by the defendant in any event.  This should take up 40% of the costs of the summons.  20% of the costs of the hearing on 7 June 2012 should be apportioned as costs of the application for inspection.

Conclusion

123.  I make an order as follows:

(1)  The application for an injunction is dismissed.

(2)  A preservation order be made such that if the defendant sells any of the offices or the flat at Tower 28 South Horizons, he shall, upon completion of any such sale preserve 60% of the proceeds of sale (after deduction of conveyancing fees and agency charges) by payment into a designated account in a bank in Hong Kong held in the name of the defendant’s solicitors until trial or further order; details of that bank account shall be notified to the plaintiff’s solicitors;

(3)  The plaintiff do fortify his undertaking as to damages so that before each payment in by the defendant of the net proceeds of sale of any of the offices or the flat at Tower 28 South Horizons into a designated account, the plaintiff shall pay an amount equivalent to 5% of those net proceeds into court.

(4)  on a nisi basis, as regards the application for the injunction and preservation order, 30% of the costs of the summons (including costs reserved), should be the plaintiff’s costs in the cause, to be taxed if not agreed.  80% of the costs of the hearing on 7 June 2012 shall be apportioned as costs under this application;

(5)  on a nisi basis, the costs of the application for inspection should be to the plaintiff, apportioned at 40% of the costs of the summons (including costs reserved), to be taxed if not agreed.  20% of the costs of the hearing on 7 June 2012 shall be apportioned as costs under this application; and

(6)  there be taxation only upon conclusion of this action.

124.  I thank counsel for their assistance.