JEN KIT JOSEPHINE, THE ADMINISTRATRIX FOR THE ESTATE OF JEN FRANK CHIA HSIANG, THE DECEASED v. CHAN SAU WAI SHIRLEY

HCA 346/2014 and
HCMP 106/2017
(Consolidated)
[2019] HKCFI 879

HCA 346/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 346 OF 2014

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AND

HCMP 106/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 106 OF 2017

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_______________

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(Consolidated pursuant to the Order of
DHCJ N Francis dated 28 February 2018)

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REASONS FOR DECISION

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1.  This matter came before me on 28 March 2019. At the end ofthe hearing, I gave my Decision orally and said that I would hand down my Reasons for Decision in due course. These are my Reasons for Decision.

THE CONSOLIDATED ACTION

2.  These are two sets of proceedings, HCA 346/2014 (“the HCA”) and HCMP 106/2017 (“the HCMP”), which were ordered to be consolidated by the Order of DHCJ N Francis dated 28 February 2018.  By that Order, the learned Deputy Judge also ordered that the HCMP be continued as if begun by writ and that the plaintiff in the HCA (“Madam Jen”) be treated as the plaintiff and the plaintiff in the HCMP (“Madam Chan”) be treated as the defendant in the Consolidated Action.

3.  I was informed by counsel on both sides that they actually consented to the consolidation of the two sets of proceedings.  Speaking for myself, I have serious doubts as to whether it is appropriate or expedient for that to be done.  I shall say more about this below.

THE FACTUAL BACKGROUND

4.  Jen Frank Chia Hsiang (“the Deceased”) died intestate in Shanghai on 25 January 2010.  His first wife was a Madam Chou who predeceased him on 21 May 1998.  They had two children, Madam Jen and a son by the name of Franklin (“Franklin”), the 2^nd defendant in the HCMP.

5.  The Deceased subsequently married Madam Chan in Canada on 2 September 1999.  They had no children.

6.  As is obvious from the evidence filed and from the number of court proceedings between Madam Jen and Franklin on the one side and Madam Chan on the other side in Hong Kong and Canada and in Shanghai, the relationship between them is extremely acrimonious.

7.  Soon after the death of the Deceased in 2010, Madam Jen and Franklin already started proceedings against Madam Chan in Shanghai where Madam Chan was living and claimed a right of inheritance to assets which allegedly belonged to the Deceased.

8.  In March 2011, Madam Jen attempted to apply for a grant of Letters of Administration of the estate of the Deceased by seeking an order for substituted service of the Citation on Madam Chan.  The Probate Registry refused to make the order for substituted service sought.

9.  In February 2012, Madam Jen tried again and this time successfully obtained from the Probate Registry an order for substituted service of the Citation on Madam Chan.  She then caused the Citation to be published in a local newspaper.  There was no response from Madam Chan.

10.  Subsequently, on 28 September 2012, Madam Jen was granted the Letters of Administration to the estate of the Deceased (“the LA”) making her the sole administratrix of the estate of the Deceased.

11.  At this juncture, it is worthy of note that, as shown by the Schedule of Assets and Liabilities of the Deceased attached to the LA, therewas nothing substantial in the estate, just a few thousand dollars in cash plus 900 shares in a company by the name of Ziang Kong Co, Ltd (“ZKCL”) and 90,000 shares in another company called Cartegena Industrial Co, Ltd (“Cartegena”).  These were companies which practically belonged to the Deceased.  I shall say more about them below.

12.  According to Madam Chan, she had no notice of the said Citation.  She has further alleged that Madam Jen had deliberately misled and was guilty of material non-disclosure towards the Probate Registry regarding the address for service on Madam Chan which resulted in her being granted an order for substituted service of the Citation and eventually in Madam Chan being bypassed and in Madam Jen being granted the LA.

THE RELEVANT LITIGATION

13.  As mentioned above, there were the legal proceedings instituted by Madam Jen and Franklin against Madam Chan in Shanghai in 2011.

14.  By its Judgment dated 5 September 2012, the local People’s Court in Shanghai ruled partly in favour of Madam Jen and Franklin and partly in favour of Madam Chan in relation to some properties in Shanghai inthe estate of the Deceased.  It does not appear that the properties in question were of any great value.

15.  By another Judgment dated 26 March 2013, the said People’s Court found against Madam Jen and Franklin and dismissed their claim in relation to the proceeds of sale of another property in Shanghai which had been registered under the name of Madam Chan.

16.  On 28 February 2014, Madam Jen in her capacity as the administratrix of the estate of the Deceased instituted the HCA.  The Amended Statement of Claim is 52 pages long.  In it, a number of allegations are made against Madam Chan, including the following:

   (i)   The marriage between her and the Deceased is not valid because the Deceased was mentally incapacitated at the material time.  There are legal proceedings started by Madam Jen through Franklin as her attorney in Canada challenging the validity of the marriage.

   (ii)   Misappropriation and intermeddling of the assets in the estate of the Deceased by Madam Chan.

   (iii)   Undue influence exercised by Madam Chan on the Deceased.

The reliefs claimed in the prayer are also numerous, including in summary the following:

   (i)   Declarations, including a declaration that the Deceased did not have the mental capacity to enter into the said marriage.

   (ii)   Delivery up and restitution of assets.

   (iii)   An account and inquiry.

It should be noted that the original Statement of Claim in the HCA was very substantially amended in March 2017 resulting in the present Amended Statement of Claim.

17.  There were also applications at the end of 2014 and the beginning of 2015 made by Madam Jen against Madam Chan in the HCA for Mareva and freezing injunctions which were unsuccessful before Chow J.

18.  In January 2017, Madam Chan issued the originating summonsin the HCMP.  This has now become the points of defence and counterclaim in the Consolidated Action.  In summary, Madam Chan claims, inter alia, the following reliefs:

   (i)   An order that the grant of the LA to Madam Jen be revoked.

   (ii)   An order that a fresh grant of Letters of Administration to the estate of the Deceased be made to an independent administrator. 

   (iii)   An order that (subject to the consent of Madam Jen and Franklin)the fees of the independent administrator be paid initially by Madam Chan as to 50%, Madam Jen as to 25% and Franklin as to 25%, subject to reimbursement by the estate in due course.

   (iv)   An order that Madam Jen do file and serve on Madam Chan a signed true and just account of the assets and properties in the estate of the Deceased.

19.  Needless to say, there are many cross-allegations between Madam Jen and Madam Chan in the affirmations filed.

20.  I am told by counsel for the parties that the proceedings in Canada challenging the validity of the marriage between the Deceased and Madam Chan have still not been resolved since their commencement in 2014. Mr D’Souza, counsel for Madam Jen, told me that the reason was that both sides’ lawyers had agreed to hang fire pending the determination of the issue of the validity of the marriage by the Hong Kong court. Mr Tang, counsel for Madam Chan, said that there was no such agreement.  No matter who isright, speaking for myself, I find it strange that the determination by the court in Canada on the question of the validity of a marriage which took place in Canada should have to await a decision on the same question by the Hong Kong court.  It does not sound very logical.

21.  At this juncture, I should refer to the three companies which were operated and managed by the Deceased and/or Madam Chan in whichthe Deceased had shares.  They are: ZKCL, Cartegena and another company called Kwai Chung Enterprises Limited (“KCEL”).

22.  Since early 2018, Madam Jen has been trying to take control of those three companies.  According to Madam Chan, Madam Jen sought to do that by unlawfully calling extraordinary general meetings and invalidly appointing herself as a director of those companies. Madam Jen has also started proceedings on the companies front in her capacity as the administratrix of the estate of the Deceased.

23.  One of those proceedings is HCMP 1151/2018 (“HCMP 1151”) the originating summons in which is scheduled to be heard before DHCJ R Ismail SC on 3 April 2019.

THE PRESENT APPLICATION

24.  The summons presently before me was issued by Madam Chan on 19 October 2018.  She claimed an order that:

   (i)   Madam Jen do forthwith lodge in the Registry the LA pending the final determination of the HCMP pursuant to Order 76, rule 4 of the Rules of the High Court (“RHC”);

   (ii)   Madam Jen be suspended from the office of administratrix until further order pursuant to section 33 of the Probate and Administration Ordinance, Cap 10 (“the PAO”);

   (iii)   Madam Jen be restrained from acting as the administratrix of theestate of the Deceased until further order, except for the limited purpose of agreeing to an order for the stay of proceedings in HCMP 1151 before DHCJ R Ismail SC on 3 April 2019.

25.  I granted to Madam Chan an order basically under items (i) and (iii) set out in paragraph 24 above upon the undertaking by Madam Chan through her counsel that she would not dissipate the assets of or destroy the records of the said three companies and would use her best endeavours to represent ZCKL in dealing with the prosecution by the Inland Revenue Department against that company for failure to file a tax return.  I did not think that an order under item (ii) in paragraph 24 above would be necessary in all the circumstances.

THE REASONS FOR MY DECISION

26.  I set out below my reasoning.

27.  To begin with, I should point out that the originating summonsin the HCMP, although not issued as a writ out of the Probate Registry under a case number prefixed by “HCAP”, can be treated as a probate action to which RHC Order 76 applies.  The old rule that a probate action must havebeen endorsed with the leave of the Probate Registrar before issue has ceased to be effective.  See footnote 1 to PD20.2/2 in Hong Kong Civil Procedure 2019 Vol 1 page 2117.  It is a claim for the revocation of a grant of letters of administration and it has been ordered by DHCJ N Francis to be treated as having been begun by writ.

28.  Order 76, rules 1 and 4 provide as follows:

“ 1. Application and interpretation (O. 76, r. 1)

(1) This Order applies to probate causes and matters, and the other provisions of these rules apply to those causes and matters including applications for the rectification of a will subject to the provisions of this Order.

(2) In these rules probate action(遺囑認證訴訟) means an action for the grant of probate of the will, or letters of administration of the estate, of a deceased person or for the revocation of such a grant or for a decree pronouncing for or against the validity of an alleged will, not being an action which is non-contentious or common form probate business.

(3)   In this Order, will(遺囑) includes a codicil.”

“ 4. Lodgment of grant in action for revocation (O. 76, r. 4)

(1) Where, at the commencement of an action for the revocation of a grant of probate of the will or letters of administration of the estate of a deceased person, the probate or letters of administration, as the case may be, have not been lodged in court, then—

(a) if the action is commenced by a person to whom the grant was made, he shall lodge the probate or letters of administration in the Registry within 7 days after the issue of the writ;

(b) if any defendant to the action has the probate or lettersof administration in his possession or under his control,he shall lodge it or them in the Registry within 14 days after the service of the writ upon him.

(2)   Any person who fails to comply with paragraph (1) may, on the application of any party to the action, be ordered by the Court to lodge the probate or letters of administration in the Registry within a specified time; and any person against whom such an order is made shall not be entitled to take any step in the action without the leave of the Court until he has complied with the order.”

29.  The HCMP being a probate action within the meaning of Order 76, rule 1, the defendant therein (Madam Jen), being the grantee of theLA, would be obliged to lodge the LA in the Probate Registry within 14 days after the service of the proceedings on her.  In view of the fact that she did not do so, the court could make an order requiring her to do so.

30.  Mr D’Souza argued that under Order 76, rule 4(2), the court might exercise its discretion to order or not to order a lodgment and that in the circumstances of this case, applying the ordinary principles in injunction cases, the court should not so order.

31.  I was not sure that Mr D’Souza’s argument about the applicability of ordinary principles in injunction cases in such a situation was right.  Without deciding the point, however, I was prepared to go alongwith it and considered the case on that basis.  My conclusion was still against Mr D’Souza’s client.

32.  The injunction principles are well-known.  There is no need for me to set them out here.

Serious questions to be tried

33.  It is clear to me that so far as the HCMP is concerned there are a number of serious questions which the court cannot determine on affirmation evidence now and which must be tried.

34.  First, there is the question of the mental capacity of the Deceased as at the date of his marriage with Madam Chan in Canada.  In evidence are a number of medical certificates by medical practitioners who attended to the Deceased in Hong Kong and on the Mainland and an expert report by a Dr Wong in Hong Kong.  It is not possible for the court to make a finding on this question now.

35.  Secondly, there is the question of the validity of the said marriage under Canadian law in light of the mental capacity of the Deceased on the day of the marriage as may be found by the relevant court, be it a Canadian court or a Hong Kong court.  In this regard, I should make it clear that I am not making any finding as to how and where the question of the validity of the marriage should be resolved, since there was not really any argument on the point.

36.  Thirdly, there is also the question as to whether Madam Jen had deliberately misled the Probate Registry or been guilty of material non-disclosure in seeking the order for substituted service of the Citation on Madam Chan.

37.  Section 33 of the PAO reads as follows:

“ 33. Revocationof grants and removal of executors

(1) Where it appears to the court that a probate or administrationeither ought not to have been granted or contains an error, thecourt may call in the probate or administration and if satisfied that it would be revoked at the instance of a party interested,may revoke it.

(2) A probate or administration may be revoked under subsection (1) without being called in if it cannot be called in.

(3) The court may, if satisfied that the due and proper administration of the estate and the interests of the persons beneficially entitled thereto so require, suspend or remove anexecutor or administrator (other than the Official Administrator)and provide for the succession of another person in place of such executor or administrator and for the vesting in that other person of any property belonging to the estate.”

38.  Subsection (1) of section 33 would be relevant in the context of the point set out in paragraph 36 above.

39.  Finally, the question also arises as to whether the court should remove Madam Jen in any event and replace her by an independent administrator under section 33(3) of the PAO on the ground that “the due and proper administration of the estate and the interests of the persons beneficially entitled thereto so require” as suggested by Madam Chan in light of her allegations that Madam Jen had failed or refused to give an account of the estate and that Madam Jen is seriously biased and has been using her position as administratrix to take revenge on Madam Chan.  For the duty of a personal representative to give an account, see the case of Re Estate of Lee Da Kor [2010] 1 HKLRD 415 at 419 paras 16 – 18.

Balance of convenience

40.  On the question of balance of convenience, I also find that the balance is tipped in favour of Madam Chan.

41.  First, as has been noted above, the Schedule of Assets and Liabilities attached to the LA shows that there are no substantial assets left by the Deceased on his estate.  Mr D’Souza plainly admitted in court that the main assets in the estate were the causes of action against Madam Chan.  Furthermore, it is also accepted that the three companies are not trading and are not really going concerns.

42.  In such circumstances, I do not see how some delay pending the determination of the question of the validity of the marriage would cause irreparable damage to Madam Jen.

43.  On the other hand, if Madam Jen is allowed to continue the litigation against Madam Chan on the basis of the LA and eventually the LA is revoked, then an injustice would have been done against Madam Chan.  Furthermore, Madam Chan may not be able to recover costs from the estate of the Deceased because there are not enough assets.

44.  In this regard, it is relevant to take into account the fact that Madam Chan has submitted that an independent administrator should be appointed in place of Madam Jen. As mentioned above, Madam Chan is willing to pay 50% of the costs and has suggested that Madam Jen and Franklin should pay the remaining 50%, all subject to reimbursement by the estate later.  This offer has been rejected by Madam Jen and Franklin.

45.  Madam Jen accuses Madam Chan of delay in taking out the present application.  On the other hand, it also appears that Madam Jen hasnot been very expeditious in progressing with the HCA either.  Furthermore,Madam Jen does not appear to be very keen to move forward with the Canadian proceedings for the challenge against the validity of the marriage. 

46.  In all the circumstances, I take the view that any delay by Madam Chan in taking out the present application is not serious enough to disentitle her to relief.

47.  I should also mention that there is authority to the effect that once an original grant of representation is lodged in the Probate Registry, the personal representative should not and cannot act further in such capacity.  See the case of Ho Wai Yin v Cheng Suet Yee HCAP 18/2003 (13 February 2004) where Lam J (as he then was) said at para 22 as follows:

“ 22. I do not accept this submission. Order 76 Rule 4(1) requires the lodgment of the grant in court after the commencement of an action for revocation. This is to ensure that nothing could be done on the strength of the grant in the meantime. It does not however mean that in every case where there is a claim for revocation of the grant, the assets of a defendant have to be frozen. If the administration of the estate has not been completed, the personal representative would not be able to continue to administer the same pending the determination of the action. …”

Thus, the injunction under paragraph 24(iii) above would just be one step forward from the natural consequence of the lodgment of a grant in the Probate Registry.

THE WAY FORWARD

48.  I have been informed by counsel that the Case Management Conference in the Consolidated Action went before Madam Justice MimmieChan on 12 March 2019 and that she refused to give directions pending thisapplication before me and the hearing before DHCJ R Ismail SC on 3 April 2019.

49.  As I have observed above, I am of the view that the issues in the HCMP should be resolved first before the HCA should proceed.  The result in the HCMP must affect the further conduct of the HCA.

50.  For the avoidance of doubt, the injunction I have granted in thepresent application does not affect the right of Madam Jen to defend against Madam Chan in her claim for the revocation of the grant of the LA in the HCMP.

51.  As to the further conduct of the Consolidated Action, having expressed my view above, I shall leave it to Madam Justice Mimmie Chan to give directions at the adjourned Case Management Conference.

52.  I should mention that I also made an order that costs of and incidental to the summons issued by Madam Chan on 19 October 2019 be in the cause of the HCMP (being part of the Consolidated Action herein).

HCA 346/2014

[2018] HKCFI 429

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 346 OF 2014

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HCMP 106/2017

[2018] HKCFI 429

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 106 OF 2017

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____________

(Heard Together)

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D E C I S I O N

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Introduction

1.  The hearing before me concerns what can be shortly described, if not entirely accurately, as competing summonses in competing actions.  The position of the parties is for the most part diametrically opposed, I infer, because each perceives some (real or imagined) tactical advantage and/or because, as is all too common with disputes of this nature, the parties rarely agree on anything.

2.  For convenience and in an effort to minimise confusion I shall refer to the parties by their given names.  Jen Kit Josephine (“Josephine”), as Administratrix of the estate of Jen Frank Chia Hsiang (“the Father”), her father, is the plaintiff in High Court Action 346 of 2014 (“the High Court Action”), the defendant to which is Chan Sau Wai Shirley (“Shirley”) (who, though the legitimacy is now one of the key items in dispute, was previously married to the Father, following the passing away of his first wife, Josephine’s mother).  In shorthand terms, Shirley is Josephine’s stepmother.

3.  However, the roles are reversed in High Court Miscellaneous Proceedings No. 106 of 2017 (“the HCMP Action”), where Shirley is the plaintiff and Josephine is the first defendant. The second defendant in the proceedings, Franklin Yuen Yuen Jen (“Franklin”) is Josephine’s brother. Therefore, again, Shirley is Franklin’s stepmother.

High Court Action

4.  The High Court Action was commenced by Josephine against Shirley by Writ of Summons in February 2014.  It is not necessary for the matters presently before me that I set out detailed particulars of the action.  It is sufficient to note that the proceedings involve a number of allegations as regards Shirley’s involvement with the affairs of the Father during his life, in particular claims regarding her dealings with his assets.   Amongst the claims made is that:

(a) from a certain date the Father lacked the, or sufficient, mental capacity to act on his own behalf and/or by reason of the same matters was susceptible to suggestion and influence as regards his affairs and assets;

(b) by virtue of the aforesaid situation, Shirley was able to wrongfully acquire substantial assets in her own name before the Father passed away; and

(c) the marriage between the father and Shirley was not legitimate, because of his lack of capacity, and should be declared void.

5.  The action is being defended by Shirley who denies Jennifer’s claims.  As it bears on the matters before me, I observe that in Shirley’s first (there have since been two amendments) Defence in the High Court Action which was dated and filed on 6 August 2014, it is pleaded that:

(a) it is filed without prejudice to her right to apply for the revocation of the letters of administration of the estate of the Father granted to Josephine (in paragraph 1);

(b) she does not admit the validity of the letters of administration obtained by Josephine and further or alternatively states that Josephine was and is no longer suitable to be the administratrix (paragraph 3 (c)).

6.  At the same time as commencing the High Court Action, Josephine sought and obtained an ex parte Mareva injunction against Shirley in a substantial sum.  Again, it is not necessary for the matters presently before me that I do more than note that this injunction was later set aside and further on a renewed application it was ordered that a new injunction not be granted.  In respect of both matters, the Honourable Mr Justice A. Chow ordered that Josephine pay Shirley’s costs.

HCMP Action

7.  A little more than three years after the commencement of the High Court Action, Shirley commenced by originating summons the HCMP Action against Josephine and Franklin.  Again, it is not necessary for the matters presently before me that I set out detailed particulars of the action.  It is sufficient to note that the principle relief sought is the revocation of Josephine’s letters of administration in respect of the estate of the Father.  Amongst the claims made is that:

(a) Shirley, as the wife of the Father, has a higher priority for the grant of letters of administration in relation to his estate and that Josephine failed to take the necessary steps to give notice to Shirley of the intention to apply for a grant or to inform the court as regards matters relevant to the service of the application on Shirley;

(b) if, as now appears to be the case, Josephine denies the legitimacy of Shirley’s marriage to the Father alleging a lack of capacity, a grant should not have been obtained but a probate action commenced; and

(c) Josephine has failed to properly administer the estate of the Father, including by commencing the High Court Action against Shirley, not least because of what are alleged to be her conflicts of interest.

There are significant disputes of fact and law

8.  While the short summary I have given may not entirely do justice to the claims and issues as they are seen by either set of parties, it should already be abundantly clear that the High Court Action and the HCMP Action are closely interlinked.  With the exception of Franklin, against whom it does not appear that any relief (or, at least, relief of a form that the court could order) is sought, the parties to the actions are the same. Furthermore, many of the factual and legal issues are common to the two actions, and as such any ultimate decision of the court as regards a matter in one action may well have a bearing on the other action.

The present applications

9.  The parties appeared before me in respect of three summonses, one issued by Shirley dated 30 March 2017 and two issued by Josephine dated 21 April 2017.  In short:

(a) Shirley seeks the stay of Josephine’s action against her until her action against Josephine is determined; and

(b) Josephine seeks the stay of Shirley’s action against her until her action against Shirley is determined.

10.  To be fair to Josephine her applications do not solely seek a stay but refer in the alternative to:

(a) the High Court Action and the HCMP Action being consolidated; or

(b) the HCMP action being tried immediately after the High Court Action before the same judge with the High Court Action (her action) being the lead action, and the evidence adduced in both proceedings shall be mutually admissible.

11.  However, for Jennifer to simply largely recite the different alternatives provided for by the rules does not substantially advance matters.  If not earlier, by the time the matter came to court her preferred alternative should have been clearly identified and the necessary directions to give effect to it put forward.

12.  Josephine’s counsel was also not able to justify to my satisfaction why it was thought necessary to issue two summonses, the second of which, somewhat unusually, is referred to as being “without prejudice” to the first.  The terms of the two summonses appear in large part identical, in any event, as a matter of drafting, could easily have been combined in a single summons and in the case of the second summons, in part, simply recite the directions desired at the first hearing which are matters of case management for submission at the hearing.

The need for the HCMP action

13.  I have previously referred to the pleas made by Shirley in her defence to the High Court Action which was filed as early as August 2014 and which appear to raise very much the same issues as regards the revocation of the grant obtained by Jennifer that are the subject of the HCMP Action she filed three years later.

14.  At the hearing I pressed counsel for Shirley regarding the need for the separate HCMP Action.  I queried why the same claims were not brought by way of counterclaim in the High Court Action pursuant to Order 15 Rule 2(1) of the RHC, the terms of which are clearly wider enough to allow this.

Order 76 Contentious Probate Proceedings (“Probate Action”)

15.  Counsel’s response was to refer to and rely on Order 76 of the RHC both as justification for the commencement of a separate action and for doing so by way of an originating summons.

16.  However, Order 76 rule 15(1) of the RHC specifically provides for the bringing by way of a counterclaim in any action the same relief that might otherwise be claimed in a separate action begun as a Probate Action.  It is clear that the objective of the rule is to avoid an unnecessary multiplicity of proceedings.  There follow specific provisions dealing with the procedure to be followed in respect of what is termed a “probate counterclaim”.

Writ of summons or originating summons

17.  Further, each of Order 76, High Court Practice Direction 20.2 and the commentary in Hong Kong Civil Procedure 2018 all make it abundantly clear that a Probate Action may be begun by writ of summons, and indeed should be brought by writ of summons where the proceedings are likely to be opposed and will involve substantial disputes of fact on which oral witness testimony is likely to be required.  With the High Court Action having been on-going and hard fought on both sides for some 3 years, it surely must have been obvious to Shirley’s legal team that her attempt to have Jennifer removed as administratrix would be opposed.

18.  That proceeding by way of an originating summons was very likely not the appropriate procedure also seems not to have occurred to or at least been raised on behalf of Jennifer’s legal team.  Indeed, the submissions of counsel for Jennifer for the hearing before me, in part echo the submissions of counsel for Shirley at the hearing.  He observed that two actions may not be appropriate for consolidation where the result would be that the plaintiff in one action would be the defendant in the other (as would be the case here), that is, unless the claim of the defendant in one action can be ordered to stand as a counterclaim in the action.  This statement I agree with.  However, he goes on to observe that in the present case the types of relief sought are very different and are not complimentary as a counterclaim. Here, with respect, I disagree.  In my view, the challenge by Shirley by way of the HCMP Action to the position of Jennifer as the plaintiff in the High Court Action is inextricably interlinked with the claims by Jennifer against Shirley in the High Court Action.  In a very large part common factual and legal arise and the outcome in one action will very likely bear on the outcome in the other.  I therefore consider that combining the two actions together will likely result in a significant saving of overall time and costs.

19.  That counsel for Jennifer originally maintained a position to the contrary may have been because it was thought to bolster the argument that her action should take precedence over that of Shirley and thus for tactical reasons only.

20.  The submissions of counsel for Jennifer also make the point that the parties to the HCMP Action are not identical in that they include Franklin, Jennifer’s brother.  However, as I have already observed, a simple reading of the originating summons reveals that no relief is sought against Franklin (or, at least, no relief that the court has jurisdiction to grant).  This was acknowledged by counsel for Shirley during submissions before me.  That Franklin, as a person potentially entitled to a grant were Jennifer’s grant revoked, might be required to be served with any “probate counterclaim”, of itself, does not require that he be made a party.  Again, this is clear from the commentary to Order 76 in Hong Kong Civil Procedure 2018 (see note 76/2/2).

21.  In short, it appears that prior to the hearing both Jennifer and Shirley’s legal teams largely shared the same misconceptions that the High Court Action and the HCMP Action were not suitable for consolidation, that the claims made in the HCMP Action could not have been made the subject of a counterclaim in the High Court Action and that the originating summons procedure was appropriate to deal with the claims made in the HCMP Action.

22.  As the size of the court file amply demonstrates, with this misconception, since the commencement of the HCMP Action the parties have filed and served voluminous further affirmation evidence, adding to the already substantial volume filed in respect of the previous interlocutory injunction proceedings in the High Court Action.  In my view, a large part of this time and what must have been significant legal costs has likely been wasted (on both sides) or, at the very least, could have been better utilised on preparing full and properly particularised pleadings in a consolidated single action.

The affirmation evidence contains substantial argument and submissions

23.  While I have not read all of the affirmation evidence of the parties in the HCMP Action, I would observe that much of that which I have read (again on both sides) is not confined to setting out the facts but in a large part is made up of argument and submissions (often repetitive of the parties evidence in the High Court Action, which again, based on that which I have read, is also full of argument and submissions).  This further illustrates why the two actions require that the issues be framed by pleadings.

24.  I also observe that the same criticisms could be levied at the submissions of the parties’ respective counsel for the hearing before me which, at some considerable length, spend much of the time rehearsing the substantive issues in the two actions and insufficient time addressing the immediate issues, which I view as essentially matters of case management.

25.  Overall, it is hard to avoid the conclusion that throughout the course of the two actions the parties (and their legal teams) have largely been focused on trying to secure every possible perceived tactical advantage over the other and not on how best to resolve the issues in a cost effective and timely way.  Each sides initial insistence before me that their claims must be addressed first before the claims of the other clearly point to this.

Consolidation

26.  O 4 r 9(1) of the RHC, provides that where two or more causes or matters are pending and if it appears to the court:

(a) that some common question of law or fact arises in both or all of them, or

(b) that the rights to relief claimed therein are in respect of or arise out of the same transaction or series of transactions, or

(c) that for some other reason it is desirable to make an order under this rule

the court may order those causes or matters to be consolidated on such terms as it thinks just or may order them to be tried at the same time, or one immediately after another, or may order any of them to be stayed until after the determination of any other of them.

27.  As the commentary to the rule makes clear, the main purpose of consolidation is to save costs and time.  Whether or not to order consolidation is a matter in the courts discretion and involves a balancing exercise and regard to the facts of each case.  The aim is to achieve convenience and economy in case management. Consolidation does not change a party’s substantive’s rights.  Having all related issues, factual or legal, before one judge, allows that judge to decide how each should be addressed, including which, if any, should be dealt with first having regard to their significance or potential impact on secondary issues. I refer in particular to the reference in the commentary at 4/9/2 of the RHC as follows:

“in making case management decisions, the court is primarily concerned with savings in time and costs and also with the avoidance of unnecessary delay, complexity, overloading of issues the inconvenience of having experts and witnesses repeating their evidence.”.

28.  Having regard to the respective issues, factual and legal, in the High Court Action and the HCMP Action I am of the view that consolidation is desirable.

The agreed order

29.  Having given an indication of my views as set out in this decision to counsel for the parties during the course of the hearing I invited them to endeavour to agree the appropriate order during a short adjournment.

30.  On the hearing resuming, the court was provided with an agreed draft order which has substantially formed the basis for the order I now make which I set out below:

(a) the HCMP Action be continued as if begun by Writ of Summons;

(b) the High Court Action and the HCMP action be consolidated to heard together as a single action with Jennifer as plaintiff and Shirley as defendant;

(c) the Amended Statement of Claim of Jennifer in the High Court Action dated and filed on 22 March 2017 do stand as her consolidated Points of Claim in the consolidated action;

(d) the Re-Amended Defence of Shirley in the High Court Action dated and filed on 8 June 2017 do stand as consolidated Points of Defence in the consolidated action;

(e) Shirley, the defendant in the consolidated action do have leave to file and serve an amended consolidated Points of Defence and Counterclaim, if any, within 28 days;

(f) the Re-Amended Reply of Jennifer in the High Court Action dated and filed on 4 September 2017 do stand as her consolidated Points of Reply in the consolidated action and she do have leave to file and serve an amended consolidated Points of Reply and Defence to Counterclaim, if any, within 28 days thereafter

(g) Shirley, the defendant in the consolidated action do have leave to file and serve a consolidated Points of Reply to Defence to Counterclaim, if any, within 28 days thereafter;

(h) the case management conference in the High Court Action listed for 20 March 2018 at 10:30 a.m. be vacated;

(i) a case management conference for the consolidated action be fixed in consultation with counsel’s diaries with an estimated length of one hour not before 1 June 2018.

The position of Franklin

31.  I have previously observed that the inclusion of Franklin as the second defendant to the HCMP Action appears to have served no purpose.  However, it is for Shirley, as the defendant to the consolidated action, to make any ‘probate counterclaim’ or other counterclaim as she is advised. In any event, for the avoidance of doubt, the procedure provided for under Order 76 in relation to any such ‘probate counterclaim’ should be followed, in particular the provisions of order 76 rule 15(4), and, if appropriate, consideration will need to be given as to whether notice of any such counterclaim should be given to Franklin if he is not a party to it.

Costs

32.  While the parties respective counsel were largely able to agree a proposed draft of the order required to achieve consolidation and providing for the filing and service of amended pleadings, as perhaps was inevitable, they were not able to agree as regards costs.

33.  Counsel for Jennifer submitted that she should be entitled to the costs both of Shirley’s summons and her two summonses, as she had achieved substantially what she wanted by her summonses.  Counsel further submitted that Shirley’s counsel’s concession regarding the appropriateness of consolidation had only been made belatedly at the hearing.

34.  Counsel for Shirley submitted that the normal costs order when consolidation is ordered would either be costs in the consolidated cause or costs reserved.  Counsel further submitted that whatever the wording of Jennifer’s two summonses, which, as I have said, simply listed in the alternative various options without indicating any clear preference, at the outset of the hearing her primary position remained that her action should take precedence.

35.  As will be apparent from my observations during the course of this decision, I am of the view that at times both parties and their legal teams have lost sight of their duty to cooperate and seek to agree matters to promote time and cost efficiency (their own and that of the court) in the conduct of the two actions.  As a result, substantial time and costs have been expended on both sides that in my view might otherwise have been avoided or, at the very least, better utilised.

36.  I am of the view that Shirley both delayed and did not follow the appropriate procedure as regards bringing forward the challenge to Jennifer’s appointment and her conduct of the administration of the Father’s estate.  However, the HCMP Action having been issued, Jennifer does not appear to have made substantial efforts to seek Shirley’s agreement that the action should proceed as if begun by writ or that it be consolidated with the High Court Action.  As regards procedural matters, it would appear that both parties were labouring under the same misconceptions.

37.  Therefore, I do not consider that there is any clear ‘winner’ as regards the three summonses before me.  Accordingly, I make an order nisi that the costs of the three summonses, including the hearing before me, and the costs of the HCMP Action up to date of consolidation be reserved. On the assumption that, by way of a ‘probate counterclaim’, Shirley renews her claim regarding the revocation of Jennifer’s appointment, such costs will likely fall to be decided by the outcome of that claim but this will be a matter for the judge who ultimately decides that issue.  I give leave to any party who seeks a varied costs order to apply in writing with reasons within 14 days failing which the order will become absolute.

Case management conference

38.  As appears from my decision, the issue between Jennifer and Shirley underlying the hearing before me was which of their respective claims should be dealt with first at a trial. Seemingly each of them, guided no doubt by their respective legal teams, had previously seen the sequencing in which their completing claims are dealt with as a matter potentially giving one or the other significant tactical advantage. However, in the circumstances of this matter, I view any perceived tactical advantage as largely illusory.  But, in any event, as I made clear to Jennifer and Shirley’s respective counsel, I do not consider that this issue of sequencing is one the court can and should decide far in advance of even properly particularised pleadings being filed and served.  In due course, the two having been consolidated, after consolidated pleadings have been filed and served, after witness statements have been filed and served, and thereby the issues, factual and legal, have been clearly identified, the court will be far better placed to form a view as to how the issues should be addressed at trial.

HCA346/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 346 OF 2014

________________________

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D E C I S I O N

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Introduction

1. On 11 November 2014, I handed down a decision (“the Decision”) whereby I ordered that the ex parte “Mareva Injunction Order” and “Disclosure Order” which the plaintiff obtained from Madam Justice Toh on 28 February 2014, as subsequently continued by Deputy High Court Judge Wilson Chan on 14 March 2014 and by Mr Justice Suffiad on 28 March 2014, be discharged immediately on the ground of material non-disclosure.

2. The background facts of this case were set out in the Decision and I shall not repeat them here.

3. On 25 November 2014, the plaintiff issued an inter partes summons (“the Injunction Summons”) seeking fresh orders in substantial the same terms as the Mareva Injunction Order and Disclosure Order.  The summons was supported by the 4^th affirmation of the plaintiff filed on 25 November 2014 which was said to contain (inter alia) new evidence justifying the grant of an interlocutory injunction against the defendant.

4. The Injunction Summons came before me on 28 November 2014.  At the commencement of that hearing, Mr Frederick Fong (for the plaintiff) argued that I had not dealt with the question of “re-grant” of the Mareva injunction in the Decision and submitted that I ought first to consider re-granting the Mareva injunction based on the previous evidence before me at the time of the Decision.  I refused to do so because, as mentioned in paragraph 32 of the Decision, the plaintiff’s former counsel did not make any submission that I ought to exercise my discretion either not to discharge the Mareva injunction, or to re-grant the Mareva injunction, but concentrated instead on the contention that there was no material non-disclosure.  In any event, I did consider the question of re-grant but, for the reason given in paragraph 33 of the Decision, declined to do so. 

5. After I had given my ruling, Mr Fong pursued the application under the Injunction Summons.  The hearing on 28 November 2014 was adjourned part heard due to insufficiency of time.  The matter resumed on 16 December 2014.  In the meantime, the plaintiff issued yet another summons on 15 December 2014 seeking leave to rely on the 2^nd affirmation of Tang Tsz Pun, the plaintiff’s solicitor, filed and served on 10 December 2014.  That affirmation consisted of 12 paragraphs and purported to contain “evidence” on the current market value of various properties.  In some instances, the solicitor referred, not to valuations given by professional valuers or banks, but to his own calculation and analysis.  In the course of the submissions, Mr Fong conceded that paragraphs 7, 8, 9 and 10 of the 2^nd affirmation of Tang Tsz Pun were irrelevant to the plaintiff’s application.

6. Mr David Tang (for the defendant) objected to the plaintiff’s attempt to rely on the new affirmation of Tang Tsz Pun for the purpose the Injunction Summons on the grounds of delay, that the plaintiff should not be permitted to file her evidence “bit by bit” in the context of a part-heard application, and that the solicitor was not qualified to give opinion evidence on valuation of properties.  Nevertheless, Mr Tang indicated that the defendant did not intend to file any reply evidence but would press ahead with the matter even if the court should permit the plaintiff to use that affirmation. 

7. Having regard to Mr Fong’s concession that paragraphs 7, 8, 9 and 10 of the 2^nd affirmation of Tang Tsz Pun were irrelevant to the plaintiff’s application and the indication by Mr Tang that the defendant did not intend to file reply evidence in any event, I informed the parties that I would (i) not grant leave to the plaintiff to rely on paragraphs 7, 8, 9 and 10 of the 2^nd affirmation of Tang Tsz Pun, and (ii) reserve my decision on whether the plaintiff should be permitted to rely on the remaining parts of that affirmation and deal with that matter together with the plaintiff’s main application under the Injunction Summons. 

8. Lastly, by way of introduction, I should record that Mr Fong informed the court that the plaintiff did not intend to pursue paragraph 3(c) of the Injunction Summons.

Test to be applied

9. In paragraph 1 of his written skeleton submission for the plaintiff, Mr Fong stated that the plaintiff was seeking “an inter parte domestic mareva injunction” against the defendant. However, Mr Fong argued, in his oral submission in reply, that the plaintiff was seeking both a Mareva injunction and a proprietary injunction.  Mr Fong further clarified that the proprietary injunction sought related only to a property known as Flat B on 9^th Floor of Tower 16, No 21 Parc Oasis Road, Parc Oasis, Kowloon (“the Parc Oasis Flat”) referred to in paragraph 1(d) of the draft order attached to the Injunction Summons which Mr Fong contended was held by the defendant on trust for the late Jen Frank Chia Hsiang, deceased (“the Deceased”).

10. For reasons which I will explain later when I consider the nature and validity of the individual complaints raised in the Statement of Claim, I consider that the plaintiff has failed to show even a serious issue to be tried that the defendant held the Parc Oasis Flat on trust for the Deceased.  Accordingly, the present application falls to be considered as one for a standard Mareva injunction.  It is well established that, to justify the court granting a Mareva injunction pending the trial of a local action (in other words, the injunction sought is not in aid of foreign proceedings under section 21M of the High Court Ordinance), the plaintiff has to establish:-

(1) that she has a good arguable case on a substantive claim over which the court has jurisdiction;

(2) that the defendant has assets within the jurisdiction;

(3) that the balance of convenience is in favour of granting the injunction;

(4) that there is a real risk of dissipation of assets, or removal of assets from the jurisdiction, which would render any judgment which the plaintiff may obtain of no effect.

See Hong Kong Civil Procedure 2015, paragraph 29/1/65.

Whether plaintiff has established a good arguable case

11. The plaintiff’s substantive complaints, under the heading of “Defendant’s Acts of Misappropriation and Suspicious Dealing”, are set out in paragraph 7(a) to (i) of the Statement of Claim.  In what follows, references to paragraphs shall be to the Statement of Claim, unless the context indicates otherwise.

12. Paragraph 7(a): the plaintiff complains that there was an unauthorised withdrawal of about HK$2.5 million by the defendant from the Deceased’s bank account at HSBC Asset Management Limited.  The evidence adduced by the plaintiff discloses that (i) as at 31 December 1995, the Deceased had a portfolio with a value of HK$6,954,323 in his account at HSBC Asset Management Limited, (ii) two sums of HK$2,497,316.21 and HK$11,659.63 were withdrawn from that account on 5 September and 31 October 2001 respectively, (iii) the final payment of HK$11,659.63 from the aforesaid account was made to an account held in the name of the Deceased at HSBC.  As can be seen from a fax covering sheet sent by HSBC Asset Management (Bahamas) Limited dated 30 October 2001, that final payment was apparently confirmed and agreed by the Deceased and the defendant.  The personal seal of the Deceased was affixed on the fax covering sheet, which was also signed by the defendant.

13. It will be recalled that it is the plaintiff’s case that the Deceased probably lost his mental capacity in the early part of the period from 1995 to 2001.  It is also the plaintiff’s case that the Deceased moved out of the matrimonial home and started to live with the defendant in Shanghai in February 1997, and had been hospitalised in Shanghai since January 2001 until his death on 25 January 2010.  The plaintiff argues that, by inference, the monies in the Deceased’s aforesaid account at HSBC Asset Management Limited were unlawfully and/or improperly withdrawn by the defendant.

14. In his submission, Mr Fong accepted that there was no evidence to show that any part of the monies in the Deceased’s account at HSBC Asset Management Limited were in fact withdrawn or received by the defendant.  There was also no evidence on how the monies in that account were used, whether by or for the benefit of the Deceased or otherwise.  I do not see how the currently available materials which the plaintiff relies upon can give rise to a serious issue to be tried against the defendant that she misappropriated the monies in the Deceased’s aforesaid account at HSBC Asset Management Limited.

15. For the sake of completeness, I should mention that the plaintiff’s allegations regarding the mental capacity of the Deceased and the period of his hospitalisation from January 2001 to his death on 25 January 2010 are disputed by the defendant (see paragraph 6(f) of the Defence). For the purpose of the present application, it would not be possible for the court to resolve such disputes of fact.  Neither is it necessary for the court to do so in order to dispose of the present application.

16. Paragraph 7(b): the plaintiff complains that the defendant wrongfully obtained the Deceased’s 18% shareholding in a company called Cartegena Industrial Co Ltd (“Cartegena”) on 20 January 2000.  Cartegena was incorporated on 28 January 1975, and the Deceased had been holding 180,000 shares (36% of all the issued shares) in Cartegena since no later than 28 January 1995.  On 20 January 2000, the Deceased transferred 90,000 shares in Cartegena to the defendant.  The plaintiff says that the Deceased had no mental capacity to transfer the 90,000 shares to the defendant on 20 January 2000 and argues that, by inference, the defendant obtained those shares illegally and/or by unlawful means (namely, forging the Deceased’s signature and/or manipulating and/or unduly influencing the Deceased into signing documents that she wished the Deceased to sign).

17. The plaintiff has not produced the instrument of transfer or bought and sold notes in respect of the transfer of the 90,000 shares in Cartegena by the Deceased to the defendant.  It is not known what, if any, document was signed by the Deceased to effect the transfer of those shares. Thus, the allegation that the defendant forged the Deceased’s signature, or manipulated or unduly influenced the Deceased into signing documents seems to me to be purely speculative.  There is also no evidence on whether any consideration was paid by the defendant to the Deceased for the transfer of those shares.  On the existing state of the evidence, I do not see that the plaintiff has begun to make out any case that the defendant obtained the 90,000 shares in Cartegena by illegal or unlawful means.

18. Further, the plaintiff has not produced any evidence regarding the value of the 90,000 shares in Cartegena as at the date of the transfer or as at the date of the application.  In paragraph 15 the Statement of Claim, it is said that Cartegena currently holds 25% in a company which was incorporated in Shenzhen, PRC in 1982 (representing an initial paid up capital of US$111,800), and this company operates a paper factory, and it is further said that the paper factory has regularly declared and paid dividends in significant amounts to Cartegena from time to time. However, no figure is given. Mr Fong submitted that the 90,000 shares in Cartegena should be regarded as having a value of US$111,800 x 18% (= US$21,240).  I am unable to see how the initial paid up capital of a company or paper factory in China in 1982 can be used to calculate the current value of a 25% shareholding in that company.  Thus, even if one assumes, for the sake of argument, that the defendant did improperly obtain 90,000 shares in Cartegena from the Deceased, I do not consider that there is any fair or reasonable basis to fix a monetary value on those shares for the purpose of granting a Mareva injunction against the defendant.

19. Paragraph 7(c): the plaintiff complains that the defendant made an unauthorised withdrawal of the monies held in a bank account of the Deceased at Nanyang Commercial Bank Ltd and closed that account on 15 September 2003.  For the purpose of this allegation, the plaintiff relies on a letter issued by Nanyang Commercial Bank Ltd dated 22 April 2010, in which it was stated that the Deceased’s account, no 043-482-025026-6, at that bank was closed on 15 September 2003.  The plaintiff argues, in view of the fact the Deceased had been bed ridden and confined in a hospital outside Hong Kong since early 2001, it was impossible for the Deceased to withdraw any monies from that account or close that account in September 2003.  The plaintiff further argues that, by inference, the account was closed by the defendant and alleges that the bank “had committed a serious mistake and/or [been negligent] in that the bank recklessly allowed the withdrawal of monies from and the closing of the said account by [the defendant], who has never been duly appointed or authorized to manage the property and affairs of the Deceased.”

20. There is no evidence that the account in fact had any money as at 15 September 2003, or that any money was withdrawn by the defendant from the Deceased’s account at Nanyang Commercial Bank Ltd.  Even if there was some money in the Deceased’s account and it was withdrawn at the time of the closing of the account, there is no evidence on whom the money was paid to or how the money was used.  Indeed, there is no evidence that the account was closed by the defendant.  The plaintiff’s aforesaid allegations against the defendant and the bank seem to me to have no foundation on the existing evidence.

21. Paragraph 7(d): the plaintiff complains that there was an unauthorised transfer of the Deceased’s shares in a company called Kwai Chung Enterprises Limited (“KCEL”) to the defendant.  KCEL is a company incorporated in Hong Kong.  It appears, from the annual return of KCEL made up to 14 April 2000, that that company had a total of 100 issued shares, and the Deceased transferred 45 shares in that company to the defendant on 20 January 2000 and retained 54 shares after the transfer.

22. The evidence also shows that KCEL purchased a property known as 2/F, Block D, East Sun Industrial Centre, No 16 Shing Yip Street, Kowloon (“the East Sun Industrial Centre Property”) at the price of $722,540 in or about 1978, and assigned that property to two persons by the names of Wu Chih Ching Siman and Chan Yuk Ha as tenants in common in 2004 for the consideration of HK$1,280,000.  KCEL was de-registered in or about March 2006, pursuant to an application in Form DR 1 signed by the defendant as a director of KCEL dated 17 March 2006.

23. As in the case of the plaintiff’s complaint regarding the transfer of shares in Cartegena, the plaintiff has not produced the instrument of transfer or bought and sold notes in respect of the transfer of the 45 shares in KCEL by the Deceased to the defendant.  There is no evidence on whether any consideration was paid by the defendant to the Deceased for the transfer of those shares.

24. Further, the plaintiff has not produced any evidence regarding the value of the 45 shares in KCEL as at the date of the transfer or as at the date of the application.  The fact that KCEL once held a property which was sold in 2004 for HK$1,280,000 cannot be regarded as any evidence that the company had a net asset value of HK$1,280,000.  In order to arrive at a reasonable estimate of the value of the 45 shares in KCEL, it is at least necessary to know what other assets and liabilities (if any) the company had as at the date of the valuation.  No account or other financial information relating to KCEL has been adduced as evidence by the plaintiff to enable the court to make even a rough estimation of the value of the 45 shares in KCEL transferred to the defendant on 20 January 2000.  There is no evidence on how the proceeds of sale of the East Sun Industrial Centre Property were used, still less that the proceeds were received by the defendant.  For all one knows, the sale proceeds could have been used to discharge existing liabilities of KCEL.  Thus, even if one assumes, for the sake of argument, that the defendant did improperly obtain 45 shares in KCEL from the Deceased, I do not see that there is any fair or reasonable basis to fix a monetary value on those shares for the purpose of granting a Mareva injunction against the defendant.

25. Paragraph 7(e): here the plaintiff alleges that the defendant was involved in a suspicious sale and purchase of two properties in Shanghai using a fake PRC identity card.  The plaintiff also relies on this matter to support her case that there is a real risk of dissipation of assets.

26. The plaintiff alleges that the two properties in question, referred to as “Villa No 8” and “Villa No 9”, were purchased by the defendant on about 28 March 2001, and she transferred Villa No 8 to her sister for the consideration of RMB 1,380,000 which the plaintiff says was far below its market value on 10 June 2007, and Villa No 9 to two other persons for the consideration of RMB 1,750,000 on 30 August 2004.

27. Mr Fong accepted, however, that there was no evidence that the two properties were acquired by the defendant in 2001 using funds belonging to the Deceased.  The fact that the defendant might have used a fake PRC identity card (which allegation is disputed by the defendant) in the sale and purchase of the two properties cannot give rise to any claim that the Deceased or his estate has any right or interest in the two properties.  The further allegation that the defendant sold Villa No 8 to her sister at an undervalue cannot take the plaintiff’s case any further.

28. Paragraph 7(f): the plaintiff complains that the defendant made unauthorised withdrawals from the Deceased’s bank account at Bank of East Asia Limited commencing in 2003.  In particular, the plaintiff refers to a letter dated 22 November 2012 issued by Bank of East Asia Limited, in which it was stated that (i) the account had a high balance of HK$11,169.12 on 30 June 2003 and (ii) there were two cash withdrawals in the sums of HK$6,000 and HK$5,000 on 10 September 2003 and 11 March 2010 respectively, with the latter one being withdrawn by an unnamed “authorized signer”.  In a further letter dated 13 December 2012 issued by Bank of East Asia Limited, it was stated that the Deceased’s account was operated by his personal chop, and the “authorized signer” (whom the bank was unable to locate) was appointed to operate the said account on 26 January 1999.

29. It may be recalled that the Deceased passed away on 25 January 2010, and thus the second withdrawal of HK$5,000 from his account at Bank of East Asia Limited on 11 March 2010 would seem to be “unauthorised”. There is, however, no evidence on the identity of the person(s) who made the two withdrawals on 10 September 2003 and 11 March 2010 respectively. Again, the plaintiff argues that, by inference, it was the defendant who made the two withdrawals.  This seems to me to be speculation.  In any event, the amounts involved are not significant and would not, in my view, justify the imposition of a Mareva injunction by reason of this complaint alone.

30. Paragraph 7(g): the plaintiff complains that the defendant used the Deceased’s personal seal without authority in the course of a litigation in the PRC in 2007 in which the Deceased was sued in respect of certain landed properties in the PRC.  As I understand from Mr Fong’s submissions, the plaintiff is not saying that the Estate has any monetary claim against the defendant arising out of her alleged unauthorised use of the Deceased’s seal, but relies on this complaint to show the low commercial morality of the defendant in support of the argument of real risk of dissipation of assets.

31. Paragraph 7(h): the plaintiff complains that the defendant used the Deceased’s personal seal without authority and/or is suspected of forging the Deceased’s signature on various annual returns of Ziang Kong Knitting Factory Limited (“ZKKF”), a company incorporated in Hong Kong on 21 February 1966.

32. As can be seen from the annual return of ZKKF made up to 21 February 1998, ZKKF had an issued share capital of HK$2,500,000 divided into 250,000 shares of HK$10 each.  The Deceased was a director and the defendant was the secretary of ZKKF.  The Deceased apparently signed the 1998 annual return, and his personal seal was affixed next to his signature.

33. The Deceased also apparently signed the 1999, 2000 and 2001 annual returns of ZKKF dated 21 February 1999, 21 February 2000 and 21 February 2001 respectively.  The personal seal of the Deceased was affixed on the 2002 annual return of ZFFK, but there was no signature of the Deceased on that document.

34. The 1998, 1999, 2000, 2001 and 2002 annual returns of ZKKF were apparently also signed by the defendant.

35. ZKKF was struck off the register and dissolved on 17 July 2002 pursuant to section 291(6) of the former Companies Ordinance (as then in force).

36. It is the plaintiff’s case that the signatures of the Deceased on the 1998, 1999, 2000 and 2001 annual returns of ZKKF were forged by the defendant, and she also affixed the personal seal of the Deceased on the 1998 and 2002 annual returns of ZKKF without authority.  The plaintiff relies on the mental incapacity of the Deceased, and the fact that he had been bed-ridden since January 2001, to contend that he could not have signed and/or affixed his person seal on the aforesaid annual returns of ZKKF.  In her 4^th affirmation filed on 25 November 2014, the plaintiff also produced an expert report on handwriting prepared by Beth Chrisman dated 18 November 2014 in support of the allegation that the Deceased’s signature on the 1998, 1999, 2000 and 2001 annual returns of ZKKF were forgeries.

37. There is no direct evidence that the Deceased’s signatures on the four annual returns of ZKKF were forged by the defendant. Even if one assumes in the plaintiff’s favour that the defendant did forge the Deceased’s signature and/or affix the Deceased’s person seal without his authority on the aforesaid annual returns of ZKKF, there is still no evidence that the Deceased suffered any loss, or the defendant derived any gain or benefit, from those acts.  There is also no evidence on the business or value of ZKKF.  At most, this ground of complaint may be relied upon to show the character of the defendant and to strengthen the argument on risk of dissipation of assets, but there is no fair or reasonable basis to fix any monetary value on this ground of complaint for the purpose of granting a Mareva injunction against the defendant.

38. Paragraph 7(i): the plaintiff complains that the defendant sold the two properties belonging to the Deceased, namely, (i) the Parc Oasis Flat and (ii) a property known as Flat E5, 15^th Floor, Block E, Mount Parker Lodge, No 10 Hong Pak Path, Hong Kong (“the Mount Parker Flat”), without authority.

39. The land search of the Parc Oasis Flat shows that: (i) the Deceased and the defendant became the joint tenants of that property on 11 February 1993, and (ii) the defendant became the sole owner of that property pursuant to an assignment dated 22 August 1997.  Apparently, the assignment of the property by the Deceased and the defendant (as joint tenants) to the defendant (as sole owner) was for the consideration of HK$4,500,000. The plaintiff challenges this assignment on the basis that the Deceased lacked mental capacity, and alleges that the sale proceeds were used, kept and/or manipulated by the defendant.

40. If the Deceased did not have mental capacity to execute the assignment dated 22 August 1997 such that it ought to be set aside, the Deceased and the defendant should remain as joint tenants of the Parc Oasis Flat such that, upon the death of the Deceased on 25 January 2010, it would pass to the defendant as the surviving joint tenant.  It does not seem to me that the Estate of the Deceased has any valid claim that the Parc Oasis Flat is held by the defendant on trust for the Deceased.

41. In so far as the sale proceeds are concerned, there is no evidence on whether the sale proceeds were in fact paid, and if so who received them and how they were distributed or used.  There does not seem to me to be any evidential foundation for the allegation that the sale proceeds were used, kept and/or manipulated by the defendant as alleged by the plaintiff.

42. The land search of the Mount Parker Flat shows that (i) the Deceased and her wife became the joint tenants of that property on 16 November 1992, and (ii) it was assigned to two persons on 1 February 1999 for the consideration of HK$2,700,000.  The plaintiff says that the sale price was about 10% below the market value of the property.

43. It will be recalled that the Deceased’s wife passed away in May 1998.  Thus, the Deceased became the sole surviving owner of the Mount Parker Flat as from that date.  In reliance on the Deceased’s mental incapacity, the plaintiff alleges that the sale proceeds of HK$2,700,000 were used, kept and/or manipulated by the defendant.  The plaintiff relies on the defendant’s “admission” at paragraph 9(iii) of the Defence that the sale proceeds were place “at the Defendant’s disposal”.

44. The defendant’s solicitor, Mr Kuan Man Chun of Tsang, Chan & Woo, made an affidavit on 15 December 2014 stating that the word “Defendant’s” in paragraph 9(iii) of the Defence was an inadvertent clerical error and the correct version, in accordance with the defendant’s instruction all along, should be “at the Deceased’s disposal”.  I granted leave to the defendant to rely on this affidavit at the hearing on 16 December 2014 because it seemed to me to be unfair, in the context of an interlocutory application for a Mareva injunction against the defendant, to hold her bound by what her solicitor had stated on oath to be an inadvertent clerical error in the preparation of the Defence.

45. For the purpose of the present application, I accept the explanation given by Mr Kuan that the word “Defendant’s” in paragraph 9(iii) of the Defence was an inadvertent clerical error, and the defendant never intended to admit having received the proceeds of sale of the Mount Parker Flat.

46. Other than the aforesaid “admission”, the plaintiff has not adduced any evidence on who in fact received the sale proceeds and how they were used.  I do not consider that the plaintiff has made out, on the evidence, any sufficient basis for the allegation that the sale proceeds were used, kept and/or manipulated by the defendant.

47. As Mr Justice Ng remarked at paragraph 30 of his recent judgment in Re Chau Cham Wong Patrick, a Bankrupt HCB 549/2012 (20 June 2014):

“A Mareva injunction should not be granted lightly. The consequences of granting the injunction are such as to put the defendant at a very real disadvantage and in a position from which it may never adequately recover”.

When assessing whether a claimant has made out a good arguable case on a substantive claim in the context of an application for a Mareva injunction, the court should always examine with care the allegations raised against the defendant and whether they are properly supported by the evidence adduced by the claimant. 

48. In the present case, it seems to me that the evidence which the plaintiff has adduced falls far short of establishing a good arguable case on the various substantive complaints raised in paragraph 7 of the Statement of Claim.  Further, the plaintiff has completely failed, in my view, to justify the court granting a Mareva injunction against the defendant to the extent of HK$50 million, or any substantial amount.

49. In the circumstances, I would not grant leave to the plaintiff to rely on the 2^nd affirmation of Tang Tsz Pun.  It also becomes unnecessary for me to consider other issues such as risk of dissipation of assets or balance of convenience, or the defendant’s argument that the present application amounts to an abuse of process of the court.

50. In conclusion, I dismiss the plaintiff’s Injunction Summons and the summons dated 15 December 2014, and I make an order nisi that the defendant shall have the costs of these applications, to be taxed if not agreed.

HCA 346/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 346 OF 2014

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D E C I S I O N

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Introduction

1. I have before me an application by the defendant by summons dated 19 June 2014 (“the setting aside application”) seeking (inter alia) to set aside (i) a Mareva injunction granted by Toh J, and (ii) a further order made by the learned judge compelling the defendant to make disclosure of assets and documents, both orders being made upon the plaintiff’s ex parte applications on 28 February 2014 (hereinafter referred to as “the Mareva Injunction Order” and the “Disclosure Order” respectively, and collectively “the Orders”).

2. The Mareva Injunction Order was continued by Deputy High Court Judge Wilson Chan on 14 March 2014 and further continued by Suffiad J on 28 March 2014, on both occasions in the absence of the defendant.

3. The evidence before me consists of:

(1)   the plaintiff’s first affirmation filed on 28 February 2014 in support of the ex parte applications made to Toh J;

(2)   the defendant’s first affirmation filed on 19 June 2014 in support of the setting aside application;

(3)   the plaintiff’s second affirmation filed on 31 July 2014 in opposition to the setting aside application; and

(4)   the defendant’s second affirmation filed on 25 September 2014 in reply to the plaintiff’s second affirmation.

4. In addition, I have before me the skeleton submissions of Mr Enzo W H Chow for the plaintiff dated 28 February 2014 placed before Toh J in support of the ex parte applications.

5. Mr David Tang (for the defendant) contends that the Orders should be set aside on the ground of material non‑disclosure as well as on the ground that the plaintiff has failed to demonstrate a good arguable case in the substantive sense.  Mr Tang further contends that the Disclosure Order is not even a “disclosure order ancillary to an injunction order” but a “discovery order” which should not have been applied for on an ex parte basis in the first place and must be set aside.

6. Before I consider Mr Tang’s arguments in support of the setting aside application, I shall give a brief outline of the facts of the present case.

Background facts

7. The plaintiff is the administratrix of the estate of the late Jen Frank Chia Hsiang (“the Deceased”), who passed away on 25 January 2010 at the age of 91 in Shanghai, PRC, letters of administration of the Deceased’s estate having been granted to the plaintiff by the High Court of the HKSAR on 28 September 2012.

8. The Deceased married the late Madam Chou, Jen Hsin‑Ya, Grace (“Madam Chou”) on 19 December 1947.  They had one son (namely, Jen Franklin Yuen Yuen (“Franklin”)), born in 1949, and one daughter (namely, Jen Kit Josephine, ie the plaintiff) born in 1950.

9. The Deceased was a businessman in Hong Kong and Shanghai, and met the defendant in about 1979.  Soon afterwards, they developed an intimate relationship.  According to the plaintiff, that relationship was a short one.  On the other hand, according to the defendant, her relationship with the Deceased was a continuous one save in relation to a brief period of about two years in the late 1980s, during which time the defendant went to the United States and got into a short term marriage with another man.  After her divorce with that man, the defendant returned to Hong Kong in around 1989 or 1990 and resumed her relationship with the Deceased.  The defendant also says that her relationship with the Deceased was well known to Madam Chou, Franklin and the plaintiff, and was a source of tension within the Jen family.

10. According to the defendant, she and the Deceased became partners in a garment business in around 1992 and their business had five very successful years until 1997.

11. In the meantime Madam Chou suffered from a stroke and became seriously illness in about 1995.  The defendant says that the plaintiff and Franklin blamed the Deceased’s relationship with the defendant for their mother’s illness, and the relationship between the Deceased and Franklin/the plaintiff got worse since 1995 and broke down completely after the death of Madam Chou in May 1998.  On the other hand, according to the plaintiff, the relationship between the Deceased and Franklin/the plaintiff had always been amicable.

12. Apparently, in or about February 1997 the Deceased moved out of his matrimonial home in Hong Kong and started to live with the defendant in Shanghai.

13. On 2 September 1999, the Deceased married the defendant in Vancouver, Canada.  The plaintiff disputes the validity of this marriage, on the ground that the Deceased lacked mental capacity to enter into the marriage.  I shall come back to the topic of the Deceased’s mental capacity later in this decision.

14. In 1995, the Deceased was diagnosed to be suffering from the early stage of Parkinson’s Disease.  By 2000 the Deceased was diagnosed to be in the late stage of Parkinson’s Disease, and since January 2001 the Deceased had been hospitalised in 上海市徐汇区永嘉医院/上海市徐汇区天平医院 in Shanghai (“the Shanghai Hospital”) until he passed away on 25 January 2010.

The Deceased’s mental capacity

15. In support of the ex parte applications, the plaintiff relied upon a medical report prepared by Dr Wong Chung Kwong (“Dr Wong”) dated 19 September 2013.  For the purpose of the present application, the following points arising from Dr Wong’s report are of note:

(1)   The opinions expressed by Dr Wong were stated to be “preliminary opinions” only.

(2)   For the purpose of preparing the report, Dr Wong had considered (inter alia) various medical certificates issued by doctors of the Shanghai Hospital, including in particular two certificates of Dr Tsui dated 2 February 2007 and 29 May 2007 respectively.  It is apparent that Dr Wong had never treated or examined the Deceased himself.

(3)   According to the said medical certificates of Dr Tsui, by 2000 the Deceased was in the late stage of Parkinson’s Disease and by 2001 he had probably been reduced to a “vegetative” state.  Dr Wong noted that the Deceased required continuous nursing care, was totally bed ridden, not able to walk and had lost his ability to eat.  He needed care even regarding the most basic biological functions.  He needed tube feeding, was on long term catheterization of the bladder, and had bed sores.  He also had sinus tachycardia of the heart.

(4)   Dr Wong expressed the following opinions on the level of probability that the Deceased lacked mental capacity during the following periods: 

(a)   from  1995/1996 to February 1997: possible to probable;

(b)   from February 1997 to the time of his re‑marriage in October 1999: probable;

(c)   from October 1999 to the time when the Deceased became vegetative in early 2001: highly probable; and

(d)   from early 2001 to his death in 2010: beyond any reasonable doubt.

(5)   Dr Wong stated that the salient question was not whether the Deceased had lost his mental capacity (it was clear that the Deceased had lost his mental capacity from early 2001 until his death in 2010), but when the mental incapacity started.  The available facts indicated that at some stage during the period from 1995 to 2001, he became an incapacitated person.  It was probable that “he lost his mental capacity in the early part of that four or five years and indeed it was possible to probable that he was a mentally incapacitated person throughout that period”.

(6)   Dr Wong also stated that he would probably be able to provide “definitive” professional psychiatric opinions about the Deceased’s mental conditions when all “medical records and reports as well as other documents that are likely to shed light on the late Mr Jen’s mental and physical conditions during the period 1995 to 2001” became available.

The Orders

16. On the basis that the Deceased had become mentally incapacitated sometime during the period from 1995 to 2000, the plaintiff, in her capacity as the administratrix of the estate of the Deceased, challenges a number of transactions entered, or purportedly entered, into by the Deceased since 1997/1998.  The plaintiff alleges that the defendant has misappropriated, intermeddled with and/or unjustly had, received, used and/or dealt with the Deceased’s assets.  It may be noted that some of the transactions complained of took place prior to 2001 while others took place in or after 2001.

17. The plaintiff also estimates that the total value of the Deceased’s assets as at 2014 (subject to valuation) is in the region of HK$50 million.  It would appear that in making this estimate, the plaintiff has included assets which she alleges were wrongfully misappropriated or transferred away from the Deceased and which form the subject matters of the transactions complained of by her in this action.

18. On 28 February 2014, the plaintiff issued the writ herein, and made the ex parte applications to Toh J. The learned judge granted a Mareva injunction against the defendant restraining her from disposing of, dealing with or diminishing her assets within Hong Kong (including in particular certain real properties in Hong Kong) up to the limit of HK$50,000,000.  The Mareva Injunction Order also required the defendant to inform the plaintiff in writing “at once of all her assets of an individual value of and whether solely or jointly owned, giving the value, location and details of all such assets”, and confirm such information in an affirmation within 14 days after the service of the order on her.

19. In addition, under the Disclosure Order, the defendant was required, within seven days from the date of the order (28 February 2014), by affirmation/affidavit to “fully and frankly disclose and produce”:

“(a) a complete list of the assets of [the Deceased] including but not limited to his real properties, cash in banks, stocks, companies shares and etc. in Hong Kong, China and elsewhere, during the period from 1995 up to this date;

(b) a complete list of the assets of the Defendant, including but not limited to [her] real properties, cash in banks, stocks, companies shares and etc. in Hong Kong, China and elsewhere, during the period from 1995 to this date; and

(c) a complete list of medical documents, including but not limited to medical notes, records, reports, certificates, payment receipts, x‑rays films and etc. issued by doctors in Hong Kong, China and elsewhere, during the period from 1995 to the date of the death of [the Deceased]”.

Irregularities and problems on the face of the Orders

20. It is apparent that there are serious departures from the standard form of Mareva injunction prescribed by Practice Direction ‑ 11.2, in the following aspects:

(1)   The standard form contains an exception to the injunction permitting the defendant to spend a specified sum per week towards his ordinary living expenses and a specified sum per week (or a reasonable sum) on legal advice and representation.  However, the Mareva Injunction Order in the present case makes no provision for the defendant’s living or legal expenses.  Mr Enzo Chow’s explanation for this omission is that:

“[at] the time of the application for the Injunction Order, there was simply no information about the expenses of D at all… There was no way for P to know whether it is necessary to release any fund to D as her living expenses at all”

(see paragraphs 25 and 26 of the skeleton submissions of the plaintiff dated 28 October 2014).  In my view, this is a wholly inadequate explanation.  The inadequacy is compounded by the fact, as admitted by Mr Enzo Chow, that Toh J’s attention was not drawn specifically to the aforesaid omission in the draft Mareva injunction order placed before her, as required by paragraph 3 of the said Practice Direction:

“Where the order sought deviates in a material respect from the standard form this should be drawn to the attention of the judge hearing the application.”

No explanation has been given for this failure to comply with the Practice Direction.

(2)   Where the defendant is ordered to make disclosure of information regarding his assets in aid of or ancillary to a Mareva injunction, the standard form provides that the defendant should be required to disclose only those assets with an individual value above a specified monetary sum, for the obvious reason that a defendant cannot reasonably be expected to disclose every single asset belonging to him whatever its value.  This safeguard is missing from the Mareva Injunction Order in the present case.  No explanation has been proffered by Mr Enzo Chow for the failure to include such limit in the Mareva Injunction Order.  Further, Toh J’s attention was not drawn specifically to this omission in the draft Mareva injunction order placed before her, as required by paragraph 3 of the said Practice Direction.

21. In so far as the Disclosure Order is concerned, even if one assumes that the defendant was in possession of the type of documents referred to in sub‑paragraph (3) thereof and even if one further assumes that the plaintiff in her capacity as the administratrix of the estate of the Deceased was entitled to those documents, the plaintiff has not given any sufficient justification for seeking an ex parte order to compel their disclosure and production by the defendant, and I am unable to see why the plaintiff did not seek such order by way of an inter partes application.

22. The Disclosure Order also required the defendant to disclose and produce a complete list of her assets, without setting a minimum individual value of the assets to be disclosed.  Again, this made compliance with the order by the defendant extremely difficult, if not practically impossible.

Material non‑disclosure

23. Mr David Tang has raised a number of complaints under the heading of material non‑disclosure.  It is not necessary for me to consider all of them.  The following are, in my view, the most significant ones.

24. First, although the plaintiff placed heavy reliance on Dr Wong’s evidence in the ex parte applications, it was not disclosed to Toh J in either the plaintiff’s first affirmation or skeleton submissions dated 28 February 2014 placed before the learned judge that Dr Wong’s opinions were only “preliminary” ones.  This omission is compounded by the fact that, while Dr Wong apparently relied on the medical certificates of Dr Tsui of the Shanghai Hospital in forming his opinions, there was no mention of two earlier medical certificates prepared by Dr Yu of the Shanghai Hospital, who apparently took care of the Deceased during the period from January 2001 to May 2006. The two medical certificates of Dr Yu were dated 3 September 2003 and 30 March 2004 respectively.  The latter certificate stated that the Deceased “至今卧床不能行走，但神智尚清楚”, and could lend support to an argument that the Deceased was still of sound mind as at the date of that certificate.  For the sake of completeness, I should mention that the name of the hospital appearing on Dr Yu’s medical certificates is slightly different from that appearing on Dr Tsui’s medical certificates, but the evidence shows that they refer to one and the same hospital with the same address.

25. The defendant argues that, given the plaintiff had access to Dr Tsui’s medical certificates which enabled Dr Wong to prepared his medical report dated 19 September 2013, she must also had access to Dr Yu’s medical certificates but chose not to disclose them to Dr Wong or to Toh J at the ex parte applications.  This allegation was raised directly in a letter dated 30 April 2014 from the defendant’s solicitors (Tsang, Chan & Woo) to the plaintiff’s solicitors (Christine M Koo & Ip).  The plaintiff has not, either in reply letters from her solicitors or in her second affirmation, denied that she had access to or know about Dr Yu’s medical certificates.

26. While it can be argued that the disclosure of Dr Yu’s medical certificates would not have affected the decisions made by Toh J, it is trite that the test of “materiality” is whether the fact not disclosed is relevant to the “weighing operation” that the court has to make in deciding whether or not to grant the order: see Gee QC, Commercial Injunctions, 5^th Edn, paragraph 9.002.  In the present case, the mental condition of the Deceased as at the dates of the transactions under challenge was the central issue going to the validity of the plaintiff’s complaints.  The date on which the Deceased became mentally incapacitated would be relevant to the question of which transactions could properly be challenged by the plaintiff and thus relevant to the monetary limit of the Mareva injunction if one was to be granted.

27. Hence, any relevant evidence which suggests that the Deceased might still be of sound mind as at 30 March 2004 was something which ought to have been drawn to the attention of the judge dealing with the ex parte applications in the present case.

28. Second, on the issue of risk of dissipation of assets, one of the matters relied upon by the plaintiff in the ex parte applications was that the defendant sold two properties situated in the PRC on 14 September 2012 and 27 March 2013 respectively in the following circumstances:

(1)   the plaintiff and Franklin applied to the People’s Court in Shanghai, PRC, to institute legal proceedings against the defendant on 22 March 2012 seeking to recover certain assets in the PRC allegedly belonging to the Deceased’s estate;

(2)   the PRC Court approved the application on 28 May 2012;

(3)   the People’s Court issued a notice on 2 August 2012 informing the parties to attend the first hearing on 17 September 2012; and

(4)   the People’s Court issued a further notice on 7 November 2012 informing the parties to attend the second hearing on 18 March 2013.

29. It was contended on behalf of the plaintiff that the above chronology showed a risk of dissipation of assets by the defendant after she had knowledge of legal proceedings commenced against her.  What the plaintiff did not inform Toh J, however, was the fact that the aforesaid action brought by the plaintiff and Franklin against the defendant had in fact been dismissed with costs by the People’s Court in Shanghai on 26 March 2013 (ie one day before the sale of the second property on 27 March 2013).

30. In my view, a fair and full picture was not presented to Toh J when the plaintiff relied upon the sale of the two properties in the aforesaid circumstances as evidence of a risk of dissipation of assets by the defendant.

31. I bear in mind that on the issue of risk of dissipation of assets, the plaintiff also relied on other matters, including:

(i)   a sale of a property in Shanghai by the defendant to her sister on 15 May 2007 allegedly at a below‑market price after the Deceased had been sued by a third party on 6 April 2007 in the PRC court in relation to an inheritance matter (which action was defended by the defendant as agent for the Deceased); and

(ii)   an allegation that the defendant had used a fake PRC identity card to purchase two properties in Shanghai in 2001 (which allegation is denied by the defendant). 

It should be noted, however, that the above matters took place long before the date on which the present ex parte applications were made to Toh J.  The alleged dispositions referred to in paragraph 28 above would, it seems to me, be more relevant to an assessment of risk of dissipation of assets by the defendant at the time of the ex parte applications.  As mentioned above, I consider that the plaintiff has failed to put before the learned judge a fair and full picture relating to those dispositions.

32. In view of the aforesaid matters, I consider that the defendant has made out a case of material non‑disclosure by the plaintiff.  The court still has a discretion not to discharge the ex parte orders, or re‑grant the orders immediately after their discharge.  Nevertheless, Mr Enzo Chow has not made any submission on these possibilities, concentrating instead on the contention that there was no material non‑disclosure.

33. Having regard to the significance of the matters which the plaintiff failed to disclose to Toh J, and also the apparent irregularities and problems on the face of the Orders, I consider that the ex parte orders ought to be discharged immediately without any re‑grant.

Disposition

34. Accordingly, I order that the Orders made by Toh J on 28 February 2014, as subsequently continued by Deputy High Court Judge Wilson Chan on 14 March 2014 and by Suffiad J on 28 March 2014, be discharged immediately.  I also make an order nisi that the plaintiff shall pay to the defendant her costs of the present application, to be taxed if not agreed.

Postscript

35. There are two matters which I wish to mention by way of concluding remarks.

36. First, practitioners are reminded to comply strictly with all relevant provisions of Practice Direction – 11.2 when making applications for Mareva injunctions and Anton Piller orders, including the requirement to use the standard forms appended to that Practice Direction, which contain standard provisions for the reasonable protection of the defendants.  The importance of using the standard forms, containing the protective provisions, has to be understood in view of (inter alia) the following considerations:

(i)  the draconian nature of a Mareva injunction or Anton Piller order;

(ii)  applications for such orders are normally made ex parte without notice to the defendants; and

(iii)  such applications are often presented to the judge at very short notice who would have little time to read the documents prior to the hearing. 

Accordingly, the judge would necessarily have to rely to a large extent on practitioners complying with all relevant provisions of Practice Direction – 11.2, secured in the knowledge that the built‑in protections provided for in the standard forms would be available to the defendants.  For this reason, any material deviations from the standard forms must be specifically drawn to the attention of the judge hearing the applications, as required by paragraph 3 of that Practice Direction.

37. Second, the defendant has not, as a matter of fact, complied with any part of the disclosure obligations contained in the Orders.  When this matter was raised with the defendant’s counsel at the hearing, the initial response was that the Orders were ex parte ones and they were being challenged by way of inter partes summons.  It should be clearly understood that any order of the court, be it made ex parte or inter partes, carries the same legal effect and must be fully complied with.  If a defendant who has been served with an ex parte order considers that there are good or justifiable grounds for suspending the operation of the order (or any part thereof) pending the hearing of an inter partes summons to vary or discharge it, in my view the proper course to adopt is to seek the plaintiff’s consent for a temporary suspension of the order or, in the absence of such consent, make an urgent application, with notice to the plaintiff or his solicitors, to the court for temporary relief.  The court will do what is just and reasonable in all the circumstances, and also take into account any unreasonable conduct on the part of the plaintiff or the defendant when deciding on the question of costs of the application.  In this connection, I would remind practitioners of the duty of the parties and their legal representatives to assist the court to further the underlying objectives of the Rules of the High Court under Order 1A, rules 1 and 3 of those rules.