XCHRX LEE TAK YEE AND ANOTHER v. LEE TAK YAN

1998, No. A10000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. On 14 December 1998, I granted an injunction against the defendant. The thrust of the plaintiffs' complaint was that the defendant received money as a fiduciary, but, instead of paying it into some form of trust account with an established bank, he paid it to a family company that I called MW Lee. This is what I said in my judgment -

"Apparently, the defendant did not make it clear to MW Lee that the money was to be treated in any special way. The company received it as an advance, without any obligation to pay interest, without any specific obligation to repay it on a fixed date, and without any other strings attached. I believe the question posed answers itself. It was, in my judgment, an unusual thing for a fiduciary to do, and it screams out for an adequate explanation. The defendant makes no attempt whatsoever to explain why he did this odd thing. The natural step for a fiduciary to do in this situation is to hold the money in a trust account with a reputable bank earning a fixed rate of interest. Not having done this, one must ask oneself why he did not do it, and instead paid it to a company that he and his immediate family controlled and to which he owed a much larger sum of money. He does not give an answer. This absence of an answer for a failure to do the natural and obvious thing invites the conclusion that he did it because it suited his own best interests. It certainly did not suit the interest of the estate or the ultimate beneficiaries.

It is for the defendant to establish that he has an arguable defence. This should have taken the form of explaining why he paid the money to MW Lee instead of taking the natural and obvious step of paying the money into a bank trust account in the name of the estate. It should have been obvious to the defendant that paying the money into a company in the circumstances I have mentioned was bound to excite suspicion. The defendant has made no attempt whatsoever to explain why he did this.

On this basis, it seems to me that the plaintiffs are entitled to an injunction restraining the defendant from continuing to allow MW Lee to hold the dividends on behalf of the estate. I leave it to the parties to agree a minute, failing which, I will hear further submissions on the form of the injunction."

2. The parties differ as to the form of order I should make. The plaintiffs say that it should be a simple order that the defendant pay the trust money, plus interest, into a fiduciary bank account. The defendant says that it should order that the defendant "cause and procure" the company to pay the money into the bank account, that the first plaintiff render such assistance as may be required to this end and that I authorise the transfer by the company because there may be difficulties in this by reason of a petition by the first plaintiff to have the company wound up on the basis that it is just and equitable that this should be done.

3. I do not know the ins and outs of the winding up petition. I am not prepared to make an order to authorise the transfer when I do not the consequences of such an order on the rights and liabilities of those concerned, including creditors. It follows that I should not order the first plaintiff to assist in this transfer. If this causes difficulties for the defendant, and there is no evidence that it will, that is something he has brought on his own head by wrongfully paying the money to the company in the first place. Accordingly, the order will be that, within 14 days, the defendant shall cause the sums of $12,347,500 and $583,700, plus all interest accrued, to be paid into a trust account with a licensed bank in Hong Kong in the names of the defendant and May Lee as fiduciaries and executors of the estate of Lee Man Wa and Ng Chan Wah. Otherwise, the defendant shall have unconditional leave to defend the action. If the defendant is able to obtain some order in the winding up proceedings enabling the company to pay this money, well and good, but my order is not dependent on this.

4. Mr Barlow also asks that my order is without prejudice to any claims of the plaintiffs in respect of the shares mentioned in the plaintiffs' summons of 15 August 1998. I do not see any need for this. Nothing in my judgment or in the order precludes the plaintiffs from pursuing their claims if they think fit.

5. I made an order nisi as to costs on 14 December 1998. This said -

"The question of costs has not been argued. Without the benefit of that argument, I am inclined to think that the defendant should pay the costs of the summary judgment application, that there should be no order as to the costs of the application for the interlocutory injunction, and that the defendant should pay the costs of his application to amend and the costs occasioned by the amendment. I make an order nisi accordingly."

6. On the summary judgment application, the plaintiffs applied for summary orders to be paid dividends and for the injunction. The plaintiffs obtained the injunction they wanted, but I granted unconditional leave to defend on the claim for the dividends. I think that makes the plaintiffs substantially successful, but there is a point raised by Mr Miu that he says makes a difference. He drew my attention to a letter from the defendant's solicitors to the plaintiffs' solicitors dated 23 October 1998. This letter proposes an order similar to the one presently proposed by the defendant. This is an order I have declined to make. Accordingly, the plaintiffs were, on my findings, entitled to refuse that offer and fight on for the order they have now obtained. Accordingly, I see no reason to change my order nisi. It is made absolute.

7. On the interlocutory injunction, I made no order as to costs because this was essentially the same application as the application for a summary order on which the plaintiffs were successful.

8. On this application, the plaintiffs have been successful. There seems no reason why costs should not follow the event. I make an order nisi that the defendant pay the costs of this application.