TAM SHUK YIN ANNY v. CHOI KWOK CHAN AND OTHERS

CACV 105/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 105 OF 2008

(ON APPEAL FROM HCMP NO. 2399 OF 2004)

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J U D G M E N T

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Hon Rogers VP:

1.  This was an appeal from an order of Madam Justice Kwan given on 5 March 2008.  The matter before the judge was the last stage in the resolution of a petition presented under section 168A of the Companies Ordinance, Cap. 32.  The judge had given judgment on 14 June 2007.  Consequent upon her judgment there were a number of matters that had to be completed, in particular, the valuation of the premises which were important parts of the disputes between the parties.  By the time the matter came before the judge on 5 March 2008 most of the remaining matters in dispute between the parties had been resolved.  On this appeal the two matters that now remain were, in effect, very minor adjustments to the overall conclusion reached by the judge.

2.  At the conclusion of the hearing of this appeal judgment was reserved which we now give.

Background

3.  The matters in dispute in this case arose out of the operation of schools in Kowloon Tong.  The parties are all related.  The husband of the petitioner is the elder brother of the second respondent.  The second respondent is married to the first respondent.  The petitioner and her husband went into business together with the first respondent in about 1975 and operated schools.  Ultimately, they had a series of companies in which the petitioner and the first respondent were equal shareholders.

4.  Particularly important in this case were premises at 10 York Road which was part of premises where a school was run under the aegis of Advance Wise Development Ltd, the fourth respondent, (“Advance Wise”) and premises at 49 Cumberland Road, which were owned by Richmond Properties and Trading Company Ltd, the sixth respondent, (“Richmond”).  Richmond was owned as to 50% by the petitioner and the other 50% by the first and second respondents.  Until about August 2004 the first and second respondents operated a primary school on the premises at 49 Cumberland Road.  Thereafter the premises appear to have been left largely unoccupied and used, if anything, for parking the first and second respondent’s cars from time to time.

5.  The petitioner had wanted to vacate the premises at 10 York Road, which was leased, and use instead the premises at 49 Cumberland Road.  The judge held, in effect, that the respondents had been obstructive and had not released the premises at the time they should have.  In consequence, the lease of the premises at 10 York Road had had to be renewed.  Overall the judge sought to separate the affairs of the parties and to put them in the way they should have been had there been an equitable parting of ways as at the date of the presentation of the petition.  Neither party has demurred from this approach.

6.  The judge considered that the fairest way of adjusting the matter between the parties in relation to 49 Cumberland Road was to order that Advance Wise pay rent to the petitioner as purchaser of 49 Cumberland Road as from 18 September, 2004, with any rent previously paid to Richmond being refunded, (see paragraph 3 of the Order of 5 March 2008) and that the first respondent should reimburse Advance Wise for that rental from 1 January 2006 until expiry of the renewed lease of 10 York Road, i.e. 5 September 2008, at the rate of HK$120,000 per month (see paragraph 26 of the Order of 14 June 2007 and paragraph 7 of the Order of 5 March 2008).  The judge said in paragraph 234 of her judgment of 14 June 2007 that she was taking the later date to allow a reasonable period to have elapsed from the closing of the school, in 2004, previously run there.

7.  On this appeal the respondents sought to argue that an earlier date than 5 September 2008 should have been taken because the key to 49 Cumberland Road had been handed over on 17 July 2007 and on 10 December of that year the petitioner changed the lock.

8.  On this aspect of the case I would simply say that the judge used the very wide discretion as to orders that can be made under section 168A in order to try and bring about a fair result.  That appears to me to have been achieved by taking into account the fact that, in the first place, 49 Cumberland Road had to be refurbished so that it could be used in place of 10 York Road and, in the second place, the lease on the premises at 10 York Road had had to be extended until 5 September 2008.  In my view the order made by the judge was well within the discretion open to her, particularly given the very complex series of orders that had to be made in order to unravel the dealings between the parties.

9.  The other matter that was raised was the question of interest on the petitioner’s share of the net proceeds arising from the sale of 49 and 57 Cumberland Road.  The judge had ordered that interest should be paid by the first respondent on the petitioner’s share of the net proceeds (see paragraph 10 of the Order of 5 March 2008).  On this appeal that order for payment of interest was challenged.  What, in effect the argument amounted to was that the judge having ordered the payment of a notional rent in respect of 49 Richmond Road over the period from 1 January 2006 until 5 September 2008, as noted above, the petitioner should not in addition be entitled to interest on the capital sum over the same period because the petitioner would then also have received compensation in respect of the ownership of property by reason of the payment of rent.  In short, the argument was that if the first respondent were to be responsible for paying rent for 49 Cumberland Road in the period from 1 January 2006 up to 5 September 2008, the petitioner would have the benefit of the rent via the ownership of Advance Wise and would not have paid for 49 Cumberland Road until the end of the period.  This was a new point taken on the appeal.  The original double accounting point was different; see paragraphs 26-7 of the decision of 5 March 2008.

10.  Whilst, at first, that argument seemed attractive, on further consideration it appears that the attraction resulted from an incomplete and superficial consideration.  Overall, the judge sought to separate the parties in the way they should have been as at the date of the presentation of the petition.  Paragraph 1 of the order of 14 June 2007 was that there should be a full account taken of the assets and liabilities of, in particular, Richmond as at 17 September 2004.  Then paragraph 4 provided that there should be an open market valuation of Richmond’s properties namely 49 and 57 Cumberland Road as at 17 September 2004.  Paragraph 5 provided that the petitioner should purchase 49 Cumberland Road at the valuation price and, likewise paragraph 6 provided that the first and second respondent should purchase 57 Cumberland Road at the valuation price.

11.  In reality what would happen is that the 2 properties owned by Richmond would be divided between the parties, each side taking one.  The payments for the properties would in practice be very much notional.  If the properties were of equal value the payments of the value would be returned, or at least credited, to each party on the ultimate distribution.  It would only be if the properties were of different values that there would an adjustment.  In his skeleton argument Mr Bartlett, who appeared on behalf of the petitioner, sought to defuse the point by suggesting an amendment to paragraph 10 of the Order.  I would adopt that proposal as follows:

“(10)    The first respondent do pay interest on the Petitioner’s share of the distributable profits of Richmond after taking into account the net proceeds arising from the sale of No. 49 and No. 57 Cumberland Road assuming a sale of such properties from 17 September 2004 with interest to run from 17 September 2004 to the date hereof at the rate of 1% over prime rate of HSBC and thereafter at the prevailing judgment rate until payment.”

12.  I consider that this amendment was easily achievable particularly as the petitioner’s solicitors had been putting it forward as the proper interpretation of the original order for some time.  In the circumstances I would dismiss this appeal, save for amending paragraph 10 of the order of 5 March 2008 as indicated and make an order nisi that costs be to the petitioner.

Hon Le Pichon JA:

13.  I agree.

Hon Sakhrani J:

14.  I also agree.