POON SHU FAN v. WONG TIN YAN AND ANOTHER

HCA 1143/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1143 OF 2011

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REASONS FOR DECISION

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The background

1.  On 22 November 2011, after hearing submissions from Mr Wilson Leung for the plaintiff and Ms Gekko Lan for the defendant, I made the following orders :

(1)  the Mareva injunction order made by the Honourable Mr Justice To on 7 July 2011 be discharged with costs to the defendants to be taxed and paid forthwith after the gross sum assessment is made.  The defendant shall file the bill of costs to the Court within 14 days from the date hereof and the plaintiff shall file her Reply to the bill of costs within 7 days thereafter ;

(2)  the plaintiff’s 1^st Summons dated 11 July 2011 and the 2^nd Summons dated 19 July 2011 be dismissed with cost to the defendants on Gross Sum Assessment and paid forthwith ;

(3)  leave be granted to the defendant to file the 3^rd affirmation of Wong Sze Mei together with a letter from the defendants’ solicitors dated 17 November 2011 annexing the company search record of New Star Communication Co Ltd as exhibit ;

(4)  leave be granted to the plaintiff to file her draft affirmation in reply with the plaintiff’s solicitors’ undertaking to file and to affirm the affirmation in the same form of draft affirmation within 7 days from the date hereof ;

(5)  time for service of this Summons be abridged ; and

(6)  the costs in respect of the 1^st and 2^nd defendants’ Summons filed herein on 18 November 2011 be costs in the cause.

2.  I now give reasons for my decisions.

The background

3.  The defendants are husband and wife.  They have 3 daughters, in order of seniority, Wong Sze Man (“Crystal”), Wong Sze Mei (“Joey”) and Wong Sze Ki (“Carina”).  Joey and the plaintiff (“Elizabeth”) were close friends and they went to the same schools when they were young. 

4.  Joey and Elizabeth were involved in the business of selling mobile phones and mobile phone accessories (“the Business”) through Cellular Baby Cell Phone Accessories Specialist Limited (“Cellular Baby”).  Carina later participated in the Business. The exact arrangement between Elizabeth, Joey and Carina is heavily contested. Elizabeth says that Joey and Carina were only employees while Joey claims that she was in a 50 / 50 partnership with Elizabeth.

5.  The first issue in these proceedings is whether there was an oral contract between Elizabeth and the defendants for the investment in a flat in the Ocean Shores, Tseung Kwan O.  The second issue is whether the 001 and 888 accounts, and the Stock Trading Account opened under the name of the 2^nd defendant (“Madam Leung”) in Hang Seng Bank were agreed to be for the exclusive use of Elizabeth and whether the assets therein belonged to Elizabeth.

6.  It is undisputed evidence that Elizabeth transferred money to the 001 and 888 Accounts from her accounts in Canada in 2007‑10.  13 remittance forms were exhibited in PSF‑2 and they showed various sums of money in HKD and CAD transferred to the 001 and 888 Accounts.  Elizabeth says that the transfers were made in pursuant of the oral agreement and for her own investment purposes. 

7.  The defendants, through Joey, say that the transfers were in fact payment for inventory purchase carried by Madam Leung.  Madam Leung had been helping the Business by buying accessories in Hong Kong (and later Shenzhen) and mailing them to Cellular Baby.  The 13 remittances were in fact payment for the goods mailed to Cellular Baby.  They rely on 10 Inward Remittances Advices exhibited in WSM‑5 (8 of them say “Inventory Purchase” in Payment Details) and 6 credit advices exhibited in WSM‑6 (5 of them say “Inventory Purchase” in Payment Details).

The grounds relied on by the defendants

8.  Ms Lan submitted that the injunction should be discharged on the following grounds :

(1)  serious material non‑disclosure ;

(2)  no arguable case ;

(3)  delay ; and

(4)  no risk of dissipation.

Issue 1‑‑serious material non‑disclosure

9.  Ms Lan raised numerous matters regarding non‑disclosure, I will now classify them as follows :

(1)  the role of Madam Leung in the Business. The amount and time of inventory purchase ;

(2)  concealment of the purpose behind the 13 remittances exhibited in PSF‑2 (10 of which corresponded to the advices in WSM‑5) ;

(3)  the reason behind operating a joint account with Madam Leung in Royal Bank of Canada No 00010‑5002882;

(4)  Elizabeth had remitted money on behalf of Joey and Carina to Madam Leung from October 2009 to March 2010 ; and

(5)  the reason behind the breakdown of relationship between Joey and Elizabeth was not money matters but the fact that Joey was in a relationship with her boyfriend (“Sean”) and Elizabeth felt betrayed.

10.  Regarding item 1, I foresee that Madam Leung’s role in the Business will be a heavily contested matter if and when this case proceeds to trial.  It is therefore inappropriate for me to comment on the precise role of Madam Leung without hearing evidence.  In any event the application before me can be decided on those matters admitted by Elizabeth alone.

11.  In paragraph 52 of her first affirmation, Elizabeth affirmed :

“52 From time to time, Cellular Baby would need to pay for certain expenses in Hong Kong, eg for buying goods in Hong Kong, shipping goods from Hong Kong to Canada, printing name cards in Hong Kong, etc. For the sake of convenience, and because of our close relationship, it was agreed in around 2005 between me and Madam Leung that she would help me to pay for such expenses. For this purpose, I arranged for her to have use of the Credit Cards. However, it was certainly not a part of agreement that Madam Leung could use the Credit Cards for her own personal expenses.”

12.  This paragraph was immediately under the subheading “Credit Cards”, which relates to the relatively non‑contentious part of these proceedings regarding Madam Leung’s improper use of certain credit cards given by Elizabeth.

13.  This seems to be the only occasion where the role of Madam Leung in purchasing goods for the Business is mentioned by Elizabeth.  Joey in her first affirmation pointed out that Madam Leung had in fact assumed a far more significant role in the Business. 

14.  This led Elizabeth to admit in her second affirmation that Madam Leung purchased some goods for Cellular Baby before 2003, but after 2003 her involvement was further reduced to purchasing goods from suppliers with no previous dealings, such as New Trend and New Star.

15.  In countering the accusation that she deliberately hid Madam Leung’s involvement, Elizabeth explained that she had been using Cellular Baby’s account to pay expenses since 2004.  She did not use her personal account to pay for purchase by Cellular Baby.  Therefore she did not see the need to include these matters in her first affirmation.

16.  I reject this explanation.  It must have been obvious to Elizabeth and her solicitors that the business dealings between her and Madam sLeung are crucial matters that must be disclosed.  If disclosed, the business dealings will highlight the nature of the relationship between them and most importantly the need to classify payment by Elizabeth (through her personal accounts or Cellular Baby’s) as personal or business.

17.  The limited disclosure in paragraph 52 of her first affirmation was completely inadequate.  First, it only says that from 2005 onward Elizabeth and Madam Leung agreed to the use of the credit cards.  It makes no mention of the dealings regarding the Business between them before 2005.  Second, her first affirmation says that Madam Leung would help with paying for expenses such as “for buying goods in Hong Kong… and printing name cards”.  It was only in the second affirmation that she mentioned her role in “[sending] samples of the products” (paragraph 10) and “continue to assist Cellular Baby by transferring money to suppliers in Hong Kong (particularly newer suppliers with whom Cellular Baby had yet to establish a stable working relationship)” (paragraph 16).

18.  I also reject the submission that Cellular Baby was a separate legal entity and its dealings with Madam Leung need not be disclosed.  It is obvious from Elizabeth’s second affirmation that she had herself used Cellular Baby’s bank accounts to transfer money to Madam Leung “for [her] own personal purposes” (paragraph 22).

19.  Regarding the second item, Ms Lan submitted that Elizabeth was guilty of concealing the Details of Payment in the 13 remittances forms exhibited in PSF‑2.  Ms Lan drew support from the Inward Remittances Advices exhibited in WSM‑5, corresponding to some of the 13 remittances forms in PSF‑2.  One advice in WSM‑5 dated 9 February 2010 says that the payment was for “Loan”.  This description matches the description in the remittance form dated the same exhibited in PSF‑2. 

20.  Ms Lan submitted the above suggests that the details in the “receipt” can only be obtained from the details provided in the “payment advice”.  The defendants’ case is that 8 of the advices in WSM‑5 says it is for “Inventory Purchase” but the corresponding remittance advices in PSF‑2 do not contain this information.

21.  Ms Lan further pointed out that some copies in PSF‑2 appear to have been tampered with because “the dotted lines at the row for ‘Details of Payment’… as if something have been covered up when making the copies and thus blocking the originally continuous dotted lines”.

22.  I accept that the information in the advices (“Inventory Purchase” and “Loan”) in WSM‑5 could only come from the bank that carried out the remittances.  I expect the remittance forms in PSF‑2 to carry the same details but there were none in many of the advices.  I need not ascertain the exact cause for the missing information.  It might be, as Ms Lan submitted, the deliberate concealment during photocopying or other reasons.  It is sufficient for me to say that the defendants have a strong case that the reasons behind at least 8 of the remittances were deliberately concealed.

23.  This allegation was first raised in paragraph 40 of Joey’s first affirmation and was never satisfactorily answered by the plaintiff’s side.  Accordingly I hold that this is also a material non‑disclosure on the part of Elizabeth.

24.  Regarding the joint account in item 3, Ms Lan submitted that it was probably not referred to To J in the ex parte hearing and Elizabeth only explained in her 2^nd affirmation that it was opened for her to make contribution to mortgage repayment.  Ms Lan submitted the true purpose was for inventory purchase instead.

25.  I do not accept that a case of material non‑disclosure can be made out in relation to item 3.  Reading paragraph 51(5) as a whole it is clear that Elizabeth mentioned the joint account in the context of she could not remember the details of her accounts with Royal Bank of Canada.  This might have been the reason why the purpose of the joint account was not explained at that time.

26.  Regarding item 4, I do not believe there is enough evidence for me to determine the factual issue of whether Elizabeth remitted money to Madam Leung on behalf of Joey and Carina at this stage.  As such a finding is a necessary prerequisite for holding that the plaintiff was guilty of material non‑disclosure, I did not consider this item in arriving at my decision.  In any event such a determination is unnecessary in light of my findings related to items 1 and 2.

27.  Regarding item 5, the defendants allege that Elizabeth is using the injunction to get back to Joey by causing hardship on the defendants.  They say that the primary reason for the breakdown of relationship between Elizabeth and Joey is Joey’s relationship with Sean but not financial problems, as alleged by Elizabeth. 

28.  I note that many of the alleged behaviours of Elizabeth relied on by the defendants might be criminal.  Strong evidence is needed to support such an assertion.  From the exhibited SMS messages of Elizabeth and the writings on the wall, there is some evidence that Elizabeth is seeking the injunction herein out of spite.  I understand this issue cannot be decided at this stage on affirmation alone.  But Joey raised all these allegations with supporting exhibits without any answer from Elizabeth.  This supported the inference that the motivation behind the injunction application is emotional rather than financial.  This would add weight to the decision to discharge the injunction.

29.  For the aforesaid reasons, I hold that Elizabeth was guilty of material non‑disclosure in relation to items 1, 2 and 5.  

Issue 2‑‑no arguable case

30.  I agree with Mr Leung’s submission that the plaintiff does not need to make out a case that is likely to win and all that is required is one that is barely capable of serious argument.

31.  In her submission, Ms Lan pointed out a number of reasons why the plaintiff’s claim is “inherently unbelievable”, “plainly unlikely” and “unbelievable”. With respect these arguments only tend to show that the plaintiff has a weak case, but they are short of capable of suggesting that she has no arguable case.

32.  The plaintiff’s case is inherently facts based.  At this stage, there is evidence to show that she remitted money to Madam Leung although the purpose behind the remittances is far from certain.  After considering the plaintiff’s pleaded case and her evidence I consider that she has an arguable case.

Issue 3‑‑delay

33.  Ms Lan submitted that Elizabeth should have applied for injunction shortly after June 2010, when there was a breakdown of relationship.  Instead she had waited for about a year and made the application in July 2011 and was guilty of delay.

34.  Mr Leung submitted the proper date to consider should be 24 May 2011 when Elizabeth discovered the defendants had sold the property under the alleged oral agreement.  There was only a “delay” of 5 weeks.

35.  I accept Mr Leung’s submission regarding delay.  Elizabeth was only expected to seek injunction when she learnt that there was a real risk that her assets would be dissipated.

Issue 4‑‑real risk of dissipation

36.  I accept Mr Leung’s submission that the sale of the property without informing Elizabeth is sufficient to support the allegation that there was a real risk of dissipation.  I do not believe the application by the defendants for legal aid points to any dishonesty on their part.  It is possible that they did not know about the rules regarding legal aid and approached the wrong person for legal assistance.

Conclusion

37.  Of the 4 issues advanced by Ms Lan the defendants only succeeded in material non‑disclosure by the plaintiff.  The ultimate issue is whether I should have allowed the injunction to continue or discharge it and refuse to re‑grant it.

38.  I held that the injunction should be discharged and not be re‑granted because the material non‑disclosure appears to be both deliberate and fraudulent.  I am satisfied that the plaintiff or her legal advisors knew the importance of disclosing their extensive dealings in the Business.  Those occasions when Elizabeth remitted money (through her account or Cellular Baby’s) to Madam Leung for the purpose of the Business would clearly have a bearing on the outcome of the ex parte application and must be disclosed.

39.  The remittance forms in PSF‑2 are prima facie missing some information which happens to be about the purpose of the remittances.  The reason for the missing information was not satisfactorily answered.  The inference to be drawn from the above is that the information was deliberately and fraudulently removed.

40.  Finally, there is evidence to support Joey’s contention that Elizabeth’s application herein is an emotional issue rather than a financial one.

41.  In these circumstances I discharged the injunction and refused to exercise my discretion in re‑granting the injunction after its discharge.