LAM SIK YING v. LAM SIK SHI AND ANOTHER

HCA 4713/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4713 OF 2001

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BETWEEN

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DECISON

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1.  This is an application by the Plaintiff to vary the terms of the Mareva injunction granted by Mr Recorder Yu SC on 14 January 2011 by increasing the amount of the assets covered by the injunction from $2,500,000 to $33,333,248.69.

BACKGROUND

2.  The background of this case has been set out in the judgment of Mr. Recorder Yu handed down on 14 January 2011 (“the Judgment”). In short, the Plaintiff and the 1^st Defendant are half brothers. Their father, Mr Lam Tim alias Stan Lam Tim (“the Father”), died intestate on 6 January 1983.  Letters of Administration were granted to the Plaintiff and his mother (Madam Wong Kwan Yung) on 24 March 1999.  Madam Wong passed away on 7 June 1999, leaving the Plaintiff as the sole surviving administrator of the estate of the Father.  This is the capacity in which the Plaintiff makes his claim in this action.

3.  The Statement of Claim was filed as long ago as April 2002.  The cause of action asserted against the 1^st Defendant was that he intermeddled with the estate and committed acts or suffered omissions in relation to the estate, causing substantial loss and damage to the estate.  In March 2010, the Plaintiff filed the particulars of damage of the claim which added up to a figure of $32,034,964.80.  Allegations include using the Father’s firm name to siphon off business, collecting receivables from the Father’s customers, collecting rent on the Father’s properties, occupying properties owned by the Father without paying rent, etc.

4.  The Plaintiff and the 1^st Defendant co-owned a property known as Ground Floor, No. 4 Sharp Street East, Hong Kong (“the No. 4 Property”).  There was a court order for the sale of the No. 4 Property and the 1^st Defendant was expected to receive substantial amount of money from the sale proceeds. 

5.  On 15 July 2010, the Plaintiff applied to the court for a Mareva injunction to restrain the 1^st Defendant from disposing assets up to the amount of $32,034,964.80, in particular, his share of the sale proceeds of the No. 4 Property.

6.  In the Judgment, Mr Recorder Yu accepted that the Plaintiff had a good arguable case on the substantive claim and there was a real risk of dissipation of assets, and so the learned judge granted a Mareva injunction in favour of the Plaintiff.

7.  So far as the quantum of the injunction is concerned, the learned judge said the following in the Judgment:

“19. During the hearing, Mr Chan [the Plaintiff’s counsel] took me through the ‘Particulars of Damage’ filed on behalf of the plaintiff. During that exercise, he readily accepted that there were some substantial heads of claim which he could not support on the materials before me. He also accepted that one must also take into account the fact that the 1^st defendant, as one of the father’s children, was entitled to a share of the estate. He produced a sheet of calculation which came up with a figure of $13,707,675.12. Another difficulty which Mr Chan faced was that the plaintiff had obtained valuation reports as to the market rental value of various properties which the plaintiff says supports the figures pleaded in the Particulars of Damage, none of these reports had been included as evidence in support of the summons. I refused an application by the plaintiff for an adjournment of the hearing to put in these reports.

20. In the circumstances, I do not think it is appropriate at this stage for me to seek to embark upon a detailed analysis of the various heads of claims.  Instead I propose to adopt a broad brush approach and to consider at the stage when I come to the balance of convenience what would be an appropriate figure which the plaintiff merits protection (assuming he satisfies the other requirements) by a Mareva injunction in the light of all the evidence before me.”

8.  Adopting such broad brush approach, the learned judge arrived at a figure of $2,500,000 as to the amount of the protection under the Mareva injunction.

THE VARIATION APPLICATION

9.  The No. 4 Property was sold at a very good price.  On 5 May 2011, the Plaintiff took out the present variation application with a view to increase the amount of the protection.  In support of such application, the Plaintiff supplies the court with the revised figures for the particulars of damages which can be found in the 3^rd Affirmation of Lam Sik Ying.  The revised figures can be listed out as follows:

(i)	misappropriation of the stock in trade of the Father’s company:	$ 2,604,972.46
(ii)	damages caused by the passing off in respect of the Father’s company:	$ 4,614,200.00
(iii)	damages caused by the wrongful occupation of the property known as No. 6 Sharp Road East (“the No. 6 Property”):	$12,524,416.30
(iv)	damages caused by the wrongful occupation of the property known as 1st Floor, No. 15 Li Kwan Avenue (“the Li Kwan Avenue Property”):	$    447,442.60
(v)	damages caused by the failure to account for the rent collected or failure to make mortgage repayment from the collected rent in respect of 4 real properties of the estate (“the 4 Properties”):	$ 5,476,993.53
(vi)	payment of estate duty:	$ 831,120.00
(vii)	interests and expenses:	$ 6,834,103.80
	Total :	$33,333,248.69

10.  The Plaintiff has also produced various valuation reports in support of the claims in items (iii), (iv) and (v) above.  As mentioned in the Judgment, these reports were not made available to Mr Recorder Yu in the last application.

11.  On 20 May 2011, the 1^st Defendant gave an undertaking to this court that he would not dispose the sale proceeds of the No. 4 Property up to the amount of $33,333,248.69 until the determination of the present application.  I understand that the 1^st Defendant’s share of the proceeds is now stake-held by a solicitors’ firm acting for the 1^st Defendant in the sale of the No. 4 Property.

(i)   The legal principles

12.  The amount of the protection under the injunction had already been adjudicated upon by Mr Recorder Yu.  However, it is trite law that where there is simply an exercise of discretion in an interlocutory proceeding, there may be no final determination of an issue giving rise to a res judicata.  The order of Mr Recorder Yu also provides for liberty to apply.  Nevertheless, in order to avoid re-argument and re-litigation of the issues already dealt with by the court, the court retains the power to prevent such abuses.  In particular, if an issue has been distinctly raised and decided in an early application, the court should be reluctant to deal with the issue again unless there is material change in the circumstances of the case.  Further, the position may be different if the decision is made on the adequacy of the material rather than on the merits of the application.  In the case of the former, the court may be more willing to revisit the issue (see: Hong Kong Civil Procedure 2012, vol. 1, §18/19/11).

(ii)   The hearing before Mr Recorder Yu

13.  In considering whether the court should entertain the Plaintiff’s application for variation, it is necessary for me to know exactly what happened in the previous hearing.  In particular, Mr Recorder Yu, in the Judgement, referred to a sheet of calculation produced by Mr Chan, the Plaintiff’s counsel who appeared in both hearings, which came up with a revised figure of $13,707,675.12.  Unfortunately, such document cannot be located in the court file and Mr Chan has also misplaced his own copy.  Hence, there was an adjournment of the hearing to enable the parties to obtain the transcript of the hearing before Mr Recorder Yu and to file further evidence in respect of the possible entitlement of the 1^st Defendant under the estate of the Father.

14.  After perusing the transcript, I find that Mr Recorder Yu had raised certain queries as to the Plaintiff’s claims under items (i), (ii), (vi) and (vii) in the morning session of the hearing.   As a result of such queries, Mr Chan submitted the revised particulars of damages in the afternoon session reducing the amount of the Plaintiff’s claim to the sum of about $13.7 million ($13,707,675.12 according to the Judgement dated 14 January 2011) for the purpose of the Mareva injunction application.

15.  Although this document is now missing, from the transcript of the hearing, I do have a rough idea about the revised figures supplied by Mr Chan which can be listed out as follows:

(i)	misappropriation of the stock in trade of the Father’s company:	$ 1,000,000.00 *
(ii)	damages caused by the passing off in respect of the Father’s company:	abandoned
(iii)	damages caused by the wrongful occupation of the No. 6 Property:	$11,872,000.00
(iv)	damages caused by the wrongful occupation of the Li Kwan Avenue Property:	$     442,000.00
(v)	damages caused by the failure to account for the rent collected or failure to make mortgage repayment from the collected rent in respect of the 4 Properties of the estate:	$ 393,675.12 * ^
(vi)	payment of estate duty:	abandoned
(vii)	interests and expenses:	abandoned
	Total :	$13,707,675.12

*    being approximate figures

^     no clear figure can be seen in the transcript but it can be calculated by deducting the other items from the grand total                          

(iii)    The assessment of the quantum of the protection

16.  In my judgment, the court should not take into account the claims under items (ii), (vi) and (vii) in assessing the quantum of the protection.  For the purpose of the application for the Mareva injunction, the Plaintiff had already conceded those claims before Mr Recorder Yu.  In such circumstances, the Plaintiff should not be allowed to re-argue the same issues before another judge.  Further, there is no change of circumstances and the Plaintiff has not adduced any new evidence to substantiate these claims.  Hence, I would ignore these items of claim in assessing the quantum of the protection.

17.  For the claim under item (i), the Plaintiff had conceded the quantum of the claim to about $1,000,000 for the purpose of the application in the last hearing.  For the same reasons given in the preceding paragraph, I would assess the quantum of the protection based on such figure.

18.  In my judgment, the only items which worth re-consideration by the court are items (iii), (iv) and (v), which relate to losses resulting from the wrongful occupation of the No. 6 Property and the Li Kwan Avenue Property and failure to account for the rent collected in respect of the 4 Properties of the Father’s estate.  From the Judgment, it was clear that the valuation reports supporting these claims were not placed before Mr Recorder Yu, and as a result the learned judge assessed the quantum of the protection without the benefit of such evidence.  According to latest particulars of damages, the total amount of the alleged damages of these three items is $18,448,852.43.  Coupled with the loss resulting from the alleged misappropriation of the stock in trade of the Father’s company ($1,000,000), the total amount of the Plaintiff’s claim should be in the region of $20,000,000 for the purpose of the present application.

19.  Despite that the Plaintiff has now produced valuation reports to substantiate the claim for these losses, I do not think that the court should offer full protection to the Plaintiff in the sum of $20,000,000 for the following reasons.

20.  Firstly, even if the 1^st Defendant had intermeddled with the properties of the Father’s estate, the Plaintiff may not be able to recover the full losses as particularised by him.  For example, in respect of the loss of rental income of the 4 Properties or the loss resulting from the failure to make mortgage repayment from the collected rent, the Plaintiff has to show by credible evidence that these properties were in fact rented out and the 1^st Defendant had collected the rent from the tenants.  As observed by Mr Recorder Yu in page 25 of the transcript, the learned judge doubted whether the evidence adduced by the Plaintiff was sufficient for the purpose of such claim.  Further, the 1^st Defendant disputes the valuation reports of the Plaintiff which may also affect the quantum of these claims.

21.  Secondly, the 1^st Defendant does have arguable defences for some of the Plaintiff’s claims.  For example, in respect of the Li Kwan Avenue Property, the 1^st Defendant claims that he was entitled to occupy the property without any consideration under an informal family arrangement.  If the court eventually accepts the 1^st Defendant’s evidence in this regard, the Plaintiff would not be able to recover any loss relating to the occupation of such property.  For the No. 6 Property, the 1^st Defendant claims that the property had been left vacant for a long time and he had not wrongfully occupied the same.  If the court eventually rules these issues in favour of the 1^st Defendant, the quantum of the Plaintiff’s claim would be substantially reduced.

22.  Thirdly, if the Plaintiff succeeds in his claim, whatever damages recovered by the Plaintiff would become part of the Father’s estate.  Being one of the beneficiaries under the Father’s estate, the Plaintiff should be entitled to a share of such estate.  At this stage, there is serious dispute between the parties as to the exact quantum of the 1^st Defendant’s entitlement, in particular, there are issues as to whether the 1^st Defendant is entitled to a share of one-sixth or one-twelfth of the estate, and whether the Plaintiff was in breach of duty as the administrator of the estate in selling the No. 6 Property at a substantial undervalue in 2003.  Although it is very difficult for the court to resolve all these issues at this stage, the court, as observed by Mr Recorder Yu in the Judgment, should take into account the 1^st Defendant’s possible entitlement to a share of the estate in assessing the quantum of the protection.

23.  Fourthly, there has been considerable delay on the part of the Plaintiff in the prosecution of the present action.  The Writ was issued in 2001 and the action has been dormant for a substantial period of time.  The Plaintiff seeks to justify part of the delay by attributing fault to the 1^st Defendant in initiating various actions or applications, yet it is difficult to see how a lapse of some 10 years can be justified.  Although Mr Recorder Yu found that there was no delay on the part of the Plaintiff in seeking the Mareva injunction which might jeopardise the granting of the entire injunction, the court should, in my judgment, take into account the delay in the prosecution of the whole action in determining the amount of the protection under the Mareva injunction.

24.  Having considered the aforesaid matters, I would increase the protection under the Mareva injunction to the sum of $10,000,000.  This would not be the full protection as sought by the Plaintiff, but I think that it is a fair figure having taken into account the possible defences of the 1^st Defendant, the possible entitlement of the 1^st Defendant to a share in the Father’s estate and the delay in the prosecution of the claim.  On the other hand, with the protection fixed at such amount, the 1^st Defendant is able get back about $23,000,000 of his share of the proceeds of sale of the No 4 Property now stake-held by the solicitors’ firm.  As the 1^st Defendant is very much a retired person with no substantial need for financial resources, I do not think that the Mareva injunction in the amount of $10,000,000 would cause him too much inconvenience.

25.  After the court arrives at a proper figure for the protection, both parties agree that the Mareva injunction should be discharged upon the payment of such sum of money into court.  Further, the issue of costs of the variation application may depend on the final quantum of damages awarded by the court after the trial of this action, and so the question of costs should be reserved at this stage.  I therefore make the following order:

(i) the 1^st Defendant do pay the sum of $10,000,000 into court within 21 days;

(ii) upon the said payment into court, the Mareva injunction against the 1^st Defendant be discharged and the 1^st Defendant be released from any previous undertakings given by him to the court to hold the proceeds of sale of the No. 4 Property;

(iii) the costs of the variation application dated 5 May 2011 be reserved; and

(iv) there be liberty to apply.