JOHN ROBERT LEES AND OTHERS v. SHEE YIP SHING

HCCW 373/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES (WINDING-UP) NO. 373 OF 2002

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D E C I S I O N

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1.  This is an application made by Shee Yip Shing (“the respondent”) on 12 May 2005, seeking an order to vary an ex parte injunction granted by Reyes J on 2 February 2005 prohibiting the disposal of assets in Hong Kong.

2.  The property and assets covered by the ex parte injunction related to the balances in the specified bank accounts with seven banks in Hong Kong.  The ex parte injunction was to remain in force up to and including the return date on 4 February 2005.

3.  At the return date on 4 February 2005, I ordered that the ex parte injunction is to be continued pending the determination of two summonses issued by the liquidators of the company in question , Promail International (HK) Limited (“the Company”), on 2 February 2005.

4.  The liquidators have applied under section 197 of the Companies Ordinance, Cap.32 to take into their custody or control the property and things in action to which the Company is or appears to be entitled, and for an order for continuation of the ex parte injunction.  The two summonses were set down to be heard together with one day reserved, and the hearing is to take place on 3 August 2005.

5.  I gave directions at that hearing on the filing of evidence in opposition by the respondent and evidence to be filed in reply by the liquidators.  To date, the respondent has not filed any evidence in opposition.  The purpose of the respondent’s present application to vary the ex parte injunction is to allow him to withdraw funds from the bank accounts covered by the injunction to pay for living expenses and his legal costs in resisting the liquidators’ summonses.  His application is opposed by the liquidators.

6.  The Company was ordered to be wound up on 10 July 2002 and on the same day the Official Receiver appointed the liquidators as provisional liquidators.  On 21 March 2003, I granted a regulating order under section 227A and the liquidators were appointed.

7.  From 22 November 2000, the respondent was appointed a director of the Company, he had not been a shareholder.

8.  On 12 January 2001, the respondent and two others were charged in the magistrates’ court with conspiracy to defraud.  In the consolidated charge, it was alleged that the respondent and three others had conspired together and with others unknown to defraud such persons who might be induced to invest with the Company by false representations.

9.  On 19 December 2000, Deputy Judge Toh granted a restraint order under the Organised and Serious Crimes Ordinance, Cap.455.  As a result, HK$48.5 million was restrained in the accounts of various banks.

10.  The trial of the respondent and the other three accused took place late last year.  The respondent was acquitted and the others were convicted.  As a result of his acquittal, the respondent made a request to the Department of Justice for the discharge of the restraint order regarding his assets.  As the Department of Justice saw no further ground of maintaining the restraint order in respect of the respondent’s assets, a consent summons was signed.  This gave rise to the ex parte injunction sought and obtained by the liquidators on 2 February 2005.

11.  In the admitted facts dated 7 December 2004 under section 65C of the Criminal Procedure Ordinance, Cap.221, the respondent admitted two things:

(1)	a total of HK$0.95 million in cash was withdrawn on three occasions from the Company’s bank accounts and cash was paid over to him at the bank; and
(2)	he had opened an account with the Bank of East Asia Limited on 24 October 2000 and put in HK$2 million, having told the bank manager that the money belonged to the Company.  He later withdrew HK$2 million.

12.  To date, the liquidators have been able to identify payments of HK$5,378,316.00 as payments made from the Company’s bank accounts to the respondent’s bank accounts from 19 April 2000 to 9 December 2000.  Of these sums of money, HK$1.95 million was paid to the respondent by way of cash cheque.  Of the 15 payments so identified by the liquidators,

(1)	one payment was made in April 2000, one in May 2000, two in October 2000, four in November 2000 and seven were made in December 2000;
(2)	nine payments were in the sum of HK$150,000.00 or above, and the total amount of these nine payments came up to just over HK$ 5 million.

13.  The liquidators believe that the funds in the respondent’s bank accounts are the property of the Company.  They are making a proprietary claim to these funds on behalf of the Company.

14.  The respondent has filed evidence in support of his application setting out his family circumstances.  He is living with his mother who is a housewife and two children aged 8 and 2.  He has filed a petition for divorce from his wife.  He is 33 years old and has been unemployed since early 2001.  He suffers from an illness and attends hospital for follow-up treatment.  He claims he is not able to work because of his illness.

15.  He was employed by the Company since early 1998 to late 2000.  He earned HK$135,000.00 to HK$145,000.00 a month, of which HK$15,000.00 was salary and the rest was bonus, commission or rebate.  During the period of his employment, he said he had accumulated regular and substantial savings.

16.  He set out the minimum living expenses for himself and his dependants at HK$19,600.00 a month and a breakdown of these was given.  He claims he has to borrow from relatives and friends in order to support his family.

17.  He applied for Legal Aid on 8 February 2005.  His application was refused on 14 April 2005.  Without drawing on his bank accounts, he said he would have no means to engage lawyers to resist the liquidators’ applications against him.

18.  He asserts that all the proceeds in his bank accounts belong to him beneficially, to the exclusion of the Company and all others.

19.  In his supplemental affirmation, the respondent listed his bank accounts.  There are seven of them and the balances in May 2005 are as follows: in respect of his one account in Shanghai Commercial Bank Limited, the credit balance stood at about HK$1.3 million odd; for his three bank accounts in the Hang Seng Bank Limited, there is a nil balance for all of them; of his two bank accounts in HSBC, he has an aggregate balance of about HK$779,000.00 odd; he has opened two new accounts at DBS Bank (Hong Kong) Limited, and the total balance is less than HK$2,000.00.  The aggregate bank balances in the accounts as disclosed by the respondent come up to about HK$2 million.

20.  There is no mention in his affirmations of his accounts in the following banks covered by the ex parte injunction, namely, the Standard Chartered Bank, the Bank of East Asia, the Bank of China and the Yien Yieh Commercial Bank.  I note however that in the respondent’s summons for variation, he has not sought withdrawal from these other bank accounts.

21.  According to the evidence adduced by the liquidators, very substantial deposits and withdrawals were made in the respondent’s bank accounts in the latter half of 2000.  The total balances in the accounts with the Standard Chartered Bank in October 2001 amounted to HK$460,000.00 odd, and, as I have mentioned, the respondent did not account for this in his supporting affirmations.

22.  The liquidators say that notwithstanding the remuneration received by the respondent from the Company as an employee, the majority of the funds in his bank accounts would appear to originate from the funds of the Company paid by investors in the investment scheme run by the Company and do not belong to the respondent beneficially.

23.  If the variation were allowed, the respondent would be permitted to withdraw living expenses of about HK$60,000.00 (for three months) in all up to the date of adjourned hearing.  Having considered the amount of the fees he has claimed that would be spent on legal expenses, the nature of the applications for which legal advisers are to be engaged, the work done by the legal advisers and to be done by them, I am inclined to think that the amount of legal expenses claimed by the respondent is on the high side.  In my view, HK$80,000.00 should be sufficient to cover reasonable legal expenses in this application and legal expenses to be incurred in resisting the liquidators’ applications.  That being the position, if I were to allow a variation, a total sum of HK$140,000.00 would be released from the ex parte injunction.  This is a modest sum and would represent about a month’s remuneration received by the respondent from the Company.

24.  Further, on my above analysis, of the amounts identified as payments from the Company, about HK$5 million out of the HK$5.3 million odd would appear unlikely to have been received due to remuneration for services rendered.  That would leave about HK$300,000.00, which might be attributable to the respondent’s remuneration for the services he provided to the Company.

25.  I think it appropriate in these circumstances to exercise my discretion to vary the ex parte injunction.

26.  I make the following orders:-

The ex parte injunction granted on 2 February 2005 and continued on 4 February 2005 is to be varied as follows:
(a)	the respondent be at liberty to withdraw from his bank accounts as specified in his summons, the periodical sum of HK$19,600.00 a month, until after the determination of the liquidators’ summonses filed on 2 February 2005 and scheduled to be heard on 3 August 2005; the first payment of which is to commence within seven days of this order and thereafter on the 1st day of each month; and
(b)	the respondent be at liberty to withdraw from his bank accounts as specified in his summons, the total sum of HK$80,000.00 towards payment of his legal expenses in respect of the liquidators’ said summonses and of the present application.

27.  Save that the liquidators’ costs of this application are to be paid out of the assets of the Company, I make no order as to costs.