ANTHONY FRANK GILES v. CHUNG WAN KAM AND ANOTHER

1986, No. A4531

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. I have before me the plaintiff's application for the continuance of an injunction first granted by Wong, J. on 7th August. On the first occasion when the matter came. before me, the first injunction granted on that occasion was abandoned. The application today is-that I should continue an injunction "restraining the 1st and 2nd defendants from removing the profits or proceeds of sale of the said business from Hong Kong". The said business or businesses are two businesses currently being conducted on Cheung Chau Island, one is called the 'Village Tree Inn' and the other the 'Village Tree Restaurant'. I have left out of my reading of the original order the words "from removing themselves" which inadventently, as I am bound to say were included in it originally. So this is simply now an application for a Mareva injunction. I have to consider whether that injunction should be granted now on all the evidence before me. The original order was made ex parte and I believe on the application of basic principle, ex parte orders have to be regarded as provisional when made, subject to review when all the evidence is put before the court. That is the position today.

2. There are two questions which arise on any Mareva type injunction. The first is : Has the plaintiff a good arguable case in support of his basic premise. The basic premise here is that he is a 50% partner now in these two businesses and has a 50% interest in the proceeds of sale of those businesses and each of them if they were now sold. That is the first thing that has to be shown. The second is: Is there a real risk that in the absence of an injunction, the businesses will be sold and the proceeds of sale will be removed from the jurisdiction so that the claim would be barren.

3. Now there has been a great deal of evidence filed. It is perfectly apparent that when this matter reaches trial, there is going to be a headlong conflict of fact in many different directions. There is no way in which this court can start dealing with those matters at this junction. I can do no more than take a bird's eye view of certain basic essentials.

4. The story goes back to 1982 when the plaintiff and the 1st defendant went into partnership initially in relation to what became the Village Tree Inn, and it said on a 50:50 basis. There is an issue as to how much was put up by the plaintiff; he says $20,000, the 1st defendant says $15,000. It is common ground that that was the limit of the plaintiff's investment. There is a major issue as to whether or not that sufficed or whether the 1st defendant, as he claims, is entitled to ask for further capital' contributions to meet the expenses of setting the business up or not. Because it is again common ground that these requests were made to the plaintiff and were refused by him.

5. The business seems to have started some time in the summer of 1982. The 1st defendant says that he was devoting his services to it more or less whole time. The first dispute between the parties appears to have arisen in early 1983 when claims were made by the plaintiff, he says for accounts to be produced by the 1st defendant. The 1st defendant says that he did not produce any document but he asked for capital contributions and that was rejected. Certainly, no accounts of any sort were ever produced, as far as I can see, by the 1st defendant in relation to that business. That is how the matter was left in 1983, with the plaintiff being dissatisfied, he said, but still in a state of trust as far as the 1st defendant was concerned. There it stayed for two years, no further claims, no further contributions, no further pressure for account. Those factors, two years total inactivity which may well have been explicable by other matters with which the plaintiff was preoccupied at the time, do raise a formidable obstacle when the plaintiff comes to court and asks for equitable relief.

6. Then come 1985, two things happened: First, I think it was on the 20th April of that year, a visit was paid to Cheung Chau by the plaintiff's solicitor, the solicitor's wife and one or two others to see how things were going with the business. It was said that on that occasion, the 1st defendant promised to visit the solicitors' office in Hong Kong and produce accounts. Unfortunately, as it appears, he was then handed a business card which was already out of date and contained the wrong address. But the solicitor says it contains the right telephone numbers and that therefore he is wrong when he says that he rang up and could not get satisfaction. Certainly no accounts were produced.

7. Conversely, the defendant's story of this visit is that he then said that he had sold the business. He has produced in evidence, an agreement to sell the Inn business from himself to. . the 2nd defendant who had already by that date taken a lease of other premises in which she was conducting what was called the Village Tree Restaurant. He has produced documentation showing that he sold the business for $30,000 to the 2nd defendant payable by three instalments of $10,000 each: Those documents were inter partes only and in a case of this nature no doubt the authenticity of them will be closely examined at the trial hereafter. There can be less argument about the authenticity of the returns made under the Business Registration Ordinance. They purport to show that the 2nd defendant was admitted to the partnership on 5th of March, and that the 1st defendant retired from the partnership on 31st July. That, they say, is consequent to the sale. To those documents, the plaintiff retorts, that all that was done after the visit in April of 1985 when the defendants were well aware the plaintiff was taking further interest in his investment.

8. Anyhow following the visit in April, no documents were produced and nothing further was done, until June/July this year, when an advertisement appeared in the paper offering the two businesses for sale. The advertiser seems to have been the 2nd defendant. The prospect of the business being sold generated instant interest in the plaintiff, notwithstanding past inactivity. A friend of his, a Mr Yeung, was put onto the job of making enquiries. Mr Yeung masqueraded as an intending purchaser of the businesses. It is said that it takes deception to disclose deception, and that he was perfectly justified in going through the sort of enquiries that he made, putting forward a totally false case, as it turned out, to the 2nd defendant. That false case took a curious turn: It ended up with the drafting of a document in a solicitors' office and more significantly, with the delivery by Mr Yeung to the 2nd defendant of a cheque drawn by Mr Yeung of a company account in favour of the 2nd defendant for $26,000. The cheque only bore one signature, Mr Yeung's. When the 2nd defendant then took it to the bank to make enquiries about it, the bank at once said it was insufficiently signed. One has a very strong suspicion that this was never intended to be a genuine document at all.

9. That suspicion hardens when the 2nd defendant complained to Yeung on the telephone about what was done. He said : "Meet me outside the bank the next day". The next day was the 7th April. The writ in this matter was issued on 6th April, the same day as Mr Yeung was going through his masquerade at another solicitors' office and giving the cheque. Ex parte relief was granted on the 7th April and so that the 2nd defendant by presenting herself outside the bank was deliberately being set up, so I am told, so that the service of the order then made by Wong, J: on her could be effected. It is said that all that was justified in the interests of discovering the truth. I could not disagree more profoundly. I will say no more. What the outcome of this masquerade in the solicitors' office will be as between the 2nd defendant and Mr Yeung, I know not, I make no comment. But as a method of enquiry, I wish to do nothing to suggest that I approve it or anything other than condemn it.

10. So that one has a curious case in some respects of total neglect for years followed by great activity and overreaction, it seems to me, in the methods of enquiry which I find very distasteful.

11. In those circumstance, I have to come back to the two basic questions, now, in the light of that history. First it is said that the plaintiff still has his 50% interest in this business with, I suppose, collectively one or other of the defendants or both together. The allegation goes much beyond a contrived sale by the 1st defendant or a sale at an undervalue. In effect it is said that the situation remains exactly the same, and that the 2nd defendant is there as the nominee for the 1st.

12. I do not know how this evidence is going to turn out at trial. But it seems to me perfectly apparent that there are very considerable problems in the plaintiff's path in making out that allegation. Those problems in my judgment are too great for this Court to be able to say now that he has a good arguable case in support of that assertion.

13. Secondly as far as the real risk as removal is concerned, I am in a state of considerable doubt. The whole thing turns, first, upon the assertions by Mr Yeung whose character I have already described and whose credibility is suspect as a result. Secondly there is the advertisement of the two businesses which talked about emigration. This, the 2nd defendant said was totally untrue and was simply to drum up some customers. I am left with considerable doubt about the whole of that story that means that there is a risk which it is really impossible to assess at this moment. Therefore do not believe that the plaintiff has shown that a real risk exists sufficient for Mareva injunction purposes.

14. In those circumstances in my judgment, the injunction should not now be granted and the present injunction must be discharged.