JEN KIT JOSEPHINE, THE ADMINISTRATRIX FOR THE ESTATE OF JEN FRANK CHIA HSIANG, THE DECEASED v. CHAN SAU WAI SHIRLEY

HCA 346/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 346 OF 2014

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D E C I S I O N

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Introduction

1. I have before me an application by the defendant by summons dated 19 June 2014 (“the setting aside application”) seeking (inter alia) to set aside (i) a Mareva injunction granted by Toh J, and (ii) a further order made by the learned judge compelling the defendant to make disclosure of assets and documents, both orders being made upon the plaintiff’s ex parte applications on 28 February 2014 (hereinafter referred to as “the Mareva Injunction Order” and the “Disclosure Order” respectively, and collectively “the Orders”).

2. The Mareva Injunction Order was continued by Deputy High Court Judge Wilson Chan on 14 March 2014 and further continued by Suffiad J on 28 March 2014, on both occasions in the absence of the defendant.

3. The evidence before me consists of:

(1)   the plaintiff’s first affirmation filed on 28 February 2014 in support of the ex parte applications made to Toh J;

(2)   the defendant’s first affirmation filed on 19 June 2014 in support of the setting aside application;

(3)   the plaintiff’s second affirmation filed on 31 July 2014 in opposition to the setting aside application; and

(4)   the defendant’s second affirmation filed on 25 September 2014 in reply to the plaintiff’s second affirmation.

4. In addition, I have before me the skeleton submissions of Mr Enzo W H Chow for the plaintiff dated 28 February 2014 placed before Toh J in support of the ex parte applications.

5. Mr David Tang (for the defendant) contends that the Orders should be set aside on the ground of material non‑disclosure as well as on the ground that the plaintiff has failed to demonstrate a good arguable case in the substantive sense.  Mr Tang further contends that the Disclosure Order is not even a “disclosure order ancillary to an injunction order” but a “discovery order” which should not have been applied for on an ex parte basis in the first place and must be set aside.

6. Before I consider Mr Tang’s arguments in support of the setting aside application, I shall give a brief outline of the facts of the present case.

Background facts

7. The plaintiff is the administratrix of the estate of the late Jen Frank Chia Hsiang (“the Deceased”), who passed away on 25 January 2010 at the age of 91 in Shanghai, PRC, letters of administration of the Deceased’s estate having been granted to the plaintiff by the High Court of the HKSAR on 28 September 2012.

8. The Deceased married the late Madam Chou, Jen Hsin‑Ya, Grace (“Madam Chou”) on 19 December 1947.  They had one son (namely, Jen Franklin Yuen Yuen (“Franklin”)), born in 1949, and one daughter (namely, Jen Kit Josephine, ie the plaintiff) born in 1950.

9. The Deceased was a businessman in Hong Kong and Shanghai, and met the defendant in about 1979.  Soon afterwards, they developed an intimate relationship.  According to the plaintiff, that relationship was a short one.  On the other hand, according to the defendant, her relationship with the Deceased was a continuous one save in relation to a brief period of about two years in the late 1980s, during which time the defendant went to the United States and got into a short term marriage with another man.  After her divorce with that man, the defendant returned to Hong Kong in around 1989 or 1990 and resumed her relationship with the Deceased.  The defendant also says that her relationship with the Deceased was well known to Madam Chou, Franklin and the plaintiff, and was a source of tension within the Jen family.

10. According to the defendant, she and the Deceased became partners in a garment business in around 1992 and their business had five very successful years until 1997.

11. In the meantime Madam Chou suffered from a stroke and became seriously illness in about 1995.  The defendant says that the plaintiff and Franklin blamed the Deceased’s relationship with the defendant for their mother’s illness, and the relationship between the Deceased and Franklin/the plaintiff got worse since 1995 and broke down completely after the death of Madam Chou in May 1998.  On the other hand, according to the plaintiff, the relationship between the Deceased and Franklin/the plaintiff had always been amicable.

12. Apparently, in or about February 1997 the Deceased moved out of his matrimonial home in Hong Kong and started to live with the defendant in Shanghai.

13. On 2 September 1999, the Deceased married the defendant in Vancouver, Canada.  The plaintiff disputes the validity of this marriage, on the ground that the Deceased lacked mental capacity to enter into the marriage.  I shall come back to the topic of the Deceased’s mental capacity later in this decision.

14. In 1995, the Deceased was diagnosed to be suffering from the early stage of Parkinson’s Disease.  By 2000 the Deceased was diagnosed to be in the late stage of Parkinson’s Disease, and since January 2001 the Deceased had been hospitalised in 上海市徐汇区永嘉医院/上海市徐汇区天平医院 in Shanghai (“the Shanghai Hospital”) until he passed away on 25 January 2010.

The Deceased’s mental capacity

15. In support of the ex parte applications, the plaintiff relied upon a medical report prepared by Dr Wong Chung Kwong (“Dr Wong”) dated 19 September 2013.  For the purpose of the present application, the following points arising from Dr Wong’s report are of note:

(1)   The opinions expressed by Dr Wong were stated to be “preliminary opinions” only.

(2)   For the purpose of preparing the report, Dr Wong had considered (inter alia) various medical certificates issued by doctors of the Shanghai Hospital, including in particular two certificates of Dr Tsui dated 2 February 2007 and 29 May 2007 respectively.  It is apparent that Dr Wong had never treated or examined the Deceased himself.

(3)   According to the said medical certificates of Dr Tsui, by 2000 the Deceased was in the late stage of Parkinson’s Disease and by 2001 he had probably been reduced to a “vegetative” state.  Dr Wong noted that the Deceased required continuous nursing care, was totally bed ridden, not able to walk and had lost his ability to eat.  He needed care even regarding the most basic biological functions.  He needed tube feeding, was on long term catheterization of the bladder, and had bed sores.  He also had sinus tachycardia of the heart.

(4)   Dr Wong expressed the following opinions on the level of probability that the Deceased lacked mental capacity during the following periods: 

(a)   from  1995/1996 to February 1997: possible to probable;

(b)   from February 1997 to the time of his re‑marriage in October 1999: probable;

(c)   from October 1999 to the time when the Deceased became vegetative in early 2001: highly probable; and

(d)   from early 2001 to his death in 2010: beyond any reasonable doubt.

(5)   Dr Wong stated that the salient question was not whether the Deceased had lost his mental capacity (it was clear that the Deceased had lost his mental capacity from early 2001 until his death in 2010), but when the mental incapacity started.  The available facts indicated that at some stage during the period from 1995 to 2001, he became an incapacitated person.  It was probable that “he lost his mental capacity in the early part of that four or five years and indeed it was possible to probable that he was a mentally incapacitated person throughout that period”.

(6)   Dr Wong also stated that he would probably be able to provide “definitive” professional psychiatric opinions about the Deceased’s mental conditions when all “medical records and reports as well as other documents that are likely to shed light on the late Mr Jen’s mental and physical conditions during the period 1995 to 2001” became available.

The Orders

16. On the basis that the Deceased had become mentally incapacitated sometime during the period from 1995 to 2000, the plaintiff, in her capacity as the administratrix of the estate of the Deceased, challenges a number of transactions entered, or purportedly entered, into by the Deceased since 1997/1998.  The plaintiff alleges that the defendant has misappropriated, intermeddled with and/or unjustly had, received, used and/or dealt with the Deceased’s assets.  It may be noted that some of the transactions complained of took place prior to 2001 while others took place in or after 2001.

17. The plaintiff also estimates that the total value of the Deceased’s assets as at 2014 (subject to valuation) is in the region of HK$50 million.  It would appear that in making this estimate, the plaintiff has included assets which she alleges were wrongfully misappropriated or transferred away from the Deceased and which form the subject matters of the transactions complained of by her in this action.

18. On 28 February 2014, the plaintiff issued the writ herein, and made the ex parte applications to Toh J. The learned judge granted a Mareva injunction against the defendant restraining her from disposing of, dealing with or diminishing her assets within Hong Kong (including in particular certain real properties in Hong Kong) up to the limit of HK$50,000,000.  The Mareva Injunction Order also required the defendant to inform the plaintiff in writing “at once of all her assets of an individual value of and whether solely or jointly owned, giving the value, location and details of all such assets”, and confirm such information in an affirmation within 14 days after the service of the order on her.

19. In addition, under the Disclosure Order, the defendant was required, within seven days from the date of the order (28 February 2014), by affirmation/affidavit to “fully and frankly disclose and produce”:

“(a) a complete list of the assets of [the Deceased] including but not limited to his real properties, cash in banks, stocks, companies shares and etc. in Hong Kong, China and elsewhere, during the period from 1995 up to this date;

(b) a complete list of the assets of the Defendant, including but not limited to [her] real properties, cash in banks, stocks, companies shares and etc. in Hong Kong, China and elsewhere, during the period from 1995 to this date; and

(c) a complete list of medical documents, including but not limited to medical notes, records, reports, certificates, payment receipts, x‑rays films and etc. issued by doctors in Hong Kong, China and elsewhere, during the period from 1995 to the date of the death of [the Deceased]”.

Irregularities and problems on the face of the Orders

20. It is apparent that there are serious departures from the standard form of Mareva injunction prescribed by Practice Direction ‑ 11.2, in the following aspects:

(1)   The standard form contains an exception to the injunction permitting the defendant to spend a specified sum per week towards his ordinary living expenses and a specified sum per week (or a reasonable sum) on legal advice and representation.  However, the Mareva Injunction Order in the present case makes no provision for the defendant’s living or legal expenses.  Mr Enzo Chow’s explanation for this omission is that:

“[at] the time of the application for the Injunction Order, there was simply no information about the expenses of D at all… There was no way for P to know whether it is necessary to release any fund to D as her living expenses at all”

(see paragraphs 25 and 26 of the skeleton submissions of the plaintiff dated 28 October 2014).  In my view, this is a wholly inadequate explanation.  The inadequacy is compounded by the fact, as admitted by Mr Enzo Chow, that Toh J’s attention was not drawn specifically to the aforesaid omission in the draft Mareva injunction order placed before her, as required by paragraph 3 of the said Practice Direction:

“Where the order sought deviates in a material respect from the standard form this should be drawn to the attention of the judge hearing the application.”

No explanation has been given for this failure to comply with the Practice Direction.

(2)   Where the defendant is ordered to make disclosure of information regarding his assets in aid of or ancillary to a Mareva injunction, the standard form provides that the defendant should be required to disclose only those assets with an individual value above a specified monetary sum, for the obvious reason that a defendant cannot reasonably be expected to disclose every single asset belonging to him whatever its value.  This safeguard is missing from the Mareva Injunction Order in the present case.  No explanation has been proffered by Mr Enzo Chow for the failure to include such limit in the Mareva Injunction Order.  Further, Toh J’s attention was not drawn specifically to this omission in the draft Mareva injunction order placed before her, as required by paragraph 3 of the said Practice Direction.

21. In so far as the Disclosure Order is concerned, even if one assumes that the defendant was in possession of the type of documents referred to in sub‑paragraph (3) thereof and even if one further assumes that the plaintiff in her capacity as the administratrix of the estate of the Deceased was entitled to those documents, the plaintiff has not given any sufficient justification for seeking an ex parte order to compel their disclosure and production by the defendant, and I am unable to see why the plaintiff did not seek such order by way of an inter partes application.

22. The Disclosure Order also required the defendant to disclose and produce a complete list of her assets, without setting a minimum individual value of the assets to be disclosed.  Again, this made compliance with the order by the defendant extremely difficult, if not practically impossible.

Material non‑disclosure

23. Mr David Tang has raised a number of complaints under the heading of material non‑disclosure.  It is not necessary for me to consider all of them.  The following are, in my view, the most significant ones.

24. First, although the plaintiff placed heavy reliance on Dr Wong’s evidence in the ex parte applications, it was not disclosed to Toh J in either the plaintiff’s first affirmation or skeleton submissions dated 28 February 2014 placed before the learned judge that Dr Wong’s opinions were only “preliminary” ones.  This omission is compounded by the fact that, while Dr Wong apparently relied on the medical certificates of Dr Tsui of the Shanghai Hospital in forming his opinions, there was no mention of two earlier medical certificates prepared by Dr Yu of the Shanghai Hospital, who apparently took care of the Deceased during the period from January 2001 to May 2006. The two medical certificates of Dr Yu were dated 3 September 2003 and 30 March 2004 respectively.  The latter certificate stated that the Deceased “至今卧床不能行走，但神智尚清楚”, and could lend support to an argument that the Deceased was still of sound mind as at the date of that certificate.  For the sake of completeness, I should mention that the name of the hospital appearing on Dr Yu’s medical certificates is slightly different from that appearing on Dr Tsui’s medical certificates, but the evidence shows that they refer to one and the same hospital with the same address.

25. The defendant argues that, given the plaintiff had access to Dr Tsui’s medical certificates which enabled Dr Wong to prepared his medical report dated 19 September 2013, she must also had access to Dr Yu’s medical certificates but chose not to disclose them to Dr Wong or to Toh J at the ex parte applications.  This allegation was raised directly in a letter dated 30 April 2014 from the defendant’s solicitors (Tsang, Chan & Woo) to the plaintiff’s solicitors (Christine M Koo & Ip).  The plaintiff has not, either in reply letters from her solicitors or in her second affirmation, denied that she had access to or know about Dr Yu’s medical certificates.

26. While it can be argued that the disclosure of Dr Yu’s medical certificates would not have affected the decisions made by Toh J, it is trite that the test of “materiality” is whether the fact not disclosed is relevant to the “weighing operation” that the court has to make in deciding whether or not to grant the order: see Gee QC, Commercial Injunctions, 5^th Edn, paragraph 9.002.  In the present case, the mental condition of the Deceased as at the dates of the transactions under challenge was the central issue going to the validity of the plaintiff’s complaints.  The date on which the Deceased became mentally incapacitated would be relevant to the question of which transactions could properly be challenged by the plaintiff and thus relevant to the monetary limit of the Mareva injunction if one was to be granted.

27. Hence, any relevant evidence which suggests that the Deceased might still be of sound mind as at 30 March 2004 was something which ought to have been drawn to the attention of the judge dealing with the ex parte applications in the present case.

28. Second, on the issue of risk of dissipation of assets, one of the matters relied upon by the plaintiff in the ex parte applications was that the defendant sold two properties situated in the PRC on 14 September 2012 and 27 March 2013 respectively in the following circumstances:

(1)   the plaintiff and Franklin applied to the People’s Court in Shanghai, PRC, to institute legal proceedings against the defendant on 22 March 2012 seeking to recover certain assets in the PRC allegedly belonging to the Deceased’s estate;

(2)   the PRC Court approved the application on 28 May 2012;

(3)   the People’s Court issued a notice on 2 August 2012 informing the parties to attend the first hearing on 17 September 2012; and

(4)   the People’s Court issued a further notice on 7 November 2012 informing the parties to attend the second hearing on 18 March 2013.

29. It was contended on behalf of the plaintiff that the above chronology showed a risk of dissipation of assets by the defendant after she had knowledge of legal proceedings commenced against her.  What the plaintiff did not inform Toh J, however, was the fact that the aforesaid action brought by the plaintiff and Franklin against the defendant had in fact been dismissed with costs by the People’s Court in Shanghai on 26 March 2013 (ie one day before the sale of the second property on 27 March 2013).

30. In my view, a fair and full picture was not presented to Toh J when the plaintiff relied upon the sale of the two properties in the aforesaid circumstances as evidence of a risk of dissipation of assets by the defendant.

31. I bear in mind that on the issue of risk of dissipation of assets, the plaintiff also relied on other matters, including:

(i)   a sale of a property in Shanghai by the defendant to her sister on 15 May 2007 allegedly at a below‑market price after the Deceased had been sued by a third party on 6 April 2007 in the PRC court in relation to an inheritance matter (which action was defended by the defendant as agent for the Deceased); and

(ii)   an allegation that the defendant had used a fake PRC identity card to purchase two properties in Shanghai in 2001 (which allegation is denied by the defendant). 

It should be noted, however, that the above matters took place long before the date on which the present ex parte applications were made to Toh J.  The alleged dispositions referred to in paragraph 28 above would, it seems to me, be more relevant to an assessment of risk of dissipation of assets by the defendant at the time of the ex parte applications.  As mentioned above, I consider that the plaintiff has failed to put before the learned judge a fair and full picture relating to those dispositions.

32. In view of the aforesaid matters, I consider that the defendant has made out a case of material non‑disclosure by the plaintiff.  The court still has a discretion not to discharge the ex parte orders, or re‑grant the orders immediately after their discharge.  Nevertheless, Mr Enzo Chow has not made any submission on these possibilities, concentrating instead on the contention that there was no material non‑disclosure.

33. Having regard to the significance of the matters which the plaintiff failed to disclose to Toh J, and also the apparent irregularities and problems on the face of the Orders, I consider that the ex parte orders ought to be discharged immediately without any re‑grant.

Disposition

34. Accordingly, I order that the Orders made by Toh J on 28 February 2014, as subsequently continued by Deputy High Court Judge Wilson Chan on 14 March 2014 and by Suffiad J on 28 March 2014, be discharged immediately.  I also make an order nisi that the plaintiff shall pay to the defendant her costs of the present application, to be taxed if not agreed.

Postscript

35. There are two matters which I wish to mention by way of concluding remarks.

36. First, practitioners are reminded to comply strictly with all relevant provisions of Practice Direction – 11.2 when making applications for Mareva injunctions and Anton Piller orders, including the requirement to use the standard forms appended to that Practice Direction, which contain standard provisions for the reasonable protection of the defendants.  The importance of using the standard forms, containing the protective provisions, has to be understood in view of (inter alia) the following considerations:

(i)  the draconian nature of a Mareva injunction or Anton Piller order;

(ii)  applications for such orders are normally made ex parte without notice to the defendants; and

(iii)  such applications are often presented to the judge at very short notice who would have little time to read the documents prior to the hearing. 

Accordingly, the judge would necessarily have to rely to a large extent on practitioners complying with all relevant provisions of Practice Direction – 11.2, secured in the knowledge that the built‑in protections provided for in the standard forms would be available to the defendants.  For this reason, any material deviations from the standard forms must be specifically drawn to the attention of the judge hearing the applications, as required by paragraph 3 of that Practice Direction.

37. Second, the defendant has not, as a matter of fact, complied with any part of the disclosure obligations contained in the Orders.  When this matter was raised with the defendant’s counsel at the hearing, the initial response was that the Orders were ex parte ones and they were being challenged by way of inter partes summons.  It should be clearly understood that any order of the court, be it made ex parte or inter partes, carries the same legal effect and must be fully complied with.  If a defendant who has been served with an ex parte order considers that there are good or justifiable grounds for suspending the operation of the order (or any part thereof) pending the hearing of an inter partes summons to vary or discharge it, in my view the proper course to adopt is to seek the plaintiff’s consent for a temporary suspension of the order or, in the absence of such consent, make an urgent application, with notice to the plaintiff or his solicitors, to the court for temporary relief.  The court will do what is just and reasonable in all the circumstances, and also take into account any unreasonable conduct on the part of the plaintiff or the defendant when deciding on the question of costs of the application.  In this connection, I would remind practitioners of the duty of the parties and their legal representatives to assist the court to further the underlying objectives of the Rules of the High Court under Order 1A, rules 1 and 3 of those rules.