LILY CHEUNG AND ANOTHER v. THE STANDARD CHARTERED BANK HONG KONG TRUSTEE LTD AND ANOTHER

IN THE COURT OF APPEAL

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J U D G M E N T

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Kempster, J.A. :

1. It falls to this Court to consider two appeals. The first is brought by Mr. Gordon Pan, the second defendant, from an order made by Bewley J., after consideration, on 10th November 1987 at the instance of the plaintiffs, Lily Cheung, claiming to be the widow of Jimmy Chao Ming Pan, deceased, and their infant son. The judge granted injunctions restraining the second defendant from withdrawing share certificates and kindred documents from the custody of Messrs. Mok Ying Kie, where they are said to be held to the order of Jimmy Pan and/or Gordon V. Ming Pan, and from disposing of the proceeds of sale both of the underlying securities and of other securities the certificates relating to which had earlier been held by the Hong Kong and Shanghai Banking Corporation to the order of Jimmy Pan Chao Midi and Gordon V. Ming Pan. He also made comprehensive orders for discovery, stayed pending the outcome of these appeals, in aid of the Mareva injunctions.

2. The second appeal, brought by the plaintiffs pursuant to Respondents' Notice, like the Notice of Appeal now amended impugnes another order made by the judge on the same occasion directing the speedy trial as a preliminary issue of what is the substantial matter of contention between the parties and staying the action meanwhile. The Notice in question also identifies considerations apt to support the grant of the injunctions.

3. These well researched and argued appeals derive from the terms of a consent order made by Nazareth J. on 22nd June 1987 in a Probate action of which the distinctive number was 1984 No. 8. It provided that the Chartered Bank Hong Kong Trustee Ltd, the first defendants in the instant proceedings, should continue to act as executors and trustees of the will of Jimmy Chao Ming Pan dated 18th August 1977 the validity of which, subject to provisions for the distribution of assets comprised in his estate, was confirmed. What thereafter became the matter of controversy-between the plaintiffs and the second defendant was whether the valuable securities now the subject of the injunctions constituted part of the estate of Jimmy Chao Ming san who had died on 26th January 1984.

4. On 11th September 1987 the plaintiffs both issued a writ claiming against the two defendants a declaration that these securities did form part of such estate and successfully applied A parte for injunctions inhibiting the transfer of material assets. At an inter partes hearing held an 22nd September an order in like term was made without opposition. However, considering the ambit of the relief so granted inadequate the plaintiffs, again successfully, sought more comprehensive orders from Bewley J. on 10th November 1987.

5. The second defendant seeks the discharge of these wider injunctions and orders as well as an inquiry as to damages under the plaintiffs' undertaking. Alternatively he invites this Court so to vary them as to reflect the provisions for distribution made by Nazareth J.; to limit injunctions relating to the proceeds of sale of securities formerly held by the Hong Kong and Shanghai Bank to assets within the jurisdiction and to delete certain other provisions. In the further alternative he sought an order for the provision by the plaintiffs of security to fortify their undertaking as to damages but, since Mr. Ching, for the second defendant, has not pressed for such an order I do not propose to make any further reference to it.

6. The second defendant's grounds of appeal are that the plaintiffs failed to discharge the onus of proof resting on them in relation to the relief sought and granted and that the judge erred in law in this and a number of other respects. For their part the plaintiffs seek the discharge of the order for trial of a preliminary issue and a stay, on the grounds that it would entail no saving of time or costs and was, in any event, premature.

7. The Mareva injunction is a well-recognised remedy under the law of Hong Kong which allows the courts to prevent dealings with assets in circumstances where there is a good arguable case that a plaintiff will recover final judgment against a defendant for a certain sum and some grounds for thinking that he has assets within the jurisdiction of which, if not restrained, he may so dispose as to render the judgment barren. I cannot think that when purporting to apply the test "a serious issue to be tried" Bewley J. was in fact applying any less stringent standard. This remedy is available against third Parties and, having regard to the provisions of section 21L(3) of the Supreme Court Ordinance, against a defendant whether or not domiciled, resident or present within the jurisdiction. Third Chandris Shipping Corporation v. Unimarine S.A.⁽¹⁾ at p. 668; Ninemia Maritime Corporation v. Trave⁽²⁾ at p. 1417; Advance Finance Ltd. v. Pang & Ors⁽³⁾. Discovery and other ancillary relief may be ordered in aid. A.J. Bekhor & Co. Ltd. v. Bilton⁽⁴⁾.

8. It is, accordingly, to be presumed that before making his unopposed order, taking effect "until after the final determination of this action or further order", on 22nd September 1987 Deputy Judge Cruden had satisfied, himself and implicitly found that the plaintiffs had demonstated a good arguable case for a declaration, after trial, that the two accounts formed part of the deceased's estate and that there were grounds for thinking, both that assets listed in such accounts were within the jurisdiction and that they might be dissipated before final judgment. The order in question was not the subject of application for leave to appeal or to discharge.

9. In the premises it is submitted as a preliminary point by Mr. Fung on the plaintiffs' behalf, that, these issues having been determined if only by default, the second defendant was estopped before Bewley J. and is estopped before us from contending that the plaintiffs had failed to disclose either a good arguable case or grounds suggesting that assets alleged to be part of the estate were within the jurisdiction and might be dissipated. Such issues, it is contended, could have been litigated before Deputy Judge Cruden.

10. The circumstances in which the order of 22nd September 1987 was made unopposed are set out in a letter from the second defendant's solicitors to those acting, for the plaintiffs dated 18th September.  The material paragraphs read:

"We are instructed not to oppose your client's application subject to your client (sic) usual undertaking to pay damages and on the basis that the 2nd Defendant does not admit any of the allegations contained in the various affirmations in support of the said summons.

    Please confirm that the Plaintiffs shall consent to the making by a consent order on the above terms at the hearing on 22nd September 1987."

11. The recent decision of the English Court of Appeal is S.C.F. Finance Co. Ltd. v. Masri⁽⁵⁾ was strongly relied on. There the plaintiff obtained a Mareva injunction inhibiting the disposal of assets which included a US$ bank account in the name of the defendant's wife. She filed an application to have the account excepted from the order on the grounds that she and not her husband was the beneficial owner. When the matter came on for hearing she stated, through counsel, that while she made no concession in relation to ownership and reserved the question she would not proceed with her application; appreciating that its dismissal would, as it did, ensue. Apparently she had made. this decision in the light of the attitude which the judge had earlier shown, with regard to her husband's evidence when judgment was given in the plaintiff's favour. The plaintiff immediately applied to garnish the USS bank account claiming that the dismissal of her application had finally determined the question of beneficial ownership. In due course such an order was made in the wife's absence and upheld on appeal. At p. 209 of the report Ralph Gibson L.J. said:

"We would hold - that to allow effect, on the facts of this case, to that statement by counsel, namely that his client did not, concede the issue which he declined to have ried, would be to permit the process of the court to be abused by Mrs. Masri for her own advantage. .... a litigant who has had an opportunity of proving a fact. in support of his claim or defence and has chosen not to rely on it is not permitted afterwards to put it before another tribunal. In this case Mrs. Masri had her opportunity to establish the case on which her application was based and she chose not to establish her alleged ownership of the dollar account. Her counsel on her instructions acknowledged that her application must be dismissed. His attempt to reserve the issue was in our judgment, ineffective."

12. The decision dismissing Mrs. Masri's application was not susceptible of reversal by the same court.

13. Insofar as the doctrine of issue estoppel per rem judicatam is regarded in its narrow sense it is, as Mr. Fung properly concedes, applicable only to final judgments and orders of a competent tribunal, domestic or foreign, and not to those which, like that of Deputy Judge Cruden where absence of finality appears on the face of the record, can be varied, re-opened or set aside by the same, as contrasted with an appellate, tribunal. The Sennar (No. 2)⁽⁶⁾. In the broader sense, however, It may, as in the S.C.F. Finance Co.⁽⁵⁾ case it was, be regarded as

"an abuse of process to raise in subsequent proceedings matters which could and therefore should have been litigated in earlier proceedings"

per Lord Kilbrandon in Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd.⁽⁷⁾ at p. 590.

14. Such an approach is always to be treated with caution. In the classic judgment of Wigram V.C. in Henderson v. Henderson⁽⁸⁾ at p. 115 an exception was made for "special cases" and, as Lord Wilberforce explained with reference to the Yat Tung⁽⁷⁾ decision, the doctrine in the broader sense.

"ought only to be applied when the facts are such as to amount to an abuse : otherwise there is a danger of a party being shut out from bringing forward a genuine subject of litigation".

Brisbane City Council v. Attorney General⁽⁹⁾ at p. 308. For my part I cannot regard it as an abuse of the process for a party to successive interlocutory proceedings not to deploy his full battery of argument at the first opportunity. Indeed, at such a stage when discovery and research are Incomplete, he should not be expected to make binding elections. In consequence I do not find that the second defendant was or is estopped from contesting the wide relief sought by the plaintiffs' summonses dated 3rd and 14th October and granted on 10th November, 1987.

15. The second defendant also makes a preliminary point namely that any remedy which the plaintiffs may have lies against the first defendants alone and that as against him the proceedings are misconceived: In my opinion this submission also fails. If a trustee is shown to have neglected the proper exercise of his duties, and this is the plaintiffs' contention here, a beneficiary may sue a third party in order to protect the trust estate. Hayim v. CitiBank⁽¹⁰⁾.

16. Beyond question the plaintiffs had good grounds at least for commencing, proceedings against the first defendants pursuant to RSC 0.85 for the due administration of the estate and for joining the second defendant as a party. The first defendants had at all material times been acting not only as executors of the estate but also as agents for the second defendant, their client, and in returns made to the Commissioner for Estate Duty in these two capacities had adopted changing and conflicting attitudes towards the assets listed in the two accounts. But the critical question whether the plaintiffs have demonstrated a good arguable case that such assets or a moiety or some of them form part of the estate of the late Jimmy Chao Ming Pan is not thereby answered.

17. The first defendants disclosed to the plaintiffs a letter to them from the Estate Duty Office dated 2nd May 1985 to the effect that they had no evidence that the second defendant had contributed to the purchase of the securities held by Messrs. Mok Ying Kie; all the income from which had been enjoyed by the deceased who had managed the account on his own. This was of no assistance in determining whether on 26th January 1984 the securities were owned by the deceased, by the second defendant or by both of them as tenants in common or as joint tenants. Like uncertainties apply to the securities formerly held by the Hong Kong and Shanghai Bank. The terms of the mandate from the deceased and the second defendant go to the Bank's authority and not to beneficial title. Both defendants have claimed privilege in relation to documents relating to the assets in dispute. The first plaintiff has deposed to the substantial business carried on by the deceased, and to the personal assistance given to him by the second defendant. She also avers a belief that the assets were bought by the deceased with his own monies.

18. The uncertainty as to the beneficial ownership of the underlying assets evidence by the two accounts derives in great measure from the absence of admissible evidence as to the intentions or motives of the deceased and of the second defendant at material times. At this interlocutory stage no inferences analogous to those respectively drawn by Romer J., Stamp J. and Megarry J. in Young v. Sealey⁽¹¹⁾, Re Bishop⁽¹²⁾ and Re Figgis⁽¹³⁾ are possible. Those were cases where the rights of a surviving spouse to a joint banking account were in issue. The second defendant has elected not to adduce evidence but, by his counsel, relies on the presumption of advancement and the absence of rebutting evidence. This is a perfectly legitimate stance but the absence of any affidavit from an interested party who is, perhaps, in the best position to assist the court, cannot be ignored. All in all I consider that such little evidence as there is, particularly that the share certificates listed in the two accounts are or were held in the joint names of the deceased and of the second defendant, an overseas resident, does permit the presentation of a good arguable case that the assets in question, or some of them, form part of the deceased's estate. I am also of the opinion that the evidence to which I have referred, coupled with the second defendant's failure to adduce a positive case and his claim to privilege in relation to the accounts, affords some grounds for thinking that he has assets coming within the parameters of the injunctions within the jurisdiction which, were the injunctions to be lifted, might be dissipated pending trial.

19. The proposition that any injunction should be limited to forty percent of the assets is wholly impracticable before final accounting and, in any event, all assets belonging to the estate within the jurisdiction should be frozen prior to administration by the first defendants. On the other hand, as a matter of law, the injunctions should not purport to inhibit dealings with assets outside the jurisdiction. Ashtiani v. Kashi⁽¹⁴⁾. The terms of paragraph l(c) of the amended order should, in my view, be expressed to relate only to proceeds of sale within the jurisiction as sought, in the alternative, by the second defendant. I would therefore insert the words "within the jurisdiction" after "accounts" where it first occurs in the penultimate line of that sub-paragraph. No appeal is brought in relation to the, orders for discovery in this context.

20. Otherwise in relation to discovery I am of the view that the requirement for the assessment by the second defendant of current market values would bind and assist no one and that, as and where it occurs, it should be deleted from the order. So should paragraph 4 which requires the first defendant prematurely to give general discovery.

21. The orders for discovery in aid made against the Hong Kong and Shanghai Bank and Messrs. Mok Ying Kie I regard as properly granted for the ostensible purpose of the applications as explained by Bewley J. in his judgment. Likewise the provisions permitting documents to be copied.

22. As to the cross-appeal I agree with the draftsman of the Respondents' Notice who points out that, as the pleadings presently stand, the issues in the action and in the preliminary issue are to all intents and purposes, identical. Separate trials are calculated lengthen rather than to shorten this litigation and to add to rather than to save costs. Further, at the time the judge exercised his discretion to make the order in question no Defence had been served by either of the defendants and the possibility of amendment of the Statement of Claim should have been in the judge's mind. The issues were not formally defined at all. For the judge to exercise his discretion as he did was, in my opinion, not only premature but plainly wrong and this court is, accordingly, entitled to exercise its own. This I would do by setting aside the order for the speedy trial of a preliminary issue and, necessarily, the related stay.

23. In summary I would allow the appeal, insofar as the Amended Order of Bewley J. calls for variation in the light of this judgment, and the cross-appeal in its entirety.

Yang, V.-P:

24. I agree.

Power, J.A. :

25. I also agree. I wish only to add that what my Lord has characterised as the "legitimate stance" taken by the 2nd defendant, when he elected not to adduce evidence but, by his counsel, to rely on the presumption of advancement and the absence of rebutting evidence, is in my view of particular significance in these interlocutory proceedings. I refer to Barker v. Furlong⁽¹⁵⁾ where Romer; J. said:

"I am entitled and bound under the circumstances of the Defendant's not appearing to support his case, though he was in Court, to make every reasonable, presumption against him; and, on this footing, having regard to the admissions made on behalf of, this Defendant in the course of the trial, it appears to me that the Plaintiffs 'have established their case against him."

26. The 2nd defendant has, I am satisfied, placed himself by taking the stance adopted in a position where he cannot complain if this court, acting upon the basis of what my Lord has described as "such little evidence as there is", accepts that evidence as sufficient to constitute a good arguable case.

(1) [1979] QB 645

(2) [1983] 1 WLR 1412

(3) [1986] HKLR 523

(4) [1981] QB 923

(5) [1987] 1 All ER 194

(6) [1985] 1 WLR 490

(7) [1975] AC 581

(8) [1843] 3 Hare 100

(9) [1978] 3 WLR 299

(10) [1987] 3 WLR 83

(11) [1949] Ch 278

(12) [1965] Ch 450

(13) [1969] 1 Ch 123

(14) [1986] 3 WLR 647

(15) [1891] 2 Ch.D. 172 at 184