CHOW WING MAN v. AU TZE PUI AND ANOTHER

HCA 1830/2022

[2025] HKCFI 357

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1830 OF 2022

_______________

BETWEEN

_______________

________________________

DECISION

________________________

Introduction

1.  By summons dated 27 February 2024 (“the Summons”), Ds apply to discharge the interlocutory injunction order granted by DHCJ H. Au-Yeung (as he then was) dated 23 December 2022 as continued and amended by an order of Madam Justice Au-Yeung dated 13 January 2023 (“the Injunction Order”), or alternatively to vary the Injunction Order with a fortification of the undertaking given by P in a sum of HK$1.1 million.

2.  The Injunction Order is characterised as a proprietary injunction and is in the following terms:

“D1and D2 must not:

(a) sell or transfer or dispose of or deal with or charge or encumber or diminish the value of or cause to be sold or transferred or disposed of or dealt with or charged or encumbered or diminished in value P’s 700 shares in MBG Limited 灝達有限公司 (company number 1091281) (“MBG Limited”) which was on 21 November 2022 transferred to and registered in the name of D2;

(b) withdraw or transfer out or dispose of or deal with or cause to be withdrawn or transferred out or disposed of or dealt with the money in any bank account in the name of MBG Limited, including MBG Limited’s bank account maintained with the Bank of East Asia Limited (bank code and account number …);

(c) sell or transfer or dispose of or deal with or charge or encumber or diminish the value of or cause to be sold or transferred or disposed of or dealt with or charged or encumbered or diminished in value the stock of MBG Limited, including the stock stored at the company’s warehouses at Unit A, 12^th Floor, Chiap King Industrial Building, 114 King Fuk Street, San Po Kong, Kowloon, Hong Kong and Unit A, 13^th Floor, Chiap King Industrial Building, 114 King Fuk Street, San Po Kong, Kowloon, Hong Kong;

(d) take any payment of any form from MBG Limited’s customers or creditors where such payments are for products and/or services sold or provided by MBG Limited to the customers or creditors;

(e) allot new shares in MBG Limited or in any way dilute or diminish the value of the current issued shares of MBG Limited.”

3.  The amendment ordered by Madam Justice Au-Yeung is an addition of the undertaking of P in the following terms:

“P undertakes that he will not dispose of, whether by himself or anyone on his behalf, any of the HK$1.1 million that he has withdrawn from the BEA account of MBG Limited, and will hold the money on trust for MBG Limited for safekeeping until trial or further order of this Court.”

4.  D1 supports his application by the Summons by his affirmations. P, acting in person, only filed a document entitled “Response to Affirmation of Au Tze Pui” with a Statement of Truth signed by him (“P’s Response”).

5.  P’s Response falls foul of the requirements of an affidavit under O.41, r.1, the Rules of the High Court (“the RHC”). P neither sworn nor affirmed its contents properly.

6.  P did not make any application pursuant to O.41, r.4, the RHC. There is no basis for this Court to exercise any discretion to allow P’s Response be filed or used in evidence as a defective affidavit thereunder. I should not give undue indulgence to P just because he acts in person. I refuse to admit P’s Response as evidence.

Background facts

7.  By way of background, P and D1 are half-brothers. D1’s father, has co-habited with P’s mother. P is the child of his mother and her former spouse.

8.  MBG Limited was incorporated on or about 28 November 2006 and at the inception, P and D1 held 90% and 10% of its shares respectively. Subsequently, over the years there has been some changes in the shareholdings of MBG Limited.

9.  MBG Limited carries on the business as a wholesale supplier of hair products.

10.  D2 is a BVI company solely owned by D1.

11.  The underlying complaint of P is that on 29 September 2022, D1 removed him as a director of MBG Limited and in his stead appointed D2. D1 at the same time transferred his 250 shares in MBG Limited to D2. Further, D1 caused to be transferred P’s 700 shares being 70% of the shareholding in MBG Limited to D2 by certain instruments bearing P’s forged signatures.

12.  On 23 December 2022, P obtained the proprietary injunction order on an ex parte basis (“the Ex Parte Order”). On 28 December 2022, P duly took out a summons for his application for the continuation of the Ex Parte Order (“the Continuation Summons”). At the hearing of the summons on 13 January 2023 before Madam Justice Au-Yeung (“the Hearing”), Ds did not turn up. The learned judge made the Injunction Order in their absence having satisfied that they had been effectively served all the relevant legal documents.

13.  Ms Yu, counsel for Ds, helpfully draws my attention to Keep Bright Limited v Super Auto Investment Limited & Ors (unreported, HCCT 16/2010, 12.1.2012) in which Au J (as he then was) at §45 set out the legal principles applicable to an application to vary or discharge an interlocutory order as follows:

“(1) The Court would only generally consider varying or discharging an interim injunction or an undertaking on good grounds or change of circumstances being shown: Chanel v FW Woolwich & Co Ltd [1981] 1 WLR 485 at 492D-E.

(2) Further, in an interim order where it is made effectively by consent, or following an inter-partes hearing when both parties were legally represented and had full opportunities to bring to the court’s attention matters relevant to the making of the order, the person seeking to vary the interim order is not entitled to do so as of right or to re-argue it as if it was a re-hearing. The burden is on the party seeking to vary the order to show either there has been some significant change of circumstances or it has become aware of facts that it could not have reasonably found out at the time of interim order: Dynamic Creations Ltd v Mint Gem & Jewelry Manufacturing Co Ltd (unrep., HCA 378/2006, 12 April 2006) at paras 42 & 44 per Chu J (as she then was); Butt v Butt [1987] 1 WLR 1351 at 1353F-G per Nourse LJ.

(3) However, the position may be different if the parties had contemplated at the time of the interim order that the issues thereunder would be revisited or where the injunction by its terms show that it was not substantively disposed of but adjourned sine die generally with liberty to apply. The parties may be able in those circumstances to re-open the arguments afresh: Butt v Butt, supra, at 1353H-1354D, 1354F-G (Nourse LJ), 1355 (Mustill LJ); Gantenbrink v BBC [1995] FSR 162 at 164-165 (Sir Donald Nicholls VC).”

Grounds of the present application

14.  Ms Yu relies on Ds’ allegations of a change of circumstances and material non-disclosure (“the MND”) in this application. There are five alleged changes:

(1) The upcoming expiry dates of the hair care products;

(2) The substantial restraints caused by the Injunction Order on MBG Limited to conduct its normal course of business due to the inability to settle invoices and receive income;

(3) The fact that P has been soliciting MBG Limited’s business when the Injunction Order is in place;

(4) P’s financial difficulty recently come to Ds’ notice; and

(5) The delay on the part of P in conducting the case promptly.

15.  The MND includes:

(1) The fact that P was merely a trustee holding the shares of the MBG Limited on behalf of Ds;

(2) The value and the operation costs of MBG Limited which would show that P was not entitled to withdraw HK$1.1 million from the BEA account in the first place; and

(3) The financial capacity of P to honour the cross-undertaking of damages.

16.  In the affirmation of D1, he explained the absence of Ds at the Hearing. It was due to his own mistake as to the return date of the Continuation Summons. However cogent his reason is, it remains an indisputable fact that the Hearing was made at an inter parte hearing. In my view, Ds could not now come back and seek to re-argue the Continuation Summons more than a year later.

17.  Ms Yu refers to Essilor Manufacturing (Thailand) Co Ltd v G Doulatram and Sons (HK) Ltd & Ors [2021] 3 HKC 167. There, Recorder Stewart Wong SC said this at §28,

“In my judgment a defendant is not precluded, in a subsequent hearing, from raising and contesting the question of whether there is any ground to grant or continue an interlocutory injunction in the first place, if the question is otherwise an appropriate and relevant one at the subsequent hearing relevant to some live issues, after the original application for the interlocutory injunction or its continuation or discharge is dealt with by some other manner, if on a proper construction of the relevant order the defendant has preserved his right to so argue.”

18.  In the present case, the learned judge disposed of the Continuation Summons after consideration of the evidence of P and submissions made on behalf of P. Ds simply did not attend the Hearing without any prior notice. There is nothing to suggest that there is any preservation of Ds’ right to argue the Continuation Summons in the Injunction Order.

19.  Ms Yu relies on the provision of liberty to apply in the ex parte order. In my view, such a provision should cease to have any effect when the Ex Parte Order was ordered to be continued by way of the Injunction Order.

20.  In my view, it is not open to Ds to seek to vary or discharge the Injunction Order on grounds which they could have advanced at the Hearing. Such grounds should include the MND.

21.  In any event, I do not agree that there is any validity in the allegations of the MND. Briefly stated, the Ds’ alleged beneficial interest in the shares held by P is only an allegation of Ds and there is no evidence that P was aware of this contention at the ex parte hearing.

22.  There is no substance in the 2^nd alleged MND. The HK$1.1 million withdrawn by P has no bearing on the injunctive relief sought.

23.  As regards the 3^rd alleged MND, the lack of any evidence of the financial condition of P might cast doubt on his ability to honour his cross undertaking as to damages. P failed to adduce such evidence. At the end of the Hearing, the learned judge accepted the undertaking in the absence of such evidence. I could not say that such a failure can be characterised as a MND unless there is clear evidence that at the time when P offered to give the undertaking, P could not realistically honour the same owing to his financial condition. Ds have not adduced any evidence to suggest this.

24.  I accept that the Injunction Order could be varied or discharged if there is a significant change of circumstances. I shall now examine each of the alleged change of circumstances in turn.

25.  I do not think that the expiry dates of the hair care products can amount to a change of circumstances. Those expiry dates have remained the same since the date of the Injunction Order and the trial of this action could not take place before such expiry dates. The Injunction Order no doubt causes loss to the business of MBG Limited.

26.  Similarly, I do not think that the substantial restraints caused by the Injunction Order on MBG Limited to conduct its normal course of business due to the inability to settle invoices and receive income is a change of circumstances. This is only an inevitable consequence flowing from the grant of the Injunction Order.

27.  I have to say I am not able to understand what useful purpose of restraining Ds from continuing the business of MBG Limited before trial would serve to maintain the status quo or to protect the interest of P even if I accept P’s allegations.

28.  The allegation of Ds that P has started his rival business after the grant of the Injunction Order may be an answer as to why P intends to cripple the business of MBG Limited. In gist, the evidence of Ds is that in early October 2023, they discovered that some of the products of Erayba Cosmetics, S.A. (“Erayba”), a company incorporated in Spain, exclusively distributed by MBG Limited in Hong Kong and the Mainland under exclusive distribution agreements were found to be offered for sale in some of the retail stores in Hong Kong. MBG Limited purchased such products from Erayba on 9 December 2022 for distribution in Hong Kong.

29.  This could be a breach of the Injunction Order if it was MBG Limited which dealt in such products and hence Ds were prompted to carry out an investigation. They eventually found out that P had collected such goods from Erayba by a new bill of lading issued to Gumbo Limited (“the Bill of Lading”). The contact person named in the Bill of Lading is P.

30.  Ds made an enquiry with Erayba by a letter dated 9 November 2023 issued by their former solicitors Messrs. M. K. Lam & Co. Somehow Gumbo Limited was alerted and replied through its solicitors Messrs. Wong & Tang by their letter dated 21 November 2023. Gumbo Limited alleged defamation committed by Ds and stated that P held no official position in it.

31.  I have heard nothing more from P about this incident. Regardless of whether P held any position in Gumbo Limited, it is plain that P did assist Gumbo Limited to deal with the products which ought to be exclusively distributed by MBG Limited.

32.  This is alarming indeed. P did not seek to explain this. I do not know whether he had intended to be involved in a rival business when he applied for the Ex Parte Order. Even if it was only a self-help measure that P wished to take when the business of MBG Limited was stifled by the Injunction Order, he should not have done so without the knowledge or consent of MBG Limited.

33.  The involvement or participation of P in a rival business after the grant of the Injunction Order must be a change of circumstances in my view.

34.  Even more alarmingly, P at the hearing indicated to this court that he had already spent all the amount of HK$1.1 million as his own legal expenses in these proceedings. He now cannot afford legal representation anymore and so he can only act in person.

35.  This is a flagrant bleach of the undertaking under the Injunction Order. In the first place, P offered to give this undertaking in his supporting affirmation (§24). He acknowledged that the amount of HK$1.1 million was the fund of MBG Limited and he merely held the same on trust for MBG Limited for safe keeping. He made it appear that the fund would have been in danger of dissipation but for his withdrawal but it turned out that it was he who dissipated the fund of MBG Limited in breach of trust.

36.  This is egregious and inexcusable. I understand that Ds have commenced contempt proceedings against P in respect of the breach of his undertaking under the Injunction Order.

37.  I accept that this breach per se may not justify a discharge or variation of the Injunction Order. I also take into account the serious allegations of P that Ds misappropriated his shares and deprived him of his directorship by forged documents. I cannot lose sight of P’s financial difficulties meaning his cross-undertaking as to damages should be meaningless.

38.  Looking all the circumstances in the round, given the conduct of P, I do not believe that he can still be entitled to any interlocutory relief. His hands are unclean. The Injunction Order should be discharged accordingly.

39.  For completeness, I do not accept Ds’ contention that the delay of P in prosecuting his claim in this action is serious enough to warrant a discharge of the Injunction Order.

Conclusion and order

40.  For the reasons given, I allow the application of Ds and discharge the Injunction Order forthwith.

41.  Costs should follow the event. I make a costs order nisi that P should pay Ds their costs of and occasioned by the Summons including all costs reserved, to be taxed if not agreed.

42.  Lastly, I thank Ms Yu for her assistance in this matter.