CHOW FU HSIEN v. K VISION INTERNATIONAL INVESTMENT (HK) LTD

HCA2884/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2884 OF 2004

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J U D G M E N T

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1.  In 1998 a trust deed was executed by the defendant acknowledging that 35% of its interest in Beijing K Vision was held on trust for the plaintiff, Madam Chow. I do not need to detail how Madam Chow’s interest came about save that in April 1994 Madam Chow’s nominee signed a Chinese agreement by which she became a 35% shareholder in HK K Vision.

2.  On 31 July 2004, Madam Chow demanded an account of her beneficial interest in HK K Visions in Beijing K Vision.  There then began what can only be described as a persistent campaign by Mr Qu Hong, the majority shareholder in HK K Vision, to deny Madam Chow’s interest and avoid or evade court orders which not only recognized her interest but sought to give effect to it.

3.  On 7 September 2004, HK K Vision denied Madam Chow’s interest under the trust.  In December 2004 Madam Chow commenced proceedings seeking amongst other consequential orders a declaration that the 1998 Trust was valid and subsisting and that it represented 35% of the shares of HK K Vision, including attributable income and profits, as being Madam Chow’s.

4.  Commercial developments and/or an Arbitration in 2005 through 2006, led to the liquidation of Beijing K Vision and the acquisition by HK K Vision of two particular assets :

(1)  3,000 sq.m. of the completed office block of Celebrity Plaza; and

(2)  26.7% share of the net asset value of Beijing K Vision excluding the service apartment of the Celebrity Plaza.

5.  On 19 July 2007, Madam Chow obtained summary judgment in her action, against which HK K Vision lodged a Notice of Appeal, dated 2 August 2007.  

6.  In accordance with the judgment obtained by her, Madam Chow proposed directions for the taking of the account.  Within a week the defendant rejected the proposal as it was proceeding with the appeal and said that in any event it was unable to give an account without saying why.  Solicitors for Madam Chow took out a summons for directions for the taking of an account in mid‑September, and one month later, the defendant filed an affidavit opposing the plaintiff’s application.  The defendant then in November 2007 took out a summons to stay the execution of Madam Chow’s judgment pending the hearing of their appeal.  That was dismissed on 12 November 2007 and directions for the taking of an account given.

7.  On 20 February 2008, the defendant’s appeal against the judgment was dismissed.  They then sought to parry Madam Chow’s efforts to obtain a hearing date for the taking of the account which she made on 27 November 2008.  

8.  In early February 2009, Master de Souza gave leave to fix a hearing date and further directions for the taking of the account and ordered costs against the defendant.  The defendant appealed Master de Souza’s order.  The appeal was dismissed on 10 March 2009.

9.  November 2009 finally saw the result of a long hearing before Master Lai.  He decided that out of the net profit of almost HK$108 million from sales by the defendant, Madam Chow was entitled to HK$37,787,830 and either 40 cents or 50 cents, the figures vary, and that the defendant should pay this to her with interest at the HSBC prime rate from the date on which her cause of action for an account and payment arose (26 October 1995).  He varied his order in relation to interest in March 2010.

10.  The defendant then brought yet another appeal, heard by Mr Recorder Benjamin Yu, SC, who affirmed the order of Master Lung save as to the crystalised financial interest of Madam Chow which he set aside and ordered the parties to agree a figure.  The reasons for this do not concern me even though the parties responded to this by agreeing a figure less than half that decided by Master Lung, because as recently as 3 June this year the Court of Appeal restored Master Lung’s figures. 

11.  The defendant had indulged yet another appeal this time against Mr Recorder Yu’s judgment.  In the meantime the defendant through its solicitors continuously refused to provide information following the plaintiff taking out a summons for the appointment of a receiver.  

12.  On 16 February 2010, Master Lai ordered the appointment of two accountants with Deloittes as receivers of the assets of the defendant arising out of the liquidation of Beijing K Vision, identifying the three assets in his order.  There were other consequential orders as well as an order that the costs of the plaintiff’s application be paid by the defendant.  It is this order which the defendant now appeals before me.

13.  Mr Jonathan Wong has in effect sought to rehearse the same argument he advanced before Master Lai but they were attractively done without success.  He sought to rely on much of what Kwan J (as she then was) said in In re K Vision International Investment (H.K.) Limited, HCCW1277/2004.  I find such reliance misconceived.  We are dealing with a significantly different set of circumstances and the Learned Judge’s comments and findings, though relevant to the case before her, cannot be lifted out of that factual matrix so as to be made relevant to the case before me.  Master Lai was rightly dismissive of it.

14.  Mr Wong at length reviewed periods of time which elapsed between certain events and some activities by the plaintiff.  These are as nothing compared with the obstructive actions or inaction as I find them to be, on the part of the defendant.  My short review of the history speaks for itself.  Madam Lam’s actions or possible actions are introduced by the defendant as if they had some relevance to the merits of the plaintiff’s efforts to obtain what is unarguably now, due to her.  He complained of a delay by the plaintiff.  But the whole situation has changed.  At the time of her initial application she had not obtained judgment and her interest had not been crystalised.  There is no merit in the delay point.

15.  Mr Wong has also relied on a number of authorities for general propositions.  There is no doubt that the court has the power to appoint a receiver after judgment to protect and gather in assets which are the subject of that judgment (see Soinco SACI & Anor v Novokuznetsk Aluminium Plant and Or [1998] QB 406, Colman J at page 422).  Lord Justice Farquharson in Orwell Steel Ltd v Asphalt Ltd [1984] 1 WLR 1097 stated clearly that :

“There is power to grant an interlocutory injunction between final judgment and execution.”

Section 37(1) of the Supreme Court Act 1981 provides :

“The High Court may by order (whether interlocutory or final) grant an injunction or appoint a receiver in all cases in which it appears to the court to be just and convenient to do so.”

16.  In my judgment there is no logical reason in this case why a receiver should not be appointed.

17.  Ms Liza Wong, S.C., for the plaintiff, made it succinctly clear that delay as alleged and identified by Mr Wong is immaterial given all the events which had overtaken the December 2005 state of play.  Any suggestion of delay in the appointment of receivers and the security required is without foundation.

18.  The fact that the plaintiff has taken proceedings on the Mainland to freeze the assets in which she has an interest is irrelevant to the issue before me.  No doubt she is well advised to use every avenue to safeguard her interest. 

19.  The application before Master Lai was concerned with the administration of a trust, and the preservation of the assets and the plaintiff’s interest in them.  Any argument about whether or not the plaintiff should have pursued an application in 2005 is an irrelevant diversion.  The Master took the view, in accordance to Mr Wong’s submission, that no risk of dissipation of assets has been improved.  But he also took the view, and I take the same view, that the defendant has persistently refused to account to the plaintiff for the trust assets.  That is unquestionably misconduct.  In my judgment the defendant has cynically tried to obstruct the plaintiff at every turn, having initially denied that any such trust existed.  They have used or rather misused proceedings in the court to avoid any accountability to the plaintiff or, at the very least, in order to delay it for as long as possible.  One asks rhetorically, why?

20.  Having had the benefit of looking back at the full history of the dispute, I have concluded without hesitation, that there is a risk of dissipation of assets.  The defendant’s twists and turns reasonably raise the spectre that it has been trying or is trying to put assets out of the plaintiff’s reach.  How else, one asks, can it explain its maneuverings over the relevant period? Quite simply, on the evidence before me, the defendant cannot be trusted to protect the interest of the plaintiff.  The court, as it has demonstrated on a number of occasions in these proceedings, has an overriding duty to protect a beneficiary’s interest in a trust where it has been shown that the persons or entities otherwise responsible for ensuring a beneficiary’s interest has shown itself to be incapable, negligent or simply unwilling to do that.  

21.  The order of Master Lai was correct and stands.  But there is one aspect which I would wish to discuss with counsel, not extensively because I think this is not the time for it.  I do not know, because I have not researched it whether the court has any jurisdiction to consider in the circumstances of the case, if it can order that the costs of the receiver be paid by the defendant out of its share of the assets of the proceedings recovered, rather than out of the total value of the assets realised before distribution.  Because clearly under the present provision the receiver’s costs are deducted from whatever assets are recovered, en bloc, at the outset.  But there is an argument — not that I am going to hear that today — that given the circumstances of this case those costs should be borne by the defendant alone and not imposed in part upon the plaintiff’s beneficial interest.  I leave that because it may be that both counsel are not able to say here and now it is or is not within the court’s jurisdiction to consider that in any event.  I leave it to activate the minds of counsel respectively.  There is of course liberty to apply.

22.  I leave the question for the decision of the receiver to be crystalised, with the appropriate security, because obviously as a result of the decision of the Court of Appeal on 3 June 2011, the figure for the plaintiff’s interest has been revised.

[Submissions from counsel]

23.  The appeal is dismissed with costs to the plaintiff.  I make an order for a certificate for two counsel.  The nature and history of his litigation justifies it.