SINO FAVOUR DEVELOPMENT LTD AND ANOTHER v. KAN WAI CHUNG AND OTHERS

HCA 1517/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1517 OF 2005

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BETWEEN

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(Consolidated by Order of the Honourable
Mr Justice Saunders dated 12 August 2005)

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D E C I S I O N

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1.  The question before the Court today is the disposition of $2.5 million paid to solicitors as stakeholders.

2.  The essential issue is whether any of the 1^st Defendants, 2^nd Defendant, or 3^rd Defendant can arguably claim a proprietary interest in the $2.5 million. If they can, then to the extent of such interest the money should not be paid out to the Plaintiffs.

3.  In my view, none of the Defendants can claim a proprietary interest.

4.  The 1^st Defendants’ pleadings at best counterclaim for the payment of money and damages. The counterclaims are purely personal. The 1^st Defendant’s defences and counterclaims do not raise any or any viable issue of a proprietary interest traceable into the monies held by the stakeholder.

5.  The 3^rd Defendant as a shareholder in the 2^nd Defendant can claim no interest in the money.

6.  That leaves the 2^nd Defendant. It claims a 50% interest in the monies. But the legal and factual basis of that claim is unclear and unparticularised in the 2^nd Defendant’s pleadings. The 2^nd Defendant signed a document waiving all interest in the 1^st Plaintiff. In light of that, it is hard to see how the 2^nd Defendant can claim an interest in the relevant monies (which arise from properties sold by the 1^st Plaintiff). Mr Lo, appearing for the 2^nd Defendant, when pressed by the Court on the matter, was unable to give particulars as to how precisely the 2^nd Defendant put its proprietary claim in light of the document just mentioned.

7.  The Defendants say that I cannot decide this case because of allegations of illegality by the Defendants and of fraud by the Plaintiff.

8.  In relation to illegality, I do not think that the question is relevant here. The monies were paid to the stakeholder pursuant to the Order of Deputy Judge Saunders. The Order was made on the footing that it was perfectly legal and proper for the properties to be sold to the parties. The only question then, today, is the proper destination of the proceeds of sale, namely, the monies held by the stakeholder.

9.  As for fraud, even if the Plaintiffs raise issues of fraud, I do not have to make any determination on those issues for the purpose of today. Those issues are irrelevant to the determination of the proper destination of the monies held by the stakeholder.

10.  The case has been put forward on the basis of the liberty to apply granted by Deputy Judge Saunders and on the basis of Order 14. I would accept that in essence this is a case seeking partial judgment. The fraud issues are not relevant to the determination of the entitlement of the Plaintiffs to a partial judgment. The trial, in the future, of course may have to deal with those issues.

11.  For those reasons, I allow the Plaintiffs’ application.