WONG KA YAN PATRICK v. CHEUNG KA YU NICOLE formerly known as CHEUNG LEE HUNG

HCA 2102/2017

[2019] HKCFI 1007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2102 OF 2017

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D E C I S I O N

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1.  The extra-marital relationship of the plaintiff with the defendant broke up, and the plaintiff now claims to recover the property and assets currently under the name and possession of the defendant, but in which the plaintiff allegedly retains beneficial interest. He also complains about the defendant’s harassment to him, his family and acquaintances. Thisis the plaintiff’s application for interlocutory injunction against the defendant pending trial of the action.

Background

2.  The plaintiff is a married businessman.  He first met the defendant in 2007 when the latter was working as a masseuse in a massage parlour in Wanchai in Hong Kong.  This developed into an extra-marital relationship.  The defendant then ceased working.  The plaintiff rented an apartment as her residence and supported her financially.

3.  By 2009, the plaintiff has been affected by symptoms of Parkinson’s disease.  He decided to purchase a property for the defendant’s residence near to his office in order to facilitate his visits to her.  The purchase was made, and the property costing HK$2,300,000 at Wanchai Road, Hong Kong was, and still is, registered in the defendant’s name (“the Wanchai Property”).  The plaintiff says he funded the purchase, and beneficially owns the Wanchai Property.

4.  According to the plaintiff, his relationship with the defendant turned cool significantly by late 2013, and he also visited the defendant less frequently.  However, in 2015, he was informed by the defendant of her pregnancy, but he immediately denied paternity.  The defendant gave birthto a son in April 2016, but the plaintiff refused to be registered as the natural father of the child.

5.  In the latter half of 2016, the defendant began to attend the plaintiff’soffice and attempted to communicate by telephone WhatsApp messages and contact withhis family members and acquaintances concerning their affair.  The plaintiff considers those harassment and acts of pressurizing him into acceding to her terms.  The defendant also threatened proceedings in the Family Court for maintenance from the plaintiff as the alleged natural father of her child.

6.  Since then, the plaintiff has met the defendant with the child at her request occasionally, but, according to him,, only with a view to pacifying the defendant.  In late 2016, the plaintiff also opened a joint savings account at Chong Hing Bank (“the Bank”) with the defendant, according to him, to appease her.  Subsequently he transferred a sum of HK$900,000 with a view to enabling the defendant to subscribe to the shares of MTR Corporation Limited.  The idea was that the defendant would receive dividends while the plaintiff would retain beneficial interest in the shares so acquired.  The money was supposed to be deposited into their joint account.  However, it was only subsequently discovered that that sum of money from him was never deposited into the joint bank account, and instead into the defendant’s personal account without his knowledge.

7.  The defendant’s version of events is different.  According to her,whilst it was the plaintiff’s idea to purchase the Wanchai Property, it was she who funded the purchase by savings and mortgage, though she admits that her savings also consisted of gifts of money and maintenance from the plaintiff.  In 2010, she was pregnant with the plaintiff’s child, but an abortion was arranged at the plaintiff’s request.  In 2015, she was pregnant again with the plaintiff’s child.  Because she refused another abortion, the plaintiff arranged that she gave birth to the child in April 2016.

8.  In late 2016, knowing that she intended to commence legal proceedings in the Family Court against him for maintenance for her son, the plaintiff offered to pay her HK$3,000,000 into the joint bank account for the purchase of anotherapartment for the child in the future.  However, that did not happen.  Instead, the plaintiff subsequently arranged a sum of HK$900,000 to be transferred into her personal account at the Bank.  It was payment of maintenance with no condition attached, and she did use the money to purchase 20,000 shares in MTR (at about HK$40 per share) at her own initiative.  The plaintiff still met her and her son, and she insists that she and the plaintiff had not broken up until the commencement of litigation[1].

Litigation

9.  There is no dispute that in June 2017, the defendant commenced maintenance suit against the plaintiff as the alleged father of her son in the Family Court (FCMP 121/2017).  The plaintiff denies paternity, and the issue of DNA test is contested strenuously[2].  The proceedings are still pending. 

10.  Subsequently, the plaintiff, through solicitors, demanded for, amongst other things, the return and account by the defendant of the HK$900,000 sum.  Meanwhile, the defendant, according to him, repeated her harassment and threatened to sell the MTR shares purchased as mentioned above.

11.  In September 2017, the plaintiff commenced the present action.

12.  As mentioned, the plaintiff allegedly discovered the true state of the deposit of the HK$900,000 sum into the defendant’s personal bank account in October 2017.  On 3 November 2017, the plaintiff applied for ex parte injunction against the defendant.  The application came before Hon Anthony Chan J, who took the view that this ought to proceed on an inter partes basis, and made no order. 

13.  Hence the present application by inter partes summons on 20 November 2017 for the following relief:

(1)  proprietary injunction against the defendant in respect of the HK$900,000 cash or any proceeds, funds or assets traceable tosuch cash, including any MTR shares, together with the ancillary asset disclosure order;

(2)  injunction compelling the defendant to deliver up the two cell phones in her possession but belonging to the plaintiff;

(3)  injunction restraining the defendant from using the information obtained from the cell phones mentioned above; and

(4)  injunction restraining the defendant from effectively approaching or harassing the plaintiff, his family members and acquaintances.

14.  The plaintiff sought leave to further amend the generally endorsed statement of claim to incorporate the claims in respect of §13(2), (3) and (4) above.

15.  The applications came before Hon Lisa Wong J on 24 November 2017.  Her Ladyship gave leave to amend as mentioned above, and adjourned the summons for interlocutory injunctions for substantive argument. In doing so, Her Ladyship accepted the defendant’s interim undertaking in respect of §13(3) and (4) above pending determination of the summons.

16.  At this hearing, Miss Wong for the defendant confirmed that her client would agree to abide by the undertakings mentioned above, subject to minor fine-tuning of the terms, further until the trial of this action.

17.  As to the plaintiff’s cell phones mentioned under §13(2) above,one of them has been delivered up to the plaintiff’s solicitors, while the otherone, according to the defendant, has been damaged and discarded.  She willbe held to such deposition as to the non-existence of the other phone. Therefore, during this hearing, the parties also agreed that this part of the application has been taken care of.

18.  While the above undertakings are given without prejudice to theresolution of the dispute at the trial, they effectively dispose of the plaintiff’s application under §13(2) to (4) above.  In the circumstances, what remains to be argued before this court is the injunction under §13(1) above.

19.  Specifically, the injunction is sought in the following terms:

“ (1) The defendant must not in any way dispose of or deal with or diminish the value of any of the following specified assets, whether in her own name or not, and whether solely or jointly owned:—

(i) A cash deposit of HK$900,000 from monies withdrawn from the plaintiff’s bank account with Chong Hing Bank (a/c no…[3]) on 8 November 2016 (the ‘Cash Transfer’); and/or

(ii) Any proceeds, funds, assets traceable to the Cash Transfer, including in particular any shares in the capital of MTR Corporation Limited (stock code 66) purchased with any/all of the Cash Transfer (the ‘Shares’) and/or their proceeds.”

20.  As mentioned, the plaintiff also asks for ancillary disclosure order.

The principles

21.  The applicant for an interlocutory injunction must show that (i) there is a serious issue to be tried in the case; (ii) that the balance of convenience is in favour of granting the interlocutory injunction; and (iii) that it is just and convenient to grant the injunction: see Order 29, rule 1 of the Rules of the High Court; American Cyanamid Co v Ethicon Ltd [1975] AC 396.

22.  The principles summarized in the preceding paragraph apply to the grant of a proprietary injunction: see DBS Bank (Hong Kong) Ltd v Tian Wen Quan HCA 3228/2016 (12 October 2017) at §11.  In view of the nature of a proprietary claim, there must exist a bona fide claim in respect of the property in question that is sought to be secured by the interlocutory injunction: see Samtani v Samtani [2012] 4 HKLRD 872 at §75.

23.  It is not mandatory to establish risk of dissipation, though such risk, if substantiated, may operate in favour of the grant of a proprietary injunction.  See Madoff Securities International Ltd & Anor v Raven & Ors [2012] 2 All ER (Comm) 634 at §140; Heitkamp & Thumann KG v Living Profit Trading Develop Ltd [2018] HKCFI 1006 at §6;Commercial Litigation: Pre-Emptive Remedies Release 44 (April 2018) at §A2-014.

Proprietary claim in respect of the HK$900,000 sum

24.  The above background reveals factual dispute between the parties as tothe basis on which the plaintiff parted with the sum of HK$900,000 in November 2016. However, in terms of the timing, there is no dispute that this happened when the defendant has made attempts to approach the plaintiff, his office, family members and friends concerning their affair as well as the defendant’s indication of intention to commence proceedings for maintenance in the latter half of 2016.

25.  Regardless of how the HK$900,000 sum came to be deposited into the defendant’s personal bank account, there is no dispute as to the source of the sum being the plaintiff.  Even on the defendant’s own case, the sum, or about HK$800,000 of it, had been applied to acquire the MTR shares.  There is no suggestion in the affirmation evidence that any part of the MTR shares has ceased to be in the defendant’s possession as at the time of this hearing.

26.  It is the plaintiff’s case that the idea was that the defendant would be entitled to the dividends on the MTR shares to be acquired.  However, it is uncertain whether any dividend has been distributed since the purchase of the shares.  More importantly, it is arguable whether the understanding asto the defendant’s entitlement to the dividends survives the final breakdown between the parties.

27.  Subject to the dispute as to the nature of the payment as well as the beneficial ownership of the money and any proceeds, funds, assets traceable to such money, including the MTR shares, a prima facie case of tracing as the basis for the grant of a proprietary injunction is made out.  The question is whether it is just and convenient to grant the injunction.

28.  In her submissions, Miss Wong emphasizes (i) the delay on the part of the plaintiff in taking out this application; (ii) the relative strengthen of the parties’ cases; and (iii) the likely impact of the injunction, if granted, on her client.

Delay

29.  The principal consideration is whether a plaintiff has failed to act promptly so that the court may conclude that the need for an interim injunction has long gone by the time when he took out the application. Miss Wong relies on King Fung Vacuum Ltd & Ors v Toto Toys Ltd & Ors [2006] 2 HKLRD 785.  In that case, the delay was considered in the context of the irreparable damage by the time of the trial as a result of breach of agreement and infringement of intellectual property rights, if an injunction was not put in place in the interim.  In the present case, both Mr Lam for the plaintiff and Miss Wong for the defendant argue about delay in the context of the risk of dissipation of asset in the hands of the defendant, ifnot secured by injunction[4].  Miss Wong points out that the cash transferby the plaintiff to the defendant took place in November 2016, and her client would have already dissipated the assets by now, had she so intended.

30.  Nevertheless, it remains that for applying for a proprietary injunction in respect of the money or the shares in question, proof of risk of dissipation by the defendant is not mandatory.  Notwithstanding the complaint about delay, the fact remains that assets like cash and shares saleable in the market are susceptible to easy disposal, which prima facie warrants preservation pending the resolution of the dispute, if it is just and convenient to do so: see Michael Cherney & Ors v Frank Neuman & Ors [2009] EWHC 1743 (Ch) at §101.

31.  The plaintiff’s case in respect of how and when he came to discover that the HK$900,000 sum was in fact deposited into the personal account of the defendant as opposed to the joint account mentioned above refers.  This explains why the plaintiff took action only in early November 2017.  Miss Wong submits that the explanation is incredible.  This brings me to the following topic.

Relative strength of the parties’ cases

32.  Miss Wong submits that the relative strength of the parties’ case is relevant in the modern approach, relying on the citation by the court in the DBS case (above)[5] of what Lord Hoffmann said in National Commercial Bank Jamaica Ltd v Olint Corpn Ltd [2009] 1 WLR 1405:

“… The basic principle is that the court should take whichever course seems likely to cause the least irreparable prejudice to one party or the other…

Among the matters which the court may take into account are the prejudice which the plaintiff may suffer if no injunction is granted or the defendant may suffer if it is; the likelihood of such prejudice actually occurring; the extent to which it may be compensated by an award of damages or enforcement of the cross-undertaking; the likelihood of either party being able to satisfy such an award; and the likelihood that the injunction will turn out to have been wrongly granted or withheld, that is to say, the court’s opinion of the relative strength of the parties’ case.”

33.  As mentioned, there is dispute as to how the HK$900,000 fromthe plaintiff ended up in the defendant’s personal bank account.  Accordingto the plaintiff, he was with the defendant at the Bank, but thought that the account number that the defendant gave to the teller for the transfer of the sum was that of the joint account.  He came to know upon enquiry with the Bank in October 2017 that it never was, and the sum was in fact deposited into the personal account of the defendant.  Miss Wong criticizes this aspect of the plaintiff’s case as being incredible.  She submits that it is impossible that the plaintiff was ignorant about the money having deposited into the defendant’s personal bank account, and that he had not checked the status of the joint account until one year later.

34.  For the present purpose, Miss Wong’s argument is not without force.  However, this forms one aspect of the dispute in respect of the sum, and does not necessarily taints the plaintiff’s case in respect of the purpose and intention behind the transfer of the sum.  I say this of course only for the present purpose.

35.  It should also be noted that whilst acknowledging the statement of principle by Lord Hoffmann mentioned above, the court in the DBS case went on to say[6] that serious issue to be tried is not a high threshold, and the court does not resolve at such stage conflict of evidence on affidavit or decide difficult questions of law.  Applying such principle to the facts, the court in the DBS case was actually able to conclude that there was not even serious question to be tried in respect of the various causes of action.  Even if this was wrong, the court there found that the merits of the case were still tilted in favour of one side[7].  In the circumstances of the present case, I am not prepared to go so far as drawing a similar conclusion for the present purpose in respect of the factual dispute in this case.

36.  What may be noted from the DBS case[8] is that the court distinguished a proprietary claim over a sum of money from one over a property of a unique character.  In the former case, damages could be adequate remedy, provided the defendant has the ability to meet such damages.  This leads to the consideration of the financial situation of the defendant.

The likely impact on the parties

37.  In the case of the plaintiff, it is emphasized that the defendant has no income and insufficient funds so much so that her expenses set out in the FCMP proceedings must be an inflationary statement with a view to extorting the maximum maintenance from him.  On the basis of his such understanding, the plaintiff projects the need to preserve the shares and any balance of the HK$900,000 sum that came from him. Otherwise, he argues, damages will not be an adequate remedy, presumably because he may end up with an empty judgment without the injunction now.

38.  In the case of the defendant, it is emphasized that not only does she have no income but she also has to live on savings.  At the same time, she has to pay legal fees for this action and the FCMP proceedings.  She argues that an interlocutory injunction to freeze her assets would have serious consequence on her in that her claim in both sets of proceedings would be stifled for the lack of funds.  However, the plaintiff’s answer to that is that the purpose of the injunction is precisely to preserve the plaintiff’s asset traced into the hands of the defendant, which, if the plaintiff is right, she is not entitled to have recourse to.

39.  Miss Wong also points out the difference between what is said to be the “personal context” as opposed to the “commercial context” of the balancing exercise in exercising the discretion whether or not to grant an interlocutory injunction.  In support, she relies on C v L, FCMC 1974/2008 (26 February 2009)[9].  However, I would treat such argumentwith caution, as the court in C v L was apparently distinguishing the use of acommercial Mareva injunction and an injunction in the matrimonial context, which indeed differ from each other materially.

40.  Where injunction involves a proprietary claim by a plaintiff, the court retains the discretion to enable a defendant to use the assets subject to the injunction, for instance, to pay legal expenses.  The court will adopt a two-stageprocess in the consideration:  The defendant applying for the release of assets has to demonstratewith full and frank evidence that there are no other assets that can be used topay his legal expenses.  If the defendant fails at this hurdle, that is the end of the application.  It is only when the defendant succeeds in demonstrating the lack of other available assets will the court proceed to balance the potential injustice to the plaintiff of releasing the assets against that to the defendant of depriving him of legal assistance to advance what may ultimately be a successful defence: see Liu Xian Feng & Anor v Liu Bo & Ors [2006] 4 HKLRD 33; Wharf Ltd v Lau Yuen How [2010] 1 HKLRD 783 [10].

41.  The above considerations apply to determining whether the asset subject to an injunction should be released, for instance, to enable the defendant to obtain legal assistance to advance what may ultimately be a successful defence.  The context of the present case is not the same.  Nevertheless, the concern of the court should remain similar,namely, whether the party resisting the injunction has disclosed and placed before the court sufficient materials in support of her financial difficulty so that if she is restrained from having recourse to the asset in question, she would be deprived of legal assistance and her defence will be stifled.

42.  There are doubtful aspects of the defendant’s case in respect of her financial situation.  On the basis of the defendant’s own case, she managed to afford such expenses on herself and the child as stated in the FCMP proceedings, which were by any standard substantial sums.  It is on the basis of such expenses that she projects her claim in those proceedings.  The defendant apparently also managed to afford the legal fees incurred in those proceedings and this action.  She managed to do so apparently without resort to the Wanchai Property or the MTR shares.

43.  There is in the context of the present case legitimate concern about the lack of or insufficient disclosure by the defendant of her actual financial situation that would have caused the court at this stage to refrain from subjecting the shares or what is left of the HK$900,000 sum to interlocutory preservation.

44.  Each case has to be decided according to its own circumstances. All circumstances and evidence considered, including those specifically discussed above,I am satisfied that the balance still tilts towards granting the injunction in respect of the HK$900,000 sum or the shares acquired by the use of such money that,the defendant admitted, are in her possession.

Other parts of the application

45.  I should mention that but for the defendant’s agreement to abideby the undertakings previously given in respect of §13(3) and (4) above, I would have been minded to grant the interlocutory injunction in respect of those parts.  The case for interlocutory injunction, in my view, is made out, whilst the dispute as to the nature of the approach and contact by the defendant is factual, and the risk of recurrence of such conduct must be objectively assessed.  In particular, upon consideration of the authorities[11], I disagree with Miss Wong’s argument that tries to doubt the existence of the tort of harassment under common law.  The question must be seriously arguable[12], at least for the present purpose.

Ancillary disclosure

46.  The ancillary disclosure order being sought is two-fold:  First,the plaintiff seeks to compel the defendant to disclose, and verify by affidavit,the details of the bank accounts into which she deposited the HK$900,000 sum and of the movement of the sum since 8 November 2016.  Second, he seeks a disclosure order against the Bank so that he could inspect and obtaincopies of the relevant documents relating to the transactions in the defendant’saccounts as of 8 November 2016 to today.

47.  As to the disclosure of the whereabouts of the sum of HK$900,000 and/or the shares, the defendant confirmed by her affirmation that the sum was deposited into her personal bank account.  She further admitted that about HK$800,000 out of such sum were applied towards the purchase of 20,000 MTR shares, which are in her possession (and which could not be kept in any bank account as such).  For the present purpose, the query relates to the whereabouts and movement of the part of the sum of HK$900,000 that had not been so applied.  I am prepared to grant an ancillary disclosure order covering that. For reasons discussed above in respect of the dispute over the entitlement to the MTR shares, I am also prepared to grant an ancillary disclosure order covering the shares.

48.  As to the order compelling disclosure by the Bank, this is ancillary to an inter partes application for interlocutory injunction, and notice of the application should be given to the Bank.  In the absence of evidence suggesting such notice having been given, I would accede to this part of the application but only with liberty to the Bank to apply for setting aside or variation of such order, if so advised.

Disposition and costs

49.  Apart from the undertakings of the defendant in terms as given during this hearing with effect until the trial of this action, I now grant the injunction so that until the trial of this action or further order of the court,the defendant must not in any way dispose of or deal with or diminish the value of any of the assets, whether in her own name or not, and whether solelyor jointly owned, namely: any part of, or any proceeds, funds and assets traceable to, the cash deposit of HK$900,000 from monies withdrawn from the plaintiff’s bank account with Chong Hing Bank (a/c no…[13]) on 8 November 2016, including in particular any shares in the capital of MTR Corporation Limited (stock code 66) purchased with any or all of such cash transfer and/or their proceeds.  As mentioned, I also grant the ancillary disclosure orders in terms as sought.

50.  Following this event, save that the costs of this application shall be in the cause of the action, the defendant shall pay the plaintiff’s costs of the hearing.  Costs shall be taxed, if not agreed.  Unless application is made within 14 days for variation, this costs order, which is nisi, shall become absolute without further order.