XCHRX WONG WAI CHUN v. AU YEUNG FUNG SIM AND OTHERS

HCA 5038/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 5038 OF 2000

____________

____________

_______________

R U L I N G

_______________

1. This is an inter partes application on the part of the plaintiff for the grant of a Mareva injunction against the defendants pursuant to Order 29 rule 1 of the Rules of the High Court to restrain them from dealing with or disposing of the remaining proceeds of sale of a property known as Flat H, 19th floor, Block 1, Chestwood Court, Kingswood Villas, No.8 Tin Shui Road, Tin Shui Wai, Yuen Long ("the Tin Shui Wai property") in the sum of $1,392,260.00.

2. The background to this application is a dispute between members of the same family. The plaintiff is the elderly mother of the 1st defendant, who was formerly married to the 2nd defendant. The 3rd defendant is the son of the 1st and 2nd defendants and the grandson of the plaintiff. The dispute relates to the previous ownership of shop premises at Tak Lee Building, No.993, Kings Road, Hong Kong ("the shop premises") which were purchased in April 1988 and registered in the name of the plaintiff and the 1st defendant. Those premises were sold on 1 April 1998 for $1.88 million. The plaintiff's case is that she was the beneficial owner of 85% of those premises, having provided the original deposit (which came from a sum of $500,000.00 which she had given to the 1st defendant) and a later sum of $140,000.00 which she had given to D1 to redeem the mortgage. She claims that she is entitled to 85% of the net proceeds of sale of the property.

3. This application for an injunction is not based on a proprietary claim to the Tin Shui Wai property. That property was purchased in the names of the 1st and 2nd defendants before the sale of the shop premises, although it is conceded that part of the proceeds of sale of the shop premises were used to redeem the mortgage on the Tin Shui Wai property. The plaintiff alleges that the defendants have not adequately accounted for the sale proceeds of the shop premises and that their conduct shows a real risk of dissipation of their only other substantial asset namely the proceeds of sale of the Tin Shui Wai property.

4. The defence of the defendants is simply that none of the consideration for the purchase of the shop premises had come from the plaintiff. The 2nd defendant had provided the downpayment and repaid the mortgage. It is suggested that the plaintiff has been influenced to make this claim by another of her children, Mr Au Yeung Kung Chu.

5. Two matters have been at issue in this application. Firstly, whether the plaintiff can show a good arguable case and secondly, whether there is a real risk of dissipation of assets by the defendants.

Good Arguable Case

6. It has been argued by Mr Ng on behalf of the defendants that the plaintiff has failed to reach the threshold of a good arguable case.

7. I have borne in mind that in Ninemia Maritime Corporation v. Trave Schiffahrtsgesellshaft Gmbh ("The Niedersachsen") [1983] 2 Lloyds Rp.600, Mustill J described a good arguable case "as one which is more than barely capable of serious argument but not necessarily one which the judge considers would have a better than 50 per cent chance of success" and that in the case of Orri v. Moundreas [1981] Com LR 198 the same judge said "it is not enough to show an arguable case, namely one which a competent advocate can get on its feet, something markedly better than that is required, even if it cannot be said with confidence that the plaintiff is more likely to be right than wrong".

8. Mr Ng points to a number of features that he contends undermine the plaintiff's claim including the following:

(1) There is no documentary support for the plaintiff's allegation that she gave the 1st defendant the sums of $500,000.00 and $140,000.00 as she alleges. He submits that her evidence that she gave these sums to the 1st defendant in cash is unlikely.

(2) He suggests that the plaintiff's conduct has been inconsistent with her pleaded case. She claims to have given $500,000.00 to the 1st defendant to purchase the property but then had gone along with the suggestion that a mortgage in the sum of $200,000.00 been taken out. There is no evidence that until these proceedings she had asked for the return of the balance of $300,000.00 even when the 1st and 2nd defendants defaulted in paying her rent for the premises which she alleges was part of the agreement under which she agreed to buy the premises in order to ensure that she had a stable income for her living expenses for the rest of her live. On her account, not only did she not demand back the balance of $300,000.00 but provided a further sum of $140,000.00 to redeem the mortgage. When the shop premises were sold she signed an authority to the solicitors Stevenson Wong and Lai dated 25 November 1997 to release the proceeds of sale to the 1st defendant.

(3) Despite the fact that the shop premises were sold in 1998, the defendants allege that the plaintiff did not make any demand for the proceeds of sale until early in 2000.

(4) There is documentary evidence that the 2nd defendant paid certain expenses in respect of the property, both in relation to its acquisition and running costs.

(5) The plaintiff's position regarding documentary evidence of the cash payments of $500,000.00 and $140,000.00 has been inconsistent. In a letter of 27 October 2000 from her solicitors, it was alleged that the plaintiff "does not have or cannot now locate such documents", suggesting that there were such documents. This suggestion was repeated in a letter of 14 December 2000 by the solicitors stating that "our client and her son cannot now locate such documents but if the same is located such documents will be disclosed for discovery as soon as possible". Yet in response to an order by Master Mary Yuen on 23 February 2001 ordering the plaintiff to discover such documents the plaintiff stated that she does not now have nor has she ever had such documents in her possession.

(6) The change in the way the plaintiff now pleads her case in the Amended Statement of Claim compared with the way that it was originally pleaded suggests unreliability in the plaintiff's account.

9. The arguments put forward by Mr Ng do have some force and may persuade the judge at the trial of this matter to dismiss the plaintiff's claim. If this had not been a family dispute they might well have persuaded me that the plaintiff did not have a good arguable case but I have come to the conclusion, bearing in mind that it is a family dispute and that I should not try the matter on affidavit that the plaintiff does have a good arguable case although certainly not one that I would say has more than a 50% chance of success. The plaintiff was one of the joint registered owners of the property. It is somewhat unusual to agree that one's mother-in-law be registered together with one's wife as a co-owner of property that one is oneself purchasing, as the 2nd defendant is alleging, simply to avoid the attention of the tax authorities, unless one's mother-in-law does have an interest in the property. Although she and her husband had worked as coolies during their working lives, there is evidence suggesting that the plaintiff and her husband had accumulated reasonably substantial capital and had given sums to their children to purchase property. It is not disputed that at one stage that defendants had received $120,000.00 from the plaintiff and the defendants have not produced evidence to show that that sum was not given to them in cash. Although the 2nd defendant may have been the instrument of paying certain expenses in connection with the property, the evidence produced by the defendants does not rule out that the source of such funds insofar as they related to the purchase of the property was the plaintiff. Although the claim for the proceeds of sale of the shop premises was only formally lodged through solicitors in early 2000 there is at least some evidence that the demand may have been made and repeated informally earlier. If the evidence of Mr Au Yeung Kung Chu is found to be credible, and that can only be assessed after oral evidence at trial it would make the plaintiff's case very strong.

10. I find therefore but not without some hesitation that the plaintiff has overcome the hurdle of establishing a good arguable case.

11. Insofar as the second matter in issue is concerned, I find that the plaintiff has established a real risk of dissipation.

12. The defendants' account of the disposal of the proceeds of the shop premises has been either inadequate or unconvincing.

13. On 23 February 2001, Master Mary Yuen ordered the 1st and 2nd defendants to disclose on affirmation "statements, bank statements, receipts and other documents" relating to the proceeds of sale of the premises. On 26 July 2000, 7 months earlier, the 2nd defendant had deposed on affirmation that he intended part of the sale proceeds to be treated as maintenance for the 1st defendant. Yet in their joint affirmation on 14 March 2001, the 1st and 2nd defendants deposed that the documents could not be located. Even a belated attempt to account for the proceeds in an affirmation of the 3rd defendant on 12 May 2001 does no more than provide a partial explanation.

14. The writ in this action was filed on 20 May 2000. At that time, the 1st defendant was the sole defendant and the only substantial known asset belonging to her was the Tin Shui Wai premises. In August the same year by consent and as part of her divorce settlement, that asset was ordered to be transferred by the 1st defendant and the 2nd defendant (who was not yet a party to this action) to their son the 3rd defendant, who was also not yet a party to this action and at that time was a student. This might be considered a somewhat unusual order to make in divorce proceedings if the object was to provide a home for the 1st defendant, particularly as she had in eleven year old daughter. The property was almost immediately following its transfer to D3 in October 2000, put up for sale and sold in February 2001. It is claimed by the defendants that it was disposed of in order to support the 1st defendant and her two children.

15. The court always has a discretion whether to grant an injunction. One matter to be taken into account is the inability of the plaintiff, who is legally aided, to give any meaningful undertaking as to damages.

16. In this case, I am satisfied that she should be entitled to an injunction despite such inability, but that the court should adopt a more generous attitude to the existing obligations of and the maintenance and education expenses of the 1st defendant and her family than would otherwise be the case in circumstances where the court is not satisfied that there has been full disclosure of the proceeds of sale of the shop premises.

17. The plaintiff now seeks an injunction restricted to the sum of $1,392,260.00 now being held by Messrs Y C Lee, Pang and Kwok pursuant to the order of Madam Justice Chu.

18. I grant the order restricting the disposal of that sum held by Messrs Y C Lee, Pang and Kwok subject to the following exceptions:

(i) that a sum of $200,000.00 may be released to the defendants out of that sum to meet their existing obligation for legal expenses;

(ii) a further sum of $52,650.00 may be released to the defendants so that they may satisfy the debts of $12,000.00 to Cheng Chi Shun, $29,450.00 to Yung Tsz Ho and existing arrears of rent of $11,200.00;

(iii) that the defendants may use $20,000.00 of that sum per month towards the support and education of the 1st and 3rd defendants and the 1st defendant's daughter, Leung Suk Yi.

19. I decline to make any order in respect of future legal expenses of the defendants in the light of my finding that they have not adequately accounted for the proceeds of sale of the shop premises. Any further application for release of funds to meet legal expenses will have to be supported by a full detailed account of the disposal of those proceeds of sale.