LAU KING TING KATIE v. CHENG MIU HAR STELLA AND OTHERS

HCA 1049/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1049 OF 2007

----------------------

----------------------

----------------------

J U D G M E N T

----------------------

Applications

1. I have 2 summonses before me.  The first in time was issued by the Plaintiff on 15 June 2007.  The Plaintiff seeks:

(1)   injunctions restraining the Defendants from disposing of the property of the 2^nd to 5^th Defendants (which are companies) or shares in them;

(2)   injunctions restraining the Defendants from taking steps to wind up the 2^nd to 5^th Defendants or, in the case of the 1^st Defendant, acting as liquidator of the 2^nd to 4^th Defendants; and

(3)   the appointment of a receiver of the assets and undertakings of the 2^nd to 4^th Defendants.

2. The 2^nd summons was issued by the Defendants on 20 July 2007.  The Defendants seek an order that registration of the writ issued in this action in the Land Registry as a lis pendens be vacated.

3. The summonses were originally listed to be heard on 6 August 2007.  They came on before Deputy Judge Muttrie, who dealt with a summons issued by the Plaintiff on 1 August 2007, which concerned the use and custody of a vesting assignment dated 28 December 2001 and a trust deed dated 8 March 2002.  The summonses issued on 15 June and 20 July 2007 were adjourned to a date to be fixed.  It is unclear to me why the matter did not come on before 23 January 2008, some 7 months after the Plaintiff issued its summons seeking an injunction.

Background

4. The Plaintiff is the daughter of the 1^st Defendant.  She is a doctor and is currently working as an intern in a hospital in Hong Kong.

5. The 1^st Defendant was until 2000 married to Edmund Lau, who is the Father of the Plaintiff.  They have one other child, Acorn, who is 13.  Shortly after they were divorced the 1^st Defendant and Mr. Lau reconciled and lived together with their children at a flat at the Belchers in Pokfulam.

6. Both the 1^st Defendant and Mr. Lau are solicitors.  They were for a period partners in a firm, which was established by Mr. Lau and known as, “Lau and Co.”  This firm ceased business in 2002.

7. Whilst in practice as a solicitor Mr. Lau established the 2^nd to 4^th Defendants, which acquired 11 properties.  By a consent order in the divorce proceedings dated 8 May 2000 Mr. Lau transferred his interest in the 2^nd to 4^th Defendants to the 1^st Defendant and resigned as a director of the 3 companies although he continued to manage them. 

8. The flat at the Belchers was originally purchased by the 1^st Defendant.  On 28 December 2001 the 1^st Defendant executed a vesting assignment acknowledging that she held the flat at the Belchers (Belchers Flat) on trust for the 4^th Defendant and assigned her interest in it to the 4^th Defendant (Vesting Assignment).

9. It is alleged by the Plaintiff that pursuant to a deed of trust executed on 8 March 2002 the 1^st Defendant holds the shares registered in her name in the 2^nd to 4^th Defendants on trust for the Plaintiff and Acorn in equal shares (Disputed Deed).

10. On 18 July 2002 Mr. Lau was reappointed director of the 2^nd to 4^th Defendants.  At that time the shareholders and directors of the 3 companies were as follows.

(1)   2^nd Defendant: the 1^st Defendant held 9,900 shares and the Plaintiff 100 shares.  The directors were the Plaintiff, the 1^st Defendant, 4^th Defendant and Mr. Lau.

(2)   3^rd Defendant: the 1^st Defendant held 100 shares and the 2^nd Defendant 900 shares.  The directors were the Plaintiff, the 1^st Defendant, the 4^th Defendant and Mr. Lau.

(3)   4^th Defendant: the 1^st Defendant held 5,200 shares and the 2^nd Defendant 4,800 shares.  The directors were the Plaintiff, the 1^st Defendant, the 4^th Defendant and Mr. Lau.

11. On 1 December 2006 the 1^st Defendant moved out of the Belchers Flat with Acorn.  She instructed her solicitors to demand vacant possession of the flat and on 2 January 2007 she commenced legal proceedings claiming to be the sole beneficial owner of the Belchers Flat.

12. On 20 March 2007 the 1^st Defendant issued 3 letters to convene extraordinary general meetings of the 2^ndto 4^th Defendants.  By a letter of 21 March 2007, Mr. Lau asserted that the 1^st Defendant had executed the Disputed Deed declaring that she held the shares registered in her name in the 2^nd to 4^th Defendants on trust for the Plaintiff and Acorn in equal shares.  The 1^st Defendant denies executing the Disputed Deed.

13. Mr. Lau says that on 5 April 2007 the 1^st Defendant removed from his personal offices at 14/F, Bangkok Bank Building in Des Voeux Road Central and 27 Chiu Lung Street, a large quantity of documents including the Disputed Deed and Vesting Assignment and changed the locks.

14. On 10 April 2007 the 1^st Defendant filed notices at the Companies Registry of change of registered office, secretary and directors of the companies thereby asserting that Mr. Lau and the Plaintiff has ceased to be directors of the companies with effect from 6 April 2007.  On 20 April 2007 the 5^th Defendant was incorporated.  On 27 April 2007 the 1^st Defendant purported to place the 2^nd to 4^th Defendants into members voluntary liquidation and appoint herself the sole liquidator for each of them.  On 30 April 2007 the 1^st Defendant as liquidator executed an assignment of 9 properties owned by the companies to the 5^th Defendant.  On the same day the 5^th Defendant executed 9 declarations of trust all stating that the properties were held on trust by the 5^th Defendant for the 2^nd to 4^th Defendants.

15. The Plaintiff contends that no valid general meetings of the 2^nd to 4^th Defendants were convened and held at which resolutions were passed putting the companies into voluntary liquidation and approving the assignment of the properties.

16. On 12 May 2007 the 1^st Defendant signed a sale and purchase agreement with Harvest Stars Holdings Limited for the sale of the property in Canton Road for HK$130,000,000.  Prior to the assignment on 30 April 2007 the property had been owned by 2^nd Defendant.

Dispute

17. The principal dispute between the Plaintiff and the Defendants concerns the Disputed Deed.  The Plaintiff herself has no knowledge of its creation.  She relies entirely on the evidence of her Father.

18. The 1^st Defendant categorically denies ever making the Disputed Deed.  Mr. Lau on the other hand has gone into some detail in his 2^nd affirmation explaining how it came to be executed and re-executed.  There is no equivocation in the position of either of them.  As Mr. Chan S.C. who appeared with Kenny Lin on behalf of the Plaintiff observed: one of them is lying.

19. Mr. Yu S.C. who appeared with Ms. Edith Sit for the Defendants invited me to conclude that Mr. Lau’s story was so riddled with problems and inconsistencies that I should find that the Plaintiff has failed to establish the first requirement of any application for an interlocutory injunction, namely, that there is a series question to be tried, and reject the application for that reason alone.

20. Further Mr. Yu S.C. argued as the 5^th Defendant held the properties on trust for the 2^nd to 4^th Defendants there was no material risk of the kind of prejudice the Plaintiff sought to prevent by the orders that she sought.  The risk was removed entirely he said by the undertaking that the Defendants were prepared to give not to dispose of their interests in the properties if the Plaintiff and Mr. Lau provide fortified cross-undertakings in damages.

21. It had seemed to me at the outset that the need for a hearing might be avoided by the 1^st Defendant’s offer of an undertaking not to dispose of the shares of the 2^nd to 5^th Defendants or the properties until trial upon provision by Mr. Lau of an adequate cross-undertaking in damages and an agreement to an order for speedy trial.  The reason it was suggested that Mr. Lau provide the cross-undertaking was that the Plaintiff herself would not be good for the cross-undertaking that she offers.  On 27 December 2007 the Defendants’ solicitors wrote to the Plaintiff’s solicitors stating that the Defendants’ estimated that the potential damages that might be caused as a consequence of the Defendants being restricted in their dealing with the properties in a rising market was HK$30,000,000 and asked for evidence that Mr. Lau had unencumbered assets of this value.

22. As matters transpired Mr. Lau was not able to provide any evidence of his assets or any fortification for the cross-undertaking the 1^st Defendant seeks.  The Plaintiff, however, withdrew her application for an order restraining the disposal of the Canton Road property and did not seek an undertaking in respect of it.  The consequence of this Mr. Chan S.C. submitted was that there was no material risk of any damages being caused to the Defendants by an undertaking not to dispose of the shares in the 2^nd to 4^th Defendants or the remaining properties.  He argued that the Defendants were free to let the properties.  If they wanted to sell any of them they could approach the Plaintiff, who would have no reason to object to a sale at market value if the proceeds of sale were not disposed of.  There is no dispute that the Plaintiff owns 1% of the issued share capital of the 2^nd Defendant and through her interest in the 2^nd Defendant just under 0.5% of the 4^th Defendant.  Both these Defendants own properties and thus the Plaintiff’s interest in them have a value.  In addition Mr. Lau claims in paragraph 12 of his 2^nd affirmation that he is owed over HK$10,000,000 by the 3^rd Defendant.  Thus says Mr. Chan S.C. even if a court were to conclude at some future date that an injunction had been wrongly granted and the undertaking in damages were to be enforced such small loss as it might be shown to have been caused could be compensated out of these combined assets.  Thus fortification is not necessary.

23. The 1^st Defendant does not accept that Mr. Lau is owed anything by the 3^rd Defendant rather she alleges that he has been falsifying its accounts.  In my view there is sufficient uncertainty about Mr. Lau’s claim that it should be ignored for the purposes of considering the adequacy of the undertaking offered by him.  On the evidence before me it is impossible to put a precise value on the Plaintiff’s interest in the 2^nd and 4^th Defendants.  The Canton Road property owned by the 2^nd Defendant has been sold for HK$130,000,000.  The 2^nd and 4^th Defendants owned another 7 properties.  Other than a flat at the Belchers owned by the 4^th Defendant, which is said to be worth in excess of HK$12,700,000, I have no information about the value of the others, but it is reasonable to assume that the total value of all these unencumbered properties is materially more than HK$150,000,000.

24. The question of enforcement of the undertaking only arises if the Plaintiff is unsuccessful at trial in which case she will have to pay the Defendant’s costs.  Such an order would itself be likely to absorb most if not all of the Plaintiff’s assets.  In these circumstances it seems to me that I must proceed on the assumption that the undertakings that are offered are of little or no value.

25. Mr. Yu S.C. has argued, correctly in my view, that if a cross-undertaking is to be given it must have value or it becomes illusory.  There are, of course, circumstances in which an undertaking is not required at all, for example, when an injunction is sought by a public body in the public interest: see, for example, F Hoffmann-La Roche & Co A.G. v Secretary of State for Trade and Industry [1975] AC 295 and Kirklees Metropolitan Borough Council v Wickes Building Supplies Ltd [1993] AC 227.  This is not such a case.  There may also be exceptional cases in which the court is satisfied that the likelihood of substantial damage being done unless an injunction is granted is very great and the loss which may be caused to the defendant sufficiently small that it is just to grant an injunction even if a cross-undertaking of value cannot be given.  Mr. Chan S.C. does not suggest that this is such a case and he could not credibly have so argued on the facts of this case.

26. As I have already said Mr. Chan S.C. has argued that fortification should be commensurate with the loss that is likely to be suffered by the Defendant and that such loss is unlikely to be substantial.  I accept that the latter is probably the case, however, the risk of loss remains.  All the time the risk remains in my view the 1^st Defendant is entitled to require fortification.  There can be nothing surprising in this conclusion.  What is more surprising is that the Plaintiff should have commenced this application, allowed it to progress at a leisurely pace, instructed 2 counsel to represent her at the hearing and then not offered any meaningful fortification.

27. In my view the undertaking offered by the 1^st Defendant gives the Plaintiff all the protection the Plaintiff requires (which is not disputed by Mr. Chan S.C.) and the 1^st Defendant’s requirement that in exchange fortified cross-undertakings be given is reasonable. 

28. Mr. Yu S.C.’s attack on the application for an injunction does not end with the absence a meaningful undertaking in damages, it extends to most of its other elements.  In case this matter goes further and my finding in respect of the need for fortification is found to be wrong, I now turn to address these objections in more detail.  First, the Disputed Deed has not been stamped and as a consequence is not admissible in evidence.  Secondly, Mr. Yu S.C. submits that the Plaintiff has not demonstrated that there is a triable issue.  Thirdly, there is no basis for seeking an injunction against the 1^st Defendant over the assets of the 2^nd to 4^th Defendants.  Fourthly, the court should not interfere to restrain the 1^st Defendant as liquidator of the 2^nd to 4^th Defendants unless it is satisfied that she has not conducted herself bona fide or has acted in a way no reasonable liquidator should act, and neither have been demonstrated.  Fifthly, as the 2^nd to 4^th Defendants are in liquidation the court should not make an order, which is inconsistent with the statutory regime, which prescribes how their assets should be dealt with.

Status of the Disputed Deed

29. Section 15(1)(b) of the Stamp Duty Ordinance, Cap. 117, provides that no instrument chargeable with duty shall be used in civil proceedings unless it has been duly stamped.  The Disputed Deed has not been stamped.  The consequence of this, subject to the exception to which I refer in the next paragraph, is that the Disputed Deed is not admissible in evidence before me: Yau Wah Yau v Commissioner of Inland Revenue [2006] 3 HKLRD 586, Le Pichon J.A. 589D. 

30. Section 15(1A) provides that notwithstanding subsection (1) an instrument that has not been stamped may be admitted into evidence if a solicitor undertakes to cause the instrument to be stamped and any penalty paid.  Mr. Lau offers such an undertaking in paragraph 7 of his 2^nd affirmation.  This has been confirmed by Mr. Chan S.C. during oral submissions before me.  I accept that undertaking and accept that the Disputed Deed is admissible as evidence before me.

Triable Issue

31. The principal issue in this case is whether or not the 1^st Defendant executed the Disputed Deed.  Mr. Lau says that to his knowledge she did so.  The 1^st Defendant vehemently denies it and says that it has been created by Mr. Lau by taking the execution page of the deed of trust that she admits executing on 27 June 2001 and using it as the execution page of the Disputed Deed. 

32. The Plaintiff’s case relies entirely on the evidence of Mr. Lau.  Mr. Yu S.C. submitted that it is so lacking in credibility that it falls short of establishing a triable issue.  He points to the fact that in a letter to Hampton, Winter & Glynn acting on behalf of the 1^st Defendant dated 11 December 2006 when specifically addressing the contention that the Plaintiff was the beneficial owner of the 2^nd to 4^th Defendants he made no reference to the Disputed Deed.  The contents of the letter is entirely consistent with the 1^st Defendant being the sole beneficial owner of the companies.  Mr. Yu S.C. also points out that Mr. Lau’s explanation of the circumstances in which the Disputed Deed was created changed materially between his 1^st affirmation (see paragraph 9) and his 2^nd affirmation (see paragraphs 5 and 6).  In the former Mr. Lau says he was present when the Disputed Deed was executed on 8 March 2002. In the latter he tells a different story.  He says that the Disputed Deed was initially signed in December 2001 and he took custody of it.  He subsequently realized that the number of shares recorded in it were wrong.  He gave the Disputed Deed back to her for correction.  She returned it to him on 8 March 2002.  Mr. Lau says that “What she did was that she retained the signing page of the original Deed (namely, page 3) but replaced the other 3 pages with 3 new pages which stated the correct share numbers and the new date of the Deed.  I took a look at the new Deed, focused on the share numbers and confirmed that they were correct.  I did not see any need for her to re-execute the Deed physically and accepted the way she did it by using the signing page of the original Deed as the signing page of the new Deed and treating the new Deed as being executed by her on that day in my presence.  I do not know whether the Deed in its present form was prepared with the use of more than 1 typewriter, but if it was, what I stated above my provide an explanation for it.”

33. The catalyst for this change of story was the filing of the 1^st report of Dr. Sheila Hamilton on behalf of the Plaintiff.  Dr. Hamilton is a forensic scientist.  Her evidence amounts to this: the execution page of the Disputed Deed was taken from the 2001 Deed.

34. A second report of Dr. Hamilton was also produced in evidence.  In this report Dr. Hamilton opined that:

(1)   the “Lau & Co.” chop used on the Disputed Deed was not the same as that used on other documents produced in 2001 and 2002.

(2)   The ink on the Disputed Deed was different to that found on documents produced in 2001 and 2002.

(3)   The typewrite ribbons shows the anomaly in the creation of the Disputed Deed: it was created in reverse order, with the execution page being typed many times and different daisy wheels used to create different drafts of the Disputed Deed.

35. Mr. Yu S.C. submitted that the Plaintiff’s evidence is so problematic that she has failed to demonstrate that there is a serious question to be tried: American Cyanamid Co. v Ethicon [1975] AC 396, 407.

36. Mr. Chan S.C. argued that the letter of 18 December 2006 was not directed to the issue of ownership of the 2^nd to 4^th Defendants and it is unfair to interpret Mr. Lau’s failure to mention the Disputed Deed as indicating that it did not exist.  The tone of the letter is certainly tendentious and its contents go beyond what was necessary to answer the specific points raised by Hampton, Winter & Glynn.  To that extent I accept that Mr. Lau may not have been focusing his mind on beneficial ownership, but simply giving voice too his general indignation and frustration at the situation he was in.  Having said that it is still difficult to explain why he did not mention it in relation to the specific point raised in the 3^rd paragraph of Hampton, Winter & Glynn’s letter, namely, that Katie had no reason to be involved with the companies.  The obvious response would have been that she had every reason to be involved as she was the beneficial owner of half the shares of the companies.

37. Mr. Chan S.C. argued that nothing can be read into the fact that the Plaintiff has not adduced expert evidence to rebut Dr. Hamilton.  There is nothing in what she says, which is inconsistent with Mr. Lau’s explanation of how the Disputed Deed came into existence, namely, that it was created by the 1^st Defendant using what Mr. Lau assumed to be the execution page of the original version of the Disputed Deed. 

38. Secondly, Mr. Chan S.C. argues the Plaintiff’s proposed expert, Dr. Lyter, wished to carry out destructive tests and he did not have access to documents.  This has delayed production of a report by him.  Mr. Yu S.C. disputes this.

39. I have read the contemporaneous correspondence concerning this matter, which is contained in exhibits EL-27 to EL-30.  What cannot be disputed is that Dr. Lyter completed non-destructive testing as this is expressly stated in Simon S.M. Kwok & Co.’s letter of 4 September 2007.  Also I find nothing in the documents exhibited by Mr. Lau, which in my view explains why it has not proved possible for Dr. Lyter to produce a report at least on the matters that do not require destructive testing.  It is obvious that Dr. Hamilton’s evidence is highly relevant in determining whether or not a triable issue has been established.  It is odd that the Plaintiff has not produced expert evidence to rebut Dr. Hamilton’s evidence if Dr. Lyter disagrees with it.  In my view the absence of any explanation from the Plaintiff of the questionable characteristics of the Disputed Deed is a matter to be taken into account in assessing whether a triable issue has been demonstrated.

40. Mr. Yu S.C. drew my attention to the following passage from Series 5 Software v Clarke Ch D 853 at 865c, in which Laddie J. considered how the court should assess whether or not a serious issue has been demonstrated in cases in which difficult questions of fact or law arise:

In my view Lord Diplock did not intend by the last-quoted passage to exclude consideration of the strength of the cases in most applications for interlocutory relief.  It appears to me that what is intended is that the court should not attempt to resolve difficult issues of fact or law on an application for interlocutory relief.  If, on the other hand, the court is able to come to a view as to the strength of the parties’ cases on the credible evidence, then it can do so.  In fact, as any lawyer who has experience of interlocutory proceedings will know, it is frequently the case that it is easy to determine who is most likely to win the trial on the basis of the affidavit evidence and any exhibited contemporaneous documents.  If it is apparent from that material that one party’s case is much stronger than the other’s then that is a matter the court should not ignore.  To suggest otherwise would be to exclude from consideration an important factor and such exclusion would fly in the face of the flexibility advocated earlier in American Cyanamid.  As Lord Diplock pointed out in Hoffmann-La Roche, one of the purposes of the cross-undertaking in damages is to safeguard the defendant if this preliminary view of the strength of the plaintiff’s case proves to be wrong.

Accordingly, it appears to me that in deciding whether to grant interlocutory relief, the court should bear the following matters in mind.  (1) The grant of an interlocutory injunction is a matter of discretion and depends on all the facts of the case.  (2) There are not fixed rules as to when an injunction should or should not be granted.  The relief must be kept flexible.  (3) Because of the practice adopted on the hearing of applications for interlocutory relief, the court should rarely attempt to resolve complex issues of disputed fact or law.  (4) Major factors the court can bear in mind are (a)  the extent to which damages are likely to be an adequate remedy for each party and the ability of the other party to pay, (b) the balance of convenience, (c) the maintenance of the status quo, and (d) any clear view the court may reach as to the relative strength of the parties’ cases.

41. Both parties have had plenty of opportunity to file evidence necessary to support as fully as they are able their respective cases.  On the evidence before me the 1^st Defendant’s case looks stronger at this stage then that of the Plaintiff.  However, I am not required to assess who is likely to win at trial, the question I have to answer for the purposes of this application is whether or not the Plaintiff has done enough to satisfy me that there is a serious question to be tried.  Lord Diplock in American Cyanamid at page 407H to 408B described the exercise that the court must undertake when considering this question in the following terms:

“It is no part of the court’s function at this stage of the litigation to try to resolve conflicts of evidence on affidavit as to facts on which the claims of either party may ultimately depend nor to decide difficult questions of law which call for detailed argument and mature considerations.  These are matters to be dealt with at the trial.  One of the reasons for the introduction of the practice of requiring an undertaking as to damages upon the grant of an interlocutory injunction was that “it aided the court in doing that which was its great object, viz. abstaining from expressing any opinion upon the merits of the case until the hearing”: Wakefield v. Duke of Buccleugh (1865) 12 L.T. 628, 629.  So unless the material available to the court at the hearing of the application for an interlocutory injunction fails to disclose that the Plaintiff has any real prospect of succeeding in his claim for a permanent injunction at the trial, the court succeeding in his claim for a permanent injunction at the trial, the court should go on to consider whether the balance of convenience lies in favour of granting or refusing the interlocutory relief that is sought”.

42. I am not satisfied that the Plaintiff has no real prospect of success at trial.  I accept, however, that the relative strengths and weaknesses of the parties’ respective cases are matters I can properly take into account when considering the balance of convenience.

Assets of the Companies

43. The Plaintiff seeks to enjoin the Plaintiff from disposing of the assets of the 2^nd to 4^th Defendants.  It is not in dispute that the Plaintiff does not have a beneficial interest in the assets of these companies.  Mr. Chan S.C. submits that as long as the Plaintiff has established that she has a cause of action the court has jurisdiction under section 21L of the High Court Ordinance to grant an injunction to preserve property, which is indirectly the subject of the proceedings even if the Plaintiff has no proprietary right in them.

44. Mr. Yu S.C. argued that the jurisdiction under section 21L only exists for the protection or assertion of legal and equitable rights and those rights must be of such a kind that the court prior to the passing of the Judicature Act of 1873 had jurisdiction to enforce by way of final judgment against the person in respect of whom relief is sought.  Mr. Yu S.C. relies on the acceptance of these propositions by the Court of Appeal for the purposes of the appeal in Mandarin Resources Corporation Ltd. v David Cheng Heng Soon & others CACV 146/1987 unrep. 28 April 1988.  He also took me to the decision of the High Court of Australia in Australian Broadcasting Corporation v Lenah Game Meat Pty. Ltd 208 CLR 199 and in particular passages in the judgments of Gleeson C.J. (pages 216 to 218) and Callinan J. (pages 310 to 311).  Mr. Yu S.C. submitted that the judgment was consistent with the principles to which I have referred above as demonstrated by the following passage at page 310 of the judgment of Callinan J. in which the judge quotes from a joint judgment of Gaudron, McHugh , Gummow and Callinan J.J. in Cardile v LED Builders Pty Ltd. (1999) CLR 380 at page 494:

“However, in England, it is now settled by several decisions of the House of Lords (495) that the power stated in Judicature legislation – that the court may grant an injunction in all cases in which it appears to the court to be just and convenient to do so – does not confer an unlimited power to grant injunctive relief.  Regard must still be had to the existence of a legal or equitable right which the injunction protects against invasion or threatened invasion, or other unconscientious conduct or exercise of legal or equitable rights 496).  The situation thus confirmed by these authorities reflects the point made by Ashburner that ‘the power of the court to grant an injunction is limited by the nature of the act which it is sought to restrain’.(497)”

45. Mr. Chan S.C. does not argue that his client has a legal or equitable interest in the assets of the 2^nd to 4^th Defendants, his response to Mr. Yu S.C.’s argument is simply that it confuses the need for their to be a legal or equitable right, which the action seeks to protect or establish and the legal and equitable rights in the asset, which the application for an interim injunction seeks to protect.  The Plaintiff asserts a right to the shares of the 2^nd to 4^th Defendant.  It is not necessary for her to go further and assert a right in respect of the companies’ assets in order to obtain an injunction.  It is enough, submits Mr. Chan S.C., for the Plaintiff to satisfy the court that it is just and convenient to make an order restraining their disposal.

46. I was not taken to the 2 cases referred to in the Court of Appeal’s decision in Mandarin Resources Corporation, but I have subsequently read them.  In my view they do not support the proposition, which the Court of Appeal accepted for the purposes of that appeal.  The relevant principle that emerges from the cases is explained in the judgment of Lord Diplock in British Airways Board v Laker Airways Ltd. & others [1985] 1 A.C. 58 at page 80H to 81C:

“The answer to these appeals, in my opinion, clearly emerges from the application to the allegations that are crucial in Laker’s case against B.A. and B.C. in the American action of what since the merger of the courts of common law and Chancery has been a fundamental principle of English legal procedure.  That principle, originally laid down in North London Railway Co. v. Great Northern Railway Co. (1883) 11 Q.B.D. 30, was re-stated by me (albeit in terms that I recognise were in one respect too narrow) in Siskina (Owners of cargo lately laden on board) v. Distos Compania Naviera S.A. [1979] A.C. 210, 256:

‘A right to obtain an … injunction is not a cause of action … It is dependant upon there being a pre-existing cause of action against the defendant arising out of an invasion, actual or threatened by him, of a legal or equitable right of the plaintiff for the enforcement of which the defendant is amenable to the jurisdiction of the court of the court’”.

47. In my view the decision of the High Court of Australia in Australian Broadcasting Corporation v Lenah Game Meat Pty. Ltd. does not say anything different.  As long as the Plaintiff has a cause of action it is not also necessary to show that the Plaintiff has a legal or equitable interest in an asset, which it is sought to protect by interlocutory injunction.  I, therefore, reject Mr. Yu S.C.’s submission.

Restraining the liquidators of the 2^nd to 4^th Defendants

48. Mr. Yu S.C. argued that the court should only interfere to restrain the 1^st Defendant as liquidator of the 2^nd to 4^th Defendants if satisfied that she had not acted bona fide or had acted in a way, which no reasonable liquidators could act: Leon v York-O-Matic Ltd. & ors [1966] 1 WLR 1450 at 1454C-D, applied in voluntary liquidation in Harold M Pitman & Co. v Top Business Systems (Nottingham) Ltd. [1984] BCLC 593 at 596c, i-597d..

49. I accept that as a general principle the court only acts to retrain a liquidator if it is demonstrated that the liquidator has acted mala fide or in a way which no reasonable liquidator should act.  However, in my view that is not the issue.  The Plaintiff seeks to restrain the 1^st Defendant from continuing to breach her duties as trustee of shares in the 2^nd to 4^th Defendant.  The fact that she has caused the companies to be put into voluntary liquidation and appointed herself liquidator is in itself irrelevant as the 1^st Defendant has only become liquidator as a consequence, on the Plaintiff’s case, of her breach of duty.  If I am satisfied that the Plaintiff has demonstrated that there is a serious issue to be tried and that the balance of convenience requires enjoining the 1^st Defendant I can see no reason in principle why the fact that this would inhibit the 1^st Defendant’s actions as liquidator of the companies requires me to refuse to grant an injunction.

Court should not make an order which is inconsistent with the statutory regime for regulating voluntary liquidations

50. For the same reasons that I have rejected the last argument I reject this one.

Balance of convenience

51. I am satisfied that there is a triable issue and that the objections to the injunction raised by Mr. Yu S.C. are misconceived.  However, the 1^st Defendant has offered to give a satisfactory undertaking to the court on terms, which I consider reasonable.  I am not satisfied that the balance of convenience requires granting an injunction in the terms sought by the Plaintiff.  I, therefore, dismiss the application. 

Receiver

52. At the outset of the hearing I told the parties that having read the papers I was unlikely to appoint a receiver over the companies with all the cost that it would entail.  Not surprisingly given my indication and the 1^st Defendant’s offer of suitable undertakings this application was not pressed by Mr. Chan S.C. and I dismiss it.

Costs of the summons dated 15 June 2007

53. I make an order nisi that the costs of the summons dated 15 June 2007 are paid forthwith by the Plaintiff to the 1^st Defendant, such costs to be taxed if not agreed.  The order will become absolute unless an application to vary it is made within 14 days of the date of handing down of this judgment.

Lis pendens

54. The Plaintiff seeks declarations in paragraphs 6 to 15 of the Amended Indorsement of Claim that assignments of 9 properties to the 5^th Defendant are null and void and in paragraph 16 of the Amended Indorsement of Claim a declaration that an agreement for sale and purchase of a property in Canton Road by the 5^th Defendant following an assignment to it of the property by the 2^nd Defendant is also null and void and should be set aside.  In addition in paragraph 17.1 of the Amended Indorsement of Claim the Plaintiff seeks an injunction preventing the disposal by the Defendants of a property in Tsuen Wan held in the name of the 3^rd Defendant.  The Plaintiff has registered the writ in this action as a lis pendens against each of these 11 properties.

55. By their summons issued on 20 July 2007 the Defendants seek an order under section 19 of the Land Registration Ordinance, Cap. 128, to vacate the registration of the writ herein as a lis pendens against each of the 11 properties.  They also seek an order that the Plaintiff pays such costs and expenses as the Defendants have incurred by the registration of the lis pendens or will incur in vacating them.

The Argument

56. Section 1 of the Land Registration Ordinance defines a lis pendens as “any action or proceeding pending in a court or tribunal that relates to land or any interest in or charge on land”.  Mr. Yu S.C. argued that only actions that affect land or an interest in it are registrable.  He took me to the following authorities: Thian’s Plastics Industrial Co. Ltd. & ors (No. 2) v Tin’s Chemical Industrial Co. Ltd. & ors [1971] HKLR 249 at 252 (CA); Tahir v Cheung Wai Bun [1980] HKC 370; Chow Chiu Tai v Chan Tak Ming [1993] 2 HKC 582 at 588C.

57. Mr. Yu S.C. submits that a dispute as to the beneficial ownership of the shares of a company which holds real property does not affect any interest in the property: Thian’s case ibid; Good Profit Development Ltd. v Leung Hoi [1992] 2 HKC 539.  Mr. Yu S.C. points out that a shareholder in a company does not have a legal or beneficial interest in the company’s assets.  As I have stated above this last proposition is not in dispute.

58. The principle issue between the Plaintiff and the 1^st Defendant is the ownership of the 2^nd to 4^th Defendants.  The declaratory relief claimed in paragraphs 6 to 16 of the Amended Indorsement of Claim and the injunction sought in paragraph 17.1 in no way affect the properties says Mr. Yu S.C.  The reality is that the 5^th Defendant holds the first 10 properties on trust for the 2^nd to 4^th Defendants and under the rule in Saunders v Vaultier (1841) Cr. & Ph 240 can call for a transfer of them at any time.  The only thing stopping them doing so is the dispute over their ownership, which is the real dispute between the parties.  Similarly the dispute in respect of the property held in the name of the 3^rd Defendant concerns ownership of that company not the property itself.  Accordingly, Mr. Yu S.C. submits this action does not relate to land or an interest in it.

59. Mr. Chan S.C. submitted that this is too narrow a reading of section 1 and the authorities.  He relies on passages from the Chow Chiu Tai v Chan Tak Ming [1993] 2 HKC 582 to demonstrate this:

“Megarry J.’s decision in that case was correct I do not for one moment doubt … I have no doubt that the judge was perfectly right in coming to the conclusion that that was not a pending land action.

But a judge’s words are to be read in the light of the question which he is determining, and although the dichotomies which the judge drew, first between a substantive right and a mere fetter on the owner’s right of disposal and, secondly, between an action claiming a proprietary interest in the land and one merely restraining the owner from exercising his power of disposition, were convenient in the context of what Megarry J had to decide, there are cases (and this is one of them) which fall within neither of those dichotomies; and I do not think Megarry J intended to lay down any general rule to determine what action does and what action does not fall within the definition.  One must in each case, as I see it, look at the terms of the definition and say whether the action or proceeding with which one is concerned is one which falls fairly within it.  Some assistance in answering the question will no doubt be obtained by considering whether, in the absence of registration, a purchaser or mortgagee might obtain a title to the land as a bona fide purchaser without notice of, and so defeat, the plaintiff’s claim.  Here the action or proceeding did claim the land and it appears to me that it clearly falls within the definition.  If Megarry J intended to lay down the principle that in order to be registrable there must be a claim to an existing interest in the land, then I venture to think he came to a wrong conclusion in that regard. [My emphasis]

Orr LJ agreed with Stamp LJ and Eveleigh LJ further commented at p 24H:

I would add that I do not read the judgment of Megarry J in Calgary and Edmonton Land Co. Ltd. v Dobinson [1974] Ch 102 as saying that there must be a claim to a specific vested proprietary interest …” page 585B-H

“However, there may be actions in which there are no direct or expressed claims for any interest in land and yet the judgment or order to be given may affect the land in question”  page 588H

60. I agree.  In my view the action does relate to the 11 properties and the lis pendens are properly registrable against their title.  I dismiss the Defendants’ summons dated 20 July 2007 and make an order nisi that the 1^st Defendant pays the Plaintiff’s costs forthwith such costs to be taxed if not agreed.  The order will become absolute if an application to vary it is not made within 14 days of the date of handing down of this judgment.