LAM SIK YING v. LAM SIK SHI AND ANOTHER

HCA 4713/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4713 OF 2001

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BETWEEN

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J U D G M E N T

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1.  This is an application for a Mareva injunction by the plaintiff against the 1^st defendant.

2.  The plaintiff and the 1^st defendant are half brothers.  Their father, Lam Tim alias Stan Lam Tim (“the father”), passed away on 6 January 1983.  He died intestate.

3.  Letters of administration were granted to the plaintiff and his mother (Madam Wong Kwan Yung) on 24 March 1999.  Madam Wong passed away on 7 June 1999, leaving the plaintiff as the sole surviving administrator of the estate of the father.  This is the capacity in which he makes his claim in this action.

4.  The Statement of Claim was filed as long ago as April 2002.  The cause of action asserted against the 1^st defendant was that he intermeddled with the estate and committed acts or suffered omissions in relation to the estate, causing substantial loss and damage to the estate.  In March 2010, the plaintiff filed particulars of damage of the claim which added up to a figure of HK$32,034,964.80. Allegations include using the father’s firm name to siphon off business, collecting receivables from father’s customers, collecting rent on father’s properties, occupying property owned by the father without paying rent, etc.

5.  In his affirmation filed in support of the summons, the plaintiff acknowledged that the action has not progressed much during the past few years.  He blamed this on the 1^st defendant in starting several actions and taking out numerous applications against him which, he claims, was directed at preventing him from proceeding with the action.  He claims that the 1^st defendant was using the other actions he started as a tactic to exhaust the funds of the estate and his energy and resources.

6.  The plaintiff and the defendant co-own a property at Ground Floor, no. 4 Sharp Street East, Hong Kong (“the property”).  In April 2010, the 1^st defendant obtained an order from the Hon Mr Justice Bharwarney in HCMP 1273 of 2010 for the sale of the property.  That order directed that the sale be conducted by private tender with a reserve price not less than HK$62 million, and if it could not be sold under those conditions, that the property be sold by public auction with a reserve price of HK$60 million. The plaintiff applied unsuccessfully for a stay of execution.  An appeal to the Court of Appeal for stay was similarly dismissed on the ground that the plaintiff (who was the defendant in that action) failed to show an arguable appeal.  The plaintiff has not pursued the intended appeal. 

7.  The sale as ordered by Bharwarney J has not proceeded.  Mr Chan for the plaintiff informed the Court that there was a potential purchaser offering $70 millon for the property, but the price has recently gone up.  Whilst the plaintiff had previously opposed the making of the order for sale, Mr Chan said the plaintiff is now keen that the sale should be effected as soon as possible.  Quite evidently, the purpose of the present application is to seek to restrain the 1^st defendant from dissipating his half share of the net proceeds of sale of the property if and when this materializes.

Relevant guidelines on the grant of Mareva Injunction

8.  I take the relevant guidelines for the grant of a Mareva injunction from the Hong Kong Civil Procedure 2011 paragraph 29/1/56.  The plaintiff has to show

(1)   that he has a good arguable case on a substantive claim over which the court has jurisdiction,

(2)   that there are assets within the jurisdiction,

(3)   that the balance of convenience is in favour of grant and

(4)   that there is a real risk of dissipation of assets or removal of assets from the jurisdiction which would render the plaintiff’s judgment of no effect. 

9.  What does it mean to say that the plaintiff must show a “good arguable case”?  Mustill J considered that question in Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft mbH & Co KG [1984] 1 All ER 398 at 402c to 404e.  He started the discussion by observing that the judge is bound to make some assessment of the plaintiff’s chance of success.  The plaintiff’s chance of success is relevant first to the threshold question of whether the plaintiff can demonstrate he has a case of certain strength before the question of granting Mareva relief can arise, and secondly to the overall weighing process.  After reviewing the authorities, Mustill J stated the following propositions:

(1)   the plaintiff must do more than make a bare assertion of facts which would give the court jurisdiction,

(2)   the question whether the plaintiff has shown a prima facie case is not an appropriate test, at least where the respondent has adduced evidence in opposition,

(3)   the court cannot, and should not attempt to, try the issues at the interlocutory stage. 

(4)   Nor does the expression ‘made sufficiently to appear’ mean that the court should apply the same standard of proof as will be appropriate at the trial. 

(5)   The plaintiff has to do substantially more than show that the case is merely ‘arguable’. 

On the other hand, the plaintiff need not go as far as to persuade the judge that he is likely to win.  In dismissing the appeal from that judgment, the Court of Appeal (Eveleigh, Kerr and Dillon LJJ) agreed with the test applied by Mustill J, and only noted that a good arguable case is no doubt the minimum which the plaintiff must show in order to cross the threshold for the exercise of the jurisdiction, but that at the end of the day the court must consider the evidence as a whole in deciding whether or not to exercise the statutory jurisdiction (p. 415d-e).

10.  Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft mbH & Co KG was applied by the Court of Appeal in Anglo-Eastern (1985) Ltd v Knutz & others [1987] 3 HKC 80 and more recently by Stone J in Akai Holdings Limited & others v Ho Wing On, Christopher & others HCCL 37/2005 and HCCL 40/2005 (9 February 2009). 

11.  As to the requirement to show risk of dissipation, it is not necessary for the plaintiff to show subjective intent on the part of the defendant to dissipate the assets or remove his assets from the jurisdiction for the purpose of defeating any judgment.  To put this in another way: there is no requirement to prove nefarious intent: see Gee, Commercial Injunctions 5^th ed., paragraph 12.032 and Akai Holdings Limited & others v Ho Wing On, Christopher & others HCCL 37/2005 and HCCL 40/2005 at paragraph 52.  The test formulated by the Court of Appeal in Ninemia Maritime Corporation v Trave Schiffahrtsgesellschaft mbH & Co KG was

“whether, on the assumption that the plaintiffs have shown ‘a good arguable case’ the court concludes, on the whole of the evidence then before it, that the refusal of a Mareva injunction would involve a real risk that a judgment or award in favour of the plaintiffs would remain unsatisfied.”[1]

Delay?

12.  One other important consideration needs to be mentioned.  It has sometimes been said that delay can bar a claimant from seeking an interlocutory injunction; the justification for that statement being that interim relief is granted only in matters of urgency, so that a claimant who delays thereby demonstrates the absence of any urgency requiring prompt relief: see Snell’s Equity, 31^st ed., paragraph 16-25.  Spry, Equitable Remedies, 8^th ed., p. 488 suggests however that general statements that delay can be fatal are in several respects misleading.  There are no doubt cases where delay on the part of the plaintiff results in prejudice either to the defendant or third parties such that it becomes unjust to grant the remedy.  Delay will also be urgent of evidential weight, as the contention that the claimant is in need of protection loses much of its force if the claimant himself fails to take any timely action after he is aware of the facts.

Has there been delay in the present case?

13.  It is convenient to start with the last point. In his written skeleton to this Court, the first point raised by the 1^st defendant is that the action has been dormant for a very substantial period of time.

14.  Although the plaintiff sought to justify part of the delay by attributing fault to the 1^st defendant in initiating various actions or applications, it is difficult to see how the lapse of some 10 years can be justified.  This action has not even been set down for trial.

15.  However, the issue here is not whether there is delay in bringing this action to trial.  Rather, it is whether there has been delay on the part of the plaintiff in seeking this interim relief, and if so, with what consequences.  In the present case, the plaintiff perceives there is a risk of dissipation only after the property is sold and the 1^st defendant has received his half share of the net proceeds.  There is thus no real urgency for the plaintiff to seek protection unless a sale is imminent.  In the rather unusual circumstances here, I do not think it can properly be said that there is any delay on the part of the plaintiff in seeking the relief sought in his present summons.

Good arguable case?

16.  I turn then to the question whether the plaintiff has shown a good arguable case.  Mr Chan submitted that there is strong evidence that the 1^st defendant has intermeddled with the estate.  He referred me in particular to paragraph 11(3) of the 1^st defendant’s Defence which is said to contain an implied admission that after the death of the father, the 1^st defendant and others had operated a business under a similar name.  He also referred me to a Tomlin Order made in HCA 1885 of 1987 as long ago as April 1992 in which the 1^st defendant expressly acknowledged his responsibility and liability to account to the estate of the father of all income, receipts, receivables, expenses, outgoings etc in respect of the father’s estate which have come into his hands since the date of death.

17.  Indeed, it is fair to say that the 1^st defendant, who appeared in person before me, did not dispute that he had had the use of the premises at ground floor, no. 6 Sharp Street East from the date of the father’s death (although he said that the business ceased in 1992 and the premises were vacated then).  Nor did he dispute that he continued after the death of the father to reside in the father’s premises at Li Kwan Road.  He contended however that he should not have to account for the value of his occupation there since the premises was family property in which all children of the father could stay rent free.  He further accepted that there were some properties in North Point belonging to the estate in respect of which he collected some rent.  He said he reported to the revenue (presumably meaning the Estate Duty Office) all receipts of rental.  He explained that the only reason why he did not account to the plaintiff was because they had a quarrel.

18.  I am satisfied on the materials before me that the plaintiff does have a good arguable case that the 1^st defendant has a duty to account to the estate.  What is however very much in dispute is the quantum. 

19.  During the hearing, Mr Chan took me through the “Particulars of Damage” filed on behalf of the plaintiff.  During that exercise, he readily accepted that there were some substantial heads of claim which he could not support on the materials before me.  He also accepted that one must also take into account the fact that the 1^st defendant, as one of the father’s children, was entitled to a share of the estate.  He produced a sheet of calculation which came up with a figure of $13,707,675.12. Another difficulty which Mr Chan faced was that the plaintiff had obtained valuation reports as to the market rental value of various properties which the plaintiff says supports the figures pleaded in the Particulars of Damage, none of these reports had been included as evidence in support of the summons. I refused an application by the plaintiff for an adjournment of the hearing to put in these reports. 

20.  In the circumstances, I do not think it is appropriate at this stage for me to seek to embark upon a detailed analysis of the various heads of claims.  Instead I propose to adopt a broad brush approach and to consider at the stage when I come to the balance of convenience what would be an appropriate figure which the plaintiff merits protection (assuming he satisfies the other requirements) by a Mareva injunction in the light of all the evidence before me.

Risk of dissipation

21.  Mr Chan has relied on a number of matters to urge upon me that there is a real risk of dissipation.  His written submissions even put his case as high as “devious conduct and low morality” of the 1^st defendant. 

22.  As noted above, the test here is objective. I ask myself whether on the whole of the evidence before me, the refusal of a Mareva injunction would involve a real risk that a judgment or award in favour of the plaintiff would remain unsatisfied.

23.  Thus posed, I answer the question in the positive. I stress that in doing so, I pass no judgment whatsoever upon the plaintiff’s allegation of “devious conduct and low morality”.  I do however take into account the following facts:

(1)   once the 1^st defendant receives the proceeds of sale, it would be relatively easy for him to move the assets out of the jurisdiction,

(2)   he is currently residing outside Hong Kong, and

(3)   there has been taxed costs against him which he has not yet settled (although I appreciate that he says he is entitled to set those off against the costs which the plaintiff has been ordered to pay him in the proceedings for an order for sale and the subsequent unsuccessful applications by the plaintiff for a stay of that order).

Balance of convenience and exercise of discretion

24.  The ultimate question is whether it is just and convenient to grant the injunction sought: s. 21L of the High Court Ordinance. 

25.  I have deferred consideration of the sum which the plaintiff merits protection until this stage.  In undertaking that exercise, I have regard to the revised figures which Mr Chan put before me and to some of the figures mentioned by the 1^st defendant during the course of his submissions.  Doing the best I can and stressing the broad brush nature of such an exercise, I have arrived at a figure of $2,500,000 to be the amount which the plaintiff merits protection upon the evidence before me.

26.  Given my finding that the plaintiff has a good arguable case and that there is a risk of dissipation, it is my view that it would be just and convenient to impose on the 1^st defendant a Mareva injunction up to the limit of HK$2,500,000, subject to the plaintiff’s undertaking as to damages, and the usual liberty to the 1^st defendant for living and legal expenses. 

27.  The plaintiff has put before me a draft order which has a provision for disclosure of information.  I do not think it would be necessary or appropriate in the present case to order the 1^st defendant to make disclosure, since the target assets are the 1^st defendant’s share of the net proceeds of sale and there can be no doubt that his share would top the amount imposed.  I have not heard submissions from the 1^st defendant on the amount he requires for living expenses or on legal advice and representation.  What I propose to do is to make an order in terms of the draft put before me, subject to appropriate amendments as indicated in this judgment, that is to say, (a) the substitution of the amount in the limit and (b) the deletion of the discovery order, and give liberty to the parties to apply. 

Costs

28.  As for costs, I make an order nisi that the plaintiff should have his costs in the cause.