XCHRX DESERT PALACE INC and Another v. CHAN CHEN LI HUNG

1996, No. A7248

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

___________

JUDGMENT

___________

1. The plaintiffs have judgments against the defendant. On 29 September and 17 October 1997, they obtained charging orders nisi in relation to 1 million shares in Ferguson Holdings Limited (Ferguson) standing in the name of the defendant. On 29 October 1997, the trustees in bankruptcy (the trustees) of Mr Ting Lei Miao (Mr Ting) issued summonses seeking orders that the charging orders be discharged "on the ground that [the defendant] never has any beneficial interest" the shares, and that beneficial interest rests in Mr Ting. On the 8 December 1997, Master Kwan dismissed the trustees' applications and made the charging orders absolute. The trustees have appealed against these orders. This appeal is now before me.

2. The defendant, through her solicitor Mr Louis Fung, also contested the application to make the charging order absolute before the Master on the basis that the plaintiffs had not satisfied her that the amount now claimed had been correctly calculated. Mr Fung also appeared before me, although, as far as I can see, the defendant has lodged no notice of appeal against the Master's decision.

3. It is accepted on all sides that the shares are registered in the name of the defendant. The solicitor now acting for the trustees, and who had previously acted for Mr Ting, made an affirmation on 28 October 1997. He says that Mr Ting "was" the registered owner of 3.5 million shares in Ferguson, and that the defendant "is" the registered owner of 1 million shares. He says that these 1 million shares "are and were at all material times held by the defendant upon trust for Ting pursuant to a Declaration of Trust dated 14 October 1998 executed by the defendant in favour of Ting." The declaration of trust is actually dated 14 October 1988, not 1998. The annual return of Ferguson filed on 29 October 1996 shows that the defendant was the holder of 1 million shares. The return does not show Mr Ting as holding any shares, but 3.5 million shares are held by two corporations.

4. There is no evidence before me from the defendant or Mr Ting. However, in an action by Mr Ting against the defendant, in which the trustees are seeking to intervene, the defendant has filed a defence in which she says she contributed money to enable Mr Ting to acquire his shares in Ferguson. She and Mr Ting agreed that she would hold 1 million shares that would later be transferred to Mr Ting upon him repaying that money. He has not repaid the money, says the defendant. These allegations in that defence are not evidence before me.

5. The defendant does not contest the proceedings before me on the basis that there is an issue as to the beneficial interest in the shares held by her.

6. The plaintiffs contest the locus standi of the trustees in this matter. In the action I have just mentioned, the Chief Judge has held, on a trial of preliminary issues, that the order of the Taiwanese court appointing the trustees did not have any effect in Hong Kong, and that this court should not recognize the order as having any effect over the shares. The trustees have appealed against this decision.

7. Mr Fok argues that it has been determined that the trustees can claim no right to the shares in Hong Kong. It is true that, subject to the appeal, this has been determined as between the trustees, the defendant and Mr Ting, but I am not sure that the plaintiffs can take advantage of a ruling in a matter to which they were not parties. It may that the decision of the Chief Judge is a judgment in rem, and that the plaintiffs can use it in these proceedings. Whether or not the judgment is in rem was not argued before me so I cannot make a finding on this.

8. As to the beneficial ownership of the shares, there is no evidence before me on how the declaration of trust came to be signed, and for what purpose. The onus is on the trustees to show cause. To discharge that burden, they have produced the declaration of trust. This, prima facie, says that the defendant has no such beneficial interest. The trustees do not say that the charging order should be discharged on this basis, but do say that there is an issue of fact that should be tried. I agree.

9. Regarding the defendant's attitude, I am not sure that her complaint is properly before me. It does seem to me, however, that where a judgment debtor has no control over the sale of assets undertaken to satisfy the judgment debt, and no other means of obtaining information regarding this, she is entitled to be supplied with the relevant documents showing that the net credit given against the judgment debt is properly calculated.

10. In the result, the order making the charging orders absolute is set aside. There will be a trial of the issues regarding the locus standi of the trustees and the beneficial ownership of the shares. It may that the trial as to locus will consist of legal argument only, or the parties may agree to be bound by the outcome of the appeal I have mentioned. If necessary, the parties may come back to me for further directions. In the meantime, the costs of the matter before me are reserved.

JK FINDLAY

Judge of the High Court
Court of First Instance