CHAN SZE WING v. CONGRUENCE CHINESE MEDICINE & JING LUO HEALTH LTD AND ANOTHER

HCA 866/2012

[2020] HKCFI 2596

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 866 OF 2012

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J U D G M E N T

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A.   Introduction

1.  This is the Judgment following the trial of this action, which began by writ issued as long ago as 23 May 2012, but which relates to various matters which occurred a few years before that.

2.  In November 2007, the plaintiff sought treatment from Madam Tsang Pui Chong (“TPC”), who held herself out as a licensed Traditional Chinese Medicine Practitioner.  TPC operated through the 1^st defendant company (“Company”), of which TPC was at all material times the sole shareholder and sole director.  The treatment caused injuries to the plaintiff.

3.  The plaintiff complained to the Consumer Council on 23 January 2008, which referred the complaint to the Chinese Medicine Council of Hong Kong, which revealed that TPC was not a licensed traditional Chinese medicine practitioner.  The matter was further referred to the Police, and following an undercover operation the Police arrested TPC on 29 April 2008.  TPC was made fully aware that the source of the complaint leading to her arrest was the plaintiff (who also identified TPC at an identity parade as the person who caused her injuries).

4.  On 3 September 2008, TPC pleaded guilty to and was convicted of 3 criminal charges in the Tsuen Wan Magistracy.  The three charges were: (1) practising Chinese medicine by an unregistered person which resulted in personal injury; (2) unlawfully practising Chinese medicine; and (3) implying that she was a registered Chinese medicine practitioner by false use of title.  After being remanded in custody for 14 days pending a background report, TPC was ultimately fined $50,000 on 17 September 2008.

5.  Subsequently, the plaintiff commenced a personal injury claim in DCPI 2692/2009 (“PI Action”) by writ dated 30 December 2009.  The claim was brought against both the Company and TPC as defendants. Following trial in the PI Action, then Deputy Judge (now HHJ) Harold Leong gave judgment on 23 March 2012 in favour of the plaintiff, holding the Company and TPC jointly and severally liable for damages in the sum of $149,550 plus interest (“Judgment Debt”), together with costs.  Leave to appeal on quantum was refused.

6.  Neither the Company nor TPC have paid any part of the Judgment Debt, or the interest since accrued, or the costs.

7.  However, in the meantime between the date of TPC’s criminal conviction on 3 September 2008 and the commencement of the PI Action on 30 December 2009, TPC procured the Company to sell what seems to have been its only substantial asset, being the property situate at and known as Flat F on 4^th Floor of Wang Wah Mansion, 57/65 Texaco Road, Tsuen Wan, New Territories (“Property”).

8.  The Property was sold by an assignment (“Assignment”) said to have been made on 5 May 2009, though it was only stamped and registered in the Land Registry on 30 September 2009.  The Property was sold to the 2^nd defendant in this action (“defendant”).  The defendant is the older sister of TPC.

9.  The purchase price stated on the Assignment was $930,000. On the basis of a valuation provided by a Single Joint Expert, it is not in dispute that the market value of the Property as at 5 May 2009 was actually $1,370,000 and as at 30 September 2009 $1,520,000.  The price of $930,000 was therefore approximately only 67% and 61% of the actual market value on those dates.

10.  The plaintiff’s claim primarily seeks to set aside the Assignment as being a sham transaction or a disposition made with intent to defraud a creditor, that is as a transaction contrary to section 60 of the Conveyancing and Property Ordinance Cap 219 (“CPO”).  There is also an alternate claim in conspiracy to injure the plaintiff by delaying or hindering her in receiving or otherwise enjoying the fruit of the Judgment Debt.

11.  At trial, the plaintiff was represented by Counsel Mr Andy Lam, and the defendant was represented by Counsel Ms Carol Wong.

B.   The Company’s Position

12.  As stated, the plaintiff obtained judgment in the PI Action against the Company and TPC jointly and severally.  However, it seems that no enforcement action on the Judgment Debt has been pursued directly against either the Company or TPC.  In cross-examination, the plaintiff explained that the decision as to what steps to take was handled by her solicitors.

13.  When this action was commenced in 2012, service was attempted on the Company by leaving a copy of the writ at the registered office of the Company on 14 August 2012.  It may be relevant that the registered office of the Company was at an address which was apparently for some time the residential address of TPC.  However, the Company had been dissolved and de-registered on 4 December 2011.

14.  By order of the Master dated 5 December 2014, these proceedings were stayed pending the reinstatement of the Company back to the Companies Register.  By the same order, the Master adjourned the plaintiff’s application for default judgment against the Company sine die with liberty to restore.  No application has been made to restore that application.

15.  By order of Mimmie Chan J dated 4 November 2015 in HCMP 1937/2015, the Company was restored to the Companies Register for a period of five years.  The restoration was made pursuant to section 767(2) of the Companies Ordinance Cap 622.  The order also required the plaintiff (as applicant in those proceedings) to inform the Registrar of Companies (as respondent to those proceedings) on the progress of the plaintiff’s claim against the Company in this action and any other related legal proceedings on a yearly basis.  I have not been informed of any progress report.

16.  Following the restoration of the Company, the stay of these proceedings was lifted by order of the Master dated 25 January 2016.

17.  In any event, because the Company was served with the writ during the period when it was not a registered company, the question arises whether that service was valid and effective.  It is trite that, under section 768, the effect of restoring a company to the Companies Register pursuant to section 767(2) is that the company in question is treated as having been registered throughout the period.  On that basis, it seems to me that the service on the Company was valid and effective.  Because the Company was served at the registered office (which was also at one time TPC’s residential address) – and where the affirmation of service exhibits a photograph of the writ pasted to the metal outer door of those premises – I think the inference must be that the proceedings came to the notice of the Company through its sole shareholder and sole director TPC (who resumed those roles on restoration of the Company to the Companies Registry).

18.  Mr Lam informed me that, though the Company was not served with the writ again after the order restoring it to the Companies Register, the plaintiff’s solicitors nevertheless gave notice to the Company of every hearing, including the trial.  Indeed, the Master was not prepared to lift the stay of proceedings on the first hearing of the application to do so after the restoration of the Company to the Companies Register.  Instead, he adjourned the application pending service of it on the Company and on TPC (as well as on the defendant).  On the affirmation subsequently filed, the Master must have been satisfied that service had been affected on both the Company and on TPC, though only the defendant appeared at and was represented by solicitors at the hearing.  The Master then lifted the stay.

19.  But, the Company has never acknowledged service of the writ, and it has taken no part in the proceedings.  It has not pleaded any defence to the claim, nor given any discovery, nor filed any witness statements, nor been represented at any hearing.  The relevant consequences of those facts can be considered later in this Judgment.

C.   Applicable Legal Principles

C.1    Section 60 of the CPO

20.  Section 60 of the CPO provides as follows:

Voidability of dispositions to defraud creditors

(1)  Subject to subsections (2) and (3), every disposition of property made, whether before or after the commencement of this section, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced.

(2)  This section does not affect the law of bankruptcy for the time being in force.

(3)  This section does not extend to any estate or interest in property disposed of for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the disposition, notice of the intent to defraud creditors.

21.  Where there is no dispute that the Assignment was a “disposition”, the two principal issues in this case are: (1) whether the Company transferred the Property to the defendant with intent to defraud creditors (in particular the plaintiff), and if so (2) whether the Property was disposed of to the defendant for valuable consideration and in good faith or upon good consideration and in good faith when the defendant did not have, at the time of the disposition, notice of the intent to defraud creditors.

22.  It is settled that the section extends to future creditors.  It is also settled that the question of the presence or absence of an intent to defraud under section 60 is a question of fact, to be determined having regard to the circumstances surrounding the execution of the disposition sought to be impeached.  The onus of proving the intent to defraud rests with the person alleging that intent.

23.  Where it is objectively shown that a disposition of property unsupported by consideration is made by a disponor when insolvent (or who thereby renders himself insolvent) with the result that his creditors (including his future creditors) are clearly subjected at least to a significant risk of being unable to recover their debts in full, those facts ought in virtually every case to be sufficient to justify the inference of the disponor’s intent to defraud creditors.  But if the disposition was made for valuable consideration, an actual intent needs to be shown as an inference properly to be drawn on the available evidence before section 60 is engaged: see Trade Power (Holdings) (In Liq) v Trade Power (Hong Kong) Ltd (2009) 12 HKCFAR 412 at §88.

24.  Whether the disponor was insolvent at the material time and whether the disposition was made for consideration are questions of fact to be objectively determined: see Trade Power at §91.

25.  The burden of proving valuable consideration and good faith without notice of the intent to defraud creditors falls on the transferee, the person making those assertions and seeking to take advantage of subsection 60(3). ‘Valuable consideration’ may be money or money’s worth, and ‘valuable’ means real, as distinguished from merely illusory or nominal.  The requirement of notice of the disponor’s intent to defraud includes both actual and constructive notice (sometimes called “blind eye knowledge”, coming from wilfully shutting one’s eyes to the obvious).  But it is not sufficient to suggest that the transferee ought to have known of the intent.

26.  The various circumstances surrounding the challenged disposition, to which the court might give weight in an appropriate case, include (without limitation, of course) (1) whether the disposition was at a gross undervalue, (2) the timing of the disposition, and (3) the retention of benefits in the assets disposed of by the transferor.

27.  But the mere fact that a disposition was at an undervalue is not of itself a circumstance which would render a transaction voidable.  Section 59 of the CPO expressly provides that no purchase, made bona fide and without fraud, of any interest in property of any kind within Hong Kong shall be opened or set aside merely on the ground of undervalue.  The phrase “merely on the ground of undervalue” does not include the case of an undervalue so gross as to amount of itself to evidence of fraud.  However, where mere undervalue will not suffice, the court will consider whether other potential vitiating factors such as fraud, unconscionable bargain or undue influence have been established.

28.  The timing of a disposition may be relevant circumstance.  One example might be if the disposition occurred shortly after a judgment had been entered against the disponor.  There, the proximity in time between the judgment and the disposition might support an inference that the disponor was influenced by an intention on his part to defeat any enforcement measures. But in some cases there may be an intention to defeat enforcement of a judgment, by the making of a disposition before (perhaps even a considerable time before) judgment being obtained.  Where a creditor’s debt arose after the disposition, he must establish the debtor’s intention to defraud him in particular (unless there is still outstanding debt which existed at the time of the disposition).

29.  As to retention of benefits in the assets disposed of, that has previously been held to be a strong indicator of an intent to defraud creditors.  But, though retention of benefits might be a strong indicator, it is not an essential element of proving intent to defraud: see New China Hong Kong Group Limited v Ng Kwai Kai Kenneth [2011] 5 HKLRD 216, at §§37-38.

C.2    Conspiracy to Injure

30.  What is sometimes referred to, probably unhelpfully, as a ‘lawful means’ conspiracy is the cause of action in conspiracy where acts which, if done by one person on his own would be lawful and not actionable, can be actionable as a tortious conspiracy if done by several persons in combination and if the predominant purpose of those persons was to injure the plaintiff, and not to protect or forward their own interests: see, for example, Lonrho plc v Fayed (No 5) [1993] 1 WLR 1489 at 1492H.

31.  A conspiracy by unlawful means requires an intention to cause loss by unlawful means, where a defendant may avoid liability on the basis that he did not have the requisite intent to injure the plaintiff on the basis that he believed he was entitled to act as he did, even if he knew it would cause loss: see Total Lubricants Hong Kong Ltd v Christophe de la Cropte de Chanterac [2012] 5 HKC 523 at §51.

C.3    Absence or Silence of Witness

32.  It is settled that, in certain circumstances, a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action: see, for example, Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd (unreported, CACV 90/2012, 17 September 2013).  If the court draws such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.  But, there must have been some evidence, however weak, adduced by the former on the matter in question before the Court is entitled to draw the desired inference.  In other words, there must be a case to answer on that issue.

33.  As it has been put, the silence of one party in the face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence.  If the reason given for the witness’ absence or silence satisfies the court, then no such adverse inference may be drawn.  If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effects of his/her absence or silence may be reduced or nullified.

34.  I also bear in mind the authority of Cheung Ying Lun v Legal Way Ltd [2014] 1 HKLRD 106 at §28, where G Lam J – in a case relating to section 60 of the CPO – held that while a defendant’s absence is not in itself evidence against him, if there is some evidence tending to establish the plaintiff’s case, albeit slender evidence, the defendant’s silence in circumstances in which he would be expected to answer might convert that evidence into proof.  When bearing that in mind, it is also necessary to have in mind that the absence or silence of one defendant may not count against another defendant who is not absent.

D.   The Procedural Chronology

35.  Insofar as it may be material, further brief reference can be made to the chronology of these proceedings.

36.  There was a letter before action dated 18 May 2012 sent by the plaintiff’s solicitors to the Company and the defendant.  The letter pointed out that the plaintiff took the view that the Assignment of the Property on 5 May 2009 was not a bona fide transaction and that it was done solely for the purpose of avoiding satisfaction of a future debt, namely the Judgment Debt.  The letter demanded documentary evidence to show (1) a proper valuation of the Property on the date of assignment, to show the consideration was a genuine market price, (2) proof of paying the consideration in full by disclosing the purchaser’s bank statements or deposit receipts, and (3) copies of cheques or cashier orders to the purchaser’s solicitors to show such payments.  The letter threatened court action if that demand was not met within five days.  It seems to me to be likely that when the defendant received this letter addressed to her and the Company that she would have contacted TPC.

37.  The proceedings were commenced by writ dated 23 May 2012, with a general endorsement of claim identifying that the plaintiff sought a declaration that the Assignment was void as contrary to section 60 of the CPO or contrary to other statutory provisions, common law rights, equities, or remedies.  Acting in person, the defendant acknowledged service on 13 September 2012, indicating her intention to defend.  A year later, she later appointed solicitors who gave notice of acting on 31 October 2013.

38.  That seems to have prompted the plaintiff to file a notice of intention to proceed on 7 November 2013, which led to the Statement of Claim dated 20 November 2013.  The defendant filed her Defence on 17 December 2013.

39.  The plaintiff sought further and better particulars of the Defence.  On each occasion that the defendant responded to a request for further and better particulars, she was represented by solicitors (though she has used three different firms in these proceedings, as well as acting in person at various times).  The first request was made by a Request dated 14 February 2014.  Most material were the requests relating to how the consideration of $930,000 was paid to the Company.  The following were the plaintiff’s requests and the defendant’s answers:

Request:   Was there any initial deposit (if applicable), and if yes, please state the amount, and for the initial deposit, was it paid by cash or by cheque, and if it was by cash, please identify the payer, or if it was by cheque, please identify the drawer of the cheque and the drawee and also answer the bank account the cheque was deposited into and the date of presentation of the cheque.

Answer:   Yes, initial deposit in the sum of $330,000 was paid to the [Company] by cashier order issued by The Bank of East Asia, Limited.

Request:   For the balance of the purchase price, was it paid by cash or by cheque, and if it was by cash, please identify the payer, or if it was by cheque, please identify the drawer of the cheque and also the drawee and also answer the bank account the cheque was deposited into and the date of presentation of the cheque.

Answer:   The balance of the purchase price was paid through the solicitors acting for the [defendant] in purchasing the Property. The [defendant] therefore has no idea as to whether it was paid by cheque or otherwise and if so, who the drawer and drawee of the cheque were. In any event, the [defendant] is trying to obtain information from the solicitors acting for her in purchasing the Property. Moreover, the plaintiff should also note the acknowledgement of receipt of payment clause in the Assignment and the fact that the First Legal Charge dated 2^nd January 2007 … had already been discharged.

40.  It can be noted that the real thrust of the requests was plainly not met by the answers.  Indeed, as well as lacking details about the initial payment, the defendant said she had “no idea” how the balance of the price was paid.  It is no surprise, therefore, that the plaintiff pursued further and better particulars of those answers.  The response was given by the defendant on 31 July 2014.  In relation to the sum of $330,000, the further requests and the answers were as follows:

Request:    Please answer:

(1)  Give the name of the person who purchased the said cashier order from the Bank of East Asia Limited;

(2)  The date when the said cashier order was purchased;

(3)  the bank account number with The Bank of East Asia Limited to which the said sum of $330,000 was debited and then the said cashier order was purchased;

(4)  if the answer to Request (1) is not the [defendant] herself, give the reason why the said cashier order was purchased by this person and not by the [defendant].

Answer:

(1)  The [defendant] does not see the relevancy of this request at all. In so far as the [defendant] had procured the payment of part of the purchase price of the property concerned, good consideration had been paid by the [defendant] as a matter of contract and the amount was already well received by the [Company’s] solicitors in the sale and purchase. And the said receipt of the amount by the [Company’s] solicitors in the sale and purchase his evidenced by the documentary proof of which the plaintiff should have notice.

(2)  Again, the [defendant] does not see the relevancy at all.

(3)  Again, the [defendant] does not see the relevancy at all.

(4)  Again, the [defendant] does not see the relevancy at all.

41.  In fact, again, the entirely proper request for further and better particulars was rebuffed by the defendant without providing any real answer or relevant information.  The plaintiff understandably pressed on, and on 9 May 2016 the defendant finally provided the following answers to the second request posed again:

Answer:

(1)  鄭妙卿

(2)  On 7^th April 2009.

(3)  The sum of $330,000 used to purchase the said cashier order was partly drawn from the bank account No. [number] under the name of 鄭妙卿with The Bank of East Asia Limited and partly paid by cash.

(4)  鄭妙卿 is a clanswoman of the [defendant]. As the [defendant] was/is a PRC resident and did not hold any bank account in Hong Kong at that time, so the [defendant] asked 鄭妙卿to purchase the said cashier order. The sum was re-paid to 鄭妙卿.

42.  But it might be thought that even those were not full or complete answers to properly meet the thrust of the enquiries. Further, there is some inconsistency with some of the evidence later given by the defendant.  It might also be asked why the involvement of 鄭妙卿 (“Madam Cheng”) was not the immediate answer to the very first request for this information.  As the case is now put forward by the defendant, as to which see below, Madam Cheng’s involvement is crucial.

43.  The plaintiff filed her witness statement of fact dated 2 December 2016.  The defendant filed her witness statement of fact dated 8 December 2016.  The defendant also subsequently filed the witness statement of Lui Chi Hung dated 23 June 2017, for which retrospective leave was later granted.

44.  It is also relevant that by various correspondence in May 2014 and December 2016, the plaintiff’s solicitors informed the defendant’s solicitors that the plaintiff did not admit the authenticity of certain documents (being the copies of the payment documents, cashier orders, cheques, and a receipt), and that the plaintiff required them to be proved at trial.  Indeed, the plaintiff’s solicitors had written to the conveyancing solicitors on 14 August 2012, asking them to retain and preserve the file of the conveyancing transaction, and asking various questions relating to the transaction.  But there was no response at all.

E.   The Factual Chronology

45.  As with many cases, the chronology of events is important to facilitate a proper understanding of what – on the balance of probabilities – happened, and why.  In dealing with the chronology, I will make various comments and findings.  When making my findings, I take into account to some extent the demeanour of witnesses, but place greater emphasis on testing witness evidence against the presence (or absence) of contemporaneous documentation and what seem to me to be the inherent likelihoods and probabilities.

46.  It is also appropriate to note, and I have taken into account, that the event of disposition giving rise to this claim occurred more than 10 years ago; memory may understandably and legitimately have faded, perhaps in particular where a witness is of advancing years, such as the defendant who is now 73.  But in this particular case, my own assessment of the defendant is that, on the whole, she remains clear and sharp.

47.  Where appropriate, I also take into account and make inferences from the absence or silence of a witness who might be expected to have been called to give evidence, or the absence of documentation which might be expected to have been adduced as evidence.  In that context, I have paid heed to whether any good explanation has been provided for the absence of a witness or such documentary material.

48.  On 1 February 2005, the Company was incorporated to carry on the business of traditional Chinese medicine treatments or services.  Its sole shareholder and sole director was TPC, who provided the treatments and services.

49.  On 30 November 2006, the Company purchased the Property at the purchase price of $1,060,000.

50.  On 2 January 2007, a First Legal Charge was created against the Property relating to an “all moneys” mortgage loan from GE Capital (Hong Kong) Limited (“GE Capital”).  By reference to the timing of the purchase and the creation of the charge, it seems that the Company was able to purchase the Property without a mortgage loan in the first instance, though the loan was taken out very shortly thereafter.

51.  On 26 and 27 November 2007, the plaintiff was treated by, and injured by, TPC.

52.  On 23 January 2008, the plaintiff lodged a complaint to the Consumer Council about the alleged malpractice or negligence on the part of TPC and/or the Company.  That complaint was first referred to the Chinese Medicine Council of Hong Kong, and then to the Police.  The plaintiff gave a statement to the Police on 16 April 2008.

53.  The defendant was arrested by the Police on 29 April 2008, following an undercover operation.  After arrest, the defendant was interviewed under caution, during which interview it was made clear that the complainant was the plaintiff.  The defendant broadly exercised her right to remain silent.

54.  On 20 May 2008, the plaintiff picked out the defendant on an identity parade as the person who had provided the treatment services on 26 and 27 November 2007, and about whose services she complained.  The plaintiff says (which I accept as true) that during the identification parade she told TPC that it was TPC who caused her pain and injuries and that she would sue TPC and her company (meaning the Company) for damages.

55.  On 26 August 2008, TPC was charged by the Police.  On 3 September 2008, TPC had legal representation when she pleaded guilty in the Tsuen Wan Magistracy to the three criminal charges.  On her guilty plea, she was convicted.  She was first remanded in custody for 14 days pending a background report, and on 17 September 2008 was fined $50,000.

56.  It is material for present purposes that one of the charges to which TPC pleaded guilty was that she had practiced Chinese medicine as an unregistered person and that had resulted in personal injury. Together with the clear statement of intention made by the plaintiff during the identification parade, TPC must have known that she and the Company faced litigation in a claim by the plaintiff for damages for personal injury.  I reject the submission made by Ms Wong that TPC would have believed all consequences of the negligent treatment of the plaintiff had been dealt with by September 2008.

57.  On around 30 November 2008, TPC was apparently on a visit to the Mainland when she fainted in the street.  She was taken to the Dongguan Changping Hospital where, after some outpatient tests, she was admitted for some care.  It seems that the medical concern was in relation to her liver, but there is a gastroscopic report dated 30 November 2008 referring to ‘superficial gastritis and ulcer’.  It further seems TPC was discharged in early December 2008, after only a short stay in hospital. The latest dated medical document made available in the evidence is dated 2 December 2008 and is a ‘clean’ electronic colonoscopy report.

58.  As an aside, to which I will later return, it seems to me that the medical records relating to TPC as were attached to the defendant’s witness statement must have been provided to the defendant or her solicitors by TPC, and provided to them for the purposes of these proceedings.

59.  The defendant says she visited her sister, TPC, in hospital at that time in late 2008.  In a relationship between sisters, which the defendant described in oral evidence as “close”, it seems to me to be likely that they would have discussed any recent events as may have brought on these symptoms, where the defendant says TPC was advised by the doctor to take more rest and not to work.

60.  In her witness statement, the defendant said that whilst she was looking after TPC in hospital, TPC decided to take the doctor’s advice and so to sell the Property owned by the Company and use the money to treat her liver disease, and for relocation to live in Dongguan after she sold the property, as it would be more convenient to attend follow-up treatment.  There is, however, no suggestion in the evidence that after the Property was sold TPC in fact moved to live in Dongguan, or that in fact TPC continued to receive follow-up treatment in relation to any liver disease.  On the evidence, it appears that TPC continued, and continues, to live in Hong Kong.

61.  In her oral evidence, the defendant said that the medical records attached to her witness statement were irrelevant to the purchase of the Property.  She also seemed to suggest that when she signed her witness statement it was “light”, meaning it did not have the bundle of exhibits, which she said were provided by someone else.  This is at best poor practice, but it seems consistent with the fact that the witness statement itself does not refer to there being any exhibits.  In any event, when I pointed out to the defendant that I had understood the medical records as part of her own explanation as to why the Property was to be transferred, she was adamant that the medical matters were irrelevant to the purchase of the Property.  If the medical condition of TPC was not relevant as to why the Property was to be transferred, no other innocent explanation for the timing of the transfer has been put forward.

62.  There was also an inconsistency or illogicality in the defendant’s evidence, including between her witness statement and her oral evidence.  The reason for sale described in the witness statement would tend to suggest that TPC would be keen to receive the maximum return from the Company’s sale of the Property.  Obviously, the maximum return would be to sell it at or above the then prevailing market value.  It seems to me to be contrary to the stated reason, that the Property was sold not on the market, but to a close relative at a significant undervalue.  The defendant says TPC told her she purchased the property for about $1 million, and agreed to sell it for around the same price, hence the agreed price of $930,000.  Even taking into account the family relationship, there is no convincing explanation as to why TPC would accept (on the arithmetic) approximately half of the value in equity by selling to her sister, rather than selling in the open market.  That seems to me to point strongly against the reasons given in the witness statement as being true.  Added to that is the absence of any evidence that TPC in fact continued any medical treatment in Dongguan, or moved her residence there.

63.  From her side of the transaction, the defendant said in evidence that she had been considering purchasing a property for her son to use for his rest on his business visits to Hong Kong.  But she agreed in oral evidence that she had never looked at any potential properties before being told by TPC that she (TPC) needed money, at which point the defendant began to consider buying the Property.

64.  The conveyancing solicitors for the transfer of the Property from the Company to the defendant were Cheung & Liu (“CL”). Lui Chi Hung, a former partner of CL, made a witness statement and gave live evidence at the trial.  The main purpose of Mr Lui’s evidence appears to have been to deal with the challenge to authenticity of certain documents relating to the transfer, and in particular the payment documents.  But he also gave hearsay evidence as to what he was told was the explanation for a number of unusual features which were apparent to him from his review of the conveyancing file.  Other than verifying the signature of a clerk who signed on the Assignment, Mr Lui had no direct involvement in the transaction.  He never met any of the parties or participants in the transaction.

65.  The hearsay matters dealt with by Mr Lui were on what he says he was told by a Mr Wu, who was the person at CL handling the file.  Even in his witness statement, Mr Lui identified that Mr Wu remained in employment with CL.  In his oral evidence, and even though Mr Lui had himself since moved to another firm, he confirmed from his own personal knowledge that Mr Wu remained in employment with CL.  In those circumstances, it is difficult to understand why Mr Wu was not called as a witness, as he is the person who had direct personal knowledge of what happened and why.

66.  The anomalies in the documentation are legion. According to the cover sheet pasted onto the front of the paper file (the original of which file was produced at trial as an exhibit), the file was opened on 3 April 2009.  It relates to a conveyancing matter regarding the Property.  The client is described as the Company (designated “V”) and the defendant (designated “P”).  There is no ‘opposing party’.  The purchase price is identified as $930,000, with no ‘initial deposit’ but a ‘further deposit’ of $330,000.  There are no dates shown for either ‘Provisional SP’ or ‘Formal SP’, but the date of ‘Completion’ is shown as 5 May 2009.

67.  Inside the file, various documents describe the client as TPC.  Indeed, there is a sale and purchase agreement dated 2 April 2009 (“SPA”), which identifies the Company as the vendor of the Property, and the purchaser of the property as TPC (with her name in English and Chinese, her address, and her Hong Kong identity card number).  The Stamp Certificate for the SPA also (understandably) refers to the Company as vendor and TPC as purchaser.  The date of stamping is 18 April 2009.  The Land Register also shows the parties to the SPA as being the Company and TPC.

68.  But, the SPA appears to have been signed by TPC against the authorised signature chop of the Company for the vendors, and by the defendant as purchaser.  Nevertheless, there is no witness to either of the signature blocks.  Further, the parts where someone should have signed to identify who, if anyone, interpreted the SPA to the vendors and purchaser respectively are also both left blank.

69.  Mr Lui said in his witness statement that he enquired of Mr Wu about the absence of witness and the error of the purchaser’s name.  He said Mr Wu confirmed to him that he (Mr Wu) was the witness at the time of signature of the SPA – though he apparently did not offer an explanation as to why he did not sign as witness if indeed he did witness the signatures.  Elsewhere in Mr Lui’s witness statement, he said that the parties signed the SPA before Mr Chu (another employee of CL, but who has since left the firm) – but he apparently did not offer an explanation as to why Mr Chu also did not sign as witness if indeed he did witness the signatures.

70.  Mr Wu also apparently said to Mr Lui that the purchaser’s name was carelessly written as TPC by Mr Wu’s mistake as the parties to the SPA asked to sign it on the same day as instructions were first given.  If so, at the very least, that evidences something of a rush to put the agreement in place (if the various other oddities do not already make that plain).

71.  The conveyancing file contains a copy of a cashier’s order dated 2 April 2009 payable to the order of TPC in the sum of $330,000.  There is also a copy of another cashier’s order dated 7 April 2009 payable to the order of the Company in the sum of $330,000.  Mr Lui said that Mr Wu explained that Mr Chu noticed that the payee of the cashier’s order was wrong, and the parties reached an agreement that the defendant could arrange a new cashier’s order with the right payee later on, but nevertheless signed the SPA.  This is contrary to the terms of the SPA which expressly records that the $330,000 had been paid before signing.

72.  The plaintiff has, through her solicitors and Mr Lam, challenged the authenticity of the cashier’s orders.  I do not think the challenge to authenticity is a good one.  I do not think there is any good reason to doubt that there were cashier’s orders were genuinely issued by the bank on the dates they bear, and with the payee and dollar sum each shows.  Nor do I think there is any basis to doubt that a genuine photocopy was taken by CL of the cashier’s orders the CL employees were shown.  Indeed, in the conveyancing file, each of the photocopies of the cashier’s orders appears to have an original signature of TPC, against the authorised signature chop of the Company on the 2 April 2009 cashier’s order, and on its own on the 7 April 2009 cashier’s order.

73.  But the thrust of Mr Lam’s challenge to the cashier’s orders seems to me not really to turn on a matter of authenticity as such.  Rather, he submits that – other than the mere say-so of the defendant – there is simply no evidence as to who obtained the cashier’s orders, what funds were used to purchase the cashier’s orders and from what source those funds came, and what might have happened to the cashier’s orders after they were shown to and copied by CL.  Indeed, I think it is tolerably clear that the first cashier’s order must have been returned to the bank to be cancelled.  It seems likely that whatever funds were used, by whoever they were used, to purchase the first cashier’s order were then reused to purchase the second cashier’s order.  But there is still no documentary evidence identifying the funding used, or to show that the second cashier’s order was in fact cashed, and where the proceeds (if cashed) went.

74.  The SPA set out the date of completion as ‘on or before’ 5 May 2009, and that the balance of the purchase price was $600,000.  That sum is the arithmetically correct balance of a purchase price of $930,000 after part payment of $330,000.  However, the defendant says that in the end she did not pay that balance amount; she paid more.

75.  By letter dated 3 April 2009, CL wrote to GE Capital informing that CL had instructions from the Company to redeem the mortgage on the Property.  CL asked for the title deeds on their undertaking to hold them on the instructions of GE Capital.  CL also asked for the calculation of total outstanding principal and interest up to 2 May 2009 (note, not 5 May 2009).  That seems to suggest that the SPA could not have been signed on 2 April 2009 with a stated completion date of 5 May 2009, for it would make no sense to ask for a calculation of principal and interest only up to 2 May 2009.  Of course, it might be yet another ‘mistake’, but no explanation was offered in evidence – and, to be fair to Mr Lui, he had no first-hand knowledge and was in no position to give any explanation – and no other witness was called whose explanation might have been sought and tested.  As it happens, GE Capital wrote back to CL on 14 April 2009 advising that the amount payable on redemption of the mortgage would be $687,374.76, if payment were to be made on a before 4 May 2009.  To complete this thread, CL wrote to GE Capital on 29 April 2009 to confirm a telephone conversation in which the retention amount calculated up to 6 May 2009 would be the same as 4 May 2009.

76.  As to the source of the purchase funds, the evidence became rather confused during cross-examination of the defendant at trial.  In her witness statement, the defendant said that she and her son and three daughters gathered together the money in RMB.  Her son paid around RMB400,000, her second and third daughters each paid around RMB100,000, and the youngest daughter paid around RMB200,000, whereas she (the defendant) paid the rest with RMB.  In the witness statement, the defendant did not identify how much comprised “the rest with RMB”.  But it can be noted that not a single piece of paper was produced to evidence the collection and/or movement of those sums of money from the defendant herself, or from any of her children – or even to show how the children might have generated those figures (vague references to being grown-up and working hardly been persuasive).  Nor was it explained why any of the daughters would contribute to the defendant’s decision to purchase a Hong Kong property for the occasional use of their brother.

77.  Further, in her oral evidence, the defendant could not really explain where she obtained “the rest”, in circumstances where she told me in answer to my questions that she had not previously worked before the age of 60 (other than in the home), and had moved to live with her children at the age of 60 because she could not afford to live on her own.  It was only in re-examination that the defendant first made some vague mention of having conducted some business which might have allowed her to accumulate savings. That evidence was unconvincing, and in any event wholly unsupported by any documentary material of any kind.

78.  The defendant explained in her witness statement that because the property was located in Hong Kong, the buying and selling process would have to be performed in Hong Kong, and as she was not familiar with Hong Kong, the transaction was handled by Madam Cheng, who engaged CL to represent the Company and the defendant jointly.  Yet, in her oral evidence, the defendant was adamant that she did not buy the Property from the Company, which had no involvement.  She said – indeed, was insistent – that she bought the property from TPC, and she did not know the relationship between the Company and TPC.  I am not sure that is a change explicable by the passage of time when the witness statement was made in December 2016, with the transfer documents to hand.  That late insistence might be thought consistent with the desire to distance herself from the Company, and any intention to defraud on its part (though I acknowledge some degree of artificiality where the controlling mind of the Company was TPC, from whom the defendant said she bought the Property).

79.  In her witness statement, the defendant says she split the purchase of the Property into two payments, the first being $330,000 by bank cashier’s order on 7 April 2009 as down payment, the rest of the balance of the purchase price with the legal fees being paid on 4 May 2009 by three cheques to CL.  No mention was made of the earlier cashier’s order dated 2 April 2009.

80.  The defendant also stated that because she was a Mainlander, and did not have a bank account in Hong Kong, she asked Madam Cheng (who she described as her “sworn sister”) to use her bank account at The Bank of East Asia Limited to prepare the cashier’s order for $330,000, then she (the defendant) gave RMB297,000 cash back to Madam Cheng in Shenzhen.  Then later TPC said CL asked to prepare and give the balance of the purchase price in legal fees totalling $693,874.76, which the defendant says she separated into three cheques.  Therefore, she spent in total $1,023,874.76.

81.  As to the three cheques, the defendant said in her witness statement that the first cheque was issued by Madam Cheng’s husband, and the other two by her younger cousin.  Madam Cheng and her husband were building an ancestral home in Chaozhou, so needed RMB at a time when the defendant needed Hong Kong dollars.  After they had paid the three cheques, the defendant’s youngest daughter would prepare the RMB equivalent of $693,874.76 and repay it to Madam Cheng and her husband “in separate payments in cash in numerous times”.

82.  Even in the witness statement, no real explanation as to the need to have involved the younger cousin was provided. But the version of events given in the witness statement also differed markedly from the version given by the defendant in her oral evidence.  There, she stated that she provided RMB900,000 to Madam Cheng in Shenzhen all in one go on one occasion.  She did so for Madam Cheng to exchange the money into Hong Kong dollars, though she did not know how that was to be done. Thereafter, she left the detail of the process of the transaction to Madam Cheng, and did not really know about it.  As she put it, she had “no idea” of how Madam Cheng dealt with matters on her behalf.

83.  Both on chronology and amounts, those versions are markedly different one from the other.  It might be thought that if a woman like the defendant, of relatively limited means, had carried the significant sum of RMB900,000 in cash to hand over to someone in Shenzhen, that would be rather memorable.  If it were true, it might be thought that it would be the first version (and only version) put forward.  The fact that – with the benefit of looking at historical exchange rates – it can be calculated that RMB900,000 was equivalent in April/May 2009 to a sum very close to the total Hong Kong dollar figure of $1,023,874.76 does not change the fact that the two versions are so different one from the other.  In one, the entirety of the funds was provided in cash, in one go, and in advance.  In the other, part of it was provided in cash by reference to the cashier’s order, but only after the cashier’s order had been issued, and the remainder was provided on numerous separate occasions in smaller separate cash payments, again only after the cheques had been written.

84.  It might be said that the original version in the witness statement was perhaps more credible, had it not been completely thrown away in oral evidence.  It might also be pointed out that neither version is fully consistent with the further and better particulars as were provided by the defendant earlier, relating to the funding of the cashier’s order.

85.  Turning back to the documents, in the conveyancing file is an original receipt of CL for the total sum of $693,874.76.  The receipt identifies that sum as comprising (a) ‘Balance of Purchase Price’ of $687,374.76; (b) ‘Certified Fees’ of $1,000; and (c) ‘Costs & Disbursements on Account’ of $5,500.  The receipt also identifies that the sum was provided by three different cheques.

86.  The three cheques are as follows:

(1)  One is drawn on the Hang Seng Bank Ltd on the account of a Mr Hui Sui Kwong (“Mr Hui”).  It bears the date of 4 May 2009 (written “4/5/09”).  It is in the sum of $280,000, the amount in words written in Chinese in someone’s handwriting.  The defendant says Mr Hui is the husband of Madam Cheng.

(2)  The second is drawn on the Bank of China (Hong Kong) Ltd on the account of a Mr Cheng Wing Ming Patrick (“Patrick Cheng”). It is a cheque numbered 778772.  It bears the date of 4 May 2009 (written “4-5-2009”).  It is in the sum of $320,000, the amount in words written in English in someone’s handwriting.  The defendant says Patrick Cheng is a cousin of Madam Cheng.

(3)  The third is also drawn on the Bank of China (Hong Kong) Ltd on the account of Patrick Cheng.  It is a cheque numbered 778773, that is it is the cheque numbered immediately consecutively after the other cheque drawn on the same account.  It bears the date of 4 May 2009 (written “4 5 2009”, in handwriting markedly different from the previous cheque).  It is in the sum of $93,874.76, where the amount in numbers appears to be in a different hand than the numbering on the other cheque, and where the amount in words is in fact put in figures by use of a cheque writing machine. I note that exactly similar machine written numbering appears on the copies of the cheques issued by CL to GE Capital, and I draw the inference that the numbering was added to this cheque by someone at CL.

87.  The three cheques are shown, as photocopied, on one page to be found in the conveyancing file.  Though there is also a challenge to the authenticity of these cheques, I see no reason to doubt that genuine cheques were provided to CL (which is the payee on each cheque), and that the photocopy of the three cheques together is a genuine copy. Ultimately, the cheques were cleared, because CL used the proceeds to settle the fees and costs and the mortgage redemption amount.  I think the much better point made by Mr Lam is again that there is absolutely no evidence – other than the say-so of the defendant – as to where the funds came from which backed the three cheques.  Neither Mr Hui or Patrick Cheng have been called as witnesses, nor has any banking documentation been provided to identify the actual source of the funds.

88.  Perhaps even more importantly, the defendant did not call Madam Cheng to give evidence.  Nor did she obtain from Madam Cheng any single piece of documentary evidence as would support the defendant’s case and Madam Cheng’s involvement.  In oral evidence, the defendant explained this was because she did not want to involve Madam Cheng in the case. But, Madam Cheng is a central character in the defendant’s story, and the defendant was fully on notice that the plaintiff simply did not accept that story as being true, and had explained the basis of her suspicions.  No suggestion was put forward as to why Madam Cheng (to whom the defendant referred as her “sworn sister”) or Mr Hui or Patrick Cheng might not have been able to give evidence and/or to produce relevant documents.

89.  There is also some force in Mr Lam’s point that the defendant’s story as to the purchase arrangements for the Property is very complicated, when the simplest thing to have done would simply have been to pay RMB to the vendor, her sister TPC.  That might be particularly so if the whole purpose of the sale was to have provided TPC with funds for her medical and living expenses in Dongguan (though I do not overlook the need to have had some Hong Kong dollar funds for redemption of the mortgage).

90.  The name of the payee on each cheque appears to have been written by the same person (but apparently neither Mr Hui nor Patrick Cheng).  This suggests that the cheques were provided to CL, or more likely to whoever provided them to CL, with the payee not yet filled in.  The inference is that neither Mr Hui nor Patrick Cheng knew the identity of the payee at the time they signed the cheques.  The further inference is that the third cheque was signed by Patrick Cheng in blank, before any of the payee or the date or the sum were added.  I also infer that at least Patrick Cheng did not physically attend the solicitors’ office, or he would have been able to date and write in the amount of the third cheque in his own handwriting.  On the overall probabilities, I also do not accept that Mr Hui physically attended the solicitors’ office.

91.  As can be seen, the total value of the first two cheques is $600,000, which is the stated balance of the purchase price for the transfer of the Property.  But the total value of all three cheques is $693,874.76, where the odd figure and cents clearly matches the redemption sum.  If one extracts the fees and costs totalling $6,500, the remainder is precisely the redemption sum of $687,374.76.  It is for that reason that Mr Lam submits – with some force – that those cheques essentially represented funds necessary for the redemption, rather than being the balance of a true purchase price which was a different, lower amount.

92.  The Assignment bears the date 5 May 2009, but the plaintiff has put in issue as to whether it was really made on that day.  The question arises because the Assignment was only stamped on 21 September 2009 (with a penalty fee payable), and only thereafter subsequently registered with the Land Registry on 30 September 2009.  The Assignment is an agreement between the Company as vendor and the defendant as purchaser.  I note that, apparently inaccurately, the defendant’s address is shown as the address of the Property itself.  The purchase price, that is the consideration, is still shown as $930,000.  The Assignment states that receipt of that sum is acknowledged.

93.  It may be a side issue, but CL was apparently only permitted under the Solicitors Rules to act for both vendor and purchaser in the transaction because the value was less than $1 million.  Obviously, $930,000 is less than $1 million.  But, equally obviously, $1,023,874.76 (or $1,017,374.76 if one ignores costs and fees) is not.  If, as is now suggested by the defendant there was an agreement to vary upwards the originally agreed price, it might be that CL would (or should) have recognised the potential problem in continuing to act for both vendor and solicitor.

94.  Had there been an actual agreement to vary the purchase price, it might also be expected that the solicitors acting in the transaction would record that variation.  That there is no record casts doubt on the assertion that there was an agreed variation in the way put forward by the defendant.  In any event, the evidence in this regard was somewhat confused, where the defendant said orally that she essentially left the details to Madam Cheng, and where after giving evidence about handing over RMB900,000 cash, she later asserted inconsistently that she had paid more than RMB1 million (and she confirmed she meant RMB and not Hong Kong dollars).

95.  The Assignment was signed by TPC for the Company and by the defendant.  Both signatures are shown as having been witnessed by a clerk to CL.  As already indicated, that clerk’s signature was verified by Mr Lui. Despite the late stamping and registration of the Assignment, I accept on the totality of the evidence that it was made on 5 May 2009 (and so it was not made on a later date and ante-dated).  The late stamping and registration was likely the result of the mistake of the solicitors.  In any event, against the particular chronology in this case, I am not sure that it matters whether the Assignment was genuinely made on 5 May 2009 or some later date up to September 2009 and ante-dated.

96.  On 6 May 2009, CL wrote to GE Capital enclosing a discharge certificate to be signed and two cheques dated 5 May 2009 drawn on CL’s clients’ account in the sums of $413,874.76 and $273,500.  Though it probably does not matter, no one has sought to explain that breakdown of the total of $687,474.76 (nor why the letter states there is only one cheque in the total amount).  On 19 May 2009, GE Capital wrote to CL acknowledging receipt of that total, and providing official receipts for the two cheques as well as the Receipt on Discharge of a Charge.  Mr Lui explained that that Receipt would have been dated by CL to match the completion date under the Assignment, prior to its registration with the Land Registry.

97.  On 5 June 2009, the Legal Aid Department granted legal aid to the plaintiff to commence the PI Action against TPC and the Company.  (The original application for legal aid had apparently been made sometime in 2008.)  I accept that the plaintiff did not give express notice to the Company, TPC or the defendant that she had applied for or had been granted legal aid.

98.  On 30 December 2009, the PI Action was commenced by writ.  On 7 March 2011, the plaintiff’s solicitors in that action were substituted with those solicitors who continue to act for her in these proceedings.

99.  On 4 December 2011, the Company was deregistered pursuant to section 291AA of the Companies Ordinance Cap 32. That section (since repealed) provided that a director or member of a private company could apply for its deregistration.  Such an application could only be made if (a) all the members of the company agreed to the deregistration, (b) the company had never commenced business or operation, or had ceased to carry on business or ceased operation for more than three months immediately before the application, and (c) the company had no outstanding liabilities. Incidentally, the section also provided that a person who knowingly or recklessly gave information to the Registrar that was misleading in a material particular was liable to a fine and to imprisonment.

100.  It seems clear that the deregistration of the Company was not brought to the attention of the plaintiff or the judge dealing with the PI Action.  Even in the judgment in the PI Action, the Company is identified as appearing in person (presumably through TPC, who was also identified as appearing in person), though neither the Company nor TPC were represented at the trial.  In any event, deregistration was clearly inappropriate where the Company was the defendant to a claim about to go to trial.

101.  Just two months after the Company was deregistered, the trial of the PI Action began on 6 February 2012.  It seems likely that the trial date was fixed before the Company was deregistered.  The trial lasted five days.  The judge preferred the evidence of the plaintiff over that of TPC.  Judgment was handed down on 23 March 2012.  Liability for damages in the quantum of $149,550 plus interest was established against the Company and TPC jointly and severally.  They were also ordered to pay the plaintiff’s costs (later varied to include a certificate for counsel).  The formal order/judgment in the PI Action was sealed on 23 May 2012, and subsequently served on the Company and TPC.

102.  The plaintiff says (which I accept as true) that just before the commencement of the trial of the PI Action on the first morning, TPC told the plaintiff that even if she (TPC) were to lose the case, she (TPC) would not pay the plaintiff a cent, because she had transferred her property to someone else and there could be no recourse against her.  Together with the undisclosed deregistration of the Company shortly before the trial, that statement identifies TPC’s – and, through her, the Company’s – intention that any judgment which the plaintiff might obtain would be frustrated and become ‘empty’.

103.  I also take that fact into account when assessing the whole course of conduct by TPC and the Company, which in total I find evidences the intention to defraud a creditor, specifically the plaintiff.

104.  The letter before action in these proceedings was written to the Company and the defendant on 18 May 2012.  The writ in this action was issued on 23 May 2012.  On the same day, it was registered with the Land Registry as an encumbrance against the Property.

105.  In her evidence, the defendant said that she discovered the encumbrance when she decided to try to sell the Property because of a decline in her son’s business in the period 2012 to 2013.  However, on the chronology in the previous paragraph, it seems to me more likely that the defendant discovered the encumbrance of the registration of the writ when she tried to sell the property as a reaction to one or both of the letter before action and the writ (which was served on her on 14 August 2012).

106.  Importantly, the defendant said in her witness statement that it was only after she learned that the property was encumbered that TPC told her about the matters giving rise to the plaintiff’s claims.  If, as I find, the defendant discovered the encumbrance as a reaction to the writ in these proceedings, that makes her denial of any prior knowledge of the plaintiff’s claims less likely.

107.  The defendant was represented in these proceedings by solicitors, SH Chan & Co, between 31 October 2013 and 12 February 2015.  The same firm of solicitors acted for TPC when she applied for leave to appeal (including leave to appeal out of time) from the judgment in the PI Action.  That application was heard by HHJ Harold Leong on 16 July 2014, and dismissed on 19 August 2014, with costs to the plaintiff.  I do not think it is mere coincidence that the same firm of solicitors was acting for both the defendant and for TPC at the same time in 2014.  I also think it unlikely that TPC (and, through her, the Company) were unaware of these proceedings – at least by mid-2014.

108.  Towards the end of her evidence, I asked the defendant whether the Property was now rented out.  She explained that it was and that the rental income of around $10,000 per month is paid into a bank account with a passbook, held in her name.  She said that if she needed money, one of her children would go to Hong Kong with the passbook and make a withdrawal.

F.   Further Analysis

109.  As Ms Wong submits, the determination of the present case essentially boils down to 2 questions: (1) was there an intent to defraud creditors by the Company (acting by TPC)? and (2) if so, was there valuable consideration given by the defendant who had no notice of the Company’s intent to defraud.

110.  It is not clear to me why the plaintiff did not take, or apparently was not advised to take, earlier steps seeking more directly to enforce the Judgment Debt following the PI Action.  But, that she might have done so does not seem to me to make a difference to the analysis as to whether the disposition of the Property, by its transfer from the Company to the defendant, is liable to be set aside.  Indeed, the lack of enforcement steps by the plaintiff after the PI Action was concluded in 2012 are chronologically irrelevant to the question of intention by the Company/TPC in 2009.

111.  On the other hand, the total failure of the Company and TPC to have paid anything so as to settle the Judgment Debt or any accruing interest or costs is at least consistent with a prior intention that any judgment obtained by the plaintiff should not be met.

112.  But, in any event for the reasons I have given above, I am satisfied that the disposition of the Property was made by the Company/TPC with its/her intention to defraud the plaintiff as a creditor on any civil judgment debt as might be obtained in the threatened litigation.

113.  I have kept in mind that it might be said that the transfer of a property by way of sale simply replaces a real property asset with a cash asset (to the extent of any equity in the property following discharge of any mortgage or loan).  On this basis, subject to the point on valuation, it might be said that there was no real “disposition”, but merely the change in form of asset.  However, not least where there appears to be no dispute that the purpose of the Company’s sale of the Property was for its sole shareholder and director to be able to extract the proceeds for her own use, I think Ms Wong was correct to concede that the Assignment was a “disposition”.

114.  As to the second question, Ms Wong submits that there was valuable consideration, and that the purchase price of $930,000 for the Property was not a “gross undervalue” when compared to the market value of $1,370,000 at the date of the disposition (5 May 2009).  She even suggested that the proper amount of consideration to compare with the market value ought to be the sum of 1,017,374.76, but for the reasons I have given the appropriate comparison seems to me to be with the stated purchase price on both the SPA and the Assignment.  The purchase price was only 67.88% of the market value.  Though the dollar figures may not be large, it seems to me that the one third discount on true value is a gross undervalue.  Indeed, if one ignores the outstanding mortgage loan (which on one form of transaction might have been taken over by the defendant), she received the equity in the Property at the cost of $330,000, when its true value ought to have cost $683,000, comfortably more than twice the amount.

115.  Of course, even those calculations presuppose that it was the defendant who provided the various funds, when there is absolutely no document which demonstrates that she paid any of the funds.  On this point, while Ms Wong may be correct that banks often destroy customers’ banking records after seven years, it can be noted that (1) the defendant gave no evidence that she had attempted to retrieve any banking documentation but had been unsuccessful; (2) the defendant’s evidence seemed to be that she made no attempt to retrieve any documentation from Madam Cheng, Mr Hui, Patrick Cheng, or any of her children; despite the fact that (3) the defendant was put on notice of the need to preserve and produce such documentation at a relatively early stage in these proceedings, and well before the expiry of seven years from 2009.

116.  The only ‘real’ money, as it were, about which it is possible to be confident that it changed hands, relates to the redemption amount.  GE Capital clearly received funds which allowed the redemption, and those funds had been provided by CL’s cheques from the firm’s client’s account.  Those funds had in turn come from the three cheques from Mr Hui and Patrick Cheng.  But, what is not known, from any documentary source, is how those three cheques were ultimately funded.

117.  The circumstances that such a large deposit was paid, and that the remainder of the payments were simply the amount necessary to achieve redemption of the mortgage (with a few thousand dollars of legal costs), seem to me to be unusual.  It certainly looks like someone paying off the mortgage, and the remainder of funds being possibly circulated.  As Mr Lam identified, TPC or any nominee of TPC might have purchased the cashier’s order which might have been cancelled and/or not been paid into the Company’s account. Had the Company taken any active participation in these proceedings, of which I have found it must have had notice, it would have been obliged to disclose the banking and accounting documentation which would have demonstrated whether the cashier’s order was ever really paid into its account.

118.  It might also be pointed out that the absence of the Company, or even TPC as a witness, in these proceedings means that the Company’s financial information has not been disclosed or adduced in evidence. It is therefore difficult to identify whether the Company was insolvent or insolvent at the time of the disposition by the Assignment.  Ordinarily, objective determination of that fact would necessarily involve a consideration of at least the accounting documents.  If the burden is on the Company to have established that it was solvent at the time of the disposition, it has plainly failed to do so, but I acknowledge that the Company had at least some equity in the Property.

119.  I accept that there is no direct evidence that TPC or the Company retained any benefit in the Property, where the defendant has stated that she now receives the rental income paid into a bank account held in her name.  Of course, it can also be noted that no bank statement or passbook was produced by her in evidence to show that it was indeed she who was receiving the rental income and keeping it for her own use.  Where Ms Wong places some emphasis on the absence of any benefit retained by the Company/TPC, the absence of the production of the passbook which might have indicated that to be true or not true is notable.

120.  As to whether the defendant did not have notice of the Company’s (and/or TPC’s) intention to defraud the plaintiff, the burden is on the defendant to demonstrate that she did not have notice.  Ms Wong points to the first time when the plaintiff informed the defendant of her complaint against TPC, in the letter before action dated 18 May 2012, three years after the disposition.  But the question of notice is not limited to what the defendant learned from the plaintiff; much more important in the context of this particular case is what she did or did not learn from TPC.

121.  I accept that it may not be possible properly to draw the inference that TPC told the defendant of the trouble involving the plaintiff, and the plaintiff’s threat of a claim, merely because of their relationship as sisters.  But there is much more evidence than just their family connection.  First, the defendant described that connection as “close”. Secondly, the defendant says she went to care for TPC in November/December 2008, when TPC was apparently suffering from stresses arising from her work environment, precisely the environment which had caused the problems between TPC and the plaintiff, leading to criminal conviction and a short spell on remand as well as a sizeable financial penalty, just a few weeks beforehand.  I accept Mr Lam’s submission that those two matters identify that it would have been natural for the defendant to have asked TPC, and natural for TPC to tell the defendant, how she came to be suffering as a result of recent events.

122.  Thirdly, the chronology points to a decision to dispose of the Property in that context, by way of a transfer to the defendant who was not otherwise really ‘in the market’ to buy a property in Hong Kong, and who on the face of things clearly could not afford it.  Fourthly, even if it was a genuine transfer (rather than a wholly sham transaction), the sale was at a considerable undervaluation compared to the true value of the Property – where, incidentally, the undervalued/underpaid amount would probably comfortably have met the plaintiff’s subsequent claim sounding in the Judgment Debt, interest and orders of costs.

123.  I have also referred to, and take into account, that if the true reason for the transfer of the Property was for TPC (via the Company) to extract money which she needed for recovery, TPC would have wanted to maximise her return.  I also think it natural that the defendant, as her close sister, would also have wanted to ensure that TPC would have more or less maximised the benefit on the sale, as opposed to taking advantage of TPC’s illness to create a significant windfall benefit for the defendant herself.

124.  I have in any event also rejected the explanation that the Company’s desire to transfer the property was the result of TPC’s medical condition.  I take into account the clear indication by the defendant that someone added the exhibits to her witness statement after she had signed it.  It is clear that TPC must have been one of those that assisted, by the provision of her (albeit limited) medical records.  Helping from the shadows, whilst avoiding the obligations of the Company as a litigant and failing to put forward the Company’s side of the story, is deeply unimpressive.

125.  Further, the almost complete failure on the part of the defendant to have produced any witness or any documents as would obviously have been expected to provide at least some support for the largely bare assertions that she makes lead me to draw significant adverse inferences against her.

126.  In conclusion, considering all of the matters and giving them such weight as seems to me appropriate in the exercise of my discretion as the trial judge, I find that the defendant has failed to prove that she took the transfer of the Property without notice.

G.   Result

127.  In the circumstances, the plaintiff is entitled to the relief sought.  She is entitled to it against the Company and the defendant.  I make a declaration that the Assignment was voidable, and it should be set aside.  I order the title deeds to the Property to be delivered up by the defendant to the plaintiff’s solicitors for them to hold pending the correction of the Land Register necessitated by the annulment of the Assignment, and until satisfaction of the Judgment Debt together with all interest and costs owed to the plaintiff, or until further order of the Court.

128.  Further, as the validity of the Restoration Order made by Mimmie Chan J is due to expire on 3 November 2020, I order the extension of the period of restoration for a further two years from that date.  Though Mr Lam suggested that there should be perhaps an extension of five years, I do not at present see why the necessary steps to be taken before the Company is permitted once again to lapse cannot be completed well inside a two-year period.

129.  In the exercise of my broad discretion as to costs, it seems to me that costs should follow the event.  Therefore, I order the plaintiff’s costs of this action (including all previously reserved costs) be paid by the Company and the defendant, being jointly and severally liable, with certificate for Counsel, to be taxed if not agreed.