LUI WAI YEE EUNICE ADMINISTRATRIX OF THE ESTATE OF UY MOON ENG, DECEASED v. SUN DAVID TSE CHIEN

HCA 1322/2018

[2022] HKCFI 2585

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1322 OF 2018

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D E C I S I O N

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INTRODUCTION

1.  This started off as the substantive hearing of an Injunction Summons taken out by the Defendant (“Sun”) on 25 July 2022 for an injunction restraining the Administratrix (“Eunice”) of the estate (“Estate”) of the late Madam UY Moon Eng (“Deceased”) from disposing of funds in the sum of HK$6.96 million (“the Funds”) held in 3 HSBC Accounts of the Deceased (collectively, “the 3 Accounts”). Sun claims proprietary interest over the Funds and he asserts that there was risk of dissipation of the Funds by Eunice.

2.  Eunice was absent at the hearing, although the Summons and supporting affirmation have been served on her. Despite her absence, the Court must still satisfy itself that it is appropriate to grant the injunction.

3.  On 17 August 2022, the Court received notice from Sun’s solicitors, Joseph Li & Co (“JLC”) that Eunice’s step-sister, Kennis, has applied for removal of Eunice as an administratrix in another set of proceedings. Kennis has also applied to intervene in the present case such that she may be appointed to represent the Estate in the place of Eunice (“Kennis’ Summons”).

4.  The Court thus directed that there be another hearing on 6 September 2022 to deal with 3 matters:

(1)  Kennis’ Summons for call over;

(2)  Sun’s application to adduce further evidence, being Kennis’ Summons and her supporting affirmation, in respect of the Injunction Summons; and

(3)  Re-opening of the hearing of the Injunction Summons.

5.  At the hearing on 6 September, Eunice has failed to appear again. Kennis does not oppose the Injunction Summons. Sun holds a neutral stance to Kennis’ Summons. I shall not deal with Kennis’ Summons in this decision.

BACKGROUND

6.  There is no dispute that Sun and the Deceased (who were separately married but estranged from his/her spouse) had cohabited as man and wife since 1989 until the death of the Deceased in 2016.

7.  The Deceased had 2 daughters, Kennis and Eunice, by 2 different men. Kennis was previously appointed by the Court to represent the Deceased’s estate and Eunice was appointed as Administratrix to the Estate on 5 August 2021 and took over this action.

8.  The Deceased and Sun had purchased 3 properties in joint names, abbreviated in the pleadings as the Tai Po Property (sold), Kwun Tong Property and a PRC Property purchased in the 1990s. Each party claims to have contributed solely to the purchase price of each property. There is no dispute, however, that Sun’s name was used in mortgages because the Deceased did not have income proof.

9.  In 1999, Sun assigned his half share in the Kwun Tong Property to the Deceased at a stated consideration of HK$350,000.

10.  In late 2001, the 4^th property, abbreviated as the Tsing Yi Property, was purchased, this time in the sole name of the Deceased. Again, the Defendant was the borrower as the Deceased lacked income proof.

11.  On 25 September 2015, the Kwun Tong Property was sold to the Urban Renewal Authority and the Deceased received HK$6.96 million as compensation.

12.  The Estate (then represented by Kennis) sought to recover vacant possession of the Tsing Yi Property from Sun, together with damages for trespass. Sun disputes the claim and asserts beneficial interest over all the Properties and the Funds.

13.  The core dispute turns on the reason behind assignment of the Kwun Tong Property to the sole name of the Deceased and purchase of the Tsing Yi Property in her sole name.

14.  Sun claims that he was the funder of the purchase price of all properties whereas the Deceased was a housewife with no gainful employment. The transfer of the Kwun Tong Property to the Deceased was not a true sale with consideration, but was pursued because of his risk of stroke that might cause him to become paralyzed and unable to co-sign documents. It was for the same reason that the Tsing Yi Property was put under the sole name of the Deceased.

15.  According to Sun, the common intention, agreement and understanding between him and the Deceased as regards the Tsing Yi Property was that they would be the beneficial joint tenants and that Property would be their family home. From late 2001 to late 2006, the Deceased and Sun had occupied the Tsing Yi Property as their family home, until they moved out due to health concerns of the Deceased and lived together at rented premises.

16.  Sun thus counterclaims for the Funds; and declarations that the Tsing Yi Property and the PRC Property were held by the Deceased on constructive trust for herself and Sun or on resulting trust for Sun.

17.  On the other hand, Eunice denies there being any trust. She claims that the Deceased did have income as a medical practitioner that far exceeded Sun’s. The relationship between the Deceased and Sun came to an end in 1999 as a result of the infidelity of Sun. The Deceased bought out Sun’s share in the Kwun Tong Property at a price of HK$350,000 paid to Sun. Upon Sun’s request, the Deceased allowed him to stay under the same roof with her but they no longer maintained any courtship. After the death of the Deceased, the Defendant entered into possession of the Tsing Yi Property without consent of the Estate.

18.  The issues for trial are thus: who provided the purchase price for each Property and who was the beneficial owner of the Tsing Yi Property, the Funds and the PRC Property.

19.  In between 4 October 2021 and 21 January 2022, there were discussions between JLC and Christopher KY Wong (“CKYW”) former solicitors for Eunice, over Eunice’s withdrawal of funds from the Accounts for meeting the Estate’s legal costs. No agreement was reached. In fear of Eunice’s dissipation of the Funds, Sun took out the Injunction Summons and obtained an injunction order and disclosure order on 28 January 2022. The Injunction Summons was adjourned and was heard by me on 28 July 2022.

20.  On 17 August 2022, just as about the Court was to give a notice of handing down of its decision on the Injunction Summons, it received notice from JLC that JLC was served with Kennis’ Summons. According to Kennis’ affirmation, Eunice has refused to inform the beneficiaries of the status of the accounts of the Estate. After repeated enquires since about January 2022, Eunice admitted that she had misappropriated over HK$2 million of the Estate’s money for her own benefit. CLYW ceased acting on 27 January 2022. Eunice has not repaid the Estate. To make matters worse, Eunice has become jobless in around January 2022.

21.  Further, Eunice has failed to attend court hearings or to properly prepare this case for trial. She has disappeared since late February 2022 and has not responded to Kennis’ calls. But Eunice has filed a listing questionnaire on 22 August 2022.

22.  Having lost faith in Eunice, Kennis commenced proceedings in HCMP 505/2022 for removing Eunice as an administratrix and have Kennis replace her.

LEAVE TO ADDUCE FURTHER EVIDENCE FOR THE INJUNCTION SUMMONS

23.  Post hearing, the Court retains the discretion to admit new evidence and even to reverse its decision at any time before an order is drawn up and perfected if these are exceptional circumstances or strong reasons for doing so: Sun Jianqiang v Trano-Island Limousine Service Ltd [2004] 1 HKC 533, §§23-33, in particular §26 (CA).

24.  Where the Court has given directions previously that no further affirmation is to be filed without leave of the court, leave would not be granted in the absence of “genuine extenuating circumstances”, meaning circumstances that would normally fall within the rule in Ladd v Marshall [1954] 1 WLR 1489. In exercising the discretion to grant leave, the court is bound to have regard to the underlying objectives set out in Order 1A, rule 1 and to seek to promote the attainment of such objectives. See Jose Miranda Da Costa Junior v Lorenzo Yih, unrep, HCA 156/2010, 28 April 2014) at §§9‑13, DHCJ Le Pichon, at first instance; upheld on appeal in HCMP 1127/2014, 21 July 2014 (CA). The court in the exercise of its case management power must pay regard to timetable already in place and the potential disruption such late application may cause to any substantive hearing (CA at §6). One of the overriding objectives is of course to ensure fairness between the parties.

25.  The present case plainly satisfies the Ladd v Marshall conditions in that Kennis’ Summons and affirmation in support emerged only after the hearing on 28 July 2022. Sun could not, with reasonable diligence, have obtained the information that Kennis now provides. Kennis’ evidence is highly credible and is directly relevant to prove dissipation of the Estate’s assets by Eunice. Eunice’s persistent absence at hearings lends credence to Kennis’ case.

26.  In the premises, I am satisfied that there are exceptional circumstances. To ensure fairness to the parties, I should give leave for Sun to adduce the new evidence and re-open the hearing of the Injunction Summons.

LEGAL PRINCIPLES ON GRANT OF INTERIM INJUNCTION

27.  The relevant principles on interim injunction and proprietary injunction have been recently stated in the case of Predicine Holdings Ltd v Bianchi (Hong Kong) Ltd and others [2021] HKCFI 123, §§69-73, Coleman J:

“69. The ordinary American Cyanamid principles apply to an application for an interim injunction to protect a claim for trust property. Therefore, the applicant must show (a) a serious issue to be tried on the merits of the claim, (b) the balance of convenience is in favour of granting the interlocutory injunction, and (c) it is just and convenient to grant the injunction. It is settled that it is not necessary to show that irremediable damage would be caused absent the injunction, and courts readily find that the balance of convenience favours the preservation of the fund or trust assets pending trial.

70. A ‘serious issue to be tried’ means that the court should be satisfied that the claim is not frivolous or vexatious. It is not a very difficult hurdle to overcome, and if the opposing party seeks to show that there is no serious issue to be tried, the threshold for doing so is high, as it amounts to demonstrating that the claim should be struck out.

71. Further, an applicant for a proprietary injunction does not need to show that there is a risk of dissipation (as would be necessary on an application for Mareva injunction relief). Further, ordinarily, proprietary injunctions are not subject to the usual liberties and exceptions found in a Mareva injunction order.

72. However, a proprietary injunction will not be granted if a monetary award will be an adequate remedy for the plaintiff. In particular, where the proprietary claim of a plaintiff is not to any specific real or personal property but to money, the plaintiff can be adequately compensated by a monetary award, unless there is evidence which calls into question the ability of the defendant to meet the award (for example its solvency), so that a proprietary injunction is not necessary or justified: see Essilor Manufacturing (Thailand) Co Ltd v G Doulatram and Sons (HK) Ltd [2021] HKCFI 30, at §§58-60.

73. To that point, I would add that a proprietary injunction may be considered necessary or justified where there is evidence which calls into question the willingness of the defendant to meet any award, or which sufficiently demonstrates an intention from which it can be inferred it would not meet an award. In other words, though it is not necessary to show a real risk of dissipation for the purposes of obtaining a proprietary injunction, if such a risk is demonstrated it may be an additional factor which points in favour of the grant of a proprietary injunction.”

SERIOUS ISSUES TO BE TRIED

28.  In Sun’s affirmation in support, there is not a single financial document showing Sun’s contribution to the purchase price of any Property. For unknown reasons, enclosures to his witness statements have all been excluded from the hearing bundle. Accordingly, Sun’s case remains bare assertions.

29.  Whilst Sun has a meritorious claim, it must not be overlooked that the Estate equally has a meritorious defence based on indisputable evidence. For 7 years before her death, the Kwun Tong Property had been registered in the Deceased’s sole name. In that period, no major assets were put into joint names, be it the Funds or the newly acquired Tsing Yi Property. Sun did not produce any medical proof to show that that state of affairs was due to his medical condition.

30.  At this stage, it is simply impossible for the Court to even make a preliminary guess at the relative chances of success of each party as neither of them had produced financial proof as to their funding of the purchase of the Properties.

31.  However, showing a serious issue to be tried is not a high hurdle. The Kwun Tong Property was amongst a series of 3 properties held in the joint names of Sun and the Deceased. The law permits joint tenancy in personal property no less than in realty. Thus a joint tenancy may carry on following a land sale by all joint owners because joint ownership may continue in relation to the sale proceeds: Re Allingham, Allingham v Allingham [1932] VLR 469; Walker at para [41]”: Zeligs v Janes (2016) BCCA 280, British Columbia Court of Appeal. On the pleadings and Sun’s witness statements, there are serious issues to be tried as to his entitlement to the Funds.

BALANCE OF CONVENIENCE

32.  Although risk of dissipation of assets is not a necessary element, there is plainly evidence of such risk as deposed to by Kennis. Whether the Estate or Sun is to succeed at the end of the trial, either of them stands to lose if the assets of the Estate are to remain in the hands of Eunice. On the other hand, there would be no prejudice to Eunice were an injunction granted as she, as current Administratrix, is not entitled to personally use the Funds until after administration is completed. The balance of convenience plainly lies in favour of granting an injunction.

JUST AND CONVENIENT TO GRANT THE INJUNCTION

33.  Applying §72 of Predicine Holdings, damages would be an adequate remedy and no injunction is required. However, there is now evidence from Kennis that calls into question the ability of Eunice to repay the misappropriated funds. It would be just and convenient to grant the injunction to prevent further misappropriation of the Funds by Eunice.

TERMS OF THE INJUNCTION

34.  There is no evidence that the compensation was paid into any particular account such that Sun could assert a proprietary right over the money in that account. Further, Sun has not denied that as a joint owner, the Deceased had beneficial interest in the Funds in her lifetime. In my view, this is not a situation where Sun can assert proprietary interests over funds in a particular account of the Deceased. The injunction is a general one rather than a proprietary one.

35.  The Injunction Summons seeks to freeze the 3 Accounts. However, both the evidence of Sun and Kennis shows that upon obtaining grant of Letters of Administration, Eunice has transferred the money from the Deceased’s accounts to Eunice’s personal bank account with the number 124-1xxxx4-xxx. Accordingly, the injunction order should also cover that account.

COSTS

36.  Prior to Kennis’ Summons, there was in lack of sufficient evidence to justify the grant of an injunction. That was because Sun’s allegation that Eunice had misappropriated assets was grounded on (i) Eunice’s request to withdraw money for legal costs; and (ii) withdrawal of the Deceased’s funds into an HSBC account of Eunice (“Eunice’s Account”).

37.  With regard to ground (i), withdrawal of part of the Funds for the purpose of litigation could not be regarded as a form of misappropriation or dissipation. The negotiation between the parties took 3 months. The initial sum of HK$2 million sought by Eunice may sound enormous, but she reduced it to HK$500,000, and then HK$700,000 with a monthly withdrawal. Neither HK$500,000 or HK$700,000 could be regarded as unreasonable in the context of this case.

38.  With regard to ground (ii), the transfer of funds to Eunice’s Account could not, in itself, have been viewed as surreptitious or wrongful. According to CKYW’s letter dated 25 January 2022, that transfer took place 3 months before the Injunction Summons was issued. And yet CKYW offered an undertaking against disposal of money in the 3 Accounts and patiently negotiated with JLC in that interval for release of money to meet legal fees. The Funds had not in any way been depleted in the interval when one compares the total amount stated in that letter and the Letters of Administration of the Estate. There was no sign of dissipation at all.

39.  Unfortunately, no consent summons was filed. CKYW came off the record on 27 January 2022.

40.  Mr Jeremy Cheung, previous counsel for Sun, relied on Wharf Ltd v Lau Yuen How [2016] HKLRD 783 §12, Au J (as he then was) to say that the Administratrix had no right to use Sun’s money. She had other sources of funds available to her because she has a property under her name.

41.  I am unable to agree with Mr Jeremy Cheung:

(1)  The schedule of assets attached to the Letters of Administration discloses that the Funds formed the bulk of the Estate. The other major asset, Tsing Yi Property, is in the possession of Sun and cannot be deployed to raise funds for the litigation.

(2)  Sun deposed that Kennis had tried to apply for legal aid but was rejected. She could not locate her brother (a potential beneficiary to the Estate) to obtain evidence to satisfy the means test.

(3)  Mr Cheung has also failed to show authority as to why Eunice had to use her own resources to litigate on behalf of the Estate.

42.  In those circumstances, Sun’s application could only be regarded as made on the flimsy basis that Eunice was about to remove part of the Funds for the purpose of litigation and her solicitors went off the record. Had the matter stopped there, before Kennis’ Summons was issued, I would not have granted the injunction after balancing the convenience.

43.  Accordingly, on a nisi basis, I order that the costs of the Injunction Summons shall be borne by Sun up to and including the hearing on 28 July 2022.

44.  As for the costs on and after 17 August 2022, it should be in the cause because neither the Estate nor Kennis has opposed the injunction. The question as to whether or not Eunice should personally bear the costs shall be reserved to the trial judge.

CONCLUSION

45.  I grant the injunction order sought, which would cover Eunice’s account number 124-1xxxx4-xxx.

46.  On a nisi basis, costs of the Injunction Summons before 28 July 2022 shall be borne by Sun; costs thereafter shall be in the cause. The question of whether or not Eunice should personally bear costs shall be reserved to the trial judge.

47.  The Defendant’s own costs with certificate for counsel shall be taxed in accordance with Legal Aid Regulations. However, the costs of exhibiting the pleadings to the 7^th affirmation of Sun shall not be allowed, as pleadings always have to be separately referred to and copied in hearing bundles. On a nisi basis, Sun’s solicitors shall bear the costs arising out of exhibiting the pleadings unless they can show cause to the contrary within 14 days.