NAM KEE TRAVEL CO LTD v. YIP WING CHING

HCA 1061/2014

[2023] HKCFI 2921

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1061 OF 2014

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DECISION

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A.  INTRODUCTION

1.  This is the plaintiff’s application for summary judgment which is made by summons filed on 5 September 2022 (“the Summons”).

B.  UNDISPUTED BACKGROUND

2.  The plaintiff was incorporated in 1991 and has been carrying on the business of travel services since then.

3.  The defendant was a director thereof.  He was married with Madam Lau Mei Wah (“Madam Lau”), and they had two sons, namely, SK Yip and TY Yip.

4.  Subsequently, Yip’s International Holdings Limited (“the Parent Company”) was incorporated on 27 March 2003.

5.  At the time of the Parent Company’s incorporation, its shareholdings were held as follows:

Shareholders	Shareholding
The defendant	55%
Madam Lau	25%
SK Yip	10%
TY Yip	10%

6.  They were also the directors of the Parent Company.

7.  The Parent Company held over 98% shareholding in Great Leader Bus Holdings Limited (“Great Leader Limited”), which in turn held two/three[1] wholly-owned subsidiaries, including Man Yee Transportation Bus Co. Ltd. (“Man Yee Limited”) and the plaintiff.  Man Yee Limited and the plaintiff in turn wholly owned a number of other subsidiary companies (collectively, “the Yip’s Group of companies” or “the Group”).

8.  This action was commenced in June 2014.

9.  On 8 July 2014, the plaintiff took out a summons and applied for summary judgment against the defendant (“the Aborted Order 14 Application”).

10.  On 25 April 2018, leave was granted to the plaintiff to withdraw the aforesaid Order 14 application with costs to the defendant.

11.  The defendant then filed and served his Defence herein on 28 May 2018.

12.  The plaintiff applied for summary judgment against the defendant again by virtue of the Summons filed on 5 September 2022.

C.  THE PLAINTIFF’S CASE

13.  Without proper authorisation from the plaintiff’s Board of Directors, the defendant had withdrawn from the plaintiff’s bank account with the DBS Bank by way of cashier orders on 18 September 2013:

(1)  the sum of $25,000,060[2] in his own favour;

(2)  the sum of $5,000,060 in favour of Concord Bus Company Limited (“Concord Limited”).

14.  Out of the said sum of $25,000,060, apart from a sum of $6,000 (in respect of which the plaintiff makes no claim because it accepts that this sum was spent on the plaintiff’s expenses), the defendant had failed to account for the balance, i.e. $24,994,060 (“the 1^st Withdrawn Sum”).

15.  By reasons of the aforesaid, the defendant had acted in breach of the fiduciary duties which he owed to the plaintiff, and he is therefore liable to account for the 1^st Withdrawn Sum and all the profits/benefits that he has derived from his wrongful conduct.

16.  By the Summons, the plaintiff is only asking for summary judgment for the 1^st Withdrawn Sum.  In other words, the Summons has nothing to do with the $5,000,060 allegedly paid to Concord Limited (“the Concord Claim”).

D.  THE DEFENDANT’S PLEADED CASE

17.  The defendant, his wife (Madam Lau) and their two sons were the shareholders and directors of the Parent Company. 

18.  Over the years, they all along treated the Parent Company’s (and its subsidiaries’) assets as their own assets.

19.  Most part of the sum of $25,000,060 had been, after its withdrawal, deposited into the bank accounts which the defendant maintained with Bank of China (Hong Kong) (“the BOC Account”) and/or Public Bank (“the PB Account”).

20.  After such deposit, except for an amount of $5,670,000 which was used to reimburse the defendant for an earlier payment made by him on behalf of the Yip’s Group of companies for part-payment for the purchase of certain buses from 金賢旅運有限公司, the balance of the 1^st Withdrawn Sum had been used subsequently to pay third parties as expenses on behalf of the Yip’s Group of companies.

21.  The details of such expenses are as follows:

Bank Account	Date	Payee	Amount	Purpose
BOC	11.9.2013	金賢旅運有限公司	$5,670,000	Part payment for the purchase price of five buses on behalf of “Money Link”[3]
BOC	23.9.2013	歐陸旅遊巴士管理有限公司 (representative of金賢旅運有限公司)	$5,670,000	Part payment for the purchase price of five buses on behalf of “Money Link”
BOC	26.9.2013	區瑞興	$50,000	Commission/Agency fee for the purchase of five buses (with licence)
BOC	26.9.2013	梁顥騰	$100,000	Commission/Agency fee for the purchase of five buses (with licence)
PB	2.10.2013	China Construction Bank (Asia)	$457,507	Loan instalment payment for vehicle PE 4713 (registered under the name of Man Yee Coach Limited)
PB	2.10.2013	Bank of East Asia	$8,535,479.50	Repayment of loan for five vehicles ($1,707,145.90 x 5)
PB	22.10.2013	Bank of East Asia	$3,000	Processing fee for obtaining original copy of vehicle registration certificate of JZ 7220
PB	22.10.2013	HKSAR Government	$46,072	First Registration Tax for bus held by Man Yee Limited
PB	25.10.2013	Century Faith Consultants (International) Limited	$26,000	Consultancy fee for the purchase of shares of Great Leader Limited
PB	25.10.2013	Century Faith Consultants (International) Limited	$250,000	Disbursement for Century Faith for valuation of shares and/or assets of Great Leader Limited
PB	9.11.2013	Century Faith Consultants (International) Limited	$900,000	Accounting fees ($150,000 per month) from 11.2013 to 4.2014
BOC	9.12.2013	Man Yee Limited	$1,000,000	Salary paid to employees or Man Yee Limited or other expenses
PB	20.2.2014	Century Faith Consultants (International) Limited	$900,000	Accounting fees ($150,000 per month) from 5.2014 to 10.2014
BOC	28.3.2014	躍達汽車有限公司	$1,000,000	Payment made on behalf of Man Yee Limited for payment of deposit for the purchase of 10 buses
BOC	23.4.2014	陶天賜、陶明興 & 陶國強	$161,992	Payment made on behalf of Man Yee Limited as contribution to 屯子園花炮會

22.  The total amount of the above was in the sum of $24,770,050.50[4]: $13,651,992 was paid from the BOC Account, and $11,118,058.5 was paid from the PB Account.

23.  All the funds claimed to have been misappropriated were used for genuine and proper commercial purposes within the Group.

24.  In fact, by the written comments made by Madam Lau on 9 June 2014, the plaintiff agreed that $21,173,308.50 out of the alleged misappropriated funds was attributable to Man Yee Limited and/or its subsidiary companies rather than the defendant, and many of the items of expenses had been classified by the plaintiff as “deductible expenses”.  From the defendant’s perspective, the items covered by the aforesaid comments were utilised for the benefit of the Yip’s Group of companies.

E.  THE DEFENDANT’S ARGUMENTS

25.  It was submitted by Mr Wong for the defendant in his skeleton argument that there are quite a large number of questions of facts which have to be tried, and they are as follows:

(1)  Whether the defendant had made the specific individual payments as set out in the table above;

(2)  Whether or to what extent the said payments were made to the benefit of the plaintiff or of the Yip’s Group of companies;

(3)  Whether it was the practice of the plaintiff (or the Yip’s Group of companies) to require board approval before funds could be drawn from the plaintiff’s bank accounts;

(4)  Whether the defendant’s application of funds withdrawn from the plaintiff’s bank accounts to the benefit of the Yip’s Group of companies deviated from previous practice;

(5)  Whether the day-to-day operation of the Yip’s Group of companies had been managed collectively and centrally as one by the defendant’s family and to what extent the respective businesses and accounts of the Yip’s Group of companies entangled;

(6)  Whether Madam Lau had endorsed the majority of the 1^st Withdrawn Sum as attributable to the Yip’s Group of companies;

(7)  Whether and to what extent any of the said payments were made to the benefit of the defendant personally;

(8)  In the circumstances of the case, whether the defendant had breached fiduciary duty owed to the plaintiff;

(9)  If the defendant did breach his fiduciary duty owed to the plaintiff but did not derive personal benefit from the breach, what should be the amount of equitable compensation.

26.  It was further stated in the defendant’s skeleton argument that there are the following questions of law which have to be resolved at the trial:

(1)  In the circumstances where shareholders’ interest was paramount and creditors’ interest was not engaged, if the business and accounts of the plaintiff and the Yip’s Group of companies were entangled and managed as one at the material time, whether the defendant breached fiduciary duty owed to the plaintiff if he applied the 1^st Withdrawn Sum to the benefit of the Yip’s Group of companies as a whole;

(2)  What is the basis of the plaintiff’s claim for “repayment” (i.e. restitution) if the defendant was not the recipient of benefits arising from the 1^st Withdrawn Sum;

(3)  To the extent that benefits arising from the 1^st Withdrawn Sum had already been received by the Yip’s Group of companies, how should further “damages or equitable compensation” payable to the plaintiff be determined to avoid causing unjust enrichment to the Yip’s Group of companies.

27.  It was also submitted that there are other reasons (“the Miscellaneous Reasons”) why the Court should not grant summary judgment at this stage.  They are as follows.

28.  Firstly, as a matter of background, this action is one of the three actions which are pending among the members of the Yip family (collectively, “the Three Actions”).  The other two actions are:

(1)  HCA 1563/2014 which concerns a dispute between the estate of Madam Lau[5] and the defendant over the beneficial ownership of 55% shareholding in the Parent Company (which had been transferred by the defendant to Madam Lau  in around November 2012) (“the Share Ownership Action”);

(2)  HCMP 818/2018 (previously FCMP 29/2018) under which the defendant claims for maintenance against Madam Lau’s estate under section 4 of the Inheritance (Provision for Family and Dependants) Ordinance (Cap.481, Laws of Hong Kong) (“the Maintenance Action”).

29.  The Three Actions have been ordered to be tried before the same Judge and to be heard at the same time or one immediately after another as the trial judge may direct.

30.  If the defendant succeeds in the Share Ownership Action, then at all material times the defendant was the majority shareholder in the Parent Company.  When “creditors’ interest was not engaged and shareholders’ interest was paramount”, breaching fiduciary duty owed to the plaintiff (one of the Yip’s Group of companies) would be contrary to the defendant’s self-interest, hence inherently improbable.  Therefore, no judgment should be granted in favour of the plaintiff until the Share Ownership Action has been resolved, as the Court should take the result of that action into account.

31.  Secondly, when the Court ordered that this action is to be tried together (or one immediately after another) with the Share Ownership Action and the Maintenance Action before the same judge, it should be obvious that the court considered that the Three Actions involving the Yip family are related to one another, and findings in one case may have an impact on the outcome of the others. 

32.  Thirdly, it is a blatant abuse of process for the plaintiff to attempt to revive its Aborted Order 14 Application at this late stage.  The irresistible inference is that the taking out of this late application is the plaintiff’s delaying or oppressive tactic to deter the defendant from pursuing his rights in the Share Ownership Action and the Maintenance Action. 

33.  Fourthly, granting summary judgment herein “without determination of the other related actions would yield unsatisfactory results and would be non-viable”[6].

34.  At the oral hearing, Mr Wong further drew this Court’s attention to the 4^th Affirmation of the defendant which was filed on 9 June 2015 in opposition to the Aborted Order 14 Application, and in particular paragraph 41 thereof which stated that:

“In such connection, I remember quite vividly that, soon after the 2^nd Advancement[7] was made, the matter was also disclosed to Madam Lau and eventually became recorded in the ledgers of the Plaintiff under Madam Lau’s own instructions to the bookkeeper. In this regard, I refer to Exhibit ‘LMW-11’ which showed an entry of ‘葉永清-葉永清-取款’ in the amount of HK$30,000,000 which represented the HK$25,000,000 under the 2^nd Advancement and the HK$5,000,000 paid to Concord for the shares in Great Leader. Similar to the case of the ledgers of Man Yee, the said HK$30,000,000 was booked and treated as a net balance as a personal loan owing by me to the Plaintiff. This again defeats any allegations that the said HK$25,000,000 was by any means ‘misappropriated’ as the matter was duly disclosed and recorded into the books after the relevant withdrawal and this action ought to be dismissed outright.” (original emphasis)

35.  Moreover, Mr Wong submitted that the grant of summary judgment at this stage is unfair and would prejudice the defendant’s interest in his conduct of the trial.

F.  LEGAL PRINCIPLES OF ORDER 14

36.  The legal principles applicable to Order 14 applications are trite. 

37.  In Li Chuen Kwai v. Po Lam Construction Development Limited (HCA 2376/2013, unreported, 24 September 2014), it was held that:

“12. As far as the defendant’s defence is concerned:

(1)  The defendant shoulders the burden to satisfy the court that he has a real or bona fide defence (ie that there are triable issues), or that there ought for some reason to be a trial of the plaintiff’s claim.

(2)  However, a complete defence need not be shown.  The defence set up need only show that there is a triable issue or question or that for some other reason there ought to be a trial; and leave to defend ought to be given unless there is clearly no defence in law and no possibility of a real defence on the question of fact.

(3)  Although the mere assertion in an affidavit does not, ipso facto, provide leave to defend, the court will not embark upon a mini‑trial of the action on paper and leave to defend will be granted unless the defence raised is so incredible or so contradicted by contemporaneous documents or circumstances that it becomes clear that the defence is a sham.

(4)  The test is not whether the defendant’s assertions are to be believed, rather it is whether those assertions are believable, ie capable of being believed.  If so, the defendant must have leave to defend.

(5)  Whether the defendant’s assertions are believable is a question that should be answered not by taking those assertions in isolation bur rather by taking them in the context of so much of the background as either undisputed or beyond reasonable dispute.”

38.  InJu Yan Di Embroidery Genesisy v Yau Wai Han [2015] 1 HKLRD 822, Cheung JA held that:

“14. It is well-established that the burden on the defendant in a summary judgment application is to show that he has a credible defence and he must condescend to give particulars of his defence. However, this does not mean that once the plaintiff invokes the application and irrespective of the strength of his case, the defendant bears all the burden of showing that there are triable issues in the case. This is because the starting point in a summary judgment application is that it should only be invoked when there is no defence to the claim. This means that the plaintiff must in the first place demonstrate that the defendant has indeed no defence. This requirement is further recognised in the procedural rules which mandate the plaintiff to state his belief in the verifying affidavit that there is no defence to the claim. This requirement must be kept in proper perspective when assessment is made of the strength of the application, otherwise there is a danger that the attention will be focused solely on what the defendant has said without consideration at the same time of the basic premise of the plaintiff’s claim or its inherent strength and weakness…”

39.  Cheung JA also had the following to say in Time Rich 08 Limited v DBE (HK) Limited & Others [2018] HKCA 404:

“[…] in deciding whether a plaintiff is entitled to summary judgment the relevant test is whether the defendant has raised credible triable issues. If there are, the matter should go to trial. If not, judgment should be entered against the defendants. In considering whether there are triable issues, the Court will not take the defence on its face value but test it against the evidence disclosed in the affidavit including matters such as contemporaneous documents, whether the alleged defence is inconsistent with the defence previously put forward or whether the defence is only recently raised despite opportunity being given to the defendant to respond earlier. The Court will also consider the inherent probability of the defence but what the Court should not do is to conduct a mini-trial on complicated factual issues : Paul Y Management Ltd v Eternal Unity Development Ltd (CACV 16/2008)” (at [5.2])

G.  DISCUSSION

G1.  Whether the defendant had made the specific individual payments as alleged

40.  As aforesaid, the defendant’s case is that the 1^st Withdrawn Sum had been deposited into his two different bank accounts, and then, as shown in the table at [21] above, various expenses had been settled by funds from those two accounts respectively.

41.  At the outset, I should deal with the defendant’s argument that there is a triable issue as to whether the defendant had made the specific individual payments as set out in the said table.  It was said that even though it is the defendant’s case that he did make such payments, but since the plaintiff did not admit it in its Reply, the matter has to be determined by the Court as a matter of fact finding, which can only be done at the trial.

42.  With greatest respect, this argument must be rejected, for it is apparent that the plaintiff is applying for summary judgment on the basis of the defendant’s case.  The Court is entitled to enter judgment in favour of the plaintiff on the basis of the defendant’s pleaded case: Poon Hau Kei v Hsin Chong Construction Co Ltd, Taylor Woodrow International Ltd Joint Venture [2004] 2 HKLRD 442, at [12] & [19] and Li Chuen Kwai (supra), at [14].

G2.  Which bank account did the defendant deposit the 1^st Withdraw Sum into upon withdrawal

43.  The next question is whether the defendant had indeed deposited the 1^st Withdrawn Sum (upon its withdrawal on 18 September 2013) into both the BOC Account and the PB Account as he alleged.

44.  In this regard, I hold the view that the factual assertion that the defendant had deposited part of the 1^st Withdrawn Sum into the BOC Account is totally unsupported by documentary evidence.  As can be seen from the defendant’s bank statement issued by the Public Bank, the whole sum of $25,000,000[8] was deposited into the PB Account on 18 September 2013.

45.  In fact, when this was pointed out to Mr Wong at the hearing, he also accepted that that was the case.

46.  However, Mr Wong said that that would not defeat the defendant’s defence, because, it was argued, that the two accounts should be looked at as a whole because both accounts belong to the defendant.

47.  I totally disagree that the two accounts should be looked at “as a whole” as suggested.  In the present application, the plaintiff is only going after the 1^st Withdrawn Sum but not any other sum[9]. Therefore, only the whereabouts of the monies which have been deposited into the PB Account should be relevant for the present purpose. 

48.  In fact, according to the 3^rd Affirmation of Yip Shung Kin filed in support of the Summons, another $25 million had been transferred from Man Yee Limited to the BOC Account and it was alleged that this sum was misappropriated by the defendant from Man Yee Limited.  This allegation was not disputed in the defendant’s 5^th Affirmation filed in opposition to the Summons.  This further demonstrated that it is simply not right to consider the purpose of the funds which had been withdrawn from the BOC Account as opposed to the PB Account.

49.  Mr Wong then argued that, as allegedly supported by paragraph 41 of the defendant’s 4^th Affirmation[10], the whole sum of $25,000,000 had been agreed by Madam Lau to be booked and treated as a personal loan owed by the defendant to the plaintiff (“the Personal Loan Defence”).

50.  With greatest respect to Mr Wong, the Personal Loan Defence must be disregarded. 

51.  The said 4^th Affirmation was filed in opposition to the Aborted Order 14 Application.  After leave had been granted on 25 April 2018 for that application to be withdrawn, the defendant filed a Defence on 28 May 2018.  However, in that pleading, the Personal Loan Defence was nowhere to be seen.  In such circumstances, the defendant is not entitled to rely on this defence: Kaefer A.G. v Winfield Marine Services Co. Ltd [2022] HKCA 807, at [30] – [32].

52.  Furthermore, it is in fact very unfair for the defendant to rely on this line of defence at the hearing because:

(a)  While the defendant did in his 5^th Affirmation (filed in opposition to the Summons) stated that he would repeat the matters deposed in his previous affirmations, his solicitors did not request the plaintiff’s solicitors to include the said 4^th Affirmation in the “Pleadings and Court Documents” Bundle.  The said 4^th Affirmation was only inserted into the Exhibits Bundle.  The documents exhibited to the said 4^th Affirmation could not even be found in the hearing bundles[11];

(b)  More importantly, this line of defence was not relied on by Mr Wong in his skeleton argument at all, and he did not refer to or cite the said paragraph 41 of the 4^th Affirmation therein. Hence, this Court should not allow the defendant to pursue such a point according to paragraph 7 of Practice Direction 5.4[12].

53.  For the above reasons, the defendant’s explanations on expenses which had been settled by the monies in the BOC Account (in the total amount of $13,651,992 as shown in the table at [21]) are totally irrelevant and unhelpful to the defendant’s defence of the plaintiff’s claim herein.  That means the defendant has raised no arguable defence in respect of this sum together with the amount of $223,949.5[13] which was unaccounted for, that is, in the total sum of $13,875,941.5 (“the Total Unaccounted Sum”).

54.  That being the case, the issues of fact and law suggested by Mr Wong do not concern the said sum of $13,875,941.5.  Subject to the Miscellaneous Reasons on the basis of which Mr Wong submitted that the Court should not grant summary judgment at this stage (which I will deal with below), judgment should be entered against the defendant at least for the Total Unaccounted Sum.

55.  Mr Wong seems to be suggesting that the Court must also make a ruling as to whether the monies transferred to the defendant’s bank account were paid to the benefit of the defendant personally, and that this is a triable issue which the Court should only decide at the trial.  He further submitted that this affects the question of whether restitutive or restorative reliefs would be appropriate in the circumstances of the present case. 

56.  On my part, I am of the view that the transfer of the Total Unaccounted Sum into the defendant’s personal bank account provides prima facie evidence that the said sum of money had been paid to the defendant for his personal benefit and that he had been in breach of his fiduciary duty in misapplying the plaintiff’s assets. The burden is then shifted to him to demonstrate the propriety of the transaction: Multi-Best Enterprises Limited v Luk Fai Holdings Company Limited & Others [2023] HKCFI 2268, at [74].  In the present scenario where the defendant is resisting the plaintiff’s application for summary judgment, he is also obliged to satisfy the Court that he has a real and bona fide defence.  However, as aforesaid, as far as the Total Unaccounted Sum is concerned, the defendant has simply failed to do so.   In these circumstances, the issues of law as suggested by Mr Wong are not really issues which the Court has to resolve.

G3.  The Miscellaneous Reasons

57.  I now turn to consider the Miscellaneous Reasons.

G3.1  Relevance of outcome in the Share Ownership Action

58.  The Three Actions have been ordered to be tried before the same Judge and be heard at the same time or one immediately after another as the trial judge may direct (“the Order 4 Rule 9 Order”).

59.  It was submitted that if the defendant is eventually found to be the majority shareholder of the Parent Company, then since “creditors’ interest was not engaged and shareholders’ interest was paramount, breaching fiduciary duty owed to the plaintiff (which is one of the Yip’s Group of companies) would be contrary to the defendant’s self-interest”[14], and therefore it would be inherently improbable for him to do so.  It was said that, as a result, no summary judgment should be granted before the Court has made a ruling on the defendant’s beneficial ownership in the Share Ownership Action.

60.  The short answer to this argument is that even if the defendant succeeds in the Share Ownership Action, he will not be and has never been the 100% beneficial owner of the Parent Company.  At the material time, he was at most the 55% shareholder of the Parent Company.  Therefore, I do not think his success in the Share Ownership Action would necessarily mean that it is inherently improbable that he would breach his fiduciary duty owed to the plaintiff.  In fact, I would have thought there is much more truth in the reverse situation, namely, that if he is found to have no beneficial interest in the Parent Company when he transferred the 1^st Withdrawn Sum away from the plaintiff, it is inherently more probable that he would breach such fiduciary duty.  Be that as it may, I do not agree that the Court should wait as suggested.

61.  Furthermore, one must of course bear in mind that what we are now considering is only the Total Unaccounted Sum, in respect of which the defendant has failed to provide any explanation despite the fact that he has filed a total of five Affirmations.  Therefore, the defendant cannot even begin to argue that it is inherently improbable for him to breach his fiduciary duty owed to the plaintiff. The transfer away of the Total Unaccounted Sum to his personal bank account for no consideration is prima facie a use of his director’s power for improper purpose.  He has simply failed to discharge his evidential burden to demonstrate the proprietary of the transaction: Multi-Best Enterprises Limited (supra), at [74].

62.  This argument is therefore rejected.

G3.2  The Three Actions heard together

63.  This argument is more or less the same as the argument dealt with above.  It was submitted that it should be obvious that the court considered that the Three Actions involving the Yip family are related to one another, and findings in one case may have an impact on the outcome of the others, otherwise the Order 4 Rule 9 Order would not have been made.

64.  I have explained above why I considered that a positive result in the Share Ownership Action (from the defendant’s perspective) would not assist him in his defence of the claim of the Total Unaccounted Sum.

65.  As far as the Maintenance Action is concerned, Mr Wong did not even explain why the findings to be made therein may be relevant to the result of this action.

66.  It should also be pointed out that:

(1)  The plaintiff initially took out a summons on 8 June 2018 for consolidation of the Three Actions.  No supporting affidavit was filed together with that summons.  Therefore, the ground of application was not made known to the Court;

(2)  At the call-over hearing of the said summons on 15 June 2018, parties informed the presiding Master that they had reached agreement on the said summons and were in the course of discussing the consequential directions.  They therefore asked the Court to adjourn the call-over hearing[15];

(3)  The Order 4 Rule 9 Order was subsequently made by consent, and the adjourned call-over hearing had been vacated.

67.  The above reveals that, with greatest respect, there is no basis for Mr Wong to say that the Court must have come to the view that the findings in one of the three cases may have an impact on the outcome of the others.

G3.3  Abuse of process

68.  Mr Wong then argued that it is a blatant abuse of process for the plaintiff to attempt to revive the Aborted Order 14 Application at this late stage.  It was said that the irresistible inference is that the plaintiff was trying to delay matters and to obstruct the defendant from pursuing his rights in the Share Ownership Action and the Maintenance Action. 

69.  There are two separate points here.

70.  The first point is whether the plaintiff should be allowed to apply for summary judgment again despite the fact that it had withdrawn its previous application in 2018.

71.  Mr Man explained that the plaintiff did not proceed with the Aborted Order 14 Application because it accepted at the time that its claims against the defendant would be caught by the “fraud exception”, and it was only because of that that the plaintiff accepted defeat.  He further stated that the plaintiff considered it advisable to make the same application again now that the “fraud exception” has been abolished.

72.  On my part, I have very serious doubt on whether the plaintiff’s claims were indeed caught by the “fraud exception” as alleged. However, whether the plaintiff’s reason of withdrawal of the application was correct in law does not matter.  It is trite that the rules relating to res judicata in interlocutory matters are less stringent than those generally applicable.  The question is whether it is just and reasonable to allow the second application to be made: Chu Hung Ching v Chan Kam Ming [2001] 1 HKC 396 at 401E-402D.  In the circumstances of the present case, where the previous Order 14 application had been withdrawn with costs being awarded in favour of the defendant, and the court had not made any ruling on the merits of the previous application, I cannot see why it is unjust or unreasonable to allow the present application to be heard.  To the contrary, if the plaintiff can demonstrate that the defendant has no defence to part of the claim, I am of the view that, in order to achieve the underlying objectives of the Rule of the High Court (“RHC”), this Court should grant judgment sooner rather than later (albeit a partial judgment), so as to:

(1)  ensure that this case or part of the claim is dealt with as expeditiously as is reasonably practicable (Order 1A, rule 1(b) of the RHC);

(2)  promote a sense of reasonable proportion and procedural economy in the conduct of proceedings (Order 1A, rule 1(c) of the RHC);

(3)  ensure that the resources of the Court are distributed fairly (Order 1A, rule 1(f) of the RHC).

73.  The second point is whether the plaintiff is deploying a delaying tactic by the taking out of this application. 

74.  At the hearing, upon this Court’s enquiry on the progress of the Three Actions, Mr Man for the plaintiff informed that the only outstanding matter to be dealt with before the Three Actions can be set down for trial is the compliance of the expert directions in the Share Ownership Action.  In that regard, while Madam Lau’s estate has invited the defendant to arrange for a joint meeting between the experts, the defendant is yet to give a reply.  The experts’ joint statement which is to be prepared by the experts is therefore still pending.  Mr Wong for the defendant did not dispute what Mr Man informed the Court.  In these circumstances, I cannot see how the defendant can validly complain that the present application is a delaying tactic.

75.  The defendant’s arguments are therefore rejected.

G3.4  Viability of granting summary judgment

76.  Finally, Mr Wong submitted that granting summary judgment herein “without determination of the other related actions would yield unsatisfactory results and would be non-viable” on the following bases:

“a. The Group/P would enjoy a windfall of a similar amount because D relying on the Said Sums had made disbursements/payments to the benefit of the Group during the period from September 2013 to April 2014;

b. The finding of a breach of fiduciary duty necessarily implies disloyalty to the Group/P on the part of D, which may not be sufficiently supported by pleadings or evidence, and which may be inherently improbable if D had all along been the majority shareholder in the Group and P;

c. If D is not financially able to comply with such an order (see D’s 5^th affirmation §§7 – 8), the usual consequences for non-compliance would ensue, and such consequences may thwart the progress of the other related cases including but not limited to, most importantly, the Share Ownership Action.”

77.  These arguments can be disposed of quickly as follows:

(1)  Regarding the argument under (a), insofar as the Total Unaccounted Sum is concerned, such a submission is totally unsupported by evidence nor is it pleaded;

(2)  In respect of the argument under (b):

(i)   The first part of the argument is not understood.  The plaintiff’s claim for the Total Unaccounted Sum has undoubtedly been pleaded sufficiently and supported by evidence;

(ii)  The second part of the argument has been dealt with in the earlier part of this Decision;

(3)  In relation to sub-paragraph (c), not only is it not supported by evidence (paragraphs 7 – 8 of the defendant’s 5^th Affirmation did not say that he could not afford to proceed with the trial of the other two actions in the event judgment is granted in favour of the plaintiff herein), the matter relied on by the defendant is simply irrelevant. 

78.  To conclude, I am of the view that none of the Miscellaneous Reasons would amount to grounds upon which the Court should withhold granting judgment in favour of the plaintiff herein despite the fact that the defendant has no defence.

G3.5 The defendant’s conduct of the trial

79.  Mr Wong further submitted that the grant of summary judgment at this stage would be unfair and prejudicial to the interest of the defendant because, for example, since the plaintiff has only disclosed very limited accounting document, the defendant has been kept in the dark as to how the plaintiff had treated the 1^st Withdrawn Sum in its account. It was said that this would affect how the defendant’s defence can be run.

80.  This argument is not accepted.

81.  Firstly, as aforesaid, the defendant is not entitled to rely on the defence set out in paragraph 41 of his 4^th Affirmation as it is not pleaded.

82.  Secondly, it lies ill in the mouth of the defendant to complain that the plaintiff has not disclosed relevant documents for the purpose of the trial, as the defendant has never made any application for specific discovery as such, and it is the defendant’s own evidence that this action is ready for trial.[16]

G4.    The expenses paid out of the PB Account

83.  I will now move on to consider the other part of the 1^st Withdrawn Sum.

84.  As shown in the table at [21] above, the defendant had paid a total of $11,118,058.5[17] out of the $25 million deposited into the PB Account to settle expenses incurred by various Yip’s Group of companies, and in his own words, those funds had been used for “genuine and proper commercial purposes within the Group”.  On this basis, it was argued by Mr Wong that there is a triable issue as to whether the defendant had acted in breach of the fiduciary duties owed to the plaintiff.

G4.1  Breach of fiduciary duties – the legal principles

85.  In Poon Ka Man Jason v Cheng Wai Tao & Others [2023] 4 HKC 434, [2023] HKCA 676, G Lam JA held at [59] that:

“[…] In the classic words of Lord Greene MR in Re Smith & Fawcett Ltd [1942] Ch 304, 306 […] directors are bound to exercise the powers conferred on them ‘bona fide in what they consider – not what a court may consider – is in the interests of the company’ (see also Simon Fireman v Golden Rice Bowl Ltd [1987] HKLR 981). Consistently with its general approach, the court does not substitute itself for a company’s management and decide what is best for the company. That is a matter for the appropriate organ of the company. Directors owe a fiduciary duty, but the essence of that duty here is loyalty; it is not a warranty that a director’s act is necessarily the best possible course for the company, viewed objectively or even retrospectively. To find a breach of this duty requires the court to conclude that the director did not subjectively believe that his act was in the interests of the company, or, where the director did not give any actual consideration to the question, that a reasonable director in his position could not have reasonably believed that it was for the benefit of the company: see e.g. Wang Pengying v Ng Wing Fai [2021] 1 HKLRD 997, §§67-74 […].” (emphasis added)

86.  The plaintiff had referred this Court to the case of Walker v Wimborne & Others (1976) 137 CLR 1, at 6 – 7 in which Mason J (as he then was) had the following to say:

“[…] each of the companies was a separate and independent entity, and that it was the duty of the directors of Asiatic to consult his interests and its interests alone in deciding whether payments should be made to other companies. In this respect it should be emphasized that the directors of a company in discharging their duty to the company must take account of the interest of its shareholders and its creditors. Any failure by the directors to take into account the interests of creditors will have adverse consequences for the company as well as for them. The creditor of a company, whether it be a member of a ‘group’ of companies in the accepted sense of that term or not, must look at that company for payment. His interests may be prejudiced by the movement of funds between companies in the event that the companies become insolvent.”

87.  The case of Walker was followed in Liquidator of Wing Fai Construction Co Ltd (in liquidation) v Yip Kwong Robert & Others [2018] 1 HKC 472, in which G Lam JA held at [235] that:

“As a matter of principle, it is not a sufficient justification for the directors involved in such payments to say that they looked to the benefit of the group as a whole. Each company, albeit within a group, is a separate legal person with separate interests and separate and probably different creditors. It is the duty of the directors of a company ‘to consult its interests and its interests alone’ in deciding how to exercise their powers as directors of that company; they are not entitled to sacrifice the interests of that company in order to promote the interests of other group companies, even if they are also directors of them […]”

88.  However, in Akai Holdings Limited (in liquidation) v. Thanakharn Kasikorn Thai Chamkat (Mahachon) also known as Kasikornbank Public Limited Company (CACV 177/2008, unreported, 10 August 2009), Tang VP (as he then was) held that:

“Bearing in mind that a breach of fiduciary duty connotes disloyalty and infidelity, I am unable to accept the tentative view expressed in Equiticorp that mere failure to consider the separate interest of the relevant company, for example, due to incompetence, would, ipso facto, amount to a breach of fiduciary duty […]”

89.  Tang VP’s view was agreed by Le Pichon JA at [179]:

“The majority in Equiticorp proffered (somewhat tentatively) as a ‘preferable view’ (at 148E-F), the proposition that the failure to give consideration to the interests of the relevant company is ipso facto a breach of duty (i.e. the Equiticorp test). As an approach, I respectfully agree with Tang VP that it seems wrong in principle for the reasons he gives […]”

G4.2  Breach of fiduciary duties – triable issues

90.  The essence of fiduciary duty is loyalty.  In order to find that the defendant was in breach of this duty owed to the plaintiff, the Court has to conclude that he did not subjectively believe that his act was in the interests of the plaintiff, or, where the defendant did not give any actual consideration to the question, that a reasonable director in his position could not have reasonably believed that it was for the benefit of the plaintiff.

91.  In the present action, it is the defendant’s case that the whole Yip family had basically treated all monies and vehicles held by the Parent Company and its subsidiaries as belonging to the family, and the monies owned by various companies under the Parent Company have been used by the companies interchangeably, for example:

(1)  “Salaries paid to office staff within the Group are paid out from the Nam Kee Group and salaries paid to coaches/buses drivers are paid out from the Man Yee Group, despite that these office staff and coaches/buses worked for everything in relation to the [Parent] Company (and its subsidiaries)”[18];

(2)  “Orders taken up by the Man Yee Group would sometimes be undertaken by coaches/buses under the Nam Kee Group; and Orders taken up by the Nam Kee Group would sometimes be undertaken by coaches/buses under the Man Yee Group.”[19]

92.  The defendant therefore considered that the 1^st Withdrawn Sum was utilized for the benefit of the Yip ‘s Group of companies. 

93.  It is also the defendant’s evidence that no one had ever complained against the plaintiff’s monies being used in such a manner until his relationship with other family members turned sour.

94.  The defendant’s assertion referred to above cannot be said to be bare assertion.  On 9 June 2014, the plaintiff’s solicitors wrote to the defendant’s solicitors as follows:

“We have instructions to act for Nam Kee and Man Yee […]

We are instructed that your client had withdrawn, removed and/or transferred monies from Nam Kee’s DBS bank account […] on 18 September 2013 in the total sum of HK$30,000,000 and from Man Yee’s DBS bank account […] on 24 July 2013, 5 September 2013 and 11 September 2013 in the total sum of HK$25,000,000. Upon repeated demand of an explanation of the use of funds and repayment by our clients over several months, it was not until 8 May 2014 that our clients finally received a brief schedule of the alleged use of partial funds from your client.

We are further instructed that, after our clients’ review of such information, some of these transactions are completely groundless and lack of evidential support.  Such transactions are therefore rejected by our clients.   We enclose herewith a list setting out clearly the calculation of our client’s treatment on the accounting record for your reference.   For the avoidance of doubt, the acknowledgement of any such record is made without prejudice to our clients’ rights to pursue any claims against your client for his embezzling of funds and breach of fiduciary duties. […]”

95.  Attached to the said solicitors’ letter was a list of expenses on which certain markings have been made by the plaintiff (presumably via Madam Lau) (“the List”).  The following items, among others, were included:

(1)	2.10.2013	$457,507	PE 4713 續會
(2)	2.10.2013	$8,535,479.50	東亞續五車會
(3)	23.10.2013	$26,000	鄧太轉名律師費
(4)	23.10.2013	$250,000	估價報告
(5)	23.10.2013	$46,072	JZ 7220新車稅
(6)	7.11.2013	$900,000	(illegible) 2013年 11.12.1.2.3.4

96.  It seems that the six items above also appear in the table in [21] above, even though some of the dates do not totally match. 

97.  Out of these six items, the plaintiff has marked “可以扣除欠款” in respect of three items.  On the face of it, the markings suggest that the plaintiff recognised that these are indeed expenses paid for the Yip’s Group of companies, and therefore they are “deductible”.  One cannot see any complaint marked on the List that the defendant had used the plaintiff’s monies to settle expenses of another company within the same Group.

98.  There was no marking of “可以扣除欠款” in relation to the remaining three items on the List.  However, coincidentally, the remark “欠收據” could be seen on the rows of those three items.  Hence, it is at least arguable that the reason why “可以扣除欠款” was not marked for those items was because no receipt had been produced at the time. 

99.  Mr Man submitted that since the List was prepared by Madam Lau, and given she was only a shareholder of the Parent Company rather than of the plaintiff, the plaintiff should not be bound by the List.  With greatest respect, this submission is made to be rejected.  As can be seen from the letter sent by the plaintiff’s solicitors dated 9 June 2014 (see [94]), the List was sent for and on behalf of the plaintiff.

100.  In any event, the plaintiff is proceeding with this summary judgment application on the basis that the descriptions of purposes as stated in the table on [21] are true.  Therefore, whether some of the items are supported by receipts and whether the List binds the plaintiff do not really matter.  Even with the aforesaid reservations, the existence of the List at least shows that the defendant’s defence, as far as the items of the table at [21] are concerned, are not bare assertions.

101.  That being the case, in my view, there are triable issues as to:

(1)  whether the whole Yip family has indeed mingled the monies held by the Yip’s Group of companies;

(2)  whether the whole Yip family had indeed caused monies of other subsidiary companies within the Yip’s Group of companies to be used to pay for expenses incurred by the plaintiff;

(3)  if the answers to the above questions are “yes”, whether the defendant subjectively believed at the material time that his acts in making payments for and on behalf of the other Yip’s Group of companies by making use of the plaintiff’s monies was in the interests of the plaintiff. 

102.  In relation to the issue under sub-paragraph (3) above, I should also add that if the defendant’s case is accepted, then while the plaintiff might well be the payer of the expenses of other subsidiary companies on some occasions, it would become the benefitted party on some other occasions when its expenses were paid by another company within the Group.  Therefore, it is at least arguable that the defendant might consider that his act was in the interests of the plaintiff.

103.  I have not forgotten what G Lam JA held in Liquidator of Wing Fai Construction Co Ltd (in liquidation) (supra) as quoted in [87] above, in that directors of a company are not entitled to sacrifice the interests of that company in order to promote the interests of other group companies, even if they are also directors of them.  In this regard, it should be noted that it seems that the situation described by G Lam JA was “one-way” in the sense that one company was the “giving” party without “receiving”.  But the situation here as alleged by the defendant is different: It is suggested that the plaintiff may be the “paying” party as well as a “benefitted” party. Hence this is not an “one-way” situation.  In such circumstances, the question of whether the defendant has breached his fiduciary duties owed to the plaintiff must be a triable issue which should be decided at the trial.

104.  Risking to state the obvious, I should add that the analysis above is not applicable to the Total Unaccounted Sum, because in the circumstances where the defendant has failed to explain the whereabouts and purpose(s) of the usage of such a sum, he cannot begin to argue that he subjectively believed that transferring the said sum from the plaintiff’s account to his personal bank account was in the interest of the plaintiff.

H.  THE PLAINTIFF’S CLAIM FOR THE SUM PAID TO CONCORD LIMITED

105.  Before I consider the exact order to be made in respect of the Summons and deal with costs of the Summons, I should say a few words on the Concord Claim (see [13(2)] above).

106.  In the 3^rd Affirmation of Yip Shung Kin filed in support of the Summons, it was stated that the plaintiff “will no longer pursue other claims in this Action if final judgment is entered against [the defendant] for the sum of $24,994,060”[20].

107.  At the hearing, upon this Court’s enquiry, Mr Man confirmed that even if the defendant is allowed to defend the entire claim of $24,994,060, the plaintiff is prepared to abandon the Concord Claim.  In other words, the plaintiff is going to withdraw the Concord Claim anyway.  Mr Man then suggested that the question of costs of such withdrawal of claim should be dealt with by way of paper disposal.

108.  In my view, despite the plaintiff’s indication of its stance on the Concord Claim, it is inappropriate for the Court to make any order thereon.  It is up to the plaintiff to take out a proper application (whether by consent or otherwise) for leave to amend its Statement of Claim and withdraw such a claim. 

109.  However, since this case is otherwise ready to be set down for trial (subject to the compliance of expert directions in the Share Ownership Action), I consider that prompt action should be taken by the plaintiff to give effect to what it planned to do with the Concord Claim. Directions will be given below for this purpose.

ORDER

110.  By reasons of the aforesaid, partial judgment should be given to the plaintiff in respect of the Total Unaccounted Sum.

111.  In respect of the other part of the 1^st Withdrawn Sum (i.e. $11,118,058.5), there is no doubt that the plaintiff knew the defendant’s defence by the time when the present application for summary judgment was made, as the defendant has already filed its Defence by then.

112.  It is trite that, in such circumstances, the plaintiff’s application for summary judgment should be dismissed.

113.  I therefore make the following orders:

(1)  Partial judgment be granted in favour of the plaintiff against the defendant in the sum of $13,875,941.5;

(2)  The plaintiff’s application for summary judgment for the sum of $11,118,118.5 be dismissed.

114.  I also make an order nisi that the plaintiff shall make an application (whether by way of consent summons or inter parte summons) for leave to withdraw its claim as pleaded in paragraphs 4(b), 5, 6, 7 and 8 of the Amended Statement of Claim and to amend the Amended Statement of Claim accordingly within 28 days hereof.  This order nisi shall become absolute in the absence of application to vary within 14 days hereof.

COSTS

115.  The plaintiff has successfully obtained partial judgment against the defendant.  The plaintiff should therefore be entitled to part of the costs of the Summons.

116.  On the other hand, since the plaintiff’s application for summary judgment for the rest of its claim is dismissed, it should bear the costs of the defendant in respect thereof. 

117.  My tentative view is that in such circumstances, I should make no order as to the costs of the Summons.  I therefore make a costs order nisi accordingly. 

118.  The above order nisi shall become absolute in the absence of application to vary (which, if any, shall be made by letter, and will be disposed of on paper) within 14 days hereof.