CHIU YEE WAH KATHERINE v. YU CHI MING AND ANOTHER

HCA2820/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2820 OF 2002

---------------------

-----------------------

---------------------

D E C I S I O N

---------------------

1. The plaintiff and the 1st defendant are married to one another, the plaintiff is the wife and the 1st defendant is the husband. Unfortunately, their relationship has broken down. They are the only directors of Glory Plan Industrial Limited, the 2nd defendant ("the Company"). They are also the only shareholders in the Company, owning 50% of the shares each. The Company sells printed circuit boards produced by its wholly owned subsidiary in Shenzhen, a company by the name of Chuang Peng Electronics (Shenzhen) Co. Ltd ("the Subsidiary"). As I understand the position : the Company enters into contacts with customers for the sale of printed circuit boards which are in turn manufactured by the Subsidiary in Shenzhen.

2. The Company is indebted to the plaintiff's parents, Mr and Mrs Chiu Kwong Bun, in the sum of about $6.9 million. The parents have obtained judgment in default against the Company. There are two Garnishee Orders outstanding, one in relation to the Citibank and the other in relation to the Bank of China, and they were obtained on 12 and 13 June 2002 respectively. As I understand the position, the Citibank and the Bank of China were the principal bankers of the Company. There was also a Charging Order obtained by them in respect of the matrimonial home. As a consequence of that, the accounts of the Company are frozen, but I understand that the Company has another account with HSBC which has not been frozen, that was probably overlooked by the parents when they applied for Garnishee Orders.

3. The 1st defendant has also petitioned to have the Company wound up on 4 July 2002. One of the husband's complaints is that the wife had kept the existence of her parents' writ from him and from the Company, resulting in a default judgment in their favour. Anyway, I am not concerned with the complaints in the petition, suffice it for me to say that having regard to both the Garnishee Orders and the petition by the husband to have the Company wound up, for all intents and purposes, the Company can no longer trade.

4. On 22 July 2002, the plaintiff, the wife, has obtained an ex parte injunction order restraining the husband from :

"(a) continuing in any manner to procure and/or solicit directly or indirectly the customers of the 2nd Defendant, particulars of which are referred to in the Schedule hereto, to deal with Global Expert Technologies Limited;

(b) continuing in any manner to procure and/or solicit or request directly or indirectly the customers of the 2nd Defendant to tender payment owed to the 2nd Defendant to Chuang Peng Electronics (Shenzhen) Company Limited or any other entity other than the 2nd Defendant; and

(c) continuing in any manner to procure and/or solicit directly or indirectly the Chuang Peng Electronics (Shenzhen) Company Limited, a limited company wholly owned by the 2nd Defendant, to manufacture and supply printed circuit boards to Global Expert Technologies Limited or its directors, shareholders, servants, employees, agents or otherwise howsoever for the purpose of sale to the customers of the 2nd Defendant."

And the plaintiff now applies for the continuation of the injunctions which were granted ex parte. There is also an application on behalf of the husband to discharge the ex parte Order on the ground of material non-disclosure as well as on the ground that the Order should not have been applied for ex parte without notice in any event.

5. So, I turn first to deal with the ex parte Order itself and consider whether or not it should be discharged for the reasons suggested on behalf of the 1st defendant. For that purpose, I ask counsel for the plaintiff why it was that the plaintiff saw fit to apply ex parte having regard to the fact that the matters which led ultimately to the ex parte application had been brewing for a very long time. I was told that on 21 July 2002, the day before the application for the ex parte Order, solicitors acting for the plaintiff wrote to solicitors who are now acting for the 1st defendant and who were then acting for the 1st defendant in the petition, Messrs Siao, Wen & Leung ("SWL"). Messrs Tso & Associates ("Tso"), the solicitors for the plaintiff wrote, stating :

"We have instructions to act for Madam Chiu Yee Wah Katherline in commencing an action in the High Court against Mr. Yu Chi Ming, who is your client as instructed. Given that, please let us know whether you have instructions to accept legal proceedings on behalf of your client.

Kindly take your client's instruction and revert to us as soon as possible"

I have been told by counsel for the plaintiff that had the reply been that they had instructions to act for Mr Yu, then notice for the application of the injunction would have been given to the 1st defendant through them.

6. However, what happened was this. By letter dated 22 July 2002, SWL wrote to Tso as follows :

"We refer to your letter dated 21 July 2002 (Sunday) and faxed to us at about 7:48 p.m. of that day and to the 2 telephone conversations between your Mr. Ho and our Mr. Dennis Ting in this afternoon.

In both telephone conversations, we have requested you to at least inform us what are the nature of the claim(s) purportedly made against our client, but we have been told in the said telephone conversations that you have no instructions to disclose. You only told us that a 'process' has been issued against our client, although we stress that such process is probably public knowledge.

Before we are provided of the basic information about the purported claim, we do not know whether this matter should be within our expertise or knowledge of the matters. Accordingly, we are instructed that our client is not in the position to consider whether we should be instructed to accept service of such 'process' as alleged.

However, if you will re-consider your position by informing our client the nature of the claim, our client will certainly let you have his reply through us or other firm of solicitors he deems fit.

We are put you on notice that, as your client is fully aware, our client has moved out from former matrimonial home in Hong Kong recently. He works in Shenzhen, PRC from time to time.

Should you apply for any substituted service order, for record sake, you are required to exhibit this letter in your ex-parte application."

7. Now, I make three observations. First, it is unfortunate that when asked about the nature of the proceedings, the plaintiff's solicitors refused to disclose. It seems to me quite probable that had SWL been told that the plaintiff was contemplating an application for an injunction, it is likely that they, or some other firm of solicitors, would have been instructed to act on behalf of the 1st defendant, the husband; secondly, I make the observation that these letters should have been disclosed to the learned deputy judge. I was told that they were not. But had they been, he was likely, in my opinion, to ask, in the circumstances, whether there was really any urgency for the application; and thirdly, my observation is that I do not believe that moving ex parte in the circumstances is justified.

8. As I have said, the matters had been brewing for a very long time, the parents' proceedings were taken out in June 2002, if not earlier, the Garnishee Orders were made, as I have said, on 12 and 13 June 2002 respectively. As a result of that, the Company had been put into serious financial difficulties because its principal accounts had been frozen. The parties had been in constant communication in June and July 2002 and, indeed, the only justification which has been given for making their application ex parte is that when inquiries were made of SWL, they had no instructions to accept service. I do not believe that to be a sufficient reason to justify moving ex parte in the circumstances of this case.

9. Having regard to that and having regard to the fact that the two letters which I have read out in full, have not been disclosed to the learned deputy judge, in my opinion, the ex parte Order ought to be discharged. In fact, I would discharge it on either one of those grounds.

10. I turn to consider whether in the circumstances fresh Injunction Orders should be granted. I have been told by Mr Mok who appeared for the 1st defendant that having regard to the fact that there is a petition to wind up the Company, in any event, the 1st defendant, the husband, would not procure or request or ask directly or indirectly customers of the 2nd defendant to pay any money which is owing to the 2nd defendant to anyone else.

11. But so far as the other two injunctions are concerned, should fresh injunctions be granted? As I have said that there is no real prospect of the Company continuing with its business. There is a petition to wind up the 2nd defendant, and more importantly perhaps, there are the Garnishee Orders, and also, there are proceedings which had been brought by customers and suppliers against the Company. As I understand the position, the plaintiff had caused, what has been described as the "UL Quality Certificates" which were issued in the name of the Company, to be discontinued, and I understand that without the quality certificates customers would not place any order on the Subsidiary whether through the Company or at all.

12. So, when I come to consider the question of balance of convenience, there is no doubt in this case, of course, that there is a serious question to be tried and I do not believe that damages to be really an adequate remedy for either the plaintiff or the defendants, so, the matter really depends on balance of convenience.

13. On the question of balance of convenience, I asked Mr Hui who appeared for the plaintiff whether there is any realistic prospect of the 2nd defendant being able to trade if the injunctions were granted with its customers. I do not think that a convincing case has been made out having regard to the circumstances that the Company would be in a position to do so. On the other hand, if the injunction is not granted and if, at the end of the day, the 1st defendant is found to have acted in breach of his fiduciary duties, the 1st defendant would be liable either for damages or for an account of profits depending on the circumstances. Therefore, in my opinion, the balance of convenience is in favour of the refusal of any injunction. So, that being the case, the ex parte Order is discharged and the inter parte application for the injunctions is refused.

[Submissions on Costs]

14. I order that the costs of the ex parte injunction and the 1st defendant's application to discharge the ex parte Order be to the 1st defendant, such costs to be taxed and paid forthwith. Costs of the inter parte summons be to the 1st defendant in any event, and the 1st defendant to have inquiry into damages if he so desires.