SIRAJ AHMED v. RAFEEQ AHMED AND OTHERS

HCA 2341/2024

[2025] HKCFI 2472

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2341 OF 2024

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BETWEEN

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DECISION

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Introduction and Background

1.  By Summons dated 26 November 2024 (“the Summons”), the Plaintiff (“P”) seeks against each of the Defendants (collectively, “Ds”): (1) a proprietary injunction restraining them from disposing of or otherwise dealing with the properties set out in Schedule 4 of the Summons; (2) a preservation order over the properties set out in Schedule 3 of the Summons; and (3) ancillary disclosure order. The properties in Schedule 3 and Schedule 4 include properties in Hong Kong as well as cash and account receivable, stock, emeralds, rubies, sapphires and other precious gemstones.

2.  The following affirmations were filed in respect of the Summons:

(1) Affirmation of Siraj Ahmed (P) dated 22 November 2024 (“P’s 1^st Aff”);

(2) Affirmation of Rehman Ahmed, P’s son (“Rehman”) dated 25 November 2024 (“Rehman’s Aff”);

(3) Affirmation of Rafeeq Ahmed (the 1^st Defendant (“D1”)) dated 28 February 2025 (“D1’s Aff”); and

(4) 2^nd Affirmation of P dated 26 March 2025 (“P’s 2^nd Aff”).

3.  This is a family dispute. P is the older brother of D1. The 2^nd Defendant (“D2”) is D1’s son. The 3^rd Defendant (“D3”) is D1’s daughter. The 4^th Defendant is D3’s husband, D1’s son-in-law.

4.  It is not disputed that Haji Nisar Ahmed, P’s and D1’s father, established his gemstone business starting from the 1950s in India: see P’s 1^st Aff, §5 and D1’s Aff, §4.

5.  According to P, in mid-1970s, he set up a new business line with D1 as his business partner (although D1 was still studying at the time), with the trade name Hazi Nisar Ahmed & Sons (“HNAS”), for sourcing, processing and selling precious gemstone. D1 joined HNAS in 1982 and over the next years as D1 gained experience, they became equal business partners in the family business, whether it was through HNAS or any other corporate vehicle (defined as the “Family Business”): see P’s 1^st Aff, §§9 and 13.

6.  P further claims that at around the birth of P’s first son (12 April 1980) and D1’s first son, D2 (6 December 1984), there was an agreement reached on the way to operate the Family Business and the division of assets (defined as the “Partnership Agreement”) consisting of:

(1) Neither P nor D1 (and any of their sons) would receive a salary or dividend from the Family Business;

(2) Any family members working in the Family Business would have their living and business expenses paid out of the assets of the Family Business; and

(3) All assets of the Family Business, including cash, gemstones, stock or any residential or commercial properties acquired using funds of the Family Business, would eventually be divided equally amongst D1 and his son, P and his son (including any sons born in the future). Subsequently in 2014, there was a variation of the Partnership Agreement such that it was agreed that there would be a 50-50 split of the assets of the Family Business between P and D1 regardless of the number of sons each had.

See P’s 1^st Aff, §§15-20, 52-54.

7.  In around 1995, P’s case is that he and D1 agreed to formally expand the operations of the Family Business to Thailand and utilized Takat Gems Co., Ltd (“TGC”) as a corporate vehicle in Thailand for operations in Thailand. D1 and an employee of HNAS were the directors and shareholders of TGC. They permanently relocated to Thailand. In around 2004, D2 started to work for TGC. P sourced gemstones for TGC and exported them to Thailand from India. Properties that were purchased in Thailand from the net profits of the proceeds of the Thailand branch were in D1’s name and were assets of the Family Business. See P’s 1^st Aff, §§23-29.

8.  Then in around 2006, P and D1 decided to set up an additional branch in Hong Kong and incorporated Takat Gems (H.K.) Co., Limited (“Takat Gems HK”) as the corporate vehicle of the Family Business. D2 was the sole director and shareholder of Takat Gems HK. P would purchase gemstones in India for export to either Thailand or Hong Kong. In around 2010, the headquarters of the Family Business moved from Thailand to Hong Kong. See P’s 1^st Aff, §§30-37.

9.  It is P’s case that P and D1 agreed that a number of properties in Hong Kong be purchased, wholly funded by the Family Business, including:

(1) A residential property at Flat B8, Hankow Centre, 47 Peking Road (“Hankow Centre Property”) in July 2008 in D2’s name;

(2) A commercial property at Office No. 5 on 8^th Floor, Chevalier House, Nos 45-51 Chatham Road South, Kowloon (“Chevalier House Small Office”) in March 2012 in D2’s name;

(3) A commercial property at Office No. 6 on 4^th Floor, Chevalier House, Nos 45-51 Chatham Road South, Kowloon ( “Chevalier House Large Office”) in March 2016 in the joint names of D1 and D2; and

(4) A residential property at Flat A, 35/F, Tower 1, Chatham Gate, No. 388 Chatham Road North, Kowloon (“Chatham Gate Property”) in July 2018 in the name of P’s daughter for use as the matrimonial home of P’s daughter and D2.

See P’s 1^st Aff, §§38-46, 62-63, 70-71.

10.  There were also properties purchased in Hong Kong which P says that he only discovered subsequent to the purchase and without his agreement:

(1) A commercial property at 14^th Floor, Rich Towers, No. 2 Blenheim Avenue, Kowloon (“Rich Towers”) in September 2017 in the name of D2 (said to be purchased in cash without a mortgage but not expressly said to be funded by the Family Business); and

(2) A residential property at Flat B, 11/F, Golden Mansion, No. 83, 83A, 85 & 85A Chatham Road South, Kowloon (“Golden Mansion”) in October 2021 in the name of D3. For this property it was stated that funds of the Family Business were used for its purchase.

See P’s 1^st Aff, §§66-69 and 93-95.

11.  It is not disputed that in around 27 June 2022, with the assistance of a family appointed mediator, P and D1 entered into a written agreement whereby the parties agreed to the equal division of the properties in India, Bangkok and Hong Kong: P’s 1^st, §§81-82 (“the Bangkok Agreement”) and D1’s Aff, §47. The Hong Kong properties mentioned therein were Hankow Centre Property, Chevalier House Small Office, Chevalier House Large Office and Chatham Gate Property.

12.  It is P’s case (denied by Ds) that because everyone was dissatisfied with the limited agreement reached on the division of properties (there was no agreement on the inventory of the Family Business i.e. emeralds, rubies and sapphires as well as cash and receivables due) subsequently on 5 July 2022, P and D1 together with D2 and Rehman met in India and orally agreed that:

(1) The Hankow Centre Property would be transferred from D2 to Rehman immediately;

(2) The Chevalier House Small Office would be transferred from D2 to Rehman immediately; and

(3) No further claims would be made by either party in respect of any of the other Hong Kong Properties. (“the India Agreement”)

The India Agreement was said to have superseded the Bangkok Agreement in respect of the division of the Hong Kong properties. See P’s 1^st Aff, §§86-88.

13.  According to P, apart from reaching agreement on division of properties in Hong Kong, P and D1 also divided up the inventory of the Family Business in respect of emeralds on a 50/50 basis. There was no agreement on the inventory of rubies and sapphires: see P’s 1^st Aff, §§83-85.

14.  At the substantive hearing of the Summons, Mr Brown, counsel, appeared for P and Mr Lam, counsel, appeared for Ds.

Applicable Legal Principles

15.  The legal principles governing proprietary injunction are well-established and not disputed. For the grant of a proprietary injunction, there are three requirements: (1) there is a serious issue to be tried on the merits; (2) that the balance of convenience lies in favour of the injunction; and (3) it is just and convenient to grant the injunction. The threshold of “serious issue to be tried” is not a very steep hurdle but if the opposing party seeks to show that there is no serious issue to be tried, the threshold is high as it would be necessary to demonstrate that the claim should be struck out. Furthermore, it is not necessary to show any risk of dissipation of assets although if such risk is demonstrated, it may be an additional factor in favour of the grant of injunction. Nor is it necessary to show that damages would not be an adequate remedy. However, it remains necessary to demonstrate that the balance of convenience favours the granting of the injunction, and that it would be just and convenient to do so. It would not be granted if a monetary award would be adequate remedy for the plaintiff. In particular, where the proprietary claim of the 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, so that a proprietary injunction is not necessary or justified. See e.g. Predicine Holdings Ltd v Bianchi (Hong Kong) Limited & Ors [2021] HKCFI 123 per Coleman J at §§69-73; and DBS Bank (Hong Kong) Limited v Tian Wen Quan (unrep), 12 October 2017 per Anthony Chan J at §§11-18.

16.  As for the principles relating to the granting of a preservation order under O.29, r.2 of the Rules of High Court, Cap. 4A (“RHC”), these were set out in Samtani v Samtani [2012] 4 HKLRD 872 at §§75-79 per DHCJ Queeny Au-Yeung (as she then was) and Liao Chen Toh v Loyal International Enterprises Co. Ltd. & Ors (unrep) HCA 2302/2014, 30 March 2016 per Lok J at §§25-27. Firstly, it has to be shown that there is property which is bona fide the subject matter of the cause or matter, or as to which any question may arise. Secondly, something ought to be done for the security of that property. Part of this inquiry will involve showing damages may not be an adequate remedy. However, the court will refuse to grant a preservation order if damages will be an adequate remedy. Thirdly, an enquiry into the relative merits of rival claims is not necessary. But the party seeking the preservation order needs to show there is a serious issue to be tried on the merits. Fourthly, there is no requirement for the applicant to show the risk of dissipation.

17.  With these principles in mind, I turn to consider whether the requirements are made out for the grant of a proprietary injunction and preservation order.

Serious issue to be tried?

18.  In the indorsement of claim of the Writ of Summons filed by P, it is stated that P claims against Ds:

(1) The equitable distribution of assets of the Family Business;

(2) Damages for Ds’ breach of trust, fiduciary obligations owed to P and knowingly assisting each other in those breaches;

(3) A declaration that Ds each respectively hold assets of the Family Business on constructive trust for the benefit of P and an order that Ds do account to P for the same; and

(4) An inquiry be made into and account to be taken in respect of Ds’ use, dealings with and conversion of the assets of the Family Business and for Ds to account to P for any assets acquired and/or pecuniary benefits, earnings, gains and/or profits derived therefrom.

19.  In the absence of any Statement of Claim filed, it is not discernable what is the legal basis for P’s proprietary claim against the properties in Schedules 3 and 4. Mr Brown submitted that P’s case would in due course be set out in full in the Statement of Claim. However, it is trite that the indorsement in the writ marks out the perimeter or range of the area within which the plaintiff may express its claim in a formal fashion in the statement of claim. See O.18, r.15(2) of RHC and Moulin Global Eyecare Holdings Ltd v Olivia Lee Sin Mei (2014) 17 HKCFAR 466 cited in Kishin Samtani, the Administrator of the Estate of Narian Samtani, Deceased v Chandersen Tikamdas Samtani [2025] HKCFI 1076 at §37 per H. Au Yeung J.

20.  Whilst the words “constructive trust”, “breach of trust” and “fiduciary obligations” are used in the indorsement of claim, Mr Brown was not able to directly answer my query apart from a breach of the alleged agreement(s) between P and D1, which may give rise to a contractual claim, how it is said that P has a proprietary claim against the properties held in the name of Ds or others.

21.  Having carefully read P’s 1^st Aff, P’s 2^nd Aff and heard the oral submissions of Mr Brown, at best, it is asserted that there were various agreements between P and D1 in respect of the equal sharing of properties or assets using funds of the Family Business.

22.  In respect of the Hong Kong properties, at most P’s case is that there was a breach of the India Agreement. However, even under that agreement, D2 was required to transfer the Hankow Centre Property and Chevalier House Small Office to Rehman and not P. As to the other Hong Kong properties, he had agreed to give up any claim thereto. It is therefore simply not understood how he can assert any proprietary claim to the Hong Kong properties even on P’s own case.

23.  As for cash, stock, emeralds, rubies, sapphires, other gemstones and other assets (not covered by the India Agreement), it is premised on P’s case that there was a partnership agreement between P and D1 whereby they would be equally entitled to its assets.

24.  However, there are no contemporaneous document in support of the partnership agreement. P and Rehman have adduced over 500 pages of documents as exhibits to their affirmations but they do not directly or indirectly support the partnership agreement.

25.  The only document which Mr Brown relied heavily was the Bangkok Agreement. He submitted that if P had nothing to do with the Hong Kong properties and the emeralds, why did D1 agree to their division with P.

26.  However, the Bangkok Agreement was not a contemporaneous document evidencing the partnership agreement and equal division of all properties of the Family Business but only the properties mentioned. Besides, an explanation has been given by D1 why he agreed to the Bangkok Agreement, namely to stop P and Rehman badgering him and his family and out of respect for his elderly brother he was trying to amicably resolve their argument: see D1’s Aff, §§45-47.

27.  Whilst Mr Brown had criticized that there was also a lack of documentation adduced by Ds, it is of course P who is alleging the beneficial ownership of the properties is different from the legal ownership, and it is P to prove his case. For the purposes of seeking a proprietary injunction, it is for P to demonstrate a serious issue to be tried. Apart from asserting the properties were wholly funded by the Family Business and/or were assets of the Family Business, there is not one piece of contemporaneous documentary evidence to support this.

28.  There is also a lack of particulars as to when the alleged partnership agreement was formed or how P and D1 agreed to purchase the properties with the funds or assets of the Family Business.

29.  I agree with Mr Lam that it appears P is relying on nothing more than bare, unparticularised and unsubstantiated assertions which fall well short of demonstrating a serious issue to be tried.

30.  In any event, in order to succeed in asserting a proprietary claim to the property in Schedule 4, P’s partnership claim or contractual claim is plainly not sufficient.

31.  Mr Brown asserted that the assets were held on constructive trust and anyone holding the legal title of the assets were holding them on trust of P and D1. Leaving aside this is inconsistent with P’s pleaded case that D hold the assets of the Family Business on constructive trust for the benefit of P (i.e. 100% beneficial ownership), it is trite if P was to rely on a common intention constructive trust, P must prove: (1) there was a common intention between P and D1 that P and D1 would each be 50% beneficial owner of all assets acquired; (2) P altered his position in detrimental reliance upon such common intention; and (3) it is unconscionable for the legal owners to assert ownership in reliance on their legal title: see Kishin Samtani at §32 referring to the summary by G Lam J (as he then was) in Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9 at §46.

32.  However, apart from saying that there was an agreement between P and D1 to purchase the property in the name of D2 (in the case of Hankow Centre Property, Chevalier House Small Office), in the name of D1 and D2 (in the case of Chevalier House Large Office) and in the name of P’s daughter (in the case of Chatham Gate Purchase), there was no mention of: (1) any common intention between the legal owner and P and D1 that the property would be beneficially owned by P and D1; (2) any detrimental reliance by P upon such common intention; and (3) why it would be unconscionable for the legal owner to assert his/her legal title.

33.  In respect of Rich Towers and Golden Mansion, P’s own case was that he only found out about the purchases after the event so plainly there could have been no common intention at the time of the purchase of these properties.

34.  I am of the view that there is no serious issue to be tried in respect of P’s proprietary claim to the properties in Schedule 4.

Balance of convenience and just and convenient to grant the proprietary injunction?

35.  Even if there was a serious issue to be tried, where essentially P is seeking a division of assets and not a proprietary claim to any specific real or personal property, P can be adequately compensated by a monetary award. Unless there is evidence which calls into question the ability of Ds to meet such monetary award, a proprietary injunction is not necessary or justified.

36.  According to the valuation report of the Hong Kong properties, they have a total net worth of over HK$54M.[1]

37.  On the other hand, P asserted with no evidence that the total value of the Family Business should exceed HK$200M. Furthermore, Ds have undertaken not to deal with these properties. The undertaking demonstrates an intention to meet any award in favour of P and that a proprietary injunction is not necessary or justified. In all the circumstances of the case, taking into account my view on the merits, and that this Court should take course which carries the lower risk of injustice should it be wrong, the balance of convenience does not lie in favour of granting the proprietary injunction. I also take the view that it would not be just and convenient to grant the injunction.

Grant of preservation order?

38.  Given that I am not satisfied that there is any serious issue to be tried on the merits on P’s case, and in any event damages would be an adequate remedy, it follows also that I would not grant the preservation order sought.

39.  Although it may be said that P seeks to preserve, under Schedule 3, the emeralds, rubies, sapphires or any precious gemstones, which may be properties of an unique character for which damages would not be an adequate remedy, apart from there being no serious issue to be tried on P’s proprietary claim to these gemstones, there is no evidence to prove that these gemstones are still in the possession of Ds. In the case of a proprietary injunction, in order to justify the grant, ordinarily the plaintiff ought to adduce some reasonable evidence of the existence of the specific asset or its traceable proceeds and that the same are still being held by or under the control of the defendant: see e.g.任俊國 v Chin Choi Ming (unrep) HCA 2017/2017, 6 November 2017 per Chow J (as he then was) at §20 and Zhang Yan & Ors v ASA Bullion Limited [2019] HKCFI 179 per Recorder Eugene Fung SC at §11(4).

40.  Contrary to Mr Brown’s suggestion, it would not be right to make an order against Ds along the lines that they are restrained from dealing with the gemstones, if any, in their possession. The observations of Coleman J in Predicine Holdings Ltd v Bianchi (Hong Kong) Limited & Ors [2021] HKCFI 123 at §23 albeit in relation to proprietary injunction are equally apposite in this regard. An injunction (or any order of the court with penal consequences) is a serious matter, potentially and usually, constituting a serious interference with a defendant’s right otherwise to deal with property as he sees fit. Any restriction needs to be clear and precise, so that the defendant knows with clarity and precision what he can and cannot do. There is no clear identification in the draft order what gemstones are subject of the injunction and against which of the Ds the order is made against.

Disposition and Orders

41.  Accordingly, I will dismiss the Summons. I see no reason why costs should not follow the event. I make a costs order nisi that P is to pay to Ds the costs of the Summons to be summarily assessed if not agreed. If no application to vary is made within 14 days from the handing down of this Decision, the costs order nisi shall become absolute and Ds should submit their Statement of Costs within 14 days thereafter and P to submit any objections within 7 days thereafter.

42.  Lastly, I thank counsel for their assistance.