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Lau Lai Shan Lisa v Zhang Qi And Others

Judgment Cited authorities 4 Cited in Precedent Map Related
Vincent
Judgment Date19 July 2019
Neutral Citation[2019] HKCFI 1750
Judgement NumberHCA1395/2018
Subject MatterCivil Action
CourtCourt of First Instance (Hong Kong)
HCA1395/2018 LAU LAI SHAN LISA v. ZHANG QI AND OTHERS

HCA 1395/2018

[2019] HKCFI 1750

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1395 OF 2018

________________

BETWEEN

LAU LAI SHAN LISA (劉麗珊) Plaintiff
and
ZHANG QI (張岐) 1st Defendant
IC ACCOUNTING LIMITED
(艾思會計有限公司)		 2nd Defendant
CHUI PUI MAN IDY (徐佩雯) 3rd Defendant

________________

Before: Deputy High Court Judge Alexander Stock SC in Chambers
Date of Hearing: 20 June 2019
Date of Decision: 20 June 2019
Date of Reasons for Decision: 19 July 2019

________________________________

REASONS FOR DECISION

________________________________

1. On 20 June 2019, two summonses taken out by the Plaintiff (“P”) came before me for hearing, namely:

(1) P’s summons (the “Injunction Summons”) dated 29 November 2018 seeking:

(a) a proprietary injunction against the 2nd Defendant (“D2”) and the 3rd Defendant (“D3”) to restrain them, pending trial or further order, from dealing with certain specified sums which were paid by D1 to D2, or the proceeds of thereof; and

(b) disclosure orders against D2 and D3 in respect of the whereabouts of those sums or their proceeds;

(2) P’s summons (the “Section 21 Summons”) dated 4 December 2018 under section 21 of the Evidence Ordinance (Cap 8) (the “EO”) for inspection of records and documents kept by The Hongkong and Shanghai Banking Corporation Limited (“HSBC”) regarding D2’s account with HSBC.

2. P was represented by Mr Toby Brown. D2 and D3 were represented by Mr Kevin Li and Mr Gilbert Chong.

3. At the conclusion of the hearing I made orders in terms of P’s summonses (subject to certain adjustments). I indicated that I would provide reasons for my decision in due course, which I now do.

Background

4. P claims that she is the victim of a fraud perpetrated by D1, who is her sister-in-law, and in which D2 and D3 also participated. D2 is a Hong Kong company, of which D3 is the sole director and shareholder [1].

5. The key facts alleged by P include the following:

(1) P formerly owned the sole share in a West Samoan company called Kidbrooke Group Limited (“Kidbrooke”). Kidbrooke held certain real property and funds on trust pursuant to a trust (the “Trust”) which had been established by P’s uncle (“Lau Senior”). Since the establishment of the Trust in 1997, P as sole director and shareholder managed the day-to-day operations of Kidbrooke and the Trust.

(2) From around 2002/2003, when D1 began a relationship with P’s brother (“Alan”), D1 started assisting P with management of the Trust. Over time, D1’s involvement increased and P reposed increasing trust and confidence in D1, to the point where P would sign documents presented to her by D1 without reading them.

(3) Starting from 2015, D1 caused P to sign various documents disposing of certain assets of the Trust and allowing D1 to have access to and operational control over Kidbrooke and its assets.

(4) In May 2017, D1 caused P to sign a written resolution to transfer P’s shareholding in Kidbrooke to D1, which transfer took effect. P was induced by a fraudulent misrepresentation by D1 that the documents she was signing related to insurance for trust assets.

(5) On 23 – 24 May 2018, D1 represented to P that D3 would bring to P a series of documents for signature in respect of Kidbrooke’s tax affairs. Unbeknownst to P, these contained a letter of P’s resignation as Kidbrooke’s director. P was induced to so sign by fraudulent misrepresentations by D1 and D3 as to the nature of the documents she was signing.

(6) On 29 May 2018, a similar incident occurred, wherein P signed a letter of resignation as Kidbrooke’s secretary, induced by fraudulent misrepresentations by D1 and D3 as to the nature of the documents she was signing.

(7) Starting in 2017, D1 had begun the process of selling the share in Kidbrooke, which company still owned a valuable property (the “Fu Hing Property”). On 29 May 2018, completion took place of a transaction by which D1 purportedly sold the share in Kidbrooke to Allied Way International Investment Limited (“Allied Way”) for a purchase price of HK$140,000,000.

(8) P’s pleaded causes of action include deceit, conversion, negligence, breach of fiduciary duty, knowing receipt of trust property, dishonest assistance in a breach of trust, unjust enrichment, proprietary/tracing claims, and conspiracy to injure by unlawful means.

6. D1’s pleaded defence is relevant mainly by way of background. Her position, in essence, is that Kidbrooke was in fact a vehicle used to manage the assets of Alan’s parents (rather than Lau Senior), which would in due course become the property of Alan as their only son. There was never any trust—or D1 knew of no such trust—created by Lau Senior for the benefit of his sons. As Alan’s wife, D1 over time became more involving with the management of Kidbrooke, with the consent of Alan, his parents and P. The various transactions which P now disputes were effected with the knowledge and consent of Alan’s parents, Alan and P; and P knew the nature of the documents she signed. It is apparently D1’s position that the proceedings are aimed at depriving Alan’s parents (and in due course Alan and D1) of assets which rightly belong to them.

7. The substantive position of D2 and D3 is set out in their pleaded defence and D3’s affirmation filed in opposition to P’s summonses. D2 and D3 complain that they are innocent parties who have become unfairly embroiled in a family dispute. Broadly, it is said that:

(1) D3 has been in the business of providing company secretarial, accounting and consultancy services since 2005. In July 2016 she incorporated D2 in for the purpose of such businesses. D2 is currently serving over 283 companies.

(2) Around May 2017, D3 was introduced to Kidbrooke, and D2 began to provide administrative services to Kidbrooke. In August 2017, D1 passed to D2/D3 Kidbrooke’s company kit which included a Certificate of Incumbency describing D1 as Kidbrooke’s sole shareholder.

(3) Around October 2017, D1 engaged D2 to handle accounting, tax and secretarial work for Kidbrooke. D2/D3 were made aware of the intention to sell the share in Kidbrooke, and provided various professional services in respect of that sale.

(4) D2/D3 admit that on 24 May and 30 May 2018, D3 met with P and provided various documents for her to sign, including to effect P’s resignation as director and secretary of Kidbrooke. However, D3 says that she explained to P the nature of the documents provided, and that P had an opportunity to review them before signing.

(5) D2/D3 deny all alleged wrongdoing and claims asserted by P.

Relevant procedural history

8. The writ was issued in June 2018 against only D1.

9. On 25 June 2018, Mimmie Chan J granted to P on an ex parte basis: (i) a proprietary injunction restraining D1 from dealing the sale proceeds (the “Sale Proceeds”) of the share in Kidbrooke [2] ; (ii) a Mareva injunction against D1 up to the sum of HK$110,000,000; and (iii) a disclosure order against D1 in respect of the whereabouts of the Sale Proceeds and their proceeds.

10. On 29 June 2018, Deputy High Court Judge Saunders made orders on an inter partes basis: (i) continuing the injunctions against D1, with an additional disclosure order against D1; and (ii) under section 21 of the EO, for the inspection by P of various documents kept by Standard Chartered Bank (Hong Kong) Limited (“SCB”) regarding D1’s account(s) with SCB.

11. As a result of documents received from SCB pursuant to the said order, P applied to join D2 and D3 as defendants to these proceedings and to amend to claim against them; which joinder and amendment took effect by consent on 20 November 2018.

12. Shortly thereafter, P issued the Injunction Summons and the Section 21 Summons against D2 and D3.

The Injunction Summons

13. The Injunction Summons relates to the Sale Proceeds (of the share in Kidbrooke), in respect of which D1 has already been injuncted.

14. Pursuant to the Court’s orders against D1, P obtained documents in relation to D1’s accounts with SCB (“D1’s Savings Account” and “D1’s Current Account”).

15. P’s evidence herein canvasses the flow of funds after receipt into D1’s SCB accounts of a portion of the Sale Proceeds, by reference to D1’s SCB account statements. It is P’s case that: (i) on 30 May 2018 sums totaling almost HK$31,000,000 were deposited into D1’s Savings Account, which represented a portion of the Sale Proceeds (HK$140,000,000), immediately prior to which D1’s Savings Account was virtually empty; (ii) from 31 May to 5 June 2018, sums totaling HK$14,300,000 were transferred from D1’s Savings Account to D1’s Current Account, which previously had a zero balance; (iii) seven cheques (the “7 Cheques”) with dates ranging 21 May to 5 June 2018 were drawn on D1’s Current Account in favour of D2, with a total value of HK$13,280,000; (iv) the statements for D1’s Current Account show withdrawals from that account from 31 May to 5 June 2018 pursuant to the 7 Cheques.

16. Accordingly, P says that D1 paid to D2 a total of HK$13,280,000 (the “7 Cheque Sum”) pursuant to the 7 Cheques, which sum represents a traceable portion of the Sale Proceeds. P’s Amended Statement of Claim includes a tracing/proprietary claim (as well as other claims) in respect of the 7 Cheque Sum received by D2.

17. The Injunction Summons seeks to restrain D2 and D3‌— pending trial or further order‌—‌from dealing with the 7 Cheque Sum or the proceeds thereof.

18. D2/D3 admit that D2 received the 7 Cheque Sum from D1 pursuant to the 7 Cheques. Mr Li for D2/D3 did not‌—‌for present purposes at least‌—‌take issue with P’s case as to the flow of...

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