Yan & Anor v Davinski Nominees Pty Ltd & Ors
[2008] VSC 278
•24 July 2008
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL LIST
No. 2006 of 2007
F6066
| LAI LIN YAN (A handicapped person by SAU KUEN WONG her litigation guardian) and KAI YUAN WONG | Plaintiffs |
| v | |
| DAVINSKI NOMINEES PTY LTD and others | Defendants |
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JUDGE: | HOLLINGWORTH J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 9 May 2008 | |
DATE OF RULING: | 24 July 2008 | |
CASE MAY BE CITED AS: | Yan v Davinski Nominees (No 1) | |
MEDIUM NEUTRAL CITATION: | [2008] VSC 278 | |
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Injunction – Freezing orders – Application to extend orders to restrain new defendants
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr N Lucarelli QC and Mr J Paterson | Baker & McKenzie |
| For the Tenth and Eleventh Defendants | Mr P Duggan | McNab, McNab & Starke |
No other appearance |
HER HONOUR:
This proceeding essentially involves a dispute between members of the Wong family over the ownership and control of certain valuable companies and assets. The first plaintiff, Madam Yan, appears by a litigation guardian, as she suffers from dementia.
Madam Yan is or was a director and shareholder of:
(a) Three companies incorporated in Australia, being the first to third defendants (“the Australian companies”);
(b) Two companies incorporated in Hong Kong, being the ninth and tenth defendants (“the Hong Kong companies”); and
(c) A company incorporated in the Virgin Islands, being the eleventh defendant (“Melia”).
The second plaintiff is the youngest of Madam Yan’s eight children. He is or was a director of the Australian and Hong Kong companies and the owner of shares in the Hong Kong companies.
The allegations raised by the plaintiffs are complex; the current statement of claim runs to almost 150 pages. At the heart of the dispute is the validity and enforceability of certain documents, purportedly executed in February and November 2006, pursuant to which Madam Yan is alleged to have resigned as a director and gifted or transferred her interests in the various companies to another of her sons, the fourth defendant. The plaintiffs say that Madam Yan did not have the mental capacity to execute the relevant documents and/or they are voidable on various other grounds, including undue influence.
On 2 March 2007, I granted several ex parte injunctions, in the nature of “Mareva” or freezing orders. The orders restrained the first to seventh defendants from altering the corporate registers of the Hong Kong companies and from dealing with shares in the Hong Kong companies or various assets of those companies, including units held by them. I granted the injunctions on the basis of evidence which raised prima facie concerns as to the propriety of some of the defendants’ conduct, including evidence that certain defendants had gone and removed the corporate registers of the Hong Kong companies from their registered offices without permission.
The interim injunctions were extended on 6 and 29 March 2007, on both of which occasions the first to seventh defendants were represented. Additional injunctions were granted on 29 March 2007, having regard to further evidence of possible wrongdoing by the fourth defendant in relation to an amount of $12.7 million.
On 8 June 2007, I gave the plaintiffs leave to join the Hong Kong companies as the ninth and tenth defendants, and Melia as the eleventh defendant, to the proceeding. They have been joined as necessary and proper parties, because the relief sought by the plaintiffs includes orders that those companies amend their corporate registers to reinstate the plaintiffs, and take no steps consequent upon any register amendments instigated by the other defendants.
Some 10 months after joinder, in early April 2008, the plaintiffs first gave notice that they proposed to seek orders amending the 29 March 2007 injunctions, so as to restrain the Hong Kong companies from dealing with the same shares and assets as the first to seventh defendants have been enjoined from dealing with pending trial. The parties’ solicitors were unable to reach agreement on the extension of the injunction, so I permitted the plaintiffs to make an oral application for the same at the directions hearing on 9 May 2008.
The plaintiffs argue that the injunctions should be extended to include the Hong Kong companies because:
(a) The Hong Kong companies own the units in the unit trusts, which in turn own the Australian properties which are the subject of some of the injunctions. The Hong Kong companies should be added “for completeness”;
(b) The fourth defendant alleged in an amended pleading dated 14 March 2008 that he has “ultimate control” of the Hong Kong companies. By reason of that control, the fourth defendant could seek to circumvent the 29 March orders by adding additional directors or completely replacing the current restrained directors. Whilst he would be in breach of the current injunctions were he to do so, he could nevertheless thereby deal with the assets of the Hong Kong companies;
(c) In breach of court orders, the fourth, sixth and seventh defendants have failed to produce for inspection all of the original documents relied upon them in relation to the alleged changes of ownership and directorship; and
(d) There is no evidence that the proposed amendments would impact on the financial arrangements of the Hong Kong companies, or create any problems for the proposed HSBC refinancing of the Australian companies.
The Hong Kong companies oppose the extension on the following grounds:
(a) There is no allegation or evidence that the Hong Kong companies have attempted to circumvent the current injunctions or are threatening to do so in the future;
(b) The proposed amendments will not offer the plaintiffs any practical protection which they do not currently enjoy; and
(c) The proposed amendments might cause unnecessary delay and additional expense in relation to the cumbersome legal and financial arrangements already in place, including in relation to the proposed HSBC refinancing of the Australian companies.
I propose to extend the current injunctions to include the Hong Kong companies for the following reasons:
(a) Had the Hong Kong companies been parties to the proceeding in March 2007, I would undoubtedly have included them in the injunction orders, having regard to the affidavit evidence then before me;
(b) No evidence has been filed since then which has caused me to reconsider the correctness of making Mareva orders against the relevant defendants, to preserve the assets until trial. That is to say, the potential risk of improper dealing with assets - in particular, by the fourth defendant - remains, even though the defendants may not have attempted to do anything improper since the injunctions have been in place;
(c) The fourth defendant - on his own, or in conjunction with the sixth and seventh defendants - currently controls the Hong Kong companies. Unless the injunctions are extended, those defendants could replace the current directors with new directors who were not the subject of any injunction and would be free to dispose of company assets. Whilst that would constitute a breach of orders by the fourth, sixth and/or seventh defendants, there would be no breach committed by the new directors or the companies;
(d) There is no evidence of any actual prejudice likely to be suffered by the Hong Kong companies (or any other defendant) were the injunctions to be extended to include them;
(e) In any event, I will reserve liberty to apply to vary the orders in the event that circumstances change. Further, the plaintiffs have offered and will be required to give the usual undertaking as to damages in respect of the extension of the injunctions; and
(f) The plaintiffs have offered no real explanation for the delay in seeking to extend the injunctions to include the Hong Kong companies. However, I note that throughout the second half of 2007 and the first quarter of 2008, there were numerous and complex applications in the proceeding, as well as contested proceedings in Singapore regarding the appointment of a committee to manage Madam Yan’s affairs, which have no doubt kept the parties and their lawyers very busy with other matters. In the circumstances, I would not refuse to extend the injunctions on the basis of delay.
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