MAYER HOLDINGS LTD v. MAKE SUCCESS LTD AND OTHERS

HCA 64/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 64 OF 2012

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D E C I S I O N

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1. Under paragraph 1 of the summons, in considering this application, I take into account of the fact that there had been virtually no opportunity for these defendants to answer by affidavit the allegation of the plaintiff. I therefore have to proceed as if this is an application for injunction on an ex parte with notice basis.

2. The plaintiff’s case is based on the pleaded case in the statement of claim, the endorsement of claim and the affirmation of one Mr Lai.

3. Mrs Daley, for the 1^st and 4^th defendants, has raised the issue of credibility of Mr Lai, which came about as a result of his conviction in Taiwan.  I am told that it was not a matter related directly to the present proceedings, but it was a conviction of Mr Lai in his capacity as a director in relation to securities matter.  Be that as it may, the court at this interlocutory stage is to act on the evidence now available, and it is no part of its function to enter into details on credibility, let alone by hearing oral evidence.  If the plaintiff dares to lie through Mr Lai or fails to make full or frank disclosure, it just runs the risk of a discharge of the injunction eventually.

4. In relation to the 7^th defendant, he has not been formally served, but that does not affect today’s application as the court is still proceeding as if on an ex parte basis.  I have been told that the plaintiff had given notice to this defendant.

5. Mr Mok SC, for the plaintiff, together with Mr Wilson Chan, have very helpfully set out the background facts in relation to this case in paragraphs 7 to 13 of their skeleton submission, I shall not repeat them here.  The main culprit of the fraud is alleged to be the 1^st defendant.  The beneficiaries to the fraud were the 1^st and 4^th defendants. The 7^th defendant was a party concerned with the voluntary cash offer which has a closing date on 10 April.

6. As pointed out by Mr Mok SC, the scheme under the voluntary cash offer does not require a holding of an EGM as suggested by Mrs Daley.  The danger of this voluntary cash offer proceeding to the end is that the shares might be acquired at undervalue, stated shares might be diluted, its directors removed and the 1^st, 4^th and 7^th defendants may then be able even to terminate the present proceedings.

7. On the evidence available, I am satisfied that there is a serious question of fraud to be tried, and the damage that may result may not be compensatable by money.

8. Mrs Daley suggests that there is no urgency in the present matter.  I respectfully disagree.  The deadline for the voluntary cash offer falls on 10 April which is the next business date from today.

9. A further complaint from the defendants is that the plaintiff has not acted quickly and there has been delay in issue of proceedings, service of statement of claim and taking out of the present application.  The plaintiff knew about the voluntary cash offer scheme in January.  They took out the writ also in January, although it was not served.

10. Fraud is not easy to plead and not easy to prove.  The plaintiff made use of 2 months in order to seek professional reports, to study the case, to amend the writ of summons and to issue the present application.  I do not think in the circumstances of this case the allegation of delay can be established. 

11. Mrs Daley also complains that the plaintiff has failed to make full and frank disclosure.  I am not convinced that the lack of disclosure in relation to a previous placement exercise by the plaintiff has anything to do with the present case.

12. Considering all the circumstances, I am of the view that the balance of convenience and the urgency of the matter justify the court granting the injunction sought, even at this interim stage.