MAN WHI CHUNG v. KU KIN PONG AND ANOTHER

HCMP 2299/2023

[2024] HKCFI 1119

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2299 OF 2023

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D E C I S I O N

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1.  I have before me an originating summons issued by one of the shareholders of the 2^nd Defendant. The 2^nd Defendant is a Company, which I shall refer to as the “Company”, was incorporated in 1998. Originally it had three shareholders: the Plaintiff, the 1^st Defendant and Mr Wong Wai Keung, each held one share.

2.  The Company operates a business that involves renting lands in the New Territories to other companies and subletting it to different tenants.  The precise details of the business are not relevant for present purposes.  Suffice it to say that a dispute has a reason over the running of the Company between Mr Man and Mr Ku.

3.  The originating summons has been issued by Mr Man, in order to allow him to call at an extraordinary general meeting, at which the board of the Company can be reconstituted by the removal of Mr Ku.  The reason Mr Man said this is necessary is because the articles require a quorum of two members to be present holding at least 51% of the paid-up shares of the Company.  Mr Man said that he owns two shares of the Company having acquired the share of Mr Wong sometime into 2001.

4.  If the facts were that simple, I anticipate that I would have made the order that Mr Man seeks.  However, the facts are not that straightforward.  Mr Ku explains in his evidence that he was not aware until recently that Mr Wong’s share had been transferred to Mr Man.  In summary, it is his evidence that the business of the Company and the distribution of its profits have been consistent with the Company being owned 50% by Mr Man and 50% by Mr Ku.

5.  As I understand Mr Ku’s evidence, he accepts, having spoken to Mr Wong, that Mr Wong probably intended his share to be in some way transferred possibly to Mr Man, but it was not his intention that the beneficial ownership of the share passed from Mr Wong to Mr Man.  It would appear that Mr Wong was assuming, and I should note at this stage that the three businessmen appear to be unsophisticated, intended Mr Man and Mr Ku to be equally interested in Mr Wong’s original interest in the Company.

6.  I would have expected Mr Man in his reply evidence to be able to explain in some detail, the circumstances of the transfer and events during the course of the last 20 years, which were consistent with Mr Wong having intended that the legal and beneficial ownership of his share be transferred to Mr Man.  There are many documents which one would have expected to be exhibited.  These would be include bought and sold notes, instruments of transfer, a record of the stamping of the bought and sold notes, a board resolution approving the transfer and the entry in the Company’s share register.

7.  Even if those documents were not available as a result of the passing of considerable time since they were executed and difficulty in locating them, I would have expected there to have been other documents created during the course of the last 20 years, which would be consistent with Mr Man having been intended to, and actually acquiring, both the legal and beneficial interest in Mr Wong’s shares.  The most obvious example would be the audited financial statements along with annual returns and the documents demonstrating that Mr Ku had been shown the annual returns.

8.  None of those documents have been exhibited.  This is particularly surprising since Mr Ku explains in his affirmation that he attempted to get audited financial statements from the Company’s accountant, but the accountant declined to provide them without Mr Man’s agreement. Not only is this allegation not dealt with in Mr Man’s reply affirmation, it would appear that neither did it occur to his legal advisors that given Mr Ku’s evidence, it was necessary for him to exhibit recent financial statements consistent with his case.

9.  It seems to me that there is clearly a live dispute between Mr Man and Mr Ku as to the beneficial ownership of what was Mr Wong’s share and that issue needs to be resolved before it would be appropriate for the court to make any order pursuant to section 570 of the Companies Ordinance.

10.  Mr Cheng, who appeared for Mr Man sought an adjournment to file evidence in order to deal with my concerns.  This I declined.  It seems to me quite clear that Mr Man and his legal advisors were given a clear warning about this issue and it should have been apparent what documentary evidence needed to be filed in reply.  It is also relevant that adjourning the originating summons and allowing more evidence to be filed is likely to turn what should be a straightforward application into a dispute about ownership of the disputed share.

11.  As I have indicated I will dismiss the originating summons and order that the Plaintiff pays the Defendants’ costs.  It does, however, seem to me that the affirmations filed by Mr Ku delved into the background to the dispute between the parties in far more detail than was necessary to contest the application and, therefore, I would order that the Plaintiff pays 75% of the Defendants’ costs, such costs to be taxed if not agreed.