JOSEPH ROBERT RICHARDSON JR v. RENE VILLENEUVE AND ANOTHER

HCMP 1799/2020

[2021] HKCFI 3144

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1799 OF 2020

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D E C I S I O N

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1.  I have before me an originating summons dated 19 October 2020 seeking the following orders.

(1)  It be declared that pursuant to the Declaration of Trust dated 17 May 2016, the 5,000 ordinary shares in the Company registered under the name of the 1^st Defendant are held on trust for the Plaintiff, and the Plaintiff is the sole beneficial owner of these 5,000 ordinary shares.

(2)  Pursuant to section 633 of the Companies Ordinance (Cap 622):

(a)  The Company do forthwith register the Plaintiff as member in respect of the aforesaid 5,000 ordinary shares;

(b)  The Company do forthwith issue and deliver the Plaintiff a share certificate in respect of the aforesaid 5,000 ordinary shares;

(c)  The Plaintiff be authorised to rectify the Company’s register of members for carrying this order into effect; and

(d)  Notice of the rectification be given to the Registrar of the Companies pursuant to section 633(4).

2.  I am satisfied that the originating summons has been duly served on the two defendants.  In the case of the 1^st Defendant this was by way of substituted service pursuant to an order granted by Master Man on 15 July 2021.

3.  The application arises in the following circumstances.

4.  Initially, both the Plaintiff and the 1^st Defendant were 50:50 shareholders of the Company.  Each of them held 5,000 shares in the Company.  However, as the Plaintiff is a holder of a United States passport, the Company was unable to open bank accounts.  As a practical way of resolving the aforesaid difficulties:

(1)  On or around 14 April 2016, the Plaintiff transferred his 5,000 shares to the 1^st Defendant.

(2)  In return, the 1^st Defendant executed a Declaration of Trust on or about 17 May 2016 (“Declaration of Trust”).  The terms of the Declaration of Trust confirms that the 1^st Defendant was holding those 5,000 shares for the Plaintiff.

5.  The net result of these back-to-back transactions was that (1) whilst on the face of the records, the 1^st Defendant became the sole owner of the Company, (2) the reality was that the Company was still 50:50 owned by the Plaintiff and the 1^st Defendant. Disputes then unfortunately ensued between the Plaintiff and the 1^st Defendant. It will suffice to note that the Plaintiff and the 1^st Defendant’s relationship has now completely broken down.  Eventually, on 27 August 2020, the Plaintiff demanded the 1^st Defendant return the shares to the Plaintiff.  When this demand was not entertained, a solicitors’ letter was issued on 9 October 2020.  On 9 October 2020, the Plaintiff’s solicitors also wrote to the Company, demanding the Company to register the Plaintiff’s name in its register of shareholders.  The 1^st Defendant did not provide any substantive response.  Instead, the 1^st Defendant resigned from the board of directors.  Subsequently, the Company Secretary also resigned.

6.  I am satisfied that this matter is sufficiently straight forward and the evidence sufficiently certain, that it is appropriate for the court to grant the declaration that is sought without requiring a formal trial, particularly as its seeming clear that neither of the Defendants wish to participate in the proceedings and contest the Plaintiff’s claim.

7.  I am also satisfied that given the recalcitrance of the Defendants it is appropriate to grant the 2^nd Order dealing with registration of the share transfer.  By s633 of the Companies Ordinance (Cap 622), the Court may make an order for rectification where the name of any person is, without sufficient cause, entered in or omitted from the register of members of a company.  The discretion was exercised in the applicant’s favour in Re Quesco Systems Limited[1].  There, the share was registered in the name of the 2^nd defendant for the benefit of the applicant. Under the declaration of trust, the 2^nd defendant was to transfer to the applicant the share whenever directed.  When the 2^nd defendant (i.e. the nominee) can no longer be found, Kwan J (as she then was) ordered rectification in favour of the applicant.  Likewise, in Re Brightex Corporation Limited[2], the declaration of trust provided that the 2^nd respondent held the share as a nominee of the applicant.  Although the instrument of transfer had not been executed (and the 1^st respondent apparently was in Italy), I held that “for all practical purposes” there has been a valid transfer of title to the applicant.  Rectification was accordingly ordered.

8.  The present case is similar to the two aforesaid cases:

(1)  The Declaration of Trust specifically provides that the 5,000 shares “do not belong to the 1^st Defendant but to the Plaintiff”.

(2)  Further, the 1^st Defendant undertook in Clause 3 that he shall “whenever called upon to do so by the Beneficial Owner, transfer the Shares to the Beneficial Owner or such other person or persons as the Beneficial Owner direct…”.

(3)  The Plaintiff has already given express instructions to the 1^st Defendant requiring him to transfer the shares.  However, the Plaintiff’s instructions were ignored.

(4)  Likewise, the letter by the Plaintiff’s solicitors to the Company for entry of the Plaintiff’s name in the register of shareholders was not responded to.

9.  I will make an order in the terms of the originating summons and grant general liberty to apply. The Plaintiff has sought a summary assessment of his costs of the application. I assess on a summary basis the costs at HK$195,000.  I order that the Defendants are jointly and severally liable for the costs, which are payable forthwith.