WONG WAI CHUNG AND ANOTHER v. WONCORN INVESTMENT LTD

HCMP 1313/2020

[2022] HKCFI 1680

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1313 OF 2020

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BETWEEN

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D E C I S I O N

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A. INTRODUCTION

1.  By an originating summons of 27th August 2020 (“the Originating Summons”), the Applicants (individually, “Wai Chung” and “Wai Tak”) seek leave to commence proceedings on behalf of Woncorn Investment Limited (“the Company”) against Wong Ying Chi Alta (“Alta”) and Chiu Wong Fat Chi Ava (“Ava”) (collectively, “the Sisters”), to seek (inter alia):

1.1 damages for breach of fiduciary duties,

1.2 delivery up of vacant possession of Flat A, 8th Floor, Sunpeace Court, Nos.136-142 Boundary Street, Kowloon, Hong Kong, and Car Park Space Nos.29 and 29A, Basement, Sunpeace Court, Nos.136-132 Boundary Street, Hong Kong, Kowloon (respectively, “the Flat” and “the Carparks” and collectively, “the Properties”) to the Company, and

1.3 an order that the Sisters cause the Company to sell the Properties and pay the proceeds into the Company’s account.

2.  Essentially, the Applicants are dissatisfied with the fact that Alta has been living at the Flat, that both Alta and Ava have been using the Carparks, that Alta and Ava have not been paying rent or expenses for their use and occupation of the Properties, and that they have not agreed to the proposals for sale of the Properties.

B. THE UNDISPUTED FACTS

3.  The following facts are undisputed.

4.  Wai Chung, Wai Tak, Alta, Ava, and Wong Mei Chi (“Mei Chi”) are siblings (“the Siblings”). They are the children of Yu Lai Yung (“Mother”).

5.  The Company was incorporated on 12th November 1985 by two nominee companies each holding one share. These two shares were transferred to Mother on 27th December 1985. On 19th December 1985, Mother was allotted a further 1,998 shares, and each of the Siblings was allotted 1,000 shares.

6.  Mother passed away in August 2013. After the grant of probate of Mother’s estate, on 12th November 2015, the 2,000 shares originally held by Mother were divided amongst equally amongst the Siblings and transferred to them. At this point in time, each of the Siblings held 1,400 shares. Subsequently, on 17th July 2017, Mei Chi transferred all of her shares to Ava, so that Ava held 2,800 shares. The shareholding structure has not changed since then.

7.  At all material times, Wai Chung, Alta and Ava were the directors of the Company.

8.  The land on which Sunpeace Court was built had originally been held by two companies which essentially belonged to Mother’s parents and their children (including Mother). After Sunpeace Court was completed in about 1985, Mother caused the Company to be incorporated, and the Company acquired the Properties in February 1986.

9.  Mother and Alta moved into the Flat in 1986. Wai Tak moved in as well in 2003. He moved out in 2016, but kept his personal belongings inside his room, and also kept his keys to the Flat. He has continued to use the address of the Flat for correspondence purposes.

10.  From the time of the first board meeting of the Company on 19th December 1985, board meetings and general meetings of the Company were held at the Flat. The Siblings at all times had access to the Properties and were aware that Mother, Alta and Wai Tak were living there. The Company has been paying the utility expenses, management fees, government rent and rates, repairs and maintenance costs through the Company’s bank accounts for over thirty-four years.

11.  After Mother passed away, there were several shareholders’ meetings and board meetings of the Company at which the issue of whether the Properties should be sold was discussed:

11.1 on 24th June 2015, an EGM at which two shareholders (Ava and Wai Tak) proposed selling them, one (Mei Chi) proposed that the Company should retain them, one (Wai Chung) proposed that the Company should retain them but on the basis that those who lived at the Properties should pay all expenses, and one (Alta) was undecided;

11.2 on 21st September 2016, an AGM at which three shareholders (Wai Chung, Wai Tak and Ava) voted in favour of selling the Properties, and two (Alta and Mei Chi) were against selling them. The notes were taken by Wai Chung and he recorded that was no consensus on the issue in the end;

11.3 on 23rd August 2018, an AGM at which Wai Tak expressed the view that the Properties, being the Company’s registered office, should be sold. Wai Chung agreed. Alta stated that Mother had told her that the Properties should be preserved as an ancestral home and she could live there until she died, and told Wai Tak that he needed to submit a proposal 14 days in advance of any meeting called to vote on the resolution;

11.4 on 9th November 2018, a directors’ meeting at which Wai Chung voted in favour of a sale of the Properties, and Alta and Ava voted against;

11.5 on 29th November 2018, an EGM at which Wai Tak’s proposals to (1) sell the Properties and (2) distribute the proceeds to the shareholders of the Company was put to the vote. 40% of the votes were in favour of the proposal and 60% of the votes were against, so both proposals were turned down. At this meeting, Wai Tak questioned, for the first time, Alta’s living in the Properties whilst not paying rent or rates, to which Alta replied that Wai Tak was in occupation of the Properties on the same basis.

C. THE PRINCIPLES ON AN APPLICATION UNDER S.733 CO

12.  There is no dispute as to the principles to be applied in the present case.

13.  Statutory derivative actions are governed by Part 14, Division 4 of the Companies Ordinance, Cap.622 (“CO”).

14.  Section 732 CO provides that:

“(1) If misconduct is committed against a company, a member of the company … may, with the leave of the Court granted under section 733, bring proceedings in respect of the misconduct before the court on behalf of the company.

…

(4) The cause of action in relation to the proceedings under subsection (1) or (2) is vested in the company. Any of those proceedings must be brought in the name of, and the relief (if any) must be sought on behalf of, the company.

…”

15.  Section 733 CO provides that:

“(1) On an application by a member of a company … the Court may grant leave of the purposes of section 732(1) … if it is satisfied that –

(a) on the face of the application, it appears to be in the company’s interests that leave be granted to the member;

(b) in the case of –

(i) an application for leave to bring proceedings under section 732(1) or (2), there is a serious question to be tried and the company has not itself brought the proceedings; or

…

(iii) except where leave is granted by the Court under subsection (5), the member has served a written notice on the company in accordance with subsection (3), and the notice complies with subsection (4).

…

(3) The written notice must be served on the company, at least 14 days before the member applies for leave in respect of the company…

(4) The written notice must state –

(a) the member’s intention to apply for leave for the purposes of section 732(1), (2) or (3) in respect of the company; and

(b) the reasons for that intention.

(5) The Court may grant leave to dispense with the service of a written notice for the purposes of subsection (1)(c).”

16.  Thus on an application for leave to commence statutory derivative action on behalf of a company, the applicant has to satisfy the court that:

16.1 on the face of the application, it appears to be in the interest of the company that leave be granted;

16.2 there is a serious question to be tried and that the company has not itself brought the proceedings;

16.3 the applicant has served a written notice on the company in accordance with s.733(3).

See Hao Xiaoying v Green Valley Investment Ltd, unreported, HCMP 1394/2015, 10th August 2016, at [8] (Anthony Chan J).

17.  The principles as to “serious question to be tried” and “interest of the company” were summarised in Hao Xiaoying at [10] and [11], cited with approval in Zhang Heng v Kingstone International Wealth Management Limited and ors, unreported, CACV 56/2017, 27th September 2017 at [11]:

“10. On serious question to be tried :

(a) The threshold is relatively low. The prospects of the company’s success are to be investigated only to a limited extent, and the court should be slow to find against the applicant unless such prospects are so slim that the company cannot be said to have any expectation of success. See Re Primlaks (HK) Ltd, HCMP 1789/2015, unrep, 28 January 2016, §§7-8 per Ng J.

(b) At the leave stage, it is not the court’s function to try to resolve conflicts of evidence or difficult questions of law which require substantial argument and deliberation. In practice, if the applicant is able to produce a draft pleading that sets out a case with some prospect of success when only the allegations contained in the pleading are considered, the criteria will be satisfied unless the respondent can demonstrate fairly readily that there is a serious flaw in the claim and that it has no real substance. See Re Primlaks (HK) Ltd, §9.

11. As regard the interest of the company:

(a) Again, the threshold is low. In deciding whether it is prima facie in the interest of the company for leave to be granted, the court should have regard to the fact that “there should not be a trial within a trial and the court should not be forced to enter into the merits of claims where there are serious disputes”. See Re Primlaks (HK) Ltd, §21.

(b) If a “serious question to be tried” has been demonstrated, in most cases it will follow that it is prima facie in the interest of the company that proceedings are pursued. See Re Primlaks (HK) Ltd, §§20-21.

(c) In assessing whether it appears to be in the interest of the company that the derivative action be pursued, the court ought to take into account whether any practical benefit is likely to result, even in circumstances where it may be clear that, eg, a director has breached his duties to the company. This essentially involves assessing whether it appears that the company stands to gain in money or money’s worth in light of the costs which will have to be incurred. See Swansson v RA Pratt Properties Pty Ltd (2002) 42 ACSR 313 at [56] to [60] per Palmer J; Pang Yong Hock v PKS Contracts Services Pte Ltd [2005] 2 LRC 72 at [21] per Tay Yong Kwang J (giving the judgment of the Singaporean Court of Appeal).”

18.  The court will usually consider the issue of “serious question to be tried” first, because if this requirement is not satisfied, it would be difficult to see how it could be in the company’s interest to bring a derivative action. See Zhang Heng, supra, at [12] (Kwan VP).

19.  There should be evidence enabling the court to form a conclusion as to whether the substance of the redress which the applicant seeks to achieve is available by a means which does not require the company to be brought into litigation against its will. For example, if the applicant can achieve the desired result in proceedings in his or her own name, it may not be in the best interests of the company to be involved in litigation at all. See Swansson v RA Pratt Properties Pty Ltd (2002) 42 ACSR 313 at [59].

20.  The same facts may found either a derivative action or proceedings for unfair prejudice. The distinction between misconduct and unfairly prejudicial management does not lie in the particular acts or omissions of which complaint is made, but in the nature of the complaint and the remedy necessary to meet it. If the whole gist of the complaint lies in the unlawfulness of the acts or omissions complained of, so that it may be adequately redressed by the remedy provided by law for the wrong, the complaint is one of misconduct. It is otherwise if the unlawfulness of the acts or omissions complained of is not the whole gist of the complaint, so that it would not be adequately redressed by the remedy provided by law for the wrong. See Re Charnley Davies Ltd (No.2) [1990] BCLC 760 at 783e-g (Millett J, as he then was), applied in Re Chime Corp Ltd (2004) 7 HKCFAR 546 at [47]-[48] and Re Shun Tak Holdings Ltd [2009] 5 HKLRD 743 at [35].

D. SERIOUS QUESTION TO BE TRIED

D1. Claims lack particularisation

21.  The writ proposed to be issued against the Sisters was framed in general terms, with no statement of claim endorsed. Four items of relief were proposed to be sought against the Sisters, as follows.

“(1) Damages or alternatively an assessment of or alternatively an inquiry into damages for their breach of fiduciary duties and/or duty of fidelity and good faith;

(2) Payment of all sums found due to the [Company] upon taking such inquiry or account;

(3) An order that the Respondents do forthwith deliver vacant possession of [the Properties] to the Applicant; …

(4) An order that the Respondents do forthwith cause and procure the Applicant to arrange for the sale of the Properties by private treaty at a market rate … and that the proceeds of sale of the Property be paid into the Applicant’s account.”

22.  Ms Tina Mok, counsel for the Applicants, filed a skeleton argument stating that the claims which the Applicants intended to bring against the Sisters as directors in the name of the Company were as follows.

“(1) Conflict of interest: Alta and Ava have been residing in and using the Properties but still voted in the resolution concerning the proposed sale of the Properties. …

(2) Failing to act in good faith and in the interest of the Company: the Properties could be rented out or sold with rentals or sale proceeds being shared among the shareholders. Instead, Alta and Ava acting in their personal interests refused to deliver vacant possession. Worse still, they also failed to pay correspondent rent and expenses in connection with their occupation and use of the Properties contrary to the interest of the Company. [Emphasis from the original.]

(3) Misappropriation and/or wrongful possession of the Company’s assets: despite repeated demands and requests from Wai Chung and Wai Tak, Alta and Ava refused to deliver the vacant possession of the Properties or pay correspondent rent and expenses in connection with their occupation and use of the Properties.”

23.  The formulation of the three claims essentially mirrored, with some adaptations, the contents of paragraphs 47, 51 and 53 of the Affirmation of Wong Wai Chung of 25th August 2020 (“Wai Chung 1st”), which was the substantive affirmation filed in support of the Originating Summons.

24.  When asked to particularise the breaches of fiduciary duty complained of, Ms Mok submitted that these consisted of the following.

24.1 Alta’s occupation of the Flat and Carparks, and Ava’s occupation of the Carparks, their refusal to vacate the same, and their voting against the sale of the Properties at the board meeting of 9th November 2018, was contrary to their duty as directors to act in good faith, in the best interests of the Company, and to avoid a conflict of interest with the Company.

24.2 Alta’s and Ava’s failure to pay rent and expenses for the occupation of the Properties since the time of Mother’s death was a misappropriation or wrongful possession of the Company’s assets.

D2. Claim alleging conflict of interest

25.  It would appear that the Applicants seek to complain that the Sisters placed themselves in a position of conflict between their personal interest and their duty to the Company.

26.  This aspect of the “no-conflict” rule was described in Snell’s Equity, 34th ed., at paragraph 7-018 as follows:

““It is an inflexible rule of a Court of Equity that a person in a fiduciary position … is not allowed to put himself in a position where his interest and his duty conflict.”

The rule applies even where the fiduciary’s personal interest “possibly may conflict with his duty, but only if a reasonable person “looking at the relevant circumstances would think that there was a real sensible possibility of conflict. Thus, if there is no non-fiduciary duty in the circumstances, there can be no conflict between duty and interest.” (Emphasis added.)

27.  However, it is not clear what duty is said to have been owed to the Company which is in conflict with the Sisters’ interest (beyond the assertion of a general duty to act in good faith and in the interest of the Company). Based on the skeleton and submissions as described above, I have considered whether it might be said that there is a duty on the Sisters to vote in favour of a sale of the Properties or otherwise to procure a sale of the Properties, which duty might conflict with their personal interest.

28.  The starting point must be that the directors of a company do not necessarily have a duty to procure the sale of the company’s property. Whether there is such a duty will depend on the facts. In the present case, it is undisputed that the audited financial statements of the Company over the years,[1] signed by Alta and Wai Chung, have stated that the Company’s principal activity, inter alia, was “long term property holding” and that the Properties were classified as “non-current assets”. Paragraph 50 of Wai Chung 1st itself stated that the Company was a vehicle to hold assets, including the Properties, and did not carry on any business for profit. It could therefore not be said that there was any duty on the Sisters to procure a sale of the Properties by reason of any business activities of the Company.

29.  Paragraph 47 of Wai Chung 1st reads:

“With reference to the above section E, although the Intended Defendants have been residing in and using the Properties, they still voted in the resolution concerning the proposed sale of the Properties. There is clearly a conflict of interest.”

30.  Section E of the affirmation recounts a number of general meetings and board meetings of the Company subsequent to Mother’s death at which the Properties were discussed. Different views were expressed by the shareholders and directors at different times. For example, at the EGM of 24th June 2015, Wai Chung was in favour of retaining the Properties but requiring anyone who lived there to pay expenses. None of the meetings resulted in any resolutions regarding the disposition of the Properties, save for the board meeting of 9th November 2018, and the EGM of 29th November 2018, at both of which the proposal for sale of the Properties was not passed. I do not see how any of the matters which transpired at these meetings could be said to give rise to a duty on the part of the Sisters to procure a sale of the Properties.

31.  Even if I am wrong in my view that the Applicants have not identified any conflict of interest and duty, there will not be any such conflict where a principal has given his free and fully informed consent to enable the fiduciary to prefer his own interest: Snell, supra, at paragraph 7-019; Virgo, The Principles of Equity and Trusts, 4th ed., at p.459. In the present case, it is the Applicant’s own evidence, as set out in the 2nd Affirmation of Wong Wai Chung dated 24th December 2020 (“Wai Chung 2nd”), that:

31.1 “…as…the Company is a “family company” essentially established by Mother with her own funds, it would appear to be reasonable for the Siblings, together with Mother, to reside or use the Properties during her lifetime and the Company to pay off expenses therefore incurred.” (Wai Chung 2nd paragraph 15; emphasis from the original.)

31.2 “Prior to Mother’s demise, the unmarried Siblings were able to reside or use the Properties by the Company’s acquiescence. However, after Mother passed away, the [Sisters] have been the majority shareholders and directors, so their conduct out of conflict of interest would not be substantiated by the Company’s acquiescence.” (Wai Chung 2nd paragraph 33.)

31.3 “The fact that the Company allowed Mother and some of the Siblings to reside in the Flat and use the Carpark Spaces for free does not mean the Company has resolved the alleged Home Purpose, providing the Properties as family home to the unmarried Siblings for free indefinitely.” (Wai Chung 2nd paragraph 36(3).)

32.  In other words, the Applicants’ own evidence is that the Company consented to the Siblings to live in, or use, the Properties – to prefer their own interest over any duty to the Company.

33.  The Applicants say, however, that any such consent ended upon Mother’s death. Mr Wong submitted, and I agree, that the reasoning given for this cannot stand. It would be for the Company to withdraw its consent, but there has been no such board or shareholders’ resolution of the Company to effect such a withdrawal. The acquiescence could not be negated simply because of the fact that Mother passed away, or that the Sisters were majority shareholders and directors (contrary to the suggestion in paragraph 33 of Wai Chung 2nd). At most, it could be said that Wai Chung and Wai Tak have withdrawn their own consent, but that is not the same thing as the Company’s withdrawal of consent. Furthermore, their conduct is equivocal as to whether even their own consent has truly been withdrawn, since Wai Tak continues to keep his personal belongings at the Flat, and to keep his keys and use of the Flat as a correspondence address.

D3. Claim alleging failure to act in good faith and in the interest of the Company

34.  The Applicants say that the Sisters failed to act in good faith and in the interest of the Company as their failure to deliver vacant possession of the Properties prevented the Properties from being rented out or sold, and the rental income or sale proceeds from being shared amongst the shareholders of the Company.

35.  However, it is not clear why it is being said that it is in the interest of the Company to sell or rent the Properties. As noted above, the Company engaged in the activity of long term property holding, so the sale of the Properties would be contrary to this activity. There was never any resolution by the board (or the shareholders) that the Properties should be sold or rented out (indeed, it does not appear that renting was even discussed).

36.  Ms Mok submitted that it was in the interest of the Company to sell or rent the Properties now because the Company made a loss in the years ending 31st December 2011, 31st December 2013, 31st December 2014, and 31st December 2018. It is difficult to understand why it is now said (in 2022) to be in the interest of the Company to sell or rent the Properties when the history is that all along, there have been occasions when the Company made a loss. Ms Mok submitted that it was because the board had resolved on 9th October 2017 and 23rd August 2018 that distributions should be made, so that if the Properties were not sold the Company would suffer losses. However, the Company is a not profit-making company, and not in the business of selling or renting out properties, but rather, a property holding company. Furthermore, on the logic of Ms Mok’s argument, the Company’s losses were caused by the decisions to make distributions rather than the Sisters’ failure to deliver vacant possession of the Property.

37.  In respect of the complaint that the Sisters have prevented the Property from being rented out, I further note that in any event, there is no claim in the proposed writ for any relief that the Property should be rented out.

38.  It is notable that the formulation of the complaint in the Applicants’ skeleton argument focuses on the fact that the Sisters’ refusal to deliver vacant possession prevented potential rental income or sale proceeds from being shared among the shareholders – in other words, the complaint is that the shareholders, rather than the Company, were prevented from enjoying the benefits of renting or sale of the Property. I will return to this point below.

39.  The Applicants also say that the Sisters failed to act in good faith and in the interest of the Company as they failed to pay rent and expenses for their occupation and use of the Properties.

40.  Mr Wong submits that the undisputed evidence is that all along, prior to Mother’s death and indeed even for some time thereafter, all the directors and shareholders of the Company knew and acquiesced in the fact that Mother and some of the Siblings (including the 2nd Applicant Wai Tak) occupied the Properties without payment of rent. The relevant paragraphs from Wai Chung 2nd are set out above at paragraph 31. It was not until the EGM of 29th November 2018 that Wai Tak raised a query as to Alta’s occupation of the Properties without paying rent – to which Alta pointed out that Wai Tak was also occupying the Properties without payment in that he had left his things in the Flat.

41.  Mr Wong submitted that on the principle of In re Duomatic [1969] 2 Ch 365, the Company should be taken as having agreed to such an arrangement as if the shareholders had resolved the same in a general meeting. A director’s act which might otherwise be a breach of his fiduciary duty to the company is not such a breach if the shareholders, with full knowledge, have agreed to it, either expressly or tacitly: see Tam Po Kei v Tam Bo Kin [2011] 1 HKLRD 537 at [67], [107], [108].

42.  Ms Mok did not seek to argue that the principle had no application to the facts if they were as characterised by Mr Wong. Rather, she submitted that the Company had only agreed to let Mother occupy the Properties, and Mother then granted a licence to her children to occupy the Properties, which licence must have terminated upon her death. However, this characterisation of the facts is not supported by the evidence relied on by Ms Mok.

42.1 The primary piece of evidence relied on by Ms Mok was paragraph 3 of Wai Chung 2nd, but as indicated in the extract cited above at paragraph 31, the Company had acquiesced in Mother and the Siblings occupying the Properties, not just Mother.

42.2 Reliance was also placed on the Applicants’ solicitors’ letter of 23rd September 2019 which stated that:

“It goes without saying that it is the custom and/or tradition that parents would allow or grant license(s) to their children to live with them in the family residential property until the children have grown up, moved out or got married. The same applied to the family of the Mother and the Siblings.”

This general assertion was made in the context of the family’s previous home in Ho Man Tin, and did not relate to any specific licences or other arrangements made in respect of the Properties by the Company.

42.3 The third matter relied on was the AGM of 21st September 2016 at which a vote was taken regarding the sale of the Properties. It was said that there would not have been such discussions had the licence to the Siblings not been revoked by that time. However, such discussions could have taken place whether or not the Siblings still had permission to live at the Properties, and no matter whether such permission had been granted in the first place by Mother or the Company.

43.  Mr Wong further submitted that whilst it was, and is, always open to the Company to revoke such acquiescence, there has been no decision of the Company which in law constitutes such revocation. Mother’s death could not amount to a revocation by the Company. Nor could the mere fact that two of the minority shareholders, Wai Tak and Wai Chung, had changed their minds. I agree.

D4. Claim alleging misappropriation and wrongful possession of Company’s assets

44.  The Applicants’ third claim relies on the same allegations as those already considered under their second claim, namely the complaint that the Sisters failed to deliver vacant possession of the Properties and failed to pay rent and expenses for occupation of the same.

45.  Given the views I have expressed above in relation to the second claim, it follows that there is no serious question to be tried as regards the third claim.

D5. Claim for payment and delivery up of vacant possession

46.  It also follows from my views above that there is no serious question to be tried as regards the second and third items of relief sought in the proposed writ: an order for payment of sums by reason of the Sisters’ breaches of duty to the Company, and an order that the Sisters deliver vacant possession of the Properties to the Applicant.

D6. Claim for order that sisters procure sale of Properties

47.  Quite apart from my views above, even if there was any breach of duty by the Sisters to the Company, it would not follow that the Sisters have a positive obligation to procure the sale of the Properties. No explanation was given as to the legal basis for this claim.

D7. No serious question to be tried

48.  I have borne in mind that in considering the issue of whether there is a serious question to be tried, the threshold to be applied is relatively low. Nevertheless, on the undisputed evidence, and without having to resolve any difficult questions of law, I have concluded that the Applicants have not demonstrated that their proposed claim involves any serious question to be tried.

E. COMPLAINT IS MISMANAGEMENT RATHER MISCONDUCT

49.  Having gone through the proposed writ and claims as formulated by the Applicants, it will be seen that what is complained of is not so much misconduct as mismanagement. Paragraph 4 of the proposed writ is revealing. It shows that what the Applicants ultimately want is a sale of the Properties. However, even if could be said that the Sisters were in breach of some sort of duty owed to the Company, the Applicants have not demonstrated why an order that the Sisters procure the sale of the Properties is an available or appropriate remedy for such breach. As Millett J said in Re Charnley Davies Ltd (No.2) [1990] BCLC 760, the alleged unlawfulness of the Sisters’ acts is not the whole gist of the complaint and would not be adequately redressed by the remedy provided by the law for the wrong.

50.  The undisputed evidence is that it was agreed by all, including the Company, that Mother, Alta and Wai Tak could live at the Flat. This was so not only prior to Mother’s death, but for some years thereafter: Wai Tak continued to live in the Flat until 2016 (and even thereafter kept his room, his belongings in the room, his keys, and the use of the Flat as a correspondence address), and the issue of Alta paying rent for her occupation was only raised at the EGM of November 2018. What the Applicants wanted to do was change the agreed status quo, but their proposals were not accepted, and they could not prevail as they were in the minority both at the shareholder and board level. The complaint is therefore one of mismanagement and not of misconduct.

51.  The point is further highlighted by the complaint against Ava.

51.1 She is not living at the Flat and has never done so. Therefore, there cannot be any serious question to be tried against Ava as regards her failure to deliver up vacant possession of the Flat. As regards the Carparks, there is no evidence that she is “occupying” them. It is not disputed that she only uses the Carparks when she goes to the Properties to pay her respects to Mother’s portrait or visit Alta. Wai Tak also admitted that he used the Carparks and did not challenge Alta’s evidence that the Carparks were available for the use of any of the Siblings.

51.2 Mr Wong submitted, and I agree, that in any event, it would not be in the interest of the Company to sue her for occasional use of the Carparks, as it would be impossible to quantify or prove a claim for such use, and as the Company could not stand to gain from such a claim when considered against the costs that would have to be incurred in bringing the claim. Ms Mok submitted that the claim could be brought to seek payment of monthly rent, rather than on a usage basis. However, there was no explanation as to the legal basis for making such a claim against Ava on the basis of the undisputed evidence that Ava sometimes parked as a visitor to the Flat.

51.3 Despite all this, no distinction was drawn in the proposed writ between Alta and Ava. Clearly, the real aim of the claim is to try to force the Sisters to procure a sale of the Properties.

52.  No submission was made by Ms Mok as to whether the Applicants might achieve their desired result (of a sale of the Properties) by alternative proceedings in their own name, which would avoid having to bring the Company into litigation against its will.

53.  Finally, as mentioned earlier, it is telling that in the Applicants’ skeleton, the complaint of the Sisters’ breach of duties of good faith and to act in the interest of the Company focuses on the shareholders being deprived of rental income or sale proceeds.

F. INTEREST OF THE COMPANY

54.  I have found that there is no serious question to be tried. I am also not satisfied that this is a case where there is no other appropriate means by which the Applicants can obtain the substance of the redress sought. In the circumstances, I am not satisfied that it would be in the interest of the Company to grant leave to commence the proposed action.

G. NOTICE UNDER S.733(5) CO

55.  Mr Wong submitted that no proper notice as required under s.733(1)(c) CO was served on the Company. The notice that was served on 4th August 2020 only made a complaint about the Sisters’ failure to deliver vacant possession of the Properties, but not about their failure to sell or rent the Properties.

56.  Ms Mok did not seek to defend the adequacy of the notice or to apply for leave for dispensation of the notice pursuant to s.733(5) CO.

57.  In the circumstances, the lack of notice is an additional reason to refuse leave at least in relation to paragraph 4 of the proposed writ, and the other paragraphs insofar as they seek to rely on a breach of duty to sell or rent out the Properties.

H. DISPOSITION

58.  I dismiss the Originating Summons.  I further make a costs order nisi that the Applicants pay to the Company the costs of and occasioned by the proceedings, to be taxed if not agreed.