HSBC SECURITIES ASIA LTD. v. HSBC HOLDINGS PLC AND OTHERS

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NOS. 3069, 3070 AND 3071 OF 1998

AND

HIGH COURT ACTION NO. 5154 OF 1992

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HCMP3069/98

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(HEARD TOGETHER)

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J U D G M E N T

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1. There are three applications before me seeking identical relief. The matter arises out of a theft of shares relating to the Hong Kong and China Gas Company, HSBC Holdings Plc and Hang Seng Bank Limited which occurred in July 1992. The Defendants in each of the actions, other than the 1st and 2nd Defendants, are the registered holders of the shares that were stolen ("the Relevant Defendants"). The Plaintiff, HSBC Securities Asia Limited, fully compensated each of the Relevant Defendants at the time of the theft by replacing the shares that had been stolen. The applications today are unopposed and all the Defendants are content that the court should grant the relief sought.

2. In essence, what is being sought is that the share registers of the three companies mentioned be rectified so that the name of the Plaintiff or its nominee is substituted for the names of the Relevant Defendants.

3. The basis of the cause of action is that although legal title remains in the Relevant Defendants, they had been compensated and in equity, the Plaintiff is entitled to be subrogated to their rights. The general principles of subrogation are conveniently summarised in Goff and Jones, the Law of Restitution 1998 Edn. at p.120 which reads :

"There are many cases where one person, A, has unofficiously conferred a benefit on another, B, usually in the form of a payment of money, and where it is just, in all the circumstances, that A should be allowed to succeed to rights or assets in order to prevent B's unjust enrichment..... it is in essence a remedy, fashioned to the particular facts, and designed to ensure 'a transfer of rights from one person to another ... by operation of law', in order to deprive B of a benefit gained at A's expense."

4. The jurisdiction to rectify the registers is set out in section 100 of the Companies Ordinance :

"100. Power of court to rectify register

(1) If-

(a) the name of any person is, without sufficient cause, entered in or omitted from the register of members of a company; or

(b) default is made or unnecessary delay takes place in entering on the register the fact of any person having ceased to be a member;

the person aggrieved, or any member of the company, or the company, may apply to the court for rectification of the register.

(2) Where an application is made under this section, the court may either refuse the application or may, subject to section 71A, order rectification of the register and payment by the company of any damages sustained by any party aggrieved.

(3) Subject to section 71A, on an application under this section the court may decide any question relating to the title of any person who is a party to the application to have his name entered in or omitted from the register, whether the question arises between members or alleged members, or between members or alleged members on the one hand and the company on the other hand, and generally may decide any question necessary or expedient to be decided for rectification of the register.

(4) ..."

5. Clearly this is a case where the Plaintiff's name is omitted from the share registers and as at present, the names of the Relevant Defendants appear on those registers without sufficient cause by reason of the Plaintiff's entitlement to subrogation. Since each of the Relevant Defendants has been adequately compensated, it seems to be correct in principle that an order should now be made to rectify the share registers by striking out the names of the Relevant Defendants as holders of the shares and by inserting the name of the Plaintiff or its nominee as the holder of the shares. I am satisfied that I have the jurisdiction to rectify the registers as requested, and on the evidence, I am also satisfied that this is an appropriate case for the discretion to be exercised.

6. Counsel for the Plaintiff referred me to the decisions in Re Welsh Highland Light Railway Co. [1993] BCLC 338 and Re BTR Plc. [1988] 4 BCC 45. I agree that those cases are distinguishable and that in the present case, there is no doubt that the Plaintiff is a "person aggrieved" within section 100 of the Companies Ordinance. Accordingly, I will order that the share registers be rectified as sought.

7. Various consequential relief follows from granting rectification, this includes an order that the 1st Defendant in each case do issue and deliver to the Plaintiff or its nominee a share certificate(s) for the shares, that the Plaintiff be paid all dividends accrued on those shares since 8 July 1992 and that the Plaintiff be given all, and any bonus script or other shares that had been issued in respect of the shares since 8 July 1992, the same to be registered in the name of the Plaintiff or its nominee, and that the 1st Defendant do deliver to the Plaintiff or its nominee shares certificate(s) for such shares.

8. It is also part of the consequential relief sought that a declaration be made that the share certificates held in the names of the Relevant Defendants, more particularly identified in the schedules to the originating summonses issued are null and void and that all instruments of transfer in respect of the shares dated on or after 8 July 1992 either received and held by the 2nd Defendant at the date of this order, or which have not yet been submitted to the 2nd Defendant are null and void.

9. In this connection, counsel invited the court's attention to the following annotation in the Supreme Court Practice 1999 Ed. at 15/16/2 :

"...the rule of the court that a declaration will not be granted when giving judgment by consent or in default without a trial is a rule of practice and not of law and will give way to the paramount duty of the court to do the fullest justice to the plaintiff to which he is entitled and accordingly the declaration will be granted, where the undefended claim is for breach of contract, to declare that the contract is at an end by reason of the defendant's repudiation and that the plaintiff is no longer bound by it but is free to negotiate a fresh contract with a third party (Patten v. Burke Publishing Co. Ltd. [1991] 1 W.L.R.541; [1991] 2 All E.R.821)."

The declarations sought are consequent upon the substantive relief which is the rectification of the share registers. They do not decide academic or hypothetical questions. Rather, they are designed to ensure that there can be no doubt as to the Plaintiff's title to the shares. In my judgment, this is an appropriate case to make the declarations sought.

10. The Plaintiff has also issued a summons that the order of Mortimer J (as he then was) dated 10 August 1992 be discharged and that the action brought against Central Registration under HCA 5154/92 be discontinued with no order as to costs. The relief granted in the originating summonses would render the order made in 1992 redundant. Accordingly, an order in terms is granted.