SKY TREASURE ENTERPRISE LTD v. LAM WAI PING GORDON AND OTHERS

HCMP 1619/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1619 OF 2004

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D E C I S I O N

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1.  This is an application of Madam Lam Sui King to be joined as a respondent in this petition presented under section 168A of the Companies Ordinance, Cap.32.  The correct provision to be invoked in the Rules of the High Court should be Order 15 rule 6(2), not rule 4 as stated in the summons.

2.  Mr Godfrey Lam, for the applicant, relied on both sub-paragraphs (i) and (ii) in rule 6(2).  The 1^st respondent, Lam Wai Ping Gordon, and the 2^nd respondent, Kwan Kan Kai Kee Holdings Limited (“KKKK”), support the application.  The petitioner, Sky Treasure Enterprise Limited, opposes the application. 

3.  I am satisfied it is right to exercise my discretion to order a joinder on both limbs as relied on by the applicant for these reasons. 

4.  Firstly, the applicant has been a director of the company in question, Kandara Limited (“the Company”), since 1982.  One of the matters hotly in dispute in these proceedings is whether the applicant and her sister had managed the mahjong school, which is the only business of the Company, or whether their nephew, Gordon Lam, has been in control.  The applicant and Gordon Lam say that she had been intimately involved in the business.  This is denied by the petitioner.  She wants to put her case to the court.  It cannot be assumed that any evidence she may file on behalf of any party in these proceedings would be used at the trial.

5.  Secondly, it is alleged in the petition that the applicant was accustomed to act in accordance with the wishes or instructions of Gordon Lam.  It is also alleged that the latter had misappropriated and diverted funds from the Company of over $65 million.  Although it is not alleged that the applicant had misappropriated funds herself, the implication of this is that she must have been in dereliction of her duty as a director of the Company.  There are other allegations made against the board of directors of which she is a member.  Further, she has been the holder of the licence of the mahjong school since March 2002.  The allegations against her may have an impact on her fitness as the licence holder.  She wants to join in as a respondent to defend the allegations against her and be represented by counsel separately, not just to file evidence on behalf of the existing respondents.

6.  Thirdly, although she is not a shareholder of the Company, she is a 20 per cent shareholder of KKKK, which holds 10,000 out of the 14,000 issued shares of the Company.  The other 4,000 shares are held by the petitioner.  The petitioner seeks an order that its shares in the Company be valued as at a date in 1992 without discount, and be purchased by Gordon Lam and KKKK.  The applicant has a substantial stake in this litigation by reason of her shareholding and would be affected by an order made by the court under the powers conferred by section 168A.  She would have a strong interest to make representation why the buy-out order should not be made against KKKK.  She is the only shareholder in KKKK not controlled by Gordon Lam.  As the minority shareholder of KKKK, she does not have conduct of these proceedings on its behalf.  The fact that the applicant’s interest in the Company is not a direct one in the sense that she is not a member of the Company is neither here nor there.

7.  In the context of a petition under section 168A, the language of the provision does not require that the respondent is to be limited to a member or director of the company or to those conducting its affairs.  Those who could be joined are the alleged wrongdoers or are otherwise responsible for its affairs, or those who might be affected by the relief sought (Practice and Procedure of the Companies Court, by Boyle & Marshall, 1997 edition, paragraphs 6.5, 6.5.1; Idmiston Ltd v Asian Master Enterprises Ltd [1988] HKC 588 at 595A to G; Re a Company [1987] BCLC 593 at 598h to 599c; Re BSB Holdings Ltd [1993] BCLC 246 at 254b to h). 

8.  There is a great variety of circumstances in which a person may be added as a party to the action.  One of the circumstances is to prevent injustice being done to a person whose rights will be affected by the judgment without giving him an opportunity of being heard (Pegang Mining Co. Ltd v Choong Sam [1969] 1 MLJ 52 at 55G to 56B).

9.  I am satisfied that the applicant is a person whose presence is necessary to ensure that all matters in dispute are effectually and completely determined.  I am also satisfied she has direct interest in the subject matter which goes beyond a mere commercial interest in the outcome of the proceedings.  The conduct of affairs of the Company is a question or issue relating to or connected with the relief claimed.  This is an issue that exists between the applicant and the existing parties and it would be just and convenient to determine this issue between them as well as between the existing parties. 

10.  The issues of delay and additional costs occasioned by the joinder are not sufficient reasons in the present circumstances to militate against the exercise of my discretion in the applicant’s favour.  I make an order that the applicant is to be added as the 4^th respondent in these proceedings.

11.  I also give these directions on the filing of evidence: 

(1)     The 4^th respondent is to have leave to file and serve evidence in reply to all affidavits respectively filed and served by the petitioner, and the 1^st and 2^nd respondents within 28 days from the date of this order. 

(2)     The petitioner and the 1^st and 2^nd respondents do have leave to file and serve their evidence in reply to the 4^th respondent’s evidence within 28 days from the date of service. 

12.  The costs of the summons, including the costs of the applicant’s affidavits filed in support thereof, are to be in the cause of the proceedings.  The costs of the applicant in the hearing today are to be paid by the petitioner to the applicant in any event.  I make no order as to the costs of the 1^st and 2^nd respondents for the hearing today.