SECURITIES AND FUTURES COMMISSION v. YEUNG KUI WONG AND OTHERS

HCMP 1742/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1742 OF 2009

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BETWEEN

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J U D G M E N T

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1.  This is a summary Carecraft hearing in relation to the 2^nd and 6^th Respondents. The Agreed Facts in respect of both Respondents are appended to this Judgment.

2.  On the basis of both sets of Agreed Facts, it is apparent that Warderly’s business and affairs have been conducted in a manner involving misfeasance or misconduct which resulted in its members (or part of them) not having been given all the information in respect to Warderly’s business and affairs which such members might reasonably expect to have been given.

3.  The 2^nd Respondent was an executive director of Warderly at all material times.  It is apparent from the facts agreed by him, that he was partly responsible for the unsatisfactory conduct of Warderly’s business and affairs. 

4.  In particular, I note that the following lapses took place during the 2^nd Respondent’s tenure as executive director:-

(1)   A failure to make disclosure of a series of matters occurring within a short period of time.

(2)   A failure to make timely disclosure of price sensitive information which resulted in shareholders not being given an opportunity to dispose of their shares so as to minimise their losses.

(3)   A failure to disclose pledges or equitable mortgages of shares by a controlling shareholder.

(4)   A failure to disclose a connected transaction (for which there was also a failure to obtain shareholder approval).

5.  In Carecraft proceedings relating to the 1^st, 3^rd, and 4^th Respondents (who were either managing or executive directors), the Court ordered that each would be barred from serving as a director or manager of a listed or unlisted company in Hong Kong for 5 years otherwise than with leave of the Court. 

6.  In the case of the 5^th Respondent (an executive director), the Court barred him from serving as director or manager of any listed or unlisted company in Hong Kong for 2 years otherwise than with the leave of the Court.  The Court did so primarily because the 5^th Respondent had only been an executive director for less than 2 months (from 16 January to 12 March 2007).

7.  The 2^nd Respondent accepts that his position is similar to that of the 1^st, 3^rd and 4^th Respondents.  But he suggests that he should only be barred from serving as a director of listed companies.  This is because (according to the 2^nd Respondent) a significant part of his livelihood depends on investing in private companies.  From time to time, he may need to sit as director on the boards of such companies in order to monitor their business.  It would be impractical (the 2^nd Respondent says) to seek the Court’s leave on every occasion where he would need to sit as a director.

8.  The 2^nd Respondent says that his case is distinguishable from that of the 1^st, 3^rd and 4^th Respondents because he remained as director even after the latter all resigned.  He also sought out investors in order to raise funds for Warderly with a view to reviving its fortunes.  He did not resign until 18 September 2009, two days before the SFC brought the present Petition.

9.  While I take account of the factors advanced by the 2^nd Respondent, in my view they are insufficient to distinguish the 2^nd Respondent’s situation from that of the 1^st, 3^rd and 4^th Respondents.  Accordingly, I would make the disqualification order sought by the SFC in the 2^nd Respondent’s case. 

10.  I will order that the 2^nd Respondent shall not, for a period of 5 years, without leave of the Court, be or continue to be:-

(1)   a director, liquidator, receiver or manager of the property or business of any listed or unlisted company in Hong Kong or the subsidiaries or affiliates of such company; or,

(2)   directly or indirectly concerned, or take part, in the management of any listed or unlisted company in Hong Kong or the subsidiaries or affiliates of such company.

11.  The 6^th Respondent was only an alternate non-executive director of Warderly.  The complaints against him are similar to those in relation to the 2^nd Respondent.  The 6^th Respondent was partly responsible for the failings identified by the SFC.

12.  In light of the 6^th Respondent’s lesser responsibility for the day-to-day management of Warderly’s affairs, I would order in his case that he shall not, for a period of 2 years, without leave of the Court, be or continue to be:-

(1)   a director, liquidator, receiver or manager of the property or business of any listed company in Hong Kong or the subsidiaries or affiliates of such company; or,

(2)   directly or indirectly concerned, or take part, in the management of any listed company in Hong Kong or the subsidiaries or affiliates of such company.

13.  Costs have been agreed among the parties.  I shall make a costs order accordingly.

Agreed Facts