YUE MI YING AND ANOTHER v. CHEUNG MAN HONG AND ANOTHER

HCMP 175/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 175 OF 2007

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REASONS FOR DECISION

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1.  At the end of the hearing of 13 June 2007, I made orders in terms of parts of the summons for directions taken out by the defendants with costs.  Those were orders directing this action to continue as if begun by writ, and consequential directions relating to pleadings.  The date scheduled for hearing the originating summons was also vacated.

2.  This action was commenced in January 2007 by way of originating summons.  The plaintiffs seek relief intended to prevent the defendants from using the name of a company (“the Company”) to sue the plaintiffs (in HCMP 2401/2006), for the defendants to rectify the records of the Company filed with the Companies Registry and for them to return the Company’s documents and records.

3.  By the directions sought in the summons for directions, the defendants asked for:-

(a)	directions to enable them to counterclaim that they can represent the Company to sue the plaintiffs in HCMP 2401/2006;
(b)	(as stated above) this action to continue as if begun by writ.

4.  The parties have filed and served voluminous affirmation evidence.  In short, the defendants’ case is that they have become the Company’s shareholders by reason of the plaintiffs’ conduct or representation.  Further or alternatively, the Company and/or the plaintiffs is/are estopped from denying they are shareholders.

5.  The plaintiffs accept that there are factual disputes arising out of the contents of the affirmation evidence.  But they claim that those disputes are irrelevant.  They argue that, even on the defendants’ own case, there is in law no defence with regard to the plaintiffs’ claim.

6.  The above argument is based on the following propositions:-

(1)	the only way in which one can become the Company’s shareholder is through the steps prescribed by the Company’s articles of association; and
(2)	the doctrine of estoppel has no place in company law.

The defendants, not having undertaken the prescribed steps, are not shareholders and therefore have no locus standi to sue.

7.  The plaintiffs are, however, unable to refer to any authorities or textbooks in support of the legal propositions summarised in para. 6 above.

8.  In view of the above, I disagree with the plaintiffs and agree with the defence: there are disputes (which are either matters of fact, or matters of mixed law and fact) which need to be resolved before this action can properly be determined.

9.  Accordingly, it is appropriate to invoke the power conferred by RHC Ord. 28 r. 8(1).