RE INTERNATIONAL PEACEFUL INTERESTS LTD.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS NO.195 OF 1983

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JUDGMENT

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1. On the 27th April 1982 International Peaceful Interests Limited (the applicant) entered into two agreements with the shareholders of two private companies Cheung On Leasehold Property Limited and Trans Continental Investment & Development Services Limited (the respondents) to purchase the entire issued capital of those companies. The object of the agreements was to acquire three properties belonging to the respondents in Connaught Road Central for the purposes of redevelopment. The total purchase price under the agreements amounted to $119,403,300 and the applicant paid a deposit of $37,143,924. The agreements were not completed because the applicant claimed that the respondents were in substantial and repeated default of their statutory obligations, and the shareholders had failed to show that they had a good title to the shares agreed to be sold. As a result the applicant purported to rescind the agreements.

2. A writ was issued by the applicant in Action No. 282 of 1983 on the 7th January 1983 against the shareholders and the two respondents claiming inter alia declarations that it was entitled to rescind the agreements, the return of the deposits and an equitable lien on the shares. The defendants by their defence deny the applicant's allegations and counterclaim for damages and other relief on the grounds that the applicant was in breach of the agreements by failing to complete on the date of completion which was due to take place on the 17th November 1982. The action has not yet been set down for trial.

3. In the present proceedings the applicant obtained an order pursuant to Order 50 rule 15(1) of the Rules of the Supreme Court on the 31st January 1983 restraining the respondents from permitting the transfer of the shares of the shareholders and from paying any dividend or interest that was due or subsequently became due. I am told that neither the respondents nor the shareholders objected to the making of the order.

4. The properties of the two respondents were sold on about the 29th November 1984 for a total sum of $30,595,620.24. After the applicant became aware that the properties had been sold, a request was made to the respondents to give an undertaking that they would preserve the proceeds of sale, and for an account. These requests were refused on the 12th February 1985.

5. By the present summonses which were issued on the 23rd May 1985 the applicant seeks orders for an account of the proceeds of sale of the properties and for an order restraining the respondents from disposing of the proceeds available for distribution. It is common ground that the properties that have been sold were the only substantial assets of the respondents.

6. Mr. Swaine, counsel for the applicant, submitted that an order was necessary to supplement the order of the 31st January 1983 in order to prevent the frustration or circumvention of that order by a dissipation of the proceeds of sale. Mr. Swaine relies upon section 19(1) of the Supreme Court Ordinance which enables the court to make an interlocutory order where it appears to be just and convenient to do so. He referred me to Beddow v. Beddow (1878) 9 Ch. D. 89 where Jessel M.R. at p.93 said: -

"I have unlimited power to grant an injunction in any case where it would be right or just to do so."

Mr. Swaine drew an analogy with cases where a Mareva injunction has been granted although he does not rely upon those principles in the present applications.

7. Mr. Tang who appeared for the respondents conceded that the court has jurisdiction to make an order, but that this is not a proper case to do so. He argued that the nature of the applications implies a lack of integrity on the part of the shareholders who hold the proceeds which is not justified upon the evidence.

8. Although the applicant does not invoke the jurisdiction of the Mareva injunction the applications essentially are based in my view on those principles. It is therefore necessary for the applicant to establish that he will recover judgment for a certain or approximate sum, and that there is evidence to show that steps may be taken to dissipate the assets in order to frustrate any judgment that may be obtained see Z Ltd. v. A and others (1982) 1 All E.R. 556. The case presented by the applicant on the pleadings does not reveal that a definite sum will be recovered.

9. In support of their assertion that the companies were in breach of their statutory obligations the applicant has alleged inter alia that the respondents failed to hold annual general meetings, that annual returns were filed out of time, and that auditors were not appointed at an annual general meeting. With regard to the contention that the shareholders did not have a good title, the applicant states that the transfers of shares were not approved, that allotments of shares were invalid, and that instruments of transfer did not show that stamp duty had been paid. Whilst it is not my function to go into the merits the facts which were raised for the first time shortly before completion was due to take place in November 1982 indicate an attempt by the applicant to extricate itself from transactions that had obviously become unprofitable. It is by no means certain that the applicants claim will succeed. In fact upon a provisional view I consider that the defendants have a stronger case.

10. Although the applicant's request for an undertaking was refused in February 1985 the present summonses were not issued until over three months later. No explanation has been given for this delay nor has any evidence been placed before me to support the applicants contention that the assets are likely to be dissipated. The applicant's applications for restraining orders therefore fail on both limbs. It necessarily follows that the application for an account is refused for the applicant has no right to this information.

 

Accordingly, the summonses will be dismissed with costs.