CHEN PEI XIONG v. CONVOY GLOBAL HOLDINGS LTD AND ANOTHER

HCMP 211/2024

[2024] HKCFI 1568

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 211 OF 2024

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J U D G M E N T

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A.  Introduction

1.  By originating summons dated 6 February 2024 (“OS”), the plaintiff seeks leave to commence a statutory derivative action (“SDA”) on behalf of the 2^nd defendant company (“Forthwise”) against Mr Ng Wing Fai (“Mr Ng”) so as to make various claims (“Claims”) in accordance with the draft Statement of Claim (“SOC”) filed with the OS.

2.  The application is made pursuant to sections 732 and 733 of the Companies Ordinance Cap 622 (“Ordinance”), which can usefully be set out here, as follows:

732. Member of company or of associated company may bring or intervene in proceedings

(1) If misconduct is committed against a company, a member of the company or of an associated company of the company may, with the leave of the Court granted under section 733, bring proceedings in respect of the misconduct before the court on behalf of the company.

(2) If, because of misconduct committed against the company, a company fails to bring proceedings in respect of any matter, a member of the company or of an associated company of the company may, with the leave of the Court granted under section 733, bring proceedings in respect of the matter before the court on behalf of the company.

(3) If, because of misconduct committed against the company, a company fails to diligently continue, discontinue or defend proceedings, a member of the company or of an associated company of the company may, with the leave of the Court granted under section 733, intervene in the proceedings before the court for the purpose of continuing, discontinuing or defending those proceedings on behalf of the company.

(4) The cause of action in relation to the proceedings under subsection (1) or (2) is vested in the company. Any of those proceedings must be brought in the name of, and the relief (if any) must be sought on behalf of, the company.

(5) The right to continue, discontinue or defend any proceedings intervened in under subsection (3) is vested in, and the relief (if any) must be sought on behalf of, the company.

(6) Subject to section 736, this Division does not affect any common law right of a member of a company, or a member of an associated company of a company, to bring proceedings on behalf of the company, or intervene in any proceedings to which the company is a party.

(7) This section does not prevent a member of a company, or of an associated company of a company, from bringing proceedings in respect of the company, or intervening in any proceedings to which the company is a party, on the member’s own behalf in respect of any personal right.

733. Leave of Court to bring or intervene in proceedings

(1) On application by a member of a company or of an associated company of a company, the Court may grant leave for the purposes of section 732(1), (2) or (3) if it is satisfied that—

(a) on the face of the application, it appears to be in the company’s interests that leave be granted to the member;

(b) in the case of—

(i) an application for leave to bring proceedings under section 732(1) or (2), there is a serious question to be tried and the company has not itself brought the proceedings; or

(ii) an application for leave to intervene in proceedings under section 732(3), the company has not diligently continued, discontinued or defended the proceedings; and

(c) except where leave is granted by the Court under subsection (5), the member has served a written notice on the company in accordance with subsection (3), and the notice complies with subsection (4).

(2) The Court may refuse to grant leave if it is satisfied that—

(a) in the case of an application for leave to bring proceedings under section 732(1) or (2), the member has, in the exercise of any common law right, brought proceedings on behalf of the company in respect of the same cause or matter; or

(b) in the case of an application for leave to intervene in proceedings under section 732(3), the member has, in the exercise of any common law right, intervened in the proceedings in question to which the company is a party.

(3) The written notice must be served on the company, at least 14 days before the member applies for leave in respect of the company—

(a) in the case of a company as defined by section 2(1), by leaving the notice at, or by sending the notice by post to, its registered office; or

(b) in the case of a non-Hong Kong company, in a manner that the notice is sufficiently served on the company by virtue of section 803.

(4) The written notice must state—

(a) the member’s intention to apply for leave for the purposes of section 732(1), (2) or (3) in respect of the company; and

(b) the reasons for that intention.

(5) The Court may grant leave to dispense with the service of a written notice for the purposes of subsection (1)(c).

3.  As part of the opposition to the OS, the defendants contest the jurisdiction of the Court on the basis that (1) the OS was not duly served on Forthwise, and that (2) Forthwise is not a “company” for the purposes of sections 732 and 733 of the Ordinance. Though it may not have been strictly necessary, the defendants issued a summons dated 5 March 2024 (“Jurisdiction Summons”) raising that contest as to jurisdiction.

4.  The OS and the Jurisdiction Summons matters came on for a first call-over/directions hearing on 18 March 2024. That date was fixed by me to cater for the fact that it was said on behalf of the plaintiff that a limitation period within which the claim against Mr Ng must be brought would or might expire on 27 March 2024.

5.  At the hearing, I declined to deal with the Jurisdiction Summons separately in advance of potentially dealing with the OS. As a matter of case management, it seemed to me sensible and appropriate for the OS and the Jurisdiction Summons to be dealt with together, and I set the date of 12 June 2024 for the substantive hearing.

6.  In the exercise of my case management discretion, I also made further orders and directions relating to the filing of evidence.

7.  Separately, in the context of the limitation point raised, I directed that there should be an interim order pending the determination of the OS (and, if relevant, the Jurisdiction Summons), namely that leave be granted to the plaintiff to issue a protective writ on behalf of Forthwise on the Claims set out in the draft SOC exhibited to the supporting affirmation of the plaintiff filed together with the OS, on the condition that the plaintiff shall not cause that writ to be served on the proposed defendant unless with the further leave granted by the order of the Court. I explained my reasoning in a written decision [2023] HKCFI 819.

8.  At the substantive hearing, Mr Paul Shieh SC and Mr James Man appeared for the plaintiff, whilst Mr William Wong SC, Mr Lai Chun Ho and Mr Han Sheng Lim appeared for the defendants.

9.  At the end of the hearing, I reserved my decision to be handed down later. This is my Judgment.

B.  The Claims

10.  Broadly adopting Mr Shieh’s summary, the Claims are said to arise against the following background.

11.  The plaintiff is the beneficial owner of 1,115,388,000 shares in the 1^st defendant (“Convoy”), a Cayman Islands company registered as a non-Hong Kong company under Part 16 of the Ordinance. Convoy was previously listed on the Hong Kong Stock Exchange, but was delisted on 4 May 2021. Forthwise, a company incorporated in the British Virgin Islands (“BVI”), is an indirectly wholly-owned owned subsidiary of Convoy.

12.  Mr Ng was at all material times a director of Forthwise, and an executive director of Convoy since September 2015.

13.  Mr Tom Tang was and is a director of Forthwise Limited (“Borrower”), and also a director of Forthwise until his resignation on 28 January 2016.

14.  On 4 February 2016, 20 April 2016, 13 June 2016 and 12 October 2016, Mr Ng on behalf of Forthwise entered into four one-page loan agreements with the Borrower (“Loan Agreements”). By the four Loan Agreements, Forthwise agreed to extend loans of HK$25 million, HK$25 million, HK$30 million and HK$10 million respectively (a total of HK$90 million) to the Borrower. The loans were unsecured, interest-free and repayable on demand.

15.  The Loan Agreements provided only for Forthwise’s right to convert the loans into equity “on such terms and conditions to be mutually agreed”, without specifying the conversion mechanism and conversion price. Hence, it is part of the Claims that the HK$90 million in loans were advanced to the Borrower when Forthwise was not given any enforceable conversion right.

16.  On 12 October 2016 (the date of the 4^th Loan Agreement), Mr Ng on behalf of Forthwise and Mr Tang on behalf of the Borrower signed a Loan Conversion Letter, with terms that the HK$90 million total loan could be converted into 46% shares of the Borrower on demand by Forthwise. There was, however, no conversion price, nor identification of how the figure of 46% was arrived at.

17.  By Deed of Guarantee dated 10 March 2017 – namely, more than a year after the 1^st Loan Agreement, and more than four months after the 4^th Loan Agreement – Mr Tang agreed to guarantee the HK$90 million loans.

18.  Also in or around March 2017, four “long form” loan agreements (“Long Form Loan Agreements”) were signed by Forthwise and the Borrower, backdated to the respective dates of the Loan Agreements.

19.  The plaintiff’s case is that the Loan Agreements were not arm’s length commercial transactions, and were against the interests of Forthwise, because:

(1)  The terms of the loans were uncommercial, being large, unsecured (at least at the time extended), interest-free and repayable on demand.

(2)  The Loan Agreements were extremely simple and prepared on Mr Ng’s instructions, without any review by Convoy’s legal department, despite the loan size.

(3)  Though the Loan Agreements provided for a conversion right, they were silent on the conversion mechanism and conversion price, and accordingly Forthwise had no enforceable conversion rights when the loans were advanced.

(4)  The Borrower had a paid-up capital of only HK$10,000 prior to 16 March 2016, and carried on a small-scale business of hi-fi dealership. Its ability to repay the loans was doubtful.

(5)  There is no evidence of any due diligence conducted in respect of the Borrower and independent valuation of its shares.

(6)  The Business of hi-fi dealership is completely different from the business carried out by the Convoy group of companies, namely the provision of financial services.

20.  The plaintiff contends that Mr Ng could not have believed, and did not believe, that entering into the Loan Agreement was in the best interests of Forthwise. Hence, he breached his fiduciary duty to act bona fide in its best interests, alternatively breached his duty of care in the conduct of its affairs. The Claims assert that Forthwise has suffered loss and damage, namely (1) loss of use of the sum of HK$90 million from the date of advancement of the loans, and (2) any unrecovered or irrecoverable portion of the HK$90 million loans.

C.  Wider Factual Context

21.  In his submissions, Mr Wong sought to place the allegations made by the Claims in a wider factual context, as follows. Though Mr Wong referred to Forthwise Limited as “Forthwise HK”, I shall continue to refer to it as the Borrower to avoid confusion between the companies with similar names.

22.  Mr Ng has led the Convoy Group since about September 2015, especially in its development of B2B and fintech investments and various overseas merger activities, including some which have been extremely financially successful.

23.  Mr Tang is the brother of Mr Henry Tang, former Chief Secretary of Hong Kong, and the son of a textile magnate. Mr Tang is an extremely wealthy man. In late 2015, Mr Tang approached Mr Ng to discuss his business in the Borrower, a wholesaler and retailer of ultra-high-end audio equipment in Hong Kong, Macau and the Mainland.

24.  In about November 2015, Mr Ng on behalf of Convoy and Mr Tang reached agreement on the principal terms of an investment into the Borrower:

(1)  Convoy would invest an aggregate amount of HK$90 million into the Borrower.

(2)  The funds would be injected into the Borrower by way of loans repayable on demand.

(3)  The loans would be convertible into 46% new shares of the Borrower at Convoy’s option.

(4)  The loans would be advanced to the Borrower in several tranches throughout 2016.

(5)  Mr Tang would personally guarantee the loans.

25.  The Borrower was incorporated to implement the intended transaction, and due diligence was conducted on the Borrower. There was an investment memo dated 15 January 2016, prepared for the directors of Convoy to consider the recommended transaction.

26.  The four cheques providing the respective tranches of the loans were approved and signed by then executive directors and the CFO, not Mr Ng.

27.  After all tranches of the loans were advanced, Mr Ng and Mr Tang signed the Loan Conversion Letter, stating that the total loan sum of HK$90 million would be convertible into 46% equity on demand on or before 31 December 2018.

28.  On 18 October 2016, Convoy made an announcement on the Hong Kong Stock Exchange in relation to its 10 largest investments as of 30 June 2016, approved by the entire Board of Convoy (“Announcement”). The announcement described the Forthwise transaction, including that (1) the nature of the transaction was an investment in convertible notes, (2) categorised as available-for-sale investments, (3) with the market value of the investment at the same value as the amount of investment (up to that date, HK$80 million), and (4) that the aggregate amount of the investment constituted 1.62% of the net assets of the Convoy Group.

29.  In about March 2017, the Long Form Loan Agreements in Convoy’s standard terms were prepared to satisfy audit requirements. On 10 March 2017, Mr Tang executed the Deed of Guarantee in favour of Forthwise.

30.  Since then, the Convoy Group has been embroiled in multiple sets of legal proceedings, including HCA 2922/2017 (“Main Action”), in which Convoy originally sought a declaration that the shares held by the plaintiff were void or had already been voided.

31.  On 10 May 2019, Forthwise notified the Borrower that it would not be exercising its conversion rights, and that the parties should discuss arrangements for repayment of the loans. Since that time, the Convoy Group has been in discussion with Mr Tang, during which (1) on 3 December 2019, Mr Tang’s solicitors wrote accepting his liability for the loans under the Forthwise transaction and offering to pay interest on them, (2) on 6 March 2020, part payment of HK$9,800,000 was made, (3) on 25 January 2021, the part payment was offered instead to be deemed to be a one-off payment for past interest at 5% per annum from 1 January 2021, and (4) on 1 February 2021, Forthwise accepted the repayment terms in principle and sent a revised payment agreement to the Borrower. Though there has been no reply, the cause of action against Forthwise and Mr Tang has remained valid.

32.  On 7 December 2023, the ICAC notified Mr Ng that its investigations into the Forthwise transaction were concluded and that his name was cleared.

33.  On 6 February 2024, the plaintiff issued the OS in these proceedings, with the draft SOC based on the same allegations raised in Madam Wang’s action (see below).

34.  On 2 May 2024, Convoy’s Board – though to the exclusion of Mr Ng – passed a resolution stating that based on the circumstances known to them, Mr Ng could rely on the indemnity provisions in the Articles of Convoy (“Indemnity”), and that Forthwise should prioritise recovering the loan from the Borrower and Mr Tang. For present purposes, Mr Wong has sought to emphasise that the Resolution:

(1)  recorded that the Board had continuously and independently monitored the Forthwise transaction, both before and after Madam Wang’s action (as to which, see below);

(2)  was passed by directors of Convoy whose independence the plaintiff has no basis to question – where the plaintiff has not alleged that any of them lack independence or are otherwise connected to Mr Ng;

(3)  was passed after the directors had the benefit of the documents filed in these proceedings;

(4)  was passed after having regard to a range of commercial matters, including that:

(a)  the Forthwise transactions have been known to Convoy and the public since 2016;

(b)  Madam Wang’s action had been struck out;

(c)  no other director had requested the commencement of legal proceedings against Mr Ng on behalf of Forthwise, despite spending considerable management time and resources considering the matter;

(d)  litigation against Mr Ng would be bound to be lengthy, expensive and possibly futile, where he could rely on the Indemnity and may have a limitation defence;

(e)  repayment can be sought from Mr Tang instead, where he has admitted liability and made part payment and whose net worth likely much exceeds the sums payable;

(f)  the Convoy Group relies heavily on Mr Ng’s leadership, and any legal proceedings against him may jeopardise various of its business interests.

D.  The Issues

35.  In his written and oral submissions, Mr Shieh identified seven areas of dispute to be addressed, being:

(1)  Jurisdiction: relating to whether Forthwise has ever established a place of business in Hong Kong at any point of time.

(2)  Locus of the plaintiff: whether it is necessary for him to be a registered member of Convoy.

(3)  Locus of the plaintiff: whether leave is required from the BVI Court.

(4)  Serious issue to be tried.

(5)  Time bar.

(6)  Circuity of action.

(7)  Interests of Convoy/Forthwise.

36.  Similar issues were identified by Mr Wong. But, to this list, Mr Wong added the issue of whether the whole application is an abuse of process, in particular in light of the previous proceedings brought by a Madam Wang, which were struck out by this Court, and as upheld by the Court of Appeal. It is convenient to address this point first – not least, where Mr Wong submitted that upon proper analysis of those decisions, that is or should be the end of the matter as regards the present proceedings.

E.  Previous Proceedings

37.  On 27 March 2018, details about the Forthwise transaction were reported on in the press. The plaintiff claims to have discovered Mr Ng’s alleged wrongdoing after publication of the news articles – hence that is the date giving rise to the limitation concern identified above.

38.  On 27 June 2018, Madam Wang commenced a common law derivative action against Convoy, Forthwise and Mr Ng in HCA 1479/2018, on the basis that Mr Ng had fraudulently or dishonestly procured the Forthwise transaction.

39.  By my Judgment dated 17 December 2019 [2019] HKCFI 3074, I struck out Madam Wang’s action (together with a separate common law derivative action commenced by Madam Wang in HCA 1619/2018). Amongst other things, I held that:

(1)  the directors of Convoy had at all material times exercised independent judgment as regards its affairs, including with respect to the complaints against Mr Ng concerning the Forthwise transaction;

(2)  the substantial majority of directors had no incentive for self-protection as their appointments did not overlap with the Forthwise transaction;

(3)  on the evidence, there was really no basis for suggesting fraud, dishonesty or personal benefit on the part of Mr Ng, nor any proper basis to suggest that this was a self-dealing transaction;

(4)  Madam Wang’s allegations could be described as a fog of conjecture, speculation and suspicion;

(5)  in the circumstances, Madam Wang had not established on evidence a prima facie case either that (a) Mr Ng was a wrongdoer in control of Convoy, and hence Forthwise, or that (b) there had been a fraud practised by Mr Ng against Convoy, and hence Forthwise.

40.  On 28 January 2021, the Court of Appeal dismissed Madam Wang’s appeal – see [2021] 1 HKLRD 997 – holding amongst other things that:

(1)  for Madam Wang to succeed on her appeal, she would need to establish that I had erred in both of my holdings regarding wrongdoer in control and fraud on the minority;

(2)  Madam Wang failed to challenge the defendants’ evidence that Convoy’s board had been reconstituted for legitimate purposes and its directors were not connected to Mr Ng;

(3)  there was no plea that the impugned transactions were self-dealing transactions, and no real evidence of substance to rebut Mr Ng’s denial of receipt of any personal benefit;

(4)  the allegations that the transactions were highly suspicious and commercially unjustified would at most give rise to a prima facie case for negligence, but not deliberate and dishonest breach of duty.

41.  Mr Wong pointed to the concurrent findings, and submitted that the current proceedings essentially comprise someone else making the same attack hoping for a different conclusion. That, he said, is a collateral attack and an abuse.

42.  But Mr Shieh submitted that there is no abusive collateral attack made by these proceedings. He stated that a subsequent action challenging the findings and conclusions of a prior civil action would only be abusive if (1) it would be manifestly unfair to a party to the later proceedings that the same issue should be re-litigated, or (2) permitting such re-litigation would bring the administration of justice into disrepute. In this case, he said, there is no basis to suggest that Madam Wang is the plaintiff’s ‘privy’, and her action was a common law derivative action struck out on the basis that the locus requirement of “wrongdoer in control” was not satisfied, and the views expressed on the “fraud on the minority” element were therefore and expressly made obiter. Hence, there would be no manifest unfairness or bringing of the administration of justice into disrepute for the plaintiff to argue that the Claims give rise to a serious question to be tried, the relevant threshold for obtaining leave to commence a SDA.

43.  In any event, Mr Shieh submitted, the evidence now before this Court is different from that adduced in Madam Wang’s action, and there is nothing abusive about the possibility of a court coming to a different conclusion on different evidence.

44.  Tempting though it sometimes is to pursue an offered ‘shortcut’, as here advanced by Mr Wong, I am persuaded that the previous claim brought by Madam Wang which was struck out does not give rise to a straightforward or short answer to the present proceedings. There are differences between a common law derivative action and an SDA, and the evidence available at the time of striking out Madam Wang’s action may not be coterminous with the evidence now available (though any new or extra evidence may or may not alter the analysis). It is, therefore, necessary to consider the various other points of dispute.

F.  Place of Business

45.  For the purposes of Part 14 of the Ordinance, the definition of “company” includes a “non-Hong Kong company”. The relevant jurisdiction issue raised by these proceedings therefore turns on whether Forthwise is such a non-Hong Kong company, meaning a company incorporated outside Hong Kong which establishes a “place of business” in Hong Kong after the commencement date of the Ordinance. In this context, the burden of proof is upon the plaintiff.

46.  As to when a company has established a place of business, reference can be made to cases such as Kam Leung Sui Kwan v Kam Kwan Lai (2015) 18 HKCFAR 501; Re Yung Kee Holdings Ltd [2014] 2 HKLRD 313; Re Oriel Ltd (in liq) [1986] 1 WLR 180; Re Gen2 Partners Inc [2012] 4 HKLRD 511; and Singamas Management Services v Axis Intermodel (UK) Ltd [2011] 5 HKLRD 145. From those authorities, I think the following propositions are well-settled:

(1)  A failure to register, though in breach of the requirements of the Ordinance, would not deprive the company of its status as a non-Hong Kong company.

(2)  The requirement is only for the company to “have established a place of business” in Hong Kong, and there is no requirement for the continued existence of such a place of business, not least at the time when sections 732 and 733 of the Ordinance are invoked.

(3)  A broad common sense approach should be adopted to the interpretation of “place of business”.

(4)  The “place of business” need not be owned or rented by the company.

(5)  But it connotes a place where or from which the company either carries on or possibly intends to carry on business.

(6)  The word “establish” indicates that some degree of regularity and permanence of location is required, and points to the company having what is sometimes referred to as a ‘local habitation’ of its own.

(7)  But there is no reason simply to assume that only one transaction means there is no “place of business”.

(8)  Depending on all the circumstances, the holding out of an address as a company’s place of business may be sufficient to establish that it is a “place of business”.

(9)  “Business” is not confined to commercial transactions or transactions creating legal obligations, but it does not cover purely internal organisational changes in the governance of the company itself.

(10)  The fact that a company’s directors discuss its affairs and hold their board meetings in a particular place is not sufficient by itself to make that place the company’s place of business.

(11)  The mere presence of a company’s directors at a location, followed by the company’s entry into a transaction elsewhere, is not enough for a finding that that location is a place of business.

(12)  There is no requirement in fact or law requiring a company which does not carry on business at all to have a place of business, and there would be nothing strange in finding that such a company has not established one anywhere.

47.  Mr Shieh submitted that, in this case, there is no issue about permanence or habituality through any scattered places for different aspects of business. Here, he said, the issue of permanence or habituality relates to the one course of business conducted by Forthwise, at its established “place of business” in Hong Kong at 39@CONVOY, 169 Electric Road, North Point, Hong Kong (“Address”).

48.  First, Mr Shieh pointed to the fact that the address of Forthwise was stated to be the Address (also the address of Convoy at the material time) in both of the Loan Conversion Letter and the Drawdown Notice and Acknowledgement of Receipt attached to the Long Form Loan Agreements. Secondly, Forthwise’s sole director was Mr Ng who worked at the Address, and who negotiated and signed the Loan Agreements, and who is said to have prepared the Investment Memo about the purpose of the ‘investment’ into the Borrower, which was then “passed” to Christie Chan who approached the then directors of Convoy (all residents of Hong Kong). The Valuation Report of the Convertible Loans was also addressed to the Board of Forthwise (i.e. Mr Ng) at the Address. Third, it was declared by both Forthwise and the Borrower in clause 29 of the Long Form Loan Agreements that the place of negotiation and completion of them was at the Address. On the basis that they were prepared and backdated to satisfy audit requirements, that must have reflected the state of affairs when the Loan Agreements were first entered into. It is also contrary to the evidence given by Mr Ng on affirmation that the negotiation and signing of documents never took place at the Address. Fourth, Convoy’s 2016 Annual Report stated that Forthwise’s “place of incorporation/registration and business” was “BVI/Hong Kong”, which Mr Shieh submitted amounted to an admission that Forthwise had a place of business in Hong Kong – and the suggested subsequent “rectification” in the 2017 to 2019 Annual Reports published only in February 2021 was simply self-serving. Lastly, the records and documents of Forthwise have been kept at the Address.

49.  As to that last point, Mr Wong pointed to the written resolutions of the directors of Forthwise identifying that the Address was the address to be used for all correspondence of Forthwise, and that the books and records should be kept at the correspondence address. This is in the context, Mr Wong submitted, that as its name would suggest Forthwise was an offshore special-purpose vehicle deliberately incorporated as such for the sole purpose of entering into the Forthwise transaction by the Convoy Group, so that there was no business for it to transact regularly from any given location. Its direct immediate shareholder was another BVI company within the Convoy Group, also without a place of business in Hong Kong. Mr Wong also pointed to the facts that there was never an office or space within the Address for it; it never had any employee or bank account in Hong Kong; the initial Loan Agreements were prepared by the Convoy execution team, and all subsequent payments were carried out by either Convoy or CCL on its behalf; and it has only one asset being the receivables arising from the Forthwise transaction.

50.  As to the reference to the Address in the various documents identified by Mr Shieh, Mr Wong submitted that shows no establishment of a “place of business” in Hong Kong. Having a correspondence address at the Address is not surprising, and the mere fact that a company has a correspondence address in Hong Kong does not mean establishment of a “place of business”. The Valuation Report was obviously sent to Forthwise at its correspondence address. As to the place of negotiations and so forth, Mr Wong submitted that the negotiations were carried out on behalf of the Convoy Group, not Forthwise, commencing even before Forthwise was even incorporated as the special-purpose vehicle; the Investment Memo was prepared for the consideration of the Convoy directors, and prepared by Mr Ng on behalf of Convoy; the subsequent monitoring of the Forthwise transaction was also done by the Convoy Group. In any event, the negotiations led at most to a ‘one-off’ transaction, which does not establish business conducted habitually or with the necessary degree of regularity. The defendants have clarified on oath that the 2016 Annual Report was an error subsequently corrected. Further, the location of Forthwise’s books and records was a matter of its internal affairs.

51.  It seems to me the arguments on this point relating to establishment of a place of business are relatively finely balanced. However, on that balance, I am ultimately persuaded that Forthwise had established a place of business in Hong Kong within the meaning of the Ordinance. Though its conduct of business was limited to the Forthwise transaction, there is no particular requirement that there should be several items of business conducted before a “place of business” can be established. Further, a number of the features identified above point to a continuing series of steps relating to the business of the Forthwise transaction. Most tellingly, the Long Form Loan Agreements expressly state that the business reflected by those agreements (and therefore by the prior Loan Agreements) was negotiated and completed at the Address in Hong Kong. I have not lost sight of the fact that Mr Ng deposed to the fact that the negotiations of the Forthwise transactions, and the signing of the documents, took place at various locations, mainly at the private membership clubs of which either Mr Tang or himself was a member, although he could not fully recollect the locations of each meeting – and that Mr Ng said he could confirm that negotiations had never taken place at the Address. Nevertheless, I would have thought that the content of the Long Form Loan Agreements signed by both Mr Ng and Mr Tang rather more contemporaneously is likely to be more reliable, not least because those forms were entered into for audit purposes (and were presumably intended to identify truthful matters for the purposes of the audit). Further, even if some of the negotiations might be regarded as having been conducted by Mr Ng on behalf of the Convoy Group, it must also have been conducted by him on behalf of the entity which entered the legally binding arrangements for the rights and obligations reflective of that business. It is the negotiations which brought the conduct of the eventual business into being.

52.  There has been valid service of the OS on Forthwise at the established place of business in Hong Kong, even if the Address is no longer a place of business: see section 803(5)(b) of the Ordinance. Nor does this form of service out of the jurisdiction require leave under Order 11 of the Rules of the High Court.

53.  Therefore, I conclude that the central question raised by the Jurisdiction Summons should be decided against Forthwise, and that summons stands to be dismissed.

G.  Locus: Registered Member

54.  Mr Shieh submitted that, as a member of Convoy, which is an “associated company” of Forthwise, the plaintiff is entitled to make the current application under sections 732 and 733 of the Ordinance.

55.  “Member” is defined in section 2 of the Ordinance to mean a founder member of the company, or a person who agrees to become a member of the company and whose name is entered, as a member, in the company’s register of members. Relying on Re Luen Fat Paints Co Ltd (unreported, HCMP 1791/2009, 11 February 2010) at §§38-39, Mr Shieh submitted that a person who is not yet a registered member of a company is still entitled to make such an application under sections 732 and 733, so long as he is able to satisfy the Court subsequently that he has become a registered member of the company by the time when leave is granted.

56.  Here, the plaintiff is the beneficial owner of 1,155,388,000 shares in Convoy. Whilst Convoy was listed, the plaintiff held the shares through a securities company and CCASS, and after delisting the plaintiff has repeatedly requested Convoy to register him as its member, but Convoy has refused without giving reasons.

57.  Originally, Convoy disputed the plaintiff’s title to the shares in the Main Action, but much later discontinued the Main Action as against him. Therefore, Mr Shieh submitted, in light of having discontinued the Main Action against the plaintiff after almost 6 years, Convoy has no basis to dispute the plaintiff’s title to the relevant shares, and it ought to have registered the plaintiff as a member.

58.  Because it did not, on 5 June 2024 the plaintiff commenced FSD 172 of 2024 in the Cayman Islands (“Cayman Proceedings”) for rectification of Convoy’s register of members. The delay in commencing those proceedings, it is said, must be viewed in the context of the delay in prosecuting the Main Action, which ultimately was discontinued against the plaintiff only in November 2023.

59.  Mr Shieh recognised from the evidence filed in the present proceedings that Convoy will run a defence similar to its former claim in the Main Action, namely that the plaintiff’s shares were wrongfully allotted and void, and (as he put it) will “resurrect” in the Cayman Court all the allegations made in Hong Kong. Hence, Mr Shieh submitted, the proper course would be for this Court to stay the OS or adjourn its decision pending the resolution of the Cayman Proceedings – in exercise of the Court’s wide case management powers. As he put it, if the Court is satisfied that the conditions for granting leave to commence the statutory derivative action are otherwise fulfilled but for the plaintiff’s locus, it would be fair and just to grant the stay or adjournment, particularly because if the OS is now dismissed the plaintiff might not be able to recommence the SDA due to limitation issues, even if he is successful in the Cayman Proceedings. On the other hand, Mr Shieh suggested, no conceivable prejudice would be caused to the defendant by the stay or adjournment.

60.  For his part, Mr Wong submitted that the question of whether the plaintiff has the necessary standing as a member of the company or an associated company must be determined for the application for leave to be granted. At this stage, it is undisputed that the plaintiff is not a registered member of Convoy, and therefore he simply has no standing. Mr Wong said that the plaintiff ought to have stated upfront that he knew that he did not have the relevant standing (at least not yet) and it is noteworthy that the plaintiff only began the Cayman Proceedings on 5 June 2024, four months after issuing the OS, after seeking and obtaining leave to issue the protective writ, and even then just a few days before the hearing of the OS on 12 June 2024.

61.  Mr Wong further submitted that it is well-established that the ability to bring a derivative action in Hong Kong is at least partly governed by the law of the place of incorporation. He referred to Wong Ming Bun v Wang Min Fan [2014] 1 HKLRD 1108 at §§32-42, where Ng J noted that there is binding Court of Appeal authority which makes the legal position clear: whether a shareholder can commence a derivative action in the name and on behalf of the company is a matter of substantive law, and is governed by the law of the place of incorporation. Hence, Ng J reached the conclusion that the ability to bring a derivative action in Hong Kong is a matter for the law of the place of incorporation of the company, though it is also necessary to comply with Hong Kong procedural requirements for the bringing of such actions.

62.  As it happens, that case also concerned a company incorporated in the BVI, so that the question was governed by BVI law. It was noted that, under that law, a shareholder can only commence a derivative action with leave of the BVI court. As no leave had been obtained, the action as then presently constituted was held to be defective. It was also noted that there was no suggestion or authority that retrospective leave could be obtained from the BVI court.

63.  Therefore, Mr Wong submitted, it is for the plaintiff to satisfy this Court that under BVI law he had standing to act on behalf of Forthwise, but the plaintiff has failed to discharge that burden because (1) the default position under BVI law is that a plaintiff must be a registered shareholder to have standing to pursue a derivative claim, and (2) a person with only a beneficial interest in shares does not have standing because he is not himself a shareholder.

64.  Mr Wong also pointed to the decision of Harris J in Hongkong Zhongxing Group Co Ltd v Grand Field Group Holdings Ltd (unreported, HCMP 3278/2013, 20 November 2014) at §6, which held that a person wishing to bring an SDA must first demonstrate he has done what is required in the place of incorporation before commencing a derivative action, and then show compliance with the requirements of the Ordinance (though it was also recognised that if the person has already obtained in the place of incorporation a similar approval to that to be found in sections 732 and 733, in practice an application before the Hong Kong Court is likely to be uncontroversial).

65.  What is required as a matter of BVI law, the place of incorporation of Forthwise, can be addressed in the next section of this Judgment. However, I am in any event persuaded that it is clear that the plaintiff does not have standing as a registered member of Convoy, and it is not appropriate to grant a stay or adjournment. I am in broad agreement with Mr Wong’s submissions in this regard, and in particular that:

(1)  the plaintiff was well aware of his lack of standing when he commenced these proceedings, but failed to address that directly until shortly before the hearing;

(2)  even then, the plaintiff failed to file evidence about commencing proceedings before the Cayman Court, dealing only with the matter originally through his Counsel’s skeleton argument, without explanation as to why the application was not taken out sooner;

(3)  the plaintiff’s claimed entitlement to be registered as a member of Convoy is strongly disputed, and there is no bar to Convoy maintaining that the plaintiff’s shares are invalid, notwithstanding discontinuance of the Main Action against him;

(4)  the invitation to the Court to grant a delay through a stay or adjournment either indefinitely, or at least for an unknown period of time, in effect seeks to extend the limitation period applicable indefinitely, which is an abuse which should not be condoned by the Court.

66.  I also take into account the fact (which I have balanced against the delays in the Main Action) that the plaintiff has waited to the very end of what he says is the limitation period for bringing the SDA – hence his seeking leave to issue the protective writ pending the argument on this OS – without even taking proactive and timely steps to resolve the question of whether he is entitled to be registered as a member of Convoy.

67.  In other words, in the exercise of the case management discretion which Mr Shieh has invited me to exercise, I would formally decline the invitation to grant either a stay of the OS or an adjournment of my decision on the OS pending future steps which may or may not be taken elsewhere at a later time, and the result of which is by no means a foregone conclusion.

68.  On its own, this point is enough to defeat the OS. Nevertheless, I will continue to address the other issues of dispute.

H.  Locus: Leave from BVI Court

69.  Mr Wong submitted that the plaintiff lacks standing because he has failed to obtain leave from the BVI Court. He submitted that the “better view” of BVI law is that leave is required to bring a multiple derivative action. He referred to the expert opinion evidence filed by Mr Tom Smith KC, opining that:

(1)  the plaintiff in the present proceedings is seeking permission to commence a multiple derivative claim (which can be distinguished from a double derivative claim);

(2)  section 184C of the BVI Business Companies Act 2004 (“BCA”) does not extend to multiple derivative claims;

(3)  hence it is necessary to look at the common law, and (despite section 184C) the jurisdiction to commence multiple derivative claims at common law has been preserved in the BVI;

(4)  in English law, the position is that although multiple derivative actions arise from common law, leave is required to continue them by applying CPR rule 19.14 (which applies to single derivative actions only) by analogy: see Boston Trust Co Ltd v Szerelmey Ltd [2021] Bus LR 1557 at §20;

(5)  in the absence of a BVI case deciding the point, the BVI Court would likely follow English law on the issue;

(6)  thus, the better view is that the BVI court would also impose a requirement of leave to bring a multiple derivative action by applying the leave provision in section 184C of the BCA by way of analogy.

70.  I note that §20 of the Boston Trust case states as follows:

Nonetheless, it is the settled practice of the court to require permission to be obtained for double and multiple derivative claims. In my judgment, the court is entitled and right to impose this requirement, and to apply by analogy the practice in CPR r 19.9. As the underlying claims are necessarily vested in the company, a member of its holding company has no right to bring a derivative claim, save as permitted by statute or the common law. In the latter case, just as the courts have laid down the circumstances in which derivative claims may be brought, so they may develop the procedure to which they are subject.

71.  Mr Smith also pointed out that in order to have sufficient interest or standing to commence a multiple derivative claim, the plaintiff must be a registered shareholder of the relevant parent company. That is a requirement which the plaintiff in this application cannot satisfy in any event (see above).

72.  Mr Shieh submitted that this is an application for leave to start an SDA in the Hong Kong forum, which applies the Ordinance as part of the lex fori, so that the question is whether – in addition to the requirements under the Ordinance – Hong Kong conflict of law rules require something additional, namely leave from the place of incorporation. He submitted that Mr Smith’s opinion cannot be about Hong Kong law, and is only triggered at all if as a matter of Hong Kong law it is necessary to look at the BVI law. The essence of his submission was that it may be correct that the BVI statutory mechanism does not apply to multiple derivative claims, and that there may be a requirement to obtain common law that you have the BVI. But it cannot be shown there is a requirement to do so under Hong Kong law. He submitted that the Wong Ming Bun case was concerned with a common law derivative action, where no leave was sought under a Hong Kong or BVI statute, so it cannot assist the defendants.

73.  Mr Shieh also referred in particular to the part of Mr Smith’s opinion (§78) which stated that there is no requirement under BVI law for a plaintiff to seek the permission of the BVI court before commencing a multiple derivative action in a foreign jurisdiction in relation to a BVI-incorporated company, nor is there any procedural mechanism which would allow that. But that overlooks a later part of the opinion (§82), which points out that it would be a matter for the Hong Kong Court to determine the issue of standing applying BVI law, in the event that BVI law is applicable to this matter under Hong Kong rules of private international law – which it is.

74.  As Harris J held obiter in the Hongkong Zhongxing case, the first question is whether or not a shareholder has done what is required in the place of incorporation before commencing a derivative action. The second question is whether Hong Kong law requires him to do anything more. If there is nothing in the law of the place of incorporation requiring something more before commencing proceedings, it does not follow that a Hong Kong SDA is not available. But, the BVI does not have a statutory leave mechanism, so it is difficult to see how helpful this finding is for present purposes.

75.  Nevertheless, though it is also not strictly necessary for me to decide the point, I tend to the view that is supported by the opinion of Mr Smith. Were it necessary to do so, I would hold that the plaintiff has failed to establish that he has the relevant standing in the absence of obtaining any leave from the BVI Court (which would, it seems, not be possible until at a minimum the plaintiff has established that he has become a registered shareholder of the holding company).

I.  Merits: Serious issue to be tried

76.  I have set out above the provisions of sections 732 and 733 of the Ordinance. It can also usefully be pointed out that “misconduct” is defined in section 731 of the Ordinance as meaning “fraud, negligence, breach of duty, or default in compliance with any Ordinance or rule of law”.

77.  As to the merits, Mr Shieh broadly submitted that:

(1)  the terms of the loans were clearly uncommercial, being of significant size, unsecured until the Guarantee given more than a year after 1^st Loan;

(2)  it is not an answer to the Claims to say that the loans were in truth a ‘proprietary investment’ into the Borrower, when no enforceable conversion right was given;

(3)  there was a significant period when substantial monies had been paid out with no security nor conversion rights;

(4)  this itself was a serious breach of duty on the part of Mr Ng, who could not have believed entering into the arrangements was in the interests of Forthwise;

(5)  no independent valuation was obtained before the monies were advanced;

(6)  the purported Investment Memo is of real questionable authenticity, and according to Mr Ng’s explanation was “conveniently” (Mr Shieh’s word) only “passed” to Christie Chan, so that communications were only “oral” – to avoid a disclosable paper trail;

(7)  the plaintiff has asked for electronic documents, but the request has been refused;

(8)  Mr Ng’s explanation is expressly challenged;

(9)  even if genuine, the Investment Memo showed losses between 2013 and 2015;

(10)  all these matters clearly show a serious issue to be tried.

78.  In response, Mr Wong submitted:

(1)  any allegation that a transaction was not entered into in good faith, but as a result of a deliberate and dishonest breach of duty, is a very serious allegation;

(2)  when a Court is invited to infer serious misconduct, the question needs to be approached with care, in a disciplined manner, where such inferences are to be drawn only when they are compelling;

(3)  a conclusion of fraud or serious misconduct should not be reached by conjecture or only on a mere balance of probabilities;

(4)  the more serious the allegation, the more strong and cogent needs to be the evidence before the allegation can be found established;

(5)  the Court will not normally substitute its own view as to the commercial merits of a transaction;

(6)  anyway, the allegations made fall far short of equitable fraud;

(7)  there is no allegation of personal benefit derived by Mr Ng;

(8)  nor is there any allegation of a special arrangement between Mr Ng and Mr Tang;

(9)  it is unreal to suggest Mr Tang might be thought not ‘good for the money’;

(10)  Mr Ng did not circumvent the usual approval processes, and the transaction was in fact conducted openly;

(11)  there was the Investment Memo and three out of the four other executive directors, as well as Convoy’s then CFO, approved different stage payments;

(12)  the entire Board approved the Announcement made in October 2016, making express reference to the Forthwise transaction;

(13)  successive Boards – which have no interest in shielding Mr Ng from claims – have assessed the validity of the Forthwise transaction and have not taken any action against Mr Ng;

(14)  no assistance can be drawn from the defendants’ refusal to satisfy the plaintiff’s requests for disclosure.

79.  Having weighed the matters, I agree with Mr Wong. I accept that establishing a serious to be tried is not a particularly high hurdle to overcome. However, in the particular circumstances of this case, I am not persuaded that the hurdle is overcome. The allegations are serious, but the available materials actually fall short of what is required. I do not think that the suggested new evidence, as was not available for the consideration of the Court when dealing with Madam Wang’s intended derivative action, makes any substantial difference to the analysis of the merits.

J.  Time Bar

80.  Mr Wong submitted that the Claims are in any event time-barred. Other than an alleged fraudulent breach of fiduciary duty, the plaintiff also wishes to assert a claim on behalf of Forthwise for Mr Ng’s failure to exercise reasonable care, namely a claim in negligence. But, Mr Wong submitted, it is well-established that such claims are subject to the usual six-year limitation period – whether by virtue of section 4(1)(a) of the Limitation Ordinance Cap 347 (“LO”) or by analogy under section 4(7).

81.  Mr Wong submitted that, as the Forthwise transaction took place more than six years ago, any claim relating to it must be time-barred, unless Forthwise can bring itself within section 26 of the LO, so as to have postponed the limitation period. However, section 26 will not avail Forthwise, because it cannot prove that it could not have discovered the fraud with reasonable diligence. Even if, which is denied, there had been any deliberate concealment by Mr Ng, Convoy and Forthwise knew or could have discovered the relevant matters with reasonable diligence from at least 18 October 2016, when the Announcement was made – which, amongst other things, made clear that the Forthwise transaction had been approved by the entire Board of Convoy. That also followed the Investment Memo circulated in January 2016 and the involvement of the CFO and three out of the four other executive directors who variously approved advances of loan monies between February and October 2016.

82.  Mr Wong also submitted that the plaintiff’s suggestion that he is the proper “plaintiff” for the purposes of section 26(1)(b) of the LO is misplaced and incorrect as a matter of law. This is because, in a derivative action, the cause of action is vested in the company and proceedings are brought in the name of the company, and time would in any event begin to run when the truth was or could have been discovered by the same persons against whom the concealment was made. Mr Wong also submitted that there was absurdity in the plaintiff’s reading of section 26, as it would permit a person, who commits an alleged wrong which is known internally by the company’s directors who decide not to sue, nevertheless to be sued years later if the information is made public and a new shareholder learns of the matter. That would be contrary to the generally understood rationales for limitation periods.

83.  Mr Shieh accepted that if the Claims were in mere negligence, they would be time-barred. But he submitted that it is arguable that the Claims are not time-barred. First, no period of limitation shall apply to a fraudulent breach of trust: see section 20(1)(a) of the LO, a provision applicable to any fraudulent breach of a director’s fiduciary duties towards the company, such as the Claims asserted in this case, involving a breach triggering a question of honesty or good faith. Secondly, the limitation period should only start to run on 27 March 2018, when the plaintiff became aware of the alleged misconduct of Mr Ng following the publication of the news articles mentioned above.

84.  On Mr Shieh’s submission, the plaintiff only had to demonstrate to the threshold of a serious issue to be tried that Mr Ng deliberately committed a breach of duty in circumstances in which it was unlikely to be discovered for some time. In my view, even if the plaintiff is the right person whose knowledge is relevant (and from whom it is said there was concealment), the plaintiff cannot meet that threshold, most obviously in light of the public Announcement made in 2016 – public knowledge available to the plaintiff in 2016 and/or slightly later when he became a shareholder in 2017.

K.  Circuity of Action

85.  This point turns on the indemnification clause handing the Articles of Forthwise, i.e the Indemnity. It is to be found in Regulation 14, which is in the following terms:

14.1 Subject to the limitations hereinafter provided the Company shall indemnify against all expenses, including legal fees, and against all judgments and amounts paid in settlement and reasonably incurred in connection with the legal, administrative or investigated proceedings any person who: (a) is a was a party or is threatened to be made a party to any threatened, pending or completed proceedings, whether civil, criminal, administrative or investigated, by reason of the fact that the person is or was a director of the Company; or (b) is or was at the request of the Company serving as a director of, or in any other capacity is or was acting for, another body corporate or a partnership, joint venture, trust or other enterprise.

14.2 The indemnity in Sub-Regulation 14.1 only applies if the person acted honestly and in good faith with a view to the best interests of the Company and, in the case of criminal proceedings, the person had no reasonable cause to believe that their conduct was unlawful.

14.3 For the purposes of Sub-Regulation 14.2, a director acts in the best interests of the Company if he acts in the best interests of (a) the Company’s holding company, or (b) a Shareholder or Shareholders; in either case, in the circumstances specified in Sub-Regulation 9.3 or the Act, as the case may be.

14.4 The decision of the directors as to whether the person acted honestly and in good faith and with a view to the best interests of the Company and as to whether the person had no reasonable cause to believe that his conduct was lawful is, in the absence of fraud, sufficient for the purposes of the Articles, and less a question of law is involved.

86.  Mr Smith KC’s opinion also dealt with this point. He first identifies that Regulation 14 is a nearly word for word copy of the text of section 132 of the BCA, but the meaning and scope of that section has not been the subject of any decisions in the BVI Court. Nevertheless, it was considered in some detail by the Royal Court of Guernsey in Emerald Bay Worldwide Ltd v Barclays Wealth Directors (Guernsey) Ltd, later upheld by the Court of Appeal of Guernsey. The question in that case was whether the indemnity provisions (in very similar terms to the subject Regulation 14 Indemnity) extended to claims brought by the company against the Director. That question was determined in the affirmative. Mr Smith opined that the conclusion that section 132 of the BCA does permit a company to indemnify its directors against causes of action vested in the company itself is correct, and he says that the analysis is difficult to criticise.

87.  As to the juridical basis upon which Mr Ng might invoke the indemnification in Regulation 14, Mr Smith opined (with his reference to authority omitted) that:

(1)  The articles of a company constitute a contract between the members of the company amongst themselves and between each of them and the company, but they do not (without more) constitute a contract between the company and its directors.

(2)  Insofar as the articles are applicable to the relationship between a company and its officers, they may be expressly or impliedly incorporated in the contract between the company and its director.

(3)  In this regard, the articles will be incorporated if the director accepts appointment “on the footing of the Articles”, and “comparatively little” may be needed to incorporate an indemnity into the contract between the company and the director.

(4)  However, in the absence of any evidence as to the director’s knowledge of an article, there will be a real issue as to whether it has been incorporated into the contract between the company and the director.

(5)  Accordingly, incorporation is necessary – and, whilst implied incorporation is relatively easy to satisfy, it is a fact-sensitive question which may require evidence of prior knowledge of the relevant article by the director.

88.  Mr Smith also noted the Hong Kong case of Yifung Developments Ltd v Liu Keung Ricky [2019] HKCFI 388, where DHCJ Field dismissed an application to strike out the claim on the basis of an indemnity provision in respect of a BVI company with similar wording to Regulation 14. He did so on the state of (a) the factual evidence and/or the pleading and (b) the expert evidence, in relation to which he held that the plaintiff had a real prospect of success of arguing that the Emerald case was wrongly decided. Mr Smith stated that the Yifung decision did not alter his opinion that, on balance, the decision in the Emerald case was correct.

89.  I note that the expert evidence filed for the Yifung case was from Mr Robert Levy QC (now KC) and Mr Philip Jones QC (now KC). As DHCJ Field also noted, those were the two experts who gave expert evidence in the Emerald case, and Mr Jones unsurprisingly gave evidence in the Yifung case that the Emerald case was wrongly decided. This is where the Deputy Judge considered there had been advanced as an arguable case that has a real prospect of success that under BVI law, if the regulation giving the indemnity is enforceable as a contractual entitlement, it applies only where directors or former directors are sued by third parties other than the company. This does seem to me also to be an arguable point.

90.  But, as was identified by Mr Smith, the main determinative aspect of the Deputy Judge’s decision was that the evidence filed as to the state of the directors’ knowledge of the indemnity regulation when they accepted appointment as directors fell far short of rendering unarguable the contention that they had failed to establish a contractual right to enforce that indemnity. Hence, it followed that there must be a hearing at which the company would have an opportunity of challenging that evidence in cross-examination with the benefit of discovery of all relevant documents.

91.  Mr Shieh relied on the Yifung case, and submitted that the evidence advanced by Mr Ng in his affirmation in this case was significantly weaker than the factual evidence submitted by the directors in the Yifung case. All that Mr Ng said was that he was appointed as a director of Forthwise on 1 December 2015, and prior to his appointment he “was acquainted with its corporate structure such as its domicile, its shareholding structure and articles”. In my view, I agree that that evidence is at least insufficient to render the opposition to the claimed indemnity unarguable.

92.  But Mr Wong preferred to focus on the subsequent resolution of the directors of Convoy to indemnify Mr Ng. He stated that the Board could provide the indemnity, even without the Regulation 14 Indemnity provision, and the resolution was made for commercial reasons, including in view of Mr Ng’s huge benefit to the Convoy Group. If the matter were an entirely commercial decision, Mr Wong submitted that the Court should not intervene.

93.  I acknowledge that point, but it seems to me to go more to the discretionary exercise, rather than to the circuity argument itself. On the materials I have canvassed above, I would not have refused leave for the SDA on the circuity ground alone.

L.  Interests of Convoy/Forthwise

94.  Mr Shieh submitted that, whilst the point is a discretionary one for the Court to decide, the resolution made by the directors (upon which Mr Ng has placed considerable reliance) should have little weight. Mr Shieh posed the question as to why, if the matters were so straightforward and the company was serious about recovery, no steps to make recovery had been taken before – not even by issuing a demand. As he put it, there is no reason why a straightforward claim on an admitted debt should be put on the backburner. Hence, it is in the interests of Forthwise that leave to commence the SDA be granted.

95.  For his part, Mr Wong submitted that the entire matter relates to a stale complaint on facts made public as long ago as in 2016. The matter has given rise to various considerations, by the Board, by the CFI and by the Court of Appeal, none of whom can be said to have been improperly influenced in any way by Mr Ng. Nevertheless, a different course has been adopted by Convoy/Forthwise, where there is no limitation problem in relation to Mr Tang, who can properly be regarded as being ‘good for the money’. It being a commercial matter as to how the company chooses to deploy its resources, there is no interest of the company demanding the Court to intervene by the grant of leave sought by the plaintiff to commence an SDA.

96.  I agree. In the overall circumstances of this case, even if there is a serious issue to be tried (although I have held otherwise), I do not think this is a case in which it is either necessary or appropriate for the Court to grant the plaintiff leave to pursue the Claims intended in his suggested SDA. I do not accept that the SDA is in the interests of Forthwise or Convoy.

M.  Result

97.  As a result, the OS is dismissed.

98.  Necessarily, though I previously granted the interim permission to issue the protective writ, I make a fresh order overturning my previous permission, such that the protective writ can be treated as never having been issued. Alternatively, if that is not possible, then I direct that the writ must not be served, and it will simply expire at the end of its period of validity without any possible extension of validity.

99.  The OS has failed. But so has the Jurisdiction Summons, though it probably need not have been issued in any event. In those circumstances, I make a costs order nisi that (1) the costs of and occasioned by the OS be payable by the plaintiff to the defendants, to be taxed if not agreed, and (2) the costs of and occasioned by the Jurisdiction Summons be payable by the defendants to the plaintiff, to be taxed if not agreed.

100.  If either party wishes to seek a variation of the costs order nisi, I will deal with such an application on the papers. If no such variation application is made within 14 days, the costs order will become absolute.