ELECTRONIC CONTROL TECHNOLOGY LTD (suing on behalf of itself as a shareholder in COBO ASIA LTD) v. WOLFANGO COZZI AND OTHERS

HCA 1524/2022,
HCA 835/2022 &
HCMP 362/2021
(Heard Together)

[2025] HKCFI 1860

HCA 1524/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1524 OF 2022

________________________

________________________

AND 

HCA 835/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 835 OF 2022

________________________

AND 

HCMP 362/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 362 OF 2021

(Heard Together)

________________________

________________________

J U D G M E N T

________________________

Introduction

1.  The present proceedings concerned the management and affairs of COBO Asia Ltd (the “Company”)  and they involved:-

(1)  Cobo SPA (the “Majority Shareholder”)  and its nominated directors (the “Majority Directors”); and

(2)  Electronic Control Technology Ltd (the “Minority Shareholder”)  and its nominated director, namely Mr Liang Tianxiang (“Mr Liang”).

2.  The Majority Shareholder and the Majority Directors took out three summonses on 4 March 2025 and three summonses on 16 April 2025[1] seeking leave to:-

(1)  re-re-amend its statement of claim in HCA 835/2022;

(2)  re-amend its amended points of defence in HCMP 362/2021;

(3)  amend its defence in HCA 1524/2022; and

(4)  adduce five sets of supplemental witness statements.

3.  This is the substantive hearing of the Majority Shareholder and Majority Directors’ summonses filed on 4 March 2025 and 16 April 2025.

Material Background

4.  The Company is owned by the Majority Shareholder as to 60% and the Minority Shareholder as to 40%.

5.  The relationship among the parties was governed by a series of written agreements, including (i)  a shareholder agreement (the “Shareholder Agreement”)  dated 8 September 2014 between the Majority Shareholder and the Minority Shareholder; and (ii)  a labour contract (the “Labour Contract”)  dated 4 July 2014 between the Company and Mr Liang.

6.  The present proceedings, ie (i)  HCA 835/2022 (the “HCA Action”); (ii)  HCMP 362/2021 (the “Unfair Prejudice Action”); and (iii)  HCA 1524/2022 (the “Derivative Action”)  are to be tried together with (iv)  HCA 87/2022 and (v)  HCA 908/2022 (the “Labour Actions”)  before Linda Chan J on 5 November 2025 (with 13 days reserved).

7.  In gist:-

(1)  In the HCA Action, the Majority Shareholder and/or the Company complain that Mr Liang and the Minority Shareholder breached their fiduciary duties and contractual duties owed to the Company by, among other things, conducting competing business activities and failing to comply with directions from the Company’s board of directors.

(2)  In the Unfair Prejudice Action, it is complained that the Majority Shareholder conducted the affairs of the Company in a manner that was unfair and prejudicial, in that the Majority Shareholder (i)  wrongfully excluded the Minority Shareholder from management; (ii)  diverted business opportunities; and (iii)  acted unfairly.

(3)  In the Derivative Action, the Minority Shareholder complains that the Majority Directors, in breach of their fiduciary duties owed to the Company, wrongfully (i)  diverted business opportunities to the Majority Shareholder; and (ii)  caused the Company to pass a board resolution on 21 October 2020 that had the effect of diverting business opportunities to a company in the Mainland that was associated with the Majority Shareholder.

The Proposed Amendments

8.  Ms Sara Tong SC, leading Ms Astina Au, (for the Majority Shareholder and Majority Directors)  summarized the justifications for the proposed amendments in a table annexed to their skeleton submissions, which is placed under Annexure 1 of this Decision.

9.  The proposed amendments appear to be substantial.  However, Ms Tong and Ms Au emphasized that they do not intend to introduce any substantial new facts or issues that had not been canvassed in the existing documents and witness statements.  They submitted that based on the pre-existing facts that had been ventilated, the purposes of the proposed amendments were to:-

(1)  correct inaccurate facts and minor grammatical errors;

(2)  remove allegations that the Majority Shareholder and Majority Directors no longer pursue;

(3)  elaborate and particularize the existing pleas; and

(4)  include additional legal bases for articulating various legal conclusions based on the pre-existing facts in the pleas and/or evidence.

Legal Principles

Amendment of Pleadings

10.  It is trite that amendments that ventilate the real question in controversy between the parties should be allowed.  However, no leave to amend would be granted if it is readily apparent that the proposed amendment is bound to fail: see Natamon Protpakorn v Citibank NA [2009] 1 HKLRD 455 at para 25 (per Cheung JA); Re Playmates Investments Ltd [1996] 4 HKC 577 at 582E-H (per Le Pichon J (as Le Pichon JA then was); Hong Kong Civil Procedure (2024)  at para 20/8/6.

11.  The burden is on the party opposing the amendment to show prejudice.  There is no injustice to the opposing party if he can be compensated by an appropriate order as to costs: see Re Playmates Investments Ltd (supra)  at 582H, 584C (per Le Pichon J, as Le Pichon JA then was); Hsu Ming Chi v Lam Shu Chit (supra)  at para 17 (per Peter Ng J).

Adducing Supplemental Witness Statements

12.  The court has wide discretionary powers to allow a litigant to serve a supplemental witness statement for the purposes of filling the gaps in his own statement and/or to answer the statement of the opposing party: see Hong Kong Civil Procedure (2025)  (Vol 1)  at para 38/2A/12.

13.  As pointed out by Recorder William Wong SC in Re Cao Zhong, ex parte Bilistyle Investments Ltd [2021] HKCFI 3143 at para 23, the relevant considerations included the following:-

(1)  whether the proposed supplemental witness statement would assist the court in securing the just resolution of the dispute in accordance with the substantive rights of the parties;

(2)  whether there will be disruption to the trial or any milestone date;

(3)  the presence or absence of real prejudice to the other party; and

(4)  whether the rules of the court or the case management directions provided by the court have been flouted.

Late Interlocutory Applications

14.  The court shall always recognize that the primary aim in exercising the powers of the court is to “secure just resolution of disputes in accordance with the substantive rights of the parties”: see Order 1A, rule 2(2).

15.  However, late interlocutory applications may be dismissed on the basis of delay alone.  The court may reject a late application when trial is imminent as delay of a trial is prejudicial to the parties who have every right to expect that a trial fixed months ahead can proceed without disruption and without time and costs being wasted: see Hongkong Changyi Real Estate Development Ltd v Neo-China (Group)  Infrastructure Investment Ltd (HCA 1576/2011, 25 February 2014)  at para 1 (per Mimmie Chan J); and Yang Yani v Fan Mingyun & Anor [2024] 1 HKLRD at para 7 (per Queeny Au-Yeung J).

16.  The mere fact that an applicant would face considerable difficulties in establishing his case is no reason to allow the late application if this would lead to the trial being adjourned part-heard: see Yang Yani (supra)  at para 7; and Credit One Finance Ltd v Leong Wun Heng [2019] 4 HLRD 591 at paras 12-13, G Lam J (as he then was).

17.  A change of legal representation normally would not amount to a valid justification for the court to accede to a late application: see Hongkong Changyi Real Estate Development Ltd (supra)  at para 1; and Yang Yani (supra)  at para 9.

Deliberation: Amendments

18.  Mr Jonathan Chang SC, leading Mr John Cheung, (for the Minority Shareholder and Mr Liang)  pointed out that the proposed amendments and proposed supplemental witness statements came belatedly after the present proceedings were set down for trial at the second case management conference before Linda Chan J on 30 October 2024.

19.  I see the basis of the Minority Shareholder and Mr Liang’s complaint as well as the force of Mr Chang and Mr Cheung’s submissions.

20.  As Ms Tong and Ms Au pointed out in their skeleton submissions, the excuses relied on by the Majority Shareholder and Majority Directors were as follows:-

(1)  Prior to May 2024, the Majority Shareholder and the Majority Directors engaged (i)  Messrs Lewis Silkin to represent them in the Labour Actions; and (ii)  Messrs SM & Co to represent them in the HCA Action, the Unfair Prejudice Action and the Derivative Action.

(2)  At the first case management conference on 7 May 2024, Linda Chan J pointed out it was not desirable for the Majority Shareholder and the Majority Directors to engage two separate law firms.

(3)  In the circumstances, Messrs Lewis Silkin took over the conduct of the HCA Action, the Unfair Prejudice Action and the Derivative Action.  Thereupon, they immediately sought to locate senior counsel to render advice on merits and evidence.

(4)  In light of (i)  the amount of documents involved; (ii)  the fact that the Majority Shareholder and Majority Directors (who were Italians)  were not proficient in English; and (iii)  the intervening holidays from December 2024 to February 2025, the process took time.

(5)  It transpired that senior counsel’s advice was rendered around 7 December 2024 and the draft amended pleadings and draft supplemental witness statements were finalized around early March 2025.

21.  Despite Ms Tong’s efforts, I am not convinced by the Majority Shareholder and Majority Directors’ excuses.  For the following reasons, I am of the view that they were guilty of inordinate delay, as a result of which the Minority Shareholder and Mr. Liang would suffer prejudice should the amendment applications under the summonses dated 4 March 2025 be allowed.

22.  First of all, as early as 11 January 2023, Linda Chan J directed that all interlocutory applications be taken out at least 14 days before the next case management conference (which was initially scheduled to be heard on 27 July 2023[2]).  Obviously, the learned judge expected the parties to put their houses in order by taking out all necessary interlocutory applications before 27 July 2023.  However, for reasons best known to the Majority Shareholder and Majority Directors, they did not put forward the present proposed amendments before the deadline imposed by the court.  In my view, the Majority Shareholder and Majority Directors should have taken the procedural timetable imposed by the court more seriously.  Whilst they could have sought senior counsel’s advice at an early stage, they cannot keep amending their pleadings at the expense of disrupting the court’s diary and creating time pressure on other parties.

23.  Second, as of the time when the second case management conference on 30 October 2024 took place, the Majority Shareholder and Majority Directors still had not taken out the present amendment applications.  The then counsel representing the Majority Shareholder and Majority Directors were unable to confirm with Linda Chan J that his camp was ready for trial and that no further interlocutory would be taken out.  However, it appears that he did confirm with Linda Chan J that there had been no outstanding interlocutory applications.  In the premises, Linda Chan J set down these proceedings for trial with 13 days reserved commencing on 5 November 2025.  The order of Linda Chan J has not been appealed against and thus the correctness thereof cannot be doubted.  In my view, there was no good reason why Majority Shareholder and Majority Directors did not pursue the present amendment applications before 30 October 2024.  This was inexcusable.  Had they done so, Linda Chan J would not have set down the proceedings for trial.

24.  Third, I accept that the Majority Shareholder and Majority Directors changed legal representation as a result of the court’s indication that it was not desirable to engage two legal teams for the same proceedings.  However, as pointed out by Linda Chan J at the call-over hearing on 11 March 2025, a change of legal representatives was not ipso facto a justification for the delay.  I agree with the learned judge’s observation: see Hongkong Changyi Real Estate Development Ltd (supra)  at para 1; and Yang Yani (supra)  at para 9.  There was no good reason why the Majority Shareholder and Majority Directors did not pursue the present applications until March 2025.  The delay was substantial and inordinate.

25.  Fourth, in this connection, I am not of the view that the Majority Shareholder and Majority Directors acted promptly after they were aware of the need to change solicitors.  As mentioned, as early as 7 May 2024 (ie the date of the first case management conference), Linda Chan J had already pointed out that it was not desirable to engage two legal teams in the same proceedings.  However, the three summonses that are now before this court were not taken out until 4 March 2025.  There was a further delay of almost 10 months.  Despite the amount of documents involved and the involvement of foreign parties, the extent of the delay was unacceptable.

26.  Fifth, I am concerned that the applications, if allowed, would cause undesirable and unmanageable complications to the proceedings and there is a real risk that the trial would derail.

27.  In this connection:-

(1)  Having perused the proposed amendments, I am of the view that the Majority Shareholder and/or Company are seeking to substantially reformulate the causes of action in the HCA Action based on dishonest assistance in breaching fiduciary duties and knowing receipt of trust properties.

(2)  I accept Mr Chang’s submissions that in light of the substantial reformulation, the Minority Shareholder and Mr Liang will be entitled to respond to the reformulated claims.  It is, to say the least, arguable these causes of action involve the application of the double actionability rule, and as such it will be open to the Minority Shareholder and Mr Liang to make pleas and adduce evidence on the question of whether the same claims are actionable under Mainland law.  These are complicated issues that cannot be disposed of summarily.  It is envisaged that there will be substantial amendments to the pleadings and further applications will be made for adducing expert evidence on Mainland laws.  It is highly doubtful as to whether all these interlocutory matters can be completely and satisfactorily disposed of within a few months before the trial commences and before the pre-trial review takes place.

(3)  Furthermore, the new assertions raised by the Majority Shareholder and Majority Directors, such as the issues regarding breach of implied duties in the HCA Action and the new explanation regarding the pricing policies in the Unfair Prejudice Action and the Derivative Action, are fact-sensitive in nature.  The new assertions may have a substantial impact on the landscape of the factual disputes between the parties.

(4)  Thus, if the applications were allowed, the Minority Shareholder and Mr Liang will call at least three further factual witnesses, namely Luo Xioayi, Chen Chunmei and Zheng Wei, to rebut the new assertions relied on by the Majority Shareholder and Majority Directors.  It also appears that there will be further discovery of documents.  In the circumstances, it is doubtful as to whether the trial can be completed within 13 days as scheduled.  Even if the upcoming trial is not derailed (which is doubtful), there is still a real risk that the trial will have to be conducted in two tranches or adjourned part-heard with additional dates being fixed.  This will cause disruption to the court’s diary and is most undesirable.

(5)  Mr Chang and Mr Cheung also submitted that the proposed amendments in regard to dishonest assistance in breaching fiduciary duties lack detailed particulars as to (i)  the alleged dishonesty on the part of Mr Liang and the Minority Shareholder and (ii)  the alleged acts of assistance rendered by the Minority Shareholder.  Arguably, the Minority Shareholder and Mr Liang may face difficulty in meeting the accusations.  Thus, if the amendment applications were allowed, they may seek further and better particulars from the Majority Shareholder and Majority Directors, who may or may not oppose the application. I am very concerned about these further interlocutory applications.  It is doubtful as to whether the pleadings and evidence will be in order before the upcoming trial commences and before the pre-trial review takes place.

28.  In the premises, it appears to me that the Majority Shareholder and Majority Directors’ amendment applications, if allowed, will put the Minority Shareholder and Mr Liang in the “unenviable position” described by A Cheung J (as Cheung CJ then was)  in Wise Union Industries Ltd v Hong Kong Science and Technology Parks Corp (HCAL 12/2009, 21 September 2009)  at para 9.  They will be forced to choose between (i)  seeking an adjournment thereby losing the trial dates or (ii)  keeping the original trial dates but not having sufficient time to properly respond.  There is no good reason why the Minority Shareholder and Mr Liang (as well as their legal team)  should be forced to respond to the Majority Shareholder and Majority Directors’ new assertions under intense time pressure when they should have focused their time, resources and energy on the preparation for the trial.  This will be unfair to the Minority Shareholder and Mr Liang and the prejudice that they will suffer is self-explanatory.

29.  For all the above reasons, I do not accede to the amendment applications under the summonses dated 4 March 2025 taken out by the Majority Shareholder and Majority Directors.

Deliberation: Supplemental Witness Statements

30.  As regards the Majority Shareholder and Majority Directors’ application to adduce supplemental witness statements, Mr Chang submitted that the same rises and falls together with the amendment applications.  He pointed out that the contents of the proposed supplemental witness statements are based on and tied to the formulations under the proposed amendments.

31.  Ms Tong disagreed. She pointed out that certain parts of the proposed supplemental witness statements address the factual matters raised by the Minority Shareholder and Mr Liang in their witness statements[3].

32.  Whilst I understand why the Majority Shareholder and Majority Directors would wish to respond to the specific factual matters raised by the Minority Shareholder and Mr Liang, it would not be desirable for the supplemental witness statements to include matters that touch upon the formulations under proposed amendments, which I rejected.

33.  Bearing in mind that the trial is imminent, the supplemental witness statements should succinctly focus on dealing with the matters in respect of which specific response and/or specific amplification are strictly necessary.

34.  I am not of the view that the proposed supplemental witness statements, in their current form, are satisfactory.  Their contents are far too lengthy, extensive and unfocused.

35.  In the premises, I do not accede to the application for adducing the five sets of supplemental witness statements.

36.  If the Majority Shareholder and Majority Directors insist on responding to the allegations raised by the Minority Shareholder and Mr Liang and/or amplifying the factual points that were made already, they should redraft the supplemental witness statements in a succinct and focused manner, and make a fresh application as soon as possible.

Conclusion and Disposition

37.  For all the above reasons, I dismiss the three summonses dated 4 March 2025 as well as the three summonses dated 16 April 2025.

38.  Costs should follow the event.

39.  Whilst I am not persuaded by Ms Tong’s submissions, I am not inclined to the view that this is an exceptional case where indemnity costs should be ordered.

40.  I order the Majority Shareholder and Majority Directors to pay the Minority Shareholder and Mr Liang’s costs in respect of the three summonses dated 4 March 2025 and the three summonses dated 16 April 2025, to be summarily assessed by this court on paper. The Majority Shareholder and Majority Directors should file their list of objections within 7 days.

41.  I express my gratitude to Ms Sara Tong SC, Ms Astina Au, Mr Jonathan Chang SC and Mr John Cheung for their very helpful assistance.