SINO CENTURY HOLDINGS LTD AND OTHERS v. STRONG PETROCHEMICAL HOLDINGS LTD AND OTHERS

HCMP 66/2025

[2025] HKCFI 456

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 66 OF 2025

________________________

________________________

________________________

________________________

D E C I S I O N

________________________

1.  After hearing the parties’ submissions, this Court granted an interim injunction in terms of §§1-5, 7 and 9 of the draft order submitted by the Plaintiff and to restrain anyone from purporting to exercise the voting right over the 49% shares held by Forever Winner in Listco pending determination of Mr Yao’s application for appointment of provisional liquidators in the British Virgin Islands court or further order of the court.

2.  The main reason for the court coming to the decision is because the Original EGM (scheduled to take place on 27 December 2024)  was convened to be held pursuant to a requisition issued by the shareholders on 29 October 2024; that EGM took place on 27 December 2024 with Mr Deng Heng as chairman of the meeting, and he decided to adjourn the meeting. This led to the parties coming to the court on 31 December 2024.  At that hearing, no injunction was granted by the court primarily because ListCo gave an undertaking to the court to reconvene the EGM to be held on 15 January 2025 with Madam Jiao Jie, one of the INEDs of ListCo, to act as chairperson alongside with other undertaking regarding the logistics of the meeting.

3.  The court considered that upon accepting the undertakings given by ListCo it was not necessary to grant any injunction because it was thought that Madam Jiao, being one of the INEDs, would be able to act independently in the conduct of the meeting, including to ensure that the meeting could proceed so that the shareholders would have the opportunity to consider the resolution proposed in the requisition raised by the shareholders.

4.  Unfortunately, that did not happen.  Instead, Madam Jiao took into account the allegation and cross-allegation made by Mr Yao and Mr Wang against each other; and she thought that Mr Yao (as contended by him)  acting alone had the right to cause the 49% shares held by Forever Winner in ListCo to be voted at the EGM.  This was despite the fact that it was pointed out to her at the meeting by the solicitors representing the Plaintiff that in fact, Mr Yao had said the opposite in an affirmation he filed in the BVI proceeding where in that affirmation, Mr Yao acknowledged that in view of the deadlock between himself and Mr Wang, no valid resolution could be passed by Forever Winner, whether at the board level or at the shareholders’ level. 

5.  That affirmation was filed, I was told, on 20 December 2024 and has not been withdrawn by Mr Yao.  So the objective fact shows that Madam Jiao, the 4^th defendant, was labouring under the misapprehension that there was a dispute as to whether Mr Yao was entitled to cast a vote on the shares such that it was impracticable for the meeting to continue because the view of the shareholders could not be ascertained at that meeting.

6.  That premise is now shown to be erroneous because, as I earlier on mentioned, Mr Yao himself accepted in the affirmation filed in the BVI court that no valid resolution could be passed by Forever Winner; and once he accepts that position, it must mean that neither Mr Yao nor Mr Wang would be able to exercise the voting right in relation to the 49% shares held by Forever Winner.  

7.  Had the correct position been known or understood by Madam Jiao, she would not have made the decision in adjourning the EGM.  In any event, her decision to adjourn the EGM was only a decision, in effect, to wait and see what is the outcome of the present application made by the Plaintiff. 

8.  For the reason I have described, I do not think that the factual premise upon which Madam Jiao acted in deciding to adjourn the EGM was a correct premise.  It follows that her decision to adjourn the EGM was not one which was made on a proper and correct basis. 

9.  The consequence of that is that I do not consider that it would be appropriate to continue to allow Madam Jiao to be the chairman of the EGM which has now been adjourned and which will in due course be re-convened to enable the shareholders to vote on the proposed resolution.

10.  While I appreciate that on the materials presently put before the court, in particular the evidence showing that Madam Jiao had taken legal advice from Cayman lawyer before she came to that decision, but that matter in and of itself would not render her decision to become a correct one if the factual premise upon which she made her decision is now shown to be incorrect.  If she remains as chairman of the meeting to be re-convened by ListCo, there is a strong likelihood that she may further adjourn the meeting, whether in view of the allegation made by Mr Wang against Mr Yao or in view of the allegation made by Mr Yao and Mr Wang; and indeed the evidence filed by the parties tend to suggest that if she continues her role as chairman of the re-convened meeting, it is likely that she would simply adjourn the meeting to await the outcome of the application for appointment of provisional liquidators currently pending in the BVI court or until the provisional liquidators, if so appointed by the court, would be able to make a decision as to whether or not to cast a vote in relation to the bloc of 49% shares.  

11.  I do not see any reason as to why the holding of EGM, which is the only means available to the shareholders to express their view and to decide who should be appointed or remain as director of the company, should be further delayed because of the internal dispute between the shareholders of Forever Winner.

12.  There has already been a delay of over two months in holding the EGM, and I do not think that the course proposed by either Mr Yao or Madam Jiao in the present application, namely, to await the outcome of the application for appointment of provisional liquidators, to be something which would serve the interests of the other 51% shareholders of the company.  There is no suggestion that those 51% shareholders of the ListCo are in any way associated with either camp of the shareholders, and even if they do, it is well established that shareholders are not fiduciary and they are entitled to exercise their vote in the way they consider appropriate.

13.  As I said, the paramount consideration is that ListCo should be able to proceed with re-convening the EGM which has already been adjourned and postponed for too many times in my view, and I consider that the balance of convenience is in favour of the court granting an order as I indicated earlier in my decision.

14.  As regards costs, I am minded, subject to counsel’s submission, to reserve the question of costs because I will give directions for the parties to file evidence in these proceedings and, of course, I remind the parties to take note of the reasons that I gave and the exchange between the bench and counsel as to the utility or otherwise of the parties filing extensive affirmation to deal with the allegation and cross-allegation in circumstances where many of the allegations have been overtaken by event and have become academic as a result of the undertaking offered by Mr Yao to the court, which the court accepts. 

15.  The directions which I give on filing of evidence will be those proposed by Mr Manzoni in the draft order, paragraphs 1 to 4, save that in relation to paragraph 4, I will simply adjourn the amended OS for substantive argument with one day reserved.

(Discussion re date)

16.  Well, on a date to be fixed in consultation with the diary of one counsel from each side save that in paragraph 4, the amended OS would be adjourned for argument, with one day reserved, to be fixed in consultation with...

(Discussion re judgment and appeal)

17.  I think I will simply dismiss the application on the basis that the grant of the injunction is an exercise of discretion on the part of the court on the basis of the materials and the arguments presented by the parties.  And, of course, it is up to your client to -- and it has not been shown that there is no legal or factual basis for the court to grant the injunction, particularly having regard to the width of the power of the court in granting injunction under section 730 which is couched in terms that the only requirement is for the court to be satisfied that there has been a breach of fiduciary duties and/or the articles of the company concerned, and for which I found that there was such a breach for the reasons articulated.

18.  As regards the interpretation of Mr Yao’s evidence (affirmation filed in the BVI proceeding), that is, of course, the argument now being put forward by Mr Manzoni for the purpose of seeking leave to appeal.  But when I reached that decision, I do not think that submission had been made.  In any event, even if that submission had been made, I do not consider that to be correct.  The wording of Mr Yao’s affirmation is clear.  And as I said in the earlier part of my decision, he himself accepted that no valid resolution could be passed by Forever Winner either at the board or at the shareholders’ meeting level.

19.  So I dismiss the application for leave to appeal, and I assess the costs of that application to be 10 minutes, right, of the hearing time. 

(Discussion re application for stay of the order)

20.  I will not stay the order.   In terms of assessment of costs, 15 minutes of the hearing time.  As for the costs, I reserve the costs of the application for injunction and the amended OS.  So the substantive hearing will be the substantive hearing for the OS, so the evidence to be filed by the parties will have to deal with the substantive merits of the amended OS.  There will not be any further hearing in relation to the amended OS.