TAN MAN KOU AND ANOTHER v. CHIME CORPORATION LTD. AND OTHERS

CACV 1948/2001

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 1948 OF 2001

(ON APPEAL FROM HCMP 4146 OF 2001)

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REASONS FOR JUDGMENT

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Hon Mayo VP:

1. This is an appeal from a decision of Deputy High Court Judge Gill. He made an order that the summons issued by the petitioners seeking interim relief should be heard on a date not before 3 October 2001. A summons had also been issued by the 2nd respondent, which was returnable at the same time.

2. The background to this appeal is quite complex.

3. Mr Wang Teh Huei ("Mr Wang") was the husband of the 2nd respondent. He was kidnapped on 10 April 1990 and has not been seen since. Mr Wang's father ("Mr Wang Senior") was granted leave to swear to the death of Mr Wang on or after 10 April 1990 on 23 September 1999. On the next day he instituted Probate Action No. 8 of 1999 against the 2nd respondent. The action was based upon a will in his favour dated 15 April 1968. The 2nd respondent claims that Mr Wang made a will in her favour dated 12 March 1990. The trial of the action commenced on 6 August and is now continuing before Yam J.

4. By an order of Deputy High Court Judge Chu (as she then was) dated 15 March 2000 Messrs Barlow & Tan were appointed joint administrators pendente lite of the estate of Mr Wang. Since that date Mr Cheung Yat Ming has been appointed to take the place of Mr Barlow. They are the petitioners.

5. The main purpose of appointing the petitioners administrators pendente lite was to preserve the assets comprised in Mr Wang's estate.

6. Since the disappearance of Mr Wang the 2nd respondent has been in control of Mr Wang's estate.

7. Consequent upon inquiries and investigations which have been undertaken by the petitioners, they were concerned that the interests of the estate may have been detrimentally affected as a result of actions undertaken by the 2nd respondent.

8. Following this a petition was lodged with the Court whereby relief was sought pursuant to the provisions contained in s.168A of the Companies Ordinance, Cap. 32.

9. The petition related to the affairs of a company called Chime Corporation Ltd ("Chime"), which is the 1st respondent.

10. Mr Wang was the chairman and majority shareholder of Chime.

11. In the petition it is contended that 15 million B shares in Chime were allotted to the 2nd respondent to the detriment of Mr Wang's interest.

12. There is also concern in relation to a claim which is being made by the 2nd respondent that she is the beneficial owner of 19,998 A shares in Chime.

13. The summons which lay before Deputy High Court Judge Gill was in effect a summons for directions in respect of the two summonses, which were set down for a 3-day hearing before a judge in chambers. One of the main issues ventilated was the difficulty which would be encountered by the 2nd respondent if she was required to give detailed instructions on the summons at the same time as she was engaged in the probate trial.

14. The relief sought in the summons issued by the Peitioners was wide ranging.

15. In paragraph 1, the 2nd respondent was to:

"... refrain from exercising any voting or other rights relating to the 15 million B shares ... in the 1st Respondent which were allotted to the 2nd Respondent pursuant to an ordinary resolution of the 1st Respondent dated 22 August 1990 save with the written consent of the petitioners (...) or the leave of the Court."

16. In paragraph 3, the respondents should:

"... refrain from procuring, permitting or otherwise participating in any transaction relating to the 1st Respondent and the companies referred to in the attached Schedule (...) which is not in the ordinary course of business and/or on ordinary commercial terms."

17. In paragraph 5.2, the respondents should take such steps as are necessary:

"to procure that the companies referred to in the Schedule provide to the Administrators as much notice as is reasonably practicable in advance of any disposition of any property (whether by sale, charge, other encumbrance, or otherwise) with a value of HK$10 million or more; and ..."

18. In paragraph 5.3, the respondent should take such steps as are necessary:

"to preserve (and to procure that others preserve) all documents (including, for the avoidance of doubt, documents maintained in electronic or magnetic form) that relate to transactions which affect or may have affected the nature or value of property in the Estate, including all transactions relating to the companies in the Schedule with a value of HK$1 million or more."

19. The other orders sought related mainly to providing information relevant to Mr Wang's interest in Chime.

20. What was not canvassed at all at the hearing before the Judge was the question of what steps were required to protect the interests of the petitioners pending the hearing of the summonses in the context that the hearing of the summonses would inevitably be delayed.

21. This was an important matter which did need to be addressed.

22. In my view, some protection should be given to the petitioners. What needs to be borne in mind is that if the 2nd respondent is prevented from doing the acts contemplated in paragraphs 1 and 3, this should in no way be detrimental to her legitimate interests. So far as the requirements of paragraphs 5.2 and 5.3 are concerned, these should not be unduly onerous.

23. During the course of the hearing before us the parties have accepted the desirability of being able to agree a form of undertaking which should be given to protect the petitioners' interests. It was also agreed that if an undertaking was given the petitioners should also provide a cross-undertaking.

24. The petitioners do not require undertakings from the 4th and 5th respondents.

25. During the hearing a form of undertaking was agreed by the 2nd and 3rd respondents.

26. However, subsequent to the hearing the 1st respondent agreed also to give a similar undertaking. As the Court order has not yet been drawn up I agree that the order which was originally made can be varied so that the order made in relation to the injunction granted against the 1st respondent need not be made and that the undertaking now should include the 1st respondent.

27. A form of cross undertaking has also been agreed.

28. The amended form of the undertaking given by the 1st, 2nd and 3rd respondents is as follows:

"1. The 2nd Respondent undertakes to refrain from exercising any voting or other rights relating to the 15 million B shares ('the Shares') in the 1st Respondent which were allotted to the 2nd Respondent pursuant to an ordinary resolution of the 1st Respondent dated 22 August 1990 save with the written consent of the petitioners (hereinafter referred to as ('the Administrators') or the leave of the Court.

2.1 The 1st Respondent undertakes to refrain from any transaction relating to the 1st Respondent, and to refrain from procuring, permitting or otherwise participating in any transaction relating to the subsidiary companies referred to in the Third Schedule hereto ('the Subsidiaries') and Chinachem Agencies Limited, which is not in the ordinary course of business, which term shall include all present business practices not inconsistent with the interests of the 1st Respondent and the Subsidiaries.

2.2 The 2nd and 3rd Respondents respectively undertake to refrain from procuring, permitting or otherwise participating in any transaction relating to the 1st Respondent, the Subsidiaries and Chinachem Agencies Limited which is not in the ordinary course of business, which term shall include all present business practices not inconsistent with the interests of the 1st Respondent and the Subsidiaries.

3.1 The 1st Respondent undertakes to provide, and to procure that the Subsidiaries and Chinachem Agencies Limited provide, to the Joint Administrators as much notice as reasonably practicable in advance of any new disposition of any individual item of property (whether by sale, charge, other encumbrance, loans or otherwise) with a value of HK$10 million or more and, in any event, within 3 working days of such disposition being occurred.

3.2 The 2nd Respondent and 3rd Respondent respectively undertake to take such steps as are necessary to procure that the 1st Respondent, the Subsidiaries and Chinachem Agencies Limited provide to the Administrators as much notice as is reasonably practicable in advance of any new disposition of any individual item of property (whether by sale, charge, other encumbrance, loans or otherwise) with a value of HK$10 million or more and, in any event, within 3 working days of such disposition having occurred.

4. The 1st Respondent, 2nd Respondent and 3rd Respondent respectively undertake to take such steps as are necessary to preserve (and to procure that others preserve) all documents (including, for the avoidance of doubt, documents maintained in electronic or magnetic form) that relate to transactions which affect or may have affected the nature or value of any individual item of property in the Estate, including all transactions relating to the 1st Respondent, the Subsidiaries and Chinachem Agencies Limited, with a value of HK$1 million or more.

5. The values referred to in 3.1, 3.2 and 4 above means the book value prepared for the purposes of the relevant last audited accounts, proceeds or price, whichever is the higher."

29. The form of the cross undertaking is:

"The petitioners undertake that they will not seek to reconstitute the Board of Directors of the 1st Respondent or the Subsidiaries in any manner as a result of the 2nd Respondent's undertaking at paragraph 1 of the First Schedule or otherwise without leave of the Court applied for upon reasonable notice to all parties."

30. At the conclusion of the hearing we ordered that the costs of the appeal should be in the cause of the two summonses.

Keith JA:

31. At the conclusion of the hearing of this appeal, I agreed with the orders proposed, and I add a few words of my own only because the hearing of the appeal took a course which the parties had not expected.

32. The petitioners are applying for interim relief pending the hearing of the petition. The hearing of that application is estimated to last two days. On 10 August, Deputy Judge Gill was asked to give directions for the hearing of that application. The petitioners wanted the hearing to begin before the end of August, and they sought consequential directions relating to the filing and service of evidence and skeleton arguments.

33. Whatever may have been the position on 10 August, the fact of the matter is that it is now impossible to give the appropriate directions for the filing and service of evidence and skeleton arguments to enable the hearing to begin by the end of August. That was recognised by Mr Ambrose Ho SC for the petitioners, who asked for directions which would enable the hearing to begin on or about 7 September. What Mr Ho did not know was that effect could only be given to that request by an order not merely that the hearing of the application be expedited, but by an order that the hearing take place on or about 7 September, even if that would involve dates which had been fixed for the cases of other litigants to be vacated. That is because the Clerk of Court informed us that the earliest date which could be given on the current state of the court's diary, even if an expedited hearing of the application was ordered, was 26 November.

34. For her part, the 2nd Respondent does not want the hearing of the application to begin until some time after she has given evidence in high-profile probate proceedings in which she is currently engaged. Until then, she is devoting all her energies to those proceedings. For that reason, she is content with the order which Deputy Judge Gill made which had at the time the effect of deferring the hearing of the application until 3 October at the earliest, but which we now know had the effect of deferring the hearing of the application to 26 November.

35. I do not think that the petitioners' need for interim relief is such that dates which have been fixed for the hearing of the cases of other litigants should be vacated, provided that the petitioners have suitable interim protection in the meantime. Moreover, I am sympathetic to the 2nd Respondent's wish that her energies be not diverted from the heavy probate litigation in which she is currently engaged. I was therefore inclined to leave the directions which Deputy Judge Gill gave undisturbed, provided that I was satisfied that the petitioners' concerns about (a) the utilisation of the shareholding of the 2nd-5th Respondents in the 1st Respondent and (b) the dissipation by the Respondents of assets of other companies in the Chinachem Group of Companies in the meantime could be assuaged. That involves a careful balancing exercise, weighing up the petitioners' need for interim protection against the wishes of the 2nd-5th Respondents to utilise their shares in the 1st Respondent and the wishes of the Respondents to cause the 1st Respondent and its subsidiary and associated companies to be run as they choose, that balancing exercise to cover only the limited period between today and the hearing of the application for interim relief. It was that balance which seemed to me to be the issue at the heart of the appeal, although I readily appreciate that initially the parties and their advisers had not seen things in quite the same way.

36. That balancing exercise was understandably not carried out by Deputy Judge Gill because he was not asked to give the petitioners interim protection in the event of his failing to give those directions for the hearing of the application which the petitioners had sought. But if the hearing of the application cannot take place until the end of November, the question of suitable interim protection has to be addressed. I have not discerned any significant downside for the Respondents if orders are made against the 1st, 2nd and 3rd Respondents, until the hearing of the application for interim relief or further order in the meantime, in the terms of paras. 1, 3, 5.2 and 5.3 of the petitioners' summons filed on 2 August, suitably modified to reflect the respective stances of the parties, with the addition of a mechanism to determine questions of valuation.

37. In the course of the hearing of the appeal, it emerged that the 2nd and 3rd Respondents were prepared to offer undertakings which were acceptable to the petitioners, provided that the petitioners offered a suitably worded cross-undertaking. The petitioners were prepared to do that. It was therefore apparent that the appeal could be disposed of (in relation to the 2nd and 3rd Respondents) by making no order on the appeal in the light of these undertakings. Mr George Lam for the 1st Respondent had no instructions to offer any undertakings, and in my opinion the need to preserve the status quo until the hearing of the application justified the making of orders against the 1st Respondent in the modified terms of paras. 3, 5.2 and 5.3 of the petitioners' summons with the addition of the mechanism to determine questions of valuation. However, since the hearing the court has been informed that the 1st Respondent is prepared to give the undertakings sought. Since the court's order has not been drawn up, the court has the jurisdiction to vary its order, and the appeal can therefore be disposed of, in relation to the 1st Respondent as well, by making no order on the appeal in the light of these undertakings.

38. There are three final matters I should mention. First, although the hearing of the application for interim relief was not so urgent as to require the dates for the hearing of the cases of other litigants to be vacated, the application is nevertheless one which should be heard promptly. Accordingly, I agree that it was appropriate to order an expedited hearing of the application. Secondly, Mr Ho was anxious to enable the petitioners to take advantage of any earlier date if one should unexpectedly become available. In effect, he wanted the Clerk of Court to notify the petitioners' solicitors of such an occurrence so that they could apply for the hearing to be fixed for that date. In the event, I thought that there were practical difficulties with an arrangement of that kind, and I was not prepared to go along with it.

39. Finally, and for the avoidance of doubt, I do not want it to be thought, as a result of the interim protection which I believe to be appropriate, that I have formed even a provisional view as to the merits of the application for interim relief. I have not. I only wish to maintain an appropriate balance between the parties between now and the date of the hearing of the application for interim relief.