SKY FLOWER INVESTMENT LTD v. BUNBO DEVELOPMENT LTD

HCMP 1914/2025

[2026] HKCFI 5013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1914 OF 2025

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REASONS FOR JUDGMENT

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1.  This is the hearing of an application by Originating Summons for an order under section 570 of the Companies Ordinance (Cap 622) ordering an Extraordinary General Meeting of the Respondent Company, Bunbo Developments Limited (“Bunbo”).

2.  The Applicant is Sky Flower Investment Limited (“Sky Flower”), a company registered in Hong Kong, and it brings this application as the registered shareholder of 70 percent of the shares in Bunbo (“the Shares”). The remaining 30 percent are held by Chao Kai Chon (“Chao”).

3.  Sky Flower issued a Notice of a General Meeting on 6 August 2025 attempting to convene a meeting on 15 August 2025, but Chao did not respond and did not attend. Under the terms of Article 23 of Bunbo’s Articles of Association –

“the quorum for all general meetings shall be two members personally present and holding either in his own right or by proxy at least fifty-one percent of the Company, and no business shall be transacted at any General Meeting unless this requisite quorum be present at the commencement of the business.”

Without Chao’s presence, a General Meeting in accordance with Article 23 cannot proceed. It is for this reason that the assistance of the court is now sought by Sky Flower, invoking section 570(4) which gives the court a power to direct that –

“to direct that one member of the company present at the meeting in person or by proxy is to be regarded as constituting a quorum.”

4.  The background to the underlying dispute is complicated, but it is not necessary to go into it here in detail. In brief summary, Bunbo is currently under the control of two directors, Liu Yan Sheng (“Liu”) and Liu Ran. The directors of Sky Flower wish to use the company’s voting rights in Bunbo to remove Liu and Liu Ran as directors and replace them with its own directors, Qian Xiang (“Qian”), Chen Kun and Li Yidong. The nature of the boardroom battle is only lightly touched on in the documents before the court: Liu says in his First Affirmation dated 12 March 2026, “I understand that there has been some power struggle within the management of the Applicant and that of its holding companies…”, but the merits of that dispute are not elaborated on and are not something on which I am asked to form a view.

5.  What is, however, central to the question that I have to decide is the beneficial ownership of the Shares.

a.  According to Qian, Sky Flower holds the Shares as trustee for another company, China Zhonghaizhi Co Ltd (“ZHZ”), which is registered in the PRC and which Sky Flower says is the beneficial owner of the Shares. The complicated route by which ZHZ is said to have acquired this beneficial interest is set out in detail in Qian’s Second Affirmation dated 19 May 2026.

b.  According to Liu, he is himself the beneficial owner of the Shares. He claims to have acquired this interest in or around 2013 from Wang Bing, whom he describes as “the controller of ZHZ”. I will set out later the basis for Liu’s claim in more detail.

6.  It is common ground that Sky Flower is entitled, as the registered holder of the Shares, to exercise the voting rights attached to them at a General Meeting. It is also common ground, however, that if Liu is in fact the beneficial owner of the Shares, he may have the right to direct Sky Flower how to vote: see Shenzhen Cau Technology Co Ltd v China Merchants Kin Swiss Transportation Co Ltd HCMP 333/2014, 16 July 2014 at [12].

Procedural history

7.  The Originating Summons was issued on 24 October 2024, supported by the First Affirmation of Qian. Since then, several further affirmations have been sworn.

8.  The matter came before Deputy High Court Judge Reyes SC at a hearing on 3 August 2026, when Bunbo made two applications to file further evidence, including affirmations that had yet to be notarized and/or affirmed. At that hearing, DHCJ Reyes SC gave leave for the additional affirmations to be filed once they had been affirmed and/or notarized as necessary. He further directed that the substantive hearing should be adjourned to be heard by me on 26 August 2026, with cross-examination of the deponents, Qian, Wei Wei and/or Liu, with the affirmations standing as evidence-in-chief for Sky Flower and Bunbo respectively.

9.  At that stage, it was assumed by DHCJ Reyes SC that the deponents would be able to attend for cross-examination, if necessary remotely by video conferencing facilities. The evidence on which Bunbo relied to explain the fact that Liu’s Affirmations had not yet been notarized was contained in three Affirmations –

(1)  an Affirmation dated 13 March 2026 by Leung Wai Man Roger (“Leung”), which explained that Liu was “currently hospitalized in Mainland China and is arranging for his First Affirmation to be notarized and delivered to Hong Kong, or Mr Liu will come to Hong Kong once he is discharged”;

(2)  a further Affirmation by Leung dated 15 July 2026, “I verily believe that Mr Liu Yan Sheng is currently in Mainland China and is arranging for Liu’s Affirmation to be notarized and delivered to Hong Kong”;

(3)  an Affirmation (now dated 18 August 2026 but not yet affirmed at the date of the hearing) by Wei Wei stating that, “Mr Liu is currently in Beijing, Mainland China. He has been hospitalised for a prolonged period (since February 2026) and is presently suffering from serious health conditions requiring close medical monitoring…Accordingly, he is unable to attend any notarial office for the purpose of executing and certifying the two Affirmations.”

10.  It was not until 13 August 2026 that it was revealed, in a Summons for a further adjournment supported by a Fourth Affirmation of Leung (so far unsworn), that Liu had been apprehended in Beijing on criminal charges as long ago as 6 May 2025, and had in fact been arrested on “12 Juny 2025” (sic: it is unclear whether this was meant to read “June” or “July”). The charges were “Obstruction of the Liquidation Process” and “Embezzlement”. It was said that as a consequence of his imprisonment, Liu was unable to attend the offices of a notary for the purposes of notarizing his two earlier Affirmations. Leung’s evidence is confirmed in further so-far unsworn affirmation by Wei Wei.

11.  Before dealing with the issues raised on the Originating Summons, I should mention one further matter. On 20 August 2026, Liu issued a Writ against Sky Flower, Chao and Bunbo, seeking a declaration that Sky Flower holds the Shares on trust for him personally, and an order requiring Sky Flower to take all necessary steps to transfer them into his name.

The substantive hearing

12.  The Originating Summons then came before me on 26 August 2026. Written Submissions were put in by Angel H.Y. Wong of Counsel on behalf of Sky Flower and by Jenkin Suen SC (with him Kaiser Leung) on behalf of Bunbo. Sky Flower argued that I should proceed to hear the case, notwithstanding the fact that Liu was not available for cross-examination; Bunbo sought a further adjournment, or, alternatively, suggested that there could be a General Meeting limited in scope to dealing with statutory requirements, but not addressing the proposed change of directors.

13.  At the start of the hearing, I raised a number of points that I thought created difficulties for both sides.

(1)  In relation to Sky Flower’s argument that the court should hear and decide the application for an order for a General Meeting, I pointed out that since Liu himself was not a party to the Originating Summons, any order I might make would not bind him. I therefore could not determine the underlying question whether or not he had a beneficial interest in the Shares. Liu would still be entitled to seek an injunction in the Writ action to prevent Sky Flower from voting to remove him and Liu Ran as directors. This is, in a sense, the flip side of Ms Wong’s complaint that Liu was using Bunbo “as a shield” to argue his own case.

(2)  In relation to Bunbo’s argument that Liu’s claim to the beneficial ownership of the Shares was a factor that the court should take into account in deciding whether or not make an order under section 570, I drew attention to two significant weaknesses in Liu’s evidence (even assuming all his Affirmations were admitted and assumed to be true) –

a.  The evidence on which Liu relied to show that Wang Bing was the previous beneficial owner, even taken as unchallenged, was extremely weak;

b.  The words said to have been spoken by Wang Bing and relied on by Liu as demonstrating the creation or transfer of a beneficial interest in the Shares in Liu’s favour amounted to no more than an incomplete gift. If Hong Kong law applied, the principle that “equity will not perfect an imperfect gift” would defeat Liu’s claim.

The non-joinder of Liu

14.  On the issue of Liu not being a party to the present action, Ms Wong accepted that if the court were to make an order in the form sought in the Originating Summons, it would not determine the question of the beneficial ownership of the Shares as against Liu. She argued that the wording of the order sought in the Originating Summons would only authorise Sky Flower to convene the meeting “for the purpose of considering, and, if thought fit, passing” the resolutions set out in the Schedule. She agreed, however, that the wording could be modified to make it explicit that the beneficial ownership of the Shares, and with it the right (arguably) to decide how the votes should be used, remained undecided.

15.  In support of her argument that a General Meeting should now be authorised by the court, Ms Wong referred to three cases: Northern Light Group SA v Jens Arne Hansen [2024] 5 HKC 729, Re Success Plan Ltd [2002] 3 HKLRD 560, and Re E-Harbour Services Ltd [ 2014] 5 HKLRD 180. In each of these cases, an application under section 570 (or its predecessor) was approved by the court. However, in all of these case, the party opposing the order was a party to the proceedings. The cases do not cover the present situation.

16.  In relation to the requirement under section 570(1) of the Companies Ordinance that the section applies if for any reason it is “impracticable” to conduct the meeting in the manner prescribed by the company’s articles, Ms Wong referred to the decision of DHCJ Maurellet SC in Yeung Ka Lai v Mark Gain Investment Ltd [2021] 4 HKC 406 in support of the proposition that “impracticable does not mean impossible”. I accept that argument, and agree that Sky Flower’s case meets the relevant standard.

Beneficial ownership of the Shares

17.  Turning then to Bunbo’s evidence on beneficial ownership, it is worth setting out in some detail the basis of Liu’s claimed ownership. First, he doesn’t actually say that Wang Bing, the alleged donor, was personally the beneficial owner before the alleged transfer: what he says instead is that the owner was ZHZ, but that “ZHZ was one of the many corporate vehicles employed by Wang Bing…” That might be sufficient to make Wang Bing the “ultimate beneficial owner” for money laundering purposes, but that is not the same as saying that ZHZ held the Shares on trust for Wang Bing as a matter of trust law.

18.  Mr Liu also relies on an article in the Epoch Times dated 12 June 2019. Leaving aside the evidential value of a newspaper article, the relevant passage of the article reads, “Those with inside information at the time commented that CITIC Shenzhen Company was indeed the private shop of the Wang Zhen family, also known as “the Shenzhen Wang Family Shop”. (According to Liu, CITIC Shenzhen Company was the majority shareholder of ZHZ.) If anything, the newspaper’s account is actually inconsistent with the idea that ZHZ held the Shares on trust for Wang Bing.

19.  The next problem for Liu, is that even if Wang Bing was the beneficial owner of the Shares at the time of the alleged transfer in 2013, Liu’s description of the event on which he relies is as follows –

“In return for my hard work throughout the years, Wang Bing orally declared a gift in my favour that I shall become the beneficial owner of all the interests in the Respondent [ie., Bunbo] and the interest in the JV business and Wang Bing also orally reassured me that my directorship in the Respondent would never be taken away as I am the rightful owner of all the interests in the Respondent and the JV Business. Wang Bing further promised that he would formally arrange for the shares in the Respondent nominally held by the Applicant to be transferred to me.”

20.  As a matter of Hong Kong trust law, this is not, on any reading, an oral direction to the trustees to hold the Shares for Liu.[1]  Nor is it an immediate gift. The words attributed to Wang Bing appear to amount to no more than a promise to arrange the transfer at some time in the future. Notably, he doesn’t promise to make the transfer – as he would if he was personally the owner – but to arrange it – which is consistent with the idea that he controlled, rather than owned, the holding vehicle.

21.  If, then, the words are interpreted as a promise to make a gift, it was a gift that was never completed. To complete a gift of shares, it is necessary to hand to the donee an executed share transfer in proper form, together with the share certificate: Lewin on Trusts (2020) 20^th edn., §3-039. It is trite law under both English and Hong Kong law that equity will not aid a volunteer, nor will a failed transfer be construed as a declaration of trust: see Lewin at §3-035 and 3-036.

22.  Having said that, it is unlikely that Hong Kong law would apply, as the gift took place in the PRC. Although the question whether there was a valid declaration of trust or a disposition of an equitable interest would depend on the locus of the company, that is not the relevant criterion in deciding what is the proper law applicable to a promise to make a gift. In the absence of expert evidence on Chinese law, it is not possible to take the matter further, save to say that, on this point, it is unlikely that Chinese law is the same as the somewhat recondite principles of equity on this topic. I think I can take judicial notice of the fact that Civil Law systems do not necessarily require consideration for a gift to be binding.

23.  For the sake of completeness, it is also possible that Liu might have a pleadable case of promissory or proprietary estoppel (again, if this were a matter of Hong Kong law).

24.  Thus although Liu’s claim to a beneficial interest in the Shares appears to be extremely weak, it is not possible, in the absence of evidence on Chinese law and in the absence of Liu himself, to decide that it is unarguable. Despite the difficulties that I have identified, Mr Suen SC and Ms Wong agreed that the question whether Liu has a beneficial interest in the Shares cannot not be determined – at least as against Liu – in the present proceedings. The only way around this would be for Liu to be joined as an additional party, but that would effectively result in the same delay as the adjournment Bunbo is asking for.

Should the hearing be adjourned? 

25.  In arguing for a further adjournment, Mr Suen SC pressed on me that the possibility of a beneficial interest in the Shares was merely a factor to be taken into account by the court in deciding whether or not to order a General Meeting under section 570. That was the effect of the decision in the Shenzhen Cau Technology case (supra). I have set out the difficulties facing Liu in order to show why I have rejected this argument. The claim does not approach the necessary threshold, even without the benefit of cross-examination of Liu, and is not a sufficient reason for refusing relief under section 570.

26.  Mr Suen SC stressed six additional points: (1) he said that the court should not rely on the benefit of hindsight; (2) he pointed out that his client would be severely handicapped in its case if the hearing went ahead in the absence of Liu; (3) he emphasised that Bunbo (which was only a holding company) had been largely inactive for many years; (4) Sky Flower had put forward no evidence of urgency; (5) Bunbo had made an offer to hold a General Meeting to deal with any statutory requirements, so long as the removal of the directors was not discussed; (6) he argued that his client would suffer serious prejudice if the meeting went ahead and Liu was removed.

27.  Taking all of these factors into consideration, I consider that the court should not adjourn the hearing. That would leave all matters unresolved, and necessitate a further hearing. Instead, the court will authorise an Extraordinary General Meeting to take place with no conditions attached to the decisions that can be taken, but explicitly on the basis that the beneficial ownership of the Shares has not been decided.

28.  Having said that, I am not prepared to authorise the meeting to take place within 14 days, as proposed by Ms Wong. When pressed on the evidence of urgency, Ms Wong fairly pointed to the delays that had taken place so far, and reminded the court of Bunbo’s failure to disclose – it could be said deliberate withholding of – the information about the criminal proceedings against Liu. Those factors, however, seem to me to be matters going to costs rather than the timing of the General Meeting.

29.  I therefore grant the application (subject to clarification of the wording), but direct that the Meeting should be held in four months’ time. This will give Liu time to apply for an injunction, if advised that his case has sufficient merit. Ms Wong has not persuaded me that Sky Flower will suffer any prejudice as a result of the delay. She rightly says that there is no guarantee that Liu will be cleared of the criminal charges against him in that time, but Mr Suen SC accepted that that was a risk Liu would have to take. On the other hand, if Liu is cleared of those charges and the meeting has already gone ahead and removed him as a director, he would have suffered irreversible prejudice.

30.  An order in the terms I have made preserves Liu’s ability to vindicate his claim, while at the same time alleviating the burden on the court of another adjourned hearing. It disposes finally of one of the actions currently active, leaving only the Writ Action (if it is pursued) to determine who is the beneficial owner of the Shares.

Costs

31.  There only remains for me to decide the issue of costs. Sky Flower has been largely, but not completely, successful. I have considered the possibility of apportioning the costs or only ordering a percentage of costs, but having regard to Bunbo’s culpable failure to mention the fact of Liu’s imprisonment at an earlier stage – given its obvious significance – as well as what I consider to be the significant weaknesses in the evidence on beneficial ownership, I have decided that a simple order that costs follow the event is appropriate.