LAI CHI KEUNG v. REGISTRAR OF COMPANIES AND OTHERS

HCMP 2141/2022

[2025] HKCFI 1095

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2141 OF 2022

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BETWEEN

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REASONS FOR JUDGMENT

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A Troubling Issue

1.  This case is ultimately a simple one, but has raised a troubling issue of what to do when a party files on an affirmation made in a language which the purported deponent may not understand at all.

2.  The issue is further complicated when the affirmation is made before a notary public in the Mainland, where the notary’s attestation may be only that the purported deponent has indeed signed his signature on the document, and nowhere is it suggested that the person actually understands the contents of the affirmation.

Background Facts

3.  The Applicant (“Lai”), the 3^rd Respondent (“Wang”), and Chen Huanghao (陳黃豪) (“Chen”) were the ultimate shareholders of a company incorporated in Hong Kong named China Energy Utilization Limited (中華能源利用有限公司) (“CUHK”).

4.  Lai and Wang were the 20% and 80% shareholders in another company incorporated in Hong Kong named China People (Hong Kong) Limited (華漢(香港)有限公司) (“CPHK”) which held 75 of the 100 issued shares in CUHK. Chen indirectly owned the other 25 issued shares. The three individuals were the directors of CUHK.

5.  Lai, Wang, and Chen have been embroidered in disputes and litigation for years. It is not necessary to recite the details of their disputes. Suffice for present purposes to note a few matters as follows.

6.  On 15 May 2013, Wang caused the signing of resolutions to appoint the 4^th Respondent (“Pang”) and a Dan Zhaobin (但召斌) (“Dan”) as directors of CUHK.

7.  On 8 July 2013, Lai commenced proceedings against Wang in HCCW No. 186 of 2013. Chen followed by commencing proceedings in HCCW Nos 187 and 188 of 2013.

8.  By a written resolution dated 12 May 2016, Wang, Pang, and Dan purportedly as directors approved an issue and an allotment of 9,900 shares in CUHK to the 2^nd Respondent (“R2”) for RMB¥10 million. R2 is a company incorporated in Xiangyang City (襄阳市), in Wubei Province, where both Wang and Pang have their household registrations.

9.  According to its corporate filing, R2 is owned by a Zhang Xin (張鑫) (“Zhang”). Wang in one of his affirmations filed in HCA No. 186 of 2013 referred to Zhang as his driver.

10.  By a Judgment dated 30 April 2019 in HCCW Nos. 186-188 of 2013, Mr Recorder Stewart Wong SC found, inter alia, that Wang had caused Lai and Chen to sign the resolutions on 15 May 2013 by violence, and that appointments of Pang and Dan as directors of CUHK were never valid.

11.  Wang, Pang, and Dan ignored the Judgment and continued to file returns for CUHK in disregard thereof. Lai filed different returns, on the basis of the Judgment and the findings therein. On 26 November 2019, Wang commenced proceedings in HCMP Nos. 2184, 2185, and 2187 of 2019 against the 1^st Respondent (“CR”), CPHK, and CUHK unilaterally to seek to validate those returns which his side had filed. Lai intervened and was joined as a defendant.

12.  By a Judgment dated 12 November 2020, Linda Chan J found for Lai and ordered, inter alia, the removal of those returns which Wang’s side had filed.

These Proceedings

13.  The parties had focused their dispute before Linda Chan J on annual returns and notices of changes of directorship. The reliefs sought did not cover and thus her Ladyship’s Order did not refer to the Return of Allotment of 9,900 shares to R2.

14.  In these proceedings, Lai seeks a declaration that the Return of Allotment of 9,900 shares to R2 is false and invalid and an Order that it be removed from the Companies Register.

15.  Lai’s case is straightforward: since Pang and Dan were never validly directors, the written resolution which they approved to issue and allot the 9,900 shares to R2 was also invalid, thus the allotment was valid, and the Return of Allotment a false and invalid document.

16.  In his first affirmation, Lai already specifically mentioned that Zhang was Wang’s driver and that the allotment was a false transaction.

17.  Wang, Pang, and R2 were all along (and still are) commonly represented. They were initially represented by the same firm which acted for Wang in HCCW Nos. 2184, 2185, and 2187 of 2019 (“Firm 1”).

18.  Wang initially filed an affirmation (“Wang 1^st”), on behalf of himself, Pang, and R2, to raise a defence that R2 was a bona fide purchaser for good value without notice, and hence the allotment should remain valid. Wang 1^st did not deny that Zhang was Wang’s driver.

19.  Lai in his reply affirmation pointed out, inter alia, that if what Wang said were true, R2 and Zhang would be the persons with a real stake in the dispute, yet they filed no affidavit evidence of their own.

20.  Wang, Pang, and R2 sought and was granted leave (not by this Court) to file another round of affirmations and to make an application for filing expert evidence on “the validity of the Share Allotment under PRC law”. They later filed a second affirmation of Wang (“Wang 2^nd”) and an affirmation of Zhang (“Zhang 1^st”). There was no application to file expert evidence on Mainland law.

21.  Zhang 2^nd began by stating that Zhang had read Wang 2^nd and would adopt the contents thereof. It went onto say that Zhang was the real owner of R2, and that Zhang through R2 subscribed for the 9,900 shares in CUHK independently of Wang. It did not describe any reason why Zhang would be interested in taking over CUHK, nor indeed any knowledge that Zhang may have of the business of CUHK.

22.  Zhang 2^nd claimed that the RMB¥10 million consideration for the allotment of shares was paid to a subsidiary of CUHK in the Mainland.

23.  As for Zhang being Wang’s driver, Zhang 2^nd said that Zhang did drive Lai for Wang, but denied that he was Wang’s driver.

24.  All of Wang 1^st, Wang 2^nd, and Zhang 1^st were written entirely in English, without any mention of translation or interpretation. Each bore the purported affirmant’s signature, in Chinese, on the last page.

25.  After the signature page was the certificate of notarization (公证书), which followed an apparently standard format. The first line stated the name of the “applicant”, meaning the applicant for attestation. It also recited the person’s date of birth, gender, and identification card number.

26.  The second line stated the subject matter of attestation (公证事项). For all three certificates, the matter was “signing” (签名).

27.  The third line stated the attestation. The exact wording in the three certificates were: (for Wang 1^st) “玆证明王志华于二0二三年八月十四日來到我处，在本公证員的面前，在前面的《AFFIMATION OF WANG ZHIHUA》上签名”; (for Wang 2^nd) “玆证明王志华于二0二四年五月十四日來到我处，在本公证員的面前，在前面的外文文件上签名”, and (for Zhang 1^st) “玆证明張鑫于2024年4月29日來到我处，在本公证員的面前，在前面的英文文件上签名”.

28.  According to the respective certificate of notarization, Wang signed Wang 1^st and Wang 2^nd in front of a notary in Beijing; Zhang signed Zhang 1^st in front of a notary in Xiangyang City.

29.  As I noted earlier, Wang 1^st, Wang 2^nd, and Zhang 1^st were all written entirely in English. The quality of the writing suggests that it was drafted by persons comfortable with the language and likely legally trained.

30.  The back sheet of each affirmation stated the name of Firm 1, its address, and a file/matter number.

The Court’s Concern

31.  When the substantive hearing of this matter came before this Court on 13 November 2024, I asked the parties how the Court is to regard Wang 1^st, Wang 2^nd, and Zhang 1^st.

32.  Common sense says that Mainland persons do not usually use English as a daily language and are unlikely to be comfortable swearing to matters in English under oath. There is no suggestion anywhere that Wang or Zhang had any reason, by education or work experience or otherwise, to have acquired English language skills.

33.  The wording of an attestation of “signing” (签名) is such that the notary public is only attesting that such-and-such an individual, holding an identification card of such-and-such a number, has signed on such-and-such a document. There is no assurance that the signor in fact understands the contents or even the nature of the document. It is also not clear if the notary himself has considered the nature or purpose of the document.

34.  For an affirmation sworn before a notary public or a solicitor in Hong Kong, the notary or solicitor has a professional duty of care and a duty to uphold the administration of justice. If he senses that the deponent may not actually know the contents or the language of the affirmation, his duties will require him to at least inquire or even verify.

35.  I do not know whether Mainland law and/or practice requires the same or impose obligations to similar effect. But even if they do, I do not think it fair or realistic to assume a degree of assurance in every case. For a start, the Mainland is a vast jurisdiction. It is not possible that every notary knows English (let alone other languages) well enough to be able to tell whether a purported deponent understands the language too.

36.  In the present case, suppose Wang or Zhang indeed does not understand English, if something stated in his affirmation(s) turns out to be a lie, he may argue that he did not know about the lie and did not intend to tell the lie, because he did not understand what was stated in the first place! He may even say that some other person (not recorded in affirmation) had mistranslated or misdescribed matters to him.

37.  I put these issues to the parties at the hearing on 13 November 2024 and invited Counsel and solicitors for Wang, Pang, and R2 to address them.

38.  It transpired that Wang, Pang, and R2 have changed their legal representation to another law firm (“Firm 2”). Furthermore, it was not a case of lawyers moving to a new firm and the clients following. I was told that the Counsel and solicitors before me were not in any way involved in the preparation or filing of Wang 1^st, Wang 2^nd or Zhang 1^st and could not speak to whether any thought (mischievous or innocent) had been given to the use of English in their purported affirmations.

39.  After canvassing with Counsel on both sides about whether to press ahead, on their election, I adjourned the hearing and directed that Lai, Wang, and Zhang shall attend the adjourned hearing to be cross-examined. I made clear that there shall not be any top-up oral evidence without leave; that my first question to each person will likely be whether he understands English; and that failure to attend the adjourned hearing would result in the person’s affirmation(s) being rejected or given no weight. I gave Counsel time to speak to their clients about dates; they agreed on 18 December 2024.

The Adjourned Hearing

40.  On 18 December 2024, another team of Counsel and solicitors for Wang, Pang, and R2 appeared before me. Counsel informed that Wang and Zhang had chosen not to attend the hearing, and that there would be no need to cross-examine Lai.

41.  In the circumstances, the dispute (or at least the defence case) has fallen away. I invited Lai to submit a draft Order and, upon review of the draft, granted Lai’s application in terms. I also awarded Lai costs and made summary assessment thereof.

42.  For completeness, I record herein that I accept Lai’s evidence and give no weight to the evidence purportedly by Wang and Zhang. The evidence shows that Zhang and R2 were Wang’s nominees, the allotment of 9,900 shares to R2 was a false transaction, no consideration was given, and R2 was not a bona fide purchaser for good value without notice. I find these matters proved.

Duty of the Lawyers

43.  It is troubling that Wang 1^st, Wang 2^nd, and/or Zhang 1^st could ever have been filed.

44.  Surely it is basic professional sense – indeed common sense – that an affirmation must be understood by the purported deponent. Best if the affirmation is in a language which the deponent fully understands. If, for ease of drafting or communication, it is in another language, it will have to be translated to the deponent.

45.  As is well known, Rules of the High Court, Order 41, rule 1(9) requires:

“Where any affidavit has been interpreted to the deponent before being sworn it shall contain a statement to that effect, state the name and address of the person who interpreted it, and be signed by him.”

46.  A lawyer drafting, settling or filing an affirmation must keep the above in mind. If he forgets, he may well be negligent. If he remembers and does not advise his client accordingly, he is certainly negligent. If he advises his client and the client declines to follow his advice without good reason, he should not be involved in misleading the court.

47.  It bears repeating that a solicitor has a duty not to mislead the court and not to put evidence before the court which is false or misleading. If he innocently put on the file an affirmation which he discovers later to be false or misleading, he has a duty, if he continues to act as solicitor, to put the matter right at the earliest moment: see Hong Kong Civil Procedure 2025, at 41/5/4, citing Myers v Elman [1940] AC 282.

48.  The Court of Final Appeal in Ma So So Josephine v Chin Yuk Lun Francis (2004) 7 HKCFAR 300 upheld an Order of wasted costs (with minor variations) against a solicitor pursuing for a client a claim which she knew to be false. As Li CJ said at the outset at §1:

“The proper conduct of litigation by the legal profession is essential to the administration of justice. This appeal concerns the position of solicitors. They are officers of the court and owe duties to the court in the conduct of proceedings. The court has an inherent jurisdiction to supervise their conduct and to impose sanctions where the solicitor concerned has acted in breach of his duties to the court.”

49.  The Court of Appeal in K.B. Chau & Co. v China Finance Trust and Investment Corporation [1995] 2 HKLR 567 similarly upheld an Order for wasted costs against a firm of solicitors for drafting and filing for a client an affirmation which gave a false and misleading impression.

50.  Barristers should not think themselves immune. Whilst they do not file affirmations for clients, they often help draft affirmations. The risks of being caught up in telling lies are possibly higher.

51.  An affirmation by a deponent logically and necessarily carries a representation that the deponent understands the contents and affirms the same. If a lawyer drafts, settles or files an affirmation for a deponent or a party in a language which he has (or must have) reasons to doubt whether the deponent understands, he risks being implicated in a wrongdoing.

52.  As I noted above, if such a lawyer does not advise his client, he is negligent. If he advises his client but the client disregards his advice without good reasons – and it is difficult to imagine what good reason there could be – he may be affixed with knowledge that the affirmation is indeed false or misleading.

53.  In the present case, the change of solicitors from Firm 1 (who filed the affirmations) to Firm 2 (who attended the first day of hearing when I raised the issues) to a third firm (who in effect abandoned the affirmations) and the change of Counsel between the two days of the substantive hearing leave some questions unanswered. It may be that the lawyers were misled by their clients. It may be that there were other explanations.

54.  I considered making further inquiries. But I am mindful that the parties’ dispute has gone on for years, in multiple sets of proceedings. The present application ought to have been straightforward. Wang, Pang, and R2 have already succeeded in making it complicated and in delaying its resolution.

55.  On balance, I believe that it is more in Lai’s interest to achieve as speedy and as complete an end to this matter as possible. For this reason, I shall not prompt further episodes or complications to these proceedings.

Disposition

56.  As I noted earlier, for the reasons given, I find in favour of Lai and have granted his application in terms.

57.  I thank Counsel and solicitors who appeared on either or both of the two days of the hearing for their responsible and sensible handling of the Court’s queries and suggestions.