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DCCJ 3374/2022
[2023] HKDC 1435
IN THE DISTRICT COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
CIVIL ACTION NO 3374 OF 2022
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BETWEEN
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楊嬡 |
Plaintiff |
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and |
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南華金融控股有限公司 |
1st Defendant |
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TEM HOLDINGS LIMITED |
2nd Defendant |
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（原創新電子控股有限公司） |
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| Before: |
Deputy District Judge Norman Hui in Chambers (Open to Public) |
| Date of Hearing: |
31 July 2023 |
| Date of Decision: |
20 October 2023 |
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DECISION
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1. The plaintiff issued an appeal on 8 May 2023 against the order of Master Patrick Siu dated 24 April 2023 where the statement of claim dated 31 August 2022 (and reply dated 9 November 2022) against the 2nd defendant was struck out upon the 2nd defendant’s application to strike out the same issued on 1 December 2022 pursuant to the Rules of the District Court, Cap 336H, Order 18, rule 19(1)(a), (b), (d).
Preparatory matters leading up to the appeal against the striking out of the statement of claim against the 2nd defendant
2. For the avoidance of doubt, on 25 July 2023, it was the 2nd defendant that filed and served the hearing bundle, dramatis personae and chronology which were used at the appeal despite the fact that it should have been the plaintiff doing so. In any event, the aforesaid documents were not disputed or challenged by the plaintiff. Although the plaintiff did not file any written submissions in support of this appeal, nonetheless counsel for the 2nd defendant, Miss Toni Chan (陳玄同大律師), did file and serve written submissions on 25 July 2023 on behalf of the 2nd defendant.
The statement of claim and the plaintiff’s notice of appeal
3. The statement of claim reads as follows:-
“原告人就下述各項提出申索金額為港幣571,200元
南華金融控股有限公司竟可事前不經我了解和同意創新電子控股有限公司自2020年8月至退市前關於退市和退市價的多份公告和通函包括相關建議、諮詢等，任由創新電子控股有限公司竟以其股票8346股價低迷時的極低價0.0855元（港幣）強行收購我7萬股股票。” (emphasis added)
4. The plaintiff’s appeal against the striking out of the statement of claim against the 2nd defendant was made pursuant to the Rules of the District Court, Cap 336H, Order 58 whereby the relevant particulars of the plaintiff’s notice of appeal were as follows:—
“1. 取消上述命令，即原告繼續申索Tem和Tem自付訟費包括對我的訟費；2. Tem 賠償因其嚴重失責而須還我的應有利益和其衍生費用。
原因：
(1) 熟悉上市公司規則且比較公平公正的港交所曾於2021年12月31日回覆我指出上市公司進行某些行動時，須向股東 (即持其股票者)寄發信函，閣下有權投票反對上市公司董事會提出的建議和計劃；這應是法庭正確判案的指引，依據和關鍵：
2. 請Tem提供以下真實的書面紀錄證明：
(1) 須寄給我（持有其股票的股東）關於其退市和退市價的建議和計劃等的諮詢文件，以及獲得我了解和同意的書面紀錄證明；
(2) 投票決定其退市和退市價的股東姓名、股數、曾購股票的價格和投票情況的書面紀錄證明；未能出席上述投票的股東姓名、股數、曾購股票的價格和未能出席的原因的書面紀錄證明；
3. 我於2023年1月30日致區域法院的誓詞中提到：Tem如何真實準確地確保核實持有其股票的股東清楚其收購股東股票的價格並退市的極重要公司行動包括建議等得到我的了解和同意，有何書面證明? 同時，我也提供了我曾購買Tem股票成為其股票的證明，所以，法庭在未清楚了解事實和真相前在2023年4月24日宣判剔除我對Tem的申索是錯判。”
5. The notice of appeal does not provide any clear ground(s) why the statement of claim should not have been struck out against the 2nd defendant per se but rather it is more a combination of observations and demands made against the 2nd defendant. Nonetheless, matters relating to the notice of appeal shall be dealt with later in this decision.
Appeal from master and striking out
6. This appeal is made pursuant to the Rules of the District Court, Cap 336H, Order 58 where it is trite that an appeal from a master to a judge in chambers is dealt with by an actual rehearing of the application which led to the order under appeal and the judge treats the matter as though it came before him for the first time. The judge will give the weight it deserves to the previous decision of the master but is in no way bound by it.
7. The 2nd defendant cited Yifung Properties Ltd & Ors v Manchester Securities Corp & Ors, HCA 1341 & 1359/2014, 19 October 2015, where Au-Yeung J held that each limb under Order 18, rule 19(1) forms a separate ground for striking out as is evidenced by the disjunctive “or”. As such, even if a cause of action might appear to be reasonable on the face of the pleading, the court is still at liberty to consider evidence and decide if the pleading should be struck out under another limb.
8. It will be noted that in Leung Kwai Ling v HK Glory Properties Ltd, HCA 347 & 432/2013, 28 November 2013 at §51 where DHCJ Marlene Ng (as she then was) also found that a party may apply for striking out on the basis of not just a singular part of Order 18, rule 19(1) such as Order 18, rule 19(1)(a), but also on the grounds under Order 18, rule 19(1)(b) to (d) as well in an alternative or cumulative manner.
9. At this appeal of the plaintiff, the 2nd defendant maintained its position to strike out the statement of claim pursuant to the Rules of the District Court, Cap 336H, Order 18, rule 19(1)(a) as its primary ground and Order 18, rule 19(1)(b) and (d) in the alternative.
10. Order 18, rule 19 reads as follows:-
(1) The court may, either of its own motion or on application, at any stage of the proceedings order to be struck out or amended any pleading or the indorsement of any writ in the action, or anything in any pleading or in the indorsement, on the ground that—
(a) it discloses no reasonable cause of action or defence, as the case may be; or
(b) it is scandalous, frivolous or vexatious; or
(c) it may prejudice, embarrass or delay the fair trial of the action; or
(d) it is otherwise an abuse of the process of the court,
and may order the action to be stayed or dismissed or judgment to be entered accordingly, as the case may be.
11. As cited by the 2nd defendant as a trite and principal proposition, as pursuant to Hong Kong Civil Procedure 2023, Vol 1, §18/19/4, it is only in plain and obvious cases that the court should exercise its summary powers to strike out the indorsement on any writ or any pleading under O 18 r 19. Disputed facts were to be taken in favour of the party sought to be struck out. The applicant bears the burden to show a plain and obvious case in order to strike out the plaintiff’s claim but plain is not the same as simple and obvious since if a statement of claim however complicated, if it can be seen that there is no cause of action, a court can, and probably will, order it to be struck out.
12. Furthermore, pursuant to Hong Kong Civil Procedure 2023, Vol 1, §18/19/7, a proceeding is frivolous when it is not capable of reasoned argument, without foundation or where it cannot possibly succeed. The 2nd defendant also relies on the commentary from Yifung (ibid.) where it was held that where a litigant brings a claim knowing that there is no substance in it or that it is bound to fail, or if the claim is on its face so manifestly misconceived that it can have no prospect of success, it may be deemed frivolous and an abuse of process.
No reasonable cause of action
13. The 2nd defendant proceeded under Order 18, rule 19(1)(a) as its primary position for striking out the statement of claim since it discloses no reasonable cause of action. After fully considering the statement of claim and understanding that the 2nd defendant bears the burden that only in plain and obvious cases that the court should exercise its summary powers to strike out the statement of claim, I do strike out the statement of claim against the 2nd defendant. From a comprehensive reading of the statement of claim, I find that there has not been any reasonable cause of action pleaded against the 2nd defendant.
14. Firstly, the plaintiff has not pleaded any cause of action against the 2nd defendant which is necessary since the material facts and thereafter the corresponding relief are dependent on the same.
15. Secondly, the statement of claim pleads that the plaintiff did not understand what was being done to her shares in the 2nd defendant nor did the plaintiff consent to how her shares in the 2nd defendant were being dealt with. Such complaints against the 2nd defendant were made without pleading what was the specific relationship between the plaintiff and the 2nd defendant and more importantly how, why or what any duty and/or responsibility was to be imposed on the 2nd defendant to the plaintiff that would allow for such complaints to be made. Notably, there is reference in the statement of claim to the 1st defendant having some role in the statement of claim whereby the said company had generally owed the plaintiff an explanation and her consent regarding the 2nd defendant’s shares but there is no or no clear link between the two defendants and more importantly no or no clear duty imposed on the 2nd defendant in this action.
16. Thirdly, the statement of claim pleads that the shares in the 2nd defendant were forcibly sold during a downturn at an extremely low price. Such complaints against the 2nd defendant were made without pleading under what conditions the said shares were forcibly sold, what was deemed to be a downturn, when exactly was the purported downturn or why there was a downturn. Furthermore, the plaintiff did not plead nor had any basis to plead that the price in the shares in the 2nd defendant was extremely low without stating what was expected as a fair price or in fact pleading why it was an extremely low price, in particular when there has not been pleaded any facts or factual basis for pricing of the 2nd defendant’s shares at all.
17. Fourthly, the statement of claim pleads that the plaintiff “claims” $571,200 against the 2nd defendant. Although the statement of claim does indicate the plaintiff was holding 70,000 shares of the 2nd defendant at the time when the 2nd defendant’s shares were sold on an unspecified date in August 2020, there is no factual basis whatsoever for how this would equate to there being a “claimed” amount owed to the plaintiff in the sum of $571,200 from the 2nd defendant.
Frivolous proceedings
18. I have already found that the statement of claim is to be struck out against the 2nd defendant for there being no reasonable cause of action disclosed but for the sake of completeness, I have also considered the 2nd defendant’s alternative basis under Order 18, rule 19(1)(b) that the plaintiff’s statement of claim is frivolous. For reasons to be explained hereinbelow, I again find that the statement of claim should be struck out.
19. The 2nd defendant has provided unchallenged evidence relating to the process of how the 2nd defendant’s shares were dealt with as explained hereinbelow.
20. The 2nd defendant’s entire process of privatization and the cancellation of its listing status was conducted according to the relevant rules and regulations which took place in stages with the relevant announcements issued to the public. As such, the 2nd defendant issued via the Hong Kong Stock Exchange to the general public the said relevant announcements from 22 September 2020 to 11 January 2021 which were checked and confirmed by the Securities and Futures Commission as being proper.
21. It will be noted that the 2nd defendant on 22 September 2020 also issued its offeror recommendation announcement regarding privatization and every cancelled share of the 2nd defendant was to be at a value of $0.0855. In relation to such matters, various other relevant information was released, namely, details of the relevant legal procedures undertaken in the Cayman Islands, obtaining of the shareholders’ EGM resolution and its approval, timetable of the privatization proposal and the cancellation of the 2nd defendant’s listing status, effective date of the privatization proposal and the cancellation of the 2nd defendant’s listing status. Again, all of the foregoing matters were made available to the general public.
22. In fact, in the plaintiff’s affirmation dated 30 January 2023 she stated that after she received a letter about the 2nd defendant’s shareholders meeting in November 2020, the plaintiff thereafter contacted “南華” which is presumably the 1st defendant , about what was going to happen at the said meeting but that “南華” only replied that it was important. In this said affirmation of the plaintiff dated 30 January 2023 and verbally in court upon being asked again, the plaintiff replied that she knew of when and where the 2nd defendant’s shareholders meeting would take place but that she was busy and was therefore unable to attend.
23. The 2nd defendant carried out its EGM with a sufficient amount of its shareholders present sufficient for and it was agreed by its shareholders the process and results from privatization and cancellation of its listing status. It will be noted that even if the plaintiff had voted against the various resolutions at the EGM, the plaintiff holding 70,000 shares in the 2nd defendant (accounting for only approximately 1.33% of the shares) would not have changed the outcome of the EGM.
24. The plaintiff was at all times aware of the details relating to the EGM, such details were also made to the general public and publicly accessible, but chose not to attend the same. Furthermore, even if the plaintiff had attended the EGM and voted in a way consistent to her choice, her presence and vote would not have changed the outcome in any event. Given the foregoing, the statement of claim does not have any substance, is bound to fail, has no prospect of success and is hereby struck out against the 2nd defendant as being frivolous.
Abuse of the process of the court
25. This ground for striking out the statement of claim under Order 18, rule 19(1)(d) was not substantially pursued by the 2nd defendant whereby the court may find that it is an abuse of process to start a case without solid foundation, hoping that something will turn up in the course of the proceedings, a situation similar to the present case. However, I need not make any distinct finding on the same given my foregoing reasons for striking out have already satisfied Order 18, rule 19(1)(a) and (b).
The plaintiff’s notice of appeal and the reply
26. Again for the sake of completeness, although I have struck out the statement of claim against the 2nd defendant, I shall also briefly deal with the plaintiff’s notice of appeal and reply.
27. The plaintiff’s notice of appeal sought relief against the 2nd defendant by claiming that, inter alia, the order of Master Patrick Siu be set aside and that the plaintiff be entitled to continue its claim against the 2nd defendant. The plaintiff’s notice of appeal further states that due to the 2nd defendant’s serious negligence, the plaintiff was entitled to monetary relief (as claimed in the statement of claim). In summary, the plaintiff has stated that the reasons for such relief to be granted in the notice of appeal was because she had the right to vote (at the EGM) and that the relevant and authentic written records relating to the details of the EGM should be provided to her (implicitly meaning that the written records were not provided to her). The plaintiff’s verbal submissions at the appeal were essentially the same as in the notice of appeal.
28. Given my foregoing findings relating to the striking out of the statement of claim against the 2nd defendant, the plaintiff’s notice of appeal simply does not have any validity. The 2nd defendant was not negligent nor was the plaintiff denied any access to the EGM or the relevant documents as claimed. The plaintiff was aware of the relevant details of the EGM and the relevant documentation was available and accessible to the plaintiff and general public.
29. The reply pleads that before the 2nd defendant acquired the plaintiff’s 70,000 shares at $0.0855 per share, the plaintiff was dissatisfied with “南華證券” which is presumably the 1st defendant, since there was no confirmation that ensured that the plaintiff had understood what was going to happen to her shares nor did the plaintiff grant her consent on how her shares were to be dealt with.
30. The statement of claim has already been struck out against the 2nd defendant and the plaintiff’s claim is at an end, but nonetheless for the sake of completeness I strike out the reply. Furthermore, as previously mentioned, the plaintiff was not denied any access to the EGM or the relevant documents as claimed. It again bears repeating that the plaintiff was aware of the relevant details of the EGM and the relevant documentation was available and accessible to the plaintiff and general public.
Conclusion
31. Having considered the submissions of the parties and all the relevant documents before me, I dismiss the plaintiff’s appeal and the statement of claim (and reply) is hereby struck out against the 2nd defendant.
Costs
32. I make a costs order nisi that the plaintiff do pay costs of and incidental to this appeal to the 2nd defendant forthwith, with certificate for counsel, to be taxed if not agreed.
33. The foregoing order nisi shall become absolute in the absence of application to vary by summons within 14 days from the date hereof.
34. Should the plaintiff require translation of this decision into Punti, she may contact my clerk to arrange for an appointment for a court interpreter to verbally translate this decision to her at the District Court Building at a mutually convenient time. Furthermore, the 2nd defendant must serve on the plaintiff a Chinese translation of the sealed copy of the order together with the sealed copy of the order made herein.
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( Norman Hui )
Deputy District Judge
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The plaintiff appeared in person
Miss Toni Chan, instructed by Chung & Kwan, for the 2nd defendant
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