LUCK CONTINENT LTD v. CHENG CHEE TOCK THEODORE AND OTHERS

CACV 107/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 107 OF 2012

(ON APPEAL FROM HCMP NO. 702 OF 2010)

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JUDGMENT

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Hon Lam VP (giving the Judgment of the Court):

1.  We handed down our judgment on 2 August 2013 dismissing the appeal by the Respondent Shareholders. On 26 August 2013, the Respondent Shareholders filed an Application for Leave to Appeal and a Notice of Motion seeking leave to appeal to the Court of Final Appeal against our judgment.

2.  In the Application for Leave, the Respondent Shareholders set out four questions which, they contended, ought to be submitted to the Court of Final Appeal for decision because of their great general or public importance:

“1. Whether, in the context of the meaning of the term “unfairly prejudicial” in Section 168A of the Companies Ordinance (Cap 32) and for the purpose of superimposing equitable considerations on the exercise of the shareholder’s strict legal rights, the equitable considerations can only be of a personal character arising between shareholders inter se and whether the requisite unfairness must arise from the personal relationship, understanding and/or dealings between the shareholders inter se?

2. Whether, in the same context, an agreement between a company and a third party (not being a shareholder in the company) can give rise to equitable considerations subject to which a shareholder must exercise his/her strict legal rights?

3. Whether, in the context of a company listed on the Hong Kong Stock Exchange, a tripartite agreement for the maintenance of the listing status of the company between the shareholders inter se as well as the company can be found on the bases of:

(a) The shareholders having acquired the company’s shares on the premise that its listing status would not be jeopardized; and

(b) An implicit promise by the company (by virtue of its being listed) to the shareholders that it would comply with the Listing Rules so as not to jeopardized its continued listing?

4.   Whether, in the same context, such an agreement is capable of giving rise to considerations of a personal character arising between shareholders inter se which may affect the exercise of a shareholder’s strict legal rights?”

3.  The Motion was originally scheduled to be heard on 6 January 2014.  The lapse of time between the filing of the application and the hearing date is partly due to the difficulty in matching the diaries of all three members of the court and partly due to other reasons.  In order to reduce the processing time of applications of this nature, in line with the spirit of Order 1A, a new practice has recently been introduced: after the filing of the application for leave to appeal, the court will enquire with the parties (by letter) to see whether they are agreeable to have the application dealt with by way of paper disposal.  If the parties are agreeable, the court will give directions for lodging written submissions.  After reading the written submissions of the parties, the court will give the decision on leave and a hearing will not be required.

4.  In accordance with such practice, enquiry was duly made with the parties.  On 3 December, both the Respondent Shareholders and the Petitioner wrote to the court through their solicitors indicating their agreement to have the application for leave processed by way of paper disposal.  Directions were given for the lodging of written submissions and they were filed accordingly.  The hearing date of 6 January was vacated.

5.  In the written reply of 30 December 2013, the Respondent Shareholders abandoned their application in respect of Question 2.

6.  Having considered the submissions of the parties, though this case arises out of a very special set of circumstances as outlined in our judgment, we see reasonable scope for argument on Questions 1 and 4.  For the sake of clarity, we would revise slightly the wording of Question 4 as follows,

“If the answer to Question 1 is ‘Yes’, whether a tripartite agreement for the maintenance of the listing status of the company between the shareholders inter se as well as the company is capable of giving rise to considerations of a personal character arising between shareholders inter se which may affect the exercise of a shareholder’s strict legal rights?”

7.  We are satisfied that these are questions of great general or public importance.

8.  As regards Question 3, it is primarily a factual question.  As stated at paras 84 and 85 of our judgment of 2 August 2013, there was no challenge to the findings by the judge on the primary facts before us. The salient features in the relevant factual matrix are set out at paras 74 to 77 of our judgment and Question 3 did not refer to all relevant features giving rise to the tripartite agreement.  These features distinguish the present case from the other authorities cited by Mr Joffe.  We do not deem it appropriate to grant leave in respect of this question. 

9.  We shall grant leave to appeal accordingly. Costs of the application will be costs in the cause of the appeal to the Court of Final Appeal.

10.  The parties have not addressed the question as to the terms on which leave should be granted.  We direct that if parties can agree on the terms, they should submit jointly a draft order for our approval within 14 days.  If there is disagreement on any term, they should each submit, again within 14 days, their respective version of the proposed order for our determination on paper.