NEW HEALTH ELITE INTERNATIONAL LTD v. GOLD SWING ENTERPRISES LTD AND ANOTHER

HCA 1720/2019

[2019] HKCFI 2520

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1720 OF 2019

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REASONS FOR DECISION
AND
DECISION ON COSTS

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1.  These are my reasons for dismissing the interlocutory summons taken out by the plaintiff (“NHE”) on 8 October 2019 which came on to be heard before me as the Summons Judge on 11 October.

2.  The salient facts relevant for my decision fall within a narrow compass.  NHE, the 1^st defendant (“Gold Swing”) and the 2^nd defendant (“Smart Base”) are the shareholders in Golden Oasis Health Ltd (“Company”) holding 61%, 20% and 19% of its shareholding respectively.  There is a dispute between them as to whether the Company can be called upon to repay certain sums apparently owing to the defendants as shareholders’ loans without the consent and approval of the other shareholder, namely, NHE.  NHE contends that those sums are in truth injected into the Company in the nature of capital and not repayable on any demand made by the defendants without NHE’s concurrence.  It is said that this is an implied term in the Shareholders Agreement between NHE and the defendants, and that NHE has a right, personal to itself, to enforce that term.

3.  On this basis, NHE has on 18 September 2019 issued the writ of summons in this action claiming (1) a declaration to that effect, (2) an injunction to restrain the defendants from “proceeding, causing or continuing to cause the winding up of the Company, including by applying for or proceeding to apply for the appointment of provisional liquidators, purportedly to enforce the repayment of the shareholders’ loans made to the Company”, and (3) damages.

4.  By the interlocutory summons dated 8 October, NHE seeks an injunction in the same terms as that prayed for in the writ, pending the determination of the action.  Although at the hearing on 11 October, Mr Wright, who appeared for NHE, only sought directions for the filing of evidence and a further conduct of the summons, I agreed with Mr Suen SC’s submission that it should be dismissed forthwith.

5.  First, the application for interlocutory injunction was made extremely late.  The relevant statutory demands were issued by both defendants to the Company on 18 April 2018.  A winding up petition (HCCW 155/2018) was presented by Smart Base on 14 June 2018, in which Gold Swing is a supporting creditor.  On 24 August 2018, Gold Swing presented its own petition (HCCW 236/2018) for the winding up of the Company, in which Smart Base in turn is a supporting creditor.  On 15 November 2018, Gold Swing’s petition was set down for substantive hearing on 15 October 2019.  Various steps have been taken in the petition proceedings, not only by Gold Swing and Smart Base, but also by NHE itself as an opposing contributory, including an attempt in November 2018 to stay Gold Swing’s petition pending Smart Base’s petition, and a subsequent application by NHE to stay Gold Swing’s petition on the basis of an arbitration clause in the Shareholders Agreement, recently dismissed by Anthony Chan J: [2019] HKCFI 2173.  NHE’s summons in the present action, taken out as it was just one week before the trial of Gold Swing’s petition, was one and a half year’s late, and late without explanation.  As stated by Anthony Chan J in Dorshare Ltd v Shun Pong Ltd (unrep, HCA 1823/2012, 4 January 2013) at §16, a bad case of unexplained inordinate delay can constitute an abuse of process.

6.  Secondly, the same point relied upon for the injunction sought by this summons is being raised both by the Company and NHE in opposition in the winding up proceedings.  Mr Wright stated that NHE was not seeking to use the present proceedings to obtain an adjournment of the hearing of Gold Swing’s petition.  On the basis that the petition is duly heard on 15 October, in due course it will either be granted or dismissed.  Either way there is no need or basis for an extraordinary interlocutory injunction which seems to have no purpose other than interfering with those proceedings which are going to take place before a judge of coordinate jurisdiction with this court.  Indeed, an issue estoppel may well arise from the court’s decision on the question whether the loans can be called by Gold Swing. 

7.  The reliance that Mr Wright sought to place on Smart Base’s petition as justifying the need for an interlocutory injunction is, in my view, misplaced because it seems to everyone involved that the two petitions stand or fall together (at any rate in relation to the point that is common with this action).

8.  In the circumstances, I do not see that the present summons has any point or prospect.

9.  As for costs, NHE shall pay the defendants’ costs on an indemnity basis because the summons was so late and so pointless as to be a waste of time.  There will be a certificate for one counsel only as the matter is in my view fairly straightforward.