GLORY SHINING LTD v. PAI CHIA HUI FENICE PROPERTY LTD

HCMP 2351/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2351 OF 2014

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DECISION
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INTRODUCTION

1. I have before me an originating summons issued by the plaintiff (Glory Shining Limited) on 22 September 2014 seeking a rectification of the register of members of the 2^nd defendant (Fenice Property Limited).

BACKGROUND FACTS

2. The background facts relevant to the present application can be shortly stated as follows.  The plaintiff is a Hong Kong company limited by shares.  It has only one issued share with a nominal value of HK$1.00.

3. By an instrument of transfer dated 31 May 2011, Hung Ling-Ling (“Hung”) transferred the one issued share in the plaintiff to Yau Ya-ming (“Yau”), who has since become the sole shareholder of the plaintiff.  Yau is also the sole director of the plaintiff.

4. The 2^nd defendant is a Hong Kong company limited by shares.  As at 25 March 2014, the 2^nd defendant had an issued share capital of HK$40,000.00 divided into 40,000 shares of HK$1.00 each.

5. According to Yau, the plaintiff was at all material times, and is, the owner of 3,000 shares in the 2^nd defendant.  However, in or about April 2014, he found out that the plaintiff’s 3,000 shares in the 2^nd defendant had purportedly been transferred to the 1^st defendant, Pai Chia-Hui, on 5 August 2013 without his knowledge.

6. Upon inquiry made through the plaintiff’s solicitors, the 2^nd defendant produced (inter alia):-

(1) A sold note dated 5 August 2013 evidencing the sale by the plaintiff of 3,000 shares in the 2^nd defendant to the 1^st defendant for the consideration of HK$1.00 per share.  The sold note was purportedly executed by or on behalf of the plaintiff.  The execution consisted of the signature of a person bearing the Chinese name of “Yau Ya-ming” and the stamp of a company chop bearing the English and Chinese names of the plaintiff.

(2) A bought note dated 5 August 2013 evidencing the purchase of 3,000 shares in the 2^nd defendant from the plaintiff for the consideration of HK$1.00 per share.

(3) An instrument of transfer dated 5 August 2013 whereby the plaintiff transferred 3,000 shares in the 2^nd defendant to the 1^st defendant for the consideration of HK$1.00 per share. The instrument of transfer was also purportedly executed by or on behalf of the plaintiff.  Like the sold note, the execution consisted of the signature of a person bearing the Chinese name of “Yau Ya-ming” and the stamp of a company chop bearing the English and Chinese names of the plaintiff.

7. In his affirmation filed on 22 September 2014, Yau stated that the sold note and instrument of transfer were not signed by him, and they were “not stamped by the Plaintiff’s company chop”.  In other words, according to Yau, the sold note and instrument of transfer are forged documents.

8. On 4 May 2015, the 2^nd defendant, through its solicitors, sent a copy of its register of members to the plaintiff’s solicitors. The register of members shows that the 2^nd defendant has currently 3 members, namely:-

(1) the 1^st defendant, holding12,000 shares;

(2) Chan Wing Hung, holding 840,000 shares; and 

(3) Yuen Wo Investment Company Limited, holding 348,000 shares.

9. It also appears from the register of members of the 2^nd defendant that:-

(1) of the 840,000 shares currently registered in the name of Chan Wing Hung, 812,000 shares were allotted on 12 June 2014;

(2) all the 348,000 shares currently registered in the name of Yuen Wo Investment Company Limited were allotted on 12 June 2014.

10. In other words, a total of 1,160,000 shares in the 2^nd defendant were allotted subsequent to the date of the purported transfer of 3,000 shares by the plaintiff to the 1^st defendant.  The issue of the validity of the aforesaid allotments is not a matter for determination in this application and I shall not make any further comment on these allotments.

The defendants’ position

11. At the hearing of the originating summons on 2 September 2015, the 1^st defendant appeared in person while the 2^nd defendant was represented by Mr Chiu of Messrs Simon C W Yung & Co.

12. The 1^st defendant did not file any evidence in opposition to the plaintiff’s application, but asked for an extension of time to enable him to do so.  According to the 1^st defendant, he was the beneficial owner of the plaintiff, and Hung originally held the one issued share in the plaintiff on his behalf.  In or about 2011, as a result of discussion between the 1^st defendant and Yau’s nephew, the 1^st defendant borrowed some money from Yau and provided securities for the loan.  The securities included the one issued share in the plaintiff, which held (inter alia) 3,000 shares in the 2^nd defendant (the subject matter of this application).  It was for this reason that the 1^st defendant caused Hung to transfer the one issued share in the plaintiff to Yau on 31 May 2011.

13. According to the 1^st defendant, he had fulfilled all his repayment obligations in 2012 or 2013, and asked for the return of the securities.  Yau’s nephew (whom the 1^st defendant dealt with all along in relation to the loan obtained from Yau) then produced, inter alia, the aforesaid instrument of transfer and bought and sold notes dated 5 August 2013 in respect of the 3,000 shares in the 2^nd defendant apparently duly executed by or on behalf of the plaintiff.  The 1^st defendant said that he had signed on the instrument of transfer and bought note first and then gave them to Yau’s nephew, who later returned the documents completed with the signatures of the plaintiff.  The 1^st defendant had no reason to doubt the authenticity of the plaintiff’s signatures, and gave the fully executed documents to his accountant who arranged for them to be stamped.

14. On the above basis, the 1^st defendant objected to the plaintiff’s application and asked for time to file evidence to resist the present application.

15. Mr Chiu informed the court, on behalf of the 2^nd defendant, that the 2^nd defendant would maintain a neutral position in relation to the present application.

Discussion

16. The present application concerns the validity of the purported transfer of the 3,000 shares in the 2^nd defendant by the plaintiff to the 1^st defendant.  The issue of the beneficial ownership of the one issued share in the plaintiff is not a matter raised for determination in the present application.  Even on the basis of the 1^st defendant’s unsworn statement made in court, there is no challenge to Yau’s evidence that the aforesaid instrument of transfer and sold note dated 5 August 2013 were not executed by or on behalf of the plaintiff.  In these circumstances, it seems to me that no useful purpose would be served by granting leave to the 1^st defendant to file evidence out of time.  I therefore refuse the 1^st defendant’s application for an extension of time to file evidence.

17. On the basis of Yau’s evidence, which I accept, the instrument of transfer and bought and sold notes dated 5 August 2013 in respect of the 3,000 shares in the 2^nd defendant are not valid instruments.  Accordingly, the 2^nd defendant’s register of members ought to be rectified to reinstate the name of the plaintiff as the holder of 3,000 shares in the 2^nd defendant.

18. Nothing in this decision shall affect the 1^st defendant’s right to commence separate proceedings, if he so wishes, to claim against Yau for the one issued share in the plaintiff.

19. In all, I make an order in terms of paragraphs (1), (2) and (4) of the originating summons.

20. As for costs, I order that:-

(1) the 1^st and 2^nd defendants shall pay to the plaintiff its costs of this application, to be taxed if not agreed; and

(2) the 1^st defendant shall pay to the 2^nd defendants its costs of this application, to be taxed if not agreed, and shall further indemnify the 2^nd defendant in respect of any costs which it is required to pay to the plaintiff pursuant to sub-paragraph (1) above.