XCHRX ACTCORP INVESTMENTS LTD. v. CHOI SAI LEUNG

HCA 10603/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 10603 OF 2000

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D E C I S I O N

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1. This is the Plaintiff's application to continue an ex parte injunction order granted on 22 December 2000.

2. The Plaintiff is a company incorporated in Hong Kong. According to the Plaintiff's evidence, in March 1995, the Plaintiff entered into a joint venture with a US partner and a partner in the mainland. The joint venture business is a restaurant/karaoke lounge located and operated in Beijing known as Beijing Shark's Fins King Restaurant Co. Ltd., (北京魚翅皇酒樓有限公司).

3. It appears to be undisputed that in September 1998, a Greater China Strategic Investment Ltd. acquired all the Plaintiff's shares and in effect became its new owner. The Defendant resigned as a director of the Plaintiff in April 1999. There seems to be no question that since then the Defendant's relationship with the Plaintiff was completely severed.

4. According to the Plaintiff, the mainland law requires that legal representatives be appointed for the joint venture business. The Defendant has been the legal representative for the Plaintiff since the beginning of the joint venture business. It was intended as part of the transfer of shares in September 1998 that the Defendant's position as the Plaintiff's legal representative in the joint venture business should be replaced by someone from the Plaintiff's new owner. The evidence filed by the Plaintiff suggests that the Defendant was co-operative in this respect and he has signed a number of documents confirming (1) the new appointee's authority and (2) the Defendant's position had been taken over: see exhibits YC-3 to YC-7 to the affirmation of Yang Chang dated 22 December 2000. Although it is unclear where these documents were signed by the Defendant, they were clearly executed for the purpose of the joint venture business in Beijing.

5. The formality for changing the name of the Plaintiff's legal representative in the mainland was however not effected because of difficulties encountered which are unrelated to the present application.

6. The alleged wrongdoing of the Defendant giving rise to this action and the ex parte application for an injunction order arose as follows. In November 2000, the board of directors of the joint venture business resolved to conduct a financial review. To put the matter shortly, as a result of the financial review by the representative of the new owner, it was discovered that the joint venture's company seal, the company chops and some accounting documents in Beijing were missing. Also missing was RMB10 million which was transferred out of the joint venture's accounts. The general manager of the joint venture, one Madam Wong Yuk Fan (黃玉芬), also disappeared.

7. It is the Plaintiff's case that Madam Wong has under the Defendant's instructions removed the above said items and in effect misappropriated the said sum. The Plaintiff contends that this was achieved by the Defendant purporting to authorize Madam Wong inter alia to open a separate account to deal with the joint venture's funds and to keep the company's seal, chop and legal documents. The Defendant's letter of authorization to Madam Wong was dated 29 November 2000, well after he has handed over his position in the joint venture business to the representative of the Plaintiff's new owner.

8. It is unclear as to the cause of action which the Plaintiff relies upon to commence this action because this is not stated in the Indorsement of Claim. But leaving that aside, the ex parte order sought by, and granted to, the Plaintiff reads:

"The Defendant by his agents or servants or otherwise howsoever be restrained from representing, or from holding out as an [sic] representative of, the Plaintiff in the joint venture company Beijing Shark's Fins King Restaurant Co. Ltd. (北京魚翅皇酒樓有限公司) of 北京市西城區復外南小區1號樓中化大厦二層 ...... and from otherwise intermeddling in the business of the JV company or the management of its affairs purportedly as a representative of the Plaintiff save and except with the prior proper authorization or instruction by the Plaintiff ...."

9. The basis of the ex parte application appears to stem from para. 17 of Yang Chang's affirmation which stated:-

"I am informed and verily believe that the Defendant is still in Hong Kong. I am also aware that the Defendant is now in serious financial difficulties, and I verily believe that unless restrained by this court, the Defendant would continue to purportedly act as the representative of the Plaintiff in the JV company (either as the authorized representative "of the Plaintiff in the JV company, or as the chairman and/or as the legal representative of the JV company") and do further acts detrimental to the interests of the Plaintiff."

10. The assertion that the deponent believed that unless restrained by the Hong Kong court, the Defendant would continue to purportedly act as the Plaintiff's representative is not supported by any objective factual basis. The alleged wrongdoing of the Defendant (set out above) was an act apparently committed not in Hong Kong but in Beijing. It already took place and there is no evidence to suggest that the Defendant will (or can) direct other individuals (Madam Wong having now disappeared) to commit other wrongs against the joint venture.

11. Even if there is somehow some risk of this happening, I do not see why legal action cannot be commenced in the mainland to deal with the problem. If it is the Plaintiff's case that the Defendant has misappropriated its funds, the appropriate relief would have been an injunction in the nature of a Mavera order rather than the order sought and obtained by the Plaintiff.

12. Mr Chan for the Defendant indicated to the Plaintiff before today's hearing that the Defendant opposes this application, that the Defendant will seek time to file and serve opposing evidence and that the Defendant would agree to the continuation of the ex parte order in the meantime. When I enquired with Mr Chan why he agreed to the continuation of the order, he informed me that he only received instructions yesterday and did not have sufficient time to consider the matter. In these circumstances, I do not find that his so-called "agreement" should affect the way in which I should approach this application.

13. In short, by reason of the matters aforesaid, I fail to see any proper basis for the Plaintiff to have sought the order of 22 December 2000. There is also no proper basis to have it continued or to grant a new order in similar terms. The ex parte order is therefore discharged and this application is dismissed.