RIGHTEARTH DEVELOPMENT LTD v. CHAN LAI LING

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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REASONS FOR JUDGMENT

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1. The plaintiff's action claims a declaration against the defendant that she has no right or authority to manage or act for the plaintiff, to use the company chop or claim herself to be a director of the plaintiff, and that the defendant does not derive any such authority from the will of her deceased husband, Mr Chun Po Shek. The plaintiff seeks this declaration because the defendant has been purporting to exercise the rights mentioned. On 9 November 1998, the plaintiff issued a summons under Orders 14 and 14A. On 14 December 1998, after hearing argument, I granted the declaration, with costs against the defendant, and said I would hand down reasons later. These are those reasons.

2. At the outset of the hearing, I asked Mr Shum to clarify the defendant's case. He told me that the defendant admitted doing the acts complained about by which she asserted the rights mentioned above. Mr Shum said that the defendant's case was that she was entitled to do so as the secretary of the plaintiff and its sole beneficial shareholder. It emerged further during the course of Mr Shum's argument that the defendant accepted that the only two directors of the plaintiff were validly appointed and that the defendant did not have any present right to manage the affairs of the plaintiff. However, he urged me to look behind the formal position to the substance of the defendant's case. What emerges from this is that the defendant says that one of the directors of the plaintiff, Mr Chim Pui Chung, who, with Mr Chun, constituted the board of directors of the plaintiff, and who, after Mr Chun's death, appointed the other director, is holding office as a kind of trustee for Mr Chun, and now holds that office as trustee for his estate, of which the defendant says she is executor. There is a dispute about this, but it seems to me that it is a dispute that does not matter for the purposes of considering the plaintiff's claim. The estate may well have remedies against Mr Chim, but I cannot see that what the defendant avers can make any possible difference to the plaintiff's right to have a declaration saying that the defendant has no present right to assert a right to take part in the management of the plaintiff. I read the declaration to Mr Shum, and he agreed that, if granted, every word of it would be an accurate statement of the factual and legal position. The only basis on which that declaration is made is that the present directors are validly appointed and have the right, as directors, to manage the plaintiff's affairs, none of which is denied by the defendant. Nothing in that declaration affects what the defendant says are her rights under her counterclaim. Whatever the truth of the defendant's case, the directors have a duty to protect the interests of the plaintiff. The declaration does nothing but seek to do this. It cannot possibly be in the interests of the plaintiff, or, indeed, the defendant herself, to have two camps asserted the right to manage the plaintiff's affairs. This would obviously cause confusion amongst those with whom the plaintiff has dealings and could easily harm the plaintiff's interests.

3. Fort these reasons, I granted the declaration sought.