ASPIAL INVESTMENT LTD AND ANOTHER v. MAYER HOLDINGS LTD AND ANOTHER

HCMP 2906/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 2906 OF 2013

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REASONS FOR DECISION

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I. INTRODUCTION

1. The 1^st and 2^nd plaintiffs (“Aspial and Bumper”) are companies incorporated in the British Virgin Islands (“BVI”).  The 1^st defendant (“Mayer HK”) is a Cayman Islands company registered under Part XI of the Companies Ordinance Cap 32 (“CO”), and its shares are listed on the Main Board of the Stock Exchange of Hong Kong (“SEHK”). Its head office is in Hong Kong and its principal place of business is in Wanchai, Hong Kong (“Wanchai Address”).  Mayer HK’s Hong Kong branch share registrar and transfer office is the 2^nd defendant (“Computershare”).  Trading of the Mayer HK shares has been suspended since 9 January 2012.

2. Mayer Corporation Development International Limited (“Mayer BVI”) is a BVI company and a substantial shareholder of Mayer HK.  It held 200 million Mayer HK shares represented by certificates Nos 70 and 71 (“Certs Nos 70 and 71”) in its name.  On 11 January 2012, Aspial and Bumper respectively agreed to purchase 100 million Mayer HK shares, and they submitted the stamped executed transfer forms in respect of Certs Nos 70 and 71 to Computershare for processing.  Computershare refused to execute the transfer because Mayer BVI had reported to the police that those certificates had been lost and it had applied to Computershare for replacement certificates.

3. Aspial and Bumper commenced HCA238/2012 against Mayer BVI for inter alia a declaration that they were entitled to be registered as respective owner of 100 million Mayer HK shares.  Shortly thereafter, Mayer BVI commenced HCCL3/2012 against inter alia Aspial and Bumper for the return of Certs Nos 70 and 71.  These two actions were heard by Reyes J.  By his judgment dated 16 July 2012 (“CFI Judgment”), the learned judge found in favour of Aspial and Bumper, and granted a declaration that they were entitled to be registered as respective owner of 100 million Mayer HK shares under Certs Nos 70 and 71.  On 24 May 2013, the Court of Appeal upheld the CFI Judgment and dismissed Mayer BVI’s appeal (“CA Judgment”).  Mayer BVI appealed to the Court of Final Appeal on the “as of right” ground.  On 30 September 2013, upon undertakings by Aspial and Bumper not to sell the 200 million Mayer HK shares under Certs Nos 70 and 71 pending the determination of Mayer BVI’s appeal (“Undertakings”), Tang PJ dismissed Mayer BVI’s application for stay of execution of the CFI and CA Judgments (“CFA Stay Judgment”).

4. In the meantime, Mayer BVI instructed Computershare not to process the share registration in favour of Aspial and Bumper pursuant to the CFI and/or CA Judgments, and as a result Computershare (even though it maintained a neutral stance) could not proceed to process such share registration without consent from Mayer HK or a court order directing it to do so.  Mayer BVI also alleged that the Undertakings were insufficient, but when Aspial and Bumper refused to give more extensive undertakings it took no further action.

5. On 30 October 2013, Aspial and Bumper commenced the present proceedings by originating summons (“OS”) against Mayer HK to compel it to register them as shareholders of 200 million Mayer HK shares under Certs Nos 70 and 71 then under the name of Mayer BVI.

6. On 30 October 2013, Aspial and Bumper filed the affirmation of Lin Jinhe (Bumper’s sole director/shareholder, “Lin”) in support of the OS claiming that Mayer HK had no defence.  It was said that the shares of Mayer HK being a listed company were subject to the provisions of SEHK’s Listing Rules (“Listing Rules”) which require the shares to be freely transferable.[1] Article 39 of the articles of association of Mayer HK (“Articles”) referred to paragraph 1(2) of appendix 3 of the Listing Rules which indicated Mayer HK’s conformity with such provision.  Lin claimed there was no reason for Mayer HK to decline registration of the transfer of the 200 million shares except to assist Mayer BVI to avoid the CFI and CA Judgments and the CFA Stay Judgment.

7. According to the affirmation of Lam Po Keung filed on 7 January 2014, he served the OS and Lin’s supporting affirmation on Mayer HK on 1 November 2013 by leaving the same at the Wanchai Address being Mayer HK’s principal place of business in Hong Kong.  On 13 November 2013, Mayer HK gave notice of intention to defend. 

8. Mayer HK filed the affidavit of its company secretary and financial controller Chan Lai Yin Tommy (“Chan”) on 11 December 2013 to oppose the OS. 

9. By an Amended Summons filed on 29 January 2014 (“Amended Summons”), Mayer HK applied to strike out the OS and to seek inter alia the following reliefs:

(a)  a declaration that the OS had not been duly served on Mayer HK and/or service of the OS be set aside on the ground that the purported service failed to comply with section 338 of the CO;

(b)  a declaration that the court had no jurisdiction over Mayer HK in respect of the subject matter of the OS or the reliefs/remedies sought therein on the ground the power of the court to order rectification of the share register under section 100(1) of the CO had no application to Mayer HK being a non-Hong Kong company as defined in sections 2(1) and 332 of the CO.

10. On 31 March 2014, Aspial and Bumper applied by OS to the Grand Court of the Cayman Islands in FSD Cause No 36/2014 against Mayer HK and Mayer BVI for an order inter alia that pursuant to section 46 of the Companies Law (2013 Revision) the register of members of Mayer HK be rectified by striking out the name of Mayer BVI in respect of 200 million shares held by it and inserting in lieu thereof the name of Aspial as holder of 100 million shares under Cert No 71 and the name of Bumper as holder of 100 million shares under Cert No 70 (“Cayman Proceedings”).  In essence, the claim before the Grand Court of the Cayman Islands was to rectify the principal share register of Mayer HK in the Cayman Islands in accordance with the CFI Judgment.

11. On 5 June 2014, Henderson J of the Grand Court of the Cayman Islands made an order that Mayer HK do rectify its register of members by replacing Mayer BVI and substituting Aspial and Bumper as respective holder of 100 million Mayer HK shares under Certs Nos 70 and 71, but stayed the order for rectification until 5 August 2014 (“5/6/14 Order”).  Although Mayer BVI lodged an appeal against the 5/6/14 Order, Mayer HK did not and hence the 5/6/14 Order was final and binding on Mayer HK upon expiry of the stay on 5 August 2014.

12. On 3 July 2014, the Court of Final Appeal dismissed the appeal against the CA Judgment, and written decision was handed down on 17 July 2014 (“CFA Judgment”).

13. By an Amended OS filed on 8 August 2014, Aspial and Bumper joined Computershare as the 2^nd defendant and demanded Mayer HK and Computershare (a) to forthwith register them as shareholders of 200 million Mayer HK shares under Certs Nos 70 and 71 then under the name of Mayer BVI in Mayer HK’s branch register maintained in Hong Kong by Computershare as Mayer HK’s registrar agent, or alternatively (b) to implement the 5/6/14 Order to forthwith rectify Mayer HK’s branch register maintained by Computershare as Mayer HK’s registrar agent in Hong Kong.

14. On 11 August 2014, Computershare gave notice of intention to defend.

15. On 4 August 2014, the controlling director of Mayer BVI and the chairman, CEO and executive director of Mayer HK Lai Yueh-Hsing (“Lai”) filed a winding up petition against Mayer HK in the Cayman Islands and applied for the appointment of provisional liquidators.  The hearing of the winding up petition was scheduled to be heard on 20 October 2014.  Mayer HK did not put up resistance, but Aspial and Bumper intervened as opposing contributories and creditors, and successfully resisted the application for appointment of provisional liquidators.

16. On 19 August 2014, Mayer HK finally rectified its share register by registering Aspial and Bumper as its shareholders for 200 million of its shares under Certs Nos 70 and 71.[2]

17. Mayer HK filed Chan’s two affidavits respectively on 21 January and 12 June 2014, the affirmation of Mayer HK’s solicitor Ng Gerald Tzy Yu on 12 June 2014 and the affidavit of Mayer HK’s Cayman solicitor Sam Dawson on 23 June 2014 in support of the Amended Summons.  Aspial and Bumper filed three affirmations of their solicitor Yang Loon Chun Samuel (“Yang”) respectively on 7 and 27 January and 16 June 2014 and Lin’s 2^nd affirmation on 15 July 2014 in opposition.

18. On 25 August 2014, the solicitors for Aspial and Bumper wrote to the solicitors for Mayer HK to invite them to withdraw the Amended Summons.  On 28 and 29 August 2014, Mayer HK’s solicitors wrote to inform the solicitors for Aspial and Bumper and the court respectively that Mayer HK had not given them any instructions to prepare for the substantive hearing for argument in respect of the Amended Summons.  At such substantive hearing on 5 September 2014 before me (“Hearing”), Mr Ng, solicitor for Mayer HK, confirmed he had no instructions to pursue (or to address the court on) the Amended Summons for both the substantive application and the question of costs.

II.  MAYER HK’S CASE

19. Chan explained that he and Lu Wen Yi (“Lu”) were authorised by Mayer HK to accept on its behalf service of process and any notice required to be served on Mayer HK; and the names of Chan and Lu were registered as authorised representatives under section 333 of the CO.  The latest annual return of Mayer HK dated 20 January 2013 showed that Lu’s address was in Wanchai, Hong Kong, and Chan’s address was at Shan Kwong Road, Hong Kong.  By a Form N8 dated 1 February 2013 filed with the Companies Registry, Lu changed his address to the Wanchai Address.  Chan complained that the OS was addressed to Mayer HK and not to the authorised representatives at their last known addresses.  In any event, Lu was in Taiwan on 1 November 2013, and since the OS in the present proceedings was not addressed to him it was not specifically brought to his attention.

20. Mayer HK pointed out that its principal and branch share registers and transfer offices were respectively located in the Cayman Islands and Hong Kong.  Under regulation 14(d) of the Articles, Mayer HK shall, as soon as practicable and on a regular basis, record in the principal register all transfer of shares effected on any branch register, in all respects in accordance with the Companies Law (2003 Revision) of the Cayman Islands and any amendments thereto or re-enactments thereof.  Mayer HK contended that since section 100 of the CO does not apply to Part XI companies, this court generally has no jurisdiction over Part XI companies (including Mayer HK) except for matters expressly and specifically applicable to such companies as prescribed under the CO.  Mayer HK claimed that since the reliefs sought by Aspial and Bumper would involve (a) changes to its branch register, which was governed by Cayman law even though it was located in Hong Kong, and also (b) changes to the principal register in the Cayman Islands, this court has no jurisdiction under Hong Kong law to entertain Aspial’s and Bumper’s claim herein.  Ng added that for practical purposes the Cayman Proceedings sought reliefs that were identical to those in the OS in the present proceedings.

III.  ASPIAL’S AND BUMBER’S CASE

21. Yang claimed that Mayer HK did not dispute service of the OS to the Wanchai Address being Mayer HK’s principal place of business on 1 November 2013.  Then on 8 November 2013, Mayer HK made a public announcement by order of its Board on its website giving notice of the present proceedings and of the need to return acknowledgment of service within 14 days “after service of [the OS] counting the day of service on 1 November 2013” (“Announcement”).  On 13 November 2013, Mayer HK’s solicitors filed acknowledgment of service of the OS. Yang claimed that in such circumstances Mayer HK had waived any challenge to service of the OS.  The present challenge made in January 2014 was late and opportunistic.

22. In any event, section 338(1) of the CO would have been sufficiently complied with if the OS was “addressed to” the authorised representative and was “left at his last known address or sent to him by post”.  Lu’s address registered with the Companies Registry was the same as the Wanchai Address, and Chan was Mayer HK’s company secretary and financial controller who used the Wanchai Address for his two affidavits, so Yang claimed the Wanchai Address might also be regarded as Chan’s address for the purpose of section 338(1) of the CO.  Hence, the alleged “failure” to comply with section 338(1) of the CO was merely that the OS was not personally “addressed” to the authorised representatives, but such complaint was sufficiently answered by the Announcement.

23. Further, at all material times, Mayer HK, Chan and Lu were fully aware of Aspial’s and Bumper’s demand for registration of the share transfer as evident from the related actions in the Court of First Instance, Court of Appeal and Court of Final Appeal involving Mayer BVI being a substantial shareholder of Mayer HK.  Chan (who testified in the related actions before Reyes J) and Lu (who made an affirmation in support of Mayer BVI’s application for stay of execution of the CFI Judgment pending appeal to the Court of Final Appeal) were involved in the related actions, and hence had full knowledge of Aspial’s and Bumper’s demands.  Correspondence between the solicitors for Aspial and Bumper and the solicitors for Mayer HK in July and October 2013 showed that Mayer HK was fully aware of the CFI and CA Judgments and the CFA Stay Judgment.  Correspondence between Computershare and the solicitors for Aspial and Bumper in October 2013 (copied to Mayer HK) showed that Mayer HK had given instructions to Computershare to refrain from processing the share transfer.

24. Yang stated that since Mayer HK knew of the demands by Aspial and Bumper to be registered as the new owners of the 200 million Mayer HK shares, and had full knowledge of the OS in the present proceedings as evident from the Announcement, the court should cure any irregularity of service of the OS pursuant to Order 2 rule 1(2) of the Rules of the High Court (“RHC”).

25. Aspial and Bumper claimed that (a) Mayer HK’s application by way of the Amended Summons was made out of time and (b) the subject matter and reliefs sought by Aspial and Bumper were within the jurisdiction of the Hong Kong courts.  In respect of (a), the OS and Lin’s supporting affirmation were served on Mayer HK on 1 November 2013.  Under Order 28 rule 1A(4) of the RHC, Mayer HK should have filed its affidavit evidence within 28 days from the date of service of Lin’s affirmation, ie by 29 November 2013, but Mayer HK did not file any affirmation or apply for time extension to do so. 

26. Mayer HK claimed that as a Hong Kong listed company subject to the Listing Rules, in particular rule 1.13 and paragraph 1(1)-(2) of appendix 3 of the Listing Rules, all Mayer HK shares must be freely transferable and Mayer HK must register the share transfers.  Further, the Articles referred to the Listing Rules to indicate their conformity with those provisions, including the margin of articles 14 and 39 of the Articles that bore references to paragraph 1(1)-(2) of appendix 3 of the Listing Rules.

27. Yang claimed the present proceedings involved changing Mayer HK’s branch register (maintained and updated by Computershare within Hong Kong) whilst the Cayman Proceedings involved changing Mayer HK’s principal register.  It was said that the Hong Kong courts would not have the necessary subject matter jurisdiction and power to make orders prayed for by Aspial and Bumper in the Cayman Proceedings in relation to Mayer HK’s principal share register, but the Hong Kong courts could enforce any order by the Grand Court of the Cayman Islands requiring Mayer HK and Computershare to rectify the share register of Mayer HK.

IV.  DISCUSSION

(a)  Service of the OS

28. Plainly, the OS had been served on Mayer HK’s principal place of business.  The complaint was that the OS was not (a) addressed to Chan and Lu as Mayer HK’s registered authorised representatives or (b) served on their last known addresses, and hence there was non-compliance with section 338 of the CO.  However, there was evidence before the court that both Chan and Lu had used the Wanchai Address as their respective address. In any event, Mayer HK’s complaint was not sustainable when it clearly had accepted service of the OS in the present proceedings.  By the Announcement Mayer HK accepted that service of the OS was effected on 1 November 2013, and it was due to file its acknowledgment of service within 14 days thereafter.  In my view, this amounted to sufficient evidence of proper and effective service of the OS on Mayer HK, especially when one bears in mind that the purpose of service of originating process is to bring the proceedings to the notice and knowledge of the defendant.  Further, even if service of the OS were technically defective in that the OS was not served on Chan and Lu as the authorised representatives of Mayer HK (being a Part XI company), in light of (a) the contents of the Announcement, (b) Mayer HK’s knowledge and involvement in the related actions and (c) the lateness of Mayer HK’s challenge to the propriety and effectiveness of service of the OS, I would have no hesitation in exercising my discretion to cure any such irregularity under Order 2 rule 1 of the RHC.[3]

(b)  Time bar

29. Under Order 12 rule 8(1) of the RHC, a defendant who wishes to dispute the jurisdiction of the court in the proceedings by reason of any such irregularity mentioned in Order 12 rule 7 of the RHC or on any other ground shall give notice of intention to defend the proceedings and shall, within the time limited for service of a defence, apply to the court for inter alia a declaration that in the circumstances of the case the court has no jurisdiction over the defendant in respect of the subject matter of the claim or the relief or remedy sought in the action[4] and/or an order declaring that the writ of summons has not been duly served on him.[5]

30. Here, Mayer HK issued the summons on 11 December 2013 to strike out the OS on the basis that the court had no jurisdiction over it in respect of the subject matter of the OS.  The Amended Summons first raised the challenge to the effectiveness of the service of the OS by way of amendment in January 2014.  In the circumstances, Mayer HK’s application to strike out the OS (now Amended OS) pursuant to Order 12 rule 8(1)(b) of the RHC was plainly out of time, and to date there is no application by Mayer HK for time extension.  Taking into account the lateness of the application and the matters discussed in Part IV(a) above, I have no hesitation in concluding that Mayer HK’s failure to comply with the time limit under Order 12 rule 8(1) of the RHC is fatal for its challenge as to jurisdiction under Order 12 rule 8(1)(b) of the RHC.[6] I take note that Order 12 rule 8(7) of the RHC provides that “[except] where the defendant makes an application in accordance with [Order 12 rule 8(1) or (2) of the RHC], the acknowledgment by a defendant of service of a writ shall, …… be treated as a submission by the defendant to the jurisdiction of the Court in the proceedings”.[7]

(c)  Subject matter jurisdiction

31. Mr Chow, counsel for Aspial and Bumper, explained that Mayer HK’s challenge based on section 100 of CO was misconceived  because the claim by Aspial and Bumper was not founded on section 100 of the CO but on the Articles which constituted a contract between Mayer HK and its shareholders.[8] Since Mayer HK is a publicly listed company, its Articles should be construed in light of the Listing Rules, which required Mayer HK’s shares to be freely transferable.[9] Indeed, the Articles bore reference to their conformity to such provision in the Listing Rules.  Further, as illustrated by China Magic Enterprises Ltd v Benefun International Holdings Ltd[10] and Hero Rich International Ltd v Benefun International Holdings Ltd,[11] Hong Kong courts have jurisdiction to grant orders for registration of share transfers in respect of Part XI companies. 

32. I agree with Mr Chow’s submissions.  Even if Mayer HK’s branch register is governed by Cayman law, it does not mean that the Hong Kong courts have no jurisdiction.  The Amended OS made clear that the present proceedings were concerned with share registration in respect of the branch register in Hong Kong and not in respect of the principal register in the Cayman Islands.  Indeed, as eventually transpired in August 2014, Computershare was able to effect registration of the transfer of the 200 million Mayer HK shares from Mayer BVI to Aspial and Bumper.  There is no merit to Mayer HK’s challenge to jurisdiction pursuant to Order 12 rule 8(1)(g) of the RHC.

V.  CONCLUSION

33. In the circumstances, at the Hearing I dismissed the Amended Summons.  In my view, there is no merit whatsoever to the application.  Against the background of the CFI and CA Judgments and the CA Stay Judgment as well as the Announcement, there is plainly no merit to the Amended Summons.  Mayer HK’s unmeritorious stance is aggravated by its failure to bring the application to a close in a timely and cost-saving manner when the CFA Judgment, the 5/6/14 Order and its own conduct in causing Computershare to effect the share registration in Aspial’s and Bumper’s names in August 2014 led inexorably to the conclusion that the Amended Summons must be dismissed.  Mayer HK’s recalcitrant attitude is also at variance with its stance in the Cayman Proceedings that it was/is uninterested as to the identity of the shareholders and remained/remains neutral as to the dispute between Aspial/Bumper and Mayer BVI.  This lends weight to Mr Chow’s submissions that the Amended Summons had always been a stalling exercise to delay Aspial and Bumper from enjoying the fruits of their entitlement under the CFI, CA and CFA Judgments.  For all the above reasons, at the Hearing I awarded costs of and occasioned by the Amended Summons (including all costs reserved, if any) in favour of Aspial and Bumper against Mayer HK on indemnity basis to be taxed if not agreed.