SHIU PAK NIN v. YET PROFIT LTD

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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DECISION

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1. These are applications in three sets of proceedings. They are all interlinked. Essentially, they all relate to the company of Yet Profit Ltd.

2. Yet Profit Ltd. was set up sometime ago. Anything I say about the origin has to be taken in the light of the fact this is a very early stage in these proceedings.

3. Yet Profit Ltd. appears to be a joint venture, as it were, between two persons, the first is Mr. Yuen Iu Hung and the other is Mr. Shiu Pak Nin. Neither of these two persons are young, indeed Mr. Yuen Iu Hung is now a patient. By an order made last year in M.P. 3094 of 1995, two of his grandchildren were appointed to be joint receivers.

4. Yet Profit Ltd. was set up to be, in effect, the lessee of a cinema in Wanchai under the terms of a lease, signed by Yet Profit Ltd. with the landlord, who happens to be Mr. Shiu Pak Nin. There are two elements of the rent. The first is a direct rent which this year has risen to $250,000.00 per month and the other is the payment of instalments and interest due under a mortgage. Matters appear to have drifted a little, no doubt because the main protagonists are now clearly elderly and, of course as I have already mentioned, a receiver has been appointed in respect of Mr. Yuen Iu Hung.

5. From what I can see of the accounts of Yet Profit Ltd., in so far as they are available, it does appear that things are not going as well in the current year as they were in the past. At any rate, receipts would appear to have been dropping.

6. In March of this year, Mr. Shiu Pak Nin as the landlord took proceedings against the company for arrears of rent and possession. He was the only effective director at the time. Judgment was entered in default of appearance. It is now admitted that that judgment was based in part upon a mistake. It was alleged in the Statement of Claim that two mortgage instalments had not been paid. It has now been discovered by the Plaintiff himself, or at least by those advising him, that one of those mortgage instalments and interest had indeed been paid.

7. There is before me an application made on behalf of Mr. John Paul Yuen, who is one of the receivers of Yuen Iu Hung, to be joined as an Intervener in the proceedings by Mr. Shiu Pak Nin against Yet Profit Ltd. and to apply to set aside the default judgment. There is a corresponding application in the Miscellaneous Proceedings that he be given power so to apply.

8. Mr. John Paul Yuen as the next friend of Yuen Iu Hung has also taken Section 168A proceedings against Yet Profit Ltd. and Mr. Shiu Pak Nin. One of the reliefs sought is that Mr. John Paul Yuen be made a director. In respect of that at least there has been some agreement between the parties. Mr. Chan Q.C., on behalf of Mr. Shiu Pak Nin and Yet Profit Ltd. has undertaken that they would use their best endeavours to have Mr. John Paul Yuen made a director, and there is a corresponding undertaking on behalf of Mr. John Paul Yuen, and the undertaking applies to both parties, that they will not seek to hold board meetings without the other. In other words, the two directors will constitute a quorum at the board notwithstanding the Articles of Association. That is with a view, as Mr. Chan has submitted and the correspondence shows, to steps being taken to have the company properly represented. As long ago as the 21st March 1996, the solicitors acting for Mr. Shiu wrote to the solicitors then acting for Mr. John Paul Yuen suggesting that as Mr. Shiu was effectively the sole director an independent person or committee should be appointed to take over the action.

9. Turning then to the application by Mr. John Paul Yuen to be joined as an Intervener in the proceedings by Mr. Shiu Pak Nin against Yet Profit Ltd, it is put on the basis that Mr. John Paul Yuen has an interest in those proceedings because the interest of Yuen Iu Hung will be adversely affected if the lease comes to an abrupt end. The only business of Yet Profit Ltd. is to run a cinema at the premises which are the subject of the lease. The lease has another five years to run. No doubt the lease is of some value even though the rent is clearly a hefty one. Unfortunately, in my view, Mr. John Paul Yuen, whether as next friend of Mr. Yuen or otherwise, clearly does not have any interest in those proceedings. The simple reason is that the lease is the property of the Yet Profit Ltd, and the property of a company should not be equated with the property of the shareholders. The shareholders merely have an interest in the proceeds of liquidation on a winding-up of a company. They have no interest directly or indirectly in the assets of a company. In those circumstances, I could not accede to Mr. John Paul Yuen's application to be joined as an Intervener.

10. Furthermore Mr. Chan Q.C. has argued very strenuously that no merits been shown to set aside the judgment. That may or may not be right, but I think it is premature to come to any conclusion on that. The point is that there are many matters which cause one concern. No doubt the memories of the main protagonists are probably not as good as they were before. For example, it is now suggested by Mr. Chan Q.C. that the deposit of $7.5m has never been paid, despite the fact that it is shown in all the accounts which have been produced from 1986 onwards, many of which have been signed by both main protagonists.

11. There are further matters which to my mind are by no means clear; these entail the fact that the original mortgage payments which were the subject of the lease have now been extinguished because that mortgage was extinguished; it is said that it has been substituted by another mortgage by a different person to another bank for a different amount. Mr. Chan may be correct that there is now part performance but that may well have to be investigated.

12. In that unsatisfactory state of affairs, and it having been drawn to the court's attention that at least part of the judgment was wrongly entered, on the basis of non-payment of a mortgage payment which is now admitted to have been paid, I consider it only right to stay execution of this judgment under the inherent jurisdiction of the court, at least until the judgment has been properly amended. I propose to so order. That will in effect rather belatedly perhaps give the parties an opportunity to get their positions in order. If any further applications need to be made, these can be formulated and properly made. It does seem to me that perhaps it can be said against Mr. John Paul Yuen or those formerly advising him, and I hasten to say that his advisers have changed recently, that there do appear to have been certain lapses which were allowed to occur at times when one would have expected rather more hasty action upon his behalf and on behalf of Mr. Yuen Iu Hung.

13. I propose to make the orders accordingly.