WAN HOW WAN v. THE LUK HOI TONG CO LTD

CACV 418/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 418 OF 2007

(ON APPEAL FROM HCA NO. 1648 OF 2007)

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JUDGMENT

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Hon Tang VP:

1.  Wan Tak-yee (“the deceased”) was the registered owner of 239 shares in the defendant (“the shares”).  The deceased died in September 1946 in the Mainland.  The plaintiff is the daughter of the deceased.  From 1950 to 2000, the defendant paid to the plaintiff the dividends in respect of such shares for the years 1946 to 1999, upon the presentation of the deceased’s dividend book and designated chop.

2.  On about 16 October 2001, Mr Wen Sheng-huai, a nephew of the plaintiff, by an action in the High Court, namely HCA 4501/2001, claimed against the plaintiff an account of the dividends received by the plaintiff in respect of those shares.  He alleged that between 1990 and 1999, the plaintiff had received dividends from the defendant totalling $1,149,590,000.

3.  That action, however, was struck out by Master Kwang, by order dated 23 May 2003.

4.  Presumably, as a result of this claim by Wen Sheng-huai no dividend has been paid in respect of the shares to the plaintiff by the defendant since 2000.

5.  By letter dated 24 July 2003, the defendant indicated to the former solicitors of the plaintiff that the defendant would pay the accrued dividends within 2 weeks upon presentation of the relevant grant of probate or letters of administration in respect of the deceased.

6.  We were told there was no reply to that letter.

7.  By the plaintiff’s solicitors’ letter of 11 November 2005, the plaintiff stated that she was considering naming the defendant as one of the defendants in the plaintiff’s intended proceedings against the estate of the deceased for declaratory relief unless the defendant was willing to be bound by the outcome of the intended proceedings.  The defendant was asked to indicate whether it would accept the outcome of the judgment.

8.  The defendant by their solicitors replied by letter dated 24 November 2005, stating that:

“… our clients will abide by the decision of the court insofar as the Court rules that your client is the sole beneficial owner of the shares of the Deceased and that the said shares be transferred to your client.”

9.  Following that, in HCA NO. 578 OF 2006, the plaintiff sued the one Wan Hoi-wei, who was appointed by the order of Master de Souza on 30 May 2006 under Order 15 rule 6A to represent the estate of the deceased.

10.  On 24 April 2007, A Cheung J made following order in this action:

“IT IS THIS DAY ADJUDGED AND DECLARED THAT:-

Since 1946, Wan Tak Yee, deceased (hereinafter called ‘the said deceased’), and his estate since his death, has been holding;-

(a)     his interest of and in the shares in Luk Hoi Tong Co. Ltd. registered in the name of the said deceased as the shareholder; and

(b)     his interest of and in the account between him and the said Luk Hoi Tong Co. Ltd. in the name of the said deceased as the account holder,

as a bare trustee for and on behalf of the Plaintiff as the beneficiary.”

11.  By letter dated 5 June 2007, the plaintiff’s solicitors wrote to the defendant and demanded that the defendant caused or procured the transfer of the shares into the name of the plaintiff, and to account to her for all dividends since 2000.

12.  The defendant replied on 25 June 2007:

“In the absence of a clear direction in the Judgment in HCA 578/2006 that the shares formerly registered in the name of the captioned member be transferred to your client, we take the view that Wan Hoi Wei as the personal representative of Wan Tak Yee, deceased, should execute an Instrument of Transfer in favour of Wan How Wan also known as Wan Sheung Chu.  The Instrument of Transfer should be presented to the Stamp Office for adjudication before it is sent to us for further action.

Kindly also let us have the followings in due course:

1.    Share certificate/s;

2.    Dividend book;

3.    A cheque in our favour in the sum of HK$625.00 ($500.00 being our fee for share transfer and $125.00 being our charges for supplying the enclosed forms); and

4.    The enclosed specimen signature cards duly completed in duplicate by your client.”

13.  By the present action, the plaintiff sued the defendant relying on an agreement (“the settlement agreement”) said to be evidenced by or contained in the letter of the plaintiff’s solicitors to the defendant’s solicitors dated 11 November 2005, and the letter of the defendant’s solicitors to the plaintiff’s solicitors dated 24 November 2005.

14.  It was alleged that the following were expressed to be the terms and conditions of the settlement agreement:

“(a)    That the Defendant would consider itself to be bound by whatever judgment that might be made or pronounced by the Court in the intended legal proceedings by the Plaintiff against the said Deceased on the beneficial ownership of the said Deceased’s interest with the Defendant.

(b)     That, in the event of the Plaintiff obtaining a judgment in the High Court in the intended legal proceedings against the estate of the said Deceased holding that the Plaintiff was the sole beneficial owner of the said Deceased’s interest with the Defendant, the Defendant would cause or procure the transfer of the said Deceased’s interest with the Defendant to the Plaintiff.”

15.  Deputy High Court Judge Carlson, who heard this case at first instance, refused to order the transfer of the shares to the plaintiff.  Mr Chong who appeared for the plaintiff below and before us has accepted that decision.

16.  With respect this judgment is clearly right: See sections 66 and 67 of the Companies Ordinance.

17.  It appeared that obtaining an instrument of a Transfer from the estate of the deceased might not be straightforward.

18.  But maybe section 52 of the Trustee Ordinance, Cap. 29 or section 55A of the High Court Ordinance might provide the answer.  It is perhaps a pity that the appropriate order was not sought before A Cheung J.

19.  Mr Chong informed us that A Cheung J had refused to make an order in respect of his claim for specific performance because it was considered unnecessary.  But I doubt whether it had been explained to the learned judge that the plaintiff needed a properly executed instrument of transfer to be registered as a shareholder in the defendant.  I can see no reason why such an order cannot be obtained, although it might now have to be done in separate proceedings.

20.  The present appeal concerns the plaintiff’s claim that the defendant is obliged to pay and/or to account to the plaintiff in respect of the dividends paid or payable in respect of the shares.  Deputy High Court Judge Carlson has refused to order an account on the ground that it was premature as the plaintiff was not yet a member of the defendant. 

21.  It is clear that dividends are only payable to members of the company, which under article 1 means the registered shareholders of the company.  On the deceased’s death, his personal representative became entitled to the shares by operation of law, and article 44 entitles the personal representative of the deceased to be registered as the holder of the deceased’s shares or to transfer the share subject to the regulations as to transfer contained in the article.  Under Article 121:

  “121.   The Board of Directors may retain the dividends payable upon the shares in respect of which any person is under the Transmission Clause entitled to become a Member or is entitled to transfer until such person shall become a Member in respect thereof or shall duly transfer the same.”

22.  Mr Chong accepted that under the Articles of Association, only a registered shareholder is entitled to be paid.  But, he submitted that since by the settlement agreement, the defendant has agreed to abide by the judgment of A Cheung J, the defendant was liable to pay the dividends to the plaintiff.  But A Cheung J had not ordered the defendant to pay any dividend to the plaintiff, nor to account to the plaintiff for the same.

23.  Mr Chong submitted that as the deceased was a bare trustee, the defendant should pay the dividends to the plaintiff.

24.  It is true that the estate is a bare trustee for the defendant, but that only means that any dividends paid to the estate of the deceased would have to be accounted for to the plaintiff by the estate.  Stevenson v Wilson [1907] SC 445.

25.  So in these circumstances the defendant was perfectly justified in refusing to pay any dividend to the plaintiff until she has become a registered shareholder.

26.  I should add that under article 39B of the Articles of Association of the defendant, the defendant’s directors may refuse to register any transfer of shares to a person of whom they do not approve.  But that article is not relied on.  All that is lacking is a proper instrument of transfer.

27.  I will dismiss this appeal with costs, such costs to be taxed if not agreed.

Hon Yam J:

28.  I agree.

Hon Stone J:

29.  I agree.

30.  All that in fact separates the parties in this case is the issue of transfer of the shares: both sides are ad idem in terms of that which ultimately they wish to achieve.

31.  Viewed thus, it is difficult to see the reason for the present action.

32.  In my view the learned judge below was right to have decided as he did, and it follows that this appeal must fail, with costs to the respondent.

Hon Tang VP:

33.  The appeal is dismissed with costs to the defendant, to be taxed if not agreed.