TAM KAM MAN AND ANOTHER v. CHAN CHIN SHING AND ANOTHER

HCA 352/2019

[2019] HKCFI 767

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 352 OF 2019

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D E C I S I O N

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1.  This is the first hearing on the Summons day of the plaintiffs’ (“Ps”) Summons dated 5 March 2019 (“Summons”) for an interlocutory injunction against the defendants (“Ds”). On the face of records, Ps[1] and D1 are directors of D2. Their respective shareholding is a matter that may be in dispute.

2.  The Writ herein was issued on 5 March 2019.  It contains an Endorsement of Claim but not any statement of claim.  The terms of the Endorsement are the same as those of the Summons, except that a permanent injunction is sought.  It tells the Court little about the nature of Ps’ cause of action against Ds. 

3.  The injunction sought by the Writ against D1 (and hence also the interlocutory injunction sought by the Summons) is an extensive one.  It comprises nine main paragraphs.  They may be summarized as follows:

(a)  restraining D1 from removal of “Documents” from D2’s office. The word “Documents” is very extensively defined as including corporate documents, leases of D2’s office and equipment, insurance policies, employees’ contracts and related records, accounts, project contracts, and contracts and correspondence with suppliers;

(b)  delivery up of those Documents or allowing inspection thereof;  

(c)  not to hinder Ps from accessing those Documents;

(d)  delivery up and/or provision of all passwords and/or keys to access D2’s office;

(e)  not to hinder Ps accessing D2’s office;

(f)  not to prevent or hinder the operation of D2’s business, including certain specific acts;

(g)  to withdraw a notice that has been filed with the Companies Registry;

(h)  not to hinder Ps or D2 from accessing all Accounts of D2 (but the word “Accounts” is not defined on the face of the Summons); and

(i)  delivery up and/or provision of all passwords and login username to access the Accounts. 

4.  As can be seen above, some paragraphs are mandatory in nature.

5.  I note also that the scope of the prohibition under (f) above is vague and undefined.  The specific acts set out that are sought to be prohibited are qualified by “inter alia”.

Service of the process

6.  I have concern over the service of the process on D2.  Its registered address is at Unit 10 on the 11^th floor of a particular industrial building.  In the affirmation of service of Philip Yu, he says that the sealed envelope containing the documents to be served was left at Unit 19 on the 11^th floor of that building.

7.  This morning, D2 is represented by Mr Slutsky.  I record what he has informed me, that service is not going to be challenged by D2.

8.  Mr Wong, counsel for Ps, has informed me that the apparent mistake is the result of a typographical error.  He undertakes to cause another affirmation of service to be filed to rectify that. He also puts on record that Ps reserve the right to challenge the authority on the part of D2 to instruct legal representation this morning, no doubt on the issue as to whether a proper resolution has been filed for that purpose.

9.  Mr Slutsky has told me that he has instructions to act.  At this stage, I take the matter no further.  Any challenge will be dealt with as it comes.  But given Mr Slutsky’s stance on the issue of service, and given the undertaking to rectify the mistake, I allow the matter to proceed.

The evidence in support

10.  The application is supported by the affirmation of P2 of 5 March 2019.  The evidence discloses a dispute between Ps on the one part and D1 on the other as directors and shareholders of D2.

11.  Certain aspects of the evidence filed are confusing.  The company records produced do not support the percentage shareholding P2 deposes to.  YKKA-7 is only a one-page document when it is produced as copies of five different documents.  It is also the same as YKKA-8 when the latter is deposed as being a different document.

12.  One of the allegations against D1 is that he has set up a company called Lee Kai (Building) Engineering Co Ltd “to solicit and entice away [D2’s] customers”—§5 of the written submission of Mr Wong.  But all that have been said in that regard by P2 is “In or about December 2018, I became aware that Lee Kai was incorporated and could be on the list of contractors.  In the premises, the 1^st Defendant [sic] in the course of directorship set up Lee Kai in order to solicit and entice away the customers of the Company in breach of his duty of confidentiality and fidelity.”

13.  D1 has not filed any evidence in opposition.

Directions for further evidence

14.  Parties agree that the matter should be adjourned for substantive hearing.  I so order, with directions on the filing of further evidence.

Interim-interim injunction

15.  That leaves the interim-interim position.

16.  Parties inform me that they have reached agreement on certain terms during the interim-interim period.  Some paragraphs of the Summons are no longer pursued.  For some other, with certain modifications and better definition of the terms concerned, D1 are prepared to give certain undertakings. What are left are paragraphs 6(3), 6(5) and 7 of the Summons.

17.  The test to apply when considering whether any interim-interim order should be granted is the balance of fairness—China Shanshui Cement Group Ltd & Ors v Zhang Caikui & Ors [2018] HKCA 409 (19 July 2018).

18.  The main thrust of Mr Wong’s submissions is that Ps and D2 require certain specific interim-interim orders to maintain the operation of D2, and more importantly to pay its employees so as not to fall foul of its duties under the Employment Ordinance.

19.  I have considered the authorities cited to me.  I am prepared to grant some interim-interim orders to hold the ring.  But I am only prepared to order those which are absolutely necessary:

(a)  paragraphs 6(3) and 7 concern what P2 has described as unauthorized filing of Notices claiming his and P1’s resignation as directors, and the spreading of rumors by D1 to that effect.  Mr Wong submits that Ps have to remain as directors to discharge their duties.  The evidence does suggest that at least since 2 February 2019, P1 and P2 together have been holding the majority.  They have not agreed to resign, and no proper resolution has been passed for their removal.  Their case is supported by documents.  No contrary evidence has been placed before me.  I am in principle prepared to grant the orders sought on an interim-interim basis.  I will hear parties on the exact wording.

(b)  I am prepared to grant paragraph 6(5) restraining D1 from changing the authorized signatories of D2’s bank accounts.  It holds the ring.

20.  I will proceed to hear parties on the exact terms of the order.