CIBA INTERNATIONAL LTD v. TUNG KA HUNG AND OTHERS

HCCW 1193/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO. 1193 OF 2002

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D E C I S I O N

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1. On 24 October 2003, the Petitioner applied for leave to further amend the Petition to add the following prayers,

"	(3)	The 1st and 2nd Respondents be restrained, whether through themselves or their agents, servants, officers, Ratonal Electronics Limited or otherwise, from directly or indirectly diverting any business and/or potential business of the Company to the 1st and 2nd Respondents or Ratonal Electronics Limited or any other companies or entities by making use of the business contacts possessed by the Company from time to time or other business opportunities of the Company or howsoever until further order;
	(4)	The 1st and 2nd Respondents be ordered to disclose the details of all business transactions conducted by Ratonal Electronics Limited and the up-to-date financial account of Ratonal Electronics Limited together with copies of all purchase orders, invoices, receipts, sale records, remittance, payments and other relevant supporting documents in the manner as the Court thinks fit;
	(5)	That there be an inquiry of damages suffered by the Company resulting from the misconducts of the 1st and 2nd Respondents as pleaded hereinabove in the manner as the Court thinks fit;
	(6)	That the 1st and 2nd Respondents be ordered to pay the Company such sum as are found owing by the 1st and 2nd Respondents pursuant to the inquiry ordered at paragraph (5) above together with interest."

2. The application was opposed by the Respondents. The only ground of objection advanced was that the proper party claiming for these additional relief should be the company and the proper form of action should be a derivative action. The Respondents relied heavily on the judgment of Kwan J in Tan Man Kou v Chime Corporation Ltd HCMP 4146 of 2001, 6 May 2003.

3. At the conclusion of the hearing on 24 October 2003, this court reserved its decision.

4. After the hearing, this court noted that the decision of Kwan J was subject to an appeal in CACV 124 of 2003 and the appeal was heard on 21 October 2003. After consulting the parties, it was agreed that the decision on leave to amend should be reserved until the Court of Appeal delivered its judgment.

5. The Court of Appeal delivered judgment in CACV 124 of 2003 on 20 February 2004. In that judgment, the Court of Appeal reversed the decision of Kwan J. It was held that as a matter of jurisdiction, in a Section 168A petition, the court can entertain claims that may overlap with claims that could be advanced by the company in a derivative action provided that the criteria under Section 168A can be satisfied. As a matter of discretion, the Court of Appeal held that on the facts of that case, it was arguable that it was appropriate for the petitioner to include the additional claim in the Section 168A petition. Hence, leave to amend for addition of the claim was granted.

6. This court invited parties to file supplemental submissions in the light of the Court of Appeal's decision. The Petitioner filed the same on 19 March 2004. The Respondent chose not to file any submissions and confirmed in a letter dated 13 April 2004 that they would not file submissions in response to those of the Petitioner. Neither party requested for a further hearing on the question of leave to amend.

7. As observed by Ma CJHC in Paragraph 30 of the judgment in Tan Man Kou, the proposed amendments should be considered in the context of the petition as a whole. Even without these amendments, the diversion of business had already been pleaded and relied upon by the Petitioner as part of the unfair and prejudicial conducts perpetuated by the Respondents in the affairs of the company in Paragraph 19 of the Amended Petition. It must therefore be arguable that the additional prayers were within the scope of Section 168A(2) as orders that could be made by the court with a view to bringing to an end the matters complained of.

8. Whether the court would make such orders after the trial is of course a matter for the judge who hears the Petition. One possibility is that a buy-out would be ordered under Prayer (2). Another possibility is a winding up of the Company under Prayer (1). If the court were to make any one of such orders, it might then be relevant to consider whether all or some of these additional orders are necessary. At this stage, I am only considering whether leave should be granted for these prayers to be added. For reasons given, I think leave should be granted and I order accordingly.

9. I also direct parties to restore the summons of 7 April 2003 for argument if they so wish. I shall also reserve the question of costs in respect of the application for leave to amend to the restored hearing.