REDWOOD CHINA LOGISTICS FUND GP PTE. LTD. (IN ITS CAPACITY AS GENERAL PARTNER OF REDWOOD CHINA LOGISTICS FUND LIMITED PARTNERSHIP) v. MIDAS PRINTING LTD AND ANOTHER

HCMP 215/2020

[2020] HKCFI 2761

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 215 OF 2020

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J U D G M E N T

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A. Introduction

1.  The plaintiff, Redwood China Logistics Fund GP Pte Ltd brings this action in its capacity as general partner of Redwood China Logistics Fund Limited Partnership (“Fund”).

2.  By originating summons dated 10 March 2020, the plaintiff seeks the determination of the Court on the following questions (as typed, sic), namely:

(1)  that there was a mutual mistake (“Mistake”) whereby Redwood China Logistics Fund Limited Partnership was mistakenly listed as the signatory under the Agreement (as defined below), instead of Redwood China Logistics Fund GP Pte Ltd (in the capacity as general partner of Redwood China Logistics Fund Limited Partnership); and

(2)  the correct parties to the agreement for the sale and purchase of the entire issued share capital of, and all the shareholder’s loan extended to, Success Gain Investment Limited dated 14 May 2014 (“Agreement”), listed as entered into between Redwood China Logistics Fund Limited Partnership, Midas Printing Limited and Midas International Holdings Limited.

3.  On that basis, the plaintiff’s claim as set out in the originating summons was to:

“a declaration that the Agreement and the ancillary documents entered into as a consequence of the Mistake (including but not limited to the following documents in relation to Success Gain Investment Limited, (a) the instruments of transfer; (b) the bought and sold note; (c) the share certificate and (d) the register of members, or as may be) ought to be rectified and read and construed as if Redwood China Logistics Fund GP Pte Ltd (in the capacity as general partner of Redwood China Logistics Fund Limited Partnership) was and had at the time of their execution be (sic) the entering party.”

4.  Originally, solicitors for the 1^st, 2^nd, and 3^rd defendants filed an acknowledgement of service dated 6 May 2020, indicating that the defendants intended to contest the proceedings.

5.  However, by letter dated 3 September 2020, the solicitors wrote to confirm that the 1^st, 2^nd, and 3^rd defendants are prepared to take a neutral stance in these proceedings, on the condition that the terms of the declaration sought to be obtained by the plaintiff be varied to read as follows:

“a declaration that the Agreement and the ancillary documents (including but not limited to the following documents in relation to Success Gain Investment Limited, (a) the instruments of transfer; (b) the bought and sold note; (c) the share certificate and (d) the register of members, or as may be) ought to be rectified and read and construed as if Redwood China Logistics Fund GP Pte Ltd (in the capacity as general partner of Redwood China Logistics Fund Limited Partnership) was and had at the time of their execution been the entering party”.

6.  In those circumstances, the plaintiff’s solicitors have suggested by letter dated 20 October 2020 that, in order to save costs and also the valuable time of the Court, the Court might consider determining the application without an oral hearing.  The letter provided a copy of a draft order (incorporating the 1^st, 2^nd, and 3^rd defendants’ condition) for the Court’s consideration.

7.  The Civil Listing Judge has determined that the case can be disposed of on paper, and I have been assigned to deal with it. Having considered the papers, and in light of the neutrality of the defendants, I see no need to put any party to any further cost of producing any further written submissions.

8.  This is my Judgment.

B.  The Application

9.  The application is supported by the affirmation of Joseph Lim Teng Hong made on 23 January 2020.  Mr Lim is the Chief Fund Financial Officer of the plaintiff, which is a company incorporated under the laws of Singapore, and with its registered office at 80 Robinson Road, #20-00 Singapore 068898.

10.  As Mr Lim sets out, the Agreement was made dated 14 May 2014, between the plaintiff and the 1^st and 2^nd defendants. The Agreement relates to the sale of the entire issued share capital of, and all the shareholder’s loan extended to Success Gain Investment Limited (“Success Gain”) by the 1^st defendant to the plaintiff.  Prior to the Agreement, the 1^st defendant was the beneficial owner of the entire issued share capital of Success Gain, holding one share by itself and one share through the 3^rd defendant.

11.  The sale effected by the Agreement had been negotiated since about August 2013, and Mr Lim says that throughout it was the intention of all parties that the Fund would be the purchaser. Pursuant to the Agreement, in particular Clauses 3.2 and 3.3, the plaintiff paid a total sum of HK$78,218,898 as consideration.

12.  A number of ancillary documents were also executed in connection with the Agreement so as to complete the sale and purchase.  Pursuant to Clause 11.1 of the Agreement, the 1^st defendant also took various steps to assist the plaintiff to complete the necessary registrations and so forth.  Mr Lim says that assistance demonstrates the defendants’ agreement that the shares were and should rightly have been transferred to the Fund.

13.  However, Mr Lim says that unbeknown to the parties at the time of the Agreement, there had been a misunderstanding of the legal position.  Subsequent advice has identified that the Fund, as a limited partnership, can have no separate legal personality or capacity under the laws of Singapore.  Such a limited partnership can only enter into a contract through its general partner.  Hence, it is now understood that – to reflect the intention amongst the parties to the Agreement – the Agreement and the ancillary documents should have been entered into by the plaintiff, in its capacity as the general partner of the Fund, rather than by the Fund itself.

14.  Mr Lim says that the mistake was genuine and mutual.  It only came to light when a third party raised the issue during a due diligence review.  In consultation with the company secretary of Success Gain, the plaintiff has executed (a) a subsequent instrument of transfer evidencing a share transfer from the Fund to the plaintiff and (b) a declaration of trust to state that the plaintiff held the shares on trust for the Fund.  The register of members of Success Gain was subsequently updated by the company secretary to identify the plaintiff as the holder of the shares.

15.  However, on taking further legal advice, Mr Lim says it was recognised that the suggestions made by the company secretary to rectify the mistake were not correct.  As a result, documents were executed to terminate the declaration of trust and undo the change in the register of members.

16.  Initial efforts to secure the defendants’ cooperation in taking appropriate steps to rectify the situation stalled.  As a result, the plaintiff applied to the Court in these proceedings.  The application is made to the Court in Hong Kong because (a) Success Gain is a company incorporated under the laws of Hong Kong and (b) by Clause 19 of the Agreement the parties to it agreed to submit to the non-exclusive jurisdiction of the courts of Hong Kong with Hong Kong law as the governing law.

17.  I note, as Mr Lim emphasises, that the defendants have never denied or challenged that consideration was duly paid in relation to the sale of the shares, which was completed some five years ago, and that it must have been the intention of all parties to the Agreement that the plaintiff execute the Agreement band be registered as holder of the shares, so that the legal and beneficial title of the shares could be properly transferred.

18.  I accept Mr Lim’s evidence.  I also accept that the relief sought in these proceedings is the appropriate and effective remedy.  I note that the defendants’ position is now one of neutrality, on the basis of the condition I have set out above.  The plaintiff is content to pursue a declaration in the form set as the condition by the defendants for adopting a neutral stance.

C.  Disposition

19.  It is open to the Court in appropriate cases to grant relief in the form of a declaration, such as is sought in these proceedings.  In the circumstances set out above, I have no hesitation in granting the declaration set out in paragraph 5 above.

20.  In the particular circumstances of these proceedings, there is no need to make any provision or order as to costs.

21.  Therefore, I grant an order in terms of the draft order submitted under cover of the plaintiff’s solicitors’ letter dated 20 October 2020 to the Court for approval.