WEALTHY ACHIEVERS LTD v. LUI HON CHING AND OTHERS

HCA 840/2020

[2020] HKCFI 2203

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 840 OF 2020

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REASONS FOR DECISION

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Introduction and unopposed part of the summons

1.  There is before me a summons taken out by the Wealthy Achievers Ltd (“P”) dated Thursday 20th of August 2020 (“the Summons”).

2.  The Summons was returnable before me today at a 9:30 am hearing with a time estimate of 15 minutes.

3.  Paragraph 1 of the Summons sought to join an intended fifth defendant, one Oriental Patron Securities Ltd (“Oriental”).

4.  It transpired during the course of the hearing that Oriental (upon further reflection) consented to be joined subject to questions of costs to be resolved later, and I therefore made an order in terms of that paragraph.

5.  I also granted leave to amend the writ of summons to largely reflect the fact that Oriental had been joined.  Mr Ernest Ng, counsel for Oriental also indicated this was not opposed.

Mandatory injunction and exercise of voting rights at an AGM this friday

6.  What was more controversial was the application by P to seek a mandatory injunction compelling the fourth defendant to forthwith execute written instructions to Oriental, and requiring it to transfer 40 million shares in Mobile Internet (China) Holdings Ltd (“Listco”) which are currently deposited in the fourth defendant securities account maintained by Oriental (“the Listco Shares”) to P’s securities account.

7.  P further seeks that in the event the fourth defendant failed execute the said written instructions or that after enquiry could not be found, then the Registrar the High Court be directed to execute written instructions as per a standard form which has been submitted, so as to transfer the said Listco Shares.

8.  P further seeks a mandatory injunction compelling Oriental to take all steps necessary to transfer the Listco Shares to P’s account and execute P’s instructions in relation to voting rights (“the Voting Rights”) including but not limited to procuring the Voting Rights to be exercised in support of certain resolution which are to be tabled at an annual general meeting of the Listco to be held this Friday on the 28th of August 2020 (“the AGM”) and giving instructions to HKSCC nominees Ltd and TRICOM nominees, for this purpose.

9.  As a further alternative, P proposed to appoint one gentleman who is a partner at a law firm to be appointed as an interim receiver over the Listco Shares until and including 28th of August 2020 (i.e the AGM) and to be empowered to exercise the Voting Rights attached to these shares. It is not clear from the evidence what experience or qualifications it is being said that the proposed Receiver in fact has which is germane for the present exercise i.e. making a commercial decision on resolutions appointing directors and approving or rejecting a mandate for the board to issue shares if it thinks appropriate.

10.  As it immediately obvious from the above, the AGM will be conducted in 3 days from now. It is thus said that there is great urgency by now such that the application needs to be determined now.

11.  The urgency in the sense I’ve described above is the one which is highlighted by P in this application.

12.  Notwithstanding the able submissions of Mr Howard Wong who appeared for P and who sought to impress upon me both the urgency of the matter and also the overall factual matrix in support of the present application in terms of P’s underlying merits in recovering the Listco Shares, I declined to grant any form of interim-interim remedy.

13.  P’s Statement of Claim discloses a number of causes of action. P claims the Lisco Shares are held on constructive trust for it by the 4^th Defendant.

14.  I accept that P may well succeed in obtaining final relief and recover the Listco Shares in the not so distant future because of the lack of active participation to date of the 1st to 4th defendants. I also accept on the state of the present evidence filed to date that this suggests that P has shown reasonable prospects in ultimately succeeding in its claim.

Delay, explanation for it and its impact

15.  This however seems to me not to be an answer or at least an acceptable answer as to why P chose to proceed in a dilatory fashion.

16.  The AGM which I refer to above, was something which was already on the cards as early as the 15th of June 2020 when an announcement was made by the Listco on that day.

17.  If P wished to proceed in this matter and seek interlocutory relief to exercise the Voting Rights prior to obtaining final relief and thus regaining control of the Listco Shares, because it considered it to be important and/or that damages were not otherwise an adequate remedy, there is no explanation (or proper explanation at any rate) in the evidence before me as to why such an application had not been made much earlier.

18.  I enquired during the course of the hearing with Mr Wong who very fairly acknowledged that the explanation for that period of the delay was not something which was adequately and properly covered in the evidence before me.

19.  In my view and based on the evidence before me, there was no impediment to prevent P from applying as early as the 3^rd or 4^th week of July or at the very least by early August where the matter could have proceeded with (1) more notice to the defendants (2) equally as important with more notice to the Court, such that a hearing with 2 or 3 hours reserved could have been fixed and with enough time for the Court to deal with and to determine the matter prior to the AGM so as to afford the Court sufficient time to consider the matter and make an informed decision.

20.  The fact that P faced some difficulties in effecting formal and proper service on the various defendants could not have prevented it to at least issue a summons and to seek a hearing date which would have allowed the Court sufficient time to deal with the application properly. 

21.  By way of example in the present case, there were 4 bundles of documents consisting of about 700 pages. The various affirmations filed and Orders since May 2020 took up almost an entire bundle.

22.  Mr Wong’s skeleton which was well prepared and thorough, referred to 2 bundles of authorities.

23.  On any view, this is plainly not a matter which can be resolved at 15 minutes hearing. As an aside, litigants should be discouraged from filing summonses with unrealistic time estimates so as to ‘secure’ an earlier hearing date. Such a hearing will be treated by the Courts (unless contrary indication had been provided) as a directions hearing and is thus likely to prove to be a deceptive shortcut.

24.  On any view, the sort of orders which are now being sought are intrusive and require a proper analysis of both the evidence and the applicable legal principles. These potentially would impact on the AGM of a listed company which has other public shareholders.

25.  I would echo what Mr Justice Anthony Chan recently held on 31st of July 2020 in Smart Edge Limited and Lun Hau Mon where his Lordship was dealing with a summons filed three or four days before the hearing, and substantive relief including mandatory injunctions had been sought.

26.  His lordship at paragraphs 10 and 11 held that:

“10.  It may be the case that the Defendants are merely buying time in resisting this application.  However, they are entitled to a fair opportunity to marshal their evidence and arguments to answer this application.  It is neither possible for this court to resolve the arguments in this hearing, nor to reject the Defendants’ case off-hand. 

11.  Very limited notice of this hearing has been given to the Defendants.  Their complaint of procedural unfairness is not without substance.  However, this is an interim-interim application for injunction.  This court must be guided by the applicable legal principles in resolving this application.  There is a high burden to be satisfied for the grant of an interim-interim relief: see the authorities cited in §§8.1 and 8.2 of the Defendants’ skeleton submissions.”

(emphasis supplied)

27.  It goes without saying that even in a case where none of the defendants appear (for whatever reasons) it remains the duty of the Court to properly and carefully scrutinize the basis of the relief which is said to be urgently sought.

28.  Indeed, that duty is often heightened by the fact that the Court does not have the advantage of hearing adversarial arguments in such cases. Thus even more time is required for the court to both go through the papers properly, and also to examine in the course of a hearing assisted by legal representatives the competing arguments so that the matter can be tested and time is also available for the Court to reach a decision.

29.  I am obviously conscious of the fact that there is an AGM to be held this Friday and this block of shares (ie the Listco Shares) may or may not have an impact on the ultimate results of the resolutions to be passed.

30.  In this regard, I would also refer to the unreported judgement of Mr Justice Godfrey Lam dated 7 May 2018, in HQ Chen v person whose names are set out in the said second column of schedule & Others, where his Lordship was also dealing with a last minute application which was said to have become urgent by reason of a shareholders meeting of a listed company.

31.  His lordship at paragraphs 13-15 held

“13 …any apparent urgency in his application was of his own making.

14. This lateness has deprived the court and the other parties of the time to consider the application together with relevant evidence, including proper evidence of the recent developments that have taken place including various attempts by those controlling the listed company to prevent the reconstitution of the board of CSI.

15.  To justify applying with such urgency it is usually necessary to show some irreparable prejudice.  But there is none suggested.  All that Mr Mok said was the reconstitution of the board should be done on a proper basis.  But there can be EGMs after EGMs, and directors appointed can be removed, and those removed, re‑appointed.  The EGM to be held tomorrow, if not adjourned, will not render Chen HQ’s application for receivership or injunction nugatory.”

(emphasis supplied)

32.  I would respectfully agree with those observations and consider those to be apposite in the present case.

33.  I was not satisfied on the evidence before me that there is likely to be a corporate action or decision to be made at the AGM which is so critical that notwithstanding the very significant delay in taking out the Summons, something interim relief needed to be granted immediately given the delay and the prejudice flowing form it, which I have highlighted above. This is of course not to say that the Courts adopt a rigid and mechanistic approach when faced with unexplained or not properly explained delay but delay will be a relevant and on occasions a significant factor when considering the exercise of its discretion in granting interlocutory injunctive relief.

34.  For the reasons above, I refused to grant ‘interim interim’ relief and since P indicated that it was not minded to proceed with the Summons if no relief was granted today, I dismissed the Summons save those relating to joinder and amendment of the writ which were unopposed and which I have dealt with above.

35.  It remains for me to thank Mr Wong for the Plaintiff and Mr Ng for Oriental for their assistance.