THE SECURITIES AND FUTURES COMMISSION v. MANDARIN RESOURCES CORPORATION LTD. AND ANOTHER

1999 CACV No. 84

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

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J U D G M E N T

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Keith J. (giving the judgment of the court):

Introduction

1. This is the third of the appeals of Chim Pui Chung, the 2nd Respondent, from various interlocutory directions given by Burrell J. in connection with the petition brought by the Securities and Futures Commission for the winding up of Mandarin Resources Corporation Ltd. ("the Company"). At the conclusion of the hearing, we dismissed the appeal with costs, but said that we would give our reasons later. This we now do.

2. The directions to which this appeal relates were given on 9th March. They related to four separate topics, and we propose to deal with each topic in turn.

The subject-matter of the petition

3. Mr. Chim sought a direction that the Securities and Futures Commission's claim should be limited to matters relating to the Company and to no other companies. Such a direction would have been uncontroversial. A petition to wind up a company should be limited to matters relating to that company. But what Mr. Chim argued was that the allegations relating to Lucky Man Properties Ltd. ("Lucky Man") which the petition raised do not relate to the Company and should therefore be struck out. Burrell J. declined to give the direction sought. He held that the issue which Mr. Chim wanted addressed had been decided at a previous hearing.

4. In our view, Burrell J. was entirely correct to rule that the question whether the allegations relating to Lucky Man related to the Company had already been decided. In November 1996, Mr. Chim had sought to strike out various paragraphs in the petition on the ground that they related to Lucky Man only and not to the Company. That application was dismissed by Rogers J. (as he then was) in January 1997. He gave a reasoned judgment which included compelling reasons for the view he had reached. Although there was an appeal from the decision of Rogers J., the argument that parts of the petition should be struck out because they related only to Lucky Man was not pursued.

The date of the petition

5. The petition was filed on 25th June 1996. Mr. Chim sought a direction that the Securities and Futures Commission's claim should be limited to events which occurred prior to that date. Burrell J. declined to give such a direction. In this connection as well, he held that the issue had already been decided at a previous hearing. We agree with Burrell J. The post-petition events were pleaded in paras. 239A-239NN of the petition. An application to add those paras. to the petition had been made in October 1996. In March 1997, Rogers J. permitted the petition to be amended to add these paras.

6. We have some reservations as to whether Rogers J. had power to make the order he did. It may be that a petition to wind up a company may be amended to plead post-petition facts to enable what relief should be granted to be determined: see the view of Warner J. in Re Citylink Group Ltd., unreported, 22nd January 1993. It is entirely another matter for a petition to plead post-petition facts as additional grounds on which the petitioner should be entitled to relief at all. However, there was no appeal from the decision of Rogers J., and we agree with the judge that it would not now be right to permit Mr. Chim to re-open an issue already decided against him so soon before the petition is due to be heard. It will be for Burrell J. when he hears the petition to decide what weight should be attached to the post-petition facts pleaded in the petition.

The convening of an E.G.M.

7. Mr. Chim sought a direction that an E.G.M. of the Company be convened. In effect, that would be a direction to the provisional liquidators of the Company to convene an E.G.M. What Mr. Chim hopes is that the minority shareholders of the Company would say that the Company's affairs neither are being, nor have been, conducted in a manner which is or was unfairly prejudicial to them. Burrell J. declined to give the direction sought. He was not persuaded that the convening of such a meeting would not serve any useful purpose so close to the hearing of the petition.

8. We agree. The convening of such a meeting would not wholly dispose of the petition since, irrespective of the position of the minority shareholders, the Securities and Futures Commission contends that the public interest requires the Company to be wound up. In any event, we are not persuaded that any views which the minority shareholders may express on the topic would be sufficiently informed. Accordingly, it was entirely open to Burrell J. to conclude that no useful purpose would be served by the convening of an E.G.M. at the time of Mr. Chim's request - especially when that request was made so soon before the hearing of the petition was due to take place.

A stay of the proceedings

9. Mr. Chim sought a stay of all proceedings on the petition pending his appeal against the various directions given by Burrell J. on 19th January. Burrell J. declined to stay the proceedings. His reasons were:

"To stay all proceedings pending an appeal of [the] summons for directions would only be appropriate in exceptional circumstances and for a specific reason. Otherwise, not only would litigation never end, it would never begin either. It is neither prejudicial nor unreasonable to expect the Respondents to continue with their preparation for trial in compliance with the Court's directions, pending the outcome of the appeal. The only thing which should [a]ffect the directions made on 19th January is the result of the appeal, not the lodging of the appeal."

We agree. In any event, had the stay been granted, it would have had the effect of putting off the commencement of the hearing of the petition on 19th April until Mr. Chim had been released from prison - which was what Mr. Chim sought and failed to obtain in appeal CACV 36/99.

Conclusion

10. For these reasons, we were not persuaded that the judge had exercised his discretion in a way which justified the intervention of an appellate court. This appeal had therefore to be dismissed.