WONG WAI HUNG v. LAM WAI MO AND ANOTHER

HCMP 528/2021

[2022] HKCFI 1071

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 528 OF 2021

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D E C I S I O N

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1.  I am of the view that this matter is not suitable for determination by way of originating summons on affidavits alone, as there are factual disputes. The Applicant (“Ms Wong”) seeks an order that certain documents relating to the 2nd Respondent (“the Company”) filed at the Companies Registry be declared null and void, or be rectified. The documents are:

1.1  a return of allotment (Form NSC1) dated 31 December 2016 allotting 990,000 shares in the Company to the 1st Respondent (“Mr Lam”);

1.2  a notice of resignation as director (Form ND4) dated 6 January 2020 which carries a signature “Wong Wai Hung” but which Ms Wong says was forged;

1.3  a notice of change of company director (Form ND2A) dated 6 January 2020 which appointed Ng Yuk Ying as director;

1.4  annual returns (Form NAR1) for the Company filed after 31 December 2016 which show Mr Lam as owning either 990,001 or 1,000,000 shares (instead of 9,999 shares).

2.  For the return of allotment dated 31 December 2016, there is a factual dispute as to whether Ms Wong and Mr Lam had agreed to make the allotment upon Mr Lam’s improvement in health. Mr David Fong, counsel for Ms Wong, says that in any event Mr Lam could not have validly signed the document as he had resigned his directorship on 28 January 2013, although “out of the blue” the Company’s annual return made up to 28 December 2016 had stated that Mr Lam was a director, so that it is possible to determine this on the documents alone. In fact Mr Lam had been shown as a director in the annual return made up to 28 December 2014, although Ms Wong questions the validity of this also (in her affidavit). In any event there is a factual dispute as to whether Mr Lam had validly become a director again. The 2014 annual return is not one of the documents challenged in the Originating Summons, and it would be inconsistent to find that Mr Lam was not a director when signing the return of allotment in 2016 when the unchallenged 2014 annual return shows that he was.

3.  Mr Vincent Chen, counsel for Mr Lam, submits that the allotment was made by agreement and that as a matter of law, under the Duomatic principle, non-compliance with the formalities in the Company’s articles and the Companies Ordinance (Cap.622) (“the CO”) does not render a corporate act invalid, if there is unanimous consent amongst the shareholders, and he says that there was unanimous consent in the present case for the allotment. Mr Fong says that the principle does not apply where the parties are in dispute; but this is why it is necessary to resolve the issues of fact first in order to see whether the principle applies.

4.  In any event, it would not be appropriate to make a determination in relation to the allotment of shares without also considering the other documents of which complaint is made, and in this regard, further issues of fact arise.

5.  For the notice of resignation as a director which Ms Wong says was forged, there is again a factual dispute as to whether this is the case. Mr Fong relies heavily on what is said to be an admission on oath by Mr Lam in a criminal case brought against Ms Wong. However, taken at its highest, Mr Lam made statements that he signed all documents relating to the Company, and not specifically that he had forged the signature on the impugned Form ND4. Mr Lam also said that he was not sure whether the signature on the Form ND4 was Ms Wong’s, and when it was put to him that he had forged the signature, he exercised his right against self-incrimination and did not answer the question. Mr Lam says that there was an agreement that Ms Wong would resign and there was no need for him to forge anything. In these circumstances where the issue of forgery is disputed, the matter cannot simply be decided on affidavit.

6.  Mr Fong cites two authorities to say that the court can dispose of a s.42 CO application by way of originating summons even if it involves a forged document. That may be so, but not in a case such as the present where there are issues of fact.

6.1  In Forever Up Holdings Ltd v. Tong Yan Wa [2019] 5 HKC 478, the forgery had been found as a matter of fact in criminal proceedings and this finding was not opposed in the s.42 application by the forger (who was the respondent).

6.2  In Xu Bei v. The Registrar of Companies and Honour Island Development Ltd [2018] HKCFI 636, the fraudulent scheme was incontrovertible on the documents, and not contradicted by any evidence; the fraudulent corporate directors had been struck off altogether.

7.  For the appointment of Ng Yuk Ying as a director and the annual returns filed after 31 December 2016, there is a factual dispute as to whether there was an agreement between Ms Wong and Mr Lam that Ms Wong would resign as director and transfer her shares to him. There is a further factual dispute raised by Ms Wong that her signature was also forged on the bought and sold note and the instrument of transfer in relation to her 9,999 shares which were transferred to Mr Lam.

8.  In addition, the 2nd Respondent’s director (“Ms Gan”) says that she is currently the sole director and shareholder of the Company. She says that she gave good value for the shares, the transfer having been made to settle sums outstanding to her business for construction and renovation services ordered by Mr Lam. Mr Ryan Law, counsel for the 2nd Respondent, submits that the requirement under s.42(4) CO could not be satisfied in that (inter alia) the Company’s interest in removing the documents would not outweigh Ms Gan’s interest in having them remain on the Register. Mr Fong submits that (a) if the allotment of the 990,000 shares never took place then Ms Gan could never have acquired them anyway; and (b) as for the 9,999 shares originally held by Ms Wong, no good title could have passed to Ms Gan. As to (a), this again raises the factual issue of whether the allotment was made by agreement. As to (b), Mr Fong’s argument in paragraph 90 of his main skeleton (as to the validity of which I express no view) depends on the instrument of transfer for the 9,999 shares being a forgery – which is again an issue of fact.

9.  Mr Law says that the Originating Summons should actually be dismissed since the matter cannot be determined on affidavit and therefore Ms Wong has not discharged her burden of proof. However, the complaints raised by Ms Wong are serious ones with some support from the documents and it would not be appropriate to simply dismiss them at this stage.

10.  I will therefore order that the Originating Summons be continued as if it had been begun by writ, and will hear the parties as to directions.