LIN REN XIANG v. KO YIN AND OTHERS

HCMP 557/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 557 OF 2014

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J U D G M E N T (2)

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Introduction

1.  On 28 April 2017, this court handed down a judgment (“Main Judgment”) in respect of this action together with 3 other actions, namely:

(i) HCMP 1558 of 2015 (“Possession Action”);

(ii) HCA 1497 of 2015 (“Loan Action”);

(iii) HCA 632 of 2015 (“Charter Port Action”).

2.  In this judgment, save as otherwise indicated, I will adopt the same abbreviations in the Main Judgment.

3.  In relation to the present action, in the Main Judgment, I have asked the parties including the Registrar to file further submissions on rectification and on the terms of the order.  Subsequently, Lin has sought clarification of certain findings in the Main Judgment (“Clarification Issue”).

4.  5 written submissions were lodged on behalf of Lin by Mr William Wong SC with Ms Ebony Ling and Ms Ellen Pang, namely (1) on 19 May 2017 (rectification, terms of the order and clarification), (2) on 8 June 2017 (clarification), (3) on 21 June 2017 (reply), (4) supplemental submissions on 28 June 2017 (clarification) and (5) 2^nd supplemental submission on 30 June 2017 (clarification) (collectively “P’s Submissions”). 

5.  Two written submissions were lodged by Mr Jeremy Cheung and Ms Candy Tang on behalf of Ko and Gold Glory (collectively “Ds”) on 9 June 2017 (on rectification and terms of the order) and 29 June 2017 (reply on clarification) (collectively “Ds’ Submissions”).

6.  Ms Christine Frances Sit, Assistant Principal Solicitor, lodged written submissions on behalf of the Registrar on 9 June 2017 on rectification and terms of the order (“Registrar’s Submissions”).

7.  I will deal first of all with rectifications and the terms of the order.

Rectifications

Schedule 1 of the statement of claim

8.  Schedule 1 consists of an amended annual return made up to 16 April 2013, which Lin asked the court to direct the Registrar to register, upon removing the 2013 Annual Return from record.  In light of the findings in Main Judgment, Lin has indicated that he will not continue to pursue the relief sought.

9.  In any event, in light of my findings in the Main Judgment, the relief sought by Lin, ie to register the amended annual return in Schedule 1, is refused.

Schedule 2 of the statement of claim

10.  There were 3 items in Schedule 2:

(1) The Notice of Increase and the Registered Shareholders’ Resolution both dated 17 April 1998;

(2) The 17.04.98 Return of Allotment;

(3) Gold Glory’s various annual returns from 1999-2013.

Item (1) – Notice of Increase and the Registered Shareholders’ Resolution

11.  This court found that the Registered Shareholders’ Resolution was invalid.  Ms Sit submitted that the Registered Shareholders’ Resolution be rectified in the manner as per the copy marked “B” annexed to the Registrar’s Submissions.  Lin has agreed to this, and there has been no objection from Ds.  I so order.

12.  In light of this court’s finding that Lin had not satisfied this court that the Purported Increase was invalid, all parties agree that no order needs to be made in respect of the Notice of Increase, which is to continue to remain on public record.

13.  As for the 17.04.98 Ordinary Resolution, Ms Sit has submitted that the 17.04.98 Ordinary Resolution be signed by Lin manually as per the copy marked “C” annexed to the Registrar’s Submissions, in light of this court’s findings in paragraphs 412(v), 499 and 500 of the Main Judgment, namely that this document was prepared by Lee under the instruction and authorization of Lin and that there was no mistake on the part of Lee and/or Smart Fortune.

14.  Lin opposes to the Registrar’s proposal, and Mr Wong submitted that given the court’s finding, no order should be made, and that Mr Cheung had indicated that Ds were in tandem with Lin’s proposal and further no application has been made by Ds for Lin to manually sign on the 17.04.98 Ordinary Resolution.

15.  I accept there was no order sought by Ds that the 17.04.98 Ordinary Resolution should be manually signed by Lin.  As Ds have not indicated any objection to there being no order, I make no order in relation to the 17.04.98 Ordinary Resolution.

Item (2) – The 17.04.98 Return of Allotment and Item (3) – Gold Glory’s annual returns from 1999-2013

16.  Mr Wong submitted on behalf of Lin that as this court found that Ko did not pay any sum to either Lin or Gold Glory for the allotted shares, the 17.04.98 Return of Allotment and all the annual returns should be rectified by recording the correct and actual paid up capital being HK$10,000.

17.  In paragraph 458 of the Main Judgment, the finding of this was that there was no sufficient evidence that Ko had in fact paid HK$200,000 to Lin to purchase the allotted shares in Gold Glory, nor was there any evidence that she had paid any sum to Gold Glory for the allotted shares (“Paragraph 458 Finding”).

18.  As pointed out by Mr Cheung, there was no positive finding by this court that Ko did not pay any sum to Gold Glory.

19.  Mr Wong however argued that in light of the Paragraph 458 Finding, the paid up capital of Gold Glory could not have been HK$200,000.  I do not agree that this would necessarily follow. 

20.  Mr Wong is seeking further clarification from this court in relation to the Paragraph 458 Finding as seen later in this judgment.

21.  In any event, there was no finding by this court that the paid up capital of Gold Glory was not HK$200,000.  In fact, as pointed out by Mr Cheung, in paragraph 485 of the Main Judgment, this court had declined to make a declaration that the share capital of Gold Glory remained, and still remains at HK$10,000.

22.  As further pointed out by Mr Cheung, Lin himself had sought and obtained notarized copies of Gold Glory’s annual return which had reflected that the share capital was HK$200,000 for his own use at the time of the sale of the Shenzhen Property.

23.  Ms Sit has also submitted on behalf of the Registrar that there should be no order for rectification in relation to the amount of paid up capital on the annual returns as this court had stated in paragraphs 505 and 506 of the Main Judgment that it was not satisfied that the information on the 17.04.98 Return of Allotment, or on the 14 years of annual returns and the 2013 Annual Returns were factually inaccurate or fell within section 42 (1).

24.  Having considered all the submissions, I decline to order any rectification of the 17.04.98 Return of Allotment or any of the annual returns in respect of the amount of paid up capital of Gold Glory.

Schedule 3 of the statement of claim

25.  Item (1) of Schedule 3 is the 16.12.13 Notification which this court accepted was filed by mistake by Smart Fortune, and I am satisfied that this document shall be removed from the Companies Registry record.

26.  As for item (2) of Schedule 3, namely the 2013 Annual Return, Ms Sit has submitted that the 2013 Annual Return be rectified by Gold Glory in the manner as per the copy marked “E” annexed to the Registrar’s Submissions, in light of this court’s findings in paragraphs 412(ii), 494 and 495 of the Main Judgment.  Lin agrees with this and there has been no objection from Ds.  I so order.

27.  As for item (3) of Schedule 3, namely the 06.12.13 Notification, Ms Sit has submitted that this item be rectified by Gold Glory in the manner as per the copy marked “G” annexed to the Registrar’s Submissions, pursuant to this court’s findings in paragraphs 412 (iii) and 510 of the Main Judgment.  Lin agrees, and there is no objection from Ds.  I so order.

28.  For item (4) of Schedule 3, namely the 28.11.13 Special Resolution, Lin agrees to Ms Sit’s submission that this item be rectified by Gold Glory in the manner as per the copy marked “I” annexed to the Registrar’s Submissions, and there is no objection from Ds.  I so order.

29.  As for the 17.04.98 Ordinary Resolution, I have dealt with this earlier.

Schedule 4 of the statement of claim

30.  Mr Wong submitted that no order be made in respect of the 4 items under Schedule 4.  Mr Cheung submitted that Ds are at tandem with Lin’s proposal.  There were no submissions from Ms Sit on Schedule 4.

31.  I made no order on those documents under Schedule 4.

Other orders

32.  Ms Sit has submitted that pursuant to section 44 of the Companies Ordinance, the Registrar may make annotations on the documents that need to be rectified as indicated on the copies thereof annexed to the Registrar’s submissions.  I see no objection to the Registrar making the proposed annotations on those documents that need to be rectified as indicated by Ms Sit, to reflect the terms of the order of this court. 

33.  Ms Sit has also proposed that all documents that need to be rectified should be delivered to the Registrar within 21 days of this order.

34.  I order Gold Glory to deliver to the Registrar all the rectified documents for registration within 21 days upon this order being sealed. 

Clarification Issue

35.  In Ps’ Submissions, Mr Wong has also sought clarifications in relation to the Paragraph 458 Finding.

36.  Mr Cheung has refused to address upon the Clarifications Issue unless further directed by this court, as it is his submission that the direction from the court in the Main Judgment was only for the parties to lodge submissions on rectification and terms of the order.

37.  Mr Cheung has also sent an undated letter received by this court on 8 June 2017 enclosing a copy of the Court of Appeal Judgment in Skink Ltd (in liquidation) & Another and Comtowell Ltd & Another [1998] 1 HKLRD 542, CACV No 74 of 1994, dated 10 February 1998.  It has been held in Skink that the High Court has an inherent jurisdiction to vary its own orders so as to carry out its own meaning and to make that meaning plain; and an express power under O.20 r.11 to correct any error in any order resulting from an accidental slip or omission, but these powers extend to the correction of errors in expressing the court’s intention, and that the court has no power to correct mistakes of its own; even where it is satisfied that it has indeed made such a mistake[1].

38.  Mr Cheung has submitted in his above letter that it follows from Skink that this court is not empowered to make clarification of a judgment save where it is to express what was the obvious and manifest intention of the court but which was somehow mistakenly omitted.

39.  Mr Cheung then submits that in the event this court takes a different view, directions ought be given to Lin to apply to the court for rehearing.

40.  On the other hand, Mr Wong has submitted that it is well accepted that a judge is entitled to, in exceptional circumstances, reopen a judgment or order in the period between delivery of the judgment and the moment when the order is sealed or otherwise perfected referring to Steward v Engel [2000] 1 WLR 2268 and Sun JianQiang and Trans-Island Limousine Service Limited, CACV 20 of 2003, 17 November 2003.

41.  I accept this court has jurisdiction to reopen a judgment in exceptional circumstances between delivery of the judgment and the moment when the order is sealed or otherwise perfected.  However, I am not satisfied that there are exceptional circumstances in the present case to justify reopening the Main Judgment.

42.  In any event, as I understand it, Lin is mainly asking this court to clarify the Paragraph 458 Finding.  It is my view that this matter can be dealt with without this court having to direct Mr Cheung to make any further submissions. 

43.  Mr Wong pointed out that it was Ds’ pleaded case that there was an agreement between Lin and Ko pursuant to which Lin agreed that Gold Glory should increase its capital to HK$200,000 and the increased 190,000 shares should be allotted to Ko at par value.  In consideration, Ko would pay Lin HK$200,000.

44.  Mr Wong has asked this court to:

(i) confirm that the court has found against the existence of the alleged agreement, and with such confirmation,

(ii) clarify what is the legal consequence of such findings of the correct shareholding structure of Gold Glory.

45.  Mr Wong has set out in paragraph 23 of P’s 1^st Written Submissions lodged on 19 May 2017 this court’s various findings and has submitted that it follows from those findings that the court has found against the existence of the alleged agreement.

46.  This court has set out Ds’ case in paragraphs 406 and 407 of the Main Judgment.  It was stated in paragraph 471 that this court did not find Lin’s evidence that he had no knowledge, nor did he authorize or consent to the Purported Increase and Purported Allotment in Gold Glory or of the appointment of Ko as director in place of him to be credible.  Further, in paragraph 472, it was this court’s positive finding that Lin had knowledge and had consented and/or authorized Hui to proceed and prepare all the necessary company documents for the Purported Increase and Purported Allotment of Gold Glory and for him to resign as a director and for Ko to be appointed in his place, and that upon his move back to Hong Kong, he had authorized Hui to prepare necessary documents for him to be re-appointed as a director of Gold Glory again in place of Ko.  Further, in paragraph 481, this court found that the 17.04.98 Ordinary Resolution was prepared by Lee based on the current situation in accordance with the then instructions from Lin.

47.  Suffice to say, there was no finding by this court against the existence of the alleged agreement, and, based on my findings, if any clarification is necessary, the effect of my findings was that Lin did agree or there was an agreement between Lin and Ko, that Gold Glory should increase its capital to HK$200,000 and the increased 190,000 shares should be allotted to Ko at par value and that Ko be appointed as a director in his place.

48.  Mr Wong submitted that apart from the Registered Shareholders Resolution and Unregistered Shareholders Resolution, none of the parties had put forward the case that there was another valid shareholders’ resolution authorizing the Purported Allotment and neither had put forward the 17.04.98 Ordinary Resolution nor relied on it.

49.  Mr Wong has further submitted that it follows from this court’s findings that there was no actual allotment of shares and that Ko holds the shares on trust for Lin.

50.  I am afraid I do not agree with what was submitted by Mr Wong. My finding was that the 17.04.98 Ordinary Resolution was a document which Lin had authorized Lee to prepare.  Lin had said it was a mistake.  It was my finding there was no mistake on the part of Lee and/or Smart Fortune.  If clarification is necessary, in fact, it follows from my finding that by authorizing the preparation of the 17.04.98 Ordinary Resolution, Lin must have accepted that the document reflected what took place on 17 April 1998, namely that there had been an increase of capital and allotment of shares to Ko.  It thus follows from this court’s findings that there was an allotment of shares to Ko.

51.  As for the Paragraph 458 Finding, that there was no sufficient evidence that Ko had in fact paid HK$200,000 to Lin nor was there any evidence that she had paid any sum to Gold Glory for the allotted shares. 

52.  The Paragraph 458 Finding does not mean that the increased capital was not paid up, or that the allotted shares were not paid in any other way or by any other person on behalf of Ko. 

53.  As this court pointed out in paragraph 458, Lin did not seek any declaration in this action that Ko holds the allotted shares on trust for him.  This was not an issue at the trial.  It may not necessarily be the case that Ko holds the allotted shares on trust for Lin.

54.  In any event, I am of the view that Lin cannot now seek a declaration that Ko holds the allotted shares on trust for him, through clarification.

Conclusion

55.  In light of what is said above, I will ask the parties to submit an agreed draft order for this court’s approval.

56.  Ms Sit has submitted that no order for costs be made against the Registrar in this action and that the Registrar be excused from attending at the costs hearing.  Neither Lin nor Ds have opposed this.  I so order and direct.

57.  As for costs of the rectification and clarification, this is to be fixed for argument, in accordance with paragraph 527 of the Main Judgment.