LAU KAM SAU v. KEVIN LI AND OTHERS

DCCJ15525/2000

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 15525 OF 2000

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JUDGMENT

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1.  This is an application for summary judgment.  The Plaintiff brings the present action against the Defendants to claim for the sum of $60,000 being the consideration for the transfer of 120,000 shares of a Company known as Wai Fung Company Limited (hereinafter referred to as “the Company”) to the 2nd and the 3rd Defendants.

2.  The Plaintiff, the 2nd and the 3rd Defendants used to be shareholders of the Company.  It is the Defendants’ case that the Company has all along been operating at a loss and that the Plaintiff has not paid up her shares in the Company.  Hence, in order for the Plaintiff to leave the Company, it was agreed that the share transfer agreement was subject to the following terms:

1. the Company would accept the Plaintiff’s resignation as a director of the Company upon the transfer of the shares;

2. the Plaintiff would cause and procure Lucida (Hong Kong) Limited, a trading partner of the Company, to pay all the outstanding debt owed by Lucida to the Company;

3. the 2nd and the 3rd Defendants would apply the consideration for the transfer of the shares, being the sum of $60,000 in total, to answer the call by the Company upon the Plaintiff for the unpaid capital share payable by the Plaintiff.

3.  In my judgment, there is certainly a triable issue as to whether there was in fact such an agreement as alleged by the Defendants.  In order to avoid the financial liability associated with the Company, it was quite possible for the Plaintiff to accept the kind of agreement as alleged by the Defendants in the defence.

4.  Mr Chan for the Plaintiff referred me to the return filed by the Company, which showed that the shares of the Plaintiff had been paid up.  He also referred me to the general ledger of the Company, which showed that the 2nd and the 3rd Defendants had paid up the shares on behalf of the Plaintiff on 31 March 2000, which was actually before the date of the actual transfer of the shares.  These facts, according to Mr Chan, make the Defendants’ allegation unbelievable.

5.  However, I do not accept his view in this regard.  It was quite possible that the return filed by the Company might not reflect the true position in the Company. Further, Miss Li for the Defendants suggested that the general ledger of the Company was only prepared for the purpose of the accounts of the Company.  The date was therefore only inserted for accounting purposes and it might not reflect the date of the actual payment.  In my judgment, these allegations on the part of the Defendants are certainly capable of being believed.

6.  In short, even taking into account the submission of the Plaintiff and the queries raised in the said submission, I am of the view that the Defendants’ allegations are still capable of being believed.  In such case, I do not accept that summary judgment is appropriate and I therefore give the Defendant unconditional leave to defend the Plaintiff’s claim. 

(Discussion re costs and the form of the order) 

7.  COURT: In such case I amend the order.  It should not be unconditional leave to defend.  I take the view that the Defendants have already set out the defence in the letter, so I do not think it would be an appropriate case for Order 14.  The order is that the application be dismissed with costs.  So instead of granting of unconditional leave to the Defendants to defend, I change it to the application be dismissed with costs.