TEH SOON SENG v. FOONG YIN CHEOK AND OTHERS

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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DECISION

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1. This is a case which has taken a slightly curious turn. It started off late last year as an application for an injunction and, very sensibly, the parties agreed to a speedy trial, to which the Court acceded. It has come on for hearing today.

2. Very briefly, the Action concerns the company which is the Fourth Defendant, Tecta First Enterprise (Far East) Limited. The Plaintiff claims that he is the sole beneficial owner of all the shares of that company.

3. There are two personnel defendants, Mr Foong, the First Defendant, and Mr Low the Second Defendant. The Third Defendant, Fort Securities Limited, is a BVI company which is owned by the Second Defendant.

4. Late, I am told, yesterday, an agreement was reached between the Second Defendant and the Plaintiff and, in effect, that gives the Plaintiff all the relief that is sought.

5. The Second Defendant had been the person who the Plaintiff had dealt with initially regarding the setting up of the Fourth Defendant, and he was the person who owned or, in effect, claimed to own all but one of the shares of the Fourth Defendant.

6. As regards the remaining share, that was in the name of the First Defendant. Prior to action being commenced the First Defendant's solicitors wrote to the Plaintiff's solicitors and said:

"Our client has in his custody on behalf of the company accounting records, business correspondence. The statutory books are with the company secretary. There are three members, of which our client is one, on the board of directors. The Board of Directors must act as a body, i.e. through the Board and through Board resolution. Our client cannot accede to your client's request without a proper board resolution related to the return of the Documents."

7. Then in relation to resignation of directors, the curious statement is that:

"Our client understands that the shareholders would like to wind up the company. He will remain on the Board until the winding up is put into effect."

8. But as regards the single share which the First Defendant held, he says:

"Our client holds one share in Tecta in trust for your client. However the share certificate, the declaration of trust and the instrument of transfer are all with your client."

9. So, in other words, he, as I see it, washed his hands of any claim to that share.

10. In the affirmation that was filed by the First Defendant on 12th January shortly after the commencement of these proceedings - the First Defendant said this:

"In this affirmation I intend to show that as it has never been denied that the ownership of the one share in the Fourth Defendant registered in my name is held by me on trust for the Plaintiff, the Order dated 13th December 1995 for interim receivership of the issue share capital of the Fourth Defendant is therefore misconceived and further the Plaintiff's claim for an injunction, account of sums, vesting order and rectification order as set out in the Writ of Summons are either misconceived or premature."

11. When the pleadings came to be filed, the First Defendant was represented by the same solicitors and counsel as the Second and Third Defendants, and they filed a joint defence. In effect, when one examines it, the lis between the parties seems to me to have been a lis between the Second Defendant and the Plaintiff, and indeed, when one examines the Defence and Counterclaim, one sees that the Counterclaim was made by the Second and Third Defendants, it is they who claimed the shares which were effectively the subject of these proceedings.

12. As Mr Yu, on behalf of the First Defendant, has pointed out, there has been a settlement, and I cannot read into that a concession that all the allegations made by the Plaintiff are correct. What was, in effect, the subject of the Plaintiff's claim, I consider can best be considered by reference to the prayer for relief in the Statement of Claim.

13. There are really three relevant paragraphs to that. First is a declaration that the Plaintiff is the beneficial owner of the entire issued share capital of the Fourth Defendant. Although technically, when one looks at it, the First Defendant joined in the defence of the Second and Third Defendants, and therefore resisted that the reality of the situation was that the lis between the First Defendant and the Plaintiff did not include that. That was really a lis between the Second Defendant and the Plaintiff.

14. The second declaration was that the First and Third Defendants held their shares in the Fourth Defendant on trust for the Plaintiff. As I have pointed out, there was an admission, both in correspondence and on affirmation, which in my view was sufficient for the Plaintiff to have applied for judgment on admissions that this share belonged to the Plaintiff.

15. Then there was an injunction restraining the Defendants and each of them from disposing or transferring, charging or in any way dealing with any part of the whole of the shares. Again, that lis, insofar as there was a lis, was really, it seems to me, a lis between the Second Defendant and the Plaintiff, and none other.

16. As I say, the reality of the situation is made apparent by the fact of what has happened now, the settlement having been reached between the Second Defendant and the Plaintiff. Indeed when the parties announced this in court, it quickly became obvious that it would really be an abuse to continue these proceedings any further. There was no point in it. There was already, as I have tried to indicate, no lis between the parties, and it seems to me this: that the true position is that probably the defence of the First Defendant should have been a more neutral affair than in fact it was, and it should have left the dispute primarily between the Second Defendant and the Plaintiff.

17. So the technically pleaded Defence I consider probably went further than it should have done. The reality was that this was a dispute between the Second Defendant and the Plaintiff which has now fallen away. The Plaintiff asked for his costs and Mr Yu on his behalf says that there was no reason for these proceedings against the First Defendant, and on behalf of the First Defendant applies for his costs.

18. I perhaps take a slightly different view from either of the parties. I consider that, the matters having happened in the way they have, the way I tend to look at it is, given the scenario which I have tried to outline as briefly as I can, what is it that the First Defendant has done which has increased the costs of this action over and above what the Second Defendant has done and over and above what they would inevitably have been? I consider that, really, it is very little. It is probably filing a defence which was too enthusiastic. In my view, one has to read that in the light of the correspondence and the affirmation.

19. In my view, taking into account the extra affirmations that would have had to have been filed and the Pleadings, I am being amply generous to the Plaintiff by giving him ten per cent of his costs.

20. Mr Ma has pointed out, on behalf of the Plaintiff, that there were costs of appointing the receiver. As regards the First Defendant, I do not consider that that was necessary. I have taken that into account in allowing ten per cent of the costs. Mr Ma, on behalf of the Plaintiff, has indicated that the $500,000 costs provisions in the settlement agreement has to be taken into account when costs are assessed, to the extent that the First Defendant would only be liable to pay anything if ten per cent of the costs come to more than $500,000. In my overall estimation, I do not expect and I have so picked the percentage figure that the Plaintiffs will be recovering any extra costs against the First Defendant over and above the $500,000 against the Second Defendant.