CHUI PUI KUN v. CHUI WAI KWAN

HCA2339/2009, HCMP438/2010
& HCMP937/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2339 OF 2009

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BETWEEN

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(HEARD TOGETHER)

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REASONS FOR DECISION

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INTRODUCTION

1.  Before the court are three actions.

2.  HCA2339/2009 is a defamation action commenced by Mr Chui Pui Kwan (“CPK”) against his younger brother, Mr Chui Wai Kwan (“CWK”).  I will call it the Defamation Action below.  Leave has been given to set it down for trial before a bilingual judge with jury with 18 days reserved.

3.  HCMP438/2010 is a petition brought under section 168A of the Companies Ordinance, Cap. 32, concerning Fook Lam Moon Restaurant Limited (福臨門酒家有限公司) (“the Company”).  The petitioner is Coqueen Company Limited (“Coqueen”), a corporate vehicle owned and controlled by CPK, which holds 26,780 B shares in the Company (44.63% of the Company’s shares) for and on behalf of CPK and his family.  The 1^st respondent is CWK, who holds 26,780 A shares in the Company (44.63% of the Company’s shares).  The other respondent is CPK and CWK’s sister, Madam Tsui Yau Hing (“TYH”), who holds 1,663 C shares (2.772 % of the Company’s shares).  Coqueen seeks a buy-out order.

4.  HCMP937/2010 is also a section 168A petition concerning the Company. It is brought by CWK against Coqueen and CPK.  He also seeks a buy-out order.

5.  I will refer to the two petitions collectively as “the Petitions” below.  As will be seen below, further factual evidence is still pending.  The parties also need to file expert evidence on the valuation of the shares of the Company.

6.  At the Case Management Conference held on 10 June 2011, I made the following orders and directions :

(A) In respect of the Defamation Action :

(1) CWK’s application that the Defamation Action be heard after the conclusion of the trial of the Petitions be refused.

(2) The length of the trial be extended from 18 days to 25 days.

(3) The parties are to approach the listing officer within the next 7 days for fixing the trial date.

(B) In respect of the Petitions :

(1) The application to re-amend the Amended Petition in HCMP438/2010 by summons dated 23 May 2011 (“the Amendment Application”) be allowed with consequential directions for filing of evidence.

(2) The Petitions are to be tried together by the same trial judge for the Defamation Action.

(3) The parties are to approach the listing officer within the next 7 days for fixing a direction hearing before the trial judge for further directions for the future conduct of the Petitions, with half a day reserved.

7.  I have indicated that I would hand down the reasons for my decision, which I now do.

BACKGROUND

8.  To put the matters in context, I will briefly outline the background.

9.  On 25 November 1975, the Company was incorporated to take over the restaurant and catering business first established in 1948 by the late Mr Chui Fook Chuen, who died on 19 August 1977.  The 300 shares of the Company were then held by Mr Chui, CPK, his 5^th son and CWK, his 7^th son (30% each) and his three wives (3.33% each).  It operated a restaurant at G/F and 1/F, No.459 Lockhart Road, Wanchai, between incorporation up to March 1989.  Since then, it has been operating at Shop 3, G/F, 1/F-3/F, Newman House, 35-45 Johnston Road, Wanchai.  Over the years, the restaurant business of the Company grew and福臨門 is now a world renowned restaurant, famous for providing top quality Cantonese cuisine.

10.  Since incorporation, the shareholding of the Company had gone through changes at various stages.  The latest position is that the 60,000 shares of the Company are divided into 3 classes : A, B and C.  CWK holds 26,780 A shares, Coqueen, 26,780 B shares.  6,440 C shares are divided among their four sisters, including TYH.  Both CPK and CWK have been directors throughout.

11.  In HCMP438/2010, CPK, through Coqueen, raised numerous matters in support of his complaints that the Company’s affairs have been conducted by CWK and TYH in a manner unfairly prejudicial to the Company’s and other shareholders’ interests.  HCMP937/2010 is in effect a cross-petition by CWK in which he set out his case on all the factual matters and allegations raised by CPK in HCMP438/2010 and his complaints on the unfairly prejudicial conduct committed by Coqueen and CPK.  For present purposes, I will not set out the complaints and cross‑complaints raised by the two brothers in the Petitions.  They have been helpfully summarized by their leading counsel in their written submissions.

12.  Of the many complaints that CPK raised through Coqueen in HCMP438/2010 are one circular that CWK sent to the directors and shareholders of the Company dated 28 October 2009 (“the 1^st Circular”) and two circulars that he sent to the directors and shareholders of the Company and a related company, Fook Lam Moon (Kowloon) Restaurant Limited (“FLM(KLN)”) dated 10 November 2009 (“the 2^nd Circulars”). The genesis of the Circulars is the board meeting of the Company held on 10 October 2009.  At that meeting, it was resolved that interim dividends of HK$10 million be declared and distributed; and that the proposed appointment of CWK’s daughter, Michelle, as Deputy Manager for Purchasing, Quality Control and Marketing be vetoed.

13.  CPK’s case is that CWK was very displeased with the board’s decision.  He deliberately withheld the payment of the dividends and called for an EGM to be held on 31 October 2009 for the purpose of passing resolutions to appoint Michelle and confirm the date for distribution of the interim dividends.  CPK then sent a letter dated 23 October 2009 to all directors and shareholders setting out his comments and position.  In response, CWK sent the 1^st Circular to all the directors and shareholders.  Eventually no EGM was held on 31 October 2009.  CWK then, among other things, issued the 2^nd Circulars on 10 November 2009.

14.  CPK complained that the 1^st and 2^nd Circulars contained false and defamatory statements of and concerning him.  Hence the Defamation Action.  CWK’s defence is that the statements complained of are not defamatory, and that they are in any event justified and published on occasions covered by qualified privilege.  CPK pleaded malice in response.  Again, for present purposes, I do not propose to detail the brothers’ pleaded case in the Defamation Action, which has been usefully summarized by counsel.

AMENDMENT APPLICATION

15.  I first dispose of the Amendment Application.

16.  The proposed re-amendment sought to introduce further unfairly prejudicial conducts against CWK since the date of the Petition (8 March 2010) and the outcome of HCMP270 & 271/2010 as to CPK’s right to inspect the minutes of meetings of the Company and FLM(KLN).  Broadly, these new matters include :

(1) Withholding of information from the ‘B’ Directors (as defined) concerning how ALKK, a firm of solicitors, as going to charge their fees.  It is Coqueen’s original pleaded case that CPK’s camp engaged ALKK as the Company’s legal advisers to further their own interests.

(2) Exclusion of CPK and other ‘B’ Directors from the management of the Company.

(3) Attempt to further downplay CPK’s role and limit his duties, rights and powers and to widen Daniel’s (CWK’s son) scope of duties.

(4) Further obstruction of Coqueen’s/CPK’s rights to access, inspect and obtain copies of documents of the Company.  This formed the subject matter of HCMP270 & 271/2010.  The proposed amendment pleads the outcome of the judgment Recorder A Chow, SC handed down on 3 January 2011.

(5) CWK’s refusal to account to the board the procurement of expensive dried ingredients handled by him.

(6) The harassment of patrons of the restaurant and Duncan (CPK’s son).

17.  Initially, Mr Jat, SC, for CWK, opposed the Amendment Application.  He relied on Cheung Hon Wah v Cheung Kam Wah & Others [2005] 2 HKLRD 599 and The Securities and Futures Commission v Mandarin Resources Corporation Ltd, CACV84/1999, unreported 1 April 1999 and argued that as a matter of principle, it is not permissible to allow amendments for post-petition events.  Mr Yu, SC, for CPK countered by citing Geoglobal Partners LLC v Peaktop Technologies (USA) Hong Kong Limited, HCCW87/2007, unreported, 12 December 2007, a decision of Kwan J (as she then was).  He submitted that there is no inflexible rule against amendments for post‑petition events, which may be allowed when the circumstances so justified.

18.  Although counsel had spent considerable time in dealing with the principles derived from the cases and their application, I need not go into details for present purposes.  For in the end Mr Jat submitted that while the proposed amendments remained objectionable, he would take a pragmatic approach and would not oppose the Amendment Application while at the same time making it clear that he was not making any concession or abandoning any of the grounds of objection.  Given his stance, I allowed the Amendment Application with consequential directions for filing of factual evidence.

19.  I would however like to repeat what I have said in the course of submissions.  There must be finality to the pleadings and evidence adduced.  The parties should not come to court for amendment whenever some post-petition unfairly prejudicial conduct allegedly took place.  They should apply proportionality and common sense vigilantly in that regard.

20.  I now turn to the other directions that I made for the Defamation Action and the Petitions.  I will call them the case management directions collectively.

CASE MANAGEMENT DIRECTIONS

(1) No “consolidation”

21.  CWK applied that the Defamation Action should be tried after the conclusion of the trial of the Petitions.  Mr Jat submitted that primary facts and issues overlapped significantly.  If the actions were to be heard separately, the evidence on many background facts would have to be led twice.  There would be monumental waste of judicial and parties’ resources associated with the risk of inconsistent outcome.  It is also disproportionate to have 18-day trial in addition to the Petitions given that the subject matter of the Defamation Action is only a relatively small part of the parties’ dispute as compared to the Petitions.  The jury’s burden in the Defamation Action would also be lessened to some degree as they would be assisted by the court’s findings in the Petitions.

22.  Mr Yu, strongly opposed CWK’s application. He submitted that CPK’s right to jury trial for the whole of the Defamation Action is conferred by statute and he has already invoked that right.  If the court accepted CWK’s application, the court would in effect abrogate CPK’s right to jury trial by case management power, which is impermissible.  In any event, the overlapping of the facts and issues are so minor that it is wrong to “consolidate” the Defamation Action with the Petitions as suggested.

23.  For present purposes, I need not come to a definite view on the correctness of Mr Yu’s submission that the court has no jurisdiction to deal with the matter by way of case management as suggested by CWK.  My provisional view is that the court does have the power to do so. I refused CWK’s application because I agreed with Mr Yu that, although there is some overlapping on the background facts, the issues to be determined by the jury in the Defamation Action and those by the judge hearing the Petitions are quite different.  It is also not inconceivable that the parties might differ as to what findings the judge has made in the Petitions. Any argument over such matters would only cause disruption to the trial of the Defamation Action.  I also have some reservation if the jury’s task would be made easier if they were told that for some disputes, the trial judge had already made a finding one way or the other in the Petitions and they are bound by those findings.  What if their views on certain matters, after hearing the witnesses, honestly differ from those of the judge?  They will be directed that they must accept the judge’s findings.  But one can readily see that the jury, as distinct from a professional judge, might find it rather confusing to proceed on the footing that their preferred views on the matters concerned must be ignored.  I think it is much better to leave all the factual disputes in the Defamation Action to the jury so that they could decide them all in one go.  Finally, the Defamation Action is ready for trial.  The Petitions are not.  It would be wrong to defer the trial of the Defamation Action until the determination of the Petitions.

(2) Same trial judge

24.  The parties agreed that the Defamation Action and the Petitions should be heard by the same judge.

(3) Extending the length of trial for the Defamation Action

25.  The parties also agreed that the original estimate for the length of the trial for the Defamation Action was too conservative, particularly bearing in the mind that a jury trial could not go part-heard.  25 days appeared to be more realistic.

(4) Future conduct of the Petitions

26.  Finally, the parties agreed that directions for future conduct of the Petitions, including the filing of expert evidence, should be reserved to the trial judge.

27.  It is for the above reasons that I made the case management directions as I did.