ZHI CHARLES v. THE STOCK EXCHANGE OF HONG KONG LTD AND OTHERS

HCA 1618/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1618 of 2016

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R E A S O N S   F O R   D E C I S I O N

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1. This application has come before me at very short notice in all the circumstances as will appear from what follows. It was issued on 20 June 2016, Monday of this week. In it the plaintiff, in person, seeks injunctions or restraining orders against the Stock Exchange of Hong Kong, and a number of listed companies including their respective auditors. The bone of contention behind these proceedings is the status of a purported expert mining engineer, Herman Tso, who has been expelled from the Australasian Mining & Metallurgy Institute, and his membership thereof invalidated as from the date of admission (meaning he cannot legitimately claim ever to have been a member of it at any time) on the grounds of his false and fraudulent claims of qualifications, expertise and experience. It appears that all the listed companies, and in due course their auditors, have relied upon his reports in the promotion of investment opportunities including securities and possibly other financial instruments, and will continue to do so unless restrained.

2. However the plaintiff has a number of obstacles in his path the major and initial one, being that he has already been adjudicated a vexatious litigant in proceedings before Mr Justice Godfrey Lam on 20 June 2016 (HCMP No 443 of 2015) the same day as he issued these proceedings before me.  A particularly worrying factor, and a distinct problem on its own for this plaintiff, is that Mr Justice Lam issued his decision at 11:54 am on Monday and this plaintiff took out his offending proceedings at 12:24 pm on the same day, ie within 30 minutes of that decision.

3. The ambit of the prohibition imposed upon him is wide and very clear.  I extract from the Judge's order the following:

"1. The Defendant be restrained or otherwise... prohibited from commencing or issuing any fresh claims or proceedings in any court in Hong Kong by whatever originating process without leave of one of the following judges being first obtained...

There then follow the names of four judges of the High Court of whom the first-named is Mr Justice Godfrey Lam.

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6.  For all applications for leave to commence or issue a fresh claim or proceedings:

(1)  The Defendant shall at least 14 days before filing his application notify each intended defendant or respondent in writing of his intention to make such a leave application.

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7.  All leave applications by the Defendant and all matters ancillary thereto shall be dealt with on the papers without an oral hearing unless the designated Judge otherwise directs."

4. As far as I am concerned that order covers the proceedings before me.  These were commenced by the filing of the Writ and Statement of Claim at 11:51 am on 18 June 2016, Saturday.  The learned Judge on 20 June 2016, the next working day, would not have been aware of these proceedings, (nor would the plaintiff, the 2^nd defendant in the action before me) otherwise he would, I am sure, have included it with the other existing actions identified in §3 of the stay order.

5. The plaintiff in his comments before me indicated that he felt that the solicitors appearing for the plaintiff before Godfrey Lam J had encouraged him to think that any other existing action commenced by him was not caught by the order and that he was therefore at liberty to pursue it.  It is not for me to examine that contention and make any finding on it.  If it remains a live issue it can be dealt with on another day.

6. The second problem faced by Mr Zhi is that he has no locus standi in relation to this action against all these defendants, at least he does not plead such in either his Statement of Claim or his affirmation in support of the summons.  He merely says in §1 of the Statement of Claim that "at all material times [he] was a general investor in stocks listed on The Stock Exchange of Hong Kong."  He does not claim to be a shareholder or investor in any of the defendant companies trading in Hong Kong so as to establish, for example, that he is owed a duty of care and thereby entitled to bring these proceedings.  However I noted from the skeleton written submissions on behalf of the 2^nd defendant, that it regards him as a shareholder in itself as from a registration date in October 2014.

7. If the plaintiff is indeed a shareholder in any one or more of the defendant companies then he must assert this but it will avail him, and even then on a limited basis, only against those companies in which he is a shareholder or investor.

8. The last matter does not emanate from anything the plaintiff has or has not done.  The 12^th defendant is a well-known firm of accountants in the United Kingdom.  They were my accountants for over twenty-years when I was in professional practice at the Bar.  That is of course now some two decades or so ago.  I was then one of their many clients.  There is currently considerable sensitivity, perhaps even controversy, about a judge's direct or indirect past contact with a party to litigation which comes before him.  Although much water has passed under the bridge since Binder Hamlin acted as my accountants involving regular contact with the Inland Revenue on my behalf and investment advice, I consider it safer to recuse myself from sitting on any aspect of this litigation, particularly since the plaintiff is a litigant in person who obviously does not have the benefit of legal advice to deal with such a situation.  This last matter makes it clear that I will not make or give any direction or ruling on any substantive matter.  I will make clear what I can and will do at the end of this decision.

9. I suspect that the plaintiff feels that he can take up the cudgels on behalf of the world at large and conduct a roving commission to ensure that large public listed companies, and their regulatory body, The Stock Exchange, do not proceed to ignore the significant development to which I have referred earlier, namely the fact that a purported engineering expert has been so discredited by the AM & M1 that any institution which has hitherto relied upon his or his company's purported expertise, valuations, investigations, opinions and reports has to discard them forthwith if they have played any part in the promotion of the institution's business for the purposes of encouraging investment and the purchase of shares by members of the public.

10. It is obvious that where such reports etc. have been used as, even at least in part, the foundation for promoting the commercial success of the company commissioning them, such a company cannot ignore that the status of the so-called expert relied upon hitherto, has been so discredited.  If it did do so it would be negligent.

11. Some of the contents of the skeleton submissions advanced by the 2^nd defendant are alarming and suggestive of a less than rigorous application of the duty of the company concerned.  This is one of the reasons why I have felt it necessary to highlight them.  The plaintiff would be encouraged by such statements to consider that the duty of care and transparency is not being applied, even though he may not be one of those to whom such duty is owed, and therefore has no "locus standi" to effect any pressure.

12. The specific contents are:

"Herman Tso's alleged work product for the 2^nd to the 9^th defendants ... all were completed in 2010 or 2011, obviously many years ago ... ."

13. On the face of it the time-scale is irrelevant.  The findings against Tso are highly likely to vitiate work etc based upon his claimed expertise such as to make them worthless, however long ago the work was done.

"Although the 2^nd defendant may need to investigate what impact [his] alleged expulsion from AM & M1 will have on his previous work product to the 2^nd defendant ...."

14. The expulsion is unchallenged, and Tso has not appealed against it, and so the need for investigation is obviously an imperative.  Any failure to do so thoroughly would be negligent.

15. If this skeleton truly reflects the approach of the 2^nd defendant to this serious development, it clearly suggests a reaction, or lack of it, which is irresponsible.  There are shareholders and investors at risk.  The regulatory authority has a clear overall duty.  I do not need to consider any of the other detail emerging from the reactions of this 2^nd defendant.  Such an attitude merely encourages concerned members of the public to bring over-mighty institutions to account, if not to heel.

16. However, even if this plaintiff were able to establish a "locus standi", litigation of this nature may well be premature unless default, neglect, breach of duty of care has already occurred and no proper steps have been taken by the company concerned or the regulatory authority to remedy them.  There exists machinery for shareholders and investors to call the company and/or the regulator to account before resorting to litigation.  Amongst other relevant provisions both for such a company and the regulatory body to pay heed to is Chapter 18 of the Listing Rules (in particular §18.05 and §18.21)

17. The upshot of this is that having recused myself I can make no orders. Instead the only proper course is to refer the matter back to Godfrey Lam, J for his consideration.  In the meantime this plaintiff must put his house in order, if he can, and he must do this as a matter of urgency within 14 days. He must also be prepared to set out clearly the basis for his contention that the Order of Godfrey Lam, J of the 20^th June 2016 did not apply to these proceedings which he had set in train on the Saturday morning immediately proceeding the learned judge's Order on the following Monday morning.

18. The costs will be reserved.