Zhi Charles v. Lim Hosok and Others

HCA 2397/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2397 OF 2016

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D E C I S I O N

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1.This is an application by the plaintiff against all 12 defendants for four injunction orders. The first seeks to restrain all the defendants from relying on the GKZ results, HASS reports or the “new technical report” unless certain specified conditions are fulfilled. The second, third and fourth orders sought are to restrain the 2^nd, 3^rd and 4^th defendants from acting as, respectively, the chairman and executive director, executive director, and independent non-executive director, of the listed company, Siberian Mining Group Company Limited (“the company”) until certain disclosures have been made by them.

2.Most of the matters that the plaintiff complains of have come before the court in one form or another on many previous occasions.  In broad terms, the plaintiff says that he is a shareholder of the company; the company has relied on the reports or opinions prepared by one Herman Tso of HASS; Herman Tso has withdrawn the reports issued by HASS, and has been expelled from membership of the Australian Institute of Metallurgy on 12 April 2016.  The plaintiff considers Herman Tso’s qualification as a mining expert to be in serious question.  The plaintiff also complains that the 9^th defendant, a partner of the solicitors firm, ie the 11^th defendant, failed to examine the ability of one Jang Sam Ki, former chairman of the company, to provide a loan facility to the company in 2015.

3.The 1^st to 6^th defendants are directors of the company; the 7^th defendant is its CFO and secretary; the 8^th defendant is an accountant associated with the accountant’s firm, ie the 10^th defendant, who are the auditors of the company; the 9^th defendant is a solicitor practising in Hong Kong, and a partner of the solicitor’s firm, ie the 11^th defendant, who are the legal advisors of the company; the 12^th defendant is a valuers firm engaged by the company.

4.The defendants have not filed any evidence yet, the summons having been taken out by the plaintiff only on 19 September.  By his skeleton argument lodged yesterday, the plaintiff indicated that he wished to seek an interim injunction today.  By his 2^nd skeleton argument lodged this morning, however, the plaintiff asked for leave to withdraw his application – a stance which the plaintiff confirmed orally just now.  It seems to me that the plaintiff’s summons should be dismissed instead because the application should fail, and the defendants are all here. 

5.First, the second to fourth injunctions sought would clearly affect the company, but the company has not been joined as a party.  The company has been left out no doubt because of the order I made (largely by consent) under section 27 of the High Court Ordinance (Cap 4) in HCMP 443/2015, on 20 June 2016, restraining the plaintiff from bringing fresh proceedings against the company without leave of one of the designated judges. No such leave has been obtained.  The plaintiff’s conduct smacks of an attempt to circumvent the restriction I imposed by consent.  Anyhow, in the absence of the company, the present application is not properly constituted, and fails for that reason. 

6.Secondly, the directors, CFO, auditors, legal advisors and valuers of a company do not generally owe any duty to any individual shareholder as such to perform their functions in a particular way. In an appropriate case there may be a duty of care and skill in tort, but the relevance of that lies in the realm of actions for damages for negligence.  A shareholder has no personal right of action against such officers and professional advisors of a company for an injunction to require them to act in a certain way.  If, on the other hand, the plaintiff seeks to make the application not in his own right but in right of the company, then the application is derivative in character but the necessary procedures and conditions must first be complied with, which is not the case here. 

7.Thirdly, the relief sought in the writ is:

“1.1 An order to restate the audit reports of 2013, 2014, and 2015 [presumably of the company] to reflect the nullification of initial recognition.

1.2   A declaration that the 1^st to 12^th Defendants have engaged in the collusion to use false instruments and offences under Section 25(1) of the Organised and Serious Crime Ordinance.”

The plaintiff has failed to show why the injunctions sought are necessary to protect his position in the interim pending the trial with reference to the final relief he claims.  Put another way, he has utterly failed to show that without the injunctions sought, he would suffer irreparable harm for which he could not be compensated by damages, even if he ultimately succeeds at trial. 

8.Fourthly, as to the second to fourth injunctions, who should be appointed and act as directors of a company is generally a matter for the shareholders in general meeting.  The plaintiff has not shown why, as a single small shareholder, he should have the right to prevent the persons duly appointed under the articles as directors from acting as such. 

9.The summons will therefore be dismissed with costs.

(Submissions re costs)

10.Costs will be on a party and party basis. 

The plaintiff appeared in person

Ms Roberta Chan, of Baker & McKenzie, for the 1^st to 7^th defendants

Mr Paul Wong, instructed by CK Chan & Co, for the 8^th and 10^th defendants

Mr David Harrington, of Reed Smith Richards Butler, for the 9^th and 11^th defendants

Mr Isaac Chan, instructed by Michael Li & Co, for the 12^th defendant