Acropolis Ltd v. W&Q Investment Ltd and Others

HCCW 218/2017 & HCA 1496/2017 (Heard Together)

[2018] HKCFI 510

HCCW 218/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

COMPANIES WINDING-UP PROCEEDINGS NO 218 OF 2017

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AND

HCA 1496/2017

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1496 OF 2017

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(By Original Action)

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(By Counterclaim of 1st Defendant of Original Action)

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(By Counterclaim of 5^th to 9^th Defendants of Original Action)

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(HEARD TOGETHER)

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D E C I S I O N

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1.On 18 September 2017 I directed that there be a case management conference (“CMC”) to address the future progress of a Petition issued by Acropolis Limited (“Acropolis”) and High Court Action no 1496 of 2017 (“the HCA”) also commenced by Acropolis seeking the same relief other than a winding-up order brought against W&Q Investment Limited (“WQ”). Both arise out of the listing on the GEM of The Stock Exchange of Hong Kong Limited (“Exchange”) of Aeso Holding Limited (“Company”). The CMC was intended to result in directions forboth the Petition and the HCA to proceed quickly to a joint trial. However, the Points of Defence in the HCA that were served on 4 January 2018 contain a counter-claim (“Counterclaim”) brought as a common law derivative action by WQ on behalf of Aeso against various parties associated with Acropolis arising, allegedly, out of events occurring after the matters, which are the subject of the claims in both the Petition and the HCA.

2.On 26 January 2018 Acropolis issued a summons seeking to have paras 70 to 127 and prayers (1) to (18) of the Counterclaim stayed until after the resolution of the principal issue in both proceedings, which at risk of over-simplification is whether ornot the listing was fraudulent as the private placement by which it was achieved was manipulated by Liu Chang Kien in orderto give him control of the Company.  The Counterclaim concerns the propriety of a loan made by Dragon Success Enterprise Limited to the Company allegedly to assist in funding expenses, including the purchase of performance bonds, of the Company in connection with certain construction projects without, it is alleged, the approval by the board. The Counterclaim already forms a claim by the Company and WQ in HCA 1737 of 2017 and HCMP 1647 of 2017.  The Statement of Claim in those proceedings was filed on 3 January 2018.

3.Although Mr Ronny Tong SC advanced various arguments on behalf of WQ and the 2^nd to 3^rd Respondents in the Petition proceedings as to why it would be wrong both as a matter of case management and in principle to stay the Counterclaim, it seems to me that the matter is in substance simply a case management matter particularly as the Company and WQ have already commenced proceedings, which they can progress if they want regardless of the Petition.  However, the determination of the claims in the Petition and the HCA may have a significant impact on the Counterclaim as WQ’s ability to prosecute a derivative action may cease as a consequence of orders made consequential on a finding that the placement was fraudulent.

4.The parties’ views on the length of the trial vary. These estimates are necessarily rough given the preliminary stage of the proceedings. Acropolis thinks that seven weeks should be allowed excluding the Counterclaim it proposes is stayed.  As I understood Mr Tong, he is of the view that this would be sufficient to address the Counterclaim and it might be possible to conclude all issues in a shorter period. 

5.It is desirable that the Petition is determined promptly in order that the Company’s status can be resolved, because it seems to me highly likely that if the listing was achieved through a fraudulent placement the Exchange will cancel it, if not I assume that the Company’s shares can recommence trading.  I note in passing that determining what is the appropriate relief if the court finds the placement was fraudulent will require some care and a consideration of the interests of innocent minority shareholders. It seems to me that the quickest and most efficient manner for the proceedings to continue will be for the Petition and the HCA to be tried together before the same judge, but that there be a split trial.  The issues other than the Counterclaim will be tried first and in respect of those issues there should be a speedy trial.  The Counterclaim will be tried subsequently.  The timetable for the Petition and the HCA should be synchronised.  There are already extensive directions in the HCA that were made by Chu J on 25 September 2017 and varied by Master Au-Yeung on 21 December 2017 dealing with all interlocutory stages up to and including witness statements and experts reports.  They did not, I assume, take into account the Counterclaim.  I will direct that a further CMC takes place to consider whether the directions already made need to be changed to reflect the introduction of the Counterclaim and my order that there be a split trial.

6.I will make the following further directions largely directed to the Petition, which are substantially agreed by the parties:

(1)   The Plaintiffs in the HCA file their Reply and Defence to Counterclaim including the Counterclaim as defined above by 5pm on 28 February 2018.

(2)   The Petition do stand as Points of Claim.

(3)   The Respondents do file and serve Points of Defence by 5pm on 28 February 2018.

(4)   The Petitioner do file and serve Points of Reply by 5pm on 21 March 2018.

(5)   Costs of the CMC be in the cause of HCCW 218 of 2017 and HCA 1496 of 2017 respectively.

(6)   Acropolis’s summons to stay the Counterclaim be dismissed and the costs are the Plaintiff by Counterclaim’s costs in the Counterclaim.

Mr Clifford Smith SC and Mr Kerby Lau, instructed by Titus & Co, for the petitioner (in HCCW 218/2017) and the 2^nd to 6^th defendants (by the 1^st defendant’s Counterclaim in HCA 1496/2017)

Mr Ronny Tong SC, Mr Richard Yip and Ms Tara Liao, instructed by Bond Ng Solicitors, for the 1^st to 4^th respondents (in HCCW 218/2017) and the 1^st to 4^th defendants (by Original Action in HCA 1496/2017)

Mr Jeffrey Tam and Mr Ian Chau, instructed by Alex To & Co Solicitors, for the 5^th to 9^th respondents (in HCCW 218/2017) and the 5^th to 9^th defendants (by Original Action in HCA 1496/2017)

Ms Fiona Chong, instructed by JC Legal, for the 10^th to 12^th respondents (in HCCW 218/2017) and the 10^th to 12^th defendants (by Original Action in HCA 1496/2017)

Mr Taylor Li, instructed by Khoo & Co, for the 13^th defendant (by Original Action in HCA 1496/2017)

Mr C M Lam, of K&L Gates, for the 1^st defendant (by the 1^st defendant’s Counterclaim in HCA 1496/2017)

The 14^th defendant in HCA 1496/2017 was not represented and did not appear

The 15^th defendant in HCA 1496/2017 was not represented and did not appear

The 16^th defendant in HCA 1496/2017 was not represented and did not appear