Hiromi Okada v. Tomohiro Okada and Another
Read the full judgment text of HCMP 2446/2017 on BabelCite. This High Court CFI judgment was delivered on 19 October 2018.
1. By an Originating Summons dated 31 October 2017, subsequently amended on 6 November 2017 (“ AOS ”), the Plaintiff seeks at paragraphs 3 to 6 thereof the following substantive relief:
Cited by 7 cases · Cites 7 cases
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HCMP 2446/2017 [2018] HKCFI 2310 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEEDINGS NO 2446 OF 2017 _________________
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_________________ Before: Hon Ng J in Chambers (not open to public) Dates of Hearing: 17 and 20 April 2018 Date of Judgment: 19 October 2018 _________________ J U D G M E N T _________________ Introduction 1.By an Originating Summons dated 31 October 2017, subsequently amended on 6 November 2017 (“AOS”), the Plaintiff seeks at paragraphs 3 to 6 thereof the following substantive relief:
2.By a summons filed herein on 31 October 2017 (“Plaintiff’s Summons”), the Plaintiff seeks an order for interim relief in terms of paragraph 7, alternatively paragraph 8, of the AOS. 3.Paragraph 7 seeks an order for interim relief until resolution of the AOS as follows (“Interim Relief”):
4.Paragraph 8 seeks an order that the Interim Relief be granted in aid of earlier proceedings commenced by the 1st Defendant on 27 September 2017 in the Tokyo District Court, Japan against the Plaintiff (“Japanese Proceedings”), pursuant to s 21M of the High Court Ordinance, Cap 4 (“HCO”), and RHC O 29 r 8A until the resolution of the Japanese Proceedings or further order. 5.On 3 November 2017, the Plaintiff’s Summons first came before DHCJ Kent Yee. At that hearing, the 1st Defendant gave an undertaking that, until the determination of the Plaintiff’s Summons or further order of the Court, he will not take any steps to dispose of, encumber, diminish the value of, or otherwise deal with the Shares, and/or their traceable fruits, and/or proceeds or any part thereof (for the avoidance of doubt, the 1st Defendant is not restrained from exercising the voting rights attached to the Shares). 6.In the 1st Defendant’s skeleton submissions, Mr Hollander QC fairly accepted that the ring must be effectively and fairly held before determination of the substantive dispute in this action. He also sensibly indicated there is no objection to the continuation of the 1st Defendant’s said undertaking until the final determination of the AOS. 7.By a summons filed herein on 1 March 2018 (“1st Defendant’s Summons”), the 1st Defendant seeks an order that all further proceedings in this action be stayed in favour of the Tokyo District Court pursuant to the exclusive jurisdiction clause contained in the Trust Agreements and/or on the ground of forum non conveniens. 8.This is the hearing of the Plaintiff’s and the 1st Defendant’s Summonses. Background 9.The disputes in this action involve members of the Okada family viz the Plaintiff, her elder brother ie the 1st Defendant and their father Mr Kazuo Okada (“Father”). The Plaintiff is 48 years old and is resident in Japan. The 1st Defendant is 2 years older and is also resident in Japan. Father, on the other hand, resides in Hong Kong. 10.The Company was incorporated in Hong Kong in September 2010. According to its Annual Return as at 13 September 2016, the 4 shareholders of the Company and their shareholding were:
11.The Company is an investment holding company and holds 67.9% of the shareholding in UEC, a company listed on the Tokyo Stock Exchange. Father founded the predecessor of UEC back in 1969. UEC is said to be a major player in the global gaming industry. 12.Father was a director of the Company until 12 May 2017 when he was removed and replaced by Mr Makoto Takada and Mr Atsunobu Ishida. Soon afterwards, on 23 May 2017, Father was suspended as Chairman of UEC. 13.By a petition dated 7 June 2017 (“Petition”), Father commenced proceedings in HCMP 1324 of 2017 (“HCMP 1324”) under s 724 of the Companies Ordinance (Cap 622), on the basis that the affairs of the Company had been conducted in an unfairly prejudicial manner against him. The Respondents to the Petition are the Plaintiff, the 1st Defendant, Takako and the Company. In the Petition, Father sought (a) to be reinstated as a director of the Company, (b) the removal of Mr Takada and Mr Ishida as directors and (c) an order to buy out the Plaintiff’s, the 1st Defendant’s and Takako’s shares in the Company. The 1st Defendant defended the Petition on the merits and had filed a substantial affirmation in opposition, not just on his own behalf but also on behalf of the Plaintiff. The Plaintiff herself has also filed an affirmation confirming the contents of the 1st Defendant’s affirmation. 14.By a summons dated 8 June 2017 issued in HCMP 1324, Father sought an order that:
15.By a summons dated 26 June 2017, Father sought, in the alternative to the above, an order that until trial or further order, the Company be restrained from exercising its voting rights in its 67.9% shareholding in UEC, including in relation to UEC’s Annual Shareholders Meeting scheduled to take place on 29 June 2017. 16.On 28 June 2017, Harris J dismissed Father’s both applications which were made on an ex parte on notice basis. It stands to reason that the learned Judge did not consider it appropriate to grant interim mandatory relief to re‑instate Father as a director of the Company. It also stands to reason that the learned Judge did not consider it appropriate to interfere with the current Boards of the Company or UEC at the interlocutory stage. 17.On 29 June 2017, at UEC’s 44th Annual General Meeting of Shareholders, it was resolved that the following 7 persons be appointed directors of UEC — Father was not among them:
18.On 26 September 2017, Harris J adjourned the Petition sine die by reason of the dispute over the ownership of the Shares between the Plaintiff and the 1st Defendant. 19.On 27 September 2017, the 1st Defendant commenced the Japanese proceedings in the Tokyo District Court against the Plaintiff for a declaration that the Trust Agreements are valid and effective. The Plaintiff contends that the Tokyo District Court has no jurisdiction over the matter and the Hong Kong Court is the appropriate forum for determining the 1st Defendant’s claim. The Plaintiff’s alternative position is that, if the present proceedings are stayed, she will make a counterclaim in the Japanese Proceedings to seek a declaration that the Trust Agreements are void and invalid and an order declaring that she is the sole legal and beneficial owner of the Shares. The Parties’ cases 20.On several occasions in March and May 2017, the 1st Defendant requested the Plaintiff to sign various papers which had the effect of entrusting the Shares to the 1st Defendant and effected a complete change to the Company’s board of directors:
21.For the present purpose, one needs only focus on the Notices of Appointment dated 12 May 2017, the Trust Agreements and 2 株式管理処分信託契約書 dated 23 May 2017 and the Instrument of Transfer dated 14 August 2017 (“Subject Documents”) which admittedly bore the Plaintiff’s signatures and which she now seeks to impugn. 22.The Plaintiff recalls meeting the 1st Defendant on four occasions: 2 March 2017, 2 May 2017, 11 May 2017 and 23 May 2017. Each time she was asked to sign documents in the following circumstances:
23.As far as the three meetings in May 2017 are concerned:
24.The Notices of Appointment had the effect of appointing Mr Takada and Mr Ishida to the Company’s Board. On 12 May 2017, the 2 new directors issued a notice to Father informing him that he was removed as a director of the Company with immediate effect. 25.On the face of the Trust Agreements, which the Plaintiff presumably signed on 23 May 2017, she (as settlor and beneficiary) transferred her Shares to the 1st Defendant (as trustee) on trust. The relevant terms of the Trust Agreements have the following effect:
26.Importantly, Article 22 of the Trust Agreements provides that the governing law is the laws of Japan while Article 23 is an exclusive jurisdiction clause in favour of the Tokyo District Court. For ease of reference and in view of their importance, they are set out in full here:
27.The Instrument of Transfer effected the transfer of the legal title of the Shares from the Plaintiff to the 1st Defendant. The Plaintiff cannot recall when she signed this document. The 1st Defendant’s evidence is that the document was undated when he arranged for the Plaintiff to sign it on 14 June 2017. 28.The Plaintiff only received copies of the Subject Documents from the 1st Defendant’s legal representatives on 2 October 2017 upon her request, save that the Instrument of Transfer was obtained by Father’s legal representatives from the Companies Registry. 29.At the suggestion of this court, after the hearing, Mr Shieh SC has filed a document dated 25 April 2018 setting out the Plaintiff’s causes of action in support of her claims for substantive relief. They are:
30.The 1st Defendant’s case is that each of the Subject Documents, inter alia, had been properly explained to the Plaintiff before signing and no vitiating factors — whether fraud, undue influence or mistake — could have arisen. 31.The 1st Defendant contends his case is inherently more credible than the Plaintiff’s and relies on, inter alia, the following matters in support:
The Applications 32.There are 2 principal matters before the Court:
Stay Application 33.The Stay Application is mounted on 2 alternative bases:
34.To begin with, the exclusive jurisdiction clause in the Trust Agreements is couched in wide terms and covers “Any dispute arising from or in connection with this Trust Agreement”. It seems to this court quite clearly the wording of the exclusive jurisdiction clause is apt to cover the present substantive dispute between the Plaintiff and the 1st Defendant ie the Plaintiff’s challenge to the validity of the Trust Agreements. 35.In Fiona Trust & Holding Corporation v Privalov [2007] 4 All ER 951, the owners of eight vessels entered into charters with eight charterers. The owners alleged that the charters were procured by bribery of the owners’ agent and sought to rescind them. The charterers applied to stay the court proceedings on the basis that the matter should have been determined by arbitration. 36.At [13] and [15], Lord Hoffmann made the following observations on the proper approach in construing Clause 41 of Shelltime 4 which contained a choice of law clause, a jurisdiction clause and an arbitration clause:
37.Adopting the approach in Fiona Trust & Holding Corporation v Privalov, the exclusive jurisdiction clause similarly contains nothing to exclude disputes about the validity of the Trust Agreements. In this court’s view, the exclusive jurisdiction clause must be held to cover the substantive disputes in the present case. 38.The next question is whether the 3 causes of action relied upon by the Plaintiff to challenge the validity of the Trust Agreements ie fraudulent misrepresentation, undue influence and mistake, impugn both the substantive terms of the Trust Agreements as well as the exclusive jurisdiction clause. On this question, Mr Hollanders QC relies on the well‑established doctrine of separability. He submits that an exclusive jurisdiction clause, like an arbitration clause, is a separate agreement from the main agreement as a whole and hence disputes about the validity of the main agreement must be resolved pursuant to the terms of the exclusive jurisdiction clause. It is only if the exclusive jurisdiction clause is itself under some specific attack that a question could arise whether it is right to invoke it: Deutsche Bank AG v Asia Pacific Broadband Wireless Communications Inc [2008] 2 CLC 520. 39.In Deutsche Bank AG v Asia Pacific Broadband Wireless Communications Inc, the claimant lenders made available a credit facility of some US$210 million to the first defendant. The second defendant, which was the parent company of the first, guaranteed the loan and became a co‑obligor under the credit agreement. At the time the agreement was made, both defendants were companies in the Rebar Group controlled by the Wang family. The defendants defaulted under the credit agreement and the claimants issued proceedings relying on an exclusive English jurisdiction clause in it. 40.The defendants’ case was that the transaction involving the credit agreement was entered into by the Wang family as part of a large scale fraud perpetrated by them upon the defendant companies. It was said that the credit agreement was void because the members of the Wang’ family who executed the documents did not have the companies’ authority to do so, there being no effective board resolution authorising the transaction or the transaction not being in the best interests of the companies, to the claimants’ knowledge. At issue was whether an exclusive jurisdiction clause, which covered any dispute as to the existence or validity of the contract, covered not merely claims advanced on the basis that the contract was a valid and subsisting one but also alternative claims advanced on the basis (asserted by the defendants but denied by the claimants) that the contract was of no effect. 41.At [24]‑[26] and [29], Longmore LJ summarized the legal principles as follows:
42.In Fiona Trust & Holding Corporation v Privalov, Lord Hoffmann also had this to say on the principle of separability at [17] to [19]:
43.Applying the legal propositions laid down in the aforesaid authorities, this court agrees with Mr Hollander QC that the exclusive jurisdiction clause does survive the Plaintiff’s attack on the Trust Agreements based on the 3 causes of action put forward and, if so, must be given effect to. 44.In the present case, there is no dispute that the Plaintiff did sign the Trust Agreements. She also signed a number of other legal documents relating to the Shares as stated in paragraph 20 above. As Ribeiro PJ stated in Ming Shiu Chung & Ors v Ming Shiu Sum & Ors (2006) 9 HKCFAR 334 at [84] and [87]:
45.On the evidence, this court is not satisfied that the present case is one where it can be said the Plaintiff could not possibly have intended to enter into any sort of contract with legal effect when she was asked to and did sign the Trust Agreements. In fact, the Plaintiff signed the Trust Agreements in Japan before a Japanese notary public. The present case is certainly not a case of a contract signed by an agent totally without authority — the Trust Agreements were signed by the Plaintiff herself. For the same reason, the present case also does not come close to a case of forged signature. Mr Shieh SC submits that this is a case more akin to forgery. With respect, this court cannot agree. But then, even if Mr Shieh SC is correct, in a case where forgery is alleged, as Longmore LJ observed in Deutsche Bank AG v Asia Pacific Broadband Wireless Communications Inc at [24], someone has to decide whether the signature was in fact forged. Hence, a mere allegation of forgery should not have the effect of rending a jurisdiction clause inapplicable. A fortiori, the case is only “akin to forgery”, according to Mr Shieh SC. 46.Importantly, the Plaintiff’s allegations of fraudulent misrepresentation, undue influence and mistake are not directed at the exclusive jurisdiction clause as such. Rather, these vitiating factors are directed at the Trust Agreements as the “main contract”. If this court were to rule that the exclusive jurisdiction clause should not be given legal effect, it would amount to saying that because the “main contract” and the exclusive jurisdiction clause are bound up with each other in the same document, the invalidity of the “main contract” should result in the invalidity of the exclusive jurisdiction clause so that the one should fall with the other because they would never have been separately concluded — a proposition utterly rejected by Lord Hoffmann in Fiona Trust & Holding Corporation v Privalov at [19] quoted above. 47.To conclude, this court does not accept the Plaintiff’s contention (specifically paragraph 13 of her skeleton submissions in opposition to the Stay Application) that the exclusive jurisdiction clause in the Trust Agreements has not been shown by the 1st Defendant to be applicable. In fact, this court is of the firm view that the exclusive jurisdiction clause must be given legal effect and the present proceedings should be stayed in favour of the Tokyo District Court. 48.In view of the above conclusion, no useful purpose will be served by dwelling on the parties’ submissions on forum non conveniens, save for the points made in paragraphs 15 to 18 of the Plaintiff’s skeleton submissions in opposition to the Stay Application ie she is seeking in this action inter alia to rectify the Company’s register of members and her claim for this relief can only be brought in the Hong Kong Court and, in any event, the Company is not a party to the Japanese proceedings and hence will not be bound by any order made by the Tokyo District Court. This makes Hong Kong the most natural and appropriate forum. 49.The short answer from Mr Hollander QC at paragraphs 14 and 18 of his Reply submissions, which this court accepts, is these. 50.First, the present action is essentially a dispute between the Plaintiff and 1st Defendant concerning the validity of the Trust Agreements. The Company is not a party to the Trust Agreements and has minimal, if any, role in the resolution of that dispute. 51.Second, and importantly, rectification of the Company’s register of members is a relief which will only arise in the event that the Plaintiff succeeds on the substantive dispute regarding the validity of the Trust Agreements. If the Plaintiff succeeds in the Tokyo District Court in challenging the Trust Agreements, then rectification of the Company’s register of members will follow as a matter of course and should be uncontroversial. That can be done by for instance the simple means of lifting the stay in Hong Kong for the limited purpose of enforcing the Tokyo District Court’s Judgment. 52.In view of Mr Hollander QC’s acceptance that rectification of the Company’s register of members will follow as a matter of course if the Plaintiff succeeds on the Tokyo District Court, the fact that she is seeking to rectify a Hong Kong company’s register of members (plus relief ancillary thereto) is not an adequate or sufficient reason for the substantive dispute between the Plaintiff and the 1st Defendant to be tried in Hong Kong instead of Tokyo. If and when the Plaintiff succeeds in the Japanese proceedings, the stay of the present proceedings can be lifted to enable her to obtain rectification of the Company’s register as well as a transfer of the Shares back to her. 53.For all the above reasons, this court shall grant a stay of the present proceedings in favour of the Tokyo District Court. Interim Relief Application 54.The next question is whether the Court should grant the Interim Relief sought in the Plaintiff’s Summons in aid of the Japanese proceedings. 55.As a preliminary observation, given that (i) this court has granted the 1st Defendant’s Stay Application, (ii) both the Plaintiff and the 1st Defendant are ordinarily resident in Japan, (iii) the Interim Relief sought by the Plaintiff are orders of an in personam nature directed against the 1st Defendant personally, and (iv) The Tokyo District Court is currently seised of the dispute between the parties, prima facie any interim relief that the Plaintiff seeks should, if so advised, be pursued in the Japanese proceedings. 56.As stated in paragraph 6 above, the 1st Defendant indicated there is no objection to the continuation of the undertaking he gave until the final determination of the AOS. But he does oppose the rest of the Interim Relief sought. 57.In essence, the Interim Relief sought by the Plaintiff is to (i) reconstitute the entire Board of the Company by appointing Father, the Plaintiff and 1st Defendant as directors and by removing the Company’s existing directors (ii) exercise the Company’s majority shareholding rights to reconstitute the entire Board of UEC and to appoint new auditors of UEC. 58.This court shall first remind itself of the governing legal principles. 59.The relevant parts of s 21M of the HCO provide as follows:
60.In Compania Sud Americana de Vapores SA v Hin‑Pro International Logistics Ltd (2016) 19 HKCFAR 586, Lord Philips of Worth Matravers NPJ set out the legal principles applicable to a s 21M application for interim relief[3] as follows:
61.With regard to the legal principles governing the grant of interim injunction in Hong Kong proceedings, they are well‑established. The Court considers whether there is a “serious issue to be tried” and whether the “balance of convenience” lies in favour of granting the injunction sought. Under the rubric of “balance of convenience”, the Court should consider (i) what harm would be caused to a plaintiff if the interim relief sought is refused and whether such harm could be adequately compensated by an award of damages; (ii) what harm would be caused to a defendant if the interim relief is granted and whether such harm could adequately be compensated by an award of damages; and (iii) other relevant considerations: Acropolis Ltd & Anr v W&Q Investment Ltd & Ors [2018] HKCA 184 at [47]. Since the Interim Relief involves restraining the parties to vote in respect of their own shares, this is something which cannot adequately or easily be compensated by an award of damages: Acropolis Ltd & Anr v W&Q Investment Ltd & Ors at [52]. 62.Ultimately, the guiding consideration is that the court should take whatever course “seems likely to cause the least irremediable prejudice to one party or the other” or “which appears to carry a lower risk of injustice if it should turn out to be wrong”: Aeso Holding Limited & Ors v Chan Siu Chung & Orsunrep, HCMP 1721 of 2017, 11 August 2017, Lisa Wong J at [39]; Acropolis Ltd & Anr v W&Q Investment Ltd & Ors at [47]. 63.Specifically in relation to the grant of interim relief in the form of appointing directors to the Board of a private company, Rogers VP had this to say in Re Chime Corp Ltd [2003] 2 HKLRD 905 at [25] and [26]:
64.Similarly, in relation to the grant of interim relief in the form of appointing directors to a public company’s Board, in H v H (Public Company: Imposed Director) [2011] 1 HKLRD 1048 at [53], Yuen JA quoted with approval the following passage in the English Court of Appeal’s decision in Pringle v Callard [2008] 2 BCLC 505:
65.At [63]‑[64], Yuen JA further elaborated on the relevant considerations peculiar to a public company:
66.Mr Shieh SC submits that the Interim Relief sought is for the purpose of restoring a balance between the Plaintiff/Father’s camp and the 1st Defendant’s camp in the Company’s and in UEC’s Board, pending resolution of this action. He submits that there are serious issues to be tried based on the 3 causes of action he puts forward and that the Plaintiff is entitled to have the Company’s register of members rectified in order for her to be registered as a member. He further submits that the balance of convenience lies decidedly in favour of granting the Interim Relief for inter alia the following reasons:
67.With respect, this court is not persuaded that the Interim Relief sought is necessary for the protection of the Plaintiff’s proprietary rights in the Shares or that the balance of convenience lies in favour of granting it. Indeed, this court is of the view that granting the Interim Relief in reconstituting the entire Board of the Company and UEC would be far too intrusive and wholly inappropriate at the interlocutory stage. 68.As Mr Hollander QC submits, there is no evidence that the current directors of the Company and UEC have harmed or intend to harm the interest of the Company or UEC and consequently the value of the Shares. Mr Takada and Mr Ishida are respectively a qualified lawyer and a qualified accountant. Even assuming they are backed by the 1st Defendant, there is no obvious reason why the 1st Defendant who legally and beneficially owns 43.4% of the Company’s shares, or Mr Takada and Mr Ishida on his behalf, will take steps to harm the Company or UEC. 69.So far, the Plaintiff’s only complaint against Mr Takada and Mr Ishida is that they have no past knowledge of the Company and UEC and they failed to inquire into UEC’s settlement with Wynn Resort Limited in a litigation in Nevada. But UEC is a public listed company in Japan managed by its own board of directors. The current Representative Director and President, Mr Fujimoto, was already the managing director of UEC in 2001 and has been leading it since 2011 with the highest executive power and authority. As a public listed company, UEC is subject to close scrutiny of the Japanese regulatory authorities and the requirement of transparency imposed by the Tokyo Stock Exchange. 70.Furthermore, the 1st Defendant must exercise the rights over the Shares in accordance with the purpose of the Trust Agreements which is stated to be (i) preventing damage to the value of the Company and (ii) seeking to maximize the profit of the Company. In light of the aforesaid, and given the undertaking offered by the 1st Defendant that he will not take any steps to dispose of, encumber, diminish the value of, or otherwise deal with the Shares, and/or their traceable fruits, and/or proceeds or any part thereof, it is difficult to see why the Interim Relief is necessary for the protection of the Plaintiff’s interest in the Shares. 71.By contrast, reconstituting the entire Board of the Company and UEC at this stage is likely to have a profound adverse effect on the operation and share price of UEC and consequently likely to harm the interest of UEC and hence the Company. Given that UEC is a public listed company, the outside shareholders, whose interest should also be taken into account, will likewise be adversely affected. 72.Mr Hollander QC submits that it is manifestly inappropriate to re-instate Father to the Board of the Company and UEC when he is the subject of multiple investigations for wrongdoings and that both UEC’s management and lenders have expressed the view that his participation in UEC’s management would be detrimental to its interest. Obviously, this court is in no position to come to any conclusion on the alleged wrongdoings of Father. Nevertheless, this court should not ignore the views of UEC’s management and lenders as to the desirability or otherwise of re‑instating Father to the Company and UEC. 73.As far as the Plaintiff is concerned, by her own admission, she has very limited experience with English in the business context and has acquired little business experience in her previous employment. She also does not have a deep understanding of what happens in UEC and has always led a simple lifestyle without active involvement in the management of UEC. Until about 2015, the Plaintiff was a self‑employed dog breeder and trainer. It is difficult to comprehend how the Plaintiff can be considered qualified to manage the Company as its director. 74.To conclude, this court is not minded to grant the Interim Relief sought in the Plaintiff’s Summons. Not only has the Plaintiff failed to establish that interfering with the current management of the 2 companies “is absolutely essential”. The Plaintiff has also failed to establish that granting the Interim Relief sought “appears to carry a lower risk of injustice if [the court] should turn out to be wrong”. Disposition and costs order nisi 75.This court hereby grants a stay of the present proceedings sought in the 1st Defendant’s Summons and dismisses the Plaintiff’s Summons, with costs to the 1st Defendant, with certificate for 4 counsel, on a nisi basis. There be general liberty to apply. 76.Lastly, this court thanks the legal representatives of both sides for their helpful assistance.
Mr Paul Shieh SC, Ms Rachel Siu, Ms Bonnie Cheng and Ms Sharon Chan, instructed by SSW & Associates, for the Plaintiff Mr Charles Hollander QC, Mr Abraham Chan SC, Mr Martin Ho and Mr Danny Tang, instructed by Gall, for the 1st Defendant Deacons for the 2nd Defendant was excused from attendance |
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