Convoy Global Holdings Ltd and Another v. Kwok Hiu Kwan and Another

HCA 2000/2018

[2020] HKCFI 1496

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2000 OF 2018

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Before:  Hon Coleman J in Chambers (Open to Public)

Dates of Hearing:  8 July 2020

Date of Judgment: 10 July 2020

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J U D G M E N T

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A. Introduction

1.These proceedings (“SFO Action”) were commenced by a generally indorsed Writ dated 24 August 2018.  The plaintiffs seek a declaration that the defendants have contravened section 131 of the Securities and Futures Ordinance Cap 571 (“SFO”), and an injunction restraining the defendants from exercising their voting rights in the 1^st plaintiff (“Convoy”), giving effect to section 131(4) of the SFO.  The plaintiffs’ case is more fully pleaded in a statement of claim dated 6 December 2018 (“SOC”).

2.By summons dated 9 November 2018, the 1^st defendant (“Kwok”) seeks to strike out the Writ, on the ground that it discloses no reasonable cause of action and that it is an abuse of process.  By summons dated 8 April 2019, the 2^nd defendant (“Chen”) seeks to strike out the SOC on similar grounds. 

3.The two applications have been listed to be heard together.

4.At the hearing, Kwok was represented by Mr Johnny Mok SC and Ms Francis Lok; Chen was represented by Mr Paul Shieh SC and Mr James Man; and Convoy and the 2^nd plaintiff (“CSL”) were represented by Mr William Wong SC, Mr Christopher Chain and Mr Lai Chun Ho.

B.   Background

5.Convoy is a Cayman Islands limited company listed on the Main Board of the Hong Kong Stock Exchange.

6.Kwok and Chen are the registered owners of 29.91% and 7.97% respectively of the issued shares of Convoy.  Together, Kwok and Chen hold an approximately 37.38% shareholding stake (“37% Stake”) in Convoy.

7.CSL is an indirect wholly-owned subsidiary of Convoy, and is a corporation licensed by the Securities and Futures Commission (“SFC”) under section 116 of the SFO to carry out Type 1 and Type 4 regulated activities.

8.In other proceedings, HCA 2922/2017 (“Main Action”), Convoy, CSL and Convoy Collateral Limited (“CCL”) as plaintiffs allege that certain shares allotted by Convoy in October 2015 were void or voidable.  Of the 39 defendants, Kwok and Chen are named as the 27^th and 28^th defendant’s respectively in the Main Action.  The plaintiffs in the Main Action allege that the Convoy shares that Kwok and Chen purchased from the open market via CCASS, and which form the 37% Stake, can be traced from the disputed allotment, and ought to be rescinded as being null and void or invalid.  The plaintiffs seek various declarations and injunctions so as to restrain Kwok and Chen from exercising the voting rights of, or transferring or otherwise dealing with their interest in the 37% Stake.

9.There have also been other related proceedings. For example, in Kwok Hiu Kwan v Johnny Chan [2020] HKCFI 324, Harris J was concerned with the exercise of Johnny Chan’s powers as chairman of Convoy when, at Convoy’s 2017 EGM held on 29 December 2017, he refused to allow Kwok and Chen to exercise their voting power pursuant to their respective shareholdings in the 37% Stake.  Harris J dismissed Kwok’s application in HCMP 41/2018 for a declaration that Johnny Chan’s decision was unlawful, void and of no legal effect.

10.In another set of proceedings, HCA 399/2018, commenced by CCL, the matter has given rise to a recent decision of the Court of Appeal in CACV 197/2020 [2020] HKCA 537 (“CA Decision”).

C.   The Claim in the SFO Action

11.Convoy’s and CSL’s claim is summarised at SOC §8 in the following terms:

Independent of the causes of action relied upon in the Main Action and entirely without prejudice to the relief of rescission sought, the Plaintiffs’ case in these proceedings is that Kwok and Chen acquired the 37% Stake contrary to sections 131 and 132 of the SFO, and by operation of the SFO are therefore not entitled to exercise the voting rights of Convoy.

12.In the indorsement on the Writ and in the prayer of the SOC, the particular relief claimed (all aspects being stated to be claimed without prejudice to the relief of rescission of the 37% Stake sought inter alia in the Main Action) is:

(1)  a declaration that Kwok and/or Chen has/have contravened section 131 of the SFO, in that Kwok and/or Chen (acting as associates or otherwise) has/have become and continued to be (purported) substantial shareholder(s) of CSL, by purportedly acquiring and continuing to hold the 37% Stake without the necessary approval to do so from the SFC under section 132 of the SFO;

(2)  a declaration that Kwok and/or Chen has/have contravened section 131 of the SFO, in that Kwok and/or Chen has/have purported to exercise the voting rights conferred by the 37% Stake (or any part thereof) which is not exercisable by virtue of section 131(4) of the SFO; and

(3)  an injunction order prohibiting Kwok and Chen from exercising the purported voting rights conferred by the 37% Stake, unless and until the SFO approves Kwok and/or Chen to become and continue to be substantial shareholder(s) of CSL under section 132 of the SFO.

13.The claimed relief is based upon the factual matters pleaded in the SOC.  The starting point is the allegation that over several years up to 2017, a wrongdoer and fraudster called Roy Cho wrongfully and illicitly acquired and maintained secret ownership in and control over Convoy (and, through Convoy, CSL).

14.In the recent CA Decision, a description of the main underlying premise for all the claims of CCL in that action was given as that:

... Roy Cho exercised control and acquired ownership in Convoy through appointment of his associates, nominees and/or agents to occupy key positions in Convoy without himself holding a formal position. Through such secret control and ownership, he was able to commit the serious runs complained of, which in many respects involved manipulations of the corporate affairs of Convoy and other listed companies in a dishonest manner. As can be seen from the summary above, the scale of these wrongdoings is very substantial and sophisticated. Most of them were carried out through complicated schemes with dishonesty and fraud practised not only against Convoy or CCL, but also the other shareholders of the listed companies involved. In our judgment, the concealment of a person’s actual ownership and control over the affairs of a listed company in the manner that Roy Cho allegedly did in order to evade one’s fiduciary obligations to listed companies and site-step compliance with the rules imposed by regulatory authorities designed for the protection of the general investing public is a serious form of dishonest deception.

15.In the SOC, it is alleged that following a raid conducted on Convoy’s offices by the SFC in June 2017, Kwok and Chen knowingly acquired the 37% Stake from associates, nominees, and/or agents of Roy Cho in July to October 2017.  It is said that although the 37% Stake was acquired from the open market, there were matching buy and sell orders whereby Kwok and Chen’s acquisitions were matched with a co-ordinated disposal by Roy Cho’s associates, nominees, and/or agents (reflected inter alia by the unusual availability of a controlling stake, unusually high trading volumes, and minimal fluctuations in price).

16.It is also pleaded that:

(1) In acquiring the 37% Stake, Kwok and Chen colluded between themselves and/or with a Francis Choi, knowingly to further the improper purposes of Roy Cho.

(2) One of the purposes for acquiring the 37% Stake was to allow Kwok and Chen, or (through them) Francis Choi, to control a secret interest in Convoy.

(3) Kwok and Chen are therefore “associates” of each other for the purposes of the SFO, in that Chen is accustomed or obliged to follow the instructions of Kwok, or both Kwok and Chen are accustomed or obliged to follow instructions of Francis Choi.

(4) Kwok and Chen have attempted to exercise their voting rights on the 37% Stake, including in particular attempting to replace the board of Convoy with Kwok’s own nominees whilst retaining two directors who had been arrested by the ICAC and who are Roy Cho’s associates.

(5) Because Kwok and Chen became “substantial shareholders” of CSL without SFC approval, they contravened sections 131(1) and 132(1) of the SFO, and also contravened section 131(5) by seeking to exercise their voting power.

(6) By operation of section 131(4) of the SFO, Kwok and Chen cannot exercise their voting rights because of their contravention of sections 131(1) and 132(1).

D.  Principles Applicable on Strike Out Applications

17.It is trite that the power to strike out is to be exercised only in plain and obvious cases.

18.However, it is also well-settled that “plain” is not the same as “simple”, and “obvious” is not the same as “short”.  If the statement of claim, however complicated, shows that there is no cause of action a court will order it to be struck out.  Further, where the court comes to the conclusion after full argument that the case is plainly apt for striking out, the court should not decline to strike it out merely because the issues are difficult or complicated.

19.Where the application to strike out is on the basis that there is no reasonable cause of action, the facts pleaded in the claim must be assumed to be true.  Further, on any other basis for striking out, disputed facts are to be taken in favour of the parties sought to be struck out.

E.   The Battleground

20.Kwok seeks to strike out the Writ on the basis that there is no reasonable cause of action, because there is no private right of action for breach of statutory duty under section 131 of the SFO, and the declarations sought by the plaintiffs ask a civil court to make a declaration as to criminality.

21.Kwok also seeks to strike out the Writ on the basis that there is a plain abuse of process for the plaintiffs to maintain the SFO Action, which seeks to litigate – in parallel proceedings – facts and allegations which are already subject matters of the Main Action.

22.Chen’s primary basis for seeking to strike out is on the ground of abuse of process, by reference to the well-established principle that two ongoing actions with the same parties based on the same essential facts and causes of action constitutes an abuse, so that the second action ought to be struck out.

23.Chen also argues that there is no reasonable cause of action to seek the injunction or the declarations claimed in the Writ and the prayer of the SOC.  A similar point relating to declarations as to criminality is also relied upon by Chen.

24.In response, Convoy and CCL do not really seek to engage with the legal arguments underpinning Kwok’s and Chen’s submissions. Rather, they suggest that those submissions are essentially irrelevant, as missing the real point.

25.In tabular form, Convoy and CCL identify the short answer to Kwok’s and Chen’s arguments as follows:

Defendants’ Arguments	Plaintiffs’ Short Answers
(a)  The plaintiffs have no reasonable cause of action to seek declaratory relief because they do not have any viable cause of action on breach of statutory duty.	The defendants have completely missed the point here.  It is well-established that declaratory relief may be sought without any cause of action, as long as the Plaintiffs have a real interest in the declaratory reliefs ought.
(b)  The plaintiffs have no reasonable cause of action to seek injunctive relief because they do not have any viable cause of action on breach of statutory duty.	The defendants have also completely missed the points here.  It is well-established that consequential injunctive relief may be granted to enforce and give effect to a declaration.
(c)  The plaintiffs are impermissibly seeking a declaration of criminality.	The defendants have completely misunderstood the plaintiffs’ case.  The plaintiffs are only seeking a declaration that Kwok and Chen’s voting rights are not exercisable pursuant to SFO s.131(4), and not any declaration that Kwok and Chen have committed an offence (whether under SFO ss.131(2) or 131(5) or otherwise).  The wording of declaratory relief sought can (and will) be fine-tuned at trial to strictly exclude any element of criminality.
(d)  This action ought to be struck out as they are abusively based on the same cause of action as the Main Action.	This action is based on a different basis than the cause of action in the Main Action, which requires proof of different factual elements.  In the present case there are two sets of proceedings with two different causes of action with overlapping evidence. This is a common scenario which appropriate case management powers will be applied to, and not an abuse of process in any way.

26.Convoy and CSL also rely on the principle that the facts pleaded in the SOC must be assumed to be true.

27.In light of the real battleground between the parties, I can take the arguments and the various legal propositions from Kwok and Chen in relatively short order.  It is then necessary to consider whether they apply at all to the current circumstances.

F.   The Statutory Regime under the SFO

28.But it is first helpful to set out the relevant statutory regime to be found in the SFO.  It may be that once that regime is understood, the answer to the current strike-out application becomes obvious.

29.Part V of the SFO relates to ‘Licensing and Registration’.  Section 116 makes provision for ‘Corporations to be licensed for carrying on regulated activities’.  As stated, CSL is one such corporation.  Amongst its subsections, section 116(3) provides as follows:

(3)  The Commission [ie. the SFC] shall refuse to grant a licence to carry on a regulated activity under subsection (1) unless the applicant satisfies the Commission that –

(a)  it is a fit and proper person to be licensed for the regulated activity;

(b)  it will be able, if licensed, to comply with the financial resources rules; and

(c)  it –

(i)  has lodged and maintains with the Commission such security in accordance with rules made under subsection (4); or

(ii)  is insured in accordance with rules made under subsection (5).

30.Section 129 makes provision as to how the SFC considers whether a person is a fit and proper person as follows:

129.     Determination of fit and proper

(1)  In considering whether a person is a fit and proper person for the purposes of any provision of this Part, the Commission or the Monetary Authority (as the case may be) shall, in addition to any other matter that the Commission or the Monetary Authority (as the case may be) may consider relevant, but subject to section 134, have regard to –

(a)  the financial status or solvency;

(b)  the educational or other qualifications or experience having regard to the nature of the functions which, if the application is allowed, the person will perform;

(c)  the ability to carry on the regulated activity competently, honestly and fairly; and

(d) the reputation, character, reliability and financial integrity,

of – 

(i)  where the person is an individual, the person himself;

(ii)  where the person is a corporation (other than an authorised financial institution), the corporation and any officer of the corporation; or

(iii)  where the person is an authorised financial institution, the institution and any director, Chief Executive, manager … and executive officer of the institution.

31.Section 131 imposes a restriction on a substantial shareholder of a licenced corporation by providing as follows:

131.     Restriction on substantial shareholding, etc.

(1)  A person shall not become and continue to be a substantial shareholder of a corporation licensed under section 116 without first being approved by the Commission under section 132(1)(a).

(2)  A person who contravenes subsection (1) commits an offence and is liable –

(a)  on conviction on indictment to a fine of $1,000,000 and to imprisonment for 2 years, and to a further fine of $5,000 for every day during which the person continues to be such substantial shareholder without the Commission’s approval under section 132(1)(b); or

(b)  on summary conviction to a fine at level 6 and to imprisonment for 6 months, and to a further fine of $500 for every day during which the person continues to be such substantial shareholder without the Commission’s approval under section 132(1)(b).

(3)  It is a defence for a person charged with an offence under subsection (2) to prove –

(a)  that he did not know, and could not have by the exercise of reasonable diligence ascertained, the existence of the act or circumstances by virtue of which he became such a substantial shareholder; and

(b)  where he subsequently became aware of such act or circumstances, that he applied under section 132(1)(b), as soon as reasonably practicable and in any event within 3 business days after he became so aware, for approval to continue to be a substantial shareholder of the corporation.

(4)  If a person becomes a substantial shareholder of a corporation licensed under section 116 without the Commission’s prior approval under section 132(1)(a) by virtue of –

(a)  a transfer of shares;

(b)  an issue of shares; or

(c)  a transfer of the right to be issued with shares,

then, unless and until the Commission approves the person to continue to be a substantial shareholder of the corporation under section 132(1)(b), the voting rights conferred by the shares concerned are not exercisable.

(5)  A person who purportedly exercises any voting right that is not exercisable by virtue of subsection (4) commits an offence and is liable –

(a)  on conviction on indictment to a fine of $200,000 and to imprisonment for 1 year; or

(b)  on summary conviction to a fine at level 6 and to imprisonment for 6 months.

(6)  It is a defence for a person charged with an offence under subsection (5) to prove that he –

(a)  did not know; and

(b)  could not have by the exercise of reasonable diligence known,

that the voting right which he purportedly exercised is by virtue of subsection (4) not exercisable.

32.Section 132 provides for SFC approval as follows:

132.     Approval to become or continue to be substantial shareholder

(1)  The Commission may, upon application in the prescribed manner and payment of the prescribed fee, approve the applicant –

(a)  to become; or

(b)  to continue to be,

as the case may be, a substantial shareholder of a corporation licensed under section 116.

(2)  The Commission shall refuse to approve an applicant to become or continue to be (as the case may be) a substantial shareholder of the licensed corporation concerned unless the applicant satisfies the Commission that the corporation will remain a fit and proper person to be licensed if the application is approved.

(3)  An approval under subsection (1)(a) or (b) shall be subject to such reasonable conditions as the Commission may impose on the applicant and on the licensed corporation concerned, and the Commission may at any time, by notice in writing served on the approved substantial shareholder and the corporation, amend or revoke any such condition or impose new conditions as may be reasonable in the circumstances.

(4)  Where the Commission by notice in writing amends or revokes any condition or imposes any new condition under subsection (3), the amendment, revocation or imposition takes effect at the time of the service of the notice or at the time specified in the notice, whichever is the later.

(5)  Without limiting the generality of subsection (3), it shall be a condition of an approval under subsection (1)(a) or (b) that the approved substantial shareholder shall –

(a)  at all times keep the Commission informed of particulars of his contact details including, in so far as applicable, his business address, residential address, telephone and facsimile numbers and electronic mail address; and

(b)  inform the Commission of any change in the particulars within 14 days after the change takes place.

33.Section 133 provides:

133.  Commission’s power to give directions

(1)  Where a person became a substantial shareholder without the Commission’s prior approval under section 132(1)(a), whether or not he has applied under section 132(1)(b) for approval to continue to be such shareholder and regardless of whether such approval is granted or not, the Commission may by notice in writing direct the licensed corporation concerned—

(a)  not to permit or acquiesce in the involvement of the person in the management of the business of the corporation;

(b)  to deem void and of no effect any votes cast by the person and any of his associates (if any) at any meeting of the corporation;

(c)  to reconvene any such meeting for voting anew on the business on which the votes were cast; and

(d) to take such other reasonable steps as it may specify in the notice.

(2)  Without prejudice to the operation of subsection (1), where the Commission refuses to approve an application to continue to be a substantial shareholder made under section 132(1)(b), it may by notice in writing direct the applicant—

(a)  to reduce, within such reasonable time as the Commission may require, the interest in shares by virtue of which he became a substantial shareholder of the licensed corporation concerned to the extent that he is no longer a substantial shareholder of the corporation; and

(b)  to take such other reasonable steps as the Commission may specify in the notice.

(3)  If a person fails to comply with any direction under subsection (1) or (2), the Commission may, by originating summons or originating motion, make an application to the Court of First Instance in respect of the failure, and the Court may inquire into the case and—

(a)  if the Court is satisfied that there is no reasonable excuse for the person not to comply with the direction, order the person to comply with the direction within the period specified by the Court; and

(b)  if the Court is satisfied that the failure was without reasonable excuse, punish the person, and any other person knowingly involved in the failure, in the same manner as if he and, where applicable, that other person had been guilty of contempt of court.

(4)  An originating summons under subsection (3) shall be in Form No. 10 in Appendix A to the Rules of the High Court (Cap. 4 sub. leg. A).

34.Also relevant might be section 213, which provides (as is material):

213.  Injunctions and other orders

(1)  Where -

(a)  a person has –

(i)   contravened –

(A)any of the relevant provisions [which includes section 131];

(B) any notice or requirement given or made under or pursuant to any of the relevant provisions;

(C) any of the terms and conditions of any licence or registration under this Ordinance; or

(D) any other condition imposed under or pursuant to any provision of this Ordinance;

(ii)  aided, abetted, or otherwise assisted, counselled or procured a person to commit any such contravention;

(iii) induced, whether by threats, promises or otherwise, a person to commit any such contravention;

(iv) directly or indirectly been in any way knowingly involved in, or a party to, any such contravention; or

(v)  attempted, or conspired with others, to commit any such contravention; or

(b)  it appears, whether or not during the course or as a result of the exercise of any power under Part VIII, to the Commission that any of the matters referred to in paragraph (a)(i) to (v) has occurred, is occurring or may occur,

the Court of First Instance, on the application of the Commission, may, subject to subsection (4), make one or more of the orders specified in subsection (2).

(2)  The orders specified for the purposes of subsection (1) are –

(a)  an order restraining or prohibiting the occurrence or the continued occurrence of any of the matters referred to in subsection (1)(a)(i) to (v);

(b)  where a person has been, or it appears that a person has been, is or may become, involved in any of the matters referred to in subsection (1)(a)(i) to (v), whether knowingly or otherwise, an order requiring the person to take such steps as the Court of First Instance may direct, including steps to restore the parties to any transaction to the position in which they were before the transaction was entered into;

(c)  an order restraining or prohibiting a person from acquiring, disposing of, or otherwise dealing in, any property specified in the order;

(d) an order appointing a person to administer the property of another person;

(e)  an order declaring a contract relating to any securities, structured product, futures contract, leveraged foreign exchange contract, or an interest in any securities, structured product, futures contract, leveraged foreign exchange contract or collective investment scheme to be void or voidable to the extent specified in the order; (Amended 8 of 2011 s. 10)

(f)  for the purpose of securing compliance with any other order made under this section, an order directing a person to do or refrain from doing any act specified in the order;

(g)  any ancillary order which the Court of First Instance considers necessary in consequence of the making of any of the orders referred to in paragraphs (a) to (f).

35.As part of the regulatory functions created by Part V, it is the SFC which is given the task of determining whether a person is fit and proper.  In that task, there are certain factors that shall be taken into consideration, over and above any other matter that the SFC may consider relevant.

36.As Mr Mok submits, section 131 is purely an offence-creating section.  It creates two offences.  Hence it can be seen, for example, that a “substantial shareholder” who has failed to obtain approval from the SFC under section 132, and who has purported to exercise voting rights which are not exercisable by virtue of section 131(4), is liable to potential criminal sanction under section 131(5).

37.I accept that the two offences are regulatory offences for the protection of members of the public dealing with or using the services of the listed corporation or individuals.  It is the SFC which is the regulatory and enforcement authority.  On the face of the statute, the offences do not seem to be intended to regulate any private rights as between the licensed corporation and its shareholders, or as between shareholders amongst themselves.

38.The two offences provide a statutory mechanism requiring the shareholder: (1) under section 131(1)-(3), to seek the SFC’s prior approval to become a substantial shareholder – see; and (2) under section 131(4)-(6), to seek the SFC’s approval to continue to be a substantial shareholder before exercising his voting rights.  The latter approval requirement targets the exercise of voting rights, because the definition of “substantial shareholder” is tied to the voting rights which give him the relevant element of control over the licensed corporation.  Approvals are required from the SFC before becoming or continuing to be a substantial shareholder, so as to ensure that the licensed corporation will remain as a fit and proper person.  The offences provided for in section 131 are the primary means of enforcing the prohibitions in the section.

39.Further, by virtue of section 133, it is open to the SFC inter alia to direct the relevant licenced corporation to deem void and of no effect any votes cast by the person who has not sought the SFC’s prior approval to becoming or continuing to be a substantial shareholder.  That suggests that, absent such a direction from the SFC, the votes cast by the person are not automatically deemed void and of no effect.  Indeed, it is not difficult to think of some circumstances in which the SFC would unlikely think any such direction necessary or appropriate, notwithstanding the breach.  I agree with Mr Mok that an example might be voting on routine business at an AGM, such as the re-appointment of auditors. Another example might be where at the time of the voting no approval had been sought, but approval was later sought and granted.

40.Section 213 creates a limited jurisdiction for the court to grant orders, on the application of the SFC.  As Mr Mok submits, because it is the SFC which is the approval authority and also the person to apply for an order under the section, the SFC will unlikely have to resort to section 213 unless (a) after due investigation, it has made a finding that the shareholder is a “substantial shareholder”, (b) that shareholder has declined to apply for approval under section 132(1) to continue to be a substantial shareholder, and (c) the SFC has considered whether to pursue criminal sanctions prescribed under section 131(5) to deter the substantial shareholder from acting in breach of section 131(4) in future.

G.   No Reasonable Cause of Action etc

G.1   No Private Right of Action

41.I have headed this section as ‘No Reasonable Cause of action etc’ because the argument may be misunderstood if focus is simply on a cause of action.  What is really in issue is whether there is a sustainable claim to the relief sought.

42.Looking at the above provisions of the SFO, Mr Mok submits that it is an established principle that no private right of action arises in respect of breach of a statute (breach of statutory duty) except where it is shown that on the true and proper construction of the statute (1) there was a legislative intent to protect a limited class of the public; and (2) the legislature intended to confer on members of that limited class a private right of action for breach of the duty: see, for example, Dah Sing Insurance Services Ltd v Gill Gurbux Singh [2014] 4 HKC 179 at §59.

43.In particular, and though it is always a matter of construction of the relevant statutory provisions, if the statute provides some other means of enforcing the duty, that will normally indicate that the statutory right was intended to be enforceable by those means and not by private right of action.

44.By reference to Hansard, Mr Mok has referred to the legislative purpose of the SFO, which was to consolidate and modernise the various ordinances previously in force governing the securities and futures market.  The aim of the reform marked by the passing of the SFO was to provide optimal market regulation, affording sufficient protection for investors on the one hand and leaving enough room for market development on the other.  It was to provide a regulatory framework capable of responding to the changing market environment.  A key objective was to establish a streamlined and effective regulatory framework, to maintain fair, transparent and orderly markets; promote public confidence in the market; secure an appropriate degree of investor protection; minimise market misconduct and facilitate market innovations and competition.

45.Part V of the SFO, which includes section 131, makes the SFC the ‘gatekeeper’ of the streamlined licensing regime.  As well as granting rights to a licenced corporation to conduct certain licenced activities, the regime also seeks to protect those dealing with the licenced corporation such as members of the public obtaining services from such corporation.  But it is the corporation itself which is the regulated entity, the regulation being to confer protection on the protected class.  So, says Mr Mok, where CSL is the licenced corporation, it cannot be within the limited class of protected persons, still less can Convoy (its ultimate parent company, four corporate layers above).

46.Mr Mok also refers to the wide-ranging means of enforcement of the duty provided under section 131.  That, he says, is itself a clear indicator that there is no room for private right of action.  Those means of enforcement include the various statutory criminal offences (with statutory defences also expressly provided).  In particular, specific to any contravention of sections 131 and 132, Mr Mok relies on the provisions in section 133(1) permitting the SFC to direct the relevant licence corporation inter alia to deem void and of no effect any votes cast by the person and any of his associates, and to reconvene any such meeting for voting a new on the business on which those votes were cast.

47.Mr Mok also relies, by way of contrast, on other parts of the SFO where there is the express creation of a civil right of action.  He also submits that the Writ and SOC are defective on their face, because no damages on the part of the plaintiffs are pleaded for the alleged breach of statutory duty by Kwok and Chen.

48.Mr Shieh makes similar submissions that the breach of statutory duty does not, by itself, give rise to any private law cause of action.  He further refers to the list of considerations which can be distilled from the authorities in answering the question of whether a statute creates a statutory duty actionable by private entities, to be found in Di Marco v Morshead Mansions Ltd [2013] EWHC 1068 (Ch) at §§16-17, as applied (but not set out) in Hong Kong in the Dah Sing Insurance case, at §66.  Of the listed 15 considerations, Mr Shieh submits that most of them should be answered in this case against the creation of an actionable statutory duty.

49.Mr Wong’s response to these various points is to submit that whilst for declaratory relief to be granted there must be a real and present dispute between the parties as to the existence or extent of a legal right between them, the plaintiff does not need to have a present cause of action against the defendant.  Mr Wong relies on Rolls-Royce plc v Unite the Union [2010] 1 WLR 318 at §120.  There, Aikens LJ summarized the principles as follows:

(1)  The power of the court to grant declaratory relief is discretionary.

(2)  There must, in general, be a real and present dispute between the parties before the Court as to the existence or extent of a legal right between them. However, the claimant does not need to have a present cause of action against the defendant.

(3)  Each party must, in general, be affected by the court’s determination of the issues concerning the legal writing question.

(4)  The fact that the claimant is not a party to the relevant contract in respect of which a declaration is sought is not fatal to an application for a declaration, provided that it is directly affected by the issue; (in this respect the cases have undoubtedly “moved on” from Meadows).

(5)  The court will be prepared to give declaratory relief in respect of a “friendly action” or where there is an “academic question” if all parties so wish, even on “private law” issues. This may particularly be so if it is a “test case”, or it may affect a significant number of other cases, and it is in the public interest to decide the issue concerned.

(6)  However, the court must be satisfied that all sides of the argument will be fully and properly put. It must therefore ensure that all those affected are either before it or will have their arguments put before the court.

(7)  In all cases, assuming that the other tests are satisfied, the court must ask: is this the most effective way of resolving the issues raised? In answering that question it must consider the other options of resolving this issue.

50.Mr Wong relies principally on point (2) above.  He also refers to Zamir & Woolf on Declaratory Judgment 4^th Ed at §5-26, where it was pointed out that a party will have standing to seek declaratory relief if he can establish that the acts of the defendant may affect his private rights.  Mr Wong says that whether any declaration will be granted, and the precise terms of it if granted, are matters for trial.

51.Reference can also be made to the case of In re S. (Hospital Patient: Court’s Jurisdiction) [1996] Fam 1 at 21-22, where Millett LJ considered what was sufficient if a plaintiff is to be regarded as interested in the subject matter of the declaration.  He took it to mean that the plaintiff must have a “legal interest”.  He referred to the use of the phrase “declaration of rights” used in previous cases, and gave the reminder (at 22B-C) that:

… the jurisdiction is limited to the resolution of justiciable issues; that the only kind of rights with which the Court is concerned are legal rights; and that accordingly there must be a real and present dispute between the parties as to the existence or extent of a legal right. Provided that the legal right in question is contested by the parties, however, and that each of them would be affected by the determination of the issue, I do not consider that the court should be astute to impose the further requirement that the legal right in question should be claimed by either of the parties to be a right which is vested in itself.

52.The position in Hong Kong was recently summarised and restated by DHCJ To in Koo Ming Kown v Rev Mr Mok Kong Ting [2018] HKCFI 967 at §§15-19.  He began the analysis of the legal principles governing the court’s jurisdiction in granting declaratory relief by reference to RHC Order 15 rule 16, and the inherent jurisdiction.  He considered it is obvious that the court’s jurisdiction to grant declaratory relief is extremely wide, and may be exercised whether the applicant has any cause of action or whether any relief is sought or available or not.  What the applicant needs to establish is his locus to show he has a real interest in the subject matter of the declaration.

53.DHCJ To summarised what an applicant seeking to invoke the court’s jurisdiction to grant declaratory relief must show as: (1) that he has a real interest in the subject matter of the declaration (the ‘real issue requirement’); (2) that he has a real interest in obtaining a declaration against the adverse party (the ‘real interest requirement’); and (3) that the adverse party is a proper contradictor (the ‘proper contradictor requirement’).  The court should adopt a practical utility approach, by asking the question whether the court’s jurisdiction to grant declaratory relief is properly exercisable, instead of applying nice tests as if it were raising a strict jurisdictional issue.

54.As an aside, though some time was spent by Mr Wong looking at the particular facts of the Koo Ming Kown case, including that there was a ‘fit and proper person’ element, it is for the legal principles that the case is of assistance.  How those principles are to be applied to any other case depends upon the facts of that other case.

55.As to what constitutes a “real interest in the subject matter of the declaration”, that means a real interest of a material character to be enforced or protected as opposed to a merely academic or hypothetical question or one raised out of curiosity.  Whether a plaintiff has shown an interest in the outcome of the proceedings is a question of fact.

56.In the SFO Action, Mr Wong submits, it is at least arguable that the plaintiffs have sufficient interest in obtaining a declaration as to whether Kwok and Chen can exercise their voting rights in the 37% Stake.  Mr Wong submits that:

(1) From the perspective of corporate governance, Convoy has a real interest in ascertaining where it stands as regards the validity of the voting rights of Kwok and Chen.  In particular, a shareholder’s voting rights is governed by the articles of a company, being a contract between the company and all shareholders, where the company has a duty to the shareholders to enforce and police the limits of the articles, including limits on shareholder voting rights imposed by general law.

(2) From the perspective of the best interests of the Company, Convoy and CSL have a real interest in ensuring that CSL continues to be a “fit and proper” person to be a licensed corporation.  If Kwok and Chen, who have demonstrated they are not “fit and proper” by failing to seek SFC approval, are allowed to act as substantial shareholders of Convoy, CSL faces the risk of losing its valuable status as a licensed corporation.  It may also jeopardise Convoy’s own resumption of trading application.

(3) Convoy has a real interest in ensuring that its continuous investigative efforts into the past wrongdoings of its directors and cooperation with regulatory agencies will not be hindered or unwound by virtue of Kwok and Chen assuming control over Convoy.

57.Hence, Mr Wong submits that the plaintiffs have not relied on, nor is there any necessity at law for them to rely on, a cause of action in breach of statutory duty to seek declaratory relief.

58.It then follows, says Mr Wong, that the court may further give effect to any declaration by granting consequential, executory injunctive relief.  The court may declare the rights of the parties and by way of ancillary relief grant injunctions.  This point was not really controversial between the parties, so focus can be whether there is plainly an obviously no declaration available to the plaintiffs of the sort claimed.

59.Mr Mok also submits that Convoy’s and CSL’s claim depends on the allegation that Kwok and Chen are “associates” as defined in section 1 of Part 1 of Schedule 1 to the SFO.  He says there is an exhaustive definition, which displaces any meaning the term might otherwise have had, and which is:

(e)  another person in accordance with whose directions or instructions the person is accustomed or obliged to act;

(f)  another person accustomed or obliged to act in accordance with the directions or instructions of the person.

60.Mr Mok says that the SOC contains no material facts from which it can be inferred that Kwok and Chen are “associates” within that definition.  Indeed, he says that by the plaintiffs’ own pleading, Kwok and Chen are alleged to have been nominees of Francis Choi who acted in accordance with Francis Choi’s instructions.

61.Mr Wong reminds that for the purposes of this application the facts pleaded in the SOC are to be assumed to be true.  So there cannot be any assumed dispute as to facts.  Rather, the court has to assume that Kwok and Chan are “associates” and that they have not applied for relevant approval from the SFC.  On that basis, Mr Wong submits that the plaintiffs are entitled to seek a declaration that the provisions for seeking approval have been breached and that therefore, as a consequence, Kwok’s and Chen’s shares in the 37% Stake are not exercisable.

62.To put it in the context of a strike out application, Mr Wong submits that it is certainly not plain and obvious that Convoy and CSL could never be entitled to the declarations they seek (or something similar, where the court is able to make whatever it thinks is the correct form of declaration at trial).  For example, Mr Wong says it is not plain and obvious that Convoy and CSL cannot demonstrate the relevant interest in the subject matter of the intended declarations.

G.2   Declaration of Criminality

63.Mr Mok and Mr Shieh also suggest that the action should be struck out on the further ground that the plaintiffs ask a civil court, in a writ action, to make a declaration of criminality.

64.This is the main reason for which Mr Shieh submits that there is no reasonable cause of action.  As he puts it, both the declarations sought (see above) give rise to criminal consequence.

65.There is an established principle that a civil Court would normally refuse declaratory relief that certain conduct amounts to criminal conduct.  Reference can be made to the case of R v DPP ex p Camelot Group (1997) 10 Admin L Rep 93, at 104 where Simon Brown LJ summarised the principles as follows:

1.  The decision falls be taken not as one of the high principle but rather in the light of a number of relevant considerations.

2.  The court should adopt an essentially flexible approach to the exercise of its declaratory jurisdiction in this field. The only rigid rule is … that once criminal proceedings have begun, the civil courts should not intervene.

3.  That said, other things being equal, criminal disputes, even upon pure issues of law, are best decided: (a) in criminal courts, and (b) between the parties most directly affected by the outcome.

The civil courts should, moreover, be the wary of embarking on this jurisdiction: (i) otherwise than at the suit of the Attorney-General (not least where he has refused his fiat for relator proceedings), (ii) when it involves existing, and not merely prospective future, conduct, (iii) when what is sought is a declaration of criminality rather than of non-criminality, and (iv) … when the facts are in issue.

4.  The availability of an alternative remedy is always a relevant, and may be a decisive, factor. The court should consider the various advantages and disadvantages of the respective remedies.

66.Mr Mok submits that the declaration sought in this case is even more unsustainable given that: (1) the allegations fact-sensitive; (2) there are alternative remedies, such as the claimed similar relief against Kwok and Chen in the Main Action; and (3) there is no evidence that the plaintiffs have ever applied for judicial review of any decision on the part of the SFC, including for not taking any action against Kwok and Chen for their alleged breach of the SFO.

67.Mr Shieh also relies on the additional principles to be found in various authorities that a finding of the civil court might potentially prejudice criminal proceedings, and that it will be relevant to consider the extent to which there is a cogent public or individual interest which could be advanced by the grant of a declaration.  He says there are no exceptional circumstances as would justify the granting of the declarations in the SFO Action that the defendants have contravened section 131 of the SFO.  Mr Shieh submits that on the basis that there is no chance of success, the claim to that relief should be struck out for disclosing no reasonable cause of action.

68.Mr Wong’s response is to make clear that the plaintiffs do not seek any declaration of criminality.  As he puts it, Convoy’s and CSL’s entitlement to declaratory and injunctive relief is not dependent on any finding that Kwok and/or Chen have committed a criminal offence.  He says that the case of SFC v Tiger Asia Management LLC (2013) 16 HKCFAR 324 is directly on point.  By reference to a similar objection taken about a declaration of criminality, Lord Hoffmann NPJ stated:

But the SFC is not seeking a declaration that Tiger has committed a criminal offence. It is seeking a declaration that it has done acts which found the jurisdiction under s.213 but which also happen to be criminal offences. The question of whether Tiger has committed a criminal offence remains entirely a matter for the criminal court. There is no question of the civil court’s declaration being admitted or in any way influencing a criminal trial. If there were a prospect of such a trial, the court would have jurisdiction to put in place protective measures to ensure that publication of material is arising in the civil proceedings did not prejudice the accused. The effect of a declaration by the Court of First Instance under s.213 that Tiger has contravened the prohibition on insider dealing is therefore no different from a finding by a civil court that Tiger is liable on the same grounds for damages under s.305.

69.Mr Wong also relies upon the flexibility of the approach to the exercise of declaratory jurisdiction when a concern arises about a declaration as to criminality.

G.3   Analysis

70.Though the subject of some of the legal submissions and argument, I am not sure it is helpful to be focused on whether there is a viable “cause of action” being asserted by Convoy and CSL in the SFO Action.  Whether there is a private right of action is just a different way of describing whether there is a statutory duty enforceable by individuals in a civil suit.  The real focus is on whether there is a proper and sustainable basis for Convoy and CSL to seek declaratory relief.

71.On analysis, I agree with Mr Mok that the answer to the application is to be found in the statutory regime.

72.I have already canvassed some aspects of that regime in Section F of this Judgment.  By way of recapitulation, I would state that:

(1) As part of the regulatory functions created by Part V, it is the SFC as regulator which is given the task of determining whether a person is fit and proper.

(2) The opportunity for the SFC to assess or reassess whether a person is fit and proper is triggered when a person becomes or continues to be a substantial shareholder.

(3) That trigger recognises the link between the person holding the substantial shareholding and the potential control permitted by that shareholding, through its voting powers.

(4) Section 131 is purely an offence-creating section, creating two offences.

(5) The two offences are regulatory offences for the protection of members of the public dealing with or using the services of the listed corporation or individuals.  It is the SFC which is the enforcement authority.

(6) There is nothing on the face of the statute to suggest that the offences are intended to regulate any private rights as between the licensed corporation and its shareholders, or as between shareholders amongst themselves.

(7) That it is open to the SFC inter alia to direct the relevant licenced corporation to deem void and of no effect any votes cast by the person who has not sought the SFC’s prior approval to becoming or continuing to be a substantial shareholder identifies that the votes cast by the person are not automatically deemed void and of no effect.

(8) The interference with the property rights attaching to shares is restricted to the voting rights, and also has a temporal limitation (by reference to the period before SFC approval).

(9) The court’s involvement arises from the limited jurisdiction created by section 213.

(10) Of course, the court might also, in administrative law proceedings, judicially review the acts or omissions of the SFC, but such review would be of the SFC’s decision-making process (as opposed to of the merits of the decisions taken).

73.I also think Mr Mok is correct when he submits that the words “not exercisable” in section 131(4) do not mean that the shareholder cannot vote his shares in the sense that he has no voting rights.  In other words, those words of themselves do not remove the bundle of property rights attaching to the shares, including the right to vote.  Rather, the right to vote the shares might be considered as in practice ‘suspended’ pending obtaining the SFC’s approval under section 132(1)(b).  The owner of the shares has the voting rights attached to them, but is not permitted to exercise those rights unless and until the relevant SFC approval is obtained.

74.But, even if the person nevertheless purports to exercise any voting right, the vote is not necessarily void.  Rather, the purported exercise of any voting right triggers the powers granted to the SFC under part V of the SFO.  One power is, under section 133(1), for the SFC to direct the licensed corporation to deem the votes as void and of no effect, and to direct the licensed corporation to reconvene the meeting for voting anew on the business on which the votes were cast.  Another power is for the SFC to bring criminal proceedings for the offence created by section 131(4) and 131(5).

75.The words “not exercisable” are to be viewed in the context of the other provisions.  They mean that the voting rights attaching to the shares may not be exercised without exposing the shareholder to the risk of potential prosecution and criminal penalty, or to a possible direction by the SFC that the votes purportedly exercised be deemed void and of no effect.

76.The person (other than the shareholder) who has the interest in whether the voting rights conferred by the shares concerned are or are not exercisable is, therefore, the SFC.  If one is looking to find the “legal right” which is said to create the relevant interest as might found the jurisdiction to grant a declaration, it is the right of the SFC to prosecute a person or to deem the vote void when that person has exercised the right to vote shares at a time when the right is not exercisable.

77.I recognise that the legal right in question does not have to be one claimed by either of the parties to be a right which is vested in itself.  So it might be argued that it is open to the plaintiffs to say that they would be affected by the determination of the issue.  But that simply begs the question as to what is the real issue.

78.I think that point links to whether there is any utility in the declarations being sought.  Essentially, by the declarations sought, the plaintiffs are asking the Court to confirm that the provisions in sections 131 and 132 have been brought into play.  This is also clear from the submission made by Mr Wong.  But the Court does not need to declare what the sections state, or what the sections bring into effect or permit by operation of their terms.  Indeed, in this case there are no legal rights really in issue; what the declarations really seek is confirmation of the stance taken by the plaintiffs themselves that the facts do bring the sections into effect and do permit certain further steps by operation of the terms of the sections.

79.I see no practical purpose or utility in any such declaration.  What the plaintiffs really want (or need) to achieve is the relief of rescission sought in the Main Action.  It is a rescission which will remove Kwok’s and Chen’s property rights in the shares.  In the meantime, if the plaintiffs want any steps to be taken because of the provisions of sections 131 and 132, it is to the SFC as the regulator that the plaintiffs should look.  It is perfectly open to the plaintiffs to lay the same facts before the SFC, and to invite the SFC to exercise the powers given to the SFC under the SFO.

80.I agree with Mr Mok that it is not for the Court to “police” the operation of the sections.  It is the SFC which is the relevant person granted the policing powers, including the various powers of investigation.  It is not helpful or appropriate for the court to usurp to SFC’s role.  If the SFC’s own actions are to be policed, that would be in entirely different administrative law proceedings of the sort I have already identified.

81.It also seems to me correct that the declarations as sought would in effect amount to a declaration as to criminality.  Once it is understood that the purpose of section 131 is simply to create the offences, any declaration that section 131 has been contravened is a declaration of criminality.

82.In passing, I think there is less in Mr Mok’s point that the sections create an offence with a statutory potential defence, so that any question of contravention of the section giving rise to criminal liability cannot ignore the possibility of a defence.  If that were the only problem, the defence could be raised and run in these proceedings.  But, as I see it, that is not the only problem.

83.Therefore, in conclusion, I think it is plain and obvious that neither Convoy nor CSL can satisfy the ‘real issue requirement’ in the test summarised in the Koo Ming Kown case at §20.  I decide against them the factual question as to whether they have an interest in the outcome of the proceedings.  I do not think the argument that they want to know where they stand is enough, some of it also being rather speculative.  It also seems to me to follow that the plaintiffs cannot show having a real interest in obtaining a declaration against Kwok and Chen (the ‘real interest requirement’), even if – which is logically open to doubt – Kwok and Chen are regarded as proper contradictors.  Further, the declarations as sought (and even if amended) effectively amount to declarations of criminality.

84.Therefore, I would strike out the writ and statement of claim on this basis.

H.  Abuse of Process

85.Strictly, as I have found that the claim to the declarations and the ancillary injunctive relief are unsustainable, the alternative basis for striking out that there has been an abuse of process does not need to be considered.  However, I will deal with this aspect too, in part because I think some of the analysis links back to the first point.

86.Mr Mok makes the submission that there is a plain abuse of process for the plaintiffs to maintain and proceed with the SFO Action, which seeks to litigate in parallel proceedings facts and allegations which are already subject matters of the Main Action.  He points to the fact that the two actions overlap to such a significant extent that the plaintiffs have to refer to the Main Action in the Writ and SOC in the SFO Action.

87.Mr Mok relies on the same authorities as does Mr Shieh, primarily Buckland v Palmer [1984] 1 WLR 1109 at 1114H-1115B and The Pertamina [1986] HKC 78 at 84B-C.  As it was put by the Master of the Rolls in Buckland:

Whilst I dislike procedural technicality and, on the facts of the instant appeal, the defendant’s argument might be thought to have no other justification, in reality there are wider issues involved. The public interest in avoiding any possibility of two courts reaching inconsistent decisions on the same issue is undoubted and this alone would suggest that two actions based upon the same cause of action should never be allowed. Equally clear is the public interest in there being finality in litigation and in protecting citizens from being ‘vexed’ more than once by what is really the same claim.

88.As to the meaning of “cause of action”, that is frequently defined as a factual situation the existence of which entitles one person to obtain from the court a remedy against another: see Letang v Cooper [1965] 1 QB 232 at 242G-243A.

89.Mr Shieh argues that it is beyond dispute that the plaintiffs have pursued the same cause of action twice by commencing the SFO Action.  He says the overlapping of the causes of action is best reflected by the commonality of the factual averments in statement of claim in the Main Action and the SOC in the SFO Action.  In particular, he refers to §63(2)(b) of the former, which he says is precisely the cause of action pursued at §14 in the latter.  He also relies on the fact that a substantial portion of the SOC in the SFO Action has been directly copied from the statement of claim in the Main Action, which he says is “very telling”.  He points to the fact that the plaintiffs claim the same relief in both actions, in that in both they seek to restrain the defendants from exercising the voting rights attached to the 37% Stake.

90.Mr Wong’s response is to seek to draw a distinction between (1) two sets of proceedings with the same duplicated cause of action, and (2) two sets of proceedings with two different causes of action with overlapping evidence.  Whilst he does not dispute that the Buckland principle applies to the former, he says it does not apply to the latter.

91.Mr Wong says a stark contrast can be drawn between the facts which Convoy and CSL must prove in order to be successful for the Main Action, and the facts which Convoy and CSL must prove in order to be successful in the SFO Action.  His focus is what he describes as the narrower facts of Kwok and Chen being associates and substantial shareholders whilst failing to have sought approval from the SFC.

92.As regards concerns about the risk of inconsistent factual findings or disproportionate multiplicity of proceedings, he makes reference to Wong Yu Cho Rolly v Lam Kwok Man (unreported, DCCJ 5422/2006, HHJ Marlene Ng), where the judge dismissed an argument that mere re-litigation justifies striking out pleadings or claims even if they do not amount to abuse of process.  She said that could not be right, and concerns as to multiplicity of proceedings in relation to legitimate ongoing proceedings can be met by proper case management.  In the case before her, she held that the proper adjudication of the claims should be open for determination at trial or other appropriate procedure notwithstanding that the same or similar facts may have been raised in another action.  Of course, that was on the basis that there was no abuse.

93.Mr Wong also submits that there is a benefit to the narrower issues in the SFO Action, including that the SFC might choose to intervene.  However, I think that is speculative and unlikely, and I give it no weight.

94.Mr Wong’s better point relates to the possible ability of the court to deal with overlapping proceedings by case management orders.  But I think that raises the question as to why the case management powers might be necessarily engaged at all.  If there is an abuse, case management powers will not save it.  (In this context, I do not think it helpful to deal with the submissions on burden, made by Mr Wong and Mr Shieh, where Mr Wong says that Mr Shieh has not identified why case management orders could not deal with any concerns, whilst Mr Shieh says it is for Mr Wong to identify how case management orders would effectively deal with and remove any concerns.)

95.Stepping back and looking at the bigger picture, the question arises as to why the second action needs to have been commenced at all.  The plaintiffs do not argue for the relief sought in the SFO Action that there are any new or additional material facts that are not pleaded in the Main Action.  If all the facts which are necessary to be established to give rise to the desired declaratory and injunctive relief are already pleaded in the Main Action (as they are), the only reason to commence the SFO Action pleading the same facts is presumably to seek to achieve an earlier result than in the Main Action.  If that is so, I do not think any case management orders will satisfactorily remove the concerns underlying the principles which come into play when there are two concurrent sets of proceedings with significantly overlapping factual matters.  If that is not so, then there is no real purpose in having a separate action and the relief (if viable) could, and probably should, be claimed in the Main Action.

96.In fact, in the prayer of the Main Action, Convoy already specifically seeks inter alia (in addition to the claim to rescission of the placement and allotment of shares):

(1) a declaration and order as against Kwok and Chen that the transfer of the Wrongfully Allotted Shares to Kwok and Chen is null and void and/or invalid and/or rescinded; and

(2) an injunction as against Kwok and Chen that they be restrained from exercising the voting rights of, or transferring or otherwise dealing with their interest in, the Wrongfully Allotted Shares.

97.Though that prayer may be based primarily on the allegation that Kwok and Chen acquired the 37% Stake in furtherance of an improper purpose, there is the specific pleaded reference to breaches by Kwok and Chen of sections 131 and 132 of the SFO.  That is why I think the abuse of process point is linked to the no reasonable cause of action / no sustainable claim point.

98.Put shortly, if Convoy thinks it is entitled to any injunctive relief preventing the voting by Kwok and Chen of their shares before resolution of the Main Action, one might think that the way to obtain that entitlement is to make an application for an interim injunction in the Main Action.  Commencing a second action instead, relying on the same factual averments which are already included in the Main Action, seems to me to be an abuse of process.

99.I also note, though for present purposes place no particular weight on, the practical fact that Kwok and Chen were previously prevented from voting their shares by the decision of the Chairman of the Convoy AGM (which decision has been upheld), and one might anticipate a similar stance being taken by the Chairman in other AGMs or EGMs.

100.I would, therefore, strike out the writ and SOC on this basis as well.  Of course, my finding that the claim to the declaratory relief and ancillary injunction is not sustainable means that no amendment can be made to include such a claim in the Main Action (and had it been pleaded there in the first place, it would have been liable to be struck out).

I.   Result

101.The Writ and the SOC are struck out, and the action is dismissed.

102.I make a costs order nisi that the costs of the action, including the costs of these applications, be payable by the plaintiffs to the defendants, to be taxed if not agreed.

Mr William Wong SC, Mr Christopher Chain and Mr Lai Chun Ho, instructed by Charles Chu & Kenneth Sit, for the plaintiffs

Mr Johnny Mok SC and Ms Frances Lok, instructed by Clifford Chance, for the 1^st defendant

Mr Paul Shieh SC and Mr James Man, instructed by So, Lung & Associates, for the 2^nd defendant