Read the full judgment text of CACV 330/2020 on BabelCite. This Court of Appeal judgment was delivered on 19 October 2021 before Kwan VP, Cheung JA and G Lam JA.
Civil procedure – striking out – declaratory relief – Securities and Futures Ordinance (Cap 571) – sections 131 and 132 – substantial shareholder – voting rights – whether s.131(4) substantively bars voting rights of unapproved substantial shareholder – whether plaintiffs have real interest in seeking declarations – whether declarations sought amount to declarations of criminality – abuse of process – whether SFO Action duplicates Main Action. The plaintiffs (Convoy Global Holdings Ltd and CSL Securities Ltd) brought an action against the 1st and 2nd defendants (Kwok and Chen) seeking declarations and an injunction to restrain them from exercising voting rights attached to an alleged 37% stake in Convoy, on the basis that they had become substantial shareholders of CSL (a SFC-licensed corporation) without SFC approval in contravention of sections 131(1), 131(4) and 132(1) of the SFO. The defendants applied to strike out the writ and statement of claim on the grounds of no reasonable cause of action and abuse of process. The Court of Appeal (Kwan VP, Cheung JA and G Lam JA) dismissed the plaintiffs' appeal from Coleman J's order striking out and dismissing the action. Held, dismissing the appeal: (1) On Ground (1), the judge correctly construed s.131(4) as a regulatory offence-creating provision for the protection of the public dealing with licensed corporations, and not as conferring a private right of action on a licensed corporation or its holding company. The words 'not exercisable' in s.131(4), read in the context of ss.131(5), 133 and 213, do not substantively bar or invalidate the voting rights of an unapproved substantial shareholder; they mean that the voting rights may not be exercised without exposing the shareholder to criminal prosecution under s.131(5) or to a possible SFC direction under s.133(1)(b) deeming votes void. The legislative history (statements by the Deputy Secretary for Financial Services and Secretary for Financial Services) was admissible only to identify the mischief (restraining unfit persons from participating in the management of licensed corporations) and not as evidence of legislative intent as to the meaning and effect of s.131(4). The three-tier regulatory structure and s.5(1) of the SFO do not confer a private right to enforce s.131(4). The plaintiffs failed to satisfy the 'real interest' and 'real issue' requirements for declaratory relief. (2) On Ground (2), the declarations sought (that the defendants have contravened ss.131(1) and (4) of the SFO) are declarations of criminality which a civil court would decline to make, applying the principles in R v DPP ex p Camelot Group; the declarations go beyond declarations of fact with civil law consequences (cf. SFC v Tiger Asia Management LLC). (3) On Ground (3), the SFO Action was an abuse of process, as the same factual situation (the defendants' acquisition of the 37% Stake and the claim to restrain voting) had been pleaded in the Main Action (HCA 2922/2017), and a substantial portion of the statement of claim had been copied from the Main Action. Outcome: appeal dismissed with costs to the defendants; the SFO Action struck out and dismissed.
Legal issues: Whether plaintiffs have real interest to seek declaratory relief under s.131(4) SFO · Whether the declarations sought are impermissible declarations of criminality · Whether the SFO Action is an abuse of process
Outcome: Appeal dismissed with costs to the defendants.
Cited by 13 cases · Cites 6 cases