Chan Benjamin Ki-wood v. Young Won Ken and Others

HCA 1094/2021

[2023] HKCFI 240

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1094 OF 2021

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Before:  Madam Recorder Eva Sit SC in Chambers

Date of Hearing: 31 October 2022

Date of Decision: 31 January 2023

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D E C I S I O N

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1.This is the application by the 1^st, 3^rd, 4^th, 5^th and 6^th Defendants to strike out the Amended Statement of Claim, on the grounds of (i) issue estoppel and (ii) the claims are bound to fail.[1]

2.This case concerns of 2 warring camps of shareholders in the 5^th Defendant (“Modena GD”), a company incorporated in the People’s Republic of China (“PRC”), which wholly owns the 6^th Defendant (“Modena HK”), a company incorporated in Hong Kong.  The Plaintiff and his wife constitute one camp, holding 30.1894% of Modena GD’s issued shares, while the 3^rd and 4^th Defendants and another entity constitute the other camp, holding a total of 69.8106% of Modena GD’s shares.  In issue is the removal of the Plaintiff (i) as legal representative, chairman of the board of directors and general manager of Modena GD and (ii) as director of Modena HK in March 2021.

3.The Plaintiff’s removal led to no less than 5 sets of proceedings in the PRC and 2 sets of proceedings in Hong Kong (including the present one), commenced variously by the Plaintiff, his wife or a company under his control.  Judgment has been rendered in all of the PRC proceedings and in the other set of Hong Kong proceedings, HCMP No. 531 of 2021 (“HCMP”).

A.   Relevant Facts

4.As this is a strike-out application I will only refer to the facts set out in the Amended Statement of Claim or that are set out in the documents and undisputed between the parties.

5.Modena GD carries on the business of production and sales of machinery and production lines for manufacturing tiles to customers in the Mainland, Hong Kong and overseas. It is listed on the National Equities Exchange and Quotations (全国中小企业股份转让系统, “NEEQ”, colloquially known as “新三板”).

6.Modena HK is the wholly owned subsidiary of Modena GD and carries on the business of promotion and sale of tiles to customers in Hong Kong and overseas.  Modena HK has accounts with 5 banks in Hong Kong, and it is said their total balances amounted to about US$15 million as at mid 2021.

7.I mentioned above that the Plaintiff and the 3^rd and 4^th Defendants are shareholders in dispute, but the shareholders of Modena GD had not always been the same persons or entities.  Previously in or around 2011, the shareholders of Modena GD were different and included (inter alios) companies controlled by the Plaintiff, the 3^rd Defendant and Mr Guan Huo Jin (管火金, “Guan”).

8.By an agreement in Chinese intituled “一致行动协议” (Concerted Action Agreement, “CAA”) dated 2 August 2011, the Plaintiff, the 3^rd Defendant and Guan agreed to act in concert with respect to important matters relating to Modena GD including those set out in clause 2 thereof, and if they could not reach consensus on any such matter, the views of the Plaintiff would prevail.  One of the matters listed in clause 2 was the appointment or dismissal of senior management.  It appears from the terms of the CAA, and it was so found by the PRC court (see §9 below), that the CAA was entered for the purpose of the intended listing of Modena GD.

9.By 2016, Modena GD terminated its listing procedure and became registered on the NEEQ instead, and the Plaintiff and Guan had fallen out.  Proceedings were then commenced in the PRC involving the Plaintiff, the 3^rd Defendant, Guan and Modena GD.  Guan was successful in the first instance and on appeal, and by the Judgment of the Foshan Intermediate Court 民事判决書 (2018) 粤06 民終67 號 dated 17 May 2018, the CAA between the Plaintiff, the 3^rd Defendant and Guan was declared to be discharged.

10.I should also mention that following the above PRC judgment, on 29 May 2018 Modena GD made a public announcement on the NEEQ information disclosure system stating that the CAA was still binding on the Plaintiff and the 3^rd Defendant.

11.Thereafter, Guan disposed of his shares in Modena GD.  By early 2021, the shareholders of Modena GD fell into 2 camps[2] as follows:-

(1)  One camp comprises a Hong Kong company called Modena Machinery (International) Limited (“Modena Intl”) controlled by the Plaintiff, which holds 27.2747% of the issued shares, and the Plaintiff’s wife, Ms Lin Xu (林旭), who holds 2.9147% (ie 30.1894% collectively).

(2)  The other camp consists of (i) the 3^rd Defendant, who by himself and through his company Foshan Haohua Investment Limited (佛山市浩華投資有限公司) hold 22.607% of Modena GD’s shares; (ii) the 4^th Defendant’s corporate vehicle, Foshan Derui Investment Limited (佛山市德瑞投資有限公司), which holds 20.847%; and (iii) a company known as Foshan Dehua Investment Limited (佛山市德华投资有限公司, “Dehua”), which holds 25.4876% (ie 69.9416% collectively).

12.At that time:-

(1)  Modena GD had 5 directors, namely the Plaintiff, the 3^rd and 4^th Defendants, and 2 other individuals; and the Plaintiff was its legal representative.

(2)  The Plaintiff was also the sole director of Modena HK.

13.By an authorization letter (授權書) dated 14 March 2021 issued by the corporate shareholders controlled by the 3^rd and 4^th Defendants and Dehua (“Authorization Letter”), these shareholders removed the Plaintiff as legal representative, chairman of the board and general manager of Modena GD, and authorized the 3^rd Defendant to carry out the duties of the aforesaid offices until the next shareholders’ meeting of Modena GD.

14.Following that, on 17 March 2021, the 3^rd Defendant, as legal representative of Modena GD, signed a “Written Resolutions of the Sole Member” of Modena HK to (i) remove the Plaintiff as director and bank signatory of Modena HK, and (ii) appoint the 1^st Defendant as the replacement director and bank signatory.

15.On 18 March 2021, a Form ND2A recording the aforesaid changes of director of Modena HK (“ND2A”) was filed with the Companies Registry and was uploaded.

16.In the meantime in late March 2021, the Plaintiff sought to seize control of the seals of Modena GD.

17.On 5 April 2021, a board meeting of Modena GD was convened, at which resolutions were passed to (i) remove the Plaintiff as legal representative, chairman of the board and general manager, and (ii) appoint the 4^th Defendant as legal representative (“April 5 BOD Resolutions”).

18.Following that, the Plaintiff and his wife commenced 3 sets of proceedings in the PRC, and the Plaintiff also commenced HCMP in Hong Kong (see Section B below).

19.On 16 May 2021, the 4^th Defendant, as legal representative of Modena GD, signed another “Written Resolutions of the Sole Member” of Modena HK to (inter alia) (i) confirm the removal of the Plaintiff and the appointment of the 1^st Defendant; and (ii) appoint an additional director, Mr Chen Jun Peng (“Chen”), of Modena HK.

20.Thereafter, the Plaintiff commenced the fourth set of proceedings in the PRC (see Section B below).

21.On 5 July 2021, a shareholders’ meeting of Modena GD was convened, during which resolutions were passed to (inter alia) (i) remove the Plaintiff as director of Modena GD; (ii) affirm the April 5 BOD Resolutions; and (iii) affirm the removal of the Plaintiff as director and the appointment of the 1^st Defendant and Chen as directors of Modena HK (“July 5 EGM Resolutions”).

22.On 21 July 2021, the Plaintiff commenced the proceedings herein, and on 7 August 2021, his wife commenced the fifth and last set of PRC proceedings (see Section B below).

B.   Previous Proceedings and Judgments Rendered

23.As indicated above, the Plaintiff’s camp has commenced 5 sets of proceedings in the PRC as well as HCMP in Hong Kong with respect to his removal, all of which have already been determined.

(B.1)  The PRC proceedings

24.The first set of PRC proceedings were commenced shortly after the April 5 BOD Resolutions, on 12 April 2021, under action number (2021) 粤 0605 民初9195號 (“1^st PRC Action”).

(1)  The 1^st PRC Action was commenced by the Plaintiff’s wife and Modena Intl against Modena GD to set aside (inter alia) the April 5 BOD Resolutions on the basis that they failed to comply with Modena GD’s articles and provisions in the PRC Company Law and hence were invalid under Article 22 of the PRC Company Law.

(2)  The first instance court found that (i) the summoning of board meeting at which the April 5 BOD Resolutions were passed complied with the relevant provisions of the PRC Company Law; (ii) the notice given for such board meeting was consistent with the articles of association of Modena GD; (iii) given the Plaintiff had attended such board meeting, even if there had been minor defect in the manner of convening that did not affect the substance of the April 5 BOD Resolutions, and according to certain requirements promulgated by the Supreme People’s Court on the application of Article 22 of the PRC Company Law the court would not set aside the April 5 BOD Resolutions; (iv) the manner of voting resulting in the April 5 BOD Resolutions complied with the relevant PRC laws and articles of Modena GD; and (v) the subject matter of the April 5 BOD Resolutions was within the scope permissible under Modena GD’s articles, such that the April 5 BOD Resolutions were valid and should not be set aside.

(3)  On appeal in (2022) 粤 06 民終3790號, the appellate court (i) upheld all of the findings of the first instance court on (inter alia) the April 5 BOD Resolutions, and (ii) also held that the 3^rd Defendant was not bound by the CAA in casting his vote on the April 5 BOD Resolutions.

25.The second set of PRC proceedings were commenced on 22 April 2021 under action number (2021) 粤 0605 民初11092號 (“2^nd PRC Action”).

(1)  The 2^nd PRC Action was commenced by the Plaintiff’s wife against the 3^rd and 4^th Defendants and the other 2 directors of Modena GD for alleged breaches of duty (including the issuance of the Authorization Letter) resulting in alleged economic loss to Modena GD.

(2)  The first instance court concluded that as the Plaintiff’s wife had already commenced the 1^st PRC Action and the 5^th PRC Action (defined below) with respect to the Authorization Letter and various corporate steps taken by Modena GD which were then pending, to avoid duplicitous findings the court would not make any determination on the same.

(3)  Although the Plaintiff’s wife initially launched an appeal against the above decision, she subsequently withdrew the appeal.

26.The third set of PRC proceedings, (2021) 粤 06行初68號(“3^rd PRC Action”), was commenced by the Plaintiff as an administrative action to challenge certain decision of the Public Security Bureau with respect to the company seals of Modena GD (see §16 above). The Plaintiff was unsuccessful in the first instance and on appeal. As the parties do not rely on the judgments in the 3^rd PRC Action in this application, I will say no more about it.

27.The fourth set of PRC proceedings were commenced on 18 June 2021 under action number (2021) 粤 0604 民初18442號 (“4^th PRC Action”).

(1)  The 4^th PRC Action was commenced by the Plaintiff against the 3^rd Defendant alleging that the CAA was still valid and binding as between the Plaintiff and the 3^rd Defendant, or that an agreement had been reached between them with effect from 29 May 2018 in terms identical to the CAA (see §10 above), and the 3^rd Defendant had acted in breach thereof by (inter alia) issuing the Authorization Letter.

(2)  The first instance court dismissed the Plaintiff’s claim on the basis that the CAA had already been discharged following the judgment of the Foshan Intermediate Court dated 17 May 2018 (see §9 above), and the Plaintiff had failed to discharge his burden of proof that there was a separate agreement between him and the 3^rd Defendant with effect from 29 May 2018.

(3)  The Plaintiff has lodged an appeal against the aforesaid judgment which appeal is currently pending.

28.The fifth set of PRC proceedings were commenced on 7 August 2021 under action number (2021) 粤 0605 民初19931號 (“5^th PRC Action”).

(1)  The 5^th PRC Action was commenced by the Plaintiff’s wife against Modena GD to set aside (inter alia) the July 5 EGM Resolutions on the basis that they failed to comply with Modena GD’s articles and provisions in the PRC Company Law and hence were invalid under Article 22 of the PRC Company Law, and the 3^rd Defendant had acted in breach of the CAA in voting in favour of the same.

(2)  The first instance court found that (i) none of the procedural issues raised by the Plaintiff’s wife (with respect to the calling of the shareholders’ meeting, the subject matter of the July 5 EGM Resolutions and the manner of voting) were in breach of Modena GD’s articles, and (ii) regardless of whether the CAA remained binding on the 3^rd Defendant, that had no impact on the July 5 EMG Resolutions validly passed by Modena GD.

(3)  On appeal in (2022) 粤 06 民終4650號, the appellate court upheld all of the findings of the first instance court and affirmed the validity of the July 5 EGM Resolutions.

29.I should also mention that while the plaintiffs in the 1^st PRC Action and the 5^th PRC Action (the Plaintiff’s wife and Modena Intl) have exhausted the appeal mechanism under the PRC legal system, on 14 September 2022 applications have been made to invoke the adjudication supervision regime (審判監督, “Retrial Procedure”) under the PRC Civil Procedure Law, whereby a legally effective judgment, against which no appeal is available, may be amenable to review by the president of the relevant people’s court or the Supreme People’s Court (as the case may be) if certain requirements are met: Bank of China Ltd v Yang Fan [2016] 3 HKLRD 7, §§43-44; First Laser Ltd v Fujian Enterprises (Holdings) Co Ltd [2020] HKCFI 495, HCA 4414/2001 (unrep., 8 April 2020), §34.  However, save for some screen shots from the website of the Judiciary of the Guangdong Province showing the fact that applications to invoke the Retrial Procedure have been made in the 1^st PRC Action and the 5^th PRC Action[3], there is no evidence as to the grounds upon which these applications are made, whether and if so how they satisfy the prescribed criteria, or their prospect of success.

(B.2)  HCMP

30.I mentioned in §15 above that the ND2A was filed at the Companies Registry on 18 March 2021 recording the cessation of the Plaintiff and the appointment of the 1^st Defendant as director of Modena HK.  One month later, on 20 April 2021, the Plaintiff commenced HCMP under section 42 of the Companies Ordinance (Cap 622) against the 1^st Defendant, Modena HK and the Registrar of Companies seeking a declaration that the removal of the Plaintiff and the appointment of the 1^st Defendant was null and void, and the ND2A be removed from the Companies Register.

31.In the affirmation filed by the Plaintiff in HCMP on 23 June 2021, he set out the bases of the HCMP application, which included (inter alia) (i) the CAA remained binding on the 3^rd Defendant who had acted in breach thereof; (ii) the Authorization Letter by the “hostile camp” referred to in §11(2) above, and the purported removal of him as legal representative, chairman and general manager of Modena GD failed to comply with Modena GD’s articles and provisions in the PRC Company Law and hence was invalid under Article 22 of the PRC Company Law; (iii) as a result, the “Written Resolutions of the Sole Member” of Modena HK on 17 March 2021 (see §14 above) (on which the ND2A was based) was also invalid. I should mention that in this affirmation, the Plaintiff also referred to events subsequent to 18 March 2021, including the facts relating to the passing of the April 5 BOD Resolutions.

32.HCMP came before Deputy High Court Judge MK Liu for substantive hearing on 29 June 2021, and the learned Deputy Judge dismissed the same on the grounds that:-

(1)  The Plaintiff could not rely on the CAA to argue that his removal as director of Modena HK was wrongful, as neither the companies that issued the Authorization Letter nor Modena GD were parties to the CAA nor were bound by it; in any event the CAA had already been declared by the PRC court to have been discharged; and the Plaintiff failed to demonstrate that the 3^rd Defendant had affirmed the CAA on 29 May 2018.

(2)  Given the majority of Modena GD’s shareholders and directors were determined to remove the Plaintiff, it was not reasonably arguable that the Plaintiff was not lawfully removed as director of Modena HK.

33.The Plaintiff did not appeal against the aforesaid decision in HCMP.

C.   The Plaintiff’s Claims in this Action

34.In this action, the Plaintiff’s pleaded case (insofar as material to the present application) is as follows:-

(1)  In addition to the defendants named in HCMP, the Plaintiff also sues the 3^rd and 4^th Defendants and Modena GD.

(2)  First, the Plaintiff avers that the CAA remains binding on the 3^rd Defendant (Amended Statement of Claim §§8-12).

(3)  He pleads that the Authorization Letter was (i) in breach of the CAA and (ii) contrary to Modena GD’s articles and PRC Company Law and hence invalid under Article 22 of the PRC Company Law (§§13-14).

(4)  Next, he refers to the “Written Resolutions of the Sole Member” of Modena HK on 17 March 2021 (see §14 above) and the ND2A, and pleads that (i) because of the alleged problems with the Authorization Letter, these steps were without authority of Modena GD and invalid; and (ii) they were also in breach of the CAA (§§16-20).

(5)  Then, he refers to the April 5 BOD Resolutions, and pleads that they were irregular, unlawful and unauthorized (referring to various articles of Modena GD), and contrary to PRC law (referring specifically to Article 22 of the PRC Company Law) (§§23-26).

(6)  Next, he pleads that the “Written Resolutions of the Sole Member” of Modena HK on 16 May 2021 (see §14 above) was invalid on the basis that the 4^th Defendant’s appointment as legal representative of Modena GD was irregular, unlawful and unauthorized (ie (5) above) (§§32-33).

(7)  Further, he refers to the July 5 EGM Resolutions, and pleads that (i) the shareholders’ meeting was improperly called; (ii) the subject matter of the July 5 EGM Resolutions was not within the powers of the shareholders’ meeting; and (iii) they were passed by the 3^rd Defendant breaching the CAA and the other shareholders voting in favour procuring the 3^rd Defendant’s breach thereof (§§34-37).

(8)  The Plaintiff then complains that the 1^st Defendant, acting as director of Modena HK, has (i) filed the ND2A; and (ii) caused letters to be sent to Modena HK’s banks to change the bank signatory. He also avers that following requests from his own solicitors, 3 of those banks with total balances of around US$7.5 million have frozen Modena HK’s accounts (§§39-47).

(9)  Finally, there is an omnibus final paragraph that

“By reason of the matters aforesaid and in the premises, the 1^st, 3^rd and 4^th Defendants have individually and/or in conspiracy acted to unlawfully and without authority take over [the Plaintiff’s] control and management of HK Modena and HK Modena’s assets with the banks to the detriment of [the Plaintiff] and HK Modena. The 1^st, 3^rd and 4^th Defendants will continue to do so unless restrained by the court. To the extent that [the Plaintiff’s] positions in HK Modena have been removed, [the Plaintiff] seeks to have his positions restored to those prior to the Purported Authorisation Letter. The Modena group of companies including Guangdong Modena and HK Modena are companies founded and controlled by [the Plaintiff] and rely on [the Plaintiff] for maintaining and developing their businesses. It is in the best interest of the Modena group of companies for [the Plaintiff] to remain in control of the same.”

(10)  In terms of relief, the Plaintiff seeks 7 declarations including that (i) the Authorization Letter; (ii) the “Written Resolutions of the Sole Member” of Modena HK on 17 March 2021 and 16 May 2021 (see §§14 and 19 above) and (iii) the ND2A are unlawful and without authority; (iv) a declaration that the 3^rd and 4^th Defendants have breached the CAA; and (v) a declaration that the 1^st, 3^rd and 4^th Defendants have conspired to unlawfully take over the Plaintiff’s control and management of Modena HK and its bank deposits. He also seeks “damages for the wrongful conduct” (presumably of the alleged conspiracy) of the 1^st, 3^rd and 4^th Defendants and Modena HK to be assessed.

35.In his skeleton submissions and at the hearing, Mr Stewart Wong SC for the Plaintiff[4] explained that:-

(1)  the Plaintiff’s case is primarily in unlawful act conspiracy, with (inter alia) (i) the unlawful acts being the corporate acts of Modena GD and Modena HK, and (ii) the unlawfulness stemming from the two-fold bases of (I) breach of PRC law and (II) breach of CAA; and

(2)  the primary act the Plaintiff relies on and complains about is the Authorization Letter.

D.   Striking-out Application

36.There is no dispute on the principles for striking out, which are well established. The court should strike out a claim only in plain and obvious cases. The burden is on the applicant to demonstrate the same. The claim must be obviously unsustainable, the pleadings unarguably bad, and it must be impossible (not just improbable) for the claim to succeed before the court will strike it out.

37.Although the summonses issued by the 1^st, 3^rd, 4^th, 5^th and 6^th Defendants on 5 October 2021 and 17 May 2022 respectively refer to no reasonable cause of action, scandalous, frivolous or vexatious and/or may prejudice, embarrass or delay the fair trial of the action, and abuse of process as grounds, Mr Jonathan Chang SC for these Defendants confirmed that the Defendants would only rely on (i) issue estoppel arising from HCMP; and (ii) the claims are bound to fail in light of the evidence of PRC law – in the form of the judgments in the PRC actions referred to above – on the validity of the Authorization Letter, the April 5 BOD Resolutions and the July 5 EGM Resolutions.

38.Further, at the hearing, Mr Wong accepted that the declaratory relief relating to the ND2A (being the subject matter of the HCMP proceedings) should be struck out in any event.

(D.1) Bound to fail

39.As Mr Chang focused his submissions on the “bound to fail” ground at the hearing, I will address this ground first.

40.The Defendants submissions are straightforward.  Mr Chang argues that for the “unlawfulness” element in the conspiracy claim, both limbs (the Modena GD corporate acts and the CAA, see §35(1) above) are governed by PRC law, and the various PRC judgments in §9 and Section B.1 above are evidence of PRC law which this Court can rely on, and clearly show that there is no unlawfulness under PRC law on either of those limbs. In particular, he relies on the judgments in the 1^st PRC Action (which concerns the April 5 BOD Resolutions and also the CAA) and the 5^th PRC Action (which concerns the July 5 EGM Resolutions), and that referred to in §9 above and in the 4^th PRC Action (which concern the CAA).

41.The Plaintiff disputes the Defendants’ arguments on 3 grounds.

(1)  First, Mr Wong argues that a foreign judgment (in this case a PRC judgment) can only be relied upon as evidence on PRC law on any issue if that judgment is between the same parties as the proceedings in Hong Kong, relying on Lu Yongliang v Bank of China Ltd, Dongguan Branch [2021] 6 HKC 46, [48] (per Lam VP, as Lam PJ then was). In this case, the parties of the 1^st , 4^th and 5^th PRC Actions and those in the present action are not identical.

(2)  He also argues that none of the PRC judgments in §9 and Section B.1 above ruled on the validity of the Authorization Letter, which he describes as “the crux (if not the sole grounds)” of the Plaintiff’s case in this action.

(3)  Finally, he argues that with respect to the 1^st and 5^th PRC Actions, the judgments therein are not final because of the pending application under the Retrial Procedure.

42.I do not accept Mr Wong’s argument. For the reasons below, I consider that the Plaintiff’s claim in this action is bound to fail.

43.First, as a matter of law:-

(1)  The Hong Kong court accepts the judgment of the courts in the Mainland as evidence of PRC law. Further, even though there is no specific reference to a particular point in a PRC judgment, so long as the court is satisfied that the point could not have escaped the attention of the foreign court or the parties, the PRC court should be regarded to have decided that point as well: Guangzhou Green-Enhan Bio-Engineering Co Ltd v Green Power Health Products International Co Ltd [2004] 3 HKLRD 223, §2(c)-(d) (per J Lam J, as Lam PJ then was).

(2)  Mr Wong’s reliance on the statement in Lu Yongliang[48] is misplaced.

(a)  The statement in question is “The common law in Hong Kong has always given recognition in at least three ways to Mainland judgments which are final and conclusive: (a) through the doctrine of res judicata …; (b) foreign judgment as a cause of action on its own …; (c) foreign judgment as evidence of foreign law on a particular issue between the same parties: see Guangzhou Green-Enhan ...” (emphasis added)

(b)  However, in issue in Lu Yongliang is the applicability of the Foreign Judgments (Restriction on Recognition and Enforcement) Ordinance (Cap 46) and the Mainland Judgments (Reciprocal Enforcement) Ordinance (Cap.597) as grounds to set aside a statutory demand served in Hong Kong. As the opening sentence in [48] makes clear, Lam VP (as he then was) was focusing on the question of recognition of PRC judgments in Hong Kong, which identity of parties is of course a necessary requirement. He was not addressing the question of the applicable test for relying on PRC judgments as evidence of PRC law.

(c)  Further, one can see from [48] that Lam VP referred to his own decision in Guangzhou Green-Enhan, which (i) did not contain any limitation that the PRC judgment in question has to be “between the same parties”; and (ii) itself refers to and relies on his earlier decision in Shenzhen Development Bank Co Ltd v New Century International (Holdings) Ltd, HCA 2976/2001 (unrep., 31 July 2002), where the PRC judgments admitted and relied on as evidence of PRC law were decisions concerning other parties and had no relation to the parties in the Hong Kong proceedings whatsoever.

(3)  In any event, even if I am wrong in rejecting Mr Wong’s argument on the law, it is clear that on the facts of this case, even if the parties are not identical, the PRC judgments in the 1^st and 5^th PRC Actions confirming the validity of the April 5 BOD Resolutions and the July 5 EGM Resolutions, being resolutions of Modena GD which is a PRC company and is also a party thereto, must be the most relevant, direct and authoritative evidence of PRC law which this Court should apply. These PRC judgments pronounce the PRC law position vis-à-vis Modena GD and bind Modena GD; and its shareholders (even if not joined as parties to the PRC actions) cannot maintain a different position.

44.Second, it can be seen from §§24, 28 and 34(5) and (7) above that the very bases advanced by the Plaintiff in this action to challenge the validity of the April 5 BOD Resolutions and the July 5 EGM Resolutions are the same as those advanced and determined in the 1^st and 5^th PRC Actions.

45.In any event, even if the grounds relied on are not fully identical (which is not the case here), I am satisfied that given full evidence on what took place leading to and at those meetings had been adduced in the 1^st and 5^th PRC Actions (including from the Plaintiff) (as can be seen from the judgments in those actions which recited the evidence filed and made detailed findings of fact), in coming to the conclusions that the April 5 BOD Resolutions and the July 5 EGM Resolutions were passed at validly convened meetings and complied with the applicable PRC laws and articles of Modena GD, the relevant PRC courts would not have overlooked any fact which might have been relevant to such findings, and should be regarded to have decided those point as well: Guangzhou Green-Enhan§2(d).

46.Third, Mr Wong’s argument that the gravamen of the Plaintiff’s claim is directed against the Authorization Letter provides no answer. Chronologically, the Authorization Letter was the first relevant event; but whatever may be its validity or otherwise, it has since been overtaken by the April 5 BOD Resolutions and the July 5 EGM Resolutions, which were corporate acts of Modena GD and held by the PRC courts to be lawful and valid, and by them the previous changes in office-holders of Modena GD and Modena HK have been confirmed and/or ratified. The Plaintiff’s complaints against the corporate acts of Modena GD and Modena HK in this action are thus bound to fail.

47.Fourth, there is no substance in Mr Wong’s contention that the appeal judgments in the 1^st and 5^th PRC Actions are not final.

(1)  It appears that Mr Wong derives support for this proposition (the need for finality) from Lu Yongliang[48] which, as explained in §43(2) above, is concerned with a different question of recognition.

(2)  There can be no suggestion that these PRC judgments are final; the very premise for invoking the Retrial Procedure is that there has to bea legally effective judgment against which no appeal is available (see §29 above).

(3)  In any event, I do not consider that the Plaintiff has discharged his burden of showing that PRC law on the validity of the April 5 BOD Resolutions and the July 5 EGM Resolutions may be different upon review. As mentioned above, save for the fact that applications to invoke the Review Procedure have been made, there is no evidence from the Plaintiff whatsoever to show the criteria for the Review Procedure have been satisfied (which are the conditions for invoking the same), the grounds for review, the prospect of the supervisory court accepting the case for review, or the prospect of the review rendering a conclusion different from those in the 1^st and 5^th PRC Actions.

48.For completeness, Mr Chang also relies on this ground with respect to the second limb of unlawfulness (the CAA), although the debate did not focus on it (as Mr Wong’s case is that the Authorization Letter is the crux).  In any event, I accept that given the PRC judgments in §9 above and in the 4^th PRC Action (where the Plaintiff and the 3^rd Defendant were parties), any contention by the Plaintiff in this action that the acts complained about were unlawful due to breach of the CAA must also be bound to fail.

(D.2) Issue estoppel / abuse of process

49.In light of my findings in Section D.1 above the Plaintiff’s claim herein must be struck out.  However as Mr Chang continues to rely on this ground and the parties have advanced submissions on the same, I will also address it briefly.

50.On this ground, Mr Chang relies on both aspects of the court’s jurisdiction to strike out collateral attacks as abuse of process, namely (i) issue estoppel; as well as (ii) the wider doctrine of abuse.

51.There is no dispute on the law on the aforesaid 2 aspects of abuse. Both sides cited and relied on Parakou Shipping Pte Ltd v Jinhui Shipping and Transportation Ltd [2011] 2 HKLRD 1.

52.The first aspect arises where a claim or issue has previously been determined between the parties or their privies in a forum of competent jurisdiction. In such a case, where the plaintiff in subsequent proceedings attempts to relitigate the same cause of action or the same fundamental issues which have previously determined by another forum as a necessary step in reaching a judgment, the court will prevent the plaintiff from reopening the cause of action or issues.

(1)  The strict doctrine of res judicata comes into play. Not only is the plaintiff prevented from relitigating the old cause of action or reopen the issues previously determined; he may not even be allowed to raise causes of action or issues in the later proceedings which he ought to have raised in previous litigation.

(2)  This applies whether or not the previous forum has rightly decided a case.

(3)  The reason for this first aspect is the policy that a person should not be twice vexed for the same reason.

(4)  “Privity” in this context refers to a relationship of “blood, title or interest”.  A pragmatic guide to existence of privity of interest is that “the required commonality is a direct interest in the subject matter of the litigation, a parallel or corresponding interest in that subject matter and not simply a financial interest in the result of the action” (citing China North Industries Investment Ltd v Chum [2010] 5 HKLRD 1, §81). To that end, where the companies that are parties to the 2 sets of proceedings are wholly owned holding company and subsidiary such that they may be regarded as alter egos of each other, or as companies within the same group they have a direct interest in establishing the existence or otherwise of a matter which may impact the business or operations of the group, that would be sufficient to establish privity of interest for the purpose of abuse.

See §§90-92, 99-103, 116-118 op.cit.

53.The second aspect can apply in a wide variety of situations, including those where the parties to the subsequent proceedings are not the same and cannot be described as privies of the original parties.

(1)  The jurisdiction would be engaged if it is shown to the satisfaction of the court that permitting a party to relitigate would either be manifestly unfair to the other party or would bring the administration of justice into disrepute. If either of these conditions is satisfied, there is no need to show any further special circumstances.

(2)  Re-litigation based on substantially the same evidence would bring the administration of justice into disrepute and the jurisdiction can be invoked on that ground.

(3)  The exercise of this power is based on the jurisdiction of the court to prevent abuse of process, as it is in the public interest that there should be an end to litigation and judicial resources should not be wasted trying the same issue all over again.

(4)  It is highly fact sensitive, and the onus is on the party contending that there is an abuse.

See Parakou §§94-96; Secretary for Justice v FTCW [2014] 1 HKLRD 849, §97.

54.Mr Chang argues that:-

(1)  Issue estoppel is engaged as (i) whether the CAA had been breached and (ii) whether the Authorization Letter and the corporate acts of Modena GD were defective were issues determined in HCMP, and the 3^rd and 4^th Defendants and Modena GD (who were not parties in HCMP) are privies.

(2)  Alternatively, the 3^rd and 4^th Defendants ought to have been joined as defendants in HCMP, as the Plaintiff was alleging breach of the CAA there.

(3)  In any event, the second aspect of abuse applies.

55.Notwithstanding his concession in §38 above, Mr Wong takes the bold position that no issue estoppel or abuse arises in this case, not even against the 1^st Defendant and Modena HK.  He makes 3 arguments:-

(1)  He first contends that since HCMP was issued under section 42 of the Companies Ordinance and was directed at the ND2A, a line should be drawn at 18 March 2021 (being date on which the ND2A was filed) and no issue estoppel can arise with respect to events thereafter.

(2)  He argues that no issue estoppel or abuse can arise even as against the 1^st Defendant and Modena HK (notwithstanding they are also parties in HCMP) because HCMP is based on section 42 of the Companies Ordinance and the only necessary party there is the Companies Registrar, whereas the Plaintiff’s claim in this action is based on the Authorization Letter and conspiracy.

(3)  As for the 3^rd and 4^th Defendants and Modena GD, in addition to the above there is no issue estoppel or abuse because (i) they are not privies and (ii) HCMP did not deal with the corporate acts of Modena GD whereas those are issues raised in this action.

56.In my view, this claim should also be struck out on the ground of abuse.

57.First, one must identify what is the fundamental issue that HCMP has determined. Even though HCMP is an application based on section 42 of the Companies Ordinance, the premise of the court granting any relief thereunder is that the information in the ND2A is factually incorrect, or derived from something that is invalid, ineffective or done without Modena HK’s authority: section 42(1). In other words, by dismissing the Plaintiff’s application in HCMP, the court has accepted that the information in the ND2A – namely the removal of the Plaintiff and the appointment of the 1^st Defendant as director of Modena HK – was accurate and done with the company’s authority.  Put another way, the fundamental issue determined in the HCMP (which led to the dismissal of the same) is that the removal of the Plaintiff and the appointment of the 1^st Defendant as director of Modena HK was valid.

58.Second, once the fundamental issue is identified, it is no answer for the Plaintiff to say that this action raises also issues concerning the Authorization Letter, or the corporate acts of Modena GD, or other events (eg writing to Modena HK’s banks) which took place after 18 March 2021. This is because when one looks at Amended Statement of Claim §48 (see §34(9) above) (being the omnibus paragraph on conspiracy that sums up the Plaintiff’s claim), Mr Wong’s confirmation that conspiracy is the Plaintiff’s primary claim, and the relief sought, they are all directed at reversing the Plaintiff’s removal and the 1^st Defendant’s appointment as director of Modena HK (except for relief (v) which is a declaration concerning breach of the CAA) – see in particular the allegation, in §48 and also the reliefs sought, on the 1^st, 3^rd and 4^th Defendant “take over [the Plaintiff’s] control and management of Modena HK”.  Thus, the very premise of this action is to set aside the removal of the Plaintiff and the appointment of the 1^st Defendant as director of Modena HK, which has already been determined in HCMP.

59.Third, the Plaintiff’s claims against the 1^st Defendant and Modena HK (and for that matter, the Registrar of Companies who is also the 7^th Defendant here) are clearly barred by issue estoppel.

60.Fourth, as to Modena GD, applying Parakou (see §52(4) above) I find that it is a privy to Modena HK and hence can invoke issue estoppel. Mr Wong has cited PJSC National Bank Trust v Mints [2022] 1 WLR 3099 and invited me to apply caution so as not to undermine the distinct legal personality of a company as against that of its shareholders and directors. However, PJSC concerns issue estoppel or abuse arising from an arbitral award which has its particular considerations (because of its contractual base limiting who could be parties) so the dicta there has to be viewed in that light. Further, Parakou is also concerned with an arbitral award and Reyes J had devoted a good part of the analysis to addressing that aspect, yet he nevertheless concluded that group companies could be regarded as privies. Finally, the actual decision in PJSC in fact held that directors of the companies who were parties to the arbitration were privies, applying considerations similar to those in §52(4) above.

61.Fifth, while I do not consider the 3^rd and 4^th Defendants can be regarded as privies of either the 1^st Defendant or Modena HK (their interest as indirect shareholders should properly be regarded as financial interest, in the sense that control or performance of Modena HK would be reflected in the value of the shares in Modena GD, of which they are shareholders), I accept that they can rely on the second aspect of abuse, in that it is both manifestly unfair to them if the issue of the validity of Plaintiff’s removal and the 1^st Defendant’s appointment as director of Modena HK can be re-opened, and that such re-litigation would bring the administration of justice into disrepute as the evidence relied on in both are substantially the same (see §31 above).

62.In the premises, I also find in favour of the Defendants on this ground.

E.   Conclusion

63.I will accordingly accede to the application of the 1^st, 3^rd, 4^th, 5^th and 6^th Defendants and strike out the Amended Statement of Claim in its entirety.

64.In light of the above, I will also dismiss this action on my own motion, as after the Amended Statement of Claim is struck out there is nothing left in this action.

65.As to costs, I will direct that:-

(1)  the Plaintiff do pay the 1^st, 3^rd, 4^th, 5^th and 6^th Defendants’ costs of this application, with certificate for two counsel;

(2)  the Plaintiff do pay the 1^st, 3^rd, 4^th, 5^th, 6^th and 7^th Defendants’ costs of this action;

(3)  the aforesaid costs be summarily assessed;

(4)  the 1^st, 3^rd, 4^th, 5^th, 6^th and 7^th Defendants do file and serve their respective skeleton bills on (1) and (2) above (as applicable) within 21 days hereof;

(5)  the Plaintiff do file and serve his list of objections (limited to 5 pages) within 21 days thereafter;

(6)  the 1^st, 3^rd, 4^th, 5^th, 6^th and 7^th Defendants do file and serve their response (if any) (limited to 3 pages) within 7 days thereafter; and

(7)  no further submissions on the skeleton bills without leave.

Mr Stewart Wong SC and Miss Natalie So, instructed by Norton Rose Fulbright Hong Kong, for the Plaintiff

Mr Jonathan Chang SC and Mr Lau Ka Kin and Mr Sik Chee Ching, instructed by Benjamin Au & Billy Chan, Solicitors, for the 1^st, 3^rd, 4^th, 5^th and 6^th Defendants