Glory Sky Asia Ltd and Others v. Koo Kam Pui and Another

HCMP 1482/2019

[2023] HKCFI 1849

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1482 OF 2019

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JUDGMENT

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Introduction

1.Pursuant to s 724 of the Companies Ordinance, Cap. 622 (“CO”), the Petitioners filed their petition on 17 September 2019 alleging that the affairs of the 2^nd Respondent (“Company”) have been conducted in a manner which is unfairly prejudicial to their interests as shareholders of the Company (“Petition”).

2.There are before this court 2 applications.

3.First, the Petitioners’ application by Summons dated 20 September 2022 (“Petitioners’ Summons”) for an Order that unless with the leave of the Court, the Company shall not take any steps in the Petition other than providing discovery and attending hearings at which the Court is to consider the reliefs to be granted in respect of the Petition.

4.Second, the Company’s applications by Summons dated 24 January 2022 for leave to amend its Points of Defence filed on 19 December 2019 and by Summons dated 23 September 2022 for leave to amend its earlier Summons to amend, which seeks to make further amendments to its Points of Defence (“Amendment Summonses”).

5.The basis of the Petitioners’ application is that unfair prejudice proceedings involve essentially disputes between shareholders. There is generally no justification for the Company to fully and actively participate in the Petition: Hollington on Shareholders’ Rights 9^th Ed. at para 9-34 - the Company’s role is nominal and should be limited as sought in the Petitioners’ Summons. In the affirmation of Wong Yuk Wah (“Wong”) filed in support of the application (“Wong 1”) at paragraph 25.2, Wong concedes that insofar as the Company seeks to make representations on reliefs, it may do so by making representations at the hearings at which the Court considers questions of reliefs, which is permitted under the terms of the Summons.

6.The Company accepts that when the disputes are essentially between shareholders, the company should normally be a nominal party. The only issue for this court to decide is whether there are substantive disputes between the Petitioners and the Company and, hence, whether the Company is entitled to actively participate in and take more than a limited role in these proceedings.

7.With regard to the Company’s Amendment Summonses, the Petitioners’ position is that if their application succeeds, the amendment applications necessarily fall away and should be dismissed. On the other hand, if their application fails, the Petitioners would not oppose the Company’s amendment applications. It does not appear that the Company disputes this is the correct approach.

Background

8.The 1^st and 2^nd Petitioners are minority shareholders of the Company. They together hold less than 10% of its shares. The 1^st Petitioner is and was at all material times wholly-owned and controlled by Mr Cheung Chung Kao, Michael (“Mr Cheung”). The 3^rd Petitioner was a shareholder of the Company from around 2011 to 2017. Since 2017, he has held shares in the Company through his corporate vehicle the 2^nd Petitioner. The 3^rd Petitioner therefore sues in his capacity as a past member.

9.The 1^st Respondent is a director and the single largest shareholder in the Company by virtue of the combined shareholdings in his own name and through his corporate vehicle, Group China Enterprise Limited, totalling about 28.69%.

10.According to the Petition at paragraph 3.2, the shareholders and directors of the Company at that time were stated to be as follows:

Name	Number of Shares	Percentage of Shareholding (%)	Director
The 1st Petitioner	3,444,986	5.65%	-
The 2nd Petitioner	2,522,096	4.13%	-
The 1st Respondent	964,144	1.58%	Director
Group China Enterprise Limited (“Group China”)	16,537,290	27.11%	-
Jeremy Lynn Schmidt (“Mr. Schmidt”)	2,312,873	3.79%	-
More Elite Limited (“More Elite”)	3,049,942	5.00%	-
Shang Rong (HK) Industrial Limited (“Shang Rong”)	3,307,214	5.42%	-
River Capital Investment Company Limited (“River Capital”)	3,639,662	5.97%	-
Shui Chung Investment Limited (“Shui Chung”)	10,341,565	16.95%	Director
General Fantasy Limited (“General Fantasy”)	14,879,077	24.39%	Director
Total:	60,998,849	100%

11.In the affirmation of Cheuk Lai Yung (“Madam Cheuk”), the wife of the 1^st Respondent, filed on behalf of the Company in opposition (“Cheuk 1”) at paragraph 3, members of the Company’s Board of directors were said to be the 1^st Respondent, General Fantasy and Madam Li Chung Man (“Madam Li”). At paragraph 5, the Company’s shareholding structure, as of July 2022, was stated to be as follows:

Name of Shareholder	Number of shares each held	Shareholding ratio (approx. %)
Group China	18,764,135	30.76%
1st Petitioner	3,444,986	5.65%
2nd Petitioner	2,522,096	4.14%
More Elite	3,460,648	5.67%
Shang Rong	3,752,419	6.15%
General Fantasy	15,336,279	25.14%
River Capital	8,453,951	13.86%
Yong Xiang Industrial Co. Ltd.	2,640,147	4.33%
Mr Schmidt	2,624,188	4.30%
Total:	60,998,849	100%

12.As summarised in Section H “CONCLUSION” of the Petition:

(i)  Various conducts of the 1^st Respondent are said to constitute a violation of the rights and interests of the Petitioners as set out in the laws governing the operation of the Company and the Articles.

(ii)  There has been a complete breakdown of mutual trust and confidence amongst the Petitioners on the one hand and the 1^st Respondent on the other hand (who have at all material times been operating the Company as a quasi-partnership) as caused by the aforesaid conducts of the 1^st Respondent who has repeatedly acted and continues to act contrary to the Shareholders’ Agreements and the 3^rd Common Understanding (as defined in the Petition) as well as the legitimate expectations of the Petitioners.

(iii)  The 1^st Respondent has been in breach of the Shareholders’ Agreements.

(iv)  The 1^st Respondent has been in breach of his fiduciary duties owed to the Company.

(v)  There has been serious mismanagement of the Company committed by the 1^st Respondent.

13.In light of the above, the affairs of the Company are said to have been and are being conducted in a manner which is unfairly prejudicial to the interests of the Petitioners.

14.In the prayer for relief, the 1^st and 2^nd Petitioners seek primarily a buy-out Order either by the 1^st Respondent or the Company; alternatively damages against the 1^st Respondent. The 3^rd Petitioner, being a past member, primarily seeks damages against the 1^st Respondent.

15.Procedurally, there is no dispute that the Company has actively participated in these proceedings. In Wong 1 at paragraph 28, Wong referred to an email dated 7 January 2021 in which the 1^st Respondent admitted that the Company had spent over HK$3 million in these proceedings as of that date. There was no denial from Madam Cheuk in Cheuk 1.

16.At the first hearing of the Petition on 24 October 2019 where the 1^st Respondent and the Company were separately represented and attended by Counsel, directions for the filing of pleadings and the hearing of the 1^st CMC were given. At that time, Counsel for the Company, recognizing this was essentially a shareholders dispute between the Petitioners and the 1^st Respondent, indicated in his skeleton that the Company would take a neutral stance in these proceedings. However, the Company would oppose the relief sought against it by the Petitioners ie a buy-out Order and an Order to allow the Petitioners to inspect the Company’s accounting records.

17.On 19 December 2019, the Company filed its Points of Defence purporting to refute various allegations and claims made against it by the Petitioners.

18.On 10 March 2020, the Company filed its further and better particulars of its Points of Defence in response to the request of the Petitioners.

19.On 26 January 2021, the Company filed the 1^st Voluntary Particulars of its Points of Defence.

20.On 22 November 2021, the Company filed the 2^nd Voluntary Particulars of its Points of Defence.

21.By the said Summons dated 24 January 2022 returnable at the 1^st CMC to be held on 11 February 2022, the Company sought leave to amend its Points of Defence.

22.At the 1^st CMC hearing on 11 February 2022 where the 1^st Respondent and the Company were separately represented and attended by Counsel, the Company expressed agreement with the 1^st Respondent’s draft directions including inter alia the filing of witness statements by the Company. No directions were given by this court in respect of the filing of witness statements. Instead, directions were given for discovery and that the Petition be adjourned for a further CMC upon determination of the Company’s Summons of 24 January 2022 and any intended application by the Petitioners to limit the Company’s role in these proceedings.

23.By Summons dated 23 September 2022, the Company sought leave to amend its earlier Summons to amend.

24.By opposing the Petitioners’ Summons, it is clear beyond doubt that, unless restrained by this court, the Company intends to continue its active participation in these proceedings and to continue incurring expenses in doing so.

Deliberation

25.The applicable principles are not in dispute. They have been set out in numerous authorities and were conveniently summarised by Barma J (as he then was) in Yuanta Securities Asia Financial Services Ltd v Core Pacific Investment Holdings (BVI) Ltd & Ors unrep, HCCW 804 of 2003, 17 October 2003 at [42] - [44] and [47] - [48].

“42. Mr Tong and Mr Graham cited to me all of the principal cases in the line of authority starting with Pickering v Stephenson (supra). Thus, I was taken to the decisions of the English High Court in Re Kenyon Swansea Ltd [1987] BCLC 514, Re Crossmore Electrical and Civil Engineering Ltd [1989] BCLC 137, Re Hydrosan Ltd [1991] BCLC 418, Re Milgate Developments Ltd [1991] BCC 24, Re a Company (No. 004502 of 1988) ex parte Johnson [1991] BCC 234 and Re a Company (No. 1126 of 1992) [1994] 2 BCLC 146. I was also referred to the decision of the Hong Kong Court of Appeal in Re C G & L Investment Ltd and Wyatt Estates Ltd [1992] 1 HKC 78.

43. In all of those cases (with the exception of Pickering v Stephenson, which was decided well before the English equivalent of section 168A of the Ordinance was first enacted) the courts have reiterated that the nature of claims by a shareholder, whether under section 168A, or section 177(1)(f), or their English equivalents, involve only claims against the shareholder said to be in control of the company concerned, and do not involve claims against the company itself, which is a nominal party, and which should not, ordinarily, participate or expend its funds in a partisan way in those proceedings. Where such funds are so expended, that will usually involve a misfeasance on the part of those who authorised such expenditure.

44. Although it is possible to detect differences of emphasis in the approaches of the different judges deciding the cases, I am content to adopt the views expressed by Lindsay J in Re a Company (No. 1126 of 1992) (supra) as an accurate statement of the law in this area. In that case, Lindsay J, having reviewed all of the principal English authorities, concluded in relation to them (at 155h to 156f) that:-

‘  ... As a body they suggest to me the following.

Firstly, that there may be cases (although it is unlikely nowadays when wide objects clauses are the norm) where a company’s active participation in or payment of its own costs in respect of active participation in a s 459 petition as to its own affairs is ultra vires in the strict sense.

Secondly, leaving aside that possible class, there is no rule that necessarily and in all cases such active participation and such expenditure is improper.

Thirdly, that the test of whether such participation and expenditure is proper is whether it is necessary or expedient in the interests of the company as a whole (to borrow from Harman J in ex parte Johnson).

Fourthly, that in considering that test the court’s starting point is a sort of rebuttable distaste for such participation and expenditure, initial scepticism as to its necessity or expediency. The chorus of disapproval in the cases puts a heavy onus on a company which has actively participated or has so incurred costs to satisfy the court with evidence of the necessity or expedience in the particular case. What will be necessary to discharge that onus will obviously vary greatly from case to case.

…

Finally on the law, I comment that I do not see this analysis as opening floodgates such that the courts will be swamped with applications of the kind before me. In the vast majority of s 459 petitions there will, I think, be no real prospect of satisfying the tests I have mentioned and applications of the kind before me will be so hopeless as not even to be embarked upon.’

…

47. In my judgment, quite apart from questions as to the independence of the Company’s board of directors, the source of its funding and its motivation for participating actively in the opposition to the Petition, it will ordinarily be inappropriate for a company which is involved in a section 168A or section 177(1)(f) petition in respect of the conduct of its affairs by a majority shareholder whose actions in that regard are under attack by a petitioner to participate actively in the proceedings either to support or to oppose them, regardless of the source of funding for such participation. I have come to that view because it seems to me to follow from the nature of the company’s position as a necessary and nominal party to such proceedings. Given that there are no claims or allegations made against the company itself, and that the proceedings are in reality a contest between the opposing camps of shareholders, it seems to me to follow that the prosecution and defence of the proceedings is a matter that should be left to the respective camps of shareholders alone. … it seems to me in principle to be objectionable to permit the company, a nominal respondent, to participate in the conduct of the petition, and thus support one side or the other, particularly in a manner involving additional and separate representation, unless there are demonstrated good reasons for it to do so.

48. I therefore think that unless the Company is able to point to good reasons for its participation in these proceedings, which render it necessary or expedient for it to participate, it should not do so, even where there is no suggestion that it is expending its own funds on such active participation. …However, even where it is not the company who seeks advance approval, it remains for the company to justify its participation by clear evidence as to necessity or expedience, it being borne in mind that the onus on the company is a heavy one. In my view, there is no significant difference for these purposes between an application for an injunction to restrain intended participation, and an application after trial, for approval of participation which has already taken place – in both cases the onus is on the company to justify its participation, or proposed participation, as the case may be.” (emphasis added)

26.In Arrow Trading & Investments Est 1920 & Anor v Edwardian Group Ltd & Ors [2004] BCC 955, the petitioners, in the context of unfair prejudice proceedings brought by them under s 459 of the Companies Act 1985, sought an Order restraining the company from expending its money or other assets in the course of participation in the proceedings other than for certain limited purpose. The petitioners alleged that the remuneration paid to those members of the board who were associated with the majority shareholder was excessive and an indirect means of distributing profits to the exclusion of the petitioners. Two non-shareholding directors on the company’s remuneration committee wanted the company to take an active part in the petition so as to justify its remuneration policy. The court granted the injunction sought by the petitioners.

27.At [17], Sir Francis Ferris explained the court’s approach in this way:

“The essential question in this case, as it seems to me, is whether it is right to say that the company has a separate and independent position on the issue of remuneration. No-one can deny of course that the company is a separate and distinct entity from its shareholders, but that is not, in my view, the same thing as saying that it has a separate and distinct position to present on an issue of the kind which this petition raises. The essence of the petitioners’ claims is that the petitioners as shareholders have been unfairly treated as a result of the decisions of the majority. Those decisions are essentially the decisions of individuals, whether in their capacity as directors or as shareholders. They are embodied in resolutions and the like of which are technically describable as ‘acts of the company’, but the reality of the position is that what is complained of is treatment resulting from a decision or series of decisions made which have caused the company to endorse what is said to be the unfair remuneration policy.” (emphasis added)

28.As can be seen from Lindsay J’s Judgment quoted above, in considering whether the Company’s participation and expenditure is proper, the test is whether it is necessary or expedient in the interests of the company as a whole. In this regard, the Court’s starting point is a sort of rebuttable distaste for such participation and expenditure and initial scepticism as to its necessity or expediency. The onus is on the Company to satisfy the Court with evidence of the necessity or expedience and it is a heavy one.

29.In his skeleton, Mr Sham submits that the present case is not just a dispute involving only the Petitioners and the 1^st Respondent. He points out that in the Points of Claim, the Petitioners have made 5 allegations against the Company. Since those allegations are disputed by the Company, it is entitled to take part to refute them and defend against the Petitioners’ claim against it.

30.Those 5 allegations have been selectively cited in Cheuk 1 between paragraphs 8 and 14. They are:

(i)  Allegation 1 (Points of Claim, para 55.2). The Company failed and/or refused to reinstate the 3^rd Petitioner’s directorship at the Company in breach of the Companies Ordinance and/or the Articles.

(ii)  Allegation 2 (Points of Claim, para 56.3). The Company failed and/or refused to reinstate the 1^st Petitioner’s directorship at the Company in breach of the Companies Ordinance and/or the Articles.

(iii)  Allegation 3 (Points of Claim, para. 59). The Company, in breach of the Shareholders’ Agreement, including Clauses 5.2, 6.9, 14 and 17, has failed and/or refused to grant to the Petitioners access to the requested documents and information of the Company or the BTI Group, which further obstructs the exercise of the rights of the Petitioners to jointly manage the Company and the BTI Group. The interests of the Petitioners as shareholders of the Company have been seriously and unfairly prejudiced.

(iv)  Allegation 4 (Points of Claim, paras. 94-95). The Company, contrary to the requirements under the Companies Ordinance and/or the Shareholders’ Agreements, failed and/or refused to take reasonable steps to perform the series of acts pleaded under paragraphs 94.1 to 94.6, including the provision of audited accounts and auditor’s report etc and in the circumstances, the interests of the 1^st and 2^nd Petitioners as shareholders of the Company have been seriously and unfairly prejudiced.

(v)  Allegation 5 (Points of Claim, paras. 102-103). In conclusion, the Petitioners claim that the aforesaid conducts of the Company constitute a violation of the rights and interests of the Petitioners; …the Company has been in breach of the Shareholders Agreements and/or the Companies Ordinance and/or the Articles; …..in light of the above, the affairs of the Company have been and are being conducted in a manner which is unfairly prejudicial to the interests of the Petitioners as shareholders of the Company within the meaning of s. 724 of the Companies Ordinance, Cap. 622.

31.This court is of the view that the 5 allegations summarised in Cheuk 1 fail to give a fair view of the essence of the Petitioners’ case in this Petition as a whole which is directed against the 1^st Respondent. If one reads the Petition as a whole as well as the relevant paragraphs of the Points of Claim in context, it is reasonably clear that the Petitioners are first and foremost complaining against the 1^st Respondent’s decisions and acts which resulted in the corollary decisions and acts of the Company. To paraphrase the words of Sir Francis Ferris, those corollary decisions and acts are technically describable as “acts of the Company”, but the reality of the position is that what is complained of is the 1^st Respondent’s unfair and prejudicial treatment of the Petitioners by the 1^st Respondent which has caused the Company to endorse and commit the acts covered by the 5 allegations.

32.Allegations 1 and 2 are the clearest examples. The relevant parts of paragraph 55 of the Points of Claim read:

“55. In breach of the Shareholders’ Agreements, including Clauses 5.2, 6.4, 14 and 17 of the First Agreement, and/or the 3^rd Common Understanding and/or the Companies Ordinance and/or the Articles:-

55.1 The 1^st Respondent initiated, masterminded and orchestrated the wrongful removal of the 3^rd Petitioner from the Board, and/or caused or took active steps to procure the 2^nd Respondent to do the same, in that he:

(a) improperly and irregularly convened the 12 July EGM and proposed for the voting of the 1^st Defective Resolutions;

(b) voted in favour for the 1^st Defective Resolutions; and

(c) procured other shareholders to vote for the 1^st Defective Resolutions.

55.2 Despite the 1^st and/or 3^rd Petitioners’ repeated protests and/or requests, the 1^st Respondent failed and/or refused to take any step reasonably within his power, including exercising his votes as a shareholder of the Company and/or votes and/or power as a director of the Company, to reinstate 3^rd Petitioner’s directorship and/or to appoint the 3^rd Petitioner or the nominee of the 2^nd and/or 3^rd Petitioner(s) as a director of the Company. Further or alternatively, the 2^nd Respondent failed and/or refused to reinstate the 3^rd Petitioner’s directorship at the Company in breach of the Companies Ordinance and/or the Articles.” (emphasis added)

33.It can be seen that only the last sentence of that paragraph is mentioned in Cheuk 1.

34.Similarly, the relevant parts of paragraph 56 of the Points of Claim read:

“56. In further breach of the Shareholders’ Agreements, including Clauses 5.2, 6.2, 6.4, 14 and 17 of the First Agreement, and/or the 3^rd Common Understanding and/or the Companies Ordinance and/or the Articles:-

56.1 The 1^st Respondent initiated, masterminded and orchestrated the wrongful retirement of the 1^st Petitioner effectively removing it from the Board and/or caused or took active steps to procure the 2^nd Respondent to do the same, in that he:-

(a) wrongfully procured the Board to in the 27 June Board Meeting note that all the directors of the Company at the material time would retire from their directorships at the Company in the upcoming annual general meeting of the Company;

(b) convened the 27 June Board Meeting for the purpose of convening the 20 July AGM wherein he procured the shareholders to wrongfully resolve that all the then directors of the Company would retire and stand for re-election;

(c) did not vote in favour of re-electing and/or appointing the 1^st Petitioner as a director of the Company; and

(d) procured other shareholders not to vote in favour of re-electing and/or appointing the 1^st Petitioner as a director of the Company causing the failure of 1^st Petitioner being re-elected.

56.2 Since the 20 July AGM, the 1^st Petitioner has had no representative in the Board.

56.3 Despite Mr. Cheung’s and/or the 1^st Petitioner’s repeated protests and/or requests, the 1^st Respondent failed and/or refused to take any step reasonably within his power, including exercising his votes as a shareholder of the Company and/or votes and/or power as a director of the Company, to reinstate 1^st Petitioner’s directorship and/to appoint 1^st Petitioner or the nominee(s) of the 1^st Petitioner as director(s) of the Company. Further or alternatively, the 2^nd Respondent failed and/or refused to reinstate the 1^st Petitioner’s directorship at the Company in breach of the Companies Ordinance and/or the Articles.” (emphasis added)

35.Again, only the last sentence of that paragraph is mentioned in Cheuk 1.

36.In relation to Allegation 3, paragraph 59 of the Points of Claim reads:

“59. In breach of the Shareholders’ Agreements, including Clauses 5.2, 6.9, 14 and 17 of the First Agreement, and/or the 3^rd Common Understanding, despite the repeated requests and demands made by the 1^st, 2^nd and/or 3^rd Petitioners including letters from The Petitioners’ Solicitors dated 30 October 2018, 15 November 2018, 9 January 2019, 11 January 2019 and 9 August 2019, the 1^st Respondent and/or the 2^nd Respondent has/have failed and/or refused to grant to the 1^st, 2^nd or 3^rd Petitioner access to the requested documents and information of the Company or the BTI Group, which further obstructs the exercise of the rights of the 1^st, 2^nd and 3^rd Petitioners to jointly manage the Company and the BTI Group. The interests of the 1^st, 2^nd and 3^rd Petitioners as shareholders of the Company have been seriously and unfairly prejudiced.”

37.In relation to Allegation 4, the beginning of paragraph 94 of the Points of Claim pleaded that “[c]ontrary to the requirements under Companies Ordinance and/or the Shareholders’ Agreements, the 1^st Respondent and/or the 2^nd Respondent failed to and/or refused to and/or failed to take reasonable steps to” perform the various acts pleaded under paragraphs 94.1 to 94.6.

38.Lastly, in relation to Allegation 5, the way Mr Ho has pleaded paragraph 102 in conclusion followed the same pattern as in paragraphs 59 and 94 ie by pleading “the aforesaid conducts of the 1^st Respondent and/or the 2^nd Respondent” or “[t]he 1^st Respondent and/or the 2^nd Respondent has/have been in breach of” the Shareholders’ Agreements and so on.

39.As Mr Ho puts it in his skeleton, there are no freestanding allegations of wrongdoing made by the Petitioners against the Company. Rather, the allegations pleaded against the Company, read in context, all reflect the wrongful conduct of the 1^st Respondent as the Company’s single largest (though not majority) shareholder and a director. This should be self-evident since the 1^st Respondent is the only shareholder and director of the Company named as a “wrongdoing” Respondent in these proceedings.

40.To put things beyond doubt, in the affidavit of Wong Wai Ching for the Petitioners, at paragraph 7.2, it is confirmed that no freestanding claim is being advanced against the Company and the Petitioners concede that if their claims against the 1^st Respondent fail, their claims against the Company would fall away automatically. Of course, another pleader could have made that point more explicitly in the Points of Claim. But looking at the Points of Claim as a whole in light of what has been pleaded in the Petition, especially at Section H “CONCLUSION”, it seems to this court Mr Ho’s pleading is sufficiently clear for the present purpose.

41.Further, the central theme of this sort of unfair prejudice petitions in general is that a company had been operating as a quasi-partnership among its shareholders and that, as a result of the “wrongdoing” shareholder, there has been a complete breakdown of mutual trust and confidence among them. This is also the central theme of the present Petition: see what is pleaded in Section H “Conclusion” in the Petition.

42.In Cheuk 1 at paragraph 5, Madam Cheuk states that apart from the Petitioners and the 1^st Respondent, there are other shareholders holding over 60% of total shareholding who are independent of the 1^st Respondent. Whether or not some or all of the other 60% shareholders are truly independent of the 1^st Respondent cannot be decided here, but the fact is that they have not come forward to state on oath that (i) they were and are acting independently of the 1^st Respondent and (ii) have taken the independent and considered view that it is necessary or expedient for the Company to defend these proceedings by actively participating in the Petition and their reasons for taking that view. Instead, the Company’s affirmation in opposition was made by Madam Cheuk, the wife of the 1^st Respondent and who is neither a shareholder nor director of the Company.

43.Importantly, as Mr Ho submits, it is not demonstrated in Cheuk 1 in what ways if any the Company has a separate and independent position from the 1^st Respondent so as to justify its active participation in the proceedings. On the contrary, since the 1^st Respondent is the only individual accused of wrongdoing and the Company does not dispute that it has adopted some or most of the 1^st Respondent’s pleaded defence in refuting the Petitioners’ allegations of wrongdoing, its position is indistinguishable from that of the 1^st Respondent: Mr Sham’s Skeleton at [25] refers.

44.While Mr Sham submits in his Reply Submissions that the Company has its own interests to protect in defending the Petitioners’ causes of action in these proceedings, those interests have not been elaborated either in Cheuk 1 or in Mr Sham’s Reply. It is only in Mr Sham’s Supplemental Submissions that he relies on Power v Ekstein [2010] NSWSC 137 at [119] - [120] for the general proposition that a company’s participation may be justified on the ground that its interest is at stake by reason of a buy-out Order sought against it. If, in the present case, that is the independent view of Company’s 60% shareholders or its directors other than the 1^st Respondent, one would expect them to come forward to say so with reasons in support of the Company’s position.

45.It is common practice in an unfair prejudice petition for the petitioner to seek a buy-out order against the company, as an alternative to that against the “wrongdoing” shareholder. The usual concern is that the “wrongdoing” shareholder does not have the means to buy out the petitioner’s shares in the company. But as this court has mentioned earlier, if the Company seeks to make representations on the reliefs sought against it, it may do so at the hearings at which the Court considers questions of reliefs. That is the usual practice and that is permitted under the terms of the Petitioners’ Summons if granted. Hence, the fact that there is an alternative claim for a buy-out Order against it could not justify the Company’s active participation in the proceedings. The same applies to the other relief sought against the Company.

46.To conclude, for the above reasons, this court is not persuaded that the Company has discharge the heavy onus of showing its past (save for giving discovery) or anticipated future participation and expenditure (save to the limited extent allowed in the Petitioners’ Summons) is necessary or expedient in the interests of the Company as a whole.

Disposition and costs

47.There shall be an Order in terms of paragraph 1 of the Petitioner’s Summons save that the words “or incur any or any further expenditure of costs” be inserted after the words “the 2^nd Respondent shall not take any steps”.

48.The Company’s Amendment Summonses dated 24 January 2022 and 23 September 2022 be dismissed.

49.Since both parties agree costs should follow the event, costs of and occasioned by the Petitioners’ Summons and the Company’s Amendment Summonses be to the Petitioners, to be summarily assessed and paid by the Company forthwith, certificate for counsel.

50.The Petitioners having already filed a Statement of Costs, leave be to the Company to lodge with the Court its list of objections to the Petitioners’ Statement of Costs for Summary Assessment within 7 days, if it has not already done so. Unless otherwise directed by this court, costs will be disposed of on paper.

51.Paragraph 2 of the Petitioners’ Summons asks for costs of and occasioned by the Company’s wrongful and unjustified participation in these proceedings, including the costs of and occasioned by this application, be paid forthwith by the Company to the 1^st to 3^rd Petitioners, to be taxed if not agreed.

52.The costs of the parties’ applications have been dealt with as aforementioned. Mr Ho, very properly, accepts at the hearing that the rest of paragraph 2 cannot be dealt with now as the costs of every alleged wrongful and unjustified participation has to be examined individually in order to ascertain the incidence of costs and it is not a matter of simple taxation. Take, for instance, the filing of the Company’s Points of Defence which was not objected to by the Petitioners and the fact that it has been filed is not necessarily wrongful or unjustified. Thus, as suggested by Mr Ho, paragraph 2 of the Petitioners’ Summons be adjourned to the substantive hearing of the Petition or until further Order.

53.Liberty to apply.

Mr Justin Ho and Mr Cedric Yeung, instructed by M/s W. K. To & Co. for the 1^st, 2^nd and 3^rd Petitioners

M/s Cheung, Yeung & Lee for the 1^st Respondent, excused from attendance

Mr Walker Sham, instructed by M/s Zeke Mok & Co., for the 2^nd Respondent